Barclays 2012 Annual Report Download - page 327

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 Impaired loans: comprises loans where an individual identified
impairment allowance has been raised and also include loans which
are fully collateralised or where indebtedness has already been
written down to the expected realisable value. This category includes
all retail loans that have been charged off to legal recovery. The
impaired loan category may include loans, which, while impaired, are
still performing;
 Accruing past due 90 days or more: comprises loans that are 90 days
or more past due with respect to principal or interest. An impairment
allowance will be raised against these loans if the expected cash
flows discounted at the effective interest rate are less than the
carrying value; and
 Impaired and restructured loans: comprises loans not included above
where, for economic or legal reasons related to the debtor’s financial
difficulties, a concession has been granted to the debtor that would
not otherwise be considered. Where the concession results in the
expected cash flows discounted at the effective interest rate being
less than the loan’s carrying value, an impairment allowance will
be raised.
Loan loss rate and coverage ratios
The loan loss rate (LLR) provides Barclays with one way of monitoring
the trends in the quality of the loan portfolio at the Group, business and
product levels. At Barclays, the LLR represents the annualised
impairment charges on loans and advances to customers and banks
and other credit provisions as a percentage of the total, period-end
loans and advances to customers and banks, gross of impairment
allowances. Details of the LLR for the current period may be found on
pages 129 and 136.
The impairment allowance is the aggregate of the identified and
unidentified impairment balances. Impairment allowance coverage, or
the coverage ratio, is reported at two levels:
 Credit risk loans coverage ratio (impairment allowances as a
percentage of CRL balances); and
 Potential credit risk loans coverage ratio (impairment allowances as a
percentage of total CRL and PPL balances).
Appropriate coverage ratios will vary according to the type of product
but can be broadly bracketed under three categories: secured retail
home loans; credit cards, unsecured and other personal lending
products; and corporate facilities. Analysis and experience has
indicated that, in general, the severity rates for these types of products
are typically within the following ranges:
 Secured retail home loans: 5%-20%;
 Credit cards, unsecured and other personal lending products:
65%-75%; and
 Corporate facilities: 30%-50%.
CRL coverage ratios would therefore be expected to be at or around
these levels over a defined period of time. In principle, a number of
factors may affect the Group’s coverage ratios, including:
 The mix of products within total CRL balances: Coverage ratios will
tend to be lower when there is a high proportion of secured retail and
corporate balances within total CRLs. This is due to the fact that the
recovery outlook on these types of exposures is typically higher than
retail unsecured products, with the result that they will have lower
impairment requirements;
 The stage in the economic cycle: Coverage ratios will tend to be lower
in the earlier stages of deterioration in credit conditions. At this stage,
retail delinquent balances will be predominantly in the early
delinquency cycles and corporate names will have only recently
moved to CRL categories. As such balances attract a lower
impairment requirement, the CRL coverage ratio will be lower;
December
2008
December
2009
December
2010
December
2011
June
2012
December
2012
19.9%
42.6%
48.9%
72.9%
24.2%
47.7%
49.7%
66.9%
23.3%
47.6%
50.4%
71.9%
25.0%
51.8%
52.1%
69.7%
17.7%
42.4%
48.2%
70.7%
12.7%
34.6%
41.9%
68.6%
Retail Unsecured & Other
Group
Corporate & Wholesale
Retail Home Loans
CRL coverage
 The balance of PPLs to CRLs: The impairment requirements for PPLs
are lower than for CRLs, so the greater the proportion of PPLs, the
lower the PCRL coverage ratio; and
 Write-off policies: The speed with which defaulted assets are written
off will affect coverage ratios. The more quickly assets are written off,
the lower the ratios will be, since stock with 100% coverage will tend
to roll out of PCRL categories more quickly.
Details of the coverage ratios for the current period may be found on
pages 128, 130-131 and 137.
81 82
70
39
83
91
84
111
85
99
86
89
87
202
88
45
89
177
90
147
91
143
92
226
93
174
94
60
95
40
96
24
97
23
98
47
99
56
00
54
01
71
02
84
03
72
04
50
05
52
06
65
07
71
08
95
09
156
10 1211
118
77 75
107 85 83
91
FY LLR
32 Year Average LLR
TTC Average LLR
Loan loss rate (bps) – longer term trends
barclays.com/annualreport Barclays PLC Annual Report 2012 I 325