Barclays 2012 Annual Report Download - page 137

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Re-age activity
Re-age is applicable only to revolving products where a minimum due payment is required. Re-age refers to returning of a delinquent account to
up-to-date status without collecting the full arrears (principal, interest and fees). The changes in timing of cash flows following re-aging do not
result in any additional cost to Barclays. The following are the principal portfolios in which re-age activity occurs.
Principal Portfolios
Re-aged balances in total
outstanding, excluding
recoveries balances
Re-aged balances as
proportion of total
outstanding, excluding
recoveries balances
30 day arrears of re-aged
balances at 12 months
on book
As at 31 December 2012
£m
2011
£m
2012
%
2011
%
2012
%
2011
%
UK Cards 232 185 1.6 1.3 17.2 14.6
US Cards 96 170 1.1 2.4 13.8 16.4
Re-aged balances as a percentage of total outstanding, excluding recoveries balances increased in the UK cards portfolios. The decrease in US
cards has been driven by improved ability of customers to self cure from a position of delinquency. The re-age activity in South Africa and Europe
RBB cards portfolios are not considered to be material.
For further detail on policy relating to the re-aging of loans, please refer to page 327.
Exposures to interest only home loans
In the course of its retail lending business, the Group provides interest only mortgages to customers, mainly in the UK. Under the terms of these
loans, the customer makes payments of interest only for the entire term of the mortgage, although customers may make early repayments of the
principal provided that these are no more than 5% of the principal balance in any year.
Subject to such overpayments, the entire principal remains outstanding until the end of the loan term and the customer is responsible for repaying
this on maturity. The repayment vehicle may include sale of the mortgaged property.
Interest only lending is subject to underwriting criteria that include: a maximum size of loan, maximum loan to value ratios, affordability and
maximum loan term amongst other criteria. Borrowers on interest only terms must have a repayment strategy in place to repay the loan at
maturity and a customer contact strategy has been developed to ensure ongoing communications are in place with interest only customers at
various points during the term of the mortgage. The contact strategy is varied dependent on our view of the risk of the customer.
Interest only mortgages comprise £53bn (46%) of the total £115bn UK Home Loans portfolio. Of these, £46bna are owner-occupiedb with the
remaining £7bn buy-to-letc.
Exposure to interest only owner-occupied home loans
As at December 31 2012
Interest only balances (£m) 45,693
90 days arrears (%) 0.3
Marked to market LTV % 45.2
Interest only mortgages maturing during:
2013 710
2014 872
2015 1,046
Management adjustments to models
Management adjustments to models for impairment in retail portfolios are applied in order to factor in certain conditions or changes in policy that
are not incorporated into the relevant impairment models, to ensure that the impairment allowance reflects all known facts and circumstances at
the period end. The main factors in management adjustments to models include changes to reflect current economic conditions and a decline in
recoveries. Adjustments typically increase the model derived impairment allowance.
Management adjustments to models for retail impairment resulted in a total additional impairment charge of £45.9m in 2012. Management
adjustments to models of more than £10m with respect to impairment charge in our principal retail portfolios are presented below and represent
£26.9m of the total adjustment.
Material portfolios
As at 31 December 2012
Total management
adjustments to
impairment charge,
including forbearance
£m
Total management
adjustments charge
proportion of total
impairment charge
%
Spain home loans 14.0 19.3
Portugal home loans 12.9 54.4
The high level of management adjustment for Spain and Portugal home loans in 2012 reflected a requirement to increase coverage to take into
account potential declines in house prices.
Notes
a Balances also include the interest only portion of the Part and Part UK owner-occupied portfolio. A Part and Part Home Loan is a product in which part of the loan is
interest only and part is amortising. Where customers request a further advance, this is generally made on a repayment basis. Advances made on a repayment basis
have been included above.
b Owner-occupied refers to mortgages where the intention of the customer was to occupy the property at origination.
c Buy-to-let refers to mortgages where the intention of the customer (investor) was to let the property at origination.
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