Barclays 2009 Annual Report Download - page 66

64 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Financial review
Analysis of results by business
continued
Global Retail and Commercial Banking
Barclaycard
Barclaycard is a multi-brand international payment services provider for
consumer and business customers including credit cards and consumer
lending. Our credit card was the first to be launched in the UK in 1966
and is now one of the leading credit card businesses in Europe, with a
fast growing business in the United States and South Africa.
What we do
In the UK our consumer payment services include Barclaycard branded
credit cards, partnership cards with leading brands and secured lending.
Barclaycard’s international presence continues to grow very strongly,
with international consumer customers now exceeding the number in the
UK. We currently operate in Germany, the United States and South Africa. In
Scandinavia, we operate through Entercard, a joint venture with Swedbank.
Our UK and international payment businesses provide payment
acceptance services for 87,000 retailers and merchants, both for face to face
transactions and over the internet and provides market-leading acceptance
of contactless cards. The business also issues credit and charge cards to
corporate customers and the UK Government, and provides sales financing
at retailers and auto dealers. Barclaycard is Europe’s number one issuer of
Visa Commercial Cards with over 145,000 public and private sector
corporate customers.
Performance
2009/08
Barclaycard profit before tax decreased 4% (£28m) to £761m (2008:
£789m). Strong income growth across the portfolio driven by increased
lending, improved margins and foreign exchange gains, was offset by higher
impairment charges, driven by the deterioration in the global economy.
International businesses’ profit before tax decreased 59% to £107m
(2008: £261m) driven by the US business. Strong income growth driven
by higher average extended credit balances was more than offset by
impairment growth, especially in the US and South African businesses, and
increased operating expenses. In the UK our businesses benefited from an
improvement in margins and growth in average extended balances leading
to income increasing 18% to £2,494m (2008: £2,111m). Income growth
was partially offset by the growth in impairment as worsening economic
conditions impacted delinquencies.
Income increased 26% (£823m) to £4,042m (2008: £3,219m)
reflecting strong growth across the portfolio, especially in the international
businesses through higher extended credit balances, lower funding rates
and the appreciation of the average values of the US Dollar and the Euro
against Sterling.
Net interest income increased 52% (£937m) to £2,723m (2008:
£1,786m) driven by strong growth in international average extended credit
card balances, up 52% to £7.9bn (2008: £5.2bn), and lower funding rates
as margins improved to 8.97% (2008: 6.92%).
Net fee and commission income decreased 2% (£28m) to £1,271m
(2008: £1,299m) through lower volumes in FirstPlus due to the decision
taken to stop writing new business in 2008 and lower volumes in the UK
card portfolios partially offset by growth in the international businesses.
Principal transactions of £22m (2008: £82m) included a £20m gain
from the sale of MasterCard shares (2008: £16m). Investment income in
2008 included a £64m gain from the Visa IPO.
Other income in 2008 included an £18m gain on the sale of a portfolio
in the US.
Impairment charges increased £701m (64%) to £1,798m (2008:
£1,097m). The rate of growth in the second half of the year was lower than
that in the first half. Impairment charges in the international businesses
increased £444m, driven by higher delinquencies due to deteriorating
economic conditions, growth in average receivables and the appreciation
of the average values of the US Dollar and the Euro against Sterling. UK
portfolio charges were higher as a result of rising delinquencies due to the
economic deterioration, especially in the loan portfolios, and the inclusion
of Goldfish in UK Cards.
Operating expenses increased 5% (£72m) to £1,494m (2008:
£1,422m), due to the appreciation in the average value of the US Dollar
and the Euro against Sterling and growth in the portfolios including the
acquisitions made in the UK, US and South Africa in 2008.
The purchase of Goldfish resulted in a gain on acquisition of
£92m in 2008.
10.8
11.6
7.7
10.4
11.7
10.1
07 08
Number of Barclaycard
International customers
m
09
Number of UK customers
m
07 08
09
Performance indicators
a
Note
aThe number of customers at 31st December 2009 is, after a reduction of 1.5 million, due
to the closure of dormant accounts.