Form 6-K

 

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

 

5 October 2005

 

Barclays PLC and

Barclays Bank PLC

(Names of Registrants)

 

1 Churchill Place

London E14 5HP

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.333-126811, 333-85646 AND 333-12384) OF BARCLAYS BANK PLC AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.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 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:

 

A document containing extracts of the previously published interim results announcement of Barclays PLC for the six months ended 30th June 2005 and certain supplemental US GAAP information.

 



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: 5 October 2005

     

By:

 

/s/    Marie Smith

               

Marie Smith

               

Assistant Secretary

       

BARCLAYS BANK PLC

(Registrant)

Date: 5 October 2005

     

By:

 

/s/    Marie Smith

               

Marie Smith

               

Assistant Secretary


Barclays PLC and Barclays Bank PLC

 

This document includes extracts of the previously published results announcement of Barclays PLC for the six months ended 30th June 2005. This document does not update or restate any of the financial information set forth in the June 2005 results announcement. This document does incorporate certain modifications to the June 2005 announcement in order 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, which govern the use of non-IFRS financial measures in documents filed with the Commission. This document also provides condensed financial information for Barclays Bank PLC.

 

This document provides additional information in accordance with SEC Release 33-8567 relating to the presentation of interim period financial statements by issuers. The release provides four options for foreign private issuers that are first-time adopters of International Financial Reporting Standards and are required to provide interim financial statements in Securities Act or Exchange Act documents used after nine months from the financial year end. Barclays PLC is using the US GAAP condensed financial information option. This option allows foreign companies to use condensed financial information prepared in accordance with US Generally Accepted Accounting Principles to bridge the gap in interim financial information between previous GAAP and IFRS. The condensed US GAAP financial information provides a level of detail consistent with that required by Article 10 of Regulation S-X for interim financial statements. The additional information is as follows:

 

    reconciliations of the IFRS financial statements of Barclays PLC and Barclays Bank PLC for the six months ended 30th June 2005 and 30th June 2004 to US Generally Accepted Accounting Principles;

 

    reconciliations of the IFRS financial statements of Barclays PLC and Barclays Bank PLC for 1st January 2004 to 1st January 2005 to UK GAAP, as previously in effect;

 

    condensed consolidated statements of income, balance sheets and statements of comprehensive income for Barclays PLC and Barclays Bank PLC for the six months ended 30th June 2005 and 30th June 2004 and the year ended 30th December 2004, all prepared in accordance with US GAAP.

 

In this document, certain non-IFRS measures are reported. Barclays management believes that these non-IFRS 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 business 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.

 

All of the financial information presented in this document is unaudited.

 

The interim financial data as of 30th June 2005 and for the six months ended 30th June 2005, 31st December 2004, and 30th June 2004 include, in the opinion of the Group, all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of the interim periods. The interim financial information complies with IAS 34, ‘Interim Financial Reporting’.

 

i


BARCLAYS PLC AND BARCLAYS BANK PLC

 

     Page

Barclays PLC Interim Results
Announcement - Extracts
   1

- Summary

   2

- Financial highlights

   3

- Consolidated income statement

   4

- Consolidated balance sheet

   5-6

- Group performance ratios

   7

- Results by business

   8-31

- Results by nature of income and expense

   32-51

- Additional information

   52-55

- Notes

   56-70

- Consolidated statement of recognised income and expense

   71

- Summary consolidated cashflow statement

   72

- Other information

   73

Barclays PLC - US GAAP data

   74-88

Barclays Bank PLC IFRS data

   89

- Consolidated income statement

   90

- Consolidated balance sheet

   91-92

- Consolidated statement of recognised income and expense

   93

- Summary consolidated cashflow statement

   94

Barclays Bank PLC US GAAP data

   95-101

Appendix A - Ratio of earnings to fixed charges

   102-106

Appendix B - UK GAAP to IFRS analysis

   107

- IFRS accounting policies

   108-125

- Reconciliations of IFRS financial statements to UK GAAP

   126-146

- Differences between UK GAAP and IFRS

   147-159

 

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 “aim”, “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group’s future financial position, income growth, impairment charges, business strategy, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditures, and plans and objectives for future operation.

 

By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS and pending tax elections with regards to certain subsidiaries, as well as 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, the impact of competition, and the Group’s ability to increase earnings per share from acquisitions such as Absa (which may be affected by, among other things, the ability to realise expected synergies, integrate businesses, and costs associated with the acquisition and integration) - a number of which factors 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.

 

BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON E14 5HP, TELEPHONE 020 7116 1000. COMPANY NO. 48839.

 

ii


BARCLAYS PLC – INTERIM RESULTS ANNOUNCEMENT

 

Extracts from the Interim Results Announcement of Barclays PLC, published on August 5th 2005, are provided on pages 2 to 73, with certain modifications as set out on page (i).

 

The information in the announcement, which was approved by the Board of Directors on 4th August 2005, did not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the ‘Act’). Statutory accounts for the year-ended 31st December 2004 were prepared under UK GAAP and included 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) and which contained an unqualified audit report under Section 235 of the Act and which did not make any statements under Section 237 of the Act, have been delivered to the Registrar of Companies in accordance with Section 242 of the Act.

 

1


BARCLAYS PLC

 

RESULTS FOR SIX MONTHS TO 30TH JUNE 2005 (UNAUDITED)

 

     Half-year ended

 
     30.06.05

    30.06.04

    % Change

 
     £m     £m        

Total income, net of insurance claims

   7,922     6,967     14  

Impairment charges and other credit provisions

   (706 )   (589 )   20  

Operating expenses

   (4,542 )   (3,974 )   14  

Profit before tax

   2,690     2,463     9  

Profit attributable to shareholders

   1,841     1,798     2  

Earnings per share

   29.1p     28.0p     4  

Proposed interim dividend per share

   9.2p     8.25p     12  

Post-tax return on average shareholders’ equity

   23.4 %   24.3 %      

Highlights of business profit before tax


   £m

    £m

    % Change

 

UK Banking

   1,275     1,162     10  

Barclays Capital

   703     588     20  

Barclays Global Investors

   242     151     60  

Wealth Management1

   89     64     39  

Barclaycard

   379     459     (17 )

International Retail and Commercial Banking

   188     145     30  

 

In this document the income statement analysis compares, unless stated otherwise, the half-year ended 30th June 2005 to the corresponding period of 2004. Balance sheet comparisons, unless stated otherwise, relate to the corresponding position at 31st December 2004. 2004 comparatives do not include additional impacts arising from the first time application of IAS 32 (Financial instruments: Disclosure and Presentation), IAS 39 (Financial instruments: Recognition and Measurement) and IFRS 4 (Insurance Contracts), which were applied from 1st January 2005.

 


1 Formerly Private Clients

 

2


BARCLAYS PLC

 

FINANCIAL HIGHLIGHTS (UNAUDITED)

 

          Half-year ended

 

RESULTS


        30.06.05

    31.12.04

    30.06.04

 
          £m     £m     £m  

Net interest income

        3,700     3,500     3,333  

Net fee and commission income

        2,540     2,532     2,315  

Principal transactions

        1,549     1,398     1,116  

Net premiums from insurance contracts

        371     506     536  

Other income

        49     75     56  

Total income

        8,209     8,011     7,356  

Net claims and benefits paid on insurance contracts

        (287 )   (870 )   (389 )

Total income, net of insurance claims

        7,922     7,141     6,967  

Impairment charges and other credit provisions

        (706 )   (504 )   (589 )

Net income

        7,216     6,637     6,378  

Operating expenses

        (4,542 )   (4,562 )   (3,974 )

Share of results of associates and joint ventures

        16     42     14  

Profit on disposal of associates and joint ventures

        —       —       45  

Profit before tax

        2,690     2,117     2,463  

Profit attributable to shareholders

        1,841     1,456     1,798  

Economic profit2

        1,004     604     964  

PER ORDINARY SHARE

        p     p     p  

Earnings

        29.1     23.0     28.0  

Proposed dividend

        9.2     15.75     8.25  

Net asset value

        249     246     232  

PERFORMANCE RATIOS

        %     %     %  

Post-tax return on average shareholders’ equity

        23.4     18.9     24.3  

Cost:income ratio1

        57     64     57  

Cost:net income ratio

        63     69     62  
     As at

 
     30.06.05

   01.01.05

    31.12.04

    30.06.04

 

BALANCE SHEET


   £m    £m     £m     £m  

Shareholders’ equity excluding minority interests

   16,099    15,287     15,870     14,978  

Minority interests

   5,686    3,330     894     178  

Total shareholders’ equity

   21,785    18,617     16,764     15,156  

Loan capital

   11,309    10,606     12,277     12,468  

Total capital resources

   33,094    29,223     29,041     27,624  

Total assets

   850,123    715,600     538,181     512,331  

Weighted risk assets

   242,406    219,758     218,601     203,333  
     30.06.05

   01.01.05

    31.12.04

    30.06.04

 
     %    %     %     %  

Tier 1 ratio

   7.6    7.1     7.6     7.7  

Risk asset ratio

   12.1    11.8     11.5     12.2  

ECONOMIC DATA

                       

Period end - US$/£

   1.79          1.92     1.81  

Average - US$/£

   1.88          1.83     1.82  

Period end - €/£

   1.48          1.41     1.49  

Average - €/£

   1.46          1.47     1.48  

1 Total income, net of insurance claims
2 A reconciliation of economic profit to profit after tax and minority interests is included on page 50.

 

3


BARCLAYS PLC

 

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

 

     Half-year ended

 

Continuing operations        


   30.06.05

         31.12.04

         30.06.04

 
     £m          £m          £m  

Interest income

     7,648            7,315            6,565  

Interest expense

     (3,948 )          (3,815 )          (3,232 )
    


      


      


Net interest income

     3,700            3,500            3,333  

Fee and commission income

     2,872            2,861            2,648  

Fee and commission expense

     (332 )          (329 )          (333 )

Net fee and commission income

     2,540            2,532            2,315  

Net trading income

     1,176            684            803  

Net investment income

     373            714            313  

Principal transactions

     1,549            1,398            1,116  

Net premiums from insurance contracts

     371            506            536  

Other income

     49            75            56  
    


      


      


Total income

     8,209            8,011            7,356  

Net claims and benefits paid on insurance contracts

     (287 )          (870 )          (389 )
    


      


      


Total income, net of insurance claims

     7,922            7,141            6,967  

Impairment charge and other credit provisions

     (706 )          (504 )          (589 )
    


      


      


Net income

     7,216            6,637            6,378  

Operating expenses

     (4,542 )          (4,562 )          (3,974 )

Share of results of associates and joint ventures

     16            42            14  

Profit on disposal of associates and joint ventures

     —              —              45  
    


      


      


Profit before tax

     2,690            2,117            2,463  

Tax

     (715 )          (634 )          (645 )
    


      


      


Profit for the period

     1,975            1,483            1,818  
    


      


      


Profit attributable to minority interests

     134            27            20  

Profit attributable to shareholders

     1,841            1,456            1,798  
    


      


      


       1,975            1,483            1,818  
    


      


      


       p            p            p  

Basic earnings per ordinary share

     29.1            23.0            28.0  

Diluted earnings per share

     28.4            22.5            27.5  

Proposed dividends per ordinary share:

                                  

Interim

     9.2            —              8.25  

Final

     —              15.75            —    

Proposed dividend

   £ 582m          £ 1,010m          £ 528m  

 

4


BARCLAYS PLC

 

CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

     £m    £m    £m    £m
Assets                    

Cash and balances at central banks

   4,106    3,238    1,753    1,829

Items in the course of collection from other banks

   2,208    1,772    1,772    2,527

Treasury bills and other eligible bills

   n/a    n/a    6,658    6,547

Trading portfolio assets

   134,235    110,033    n/a    n/a

Financial assets designated at fair value:

                   

- held on own account

   9,747    9,799    n/a    n/a
- held in respect of linked liabilities to customers under investment contracts    69,792    63,124    n/a    n/a

Derivative financial instruments

   133,932    94,211    n/a    n/a

Loans and advances to banks

   35,225    25,728    80,632    83,034

Loans and advances to customers

   237,123    207,259    262,409    252,053

Debt securities

   n/a    n/a    130,311    119,840

Equity shares

   n/a    n/a    11,399    8,599

Available for sale financial investments

   61,143    48,097    n/a    n/a

Reverse repurchase agreements and cash collateral on securities borrowed

   149,400    139,574    n/a    n/a

Other assets

   3,491    3,647    25,915    21,344

Insurance assets, including unit-linked assets

   107    109    8,576    8,165

Investments in associates and joint ventures

   438    429    429    442

Goodwill

   4,590    4,518    4,518    4,398

Intangible assets

   120    139    139    62

Property, plant and equipment

   2,407    2,282    2,282    2,108

Deferred tax assets

   2,059    1,641    1,388    1,383
    
  
  
  
Total assets    850,123    715,600    538,181    512,331
    
  
  
  

 

5


BARCLAYS PLC

 

CONSOLIDATED BALANCE SHEET (UNAUDITED)

 

     As at

 
     30.06.05

    01.01.05

    31.12.04

    30.06.04

 
     £m     £m     £m     £m  
Liabilities                         

Deposits from banks

   84,538     74,735     111,024     115,836  

Items in the course of collection due to other banks

   2,809     1,205     1,205     1,442  

Customer accounts

   217,715     194,478     217,492     206,170  

Trading portfolio liabilities

   65,598     59,114     n/a     n/a  

Financial liabilities designated at fair value: held on own account

   8,231     5,320     n/a     n/a  

Liabilities to customers under investment contracts

   71,608     64,609     n/a     n/a  

Derivative financial instruments

   132,784     94,429     n/a     n/a  

Debt securities in issue

   93,328     76,154     83,842     69,431  

Repurchase agreements and cash collateral on securities lent

   122,076     98,582     n/a     n/a  

Other liabilities

   9,649     9,869     82,936     79,546  

Current tax liabilities

   786     621     621     697  

Insurance contract liabilities, including unit-linked liabilities

   3,589     3,596     8,377     7,944  

Subordinated liabilities:

                        

- Undated loan capital-non convertible

   4,366     4,208     6,149     6,233  

- Dated loan capital-convertible to preference shares

   13     15     15     15  

- Dated loan capital-non convertible

   6,930     6,383     6,113     6,220  

Deferred tax liabilities

   1,891     1,397     1,362     1,284  

Other provisions for liabilities

   386     403     416     329  

Retirement benefit liabilities

   2,041     1,865     1,865     2,028  
    

 

 

 

Total liabilities    828,338     696,983     521,417     497,175  
    

 

 

 

Shareholders’ equity                         

Called up share capital

   1,616     1,614     1,614     1,613  

Share premium account

   5,554     5,524     5,524     5,437  

Less: treasury shares

   (239 )   (119 )   (119 )   (115 )

Available for sale reserve

   374     314     n/a     n/a  

Cash flow hedging reserve

   328     302     n/a     n/a  

Capital redemption reserve

   309     309     309     305  

Other capital reserve

   617     617     617     617  

Translation reserve

   (35 )   (58 )   (58 )   (43 )

Retained earnings

   7,575     6,784     7,983     7,164  
    

 

 

 

Shareholders’ equity excluding minority interest    16,099     15,287     15,870     14,978  
Minority interests    5,686     3,330     894     178  
    

 

 

 

Total shareholders’ equity    21,785     18,617     16,764     15,156  
    

 

 

 

Total liabilities and shareholders’ equity    850,123     715,600     538,181     512,331  
    

 

 

 

 

6


BARCLAYS PLC

 

Group performance ratios

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Net asset value per ordinary share (excluding minority interests)

   249p    236p    246p    232p

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     %    %    %

Post-tax return on average shareholders’ equity (excluding minority interests)

   23.4    18.9    24.3

 

Cost:income ratios

 

The cost:income ratios are defined as follows:

 

    The cost:income ratio is defined as operating expenses compared to total income, net of insurance claims; and

 

    The cost:net income ratio is defined as operating expenses compared to total income, net of insurance claims, less impairment charges.

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     %    %    %

Cost:income ratio

   57    64    57

Cost:net income ratio

   63    69    62

 

7


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Results by business

 

The following section analyses the Group’s performance by business. For management and reporting purposes, Barclays is organised into the following business groupings:

 

  UK Banking, comprising

 

  UK Retail Banking

 

  UK Business Banking

 

  Barclays Capital

 

  Barclays Global Investors

 

  Wealth Management

 

  Wealth Management – closed life assurance activities

 

  Barclaycard

 

  International Retail and Commercial Banking

 

  Head office functions and other operations

 

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. This cluster of 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 14 million retail customers, including current accounts, savings, mortgages, and general insurance. Small Business provides banking services to 580,000 small businesses. UK Premier provides banking, investment products and advice to some 280,000 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. UK Business Banking provides asset financing and leasing solutions through a specialist business to customers in the United Kingdom and continental Europe.

 

8


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.

 

Barclays Capital 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 organised into three principal areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets sales, trading and research, prime brokerage and equity related activities; Credit, which includes primary and secondary activities for loans and bonds for investment grade, high yield and emerging market credits, as well as hybrid capital products, asset based finance, commercial mortgage backed securities, credit derivatives, structured capital markets and large asset leasing; and Private Equity.

 

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, tactical asset allocation and risk-controlled active products. BGI also provides related investment services such as securities lending, cash management and portfolio transition services. In addition, BGI is the global leader in Exchange Traded Funds, with over 130 funds for institutions and individuals trading in eleven global markets. BGI’s investment philosophy is founded on managing all dimensions of performance: a consistent focus on controlling risk, return and cost.

 

Wealth Management

 

Wealth Management (formerly Private Clients) serves affluent, high net worth and corporate clients, primarily in the UK and continental Europe, providing private banking, offshore banking, stockbroking, asset management and financial planning services.

 

Wealth Management – closed life assurance activities

 

Wealth Management - closed life assurance activities comprise the closed life assurance businesses of Barclays and Woolwich in the UK.

 

9


BARCLAYS PLC

 

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 and other non-Barclaycard branded card portfolios including Monument, SkyCard and Solution Personal Finance. In consumer lending, Barclaycard manages both secured and unsecured loan portfolios, through Barclays branded loans, being mostly Barclayloan, and also through the FirstPlus and Clydesdale Financial Services businesses.

 

Outside the UK, Barclaycard operates in the United States, through Juniper Financial Corporation, in Germany, Spain, Greece, Italy, Portugal, Republic of Ireland and across Africa. In the Nordic region, Barclaycard operates through Entercard, the joint venture with FöreningsSparbanken (Swedbank).

 

Barclaycard Business processes card payments for retailers and issues purchasing and credit cards to business customers and to the UK Government.

 

Barclaycard works closely with other parts of the Group, including UK Retail Banking, UK Business Banking and International Retail and Commercial Banking, to leverage their distribution capability.

 

International Retail and Commercial Banking

 

International Retail and Commercial Banking provides a range of banking services, including current accounts, savings, investments, mortgages and loans to personal and corporate customers across Spain, Portugal, France, Italy, the Caribbean, Africa and the Middle East.

 

International Retail and Commercial Banking works closely with other parts of the Group, including Barclaycard, UK Banking, Barclays Capital and Barclays Global Investors, to leverage synergies from product and service propositions.

 

Head office functions and other operations

 

Head office functions and other operations comprise:

 

  head office and central support functions
  discontinued businesses in transition
  consolidation adjustments

 

Head office and central support functions comprise the following areas: Executive Management, Finance, Treasury, Communications, Human Resources, Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are recharged to them.

 

Discontinued businesses in transition principally relate to South American and Middle Eastern corporate banking businesses. These businesses are centrally managed with the objective of maximising recovery from the assets.

 

Consolidation adjustments largely reflect the elimination of inter segment transactions.

 

10


BARCLAYS PLC

 

SUMMARY OF RESULTS (UNAUDITED)

 

Analysis of profit attributable to shareholders

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

UK Banking

   1,275     1,103     1,162  

UK Retail Banking

   549     405     558  

UK Business Banking

   726     698     604  

Barclays Capital

   703     432     588  

Barclays Global Investors

   242     185     151  

Wealth Management

   89     46     64  

Wealth Management - closed life assurance activities

   (2 )   (51 )   (1 )

Barclaycard

   379     384     459  

International Retail and Commercial Banking

   188     148     145  

Head office functions and other operations

   (184 )   (130 )   (105 )
    

 

 

Profit before tax

   2,690     2,117     2,463  

Tax

   (715 )   (634 )   (645 )
    

 

 

Profit for the period

   1,975     1,483     1,818  

Profit attributable to minority interests

   (134 )   (27 )   (20 )
    

 

 

Profit attributable to shareholders

   1,841     1,456     1,798  
    

 

 

 

11


BARCLAYS PLC

 

TOTAL ASSETS AND WEIGHTED RISK ASSETS

 

Total assets     
     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

     £m    £m    £m    £m

UK Banking

   134,322    128,573    119,561    114,404

UK Retail Banking

   67,518    69,064    68,861    67,255

UK Business Banking

   66,804    59,509    50,700    47,149

Barclays Capital

   566,675    454,437    346,901    330,235

Barclays Global Investors

   68,630    61,201    798    711

Wealth Management

   5,215    5,050    5,007    4,409

Wealth Management - closed life assurance activities

   6,653    6,551    6,425    6,092

Barclaycard

   23,777    22,878    23,059    20,693

International Retail and Commercial Banking

   29,505    28,723    28,448    25,114

Head office functions and other operations

   10,756    3,669    3,464    6,275

Goodwill

   4,590    4,518    4,518    4,398
    
  
  
  
     850,123    715,600    538,181    512,331
    
  
  
  
Weighted risk assets                    
     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

     £m    £m    £m    £m

UK Banking

   100,355    92,590    91,913    87,506

UK Retail Banking

   37,010    37,835    37,111    36,458

UK Business Banking

   63,345    54,755    54,802    51,048

Barclays Capital

   90,828    79,511    79,949    72,715

Barclays Global Investors

   1,474    1,233    1,230    1,004

Wealth Management

   4,589    4,187    4,018    3,632

Barclaycard

   21,666    21,595    20,188    18,404

International Retail and Commercial Banking

   19,430    18,701    19,319    17,292

Head office functions and other operations

   4,064    1,941    1,984    2,780
    
  
  
  
     242,406    219,758    218,601    203,333
    
  
  
  

 

12


BARCLAYS PLC

 

UK Banking

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Net interest income

     1,919       1,780       1,697  

Net fee and commission income

     868       974       962  

Net trading income

     (2 )     —         —    

Net investment income

     19       4       1  

Principal transactions

     17       4       1  

Net premiums from insurance contracts

     141       100       149  

Other income

     15       31       6  
    


 


 


Total income

     2,960       2,889       2,815  

Net claims and benefits on insurance contracts

     (33 )     (20 )     (26 )
    


 


 


Total income, net of insurance claims

     2,927       2,869       2,789  

Impairment charges and other credit provisions

     (148 )     (46 )     (153 )
    


 


 


Net income

     2,779       2,823       2,636  

Operating expenses

     (1,498 )     (1,722 )     (1,519 )

Share of results of associates and joint ventures

     (6 )     2       3  

Profit on disposal of associates and joint ventures

     —         —         42  
    


 


 


Profit before tax

     1,275       1,103       1,162  
    


 


 


Cost:income ratio

     51 %     60 %     54 %

Cost:net income ratio

     54 %     61 %     58 %

Risk Tendency

   £ 420m     £ 375m     £ 360m  

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Loans and advances to customers

   £ 125.4bn    £ 119.6bn    £ 114.1bn    £ 109.0bn

Customer accounts

   £ 131.0bn    £ 124.6bn    £ 114.8bn    £ 113.1bn

Total assets

   £ 134.3bn    £ 128.6bn    £ 119.6bn    £ 114.4bn

Weighted risk assets

   £ 100.4bn    £ 92.6bn    £ 91.9bn    £ 87.5bn

Key Facts


        30.06.05

   31.12.04

   30.06.04

Number of UK branches

            2,053      2,061      2,064

 

UK Banking profit before tax increased 10% (£113m) to £1,275m (2004: £1,162m), driven by good income growth, well controlled risk and strong cost management as operating expenses were held below 2004 levels.

 

UK Banking has continued to make good progress towards achieving its strategic aims of delivering integrated banking solutions to customers, enhancing the customer service experience, capturing revenue growth opportunities and improving productivity. UK Banking is targeting cost:income ratio improvements of 2 percentage points per annum in 2005, 2006 and 2007. During the first half of 2005 UK Banking made good progress towards achieving this target with the cost:income ratio improving by 3 percentage points to 51% (2004: 54%).

 

13


BARCLAYS PLC

 

UK Retail Banking

 

         Half-year ended

 
         30.06.05

    31.12.04

    30.06.04

 
         £m     £m     £m  

Net interest income

           1,041       1,046       1,013  

Net fee and commission income

           550       554       569  

Net trading income

           —         —         —    

Net investment income

           9       1       —    

Principal transactions

           9       1       —    

Net premiums from insurance contracts

           141       100       149  

Other income

           12       22       4  
          


 


 


Total income

           1,753       1,723       1,735  

Net claims and benefits on insurance contracts

           (33 )     (20 )     (26 )
          


 


 


Total income, net of insurance claims

           1,720       1,703       1,709  

Impairment charges and other credit provisions

           (72 )     2       (62 )
          


 


 


Net income

           1,648       1,705       1,647  

Operating expenses

           (1,092 )     (1,300 )     (1,133 )

Share of results of associates and joint ventures

           (7 )     —         2  

Profit on disposal of associates and joint ventures

           —         —         42  
          


 


 


Profit before tax

           549       405       558  
          


 


 


Cost:income ratio

           63 %     76 %     66 %

Cost:net income ratio

           66 %     76 %     69 %

Risk Tendency

         £ 160m     £ 150m     £ 150m  
    As at

 
    30.06.05

   01.01.05

    31.12.04

    30.06.04

 

Loans and advances to customers

  £ 64.9bn    £ 66.0bn     £ 65.6bn     £ 64.4bn  

Customer accounts

  £ 74.6bn    £ 73.1bn     £ 72.4bn     £ 70.7bn  

Total assets

  £ 67.5bn    £ 69.1bn     £ 68.9bn     £ 67.3bn  

Weighted risk assets

  £ 37.0bn    £ 37.8bn     £ 37.1bn     £ 36.5bn  

Key Facts


       30.06.05

    31.12.04

    30.06.04

 

Personal Customers

                              

Number of UK current accounts

           10.9m       10.7m       10.6m  

Number of UK savings accounts

           10.7m       10.6m       10.5m  

Total UK mortgage balances (residential)

         £ 61.0bn     £ 61.7bn     £ 60.8bn  

Small Business and UK Premier

                              

Number of Small Business customers

           580,000       566,000       567,000  

Number of UK Premier customers

           280,000       273,000       269,000  

 

14


BARCLAYS PLC

 

UK Retail Banking profit before tax decreased 2% (£9m) to £549m (2004: £558m).

 

Total income net of insurance claims increased 1% (£11m) to £1,720m (2004: £1,709m). There was a good performance in current accounts, whilst income from mortgages and retail savings was weaker. Net income was flat at £1,648m (2004: £1,647m).

 

Net interest income increased 3% (£28m) to £1,041m (2004: £1,013m). Growth was driven by a higher contribution from current accounts (both deposits and overdrafts), which was offset by margin pressure in retail savings. Excluding the impact of the application of IAS 32 and IAS 39 from 1st January 2005, net interest income increased 1%.

 

UK average residential mortgage balances increased 1% to £61.4bn (2004: £60.6bn). The mortgage business focused on higher margin new business rather than volume during the period, which resulted in an improved margin on new business. Gross advances were £5.2bn (2004: £9.2bn), an estimated market share of 4%. UK residential mortgage balances ended the period at £61.0bn (31st December 2004: £61.7bn). The estimated loan to value ratio within the residential mortgage book on a current valuation basis was 34% (31st December 2004: 35%). Average overdraft balances within Personal Customers increased 11% and average Small Business loan balances rose 10%.

 

Total average customer deposit balances increased 5% to £71.0bn (2004: £67.5bn). There was strong growth in UK Premier with average deposits up 12% and good growth in Small Business where average deposit balances were 5% higher. Personal Customer average current account balances increased 4% and average retail savings balances by 3%.

 

Net fee and commission income decreased 3% (£19m) to £550m (2004: £569m), as lending related fees were impacted by the application of IAS 32 and IAS 39 from 1st January 2005. Excluding this impact, net fee and commission income was 1% higher. Higher fee income was generated by value-added fee-based current accounts, reflecting higher account numbers and a broader product range.

 

Income from principal transactions was £9m (2004: £nil) representing the gain on the sale of the investment in Gresham, an insurance underwriting business, ahead of the launch of the new general insurance offering.

 

Net premiums from insurance underwriting activities decreased 5% (£8m) to £141m (2004: £149m), due to a lower insurance take up on consumer lending activity.

 

Impairment charges increased 16% (£10m) to £72m (2004: £62m), in line with expectations. The increase has principally arisen in Personal Customer overdrafts and Small Business loans reflecting balance growth. The quality of the mortgage portfolio remains high. Mortgage arrears balances remained at a low level, despite some modest deterioration in the period.

 

Operating expenses decreased 4% (£41m) to £1,092m (2004: £1,133m) as cost saving initiatives focused on the back and middle office more than offset cost pressures arising from investment in frontline customer service, inflation and volume growth. Investment in the infrastructure of the business continued during the first half of 2005. The cost:income ratio improved by 3 percentage points to 63% (2004: 66%).

 

15


BARCLAYS PLC

 

UK Business Banking

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Net interest income

     878       734       684  

Net fee and commission income

     318       420       393  

Net trading income

     (2 )     —         —    

Net investment income

     10       3       1  

Principal transactions

     8       3       1  

Other income

     3       9       2  
    


 


 


Total income

     1,207       1,166       1,080  

Impairment charges and other credit provisions

     (76 )     (48 )     (91 )
    


 


 


Net income

     1,131       1,118       989  

Operating expenses

     (406 )     (422 )     (386 )

Share of results of associates and joint ventures

     1       2       1  
    


 


 


Profit before tax

     726       698       604  
    


 


 


Cost:income ratio

     34 %     36 %     36 %

Cost:net income ratio

     36 %     38 %     39 %

Risk Tendency

   £ 260m     £ 225m     £ 210m  

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Loans and advances to customers

   £ 60.5bn    £ 53.6bn    £ 48.5bn    £ 44.7bn

Customer accounts

   £ 56.4bn    £ 51.6bn    £ 42.4bn    £ 42.4bn

Total assets

   £ 66.8bn    £ 59.5bn    £ 50.7bn    £ 47.1bn

Weighted risk assets

   £ 63.3bn    £ 54.8bn    £ 54.8bn    £ 51.0bn

Key Facts


        30.06.05

   31.12.04

   30.06.04

Total number of Business Banking customers

            182,000      179,000      179,000

Customers registered for online banking/Business Master

            70,300      66,900      66,800

 

16


BARCLAYS PLC

 

UK Business Banking profit before tax increased 20% (£122m) to £726m (2004: £604m), as a result of strong income growth and lower impairment losses. Both Larger Business and Medium Business performed well. The asset and sales finance business performed very strongly and future growth will be enhanced by the acquisition of a 51% stake in Iveco Finance, which completed during June 2005.

 

Total income increased 12% (£127m) to £1,207m (2004: £1,080m). Net income increased 14% (£142m) to £1,131m (2004: £989m).

 

Net interest income increased 28% (£194m) to £878m (2004: £684m). Excluding the impact of the application of IAS 32 and IAS 39 from 1st January 2005, net interest income increased by 12%.

 

Balance sheet growth was very strong. The application of IAS 32 and IAS 39 from 1st January 2005 has resulted in the grossing up of previously netted positions (assets and liabilities subject to master netting agreements). These amounted to £8.7bn as at 30th June 2005. Average lending balances (excluding previously netted balances) increased 21% to £51.7bn (2004: £42.7bn), with particularly strong growth in the large corporate segment. UK Business Banking’s market share of lending balances increased over the period. Average deposit balances (excluding previously netted balances) increased 10% to £44.4bn (2004: £40.4bn). Adjusting for the income reclassification, there has been a modest decline in both the lending and deposit margins.

 

The impact of the Iveco transaction was to increase both period end total assets and weighted risk assets by £1.8bn.

 

Net fee and commission income decreased 19% (£75m) to £318m (2004: £393m). Excluding the impact of the IAS 32 and IAS 39, net fee and commission income increased 8%, as a result of higher underlying lending fees and higher fees from the asset and sales finance business.

 

Income from principal transactions was £8m (2004: £1m). The majority of the increase represented gains on the sale of venture capital investments.

 

Impairment charges decreased 16% (£15m) to £76m (2004: £91m). The overall credit profile of the portfolio was maintained and the average credit quality of new lending was above that of the average for the overall book.

 

Operating expenses increased 5% (£20m) to £406m (2004: £386m), reflecting volume growth and higher expenditure on front line staff. The cost:income ratio improved by 2 percentage points to 34% (2004: 36%).

 

17


BARCLAYS PLC

 

Barclays Capital

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Net interest income

     483       535       456  

Net fee and commission income

     350       331       272  

Net trading income

     1,115       679       784  

Net investment income

     158       121       176  

Principal transactions

     1,273       800       960  

Other income

     11       11       10  
    


 


 


Total income

     2,117       1,677       1,698  

Impairment charges and other credit provisions

     (48 )     (53 )     (49 )
    


 


 


Net income

     2,069       1,624       1,649  

Operating expenses

     (1,366 )     (1,192 )     (1,061 )
    


 


 


Profit before tax

     703       432       588  
    


 


 


Cost:income ratio

     65 %     71 %     62 %

Cost:net income ratio

     66 %     73 %     64 %

Risk Tendency

   £ 75m     £ 70m     £ 80m  

Average net income per member of staff (‘000)

   £ 257     £ 221     £ 260  

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Total assets

   £ 566.7bn    £ 454.4bn    £ 346.9bn    £ 330.2bn

Weighted risk assets

   £ 90.8bn    £ 79.5bn    £ 79.9bn    £ 72.7bn

Key Facts1


   30.06.05

   30.06.04

     League
table
position


   Issuance
value


   League
table
position


   Issuance
value


Global all debt

     4th    $ 163.5bn      5th    $ 122.3bn

European all debt

     2nd    $ 116.0bn      3rd    $ 80.9bn

All international bonds (all currencies)

     4th    $ 96.0bn      6th    $ 75.9bn

All international bonds (Euros)

     3rd    44.3bn      3rd    35.4bn

Sterling bonds

     2nd    £ 8.3bn      2nd    £ 7.7bn

US investment grade bonds

     4th    $ 5.1bn      12th    $ 2.1bn

1 League tables compiled by Barclays Capital from external sources including Dealogic and Thomson Financials.

 

18


BARCLAYS PLC

 

Barclays Capital continued to perform strongly delivering record first half profit before tax and net income despite difficult market conditions, particularly during the second quarter. Profit before tax increased 20% (£115m) to £703m (2004: £588m) reflecting very strong income growth driven by higher business volumes and client activity levels. Net income increased 25% (£420m) to £2,069m (2004: £1,649m).

 

Total income increased 25% (£419m) to £2,117m (2004: £1,698m) as a result of strong growth across the Rates and Credit businesses. Income by asset category was broadly based with particularly strong income growth from credit products and commodities. Areas of investment in 2004, such as commercial mortgage backed securities, equity derivatives and commodities, performed well. Average DVaR decreased 20% to £30.4m (2004: £38.1m) primarily due to better diversification and was broadly in line with DVaR for the second half of 2004 (£30.7m).

 

Secondary income, comprising principal transactions (net trading income and net investment income) and net interest income, is mainly generated from providing financing and client risk management solutions. This increased 24% (£340m) to £1,756m (2004: £1,416m).

 

Trading income increased 42% (£331m) to £1,115m (2004: £784m) due to strong performances across the Rates and Credit businesses, in particular from commodities, foreign exchange, structured capital markets and credit derivatives. This was driven by higher volumes of client led activity across a broad range of products and geographic regions and the continued return on prior year investments. Net investment income decreased 10% (£18m) to £158m (2004: £176m), due to lower contributions from structured capital markets and private equity realisations. Net interest income increased 6% (£27m) to £483m (2004: £456m).

 

Primary income, comprising net fee and commission income from advisory and origination activities, grew 29% (£78m) to £350m (2004: £272m). This reflected increased volumes and market share gains in a number of key markets with particularly strong performances from primary bonds and loans.

 

Other income of £11m (2004: £10m) reflected income from operating leases.

 

Impairment charges of £48m (2004: £49m) were broadly in line with prior year as the wholesale credit environment remained stable.

 

Operating expenses increased 29% (£305m) to £1,366m (2004: £1,061m), reflecting the ongoing costs associated with staff hired during 2004 and the first half of 2005 and higher business volumes. Performance related costs increased due to the strong profit performance. Investment expenditure, primarily in the front office continued to be significant, but decreased, relative to 2004, reflecting the reduced pace of hiring in the first half of 2005. The cost:net income ratio increased to 66% (2004: 64%). Total staff costs to net income was in line with the prior year at 53%. Approximately half of the total operating expenses comprised performance related pay, discretionary investment spend and short-term contractor resource, consistent with the experience in the first half of 2004.

 

Total headcount increased by 500 during the first half of 2005 to 8,300 (31st December 2004: 7,800). Almost 60% of the increase was in the front office, spread across product, client coverage and distribution across all geographies. The remainder was directed at the continued strengthening of the back office and control environment, mostly in lower cost jurisdictions.

 

19


BARCLAYS PLC

 

Barclays Global Investors

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Net interest income

     7       1       4  

Net fee and commission income

     570       464       418  

Net trading income

     2       3       —    

Net investment income

     4       3       —    

Principal transactions

     6       6       —    

Other income

     —         (1 )     1  
    


 


 


Total income

     583       470       423  

Operating expenses

     (342 )     (284 )     (272 )

Share of results of associates and joint ventures

     1       (1 )     (1 )

Profit on disposal of associates and joint ventures

     —         —         1  
    


 


 


Profit before tax

     242       185       151  
    


 


 


Cost:income ratio

     59 %     60 %     64 %

Average income per member of staff (‘000)

   £ 299     £ 247     £ 217  

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Total assets

   £ 68.6bn    £ 61.2bn    £ 0.8bn    £ 0.7bn

Weighted risk assets

   £ 1.5bn    £ 1.2bn    £ 1.2bn    £ 1.0bn

Key Facts


        30.06.05

   31.12.04

   30.06.04

Number of institutional clients

            2,700      2,600      2,600

Assets under management:

                           

-indexed

          £ 517bn    £ 478bn    £ 429bn

-active

          £ 169bn    £ 147bn    £ 134bn

-managed cash and other

          £ 95bn    £ 84bn    £ 71bn

Total assets under management

          £ 781bn    £ 709bn    £ 634bn

Total assets under management (US$)

          $ 1,401bn    $ 1,362bn    $ 1,151bn

Number of iShares products

            135      132      123

Total iShares assets under management1

          £ 84bn    £ 68bn    £ 52bn

1 Included in indexed assets

 

20


BARCLAYS PLC

 

Barclays Global Investors (BGI) delivered another excellent performance. Profit before tax increased 60% (£91m) to £242m (2004: £151m) reflecting substantial income growth coupled with tight cost control and focused investment spend.

 

Net fee and commission income increased 36% (£152m) to £570m (2004: £418m). This was driven by a sharp rise in management and incentive fees across all areas, particularly in the active and iShares businesses. Higher margin assets under management and strong investment performance contributed to the significant income growth along with higher market levels. In addition, securities lending income growth was strong, reflecting increased volumes in this area.

 

Very strong income and profit performance continued across a diverse range of products, distribution channels and geographies. The trend of net new revenue generation from an increasingly higher margin product mix continued. Active product investment performance remained very good and most funds outperformed their benchmarks. The growth in global iShares continued at pace with assets under management up 24% (£16bn) to £84bn from 2004 year-end and up 62% (£32bn) from June 2004.

 

Operating expenses increased 26% (£70m) to £342m (2004: £272m) primarily as a result of higher performance based expenses and investment in growth initiatives including Fixed Income and Alternative Assets. The cost:income ratio of 59% showed continued improvement over the prior year (2004: 64%).

 

Total headcount rose by 200 in the period to 2,100 (31st December 2004: 1,900) driven by the targeted ongoing investment for future growth of the business. Headcount increased in all regions, across both product groups and the support functions.

 

Total assets under management increased 10% (£72bn) to £781bn (31st December 2004: £709bn). The growth included £33bn of net new assets, £32bn attributable to favourable exchange rate movements and £7bn as a result of market movements. The increase in the US$ assets under management from US$1,362bn (31st December 2004) to US$1,401bn includes US$61bn of net new assets and US$11bn of market movements, partially offset by adverse exchange rate movements of US$33bn. BGI manages assets denominated in numerous currencies with the majority being in US dollars.

 

21


BARCLAYS PLC

 

Wealth Management

 

     Half-year ended

 
     30.06.05

         31.12.04

         30.06.04

 
     £m          £m          £m  

Net interest income

     165            155            148  

Net fee and commission income

     283            268            261  

Net trading income

     —              —              —    

Net investment income

     5            —              —    

Principal transactions

     5            —              —    

Other income

     (1 )          4            3  
    


      


      


Total income

     452            427            412  

Impairment charges and other credit provisions

     (1 )          1            —    
    


      


      


Net income

     451            428            412  

Operating expenses

     (362 )          (382 )          (348 )
    


      


      


Profit before tax

     89            46            64  
    


      


      


Cost:income ratio

     80 %          89 %          84 %

Cost:net income ratio

     80 %          89 %          84 %

Risk Tendency

   £ 5m          £ 5m          £ 5m  

Average net income per member of staff (‘000)

   £ 63          £ 60          £ 59  

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

Loans and advances to customers

   £ 4.5bn    £ 4.2bn    £ 4.1bn    £ 3.6bn

Customer accounts

   £ 22.6bn    £ 21.4bn    £ 21.3bn    £ 20.4bn

Total assets

   £ 5.2bn    £ 5.1bn    £ 5.0bn    £ 4.4bn

Weighted risk assets

   £ 4.6bn    £ 4.2bn    £ 4.0bn    £ 3.6bn

Key Facts


        30.06.05

   31.12.04

   30.06.04

Total customer funds

          £ 74.2bn    £ 70.8bn    £ 69.0bn

 

22


BARCLAYS PLC

 

Wealth Management profit before tax increased 39% (£25m) to £89m (2004: £64m), reflecting broad based income growth and tight control of costs.

 

Total income increased 10% (£40m) to £452m (2004: £412m).

 

Net interest income increased 11% (£17m) to £165m (2004: £148m) reflecting good balance sheet growth. Total average customer deposits increased 9% to £22.2bn (2004: £20.4bn) driven by strong growth from offshore and private banking clients. Total average loans increased 27% to £4.2bn (2004: £3.3bn), largely as a result of an increase in lending to corporate clients in the offshore business. The deposit margin remained stable whilst the lending margin declined modestly.

 

Net fee and commission income increased 8% (£22m) to £283m (2004: £261m). The increase was driven principally by sales of investment products to private banking and financial planning clients together with the growth in equity markets.

 

Operating expenses increased 4% (£14m) to £362m (2004: £348m). Growth was driven by investment in new customer propositions, Gerrard integration costs and the continued investment in customer service and geographic expansion. Core operating costs remained in line with 2004 levels. The cost:income ratio improved to 80% (2004: 84%).

 

The integration of the Gerrard business continued to progress well with profits ahead of 2004 and expectations.

 

Total customer funds, comprising customer deposits and assets under management, increased to £74.2bn (31st December 2004: £70.8bn). Multi-Manager assets increased to £4.1bn (31st December 2004: £1.6bn), including existing customer assets.

 

23


BARCLAYS PLC

 

Wealth Management - closed life assurance activities

 

          Half-year ended

 
          30.06.05

         31.12.04

         30.06.04

 
          £m          £m          £m  

Net interest income

            (15 )          (33 )          (20 )

Net fee and commission income

            18            —              —    

Net trading income

            —              —              —    

Net investment income

            115            517            79  

Principal transactions

            115            517            79  

Net premiums from insurance contracts

            100            195            167  

Other income

            1            1            3  
           


      


      


Total income

            219            680            229  

Net claims and benefits on insurance contracts

            (167 )          (639 )          (179 )
           


      


      


Total income, net of insurance claims

            52            41            50  

Endowment redress costs

            (40 )          (64 )          (33 )

Other operating expenses

            (14 )          (28 )          (18 )
           


      


      


Loss before tax

            (2 )          (51 )          (1 )
           


      


      


Cost:income ratio

            104 %          224 %          102 %
     As at

 
     30.06.05

   01.01.05

         31.12.04

         30.06.04

 

Total assets

   £ 6.7bn    £ 6.6bn          £ 6.4bn          £ 6.1bn  

 

24


BARCLAYS PLC

 

From 1st January 2005, following the application of IAS 39 and IFRS 4, life assurance products are divided into investment contracts and insurance contracts. Investment income from assets backing investment contracts, and the corresponding movement in investment contract liabilities, has been presented on a net basis in other income. Therefore the line by line results for 2005 are not directly comparable to those reported for 2004.

 

Wealth Management - closed life assurance activities loss before tax was stable at £2m (2004: loss of £1m).

 

Total income decreased £10m to £219m (2004: £229m). The decrease was offset by a broadly similar reduction in net claims and benefits of £12m.

 

Costs relating to redress for customers in respect of sales of endowment policies increased 21% (£7m) to £40m (2004: £33m). Other operating expenses decreased by 22% to £14m (2004: £18m).

 

25


BARCLAYS PLC

 

Barclaycard

 

          Half-year ended

 
          30.06.05

    31.12.04

    30.06.04

 
          £m     £m     £m  

Net interest income

            863       790       810  

Net fee and commission income

            454       416       374  

Net premiums from insurance contracts

            10       11       11  
           


 


 


Total income

            1,327       1,217       1,195  

Net claims and benefits on insurance contracts

            (2 )     (3 )     (2 )
           


 


 


Total income, net of insurance claims

            1,325       1,214       1,193  

Impairment charges and other credit provisions

            (508 )     (404 )     (357 )
           


 


 


Net income

            817       810       836  

Operating expenses

            (439 )     (428 )     (379 )

Share of results of associates and joint ventures

            1       2       2  
           


 


 


Profit before tax

            379       384       459  
           


 


 


Cost:income ratio

            33 %     35 %     32 %

Cost:net income ratio

            54 %     53 %     45 %

Risk Tendency

          £ 980m     £ 860m     £ 810m  
     As at

 
     30.06.05

   01.01.05

    31.12.04

    30.06.04

 

Loans and advances to customers

   £  23.1bn    £ 22.2bn     £  22.3bn     £  20.1bn  

Total assets

   £ 23.8bn    £ 22.9bn     £ 23.1bn     £ 20.7bn  

Weighted risk assets

   £ 21.7bn    £ 21.6bn     £ 20.2bn     £ 18.4bn  
          Half-year ended

 

Key Facts


        30.06.05

    31.12.04

    30.06.04

 

Number of Barclaycard UK customers

            11.2m       11.2m       10.8m  

Number of retailer relationships

            92,000       90,000       89,000  

UK credit cards-average outstanding balances

          £ 10.2bn     £ 9.9bn     £ 9.3bn  

UK credit cards-average extended credit balances

          £ 8.8bn     £ 8.5bn     £ 7.9bn  

UK loans-average consumer lending balances

          £ 9.9bn     £ 9.6bn     £ 9.2bn  

International-average extended credit balances

          £ 1.7bn     £ 1.0bn     £ 0.8bn  

International-cards in issue

            3.7m       2.9m       1.8m  

 

26


BARCLAYS PLC

 

Barclaycard profit before tax decreased 17% (£80m) to £379m (2004: £459m) as good income growth was more than offset by higher impairment charges together with increased costs arising from continued investment in the business.

 

Total income, net of insurance claims, increased 11% (£132m) to £1,325m (2004: £1,193m) driven by good performances across the diversified UK cards and loans businesses, strong momentum in the international cards business and continued growth in Barclaycard Business.

 

Net income fell 2% (£19m) to £817m (2004: £836m) as a result of the rise in impairment charges.

 

Net interest income increased 7% (£53m) to £863m (2004: £810m) reflecting growth in balances. UK average extended credit balances rose 11% to £8.8bn (2004: £7.9bn) and international average extended credit balances more than doubled to £1.7bn (2004: £0.8bn). UK average consumer loan balances increased 8% to £9.9bn (2004: £9.2bn). Margins in the cards business declined from the levels in the first half of 2004, falling to 7.56% (2004: 7.83%), but increased from those in the second half of 2004 (6.88%), due to the flow through of the UK rate rises and a reduced impact from promotional offers. Margins in consumer lending fell from 2004 levels to 5.15% (2004: 6.31%), due to competitive pressure, change in the product mix and the impact of IAS 39 moving fee and commission expenses to net interest income. Excluding the impact of the application of IAS 32 and IAS 39 from 1st January 2005, net interest income increased by 5%.

 

Net fee and commission income increased 21% (£80m) to £454m (2004: £374m) reflecting the inclusion of Juniper for the full period and increased contributions from FirstPlus and Barclaycard Business. Excluding the impact of IAS 32 and IAS 39, net fee and commission income increased 16%.

 

Impairment charges increased to £508m, an increase of 26% relative to the second half of 2004 and 42% relative to the first half of 2004. The increase was driven largely by an increase in the size of the book and a rise in delinquent balances and severity rates. The increases arose primarily in the UK cards business and reflected the UK industry wide credit experience in the first part of 2005. In UK consumer loans and internationally (excluding Juniper), the rate of increase in impairment charges was lower. Non-performing card and loan balances increased significantly, driven by the growth in delinquent balances.

 

Operating expenses rose 16% (£60m) to £439m (2004: £379m) as a result of the inclusion of Juniper. Costs in the UK cards and loans business were flat.

 

In the UK, the FirstPlus business and Barclaycard Business performed well. The SkyCard program was launched in April and customer recruitment was ahead of expectations at the end of the period.

 

Barclaycard International continued to make good progress with its growth strategy. The businesses in Germany and Spain performed particularly strongly. In June Barclaycard formed a new joint venture with Swedbank to develop a card business in the Nordic region. Barclaycard International profit before tax was £1m (2004: £1m). Juniper performance and integration proceeded in line with expectations, with strong growth in balances and customer account numbers and a steady stream of new partnerships being established.

 

27


BARCLAYS PLC

 

International Retail and Commercial Banking

 

          Half-year ended

 
          30.06.05

         31.12.04

         30.06.04

 
          £m          £m          £m  

Net interest income

            288            277            257  

Net fee and commission income

            171            145            143  

Net trading income

            6            —              —    

Net investment income

            67            71            64  

Principal transactions

            73            71            64  

Net premiums from insurance contracts

            60            155            145  

Other income

            14            12            13  
           


      


      


Total income

            606            660            622  

Net claims and benefits on insurance contracts

            (85 )          (208 )          (182 )
           


      


      


Total income, net of insurance claims

            521            452            440  

Impairment charges and other credit provisions

            (8 )          (12 )          (19 )
           


      


      


Net income

            513            440            421  

Operating expenses

            (345 )          (330 )          (287 )

Share of results of associates and joint ventures

            20            38            11  
           


      


      


Profit before tax

            188            148            145  
           


      


      


Cost:income ratio

            66 %          73 %          65 %

Cost:net income ratio

            67 %          75 %          68 %

Risk Tendency

          £ 75m          £ 65m          £ 75m  
     As at

 
     30.06.05

   01.01.05

         31.12.04

         30.06.04

 

Loans and advances to customers

   £ 21.7bn    £ 20.8bn          £ 20.7bn          £ 17.6bn  

Customer accounts

   £ 9.6bn    £ 9.5bn          £ 10.1bn          £ 9.7bn  

Total assets

   £ 29.5bn    £ 28.7bn          £ 28.4bn          £ 25.1bn  

Weighted risk assets

   £ 19.4bn    £ 18.7bn          £ 19.3bn          £ 17.3bn  
          Half-year ended

 

Key Facts


        30.06.05

         31.12.04

         30.06.04

 

Number of international branches

            799            830            837  

Number of Barclays Africa and the Middle East customer accounts

            1.3m            1.4m            1.5m  

Number of Barclays Spain customers

            0.5m            0.5m            0.5m  

Number of Openplan customers in Spain

            52,000            47,000            44,000  

European mortgages - average balances (Euros)

          19.9bn          18.1bn          16.0bn  

European assets under management (Euros)

          19.5bn          17.1bn          17.2bn  

 

28


BARCLAYS PLC

 

International Retail and Commercial Banking performed very strongly with profit before tax increasing 30% (£43m) to £188m (2004: £145m). There was progress in all geographies, with very good growth in Spain, where profit before integration costs rose 30%, driven by the successful realisation of synergies from the integration of Banco Zaragozano.

 

From 1st January 2005, following the application of IAS 39 and IFRS 4, life assurance products are divided into investment contracts and insurance contracts. Investment income from assets backing insurance contracts, and the corresponding movement in investment contract liabilities, has been presented on a net basis in other income. Therefore the line by line results for 2005 are not directly comparable to those reported for 2004.

 

Total income, net of insurance claims, increased 18% (£81m) to £521m (2004: £440m). Net income increased 22% (£92m) to £513m (2004: £421m).

 

Net interest income increased 12% (£31m) to £288m (2004: £257m) as a result of good balance growth in Spain, Italy, Africa and the Middle East. Total average customer loans increased 28% to £20.8bn (2004: £16.3bn), reflecting growth across the portfolio. Mortgage balance growth in Europe was strong with average Euro balances up 24% including the benefit of recent mortgage campaigns in France. Average lending balances in Africa and the Middle East increased 38%. Competitive pressures in key European markets and a change in the overall product mix, with a higher weighting to mortgages, have contributed to slightly lower lending margins. Average customer deposits increased 10% to £9.1bn (2004: £8.3bn), mainly in Africa and the Middle East. Excluding the impact of the application of IAS 32 and IAS 39 from 1st January 2005, net interest income increased by 5%.

 

Net fee and commission income increased 20% (£28m) to £171m (2004: £143m). This reflected a strong performance in Spain from increased fund management related fees, together with good growth in France. Spain’s assets under management increased by 18%. Sales of mortgage related insurance products in Italy have also contributed. Fee income showed solid growth in Africa and the Middle East. Excluding the impact of IAS 32 and IAS 39, net fee and commission income increased 25%.

 

Principal transactions increased 14% (£9m) to £73m (2004: £64m). This reflected gains from investment realisations, including the sale of a preference share holding in FirstCaribbean, partly offset by the change in accounting for insurance businesses.

 

Impairment charges decreased 58% (£11m) to £8m (2004: £19m) with the reduction mainly in Africa and the Middle East.

 

Operating expenses increased 20% (£58m) to £345m (2004: £287m). The majority of the increase was attributable to integration costs in Spain and the continued expansion of the business in Africa and the Middle East. The cost:income ratio was 66% (2004: 65%).

 

Barclays Spain performed very strongly with profit before tax, pre integration costs, up 30% to £82m (2004: £63m). This was driven by benefits from the accelerated integration of Banco Zaragozano, together with growth in mortgages and assets under management. The integration of Banco Zaragozano is well ahead of plan.

 

29


BARCLAYS PLC

 

In Spain, Openplan continued to grow strongly reflecting the successful targeting of new customer segments. Total customer numbers increased in the period to 52,000 (31st December 2004: 47,000). The recent re-launch of Openplan in Portugal has contributed to a strong performance, supported by further expansion in the branch network, and customer numbers reached 10,600 by 30th June (31st December 2004: 8,900).

 

Africa and the Middle East profit before tax increased 12% to £65m (2004: £58m) reflecting balance sheet growth across the businesses, particularly in Egypt, UAE and South Africa.

 

The post-tax profit from associates increased £9m to £20m (2004: £11m) reflecting an increased contribution from FirstCaribbean.

 

30


BARCLAYS PLC

 

Head office functions and other operations

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Net interest expense

   (10 )   (5 )   (19 )

Net fee and commission expense

   (174 )   (66 )   (115 )

Net trading income

   55     2     19  

Net investment income

   5     (2 )   (7 )

Principal transactions

   60     —       12  

Net premiums from insurance contracts

   60     45     64  

Other income

   9     17     20  
    

 

 

Total income

   (55 )   (9 )   (38 )

Impairment charges and other credit provisions

   7     10     (11 )
    

 

 

Net (loss)/income

   (48 )   1     (49 )

Other operating expenses

   (136 )   (132 )   (57 )

Share of results of associates and joint ventures

   —       1     1  
    

 

 

Loss before tax

   (184 )   (130 )   (105 )
    

 

 

 

Loss before tax increased £79m to £184m (2004: loss £105m), reflecting increased costs and the impact of the elimination of inter-segment transactions.

 

Group segmental reporting is prepared in accordance with Group accounting policies as if each business segment were a stand alone company. This means that inter-segment transactions are recorded in each segment as if undertaken on an arms length basis. Consolidation adjustments necessary to fully eliminate the inter-segment transactions, including adjustments to eliminate timing differences on the recognition of inter-segment cost and income, are included in Head office functions and other operations.

 

The consolidation adjustments amount to a loss to Head office functions and other operations of £132m. The most significant adjustments include: internal fees for structured capital market activities arranged by Barclays Capital of £63m (2004: £45m); the timing of the recognition of insurance commissions between UK Retail Banking and Barclaycard included as a net fee and commission expense of £49m (2004: £nil) and net fees paid to Barclays Capital for capital raising and currency management of £32m (2004: £nil).

 

Net trading income of £55m (2004: £19m) arose as a result of hedging-related transactions in Treasury. The hedge ineffectiveness from 1st January 2005, together with other related Treasury adjustments, amounted to a gain of £12m (2004: £nil) and was reported in net interest income. Other income comprises mainly property rental income.

 

Impairment gains reflect recoveries made on loans previously written off in the transition businesses.

 

Operating expenses rose £79m to £136m (2004: £57m). Of this increase, £47m reflected non-recurring costs relating to the head office relocation to Canary Wharf.

 

31


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Results by nature of income and expense

Net interest income

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Interest income

   7,648     7,315     6,565  

Interest expense

   (3,948 )   (3,815 )   (3,232 )
    

 

 

     3,700     3,500     3,333  
    

 

 

 

Group net interest income increased 11% (£367m) to £3,700m (2004: £3,333m), reflecting growth in average balances across all businesses. Growth in net interest income was most notable in UK Banking, partly due to the growth in average lending balances and deposit balances and the reclassification of certain lending related fees from net fee and commission income to net income with the application of IAS 32 and IAS 39 from 1st January 2005. Net interest income also improved in Barclaycard and International Retail and Commercial Banking, as a result of strong growth in balances.

 

The increase in net interest income also reflects the application of IAS 32 and IAS 39 with effect from 1st January 2005, under which Reserve Capital Instruments and other capital instruments were classified from debt under UK GAAP to minority interests under IFRS. The associated funding cost has moved from interest expense to profit attributable to minority interests.

 

A component of the benefit of free funds included in Group net interest income is the structural hedge which functions to reduce the impact of the volatility of short-term interest rate movements. The contribution of the structural hedge has decreased to £58m (2004: £206m), largely due to the impact of higher short-term interest rates.

 

32


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Net fee and commission income

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Fee and commission income

   2,872     2,861     2,648  

Fee and commission expense

   (332 )   (329 )   (333 )
    

 

 

     2,540     2,532     2,315  
    

 

 

 

Net fee and commission income increased 10% (£225m) to £2,540m (2004: £2,315m), reflecting increases across the business. The application of IAS 32 and 39 caused the reclassification of £109m from net fee and commission income to net interest income in the first half of 2005. Excluding IAS 32 and 39 growth was 14% reflecting increases across all businesses.

 

Fee and commission income receivable rose 8% (£224m) to £2,872m (2004: £2,648m). The increase was driven by Barclays Global Investors, reflecting strong investment performance and higher market levels and Barclays Capital, due to increased business volumes and improved market share; and Barclaycard fee and commission income increased as a result of including Juniper for the full period, and higher contributions from FirstPlus and Barclaycard Business.

 

Total foreign exchange income was £298m (half-year ended 31st December 2004: £260m; half-year ended 30th June 2004: £260m) and consisted of revenues earned from both retail and wholesale activities. The foreign exchange income earned on customer transactions by UK Retail Banking, UK Business Banking, International Retail and Commercial Banking, Barclaycard, Barclays Global Investors and Wealth Management, both externally and with Barclays Capital, is reported in those business units, within fee and commission income. The foreign exchange income earned in Barclays Capital is reported within trading income.

 

33


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Principal transactions

 

     Half-year ended

     30.06.05

   31.12.04

    30.06.04

     £m    £m     £m
Net trading income                

Rates related business

   859    443     698

Credit related business

   317    241     105
    
  

 
     1,176    684     803
    
  

 
Net investment income                

Cumulative gain from disposal of available for sale assets/investment securities

   87    129     70

Dividend income

   13    11     6

Net income from financial instruments designated at fair value

   175    —       —  

Income from assets backing insurance policies

   —      581     136

Other investment income

   98    (7 )   101
    
  

 
     373    714     313
    
  

 

 

Most of the Group’s trading income is generated in Barclays Capital.

 

Trading income increased 46% (£373m) to £1,176m (2004: £803m) due to strong performances across the Rates and Credit businesses, in particular from commodities, foreign exchange, structured capital markets and credit derivatives. This was driven by higher volumes of client led activity across a broad range of products and geographic regions and the return on prior year headcount investment.

 

Net investment income rose by 19% (£60m) to £373m (2004: £313m) reflecting gains on the disposals of short term investments and fair value movements.

 

Following the application of IAS 39 at 1st January 2005, certain assets and liabilities have been designated at fair value. Fair value movements on these items of £175m are taken to net investment income. Fair value movements on insurance assets included within this category contributed £149m.

 

From 1st January 2005, investment and insurance contracts are separately accounted for in accordance with IAS 39 and IFRS 4. This has resulted in investment income and the corresponding movement in investment contract liabilities being presented on a net basis within other income. In 2004, all contracts were accounted for as insurance contracts and the gross income relating to these contracts was reported as income from assets backing insurance policies.

 

34


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Net premiums from insurance contracts

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Gross premiums from insurance contracts

   385     519     550  

Premiums ceded to reinsurers

   (14 )   (13 )   (14 )
    

 

 

Net premiums from insurance contracts

   371     506     536  
    

 

 

 

The change in accounting for investment contracts results in a substantial decline in reported net premiums from insurance contracts in the Wealth Management - closed life assurance activities and International Retail and Commercial Banking businesses. There is a corresponding decline in net claims and benefits on insurance contracts.

 

Other income

 

     Half-year ended

     30.06.05

    31.12.04

   30.06.04

     £m     £m    £m

Increase in fair value of assets held in respect of linked liabilities to customers under investment contracts

   6,885     n/a    n/a

Increase in liabilities held in respect of linked liabilities to customers under investment contracts

   (6,885 )   n/a    n/a

Property rentals

   25     28    18

Other income

   24     47    38
    

 
  
     49     75    56
    

 
  

 

In accordance with IAS 39, from 1st January 2005, asset management products offered to institutional pension funds by Barclays Global Investors are recognised as investment contracts. This results in a substantial increase in the fair value of assets held in respect of linked liabilities to customers under investment contracts and the related liabilities compared to the increase which has followed the change in accounting for investment contracts in the Wealth Management – closed life assurance activities and International Retail and Commercial Banking businesses.

 

35


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Net claims and benefits paid on insurance contracts

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Gross claims and benefits paid on insurance contracts

   296     880     395  

Reinsurers’ share of claims paid

   (9 )   (10 )   (6 )
    

 

 

Net claims and benefits paid on insurance contracts

   287     870     389  
    

 

 

 

The change in accounting for investment contracts results in a substantial decline in reported net claims and benefits paid on insurance contracts in Wealth Management - closed life assurance activities and International Retail and Commercial Banking. There is a corresponding decline in net premiums from insurance contracts.

 

36


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Impairment charges and other credit provisions

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  
Impairment charges                   

The charges for the period in respect of impairment for loans and advances comprise:

                  

  - New and increased

   945     927     828  

  - Releases

   (134 )   (267 )   (129 )

  - Recoveries

   (98 )   (140 )   (115 )
    

 

 

Total impairment charges

   713     520     584  
Other credit provisions                   

Charges for the period in respect of provision for undrawn contractually committed facilities and guarantees provided

   (7 )   (16 )   5  
    

 

 

Total impairment charges and other credit provisions

   706     504     589  
    

 

 

 

Period-on-period comparison is affected by the adoption of IAS 39 on 1st January 2005, which has changed the absolute value and calculation basis of the impairment charges and Potential Credit Risk Loans (PCRLs).

 

The high level of household indebtedness in the UK and lower discretionary incomes have led to strains on household budgets and resulted in a deterioration in consumer credit risk. Wholesale and corporate credit conditions remained satisfactory though loan markets were very competitive.

 

Overall, an increase in retail impairment charges was partly offset by lower wholesale impairment charges, resulting in impairment charges for the half-year of £706m (2004: £589m). As a percentage of period-end total non-trading loans and advances, impairment charges on an annualised basis were 0.51% (2004: 0.53%).

 

Retail impairment charges increased to £582m (2004: £417m), accounting for over 80% of the Group’s impairment charges and amounting to 1.06% (2004: 0.83%) of the period-end total non-trading loans and advances. The increase was predominantly in the UK cards portfolio. The mortgage impairment charge was low. There was some deterioration in mortgage arrears though they remain low and below the level of mid-2003.

 

In the wholesale and corporate businesses, impairment charges declined to £131m (2004: £161m). The decrease occurred largely in UK Business Banking which included a number of recoveries. Wholesale and corporate impairment charges were 0.16% (2004: 0.26%) of period-end total non-trading loans and advances.

 

In the second half of 2004, the credit loss was reduced by a number of one-off items, including an exceptional recovery of £57m in UK Business Banking and a release of mortgage provisions of £40m. The absence of such items means that the increase in the impairment charge in the first half of 2005 relative to the second half of 2004 appears greater than the increase in the underlying trends.

 

37


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Operating expenses

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     £m    £m    £m

Staff costs (refer to page 39)

   2,854    2,720    2,507

Administrative expenses

   1,382    1,553    1,213

Depreciation

   152    156    141

Amortisation of intangible assets

   17    13    9

Impairment loss - intangible assets

   —      5    4

Operating lease rentals

   137    115    100
    
  
  
     4,542    4,562    3,974
    
  
  

 

Operating expenses increased 14% (£568m) to £4,542m (2004: £3,974m).

 

Administrative expenses increased 14% (£169m) to £1,382m (2004: £1,213m) principally as a result of higher business activity in Barclays Capital and Barclays Global Investors and the inclusion of Juniper in Barclaycard. There was a strong focus on cost control, particularly in UK Retail Banking.

 

Amortisation of intangible assets increased £8m to £17m (2004: £9m), primarily due to the acquisition of Juniper in December 2004.

 

Operating lease rentals increased by £37m to £137m (2004: £100m) as a consequence of the double occupancy costs associated with the head office relocation to Canary Wharf.

 

The Group cost:income ratio remained steady at 57%. This reflected improved productivity in UK Banking, Barclays Global Investors and Wealth Management, offset by increases in Barclays Capital, Barclaycard and International Retail and Commercial Banking, reflecting increased investment.

 

The Group cost:net income ratio was 63% (2004: 62%).

 

38


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Staff costs

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     £m    £m    £m

Salaries and accrued incentive payments

   2,256    2,124    1,974

Social security costs

   197    172    167

Pension costs

              

  - defined contribution plans

   40    39    53

  - defined benefit plans

   156    126    109

Other post retirement benefits

   13    16    13

Other

   192    243    191
    
  
  
     2,854    2,720    2,507
    
  
  

 

Included in salaries and accrued incentive payments is £130m (half-year ended 31st December 2004: £115m; half-year ended 30th June 2004: £89m) arising from equity settled share based payments.

 

Staff costs increased by 14% (£347m) to £2,854m (2004:£2,507m).

 

Salaries and accrued incentive payments rose by 14% (£282m) to £2,256m (2004: £1,974m), primarily due to increased headcount in Barclays Capital and performance related payments primarily in Barclays Capital and Barclays Global Investors.

 

Pension costs comprise all UK and international pension schemes. Included in pension costs is a charge of £155m (2004: £140m) in respect of the Group’s main UK pension schemes.

 

39


BARCLAYS PLC

 

FINANCIAL REVIEW

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

Staff numbers:

              

UK Banking

   40,700    41,800    40,700

UK Retail Banking

   32,900    34,400    33,500

UK Business Banking

   7,800    7,400    7,200

Barclays Capital

   8,300    7,800    6,900

Barclays Global Investors

   2,100    1,900    1,900

Wealth Management

   7,200    7,200    7,100

Barclaycard

   7,200    6,700    6,600

International Retail and Commercial Banking

   12,400    12,100    12,000

Head office functions and other operations

   900    900    1,000
    
  
  

Total Group permanent and contract staff worldwide

   78,800    78,400    76,200

Temporary and agency staff worldwide

   4,300    4,300    5,600
    
  
  

Total including temporary and agency staff

   83,100    82,700    81,800
    
  
  

 

Staff numbers are shown on a full-time equivalent basis. Total Group permanent and contract staff comprise 59,200 (31st December 2004: 60,000) in the UK and 19,600 (31st December 2004: 18,400) internationally.

 

Since 31st December 2004, permanent and contract staff numbers increased by 400. The implementation of restructuring programmes resulted in a decrease of 800 staff, which was offset by the recruitment of additional staff throughout the Group.

 

UK Banking staff numbers fell by 1,100 to 40,700 (31st December 2004: 41,800), reflecting the cost management programme in UK Retail Banking offset by an increase in UK Business Banking frontline staff and the inclusion of 200 Iveco Finance staff.

 

Barclays Capital staff numbers rose by 500 to 8,300 (31st December 2004: 7,800), reflecting the continued expansion of the business. Barclays Global Investors increased staff numbers in line with business growth plans to 2,100 (31st December 2004: 1,900).

 

Barclaycard staff numbers rose by 500 to 7,200 (31st December 2004: 6,700), reflecting growth in Juniper and an increase in customer facing staff, particularly in partnership activities.

 

International Retail and Commercial Banking increased staff numbers by 300 to 12,400 (31st December 2004: 12,100), mainly due to growth in continental Europe.

 

Head office functions and other operations staff numbers remained stable at 900 (31st December 2004: 900).

 

The number of staff who were under notice at 30th June 2005, was 1,700.

 

40


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Share of results of associates and joint ventures (after tax)

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     £m    £m    £m

Profit from joint ventures

   1    —      —  

Profit from associates

   15    42    14
    
  
  
     16    42    14
    
  
  

 

Profit from associates in the first half of 2005 primarily relates to the investment in FirstCaribbean.

 

Tax

 

The charge for the period is based upon a UK corporation tax rate of 30% for the calendar year 2005 (full-year 2004: 30%). The effective rate of tax for the first half of 2005 was 26.7% (2004: 26.3%). This excludes tax on associates and joint ventures whose results are stated on an after tax basis. This is lower than the standard rate due to the beneficial effects of lower tax on overseas income and certain non-taxable gains.

 

Profit attributable to minority interests

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     £m    £m    £m

Preference shares

   33    2    —  

Reserve capital instruments

   65    —      —  

Upper Tier 2 instruments

   7    —      —  

Other minority interests

   29    25    20
    
  
  
     134    27    20
    
  
  

 

Profit attributable to minority interests has increased due to the inclusion of reserve capital instruments within minority interests in accordance with IAS 39, together with an increase in the preference share capital of subsidiary undertakings and the related dividends payable.

 

Other minority interests include the share of earnings in Barclays Global Investors attributable to employee shareholders.

 

41


BARCLAYS PLC

 

FINANCIAL REVIEW

 

Earnings per share

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

Profit attributable to the members of Barclays PLC

   £ 1,841m    £ 1,456m    £ 1,798m

Basic weighted average number of shares in issue

     6,337m      6,341m      6,421m

Potential ordinary shares1

     141m      120m      106m
    

  

  

Diluted weighted average number of shares

     6,478m      6,461m      6,527m
    

  

  

       p      p      p

Basic earnings per ordinary share

     29.1      23.0      28.0

Diluted earnings per ordinary share

     28.4      22.5      27.5

 

Dividends on ordinary shares

 

An interim dividend for the year ending 31st December 2005 of 9.2p per ordinary share was paid on 3rd October 2005, for shares registered in the books of the Company at the close of business on 19th August 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 2004/2005 tax year in mid-October 2005.

 

The amount payable for the 2005 interim dividend is £582m (half-year ended 31st December 2004: £1,010m; half-year ended 30th June 2004: £528m). This amount excludes £12m payable on shares held by employee benefit trusts (half-year ended 31st December 2004: £7m; half-year ended 30th June 2004: £3m). Dividends payable are no longer accrued but rather are recognised when they are paid.

 

For qualifying US and Canadian resident ADR holders, the interim dividend of 9.2p per ordinary share becomes 36.8p per ADS (representing four shares). The ADR depositary mailed the dividend on 3rd October 2005 to ADR holders on the record on 19th August 2005.

 

For qualifying Japanese shareholders, the interim dividend of 9.2p per ordinary share will be distributed in mid-October to shareholders on the record on 19th August 2005.

 

Shareholders may have their dividends reinvested in Barclays PLC shares by participating in the Barclays Dividend Reinvestment Plan. The plan is available to all shareholders, including members of Barclays Sharestore, provided that they do not live in or are subject to the jurisdiction of any country where their participation in the plan would require Barclays or The Plan Administrator to take action to comply with local government or regulatory procedures or any similar formalities. Any shareholder wishing to obtain details and a form to join the plan should contact The Plan Administrator by writing to: The Plan Administrator to Barclays, Share Dividend Team, The Causeway, Worthing, West Sussex, BN99 6DA; or, by telephoning 0870 609 4535. Shareholders who are already in the plan need take no action unless they wish to change their instructions in which case they should write to The Plan Administrator.

 


1 Potential ordinary shares reflect the dilutive effect of share options outstanding.

 

42


BARCLAYS PLC

 

Analysis of amounts included in the balance sheet

 

Capital resources

 

     As at

     30.06.05

   01.01.05

   31.12.04

   30.06.04

     £m    £m    £m    £m

Shareholders’ equity excluding minority interests

   16,099    15,287    15,870    14,978

Preference shares

   2,971    690    690    —  

Reserve capital instruments

   1,929    1,907    n/a    n/a

Upper Tier 2 instruments

   586    586    n/a    n/a

Other minority interests

   200    147    204    178

Minority interests

   5,686    3,330    894    178
    
  
  
  

Total shareholders’ equity

   21,785    18,617    16,764    15,156

Loan capital

   11,309    10,606    12,277    12,468
    
  
  
  
     33,094    29,223    29,041    27,624
    
  
  
  

 

The authorised share capital of Barclays PLC is £2,500m (2004: £2,500m) comprising 9,996 million (2004: 9,996million) ordinary shares of 25p shares and 1 million (2004: 1 million) staff shares of £1 each. Called up share capital comprises 6,461million (December 2004: 6,454 million; June 2004: 6,447 million) ordinary shares of 25p each and 1 million (2004: 1 million) staff shares of £1 each.

 

Total capital resources increased since 1st January 2005 by £3,871m to £33,094m.

 

Shareholders’ equity excluding minority interests increased by £812m since 1st January 2005. The increase included profits attributable to shareholders of £1,841m, available for sale movements of £60m, £32m of proceeds from shares issued, cashflow hedge movements of £26m, tax credits of £26m and foreign exchange movements of £23m and other movements of £31m. These were offset by dividends of £1,017m1, increases in ESOP shares of £120m and tax adjustments of £90m.

 

Loan capital rose by £703m reflecting raisings of £1,011m, fair value uplift of £156m and exchange rate movements of £41m offset by redemptions of £458m, accrued interest of £44m and amortisation of issue expenses of £3m.

 

Minority interests increased by £2,356m since 1st January 2005 primarily reflecting the issue of preference shares during the first six months of 2005:

 

    140,000 preference shares of Euro 100 each (€1.4bn; £978m) with a 4.75% dividend

 

    100,000 preference shares of US$100 each (US$1.0bn; £551m) with a 6.278% dividend

 

    75,000 preference shares of £100 each (£750m) with a 6% dividend

 

The impact of IAS 32 resulted in the reclassification of certain capital instruments from debt to minority interests. This accounts for substantially all of the increase in minority interests between 31st December 2004 and 1st January 2005.

 


1 This amount includes £7m dividend on shares held by employee benefit trusts.

 

43


BARCLAYS PLC

 

Capital ratios

 

Weighted risk assets and capital resources, as defined for supervisory purposes by the Financial Services Authority (FSA), comprise:

 

     As at

 
     30.06.05

    01.01.05

    31.12.04

    30.06.04

 
     £m     £m     £m     £m  
Weighted risk assets:                         

Banking book

                        

On-balance sheet

   159,927     148,328     148,621     138,021  

Off-balance sheet

   30,090     28,191     26,741     23,894  

Associated undertakings and joint ventures

   3,299     3,020     3,020     3,386  
    

 

 

 

Total banking book

   193,316     179,539     178,382     165,301  
    

 

 

 

Trading book

                        

Market risks

   26,432     22,106     22,106     20,338  

Counterparty and settlement risks

   22,658     18,113     18,113     17,694  
    

 

 

 

Total trading book

   49,090     40,219     40,219     38,032  
    

 

 

 

Total weighted risk assets

   242,406     219,758     218,601     203,333  
    

 

 

 

Capital resources:                         

Tier 1

                        

Called up share capital

   1,616     1,614     1,614     1,613  

Eligible reserves

   15,544     14,933     15,670     15,245  

Minority interests1

   5,237     2,824     2,890     2,227  

Tier one notes2

   957     920     920     951  

Less: intangible assets

   (4,880 )   (4,747 )   (4,432 )   (4,427 )
    

 

 

 

Total qualifying Tier 1 capital

   18,474     15,544     16,662     15,609  
    

 

 

 

Tier 2

                        

Revaluation reserves

   25     25     25     25  

Collectively assessed impairment allowances

   2,067     2,046     n/a     n/a  

General Provisions

   n/a     n/a     564     713  

Minority Interests

   494     397     —       —    

Qualifying subordinated liabilities3

                        

Undated loan capital

   3,210     3,176     3,573     3,595  

Dated loan capital

   6,560     5,647     5,647     5,773  

Other

   —       3     2     2  
    

 

 

 

Total qualifying Tier 2 capital

   12,356     11,294     9,811     10,108  
    

 

 

 

Tier 3: short term subordinated liabilities3

   —       286     286     267  
    

 

 

 

Less: Supervisory deductions:

                        

Investments not consolidated for supervisory purposes

   (696 )   (781 )   (1,047 )   (923 )

Other deductions

   (713 )   (496 )   (496 )   (343 )
    

 

 

 

     (1,409 )   (1,277 )   (1,543 )   (1,266 )
    

 

 

 

Total net capital resources

   29,421     25,847     25,216     24,718  
    

 

 

 

Tier 1 ratio

   7.6 %   7.1 %   7.6 %   7.7 %

Risk asset ratio

   12.1 %   11.8 %   11.5 %   12.2 %

1 Includes Reserve Capital Instruments of £1,679m (01.01.05: £1,627m; 31.12.04: £1,627m; 30.06.04: £1,656m).
2 Tier one notes are included in undated loan capital in the consolidated balance sheet.
3 Subordinated liabilities are included in Tiers 2 or 3, subject to limits laid down in the supervisory requirements.

 

44


BARCLAYS PLC

 

Capital ratios (continued)

 

Capital ratios strengthened from 1st January 2005 with the addition of £3.6bn in net total capital resources. This more than offset the growth in weighted risk assets. The risk asset ratio increased 30 basis points and the Tier 1 capital ratio increased 50 basis points.

 

Tier 1 capital rose £2.9bn, including retained profit of £0.8bn. In accordance with IFRS, no amount has been provided for the 2005 interim dividend which will impact the capital ratios when paid. Minority interests increased £2.4bn primarily due to the issuance of £2.3bn of preference shares by Barclays Bank PLC. This increase included funding for balance sheet growth and for the acquisition of a majority stake in Absa which closed subsequent to the half-year end. Tier 2 capital increased £1.1bn largely due to the issue of loan stock. The Tier 3 debt matured in April 2005.

 

The increase in weighted risk assets since 1st January 2005 comprised a rise of £13.8bn in the Banking book and a rise of £8.9bn in the Trading book.

 

A reconciliation of accounting capital to regulatory capital is as follows:

 

     30.06.05

    01.01.05

 
     £m     £m  

Shareholders’ equity excluding minority interests

   16,099     15,287  

Available for sale reserve

   (374 )   (314 )

Cashflow hedging reserve

   (328 )   (302 )

Defined benefit pension scheme

   1,401     1,252  

Additional companies in regulatory consolidation and non-consolidated companies

   5     266  

Foreign exchange on Reserve Capital Instruments and Upper Tier 2 loan stock

   390     459  

Other adjustments

   (33 )   (101 )
    

 

Called up share capital and eligible reserves for regulatory purposes

   17,160     16,547  
    

 

 

The difference between shareholders’ equity excluding minority interests and called up share capital and eligible reserves for regulatory purposes, arises from the treatment of regulatory capital versus the treatment of accounting capital.

 

The available for sale reserve in respect of debt instruments is reversed for regulatory capital purposes. Equity net losses are written back but net gains are included in Tier 2 capital. The effect of cashflow hedging is eliminated from the calculation of regulatory capital.

 

For regulatory capital purposes the defined benefit pension scheme post tax deficit is replaced with a liability calculated for regulatory purposes.

 

For regulatory capital purposes the Reserve Capital Instruments and Upper Tier 2 loan stock are converted to sterling at the exchange rates ruling at the reporting date rather than the exchange rates at issue date which are used for financial reporting.

 

45


BARCLAYS PLC

 

Total assets and weighted risk assets

 

Total assets increased 19% to £850.1bn (1st January 2005: £715.6bn). Weighted risk assets increased 10% to £242.4bn (1st January 2005: £219.8bn). Securitised assets are excluded from weighted risk assets but included in total assets.

 

UK Banking total assets increased 4% to £134.3bn (1st January 2005: £128.6bn). Weighted risk assets increased 8% to £100.4bn (1st January 2005: £92.6bn).

 

UK Retail Banking total assets decreased 2% to £67.5bn (1st January 2005: £69.1bn). This was mainly attributable to lower period end UK residential mortgage balances. Weighted risk assets decreased 2% to £37.0bn (1st January 2005: £37.8bn).

 

UK Business Banking total assets increased 12% to £66.8bn (1st January 2005: £59.5bn). Weighted risk assets increased 16% to £63.3bn (1st January 2005: £54.8bn), reflecting strong growth in lending balances. The acquisition of a 51% stake in Iveco Finance, completed in June, increased total assets and weighted risk assets by £1.8bn.

 

Barclays Capital total assets increased 25% to £566.7bn (1st January 2005: £454.4bn), due to the impact of market movements on derivatives financial instruments and growth in settlement balances and debt securities, as the expansion of the business continued. Weighted risk assets increased 14% to £90.8bn (1st January 2005: £79.5bn), reflecting increased business volumes and expansion of the credit derivatives business to meet client demand.

 

Barclays Global Investors total assets increased 12% to £68.6bn (1st January 2005: £61.2bn) due to growth in asset management products held on the balance sheet. Equal and offsetting balances are reflected within liabilities to customers. Weighted risk assets rose 25% to £1.5bn (1st January 2005: £1.2bn), primarily driven by growth in the securities lending business.

 

Wealth Management total assets increased 2% to £5.2bn (1st January 2005: £5.1bn). Weighted risk assets increased 10% to £4.6bn (1st January 2005: £4.2bn) reflecting the growth in lending balances.

 

Barclaycard total assets increased 4% to £23.8bn (1st January 2005: £22.9bn). Weighted risk assets were in line at £21.7bn (1st January 2005: £21.6bn).

 

International Retail and Commercial Banking total assets increased 3% to £29.5bn (1st January 2005: £28.7bn) and weighted risk assets increased 4% to £19.4bn (1st January 2005: £18.7bn).

 

Head office and other operations total assets increased 192% to £10.8bn (1st January 2005: £3.7bn), excluding goodwill. The increase includes assets acquired for hedging purposes and cash raised from preference share issues during the period relating to the funding for the acquisition of Absa which closed in July. Weighted risk assets increased 116% to £4.1bn (1st January 2005: £1.9bn) reflecting assets held for hedging purposes.

 

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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 and benchmarks outputs to external reference points. During 2004, the framework was enhanced to reflect default probabilities during average credit conditions, rather than those prevailing at the balance sheet date, thus seeking to remove cyclicality from the capital calculation. The framework also adjusts capital to reflect time horizon, correlation of risks and risk concentrations.

 

Economic capital is allocated on a consistent basis across all of Barclays businesses and risk activities. A single cost of equity is applied to calculate the cost of risk. Capital allocations are adjusted to reflect varying levels of risk.

 

The total average economic capital required by the Group, as determined by risk assessment models and after considering the Group’s estimated diversification benefits, is compared with the supply of capital to evaluate capital utilisation. Supply of economic capital is calculated as the average available shareholders’ equity after adjustment and including preference shares.

 

The economic capital methodology will form the basis of the Group’s submission for the Basel II Internal Capital Adequacy Assessment Process (ICAAP).

 

Capital demand

 

The average demand for capital from the Group’s businesses via the economic capital framework is set out below:

 

     Half-year ended

     30.06.05

   31.12.04

   30.06.04

     £m    £m    £m

UK Banking

   5,150    4,800    4,450

UK Retail Banking

   2,250    2,200    2,150

UK Business Banking

   2,900    2,600    2,300

Barclays Capital

   2,400    2,100    2,050

Barclays Global Investors

   150    150    150

Wealth Management

   400    350    300

Wealth Management - closed life assurance activities

   50    100    100

Barclaycard

   2,650    2,500    2,450

International Retail and Commercial Banking

   1,100    1,000    1,000

Head office functions and other operations1

   200    200    200
    
  
  

Business unit economic capital

   12,100    11,200    10,700

Capital held at Group centre2

   1,600    1,500    1,300
    
  
  

Economic capital requirement (excluding goodwill)

   13,700    12,700    12,000

Average historic goodwill3

   5,800    5,650    5,550
    
  
  

Total economic capital requirement

   19,500    18,350    17,550
    
  
  

 


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.
3 Average goodwill relates to purchased goodwill and intangibles from business acquisitions.

 

47


BARCLAYS PLC

 

UK Retail Banking economic capital allocation increased £50m to £2.25bn. The impact of growth was offset by a risk transfer transaction within UK mortgages. UK Business Banking economic capital allocation increased £300m to £2.9bn as a consequence of asset growth and the addition of the Iveco Finance business.

 

Barclays Capital economic capital increased by £300m to £2.4bn reflecting underlying growth in loan and derivative portfolios and the Group-wide annual recalibration of business and operational risk economic capital.

 

Wealth Management ongoing business economic capital allocation increased £50m to £400m as a consequence of general growth across all businesses and the recalibration of business and operational risk economic capital.

 

Wealth Management—closed life assurance activities economic capital allocation reduced £50m to £50m reflecting the impact of IFRS removing the volatility associated with embedded value accounting.

 

Barclaycard economic capital allocation increased by £150m to £2.65bn, due to growth in outstandings and the acquisition of Juniper.

 

International Retail and Commercial Banking economic capital allocation increased by £100m to £1.1bn due to the Group-wide annual recalibration of business and operational risk economic capital together with growth exposure in Africa and Spain.

 

Capital held at the Group centre rose £100m to £1.6bn, as a result of the increase in available funds to support economic capital (see Capital supply).

 

Capital supply

 

The Group has determined that the impacts of IFRS should be modified in calculating available funds for economic capital. This applies specifically to:

 

    Cashflow hedge reserve - to the extent that the Group undertakes the hedging of future cash flows, shareholders’ equity will include gains and losses which will be offset at the conclusion of the future hedged transaction. Given the future offset of such gains and losses, they are excluded from shareholders’ equity upon which the capital charge is based.

 

    Available for sale reserve - unrealised gains and losses on such securities are included in shareholders’ equity until disposal or impairment. Such gains and losses will be excluded from shareholders’ equity for the purposes of calculating the capital charge. Realised gains and losses and any impairment charges recorded in the income statement will impact economic profit.

 

    Pension liability - the Group has recorded a deficit with a consequent reduction in shareholders’ equity. This represents a non-cash reduction in shareholders’ equity. For the purposes of deriving the capital charge, the Group will not deduct the pension deficit from shareholders’ equity upon which the capital charge is based, a policy that is also followed for regulatory purposes.

 

The capital resources to support economic capital comprise adjusted shareholders’ equity including preference shares but excluding other minority interests. Preference shares have been issued to optimise the long-term capital base of the Group.

 

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BARCLAYS PLC

 

The average supply of capital to support the economic capital framework is set out below1:

 

     Half-year ended

     30.06.05

    31.12.04

   30.06.04

     £m     £m    £m

Shareholders’ equity excluding minority interests, less goodwill2

   11,000     10,600    10,300

Pension liability

   1,500     1,750    1,700

Cashflow hedge reserve

   (250 )   n/a    n/a

Available for sale reserve

   (300 )   n/a    n/a

Preference shares

   1,750     350    —  
    

 
  
Available funds for economic capital excluding goodwill    13,700     12,700    12,000

Average historic goodwill2

   5,800     5,650    5,550
    

 
  
Available funds for economic capital    19,500     18,350    17,550
    

 
  

1 Averages for the period will not correspond to period-end balances disclosed in the balance sheet. Numbers are independently rounded to the nearest £50m for presentational purposes only.
2 Average goodwill relates to purchased goodwill and intangibles from business acquisitions.

 

49


BARCLAYS PLC

 

Economic profit

 

Economic profit comprises:

 

  Profit after tax and minority interests; less
  Capital charge (average shareholders’ equity excluding minority interests multiplied by the Group cost of capital).

 

The Group cost of capital has been applied at a uniform rate of 9.5%. Prior periods have been restated on a comparable basis.

 

The Group uses economic profit, a non-GAAP measure, as a key indicator of performance because it believes that it provides important discipline in decision making. The Group believes that economic profit encourages both profitable growth and the efficient use of capital.

 

The economic profit for the Group is set out below:

 

     Half-year ended

 
     30.06.05

    31.12.04

    30.06.04

 
     £m     £m     £m  

Profit after tax and minority interests

   1,841     1,456     1,798  

Addback of amortisation charged on acquired intangible assets

   7     6     —    
    

 

 

Profit for economic profit purposes    1,848     1,462     1,798  

Average shareholders’ equity for economic profit purposes1

   17,750     18,000     17,550  

Capital charge at 9.5%

   (844 )   (858 )   (834 )
    

 

 

Economic profit    1,004     604     964  
    

 

 


1 Average ordinary shareholders’ equity for Group economic profit calculation is the sum of the available funds for economic capital (£19,500) less preference shares (£1,750).

 

50


BARCLAYS PLC

 

Risk Tendency

 

As part of its credit risk management system, the Group uses a model-based methodology to assess the point-in-time expected loss of credit portfolios across different customer categories. The approach is termed Risk Tendency and applies to credit exposures in both wholesale and retail sectors. Risk Tendency provides statistical estimates of losses expected to arise within the next year based on averages in the ranges of possible losses expected from each of the current portfolios. This can be contrasted with impairment allowances required under accounting standards, which are based on losses known to have been incurred at the balance sheet date.

 

Since Risk Tendency and impairment allowances are calculated for different purposes and on different bases, Risk Tendency does not predict loan impairment. Risk Tendency is provided to present a view of the evolution of the quality and scale of the credit portfolios.

 

     As at

     30.06.05

        31.12.04

        30.06.04

     £m         £m         £m

UK Banking

   420         375         360

UK Retail Banking

   160         150         150

UK Business Banking

   260         225         210

Barclays Capital

   75         70         80

Wealth Management

   5