Barclays 2008 Annual Report Download - page 102

100 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Table 13:Impairment Charges and Other Credit Provisions
Year Ended Year Ended
31.12.08 31.12.07
£m £m
UK Retail Banking 602 559
Barclays Commercial Bank 414 292
Barclaycard 1,097 827
GRCB – Western Europe 296 76
GRCB – Emerging Markets 166 39
GRCB – Absa 347 146
Barclays Capital 419 64
Barclays Wealth 44 7
Head office functions and other operations 11 3
Group Total 3,396 2,013
ABS CDO Sub-Prime and other credit
Market Provisions 1,763 782
Group Total (Including ABS CDO) 5,159 2,795
Other AFS Assets and Reverse Repos 260 –
Group Total
(Including ABS CDO and AFS/Reverse Repos) 5,419 2,795
calculated using a weighted average for the relevant portfolio. This
method applies to parts of GRCB’s international portfolios, Barclaycard
and UK Retail Banking and is consistent with Barclays policy of raising an
allowance as soon as impairment is identified.
Unidentified impairment allowances, albeit significantly lower in
amount than those reported above, are also raised to cover losses which
are judged to be incurred but not yet specifically identified in customer
exposures at the balance sheet date, and which, therefore, have not been
specifically reported.
The incurred but not yet reported calculation is based on the asset’s
probability of moving from the performing portfolio to being specifically
identified as impaired within the given emergence period and then on to
default within a specified period. This is calculated on the present value
of estimated future cash flows discounted at the financial asset’s original
effective interest rate.
The emergence periods vary across businesses and are based on
actual experience and are reviewed on an annual basis. This methodology
ensures that the Group only captures the loss incurred at the balance
sheet date.
These impairment allowances are reviewed and adjusted at least
quarterly by an appropriate charge or release of the stock of impairment
allowances based on statistical analysis and management judgement.
Where appropriate, the accuracy of this analysis is periodically
assessed against actual losses.
As one of the controls of ensuring that adequate impairment
allowances are held, movements in impairment allowances to individual
names above £10m are presented to the Credit Committee for agreement.
Impairment charges and other credit provisions in 2008
In 2008, total impairment charges increased 94% (£2,624m) to £5,419m
(2007: £2,795m). This figure included impairment charges of £506m
(2007: £13m) on available for sale assets and reverse repurchase
agreements.
Impairment charges on loans and advances and other credit
provisions increased 77% (£2,131m) to £4,913m (2007: £2,782m) (see
table 1 on page 89) reflecting charges of £1,763m against ABS CDO Super
Senior and other credit market exposures and increased impairment in the
international portfolios within Global Retail and Commercial Banking. Total
loans and advances grew 33% to £516,096m (31st December 2007:
£389,290m). As a result, impairment charges on loans and advances
and other credit provisions as a percentage of period end Group total loans
and advances increased to 0.95% (2007: 0.71%).
In the retail portfolios, impairment charges on loans and advances
and other credit provisions rose 45% (£728m) to £2,333m (2007:
£1,605m) (see table 1 on page 89) principally as a consequence of
increased impairment in the international portfolios, whilst total loans and
advances increased 24% to £201,588m (31st December 2007:
£162,081m). As a result, impairment charges as a percentage of period
end total loans and advances increased to 1.16% (2007: 0.99%).
In the wholesale and corporate portfolios, impairment charges on
loans and advances and other credit provisions rose by 119% (£1,403m)
to £2,580m (2007: £1,177m) (see table 1 on page 89) whilst total loans
and advances increased 38% to £314,508m (31st December 2007:
£227,209m). As a result, impairment charges as a percentage of period
end total loans and advances increased to 0.82% (2007: 0.52%).
Global Retail and Commercial Banking
Impairment charges in UK Retail Banking increased £43m to £602m
(2007: £559m), reflecting growth in the book and deteriorating economic
conditions. In UK Home Finance, whilst three month arrears increased
from 0.63% to 0.91%, the quality of the book and conservative loan to
value ratios meant that the impairment charges and amounts charged
off remained low at £24m (2007: £3m release). Impairment charges in
Consumer Lending increased 3% reflecting the current economic
environment and loan growth.
Fig. 13: Impairment/provisions charges over five years £m
1,093
1,571
2,154
2,795
5,419
04a05 06 07 08
Note
a2004 does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective
from 1st January 2005.
Risk management
Credit risk management
Loans and advances