Barclays 2004 Annual Report Download - page 112

110
Financial review
Analysis of results by business
Barclaycard
2004 2003 2002
£m £m £m
Net interest income 1,600 1,555 1,354
Net fees and commissions 764 673 585
Other operating income ––1
Operating income 2,364 2,228 1,940
Goodwill amortisation (41) (38) (26)
Other operating expenses (806) (761) (636)
Operating expenses (847) (799) (662)
Operating profit before
provisions 1,517 1,429 1,278
Provisions for bad and
doubtful debts (761) (708) (663)
Operating profit 756 721 615
Profit/(loss) from joint
ventures 42(4)
Exceptional items ––2
Profit on ordinary activities
before tax 760 723 613
Barclaycard profit before tax increased 5% (£37m) to £760m
(2003: £723m).
Operating income increased 6% (£136m) to £2,364m (2003: £2,228m).
Net revenue (operating income less provisions) increased 5% (£83m)
to £1,603m (2003: £1,520m). A high level of recruitment of UK retail
card customers continued at 1.33m (2003: 1.55m).
Net interest income increased 3% (£45m) to £1,600m (2003: £1,555m)
reflecting growth in UK average extended credit balances, up 11% to
£8.2bn (2003: £7.4bn) and higher UK average loan balances, up 11%
to £9.4bn (2003: £8.5bn). Margins in the consumer lending business
remained broadly stable whereas margins in UK cards decreased,
reflecting higher funding costs and the impact of increased balance
transfer activity at promotional rates.
Net fees and commissions increased 14% (£91m) to £764m
(2003: £673m) as a result of the continued growth in the credit
card and consumer lending businesses and good volume growth
within the merchant acquiring business.
Operating expenses rose 6% (£48m) to £847m (2003: £799m).
The increase reflected investment in Barclaycard International and
brand related investment in the UK.
Provisions increased 7% (£53m) to £761m (2003: £708m). This
increase was lower than the growth in assets and reflected the
continued benefit of improved collections activity. Non-performing
loan balances increased but at a significantly lower rate than the
growth in assets. Delinquency levels as a percentage of outstandings
for both Barclaycard branded credit cards and for Barclayloan
were stable.
In the UK, particularly strong performances from the Monument and
FirstPlus businesses, together with Barclaycard Business, more than
offset the margin pressure and brand investment in the Barclaycard
branded card activities.
Provisions decreased 6% (£2m) to £31m (2003: £33m).
Barclays Spain (including Banco Zaragozano) profit before tax
declined 2% overall, after accounting for integration costs of ¤62m
(2003: ¤12m) and goodwill of ¤32m (2003: ¤15m), with the increase
in goodwill between 2003 and 2004 reflecting the first full year
of charge. The retention rate of Banco Zaragozano customers has been
high and Barclays products were successfully introduced to the
customer base. The integration is well ahead of schedule.
Openplan in Spain continued its successful growth and it has been
popular with the customers of Banco Zaragozano: total customer
numbers at the end of 2004 were 47,000 (2003: 35,000), mortgage
balances were ¤7.8bn (2003: ¤4.8bn) and savings balances were
¤1.5bn (2003: ¤1bn). Openplan also continued to grow in Portugal,
with 8,900 customers at 31st December (2003: 6,200) and total
balances up 44% to ¤1.3bn (2003: ¤0.9bn). This was supported by
ongoing investment in new branches. In October 2004, Openplan
was launched in France.
Profit before tax in Africa and the Middle East increased 13% to
£126m (2003: £112m) driven by strong growth in corporate balances,
particularly in South Africa, together with reduced restructuring costs.
The profit from associated undertakings reflected the contribution
from FirstCaribbean. The improved performance reflected the delivery
of synergies arising from the merger which created FirstCaribbean,
together with good underlying growth in customer activity. The results
of FirstCaribbean included a gain of £28m on the sale of shares held in
Republic Bank Limited.
International profit before tax in 2003 increased by 36% to £245m
(2002: £180m).
On 11th October 2002, the Caribbean businesses of Barclays and
Canadian Imperial Bank of Commerce were combined to form
FirstCaribbean International Bank Ltd, and the interest in
FirstCaribbean has been accounted for as an associated
undertaking thereafter.
Net interest income in 2003 increased by 11% to £461m (2002:
£417m), mainly reflecting the success of Openplan in Spain, growth
in lending and deposit volumes together with the acquisition of BNPI
Mauritius in Africa, and the inclusion of income relating to Banco
Zaragozano, acquired in July 2003. These factors more than offset the
absence of the contribution from the Caribbean business in 2003.
Net fees and commissions in 2003 increased by 9% to £289m
(2002: £266m). This was due to balance sheet growth in Spain
and Africa in addition to the contributions from BNPI Mauritius
and Banco Zaragozano.
Operating expenses in 2003 increased by 9% to £523m
(2002: £480m). This reflected the inclusion of costs relating to
Banco Zaragozano, and additional costs in Africa relating to increased
infrastructure investment, further development of the business and
costs of relocating the Head office to Johannesburg. Partially offsetting
this was the absence of costs relating to the Caribbean in 2003.
Provisions in 2003 decreased by 13% to £33m (2002: £38m), mainly
reflecting the impact of the Caribbean transaction.