UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the securities exchange act of 1934
15 February 2005
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):
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE
REGISTRATION STATEMENTS ON FORM F-3 (NOS. 333-85646, 333-12384 AND 333-8054) OF
BARCLAYS BANK PLC AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS
FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY
FILED OR FURNISHED. THIS REPORT ON FROM 6-K SHALL BE DEEMED TO BE SUPERCEDED IN
ITS ENTIRITY BY, AND UPON THE FILING OF, THE ANNUAL REPORT ON FORM 20-F FOR THE
YEAR ENDED DECEMBER 31, 2004 TO BE FILED JOINTLY BY BARCLAYS PLC AND BARCLAYS
BANK PLC.
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.
The Report comprises:
The results of Barclays PLC and Barclays Bank PLC for the year ended 31
December 2004.
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 15, 2005 By:
------------------------------------------------
Toby Vero
Assistant Secretary
BARCLAYS BANK PLC
(Registrant)
Date: February 15, 2005 By:
------------------------------------------------
Toby Vero
Assistant Secretary
This document includes portions from the previously published results
announcement of Barclays PLC for the year ended 31 December 2004, as amended to
comply with the requirements of Regulation G and Item 10(e) of Regulation S-K
promulgated by the U.S. Securities and Exchange Commission. In addition, this
document includes data relating to Barclays Bank PLC, the wholly owned
subsidiary of Barclays PLC. The purpose of this document is to provide such
additional disclosure as required by Regulation G and Regulation S-K Item 10
(e), to delete certain information not in compliance with SEC regulations and to
include reconciliations of certain non-UK GAAP figures to the most directly
equivalent UK GAAP figures, as of, and for the period ended, 31 December 2004,
and does not update or otherwise supplement the information contained in the
results announcement, which speaks only as of its date.
In this document certain non-GAAP measures are reported. Barclays management
believes that these non-GAAP measures provide valuable information to readers of
its financial statements because they enable the reader to focus more directly
on the underlying day-to-day performance of its businesses and provide more
detail concerning the elements of performance which the managers of these
businesses are most directly able to influence. They also reflect an important
aspect of the way in which operating targets are defined and performance is
monitored by Barclays management.
An audit opinion has not been rendered on this announcement.
The information in this document does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory
accounts, 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), will be delivered to the Registrar of Companies
in accordance with Section 242 of the Act. The 2004 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, the outcome of pending and future litigation 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.
Comparative figures have been restated for the changes in accounting policy and
presentation detailed on page 46.
In this document the profit and loss analysis compares, unless stated otherwise,
the full-year to 31st December 2004 to the corresponding period of 2003. Balance
sheet comparisons, unless stated otherwise, relate to the corresponding position
at 31st December 2003. Average balance sheet comparisons relate the full-year to
31st December 2004 to the corresponding period of 2003.
10th February 2005
BARCLAYS PLC
RESULTS FOR YEAR TO 31ST DECEMBER 2004
-------------------------------------------------------------------------------------------------------------------
Group Results 2004 2003 % Change
GBPm GBPm
Operating income 13,945 12,411 12
Operating expenses (8,350) (7,253) 15
Provisions for bad and doubtful debts (1,091) (1,347) (19)
Profit before tax 4,603 3,845 20
Profit after tax 3,314 2,769 20
Earnings per share 51.2p 42.3p 21
Dividend per share 24.0p 20.5p 17
Post-tax return on average shareholders' funds 19.2% 17.0%
-------------------------------------------------------------------------------------------------------------------
- 1 -
BARCLAYS PLC
BARCLAYS PLC - SUMMARY
* Group performance was very strong:
- profit before tax up 20% to GBP4,603m
- earnings per share up 21% at 51.2p
- dividend per share up 17% to 24.0p
- return on equity of 19.2%
* Barclays ranked top within its total shareholder return (TSR) global
peer group1. TSR of 23% was almost double the average for the peer
group and FTSE 100 Index. Economic profit2 rose 32% to GBP1,885m,
reflecting the growth in earnings and tight capital management.
* All business divisions made good progress and delivered higher profits
with a very strong result from the global product businesses.
* Income grew 12% and was well diversified by business, income type and
geography. Non interest income rose 22% and was over half of total
income. Net revenue (income less provisions) was up 16%.
* Costs were 15% higher, with significant investment directed at future
growth.
* A sharp fall in potential credit risk loans was a key driver in the
reduction of provisions by 19% to GBP1,091m.
* UK Banking showed good growth with profit before tax excluding goodwill
up 9%. UK Banking profit before tax including goodwill was up 9%. Good
momentum in Business Banking led to a record performance whilst Retail
Banking performance was broadly flat.
* Private Clients and International profit before tax excluding goodwill
improved sharply, up 57%, reflecting the benefit of a diversified and
growing portfolio. Private Clients and International profit before tax
including goodwill rose 60%. The integrations of Banco Zaragozano and
Gerrard are ahead of schedule.
* Barclaycard achieved growth in profit before tax excluding goodwill of
5%, with higher volumes more than offsetting margin pressure and the
impact of considerable investment in both the UK and the international
card businesses. Barclaycard profit before tax including goodwill rose
5%.
* Barclays Capital had another record year with profit before tax up 25%.
The increasingly diverse business portfolio, both by product and
geography, positions it strongly for future growth.
* Barclays Global Investors delivered outstanding results with profit
before tax excluding goodwill up 82%, to GBP347m, benefiting from
US$118bn of net new assets, good investment performance and better
market conditions. Barclays Global Investors profit before tax
including goodwill rose 85%.
* The Group's capital position remained healthy with a Tier 1 ratio of
7.6%. In respect of 2004, over GBP2.2bn will have been returned to
shareholders through dividends and share buybacks.
1 Peer group for 2004: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank,
HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland and UBS.
2 A reconciliation of economic profit to profit after tax and minority interests
is included on page 44.
- 2 -
BARCLAYS PLC
FINANCIAL HIGHLIGHTS
2004 2003
RESULTS GBPm GBPm
Net interest income 6,842 6,604
Non-interest income 7,103 5,807
Operating income 13,945 12,411
Operating expenses (8,350) (7,253)
Provisions for bad and doubtful debts (1,091) (1,347)
Provisions for contingent liabilities and commitments (2) 1
Operating profit 4,502 3,812
Profit from joint ventures and associated undertakings 56 29
Exceptional items 45 4
Profit before tax 4,603 3,845
Profit after tax 3,314 2,769
Profit attributable to shareholders 3,268 2,744
Economic profit1 1,885 1,430
BALANCE SHEET
Shareholders' funds 17,417 16,374
Minority interests: non-equity and equity 901 283
Loan capital 12,277 12,339
Total capital resources 30,595 28,996
Total assets 522,089 443,262
Weighted risk assets 218,601 188,997
PER ORDINARY SHARE p p
Earnings 51.2 42.3
Dividend 24.0 20.5
Net asset value 270 250
PERFORMANCE RATIOS % %
Post-tax return on average shareholders' funds 19.2 17.0
CAPITAL RATIOS % %
Tier 1 ratio 7.6 7.9
Risk asset ratio 11.5 12.8
GROUP NET INTEREST MARGIN % %
Group 2.59 2.61
Domestic 3.48 3.64
International 0.81 0.77
ECONOMIC DATA
Period end - US$/GBP 1.92 1.78
Average - US$/GBP 1.83 1.64
Period end - EUR/GBP 1.41 1.41
Average - EUR/GBP 1.47 1.45
FTSE 100 Index period end 4,814 4,477
FTSE 100 Index average 4,522 4,051
1 A reconciliation of economic profit to profit after tax and minority interests
is included on page 44.
- 3 -
BARCLAYS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2004 2003
GBPm GBPm
Interest receivable 13,665 12,427
Interest payable (6,823) (5,823)
----------------------------------
Net interest income 6,842 6,604
----------------------------------
Net fees and commissions receivable 4,966 4,263
Dealing profits 1,493 1,054
Other operating income 644 490
----------------------------------
Total non-interest income 7,103 5,807
----------------------------------
Operating income 13,945 12,411
----------------------------------
Administration expenses - staff costs (4,998) (4,295)
Administration expenses - other (2,758) (2,404)
Depreciation (295) (289)
Goodwill amortisation (299) (265)
----------------------------------
Operating expenses (8,350) (7,253)
----------------------------------
Operating profit before provisions 5,595 5,158
Provisions for bad and doubtful debts (1,091) (1,347)
Provisions for contingent liabilities and commitments (2) 1
----------------------------------
Operating profit 4,502 3,812
Profit from joint ventures and associated undertakings 56 29
Exceptional items 45 4
----------------------------------
Profit on ordinary activities before tax 4,603 3,845
Tax on profit on ordinary activities (1,289) (1,076)
----------------------------------
Profit on ordinary activities after tax 3,314 2,769
Minority interests (including non-equity interests) (46) (25)
----------------------------------
Profit for the financial year attributable
to the members of Barclays PLC 3,268 2,744
Dividends (1,538) (1,340)
----------------------------------
Profit retained for the financial year 1,730 1,404
----------------------------------
Earnings per ordinary share 51.2p 42.3p
Fully diluted earnings per share 51.0p 42.1p
Post tax return on average shareholders' funds 19.2% 17.0%
Dividend per ordinary share 24.0p 20.5p
1 A reconciliation of economic profit to profit after tax and minority interests
is included on page 44.
- 4 -
BARCLAYS PLC
CONSOLIDATED BALANCE SHEET
2004 2003
Assets: GBPm GBPm
Cash and balances at central banks 1,753 1,726
Items in course of collection from other banks 1,772 2,006
Treasury bills and other eligible bills 6,658 7,177
----------------------------------
Loans and advances to banks - banking 24,986 17,254
- trading 50,145 44,670
----------------------------------
75,131 61,924
----------------------------------
Loans and advances to customers - banking 189,847 167,858
- trading 65,099 58,961
----------------------------------
254,946 226,819
Debt securities 127,428 97,393
Equity shares 12,166 7,859
Interests in joint ventures and associated undertakings 409 428
Intangible fixed assets - goodwill 4,295 4,406
Tangible fixed assets 1,921 1,790
Other assets 27,232 23,657
----------------------------------
513,711 435,185
Retail life-fund assets attributable to policyholders 8,378 8,077
----------------------------------
Total assets 522,089 443,262
----------------------------------
Liabilities:
----------------------------------
Deposits by banks - banking 74,211 57,641
- trading 36,813 36,451
----------------------------------
111,024 94,092
----------------------------------
Customer accounts - banking 171,963 155,814
- trading 45,755 29,054
----------------------------------
217,718 184,868
Debt securities in issue 67,806 49,569
Items in course of collection due to other banks 1,205 1,286
Other liabilities 85,363 76,374
Undated loan capital - non-convertible 6,149 6,310
Dated loan capital - convertible to preference shares 15 17
Dated loan capital - non-convertible 6,113 6,012
----------------------------------
495,393 418,528
----------------------------------
Minority interests and shareholders' funds:
Minority interests (including non-equity interests) 901 283
----------------------------------
Called up share capital 1,614 1,642
Reserves 15,803 14,732
----------------------------------
Shareholders' funds: equity 17,417 16,374
----------------------------------
18,318 16,657
----------------------------------
513,711 435,185
Retail life-fund liabilities attributable to policyholders 8,378 8,077
----------------------------------
Total liabilities and shareholders' funds 522,089 443,262
----------------------------------
- 5 -
BARCLAYS PLC
RECONCILIATION OF OPERATING EXPENSES, OPERATING PROFIT, PROFIT BEFORE TAX,
AND TOTAL ASSETS
In the detailed business analyses shown on pages 13 to 30, results are also
presented excluding goodwill amortisation. Barclays management believes that
these non-GAAP measures provide valuable information to readers of its financial
statements because they enable the reader to focus more directly on the
underlying day-to-day performance of Barclays businesses and provide more detail
concerning the elements of performance which the managers of these businesses
are most directly able to influence. They also reflect an important aspect of
the way in which operating targets are defined and performance is monitored by
Barclays management. The tables below reconcile operating expenses excluding
goodwill, operating profit excluding goodwill, profit before tax excluding
goodwill and total assets excluding goodwill, which are non-GAAP numbers used in
the presentation of the results of the businesses, to the relevant UK GAAP
numbers.
OPERATING EXPENSES BY BUSINESS
2004 2003
------------------------------------------------------------------------------------------
Excluding Goodwill Operating Excluding Goodwill Operating
goodwill expenses goodwill expenses
GBPm GBPm GBPm GBPm GBPm GBPm
UK Banking (3,019) (176) (3,195) (2,903) (172) (3,075)
------------------------------------------------------------------------------------------
UK Retail Banking (2,270) (158) (2,428) (2,188) (158) (2,346)
UK Business Banking (749) (18) (767) (715) (14) (729)
------------------------------------------------------------------------------------------
Private Clients and International (1,304) (64) (1,368) (1,096) (42) (1,138)
------------------------------------------------------------------------------------------
Private Clients - ongoing business (696) (40) (736) (585) (30) (615)
- closed life - - - - - -
International (608) (24) (632) (511) (12) (523)
------------------------------------------------------------------------------------------
Barclaycard (806) (41) (847) (761) (38) (799)
Barclays Capital (2,237) - (2,237) (1,638) - (1,638)
Barclays Global Investors (545) (18) (563) (480) (13) (493)
Head office functions and other operations (140) - (140) (110) - (110)
Goodwill (299) 299 - (265) 265 -
------------------------------------------------------------------------------------------
Operating expenses (8,350) - (8,350) (7,253) - (7,253)
------------------------------------------------------------------------------------------
- 6 -
BARCLAYS PLC
RECONCILIATION OF OPERATING EXPENSES, OPERATING PROFIT, PROFIT BEFORE TAX,
AND TOTAL ASSETS
OPERATING PROFIT BY BUSINESS
2004 2003
------------------------------------------------------------------------------------------
Excluding Goodwill Operating Excluding Goodwill Operating
goodwill profit goodwill profit
GBPm GBPm GBPm GBPm GBPm GBPm
UK Banking 2,428 (176) 2,252 2,276 (172) 2,104
------------------------------------------------------------------------------------------
UK Retail Banking 1,085 (158) 927 1,144 (158) 986
UK Business Banking 1,343 (18) 1,325 1,132 (14) 1,118
------------------------------------------------------------------------------------------
Private Clients and International 395 (64) 331 256 (42) 214
------------------------------------------------------------------------------------------
Private Clients - ongoing business 144 (40) 104 98 (30) 68
- closed life (4) - (4) (80) - (80)
International 255 (24) 231 238 (12) 226
------------------------------------------------------------------------------------------
Barclaycard 797 (41) 756 759 (38) 721
Barclays Capital 1,042 - 1,042 835 - 835
Barclays Global Investors 348 (18) 330 192 (13) 179
Head office functions and other operations (209) - (209) (241) - (241)
Goodwill (299) 299 - (265) 265 -
------------------------------------------------------------------------------------------
Operating profit 4,502 - 4,502 3,812 - 3,812
------------------------------------------------------------------------------------------
PROFIT BEFORE TAX BY BUSINESS
2004 2003
--------------------------------------------------------------------------------------------
Excluding Goodwill Profit Excluding Goodwill Profit
goodwill before goodwill before
tax tax
GBPm GBPm GBPm GBPm GBPm GBPm
UK Banking 2,474 (176) 2,298 2,275 (172) 2,103
--------------- -------------- ------------------------------ -------------- ---------------
UK Retail Banking 1,127 (158) 969 1,141 (158) 983
UK Business Banking 1,347 (18) 1,329 1,134 (14) 1,120
--------------- -------------- ------------------------------ -------------- ---------------
Private Clients and International 451 (71) 380 287 (49) 238
--------------- -------------- ------------------------------ -------------- ---------------
Private Clients - ongoing business 144 (40) 104 103 (30) 73
- closed life (4) - (4) (80) - (80)
International 311 (31) 280 264 (19) 245
--------------- -------------- ------------------------------ -------------- ---------------
Barclaycard 801 (41) 760 761 (38) 723
Barclays Capital 1,042 - 1,042 836 - 836
Barclays Global Investors 347 (18) 329 191 (13) 178
Head office functions and other
operations (206) - (206) (233) - (233)
Goodwill amortisation (299) 299 - (265) 265 -
Goodwill relating to associated
undertakings (7) 7 - (7) 7 -
--------------- -------------- ------------------------------ -------------- ---------------
Profit before tax 4,603 - 4,603 3,845 - 3,845
--------------- -------------- ------------------------------ -------------- ---------------
- 7 -
BARCLAYS PLC
RECONCILIATION OF OPERATING EXPENSES, OPERATING PROFIT, PROFIT BEFORE TAX,
AND TOTAL ASSETS
TOTAL ASSETS BY BUSINESS
2004 2003
------------------------------------------------------------------------------------------
Excluding Goodwill Total Excluding Goodwill Total
goodwill assets goodwill assets
GBPm GBPm GBPm GBPm GBPm GBPm
UK Banking 119,806 2,619 122,425 110,995 2,793 113,788
-------------------------------------------------------------------------- ---------------
UK Retail Banking 69,028 2,586 71,614 67,001 2,744 69,745
UK Business Banking 50,778 33 50,811 43,994 49 44,043
-------------------------------------------------------------------------- ---------------
Private Clients and International 30,606 1,097 31,703 26,492 1,155 27,647
-------------------------------------------------------------------------- ---------------
Private Clients - ongoing business 4,988 665 5,653 3,867 697 4,564
- closed life 653 - 653 528 - 528
International 24,965 432 25,397 22,097 458 22,555
-------------------------------------------------------------------------- ---------------
Barclaycard 23,019 400 23,419 20,348 291 20,639
Barclays Capital 332,606 - 332,606 268,702 - 268,702
Barclays Global Investors 796 174 970 533 162 695
Head office functions and other operations 2,583 5 2,588 3,709 5 3,714
Goodwill 4,295 (4,295) - 4,406 (4,406) -
Retail life-fund assets 8,378 - 8,378 8,077 - 8,077
-------------------------------------------------------------------------- ---------------
Total assets 522,089 - 522,089 443,262 - 443,262
-------------------------------------------------------------------------- ---------------
- 8 -
BARCLAYS PLC
FINANCIAL REVIEW
Results by business
The following section analyses the Group's performance by business.
Barclays business divisions during 2004 were:
* UK Banking, comprising
- UK Retail Banking
- UK Business Banking
* Private Clients and International, comprising
- Private Clients
- International
* Barclaycard
* Barclays Capital
* Barclays Global Investors
The analysis of results by business division excludes goodwill amortisation. The
reconciliation of operating expenses excluding goodwill to operating expenses is
on page 6, the reconciliation of operating profit excluding goodwill to
operating profit is on page 7, the reconciliation of profit on ordinary
activities before tax excluding goodwill to profit before tax is on page 7 and
the reconciliation of total assets excluding goodwill to total assets is on page
8.
UK Banking
UK Banking delivers banking solutions to Barclays UK retail and business banking
customers. It offers a range of integrated products and services and access to
the expertise of other Group businesses. Customers are served through a variety
of channels comprising: the branch network, automated teller machines, telephone
banking, online banking and relationship managers. UK Banking is managed through
two business areas, UK Retail Banking and UK Business Banking.
UK Retail Banking
UK Retail Banking comprises Personal Customers, Mortgages, Small Business and UK
Premier. The bringing together of these businesses enables the building of
broader and deeper relationships with both existing and new customers. Personal
Customers and Mortgages provide a wide range of products and services to over 14
million retail customers, including current accounts, savings, mortgages, and
general insurance. Small Business provides banking services to 566,000 small
businesses. UK Premier provides banking, investment products and advice to some
273,000 affluent customers.
UK Business Banking
UK Business Banking provides relationship banking to the Group's larger and
medium 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 the
products and expertise of other businesses in the Group, particularly Barclays
Capital.
- 9 -
BARCLAYS PLC
Private Clients and International
Private Clients and International manages Barclays wealth management operations
and the Group's international retail and commercial banking activities. It is
managed as two distinct businesses.
Private Clients
Private Clients serves affluent, high net worth and corporate clients, primarily
in the UK and continental Europe, providing private banking, offshore banking,
stockbroking and asset management services, as well as financial planning
services to a broader customer base. Private Clients comprises two businesses:
International and Private Banking; and Wealth Solutions (which includes Barclays
Financial Planning, Barclays Stockbrokers and the Gerrard business, which was
acquired in 2003). Through Wealth Solutions, Private Clients delivers investment
products to UK Retail Banking. Private Clients also includes the closed life
assurance activities.
International
International provides a range of banking services, including current accounts,
savings, investments, mortgages and consumer loans to personal and corporate
customers across Spain, Portugal, France, Italy, Africa and the Middle East.
International also includes the results of the FirstCaribbean business,
accounted for as an associated undertaking.
Barclaycard
Barclaycard is a multi-brand credit card and consumer lending business with an
increasing international presence and is one of the leading credit card
businesses in Europe.
In the UK, Barclaycard manages the Barclaycard branded credit cards, Barclays
branded consumer loans, mostly Barclayloan, and also comprises FirstPlus,
Clydesdale Financial Services and Monument credit cards.
Outside the UK, Barclaycard International is in the United States, Germany,
Spain, Greece, Italy, Portugal, Republic of Ireland and across Africa. The
acquisition of the US credit card issuer, Juniper Financial Corporation, was
completed on 1st December 2004. Juniper provides a platform for the expansion of
Barclaycard's international business into the US credit card market and
specialises in partnership card issuance programmes.
Barclaycard Business processes card payments for retailers and merchants and
issues cards to corporate customers.
Barclaycard works closely with other parts of the Group, including UK Retail
Banking, UK Business Banking and International, to leverage their distribution
capability.
- 10 -
BARCLAYS PLC
Barclays Capital
Barclays Capital is a leading global investment bank which provides large
corporate, institutional and government clients with solutions to their
financing and risk management needs.
The Barclays Capital business model focuses on a broad span of financing and
risk management services. It services a wide variety of client needs, from
capital raising and managing foreign exchange, interest rate and commodity
risks, through to providing technical advice and expertise. Activities are
primarily divided 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, commercial mortgage backed
securities, private equity and large asset leasing.
Barclays Global Investors
Barclays Global Investors (BGI) is one of the world's largest asset managers and
a leading global provider of investment management products and services.
BGI offers structured investment strategies such as indexing, global asset
allocation and risk controlled active products, including hedge funds. BGI also
provides related investment services such as securities lending, cash management
and portfolio transition services. In addition, BGI is the global product leader
in Exchange Traded Funds (iShares), with over 100 funds for institutions and
individuals trading in ten global markets. BGI's investment philosophy is
founded on managing all dimensions of performance with a consistent focus on
controlling risk, return and cost.
- 11 -
BARCLAYS PLC
Intentionally left blank
- 12 -
BARCLAYS PLC
UK Banking
2004 2003
GBPm GBPm
Net interest income 3,466 3,301
Net fees and commissions 1,930 1,807
Other operating income 250 397
----------------------------------
Operating income 5,646 5,505
Operating expenses excluding goodwill (3,019) (2,903)
----------------------------------
Operating profit before provisions excluding goodwill 2,627 2,602
Provisions for bad and doubtful debts (199) (326)
----------------------------------
Operating profit excluding goodwill 2,428 2,276
Profit from associated undertakings 4 10
Exceptional items 42 (11)
----------------------------------
Profit on ordinary activities before tax excluding goodwill1 2,474 2,275
----------------------------------
Total assets excluding goodwill1 GBP119.8bn GBP111.0bn
Weighted risk assets GBP91.9bn GBP84.5bn
Risk Tendency GBP375m GBP385m
UK Banking managed its portfolio of businesses to deliver good profit growth in
a year of extensive business re-organisation. UK Banking profit before tax
excluding goodwill increased 9% (GBP199m) to GBP2,474m (2003: GBP2,275m) as a
result of a very strong performance from UK Business Banking and a broadly flat
contribution from UK Retail Banking. Profit before tax including goodwill
increased 9% (GBP195m) to GBP2,298m (2003: GBP2,103m).
UK Banking held a seminar in October 2004 at which it outlined how the formation
of UK Banking would seek to deliver integrated banking solutions to customers,
an enhanced customer service experience and significant opportunities for
revenue growth and productivity improvements.
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 13 -
BARCLAYS PLC
UK Retail Banking
2004 2003
GBPm GBPm
Net interest income 2,059 2,000
Net fees and commissions 1,117 1,074
Other operating income 239 365
---------------- ----------------
Operating income 3,415 3,439
Operating expenses excluding goodwill (2,270) (2,188)
---------------- ----------------
Operating profit before provisions excluding goodwill 1,145 1,251
Provisions for bad and doubtful debts (60) (107)
---------------- ----------------
Operating profit excluding goodwill 1,085 1,144
Profit from associated undertakings - 7
Exceptional items 42 (10)
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 1,127 1,141
---------------- ----------------
Loans and advances to customers - banking (period end) GBP65.6bn GBP63.2bn
Customer deposits - banking (period end) GBP72.4bn GBP69.5bn
Total assets excluding goodwill1 GBP69.0bn GBP67.0bn
Weighted risk assets GBP37.1bn GBP35.8bn
Risk Tendency GBP150m GBP150m
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 14 -
BARCLAYS PLC
UK Retail Banking profit before tax excluding goodwill decreased 1% (GBP14m) to
GBP1,127m (2003: GBP1,141m). Profit before tax including goodwill decreased 1%
(GBP14m) to GBP969m (2003: GBP983m).
Operating income was broadly flat at GBP3,415m (2003: GBP3,439m). There were
strong performances in current accounts and UK Premier. The performance in the
mortgage business was impacted by margin pressure. Net revenue (operating income
less provisions) was also broadly flat at GBP3,355m (2003: GBP3,332m).
Net interest income increased 3% (GBP59m) to GBP2,059m (2003: GBP2,000m). Growth
was driven by higher customer deposit balances particularly in Personal Customer
current accounts and UK Premier deposits, together with an increase in the
retail savings margin. This growth was partially offset by a reduced
contribution from the mortgage business. The favourable impact of higher average
UK mortgage balances was more than offset by margin pressure, due to a fall in
the proportion of the mortgage portfolio on the standard variable rate, the
impact of successive base rate increases and a reduction in early redemption
income.
UK residential mortgage balances ended the period at GBP61.7bn (2003:
GBP59.8bn). Gross advances were GBP17.5bn (2003: GBP18.3bn) and net lending was
GBP1.9bn (2003: GBP2.0bn). The loan to value ratio within the mortgage book on a
current valuation basis averaged 35% (2003: 40%).
Average overdraft balances within Personal Customers increased by 9%. Average
customer deposit balances increased 5% to GBP68.5bn (2003: GBP65.0bn). Personal
Customer average current account balances increased 10%. There was strong growth
in UK Premier with average deposits up 15%, and in Small Business where average
deposit balances were 7% higher. Retail average savings balances increased by 1%
in a highly competitive market.
Net fees and commissions increased 4% (GBP43m) to GBP1,117m (2003: GBP1,074m),
driven by strong growth in value added fee-based current account income.
Other operating income decreased 35% (GBP126m) to GBP239m (2003: GBP365m). The
majority of the decrease was attributable to a reduction of GBP89m in income
from the revision of estimated amounts expected to be repaid on banking
liabilities. There was also lower net premium income on insurance underwriting
due to a provision relating to the early termination of contracts.
Operating expenses excluding goodwill rose 4% (GBP82m) to GBP2,270m (2003:
GBP2,188m). Operating expenses including goodwill rose 3% (GBP82m) to GBP2,428m
(2003: GBP2,346m). Almost half of the cost increase (GBP40m) was attributable to
preparations for a new regulatory environment, particularly in the mortgage and
general insurance businesses. There was significant investment in the business
infrastructure and restructuring costs were incurred in re-organising the
business. This included adding 1,000 customer facing staff, an upgrade in branch
management capability and investment in new technology.
Provisions decreased 44% (GBP47m) to GBP60m (2003: GBP107m). The quality of the
loan portfolio improved and mortgage balances in arrears remained at a low
level. The reduction in the provisions charge included a release of GBP40m
associated with the UK mortgage business following a review of the portfolio and
the current loss experience.
The exceptional item of GBP42m was predominantly in respect of the profit on the
sale of a shareholding in Edotech, a former Barclays in-house statement printing
operation.
- 15 -
BARCLAYS PLC
UK Business Banking
2004 2003
GBPm GBPm
Net interest income 1,407 1,301
Net fees and commissions 813 733
Other operating income 11 32
---------------- ----------------
Operating income 2,231 2,066
Operating expenses excluding goodwill (749) (715)
---------------- ----------------
Operating profit before provisions excluding goodwill 1,482 1,351
Provisions for bad and doubtful debts (139) (219)
---------------- ----------------
Operating profit excluding goodwill 1,343 1,132
Profit from associated undertakings 4 3
Exceptional items - (1)
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 1,347 1,134
---------------- ----------------
Loans and advances to customers - banking (period end) GBP48.6bn GBP41.4bn
Customer deposits - banking (period end) GBP42.4bn GBP38.5bn
Total assets excluding goodwill1 GBP50.8bn GBP44.0bn
Weighted risk assets GBP54.8bn GBP48.6bn
Risk Tendency GBP225m GBP235m
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 16 -
BARCLAYS PLC
UK Business Banking profit before tax excluding goodwill increased 19% (GBP213m)
to GBP1,347m (2003: GBP1,134m), as a result of good income growth, a continued
focus on cost management and a significantly reduced provision charge. Profit
before tax including goodwill increased 19% (GBP209m) to GBP1,329m (2003:
GBP1,120m). Both Larger Business and Medium Business performed well. Market
shares of primary banking relationships for Larger Business and Medium Business
were maintained.
Operating income increased 8% (GBP165m) to GBP2,231m (2003: GBP2,066m). Net
revenue (operating income less provisions) increased 13% (GBP245m) to GBP2,092m
(2003: GBP1,847m).
Net interest income increased 8% (GBP106m) to GBP1,407m (2003: GBP1,301m), as a
result of strong balance sheet growth. Average lending balances increased 11% to
GBP44.6bn (2003: GBP40.2bn); the quality of the new lending was good and the
overall credit profile of the portfolio was maintained. Average deposit balances
increased 9% to GBP41.5bn (2003: GBP37.9bn). There was an improvement in the
lending margin and a modest decline in the deposit margin. There was a lower
contribution from the structural hedge.
Net fees and commissions increased 11% (GBP80m) to GBP813m (2003: GBP733m),
driven by significantly higher lending related fees.
Operating expenses excluding goodwill increased 5% (GBP34m) to GBP749m (2003:
GBP715m), reflecting higher business volumes and increased expenditure on front
line staff and marketing. The cost of regulatory compliance programmes also
increased. Operating expenses including goodwill increased 5% (GBP38m) to
GBP765m (2003: GBP767m).
Provisions decreased 37% (GBP80m) to GBP139m (2003: GBP219m). The provisions
performance was driven by the impact of significantly lower potential problem
loans and non-performing loans and the benefit of a single recovery of GBP57m.
- 17 -
BARCLAYS PLC
Intentionally left blank
- 18 -
BARCLAYS PLC
Private Clients and International
2004 2003
GBPm GBPm
Net interest income 836 749
Net fees and commissions 850 683
Other operating income 47 36
---------------- ----------------
Operating income 1,733 1,468
Operating expenses excluding goodwill (1,304) (1,096)
---------------- ----------------
Operating profit before provisions excluding goodwill 429 372
Provisions for bad and doubtful debts (30) (36)
---------------- ----------------
Operating profit excluding goodwill - ongoing business 399 336
Profit from associated undertakings 56 24
Exceptional items - 7
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill
- ongoing business 455 367
Contribution from closed life assurance activities (4) (80)
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 451 287
---------------- ----------------
Total assets excluding goodwill1 GBP30.6bn GBP26.5bn
Weighted risk assets GBP23.3bn GBP18.2bn
Risk Tendency GBP70m GBP75m
Private Clients and International profit before tax excluding goodwill increased
57% (GBP164m) to GBP451m (2003: GBP287m). Profit before tax including goodwill
increased 60% (GBP142m) to GBP380m (2003: GBP238m).
The improved performance reflected good momentum in the businesses with strong
income growth in both the Private Clients and International businesses. This was
supported by improved market conditions together with the benefits from the
acquisitions made in 2003 and the return on the prior investments in improving
the client experience.
There was a significantly improved performance from the closed life assurance
activities.
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 19 -
BARCLAYS PLC
Private Clients
2004 2003
GBPm GBPm
Net interest income 302 288
Net fees and commissions 529 394
Other operating income 8 4
----------------------------------
Operating income 839 686
Operating expenses excluding goodwill (696) (585)
----------------------------------
Operating profit before provisions excluding goodwill 143 101
Provisions for bad and doubtful debts 1 (3)
----------------------------------
Operating profit excluding goodwill - ongoing business 144 98
Exceptional items - 5
----------------------------------
Profit on ordinary activities before tax excluding goodwill 144 103
- ongoing business
Contribution from closed life assurance activities (4) (80)
----------------------------------
Profit on ordinary activities before tax excluding goodwill1 140 23
----------------------------------
Loans and advances to customers - banking (period end) GBP4.1bn GBP3.1bn
Customer deposits - banking (period end) GBP21.3bn GBP20.2bn
Total assets excluding goodwill1 GBP5.6bn GBP4.4bn
Weighted risk assets GBP4.0bn GBP3.2bn
Risk Tendency GBP5m GBP5m
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 20 -
BARCLAYS PLC
The comparison with the prior period is impacted by the acquisitions of the
Gerrard business in mid December 2003 and the retail stockbroking business of
Charles Schwab Europe at the end of January 2003.
Private Clients profit before tax excluding goodwill for the ongoing business
increased 40% (GBP41m) to GBP144m (2003: GBP103m). Profit before tax including
goodwill for the ongoing business increased 42% (GBP31m) to GBP104m (2003:
GBP73m). There was a significantly improved performance from the closed life
assurance activities.
Operating income increased 22% (GBP153m) to GBP839m (2003: GBP686m).
Net interest income increased 5% (GBP14m) to GBP302m (2003: GBP288m). Total
average loans increased 31% to GBP3.8bn (2003: GBP2.9bn). Total average customer
deposits increased 4% to GBP21.4bn (2003: GBP20.6bn). Good income growth from
offshore corporate deposits and loans in International and Private Banking
reflected the benefit of investment in relationship managers and internet based
offerings, partially offset by adverse exchange rate movements. Deposit margins
improved slightly and were partially offset by lower lending margins.
Net fees and commissions increased 34% (GBP135m) to GBP529m (2003: GBP394m).
Excluding the contribution from Gerrard, net fees and commissions increased 8%.
Business volumes improved as higher average equity market levels contributed to
increased sales of investment products and higher fund management fees. The
average level of the FTSE 100 Index was 12% higher at 4,522 (2003: 4,051).
Stockbroking fee income increased 6% reflecting the benefits of the integration
of Charles Schwab Europe as well as improved market conditions. Although
headline average daily deal volumes in UK retail stockbroking decreased to 7,800
(2003: 8,200), a more favourable product mix, including an increase in higher
margin deals, more than compensated for the lower volume. Fee income in Private
Banking increased 13%, reflecting the impact of additional private bankers and
new product launches.
Operating expenses excluding goodwill increased 19% (GBP111m) to GBP696m (2003:
GBP585m). Operating expenses including goodwill increased 20% (GBP121m) to
GBP736m (2003: GBP615m).
Excluding the Gerrard business, operating expenses remained broadly flat. Cost
savings resulting from reduced restructuring costs and cost synergies from
Charles Schwab Europe enabled increased investment in product development and
customer service in International and Private Banking and in Wealth Solutions.
Total customer funds, comprising customer deposits and assets under management,
increased to GBP77bn (2003: GBP75bn). Growth in new business and the impact of
the rising stockmarket were partly offset by adverse exchange rate movements. In
October 2004, a multi-manager product was launched, which had GBP1.6bn of assets
under management at the year-end.
The contribution from the closed life assurance activities was a loss of GBP4m
(2003: loss of GBP80m). The impact of stronger stock markets, improved
investment performance and better persistency levels largely offset the costs of
GBP97m (2003: GBP95m) relating to redress for customers in respect of sales of
endowment policies. The loss of GBP4m is reflected in the Group's results as a
gain of GBP49m (2003: loss of GBP40m) within other operating income offset by a
reduction of GBP53m (2003: GBP40m) within net interest income.
- 21 -
BARCLAYS PLC
International
2004 2003
GBPm GBPm
Net interest income 534 461
Net fees and commissions 321 289
Other operating income 39 32
---------------- ----------------
Operating income 894 782
Operating expenses excluding goodwill (608) (511)
---------------- ----------------
Operating profit before provisions excluding goodwill 286 271
Provisions for bad and doubtful debts (31) (33)
---------------- ----------------
Operating profit excluding goodwill 255 238
Profit from associated undertakings 56 24
Exceptional items - 2
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 311 264
---------------- ----------------
Loans and advances to customers - banking (period end) GBP19.7bn GBP16.8bn
Customer deposits - banking (period end) GBP10.1bn GBP9.9bn
Total assets excluding goodwill1 GBP25.0bn GBP22.1bn
Weighted risk assets GBP19.3bn GBP15.0bn
Risk Tendency GBP65m GBP70m
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 22 -
BARCLAYS PLC
The comparison with the prior period is impacted by the acquisition of Banco
Zaragozano in July 2003.
International profit before tax excluding goodwill increased 18% (GBP47m) to
GBP311m (2003: GBP264m) reflecting good growth in all businesses. Profit before
tax including goodwill increased 14% (GBP35m) to GBP280m (2003: GBP245m).
Operating income increased 14% (GBP112m) to GBP894m (2003: GBP782m). Net revenue
(operating income less provisions) increased 15% (GBP114m) to GBP863m (2003:
GBP749m).
Net interest income increased 16% (GBP73m) to GBP534m (2003: GBP461m) as a
result of the inclusion of Banco Zaragozano and good balance growth in Spain,
Africa and Italy.
Total average customer deposits increased 18% to GBP9.4bn (2003: GBP8.0bn),
resulting from both the inclusion of Banco Zaragozano and strong organic growth
in Spain and Africa.
Total average loans increased 48% to GBP18.3bn (2003: GBP12.4bn), reflecting
strong growth across the portfolio and the inclusion of Banco Zaragozano for a
full year in 2004. Mortgage balance growth in Europe was very strong with
balances up 39%. Average lending balances in Africa increased 25%. Overall
lending margins reduced mainly due to the impact of mortgage growth on the
product mix.
Net fees and commissions increased 11% (GBP32m) to GBP321m (2003: GBP289m), with
the majority of the increase reflecting the inclusion of Banco Zaragozano. There
was a strong performance in France and Spain from increased fund management
related fees. Spain's total assets under management increased by 27%.
Operating expenses excluding goodwill increased 19% (GBP97m) to GBP608m (2003:
GBP511m) with the majority of the increase attributable to the inclusion of
Banco Zaragozano. Operating expenses including goodwill increased 21% (GBP109m)
to GBP639m (2003: GBP530m). Investment in the development of new products and in
enhancing the customer experience remained high across the portfolio.
Provisions decreased 6% (GBP2m) to GBP31m (2003: GBP33m).
The profit from associated undertakings reflected the contribution from
FirstCaribbean. The improved performance reflected the delivery of synergies
arising from the merger which created FirstCaribbean, together with good
underlying growth in customer activity. The results of FirstCaribbean included
a gain of GBP28m on the sale of shares held in Republic Bank Limited.
- 23 -
BARCLAYS PLC
Barclaycard
2004 2003
GBPm GBPm
Net interest income 1,600 1,555
Net fees and commissions 764 673
---------------- ----------------
Operating income 2,364 2,228
Operating expenses excluding goodwill (806) (761)
---------------- ----------------
Operating profit before provisions excluding goodwill 1,558 1,467
Provisions for bad and doubtful debts (761) (708)
---------------- ----------------
Operating profit excluding goodwill 797 759
Profit from joint ventures 4 2
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 801 761
---------------- ----------------
Loans and advances to customers - banking (period end) GBP22.3bn GBP19.6bn
Total assets excluding goodwill1 GBP23.0bn GBP20.3bn
Weighted risk assets GBP20.2bn GBP18.3bn
Risk Tendency GBP860m GBP775m
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 24 -
BARCLAYS PLC
Barclaycard profit before tax excluding goodwill increased 5% (GBP40m) to
GBP801m (2003: GBP761m). Profit before tax including goodwill increased 5%
(GBP37m) to GBP760m (2003: GBP723m).
Operating income increased 6% (GBP136m) to GBP2,364m (2003: GBP2,228m). Net
revenue (operating income less provisions) increased 5% (GBP83m) to GBP1,603m
(2003: GBP1,520m). A high level of recruitment of UK retail card customers
continued at 1.33m (2003: 1.55m).
Net interest income increased 3% (GBP45m) to GBP1,600m (2003: GBP1,555m)
reflecting growth in UK average extended credit balances, up 11% to GBP8.2bn
(2003: GBP7.4bn) and higher UK average loan balances, up 11% to GBP9.4bn (2003:
GBP8.5bn). Margins in the consumer lending business remained broadly stable
whereas margins in UK cards decreased, reflecting higher funding costs and the
impact of increased balance transfer activity at promotional rates.
Net fees and commissions increased 14% (GBP91m) to GBP764m (2003: GBP673m) as a
result of the continued growth in the credit card and consumer lending
businesses and good volume growth within the merchant acquiring business.
Operating expenses excluding goodwill rose 6% (GBP45m) to GBP806m (2003:
GBP761m). Operating expenses including goodwill rose 6% (GBP48m) to GBP847m
(2003: GBP799m). The increase reflected investment in Barclaycard International
and brand related investment in the UK.
Provisions increased 7% (GBP53m) to GBP761m (2003: GBP708m). This increase was
lower than the growth in assets and reflected the continued benefit of improved
collections activity. Non-performing loan balances increased but at a
significantly lower rate than the growth in assets. Delinquency levels as a
percentage of outstandings for both Barclaycard branded credit cards and for
Barclayloan were stable.
In the UK, particularly strong performances from the Monument and FirstPlus
businesses, together with Barclaycard Business, more than offset the margin
pressure and brand investment in the Barclaycard branded card activities.
Barclaycard International made good progress with its growth strategy. Profit
before tax increased to GBP8m (2003: GBP4m). Income increased 30% due to the
growth in average extended credit balances, up 28% to GBP882m (2003: GBP689m).
The number of Barclaycard International cards in issue rose to 2.9m (2003:
1.7m). Barclaycard established a presence in the US credit card market through
the acquisition of the Juniper Financial Corporation in December 2004. Juniper
is a US credit card issuer with US$1.4bn in receivables and 1 million cards in
issue. In 2004, Juniper contributed a loss of GBP2m, for the month of December,
in line with expectations at the time of the acquisition.
- 25 -
BARCLAYS PLC
Barclays Capital
2004 2003
GBPm GBPm
Net interest income 1,006 1,024
Dealing profits 1,469 1,042
Net fees and commissions 611 551
Other operating income 295 109
---------------- ----------------
Operating income 3,381 2,726
Operating expenses (2,237) (1,638)
---------------- ----------------
Operating profit before provisions 1,144 1,088
Provisions for bad and doubtful debts (102) (253)
---------------- ----------------
Operating profit 1,042 835
Profit from associated undertakings - 1
---------------- ----------------
Profit on ordinary activities before tax 1,042 836
---------------- ----------------
Net revenue per member of staff (year average FTE '000) GBP479 GBP443
Total assets GBP333bn GBP269bn
Weighted risk assets GBP80bn GBP65bn
Risk Tendency GBP70m GBP135m
- 26 -
BARCLAYS PLC
Barclays Capital profit before tax increased 25% (GBP206m) to GBP1,042m (2003:
GBP836m), as a result of very strong operating income growth and the continued
improvement in the credit environment. The very strong performance was driven by
growth in business volumes and client activity levels. Net revenue (operating
income less provisions) increased 33% (GBP806m) to GBP3,279m (2003: GBP2,473m).
Operating income increased 24% (GBP655m) to a record GBP3,381m (2003: GBP2,726m)
as a result of strong growth across most of the product areas in Rates and
Credit. Income by product continued to diversify with the strongest growth
delivered by credit products and equity related products. Regional growth was
broadly based with particularly strong results in the US and Asia. Average DvaR
increased to GBP34m (2003: GBP26m). Period end DvaR was GBP32m (2003: GBP37m).
Secondary income, comprising dealing profits and net interest income, is mainly
generated from providing client risk management solutions. This increased 20%
(GBP409m) to GBP2,475m (2003: GBP2,066m).
Dealing profits increased 41% (GBP427m) to GBP1,469m (2003: GBP1,042m), with
very strong performances in both the Rates and Credit businesses. This reflected
higher volumes of client led activity across a broad range of products and the
continued benefit of recent headcount investments in product depth and
geographic reach. Net interest income fell 2% (GBP18m) to GBP1,006m (2003:
GBP1,024m) driven by lower contributions from money markets due to the reduced
size of the book.
Primary income, comprising net fees and commissions from advisory and
origination activities, grew 11% (GBP60m) to GBP611m (2003: GBP551m).
Securitisation, structured bonds and leveraged finance grew significantly, more
than offsetting lower market activity by corporates. Net fees and commissions
included GBP63m (2003: GBP89m) of internal fees for structured capital markets
activities arranged by Barclays Capital.
Other operating income increased to GBP295m (2003: GBP109m) as a result of a
number of private equity realisations and structured capital markets
transactions.
Operating expenses increased 37% (GBP599m) to GBP2,237m (2003: GBP1,638m) due to
the execution of the business expansion plan and an increase in performance
related pay. Business as usual costs increased significantly, reflecting higher
volumes and the growth in staff numbers. Revenue related costs increased due to
the strong profit performance. The recruitment of staff to expand product,
client coverage and distribution capabilities resulted in significantly higher
strategic investment costs. The ratio of total costs to net revenue and staff
costs to net revenue both increased by 2% to 68% and 55% respectively.
Approximately half of the total costs comprised performance related pay,
discretionary investment spend and short-term contractor resource.
Total headcount increased by 2,000 to 7,800 (2003: 5,800). Almost a third were
in the front office, mainly in Europe and the US. Approximately half of the
increase was directed at strengthening the back office and control functions.
The remainder related to contract staff, mainly in technology, which ensured
that the support platform could be developed whilst maintaining flexibility.
Barclays Capital accelerated targeted investments in revenue generating
capabilities together with a strengthening of the control and support
environment. This investment has expanded the scope of the product offering,
building new income streams from commercial and residential mortgage backed
securities and home equity loans. Existing offerings in commodities trading and
equity related products were extended to the US and client channels continued to
be extended in Europe, the US and Asia.
Provisions fell 60% (GBP151m) to GBP102m (2003: GBP253m), reflecting the
significant decline in non-performing and potential problem loan balances as a
result of a more stable wholesale credit environment.
- 27 -
BARCLAYS PLC
Barclays Global Investors
2004 2003
GBPm GBPm
Net interest income 5 9
Net fees and commissions 882 662
Other operating income 6 1
---------------- ----------------
Operating income 893 672
Operating expenses excluding goodwill (545) (480)
---------------- ----------------
Operating profit excluding goodwill 348 192
Loss from joint ventures (2) (1)
Exceptional items 1 -
---------------- ----------------
Profit on ordinary activities before tax excluding goodwill1 347 191
---------------- ----------------
Net revenue per member of staff (year average FTE '000) GBP464 GBP333
Total assets excluding goodwill1 GBP0.8bn GBP0.5bn
Weighted risk assets GBP1.2bn GBP1.1bn
1 The reconciliation of certain figures excluding goodwill shown in this table
to the comparable figures including goodwill appears on pages 6-8.
- 28 -
BARCLAYS PLC
Barclays Global Investors (BGI) delivered another year of record performance.
Profit before tax excluding goodwill increased 82% (GBP156m) to GBP347m (2003:
GBP191m) reflecting substantial income growth and continued discipline in cost
management. Profit before tax including goodwill increased 85% (GBP151m) to
GBP329m (2003: GBP178m). Foreign exchange movements impacted growth in income
and costs. Approximately 55% of income is generated in the US and 31% in the UK
and continental Europe.
Net fees and commissions increased 33% (GBP220m) to GBP882m (2003: GBP662m),
with strong income generation across both the active and index businesses and
particularly in investment management fees. These resulted from strong net new
sales, growth in sales of higher margin products and stronger global equity
markets, partially offset by adverse foreign exchange movements. Securities
lending income growth was also very strong, benefiting from increased volumes.
Successful income generation continued across a diverse range of products,
distribution channels and geographies and active product investment performance
remained strong. BGI's commitment to innovation continued as a number of iShare
(Exchange Traded Funds) products were launched during 2004. There was
significant growth in global iShares with assets under management up 88% to
US$130bn at the year-end.
Operating expenses excluding goodwill increased 14% (GBP65m) to GBP545m (2003:
GBP480m) primarily as a result of higher performance based expenses and
benefited from foreign exchange movements. Operating expenses including goodwill
increased 14% (GBP70m) to GBP563m (2003: GBP493m).
Total assets under management increased 19% (GBP111bn) to GBP709bn (2003:
GBP598bn). The growth included the significant generation of net new assets of
GBP65bn. An increase of GBP97bn attributable to market movements was partially
offset by GBP51bn of adverse exchange rate movements.
- 29 -
BARCLAYS PLC
Head office functions and other operations
Head office functions comprise all the Group's central costs, including the
following areas that fall within Group Functions: Executive Management, Finance,
Treasury, Marketing, Communications, Human Resources, Strategy and Planning,
Internal Audit, Legal, Corporate Secretariat, Tax, Compliance and Risk. Costs
incurred wholly on behalf of the business units are recharged to them.
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.
Transition Businesses comprise discontinued South American and Middle Eastern
corporate banking businesses and other centrally managed Transition Businesses.
These non-core relationships are managed separately with the objective of
maximising the recovery from the assets concerned.
2004 2003
GBPm GBPm
Head office functions and central items (201) (192)
Transition Businesses 7 (25)
Restructuring costs (12) (16)
----------------------------------
Loss on ordinary activities before tax excluding goodwill1 (206) (233)
----------------------------------
Head office functions and central items costs increased 5% (GBP9m) to GBP201m
(2003: GBP192m). Central items included internal fees charged by Barclays
Capital for structured capital market activities of GBP63m (2003: GBP89m).
The improved performance of Transition Businesses, from a loss of GBP25m to a
profit of GBP7m, primarily reflected provisions released.
1 The reconciliation of loss on ordinary activities before tax excluding
goodwill to loss before tax is on page 7.
- 30 -
BARCLAYS PLC
Results by nature of income and expense
Net interest income 2004 2003
GBPm GBPm
Interest receivable 13,665 12,427
Interest payable (6,823) (5,823)
----------------------------------
6,842 6,604
----------------------------------
Group net interest margin1 % %
Group 2.59 2.61
Domestic 3.48 3.64
International 0.81 0.77
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, some international
business is transacted in the UK. Interest margin is net interest income as a
percentage of average interest earning assets.
The 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.
Group net interest income increased 4% (GBP238m) to GBP6,842m (2003: GBP6,604m),
reflecting growth in balances which more than offset a 2 basis points fall in
the Group net interest margin to 2.59%.
The Group net interest margin of 2.59% (2003: 2.61%) includes 0.42% (2003:
0.48%) arising from the benefit of free funds. A component of the benefit of
free funds is the structural hedge against short-term interest rate movements.
The contribution of the structural hedge has decreased to 0.12% (2003: 0.19%)
largely due to the impact of higher short-term interest rates.
Group average interest earning assets increased GBP11bn to GBP264bn (2003:
GBP253bn). Domestic average interest earning assets increased GBP14bn to
GBP176bn (2003: GBP162bn). This reflected increases across the businesses.
International average interest earning assets remained broadly stable at GBP88bn
(2003: GBP90bn).
The domestic net interest margin fell 16 basis points to 3.48% (2003: 3.64%).
This was attributable to the margin pressure in the mortgage business, the
impact of base rate rises during the year, higher funding costs, increased
promotional balance transfer activity in the cards business and the impact of
the structural hedge. This was partially offset by increased margins in retail
savings, Business Banking loans and Barclays Capital banking activities. Margins
in other areas remained broadly stable.
The international net interest margin increased by 4 basis points to 0.81%
(2003: 0.77%) largely due to a change in the mix of both assets and liabilities
in Barclays Capital banking activities.
The Group net interest margin was impacted by the factors described above with
the reduction largely mitigated by an increase in the proportion of domestic
interest earning assets.
- 31 -
BARCLAYS PLC
Net fees and commissions
2004 2003
GBPm GBPm
Fees and commissions receivable 5,672 4,896
Less: fees and commissions payable (706) (633)
----------------------------------
4,966 4,263
----------------------------------
Group net fees and commissions increased 16% (GBP703m) to GBP4,966m (2003:
GBP4,263m), reflecting good growth across all businesses.
Fees and commissions receivable rose 16% (GBP776m) to GBP5,672m (2003:
GBP4,896m) driven by increases in: Barclays Global Investors, reflecting strong
income generation across both the active and index businesses; Barclays Capital,
with good contributions from origination and advisory activities; and Private
Clients, as a result of stronger business volumes and the acquisition of
Gerrard. Good growth was also achieved in UK Banking and in Barclaycard.
Dealing profits
2004 2003
GBPm GBPm
Rates related business 1,141 909
Credit related business 352 145
----------------------------------
1,493 1,054
----------------------------------
Almost all the Group's dealing profits are generated in Barclays Capital.
Dealing profits increased 42% (GBP439m) to GBP1,493m (2003: GBP1,054m), with
very strong performances in both the Rates and Credit businesses. This reflected
higher volumes of client led activity throughout the year across a broad range
of products and the continued benefit of headcount investments to broaden
product depth and geographical reach. The very strong growth in the Rates
businesses was across equity related activities, foreign exchange and fixed
income. The very strong performance in the Credit businesses reflected an
increase in the contribution from credit derivatives.
Total foreign exchange income was GBP520m (2003: GBP498m) and consisted of
revenues earned from both retail and wholesale activities. The foreign exchange
income earned on customer transactions by UK Banking, Private Clients and
International and Barclaycard, both externally and within Barclays Capital, is
reported in those business units, within fees and commissions.
- 32 -
BARCLAYS PLC
Other operating income
2004 2003
GBPm GBPm
Net premium income on insurance underwriting 211 264
Gain on disposal of investment securities 181 73
Income from the long term assurance business 58 (33)
Property rentals 9 15
Dividend income from equity shares 17 6
Other income 168 165
----------------------------------
644 490
----------------------------------
Other operating income increased 31% (GBP154m) to GBP644m (2003: GBP490m).
Net premium income on insurance underwriting decreased 20% (GBP53m) to GBP211m
(2003: GBP264m), primarily due to a provision relating to the early termination
of contracts.
Gain on disposal of investment securities rose by GBP108m to GBP181m (2003:
GBP73m), predominantly due to a number of realisations in the private equity
business within Barclays Capital.
Virtually all the Group's long term assurance activity is based in the UK and
was the main component of the GBP58m contribution. This included costs of
redress for customer claims in respect of endowment policies of GBP97m (2003:
GBP95m).
Dividend income increased by GBP11m to GBP17m (2003: GBP6m) as a result of a
significant dividend received from an investment.
Other income was flat at GBP168m (2003: GBP165m). This reflected a reduction of
GBP98m in income, primarily in UK Retail Banking, from the revision of estimated
amounts expected to be repaid on banking liabilities. This was offset by
realisations on structured capital market transactions.
- 33 -
BARCLAYS PLC
Operating expenses
The Group manages costs on the basis of three specific categories: business as
usual, revenue related and strategic investment. Revenue related costs are costs
that are directly associated with a corresponding change in revenue or profits.
Strategic investment costs are costs that can generate or enable new revenue
streams or definable growth in a revenue stream, or generate or enable reduced
costs. Acquisition and disposal costs are those expenses incurred in 2004 or
2003 by those businesses that were purchased or sold by the group in 2004 or
2003. Restructuring costs and goodwill amortisation are reported separately.
The Group's expenses are summarised in the following table:
2004 2003
GBPm GBPm
Business as usual expenses 5,864 5,316
Revenue related costs 1,213 982
Strategic investment costs 502 392
Acquisitions and disposals 273 89
Restructuring charge 199 209
Goodwill amortisation 299 265
----------------------------------
8,350 7,253
----------------------------------
Operating expenses rose 15% (GBP1,097m) to GBP8,350m (2003: GBP7,253m).
Business as usual costs increased 10% (GBP548m) to GBP5,864m (2003: GBP5,316m),
reflecting higher business volumes and increased organic investment. Costs
associated with the implementation of major regulatory and legislative
programmes, including the new Mortgage & General Insurance regulations,
International Financial Reporting Standards, Basel II and Sarbanes Oxley,
represented GBP94m of the increase.
Revenue related costs rose 24% (GBP231m) to GBP1,213m (2003: GBP982m) driven
largely by increased performance related payments, primarily in Barclays Capital
and Barclays Global Investors.
Strategic investment costs increased 28% (GBP110m) to GBP502m (2003: GBP392m).
This reflected increased spend in Barclays Capital, due to the impact of
targeted acquisition of staff to drive the development of products, client
coverage and distribution capabilities, across Europe, the US and Asia. Also
included is a GBP23m cost increase relating to the relocation of Barclays
headquarters to Canary Wharf.
Acquisitions and disposals costs reflected the acquisitions of Juniper Financial
Corporation in 2004 and Charles Schwab Europe, Clydesdale Financial Services,
Banco Zaragozano and Gerrard in 2003.
- 34 -
BARCLAYS PLC
Administrative expenses - staff costs
2004 2003
GBPm GBPm
Salaries and accrued incentive payments 4,043 3,441
Social security costs 339 278
Pension costs 160 180
Post-retirement health care 22 19
Other staff costs 434 377
----------------------------------
4,998 4,295
----------------------------------
2004 2003
Number of staff at period end:
UK Banking 41,800 41,000
----------------------------------
UK Retail Banking 34,400 34,000
UK Business Banking 7,400 7,000
----------------------------------
Private Clients and International 19,300 19,000
----------------------------------
Private Clients 7,200 6,900
International 12,100 12,100
----------------------------------
Barclaycard 6,700 6,200
Barclays Capital 7,800 5,800
Barclays Global Investors 1,900 2,000
Head office functions and other operations 900 800
----------------------------------
Total Group permanent and contract staff worldwide 78,400 74,800
Temporary and agency staff worldwide 4,300 4,100
----------------------------------
Total including temporary and agency staff 82,700 78,900
----------------------------------
Staff costs increased by 16% (GBP703m) to GBP4,998m (2003: GBP4,295m).
Salaries and accrued incentive payments rose by 17% (GBP602m) to GBP4,043m
(2003: GBP3,441m) principally reflecting increased performance related payments
primarily within Barclays Capital and Barclays Global Investors, increased
headcount, and the impact of the businesses acquired in 2003.
Pension costs comprise all UK and international pension schemes. Included in the
costs is a charge of GBP103m (2003: GBP128m) in respect of the Group's main UK
pension schemes.
Staff numbers shown are on a full time equivalent basis. United Kingdom
permanent and contract staff are 60,000 (2003: 58,000). Internationally based
permanent and contract staff numbers are 18,400 (2003: 16,800).
During 2004, permanent and contract staff increased by 3,600. The implementation
of restructuring programmes resulted in a decrease of 2,100 staff, but this was
more than offset by the recruitment of additional staff throughout the Group and
400 staff from the acquisition of Juniper. Significant areas of recruitment
were: Barclays Capital, to drive the expansion of its business; Barclaycard,
through the growth of Barclaycard International, and the addition of front
office staff to improve customer service in Barclaycard UK; and UK Banking,
mostly from the recruitment of front line staff in both UK Retail Banking and UK
Business Banking.
Head office functions and other operations include staff undertaking activities
which support the operating businesses including central information technology
services. These costs are predominantly passed onto the businesses.
- 35 -
BARCLAYS PLC
Administrative expenses - other
2004 2003
GBPm GBPm
Property and equipment expenses 1,041 985
Other administrative expenses 1,717 1,419
----------------------------------
2,758 2,404
----------------------------------
Administrative expenses - other rose by 15% (GBP354m) to GBP2,758m (2003:
GBP2,404m) as a result of higher business activity and the impact of
acquisitions.
Depreciation
2004 2003
GBPm GBPm
Property depreciation 86 93
Equipment depreciation 209 196
----------------------------------
295 289
----------------------------------
- 36 -
BARCLAYS PLC
Provisions for bad and doubtful debts
2004 2003
GBPm GBPm
The provisions charge for the year in respect of bad and doubtful debts
comprises:
Specific provisions
New and increased provisions 1,767 1,628
Releases (211) (195)
Recoveries (255) (113)
----------------------------------
1,301 1,320
General provisions (release) / charge (210) 27
----------------------------------
Net charge 1,091 1,347
----------------------------------
Total provisions balances for bad and doubtful debts at end of the year
comprise:
Specific provisions 2,202 2,233
General provisions 564 795
----------------------------------
2,766 3,028
----------------------------------
The credit environment in both retail and in corporate and wholesale businesses
was relatively benign in 2004. This led to lower provisions charges, a lower
level of potential problem loans and non-performing loans and consequently a
reduced need to hold provision balances.
Overall, the Group provisions charge declined 19% to GBP1,091m (2003:
GBP1,347m). This resulted from a substantial decrease in the corporate and
wholesale provisions charge, whilst the retail provision charge was steady.
The provision coverage of potential credit risk loans (PCRLs), comprising
potential problem loans and non performing loans, was higher at 59.2% (2003:
54.6%) as PCRLs fell relatively more than the provisions balance. As a
percentage of average banking loans and advances, the provisions rate fell to
0.54% (2003: 0.73%).
In the corporate and wholesale businesses, PCRLs fell 29% to GBP2,062m (2003:
GBP2,920m), reflecting the strong corporate credit environment. The corporate
and wholesale provisions charge declined to GBP284m (2003: GBP543m). The
reduction in the provisions charge included an exceptional recovery of GBP57m in
UK Business Banking.
In the retail businesses, PCRLs remained steady at GBP2,679m (2003: GBP2,712m).
The provisions charge in the retail businesses was also steady at GBP807m (2003:
GBP804m). The provisions charge increased in Barclaycard (the card and unsecured
consumer lending business) due to volume growth and the maturation of new
customer recruitment. The provisions charge included a release of GBP40m
associated with the UK mortgage business, following a review of the portfolio
and the current loss experience.
Total provision balances declined 9% (GBP262m) to GBP2,766m (2003: GBP3,028m).
The fall in the general provisions balance of GBP231m largely resulted from
transfers to specific provisions of GBP198m, which had no effect on the net
provisions charge as the specific provisions charge was increased by the same
amount. The transfers reflected enhancements to provisioning models and the
resolution of an individual large corporate exposure.
- 37 -
BARCLAYS PLC
Profit from joint ventures and associated undertakings
2004 2003
GBPm GBPm
(Loss)/profit from joint ventures (3) 1
Profit from associated undertakings 59 28
----------------------------------
56 29
----------------------------------
The majority of the profit from associated undertakings for the year relates to
the investment in FirstCaribbean. The profit from FirstCaribbean reflects a
strong operating performance and includes a gain of GBP28m on the disposal of
shares held in Republic Bank Limited.
Exceptional items
2004 2003
GBPm GBPm
Profit on sale of businesses 45 4
----------------------------------
45 4
----------------------------------
The profit on disposal relates mainly to the sale of the shareholding in
Edotech, an investment in a former Barclays in-house statement printing
operation.
Tax rate
The charge for the year is based upon a UK corporation tax rate of 30% for the
calendar year 2004 (2003: 30%). The effective rate of tax is 28.0% (2003:
28.0%). The rate is lower than the standard rate of tax due to the beneficial
effects of lower tax on overseas income and certain non-taxable gains offset by
the absence of tax relief on goodwill.
Minority interests (including non-equity interests)
Minority interests (including non-equity interests) of GBP46m (2003: GBP25m)
includes GBP21m (2003: GBP2m) attributable to the equity owned by staff in
Barclays Global Investors.
- 38 -
BARCLAYS PLC
Earnings per ordinary share
2004 2003
Profit for the financial year attributable to the
members of Barclays PLC GBP3,268m GBP2,744m
Weighted average number of ordinary shares in issue 6,381m 6,483m
Dilutive effect of share options outstandings 33m 31m
---------------- -----------------
Diluted weighted average number of shares 6,414m 6,514m
---------------- -----------------
p p
Earnings per ordinary share 51.2 42.3
Fully diluted earnings per ordinary share 51.0 42.1
Dividends on ordinary shares
The Board has decided to pay, on 29th April 2005, a final dividend for the year
ending 31st December 2004 of 15.75p per ordinary share, for shares registered in
the books of the Company at the close of business on 25th February 2005.
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 2005/2006 tax year in mid-October 2005.
For qualifying US and Canadian resident ADR holders, the final dividend of
15.75p per ordinary share becomes 63.00p per ADS (representing four shares). The
ADR depositary will mail the dividend on 29th April 2005 to ADR holders on the
record on 25th February 2005.
For qualifying Japanese shareholders, the final dividend of 15.75p per ordinary
share will be distributed at the beginning of June to shareholders on the record
on 25th February 2005.
- 39 -
BARCLAYS PLC
Balance Sheet
Capital resources
2004 2003
GBPm GBPm
Shareholders' funds: equity 17,417 16,374
Minority interests: non-equity 690 -
Minority interests: equity 211 283
----------------------------------
18,318 16,657
Loan capital 12,277 12,339
----------------------------------
30,595 28,996
----------------------------------
Total capital resources increased in the year by GBP1,599m.
Shareholders' funds increased by GBP1,043m, reflecting profit retentions of
GBP1,730m, net proceeds of share issues of GBP114m and gains arising from
transactions with third parties which are reflected in the statement of
recognised gains and losses of GBP13m; offset primarily by share repurchases of
GBP699m, an increase in treasury shares of GBP53m and exchange rate losses of
GBP58m.
Non-equity minority interests reflected the issue by Barclays Bank PLC of EUR1bn
(GBP688m) of non-cumulative preference shares on 8th December 2004 and an
additional GBP2m of profits attributable to these non-equity minority interests
at the year-end.
Loan capital decreased by GBP62m reflecting raisings of GBP774m, more than
offset by redemptions of GBP611m, exchange rate movements of GBP224m and
amortisation of issue expenses of GBP1m.
- 40 -
BARCLAYS PLC
Capital ratios
Weighted risk assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority, comprise:
2004 2003
Weighted risk assets: GBPm GBPm
Banking book
on-balance sheet 148,621 133,816
off-balance sheet 26,741 22,987
Associated undertakings and joint ventures 3,020 2,830
----------------------------------
Total banking book 178,382 159,633
----------------------------------
Trading book
Market risks 22,106 13,861
Counterparty and settlement risks 18,113 15,503
----------------------------------
Total trading book 40,219 29,364
----------------------------------
Total weighted risk assets 218,601 188,997
----------------------------------
Capital resources:
Tier 1
Called up share capital 1,614 1,642
Eligible reserves 15,670 14,657
Minority interests - non-equity 688 -
Minority interests - equity 575 637
Reserve capital instruments1 1,627 1,705
Tier one notes1 920 960
Less: goodwill (4,432) (4,607)
----------------------------------
Total qualifying tier 1 capital 16,662 14,994
----------------------------------
Tier 2
Revaluation reserves 25 25
General provisions 564 795
Qualifying subordinated liabilities2
Undated loan capital 3,573 3,636
Dated loan capital 5,647 5,652
Other 2 2
----------------------------------
Total qualifying tier 2 capital 9,811 10,110
----------------------------------
Tier 3: short term subordinated liabilities2 286 280
----------------------------------
Less: Supervisory deductions
Investments not consolidated for Supervisory purposes3 (1,047) (979)
Other deductions (496) (182)
----------------------------------
(1,543) (1,161)
----------------------------------
Total net capital resources 25,216 24,223
----------------------------------
% %
Tier 1 ratio 7.6 7.9
Risk asset ratio 11.5 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 Subordinated liabilities are included in tiers 2 or 3, subject to limits laid
down in the supervisory requirements. Barclays retains significant capacity to
raise additional capital within these limits.
3 Includes GBP610m (2003: GBP478m) of shareholders' interest in the retail life
fund.
- 41 -
BARCLAYS PLC
Capital ratios (continued)
Net capital resources grew by 4.1% (GBP1.0bn). Tier 1 capital rose by GBP1.7bn
with retained profits of GBP1.7bn and the issue of GBP0.7bn of preference shares
being offset by ordinary share repurchases of GBP0.7bn. Tier 2 capital fell by
3.0% (GBP0.3bn) and tier 3 capital remained broadly as reported at 31st December
2003. Supervisory deductions increased by GBP0.4bn.
The overall growth in weighted risk assets of GBP29.6bn comprised trading book
weighted risk assets growth of 37.0% (GBP10.9bn) and banking book weighted risk
assets growth of 11.7% (GBP18.7bn).
The risk asset ratio was 11.5% (2003: 12.8%). The tier 1 ratio was 7.6% (2003:
7.9%).
- 42 -
BARCLAYS PLC
Economic Capital
Barclays assesses capital requirements by measuring the Group risk profile using
both internally and externally developed models. The Group assigns economic
capital primarily within seven risk categories: Credit Risk, Market Risk,
Business Risk, Operational Risk, Insurance Risk, Fixed Assets and Private
Equity.
The Group regularly enhances its economic capital methodology. During 2004,
enhancements included improvements in the modelling of the time horizon,
correlation of risks and risk concentrations. The developments in the
methodology are consistent with the capital proposals within the Basel II
accord.
Average economic capital by business is set out below:
2004 2003
GBPm GBPm
UK Banking 4,650 4,750
----------------------------------
UK Retail Banking 2,200 2,250
UK Business Banking 2,450 2,500
----------------------------------
Private Clients and International 1,400 1,150
----------------------------------
Private Clients - ongoing business 300 200
- closed life assurance activities 100 150
International 1,000 800
----------------------------------
Barclaycard 2,450 2,200
Barclays Capital 2,100 2,150
Barclays Global Investors 150 150
Head office functions and other operations1 200 250
----------------------------------
Average business unit economic capital 10,950 10,650
Capital held at Group centre2 1,650 1,250
Average historical goodwill 5,600 5,100
----------------------------------
Total average shareholders' funds 18,200 17,000
----------------------------------
1 Includes Transition Businesses and capital for central functional risks.
2 The Group's practice is to maintain an appropriate level of excess capital,
held at Group centre, which is not allocated to business units. This variance
arises as a result of capital management timing and includes capital held to
cover pension contribution risk.
Total average shareholders' funds including unamortised goodwill rose by
GBP1.2bn to GBP18.2bn during 2004.
UK Retail Banking economic capital allocation decreased GBP50m to GBP2.2bn with
the impact of continued growth more than offset by the sale in 2003 of non-core
assets that had previously been acquired with the Woolwich. UK Business Banking
economic capital allocation decreased GBP50m to GBP2.45bn as a consequence of a
general improvement in the credit quality of counterparties and improved risk
assessment of complex transactions.
Private Clients ongoing business economic capital allocation increased GBP100m
to GBP300m following the acquisition of Gerrard and growth of the business.
International economic capital allocation increased by GBP200m to GBP1.0bn
reflecting the inclusion of Banco Zaragozano for a full year and growth of the
Spanish business.
Barclaycard economic capital allocation increased by GBP250m to GBP2.45bn due to
growth in outstandings and the acquisition of Juniper.
Barclays Capital economic capital decreased by GBP50m to GBP2.1bn as a result of
improved wholesale credit conditions during 2004, more than offsetting the
increase in market risk capital driven by growth of the business.
- 43 -
BARCLAYS PLC
Economic Profit
Economic profit for 2004 was GBP1,885m (2003: GBP1,430m).
The reconciliation of economic profit to profit after tax and minority interests
is shown below:
2004 2003
GBPm GBPm
----------------------------------
Profit after tax and minority interests 3,268 2,744
Goodwill amortisation 299 265
Tax credit on goodwill (11) (7)
Goodwill relating to associated undertakings 7 7
----------------------------------
Profit after tax and minority interests excluding goodwill amortisation 3,563 3,009
Gain/(loss) on disposal recognised in the statement of total recognised
gains and losses 13 (4)
----------------------------------
3,576 3,005
----------------------------------
Average shareholders' funds including average historical goodwill1 18,237 17,019
Post tax cost of equity 9.5% 9.5%
----------------------------------
Cost of average shareholders' funds including average historical
goodwill2 (1,691) (1,575)
----------------------------------
Economic profit 1,885 1,430
----------------------------------
1 The difference between the average shareholders' funds (excluding minority
interests) 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 GBP490m (2003: GBP442m).
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.
- 44 -
BARCLAYS PLC
Risk Tendency
As part of its credit risk measurement system, the Group uses a model-based
methodology to assess the quality of the credit portfolios across different
customer categories. The approach is termed Risk Tendency and applies to all
performing credit exposures in both wholesale and retail sectors. Looking one
year ahead, it provides a statistical estimate that is the average in the range
of possible losses expected from the current performing portfolio. The actual
outcome in any one year is likely to be different. Thus it is not a prediction
of specific provisions but it gives management a clear view of the evolution of
the quality of the credit portfolio.
2004 2003
GBPm GBPm
UK Banking 375 385
----------------------------------
UK Retail Banking 150 150
UK Business Banking 225 235
----------------------------------
Private Clients and International 70 75
----------------------------------
Private Clients 5 5
International 65 70
----------------------------------
Barclaycard 860 775
Barclays Capital 70 135
Transition Businesses 20 20
----------------------------------
1,395 1,390
----------------------------------
Risk Tendency remained steady at GBP1,395m (2003: GBP1,390m).
Risk Tendency declined in the corporate and wholesale businesses during 2004 as
the corporate and wholesale credit environments continued to improve and as
potential problem loans declined significantly.
In Private Clients and International, Risk Tendency decreased GBP5m (7%) to
GBP70m (2003: GBP75m) as the Group developed a better understanding of the risks
in the Banco Zaragozano portfolio acquired in 2003.
Barclaycard Risk Tendency increased 11% to GBP860m (2003: GBP775m) due to growth
in the portfolio and the acquisition of Juniper.
- 45 -
BARCLAYS PLC
ADDITIONAL INFORMATION
Group structure changes from 2003
From 1st January 2004, for reporting purposes, Barclays was organised into the
business divisions outlined on pages 9 to 11. Results are also provided for Head
office functions and other operations.
The structural changes in the Group's organisation announced on 14th December
2004 took effect from 1st January 2005. Under the reorganisation, the Private
Clients and International businesses have been separated. David Roberts became
Chief Executive, International Retail and Commercial Banking, responsible for
Barclays retail and commercial banking businesses outside the UK. Robert E.
Diamond Jr., Chief Executive of Barclays Capital and Chairman of Barclays Global
Investors, assumed responsibility for the Private Clients businesses -
International & Private Banking and Wealth Solutions.
Acquisitions and disposals
On 11th March 2004, Barclays purchased the remaining 40% minority share in
Barclays Cairo Bank.
On 7th April 2004, Barclays completed the disposal of its shareholding in
Edotech Limited to Astron, the business process outsourcing group.
On 1st December 2004, Barclays completed the acquisition of Juniper Financial
Corporation from Canadian Imperial Bank of Commerce.
Accounting policies
A change in accounting policy arose from the adoption in 2004 of UITF Abstract
38 (UITF 38), 'Accounting for ESOP trusts'. UITF 38 requires Barclays PLC shares
held in Employee Share Ownership Plans (ESOP) trusts to be accounted for as a
deduction in arriving at shareholders' funds, rather than as assets. The balance
sheet for December 2003 has been restated accordingly, and other assets and
shareholders' funds have been reduced by GBP153m at 31st December 2004 (2003:
GBP99m). There was no impact on the 2003 or 2004 profit and loss account.
There have been no other significant changes to the accounting policies as
described in the 2003 Annual Report.
- 46 -
BARCLAYS PLC
ADDITIONAL INFORMATION
Future UK accounting developments
During 2004, the Accounting Standards Board (ASB) issued seven new Financial
Reporting Standards, FRS 20 to FRS 26, as part of its convergence programme
between UK GAAP and International Financial Reporting Standards (IFRS). These
new UK standards, which are not effective until 2005, will not impact the Group
because of the conversion to IFRS in 2005, as discussed below.
In December 2004, the ASB issued FRS 27 'Life Assurance'. Following feedback
received in response to the exposure draft issued in July 2004, the ASB has
deferred implementation of the standard until 2005. However, in line with the
Memorandum of Understanding entered into by the ASB, together with the
Association of British Insurers and major insurers and bancassurers, Barclays
plans to make additional voluntary disclosure in respect of its life assurance
business in the 2004 Annual Report.
Conversion to International Financial Reporting Standards in 2005
By Regulation the European Union (EU) has agreed that virtually all listed
companies must use International Financial Reporting Standards (IFRS) adopted
for use in the EU in the preparation of their 2005 consolidated accounts.
Barclays will comply with this Regulation. The objective is to improve financial
reporting and enhance transparency to assist the free flow of capital throughout
the EU and to improve the efficiency of the capital markets.
The Group commenced a programme of work in 2002, initially identifying the
differences between IFRS and existing UK standards based on the requirements
then in force. This led to a programme of work led centrally, but involving all
the businesses and functions, to change systems and processes and to provide
training so as to ensure that the Group can meet the requirements fully in 2005.
In addition, the programme is assisting the businesses and functions to consider
and address the wider business impact of the change in reporting in the EU. This
work is nearing completion. Conversion work, including reviewing the accuracy of
the opening balances, will continue during 2005.
Although many of the uncertainties concerning whether and how the standards will
be adopted for use in the EU have been resolved, some questions remain,
particularly regarding the adoption of amendments to standards and to
interpretations issued in the second half of 2004. In addition, how IFRS
financial statements will be interpreted for tax and regulatory capital purposes
remains subject to some uncertainty, with the regulatory capital requirements
not expected to be finalised before April 2005 and the tax treatment of the
first time adoption adjustments not determined until later. However, the
programme is following normal project controls and change management and the
Group believes it is on track to meet all requirements for financial reporting
in 2005.
The restated 2004 IFRS results, excluding the impact of IAS 32 and IAS 39 on
financial instruments and IFRS 4 on insurance contracts, and the opening 2005
IFRS balance sheet including these standards, will be issued in the second
quarter of 2005. The first results on full IFRS basis will be the June 2005
half-year results.
- 47 -
BARCLAYS PLC
ADDITIONAL INFORMATION
Changes in accounting presentation
The prior period presentation has, where appropriate, been restated to conform
with current year classification, and the change in accounting policy 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 2005 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 the
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.
Recent developments
As announced on 23rd September 2004, Barclays is in discussion with Absa Group
Limited ('Absa'), a leading South African bank, in connection with a possible
partial offer for a majority stake in Absa. A due diligence exercise has been
completed and Barclays has submitted an application to the South African banking
regulators to approve the possible transaction. It is not known how long the
approval process will take. The discussions may or may not lead to an offer
being made.
On 20th January 2005 Barclays announced that it had made an offer to acquire the
wealth business of ING Securities Bank (France), consisting of ING Ferri and ING
Private Banking, subject to consultation with employee representative bodies and
finalising terms. Subject to consultation, the acquisition is expected to
complete by the end of the first half of this year.
On 3rd February 2005, Barclays announced its plans to consolidate its core
general insurance business from two suppliers to one and that discussions are
well advanced with Norwich Union to provide services across the home, motor and
travel insurance portfolio. Barclays also announced that it has agreed in
principle to purchase 90% of Gresham Insurance from Legal & General. Barclays
currently owns the remaining 10%. At the same time negotiations are underway for
the sale of Gresham Insurance to Norwich Union.
On 4th February 2005, Barclays announced it had signed an agreement with
ForeningsSparbanken (also known as Swedbank) to form a joint venture to provide
credit cards in the Nordic market, subject to confirmatory due diligence and
regulatory approvals.
- 48 -
BARCLAYS PLC
NOTES
1. Loans and advances to banks
2004 2003
Banking business GBPm GBPm
United Kingdom 21,351 14,315
Other European Union 1,189 1,702
United States 753 110
Rest of the World 1,699 1,143
----------------------------------
24,992 17,270
Less provisions (6) (16)
----------------------------------
24,986 17,254
Trading business 50,145 44,670
----------------------------------
Total loans and advances to banks 75,131 61,924
----------------------------------
Of the total loans and advances to banks, placings with banks were
GBP66.7bn at 31st December 2004 (2003: GBP56.5bn). Placings with banks
include reverse repos of GBP61.1bn (2003: GBP50.4bn). The majority of the
placings have a residual maturity of less than one year.
- 49 -
BARCLAYS PLC
2. Loans and advances to customers
2004 2003
Banking business - United Kingdom: GBPm GBPm
Financial institutions 11,947 7,721
Agriculture, forestry and fishing 1,947 1,766
Manufacturing 6,282 5,967
Construction 2,476 1,883
Property 7,933 6,341
Energy and water 936 1,286
Wholesale and retail distribution and leisure 9,751 8,886
Transport 2,275 2,579
Postal and communication 454 476
Business and other services 14,281 12,030
Home loans1 64,481 61,905
Other personal 23,313 21,905
Overseas customers 7,612 5,477
Finance lease receivables 5,406 5,587
----------------------------------
Total United Kingdom 159,094 143,809
----------------------------------
Banking business - Overseas:
Other European Union 20,393 19,027
United States 7,984 3,573
Rest of the World 5,176 4,510
----------------------------------
33,553 27,110
----------------------------------
Total banking loans and advances to customers 192,647 170,919
Less provisions (2,760) (3,012)
Less interest in suspense (40) (49)
----------------------------------
189,847 167,858
Trading business 65,099 58,961
----------------------------------
Total loans and advances to customers 254,946 226,819
----------------------------------
1 Excludes commercial property mortgages
Of the total loans and advances to customers, reverse repos were GBP58.3bn
(2003: GBP50.0bn).
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.
- 50 -
BARCLAYS PLC
3. Provision balances for bad and doubtful debts
Movements in provisions for bad and doubtful debts 2004 2003
GBPm GBPm
Provisions at beginning of year 3,028 2,998
Acquisitions and disposals 21 62
Exchange and other adjustments (34) (18)
Amounts written off (see below) (1,595) (1,474)
Recoveries (see below) 255 113
Provisions charged against profit (see below) 1,091 1,347
----------------------------------
Provisions balance at end of year 2,766 3,028
----------------------------------
Amounts written off
United Kingdom (1,411) (1,175)
Other European Union (58) (54)
United States (71) (215)
Rest of the World (55) (30)
----------------------------------
Total amounts written off (1,595) (1,474)
----------------------------------
Recoveries
United Kingdom 220 95
Other European Union 8 7
United States 15 10
Rest of the World 12 1
----------------------------------
Total recoveries 255 113
----------------------------------
Provisions charged against profit
New and increased specific provisions
United Kingdom 1,571 1,373
Other European Union 82 57
United States 67 118
Rest of the World 47 80
----------------------------------
1,767 1,628
----------------------------------
Releases of specific provisions
United Kingdom (153) (151)
Other European Union (17) (13)
United States (19) (24)
Rest of the World (22) (7)
----------------------------------
(211) (195)
Recoveries (255) (113)
----------------------------------
Net specific provisions charge 1,301 1,320
General provision (release) / charge (210) 27
----------------------------------
Net charge to profit 1,091 1,347
----------------------------------
- 51 -
BARCLAYS PLC
3. Provision balances for bad and doubtful debts (continued)
Total provisions for bad and doubtful debts at end of year comprise:
2004 2003
Specific provisions GBPm GBPm
United Kingdom 1,860 1,856
Other European Union 104 97
United States 128 121
Rest of the World 110 159
----------------------------------
Total specific provisions 2,202 2,233
General provisions 564 795
----------------------------------
2,766 3,028
----------------------------------
The geographic analysis of provisions shown above is based on the location
of the office recording the transaction.
- 52 -
BARCLAYS PLC
4. Potential credit risk loans
The following table presents an analysis of potential credit risk loans
(non-performing and potential problem 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.
Potential credit risk loans 2004 2003
Summary GBPm GBPm
Non-accrual loans 2,115 2,261
Accruing loans where interest is being suspended with or without
provisions 492 629
Other accruing loans against which provisions have been made 842 821
----------------------------------
3,449 3,711
Accruing loans 90 days overdue, against which no provisions have
been made 521 590
Reduced rate loans 15 4
----------------------------------
Total non-performing loans 3,985 4,305
Potential problem loans 756 1,327
----------------------------------
Total potential credit risk loans 4,741 5,632
----------------------------------
Geographical split 2004 2003
Non-accrual loans: GBPm GBPm
United Kingdom 1,583 1,572
Other European Union 194 143
United States 249 383
Rest of the World 89 163
----------------------------------
Total 2,115 2,261
----------------------------------
Accruing loans where interest is being suspended with or without
provisions:
United Kingdom 431 559
Other European Union 31 29
United States - -
Rest of the World 30 41
----------------------------------
Total 492 629
----------------------------------
Other accruing loans against which provisions have been made:
United Kingdom 764 760
Other European Union 27 35
United States 26 -
Rest of the World 25 26
----------------------------------
Total 842 821
----------------------------------
- 53 -
BARCLAYS PLC
4. Potential credit risk loans (continued)
2004 2003
Accruing loans 90 days overdue, against which no provisions have GBPm GBPm
been made:
United Kingdom 484 566
Other European Union 34 24
United States 1 -
Rest of the World 2 -
----------------------------------
Total 521 590
----------------------------------
Reduced rate loans:
United Kingdom 2 4
Other European Union - -
United States 13 -
Rest of the World - -
----------------------------------
Total 15 4
----------------------------------
Total non-performing loans:
United Kingdom 3,264 3,461
Other European Union 286 231
United States 289 383
Rest of the World 146 230
----------------------------------
Total 3,985 4,305
----------------------------------
Potential problem loans:
United Kingdom 648 989
Other European Union - 23
United States 27 259
Rest of the World 81 56
----------------------------------
Total 756 1,327
----------------------------------
Total potential credit risk loans:
United Kingdom 3,912 4,450
Other European Union 286 254
United States 316 642
Rest of the World 227 286
----------------------------------
Total 4,741 5,632
----------------------------------
Provision coverage of non-performing loans1: % %
United Kingdom 72.4 74.2
Other European Union 55.6 71.4
United States 49.5 39.2
Rest of the World 95.9 83.9
----------------------------------
Total 70.4 71.5
----------------------------------
Provision coverage of total potential credit risk loans1: % %
United Kingdom 60.4 57.7
Other European Union 55.6 65.0
United States 45.3 23.4
Rest of the World 61.7 67.5
----------------------------------
Total 59.2 54.6
----------------------------------
- 54 -
1 The geographical coverage ratios include an allocation of general
provisions.
- 55 -
BARCLAYS PLC
5. Other assets
2004 2003
GBPm GBPm
Balances arising from off-balance sheet financial instruments (see
note 9) 18,174 15,812
Shareholders' interest in long term assurance fund 610 478
London Metal Exchange warrants and other metals trading positions
952 1,290
Sundry debtors 2,418 2,156
Prepayments and accrued income 5,078 3,921
----------------------------------
27,232 23,657
----------------------------------
6. Other liabilities
2004 2003
GBPm GBPm
Obligations under finance leases payable 353 110
Balances arising from off-balance sheet financial instruments (See
note 9) 18,009 14,797
Short positions in securities 53,714 49,934
Current tax 584 497
Sundry creditors 3,905 4,159
Accruals and deferred income 6,582 4,983
Provisions for liabilities and charges 1,205 1,015
Dividend 1,011 879
----------------------------------
85,363 76,374
----------------------------------
- 56 -
BARCLAYS PLC
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. 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. In
addition, in respect of investigations relating to Enron, Barclays is
continuing to provide information in response to enquiries by regulatory
and governmental authorities in the U.S. and elsewhere including subpoenas
from the U.S. Securities and Exchange Commission. It is not possible to
estimate Barclays possible loss in relation to these matters, nor the
effect that it might have upon operating results in any particular
financial period.
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 of the Group.
8. Contingent liabilities and commitments
2004 2003
Contingent liabilities GBPm GBPm
Acceptances and endorsements 303 671
Guarantees and assets pledged as collateral security 30,011 24,596
Other contingent liabilities 8,245 8,427
----------------- ----------------
38,559 33,694
----------------- ----------------
Commitments
Standby facilities, credit lines and other commitments 134,051 114,847
----------------- ----------------
Current year credit cards commitments have been calculated on a
contractual basis rather than a modelled basis. Had this method been
applied in 2003, reported commitments would have been increased by
GBP5,899m to GBP120,746m.
- 57 -
BARCLAYS PLC
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 2004 2003
Contract or underlying principal amount GBPm GBPm
Forward foreign exchange 380,855 310,319
Currency swaps 274,568 207,364
Other exchange rate related contracts 169,471 167,643
----------------------------------
824,894 685,326
----------------------------------
Interest rate derivatives
Contract or underlying principal amount
Interest rate swaps 5,412,935 2,944,310
Forward rate agreements 893,978 381,511
OTC options bought and sold 1,726,745 842,631
Other interest rate related contracts 3,267,233 2,051,161
----------------------------------
11,300,891 6,219,613
----------------------------------
Credit derivatives 191,408 47,450
----------------------------------
Equity, stock index and commodity derivatives
Contract or underlying principal amount 321,035 171,939
----------------------------------
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.
- 58 -
BARCLAYS PLC
9. Derivatives (continued)
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. The fair
values as set out below provide a more relevant economic assessment of the
financial exposure than the nominal amounts.
2004 2003
Positive fair values GBPm GBPm
Foreign exchange derivatives 20,066 17,129
Interest rate derivatives 63,177 51,776
Credit derivatives 1,446 798
Equity, stock index and commodity derivatives 9,385 4,721
Effect of netting (69,919) (55,030)
Cash collateral meeting offset criteria (5,981) (3,582)
----------------------------------
18,174 15,812
----------------------------------
Negative fair values
Foreign exchange derivatives 21,476 18,393
Interest rate derivatives 60,600 49,735
Credit derivatives 1,217 584
Equity, stock index and commodity derivatives 10,030 5,733
Effect of netting (69,919) (55,030)
Cash collateral meeting offset criteria (5,395) (4,618)
----------------------------------
18,009 14,797
----------------------------------
- 59 -
BARCLAYS PLC
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 of the
potential loss which might arise from unfavourable market movements, if
the current positions were to be held unchanged for one business day,
measured to a confidence level of 98%. Daily losses exceeding the DVaR
figure are likely to occur, on average, twice in every one hundred
business days.
Analysis of Barclays Capital's market risk exposures
Barclays Capital's market risk exposure, as measured by average total
Daily Value at Risk (DVaR), increased in 2004. This was due mainly to
interest rate opportunities taken in the first half of 2004 and an
increase in credit spread positions. The latter increase was primarily the
result of growing client flows in corporate bonds and credit derivatives.
The increase in total DVaR is consistent with Barclays Capital's business
expansion.
DVaR
Twelve months to
31st December 2004
Average High1 Low1
GBPm GBPm GBPm
Interest rate risk 25.0 53.6 15.1
Credit spread risk 22.6 32.9 16.0
Foreign exchange risk 2.4 7.4 0.9
Equities risk 4.2 7.9 2.2
Commodities risk 6.0 14.4 2.2
Diversification effect (25.9) n/a n/a
---------------------------------------------------
Total DVaR2 34.3 46.8 24.0
---------------------------------------------------
Twelve months to
31st December 2003
Average High1 Low1
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 DVaR2 25.9 38.6 17.6
---------------------------------------------------
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 2004 was GBP31.9m (2003: GBP37.2m).
- 60 -
BARCLAYS PLC
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' FUNDS
2004 2003
GBPm GBPm
At beginning of year 16,374 15,146
Proceeds of shares issued (net of expenses) 114 149
Exchange rate translation differences (58) (29)
Repurchase of ordinary shares (699) (204)
Shares issued to the 2003 QUEST in relation to share option schemes for staff (1) (36)
Gain/(loss) arising from transactions with third parties 13 (4)
ESOP trust shares allocated to staff (3) -
Increase in Treasury shares and ESOP Shares (53) (52)
Profit retained 1,730 1,404
---------------- -----------------
At end of year 17,417 16,374
---------------- -----------------
Included in shareholders' funds is share capital comprising 6,454m (2003:
6,563m) ordinary shares of 25p each and 1m (2003:1m) staff shares of GBP1 each.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2004 2003
GBPm GBPm
Profit attributable to the members of Barclays PLC 3,268 2,744
Exchange rate translation differences (33) (4)
Gain/(loss) arising from transactions with third parties 13 (4)
Joint ventures and associated undertakings (30) (22)
Other items 5 (3)
---------------- -----------------
Total gains and losses recognised in the period 3,223 2,711
---------------- -----------------
- 61 -
BARCLAYS PLC
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
2004 2003
GBPm GBPm
Net cash inflow/(outflow) from operating activities 6,089 (2,290)
Dividends received from joint ventures and associated undertakings 15 7
Net cash outflow from returns on investment and servicing of finance (671) (620)
Tax paid (690) (910)
Net cash (outflow)/inflow from capital expenditure and
financial investment (6,764) 1,432
Net cash outflow from acquisitions and disposals (185) (930)
Equity dividend paid (1,406) (1,249)
----------------------------------
Net cash outflow before financing (3,612) (4,560)
Net cash inflow from financing 4,420 4,188
----------------------------------
Increase/(decrease) in cash 808 (372)
----------------------------------
- 62 -
BARCLAYS PLC
OTHER INFORMATION
Financial Summary 2004 2003 2002 2001 2000
GBPm GBPm GBPm GBPm GBPm
Profit before tax 4,603 3,845 3,205 3,425 3,392
Profit after tax 3,314 2,769 2,250 2,482 2,491
Total capital resources 30,595 28,996 26,839 24,600 21,148
p p p p p
Earnings per ordinary share 51.2 42.3 33.7 36.8 40.4
Fully diluted earnings per share issue 51.0 42.1 33.4 36.4 40.0
Dividends per ordinary share 24.0 20.5 18.35 16.63 14.5
Net asset value per ordinary share 270 250 230 217 198
Dividend payout ratio (%) 46.9 48.5 54.5 45.2 35.9
Capital ratios: % % % % %
Tier 1 ratio 7.6 7.9 8.2 7.8 7.2
Risk asset ratio 11.5 12.8 12.8 12.5 11.0
Performance ratios
Return on average shareholders' funds: % % % % %
Pre-tax 26.7 23.6 21.0 23.9 33.8
Post-tax 19.2 17.0 14.7 17.4 24.8
Return on average total assets:
Pre-tax 0.7 0.8 0.7 0.9 1.1
Post-tax 0.5 0.6 0.5 0.6 0.8
Return on average weighted risk assets:
Pre-tax 2.2 2.1 1.9 2.2 2.6
Post-tax 1.6 1.5 1.4 1.6 1.9
Non interest income/total income: 50.9 46.8 45.2 46.5 46.2
Operating expenses/total income: 59.9 58.4 58.5 58.9 57.8
- 63 -
BARCLAYS PLC
OTHER INFORMATION
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Half-year
31.12.04 30.06.04 31.12.03 30.06.03
GBPm GBPm GBPm GBPm
Interest receivable 7,202 6,463 6,334 6,093
Interest payable (3,701) (3,122) (2,966) (2,857)
------------------------------------------------- ----------------
Net interest income 3,501 3,341 3,368 3,236
------------------------------------------------- ----------------
Net fees and commissions receivable 2,588 2,378 2,233 2,030
Dealing profits 687 806 524 530
Other operating income 317 327 293 197
------------------------------------------------- ----------------
Total non-interest income 3,592 3,511 3,050 2,757
------------------------------------------------- ----------------
Operating income 7,093 6,852 6,418 5,993
------------------------------------------------- ----------------
Administration expenses - staff costs (2,601) (2,397) (2,269) (2,026)
Administration expenses - other (1,532) (1,226) (1,312) (1,092)
Depreciation (155) (140) (145) (144)
Goodwill amortisation (151) (148) (140) (125)
------------------------------------------------- ----------------
Operating expenses (4,439) (3,911) (3,866) (3,387)
------------------------------------------------- ----------------
Operating profit before provisions 2,654 2,941 2,552 2,606
Provisions for bad and doubtful debts (502) (589) (695) (652)
Provisions for contingent liabilities and commitments (2) - 1 -
------------------------------------------------- ----------------
Operating profit 2,150 2,352 1,858 1,954
Profit from joint ventures and associated undertakings 42 14 19 10
Exceptional items - 45 5 (1)
------------------------------------------------- ----------------
Profit on ordinary activities before tax 2,192 2,411 1,882 1,963
Tax on profit on ordinary activities (614) (675) (509) (567)
------------------------------------------------- ----------------
Profit on ordinary activities after tax 1,578 1,736 1,373 1,396
Minority interests (including non-equity interests) (26) (20) (12) (13)
------------------------------------------------- ----------------
------------------------------------------------- ----------------
Profit for the period attributable to the members of 1,552 1,716 1,361 1,383
Barclays PLC
Dividends (1,010) (528) (883) (457)
------------------------------------------------- ----------------
Profit retained for the financial period 542 1,188 478 926
------------------------------------------------- ----------------
Earnings per ordinary share 24.5p 26.7p 21.0p 21.3p
Dividends per ordinary share:
Interim - 8.25p - 7.05p
Final 15.75p - 13.45p -
- 64 -
BARCLAYS BANK PLC
BARCLAYS BANK PLC IS A WHOLLY OWNED SUBSIDIARY OF BARCLAYS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
The Directors report the following results of the Barclays Bank PLC Group for
the year ended 31st December 2004:
2004 2003
Interest receivable: GBPm GBPm
----------------------------------
Interest receivable and similar income arising from debt securities 2,414 2,384
Other interest receivable and similar income 11,251 10,043
----------------------------------
13,665 12,427
Interest payable (6,823) (5,823)
----------------------------------
Net interest income 6,842 6,604
Fees and commissions receivable 5,672 4,896
Less: fees and commissions payable (706) (633)
Dealing profits 1,493 1,054
Other operating income 653 490
----------------------------------
Operating income 13,954 12,411
----------------------------------
Administrative expenses - staff costs (4,998) (4,295)
Administrative expenses - other (2,758) (2,404)
Depreciation (295) (289)
Goodwill amortisation (299) (265)
----------------------------------
Operating expenses (8,350) (7,253)
----------------------------------
Operating profit before provisions 5,604 5,158
----------------------------------
Provisions for bad and doubtful debts (1,091) (1,347)
Provisions for contingent liabilities and commitments (2) 1
----------------------------------
Provisions (1,093) (1,346)
----------------------------------
Operating profit 4,511 3,812
(Loss)/profit from joint ventures (3) 1
Profit from associated undertakings 59 28
Profit on disposal/termination of businesses 45 4
----------------------------------
Profit on ordinary activities before tax 4,612 3,845
Tax on profit on ordinary activities (1,289) (1,076)
----------------------------------
Profit on ordinary activities after tax 3,323 2,769
Minority interests - equity (44) (25)
----------------------------------
Profit attributable to shareholders 3,279 2,744
Profit attributable to non - equity shareholders (2) -
Dividends payable to Barclays PLC (2,247) (1,580)
----------------------------------
Profit retained for the financial year 1,030 1,164
----------------------------------
- 65 -
BARCLAYS BANK PLC
CONSOLIDATED BALANCE SHEET
2004 2003
Assets: GBPm GBPm
Cash and balances at central banks 1,753 1,726
Items in course of collection from other banks 1,772 2,006
Treasury bills and other eligible bills 6,658 7,177
----------------------------------
Loans and advances to banks - banking 24,986 17,254
- trading 50,145 44,670
----------------------------------
75,131 61,924
----------------------------------
Loans and advances to customers - banking 189,847 167,858
- trading 65,099 58,961
----------------------------------
254,946 226,819
Debt securities 127,428 97,393
Equity shares 12,177 7,871
----------------------------------
Interests in joint ventures - share of gross assets 147 266
- share of gross liabilities (119) (208)
----------------------------------
28 58
Interests in associated undertakings 381 370
Intangible fixed assets 4,295 4,406
Tangible fixed assets 1,921 1,790
Other assets 22,307 19,835
Prepayments and accrued income 5,078 3,921
----------------------------------
513,875 435,296
Retail life-fund assets attributable to policyholders 8,378 8,077
----------------------------------
Total assets 522,253 443,373
----------------------------------
- 66 -
BARCLAYS BANK PLC
CONSOLIDATED BALANCE SHEET
2004 2003
Liabilities: GBPm GBPm
---------------- ----------------
Deposits by banks - banking 74,211 57,641
- trading 36,813 36,451
---------------- ----------------
111,024 94,092
---------------- ----------------
Customer accounts - banking 171,963 155,814
- trading 45,755 29,054
---------------- ----------------
217,718 184,868
Debt securities in issue 67,806 49,569
Items in course of collection due to other banks 1,205 1,286
Other liabilities 76,550 69,497
Balances due to Barclays PLC 49 10
Accruals and deferred income 6,582 4,983
Provisions for liabilities and charges - deferred tax 738 646
Provisions for liabilities and charges - other 467 369
Dividend payable to Barclays PLC 977 869
Subordinated liabilities:
Undated loan capital - non-convertible 6,149 6,310
Dated loan capital - convertible to preference shares 15 17
Dated loan capital - non-convertible 6,113 6,012
---------------- ----------------
495,393 418,528
---------------- ----------------
Shareholders' funds and minority interests
---------------- ----------------
Called up share capital 2,316 2,302
Share premium account 6,531 5,743
Revaluation reserve 24 24
Profit and loss account 9,400 8,416
---------------- ----------------
18,271 16,485
---------------- ----------------
Shareholders' funds - equity 17,581 16,485
- non-equity 690 -
---------------- ----------------
Minority interests - equity 211 283
---------------- ----------------
18,482 16,768
---------------- ----------------
513,875 435,296
Retail life-fund liabilities to policyholders 8,378 8,077
---------------- ----------------
Total liabilities and shareholders' funds 522,253 443,373
---------------- ----------------
Memorandum items
Contingent liabilities:
Acceptances and endorsements 303 671
Guarantees and assets pledged as collateral security 30,011 24,596
Other contingent liabilities 8,245 8,427
---------------- ----------------
38,559 33,694
---------------- ----------------
Commitments - standby facilities, credit lines and other 134,051 114,847
---------------- ----------------
- 67 -
BARCLAYS BANK PLC
NOTES
1. Authorised share capital
Ordinary shares
The authorised ordinary share capital of Barclays Bank PLC, at 31st December
2004, was 3,000million (2003: 3,000million) ordinary shares of GBP1 each.
Preference shares
The authorised preference share capital of Barclays Bank PLC, at 31st
December 2004, was 1,000 (2003: nil) preference shares of GBP1 each,
150million (2003: 150million) preference shares of US$0.01 each and 400,000
(2003: nil) preference shares of EUR100 each.
2. Issued share capital
Ordinary shares
The issued ordinary share capital of Barclays Bank PLC, at 31st December
2004 comprised 2,309million (2003: 2,302million) ordinary shares of GBP1
each.
The whole of the issued ordinary share capital of Barclays Bank PLC is
beneficially owned by Barclays PLC.
Preference shares
The issued preference share capital of Barclays Bank PLC, at 31 December
2004 comprised 1,000 (2003: nil) preference shares of GBP1 each and 100,000
(2003: nil) preference shares of EUR100 each. The sterling preference
shares were issued on 31st December 2004 at nil premium. The euro
preference shares were issued on 8th December 2004 for a consideration of
EUR993.6million or (GBP688.4million), of which the nominal value was
EUR10million and the balance was share premium.
3. Staff numbers
On a full time equivalent basis the total permanent and contract staff was
78,400 (2003: 74,800). Additionally, temporary and agency staff totalled
4,300 (2003: 4,100).
4. Conversion to International Financial Reporting Standards in 2005
By Regulation, the European Union (EU) has agreed that virtually all listed
companies must use International Financial Reporting Standards (IFRS)
adopted for use in the EU in the preparation of their 2005 consolidated
accounts. Barclays Bank PLC will comply with this Regulation, as part of a
Groupwide implementation programme, details of which are discussed in the
Results Announcement for Barclays PLC. The Group believes it is on track to
meet all requirements for financial reporting in 2005.
5. Commitments
Current year credit card commitments have been calculated on a contractual
basis rather than a modelled basis. Had this method been applied in 2003,
reported commitments would have been increased by GBP5,899million to
GBP120,746million.
- 68 -