Annual Reports

  • 20-F (Feb 22, 2018)
  • 20-F (Feb 23, 2017)
  • 20-F (Mar 1, 2016)
  • 20-F (Mar 3, 2015)
  • 20-F (Mar 14, 2014)
  • 20-F (Mar 13, 2013)

 
Other

Barclays 20-F 2009
Form 20-F
Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

   For the fiscal year ended December 31, 2008

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

   For the transition period from              to             

OR

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

   Date of event requiring this shell company report             

 

Commission file numbers    Barclays PLC    1-09246
   Barclays Bank PLC    1-10257

BARCLAYS PLC

BARCLAYS BANK PLC

(Exact Names of Registrants as Specified in their Charters)

ENGLAND

(Jurisdiction of Incorporation or Organization)

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

(Address of Principal Executive Offices)

 

PATRICK GONSALVES, +44 (0)20 7116 2901, PATRICK.GONSALVES@BARCLAYS.COM

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Barclays PLC

 

Title of Each Class

  

Name of Each Exchange On Which Registered

25p ordinary shares    New York Stock Exchange*
American Depository Shares, each representing four 25p ordinary shares    New York Stock Exchange

 

  * Not for trading, but in connection with the registration of American Depository Shares, pursuant to the requirements of the Securities and Exchange Commission.

Barclays Bank PLC

 

Title of Each Class

  

Name of Each Exchange On Which Registered

7.4% Subordinated Notes 2009    New York Stock Exchange
Callable Floating Rate Notes 2035    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 2    New York Stock Exchange*
American Depository Shares, Series 2, each representing one Non-Cumulative Callable Dollar Preference Share, Series 2    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 3    New York Stock Exchange*
American Depository Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 4    New York Stock Exchange*
American Depository Shares, Series 4, each representing one Non-Cumulative Callable Dollar Preference Share, Series 4    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 5    New York Stock Exchange*
American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5    New York Stock Exchange
iPath® Dow Jones – AIG Grains total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Livestock Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Nickel Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Copper Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Energy Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Agriculture Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Natural Gas total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones – AIG Industrial Metals Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Softs Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Tin Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Coffee Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Cotton Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Sugar Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Precious Metals Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Platinum Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Cocoa Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Lead Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Dow Jones-AIG Aluminum Total Return Sub-IndexSM ETN    NYSE Arca
iPath® Global Carbon ETN    NYSE Arca
iPath® Dow Jones – AIG Commodity Index Total ReturnSM ETN    NYSE Arca
iPath® S&P GSCITM Crude Oil Total Return Index ETN    NYSE Arca
iPath® S&P GSCITM Total Return Index ETN    NYSE Arca
iPath® MSCI India IndexSM ETN    NYSE Arca
iPath® EUR/USD Exchange Rate ETN    NYSE Arca
iPath® GBP/USD Exchange Rate ETN    NYSE Arca
iPath® JPY/USD Exchange Rate ETN    NYSE Arca
iPath® S&P 500 VIX Short-Term FuturesTM ETN    NYSE Arca
iPath® S&P 500 VIX Mid-Term FuturesTM ETN    NYSE Arca
iPath® CBOE S&P 500 BuyWrite IndexSM ETN    NYSE Arca
iPath® Optimized Currency Carry ETN    NYSE Arca
Barclays GEMS IndexTM ETN    NYSE Arca
Barclays GEMS Asia 8 ETN    NYSE Arca
Barclays Asian and Gulf Currency Revaluation ETN    NYSE Arca
Barclays GEMS IndexTM ETN    American Stock Exchange

 

* Not for trading, but in connection with the registration of American Depository Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuers’ classes of capital or common stock as of the close of the period covered by the annual report.

 

Barclays PLC    25p ordinary shares    8,371,830,617
Barclays Bank PLC    £1 ordinary shares    2,338,170,515
   £1 preference shares    1,000
   £100 preference shares    75,000
   €100 preference shares    240,000
   $0.25 preference shares    237,000,000
   $100 preference shares    100,000

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  þ    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.

Yes  ¨    No  þ

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes  þ    No  ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Barclays PLC                
Large Accelerated Filer  þ      Accelerated Filer  ¨      Non-Accelerated Filer  ¨      
Barclays Bank PLC                
Large Accelerated Filer  ¨      Accelerated Filer  ¨      Non-Accelerated Filer  þ      

 

* Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨

International Financial Reporting Standards as issued by the International Accounting Standards Board  þ

Other  ¨

 

* If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17  ¨        Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  þ

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  ¨    No  ¨

 

 


Table of Contents

Certain non-IFRS measures

In this document certain non-IFRS (International Financial Reporting Standards) 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 businesses and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays management. However, any non-IFRS measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well.

Market and other data

This document contains information, including statistical data, about certain of Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream, Dealogic, Euroweek, Thompson Reuters, AMEX/NYSE weekly reports, European ETF reports and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.

Forward-looking statements

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. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. 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 ‘may’, ‘will’, ‘seek’, ‘continue’, ‘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, assets, impairment charges, business strategy, capital ratios, leverage, payment of dividends, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditures, and plans and objectives for future operations and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market related risks such as changes in interest rates and exchange rates, effects of changes in valuation of credit market exposures, changes in valuation of issued notes, the policies and actions of governmental and regulatory authorities, changes in legislation, 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, progress in the integration of the Lehman Brothers North American businesses into the Group’s business and the quantification of the benefits resulting from such acquisition, the outcome of pending and future litigation, the success of future acquisitions and other strategic transactions and the impact of competition – 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 herein speak only as of the date they are made. Except as required by the UK Financial Services Authority (FSA), the London Stock Exchange or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Barclays expectations with regard thereto or any change 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 Securities and Exchange Commission (SEC).


Table of Contents

SEC FORM 20-F CROSS REFERENCE INFORMATION

 

Form 20-F
item number
        

Page and caption references

in this document*

1    Identity of Directors, Senior Management and Advisers   

Not applicable

2    Offer Statistics and Expected Timetable    Not applicable
3    Key Information     
   A. Selected financial data    2, 12, 304
   B. Capitalization and indebtedness    Not applicable
   C. Reason for the offer and use of proceeds    Not applicable
     D. Risk factors    57-61
4    Information on the Company   
   A. History and development of the company   

176, 234(Note 38)-239(Note 42),

244(Events after balance sheet date), 305

   B. Business overview    30, 135-136, 202-204(Note 14), 232(Note 36), 279-284 (Note 53)
   C. Organizational structure    238(Notes 40 and 41), 239(Note 42)
     D. Property, plants and equipment    210(Note 23), 233-224(Note 37)
4A    Unresolved staff comments    Not applicable
5    Operating and Financial Review and Prospects   
   A. Operating results    2-52, 135-136, 202-204(Note 14), 232(Note  36), 267(Note 48)
   B. Liquidity and capital resources    17, 91-92, 111-116, 193, 202-204(Note 14), 214-218(Note 27), 219(Note 29), 226-228(Note 31), 230-231(Note 34), 268-272(Note 49), 278(Note 52)
   C. Research and development, patents and licenses, etc.   

Not applicable

   D. Trend information    11
   E. Off-balance sheet arrangements    25-26
   F. Tabular disclosure of contractual obligations    19
     G. Safe harbor    Inside front cover
(Forward-looking statements)
6    Directors, Senior Management and Employees   
   A. Directors and senior management    138-139
   B. Compensation    157-172, 220-226(Note 30), 240-243(Note 43)
   C. Board practices    138-139, 141-156, 165-166
   D. Employees    9-10, 55
     E. Share ownership    157-172, 243(Note 43)
7    Major Shareholders and Related Party Transactions   
   A. Major shareholders    141, 176
   B. Related party transactions    240-243(Note 43)
     C. Interests of experts and counsel    Not applicable
8    Financial Information   
   A. Consolidated statements and other financial information    11, 140, 177-298, 305-306
     B. Significant changes    11, 189, 244(Note 44)
9    The Offer and Listing   
   A. Offer and listing details    303
   B. Plan of distribution    Not applicable
   C. Markets    302
   D. Selling shareholders    Not applicable
   E. Dilution    Not applicable
     F. Expenses of the issue    Not applicable
10    Additional Information   
   A. Share capital    Not applicable
   B. Memorandum and Articles of Association    305-307
   C. Material contracts    142, 165-166, 227-228(Note 31)
   D. Exchange controls    239(Note 42), 309
   E. Taxation    307-309
   F. Dividends and paying agents    Not applicable
   G. Statement by experts    Not applicable
   H. Documents on display    309
     I. Subsidiary information    238(Note 40)
11    Quantitative and Qualitative Disclosures about Market Risk    56-134, 250(Note 46)-272(Note 49)
12    Description of Securities Other than Equity Securities    Not applicable
13    Defaults, Dividend Arrearages and Delinquencies    Not applicable
14    Material Modifications to the Rights of Security Holders and Use of Proceeds    Not applicable
15    Controls and Procedures   
   A. Disclosure controls and procedures    174
   B. Management’s annual report on internal control over financial reporting    173
   C. Attestation report of the registered public accounting firm    177-178
     D. Changes in internal control over financial reporting    174
15T    Controls and Procedures    173-174, 177
16A    Audit Committee Financial Expert    149
16B    Code of Ethics    155
16C    Principal Accountant Fees and Services    142, 151(Non-Audit Services Policy), 198-199(Note 9)
16D    Exemptions from the Listing Standards for Audit Committees    Not applicable
16E    Purchases of Equity Securities by the Issuer and Affiliated Purchasers    227(Share repurchase)
16F    Change in Registrant’s Certifying Accountant    Not applicable
16G    Corporate Governance    143, 155
17    Financial Statements    Not applicable
18    Financial Statements    175-300
19    Exhibits    Exhibit Index

 

* Captions have been included only in respect of pages with multiple sections on the same page in order to identify the relevant caption on that page covered by the corresponding Form 20-F item number.


Table of Contents

Contents

 

Business review

   1

Financial review

   1

Corporate sustainability

   53

Our people

   55

Risk management

   56

Governance

   137

Board and Executive Committee

   138

Directors’ report

   140

Corporate governance report

   143

Remuneration report

   157

Accountability and audit

   173

Financial statements

   175

Presentation of information

   176

Independent Auditors’ report/Independent Registered Public Accounting Firm’s report

   177

Consolidated accounts Barclays PLC

   179

Barclays Bank PLC data

   285

Shareholder information

   301


Table of Contents

LOGO

 



Table of Contents

Consolidated income statement

 

 

For the year ended 31st December                               
     

2008

£m

   

2007

£m

   

2006

£m

   

2005

£m

    2004
£m a
 

Net interest income

   11,469     9,610     9,143     8,075     6,833  

Net fee and commission income

   8,407     7,708     7,177     5,705     4,847  

Principal transactions

   2,009     4,975     4,576     3,179     2,514  

Net premiums from insurance contracts

   1,090     1,011     1,060     872     1,042  

Other income

   377     188     214     147     131  

Total income

   23,352     23,492     22,170     17,978     15,367  

Net claims and benefits incurred on insurance contracts

   (237 )   (492 )   (575 )   (645 )   (1,259 )

Total income net of insurance claims

   23,115     23,000     21,595     17,333     14,108  

Impairment charges and other credit provisions

   (5,419 )   (2,795 )   (2,154 )   (1,571 )   (1,093 )

Net income

   17,696     20,205     19,441     15,762     13,015  

Operating expenses

   (14,366 )   (13,199 )   (12,674 )   (10,527 )   (8,536 )

Share of post-tax results of associates and joint ventures

   14     42     46     45     56  

Profit before business acquisitions and disposals

   3,344     7,048     6,813     5,280     4,535  

Profit on disposal of subsidiaries, associates and joint ventures

   327     28     323         45  

Gains on acquisitions

   2,406                  

Profit before tax

   6,077     7,076     7,136     5,280     4,580  

Tax

   (790 )   (1,981 )   (1,941 )   (1,439 )   (1,279 )

Profit after tax

   5,287     5,095     5,195     3,841     3,301  

Profit attributable to minority interests

   905     678     624     394     47  

Profit attributable to equity holders of the parent

   4,382     4,417     4,571     3,447     3,254  
     5,287     5,095     5,195     3,841     3,301  

Selected financial statistics

 

                              

Basic earnings per share

   59.3p     68.9p     71.9p     54.4p     51.0p  

Diluted earnings per share

   57.5p     66.7p     69.8p     52.6p     49.8p  

Dividends per ordinary share

   11.5p     34.0p     31.0p     26.6p     24.0p  

Dividend payout ratio

   19.4%     49.3%     43.1%     48.9%     47.1%  

Profit attributable to the equity holders of the parent as a percentage of:

          

average shareholders’ equity

   16.5%     20.3%     24.7%     21.1%     21.7%  

average total assets

   0.2%     0.3%     0.4%     0.4%     0.5%  

Cost: income ratio

   62%     57%     59%     61%     61%  

Average United States Dollar exchange rate used in preparing the accounts

   1.86     2.00     1.84     1.82     1.83  

Average Euro exchange rate used in preparing the accounts

   1.26     1.46     1.47     1.46     1.47  

Average Rand exchange rate used in preparing the accounts

   15.17     14.11     12.47     11.57     11.83  

The financial information above is extracted from the published accounts for the last three years. This information should be read together with, and is qualified by reference to, the accounts and notes included in this report.

Note

 

a Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

 

2    

Barclays

Annual Report 2008


Table of Contents

LOGO

Financial review

Income statement commentary

 

Income statement

Barclays delivered profit before tax of £6,077m in 2008, a decline of 14% on 2007. The results included the following significant items:

 

 

gains on acquisitions of £2,406m, including £2,262m gain on acquisition of Lehman Brothers North American businesses

 

 

profit on disposal of Barclays Closed UK Life assurance business of £326m

 

 

gains on Visa IPO and sales of shares in MasterCard of £291m, distributed widely across the Group

 

 

gross credit market losses and impairment of £8,053m, or £4,957m net of related income and hedges of £1,433m and gains on own credit of £1,663m

Profit after tax increased 4% to £5,287m. This reflected an effective tax rate of 13% (2007: 28%) primarily due to the gain on the acquisition of Lehman Brothers North American businesses of £2,262m in part being offset by carried forward US tax losses attributable to Barclays businesses. Earnings per share were 59.3p (2007: 68.9p), a decline of 14% from 2007, reflecting the impact of share issuance during 2008 on the weighted average number of shares in issue.

Income grew 1% to £23,115m. Income in Global Retail and Commercial Banking increased 17% and was particularly strong in businesses outside of the UK to which we have directed significant resource. Income in Investment Banking and Investment Management was down 19%. Barclays Capital was affected by very challenging market conditions in 2008, with income falling by £1,888m (27%) on 2007, reflecting gross losses of £6,290m relating to credit market assets, partially offset by gains of £1,663m on the fair valuation of notes issued by Barclays

Capital due to widening of credit spreads and £1,433m in related income and hedges. Excluding credit market related losses, gains on own credit and related income and hedges, income in Barclays Capital increased 6%.

Impairment charges and other credit provisions of £5,419m increased 94% on the prior year. Impairment charges included £1,763m arising from US sub-prime mortgages and other credit market exposures. Other wholesale impairment charges increased significantly as corporate credit conditions turned sharply worse. In Barclays Capital increased charges also arose in prime services, corporate lending and private equity. In Barclays Commercial Bank, increased impairment charges reflected the UK economy moving into recession. In the UK there was a moderate increase in impairment in UK Retail Banking as a result of book growth and a deteriorating economic environment. UK mortgage impairment charges remained low. There was a lower charge in UK cards as net flows into delinquency and arrears levels reduced. Significant impairment growth in our Global Retail and Commercial Banking businesses outside the UK reflected very strong book growth in recent years, and maturation of those portfolios, together with deteriorating credit conditions and rising delinquency rates in the US, South Africa and Spain.

Operating expenses increased 9% to £14,366m. We continued to invest in our distribution network in the Global Retail and Commercial Banking businesses. Expenses fell in Barclays Capital due to lower performance related costs. Expenses in Barclays Global Investors included selective support of liquidity products of £263m (2007: £80m). Group gains from property disposals were £148m (2007: £267m). Head office reflects £101m due to the cost of the contribution to the UK Financial Services Compensation Scheme. Underlying cost growth was well controlled. The Group cost:income ratio deteriorated by five percentage points to 62%.


 

 

Barclays

Annual Report 2008

    3


Table of Contents

Financial review

Income statement commentary

 

Net interest income

2008/07

Group net interest income increased 19% (£1,859m) to £11,469m (2007: £9,610m) reflecting balance sheet growth across the Global Retail and Commercial Banking businesses and in particular very strong growth internationally driven by expansion of the distribution network and entrance into new markets. An increase in net interest income was also seen in Barclays Capital due to strong results from global loans and money markets.

Group net interest income includes the impact of structural hedges which function to reduce the impact of the volatility of short-term interest rate movements on equity and customer balances that do not re-price with market rates. The contribution of structural hedges relative to average base rates increased income by £117m (2007: £351m expense), largely due to the effect of the structural hedge on changes in interest rates.

2007/06

Group net interest income increased 5% (£467m) to £9,610m (2006: £9,143m) reflecting balance sheet growth across a number of businesses. The contribution of structural hedges relative to average base rates decreased to £351m expense (2006: £26m income), largely due to the effect of the structural hedge on changes in interest rates. Other interest expense principally includes interest on repurchase agreements and hedging activity.

 


 

 

Net interest income

 

      2008
£m
    2007
£m
    2006
£m
 

Cash and balances with central banks

   174     145     91  

Available for sale investments

   2,355     2,580     2,811  

Loans and advances to banks

   1,267     1,416     903  

Loans and advances to customers

   23,754     19,559     16,290  

Other

   460     1,608     1,710  
Interest income    28,010     25,308     21,805  

Deposits from banks

   (2,189 )   (2,720 )   (2,819 )

Customer accounts

   (6,697 )   (4,110 )   (3,076 )

Debt securities in issue

   (5,910 )   (6,651 )   (5,282 )

Subordinated liabilities

   (1,349 )   (878 )   (777 )

Other

   (396 )   (1,339 )   (708 )
Interest expense    (16,541 )   (15,698 )   (12,662 )
Net interest income    11,469     9,610     9,143  

 

4    

Barclays

Annual Report 2008

 


Table of Contents

LOGO

 

Net fee and commission income

2008/07

Net fee and commission income increased 9% (£699m) to £8,407m (2007: £7,708m). Banking and credit related fees and commissions increased 13% (£845m) to £7,208m (2007: £6,363m), reflecting growth in Barclaycard International, increased fees from advisory and origination activities in Barclays Capital and increased foreign exchange, derivative and debt fees in Barclays Commercial Bank.

2007/06

Net fee and commission income increased 7% (£531m) to £7,708m (2006: £7,177m). Fee and commission income rose 8% (£673m) to £8,678m (2006: £8,005m) reflecting increased management and securities lending fees in Barclays Global Investors, increased client assets and higher transactional income in Barclays Wealth and higher income generated from lending fees in Barclays Commercial Bank. Fee income in Barclays Capital increased primarily due to the acquisition of HomEq.

 


 

 

Net fee and commission income

 

      2008
£m
    2007
£m
    2006
£m
 

Brokerage fees

   87     109     70  

Investment management fees

   1,616     1,787     1,535  

Securities lending

   389     241     185  

Banking and credit related fees and commissions

   7,208     6,363     6,031  

Foreign exchange commission

   189     178     184  
Fee and commission income    9,489     8,678     8,005  
Fee and commission expense    (1,082 )   (970 )   (828 )
Net fee and commission income    8,407     7,708     7,177  

 


 

 

Barclays

Annual Report 2008

    5


Table of Contents

Financial review

Income statement commentary

Principal transactions

2008/07

Principal transactions decreased 60% (£2,966m) to £2,009m (2007: £4,975m).

Net trading income decreased 65% (£2,430m) to £1,329m (2007: £3,759m). The majority of the Group’s net trading income arises in Barclays Capital. Growth in the Rates related business reflected growth in fixed income, prime services, foreign exchange, commodities and emerging markets. The Credit related business included net losses from credit market dislocation partially offset by the benefits of widening credit spreads on structured notes issued by Barclays Capital.

Net investment income decreased 44% (£536m) to £680m (2007: £1,216m). The cumulative gain from disposal of available for sale assets decreased 62% (£348m) to £212m (2007: £560m) reflecting the lower profits realised on the sale of investments. The £212m gain in 2008 included the £47m gain from sale of shares in MasterCard.

The dividend income increased £170m to £196m (2007: £26m) reflecting the Visa IPO dividend received by GRCB – Western Europe, GRCB – Emerging Markets and Barclaycard in the current year. The GRCB – Absa gain on the Visa IPO of £47m has been recognised in other income.

Net gain from financial instruments designated at fair value decreased 89% (£260m) to £33m (2007: £293m), driven by the continued decrease in value of assets backing customer liabilities in Barclays Life Assurance; and fair value decreases of a number of investments reflecting the current market condition.

Other investment income decreased 29% (£98m) to £239m (2007: £337m) due to a number of non-recurring disposals in the prior year.

2007/06

Principal transactions increased 9% (£399m) to £4,975m (2006: £4,576m).

Net trading income increased 4% (£145m) to £3,759m (2006: £3,614m). The majority of the Group’s net trading income arose from Barclays Capital. Growth in the Rates related business reflected very strong performances in fixed income, commodities, foreign exchange, equity and prime services. The Credit related business included net losses from credit market turbulence and the benefits of widening credit spreads on structured notes issued by Barclays Capital.

 

Net investment income increased 26% (£254m) to £1,216m (2006: £962m). The cumulative gain from disposal of available for sale assets increased 82% (£253m) to £560m (2006: £307m) largely as a result of a number of private equity realisations and divestments. Net income from financial instruments designated at fair value decreased by 34% (£154m) largely due to lower growth in the value of linked insurance assets within Barclays Wealth.

Fair value movements on insurance assets included within net investment income contributed £113m (2006: £205m).

Net premiums from insurance contracts

2008/07

Net premiums from insurance contracts increased 8% (£79m) to £1,090m (2007: £1,011m), primarily due to expansion in GRCB – Western Europe reflecting a full year’s impact of a range of insurance products launched in late 2007, partially offset by lower net premiums following the sale of the closed life assurance book.

2007/06

Net premiums from insurance contracts decreased 5% (£49m) to £1,011m (2006: £1,060m), primarily due to lower customer take up of loan protection insurance.

Other income

2008/07

Certain asset management products offered to institutional clients by Barclays Global Investors are recognised as investment contracts. Accordingly, the invested assets and the related liabilities to investors are held at fair value and changes in those fair values are reported within other income. Other income in 2008 includes a £47m gain from the Visa IPO.

2007/06

Certain asset management products offered to institutional clients by Barclays Global Investors are recognised as investment contracts. Accordingly, the invested assets and the related liabilities to investors are held at fair value and changes in those fair values are reported within other income. Other income in 2007 includes a loss on the part disposal of Monument credit card portfolio and gains on reinsurance transactions in 2007 and 2006.


 

 

Principal transactions       
      2008
£m
    2007
£m
    2006
£m

Rates related business

   4,751     4,162     2,848

Credit related business

   (3,422 )   (403 )   766

Net trading income

   1,329     3,759     3,614
      

Net gain from disposal of available for sale assets

   212     560     307

Dividend income

   196     26     15

Net gain from financial instruments designated at fair value

   33     293     447

Other investment income

   239     337     193

Net investment income

   680     1,216     962

Principal transactions

   2,009     4,975     4,576

 

 

Net premiums from insurance contracts       
      2008
£m
    2007
£m
    2006
£m
 

Gross premiums from insurance contracts

   1,138     1,062     1,108  

Premiums ceded to reinsurers

   (48 )   (51 )   (48 )

Net premiums from insurance contracts

   1,090     1,011     1,060  

 

Other income       
      2008
£m
    2007
£m
    2006
£m
 

(Decrease)/increase in fair value of assets held in respect of linked liabilities to customers under investment contracts

   (10,422 )   5,592     7,417  

Decrease/(increase) in liabilities to customers under investment contracts

   10,422     (5,592 )   (7,417 )

Property rentals

   73     53     55  

Loss on part disposal of Monument credit card portfolio

       (27 )    

Other

   304     162     159  

Other income

   377     188     214  

 

 

Net claims and benefits incurred on insurance contracts  
      2008
£m
    2007
£m
    2006
£m
 

Gross claims and benefits incurred on insurance contracts

   263     520     588  

Reinsurers’ share of claims incurred

   (26 )   (28 )   (13 )

Net claims and benefits incurred on insurance contracts

   237     492     575  

 

6    

Barclays

Annual Report 2008


Table of Contents

LOGO

 

Net claims and benefits incurred on insurance contracts

2008/07

Net claims and benefits incurred under insurance contracts decreased 52% (£255m) to £237m (2007: £492m), principally due to a decrease in the value of unit linked insurance contracts in Barclays Wealth; explained by falls in equity markets and disposal of closed life business in October 2008. Partially offsetting these trends is the increase in contract liabilities associated with increased net premiums driven by the growth in GRCB – Western Europe.

2007/06

Net claims and benefits incurred under insurance contracts decreased 14% (£83m) to £492m (2006: £575m), principally reflecting lower investment gains attributable to customers in Barclays Wealth.

Impairment charges and other credit provisions

2008/07

Impairment charges in UK Retail Banking increased £43m to £602m (2007: £559m), reflecting growth in the book and deteriorating economic conditions. In UK Home Finance, whilst three month arrears increased from 0.63% to 0.91%, the quality of the book and conservative loan to value ratios meant that the impairment charges and amounts charged off remained low at £24m (2007: £3m release). Impairment charges in Consumer Lending increased 3%, reflecting the current economic environment and loan growth.

The impairment charge in Barclays Commercial Bank increased £122m to £414m (2007: £292m), primarily reflecting higher impairment losses in Larger Business, particularly in the final quarter as the UK corporate credit environment deteriorated.

The impairment charge in Barclaycard increased £270m to £1,097m (2007: £827m), reflecting higher charges in Barclaycard International portfolios, particularly Barclaycard US which was driven by loan growth, rising delinquency due to deteriorating economic conditions and exchange rate movements; and £68m from the inclusion of Goldfish. These factors were partially offset by lower charges in UK Cards and secured consumer lending.

 

Impairment charges in GRCB – Western Europe increased £220m to £296m (2007: £76m), principally due to deteriorating economic trends and asset growth in Spain, where there were higher charges in the commercial portfolios as a consequence of the slowdown in the property and construction sectors. In addition, higher household indebtedness and rising unemployment has driven up delinquency and charge-offs in the personal sector.

Impairment charges in GRCB – Emerging Markets increased £127m to £166m (2007: £39m), reflecting: weakening credit conditions which adversely impacted delinquency trends in the majority of the retail portfolios; asset growth, particularly in India; and increased wholesale impairment in Africa.

Impairment charges in GRCB – Absa increased £201m to £347m (2007: £146m) as a result of rising delinquency levels in the retail portfolios, which have been impacted by rising interest and inflation rates and increasing consumer indebtedness.

Barclays Capital impairment charges of £2,423m (2007: £846m) included a charge of £1,763m (2007: £782m) against ABS CDO Super Senior and other credit market positions. Further impairment charges of £241m were incurred in respect of available for sale assets and reverse repurchase agreements (2007: nil). Other impairment charges increased £355m to £419m (2007: £64m) and primarily related to charges in the private equity and other loans business.

The impairment charge in Barclays Wealth increased £37m to £44m (2007: £7m) from a very low base. This increase reflected both the substantial increase in the loan book over the last three years and the impact of the current economic environment on client liquidity and collateral values.

The impairment charge In Head office functions and other operations increased £8m to £11m (2007: £3m), mainly reflecting losses on Floating Rate Notes held for hedging purposes. An additional £19m (2007: nil) of impairment charges were incurred on available for sale assets.


 

 

Impairment charges and other credit provisions                   
      2008
£m
    2007
£m
    2006
£m
 

Impairment charges on loans and advances

      

– New and increased impairment allowances

   5,116     2,871     2,722  

– Releases

   (358 )   (338 )   (389 )

– Recoveries

   (174 )   (227 )   (259 )

Impairment charges on loans and advances

   4,584     2,306     2,074  

Charge/(release) in respect of provision for undrawn contractually committed facilities and guarantees provided

   329     476     (6 )

Impairment charges on loans and advances and other credit provisions

   4,913     2,782     2,068  

Impairment charges on reverse repurchase agreements

   124          

Impairment on available for sale assets

   382     13     86  

Impairment charges and other credit provisions

   5,419     2,795     2,154  

Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market exposures included above:

                  

Impairment charges on loans and advances

   1,218     300      

Charges in respect of undrawn facilities and guarantees

   299     469      

Impairment charges on loans and advances and other credit provisions on ABS CDO Super Senior and other credit market exposures

   1,517     769      

Impairment charges on reverse repurchase agreements

   54          

Impairment charges on available for sale assets

   192     13      

Impairment charges and other credit provisions on ABS CDO Super Senior and other credit market exposures

   1,763     782      

 

 

Barclays

Annual Report 2008

    7


Table of Contents

Financial review

Income statement commentary

2007/06

Impairment charges in UK Retail Banking decreased by £76m to £559m (2006: £635m), reflecting lower charges in unsecured Consumer Lending and Local Business driven by improved collection processes, reduced flows into delinquency, lower arrears trends and stable charge-offs. In UK Home Finance, asset quality remained strong and mortgage charges remained negligible. Mortgage delinquencies as a percentage of outstandings remained stable and amounts charged off were low.

The impairment charge in Barclays Commercial Bank increased £39m to £292m (2006: £253m), primarily due to higher impairment charges in Larger Business, partially offset by a lower charge in Medium Business due to a tightening of the lending criteria.

Impairment charges in Barclaycard decreased £226m to £827m (2006: £1,053m), reflecting reduced flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. Changes were made to impairment methodologies to standardise the approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by the increase in impairment charges in Barclaycard International and secured consumer lending.

Impairment charges in GRCB – Western Europe and GRCB – Emerging Markets rose by £47m to £115m (2006: £68m), reflecting very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007. Arrears in some of GRCB – Absa’s retail portfolios deteriorated in 2007, driven by interest rate increases in 2006 and 2007 resulting in pressure on collections.

Barclays Capital impairment charges and other credit provisions of £846m included a charge of £782m against ABS CDO Super Senior and other credit market exposures and £58m net of fees relating to drawn leveraged finance positions.

 

Operating expenses

2008/07

Operating expenses increased 9% (£1,167m) to £14,366m (2007: £13,199m).

Administrative expenses grew 30% (£1,175m) to £5,153m (2007: £3,978m), reflecting the impact of acquisitions (in particular Lehman Brothers North American businesses and Goldfish), fees associated with Group capital raisings, the cost of the Financial Services Compensation Scheme as well as continued investment in the Global Retail and Commercial Banking distribution network. In addition, Barclays Global Investors’ selective support of liquidity products increased to £263m in the year (2007: £80m).

Operating expenses were reduced by gains from the sale of property of £148m (2007: £267m) as the Group continued the sale and leaseback of some of its freehold portfolio, principally in UK Retail Banking, Barclays Commercial Bank and GRCB – Western Europe.

Amortisation of intangible assets increased 56% (£105m) to £291m (2007: £186m), primarily related to intangible assets arising from the acquisition of Lehman Brothers North American businesses.

Goodwill impairment of £111m reflects the full write-down of £74m relating to EquiFirst, a US non-prime mortgage originator and a partial write-down of £37m relating to FirstPlus following its closure to new business in August 2008.

2007/06

Operating expenses grew 4% (£525m) to £13,199m (2006: £12,674m). The increase was driven by growth of 3% (£236m) in staff costs to £8,405m (2006: £8,169m) and lower gains on property disposals.

Administrative expenses remained flat at £3,978m (2006: £3,980m), reflecting good cost control across all businesses.

Operating lease rentals increased 20% (£69m) to £414m (2006: £345m), primarily due to increased property held under operating leases.

 

 

Operating expenses                   
      2008
£m
    2007
£m
    2006
£m
 

Staff costs

   7,779     8,405     8,169  

Administrative expenses

   5,153     3,978     3,980  

Depreciation

   630     467     455  

Impairment charges/(releases)

      

– property and equipment

   33     2     14  

– intangible assets

   (3 )   14     7  

– goodwill

   111          

Operating lease rentals

   520     414     345  

Gain on property disposals

   (148 )   (267 )   (432 )

Amortisation of intangible assets

   291     186     136  

Operating expenses

   14,366     13,199     12,674  

 

8    

Barclays

Annual Report 2008


Table of Contents

LOGO

 

Operating expenses were reduced by gains from the sale of property of £267m (2006: £432m) as the Group continued the sale and leaseback of some of its freehold portfolio, principally in UK Retail Banking.

Amortisation of intangible assets increased 37% (£50m) to £186m (2006: £136m), primarily reflecting the amortisation of mortgage servicing rights relating to the acquisition of HomEq in November 2006.

Staff costs

2008/07

Staff costs decreased 7% (£626m) to £7,779m (2007: £8,405m). Salaries and accrued incentive payments fell overall by 10% (£720m) to £6,273m (2007: £6,993m), after absorbing increases of £718m relating to in year hiring and staff from acquisitions. Performance related costs were 48% lower, driven mainly by Barclays Capital.

Defined benefit plans pension costs decreased 41% (£61m) to £89m (2007: £150m). This was due to recognition of actuarial gains, higher expected return on assets and reduction in past service costs partially offset by higher interest costs and reduction in curtailment credit.

2007/06

Staff costs increased 3% (£236m) to £8,405m (2006: £8,169m). Salaries and accrued incentive payments rose 5% (£358m) to £6,993m (2006: £6,635m), reflecting increased permanent and fixed term staff worldwide. Defined benefit plans pension costs decreased 47% (£132m) to £150m (2006: £282m). This was mainly due to lower service costs.

Staff numbers

2008/07

Staff numbers are shown on a full-time equivalent basis. Total Group permanent and fixed-term contract staff comprised 60,700 (2007: 61,900) in the UK and 95,600 (2007: 73,000) internationally.

 

UK Retail Banking staff numbers decreased 300 to 30,400 (2007: 30,700). Barclays Commercial Bank staff numbers increased 600 to 9,800 (2007: 9,200), reflecting investment in product expertise, sales and risk capability and associated support areas. Barclaycard staff numbers increased 700 to 9,600 (2007: 8,900), primarily due to the transfer of staff into Absacard as a result of the acquisition of a majority stake in the South African Woolworth Financial Services business in October 2008. GRCB – Western Europe staff numbers increased 2,100 to 10,900 (2007: 8,800), reflecting expansion of the retail distribution network. GRCB – Emerging Markets staff numbers increased 8,800 to 22,700 (2007: 13,900), driven by expansion into new markets and continued investment in distribution in existing countries. GRCB – Absa staff numbers increased 1,000 to 36,800 (2007: 35,800), reflecting continued growth in the business and investment in collections capacity.

Barclays Capital staff numbers increased 6,900 to 23,100 (2007: 16,200), due principally to the acquisition of Lehman Brothers North American businesses. Barclays Global Investors staff numbers increased 300 to 3,700 (2007: 3,400). Staff numbers increased primarily in the iShares business due to continued expansion in the global ETF franchise. Barclays Wealth staff numbers increased 1,000 to 7,900 (2007: 6,900), principally due to the acquisition of the Lehman Brothers North American businesses.

2007/06

Total Group permanent and fixed term contract staff comprised 61,900 (2006: 62,400) in the UK and 73,000 (2006: 60,200) internationally.


 

 

Staff costs               
      2008
£m
   2007
£m
   2006
£m

Salaries and accrued incentive payments

   6,273    6,993    6,635

Social security costs

   464    508    502

Pension costs

        

– defined contribution plans

   237    141    128

– defined benefit plans

   89    150    282

Other post retirement benefits

   1    10    30

Other

   715    603    592

Staff costs

   7,779    8,405    8,169

 

 

Staff numbers               
      2008    2007    2006

UK Retail Banking

   30,400    30,700    34,500

Barclays Commercial Bank

   9,800    9,200    8,100

Barclaycard

   9,600    8,900    9,100

GRCB – Western Europe

   10,900    8,800    6,600

GRCB – Emerging Markets

   22,700    13,900    7,600

GRCB – Absa

   36,800    35,800    33,000

Barclays Capital

   23,100    16,200    13,200

Barclays Global Investors

   3,700    3,400    2,700

Barclays Wealth

   7,900    6,900    6,600

Head office functions and other operations

   1,400    1,100    1,200

Total Group permanent and fixed-term contract staff worldwide

   156,300    134,900    122,600

 

 

Barclays

Annual Report 2008

    9


Table of Contents

Financial review

Income statement commentary

UK Retail Banking headcount decreased 3,800 to 30,700 (2006: 34,500), due to efficiency initiatives in back-office operations and the transfer of operations personnel to Barclays Commercial Bank. Barclays Commercial Bank headcount increased 1,100 to 9,200 (2006: 8,100) due to the transfer of operations personnel from UK Retail Banking and additional investment in front line staff to drive improved geographical coverage. Barclaycard staff numbers decreased 200 to 8,900 (2006: 9,100), due to efficiency initiatives implemented across the UK operation and the sale of part of the Monument card portfolio, partially offset by an increase in the International cards businesses. GRCB – Western Europe staff numbers increased 2,200 to 8,800 (2006: 6,600) and GRCB – Emerging Markets staff numbers increased 6,300 to 13,900 (2006: 7,600) due to growth in the distribution network. GRCB – Absa staff numbers increased 2,800 to 35,800 (2006: 33,000) reflecting growth in the business and distribution network.

Barclays Capital staff numbers increased 3,000 to 16,200 (2006: 13,200) including 800 from the acquisition of EquiFirst. This reflected further investment in the front office, systems development and control functions to support continued business expansion. The majority of organic growth was in Asia Pacific. Barclays Global Investors staff numbers increased 700 to 3,400 (2006: 2,700). Headcount increased in all geographical regions and across product groups and the support functions, reflecting continued investment to support further growth. Barclays Wealth staff numbers increased 300 to 6,900 (2006: 6,600) principally due to the acquisition of Walbrook and increased client- facing professionals.

 

Share of post-tax results of associates and joint ventures

2008/07

The overall share of post-tax results of associates and joint ventures decreased £28m to £14m (2007: £42m).The share of results from associates decreased £11m mainly due to reduced contribution from private equity associates. The share of results from joint ventures decreased £17m mainly due to reduced contribution from Barclays Capital joint ventures.

2007/06

The overall share of post-tax results of associates and joint ventures decreased £4m to £42m (2006: £46m). The share of results from associates decreased £20m mainly due to the sale of FirstCaribbean International Bank (2006: £41m) at the end of 2006, partially offset by an increased contribution from private equity associates. The share of results from joint ventures increased by £16m mainly due to the contribution from private equity entities.

Profit on disposal of subsidiaries, associates and joint ventures

2008/07

On 31st October 2008 Barclays completed the sale of Barclays Life Assurance Company Ltd to Swiss Reinsurance Company for a net consideration of £729m leading to a net profit on disposal of £326m.

2007/06

The profit on disposal in 2007 related mainly to the disposal of the Group’s shareholdings in Gabetti Property Solutions (£8m) and Intelenet Global Services (£13m).

 

 

Share of post-tax results of associates and joint ventures  
      2008
£m
    2007
£m
   2006
£m
 

Profit from associates

   22     33    53  

(Loss)/profit from joint ventures

   (8 )   9    (7 )

Share of post-tax results of associates and joint ventures

   14     42    46  

 

Profit on disposal of subsidiaries, associates and joint ventures

 
      2008
£m
    2007
£m
   2006
£m
 

Profit on disposal of subsidiaries, associates and joint ventures

   327     28    323  

 

10    

Barclays

Annual Report 2008


Table of Contents

LOGO

 

Gains on acquisitions

2008/07

The gains on acquisitions in 2008 relate to the acquisition of Lehman Brothers North American businesses (£2,262m) on 22nd September 2008, Goldfish credit card UK business (£92m) on 31st March 2008 and Macquarie Bank Limited Italian residential mortgage business (£52m) on 6th November 2008.

Tax

The overall tax charge is explained in the table below.

2008/07

The effective rate of tax for 2008, based on profit before tax, was 13% (2007: 28%). The effective tax rate differs from the 2007 effective rate and the UK corporation tax rate of 28.5% principally due to the Lehman Brothers North American businesses acquisition. Under IFRS the gain on acquisition of £2,262m is calculated net of deferred tax liabilities included in the acquisition balance sheet and is thus not subject to further tax in calculating the tax charge for the year. Furthermore, Barclays has tax losses previously unrecognised as a deferred tax asset but capable of sheltering part of this deferred tax liability. This gives rise to a tax benefit of £492m which, in accordance with IAS 12, is included as a credit within the tax charge for the year. The effective rate has been adversely impacted by the effect of the fall in the Barclays share price on the deferred tax asset recognised on share awards. In common with prior years there have been offsetting adjustments relating to different overseas tax rates, disallowable expenditure and non-taxable gains and income.

2007/06

The tax charge for the period was based on a UK corporation tax rate of 30% (2006: 30%). The effective rate of tax for 2007, based on profit before tax, was 28% (2006: 27%). The effective tax rate differed from 30% as it took account of the different tax rates applied to profits earned outside the UK, non-taxable gains and income and adjustments to prior year tax provisions. The forthcoming change in the UK rate of corporation tax from 30% to 28% on 1st April 2008 led to an additional tax charge in 2007 as a result of its effect on the Group’s net deferred tax asset. The effective tax rate for 2007 was higher than the 2006 rate, principally because there was a higher level of profit on disposals of subsidiaries, associates and joint ventures offset by losses or exemptions in 2006.

 

 

Gains on acquisitions  
      2008
£m
    2007
£m
    2006
£m
 

Gains on acquisitions

   2,406          

 

Tax

 
      2008
£m
    2007
£m
    2006
£m
 

Profit before tax

   6,077     7,076     7,136  

Tax charge at average UK corporation tax rate of 28.5% (2007: 30%, 2006: 30%)

   1,732     2,123     2,141  

Prior year adjustments

   (176 )   (37 )   24  

Differing overseas tax rates

   215     (77 )   (17 )

Non-taxable gains and income (including amounts offset by unrecognised tax losses)

   (833 )   (136 )   (393 )

Share-based payments

   229     72     27  

Deferred tax assets not previously recognised

   (514 )   (158 )   (4 )

Change in tax rates

   (1 )   24     4  

Other non-allowable expenses

   138     170     159  

Overall tax charge

   790     1,981     1,941  

Effective tax rate

   13%     28%     27%  

2009 Strategic Framework

Our framework for moving the strategy forward in 2009 has the following features:

 

   

Responsible corporate citizenship. Governments in the UK and elsewhere have taken significant steps to address the impacts of the financial crisis and recession, and we must work with the authorities and, of course, with our customers, to deal with the crisis in a way which is consistent with our obligations to shareholders.

 

   

We have committed to recommencing dividend payments during the second half of 2009. Thereafter, and as previously announced, dividend payments will be made on a quarterly basis. We will set out our dividend policy at the Annual General Meeting in April.

 

   

We must ensure that our capital position is robust and our balance sheet well-managed. We set out within the Financial Review our approach to managing leverage in the balance sheet, and our expectations for capital ratios. For 2009, returns will rank ahead of growth.

 

   

To create good returns at this time, we must preserve strategic and operational choice. As conditions remain very difficult in 2009, we expect that there will be considerable value at stake for our shareholders in decisions that we take relating to resource utilisation, capital allocation and risk management. Our objective over time is to ensure that the cost of the capital we raised last November is covered many times over by the benefits of pursuing our strategy.

 

   

We must deliver solid profitability notwithstanding the global downturn. Our diversified income streams have served us well in recent years and have enabled us to absorb substantial costs from the financial crisis. We expect them to continue to do so.

 

   

We will seek to manage the composition of our profits, and capital allocation, to ensure that we optimise returns from our universal banking business model. What does this mean? It is clear to us that in the future there will be more capital in the banking system, and less leverage, particularly in capital markets businesses. This will be true at Barclays too, and will govern our approach to capital allocation and expected returns. We expect to see balance sheet utilisation by Barclays Capital fall over time, which will help us to deliver strengthening returns. We believe that the businesses that we have built from the integration of Lehman Brothers North American businesses and Barclays Capital will help in this regard, since the capital intensity of the advisory businesses in M&A and of the flow businesses in fixed income, currencies, equities and credit will be lower, once we have managed down our credit market exposures.

Outlook

We expect 2009 to be another challenging year with continuing downturns or recessions in many of the economies in which we are represented. In 2008 our profits were reduced by the impacts of substantial gross credit market losses. In 2009, we expect the impact of such credit market losses to be lower. Whilst we are confident in the relative quality of our major books of assets, we also expect the recessionary environments in the UK, Spain, South Africa and the US to increase the loan loss rates on our loans and advances.

Governments in the UK and elsewhere have taken significant measures to assist borrowers and lenders in response to the emerging recession, including reducing official interest rates. The low interest rate environment will have the impact of substantially reducing the spread generated on our retail and commercial banking deposits, particularly in the UK, but we expect the combined impact of these government measures to be positive for the economy in time.

2009 Trading

Customer and client activity levels were high in the first month of 2009, and we have had a good start to the year. In particular, the operating performance of Barclays Capital, benefiting from the now complete integration of the Lehman Brothers North American businesses, was extremely strong. The trends that lie behind the strong operating performance in Global Retail and Commercial Banking in 2008 were again observable in its performance in January.

Recent Developments

As reported in note 35 of the financial statements, in March 2007 the United States Court of Appeals for the Fifth Circuit issued a decision that the Newby litigation relating to Enron could not proceed against Barclays as a class action because the plaintiffs had not alleged a proper claim against Barclays. On 5th March 2009, the District Court granted summary judgment in Barclays favour on plaintiffs’ claims against Barclays. The District Court also denied plaintiffs’ request to amend the complaint to assert revised claims against Barclays on behalf of the putative class. Plaintiffs’ time in which to file an appeal regarding the District Court’s 5th March 2009 decision has not yet expired. For further information on the Newby litigation, see note 35 of the financial statements.


 

 

 

 

 

Barclays

Annual Report 2008

    11


Table of Contents

Financial review

Consolidated balance sheet

 

 

As at 31st December

 

     2008    2007    2006    2005    2004
      £m    £m    £m    £m    £m a
Assets               

Cash and other short-term funds

   31,714    7,637    9,753    5,807    3,525

Treasury bills and other eligible bills

   n/a    n/a    n/a    n/a    6,658

Trading portfolio and financial assets designated at fair value

   306,836    341,171    292,464    251,820    n/a

Derivative financial instruments

   984,802    248,088    138,353    136,823    n/a

Debt securities and equity securities

   n/a    n/a    n/a    n/a    141,710

Loans and advances to banks

   47,707    40,120    30,926    31,105    80,632

Loans and advances to customers

   461,815    345,398    282,300    268,896    262,409

Available for sale financial investments

   64,976    43,072    51,703    53,497    n/a

Reverse repurchase agreements and cash collateral on securities borrowed

   130,354    183,075    174,090    160,398    n/a

Other assets

   24,776    18,800    17,198    16,011    43,247
Total assets    2,052,980    1,227,361    996,787    924,357    538,181

Liabilities

              

Deposits and items in the course of collection due to banks

   116,545    92,338    81,783    77,468    112,229

Customer accounts

   335,505    294,987    256,754    238,684    217,492

Trading portfolio and financial liabilities designated at fair value

   136,366    139,891    125,861    104,949    n/a

Liabilities to customers under investment contracts

   69,183    92,639    84,637    85,201    n/a

Derivative financial instruments

   968,072    248,288    140,697    137,971    n/a

Debt securities in issue

   149,567    120,228    111,137    103,328    83,842

Repurchase agreements and cash collateral on securities lent

   182,285    169,429    136,956    121,178    n/a

Insurance contract liabilities, including unit-linked liabilities

   2,152    3,903    3,878    3,767    8,377

Subordinated liabilities

   29,842    18,150    13,786    12,463    12,277

Other liabilities

   16,052    15,032    13,908    14,918    87,200
Total liabilities    2,005,569    1,194,885    969,397    899,927    521,417
Shareholders’ equity               

Shareholders’ equity excluding minority interests

   36,618    23,291    19,799    17,426    15,870

Minority interests

   10,793    9,185    7,591    7,004    894
Total shareholders’ equity    47,411    32,476    27,390    24,430    16,764
Total liabilities and shareholders’ equity    2,052,980    1,227,361    996,787    924,357    538,181
Risk weighted assets and capital ratios b                              

Risk weighted assets

   433,302    353,878    297,833    269,148    218,601

Tier 1 ratio

   8.6%    7.6%    7.7%    7.0%    7.6%

Risk asset ratio

   13.6%    11.2%    11.7%    11.3%    11.5%
Selected financial and other statistics                              

Net asset value per ordinary share

   437p    353p    303p    269p    246p

Number of ordinary shares of Barclays PLC (in millions)

   8,372    6,601    6,535    6,490    6,454

Year-end United States Dollar exchange rate used in preparing the accounts

   1.46    2.00    1.96    1.72    1.92

Year-end Euro exchange rate used in preparing the accounts

   1.04    1.36    1.49    1.46    1.41

Year-end Rand exchange rate used in preparing the accounts

   13.74    13.64    13.71    10.87    10.86

The financial information above is extracted from the published accounts for the last three years. This information should be read together with, and is qualified by reference to, the accounts and Notes included in this report.

 

Notes

 

a Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

 

b Risk weighted assets and capital ratios for 2006, 2005 and 2004 are calculated on a Basel I basis. Risk weighted assets and capital ratios for 2008 and 2007 are calculated on a Basel II basis. Capital ratios for 2004 are based on UK GAAP and have not been restated as these remain as reported to the Financial Services Authority (FSA). As at 1st January 2005 the Tier 1 ratio was 7.1% and the risk asset ratio was 11.8% reflecting the impact of IFRS including the adoption of IAS 32, IAS 39 and IFRS 4.

 

12    

Barclays

Annual Report 2008


Table of Contents

LOGO

Financial review

Balance sheet commentary

 

Balance sheet

Total assets increased £826bn to £2,053bn in 2008. Of this increase, £737bn was attributable to an increase in derivative assets and £124bn was attributable to increased loans and advances. All other assets declined by £35bn.

Shareholders’ equity

Shareholders’ equity, excluding minority interests increased, nearly 57% from £23bn at the end of 2007 to £37bn at the end of 2008. The main drivers for this were: equity issuances in July and September of £5.0bn; equity impact of issuing Mandatorily Convertible Notes and Warrants of £4.4bn; and after-tax profits of £5.3bn. Other reserves increased £1.6bn and we paid dividends of £2.3bn.

Capital management

At 31st December 2008, on a Basel II basis the equity Tier 1 ratio was 6.7% and the Tier 1 ratio was 9.7%, both stated on a basis to reflect conversion into ordinary shares of the Mandatorily Convertible Notes and inclusion of all innovative Tier 1 capital. Capital ratios reflect a 22% increase in risk weighted assets to £433bn during the year. This was driven by the combined impacts on risk weighted assets of the weakening of Sterling and the pro-cyclical effects of the International Basel Accord as well as lending growth in 2008. The capital ratios reflect this risk weighted asset growth and benefited from the significant increases in our capital over the course of 2008. The pro forma ratios significantly exceed the minimum levels established by the UK Financial Services Authority.

On 19th January 2009 the UK government announced, amongst other measures, an asset protection scheme under which banks may insure certain assets on their balance sheet. We are working with the Tripartite Authorities (Her Majesty’s Treasury, Bank of England and the

UK Financial Services Authority) to determine the terms on which, and the extent to which, we would wish to participate in the scheme. The procuring of such insurance could have the effect of reducing risk weighted assets. The UK Financial Services Authority also announced on 19th January 2009 a programme of work to reduce significantly the requirement for additional capital raising from the pro-cyclical effects of the International Basel Accord.

We expect a single digit percentage rate of risk weighted asset growth in 2009.

We expect to maintain the equity Tier 1 ratio and Tier 1 ratio at levels which significantly exceed the minimum requirements of the UK Financial Services Authority for the duration of the current period of financial and economic stress.

Foreign Currency Translation

Assets and risk weighted assets were affected by the decline in value of Sterling relative to other currencies during 2008, particularly in the last two months of the year. Over the course of the year, Sterling depreciated by 37% relative to the US Dollar and 31% relative to the Euro. We estimate that currency movements contributed £60bn to risk weighted assets.

Our hedging strategy in respect of net investments in foreign currencies is designed to mitigate against the impact of such movements on our capital ratios. In this regard, equity and Tier 1 capital ratios are hedged to approximately 75%, 30% and 100% of the movements in US Dollar, Euro and South African Rand respectively against Sterling.

The currency translation reserve increased by £3.1bn year on year. This reflected foreign exchange movements in foreign currency net investments which are largely economically hedged through preference share capital (denominated in US Dollars and Euros) that is not revalued for accounting purposes.


 

 

Barclays

Annual Report 2008

    13


Table of Contents

Financial review

Balance sheet commentary

 

Total assets and risk weighted assetsa

2008/07

Total assets increased 67% to £2,053.0bn (2007: £1,227.4bn). Risk weighted assets increased 22% to £433.3bn (2007: £353.9bn).

UK Retail Banking total assets increased 15% to £101.4bn (31st December 2007: £88.5bn) driven by growth in mortgage balances. Risk weighted assets decreased 3% to £30.5bn (31st December 2007: £31.5bn) as lending growth mainly in high quality, low risk mortgages was more than offset in capital terms by active risk management.

Barclays Commercial Bank total assets grew 13% to £84.0bn (31st December 2007: £74.6bn) driven by higher loans and advances. Risk weighted assets increased 11% to £63.1bn (31st December 2007: £57.0bn). This was slightly lower than asset growth, reflecting a relative increase in lower risk portfolios.

Barclaycard total assets increased 40% to £30.9bn (31st December 2007: £22.1bn) reflecting increases in International assets, the acquisition of Goldfish and the appreciation of the Euro and US Dollar against Sterling. Risk weighted assets increased 35% to £27.3bn (31st December 2007: £20.2bn), driven by acquisitions, the redemption of securitisation deals and exposure growth predominantly in the US.

GRCB – Western Europe total assets grew 48% to £64.7bn (31st December 2007: £43.7bn) reflecting growth in retail mortgages, unsecured lending, commercial lending and a 31% appreciation over the year in the value of the Euro against Sterling. Risk weighted assets increased 46% to £36.5bn (31st December 2007: £25.0bn), primarily reflecting underlying lending growth and the appreciation of the Euro.

GRCB – Emerging Markets total assets grew 60% to £14.7bn (31st December 2007: £9.2bn) reflecting increases in retail and commercial lending combined with the impact of Sterling depreciation. Risk weighted assets increased 44% to £15.1bn (31st December 2007: £10.5bn), reflecting portfolio growth.

 

GRCB – Absa total assets increased 11% to £40.4bn (31st December 2007: £36.4bn) reflecting broad based asset growth. Risk weighted assets increased 6% to £18.8bn (31st December 2007: £17.8bn), reflecting balance sheet growth.

Barclays Capital total assets increased 94% (£789.2bn) to £1,629.1bn (31st December 2007: £839.9bn) due to an increase in derivative assets of £736.7bn, predominantly driven by significant volatility and movements in yield curves during the year, together with a substantial depreciation in Sterling against most major currencies. Risk weighted assets increased 28% to £227.4bn (31st December 2007: £178.2bn). This was driven by the depreciation in Sterling against the US Dollar and Euro, and an increase in market volatility.

Barclays Global Investors total assets decreased 20% to £71.3bn (31st December 2007: £89.2bn), mainly attributable to adverse market movements in certain asset management products recognised as investment contracts. Risk weighted assets decreased 11% to £3.9bn (31st December 2007: £4.4bn) mainly attributed to changes in the asset class mix, partially offset by the weakening of Sterling against other currencies.

Barclays Wealth total assets decreased 27% to £13.3bn (31st December 2007: £18.2bn) reflecting the sale of the closed life assurance business partially offset by strong growth in lending to high net worth and intermediary clients. Risk weighted assets increased 26% to £10.3bn (31st December 2007: £8.2bn) reflecting strong growth in lending.

Head office functions and other operations total assets decreased 46% to £3.1bn (31st December 2007: £5.7bn). Risk weighted assets decreased 64% to £0.4bn (31st December 2007: £1.1bn). The decrease in the year was mainly attributable to the increased netting of Group deferred tax assets and liabilities.


 

 

Total assets by business

 

     2008    2007    2006
     £m    £m    £m

UK Retail Banking

   101,384    88,477    81,693

Barclays Commercial Bank

   84,029    74,566    66,224

Barclaycard

   30,925    22,121    20,033

GRCB – Western Europe

   64,732    43,702    33,487

GRCB – Emerging Markets

   14,653    9,188    5,219

GRCB – Absa

   40,391    36,368    29,575

Barclays Capital

   1,629,117    839,850    657,922

Barclays Global Investors

   71,340    89,218    80,515

Barclays Wealth

   13,263    18,188    15,023

Head office functions and other operations

   3,146    5,683    7,096

Total assets

   2,052,980    1,227,361    996,787

 

Risk weighted assets by business

 

     2008 b    2007 b    2007    2006
   Basel II    Basel II    Basel I    Basel I
     £m    £m    £m    £m

UK Retail Banking

   30,491    31,463    46,059    43,020

Barclays Commercial

           

Bank

   63,081    57,040    54,325    50,302

Barclaycard

   27,316    20,199    19,690    16,873

GRCB

           

– Western Europe

   36,480    24,971    24,462    17,567

GRCB

           

– Emerging Markets

   15,080    10,484    6,050    3,255

GRCB – Absa

   18,846    17,829    22,448    19,809

Barclays Capital

   227,448    178,206    169,124    137,635

Barclays Global Investors

   3,910    4,369    1,994    1,375

Barclays Wealth

   10,300    8,216    7,692    6,077

Head office functions and other operations

   350    1,101    1,632    1,920

Total risk weighted assets

   433,302    353,878    353,476    297,833

 

Notes

 

a The 2008/07 commentary on risk weighted assets is on a Basel II basis. The 2007/06 commentary is on a Basel I basis.

 

b Under the Group’s securitisation programme, certain portfolios subject to securitisation or similar risk transfer transaction are adjusted in calculating the Group’s risk weighted assets. Previously, for pre-2008 transactions, regulatory capital adjustments were allocated to the business in proportion to their RWAs. From 1st January 2008, the regulatory capital adjustments for all transactions are allocated to the business undertaking the securitisation unless the transaction has been undertaken for the benefit of a cluster of businesses, in which case the regulatory capital adjustments are shared.

 

14    

Barclays

Annual Report 2008


Table of Contents

LOGO

 

2007/06

Total assets increased 23% to £1,227.4bn (2006: £996.8bn). Risk weighted assets increased 19% to £353.5bn (2006: £297.8bn). Loans and advances to customers that have been securitised increased £4.3bn to £28.7bn (2006: £24.4bn).

UK Retail Banking total assets increased 8% to £88.5bn (2006: £81.7bn). This was mainly attributable to growth in mortgage balances. Risk weighted assets increased by 7% to £46.1bn (2006: £43.0bn) with growth in mortgages partially offset by an increase in securitised balances and other reductions.

Barclays Commercial Bank total assets grew 13% to £74.6bn (2006: £66.2bn) driven by good growth across lending products. Risk weighted assets increased 8% to £54.3bn (2006: £50.3bn), reflecting asset growth partially offset by increased regulatory netting and an increase in securitised balances.

Barclaycard total assets increased 11% to £22.1bn (2006: £20.0bn). Risk weighted assets increased 17% to £19.7bn (2006: £16.9bn), primarily reflecting the increase in total assets, redemption of securitisation transactions, partially offset by changes to the treatment of regulatory associates and the sale of part of the Monument card portfolio.

GRCB – Western Europe total assets grew 31% to £43.7bn (2006: £33.5bn). This growth was mainly driven by increases in retail mortgages and unsecured lending. Risk weighted assets increased 39% to £24.5bn (2006: £17.6bn), reflecting asset growth.

GRCB – Emerging Markets total assets grew by 76% to £9.2bn (2006: £5.2bn). This growth was driven by increases in unsecured lending. Risk weighted assets increased 86% to £6.1bn (2006: £3.3bn), reflecting asset growth.

GRCB – Absa total assets increased 23% to £36.4bn (2006: £29.6bn), primarily driven by increases in mortgages, credit cards and commercial property finance. Risk weighted assets increased 13% to £22.4bn (2006: £19.8bn), reflecting balance sheet growth.

Barclays Capital total assets rose 28% to £839.9bn (2006: £657.9bn). Derivative assets increased £109.7bn primarily due to movements across a range of market indices. This was accompanied by a corresponding increase in derivative liabilities. The increase in non-derivative assets reflects an expansion of the business across a number of asset classes, combined with an increase in drawn leveraged loan positions and mortgage-related assets. Risk weighted assets increased 23% to £169.1bn (2006: £137.6bn) reflecting growth in fixed income, equities and credit derivatives.

 

Barclays Global Investors total assets increased 11% to £89.2bn (2006: £80.5bn), mainly attributable to growth in certain asset management products recognised as investment contracts. The majority of total assets relates to asset management products with equal and offsetting balances reflected within liabilities to customers. Risk weighted assets increased 45% to £2.0bn (2006: £1.4bn) mainly attributable to overall growth in the balance sheet and the mix of securities lending activity.

Barclays Wealth total assets increased 21% to £18.2bn (2006: £15.0bn) reflecting strong growth in lending to high net worth, affluent and intermediary clients. Risk weighted assets increased 27% to £7.7bn (2006: £6.1bn) reflecting the increase in lending.

Head office functions and other operations total assets decreased 20% to £5.7bn (2006: £7.1bn). Risk weighted assets decreased 15% to £1.6bn (2006: £1.9bn).

Adjusted gross leverage

The adjusted gross leverage ratio is defined as the multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets less derivative counterparty netting, assets under management on the balance sheet, settlement balances, goodwill and tangible assets. Tier 1 capital is defined by the UK FSA. Adjusted gross leverage is a non-IFRS measure. However, Barclays management believes that this measure provides valuable information to readers of Barclays financial statements because there will be more capital and less leverage in the banking system, as a key measure of stability, which is consistent with the views of regulators and investors. However, this measure is not a substitute for IFRS measures and readers should consider IFRS measures as well.

Volatility in reference rates and yield curves used for pricing have led to significantly higher values for derivative assets and liabilities. Limited netting is permitted under IFRS, even for receivables and payables with the same counterparty where there are contractually agreed netting arrangements. Derivative assets and liabilities would be £917bn (2007: £215bn) lower than reported under IFRS if netting were permitted for assets and liabilities with the same counterparty or for which we hold cash collateral.

Assets and liabilities also include amounts held under investment contracts with third parties of a further £69bn as at 31st December 2008 (2007: £93bn). These constitute asset management products offered to institutional pension funds which are required to be recognised as financial instruments. Changes in value in these assets are entirely to the account of the beneficial owner of the asset.

Excluding these items, settlement balances, goodwill and intangible assets, our adjusted total tangible assets were £1,026bn at 31st December 2008 (2007: £888bn). On this basis we define adjusted gross leverage, being the multiple of adjusted total tangible assets over total qualifying Tier 1 capital. At 31st December 2008 adjusted gross leverage was 28x (2007: 33x).

We expect adjusted gross leverage to improve further over time.

 

 

Adjusted gross leverage  
     

2008

£m

   

2007

£m

 
Total assets    2,052,980     1,227,361  
Counterparty net/ collateralised derivatives    (917,074 )   (215,485 )
Financial assets designated at fair value and associated cash balances – held in respect of linked liabilities to customers under investment contracts    (69,183 )   (92,639 )
Net settlement balances    (29,786 )   (22,459 )
Goodwill and intangible assets    (10,402 )   (8,296 )
Adjusted total tangible assets    1,026,535     888,482  
Total qualifying Tier 1 capital    37,250     26,743  
Adjusted gross leverage    28     33  

 

 

Barclays

Annual Report 2008

    15


Table of Contents

Financial review

Balance sheet commentary

 

Total shareholders’ equity

2008/07

Total shareholders’ equity increased £14,935m to £47,411m (2007: £32,476m).

Called up share capital comprises 8,372 million ordinary shares of 25p each (2007: 6,600 million ordinary shares of 25p each and 1 million staff shares of £1 each).

Retained earnings increased £3,238m to £24,208m (2007: £20,970m). Profit attributable to the equity holders of the parent of £4,382m and the proceeds of capital raising of £1,410m were partially offset by dividends paid to shareholders of £2,344m. Other equity of £3,652m represents the issue of Mandatorily Convertible Notes, which will convert into ordinary shares by June 2009.

Movements in other reserves, except the capital redemption reserve, reflect the relevant amounts recorded in the consolidated statement of recognised income and expense on page 206.

Minority interests increased £1,608m to £10,793m (2007: £9,185m). The increase primarily reflects a preference share issuance by Barclays Bank PLC of £1,345m.

The Group’s authority to buy-back equity shares was renewed at the 2008 AGM.

2007/06

Total shareholders’ equity increased £5,086m to £32,476m (2006: £27,390m).

Called up share capital comprises 6,600 million (2006: 6,535 million) ordinary shares of 25p each and 1 million (2006: 1 million) staff shares of £1 each. Called up share capital increased by £17m representing the nominal value of shares issued to Temasek Holdings, China Development Bank (CDB) and employees under share option plans largely offset by a reduction in nominal value arising from share buy-backs. Share premium

reduced by £5,762m; the reclassification of £7,223m to retained earnings resulting from the High Court approved cancellation of share premium was partly offset by additional premium arising on the issuance to CDB and on employee options. The capital redemption reserve increased by £75m representing the nominal value of the share buy-backs.

Retained earnings increased by £8,801m. Increases primarily arose from profit attributable to equity holders of the parent of £4,417m, the reclassification of share premium of £7,223m and the proceeds of the Temasek issuance in excess of nominal value of £941m. Reductions primarily arose from external dividends paid of £2,079m and the total cost of share repurchases of £1,802m.

Movements in other reserves, except the capital redemption reserve, reflect the relevant amounts recorded in the consolidated statement of recognised income and expense on page 206.

Minority interests increased £1,594m to £9,185m (2006: £7,591m). The increase was primarily driven by preference share issuances of £1,322m and an increase in the minority interest in Absa of £225m.

The Group’s authority to buy-back equity shares was renewed at the 2007 AGM.

Barclays Bank PLC

Preference shares issued by Barclays Bank PLC are included within share capital and share premium in the Barclays Bank PLC Group but represent minority interests in the Barclays PLC Group. Certain issuances of reserve capital instruments and capital notes by Barclays Bank PLC are included within other shareholders’ equity in the Barclays Bank PLC Group but represent minority interests in Barclays PLC Group. The Mandatorily Convertible Notes issued pursuant to the equity issuances by Barclays PLC represent financial liabilities in the financial statements of Barclays Bank PLC and have not been included in shareholders’ equity.


 

 

Total shareholders’ equity

 

      2008
£m
          2007
£m
         

2006

£m

 
Barclays PLC Group             
Called up share capital    2,093        1,651        1,634  
Share premium account    4,045        56        5,818  
Other equity    3,652                
Available for sale reserve    (1,190 )               132  
Cash flow hedging reserve    132           26           (230 )
Capital redemption reserve    394        384        309  
Other capital reserve    617        617        617  
Currency translation reserve    2,840        (307 )      (438 )
Other reserves    2,793        874        390  
Retained earnings    24,208        20,970        12,169  
Less: Treasury shares    (173 )        (260 )        (212 )
Shareholders’ equity excluding minority interests    36,618        23,291        19,799  
Minority interests    10,793          9,185          7,591  
Total shareholders’ equity    47,411          32,476          27,390  

 

Total shareholders’ equity

 

      2008
£m
          2007
£m
          2006
£m
 
Barclays Bank PLC Group             
Called up share capital    2,398        2,382        2,363  
Share premium account    12,060        10,751        9,452  
Available for sale reserve    (1,249 )      111           184  
Cash flow hedging reserve    132           26        (230 )
Currency translation reserve    2,840        (307 )      (438 )
Other reserves    1,723        (170 )      (484 )
Other shareholders’ equity    2,564        2,687        2,534  
Retained earnings    22,457          14,222          11,556  
Shareholders’ equity excluding minority interests    41,202        29,872        25,421  
Minority interests    2,372          1,949          1,685  
Total shareholders’ equity    43,574          31,821          27,106  

 

16    

Barclays

Annual Report 2008


Table of Contents

LOGO

Financial review

Capital management

 

Capital resources

Tier 1 capital increased by £10.5bn during the year, driven by issues of ordinary shares (£5.2bn), other capital issuances (£4.3bn), retained profits (£2.0bn) and exchange rate movements (£3.2bn). These movements were partially offset by an increase in intangible assets (£1.3bn), innovative Tier 1 capital in excess of regulatory limits being reclassified as Tier 2 capital (£1.3bn) and the reversal of gains on own credit, net of tax (£1.2bn).

Tier 2 capital increased by £8.5bn due to issuance of loan capital (£3.6bn) net of redemptions (£1.1bn), inclusion of innovative capital in excess of the Tier 1 limits (£1.3bn), increases in collective impairment (£1.2bn) and exchange rate movements (£3.9bn).

The Mandatorily Convertible Notes (MCNs) issued during the year (£4.1bn) will qualify as equity capital from the date of their conversion, on or before 30th June 2009.

All capital issuance referred to above is stated gross of issue costs.

Basel I transitional floor

Barclays commenced calculating capital requirements under the Basel II capital framework from 1st January 2008. The Group manages its businesses and reports capital requirements on a Basel II basis. During the transition period for the adoption of Basel II, banks’ capital requirements may not fall below a transitional floor. In 2008 this floor was 90% of adjusted Basel I capital requirements. As at 31st December 2008, the Group had additional capital requirements under the transitional floor rules of £1.5bn. The Group’s total capital resources of £58.7bn exceeded its capital requirements taking into account the transitional floor by £22.5bn. On 1st January 2009, the transitional floor reduced to 80% of adjusted Basel I capital requirements and there were no additional capital requirements resulting from its application.


 

Capital ratios

 

 

     Basel II     Basel II     Basel I     Basel I  
     2008     2007     2007     2006  
     Barclays

PLC

Group

 

 

 

  Barclays

Bank PLC

Group

 

 

 

  Barclays

PLC

Group

 

 

 

  Barclays

Bank PLC

Group

 

 

 

  Barclays

PLC

Group

 

 

 

  Barclays

Bank PLC

Group

 

 

 

  Barclays

PLC

Group

 

 

 

  Barclays

Bank PLC

Group

 

 

 

Capital ratios

   %     %     %     %     %     %     %     %  

Tier 1 ratio

   8.6     8.6     7.6     7.3     7.8     7.5     7.7     7.5  

Risk asset ratio

   13.6     13.5     11.2     11.0     12.1     11.8     11.7     11.5  
   

Risk weighted assets

   £m     £m     £m     £m     £m     £m     £m     £m  

Credit risk

   266,912     266,912     244,474     244,469     265,264     265,259     233,630     233,630  

Counterparty risk

   70,902     70,902     41,203     41,203     51,947     51,947     33,912     33,912  

Market risk

   65,372     65,372     39,812     39,812     36,265     36,265     30,291     30,291  

Operational risk

   30,116     30,116     28,389     28,389     n/a     n/a     n/a     n/a  

Total risk weighted assets

   433,302     433,302     353,878     353,873     353,476     353,471     297,833     297,833  

Total net capital resources

 

                

 

Capital resources (as defined for regulatory purposes)

                                                
      £m     £m     £m     £m     £m     £m     £m     £m  

Tier 1

                    

Called up share capital

   2,093     2,338     1,651     2,382     1,651     2,382     1,634     2,363  

Eligible reserves

   31,156     36,639     22,939     26,028     22,526     25,615     19,608     21,700  

Minority interests

   13,915     8,038     10,551     5,857     10,551     5,857     7,899     4,528  

Tier One Notes

   1,086     1,086     899     899     899     899     909     909  

Less: Intangible assets

   (9,964 )   (9,964 )   (8,191 )   (8,191 )   (8,191 )   (8,191 )   (7,045 )   (7,045 )

Less: Deductions from Tier 1 capital

   (1,036 )   (1,036 )   (1,106 )   (1,106 )   (28 )   (28 )        

Total qualifying Tier 1 capital

   37,250     37,101     26,743     25,869     27,408     26,534     23,005     22,455  

Tier 2

                    

Revaluation reserves

   26     26     26     26     26     26     25     25  

Available for sale equity

   122     122     295     295     295     295     221     221  

Collectively assessed impairment allowances

   1,654     1,654     440     440     2,619     2,619     2,556     2,556  

Minority interests

   607     607     442     442     442     442     451     451  

Qualifying subordinated liabilities

                    

Undated loan capital

   6,745     6,768     3,191     3,191     3,191     3,191     3,180     3,180  

Dated loan capital

   14,215     14,215     10,578     10,578     10,578     10,578     7,603     7,603  

Less: Deductions from Tier 2 capital

   (1,036 )   (1,036 )   (1,106 )   (1,106 )   (28 )   (28 )        

Total qualifying Tier 2 capital

   22,333     22,356     13,866     13,866     17,123     17,123     14,036     14,036  

Less: Regulatory deductions

                    

Investments not consolidated for supervisory purposes

   (403 )   (403 )   (633 )   (633 )   (633 )   (633 )   (982 )   (982 )

Other deductions

   (453 )   (561 )   (193 )   (193 )   (1,256 )   (1,256 )   (1,348 )   (1,348 )

Total deductions

   (856 )   (964 )   (826 )   (826 )   (1,889 )   (1,889 )   (2,330 )   (2,330 )

Total net capital resources

   58,727     58,493     39,783     38,909     42,642     41,768     34,711     34,161  

 

 

Barclays

Annual Report 2008

    17


Table of Contents

Financial review

Additional financial disclosure

Deposits and short-term borrowings

 

Deposits

Deposits include deposits from banks and customers accounts.

 

      Average: year ended 31st December
     2008

£m

   2007

£m

   2006

£m

Deposits from banks

        

Customers in the United Kingdom

   14,003    15,321    12,832

Customers outside the

        

United Kingdom:

        

Other European Union

   38,210    33,162    30,116

United States

   15,925    6,656    7,352

Africa

   3,110    4,452    4,140

Rest of the World

   36,599    36,626    35,013

Total deposits from banks

   107,847    96,217    89,453

Customer accounts

        

Customers in the United Kingdom

   206,020    187,249    173,767

Customers outside the

        

United Kingdom:

        

Other European Union

   30,909    23,696    22,448

United States

   31,719    21,908    17,661

Africa

   35,692    29,855    23,560

Rest of the World

   27,653    23,032    19,992

Customer accounts

   331,993    285,740    257,428

Deposits from banks in offices in the United Kingdom received from non- residents amounted to £63,284m (2007: £45,162m).

 

      Year ended 31st December
     2008

£m

   2007

£m

   2006

£m

Customer accounts

   335,505    294,987    256,754

In offices in the United Kingdom:

        

Current and Demand accounts

        

– interest free

   41,351    33,400    25,650

Current and Demand accounts

        

– interest bearing

   20,898    32,047    31,769

Savings accounts

   68,335    70,682    62,745

Other time deposits – retail

   33,785    36,123    36,110

Other time deposits – wholesale

   74,417    65,726    53,733

Total repayable in offices in the United Kingdom

   238,786    237,978    210,007

In offices outside the United Kingdom:

        

Current and Demand accounts

        

– interest free

   4,803    2,990    2,169

Current and Demand accounts

        

– interest bearing

   15,463    11,570    17,626

Savings accounts

   7,673    3,917    3,041

Other time deposits

   68,780    38,532    23,911

Total repayable in offices outside the United Kingdom

   96,719    57,009    46,747

Customer accounts deposits in offices in the United Kingdom received from non-residents amounted to £61,714m (2007: £49,179m).

Short-term borrowings

Short-term borrowings include deposits from banks, commercial paper and negotiable certificates of deposit.

Deposits from banks

Deposits from banks are taken from a wide range of counterparties and generally have maturities of less than one year.

 

     

2008

£m

  

2007

£m

  

2006

£m

Year-end balance

   114,910    90,546    79,562

Average balance

   107,847    96,217    89,453

Maximum balance

   139,836    109,586    97,165

Average interest rate during year

   3.6%    4.1%    4.2%

Year-end interest rate

   2.3%    4.0%    4.3%

Commercial paper

Commercial paper is issued by the Group, mainly in the United States, generally in denominations of not less than US$100,000, with maturities of up to 270 days.

 

     

2008

£m

  

2007

£m

  

2006

£m

Year-end balance

   27,692    23,451    26,546

Average balance

   24,668    26,229    29,740

Maximum balance

   27,792    30,736    31,859

Average interest rate during year

   4.4%    5.4%    4.4%

Year-end interest rate

   4.2%    5.2%    5.0%

Negotiable certificates of deposit

Negotiable certificates of deposits are issued mainly in the United Kingdom and United States, generally in denominations of not less than US$100,000.

 

     

2008

£m

  

2007

£m

  

2006

£m

Year-end balance

   61,332    58,401    52,800

Average balance

   55,122    55,394    49,327

Maximum balance

   67,715    62,436    60,914

Average interest rate during year

   4.4%    5.1%    5.3%

Year-end interest rate

   4.1%    5.0%    5.1%

 

18    

Barclays

Annual Report 2008


Table of Contents

LOGO

Financial review

Additional financial disclosure

Commitments and contractual obligations

Commercial commitments include guarantees, contingent liabilities and standby facilities.

 

 

Commercial commitments

    

2008

Amount of commitment expiration per period

     

Less than

one year

£m

  

Between

one to
three years

£m

  

Between

three to
five years

£m

  

After
five years

£m

  

Total
amounts
committed

£m

Acceptances and endorsements

   576    6    3       585

Guarantees and letters of credit pledged as collateral security

   7,272    2,529    1,781    4,070    15,652

Securities lending arrangements

   38,290             38,290

Other contingent liabilities

   7,989    1,604    372    1,818    11,783

Documentary credits and other short-term trade related transactions

   770    88    1       859

Forward asset purchases and forward deposits placed

   50    241          291

Standby facilities, credit lines and other

   195,035    29,666    26,150    8,815    259,666
    

2007

Amount of commitment expiration per period

     

Less than
one year

£m

  

Between

one to
three years

£m

  

Between

three to

five years

£m

  

After

five years

£m

  

Total
amounts
committed

£m

Acceptances and endorsements

   365             365

Guarantees and letters of credit pledged as collateral security

   6,417    2,711    1,971    1,874    12,973

Securities lending arrangements

   22,719             22,719

Other contingent liabilities

   6,594    1,556    416    1,151    9,717

Documentary credits and other short-term trade related transactions

   401    121          522

Forward asset purchases and forward deposits placed

   283             283

Standby facilities, credit lines and other

   136,457    17,039    28,127    10,211    191,834

 

Contractual obligations include debt securities, operating lease and purchase obligations.

 

 

Contractual obligations

    

2008

Payments due by period

     

Less than
one year

£m

  

Between

one to

three years

£m

  

Between
three to

five years

£m

  

After

five years

£m

  

Total

£m

Long-term debt

   108,172    24,701    10,855    22,008    165,736

Operating lease obligations

   280    690    785    2,745    4,500

Purchase obligations

   214    225    61    20    520

Total

   108,666    25,616    11,701    24,773    170,756
    

2007

Payments due by period

     

Less than

one year

£m

  

Between

one to

three years

£m

  

Between

three to

five years

£m

  

After

five years

£m

  

Total

£m

Long-term debt

   90,201    13,558    8,630    19,358    131,747

Operating lease obligations

   197    755    610    2,225    3,787

Purchase obligations

   141    186    27    6    360

Total

   90,539    14,499    9,267    21,589    135,894

The long-term debt does not include undated loan capital of £13,673m (2007: £6,631m).

Further information on the contractual maturity of the Group’s assets and liabilities is given in Note 49.

 

 

Barclays

Annual Report 2008

    19


Table of Contents

Financial review

Additional financial disclosure

Securities

The following table analyses the book value of securities which are carried at fair value.

 

 

     2008    2007    2006
     

Book value

£m

  

Amortised
cost

£m

  

Book value

£m

  

Amortised
cost

£m

  

Book value

£m

  

Amortised
cost

£m

Investment securities – available for sale

                 

Debt securities:

                 

United Kingdom government

   1,238    1,240    78    81    758    761

Other government

   11,456    11,338    7,383    7,434    12,587    12,735

Other public bodies

   2,373    2,379    634    632    280    277

Mortgage and asset backed securities

   3,510    4,126    1,367    1,429    1,706    1,706

Bank and building society certificates of deposit

   10,478    10,535    3,028    3,029    6,686    6,693

Corporate and other issuers

   29,776    30,363    26,183    26,219    25,895    25,857

Equity securities

   2,142    1,814    1,676    1,418    1,371    1,047

Investment securities – available for sale

   60,973    61,795    40,349    40,242    49,283    49,076

Other securities – held for trading

                 

Debt securities:

                 

United Kingdom government

   6,955    n/a    3,832    n/a    4,986    n/a

Other government

   50,727    n/a    51,104    n/a    46,845    n/a

Mortgage and asset backed securities

   30,748    n/a    37,038    n/a    29,606    n/a

Bank and building society certificates of deposit

   7,518    n/a    17,751    n/a    14,159    n/a

Corporate and other issuers

   52,738    n/a    43,053    n/a    44,980    n/a

Equity securities

   30,535    n/a    36,307    n/a    31,548    n/a

Other securities – held for trading

   179,221    n/a    189,085    n/a    172,124    n/a

Investment debt securities include government securities held as part of the Group’s treasury management portfolio for asset and liability, liquidity and regulatory purposes and are for use on a continuing basis in the activities of the Group. In addition, the Group holds as investments listed and unlisted corporate securities.

Bank and building society certificates of deposit are freely negotiable and have original maturities of up to five years, but are typically held for shorter periods.

In addition to UK government securities shown above, at 31st December 2008, 2007 and 2006, the Group held the following government securities which exceeded 10% of shareholders’ equity.

 

 

Government securities

     2008    2007    2006
     

Book value

£m

  

Book value

£m

  

Book value

£m

United States

   17,165    15,156    18,343

Japan

   9,092    9,124    15,505

Germany

   5,832    5,136    4,741

France

   4,091    3,538    4,336

Italy

   6,091    5,090    3,419

Spain

   3,647    3,674    2,859

 

 

Maturities and yield of available for sale debt securities

 

     Maturing within
one year
   Maturing after one but
within five years
   Maturing after five but
within ten years
   Maturing after
ten years
   Total
     

Amount

£m

  

Yield

%

  

Amount

£m

  

Yield

%

  

Amount

£m

  

Yield

%

  

Amount

£m

  

Yield

%

  

Amount

£m

  

Yield

%

Government

   3,096    6.0    5,410    5.1    1,694    1.1    2,493    0.9    12,693    4.0

Other public bodies

   832    1.9    1,526    0.9    1       14    4.7    2,373    1.3

Other issuers

   21,749    4.3    9,692    3.8    7,702    4.4    4,622    5.7    43,765    4.3

Total book value

   25,677    4.4    16,628    3.9    9,397    3.8    7,129    4.0    58,831    4.1

The yield for each range of maturities is calculated by dividing the annualised interest income prevailing at 31st December 2008 by the fair value of securities held at that date.

 

20    

Barclays

Annual Report 2008


Table of Contents

LOGO

Financial review

Additional financial disclosure

Average balance sheet

Average balance sheet and net interest income (year ended 31st December)

 

 

 

   2008    2007    2006
     Average
balance a
£m
 
 
 
  Interest
£m
 
 
  Average
rate

%

   Average
balance a

£m

 
 

 

  Interest
£m
 
 
  Average
rate

%

   Average
balance a

£m

 
 

 

  Interest
£m
 
 
  Average
rate

%

Assets

                    

Loans and advances to banks b :

                    

– in offices in the United Kingdom

   38,913     1,453     3.7    29,431     1,074     3.6    18,401     647     3.5

– in offices outside the United Kingdom

   14,379     419     2.9    12,262     779     6.4    12,278     488     4.0

Loans and advances to customers b :

                    

– in offices in the United Kingdom

   249,081     13,714     5.5    205,707     13,027     6.3    184,392     11,247     6.1

– in offices outside the United Kingdom

   116,284     9,208     7.9    88,212     6,733     7.6    77,615     4,931     6.4

Lease receivables:

                    

– in offices in the United Kingdom

   4,827     281     5.8    4,822     283     5.9    5,266     300     5.7

– in offices outside the United Kingdom

   6,543     752     11.5    5,861     691     11.8    6,162     595     9.7

Financial investments:

                    

– in offices in the United Kingdom

   35,844     1,654     4.6    37,803     2,039     5.4    41,125     1,936     4.7

– in offices outside the United Kingdom

   10,450     697     6.7    14,750     452     3.1    14,191     830     5.8

Reverse repurchase agreements and cash collateral on securities borrowed:

                    

– in offices in the United Kingdom

   207,521     8,768     4.2    211,709     9,644     4.6    166,713     6,136     3.7

– in offices outside the United Kingdom

   128,250     4,450     3.5    109,012     5,454     5.0    100,416     5,040     5.0

Trading portfolio assets:

                    

– in offices in the United Kingdom

   107,626     4,948     4.6    120,691     5,926     4.9    106,148     4,166     3.9

– in offices outside the United Kingdom

   128,287     5,577     4.3    57,535     3,489     6.1    61,370     2,608     4.2

Total average interest earning assets

   1,048,005     51,921     5.0    897,795     49,591     5.5    794,077     38,924     4.9

Impairment allowances/provisions

   (5,749 )        (4,435 )        (3,565 )    

Non-interest earning assets

   711,856          422,834          310,949      

Total average assets and interest income

   1,754,112     51,921     3.0    1,316,194     49,591     3.8    1,101,461     38,924     3.5

Percentage of total average interest earning assets in offices outside the United Kingdom

   38.6%          32.0%          34.3%      

Total average interest earning assets related to:

                    

Interest income

     51,921     5.0      49,591     5.5      38,924     4.9

Interest expense

     (38,181 )   3.6      (37,892 )   4.2      (30,385 )   3.8
           13,740     1.4          11,699     1.3          8,539     1.1

Notes

 

a Average balances are based upon daily averages for most UK banking operations and monthly averages elsewhere.

 

b Loans and advances to customers and banks include all doubtful lendings, including non-accrual lendings. Interest receivable on such lendings has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Group.

 

 

Barclays

Annual Report 2008

    21


Table of Contents

Financial review

Additional financial disclosure

Average balance sheet

Average balance sheet and net interest income (year ended 31st December)

 

 

 

   2008    2007    2006
     Average
balance a
£m
   Interest
£m
   Average
rate

%

   Average
balance a
£m
   Interest
£m
   Average
rate

%

   Average
balance 
a
£m
   Interest
£m
   Average
rate

%

Liabilities and shareholders’ equity

                          

Deposits by banks:

                          

– in offices in the United Kingdom

   70,272    2,780    4.0    63,902    2,511    3.9    62,236    2, 464    4.0

– in offices outside the United Kingdom

   32,172    956    3.0