Barclays 2004 Annual Report Download - page 9

Our efforts in 2004 were directed at advancing our four strategic
priorities. These are: building the best bank in the UK; growing our
global product businesses (credit cards, investment banking,
institutional money management and wealth management); extending
our presence in selected retail and commercial banking markets
outside the UK (Spain and Africa are good examples of this); and
creating operational excellence. At the heart of all four priorities is our
commitment to strengthen franchise health, by which we mean our
relationships with customers and clients, the engagement of our
colleagues, and our contribution to the communities in which we live
and work.
We formed UK Banking, which is run by Roger Davis, a year ago by
combining Business Banking with most of what was then Personal
Financial Services. In UK Banking we saw the strong profit growth
generated by UK Business Banking somewhat diluted by broadly flat
earnings in the UK Retail Banking business. Although it is clear that we
must lift our performance in UK Retail Banking, the headline profit
figure here masks better underlying performance year on year. We
have been investing heavily in front-line people, in infrastructure, and
in branch-based technology. We are looking for these investments to
bear fruit during 2005. The best fruit, of course, will be rising
customer satisfaction among retail customers driving further growth
in business flows.
All our global product businesses delivered good results. Partly this is
the consequence of very strong organic performance – I am referring
here in particular to Barclays Capital and Barclays Global Investors
where the results were sparkling. In Private Clients, the sharp lift in
profits was attributable to acquisitions made in 2003 as well as to
good organic performance.
It gives me considerable satisfaction to be able to report another
record year at Barclays Capital, which is run by Bob Diamond.
Investors look for consistency and sustainability: the compound annual
growth rate in economic profit at Barclays Capital over the last three
years has been 26%. The record achievement of 2004 was in an
environment where corporate issuance volumes in the US and Europe
were down, where interest rates were rising, and where volatility, on
which investment banks generally thrive, was quite low.
At Barclays Global Investors, chaired by Bob Diamond, profit before
tax has more than quadrupled in the last three years; this speaks of
satisfied clients. Our investment track record in Barclays Global
Investors, across all asset classes and durations, singles us out as a
harbour of dependability in a very turbulent sea. You can see this in
the net new asset flow, which amounted to $118bn during the year.
Financial performance has partly been driven by successful innovation:
we have continued to see very substantial demand for exchange traded
funds – which we call iShares – which are the fastest growing new fund
complex in US history. We now have around $130bn assets in iShares
as part of total assets under management of $1.36 trillion.
Profit growth at Barclaycard, which is run by Gary Hoffman, was more
muted this year, partly because the interest rate environment was
tougher and partly because we continued to invest heavily in growing
our customer base in the UK and in developing Barclaycard
International. The UK regulatory and consumer environment continues
to be challenging. The international business performed well in core
markets – Spain and Germany – and the Juniper acquisition in the US,
although small, is strategically significant.
Private Clients – our wealth management business – staged a strong
recovery in 2004. The acquisition of Gerrard (completed at the end of
2003) has given a boost to the business, as has Charles Schwab
Europe, which we acquired at the beginning of 2003. From 1st January
2005, Bob Diamond took on responsibility for our Private Client
businesses. I look to Private Clients to be one of our growth engines
for the future.
International Retail and Commercial Banking, which is run by David
Roberts, delivered good growth during the year. The strong
performance was broadly based, but was driven primarily by progress
in our businesses in the Iberian peninsula, Africa, the Middle East and
our joint venture in the Caribbean. The Spanish business is doing well;
we are pleased with our acquisition of Banco Zaragozano and the
merging of our two businesses in Spain is stimulating strong new
business flows. For example, lending is up 13% and Openplan
mortgage balances are up 63%.
In September, we announced that we were in negotiations to purchase
a majority stake in Absa. We have completed due diligence. The
Regulatory Authorities are considering our applications and we are
working with them. This transaction would increase our earnings
generated outside the UK and provide a strong position in a rapidly
growing and well run emerging market.
The fourth component of our Group Strategy is operational excellence.
We regard strong franchise health with customers, employees and
communities as a proxy for future growth. So we attach great
importance to this strategic priority.
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Barclays PLC Annual Report 2004
Colleagues: significant improvement in employee opinion survey results
20%Increase
in profit
before tax