Barclays 2011 Annual Report Download - page 24

Finance Director’s review
We have delivered resilient profits in 2011 despite
the difficult trading environment in the second
half of the year. Our capital, funding and liquidity
positions remained strong throughout 2011 and we
are well protected against further economic stress.
For 2011 we reported a slight decrease in profits, as a reduction
in income at Corporate and Investment Banking was partly offset
by income improvements in all other businesses, a significant
improvement in credit impairment and cost reductions. Prudent
capital management led to a further increase in our Core Tier 1 ratio.
Our funding and liquidity remains strong.
Income Statement
Barclays delivered adjusted profit before tax of £5.6bn in 2011 which was
well balanced across the Group. Statutory profits were broadly similar at
£5.9bn. The adjusted basis helps to provide a more consistent basis for
comparing business performance between periods and principally
excludes gains on own credit and debt buy-backs of £3.8bn, impairment
on our stake in BlackRock, Inc. of £1.8bn, a £1bn provision for PPI, and
almost £600m of goodwill write offs, mainly in Spain.
Income increased 3% including gains on debt buy-backs of £1.1bn and
an increase in own credit gains of £2.3bn. Excluding these one-off items,
income declined 8% to £28,512m, principally reflecting a decrease in
income at Barclays Capital. However, income increased in most other
businesses despite continued low interest rates and difficult
macroeconomic conditions. This resilience of income is reflected in the
RBB, Corporate and Wealth net interest margin which remained stable at
204bps (2010: 203bps). Net interest income from RBB, Corporate, Wealth
and Barclays Capital increased 5% to £13.2bn of which the contribution
from hedging (including £463m of increased gains from the disposal of
hedging instruments) increased by 3%.
Credit impairment charges decreased 33% to £3,802m, reflecting
significant improvements across all businesses, and impairment charges
as a proportion of Group loans and advances improved to 77bps,
compared to 118bps for 2010. In addition, impairment of £1.8bn was
taken against our investment in BlackRock, Inc.
Adjusted operating expenses, which exclude the £1bn provision for PPI
redress and £597m (2010: £243m) goodwill impairment, were down
£548m to £19,180m. Excluding the UK bank levy of £325m introduced in
2011, operating expenses were down 4% to £18,855m, which included
£408m (2010: £330m) of restructuring charges taken now in order to
deliver future benefits.
Despite cost savings, the adjusted cost: income ratio increased to 67%
(2010: 64%), reflecting lower income, increased restructuring charges and
the UK bank levy. At Barclays Capital the cost: net operating income ratio
was 71% (2010: 65%) and the compensation: income ratio was 47%
(2010: 43%), reflecting lower income in difficult conditions.
Balance Sheet
Net asset value per share increased 9% to 456p with net tangible asset
value per share, which adjusts for goodwill and other intangible assets,
increasing 13% to 391p.
We have delivered profit before tax of
£5.9bn in 2011 which was well balanced across
our retail and investment banking businesses.
Our Core Tier 1 ratio improved to 11.0% despite
the impact of the third Capital Requirements
Directive (CRD3).
Chris Lucas
Group Finance Director
For more detailed information, please see Financial Review
page 159
22 Barclays PLC Annual Report 2011 www.barclays.com/annualreport