Barclays 2008 Annual Report Download - page 100

98 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Risk management
Credit risk management
Loans and advances
CRLs in retail secured mortgage products increased by £1,309m
(89%) to £2,783m (2007: £1,474m). The key driver was Absa Home
Finance where balances increased significantly as a result of higher
interest rates and increasing consumer indebtedness. Increases were also
seen in UK Home Finance, reflecting weakening UK house prices and the
slowing economy, and in Spain, as economic conditions deteriorated.
CRLs in the unsecured and other retail portfolios increased by
£1,715m (57%) to £4,725m (2007: £3,010m). The key drivers for this
increase were: Absa, which was impacted by higher interest rates and
increasing consumer indebtedness, Barclaycard US, due to deteriorating
credit conditions which resulted in rising delinquency rates, asset growth
and exchange rate movements, and Spain, as economic conditions
deteriorated and consumer indebtedness increased.
Corporate/Wholesale CRLs, excluding ABS CDO Super Senior
positions, increased by £2,262m (125%) to £4,075m (2007: £1,813m).
The key drivers were: Barclays Capital following a number of credit
downgrades; increasing default probabilities; and Spain, primarily due
to increases to the property-related names. Balances also increased in
Barclays Commercial Bank and Absa Commercial and Banking Business
as corporate credit conditions deteriorated, particularly in the last quarter
of 2008.
CRLs on ABS CDO Super Senior positions increased £773m (23%) to
£4,117m (2007: £3,344m). The majority of this increase resulted from a
migration of assets, totalling £801m, from potential problem loans (PPLs)
to CRLs.
Potential Problem Loans
Balances within the Group’s potential problem loans (PPLs) category rose
by £659m to £2,456m (31st December 2007: £1,797m). The principal
movements were in the corporate and wholesale portfolios, where PPLs
rose £1,463m to £1,959m (31st December 2007: £496m) as credit
conditions deteriorated. This rise was offset by a fall in PPLs relating to ABS
CDO positions, as those balances moved into the CRL category. Broadly
flat PPLs from retail portfolios reflected methodology alignments affecting
GRCB – Absa which transferred balances of just over £200m previously
reported as PPLs to CRLs. This was offset by rises in UK Retail Banking,
GRCB – Western Europe and GRCB – Emerging Markets.
Potential Credit Risk Loans
Combining CRLs and PPLs, total potential credit risk loans (PCRL)
balances in the corporate and wholesale portfolios increased by 161%
in 2008 to £6,034m (31st December 2007: £2,309m) as a number of
names migrated into the CRL and PPL categories, reflecting higher default
probabilities in the deteriorating global wholesale environment.
PCRLs relating to ABS CDO positions remained stable at £4,117m
(31st December 2007: £4,145m).
Total retail PCRL balances increased 61% to £8,005m
(31st December 2007: £4,984m) as delinquency rates rose across
a number of secured and unsecured portfolios following a deterioration
in credit conditions, particularly in the UK, US, Spain and South Africa.
Group PCRL balances rose 59% to £18,156m (31st December 2007:
£11,438m). Excluding ABS CDO Super Senior positions, PCRLs increased
92% to £14,039m (31st December 2007: £7,293m).
Table 12:Potential credit risk loans and coverage ratios
CRLsPPLsPCRLs
31.12.08 31.12.07 31.12.08 31.12.07 31.12.08 31.12.07
Retail Secured 2,783 1,474 280 317 3,063 1,791
Retail Unsecured and other 4,725 3,010 217 183 4,942 3,193
Retail 7,508 4,484 497 500 8,005 4,984
Corporate/Wholesale (excl ABS) 4,075 1,813 1,959 496 6,034 2,309
Group (excl ABS) 11,583 6,297 2,456 996 14,039 7,293
ABS CDO Super Senior 4,117 3,344 –801 4,117 4,145
Group 15,700 9,641 2,456 1,797 18,156 11,438
Impairment allowance CRL coverage PCRL coverage
31.12.08 31.12.07 31.12.08 31.12.07 31.12.08 31.12.07
Retail Secured 561 320 20.2% 21.7% 18.3% 17.9%
Retail Unsecured and other 3,178 2,140 67.3% 71.1% 64.3% 67.0%
Retail 3,739 2,460 49.8% 54.9% 46.7% 49.4%
Corporate/Wholesale (excl ABS) 1,822 1,022 44.7%56.4% 30.2% 44.3%
Group (excl ABS) 5,561 3,482 48.0%55.3% 39.6% 47.7%
ABS CDO Super Senior 1,013 290 24.6% 8.7% 24.6% 7.0%
Group 6,574 3,772 41.9% 39.1% 36.2% 33.0%