Barclays 2004 Annual Report Download - page 226

Notes to the accounts
For the year ended 31st December 2004
55 Significant Group concentration of credit risk
A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics
that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.
Barclays has three significant concentrations of exposures to credit risk: the UK economy, home loans and banks.
Credit exposure is concentrated in the UK where the majority of the Group’s activities are conducted. Gross credit exposure to borrowers on the
banking book in the UK (based on the location of the office recording the transaction) was £159bn at 31st December 2004 (2003: £144bn). In the
UK, the Group’s collateral policy differs by line of business and product but is broadly consistent with UK market practice. Netting agreements are
made with wholesale counterparties whenever practical and to the extent that such agreements are legally enforceable.
Lending in respect of home loans totalled £78bn at 31st December 2004 (2003: £72bn). This represents 40% (2003: 42%) of loans to customers
on the banking book. As collateral, Barclays requires a first mortgage over the residential property for the acquisition of which the loan is made.
As an active participant in the international financial markets, the Group has significant credit exposure to banks. In total, credit exposure to
banks at 31st December 2004 was estimated to have amounted to £107bn (2003: £87bn) of which £75bn (2003: £62bn) consisted of loans and
advances and £10bn (2003: £9bn) of mark-to-market balances in respect of derivatives. The remaining credit exposure is largely related to letters
of credit and guarantees. The Group may require collateral before entering into a credit commitment with another bank, depending on the type
of the financial product and the counterparty involved. Netting agreements are secured whenever possible and to the extent that such
agreements are legally enforceable.
The concentrations of credit exposure described above are not proportionally related to credit loss. Some segments of the Group’s portfolio have
and are expected to have proportionally higher credit charges in relation to the exposure than others. Moreover, the volatility of credit loss is
different in different parts of the portfolio. Thus comparatively large credit charges could arise in parts of the portfolio not mentioned above.
56 Ratio of earnings to fixed charges and preference share dividends
2004 2003 2002 2001 2000
Ratio of earnings to fixed charges
UK GAAP:
Excluding interest on deposits 1.48 1.55 1.50 1.40 1.49
Including interest on deposits 1.32 1.35 1.31 1.26 1.29
US GAAP:
Excluding interest on deposits 1.47 1.36 1.58 1.47 1.49
Including interest on deposits 1.31 1.23 1.36 1.30 1.29
Ratio of earnings to combined fixed charges, preference share dividends
and payments to Reserve Capital Instrument holders
UK GAAP:
Excluding interest on deposits 1.48 1.55 1.50 1.40 1.48
Including interest on deposits 1.32 1.35 1.31 1.26 1.29
US GAAP:
Excluding interest on deposits 1.46 1.34 1.55 1.45 1.47
Including interest on deposits 1.31 1.22 1.35 1.29 1.28
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