Barclays 2007 Annual Report Download - page 38

Financial review
Analysis of results by business
36 Barclays PLC Annual Report 2007
Global Retail and Commercial Banking
International Retail and
Commercial Banking – Absa
Who we are
This business represents Barclays consolidation of Absa,
excluding Absa Capital which is included in Barclays Capital.
International Retail and Commercial Banking – Absa
comprises four operating divisions: Retail Banking,
Commercial Banking, African operations and a
Bancassurance division. (Barclays Bank PLC owns
59% of Absa Group Limited).
What we do
International Retail and Commercial Banking – Absa serves retail customers
through a variety of distribution channels and offers a full range of banking
services, including current and deposit accounts, mortgages, instalment
finance, credit cards, bancassurance products and wealth management
services. It also offers customised business solutions for commercial and
large corporate customers.
Key facts 2007 2006 2005
Number of branches 837 800 759
Number of sales centres 164 38 41
Number of distribution points 1,001 838 800
Number of ATMs 7,884 7,411 5,835
Number of retail customers 9.7m 8.3m 7.7m
Number of corporate customers 100,000 84,000 79,000
Performance
2007/06
Absa Group Limited’s operating profit before income tax increased
23% (R2,650m) to R14,067m (2006: R11,417m) reflecting very good
performances from Retail Banking, Absa Capital and Absa Corporate and
Business Bank. Absa Group Limited delivered a return on equity of 27.2%
(2006: 27.4%). Key factors impacting the results included: very strong
asset and income growth; the diversification of earnings in favour of
investment banking and commercial banking; an increased retail credit
impairment charge, and the achievement of the Absa – Barclays synergy
target 18 months ahead of schedule.
Net operating income grew 17% (R4,852m) to R33,185m
(2006: R28,333m).
Net interest income grew 27% (R4,003m) to R18,890m (2006: R14,887m)
driven by growth in loans and advances and deposits at improved margins.
Loans and advances to customers increased 22% from 31st December
2006 driven by growth of 23% in mortgages and 23% in credit cards.
Non-interest income grew 11% (R1,709m) to R16,728m (2006: R15,019m)
driven by increased transaction volumes in retail banking and Absa
Corporate and Business Bank, as well as advisory fees from Absa Capital.
Impairment charges on loans and advances increased 55% (R860m) to
R2,433m (2006: R1,573m) from the cyclically low levels of recent years.
Arrears in retail portfolios increased driven by interest rate increases in
2006 and 2007. Impairment charges as a percentage of loans and
advances was 0.58%, ahead of the 0.45% charge in 2006 but within
long-term industry averages.
Operating expenses increased 15% (R2,353m) to R18,442m, (2006:
R16,089m) resulting from increased investment in new distribution
outlets and staff in order to support continued growth in volumes and
customers. The cost:income ratio improved two percentage points from
54% to 52%.
Excellent progress was made with the realisation of synergy benefits of
R1,428m to date thus achieving the synergy target of R1.4bn, 18 months
ahead of schedule.
Impact on Barclays results
Absa Group Limited's profit before tax of R14,067m (2006: R11,417m) is
translated into Barclays results at an average exchange value of R14.11/£
(2006: R12.47/£), a 12% depreciation in the average value of the Rand
against Sterling. Consolidation adjustments reflected the amortisation of
intangible assets of £55m (2006: £75m) and internal funding and other
adjustments of £98m (2006: £72m). The resulting profit before tax of
£844m (2006: £769m) is represented within International Retail and
Commercial Banking – Absa £689m, (2006: £698m) and Barclays Capital,
£155m (2006: £71m).
Absa Group Limited’s total assets were R640,909m (2006: R495,112m),
growth of 29%. This is translated into Barclays results at a period-end
exchange rate of R13.64/£ (2006: R13.71/£). The capital investment
was hedged against currency movements in 2007.
Highlights
£2,184m£689m
Income Profit before tax
Performance indicators
Number of retail customers
Number of distribution points
(branches and sales centres)
06 07
8.3m
05
7.7m
9.7m
838
800
1,001
0605 07