Barclays 2013 Annual Report Download - page 173

Business lending
Business lending primarily relates to small and medium enterprises typically with exposures up to £3m or with a turnover up to £5m.
The portfolio is managed in two ways: arrears managed and early warning list (EWL) managed.
 Arrears Managed accounts are principally customers with an exposure limit less than £50,000 in the UK and €100,000 in Europe, with processes
designed to manage a homogeneous set of assets. Arrears balances reflect the total balances of accounts which are past due on payments.
 EWL Managed accounts are customers that exceed the Arrears Managed limits and are monitored with standard processes that record
heightened levels of risk through an EWL grading. EWL balances comprise of a list of three categories graded in line with the perceived severity
of the risk attached to the lending, and can include customers that are up-to-date with contractual payments or subject to forbearance as
appropriate.
The principal portfolios listed below account for 87% (2012: 88%) of total business lending loans in the Group’s retail portfolios.
Principal portfolios
Arrears managed Early Warning List managed
Drawn
balances
£m
Of which
arrears
balances
%
Drawn
balances
£m
Of which
Early
Warning
List balances
%
Loan loss
rates
bps
Annualised
gross
charge-off
ratesa
%
Recoveries
proportion of
outstanding
balances
%
Recoveries
coverage
ratio
%
As at 31 December 2013
UK 629 4.0 7,424 7.7 134 2.0 3.3 47.0
Spain 82 11.1 875 33.9 608 3.0 6.9 47.7
Portugal 157 4.6 268 25.1 691 6.6 9.2 65.4
As at 31 December 2012
UK 713 6.0 7,122 9.2 140 2.5 4.3 34.9
Spain 95 11.3 993 60.4 210 3.8 6.6 45.0
Portugal 185 6.4 393 17.8 503 5.7 6.7 65.9
While UK business lending balances increased 3%, closer management of the portfolio has reduced the level of arrears and EWL balances leading
to a reduction in recoveries balances.
The reduction in business lending balances in Spain and Portugal was primarily due to the tightening of credit policy and a reduction in new
business volumes.
The loan loss rates in Spain increased to 608bps (2012: 210bps) due primarily to the impact of changes in the renewable energy sector impacting
the cash flow of customers in this sector and the difficult macro environment. EWL balances in Spain as a percentage of drawn balances reduced
significantly following the review of cases and identification of performing assets that were moved to the performing book.
The loan loss rates in Portugal increased to 691bps (2012: 503bps) driven by increasing charge-off rates and recovery balances due to the
macroeconomic environment.
Note
a Gross charge-off rates are calculated over average monthly outstanding balances through the year.
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