Barclays 2014 Annual Report Download - page 159

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Analysis of specific portfolios and asset types
This section provides an analysis of principal portfolios and businesses in the retail and wholesale segments. In particular, home loans, credit
cards, overdrafts and unsecured loans are covered for retail segments while exposures in Investment Bank and PCB including watch-list analysis
are covered for wholesale segments.
In general, improved economic conditions in the UK and US aided better performance in 2014. While, European portfolios continued to show signs
of stability, they remain susceptible to adverse market pressures. South African portfolios were resilient despite challenging market conditions with
contracting economic growth.
Following an enhancement to the retail methodology in 2014, management adjustments to impairment allowances have now been aligned to the
appropriate segments of a portfolio rather than a segment. As a result, the coverage ratio for the single segment would be higher in 2013 than
2014. The reverse would apply to segments to which management adjustments have now been allocated in 2014. There has been no impact on
the overall impairment coverage at a portfolio level. This applies, in particular, to secured home loans and credits cards.
Secured home loans
Total home loans to retail customers of £161bn (2013: £173bn) represented 72% (2013: 73%) of the Group’s total retail balances. The reduction in
balances was principally due to the classification of Spain assets as held for sale (2013 home loans: £13bn).
The principal portfolios listed below account for 94% of home loans in the Group’s retail portfolios, and comprise first lien mortgages.
Home loans principal portfolios
Gross loans
and advances
£m
> 90 day
arrears
%
Non-
performing
proportion of
outstanding
balances
%
Gross
charge-off
rates
%
Recoveries
proportion of
outstanding
balances
%
Recoveries
impairment
coverage
ratio
%
As at 31 December 2014
PCB – UK 126,668 0.2 0.6 0.4 0.4 8.3
Africa – South Africa 11,513 0.7 4.8 1.9 4.1 31.1
BNC – Italy 13,761 1.2 4.2 0.7 3.0 28.0
As at 31 December 2013
PCB – UK 122,880 0.3 0.8 0.5 0.5 14.7
Africa – South Africa 12,172 0.7 6.2 2.6 5.6 34.7
BNC – Italy 15,518 1.1 3.5 0.7 2.4 25.8
PCB – UK: Gross loans and advances in the home loans portfolio increased by 3% to £127bn. Arrears and charge-off rates improved reflecting the
continuing low base rate and improved economic conditions. Balance weighted LTV reduced to 51.6% (2013: 56.3%) due to an increase in
average house prices, which was particularly marked in London and the south east. The house price increase resulted in a 60% reduction in home
loans that have LTV >100% to £641m (2013: £1,596m).
Within the UK home loans portfolio:
Q Owner-occupied interest-only home loans comprised 33% (2013: 36%) of total balances. The average balance weighted LTV on these loans
reduced to 48.7% (2013: 54.2%), and >90 day arrears reduced to 0.1% (2013: 0.3%); and
Q Buy-to-let home loans comprised 8% (2013: 8%) of total balances. The average balance weighted LTV reduced to 57.6% (2013: 62.9%), and
>90 day arrears remained broadly steady at 0.1% (2013: 0.1%).
The recoveries impairment coverage reduced to 8.3% (2013: 14.7%). In 2014, management adjustments to impairment allowances were better
aligned to appropriate segments of the portfolio, resulting in a reduction of the impairment allocated to the recoveries book. The overall
impairment coverage of the total home loans portfolio remained unchanged.
Africa – South Africa: Gross loans and advances reduced by 5% as inflow of new business was outweighed by the paydown on the existing book.
The improvement in the charge-off rates to 1.9% (2013: 2.6%) was due to the continued strong performance of new lending as well as focused
collections strategies that led to the reduction of the recoveries book. Balances with >100% LTV reduced 28% to £390m, primarily due to a
reduction in the size of the recoveries book.
BNC – Italy: Gross loans and advances reduced by 11% reflecting the amortisation of the existing portfolio, depreciation of local currency, and
reduced new business flows. The impact of a reduction in the average house price was offset by paydown of the existing book, and the average
balance weighted LTV remained steady at 60.0%. The proportion of home loans in recoveries increased to 3.0% (2013: 2.4%). This was due to the
lengthy local legal process and difficult property market conditions.
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