Barclays 2012 Annual Report Download - page 205

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2012
Barclays delivered profit before tax of £246m in 2012, a decrease from
£5,879 in 2011. Excluding movements on own credit, gains on debt
buy-backs, loss/gains on acquisitions and disposals, impairment of
investment in BlackRock, Inc., provision for PPI and interest rate
hedging products and goodwill impairment, adjusted profit before tax
increased 26% to £7,048m.
Income decreased 24% to £24,691m. Adjusted income, that excludes
own credit and debt buy backs increased 2% to £29,043m. Income
increased despite challenging economic conditions, the continuing low
interest rate environment and non-recurrence of £1,061m gains from
the disposal of hedging instruments in 2011.
Customer net interest income for Retail and Business Banking,
Corporate Banking and Wealth and Investment Management remained
stable at £9,816m (2011: £9,849m) while the net interest margin for
these businesses declined to 185bps (2011: 203bps), principally
reflecting the non-recurrence of gains from the disposal of hedging
instruments in 2011.
Total income in the Investment Bank increased 13% to £11,722m
driven by increases in Fixed Income, Currency and Commodities (FICC),
Equities and Prime Services, and Investment Banking, particularly in the
Americas.
Impairment charges and other credit provisions decreased 5% to
£3,596m, principally reflecting improvements in Barclaycard, Corporate
Banking and UKRBB. This was partially offset by higher charges in the
Investment Bank, Africa RBB and Europe RBB. Impairment charges as a
proportion of Group loans and advances as at 31 December 2012
improved to 75bps, compared to 77bps for 2011.
As a result, net operating income for the Group after impairment
charges decreased 21% to £21,095m. Net adjusted operating income
that excludes movements on own credit, gains on debt buy-backs,
loss/gains on acquisitions and disposals, impairment of investment in
BlackRock, Inc., provision for PPI and interest rate hedging products
and goodwill impairment increased 3% to £25,447m.
Operating expenses increased 1% to £20,989m in 2012. Adjusted
operating expenses, that excludes £1,600m (2011: £1,000m) provision
for PPI redress and £850m (2011: £nil) provision for interest rate
hedging products redress, were down 3% to £18,539m, including
£125m (2011: £408m) of restructuring charges.
The cost: income ratio increased to 85% (2011: 64%). The adjusted
cost: income ratio that excludes movements on own credit, gains on
debt buy-backs, loss/gains on acquisitions and disposals, impairment
of investment in BlackRock, Inc., provision for PPI and interest rate
hedging products and goodwill impairment improved to 64%
(2011: 67%).
The tax charge for continuing operations for 2012 was £482m (2011:
£1,928m) on profit before tax of £246m (2011: £5,879m), representing
an effective tax rate of 195.9% (2011: 32.8%).The high effective tax rate
in 2012 is a result of the combination of losses in the UK, primarily
relating to the own credit charge of £4,579m (2011: gain of £2,708m)
with tax relief at 24.5% (2011: 26.5%) and profits outside the UK taxed
at higher rates.
2011
Barclays delivered profit before tax of £5,879m in 2011, a decrease of
3%. Excluding movements on own credit, gains on debt buy-backs,
loss/gains on acquisitions and disposals, impairment of investment in
BlackRock, Inc., provision for PPI and goodwill impairment, adjusted
profit before tax decreased 2% to £5,590m .
Income increased 3% to £32,292m. Adjusted income that excludes
own credit and debt buy backs decreased 8% to £28,512m principally
reflecting a decrease in income at Investment Bank. Income increased
in most other businesses despite continued low interest rates and
difficult macroeconomic conditions.
The Retail and Business Banking, Corporate Banking and Wealth and
Investment Management net interest margin remained stable at
203bps (2010: 203bps). Net interest income from Retail and Business
Banking, Corporate Banking, Wealth and Investment Management
and the Investment Bank 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%.
Impairment charges and other credit provisions decreased 33% to
£3,802m reflecting significant improvements across all businesses.
Impairment charges as a proportion of Group loans and advances as at
31 December 2011 improved to 77bps, compared to 118bps for 2010.
In addition, impairment of £1,800m was taken against the investment
in BlackRock, Inc.
As a result, net operating income for the Group after impairment
charges increased 4% to £26,690m.
Operating expenses increased 4% to £20,777m in 2011. Adjusted
operating expenses, that excludes provision for PPI redress, goodwill
impairment, and the UK bank levy of £325m (2010: £nil), were down
4% to £18,855m, which included £408m (2010: £330m) of
restructuring charges. Despite cost savings, the cost: income ratio
remained stable at 64% (2010: 64%),
The effective tax rate increased to 32.8% (2010: 25.0%), principally due
to non-deductible charges arising on the impairment of BlackRock, Inc.
and goodwill, and the UK bank levy.
Adjusted profit reconciliation
2012
£m
2011
£m
Adjusted profit before tax 7,048 5,590
Own credit (4,579) 2,708
Gains on debt buy-backs –1,130
Gain/(loss) on disposal and impairment
of investment in BlackRock, Inc. 227 (1,858)
Provision for PPI redress (1,600) (1,000)
Provision for interest rate hedging products
redress (850) –
Goodwill impairment –(597)
Losses on acquisitions and disposals –(94)
Statutory profit before tax 246 5,879
Selected financial statistics on an
adjusted basis
Adjusted basic earnings per share 34.5p 27.7p
Adjusted dividend payout ratio 18.8% 21.7%
barclays.com/annualreport Barclays PLC Annual Report 2012 I 203
Financial review
Income statement commentary