2nd Aug 2007 07:02
Barclays PLC02 August 2007 PART 2 BARCLAYS PLC ANALYSIS OF AMOUNTS INCLUDED IN THE BALANCE SHEET Capital resources As at 30.06.07 31.12.06 30.06.06 £m £m £mShareholders' equity excluding minority interests 20,973 19,799 17,988 -------- -------- --------Preference shares 3,431 3,414 3,435Reserve capital instruments 1,921 1,906 1,922Upper tier 2 instruments 586 586 586Absa minority interests 1,541 1,451 1,397Other minority interests 269 234 211 -------- -------- --------Minority interests 7,748 7,591 7,551 -------- -------- --------Total shareholders' equity 28,721 27,390 25,539Subordinated liabilities 15,067 13,786 13,629 -------- -------- --------Total capital resources 43,788 41,176 39,168 -------- -------- -------- The authorised share capital of Barclays PLC was £2,500m (31st December 2006:£2,500m) comprising 9,996 million (31st December 2006: 9,996 million) ordinaryshares of 25p each and 1 million (31st December 2006: 1 million) staff shares of£1 each. Called up share capital comprises 6,545 million (31st December 2006:6,535 million) ordinary shares of 25p each and 1 million (31st December 2006: 1 million) staff shares of £1 each. Total capital resources increased £2,612m to £43,788m (31st December 2006:£41,176m). Shareholders' equity excluding minority interests increased £1,174m since31st December 2006. The increase reflected profits attributable to equityholders of the parent of £2,634m, increases in share capital and share premiumof £44m and increases in available for sale reserves of £106m. Offsetting thesemovements were dividends paid of £1,311m, decreases in the cash flow hedgingreserves of £177m, a £43m decrease due to changes in treasury and Employee ShareOwnership Plan shares, a £48m decrease in the currency translation reserve andother decreases in retained reserves of £31m. Subordinated liabilities have increased £1,281m to £15,067m (31st December 2006:£13,786m). This increase is driven by capital issuances of £2,400m, partiallyoffset by redemptions of £670m, a decrease to the adjustment associated withfair value hedge arrangements of £344m, a decrease of £124m relating tomovements in exchange rates. Minority interests increased £157m to £7,748m (31st December 2006: £7,591m). Capital ratios Risk weighted assets and capital resources, as defined for regulatory purposesby the FSA, comprised: As atRisk weighted assets: 30.06.07 31.12.06 30.06.06Banking book £m £m £mOn-balance sheet 202,835 197,979 190,979Off-balance sheet 33,748 33,821 33,010Associated undertakings and joint ventures(1) 1,075 2,072 6,351 -------- -------- --------Total banking book 237,658 233,872 230,340 -------- -------- -------- Trading bookMarket risks 33,811 30,291 27,477Counterparty and settlement risks 46,574 33,670 33,107 -------- -------- --------Total trading book 80,385 63,961 60,584 -------- -------- --------Total risk weighted assets 318,043 297,833 290,924 -------- -------- -------- Capital resources:Tier 1Called up share capital 1,637 1,634 1,628Eligible reserves 21,323 19,608 18,061Minority interests(2) 8,405 7,899 7,629Tier 1 notes(3) 887 909 941Less: intangible assets (7,757) (7,045) (7,242)Less: deductions from Tier 1 capital(4) (26) - - -------- -------- --------Total qualifying Tier 1 capital 24,469 23,005 21,017 -------- -------- -------- Tier 2Revaluation reserves 24 25 25Available for sale-equity gains 440 221 188Collectively assessed impairment 2,527 2,556 2,593allowancesMinority Interests 441 451 479Qualifying subordinated liabilities(5)Undated loan capital 3,174 3,180 3,200Dated loan capital 8,626 7,603 8,157Less: deductions from Tier 2 capital(4) (26) - - -------- -------- --------Total qualifying Tier 2 capital 15,206 14,036 14,642 -------- -------- -------- Less: Regulatory deductions:Investments not consolidated for regulatory purposes (947) (982) (946)Other deductions (1,276) (1,348) (998) -------- -------- -------- (2,223) (2,330) (1,944) -------- -------- --------Total net capital resources 37,452 34,711 33,715 -------- -------- -------- Equity Tier 1 ratio 5.3% 5.3% 4.9%Tier 1 ratio 7.7% 7.7% 7.2%Risk asset ratio 11.8% 11.7% 11.6% (1) From 1st January 2007, under the FSA's Prudential Sourcebook for Banks, Building Societies and Investment Firms, eligible associates are proportionally, rather than fully, consolidated for regulatory purposes. (2) Includes reserve capital instruments of £3,222m (31st December 2006: £2,765m; 30th June 2006: £2,158m). Of this amount, an issue of £500m was made during 2007. This issue is classified within subordinated liabilities on the consolidated balance sheet. (3) Tier 1 notes are included in subordinated liabilities in the consolidated balance sheet. (4) From 1st January 2007, under the FSA's General Prudential Sourcebook, certain deductions are made directly from Tiers 1 and 2 rather than being included in regulatory deductions. (5) Subordinated liabilities included in Tier 2 Capital are subject to limits laid down in the regulatory requirements. At 30th June 2007, the Tier 1 Capital ratio was 7.7% and the risk asset ratiowas 11.8%. From 31st December 2006, total net capital resources rose £2.7bn andrisk weighted assets increased £20.2bn. Tier 1 capital rose £1.5bn, including £1.3bn arising from profits attributableto equity holders net of dividends paid. Minority interests within Tier 1capital increased £0.5bn primarily due to the issuance of reserve capitalinstruments. The deduction for goodwill and intangible assets increased by£0.7bn. Tier 2 capital increased £1.2bn mainly as a result of net issuance of£1.2bn of dated loan capital. Reconciliation of regulatory capital Capital is defined differently for accounting and regulatory purposes. Areconciliation of shareholders' equity for accounting purposes to called upshare capital and eligible reserves for regulatory purposes, is set out below: As at 30.06.07 31.12.06 30.06.06 £m £m £m Shareholders' equity excluding minority interests 20,973 19,799 17,988 Available for sale reserve (238) (132) (9)Cash flow hedging reserve 407 230 172Adjustments to retained earningsDefined benefit pension scheme 1,261 1,165 1,302Additional companies in regulatoryconsolidation and non-consolidated companies (230) (498) (101)Foreign exchange on RCIs and upper Tier 2 loan stock 533 504 398Other adjustments 254 174 (61) --------- --------- ---------Called up share capital and eligible reserves for regulatory purposes 22,960 21,242 19,689 --------- --------- --------- Total assets and risk weighted assets Total assets increased 16% to £1,158.3bn (2006: £996.8bn). Risk weighted assetsincreased 7% to £318.0bn (31st December 2006: £297.8bn). Loans and advances tocustomers that have been securitised increased £6.5bn to £30.9bn (31st December2006: £24.4bn). The increase in risk weighted assets since 2006 reflected a riseof £3.8bn in the banking book and a rise of £16.4bn in the trading book. UK Retail Banking total assets increased 3% to £84.3bn (31st December 2006:£81.7bn). This was mainly attributable to growth in mortgage balances. Riskweighted assets fell 1% to £42.5bn (31st December 2006: £43.0bn) with growth inmortgages offset by an increase in securitised balances. UK Business Banking total assets grew 5% to £69.5bn (31st December 2006:£65.9bn) driven by good growth across lending products. Risk weighted assetsincreased 2% to £50.8bn (31st December 2006: £50.0bn), reflecting asset growthpartially offset by increased regulatory netting and an increase in securitisedbalances. Barclaycard total assets increased 1% to £20.4bn (31st December 2006: £20.1bn).Risk weighted assets increased 1% to £17.1bn (31st December 2006: £17.0bn),primarily reflecting underlying net business growth, broadly offset by theredemption of a securitisation transaction, changes to the regulatory treatmentof associates and the sale of part of the Monument portfolio. International Retail and Commercial Banking - excluding Absa total assets grew11% to £42.4bn (31st December 2006: £38.2bn) driven by increases in mortgagesand unsecured lending in the retail sectors in Western Europe. Risk weightedassets increased 17% to £23.5bn (31st December 2006: £20.1bn), reflecting thebalance sheet growth. International Retail and Commercial Banking - Absa total assets increased 8% to£32.8bn (31st December 2006: £30.4bn), primarily driven by increases inmortgages and commercial lending. Risk weighted assets increased 5% to £21.8bn(31st December 2006: £20.7bn), reflecting the balance sheet growth. Barclays Capital total assets rose 21% to £796.4bn (31st December 2006:£657.9bn). This reflected the continued expansion of the business, with growthmainly attributable to increases in traded debt and equity securities andgrossed-up derivative positions. Risk weighted assets increased 11% to £152.5bn(31st December 2006: £137.6bn) in line with risk, driven by the growth intrading portfolios and derivatives. Barclays Global Investors total assets increased 12% to £90.4bn (31st December2006: £80.5bn), mainly attributable to growth in insurance products. Themajority of total assets relates to asset management products with equal andoffsetting balances reflected within liabilities to customers. Risk weightedassets increased 14% to £1.6bn (31st December 2006: £1.4bn). Barclays Wealth total assets increased 11% to £16.7bn (December 2006: £15.0bn)reflecting strong growth in lending to high net worth, affluent and intermediaryclients. Risk weighted assets increased 13% to £6.9bn (31st December 2006:£6.1bn) reflecting the increase in lending. Head office functions and other operations total assets decreased 24% to £5.4bn(31st December 2006: £7.1bn). Risk weighted assets decreased 21% to £1.5bn (31stDecember 2006: £1.9bn). PERFORMANCE MANAGEMENT Economic capital Barclays assesses capital requirements by measuring the Group risk profile usingboth internally and externally developed models. The Group assigns economiccapital primarily within seven risk categories: Credit Risk, Market Risk,Business Risk, Operational Risk, Insurance Risk, Fixed Assets and PrivateEquity. The Group regularly enhances its economic capital methodology and benchmarksoutputs to external reference points. The framework uses default probabilitiesduring average credit conditions, rather than those prevailing at the balancesheet date, thus seeking to remove cyclicality from the economic capitalcalculation. The framework also adjusts economic capital to reflect timehorizon, correlation of risks and risk concentrations. Economic capital is allocated on a consistent basis across all of Barclaysbusinesses and risk activities with allocations reflecting varying levels ofrisk. A single cost of equity is applied to calculate the cost of risk. The total average economic capital required by the Group, as determined by riskassessment models and after considering the Group's estimated portfolio effects,is compared with the supply of economic capital to evaluate economic capitalutilisation. Supply of economic capital is calculated as the average availableshareholders' equity after adjustment and including preference shares. The economic capital methodology formed the basis of the Group's submission forthe Basel II Internal Capital Adequacy Assessment Process (ICAAP). Economic capital demand(1) As at 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 6,550 6,050 5,850 -------- -------- --------UK Retail Banking 3,400 3,250 3,250UK Business Banking 3,150 2,800 2,600 -------- -------- --------Barclaycard 2,050 1,850 2,150International Retail and Commercial Banking 2,250 2,000 1,850 -------- -------- --------International Retail and Commercial Banking-ex Absa 1,300 1,200 1,150International Retail and Commercial Banking-Absa 950 800 700 -------- -------- --------Barclays Capital 4,400 3,950 3,600Barclays Global Investors 200 200 150Barclays Wealth 500 450 400Head office functions and other operations(2) 250 250 250 -------- -------- --------Economic Capital requirement (excluding goodwill) 16,200 14,750 14,250Average historic goodwill and intangible assets(3) 8,100 7,700 7,900 -------- -------- --------Total economic capital requirement(4) 24,300 22,450 22,150 -------- -------- -------- (1) Calculated using a five point average over the year and rounded to the nearest £50m for presentation purposes. (2) Includes Transition Businesses and capital for central functional risks. (3) Average goodwill relates to purchased goodwill and intangible assets from business acquisitions. (4) Total period end economic capital requirement (including core available funds) as at 30th June 2007 stood at £26,800m (31st December 2006: £25,150m; 30th June 2006: £24,100m). UK Retail Banking economic capital allocation increased £150m to £3,400m (31stDecember 2006: £3,250m), reflecting exposure growth in the portfolio andimplementation of the updated Operational Risk Model. UK Business Bankingeconomic capital allocation increased £350m to £3,150m (31st December 2006:£2,800m) as a consequence of asset growth and implementation of updated Creditand Operational Risk Models. Barclaycard economic capital allocation increased £200m to £2,050m (31stDecember 2006: £1,850m), as a consequence of exposure growth, primarily in theinternational cards and secured loans portfolio, partially offset by risktransfer activity. International Retail and Commercial Banking - excluding Absa economic capitalallocation increased £100m to £1,300m (31st December 2006: £1,200m). This wasdue to lending growth primarily in Spain. International Retail and CommercialBanking - Absa economic capital allocation (excluding the risk borne by theminority interest) increased £150m to £950m (31st December 2006: £800m),reflecting exposure growth in the portfolio. Barclays Capital economic capital increased £450m to £4,400m (31st December2006: £3,950m) due to growth in equity investments, operational and market risk. Barclays Wealth economic capital allocation increased £50m to £500m (31stDecember 2006: £450m) reflecting exposure growth in the portfolio. The Group's practice is to maintain an appropriate level of excess capital,which is not allocated to the business units. This excess arises as a result ofcapital management timing and includes capital held to cover pensioncontribution risk. Available funds for economic capital exceeds demand by£1,900m (31st December 2006: £2,050m). Economic capital supply The capital resources to support economic capital comprise adjustedshareholders' equity including preference shares but excluding other minorityinterests. Preference shares have been issued to optimise the long-term capitalbase of the Group. The capital resources to support economic capital are impacted by a number offactors arising from the application of IFRS and are modified in calculatingavailable funds for economic capital. This applies specifically to: • Cash flow hedging reserve - to the extent that the Group undertakes the hedging of future cash flows, shareholders' equity will include gains and losses which will be offset against the gain or loss on the hedged item when it is recognised in the income statement at the conclusion of the future hedged transaction. Given the future offset of such gains and losses, they are excluded from shareholders' equity when calculating economic capital. • Available for sale reserve - unrealised gains and losses on such securities are included in shareholders' equity until disposal or impairment. Such gains and losses are excluded from shareholders' equity for the purposes of calculating economic capital. Realised gains and losses, foreign exchange translation differences and any impairment charges recorded in the income statement will impact economic profit. • Retirement benefits liability - the Group has recorded a deficit with a consequent reduction in shareholders' equity. This represents a non-cash reduction in shareholders' equity. For the purposes of calculating economic capital, the Group does not deduct the pension deficit from shareholders' equity. The average supply of capital to support the economic capital framework is setout below(1): Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mShareholders' equity excluding minority 13,250 12,100 10,750interests less goodwill(2)Retirement benefits liability 1,250 1,300 1,300Cashflow hedging reserve 350 150 50Available for sale reserve (150) (100) (50)Preference shares 3,400 3,350 3,100 --------- --------- --------Available funds for economic capital excluding goodwill 18,100 16,800 15,150Average historic goodwill and intangible assets(2) 8,100 7,700 7,900 --------- --------- --------Available funds for economic capital including goodwill(3) 26,200 24,500 23,050 --------- --------- -------- (1) Averages for the period will not correspond to period-end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentational purposes only. (2) Average goodwill relates to purchased goodwill and intangible assets from business acquisitions. (3) Available funds for economic capital (including other Tier 1 instruments) as at 30th June 2007 stood at £30,950m (31st December 2006: £28,800m; 30th June 2006: £27,200m). In addition, the Group holds other Tier 1 Instruments of £4,109m as at 30th June2007 (31st December 2006: £3,674m; 30th June 2006: £3,099m) consisting of Tier 1notes of £887m and reserve capital instruments of £3,222m. Economic profit Economic profit comprises: • Profit after tax and minority interests; less • Capital charge (average shareholders' equity excluding minority interests multiplied by the Group cost of capital). The Group cost of capital has been applied at a uniform rate of 9.5%(1). The costs of servicing preference shares are included in minority interests, and sopreference shares are excluded from average shareholders' equity for economicprofit purposes. The economic profit performance in 2007 and 2006 is shown below: Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mProfit after tax and minority interests 2,634 2,264 2,307Addback of amortisation charged on acquired intangible assets(2) 59 60 23 -------- -------- --------Profit for economic profit purposes 2,693 2,324 2,330 -------- -------- --------Average shareholders' equity excluding minority interests (3),(4) 13,250 12,100 10,750Adjust for unrealised loss/(gains) on cashflow hedge reserve(4) 350 150 50Adjust for unrealised gains on available for sale financial instruments (4) (150) (100) (50)Add: retirements benefits liability 1,250 1,300 1,300Goodwill and intangible assets arising on acquisitions (4) 8,100 7,700 7,900 -------- -------- --------Average shareholders' equityfor economic profit purposes (3),(4) 22,800 21,150 19,950 -------- -------- -------- Capital charge at 9.5% (1,084) (1,005) (945) -------- -------- --------Economic profit 1,609 1,319 1,385 -------- -------- -------- (1) The Board determined the Group's cost of capital is to be unchanged for 2007 at 9.5%. (2) Amortisation charged for purchased intangibles, adjusted for tax and minority interests. (3) Average ordinary shareholders' equity for Group economic profit calculation is the sum of adjusted equity and reserves plus goodwill and intangible assets arising on acquisition, but excludes preference shares. (4) Averages for the period will not correspond exactly to period end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentation purposes only. Economic profit generated by business 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 654 734 593 --------- -------- --------UK Retail Banking 315 323 266UK Business Banking 339 411 327 --------- --------- ---------Barclaycard 101 22 115International Retail and Commercial Banking 85 324 169 --------- --------- ---------International Retail and Commercial Banking-ex Absa 31 233 76International Retail and Commercial Banking-Absa 54 91 93 --------- --------- ---------Barclays Capital 969 510 671Barclays Global Investors 210 181 195Barclays Wealth 114 43 87Head office functions and other operations (185) (172) (143) --------- --------- --------- 1,948 1,642 1,687Historic goodwill and intangibles arising on acquisition (387) (363) (376)Variance to average shareholders' funds(excluding minority interest) 48 40 74 --------- --------- ---------Economic profit 1,609 1,319 1,385 --------- --------- --------- Economic profit for the Group increased 16% (£224m) to £1,609m (2006: £1,385m).The rise in economic profit was greater than the increase in both profit beforetax and earnings per share. This was due to the more efficient use of capitalacross the Group partially offset by the increased share of minority interests. UK Retail Banking economic profit increased 18% (£49m) to £315m (2006: £266m)due to a 9% increase in profit before tax and a 5% increase in the economiccapital charge reflecting exposure growth in the portfolio and implementation ofthe updated Operational Risk Model. UK Business Banking economic profitincreased 4% (£12m) to £339m (2006: £327m) due to a 9% increase in profit beforetax partially offset by a 22% increase in the economic capital charge arisingfrom the impact of asset growth and implementation of the updated Credit andOperational Risk Models. Barclaycard economic profit decreased 12% (£14m) to £101m (2006: £115m),primarily due to the 17% decrease in profit before tax and a 5% decrease in theeconomic capital charge arising from the decline in UK card balances andimprovement in default probability methodology. International Retail and Commercial Banking - excluding Absa economic profitdecreased 59% (£45m) to £31m (2006: £76m), due to a 27% decrease in profitbefore tax, and an increase in the economic capital charge of 14%. The increasein economic capital charge reflects the impact of lending growth in Spain and arevised methodology. International Retail and Commercial Banking - Absa economic profit decreased 42%(£39m) reflecting a higher economic capital charge due to exposure growth in theportfolio. Barclays Capital economic profit increased 44% (£298m) to £969m (2006: £671m),due to a 33% increase in profit before tax and a 22% increase in the economiccapital charge. The increased economic capital charge is due to growth in equityinvestments and operational and market risk. Barclays Wealth economic profit increased 31% (£27m) to £114m (2006: £87m), dueto a 34% increase in profit before tax and an increase in the economic capitalcharge of 18%, reflecting exposure growth in the Wealth lending portfolio. Performance relative to the 2004 to 2007 goal period Barclays will continue to use goals to drive performance. At the end of 2003,Barclays established a set of four year performance goals for the period 2004 to2007 inclusive. The primary goal is to achieve top quartile total shareholderreturn (TSR) relative to a peer group(1) of financial services companies. TSR isdefined as the value created for shareholders through share price appreciation,plus reinvested dividend payments. The peer group is regularly reviewed toensure that it remains aligned to our business mix and the direction and scaleof our ambition. In terms of progress towards the Group's goal, Barclays delivered TotalShareholder Return (TSR) of 63% and was positioned 6th within its peer group(second quartile) for the goal period commencing 1st January 2004. At the time of setting the TSR goal, we estimated that achieving top quartileTSR would require the achievement of compound annual growth in economic profit(2) in the range of 10% to 13% per annum (£6.5bn to £7.0bn of cumulative economic profit) (3) over the 2004 to 2007 goal period. Economic profit for the first half of 2007 was £1.6bn, which, added to the£6.0bn generated in 2004, 2005 and 2006, delivered a cumulative total of £7.6bnfor the goal period to date. Therefore Barclays has delivered 117% of theminimum range and 109% of the upper range of the cumulative economic profit goalafter expiry of only 88% of the goal period. (1) Peer group for 2007 remained unchanged from 2006: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland and UBS. (2) Economic profit is defined on page 64. (3) Restated for the implementation of IFRS in 2005. Risk Tendency As part of its credit risk management system, the Group uses a model-basedmethodology to assess the point-in-time expected loss of credit portfoliosacross different customer categories. The approach is termed Risk Tendency andapplies to credit exposures in both wholesale and retail sectors. Risk Tendencymodels provide statistical estimates of loss levels within a rolling 12 monthperiod based on averages in the ranges of possible losses expected from each ofthe current portfolios. This contrasts with impairment allowances required underaccounting standards, which are based on objective evidence of actual impairmentas at the balance sheet date. Since Risk Tendency and impairment allowances are calculated for differentpurposes and on different bases, Risk Tendency does not predict loan impairment.Risk Tendency is provided to present a view of the evolution of the quality andscale of the credit portfolios. 30.06.07 31.12.06 30.06.06 £m £m £mUK Banking 870 790 705 --------- -------- --------UK Retail Banking 580 500 430UK Business Banking 290 290 275 --------- -------- --------Barclaycard 1,000 1,135 1,105International Retail and Commercial Banking 315 220 195 --------- -------- --------International Retail and Commercial Banking-ex Absa 105 75 70International Retail and Commercial Banking-Absa 210 145 125 --------- -------- --------Barclays Capital 110 95 125Barclays Wealth 10 10 10Transition Businesses(1) 5 10 25 --------- -------- -------- 2,310 2,260 2,165 --------- -------- -------- (1) Included within Head office functions and other operations. Risk Tendency increased £50m (2%) to £2,310m (31st December 2006: £2,260m)reflecting the broadly stable risk profile of the loan book. Factors influencingRisk Tendency included the very strong growth (16%) of the Group loans andadvances balances, particularly in Barclays Capital where the Risk Tendencycomponent is very low, methodology enhancements in UK Retail Banking, and thematuration in the credit risk profile in the international card portfolios.These were partially offset by a portfolio sale, methodology refinements inBarclaycard and improvements in the credit risk profile in the wholesale andcorporate portfolios. UK Retail Banking Risk Tendency increased £80m to £580m (31st December 2006:£500m). This reflects £120m methodology enhancements in unsecured loans to bringthem more in line with UK cards. Excluding these enhancements Risk Tendencydecreased by £40m reflecting an improvement in the credit risk profile in the UKunsecured personal loan portfolios offset by some growth in loan balances. Barclaycard Risk Tendency decreased £135m to £1,000m (31st December 2006:£1,135m) reflecting the sale of part of the Monument portfolio and a methodologyenhancement in the UK cards portfolio. Excluding these factors, Risk Tendencyincreased by £20m reflecting balance sheet growth in the internationalportfolios offset by some improvement in the credit risk profile of UK cards. Risk Tendency at International Retail and Commercial Banking - excluding Absaincreased £30m to £105m (31st December 2006: £75m) reflecting a change to therisk profile in Emerging Markets and balance sheet growth in Emerging Marketsand Western Europe. International Retail and Commercial Banking - Absa Risk Tendency increased £65mto £210m (31st December 2006: £145m) caused by a weakening of retail creditconditions in South Africa after a series of interest rate rises in 2006 and2007 and balance sheet growth. ADDITIONAL INFORMATION Group reporting changes in 2007 Barclays announced on19th June 2007 the impact of certain changes in GroupStructure and reporting on the 2006 results. There was no impact on the Groupincome statement or balance sheet. UK Retail Banking. The unsecured lending business, previously managed andreported within Barclaycard and the Barclays Financial Planning business,previously managed and reported within Barclays Wealth are now managed andreported within UK Retail Banking. The changes combine these products withrelated products already offered by UK Retail Banking. In the UK certain UKPremier customers are now managed and reported within Barclays Wealth. Barclaycard. The unsecured lending portfolio, previously managed and reportedwithin Barclaycard, has been transferred and is now managed and reported withinUK Retail Banking. International Retail and Commercial Banking - excluding Absa. A number of highnet worth customers are now managed and reported within Barclays Wealth in orderto better match client profiles to wealth services. Barclays Wealth. In the UK and Western Europe certain Premier and high net worthcustomers are now managed and reported within Barclays Wealth having beenpreviously reported within UK Retail Banking and International Retail andCommercial Banking - excluding Absa. The Barclays Financial Planning business previously managed and reported withinBarclays Wealth, has become a fully integrated part of and is managed andreported within UK Retail Banking. Finally with effect from 1st January 2007Barclays Wealth - closed life assurance activities continues to be managedwithin Barclays Wealth and for reporting purposes has been combined rather thanbeing reported separately. The structure and reporting remains unchanged for UK Business Banking,International Retail and Commercial Banking- Absa, Barclays Capital, BarclaysGlobal Investors and Head Office Functions and Other Operations. Basis of Preparation There have been no significant changes to the accounting policies described inthe 2006 Annual report. Therefore the information in this announcement has beenprepared using the accounting policies and presentation applied in 2006. Changes to the UK Financial Services Authority Listing, Prospectus, Disclosureand Transparency Rules to implement the European Union Transparency Directive,including the requirement for the half-yearly report to be prepared inaccordance with IAS 34 'Interim Financial Reporting,' first apply to financialyears beginning on or after 20th January 2007. Therefore the revised Listing,Prospectus and Disclosure Rules will first be applied to the June 2008 InterimResults Announcement. Future accounting developments IFRS 7 ('Financial Instruments Disclosures') and an amendment to IAS 1('Presentation of Financial Statements') on capital disclosures were issued bythe IASB in August 2005 for application in accounting periods beginning on orafter 1st January 2007 and have been adopted by the European Commission. The newor revised disclosures will be included in the financial statements for the yearended 31st December 2007. Consideration will be given during the second half of 2007 to the implications,if any, of the following IFRIC interpretations issued during 2006 and 2007 whichwould first apply to the Group accounting period beginning on 1st January 2008: • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions• IFRIC 12 Service Concession Arrangements• IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction IFRS 8 ('Operating Segments') was issued in November 2006 and would first berequired to be applied to the Group accounting period beginning on 1st January2009. The standard replaces IAS 14 Segmental Reporting and would align operatingsegmental reporting with segments reported to senior management as well asrequiring amendments and additions to the existing segmental reportingdisclosures. The standard has not been endorsed for use in the European Union.Once it has been endorsed, the Group will consider the enhancements thatpermitted early adoption in 2008 may make to the transparency of the segmentaldisclosures. IFRIC 13 Customer Loyalty Programs was issued in June 2007 and would first applyto the Group accounting period beginning on 1st January 2009. The Interpretationaddresses accounting by entities that grant loyalty award credits (such as'points' or travel miles) to customers who buy other goods or services. Itrequires entities to allocate some of the proceeds of the initial sale to theaward credits and recognise these proceeds as revenue only when they havefulfilled their obligations. The implications of this IFRIC interpretation arebeing considered and any resulting change in accounting policy would beaccounted for in accordance with IAS 8 in 2009. Share capital The Group manages its debt and equity capital actively. The Group's authority tobuy back ordinary shares (up to 980.8 million ordinary shares) was renewed atthe 2007 Annual General Meeting. As per the announcement made on 23rd July 2007, Barclays intends to minimise thedilutive effect on its existing shareholders of the issuance of Barclays sharesto Temasek and China Development Bank by commencing a share buyback programmefor up to €3.6 billion (£2.4 billion). The earliest date the buyback would startis shortly after the publication of these interim results and the latest isafter conclusion of its offer for ABN AMRO. Group share schemes The independent trustees of the Group's share schemes may make purchases ofBarclays PLC ordinary shares in the market at any time or times following thisannouncement of the Group's results for the purposes of those schemes' currentand future requirements. The total number of ordinary shares purchased would notbe material in relation to the issued share capital of Barclays PLC. Filings with the SEC The results will be furnished as a Form 6-K to the US Securities and ExchangeCommission as soon as practicable following the publication of these results. Competition and regulatory matters The scale of regulatory change remains challenging, arising in part from theimplementation of some key European Union (EU) directives. Many changes tofinancial services legislation and regulation have come into force in recentyears and further changes will take place in the near future. Concurrently,there is continuing political and regulatory scrutiny of the operation of theretail banking and consumer credit industries in the UK and elsewhere. Thenature and impact of future changes in policies and regulatory action are notpredictable and are beyond the Group's control but could have an impact on theGroup's businesses and earnings. In the EU as a whole, these regulatory actions included an enquiry into retailbanking in all of the then 25 member states by the European Commission'sDirectorate General for Competition. The enquiry looked at retail banking inEurope generally and Barclays has fully co-operated with the enquiry. On 31stJanuary 2007 the European Commission announced that the enquiry had identifiedbarriers to competition in certain areas of retail banking, payment cards andpayment systems in the EU. The Commission indicated it will use its powers toaddress these barriers, and will encourage national competition authorities toenforce European and national competition laws where appropriate. Any actiontaken by the Commission and national competition authorities could have animpact on the payment cards and payment systems businesses of Barclays and onits retail banking activities in the EU countries in which it operates. In September 2005 the UK Office of Fair Trading (OFT) received a super-complaintfrom the Citizens Advice Bureau relating to payment protection insurance (PPI).As a result, the OFT commenced a market study on PPI in April 2006. In October2006, the OFT announced the outcome of the market study and, following a periodof consultation, the OFT referred the PPI market to the UK CompetitionCommission for an in-depth enquiry in February 2007. This enquiry could last forup to two years. Also in October 2006, the UK Financial Services Authority (FSA)published the outcome of its broad industry thematic review of PPI salespractices in which it concluded that some firms fail to treat customers fairly.Barclays has cooperated fully with these investigations and will continue to doso. In April 2006, the OFT commenced a review of the undertakings given followingthe conclusion of the Competition Commission Enquiry in 2002 into the supply ofbanking services to small and medium enterprises. Barclays is cooperating fullywith that review. The OFT has carried out investigations into Visa and MasterCard credit cardinterchange rates. The decision by the OFT in the MasterCard interchange casewas set aside by the Competition Appeals Tribunal in June 2006. The OFT'sinvestigation in the Visa interchange case and a second MasterCard interchangecase are ongoing. The outcome is not known but these investigations may have animpact on the consumer credit industry in general and therefore on Barclaysbusiness in this sector. In February 2007 the OFT announced that it wasexpanding its investigation into interchange rates to include debit cards. On 1st April 2007, the UK consumer interest association known as Which?submitted a super-complaint to the OFT pursuant to the Enterprise Act 2002. Thesuper-complaint criticises the various ways in which credit card companiescalculate interest charges on credit card accounts. On 26th June 2007, the OFTannounced a new programme of work with the credit card industry and consumerbodies in order to make the costs of credit cards easier for consumers tounderstand. This OFT decision follows the receipt by the OFT of thesuper-complaint from Which?. This new work will explore the issues surroundingthe costs of credit for credit cards including purchases, cash advances,introductory offers and payment allocation. The OFT's programme of work isexpected to take six months. The OFT announced the findings of its investigation into the level of late andover-limit fees on credit cards in April 2006, requiring a response from creditcard companies by 31st May 2006. Barclaycard responded by confirming that itwould reduce its late and over-limit fees on credit cards from 1st August 2006. In September 2006, the OFT announced that it had decided to undertake a factfind on the application of its statement on credit card fees to current accountunauthorised overdraft fees. The fact find was completed in March 2007. On 29th March 2007, the OFT announced its decision to conduct a formal investigation into the fairness of bank current account charges. The OFT announced a market study into personal current accounts (PCAs) in the UK on 26th April 2007. The market study will look at: (i) whether the provision of ''free if in credit'' PCAs delivers sufficiently high levels of transparency and value for customers; (ii) the implications for competition and consumers if there were to be a shift away from ''free if in credit'' PCAs; (iii) the fairness and impact on consumers generally of the incidence, level and consequences of account charges; and (iv) what steps could be taken to improvecustomers' ability to secure better value for money, in particular to helpcustomers make more informed current account choices and drive competition. Thestudy will focus on PCAs but will include an examination of other retail bankingproducts, in particular savings accounts, credit cards, personal loans andmortgages in order to take into account the competitive dynamics of UK retailbanking. On 27th July 2007, the OFT commenced High Court proceedings by agreement withBarclays and seven other banks and building societies in which both the OFT andthe banks and building societies seek declarations on legal issues arising fromthe banks' terms and conditions relating to overdraft charges. Specifically,those declarations will address key aspects of the applicability of the UnfairTerms in Consumer Contracts Regulations to those terms and conditions and thequestion of whether such terms are capable of amounting to unlawful penaltycharges. The proceedings will run in parallel with the ongoing OFT dual inquiry intounauthorised overdraft charges and PCAs. As the purpose of the proceedings is toseek to clarify the legitimacy of the banks' overdraft charging provisions, thebanks are seeking a stay of all pending county court litigation in relation tosuch matters. The Financial Ombudsman Service has agreed to suspend reviews ofsuch cases and the FSA has granted complaints handling waivers in respect of allcomplaints on the same issues pending conclusion of the test case. In January 2007, the FSA issued a Statement of Good Practice relating toMortgage Exit Administration fees. Barclays will charge the fee applicable atthe time the customer took out the mortgage, which is one of the optionsrecommended by the FSA. Acquisitions On 8th February 2007 Barclays completed the acquisition of IndexchangeInvestment AG. Indexchange is based in Munich offering exchange traded fundproducts. On 28th February 2007 Barclays completed the acquisition Nile Bank Limited. NileBank is based in Uganda with 18 branches and 228 employees. On 30th March 2007 Barclays completed the acquisition of EquiFirst. EquiFirst isa non-prime wholesale mortgage originator in the United States. On 18th May 2007 Barclays completed the acquisition of Walbrook GroupLimited. Walbrook is based in Jersey, Guernsey, Isle of Man and Hong Kong whereit serves high net worth private clients and corporate customers. Disposals On 4th April 2007 Barclays completed the sale of part of Monument, a credit cardportfolio. Recent developments On 16th April 2007 Barclays announced the sale of Barclays Global InvestorsJapan Trust & Banking Co., Ltd, a Japanese trust administration and custodyoperation. On 18th June 2007 Barclays announced it had entered into an agreement to sell a50% shareholding in Intelenet Global Services Pvt Ltd. Completion is subject tothe receipt of applicable regulatory approval and is expected in the second halfof 2007. On 23rd April 2007, the supervisory and management boards of ABN AMRO HoldingN.V. (ABN AMRO) and the board of Barclays jointly announced that agreement hadbeen reached on the terms of a merger of ABN AMRO and Barclays. Revised terms ofthe offer being made by Barclays for ABN AMRO were announced by Barclays on 23rdJuly 2007. On 23rd July 2007, Barclays also announced an unconditional subscription of £2.4billion of Barclays shares by China Development Bank and Temasek Holdings, aswell as a conditional subscription by them of £6.6 billion of Barclays shareswhich was subject to a partial clawback in favour of certain Barclaysshareholders. The proceeds of this conditional investment will be used to fundpart of the cash consideration to be payable to ABN AMRO shareholders under therevised offer. Barclays also announced that it intends to minimise the dilutiveeffect of the unconditional subscription on existing shareholders by commencinga share buyback programme for up to £2.4 billion. Barclays will make a separateannouncement describing the timing and terms on which such buybacks will bemade. The merger is subject to, among other things, the satisfaction or waiver ofcertain conditions, including approval by Barclays shareholders. It is currentlyanticipated that the merger will be completed in the fourth quarter of 2007. NOTES----- 1. Assets held in respect of linked liabilities to customers under investment contracts/liabilities to customers under investment contracts As at 30.06.07 31.12.06 30.06.06Non-trading financial instruments fair £m £m £mvaluedthrough profit and loss held in respect of linked liabilities 92,194 82,798 79,334Cash and bank balances within the funds 1,541 1,839 2,046 --------- --------- ---------Assets held in respect of linked liabilities to customers under investment contracts 93,735 84,637 81,380 --------- --------- ---------Liabilities arising from investment contracts (93,735) (84,637) (81,380) --------- --------- --------- 2. Derivative financial instruments The tables set out below analyse the contract or underlying principal and thefair value of derivative financial instruments held for trading purposes and forthe purposes of managing the Group's structural exposures. Derivatives aremeasured at fair value and the resultant profits and losses from derivativesheld for trading purposes are included in net trading income. Where derivativesare held for risk management purposes and when transactions meet the criteriaspecified in IAS 39, the Group applies hedge accounting as appropriate to therisks being hedged. Contract 30.06.07 notional Fair value amount Assets LiabilitiesDerivatives designated as held for £m £m £mtradingForeign exchange derivatives 2,113,080 23,852 (22,325)Interest rate derivatives 21,671,954 102,959 (103,722)Credit derivatives 1,755,840 13,430 (12,916)Equity and stock index and commodity derivatives 620,500 32,254 (37,814) ---------- -------- ---------Total derivative assets/(liabilities) held for trading 26,161,374 172,495 (176,777) ---------- -------- --------- Derivatives designated in hedgeaccounting relationshipsDerivatives designated as cash flow hedges 42,193 162 (433)Derivatives designated as fair value hedges 22,246 324 (483)Derivatives designated as hedges of 16,094 1,244 (81)net investments ---------- -------- ---------Total derivative assets/(liabilities)designated in hedge accounting relationships 80,533 1,730 (997) ---------- -------- ---------Total recognised derivative assets/ (liabilities) 26,241,907 174,225 (177,774) ---------- -------- --------- Contract 31.12.06 notional Fair value amount Assets LiabilitiesDerivatives designated as held fo £m £m £mtradingForeign exchange derivatives 1,500,774 22,026 (21,745)Interest rate derivatives 17,666,353 76,010 (75,854)Credit derivatives 1,224,548 9,275 (8,894)Equity and stock index and commodity derivatives 495,080 29,962 (33,253) ---------- -------- --------Total derivative assets/(liabilities) held for trading 20,886,755 137,273 (139,746) ---------- -------- -------- Derivatives designated in hedgeaccounting relationshipsDerivatives designated as cash flow hedges 63,895 132 (401)Derivatives designated as fair value hedges 19,489 298 (441)Derivatives designated as hedges of net investments 12,050 650 (109) ---------- -------- --------Total derivative assets/(liabilities)designated in hedge accounting relationships 95,434 1,080 (951) ---------- -------- --------Total recognised derivative assets/ (liabilities) 20,982,189 138,353 (140,697) ---------- -------- -------- Contract 30.06.06 notional Fair value amount Assets LiabilitiesDerivatives designated as held for £m £m £mtradingForeign exchange derivatives 1,407,480 20,865 (20,885)Interest rate derivatives 17,863,507 80,471 (80,625)Credit derivatives 897,769 5,473 (5,075)Equity and stock index and commodity derivatives 587,142 29,099 (31,721) ----------- --------- ---------Total derivative assets/(liabilities) held for trading 20,755,898 135,908 (138,306) ----------- --------- --------- Derivatives designated in hedgeaccounting relationshipsDerivatives designated as cash flow 31,724 135 (351)hedgesDerivatives designated as fair value hedges 15,982 267 (313)Derivatives designated as hedges of net investments 12,292 591 (12) ----------- --------- ---------Total derivative assets/(liabilities)designated in hedge accounting relationships 59,998 993 (676) ----------- --------- ---------Total recognised derivative assets/ (liabilities) 20,815,896 136,901 (138,982) ----------- --------- --------- Total derivative notionals have grown over the period primarily due to increasesin the volume of fixed income derivatives, reflecting the continued growth inclient based activity and increased use of electronic trading platforms inEurope and the US. Internet rate and credit derivative values have alsoincreased significantly, largely due to growth in the market for these products. 3. Loans and advances to banks As at 30.06.07 31.12.06 30.06.06By geographical area £m £m £mUnited Kingdom 8,933 6,229 7,848Other European Union 13,538 8,513 10,209United States 12,351 9,056 10,888Africa 2,252 2,219 1,375Rest of the World 6,120 4,913 5,014 -------- -------- -------- 43,194 30,930 35,334Less: Allowance for impairment (3) (4) (4) -------- -------- --------Total loans and advances to banks 43,191 30,926 35,330 -------- -------- -------- 4. Loans and advances to customers As at 30.06.07 31.12.06 30.06.06 £m £m £mRetail business 147,730 139,350 134,534Wholesale and corporate business 176,787 146,281 150,963 --------- -------- -------- 324,517 285,631 285,497Less: Allowances for impairment (3,274) (3,331) (3,400) --------- -------- --------Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- By geographical areaUnited Kingdom 183,756 170,518 164,417Other European Union 52,178 43,430 43,528United States 33,767 25,677 26,523Africa 34,175 31,691 29,694Rest of the World 20,641 14,315 21,335 --------- -------- -------- 324,517 285,631 285,497Less: Allowance for impairment (3,274) (3,331) (3,400) --------- -------- --------Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- By industryFinancial institutions 67,125 45,954 56,616Agriculture, forestry and fishing 3,144 3,997 3,449Manufacturing 14,086 15,451 13,951Construction 4,764 4,056 4,430Property 17,489 16,528 16,929Energy and water 8,000 6,810 5,527Wholesale and retail distribution and leisure 17,209 15,490 16,902Transport 6,012 5,586 5,252Postal and communication 3,793 2,180 1,394Business and other services 36,533 29,425 29,453Home loans(1) 104,319 98,172 89,001Other personal 31,713 31,840 31,865Finance lease receivables 10,330 10,142 10,728 --------- -------- -------- 324,517 285,631 285,497Less: Allowance for impairment (3,274) (3,331) (3,400) --------- -------- --------Total loans and advances to customers 321,243 282,300 282,097 --------- -------- -------- (1) Excludes commercial property mortgages. The industry classifications have been prepared at the level of the borrowingentity. This means that a loan to the subsidiary of a major corporation isclassified by the industry in which that subsidiary operates even though theparent's predominant business may be a different industry. 5. Allowance for impairment on loans and advances Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mAt beginning of period 3,335 3,404 3,450Acquisitions and disposals (75) (20) (3)Exchange and other adjustments (6) (48) (105)Unwind of discount (53) (50) (48)Amounts written off (see below) (1,011) (1,178) (996)Recoveries (see below) 124 134 125Amounts charged against profit (see below) 963 1,093 981 --------- -------- --------At end of period 3,277 3,335 3,404 --------- -------- -------- Amounts written offUnited Kingdom (820) (995) (751)Other European Union (46) (20) (54)United States (87) (28) (18)Africa (58) (97) (167)Rest of the World - (38) (6) --------- -------- -------- (1,011) (1,178) (996) --------- -------- --------RecoveriesUnited Kingdom 93 98 80Other European Union 7 8 10United States 8 9 13Africa 15 16 17Rest of the World 1 3 5 --------- -------- -------- 124 134 125 --------- -------- --------Impairment charged against profit: New and increased impairment allowancesUnited Kingdom 941 1,211 1,042Other European Union 85 126 56United States 82 16 44Africa 111 107 102Rest of the World 4 5 13 --------- -------- -------- 1,223 1,465 1,257 --------- -------- -------- Less: Releases of impairment allowanceUnited Kingdom (82) (111) (84)Other European Union (11) (47) (25)United States (21) (10) (16)Africa (9) (18) (15)Rest of the World (13) (52) (11) --------- -------- -------- (136) (238) (151) --------- -------- -------- Recoveries (124) (134) (125) --------- -------- --------Total impairment charges on loans and advances(1) 963 1,093 981 --------- -------- -------- (1) This excludes other credit provisions and impairment on available for sale assets detailed on page 50. Allowance £m £m £mUnited Kingdom 2,396 2,477 2,428Other European Union 334 311 259United States 72 100 128Africa 452 417 474Rest of the World 23 30 115 -------- -------- --------Total allowance for impairment 3,277 3,335 3,404 -------- -------- -------- 6. Potential credit risk loans The following tables present an analysis of potential credit risk loans(non-performing and potential problem loans). As at 30.06.07 31.12.06 30.06.06Potential credit risk loans £m £m £mSummaryImpaired loans(1) 4,693 4,444 4,630Accruing loans which are contractuallyoverdue 90 days or more as to principal or interest 598 598 618 --------- -------- -------- 5,291 5,042 5,248Restructured loans 61 46 46 --------- -------- --------Total non-performing loans 5,352 5,088 5,294Potential problem loans 735 761 935 --------- -------- --------Total potential credit risk loans 6,087 5,849 6,229 --------- -------- -------- Geographical splitImpaired loans(1):United Kingdom 3,548 3,340 3,164Other European Union 456 410 461United States 76 129 172Africa 589 535 657Rest of the World 24 30 176 --------- -------- --------Total 4,693 4,444 4,630 --------- -------- -------- Accruing loans which are contractuallyoverdue 90 days or more as to principal or interestUnited Kingdom 508 516 528Other European Union 61 58 67United States 4 3 2Africa 25 21 21Rest of the World - - - --------- -------- --------Total 598 598 618 --------- -------- -------- (1) Impaired loans are non-performing loans where, in general, an impairment allowance has been raised. This classification may also include non-performing loans which are fully collateralised or where the indebtedness has already been written down to the expected realisable value. As at 30.06.07 31.12.06 30.06.06 £m £m £mRestructured loansUnited Kingdom 3 - 2Other European Union 12 10 10United States 28 22 17Africa 18 14 17Rest of the World - - - -------- -------- --------Total 61 46 46 -------- -------- -------- Total non-performing loansUnited Kingdom 4,059 3,856 3,694Other European Union 529 478 538United States 108 154 191Africa 632 570 695Rest of the World 24 30 176 -------- -------- --------Total 5,352 5,088 5,294 -------- -------- -------- Potential problem loansUnited Kingdom 409 465 599Other European Union 23 32 51United States 9 21 35Africa 271 240 248Rest of the World 23 3 2 -------- -------- --------Total 735 761 935 -------- -------- -------- Total potential credit risk loansUnited Kingdom 4,468 4,321 4,293Other European Union 552 510 589United States 117 175 226Africa 903 810 943Rest of the World 47 33 178 -------- -------- --------Total 6,087 5,849 6,229 -------- -------- -------- Allowance coverage of non-performing % % %loansUnited Kingdom 59.0 64.2 65.7Other European Union 63.1 65.1 48.1United States 66.7 64.9 67.0Africa 71.5 73.2 68.2Rest of the World 95.8 100.0 65.3 -------- -------- --------Total 61.2 65.6 64.3 -------- -------- -------- Allowance coverage of total potential % % %credit risk loansUnited Kingdom 53.6 57.3 56.6Other European Union 60.5 61.0 44.0United States 61.5 57.1 56.6Africa 50.0 51.5 50.3Rest of the World 48.9 91.0 64.6 -------- -------- --------Total 53.8 57.0 54.6 -------- -------- -------- As at 30.06.07 31.12.06 30.06.06Allowance coverage of non-performing % % %loans:Retail 61.4 65.6 63.2Wholesale and corporate 60.9 65.5 66.8 --------- -------- --------Total 61.2 65.6 64.3 --------- -------- -------- Allowance coverage of total potentialcredit risk loans:Retail 55.6 59.8 56.9Wholesale and corporate 49.7 50.6 50.4 --------- -------- --------Total 53.8 57.0 54.6 --------- -------- -------- Allowance coverage of non-performance loans decreased to 61.2% from 65.6% at31st December 2006 principally owing to a number of larger names where therecovery outlook is relatively high. 7. Available for sale financial investments As at 30.06.07 31.12.06 30.06.06 £m £m £mDebt securities 42,727 47,910 49,908Equity securities 1,652 1,379 1,400Treasury bills and other eligible bills 3,387 2,420 2,498 --------- -------- --------- 47,766 51,709 53,806Less: Allowance for impairment (2) (6) (90) --------- -------- ---------Available for sale financial investments 47,764 51,703 53,716 --------- -------- --------- 8. Other assets As at 30.06.07 31.12.06 30.06.06 £m £m £mSundry debtors 4,401 4,298 3,980Prepayments 583 658 962Accrued income 1,159 722 834Insurance assets, including unit linked assets 146 172 90 -------- -------- --------Other assets 6,289 5,850 5,866 -------- -------- -------- 9. Other liabilities As at 30.06.07 31.12.06 30.06.06 £m £m £mObligations under finance leases payable 86 92 102Sundry creditors 5,075 4,118 5,772Accruals and deferred income 5,747 6,127 4,893 -------- -------- --------Other liabilities 10,908 10,337 10,767 -------- -------- -------- 10. Provisions 30.06.07 31.12.06 30.06.06Redundancy and restructuring 104 102 90Undrawn contractually committed facilities and guarantees 38 46 50Onerous contracts 68 71 44Sundry provisions 317 243 290 -------- -------- --------Provisions 527 462 474 -------- -------- -------- 11. Other reserves As at 30.06.07 31.12.06 30.06.06 £m £m £mAvailable for sale reserve 238 132 9Cash flow hedging reserve (407) (230) (172)Capital redemption reserve 309 309 309Other capital reserve 617 617 617Currency translation reserve (486) (438) (176) -------- -------- --------Other reserves 271 390 587 -------- -------- -------- Movements in other reserves reflect the relevant amounts recorded in theconsolidated statement of recognised income and expense on page 90. 12. Retirement benefit liabilities The Group's IAS 19 pension surplus across all schemes as at 30th June 2007 was£540m (31st December 2006: deficit of £817m). The surplus comprised net recognised liabilities of £1,804m (31st December 2006: £1,719m) and unrecognised actuarial gains of £2,344m (31st December 2006: £902m). The net recognised liabilities comprised retirement benefit liabilities of £1,840m (31st December 2006: £1,807m) and assets of £36m (31st December 2006: £88m). The Group's IAS 19 pension surplus in respect of the main UK scheme as at 30thJune 2007 was £867m (31st December 2006: deficit of £475m). The primary reasonfor the movement of £1,342m was an increase in AA long-term corporate bondyields which resulted in a higher discount rate of 5.82% (31st December 2006:5.12%), partially offset by an increase in the inflation assumption to 3.35%(31st December 2006: 3.08%) and lower than expected returns on the assets.Mortality assumptions remain unchanged from those in force at 31st December2006. The actuarial funding position of the main UK pension scheme as at 30th June2007, estimated based on assumptions relating to the formal triennial valuationin 2004, was a surplus of £1,100m (31st December 2006: surplus of £1,300m), representing a funding ratio of 107%. The Pensions Protection Fund (PPF) solvency ratio(1) for the main UK scheme as at 30th June 2007 was estimated to be 131% (31st December 2006: 121%). The next formal triennial valuation is due as at 30th September 2007. Assumptions will be reviewed and updated as part of that valuation. (1) The PPF solvency ratio represents the funds assets as a percentage of pension liabilities calculated using a section 179 valuation model. 13. Legal proceedings Barclays has for some time been party to proceedings, including a class action,in the United States against a number of defendants following the collapse ofEnron; the class action claim is commonly known as the Newby litigation. On 20thJuly 2006 Barclays received an Order from the United States District Court forthe Southern District of Texas Houston Division which dismissed the claimsagainst Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newbylitigation. On 4th December 2006 the Court stayed Barclays dismissal from theproceedings and allowed the plaintiffs to file a supplemental complaint. On 19thMarch 2007 the United States Court of Appeals for the Fifth Circuit issued itsdecision on an appeal by Barclays and two other financial institutionscontesting a ruling by the District Court allowing the Newby litigation toproceed as a class action. The Court of Appeals held that because no properclaim against Barclays and the other financial institutions had been alleged bythe plaintiffs, the case could not proceed against them. The plaintiffs haveapplied to the United States Supreme Court for a review of this decision.Pending the outcome of further appellate proceedings, the District Court hasstayed the Newby litigation. Barclays considers that the Enron related claims against it are without meritand is defending them vigorously. It is not possible to estimate Barclayspossible loss in relation to these matters, nor the effect that they might haveupon operating results in any particular financial period. Barclays has been in negotiations with the staff of the US Securities andExchange Commission with respect to a settlement of the Commission'sinvestigations of transactions between Barclays and Enron. Barclays does notexpect that the amount of any settlement with the Commission would have asignificant adverse effect on its financial position or operating results. Barclays is engaged in various other litigation proceedings both in the UnitedKingdom and a number of overseas jurisdictions, including the United States,involving claims by and against it which arise in the ordinary course ofbusiness. Barclays does not expect the ultimate resolution of any of theproceedings to which Barclays is party to have a significant adverse effect onthe financial position of the Group and Barclays has not disclosed thecontingent liabilities associated with these claims either because they cannotreasonably be estimated or because such disclosure could be prejudicial to theconduct of the claims. 14. Contingent liabilities and commitments As at 30.06.07 31.12.06 30.06.06 £m £m £mAcceptances and endorsements 295 287 248Guarantees and assets pledged as collateral for security 33,445 31,252 33,417Other contingent liabilities 7,757 7,880 8,354 -------- -------- --------Contingent liabilities 41,497 39,419 42,019 -------- -------- -------- Commitments 194,810 205,504 204,860 -------- -------- -------- 15. Market risk Market risk is the risk that Barclays earnings or capital, or its ability tomeet business objectives, will be adversely affected by changes in the level orvolatility of market rates or prices such as interest rates, credit spreads,commodity prices, equity prices and foreign exchange rates. Barclays Capital's market risk exposure, as measured by average total DailyValue at Risk (DVaR), was £39.3m in the first half of 2007. This is 9% (£3.1m)more than the corresponding period of 2006 and 3% (£1.3m) up on the second halfof 2006. The growth in Commodity DVaR is consistent with Barclays Capital'sbusiness plan. Total DVaR as at 30th June 2007 was £41.6m (31st December 2006: £41.9m). Analysis of Barclays Capital's market risk exposures The daily average, maximum and minimum values of DVaR were calculated as below: DVaR Half-year ended 30th June 2007 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 19.7 27.2 13.0Credit spread risk 20.4 28.1 14.6Commodity risk 19.5 27.2 14.8Equity risk 10.1 15.3 7.3Foreign exchange risk 4.3 6.7 2.9Diversification effect (34.7) n/a n/a ------- -------- -------Total DVaR 39.3 47.1 33.1 ------- -------- ------- Half-year ended 31st December 2006 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 19.7 28.8 12.3Credit spread risk 24.4 33.1 17.9Commodity risk 14.2 21.6 9.0Equity risk 7.9 11.6 5.8Foreign exchange risk 3.6 6.3 1.8Diversification effect (31.8) n/a n/a ------- -------- -------Total DVaR 38.0 43.2 34.0 ------- -------- ------- Half-year ended 30th June 2006 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 20.5 25.2 14.6Credit spread risk 24.2 27.5 20.9Commodity risk 8.4 13.9 5.7Equity risk 7.7 10.0 6.0Foreign exchange risk 4.5 7.7 2.0Diversification effect (29.1) n/a n/a ------- -------- -------Total DVaR 36.2 43.0 31.3 ------- -------- ------- (1) The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet movements in available for sale reserve 95 173 (313)Net movements in cash flow hedging reserve (280) (68) (419)Net movements in currency translation reserve (48) (186) (595)Tax 37 (14) 267Other movements 23 (5) 30 -------- -------- --------Amounts included directly in equity (173) (100) (1,030)Profit after tax 2,943 2,594 2,601 -------- -------- --------Total recognised income and expense 2,770 2,494 1,571 -------- -------- -------- Attributable to:Equity holders of the parent 2,502 2,121 1,561Minority interests 268 373 10 -------- -------- -------- 2,770 2,494 1,571 -------- -------- -------- The consolidated statement of recognised income and expense reflects all itemsof income and expense for the period, including items taken directly to equity.Movements in individual reserves are shown including amounts which relate tominority interests; the impact of such amounts is then reflected in the amountattributable to such interests. Movements in individual reserves are also shownon a pre-tax basis with any related tax recorded on the separate tax line. The available for sale reserve reflects gains or losses arising from the changein fair value of available for sale financial assets except for items recordedin the income statement which are: impairment losses; gains or lossestransferred to the income statement due to fair value hedge accounting; andforeign exchange gains or losses on monetary items such as debt securities. Whenan available for sale asset is impaired or derecognised, the cumulative gain orloss previously recognised in the available for sale reserve is transferred tothe income statement. The movement in the first half of 2007 primarily reflectsthe recognition of net unrealised gains from changes in fair value partiallyoffset by the transfer of net realised gains. Cash flow hedging aims to minimise exposure to variability in cash flows that isattributable to a particular risk associated with a recognised asset orliability or a highly probable forecast transaction that could affect profit orloss. The portion of the gain or loss on the hedging instrument that is deemedto be an effective hedge is recognised in the cash flow hedging reserve. Thegains and losses deferred in this reserve will be transferred to the incomestatement in the same period or periods during which the hedged item isrecognised in the income statement. The movement in the first half of 2007primarily reflects net unrealised losses from changes in the fair value of thehedging instruments partially offset by the transfer of net losses to the incomestatement. Exchange differences arising on the net investments in foreign operations andeffective hedges of net investments are recognised in the currency translationreserve and transferred to the income statement on the disposal of the netinvestment. The movement in the first half of 2007 primarily reflects changes inthe value of the US Dollar on net investments and the impact of changes in thevalue of the Rand on the minority interest in Absa Group Limited partiallyoffset by the impact of other currency movements on net investments which arehedged on a post-tax basis. The US Dollar net investments are economicallyhedged through US Dollar-denominated preference share capital, which is notrevalued for accounting purposes. SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) Half Year ended 30.06.07 31.12.06 30.06.06 £m £m £mNet cash flow from operating activities 2,729 1,017 9,030Net cash flow from investing activities 3,990 184 (1,338)Net cash flow from financing activities 410 (574) 1,266Effects of exchange rate on cash and (196) 948 (386)cash equivalents -------- -------- --------Net increase in cash and cash equivalents 6,933 1,575 8,572Cash and cash equivalents at beginning of period 30,952 29,377 20,805 -------- -------- --------Cash and cash equivalents at end of period 37,885 30,952 29,377 -------- -------- -------- In order to provide more relevance to users and to enhance the comparability ofits financial statement presentation, the Group has changed certainclassification within the cash flow statement in 2006. Certain activities whichwere categorised as operating activities have been reclassified as financingactivities and investing activities. OTHER INFORMATION Registered office 1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0) 20 7116 1000.Company number: 48839. Website www.barclays.com Registrar The Registrar to Barclays PLC, The Causeway, Worthing, West Sussex, BN99 6DA,England, United Kingdom. Tel: 0870 609 4535 or +44 1214 157 004 from overseas. Listing The principal trading market for Barclays PLC ordinary shares is the LondonStock Exchange. Ordinary shares are also listed on the Tokyo Stock Exchange.Trading on the New York Stock Exchange is in the form of ADSs under the tickersymbol 'BCS'. Each ADS represents four ordinary shares of 25p each and isevidenced by an ADR. The ADR depositary is The Bank of New York whoseinternational telephone number is +1-212-815-3700, whose domestic telephonenumber is 1-888-BNY-ADRS and whose address is The Bank of New York, InvestorRelations, PO Box 11258, Church Street Station, New York, NY 10286-1258. Filings with the SEC Statutory accounts for the year ended 31st December 2006, which also includecertain information required for the joint Annual Report on Form 20-F ofBarclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission(SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200Park Avenue, New York, NY 10166, United States of America or from the Director,Investor Relations at Barclays registered office address. Copies of the Form20-F are available from the Barclays Investor Relations website (details below)and from the SEC's website (www.sec.gov). Results timetableEx dividend Date Wednesday, 15th August 2007Dividend Record Date Friday, 17th August 2007Dividend Payment Date Monday, 1st October 2007Full Year Trading Update* Tuesday, 27th November 20072007 Preliminary Results Announcement* Tuesday, 19th February 2008 *Note that these announcement dates are provisional and subject to change. Economic data 30.06.07 31.12.06 30.06.06 Period end - US$/£ 2.01 1.96 1.85Average - US$/£ 1.97 1.84 1.79Period end - •/£ 1.49 1.49 1.45Average - •/£ 1.48 1.47 1.46Period end - ZAR/£ 14.12 13.71 13.19Average - ZAR/£ 14.11 12.47 11.31 For further information please contact: Investor Relations Media Relations-------------------- -----------------Mark Merson/James S Johnson Alistair Smith/Robin Tozer+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6132/6586 More information on Barclays can be found on our website at the followingaddress: www.investorrelations.barclays.com APPENDIX 1 ABSA Half Year ended 30.06.07 31.12.06 30.06.06 Rm Rm Rm -------- -------- --------Interest and similar income 24,185 20,269 17,331Interest expense and similar charges (15,608) (12,263) (10,440) -------- -------- --------Net interest income 8,577 8,006 6,891Impairment losses on loans and advances (985) (979) (594) -------- -------- -------- 7,592 7,027 6,297 -------- -------- --------Fee and commission income 6,020 5,874 5,077Fee and commission expense (394) (305) (272) -------- -------- --------Net fee and commission income 5,626 5,569 4,805 -------- -------- --------Insurance premium revenue 1,795 1,720 1,549Premiums ceded to reinsurers (142) (134) (141) -------- -------- --------Net insurance premium income 1,653 1,586 1,408 -------- -------- --------Gross claims and benefits paid on insurance contracts (836) (754) (622)Reinsurance recoveries 58 42 15 -------- -------- --------Net claims and benefits paid (778) (712) (607)Changes in insurance and investment liabilities (573) (454) (294)Gains and losses from banking and trading activities 930 806 610Gains and losses from investment activities 1,084 1,303 588Other operating income 469 579 359 -------- -------- --------Net operating income 16,003 15,704 13,166Operating expenses (9,113) (8,685) (7,935)Impairments (28) (75) -Indirect taxation (449) (450) (421)Share of profit of associated and joint venture companies 16 44 69 -------- -------- --------Operating profit before income tax 6,429 6,538 4,879 -------- -------- -------- This appendix summarises the Rand results of Absa Group Limited for the sixmonths to 30th June 2007 as reported to JSE Limited. Absa Group Limited results Absa Group Limited's operating profit before income tax increased 32% (R1,550m) to R6,429m (2006 R4,879m) reflecting very good performances from Retail Banking,Absa Capital, Bancassurance and Corporate and Business Banking. Absa GroupLimited delivered a return on equity of 26.8% (2006: 24.7%). Key factorsimpacting the results included very strong asset and income growth, increasedtransaction volumes, a strong investment performance, an increased retailcredit impairment charge, and the realisation of synergies from leveragingBarclays expertise and economies of scale. Net operating income has grown R2,837m to R16,003m (2006: R13,166m). Net interest income grew 25% (R1,686m) to R8,577m (2006: R6,891m). Loans andadvances to customers increased 20% from 30th June 2006 driven by growth of 25%in mortgages, 53% in credit cards and 32% in commercial property finance.Deposits increased 13%. Non-interest income increased 22% reflecting higher transaction volumes, astrong performance in insurance related earnings and higher investment incomefrom bancassurance operations. As expected the impairment charge on loans and advances increased R391m to R985m(2006: R594m) from the cyclically low levels of recent years. Arrears in retailportfolios increased driven by interest rate increases in 2006 and 2007 andpressure on collections. Action has been taken to reduce some of the higher riskcustomer balances. Operating expenses increased 15% resulting from increased investment in thebusiness in order to support continued growth in volumes and customers. Excellent progress was made with the realisation of synergy benefits resultingfrom the majority ownership of Absa Group Limited by Barclays. In the first sixmonths of 2007, synergies of R650m were delivered relative to a full year 2007target of R750m. On an annualised basis, synergies delivered to date are closeto delivery of the 2009 target of R1.4bn. Integration costs were in line withthe target of R300m. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Barclays