Final Results

Barclays PLC 10 February 2005 BARCLAYS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 2004 PAGE Summary 1 Financial highlights 3 Chairman's statement 4 Group Chief Executive's statement 6 Consolidated profit and loss account 9 Consolidated balance sheet 10 Summary of results 11 Financial review 12 Additional information 49 Notes 52 Consolidated statement of changes in shareholders' funds 63 Statement of total recognised gains and losses 63 Summary consolidated cashflow statement 64 Other information 65 Index 69 The information in this announcement, which was approved by the Board of Directors on 9th February 2005, does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the 'Act'). Statutory accounts, which also include certain information required for the joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC), will be delivered to the Registrar of Companies in accordance with Section 242 of the Act. The 2004 Annual Review and Summary Financial Statement will be posted to shareholders together with the Group's full Annual Report for those shareholders who request it. This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Group's plans and its current goals and expectations relating to its future financial condition and performance. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, market related risks such as changes in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the outcome of pending and future litigation and the impact of competition, a number of which are beyond the Group's control. As a result, the Group's actual future results may differ materially from the plans, goals, and expectations set forth in the Group's forward-looking statements. Any forward-looking statements made by or on behalf of Barclays speak only as of the date they are made. Barclays does not undertake to update forward-looking statements to reflect any changes in Barclays expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has filed or may file with the SEC including its most recent Annual Report on Form 20-F. Comparative figures have been restated for the changes in accounting policy and presentation detailed on page 49. In this document the profit and loss analysis compares, unless stated otherwise, the full-year to 31st December 2004 to the corresponding period of 2003. Balance sheet comparisons, unless stated otherwise, relate to the corresponding position at 31st December 2003. Average balance sheet comparisons relate the full-year to 31st December 2004 to the corresponding period of 2003. BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 020 7699 5000, COMPANY NO. 48839. RESULTS FOR YEAR TO 31ST DECEMBER 2004 Group Results 2004 2003 % Change Â£m Â£m Operating income 13,945 12,411 12 Operating expenses (8,350) (7,253) 15 Provisions for bad and doubtful debts (1,091) (1,347) (19) Profit before tax 4,603 3,845 20 Profit after tax 3,314 2,769 20 Economic profit 1,885 1,430 32 Earnings per share 51.2p 42.3p 21 Dividend per share 24.0p 20.5p 17 Post-tax return on average shareholders' funds 19.2% 17.0% Summary of business performance1 Â£m Â£m % Change UK Banking 2,474 2,275 9 UK Retail Banking 1,127 1,141 (1) UK Business Banking 1,347 1,134 19 Private Clients and International 451 287 57 Private Clients - ongoing business 144 103 40 - closed life assurance activities (4) (80) - International 311 264 18 Barclaycard 801 761 5 Barclays Capital 1,042 836 25 Barclays Global Investors 347 191 82 1 Comprises profit on ordinary activities before tax excluding goodwill. 'Barclays had a record year, with strong profit growth across the Group. The combination of income momentum and accelerated investment during 2004 creates a good platform for future growth.' John Varley, Group Chief Executive Performance Summary â€¢ Group performance was very strong: - profit before tax up 20% to Â£4,603m - earnings per share up 21% at 51.2p - dividend per share up 17% to 24.0p - return on equity of 19.2% â€¢ Barclays ranked top within its total shareholder return (TSR) global peer group1. TSR of 23% was almost double the average for the peer group and FTSE 100 Index. Economic profit rose 32% to Â£1,885m, reflecting the growth in earnings and tight capital management. â€¢ All business divisions made good progress and delivered higher profits with a very strong result from the global product businesses. â€¢ Income grew 12% and was well diversified by business, income type and geography. Non interest income rose 22% and was over half of total income. Net revenue (income less provisions) was up 16%. â€¢ Costs were 15% higher, with significant investment directed at future growth. â€¢ A sharp fall in potential credit risk loans was a key driver in the reduction of provisions by 19% to Â£1,091m. â€¢ UK Banking showed good growth with profit2 up 9%. Good momentum in Business Banking led to a record performance whilst Retail Banking performance was broadly flat. â€¢ Private Clients and International profit2 improved sharply, up 57%, reflecting the benefit of a diversified and growing portfolio. The integrations of Banco Zaragozano and Gerrard are ahead of schedule. â€¢ Barclaycard achieved growth in profit2 of 5%, with higher volumes more than offsetting margin pressure and the impact of considerable investment in both the UK and the international card businesses. â€¢ Barclays Capital had another record year with profit2 up 25%. The increasingly diverse business portfolio, both by product and geography, positions it strongly for future growth. â€¢ Barclays Global Investors delivered outstanding results with profit2, up 82%, to Â£347m, benefiting from US$118bn of net new assets, good investment performance and better market conditions. â€¢ The Group's capital position remained healthy with a Tier 1 ratio of 7.6%. In respect of 2004, over Â£2.2bn will have been returned to shareholders through dividends and share buybacks. 1 Peer group for 2004: ABN Amro, BBVA, BNP Paribas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB, Royal Bank of Scotland and UBS. 2 Comprises profit on ordinary activities before tax excluding goodwill. FINANCIAL HIGHLIGHTS 2004 2003 RESULTS Â£m Â£m Net interest income 6,842 6,604 Non-interest income 7,103 5,807 Operating income 13,945 12,411 Operating expenses (8,350) (7,253) Provisions for bad and doubtful debts (1,091) (1,347) Provisions for contingent liabilities and commitments (2) 1 Operating profit 4,502 3,812 Profit from joint ventures and associated undertakings 56 29 Exceptional items 45 4 Profit before tax 4,603 3,845 Profit after tax 3,314 2,769 Profit attributable to shareholders 3,268 2,744 Economic profit 1,885 1,430 BALANCE SHEET Shareholders' funds 17,417 16,374 Minority interests: non-equity and equity 901 283 Loan capital 12,277 12,339 Total capital resources 30,595 28,996 Total assets 522,089 443,262 Weighted risk assets 218,601 188,997 PER ORDINARY SHARE p p Earnings 51.2 42.3 Dividend 24.0 20.5 Net asset value 270 250 PERFORMANCE RATIOS % % Post-tax return on average shareholders' funds 19.2 17.0 CAPITAL RATIOS % % Tier 1 ratio 7.6 7.9 Risk asset ratio 11.5 12.8 GROUP NET INTEREST MARGIN % % Group 2.59 2.61 Domestic 3.48 3.64 International 0.81 0.77 ECONOMIC DATA Period end - US$/Â£ 1.92 1.78 Average - US$/Â£ 1.83 1.64 Period end - â‚¬/Â£ 1.41 1.41 Average - â‚¬/Â£ 1.47 1.45 FTSE 100 Index period end 4,814 4,477 FTSE 100 Index average 4,522 4,051 CHAIRMAN'S STATEMENT As the figures show, 2004 was a very successful year for Barclays. 2004 was also a year in which we managed successfully the transition to a new leadership team. John Varley took the reins as Group Chief Executive with effect from 1st September and I succeeded Sir Peter Middleton as Chairman. On behalf of shareholders, I would like to take this opportunity to thank Sir Peter - Barclays owes him an enormous debt of gratitude. The Group would not be where it is today - financially strong, with a distinct portfolio of businesses, a great brand, motivated people and millions of loyal customers and clients around the world - were it not for his leadership. Looking forward, the Board is delighted that Barclays has such a strong management team in John Varley and his colleagues to take the Group forward. We have been particularly pleased with the way in which they have quickly adapted to their new roles. Corporate Governance Corporate governance continues to be a subject of intense interest to shareholders, regulators, companies and the press. Our goal is to ensure that Barclays is an exemplar in the area of corporate governance. 2004 was the first year in which Barclays had to comply with the provisions of the new Combined Code and our compliance is of a high standard. In recent months, we have taken a number of steps to enhance further our corporate governance practices. We have expanded the remit of the Remuneration Committee to cover strategic human resource issues. We have also expanded the remit of the Nominations Committee to cover a broad range of corporate governance issues in addition to matters relating to the composition of the Board. We have conducted a thorough, formal review of performance and effectiveness of the Board, Board Committees, and individual directors. The review concluded that the Board is discharging its responsibilities in a highly effective manner. Corporate Responsibility We believe that attention to Corporate Responsibility is essential to creating and sustaining value creation for shareholders. During 2004, we made significant progress in pursuit of the objective that Barclays should be a leading company in this field. Corporate Responsibility is about business behaviours and earning the trust and loyalty of our stakeholders. It was encouraging that in 2004 Barclays won the National Business Award for Corporate and Social Responsibility and was ranked in the top decile of 100 companies by Business in the Community in this area. We continued to build on our well-established Equality & Diversity, Environmental and Community programmes and on our pioneering work in the field of financial inclusion. During the year, we continued to work closely with our trade union partner, Amicus, developing a groundbreaking agreement in the area of offshore outsourcing. Regulatory Change There was no abatement in the volume and frequency of regulatory change in 2004. The banking industry is facing Basel II, Sarbanes Oxley, International Financial Reporting Standards, the recent introduction of statutory regulation of mortgages and general insurance, and a number of EU Directives generated by the Financial Services Action Plan. All these initiatives cause considerable resource stretch for even the largest financial services institutions. We welcome the fact that our lead regulator in the UK, the Financial Services Authority, is also concerned at the level of regulatory change and is seeking to minimise further initiatives. We believe that it is vital that all new regulation is subjected to rigorous cost/benefit analysis before its introduction into the national legislative framework. Economic Outlook 2004 was a year of strong growth across the world, with the global economy expanding by around 5%. The UK too did well, growing at more than 3%, the fastest rate since 2000 with unemployment and inflation remaining low and stable. The coming year may see growth slower than the rate achieved in 2004. Internationally, growth in the American and Chinese economies may moderate, while in the UK, interest rate rises during 2004 may have an impact on household spending. Summary 2004 was a year in which the Group continued to make very good progress. We have a strong management team in place and benefit from a committed and highly professional workforce, a distinctive portfolio of businesses and a strong capital base. We look forward to the future with confidence. Matthew W. Barrett Chairman GROUP CHIEF EXECUTIVE'S STATEMENT Barclays had a record year in 2004, demonstrating the strength and flexibility of its strategy. A combination of good returns from prior investment and the continued strong pace of investment during 2004 means that we are in good shape to deliver profitable growth in the future. Profit before tax increased by 20%. Our return on equity was 19%. Asset quality remained strong. We maintained our strong capital position, with a Tier one capital ratio of 7.6%. We increased the dividend 17%. The task of every generation of leadership is to take performance to the next level and that is what we are determined to do. I want the new era of leadership, building on the profound transformation of the last years, to be characterised by growth. Looking back at it, growth was what 2004 was all about. Our financial performance is built on a clear and simple understanding of what Barclays exists to do: we move, lend, invest and protect money, for customers and clients of all kinds. By doing this we achieve our overall business purpose: this is to help our customers and clients achieve their goals. We hope thereby to create value for them and earn their loyalty. If we do this well we will deliver consistently good returns to shareholders. Our business model is that of a universal bank comprising businesses that create additional value for shareholders beyond the sum of the parts by virtue of the synergies inherent in the business mix. We have a global perspective in developing our business. We are seeking to produce a blend of earnings drawn from our businesses in the UK and from high growth global product businesses and selected retail and commercial banking businesses outside the UK. You can see our approach at work in how we performed during 2004. We saw earnings surge in businesses with strong overseas exposure such as Barclays Capital and Barclays Global Investors, and in the Private Clients and International businesses. You can also see it in our strategic decisions during the year. We acquired Juniper Financial Corporation to create a US arm for our international credit card strategy; and we are in negotiations to acquire a controlling stake in Absa, one of the leading banks in the Republic of South Africa. Our efforts in 2004 were directed at advancing our four strategic priorities. These are: building the best bank in the UK; growing our global product business (credit cards, investment banking, institutional money management and wealth management); extending our presence in selected retail and commercial banking markets outside the UK (Spain and Africa are good examples of this); and creating operational excellence. At the heart of all four priorities is our commitment to strengthen franchise health, by which we mean our relationships with customers and clients, the engagement of our colleagues, and our contribution to the communities in which we live and work. We formed UK Banking, which is run by Roger Davis, a year ago by combining Business Banking with most of what was then Personal Financial Services. In UK Banking we saw the strong profit growth generated by UK Business Banking somewhat diluted by broadly flat earnings in the UK Retail Banking business. Although it is clear that we must lift our performance in UK Retail Banking, the headline profit figure here masks better underlying performance year on year. We have been investing heavily in front-line people, in infrastructure, and in branch-based technology. We are looking for these investments to bear fruit during 2005. The best fruit, of course, will be rising customer satisfaction among retail customers driving further growth in business flows. All our global product businesses delivered good results. Partly this is the consequence of very strong organic performance - I am referring here in particular to Barclays Capital and Barclays Global Investors where the results were sparkling. In Private Clients, the sharp lift in profits was attributable to acquisitions made in 2003 as well as to good organic performance. It gives me considerable satisfaction to be able to report another record year at Barclays Capital, which is run by Bob Diamond. Investors look for consistency and sustainability: the compound annual growth rate in economic profit at Barclays Capital over the last three years has been 26%. The record achievement of 2004 was in an environment where corporate issuance volumes in the US and Europe were down, where interest rates were rising, and where volatility, on which investment banks generally thrive, was quite low. At Barclays Global Investors, chaired by Bob Diamond, profit before tax has more than quadrupled in the last three years; this speaks of satisfied clients. Our investment track record in Barclays Global Investors, across all asset classes and durations, singles us out as a harbour of dependability in a very turbulent sea. You can see this in the net new asset flow, which amounted to $118bn during the year. Financial performance has partly been driven by successful innovation: we have continued to see very substantial demand for exchange traded funds - which we call iShares - which are the fastest growing new fund complex in US history. We now have around $130bn assets in iShares as part of total assets under management of $1.36 trillion. Profit growth at Barclaycard, which is run by Gary Hoffman, was more muted this year, partly because the interest rate environment was tougher and partly because we continued to invest heavily in growing our customer base in the UK and in developing Barclaycard International. The UK regulatory and consumer environment continues to be challenging. The international business performed well in core markets - Spain and Germany - and the Juniper acquisition in the United States, although small, is strategically significant. Private Clients - our wealth management business - staged a strong recovery in 2004. The acquisition of Gerrard (completed at the end of 2003) has given a boost to the business, as has Charles Schwab Europe, which we acquired at the beginning of 2003. From 1st January 2005, Bob Diamond took on responsibility for our Private Client businesses. I look to Private Clients to be one of our growth engines for the future. International Retail and Commercial Banking, which is run by David Roberts, delivered good growth during the year. The strong performance was broadly based, but was driven primarily by progress in our businesses in the Iberian peninsula, Africa, the Middle East and our joint venture in the Caribbean. The Spanish business is doing well; we are pleased with our acquisition of Banco Zaragozano and the merging of our two businesses in Spain is stimulating strong new business flows. For example, lending is up 13% and Openplan mortgage balances are up 63%. In September, we announced that we were in negotiations to purchase a majority stake in Absa. We have completed due diligence. The Regulatory Authorities are considering our application and we are working with them. This transaction would increase the proportion of our earnings generated outside the UK and provide a strong position in a rapidly growing and well run emerging market. The fourth component of our Group Strategy is operational excellence. We regard strong franchise health with customers, employees and communities as a proxy for future growth. So we attach great importance to this strategic priority. In 2004, we received widespread recognition for our policies in a range of areas, including financial inclusion, community involvement, staff pensions, outsourcing, partnership with our trade union partner, Amicus, and disability. This recognition is important because it demonstrates that we take seriously the issues that concern our customers, our employees, and society at large and that we are taking positive action. The outlook for 2005 is good as a result of balance sheet growth and investments made in 2004. We are targeting double digit income growth and will continue to invest in the organic development of the business. We intend that cost growth should be broadly in line with income growth and we will manage costs carefully in response to actual income through the year. Asset quality is strong, and the risk dials are stable. But we must acknowledge that 2004 was a very benign year for provisions where we benefited from a charge lower than it would be reasonable to expect in 2005. Overall, we take nothing for granted, but 2005 should be a year in which we can move forward confidently. We are in business to help our customers achieve their goals. Our ability to earn our customers' loyalty, to win more of their business, and our success in recruiting new customers, depends entirely on the quality of our people. We have great people in Barclays and my thanks go to all of them, throughout the world, who have coped well with continuing change and with the demands placed upon them. That Barclays delivered the best year in its long history in 2004 is, more than anything else, a tribute to them. John Varley Group Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT 2004 2003 Â£m Â£m Interest receivable 13,665 12,427 Interest payable (6,823) (5,823) Net interest income 6,842 6,604 Net fees and commissions receivable 4,966 4,263 Dealing profits 1,493 1,054 Other operating income 644 490 Total non-interest income 7,103 5,807 Operating income 13,945 12,411 Administration expenses - staff costs (4,998) (4,295) Administration expenses - other (2,758) (2,404) Depreciation (295) (289) Goodwill amortisation (299) (265) Operating expenses (8,350) (7,253) Operating profit before provisions 5,595 5,158 Provisions for bad and doubtful debts (1,091) (1,347) Provisions for contingent liabilities and commitments (2) 1 Operating profit 4,502 3,812 Profit from joint ventures and associated undertakings 56 29 Exceptional items 45 4 Profit on ordinary activities before tax 4,603 3,845 Tax on profit on ordinary activities (1,289) (1,076) Profit on ordinary activities after tax 3,314 2,769 Minority interests (including non-equity interests) (46) (25) Profit for the financial year attributable to the members of Barclays PLC 3,268 2,744 Dividends (1,538) (1,340) Profit retained for the financial year 1,730 1,404 Earnings per ordinary share 51.2p 42.3p Fully diluted earnings per share 51.0p 42.1p Post tax return on average shareholders' funds 19.2% 17.0% Dividend per ordinary share 24.0p 20.5p CONSOLIDATED BALANCE SHEET 2004 2003 Assets: Â£m Â£m Cash and balances at central banks 1,753 1,726 Items in course of collection from other banks 1,772 2,006 Treasury bills and other eligible bills 6,658 7,177 Loans and advances to banks - banking 24,986 17,254 - trading 50,145 44,670 75,131 61,924 Loans and advances to customers - banking 189,847 167,858 - trading 65,099 58,961 254,946 226,819 Debt securities 127,428 97,393 Equity shares 12,166 7,859 Interests in joint ventures and associated undertakings 409 428 Intangible fixed assets - goodwill 4,295 4,406 Tangible fixed assets 1,921 1,790 Other assets 27,232 23,657 513,711 435,185 Retail life-fund assets attributable to policyholders 8,378 8,077 Total assets 522,089 443,262 Liabilities: Deposits by banks - banking 74,211 57,641 - trading 36,813 36,451 111,024 94,092 Customer accounts - banking 171,963 155,814 - trading 45,755 29,054 217,718 184,868 Debt securities in issue 67,806 49,569 Items in course of collection due to other banks 1,205 1,286 Other liabilities 85,363 76,374 Undated loan capital - non-convertible 6,149 6,310 Dated loan capital - convertible to preference shares 15 17 Dated loan capital - non-convertible 6,113 6,012 495,393 418,528 Minority interests and shareholders' funds: Minority interests (including non-equity interests) 901 283 Called up share capital 1,614 1,642 Reserves 15,803 14,732 Shareholders' funds: equity 17,417 16,374 18,318 16,657 513,711 435,185 Retail life-fund liabilities attributable to policyholders 8,378 8,077 Total liabilities and shareholders' funds 522,089 443,262 SUMMARY OF RESULTS RECONCILIATION OF PROFIT BEFORE TAX EXCLUDING GOODWILL AMORTISATION 2004 2003 Â£m Â£m UK Banking 2,474 2,275 UK Retail Banking 1,127 1,141 UK Business Banking 1,347 1,134 Private Clients and International 451 287 Private Clients - ongoing business 144 103 - closed life assurance activities (4) (80) International 311 264 Barclaycard 801 761 Barclays Capital 1,042 836 Barclays Global Investors 347 191 Head office functions and other operations (206) (233) Profit before tax excluding goodwill amortisation 4,909 4,117 Goodwill amortisation (299) (265) Goodwill amortisation relating to associated (7) (7) undertakings Profit before tax 4,603 3,845 TOTAL ASSETS AND WEIGHTED RISK ASSETS Total assets Weighted risk assets 2004 2003 2004 2003 Â£m Â£m Â£m Â£m UK Banking 119,806 110,995 91,913 84,482 UK Retail Banking 69,028 67,001 37,111 35,835 UK Business Banking 50,778 43,994 54,802 48,647 Private Clients and 30,606 26,492 23,337 18,184 International Private Clients - ongoing business 4,988 3,867 4,018 3,238 - closed life assurance activities 653 528 - 2 International 24,965 22,097 19,319 14,944 Barclaycard 23,019 20,348 20,188 18,334 Barclays Capital 332,606 268,702 79,949 65,149 Barclays Global Investors 796 533 1,230 1,137 Head office functions and other operations 2,583 3,709 1,984 1,711 Goodwill 4,295 4,406 - - Retail life-fund assets 8,378 8,077 - - 522,089 443,262 218,601 188,997 FINANCIAL REVIEW Results by business The following section analyses the Group's performance by business. Barclays business divisions during 2004 were: â€¢ UK Banking, comprising - UK Retail Banking - UK Business Banking â€¢ Private Clients and International, comprising - Private Clients - International â€¢ Barclaycard â€¢ Barclays Capital â€¢ Barclays Global Investors The analysis of results by business division excludes goodwill amortisation. UK Banking UK Banking delivers banking solutions to Barclays UK retail and business banking customers. It offers a range of integrated products and services and access to the expertise of other Group businesses. Customers are served through a variety of channels comprising: the branch network, automated teller machines, telephone banking, online banking and relationship managers. UK Banking is managed through two business areas, UK Retail Banking and UK Business Banking. UK Retail Banking UK Retail Banking comprises Personal Customers, Mortgages, Small Business and UK Premier. The bringing together of these businesses enables the building of broader and deeper relationships with both existing and new customers. Personal Customers and Mortgages provide a wide range of products and services to over 14 million retail customers, including current accounts, savings, mortgages, and general insurance. Small Business provides banking services to 566,000 small businesses. UK Premier provides banking, investment products and advice to some 273,000 affluent customers. UK Business Banking UK Business Banking provides relationship banking to the Group's larger and medium business customers in the United Kingdom. Customers are served by a network of relationship and industry sector specialist managers who provide local access to an extensive range of products and services, as well as offering business information and support. Customers are also offered access to the products and expertise of other businesses in the Group, particularly Barclays Capital. Private Clients and International Private Clients and International manages Barclays wealth management operations and the Group's international retail and commercial banking activities. It is managed as two distinct businesses. Private Clients Private Clients serves affluent, high net worth and corporate clients, primarily in the UK and continental Europe, providing private banking, offshore banking, stockbroking and asset management services, as well as financial planning services to a broader customer base. Private Clients comprises two businesses: International and Private Banking; and Wealth Solutions (which includes Barclays Financial Planning, Barclays Stockbrokers and the Gerrard business, which was acquired in 2003). Through Wealth Solutions, Private Clients delivers investment products to UK Retail Banking. Private Clients also includes the closed life assurance activities. International International provides a range of banking services, including current accounts, savings, investments, mortgages and consumer loans to personal and corporate customers across Spain, Portugal, France, Italy, Africa and the Middle East. International also includes the results of the FirstCaribbean business, accounted for as an associated undertaking. Barclaycard Barclaycard is a multi-brand credit card and consumer lending business with an increasing international presence and is one of the leading credit card businesses in Europe. In the UK, Barclaycard manages the Barclaycard branded credit cards, Barclays branded consumer loans, mostly Barclayloan, and also comprises FirstPlus, Clydesdale Financial Services and Monument credit cards. Outside the UK, Barclaycard International is in the United States, Germany, Spain, Greece, Italy, Portugal, Republic of Ireland and across Africa. The acquisition of the US credit card issuer, Juniper Financial Corporation, was completed on 1st December 2004. Juniper provides a platform for the expansion of Barclaycard's international business into the US credit card market and specialises in partnership card issuance programmes. Barclaycard Business processes card payments for retailers and merchants and issues cards to corporate customers. Barclaycard works closely with other parts of the Group, including UK Retail Banking, UK Business Banking and International, to leverage their distribution capability. Barclays Capital Barclays Capital is a leading global investment bank which provides large corporate, institutional and government clients with solutions to their financing and risk management needs. The Barclays Capital business model focuses on a broad span of financing and risk management services. It services a wide variety of client needs, from capital raising and managing foreign exchange, interest rate and commodity risks, through to providing technical advice and expertise. Activities are primarily divided between two areas: Rates, which includes fixed income, foreign exchange, commodities, emerging markets, money markets sales, trading and research, prime brokerage and equity related activities; and Credit, which includes origination, sales, trading and research relating to loans, debt capital markets, structured capital markets, commercial mortgage backed securities, private equity and large asset leasing. Barclays Global Investors Barclays Global Investors (BGI) is one of the world's largest asset managers and a leading global provider of investment management products and services. BGI offers structured investment strategies such as indexing, global asset allocation and risk controlled active products, including hedge funds. BGI also provides related investment services such as securities lending, cash management and portfolio transition services. In addition, BGI is the global product leader in Exchange Traded Funds (iShares), with over 100 funds for institutions and individuals trading in ten global markets. BGI's investment philosophy is founded on managing all dimensions of performance with a consistent focus on controlling risk, return and cost. UK Banking 2004 2003 Â£m Â£m Net interest income 3,466 3,301 Net fees and commissions 1,930 1,807 Other operating income 250 397 Operating income 5,646 5,505 Operating expenses excluding goodwill (3,019) (2,903) Operating profit before provisions excluding goodwill 2,627 2,602 Provisions for bad and doubtful debts (199) (326) Operating profit excluding goodwill 2,428 2,276 Profit from associated undertakings 4 10 Exceptional items 42 (11) Profit on ordinary activities before tax excluding goodwill 2,474 2,275 Cost:income ratio 53% 53% Total assets Â£119.8bn Â£111.0bn Weighted risk assets Â£91.9bn Â£84.5bn Risk Tendency Â£375m Â£385m Return on average economic capital 38% 34% Economic profit Â£1,312m Â£1,123m Key Facts Number of UK branches 2,061 2,070 UK Banking managed its portfolio of businesses to deliver good profit growth in a year of extensive business re-organisation. UK Banking profit before tax excluding goodwill increased 9% (Â£199m) to Â£2,474m (2003: Â£2,275m) as a result of a very strong performance from UK Business Banking and a broadly flat contribution from UK Retail Banking. UK Banking held a seminar in October 2004 at which it outlined how the formation of UK Banking would seek to deliver integrated banking solutions to customers, an enhanced customer service experience and significant opportunities for revenue growth and productivity improvements. UK Banking also announced that it is targeting cost:income ratio improvements of 2% per annum in 2005, 2006 and 2007. UK Retail Banking 2004 2003 Â£m Â£m Net interest income 2,059 2,000 Net fees and commissions 1,117 1,074 Other operating income 239 365 Operating income 3,415 3,439 Operating expenses excluding goodwill (2,270) (2,188) Operating profit before provisions excluding goodwill 1,145 1,251 Provisions for bad and doubtful debts (60) (107) Operating profit excluding goodwill 1,085 1,144 Profit from associated undertakings - 7 Exceptional items 42 (10) Profit on ordinary activities before tax excluding goodwill 1,127 1,141 Cost:income ratio 66% 64% Loans and advances to customers - banking (period end) Â£65.6bn Â£63.2bn Customer deposits - banking (period end) Â£72.4bn Â£69.5bn Total assets Â£69.0bn Â£67.0bn Weighted risk assets Â£37.1bn Â£35.8bn Risk Tendency Â£150m Â£150m Return on average economic capital 37% 37% Economic profit Â£595m Â£596m Key Facts Personal Customers Number of UK current accounts 10.7m 10.5m Number of UK savings accounts 10.6m 10.3m Total UK mortgage balances (residential) Â£61.7bn Â£59.8bn Small Business and UK Premier Number of Small Business customers 566,000 561,000 Number of UK Premier customers 273,000 265,000 UK Openplan Number of UK Openplan customers 2.9m 2.6m Total UK Openplan savings balances Â£21.0bn Â£21.6bn Total UK Openplan mortgage balances (residential) Â£31.6bn Â£28.7bn UK Retail Banking profit before tax excluding goodwill decreased 1% (Â£14m) to Â£1,127m (2003: Â£1,141m). Operating income was broadly flat at Â£3,415m (2003: Â£3,439m). There were strong performances in current accounts and UK Premier. The performance in the mortgage business was impacted by margin pressure. Net revenue (operating income less provisions) was also broadly flat at Â£3,355m (2003: Â£3,332m). Net interest income increased 3% (Â£59m) to Â£2,059m (2003: Â£2,000m). Growth was driven by higher customer deposit balances particularly in Personal Customer current accounts and UK Premier deposits, together with an increase in the retail savings margin. This growth was partially offset by a reduced contribution from the mortgage business. The favourable impact of higher average UK mortgage balances was more than offset by margin pressure, due to a fall in the proportion of the mortgage portfolio on the standard variable rate, the impact of successive base rate increases and a reduction in early redemption income. UK residential mortgage balances ended the period at Â£61.7bn (2003: Â£59.8bn). Gross advances were Â£17.5bn (2003: Â£18.3bn) and net lending was Â£1.9bn (2003: Â£2.0bn). The loan to value ratio within the mortgage book on a current valuation basis averaged 35% (2003: 40%). Average overdraft balances within Personal Customers increased by 9%. Average customer deposit balances increased 5% to Â£68.5bn (2003: Â£65.0bn). Personal Customer average current account balances increased 10%. There was strong growth in UK Premier with average deposits up 15%, and in Small Business where average deposit balances were 7% higher. Retail average savings balances increased by 1% in a highly competitive market. Net fees and commissions increased 4% (Â£43m) to Â£1,117m (2003: Â£1,074m), driven by strong growth in value added fee-based current account income. Other operating income decreased 35% (Â£126m) to Â£239m (2003: Â£365m). The majority of the decrease was attributable to a reduction of Â£89m in income from the revision of estimated amounts expected to be repaid on banking liabilities. There was also lower net premium income on insurance underwriting due to a provision relating to the early termination of contracts. Operating expenses rose 4% (Â£82m) to Â£2,270m (2003: Â£2,188m). Almost half of the cost increase (Â£40m) was attributable to preparations for a new regulatory environment, particularly in the mortgage and general insurance businesses. There was significant investment in the business infrastructure and restructuring costs were incurred in re-organising the business. This included adding 1,000 customer facing staff, an upgrade in branch management capability and investment in new technology. The cost:income ratio increased to 66% (2003: 64%). Provisions decreased 44% (Â£47m) to Â£60m (2003: Â£107m). The quality of the loan portfolio improved and mortgage balances in arrears remained at a low level. The reduction in the provisions charge included a release of Â£40m associated with the UK mortgage business following a review of the portfolio and the current loss experience. The exceptional item of Â£42m was predominantly in respect of the profit on the sale of a shareholding in Edotech, a former Barclays in-house statement printing operation. UK Business Banking 2004 2003 Â£m Â£m Net interest income 1,407 1,301 Net fees and commissions 813 733 Other operating income 11 32 Operating income 2,231 2,066 Operating expenses excluding goodwill (749) (715) Operating profit before provisions excluding goodwill 1,482 1,351 Provisions for bad and doubtful debts (139) (219) Operating profit excluding goodwill 1,343 1,132 Profit from associated undertakings 4 3 Exceptional items - (1) Profit on ordinary activities before tax excluding goodwill 1,347 1,134 Cost:income ratio 34% 35% Loans and advances to customers - banking Â£48.6bn Â£41.4bn (period end) Customer deposits - banking (period end) Â£42.4bn Â£38.5bn Total assets Â£50.8bn Â£44.0bn Weighted risk assets Â£54.8bn Â£48.6bn Risk Tendency Â£225m Â£235m Return on average economic capital 39% 31% Economic profit Â£717m Â£527m Key Facts Total number of Business Banking customers 179,000 177,000 Customers registered for online banking/ 69,000 63,500 BusinessMaster UK Business Banking profit before tax excluding goodwill increased 19% (Â£213m) to Â£1,347m (2003: Â£1,134m), as a result of good income growth, a continued focus on cost management and a significantly reduced provision charge. Both Larger Business and Medium Business performed well. Market shares of primary banking relationships for Larger Business and Medium Business were maintained. Operating income increased 8% (Â£165m) to Â£2,231m (2003: Â£2,066m). Net revenue (operating income less provisions) increased 13% (Â£245m) to Â£2,092m (2003: Â£1,847m). Net interest income increased 8% (Â£106m) to Â£1,407m (2003: Â£1,301m), as a result of strong balance sheet growth. Average lending balances increased 11% to Â£44.6bn (2003: Â£40.2bn); the quality of the new lending was good and the overall credit profile of the portfolio was maintained. Average deposit balances increased 9% to Â£41.5bn (2003: Â£37.9bn). There was an improvement in the lending margin and a modest decline in the deposit margin. There was a lower contribution from the structural hedge. Net fees and commissions increased 11% (Â£80m) to Â£813m (2003: Â£733m), driven by significantly higher lending related fees. Operating expenses increased 5% (Â£34m) to Â£749m (2003: Â£715m), reflecting higher business volumes and increased expenditure on front line staff and marketing. The cost of regulatory compliance programmes also increased. The cost:income ratio improved to 34% (2003: 35%). Provisions decreased 37% (Â£80m) to Â£139m (2003: Â£219m). The provisions performance was driven by the impact of significantly lower potential problem loans and non-performing loans and the benefit of a single recovery of Â£57m. Private Clients and International 2004 2003 Â£m Â£m Net interest income 836 749 Net fees and commissions 850 683 Other operating income 47 36 Operating income 1,733 1,468 Operating expenses excluding goodwill (1,304) (1,096) Operating profit before provisions excluding goodwill 429 372 Provisions for bad and doubtful debts (30) (36) Operating profit excluding goodwill - ongoing business 399 336 Profit from associated undertakings 56 24 Exceptional items - 7 Profit on ordinary activities before tax excluding goodwill - ongoing business 455 367 Contribution from closed life assurance activities (4) (80) Profit on ordinary activities before tax excluding goodwill 451 287 Cost:income ratio 75% 75% Total assets Â£30.6bn Â£26.5bn Weighted risk assets Â£23.3bn Â£18.2bn Risk Tendency Â£70m Â£75m Return on average economic capital 28% 22% Economic profit Â£264m Â£129m Private Clients and International profit before tax excluding goodwill increased 57% (Â£164m) to Â£451m (2003: Â£287m). The improved performance reflected good momentum in the businesses with strong income growth in both the Private Clients and International businesses. This was supported by improved market conditions together with the benefits from the acquisitions made in 2003 and the return on the prior investments in improving the client experience. There was a significantly improved performance from the closed life assurance activities. Private Clients 2004 2003 Â£m Â£m Net interest income 302 288 Net fees and commissions 529 394 Other operating income 8 4 Operating income 839 686 Operating expenses excluding goodwill (696) (585) Operating profit before provisions excluding goodwill 143 101 Provisions for bad and doubtful debts 1 (3) Operating profit excluding goodwill - ongoing business 144 98 Exceptional items - 5 Profit on ordinary activities before tax excluding goodwill - ongoing business 144 103 Contribution from closed life assurance activities (4) (80) Profit on ordinary activities before tax excluding goodwill 140 23 Cost:income ratio 83% 85% Loans and advances to customers - banking (period end) Â£4.1bn Â£3.1bn Customer deposits - banking (period end) Â£21.3bn Â£20.2bn Total assets Â£5.6bn Â£4.4bn Weighted risk assets Â£4.0bn Â£3.2bn Risk Tendency Â£5m Â£5m Return on average economic capital 42% 21% Economic profit Â£137m Â£38m Key Facts Total customer funds Â£77bn Â£75bn Average stockbroking deal volumes per day 7,800 8,200 The comparison with the prior period is impacted by the acquisitions of the Gerrard business in mid December 2003 and the retail stockbroking business of Charles Schwab Europe at the end of January 2003. Private Clients profit before tax excluding goodwill for the ongoing business increased 40% (Â£41m) to Â£144m (2003: Â£103m). There was a significantly improved performance from the closed life assurance activities. Operating income increased 22% (Â£153m) to Â£839m (2003: Â£686m). Net interest income increased 5% (Â£14m) to Â£302m (2003: Â£288m). Total average loans increased 31% to Â£3.8bn (2003: Â£2.9bn). Total average customer deposits increased 4% to Â£21.4bn (2003: Â£20.6bn). Good income growth from offshore corporate deposits and loans in International and Private Banking reflected the benefit of investment in relationship managers and internet based offerings, partially offset by adverse exchange rate movements. Deposit margins improved slightly and were partially offset by lower lending margins. Net fees and commissions increased 34% (Â£135m) to Â£529m (2003: Â£394m). Excluding the contribution from Gerrard, net fees and commissions increased 8%. Business volumes improved as higher average equity market levels contributed to increased sales of investment products and higher fund management fees. The average level of the FTSE 100 Index was 12% higher at 4,522 (2003: 4,051). Stockbroking fee income increased 6% reflecting the benefits of the integration of Charles Schwab Europe as well as improved market conditions. Although headline average daily deal volumes in UK retail stockbroking decreased to 7,800 (2003: 8,200), a more favourable product mix, including an increase in higher margin deals, more than compensated for the lower volume. Fee income in Private Banking increased 13%, reflecting the impact of additional private bankers and new product launches. Operating expenses increased 19% (Â£111m) to Â£696m (2003: Â£585m). Excluding the Gerrard business, operating expenses remained broadly flat. Cost savings resulting from reduced restructuring costs and cost synergies from Charles Schwab Europe enabled increased investment in product development and customer service in International and Private Banking and in Wealth Solutions. The cost: income ratio improved to 83% (2003: 85%). Total customer funds, comprising customer deposits and assets under management, increased to Â£77bn (2003: Â£75bn). Growth in new business and the impact of the rising stockmarket were partly offset by adverse exchange rate movements. In October 2004, a multi-manager product was launched, which had Â£1.6bn of assets under management at the year-end. The contribution from the closed life assurance activities was a loss of Â£4m (2003: loss of Â£80m). The impact of stronger stock markets, improved investment performance and better persistency levels largely offset the costs of Â£97m (2003: Â£95m) relating to redress for customers in respect of sales of endowment policies. The loss of Â£4m is reflected in the Group's results as a gain of Â£49m (2003: loss of Â£40m) within other operating income offset by a reduction of Â£53m (2003: Â£40m) within net interest income. International 2004 2003 Â£m Â£m Net interest income 534 461 Net fees and commissions 321 289 Other operating income 39 32 Operating income 894 782 Operating expenses excluding goodwill (608) (511) Operating profit before provisions excluding goodwill 286 271 Provisions for bad and doubtful debts (31) (33) Operating profit excluding goodwill 255 238 Profit from associated undertakings 56 24 Exceptional items - 2 Profit on ordinary activities before tax excluding goodwill 311 264 Cost:income ratio 68% 65% Loans and advances to customers - banking (period end) Â£19.7bn Â£16.8bn Customer deposits - banking (period end) Â£10.1bn Â£9.9bn Total assets Â£25.0bn Â£22.1bn Weighted risk assets Â£19.3bn Â£15.0bn Risk Tendency Â£65m Â£70m Return on average economic capital 21% 22% Economic profit Â£127m Â£91m Key Facts Number of international branches 841 859 Number of Barclays Africa customer accounts 1.4m 1.5m Number of Barclays Spain customers 0.5m 0.5m Number of Openplan customers in Spain 47,000 35,000 European mortgages - average balances Â£11.4bn Â£8.2bn European mortgages - average balances (Euros) â‚¬16.9bn â‚¬11.9bn The comparison with the prior period is impacted by the acquisition of Banco Zaragozano in July 2003. International profit before tax excluding goodwill increased 18% (Â£47m) to Â£311m (2003: Â£264m) reflecting good growth in all businesses. Operating income increased 14% (Â£112m) to Â£894m (2003: Â£782m). Net revenue (operating income less provisions) increased 15% (Â£114m) to Â£863m (2003: Â£749m). Net interest income increased 16% (Â£73m) to Â£534m (2003: Â£461m) as a result of the inclusion of Banco Zaragozano and good balance growth in Spain, Africa and Italy. Total average customer deposits increased 18% to Â£9.4bn (2003: Â£8.0bn), resulting from both the inclusion of Banco Zaragozano and strong organic growth in Spain and Africa. Total average loans increased 48% to Â£18.3bn (2003: Â£12.4bn), reflecting strong growth across the portfolio and the inclusion of Banco Zaragozano for a full year in 2004. Mortgage balance growth in Europe was very strong with balances up 39%. Average lending balances in Africa increased 25%. Overall lending margins reduced mainly due to the impact of mortgage growth on the product mix. Net fees and commissions increased 11% (Â£32m) to Â£321m (2003: Â£289m), with the majority of the increase reflecting the inclusion of Banco Zaragozano. There was a strong performance in France and Spain from increased fund management related fees. Spain's total assets under management increased by 27%. Operating expenses increased 19% (Â£97m) to Â£608m (2003: Â£511m) with the majority of the increase attributable to the inclusion of Banco Zaragozano. Investment in the development of new products and in enhancing the customer experience remained high across the portfolio. The cost:income ratio was 68% (2003: 65%) reflecting higher integration costs for Banco Zaragozano. Provisions decreased 6% (Â£2m) to Â£31m (2003: Â£33m). Barclays Spain (including Banco Zaragozano) continued to perform strongly, with profit before tax excluding integration costs up 49%. The retention rate of Banco Zaragozano customers has been high and Barclays products were successfully introduced to the customer base. The integration is well ahead of schedule. Openplan in Spain continued its successful growth and it has been popular with the customers of Banco Zaragozano: total customer numbers at the end of the 2004 were 47,000 (2003: 35,000), mortgage balances were â‚¬7.8bn (2003: â‚¬4.8bn) and savings balances were â‚¬1.5bn (2003: â‚¬1.0bn). Openplan also continued to grow in Portugal, with 8,900 customers at 31st December (2003: 6,200) and total balances up 44% to â‚¬1.3bn (2003: â‚¬0.9bn). This was supported by ongoing investment in new branches. In October 2004, Openplan was launched in France. Profit before tax in Africa and the Middle East increased 13% to Â£128m (2003: Â£113m) driven by strong growth in corporate balances, particularly in South Africa, together with reduced restructuring costs. The profit from associated undertakings reflected the contribution from FirstCaribbean. The improved performance reflected the delivery of synergies arising from the merger which created FirstCaribbean, together with good underlying growth in customer activity. The results of FirstCaribbean included a gain of Â£28m on the sale of shares held in Republic Bank Limited. Barclaycard 2004 2003 Â£m Â£m Net interest income 1,600 1,555 Net fees and commissions 764 673 Operating income 2,364 2,228 Operating expenses excluding goodwill (806) (761) Operating profit before provisions excluding goodwill 1,558 1,467 Provisions for bad and doubtful debts (761) (708) Operating profit excluding goodwill 797 759 Profit from joint ventures 4 2 Profit on ordinary activities before tax excluding goodwill 801 761 Cost:income ratio 34% 34% Loans and advances to customers - banking (period end) Â£22.3bn Â£19.6bn Total assets Â£23.0bn Â£20.3bn Weighted risk assets Â£20.2bn Â£18.3bn Risk Tendency Â£860m Â£775m Return on average economic capital 23% 24% Economic profit Â£321m Â£304m Key Facts Number of Barclaycard UK retail card customers 11.2m 10.6m Number of retailer relationships 90,000 86,000 Number of customers registered for online services 1.9m 1.5m UK credit cards - average outstanding balances Â£10.2bn Â£9.5bn UK credit cards - average extended credit balances Â£8.2bn Â£7.4bn UK loans - average consumer lending balances Â£9.4bn Â£8.5bn International - average extended credit balances Â£0.9bn Â£0.7bn International - cards in issue 2.9m 1.7m Barclaycard profit before tax excluding goodwill increased 5% (Â£40m) to Â£801m (2003: Â£761m). Operating income increased 6% (Â£136m) to Â£2,364m (2003: Â£2,228m). Net revenue (operating income less provisions) increased 5% (Â£83m) to Â£1,603m (2003: Â£1,520m). A high level of recruitment of UK retail card customers continued at 1.33m (2003: 1.55m). Net interest income increased 3% (Â£45m) to Â£1,600m (2003: Â£1,555m) reflecting growth in UK average extended credit balances, up 11% to Â£8.2bn (2003: Â£7.4bn) and higher UK average loan balances, up 11% to Â£9.4bn (2003: Â£8.5bn). Margins in the consumer lending business remained broadly stable whereas margins in UK cards decreased, reflecting higher funding costs and the impact of increased balance transfer activity at promotional rates. Net fees and commissions increased 14% (Â£91m) to Â£764m (2003: Â£673m) as a result of the continued growth in the credit card and consumer lending businesses and good volume growth within the merchant acquiring business. Operating expenses rose 6% (Â£45m) to Â£806m (2003: Â£761m). The increase reflected investment in Barclaycard International and brand related investment in the UK. Provisions increased 7% (Â£53m) to Â£761m (2003: Â£708m). This increase was lower than the growth in assets and reflected the continued benefit of improved collections activity. Non-performing loan balances increased but at a significantly lower rate than the growth in assets. Delinquency levels as a percentage of outstandings for both Barclaycard branded credit cards and for Barclayloan were stable. In the UK, particularly strong performances from the Monument and FirstPlus businesses, together with Barclaycard Business, more than offset the margin pressure and brand investment in the Barclaycard branded card activities. Barclaycard International made good progress with its growth strategy. Profit before tax increased to Â£8m (2003: Â£4m). Income increased 30% due to the growth in average extended credit balances, up 28% to Â£882m (2003: Â£689m). The number of Barclaycard International cards in issue rose to 2.9m (2003: 1.7m). Barclaycard established a presence in the US credit card market through the acquisition of the Juniper Financial Corporation in December 2004. Juniper is a US credit card issuer with US$1.4bn in receivables and 1 million cards in issue. In 2004, Juniper contributed a loss of Â£2m, for the month of December, in line with expectations at the time of the acquisition. Barclays Capital 2004 2003 Â£m Â£m Net interest income 1,006 1,024 Dealing profits 1,469 1,042 Net fees and commissions 611 551 Other operating income 295 109 Operating income 3,381 2,726 Operating expenses (2,237) (1,638) Operating profit before provisions 1,144 1,088 Provisions for bad and doubtful debts (102) (253) Operating profit 1,042 835 Profit from associated undertakings - 1 Profit on ordinary activities before tax 1,042 836 Cost:income ratio 66% 60% Cost:net revenue ratio 68% 66% Net revenue per member of staff (year average FTE '000) Â£479 Â£443 Total assets Â£333bn Â£269bn Weighted risk assets Â£80bn Â£65bn Risk Tendency Â£70m Â£135m Return on average economic capital 36% 27% Economic profit Â£534m Â£349m Key facts1 2004 2003 League League table Issuance table Issuance position value position value Global all debt 4th $284.0bn 4th $199.3bn European all debt 1st $174.2bn 3rd $140.1bn All international bonds (all 3rd $148.7bn 8th $103.8bn currencies) All international bonds (Euros) 6th â‚¬59.0bn 8th â‚¬47.4bn Sterling bonds 1st Â£18.5bn 1st Â£15.9bn US investment grade bonds 10th $4.8bn 10th $7.5bn 1 League tables compiled by Barclays Capital from external sources including Dealogic and Thomson Financials. Barclays Capital profit before tax increased 25% (Â£206m) to Â£1,042m (2003: Â£836m), as a result of very strong operating income growth and the continued improvement in the credit environment. The very strong performance was driven by growth in business volumes and client activity levels. Net revenue (operating income less provisions) increased 33% (Â£806m) to Â£3,279m (2003: Â£2,473m). Operating income increased 24% (Â£655m) to a record Â£3,381m (2003: Â£2,726m) as a result of strong growth across most of the product areas in Rates and Credit. Income by product continued to diversify with the strongest growth delivered by credit products and equity related products. Regional growth was broadly based with particularly strong results in the US and Asia. Average DvaR increased to Â£34m (2003: Â£26m). Period end DvaR was Â£32m (2003: Â£37m). Secondary income, comprising dealing profits and net interest income, is mainly generated from providing client risk management solutions. This increased 20% (Â£409m) to Â£2,475m (2003: Â£2,066m). Dealing profits increased 41% (Â£427m) to Â£1,469m (2003: Â£1,042m), with very strong performances in both the Rates and Credit businesses. This reflected higher volumes of client led activity across a broad range of products and the continued benefit of recent headcount investments in product depth and geographic reach. Net interest income fell 2% (Â£18m) to Â£1,006m (2003: Â£1,024m) driven by lower contributions from money markets due to the reduced size of the book. Primary income, comprising net fees and commissions from advisory and origination activities, grew 11% (Â£60m) to Â£611m (2003: Â£551m). Securitisation, structured bonds and leveraged finance grew significantly, more than offsetting lower market activity by corporates. Net fees and commissions included Â£63m (2003: Â£89m) of internal fees for structured capital markets activities arranged by Barclays Capital. Other operating income increased to Â£295m (2003: Â£109m) as a result of a number of private equity realisations and structured capital markets transactions. Operating expenses increased 37% (Â£599m) to Â£2,237m (2003: Â£1,638m) due to the execution of the business expansion plan and an increase in performance related pay. Business as usual costs increased significantly, reflecting higher volumes and the growth in staff numbers. Revenue related costs increased due to the strong profit performance. The recruitment of staff to expand product, client coverage and distribution capabilities resulted in significantly higher strategic investment costs. The ratio of total costs to net revenue and staff costs to net revenue both increased by 2% to 68% and 55% respectively. Approximately half of the total costs comprised performance related pay, discretionary investment spend and short-term contractor resource. Total headcount increased by 2,000 to 7,800 (2003: 5,800). Almost a third were in the front office, mainly in Europe and the US. Approximately half of the increase was directed at strengthening the back office and control functions. The remainder related to contract staff, mainly in technology, which ensured that the support platform could be developed whilst maintaining flexibility. Barclays Capital accelerated targeted investments in revenue generating capabilities together with a strengthening of the control and support environment. This investment has expanded the scope of the product offering, building new income streams from commercial and residential mortgage backed securities and home equity loans. Existing offerings in commodities trading and equity related products were extended to the US and client channels continued to be extended in Europe, the US and Asia. Provisions fell 60% (Â£151m) to Â£102m (2003: Â£253m), reflecting the significant decline in non-performing and potential problem loan balances as a result of a more stable wholesale credit environment. Barclays Global Investors 2004 2003 Â£m Â£m Net interest income 5 9 Net fees and commissions 882 662 Other operating income 6 1 Operating income 893 672 Operating expenses excluding goodwill (545) (480) Operating profit excluding goodwill 348 192 Loss from joint ventures (2) (1) Exceptional items 1 - Profit on ordinary activities before tax excluding goodwill 347 191 Cost:income ratio 61% 71% Net revenue per member of staff (year average FTE Â£464 Â£333 '000) Total assets Â£0.8bn Â£0.5bn Weighted risk assets Â£1.2bn Â£1.1bn Return on average economic capital 173% 85% Economic profit Â£204m Â£112m Key Facts Number of institutional clients 2,600 2,500 Total assets under management Â£709bn Â£598bn Total assets under management (US$) $1,362bn $1,070bn Total indexed assets under management Â£478bn Â£410bn Total active assets under management Â£147bn Â£125bn Total managed cash assets under management Â£84bn Â£63bn Number of iShares products 132 108 Total iShares assets under management Â£68bn Â£38bn Barclays Global Investors (BGI) delivered another year of record performance. Profit before tax excluding goodwill increased 82% (Â£156m) to Â£347m (2003: Â£191m) reflecting substantial income growth and continued discipline in cost management. Foreign exchange movements impacted growth in income and costs. Approximately 55% of income is generated in the US and 31% in the UK and continental Europe. Net fees and commissions increased 33% (Â£220m) to Â£882m (2003: Â£662m), with strong income generation across both the active and index businesses and particularly in investment management fees. These resulted from strong net new sales, growth in sales of higher margin products and stronger global equity markets, partially offset by adverse foreign exchange movements. Securities lending income growth was also very strong, benefiting from increased volumes. Successful income generation continued across a diverse range of products, distribution channels and geographies and active product investment performance remained strong. BGI's commitment to innovation continued as a number of iShare (Exchange Traded Funds) products were launched during 2004. There was significant growth in global iShares with assets under management up 88% to US$130bn at the year-end. Operating expenses increased 14% (Â£65m) to Â£545m (2003: Â£480m) primarily as a result of higher performance based expenses and benefited from foreign exchange movements. The cost:income ratio improved to 61% (2003: 71%). Total assets under management increased 19% (Â£111bn) to Â£709bn (2003: Â£598bn). The growth included the significant generation of net new assets of Â£65bn. An increase of Â£97bn attributable to market movements was partially offset by Â£51bn of adverse exchange rate movements. Head office functions and other operations Head office functions comprise all the Group's central costs, including the following areas that fall within Group Functions: Executive Management, Finance, Treasury, Marketing, Communications, Human Resources, Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Tax, Compliance and Risk. Costs incurred wholly on behalf of the business units are recharged to them. Central items include internal fees charged by Barclays Capital for structured capital markets activities, income from the management of the Group's operational premises, property related services and other central items including activities which support the operating business. Transition Businesses comprise discontinued South American and Middle Eastern corporate banking businesses and other centrally managed Transition Businesses. These non-core relationships are managed separately with the objective of maximising the recovery from the assets concerned. 2004 2003 Â£m Â£m Head office functions and central items (201) (192) Transition Businesses 7 (25) Restructuring costs (12) (16) Loss on ordinary activities before tax excluding goodwill (206) (233) Head office functions and central items costs increased 5% (Â£9m) to Â£201m (2003: Â£192m). Central items included internal fees charged by Barclays Capital for structured capital market activities of Â£63m (2003: Â£89m). The improved performance of Transition Businesses, from a loss of Â£25m to a profit of Â£7m, primarily reflected provisions released. Woolwich integration synergies Total Woolwich integration benefits of Â£496m were achieved by the programme in the year ended 31st December 2004. This comprises ongoing cost and revenue synergies totalling Â£493m and tax savings of Â£3m. The Woolwich integration programme was formally completed at the end of 2004. Results by nature of income and expense Net interest income 2004 2003 Â£m Â£m Interest receivable 13,665 12,427 Interest payable (6,823) (5,823) 6,842 6,604 Group net interest margin1 % % Group 2.59 2.61 Domestic 3.48 3.64 International 0.81 0.77 1 Domestic business is conducted primarily in the UK in Sterling. International business is conducted primarily in foreign currencies. In addition to the business carried out by overseas branches and subsidiaries, some international business is transacted in the UK. Interest margin is net interest income as a percentage of average interest earning assets. The margins shown above exclude non-margin related items, including profits and losses on the repurchase of loan capital and the unwinding of the discount on vacant leasehold property provisions. Group net interest income increased 4% (Â£238m) to Â£6,842m (2003: Â£6,604m), reflecting growth in balances which more than offset a 2 basis points fall in the Group net interest margin to 2.59%. The Group net interest margin of 2.59% (2003: 2.61%) includes 0.42% (2003: 0.48%) arising from the benefit of free funds. A component of the benefit of free funds is the structural hedge against short-term interest rate movements. The contribution of the structural hedge has decreased to 0.12% (2003: 0.19%) largely due to the impact of higher short-term interest rates. Group average interest earning assets increased Â£11bn to Â£264bn (2003: Â£253bn). Domestic average interest earning assets increased Â£14bn to Â£176bn (2003: Â£162bn). This reflected increases across the businesses. International average interest earning assets remained broadly stable at Â£88bn (2003: Â£90bn). The domestic net interest margin fell 16 basis points to 3.48% (2003: 3.64%). This was attributable to the margin pressure in the mortgage business, the impact of base rate rises during the year, higher funding costs, increased promotional balance transfer activity in the cards business and the impact of the structural hedge. This was partially offset by increased margins in retail savings, Business Banking loans and Barclays Capital banking activities. Margins in other areas remained broadly stable. The international net interest margin increased by 4 basis points to 0.81% (2003: 0.77%) largely due to a change in the mix of both assets and liabilities in Barclays Capital banking activities. The Group net interest margin was impacted by the factors described above with the reduction largely mitigated by an increase in the proportion of domestic interest earning assets. Net fees and commissions 2004 2003 Â£m Â£m Fees and commissions receivable 5,672 4,896 Less: fees and commissions payable (706) (633) 4,966 4,263 Group net fees and commissions increased 16% (Â£703m) to Â£4,966m (2003: Â£4,263m), reflecting good growth across all businesses. Fees and commissions receivable rose 16% (Â£776m) to Â£5,672m (2003: Â£4,896m) driven by increases in: Barclays Global Investors, reflecting strong income generation across both the active and index businesses; Barclays Capital, with good contributions from origination and advisory activities; and Private Clients, as a result of stronger business volumes and the acquisition of Gerrard. Good growth was also achieved in UK Banking and in Barclaycard. Dealing profits 2004 2003 Â£m Â£m Rates related business 1,141 909 Credit related business 352 145 1,493 1,054 Almost all the Group's dealing profits are generated in Barclays Capital. Dealing profits increased 42% (Â£439m) to Â£1,493m (2003: Â£1,054m), with very strong performances in both the Rates and Credit businesses. This reflected higher volumes of client led activity throughout the year across a broad range of products and the continued benefit of headcount investments to broaden product depth and geographical reach. The very strong growth in the Rates businesses was across equity related activities, foreign exchange and fixed income. The very strong performance in the Credit businesses reflected an increase in the contribution from credit derivatives. Total foreign exchange income was Â£520m (2003: Â£498m) and consisted of revenues earned from both retail and wholesale activities. The foreign exchange income earned on customer transactions by UK Banking, Private Clients and International and Barclaycard, both externally and within Barclays Capital, is reported in those business units, within fees and commissions. Other operating income 2004 2003 Â£m Â£m Net premium income on insurance underwriting 211 264 Gain on disposal of investment securities 181 73 Income from the long term assurance business 58 (33) Property rentals 9 15 Dividend income from equity shares 17 6 Other income 168 165 644 490 Other operating income increased 31% (Â£154m) to Â£644m (2003: Â£490m). Net premium income on insurance underwriting decreased 20% (Â£53m) to Â£211m (2003: Â£264m), primarily due to a provision relating to the early termination of contracts. Gain on disposal of investment securities rose by Â£108m to Â£181m (2003: Â£73m), predominantly due to a number of realisations in the private equity business within Barclays Capital. Virtually all the Group's long term assurance activity is based in the UK and was the main component of the Â£58m contribution. This included costs of redress for customer claims in respect of endowment policies of Â£97m (2003: Â£95m). Dividend income increased by Â£11m to Â£17m (2003: Â£6m) as a result of a significant dividend received from an investment. Other income was flat at Â£168m (2003: Â£165m). This reflected a reduction of Â£98m in income, primarily in UK Retail Banking, from the revision of estimated amounts expected to be repaid on banking liabilities. This was offset by realisations on structured capital market transactions. Operating expenses The Group manages costs on the basis of three specific categories: business as usual, revenue related and strategic investment. Revenue related costs are costs that are directly associated with a corresponding change in revenue or profits. Strategic investment costs are costs that can generate or enable new revenue streams or definable growth in a revenue stream, or generate or enable reduced costs. Acquisition and disposal costs are those expenses incurred in 2004 or 2003 by those businesses that were purchased or sold by the group in 2004 or 2003. Restructuring costs and goodwill amortisation are reported separately. The Group's expenses are summarised in the following table: 2004 2003 Â£m Â£m Business as usual expenses 5,864 5,316 Revenue related costs 1,213 982 Strategic investment costs 502 392 Acquisitions and disposals 273 89 Restructuring charge 199 209 Goodwill amortisation 299 265 8,350 7,253 Operating expenses rose 15% (Â£1,097m) to Â£8,350m (2003: Â£7,253m). Business as usual costs increased 10% (Â£548m) to Â£5,864m (2003: Â£5,316m), reflecting higher business volumes and increased organic investment. Costs associated with the implementation of major regulatory and legislative programmes, including the new Mortgage & General Insurance regulations, International Financial Reporting Standards, Basel II and Sarbanes Oxley, represented Â£94m of the increase. Revenue related costs rose 24% (Â£231m) to Â£1,213m (2003: Â£982m) driven largely by increased performance related payments, primarily in Barclays Capital and Barclays Global Investors. Strategic investment costs increased 28% (Â£110m) to Â£502m (2003: Â£392m). This reflected increased spend in Barclays Capital, due to the impact of targeted acquisition of staff to drive the development of products, client coverage and distribution capabilities, across Europe, the US and Asia. Also included is a Â£23m cost increase relating to the relocation of Barclays headquarters to Canary Wharf. Acquisitions and disposals costs reflected the acquisitions of Juniper Financial Corporation in 2004 and Charles Schwab Europe, Clydesdale Financial Services, Banco Zaragozano and Gerrard in 2003. Administrative expenses - staff costs 2004 2003 Â£m Â£m Salaries and accrued incentive payments 4,043 3,441 Social security costs 339 278 Pension costs 160 180 Post-retirement health care 22 19 Other staff costs 434 377 4,998 4,295 2004 2003 Number of staff at period end: UK Banking 41,800 41,000 UK Retail Banking 34,400 34,000 UK Business Banking 7,400 7,000 Private Clients and International 19,300 19,000 Private Clients 7,200 6,900 International 12,100 12,100 Barclaycard 6,700 6,200 Barclays Capital 7,800 5,800 Barclays Global Investors 1,900 2,000 Head office functions and other operations 900 800 Total Group permanent and contract staff worldwide 78,400 74,800 Temporary and agency staff worldwide 4,300 4,100 Total including temporary and agency staff 82,700 78,900 Staff costs increased by 16% (Â£703m) to Â£4,998m (2003: Â£4,295m). Salaries and accrued incentive payments rose by 17% (Â£602m) to Â£4,043m (2003: Â£3,441m) principally reflecting increased performance related payments primarily within Barclays Capital and Barclays Global Investors, increased headcount, and the impact of the businesses acquired in 2003. Pension costs comprise all UK and international pension schemes. Included in the costs is a charge of Â£103m (2003: Â£128m) in respect of the Group's main UK pension schemes. Staff numbers shown are on a full time equivalent basis. United Kingdom permanent and contract staff are 60,000 (2003: 58,000). Internationally based permanent and contract staff numbers are 18,400 (2003: 16,800). During 2004, permanent and contract staff increased by 3,600. The implementation of restructuring programmes resulted in a decrease of 2,100 staff, but this was more than offset by the recruitment of additional staff throughout the Group and 400 staff from the acquisition of Juniper. Significant areas of recruitment were: Barclays Capital, to drive the expansion of its business; Barclaycard, through the growth of Barclaycard International, and the addition of front office staff to improve customer service in Barclaycard UK; and UK Banking, mostly from the recruitment of front line staff in both UK Retail Banking and UK Business Banking. Head office functions and other operations include staff undertaking activities which support the operating businesses including central information technology services. These costs are predominantly passed onto the businesses. Administrative expenses - other 2004 2003 Â£m Â£m Property and equipment expenses 1,041 985 Other administrative expenses 1,717 1,419 2,758 2,404 Administrative expenses - other rose by 15% (Â£354m) to Â£2,758m (2003: Â£2,404m) as a result of higher business activity and the impact of acquisitions. Depreciation 2004 2003 Â£m Â£m Property depreciation 86 93 Equipment depreciation 209 196 295 289 Provisions for bad and doubtful debts 2004 2003 Â£m Â£m The provisions charge for the year in respect of bad and doubtful debts comprises: Specific provisions New and increased provisions 1,767 1,628 Releases (211) (195) Recoveries (255) (113) 1,301 1,320 General provisions (release) / charge (210) 27 Net charge 1,091 1,347 Total provisions balances for bad and doubtful debts at end of the year comprise: Specific provisions 2,202 2,233 General provisions 564 795 2,766 3,028 The credit environment in both retail and in corporate and wholesale businesses was relatively benign in 2004. This led to lower provisions charges, a lower level of potential problem loans and non-performing loans and consequently a reduced need to hold provision balances. Overall, the Group provisions charge declined 19% to Â£1,091m (2003: Â£1,347m). This resulted from a substantial decrease in the corporate and wholesale provisions charge, whilst the retail provision charge was steady. The provision coverage of potential credit risk loans (PCRLs), comprising potential problem loans and non performing loans, was higher at 59.2% (2003: 54.6%) as PCRLs fell relatively more than the provisions balance. As a percentage of average banking loans and advances, the provisions rate fell to 0.54% (2003: 0.73%). In the corporate and wholesale businesses, PCRLs fell 29% to Â£2,062m (2003: Â£2,920m), reflecting the strong corporate credit environment. The corporate and wholesale provisions charge declined to Â£284m (2003: Â£543m). The reduction in the provisions charge included an exceptional recovery of Â£57m in UK Business Banking. In the retail businesses, PCRLs remained steady at Â£2,679m (2003: Â£2,712m). The provisions charge in the retail businesses was also steady at Â£807m (2003: Â£804m). The provisions charge increased in Barclaycard (the card and unsecured consumer lending business) due to volume growth and the maturation of new customer recruitment. The provisions charge included a release of Â£40m associated with the UK mortgage business, following a review of the portfolio and the current loss experience. Total provision balances declined 9% (Â£262m) to Â£2,766m (2003: Â£3,028m). The fall in the general provisions balance of Â£231m largely resulted from transfers to specific provisions of Â£198m, which had no effect on the net provisions charge as the specific provisions charge was increased by the same amount. The transfers reflected enhancements to provisioning models and the resolution of an individual large corporate exposure. Profit from joint ventures and associated undertakings 2004 2003 Â£m Â£m (Loss)/profit from joint ventures (3) 1 Profit from associated undertakings 59 28 56 29 The majority of the profit from associated undertakings for the year relates to the investment in FirstCaribbean. The profit from FirstCaribbean reflects a strong operating performance and includes a gain of Â£28m on the disposal of shares held in Republic Bank Limited. Exceptional items 2004 2003 Â£m Â£m Profit on sale of businesses 45 4 45 4 The profit on disposal relates mainly to the sale of the shareholding in Edotech, an investment in a former Barclays in-house statement printing operation. Tax rate The charge for the year is based upon a UK corporation tax rate of 30% for the calendar year 2004 (2003: 30%). The effective rate of tax is 28.0% (2003: 28.0%). The rate is lower than the standard rate of tax due to the beneficial effects of lower tax on overseas income and certain non-taxable gains offset by the absence of tax relief on goodwill. Minority interests (including non-equity interests) Minority interests (including non-equity interests) of Â£46m (2003: Â£25m) includes Â£21m (2003: Â£2m) attributable to the equity owned by staff in Barclays Global Investors. Earnings per ordinary share 2004 2003 Profit for the financial year attributable to the members of Barclays PLC Â£3,268m Â£2,744m Weighted average number of ordinary shares in issue 6,381m 6,483m Dilutive effect of share options outstandings 33m 31m Diluted weighted average number of shares 6,414m 6,514m p p Earnings per ordinary share 51.2 42.3 Fully diluted earnings per ordinary share 51.0 42.1 Dividends on ordinary shares The Board has decided to pay, on 29th April 2005, a final dividend for the year ending 31st December 2004 of 15.75p per ordinary share, for shares registered in the books of the Company at the close of business on 25th February 2005. Shareholders who have their dividends paid direct to their bank or building society account will receive a consolidated tax voucher detailing the dividends paid in the 2005/2006 tax year in mid-October 2005. For qualifying US and Canadian resident ADR holders, the final dividend of 15.75p per ordinary share becomes 63.00p per ADS (representing four shares). The ADR depositary will mail the dividend on 29th April 2005 to ADR holders on the record on 25th February 2005. For qualifying Japanese shareholders, the final dividend of 15.75p per ordinary share will be distributed at the beginning of June to shareholders on the record on 25th February 2005. 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 +44 (0) 870 609 4535. The completed form should be returned to The Plan Administrator on or before 8th April 2005 for it to be effective in time for the payment of the final dividend on 29th April 2005. 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 2004 2003 Â£m Â£m Shareholders' funds: equity 17,417 16,374 Minority interests: non-equity 690 - Minority interests: equity 211 283 18,318 16,657 Loan capital 12,277 12,339 30,595 28,996 Total capital resources increased in the year by Â£1,599m. Shareholders' funds increased by Â£1,043m, reflecting profit retentions of Â£1,730m, net proceeds of share issues of Â£114m and gains arising from transactions with third parties which are reflected in the statement of recognised gains and losses of Â£13m; offset primarily by share repurchases of Â£699m, an increase in treasury shares of Â£53m and exchange rate losses of Â£58m. Non-equity minority interests reflected the issue by Barclays Bank PLC of â‚¬1bn (Â£688m) of non-cumulative preference shares on 8th December 2004 and an additional Â£2m of profits attributable to these non-equity minority interests at the year-end. Loan capital decreased by Â£62m reflecting raisings of Â£774m, more than offset by redemptions of Â£611m, exchange rate movements of Â£224m and amortisation of issue expenses of Â£1m. Capital ratios Weighted risk assets and capital resources, as defined for supervisory purposes by the Financial Services Authority, comprise: 2004 2003 Weighted risk assets: Â£m Â£m Banking book on-balance sheet 148,621 133,816 off-balance sheet 26,741 22,987 Associated undertakings and joint ventures 3,020 2,830 Total banking book 178,382 159,633 Trading book Market risks 22,106 13,861 Counterparty and settlement risks 18,113 15,503 Total trading book 40,219 29,364 Total weighted risk assets 218,601 188,997 Capital resources: Tier 1 Called up share capital 1,614 1,642 Eligible reserves 15,670 14,657 Minority interests - non-equity 688 - Minority interests - equity 575 637 Reserve capital instruments1 1,627 1,705 Tier one notes1 920 960 Less: goodwill (4,432) (4,607) Total qualifying tier 1 capital 16,662 14,994 Tier 2 Revaluation reserves 25 25 General provisions 564 795 Qualifying subordinated liabilities2 Undated loan capital 3,573 3,636 Dated loan capital 5,647 5,652 Other 2 2 Total qualifying tier 2 capital 9,811 10,110 Tier 3: short term subordinated liabilities2 286 280 Less: Supervisory deductions Investments not consolidated for Supervisory (1,047) (979) purposes3 Other deductions (496) (182) (1,543) (1,161) Total net capital resources 25,216 24,223 % % Tier 1 ratio 7.6 7.9 Risk asset ratio 11.5 12.8 1 Reserve capital instruments (RCIs) and tier one notes (TONs) are included in the undated loan capital in the consolidated balance sheet. 2 Subordinated liabilities are included in tiers 2 or 3, subject to limits laid down in the supervisory requirements. Barclays retains significant capacity to raise additional capital within these limits. 3 Includes Â£610m (2003: Â£478m) of shareholders' interest in the retail life fund. Net capital resources grew by 4.1% (Â£1.0bn). Tier 1 capital rose by Â£1.7bn with retained profits of Â£1.7bn and the issue of Â£0.7bn of preference shares being offset by ordinary share repurchases of Â£0.7bn. Tier 2 capital fell by 3.0% (Â£0.3bn) and tier 3 capital remained broadly as reported at 31st December 2003. Supervisory deductions increased by Â£0.4bn. The overall growth in weighted risk assets of Â£29.6bn comprised trading book weighted risk assets growth of 37.0% (Â£10.9bn) and banking book weighted risk assets growth of 11.7% (Â£18.7bn). The risk asset ratio was 11.5% (2003: 12.8%). The tier 1 ratio was 7.6% (2003: 7.9%). Total assets and Weighted risk assets The Group's balance sheet increased 18% (Â£78.8bn) to Â£522.1bn (2003: Â£443.3bn). Weighted risk assets increased 16% (Â£29.6bn) to Â£218.6bn (2003: Â£189.0bn). UK Banking total assets increased 8% to Â£119.8bn (2003: Â£111.0bn). Weighted risk assets increased 9% to Â£91.9bn (2003: Â£84.5bn). UK Retail Banking total assets increased 3% to Â£69.0bn (2003: Â£67.0bn) and weighted risk assets increased 4% to Â£37.1bn (2003: Â£35.8bn). This was mainly attributable to growth in the UK residential mortgage portfolio, up 3% to Â£61.7bn (2003: Â£59.8bn). UK Business Banking total assets increased 15% to Â£50.8bn (2003: Â£44.0bn) and weighted risk assets increased 13% to Â£54.8bn (2003: Â£48.6bn). This reflected strong growth in lending balances. Private Clients and International total assets (excluding the assets of the closed life assurance activities) increased 15% to Â£30.0bn (2003: Â£26.0bn), and weighted risk assets increased 28% to Â£23.3bn (2003: Â£18.2bn). This was mainly attributable to growth in customer loans in Spain, Italy and Africa. Barclaycard total assets increased 13% to Â£23.0bn (2003: Â£20.3bn) reflecting growth in the credit card and consumer lending business and the acquisition of Juniper. Weighted risk assets increased 10% to Â£20.2bn (2003: Â£18.3bn). Barclays Capital total assets increased 24% to Â£332.6bn (2003: Â£268.7bn) due to increases in debt securities and fully collateralised reverse repos as the expansion of the business continued. Total weighted risk assets increased 23% to Â£79.9bn (2003: Â£65.1bn), reflecting increased business volumes and the expansion of credit trading, credit derivatives and residential and commercial mortgage backed securities to meet client demands. Economic Capital Barclays assesses capital requirements by measuring the Group risk profile using both internally and externally developed models. The Group assigns economic capital primarily within seven risk categories: Credit Risk, Market Risk, Business Risk, Operational Risk, Insurance Risk, Fixed Assets and Private Equity. The Group regularly enhances its economic capital methodology. During 2004, enhancements included improvements in the modelling of the time horizon, correlation of risks and risk concentrations. The developments in the methodology are consistent with the capital proposals within the Basel II accord. Average economic capital by business is set out below: 2004 2003 Â£m Â£m UK Banking 4,650 4,750 UK Retail Banking 2,200 2,250 UK Business Banking 2,450 2,500 Private Clients and International 1,400 1,150 Private Clients - ongoing business 300 200 - closed life assurance activities 100 150 International 1,000 800 Barclaycard 2,450 2,200 Barclays Capital 2,100 2,150 Barclays Global Investors 150 150 Head office functions and other operations1 200 250 Average business unit economic capital 10,950 10,650 Capital held at Group centre2 1,650 1,250 Average historical goodwill 5,600 5,100 Total average shareholders' funds 18,200 17,000 1 Includes Transition Businesses and capital for central functional risks. 2 The Group's practice is to maintain an appropriate level of excess capital, held at Group centre, which is not allocated to business units. This variance arises as a result of capital management timing and includes capital held to cover pension contribution risk. Total average shareholders' funds including unamortised goodwill rose by Â£1.2bn to Â£18.2bn during 2004. UK Retail Banking economic capital allocation decreased Â£50m to Â£2.2bn with the impact of continued growth more than offset by the sale in 2003 of non-core assets that had previously been acquired with the Woolwich. UK Business Banking economic capital allocation decreased Â£50m to Â£2.45bn as a consequence of a general improvement in the credit quality of counterparties and improved risk assessment of complex transactions. Private Clients ongoing business economic capital allocation increased Â£100m to Â£300m following the acquisition of Gerrard and growth of the business. International economic capital allocation increased by Â£200m to Â£1.0bn reflecting the inclusion of Banco Zaragozano for a full year and growth of the Spanish business. Barclaycard economic capital allocation increased by Â£250m to Â£2.45bn due to growth in outstandings and the acquisition of Juniper. Barclays Capital economic capital decreased by Â£50m to Â£2.1bn as a result of improved wholesale credit conditions during 2004, more than offsetting the increase in market risk capital driven by growth of the business. Economic Profit Economic profit for 2004 was Â£1,885m (2003: Â£1,430m). The breakdown of economic profit performance is shown below: 2004 2003 Â£m Â£m Profit after tax and minority interests 3,268 2,744 Goodwill amortisation 299 265 Tax credit on goodwill (11) (7) Goodwill relating to associated undertakings 7 7 Profit after tax and minority interests excluding goodwill amortisation 3,563 3,009 Gain/(loss) on disposal recognised in the statement of total recognised gains and losses 13 (4) 3,576 3,005 Average shareholders' funds including average historical goodwill1 18,237 17,019 Post tax cost of equity 9.5% 9.5% Cost of average shareholders' funds including average historical goodwill2 (1,691) (1,575) Economic profit 1,885 1,430 1 The difference between the average shareholders' funds (excluding minority interests) and that reported above represents cumulative goodwill amortisation charged and goodwill previously written off to reserves. 2 The cost includes a charge for purchased goodwill of Â£490m (2003: Â£442m). 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. The table below shows the economic profit generated by each business area before goodwill: 2004 2003 Â£m Â£m UK Banking 1,312 1,123 UK Retail Banking 595 596 UK Business Banking 717 527 Private Clients and International 264 129 Private Clients - ongoing business 102 84 - closed life assurance activities 35 (46) International 127 91 Barclaycard 321 304 Barclays Capital 534 349 Barclays Global Investors 204 112 Head office functions and other operations1 (149) (68) 2,486 1,949 Historical goodwill2 (490) (442) Variance to average shareholders' funds3 (111) (77) Economic profit 1,885 1,430 1 Includes Transition Businesses, see page 33. 2 Cost of equity charge on historical purchased goodwill. 3 Economic capital charge based on Capital held at Group Centre, see page 46. Risk Tendency As part of its credit risk measurement system, the Group uses a model-based methodology to assess the quality of the credit portfolios across different customer categories. The approach is termed Risk Tendency and applies to all performing credit exposures in both wholesale and retail sectors. Looking one year ahead, it provides a statistical estimate that is the average in the range of possible losses expected from the current performing portfolio. The actual outcome in any one year is likely to be different. Thus it is not a prediction of specific provisions but it gives management a clear view of the evolution of the quality of the credit portfolio. 2004 2003 Â£m Â£m UK Banking 375 385 UK Retail Banking 150 150 UK Business Banking 225 235 Private Clients and International 70 75 Private Clients 5 5 International 65 70 Barclaycard 860 775 Barclays Capital 70 135 Transition Businesses 20 20 1,395 1,390 Risk Tendency remained steady at Â£1,395m (2003: Â£1,390m). Risk Tendency declined in the corporate and wholesale businesses during 2004 as the corporate and wholesale credit environments continued to improve and as potential problem loans declined significantly. In Private Clients and International, Risk Tendency decreased Â£5m (7%) to Â£70m (2003: Â£75m) as the Group developed a better understanding of the risks in the Banco Zaragozano portfolio acquired in 2003. Barclaycard Risk Tendency increased 11% to Â£860m (2003: Â£775m) due to growth in the portfolio and the acquisition of Juniper. ADDITIONAL INFORMATION Group structure changes from 2003 From 1st January 2004, for reporting purposes, Barclays was organised into the business divisions outlined on pages 12 to 14. Results are also provided for Head office functions and other operations. The structural changes in the Group's organisation announced on 14th December 2004 took effect from 1st January 2005. Under the reorganisation, the Private Clients and International businesses have been separated. David Roberts became Chief Executive, International Retail and Commercial Banking, responsible for Barclays retail and commercial banking businesses outside the UK. Robert E. Diamond Jr., Chief Executive of Barclays Capital and Chairman of Barclays Global Investors, assumed responsibility for the Private Clients businesses - International & Private Banking and Wealth Solutions. Acquisitions and disposals On 11th March 2004, Barclays purchased the remaining 40% minority share in Barclays Cairo Bank. On 7th April 2004, Barclays completed the disposal of its shareholding in Edotech Limited to Astron, the business process outsourcing group. On 1st December 2004, Barclays completed the acquisition of Juniper Financial Corporation from Canadian Imperial Bank of Commerce. Accounting policies A change in accounting policy arose from the adoption in 2004 of UITF Abstract 38 (UITF 38), 'Accounting for ESOP trusts'. UITF 38 requires Barclays PLC shares held in Employee Share Ownership Plans (ESOP) trusts to be accounted for as a deduction in arriving at shareholders' funds, rather than as assets. The balance sheet for December 2003 has been restated accordingly, and other assets and shareholders' funds have been reduced by Â£153m at 31st December 2004 (2003: Â£99m). There was no impact on the 2003 or 2004 profit and loss account. There have been no other significant changes to the accounting policies as described in the 2003 Annual Report. Future UK accounting developments During 2004, the Accounting Standards Board (ASB) issued seven new Financial Reporting Standards, FRS 20 to FRS 26, as part of its convergence programme between UK GAAP and International Financial Reporting Standards (IFRS). These new UK standards, which are not effective until 2005, will not impact the Group because of the conversion to IFRS in 2005, as discussed below. In December 2004, the ASB issued FRS 27 'Life Assurance'. Following feedback received in response to the exposure draft issued in July 2004, the ASB has deferred implementation of the standard until 2005. However, in line with the Memorandum of Understanding entered into by the ASB, together with the Association of British Insurers and major insurers and bancassurers, Barclays plans to make additional voluntary disclosure in respect of its life assurance business in the 2004 Annual Report. Conversion to International Financial Reporting Standards in 2005 By Regulation the European Union (EU) has agreed that virtually all listed companies must use International Financial Reporting Standards (IFRS) adopted for use in the EU in the preparation of their 2005 consolidated accounts. Barclays will comply with this Regulation. The objective is to improve financial reporting and enhance transparency to assist the free flow of capital throughout the EU and to improve the efficiency of the capital markets. The Group commenced a programme of work in 2002, initially identifying the differences between IFRS and existing UK standards based on the requirements then in force. This led to a programme of work led centrally, but involving all the businesses and functions, to change systems and processes and to provide training so as to ensure that the Group can meet the requirements fully in 2005. In addition, the programme is assisting the businesses and functions to consider and address the wider business impact of the change in reporting in the EU. This work is nearing completion. Conversion work, including reviewing the accuracy of the opening balances, will continue during 2005. Although many of the uncertainties concerning whether and how the standards will be adopted for use in the EU have been resolved, some questions remain, particularly regarding the adoption of amendments to standards and to interpretations issued in the second half of 2004. In addition, how IFRS financial statements will be interpreted for tax and regulatory capital purposes remains subject to some uncertainty, with the regulatory capital requirements not expected to be finalised before April 2005 and the tax treatment of the first time adoption adjustments not determined until later. However, the programme is following normal project controls and change management and the Group believes it is on track to meet all requirements for financial reporting in 2005. The restated 2004 IFRS results, excluding the impact of IAS 32 and IAS 39 on financial instruments and IFRS 4 on insurance contracts, and the opening 2005 IFRS balance sheet including these standards, will be issued in the second quarter of 2005. The first results on full IFRS basis will be the June 2005 half-year results. Changes in accounting presentation The prior period presentation has, where appropriate, been restated to conform with current year classification, and the change in accounting policy discussed above. Share capital The Group manages both its debt and equity capital actively. The Group will seek to renew its authority to buy back ordinary shares at the 2005 Annual General Meeting to provide additional flexibility in the management of the Group's capital resources. Group share schemes The independent trustees of the Group's share schemes may make purchases of Barclays PLC ordinary shares in the market at any time or times following this announcement of the Group's results for the purposes of those schemes' current and future requirements. The total number of ordinary shares purchased would not be material in relation to the issued share capital of Barclays PLC. Recent developments As announced on 23rd September 2004, Barclays is in discussion with Absa Group Limited ('Absa'), a leading South African bank, in connection with a possible partial offer for a majority stake in Absa. A due diligence exercise has been completed and Barclays has submitted an application to the South African banking regulators to approve the possible transaction. It is not known how long the approval process will take. The discussions may or may not lead to an offer being made. On 20th January 2005 Barclays announced that it had made an offer to acquire the wealth business of ING Securities Bank (France), consisting of ING Ferri and ING Private Banking, subject to consultation with employee representative bodies and finalising terms. Subject to consultation, the acquisition is expected to complete by the end of the first half of this year. On 3rd February 2005, Barclays announced its plans to consolidate its core general insurance business from two suppliers to one and that discussions are well advanced with Norwich Union to provide services across the home, motor and travel insurance portfolio. Barclays also announced that it has agreed in principle to purchase 90% of Gresham Insurance from Legal & General. Barclays currently owns the remaining 10%. At the same time negotiations are underway for the sale of Gresham Insurance to Norwich Union. On 4th February 2005, Barclays announced it had signed an agreement with ForeningsSparbanken (also known as Swedbank) to form a joint venture to provide credit cards in the Nordic market, subject to confirmatory due diligence and regulatory approvals. NOTES 1. Loans and advances to banks 2004 2003 Banking business Â£m Â£m United Kingdom 21,351 14,315 Other European Union 1,189 1,702 United States 753 110 Rest of the World 1,699 1,143 24,992 17,270 Less provisions (6) (16) 24,986 17,254 Trading business 50,145 44,670 Total loans and advances to banks 75,131 61,924 Of the total loans and advances to banks, placings with banks were Â£66.7bn at 31 st December 2004 (2003: Â£56.5bn). Placings with banks include reverse repos of Â£61.1bn (2003: Â£50.4bn). The majority of the placings have a residual maturity of less than one year. 2. Loans and advances to customers 2004 2003 Banking business - United Kingdom: Â£m Â£m Financial institutions 11,947 7,721 Agriculture, forestry and fishing 1,947 1,766 Manufacturing 6,282 5,967 Construction 2,476 1,883 Property 7,933 6,341 Energy and water 936 1,286 Wholesale and retail distribution and leisure 9,751 8,886 Transport 2,275 2,579 Postal and communication 454 476 Business and other services 14,281 12,030 Home loans1 64,481 61,905 Other personal 23,313 21,905 Overseas customers 7,612 5,477 Finance lease receivables 5,406 5,587 Total United Kingdom 159,094 143,809 Banking business - Overseas: Other European Union 20,393 19,027 United States 7,984 3,573 Rest of the World 5,176 4,510 33,553 27,110 Total banking loans and advances to customers 192,647 170,919 Less provisions (2,760) (3,012) Less interest in suspense (40) (49) 189,847 167,858 Trading business 65,099 58,961 Total loans and advances to customers 254,946 226,819 1 Excludes commercial property mortgages Of the total loans and advances to customers, reverse repos were Â£58.3bn (2003: Â£50.0bn). The geographic presentation above is based on the office recording the transaction. The UK industry classifications have been prepared at the level of the borrowing entity. This means that a loan to the subsidiary of a major corporation is classified by the industry in which the subsidiary operates even though the parent's predominant business may be in a different industry. 3. Provision balances for bad and doubtful debts Movements in provisions for bad and doubtful debts 2004 2003 Â£m Â£m Provisions at beginning of year 3,028 2,998 Acquisitions and disposals 21 62 Exchange and other adjustments (34) (18) Amounts written off (see below) (1,595) (1,474) Recoveries (see below) 255 113 Provisions charged against profit (see below) 1,091 1,347 Provisions balance at end of year 2,766 3,028 Amounts written off United Kingdom (1,411) (1,175) Other European Union (58) (54) United States (71) (215) Rest of the World (55) (30) Total amounts written off (1,595) (1,474) Recoveries United Kingdom 220 95 Other European Union 8 7 United States 15 10 Rest of the World 12 1 Total recoveries 255 113 Provisions charged against profit New and increased specific provisions United Kingdom 1,571 1,373 Other European Union 82 57 United States 67 118 Rest of the World 47 80 1,767 1,628 Releases of specific provisions United Kingdom (153) (151) Other European Union (17) (13) United States (19) (24) Rest of the World (22) (7) (211) (195) Recoveries (255) (113) Net specific provisions charge 1,301 1,320 General provision (release) / charge (210) 27 Net charge to profit 1,091 1,347 Total provisions for bad and doubtful debts at end of year comprise: 2004 2003 Specific provisions Â£m Â£m United Kingdom 1,860 1,856 Other European Union 104 97 United States 128 121 Rest of the World 110 159 Total specific provisions 2,202 2,233 General provisions 564 795 2,766 3,028 The geographic analysis of provisions shown above is based on the location of the office recording the transaction. 4. Potential credit risk loans The following table presents an analysis of potential credit risk loans (non-performing and potential problem loans). The geographical presentation is based on the location of the office recording the transaction, and the amounts are stated before deduction of the value of security held, specific provisions carried or interest suspended. Potential credit risk loans 2004 2003 Summary Â£m Â£m Non-accrual loans 2,115 2,261 Accruing loans where interest is being suspended with or without provisions 492 629 Other accruing loans against which provisions have been made 842 821 3,449 3,711 Accruing loans 90 days overdue, against which no provisions have been made 521 590 Reduced rate loans 15 4 Total non-performing loans 3,985 4,305 Potential problem loans 756 1,327 Total potential credit risk loans 4,741 5,632 Geographical split 2004 2003 Non-accrual loans: Â£m Â£m United Kingdom 1,583 1,572 Other European Union 194 143 United States 249 383 Rest of the World 89 163 Total 2,115 2,261 Accruing loans where interest is being suspended with or without provisions: United Kingdom 431 559 Other European Union 31 29 United States - - Rest of the World 30 41 Total 492 629 Other accruing loans against which provisions have been made: United Kingdom 764 760 Other European Union 27 35 United States 26 - Rest of the World 25 26 Total 842 821 2004 2003 Accruing loans 90 days overdue, against which Â£m Â£m no provisions have been made: United Kingdom 484 566 Other European Union 34 24 United States 1 - Rest of the World 2 - Total 521 590 Reduced rate loans: United Kingdom 2 4 Other European Union - - United States 13 - Rest of the World - - Total 15 4 Total non-performing loans: United Kingdom 3,264 3,461 Other European Union 286 231 United States 289 383 Rest of the World 146 230 Total 3,985 4,305 Potential problem loans: United Kingdom 648 989 Other European Union - 23 United States 27 259 Rest of the World 81 56 Total 756 1,327 Total potential credit risk loans: United Kingdom 3,912 4,450 Other European Union 286 254 United States 316 642 Rest of the World 227 286 Total 4,741 5,632 Provision coverage of non-performing loans1: % % United Kingdom 72.4 74.2 Other European Union 55.6 71.4 United States 49.5 39.2 Rest of the World 95.9 83.9 Total 70.4 71.5 Provision coverage of total potential credit % % risk loans1: United Kingdom 60.4 57.7 Other European Union 55.6 65.0 United States 45.3 23.4 Rest of the World 61.7 67.5 Total 59.2 54.6 1 The geographical coverage ratios include an allocation of general provisions. 5. Other assets 2004 2003 Â£m Â£m Balances arising from off-balance sheet financial instruments (see note 9) 18,174 15,812 Shareholders' interest in long term assurance fund 610 478 London Metal Exchange warrants and other metals trading positions 952 1,290 Sundry debtors 2,418 2,156 Prepayments and accrued income 5,078 3,921 27,232 23,657 6. Other liabilities 2004 2003 Â£m Â£m Obligations under finance leases payable 353 110 Balances arising from off-balance sheet financial instruments (See note 9) 18,009 14,797 Short positions in securities 53,714 49,934 Current tax 584 497 Sundry creditors 3,905 4,159 Accruals and deferred income 6,582 4,983 Provisions for liabilities and charges 1,205 1,015 Dividend 1,011 879 85,363 76,374 7. Legal proceedings Proceedings have been brought in the United States against a number of defendants including Barclays following the collapse of Enron. In each case the claims are against groups of defendants. Barclays considers that the claims against it are without merit and is defending them vigorously. A court ordered mediation commenced in September 2003 but no material progress has been made towards a resolution of the litigation. In addition, in respect of investigations relating to Enron, Barclays is continuing to provide information in response to enquiries by regulatory and governmental authorities in the U.S. and elsewhere including subpoenas from the U.S. Securities and Exchange Commission. It is not possible to estimate Barclays possible loss in relation to these matters, nor the effect that it might have upon operating results in any particular financial period. Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it, which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedings to which Barclays is party to have a significant adverse effect on the financial position of the Group. 8. Contingent liabilities and commitments 2004 2003 Contingent liabilities Â£m Â£m Acceptances and endorsements 303 671 Guarantees and assets pledged as collateral security 30,011 24,596 Other contingent liabilities 8,245 8,427 38,559 33,694 Commitments Standby facilities, credit lines and other commitments 134,051 114,847 Current year credit cards commitments have been calculated on a contractual basis rather than a modelled basis. Had this method been applied in 2003, reported commitments would have been increased by Â£5,899m to Â£120,746m. 9. Derivatives The tables set out below analyse the contract or underlying principal amounts of derivative financial instruments held for trading purposes and for the purposes of managing the Group's structural exposures. Foreign exchange derivatives 2004 2003 Contract or underlying principal amount Â£m Â£m Forward foreign exchange 380,855 310,319 Currency swaps 274,568 207,364 Other exchange rate related contracts 169,471 167,643 824,894 685,326 Interest rate derivatives Contract or underlying principal amount Interest rate swaps 5,412,935 2,944,310 Forward rate agreements 893,978 381,511 OTC options bought and sold 1,726,745 842,631 Other interest rate related contracts 3,267,233 2,051,161 11,300,891 6,219,613 Credit derivatives 191,408 47,450 Equity, stock index and commodity derivatives Contract or underlying principal amount 321,035 171,939 Other exchange rate related contracts are primarily over the counter (OTC) options. Other interest rate related contracts are primarily exchange traded options, futures and swaps. Derivatives entered into as trading transactions, together with any associated hedging thereof, are measured at fair value and the resultant profits and losses are included in dealing profits. The tables below summarise the positive and negative fair values of such derivatives, including an adjustment for netting where the Group has the ability to insist on net settlement which is assured beyond doubt, based on a legal right that would survive the insolvency of the counterparty. The fair values as set out below provide a more relevant economic assessment of the financial exposure than the nominal amounts. 2004 2003 Positive fair values Â£m Â£m Foreign exchange derivatives 20,066 17,129 Interest rate derivatives 63,177 51,776 Credit derivatives 1,446 798 Equity, stock index and commodity 9,385 4,721 derivatives Effect of netting (69,919) (55,030) Cash collateral meeting offset criteria (5,981) (3,582) 18,174 15,812 Negative fair values Foreign exchange derivatives 21,476 18,393 Interest rate derivatives 60,600 49,735 Credit derivatives 1,217 584 Equity, stock index and commodity 10,030 5,733 derivatives Effect of netting (69,919) (55,030) Cash collateral meeting offset criteria (5,395) (4,618) 18,009 14,797 10. Market risk The Group's policy is that the market risks associated with the Group's business activities are clearly identified, assessed and controlled within agreed limits and that the market risks arising from trading activities are concentrated in Barclays Capital. The Group uses a 'value at risk' measure as the primary mechanism for controlling market risk. Daily Value at Risk (DVaR) is an estimate of the potential loss which might arise from unfavourable market movements, if the current positions were to be held unchanged for one business day, measured to a confidence level of 98%. Daily losses exceeding the DVaR figure are likely to occur, on average, twice in every one hundred business days. Analysis of Barclays Capital's market risk exposures Barclays Capital's market risk exposure, as measured by average total Daily Value at Risk (DVaR), increased in 2004. This was due mainly to interest rate opportunities taken in the first half of 2004 and an increase in credit spread positions. The latter increase was primarily the result of growing client flows in corporate bonds and credit derivatives. The increase in total DVaR is consistent with Barclays Capital's business expansion. DVaR Twelve months to 31st December 2004 Average High1 Low1 Â£m Â£m Â£m Interest rate risk 25.0 53.6 15.1 Credit spread risk 22.6 32.9 16.0 Foreign exchange risk 2.4 7.4 0.9 Equities risk 4.2 7.9 2.2 Commodities risk 6.0 14.4 2.2 Diversification effect (25.9) n/a n/a Total DVaR2 34.3 46.8 24.0 Twelve months to 31st December 2003 Average High1 Low1 Â£m Â£m Â£m Interest rate risk 21.0 34.1 13.6 Credit spread risk 16.2 29.2 8.9 Foreign exchange risk 2.3 5.0 1.0 Equities risk 2.6 4.9 1.5 Commodities risk 4.4 7.0 2.2 Diversification effect (20.6) n/a n/a Total DVaR2 25.9 38.6 17.6 1 The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table. 2 The year-end Total DVaR for 2004 was Â£31.9m (2003: Â£37.2m). CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDs 2004 2003 Â£m Â£m At beginning of year 16,374 15,146 Proceeds of shares issued (net of expenses) 114 149 Exchange rate translation differences (58) (29) Repurchase of ordinary shares (699) (204) Shares issued to the 2003 QUEST in relation to share option schemes for staff (1) (36) Gain/(loss) arising from transactions with third parties 13 (4) ESOP trust shares allocated to staff (3) - Increase in Treasury shares and ESOP Shares (53) (52) Profit retained 1,730 1,404 At end of year 17,417 16,374 Included in shareholders' funds is share capital comprising 6,454m (2003: 6,563m) ordinary shares of 25p each and 1m (2003:1m) staff shares of Â£1 each. Statement of total recognised gains and losses 2004 2003 Â£m Â£m Profit attributable to the members of Barclays PLC 3,268 2,744 Exchange rate translation differences (33) (4) Gain/(loss) arising from transactions with third parties 13 (4) Joint ventures and associated undertakings (30) (22) Other items 5 (3) Total gains and losses recognised in the period 3,223 2,711 SUMMARY CONSOLIDATED CASH FLOW STATEMENT 2004 2003 Â£m Â£m Net cash inflow/(outflow) from operating activities 6,089 (2,290) Dividends received from joint ventures and associated undertakings 15 7 Net cash outflow from returns on investment and servicing of finance (671) (620) Tax paid (690) (910) Net cash (outflow)/inflow from capital expenditure and financial investment (6,764) 1,432 Net cash outflow from acquisitions and disposals (185) (930) Equity dividend paid (1,406) (1,249) Net cash outflow before financing (3,612) (4,560) Net cash inflow from financing 4,420 4,188 Increase/(decrease) in cash 808 (372) OTHER INFORMATION Financial Summary 2004 2003 2002 2001 2000 Â£m Â£m Â£m Â£m Â£m Profit before tax 4,603 3,845 3,205 3,425 3,392 Profit after tax 3,314 2,769 2,250 2,482 2,491 Total capital resources 30,595 28,996 26,839 24,600 21,148 p p p p p Earnings per ordinary share 51.2 42.3 33.7 36.8 40.4 Fully diluted earnings per share issue 51.0 42.1 33.4 36.4 40.0 Dividends per ordinary share 24.0 20.5 18.35 16.63 14.5 Net asset value per ordinary share 270 250 230 217 198 Dividend payout ratio (%) 46.9 48.5 54.5 45.2 35.9 Capital ratios: % % % % % Tier 1 ratio 7.6 7.9 8.2 7.8 7.2 Risk asset ratio 11.5 12.8 12.8 12.5 11.0 Performance ratios Return on average % % % % % shareholders' funds: Pre-tax 26.7 23.6 21.0 23.9 33.8 Post-tax 19.2 17.0 14.7 17.4 24.8 Return on average total assets: Pre-tax 0.7 0.8 0.7 0.9 1.1 Post-tax 0.5 0.6 0.5 0.6 0.8 Return on average weighted risk assets: Pre-tax 2.2 2.1 1.9 2.2 2.6 Post-tax 1.6 1.5 1.4 1.6 1.9 Non interest income/total 50.9 46.8 45.2 46.5 46.2 income: Operating expenses/total 59.9 58.4 58.5 58.9 57.8 income: PROFIT BEFORE TAX EXCLUDING GOODWILL AMORTISATION Half-year 31.12.04 30.06.04 31.12.03 30.06.03 Â£m Â£m Â£m Â£m UK Banking 1,215 1,259 1,126 1,149 UK Retail Banking 497 630 559 582 UK Business Banking 718 629 567 567 Private Clients and International 255 196 158 129 Private Clients - ongoing business 63 81 45 58 - closed life assurance activities 25 (29) (32) (48) International 167 144 145 119 Barclaycard 373 428 374 387 Barclays Capital 443 599 398 438 Barclays Global Investors 189 158 100 91 Head office functions and other operations (128) (78) (130) (103) Profit before tax excluding goodwill amortisation 2,347 2,562 2,026 2,091 Goodwill amortisation (151) (148) (140) (125) Goodwill relating to associated undertakings (4) (3) (4) (3) Profit before tax 2,192 2,411 1,882 1,963 TOTAL ASSETS UK Banking 119,806 114,683 110,995 109,529 UK Retail Banking 69,028 67,502 67,001 66,415 UK Business Banking 50,778 47,181 43,994 43,114 Private Clients and International 30,606 27,794 26,492 21,170 Private Clients - ongoing business 4,988 4,426 3,867 4,072 - closed life assurance activities 653 480 528 872 International 24,965 22,888 22,097 16,226 Barclaycard 23,019 20,689 20,348 19,054 Barclays Capital 332,606 317,027 268,702 279,963 Barclays Global Investors 796 706 533 607 Head office functions and other operations 2,583 4,921 3,709 4,792 Goodwill 4,295 4,263 4,406 3,867 Retail Life funds 8,378 7,911 8,077 7,642 522,089 497,994 443,262 446,624 WEIGHTED RISK ASSETS UK Banking 91,913 87,506 84,482 83,062 UK Retail Banking 37,111 36,458 35,835 36,022 UK Business Banking 54,802 51,048 48,647 47,040 Private Clients and International 23,337 20,924 18,184 15,556 Private Clients - ongoing business 4,018 3,632 3,238 2,968 - closed life assurance activities - - 2 16 International 19,319 17,292 14,944 12,572 Barclaycard 20,188 18,404 18,334 17,571 Barclays Capital 79,949 72,715 65,149 62,082 Barclays Global Investors 1,230 1,004 1,137 1,083 Head office functions and other operations 1,984 2,780 1,711 2,060 218,601 203,333 188,997 181,414 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half-year 31.12.04 30.06.04 31.12.03 30.06.03 Â£m Â£m Â£m Â£m Interest receivable 7,202 6,463 6,334 6,093 Interest payable (3,701) (3,122) (2,966) (2,857) Net interest income 3,501 3,341 3,368 3,236 Net fees and commissions receivable 2,588 2,378 2,233 2,030 Dealing profits 687 806 524 530 Other operating income 317 327 293 197 Total non-interest income 3,592 3,511 3,050 2,757 Operating income 7,093 6,852 6,418 5,993 Administration expenses - staff costs (2,601) (2,397) (2,269) (2,026) Administration expenses - other (1,532) (1,226) (1,312) (1,092) Depreciation (155) (140) (145) (144) Goodwill amortisation (151) (148) (140) (125) Operating expenses (4,439) (3,911) (3,866) (3,387) Operating profit before provisions 2,654 2,941 2,552 2,606 Provisions for bad and doubtful debts (502) (589) (695) (652) Provisions for contingent liabilities and commitments (2) - 1 - Operating profit 2,150 2,352 1,858 1,954 Profit from joint ventures and associated undertakings 42 14 19 10 Exceptional items - 45 5 (1) Profit on ordinary activities before tax 2,192 2,411 1,882 1,963 Tax on profit on ordinary activities (614) (675) (509) (567) Profit on ordinary activities after tax 1,578 1,736 1,373 1,396 Minority interests (including non-equity interests) (26) (20) (12) (13) Profit for the period attributable to the members of Barclays PLC 1,552 1,716 1,361 1,383 Dividends (1,010) (528) (883) (457) Profit retained for the financial period 542 1,188 478 926 Earnings per ordinary share 24.5p 26.7p 21.0p 21.3p Dividends per ordinary share: Interim - 8.25p - 7.05p Final 15.75p - 13.45p - Registered office 54 Lombard Street, London, EC3P 3AH, England, United Kingdom. Tel: +44 (0)20 7699 5000. Company number: 48839. With effect from 31st May 2005, the registered office will move to: 1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0)20 7116 1000. Website www.barclays.com Registrar The Registrar to Barclays PLC, The Causeway, Worthing BN99 6DA. Tel: + 44 (0) 870 609 4535. Listing The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. Ordinary shares are also listed on the New York Stock Exchange and the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in the form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary shares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank of New York whose international telephone number is +1-610-382-7836, whose domestic telephone number is +1-888-269-2377 and whose address is The Bank of New York, Investor Relations, PO Box 11258, Church Street Station, New York, NY 10286-1258. Filings with the SEC Statutory accounts for the year ended 31st December 2004, which also include certain information required for the joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200 Park Avenue, New York, NY 10166 or from the Head of Investor Relations at Barclays registered office address, shown above, once they have been published in late March. Once filed with the SEC, copies of the Form 20-F will also be available from the Barclays Investor Relations' website (details below) and from the SEC's website (www.sec.gov). Results timetable Ex Dividend Date Wednesday 23rd February 2005 Dividend Record Date 2004 Friday 25th February 2005 2005 Annual General Meeting Thursday 28th April 2005 Dividend Payment Date Friday 29th April 2005 2004 IFRS Transition Report Wednesday 11th May 2005 2005 Interim Trading Update Thursday 26th May 2005 2005 Interim Results announcement Friday 5th August 2005 2005 Full Year Results announcement Thursday 9th February 2006 All announcement dates are provisional and subject to change. For further information please contact: Investor Relations Media Relations James S Johnson/Cathy Turner Chris Tucker/Leigh Bruce +44 (0) 20 7699 4525/3638 +44 (0) 20 7699 3161/2658 More information on Barclays, including the 2004 results, can be found on our website at the following address:www.investorrelations.barclays.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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