UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
February 2004
Barclays PLC and
Barclays Bank PLC
(Names of Registrants)
54 Lombard Street
London EC3P 3AH
England
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
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This Report is a joint Report on Form 6-K filed by Barclays PLC and Barclays
Bank PLC. All of the issued ordinary share capital of Barclays Bank PLC is
owned by Barclays PLC.
This Report comprises:
Information given to The London Stock Exchange and furnished pursuant to
General Instruction B to the General Instructions to Form 6-K.
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EXHIBIT INDEX
Final Results dated February 12, 2004
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each of
the registrants has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BARCLAYS PLC
(Registrant)
Date: February 12, 2004 By: /s/ Simon Pordage
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Simon Pordage
Head of Board Support
BARCLAYS BANK PLC
(Registrant)
Date: February 12, 2004 By: /s/ Simon Pordage
----------------------
Simon Pordage
Head of Board Support
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BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2003
PAGE
Summary 1
Financial highlights 4
Chairman's statement 5
Group Chief Executive's statement 6
Group performance management 11
Summary of results 14
Consolidated profit and loss account 15
Consolidated balance sheet 16
Financial review 17
Additional information 49
Notes 51
Consolidated statement of changes in shareholders' funds 60
Statement of total recognised gains and losses 60
Summary consolidated cashflow statement 61
Average balance sheet 62
Other information 64
Index 70
The information in this announcement, which was approved by the Board of
Directors on 11th February 2004, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the "Act"). Statutory accounts
which are combined with the Group's Annual Report on Form 20-F to the US
Securities and Exchange Commission (SEC) and which will contain an unqualified
audit report, will be delivered to the Registrar of Companies in accordance with
Section 242 of the Act. The 2003 Annual Review and Summary Financial Statement
will be posted to shareholders together with the Group's full Annual Report for
those shareholders who request it.
This document contains certain forward-looking statements within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, and Section
27A of the US Securities Act of 1933, as amended, with respect to certain of the
Group's plans and its current goals and expectations relating to its future
financial condition and performance. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as "anticipate",
"target", "expect", "estimate", "intend", "plan", "goal", "believe", or other
words of similar meaning. By their nature, forward-looking statements involve
risk and uncertainty because they relate to future events and circumstances,
including, but not limited to, UK domestic and global economic and business
conditions, market related risks such as changes in interest rates and exchange
rates, the policies and actions of governmental and regulatory authorities,
changes in legislation and the impact of competition, a number of which are
beyond the Group's control. As a result, the Group's actual future results may
differ materially from the plans, goals, and expectations set forth in the
Group's forward-looking statements. Any forward-looking statements made by or on
behalf of Barclays speak only as of the date they are made. Barclays does not
undertake to update forward-looking statements to reflect any changes in
Barclays expectations with regard thereto or any changes in events, conditions
or circumstances on which any such statement is based. The reader should,
however, consult any additional disclosures that Barclays has made or may make
in documents it has filed or may file with the SEC including its most recent
Annual Report on Form 20-F.
In 2003, the SEC adopted regulations relating to the presentation of financial
data which is not based on the Generally Accepted Accounting Principles (GAAP)
applied by SEC reporting companies. These regulations are commonly referred to
as Regulation G. In this document, the presentation of certain individual
business results and assets excludes goodwill and exceptional items. For a
reconciliation of (i) profit before tax excluding goodwill and exceptional items
and (ii) total assets excluding goodwill of our various businesses to the
comparable UK GAAP measure, see 'Reconciliation of profit before tax and total
assets' on page 66.
BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 020 7699 5000,
COMPANY NO. 48839.
RESULTS FOR YEAR TO 31ST DECEMBER 2003
2003 2002 1 % Change
GBPm GBPm
Operating income 12,411 11,327 10
Operating expenses (7,253) (6,624) 9
Provisions for bad and doubtful debts (1,347) (1,484) (9)
Operating profit 3,812 3,218 18
Profit before tax 3,845 3,205 20
Profit after tax 2,769 2,250 23
Economic profit 1,420 1,237 15
Earnings per share 42.3p 33.7p 26
Dividend per share 20.5p 18.35p 12
Post-tax return on average shareholders'
funds 17% 15%
"These are strong results, which demonstrate the momentum we have generated over
our first four-year goal period. We have strengthened our diversified portfolio
of businesses while maintaining downward pressure on costs and a prudent
approach to risk. As a result, we have achieved top quartile total shareholder
return relative to our peers. This is an important milestone for Barclays.
We embark on the next four-year goal period with confidence and commitment to
further enhance performance."
Matthew W. Barrett, Group Chief Executive
Financial Summary
- Operating income increased 10% (GBP1,084m) to GBP12,411m (2002:
GBP11,327m).
- Operating expenses rose 9% (GBP629m) to GBP7,253m (2002: GBP6,624m),
with approximately one third of the increase attributable to the move
to a pensions charge in 2003 (GBP128m) from a pensions credit (GBP72m)
in respect of the Group's main UK pension schemes. Restructuring costs
amounted to GBP209m (2002: GBP187m). Goodwill amortisation was GBP265m
(2002: GBP254m).
- The cost:income ratio was maintained at 58% (2002: 58%).
- Provisions for bad and doubtful debts fell 9% (GBP137m) to GBP1,347m
(2002: GBP1,484m). Provisions excluding the impact of Transition
Businesses, mainly in respect of Argentina in 2002, fell 3% (GBP36m)
to GBP1,324m (2002: GBP1,360m).
- Operating profit rose 18% (GBP594m) to GBP3,812m (2002: GBP3,218m).
- Profit before tax rose 20% (GBP640m) to GBP3,845m (2002: GBP3,205m).
- Post-tax return on average shareholders' funds was 17% (2002: 15%).
- Earnings per share rose 26% to 42.3p (2002: 33.7p). The final dividend
per share for 2003 is 13.45p (2002: 12.00p). The full year dividend
per share increased by 12% to 20.5p (2002: 18.35p).
1 Comparative figures have been restated consequent upon the change in
accounting presentation detailed on page 50. Comparative figures have also been
restated as a result of the change in accounting policy arising from the
adoption of UITF Abstract 37, 'Purchases and sales of own shares'. The impact of
the change of accounting policy is fully set out on page 49.
- In 2003, the Group repurchased shares with a value of GBP204m and
distributed GBP788m through the final dividend for 2002 and GBP461m
through the interim dividend for 2003.
- Equity shareholders' funds were GBP16.5bn at 31st December 2003 (31st
December 2002: GBP15.2bn). The tier 1 capital ratio was 7.9% (31st
December 2002: 8.2%). The average economic capital (excluding goodwill
and capital held at Group centre) to support the Group's ongoing
business requirements was approximately GBP10.9bn (2002: GBP10.2bn).
Business Performance Summary
- Personal Financial Services operating profit excluding goodwill
increased 11% to GBP967m (2002: GBP871m). Operating income was up 7%
at GBP3,109m (2002: GBP2,919m). Operating expenses excluding goodwill
rose 7% to GBP1,839m (2002: GBP1,714m), with almost two-thirds of the
increase attributable to the pensions charge and higher strategic
investment spend. The cost:income ratio was maintained at 59%.
Provisions decreased 9% to GBP303m (2002: GBP334m) as both the
portfolio and risk processes improved. Stronger lending and deposit
volumes and active margin management helped drive income momentum.
This was reinforced by broadly based operating income growth across
the main businesses: general insurance up 32%; consumer finance up
15%; mortgages up 10%; and current accounts and savings up 2%. Income
from independent financial advice fell 28%. The market share of net
new mortgage lending in the UK was 2% (2002: 9%). The interest spread
on new mortgage business increased. The number of Openplan customers
in the UK grew to 2.6 million. Barclays branded savings was one of the
leaders in new business generation with average deposits rising 19%.
- Barclays Private Clients operating profit, excluding goodwill, for the
ongoing business decreased 11% to GBP328m (2002: GBP368m). Profit
before tax, excluding goodwill and exceptional items, fell 3% to
GBP351m (2002: GBP360m). Barclays Private Clients business activity
was impacted by significantly lower average equity markets and by
lower average interest rates than in 2002, offset in part by a good
performance in Spain. Operating income fell 4% to GBP1,350m (2002:
GBP1,401m). Operating expenses excluding goodwill fell 1% to GBP991m
(2002: GBP996m). The cost: income ratio was 73% (2002: 71%). The
performance of Barclays Spanish business remained strong, with
operating income rising 22% fuelled by further growth in Openplan
mortgages and favourable exchange rate movements. This was before the
contribution of Banco Zaragozano; GBP18m operating profit excluding
goodwill. The acquisition of Banco Zaragozano was completed in mid
July 2003. The acquisition of Charles Schwab Europe was completed in
January 2003. The acquisition of Gerrard was completed in mid December
2003. The contribution from the closed life assurance activities was a
loss of GBP77m (2002: loss GBP87m).
- Barclaycard operating profit excluding goodwill increased 17% to
GBP722m (2002: GBP615m), with strong business volumes driving income
growth of 16% to GBP1,830m (2002: GBP1,582m). Operating expenses
excluding goodwill rose 14% to GBP646m (2002: GBP565m) reflecting
strong growth in business volumes, increased marketing activity and
higher strategic investment expenditure. The cost: income ratio
improved to 35% (2002: 36%). Provisions increased 15% to GBP462m
(2002: GBP402m) in line with growth in the loan portfolio. Average UK
extended credit balances grew 14% to GBP7.4bn (2002: GBP6.5bn). A
record 1,547,000 customers (2002: 1,218,000) were recruited to
Barclaycard in the UK during 2003. Barclaycard International made a
profit of GBP4m (2002: loss GBP14m) with income growth of 48%. Average
extended credit balances were 43% higher whilst Barclaycard
International cards in issue rose to 1.42m (2002: 1.28m).
- Business Banking operating profit excluding goodwill increased 7% to
GBP1,308m (2002: GBP1,227m) reflecting loan volume growth and stable
lending margins, the benefits of tight cost management and well
controlled risk. Operating income grew 5% to GBP2,628m (2002:
GBP2,514m), and reflected the impact of the implementation of the
Competition Commission Inquiry transitional pricing remedy. Operating
expenses excluding goodwill rose 1% to GBP1,071m (2002: GBP1,061m) and
included cost savings realised in the back office. The cost:income
ratio improved to 41% (2002: 42%). Provisions increased 10% to GBP249m
(2002: GBP226m) in line with lending growth in the portfolio. The
overall quality of the lending portfolio, as defined by risk grade,
was maintained. Average lending balances increased 11% to GBP47.0bn
and average deposit balances increased 5% to GBP46.2bn.
- Barclays Africa operating profit excluding goodwill increased 27% to
GBP113m (2002: GBP89m). Operating income was up 18% at GBP325m (2002:
GBP275m), driven by strong lending growth in selected markets.
Operating expenses excluding goodwill rose 16% to GBP185m (2002:
GBP159m). The cost:income ratio improved to 57% (2002: 58%).
Provisions were steady at GBP27m.
- Barclays Capital operating profit increased 35% to GBP782m (2002:
GBP580m). Operating income grew 18% to a record GBP2,652m (2002:
GBP2,238m), with secondary income up 17% and primary income up 16%.
Average Daily Value at Risk (DVaR) was GBP26m (2002: GBP23m).
Operating expenses rose 22% to GBP1,618m (2002: GBP1,324m) reflecting
increased business as usual costs from higher business volumes and
headcount growth, performance based revenue related costs and
increased strategic investment spend. The cost: income ratio rose to
61% (2002: 59%). Provisions declined 25% to GBP252m (2002: GBP334m)
reflecting continued improvements in the quality of the loan book and
in the corporate credit environment. Market share grew; Barclays
Capital progressed to 4th in the global all debt league table, from
5th in 2002, with US$199bn of debt issued for clients (2002:
US$162bn).
- Barclays Global Investors operating profit excluding goodwill
increased 73% to GBP192m (2002: GBP111m). Operating income,
predominantly fees and commissions, rose 22% to GBP672m (2002:
GBP550m) reflecting growth in assets under management, good investment
performance and increased higher margin business. Operating expenses
excluding goodwill increased 9% to GBP480m (2002: GBP439m). The
cost:income ratio improved to 71% (2002: 80%). Total assets under
management at year-end were GBP598bn (31st December 2002: GBP462bn)
including GBP67bn of net new assets acquired during the year.
Goals
- Barclays achieved its primary goal, of top quartile total shareholder
return relative to its peer group, for the four years ended 31st
December 2003.
- Cumulative economic profit for the four years ended 31st December 2003
was GBP5.3bn, 87% of the original goal of GBP6.1bn.
- Cumulative annual cost savings for the four years ended 31st December
2003 were GBP1.26bn, 26% ahead of the GBP1bn goal.
- For the year ended 31st December 2003, ongoing Woolwich integration
synergies of GBP375m were achieved, relative to a target of GBP330m
for the year. Barclays remains on track to achieve the target
synergies of GBP400m per annum by the end of 2004.
- Barclays will continue to use goals to drive business performance. The
primary goal for the period 2004 to 2007 remains unchanged; to achieve
top quartile total shareholder return relative to its global peer
group. Based on current market valuations and forecasts, we estimate
compound annual growth of economic profit in the range of 10% to 13%
(GBP7.3bn to GBP7.8bn of cumulative economic profit) would be required
over the goal period.
FINANCIAL HIGHLIGHTS
2003 2002 1
RESULTS GBPm GBPm
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Net interest income 6,604 6,205
Non-interest income 5,807 5,122
Operating income 12,411 11,327
Operating expenses (7,253) (6,624)
Provisions for bad and doubtful debts (1,347) (1,484)
Provisions for contingent liabilities and commitments 1 (1)
Operating profit 3,812 3,218
Profit / (loss) from joint ventures and associated
undertakings 29 (10)
Exceptional items 4 (3)
Profit before tax 3,845 3,205
Profit after tax 2,769 2,250
Profit attributable to shareholders 2,744 2,230
Economic profit 1,420 1,237
BALANCE SHEET
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Shareholders' funds 16,473 15,201
Loan capital 12,339 11,537
Total capital resources 29,095 26,894
Total assets 443,361 403,062
Weighted risk assets 188,997 172,748
PER ORDINARY SHARE p p
------------------
Earnings 42.3 33.7
Fully diluted earnings 42.1 33.4
Dividend 20.5 18.35
Net asset value 251.0 231.2
PERFORMANCE RATIOS % %
------------------
Post-tax return on average shareholders' funds 16.9 14.7
CAPITAL RATIOS % %
--------------
Equity Tier 1 ratio 6.5 6.6
Tier 1 ratio 7.9 8.2
Risk asset ratio 12.8 12.8
GROUP YIELDS, SPREADS & MARGINS % %
-------------------------------
Gross yield 4.92 5.35
Interest spread 2.33 2.42
Interest margin 2.61 2.75
ECONOMIC DATA
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Period end - US$/GBP 1.78 1.61
Average - US$/GBP 1.64 1.50
Period end - EUR/GBP 1.41 1.54
Average - EUR/GBP 1.45 1.59
FTSE 100 index period end 4,477 3,940
FTSE 100 index period average 4,051 4,599
1 Comparative figures have been restated consequent upon the change in
accounting presentation detailed on page 50. Comparative figures have also been
restated as a result of the change in accounting policy arising from the
adoption of UITF Abstract 37, 'Purchases and sales of own shares'. The impact of
the change of accounting policy is fully set out on page 49.
CHAIRMAN'S STATEMENT
Barclays had a successful 2003, delivering strong returns to our shareholders
while continuing to invest in our staff, customer products and services, and
contributing to the communities in which we work.
The economic picture was brighter in 2003. The UK economy made progress, growing
at 2.1%, whilst repositioning away from consumption towards corporate
investment, government spending and a stronger trade balance. The US economy
embarked on a vigorous recovery, with uncertainties about the strength and
durability of the recovery diminishing. There are signs at last that the
Eurozone economy may be stabilising.
Financial markets also witnessed greater stability in 2003 - a welcome change
following the volatility and depressed state of 2001 and 2002. As a result,
confidence has improved.
We announced last October that Matthew W. Barrett will succeed me as Chairman at
the end of 2004. Mr Barrett will be replaced as Group Chief Executive by John
Varley who became Group Deputy Chief Executive on 1st January 2004.
Barclays has a strong management team to take the business forward. It is one of
the key tasks of the Group Chief Executive to develop talent so that the
organisation is well led at all levels. Mr Barrett has done an outstanding job
in this regard.
A recurring theme in 2003 was the significant amount of senior management time
that continued to be committed to regulation, compliance and governance. The
final version of the revised Combined Code on Corporate Governance, which comes
into effect for our 2004 reporting year, was a balanced document. Barclays
welcomes the principles-based approach retained in the Combined Code, and the
continuance of comply or explain. There will never be one set of prescriptive
rules which can fit all companies in all countries in all circumstances.
Overall, we made much progress across a broad-based set of activities, and this
positions Barclays strongly for the future. We are well-capitalised. We have a
distinctive set of businesses. We have a high quality and experienced leadership
team and loyal and dedicated staff. I am extremely grateful to them for their
hard work in helping us achieve a successful 2003.
Sir Peter Middleton
Chairman
GROUP CHIEF EXECUTIVE'S STATEMENT
Our priorities in 2003 were to: drive profitable revenue growth; maintain tight
cost control; retain our prudent and considered approach to risk management; and
accelerate the execution of our strategic agenda.
These priorities were all met.
Financial performance was strong, with a record set of results. We achieved a
20% increase in profit before tax. Return on equity was 17% and earnings per
share increased by 26%. Capital remained strong with a tier 1 ratio of 7.9%. Our
long term credit rating continued to be AA/Aa1. We increased the dividend by
12%.
2003 marked the end of our four-year (2000 to 2003) goal performance cycle. At
the outset the goals were communicated to shareholders. The primary goal of
delivering top quartile total shareholder return relative to a global peer group
1 was achieved. Total shareholder return for the four-year cycle was 31%,
resulting in a ranking of third out of twelve. This compared favourably to the
16% total average return for the peer group and with the decline of 28% for the
FTSE 100 Index. A more complete report on performance versus all goals is
outlined in the 'Group Performance Management' section on page 11.
1 Peer group for 2003: Abbey, ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche
Bank, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Standard Chartered.
Four years ago we embarked on a strategy to become one of the world's top 10
banks. This has been achieved. We ranked 9th in the world by market
capitalisation at the end of 2003. In achieving this, our primary focus was, and
continues to be, on organic growth. A secondary focus was on in-fill
acquisitions, joint ventures and strategic alliances to accelerate strategy
execution for each of the businesses. The rate of corporate development activity
has accelerated during this period with an increasingly strong track record in
integration.
2003 was also a year where we continued to make good progress in advancing our
strategic priorities. The highlights are summarised below.
Core UK Banking
2003 was an important year for Personal Financial Services (PFS), where the
ongoing repositioning of the business resulted in stronger financial
performance. Our three priorities for PFS in 2003 were to: deliver value to
customers through more integrated banking; improve productivity; and improve the
customer service to make Barclays easier to do business with.
We made improvements to the full range of consumer finance products and we are,
as a result, much better placed to meet our customers' needs. The response from
our customers has been positive and encourages us to accelerate our efforts. For
example, the scale of demand for our new savings range pushed Barclays branded
savings into a leading position in the UK market for new savings flow.
The Woolwich, now fully integrated within Barclays, has positioned us as a major
player in the mortgage market. In 2003, this enabled us to deliver a good profit
performance from the mortgage business while maintaining a commitment to prudent
lending and developing attractive product features for customers. We extended
the Openplan proposition, pioneered by The Woolwich, across the Barclays
franchise. With 2.6 million customers already signed up in the UK, Openplan has
become the spearhead of our strategy to deliver integrated banking services,
where we reward customers who bring us more of their business.
Business Banking is our largest single business and operates in markets that are
critical to wealth generation and job creation in the UK. It serves over 730,000
businesses, ranging from small businesses with turnover of less than GBP500,000
to large enterprises with turnover of greater than GBP10 million.
Business Banking delivered a strong financial performance in 2003, a clear
indication that customers liked what we have been doing.
We broadened our products and services and increased our specialisation in the
sectors we serve. We also maintained our focus on improving efficiency. Our risk
management processes are integrated within the day-to-day business activity,
which enables us to manage the overall portfolio in a prudent manner.
In October 2003, we announced the creation of UK Banking, which comprises most
of PFS, Business Banking and most of UK Premier (previously managed within
Barclays Private Clients). This new grouping, led by Roger Davis, will allow us
to offer a more integrated service to our UK personal and business customers.
Global Businesses
Barclays has made good progress in executing its second strategic priority
through its three distinctive global businesses - Barclaycard, Barclays Capital
and Barclays Global Investors. Each is well placed for further rapid expansion
and we have invested substantially over the last few years to develop
differentiated business models and superior offerings for our customers and
clients.
Barclaycard delivered another record year of results in 2003.
The business demonstrated attractive growth prospects in the UK market and
overseas. Its strong focus on execution, innovation, and customer service,
combined with a prudent approach to risk, provides competitive advantage.
Barclaycard International achieved a full year profit for the first time. We
plan to accelerate the rate of expansion in the international business. The
strategic alliance with the Standard Bank of South Africa, announced in August
2003, and the launches into the Republic of Ireland and Portugal in January
2004, represent first steps. Also in January 2004 we brought together all
Barclays UK consumer credit business and Barclaycard UK into a single management
grouping for the first time. Barclaycard is led by Gary Hoffman.
Barclays Capital, our financing and risk management focused investment bank, had
a record year.
Barclays Capital demonstrated that it can deliver earnings and growth on a
sustained basis in variable market conditions. This performance was achieved
while we invested heavily in product origination and distribution capabilities.
We continued to diversify the product range and expanded into new geographies
and attracted new clients.
Barclays Capital has an emphasis on financing and risk management that has been
well received by clients around the world. In 2003 we saw good new issuance
volumes and Barclays Capital achieved fourth position in the global all debt
league table. The expansion in the US is particularly noteworthy, where our
growing reputation earned us the lead in 49 dollar denominated bond issues for
US clients compared to only one as recently as 2000. We achieved a top 10
ranking in the US investment grade corporate debt league table for the first
time, more than doubling our market share. Barclays Capital is well placed to
grow further.
Barclays Global Investors (BGI) had a record year and continued to be a global
leader in the institutional investment management market.
BGI now has some US$1 trillion in assets under management and attracted over
US$100 billion of net new assets in 2003, demonstrating that the strong
investment performance, combined with its proven risk controlled asset
allocation processes and quantitative methodologies, are attractive to clients.
BGI's Global i-shares product range has been a great success and has catapulted
BGI to number one in assets under management in the exchange traded funds (ETF)
market in both the US and globally. BGI is known as the world's leading indexer.
Less well known is that its advanced active business has over US$200 billion
assets under management as it extended its successful investment philosophy and
techniques to new areas. We have high expectations for the future.
In October 2003, we announced that Barclays Capital and BGI together would
constitute Wholesale and Institutional, led by Bob Diamond, to accelerate the
development of world class global businesses in these markets.
Wealth Management
Our third priority is to build a leading wealth management business in the UK
and Europe. Despite the harsh climate of the last couple of years, this is an
attractive business and its growth and development remains a strategic priority
for Barclays. During 2003 we took steps to accelerate our progress, and in doing
so to equip Barclays Private Clients (BPC) to bounce back as the environment for
wealth management businesses worldwide improves. Our ability to offer customers
a fully integrated service for both banking and investment management services
means that we believe we are well placed for success. We started to see some
early improvements in performance during the second half of 2003, which was
accelerated by the acquisition of Charles Schwab Europe and latterly the
acquisition of Gerrard. We expect to build on this base in 2004.
In addition, by moving our domestic mass affluent business, UK Premier, to UK
Banking, we have refocused BPC on private banking, stockbroking, investment
management and offshore banking. We are moving away from a model overly
dominated by the domestic market to a global product model which has been
successfully implemented in Barclays Capital, Barclays Global Investors and
Barclaycard.
International Retail and Commercial Banking
The fourth strategic priority is to grow our presence in retail and commercial
banking in selected overseas markets. In 2003, we built on our strong platform
in Spain with the acquisition of Banco Zaragozano, more than doubling our branch
network, our customer base and our assets, while creating attractive
opportunities for in-market synergies. The Spanish market is one of the
strongest in Europe and has a well-regulated and competitive banking sector with
customers who value innovation and service.
In October 2003, we announced the creation of Private Clients and International,
under the leadership of David Roberts, to accelerate growth of retail and
commercial banking activities outside the UK - including our presence in Spain,
France, Portugal, Italy, Egypt, Africa, and the Caribbean - and to build
Barclays wealth management businesses.
Organisational Fitness
The final strategic priority is organisational fitness which, for us,
encompasses all the key competencies essential to execute our strategy and
deliver top quartile financial performance on a sustained basis. These include
information technology, risk management, human resources, marketing, brand
management, productivity and value based management disciplines. We believe that
strong execution capabilities underpin superior performance.
Two examples worthy of note in the human resources area are our ground breaking
new staff pension scheme, afterwork, and the agreement with our union partner
UNIFI to manage the impact on employees of outsourcing. Both demonstrate our
firm commitment to becoming an employer of choice without compromising our
ability to drive the business forward.
We have adopted value-based decision making in everything that we do and at all
levels in the business - from the development of strategy, to planning, risk
management and reward systems. Overall we have benefited not just from more
consistency and clarity in our strategic development, but also from a stronger
sense of accountability throughout Barclays.
Committing to standards and goals has been an important element of the
value-based management process. We believe in the galvanising effect of
stretching goals, and they have served us well. It is no coincidence that
cumulative economic profit for the goal period 2000 to 2003, while short of our
original goal, was double the economic profit delivered over the prior four year
period.
We have embraced another set of stretching goals for 2004 to 2007. Our primary
aim, to achieve top-quartile total shareholder return, remains unchanged. In
addition, we will continue to have economic profit and efficiency goals
internally to support the value creation process. We believe that, given current
and expected market conditions, a compound annual growth rate in economic profit
in the range of 10% to 13%, which would translate into cumulative economic
profit generation of GBP7.3 billion to GBP7.8 billion, will be required to
deliver top quartile shareholder return over the 2004 to 2007 goal period.
Delivering strong results on a sustained basis requires world class efficiency
and all businesses will be expected to meet or exceed top quartile performance
relative to comparable peers in their sector. We will continue to report
progress relative to these goals regularly.
In summary, Barclays performed strongly in 2003. Our thanks go to our employees
worldwide who have coped with continuous change, done more business with
existing customers and acquired new customers. They have delivered improved
services across the board to the customers we are privileged to serve.
Matthew W. Barrett
Group Chief Executive
KEY FACTS
2003 2002
Number of UK branches 2,070 2,080
Number of overseas branches 846 499
Number of UK ATMs 3,850 3,900
Employees worldwide 74,800 74,700
Total customers registered for online banking 4.5m 3.9m
UK OPENPLAN
-----------
Number of customers with Openplan from Woolwich 1.4m 1.2m
Number of customers with Openplan from Barclays 1.2m 0.8m
Total UK Openplan savings balances GBP21.6bn GBP18.5bn
Total UK Openplan mortgage balances GBP28.7bn GBP21.2bn
PERSONAL FINANCIAL SERVICES
---------------------------
Number of UK current accounts 10.5m 10.5m
Number of UK savings accounts 10.3m 10.2m
Total UK mortgage balances1 GBP59.8bn GBP57.8bn
BARCLAYS PRIVATE CLIENTS
------------------------
Total customer funds GBP109bn GBP85bn
Number of Openplan customers in Spain 35,000 20,000
Average stockbroking deal volumes per day 8,350 6,300
BARCLAYCARD
-----------
Number of Barclaycard UK customers 10.6m 9.7m
Number of customers registered for online services 1.5m 1.1m
Number of retailer relationships 86,000 85,000
Number of retailer transactions processed 1.5bn 1.4bn
Number of Barclaycard International cards in issue 1.42m 1.28m
BUSINESS BANKING
----------------
Number of Business Banking customers 732,000 727,000
Number of current accounts 743,000 731,000
Number of deposit accounts 401,000 405,000
Customers registered for online banking/BusinessMaster 285,000 288,000
BARCLAYS AFRICA
---------------
Number of customers accounts 1.5m 1.4m
BARCLAYS GLOBAL INVESTORS
-------------------------
Total assets under management GBP598bn GBP462bn
Number of institutional clients 2,500 2,300
BARCLAYS CAPITAL 2003 2002
----------------
League League
table issuance table issuance
position value position value
Global all debt 4th $199.3bn 5th $162.2bn
European all debt 3rd $140.1bn 2nd $116.4bn
All international bonds (all
currencies) 8th $103.8bn 9th $73.7bn
All international bonds
(Euros) 8th EUR47.4bn 8th EUR34.6bn
Sterling bonds 1st GBP15.9bn 1st GBP13.2bn
US investment grade 8th $9.0bn 13th $3.5bn
corporate bonds
1 Total UK residential mortgage balances.
GROUP PERFORMANCE MANAGEMENT
Value Based Management
Barclays primary focus is to deliver superior value to its shareholders. To
achieve this we use the principles of value based management (VBM) to develop
strategy, allocate resources and manage performance.
In applying VBM principles Barclays has developed a disciplined fact-based
approach to strategy development and business planning, which aims to build
sustainable competitive advantage. Individual businesses generate alternative
business strategies to facilitate the selection of the most appropriate
value-maximising option. Our aim is to achieve profitable growth in all our
businesses.
We use performance goals as an integral part of our value based management
disciplines. These are designed to stretch the thinking and ambition of our
businesses. Goals are set for four year periods to align with the planning
processes described above. In 1999 we announced goals for the 2000 to 2003
period. This performance cycle has concluded and we have commenced a new cycle
for the 2004 to 2007 period. The remainder of this section provides a summary of
our performance for the first performance cycle and details of the goals for the
2004 to 2007 period.
Performance relative to the 2000 to 2003 goal period
At the end of 1999, Barclays set a series of four year performance goals for the
period 2000 to 2003 inclusive. The primary goal was to achieve top quartile
total shareholder return (TSR) relative to a peer group1 of financial services
companies. TSR is defined as the value created for shareholders through share
price appreciation, plus re-invested dividend payments.
1 Peer group for 2003 remained unchanged from 2002: Abbey, ABN Amro, BBVA, BNP
Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, Lloyds TSB, Royal Bank of
Scotland and Standard Chartered.
For the four years from 31st December 1999 to 31st December 2003, Barclays was
positioned third within its peer group, thereby achieving its primary goal of
top quartile TSR performance.
In addition, a set of secondary goals were used to support the achievement of
the primary TSR goal.
The first supporting goal was to double the absolute value of a hypothetical
GBP100 invested in Barclays over the four year period from the end of 1999. At
the time of setting the goals, analysis of financial services companies who had
delivered top quartile TSR performance historically indicated that this level of
value creation would be required for Barclays to be in the top quartile of its
peer group.
Therefore, a hypothetical GBP100 invested in Barclays at the end of 1999, should
have been worth GBP200 by 31st December 2003. However, the hypothetical GBP100
investment would have been worth GBP131. This compared favourably with a
corresponding hypothetical investment in a basket of shares made up of the
Barclays peer group which would have been worth GBP116 on 31st December 2003,
while the same investment in the FTSE 100 Index would have fallen to GBP72.
The second supporting goal was to double economic profit2 over the period. At
the time of setting the goals, we believed that we would be required to deliver
GBP6.1bn of cumulative economic profit for the period 2000 to 2003 inclusive to
achieve our primary TSR goal.
2 Economic profit is defined as profit after tax and minority interests plus
certain gains (and losses) reported within the statement of total recognised
gains and losses where they arise from the Group's business activities and
which are in respect of transactions with third parties, less a charge for the
cost of average shareholders' funds (which includes purchased goodwill). The
cost of average shareholders' funds is calculated using the capital asset
pricing model (CAPM). The cost of equity comprises primarily three components:
the equity risk premium; the market beta; and the risk free rate.
Economic profit for 2003 was GBP1.4bn, which, added to the GBP3.9bn generated
between 2000-2002 inclusive, delivered a cumulative total of GBP5.3bn for the
goal period.
The breakdown of economic profit performance is shown below:
2003 2002
GBPm GBPm
-------- --------
Profit after tax and minority interests 2,744 2,230
Goodwill amortisation 265 254
Tax credit on goodwill (7) (5)
Goodwill relating to associated undertakings 7 1
Goodwill on disposals - 10
-------- --------
Profit after tax and minority interests
excluding goodwill amortisation 3,009 2,490
(Loss) / Gain on disposal recognised in the statement
of total recognised gains and losses (4) 206
-------- --------
3,005 2,696
-------- --------
Average shareholders' funds including
average historical
goodwill 1 17,135 15,812
Post tax cost of equity 9.5% 9.5%
-------- --------
Cost of average shareholders' funds
including average historical goodwill 2 (1,585) (1,459)
-------- --------
Economic profit 1,420 1,237
-------- --------
The third supporting goal was focused on improving cost management. This goal
was to reduce the annual run rate of Group costs by GBP1bn over the four year
period to the end of 2003 thereby absorbing the impact of inflation and volume
related growth during the period.
Between 2000 and 2002 inclusive, GBP910m of savings were achieved. During 2003,
a further GBP355m of savings were achieved, creating a cumulative total of
GBP1.26bn. Therefore at the end of the four year period, Barclays exceeded its
GBP1bn goal by 26%.
1 The difference between the average shareholders' funds (excluding minority
interests) of GBP16,243m and that reported above represents cumulative
goodwill amortisation charged and goodwill previously written off to
reserves.
2 The cost includes a charge for purchased goodwill of GBP442m (2002:
GBP398m). A post-tax cost of equity of 8.5% has been used for goodwill
associated with the acquisition of Woolwich plc. A post-tax cost of equity
of 9.5% has been used for all other goodwill. The post tax cost of equity
is unchanged for 2004.
Performance Goals for the 2004 to 2007 period
Barclays will continue to use goals to drive performance. Our primary goal, to
achieve top quartile total shareholder return, remains unchanged from the prior
goal period. The peer group1 has been reviewed to ensure it aligns with our
business mix and the scale of our ambition.
In addition, we will continue to use supporting goals. Economic profit will
remain the key internal financial measure.
Based on current market valuations and forecasts, we estimate that a compound
annual growth rate of economic profit in the range of 10% to 13% (GBP7.3bn to
GBP7.8bn of cumulative economic profit) would be required to deliver top
quartile shareholder return over the 2004 to 2007 period.
A second supporting goal is to continue to improve productivity. World class
productivity is an important contributor to sustaining strong performance. All
businesses are expected to meet or exceed top quartile productivity performance
relative to comparable peers within their sector.
We will continue to report progress relative to goals on a regular basis.
1 There are two changes to the peer group for 2004 relative to 2003: Abbey and
Standard Chartered have been removed and replaced with JP Morgan Chase and UBS.
The complete peer group for 2004 is ABN Amro, BBVA, BNP Paribas, Citigroup,
Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland
and UBS.
SUMMARY OF RESULTS
RECONCILIATION OF PROFIT BEFORE TAX EXCLUDING GOODWILL
AMORTISATION AND EXCEPTIONAL ITEMS
2003 2002
GBPm GBPm
Personal Financial Services 973 874
Barclays Private Clients
- ongoing business 351 360
- closed life assurance activities (77) (87)
Barclaycard 724 611
Business Banking 1,311 1,225
Barclays Africa 113 89
Barclays Capital 783 581
Barclays Global Investors 191 110
Head office functions and other operations (256) (300)
-------- --------
Profit before tax excluding goodwill amortisation
and exceptional items 4,113 3,463
Exceptional items 4 (3)
-------- --------
Profit before tax, excluding goodwill amortisation 4,117 3,460
Goodwill relating to associated undertakings (7) (1)
Goodwill amortisation (265) (254)
-------- --------
Profit before tax 3,845 3,205
-------- --------
TOTAL ASSETS AND WEIGHTED RISK ASSETS
Total assets Weighted risk assets
2003 2002 1 2003 2002
GBPm GBPm GBPm GBPm
Personal Financial Services 74,786 71,871 42,426 41,100
Barclays Private Clients
- ongoing 20,529 13,087 15,129 11,707
- closed life
assurance
activities 528 929 - 6
Barclaycard 12,278 10,669 9,806 10,005
Business Banking 52,112 47,315 54,964 50,449
Barclays Africa 3,051 2,632 2,225 1,892
Barclays Capital 263,169 236,468 61,285 53,496
Barclays Global Investors 533 494 1,137 666
Head office functions and
other operations 3,892 8,379 2,025 3,427
Goodwill 4,406 3,934 - -
Retail life-fund assets 8,077 7,284 - -
-------- -------- -------- --------
443,361 403,062 188,997 172,748
-------- -------- -------- --------
1 Restated for changes in accounting policy and presentation. See pages 49 and
50.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2003 2002
GBPm GBPm
Interest receivable 12,427 12,044
Interest payable (5,823) (5,839)
-------- --------
Net interest income 6,604 6,205
-------- --------
Net fees and commissions receivable 4,263 3,925
Dealing profits 1,054 833
Other operating income 490 364
-------- --------
Total non-interest income 5,807 5,122
-------- --------
Operating income 12,411 11,327
-------- --------
Administration expenses - staff costs (4,295) (3,755)
Administration expenses - other (2,404) (2,312)
Depreciation (289) (303)
Goodwill amortisation (265) (254)
-------- --------
Operating expenses (7,253) (6,624)
-------- --------
Operating profit before provisions 5,158 4,703
Provisions for bad and doubtful debts (1,347) (1,484)
Provisions for contingent liabilities and commitments 1 (1)
-------- --------
Operating profit 3,812 3,218
Profit / (loss) from joint ventures and associated
undertakings 29 (10)
Exceptional items 4 (3)
-------- --------
Profit on ordinary activities before tax 3,845 3,205
Tax on profit on ordinary activities (1,076) (955)
-------- --------
Profit on ordinary activities after tax 2,769 2,250
Minority interests (equity and non-equity) (25) (20)
-------- --------
Profit for the financial year attributable
to the members of Barclays PLC 2,744 2,230
Dividends (1,340) (1,206)
-------- --------
Profit retained for the financial year 1,404 1,024
-------- --------
Earnings per ordinary share 42.3p 33.7p
Fully diluted earnings per share 42.1p 33.4p
Post tax return on average shareholders' funds 16.9% 14.7%
Dividends per ordinary share:
Interim 7.05p 6.35p
Final (payable 30th April 2004) 13.45p 12.00p
CONSOLIDATED BALANCE SHEET
2003 2002
restated
Assets: GBPm GBPm
Cash and balances at central banks 1,726 2,032
Items in course of collection from other banks 2,006 2,335
Treasury bills and other eligible bills 7,177 7,645
-------- --------
Loans and advances to banks - banking 17,254 15,369
- trading 44,670 42,805
-------- --------
61,924 58,174
-------- --------
Loans and advances to customers - banking 167,858 157,222
- trading 58,961 45,176
-------- --------
226,819 202,398
Debt securities 97,393 94,229
Equity shares 7,859 3,129
Interests in joint ventures and associated undertakings 428 455
Intangible fixed assets - goodwill 4,406 3,934
Tangible fixed assets 1,790 1,626
Other assets 23,756 19,821
-------- --------
435,284 395,778
Retail life-fund assets attributable to policyholders 8,077 7,284
-------- --------
Total assets 443,361 403,062
-------- --------
Liabilities:
-------- --------
Deposits by banks - banking 57,641 48,751
- trading 36,451 38,683
-------- --------
94,092 87,434
-------- --------
Customer accounts - banking 155,814 144,078
- trading 29,054 27,420
-------- --------
184,868 171,498
Debt securities in issue 49,569 45,885
Items in course of collection due to other banks 1,286 1,416
Other liabilities 76,374 62,651
Undated loan capital - convertible to preference shares - 310
Undated loan capital - non-convertible 6,310 6,368
Dated loan capital - convertible to preference shares 17 11
Dated loan capital - non-convertible 6,012 4,848
-------- --------
418,528 380,421
-------- --------
Minority interests and shareholders' funds:
Minority interests: equity 283 156
-------- --------
Called up share capital 1,642 1,645
Reserves 14,831 13,556
-------- --------
Shareholders' funds: equity 16,473 15,201
-------- --------
16,756 15,357
-------- --------
435,284 395,778
Retail life-fund liabilities attributable to policyholders 8,077 7,284
-------- --------
Total liabilities and shareholders' funds 443,361 403,062
-------- --------
FINANCIAL REVIEW
Results by nature of income and expense
Net interest income 2003 2002
GBPm GBPm
Interest receivable 12,427 12,044
Interest payable (5,823) (5,839)
-------- --------
6,604 6,205
-------- --------
Group net interest income increased by 6% to GBP6,604m, reflecting growth in
balances which more than offset a 14 basis point fall versus 2002 in the Group
net interest margin to 2.61%
(2002: 2.75%).
The Group net interest margin of 2.61% (2002: 2.75%) includes 0.48% (2002:
0.55%) arising from the benefit of free funds. A component of the benefit of
free funds is the hedge against short term interest rate movements. The
contribution of the hedge in 2003 was 0.19% (2002: 0.22%).
Average interest earning assets increased by 12% to GBP253bn (2002: GBP225bn),
primarily due to a GBP9bn increase in average loans and advances to customers,
largely in Personal Financial Services, Barclaycard and Business Banking and an
GBP18bn increase in average holdings of debt securities balances, predominantly
in Barclays Capital.
Domestic average interest earning assets increased by 7% to GBP162bn (2002:
GBP152bn), predominantly driven by the GBP5bn increase in Business Banking
average lending balances and a GBP4bn increase in average mortgage balances in
Personal Financial Services. International average interest earning assets
increased by 23% to GBP90bn (2002: GBP73bn), primarily driven by an increase in
Barclays Capital wholesale activities.
The 14 basis points fall in the Group net interest margin was primarily
attributable to a fall in the international net interest margin and a change in
the mix of both assets and liabilities.
The domestic net interest margin rose by 3 basis points to 3.64% (2002: 3.61%),
reflecting active management of margins across the UK businesses in competitive
market conditions. Net interest margin improved relative to 2002 in mortgages
and consumer finance and remained stable in retail savings and corporate
lending.
The reduction of 19 basis points in the international margin was mainly as a
result of an increase in higher quality assets in Barclays Capital, the
conversion to associate status of the Caribbean business, a change in the
currency mix of the portfolio and the general fall in global interest rates.
Yields, spreads and margins - banking business 1
2003 2002
Gross yield 2 % %
Group 4.92 5.35
Domestic 5.57 5.97
International 3.75 4.06
Interest spread 3
Group 2.33 2.42
Domestic 3.28 3.22
International 0.68 0.80
Interest margin 4
Group 2.61 2.75
Domestic 3.64 3.61
International 0.77 0.96
Average UK base rate 3.69 4.00
1 Domestic business is conducted primarily in the UK in Sterling. International
business is conducted primarily in foreign currencies. In addition to the
business carried out by overseas branches and subsidiaries, international
business is transacted in the UK by Barclays Capital.
The yields, spreads, and margins shown above exclude non-margin related items,
including profits and losses on the repurchase of loan capital and the
unwinding of the discount on vacant leasehold property provisions.
2 Gross yield is the interest rate earned on average interest earning assets.
3 Interest spread is the difference between the interest rate earned on average
interest earning assets and the interest rate paid on average interest bearing
liabilities.
4 Interest margin is net interest income as a percentage of average interest
earning assets.
Average interest earning assets and liabilities - banking business
2003 2002
Average interest earning assets GBPm GBPm
Group 252,737 225,178
Domestic 162,434 151,810
International 90,303 73,368
Average interest bearing liabilities
Group 224,778 199,708
Domestic 136,939 130,045
International 87,839 69,663
Net fees and commissions
2003 2002
GBPm GBPm
Fees and commissions receivable 4,896 4,454
Less: fees and commissions payable (633) (529)
-------- --------
4,263 3,925
-------- --------
Group net fees and commissions increased by GBP338m (9%) to GBP4,263m,
reflecting increases in most businesses, partially offset by a reduction in
Barclays Private Clients.
In Personal Financial Services, net fees and commissions increased 1% (GBP8m) to
GBP802m (2002: GBP794m). Underlying this were good performances from fee based
current accounts and consumer finance, largely offset by continued weakness in
the independent financial advisor (IFA) business.
In Barclays Private Clients, net fees and commissions decreased 13% (GBP79m) to
GBP515m (2002: GBP594m). This reflected the impact of lower average equity
market levels in 2003 on sales of investment products and on fund management
fees, together with the absence of the contribution from the Caribbean business.
The average level of the FTSE 100 Index was 12% lower than in the prior year at
4,051 (2002: 4,599). Fee income improved significantly in the second half of
2003, reflecting volume growth and the recovery in equity markets towards the
year-end. Average daily deal volumes in UK retail stockbroking, including
Charles Schwab Europe, increased to 8,350 (2002: 6,300). The stockbroking
business maintained its leading UK position with a 19% (2002: 12%) market share
of client order business.
In Barclaycard, net fees and commissions increased 14% (GBP97m) to GBP793m
(2002: GBP696m), as a result of higher cardholder activity and good volume
growth within the merchant acquiring business.
In Business Banking, net fees and commissions increased 7% (GBP61m) to GBP925m
(2002: GBP864m), driven by lending related fees which rose strongly, reflecting
the growth in the balance sheet. Foreign exchange commission income grew due to
increased business volumes. Money transmission income fell as a result of the
alternative offer made in response to the Competition Commission Inquiry
transitional pricing remedy and the targeted migration of transactions to
electronic channels.
Net fees and commissions in Barclays Africa rose 17% (GBP19m) to GBP133m (2002:
GBP114m), reflecting growth in fee based services, treasury profits and the
impact of the acquisition of BNPI Mauritius in 2002.
In Barclays Capital, net fees and commissions increased 16% (GBP74m) to GBP537m
(2002: GBP463m), with good performances across the Credit businesses.
In Barclays Global Investors, net fees and commissions increased 23% (GBP124m)
to GBP662m (2002: GBP538m), reflecting good income generation across a diverse
range of products, distribution channels and geographies. The increase was
largely driven by growth of investment management fees. These resulted from
strong net new sales, growth in the sales of higher margin products, good
investment performance and the recovery in equity markets towards the year-end,
which more than compensated for the adverse impact of foreign exchange
translation movements. Actively managed assets now generate over 60% of
management fees and over 50% of total income. Securities lending income growth
was good, benefiting from higher volumes.
Dealing profits
2003 2002
GBPm GBPm
Rates related business 909 876
Credit related business 145 (43)
-------- --------
1,054 833
-------- --------
Almost all the Group's dealing profits are generated in Barclays Capital.
Dealing profits grew 27% to GBP1,054m, driven by significant growth in client
transaction volumes, particularly in continental Europe. The strong performances
in the Credit businesses, principally in corporate bonds, were due to credit
spreads tightening in the secondary bond markets. The growth in Rates related
businesses reflected good results from equity related activities and money
markets. Fixed income, foreign exchange and commodities continued to make good
contributions.
Total foreign exchange income was GBP498m (2002: GBP496m) and consisted of
revenues earned from both retail and wholesale activities. The foreign exchange
income earned on customer transactions by Personal Financial Services, Barclays
Private Clients, Barclaycard, Business Banking, Barclays Africa and Barclays
Global Investors, both externally and with Barclays Capital, is reported in
those business units, within fees and commissions.
Other operating income
2003 2002
GBPm GBPm
Premium income on insurance underwriting 264 178
Profits on disposal of investment securities 73 58
Income from the long term assurance business (33) (51)
Property rentals 15 20
Dividend income from equity shares 6 7
Other income 165 152
-------- --------
490 364
-------- --------
Other operating income increased by GBP126m (35%) to GBP490m (2002: GBP364m).
Premium income on insurance underwriting rose by GBP86m to GBP264m (2002:
GBP178m) as a result of a good increase from consumer lending activities, a
favourable claims experience and a one off income gain of GBP43m resulting from
an adjustment to insurance reserves.
Profits on disposal of investment securities primarily reflects realisations in
the private equity business within Barclays Capital.
The substantial majority of the Group's long term assurance activity is based in
the UK. This UK business, which closed to new business following the Legal &
General alliance in 2001, was the main contributor to the loss of GBP33m for
2003 and the losses experienced in 2002.
Income from the long term assurance business reflects an investment gain
compared to a loss in 2002 and increased income from the ongoing life business.
These were partially offset by a reduction in the benefit of actuarial
assumptions and other movements and the costs of redress for customers in
respect of sales of endowment policies of GBP95m (2002: GBP19m).
Operating expenses
The Group manages core costs on the basis of three distinct categories:
strategic investment, revenue related and business as usual. In addition,
goodwill amortisation, restructuring costs and Woolwich integration costs are
reported separately.
Costs are allocated to individual categories based on the following definitions:
Strategic investment costs relate to the development costs of an investment
project which has either or both of the following features:
- it generates or enables new revenue streams or definable growth in
a revenue stream; or
- it generates or enables reduced costs.
Strategic investment costs exclude restructuring costs, integration costs and
project operating costs.
Revenue related costs are those costs which are directly associated with a
corresponding change in revenues or profit. An increase or decrease in revenues
or profits will usually lead to an increase or decrease in these costs.
Business as usual costs are those costs not classified as strategic investment
or revenue related. This category includes operating costs of live strategic
projects, other project costs not classified as strategic and volume related
costs which are not revenue related.
Acquisitions and disposals costs are those expenses incurred in 2003 and 2002 by
those businesses that were purchased or sold by the Group in 2003 or 2002. These
comprise business as usual costs, revenue related costs and strategic investment
costs.
Restructuring costs are those costs associated with the ongoing reorganisation
and restructuring of the Group's operations as part of its cost reduction
initiatives.
Woolwich integration costs are in respect of projects and initiatives associated
with the acquisition of Woolwich plc and include expenditure to achieve cost
savings and revenue synergies.
Based on the definitions on page 22, the Group's costs are summarised in the
following table:
2003 2002
GBPm GBPm
Business as usual costs 5,218 4,885
Revenue related costs 982 730
Strategic investment costs 392 381
Acquisitions and disposals 137 107
Restructuring costs 209 187
Goodwill amortisation 265 254
Woolwich integration costs 50 80
-------- --------
7,253 6,624
-------- --------
Operating expenses rose 9% to GBP7,253m (2002: GBP6,624m).
Business as usual costs rose 7% (GBP333m) to GBP5,218m (2002: GBP4,885m). The
majority of the increase, GBP200m, was attributable to the year-on-year impact
arising from the move to a pensions charge (GBP128m) from a pensions credit
(GBP72m) in 2002 in respect of the Group's main UK pension schemes.
In addition, business as usual costs reflected higher business volumes and the
impact of continued investment in Personal Financial Services, Barclays Capital,
Barclaycard and Barclays Africa. Barclays Private Clients business as usual
costs were broadly in line with the prior year. Business as usual costs were
lower in Business Banking and Barclays Global Investors.
Revenue related costs rose 35% (GBP252m) to GBP982m (2002: GBP730m), driven
largely by increased performance related payments primarily in Barclays Capital
and Barclays Global Investors.
Strategic investment costs increased 3% (GBP11m) to GBP392m (2002: GBP381m).
Strategic investment in the second half of the year was considerably higher than
in the first half.
Acquisitions and disposals costs reflect the acquisition of Banco Zaragozano,
Charles Schwab Europe and Clydesdale Financial Services in 2003, the acquisition
of Monument in 2002 and the restructuring of the Caribbean business in 2002.
Administrative expenses - staff costs
2003 2002
GBPm GBPm
Salaries and accrued incentive payments 3,441 3,159
Social security costs 278 240
Pension costs 180 (27)
Post-retirement health care 19 15
Other staff costs 377 368
-------- --------
4,295 3,755
-------- --------
2003 2002
Number of staff at period end:1
Personal Financial Services2 25,800 27,200
Barclays Private Clients3 13,000 10,700
Barclaycard4 5,300 4,700
Business Banking5 9,000 9,700
Barclays Africa6 6,800 7,500
Barclays Capital 5,700 5,500
Barclays Global Investors 2,000 2,100
Head office functions and other operations7 7,200 7,300
-------- --------
Total Group permanent and contract staff worldwide 74,800 74,700
Temporary and agency staff worldwide 4,100 3,700
-------- --------
Total including temporary and agency staff 78,900 78,400
-------- --------
1 Staff numbers are on a full time equivalent basis. UK permanent and contract
staff totalled 58,000 (31st December 2002: 59,000).
2 Staff numbers decreased since 31st December 2002 by 1,400, as a result of a
number of productivity initiatives.
3 The increase in staff numbers includes 3,500 staff arising from the
acquisition of Charles Schwab Europe, Banco Zaragozano and Gerrard,
partially offset by restructuring initiatives (1,200).
4 Includes 200 staff arising from the acquisition of Clydesdale Financial
Services and the recruitment of an additional 500 staff in Barclaycard,
partially offset by restructuring initiatives (100).
5 Staff numbers decreased since 31st December 2002 by 700 due to a number of
restructuring initiatives.
6 The decrease in staff numbers is due to a number of restructuring
initiatives mainly within the Kenyan, Zambian and Zimbabwean operations.
7 Staff numbers include staff undertaking certain activities which support the
operating business and provide central information technology services,
whose costs are predominantly passed on to the businesses.
Staff costs
Staff costs increased by 14% to GBP4,295m (2002: GBP3,755m).
Salaries and accrued incentive payments increased by 9% (GBP282m) to GBP3,441m
(2002: GBP3,159m) reflecting increased performance related payments primarily
within Barclays Capital and Barclays Global Investors.
Pension costs comprise all UK and international pension schemes. Included in the
costs is the charge of GBP128m (2002: GBP72m credit) in respect of the Group's
main UK pension schemes.
Permanent and contract staff numbers increased by 100 during 2003. The
implementation of restructuring programmes resulted in a decrease of 4,400
staff. This was more than offset by an increase of 3,700 staff from the
acquisitions of Charles Schwab Europe, Clydesdale Financial Services, Banco
Zaragozano and Gerrard and the recruitment of an additional 500 staff in
Barclaycard and 300 staff elsewhere.
Administrative expenses - Other
2003 2002
GBPm GBPm
Property and equipment expenses
Hire of equipment 8 12
Property rentals 184 180
Other property and equipment expenses 901 793
-------- --------
1,093 985
Other administrative expenses
Stationery, postage and telephones 311 294
Advertising and market promotion 237 238
Travel, accommodation and entertainment 145 136
Subscriptions and publications 91 86
Sundry losses, provisions and write-offs 128 121
Consultancy fees 56 85
Professional fees 159 161
Other expenses 184 206
-------- --------
1,311 1,327
-------- --------
2,404 2,312
-------- --------
Administrative expenses - Other rose by 4% (GBP92m) to GBP2,404m (2002:
GBP2,312m). Property and equipment expenses increased by 11% (GBP108m) to
GBP1,093m as a result of increased outsourced processing, information technology
costs, and property repairs and maintenance.
Other administrative expenses were broadly flat at GBP1,311m (2002: GBP1,327m).
Increases across a number of expense categories reflected higher business
activity and were more than offset by reductions in a number of other categories
including consultancy spend and other expenses.
Depreciation
2003 2002
GBPm GBPm
Property depreciation 93 93
Equipment depreciation 196 198
Loss on sale of equipment - 12
-------- --------
289 303
-------- --------
Goodwill amortisation
2003 2002
GBPm GBPm
Woolwich 206 206
Other 59 48
-------- --------
265 254
-------- --------
Provisions for bad and doubtful debts
2003 2002
GBPm GBPm
The charge for the year in respect of
bad and doubtful debts comprises:
Specific provisions
New and increased 1,628 1,719
Releases (195) (127)
Recoveries (113) (106)
-------- --------
1,320 1,486
General provision charge / (release) 27 (2)
-------- --------
Net charge 1,347 1,484
-------- --------
The net charge for the year in respect of bad
and doubtful debts comprises:
Transition businesses 23 124
Other 1,324 1,360
-------- --------
Net charge 1,347 1,484
-------- --------
Total provisions for bad and doubtful
debts at end of the year comprise:
Specific provisions 2,233 2,261
General provisions 795 737
-------- --------
3,028 2,998
-------- --------
Provisions fell 9% (GBP137m) to GBP1,347m (2002: GBP1,484m). Provisions
excluding the impact of Transition Businesses, mainly Argentina in 2002, fell 3%
(GBP36m) to GBP1,324m (2002: GBP1,360m). The Group's provisions charge improved
significantly to 0.73% (2002: 0.85%) of average banking loans and advances.
Business Banking provisions increased broadly in line with portfolio growth.
Provisions fell in Barclays Capital reflecting the ongoing improvement in the
loan book and the continued recovery in the large corporate credit environment.
Provisions fell in Personal Financial Services with an improvement in the
quality of the loan portfolio and improved risk management. The reduction
occurred in the unsecured lending portfolio. Provisions for mortgages remained
very small. Barclaycard provisions increased in line with continued portfolio
growth.
The year-end general provision stock increased by 8% (GBP58m) to GBP795m (31st
December 2002: GBP737m).
Profit /(loss) from joint ventures and associated undertakings
2003 2002
GBPm GBPm
Profit/(loss) from joint ventures 1 (5)
Profit/(loss) from associated undertakings 28 (5)
-------- --------
29 (10)
-------- --------
The majority of the profit from associated undertakings for the year relates to
the investment in FirstCaribbean (including goodwill amortisation of GBP7m).
Exceptional items
2003 2002
GBPm GBPm
Profit on disposal of Group undertakings 4 8
Loss on termination of Group activities - (11)
-------- --------
4 (3)
-------- --------
Tax
The charge for the year is based upon a UK corporation tax rate of 30% for the
calendar year 2003 (2002: 30%). The effective rate of tax was 28.0% (2002:
29.8%). The decrease in the tax rate was primarily due to the beneficial effects
of lower tax on overseas income, recognition of agreed capital gains tax losses
and certain non-taxable gains, partially offset by the absence of tax relief on
goodwill.
Earnings per ordinary share
2003 2002
Profit for the financial year attributable to
the members of Barclays PLC GBP2,744m GBP2,230m
Basic weighted average number of ordinary shares in issue 6,483m 6,626m
Add: potential ordinary shares 31m 47m
-------- --------
Diluted weighted average number of shares 6,514m 6,673m
-------- --------
Earnings per ordinary share 42.3p 33.7p
Fully diluted earnings per ordinary share 42.1p 33.4p
Dividends on ordinary shares
The Board has decided to pay, on 30th April 2004, a final dividend for the year
ending 31st December 2003 of 13.45p per ordinary share, for shares registered in
the books of the Company at the close of business on 27th February 2004.
Shareholders who have their dividends paid direct to their bank or building
society account will receive a consolidated tax voucher detailing the dividends
paid in the 2004/2005 tax year in mid-October 2004.
For qualifying US and Canadian resident ADR holders, the final dividend of
13.45p per ordinary share becomes 53.8p per ADS (representing four shares). The
ADR depositary will mail the dividend on 30th April 2004 to ADR holders on the
record on 27th February 2004.
For qualifying Japanese shareholders, the final dividend of 13.45p per ordinary
share will be distributed in mid-May to shareholders on the record on 27th
February 2004.
Shareholders may have their dividends reinvested in Barclays PLC shares by
participating in the Barclays Dividend Reinvestment Plan. The plan is available
to all shareholders, including members of Barclays Sharestore, provided that
they do not live in or are subject to the jurisdiction of any country where
their participation in the plan would require Barclays or The Plan Administrator
to take action to comply with local government or regulatory procedures or any
similar formalities. Any shareholder wishing to obtain details and a form to
join the plan should contact The Plan Administrator by writing to: The Plan
Administrator to Barclays, The Causeway, Worthing BN99 6DA; or by phoning 0870
609 4535. The completed form should be returned to The Plan Administrator on or
before 7th April 2004 for it to be effective in time for the payment of the
final dividend on 30th April 2004. Shareholders who are already in the plan need
take no action unless they wish to change their instructions in which case they
should write to The Plan Administrator.
Balance Sheet
Capital resources
2003 2002
restated
GBPm GBPm
Shareholders' funds 16,473 15,201
Minority interests 283 156
-------- --------
16,756 15,357
Loan capital 12,339 11,537
-------- --------
29,095 26,894
-------- --------
Total capital resources increased in the year by GBP2,201m.
Equity shareholders' funds increased by GBP1,272m reflecting profit retentions
of GBP1,404m, net proceeds of share issues of GBP149m, offset by share
repurchases of GBP204m, exchange rate losses of GBP29m, shares issued to QUEST
of GBP36m and other movements of GBP12m.
Loan capital rose by GBP802m reflecting raisings of GBP1,926m, partially offset
by redemptions of GBP974m, exchange rate movements of GBP146m and amortisation
of issue expenses of GBP4m.
Capital ratios
Weighted risk assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority, comprise:
2003 2002
Weighted risk assets: restated
Banking book GBPm GBPm
on-balance sheet 133,816 128,691
off-balance sheet 22,987 21,999
Joint ventures and associated undertakings 2,830 3,065
-------- --------
Total banking book 159,633 153,755
-------- --------
Trading book
Market risks 13,861 7,988
Counterparty and settlement risks 15,503 11,005
-------- --------
Total trading book 29,364 18,993
-------- --------
Total weighted risk assets 188,997 172,748
-------- --------
Capital resources:
Tier 1
Called up share capital 1,642 1,645
Less: own shares (6) (3)
-------- --------
1,636 1,642
Eligible reserves 14,663 13,408
Minority interests - equity 637 522
Reserve capital instruments 1 1,705 1,771
Tier one notes1 960 1,019
Less: goodwill (4,607) (4,158)
-------- --------
Total qualifying tier 1 capital 14,994 14,204
-------- --------
Tier 2
Revaluation reserves 2 25 25
General provisions 795 737
Qualifying subordinated liabilities 3
Undated loan capital 3,636 3,854
Dated loan capital 5,652 4,573
Other4 2 2
-------- --------
Total qualifying tier 2 capital 10,110 9,191
-------- --------
Tier 3: short term subordinated liabilities 3 280 203
-------- --------
Less: Supervisory deductions
Investments not consolidated for Supervisory purposes 5 (979) (1,288)
Other deductions (182) (119)
-------- --------
(1,161) (1,407)
-------- --------
Total net capital resources 24,223 22,191
-------- --------
% %
Equity Tier 1 ratio 6 6.5 6.6
Tier 1 ratio 7.9 8.2
Risk asset ratio 12.8 12.8
1 Reserve capital instruments (RCIs) and tier one notes (TONs) are included
in the undated loan capital in the consolidated balance sheet.
2 Includes GBP1m (31st December 2002: GBP1m) negative goodwill adjustment.
3 Subordinated liabilities are included in tiers 2 or 3, subject to limits
laid down in the supervisory requirements.
4 Comprises revaluation reserves, in relation to minority interests, of GBP2m
(31st December 2002: GBP2m).
5 Includes GBP478m (31st December 2002: GBP867m) of shareholders' interest in
the retail life fund.
6 Equity defined as Total qualifying tier 1 capital less RCIs and TONs.
The growth in net capital resources of 9.2% (GBP2.0bn), was offset by the impact
of 9.4% (GBP16.2bn) growth in weighted risk assets. The risk asset ratio was
steady at 12.8% (31st December 2002: 12.8%). The Tier 1 ratio fell from 8.2% to
7.9%. The Equity Tier 1 ratio fell to 6.5% (2002: 6.6%).
Within total net capital, tier 1 capital rose by GBP0.8bn primarily reflecting
retained profits of GBP1.4bn and an increase in the deduction for goodwill of
GBP0.4bn. Tier 2 capital increased by GBP0.9bn and tier 3 capital by GBP0.1bn.
Supervisory deductions decreased by GBP0.2bn.
Equity tier 1 capital rose by GBP0.9bn.
The increase in weighted risk assets is primarily accounted for by a rise of
54.6% (GBP10.4bn) in the Trading book. Banking book weighted risk assets grew
3.8% (GBP5.9bn). The growth in weighted risk assets is discussed further under
'Total assets and Weighted risk assets' below.
Total assets and Weighted risk assets
The Group's balance sheet grew by 10% (GBP40bn) to GBP443bn (31st December 2002:
GBP403bn). Weighted risk assets rose by 9% (GBP16bn) to GBP189bn (31st December
2002: GBP173bn).
Within Personal Financial Services, total assets increased 4% to GBP74.8bn (31st
December 2002: GBP71.9bn). Weighted risk assets increased by 3% to GBP42.4bn
(31st December 2002: GBP41.1bn). This was mainly attributable to steady growth
in UK residential mortgage balances, up 3% to GBP59.8bn (2002: GBP57.8bn) and to
good growth in unsecured lending.
Barclays Private Clients total assets (excluding the assets of the closed life
assurance activities) grew 56% (GBP7.4bn) to GBP20.5bn (31st December 2002:
GBP13.1bn), primarily as a result of the growth of Openplan in Spain and the
inclusion of assets relating to the acquired business of Banco Zaragozano.
Weighted risk assets increased 29% to GBP15.1bn (31st December 2002: GBP11.7bn),
largely reflecting the growth in Openplan assets in Spain and the impact of the
acquisition of Banco Zaragozano.
Barclaycard total assets increased 15% to GBP12.3bn (31st December 2002
GBP10.7bn). Weighted risk assets decreased by 2% to GBP9.8bn (31st December
2002: GBP10.0bn), reflecting the effect of securitised credit card receivables.
Within Business Banking, total assets grew by 10% to GBP52.1bn (31st December
2002: GBP47.3bn). Weighted risk assets increased by 9% to GBP55.0bn (31st
December 2002: GBP50.4bn) as a result of strong growth in lending balances.
Lending growth was directed towards higher quality large and medium business
customers.
Barclays Capital total assets grew 11% to GBP263.2bn (31st December 2002:
GBP236.5bn) primarily due to increases in low risk, high quality reverse repos
and debt securities. Reverse repo balances, which are fully collateralised,
increased GBP17.1bn, driven by growth in client transactions. The increase in
debt securities of GBP6.7bn arose primarily in governments and high-grade
corporates. Total weighted risk assets increased 15% (GBP7.8bn) to GBP61.3bn
(31st December 2002: GBP53.5bn), broadly in line with the growth in assets.
Personal Financial Services
Personal Financial Services provides a wide range of products and services to 14
million personal customers throughout the United Kingdom, including current
accounts, savings, mortgages, consumer loans and general insurance. These are
available to customers through integrated channels comprising the branch
network, automated teller machines, telephone banking and online banking.
Personal Financial Services works closely with other businesses in the Group, in
particular Barclays Private Clients, Barclaycard and Business Banking.
Within Personal Financial Services, the principal goal has been to do more
business with more customers. This has been achieved by building broader and
deeper relationships with the existing customer base as well as attracting new
customers. There has also been a focus on increasing risk adjusted returns and
continuing to strengthen the quality of the lending portfolio.
2003 2002
GBPm GBPm
Net interest income 1,949 1,834
Net fees and commissions 802 794
Other operating income 358 291
-------- --------
Operating income 3,109 2,919
-------- --------
Operating expenses excluding goodwill (1,789) (1,675)
and restructuring costs
Restructuring costs (50) (39)
-------- --------
Operating expenses excluding goodwill (1,839) (1,714)
-------- --------
Operating profit before provisions, excluding goodwill 1,270 1,205
Provisions for bad and doubtful debts (303) (334)
-------- --------
Operating profit excluding goodwill 967 871
Profit from associated undertakings 6 3
-------- --------
Profit on ordinary activities before tax excluding
goodwill and exceptional items 973 874
-------- --------
Personal Financial Services operating profit excluding goodwill increased 11%
(GBP96m) to GBP967m (2002: GBP871m), reflecting good income momentum, continued
good cost control and reduced provisions.
Operating income increased 7% (GBP190m) to GBP3,109m (2002: GBP2,919m). Net
revenue (operating income less provisions) increased 9% to GBP2,806m (2002:
GBP2,585m).
Operating income growth was broadly based: general insurance rose 32%; consumer
finance rose 15%; mortgages rose 10%; and current accounts and savings rose 2%.
Income from independent financial advice fell 28%.
Net interest income increased 6% (GBP115m) to GBP1,949m (2002: GBP1,834m).
Growth resulted from higher average product balances and improved asset margins.
The retail savings margin remained stable.
Consumer finance experienced good growth in average balances, up 6% to GBP6.8bn
(2002: GBP6.4bn), and improved margins. Sales of the key Barclayloan product
were particularly strong, increasing 32%. A significant part of the new consumer
loan business was in the better risk grades.
Average savings balances increased 6% to GBP30.9bn (2002: GBP29.2bn), after
transferring some balances to Barclays Private Clients in the second half of
2003. Excluding the impact of the transfer average savings balances increased 9%
to GBP31.8bn (2002: GBP29.2bn). Barclays branded savings continued to perform
strongly, growing 19%. This was a market leading performance driven by Openplan.
Average residential mortgage balances increased 8% to GBP59.0bn (2002:
GBP54.5bn). The selective approach taken to certain sectors of the mortgage
market has been maintained throughout 2003. Gross advances were GBP18.3bn (2002:
GBP22.2bn), a gross market share of 7% (2002: 10%). Net lending of GBP2.0bn
(2002: GBP6.9bn) represented a net market share of 2% (2002: 9%). UK residential
mortgage balances ended the period at GBP59.8bn (31st December 2002: GBP57.8bn).
The interest spread on new mortgage business increased.
Net fees and commissions increased 1% (GBP8m) to GBP802m (2002: GBP794m).
Underlying this were good performances from fee based current accounts and
consumer finance, largely offset by continued weakness in the independent
financial advisor (IFA) business.
Other operating income increased by 23% (GBP67m) to GBP358m (2002: GBP291m).
This resulted from a strong performance in general insurance activities,
reflecting increased sales of personal protection insurance products, and a more
favourable claims experience. A one-off income gain of GBP43m arose through an
adjustment to insurance reserves.
Contributing to the overall increase in operating income has been the continued
success of Openplan. Customer numbers now total 2.6m (2002: 2.0m), with deeper
customer relationships evident through significantly higher product penetration
and income contribution than for non-Openplan relationships. The percentage of
new to Group customers in Openplan has increased. Openplan from Barclays has
attracted 1.25m customers (2002: 0.78m) across the UK. Product penetration was
an average of 4.6 products per customer, well above the average of 2.6 outside
Openplan. Annual customer income was GBP397, relative to GBP249 outside
Openplan. Openplan from Woolwich customer numbers rose to 1.40m (2002: 1.21m)
with average product penetration of 3.2 products per customer relative to 1.5
outside Openplan. Annual customer income was GBP311, relative to GBP165 outside
Openplan.
Operating expenses excluding goodwill rose 7% (GBP125m) to GBP1,839m (2002:
GBP1,714m), with around half of the increase attributable to the impact of the
pension charge of GBP40m (2002: credit GBP20m). Business as usual costs were
tightly managed to improve operational efficiency, and staff numbers continued
to decline. Headcount fell to 25,800 (2002: 27,200). Strategic investment spend
increased. Integration costs associated with the Woolwich integration reduced to
GBP50m (2002: GBP70m). The cost:income ratio was maintained at 59%.
Provisions decreased 9% (GBP31m) to GBP303m (2002: GBP334m), reflecting the
overall quality of the lending portfolio, improvements to risk management
processes and a reduction in problem loans. Coverage ratios improved. The loan
to value ratio within the mortgage book on a current valuation basis averaged
40% (2002: 45%).
Barclays Private Clients
Barclays Private Clients serves affluent and high net worth clients, primarily
in the UK and continental Europe, providing banking and asset management
services.
The businesses have continued to maintain a strong focus on improving
operational efficiency and developing a distinctive customer service.
The comparison with the 2002 results is impacted by the Caribbean business being
accounted for as an associated undertaking, following the formation of
FirstCaribbean on 11th October 2002, and by the acquisitions made during 2003.
The retail stockbroking business Charles Schwab Europe was acquired on 31st
January 2003. In May 2003, Barclays announced the acquisition of Banco
Zaragozano in Spain, which completed in mid July. The acquisition of Gerrard
completed in mid December 2003.
The contribution recognised from the closed life assurance activities is
reported separately to provide increased transparency in the financial reporting
within Barclays Private Clients.
Barclays Private Clients works closely with other Group businesses, particularly
Personal Financial Services, Business Banking, Barclays Global Investors and
Barclays Capital, in order to enhance product development and customer service.
2003 2002
GBPm GBPm
Net interest income 804 788
Net fees and commissions 515 594
Other operating income 31 19
-------- --------
Operating income 1,350 1,401
-------- --------
Operating expenses excluding goodwill
and restructuring costs (941) (952)
Restructuring costs (50) (44)
-------- --------
Operating expenses (991) (996)
-------- --------
Operating profit before provisions excluding goodwill 359 405
Provisions for bad and doubtful debts (31) (37)
-------- --------
Operating profit
- ongoing business 328 368
Profit from associated undertakings 23 (8)
-------- --------
Profit on ordinary activities before tax excluding
goodwill and exceptional items
- ongoing business 351 360
Contribution from closed life assurance activities (77) (87)
-------- --------
Profit on ordinary activities before tax excluding
goodwill and exceptional items 274 273
-------- --------
Barclays Private Clients operating profit, excluding goodwill, for the ongoing
business fell 11% (GBP40m) to GBP328m (2002: GBP368m). Barclays Private Clients,
profit before tax excluding goodwill and exceptional items for the ongoing
business and including the contribution of FirstCarribean, decreased 3% to
GBP351m (2002: GBP360m).
Net interest income increased 2% (GBP16m) to GBP804m (2002: GBP788m). The
increase reflected a resilient core banking performance, the continued success
of Openplan in Spain and the inclusion of Banco Zaragozano, which together more
than offset the absence of the contribution from the Caribbean business. Average
customer deposits increased 5% to GBP41bn (2002: GBP39bn), including the
transfer of some client savings balances from Personal Financial Services in the
second half of 2003. Excluding the impact of the transfer, average customer
deposits increased 3% to GBP40bn (GBP39bn). Average loans increased 44% to
GBP13bn (2002: GBP9bn). Margins remained broadly stable.
Net fees and commissions decreased 13% (GBP79m) to GBP515m (2002: GBP594m). This
reflected the impact of lower average equity market levels in 2003 on sales of
investment products and on fund management fees, together with the absence of
the contribution from the Caribbean business. The average level of the FTSE 100
Index was 12% lower than in the prior year at 4,051 (2002: 4,599). Fee income
improved significantly in the second half of 2003, reflecting volume growth and
the recovery in equity markets towards the year-end. Average daily deal volumes
in UK retail stockbroking, including Charles Schwab Europe, increased to 8,350
(2002: 6,300). The stockbroking business maintained its leading UK position with
a 19% (2002: 12%) market share of client order business.
Operating expenses excluding goodwill decreased 1% (GBP5m) to GBP991m (2002:
GBP996m). The tight control of costs, together with the impact of the
deconsolidation of the Caribbean business, fully mitigated the additional
pensions charge of GBP28m (2002: credit GBP13m), the inclusion of costs relating
to Banco Zaragozano and Charles Schwab Europe, and increased restructuring
charges. The cost: income ratio was 73% (2002: 71%).
Provisions decreased GBP6m to GBP31m (2002: GBP37m), reflecting the impact of
the Caribbean transaction.
Total customer funds, comprising customer deposits and assets under management
(including assets managed by Legal & General under the strategic alliance),
increased GBP24bn to GBP109bn (31st December 2002: GBP85bn). This was due to the
inclusion of funds relating to the acquired businesses of Charles Schwab Europe,
Banco Zaragozano and Gerrard (which together amounted to GBP19bn), the impact of
new business, favourable exchange rate movements and improved stock market
levels. Customer deposits increased by GBP5bn to GBP44bn (31st December 2002:
GBP39bn) , reflecting the inclusion of Banco Zaragozano and savings balances of
GBP1.9bn which were transferred from Personal Financial Services in the second
half of 2003.
Sales of Legal & General life and pensions products have fallen in line with
industry trends. Sales of funds and bonds were impacted by reduced customer
demand for investment products.
Openplan in UK Premier attracted GBP1.1bn of new mortgage balances together with
GBP1.3bn of additional savings in the year.
Income in Spain, excluding Banco Zaragozano, continued to grow significantly in
2003, increasing 22% (GBP32m) to GBP179m (2002: GBP147m). This reflected the
continued success of Openplan mortgage products together with favourable
exchange rate movements. 15,000 new customers were recruited to Openplan in
Spain in 2003.
The first benefits of the integration of Banco Zaragozano were evident: sales of
non-core assets totalling some GBP175m, representing 23% of the purchase
consideration; progress has been made on the combination of head office
functions and technology integration; and Barclays products have been
successfully launched into the Banco Zaragozano customer base. The majority of
the restructuring costs will be borne in 2004 and 2005.
The contribution from the closed life assurance activities, a loss of GBP77m
(2002: loss of GBP87m), comprises the embedded value of the closed Barclays Life
fund and former Woolwich Life fund together with the costs relating to redress
for customers in respect of sales of endowment policies. Of the loss of GBP77m,
in the Group's results, GBP42m is included within other operating income and
GBP35m within net interest income.
Total costs relating to customer redress in respect of mortgage endowment
policies were GBP95m (2002: GBP19m).
Barclaycard
Barclaycard is one of the leading credit card businesses in Europe. In addition
to its operations in the United Kingdom, Barclaycard is active in Germany,
Spain, Greece, France, Italy and across Africa. Barclaycard offers a full range
of credit card services to individual and corporate customers, together with
card payment facilities to retailers and other businesses.
Barclaycard continued to grow both its domestic and international businesses
through organic and non-organic activity in 2003. In April, Barclaycard
purchased the global rights (excluding UK and Singapore) to use the Manchester
United credit card brand. Barclaycard has launched a Manchester United branded
credit card into five countries.
Barclaycard acquired Clydesdale Financial Services, a retailer point of sale
finance business in May and, in August, entered into a strategic alliance with
the Standard Bank of South Africa. Barclaycard, already established in Spain, is
currently working with Banco Zaragozano to accelerate growth in this market.
2003 2002
GBPm GBPm
Net interest income 1,037 886
Net fees and commissions 793 696
-------- --------
Operating income 1,830 1,582
-------- --------
Operating expenses excluding goodwill and restructuring costs (633) (553)
Restructuring costs (13) (12)
-------- --------
Operating expenses excluding goodwill (646) (565)
-------- --------
Operating profit before provisions excluding goodwill 1,184 1,017
Provisions for bad and doubtful debts (462) (402)
-------- --------
Operating profit excluding goodwill 722 615
Profit from joint ventures 2 (4)
-------- --------
Profit on ordinary activities before tax excluding
goodwill and exceptional items 724 611
-------- --------
Barclaycard operating profit excluding goodwill increased 17% (GBP107m) to
GBP722m (2002: GBP615m).
Operating income increased 16% (GBP248m) to GBP1,830m (2002: GBP1,582m). Net
revenue (operating income less provisions) increased 16% (GBP188m) to GBP1,368m
(2002: GBP1,180m).
Net interest income increased 17% (GBP151m) to GBP1,037m (2002: GBP886m), due to
good growth in UK average extended credit balances, up 14% to GBP7.4bn (2002:
GBP6.5bn). Growth in new UK customers remained strong, up 27%, with 1,547,000
(2002: 1,218,000) recruited in the period.
Net fees and commissions increased 14% (GBP97m) to GBP793m (2002: GBP696m), as a
result of higher cardholder activity and good volume growth within the merchant
acquiring business.
Operating expenses excluding goodwill increased 14% (GBP81m) to GBP646m (2002:
GBP565m). The increase reflected higher business volumes and greater marketing
activity. Strategic investment spend increased as Barclaycard enhanced
operational capabilities. The cost:income ratio improved to 35% (2002: 36%).
Provisions increased 15% (GBP60m) to GBP462m (2002: GBP402m), in line with the
growth in lending.
Barclaycard International made a profit of GBP4m (2002: loss GBP14m) whilst
maintaining significant ongoing investment in the existing businesses and
launching into new markets. Income increased by 48% and average extended credit
balances rose by 43%. The number of Barclaycard International cards in issue
rose to 1.42m (2002: 1.28m).
Business Banking
Business Banking provides relationship banking to the Group's large, medium and
small business customers in the United Kingdom. Customers are served by a
network of relationship and industry sector specialist managers who provide
local access to an extensive range of products and services, as well as offering
business information and support. Customers are also offered access to business
centres in continental Europe and to the products and expertise of other
businesses in the Group.
The strategy to accelerate business growth is underpinned by the Value Aligned
Performance Measurement (VAPM) system which is linked to targets and reward. The
VAPM outputs demonstrate the additional value that is generated through the
acquisition of new customers, together with the strengthening and the expansion
of relationships with existing customers.
In accordance with the Competition Commission Inquiry transitional pricing
remedy, Business Banking offered qualifying small and medium enterprise
customers interest on current accounts, or an alternative of discounted money
transmission charges, with effect from 1st January 2003.
2003 2002
GBPm GBPm
Net interest income 1,665 1,626
Net fees and commissions 925 864
Other operating income 38 24
-------- --------
Operating income 2,628 2,514
-------- --------
Operating expenses excluding goodwill
and restructuring costs (1,032) (1,019)
Restructuring costs (39) (42)
-------- --------
Operating expenses excluding goodwill (1,071) (1,061)
-------- --------
Operating profit before provisions excluding goodwill 1,557 1,453
Provisions for bad and doubtful debts (249) (226)
-------- --------
Operating profit excluding goodwill 1,308 1,227
Profit from associated undertakings 3 (2)
-------- --------
Profit on ordinary activities before tax excluding
goodwill amortisation and exceptional items 1,311 1,225
-------- --------
Business Banking operating profit excluding goodwill increased 7% (GBP81m) to
GBP1,308m (2002: GBP1,227m), as a result of good income growth, continued tight
cost management and well controlled risk. Operating income increased 5%
(GBP114m) to GBP2,628m (2002: GBP2,514m). Net revenue (operating income less
provisions) increased 4% (GBP91m) to GBP2,379m (2002: GBP2,288m).
Net interest income increased 2% (GBP39m) to GBP1,665m (2002: GBP1,626m).
Average lending balances increased 11% to GBP47.0bn (2002: GBP42.3bn) and
average deposit balances increased 5% to GBP46.2bn (2002: GBP43.9bn). Lending
margins were maintained and lending growth was concentrated towards higher
quality large and medium business customers. The impact of the Competition
Commission Inquiry transitional pricing remedy and the lower interest rate
environment contributed to lower deposit margins.
Net fees and commissions increased 7% (GBP61m) to GBP925m (2002: GBP864m),
driven by lending related fees which rose strongly, reflecting the growth in the
balance sheet. Foreign exchange commission income grew due to increased business
volumes. Money transmission income fell as a result of the alternative offer
made in response to the Competition Commission Inquiry transitional pricing
remedy and the targeted migration of transactions to electronic channels.
Operating expenses excluding goodwill increased 1% (GBP10m) to GBP1,071m (2002:
GBP1,061m). Business as usual costs reduced, with cost savings from the back
office more than offsetting the impact of the pension charge of GBP50m (2002:
credit GBP26m). Headcount fell to 9,000 (2002: 9,700). Strategic investment
spend increased, and was focused on improving direct channels, realising cost
savings and enhancing the shared technology infrastructure. The cost:income
ratio improved to 41% (2002: 42%).
Provisions increased 10% (GBP23m) to GBP249m (2002: GBP226m). The increase was
in line with lending growth. The lending portfolio remained well diversified by
sector and the overall quality of the portfolio, as defined by risk grade, was
maintained.
Barclays Africa
Barclays Africa provides banking services to personal and corporate customers in
North Africa, sub-Saharan Africa and islands in the Indian Ocean. The portfolio
comprises banking operations in Botswana, Egypt, Ghana, Kenya, Mauritius,
Seychelles, South Africa, Tanzania, Uganda, Zambia and Zimbabwe.
The integration of BNPI Mauritius, acquired in November 2002, was completed.
Restructuring initiatives continued to reposition the businesses to take account
of the economic prospects and situations in the African countries where we
operate. Head office functions have largely been relocated from the United
Kingdom to South Africa.
2003 2002
GBPm GBPm
Net interest income 187 160
Net fees and commissions 133 114
Other operating income 5 1
-------- --------
Operating income 325 275
-------- --------
Operating expenses excluding goodwill
and restructuring costs (164) (143)
Restructuring costs (21) (16)
-------- --------
Operating expenses excluding goodwill (185) (159)
-------- --------
Operating profit before provisions excluding goodwill 140 116
Provisions for bad and doubtful debts (27) (27)
-------- --------
Operating profit excluding goodwill 113 89
Profit from joint ventures - -
-------- --------
Profit on ordinary activities before tax excluding
goodwill and exceptional items 113 89
-------- --------
Barclays Africa operating profit excluding goodwill increased 27% (GBP24m) to
GBP113m (2002: GBP89m) driven by strong customer lending.
Operating income increased 18% (GBP50m) to GBP325m (2002: GBP275m).
Net interest income increased 17% (GBP27m) to GBP187m (2002: GBP160m), the
growth being largely attributable to the acquisition of BNPI Mauritius and
expansion in selected markets. There was a 20% increase in customer lending to
GBP1.8bn (2002: GBP1.5bn) and a 12% rise in customer deposits to GBP2.8bn (2002:
GBP2.5bn).
Net fees and commissions rose 17% (GBP19m) to GBP133m (2002: GBP114m),
reflecting growth in fee based services, treasury profits and the impact of the
acquisition of BNPI Mauritius in 2002.
Operating expenses excluding goodwill increased 16% (GBP26m) to GBP185m (2002:
GBP159m), due to increased infrastructure investment, further development of the
business and the relocation of Head office functions. The cost:income ratio
improved to 57% (2002: 58%).
Provisions remained steady at GBP27m, notwithstanding strong lending growth, and
reflected improved portfolio quality and recoveries.
Barclays Capital
Barclays Capital is the investment banking division of Barclays, providing
corporate, institutional and government clients with solutions to their
financing and risk management needs.
The Barclays Capital business model is distinctive. It focuses on a broad span
of financing and risk management services in the interest rate, foreign
exchange, commodities and credit markets combined with certain capabilities in
equities. Activities are split between two areas: Rates, which includes fixed
income, foreign exchange, commodities, emerging markets, money markets sales,
trading and research, prime brokerage and equity related activities; and Credit,
which includes origination, sales, trading and research relating to loans, debt
capital markets, structured capital markets, and private equity.
Barclays Capital works increasingly with other Group businesses, including
Barclays Private Clients, Business Banking and Barclays Global Investors, to
provide a more integrated customer service and to develop business opportunities
across the Group.
Barclays Capital rose to 4th position (2002: 5th) in the global all debt league
table as debt issuance for clients increased to US$199bn (2002: US$162bn).
Barclays Capital maintained its lead position in Sterling bonds.
2003 2002
GBPm GBPm
Net interest income 964 889
Dealing profits 1,042 827
Net fees and commissions 537 463
Other operating income 109 59
-------- --------
Operating income 2,652 2,238
-------- --------
Operating expenses excluding restructuring costs (1,606) (1,312)
Restructuring costs (12) (12)
-------- --------
Operating expenses (1,618) (1,324)
-------- --------
Operating profit before provisions 1,034 914
Provisions for bad and doubtful debts (252) (334)
-------- --------
Operating profit 782 580
Profit from associated undertakings 1 1
-------- --------
Profit on ordinary activities before tax 783 581
-------- --------
Barclays Capital operating profit increased 35% (GBP202m) to GBP782m (2002:
GBP580m). This was due to very strong operating income growth and the improved
credit environment. Revenue related costs increased with the strong performance.
Operating income increased 18% (GBP414m) to a record GBP2,652m (2002: GBP2,238m)
and reflected broadly based growth across most of the product areas in Rates and
Credit. Average DVaR rose 13%, to GBP26m (2002: GBP23m). Net revenue (operating
income less provisions) increased by 26% to GBP2,400m (2002: GBP1,904m).
Secondary income, comprising dealing profits and net interest income, and which
is primarily generated from providing client risk management and financing
solutions, increased 17% (GBP290m) to GBP2,006m (2002: GBP1,716m).
Dealing profits grew 26% (GBP215m) to GBP1,042m (2002: GBP827m), driven by
significant growth in client transaction volumes, particularly in continental
Europe. The strong performance in the Credit businesses, principally in
corporate bonds, was due to credit spreads tightening in the secondary bond
markets. The growth in Rates businesses reflected good results from equity
related activities and money markets. Fixed income, foreign exchange and
commodities continued to make good contributions. Net interest income grew 8%
(GBP75m) to GBP964m (2002: GBP889m) due to balance sheet growth in higher
quality assets, partially offset by margin compression. Corporate lending
remained tightly managed and the credit portfolio continued to decline, with
drawn credit balances falling to GBP7bn (31st December 2002: GBP10bn).
Primary income, comprising net fees and commissions, increased 16% (GBP74m) to
GBP537m (2002: GBP463m), with good performances across the Credit businesses.
Net fees and commissions included GBP89m (2002: GBP87m) of internal fees for
structured capital markets activities arranged by Barclays Capital.
Other operating income increased to GBP109m (2002: GBP59m) as a result of a
number of private equity and structured capital markets investment realisations.
Operating expenses increased 22% (GBP294m) to GBP1,618m (2002: GBP1,324m).
Business as usual costs grew as a result of higher business volumes and
increased front office headcount. Revenue related costs increased due to the
strong financial performance. Strategic investment spend increased as product
and distribution development accelerated, particularly in the second half of
2003. The ratio of staff costs to net revenue improved to 53% (2002: 54%). The
cost:income ratio rose to 61% (2002: 59%).
Provisions fell 25% (GBP82m) to GBP252m (2002: GBP334m). This reflected the
ongoing improvement in the quality of the loan book and continued recovery in
the large corporate credit environment.
Barclays Global Investors
Barclays Global Investors is one of the world's largest asset managers and a
leading global provider of investment management products and services. Barclays
Global Investors offers structured investment strategies such as indexing,
tactical asset allocation and risk controlled active products such as hedge
funds. The firm also provides related investment services such as securities
lending, cash management and portfolio transition services. Barclays Global
Investors investment philosophy focuses on managing all dimensions of
performance: return, risk and cost.
Several important milestones were achieved by 31st December 2003: total assets
under management exceeded US$1 trillion, of which more than US$200bn were in
actively managed assets; Exchange Traded Funds (ETFs) totalled US$69bn (31st
December 2002: US$35bn); and for the first time total revenues exceeded US$1
billion. Barclays Global Investors leading position in ETFs was extended with
the launch of eight new funds and it became the largest ETF manager in the
world.
2003 2002
GBPm GBPm
Net interest income 9 12
Net fees and commissions 662 538
Other operating income 1 -
-------- --------
Operating income 672 550
-------- --------
Operating expenses excluding goodwill and restructuring costs (473) (439)
Restructuring costs (7) -
-------- --------
Operating expenses excluding goodwill (480) (439)
-------- --------
Operating profit excluding goodwill 192 111
Loss from joint ventures (1) (1)
-------- --------
Profit on ordinary activities before tax excluding goodwill 191 110
-------- --------
Barclays Global Investors operating profit excluding goodwill increased 73%
(GBP81m) to GBP192m (2002: GBP111m) and reflected very strong top line income
growth and good control of costs.
Net fees and commissions increased 23% (GBP124m) to GBP662m (2002: GBP538m),
reflecting good income generation across a diverse range of products,
distribution channels and geographies. The increase was largely driven by growth
of investment management fees. These resulted from strong net new sales, growth
in the sales of higher margin products, good investment performance and the
recovery in equity markets towards the year-end, which more than compensated for
the adverse impact of foreign exchange translation movements. Actively managed
assets now generate over 60% of management fees and over 50% of total income.
Securities lending income growth was good, benefiting from higher volumes.
Operating expenses excluding goodwill increased by 9% (GBP41m) to GBP480m (2002:
GBP439m), due to higher revenue related costs, partly offset by the impact of
foreign exchange translation movements. The cost:income ratio improved to 71%
(2002: 80%).
Growth in income and costs was constrained by foreign exchange translation
movements. Approximately 56% of Barclays Global Investors income was in US
Dollars and 31% in Sterling.
Total assets under management increased 29% (GBP136bn) to GBP598bn (31st
December 2002: GBP462bn). This growth came from GBP67bn of net new assets and
GBP134bn attributable to market movements, offset by GBP65bn of adverse exchange
rate movements. Assets under management comprise: GBP410bn (69%) indexed assets;
GBP125bn (21%) active assets; and GBP63bn (10%) managed cash assets.
Head office functions and other operations
Head office functions comprise all the Group's central costs, including Group
Executive, Group Finance, Marketing and Communications, Human Resources, Group
Strategy and Planning, Internal Audit, Marketing, Legal, Corporate Secretariat,
Tax, Compliance and Risk. Costs incurred wholly on behalf of the business units
are recharged to them.
Transition Businesses comprise discontinued South American and Middle Eastern
corporate banking businesses and other centrally managed Transition Businesses.
These non-core relationships are now being managed separately with the objective
of maximising the recovery from the assets concerned.
Central items include internal fees charged by Barclays Capital for structured
capital markets activities, income from the management of the Group's
operational premises, property related services and other central items
including activities which support the operating business and provide central
information technology services.
2003 2002 1
GBPm GBPm
Head office functions (136) (109)
Transition businesses (25) (121)
Central items (78) (48)
Restructuring costs (17) (22)
-------- --------
Loss on ordinary activities before tax excluding goodwill and
exceptional items (256) (300)
-------- --------
1 Comparative figures have been restated to reflect the aggregation of Head
office functions and other operations, which were formerly reported
separately.
Head office functions increased 25% (GBP27m) to GBP136m (2002: GBP109m). This
increase included a pension charge of GBP5m (2002: credit GBP4m).
The improved performance of Transition Businesses, from a loss of GBP121m to a
loss of GBP25m, primarily reflected a reduced provisions charge of GBP7m (2002:
GBP132m) in respect of various South American Corporate Banking exposures.
Central items include internal fees charged by Barclays Capital for structured
capital markets activities of GBP89m (2002: GBP87m). Central items increased
from GBP48m to GBP78m, primarily reflecting a GBP16m increase in the centrally
held information technology services costs.
Woolwich integration synergies
2003 2002
GBPm GBPm
Synergies achieved in the year ending 31st December 2003
were as follows:
Gross revenue synergies 244 131
Attributable operating costs (83) (59)
-------- --------
Net revenue synergies 161 72
Cost savings 160 104
Avoided costs 1 54 55
-------- --------
Ongoing integration synergies 375 231
One-off benefits 51 72
Tax savings 8 9
-------- --------
Total synergy benefits 434 312
-------- --------
1 Avoided costs are primarily strategic investment costs which are not required
due to the acquisition and integration of Woolwich plc.
Total benefits of GBP434m were achieved by the programme in 2003. These comprise
ongoing cost and revenue synergies totalling GBP375m, significantly ahead of the
target of GBP330m, tax savings of GBP8m and other gains totalling GBP51m which
were of a one-off nature.
The Group expects to realise ongoing synergies of at least GBP400m per annum
from the end of 2004.
The 2003 costs of integrating Woolwich plc were GBP50m (2002: GBP80m).
Economic Capital
The Group assesses internal capital requirements using its own risk-based
methodologies. These are used in performance assessment and for risk management
decision making. The Group computes and assigns this 'economic' capital to all
operating units. This enables the Group to apply a common and consistent metric
to ensure that returns throughout the Group are commensurate with the associated
risks.
The total economic capital required by the Group, as determined by its internal
risk assessment models and after considering the Group's estimated
diversification benefits, is compared with available common shareholders' funds
to evaluate overall capital utilisation.
Average economic capital by business is set out below:
2003 2002
GBPm GBPm
Personal Financial Services 2,400 2,100
Barclays Private Clients - ongoing 700 550
- closed life assurance activities 200 300
Barclaycard 1,800 1,500
Business Banking 2,850 2,750
Barclays Africa 200 200
Barclays Capital 2,100 2,050
Barclays Global Investors 150 200
Other operations 1 500 550
-------- --------
Average economic capital 10,900 10,200
Average historical goodwill 5,100 4,700
Capital held at Group centre 2 1,100 900
-------- --------
Total average shareholders' funds including
average historical goodwill 17,100 15,800
-------- --------
1 Includes Transition Businesses.
2 The capital held at Group centre represents the variance between average
economic capital by business and average shareholders' funds.
Personal Financial Services economic capital allocation has increased by GBP300m
to GBP2,400m largely due to continued improvements in methodologies for
quantification of credit risk for long maturity assets, previously carried at
the Group centre.
Barclays Private Clients economic capital allocation has increased by GBP150m to
GBP700m due to the acquisitions of Banco Zaragozano and Charles Schwab Europe.
The closed life assurance activities economic capital allocation has reduced by
GBP100m to GBP200m due to the continued run off of the portfolio and a series of
hedges implemented to reduce exposure to equity markets.
Barclaycard economic capital allocation has increased by GBP300m to GBP1,800m
due to continued growth in the loan book and the acquisition of Clydesdale
Financial Services.
Goodwill has increased with the acquisitions of Charles Schwab Europe,
Clydesdale Financial Services, Banco Zaragozano and Gerrard.
The Group regularly reviews and updates its economic capital allocation
methodologies. A number of enhancements developed during 2003 will be
incorporated in 2004.
ECONOMIC PROFIT
The table below shows the economic profit generated by each business area.
2003 2002
GBPm GBPm
Personal Financial Services 460 395
Barclays Private Clients - ongoing business 218 202
- closed life assurance activities (51) (80)
- Caribbean sale (4) 206
Barclaycard 319 267
Business Banking 623 574
Barclays Africa 36 22
Barclays Capital 320 178
Barclays Global Investors 112 56
Head office functions and other operations 1 (98) (126)
-------- --------
1,935 1,694
Goodwill 2 (442) (398)
Variance to average shareholders' funds (73) (59)
-------- --------
Economic profit 1,420 1,237
-------- --------
Risk Tendency
As shown in the table below, Risk Tendency is GBP1,390m based on the composition
of the lending portfolio as at 31st December 2003 (31st December 2002:
GBP1,375m).
Risk Tendency fell in Personal Financial Services by 8% (GBP30m) to GBP340m
(2002: GBP370m) as a result of enhanced risk and fraud management strategies.
Barclaycard Risk Tendency increased by 21% (GBP90m) to GBP525m (2002: GBP435m),
commensurate with the growth in the portfolio and the impact of the acquisition
of Clydesdale Financial Services. Risk Tendency has increased in Barclays
Private Clients by 44% (GBP20m) to GBP65m (2002: GBP45m) following the
acquisition of Banco Zaragozano.
Risk Tendency fell in Barclays Capital by 38% (GBP80m) to GBP130m (2002:
GBP210m) following the recovery in wholesale credit markets and improvement in
the quality of the portfolio.
2003 2002
GBPm GBPm
Personal Financial Services 340 370
Barclays Private Clients 65 45
Barclaycard 525 435
Business Banking 280 280
Barclays Africa 30 30
Barclays Capital 130 210
Transition businesses 20 5
-------- --------
1,390 1,375
-------- --------
1 Includes Transition Business, see page 49.
2 Cost of equity charge on purchased goodwill.
ADDITIONAL INFORMATION
Group structure changes from 2002
Within Barclays Private Clients, the contribution recognised from the closed
life assurance activities is reported separately to provide increased
transparency.
The Group identified certain non-strategic operations in the Middle East which
were previously reported within Barclays Capital. These are now separately
managed with the objective of maximising the recovery from the assets concerned.
These operations, together with South American Corporate Banking which was
separately identified in 2002, and residual balances from other Transition
Businesses, are collectively reported as Transition Businesses within Head
office functions and other operations.
The structural changes in the Group's organisation announced on 9th October 2003
took effect from 1st January 2004.
Acquisitions and disposals
On 31st January 2003, Barclays acquired the retail stockbroking business Charles
Schwab Europe.
On 19th May 2003, Barclays completed the acquisition of Clydesdale Financial
Services Limited and its holding company Carnegie Holdings Limited, a retailer
point of sale finance business.
On 16th July 2003, Barclays completed the acquisition of Banco Zaragozano, a
Spanish private sector banking group.
On 17th December 2003, Barclays acquired Gerrard Management Services Limited
('Gerrard'), a private client discretionary and advisory asset management
business.
Accounting policies
A change in accounting policy arose from the adoption in 2003 of UITF Abstract
37, 'Purchases and sales of own shares', which was issued in October 2003. Group
holdings of Barclays PLC shares (excluding shares held in Employee Share
Ownership Plan (ESOP) trusts) are accounted for as a deduction in arriving at
shareholders' funds, rather than as assets. Purchases and sales of Barclays PLC
shares are shown as changes in shareholders' funds. No profits or losses are
recognised in respect of dealings in Barclays PLC shares. Comparatives have been
restated accordingly. As a result, equity shares and shareholders' funds have
been reduced by GBP4m at 31st December 2002 and by GBP12m at 31st December 2003.
There was no impact on the 2002 or 2003 profit and loss account.
The Group is currently considering the implications of UITF Abstract 38,
'Accounting for ESOP trusts', which was issued in December 2003. UITF Abstract
38 requires shares held in ESOP trusts to be accounted for as a deduction in
arriving at shareholders' funds, rather than as assets. The charge to the profit
and loss account in respect of such shares is based on the intrinsic value of
such shares, rather than the book value. UITF Abstract 38 will be implemented by
the Group in 2004.
There have been no other significant changes to the accounting policies as
described in the 2002 Annual Report.
Changes in accounting presentation
In 2003, the SEC adopted regulations relating to the presentation of financial
data which is not based on the Generally Accepted Accounting Principles (GAAP)
applied by SEC reporting companies. These regulations are commonly referred to
as Regulation G.
Barclays has in the past published both Group statutory financial statements, as
well as Group and business further analyses which were designed to assist the
understanding of underlying operating trends. Commencing with the 2003 year-end
results, Barclays will present its Group financial results solely on a GAAP
basis, in response to this regulation.
As a consequence, goodwill amortisation, restructuring costs and costs directly
associated with the integration of Woolwich plc are included in all
presentations of Group operating expenses and operating profit, while the profit
/(loss) from joint ventures and associates is taken into account below operating
profit.
In the detailed presentation of business group results, restructuring costs and
Woolwich integration costs are included in the calculation of operating expenses
and operating profit. Restructuring costs are disclosed separately to provide
further transparency. Goodwill amortisation (which is now identified separately
in the Group profit and loss account) is not allocated to business groups in the
detailed presentation. Goodwill amortisation is reflected in the reconciliation
of business group profit before tax on page 66.
The prior period presentation has, where appropriate, been restated to conform
with current year classification, and the change in accountancy policies
discussed above.
Share capital
The Group manages both its debt and equity capital actively. The Group will seek
to renew its authority to buy back ordinary shares at the forthcoming 2004
Annual General Meeting to provide additional flexibility in the management of
the Group's capital resources.
Group share schemes
The independent trustees of the Group's share schemes may make purchases of
Barclays PLC ordinary shares in the market at any time or times following this
announcement of the Group's results for the purposes of those schemes' current
and future requirements. The total number of ordinary shares purchased would not
be material in relation to the issued share capital of Barclays PLC.
NOTES
1. Loans and advances to banks
2003 2002
Banking business: GBPm GBPm
United Kingdom 14,315 11,510
Other European Union 1,702 2,154
United States 110 256
Rest of the World 1,143 1,531
-------- --------
17,270 15,451
Less - provisions (16) (82)
-------- --------
17,254 15,369
Trading business 44,670 42,805
-------- --------
Total loans and advances to banks 61,924 58,174
-------- --------
Of the total loans and advances to banks, placings with banks were GBP56.5bn at
31st December 2003 (2002: GBP48.1bn). Placings with banks include reverse repos
of GBP50.4bn (2002: GBP41.0bn). The majority of the placings have a residual
maturity of less than one year.
2. Loans and advances to customers
2003 2002
Banking business - United Kingdom: GBPm GBPm
Financial institutions 7,721 6,158
Agriculture, forestry and fishing 1,766 1,747
Manufacturing 5,967 6,435
Construction 1,883 1,825
Property 6,341 5,695
Energy and water 1,286 1,290
Wholesale and retail distribution and leisure 8,886 7,858
Transport 2,579 2,366
Postal and communication 476 694
Business and other services 12,030 11,693
Home loans 1 61,905 58,436
Other personal 21,905 21,357
Overseas customers 5,477 6,201
Finance lease receivables 5,587 4,145
-------- --------
Total United Kingdom 143,809 135,900
-------- --------
Banking Business - Overseas:
Other European Union 19,027 12,579
United States 3,573 6,138
Rest of the World 4,510 5,599
-------- --------
27,110 24,316
-------- --------
Total banking loans and advances to customers 170,919 160,216
Less provisions (3,012) (2,916)
Less interest in suspense (49) (78)
-------- --------
167,858 157,222
Trading business 58,961 45,176
-------- --------
Total loans and advances to customers 226,819 202,398
-------- --------
1 Excludes commercial property mortgages
Of the total loans and advances to customers, reverse repos were GBP50.0bn
(2002: GBP42.5bn).
The geographic presentation above is based on the office recording the
transaction.
The UK industry classifications have been prepared at the level of the borrowing
entity. This means that a loan to the subsidiary of a major corporation is
classified by the industry in which the subsidiary operates even though the
parent's predominant business may be in a different industry.
3. Provisions for bad and doubtful debts
2003 2002
GBPm GBPm
Provisions balance at beginning of year 2,998 2,716
Acquisitions and disposals 62 (11)
Exchange and other adjustments (18) (77)
Amounts written off (see below) (1,474) (1,220)
Recoveries (see below) 113 106
Provisions charged against profit (see below) 1,347 1,484
-------- --------
Provisions balance at end of year 3,028 2,998
-------- --------
Amounts written off
United Kingdom (1,175) (950)
Other European Union (54) (31)
United States (215) (215)
Rest of the World (30) (24)
-------- --------
Total (1,474) (1,220)
-------- --------
Recoveries
United Kingdom (95) (88)
Other European Union (7) (7)
United States (10) (9)
Rest of the World (1) (2)
-------- --------
Total (113) (106)
-------- --------
Provisions charged against profit
New and increased specific provisions
United Kingdom 1,373 1,210
Other European Union 57 33
United States 118 404
Rest of the World 80 72
-------- --------
Total 1,628 1,719
-------- --------
Releases of specific provisions
United Kingdom (146) (81)
Other European Union (13) (12)
United States (24) (10)
Rest of the World (12) (24)
-------- --------
Total (195) (127)
Recoveries (113) (106)
-------- --------
Net specific provisions charge 1,320 1,486
General provision - charge / (release) 27 (2)
-------- --------
Net charge to profit 1,347 1,484
-------- --------
Total provisions for bad and doubtful debts at end of year
comprise:
2003 2002
GBPm GBPm
Specific provisions
United Kingdom 1,856 1,790
Other European Union 97 84
United States 121 257
Rest of the World 159 130
-------- --------
Total specific provisions 2,233 2,261
General provisions 795 737
-------- --------
3,028 2,998
-------- --------
The geographic analysis of provisions shown above is based on the location of
the office recording the transaction. Provisions raised in the US include
amounts in respect of South American Corporate Banking exposures booked in the
US.
4. Other assets
2003 2002
GBPm GBPm
Own shares 99 55
Balances arising from off-balance sheet financial 15,812 13,454
instruments (see note 9)
Shareholders' interest in long term assurance fund 478 867
London Metal Exchange warrants and other metals trading 1,290 829
positions
Sundry debtors 2,156 1,634
Prepayments and accrued income 3,921 2,982
-------- --------
23,756 19,821
-------- --------
Own shares represent Barclays PLC shares held in employee benefit trusts where
the Group retains the risks and rewards related to those shares.
5. Other liabilities
2003 2002
GBPm GBPm
Obligations under finance leases payable 110 140
Balances arising from off-balance sheet financial
instruments
(see note 9) 14,797 11,538
Short positions in securities 49,934 39,940
Current tax 497 641
Sundry creditors 4,159 4,305
Accruals and deferred income 4,983 4,352
Provisions for liabilities and charges 1,015 947
Dividend 879 788
-------- --------
76,374 62,651
-------- --------
6. Potential credit risk loans
The following table presents an analysis of potential credit risk loans. The
geographical presentation is based on the location of the office recording the
transaction, and the amounts are stated before deduction of the value of
security held, specific provisions carried or interest suspended.
Non-performing loans 2003 2002
Summary GBPm GBPm
Non-accrual loans 2,261 2,542
Accruing loans where interest is being suspended with or
without provisions 646 611
Other accruing loans against which provisions have been made 669 677
-------- --------
3,576 3,830
Accruing loans 90 days overdue, against which no provisions
have been made 575 690
Reduced rate loans 4 6
-------- --------
Total non-performing loans 4,155 4,526
-------- --------
Geographical split:
Non-accrual loans
United Kingdom 1,572 1,557
Other European Union 143 108
United States 383 744
Rest of the World 163 133
-------- --------
Total 2,261 2,542
-------- --------
Accruing loans where interest is being suspended with or
without provisions:
United Kingdom 559 480
Other European Union 46 35
United States - -
Rest of the World 41 96
-------- --------
Total 646 611
-------- --------
Other accruing loans against which provisions have been made:
United Kingdom 610 609
Other European Union 33 27
United States - -
Rest of the World 26 41
-------- --------
Total 669 677
-------- --------
Sub totals:
United Kingdom 2,741 2,646
Other European Union 222 170
United States 383 744
Rest of the World 230 270
-------- --------
Total 3,576 3,830
-------- --------
Accruing loans 90 days overdue, against which no
provisions have been made:
United Kingdom 566 687
Other European Union 9 3
United States - -
Rest of the World - -
-------- --------
Total 575 690
-------- --------
GBPm GBPm
Reduced rate loans:
United Kingdom 4 4
Other European Union - -
United States - -
Rest of the World - 2
------- --------
Total 4 6
------- --------
Total non-performing loans:
United Kingdom 3,311 3,337
Other European Union 231 173
United States 383 744
Rest of the World 230 272
-------- --------
Total 4,155 4,526
-------- --------
Potential problem loans:
United Kingdom 1,139 994
Other European Union 23 -
United States 259 241
Rest of the World 56 69
-------- --------
Total 1,477 1,304
-------- --------
2003 2002
Provision coverage of non-performing loans : % %
United Kingdom 77.6 74.2
Other European Union 71.4 61.8
United States 39.2 43.7
Rest of the World 83.9 61.8
Total 74.1 68.0
Provision coverage of total potential credit risk
loans:
United Kingdom 57.7 57.2
Other European Union 65.0 61.8
United States 23.4 33.0
Rest of the World 67.5 49.3
Total 54.6 52.8
2003 2002
Interest forgone on non-performing loans: GBPm GBPm
Interest income that would have been recognised
under original
contractual terms 312 275
Interest income included in profit (47) (22)
-------- --------
Interest forgone 265 253
-------- --------
The geographical coverage ratios include an allocation of general provisions.
UK non-performing loans decreased by 1% (GBP26m) to GBP3,311m (31st December
2002: GBP3,337m).
Other European Union non-performing loans increased by 34% (GBP58m) to GBP231m
(31st December 2002: GBP173m) reflecting growth in the portfolio including from
acquisitions.
US non-performing loans decreased by 49% (GBP361m) to GBP383m (31st December
2002: GBP744m) as the exposures in this category were written off, restructured,
upgraded, sold or otherwise worked out at a faster rate than new non-performing
loans arose.
In the Rest of the World non-performing loans decreased by 15% (GBP42m) to
GBP230m (31st December 2002: GBP272m).
The coverage of non-performing loans by the Group's stock of provisions and
interest in suspense increased to 74.1% (31st December 2002: 68.0%). The
coverage of total potential credit risk lendings increased to 54.6% (31st
December 2002: 52.8%).
7. Legal proceedings
Proceedings have been brought in the United States against a number of
defendants including Barclays following the collapse of Enron. In each case the
claims are against groups of defendants and it is not possible to estimate
Barclays possible loss, if any, in relation to them. Barclays considers that the
claims against it are without merit and is defending them vigorously. A court
ordered mediation commenced in September 2003 but no material progress has been
made towards a resolution of the litigation.
Barclays is engaged in various other litigation proceedings both in the United
Kingdom and a number of overseas jurisdictions, including the United States,
involving claims by and against it, which arise in the ordinary course of
business.
Barclays does not expect the ultimate resolution of any of the proceedings to
which Barclays is party to have a significant adverse effect on the financial
position or profitability of the Group.
8. Contingent liabilities and commitments
2003 2002
Contingent liabilities GBPm GBPm
Acceptances and endorsements 671 2,589
Guarantees and assets pledged as collateral security 24,596 16,043
Other contingent liabilities 8,427 7,914
-------- --------
33,694 26,546
-------- --------
Commitments
Standby facilities, credit lines and other commitments 114,847 101,378
-------- --------
9. Derivatives
The tables set out below analyse the contract or underlying principal amounts of
derivative financial instruments held for trading purposes and for the purposes
of managing the Group's structural exposures.
Foreign exchange derivatives 2003 2002
Contract or underlying principal amount GBPm GBPm
Forward foreign exchange 310,319 271,646
Currency swaps 207,364 159,132
Other exchange rate related contracts 167,643 64,399
--------- ---------
685,326 495,177
--------- ---------
Interest rate derivatives
Contract or underlying principal amount
Interest rate swaps 2,944,310 2,164,312
Forward rate agreements 381,511 180,043
OTC options bought and sold 842,630 592,137
Other interest rate related contracts 2,051,161 788,878
--------- ---------
6,219,612 3,725,370
--------- ---------
Credit derivatives 47,450 18,401
--------- ---------
Equity, stock index and commodity derivatives
Contract or underlying principal amount 171,939 110,205
--------- ---------
Other exchange rate related contracts are primarily over the counter (OTC)
options. Other interest rate related contracts are primarily exchange traded
options, futures and swaps.
Derivatives entered into as trading transactions, together with any associated
hedging thereof, are measured at fair value and the resultant profits and losses
are included in dealing profits. The tables below summarise the positive and
negative fair values of such derivatives, including an adjustment for netting
where the Group has the ability to insist on net settlement which is assured
beyond doubt, based on a legal right that would survive the insolvency of the
counterparty.
2003 2002
GBPm GBPm
Positive fair values
Foreign exchange derivatives 17,129 10,639
Interest rate derivatives 51,776 62,942
Credit derivatives 797 660
Equity, stock index and commodity derivatives 4,722 2,750
Effect of netting (55,030) (60,327)
Cash collateral meeting offset criteria (3,582) (3,210)
-------- --------
15,812 13,454
-------- --------
Negative fair values
Foreign exchange derivatives 18,393 11,281
Interest rate derivatives 49,735 61,332
Credit derivatives 584 106
Equity, stock index and commodity derivatives 5,733 2,778
Effect of netting (55,030) (60,327)
Cash collateral meeting offset criteria (4,618) (3,632)
-------- --------
14,797 11,538
-------- --------
10. Market risk
The Group's policy is that the market risks associated with the Group's business
activities are clearly identified, assessed and controlled within agreed limits
and that the market risks arising from trading activities are concentrated in
Barclays Capital.
The Group uses a 'value at risk' measure as the primary mechanism for
controlling market risk. Daily Value at Risk (DVaR) is an estimate, with a
confidence level of 98%, of the potential loss which might arise if the current
positions were to be held unchanged for one business day. Daily losses exceeding
the DVaR figure are likely to occur, on average, twice in every one hundred
business days. Actual outcomes are monitored regularly to test the validity of
the assumptions made in the calculation of DVaR.
Analysis of Barclays Capital's market risk exposures
Barclays Capital's market risk exposure increased in 2003. The credit businesses
incurred additional credit spread risk, primarily due to growing client business
in corporate bonds and credit derivatives.
The daily average, maximum and minimum values of DVaR were estimated as below:
Twelve months to
31st December 2003
Average High 1 Low 1
GBPm GBPm GBPm
Interest rate risk 21.0 34.1 13.6
Credit spread risk 16.2 29.2 8.9
Foreign exchange risk 2.3 5.0 1.0
Equities risk 2.6 4.9 1.5
Commodities risk 4.4 7.0 2.2
Diversification effect (20.6) n/a n/a
-------- -------- --------
Total DVaR 2 25.9 38.6 17.6
-------- -------- --------
Twelve months to
31st December 2002
Average High 1 Low 1
GBPm GBPm GBPm
Interest rate risk 21.7 34.5 10.0
Credit spread risk 9.4 12.5 6.0
Foreign exchange risk 2.9 4.4 1.9
Equities risk 3.6 5.4 2.1
Commodities risk 1.8 3.3 0.8
Diversification effect (16.2) n/a n/a
-------- -------- --------
Total DVaR 2 23.2 35.7 13.4
-------- -------- --------
1 The high (and low) DVaR figures reported for each category did not necessarily
occur on the same day as the high (and low) DVaR reported as a whole.
Consequently a diversification effect number for the high (and low) DVaR
figures would not be meaningful and it is therefore omitted from the above
table.
2 The year-end Total DVaR for 2003 was GBP37.2m (2002: GBP25.8m).
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' FUNDS
2003 2002
restated
GBPm GBPm
At beginning of year 15,201 14,485
Proceeds of shares issued (net of expenses) 149 135
Exchange rate translation differences (29) (61)
Repurchase of ordinary shares * (204) (546)
Goodwill written back on disposals - 10
Shares issued to the QUEST in relation to
share option schemes for staff (36) (48)
(Loss)/gain arising from transactions with third parties (4) 206
Increase in Treasury shares (8) (4)
Profit retained 1,404 1,024
-------- --------
At end of year 16,473 15,201
-------- --------
*Including nominal amount of GBP12m (2002: GBP30m)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2003 2002
GBPm GBPm
Profit attributable to the members of Barclays PLC 2,744 2,230
Exchange rate translation differences (4) (61)
(Loss)/gains arising from transactions with third parties (4) 206
Joint ventures and associated undertakings (22) 2
Other items (3) 8
-------- --------
Total recognised gains and losses relating to the year 2,711 2,385
Prior year adjustment - (23)
-------- --------
Total gains and losses recognised in the year 2,711 2,362
-------- --------
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
2003 2002
GBPm GBPm
Net cash (outflow)/inflow from operating activities (2,290) 6,747
Dividends received from joint ventures
and associated undertakings 7 1
Net cash outflow from returns on investment
and servicing of finance (620) (630)
Tax paid (910) (828)
Net cash inflow / (outflow) from capital
expenditure and financial investment 1,432 (6,756)
Net cash outflow from acquisitions and disposals (930) (612)
Equity dividend paid (1,249) (1,146)
-------- --------
Net cash outflow before financing (4,560) (3,224)
Net cash inflow from financing 4,188 2,017
-------- --------
Decrease in cash (372) (1,207)
-------- --------
AVERAGE BALANCE SHEET AND NET INTEREST INCOME
2003 2002
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Assets GBPm GBPm % GBPm GBPm %
Treasury bills and
other eligible bills:
In offices in
the UK 4,048 121 3.0 4,496 158 3.5
In offices
outside the UK 1,222 66 5.4 960 66 6.9
Loans and advances to
banks:
In offices in
the UK 14,012 574 4.1 12,560 561 4.5
In offices
outside the UK 4,272 108 2.5 5,535 161 2.9
Loans and advances to
customers:
In offices in
the UK 135,373 7,804 5.8 126,306 7,712 6.1
In offices
outside the UK 26,323 1,136 4.3 25,896 1,132 4.4
Lease receivables:
In offices in
the UK 4,520 215 4.8 4,245 209 4.9
In offices
outside the UK 265 19 7.2 222 15 6.8
Debt securities:
In offices in
the UK 58,435 2,174 3.7 40,115 1,790 4.5
In offices
outside the UK 4,267 210 4.9 4,843 240 5.0
------------------ ------- ------- ------- ------- ------- -------
Average assets
of banking
business 252,737 12,427 4.9 225,178 12,044 5.3
Average assets
of trading
business 189,446 5,001 2.6 160,647 4,372 2.7
------------------ ------- ------- ------- ------- ------- -------
Total average
interest
earning assets 442,183 17,428 3.9 385,825 16,416 4.2
Provisions (2,796) (2,808)
Non-interest
earning assets 53,428 46,753
------------------ ------- ------- ------- ------- ------- -------
Total average
assets and
Interest
income 492,815 17,428 3.5 429,770 16,416 3.8
------------------ ------- ------- ------- ------- ------- -------
Percentage of
total average
assets in
offices outside the
UK 26.6% 27.2%
------------------ ------- ------- ------- ------- ------- -------
Average interest
earning assets
and net interest
income:
Banking
business 252,737 6,606 2.6 225,178 6,188 2.7
Trading
business 189,446 68 0.0 160,647 75 0.0
Non margin
interest (2) - 17 -
------------------ ------- ------- ------- ------- ------- -------
Total average
interest
earning
assets
and net
interest
income 442,183 6,672 1.5 385,825 6,280 1.6
------------------ ------- ------- ------- ------- ------- -------
Total average
interest earning
assets related
to:
Interest
income 17,428 3.9 16,416 4.2
Interest
expense (10,754) (2.4) (10,153) (2.6)
Non margin
interest (2) 17 -
------------------ ------- ------- ------- ------- ------- -------
6,672 1.5 6,280 1.6
------------------ ------- ------- ------- ------- ------- -------
1 Loans and advances to customers and banks include all doubtful lendings,
including non-accrual lendings. Interest receivable on such lendings has been
included to the extent to which either cash payments have been received or
interest has been accrued in accordance with the income recognition policy of
the Group.
2 Average balances are based upon daily averages for most UK banking operations
and monthly averages elsewhere.
3 The average balance sheet does not include the retail life-fund assets
attributable to policyholders nor the related liabilities.
2003 2002
Average Average Rate Average Average
Balance Interest Balance Interest Rate
Liabilities and GBPm GBPm % GBPm GBPm %
shareholders' funds
Deposits by banks:
In offices in
the UK 40,959 993 2.4 31,880 987 3.1
In offices
outside the UK 10,100 184 1.8 8,908 200 2.2
Customer accounts -
demand accounts:
In offices in
the UK 18,788 170 0.9 16,260 164 1.0
In offices
outside the UK 3,497 48 1.4 1,846 27 1.5
Customer accounts -
savings accounts:
In offices in
the UK 45,565 999 2.2 41,722 982 2.4
In offices
outside the UK 813 26 3.2 1,262 32 2.5
Customer accounts -
Other time deposits -
retail:
In offices in
the UK 35,228 1,171 3.3 40,075 1,303 3.3
In offices
outside the UK 3,678 103 2.8 5,479 139 2.5
Customer accounts -
Other time deposits -
wholesale:
In offices in
the UK 57,364 1,634 2.8 35,607 1,175 3.3
In offices
outside the UK 8,193 247 3.0 7,959 231 2.9
Debt securities in
issue:
In offices in
the UK 34,811 949 2.7 28,596 1,061 3.7
In offices
outside the UK 11,906 244 2.0 11,728 339 2.9
Dated and undated loan
capital
and other subordinated
liabilities
Principally in
offices in the
UK 12,312 684 5.6 11,012 645 5.9
Internal
funding of
trading
business (58,436) (1,631) (2.8) (42,626) (1,429) (3.4)
-------------------- ------- ------- ------- ------- ------- -------
Average
liabilities of
banking
business 224,778 5,821 2.6 199,708 5,856 2.9
Average
liabilities of
trading
business 191,240 4,933 2.6 162,858 4,297 2.6
-------------------- ------- ------- ------- ------- ------- -------
Total average
interest
bearing
liabilities 416,018 10,754 2.6 362,566 10,153 2.8
Interest free customer
deposits:
In offices in
the UK 13,819 11,614
In offices
outside the UK 1,260 2,132
Other
non-interest
bearing
liabilities 45,276 38,172
Minority
interests and
shareholders'
funds 16,442 15,286
-------------------- ------- ------- ------- ------- ------- -------
Total average
liabilities,
shareholders'
funds and interest
expense 492,815 10,754 2.2 429,770 10,153 2.4
-------------------- ------- ------- ------- ------- ------- -------
Percentage of
total average
non-capital
liabilities in
offices
outside the UK 23.1% 25.5%
-------------------- ------- ------- ------- ------- ------- -------
OTHER INFORMATION
Financial Summary 2003 2002 2001 2000 1999
restated
GBPm GBPm GBPm GBPm GBPm
Profit before tax 3,845 3,205 3,425 3,392 2,478
Profit after tax 2,769 2,250 2,482 2,491 1,823
Total capital resources 29,095 26,894 24,606 21,153 13,442
p p p p p
Earnings per ordinary share 42.3 33.7 36.8 40.4 29.6
Fully diluted earnings per share
issue 42.1 33.4 36.4 40.0 29.2
Dividends per ordinary share 20.5 18.35 16.625 14.5 12.5
Net asset value per ordinary
share 251 231 217 198 142
Dividend cover (times) 2.1 1.8 2.2 2.8 2.4
Capital ratios: % % % % %
Equity Tier 1 ratio 6.5 6.6 6.6 6.2 7.5
Tier 1 ratio 7.9 8.2 7.8 7.2 7.5
Risk asset ratio 12.8 12.8 12.5 11.0 11.3
Performance ratios
Return on average shareholders' % % % % %
funds:
Pre-tax 23.5 21.0 23.9 33.8 29.2
Post-tax 16.9 14.7 17.4 24.8 21.5
Return on average total assets:
Pre-tax 0.8 0.7 0.9 1.1 1.0
Post-tax 0.6 0.5 0.6 0.8 0.7
Return on average weighted risk
assets:
Pre-tax 2.1 1.9 2.2 2.6 2.2
Post-tax 1.5 1.4 1.6 1.9 1.6
Non interest income/total income: 46.8 45.2 46.5 46.2 44.9
Operating expenses/total income: 58.4 58.5 58.9 57.8 61.3
PROFIT BEFORE TAX EXCLUDING GOODWILL AMORTISATION AND EXCEPTIONAL ITEMS
Half-year
31.12.03 30.06.03 31.12.02 30.06.02
GBPm GBPm GBPm GBPm
Personal Financial
Services 488 485 447 427
Barclays Private Clients
- ongoing 183 168 120 240
- closed life
assurance
activities (31) (46) (61) (26)
Barclaycard 347 377 302 309
Business Banking 656 655 597 628
Barclays Africa 55 58 46 43
Barclays Capital 369 414 211 370
Barclays Global Investors 100 91 50 60
Head office functions and
other operations (146) (110) (134) (166)
-------- -------- -------- --------
Profit before tax
excluding goodwill
amortisation and
exceptional items 2,021 2,092 1,578 1,885
Exceptional items 5 (1) (3) -
-------- -------- -------- --------
Profit before tax
excluding goodwill
amortisation 2,026 2,091 1,575 1,885
Goodwill relating to
associated undertakings (4) (3) (1) -
Goodwill amortisation (140) (125) (124) (130)
-------- -------- -------- --------
Profit before tax 1,882 1,963 1,450 1,755
-------- -------- -------- --------
31.12.03 30.06.03 31.12.02 30.06.02
TOTAL ASSETS restated restated
--------------
Personal Financial
Services 74,786 73,584 71,871 67,877
Barclays Private Clients
- ongoing 20,529 15,392 13,087 13,859
- closed life
assurance
activities 528 862 929 950
Barclaycard 12,278 11,412 10,669 10,278
Business Banking 52,112 51,182 47,315 44,509
Barclays Africa 3,051 2,776 2,632 2,366
Barclays Capital 263,169 274,559 236,468 230,511
Barclays Global Investors 533 607 494 389
Head office functions and
other operations 3,892 4,841 8,379 7,035
Goodwill 4,406 3,867 3,934 4,055
Retail life-fund assets 8,077 7,642 7,284 7,879
-------- -------- -------- --------
443,361 446,724 403,062 389,708
-------- -------- -------- --------
WEIGHTED RISK ASSETS
----------------------
Personal Financial
Services 42,426 41,879 41,100 38,673
Barclays Private Clients 15,129 12,668 11,713 9,856
Barclaycard 9,806 9,584 10,005 9,756
Business Banking 54,964 53,640 50,449 47,159
Barclays Africa 2,225 1,980 1,892 1,672
Barclays Capital 61,285 58,067 53,496 53,974
Barclays Global Investors 1,137 1,083 666 636
Head office functions and
other operations 2,025 2,513 3,427 3,442
-------- -------- -------- --------
188,997 181,414 172,748 165,168
-------- -------- -------- --------
RECONCILIATION OF PROFIT BEFORE TAX AND TOTAL ASSETS
The presentation in this document of the results of individual businesses
excludes goodwill amortisation and exceptional items. Barclays believes that
this is a better measurement of the day to day performance of its businesses,
and it is the basis upon which business performance is managed internally. The
tables below reconcile certain of the non GAAP numbers in the presentation of
the results of the businesses to the relevant UK GAAP numbers, which will be
reported in the Annual Report for 2003.
PROFIT BEFORE TAX
2003 2002
----------------------------------------------------------------------------
Excluding Goodwill Profit Excluding Goodwill Profit
goodwill and before goodwill and before
and exceptional tax and exceptional tax
exceptional Items exceptional Items
items items
GBPm GBPm GBPm GBPm GBPm GBPm
Personal
Financial
Services 973 (152) 821 874 (162) 712
Barclays
Private
Clients
- ongoing
business 351 (58) 293 360 (47) 313
- closed life
assurance
activities (77) - (77) (87) - (87)
Barclaycard 724 (33) 691 611 (20) 591
Business
Banking 1,311 (10) 1,301 1,225 (15) 1,210
Barclays
Africa 113 (1) 112 89 (1) 88
Barclays
Capital 783 - 783 581 (2) 579
Barclays
Global
Investors 191 (12) 179 110 (13) 97
Head office
functions
and
other
operations (256) (2) (258) (300) 2 (298)
Exceptional
items 4 (4) - (3) 3 -
Goodwill
relating
to
associated
undertakings (7) 7 - (1) 1 -
Goodwill
amortisation (265) 265 - (254) 254 -
-------- -------- -------- -------- -------- --------
Profit before
tax 3,845 - 3,845 3,205 - 3,205
-------- -------- -------- -------- -------- --------
TOTAL ASSETS
2003 2002
----------------------------------------------------------------------------
Excluding Goodwill Total Excluding Goodwill Total
goodwill assets goodwill assets
GBPm GBPm GBPm GBPm GBPm GBPm
Personal
Financial
Services 74,786 2,543 77,329 71,871 2,697 74,568
Barclays
Private
Clients
- ongoing 20,529 1,429 21,958 13,087 807 13,894
- closed life
assurance
activities 528 - 528 929 - 929
Barclaycard 12,278 207 12,485 10,669 200 10,869
Business
Banking 52,112 49 52,161 47,315 54 47,369
Barclays
Africa 3,051 11 3,062 2,632 9 2,641
Barclays
Capital 263,169 - 263,169 236,468 - 236,468
Barclays
Global
Investors 533 162 695 494 162 656
Head office
functions
and
other
operations 3,892 5 3,897 8,379 5 8,384
Goodwill 4,406 (4,406) - 3,934 (3,934) -
Retail
life-fund
assets 8,077 - 8,077 7,284 - 7,284
-------- -------- -------- -------- -------- --------
443,361 - 443,361 403,062 - 403,062
-------- -------- -------- -------- -------- --------
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Half-year
31.12.03 30.06.03 31.12.02 30.06.02
GBPm GBPm GBPm GBPm
Interest receivable 6,334 6,093 6,007 6,037
Interest payable (2,966) (2,857) (2,935) (2,904)
-------- -------- -------- --------
Net interest income 3,368 3,236 3,072 3,133
-------- -------- -------- --------
Net fees and commissions
receivable 2,233 2,030 1,961 1,964
Dealing profits 524 530 320 513
Other operating income 293 197 240 124
-------- -------- -------- --------
Total non-interest income 3,050 2,757 2,521 2,601
-------- -------- -------- --------
Operating income 6,418 5,993 5,593 5,734
-------- -------- -------- --------
Administration expenses -
staff costs (2,269) (2,026) (1,877) (1,878)
Administration expenses -
other (1,312) (1,092) (1,213) (1,099)
Depreciation (145) (144) (147) (156)
Goodwill amortisation (140) (125) (124) (130)
-------- -------- -------- --------
Operating expenses (3,866) (3,387) (3,361) (3,263)
-------- -------- -------- --------
Operating profit before
provisions 2,552 2,606 2,232 2,471
-------- -------- -------- --------
Provisions for bad and
doubtful debts (695) (652) (771) (713)
Provisions for contingent
liabilities 1 - (2) 1
-------- -------- -------- --------
Operating profit 1,858 1,954 1,459 1,759
Income / (loss) from joint
ventures
and associated
undertakings 19 10 (6) (4)
Exceptional items 5 (1) (3) -
-------- -------- -------- --------
Profit on ordinary
activities before tax 1,882 1,963 1,450 1,755
Tax on profit on ordinary
activities (509) (567) (446) (509)
-------- -------- -------- --------
Profit on ordinary
activities after tax 1,373 1,396 1,004 1,246
Minority interests (equity
and non-equity) (12) (13) (11) (9)
-------- -------- -------- --------
Profit attributable to the
members of
Barclays PLC 1,361 1,383 993 1,237
Dividends (883) (457) (787) (419)
-------- -------- -------- --------
Profit retained for the
financial period 478 926 206 818
-------- -------- -------- --------
Earnings per ordinary share 21.0p 21.3p 15.1p 18.6p
Dividend per ordinary share
Interim: - 7.05p - 6.35p
Final: 13.45p - 12.00p -
Registered office
54 Lombard Street, London, EC3P 3AH, England, United Kingdom.
Tel: 020 7699 5000.
Company number: 48839.
Website
www.barclays.com
Registrar
The Registrar to Barclays PLC, The Causeway, Worthing BN99 6DA.
Tel: 0870 609 4535.
Listing
The principal trading market for Barclays PLC ordinary shares is the London
Stock Exchange. Ordinary shares are also listed on the New York Stock Exchange
and the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in the
form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary
shares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank of
New York whose international telephone number is +1-610-312-5315, whose domestic
telephone number is
+1-888-269-2377 and whose address is 22nd Floor, 101 Barclay Street, New York,
NY 10286.
Filings with the SEC
Statutory accounts for the year ended 31st December 2003, which also include
certain information required for the joint Annual Report on Form 20-F of
Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission
(SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200
Park Avenue, New York, NY 10166 or from the Head of Investor Relations at
Barclays registered office address, shown above, once they have been published
in mid-March. Once filed with the SEC, copies of the Form 20-F will also be
available from the SEC's website (www.sec.gov).
Results timetable
Ex dividend date: Wednesday 25th February 2004
Dividend record date: Friday 27th February 2004
2004 Annual General Meeting: Thursday 29th April 2004
Dividend payment date: Friday 30th April 2004
2004 Interim pre close date: Thursday 27th May 2004
2004 Interim results announcement: Thursday 5th August 2004
For further information, please contact: Naguib Kheraj
Group Finance Director
+44 (0)20 7699 5000 - Switchboard
Cathy Turner
Head of Investor Relations
+44 (0)20 7699 3638 - Direct Line
James S. Johnson
Senior Manager, Investor Relations
+44 (0)20 7699 4525 - Direct Line
Leigh Bruce
Corporate Communications Director
+44 (0)20 7699 2658 - Direct Line
Chris Tucker
Public Relations Director
+44 (0)20 7699 3161 - Direct Line
More information on Barclays, including the 2003 results, can be found on our
website at the following address: http://www.investorrelations.barclays.co.uk
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