Barclays 2003 Annual Report Download - page 93

Barclays PLC Annual Report 2003 91
Excluding the impact of the transfer, average customer deposits
increased 3% to £40bn (£39bn). Average loans increased 44% to £13bn
(2002: £9bn). Margins remained broadly stable.
Net fees and commissions decreased 13% (£79m) to £515m
(2002: £594m). This reflected the impact of lower average equity market
levels in 2003 on sales of investment products and on fund management
fees, together with the absence of the contribution from the Caribbean
business. The average level of the FTSE 100 Index was 12% lower than in
the prior year at 4,051 (2002: 4,599). Fee income improved significantly
in the second half of 2003, reflecting volume growth and the recovery in
equity markets towards the year end. Average daily deal volumes in UK
retail stockbroking, including Charles Schwab Europe, increased to 8,350
(2002: 6,300). The stockbroking business maintained its leading UK
position with a 19% (2002: 12%) market share of client order business.
Operating expenses increased 1% (£8m) to £1,049m (2002: £1,041m).
The tight control of costs, together with the impact of the deconsolidation
of the Caribbean business, fully mitigated the additional pensions charge
of £28m (2002: credit £13m), the inclusion of costs relating to Banco
Zaragozano and Charles Schwab Europe, and increased restructuring
charges. Operating expenses included goodwill of £58m (2002: £45m).
Provisions decreased £6m to £31m (2002: £37m), reflecting the impact
of the Caribbean transaction.
Total customer funds, comprising customer deposits and assets under
management (including assets managed by Legal & General under the
strategic alliance), increased £24bn to £109bn (31st December
2002: £85bn). This was due to the inclusion of funds relating to the
acquired businesses of Charles Schwab Europe, Banco Zaragozano and
Gerrard (which together amounted to £19bn), the impact of new
business, favourable exchange rate movements and improved stock
market levels. Customer deposits increased by £5bn to £44bn
(31st December 2002: £39bn), reflecting the inclusion of Banco
Zaragozano and savings balances of £1.9bn which were transferred
from Personal Financial Services in the second half of 2003.
Sales of Legal & General life and pensions products have fallen in line
with industry trends. Sales of funds and bonds were impacted by
reduced customer demand for investment products.
Openplan in UK Premier attracted £1.1bn of new mortgage balances
together with £1.3bn of additional savings in the year.
Income in Spain, excluding Banco Zaragozano, continued to grow
significantly in 2003, increasing 22% (£32m) to £179m (2002: £147m).
This reflected the continued success of Openplan mortgage products
together with favourable exchange rate movements. 15,000 new
customers were recruited to Openplan in Spain in 2003.
The first benefits of the integration of Banco Zaragozano were evident:
sales of non-core assets totalling some £175m, representing 23% of the
purchase consideration; progress has been made on the combination of
Head office functions and technology integration; and Barclays products
have been successfully launched into the Banco Zaragozano customer
base. The majority of the restructuring costs will be borne in 2004
and 2005.
The contribution from the closed life assurance activities, a loss of £77m
(2002: loss of £87m), comprises the embedded value of the closed
Barclays Life fund and former Woolwich Life fund together with the
costs relating to redress for customers in respect of sales of endowment
policies. Of the loss of £77m in the Group’s results, £42m is included
within other operating income and £35m within net interest income.
Net interest income in 2002 was £1,834m (2001: £1,911m). Margin
pressures, particularly within mortgages, were actively managed with
increased balances mitigating some of the compression.
Net fees and commissions in 2002 were £794m (2001: £805m).
Other operating income in 2002 was £291m (2001: £193m). The
contribution from payment protection income increased strongly (18%)
to £171m (2001: £145m) reflecting consumer lending activities. An
increase of £59m resulted from a revision of the estimated amounts
expected to be repaid on banking liabilities in the light of experience
since the Woolwich acquisition in 2000 and to align Woolwich with
Barclays practice.
Operating expenses in 2002 fell 1% to £1,865m (2001: £1,886m) despite
significant continued investment in infrastructure and the higher costs
associated with increased business volumes.
Provisions in 2002 were £334m (2001: £375m) despite growth in lending
balances. This primarily reflected the implementation of specific
initiatives to improve the overall risk profile of our lending portfolio,
particularly in relation to consumer loans and current accounts.
Barclays Private Clients
2003 2002 2001
£m £m £m
Net interest income 804 788 870
Net fees and commissions 515 594 567
Other operating income 31 19 (11)
Operating income 1,350 1,401 1,426
Goodwill amortisation (58) (45) (45)
Other operating expenses (991) (996) (960)
Operating expenses (1,049) (1,041) (1,005)
Operating profit before
provisions 301 360 421
Provisions for bad and
doubtful debts (31) (37) (36)
Operating profit
– ongoing business 270 323 385
Profit/(loss) from associated
undertakings 16 (8) –
Exceptional items 7(2) 4
Profit on ordinary activities
before tax – ongoing business 293 313 389
Contribution from closed life
assurance activities (77) (87) 123
Profit on ordinary activities
before tax 216 226 512
Barclays Private Clients operating profit for the ongoing business fell
16% (£53m) to £270m (2002: £323m). Barclays Private Clients profit
before tax for the ongoing business including the contribution of
FirstCarribean and exceptional items, decreased 6% to £293m
(2002: £313m).
Net interest income increased 2% (£16m) to £804m (2002: £788m). The
increase reflected a resilient core banking performance, the continued
success of Openplan in Spain and the inclusion of Banco Zaragozano,
which together more than offset the absence of the contribution from
the Caribbean business. Average customer deposits increased 5% to
£41bn (2002: £39bn), including the transfer of some client savings
balances from Personal Financial Services in the second half of 2003.