Barclays 2009 Annual Report Download - page 74

72 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Financial review
Analysis of results by business
continued
Investment Banking and Investment Management
Barclays Capital
Barclays Capital is a leading global investment bank providing
large corporate, government and institutional clients with a full
spectrum of solutions to their strategic advisory, financing and
risk management needs.
What we do
Barclays Capital is a global investment bank, which offers clients the full
range of services covering strategic advisory and M&A; equity and fixed
income capital raising and corporate lending; and risk management across
foreign exchange, interest rates, equities and commodities.
Activities are organised into three principal areas: Global Markets, which
includes commodities, credit products, equities, foreign exchange, interest
rate products; Investment Banking, which includes corporate advisory,
Mergers and Acquisitions, equity and fixed-income capital raising and
corporate lending; and Private Equity and Principal Investments. Barclays
Capital includes Absa Capital, the investment banking business of Absa.
Barclays Capital works closely with all other parts of the Group to
leverage synergies from client relationships and product capabilities.
Performance
2009/08
Barclays Capital profit before tax increased 89% to £2,464m (2008:
£1,302m). The substantial increase in income and profit reflected very
strong performances in the UK and Europe, and a transformation in the
scale and service offering in the US through the integration of the Lehman
Brothers North American businesses acquired in September 2008. Profit
before tax was struck after credit market writedowns of £6,086m (2008:
£8,053m), including £4,417m credit market losses (2008: £6,290m) and
£1,669m of impairment (2008: £1,763m). The loss on own credit was
£1,820m (2008: £1,663m gain).
Income of £11,625m was up 122% (2008: £5,231m), reflecting
excellent growth across the client franchise. Top-line income increased 81%
to £17,862m (2008: £9,858m). Fixed Income, Currency and Commodities
increased 76% and drove the strong increase in trading income following
the expansion of the business and the associated increase in client flows.
Equities and Prime Services increased 147% driven by the acquisition of
the Lehman Brothers North American businesses with particularly strong
performances in cash equities and equity derivatives.
Investment Banking, which comprises advisory businesses and equity
and debt underwriting, more than doubled to £2,195m (2008: £1,053m)
driven by origination and advisory activity. The cash equity business, along
with Investment Banking, drove a significant rise in fee and commission
income.
Losses in Principal Investments of £143m (2008: income of £299m)
contributed to the overall net investment loss of £164m (2008: income
of £559m).
Impairment charges of £2,591m (2008: £2,423m) included credit
market impairment of £1,669m (2008: £1,763m) as discussed on
page 109. Non credit market related impairment of £922m (2008: £660m)
principally related to charges in the portfolio management, global loans and
principal investment businesses. Impairment charges declined significantly
in the second half of 2009.
Operating expenses increased 75% to £6,592m (2008: £3,774m),
reflecting the inclusion of the acquired Lehman business. Compensation
costs represented 38% of income, a reduction of 6 percentage points on
the prior year.
2008/07
In an exceptionally challenging market environment in 2008, Barclays Capital
profit before tax decreased 44% (£1,033m) to £1,302m (2007: £2,335m).
Profit before tax included a gain on the acquisition of Lehman Brothers North
American businesses of £2,262m. Absa Capital profit before tax grew 13%
to £175m (2007: £155m).
Net income included gross losses of £8,053m (2007: £2,999m) due
to continuing dislocation in the credit markets. These losses were partially
offset by income and hedges of £1,433m (2007: £706m), and gains of
£1,663m (2007: £658m) from the general widening of credit spreads on
structured notes issued by Barclays Capital. The gross losses, comprised
£6,290m (2007: £2,217m) against income and £1,763m (2007: £782m)
in impairment charges.
The integration of the Lehman Brothers North American businesses was
completed in the fourth quarter of 2008 and the acquired businesses made
a positive contribution in the period following completion, with good results
in equities, fixed income and advisory. There was a gain on acquisition of
£2,262m. Not included in this gain is expenditure relating to integration of
the acquired business.
232
168
116
07
08
09
Number of clients generating
more than £10m income
Performance indicators
Analysis of Total Income Year ended 31st December
2009 2008 2007
£m £m £m
Fixed Income, Currency
and Commodities 12,964 7,353 5,722
Equities and Prime Services 2,846 1,153 1,631
Investment Banking 2,195 1,053 921
Principal Investments (143)
299 404
Top-line income 17,862 9,858 8,678
Credit market losses in income (4,417) (6,290) (2,217)
Own credit (1,820) 1,663 658
Total Income 11,625 5,231 7,119