Barclays 2008 Annual Report Download - page 103

1
Business review
Barclays PLC Annual Report 2008 101
The impairment charge in Barclays Commercial Bank increased
£122m to £414m (2007: £292m), primarily reflecting higher impairment
losses in Larger Business, particularly in the final quarter as the UK
corporate credit environment deteriorated.
The impairment charge in Barclaycard increased £270m (33%)
to £1,097m (2007: £827m), reflecting higher charges in Barclaycard
International portfolios, particularly Barclaycard US which was driven by
loan growth, rising delinquency due to deteriorating economic conditions
and exchange rate movements; and £68m from the inclusion of Goldfish.
These factors were partially offset by lower charges in UK Cards and
secured consumer lending.
Impairment charges in GRCB – Western Europe increased £220m to
£296m (2007: £76m) principally due to deteriorating economic trends
and asset growth in Spain, where there were higher charges in the
commercial portfolios as a consequence of the slowdown in the property
and construction sectors. In addition higher household indebtedness and
rising unemployment has driven up delinquency and charge-offs in the
personal sector.
Impairment charges in GRCB – Emerging Markets increased £127m
to £166m (2007: £39m), reflecting: weakening credit conditions which
adversely impacted delinquency trends in the majority of the retail
portfolios; asset growth, particularly in India; and increased wholesale
impairment in Africa.
Impairment charges in GRCB – Absa increased £201m to £347m
(2007: £146m) as a result of rising delinquency levels in the retail
portfolios, which have been impacted by rising interest and inflation
rates and increasing consumer indebtedness.
Investment Banking and Investment Management
Barclays Capital impairment charges of £2,423m (2007: £846m) included
a charge of £1,763m (2007: £782m) against ABS CDO Super Senior and
other credit market positions. Further impairment charges of £241m were
incurred in respect of available for sale assets and reverse repurchase
agreements (2007: £nil). Other impairment charges increased £355m to
£419m (2007: £64m) and primarily related to charges in the private equity
and other loans business.
The impairment charge in Barclays Wealth increased £37m to
£44m (2007: £7m) from a very low base. This increase reflected both
the substantial increase in the loan book over the last three years and
the impact of the current economic environment on client liquidity and
collateral values.
The impairment charge in Head Office Functions and Other
Operations increased £8m to £11m (2007: £3m) mainly reflecting
losses on Floating Rate Notes held for hedging purposes. An additional
£19m (2007: £nil) of impairment charges were incurred on available for
sale assets.
Writing-off of assets
After an advance has been identified as impaired and is subject to an
impairment allowance, the stage may be reached whereby it is concluded
that there is no realistic prospect of further recovery. Write-off will occur
when, and to the extent that, the whole or part of a debt is considered
irrecoverable.
The timing and extent of write-offs may involve some element of
subjective judgement. Nevertheless, a write-off will often be prompted by
a specific event, such as the inception of insolvency proceedings or other
formal recovery action, which makes it possible to establish that some or
the entire advance is beyond realistic prospect of recovery. In any event,
the position of impaired loans is reviewed at least quarterly to ensure that
irrecoverable advances are being written off in a prompt and orderly
manner and in compliance with any local regulations.
Such assets are only written off once all the necessary procedures
have been completed and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off are written
back and hence decrease the amount of the reported loan impairment
charge in the income statement.
Total write-offs of impaired financial assets increased by £956m to
£2,919m (2007: £1,963m).
Fig. 14: Total write-offs of impaired financial assets £m
Note
aDoes not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective
from 1st January 2005.
1,595
1,587
2,174
1,963
2,919
04a05 06 07 08