Barclays 2003 Annual Report Download - page 92

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Analysis of Results by Business
The following section analyses the Group’s performance within the
businesses. Inter-business activities are included within these figures.
The total income and expenditure for the businesses therefore does not
necessarily equate to the amounts reported in the Group’s results.
Comparative figures have been restated as a result of the changes in
accounting policy and accounting presentation as set out on pages 118
and 119.
The analysis of results by business incorporates goodwill amortisation,
restructuring costs, costs directly associated with the integration of
Woolwich plc and profit/(loss) from joint ventures and associates in a
manner consistent with the Group presentation detailed above.
Additionally, exceptional items are now allocated out to individual
businesses. This is a different treatment to that included in the Results
Announcement where the analysis of results by business excludes
goodwill amortisation and exceptional items, and separately identifies
restructuring costs.
Personal Financial Services
2003 2002 2001
£m £m £m
Net interest income 1,949 1,834 1,911
Net fees and commissions 802 794 805
Other operating income 358 291 193
Operating income 3,109 2,919 2,909
Goodwill amortisation (151) (151) (151)
Other operating expenses (1,839) (1,714) (1,735)
Operating expenses (1,990) (1,865) (1,886)
Operating profit before
provisions 1,119 1,054 1,023
Provisions for bad and
doubtful debts (303) (334) (375)
Operating profit 816 720 648
Profit from associated
undertakings 63 4
Exceptional items (1) (11) (8)
Profit on ordinary activities
before tax 821 712 644
Personal Financial Services operating profit increased 13% (£96m) to
£816m (2002: £720m), reflecting good income momentum, continued
good cost control and reduced provisions.
Operating income increased 7% (£190m) to £3,109m (2002: £2,919m).
Net revenue (operating income less provisions) increased 9% to £2,806m
(2002: £2,585m).
Operating income growth was broadly based: general insurance rose
32%; consumer finance rose 15%; mortgages rose 10%; and current
accounts and savings rose 2%. Income from independent financial advice
fell 28%.
Net interest income increased 6% (£115m) to £1,949m (2002: £1,834m).
Growth resulted from higher average product balances and improved
asset margins. The retail savings margin remained stable.
Consumer finance experienced good growth in average balances, up 6%
to £6.8bn (2002: £6.4bn), and improved margins. Sales of the key
Barclayloan product were particularly strong, increasing 32%.
A significant part of the new consumer loan business was in the better
risk grades.
Average savings balances increased 6% to £30.9bn (2002: £29.2bn),
after transferring some balances to Barclays Private Clients in the second
half of 2003. Excluding the impact of the transfer average savings
balances increased 9% to £31.8bn (2002: £29.2bn). Barclays branded
savings continued to perform strongly, growing 19%. This was a market
leading performance driven by Openplan.
Average residential mortgage balances increased 8% to £59.0bn
(2002: £54.5bn). The selective approach taken to certain sectors of the
mortgage market has been maintained throughout 2003. Gross advances
were £18.3bn (2002: £22.2bn), a gross market share of 7% (2002: 10%).
Net lending of £2.0bn (2002: £6.9bn) represented a net market share of
2% (2002: 9%). UK residential mortgage balances ended the period at
£59.8bn (31st December 2002: £57.8bn). The interest spread on new
mortgage business increased.
Net fees and commissions increased 1% (£8m) to £802m
(2002: £794m). Underlying this were good performances from fee-based
current accounts and consumer finance, largely offset by continued
weakness in the independent financial adviser (IFA) business.
Other operating income increased by 23% (£67m) to £358m
(2002: £291m). This resulted from a strong performance in general
insurance activities, reflecting increased sales of personal protection
insurance products, and a more favourable claims experience. A one-off
income gain of £43m arose through an adjustment to insurance reserves.
Contributing to the overall increase in operating income has been the
continued success of Openplan. Customer numbers now total 2.6m
(2002: 2m), with deeper customer relationships evident through
significantly higher product penetration and income contribution than
for non-Openplan relationships. The percentage of new to Group
customers in Openplan has increased. Openplan from Barclays has
attracted 1.25m customers (2002: 0.78m) across the UK. Product
penetration was an average of 4.6 products per customer, well above the
average of 2.6 outside Openplan. Annual customer income was £397,
relative to £249 outside Openplan. Openplan from Woolwich customer
numbers rose to 1.40m (2002: 1.21m) with average product penetration
of 3.2 products per customer relative to 1.5 outside Openplan. Annual
customer income was £311, relative to £165 outside Openplan.
Operating expenses rose 7% (£125m) to £1,990m (2002: £1,865m),
with around half of the increase attributable to the impact of the
pension charge of £40m (2002: credit £20m). Business as usual costs
were tightly managed to improve operational efficiency, and staff
numbers continued to decline. Headcount fell to 25,800 (2002: 27,200).
Strategic investment spend increased. Integration costs associated with
the Woolwich integration reduced to £50m (2002: £70m). Operating
expenses included goodwill of £151m (2002: £151m).
Provisions decreased 9% (£31m) to £303m (2002: £334m), reflecting
the overall quality of the lending portfolio, improvements to risk
management processes and a reduction in problem loans. Coverage
ratios improved. The loan to value ratio within the mortgage book
on a current valuation basis averaged 40% (2002: 45%).
Personal Financial Services operating profit in 2002 was £720m
(2001: £648m). Operating income was steady at £2,919m
(2001: £2,909m).
Financial Review
Analysis of Results by Business