Barclays 2008 Annual Report Download - page 12

10 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Group Chairman’s statement
As a Board, we very much regret what has happened to the
banking sector in general and to Barclays share price in particular.
We fully recognise that banks must review their internal governance
systems and remuneration structures to ensure there can be no repeat
of the turmoil that has impacted the industry, and the wider economy,
over the last 18 months. The Board HR and Remuneration Committee
is reviewing compensation policy and structures across the Group to
ensure maximum alignment both with the interests of our shareholders
and with best practice. The Board is also committed to ensuring that
Barclays plays its full part in contributing to the restoration of the health
of the global economy and, with that, the reputation of the industry.
In particular, the capital position and ongoing profitability of the Group
is enabling us to support our customers in the difficult economic
environment. For example, our lending to UK consumers and UK
commercial clients increased by 16% and 14% respectively in 2008.
Market Environment
The announcement that Lehman Brothers would file for bankruptcy in
September was the start of a period of extreme instability in global stock
markets and a crisis of confidence in the banking system. Credit market
conditions became very difficult and a number of banks around the world
required government assistance. In October, the UK authorities decided to
take action to stabilise the UK financial services industry. The capital plans
and balance sheets of all the UK banks were subject to severe stress tests
and additional capital was required to be raised to ensure that their ratios
would remain prudent even in the severest downturn. This represented a
significant change in the capital framework across the UK banking industry
and obliged Barclays to raise capital well beyond the level we had previously
agreed with our regulators.
In my speech at the General Meeting to approve the capital raising in
November (which is available at www.barclays.com), we also recognised
that some of our shareholders were unhappy about some aspects of the
November capital raising. This unhappiness is a matter of great regret to us.
I set out in my introduction to the Corporate Governance Report on page
2008 was an extraordinarily difficult year for the financial services industry
with the second half in particular seeing a period of exceptional instability.
It was a year that saw the rescue of a number of banks around the world
and significant action being taken by governments globally to rebuild
confidence in the sector including, in the UK, the government taking large
shareholdings in two major banks.
Barclays was impacted by the difficult environment – we undertook
two significant capital raisings during the year and incurred gross losses
from credit market write-downs of approximately £8bn. However, a profit
before tax for the year of just over £6bn, whilst benefiting from a number
of gains on acquisitions and disposals, remains a resilient performance in
such a difficult environment and reflects a continuing focus by all our
people on servicing the needs of our customers and clients. We were able
to absorb the level of credit market write-downs through the strong
income performance of the Group. As a result of raising over £13bn in
equity and Tier 1 capital in 2008, our capital base has been substantially
strengthened and we have over £37bn of equity capital and reserves. This
scale of loss absorption capacity, combined with the underlying profitability
of the Group, gives us confidence that our capital resources are sufficient,
even in these difficult markets. Our liquidity position remains strong.
The share price performance during the year was acutely disappointing.
Share prices in the sector as a whole were badly hit during the year by a
number of factors, including concerns over the profit outlook given the
macroeconomic environment and uncertainty over banks’ capital strength.
It is of little consolation that in terms of total shareholder return we out-
performed the majority of our UK peers and a number of our global
competitors. The Board is committed to creatingthe conditions to allow the
share price to recover and to resume dividend payments in the second half
of 2009, following the decision not to pay a final dividend for 2008.
The difficult market conditions for bank shares has continued in 2009.
We welcomed the announcements made by HM Treasury and the FSA in
January designed to help the UK economy through a number of initiatives
in the areas of capital ratios, funding and asset protection. Despite these,
market confidence remains extremely fragile.
“
The Board is committed to creating
the conditions to allow the share price
to recover and to resume dividend
payments in the second half of 2009.
”