Barclays 2007 Annual Report Download - page 51

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Business review
Barclays PLC Annual Report 2007 49
Other income
2007 2006 2005
£m £m £m
Increase in fair value of assets held
in respect of linked liabilities to
customers under investment
contracts 5,592 7,417 9,234
Increase in liabilities to customers
under investment contracts (5,592) (7,417) (9,234)
Property rentals 53 55 54
Loss on part disposal of Monument
credit card portfolio (27) ––
Other 162 159 93
Other income 188 214 147
Certain asset management products offered to institutional clients by
Barclays Global Investors are recognised as investment contracts.
Accordingly the invested assets and the related liabilities to investors are
held at fair value and changes in those fair values are reported within
other income.
Impairment charges and other credit provisions
2007 2006 2005
£m £m £m
Impairment charges on loans and advances
– New and increased impairment
allowances 2,871 2,722 2,129
– Releases (338) (389) (333)
– Recoveries (227) (259) (222)
Impairment charges on loans
and advances 2,306 2,074 1,574
Other credit provisions
Charges/(credits) in respect of undrawn
contractually committed facilities
and guarantees 476 (6) (7)
Impairment charges on loans and
advances and other credit provisions 2,782 2,068 1,567
Impairment charges on available
for sale assets 13 86 4
Impairment charges and other
credit provisions 2,795 2,154 1,571
Impairment charges and other credit
provisions on ABS CDO Super Senior
and other credit market exposures
included above:
Impairment charges on loans
and advances 313 ––
Charges in respect of undrawn facilities 469 ––
Impairment charges and other credit
provisions on ABS CDO Super senior
and other credit market positions 782 ––
2007/06
Total impairment charges and other credit provisions increased 30%
(£641m) to £2,795m (2006: £2,154m).
Impairment charges on loans and advances and other credit provisions
increased 35% (£714m) to £2,782m (2006: £2,068m) reflecting charges
of £782m against ABS CDO Super Senior and other credit market positions.
Impairment charges on loans and advances and other credit provisions
as a percentage of Group total loans and advances increased to 0.71%
(2006: 0.65%); total loans and advances grew 23% to £389,290m
(2006: £316,561m).
Retail
Retail impairment charges on loans and advances fell 11% (£204m) to
£1,605m (2006: £1,809m). Retail impairment charges as a percentage
of period end total loans and advances reduced to 0.98% (2006: 1.30%);
total retail loans and advances increased 18% to £164,062m (2006:
£139,350m).
Barclaycard 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 the increase in impairment charges in Barclaycard International
and secured consumer lending.
Impairment charges in UK Retail Banking decreased by £76m (12%) to
£559m (2006: £635m), reflecting lower charges in unsecured Consumer
Lending and Local Business driven by improved collection processes,
reduced flows into delinquency, lower arrears trends and stable charge-
offs. In UK Home Finance, asset quality remained strong and mortgage
charges remained negligible. Mortgage delinquencies as a percentage
of outstandings remained stable and amounts charged off were low.
Impairment charges in International Retail and Commercial Banking –
excluding Absa rose by £38m (93%) to £79m (2006: £41m) reflecting
very strong balance sheet growth in 2006 and 2007 and the impact of
lower releases in 2007.
Arrears in some of International Retail and Commercial Banking – Absa’s
retail portfolios deteriorated in 2007, driven by interest rate increases in
2006 and 2007 resulting in pressure on collections.
Wholesale and corporate
Wholesale and corporate impairment charges on loans and advances
increased £436m to £701m (2006: £265m). Wholesale and corporate
impairment charges as a percentage of period end total loans and
advances increased to 0.31% (2006: 0.15%); total loans and advances
grew 27% to £225,228m (2006: £177,211m).
Barclays Capital impairment charges and other credit provisions of £846m
included a charge of £782m against ABS CDO Super Senior and other
credit market exposures and £58m net of fees relating to drawn leveraged
finance positions.
The impairment charge in Barclays Commercial Bank increased £38m
(15%) to £290m (2006: £252m), primarily due to higher impairment
charges in Larger Business, partially offset by a lower charge in Medium
Business due to a tightening of the lending criteria.