Barclays 2009 Annual Report Download - page 72

70 Barclays PLC Annual Report 2009 www.barclays.com/annualreport09
Financial review
Analysis of results by business
continued
Global Retail and Commercial Banking
Absa
GRCB – Absa comprises three operating divisions: Retail Banking,
Commercial Banking and a Bancassurance division. The Absa Group’s
other businesses are Absa Capital, Absa Card and Absa Wealth, which
are included in Barclays Capital, Barclaycard and Barclays Wealth
respectively.
What we do
GRCB – Absa forms part of Absa Group Limited, one of South Africa’s
largest financial services groups, listed on the Johannesburg Stock
Exchange Limited. GRCB – Absa offers a complete range of banking
products and services, including current accounts, savings products,
bancassurance, mortgages, instalment finance and wealth management.
It also offers customised business solutions for commercial and large
corporate customers.
Absa’s business is conducted primarily in South Africa. In addition to
this, the Group has equity holdings in banks in Mozambique and Tanzania.
Absa serves more than 11 million customers through a range of
physical channels that include 1,062 distribution points and 8,560 ATMs,
as well as electronic channels such as telephone and online banking.
Performance
2009/08
Impact of Absa Group Limited on Barclays results
Absa Group Limited profit before tax of R9,842m (2008: R15,305m), a
decrease of 36%, is translated in Barclays results at an average exchange
rate of R13.14/£ (2008: R15.17/£), a 15% appreciation in the average
value of the Rand against Sterling. Consolidation adjustments reflected
the amortisation of intangible assets of £51m (2008: £50m) and internal
funding and other adjustments of £115m (2008: £174m). The resulting
profit before tax of £583m (2008: £785m) is represented within Global
Retail and Commercial Banking – Absa £506m (2008: £552m), Barclays
Capital £16m loss (2008: £175m profit), Barclaycard £95m (2008: £58m)
and Barclays Wealth £2m loss (2008: £nil).
Absa Group Limited’s total assets were R717,740m (31st December
2008: R774,157m), a decline of 7%. This is translated into Barclays results
at a period end exchange rate of R11.97/£ (2008: R13.74/£).
Global Retail and Commercial Banking – Absa
Profit before tax decreased 8% (£46m) to £506m (2008: £552m) owing to
challenging market conditions. Modest Rand income growth and tight cost
control were offset by increased impairment.
Income increased 16% (£351m) to £2,549m (2008: £2,198m)
predominantly reflecting the impact of exchange rate movements.
Net interest income improved 18% (£196m) to £1,300m (2008:
£1,104m) reflecting the appreciation in the average value of the Rand
against Sterling and modest balance sheet growth. Average customer
assets increased 17% to £32.5bn (2008: £27.7bn) driven by appreciation of
the Rand against Sterling and modest growth in loans and advances. Retail
and commercial mortgages remained relatively flat in 2009 while instalment
finance showed a slight decline with the run-off outweighing new sales. The
assets margin decreased to 2.68% (2008: 2.79%) as a result of the higher
cost of wholesale funding and significant reductions in interest recognised
on delinquent accounts. Average customer deposits increased 29% to
£17.4bn (2008: £13.5bn), primarily driven by the appreciation of the Rand
and the increase in the number of customers. Retail and commercial
deposits increased 3.9% and 4.6% respectively. The liabilities margin was
down 63 basis points to 2.43% (2008: 3.06%) reflecting stronger growth
in lower margin retail deposits, pricing pressure from competitors and the
impact of margin compression due to the decrease in interest rates.
Net fee and commission increased 24% (£181m) to £943m (2008:
£762m), reflecting pricing increases, volume growth and the impact of
exchange rate movements.
Principal transactions increased £12m to £123m (2008: £111m)
reflecting the impact of exchange rate movements and gains of £17m from
the sale of shares in MasterCard, slightly offset by lower gains on economic
hedges.
Net premiums from insurance contracts increased 26% (£60m) to
£294m (2008: £234m) reflecting volume growth in short-term insurance
contracts and the impact of exchange rate movements.
Other income decreased £53m to £60m (2008: £113m) reflecting
the non-recurrence of the gain of £46m recorded on the Visa IPO in 2008.
Impairment charges increased £220m to £567m (2008: £347m) due
to high delinquency levels in the retail portfolios as a result of continued
consumer indebtedness, despite the decline in interest and inflation rates
during the first half of the year. There was a slight improvement in
impairment ratios in the second half of 2009.
Operating expenses increased 13% (£164m) to £1,469m (2008:
£1,305m) reflecting the impact of exchange rate movements. Costs
were tightly controlled in Rand.
11.5
10.5
9.8
1,062
1,177
1,001
07 08
Number of customers
m
09
Number of distribution points
(branches and sales centres)
07 08
09
Performance indicators