Barclays 2010 Annual Report Download - page 100

Risk management
Credit risk management continued
Potential Credit Risk Loans
Protium
As at 31st December 2010, wholesale gross loans and advances included
a £7,560m loan to Protium. Principal and interest payments have been
received in accordance with contractual terms. However, following a
reassessment of the expected realisation period, the loan is carried at an
amount equivalent to the fair value of the underlying collateral, resulting
in an impairment of £532m. Further details are provided on page 114.
In light of the effect of the Protium loan and related impairment allowance
on CRLs and coverage ratios, the commentary below excludes the impact
of the Protium loan to allow for a more meaningful analysis of other
exposures and to facilitate comparison with prior years.
Credit Risk Loans
The Group’s Credit Risk Loans (CRLs) rose 8% to £24,322m (2009:
£22,542m) reflecting increases in both the retail and wholesale sectors.
CRLs in the Wholesale portfolios increased 6% to £11,751m (2009:
£11,039m) primarily due to a rise in Continental Europe reflecting the
deterioration in the Spanish property sector. This was partially offset by
lower balances in Barclays Capital as credit conditions led to improvements
across default grades and an improvement in credit market exposures.
CRLs in the Retail portfolios rose 9% to £12,571m (2009: £11,503m)
reflecting increases in Home Loans of 14% to £4,294m (2009: £3,758m)
primarily due to an increase in the Sterling value of recovery balances in
the Absa Home Loans portfolio as well as the acquisition of Standard Life
Bank. Credit Cards, Unsecured and Other Retail Lending increased 7%
to £8,277m (2009: £7,745m) reflecting higher recovery balances as
accounts rolled through to later cycles in most businesses and a weak
debt sale sector.
Potential Problem Loans
The Group’s Potential Problem Loans (PPLs) balance fell by 24%
to £2,695m (2009: £3,523m).
PPL balances fell 26% in Wholesale portfolios to £1,970m (2009:
£2,674m) mainly reflecting a decrease in Barclays Capital as a small
number of counterparties moved out of the category and some balances
reduced, and decreases in Continental Europe, mainly Spain, and Absa
as accounts flowed in to CRL categories.
In the Retail portfolios, PPLs fell 15% to £725m (2009: £849m) primarily
due to a fall of £94m in Credit Cards, Unsecured and Other Retail Lending
portfolios, driven by lower balances in Barclaycard, primarily UK Secured
Loans and US Cards and Western Europe Retail Bank, primarily Spain.
Potential Credit Risk Loans
Group Potential Credit Risk Loan (PCRL) balances increased 4% to £27,017m
(2009: £26,065m), reflecting an increase in CRLs partially offset by a
decrease in PPLs.
Total PCRL balances in the Wholesale portfolios remained broadly unchanged
at £13,721m (2009: £13,713m).
PCRL balances rose in Home Loans by 13% to £4,554m (2009: £4,048m)
while PCRLs in Credit Cards, Unsecured and Other Retail Lending portfolios
increased 5% to £8,742m (2009: £8,304m).
Coverage Ratios
In the Wholesale portfolios, the CRL coverage ratio increased to 42.7%
(2009: 42.4%), and the PCRL coverage ratio increased to 36.6%
(2009: 34.1%).
The CRL coverage ratio in Home Loans increased to 19.9% (2009: 17.0%),
and the PCRL coverage ratio increased to 18.8% (2009: 15.8%). The CRL
coverage ratio in Credit Cards, Unsecured and Other portfolios increased
to 72.8% (2009: 70.8 %) and the PCRL coverage ratio increased to 69.0%
(2009: 66.0%).
The CRL coverage ratios in Home Loans, Credit Cards, Unsecured and
Other and Wholesale portfolios remain within typical severity rate ranges
for these types of products. The Group’s CRL coverage ratio increased to
48.9% (2009: 47.9%). The PCRL coverage ratio also increased to 44.0%
(2009: 41.4%).
Potential credit risk loans and coverage ratios CRLs PPLs PCRLs
As at 31st December 2010
£m
2009
£m
2010
£m
2009
£m
2010
£m
2009
£m
Home loansa 4,294 3,758 260 290 4,554 4,048
Credit cards, unsecured and other retail lending 8,277 7,745 465 559 8,742 8,304
Retail 12,571 11,503 725 849 13,296 12,352
Wholesale (excluding loan to Protium) 11,751 11,039 1,970 2,674 13,721 13,713
Loan to Protiumb 7,560 – – – 7,560 –
Wholesale 19,311 11,039 1,970 2,674 21,281 13,713
Group (excluding loan to Protium) 24,322 22,542 2,695 3,523 27,017 26,065
Group 31,882 22,542 2,695 3,523 34,577 26,065
Impairment allowance CRL coverage PCRL coverage
As at 31st December 2010
£m
2009
£m
2010
%
2009
%
2010
%
2009
%
Home loansa 854 639 19.9 17.0 18.8 15.8
Credit cards, unsecured and other retail lending 6,029 5,480 72.8 70.8 69.0 66.0
Retail 6,883 6,119 54.8 53.2 51.8 49.5
Wholesale (excluding loan to Protium) 5,017 4,677 42.7 42.4 36.6 34.1
Loan to Protiumb 532 – 7.0 – 7.0 –
Wholesale 5,549 4,677 28.7 42.4 26.1 34.1
Group (excluding loan to Protium) 11,900 10,796 48.9 47.9 44.0 41.4
Group 12,432 10,796 39.0 47.9 36.0 41.4
Notes
a Comparative figures for Home Loans have been restated to align with externally disclosed arrears definitions.
b Refer to page 114 for further information on Protium.
98 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10