Barclays 2007 Annual Report Download - page 32

30 Barclays PLC Annual Report 2007
Financial review
Analysis of results by business
Global Retail and Commercial Banking
Barclaycard
Who we are
We are a multi-brand international credit card and
consumer lending business. Our credit card was the
first to be launched in the UK in 1966 and is now one
of the leading credit card businesses in Europe, with
a fast growing business in the US.
What we do
UK
Our activities include all Barclaycard branded credit cards, the FirstPlus
secured lending business and the retail finance business Barclays Partner
Finance. In addition to these activities, Barclaycard also operates partnership
cards with leading brands including SkyCard and the Thomas Cook
Credit Card. We continue to lead the UK market with the launch in 2007
of Barclaycard OnePulse, the UK’s first contactless card, and Barclaycard
Breathe, the first card to donate a percentage of its profits to carbon
reduction projects around the world.
International
Barclaycard’s international presence is extensive. In 2007, 3 out of every
4 cards issued by Barclaycard were in markets outside the UK and we have
8.8m international cards in issue. We currently operate across Europe and
the United States where we are the fastest growing credit card business. In
Scandinavia we operate through Entercard, a joint venture with Swedbank.
Barclaycard Business
Barclaycard Business processes card payments for 93,000 retailers and
merchants and issues credit and charge cards to corporate customers and
the UK Government. It is Europe’s number one issuer of Visa Commercial
Cards with over 137,000 corporate customers.
Key facts 2007 2006 2005
Number of Barclaycard UK customers 10.1m 9.8m 11.2m
Number of retailer relationships 93,000 93,000 93,000
UK credit cards –
average outstanding balances £8.4bn £9.4bn £10.1bn
UK credit cards –
average extended credit balances £6.9bn £8.0bn £8.6bn
International average
outstanding balance £3.9bn £2.9bn £2.1bn
International –
average extended credit balances £3.3bn £2.5bn £1.8bn
International – cards in issue 8.8m 6.4m 4.3m
Secured lending –
average outstanding balance £4.3bn £3.4bn £2.2bn
Performance
2007/06
Barclaycard profit before tax increased 18% (£82m) to £540m (2006:
£458m), driven by strong international growth coupled with a significant
improvement in UK impairment charges. Other income included a £27m
loss on disposal of part of the Monument card portfolio. 2006 results
reflected a property gain of £38m.
Income decreased 1% (£28m) to £2,486m (2006: £2,514m) reflecting
strong growth in Barclaycard International, offset by a decline in UK Cards
revenue resulting from a more cautious approach to lending in the UK and
a £27m loss on disposal of part of the Monument card portfolio.
Net interest income increased 1% (£11m) to £1,394m (2006: £1,383m)
due to strong organic growth in international average extended credit
card balances, up 32% to £3.3bn and average secured consumer lending
balances up 26% to £4.3bn, partially offset by lower UK average extended
credit card balances which fell 14% to £6.9bn. Margins fell to 6.59%
(2006: 7.13%) due to higher average base rates across core operating
markets and a change in the product mix with an increased weighting
to secured lending.
Net fee and commission income fell 2% (£26m) to £1,080m (2006:
£1,106m) with growth in Barclaycard International offset by our actions
in response to the Office of Fair Trading’s findings on late and overlimit fees
in the UK which were implemented in August 2006.
Impairment charges improved 21% (£229m) to £838m (2006: £1,067m)
reflecting reduced flows into delinquency, lower levels of arrears and
lower charge-offs in UK Cards. We made changes to our impairment
methodologies to standardise our approach and in anticipation of Basel II.
The net positive impact of these changes in methodology was offset by an
increase in impairment charges in Barclaycard International and secured
consumer lending.
Operating expenses increased 12% (£120m) to £1,101m (2006: £981m).
Excluding a property gain of £38m in 2006, operating expenses increased
8% (£82m) reflecting continued investment in expanding our businesses
in Europe and the US. Costs in the UK businesses were broadly flat, with
investment in new UK product innovations such as Barclaycard OnePulse
being funded out of operating efficiencies.
Barclaycard International continued to gain momentum, delivering a
profit before tax of £77m against a loss before tax of £36m in 2006.
We concluded seven new credit card partnership deals across Western
Europe. The Entercard joint venture continued to perform ahead of plan
and entered the Danish market, extending its reach across the Scandinavian
region. Barclaycard US was profitable, with very strong average balance
growth and a number of new card partnerships including Lufthansa
Airlines and Princess Cruise Lines.
Highlights
£2,486m£540m
Income Profit before tax
Performance indicators
0706
8.8m
6.4m
05
4.3m
0706
10.1m
9.8m
05
11.2 m
International cards in issue Number of UK customers