Interim Results - Part 2

3rd Aug 2006 07:01

Barclays PLC03 August 2006 PART 2 OF 2 FINANCIAL REVIEW Results by nature of income and expense Net interest income Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mCash and balances at central banks 7 6 3Financial instruments 1,406 1,305 967Loans and advances to banks 523 251 439Loans and advances to customers 7,883 7,275 5,669Other 725 747 570 -------- -------- --------Interest income 10,544 9,584 7,648 -------- -------- -------- Deposits from banks (1,263) (1,102) (954)Customer accounts (1,844) (1,530) (1,185)Debt securities in issue (2,388) (1,913) (1,355)Subordinated liabilities (340) (312) (293)Other (305) (352) (161) -------- -------- --------Interest expense (6,140) (5,209) (3,948) -------- -------- --------Net interest income 4,404 4,375 3,700 -------- -------- -------- Group net interest income increased 19% (£704m) to £4,404m (2005: £3,700m). Theinclusion of Absa added net interest income of £600m in the first half of 2006.Group net interest income excluding Absa grew 3%. A component of the benefit of free funds included in Group net interest incomeis the structural hedge which functions to reduce the impact of the volatilityof short-term interest rate movements. The contribution of the structural hedgedecreased to £47m (2005: £58m), largely due to the impact of relatively highershort-term interest rates and lower medium-term rates. Interest income includes £48m (2005: £30m) accrued on impaired loans. Business margins Half-year ended 30.06.06 31.12.05 30.06.05 % % %UK Retail Banking assets 0.86 1.01 0.83UK Retail Banking liabilities 1.98 1.97 2.01UK Business Banking assets 1.86 1.87 1.87UK Business Banking liabilities 1.44 1.38 1.54Barclaycard assets 6.64 6.70 6.48 -------- -------- --------Barclaycard assets-cards 8.78 8.35 7.56Barclaycard assets-loans 4.34 4.78 5.15 -------- -------- --------International Retail and CommercialBanking-ex Absa assets(1) 1.24 1.26 1.47International Retail and CommercialBanking-ex Absa liabilities(1) 2.12 2.03 2.00International Retail and CommercialBanking-Absa assets(1), (2) 3.45 3.52 -International Retail and CommercialBanking-Absa liabilities(1), (2) 2.41 2.39 -Wealth Management assets 1.11 0.99 0.98Wealth Management liabilities 1.08 1.02 1.06 Average balances Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mUK Retail Banking assets 64,989 65,689 66,511UK Retail Banking liabilities 77,566 74,867 72,072UK Business Banking assets 51,103 45,879 42,059UK Business Banking liabilities 43,671 41,837 39,234Barclaycard assets 25,727 24,729 23,759 -------- -------- --------Barclaycard assets-cards 13,307 13,233 13,126Barclaycard assets-loans 12,420 11,496 10,633 -------- -------- --------International Retail and CommercialBanking-ex Absa assets(1) 26,245 24,847 20,931International Retail and CommercialBanking-ex Absa liabilities(1) 10,174 9,372 9,065International Retail and CommercialBanking-Absa assets(1) 24,228 20,225 -International Retail and CommercialBanking-Absa liabilities(1) 13,455 13,338 -Wealth Management assets 4,891 4,560 4,229Wealth Management liabilities 24,521 24,257 22,603 (1) International Retail and Commercial Banking business margins, average balances and business net interest income have been restated on a consistent basis to reflect changes in methodology. (2) For the second half of 2005, this reflects the five month post-acquisitionperiod on an annualised basis. Business net interest income Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mUK Retail Banking assets 276 336 273UK Retail Banking liabilities 762 744 718UK Business Banking assets 471 433 390UK Business Banking liabilities 312 292 300Barclaycard assets 846 828 770 -------- -------- --------Barclaycard assets-cards 579 553 496Barclaycard assets-loans 267 275 274 -------- -------- --------International Retail and CommercialBanking-ex Absa assets(1) 162 158 153International Retail and CommercialBanking-ex Absa liabilities(1) 107 96 90International Retail and CommercialBanking-Absa assets(1) 414 308 -International Retail and CommercialBanking-Absa liabilities(1) 161 138 -Wealth Management assets 27 22 21Wealth Management liabilities 132 124 120 -------- -------- --------Business net interest income 3,670 3,479 2,835 -------- -------- -------- Reconciliation of business interest income to Group net interest income Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mBusiness net interest income 3,670 3,479 2,835Other:- Barclays Capital 495 540 525- Barclays Global Investors 7 9 6- Other 232 347 334 -------- -------- --------Group net interest income 4,404 4,375 3,700 -------- -------- -------- Business net interest income is derived from the interest rate earned on averageassets or paid on average liabilities relative to the average Bank of Englandbase rate, local equivalents for international businesses or the rate managed bythe bank using derivatives. The margin is expressed as annualised businessinterest income over the relevant average balance. Asset and liability marginscannot be added together as they are relative to the average Bank of Englandbase rate, local equivalent for international businesses or the rate managed bythe bank using derivatives. The benefit of capital attributed to thesebusinesses is excluded from the calculation of business margins and business netinterest income. Average balances are calculated on daily averages for most UK banking operationsand monthly averages elsewhere. Within the reconciliation of Group net interest income, there is an amountcaptured as Other. This relates to: benefit of capital, excluded from thebusiness margin calculation, Head office functions and other operations; netfunding on non-customer assets and liabilities; and Wealth Management - closedlife assurance activities. (1) International Retail and Commercial Banking business margins, average balancesand business net interest income have been restated on a consistent basis toreflect changes in methodology. UK Retail Banking assets margin improved slightly to 0.86% (2005: 0.83%)reflecting a stable mortgage margin, despite the impact of new product launchesand a higher contribution from non-mortgage assets. UK Retail Bankingliabilities margin was broadly stable at 1.98% (2005: 2.01%). UK Business Banking assets margin was broadly stable at 1.86% (2005: 1.87%). TheUK Business Banking liabilities margin decreased 10 basis points to 1.44% (2005:1.54%), although it improved relative to the second half of 2005. Barclaycard cards margin increased 122 basis points to 8.78% (2005: 7.56%).Margins in the cards business improved principally due to the impact ofincreased card rates in the second half of 2005 and the continued roll-off ofpromotional rate balances through the first half of 2006. Barclaycard loansmargin decreased 81 basis points to 4.34% (2005: 5.15%). Margins in the loansbusiness continued to reduce due to both a change in the product mix, with ahigher weighting to secured loans, and competitive pressures. International Retail and Commercial Banking - excluding Absa assets margindecreased 23 basis points to 1.24% (2005: 1.47%) largely reflecting growth inmortgage assets as a proportion of total assets in Europe, revised competitivepricing strategies aimed at increasing market share, and competitive pressures.International Retail and Commercial Banking - excluding Absa liabilities marginincreased 12 basis points to 2.12% (2005: 2.00%) mainly as a consequence ofincreased margins in Africa and the acquisition of the ING Ferri business inFrance. International Retail and Commercial Banking - Absa assets margin of 3.45%(Second half 2005: 3.52%) was broadly stable compared to the margin for thefirst five months of Barclays ownership. The liabilities margin of 2.41% (Secondhalf 2005: 2.39%) remained consistent. Wealth Management assets margin increased 13 basis points to 1.11% (2005: 0.98%)principally due to a change in product mix and pricing. Wealth Managementliabilities margin was broadly stable at 1.08% (2005: 1.06%). Net fee and commission income Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mFee and commission income 4,077 3,558 2,872Fee and commission expense (425) (393) (332) -------- -------- --------Net fee and commission income 3,652 3,165 2,540 -------- -------- -------- Fee and commission income rose 42% (£1,205m) to £4,077m (2005: £2,872m). Theinclusion of Absa increased fee and commission income by £479m in the first halfof 2006. Excluding Absa, fee and commission income grew 25%, driven by a broadbased performance across the Group, particularly within Barclays GlobalInvestors reflecting increases in both management and incentive fees, higherasset values, higher market levels and a strong investment performance. Fee and commission expense increased 28% (£93m) to £425m (2005: £332m), largelyreflecting the inclusion of Absa, which added £43m, and increases inBarclaycard. Net fee and commission income increased 44% (£1,112m) to £3,652m (2005:£2,540m). The inclusion of Absa increased net fee and commission income by £436min the first-half of 2006. Group net fee and commission income excluding Absagrew 27%, reflecting growth across all businesses. Total foreign exchange income was £457m (2005: £298m) and consisted of revenuesearned from both retail and wholesale activities. Foreign exchange income earnedon customer transactions by UK Retail Banking, UK Business Banking,International Retail and Commercial Banking, Barclaycard, Barclays GlobalInvestors and Wealth Management, both externally and with Barclays Capital, isreported in those respective business units within fee and commission income.The foreign exchange income earned in Barclays Capital and in Treasury isreported within trading income. Principal transactions Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mRates related business 1,636 873 859Credit related business 565 272 317 -------- -------- --------Net trading income 2,201 1,145 1,176 -------- -------- -------- Cumulative gain from disposal ofavailable forsale assets/investment securities 120 33 87Dividend income 18 9 13Net income from financial instruments 86 214 175designated at fair valueOther investment income 150 229 98 -------- -------- --------Net investment income 374 485 373 -------- -------- --------Principal transactions 2,575 1,630 1,549 -------- -------- -------- Most of the Group's trading income is generated in Barclays Capital. Net trading income increased 87% (£1,025m) to £2,201m (2005: £1,176m) due tostrong performances across Barclays Capital Rates and Credit businesses, inparticular in fixed income, equities, commodities and credit derivativeproducts. This was driven by higher volumes of client-led activity across abroad range of products and geographical regions and by the continued return onprior year investments. The inclusion of Absa increased net trading income by£31m in the first-half of 2006. Group net trading income excluding Absa grew85%. Net investment income remained flat at £374m (2005: £373m). The inclusion ofAbsa increased net investment income by £32m in the first-half of 2006. The cumulative gain from disposal of available for sale assets and investmentsecurities increased 38% (£33m) to £120m (2005: £87m) driven by investmentrealisations primarily in Private Equity. Fair value movements on certain assets and liabilities have been reported withinnet trading income or within net investment income depending on the nature ofthe transaction. Fair value movements on insurance assets included within netinvestment income contributed £46m (2005: £149m). Net premiums from insurance contracts Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mGross premiums from insurance 536 524 385contractsPremiums ceded to reinsurers (26) (23) (14) -------- -------- --------Net premiums from insurance contracts 510 501 371 -------- -------- -------- Net premiums from insurance contracts increased 37% (£139m) to £510m (2005:£371m). The inclusion of Absa increased net premiums from insurance contracts by£124m in the first half of 2006. Group net premiums from insurance contractsexcluding Absa increased 4% reflecting growth in UK consumer lending. Other income Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £m(Decrease)/increase in fair value ofassets held in respect of linkedliabilities to customers underinvestment contracts (2,960) 2,349 6,885Decrease/(increase) in liabilitiesheld in respect of linked liabilities to customers under investment contracts 2,960 (2,349) (6,885)Property rentals 28 29 25Other 33 69 24 -------- -------- --------Other income 61 98 49 -------- -------- -------- Certain asset management products offered to institutional clients by BarclaysGlobal Investors are recognised as investment contracts. Accordingly theinvested assets and the related liabilities to investors are held at fair valueand changes in those fair values are reported within Other income. Net claims and benefits paid on insurance contracts Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mGross claims and benefits paid oninsurance contracts 235 398 296Reinsurers' share of claims paid (2) (40) (9) -------- -------- --------Net claims and benefits paid oninsurance contracts 233 358 287 -------- -------- -------- Net claims and benefits paid on insurance contracts decreased 19% (£54m) to£233m (2005: £287m). The inclusion of Absa increased net claims and benefits by£54m. Net claims and benefits paid on insurance contracts excluding Absadecreased 38%, principally reflecting lower claims and benefits in WealthManagement - closed life assurance activities due to market conditions in theperiod. Impairment charges Half-year ended 30.06.06 31.12.05 30.06.05Impairment charges on loans and £m £m £madvances- New and increased impairment allowances 1,257 1,184 945- Releases (151) (199) (134)- Recoveries (125) (124) (98) -------- -------- --------Impairment charges on loans andadvances (see note 5) 981 861 713 Credit provisionsCharges for the period in respect ofprovision for undrawncontractually committed facilities andguarantees provided (7) - (7) -------- -------- --------Impairment charges on loans andadvances and credit provisions 974 861 706 Impairment on available for sale assets 83 4 - -------- -------- --------Total impairment charges 1,057 865 706 -------- -------- -------- Total impairment charges increased 50% (£351m) to £1,057m (2005: £706m). Impairment charges on loans and advances and credit provisions Impairment charges on loans and advances and credit provisions increased 38%(£268m) to £974m (2005: £706m). Excluding Absa, the increase was 30% andreflected the continued challenging credit environment in UK unsecured retaillending. Steady conditions in the wholesale sector persisted, with a low levelof corporate defaults. In the UK, consumers faced continued pressure on household cash flows. High debtlevels and changing social attitudes to bankruptcy and debt default contributedto increased impairment charges. In UK credit cards, the quality of new businesscontinued to improve, reflecting a continued tightening of underwritingstandards. Despite these improvements, the value of debt in arrears rose becauseof an increase in the average value of debt per customer whilst the number ofcustomers in delinquency decreased. In unsecured loans, delinquency rates weresteady in the first half of 2006 and customers in delinquency decreased but thehigher rate of bankruptcy has increased the level of charge-offs. Impairment onunsecured loans grew but at a slower rate than seen in UK Cards. In UK Home Finance, delinquencies were flat and amounts charged-off remainedlow. Smaller business continued to see some deterioration in delinquency ratesfrom a historically low base. Group impairment charges on loans and advances on an annualised basis amountedto 0.61% (2005: 0.52%), as a percentage of period-end total loans and advancesof £320,831m (30th June 2005: £275,188m). Retail impairment charges increased to £839m (2005: £582m), including £39m inrespect of Absa. Retail impairment charges on loans and advances on anannualised basis amounted to 1.25% (2005: 1.06%) of period end loans andadvances of £134,534m (30th June 2005: £109,566m). In the wholesale and corporate businesses, impairment charges on loans andadvances increased to £142m (2005: £131m), including £13m in respect of Absa.The increase occurred primarily in UK Business Banking and reflected the growthin lending balances and the inclusion of Iveco Finance. The wholesale andcorporate impairment charge on an annualised basis amounted to 0.15% (2005:0.16%) as a percentage of period end total loans and advances of £186,297m (30thJune 2005: £165,622m). Impairment on available for sale assets Impairment charges of £83m related to losses on assets in the available for saleportfolio where an intention to sell caused the losses to be treated as otherthan temporary in nature. This impairment charge arose from interest ratemovements rather than credit deterioration. There was a corresponding gain whichwas recognised in net trading income. Operating expenses Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mStaff costs (refer to page 52) 4,147 3,464 2,854Administrative expenses 1,916 2,061 1,382Depreciation 207 210 152Impairment loss - property andequipment 6 - -- intangible assets - 9 -Operating lease rentals 168 179 137Gains on sale and leaseback of property (238) - -Amortisation of intangible assets 63 62 17 -------- -------- --------Operating expenses 6,269 5,985 4,542 -------- -------- -------- Operating expenses increased 38% (£1,727m) to £6,269m (2005: £4,542m). Theinclusion of Absa added operating expenses of £781m. Group operating expensesexcluding Absa grew 21%, reflecting a higher level of business activity and anincrease in performance related pay. Operating expenses were reduced by gains from the sale and leaseback of propertyof £238m (2005: £nil) as the Group took advantage of historically low yields onproperty to realise gains on some of its freehold portfolio. The gains within UKBanking of £145m were largely offset by incremental investment. Administrative expenses increased 39% (£534m) to £1,916m (2005: £1,382m). Theinclusion of Absa added administrative expenses of £314m in the first half of2006. Group administrative expenses excluding Absa grew 16% principally as aresult of higher business activity in Barclays Global Investors, BarclaysCapital and Barclaycard International. Operating lease rentals increased 23% (£31m) to £168m (2005: £137m). Theinclusion of Absa added operating lease rentals of £43m in the first half of2006 which more than offset the absence of double occupancy costs incurred in2005, associated with the head office relocation to Canary Wharf. The increase in the amortisation of intangible assets primarily arises followingthe acquisition of Absa Group Limited on 27th July 2005. The Group cost:income ratio remained flat at 57% (2005: 57%). This reflectedimproved productivity across all businesses, which was offset by the inclusionof Absa. The Group cost:net income ratio was 63% (2005: 63%). Staff costs Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mSalaries and accrued incentive payments 3,364 2,780 2,256Social security costs 292 215 197Pension costs- defined contribution plans 55 36 40- defined benefit plans 142 115 156Other post retirement benefits 15 14 13Other 279 304 192 -------- -------- --------Staff costs 4,147 3,464 2,854 -------- -------- -------- Staff costs increased 45% (£1,293m) to £4,147m (2005: £2,854m). The inclusion ofAbsa added staff costs of £347m. Excluding the impact of Absa, staff costsincreased 33%. Salaries and accrued incentive payments rose 49% (£1,108m) to £3,364m (2005:£2,256m). The inclusion of Absa added £316m. Excluding Absa, salaries andaccrued incentive payments rose 35%, principally due to performance relatedpayments in Barclays Capital and Barclays Global Investors. Pension costs comprise all UK and international pension schemes. Included inpension costs is a charge of £147m (2005: £155m) in respect of the Group's mainUK pension schemes. Staff numbers As at 30.06.06 31.12.05 30.06.05Staff numbers:UK Banking 41,500 39,800 40,600 -------- -------- --------UK Retail Banking 33,600 32,000 33,000UK Business Banking 7,900 7,800 7,600 -------- -------- --------Barclaycard 8,400 7,800 7,200International Retail and Commercial Banking 47,000 45,400 12,400 -------- -------- --------International Retail and CommercialBanking-ex Absa 13,300 12,700 12,400International Retail and CommercialBanking-Absa 33,700 32,700 - -------- -------- --------Barclays Capital 10,500 9,900 8,400Barclays Global Investors 2,400 2,300 2,100Wealth Management 7,500 7,200 7,200Head office functions and other operations 1,000 900 900Total Group permanent and fixed term contract staff worldwide 118,300 113,300 78,800Agency staff worldwide 8,700 7,000 4,300 -------- -------- --------Total including agency staff 127,000 120,300 83,100 -------- -------- -------- Staff numbers are shown on a full-time equivalent basis. Total Group permanentand contract staff comprised 61,900 (31st December 2005: 59,100) in the UK and56,400 (31st December 2005: 54,200) internationally. UK Banking staff numbers increased by 1,700 to 41,500 (31st December 2005:39,800), primarily reflecting the inclusion in UK Retail Banking of mortgageprocessing staff involved in activities previously outsourced. Barclaycard staff numbers rose by 600 to 8,400 (31st December 2005: 7,800),reflecting growth of 200 in Barclaycard US, and increases in operations andcustomer facing staff in the UK. International Retail and Commercial Banking increased staff numbers by 1,600 to47,000 (31st December 2005: 45,400). International Retail and Commercial Banking- excluding Absa increased staff numbers by 600 to 13,300 (31st December 2005:12,700), mainly due to growth in continental Europe. International Retail andCommercial Banking - Absa increased staff numbers by 1,000 to 33,700(31st December 2005: 32,700), reflecting continued growth in the business. Barclays Capital staff numbers rose by 600 to 10,500 (31st December 2005:9,900). Growth was broadly based across all regions and reflected investments inthe front office, systems development and control functions to support greaterbusiness volumes. The growth year on year includes the impact of Absa Capitalstaff, which were included from July 2005. Barclays Global Investors increased staff numbers by 100 to 2,400 (31st December2005: 2,300) reflecting investment to support strategic initiatives. Wealth Management staff numbers rose by 300 to 7,500 (31st December 2005: 7,200)to support the expansion of the business. Head office functions and other operations staff numbers grew 100 to 1,000(31st December 2005: 900). Agency staff numbers rose by 1,700 to 8,700 (31st December 2005: 7,000), largelydue to an increase in Absa. Share of post-tax results of associates and joint ventures Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mProfit from associates 29 38 15Profit/(loss) from joint ventures 1 (9) 1 -------- -------- --------Share of post-tax results ofassociates and joint ventures 30 29 16 -------- -------- -------- The share of post-tax results of associates and joint ventures increased 88%(£14m) to £30m (2005: £16m). The increase in profit from associates primarilyreflects the addition of the Absa associates. Tax The charge for the period is based upon a UK corporation tax rate of 30% for thecalendar year 2006 (full-year 2005: 30%). The effective rate of tax for thefirst half of 2006, based on profit before tax, was 29.2% (2005: 26.6%). Theeffective tax rate differs from 30% as it takes account of the different taxrates which are applied to the profits earned outside the UK, disallowableexpenditure, tax-free income and adjustments to prior year tax provisions. Theeffective tax rate for 2006 is higher than in the prior period principally dueto the higher tax rates applicable to international operations. The tax chargefor the first half of the year includes £640m (2005: £477m) arising in the UKand £432m (2005: £238m) arising overseas. Profit attributable to minority interests Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mAbsa Group Limited minority interests 122 116 -Preference shares 85 80 33Reserve capital instruments 47 28 65Upper tier 2 instruments 7 4 7Barclays Global Investors minorityinterests 26 22 19Other minority interests 7 10 10 -------- -------- --------Profit attributable to minorityinterests 294 260 134 -------- -------- -------- Profit attributable to minority interests increased £160m to £294m (2005: £134m)largely reflecting the acquisition of Absa Group Limited on 27th July 2005 andthe associated preference share funding. Earnings per share Half-year ended 30.06.06 31.12.05 30.06.05Profit attributable to equity holdersof the parent £2,307m £1,606m £1,841mDilutive impact of convertible options (£17m) (£29m) - -------- -------- --------Profit attributable to equity holdersof the parent including dilutive impact of convertible options £2,290m £1,577m £1,841mBasic weighted average number ofshares in issue 6,353m 6,335m 6,337mNumber of potential ordinary shares(1) 177m 156m 141m -------- -------- --------Diluted weighted average number ofshares 6,530m 6,491m 6,478m -------- -------- -------- Basic earnings per ordinary share 36.3p 25.4p 29.1p Diluted earnings per ordinary share 35.1p 24.3p 28.4p The calculation of basic earnings per share is based on the profit attributableto equity holders of the parent and the weighted average number of sharesexcluding own shares held in employee benefit trusts, currently not vested andshares held for trading. When calculating the diluted earnings per share, the profit attributable toequity holders of the parent is adjusted for the conversion of outstandingoptions into shares within certain subsidiary entities. The weighted averagenumber of ordinary shares excluding own shares held in employee benefit trustscurrently not vested and shares held for trading, is adjusted for the effects ofall dilutive potential ordinary shares, totalling 177 million (2005: 141million). (1) Potential ordinary shares reflect the dilutive impact of share optionsoutstanding. Dividends on ordinary shares The Board has decided to pay, on 2nd October 2006, an interim dividend for theyear ended 31st December 2006 of 10.5p per ordinary share for shares registeredin the books of the Company at the close of business on 18th August 2006. Theinterim dividend of 9.2p per ordinary share for the year ended 31st December2005 was paid on 3rd October 2005 and the final dividend for the year ended 31stDecember 2005 of 17.4p per ordinary share was paid on 28th April 2006.Shareholders who have their dividends paid direct to their bank or buildingsociety account will receive a consolidated tax voucher detailing the dividendspaid in the 2006-2007 tax year in mid-October 2006. The amount payable for the 2006 interim dividend is £667m (half-year ended 31stDecember 2005: £1,105m; half-year ended 30th June 2005: £582m). This amountexcludes £16m payable on Barclays shares held by employee benefit trusts (halfyear ended 31st December 2005: £24m; half year ended 30th June 2005: £12m). For qualifying US and Canadian resident ADR holders, the interim dividend of10.5p per ordinary share becomes 42p per ADS (representing four shares). The ADRdepositary will mail the dividend on 2nd October 2006 to ADR holders on therecord on 18th August 2006. For qualifying Japanese shareholders, the final dividend of 10.5p per ordinaryshare will be distributed in mid-October to shareholders on the record on 18thAugust 2006. Shareholders may have their dividends reinvested in Barclays PLC shares byparticipating in the Barclays Dividend Reinvestment Plan. The plan is availableto all shareholders, including members of Barclays Sharestore, provided thatthey do not live in or are subject to the jurisdiction of any country wheretheir participation in the plan would require Barclays or The Plan Administratorto take action to comply with local government or regulatory procedures or anysimilar formalities. Any shareholder wishing to obtain details and a form tojoin the plan should contact The Plan Administrator by writing to: The PlanAdministrator to Barclays, Share Dividend Team, The Causeway, Worthing, WestSussex, BN99 6DA; or, by telephoning 0870 609 4535. The completed form should bereturned to The Plan Administrator on or before 8th September 2006 for it to beeffective in time for the payment of the interim dividend on 2nd October 2006.Shareholders who are already in the plan need take no action unless they wish tochange their instructions in which case they should write to The PlanAdministrator. Analysis of amounts included in the balance sheet Capital resources As at 30.06.06 31.12.05 30.06.05 £m £m £mShareholders' equity excludingminority interests 17,988 17,426 16,099 -------- -------- --------Preference shares 3,435 2,977 2,971Reserve capital instruments 1,922 1,868 1,929Upper tier 2 instruments 586 581 586Absa minority interests 1,397 1,351 -Other minority interests 211 227 200 -------- -------- --------Minority interests 7,551 7,004 5,686 -------- -------- --------Total shareholders' equity 25,539 24,430 21,785Subordinated liabilities 13,629 12,463 11,309 -------- -------- --------Total capital resources 39,168 36,893 33,094 -------- -------- -------- The authorised share capital of Barclays PLC is £2,500m (31st December 2005:£2,500m) comprising 9,996 million (31st December 2005: 9,996 million) ordinaryshares of 25p shares and 1 million (31st December 2005: 1 million) staff sharesof £1 each. Called up share capital comprises 6,509 million (31st December 2005:6,490 million) ordinary shares of 25p each and 1 million (31st December 2005:1 million) staff shares of £1 each. Total capital resources increased £2,275m to £39,168m since 31st December 2005. Shareholders' equity, excluding minority interests, increased £562m since31st December 2005. The current period increase reflects profits attributable toequity holders of the parent of £2,307m, increases in share capital and sharepremium of £75m and other increases in retained reserves of £120m. Offsettingthese movements were dividends paid of £1,105m, decreases in the available forsale and cash flow hedging reserves of £216m and £242m respectively, a £332mdecrease in the translation reserve and a £45m decrease due to changes intreasury and ESOP shares. Subordinated liabilities rose £1,166m since 31st December 2005 reflectingcapital raisings of £1,926m and accrued interest of £15m; offset by exchangerate movements of £352m, redemptions of £129m, fair value adjustments of £280mand amortisation of issue expenses of £14m. Minority interests increased £547m since 31st December 2005. The increaseprimarily reflected the issue, during April 2006, of 30,000,000 preferenceshares of US$25 each (US$750m; £419m) with a 6.625% dividend. Capital ratios Risk weighted assets and capital resources, as defined for supervisory purposesby the Financial Services Authority, comprised: As at 30.06.06 31.12.05 30.06.05Risk weighted assets: £m £m £mBanking bookOn-balance sheet 190,979 180,808 159,927Off-balance sheet 33,010 31,351 30,090Associated undertakings and joint ventures 6,351 3,914 3,299 -------- -------- --------Total banking book 230,340 216,073 193,316 -------- -------- -------- Trading bookMarket risks 27,477 23,216 26,432Counterparty and settlement risks 33,107 29,859 22,658 -------- -------- --------Total trading book 60,584 53,075 49,090 -------- -------- --------Total risk weighted assets 290,924 269,148 242,406 -------- -------- -------- Capital resources:Tier 1Called up share capital 1,628 1,623 1,616Eligible reserves 18,061 16,837 15,544Minority interests(1) 7,629 6,634 5,237Tier one notes(2) 941 981 957Less: intangible assets (7,242) (7,180) (4,880) -------- -------- --------Total qualifying tier 1 capital 21,017 18,895 18,474 -------- -------- -------- Tier 2Revaluation reserves 25 25 25Available for sale-equity gains 188 223 -Collectively assessed impairment allowances 2,593 2,306 2,067Minority Interests 479 515 494Qualifying subordinated liabilities(3)Undated loan capital 3,200 3,212 3,210Dated loan capital 8,157 7,069 6,560 -------- -------- --------Total qualifying tier 2 capital 14,642 13,350 12,356 -------- -------- -------- Less: Supervisory deductions:Investments not consolidated for supervisorypurposes (946) (782) (696)Other deductions (998) (961) (713) -------- -------- -------- (1,944) (1,743) (1,409) -------- -------- --------Total net capital resources 33,715 30,502 29,421 -------- -------- -------- Tier 1 ratio 7.2% 7.0% 7.6%Risk asset ratio 11.6% 11.3% 12.1% (1) Includes reserve capital instruments of £2,158m (31st December 2005: £1,735m; 30th June 2005: £1,679m). Minority interests include an issue of £500m of reserve capital instruments raised during the first half of 2006 which is eligible for inclusion in tier 1 capital. This issue is classified withinsubordinated liabilities on the balance sheet. (2) Tier one notes are included in subordinated liabilities in the consolidatedbalance sheet. (3) Subordinated liabilities are included in tier 2, subject to limits laid downin the supervisory requirements. At 30th June 2006, the Tier 1 capital ratio was 7.2% and the risk asset ratiowas 11.6%. From 31st December 2005, net total capital resources rose £3.2bn andrisk weighted assets increased £21.8bn. Tier 1 capital rose £2.1bn, including £1.2bn arising from profits attributableto equity holders net of dividends paid. Minority interests within Tier 1capital increased £1.0bn primarily due to the issuance of £0.5bn of ReserveCapital Instruments and £0.6bn of preference shares. Tier 2 capital increased£1.3bn mainly as a result of the issuance of £1.4bn of loan capital. The weakening of the Rand against Sterling had a positive impact on capitalratios for the first half of 2006. 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 30.06.06 31.12.05 30.06.05 £m £m £mShareholders' equity excluding minorityinterests 17,988 17,426 16,099 Available for sale reserve (9) (225) (374)Cash flow hedging reserve 172 (70) (328)Retained earningsDefined benefit pension scheme 1,302 1,215 1,401Additional companies in regulatory consolidationand non-consolidated companies (101) (145) 5Foreign exchange on RCIs and upper tier2 loan stock 398 289 390Other adjustments (61) (30) (33) -------- -------- --------Called up share capital and eligiblereserves for regulatory purposes 19,689 18,460 17,160 -------- -------- -------- Total assets and risk weighted assets Total assets increased 7% to £986.1bn (31st December 2005: £924.4bn). Riskweighted assets increased 8% to £290.9bn (31st December 2005: £269.1bn). UK Retail Banking total assets increased 1% to £70.9bn (31st December 2005:£70.4bn). Risk weighted assets increased 3% to £33.8bn (31st December 2005:£32.8bn), due to asset growth, small changes in the asset weighting mix and areduced benefit from credit mitigation transactions in mortgages. UK Business Banking total assets increased 6% to £63.5bn (31st December 2005:£59.9bn), reflecting strong growth in loans and advances to customers. Riskweighted assets increased 8% to £50.8bn (31st December 2005: £47.1bn), broadlyin line with total asset growth. Barclaycard total assets increased 3% to £26.6bn (31st December 2005: £25.8bn)driven by growth in lending balances. Risk weighted assets increased by 10% to£24.0bn (31st December 2005: £21.8bn) primarily due to balance sheet growth anda reduction in securitised balances. International Retail and Commercial Banking - excluding Absa total assetsincreased 5% to £35.8bn (31st December 2005: £34.2bn) primarily reflected strongvolume growth in continental European mortgages. Risk weighted assets increased5% to £21.4bn (31st December 2005: £20.4bn), reflecting the balance sheetgrowth. International Retail and Commercial Banking - Absa total assets were £29.3bn(31st December 2005: £29.4bn) and risk weighted assets £20.7bn (31st December2005: £20.8bn). In Rand terms assets grew 21% to R386bn (31st December 2005:R319bn) and risk weighted assets grew 20% to R273bn (31st December 2005:R226bn). Growth in Rand terms was more than offset by the depreciation in theRand exchange rate against Sterling. Barclays Capital total assets increased 10% to £659.3bn (31st December 2005:£601.2bn). This was mainly attributable to increases in debt and equitysecurities held in the trading portfolio and in reverse repurchase agreements,as the business continued to grow in Europe, the US and Asia. Settlementbalances were also higher compared to December as a result of seasonalfluctuations in trading related activity. Risk weighted assets increased 12% to£130.5bn (31st December 2005: £116.7bn). This increase reflected the growth inthe business. Barclays Global Investors total assets decreased 4% to £77.3bn (31st December2005: £80.9bn). The substantial majority of total assets related to assetmanagement products where equal and offsetting balances are reflected withinliabilities to customers. Risk weighted assets decreased 5% to £1.4bn (31stDecember 2005: £1.5bn). Wealth Management total assets increased 12% to £6.8bn (31st December 2005:£6.1bn) principally reflecting good growth in lending balances. Risk weightedassets increased 21% to £4.9bn (31st December 2005: £4.1bn). Head office functions and other operations total assets remained flat at £9.3bn(31st December 2005: £9.3bn). Risk weighted assets decreased 15% to £3.4bn (31stDecember 2005: £4.0bn). 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 has been enhanced to reflectdefault probabilities during average credit conditions, rather than thoseprevailing at the balance sheet date, thus seeking to remove cyclicality fromthe economic capital calculation. The framework also adjusts economic capital toreflect time horizon, correlation of risks and risk concentrations. Economic capital is allocated on a consistent basis across all of Barclaysbusinesses and risk activities. A single cost of equity is applied to calculatethe cost of risk. Economic capital allocations reflect varying levels 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 will form the basis of the Group's submissionfor the Basel II Internal Capital Adequacy Assessment Process (ICAAP). Economic capital demand(1) Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 5,000 4,900 4,800 -------- -------- --------UK Retail Banking 2,400 2,400 2,300UK Business Banking 2,600 2,500 2,500 -------- -------- --------Barclaycard 3,000 2,950 2,650International Retail and CommercialBanking 1,850 1,700 1,100 -------- -------- --------International Retail and CommercialBanking-ex Absa 1,150 1,150 1,100International Retail and CommercialBanking-Absa(2) 700 550 - -------- -------- --------Barclays Capital 3,600 3,100 2,700Barclays Global Investors 150 150 150Wealth Management 350 400 400Wealth Management - closed lifeassurance activities 50 50 50Head office functions and otheroperations(3) 250 300 250 -------- -------- --------Business unit economic capital 14,250 13,550 12,100Capital held at Group centre(4) 900 950 1,600 -------- -------- --------Economic capital requirement(excluding goodwill) 15,150 14,500 13,700Average historic goodwill andintangible assets(5) 7,900 7,150 5,800 -------- -------- --------Total economic capital requirement(6) 23,050 21,650 19,500 -------- -------- -------- UK Retail Banking economic capital allocation remained unchanged at £2,400m. UKBusiness Banking economic capital allocation increased £100m to £2,600m as assetgrowth was offset by changes to estimates of risk correlation. Barclaycard economic capital allocation increased £50m to £3,000m, reflectingportfolio growth in the UK and Barclaycard US. International Retail and Commercial Banking - excluding Absa economic capitalremained unchanged at £1,150m as portfolio growth in primarily in Africa, Italyand Spain was offset by changes to estimates of risk correlation. International Retail and Commercial Banking - Absa economic capital increased£150m to £700m, after excluding the risk borne by the minority interest. Theallocation reflects six months of ownership, compared to the five months held inthe second half of 2005. (1) Calculated using a five point average over the year. For the half-year a three point average is used. (2) For the second half of 2005 average economic capital demand for Absa relatesto 5 months. (3) Includes Transition Businesses and capital for central function risks. (4) The Group's practice is to maintain an appropriate level of excess capital,held at Group centre, which is not allocated to business units. This variancearises as a result of capital management timing and includes capital held tocover pension contribution risk. (5) Average goodwill relates to purchased goodwill and intangible assets frombusiness acquisitions and (with effect from 2006) capitalised software. Absagoodwill is included for 5 months of the second-half of 2005. As at 30th June2006 Absa goodwill and intangibles amounted to £1,800m and total goodwill andintangibles was £8,100m. (6) Total period-end economic capital requirement as at 30th June 2006 stood at£24,100m (31st December 2005: £21,850m; 30th June 2005: £20,750m). Barclays Capital economic capital allocation increased £500m to £3,600m,reflecting underlying growth in derivative and loan portfolios and a methodologyenhancement to include specific market risk not previously measured in DVaR andgrowth in Private Equity investments. Wealth Management economic capital allocation decreased £50m to £350m followingchanges in estimates of risk correlation. Capital held at the Group centre decreased £50m to £900m as a result of growthin the businesses being partially offset by an increase in available funds tosupport economic capital (see Economic capital supply on page 65). 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: • Cashflow hedging reserve - to the extent that the Group undertakes thehedging of future cash flows, shareholders' equity will include gains and losseswhich will be offset against the gain or loss on the hedged item when it isrecognised in the income statement at the conclusion of the future hedgedtransaction. Given the future offset of such gains and losses, they are excludedfrom shareholders' equity when calculating economic capital. • Available for sale reserve - unrealised gains and losses on such securitiesare included in shareholders' equity until disposal or impairment. Such gainsand losses are excluded from shareholders' equity for the purposes ofcalculating economic capital. Realised gains and losses, foreign exchangetranslation differences and any impairment charges recorded in the incomestatement will impact economic profit. • Retirement benefits liability - the Group has recorded a deficit with aconsequent reduction in shareholders' equity. This represents a non-cashreduction in shareholders' equity. For the purposes of calculating economiccapital, the Group will 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 30.06.06 31.12.05 30.06.05 £m £m £mShareholders' equity excluding 10,750 10,650 11,000minorityinterests less goodwill(2)Retirement benefits liability 1,300 1,350 1,500Cashflow hedging reserve 50 (200) (250)Available for sale reserve (50) (250) (300)Preference shares 3,100 2,950 1,750 -------- -------- --------Available funds for economic capitalexcluding goodwill 15,150 14,500 13,700Average historic goodwill andintangible assets(2) 7,900 7,150 5,800 -------- -------- --------Available funds for economic capital(3) 23,050 21,650 19,500 -------- -------- -------- (1) Averages for the period will not correspond to period-end balances disclosedin the balance sheet. Numbers are rounded to the nearest £50m for presentationalpurposes only. (2) Average goodwill relates to purchased goodwill and intangible assets frombusiness acquisitions, and (with effect from 2006) capitalised software. (3) Available funds for economic capital as at 30th June 2006 stood at £24,100m(31st December 2005: £21,850m; 30th June 2005: £20,750m). Economic profit Economic profit comprises: • Profit after tax and minority interests; less • Capital charge (average shareholders' equity excluding minorityinterests 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. The economic profit performance in 2006 and 2005 is shown below: Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mProfit after tax and minority 2,307 1,606 1,841interests -------- -------- --------Addback of amortisation charged onacquired intangible assets(2) 23 22 7 -------- -------- --------Profit for economic profit purposes 2,330 1,628 1,848 -------- -------- --------Average shareholders' equity excludingminority interests (3), (4) 10,750 10,650 11,000Adjust for unrealised loss/(gains) oncashflow hedge reserve(4) 50 (200) (250)Adjust for unrealised gains onavailable for sale financial instruments (4) (50) (250) (300) Add: retirements benefits liability 1,300 1,350 1,500 Goodwill and intangible assets arisingon acquisitions (4),(5) 7,900 7,150 5,800 -------- -------- --------Average shareholders' equity foreconomic profit purposes (3),(4) 19,950 18,700 17,750 -------- -------- -------- Capital charge at 9.5% (945) (880) (844) -------- -------- --------Economic profit 1,385 748 1,004 -------- -------- -------- (1) The Group's cost of capital for 2006 is unchanged from 2005 at 9.5%. (2) Amortisation charged for purchased intangibles only, adjusted for tax andminority interests. (3) Average ordinary shareholders' equity for Group economic profit calculation is the sum of adjusted equity and reserves plus goodwill and intangible assetsarising on acquisition, but excludes preference shares. (4) Averages for the period will not correspond exactly to period end balancesdisclosed in the balance sheet. Numbers are rounded to the nearest £50m forpresentation purposes only. (5) Absa goodwill is included for 5 months for the second half of 2005. As at 30thJune 2006 Absa goodwill and intangibles amounted to £1,800m (31st December 2005:£1,800m). Economic profit generated by business Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 641 577 553 -------- -------- --------UK Retail Banking 314 316 270UK Business Banking 327 261 283 -------- -------- --------Barclaycard 55 68 115International Retail and CommercialBanking 187 135 70 -------- -------- --------International Retail and CommercialBanking-ex Absa 94 45 70International Retail and CommercialBanking-Absa 93 90 - -------- -------- --------Barclays Capital 671 323 383Barclays Global Investors 195 170 129Wealth Management 77 60 49Wealth Management - closed lifeassurance activities 4 1 (8)Head office functions and otheroperations (143) (323) (17) -------- -------- -------- 1,687 1,011 1,274Historic goodwill and intangiblesarising on acquisition (376) (340) (275)Variance to average shareholders'funds (excluding minority interest) 74 77 5 -------- -------- --------Economic profit 1,385 748 1,004 -------- -------- -------- Economic profit for the Group increased 38% (£381m) to £1,385m (2005: £1,004m).The rise in economic profit was greater than the increase in both profit beforetax and earnings per share. This was due to the efficient use of capital acrossthe Group more than offsetting the increased share of minority interests. Barclaycard economic profit decreased 52% (£60m) to £55m (2005: £115m),comprising a 14% decrease in profit before tax and a 14% increase in theeconomic capital charge, arising from the impact of portfolio growth on averageeconomic capital. International Retail and Commercial Banking - excluding Absa economic profitincreased 34% (£24m) to £94m (2005: £70m), comprising a 28% increase in profitbefore tax and an increase in the economic capital charge of 5%. The increase ineconomic capital charge reflects the impact of portfolio growth in Africa andSpain on economic capital, partly offset by changes to estimates of riskcorrelation. Barclays Capital economic profit increased 75% (£288m) to £671m (2005: £383m),comprising a 66% increase in profit before tax and a 36% increase in theeconomic capital charge. The increase in economic capital charge reflects theimpact of portfolio growth in loan and derivative portfolios on economiccapital, partly offset by methodology enhancements. Wealth Management economic profit increased 57% (£28m) to £77m (2005: £49m),comprising a 31% increase in profit before tax and a decrease in the economiccapital charge of 8%, reflecting the benefit of changes to estimates of riskcorrelation on average economic capital. Group performance management 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 new set of four year performance goals for the period2004-2007 inclusive. The primary goal is to achieve top quartile TotalShareholder Return (TSR) relative to a peer group(1) of financial servicescompanies and is unchanged from the prior goal period. TSR is defined as thevalue created for shareholders through share price appreciation, plusre-invested dividend payments. The peer group is regularly reviewed to ensurethat it remains aligned to our business mix and the direction and scale of ourambition. In terms of progress towards Group goals, Barclays delivered Total ShareholderReturn (TSR) of 38% and was positioned 7th within its peer group (thirdquartile) for the goal period commencing 1st January 2004. The TSR of the FTSE100 Index for this period was 42%. 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) to support top quartile TSR over the 2004-2007 goal period. Economic Profit for the first half of 2006 was £1.4bn, a 38% increase on thefirst six months of 2005. This, when added to the £1.8bn and £1.6bn generated in2005 and 2004 respectively, delivers a cumulative total of £4.8bn for the goalperiod to date which is well ahead of the target range. (1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan, Lloyds TSB, Royal Bank of Scotland and UBS. (2) Economic profit is defined on page 66. (3) Restated for IFRS. 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 Tendencyprovides statistical estimates of losses expected to arise within the next yearbased on averages in the ranges of possible losses expected from each of thecurrent portfolios. This can be contrasted with impairment allowances requiredunder accounting standards, which are based on objective evidence of 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. As at 30.06.06 31.12.05 30.06.05 £m £m £mUK Banking 470 430 400 -------- -------- --------UK Retail Banking 195 180 170UK Business Banking 275 250 230 -------- -------- --------Barclaycard 1,340 1,100 980International Retail and Commercial Banking 195 175 75 -------- -------- --------International Retail and CommercialBanking-ex Absa 70 75 75International Retail and CommercialBanking-Absa 125 100 - -------- -------- --------Barclays Capital 125 110 80Wealth Management 10 5 5Transition Businesses(1) 25 25 35 -------- -------- -------- 2,165 1,845 1,575 -------- -------- -------- Risk Tendency increased 17% (£320m) to £2,165m (31st December 2005: £1,845m). The principal increase in Risk Tendency occurred in Barclaycard, where RiskTendency rose £240m to £1,340m, reflecting the deterioration of creditconditions in the UK credit card and unsecured loan market and enhancements tothe methodology. Risk Tendency growth in the other businesses largely reflectedcredit conditions and loan growth. (1) Included within head office functions and other operations. ADDITIONAL INFORMATION Group reporting changes in 2006 Barclays announced on 16th June 2006 the impact of certain changes in Groupstructure and reporting on 2005 and 2004 results. Barclays has realigned a number of reportable business segments based on thereorganisation of certain portfolios better to reflect the type of clientserved, the nature of the products offered and the associated risks and rewards.The Group's policy for the internal cost of funding and the segmental disclosureof risk weighted assets was also revised with effect from 1st January 2006. Therestatements have no impact on the Group Income Statement or Balance Sheet. Group structure changes - effective 1st January 2006 UK Retail Banking comprises Personal Customers, Local Business (formerly SmallBusiness), UK Premier and Home Finance (formerly Mortgages). A number of smallerbusiness clients previously within UK Business Banking are now managed andreported within UK Retail Banking. UK Business Banking comprises Larger Business and Medium Business includingAsset and Sales Finance. A number of financial institution, large corporate andproperty clients previously within UK Business Banking are now managed by andreported in Barclays Capital. A number of smaller business clients previouslywithin UK Business Banking are now managed and reported within UK Retail Banking. Certain portfolios have been reclassified as businesses in transition and are now managed and reported in Head office functions and other operations. International Retail and Commercial Banking - Absa. The majority of AbsaCorporate and Merchant Banking has been relaunched as Absa Capital and is beingmanaged and reported in Barclays Capital. Barclays Capital has added a number of financial institutions, large corporatesand property companies previously managed within UK Business Banking andInternational Retail and Commercial Banking - Absa. Head office functions and other operations. Certain lending portfoliospreviously managed within UK Business Banking have been reclassified asbusinesses in transition. These businesses are now centrally managed with theobjective of maximising the recovery from these assets. The structure remains unchanged for: Barclays Global Investors; WealthManagement; Wealth Management - closed life assurance activities; Barclaycard and; International Retail and Commercial Banking excluding - Absa. Changes to internal cost of funding - effective 1st January 2006 All transactions between the businesses are conducted on an arm's length basis.Internal charges and transfer pricing adjustments are reflected in theperformance of each business. Head office functions and other operationscontains a centralised Treasury function which manages the Group's capital base,generating a net interest income. Previously the net interest income wasallocated to the businesses based on the level of economic capital held by eachbusiness as a proportion of that held by the Group, which ensured a nil netinterest income result in Treasury. The allocation is now determined by applyingTreasury's effective rate of return on capital to the average economic capitalheld by each business. Changes to risk weighted assets by business - effective 1st January 2006 Under the Group's securitisation programme, certain portfolios of loans andadvances to customers and other assets subject to securitisation or similar risktransfer are adjusted in calculating the Group's risk weighted assets. Witheffect from 1st January 2006 the costs associated with each securitisation,which were previously held centrally, will be allocated to the relevantbusinesses. The regulatory capital adjustments arising from the securitisationprogramme will be attributed to the business which bears the costs. Acquisitions and disposals On 1st January 2006 Barclays completed the sale to Absa Group Limited of theBarclays South African branch business. This business consists of the BarclaysCapital South African operations and Corporate and Business Banking activitiespreviously carried out by the South African Branch of International Retail andCommercial Banking - excluding Absa, together with the associated assets andliabilities. On 29th June 2006, a wholly-owned subsidiary of Barclays Bank PLC acquired a 16%minority equity stake in Greenergy International Limited, a UK based fuels andbiofuels company, for a cash consideration of £12m. Basis of Preparation There have been no significant changes to the accounting policies described inthe 2005 Annual Report. Therefore the information in this announcement has beenprepared using the accounting policies and presentation applied in 2005. 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 adopted by the Group for reporting in 2007. Consideration will be given during 2006 to the implications, if any, of thefollowing International Financial Reporting Interpretations Committee (IFRIC)interpretations issued during 2005 and 2006 which first apply to accountingperiods beginning on or after 1st January 2007: • Interpretation 7 - Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies• Interpretation 8 - Scope of IFRS 2• Interpretation 9 - Reassessment of Embedded Derivatives• Interpretation 10 - Interim Financial Reporting and Impairment. Share capital The Group manages its debt and equity capital actively. The Group's authority tobuy back ordinary shares was renewed at the 2006 Annual General Meeting. 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. In the EU as a whole, this includes an inquiry into retail banking in all 25member states by the European Commission's Directorate General for Competition.The inquiry is looking at retail banking in Europe generally and the Group isco-operating with the inquiry. The outcome of the inquiry is unclear, but it mayhave an impact on retail banking in one or more of the EU countries in which theGroup operates and therefore on the Group's business in that sector. In the UK, in September 2005 the Office of Fair Trading (OFT) received asuper-complaint from the Citizens Advice Bureau relating to payment protectioninsurance (PPI). As a result of its inquiries, the OFT commenced a market studyon PPI in April 2006. The impact of the study is not known at present. In relation to UK consumer credit: • The OFT has carried out investigations into Visa and MasterCard creditcard interchange rates. The decision by the OFT in the MasterCard interchangecase was set aside by the Competition Appeals Tribunal in June 2006. The OFT'sinvestigation in the Visa interchange case is at an earlier stage and a secondMasterCard interchange case is ongoing. The outcome is not known but theseinvestigations may have an impact on the consumer credit industry in general andtherefore on the Group's business in this sector. • The OFT also has a continuing investigation into the level of late andover-limit fees on credit cards. The OFT announced its findings on 5th April2006 requiring a response from credit card companies by 31st May 2006.Barclaycard responded by confirming that it will be reducing its late andover-limit fees on credit cards. The OFT announced in January 2006 that it would be reviewing the undertakingsgiven following the conclusion of the Competition Commission Inquiry in 2002into the supply of banking services to Small and Medium Sized Enterprises. TheOFT commenced the review in April 2006 and anticipates that it will take ninemonths. The Group is cooperating fully with that review. Recent developments Barclays announced on 13th March 2006, that it had signed a non-binding Letterof Intent with Canadian Imperial Bank of Commerce (CIBC) for the sale ofBarclays 43.7% stake in FirstCaribbean International Bank (FirstCaribbean) toCIBC. On 29th June 2006 Barclays announced that it had entered into a definitiveagreement for the sale of the stake to CIBC for approximately US$1.08 billion.CIBC has the option of paying for the transaction in cash, CIBC common shares,or a combination of cash and shares, the relative proportions of which CIBC willdetermine before completion. Barclays would not intend to be a long term holderof any CIBC shares it may receive in connection with this transaction. Thetransaction, which is subject to a number of conditions, including the receiptof applicable regulatory approvals, is anticipated to complete in late 2006. Barclays announced on 22nd June 2006 that it had entered into an agreement topurchase the US mortgage servicing business of HomEq Servicing Corporation fromWachovia Corporation for a consideration of US$469 million. NOTES 1. Assets held in respect of linked liabilities to customers under investment contracts/liabilities arising from investment contracts As at 30.06.06 31.12.05 30.06.05 £m £m £mNon-trading financial instruments fairvalued through profit and loss held inrespect of linked liabilities 79,334 83,193 69,792Cash and bank balances within the funds 2,046 2,008 1,816 -------- -------- --------Assets held in respect of linkedliabilities to customers under investment contracts 81,380 85,201 71,608 -------- -------- --------Liabilities arising from investmentcontracts (81,380) (85,201) (71,608) -------- -------- -------- 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. As at 30.06.06 Contract 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 commodityderivatives 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 flowhedges 31,724 135 (351)Derivatives designated as fair valuehedges 15,982 267 (313)Derivatives designated as hedges of netinvestments 12,292 591 (12) -------- -------- --------Total derivative assets/(liabilities)designated in hedge accounting relationships 59,998 993 (676) -------- -------- --------Total recognised derivativeassets/(liabilities) 20,815,896 136,901 (138,982) -------- -------- -------- Total derivative notionals as at 30th June 2006 have grown from 31st December2005 primarily due to increases in the volume of fixed income derivatives, whichreflects the continued growth in our client base and increased use of electronictrading platforms in Europe and the US. Credit derivative values have alsoincreased significantly due to growth in the market for these products. As at 31.12.05 Contract notional Fair value amount Assets LiabilitiesDerivatives designated as held for £m £m £mtradingForeign exchange derivatives 1,184,074 18,485 (17,268)Interest rate derivatives 15,374,057 81,028 (79,701)Credit derivatives 609,381 4,172 (4,806)Equity and stock index and commodityderivatives 637,452 32,481 (35,128) -------- -------- --------Total derivative assets/(liabilities)held for trading 17,804,964 136,166 (136,903) -------- -------- -------- Derivatives designated in hedgeaccounting relationshipsDerivatives designated as cash flowhedges 40,080 232 (483)Derivatives designated as fair valuehedges 33,479 423 (331)Derivatives designated as hedges ofnet investments 5,919 2 (254) -------- -------- --------Total derivative assets/(liabilities)designated inhedge accounting relationships 79,478 657 (1,068) -------- -------- --------Total recognised derivativeassets/(liabilities) 17,884,442 136,823 (137,971) -------- -------- -------- As at 30.06.05 Contract notional Fair value amount Assets LiabilitiesDerivatives designated as held for £m £m £mtradingForeign exchange derivatives 1,031,529 17,912 (17,174)Interest rate derivatives 13,362,136 93,435 (91,197)Credit derivatives 398,126 3,110 (2,897)Equity and stock index and commodityderivatives 376,436 18,492 (20,815) -------- --------- --------Total derivative assets/(liabilities) held for trading 15,168,227 132,949 (132,083) -------- --------- -------- Derivatives designated in hedgeaccounting relationshipsDerivatives designated as cash flowhedges 22,839 283 (300)Derivatives designated as fair valuehedges 38,857 694 (401)Derivatives designated as hedges ofnet investments 313 6 - -------- --------- --------Total derivative assets/(liabilities) designatedin hedge accounting relationships 62,009 983 (701) -------- --------- --------Total recognised derivativeassets/(liabilities) 15,230,236 133,932 (132,784) -------- --------- -------- 3. Loans and advances to banks As at 30.06.06 31.12.05 30.06.05By geographical area £m £m £mUnited Kingdom 7,848 4,624 6,026Other European Union 10,209 5,423 11,992United States 10,888 13,267 9,180Africa 1,375 880 409Rest of the World 5,014 6,915 7,630 -------- -------- -------- 35,334 31,109 35,237Less: Allowance for impairment (4) (4) (12) -------- -------- --------Total loans and advances to banks 35,330 31,105 35,225 -------- -------- -------- Of the total loans and advances to banks, placings with banks were £18.1bn(2005: £21.1bn). 4. Loans and advances to customers As at 30.06.06 31.12.05 30.06.05 £m £m £mRetail business 134,534 144,039 109,566Wholesale and corporate business 150,963 128,303 130,385 -------- -------- -------- 285,497 272,342 239,951Less: Allowances for impairment (3,400) (3,446) (2,828) -------- -------- --------Total loans and advances to customers 282,097 268,896 237,123 -------- -------- --------By geographical areaUnited Kingdom 164,417 163,759 165,382Other European Union 43,528 38,923 35,479United States 26,523 22,925 22,588Africa 29,694 33,221 3,046Rest of the World 21,335 13,514 13,456 -------- -------- -------- 285,497 272,342 239,951Less: Allowance for impairment (3,400) (3,446) (2,828) -------- -------- --------Total loans and advances to customers 282,097 268,896 237,123 -------- -------- -------- By industryFinancial institutions 56,616 43,102 44,791Agriculture, forestry and fishing 3,449 3,785 2,426Manufacturing 13,951 13,779 12,717Construction 4,430 5,020 4,478Property 16,929 16,325 7,797Energy and water 5,527 6,891 4,976Wholesale and retail distribution andleisure 16,902 17,760 13,844Transport 5,252 5,960 5,169Postal and communication 1,394 1,313 1,164Business and other services 29,453 24,247 28,721Home loans(1) 89,001 89,529 75,435Other personal 31,865 35,543 30,287Finance lease receivables 10,728 9,088 8,146 -------- -------- -------- 285,497 272,342 239,951Less: Allowance for impairment (3,400) (3,446) (2,828) -------- -------- --------Total loans and advances to customers 282,097 268,896 237,123 -------- -------- -------- 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. Loans and advances grew 5% (£13,201m) to £282,097m (31st December 2005:£268,896m). (1) Excludes commercial property mortgages. 5. Allowance for impairment on loans and advances Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mAt beginning of period 3,450 2,840 2,637Acquisitions and disposals (3) 532 23Exchange and other adjustments (105) 62 63Unwind of discount (48) (46) (30)Amounts written off (see below) (996) (923) (664)Recoveries (see below) 125 124 98Amounts charged against profit (seebelow) 981 861 713 -------- -------- --------At end of period 3,404 3,450 2,840 -------- -------- -------- Amounts written offUnited Kingdom (751) (682) (620)Other European Union (54) (40) (16)United States (18) (119) (24)Africa (167) (77) (4)Rest of the World (6) (5) - -------- -------- -------- (996) (923) (664) -------- -------- --------RecoveriesUnited Kingdom 80 95 65Other European Union 10 9 4United States 13 9 6Africa 17 15 1Rest of the World 5 (4) 22 -------- -------- -------- 125 124 98 -------- -------- --------Impairment charged against profit: New and increased impairmentallowancesUnited Kingdom 1,042 936 827Other European Union 56 68 45United States 44 68 37Africa 102 92 17Rest of the World 13 20 19 -------- -------- -------- 1,257 1,184 945 -------- -------- -------- Less: Releases of impairment allowanceUnited Kingdom (84) (124) (97)Other European Union (25) (15) (10)United States (16) 9 (23)Africa (15) (52) (4)Rest of the World (11) (17) - -------- -------- -------- (151) (199) (134) -------- -------- -------- Recoveries (125) (124) (98) -------- -------- -------- Total impairment charges on loans andadvances(1) 981 861 713 -------- -------- -------- (1) This excludes other credit provisions and impairment on available for saleassets detailed on page 50. Half-year ended 30.06.06 31.12.05 30.06.05Allowance £m £m £mUnited Kingdom 2,428 2,266 2,174Other European Union 259 284 282United States 128 130 149Africa 474 647 76Rest of the World 115 123 159 -------- -------- -------- 3,404 3,450 2,840 -------- -------- -------- 6. Potential credit risk loans The following tables present an analysis of potential credit risk loans(non-performing and potential problem loans). As at 30.06.06 31.12.05 30.06.05 £m £m £mPotential credit risk loansSummaryImpaired loans(1) 4,630 4,550 3,735Accruing loans which are contractuallyoverdue 90 days or more as to principal or interest 618 609 613 -------- -------- -------- 5,248 5,159 4,348Restructured loans 46 51 23 -------- -------- --------Total non-performing loans 5,294 5,210 4,371Potential problem loans 935 929 731 -------- -------- --------Total potential credit risk loans 6,229 6,139 5,102 -------- -------- -------- Geographical splitImpaired loans(1):United Kingdom 3,164 2,965 2,870Other European Union 461 345 305United States 172 230 237Africa 657 831 122Rest of the World 176 179 201 -------- -------- --------Total 4,630 4,550 3,735 -------- -------- -------- Accruing loans which are contractuallyoverdue 90 days or more as to principal or interestUnited Kingdom 528 539 576Other European Union 67 53 31United States 2 - 1Africa 21 17 5Rest of the World - - - -------- -------- --------Total 618 609 613 -------- -------- -------- (1) Impaired loans are non-performing loans where, in general, an impairmentallowance has been raised. This classification may also include non-performingloans which are fully collateralised or where the indebtedness has already beenwritten down to the expected realisable value. As at 30.06.06 31.12.05 30.06.05 £m £m £mRestructured loansUnited Kingdom 2 5 -Other European Union 10 7 7United States 17 16 16Africa 17 23 -Rest of the World - - - -------- -------- --------Total 46 51 23 -------- -------- -------- Total non-performing loansUnited Kingdom 3,694 3,509 3,446Other European Union 538 405 343United States 191 246 254Africa 695 871 127Rest of the World 176 179 201 -------- -------- --------Total 5,294 5,210 4,371 -------- -------- -------- Potential problem loansUnited Kingdom 599 640 561Other European Union 51 26 58United States 35 12 43Africa 248 248 66Rest of the World 2 3 3 -------- -------- --------Total 935 929 731 -------- -------- -------- Total potential credit risk loansUnited Kingdom 4,293 4,149 4,007Other European Union 589 431 401United States 226 258 297Africa 943 1,119 193Rest of the World 178 182 204 -------- -------- --------Total 6,229 6,139 5,102 -------- -------- -------- Allowance coverage of non-performing % % %loansUnited Kingdom 65.7 64.6 63.1Other European Union 48.1 70.1 82.2United States 67.0 52.8 58.7Africa 68.2 74.3 59.8Rest of the World 65.3 68.7 79.1 -------- -------- --------Total 64.3 66.2 65.0 -------- -------- -------- Allowance coverage of total potential % % %credit risk loansUnited Kingdom 56.6 54.6 54.3Other European Union 44.0 65.9 70.3United States 56.6 50.4 50.2Africa 50.3 57.8 39.3Rest of the World 64.6 67.6 77.9 -------- -------- --------Total 54.6 56.2 55.7 -------- -------- -------- As at 30.06.06 31.12.05 30.06.05Allowance coverage of non-performing % % %loans:Retail 63.2 62.3 64.3Wholesale and corporate 66.8 74.2 66.3 --------- --------- ---------Total 64.3 66.2 65.0 --------- --------- --------- Allowance coverage of total potentialcredit risk loans:Retail 56.9 57.1 59.2Wholesale and corporate 50.4 54.4 49.8 --------- --------- ---------Total 54.6 56.2 55.7 --------- --------- --------- In the half year to 30th June 2006, Group non-performing loans (NPLs) increased2% to £5,294m (31st December 2005: £5,210m). Retail NPLs increased 3% andwholesale and corporate NPLs were broadly flat. Potential problem loans (PPLs) were broadly flat at £935m (31st December 2005:£929m). Retail PPLs increased 25% and wholesale and corporate PPLs declined 12%. Potential Credit Risk Loans (PCRLs) increased 1% from 31st December 2005 to£6,229m (31st December 2005: £6,139m). Retail PCRLs increased 5% and wholesaleand corporate PCRLs declined 5%. 7. Available for sale financial investments As at 30.06.06 31.12.05 30.06.05 £m £m £mDebt securities 49,908 50,024 59,227Equity securities 1,400 1,258 848Treasury bills and other eligible bills 2,498 2,223 1,068 --------- --------- --------- 53,806 53,505 61,143Less: Allowance for impairment (90) (8) - --------- --------- ---------Available for sale financialinvestments 53,716 53,497 61,143 --------- --------- --------- 8. Other assets As at 30.06.06 31.12.05 30.06.05 £m £m £mSundry debtors 3,980 3,569 2,789Prepayments 962 722 530Accrued income 834 329 172Insurance assets, including unitlinked assets 90 114 107 -------- -------- --------Other assets 5,866 4,734 3,598 -------- -------- -------- 9. Other liabilities As at 30.06.06 31.12.05 30.06.05 £m £m £mObligations under finance leases payable 102 289 338Sundry creditors 5,772 6,131 5,477Accruals and deferred income 4,893 4,711 3,834 -------- -------- --------Other liabilities 10,767 11,131 9,649 -------- -------- -------- 10. Other provisions for liabilities As at 30.06.06 31.12.05 30.06.05 £m £m £mRedundancy and restructuring 90 74 70Undrawn contractually committed facilities and guarantees 50 55 48Onerous contracts 44 79 42Sundry provisions 290 309 226 -------- -------- --------Other provisions for liabilities 474 517 386 -------- -------- -------- 11. Other reserves As at 30.06.06 31.12.05 30.06.05 £m £m £mAvailable for sale reserve 9 225 374Cash flow hedging reserve (172) 70 328Capital redemption reserve 309 309 309Other capital reserve 617 617 617Translation reserve (176) 156 (35) -------- -------- --------Other reserves 587 1,377 1,593 -------- -------- -------- Movements in other reserves reflect the relevant amounts recorded in theconsolidated statement of recognised income and expense on page 88. The movements include related tax impacts but exclude amounts attributable tominority interests. 12. Retirement benefit liabilities The Group's IAS 19 pension deficit across all schemes as at 30th June 2006 was£1,843m (31st December 2005: £2,879m). This comprises net recognised liabilitiesof £1,893m (31st December 2005: £1,737m) and unrecognised actuarial gains of£50m (31st December 2005: £1,142m unrecognised actuarial loss). The netrecognised liabilities comprises retirement benefit liabilities of £1,976m (31stDecember 2005: £1,823m) and assets of £83m (31st December 2005: £86m). The Group's IAS 19 pension deficit in respect of the main UK scheme as at 30thJune 2006 was £1,469m (31st December 2005: £2,535m). The primary reason for thischange was the increase in the discount rate from 4.83% pa at 31st December 2005to 5.32% pa at 30th June 2006, reflecting the increase in AA corporate bondyields over the period. This change in assumptions had the effect of decreasingthe liabilities measured for IAS19 purposes by £1,738m and more than offset theeffect of an increase in the inflation assumption to 2.9% (31st December 2005:2.75%). The actuarial funding position of the main UK pension scheme as at 30th June2006, estimated from the formal triennial valuation in 2004, was a surplus of£1,300m (31st December 2005: surplus of £900m). The Pensions Protection Fund (PPF) solvency ratio(1) for the main UK scheme as at 30th June 2006 was estimated to be 116% (31st December 2005: 110%). (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. This Order, unless successfully challenged by the Plaintiffs, endsthe Newby litigation for Barclays. Barclays considers that the remaining Enron 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 it 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'sinvestigation of transactions between Barclays and Enron. Barclays has also beenin negotiations in the Enron bankruptcy proceedings. Barclays does not expectthat the amount of any settlement with the Commission or in the bankruptcyproceedings would have a significant adverse effect on its financial position oroperating 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 30.06.06 31.12.05 30.06.05Contingent liabilities £m £m £mAcceptances and endorsements 248 283 271Guarantees and assets pledged as collateral for security 33,417 38,035 35,703Other contingent liabilities 8,354 8,825 8,503 -------- -------- -------- 42,019 47,143 44,477 -------- -------- --------CommitmentsStandby facilities, credit lines and othercommitments 204,860 203,785 163,037 -------- -------- -------- Contingent liabilities decreased 11% (£5.1bn) to £42.0bn (31st December 2005:£47.1bn). Commitments increased 1% (£1.1bn) to £204.9bn (31st December 2005: £203.8bn). 15. Market risk Market risk is the risk that the Group's earnings, capital, or ability to meetits business objectives, will be adversely affected by changes in the level orvolatility of market rates or prices such as interest rates, credit spreads,foreign exchange rates, equity prices and commodity prices. Barclays Capital's market risk exposure, as measured by average total DailyValue at Risk (DVaR), increased in the first half of 2006 to £36.2m. This wasmainly due to an increase in non-interest rate trading risk. Total DVaR as at30th June 2006 was £36.4m (31st December 2005: £37.6m(1)). (1) This was previously reported as £37.4m. The increase is due to the inclusionof Absa Capital. 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 2006 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 20.5 25.2 14.6Credit spread risk 24.2 27.5 20.9Foreign exchange risk 4.5 7.7 2.0Equities risk 7.7 10.0 6.0Commodities risk 8.4 13.9 5.7Diversification effect (29.1) - - ------- -------- -------Total DVaR 36.2 43.0 31.3 ------- -------- ------- Half-year ended 31st December 2005 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 26.2 34.1 18.6Credit spread risk 22.4 27.6 19.0Foreign exchange risk 2.7 5.4 1.6Equities risk 6.8 8.3 3.9Commodities risk 7.7 11.4 5.4Diversification effect (32.2) - - ------- -------- -------Total DVaR 33.6 40.7 27.2 ------- -------- ------- Half-year ended 30th June 2005 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 24.6 44.8 15.4Credit spread risk 23.6 28.3 19.4Foreign exchange risk 2.9 5.3 1.6Equities risk 5.2 7.3 3.9Commodities risk 5.8 7.6 4.5Diversification effect (31.7) - - ------- ------- -------Total DVaR 30.4 37.4 25.4 ------- ------- ------- (1) The high (and low) DVaR figures reported for each category did not necessarilyoccur 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 figureswould not be meaningful and it is therefore omitted from the above table. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED) Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet movements in available for salereserve (313) (195) 86Net movements in cash flow hedgingreserve (419) (147) 28Currency translation differencesarising during the period (595) 277 23Tax 267 168 (118)Other movements 30 (112) 10 -------- -------- --------Amounts included directly in equity (1,030) (9) 29Profit for the period 2,601 1,866 1,975 -------- -------- --------Total recognised income and expensefor the period 1,571 1,857 2,004 -------- -------- --------Attributable to:Equity holders of the parent 1,561 1,506 1,873Minority interests 10 351 131 -------- -------- -------- 1,571 1,857 2,004 -------- -------- -------- The consolidated statement of recognised income and expense reflects all itemsof income and expense for the period, including items taken directly to equityin accordance with IFRS. Movements in individual reserves include amounts whichrelate to minority interests; the impact of such amounts is then reflected inthe amount attributable to such interests. Income and expense recogniseddirectly in equity is recorded on a gross basis with any related tax recorded onthe 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 impairmentlosses and foreign exchange gains or losses on monetary items such as debtsecurities, which are recognised in the income statement. When an available forsale asset is impaired or derecognised, the cumulative gain or loss previouslyrecognised in the available for sale reserve is transferred to income. Themovement in the first half of 2006 reflects net unrealised losses from changesin fair value and the transfer of net realised gains to the income statement ondisposal of assets. 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. Themovement in the first half of 2006 primarily reflects net unrealised losses fromchanges in the fair value of the hedging instruments. The gains and lossesdeferred in this reserve will be transferred to the income statement in the sameperiod or periods during which the hedged item is recognised in the incomestatement. Exchange differences arising on the net investments in foreign operations andeffective hedges of net investments are recognised in the translation reserveand transferred to income on the disposal of the net investment. The movement inthe period primarily reflects the impact of changes in the value of the Rand onthe minority interest in Absa Group Limited and changes in the value of the USDollar on net investments which are economically hedged throughdollar-denominated preference share capital, but where the hedging item is notrevalued for accounting purposes. Other movements primarily reflect the change in insurance liabilities takendirectly to reserves. SUMMARY CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED) Half-year ended 30.06.06 31.12.05 30.06.05 £m £m £mNet cash inflow/(outflow) fromoperating activities 8,280 (28,082) 17,584Net cash (outflow)/inflow frominvesting activities (1,159) 6,213 (11,394)Net cash inflow from financingactivities 1,837 12,593 2,526 -------- -------- --------Net (gain)/loss on exchange ratechanges on cash and cash equivalents (386) 301 (539) -------- -------- --------Net increase/(decrease) in cash andcash equivalents 8,572 (8,975) 8,177Cash and cash equivalents at beginningof period 20,805 29,780 21,603 -------- -------- --------Cash and cash equivalents at end ofperiod 29,377 20,805 29,780 -------- -------- -------- OTHER INFORMATION Registered office 1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0) 207116 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: + 44 (0) 870 609 4535. Listing The principal trading market for Barclays PLC ordinary shares is the LondonStock Exchange. Ordinary shares are also listed on the New York Stock Exchangeand the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in theform of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinaryshares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank ofNew York whose international telephone number is +1-212-815-3700, whose domestictelephone number is 1-888-BNY-ADRS and whose address is The Bank of New York,Investor Relations, PO Box 11258, Church Street Station, New York, NY10286-1258. Filings with the SEC Statutory accounts for the year ended 31st December 2005, 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, shown above. Copies ofthe Form 20-F are also available from the Barclays Investor Relations' website(details below) and from the SEC's website (www.sec.gov). Results timetableEx-dividend date Wednesday, 16th August 2006Dividend Record Date Friday, 18th August 2006Dividend Payment Date Monday, 2nd October 2006Full Year Trading Update* Tuesday, 28th November 20062006 Preliminary Results* Tuesday, 20th February 2006 *Note that these announcement dates are provisional and subject to change. Economic data 30.06.06 31.12.05 30.06.05 Period end - US$/£ 1.85 1.72 1.79Average - US$/£ 1.79 1.82 1.88Period end - •/£ 1.45 1.46 1.48Average - •/£ 1.46 1.46 1.46Period end - ZAR/£ 13.19 10.87 11.96Average - ZAR/£ 11.31 11.57 11.63 For further information please contact: Investor Relations Media Relations-------------------- -----------------Mark Merson/James S Johnson Jason Nisse/Alistair Smith+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6223/6132 More information on Barclays can be found on our website at the followingaddress: www.investorrelations.barclays.com APPENDIX Absa Group Limited results(1) This appendix summarises the Rand results of Absa Group Limited for the halfyear to 30th June 2006, as reported to the Johannesburg Stock Exchange, andtheir impact in Sterling on the consolidated interim results of Barclays. Absa Group Limited's profit before tax increased 16% (R688m) to R4,881m (2005:R4,193m), reflecting very good performances from banking operations which werewell spread across all business segments. Absa's bancassurance offering wasnegatively affected by increased equity market volatility. Net interest income grew strongly by 28% (R1,575) to R7,163m (2005: R5,588m) ascredit demand remained strong. Loans and advances to customers increased by 14%to R367bn (31st December 2005: R322bn). Mortgages and credit cards remained thecore drivers of this growth. Margins contracted modestly reflecting an increasedreliance on wholesale funding as well as increased competition. Non-interest income increased 3% (R183m) to R6,600m (2005: R6,417m). Increasedretail transaction volumes were partially offset by the closure of Absa Group'sinternational operations outside Africa, and lower fair value gains in respectof the listed equity portfolio. Impairment charges increased 5% (R26m) to R594m (2005: R568m). The increaselargely arose in Absa Home Loans and Retail Banking Services. The ratio ofnon-performing loans to total advances continued its downward trend and improvedto 1.3% (2005: 2.0%). Operating expenses increased 15% (R1,091m) to R8,357m (2005: R7,266m),principally due to the further expansion of the Group's branch and ATM networkand regulatory and compliance expenditure. Absa Capital has demonstrated very strong growth in profit after tax for the sixmonths under review of 22% (R111m) to R617m (2005: R506m). Total incomeincreased by 90% compared with the comparable period. Absa Group has made good progress with integration and the realisation ofsynergy benefits. Included in Absa Group Limited's results for 2006 are R262m(£23m) of integration costs and R197m (£17m) of sustainable pre-tax synergybenefits. Total revenue and cost synergies identified to date are expected toimprove Absa Group Limited's pre-tax profits by approximately R1.4bn per annumfour years after the completion of the transaction. Implementation coststotalling R1.8bn are expected to be incurred over the first three years. Absa Group Limited's profit before tax of R4,881m is translated into theBarclays results at an average exchange rate for the period of R11.31/£.Consolidation adjustments reflect amortisation of intangible assets of £42m andinternal funding costs and other adjustments of £28m. The resulting profitbefore tax of £362m is represented within International Retail and CommercialBanking - Absa (£317m) and Barclays Capital (£45m). (1) Absa Group's interim reporting period has changed from the six months ended30th September to the six months ended 30th June. This change was necessitatedby the need to align Absa's financial reporting with that of Barclays. Tofacilitate evaluation and interpretation, these results are compared withunaudited proforma results for the six months ended 30th June 2005. Half-year ended 30.06.06 30.06.05 Proforma -------- -------- Rm Rm -------- --------Interest and similar income 17,977 13,977Interest expense and similar charges (10,814) (8,389) -------- --------Net interest income 7,163 5,588Impairment losses on loans and advances (594) (568) -------- -------- 6,569 5,020 -------- --------Fee and commission income 5,113 4,881Fee and commission expense (272) (224) -------- --------Net fee and commission income 4,841 4,657 -------- --------Insurance premium revenue 1,549 1,243Premiums ceded to reinsurers (141) (169) -------- --------Net insurance premium income 1,408 1,074 -------- --------Gross claims and benefits paid on insurance contracts (622) (508)Reinsurance recoveries 15 21 -------- --------Net claims and benefits paid (607) (487)Changes in insurance and investment liabilities (564) (257)Gains and losses from banking and trading activities 461 264Gains and losses from investment activities 629 663Other operating income 432 503 -------- --------Net operating income 13,169 11,437Operating expenses (8,357) (7,266)Share of profit of associated and joint venturecompanies 69 22 -------- --------Operating profit before income tax 4,881 4,193 -------- -------- --------Cost:income ratio 61% 61%Cost:net income ratio 63% 64% Index of Main Reference Points Acquisitions and disposals 71Additional information 72Allowance for impairment on loans and advances 78Analysis of profit attributable 16Appendix 92, 93Assets held in respect of linked liabilities 74Available for sale financial investments 82Balance sheet (consolidated) 10, 11Barclaycard 13, 24, 25Barclays Capital 14, 32, 33Barclays Global Investors 14, 34, 35Business margins 43Basis of preparation 72Business net interest income 44Capital ratios 59Capital resources 58Cash flow statement - summary (consolidated) 89Changes to internal cost of funding 71Changes to risk weighted assets by business 71Chief Executive's Half-year review 5Competition and regulatory matters 73Contingent liabilities and commitments 85Derivative financial instruments 74Dividends on ordinary shares 57Daily Value at Risk (DVaR) 87Earnings per share 56Economic capital 62Economic capital demand 63Economic capital supply 65Economic data 90Economic profit 66- by business 67Filings with the SEC 72, 90Financial highlights 4Future accounting developments 72Glossary of terms iiGroup performance management 68Group reporting changes in 2006 70Group share schemes 72Group structure changes 70Head office functions and other operations 15, 40Impairment charges 49Income statement (consolidated) 9International Retail and Commercial Banking 13, 26, 27- excluding Absa 13, 28, 29Legal proceedings 85Loans and advances to banks 76Loans and advances to customers 77Margins (business) 43Market risk 86Net fee and commission income 46Net premiums from insurance contracts 48Net claims and benefits paid on insurance contracts 48Net interest income 42Operating expenses 51Other assets 83Other income 48Other information 90Other liabilities 83Other provisions for liabilities 83Performance summary 2Potential credit risk loans 80Principal transactions 47Profit attributable to minority interests 55Profit before tax 1Recent developments 73Reconciliation of business interest income to group net interest income 44Reconciliation of regulatory capital 60Results by business 12Results timetable 90Retirement benefit liabilities 84Risk asset ratio 4, 59Risk Tendency 69Risk weighted assets 17, 59, 61Share capital 58, 72Share of post-tax results of associatesand joint ventures 55Staff costs 52Staff numbers 53Statement of recognised income and expense (consolidated) 88Summary of key information 1Tax 55Tier 1 ratio 4, 59Total assets 17, 61UK Banking 12, 18, 19UK Business Banking 12, 22, 23UK Retail Banking 12, 20, 21Wealth Management 14, 36, 37Wealth Management-closed life assurance activities 14, 38, 39- Absa 14, 30, 31 93 This information is provided by RNS The company news service from the London Stock Exchange

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