Final Results - Part 1
Barclays PLC
12 February 2004
PART 1
BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2003
PAGE
Summary 1
Financial highlights 4
Chairman's statement 5
Group Chief Executive's statement 6
Group performance management 11
Summary of results 14
Consolidated profit and loss account 15
Consolidated balance sheet 16
Financial review 17
Additional information 49
Notes 51
Consolidated statement of changes in shareholders' funds 60
Statement of total recognised gains and losses 60
Summary consolidated cashflow statement 61
Average balance sheet 62
Other information 64
Index 70
The information in this announcement, which was approved by the Board of
Directors on 11th February 2004, does not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accounts
which are combined with the Group's Annual Report on Form 20-F to the US
Securities and Exchange Commission (SEC) and which will contain an unqualified
audit report, will be delivered to the Registrar of Companies in accordance with
Section 242 of the Act. The 2003 Annual Review and Summary Financial Statement
will be posted to shareholders together with the Group's full Annual Report for
those shareholders who request it.
This document contains certain forward-looking statements within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, and Section
27A of the US Securities Act of 1933, as amended, with respect to certain of the
Group's plans and its current goals and expectations relating to its future
financial condition and performance. These forward-looking statements can be
identified by the fact that they do not relate only to historical or current
facts. Forward-looking statements sometimes use words such as 'anticipate',
'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other
words of similar meaning. By their nature, forward-looking statements involve
risk and uncertainty because they relate to future events and circumstances,
including, but not limited to, UK domestic and global economic and business
conditions, market related risks such as changes in interest rates and exchange
rates, the policies and actions of governmental and regulatory authorities,
changes in legislation and the impact of competition, a number of which are
beyond the Group's control. As a result, the Group's actual future results may
differ materially from the plans, goals, and expectations set forth in the
Group's forward-looking statements. Any forward-looking statements made by or on
behalf of Barclays speak only as of the date they are made. Barclays does not
undertake to update forward-looking statements to reflect any changes in
Barclays expectations with regard thereto or any changes in events, conditions
or circumstances on which any such statement is based. The reader should,
however, consult any additional disclosures that Barclays has made or may make
in documents it has filed or may file with the SEC including its most recent
Annual Report on Form 20-F.
In 2003, the SEC adopted regulations relating to the presentation of financial
data which is not based on the Generally Accepted Accounting Principles (GAAP)
applied by SEC reporting companies. These regulations are commonly referred to
as Regulation G. In this document, the presentation of certain individual
business results and assets excludes goodwill and exceptional items. For a
reconciliation of (i) profit before tax excluding goodwill and exceptional items
and (ii) total assets excluding goodwill of our various businesses to the
comparable UK GAAP measure, see 'Reconciliation of profit before tax and total
assets' on page 66.
BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 020 7699 5000,
COMPANY NO. 48839.
RESULTS FOR YEAR TO 31ST DECEMBER 2003
2003 2002 1 % Change
£m £m
Operating income 12,411 11,327 10
Operating expenses (7,253) (6,624) 9
Provisions for bad and doubtful debts (1,347) (1,484) (9)
Operating profit 3,812 3,218 18
Profit before tax 3,845 3,205 20
Profit after tax 2,769 2,250 23
Economic profit 1,420 1,237 15
Earnings per share 42.3p 33.7p 26
Dividend per share 20.5p 18.35p 12
Post-tax return on average shareholders'
funds 17% 15%
'These are strong results, which demonstrate the momentum we have generated over
our first four-year goal period. We have strengthened our diversified portfolio
of businesses while maintaining downward pressure on costs and a prudent
approach to risk. As a result, we have achieved top quartile total shareholder
return relative to our peers. This is an important milestone for Barclays.
We embark on the next four-year goal period with confidence and commitment to
further enhance performance.'
Matthew W. Barrett, Group Chief Executive
Financial Summary
• Operating income increased 10% (£1,084m) to £12,411m (2002: £11,327m).
• Operating expenses rose 9% (£629m) to £7,253m (2002: £6,624m), with
approximately one third of the increase attributable to the move to a
pensions charge in 2003 (£128m) from a pensions credit (£72m) in respect of
the Group's main UK pension schemes. Restructuring costs amounted to £209m
(2002: £187m). Goodwill amortisation was £265m (2002: £254m).
• The cost:income ratio was maintained at 58% (2002: 58%).
• Provisions for bad and doubtful debts fell 9% (£137m) to £1,347m (2002:
£1,484m). Provisions excluding the impact of Transition Businesses, mainly
in respect of Argentina in 2002, fell 3% (£36m) to £1,324m (2002: £1,360m).
• Operating profit rose 18% (£594m) to £3,812m (2002: £3,218m).
• Profit before tax rose 20% (£640m) to £3,845m (2002: £3,205m).
• Post-tax return on average shareholders' funds was 17% (2002: 15%).
• Earnings per share rose 26% to 42.3p (2002: 33.7p). The final dividend
per share for 2003 is 13.45p (2002: 12.00p). The full year dividend per
share increased by 12% to 20.5p (2002: 18.35p).
1 Comparative figures have been restated consequent upon the change in
accounting presentation detailed on page 50. Comparative figures have also been
restated as a result of the change in accounting policy arising from the
adoption of UITF Abstract 37, 'Purchases and sales of own shares'. The impact of
the change of accounting policy is fully set out on page 49.
• In 2003, the Group repurchased shares with a value of £204m and
distributed £788m through the final dividend for 2002 and £461m through the
interim dividend for 2003.
• Equity shareholders' funds were £16.5bn at 31st December 2003 (31st
December 2002: £15.2bn). The tier 1 capital ratio was 7.9% (31st December
2002: 8.2%). The average economic capital (excluding goodwill and capital
held at Group centre) to support the Group's ongoing business requirements
was approximately £10.9bn (2002: £10.2bn).
Business Performance Summary
• Personal Financial Services operating profit excluding goodwill
increased 11% to £967m (2002: £871m). Operating income was up 7% at £3,109m
(2002: £2,919m). Operating expenses excluding goodwill rose 7% to £1,839m
(2002: £1,714m), with almost two-thirds of the increase attributable to the
pensions charge and higher strategic investment spend. The cost:income
ratio was maintained at 59%. Provisions decreased 9% to £303m (2002: £334m)
as both the portfolio and risk processes improved. Stronger lending and
deposit volumes and active margin management helped drive income momentum.
This was reinforced by broadly based operating income growth across the
main businesses: general insurance up 32%; consumer finance up 15%;
mortgages up 10%; and current accounts and savings up 2%. Income from
independent financial advice fell 28%. The market share of net new mortgage
lending in the UK was 2% (2002: 9%). The interest spread on new mortgage
business increased. The number of Openplan customers in the UK grew to
2.6 million. Barclays branded savings was one of the leaders in new
business generation with average deposits rising 19%.
• Barclays Private Clients operating profit, excluding goodwill, for the
ongoing business decreased 11% to £328m (2002: £368m). Profit before tax,
excluding goodwill and exceptional items, fell 3% to £351m (2002: £360m).
Barclays Private Clients business activity was impacted by significantly
lower average equity markets and by lower average interest rates than in
2002, offset in part by a good performance in Spain. Operating income fell
4% to £1,350m (2002: £1,401m). Operating expenses excluding goodwill fell
1% to £991m (2002: £996m). The cost: income ratio was 73% (2002: 71%). The
performance of Barclays Spanish business remained strong, with operating
income rising 22% fuelled by further growth in Openplan mortgages and
favourable exchange rate movements. This was before the contribution of
Banco Zaragozano; £18m operating profit excluding goodwill. The acquisition
of Banco Zaragozano was completed in mid July 2003. The acquisition of
Charles Schwab Europe was completed in January 2003. The acquisition of
Gerrard was completed in mid December 2003. The contribution from the
closed life assurance activities was a loss of £77m (2002: loss £87m).
• Barclaycard operating profit excluding goodwill increased 17% to £722m
(2002: £615m), with strong business volumes driving income growth of 16% to
£1,830m (2002: £1,582m). Operating expenses excluding goodwill rose 14% to
£646m (2002: £565m) reflecting strong growth in business volumes, increased
marketing activity and higher strategic investment expenditure. The cost:
income ratio improved to 35% (2002: 36%). Provisions increased 15% to £462m
(2002: £402m) in line with growth in the loan portfolio. Average UK
extended credit balances grew 14% to £7.4bn (2002: £6.5bn). A record
1,547,000 customers (2002: 1,218,000) were recruited to Barclaycard in the
UK during 2003. Barclaycard International made a profit of £4m (2002: loss
£14m) with income growth of 48%. Average extended credit balances were 43%
higher whilst Barclaycard International cards in issue rose to 1.42m
(2002: 1.28m).
• Business Banking operating profit excluding goodwill increased 7% to
£1,308m (2002: £1,227m) reflecting loan volume growth and stable lending
margins, the benefits of tight cost management and well controlled risk.
Operating income grew 5% to £2,628m (2002: £2,514m), and reflected the
impact of the implementation of the Competition Commission Inquiry
transitional pricing remedy. Operating expenses excluding goodwill rose 1%
to £1,071m (2002: £1,061m) and included cost savings realised in the back
office. The cost:income ratio improved to 41% (2002: 42%). Provisions
increased 10% to £249m (2002: £226m) in line with lending growth in the
portfolio. The overall quality of the lending portfolio, as defined by risk
grade, was maintained. Average lending balances increased 11% to £47.0bn
and average deposit balances increased 5% to £46.2bn.
• Barclays Africa operating profit excluding goodwill increased 27% to
£113m (2002: £89m). Operating income was up 18% at £325m (2002: £275m),
driven by strong lending growth in selected markets. Operating expenses
excluding goodwill rose 16% to £185m (2002: £159m). The cost:income ratio
improved to 57% (2002: 58%). Provisions were steady at £27m.
• Barclays Capital operating profit increased 35% to £782m (2002: £580m).
Operating income grew 18% to a record £2,652m (2002: £2,238m), with
secondary income up 17% and primary income up 16%. Average Daily Value at
Risk (DVaR) was £26m (2002: £23m). Operating expenses rose 22% to £1,618m
(2002: £1,324m) reflecting increased business as usual costs from higher
business volumes and headcount growth, performance based revenue related
costs and increased strategic investment spend. The cost: income ratio rose
to 61% (2002: 59%). Provisions declined 25% to £252m (2002: £334m)
reflecting continued improvements in the quality of the loan book and in
the corporate credit environment. Market share grew; Barclays Capital
progressed to 4th in the global all debt league table, from 5th in 2002,
with US$199bn of debt issued for clients (2002: US$162bn).
• Barclays Global Investors operating profit excluding goodwill increased
73% to £192m (2002: £111m). Operating income, predominantly fees and
commissions, rose 22% to £672m (2002: £550m) reflecting growth in assets
under management, good investment performance and increased higher margin
business. Operating expenses excluding goodwill increased 9% to £480m
(2002: £439m). The cost:income ratio improved to 71% (2002: 80%). Total
assets under management at year-end were £598bn (31st December 2002:
£462bn) including £67bn of net new assets acquired during the year.
Goals
• Barclays achieved its primary goal, of top quartile total shareholder
return relative to its peer group, for the four years ended 31st December
2003.
• Cumulative economic profit for the four years ended 31st December 2003
was £5.3bn, 87% of the original goal of £6.1bn.
• Cumulative annual cost savings for the four years ended 31st December
2003 were £1.26bn, 26% ahead of the £1bn goal.
• For the year ended 31st December 2003, ongoing Woolwich integration
synergies of £375m were achieved, relative to a target of £330m for the
year. Barclays remains on track to achieve the target synergies of £400m
per annum by the end of 2004.
• Barclays will continue to use goals to drive business performance. The
primary goal for the period 2004 to 2007 remains unchanged; to achieve top
quartile total shareholder return relative to its global peer group. Based
on current market valuations and forecasts, we estimate compound annual
growth of economic profit in the range of 10% to 13% (£7.3bn to £7.8bn of
cumulative economic profit) would be required over the goal period.
FINANCIAL HIGHLIGHTS
2003 2002 1
RESULTS £m £m
-------
Net interest income 6,604 6,205
Non-interest income 5,807 5,122
Operating income 12,411 11,327
Operating expenses (7,253) (6,624)
Provisions for bad and doubtful debts (1,347) (1,484)
Provisions for contingent liabilities and commitments 1 (1)
Operating profit 3,812 3,218
Profit / (loss) from joint ventures and associated
undertakings 29 (10)
Exceptional items 4 (3)
Profit before tax 3,845 3,205
Profit after tax 2,769 2,250
Profit attributable to shareholders 2,744 2,230
Economic profit 1,420 1,237
BALANCE SHEET
-------------
Shareholders' funds 16,473 15,201
Loan capital 12,339 11,537
Total capital resources 29,095 26,894
Total assets 443,361 403,062
Weighted risk assets 188,997 172,748
PER ORDINARY SHARE p p
------------------
Earnings 42.3 33.7
Fully diluted earnings 42.1 33.4
Dividend 20.5 18.35
Net asset value 251.0 231.2
PERFORMANCE RATIOS % %
------------------
Post-tax return on average shareholders' funds 16.9 14.7
CAPITAL RATIOS % %
--------------
Equity Tier 1 ratio 6.5 6.6
Tier 1 ratio 7.9 8.2
Risk asset ratio 12.8 12.8
GROUP YIELDS, SPREADS & MARGINS % %
-------------------------------
Gross yield 4.92 5.35
Interest spread 2.33 2.42
Interest margin 2.61 2.75
ECONOMIC DATA
-------------
Period end - US$/£ 1.78 1.61
Average - US$/£ 1.64 1.50
Period end - €/£ 1.41 1.54
Average - €/£ 1.45 1.59
FTSE 100 index period end 4,477 3,940
FTSE 100 index period average 4,051 4,599
1 Comparative figures have been restated consequent upon the change in
accounting presentation detailed on page 50. Comparative figures have also been
restated as a result of the change in accounting policy arising from the
adoption of UITF Abstract 37, 'Purchases and sales of own shares'. The impact of
the change of accounting policy is fully set out on page 49.
CHAIRMAN'S STATEMENT
Barclays had a successful 2003, delivering strong returns to our shareholders
while continuing to invest in our staff, customer products and services, and
contributing to the communities in which we work.
The economic picture was brighter in 2003. The UK economy made progress, growing
at 2.1%, whilst repositioning away from consumption towards corporate
investment, government spending and a stronger trade balance. The US economy
embarked on a vigorous recovery, with uncertainties about the strength and
durability of the recovery diminishing. There are signs at last that the
Eurozone economy may be stabilising.
Financial markets also witnessed greater stability in 2003 - a welcome change
following the volatility and depressed state of 2001 and 2002. As a result,
confidence has improved.
We announced last October that Matthew W. Barrett will succeed me as Chairman at
the end of 2004. Mr Barrett will be replaced as Group Chief Executive by John
Varley who became Group Deputy Chief Executive on 1st January 2004.
Barclays has a strong management team to take the business forward. It is one of
the key tasks of the Group Chief Executive to develop talent so that the
organisation is well led at all levels. Mr Barrett has done an outstanding job
in this regard.
A recurring theme in 2003 was the significant amount of senior management time
that continued to be committed to regulation, compliance and governance. The
final version of the revised Combined Code on Corporate Governance, which comes
into effect for our 2004 reporting year, was a balanced document. Barclays
welcomes the principles-based approach retained in the Combined Code, and the
continuance of comply or explain. There will never be one set of prescriptive
rules which can fit all companies in all countries in all circumstances.
Overall, we made much progress across a broad-based set of activities, and this
positions Barclays strongly for the future. We are well-capitalised. We have a
distinctive set of businesses. We have a high quality and experienced leadership
team and loyal and dedicated staff. I am extremely grateful to them for their
hard work in helping us achieve a successful 2003.
Sir Peter Middleton
Chairman
GROUP CHIEF EXECUTIVE'S STATEMENT
Our priorities in 2003 were to: drive profitable revenue growth; maintain tight
cost control; retain our prudent and considered approach to risk management; and
accelerate the execution of our strategic agenda.
These priorities were all met.
Financial performance was strong, with a record set of results. We achieved a
20% increase in profit before tax. Return on equity was 17% and earnings per
share increased by 26%. Capital remained strong with a tier 1 ratio of 7.9%. Our
long term credit rating continued to be AA/Aa1. We increased the dividend by
12%.
2003 marked the end of our four-year (2000 to 2003) goal performance cycle. At
the outset the goals were communicated to shareholders. The primary goal of
delivering top quartile total shareholder return relative to a global peer group
1 was achieved. Total shareholder return for the four-year cycle was 31%,
resulting in a ranking of third out of twelve. This compared favourably to the
16% total average return for the peer group and with the decline of 28% for the
FTSE 100 Index. A more complete report on performance versus all goals is
outlined in the 'Group Performance Management' section on page 11.
1 Peer group for 2003: Abbey, ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche
Bank, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Standard Chartered.
Four years ago we embarked on a strategy to become one of the world's top 10
banks. This has been achieved. We ranked 9th in the world by market
capitalisation at the end of 2003. In achieving this, our primary focus was, and
continues to be, on organic growth. A secondary focus was on in-fill
acquisitions, joint ventures and strategic alliances to accelerate strategy
execution for each of the businesses. The rate of corporate development activity
has accelerated during this period with an increasingly strong track record in
integration.
2003 was also a year where we continued to make good progress in advancing our
strategic priorities. The highlights are summarised below.
Core UK Banking
2003 was an important year for Personal Financial Services (PFS), where the
ongoing repositioning of the business resulted in stronger financial
performance. Our three priorities for PFS in 2003 were to: deliver value to
customers through more integrated banking; improve productivity; and improve the
customer service to make Barclays easier to do business with.
We made improvements to the full range of consumer finance products and we are,
as a result, much better placed to meet our customers' needs. The response from
our customers has been positive and encourages us to accelerate our efforts. For
example, the scale of demand for our new savings range pushed Barclays branded
savings into a leading position in the UK market for new savings flow.
The Woolwich, now fully integrated within Barclays, has positioned us as a major
player in the mortgage market. In 2003, this enabled us to deliver a good profit
performance from the mortgage business while maintaining a commitment to prudent
lending and developing attractive product features for customers. We extended
the Openplan proposition, pioneered by The Woolwich, across the Barclays
franchise. With 2.6 million customers already signed up in the UK, Openplan has
become the spearhead of our strategy to deliver integrated banking services,
where we reward customers who bring us more of their business.
Business Banking is our largest single business and operates in markets that are
critical to wealth generation and job creation in the UK. It serves over 730,000
businesses, ranging from small businesses with turnover of less than £500,000 to
large enterprises with turnover of greater than £10 million.
Business Banking delivered a strong financial performance in 2003, a clear
indication that customers liked what we have been doing.
We broadened our products and services and increased our specialisation in the
sectors we serve. We also maintained our focus on improving efficiency. Our risk
management processes are integrated within the day-to-day business activity,
which enables us to manage the overall portfolio in a prudent manner.
In October 2003, we announced the creation of UK Banking, which comprises most
of PFS, Business Banking and most of UK Premier (previously managed within
Barclays Private Clients). This new grouping, led by Roger Davis, will allow us
to offer a more integrated service to our UK personal and business customers.
Global Businesses
Barclays has made good progress in executing its second strategic priority
through its three distinctive global businesses - Barclaycard, Barclays Capital
and Barclays Global Investors. Each is well placed for further rapid expansion
and we have invested substantially over the last few years to develop
differentiated business models and superior offerings for our customers and
clients.
Barclaycard delivered another record year of results in 2003.
The business demonstrated attractive growth prospects in the UK market and
overseas. Its strong focus on execution, innovation, and customer service,
combined with a prudent approach to risk, provides competitive advantage.
Barclaycard International achieved a full year profit for the first time. We
plan to accelerate the rate of expansion in the international business. The
strategic alliance with the Standard Bank of South Africa, announced in August
2003, and the launches into the Republic of Ireland and Portugal in January
2004, represent first steps. Also in January 2004 we brought together all
Barclays UK consumer credit business and Barclaycard UK into a single management
grouping for the first time. Barclaycard is led by Gary Hoffman.
Barclays Capital, our financing and risk management focused investment bank, had
a record year.
Barclays Capital demonstrated that it can deliver earnings and growth on a
sustained basis in variable market conditions. This performance was achieved
while we invested heavily in product origination and distribution capabilities.
We continued to diversify the product range and expanded into new geographies
and attracted new clients.
Barclays Capital has an emphasis on financing and risk management that has been
well received by clients around the world. In 2003 we saw good new issuance
volumes and Barclays Capital achieved fourth position in the global all debt
league table. The expansion in the US is particularly noteworthy, where our
growing reputation earned us the lead in 49 dollar denominated bond issues for
US clients compared to only one as recently as 2000. We achieved a top 10
ranking in the US investment grade corporate debt league table for the first
time, more than doubling our market share. Barclays Capital is well placed to
grow further.
Barclays Global Investors (BGI) had a record year and continued to be a global
leader in the institutional investment management market.
BGI now has some US$1 trillion in assets under management and attracted over
US$100 billion of net new assets in 2003, demonstrating that the strong
investment performance, combined with its proven risk controlled asset
allocation processes and quantitative methodologies, are attractive to clients.
BGI's Global i-shares product range has been a great success and has catapulted
BGI to number one in assets under management in the exchange traded funds (ETF)
market in both the US and globally. BGI is known as the world's leading indexer.
Less well known is that its advanced active business has over US$200 billion
assets under management as it extended its successful investment philosophy and
techniques to new areas. We have high expectations for the future.
In October 2003, we announced that Barclays Capital and BGI together would
constitute Wholesale and Institutional, led by Bob Diamond, to accelerate the
development of world class global businesses in these markets.
Wealth Management
Our third priority is to build a leading wealth management business in the UK
and Europe. Despite the harsh climate of the last couple of years, this is an
attractive business and its growth and development remains a strategic priority
for Barclays. During 2003 we took steps to accelerate our progress, and in doing
so to equip Barclays Private Clients (BPC) to bounce back as the environment for
wealth management businesses worldwide improves. Our ability to offer customers
a fully integrated service for both banking and investment management services
means that we believe we are well placed for success. We started to see some
early improvements in performance during the second half of 2003, which was
accelerated by the acquisition of Charles Schwab Europe and latterly the
acquisition of Gerrard. We expect to build on this base in 2004.
In addition, by moving our domestic mass affluent business, UK Premier, to UK
Banking, we have refocused BPC on private banking, stockbroking, investment
management and offshore banking. We are moving away from a model overly
dominated by the domestic market to a global product model which has been
successfully implemented in Barclays Capital, Barclays Global Investors and
Barclaycard.
International Retail and Commercial Banking
The fourth strategic priority is to grow our presence in retail and commercial
banking in selected overseas markets. In 2003, we built on our strong platform
in Spain with the acquisition of Banco Zaragozano, more than doubling our branch
network, our customer base and our assets, while creating attractive
opportunities for in-market synergies. The Spanish market is one of the
strongest in Europe and has a well-regulated and competitive banking sector with
customers who value innovation and service.
In October 2003, we announced the creation of Private Clients and International,
under the leadership of David Roberts, to accelerate growth of retail and
commercial banking activities outside the UK - including our presence in Spain,
France, Portugal, Italy, Egypt, Africa, and the Caribbean - and to build
Barclays wealth management businesses.
Organisational Fitness
The final strategic priority is organisational fitness which, for us,
encompasses all the key competencies essential to execute our strategy and
deliver top quartile financial performance on a sustained basis. These include
information technology, risk management, human resources, marketing, brand
management, productivity and value based management disciplines. We believe that
strong execution capabilities underpin superior performance.
Two examples worthy of note in the human resources area are our ground breaking
new staff pension scheme, afterwork, and the agreement with our union partner
UNIFI to manage the impact on employees of outsourcing. Both demonstrate our
firm commitment to becoming an employer of choice without compromising our
ability to drive the business forward.
We have adopted value-based decision making in everything that we do and at all
levels in the business - from the development of strategy, to planning, risk
management and reward systems. Overall we have benefited not just from more
consistency and clarity in our strategic development, but also from a stronger
sense of accountability throughout Barclays.
Committing to standards and goals has been an important element of the
value-based management process. We believe in the galvanising effect of
stretching goals, and they have served us well. It is no coincidence that
cumulative economic profit for the goal period 2000 to 2003, while short of our
original goal, was double the economic profit delivered over the prior four year
period.
We have embraced another set of stretching goals for 2004 to 2007. Our primary
aim, to achieve top-quartile total shareholder return, remains unchanged. In
addition, we will continue to have economic profit and efficiency goals
internally to support the value creation process. We believe that, given current
and expected market conditions, a compound annual growth rate in economic profit
in the range of 10% to 13%, which would translate into cumulative economic
profit generation of £7.3 billion to £7.8 billion, will be required to deliver
top quartile shareholder return over the 2004 to 2007 goal period. Delivering
strong results on a sustained basis requires world class efficiency and all
businesses will be expected to meet or exceed top quartile performance relative
to comparable peers in their sector. We will continue to report progress
relative to these goals regularly.
In summary, Barclays performed strongly in 2003. Our thanks go to our employees
worldwide who have coped with continuous change, done more business with
existing customers and acquired new customers. They have delivered improved
services across the board to the customers we are privileged to serve.
Matthew W. Barrett
Group Chief Executive
KEY FACTS
2003 2002
Number of UK branches 2,070 2,080
Number of overseas branches 846 499
Number of UK ATMs 3,850 3,900
Employees worldwide 74,800 74,700
Total customers registered for online banking 4.5m 3.9m
UK OPENPLAN
-----------
Number of customers with Openplan from Woolwich 1.4m 1.2m
Number of customers with Openplan from Barclays 1.2m 0.8m
Total UK Openplan savings balances £21.6bn £18.5bn
Total UK Openplan mortgage balances £28.7bn £21.2bn
PERSONAL FINANCIAL SERVICES
---------------------------
Number of UK current accounts 10.5m 10.5m
Number of UK savings accounts 10.3m 10.2m
Total UK mortgage balances1 £59.8bn £57.8bn
BARCLAYS PRIVATE CLIENTS
------------------------
Total customer funds £109bn £85bn
Number of Openplan customers in Spain 35,000 20,000
Average stockbroking deal volumes per day 8,350 6,300
BARCLAYCARD
-----------
Number of Barclaycard UK customers 10.6m 9.7m
Number of customers registered for online services 1.5m 1.1m
Number of retailer relationships 86,000 85,000
Number of retailer transactions processed 1.5bn 1.4bn
Number of Barclaycard International cards in issue 1.42m 1.28m
BUSINESS BANKING
----------------
Number of Business Banking customers 732,000 727,000
Number of current accounts 743,000 731,000
Number of deposit accounts 401,000 405,000
Customers registered for online banking/BusinessMaster 285,000 288,000
BARCLAYS AFRICA
---------------
Number of customers accounts 1.5m 1.4m
BARCLAYS GLOBAL INVESTORS
-------------------------
Total assets under management £598bn £462bn
Number of institutional clients 2,500 2,300
BARCLAYS CAPITAL 2003 2002
----------------
League League
table issuance table issuance
position value position value
Global all debt 4th $199.3bn 5th $162.2bn
European all debt 3rd $140.1bn 2nd $116.4bn
All international bonds (all
currencies) 8th $103.8bn 9th $73.7bn
All international bonds
(Euros) 8th €47.4bn 8th €34.6bn
Sterling bonds 1st £15.9bn 1st £13.2bn
US investment grade 8th $9.0bn 13th $3.5bn
corporate bonds
1 Total UK residential mortgage balances.
GROUP PERFORMANCE MANAGEMENT
Value Based Management
Barclays primary focus is to deliver superior value to its shareholders. To
achieve this we use the principles of value based management (VBM) to develop
strategy, allocate resources and manage performance.
In applying VBM principles Barclays has developed a disciplined fact-based
approach to strategy development and business planning, which aims to build
sustainable competitive advantage. Individual businesses generate alternative
business strategies to facilitate the selection of the most appropriate
value-maximising option. Our aim is to achieve profitable growth in all our
businesses.
We use performance goals as an integral part of our value based management
disciplines. These are designed to stretch the thinking and ambition of our
businesses. Goals are set for four year periods to align with the planning
processes described above. In 1999 we announced goals for the 2000 to 2003
period. This performance cycle has concluded and we have commenced a new cycle
for the 2004 to 2007 period. The remainder of this section provides a summary of
our performance for the first performance cycle and details of the goals for the
2004 to 2007 period.
Performance relative to the 2000 to 2003 goal period
At the end of 1999, Barclays set a series of four year performance goals for the
period 2000 to 2003 inclusive. The primary goal was to achieve top quartile
total shareholder return (TSR) relative to a peer group1 of financial services
companies. TSR is defined as the value created for shareholders through share
price appreciation, plus re-invested dividend payments.
1 Peer group for 2003 remained unchanged from 2002: Abbey, ABN Amro, BBVA, BNP
Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, Lloyds TSB, Royal Bank of
Scotland and Standard Chartered.
For the four years from 31st December 1999 to 31st December 2003, Barclays was
positioned third within its peer group, thereby achieving its primary goal of
top quartile TSR performance.
In addition, a set of secondary goals were used to support the achievement of
the primary TSR goal.
The first supporting goal was to double the absolute value of a hypothetical
£100 invested in Barclays over the four year period from the end of 1999. At the
time of setting the goals, analysis of financial services companies who had
delivered top quartile TSR performance historically indicated that this level of
value creation would be required for Barclays to be in the top quartile of its
peer group.
Therefore, a hypothetical £100 invested in Barclays at the end of 1999, should
have been worth £200 by 31st December 2003. However, the hypothetical £100
investment would have been worth £131. This compared favourably with a
corresponding hypothetical investment in a basket of shares made up of the
Barclays peer group which would have been worth £116 on 31st December 2003,
while the same investment in the FTSE 100 Index would have fallen to £72.
The second supporting goal was to double economic profit2 over the period. At
the time of setting the goals, we believed that we would be required to deliver
£6.1bn of cumulative economic profit for the period 2000 to 2003 inclusive to
achieve our primary TSR goal.
2 Economic profit is defined as profit after tax and minority interests plus
certain gains (and losses) reported within the statement of total recognised
gains and losses where they arise from the Group's business activities and
which are in respect of transactions with third parties, less a charge for the
cost of average shareholders' funds (which includes purchased goodwill). The
cost of average shareholders' funds is calculated using the capital asset
pricing model (CAPM). The cost of equity comprises primarily three components:
the equity risk premium; the market beta; and the risk free rate.
Economic profit for 2003 was £1.4bn, which, added to the £3.9bn generated
between 2000-2002 inclusive, delivered a cumulative total of £5.3bn for the goal
period.
The breakdown of economic profit performance is shown below:
2003 2002
£m £m
-------- --------
Profit after tax and minority interests 2,744 2,230
Goodwill amortisation 265 254
Tax credit on goodwill (7) (5)
Goodwill relating to associated undertakings 7 1
Goodwill on disposals - 10
-------- --------
Profit after tax and minority interests
excluding goodwill amortisation 3,009 2,490
(Loss) / Gain on disposal recognised in the statement
of total recognised gains and losses (4) 206
-------- --------
3,005 2,696
-------- --------
Average shareholders' funds including
average historical
goodwill 1 17,135 15,812
Post tax cost of equity 9.5% 9.5%
-------- --------
Cost of average shareholders' funds
including average historical goodwill 2 (1,585) (1,459)
-------- --------
Economic profit 1,420 1,237
-------- --------
The third supporting goal was focused on improving cost management. This goal
was to reduce the annual run rate of Group costs by £1bn over the four year
period to the end of 2003 thereby absorbing the impact of inflation and volume
related growth during the period.
Between 2000 and 2002 inclusive, £910m of savings were achieved. During 2003, a
further £355m of savings were achieved, creating a cumulative total of £1.26bn.
Therefore at the end of the four year period, Barclays exceeded its £1bn goal by
26%.
1 The difference between the average shareholders' funds (excluding minority
interests) of £16,243m and that reported above represents cumulative goodwill
amortisation charged and goodwill previously written off to reserves.
2 The cost includes a charge for purchased goodwill of £442m (2002: £398m). A
post-tax cost of equity of 8.5% has been used for goodwill associated with the
acquisition of Woolwich plc. A post-tax cost of equity of 9.5% has been used
for all other goodwill. The post tax cost of equity is unchanged for 2004.
Performance Goals for the 2004 to 2007 period
Barclays will continue to use goals to drive performance. Our primary goal, to
achieve top quartile total shareholder return, remains unchanged from the prior
goal period. The peer group1 has been reviewed to ensure it aligns with our
business mix and the scale of our ambition.
In addition, we will continue to use supporting goals. Economic profit will
remain the key internal financial measure.
Based on current market valuations and forecasts, we estimate that a compound
annual growth rate of economic profit in the range of 10% to 13% (£7.3bn to
£7.8bn of cumulative economic profit) would be required to deliver top quartile
shareholder return over the 2004 to 2007 period.
A second supporting goal is to continue to improve productivity. World class
productivity is an important contributor to sustaining strong performance. All
businesses are expected to meet or exceed top quartile productivity performance
relative to comparable peers within their sector.
We will continue to report progress relative to goals on a regular basis.
1 There are two changes to the peer group for 2004 relative to 2003: Abbey and
Standard Chartered have been removed and replaced with JP Morgan Chase and UBS.
The complete peer group for 2004 is ABN Amro, BBVA, BNP Paribas, Citigroup,
Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland
and UBS.
SUMMARY OF RESULTS
RECONCILIATION OF PROFIT BEFORE TAX EXCLUDING GOODWILL
AMORTISATION AND EXCEPTIONAL ITEMS
2003 2002
£m £m
Personal Financial Services 973 874
Barclays Private Clients
- ongoing business 351 360
- closed life assurance activities (77) (87)
Barclaycard 724 611
Business Banking 1,311 1,225
Barclays Africa 113 89
Barclays Capital 783 581
Barclays Global Investors 191 110
Head office functions and other operations (256) (300)
-------- --------
Profit before tax excluding goodwill amortisation
and exceptional items 4,113 3,463
Exceptional items 4 (3)
-------- --------
Profit before tax, excluding goodwill amortisation 4,117 3,460
Goodwill relating to associated undertakings (7) (1)
Goodwill amortisation (265) (254)
-------- --------
Profit before tax 3,845 3,205
-------- --------
TOTAL ASSETS AND WEIGHTED RISK ASSETS
Total assets Weighted risk assets
2003 2002 1 2003 2002
£m £m £m £m
Personal Financial Services 74,786 71,871 42,426 41,100
Barclays Private Clients
- ongoing 20,529 13,087 15,129 11,707
- closed life
assurance
activities 528 929 - 6
Barclaycard 12,278 10,669 9,806 10,005
Business Banking 52,112 47,315 54,964 50,449
Barclays Africa 3,051 2,632 2,225 1,892
Barclays Capital 263,169 236,468 61,285 53,496
Barclays Global Investors 533 494 1,137 666
Head office functions and
other operations 3,892 8,379 2,025 3,427
Goodwill 4,406 3,934 - -
Retail life-fund assets 8,077 7,284 - -
-------- -------- -------- --------
443,361 403,062 188,997 172,748
-------- -------- -------- --------
1 Restated for changes in accounting policy and presentation. See pages 49 and
50.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2003 2002
£m £m
Interest receivable 12,427 12,044
Interest payable (5,823) (5,839)
-------- --------
Net interest income 6,604 6,205
-------- --------
Net fees and commissions receivable 4,263 3,925
Dealing profits 1,054 833
Other operating income 490 364
-------- --------
Total non-interest income 5,807 5,122
-------- --------
Operating income 12,411 11,327
-------- --------
Administration expenses - staff costs (4,295) (3,755)
Administration expenses - other (2,404) (2,312)
Depreciation (289) (303)
Goodwill amortisation (265) (254)
-------- --------
Operating expenses (7,253) (6,624)
-------- --------
Operating profit before provisions 5,158 4,703
Provisions for bad and doubtful debts (1,347) (1,484)
Provisions for contingent liabilities and commitments 1 (1)
-------- --------
Operating profit 3,812 3,218
Profit / (loss) from joint ventures and associated
undertakings 29 (10)
Exceptional items 4 (3)
-------- --------
Profit on ordinary activities before tax 3,845 3,205
Tax on profit on ordinary activities (1,076) (955)
-------- --------
Profit on ordinary activities after tax 2,769 2,250
Minority interests (equity and non-equity) (25) (20)
-------- --------
Profit for the financial year attributable
to the members of Barclays PLC 2,744 2,230
Dividends (1,340) (1,206)
-------- --------
Profit retained for the financial year 1,404 1,024
-------- --------
Earnings per ordinary share 42.3p 33.7p
Fully diluted earnings per share 42.1p 33.4p
Post tax return on average shareholders' funds 16.9% 14.7%
Dividends per ordinary share:
Interim 7.05p 6.35p
Final (payable 30th April 2004) 13.45p 12.00p
CONSOLIDATED BALANCE SHEET
2003 2002
restated
Assets: £m £m
Cash and balances at central banks 1,726 2,032
Items in course of collection from other banks 2,006 2,335
Treasury bills and other eligible bills 7,177 7,645
-------- --------
Loans and advances to banks - banking 17,254 15,369
- trading 44,670 42,805
-------- --------
61,924 58,174
-------- --------
Loans and advances to customers - banking 167,858 157,222
- trading 58,961 45,176
-------- --------
226,819 202,398
Debt securities 97,393 94,229
Equity shares 7,859 3,129
Interests in joint ventures and associated undertakings 428 455
Intangible fixed assets - goodwill 4,406 3,934
Tangible fixed assets 1,790 1,626
Other assets 23,756 19,821
-------- --------
435,284 395,778
Retail life-fund assets attributable to policyholders 8,077 7,284
-------- --------
Total assets 443,361 403,062
-------- --------
Liabilities:
-------- --------
Deposits by banks - banking 57,641 48,751
- trading 36,451 38,683
-------- --------
94,092 87,434
-------- --------
Customer accounts - banking 155,814 144,078
- trading 29,054 27,420
-------- --------
184,868 171,498
Debt securities in issue 49,569 45,885
Items in course of collection due to other banks 1,286 1,416
Other liabilities 76,374 62,651
Undated loan capital - convertible to preference shares - 310
Undated loan capital - non-convertible 6,310 6,368
Dated loan capital - convertible to preference shares 17 11
Dated loan capital - non-convertible 6,012 4,848
-------- --------
418,528 380,421
-------- --------
Minority interests and shareholders' funds:
Minority interests: equity 283 156
-------- --------
Called up share capital 1,642 1,645
Reserves 14,831 13,556
-------- --------
Shareholders' funds: equity 16,473 15,201
-------- --------
16,756 15,357
-------- --------
435,284 395,778
Retail life-fund liabilities attributable to policyholders 8,077 7,284
-------- --------
Total liabilities and shareholders' funds 443,361 403,062
-------- --------
FINANCIAL REVIEW
Results by nature of income and expense
Net interest income 2003 2002
£m £m
Interest receivable 12,427 12,044
Interest payable (5,823) (5,839)
-------- --------
6,604 6,205
-------- --------
Group net interest income increased by 6% to £6,604m, reflecting growth in
balances which more than offset a 14 basis point fall versus 2002 in the Group
net interest margin to 2.61%
(2002: 2.75%).
The Group net interest margin of 2.61% (2002: 2.75%) includes 0.48% (2002:
0.55%) arising from the benefit of free funds. A component of the benefit of
free funds is the hedge against short term interest rate movements. The
contribution of the hedge in 2003 was 0.19% (2002: 0.22%).
Average interest earning assets increased by 12% to £253bn (2002: £225bn),
primarily due to a £9bn increase in average loans and advances to customers,
largely in Personal Financial Services, Barclaycard and Business Banking and an
£18bn increase in average holdings of debt securities balances, predominantly in
Barclays Capital.
Domestic average interest earning assets increased by 7% to £162bn (2002:
£152bn), predominantly driven by the £5bn increase in Business Banking average
lending balances and a £4bn increase in average mortgage balances in Personal
Financial Services. International average interest earning assets increased by
23% to £90bn (2002: £73bn), primarily driven by an increase in Barclays Capital
wholesale activities.
The 14 basis points fall in the Group net interest margin was primarily
attributable to a fall in the international net interest margin and a change in
the mix of both assets and liabilities.
The domestic net interest margin rose by 3 basis points to 3.64% (2002: 3.61%),
reflecting active management of margins across the UK businesses in competitive
market conditions. Net interest margin improved relative to 2002 in mortgages
and consumer finance and remained stable in retail savings and corporate
lending.
The reduction of 19 basis points in the international margin was mainly as a
result of an increase in higher quality assets in Barclays Capital, the
conversion to associate status of the Caribbean business, a change in the
currency mix of the portfolio and the general fall in global interest rates.
Yields, spreads and margins - banking business1
2003 2002
Gross yield 2 % %
Group 4.92 5.35
Domestic 5.57 5.97
International 3.75 4.06
Interest spread 3
Group 2.33 2.42
Domestic 3.28 3.22
International 0.68 0.80
Interest margin 4
Group 2.61 2.75
Domestic 3.64 3.61
International 0.77 0.96
Average UK base rate 3.69 4.00
1 Domestic business is conducted primarily in the UK in Sterling. International
business is conducted primarily in foreign currencies. In addition to the
business carried out by overseas branches and subsidiaries, international
business is transacted in the UK by Barclays Capital.
The yields, spreads, and margins shown above exclude non-margin related items,
including profits and losses on the repurchase of loan capital and the
unwinding of the discount on vacant leasehold property provisions.
2 Gross yield is the interest rate earned on average interest earning assets.
3 Interest spread is the difference between the interest rate earned on average
interest earning assets and the interest rate paid on average interest bearing
liabilities.
4 Interest margin is net interest income as a percentage of average interest
earning assets.
Average interest earning assets and liabilities - banking business
2003 2002
Average interest earning assets £m £m
Group 252,737 225,178
Domestic 162,434 151,810
International 90,303 73,368
Average interest bearing liabilities
Group 224,778 199,708
Domestic 136,939 130,045
International 87,839 69,663
Net fees and commissions
2003 2002
£m £m
Fees and commissions receivable 4,896 4,454
Less: fees and commissions payable (633) (529)
-------- --------
4,263 3,925
-------- --------
Group net fees and commissions increased by £338m (9%) to £4,263m, reflecting
increases in most businesses, partially offset by a reduction in Barclays
Private Clients.
In Personal Financial Services, net fees and commissions increased 1% (£8m) to
£802m (2002: £794m). Underlying this were good performances from fee based
current accounts and consumer finance, largely offset by continued weakness in
the independent financial advisor (IFA) business.
In Barclays Private Clients, net fees and commissions decreased 13% (£79m) to
£515m (2002: £594m). This reflected the impact of lower average equity market
levels in 2003 on sales of investment products and on fund management fees,
together with the absence of the contribution from the Caribbean business. The
average level of the FTSE 100 Index was 12% lower than in the prior year at
4,051 (2002: 4,599). Fee income improved significantly in the second half of
2003, reflecting volume growth and the recovery in equity markets towards the
year-end. Average daily deal volumes in UK retail stockbroking, including
Charles Schwab Europe, increased to 8,350 (2002: 6,300). The stockbroking
business maintained its leading UK position with a 19% (2002: 12%) market share
of client order business.
In Barclaycard, net fees and commissions increased 14% (£97m) to £793m (2002:
£696m), as a result of higher cardholder activity and good volume growth within
the merchant acquiring business.
In Business Banking, net fees and commissions increased 7% (£61m) to £925m
(2002: £864m), driven by lending related fees which rose strongly, reflecting
the growth in the balance sheet. Foreign exchange commission income grew due to
increased business volumes. Money transmission income fell as a result of the
alternative offer made in response to the Competition Commission Inquiry
transitional pricing remedy and the targeted migration of transactions to
electronic channels.
Net fees and commissions in Barclays Africa rose 17% (£19m) to £133m (2002:
£114m), reflecting growth in fee based services, treasury profits and the impact
of the acquisition of BNPI Mauritius in 2002.
In Barclays Capital, net fees and commissions increased 16% (£74m) to £537m
(2002: £463m), with good performances across the Credit businesses.
In Barclays Global Investors, net fees and commissions increased 23% (£124m) to
£662m (2002: £538m), reflecting good income generation across a diverse range of
products, distribution channels and geographies. The increase was largely driven
by growth of investment management fees. These resulted from strong net new
sales, growth in the sales of higher margin products, good investment
performance and the recovery in equity markets towards the year-end, which more
than compensated for the adverse impact of foreign exchange translation
movements. Actively managed assets now generate over 60% of management fees and
over 50% of total income. Securities lending income growth was good, benefiting
from higher volumes.
Dealing profits
2003 2002
£m £m
Rates related business 909 876
Credit related business 145 (43)
-------- --------
1,054 833
-------- --------
Almost all the Group's dealing profits are generated in Barclays Capital.
Dealing profits grew 27% to £1,054m, driven by significant growth in client
transaction volumes, particularly in continental Europe. The strong performances
in the Credit businesses, principally in corporate bonds, were due to credit
spreads tightening in the secondary bond markets. The growth in Rates related
businesses reflected good results from equity related activities and money
markets. Fixed income, foreign exchange and commodities continued to make good
contributions.
Total foreign exchange income was £498m (2002: £496m) and consisted of revenues
earned from both retail and wholesale activities. The foreign exchange income
earned on customer transactions by Personal Financial Services, Barclays Private
Clients, Barclaycard, Business Banking, Barclays Africa and Barclays Global
Investors, both externally and with Barclays Capital, is reported in those
business units, within fees and commissions.
Other operating income
2003 2002
£m £m
Premium income on insurance underwriting 264 178
Profits on disposal of investment securities 73 58
Income from the long term assurance business (33) (51)
Property rentals 15 20
Dividend income from equity shares 6 7
Other income 165 152
-------- --------
490 364
-------- --------
Other operating income increased by £126m (35%) to £490m (2002: £364m).
Premium income on insurance underwriting rose by £86m to £264m (2002: £178m) as
a result of a good increase from consumer lending activities, a favourable
claims experience and a one off income gain of £43m resulting from an adjustment
to insurance reserves.
Profits on disposal of investment securities primarily reflects realisations in
the private equity business within Barclays Capital.
The substantial majority of the Group's long term assurance activity is based in
the UK. This UK business, which closed to new business following the Legal &
General alliance in 2001, was the main contributor to the loss of £33m for 2003
and the losses experienced in 2002.
Income from the long term assurance business reflects an investment gain
compared to a loss in 2002 and increased income from the ongoing life business.
These were partially offset by a reduction in the benefit of actuarial
assumptions and other movements and the costs of redress for customers in
respect of sales of endowment policies of £95m (2002: £19m).
Operating expenses
The Group manages core costs on the basis of three distinct categories:
strategic investment, revenue related and business as usual. In addition,
goodwill amortisation, restructuring costs and Woolwich integration costs are
reported separately.
Costs are allocated to individual categories based on the following definitions:
Strategic investment costs relate to the development costs of an investment
project which has either or both of the following features:
- it generates or enables new revenue streams or definable growth in
a revenue stream; or
- it generates or enables reduced costs.
Strategic investment costs exclude restructuring costs, integration costs and
project operating costs.
Revenue related costs are those costs which are directly associated with a
corresponding change in revenues or profit. An increase or decrease in revenues
or profits will usually lead to an increase or decrease in these costs.
Business as usual costs are those costs not classified as strategic investment
or revenue related. This category includes operating costs of live strategic
projects, other project costs not classified as strategic and volume related
costs which are not revenue related.
Acquisitions and disposals costs are those expenses incurred in 2003 and 2002 by
those businesses that were purchased or sold by the Group in 2003 or 2002. These
comprise business as usual costs, revenue related costs and strategic investment
costs.
Restructuring costs are those costs associated with the ongoing reorganisation
and restructuring of the Group's operations as part of its cost reduction
initiatives.
Woolwich integration costs are in respect of projects and initiatives associated
with the acquisition of Woolwich plc and include expenditure to achieve cost
savings and revenue synergies.
Based on the definitions on page 22, the Group's costs are summarised in the
following table:
2003 2002
£m £m
Business as usual costs 5,218 4,885
Revenue related costs 982 730
Strategic investment costs 392 381
Acquisitions and disposals 137 107
Restructuring costs 209 187
Goodwill amortisation 265 254
Woolwich integration costs 50 80
-------- --------
7,253 6,624
-------- --------
Operating expenses rose 9% to £7,253m (2002: £6,624m).
Business as usual costs rose 7% (£333m) to £5,218m (2002: £4,885m). The majority
of the increase, £200m, was attributable to the year-on-year impact arising from
the move to a pensions charge (£128m) from a pensions credit (£72m) in 2002 in
respect of the Group's main UK pension schemes.
In addition, business as usual costs reflected higher business volumes and the
impact of continued investment in Personal Financial Services, Barclays Capital,
Barclaycard and Barclays Africa. Barclays Private Clients business as usual
costs were broadly in line with the prior year. Business as usual costs were
lower in Business Banking and Barclays Global Investors.
Revenue related costs rose 35% (£252m) to £982m (2002: £730m), driven largely by
increased performance related payments primarily in Barclays Capital and
Barclays Global Investors.
Strategic investment costs increased 3% (£11m) to £392m (2002: £381m). Strategic
investment in the second half of the year was considerably higher than in the
first half.
Acquisitions and disposals costs reflect the acquisition of Banco Zaragozano,
Charles Schwab Europe and Clydesdale Financial Services in 2003, the acquisition
of Monument in 2002 and the restructuring of the Caribbean business in 2002.
Administrative expenses - staff costs
2003 2002
£m £m
Salaries and accrued incentive payments 3,441 3,159
Social security costs 278 240
Pension costs 180 (27)
Post-retirement health care 19 15
Other staff costs 377 368
-------- --------
4,295 3,755
-------- --------
2003 2002
Number of staff at period end:1
Personal Financial Services2 25,800 27,200
Barclays Private Clients3 13,000 10,700
Barclaycard4 5,300 4,700
Business Banking5 9,000 9,700
Barclays Africa6 6,800 7,500
Barclays Capital 5,700 5,500
Barclays Global Investors 2,000 2,100
Head office functions and other operations7 7,200 7,300
-------- --------
Total Group permanent and contract staff worldwide 74,800 74,700
Temporary and agency staff worldwide 4,100 3,700
-------- --------
Total including temporary and agency staff 78,900 78,400
-------- --------
1 Staff numbers are on a full time equivalent basis. UK permanent and contract
staff totalled 58,000 (31st December 2002: 59,000).
2 Staff numbers decreased since 31st December 2002 by 1,400, as a result of a
number of productivity initiatives.
3 The increase in staff numbers includes 3,500 staff arising from the
acquisition of Charles Schwab Europe, Banco Zaragozano and Gerrard,
partially offset by restructuring initiatives (1,200).
4 Includes 200 staff arising from the acquisition of Clydesdale Financial
Services and the recruitment of an additional 500 staff in Barclaycard,
partially offset by restructuring initiatives (100).
5 Staff numbers decreased since 31st December 2002 by 700 due to a number of
restructuring initiatives.
6 The decrease in staff numbers is due to a number of restructuring
initiatives mainly within the Kenyan, Zambian and Zimbabwean operations.
7 Staff numbers include staff undertaking certain activities which support the
operating business and provide central information technology services,
whose costs are predominantly passed on to the businesses.
Staff costs
Staff costs increased by 14% to £4,295m (2002: £3,755m).
Salaries and accrued incentive payments increased by 9% (£282m) to £3,441m
(2002: £3,159m) reflecting increased performance related payments primarily
within Barclays Capital and Barclays Global Investors.
Pension costs comprise all UK and international pension schemes. Included in the
costs is the charge of £128m (2002: £72m credit) in respect of the Group's main
UK pension schemes.
Permanent and contract staff numbers increased by 100 during 2003. The
implementation of restructuring programmes resulted in a decrease of 4,400
staff. This was more than offset by an increase of 3,700 staff from the
acquisitions of Charles Schwab Europe, Clydesdale Financial Services, Banco
Zaragozano and Gerrard and the recruitment of an additional 500 staff in
Barclaycard and 300 staff elsewhere.
Administrative expenses - Other
2003 2002
£m £m
Property and equipment expenses
Hire of equipment 8 12
Property rentals 184 180
Other property and equipment expenses 901 793
-------- --------
1,093 985
Other administrative expenses
Stationery, postage and telephones 311 294
Advertising and market promotion 237 238
Travel, accommodation and entertainment 145 136
Subscriptions and publications 91 86
Sundry losses, provisions and write-offs 128 121
Consultancy fees 56 85
Professional fees 159 161
Other expenses 184 206
-------- --------
1,311 1,327
-------- --------
2,404 2,312
-------- --------
Administrative expenses - Other rose by 4% (£92m) to £2,404m (2002: £2,312m).
Property and equipment expenses increased by 11% (£108m) to £1,093m as a result
of increased outsourced processing, information technology costs, and property
repairs and maintenance.
Other administrative expenses were broadly flat at £1,311m (2002: £1,327m).
Increases across a number of expense categories reflected higher business
activity and were more than offset by reductions in a number of other categories
including consultancy spend and other expenses.
Depreciation
2003 2002
£m £m
Property depreciation 93 93
Equipment depreciation 196 198
Loss on sale of equipment - 12
-------- --------
289 303
-------- --------
Goodwill amortisation
2003 2002
£m £m
Woolwich 206 206
Other 59 48
-------- --------
265 254
-------- --------
Provisions for bad and doubtful debts
2003 2002
£m £m
The charge for the year in respect of
bad and doubtful debts comprises:
Specific provisions
New and increased 1,628 1,719
Releases (195) (127)
Recoveries (113) (106)
-------- --------
1,320 1,486
General provision charge / (release) 27 (2)
-------- --------
Net charge 1,347 1,484
-------- --------
The net charge for the year in respect of bad
and doubtful debts comprises:
Transition businesses 23 124
Other 1,324 1,360
-------- --------
Net charge 1,347 1,484
-------- --------
Total provisions for bad and doubtful
debts at end of the year comprise:
Specific provisions 2,233 2,261
General provisions 795 737
-------- --------
3,028 2,998
-------- --------
Provisions fell 9% (£137m) to £1,347m (2002: £1,484m). Provisions excluding the
impact of Transition Businesses, mainly Argentina in 2002, fell 3% (£36m) to
£1,324m (2002: £1,360m). The Group's provisions charge improved significantly to
0.73% (2002: 0.85%) of average banking loans and advances.
Business Banking provisions increased broadly in line with portfolio growth.
Provisions fell in Barclays Capital reflecting the ongoing improvement in the
loan book and the continued recovery in the large corporate credit environment.
Provisions fell in Personal Financial Services with an improvement in the
quality of the loan portfolio and improved risk management. The reduction
occurred in the unsecured lending portfolio. Provisions for mortgages remained
very small. Barclaycard provisions increased in line with continued portfolio
growth.
The year-end general provision stock increased by 8% (£58m) to £795m (31st
December 2002: £737m).
Profit /(loss) from joint ventures and associated undertakings
2003 2002
£m £m
Profit/(loss) from joint ventures 1 (5)
Profit/(loss) from associated undertakings 28 (5)
-------- --------
29 (10)
-------- --------
The majority of the profit from associated undertakings for the year relates to
the investment in FirstCaribbean (including goodwill amortisation of £7m).
Exceptional items
2003 2002
£m £m
Profit on disposal of Group undertakings 4 8
Loss on termination of Group activities - (11)
-------- --------
4 (3)
-------- --------
Tax
The charge for the year is based upon a UK corporation tax rate of 30% for the
calendar year 2003 (2002: 30%). The effective rate of tax was 28.0% (2002:
29.8%). The decrease in the tax rate was primarily due to the beneficial effects
of lower tax on overseas income, recognition of agreed capital gains tax losses
and certain non-taxable gains, partially offset by the absence of tax relief on
goodwill.
Earnings per ordinary share
2003 2002
Profit for the financial year attributable to
the members of Barclays PLC £2,744m £2,230m
Basic weighted average number of ordinary shares in issue 6,483m 6,626m
Add: potential ordinary shares 31m 47m
-------- --------
Diluted weighted average number of shares 6,514m 6,673m
-------- --------
Earnings per ordinary share 42.3p 33.7p
Fully diluted earnings per ordinary share 42.1p 33.4p
Dividends on ordinary shares
The Board has decided to pay, on 30th April 2004, a final dividend for the year
ending 31st December 2003 of 13.45p per ordinary share, for shares registered in
the books of the Company at the close of business on 27th February 2004.
Shareholders who have their dividends paid direct to their bank or building
society account will receive a consolidated tax voucher detailing the dividends
paid in the 2004/2005 tax year in mid-October 2004.
For qualifying US and Canadian resident ADR holders, the final dividend of
13.45p per ordinary share becomes 53.8p per ADS (representing four shares). The
ADR depositary will mail the dividend on 30th April 2004 to ADR holders on the
record on 27th February 2004.
For qualifying Japanese shareholders, the final dividend of 13.45p per ordinary
share will be distributed in mid-May to shareholders on the record on 27th
February 2004.
Shareholders may have their dividends reinvested in Barclays PLC shares by
participating in the Barclays Dividend Reinvestment Plan. The plan is available
to all shareholders, including members of Barclays Sharestore, provided that
they do not live in or are subject to the jurisdiction of any country where
their participation in the plan would require Barclays or The Plan Administrator
to take action to comply with local government or regulatory procedures or any
similar formalities. Any shareholder wishing to obtain details and a form to
join the plan should contact The Plan Administrator by writing to: The Plan
Administrator to Barclays, The Causeway, Worthing BN99 6DA; or by phoning 0870
609 4535. The completed form should be returned to The Plan Administrator on or
before 7th April 2004 for it to be effective in time for the payment of the
final dividend on 30th April 2004. Shareholders who are already in the plan need
take no action unless they wish to change their instructions in which case they
should write to The Plan Administrator.
Balance Sheet
Capital resources
2003 2002
restated
£m £m
Shareholders' funds 16,473 15,201
Minority interests 283 156
-------- --------
16,756 15,357
Loan capital 12,339 11,537
-------- --------
29,095 26,894
-------- --------
Total capital resources increased in the year by £2,201m.
Equity shareholders' funds increased by £1,272m reflecting profit retentions of
£1,404m, net proceeds of share issues of £149m, offset by share repurchases of
£204m, exchange rate losses of £29m, shares issued to QUEST of £36m and other
movements of £12m.
Loan capital rose by £802m reflecting raisings of £1,926m, partially offset by
redemptions of £974m, exchange rate movements of £146m and amortisation of issue
expenses of £4m.
Capital ratios
Weighted risk assets and capital resources, as defined for supervisory purposes
by the Financial Services Authority, comprise:
2003 2002
Weighted risk assets: restated
Banking book £m £m
on-balance sheet 133,816 128,691
off-balance sheet 22,987 21,999
Joint ventures and associated undertakings 2,830 3,065
-------- --------
Total banking book 159,633 153,755
-------- --------
Trading book
Market risks 13,861 7,988
Counterparty and settlement risks 15,503 11,005
-------- --------
Total trading book 29,364 18,993
-------- --------
Total weighted risk assets 188,997 172,748
-------- --------
Capital resources:
Tier 1
Called up share capital 1,642 1,645
Less: own shares (6) (3)
-------- --------
1,636 1,642
Eligible reserves 14,663 13,408
Minority interests - equity 637 522
Reserve capital instruments1 1,705 1,771
Tier one notes1 960 1,019
Less: goodwill (4,607) (4,158)
-------- --------
Total qualifying tier 1 capital 14,994 14,204
-------- --------
Tier 2
Revaluation reserves2 25 25
General provisions 795 737
Qualifying subordinated liabilities 3
Undated loan capital 3,636 3,854
Dated loan capital 5,652 4,573
Other4 2 2
-------- --------
Total qualifying tier 2 capital 10,110 9,191
-------- --------
Tier 3: short term subordinated liabilities3 280 203
-------- --------
Less: Supervisory deductions
Investments not consolidated for Supervisory purposes 5 (979) (1,288)
Other deductions (182) (119)
-------- --------
(1,161) (1,407)
-------- --------
Total net capital resources 24,223 22,191
-------- --------
% %
Equity Tier 1 ratio6 6.5 6.6
Tier 1 ratio 7.9 8.2
Risk asset ratio 12.8 12.8
1 Reserve capital instruments (RCIs) and tier one notes (TONs) are included in
the undated loan capital in the consolidated balance sheet.
2 Includes £1m (31st December 2002: £1m) negative goodwill adjustment.
3 Subordinated liabilities are included in tiers 2 or 3, subject to limits laid
down in the supervisory requirements.
4 Comprises revaluation reserves, in relation to minority interests, of £2m
(31st December 2002: £2m).
5 Includes £478m (31st December 2002: £867m) of shareholders' interest in the
retail life fund.
6 Equity defined as Total qualifying tier 1 capital less RCIs and TONs.
The growth in net capital resources of 9.2% (£2.0bn), was offset by the impact
of 9.4% (£16.2bn) growth in weighted risk assets. The risk asset ratio was
steady at 12.8% (31st December 2002: 12.8%). The Tier 1 ratio fell from 8.2% to
7.9%. The Equity Tier 1 ratio fell to 6.5% (2002: 6.6%).
Within total net capital, tier 1 capital rose by £0.8bn primarily reflecting
retained profits of £1.4bn and an increase in the deduction for goodwill of
£0.4bn. Tier 2 capital increased by £0.9bn and tier 3 capital by £0.1bn.
Supervisory deductions decreased by £0.2bn.
Equity tier 1 capital rose by £0.9bn.
The increase in weighted risk assets is primarily accounted for by a rise of
54.6% (£10.4bn) in the Trading book. Banking book weighted risk assets grew 3.8%
(£5.9bn). The growth in weighted risk assets is discussed further under 'Total
assets and Weighted risk assets' below.
Total assets and Weighted risk assets
The Group's balance sheet grew by 10% (£40bn) to £443bn (31st December 2002:
£403bn). Weighted risk assets rose by 9% (£16bn) to £189bn (31st December 2002:
£173bn).
Within Personal Financial Services, total assets increased 4% to £74.8bn (31st
December 2002: £71.9bn). Weighted risk assets increased by 3% to £42.4bn (31st
December 2002: £41.1bn). This was mainly attributable to steady growth in UK
residential mortgage balances, up 3% to £59.8bn (2002: £57.8bn) and to good
growth in unsecured lending.
Barclays Private Clients total assets (excluding the assets of the closed life
assurance activities) grew 56% (£7.4bn) to £20.5bn (31st December 2002:
£13.1bn), primarily as a result of the growth of Openplan in Spain and the
inclusion of assets relating to the acquired business of Banco Zaragozano.
Weighted risk assets increased 29% to £15.1bn (31st December 2002: £11.7bn),
largely reflecting the growth in Openplan assets in Spain and the impact of the
acquisition of Banco Zaragozano.
Barclaycard total assets increased 15% to £12.3bn (31st December 2002 £10.7bn).
Weighted risk assets decreased by 2% to £9.8bn (31st December 2002: £10.0bn),
reflecting the effect of securitised credit card receivables.
Within Business Banking, total assets grew by 10% to £52.1bn (31st December
2002: £47.3bn). Weighted risk assets increased by 9% to £55.0bn (31st December
2002: £50.4bn) as a result of strong growth in lending balances. Lending growth
was directed towards higher quality large and medium business customers.
Barclays Capital total assets grew 11% to £263.2bn (31st December 2002:
£236.5bn) primarily due to increases in low risk, high quality reverse repos and
debt securities. Reverse repo balances, which are fully collateralised,
increased £17.1bn, driven by growth in client transactions. The increase in debt
securities of £6.7bn arose primarily in governments and high-grade corporates.
Total weighted risk assets increased 15% (£7.8bn) to £61.3bn (31st December
2002: £53.5bn), broadly in line with the growth in assets.
This information is provided by RNS
The company news service from the London Stock Exchange
MORE TO FOLLOW
FR ILFETFSILLIS
Latest directors dealings
- 1 day ago IntegraFin Holding
- 1 day ago Spirent Communications
- 1 day ago CRH (CDI)
- 1 day ago Bezant Resources
- 1 day ago EJF Investments Ltd NPV