barc201307306k.htm
 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
July 30, 2013
 
Barclays PLC and

Barclays Bank PLC
(Names of Registrants)
 
 
 1 Churchill Place

London E14 5HP
England
(Address of Principal Executive Offices)

 
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.

 
Form 20-F x           Form 40-F

 
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 
Yes           No x

 
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):

 
This Report is a joint Report on Form 6-K filed by Barclays PLC and Barclays
Bank PLC. All of the issued ordinary share capital of Barclays Bank PLC is
owned by Barclays PLC.

 
This Report comprises:

 
Information given to The London Stock Exchange and furnished pursuant to
General Instruction B to the General Instructions to Form 6-K.


 
 
EXHIBIT INDEX
 
Half Yearly Report dated  30 July 2013







 




SIGNATURES

 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
BARCLAYS PLC
(Registrant)

 
Date: July 30,  2013
 
 
By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Deputy Secretary
 
 
 
 
BARCLAYS BANK PLC
(Registrant)



Date: July 30, 2013
 
 
By: /s/ Patrick Gonsalves
----------------------
Patrick Gonsalves
Joint Secretary
 
 
 

 
 
 
 
 
Barclays PLC
Results Announcement
 
30 June 2013
 
 
 
 
 
 
 
 
 
 

 
Table of Contents
  
Interim Results Announcement
  
Performance Highlights
  
Chief Executive's Review
  
Group Finance Director's Review
  
Barclays Results by Quarter
  
Condensed Consolidated Financial Statements
  
Results by Business
  
- Retail and Business Banking
  
-   UK
  
-   Europe
  
-   Africa
  
- Barclaycard
  
- Investment Bank
  
- Corporate Banking
  
- Wealth and Investment Management
  
- Head Office and Other Operations
  
Business Results by Quarter
  
Performance Management
  
- Returns and Equity
  
- Transform Update
  
- Margins and Balances
  
Risk Management
  
- Funding Risk - Capital
  
- Funding Risk - Liquidity
  
- Credit Risk
  
- Market Risk
  
Statement of Directors' Responsibilities
  
Independent Auditors' Review Report
  
Financial Statement Notes
  
CRD IV Appendices
  
Shareholder Information
  
Index
  
 
BARCLAYS PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 48839
 
 

 
Notes
 
The term Barclays or Group refers to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the six months to 30 June 2013 to the corresponding six months of 2012 and balance sheet comparatives relate to 31 December 2012. The abbreviations '£m' and '£bn' represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations '$m' and '$bn' represent millions and thousands of millions of US Dollars respectively; '€m' and '€bn' represent millions and thousands of millions of Euros respectively; and 'C$m' and 'C$bn' represent millions and thousands of millions of Canadian Dollars respectively.
 
The comparatives have been restated to reflect the implementation of IFRS 10 Consolidated Financial Statements and IAS 19 Employee Benefits (Revised 2011), the reallocation of elements of the Head Office results to businesses and portfolio restatements between businesses, as detailed in our announcement on 16 April 2013.
 
Adjusted profit before tax and adjusted performance metrics have been presented to provide a more consistent basis for comparing business performance between periods. Adjusting items are considered to be significant and not representative of the underlying business performance. Items excluded from the adjusted measures are: the impact of own credit; gains on debt buy-backs; impairment and disposal of the investment in BlackRock, Inc.; the provision for Payment Protection Insurance redress payments and claims management costs (PPI redress); the provision for interest rate hedging products redress and claims management costs (interest rate hedging products redress); goodwill impairments; and losses and gains on acquisitions and disposals. The regulatory penalties relating to the industry-wide investigation into the setting of interbank offered rates were not excluded from adjusted measures.
 
Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the Results glossary that can be accessed at www.Barclays.com/results.
 
In accordance with Barclays' policy to provide meaningful disclosures that help investors and other stakeholders understand the financial position, performance and changes in the financial position of the Group, and having regard to the British Bank Association Disclosure Code and the Enhanced Disclosure Task Force recommendations, the information provided in this report goes beyond minimum requirements. Barclays continues to develop its financial reporting considering best practice and welcomes feedback from investors, regulators and other stakeholders on the disclosures that they would find most useful.
 
The information in this announcement, which was approved by the Board of Directors on 29 July 2013 does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012, which included certain information required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC) and which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.
 
 
 
Forward-looking statements
 
This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Barclays Group's (the Group) plans and its current goals and expectations relating to its future financial condition and performance. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "may", "will", "seek", "continue", "aim", "anticipate", "target", "projected", "expect", "estimate", "intend", "plan", "goal", "believe", "achieve" or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group's future financial position, income growth, assets, impairment charges and provisions, business strategy, capital ratios, leverage, payment of dividends, projected levels of growth in the banking and financial markets, projected costs, commitments and targets in connection with the Transform Programme, estimates of capital expenditures and plans and objectives for future operations and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  These may be affected by changes in legislation, the development of standards and interpretations under International Financial Reporting Standards (IFRS), evolving practices with regard to the interpretation and application of standards, the outcome of current and future legal proceedings and regulatory investigations, future levels of conduct provisions, the policies and actions of governmental and regulatory authorities, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect: prudential capital rules applicable to past, current and future periods; UK domestic, Eurozone and global macroeconomic and business conditions; the effects of continued volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; changes in valuation of issued notes; volatility in capital markets, particularly as it may affect the timing and cost of planned capital raisings, changes in credit ratings of the Group; requirements regarding capital and Group structures; the potential for one or more countries exiting the Eurozone; the ability to implement the Transform Programme and the success of future acquisitions, disposals and other strategic transactions.  A number of these influences and factors are beyond the Group's control. As a result, the Group's actual future results, dividend payments, and capital and leverage ratios may differ materially from the plans, goals, and expectations set forth in the Group's forward-looking statements.
 
Any forward-looking statements made herein speak only as of the date they are made. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc (the LSE) or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Barclays expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has published or may publish via the Regulatory News Service of the LSE and/or has filed or may file with the US Securities and Exchange Commission.
 
 
 
 
 
 
 
 
 
Performance Highlights
 
Performance Highlights
 
 
—
 Adjusted profit before tax was down 17% (£748m) to £3,591m, driven by costs to achieve Transform of £640m
 
—
 
 Statutory profit increased £806m to £1,677m, including a £1,350m (2012: £300m) provision relating to PPI redress, a £650m (2012: £450m) provision relating to interest rate hedging products redress and an own credit gain of £86m
     (2012: charge of £2,945m)
 
—
 Adjusted return on average shareholders' equity decreased to 7.8% (2012: 10.6%) principally reflecting costs to achieve Transform. Statutory return on shareholders' equity increased to 2.6% (2012: 0.6%)
 
—
 Adjusted income decreased 3% to £15,071m, with income growth across the majority of businesses offset by cost of funding deposit growth across the Group
 
—
 Investment Bank income was stable at £6,473m driven by increases in Equities and Prime Services and Investment Banking, offset by a decrease in Fixed Income, Currency and Commodities (FICC) income
 
—
 Credit impairment charges were down 5% to £1,631m, reflecting improvements in  Corporate Banking and Africa RBB, partially offset by increases in Barclaycard, UK RBB, Wealth and Investment Management and Europe RBB
 
—
 
 Adjusted operating expenses were up 3% (£261m) to £9,781m, reflecting costs to achieve Transform of £640m, principally related to restructuring costs in Europe RBB and the Investment Bank. The adjusted cost: income ratio
    increased to 65% (2012: 61%) largely due to costs to achieve Transform. Excluding costs to achieve Transform, the Investment Bank compensation: income ratio was 38% (2012: 40%)
 
—
 Risk weighted assets (RWAs) were stable at £387bn. On an estimated CRD IV basis, Transform Exit Quadrant RWAs reduced by £25.4bn to £68.4bn
 
—
 Core Tier 1 ratio increased to 11.1% (2012: 10.8%) principally reflecting capital generated through earnings and the exercise of warrants offset by dividends paid
 
—
 
 Total assets increased to £1,533bn (2012: £1,488bn), principally reflecting increases in reverse repurchase agreements and other similar secured lending, growth in loans and advances and an increase in available for sale
     investments.  These increases were partially offset by a decrease in derivative assets
 
—
 Total liabilities increased to £1,473bn (2012: £1,428bn) primarily due to higher than expected deposit inflows, resulting in a decrease in the loan: deposit ratio from 110% to 102%
 
—
 Net asset value per share of 397p (2012: 414p) and net tangible asset value per share of 336p (2012: 349p) reflecting an increase in shares issued, including the exercise of warrants
 
—
 An estimated £42bn of Funding for Lending (FLS) eligible gross new lending was made to UK households and businesses in H113
 
 
 
 
 
 
 
 
 
 
 
Performance Highlights
 
Barclays Unaudited Results1 
Adjusted
  
Statutory
 
30.06.13
30.06.12
    
30.06.13
30.06.12
  
 
£m
£m
% Change
  
£m
£m
% Change
 
 
Total income net of insurance claims
15,071 
15,492 
(3)
  
15,157 
12,774 
19 
Credit impairment charges and other provisions  
(1,631)
(1,710)
(5)
  
(1,631)
(1,710)
(5)
Net operating income  
13,440 
13,782 
(2)
  
13,526 
11,064 
22 
Operating expenses (excluding costs to achieve Transform)
(9,141)
(9,520)
(4)
  
(11,141)
(10,270)
8 
Costs to achieve Transform
(640)
- 
    
(640)
- 
  
Operating expenses
(9,781)
(9,520)
3 
  
(11,781)
(10,270)
15 
Other net (expense)/ income  
(68)
77 
    
(68)
77 
  
Profit before tax  
3,591 
4,339 
(17)
  
1,677 
871 
   93
Profit after tax   
2,467 
3,148 
(22)
  
1,083 
558 
94
Attributable profit
2,055 
2,738 
(25)
  
671 
148 
  
               
Performance Measures
              
Return on average shareholders' equity
7.8%
10.6%
    
2.6%
0.6%
  
Return on average tangible shareholders' equity
9.1%
12.5%
    
3.0%
0.7%
  
Return on average risk weighted assets
1.3%
1.6%
    
0.5%
0.3%
  
Cost: income ratio
65%
61%
    
78%
80%
  
Compensation: net operating income ratio
38%
38%
    
38%
47%
  
Loan loss rate
63bps
67bps
    
63bps
67bps
  
               
Basic earnings per share  
16.2p
22.4p
    
5.3p
1.2p
  
Dividend per share  
2.0p
2.0p
    
2.0p
2.0p
  
   
              
Capital and Balance Sheet  
        
30.06.13
31.12.12
  
Core Tier 1 ratio  
        
11.1%
10.8%
  
Risk weighted assets  
        
£387bn
£387bn
  
Adjusted gross leverage
        
20x
19x
  
Group liquidity pool  
        
£138bn
£150bn
  
Net asset value per share  
        
397p
414p
  
Net tangible asset value per share  
        
336p
349p
  
Loan: deposit ratio  
        
102%
110%
  
               
Adjusted Profit Reconciliation
    
   
  
30.06.13
30.06.12
  
Adjusted profit before tax
    
   
  
3,591 
4,339 
  
Own credit
    
   
  
86 
(2,945)
  
Gain on disposal of BlackRock investment
    
   
  
- 
227 
  
Provision for PPI redress
    
   
  
(1,350)
(300)
  
Provision for interest rate hedging products redress
    
   
  
(650)
(450)
  
Statutory profit before tax
    
   
  
1,677 
871 
  
               
 
 
 
Adjusted 
  
Statutory
Profit/(Loss) Before Tax by Business
30.06.13
30.06.12
    
30.06.13
30.06.12
  
 
£m
£m
% Change
  
£m
£m
% Change
 
 
UK RBB
632 
592 
7 
  
(28)
292 
  
Europe RBB
(709)
(148)
    
(709)
(148)
  
Africa RBB
212 
183 
16 
  
212 
183 
16 
Barclaycard
775 
751 
3 
  
85 
751 
(89)
Investment Bank
2,389 
2,242 
7 
  
2,389 
2,242 
7 
Corporate Banking
402 
311 
29 
  
(248)
(139)
  
Wealth and Investment Management
47 
99 
(53)
  
47 
99 
(53)
Head Office and Other Operations
(157)
309 
    
(71)
(2,409)
  
Total profit before tax
3,591 
4,339 
(17)
  
1,677 
871 
93
 
 
 
1 
     The comparatives on pages 3 to 43 have been restated to reflect the implementation of IFRS 10 Consolidated Financial Statements and IAS 19 Employee Benefits (Revised 2011), the reallocation of elements of Head Office
     results to businesses and portfolio restatements between businesses, as detailed in our announcement on 16 April 2013, accessible at http://group.barclays.com/about-barclays/investor-relations/investor-news
 
 

 
Chief Executive's Statement
 
 
"In February, we outlined our Transform plan to become the 'Go-To' bank. As part of Transform, we set out a number of financial commitments, including in relation to capital, to be achieved by the end of 2015.
 
As a consequence of the Prudential Regulation Authority (PRA) review we have had to modify our capital plans, in order to meet the 3% PRA Leverage Ratio target by June 2014. After careful consideration of the options, the Board and I have determined that Barclays should respond quickly and decisively to meet this new target.
 
The plan is a combination of: a rights issue; prudent reduction of our leverage exposure; issuance of additional tier 1 securities; and the retention of earnings and other forms of capital accretion. We believe this represents the right combination to meet the PRA's leverage target. It also enables us to maintain our planned lending growth and broader support of our customers and clients.
 
I am certain the decisive and prompt action we are taking will leave Barclays stronger and our goal of becoming the 'Go-To' bank even more attainable.
 
Our first half results demonstrate the strength of our business. We saw good momentum in our performance and - five months on - the execution of our Transform plan is progressing well. Adjusted profit before tax was £3.6bn, excluding an additional £1.35bn charge in respect of PPI redress and an additional £650m for Interest Rate Hedging Products. This takes the total provision Barclays has made for both issues to £5.45bn, of which almost £3bn is unspent, reducing uncertainty for shareholders around these conduct risks. As a result the PRA capital adjustments for the PRA Leverage Ratio no longer include provisions for conduct. 
 
Cost remains a critical component of our commitments and we expect to accelerate part of the £2.7bn of costs to achieve (CTA) Transform in 2013, having recognised £640m in the first half of the year focused on restructuring and investment in the Investment Bank and Europe Retail and Business Banking.
 
The CTA have impacted Barclays return on equity of 7.8% in the first half but strategic reduction of the cost base is an important step to achieve sustainable returns over the cost of equity in the medium term. Return on equity, excluding costs to achieve, was 9.5% driven by continued momentum across the businesses and in particular in the Corporate and Investment Bank, Barclaycard and UK Retail and Business Banking.
 
We continue to make good progress in running down Exit Quadrant business units in a positive way for shareholders; in the first half we reduced estimated CRD IV Risk Weighted Assets by £25.4bn. Our commitment to lend has not faltered and we provided a gross £42bn of lending to UK households and businesses under the Funding for Lending Scheme in the first half of the year.
 
Our capital position remains a key focus, with an estimated fully loaded CRD IV Common Equity Tier 1 ratio of 8.1% as of 30 June 2013. Adjusted for the rights issue this is equivalent to 9.3%. The Board and I expect this ratio to increase during the second half of 2013, with an accelerated achievement of the target 10.5% fully loaded CET1 ratio by early 2015.
 
We remain committed to our Purpose of helping people achieve their ambitions, in the right way - and the Values that underpin it. To this end, I am pleased to say that 95% of our colleagues have now attended a half day Values workshop and we will be launching our Balanced Scorecard across the Senior Leadership Group in the second half of 2013 to measure our progress. This is a new approach to how we measure and report our performance and will be critical to our success in the future.
 
It is early days, and there is a long way to go, but I'm pleased with our progress and confident that we are on track to become the 'Go To' bank."
 
 
Antony Jenkins, Chief Executive
 
 

 
Group Finance Director's Review
 
Income Statement
 
—
 Adjusted profit before tax decreased 17% to £3,591m, driven by costs to achieve Transform of £640m in H113
 
—
 
 Statutory profit increased £806m to £1,677m, including a £1,350m (2012: £300m) provision relating to PPI redress, a £650m (2012: £450m) provision relating to interest rate hedging products redress and an own credit gain of £86m
    (2012: charge of £2,945m)
 
—
 Adjusted return on average shareholders' equity decreased to 7.8% (2012: 10.6%) while statutory return on average shareholders' equity increased to 2.6% (2012: 0.6%)
 
—
 
 Adjusted income decreased 3% to £15,071m largely due to the margin achieved on higher than expected growth in deposits across the Group. Non-recurring gains of £235m in relation to hedges on employee share awards in Head
    Office in Q112 was offset by a fair value adjustment of £259m in the Investment Bank primarily as a result of greater certainty regarding the recoverability of certain assets not yet received from the 2008 US Lehman acquisition
 
—
 
 Investment Bank income was stable at £6,473m including increases in Equities and Prime Services and Investment Banking, partially offset by a decrease in Fixed Income, Currency and Commodities (FICC) given strong
    performance in H112. Income decreased 13% from Q113 to Q213 to £3,010m due to the seasonally higher contributions from FICC in Q113
 
—
 
 Customer net interest income from RBB, Barclaycard, Corporate Banking and Wealth and Investment Management increased 4% to £5,105m. Total net interest income in these businesses increased 2% to £5,628m, as the growth
    in assets offset the net interest margin decline from 186bps to 177bps
 
—
 Credit impairment charges were down 5% to £1,631m, reflecting improvements in Corporate Banking and Africa RBB, partially offset by increases in Barclaycard, UK RBB, Wealth and Investment Management and Europe RBB
 
 
  -    Improved impairment performance in wholesale lending reflected lower charges in Corporate Banking in Europe despite the continued challenging nature of economic conditions in that region
 
 
  -    Higher charges in retail businesses principally reflected an increase in South Africa Card portfolios in Barclaycard, which included the impact of recent acquisitions, and increased impairment in UK RBB principally due         to the  non-recurrence of provision releases in 2012
 
—
 The annualised loan loss rate decreased to 63bps (2012: 67bps) compared to a long term average of 91bps
 
—
 Other net expense increased £145m to £68m due to a valuation adjustment of £148m recognised in Europe RBB in respect of contractual obligations to trading partners, based in locations affected by our restructuring plans
 
—
 
 The statutory effective tax rate on statutory profit before tax was 35.4% (2012: 35.9%) principally due to profits taxed in countries with high local tax rates and non-deductible expenses. The effective tax rate on adjusted profit
    before tax was 31.3% (2012: 27.4%)
 
—
 Adjusted operating expenses were up 3% to £9,781m, reflecting costs to achieve Transform of £640m
 
 
  -    Non-performance costs excluding costs to achieve Transform decreased by 3% to £7,865m with the non-recurrence of a £290m charge relating to the setting of inter-bank offered rates in H112
 
 
  -    Performance costs excluding costs to achieve Transform reduced by 10% to £1,276m
 
The adjusted cost: income ratio increased to 65% (2012: 61%) largely due to costs to achieve Transform of £640m. The Investment Bank cost: net operating income ratio decreased 3% to 62% within which the compensation: income ratio was 39% (2012: 40%). Excluding costs to achieve Transform, the Investment Bank compensation: income ratio was 38% (2012: 40%)
 
Group Finance Director's Review
 
Balance Sheet
 
—
 
 Total assets increased to £1,533bn (2012: £1,488bn), principally reflecting increases in reverse repurchase agreements and other similar secured lending (broadly matched by an increase in repurchase agreements and other similar
    secured liabilities), growth in loans and advances and an increase in available for sale investments. These increases were partially offset by a decrease in derivative assets (broadly matched by a decrease in derivative liabilities)
    due to increases in major forward curves and exposure reduction initiatives with central clearing parties
 
—
 Total loans and advances increased to £517bn (2012: £464bn) primarily due to higher settlement balances in the Investment Bank, the acquisition of ING Direct and increased retail lending in UK RBB and Barclaycard
 
—
 
 Total shareholders' equity including non-controlling interests, was £60.1bn (2012: £60.0bn). Excluding non-controlling interests, shareholders' equity increased £0.5bn to £51.1bn. This reflects a £1.5bn increase in share capital
    and share premium including the exercise of warrants, and increase of £0.8bn in currency translation reserves, partially offset by  a decrease in cash flow hedge reserve of £1.1bn and dividends paid of £0.6bn
 
—
 Net asset value per share was 397p (2012: 414p) and the net tangible asset value per share 336p (2012: 349p). The decrease was mainly attributable to an increase in shares issued, including the exercise of warrants
 
—
 Adjusted gross leverage was 20x (2012: 19x).  Excluding the liquidity pool, adjusted gross leverage was 17x (2012: 16x)
 
—
 During H113 the Group's net on-balance sheet exposures to Spain, Italy, Portugal, Ireland, Cyprus and Greece decreased to £57.2bn (2012: £59.3bn)
 
Capital Management
 
—
 
 The Core Tier 1 ratio strengthened to 11.1% (2012: 10.8%)
 
—
 
 Core Tier 1 capital increased by £1.2bn to £42.9bn principally due to the exercise of outstanding warrants of £0.8bn and foreign currency movements of £0.5bn. Capital generated from earnings absorbed the impact of dividends
    paid
 
—
 
 RWAs were stable at £387bn, primarily driven by business activity risk reductions of £11.0bn, including Exit Quadrant RWAs, offset by foreign currency movements of £7.1bn and methodology changes of £4.2bn. On a CRD IV
    basis, Exit Quadrant RWAs reduced by £25.4bn
 
—
 
 Barclays estimated transitional CRD IV Common Equity Tier 1 (CET1) ratio assuming the final rules were applied as at 30 June 2013 is approximately 10.0%. The estimated fully loaded CET1 ratio is approximately 8.1%
 
—
 
 In April 2013, Barclays issued a further $1.0bn of Tier 2 contingent capital notes and repurchased existing Tier 2 instruments for a similar amount, as a step in transitioning towards its future CRD IV capital structure. Barclays also
    obtained authority, from shareholders, to issue Equity Conversion Notes (ECNs) and/or shares on conversion or exchange of ECNs
 
Group Finance Director's Review
 
Funding and Liquidity
 
—
 
 The Group maintained a strong liquidity position throughout H113 as it managed down its internal surplus whilst remaining within internal and regulatory requirements. As at 30 June 2013, the Group estimates the Liquidity
    Coverage Ratio (LCR) at 111% (2012: 126%) and the Net Stable Funding Ratio (NSFR) at 105% (2012: 104%) based upon the latest standards published by the Basel Committee
 
—
 
 Consistent with optimising the surplus to internal and regulatory stress requirements, the Group liquidity pool as at 30 June 2013 reduced to £138bn (2012: £150bn). During H113, the month end liquidity pool ranged from £138bn
    to £157bn (2012: £150bn to £173bn)
 
—
 
 As a result of strong growth of customer deposits in UK RBB, Corporate Banking, and Wealth and Investment Management, the loan to deposit ratio for the Group improved to 102% as at 30 June 2013 (2012: 110%) and the ratio
    for RBB, Barclaycard, Corporate Banking and Wealth and Investment Management businesses, improved to 94% (2012: 102%)
 
—
 
 Strong growth in customer deposits and continued reduction in legacy assets reduced wholesale funding needs. In addition, a significant portion of the Group's 2013 term funding needs were pre-funded in 2012. As a result, term
    issuance in H113 was fully offset by buybacks
 
—
 Total wholesale funding outstanding (excluding repurchase agreements) also reduced as at 30 June 2013 to £217bn (2012: £240bn). Term funding maturities for 2013 were £18bn of which £7bn remains outstanding
 
Group Finance Director's Review
 
Other Matters
 
—
 
 As part of its review of the capital adequacy of major UK banks, the PRA introduced a minimum 3% PRA Leverage Ratio¹ target. Barclays discussed a number of options with the PRA to meet the 3% PRA Leverage Ratio target,
    following which Barclays was asked to submit a plan to achieve a 3% PRA Leverage Ratio the target by 30 June 2014
 
Following careful consideration of a number of options, Barclays plans to meet this target through a combination of a rights issue, CRD IV leverage exposure reduction, the business as usual issuance of contingent capital and retained earnings and other capital accretion
 
—
 
 The provision in respect of Payment Protection Insurance (PPI) has been increased by £1,350m, bringing the cumulative expense recognised to £3,950m. The monthly volume of claims received has declined by 46% since the peak
    in May 2012, although the rate of decline has been less than previously expected. Consequently the future level of expected complaints has been increased to reflect the slower rate of decline. With the overall increase in volume
    of expected complaints, expectations on the number of complaints which are likely to be referred to the Financial Ombudsman Service (FOS) have been revised upwards. As a result an additional provision of £1.35bn was
    recognised as at June 2013 to reflect these updated assumptions including a provision for operational costs through to December 2014 
 
The resulting provision represents Barclays' best estimate of all future expected costs of PPI redress. However, it is possible the eventual outcome may differ from the current estimate and if this were to be material a further provision will be made, otherwise any residual costs will be handled as part of normal operations
 
—
 
 The provision in respect of interest rate hedging product redress has been increased by £650m, bringing the cumulative expense recognised to £1.5bn. As at 31 December 2012, an expense of £850m had been recognised,
    reflecting our best estimate of redress costs to customers categorised as non-sophisticated and related costs. This was based on an extrapolation of the results of an initial pilot review. During 2013, additional cases have been
    reviewed providing a larger and more representative sample upon which to base our provision. The provision on the balance sheet as at 30 June 2013 is £1,349m reflecting cumulative utilisation of £151m. It is expected that this
    provision will be sufficient to cover the full cost of completing the redress, however no provision has been recognised in relation to claims from customers classified as sophisticated, which are not covered by the redress exercise,
    or incremental consequential loss claims from customers classified as non-sophisticated. These will be monitored and future provisions recognised to the extent an obligation resulting in a probable outflow is identified
 
Dividends
 
—
 
 It is our policy to declare and pay dividends on a quarterly basis. We will pay a second interim dividend for 2013 of 1p per share on 13 September 2013.  The Barclays PLC Scrip Dividend Programme will be offered for the second
    interim dividend
 
Outlook
 
—
 We continue to remain cautious about the environment in which we operate and our focus remains on costs, capital, leverage and returns to drive sustainable performance improvements
 
 
 
Chris Lucas, Group Finance Director

 
 
 
 
 
 
1
     [i] PRA Leverage Ratio is a non risk based ratio introduced by the PRA in June 2013, calculated as CRD IV CET1 capital after PRA adjustments divided by CRD IV leverage exposures.
 
[page intentionally left blank]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Barclays Results by Quarter
 
Barclays Results by Quarter
Q213
Q113
  
Q412
Q312
Q212
Q112
  
Q411
Q311
 
£m
£m
  
£m
£m
£m
£m
  
£m
£m
Adjusted basis  
                    
Total income net of insurance claims  
7,337 
7,734 
  
6,867 
7,002 
7,384 
8,108 
  
6,213 
7,001 
Credit impairment charges and other provisions  
(925)
(706)
  
(825)
(805)
(926)
(784)
  
(951)
(1,023)
Net operating income  
6,412 
7,028 
  
6,042 
6,197 
6,458 
7,324 
  
5,262 
5,978 
Operating expenses (excluding costs to achieve Transform and UK bank levy)
(4,359)
(4,782)
  
(4,345)
(4,353)
(4,555)
(4,965)
  
(4,441)
(4,686)
Costs to achieve Transform
(126)
(514)
  
- 
- 
- 
- 
  
- 
- 
UK bank levy  
- 
- 
  
(345)
- 
- 
- 
  
(325)
- 
Operating expenses
(4,485)
(5,296)
  
(4,690)
(4,353)
(4,555)
(4,965)
  
(4,766)
(4,686)
Other net income
(122)
54 
  
43 
21 
41 
36 
  
5 
18 
Adjusted profit before tax  
1,805 
1,786 
  
1,395 
1,865 
1,944 
2,395 
  
501 
1,310 
   
                    
Adjusting items  
                    
Own credit  
337 
(251)
  
(560)
(1,074)
(325)
(2,620)
  
(263)
2,882 
Gains on debt buy-backs  
- 
- 
  
- 
- 
- 
- 
  
1,130 
- 
Gain on disposal and impairment of BlackRock investment
- 
- 
  
- 
- 
227 
- 
  
- 
(1,800)
Provision for PPI redress
(1,350)
- 
  
(600)
(700)
- 
(300)
  
- 
- 
Provision for interest rate hedging products
redress
(650)
- 
  
(400)
- 
(450)
- 
  
- 
- 
Goodwill impairment  
- 
- 
  
- 
- 
- 
- 
  
(550)
- 
(Losses)/gains on acquisitions and disposals  
- 
- 
  
- 
- 
- 
- 
  
(32)
3 
Statutory profit/(loss) before tax
142 
1,535 
  
(165)
91 
1,396 
(525)
  
786 
2,395 
Statutory profit/(loss) after tax  
39 
1,044 
  
(364)
(13)
943 
(385)
  
581 
1,345 
   
                    
Attributable to:  
                    
Equity holders of the parent  
(168)
839 
  
(589)
(183)
746 
(598)
  
335 
1,132 
Non-controlling interests  
207 
205 
  
225 
170 
197 
213 
  
246 
213 
   
                    
Adjusted basic earnings per share  
8.1p
8.1p
  
7.2p
8.3p
9.2p
13.2p
  
1.0p
6.8p
Adjusted cost: income ratio  
61%
68%
  
68%
62%
62%
61%
  
77%
67%
Basic earnings per share  
(1.4p)
6.7p
  
(4.8p)
(1.5p)
6.1p
(4.9p)
  
2.8p
9.4p
Cost: income ratio  
85%
71%
  
90%
85%
69%
96%
  
75%
58%
                     
 
 
Adjusted Profit/(Loss) Before Tax
Q213
Q113
  
Q412
Q312
Q212
Q112
  
Q411
Q311
by Business
£m
£m
  
£m
£m
£m
£m
  
£m
£m
UK RBB
333 
299 
  
275 
358 
360 
232 
  
162 
429 
Europe RBB
(247)
(462)
  
(114)
(81)
(76)
(72)
  
(176)
21 
Africa RBB
131 
81 
  
105 
34 
51 
132 
  
231 
191 
Barclaycard
412 
363 
  
335 
396 
404 
347 
  
261 
367 
Investment Bank
1,074 
1,315 
  
760 
988 
1,060 
1,182 
  
(32)
210 
Corporate Banking
219 
183 
  
61 
88 
108 
203 
  
(10)
140 
Wealth and Investment Management
(13)
60 
  
105 
70 
49 
50 
  
43 
70 
Head Office and Other Operations
(104)
(53)
  
(132)
12 
(12)
321 
  
22 
(118)
Total profit before tax
1,805 
1,786 
  
1,395 
1,865 
1,944 
2,395 
  
501 
1,310 
 
 
 
 
 

 
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statement (Unaudited)
   
Half Year
Ended
Half Year
Ended
Half Year
Ended
Continuing Operations
  
30.06.13
31.12.12
30.06.12
 
Notes1 
£m
£m
£m
Net interest income
2
5,577 
5,525 
6,129 
Net fee and commission income
  
4,396 
4,306 
4,230 
Net trading income
  
4,574 
1,738 
1,609 
Net investment income
  
417 
478 
366 
Net premiums from insurance contracts
  
387 
380 
516 
Net gain on disposal of investment in BlackRock, Inc.
  
- 
- 
227 
Other income
  
74 
45 
60 
Total income  
  
15,425 
12,472 
13,137 
Net claims and benefits incurred on insurance contracts
  
(268)
(237)
(363)
Total income net of insurance claims
  
15,157 
12,235 
12,774 
Credit impairment charges and other provisions
  
(1,631)
(1,630)
(1,710)
Net operating income
  
13,526 
10,605 
11,064 
         
Staff costs
3
(6,431)
(5,522)
(5,945)
Administration and general expenses
4
(3,350)
(3,175)
(3,575)
Operating expenses excluding UK bank levy, provisions for PPI and interest rate hedging products redress
  
(9,781)
(8,697)
(9,520)
UK bank levy
5  
- 
(345)
- 
Provision for PPI redress
  
(1,350)
(1,300)
(300)
Provision for interest rate hedging products redress
  
(650)
(400)
(450)
Operating expenses
  
(11,781)
(10,742)
(10,270)
         
(Loss)/profit on disposal of undertakings and share of results of  
        
associates and joint ventures
  
(68)
63 
77 
Profit/(loss) before tax
  
1,677 
(74)
871 
Tax
6
(594)
(303)
(313)
Profit/(loss) after tax
  
1,083 
(377)
558 
         
Attributable to:
        
Equity holders of the parent
  
671 
(772)
148 
Non-controlling interests
7
412 
395 
410 
Profit/(loss) after tax
  
1,083 
(377)
558 
         
Earnings per Share from Continuing Operations
        
Basic earnings/(loss) per ordinary share
8
5.3p
(6.3p)
1.2p
Diluted earnings/(loss) per ordinary share
8
5.2p
(6.3p)
1.2p
 
 
 
 
 
 
 
 
 
 
 
 
1
     For notes to the Financial Statements see pages 97 to 130.
 
 
 
Condensed Consolidated Financial Statements
 
Condensed Consolidated Statement of Profit or Loss and other Comprehensive Income (Unaudited)
         
   
Half Year
Ended
Half Year
Ended
Half Year
Ended
Continuing Operations
  
30.06.13
31.12.12
30.06.12
 
Notes1 
£m
£m
£m
Profit/(loss) after tax
  
1,083 
(377)
558 
         
Other comprehensive income that may be recycled to profit or loss:
        
Currency translation reserve
18
511 
(946)
(602)
Available for sale reserve
18
(94)
745 
(199)
Cash flow hedge reserve
18
(1,137)
420 
242 
Other
  
20 
46 
50 
Total comprehensive (loss)/income that may be recycled to profit or loss
  
(700)
265 
(509)
         
Other comprehensive income not recycled to profit or loss:
        
Retirement benefit remeasurements
18
(37)
(55)
(1,180)
         
Other comprehensive (loss)/income for the period
  
(737)
210 
(1,689)
         
Total comprehensive income/(loss) for the period
  
346 
(167)
(1,131)
         
Attributable to:
        
Equity holders of the parent
  
232 
(396)
(1,498)
Non-controlling interests
  
114 
229 
367 
Total comprehensive income/(loss) for the period
  
346 
(167)
(1,131)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1      For notes, see pages 97 to 130.
 
 
Condensed Consolidated Financial Statements
 
Condensed Consolidated Balance Sheet (Unaudited)
   
As at
As at
As at
Assets
  
30.06.13
31.12.12
30.06.12
 
Notes1 
£m
£m
£m
 
 
Cash and balances at central banks
  
72,720 
86,191 
126,074 
Items in the course of collection from other banks
  
2,578 
1,473 
2,598 
Trading portfolio assets
  
151,981 
146,352 
167,452 
Financial assets designated at fair value
  
46,847 
46,629 
46,761 
Derivative financial instruments
10
403,072 
469,156 
517,693 
Loans and advances to banks
  
46,451 
40,462 
48,765 
Loans and advances to customers
  
470,062 
423,906 
452,744 
Reverse repurchase agreements and other similar secured lending
  
222,881 
176,522 
173,814 
Available for sale investments
  
91,707 
75,109 
68,925 
Current and deferred tax assets
6
4,697 
3,815 
3,959 
Prepayments, accrued income and other assets
  
5,579 
4,365 
5,896 
Investments in associates and joint ventures
  
591 
633 
549 
Goodwill and intangible assets
13
7,849 
7,915 
7,861 
Property, plant and equipment
  
5,618 
5,754 
5,909 
Retirement benefit assets
16
100 
53 
56 
Total assets
  
1,532,733 
1,488,335 
1,629,056 
         
Liabilities
        
Deposits from banks
  
78,330 
77,012 
94,467 
Items in the course of collection due to other banks
  
1,542 
1,587 
1,671 
Customer accounts
  
460,264 
385,411 
408,269 
Repurchase agreements and other similar secured borrowing
  
259,539 
217,178 
245,833 
Trading portfolio liabilities
  
59,360 
44,794 
51,747 
Financial liabilities designated at fair value
  
71,274 
78,561 
95,150 
Derivative financial instruments  
10
396,125 
462,721 
507,712 
Debt securities in issue
  
102,946 
119,525 
124,901 
Accruals, deferred income and other liabilities
  
13,738 
12,532 
12,589 
Current and deferred tax liabilities
6
982 
962 
999 
Subordinated liabilities
14
22,641 
24,018 
22,089 
Provisions  
15
4,425 
2,766 
1,851 
Retirement benefit liabilities
16
1,430 
1,282 
1,358 
Total liabilities
  
1,472,596 
1,428,349 
1,568,636 
         
Shareholders' Equity
        
Shareholders' equity excluding non-controlling interests
  
51,083 
50,615 
50,935 
Non-controlling interests
7
9,054 
9,371 
9,485 
Total shareholders' equity
  
60,137 
59,986 
60,420 
         
Total liabilities and shareholders' equity
  
1,532,733 
1,488,335 
1,629,056 
 
 
 
 
 
 
 
 
 
 
 
 
 
1      For notes, see pages 97 to 130.
 
Condensed Consolidated Financial Statements
 
Condensed Consolidated Statement of Changes in Equity (Unaudited)
Half Year Ended 30.06.13
Called up
Share Capital
and Share
Premium1 
Other
Reserves1 
Retained
Earnings
Total
Non-
controlling
Interests2 
Total
Equity
 
£m
£m
£m
£m
£m
£m
Balance at 1 January 2013
12,477 
3,674 
34,464 
50,615 
9,371 
59,986 
Profit after tax
- 
- 
671 
671 
412 
1,083 
Currency translation movements
- 
750 
- 
750 
(239)
511 
Available for sale investments
- 
(96)
- 
(96)
2 
(94)
Cash flow hedges
- 
(1,080)
- 
(1,080)
(57)
(1,137)
Retirement benefit remeasurements
- 
- 
(33)
(33)
(4)
(37)
Other
- 
- 
20 
20 
- 
20 
Total comprehensive income for the period
- 
(426)
658 
232 
114 
346
Issue of new ordinary shares
750 
- 
- 
750 
- 
750 
Issue of shares under employee share schemes
761 
- 
337 
1,098 
- 
1,098 
Increase in treasury shares
- 
(1,049)
- 
(1,049)
- 
(1,049)
Vesting of shares under employee share schemes
- 
1,034 
(1,034)
- 
- 
- 
Dividends paid
- 
- 
(570)
(570)
(323)
(893)
Other reserve movements
- 
- 
7 
7 
(108)
(101)
Balance at 30 June 2013
13,988 
3,233 
33,862 
51,083 
9,054 
60,137 
             
Half Year Ended 31.12.12
            
Balance at 1 July 2012
12,462 
3,279 
35,194 
50,935 
9,485 
60,420 
(Loss)/profit after tax
- 
- 
(772)
(772)
395 
(377)
Currency translation movements
- 
(758)
- 
(758)
(188)
(946)
Available for sale investments
- 
720 
- 
720 
25 
745 
Cash flow hedges
- 
423 
- 
423 
(3)
420 
Retirement benefit remeasurements
- 
- 
(55)
(55)
- 
(55)
Other
- 
- 
46 
46 
- 
46 
Total comprehensive income for the period
- 
385 
(781)
(396)
229 
(167)
Issue of new ordinary shares
- 
- 
- 
- 
- 
- 
Issue of shares under employee share schemes
15 
- 
348 
363 
- 
363 
Increase in treasury shares
- 
(24)
- 
(24)
- 
(24)
Vesting of shares under employee share schemes
- 
34 
(34)
- 
- 
- 
Dividends paid
- 
- 
(245)
(245)
(330)
(575)
Other reserve movements
- 
- 
(18)
(18)
(13)
(31)
Balance at 31 December 2012
12,477 
3,674 
34,464 
50,615 
9,371 
59,986 
             
Half Year Ended 30.06.12
            
Balance at 1 January 2012
12,380 
3,837 
37,189 
53,406 
9,607 
63,013 
Profit after tax
- 
- 
148 
148 
410 
558 
Currency translation movements
- 
(531)
- 
(531)
(71)
(602)
Available for sale investments
- 
(218)
- 
(218)
19 
(199)
Cash flow hedges
- 
234 
- 
234 
8 
242 
Retirement benefit remeasurements
- 
- 
(1,180)
(1,180)
- 
(1,180)
Other
- 
- 
49 
49 
1 
50 
Total comprehensive income for the period
- 
(515)
(983)
(1,498)
367 
(1,131)
Issue of new ordinary shares
- 
- 
- 
- 
- 
- 
Issue of shares under employee share schemes
82 
- 
369 
451 
- 
451 
Increase in treasury shares
- 
(955)
- 
(955)
- 
(955)
Vesting of shares under employee share schemes
- 
912 
(912)
- 
- 
- 
Dividends paid
- 
- 
(488)
(488)
(364)
(852)
Other reserve movements
- 
- 
19 
19 
(125)
(106)
Balance at 30 June 2012
12,462 
3,279 
35,194 
50,935 
9,485 
60,420 
 
1    Details of Share Capital and Other Reserves are shown on page 120.
2     Details of Non-controlling Interests are shown on page 101.
 
 
 
Condensed Consolidated Financial Statements
 
Condensed Consolidated Cash Flow Statement (Unaudited)
    
 
Half Year
Ended
Half Year
Ended
Half Year
Ended
Continuing Operations
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
Profit/(loss) before tax
1,677 
(74)
871 
Adjustment for non-cash items
351 
5,478 
4,014 
Changes in operating assets and liabilities
9,634 
(49,530)
27,090 
Corporate income tax paid
(794)
(627)
(889)
Net cash from operating activities
10,868 
(44,753)
31,086 
Net cash from investing activities
(16,628)
(5,007)
(2,150)
Net cash from financing activities
(1,212)
1,019 
(3,861)
Effect of exchange rates on cash and cash equivalents
3,323 
(1,683)
(2,428)
Net increase in cash and cash equivalents
(3,649)
(50,424)
22,647 
Cash and cash equivalents at beginning of the period
121,896 
172,320 
149,673 
Cash and cash equivalents at end of the period
118,247 
121,896 
172,320 
       
 
 
 
 
 
 
 
 
 
 
 
Results by Business
 
Retail and Business Banking
                
 
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information
  
30.06.13
    
31.12.12
  
30.06.12
YoY
   
£m
    
£m
  
£m
%
Change
Net interest income
  
1,621 
    
1,596 
  
1,594 
2 
Net fee and commission income
  
567 
    
587 
  
567 
- 
Net premiums from insurance contracts
  
27 
    
35 
  
39 
(31)
Other (expense)/income
  
(2)
    
(2)
  
1 
  
Total income
  
2,213 
    
2,216 
  
2,201 
1 
Net claims and benefits incurred under insurance contracts
  
(11)
    
(16)
  
(17)
  
Total income net of insurance claims
  
2,202 
    
2,200 
  
2,184 
1 
Credit impairment charges and other provisions
  
(178)
    
(147)
  
(122)
46 
Net operating income
  
2,024 
    
2,053 
  
2,062 
(2)
                 
Operating expenses (excluding provision for PPI redress, Costs to achieve Transform and UK bank levy)
  
(1,393)
    
(1,407)
  
(1,470)
(5)
Provision for PPI redress
  
(660)
    
(880)
  
(300)
  
Costs to achieve Transform
  
(27)
    
- 
  
- 
  
UK bank levy
  
- 
    
(17)
  
- 
  
Operating expenses
  
(2,080)
    
(2,304)
  
(1,770)
18 
Other net income
  
28 
    
4 
  
- 
  
(Loss)/profit before tax
  
(28)
    
(247)
  
292 
  
                 
Adjusted profit before tax1 
  
632 
    
633 
  
592 
7 
Adjusted attributable profit1,2
  
480 
    
450 
  
424 
13 
                 
Balance Sheet Information and Key Facts
                
Loans and advances to customers at amortised cost
  
£135.4bn
    
£128.1bn
  
£123.4bn
  
Customer deposits
  
£133.2bn
    
£116.0bn
  
£113.9bn
  
Total assets3 
  
£159.5bn
    
£134.6bn
  
£129.7bn
  
Risk weighted assets3 
  
£43.6bn
    
£39.1bn
  
£36.0bn
  
                 
Number of UK current accounts
  
11.8m
    
11.7m
  
12.0m
  
Number of UK savings accounts
  
16.7m
    
15.4m
  
15.6m
  
Number of UK mortgage accounts
  
983,000 
    
945,000 
  
932,000 
  
Number of Barclays Business customers
  
790,000 
    
765,000 
  
790,000 
  
Number of branches
  
1,577 
    
1,593 
  
1,614 
  
90 day arrears rates - UK personal loans
  
1.3%
    
1.3%
  
1.4%
  
90 day arrears rates - Home loans
  
0.3%
    
0.3%
  
0.3%
  
Average LTV of mortgage portfolio4 
  
45%
    
46%
  
44%
  
Average LTV of new mortgage lending4 
  
54%
    
56%
  
55%
  
Number of employees (full time equivalent)
  
33,600 
    
33,000 
  
32,500 
  
                 
 
Adjusted1 
  
Statutory
  
Performance Measures
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
  
Return on average equity
12.2%
12.3%
12.2%
  
(1.0%)
(6.0%)
5.7%
  
Return on average risk weighted assets
2.4%
2.5%
2.6%
  
(0.1%)
(1.1%)
1.3%
  
Cost: income ratio
64%
65%
67%
  
94%
105%
81%
  
Loan loss rate (bps)
26 
21 
19 
  
26 
21 
19 
  
 
1
     Adjusted profit before tax, adjusted attributable profit and adjusted performance measures excludes the impact of the provision for PPI redress of £660m (H212: £880m; H112: £300m).
2
     Adjusted attributable profit includes profit after tax and non-controlling interests.
3
     2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.
4
     Average LTV of mortgage portfolio and new mortgage lending calculated on the Valuation basis.
 
 
 
 
 
Results by Business
 
UK Retail and Business Banking
 
Income Statement - H113 compared to H112
 
—
 
 Net interest income increased 2% to £1,621m driven by strong mortgage balance growth and contribution from Barclays Direct (previously ING Direct UK, acquired during Q113). Net interest margin was down 11bps to 127bps
    primarily reflecting reduced contributions from structural hedges
 
 
  -    Customer asset margin increased 10bps to 118bps reflecting higher customer margin on newly written mortgages. Average customer assets increased 9% to £132.8bn driven by mortgage growth and Barclays Direct
 
 
  -    Customer liability margin decreased 9bps to 88bps reflecting higher customer deposit rates. Average customer liabilities increased 12% to £124.3bn driven by Barclays Direct and growth in personal customer deposits
 
—
 Net fee and commission income was in line at £567m
 
—
 Other net income includes a £25m gain on acquisition of ING Direct UK
 
—
 Credit impairment charges increased £56m to £178m primarily due to provision releases in 2012 impacting unsecured lending and mortgages
 
 
  -    Loan loss rate increased to 26bps (2012: 19bps)
 
 
  -    90 day arrears rates on UK personal loans improved to 1.3% (2012: 1.4%).  90 day arrears rates on home loans were flat at 0.3%
 
—
 
 Adjusted operating expenses decreased 3% to £1,420m, despite the increased costs relating to Barclays Direct and costs to achieve Transform of £27m, driven in part by non-recurring operational costs incurred in H112. Statutory
    operating expenses increased by 18% to £2,080m due to the £660m provision for PPI redress (2012: £300m)
 
—
 Adjusted profit before tax improved 7% to £632m, while statutory loss before tax was £28m (2012: profit of £292m) due to the provision for PPI redress
 
Income Statement - Q213 compared to Q113
 
—
 Adjusted profit before tax increased 11% to £333m reflecting a 6% increase in income primarily due to Barclays Direct
 
—
 Statutory loss before tax was £327m (Q113: profit of £299m) due to the provision for PPI redress
 
Balance Sheet - 30 June 2013 compared to 31 December 2012
 
—
 Barclays has successfully completed the acquisition of ING Direct UK and customer deposit balances at H113 are higher than initially expected
 
—
 Total loans and advances to customers increased 6% to £135.4bn primarily due to Barclays Direct, which added £5.3bn at H113
 
 
  -    Mortgage balances including Barclays Direct of £121.7bn (2012: £114.7bn). Gross new mortgage lending of £7.7bn (30 June 2012: £7.8bn) and mortgage redemptions of £6.0bn (30 June 2012: £5.6bn)
 
 
  -    Average Loan to Value (LTV) ratio on the mortgage portfolio (including Buy to Let) was 45% (2012: 46%). Average LTV of new mortgage lending was 54% (full year to 31 December 2012: 56%)
 
—
 Total customer deposits increased 15% to £133.2bn primarily due to Barclays Direct, which added £9.8bn at H113 and continued growth in personal customer deposits
 
—
 RWAs increased 12% to £43.6bn primarily due to Barclays Direct and mortgage asset growth
 
 

 
Results by Business
 
Europe Retail and Business Banking
                
 
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information
  
30.06.13
    
31.12.12
  
30.06.12
YoY
   
£m
    
£m
  
£m
%
Change
 
 
Net interest income  
  
219 
    
207 
  
221 
(1)
Net fee and commission income
  
93 
    
117 
  
131 
(29)
Net trading (expense)/income
  
(1)
    
3 
  
4 
  
Net investment income
  
45 
    
25 
  
27 
67 
Net premiums from insurance contracts
  
148 
    
111 
  
220 
(33)
Other income/(expense)
  
10 
    
(12)
  
13 
  
Total income
  
514 
    
451 
  
616 
(17)
Net claims and benefits incurred under insurance contracts
  
(162)
    
(122)
  
(237)
(32)
Total income net of insurance claims
  
352 
    
329 
  
379 
(7)
Credit impairment charges and other provisions
  
(142)
    
(132)
  
(125)
14 
Net operating income
  
210 
    
197 
  
254 
(17)
                 
Operating expenses (excluding costs to achieve Transform and UK bank levy)
  
(422)
    
(378)
  
(409)
3 
Costs to achieve Transform
  
(356)
    
- 
  
- 
  
UK bank levy
  
- 
    
(20)
  
- 
  
Operating expenses  
  
(778)
    
(398)
  
(409)
90 
                 
Other net (expense)/income
  
(141)
    
6 
  
7 
  
Loss before tax
  
(709)
    
(195)
  
(148)
  
Attributable loss1 
  
(522)
    
(156)
  
(120)
  
                 
Balance Sheet Information and Key Facts
                
Loans and advances to customers at amortised cost
  
£39.8bn
    
£39.2bn
  
£40.4bn
  
Customer deposits
  
£17.5bn
    
£17.6bn
  
£18.3bn
  
Total assets2 
  
£48.7bn
    
£46.1bn
  
£47.1bn
  
Risk weighted assets2 
  
£16.7bn
    
£15.8bn
  
£15.4bn
  
                 
Number of customers
  
2.0m
    
2.0m
  
2.0m
  
                 
Number of branches  
  
797 
    
923 
  
951 
  
Number of sales centres
  
166 
    
219 
  
228 
  
Number of distribution points
  
963 
    
1,142 
  
1,179 
  
                 
90 day arrears rate - Spain home loans
  
0.7%
    
0.7%
  
0.8%
  
90 day arrears rate - Portugal home loans
  
0.4%
    
0.7%
  
0.4%
  
90 day arrears rate - Italy home loans
  
1.0%
    
1.0%
  
1.0%
  
90 day arrears rate - Total Europe RBB home loans
  
0.8%
    
0.8%
  
0.8%
  
                 
Number of employees (full time equivalent)
  
6,900 
    
7,500 
  
7,700 
  
                 
 
Adjusted
  
Statutory
  
Performance Measures
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
  
Return on average equity
(49.1%)
(15.0%)
(10.9%)
  
(49.1%)
(15.0%)
(10.9%)
  
Return on average risk weighted assets
(6.2%)
(2.0%)
(1.4%)
  
(6.2%)
(2.0%)
(1.4%)
  
Cost: income ratio
221%
121%
108%
  
221%
121%
108%
  
Loan loss rate (bps)
70 
64 
61 
  
70 
64 
61 
  
 
 
1
     Attributable loss includes profit after tax and non-controlling interests.
2
     2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.
 
 
 
 
 
 
Results by Business
 
Europe Retail and Business Banking
 
Income Statement - H113 compared to H112
 
—
 
 Income declined 7% to £352m, reflecting actions taken to reduce the volume of new assets written as part of the Transform programme and address the continuing economic challenges across Europe, partially offset by an
    increase due to foreign currency movements
 
—
 Net interest income was in line at £219m.  Net interest margin was broadly in line at 81bps
 
 
  -    Customer asset margin remained flat at 47bps, with higher customer lending rates offset by higher funding costs. Average customer assets decreased 3% to £40.1bn
 
 
  -    Customer liability margin decreased 5bps to 41bps, with higher rates on new deposits partially offset by increased funding rates. Average customer liabilities were down 9% to £14.1bn
 
—
 Net fee and commission income declined 29% to £93m, reflecting lower asset volumes
 
—
 Other net expense increased by £148m due to a valuation adjustment recognised in respect of contractual obligations to trading partners, based in locations affected by our restructuring plans
 
—
 Net premiums from insurance contracts declined 33% to £148m due to discontinuance of certain products leading to a corresponding 32% decline in net claims and benefits to £162m
 
—
 Credit impairment charges increased 14% to £142m due to foreign currency movements and deterioration in recoveries performance within mortgages reflecting current economic conditions across Europe
 
—
  -    Loan loss rate increased to 70bps (2012: 61bps)
 
—
  -    Overall 90 day arrears rate increased to 97bps (2012: 94bps)
 
—
 Operating expenses increased by £369m to £778m, primarily reflecting costs to achieve Transform of £356m.  This related to restructuring costs to significantly downsize the distribution network, with the remaining increase driven
    by foreign currency movements
 
—
 Loss before tax increased £561m to £709m, including costs to achieve Transform of £356m and an increase in other net expenses
 
Income Statement - Q213 compared to Q113
                                              
—
 Loss before tax of £247m (Q113: £462m), mainly reflecting a reduction in operating expenses including restructuring costs to achieve Transform of £356m in Q113, partially offset by an increase in other net expenses
 
Balance Sheet - 30 June 2013 compared to 31 December 2012
 
—
 Loans and advances to customers increased by 2% to £39.8bn, driven by foreign currency movements offset by reduced volumes as part of the Transform programme
 
—
 Customer deposits reduced by 1% to £17.5m, due to customer attrition partially offset by foreign currency movements
 
—
 RWAs increased 6% to £16.7bn primarily driven by foreign currency movements and methodology changes to better reflect the risk of forbearance
 
 
 
 
 
 
 
 
 
Results by Business
 
Africa Retail and Business Banking
                
 
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information
  
30.06.13
    
31.12.12
  
30.06.12
YoY
   
£m
    
£m
  
£m
%
Change
Net interest income  
  
733 
    
819 
  
835 
(12)
Net fee and commission income
  
478 
    
526 
  
539 
(11)
Net trading (expense)/income
  
(2)
    
(10)
  
6 
  
Net investment income/(expense)
  
10 
    
(3)
  
8 
  
Net premiums from insurance contracts
  
185 
    
203 
  
214 
(14)
Other income/(expense)
  
43 
    
(1)
  
(1)
  
Total income
  
1,447 
    
1,534 
  
1,601 
(10)
Net claims and benefits incurred under insurance contracts
  
(95)
    
(99)
  
(108)
(12)
Total income net of insurance claims
  
1,352 
    
1,435 
  
1,493 
(9)
Credit impairment charges and other provisions
  
(208)
    
(318)
  
(314)
(34)
Net operating income
  
1,144 
    
1,117 
  
1,179 
(3)
                 
Operating expenses (excluding costs to achieve Transform and UK bank levy)  
  
(926)
    
(961)
  
(999)
(7)
Costs to achieve Transform
  
(9)
    
- 
  
- 
  
UK bank levy
  
- 
    
(24)
  
- 
  
Operating expenses  
  
(935)
    
(985)
  
(999)
(6)
                 
Other net income
  
3 
    
7 
  
3 
- 
Profit before tax
  
212 
    
139 
  
183 
16 
Attributable profit/(loss)1 
  
35 
    
(38)
  
35 
- 
                 
Balance Sheet Information and Key Facts
                
Loans and advances to customers at amortised cost
  
£27.6bn
    
£29.9bn
  
£32.1bn
  
Customer deposits
  
£18.2bn
    
£19.5bn
  
£19.9bn
  
Total assets2 
  
£37.5bn
    
£42.2bn
  
£44.3bn
  
Risk weighted assets2 
  
£25.5bn
    
£24.5bn
  
£25.1bn
  
                 
Number of customers
  
13.3m
    
13.5m
  
14.8m
  
Number of ATMs
  
10,529 
    
10,468 
  
10,365 
  
                 
Number of branches  
  
1,317 
    
1,339 
  
1,342 
  
Number of sales centres
  
119 
    
112 
  
106 
  
Number of distribution points
  
1,436 
    
1,451 
  
1,448 
  
                 
90 days arrears rate- Home loans
  
1.1%
    
1.6%
  
2.8%
  
Number of employees (full time equivalent)
  
40,900 
    
40,500 
  
41,600 
  
                 
 
Adjusted
  
Statutory
  
Performance Measures
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
  
Return on average equity
3.0%
(3.0%)
2.5%
  
3.0%
(3.0%)
2.5%
  
Return on average risk weighted assets
1.1%
0.3%
1.0%
  
1.1%
0.3%
1.0%
  
Cost: income ratio
69%
69%
67%
  
69%
69%
67%
  
Loan loss rate (bps)
146 
202 
186 
  
146 
202 
186 
  
 
 
 
 
 
 
 
1
     Attributable profit includes profit after tax and non-controlling interests.
2
     2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.
 
 
 
 
Results by Business
 
Africa Retail and Business Banking
 
Income Statement - H113 compared to H112
 
—
 
 The average ZAR depreciated against GBP by 13% on H112. The deterioration was a significant contributor to the year on year movement in the reported results, which are in GBP.  Other currency movements were considered
    insignificant
 
—
 
 Income declined 9% to £1,352m, driven by foreign currency movements, primarily the depreciation of ZAR, partially offset by prior year fair value adjustments on the commercial property finance portfolio. On a constant currency
    basis income growth was broadly steady following pressure on transaction volumes in a subdued economic environment
 
—
 Net interest income declined 12% to £733m.  On a constant currency basis, net interest income was broadly stable. Net interest margin was down 12bps to 311bps through a decrease in the customer asset and liability margins
 
 
  -    Customer asset margin decreased 8bps to 308bps, driven by higher funding costs in South African home loans together with competitor pressure in commercial property finance.  Average customer assets decreased 11% to £28.9bn, driven by the depreciation of ZAR. On a constant currency basis, customer assets, particularly home loans, remained broadly stable
 
 
  -    Customer liability margin decreased 5bps to 271bps through increased competition and change in product mix. Average customer liabilities decreased 5% to £18.7bn. Excluding foreign currency movements, deposits reflected modest growth
 
—
 Net fee and commission income declined 11% to £478m. On a constant currency basis, net fee and commission income was broadly steady following pressure on transaction volumes through a subdued economic environment
 
—
 
 Credit impairment charges decreased 34% to £208m, driven in part by foreign currency movements. On a constant currency basis, credit impairment charges reduced due to higher 2012 provisions on the South African home loans
    recovery book. This decrease was partly offset by deterioration in the South African unsecured lending portfolio, which is due to the challenging economic environment
 
 
  -    90 day arrears rates on home loans improved to 1.1% (2012: 2.8%)
 
—
 Operating expenses decreased 6% to £935m. On a constant currency basis, costs remained well contained despite inflation in South Africa of 6%
 
—
 
 Profit before tax increased 16% to £212m, despite currency depreciation, primarily due to higher 2012 provisions on the South African home loans recovery book and prior year fair value adjustments on the commercial property finance portfolio
 
Income Statement - Q213 compared to Q113
 
—
 
 Profit before tax of £131m (Q113: £81m) was driven by lower credit impairment charges in South African home loans coupled with lower claims in the Absa insurance business, partially offset by further depreciation of ZAR in
    Q213
 
Balance Sheet - 30 June 2013 compared to 31 December 2012
 
—
 The closing ZAR depreciated against GBP by 10%. The deterioration was a significant contributor to the movement in the reported results, which are in GBP
 
—
 Loans and advances to customers decreased 8% to £27.6bn, mainly due to foreign currency movements. On a constant currency basis, loans and advances, particularly home loans, were broadly unchanged
 
—
 Customer deposits decreased 7% to £18.2bn, driven by foreign currency movements. On a constant currency basis, deposits were broadly in line
 
—
 RWAs increased 4% to £25.5bn primarily driven by the deterioration in Egypt credit ratings and RWA reallocation across businesses partially offset by foreign currency movements
 
 

 
Results by Business
 
Barclaycard
                
 
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information
  
30.06.13
    
31.12.12
  
30.06.12
YoY
   
£m
    
£m
  
£m
%
Change
Net interest income
  
1,626 
    
1,542 
  
1,467 
11 
Net fee and commission income
  
698 
    
674 
  
618 
13 
Net trading expense
  
(4)
    
(4)
  
(5)
  
Net premiums from insurance contracts
  
14 
    
14 
  
22 
  
Other income
  
9 
    
6 
  
11 
  
Total income
  
2,343 
    
2,232 
  
2,113 
11 
Net claims and benefits incurred under insurance contracts
        
- 
  
(1)
  
Total income net of insurance claims
  
2,343 
    
2,232 
  
2,112 
11 
Credit impairment charges and other provisions
  
(616)
    
(557)
  
(492)
25 
Net operating income
  
1,727 
    
1,675 
  
1,620 
7 
                 
Operating expenses (excluding provision for PPI redress, costs to achieve Transform and UK bank levy)  
  
(963)
    
(940)
  
(886)
9 
Provision for PPI redress
  
(690)
    
(420)
  
- 
  
Costs to achieve Transform
  
(5)
    
- 
  
- 
  
UK bank levy
  
- 
    
(16)
  
- 
  
Operating expenses
  
(1,658)
    
(1,376)
  
(886)
87 
                 
Other net income
  
16 
    
12 
  
17 
(6)
Profit before tax
  
85 
    
311 
  
751 
(89)
                 
Adjusted profit before tax1 
  
775 
    
731 
  
751 
3 
Adjusted attributable profit1,2
  
524 
    
482 
  
492 
7 
                 
Balance Sheet Information and Key Facts
                
Loans and advances to customers at amortised cost
  
£34.7bn
    
£33.8bn
  
£31.5bn
  
Customer deposits
  
£4.5bn
    
£2.8bn
  
£2.0bn
  
Total assets3 
  
£39.2bn
    
£38.2bn
  
£35.4bn
  
Risk weighted assets3 
  
£38.8bn
    
£37.8bn
  
£34.2bn
  
                 
Total number of Barclaycard customers
  
33.7m
    
32.8m
  
27.0m
  
Total number of Barclaycard clients
  
339,200 
    
315,500 
  
315,800 
  
Payments processed
  
£124bn
    
£121bn
  
£114bn
  
30 day arrears rates - UK cards
  
2.5%
    
2.5%
  
2.7%
  
30 day arrears rates - US cards
  
2.0%
    
2.4%
  
2.5%
  
30 day arrears rates - South Africa cards4 
  
9.1%
    
7.4%
  
5.1%
  
Number of employees (full time equivalent)
  
11,800 
    
11,100 
  
11,100 
  
                 
 
Adjusted1 
  
Statutory
  
Performance Measures
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
  
Return on average equity
                    %
19.4%
20.1%
  
0.5%
6.5%
20.1%
  
Return on average risk weighted assets
3.0%
3.1%
3.1%
  
0.3%
1.2%
3.1%
  
Cost: income ratio
41%
43%
42%
  
71%
62%
42%
  
Loan loss rate (bps)
339 
294 
295 
  
339 
294 
295 
  
 
 
 
 
 
1
     Adjusted profit before tax, adjusted attributable profit and adjusted performance measures excludes the impact of the provision for PPI redress of  £690m (H212: £420m; H112: £nil).
2
     Adjusted attributable profit includes profit after tax and non-controlling interests.
3
     2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.
4
     H212 30 day arrears rates on South Africa cards restated to reflect a portfolio acquisition.
 
 
 

 
Results by Business
 
Barclaycard
 
 
Income Statement – H113 compared to H112
 
 
—  
Income improved 11% to £2,343m reflecting continued net lending growth across the business and contributions from 2012 portfolio acquisitions
 
–  
UK income increased by 6% to £1,344m reflecting net lending growth
 
 
–  
International income improved 19% to £999m reflecting contribution from 2012 portfolio acquisitions and higher US customer balances
 
 
—  
Net interest income increased by 11% to £1,626m driven by volume growth and a lower impact from structural hedges offsetting lower customer asset margin
 
–  
Customer asset margin declined modestly by 29bps to 9.42% reflecting lower rates on customer lending. Average customer assets increased 9% to £36.0bn due to 2012 portfolio acquisitions and business growth
 
 
–  
Customer liability margin was negative 0.33% reflecting the cost of deposit funding initiatives in the US and Germany
 
 
—  
Net fee and commission income improved 13% to £698m due to increased payment volumes predominantly in the US and UK
 
 
—  
Credit impairment charges increased 25% to £616m primarily driven by the impact of portfolio acquisitions and non-recurrence of provision releases in 2012
 
 
–  
Impairment loan loss rates in consumer credit cards remained stable at 366bps (2012: 372bps) in the UK and 280bps (2012: 275bps) in the US, while the impairment loan loss rates in South Africa increased to 493bps (2012: 192bps) due to acquisitions driving a change in product mix
 
 
–  
30 day arrears rates for consumer cards in UK were down 20bps to 2.5%, in the US were down 50bps to 2.0% and in South Africa were up 401bps to 9.1%
 
 
—  
Adjusted operating expenses increased 9% to £968m reflecting contribution from 2012 portfolio acquisitions, net lending growth and higher operating losses.  Statutory operating expenses increased 87% to £1,658m due to the £690m provision for PPI redress (2012: nil)
 
 
—  
Adjusted profit before tax improved 3% to £775m driven by the US and UK card portfolios, while statutory profit before tax was £85m (2012: £751m) due to the provision for PPI redress
 
 
 
Income Statement – Q213 compared to Q113
 
 
—  
Adjusted profit before tax improved 13% to £412m driven by higher income reflecting seasonal trends and business growth
 
 
—  
Statutory loss before tax was £278m (Q113: profit of £363m) due to the provision for PPI redress
 
 
 
Balance Sheet – 30 June 2013 compared to 31 December 2012
 
 
—  
Total assets increased 3% to £39.2bn in line with loans and advances to customers across UK and International businesses
 
 
—  
Customer deposits increased by £1.7bn to £4.5bn due to funding initiatives in the US and Germany
 
 
—  
RWAs increased 3% to £38.8bn primarily driven by asset growth and foreign currency movements
 


Results by Business
Investment Bank 
    
  
          
  
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information 
  
30.06.13
  
  
31.12.12
  
30.06.12
YoY
  
  
£m
  
  
£m
  
£m
% Change

Net interest income 
  
86 
  
  
166 
  
364 
(76)
Net fee and commission income 
  
1,622 
  
  
1,527 
  
1,502 
8 
Net trading income 
  
4,435 
  
  
3,369 
  
4,319 
3 
Net investment income 
  
329 
  
  
250 
  
271 
21 
Other income 
  
1 
  
  
3 
  
4 
  
Total income 
  
6,473 
  
  
5,315 
  
6,460 
- 
Credit impairment charges and other provisions 
  
(181) 
  
  
(2)
  
(202)
(10)
Net operating income 
  
6,292 
  
  
5,313 
  
6,258 
1 
  
    
  
          
Operating expenses (excluding costs to achieve Transform and UK bank levy)  
  
(3,751)
  
  
(3,381)
  
(4,044)
(7)
Costs to achieve Transform 
  
(169)
  
  
- 
  
- 
  
UK bank levy 
  
- 
  
  
(206)
  
- 
  
Operating expenses 
  
(3,920)
  
  
(3,587)
  
(4,044)
(3)
  
    
  
          
Other net income  
  
17 
  
  
22 
  
28 
  
Profit before tax 
  
2,389 
  
  
1,748 
  
2,242 
7 
Attributable profit1 
  
1,541 
  
  
1,236 
  
1,446 
7 
  
    
  
          
Balance Sheet Information and Key Facts 
    
  
          
Loans and advances to banks and customers at amortised cost2
  
£186.6bn
  
  
£143.5bn
  
£184.3bn
  
Customer deposits2
  
£117.4bn
  
  
£75.9bn
  
£114.3bn
  
Total assets3 
  
£1,043.8bn
  
  
£1,073.7bn
  
£1,224.0bn
  
Assets contributing to adjusted gross leverage3
  
£568.5bn
  
  
£567.0bn
  
£649.2bn
  
Risk weighted assets3 
  
£168.8bn
  
  
£177.9bn
  
£190.5bn
  
  
 
 
            
Average DVaR (95%) 
  
£31m
  
  
£34m
  
£42m
  
Number of employees (full time equivalent) 
  
25,300 
  
  
25,600 
  
24,500 
  

  
    
  
          
  
Adjusted 
  
Statutory
  
Performance Measures 
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12
  

Return on average equity 
15.4%
11.9%
13.4% 
  
15.4%
11.9%
13.4%
  
Return on average risk weighted assets 
1.8%
1.5%
1.6% 
  
1.8%
1.5%
1.6%
  
Cost: income ratio  
61%
67%
63% 
  
61%
67%
63%
  
Cost: net operating income ratio  
62%
68%
65% 
  
62%
68%
65%
  
Compensation: income ratio 
39%
40%
40% 
  
39%
40%
40%
  
Loan loss rate (bps) 
19
13 
22  
  
19
13 
22 
  
  
    
  
          



 

1  
Attributable profit includes profit after tax and non-controlling interests.
2  
Loans and advances includes £146.4bn of loans and advances to customers (including settlement balances and cash collateral of £103.5bn) and loans and advances to banks of £40.2bn (including settlement balances and cash collateral of £26.2bn). Customer deposits includes £91.1bn relating to settlement balances and cash collateral.
3  
2013 total assets, assets contributing to adjusted gross leverage and risk weighted assets reflect a reallocation of liquidity pool assets to other businesses.



Results by Business
 
Investment Bank
 
 
 
Income Statement – H113 compared to H112
 
  
Half Year Ended
Half Year Ended
Half Year Ended
  
Analysis of Total Income 
30.06.13
31.12.12
30.06.12
YoY
  
£m
£m
£m
%  Change
     Macro Products1 
 2,013 
1,548 
2,476 
(19)
     Credit Products1 
 1,467 
1,206 
1,441 
2 
     Exit Quadrant Assets1 
 88 
415 
163 
(46)
Fixed Income, Currency and Commodities (FICC) 
 3,568 
3,169 
4,080 
(13)
Equities and Prime Services 
 1,531 
977 
1,206 
27 
Investment Banking 
 1,086 
1,113 
1,024 
6 
Principal Investments and Other Income 
 288 
56 
150 
92 
Total income 
 6,473 
5,315 
6,460 
- 
 
—  
Total income of £6,473m was in line with H112
 
 
–  
FICC income decreased 13% to £3,568m
 
 
·  
Macro Products income decreased 19% to £2,013m due to a strong Q112 where markets were supported by the European Long Term Refinancing Operation (LTRO)
 
 
·  
Credit Products income increased 2% to £1,467m benefitting from credit spreads tightening and strong trading volumes
 
 
·  
Exit Quadrant Assets income of £88m reduced £75m from the prior year as we accelerated the disposal of exit assets
 
 
–  
Equities and Prime Services income increased 27% to £1,531m across US, Asia and European businesses, reflecting steady commission gains, an improvement in global equity markets driven by increased market confidence and increased client activity in Prime Services
 
 
–  
Investment Banking income increased 6% to £1,086m driven by equity and debt underwriting due to increased client activity in favourable  market conditions
 
 
–  
Principal Investments and Other income of £288m included a fair value adjustment of £259m as a result of greater certainty regarding the recoverability of certain assets not yet received from the 2008 US Lehman acquisition
 
 
—  
Net credit impairment charges of £181m (2012: £202m) reflect a charge against a single name exposure, partially offset by a number of releases
 
 
—  
Operating expenses reduced 3% to £3,920m, including £169m of costs to achieve Transform primarily related to restructuring.  The reduction in operating expenses was driven by the ongoing cost saving initiatives despite £188m of costs relating to infrastructure improvement, including investments to meet the requirements of the Dodd-Frank Act, CRD IV and other regulatory reporting change projects.  2012 included a £193m charge relating to the setting of inter-bank offered rates
 
 
—  
Cost: net operating income ratio improved 3% to 62%. Compensation: income ratio improved to 39% (2012: 40%)
 
 
—  
Profit before tax increased 7% to £2,389m
 
 

 


1  
Macro Products represent Rates, Currency and Commodities income.  Credit Products represent Credit and Securitised Products income.  Exit Quadrant Assets consist of the Investment Bank Exit Quadrant business units as detailed on page 40.



Results by Business
 
Investment Bank
 
 
Income Statement – Q213 compared to Q113
 
 
—  
Income decreased 13% to £3,010m
 
 
–  
FICC income decreased 37% to £1,378m, reflecting lower activity in Macro and Credit Products driven by a decrease in client flow and a decline in Rates as the market weakened over concerns of central banks tapering quantitative easing programmes
 
 
–  
Equities and Prime Services income increased 17% to £825m, with growth in equity derivatives and Prime Services as the business continues to gain market share
 
 
–  
Investment Banking income decreased 5% to £528m, reflecting lower debt underwriting when compared to a seasonally strong first quarter coupled with declines in financial advisory market activity
 
 
–  
Principal Investments and Other income included a fair value adjustment of £259m in the second quarter as a result of greater certainty regarding the recoverability of certain assets not yet received from the 2008 US Lehman acquisition
 
 
—  
Net credit impairment charges of £195m (Q113: release of £14m) reflect a charge against a single name exposure, partially offset by a number of releases
 
 
—  
Operating expenses decreased 19% to £1,750m (Q113: £2,170m) due to lower performance cost and a reduction in costs to achieve Transform
 
 
—  
Profit before tax decreased 18% to £1,074m
 
 
Income Statement – Q213 compared to Q212
 
 
—  
Income of £3,010m is in line with Q212
 
 
–  
FICC income decreased 22% to £1,378m, reflecting lower activity in Macro and Credit Products driven by a decrease in client flow market declines over concerns of central banks tapering of quantitative easing programmes.  There were also charges of £30m (Q212: gains of £56m) related to accelerated disposals of Exit Quadrant assets
 
 
–  
Equities and Prime Services income increased 34% to £825m driven by stronger performances in cash equities and equity derivatives as markets improved and trading volumes increased
 
 
–  
Investment Banking income increased 4% to £528m as increased deal issuance for equity and debt underwriting was offset by declines in financial advisory market activity
 
 
—  
Operating expenses reduced 5% to £1,750m.  Q212 included a £78m charge relating to the setting of inter-bank offered rates
 
 
—  
Profit before tax increased 1% to £1,074m
 
 
Balance Sheet – 30 June 2013 compared to 31 December 2012
 
—  
Assets contributing to adjusted gross leverage remained in line at £568.5bn reflecting increases in reverse repurchase agreements driven by higher matchbook trading, an increase in available for sale investments, offset by a reduction in cash and balances at central banks
 
—  
RWAs decreased 5% to £168.8bn primarily driven by a reduction of sovereign exposures in the trading book and a reduction in Exit Quadrant RWAs, partially offset by foreign currency movements
 


Results by Business
Corporate Banking 
    
  
          
  
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information 
  
30.06.13
  
  
31.12.12
  
30.06.12
YoY
  
  
£m
  
  
£m
  
£m
% Change

Net interest income 
  
998 
  
  
941 
  
970 
3 
Net fee and commission income 
  
506 
  
  
487 
  
511 
(1)
Net trading income 
  
49 
  
  
8 
  
79 
(38)
Net investment income 
  
2 
  
  
14 
  
9 
  
Other (expense)/income 
  
(3)
  
  
13 
  
14 
  
Total income 
  
1,552 
  
  
1,463 
  
1,583 
(2)
Credit impairment charges and other provisions 
  
(258)
  
  
(454)
  
(431)
(40)
Net operating income 
  
1,294 
  
  
1,009 
  
1,152 
12 
  
    
  
          
Operating expenses (excluding provision for interest rate hedging products redress, costs to achieve Transform and UK bank levy) 
  
(852)
  
  
(833)
  
(839)
2 
Provision for interest rate hedging products redress 
  
(650)
  
  
(400)
  
(450)
  
Costs to achieve Transform 
  
(41)
  
  
- 
  
- 
  
UK bank levy 
  
- 
  
  
(39)
  
- 
  
Operating expenses 
  
(1,543)
  
  
(1,272)
  
(1,289)
20 
  
    
  
          
Other net income /(expense) 
  
1 
  
  
12 
  
(2)
  
Loss before tax 
  
(248)
  
  
(251)
  
(139)
  
  
    
  
          
Adjusted profit before tax1 
  
402 
  
  
149 
  
311 
29 
Adjusted attributable profit1,2
  
277 
  
  
75 
  
154 
80 
  
    
  
          
Balance Sheet Information and Key Facts 
    
  
          
Loans and advances to customers at amortised cost 
  
£62.7bn
  
  
£64.3bn
  
£65.6bn
  
Loans and advances to customers at fair value 
  
£16.3bn
  
  
£17.6bn
  
£17.3bn
  
Customer deposits 
  
£106.7bn
  
  
£99.6bn
  
£90.9bn
  
Total assets3 
  
£120.4bn
  
  
£87.8bn
  
£89.9bn
  
Risk weighted assets3 
  
£73.1bn
  
  
£70.9bn
  
£72.3bn
  
  
  
 
  
          
Number of employees (full time equivalent) 
  
13,000 
  
  
13,000 
  
13,300 
  
  
    
  
          
  
Adjusted1 
  
Statutory
  
Performance Measures 
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12
  

Return on average equity 
7.1%
2.0%
3.8% 
  
(4.6%)
(6.3%)
(4.6%)
  
Return on average risk weighted assets 
0.9%
0.4%
0.5% 
  
(0.4%)
(0.5%)
(0.4%)
  
Loan loss rate (bps) 
76 
127 
124  
  
76 
127 
124 
  
Cost: income ratio 
58%
60%
53% 
  
99%
87%
81%
  


 


1  
Adjusted profit before tax, adjusted attributable profit and adjusted performance measures exclude the provision for interest rate hedging products redress of £650m (H212: £400m, H112: £450m).
2  
Adjusted attributable profit includes profit after tax and non-controlling interests.
3  
2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.



Results by Business
Corporate Banking 
        
  
        
Half Year Ended 30 June 2013 
UK
Europe
RoW
Total
Income Statement Information 
£m
£m
£m
£m
Income 
1,161 
117 
274 
1,552 
Credit impairment (charges)/releases and other provisions 
(84)
(180)
6 
(258)
Operating expenses (excluding provision for sale of interest rate hedging products redress and costs to achieve Transform) 
(570)
(78)
(204)
(852)
Provision for sale of interest rate hedging products redress 
(650)
- 
- 
(650)
Costs to achieve Transform 
(4)
(37)
- 
(41)
Other net income 
- 
- 
1 
1 
(Loss)/profit before tax 
(147)
(178)
77 
(248)
         
Adjusted profit/(loss) before tax1 
503 
(178)
77 
402 
  
        
Balance Sheet Information 
        
Loans and advances to customers at amortised cost 
£50.1bn
£6.1bn
£6.5bn
£62.7bn
Loans and advances to customers at fair value 
£16.3bn
- 
- 
£16.3bn
Customer deposits 
£84.4bn
£9.3bn
£13.0bn
£106.7bn
Risk weighted assets2 
£54.4bn
£10.0bn
£8.7bn
£73.1bn
  
        
Half Year Ended 31 December 2012 
        
Income Statement Information 
        
Income 
1,085 
132 
246 
1,463 
Credit impairment charges and other provisions 
(139)
(265)
(50)
(454)
Operating expenses (excluding provision for sale of interest rate hedging products redress and UK bank levy) 
(531)
(85)
(217)
(833)
Provision for sale of interest rate hedging products redress 
(400)
- 
- 
(400)
UK bank levy 
(39)
- 
- 
(39)
Other net income 
4 
- 
8 
12 
Loss before tax 
(20)
(218)
(13)
(251)
         
Adjusted profit/(loss) before tax1 
380 
(218)
(13)
149 
  
        
Balance Sheet Information 
        
Loans and advances to customers at amortised cost 
£51.5bn
£6.5bn
£6.3bn
£64.3bn
Loans and advances to customers at fair value 
£17.6bn
- 
- 
£17.6bn
Customer deposits 
£79.0bn
£8.2bn
£12.4bn
£99.6bn
Risk weighted assets2 
£49.9bn
£10.5bn
£10.5bn
£70.9bn
  
        
Half Year Ended 30 June 2012 
        
Income Statement Information 
        
Income 
1,136 
169 
278 
1,583 
Credit impairment charges and other provisions 
(145)
(277)
(9)
(431)
Operating expenses (excluding provision for sale of interest rate hedging products redress) 
(538)
(78)
(223)
(839)
Provision for sale of interest rate hedging products redress 
(450)
- 
- 
(450)
Other net expense 
(2)
- 
- 
(2)
(Loss)/profit before tax 
1 
(186)
46 
(139)
         
Adjusted profit/(loss) before tax1 
451 
(186)
46 
311 
  
        
Balance Sheet Information 
        
Loans and advances to customers at amortised cost 
£51.1bn
£7.5bn
£7.0bn
£65.6bn
Loans and advances to customers at fair value 
£17.2bn
- 
£0.1bn
£17.3bn
Customer deposits 
£72.6bn
£5.6bn
£12.7bn
£90.9bn
Risk weighted assets2 
£49.9bn
£11.5bn
£10.9bn
£72.3bn

1  
Adjusted profit before tax and adjusted performance measures exclude the provision for interest rate hedging products redress of £650m (H212: £400m, H112: £450m).
2  
2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.



Results by Business
 
Corporate Banking

Income Statement – H113 compared to H112
 
—  
Total income decreased 2% to £1,552m  reflecting a reduction in gains on fair value items of £24m (2012: £68m), non-recurring income from exited businesses and a reduction in Exit Quadrant portfolios in Europe, partially offset by an increase in UK Cash Management income
 
 
—  
Net interest margin was down 4bps to 123bps primarily reflecting reduced contributions from structural hedges
 
 
–  
Customer asset margin increased 9bps to 128bps reflecting higher margins on term and syndicated loans in the UK.  Average customer assets decreased 4% to £67.2bn driven by the rundown of Exit Quadrant portfolios in Europe
 
 
–  
Customer liability margin decreased 8bps to 104bps reflecting higher customer deposit rates. Average customer liabilities increased 15% to £95.9bn driven by an increase in deposits from UK corporates
 
 
—  
 Credit impairment charges reduced 40% to £258m. Loan loss rate improved to 76bps (2012: 124bps)
 
 
–  
UK impairment charges reduced by £62m to £84m, partly reflecting reduced impairment against large corporate clients
 
 
–  
Europe impairment charges reduced by £97m to £180m following ongoing action to reduce exposure to the property and construction sector in Spain
 
 
—  
Adjusted operating expenses increased 6% to £893m driven by costs to achieve Transform of £41m largely related to restructuring costs in Europe. Statutory operating expenses increased 20% to £1,543m after charging an additional £650m provision for interest rate hedging products redress (2012: £450m)
 
 
—  
Adjusted profit before tax increased 29% to £402m
 
 
–  
UK adjusted profit before tax increased 12% to £503m driven by lower credit impairment charges
 
 
–  
Europe loss before tax reduced 4% to £178m principally due to lower credit impairment charges, partially offset by non-recurring income from exited businesses and a reduction in Exit Quadrant portfolios, and costs to achieve Transform
 
 
–  
Rest of the World profit before tax increased 67% to £77m reflecting lower costs due to exited businesses
 
 
—  
Statutory loss before tax was £248m (2012: £139m) after charging an additional provision for interest rate hedging products redress
 
 
Income Statement – Q213 compared to Q113
 
 
—  
Adjusted profit before tax increased 20% to £219m driven by increased UK Cash Management income and reduced operating expenses due to lower costs to achieve Transform
 
 
—  
Statutory loss before tax was £431m (Q113: profit of £183m) after charging an additional provision for interest rate hedging products redress
 
 
Balance Sheet – 30 June 2013 compared to 31 December 2012
 
 
—  
Loans and advances to customers declined 2% to £62.7bn driven by a reduction in the client financing requirements as working capital deposits increased and the rundown of Exit Quadrant portfolios in Europe
 
 
—  
Customer deposits increased 7% to £106.7bn reflecting an increase in UK deposit growth
 
 
—  
Total assets increased £32.6bn to £120.4bn driven by a reallocation of liquidity pool assets. This was following a decision in 2013 to reallocate liquidity costs to the businesses
 
 
—  
RWAs increased 3% to £73.1bn primarily reflecting loss given default recalibration, a change in the regulatory treatment for commercial real estate exposures, and foreign currency movements. This was partially offset by a reduction in Exit Quadrant RWAs and RWA reallocations across businesses
 


Results by Business
Wealth and Investment Management 
                
  
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information 
  
30.06.13
    
31.12.12
  
30.06.12
YoY
  
  
£m
    
£m
  
£m
% Change

Net interest income 
  
431 
    
436 
  
420 
3 
Net fee and commission income 
  
485 
    
480 
  
468 
4 
Net trading income 
  
9 
    
11 
  
5 
80 
Net investment income 
  
6 
    
- 
  
- 
  
Other (expense)/income 
  
- 
    
(1)
  
1 
  
Total income 
  
931 
    
926 
  
894 
4 
Credit impairment charges and other provisions 
  
(49)
    
(19)
  
(19)
  
Net operating income 
  
882 
    
907 
  
875 
1 
  
                
Operating expenses (excluding costs to achieve Transform and UK bank levy)  
  
(810)
    
(730)
  
(775)
5 
Costs to achieve Transform 
  
(33)
    
- 
  
- 
  
UK bank levy 
  
- 
    
(4)
  
- 
  
Operating expenses 
  
(843)
    
(734)
  
(775)
9 
  
                
Other net income/(expense) 
  
8 
    
2 
  
(1)
  
Profit before tax 
  
47 
    
175 
  
99 
(53)
  
                
Adjusted profit before tax 
  
47 
    
175 
  
99 
(53)
Adjusted attributable profit1 
  
29 
    
153 
  
70 
(59)
  
                
Balance Sheet Information and Key Facts 
                
Loans and advances to customers at amortised cost 
  
£22.6bn
    
£21.3bn
  
£19.8bn
  
Customer deposits 
  
£62.8bn
    
£53.8bn
  
£50.0bn
  
Total assets2 
  
£36.5bn
    
£24.5bn
  
£23.4bn
  
Risk weighted assets2 
  
£17.0bn
    
£16.1bn
  
£14.0bn
  
  
 
 
            
Client assets 
  
£202.8bn
    
£186.0bn
  
£176.1bn
  
Number of employees (full time equivalent) 
  
8,300 
    
8,300 
  
8,200 
  
  
                
  
Adjusted
  
Statutory
  
Performance Measures 
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
  

Return on average equity 
2.5%
14.9%
7.3%
  
2.5%
14.9%
7.3%
  
Return on average risk weighted assets 
0.4%
2.2%
1.2%
  
0.4%
2.2%
1.2%
  
Cost: income ratio 
91%
79%
87%
  
91%
79%
87%
  
Loan loss rate (bps) 
43 
17 
19 
  
43 
17 
19 
  
  
                
  
                
  
                
  
                
  
                
  
                
  
                
  
                
   


 
 
1  
Attributable profit includes profit after tax and non-controlling interests.
2  
2013 total assets and risk weighted assets include an allocation of liquidity pool assets previously held centrally.

 

 
Results by Business
 
Wealth and Investment Management

Income Statement – H113 compared to H112
 
—  
Total income increased 4% to £931m, driven by the High Net Worth businesses, with particular growth in the Americas and Asia regions
 
 
—  
Net interest income grew 3% to £431m, driven by growth in deposit and lending balances primarily in the High Net Worth businesses.  Net interest margin decreased 17bps to 108bps primarily reflecting reduced contributions from structural hedges
 
 
–  
Customer asset margin increased 16bps to 81bps reflecting higher margins on High Net Worth businesses.  Average customer assets increased 16% to £22.1bn
 
 
–  
Customer liability margin decreased 12bps to 99bps reflecting changes in product mix. Average customer liabilities increased 21% to £58.4bn
 
 
—  
Net fees and commission income increased 4% to £485m
 
 
—  
Credit impairment charges increased £30m to £49m, largely due to a £15m charge relating to secured lending on Spanish property
 
 
—  
Operating expenses increased £68m to £843m largely reflecting cost to achieve Transform of £33m related to restructuring costs and a £22m customer remediation provision
 
 
—  
Profit before tax decreased 53% to £47m primarily driven by costs to achieve Transform, customer remediation provision and increased credit impairment charges
 
 
 
Income Statement – Q213 compared to Q113
 
 
—  
Profit before tax decreased £73m to a loss of £13m primarily due to cost to achieve Transform, customer remediation provision and increased credit impairment charges
 
 
 
Balance Sheet – 30 June 2013 compared to 31 December 2012
 
 
—  
Loans and advances to customers increased 7% to £22.6bn and customer deposits increased 17% to £62.8bn primarily driven by growth in the High Net Worth businesses
 
 
—  
Client Assets increased to £202.8bn (2012: £186.0bn) driven by net new assets in the High Net Worth businesses and favourable equity market and foreign currency movements
 
 
—  
RWAs increased 6% to £17.0bn driven by foreign currency movements
 


Results by Business
Head Office and Other Operations
  
  
Half Year Ended
Half Year Ended
Half Year Ended
  
Income Statement Information 
  
30.06.13
    
31.12.12
  
30.06.12
  
  
  
£m
    
£m
  
£m
  

Net interest (expense)/income 
  
(137)
    
(182)
  
258 
  
Net fee and commission expense 
  
(53)
    
(92)
  
(106)
  
Net trading income/(expense) 
  
2 
    
(5)
  
122 
  
Net investment income 
  
24 
    
192 
  
75 
  
Net premiums from insurance contracts 
  
13 
    
17 
  
21 
  
Other income 
  
17 
    
39 
  
17 
  
Adjusted total (expense)/income net of insurance claims 
  
(134)
    
(31)
  
387 
  
Own credit 
  
86 
    
(1,634)
  
(2,945)
  
Gain on disposal of investment in BlackRock, Inc. 
  
- 
    
- 
  
227 
  
Total expense net of insurance claims 
  
(48)
    
(1,665)
  
(2,331)
  
Credit impairment release/(charges) and other provisions 
  
1 
    
(1)
  
(5)
  
Net operating expense 
  
(47)
    
(1,666)
  
(2,336)
  
  
                
Operating expenses (excluding UK bank levy) 
  
(24)
    
(67)
  
(98)
  
UK bank levy 
  
- 
    
(19)
  
- 
  
Operating expenses 
  
(24)
    
(86)
  
(98)
  
  
                
Other net (expense)/income 
  
- 
    
(2)
  
25 
  
Loss before tax 
  
(71)
    
(1,754)
  
(2,409)
  
  
                
Adjusted (loss)/profit before tax1 
  
(157)
    
(120)
  
309 
  
Adjusted attributable (loss)/profit1,2
  
(313)
    
(305)
  
237 
  
  
                
Balance Sheet Information and Key Facts 
                
Total assets3 
  
£47.2bn
    
£41.3bn
  
£35.3bn
  
Risk weighted assets3 
  
£3.7bn
    
£5.3bn
  
£2.7bn
  
  
 
 
            
Number of employees (full time equivalent) 
  
100 
    
200 
  
100 
  

 

 

 
1  
Adjusted (loss)/profit before tax, adjusted attributable (loss)/profit and adjusted performance measures and profit before tax exclude the impact of £86m own credit gain (H212: loss of £1,634m, H112: £2,945m) and £nil gain on disposal of strategic investment in BlackRock, Inc (H212: nil, H112: £227m).
2  
Attributable profit includes profit after tax and non-controlling interests.
3  
2013 total assets and risk weighted assets reflect reallocation to businesses of liquidity pool assets previously held centrally.



Results by Business
 
 
Head Office and Other Operations
 
 
Income Statement – H113 compared to H112
 
 
—  
Adjusted income declined to a net expense of £134m (2012: income of £387m), predominately driven by lower margins achieved on funding higher growth in customer deposits across the Group and the non-recurrence of gains related to hedges of employee share awards in Q112 of £235m
 
 
—  
Operating expenses decreased £74m to £24m, mainly due to the non-recurrence of the £97m penalty arising from the industry wide investigation into the setting of inter-bank offered rates recognised in H112, partially offset by Transform programme costs and the Salz review
 
 
—  
Adjusted loss before tax increased to £157m (2012: profit of £309m). Statutory loss before tax improved to £71m (2012: £2,409m) including an own credit gain of £86m (2012: charge of £2,945m)
 
 
 
Income Statement – Q213 compared to Q113
 
 
—  
Adjusted loss before tax of £104m (Q113: £53m) principally reflecting a decline in total expense net of insurance claims to £100m (Q113: £34m) driven by the impact of growth in customer deposits, partially offset by a gain on debt buy back
 
 
—  
Statutory profit before tax of £233m (Q113: loss of £304m) included an own credit gain of £337m (Q113: charge of £251m)
 
 
 
Balance Sheet – 30 June 2013 compared to 31 December 2012
 
 
—  
Total assets increased 14% to £47.2bn reflecting growth in the liquidity pool bond portfolio, partially offset by a reallocation of liquidity pool assets across the businesses.  This was following a decision in 2013 to reallocate liquidity costs to the businesses
 
 
—  
RWAs decreased 31% to £3.7bn primarily driven by reallocation of liquidity pool assets to the businesses
 


Business Results by Quarter
 
Q213
Q113
  
Q412
Q312
Q212
Q112
  
Q411
Q311
UK Retail and Business Banking 
£m
£m
  
£m
£m
£m
£m
  
£m
£m
Adjusted basis  
                    
Total income net of insurance claims  
1,135 
1,067 
  
1,077 
1,123 
1,118 
1,066 
  
1,129 
1,244 
Credit impairment charges and other provisions  
(89)
(89)
  
(71)
(76)
(46)
(76)
  
(156)
(105)
Net operating income  
1,046 
978 
  
1,006 
1,047 
1,072 
990 
  
973 
1,139 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(689)
(704)
  
(718)
(689)
(713)
(757)
  
(790)
(711)
Costs to achieve Transform 
(27)
- 
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(17)
- 
- 
- 
  
(22)
- 
Operating expenses 
(716)
(704)
  
(735)
(689)
(713)
(757)
  
(812)
(711)
Other net income/(expenses) 
3 
25 
  
4 
- 
1 
(1)
  
1 
1 
Adjusted profit before tax  
333 
299 
  
275 
358 
360 
232 
  
162 
429 
   
                    
Adjusting items  
                    
Provision for PPI redress  
(660)
- 
  
(330)
(550)
- 
(300)
  
- 
- 
Statutory (loss)/profit before tax   
(327)
299 
  
(55)
(192)
360 
(68)
  
162 
429 
  
                    

Europe Retail and Business Banking 
                    
Adjusted basis  
                    
Total income net of insurance claims  
176 
176 
  
161 
168 
191 
188 
  
198 
309 
Credit impairment charges and other provisions  
(72)
(70)
  
(74)
(58)
(71)
(54)
  
(65)
(46)
Net operating income  
104 
106 
  
87 
110 
120 
134 
  
133 
263 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(207)
(215)
  
(185)
(193)
(200)
(209)
  
(290)
(244)
Costs to achieve Transform 
- 
(356)
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(20)
- 
- 
- 
  
(21)
- 
Operating expenses  
(207)
(571)
  
(205)
(193)
(200)
(209)
  
(311)
(244)
Other net (expense)/income 
(144)
3 
  
4 
2 
4 
3 
  
2 
2 
Adjusted (loss)/profit before tax  
(247)
(462)
  
(114)
(81)
(76)
(72)
  
(176)
21 
   
                    
Adjusting items  
                    
Goodwill impairment  
- 
- 
  
- 
- 
- 
- 
  
(427)
- 
Statutory (loss)/profit before tax  
(247)
(462)
  
(114)
(81)
(76)
(72)
  
(603)
21 
  
                    

Africa Retail and Business Banking 
                    
Adjusted basis  
                    
Total income net of insurance claims  
684 
668 
  
721 
714 
729 
764 
  
806 
883 
Credit impairment charges and other provisions  
(94)
(114)
  
(142)
(176)
(208)
(106)
  
(86)
(108)
Net operating income  
590 
554 
  
579 
538 
521 
658 
  
720 
775 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(452)
(474)
  
(455)
(506)
(471)
(528)
  
(468)
(584)
Costs to achieve Transform 
(9)
- 
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(24)
- 
- 
- 
  
(23)
- 
Operating expenses  
(461)
(474)
  
(479)
(506)
(471)
(528)
  
(491)
(584)
Other net income 
2 
1 
  
5 
2 
1 
2 
  
2 
- 
Adjusted profit before tax  
131 
81 
  
105 
34 
51 
132 
  
231 
191 
   
                    
Adjusting items  
                    
Gains on acquisitions and disposals  
- 
- 
  
- 
- 
- 
- 
  
- 
2 
Statutory profit before tax  
131 
81 
  
105 
34 
51 
132 
  
231 
193 
  
                    
                     





Business Results by Quarter
 
Q213
Q113
  
Q412
Q312
Q212
Q112
  
Q411
Q311
Barclaycard 
£m
£m
  
£m
£m
£m
£m
  
£m
£m
Adjusted basis  
                    
Total income net of insurance claims  
1,190 
1,153 
  
1,140 
1,092 
1,079 
1,033 
  
1,037 
1,177 
Credit impairment charges and other provisions  
(313)
(303)
  
(286)
(271)
(242)
(250)
  
(287)
(356)
Net operating income  
877 
850 
  
854 
821 
837 
783 
  
750 
821 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(467)
(496)
  
(508)
(432)
(441)
(445)
  
(478)
(462)
Costs to achieve Transform 
(5)
- 
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(16)
- 
- 
- 
  
(16)
- 
Operating expenses  
(472)
(496)
  
(524)
(432)
(441)
(445)
  
(494)
(462)
Other net income 
7 
9 
  
5 
7 
8 
9 
  
5 
8 
Adjusted profit before tax  
412 
363 
  
335 
396 
404 
347 
  
261 
367 
   
                    
Adjusting items  
                    
Provision for PPI redress  
(690)
- 
  
(270)
(150)
- 
- 
  
- 
- 
Statutory (loss)/profit before tax   
(278)
363 
  
65 
246 
404 
347 
  
261 
367 
  
                    

Investment Bank 
                    
Adjusted and statutory basis  
                    
     Macro Products 
900 
1,113 
  
800 
748 
1,040 
1,436 
  
563 
1,131 
     Credit Products 
508 
959 
  
505 
701 
665 
776 
  
490 
439 
     Exit Quadrant Assets 
(30)
118 
  
189 
226 
56 
107 
  
(120)
(271)
Fixed Income, Currency and Commodities  
1,378 
2,190 
  
1,494 
1,675 
1,761 
2,319 
  
933 
1,299 
Equities and Prime Services  
825 
706 
  
454 
523 
615 
591 
  
300 
346 
Investment Banking  
528 
558 
  
620 
493 
509 
515 
  
518 
402 
Principal Investments and Other Income  
279 
9 
  
26 
30 
139 
11 
  
36 
89 
Total income  
3,010 
3,463 
  
2,594 
2,721 
3,024 
3,436 
  
1,787 
2,136 
Credit impairment (charges)/releases and other provisions
(195) 
14 
  
1 
(3)
(121)
(81)
  
(89)
(114)
Net operating income  
2,815 
3,477 
  
2,595 
2,718 
2,903 
3,355 
  
1,698 
2,022 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(1,697)
(2,054)
  
(1,644)
(1,737)
(1,849)
(2,195)
  
(1,527)
(1,818)
Costs to achieve Transform 
(53)
(116)
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(206)
- 
- 
- 
  
(199)
- 
Operating expenses  
(1,750)
(2,170)
  
(1,850)
(1,737)
(1,849)
(2,195)
  
(1,726)
(1,818)
Other net income/(expenses) 
9 
8 
  
15 
7 
6 
22 
  
(4)
6 
Adjusted and statutory profit/(loss) before tax 
1,074 
1,315 
  
760 
988 
1,060 
1,182 
  
(32)
210 
  
                    


Business Results by Quarter
 

Corporate Banking 
Q213
Q113
  
Q412
Q312
Q212
Q112
  
Q411
Q311
  
£m
£m
  
£m
£m
£m
£m
  
£m
£m
Adjusted basis  
                    
Total income net of insurance claims  
780 
772 
  
746 
717 
734 
849 
  
753 
902 
Credit impairment charges and other provisions  
(128)
(130)
  
(240)
(214)
(223)
(208)
  
(252)
(284)
Net operating income  
652 
642 
  
506 
503 
511 
641 
  
501 
618 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(430)
(422)
  
(412)
(421)
(402)
(437)
  
(469)
(480)
Costs to achieve Transform 
(4)
(37)
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(39)
- 
- 
- 
  
(43)
- 
Operating expenses  
(434)
(459)
  
(451)
(421)
(402)
(437)
  
(512)
(480)
Other net income/(expenses) 
1 
- 
  
6 
6 
(1)
(1)
  
1 
2 
Adjusted profit/(loss) before tax   
219 
183 
  
61 
88 
108 
203 
  
(10)
140 
   
                    
Adjusting items  
                    
Goodwill impairment  
- 
- 
  
- 
- 
- 
- 
  
(123)
- 
Provision for interest rate hedging products
redress 
(650)
- 
  
(400)
- 
(450)
- 
  
- 
- 
Losses on disposal  
- 
- 
  
- 
- 
- 
- 
  
(9)
- 
Statutory (loss)/profit before tax   
(431)
183 
  
(339)
88 
(342)
203 
  
(142)
140 

  
                    
Wealth and Investment Management 
                    
Adjusted and statutory basis  
                    
Total income net of insurance claims  
462 
469 
  
483 
443 
442 
452 
  
453 
462 
Credit impairment charges and other provisions  
(35)
(14)
  
(13)
(6)
(12)
(7)
  
(10)
(12)
Net operating income  
427 
455 
  
470 
437 
430 
445 
  
443 
450 
Operating expenses (excluding costs to achieve Transform and UK bank levy) 
(410)
(400)
  
(361)
(369)
(380)
(395)
  
(398)
(380)
Costs to achieve Transform 
(33)
- 
  
- 
- 
- 
- 
  
- 
- 
UK bank levy 
- 
- 
  
(4)
- 
- 
- 
  
(1)
- 
Operating expenses  
(443)
(400)
  
(365)
(369)
(380)
(395)
  
(399)
(380)
Other net income/(expense) 
3 
5 
  
- 
2 
(1)
- 
  
(1)
- 
Adjusted and statutory (loss)/profit before tax  
(13)
60 
  
105 
70 
49 
50 
  
43 
70 
  
                    

Head Office and Other Operations 
                    
Adjusted basis  
                    
Total (expense)/income net of insurance claims  
(100)
(34)
  
(55)
24 
68 
319 
  
49 
(112)
Credit impairment releases/(charges) and other provisions  
1 
- 
  
- 
(1)
(3)
(2)
  
(6)
2 
Net operating (expense)/income  
(99)
(34)
  
(55)
23 
65 
317 
  
43 
(110)
Operating expenses (excluding costs to achieve Transform and UK bank levy)  
(7)
(17)
  
(61)
(6)
(99)
1 
  
(22)
(7)
Costs to achieve Transform 
5 
(5)
  
- 
- 
- 
- 
  
- 
- 
UK bank levy  
- 
- 
  
(19)
- 
- 
- 
  
- 
- 
Operating expenses 
(2)
(22)
  
(80)
(6)
(99)
1 
  
(22)
(7)
Other net (expense)/income 
(3)
3 
  
3 
(5)
23 
2 
  
- 
1 
Adjusted (loss)/profit before tax  
(104)
(53)
  
(132)
12 
(11)
320 
  
21 
(116)
   
                    
Adjusting items  
                    
Own credit  
337 
(251)
  
(560)
(1,074)
(325)
(2,620)
  
(263)
2,882 
Impairment and gain on disposal of BlackRock investment 
- 
- 
  
- 
- 
227 
- 
  
- 
(1,800)
Gains on debt buy-backs  
- 
- 
  
- 
- 
- 
- 
  
1,130 
- 
(Losses)/gains on acquisitions and disposals  
- 
- 
  
- 
- 
- 
- 
  
(23)
1 
Statutory profit/(loss) before tax  
233 
(304)
  
(692)
(1,062)
(109)
(2,300)
  
865 
967 


Performance Management
 
Returns and Equity by Business
 
 
Returns on average equity and average tangible equity are calculated using attributable profit for the period, divided by average allocated equity or tangible equity as appropriate. Average allocated equity has been calculated as 10.5% of average RWAs for each business, adjusted for capital deductions, including goodwill and intangible assets, reflecting the assumptions the Group uses for capital planning purposes. The higher capital level currently held, reflecting Core Tier 1 capital ratio of 11.1% as at 30 June 2013, is allocated to Head Office and Other Operations. Average allocated tangible equity is calculated using the same method but excludes goodwill and intangible assets.
 

  
Adjusted 
  
Statutory 
  
Half year ended
Half year ended
Half year ended 
  
Half year ended
Half year ended
Half year ended 
  
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12 
Return on Average Equity 
%
%
% 
  
%
%
% 

UK RBB 
12.2 
12.3 
12.2  
  
(1.0)
(6.0)
5.7  
Europe RBB 
(49.1)
(15.0)
(10.9) 
  
(49.1)
(15.0)
(10.9) 
Africa RBB 
3.0 
(3.0)
2.5  
  
3.0 
(3.0)
2.5  
Barclaycard 
19.3 
19.4 
20.1  
  
0.5 
6.5 
20.1  
Investment Bank 
15.4 
11.9 
13.4  
  
15.4 
11.9 
13.4  
Corporate Banking 
7.1 
2.0 
3.8  
  
(4.6)
(6.3)
(4.6) 
Wealth and Investment Management 
2.5 
14.9 
7.3  
  
2.5 
14.9 
7.3  
Group excluding Head Office and Other Operations 
9.9 
9.3 
10.4  
  
3.7 
3.8 
8.0  
Head Office and Other Operations impact 
(2.1)
(1.9)
0.2  
  
(1.1)
(6.8)
(7.4) 
Total 
7.8 
7.4 
10.6  
  
2.6 
(3.0)
0.6  
  
    
  
      
  
  
Adjusted 
  
Statutory 
  
Half year ended
Half year ended
Half year ended 
  
Half year ended
Half year ended
Half year ended 
  
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12 
Return on Average Tangible Equity 
%
%
% 
  
%
%
% 

UK RBB 
21.5 
22.7 
23.1  
  
(1.7)
(11.1)
10.7  
Europe RBB 
(53.8)
(16.5)
(11.9) 
  
(53.8)
(16.5)
(11.9) 
Africa RBB1 
9.4 
1.6 
7.9  
  
9.4 
1.6 
7.9  
Barclaycard 
26.0 
26.6 
27.2  
  
0.6 
8.9 
27.2  
Investment Bank 
15.9 
12.3 
13.9  
  
15.9 
12.3 
13.9  
Corporate Banking 
7.4 
2.1 
4.0  
  
(4.8)
(6.6)
(4.9) 
Wealth and Investment Management 
3.3 
20.4 
10.2  
  
3.3 
20.4 
10.2  
Group excluding Head Office and Other Operations 
11.8 
11.1 
12.3  
  
4.6 
4.7 
9.6  
Head Office and Other Operations impact 
(2.7)
(2.4)
0.2  
  
(1.6)
(8.2)
(8.9) 
Total 
9.1 
8.7 
12.5  
  
3.0 
(3.5)
0.7  

 


 
1  
The return on average tangible equity for Africa RBB has been calculated including amounts relating to Absa Group’s non-controlling interests.
 
 

 

 
Performance Management
 
  
Adjusted 
  
Statutory 
  
Half year ended
Half year ended
Half year ended 
  
Half year ended
Half year ended
Half year ended 
  
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12 
Attributable profit 
£m
£m
£m 
  
£m
£m
£m 

UK RBB 
480 
450 
424  
  
(39)
(219)
197  
Europe RBB 
(522)
(156)
(120) 
  
(522)
(156)
(120) 
Africa RBB 
35 
(38)
35  
  
35 
(38)
35  
Barclaycard 
524 
482 
492  
  
13 
161 
492  
Investment Bank 
1,541 
1,236 
1,446  
  
1,541 
1,236 
1,446  
Corporate Banking 
277 
75 
154  
  
(180)
(233)
(186) 
Wealth and Investment Management 
29 
153 
70  
  
29 
153 
70  
Head Office and Other Operations1
(309)
(305)
237  
  
(206)
(1,676)
(1,786) 
Total 
2,055 
1,897 
2,738  
  
671 
(772)
148  
  
    
  
      
  
  
Average Equity  
  
Average Tangible Equity  
  
Half year ended
Half year ended
Half year ended 
  
Half year ended
Half year ended
Half year ended 
  
30.06.13
31.12.12
30.06.12 
  
30.06.13
31.12.12
30.06.12 
  
£m
£m
£m 
  
£m
£m
£m 

UK RBB 
7,848 
7,297 
6,945  
  
4,470 
3,964 
3,666  
Europe RBB 
2,128 
2,081 
2,204  
  
1,942 
1,891 
2,022  
Africa RBB 
2,318 
2,516 
2,799  
  
1,012 
1,140 
1,327  
Barclaycard 
5,421 
4,962 
4,886  
  
4,039 
3,628 
3,617  
Investment Bank 
20,072 
20,823 
21,523  
  
19,377 
20,133 
20,804  
Corporate Banking 
7,840 
7,448 
8,030  
  
7,474 
7,087 
7,650  
Wealth and Investment Management 
2,294 
2,052 
1,911  
  
1,732 
1,497 
1,376  
Head Office and Other Operations1 
4,056 
4,194 
4,433  
  
4,039 
4,191 
4,433  
Total2 
51,977 
51,373 
52,731  
  
44,085 
43,531 
44,895  



 

 
1  
Includes risk weighted assets and capital deductions in Head Office and Other Operations, plus the residual balance of average shareholders’ equity and tangible equity.
 
 
2  
Group average shareholders’ equity and average shareholders’ tangible equity excludes the cumulative impact of own credit on retained earnings for the calculation of adjusted performance measures.  
 



Performance Management
 
Costs to achieve Transform
 
·  
On 12 February 2013 the Group announced the commencement of a strategic cost management programme targeted at reducing net operating expenditure by £1.7bn by 2015.  The programme is being executed and managed through the delivery of rightsizing, industrialisation and innovation initiatives.  Rightsizing focuses on restructuring the current cost base to match profitable sources of growth; whilst industrialisation and innovation initiatives seek to invest in technology and new ways of working to reduce future operating costs and enhance customer and client propositions

·  
In the first half of the year the Transform investment has focused primarily on rightsizing. We expect the programme to shift towards industrialisation and innovation in the second half of 2013 and in 2014. Part of the total expected £2.7bn of costs to achieve Transform is being accelerated in 2013, having recognised £640m in H113

·  
The material costs within major restructuring initiatives consist of redundancy, reflecting our immediate priorities to rightsize our Europe RBB operations and the Investment Bank’s operations in Asia and Europe

       
 
Half year ended 30.06.13
 Costs to achieve Transform by business
Major
restructuring initiatives
Other Transform costs
Total costs to achieve Transform
 
£m
£m
£m

UK RBB
- 
(27)
(27)
Europe RBB
(356)
- 
(356)
Africa RBB
- 
(9)
(9)
Barclaycard
- 
(5)
(5)
Investment Bank
(168)
(1)
(169)
Corporate Banking
(37)
(4)
(41)
Wealth and Investment Management
(32)
(1)
(33)
Total costs to achieve Transform
(593)
(47)
(640)
       

 
Adjusted performance measures by business excluding costs to achieve Transform
Profit before tax
Return on average equity
Cost: income ratio
 
£m
%
%

UK RBB
659 
12.7 
63 
Europe RBB
(353)
(25.6)
120 
Africa RBB
221 
3.6 
68 
Barclaycard
780 
19.5 
41 
Investment Bank
2,558 
16.5 
58 
Corporate Banking
443 
7.8 
55 
Wealth and Investment Management
80 
4.5 
87 
Head Office and Other Operations
(157)
(2.2)
(18)
Group excluding costs to achieve Transform
4,231 
9.5 
61 


Performance Management
 
Exit Quadrant Business Units
 
 
·  
On 12 February 2013, the Group announced as part of its Strategic Review that, following a rigorous bottom-up analysis of each of its businesses based on the attractiveness of the market they operate in and their ability to generate sustainable returns on equity above cost of equity, it would be exiting certain businesses
 
 
·  
The table below presents selected financial data for these Exit Quadrant businesses
 

  
CRD IV RWAs1 
Balance Sheet
Half Year Ended 30.06.13
  
As at 30.06.13
As at 31.12.12 
As at 30.06.13
As at 31.12.12
Income/ (Expense)
Impairment (charge)/ release
Net operating (expense)/ income
Corporate Banking2 
£bn
£bn 
£bn
£bn
£m
£m
£m

European legacy assets 
4.1 
5.0  
3.4 
3.9 
39 
(178)
(139)
Europe RBB 
  
  
          
Legacy assets 
9.5 
9.7  
23.0 
22.9 
56 
(110)
(54)
Investment Bank 
  
  
          
US Residential Mortgages 
0.7 
5.3  
1.1 
2.2 
375 
- 
375 
Commercial Mortgages and Real Estate 
3.0 
3.1  
3.9 
4.0 
41 
- 
41 
Leveraged and Other Loans 
8.4 
10.1  
9.6 
11.5 
(65)
2 
(63)
CLOs and Other Insured Assets 
6.5 
5.9  
14.1 
16.3 
(286)
- 
(286)
Structured Credit and other 
5.3 
9.4  
8.1 
8.6 
(40)
- 
(40)
Monoline Derivatives 
1.8 
3.1  
0.3 
0.6 
63 
- 
63 
Corporate Derivatives 
3.6 
8.3  
2.5 
3.6 
- 
- 
- 
Portfolio Assets 
29.3 
45.2  
39.6 
46.8 
 88 
 2 
90 
Pre-CRD IV Rates Portfolio 
25.5 
33.9  
          
Total Investment Bank
54.8 
79.1  
          
Total  
68.4 
93.8  
          


—  
The estimated CRD IV RWAs of the Exit Quadrant businesses decreased £25.4bn to £68.4bn, principally reflecting reductions in Investment Bank asset exposures, particularly in the US Residential and Structured Credit portfolios, combined with optimisation initiatives within the Monoline and Corporate Derivatives and pre-CRD IV Rates portfolio. RWAs in Corporate Banking’s Exit Quadrant portfolios decreased due to asset run down slightly offset by foreign currency movements. RWAs in Exit Quadrant portfolios in Europe RBB remained broadly flat

—  
The Portfolio Assets balance sheet includes previously reported Credit Market Exposures of £6.9bn (2012: £8.8bn), and identified loans, securities, investments and derivative exposure of £32.7bn (2012: £38.0bn) that all generate a return on equity below the cost of equity on a CRD IV basis

—  
The Portfolio Assets balance sheet decreased £7.2bn to £39.6bn driven by net sales and paydowns and other movements of £8.9bn offset by foreign currency movements of £1.6bn and net fair value gains of £0.1bn

—  
Portfolio Assets income of £88m was primarily driven by realised gains on the disposal of US Residential Mortgage exposures. Income was lower than the £415m recorded in H212 largely due to fair value gains on trading assets

—  
Pre-CRD IV Rates Portfolio balance sheet of £280.8bn (2012: £353.8bn) represents the carrying value of derivative assets as reported on the balance sheet. The derivative asset exposure would be £249.5bn (2012: £317.3bn) lower than reported under IFRS if netting were permitted for assets and liabilities with the same counterparty or for which the Group holds cash collateral. Therefore, the net exposure post counterparty netting and cash collateral would be £31.3bn (2012: £36.5bn)

 
 
 
1  
Estimated RWAs provide an indication of the potential CRD IV impact using the calculation basis set out on page 51.  June reflects a refinement in allocation methodology for derivatives to better reflect CVA exemptions and the marginal RWA impact of each business.  
2  
Corporate Banking Exit Quadrant balance sheet assets in Europe decreased £0.5bn to £3.4bn largely driven by reductions in Spain and Portugal.
 


 
Performance Management
 
Margins and Balances
 
 
 
 
Half year
Half year
Half year
 
ended
ended
ended
Analysis of Net Interest Income 
30.06.13
31.12.12
30.06.12
  
£m
£m
£m
RBB, Barclaycard, Corporate Banking and Wealth and Investment Management customer income: 
      
- Customer assets 
 3,506 
 3,334 
 3,320 
- Customer liabilities 
 1,599 
 1,614 
 1,571 
Total 
 5,105 
 4,948 
 4,891 
RBB, Barclaycard, Corporate Banking and Wealth and Investment Management non-customer income: 
      
- Product structural hedge1 
 433 
 475 
 487 
- Equity structural hedge2 
 149 
 163 
 154 
- Other 
(59)
(45)
(24)
Total RBB, Barclaycard, Corporate Banking and Wealth and Investment Management net interest income 
5,628 
 5,541 
 5,508 
Investment Bank 
86 
 166 
364 
Head Office and Other Operations 
(137)
(182)
257 
Group net interest income  
 5,577 
 5,525 
 6,129 

 
RBB, Barclaycard, Corporate Banking and Wealth and Investment Management Net Interest Income (NII)
 
Barclays distinguishes the relative net interest contribution from customer assets and customer liabilities, and separates this from the contribution delivered by non-customer income, which principally arises from Group hedging activities.
 
 
Customer Interest Income
 
 
—  
Customer NII increased to £5,105m (2012: £4,891m) driven by an increase in both the customer asset margin and  growth in average customer assets. Customer liabilities grew due to increases in retail savings products and corporate deposits, however, the customer liability margin declined
 
 
—  
The customer asset margin increased to 2.16% (2012: 2.10%) primarily due to an increase in margin on newly written mortgages in UK RBB and UK lending in Corporate Banking offset by a modest reduction in margin in Barclaycard
 
 
—  
The customer liability margin decreased to 1.02% (2012: 1.14%) predominantly reflecting increased customer rates on deposit accounts in Corporate Banking and UK RBB
 
 
Non-customer interest income
 
 
—  
Non-customer NII decreased to £523m (2012: £617m), reflecting a reduction in the non-customer generated margin. Group hedging activities utilise structural interest rate hedges to mitigate the impact of the low interest rate environment on customer liabilities and the Group’s equity
 
 
—  
Product structural hedges generated a lower contribution of £433m (2012: £487m), as hedges were maintained in this period of continued low interest rates. Based on current interest rate curves and the on-going hedging strategy, fixed rate returns on product structural hedges are expected to continue to make a significant but declining contribution in H2 2013 and 2014
 
 
—  
The contribution from equity structural hedges in RBB, Barclaycard, Corporate Banking and Wealth and Investment Management decreased to £149m (2012: £154m) due to the continued low interest rate environment
 
 
Other Group Interest Income
 
 
—  
Head Office NII decreased £394m to a net expense of £137m reflecting the cost of funding surplus liquidity due to growth in customer deposits across the Group
 
 

 
 
1  
Product structural hedges convert short term interest margin volatility on product balances (such as non-interest bearing current accounts and managed rate deposits) into a more stable medium term rate and are built on a monthly basis to achieve a targeted maturity profile.
2  
Equity structural hedges are in place to manage the volatility in net earnings generated by businesses on the Group’s equity, with the impact allocated to businesses in line with their economic capital usage.
 
 

 

 
Performance Management
 
 
—  
Investment Bank NII decreased to £86m (2012: £364m) primarily due to a reduction in interest income from Exit Quadrant assets
 
 
Net Interest Margin
 
—  
The net interest margin for RBB, Barclaycard, Corporate Banking and Wealth and Investment Management decreased to 1.77% (2012: 1.86%) reflecting the reduction in contribution from customer liabilities and Group hedging activities. Consistent with prior periods the net interest margin is expressed as a percentage of the sum of average customer assets and liabilities to reflect the impact of the margin generated on retail and commercial banking liabilities
 
 
—  
The net interest margin expressed as a percentage of average customer assets only declined to 3.44% (2012: 3.88%)
 
 
—  
Net interest margin and customer asset and liability margins reflect movements in the Group’s internal funding rates which are based on the cost to the Group of alternative funding in the wholesale market. The Group’s internal funding rate prices intra-group funding and liquidity to appropriately give credit to businesses with net surplus liquidity and to charge those businesses in need of wholesale funding at a rate that is driven by prevailing market rates and includes a term premium. The objective is to price internal funding for assets and liabilities in line with the cost of alternative funding, which ensures there is consistency between retail and wholesale sources
 
Analysis of Net Interest Margin
  
 
  
 
 
 
UK RBB
Europe RBB
Africa RBB  
Barclaycard
Corporate Banking  
Wealth and Investment Management
Total RBB, Barclaycard, Corporate and Wealth
Half Year Ended 30.06.13
%
%
% 
%
% 
%
%

Customer asset margin
1.18 
0.47 
3.08  
9.42 
1.28  
0.81 
2.16 
Customer liability margin
0.88 
0.41 
2.71  
(0.33)
1.04  
0.99 
1.02 
     
  
  
  
    
Customer generated margin
1.03 
0.45 
2.94  
8.61 
1.14  
0.94 
1.60 
Non-customer generated margin
0.24 
0.36 
0.17  
(0.25)
0.09  
0.14 
0.17 
     
  
  
  
    
Net interest margin
1.27 
0.81 
3.11  
8.36 
1.23  
1.08 
1.77 
     
  
  
  
    
Average customer assets (£m)
 132,778 
 40,129 
 28,925  
 35,984 
 67,168  
 22,145 
 327,129 
Average customer liabilities (£m)
 124,312 
 14,124 
 18,722  
 3,226 
 95,875  
 58,436 
 314,695 
     
  
  
  
    
Half Year Ended 31.12.12
    
  
  
  
    
Customer asset margin
1.06 
0.46 
3.08  
9.42 
1.17  
0.66 
2.08 
Customer liability margin
0.97 
0.28 
2.78  
 - 
1.14  
1.13 
1.13 
     
  
  
  
    
Customer generated margin
1.02 
0.41 
2.97  
8.88 
1.15  
0.99 
1.63 
Non-customer generated margin
0.31 
0.37 
0.24  
(0.36)
0.07  
0.21 
0.19 
     
  
  
  
    
Net interest margin
1.33 
0.78 
3.21  
8.52 
1.22  
1.20 
1.82 
     
  
  
  
    
Average customer assets (£m)
 126,186 
 38,798 
 31,695  
 34,101 
 67,826  
 20,180 
 318,786 
Average customer liabilities (£m)
 112,953 
 14,132 
 19,151  
 1,908 
 84,721  
 52,037 
 284,902 
 
 
 
  
 
  
 
 
Half Year Ended 30.06.12
    
  
  
  
    
Customer asset margin
1.08 
0.46 
3.16  
9.71 
1.19  
0.65 
2.10 
Customer liability margin
0.97 
0.46 
2.76  
- 
1.12  
1.11 
1.14 
     
  
  
  
    
Customer generated margin
1.03 
0.46 
3.01  
9.71 
1.15  
0.98 
1.66 
Non-customer generated margin
0.35 
0.32 
0.22  
(0.72)
0.12  
0.27 
0.20 
     
  
  
  
    
Net interest margin
1.38 
0.78 
3.23  
8.99 
1.27  
1.25 
1.86 
     
  
  
  
    
Average customer assets (£m)
 122,343 
 41,207 
 32,386  
 32,832 
 69,768  
 19,137 
 317,673 
Average customer liabilities (£m)
 110,540 
 15,523 
 19,783  
n/m
 83,357  
 48,264 
 277,467 

 
 
Performance Management
          
Analysis of Net Interest Margin-Quarterly
  
 
  
 
 
 
UK RBB
Europe RBB
Africa RBB 
Barclaycard
Corporate Banking  
Wealth and Investment Management
Total RBB, Barclaycard, Corporate and Wealth
Quarter Ended 30.06.13
%
%
% 
%
% 
%
%

Customer asset margin
1.25 
0.47 
3.19  
9.34 
1.34  
0.75 
2.19 
Customer liability margin
0.80 
0.40 
2.71  
(0.30)
1.10  
0.97 
1.00 
     
  
  
  
    
Customer generated margin
1.03 
0.45 
3.00  
8.46 
1.20  
0.91 
1.60 
Non-customer generated margin
0.23 
0.36 
0.15  
(0.22)
0.07  
0.15 
0.15 
     
  
  
  
    
Net interest margin
1.26 
0.81 
3.15  
8.24 
1.27  
1.06 
1.75 
     
  
  
  
    
Average customer assets (£m)
 134,986 
 39,767 
 27,925  
 36,069 
 66,869  
 22,351 
 327,967 
Average customer liabilities (£m)
 129,843 
 13,943 
 18,405  
 3,629 
 95,178  
 60,670 
 321,668 
     
  
  
  
    
Quarter Ended 31.03.13
    
  
  
  
    
Customer asset margin
1.10 
0.45 
2.92  
9.49 
1.24  
0.85 
2.12 
Customer liability margin
0.96 
0.42 
2.73  
(0.35)
1.02  
1.02 
1.06 
     
  
  
  
    
Customer generated margin
1.03 
0.44 
2.85  
8.77 
1.11  
0.97 
1.62 
Non-customer generated margin
0.25 
0.37 
0.18  
(0.28)
0.12  
0.14 
0.17 
     
  
  
  
    
Net interest margin
1.28 
0.81 
3.03  
8.49 
1.23  
1.11 
1.79 
     
  
  
  
    
Average customer assets (£m)
 130,546 
 40,494 
 30,451  
 35,887 
 66,741  
 22,221 
 326,340 
Average customer liabilities (£m)
 118,721 
 14,307 
 18,925  
 2,822 
 93,423  
 55,642 
 303,840 


Risk Management
 
Overview
 
 
Barclays has clear risk management objectives, and a well-established strategy and framework for managing risk. The approach to identifying, assessing, controlling, reporting and managing risks is formalised in the Principal Risks Policy, which is implemented through relevant control frameworks. Conduct Risk and Reputation Risk have been re-categorised as Principal Risks in 2013. Further detail on how these risks are managed may be found in the 2012 Annual Report and Accounts
 
 
The topics and associated specific key risks, by Principal Risk, covered in this report are described below:  
 
Principal Risks and Key Specific Risks
  
Topics Covered
Page
Funding Risk
      
 
· Increasing capital requirements or changes to what is defined to constitute capital may constrain planned activities and increase costs and contribute to adverse impacts on earnings
 
· Maintaining capital strength. A material adverse deterioration in the Group’s financial performance can affect the Group’s capacity to support further capital deployment
 
· Changes in funding availability and costs may impact the Group’s ability to support normal business activity and meet liquidity regulatory requirements
 
· Whilst the text for CRD IV has now been issued, significant risks remain both to its implementation and the additional finish applied to each country, e.g. early implementation of leverage ratios
  
 
· Capital resources, risk weighted assets, balance sheet leverage and significant regulatory changes
 
· Liquidity pool and funding structure
 
· Eurozone balance sheet redenomination risk
 
· Impact of CRD IV
46
 
 
56
93
 
49
Credit Risk
      
 
· Near term economic performance across major geographies is expected to remain subdued, which may lead to material adverse impacts on the Group. The possibility of a slowing of monetary stimulus by one of more governments has increased the uncertainty
 
· The Group could be adversely impacted by deterioration in a country/region as a result of political unrest
 
· Possibility of further falls in residential property prices in the UK, South Africa and Western Europe. The UK interest only portfolio is particularly susceptible to weak property prices
 
· Risk of further draw down of unutilised limits by customers in financial difficulties in our Mortgage Current Accounts
 
· Impact of increased unemployment, rising inflation and potential interest rate rises in a number of countries in which the Group operates could adversely impact consumer debt affordability and corporate profitability
 
· The possibility of increased corporate tax receipts could reduce corporate cash flow for debt serviceability leading to weakening corporate credit quality
 
· Possibility of a Eurozone crisis remains with the risk of one or more countries reverting to a locally denominated currency. This could directly impact the Group should the value of assets and liabilities be affected differently
 
· Impact of potentially deteriorating sovereign credit quality, particularly debt servicing and refinancing capability
 
· Large single name losses and deterioration in specific sectors and geographies and deterioration in the Legacy portfolio
  
 
· Total assets by valuation basis and underlying asset class
 
· Loans and advances to customers and banks
 
· Impairment, potential credit risk loans and coverage ratios
 
· Retail credit risk
 
· Wholesale credit risk
 
· Group exposures to Eurozone countries
63
 
64
 
66
 
69
 
80
85
 
 



Risk Management
 

Market Risk
      
 
· A significant reduction in client volumes or market liquidity could result in lower fees and commission income and a longer time period between executing a client trade, closing out a hedge, or exiting a position arising from that trade
 
· Uncertain interest and exchange rate environment could adversely impact the Group, for example interest rate volatility can impact Barclays net interest margin
 
· Adverse movements between pension assets and liabilities for defined benefit pension schemes could contribute to a pension deficit
  
 
· Analysis Investment Bank’s DvaR
 
· Analysis of interest margins
 
· Retirement benefit liabilities
94
41
 
119
 
Operational Risk
      
 
· The industry continues to be subject to unprecedented levels of regulatory change and scrutiny in many of the countries in which the Group operates with past business reviews and the new legislation/regulatory frameworks driving heightened risk exposure
 
· The Group is subject to a comprehensive range of legal obligations and is operating in an increasingly litigious environment
 
· Increasing risk of cyber attacks to IT systems both in quantity and sophistication
 
· The Transform agenda is driving a period of significant strategic and organisational change, which in the short term, during implementation, may heighten operational risk exposure
  
 
· Significant litigation matters
 
· Significant competition and regulatory matters
 
122
 
126
 
Reputation Risk
      
 
· Impact on stakeholder trust and subsequent damage to Barclays’ reputation arising from failure or perceived failure to comply with required/stated standards or to behave in accordance with societal expectations.
 
· Cumulative adverse impact on Barclays reputation of legacy governance failures
 
· Adverse impact on Barclays’ reputation and business success due to failure to identify and mitigate emerging reputational issues or events
 
 
· Significant litigation matters
 
· Significant competition and regulatory matters
122
 
126
 
 
Conduct Risk
      
 
· Detriment caused to our customers, clients or counterparties or Barclays and its employees arising from risk inherent in:
 
o Business model and strategy
 
o Governance and culture
 
o Product and service design
 
o Transaction services (suitability and sales process)
 
o Customer servicing (post sales process)
 
o Financial crime
  
 
· Significant litigation matters
 
· Significant competition and regulatory matters
122
126
 
The comparatives on pages 16 to 36 have been restated to reflect the implementation of IFRS 10 Consolidated Financial Statements, IAS 19 Employee Benefits (Revised 2011) and the reallocation of elements of Head Office results to businesses and portfolio restatements between businesses, as detailed in our announcement on 16 April 2013.
 
 

 
Funding Risk
 
Key Capital Ratios 
As at
As at
As at
  
30.06.13
31.12.12
30.06.12
Core Tier 1 
11.1%
10.8%
10.7%
Tier 1 
13.5%
13.2%
13.2%
Total capital 
17.4%
17.0%
16.4%
  
      
Capital Resources 
£m
£m
£m
Shareholders' equity (excluding non-controlling interests) per balance sheet 
 51,083 
 50,615 
 50,935 
Own credit cumulative loss/(gain)1 
593 
804 
(492)
Unrealised (gains)/losses on available for sale debt securities1 
(293)
(417)
288 
Unrealised gains on available for sale equity (recognised as tier 2 capital)1 
(137)
(110)
(95)
Cash flow hedging reserve1 
(1,019)
(2,099)
(1,676)
  
      
Non-controlling interests per balance sheet  
9,054 
9,371 
9,485 
- Less: Other Tier 1 capital - preference shares 
(6,171)
(6,203)
(6,225)
- Less: Non-controlling Tier 2 capital 
(486)
(547)
(564)
Other regulatory adjustments to non-controlling interests 
(116)
(171)
(171)
  
      
Other regulatory adjustments and deductions: 
      
Defined benefit pension adjustment1 
12 
49 
207 
Goodwill and intangible assets1 
(7,583)
(7,622)
(7,574)
50% excess of expected losses over impairment1 
(812)
(648)
(500)
50% of securitisation positions 
(759)
(997)
(1,286)
Other regulatory adjustments 
(423)
(303)
(426)
Core Tier 1 capital 
 42,943 
 41,722 
 41,906 
  
      
Other Tier 1 capital: 
      
Preference shares 
6,171 
6,203 
6,225 
Tier 1 notes2 
538 
509 
521 
Reserve Capital Instruments 
2,902 
2,866 
2,874 
  
      
Regulatory adjustments and deductions: 
      
50% of material holdings 
(475)
(241)
(285)
50% of the tax on excess of expected losses over impairment 
27 
176 
100 
Total Tier 1 capital 
 52,106 
 51,235 
 51,341 
  
      
Tier 2 capital: 
      
Undated subordinated liabilities 
1,558 
1,625 
1,648 
Dated subordinated liabilities 
14,500 
14,066 
12,488 
Non-controlling Tier 2 capital 
486 
547 
564 
Reserves arising on revaluation of property1 
19 
39 
21 
Unrealised gains on available for sale equity1 
139 
110 
95 
Collectively assessed impairment allowances 
2,024 
2,002 
1,783 
  
      
Tier 2 deductions: 
      
50% of material holdings 
(475)
(241)
(285)
50% excess of expected losses over impairment (gross of tax) 
(839)
(824)
(600)
50% of securitisation positions 
(759)
(997)
(1,286)
  
      
Total capital regulatory adjustments and deductions: 
      
Investments that are not material holdings or qualifying holdings 
(1,084)
(1,139)
(1,209)
Other deductions from total capital 
(326)
(550)
(565)
Total regulatory capital  
 67,349 
 65,873 
 63,995 
       
  
 
 
 
      
  
      
1    The capital impacts of these items are net of tax
2    Tier 1 notes are included in subordinated liabilities in the consolidated balance sheet.
 
 
Funding Risk
Half Year Movement in Core Tier 1 Capital 
Half Year
Half Year
Half Year
  
Ended
Ended
Ended
  
30.06.13
31.12.12
30.06.12
  
£m
£m
£m
Opening Core Tier 1 capital 
41,722 
41,906 
42,093 
  
      
Profit/(Loss) for the period 
1,083 
(377)
558 
Removal of own credit1 
(211)
1,296 
2,188 
Dividends paid 
(893)
(575)
(852)
Retained capital generated from earnings 
(21) 
344 
1,894 
  
      
Movement in reserves - impact of ordinary shares and share schemes 
799 
339 
(504)
Movement in currency translation reserves 
511 
(946)
(602)
Movement in pension reserves 
(37)
(55)
(1,180)
Other reserves movements 
12 
76 
(43)
Movement in other qualifying reserves 
1,285 
(586)
(2,329)
  
      
Movement in regulatory adjustments and deductions: 
      
Defined benefit pension adjustment1 
(37)
(158)
211 
Goodwill and intangible asset balances1 
39 
(48)
(14)
50% excess of expected losses over impairment1 
(164)
(148)
6 
50% of securitisation positions 
238 
289 
31 
Other regulatory adjustments 
(119)
123 
14 
Closing Core Tier 1 capital 
42,943 
41,722 
41,906 
  
      

 
·  
The Core Tier 1 ratio increased to 11.1% (2012: 10.8%) reflecting an increase in Core Tier 1 capital of £1.2bn to £42.9bn reflecting:
 
 
–  
Capital generated from earnings absorbed the impact of dividends paid
 
 
–  
£0.8bn increase in share capital and share premium due to warrants exercised
 
 
–  
£0.5bn increase due to foreign currency movements, primarily due to appreciation of Euro and US Dollar against Sterling
 
 
·  
Total capital resources increased by £1.5bn to £67.3bn.  In addition to the increases in Core Tier 1 capital there was a $1.0bn issuance of Tier 2 Contingent Capital Notes and a £0.6bn increase due to foreign exchange movements, partially offset by £1.2bn of redemptions of dated subordinated liabilities
 

 
 
 
1  
 The capital impacts of these items are net of tax.
 



Funding Risk
 

Risk Weighted Assets by Risk Type and Business
  
Credit Risk
Counterparty
Market Risk
Operational
Total
  
Credit Risk
Risk
RWAs
  
              
Charges
 
  
  
              
Add-on
 
 
  
        
Non
    
and Non-
 
 
  
        
Model
  
Modelled
VaR
 
 
As at 30.06.13 
STD
F-IRB
A-IRB
IMM
Method
STD
 - VaR
Modelled
 
 
  
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
UK RBB 
3,057 
- 
33,872 
- 
- 
- 
- 
- 
6,680 
43,609 
Europe RBB 
4,944 
- 
9,656 
- 
5 
- 
- 
- 
2,128 
16,733 
Africa RBB 
6,196 
5,538 
9,790 
- 
3 
- 
- 
- 
3,965 
25,492 
Barclaycard 
17,761 
- 
14,446 
- 
- 
- 
- 
- 
6,594 
38,801 
Investment Bank 
8,862 
3,687 
48,002 
24,871 
6,378 
22,764 
18,935 
10,536 
24,807 
168,842 
Corporate Banking 
25,990 
2,555 
37,174 
684 
- 
- 
- 
- 
6,717 
73,120 
Wealth and Investment Management 
11,668 
228 
1,440 
- 
382 
- 
- 
- 
3,261 
16,979 
Head Office Functions and Other Operations 
117 
411 
2,965 
- 
- 
- 
- 
- 
161 
3,654 
Total RWAs  
78,595 
12,419 
157,345 
25,555 
6,768 
22,764 
18,935 
10,536 
54,313 
387,230 
  
                    
As at 31.12.12 
                    
                     
UK RBB 
1,163 
- 
31,401 
- 
- 
- 
- 
- 
6,524 
39,088 
Europe RBB 
5,051 
- 
8,786 
- 
3 
- 
- 
- 
1,955 
15,795 
Africa RBB 
3,801 
5,778 
10,602 
- 
7 
- 
- 
- 
4,344 
24,532 
Barclaycard 
17,326 
- 
13,957 
- 
- 
- 
- 
- 
6,553 
37,836 
Investment Bank 
9,386 
3,055 
48,000 
25,127 
4,264 
25,396 
22,497 
15,429 
24,730 
177,884 
Corporate Banking 
28,295 
3,430 
31,897 
500 
- 
- 
- 
- 
6,736 
70,858 
Wealth and Investment Management 
11,647 
317 
707 
- 
199 
- 
- 
- 
3,184 
16,054 
Head Office Functions and Other Operations 
205 
- 
4,961 
- 
- 
- 
- 
- 
160 
5,326 
Total RWAs  
76,874 
12,580 
150,311 
25,627 
4,473 
25,396 
22,497 
15,429 
54,186 
387,373 
 
Movement in RWAs
  
 
£bn
As at 1 January 2013
387.4 
Business activity risk reductions
(11.0)
Change in risk parameters
(0.5)
Foreign Exchange
7.1 
Methodology and model changes
4.2 
As at 30 June 2013
387.2 




RWAs remained broadly flat at £387.2bn, reflecting:

·  
Business activity risk reductions leading to a decrease of £11.0bn, due to a reduction of sovereign exposures in the trading book and Exit Quadrant RWAs

·  
Change in risk parameters leading to a decrease of £0.5bn, driven by overall improvements in risk profile and market conditions


·  
Foreign exchange movements increase of £7.1bn, primarily driven by the appreciation of Euro and US Dollar against GBP, partly offset by the depreciation of ZAR
 
·  
Methodology and model changes leading to an increase of £4.2bn reflecting loss given default recalibration and change of regulatory treatment for commercial real estate exposures
 



Funding Risk
 
Impact of CRD IV

The new capital requirements regulation and capital requirements directive that implement Basel 3 proposals within the EU (collectively known as CRD IV) were finalised and published in the Official Journal of the EU in June 2013 and will be implemented from 1 January 2014. The actual impact of CRD IV on capital ratios may be materially different to the estimates disclosed as there are interpretative issues outstanding and related technical standards have not yet been finalised. This would impact, for example, provisions relating to the scope of application of the CVA volatility charge, the treatment of minority interest and restrictions on short hedges relating to non-significant financial holdings. The actual impact will also be dependent on required regulatory approvals and the extent to which further management action is taken prior to implementation
 
 
—  
CRD IV includes the requirement for a minimum Common Equity Tier 1 (CET1) ratio of 4.5%, a minimum Tier 1 ratio of 6% and a minimum total capital ratio of 8%. There is an additional requirement for a Capital Conservation Buffer (CCB) of 2.5% and Counter-Cyclical Capital Buffer (CCCB) of up to 2.5% to be applied when macroeconomic conditions indicate areas of the economy are over-heating. Barclays working assumption is that the CCCB would be zero if implemented today
 
 
—  
CRD IV also introduces an additional buffer of up to 2% for Other Systemically Important Institutions (O-SII) that are designated as systemically important at the national level. Globally Systemically Important Institutions (G-SII) are expected to hold a buffer of up to 2.5%, possibly higher. Where a firm is designated both an O-SII and a G-SII the higher buffer will apply. Based on the designation by the Financial Stability Board in November 2012, Barclays expects a G-SII buffer of 2%, resulting in a regulatory target CET1 ratio of 9% including the capital conservation buffer. The G-SII capital buffer will phase in between 2016 and 2019
 
 
—  
CRD IV also includes the potential for a systemic risk buffer. This buffer could be applied at the Group level or at a subset of the institution, such as a particular portfolio in a given country. If required this buffer would be phased in, providing lead time for the institution to meet the requirements. At the moment, no systemic buffer has been communicated to Barclays
 
 
—  
Given the phasing of both capital requirements, transitional provisions and target levels in advance of needing to comply with the end state requirements, Barclays will have the opportunity to continue to generate additional capital from earnings and take management actions to mitigate the impact of CRD IV
 
 
—  
To provide an indication of the potential impact Barclays has estimated RWAs and CET1 ratio on both a transitional and fully loaded basis, reflecting current interpretation of the rules and assuming 2013 is year 1 of the transitional period. As at 30 June 2013, Barclays estimated RWAs on a CRD IV basis are approximately £472bn with a resultant transitional CET1 ratio of approximately 10.0% and a fully loaded CET1 ratio of approximately 8.1%. Further analysis of the impacts are set out on page 50
 
 
—  
The CRD IV rules include a proposed leverage metric to be implemented by national supervisors initially under a parallel run until 2017 with disclosure from 2015. Based on Barclays interpretation of the final CRD IV text, the Group’s leverage ratio as at 30 June 2013 would be above 3%, allowing for transitional relief to Tier 1 capital. On a fully loaded basis, leverage would be 2.5%. Based on the Basel 3 2010 text the fully loaded leverage ratio would be 2.3%
 
 
—  
The PRA has communicated its expectation that Barclays meets an adjusted 7% fully loaded CET1 ratio by December 2013 and a 3% leverage ratio by June 2014.  The PRA leverage ratio is calculated on a PRA-adjusted CET1 capital base and using a CRD IV leverage exposure measure
 
 
—  
Barclays expects to meet the leverage requirements communicated by the PRA and to continue to be in excess of minimum capital ratios on both a transitional and fully loaded basis
 
 
 
 

 
Funding Risk
 
Estimated impact of CRD IV - Capital
CET1
CET1
 
Transitional
Fully-loaded
 
30.06.13
30.06.13
 
£bn
£bn
Core Tier 1 capital (FSA 2009 definition)
 42.9 
 42.9 
Risk Weighted Assets (RWA) (current Basel 2.5 rules)
 387.2 
 387.2 
     
Core Tier 1 ratio (Basel 2.5)
11.1%
11.1%
     
CRD IV impact on Core Tier 1 capital:
    
Adjustments not impacted by transitional provisions
    
Conversion from securitisation deductions to RWAs
0.8 
0.8 
Prudential Valuation Adjustment (PVA)
(2.1)
(2.1)
Other
(0.2)
(0.2)
Adjustments impacted by transitional provisions
    
Goodwill and intangibles
6.1 
-
Expected losses over impairment
0.4 
(1.0)
Deferred tax assets deduction
(0.4)
(1.9)
Excess minority interest
(0.2)
(0.6)
Debit Valuation Adjustment (DVA)
(0.1)
(0.3)
Gains on available for sale equity and debt
-
0.5 
Non-significant holdings in Financial Institutions
(0.5)
(2.5)
Mitigation of non-significant holdings in Financial Institutions
0.5 
2.5 
CET1 capital
47.2 
38.1 
     
CRD IV impact to RWAs:
    
Credit Valuation Adjustment (CVA)
32.2 
32.2 
Securitisation
19.0 
19.0 
Central Counterparty Clearing
21.7 
21.7 
Other
11.4 
11.4 
Gross Impact
84.3 
84.3 
     
RWAs (CRD IV)
471.5 
471.5 
     
CET1 ratio
10.0%
8.1%
     
For further detail, see page 131, CRD IV transitional own funds disclosure
    
     




Funding Risk
 
Basis of calculation of the impact of CRD IV

CRD IV, models and waivers
 
We have estimated our CRD IV CET1 ratio, capital resources and RWAs based on the final CRD IV text assuming the rules applied as at 30 June 2013 on both a transitional and fully loaded basis. The final impact of CRD IV is dependent on technical standards to be finalised by the European Banking Authority (EBA) and on the final UK implementation of the rules.
 
The impacts assume that all material items in the Internal Model Method application to the PRA are approved and existing waivers, where such discretion is available under CRD IV, will continue.
 
—  
Transitional CET1 capital is based on application of the CRD IV transitional provisions and the PRA (formerly the FSA) guidance on their application. In line with this guidance, adjustments for own shares and interim losses are assumed to transition in at 100%. Other deductions (including goodwill and intangibles, expected losses over impairment and DVA) transition in at 20% in year 1 (except for AFS debt and equity gains which are 0% in the first year), 40% in year 2, 60% in year 3, 80% in year 4 with the full impact in subsequent years.  For the purpose of 30 June 2013 disclosures, the PRA have requested that banks assume 2013 is year 1 of transition.  However, our disclosures of CRD IV impacts in previous announcements have reflected 2014 as the first year of application in line with the actual CRD IV implementation date
 
 
—  
The PVA deduction is shown as fully deducted from CET1 upon adoption of CRD IV. PVA is subject to a technical standard being drafted by the EBA and therefore the impact is currently based on methodology agreed with the PRA.  The PVA deduction as at 30 June 2013 is £2.1bn gross of tax (December 2012: £1.5bn gross of tax, £1.2bn net of tax), with the increase principally reflecting methodology changes during 2013
 
 
—  
As at 30 June 2013, net long non-significant holdings in financial entities were £9.3bn. This exceeds 10% of CET1 capital resources, which would result in a deduction from CET1 of £2.5bn in the absence of identified management actions to eliminate this deduction.  The EBA consultation on Technical Standards for Own funds – Part III identifies potential changes to the calculation that are not reflected in the estimate, including the treatment of tranche positions as indirect holdings, the use of notional values for synthetic exposures and the widening of the scope of eligible entities to include Barclays defined pension benefit funds. Depending on the final implementation and further clarification on the application of the proposals, these changes would potentially have a material impact on the calculation of the non-significant holdings deduction
 
 
—  
The impact of changes in the calculation of allowable minority interest may be different pending the finalisation of the EBA’s technical standards on own funds, particularly regarding the treatment of non-financial holding companies and the equivalence of overseas regulatory regimes. The estimated CRD IV numbers calculate the full impact and transitional capital base on the assumption that the Group’s holding companies will be deemed eligible and their surplus capital due to minority interests consolidated in accordance with CRD IV rules. Our estimated CRD IV fully loaded CET1 capital base includes £1.7bn of minority interests relating to Absa
 
 
RWAs
 
—  
It is assumed that corporates, pension funds and sovereigns that meet the eligibility conditions are exempt from CVA volatility charges
 
 
—  
It is assumed all Central Clearing Counterparties (CCPs) will be deemed to be ‘Qualifying’. The final determination of Qualifying status will be made by the European Securities and Markets Authority (ESMA)
 
 
—  
The estimated RWA increase from CRD IV includes 1250% risk weighting of securitisation positions while estimated capital includes an add back of 50/50 securitisations deducted under the current rules
 
 
—  
Estimated RWAs for definition of default assume that national discretion over 180 days definition of default remains for UK retail mortgages
 
 
—  
‘Other’ CRD IV impacts to RWAs include adjustments for withdrawal of national discretion of definition of default relating to non UK mortgage retail portfolios, Deferred Tax Assets, Significant Holdings in financial institutions, other counterparty credit risk and other items
 
 
—  
RWAs are sensitive to market conditions. The estimated impact on RWAs for all periods reflects market conditions as at 30 June 2013
 



Funding Risk
 
Implementation of CRD IV – Leverage impacts
 
Barclays already measures and reports adjusted gross leverage as an internal measure of balance sheet leverage based on adjusted tangible assets divided by qualifying regulatory Tier 1 capital. As at 30 June 2013, the Group’s adjusted gross leverage was 20x (see page 54).
 
 
CRD IV introduces a non-risk based leverage ratio that is intended to supplement the risk based capital requirements, calculated as CRD IV Tier 1 capital divided by CRD IV leverage exposure. Under CRD IV, until a legislative proposal is finalised, following the Commission’s report in 2016, supervisors will monitor leverage ratio levels. From 2015 banks are required to publish their leverage ratios in their Pillar 3 disclosures. A binding limit is due to be established under CRD IV by 2017, prior to which the basis of calculation is expected to be refined and the required limits will be calibrated.
 
 
Leverage ratio calculation
 
The CRD IV leverage ratios are higher than the adjusted gross leverage ratio, primarily due to the CRD IV ratio excluding netting of settlement balances and of cash collateral against derivatives and including off balance sheet potential future exposures and undrawn commitments, which the adjusted gross leverage ratio (consistent with many other banks’ treatment) does not. The key adjustments to total assets under the CRD IV leverage ratio are as follows:
 
 
—  
Derivatives netting adjustment: regulatory netting applied across asset and liability mark-to-market derivative positions, pursuant to legally enforceable bilateral netting agreements and otherwise meeting the requirements set out in CRD IV
 
 
—  
Potential future exposure (PFE) add-on: regulatory add-on for potential future credit exposure on derivative contracts, calculated by assigning a standardised percentage (based on underlying risk category and residual trade maturity) to the gross notional value of each contract. PFE measure recognises some netting benefits, but these are floored at 40% of gross PFE by netting set, regardless of whether a positive or negative mark-to market exists at the individual trade level. Following clarification in the final CRD IV text, exchange traded and cleared OTC derivative exposures are now included in the calculation on a gross basis
 
 
—  
Securities Financing Transactions (SFT) adjustments:  under CRD IV the IFRS exposure measure for SFTs (eg repo/reverse repo) is replaced with the Financial Collateral Comprehensive Method (FCCM) measure. FCCM is calculated as exposure less collateral, taking into account legally enforceable master netting agreements, with standardised adjustments to both sides of the trade for volatility and currency mismatches. Under Basel 3, SFTs are measured by applying the regulatory netting rules per the Basel 2 framework
 
 
—  
Undrawn Commitments: regulatory add on relating to off balance sheet undrawn commitments based on a credit conversion factor of 10% for unconditionally cancellable commitments and 100% for other commitments. The rules specify additional relief to be applied to trade finance related undrawn commitments which are medium/low risk (20%) and medium risk (50%). For Barclays, this relief is not estimated to be material
 
 
—  
Regulatory deductions: items (comprising goodwill and intangibles, deferred tax asset losses, own paper, cash flow hedge reserve, pension assets and PVA) that are deducted from the capital measure are also deducted from total leverage exposure to ensure consistency between the numerator and denominator
 
 
—  
Other adjustments: includes adjustments required to change from an IFRS scope of consolidation to a regulatory scope of consolidation, adjustments for significant investments in financial sector entities that are consolidated for accounting purposes but not for regulatory purposes, and the removal of IFRS netting for other assets
 
 
To provide an indication of the potential impact on Barclays, we have estimated our CRD IV leverage ratio as at 30 June 2013.
 
 
At the PRA’s request, in addition to the CRD IV leverage ratio, Barclays has estimated the fully loaded leverage ratio using the Basel 3 (December 2010) measure of leverage exposure, with additional guidance provided in the July 2012 instructions for the Quantitative Impact Study.  The key difference to the CRD IV basis of preparation is the measurement of SFTs.  Under Basel 3, SFT leverage exposure is calculated as the IFRS measure of exposure after applying regulatory netting rules based on the Basel 2 Framework.  In accordance with the PRA’s request, the capital measure remains as CRD IV Tier 1 capital.
 
 

 

 
Funding Risk
 


Estimated impact of CRD IV - Leverage
  
Basel 3
2010 text basis
Final CRD IV
text basis
 
  
 As at 30.06.13
As at 30.06.13
Leverage exposure 
  
£bn 
£bn
Derivative financial instruments 
  
 403 
 403 
Reverse repurchase agreements and other similar secured lending 
  
 223 
 223 
Loans and Advances and other assets 
  
907 
   907
Total assets 
  
 1,533
 1,533
       
CRD IV exposure measure adjustments
      
       
Derivatives
      
Netting adjustments for derivatives 
  
(324)
(324)
Potential Future Exposure on derivatives 
  
308
308
       
SFTs
      
Remove net IFRS SFTs
  
(223)
(223)
Add leverage exposure measure for SFTs
  
199
93
       
Other adjustments
      
Undrawn commitments 
  
  190 
 190 
Regulatory deductions and other adjustments 
  
 (18) 
 (18) 
  
      
Fully loaded CRD IV Leverage exposure measure 
  
1,665 
1,559
       
Transitional adjustments to assets deducted from Tier 1 Capital
  
 2  
 2 
       
Transitional CRD IV Leverage exposure measure 
  
1,667
 1,561 
  
  
  
  
Leverage Ratio as at 30.06.13
Tier 1 Capital
Leverage ratio
Basel 3
2010 text basis
As at 30.06.13 
Leverage ratio
Final CRD IV
text basis
As at 30.06.13  
  
£bn 
% 
%
Transitional measure1 
 48.2  
2.9  
3.1  
Adjusted fully loaded measure2 
  47.9 
2.9  
3.1  
Fully loaded measure3 
38.3 
 2.3  
 2.5 
 
—  
The CRD IV fully loaded leverage ratio as at 30 June 2013 was estimated at 2.5%, compared to a previously reported leverage ratio as at 31 December 2012 estimated at 2.8%
 
 
—  
CRD IV leverage exposure increased £85bn as a result of changes in the basis of preparation following the publication of the final CRD IV text on 26 June 2013, reflecting the inclusion of exchange traded and cleared OTC derivatives within the potential future exposure calculation on a gross notional basis, offset by refinements to previous estimates including improvements in both data sourcing and the application of netting
 
 
—  
Except for the differences in changes in the basis of preparation, CRD IV leverage exposure increased in the first half of 2013 by £61bn primarily due to increased loans and advances, reflecting higher settlement balances, the acquisition of ING Direct UK and increased retail lending
 
 

 

 
 
1  
Tier 1 capital is calculated as the transitional CRD IV measure assuming 2013 is the first year of implementation at the request of the PRA. Regulatory deductions are adjusted to reflect the transitional impact on Tier 1 capital.
2  
Tier 1 capital is calculated as the fully loaded CRD IV measure with all ineligible Tier 1 instruments added back. Regulatory deductions reflect the fully loaded impact on Tier 1 capital.
3  
Tier 1 capital is calculated as the fully loaded CRD IV measure. Regulatory deductions reflect the fully loaded impact on Tier 1 capital.
 



Funding Risk
 
Balance sheet leverage

  
As at
30.06.13
As at
31.12.12
As at
30.06.12
  
£m
£m
£m
Total assets1 
1,532,733 
1,488,335 
1,629,056 
Counterparty netting 
(324,303)
(387,672)
(425,616)
Collateral on derivatives 
(41,044)
(46,855)
(51,421)
Settlement balances and cash collateral 
(109,196)
(71,718)
(97,181)
Goodwill and intangible assets 
(7,849)
(7,915)
(7,861)
Customer assets held under investment contracts2 
(1,838)
(1,542)
(1,710)
Adjusted total tangible assets 
1,048,503 
972,633 
1,045,267 
Total qualifying Tier 1 capital 
52,106 
51,235 
51,341 
Adjusted gross leverage 
20 
19 
20 
Adjusted gross leverage (excluding liquidity pool) 
17 
16 
17 
Ratio of total assets to shareholders' equity 
25 
25 
27 
Ratio of total assets to shareholders' equity (excluding liquidity pool) 
23 
22 
24 

 
—  
Adjusted gross leverage increased to 20x (2012: 19x) reflecting a 2% increase in qualifying Tier 1 capital to £52bn and an 8% increase in adjusted total tangible assets to £1,049bn
 
 
—  
At month ends during 2013, the ratio moved in a range from 20x to 21x (2012: 19x to 23x) primarily due to fluctuations in collateralised reverse repurchase lending, driven by increased client demand
 
 
—  
Adjusted total tangible assets include cash and balances at central banks of £73bn (2012: £86bn). Excluding these balances, the balance sheet leverage would be 19x (2012: 17x). Excluding the liquidity pool, leverage would be 17x (2012: 16x)
 
 
—  
The ratio of total assets to total shareholders’ equity was 25x (2012: 25x) and moved within a month end range of 25x to 27x (Full Year 2012: 25x to 28x) due to fluctuations in collateralised reverse repurchase lending and derivative assets
 
 
 

 
 
1  
Includes Liquidity Pool £138bn (2012: £150bn).
2  
Comprising financial assets designated at fair value and associated cash balances.
 


Funding Risk
 
Funding & Liquidity
 
Barclays has a comprehensive Liquidity Risk Management Framework (the Liquidity Framework) for managing the Group’s liquidity risk. The Liquidity Framework meets the PRA’s standards and is designed to ensure that the Group maintains sufficient financial resources of appropriate quality for the Group’s funding profile. This is achieved via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Together, these meet internal and regulatory requirements.
 
 
Liquidity risk is managed separately at Absa Group due to local currency and funding requirements. Unless stated otherwise, all disclosures in this section exclude Absa. For details of liquidity risk management at Absa, see page 62.
 

Liquidity stress testing
 
Under the Liquidity Framework, the Group has established a Liquidity Risk Appetite (LRA), which is measured with reference to the liquidity pool compared to anticipated stressed net contractual and contingent outflows under a variety of stress scenarios. These scenarios are aligned to the PRA’s prescribed stresses and cover a market-wide stress event, a Barclays-specific stress event and a combination of the two. Under normal market conditions, the liquidity pool is managed to be at least 100% of three months’ anticipated outflows for a market-wide stress and one month’s anticipated outflows for each of the Barclays-specific and combined stresses. Of these, the one month Barclays-specific scenario is the most constraining.
 
 
Since June 2010 the Group has reported its liquidity position against Individual Liquidity Guidance (ILG) provided by the PRA. The Group also monitors its position against anticipated Basel 3 metrics, including the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). Based on the standards published by the Basel Committee, as at 30 June 2013 Barclays reported ratios in excess of 100% for both of these metrics, with an estimated LCR of 111% (2012: 126%) and an estimated NSFR of 105% (2012: 104%)1,2.
 
 
As at 30 June 2013, the Group held eligible liquid assets in excess of 100% of net stress outflows for each of the one month Barclays-specific LRA scenario and the Basel 3 LCR:
 

Compliance with internal and regulatory stress tests
Barclays' LRA (one month Barclays specific requirement)3 
  
Estimated Basel 3 LCR2 
 
£bn 
  
£bn 
Eligible liquidity buffer
138  
  
145  
Net stress outflows
124  
  
131  
Surplus
 14  
  
 14  
Liquidity pool as a percentage of anticipated net outflows
111% 
  
111% 
 
  
  
  

 
Barclays plans to maintain its surplus to the internal and regulatory stress requirements at an efficient level. Barclays will continue to monitor the money markets closely, in particular for early indications of the tightening of available funding. In these conditions, the nature and severity of the stress scenarios are reassessed and appropriate action taken with respect to the liquidity pool. This may include further increasing the size of the pool or monetising the pool to meet stress outflows.
 
 
 

 
1  
The methodology for estimating the LCR is based on an interpretation of the published Basel standards and includes a number of assumptions which are subject to change prior to the implementation of the LCR. CRD IV requires a phased-in implementation of the LCR in Europe. As at 1 January 2015, institutions will be required to comply with a 60% LCR. This will increase gradually to 100% by 1 January 2018.
2  
The LCR and NSFR are calculated on a consolidated basis including Absa.
3  
Of the three stress scenarios monitored as part of the LRA, the one month Barclays specific scenario results in the lowest ratio at 111% (2012: 129%). This compares to 137% (2012: 141%) under the three month market-wide scenario and 123% (2012: 145%) under the one month combined scenario.
 


Funding Risk
 
Liquidity pool
 
The Group liquidity pool as at 30 June 2013 was £138bn (2012: £150bn). During H113, the month-end liquidity pool ranged from £138bn to £157bn (Full Year 2012: £150bn to £173bn), and the month-end average balance was £148bn (Full Year 2012: £162bn). The liquidity pool is held unencumbered and is not used to support payment or clearing requirements. Such requirements are treated as part of our regular business funding. The liquidity pool is intended to offset stress outflows and comprises the following cash and unencumbered assets.
 

Composition of the Group Liquidity Pool 
  
 
 
 
  
 
   
Liquidity Pool 30.06.2013
Liquidity pool of which PRA eligible
Liquidity pool of which Basel III LCR-eligible1 
Liquidity Pool 31.12.2012
  
      
Level 1
Level 2A
 
As at 30.06.2013 
  
£bn
£bn
£bn
£bn
£bn

Cash and deposits with central banks2 
  
 71 
 69 
 69 
 - 
85 
             
Government bonds3 
            
AAA rated 
  
 41 
 40 
 41 
 - 
40 
AA+ to AA- rated 
  
 4 
 3 
 4 
 - 
5 
Other government bonds 
  
 2 
 - 
 - 
 1 
1 
Total Government bonds 
  
 47 
 43 
 45 
 1 
46 
  
            
Other
            
Supranational bonds and multilateral development banks 
  
 4 
 4 
 4 
 - 
4 
Agencies and agency mortgage-backed securities
  
 7 
 - 
 5 
 3 
7 
Covered bonds (rated AA- and above) 
  
 5 
 - 
 - 
 5 
5 
Other 
  
 4 
 - 
 - 
 - 
3 
Total other 
  
 20 
 4 
 9 
 8 
19 
  
            
Total as at 30 June 2013 
  
 138 
 116 
 123 
 9 
  
Total as at 31 December 2012 
  
 150 
129 
 136 
 8 
150 
 
Barclays manages the liquidity pool on a centralised basis. As at 30 June 2013, 87% of the liquidity pool was located in Barclays Bank PLC (2012: 90%) and was available to meet liquidity needs across the Barclays Group. The residual liquidity pool is held predominantly within Barclays Capital Inc. (BCI). The portion of the liquidity pool outside of Barclays Bank PLC is held against entity-specific stressed outflows and regulatory requirements.
 
 
 
 
1  
The Liquidity Coverage Ratio-eligible assets presented in this table represent only those assets which are also eligible for the Group liquidity pool and do not include any Level 2B assets as defined by the Basel Committee on Banking Supervision.
2  
Of which over 95% (2012: over 95%) was placed with the  Bank of England, US Federal Reserve, European Central Bank, Bank of Japan and Swiss National Bank.
3  
Of which over 80% (2012: over 80%) are comprised of UK, US, Japanese, French, German, Danish, Swiss and Dutch securities.
 

 
 
Funding Risk
 

Deposit Funding  
          
  
As at 30.06.2013
  
As at 31.12.12
Funding of Loans and Advances to Customers1 
Loans and Advances to Customers
Customer Deposits
Loan to Deposit Ratio
  
Loan to Deposit Ratio
  
£bn
£bn
%
  
%

RBB and Barclaycard 
 237.5 
 173.4 
 137 
  
148 
Corporate Banking2 
 62.7 
 106.7 
 59 
  
65 
Wealth and Investment Management 
 22.6 
 62.8 
 36 
  
39 
Total funding excluding secured 
 322.8 
 342.9 
 94 
  
102 
Secured funding 
  
 43.0 
      
Sub-total including secured funding 
 322.8 
 385.9 
 84 
  
88 
  
          
RBB, Barclaycard, Corporate Banking  & Wealth and Investment Management2 
 322.8 
 342.9 
 94 
  
102 
Investment Bank 
 42.9 
 26.3 
 163 
  
173 
Head Office and Other Operations 
 0.9 
 - 
      
Trading settlement balances and cash collateral 
 103.5 
 91.1 
 114 
  
123 
Total 
 470.1 
 460.3 
 102 
  
110 


The Group loan to deposit ratio was 102% (2012: 110%).
 
RBB, Barclaycard, Corporate Banking and Wealth and Investment Management activities are largely funded by customer deposits with the remaining funding secured against customer loans and advances. The loan to deposit ratio for these businesses was 94% (2012: 102%).
 
The excess of the Investment Bank’s loans and advances over customer deposits is funded with long-term debt and equity. The Investment Bank does not rely on customer deposit funding from RBB, Barclaycard, Corporate Banking and Wealth and Investment Management.

As at 30 June 2013, £126bn (2012: £112bn) of total customer deposits were insured through the UK Financial Services Compensation Scheme and other similar schemes. In addition to these customer deposits, there were £4bn (2012: £3bn) of other liabilities insured or guaranteed by governments.


 
 
1  
Included within RBB, Barclaycard, Corporate Banking, Wealth and Investment Management and the Investment Bank are Absa Group related balances totalling £35bn of loans and advances to customers funded by £31bn of customer deposits.
2  
In addition, Corporate Banking holds £16.3bn (2012: £17.6bn) loans and advances as financial assets held at fair value.
 


Funding Risk
 
Wholesale Funding
   
 
    
Funding of Other Assets as at 30 June 2013
  
 
    
Assets 
£bn
  
Liabilities
£bn
  
        
Trading Portfolio Assets 
 96 
  
Repurchase agreements
 259 
Reverse repurchase agreements 
 163 
      
  
        
Reverse repurchase agreements 
 59 
  
Trading Portfolio Liabilities
59 
  
        
Derivative Financial Instruments 
 401 
  
Derivative Financial Instruments
 394 
  
        
Liquidity pool 
 138 
  
Less than 1 year wholesale debt
 93 
Other unencumbered assets 1 
 136 
  
Greater than 1 year wholesale debt and equity
 181 

 
—  
Trading portfolio assets are largely funded by repurchase agreements with 72% (2012: 74%) secured against highly liquid assets2. The weighted average maturity of these repurchase agreements secured against less liquid assets was 70 days (2012: 84 days)3,4
 
 
—  
The majority of reverse repurchase agreements are matched by repurchase agreements. As at 30 June 2013, 80% (2012: 75%) of matchbook activity was secured against highly liquid assets2,3. The remainder of reverse repurchase agreements are used to settle trading portfolio liabilities
 
 
—  
Derivative assets and liabilities are largely matched. A substantial proportion of balance sheet derivative positions qualify for counterparty netting and the remaining portions are largely offset once netted against cash collateral received and paid (see Note 12 ‘Offsetting financial assets and liabilities’ for further detail on netting)
 
 
—  
The liquidity pool is funded by wholesale debt, the majority of which matures in less than one year
 
 
—  
Other assets are largely matched by term wholesale debt and equity
 
 

 

 
1  
Predominantly available for sale investments, trading portfolio assets, financial assets designated at fair value and loans and advances to banks.
2  
Highly liquid assets are limited to government bonds, US agency securities and US agency mortgage-backed securities.
3  
Includes collateral swaps.
4  
The 2012 weighted average maturity has been revised to reflect an updated calculation methodology adopted during 2013.
 
 

 
 
Funding Risk
 
Composition of wholesale funding
 
As at 30 June 2013 total wholesale funding outstanding (excluding repurchase agreements) was £217bn (2012: £240bn). £93bn of wholesale funding matures in less than one year (2012: £102bn) of which £19bn relates to term funding (2012: £18bn)1.
 
 
Outstanding wholesale funding comprised of £38bn secured funding (2012: £40bn) and £178bn unsecured funding (2012: £199bn).
 
Maturity profile2

  
Not more than one month
Over one month but not more than three months
Over three months but not more than six months
Over six months but not more than one year
Sub-total less than one year
Over one year but not more than two years
Over two years
Total 
  
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn 
Deposits from Banks 
16.0 
5.2 
1.7 
0.8 
23.7 
6.0 
1.8 
31.5  
Certificates of Deposit and Commercial Paper 
6.5 
13.0 
9.5 
6.0 
35.0 
1.8 
1.2 
38.0  
Asset Backed Commercial Paper 
2.9 
1.6 
- 
- 
4.5 
- 
- 
4.5  
Senior unsecured (Public benchmark) 
- 
0.5 
- 
6.1 
6.6 
4.7 
11.8 
23.1  
Senior unsecured (Privately placed) 
0.8 
2.5 
2.3 
6.9 
12.5 
11.2 
32.1 
55.8  
Covered bonds/ABS 
- 
0.1 
0.1 
1.3 
1.5 
9.3 
15.5 
26.3  
Subordinated liabilities 
- 
- 
0.1 
- 
0.1 
0.2 
21.3 
21.6  
Other3
4.1 
1.7 
1.2 
2.4 
9.4 
1.2 
5.1 
15.7  
Total as at 30 June 2013 
30.3 
24.6 
14.9 
23.5 
93.3 
34.4 
88.8 
216.5  
Of which secured 
5.1 
3.3 
1.3 
2.5 
12.2 
9.9 
16.0 
38.1  
Of which unsecured 
25.2 
21.3 
13.6 
21.0 
81.1 
24.5 
72.8 
178.4  
Total as at 31 December 2012 
29.4 
39.4 
17.5 
15.4 
101.7 
28.3 
109.7 
239.7  
Of which secured 
5.9 
4.0 
2.4 
1.3 
13.6 
5.2 
21.6 
40.4  
Of which unsecured 
23.5 
35.4 
15.1 
14.1 
88.1 
23.1 
88.1 
199.3  
  
              
  


 
Outstanding wholesale funding includes £56bn of privately placed senior unsecured notes in issue. These notes are issued through a variety of distribution channels including intermediaries and private banks. A large proportion of end users of these products are individual retail investors.
 
 
In H113, Barclays repaid €1.2bn of funding raised through the European Central Bank’s 3 year LTRO, leaving €7.0bn outstanding as at 30 June 2013 (see page 93 for more detail of local Eurozone balance sheet redenomination risk).  
 
 
The liquidity risk of wholesale funding is carefully managed primarily through the LRA stress tests, against which the liquidity pool is held. Although not a requirement, the liquidity pool exceeded wholesale funding maturing in less than one year by £45bn as at 30 June 2013 (2012: £48bn).
 
 
The average maturity of wholesale funding net of the liquidity pool was at least 61 months (2012: 61 months).
 
 

 
 

 
 
1  
Term funding maturities comprise public benchmark and privately placed senior unsecured notes, covered bonds/asset-backed securities (ABS) and subordinated debt where the original maturity of the instrument was more than 1 year. In addition, at 30 June 2013, £2bn of these instruments were not counted towards term financing as they had an original maturity of less than 1 year.
2  
The composition of wholesale funds comprises the balance sheet reported Deposits from Banks, Financial liabilities at Fair Value, Debt Securities in Issue and Subordinated Liabilities, excluding cash collateral and settlement balances. It does not include collateral swaps, including participation in the Bank of England’s Funding for Lending Scheme. Included within deposits from banks are £6.0bn of liabilities drawn in the European Central Bank’s 3 year LTRO.
3  
Primarily comprised of fair value deposits £5.7bn and secured financing of physical gold £7.4bn.
 



Funding Risk
 
Currency profile
 
As at 30 June 2013 the proportion of wholesale funding by major currency was as follows:
 

 
USD
EUR
GBP
Other
Currency composition of wholesale funds
%
%
%
%
Deposits from Banks
26 
40 
26 
8 
Certificates of Deposit and Commercial Paper
66 
13 
21 
-
Asset Backed Commercial Paper
81 
12 
8 
-
Senior unsecured
27 
35 
17 
21 
Covered bonds/ABS
21 
63 
15 
1 
Subordinated Liabilities
34 
25 
39 
1 
Total as at 30 June 2013
36 
34 
21 
9 
Total as at 31 December 2012
31 
38 
22 
9 

 
To manage cross-currency refinancing risk Barclays manages to FX cash-flow limits, which limit the risk at specific maturities
 

Term financing
 
Term issuance in H113 was fully offset by buybacks. Term funding maturities were offset by growth in customer deposits and reduction in legacy assets, while a significant portion of the Group’s 2013 funding needs were pre-funded in 2012.
 
 
The Group has term funding maturities of £7bn for the remainder of 2013 (2012: full-year 2013 maturities £18bn). As a result of strong deposit growth in H113 and further reduction in legacy assets, term wholesale funding needs are likely to be lower than maturities.
 
 
In April, Barclays issued $1.0bn of Tier 2 contingent capital notes and repurchased existing Tier 2 instruments for a similar amount, as a transitional step towards its fully loaded CRD IV capital structure.
 



Funding Risk
 
Encumbrance of loans and advances

Barclays issues ABS, covered bonds and other similar secured instruments that are secured primarily over customer loans and advances.  Notes issued from these programmes are also used in repurchase agreements with market counterparts and in central bank facilities. Barclays also utilises loan collateral in central bank facilities in non-securitised form.  

  
  
  
Notes issued
 
  
  
Externally issued notes
Other secured funding2 
  
  
Assets1 
Retained
As at 30 June 2013 
£bn 
£bn
£bn 
£bn

Mortgages (Residential Mortgage Backed Securities) 
 35.8  
 4.2 
 15.6  
 9.6 
Mortgages (covered bonds) 
 30.5  
 16.6 
 2.0  
 - 
Mortgages (loans)3 
 13.6  
 - 
 5.5  
 - 
Credit cards 
 13.1  
 4.9 
 -  
 0.9 
Corporate loans 
 6.8  
 0.2 
 1.2  
 5.3 
Other4 
 4.7  
 - 
 1.2  
 3.0 
Total as at 30 June 2013 
 104.4  
 25.9 
 25.5  
 18.9 
Total as at 31 December 2012 
 98.4  
 27.0 
 31.1  
 11.0 

As at 30 June 2013, £104bn (2012: £98bn) of customer loans and advances were transferred to asset backed funding programmes or utilised to secure funding from central bank facilities. These assets were used to support £26bn (2012: £27bn) of externally issued notes and a further £25bn (2012: £31bn) of retained notes and non-securitised loan collateral were used in repurchase agreements with market counterparts and at central bank facilities. Inclusive of required over-collateralisation of £14bn, a total of 14% (2012: 17%) of total loans and advances to customers were used to secure external funding via these programmes. Compared to 31 December 2012, the decrease in encumbrance of loans and advances to customers was predominantly driven by increased cash collateral and settlement balances within loans and advances to customers.
 
In addition, the Group had £19bn (2012: £15bn) of excess collateral over minimum requirements within its asset backed funding programmes that were readily available for use to support future secured funding issuance. A portion of retained notes are also available to raise secured funding.
 

 
 
Credit Rating
 

Credit Rating as at 30 June 2013
Standard & Poor's
Moody's
Fitch
DBRS
Barclays Bank PLC
        
Long Term
A+ (Negative)
A2 (Negative)
A (Stable)
AA (Negative)
Short Term
A-1
P-1
F1
R-1 (high)
 
During H113, Fitch affirmed Barclays Bank PLC ratings, whereas DBRS placed the bank under review with negative implications, due to the challenges facing the bank and the industry more generally.
 
 
The below table shows contractual collateral requirements and contingent obligations following one and two notch long-term and associated short-term simultaneous downgrades across all credit rating agencies, which were fully reserved for in the liquidity pool. These numbers do not assume any management or restructuring actions that could be taken to reduce posting requirements.
 
 
 

 
 
1  
Includes £6bn of cash reserves supporting secured funding vehicles.
2  
Comprised of bilateral repurchase agreements, collateral swaps and participation in central bank facilities.  
3  
For mortgage loan collateral, asset reflects the value of collateral pledged and other secured funding reflects the liquidity value obtained.
4  
Primarily comprised of local authority covered bonds and export credit agency guaranteed loan collateral.
 




Funding Risk
 

Contractual Credit Rating Downgrade Exposure (cumulative cash flow)
One-notch
Two-notch
 
£bn
£bn
Securitisation derivatives
 7 
 9 
Contingent liabilities
 6 
 6 
Derivatives margining
- 
 1 
Liquidity facilities
 1 
 1 
Total as at 30 June 2013
 14 
 17 
Total as at 31 December 2012
 13 
 17 

 
Beyond these contractual requirements, these outflows do not include the potential liquidity impact from loss of unsecured funding, such as from money market funds or loss of secured funding capacity. However, unsecured and secured funding stresses are included in the LRA stress scenarios and a portion of the liquidity pool is held against these risks.
 
 
On 2 July 2013, Standard & Poor’s downgraded Barclays Bank PLC long term issuer rating one notch to A (Stable), reflecting its view that risks increased for some large European-based banks operating in investment banking, as a result of tightening regulation and uncertain market conditions. Barclays Bank PLC short term rating was affirmed at A-11. The downgrade was fully reserved for in the liquidity pool and there has been no significant change in deposit funding or wholesale funding. Further one and two notch long-term and associated short-term simultaneous downgrades across all credit rating agencies continue to be fully reserved for in the liquidity pool.
 

 
Absa Group
 
 
·  
Liquidity risk is managed separately at Absa Group due to local currency, funding and regulatory requirements
 
 
·  
In addition to the Group liquidity pool, Absa Group held £4bn (2012: £5bn) of liquidity pool assets against Absa-specific anticipated stressed outflows. The liquidity pool consists of South African government bonds and Treasury bills
 
 
·  
The Absa loan to deposit ratio was 113% (2012: 113%)
 
 
·  
As at 30 June 2013, Absa had £11bn of wholesale funding outstanding (2012: £12bn), of which £6bn matures in less than 12 months (2012: £6bn)
 
 


 
 
1  
The Standard & Poor’s downgrade on 2 July 2013 did not have a significant impact on Barclays’ contractual exposure to downgrades across all credit rating agencies.
 
 
 

 
Credit Risk
 
Analysis of Total Assets by Valuation Basis
  
    
 Accounting Basis
Assets as at 30.06.13 
Total Assets
  
Cost Based
Measure
Fair Value
  
£m
  
£m
£m

Cash and balances at central banks 
72,720 
  
72,720 
- 
  
        
Items in the course of collection from other banks 
2,578 
  
2,578 
- 
  
        
Debt securities 
105,026 
  
- 
105,026 
Equity securities 
39,249 
  
- 
39,249 
Traded loans 
2,340 
  
- 
2,340 
Commodities1 
5,366 
  
- 
5,366 
Trading portfolio assets 
151,981 
  
- 
151,981 
  
        
Loans and advances 
20,144 
  
- 
20,144 
Debt securities 
6,081 
  
- 
6,081 
Equity securities 
10,454 
  
- 
10,454 
Other financial assets2 
8,513 
  
- 
8,513 
Held in respect of linked liabilities to customers under investment contracts 
1,655 
  
- 
1,655 
Financial assets designated at fair value 
46,847 
  
- 
46,847 
  
        
Derivative financial instruments 
403,072 
  
- 
403,072 
  
        
Loans and advances to banks 
46,451 
  
46,451 
- 
  
        
Loans and advances to customers 
470,062 
  
470,062 
- 
  
        
Reverse repurchase agreements and other similar secured lending 
222,881 
  
222,881 
- 
  
        
Debt securities  
91,255 
  
- 
91,255 
Equity securities 
452 
  
- 
452 
Available for sale investments 
91,707 
  
- 
91,707 
  
        
Other assets 
24,434 
  
22,832 
1,602 
  
        
Total assets as at 30.06.13 
1,532,733 
  
837,524 
695,209 
  
        
Total assets as at 31.12.12 
1,488,335 
  
749,403 
738,932 


 
 
 
 
1Commodities primarily consist of physical inventory positions.
 
2Primarily consists of reverse repurchase agreements designated at fair value.
 


Credit Risk
 
 
Analysis of Loans and Advances to Customers and Banks

 
 
 
 
 
 
  
Loans and Advances at Amortised Cost Net of Impairment Allowances, by Industry Sector and Geography
             
 
United Kingdom
Europe
Americas
Africa and Middle East
Asia
Total
As at 30.06.13
£m
£m
£m
£m
£m
£m

Banks
7,413 
15,403 
11,039 
2,668 
6,761 
43,284 
Other financial institutions
27,576 
27,324 
59,991 
2,642 
5,583 
123,116 
Manufacturing
5,491 
2,751 
1,525 
1,649 
613 
12,029 
Construction
3,137 
432 
2 
696 
29 
4,296 
Property
15,370 
2,113 
728 
1,993 
102 
20,306 
Government
977 
2,383 
1,457 
1,548 
2,461 
8,826 
Energy and water
1,791 
3,576 
1,912 
854 
392 
8,525 
Wholesale and retail distribution and leisure
9,618 
2,123 
739 
1,858 
155 
14,493 
Business and other services
18,296 
2,658 
3,079 
2,445 
611 
27,089 
Home loans
127,234 
36,621 
311 
15,596 
125 
179,887 
Cards, unsecured loans and other personal lending
28,444 
7,295 
12,273 
7,467 
1,456 
56,935 
Other
6,654 
2,324 
1,151 
6,851 
747 
17,727 
Net loans and advances to customers and banks
252,001 
105,003 
94,207 
46,267 
19,035 
516,513 
Impairment allowance
(3,357)
(2,490)
(742)
(1,247)
(68)
(7,904)
             
As at 31.12.12
            
Banks
7,134 
14,447 
12,050 
1,806 
3,405 
38,842 
Other financial institutions
17,113 
20,812 
40,884 
4,490 
3,031 
86,330 
Manufacturing
6,041 
2,533 
1,225 
1,232 
487 
11,518 
Construction
3,077 
476 
1 
699 
21 
4,274 
Property
15,167 
2,411 
677 
3,101 
247 
21,603 
Government
558 
2,985 
1,012 
1,600 
253 
6,408 
Energy and water
2,286 
2,365 
1,757 
821 
393 
7,622 
Wholesale and retail distribution and leisure
9,567 
2,463 
734 
1,748 
91 
14,603 
Business and other services
15,754 
2,754 
2,360 
2,654 
630 
24,152 
Home loans
119,653 
36,659 
480 
14,931 
270 
171,992 
Cards, unsecured loans and other personal lending
29,716 
5,887 
11,725 
7,170 
1,147 
55,645 
Other
9,448 
2,390 
1,232 
7,788 
520 
21,378 
Net loans and advances to customers and banks
235,514 
96,182 
74,137 
48,040 
10,495 
464,368 
Impairment allowance
(3,270)
(2,606)
(472)
(1,381)
(70)
(7,799)
 
Impairment Allowance
 
 
 
 
Half Year Ended
Half Year Ended
Half Year Ended
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
At beginning of period
7,799 
8,153 
8,896 
Acquisitions and disposals
(5)
(7)
(73)
Exchange and other adjustments
72 
(69)
(137)
Unwind of discount
(95)
(102)
(109)
Amounts written off
(1,605)
(1,917)
(2,202)
Recoveries
116 
117 
95 
Amounts charged against profit
1,622 
1,624 
1,683 
At end of period
7,904 
7,799 
8,153 
       
       



Credit Risk
    
Loans and Advances Held at Fair Value, by Industry Sector and Geography
 
 
  
 
 
 
 
 
 
 
United Kingdom
Europe
Americas
Africa and Middle East
Asia
Total
As at 30.06.13
£m
£m
£m
£m
£m
£m

Banks 
2 
336 
156 
516 
- 
1,010 
Other financial institutions1 
82 
664 
631 
58 
37 
1,472 
Manufacturing 
142 
42 
352 
19 
4 
559 
Construction 
153 
- 
- 
84 
1 
238 
Property 
8,018 
875 
264 
53 
- 
9,210 
Government 
5,441 
28 
- 
22 
1 
5,492 
Energy and water 
10 
99 
63 
79 
3 
254 
Wholesale and retail distribution and leisure 
44 
11 
165 
59 
- 
279 
Business and other services 
3,125 
96 
454 
11 
- 
3,686 
Other 
42 
64 
104 
74 
- 
284 
Total 
17,059 
2,215 
2,189 
975 
46 
22,484 
  
            
As at 31.12.12
            
Banks 
- 
493 
120 
422 
- 
1,035 
Other financial institutions1 
13 
611 
622 
8 
39 
1,293 
Manufacturing 
6 
38 
601 
16 
15 
676 
Construction 
161 
1 
- 
28 
4 
194 
Property 
8,671 
830 
295 
121 
- 
9,917 
Government 
5,762 
6 
314 
17 
5 
6,104 
Energy and water 
10 
73 
41 
46 
3 
173 
Wholesale and retail distribution and leisure 
33 
2 
220 
72 
1 
328 
Business and other services 
3,404 
20 
685 
14 
- 
4,123 
Other 
105 
132 
46 
224 
56 
563 
Total 
18,165 
2,206 
2,944 
968 
123 
24,406 

 


 
 
1  
Included within Other financial institutions (Americas) are £239m (2012: £427m) of loans backed by retail mortgage collateral.
 
 

 

 

 
Credit Risk
 
Credit impairment charges and other provisions by business
  
Half Year Ended 30.06.13
Half Year Ended 30.12.12
Half Year Ended 30.06.12
  
£m
£m
£m
Loan impairment 
      

UK RBB 
178 
147 
122 
Europe RBB 
142 
132 
125 
Africa RBB 
211 
318 
314 
Barclaycard 
616 
557 
492 
Investment Bank 
179
(10)
202 
Corporate Banking 
260 
439 
425 
Wealth and Investment Management 
49 
19 
19 
Head Office and Other Operations 
(1)
1 
1 
Total loan impairment charge1 
1,634 
1,603 
1,700 
Impairment charges on available for sale investments 
-
29 
11 
Impairment of reverse repurchase agreements 
(3)
(2)
(1)
Total credit impairment charges and other provisions 
1,631 
1,630 
1,710 

 
·  
Impairment charges on loans and advances were 5% lower than H112 reflecting releases and lower charges in the wholesale portfolios, notably in Corporate Banking and the Investment Bank, as well as in Africa RBB. This was partially offset by increased charges in unsecured products for UK RBB and Barclaycard
 
 
·  
Further detail can be found in the Retail and Wholesale Credit Risk sections on pages 69 and 80 respectively
 

Potential Credit Risk Loans and Coverage Ratios
            
 
CRLs
  
PPLs
  
PCRLs
 
As at 30.06.13
As at 31.12.12
  
As at 30.06.13
As at 31.12.12
  
As at 30.06.13
As at 31.12.12
 
£m
£m
  
£m
£m
  
£m
£m

Retail
8,439 
8,821 
  
629 
656 
  
9,068 
9,477 
Wholesale
6,246 
6,303 
  
1,072 
1,102 
  
7,318 
7,405 
Group
14,685 
15,124 
  
1,701 
1,758 
  
16,386 
16,882 
                 
 
Impairment Allowance
  
CRL Coverage
  
PCRL Coverage
 
As at 30.06.13
As at 31.12.12
  
As at 30.06.13
As at 31.12.12
  
As at 30.06.13
As at 31.12.12
 
£m
£m
  
%
£m
  
%
£m

Retail
4,699 
4,635 
  
55.7 
52.5 
  
51.8 
48.9 
Wholesale
3,205 
3,164 
  
51.3 
50.2 
  
43.8 
42.7 
Group
7,904 
7,799 
  
53.8 
51.6 
  
48.2 
46.2 

 
Credit Risk Loan (CRL) balances decreased by 3% in H113 reflecting improvements in both the wholesale and retail portfolios. The CRL coverage ratio increased to 53.8% (2012: 51.6%)
 
 
Further detail can be found in the Retail and Wholesale Credit Risk sections on pages 71 and 81 respectively
 
 

 
1  
Includes charges of £12m (H212: £21m write back, H112: £17m charge) in respect of undrawn facilities and guarantees.
 
 

 

 
Credit Risk
 
Retail and Wholesale Loans and Advances to Customers and Banks
    
 
 
 
 
        
As at 30.06.13
Gross
L&A
Impairment Allowance
L&A Net of Impairment
Credit
Risk Loans 
CRLs % of Gross L&A 
Loan Impairment Charges1 
Loan Loss Rates 
 
£m
£m
£m
£m 
% 
£m 
bps 

Total retail
240,079 
4,699 
235,380 
8,439  
3.5  
1,112  
93  
       
  
  
  
  
Wholesale - customers
238,457 
3,170
235,287 
6,192  
2.6  
534
45 
Wholesale - banks
45,881 
35 
45,846 
54  
0.1  
(12) 
(5) 
Total wholesale
284,338 
3,205
281,133
6,246  
2.2  
522
37
       
  
  
  
  
Loans and advances at
524,417 
7,904 
516,513 
14,685  
2.8  
1,634
63
amortised cost
      
  
  
  
  
       
  
  
  
  
Traded Loans
2,340 
n/a
2,340 
  
  
  
  
Loans and advances designated at fair value
20,144 
n/a
20,144 
  
  
  
  
Loans and advances held at fair value
22,484 
n/a
22,484 
  
  
  
  
       
  
  
  
  
Total loans and advances
546,901 
7,904 
538,997 
  
  
  
  
 
 
 
 
  
  
  
  
As at 31.12.12
      
  
  
  
  
Total retail
232,672 
4,635 
228,037 
8,821  
3.8  
2,075  
89  
       
  
  
  
  
Wholesale - customers
199,423 
3,123 
196,300 
6,252  
3.1  
1,251  
63  
Wholesale - banks
40,072 
41 
40,031 
51  
0.1  
(23) 
(6) 
Total wholesale
239,495 
3,164 
236,331 
6,303  
2.6  
1,228  
51  
       
  
  
  
  
Loans and advances at
472,167 
7,799 
464,368 
15,124  
3.2  
3,303  
70  
amortised cost
      
  
  
  
  
       
  
  
  
  
Traded Loans
2,410 
n/a
2,410 
  
  
  
  
Loans and advances designated at fair value
21,996 
n/a
21,996 
  
  
  
  
Loans and advances held at fair value
24,406 
n/a
24,406 
  
  
  
  
       
  
  
  
  
Total loans and advances
496,573 
7,799 
488,774 
  
  
  
  

 
—  
Loans and advances to customers and banks at amortised cost net of impairment increased 11%, reflecting:
 
 
–  
£44.8bn increase to £281.1bn in the wholesale portfolios principally in the Investment Bank, reflecting an increase in settlement balances driven by higher trading volumes
 
 
–  
£7.3bn increase to £235.4bn in the retail portfolios, driven by increased mortgage lending and the acquisition of ING Direct UK in UK RBB and business growth in Barclaycard, offset by reductions in Africa RBB, principally reflecting currency movements
 
 
—  
This  growth, combined with lower impairment charges on loans and advances, resulted in a lower annualised loan loss rate of 63bps (30 June 2012: 67bps; 31 December 2012: 70bps)
 
 
—  
Further detail can be found in the Retail and Wholesale Credit Risk sections on pages 69 and 80 respectively
 
 
1  
Loan impairment charge as at 31 December 2012 is the charge for the 12 month period.
 
 

 

 
Credit Risk
 
Exposure to UK Commercial Real Estate
 
Loans and advances at amortised cost
Balances Past Due
Impairment Allowances
 
As at
As at
As at
 
30.06.13
31.12.12
30.06.13
31.12.12
30.06.13
31.12.12
 
£m
£m
£m
£m
£m
£m

Wholesale
9,271 
 9,676 
306 
 295 
134 
 106 
Retail
1,554
 1,534 
114
 123 
18
 20 
Group
10,825 
 11,210 
420 
 418 
152 
 126 

 
—  
Overall, balances to UK CRE decreased by 3% in H113 reflecting a reduction in the wholesale portfolio, with retail balances remaining stable. Balances past due remained stable reflecting increases in wholesale and decreases in retail
 
 
—  
Further detail can be found in the Retail and Wholesale Credit Risk sections on pages 78 and 84 respectively
 


 




Credit Risk
Retail Credit Risk
 
 
  
 
 
 
 
 
 
 
  
 
Retail Loans and Advances at Amortised Cost
  
 
 
Gross L&A
Impairment Allowance
L&A Net of Impairment
Credit Risk Loans
CRLs % of Gross L&A
Loan Impairment Charges2 
Loan Loss  Rates
As at 30.06.13
£m
£m
£m
£m
%
£m 
bps

UK RBB 
 137,135 
 1,337 
 135,798 
 2,770 
 2.0 
 178  
 26 
Europe RBB 
 40,661 
 638 
 40,023 
 1,807 
 4.4 
 142  
 70 
Africa RBB 
 22,297 
 656 
 21,641 
 1,469 
 6.6 
 176  
 159 
Barclaycard 
 36,666 
 2,004 
 34,662 
 2,296 
 6.3 
 616  
 339 
Corporate Banking1 
 607 
 48 
 559 
 54 
 8.9 
(5) 
(166)
Wealth and Investment Management 
 2,713 
 16 
 2,697 
 43 
 1.6 
 5  
 37 
Total 
 240,079
 4,699 
 235,380 
 8,439 
 3.5 
 1,112  
 93 
  
          
  
  
As at 31.12.12 
          
  
  
UK RBB 
 129,682 
 1,369 
 128,313 
 2,883 
2.2 
 269  
 21 
Europe RBB1 
 39,997 
 560 
 39,437 
 1,734 
4.3 
 257  
 64 
Africa RBB 
 23,987 
 700 
 23,287 
 1,790 
7.5 
 472  
 197 
Barclaycard 
 35,732 
 1,911 
 33,821 
 2,288 
6.4 
 1,050  
 294 
Corporate Banking1 
 739 
 79 
 660 
 92 
12.4 
 27  
 365 
Wealth and Investment Management 
 2,535 
 16 
 2,519 
 34 
1.3 
 -  
 - 
Total 
 232,672 
 4,635 
 228,037 
 8,821 
3.8 
 2,075  
 89 

 
—  
Gross loans and advances to customers and banks in the retail portfolios increased 3% to £240.1bn during H113 principally reflecting movements in:
 
 
–  
UK RBB, where a 6% increase to £137.1bn primarily reflected the purchase of ING Direct UK and growth in home loans balances
 
 
–  
Barclaycard, where an 3% increase to £36.7bn primarily reflected business growth across UK and International businesses
 
 
–  
 Wealth and Investment Management, where a 7% increase to £2.7bn mainly reflected growth in the Wealth International home loans portfolio
 
 
—  
The loan impairment charge increased 12% to £1,112m (H112: £994m) principally the result of:
 
 
–  
Barclaycard increased  25% to £616m reflecting higher charges in South Africa Card portfolios which included the impact of recent acquisitions, and the non-recurrence of provision releases in 2012
 
 
–  
UK RBB  increased 46%  to £178m primarily due to provision releases in 2012 as a result of improved recoveries in consumer lending and resolution of backlogs in litigation in home loans
 
 
–  
Europe RBB increased 14% to £142m due to foreign currency movements and deterioration in recoveries performance within mortgages reflecting current economic conditions across Europe
 
 
—  
Higher overall impairment charges coupled with slightly higher loan balances led to a rise in the retail annualised loan loss rate to 93bps (H112: 87bps; FY12: 89bps)
 
 

 
 

 
 
1  
Primarily comprises UAE retail portfolios.
2  
Loan impairment charge as at December 2012 is the charge for the 12 month period.
 
 

 

 

 
Credit Risk
 

Analysis of Retail Gross Loans & Advances to Customers
 
  
  
  
  
  
    
 
Secured Home Loans1 
Credit Cards,
Overdrafts and
Unsecured Loans
Other Secured Retail
Lending2 
Business Lending
Total Retail
As at 30.06.13
£m 
£m
£m 
£m
£m

UK RBB 
 121,784  
 7,002 
 -  
 8,349 
137,135 
Europe RBB 
 35,795  
 3,193 
 -  
 1,673 
40,661 
Africa RBB 
 15,956  
 2,696 
 2,839  
 806 
22,297 
Barclaycard 
 -  
 33,472 
 2,475  
 719 
36,666 
Corporate Banking 
 294  
 245 
 59  
 9 
607 
Wealth and Investment Management 
 2,418  
 74 
 221  
 - 
2,713 
Total 
 176,247  
 46,682 
 5,594  
 11,556 
240,079 
  
  
  
  
    
As at 31.12.12 
  
  
  
    
UK RBB 
 114,766  
 6,863 
 -  
 8,053 
129,682 
Europe RBB 
 34,825  
 3,430 
 -  
 1,742 
39,997 
Africa RBB 
 17,422  
 2,792 
 3,086  
 687 
23,987 
Barclaycard 
 -  
 32,432 
 2,730  
 570 
35,732 
Corporate Banking 
 274  
 336 
 117  
 12 
739 
Wealth and Investment Management 
 2,267  
 63 
 205  
 - 
2,535 
Total 
 169,554  
 45,916 
 6,138  
 11,064 
232,672 

 

 
 
 
1  
All portfolios under Secured Home Loans are primarily first lien mortgages. Other Secured Retail Lending under Barclaycard is a second lien mortgage portfolio.
2  
Other Secured Lending includes Vehicle Auto Finance in Africa RBB and UK Secured Lending in Barclaycard.
 
 


 
 
Credit Risk
 

Analysis of Potential Credit Risk Loans and Coverage Ratios
 
 
 
 
 
 
     
 
 
 
 
 
 
 
CRLs
  
PPLs
  
PCRLs
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
£m
£m
  
£m
£m

Home loans
3,167 
3,397 
  
244 
262 
  
3,411 
3,659 
Credit cards and unsecured lending
3,861 
3,954 
  
298 
295 
  
4,159 
4,249 
Other retail lending and business banking
1,411 
1,470 
  
87 
99 
  
1,498 
1,569 
Total retail
8,439 
8,821 
  
629 
656 
  
9,068 
9,477 
                 
 
Impairment allowance
  
CRL coverage
  
PCRL coverage
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
%
%
  
%
%

Home loans
866 
849 
  
27.3 
25.0 
  
25.4 
23.2 
Credit cards and unsecured lending
3,224 
3,212 
  
83.5 
81.2 
  
77.5 
75.6 
Other retail lending and business banking
609 
574 
  
43.2 
39.0 
  
40.7 
36.6 
Total retail
4,699 
4,635 
  
55.7 
52.5 
  
51.8 
48.9 

 
Potential Credit Risk Loans and Coverage Ratios by business
 
 
 
 
 
CRLs
  
PPLs
  
PCRLs
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
£m
£m
  
£m
£m

UK RBB
2,770 
2,883 
  
251 
283 
  
3,021 
3,166 
Europe RBB
1,807 
1,734 
  
85 
98 
  
1,892 
1,832 
Africa RBB
1,469 
1,790 
  
64 
61 
  
1,533 
1,851 
Barclaycard
2,296 
2,288 
  
223 
208 
  
2,519 
2,496 
Corporate Banking
54 
92 
  
4 
5 
  
58 
97 
Wealth and Investment Management
43 
34 
  
2 
1 
  
45 
35 
Total retail
8,439 
8,821 
  
629 
656 
  
9,068 
9,477 
                 
 
Impairment allowance
  
CRL coverage
  
PCRL coverage
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
%
%
  
%
%

UK RBB
1,337 
1,369 
  
48.3 
47.5 
  
44.3 
43.2 
Europe RBB
638 
560 
  
35.3 
32.3 
  
33.7 
30.6 
Africa RBB
656 
700 
  
44.7 
39.1 
  
42.8 
37.8 
Barclaycard
2,004 
1,911 
  
87.3 
83.5 
  
79.6 
76.6 
Corporate Banking
48 
79 
  
88.9 
85.9 
  
82.8 
81.4 
Wealth and Investment Management
16 
16 
  
37.2 
47.1 
  
35.6 
45.7 
Total retail
4,699 
4,635 
  
55.7 
52.5 
  
51.8 
48.9 

 
—  
CRL balances in retail portfolios decreased 4%, primarily in:
 
 
–  
 Africa RBB, principally due to improved recoveries in South Africa home loans and depreciation of ZAR against GBP
 
 
–  
UK RBB, where reductions reflected lower recovery balances across portfolios primarily due to improved performance in Business Banking and in Consumer Lending
 
 
–  
This was partially offset by higher balances in Europe RBB primarily due to an increase in mortgage recovery balances across all home loans portfolios reflecting challenging economic conditions
 


Credit Risk
 
 
Secured home loans
 
—  
The principal home loan portfolios listed below account for 96% (2012: 96%) of total home loans in the Group’s retail portfolios
 
 
—  
Total home loans to retail customers increased 4% to £176,247m (2012: £169,554m)
 

Home loans principal portfolios1 
  
    
  
As at 30.06.13 
Gross loans and advances
> 90 Day
arrears 
> 90 Day
arrears,
including
recoveries2 
Gross
charge-off
rates
Recoveries
proportion of
outstanding
balances
Recoveries
impairment
coverage ratio 
  
£m
% 
% 
%
%
% 

UK 
121,784 
0.3  
0.8  
0.5 
0.5 
13.7  
South Africa 
14,156 
1.1  
7.8  
2.9 
6.8 
36.0  
Spain 
13,756 
0.7  
2.8  
1.0 
2.0 
36.5  
Italy 
16,248 
1.0  
3.1  
0.7 
2.1 
25.8  
Portugal 
3,814 
0.4  
3.5  
1.1 
3.1 
30.0  
  
  
  
  
    
  
As at 31.12.12 
  
  
  
    
  
UK 
114,766 
0.3  
0.8  
0.6 
0.5 
13.4  
South Africa 
15,773 
1.6  
8.4  
3.9 
6.9 
34.6  
Spain 
13,551 
0.7  
2.6  
1.1 
1.9 
34.0  
Italy 
15,529 
1.0  
2.9  
0.8 
1.8 
25.4  
Portugal 
3,710 
0.7  
3.4  
1.4 
2.8 
25.6  

 
—  
Arrears rates remained steady in the UK due to targeted balance growth and improved customer affordability that continued to be supported by the low interest rate environment. The recoveries impairment coverage ratio also remained stable in line with the recoveries balances
 
 
—  
In the UK, of the total home loans portfolio of £121,784m
 
 
–  
Owner-occupied interest only balances of £46.1bn (2012: £45.7bn) represented 37.9% of total home loan balances (see page 75 for more detail). The average balance weighted LTV for interest only balances remained low at 57.3% (2012: 58.9%) and with 90 day arrears rates were flat at 30bps (2012: 30bps) and in line with overall portfolio performance
 
 
–  
Buy to let home loans comprised 7% of the total stock (2012: 7%).  For buy to let home loans, arrears rates improved marginally from 0.54% to 0.49% while balance weighted portfolio LTV remained broadly stable at 64.7% (2012: 65.7%)
 
 
—  
South African home loans arrears decreased and charge off rates improved due to continued focus on collection strategies. Recovery impairment coverage ratio increased in part due to an increase in ageing within the recovery book
 
 
—  
Recoveries performance of home loans in Europe continued to decline as reflected in the increase in the recoveries proportion of outstanding balances for Spain, Italy and Portugal and the increase in recoveries impairment coverage ratio
 
 
 

 
 
1  
Excluded from the above analysis are Wealth International home loans, which are managed on an individual customer exposure basis, France home loans and other small home loans portfolios.
2  
90 days Arrears including recoveries is sum of balances more than 90 days in arrears and balances charged off to recoveries, expressed as a percentage of total outstanding balances.
 
 

 

 
Credit Risk
 
Home loans principal portfolios - distribution of balances by LTV1 
  
                  
  
  
UK
South Africa
Spain
Italy
Portugal 
  
30.06.13
31.12.12
30.06.13
31.12.12
30.06.13
31.12.12
30.06.13
31.12.12
30.06.13
31.12.12 
  
%
%
%
%
%
%
%
%
%
% 

<=75% 
80.4 
76.1 
66.7 
62.8 
62.3 
64.2 
74.4 
74.3 
37.6 
40.3  
>75% and <=80% 
8.4 
9.2 
9.0 
9.0 
6.5 
6.5 
15.3 
16.0 
7.4 
8.3  
>80% and <=85% 
4.1 
5.4 
7.8 
8.2 
6.0 
6.1 
6.0 
5.5 
9.5 
10.6  
>85% and <=90% 
2.6 
3.3 
5.4 
6.4 
5.5 
5.5 
1.6 
1.4 
10.8 
11.1  
>90% and <=95% 
1.7 
2.2 
3.5 
4.0 
4.8 
4.4 
0.8 
0.9 
11.0 
10.2  
>95% and <=100% 
1.0 
1.4 
2.3 
2.8 
3.8 
3.3 
0.6 
0.6 
8.3 
7.6  
>100% 
1.8 
2.4 
5.3 
6.8 
11.1 
10.0 
1.3 
1.3 
15.4 
11.9  
  
                  
  
Marked to market LTV:
valuation weighted %2 
44.8 
45.5 
43.0 
44.2 
46.5 
45.4 
46.6 
46.7 
69.3 
67.7  
Marked to market LTV:
balance weighted %2 
57.9 
59.1 
63.7 
65.6 
65.7 
64.6 
59.8 
59.6 
79.7 
77.6  
  
                  
  
For >100% LTVs: 
                  
  
balances (£m) 
2,223 
 2,698 
739 
 1,064 
 1,523 
 1,343 
215 
 203 
587 
440  
Marked to market
collateral (£m) 
2,006 
 2,478 
618 
 898 
 1,305 
 1,136 
172 
 167 
538 
405  
Average LTV:
valuation weighted % 
110.8 
 108.9 
119.6 
 118.4 
116.8 
 118.2 
125.4 
 121.1 
109.2 
108.5  
Average LTV:
balance weighted % 
115.8 
 112.3 
123.1 
 121.7 
116.8
118.1
145.3
137.0
111.6
110.7  
% of balances in recoveries 
2.7 
 2.6 
50.1 
 46.2 
11.3 
 12.0 
58.1 
 51.2 
11.4 
12.5  

 
—  
Credit quality of the principal home loan portfolios reflected relatively conservative credit criteria resulting in low levels of high LTV lending as well as moderate LTV on existing portfolios
 
 
—  
During H113, the average marked to market LTV (both balance weighted and valuation weighted) of UK decreased due to appreciating house prices. The increase in Spain and Portugal was as a result of continued decline in house prices. The marked to market LTV in Italy remained broadly stable
 
 
—  
In UK, balances >100% LTV reduced in the first half of 2013. However, the balance weighted LTV for the same period increased due to  the remaining balances having higher LTVs  than those paid down
 
 
—  
In South Africa Home Loans, whilst balances with >100% LTV reduced to £739m (2012: £1,064m) the percentage of balances in recoveries with >100% LTV increased to 50.1% (2012: 46.2%) due to longer resolution time for recovery balances
 
 

 

 
 
1  
Portfolio marked to market based on the most updated valuations and includes recoveries balances. Updated valuations reflect the application of the latest house price index available in the country as at 30 June 2013.
2  
Valuation weighted LTV is the ratio between total outstanding balances and the value of total collateral held against these balances. Balance weighted LTV approach is derived by calculating individual LTVs at account level and weighting by the individual loan balances to arrive at the average position.  
 
 
 

 
Credit Risk
 
Home loans principal portfolios - new lending1 
 
  
  
  
  
  
  
  
  
UK 
South Africa 
Spain 
Italy 
Portugal 
As at 30 June 
2013 
2012  
2013 
2012  
2013 
2012  
2013 
2012  
2013 
2012  

New home loans (£m) 
 7,700 
 7,800  
 532 
 504  
 221 
 96  
 374 
 516  
 11 
 68  
  
  
  
  
  
  
  
  
  
  
  
New home loans proportion above 85% LTV 
2.6 
4.8  
28.1 
33.3  
0.6 
5.2  
-
- 
17.6 
4.6  
Average LTV:
Valuation weighted % 
53.8 
55.3  
63.8 
62.9  
56.1 
54.1  
53.3 
56.2  
53.5 
57.4  
Average LTV:
Balance weighted % 
60.6 
63.6  
74.1 
73.8  
61.6 
62.5  
60.2 
63.7  
63.3 
60.6  
 

 
—  
New lending in principal home loan portfolios decreased 2% to £8,838m (2012: £8,984m)
 
 
—  
The decrease in average valuation weighted LTV in the UK to 53.8% (2012: 55.3%) was driven by an increased proportion of lower LTV originations. The volume in  the UK is constrained by conservative credit criteria and risk limits, as evidenced by the decrease in the new home loans proportion above 85%
 
 
—  
In South Africa, new home loans above 85% LTV decreased from 33.3% to 28.1% due to stricter lending criteria
 
 
—  
During H113, new lending was reduced in Europe home loans as conservative credit criteria were maintained. Average LTV on new home loans in Spain remained broadly stable. Whilst the proportion of new home loans above 85% LTV decreased from 5.2% to 0.6%
 

 
 
 
1  
New home loans for 2013 and 2012 is total for the first half of the year.
 

Credit Risk
 
Exposures to interest only home loans
 
—  
The Group provides interest only mortgages to customers, mainly in the UK. Under the terms of these loans, the customer makes payments of interest only for the entire term of the mortgage, although customers may make early repayments of the principal provided that these are no more than 5% of the principal balance in any year
 
 
—  
Subject to such overpayments, the entire principal remains outstanding until the end of the loan term and the customer is responsible for repaying this on maturity. The means of repayment may include the sale of the mortgaged property
 
 
—  
Interest only lending is subject to underwriting criteria that includes: a maximum size of loan, maximum LTV ratios, affordability and maximum loan term amongst other criteria. Borrowers on interest only terms must have a repayment strategy in place to repay the loan at maturity and a customer contact strategy has been developed to ensure ongoing communications are in place with interest only customers at various points during the term of the mortgage. The contact strategy is varied dependent on our view of the risk of the customer
 
 
—  
Interest only mortgages comprise £53bn (2012: £53bn) of the total £122bn (2012: £115bn) UK home loans portfolio. Of these, £46bn (2012: £46bn) are owner-occupied with the remaining £7bn (2012: £7bn) buy-to-let
 







Exposure to interest only owner-occupied home loans
As at
As at
 
30.06.13
31.12.12
Interest only balances (£m)
46,080 
 45,693 
90 days arrears (%)
0.3 
0.3 
Marked to market LTV: Valuation weighted %
44.2 
45.2 
Marked to market LTV: Balance weighted %
57.3 
58.9 
Interest only mortgages maturing during:
    
2013 
£350m
£710m
2014 
£923m
£872m
2015 
£928m
£1046m

 
—  
The average valuation weighted LTV for interest only balances remained low at 44.2% (2012: 45.2%) and overall 90 days arrears rates was flat at 30bps (2012: 30bps) and in line with overall portfolio performance
 
 

 
Exposures to Mortgage Current Accounts Reserves
 

 
 
—  
A Mortgage Current Account (MCA) Reserve is a secured overdraft facility available to a home loan customer which allows them to borrow against the equity in their home. It allows draw-down up to an agreed available limit. The balance drawn must be repaid on redemption of the mortgage
 
 
—  
Of total 920k home loan customers, 611k have Mortgage Current Account (MCA) reserves, with total reserve limits of £18.5bn. Utilisation of these limits was 31.5% at June 2013 (2012: 30.9%)
 
 
—  
While the MCA reserve was withdrawn from sale in December 2012, as existing customers, including those in potential financial difficulty, can continue to draw down against the available reserve (£13.0bn of undrawn limits as at June 2013) 
 
 
—  
Including the drawn down proportion of MCA reserves, these accounts represent £78.1bn (2012: £82.2bn) of the total UK Home Loans exposure of £121.8bn (2012: £114.8bn)
 
 
—  
Using current valuations, the average balance weighted LTV of accounts with a mortgage current account reserve is 58.3% (2012: 59.7%). This compares with a portfolio average balance weighted LTV of 57.9%
 
 

 


Credit Risk
 
Credit cards, overdrafts and unsecured loans
 
—  
The principal portfolios listed below account for 90% (2012: 90%) of total credit cards, overdrafts and unsecured loans in the Group’s retail portfolios
 

Principal Portfolios
As at 30.06.13 
Gross Loans and Advances
30 Day
Arrears 
90 Day
Arrears 
Gross
Charge-off
Rates 
Recoveries
Proportion of
Outstanding Balances
Recoveries Impairment Coverage Ratio
  
£m
% 
% 
% 
%
%
UK cards1 
15,695 
2.5  
1.2  
4.4  
6.1 
82.9 
US cards2 
9,672 
2.0  
1.0  
4.4  
2.2 
88.4 
UK personal loans 
4,942 
2.9  
1.3  
5.0  
16.6 
78.7 
Barclays Partner Finance 
2,508 
1.8  
0.9  
3.1  
4.4 
80.2 
South Africa cards2 
2,409 
9.1  
4.7  
6.7  
4.7 
73.1 
Germany cards 
2,071 
2.4  
1.0  
3.9  
3.7 
82.1 
UK overdrafts 
1,283 
5.4  
3.6  
8.0  
15.6 
95.1 
Italy salary advance loans3 
1,214 
4.1  
2.0  
7.7  
10.9 
15.8 
Iberia cards 
1,174 
7.5  
3.6  
9.8  
9.8 
88.0 
South Africa personal loans 
1,017 
5.7  
3.0  
7.8  
7.7 
75.3 
  
  
  
  
  
    
As at 31.12.12 
  
  
  
  
    
UK cards1 
15,434 
2.5  
1.1  
4.9  
6.2 
80.4 
US cards2 
9,296 
2.4  
1.1  
5.0  
2.3 
90.7 
UK personal loans 
4,861 
3.0  
1.3  
5.1  
17.4 
78.9 
Barclays Partner Finance 
2,323 
1.9  
1.0  
3.9  
4.8 
78.1 
South Africa cards2 
2,511 
7.4  
3.9  
4.7  
4.7 
70.9 
Germany cards 
1,778 
2.5  
0.9  
3.6  
3.2 
79.4 
UK overdrafts 
1,382 
5.3  
3.5  
8.2  
14.6 
92.7 
Italy salary advance loans3 
1,354 
2.3  
0.9  
8.4  
9.4 
12.5 
Iberia cards 
1,140 
7.5  
3.5  
9.6  
12.4 
88.2 
South Africa personal loans 
1,061 
5.6  
3.1  
8.5  
7.6 
72.3 

 
—  
Gross loans and advances in credit cards, overdrafts and unsecured loans remained broadly stable with the increase in Germany, Barclays Partner Finance and US card portfolios being offset by decreases in Italy salary advance loans and UK overdrafts
 
 
—  
With the exception of South Africa cards and Italy salary advance loans, arrears rates remained broadly stable. In Iberia cards portfolios recoveries proportion of outstanding balances have been actively reduced during the period following a tightening in write off policy
 
 
—  
In South Africa, delinquency and charge off rates deteriorated due to the difficult macroeconomic environment
 
 
—  
The deterioration in arrears rates in Italy salary advance loans was driven by one intermediary otherwise underlying performance was broadly stable. The increase in recoveries proportion of outstanding balances and coverage ratio reflected the difficult economic environment and insurance claims experience which resulted in the lower recovery of outstanding balances
 

 
 

 
1 UK cards includes the acquired Egg credit card assets, which totalled £1.7bn at acquisition. The outstanding acquired balances have been excluded from the recoveries impairment coverage ratio on the basis that the portfolio has been recognised on acquisition at fair value during 2011 (with no related impairment allowance). Impairment allowances have been recognised as appropriate where these relate to the period post acquisition.
 
2 South Africa Cards now includes the acquired Edcon portfolio and in both FY12 and H113 figures. The outstanding acquired balances have been excluded from the recoveries impairment coverage ratio on the basis that the portfolio has been recognised on acquisition at fair value during 2012 (with no related impairment allowance). Impairment allowances have been recognised as appropriate where these relate to the period post acquisition.
 
3 The recoveries impairment coverage ratio for Italy salary advance loans is lower than other unsecured portfolios as these loans are extended to customers where the repayment is made via a salary deduction at source by qualifying employers and Barclays is insured in the event of  termination of employment or death. Recoveries represent balances where insurance claims are pending that we believe are largely recoverable, hence the lower coverage.
 


 

 
Credit Risk
 
 
Other Secured Retail Lending
 
—  
The principal portfolio listed below accounts for 50% (2012: 50%) of total Other Secured Retail Lending Loans in the Group’s retail portfolios
 

 
Gross
 Loans and Advances
30 Day Arrears
90 Day Arrears
Gross Charge-off Rates
Recoveries Proportion of Outstanding Balances
Recoveries Impairment Coverage Ratio
South Africa Vehicle auto finance
£m
%
%
%
%
%
As at 30.06.13
2,797 
2.0 
0.7 
3.1 
2.6 
62.3 
As at 31.12.12
3,081 
2.0 
0.7 
3.6 
3.0 
57.6 

 
—  
Arrears rates in South Africa auto loans remained stable. This has been driven by focussing sales efforts on lower risk customers and improving the effectiveness of collection processes
 
 
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 principal portfolios listed below account for 86% of total Business Lending Loans (2012: 88%) in the Group’s retail portfolios
 

Principal Portfolios
  
  
    
  
        
   
Arrears Managed1 
  
Early Warning List Managed2 
        
As at 30.06.13
Gross
 Loans and Advances
Drawn balances
Of which Arrears balances 
  
Drawn balances
Of which Early Warning List Balances 
Loan Loss Rates
Gross Charge-off Rates
Recoveries Proportion of Outstanding Balances
Recoveries Coverage Ratio
 
£m
£m
% 
  
£m
% 
bps
%
%
%

UK
8,349 
698 
5.4  
  
7,245 
9.1  
145 
2.0 
3.8 
37.8 
Spain
1,071 
97 
9.7  
  
978 
33.2  
320 
2.6 
6.4 
45.1 
Portugal
549 
188 
5.5  
  
335 
20.7  
588 
7.6 
8.0 
57.5 
     
  
    
  
        
As at
31.12.12
    
  
    
  
        
UK
8,053 
713 
6.0  
  
7,122 
9.2  
140 
2.5 
4.3 
34.9 
Spain
1,095 
95 
11.3  
  
993 
60.4  
210 
3.8 
6.6 
45.0 
Portugal
596 
185 
6.4  
  
393 
17.8  
503 
5.7 
6.7 
65.9 

 
—  
UK business lending gross loans and advances increased 4% to £8,349m (2012: £8,053m). Arrears and charge off rates improved due to close monitoring of the portfolio resulting in a reduction in recoveries balances
 
 
—  
Business lending gross loans and advances in Europe reduced 4% in the first half of 2013 to £1,673m (2012: £1,742m) primarily due to the tightening of credit policy and a reduction in new business volumes
 
 
—  
Spain gross loans and advances reduced 2% to £1,071m (2012: £1,095m). Loan loss rates increased to 320bps (2012: 210bps) due to difficult macro economic conditions. Spain early warning list balances as a percentage of drawn balances reduced significantly as a result of closely managing cases
 
 
—  
Portugal gross loans and advances reduced 8% to £549m (2012: £596m). Loan loss rates increased to 588bps (2012: 503bps) reflecting both increasing arrears in the difficult macro environment and reducing balances
 

 
1Arrears 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 reflects the total balances of accounts which are past due on payments.
 
2Early Warning List Managed accounts are customers that exceed the Arrears Managed limits and are monitored with processes that record heightened levels of risk through an Early Warning List grading. Early Warning List 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.



Credit Risk
 
UK Commercial Real Estate (UK CRE)
 
—  
Total loans and advances at amortised cost to UK CRE in business lending amounted to £1,554m (2012: £1,534m), with a total of £114m (7% of the total) being past due (2012: £123m; 8%). Impairment allowances totalled £18m (2012: £20m)
 
 
—  
The impairment charge for H113 was lower at £10m (2012: £17m)
 
 
—  
As at H113, UK CRE in business lending accounted for 18.6% of total UK Business Lending balances
 
 
—  
Arrears balances have reduced due to improved economic conditions coupled with more effective turnaround strategies
 

UK Commercial Real Estate
 
As at
As at
 
30.06.13
31.12.12

UK CRE loans and advances (£m)
 1,554 
 1,534 
Past due balances (£m)
 114 
123 
Balances past due as % of UK CRE total loans and advances
7.0%
8.0%
Impairment allowances (£m)
 17.9 
 19.9 
Past due coverage ratio
15.6%
16.1%
     
 
Six months
ended
30.06.13
Six months
ended
30.06.12
Impairment Charge (£m)
 10.1 
 16.5 




Retail forbearance programmes
 
Forbearance programmes on principal Credit Cards, Overdrafts, Unsecured Loans, Home Loans and Business Lending portfolios
 
 
—  
Retail forbearance is available to customers experiencing financial difficulties. Forbearance solutions may take a number of forms depending on the extent of the financial dislocation. Short term solutions normally focus on temporary reductions to contractual payments and switches from capital and interest payments to interest only. For customers with longer term financial difficulties, term extensions may be offered, which may also include interest rate concessions and fully amortising balances for card portfolios
 
 
—  
Forbearance on the Group’s principal portfolios in the US, UK and Europe is presented below
 
 
—  
Forbearance balances in South Africa are not included as local practices are in the process of being aligned to Group policy. In other retail portfolios, the level of forbearance extended to customers is not material and, typically, is not a significant factor in the management of customer relationships
 
 

 
 

 
Credit Risk
 


Principal Portfolios
Gross L&A subject to forbearance programmes
Forbearance programmes proportion of outstanding balances
Marked to market LTV of forbearance balances: valuation weighted
Marked to market LTV of forbearance balances: balance weighted
As at 30.06.13
£m
%
%
%
Home loans
        
UK
1,634 
1.3 
36.6 
58.2 
Spain
177 
1.3 
53.3 
69.1 
Italy
493 
3.0 
52.7 
63.0 
         
Credit Cards, Overdrafts and Unsecured Loans
        
UK cards
961 
6.0 
n/a
n/a
UK personal loans
155 
3.1 
n/a
n/a
US cards
95 
1.0 
n/a
n/a
         
Business Lending
        
UK
275 
3.3 
n/a
n/a
         
As at 31.12.12
        
Home Loans
        
UK
1,596 
 1.4 
 36.6 
 58.2 
Spain
174 
 1.3 
 53.3 
 68.9 
Italy
217 
 1.4 
 49.1 
 60.6 
         
Credit Cards, Overdrafts and Unsecured Loans
        
UK cards
991 
 6.3 
n/a
n/a
UK personal loans
168 
 3.4 
n/a
n/a
US cards
116 
 1.3 
n/a
n/a
         
Business Lending
        
UK
203 
 2.5 
n/a
n/a
         

 
—  
Loans in forbearance in the principal home loans portfolios increased 16% to £2,304m, mainly due to an increase in UK and Italy
 
 
—  
In Spain, forbearance accounts are predominantly full account restructures, In Italy, the majority of the balances relate to specific schemes required by the Government and amendments are weighted towards payment holidays and interest suspensions
 
 
—  
Within UK home loans, term extensions account for over 60% of forbearance balances, the majority of the remainder being switches from ‘capital and interest’ to ‘interest only’ pre 2010
 
 
—  
Loans in forbearance in principal Credit Cards, Overdrafts and Unsecured Loans portfolios decreased  5% to £1,211m. Forbearance programmes as a proportion of outstanding balances reduced in UK and US cards due to an improved credit environment and repayment behaviours and a tightening of forbearance policy in 2012
 
 
—  
The increase in Italy forbearance is in part due to inclusion of €256m (£219m) of Italian government payment suspension schemes relating to earthquakes in Abruzzo, Emilia and Lombardy
 

 
 


Credit Risk
        
Wholesale Credit Risk
 
 
  
 
 
 
 
 
 
 
  
 
Wholesale Loans and Advances to Customers and Banks at Amortised Cost
  
  
  
      
 
  
  
  
 
Gross
L&A
Impairment allowance
L&A net of impairment
Credit
risk loans
CRLs % of gross L&A
Loan impairment charges2 
Loan loss rates
As at 30.06.13
£m
£m
£m
£m
%
£m 
bps

Investment Bank1 
 187,256 
640
 186,616 
835 
0.4 
179
19
Corporate Banking 
 68,295 
 2,180 
 66,115 
3,966 
5.8 
 265  
 78 
- UK 
 52,007 
 450 
 51,557 
 1,377 
2.6 
 83  
 32 
- Europe 
 7,636 
 1,543 
 6,093 
 2,416 
31.6 
 180  
 475 
- Rest of World 
 8,652 
 187 
 8,465 
 173 
2.0 
 2  
 5 
Wealth and Investment Management 
 20,386 
 167 
 20,219 
 706 
3.5 
 44  
 44 
Africa RBB 
 6,767 
 198 
 6,569 
719 
10.6 
 35  
 104 
Head Office and Other Operations 
 1,634 
 20 
 1,614 
20 
1.2 
 (1) 
(12)
Total 
 284,338 
 3,205 
281,133
6,246 
2.2 
522
37
 
 
 
 
    
  
  
As at 31.12.12 
          
  
  
Investment Bank1 
 144,143 
 586 
 143,557 
768 
0.5 
 192  
 13 
Corporate Banking 
 67,337 
 2,171 
 65,166 
4,232 
6.3 
 838  
 124 
- UK 
 52,667 
 428 
 52,239 
1,381 
2.6 
 279  
 53 
- Europe 
 8,122 
 1,536 
 6,586 
2,607 
32.1 
 527  
 649 
- Rest of World 
 6,548 
 207 
 6,341 
244 
3.7 
 32  
 49 
Wealth and Investment Management 
 19,236 
 141 
 19,095 
603 
3.1 
 38  
 20 
Africa RBB 
 7,313 
 250 
 7,063 
681 
9.3 
 160  
 219 
Head Office and Other Operations 
 1,466 
 16 
 1,450 
19 
1.3 
 -  
 - 
Total 
 239,495 
 3,164 
 236,331 
6,303 
2.6 
 1,228  
 51 

 
—  
Gross loans and advances to customers and banks increased 19% during H113 principally due to a 30% rise in the Investment Bank as a result of higher settlement balances. For more detail, see analysis of Investment Bank wholesale loans and advances on page 82
 
 
—  
The loan impairment charge decreased 26% to £522m (H112: £706m) principally due to improvements in Corporate Banking partly reflecting reduced impairment against large corporate clients in the UK and lower charges in Europe reflecting actions to reduce exposure to the Spanish property and construction sectors
 
 
—  
The lower impairment charge coupled with the higher loan balances resulted in an annualised loan loss rate of 37bps (H112: 50bps; FY12: 51bps)
 
 

 
 
1  
Investment Bank gross loans and advances include cash collateral and settlement balances of £129,667m as at 30 June 2013 and £85,116m as at 31 December 2012. Excluding these balances CRLs as a proportion of gross loans and advances were 1.5% and 1.3% respectively and the loan loss rates were 63bps and 33bps respectively.
2  
Loan impairment charge as at December 2012 is the charge for the 12 month period.
 
 
 

 
Credit Risk
 
Potential Credit Risk Loans and Coverage Ratios
 
 
 
 
 
 
 
 
CRLs
  
PPLs
  
PCRLs
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
£m
£m
  
£m
£m

Investment Bank
835 
768 
  
316 
327 
  
1,151 
1,095 
Corporate Banking
3,966 
4,232 
  
606 
624 
  
4,572 
4,856 
Wealth and Investment Management
706 
603 
  
103 
74 
  
809 
677 
Africa RBB
719 
681 
  
46 
77 
  
765 
758 
Head Office and Other Operations
20 
19 
  
1 
-
  
21 
19 
Total wholesale
6,246 
6,303 
  
1,072 
1,102 
  
7,318 
7,405 
                 
 
Impairment allowance
  
CRL coverage
  
PCRL coverage
 
As at
As at
  
As at
As at
  
As at
As at
 
30.06.13
31.12.12
  
30.06.13
31.12.12
  
30.06.13
31.12.12
 
£m
£m
  
%
%
  
%
%

Investment Bank
640 
586 
  
76.6 
76.3 
  
55.6
53.5 
Corporate Banking
2,180 
2,171 
  
55.0 
51.3 
  
47.7 
44.7 
Wealth and Investment Management
167 
141 
  
23.7 
23.4 
  
20.6 
20.8 
Africa RBB
198 
250 
  
27.5 
36.7 
  
25.9 
33.0 
Head Office and Other Operations
20 
16 
  
100.0 
84.2 
  
95.2 
84.2 
Total wholesale
3,205 
3,164 
  
51.3 
50.2 
  
43.8
42.7 

 
—  
CRL balances  decreased 1% to £6,246m primarily due to Corporate Banking where lower balances reflected a reduction in Europe, most notably Spain, following write-offs and a debt sale
 
 
—  
This decrease was partially offset by higher balances in:   
 
 
–  
Wealth and Investment Management, principally reflecting the inclusion of a single name exposure  
 
 
–  
Investment Bank reflecting the inclusion of a single name exposure partially offset by sales and payments and the exit from one large position   
 
 

 

 
Credit Risk
 
Analysis of Investment Bank Wholesale Loans and Advances at Amortised Cost 
    
As at 30.06.13 
Gross
L&A
Impairment allowance
L&A net of impairment
Credit risk loans 
CRLs % of gross L&A 
Loan impairment Charges
Loan loss rates
  
£m
£m
£m
£m 
% 
£m
bps

Loans and advances to banks 
      
  
  
    
Interbank lending 
13,946 
35 
13,911 
54  
0.4  
- 
- 
Cash collateral and settlement balances 
26,217 
- 
26,217 
-  
-  
- 
- 
Loans and advances to customers 
      
  
  
    
Corporate lending 
30,344 
155 
30,189 
168  
0.6  
(13)
(9)
Government lending 
1,322 
- 
1,322 
-  
-  
- 
- 
Other wholesale lending 
11,973 
450
11,523
613  
5.1  
192
323
Cash collateral and settlement balances 
103,454 
- 
103,454 
-  
-  
- 
- 
Total 
187,256 
640 
186,616 
835  
0.4  
179
19
  
      
  
  
    
As at 31.12.12 
      
  
  
    
Loans and advances to banks 
      
  
  
    
Interbank lending 
13,763 
41 
13,722 
51  
0.4  
41 
30 
Cash collateral and settlement balances 
23,350 
- 
23,350 
-  
-  
- 
- 
Loans and advances to customers 
      
  
  
    
Corporate lending 
29,546 
205 
29,341 
349  
1.2  
160 
54 
Government lending 
1,369 
- 
1,369 
-  
-  
- 
- 
Other wholesale lending 
14,349 
340 
14,009 
368  
2.6  
(9)
(6)
Cash collateral and settlement balances 
61,766 
- 
61,766 
-  
-  
- 
- 
Total 
144,143 
586 
143,557 
768  
0.5  
192 
13 

 
—  
Investment Bank wholesale loans and advances increased 30% to £186,616m driven by higher settlement balances offset by a reduction in other wholesale lending
 
 
—  
Excluding settlement and cash collateral balances from total loans and advances, the annualised loan loss rate for the Investment Bank increased to 63bps (2012: 33bps) due to a charge on a single name exposure within Other wholesale lending
 
 
—  
Included within corporate lending and other wholesale lending portfolios are £1,280m (2012: £1,336m) of loans backed by retail mortgage collateral
 
 

 

 
 
 
Credit Risk
 
 
Wholesale Forbearance
 
—  
Wholesale client relationships are individually managed and lending decisions are made with reference to specific circumstances and on bespoke terms
 
 
—  
Forbearance occurs when Barclays, for reasons relating to the actual or perceived financial difficulty of an obligor, grants a concession below current Barclays standard terms (i.e. lending criteria below our current lending terms), that would not normally be considered. This includes all troubled debt restructures granted below our standard rates
 
 
—  
Personal and Trusts includes Wealth and Investment Management clients that are high net worth individuals who organise their affairs through funds and trusts
 
 
—  
Loan impairment on forbearance cases amounted to £1,005m (2012: £1,149m), which represented 26% (2012: 27%) of total forbearance balances
 
 
—  
Maturity date extension accounted for the largest proportion of forbearance recognised, followed by changes to cashflow profile other than maturity extension and adjustments to or non-enforcement of covenants
 
 
—  
Corporate borrowers accounted for 86% (2012: 89%) of balances and 94% (2012: 95%) of impairment booked to forbearance exposures at 30 June 2013, with impairment representing 28% (2012: 29%) of forbearance balances
 
 
—  
Corporate Banking accounted for the single largest proportion of overall Wholesale forbearance, with forbearance exposures concentrated in Western Europe and particularly Spain, which accounted for 21% (2012: 29%) of total Wholesale forbearance balances and 43% (2012: 45%) of total impairment booked to forbearance exposures at 30 June 2013
 

Wholesale forbearance reporting split by exposure class
 
        
 
Sovereign
Financial Institutions
Corporate
Personal and  Trusts
Total
As at 30.06.13
£m
£m
£m
£m
£m

Restructure: reduced contractual cashflows
 3 
 16 
 433 
 - 
 452 
Restructure: maturity date extension
 5 
 109 
 1,194 
 68 
 1,376 
Restructure: changed cashflow profile (other than extension)
 5 
 47 
 612 
 23 
 687 
Restructure: payment other than cash
 - 
 - 
 40 
 1 
 41 
Change in security
 - 
 - 
 30 
 8 
 38 
Adjustments/ non enforced covenant
 10 
 7 
 508 
 125 
 650 
Other
 1 
 - 
 537 
 130 
 668 
Total
 24 
 179 
 3,354 
 355 
 3,912 
           
As at 31.12.12
          
Restructure: reduced contractual cashflows
 4 
 16 
 405 
 - 
 425 
Restructure: maturity date extension
 5 
 107 
 1,412 
 33 
 1,557 
Restructure: changed cashflow profile (other than extension)
 5 
 46 
 876 
 26 
 953 
Restructure: payment other than cash
 - 
 - 
 71 
 1 
 72 
Change in security
 - 
 - 
 76 
 8 
 84 
Adjustments/ non enforced covenant
 10 
 7 
 626 
 128 
 771 
Other
 - 
 - 
 318 
 74 
 392 
Total
 24 
 176 
 3,784 
 270 
 4,254 
           
           
           
 
 
Credit Risk
Wholesale forbearance reporting split by business unit
          
 
Corporate Banking
Investment Bank
Wealth & Investment Management
Africa RBB
Total
As at 30.06.13
£m
£m
£m
£m
£m
Restructure: reduced contractual cashflows
 325 
 103 
 - 
 25 
 453 
Restructure: maturity date extension
 775 
 352 
 135 
 113 
 1,375 
Restructure: changed cashflow profile (other than extension)
 428 
 116 
 75 
 68 
 687 
Restructure: payment other than cash (e.g. debt to equity)
 40 
 - 
 1 
 - 
 41 
Change in security
 19 
 7 
 12 
 1 
 39 
Adjustments/ non enforced covenant
 296 
 73 
 279 
 1 
 649 
Other
 377 
 - 
 279 
 12 
 668 
Total
 2,260 
 651 
 781 
 220 
 3,912 
           
As at 31.12.12
          
Restructure: reduced contractual cashflows
 258 
 138 
 - 
 29 
 425 
Restructure: maturity date extension
 952 
 408 
 112 
 85 
 1,557 
Restructure: changed cashflow profile (other than extension)
 624 
 152 
 70 
 107 
 953 
Restructure: payment other than cash (e.g. debt to equity)
 64 
 7 
 1 
 - 
 72 
Change in security
 45 
 26 
 12 
 1 
 84 
Adjustments/ non enforced covenant
 377 
 115 
 277 
 2 
 771 
Other
 162 
 - 
 211 
 19 
 392 
Total
 2,482 
 846 
 683 
 243 
 4,254 

 
UK Commercial Real Estate (UK CRE)
 
—  
The UK CRE portfolio includes property investment, development, trading and housebuilders but excludes social housing contractors
 
 
—  
Total loans and advances at amortised cost to UK CRE amounted to £9,271m (2012: £9,676m), with a total of £306m (3.3% of the total) being past due (2012: £295m; 3.0%). Impairment provisions allowances totalled £134m at 30 June 2013 (2012: £106m)
 
 
—  
The impairment charge for H113 for the UK CRE portfolio was £28m (2012: £28m) principally within  UK Corporate Banking
 

Commercial Real Estate1
 
As at
As at
 
30.06.13
31.12.12

UK CRE loans and advances (£m)
 9,271 
 9,676 
Past due balances (£m)
 306 
 295 
Balances past due as % of total loans
3.3%
3.0%
Impairment provision (£m)
 134 
 106 
Balances past due coverage ratio (%)
44%
36%
     
 
Six months
ended
30.06.13
Six months
ended
30.06.12
Impairment charge (£m)
 28 
 28 


 

 
1     An additional £178m (2012: £270m) of UK CRE exposure is held at fair value.


Credit Risk
 
Group exposures to Eurozone countries
 
 
—  
The Group recognises the credit and market risk resulting from the ongoing volatility in the Eurozone and continues to monitor events closely while taking coordinated steps to mitigate the risks associated with the challenging economic environment
 
 
—  
During H113 the Group’s net on-balance sheet exposures to Spain, Italy, Portugal, Ireland, Cyprus and Greece reduced by 4% to £57.2bn (2012: £59.3bn) principally due to Sovereign exposure decreasing 50% to £2.7bn with a reduction in Spanish and Italian government bonds held as available for sale
 
 
—  
As at 30 June 2013, the local net funding deficit in Italy was €13.6bn (2012: €11.8bn) and the deficit in Portugal was €4.4bn (2012: €4.1bn). The net funding surplus in Spain was €1.8bn (2012: €2.3bn). Barclays continues to monitor the potential impact of the Eurozone volatility on local balance sheet funding and will consider actions as appropriate to manage the risk
 
 
Summary of Group exposures
 
—  
The following table shows Barclays exposure to Eurozone countries monitored internally as being higher risk and thus being the subject of particular management focus. Detailed analysis on these countries is on pages 86 to 93. The basis of preparation is consistent with that described in the 2012 Annual Report
 
 
—  
The net exposure provides the most appropriate measure of the credit risk to which the Group is exposed. The gross exposure is also presented below, alongside off-balance sheet contingent liabilities and commitments
 

             
Net on-balance Sheet exposure
  
Gross on-balance sheet exposure
Contingent liabilities and commitments
           
Other
 
     
Financial
  
Residential
retail
 
 
Sovereign
institutions
Corporate
mortgages
lending
 
As at 30.06.13
£m
£m
£m
£m
£m
£m
  
£m
£m
Spain
  
 292 
 1,028 
 4,976 
 13,546 
 2,436 
 22,278 
  
 30,345 
 3,245 
Italy
  
 1,967 
 390 
 1,489 
 16,034 
 2,072 
 21,952 
  
 30,260 
 3,464 
Portugal
  
 388 
 30 
 1,357 
 3,595 
 1,720 
 7,090 
  
 7,680 
 2,536 
Ireland
  
 26 
 4,194 
 1,144 
 108 
 114 
 5,586 
  
 9,752 
 1,363 
Cyprus
  
 - 
 - 
 133 
 45 
 29 
 207 
  
 301 
 48 
Greece
  
 2 
 7 
 40 
 6 
 14 
 69 
  
 1,185 
 3 
                     
As at 31.12.12
                  
Spain
  
 2,067 
 1,525 
 4,138 
 13,305 
 2,428 
 23,463 
  
 32,374 
 3,301 
Italy
  
 2,669 
 567 
 1,962 
 15,591 
 1,936 
 22,725 
  
 33,029 
 3,082 
Portugal
  
 637 
 48 
 1,958 
 3,474 
 1,783 
 7,900 
  
 8,769 
 2,588 
Ireland
  
 21 
 3,585 
 1,127 
 112 
 83 
 4,928 
  
 10,078 
 1,644 
Cyprus
  
 8 
 - 
 106 
 44 
 26 
 184 
  
 300 
 131 
Greece
  
 1 
 - 
 61 
 8 
 9 
 79 
  
 1,262 
 5 

 
—  
During H113 the Group’s sovereign exposure to Spain, Italy, Portugal, Ireland, Cyprus and Greece reduced by 50% to £2.7bn
 
 
–  
Spanish sovereign exposure reduced 86% to £292m due to the disposal of available for sale government bonds
 
 
–  
Italian sovereign exposure decreased 26% to £2bn principally due to a reduction in government bonds held as available for sale
 
 
—  
Residential mortgage and other retail exposures increased by 2% to £33.3bn and £6.4bn respectively, reflecting foreign exchange movements offset partially by  lower new originations across Spain, Italy and Portugal
 
 
—  
Corporate exposure reduced 2% to £9.1bn, largely reflecting reduced lending in Italy and Portugal, partially offset by increased trading assets in Spain and foreign exchange movements
 
 
—  
Exposures to financial institutions fell marginally by 1% to £5.6bn, with lower exposure in Spain and Italy offset predominately by increased exposure in Ireland relating to a loan to a single investment grade counterparty
 
 

 
 

 
 

 
Credit Risk
 
 
Barclays has exposures to other Eurozone countries as set out below. Total net on-balance sheet exposures to individual countries that are less than £1bn are reported in aggregate under Other
 

  
 
            
Net on-balance sheet exposure
  
Gross on-balance sheet exposure
Contingent liabilities and commitments
  
          
Other
  
  
    
Financial
  
Residential
retail
  
  
Sovereign
institutions
Corporate
mortgages
lending
  
As at 30.06.13
£m
£m
£m
£m
£m
£m
  
£m
£m
France 
  
 3,448 
 5,422 
 5,328 
 2,584 
 182 
 16,964 
  
 56,365 
 8,647 
Germany 
  
 1,985 
 4,760 
 6,621 
 26 
 2,013 
 15,405 
  
 58,055 
 7,160 
Netherlands 
  
 3,336 
 4,480 
 1,958 
 16 
 70 
 9,860 
  
 26,092 
 2,286 
Belgium 
  
 2,866 
 17 
 390 
 13 
 4 
 3,290 
  
 9,480 
 778 
Luxembourg 
  
 39 
 823 
 706 
 208 
 22 
 1,798 
  
 5,027 
 931 
Austria 
  
 1,092 
 340 
 151 
 1 
 6 
 1,590 
  
 3,528 
 210 
Finland 
  
 1,079 
 120 
 38 
 3 
 - 
 1,240 
  
 6,454 
 463 
Other 
  
 130 
 4 
 11 
 5 
 64 
 214 
  
 466 
 - 
  
                    
As at 31.12.12
                  
France 
  
 3,746 
 5,553 
 4,042 
 2,607 
 121 
 16,069 
  
 59,317 
 7,712 
Germany 
  
 282 
 4,462 
 4,959 
 27 
 1,734 
 11,464 
  
 62,043 
 6,604 
Netherlands 
  
 3,503 
 4,456 
 2,002 
 16 
 92 
 10,069 
  
 28,565 
 2,205 
Belgium 
  
 2,548 
 333 
 239 
 9 
 6 
 3,135 
  
 10,602 
 1,525 
Luxembourg
  
 13 
 1,127 
 704 
 151 
 49 
 2,044 
  
 6,009 
 812 
Austria 
  
 1,047 
 228 
 187 
 5 
 - 
 1,467 
  
 3,930 
 127 
Finland 
  
 1,044 
 209 
 140 
 3 
 - 
 1,396 
  
 9,120 
 461 
Other 
  
 210 
 9 
 24 
 26 
 41 
 310 
  
 649 
 25 

 


Credit Risk
Spain
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m
Sovereign
 989 
 (989)
 - 
  
 30 
 -  
 - 
 30 
 208 
 238 
  
 476 
Financial institutions
 694 
 (177)
 517 
  
 6,591 
 (6,430) 
 (157)
 4 
 272 
 793 
  
 788 
Corporate
 1,440 
 (136)
 1,304 
  
 407 
 (181) 
 2 
 228 
 380 
 1,912 
  
 817 
           
  
            
           
  
          
Total
as at
31.12.12
         
Available for Sale Assets as at 30.06.13
  
Fair Value through OCI
  
Cost1 
AFS Reserve
  
Total
  
         
£m  
£m
 
£m
 
£m
Sovereign
        
 23  
  
 - 
  
 23 
  
 1,562 
Financial institutions
        
 161  
  
 4 
  
 165 
  
 480 
Corporate
          
 8  
  
 - 
  
 8 
  
 10 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m
Sovereign
          
 31  
  
 - 
  
 31 
  
 29 
Financial institutions
        
 81  
  
 (11)
  
 70 
  
 257 
Residential mortgages
        
 13,677  
  
 (131)
  
 13,546 
  
 13,305 
Corporate
          
 4,055  
  
 (999)
  
 3,056 
  
 3,311 
Other retail lending
        
 2,565  
  
 (129)
  
 2,436 
  
 2,428 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m
Financial institutions
        
  
      
 184 
  
 88 
Residential mortgages
        
  
      
 10 
  
 12 
Corporate
          
  
      
 2,029 
  
 1,938 
Other retail lending
        
  
      
 1,023 
  
 1,263 

 
—  
Sovereign
 
 
–  
£292m (2012: £2,067m) largely consisting of holdings in government bonds held at fair value through profit and loss.  During the period Spanish sovereign exposure reduced due to the disposal of AFS government bonds
 
 
—  
Financial institutions
 
 
–  
£793m (2012: £788m) held at fair value through profit and loss, predominantly debt securities held by the Investment Bank to support trading and market making activities
 
 
–  
£165m (2012: £480m) AFS assets with £4m (2012: £11m loss) cumulative gain held in AFS reserve
 
 
—  
Residential mortgages
 
 
–  
£13,546m (2012: £13,305m) fully secured on residential property with average balance weighted marked to market LTV of 65.7% (2012: 64.6%). The increase in LTV is reflected in the CRL coverage of 38% (2012: 36%)
 
 
–  
90 day arrears rates have remained stable at 0.7% (2012: 0.7%) while gross charge off rates have improved slightly to 1.0% (2012: 1.1%)
 
 
—  
 Corporate
 
 
–  
Net lending to corporates of £3,056m (2012: £3,311m) with CRLs of £1,710m (2012: £1,887), impairment allowance of £999m (2012: £1,060m) and CRL coverage of 58% (2012: 56%). Balances on early warning lists peaked in November 2010
 
 
 
1  
 ‘Cost’ refers to the fair value of the asset at recognition, less any impairment booked. ‘AFS Reserve’ is the cumulative fair value gain or loss on the assets that is held in equity. ‘Total’ is the fair value of the assets at the balance sheet date.
 
 

 

 
Credit Risk
 
 
–  
The portfolio is kept under close review. Early warning list (EWL) balances remain on the reducing trend seen since the peak in H110. Over this period, EWL balances have more than halved
 
 
–  
Net lending to property and construction industry of £1,692m (2012: £2,009m) largely secured on real estate collateral, with CRLs of £1,208m (2012: £1,429m), impairment allowance of £741m (2012: £820m) and CRL coverage of 61% (2012: 57%)
 
 
–  
Corporate impairment in Spain was at its highest level during H110 when commercial property declines were reflected earlier in the cycle
 
 
–  
£345m (2012: £359m) lending to multinational and large national corporates, which continues to perform
 
 
—  
 Other retail lending
 
 
–  
£1,051m (2012: £1,052m) credit cards and unsecured loans. 30 day arrears marginally improved while 90 days arrears rates increased. Gross charge off rates in credit cards and unsecured loans were stable in H113
 
 
–  
 £1,007m (2012: £1,045m) lending to small and medium enterprises (SMEs), largely secured against residential or commercial property
 


 

Credit Risk
                        
Italy
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m

Sovereign
 2,401 
 (2,401)
 - 
  
 1,714 
 (471) 
 2 
 1,245 
 2 
 1,247 
  
 1,123 
Financial institutions
 200 
 (122)
 78 
  
 4,888 
 (3,144) 
 (1,744)
 - 
 175 
 253 
  
 391 
Corporate
 215 
 (129)
 86 
  
 399 
 (161) 
 (133)
 105 
 304 
 495 
  
 699 
           
  
            
           
  
          
Total
as at
31.12.12
         
Available for Sale Assets as at 30.06.13
  
Fair Value through OCI
  
Cost1 
AFS Reserve
  
Total
  
         
£m  
£m
 
£m
 
£m

Sovereign
        
 706  
  
 14 
  
 720 
  
 1,537 
Financial institutions
        
 62  
  
 2 
  
 64 
  
 138 
Corporate
          
 26  
  
 2 
  
 28 
  
 29 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m

Sovereign
          
 -  
  
 - 
  
 - 
  
 9 
Financial institutions
        
 73  
  
 - 
  
 73 
  
 38 
Residential mortgages
        
 16,160  
  
 (126)
  
 16,034 
  
 15,591 
Corporate
          
 1,105  
  
 (138)
  
 967 
  
 1,234 
Other retail lending
        
 2,206  
  
 (132)
  
 2,074 
  
 1,936 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m

Financial institutions
        
  
      
 338 
  
 90 
Residential mortgages
        
  
      
 43 
  
 45 
Corporate
          
  
      
 2,284 
  
 2,158 
Other retail lending
        
  
      
 799 
  
 789 

 
—  
Sovereign
 
 
–  
Predominantly £1,247m (2012: £1,123m) government bonds held at fair value through profit and loss and AFS government bonds of £720m (2012: £1,537m). AFS government bonds has £14m cumulative fair value gain (2012: £28m) held in the AFS reserve
 
 
—  
Residential mortgages
 
 
–  
£16,034m (2012: £15,591m) secured on residential property with average valuation weighted marked to market LTVs of 46.6% (2012: 46.7%). CRL coverage of 24% (2012: 23%) marginally increased
 
 
–  
90 day arrears at 1.0% (2012: 1.0%) were broadly stable, however gross charge off rates improved to 0.7% (2012: 0.8%)
 
 
—  
 Corporate
 
 
–  
£967m (2012: £1,234m) focused on large corporate clients with limited exposure to property sector
 
 
–  
Balances on EWL increased in 2013 due to the inclusion of a single counterparty. Excluding this counterparty, balances on early warning list have been broadly stable
 
 
—  
 Other retail lending
 
 
–  
£1,194m (2012: £1,337m) Italian salary advance loans (repayment deducted at source by qualifying employers and Barclays is insured in the event of termination of employment or death). Arrears rates on salary loans deteriorated during 2013 while charge-off rates improved
 
 
–  
£418m (2012: £434m) credit cards and other unsecured loans. Arrears rates (both 30 and 90 days) in cards and unsecured loans slightly increased while gross charge-off rates have improved in H113
 
 
1  
‘Cost’ refers to the fair value of the asset at recognition, less any impairment booked. ‘AFS Reserve’ is the cumulative fair value gain or loss on the assets that is held in equity. ‘Total’ is the fair value of the assets at the balance sheet date.
 



Credit Risk
                        
Portugal
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m

Sovereign
 124 
 (124)
 - 
  
 235 
 (235) 
 - 
 - 
 - 
 - 
  
 8 
Financial institutions
 9 
 (9)
 - 
  
 168 
 (134) 
 (34)
 - 
 - 
 - 
  
 18 
Corporate
 48 
 (23)
 25 
  
 79 
 (28) 
 (4)
 47 
 - 
 72 
  
 252 
           
  
            
           
  
          
Total
as at
31.12.12
         
Available for Sale Assets as at 30.06.13
  
Fair Value through OCI
  
Cost1 
AFS Reserve
  
Total
  
         
£m  
£m
 
£m
 
£m

Sovereign
        
 350  
  
 5 
  
 355 
  
 594 
Financial institutions
        
 2  
  
 - 
  
 2 
  
 2 
Corporate
          
 155  
  
 - 
  
 155 
  
 331 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m

Sovereign
          
 33  
  
 - 
  
 33 
  
 35 
Financial institutions
        
 28  
  
 - 
  
 28 
  
 28 
Residential mortgages
        
 3,633  
  
 (38)
  
 3,595 
  
 3,474 
Corporate
          
 1,450  
  
 (320)
  
 1,130 
  
 1,375 
Other retail lending
        
 1,882  
  
 (162)
  
 1,720 
  
 1,783 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m

Financial institutions
        
  
      
 - 
  
 1 
Residential mortgages
        
  
      
 14 
  
 25 
Corporate
          
  
      
 728 
  
 889 
Other retail lending
        
  
      
 1,793 
  
 1,673 

 
—  
Sovereign
 
 
–  
£388m (2012: £637m) of largely AFS government bonds. No impairment and £5m (2012: £4m loss) cumulative fair value gain held in the AFS reserve
 
 
—  
Residential mortgages
 
 
–  
Secured on residential property with average balance weighted LTVs of 79.7% (2012: 77.6%). The higher LTV is reflected in a higher CRL coverage of 33% (2012: 29%)
 
 
–  
90 day arrears rates improved to 0.4% (2012: 0.7%) while recoveries impairment coverage increased to 30.0% (2012: 25.6%) driven by an increase in loss given default rates
 
 
—  
 Corporate
 
 
–  
Net lending to corporates of £1,130m (2012: £1,375m), with CRLs of £548m (2012: £501m), impairment allowance of £320m (2012: £296m) and CRL coverage of 58% (2012: 59%)
 
 
–  
Net lending to the property and construction industry of £302m (2012: £364m) secured, in part, against real estate collateral, with CRLs of £294m (2012: £275m), impairment allowance of £160m (2012: £149m) and CRL coverage of 54% (2012: 54%)
 
 
—  
 Other retail lending
 
 
–  
£965m (2012: £950m) credit cards and unsecured loans. During 2013, arrears rates in cards portfolio deteriorated while charge-off rates remained stable
 
 
–  
CRL coverage of 78% (2012: 74%) driven by credit cards and unsecured loans exposure
 

1  
‘Cost’ refers to the fair value of the asset at recognition, less any impairment booked. ‘AFS Reserve’ is the cumulative fair value gain or loss on the assets that is held in equity. ‘Total’ is the fair value of the assets at the balance sheet date.

 


Credit Risk
                        
Ireland
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m

Sovereign
 175 
 (175)
 - 
  
 269 
 (2) 
 (253)
 14 
 2 
 16 
  
 12 
Financial institutions
 1,183 
 (54)
 1,129 
  
 3,611 
 (2,578) 
 (987)
 46 
 538 
 1,713 
  
 1,558 
Corporate
 190 
 (58)
 132 
  
 146 
 (58) 
 (2)
 86 
 79 
 297 
  
 293 
           
  
            
           
  
          
Total
as at
31.12.12
         
Available for Sale Assets as at 30.06.13
  
Fair Value through OCI
  
Cost1 
AFS Reserve
  
Total
  
         
£m  
£m
 
£m
 
£m

Sovereign
        
 9  
  
 1 
  
 10 
  
 9 
Financial institutions
        
 43  
  
 (1)
  
 42 
  
 60 
Corporate
          
 5  
  
 (1)
  
 4 
  
 4 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m

Financial institutions
        
 2,439  
  
 - 
  
 2,439 
  
 1,967 
Residential mortgages
        
 112  
  
 (4)
  
 108 
  
 112 
Corporate
          
 852  
  
 (9)
  
 843 
  
 830 
Other retail lending
        
 114  
  
 - 
  
 114 
  
 83 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m

Sovereign
          
  
      
 7 
  
-
Financial institutions
        
  
      
 627 
  
 628 
Corporate
          
  
      
 728 
  
 1,007 
Other retail lending
        
  
      
 - 
  
 9 

 
—  
Financial institutions
 
 
–  
Exposure focused on financial institutions with investment grade credit ratings
 
 
–  
Exposure to Irish banks amounted to £153m (2012: £102m)
 
 
–  
£1.5bn (2012: £1.4bn) of loans relate to issuers domiciled in Ireland whose principal business and exposures are outside of Ireland
 
 
—  
Corporate
 
 
–  
£843m (2012: £830m) net loans and advances, including a significant proportion to other multinational entities domiciled in Ireland, whose principal businesses and exposures are outside of Ireland
 
 
–  
The portfolio continues to perform and has not been materially impacted by the decline in the property sector
 
 
 
1  
‘Cost’ refers to the fair value of the asset at recognition, less any impairment booked. ‘AFS Reserve’ is the cumulative fair value gain or loss on the assets that is held in equity. ‘Total’ is the fair value of the assets at the balance sheet date.
 
 

 





Credit Risk
 

Cyprus
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m

Financial institutions
 - 
 - 
 - 
  
 75 
 (75) 
 - 
 - 
 - 
 - 
  
 - 
Corporate
 3 
 - 
 3 
  
 29 
 -  
 (17)
 12 
 - 
 15 
  
 12 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m

Sovereign
          
 -  
  
 - 
  
 - 
  
 8 
Residential mortgages
        
 45  
  
 - 
  
 45 
  
 44 
Corporate
          
 119  
  
 1 
  
 120 
  
 94 
Other retail lending
        
 29  
  
 - 
  
 29 
  
 26 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m

Corporate
          
  
      
 33 
  
 94 
Other retail lending
        
  
      
 15 
  
 37 


 


Greece
          
  
    
Designated at FV through P&L
      
 
Trading Portfolio
  
Derivatives
Total
as at
30.06.13
  
Total
as at
31.12.12
Fair Value through
         
  
Cash
   
Profit and Loss
Assets
Liabilities
Net
  
Assets
Liabilities 
Collateral
Net
 
 
£m
£m
£m
 
£m
£m  
£m
£m
£m
£m
 
£m

Sovereign
 2 
 - 
 2 
  
 - 
 -  
 - 
 - 
 - 
 2 
  
 1 
Financial institutions
 - 
 - 
 - 
  
 1,123 
 (315) 
 (801)
 7 
 - 
 7 
  
 - 
Corporate
 37 
 - 
 37 
  
 - 
 -  
 - 
 - 
 - 
 37 
  
 3 
           
  
            
         
Loans and Advances as at 30.06.13
  
Total
as at
31.12.12
           
  
  
Impairment
     
Held at Amortised Cost
    
Gross  
  
Allowances
  
Total
  
           
£m  
  
£m
 
£m
 
£m

Residential mortgages
        
 6  
  
 - 
  
 6 
  
 8 
Corporate
          
 3  
  
 - 
  
 3 
  
 58 
Other retail lending
        
 21  
  
 (7)
  
 14 
  
 9 
           
  
            
           
  
      
Total
as at
30.06.13
  
Total
as at
31.12.12
Contingent Liabilities and Commitments
    
  
        
           
  
        
           
  
      
£m
  
£m

Corporate
          
  
      
 3 
  
 3 
Other retail lending
        
  
      
 - 
  
 2 



Credit Risk
 
 
Credit derivatives referencing Eurozone sovereign debt
 
 
—  
The Group enters into credit mitigation arrangements (principally credit default swaps and total return swaps) for which the reference asset is government debt. For Italy and Portugal, these have the net effect of reducing the Group’s exposure in the event of sovereign default
 

As at 30.06.13
Spain
Italy
Portugal
Ireland
Cyprus
Greece
 
£m
£m
£m
£m
£m
£m
Fair value
  
          
- Bought
621 
1,249 
312 
35 
2 
- 
- Sold
(612)
(1,186)
(305)
(43)
(1)
- 
Net derivative fair value
9 
63 
7 
(8)
1 
- 
             
Contract notional amount
            
- Bought
(12,920)
(22,132)
(4,152)
(3,587)
(8)
- 
- Sold
12,962 
21,475 
4,131 
3,632 
8 
- 
Net derivative notional amount
42 
(657)
(21)
45 
- 
- 
             
Net exposure to/(protection from) credit derivatives in the event of sovereign default (notional less fair value)
51 
(594)
(14)
37 
1 
- 

As at 31.12.12
            
Net (protection from)/exposure to credit derivatives in the event of sovereign default (notional less fair value)
(122)
(307)
(88)
44 
- 
- 

 
—  
Credit derivatives are contracts whereby the default risk of an asset (reference asset) is transferred from the buyer to the seller of the credit derivative contract
 
 
—  
Credit derivatives referencing sovereign assets are bought and sold to support client transactions and for risk management purposes
 
 
—  
The contract notional amount represents the size of the credit derivative contracts that have been bought or sold, while the fair value represents the change in the value of the reference asset
 
 
—  
The net protection or exposure from credit derivatives in the event of sovereign default amount represents a net purchase or sale of insurance by the Group. This insurance reduces or increases the Group’s total exposure and should be considered alongside the direct exposures disclosed in the preceding pages
 
 
Eurozone balance sheet redenomination risk
 
—  
Redenomination risk is the risk of financial loss to the Group should one or more countries exit the Euro, leading to the devaluation of local balance sheet assets and liabilities. The Group is directly exposed to redenomination risk where there is a mismatch between the level of locally denominated assets and liabilities
 
 
—  
Within Barclays, retail banking, corporate banking and wealth management activities in the Eurozone are generally booked locally within each country. Locally booked customer assets and liabilities, primarily loans and advances to customers and customer deposits, are predominantly denominated in Euros. The remaining funding need is met through local funding secured against customer loans and advances, with any residual need funded through the Group
 
 
—  
During H113, the net funding mismatch increased from €11.8bn to €13.6bn in Italy and from €4.1bn to €4.4bn in Portugal. The surplus in Spain decreased from €2.3bn to €1.8bn. These increases were predominantly driven by a reduction in local liabilities, including the partial repayment of the European Central Bank’s 3 year LTRO in Portugal and Spain
 
 
—  
Barclays continues to monitor the potential impact of the Eurozone volatility on local balance sheet funding and will consider actions as appropriate to manage the risk
 
 
—  
Direct exposure to Greece is very small with negligible net funding required from Group. For Ireland there is no local balance sheet funding requirement by the Group as total liabilities in this country exceed total assets
 


Market Risk
 
 
Analysis of the Investment Bank’s market risk exposure
 
 
—  
The Investment Bank’s market risk positions are monitored, reported and challenged by an independent Risk department. Measurement methodologies are continually monitored and scenarios used for stress tests are regularly reviewed to ensure that they remain appropriate
 
 
—  
Daily Value at Risk (DVaR) is one of a range of market risk metrics used in the Investment Bank to measure and control market risk. This measure is further supplemented with additional metrics used to manage the firm’s trading exposures such as stress testing, scenario analysis and position limits
 
 
—  
The Investment Bank’s management DVaR is calculated at a 95% confidence level, assuming a one day holding period. The calculation is based on historical simulation of the most recent two years of data. This is calculated and reported internally on a daily basis
 
 
—  
Total DVaR fell by 26% to £31m since the same period in 2012 due to decreases in Foreign Exchange Risk (33% decrease), Spread Risk (38% decrease) and Credit Risk (19% decrease)
 
 
—  
The business remained well within the DVaR limits approved by the Barclays Board Financial Risk Committee throughout H113
 
  
Half year ended 30.06.13 
  
Half year ended 31.12.12 
  
Half year ended 30.06.12 
DVaR (95%) 
Daily Avg
High1 
Low1 
  
Daily Avg
High1 
Low1 
  
Daily Avg
High1 
Low1 
  
£m
£m 
£m 
  
£m
£m 
£m 
  
£m
£m 
£m 

Interest rate risk 
14 
24  
6  
  
15 
23  
8  
  
13 
22  
7  
Credit risk 
21 
25  
17  
  
25 
33  
18  
  
26 
44  
20  
Basis risk 
13 
17  
9  
  
15 
21  
7  
  
7 
8  
5  
Inflation risk 
4 
8  
2  
  
3 
7  
2  
  
4 
6  
2  
Spread risk 
15 
21  
7  
  
22 
27  
17  
  
24 
31  
20  
Commodity risk 
5 
8  
4  
  
5 
7  
4  
  
6 
9  
4  
Equity risk 
10 
21  
5  
  
9 
19  
4  
  
10 
17  
6  
Foreign exchange risk 
4 
7  
2  
  
5 
9  
2  
  
6 
10  
3  
Diversification effect 
(55)
na 
na 
  
(66)
na 
na 
  
(53)
na 
na 
Total DVaR 
31 
39  
23  
  
34 
42  
27  
  
42 
75  
29  
  
  
  
  
    
  
  
    
  
  

 
 
 
1The high and low DVaR figures reported for each category did not necessarily occur on the same day as the high and low DVaR reported as a whole. Consequently a diversification effect balance for the high and low DVaR figures would not be meaningful and is therefore omitted from the above table.

 


Statement of Directors’ Responsibilities
 
 
The Directors confirm to the best of their knowledge that the condensed consolidated interim financial statements set out on pages 11 to 15 and 97 to 130 have been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7 and 4.2.8 namely:
 
 
An indication of important events that have occurred during the six months ended 30 June 2013 and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year
 
 
Material related party transactions in the six months ended 30 June 2013 and any material changes in the related party transactions described in the last Annual Report
 
 
On behalf of the Board
 
 
 
Antony Jenkins Chris Lucas
 
 
Group Chief ExecutiveGroup Finance Director
 


Independent Auditors’ Review Report to Barclays PLC
 
Introduction

We have been engaged by Barclays PLC to review the condensed set of consolidated interim financial statements in the interim results announcement for the six months ended 30 June 2013, which comprises the Condensed Consolidated Income Statement, Condensed Consolidated Statement of Profit or Loss and other Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Cash Flow Statement and related notes. We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Directors’ responsibilities1,2

The interim results announcement is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim results announcement in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in the ‘ Accounting Policies’ section, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial statements included in this interim results announcement has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements in the interim results announcement for the six months ended 30 June 2013 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
 

 
PricewaterhouseCoopers LLP
Chartered Accountants
London, United Kingdom
29 July 2013

 

 
1  
The maintenance and integrity of the Barclays website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
2  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
 

 
Financial Statement Notes
 
1.    Basis of preparation
 
The Results Announcement has been prepared in accordance with IAS 34 Interim Financial Reporting, using the same accounting policies and methods of computation as those used in the 2012 Annual Report, except for the following accounting standards which were adopted by the Group on 1 January 2013:

IFRS 10 Consolidated Financial Statements

IFRS 10 replaced requirements in IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation – Special Purpose Entities. This introduced new criteria to determine whether entities in which the Group has interests should be consolidated. The implementation of IFRS 10 resulted in the Group consolidating some entities that were previously not consolidated and deconsolidating some entities that were previously consolidated, principally impacting the consolidation of entities in the Investment Bank with credit market exposures.

IAS 19 (Revised 2011) Employee Benefits

IAS 19 (Revised 2011), amongst other changes, requires actuarial gains and losses arising from defined benefit pension schemes to be recognised in full. Previously the Group deferred these over the remaining average service lives of the employees (known as the ‘corridor’ approach).

Comparatives have been fully restated for IFRS 10 and IAS19 in accordance with their transition requirements. IFRS 10 requires the presentation of restated comparatives immediately prior to the first period of application only. The Group published a restatement document on 16 April 2013 describing the financial impacts of IFRS 10 and IAS 19.

The financial impact on the Group for the year ended 31 December 2012 had IFRS 10 and IAS 19 been adopted is shown in the table below:

Impact of Accounting Restatements 
  
Restatement Adjustments
      
  
2012 as
Published
IFRS 10
IAS 19
2012 as
Restated
Adjusted Income Statement 
£m
£m
£m
£m

Profit before tax 
7,048 
573 
(22)
7,599 
Tax 
(2,025)
(134)
- 
(2,159)
Profit after tax 
5,023 
439 
(22)
5,440 
  
        
Balance Sheet 
        
Total assets 
1,490,321 
(144)
(1,842)
1,488,335 
Total liabilities 
1,427,364 
333 
652 
1,428,349 
Total shareholders' equity 
62,957 
(477)
(2,494)
59,986 

IFRS 13 Fair Value Measurement
 
IFRS 13 provides comprehensive guidance on how to calculate the fair value of financial and non-financial assets. The adoption of IFRS 13 did not have a material financial impact on the Group.

Future accounting developments

IFRS 9 Financial Instruments

IFRS 9 will change the classification and therefore the measurement of its financial assets, the recognition of impairment and hedge accounting. In addition to these changes, the portion of gains and losses arising from changes in the Group’s credit rating included in changes in the value of the Group’s issued debt securities held at fair value through profit or loss will be included in other comprehensive income rather than the income statement. The proposals have yet to be finalised and it is therefore not yet possible to estimate the financial effects. The current effective date is 1 January 2015, but may be delayed.
 
For more information on future accounting changes, refer to the Barclays 2012 Annual Report. 
 

 

 

 
Financial Statement Notes
 
 
Going Concern
 
The Group's business activities and financial position, the factors likely to affect its future development and performance, and its objectives and policies in managing the financial risks to which it is exposed and its capital are discussed in the Results by Business, Performance Management and Risk Management sections.
 
 
The Directors confirm they are satisfied that the Group has adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the going concern basis for preparing accounts.
 
2.    Net Interest Income
        
   
Half Year
Half Year
Half Year
   
Ended
Ended
Ended
   
30.06.13
31.12.12
30.06.12
   
£m
£m
£m
Cash and balances with central banks
  
101 
84 
169 
Available for sale investments1
  
881 
674 
1,062 
Loans and advances to banks
 
215 
191 
185 
Loans and advances to customers
  
7,939 
7,984 
8,464 
Other
  
115 
220 
179 
Interest income
  
9,251 
9,153 
10,059 
         
Deposits from banks
  
(98)
(86)
(171)
Customer accounts1
  
(1,363)
(1,260)
(1,225)
Debt securities in issue
  
(1,241)
(1,342)
(1,579)
Subordinated liabilities
  
(879)
(815)
(817)
Other
  
(93)
(125)
(138)
Interest expense
  
(3,674)
(3,628)
(3,930)
         
Net interest income
  
5,577 
5,525 
6,129 






 
 
1The June 2012 comparative for interest income from available for sale investments has been restated from £1,703m to £1,062m and the comparative for interest expense from customer accounts from £1,866m to £1,225m to more appropriately reflect the nature of certain transactions. Total net interest income does not change.
 


Financial Statement Notes
 
 3.   Staff Costs1
 
  
Half Year Ended
Half Year Ended
Half Year Ended
  
30.06.13
31.12.12
30.06.12
Compensation costs 
£m
£m
£m
Deferred bonus charge 
655 
568 
655 
Current year bonus charges 
511 
328 
539 
Sales commissions, commitments and other incentives 
204 
107 
228 
Performance costs 
1,370 
1,003 
1,422 
Salaries 
2,703 
2,606 
2,648 
Social security costs 
376 
316 
369 
Post retirement benefits 
348 
270 
342 
Allowances and trading incentives 
163 
156 
106 
Other compensation costs 
190 
239 
282 
Total compensation costs 
5,150 
4,590 
5,169 
  
      
Other resourcing costs 
      
Outsourcing 
522 
551 
448 
Redundancy and restructuring 
383 
11 
57 
Temporary staff costs 
281 
271 
210 
Other 
95 
99 
61 
Total other resourcing costs  
1,281 
932 
776 
  
      
Total staff costs 
6,431 
5,522 
5,945 
  
      
Total employees  
      
Full time equivalent 
139,900 
139,200 
139,000 

 
Total staff costs increased 8% to £6,431m, principally reflecting £383m redundancy and restructuring costs across Europe RBB and the Investment Bank as part of Transform.
 
 
Group compensation costs were broadly stable at £5,150m (2012: £5,169m) with the Group compensation: adjusted net operating income ratio remaining at 38% (FY12: 38%; H112: 38%). Group performance costs reduced 4% to £1,370m with the Group current year bonus charge reducing 5% to £511m, including £94m of deferred bonus charges accelerated as part of Transform. The deferred bonus charge for 2013 remained stable, and there was an expected charge of £1.2bn (2012: £1.7bn) relating to future periods for bonus awards granted but not yet expensed as at 30 June 2013.
 
 
Investment Bank compensation costs were £2,542m (2012: £2,579m) with the Investment Bank compensation: income ratio remaining stable at 39% (FY12: 40%; H112: 40%). Investment Bank performance costs reduced 3% to £1,009m, compared to a 7% increase in profit before tax.
 
 
No awards have yet been granted in relation to the 2013 bonus pool as decisions regarding incentive awards are not taken by the Remuneration Committee until the performance for the full year can be assessed. The current year bonus charge for the first six months represents an accrual for estimated costs in accordance with accounting requirements.
 
 
Other resourcing costs increased by £505m to £1,281m primarily due to £383m of redundancy and restructuring costs relating to Costs to Achieve Transform.

 
 
1For H113 the Group has realigned outsourcing costs from administration and general expenses to staff costs in order to more appropriately reflect the nature and internal management of these costs. The net effect of these movements is to reduce administration and general expenses and increase staff costs by £522m in H113 and £448m in H112.
 
 

 

 
Financial Statement Notes
 
4.  Administration and General Expenses1
 
  
Half Year  Ended
Half Year  Ended
Half Year  Ended
  
30.06.13
31.12.12
30.06.12
  
£m
£m
£m
Infrastructure costs 
      
Property and equipment 
899 
764 
892 
Depreciation of property, plant and equipment 
331 
332 
337 
Operating lease rentals 
320 
315 
307 
Amortisation of intangible assets 
234 
224 
211 
Impairment of property, equipment and intangible assets 
48 
14 
3 
Total infrastructure costs 
 1,832 
 1,649 
 1,750 
  
      
Other costs 
      
Consultancy, legal and professional fees 
541 
 606 
 576 
Subscriptions, publications, stationery and communications 
390 
 360 
 367 
Marketing, advertising and sponsorship 
257 
 315 
 257 
Travel and accommodation 
153 
 167 
 157 
Other administration and general expenses 
177 
 78 
 468 
Total other costs 
 1,518 
 1,526 
 1,825 
  
      
Total administration and general expenses 
 3,350 
 3,175 
 3,575 
 
Administration and general expenses have reduced 6% to £3,350m (2012: £3,575m) primarily reflecting the non-recurrence of the £290m penalty relating to the industry wide investigation into the setting of interbank offered rates, offset by costs to achieve Transform of £160m.
 

5. UK Bank Levy
 
UK legislation was enacted in July 2011 to introduce an annual bank levy, which is calculated by reference to the Group’s year end liabilities. The levy resulted in an additional operating expense of £345m for the year ended 31 December 2012. The total cost for 2013 is expected to be approximately £520m, all of which is due to be recognised on 31 December 2013 in accordance with IFRS.


6.Tax
 
The tax charge for H113 was £594m (2012: £313m) representing an effective tax rate of 35.4% (2012: 35.9%). The effective tax rate for both periods is higher than the UK tax rate of 23.25% (2012: 24.5%) because of profits outside of the UK being taxed at local statutory tax rates that are higher than the UK statutory tax rate, non-creditable taxes and non-deductible expenses, partially offset by the effect of non-taxable gains and income.

               
 
Assets
  
Liabilities
Current and Deferred Tax Assets and Liabilities
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
  
£m
£m
£m

Current tax
149  
252  
266  
  
(698)
(621)
(352)
Deferred tax
4,548  
3,563  
3,693  
  
(284)
(341)
(647)
Total
4,697  
3,815  
3,959  
  
(982)
(962)
(999)


The deferred tax asset of £4,548m (2012: £3,563m) mainly relates to amounts in the UK, USA and Spain.

 
 
 
1For H113 the Group has realigned outsourcing costs from administration and general expenses to staff costs in order to more appropriately reflect the nature and internal management of these costs. The net effect of these movements is to reduce administration and general expenses and increase staff costs by £522m in H113 and £448m in H112.
 
 

 
 

 
Financial Statement Notes
 
 
 
 
 
 
 
 
 
7.       Non-controlling Interests
 
Profit Attributable to Non-controlling Interest
  
Equity Attributable to Non-controlling Interest
 
Half Year Ended
Half Year Ended
Half Year Ended
  
Half Year Ended
Half Year Ended
Half Year Ended
 
30.06.13
31.12.12
30.06.12
  
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
 
£m
£m
£m

Barclays Bank PLC Issued:
              
- Preference shares
239 
230 
232 
  
5,948 
5,927 
5,942 
- Upper Tier 2 instruments
1 
2 
2 
  
486 
591 
589 
Absa Group Limited
158 
150 
154 
  
2,509 
2,737 
2,842 
Other non-controlling interests
14 
13 
22 
  
111 
116 
112 
Total
412 
395 
410 
  
9,054 
9,371 
9,485 
               

8.         Earnings Per Share 
      
  
Half Year Ended
Half Year Ended
Half Year Ended
  
30.06.13
31.12.12
30.06.12
  
£m
£m
£m
Profit/(loss) attributable to equity holders of the parent 
 671 
(772)
148 
Basic weighted average number of shares in issue1 
12,675 
12,223 
12,215 
Number of potential ordinary shares 
365 
375 
317 
Diluted weighted average number of shares 
13,040 
12,598 
12,532 
  
      
Basic earnings/(loss) per ordinary share  
5.3p
(6.3p)
1.2p
Diluted earnings/(loss) per ordinary share 
5.2p
(6.3p)
1.2p


 
9.Dividends on Ordinary Shares
 
It is Barclays’ policy to declare and pay dividends on a quarterly basis. The first interim dividend for 2013 of 1p per share was paid on 7 June 2013. The Board has decided to pay on 13 September 2013, a second interim dividend for 2013 of 1p per ordinary share to shareholders on the share register on 9 August 2013, making a total for the first half of 2013 of 2p (2012: 2p). Shareholders may have their dividends reinvested in Barclays shares by joining the Barclays PLC Scrip Dividend Programme (the Programme), which was approved by shareholders at the Barclays 2013 Annual General Meeting. The Programme will initially be offered for the second interim dividend and for any dividends paid thereafter (subject to the Directors making the Programme available for each dividend).

       
 
 
 
 
 
 
Half Year Ended 30.06.13
  
Half Year Ended 31.12.12
  
Half Year Ended 30.06.12
Dividends Paid During the Period
Per Share
Total
  
Per Share
Total
  
Per Share
Total
 
Pence
£m
 
Pence
£m
 
Pence
£m

Final dividend paid during period
3.5p
 442 
  
-
-
  
3.0p
 366 
Interim dividends paid during period
1.0p
 128 
  
2.0p
245 
  
1.0p
 122 

 
For qualifying US and Canadian resident ADR holders, the second interim dividend of 1p per ordinary share becomes 4p per ADS (representing four shares). The ADR depositary will post the second interim dividend on 13 September 2013 to ADR holders on the record at close of business on 9 August 2013.

 
 
 
 
1The number of basic weighted average number of shares excludes Treasury shares held in employee benefit trusts for trading.
 




Financial Statement Notes
 
10.       Derivative Financial Instruments
        
 
Contract Notional
Amount
 
Fair Value
As at 30.06.13
  
Assets
Liabilities
 
£m
  
£m
£m

Foreign exchange derivatives
5,611,437 
  
64,279 
(67,837)
Interest rate derivatives
36,824,042 
  
280,046 
(264,599)
Credit derivatives
1,956,420 
  
28,559 
(28,128)
Equity and stock index and commodity derivatives
992,595 
  
27,159 
(33,231)
Derivative assets/(liabilities) held for trading
45,384,494 
  
400,043 
(393,795)
         
Derivatives in Hedge Accounting Relationships
        
Derivatives designated as cash flow hedges
158,440 
  
1,332 
(595)
Derivatives designated as fair value hedges
127,140 
  
1,642 
(1,347)
Derivatives designated as hedges of net investments
22,496 
  
55 
(388)
Derivative assets/(liabilities) designated in hedge accounting relationships
308,076 
  
3,029 
(2,330)
         
Total recognised derivative assets/(liabilities)
45,692,570 
  
403,072 
(396,125)
         
As at 31.12.12
        
Foreign exchange derivatives
4,423,737 
  
59,299 
(63,821)
Interest rate derivatives
32,995,831 
  
351,381 
(336,625)
Credit derivatives
1,768,180 
  
29,797 
(29,208)
Equity and stock index and commodity derivatives
1,005,366 
  
24,880 
(29,933)
Derivative assets/(liabilities) held for trading
40,193,114 
  
465,357 
(459,587)
         
Derivatives in Hedge Accounting Relationships
        
Derivatives designated as cash flow hedges
177,122 
  
2,043 
(1,097)
Derivatives designated as fair value hedges
108,240 
  
1,576 
(1,984)
Derivatives designated as hedges of net investments
17,460 
  
180 
(53)
Derivative assets/(liabilities) designated in hedge accounting relationships
302,822 
  
3,799 
(3,134)
         
Total recognised derivative assets/(liabilities)
40,495,936 
  
469,156 
(462,721)
         
As at 30.06.12
        
Foreign exchange derivatives
5,067,266 
  
58,663 
(63,369)
Interest rate derivatives
38,549,480 
  
374,359 
(357,665)
Credit derivatives
1,926,860 
  
48,100 
(46,539)
Equity and stock index and commodity derivatives
1,505,558 
  
31,584 
(35,278)
Derivative assets/(liabilities) held for trading
47,049,164 
  
512,706 
(502,851)
         
Derivatives in Hedge Accounting Relationships
        
Derivatives designated as cash flow hedges
210,141 
  
2,760 
(1,414)
Derivatives designated as fair value hedges
133,581 
  
2,121 
(3,388)
Derivatives designated as hedges of net investments
10,246 
  
106 
(59)
Derivative assets/(liabilities) designated in hedge accounting relationships
353,968 
  
4,987 
(4,861)
         
Total recognised derivative assets/(liabilities)
47,403,132 
  
517,693 
(507,712)

 
The fair value of gross derivative assets decreased by 14% to £403bn (2012: £469bn) reflecting the impact of optimisation initiatives to reduce gross derivative exposures and increases in the major forward curves, offset by movements in the foreign exchange rates.
 
 
Information on further netting of derivative financial instruments is included within note 12, Offsetting financial assets and financial liabilities.
 


Financial Statement Notes
 
11.Financial Instruments Held at Fair Value
 
This section should be read in conjunction with Note 18 “Fair value of financial instruments” of the 2012 Annual Report, which provides more detail about accounting policies adopted, valuation methodologies used in calculating fair value and, the Valuation control framework which governs the oversight of valuations.
 
 
Comparison of carrying amounts and fair values
 
Valuation methodologies employed in calculating the fair value of financial assets and liabilities measured at amortised cost are consistent with the 2012 Annual Report disclosure.
 
 
The following table summarises the fair value of financial assets and liabilities measured at amortised cost on the Group’s balance sheet.  
 

  
As at 30.06.13
As at 31.12.12
  
Carrying
amount
Fair
value
Carrying
amount
Fair
value
  
£m
£m
£m
£m

Financial assets 
        
Cash and balances at central banks 
 72,720 
 72,720 
86,191 
86,191 
Items in the course of collection from other banks 
 2,578 
 2,578 
1,473 
1,473 
Loans and advances to banks 
 46,451 
 46,451 
40,462 
40,462 
Loans and advances to customers: 
        
– Home loans 
 179,903 
 169,256 
174,988 
164,608 
– Credit cards, unsecured and other retail lending 
 66,351 
 65,312 
66,414 
65,357 
– Corporate loans 
 223,808 
 217,839 
182,504 
176,727 
Reverse repurchase agreements and other similar secured lending 
 222,881 
 222,881 
176,522 
176,461 
  
        
Financial liabilities 
        
Deposits from banks 
(78,330)
(78,330)
(77,012)
(77,025)
Items in course of collection due to other banks 
(1,542)
(1,542)
(1,587)
(1,587)
Customer accounts: 
        
– Current and demand accounts 
(132,694)
(132,694)
(127,786)
(127,786)
– Savings accounts 
(120,593)
(120,593)
(99,875)
(99,875)
– Other time deposits 
(206,977)
(207,058)
(157,750)
(157,752)
Debt securities in issue 
(102,946)
(103,365)
(119,525)
(119,669)
Repurchase agreements and other similar secured borrowing 
(259,539)
(259,539)
(217,178)
(217,178)
Subordinated liabilities 
(22,641)
(22,516)
(24,018)
(23,467)



Financial Statement Notes
 
 
Fair Value Hierarchy
 
IFRS 13 Fair Value Measurement requires an entity to classify its financial instruments held at fair value according to a hierarchy that reflects the significance of observable market inputs. The three levels of the fair value hierarchy are defined below.
 
 
Quoted market prices – Level 1
 
 
Financial instruments are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents actual and regularly occurring market transactions on an arm’s length basis. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.
 
 
This category includes liquid government bonds actively traded through an exchange or clearing house, actively traded listed equities and actively exchange-traded derivatives.
 
 
Valuation technique using observable inputs – Level 2
 
 
Financial instruments classified as Level 2 have been valued using models whose inputs are observable in an active market. Valuations based on observable inputs include financial instruments such as swaps and forwards which are valued using market standard pricing techniques, and options that are commonly traded in markets where all the inputs to the market standard pricing models are observable.
 
 
This category includes most investment grade and liquid high yield bonds, certain asset backed securities, US agency securities, government bonds, less actively traded listed equities, bank, corporate and municipal obligations, certain OTC derivatives, certain convertible bonds, certificates of deposit, commercial paper, collateralised loan obligations (CLOs), most commodities based derivatives, credit derivatives, certain credit default swaps (CDSs), most fund units, certain loans, foreign exchange spot and forward transactions and certain issued notes.
 
 
Valuation technique using significant unobservable inputs – Level 3
 
 
Financial instruments are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. An input is deemed significant if it is shown to contribute more than 10% to the valuation of a financial instrument.
 
 
Unobservable input levels are generally determined based on observable inputs of a similar nature, historical observations or other analytical techniques.
 
 
The Level 3 category includes certain corporate debt securities, distressed debt, private equity investments, commercial real estate loans, certain OTC derivatives (requiring complex and unobservable inputs such as correlations and long dated volatilities), certain convertible bonds, certain CDSs, derivative exposures to monoline insurers, certain fund units, certain asset backed securities, certain issued notes, certain CDOs (synthetic and some cash underlyings), certain CLOs and certain loans.

 

Financial Statement Notes
 
The following table shows the Group’s financial assets and liabilities that are held at fair value disaggregated by fair value hierarchy and balance sheet classification:

 
Valuations based on
    
 
Quoted market prices
Observable inputs
Significant unobservable inputs
    
 
(Level 1)
(Level 2)
(Level 3)
  
Total
As at 30.06.13
£m
£m
£m
  
£m
Trading portfolio assets
58,758 
85,208 
8,015 
  
151,981 
Financial assets designated at fair value
16,043 
25,997 
4,807 
  
46,847 
Derivative financial assets
3,128 
393,933 
6,011 
  
403,072 
Available for sale assets
37,599 
51,326 
2,782 
  
91,707 
Total assets
115,528 
556,464 
21,615 
  
693,607 
           
Trading portfolio liabilities
(25,504)
(33,644)
(212)
  
(59,360)
Financial liabilities designated at fair value
- 
(69,471)
(1,803)
  
(71,274)
Derivative financial liabilities
(2,541)
(388,450)
(5,134)
  
(396,125)
Total liabilities
(28,045)
(491,565)
(7,149)
  
(526,759)
           
As at 31.12.12
          
Trading portfolio assets
 51,639 
 86,199 
 8,514 
  
146,352 
Financial assets designated at fair value
 14,518 
 26,025 
 6,086 
  
46,629 
Derivative financial assets
 2,863 
 460,076 
 6,217 
  
469,156 
Available for sale assets
 28,949 
 43,280 
 2,880 
  
75,109 
Total assets
 97,969 
 615,580 
 23,697 
  
737,246 
           
Trading portfolio liabilities
(20,294)
(24,498)
(2)
  
(44,794)
Financial liabilities designated at fair value
(182)
(76,024)
(2,355)
  
(78,561)
Derivative financial liabilities
(2,666)
(455,068)
(4,987)
  
(462,721)
Total liabilities
(23,142)
(555,590)
(7,344)
  
(586,076)
           
As at 30.06.12
          
Trading portfolio assets
71,718 
86,367 
9,367 
  
167,452 
Financial assets designated at fair value
9,636 
29,388 
7,737 
  
46,761 
Derivative financial assets
1,902 
507,134 
8,657 
  
517,693 
Available for sale assets
31,377 
34,574 
2,974 
  
68,925 
Total assets
114,633 
657,463 
28,735 
  
800,831 
           
Trading portfolio liabilities
(25,387)
(26,251)
(109)
  
(51,747)
Financial liabilities designated at fair value
(51)
(92,169)
(2,930)
  
(95,150)
Derivative financial liabilities
(1,885)
(499,020)
(6,807)
  
(507,712)
Total liabilities
(27,323)
(617,440)
(9,846)
  
(654,609)
 
Included in financial assets designated at fair value is the Education, Social Housing and Local Authority loan portfolio of £16.2bn (2012: £17.6bn) whose valuation continues to use internal credit spreads among other (observable) factors. Valuation uncertainty arises mainly from the long dated nature of the portfolio, the lack of active secondary market in the loans and the lack of observable loan counterparty credit spreads. Should the valuation of the underlying assets become observable, for instance because of sales of comparable assets by third parties, this could be at a materially different valuation to the current carrying value.


 

Financial Statement Notes
 
The following table shows the Group’s financial assets and liabilities that are held at fair value disaggregated by fair value hierarchy and product type:
 

  
Assets
  
Liabilities
  
Valuation technique using
  
Valuation technique using
  
Quoted
market prices
(Level 1)
Observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
  
Quoted
market prices
(Level 1)
Observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
  
£m
£m
£m
  
£m
£m
£m
As at 30.06.13 
              
Interest rate derivatives 
1 
281,661 
1,358 
  
- 
(265,512)
(1,029)
Foreign exchange derivatives 
2 
64,162 
170 
  
(2)
(68,069)
(154)
Credit derivatives1 
- 
26,180 
2,379 
  
- 
(26,941)
(1,187)
Equity derivatives 
3,122 
8,577 
1,500 
  
(2,504)
(14,654)
(2,038)
Commodity derivatives 
1 
13,315 
644 
  
(1)
(13,312)
(722)
Government and government sponsored debt 
64,626 
71,545 
226 
  
(15,539)
(27,704)
- 
Corporate debt 
1,346 
24,967 
3,274 
  
- 
(3,802)
(15)
Certificates of deposit, commercial paper and other money market instruments 
316 
5,486 
- 
  
- 
(2,905)
(578)
Reverse repurchase and repurchase agreements 
- 
7,713 
- 
  
- 
(7,589)
- 
Non asset backed loans 
- 
18,123 
1,514 
  
- 
(6)
- 
Asset backed securities 
20 
25,438 
3,294 
  
- 
(622)
(209)
Commercial real estate loans 
- 
- 
1,578 
  
- 
- 
- 
Issued debt 
- 
- 
- 
  
- 
(55,323)
(1,162)
Equity cash products 
42,827 
4,176 
156 
  
(9,964)
(2,197)
- 
Funds and fund linked products 
936 
1,441 
671 
  
(35)
(1,257)
(51)
Physical commodities 
2,317 
3,049 
- 
  
- 
(76)
- 
Other2 
14 
631 
4,851 
  
- 
(1,596)
(4)
Total 
115,528 
556,464 
21,615 
  
(28,045)
(491,565)
(7,149)
As at 31.12.12 
              
Interest rate derivatives 
- 
353,647 
1,353 
  
- 
(338,502)
(1,204)
Foreign exchange derivatives 
1 
59,275 
203 
  
- 
(63,630)
(244)
Credit derivatives1 
- 
26,758 
3,039 
  
- 
(28,002)
(1,206)
Equity derivatives 
2,851 
6,281 
1,092 
  
(2,626)
(10,425)
(1,702)
Commodity derivatives 
12 
13,984 
660 
  
(5)
(14,632)
(543)
Government and government sponsored debt 
65,598 
60,336 
367 
  
(13,098)
(20,185)
- 
Corporate debt 
844 
28,640 
3,339 
  
(130)
(3,312)
(36)
Certificates of deposit, commercial paper and other money market instruments 
203 
5,443 
- 
  
(5)
(7,840)
(760)
Reverse repurchase and repurchase agreements 
- 
6,034 
- 
  
- 
(6,020)
- 
Non asset backed loans 
21 
19,666 
2,365 
  
(2)
(3)
- 
Asset backed securities 
17 
26,787 
4,106 
  
(2)
(831)
- 
Commercial real estate loans 
- 
- 
1,798 
  
- 
- 
- 
Issued debt 
- 
- 
- 
  
- 
(57,303)
(1,439)
Equity cash products 
26,992 
2,855 
145 
  
(7,236)
(1,111)
- 
Funds and fund linked products 
737 
2,447 
754 
  
(38)
(2,000)
(122)
Physical commodities 
678 
2,438 
- 
  
- 
(73)
- 
Other2 
15 
989 
4,476 
  
- 
(1,721)
(88)
Total 
97,969 
615,580 
23,697 
  
(23,142)
(555,590)
(7,344)

 
 
1  
Credit derivatives also includes derivative exposure to Monoline insurers.
2  
Other primarily includes receivables resulting from the acquisition of the North American businesses of Lehman Brothers, asset backed loans and private equity investments.
 



Financial Statement Notes
 
 
Financial assets and liabilities reclassified between Level 1 and Level 2
 
The most recent issuance of government bonds will be the most actively traded.  When there is a new issuance of certain government bonds, any previous issuances held on the balance sheet as Level 1 will be transferred into Level 2 to reflect a decrease in trading activity.  As a result of new issuances in H113, £631m of government and government sponsored debt were transferred from Level 1 into Level 2.
 
Level 3 movement analysis
 
The following table summarises the movements in the Level 3 balance during the year. The table shows gains and losses and includes amounts for all financial assets and liabilities transferred to and from Level 3 during the year. Transfers have been reflected as if they had taken place at the beginning of the year.
 

 
As at 01.01.13
Purch-ases
Sales
Issues
Settle-ments 
Total gains and losses in the period recognised in the income statement
Total gains or losses recog-nised in OCI
Transfers
As at 30.06.13
Trading income
Other income
In
Out
 
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m

Government and government sponsored debt
321  
125  
(193)
 -    
(23)
6  
 -    
 -    
 -    
(64)
172  
Corporate debt
3,136  
155  
(117)
 -    
 -    
55  
(7)
 -    
74  
(33)
3,263  
Asset backed securities
3,614  
2,207  
(3,118)
 -    
(298)
884  
 -    
 -    
121  
(118)
3,292  
Non asset backed loans
344  
111  
(255)
 -    
 -    
6  
 -    
 -    
3  
(1)
208  
Funds and fund linked products
685  
 -    
(31)
 -    
 -    
32  
 -    
 -    
 -    
(66)
620  
Other
414  
46  
(21)
 -    
(7)
39  
 -    
 -    
 -    
(11)
460  
Trading portfolio assets
8,514  
2,644  
(3,735)
 -   
(328)
1,022  
(7)
 -   
198  
(293)
8,015  
                       
Commercial real estate loans
1,798  
630  
(708)
 -    
(238)
129  
 -    
 -    
2  
(35)
1,578  
Non asset backed loans
2,021  
26  
(6)
 -    
(178)
(23)
(87)
(1)
101  
(547)
1,306  
Asset backed loans
564  
429  
(589)
 -    
(14)
88  
 -    
 -    
 -    
(96)
382  
Private equity investments
1,350  
81  
(38)
 -    
(20)
(2)
19  
 -    
19  
(8)
1,401  
Other
353  
17  
(130)
 -    
 -    
(24)
 -    
 -    
5  
(81)
140  
Financial assets designated at fair value
6,086  
1,183  
(1,471)
 -    
(450)
168  
(68)
(1)
127  
(767)
4,807  
                       
Asset backed securities
492  
 -    
(520)
 -    
(30)
 -    
29  
31  
 -    
 -    
2  
Government and government sponsored debt
46  
9  
 -    
 -    
(1)
 -    
 -    
 -    
 -    
 -    
54  
Other
2,342  
10  
(39)
 -    
(6)
 -    
396  
9  
43  
(29)
2,726  
Available for sale investments
2,880  
19  
(559)
 -    
(37)
 -    
425  
40  
43  
(29)
2,782  



 

Financial Statement Notes
 

 
As at 01.01.13
Purch-ases
Sales
Issues
Settle-ments 
Total gains and losses in the period recognised in the income statement
Total gains or losses recog-nised in OCI
Transfers
As at 30.06.13
Trading income
Other income
In
Out
 
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m

Corporate debt
(2)
(1)
- 
- 
- 
(2)
- 
- 
- 
2 
(3)
Other
- 
- 
(239)
- 
27 
3 
- 
- 
- 
- 
(209)
Trading portfolio liabilities
(2)
(1)
(239)
- 
27 
1 
- 
- 
- 
2 
(212)
                       
Certificates of deposit, commercial paper and other money market instruments
(760)
- 
- 
(20)
- 
80 
51 
- 
- 
71 
(578)
Issued debt
(1,439)
5 
9 
(67)
279 
(27)
- 
- 
(36)
114 
(1,162)
Other
(156)
- 
- 
- 
(1)
- 
1 
- 
- 
93 
(63)
Financial liabilities designated at fair value
(2,355)
5 
9 
(87)
278 
53 
52 
- 
(36)
278 
(1,803)
                       
Interest rate derivatives
149 
- 
- 
- 
59 
186 
(2)
- 
90 
(153)
329 
Credit derivatives
1,776 
24 
(52)
- 
48 
(364)
(34)
- 
(317)
76 
1,157 
Equity derivatives
(608)
163 
- 
(238)
(8)
(50)
- 
- 
(4)
207 
(538)
Commodity derivatives
117 
(24)
- 
(114)
(28)
82 
- 
- 
(31)
(80)
(78)
Other
(204)
- 
- 
2 
79 
46 
- 
- 
93 
(9)
7 
Net derivative financial instruments
1,230 
163 
(52)
(350)
150 
(100)
(36)
- 
(169)
41 
877 
                       
Total
16,353 
4,013 
(6,047)
(437)
(360)
1,144 
366 
39 
163 
(768)
14,466 

Instruments move between Level 2 and Level 3  primarily due to i) an increase or decrease in observable market activity related to an input or ii) a change in the significance of the unobservable input.  Instruments are classified as Level 3 if an unobservable input is deemed significant as it contributes more than 10% to the valuation of a financial instrument.  There are regular reassessments of the significance of unobservable inputs which will result in transfers between Level 2 and Level 3.

During H113, transfers into Level 3 totalled £163m. Asset backed securities held as trading portfolio assets amounting to £121m were transferred into Level 3 reflecting a decrease in observable market activity. Loans designated at fair value through profit or loss with a fair value of £101m and net credit derivatives of £317m were transferred from Level 2 to Level 3 following a reassessment of the significance of the unobservable inputs at 30 June 2013.

Transfers out of Level 3 totalled £768m.  Certain loans designated at fair value through profit or loss with a fair value of £547m and interest rate derivatives amounting to £153m were transferred from Level 3 to Level 2 following a reassessment of the significance of the unobservable inputs used in the valuation of the loans to their fair value at 30 June 2013.  Additionally, £207m of Equity derivatives, £114m of Issued debt and £118m of Asset backed securities held as trading portfolio assets were transferred out of Level 3 in line with observable market activity.

 

 



Financial Statement Notes
 
 
Gains and losses on Level 3 financial assets and liabilities
 
The following table discloses the gains and losses recognised in the year arising on Level 3 financial assets and liabilities held at the period end.
 

Gains and losses recognised during the period on Level 3 financial assets and liabilities held at period end
  
  
  
 
As at 30.06.13
    
As at 31.12.121 
  
 
Income statement
Other compre hensive income
Total
  
Income statement
Other compre hensive income 
Total
 
Trading income
Other income
  
Trading income
Other income
 
£m
£m
£m
£m
  
£m
£m
£m 
£m
Trading portfolio assets
593 
- 
- 
593 
  
(36)
(7)
- 
(43)
Financial assets designated at fair value
12 
48 
- 
60 
  
(174)
6 
-  
(168)
Available for sale assets
- 
381 
15 
396 
  
(3)
(11)
67  
53 
Trading portfolio liabilities
(1)
- 
- 
(1)
  
(1)
- 
-  
(1)
Financial liabilities designated at fair value
28 
- 
- 
28 
  
33 
55 
-  
88 
Net derivative financial instruments
(193)
(34)
- 
(227)
  
(1,747)
(61)
-  
(1,808)
Total
 439 
 395 
 15 
 849 
  
(1,928)
(18)
67  
(1,879)

 
Valuation techniques and sensitivity analysis

Current year valuation methodologies were consistent with those described within the 2012 Annual Report, however product categories disclosed have been amended in order to present a level of detail that is more appropriate to disclosure requirements under IFRS 13. Product types that previously included both derivative and non-derivative products have now been split. For example, ‘Equity products’ has been split into ‘Equity derivatives’ and ‘Equity cash products’.  ‘Non-asset backed debt instruments’ have been split into ‘Government and government sponsored debt’, ‘Corporate debt’, ‘Certificates of deposit, commercial paper and other money market instruments’ and ‘Issued debt’.  ‘Non asset backed loans’ were previously disclosed as part of the product type ‘Other’.
 
Sensitivity analysis is performed on products with significant unobservable parameters (Level 3) to generate a range of reasonably possible alternative valuations. The sensitivity methodologies applied take account of the nature of valuation techniques used, as well as the availability and reliability of observable proxy and historical data and the impact of using alternative models. Sensitivities are calculated without reflecting the impact of any diversification in the portfolio.
 
 
Sensitivities are dynamically calculated on a monthly basis. The calculation is based on a range, standard deviation or spread data of a reliable reference source or a scenario based on alternative market views alongside the impact of using alternative models. The level of shift or scenarios applied is considered for each product and varied according to the quality of the data and variability of underlying market. Sensitivity to using alternative models is quantified through scenario analysis and proxy approaches.
 
 
 

 

1  
Gains and losses recognised on level 3 financial assets and liabilities are those for the year ended 31 December 2012.


 

 
Financial Statement Notes
 
Sensitivity analysis of valuations using unobservable inputs
 
 
Fair value
Favourable changes
Unfavourable changes
Product type
Total
assets
Total
liabilities
Income
statement
Equity
Income
statement
Equity
 
£m
£m
£m
£m
£m
£m

As at 30.06.13
            
Interest rate derivatives
 1,358 
(1,029)
 136 
 - 
(133)
- 
Foreign exchange derivatives
 170 
(154)
 53 
 - 
(53)
- 
Credit derivatives
 2,379 
(1,187)
 219 
 - 
(450)
- 
Equity derivatives
 1,500 
(2,038)
 233 
 - 
(230)
(1)
Commodity derivatives
 644 
(722)
 63 
 - 
(63)
- 
Government and government sponsored debt
 226 
- 
 - 
 - 
- 
- 
Corporate debt
 3,274 
(15)
 19 
 - 
(11)
- 
Certificates of deposit, commercial paper and other money market instruments
 - 
(578)
 - 
 - 
- 
- 
Non asset backed loans
 1,514 
- 
 53 
 9 
(83)
(9)
Asset backed securities
 3,294 
(209)
 168 
 - 
(158)
- 
Commercial real estate loans
 1,578 
- 
 82 
 - 
(37)
- 
Issued debt
 - 
(1,162)
 - 
 - 
- 
- 
Equity cash products
 156 
- 
 - 
 14 
- 
(14)
Funds and fund linked products
 671 
(51)
 66 
 - 
(66)
- 
Other
 4,851 
(4)
 309 
 61 
(302)
(49)
Total
 21,615 
(7,149)
 1,401 
 84 
(1,586)
(73)
As at 31.12.12
            
Interest rate derivatives
1,353 
(1,204)
109 
- 
(109)
- 
Foreign exchange derivatives
203 
(244)
44 
- 
(44)
- 
Credit derivatives
3,039 
(1,206)
410 
- 
(512)
- 
Equity derivatives
1,092 
(1,702)
220 
- 
(214)
(1)
Commodity derivatives
660 
(543)
70 
- 
(70)
- 
Government and government sponsored debt
367 
- 
- 
- 
- 
- 
Corporate debt
3,339 
(36)
15 
- 
(11)
- 
Certificates of deposit, commercial paper and other money market instruments
- 
(760)
- 
- 
- 
- 
Non asset backed loans
2,365 
- 
59 
12 
(58)
(12)
Asset backed securities
4,106 
- 
390 
7 
(305)
(7)
Commercial real estate loans
1,798 
- 
64 
- 
(47)
- 
Issued debt
- 
(1,439)
- 
- 
- 
- 
Equity cash products
145 
- 
- 
13 
- 
(13)
Funds and fund linked products
754 
(122)
112 
- 
(112)
- 
Other
4,476 
(88)
312 
64 
(281)
(60)
Total
23,697 
(7,344)
1,805 
96 
(1,763)
(93)

 
The effect of stressing unobservable inputs to a range of reasonably possible alternatives alongside considering the impact of using alternative models would be to increase fair values by up to £1.5bn (2012: £1.9bn) or to decrease fair values by up to £1.7bn (2012: £1.9bn) with substantially all the potential effect impacting the income statement rather than equity.
 
No stress has been applied to the receivables relating to the Lehman acquisition (Note 20). The sensitivity inherent in the measurement of the receivables is akin to a litigation provision. Due to this, an upside and downside stress on a basis comparable with the other assets cannot be applied.



Financial Statement Notes
 
Significant  unobservable inputs

The following table discloses the valuation techniques and significant unobservable inputs for assets and liabilities recognised at fair value and classified as Level 3 along with the range of values used for those significant unobservable inputs.

  
Total assets
Total liabilities
Valuation 
Significant unobservable 
Range
Weighted 
  
  
£m
£m
technique(s) 
inputs 
Min
Max
average1 
Units2 
Derivative financial instruments3 
 
  
  
  
    
  
  

Interest rate derivatives 
1,358 
(1,029)
Discounted Cash Flows 
Inflation forwards 
0.4 
4 
  
%  
  
    
Option Model 
Inflation Volatility  
0.5 
2 
  
%  
  
    
  
Interest Rate (IR) Volatility 
11 
66 
  
% 
  
    
  
IR - IR Correlation 
(34)
100 
  
% 
  
    
  
  
    
  
  
Credit derivatives 
2,379 
(1,187)
Discounted Cash Flows 
Credit Spread 
49 
1,530 
  
bps 
  
    
  
Price 
5 
100 
  
points 
  
    
Correlation Model 
Credit Correlation 
18 
90 
  
%  
  
    
  
Option Volatility 
7 
10 
  
%  
  
    
  
  
    
  
  
Equity derivatives 
1,500 
(2,038)
Option Model 
Equity Volatility 
14 
150 
  
%  
  
    
  
Equity - Equity Correlation 
25 
100 
  
%  
  
    
  
Equity - FX correlation 
(91)
65 
  
%  
Non derivative financial instruments 
 
 
  
  
    
  
  

Corporate debt 
3,274 
(15)
Discounted Cash Flows 
Credit Spread 
135 
550 
227  
bps 
  
    
Comparable Pricing 
Price 
0
104 
32  
points 
  
    
  
  
    
  
  
Asset backed securities 
3,294 
(209)
Discounted Cash Flows 
Conditional Prepayment Rate 
0
44 
6  
%  
  
    
  
Constant Default Rate 
0
23 
5  
%  
  
    
  
Discount Margin 
300 
1,200 
576  
bps 
  
    
  
Loss Given Default 
0
100 
72  
%  
  
    
  
Yield 
0
47 
7  
%  
  
    
  
Credit Spread 
6 
4,869 
253  
bps 
  
    
Comparable Pricing 
Price 
0
104 
60  
points 
  
    
  
  
    
  
  
Commercial real estate loans 
1,578 
- 
Discounted Cash Flows 
Loss Given Default 
0
12 
0.3  
%  
  
    
  
Yield 
1 
33 
11  
%  
  
    
  
Credit Spread 
239 
333 
259  
bps 
  
    
  
  
    
  
  
Non asset backed loans 
1,514 
- 
Discounted Cash Flows 
Credit Spread 
47 
2,445 
75  
bps 
  
    
  
  
    
  
  
Other4 
4,851 
(4)
Private equity - Discounted Cash Flows 
Liquidity discount 
15 
15 
15  
%  
  
    
  
Weighted average cost of capital 
11 
18 
13  
%  
  
    
Private equity - EBITDA multiple 
EBITDA multiples 
0
9 
7  
  

 
1  
Weighted averages have been provided for non derivative financial instruments and have been calculated by weighting inputs by the relative fair value.  A weighted average has not been provided for derivatives as weighting by fair value would not give a comparable metric.
2  
The units used to disclose ranges for significant unobservable inputs are percentages, points and basis points.  Points are a percentage of par; for example, 100 points equals 100% of par. A basis point equals 1/100th of 1%; for example, 150 basis points equals 1.5%.
3  
Certain derivative instruments are classified as Level 3 due to a significant unobservable credit spread input into the calculation of the Credit Valuation Adjustment (CVA) for the instruments. The range of unobservable credit spreads is between 49-1,530bps.
4  
Other primarily includes receivables resulting from the acquisition of the North American business of Lehman Brothers, asset backed loans and private equity investments.
 



 
Financial Statement Notes
 
The following section describes the significant unobservable inputs identified in the table above, and the sensitivity of fair value measurement of the instruments categorised as Level 3 assets or liabilities to increases in significant unobservable inputs. Where sensitivities are described the inverse relationship will also generally apply.

Where reliable interrelationships can be identified between significant unobservable inputs used in fair value measurement a description of those interrelationships is included below.

Comparable Price
Comparable instrument prices are used in valuation by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable observable bond, then adjusting that yield (or spread) to derive a value for the unobservable bond. The adjustment to yield (or spread) should account for relevant differences in the bonds such as maturity or credit quality. Alternatively, a price-to-price basis can be assumed between the comparable instrument and bond being valued in order to establish the value of the bond. In general a significant increase in comparable price in isolation will result in a movement in fair value that is favourable for the holder of a cash instrument.

For a derivative instrument, a significant increase in an input derived from a comparable price in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.

Conditional Prepayment Rate
Conditional prepayment rate is the proportion of voluntary, unscheduled repayments of loan principal by a borrower. Prepayment rates affect the weighted average life of securities by altering the timing of future projected cashflows.  

A significant increase in a conditional prepayment rate in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.

Conditional prepayment rates are typically inversely correlated to credit spread. i.e. Securities with high borrower credit spread typically experience lower prepayment rates, and also tend to experience higher default rates.

Constant Default Rate
The Constant Default Rate represents an annualised rate of default of the loan principal by the borrower. A significant increase in a constant default rate in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.

Constant Default Rate and Conditional Prepayment Rates are typically inversely correlated, less defaults on loans typically will mean higher credit quality and therefore more prepayments.

Correlation
Correlation is a measure of the relationship between the movements of two variables (i.e. how the change in one variable influences a change in the other variable).   Correlation is a key input into valuation of derivative contracts with more than one underlying instrument. For example, where an option contract is written on a basket of underlying names the volatility of the basket, and hence the fair value of the option, will depend on the correlation between the basket components. Credit correlation generally refers to the correlation between default processes for the separate names that make up the reference pool of a collateralised debt obligation structure.

A significant increase in correlation in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.

Credit Spread / Discount Margin
Credit spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cashflow calculation. In general a significant increase in credit spread or discount margin in isolation will result in a movement in fair value that is unfavourable for the holder of a cash instrument.

For a derivative instrument, a significant increase in credit spread or discount margin in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.

EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization is an industry standard measure of maintainable earnings for an entity. In general a significant increase in EBITDA in isolation will result in a movement in fair value that is favourable for the entity.



Financial Statement Notes
 
EBITDA multiples
EBITDA multiples represent the Enterprise Value to EBITDA ratio, where the Enterprise Value is the aggregate value of equity and debt minus cash and cash equivalents for an entity. In general a significant increase in EBITDA multiples in isolation will result in a movement in fair value that is favourable for the entity.

Forwards
A price or rate that is applicable to a financial transaction that will take place in the future. A forward is generally based on the spot price or rate, adjusted for the cost of carry, and defines the price or rate that will be used to deliver a currency, bond, commodity or some other underlying instrument at a point in the future. A forward may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. In general a significant increase in a forward in isolation will result in a movement in fair value that is favourable for the contracted receiver of the underlying (currency, bond, commodity etc.), but the sensitivity is dependent on the specific terms of the instrument.

Liquidity discount
A liquidity discount is the basis between listed firms (highly liquid) and unlisted private equity. In general a significant increase in liquidity discount in isolation will result in a movement in fair value that is unfavourable for the unlisted private equity.

Loss Given Default
Loss Given Default represents the expected loss upon liquidation of the collateral as a percentage of the balance outstanding. In general, lower recovery and lower projected cashflows to pay to the securitisation will translate to a significant increase in the Loss Given Default, resulting in a reduction in fair value that is unfavourable for the holder of the securitised product.

Volatility
Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time.  In general, volatilities will be implied from observed option prices. For unobservable options the implied volatility may reflect additional assumptions about the nature of the underlying risk, as well as reflecting the given strike/maturity profile of a specific option contract.

In general a significant increase in volatility in isolation will result in a movement in fair value that is favourable for the holder of a simple option, but the sensitivity is dependent on the specific terms of the instrument.

There may be inter-relationships between unobservable volatilities and other unobservable inputs that can be implied from observation (e.g. when equity prices fall, implied equity volatilities generally rise) but these are specific to individual markets and may vary over time.

Weighted average cost of capital
Discount factor applied to cashflow forecasts to reflect the risks of receiving those cashflows. In general a significant increase in weighted average cost of capital in isolation will result in a movement in fair value that is unfavourable for the receiver of the cashflows.

Yield
The rate used to discount projected cashflows in a discounted future cashflow analysis. In general a significant increase in yield in isolation will result in a movement in fair value that is unfavourable for the holder of a cash instrument.

 

 
Financial Statement Notes
 
 
Fair value adjustments
 
Valuation adjustments made are consistent with those described in detail in the 2012 Annual Report.
 
 
At 30 June 2013, the own credit adjustment arose from the fair valuation of Barclays financial liabilities designated at fair value. Barclays credit spreads widened during 2013, leading to a gain of £86m (2012: charge of £2,945m) from the fair value of changes primarily in own credit itself but also reflecting the effects of foreign exchange rates, time decay and trade activity.
 
The Group uses the portfolio exemption in IFRS 13 Fair Value Measurement to measure the fair value of the group financial assets and financial liabilities. Instruments are measured using the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the balance sheet date under current market conditions.
 
Other key valuation adjustments that may be of interest from a financial statement user perspective are quantified below:
 

 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
Bid-offer valuation adjustments
(459)
(452)
(501)
Uncertainty adjustments
(241)
(294)
(307)
Uncollateralised derivative funding
(67)
(101)
- 
Derivative credit valuation adjustments:
      
 - Monolines
(63)
(235)
(348)
 - Other derivative credit valuation adjustments
(436)
(693)
(928)
Derivative debit valuation adjustments
493 
442 
726 

 
Unrecognised gains as a result of the use of valuation models using unobservable inputs
 
The amount that has yet to be recognised in income that relates to the difference between the transaction price (the fair value at initial recognition) and the amount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less amounts subsequently recognised, is as follows:
 

 
Half year ended
Half year ended
Half year ended
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
Opening balance
148 
144 
117 
Additions
41 
43 
35 
Amortisation and releases
(30)
(39)
(8)
Closing balance
159 
148 
144 


The reserve held for unrecognised gains is predominantly related to derivative financial instruments.
 
Third-party credit enhancements
 
There were no significant liabilities measured at fair value and issued with inseparable third-party credit enhancements.
 



Financial Statement Notes
 
12.Offsetting financial assets and financial liabilities
 
 
In accordance with IAS 32 Financial Instruments: Presentation, the group reports financial assets and financial liabilities on a net basis on the balance sheet only if there is a legally enforceable right to set off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on:
 
 
·  
all financial assets and liabilities that are reported net on the balance sheet; and
 
 
·  
all derivative financial instruments and reverse repurchase and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
 
 
 The table identifies the amounts that have been offset in the balance sheet and also those amounts that are covered by enforceable netting arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of IAS 32 described above.
 
 
The ‘Net amounts’ presented below are not intended to represent the Group’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements.  
 

 
Amounts subject to enforceable netting arrangements 
  
Amounts not subject to enforceable netting arrangements4 
Balance sheet total5 
 
Effects of offsetting on balance sheet 
  
Related amounts not offset3 
  
 
Gross amounts
Amounts offset1 
Net amounts reported on the balance sheet2 
  
Financial instruments
Financial collateral
Net amount 
  
As at 30.06.13
£m
£m 
£m 
  
£m
£m
£m 
  
£m 
£m 

Derivative financial assets
733,148 
(343,563) 
389,585  
  
(324,303)
(48,131)
17,151  
  
13,487  
403,072  
Reverse repurchase agreements and other similar secured lending
287,999 
(122,612) 
165,387  
  
- 
(163,353)
2,034  
  
57,494  
222,881  
Total Assets
1,021,147 
(466,175) 
554,972  
  
(324,303)
(211,484)
19,185  
  
70,981  
625,953  
Derivative financial liabilities
(724,856)
343,458  
(381,398) 
  
324,303 
42,818 
(14,277) 
  
(14,727) 
(396,125) 
Repurchase agreements and other similar secured borrowing
(288,955)
122,612  
(166,343) 
  
- 
164,573 
(1,770) 
  
(93,196) 
(259,539) 
Total Liabilities
(1,013,811)
466,070  
(547,741) 
  
324,303 
207,391 
(16,047) 
  
(107,923) 
(655,664) 
   
  
  
      
  
  
  
  
 

 
 
1  
Amounts offset for Derivative financial assets includes cash collateral netted of £2,008m (31 December 2012: £6,506m, 30 June 2012: £8,968m). Amounts offset for Derivative liabilities includes cash collateral netted of £1,903m (31 December 2012: £4,957m,30 June 2012: £9,733m). Settlements assets and liabilities have been offset by £17,478m (31 December 2012: £9,879m, 30 June 2012: £12,515m). No other significant recognised financial assets and liabilities were offset in the balance sheet.  Therefore, the only balance sheet categories necessary for inclusion in the table are those shown above.
2  
The table excludes Reverse repurchase agreements designated at fair value which are subject to enforceable master netting arrangements of £4bn (31 December 2012: £3bn, 30 June 2012: £5bn).
3  
Financial collateral is reflected at its fair value, but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
4  
This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
5  
 The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’.     
 



Financial Statement Notes
 
      
 
Amounts subject to enforceable netting arrangements 
  
Amounts not subject to enforceable netting arrangements4 
Balance sheet total5 
 
Effects of offsetting on balance sheet 
  
Related amounts not offset3 
  
 
Gross amounts
Amounts offset1 
Net amounts reported on the balance sheet2 
  
Financial instruments
Financial collateral
Net amount 
  
As at 31.12.12
  
  
  
      
  
  
  
  

Derivative financial assets
879,082 
(420,741) 
458,341  
  
(387,672)
(53,183)
17,486  
  
10,815  
469,156  
Reverse repurchase agreements and other similar secured lending
231,477 
(100,989) 
130,488  
  
- 
(129,716)
772  
  
46,034  
176,522  
Total Assets
1,110,559 
(521,730) 
588,829  
  
(387,672)
(182,899)
18,258  
  
56,849  
645,678  
Derivative financial liabilities
(869,514)
419,192  
(450,322) 
  
387,672 
52,163 
(10,487) 
  
(12,399) 
(462,721) 
Repurchase agreements and other similar secured borrowing
(232,029)
100,989  
(131,040) 
  
- 
130,444 
(596) 
  
(86,138) 
(217,178) 
Total Liabilities
(1,101,543)
520,181  
(581,362) 
  
387,672 
182,607 
(11,083) 
  
(98,537) 
(679,899) 
   
  
  
      
  
  
  
  
   
  
  
      
  
  
  
  
As at 30.06.12
  
  
  
      
  
  
  
  
Derivative financial assets
985,224 
(483,691) 
501,533  
  
(425,616)
(57,242)
18,675  
  
16,160  
517,693  
Reverse repurchase agreements and other similar secured lending
234,954 
(107,483) 
127,471  
  
- 
(127,124)
347  
  
46,343  
173,814  
Total Assets
1,220,178 
(591,174) 
629,004  
  
(425,616)
(184,366)
19,022  
  
62,503  
691,507  
   
  
  
      
  
  
  
  
Derivative financial liabilities
(973,640)
484,456  
(489,184) 
  
425,616 
53,411 
(10,157) 
  
(18,528) 
(507,712) 
Repurchase agreements and other similar secured borrowing
(265,554)
107,483  
(158,071) 
  
- 
156,981 
(1,090) 
  
(87,762) 
(245,833) 
Total Liabilities
(1,239,194)
591,939  
(647,255) 
  
425,616 
210,392 
(11,247) 
  
(106,290) 
(753,545) 





 
1  
Amounts offset for Derivative financial assets includes cash collateral netted of £2,008m (31 December 2012: £6,506m, 30 June 2012: £8,968m). Amounts offset for Derivative liabilities includes cash collateral netted of £1,903m (31 December 2012: £4,957m,30 June 2012: £9,733m). Settlements assets and liabilities have been offset amounting to £17,478m (31 December 2012: £9,879m, 30 June 2012: £12,515m). No other significant recognised financial assets and liabilities were offset in the balance sheet.  Therefore, the only balance sheet categories necessary for inclusion in the table are those shown above.
2  
The table excludes Reverse repurchase agreements designated at fair value which are subject to enforceable master netting arrangements of £4bn (31 December 2012: £3bn, 30 June 2012: £5bn).
3  
Financial collateral is reflected at its fair value, but has been limited to the net balance sheet exposure so as not to include any over-collateralisation.
4  
Includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
5  
The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’.     
 


Financial Statement Notes
 
Related amounts not offset


Derivative assets and liabilities
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding transaction covered by the agreements if an event of default or other predetermined events occur.
 
Financial collateral refers to cash and non-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events occur.
 
Repurchase and reverse repurchase agreements and other similar secured lending and borrowing
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as global master repurchase agreements and global master securities lending agreements, whereby all outstanding transactions with the same counterparty can be offset and close-out netting applied across all outstanding transaction covered by the agreements if an event of default or other predetermined events occur. Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated in the event of counterparty default.

These offsetting and collateral arrangements and other credit risk mitigation strategies used by the Group are further explained in the Credit risk mitigation section (page 329) of the 2012 Annual Report.


13.    Goodwill and Intangible Assets
 
As at
As at
As at
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m

Goodwill
5,115 
5,206 
5,295 
Intangible assets
2,734 
2,709 
2,566 
Total
7,849 
7,915 
7,861 


At 30 June 2013, goodwill carried on the Group’s balance sheet amounted to £5,115m (2012: £5,206m).  The goodwill principally comprises £3,144m in UK RBB (2012: £3,144m), £789m in Africa RBB (2012: £863m), £513m in Barclaycard (2012: £514m) and £391m in Wealth and Investment Management (2012: £391m).
 
Goodwill is reviewed for indicators of impairment quarterly and tested for impairment on an annual basis by comparing the carrying value to its recoverable amount. All goodwill has been assessed for indicators of impairment. No indicators of impairment were identified.
 

14.    Subordinated Liabilities
 
As at
As at
As at
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m

Opening balance as at 1 January
24,018 
24,870 
24,870 
Issuances
652 
2,258 
- 
Redemptions
(1,333)
(2,680)
(2,153)
Other
(696)
(430)
(628)
Total dated and undated subordinated liabilities as at period end
22,641 
24,018 
22,089 

 
During the six months ended 30 June 2013 redemptions comprised: Fixed Rates Subordinated Notes of £636m (€750m) and £554m ($850m), CPI-linked Callable Notes of £135m (ZAR1,886m), and Junior Guaranteed Undated Floating Rate Notes of £8m ($12m). 7.75% Contingent Capital Notes of £652m ($1,000m) were issued.


 

Financial Statement Notes
      
15.       Provisions
 
 
 
 
As at
As at
As at
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
Redundancy and restructuring
402 
71 
163 
Undrawn contractually committed facilities and guarantees
178 
159 
222 
Onerous contracts
81 
104 
107 
Payment Protection Insurance redress
1,650 
986 
406 
Interest rate hedging product redress
1,349 
814 
450 
Litigation
185 
200 
187 
Sundry provisions
580 
432 
316 
Total
4,425 
2,766 
1,851 

 
Payment protection insurance redress
 
Following the conclusion of the 2011 Judicial Review, a provision for PPI redress of £1.0bn was raised in May 2011 based on FSA guidelines and historic industry experience in resolving similar claims.  Subsequently, further provisions totalling £1.6bn were raised during 2012.

Through to 30 June 2013, 1.46m (31 December 2012: 1.1m) customer initiated claims1 had been received and processed.  The monthly volume of claims received has declined by 46% since the peak in May 2012, although the rate of decline has been less than previously expected.  Consequently the future level of expected complaints has been increased to reflect the slower rate of decline. With the overall increase in volume of expected complaints, expectations on the number of complaints which are likely to be referred to the Financial Ombudsman Service (FOS) have been revised upwards. As a result an additional provision of £1.35bn was recognised in June 2013 to reflect these updated assumptions including a provision for operational costs through to December 2014.  As at 30 June 2013 £2.3bn of the provision has been utilised, leaving a residual provision of £1.65bn.

In August 2012, in accordance with regulatory standards, Barclays commenced a proactive mailing of the holders of approximately 750,000 policies.  Of this population approximately 510,000 (31 December 2012: 100,000) had either been mailed or contacted Barclays independently by 30 June 2013 and it is anticipated that the remainder will be contacted by 31 December 2013.

To date Barclays has upheld on average 41% (31 December 2012: 39%) of all claims received, excluding payment of gestures of goodwill and reflecting a high proportion of claims for which no PPI policy exists.  The average redress per valid claim to date is £2,830 (31 December 2012: £2,750), comprising, where applicable, the refund of premium, compound interest charged and interest of 8%.   

The basis of the current provision is calculated from a number of key assumptions which continue to involve significant management judgement and modelling:
-  
Customer initiated claim volumes  – claims received but not yet processed as at 30 June and an estimate of future claims initiated by customers where the volume is anticipated to decline over time
-  
Proactive response rate – volume of claims in response to proactive mailing
-  
Uphold rate – the percentage of claims that are upheld as being valid upon review
-  
Average claim redress - the expected average payment to customers for upheld claims based on the type and age of the policy/policies

The provision also includes an estimate of our claims handling costs and those costs associated with claims that subsequently are referred to the FOS.

 
1  
Total claims received to date including those for which no PPI policy exists and excluding responses to proactive mailing.
 
Financial Statement Notes
 
These assumptions remain subjective; in particular due to the uncertainty associated with future claims levels. The resulting provision represents Barclays’ best estimate of all future expected costs of PPI redress. However, it is possible the eventual outcome may differ from the current estimate and if this were to be material a further provision will be made, otherwise it is expected that any residual costs will be handled as part of normal operations. The following table details, by key assumption, actual data through to 30 June 2013, forecast assumptions used in the provision calculation and a sensitivity analysis illustrating the impact on the provision if the future expected assumptions prove too high or too low.
       

 
 
Assumption
 
Cumulative actual   
   to 30.06.13
  
Future Expected
Sensitivity Analysis        increase/decrease
in provision
Customer initiated claims1 received and processed
1,460k
630k
50k = £54m
Proactive mailing
510k
240k
  
Response rate to proactive mailing2  
24%
39%
1% = £9m
Average uphold rate per claim3
41%
46%
1% = £17m
Average redress per valid claim3
£2,830
£2,560
£100 = £56m
 
Interest rate hedging product redress
 
 
On 29 June 2012, the FSA announced that it had reached agreement with a number of UK banks, including Barclays, in relation to a review and redress exercise to be carried out in respect of interest rate hedging products sold to small and medium sized enterprises.  On 31 January 2013, the FSA issued a report on the findings of an initial pilot review conducted by Barclays and a number of other banks.  The report included a number of changes and clarifications to the requirements under which the main review and redress exercise should be conducted and Barclays agreed to conduct the exercise in line with the approach set out in this report.
 
 
There are approximately 4,000 private or retail classified customers to which interest rate hedging products were sold within the relevant timeframe, of which approximately 2,900 have been categorised as non-sophisticated under the terms of the agreement.  As at 31 December 2012, a provision of £850m had been recognised, reflecting management’s best estimate of future redress to customers categorised as non-sophisticated and related costs.  The estimate was based on an extrapolation of the results of the initial pilot exercise across the population.  The provision recognised in the balance sheet as at 31 December 2012 was £814m, after utilisation of £36m during 2012, primarily related to administrative costs.
 
 
During 2013, additional cases have been reviewed providing a larger and more representative sample upon which to base our provision.  As a result, an additional provision of £650m has been recognised, bringing the cumulative expense to £1,500m. The provision on the balance sheet is £1,349m reflecting cumulative utilisation of £151m.
 
 
It is expected that this provision will be sufficient to cover the full cost of completing the redress, however, no provision has been recognised in relation to claims from customers classified as sophisticated, which are not covered by the redress exercise, or incremental consequential loss claims from customers classified as non-sophisticated.  These will be monitored and future provisions will be recognised to the extent an obligation resulting in a probable outflow is identified.
 
16.Retirement Benefits
 
 
As at 30 June 2013, the Group's IAS 19 (Revised) pension deficit across all schemes was £1.3bn (2012: £1.2bn). The increase in the deficit is due to small movements across a number of the Group’s pension schemes. The UK Retirement Fund (UKRF), which is the Group’s main scheme, had a deficit of £0.8bn (2012: £0.8bn).
 
The latest triennial funding valuation of the UKRF was carried out with an effective date of 30 September 2010, and showed a deficit of £5.0bn. Under the agreed recovery plan, deficit contributions of £1.8bn were paid to the fund in December 2011 and a further £0.5bn paid in April 2012. Further deficit contributions are payable from 2017 to 2021 starting at £0.65bn in 2017 and increasing by approximately 3.5% per annum until 2021. These deficit contributions are in addition to the regular contributions to meet the Group’s share of the cost of benefits accruing over each year.
 
The Scheme Actuary prepares an annual update of the funding position as at 30 September. The latest annual update was carried out as at 30 September 2012 and showed a deficit of £3.6bn. The next triennial funding valuation will be at 30 September 2013. Contribution requirements, including any deficit recovery plans, will be agreed between the Bank and Trustee by the end of 2014.
 

 
1  
Total claims received to date including those for which no PPI policy exists and excluding responses to proactive mailing.
2  
The Proactive Response rate is expected to mature over time reflecting the lag between mailing and customer response.
3  
Claims include both customer initiated and proactive mailing. Future expected rates reflect the increased mix of proactive cases over time.
 


Financial Statement Notes
 
17.Share Capital and Warrants
 
 
Called up share capital comprises 12,867m (2012: 12,243m) ordinary shares of 25p each.
 
 
As at 30 June 2013, there were no unexercised warrants (2012: 379.2m).
 

18.Other Reserves
 
 
Currency Translation Reserve
 
Currency translation reserves in 2013 have increased by £750m (2012: decreased £531m) largely due to the appreciation of the US Dollar and Euro against Sterling. The currency translation reserve associated with non-controlling interests decreased by £239m (2012: £71m) due to the depreciation of ZAR against Sterling.
 
 
During the period, £2m gain (2012: £20m gain) from the currency translation reserve was recognised in the income statement.
 
 
Available for Sale Reserve
 
The available for sale reserve decreased £96m (2012: increased £502m), largely driven by £1,885m losses from changes in fair value on Government Bonds offset by £1,823m gains transferred to the income statement due to fair value hedging.
 
 
Cash Flow Hedge Reserve
 
The cash flow hedge reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled to the income statement when hedged transactions affect profit or loss.
 
 
The decrease in the cash flow hedge reserve of £1,080m (2012: £0.7bn increase) principally reflected decreases in the fair value of interest rate swaps held for hedging purposes.
 
 
Treasury Shares
 
During the period £1,049m (2012: £955m) net purchases of treasury shares were made principally reflecting the increase in shares held for the purposes of employee share schemes, and £1,034m (2012: £912m) was transferred to retained earnings reflecting the vesting of deferred share based payments.
 


19.       Contingent Liabilities and Commitments
      
 
As at
As at
As at
 
30.06.13
31.12.12
30.06.12
 
£m
£m
£m
Securities lending arrangements
 - 
 - 
 42,609 
Guarantees and letters of credit pledged as collateral security
 17,641 
 15,855 
 14,995 
Performance guarantees, acceptances and endorsements
 6,013 
 6,406 
 7,120 
Contingent liabilities
 23,654 
 22,261 
 64,724 
       
Documentary credits and other short-term trade related transactions
 1,229 
 1,027 
 1,299 
       
Standby facilities, credit lines and other commitments
 260,970 
 247,816 
 245,853 

 
The Financial Services Compensation Scheme

The Financial Services Compensation Scheme (the FSCS) is the UK’s compensation scheme for customers of authorised institutions that are unable to pay claims. It provides compensation to depositors in the event that UK licensed deposit taking institutions are unable to meet their claims. The FSCS raises levies on UK licensed deposit taking institutions to meet such claims based on their share of UK deposits on 31 December of the year preceding the scheme year (which runs from 1 April to 31 March).



Financial Statement Notes
 
Compensation has previously been paid out by the FSCS funded by loan facilities totalling approximately £18bn provided by HM Treasury to FSCS in support of FSCS’s obligations to the depositors of banks declared in default.  In April 2012, the FSCS agreed revised terms on the loan facilities including a 70bps increase in the interest rate payable to 12 month LIBOR plus 100 basis points. This rate is subject to a floor equal to the HM Treasury’s own cost of borrowing, based on the relevant gilt rate. The facilities are expected to be repaid wholly from recoveries from the failed deposit takers, except for an estimated shortfall of £0.8bn,  The FSCS has announced it intends to recover this shortfall by levying the industry in three instalments across 2013, 2014 and 2015, in addition to the ongoing interest charges on the outstanding loans. Barclays has included an accrual of £190m in other liabilities as at 30 June 2013 (2012: £156m) in respect of the Barclays portion of the total levies raised by the FSCS.
 
Investment Bank US Mortgage Activities
 
Barclays activities within the US residential mortgage sector during the period of 2005 through 2008 included: sponsoring and underwriting of approximately $39bn of private-label securitisations; underwriting of approximately $34bn of other private-label securitisations; sales of approximately $150m of loans to government sponsored enterprises (GSEs); and sales of approximately $3bn of loans to others. Some of the loans sold by Barclays were originated by a Barclays subsidiary. Barclays also performed servicing activities through its US residential mortgage servicing business which Barclays acquired in Q4 2006 and subsequently sold in Q3 2010.
 
 
In connection with Barclays loan sales and sponsored private-label securitisations, Barclays provided certain loan level representations and warranties (R&Ws) generally relating to the underlying borrower, the property, mortgage documentation and/or compliance with law. Under certain circumstances, Barclays may be required to repurchase the related loans or make other payments related to such loans if the R&Ws are breached. Barclays was the sole provider of R&Ws with respect to approximately $5bn of Barclays sponsored securitizations, approximately $0.2bn of sales of loans to GSEs and approximately $3bn of loans sold to others. Other than approximately $1bn of loans sold to others for which R&Ws expired prior to 2012, there are no expiration provisions applicable to the R&Ws made by Barclays.  Barclays R&Ws with respect to loans sold to others are related to loans that were generally sold at significant discounts and contained more limited R&Ws than loans sold to GSEs and in respect of the approximately $5bn of Barclays sponsored securitisations discussed above.  R&Ws on the remaining approximately $34bn of Barclays sponsored securitisations were primarily provided by third party originators directly to the securitisation trusts with Barclays, as depositor to the securitisation trusts, providing more limited R&Ws. Total unresolved repurchase requests associated with all R&Ws made by Barclays on loans sold to GSEs and others and private-label activities were $0.4bn at 31 December 2012. Barclays currently has no provisions with respect to such repurchase requests, given Barclays analysis of such requests and Barclays belief as to applicable defences with respect thereto. Based upon a large number of defaults occurring in US residential mortgages, there is a potential for additional requests for repurchases.
 
 
Claims against Barclays as an underwriter of RMBS offerings have been brought in certain civil actions. Additionally, Barclays has received inquiries from various regulatory and governmental authorities regarding its mortgage-related activities and is cooperating with such inquiries.
 
 
It is not practicable to provide an estimate of the financial impact of the potential exposure in relation to Barclays US Mortgage activities.
 
 
Further details on contingent liabilities relating to Legal Proceedings and Competition and Regulatory Matters are held in Note 20 and 21 respectively.
 


Financial Statement Notes
 
20.Legal Proceedings
 
 
Lehman Brothers
 
 
On 15 September 2009, motions were filed in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) by Lehman Brothers Holdings Inc. (LBHI), the SIPA Trustee for Lehman Brothers Inc. (Trustee) and the Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. (Committee). All three motions challenged certain aspects of the transaction pursuant to which Barclays Capital Inc. (BCI) and other companies in the Group acquired most of the assets of Lehman Brothers Inc. (LBI) in September 2008 and the court order approving such sale (Sale). The claimants were seeking an order voiding the transfer of certain assets to BCI; requiring BCI to return to the LBI estate alleged excess value BCI received; and declaring that BCI is not entitled to certain assets that it claims pursuant to the sale documents and order approving the Sale (Rule 60 Claims). On 16 November 2009, LBHI, the Trustee and the Committee filed separate complaints in the Bankruptcy Court asserting claims against BCI based on the same underlying allegations as the pending motions and seeking relief similar to that requested in the motions. On 29 January 2010, BCI filed its response to the motions and also filed a motion seeking delivery of certain assets that LBHI and LBI have failed to deliver as required by the sale documents and the court order approving the Sale (together with the Trustee’s competing claims to those assets, Contract Claims). Approximately $4.5bn (£3.0bn) of the assets acquired as part of the acquisition had not been received by 30 June 2013 approximately $3.4bn (£2.3bn) of which have been recognised as a receivable on the balance sheet as at 30 June 2013. The receivable reflects an increase of $0.4bn (£0.3bn) recognised in profit or loss during the period, primarily as a result of greater certainty regarding the recoverability of $769m (£0.5bn) from the Trustee in respect of LBI’s 15c3-3 reserve account assets. On 16 July 2013, the Trustee paid this amount to Barclays. This results in an effective provision as of 30 June 2013 of $1.1bn (£0.7bn) against the uncertainty inherent in the litigation and issues relating to the recovery of certain assets held by institutions outside the United States.
 
 
On 22 February 2011, the Bankruptcy Court issued its Opinion in relation to these matters, rejecting the Rule 60 Claims and deciding some of the Contract Claims in the Trustee’s favour and some in favour of Barclays. On 15 July 2011, the Bankruptcy Court entered final Orders implementing its Opinion. Barclays and the Trustee each appealed the Bankruptcy Court’s adverse rulings on the Contract Claims to the United States District Court for the Southern District of New York (District Court). LBHI and the Committee did not pursue an appeal from the Bankruptcy Court’s ruling on the Rule 60 Claims. After briefing and argument, the District Court issued its Opinion on 5 June 2012 in which it reversed one of the Bankruptcy Court’s rulings on the Contract Claims that had been adverse to Barclays and affirmed the Bankruptcy Court’s other rulings on the Contract Claims. On 17 July 2012, the District Court issued an amended Opinion, correcting certain errors but not otherwise affecting the rulings, and an agreed judgment implementing the rulings in the Opinion (Judgment). Barclays and the Trustee have each appealed the adverse rulings of the District Court to the United States Court of Appeals for the Second Circuit (Court of Appeals).
 
 
Under the Judgment, Barclays is entitled to receive: (i) $1.1bn (£0.7bn) from the Trustee in respect of “clearance box” assets (Clearance Box Assets); (ii) property held at various institutions to secure obligations under the exchange-traded derivatives transferred to BCI in the Sale (ETD Margin), subject to the proviso that BCI will be entitled to receive $507m (£0.3bn) of the ETD Margin only if and to the extent the Trustee has assets available once the Trustee has satisfied all of LBI’s customer claims; and (iii) $769m (£0.5bn) from the Trustee in respect of LBI’s 15c3-3 reserve account assets only if and to the extent the Trustee has assets available once the Trustee has satisfied all of LBI’s customer claims.
 
 
A portion of the ETD Margin which has not yet been recovered by BCI or the Trustee is held or owed by certain institutions outside the United States (including several Lehman affiliates that are subject to insolvency or similar proceedings). Barclays cannot reliably estimate how much of the ETD Margin held or owed by such institutions Barclays is ultimately likely to receive. On 7 June 2013, the Trustee announced that he was commencing additional distributions to former securities customers of LBI and would continue to make distributions until all customer claims have been fully paid.  On 2 July 2013, the Trustee notified Barclays that such distributions were “substantially complete.”  Pursuant to a Stipulation and Order dated 24 April, 2013, the Trustee had previously reserved $5.6bn (£3.7m) which was to be available to pay any amounts ultimately due to Barclays, including the $507m (£0.3bn) in respect of ETD Margin and the $769m (£0.5bn) in respect of LBI’s 15c3-3 reserve account assets. On 16 July 2013, the Trustee paid Barclays the $769m (£0.5bn).
 
 
The $3.4bn (£2.3bn) recognised on Barclays’ balance sheet as at 30 June 2013 is consistent with a scenario in which the District Court’s rulings are unaffected by future proceedings, but conservatively assuming no recovery by Barclays of any of the ETD Margin not yet recovered by Barclays or the Trustee that is held or owed by institutions outside the United States. In such case, to the extent Barclays recovers ETD Margin held or owed by institutions outside of the United States, the value of such recovered margin would therefore result in a gain to Barclays. However, there remains a significant degree of uncertainty with respect to the value of such ETD Margin to which Barclays is entitled or that Barclays may recover. In a worst case scenario in which the Court of Appeals reverses the District Court’s rulings and determines that Barclays is not entitled to any of the Clearance Box Assets or ETD Margin, Barclays estimates that, after taking into account its effective provision, its total losses would be approximately $6.0bn (£4.0bn).  Approximately, $3.3bn (£2.2bn) of that loss would relate to Clearance Box Assets and ETD Margin previously received by Barclays and prejudgement and post-judgement interest on such Clearance Box Assets and ETD Margin that would have to be returned or paid to the Trustee. Barclays is satisfied with the valuation of the asset recognised on its balance sheet and the resulting level of effective provision.
 
 
American Depositary Shares
 
 
Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC's Board of Directors have been named as defendants in five proposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New York (Court). The consolidated amended complaint, dated 12 February 2010, alleges that the registration statements relating to American Depositary Shares representing Preferred Stock, Series 2, 3, 4 and 5 (ADS) offered by Barclays at various times between 2006 and 2008 contained misstatements and omissions concerning (amongst other things) Barclays’ portfolio of mortgage-related (including US subprime-related) securities, Barclays’ exposure to mortgage and credit market risk and Barclays’ financial condition. The consolidated amended complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. On 5 January 2011, the Court issued an order and, on 7 January 2011, judgment was entered, granting the defendants' motion to dismiss the complaint in its entirety and closing the case. On 4 February 2011, the plaintiffs filed a motion asking the Court to reconsider in part its dismissal order. On 31 May 2011, the Court denied in full the plaintiffs’ motion for reconsideration. The plaintiffs have appealed both decisions (the grant of the defendants’ motion to dismiss and the denial of the plaintiffs’ motion for reconsideration) to the United States Court of Appeals for the Second Circuit. Oral argument was held on 18 October 2012.
 
 
Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not practicable to estimate Barclays’ possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.
 
 
US Federal Housing Finance Agency and Other Residential Mortgage-Backed Securities Litigation
 
 
The US Federal Housing Finance Agency (FHFA), acting for two US government sponsored enterprises, Fannie Mae and Freddie Mac (collectively, GSEs), filed lawsuits against 17 financial institutions in connection with the GSEs’ purchases of residential mortgage-backed securities (RMBS). The lawsuits allege, amongst other things, that the RMBS offering materials contained materially false and misleading statements and/or omissions. Barclays and/or certain of its affiliates or former employees are named in two of these lawsuits, relating to sales between 2005 and 2007 of RMBS, in which BCI was lead or co-lead underwriter.
 
 
Both complaints demand, amongst other things: rescission and recovery of the consideration paid for the RMBS; and recovery for the GSEs’ alleged monetary losses arising out of their ownership of the RMBS. The complaints are similar to other civil actions filed against Barclays Bank PLC and/or certain of its affiliates by other plaintiffs, including the Federal Home Loan Bank of Seattle, Federal Home Loan Bank of Boston, Federal Home Loan Bank of Chicago, Cambridge Place Investment Management, Inc., HSH Nordbank AG (and affiliates), Sealink Funding Limited, Landesbank Baden-Württemberg (and affiliates), Deutsche Zentral-Genossenschaftsbank AG (and affiliates) and Stichting Pensioenfonds ABP, Royal Park Investments SA/NV, Bayerische Landesbank, John Hancock Life Insurance Company (and affiliates), Prudential Life Insurance Company of America (and affiliates) and the National Credit Union Administration relating to purchases of RMBS. Barclays considers that the claims against it are without merit and intends to defend them vigorously.
 
 
The original amount of RMBS related to the claims against Barclays in the FHFA cases and the other civil actions against the Group totalled approximately $8.7bn, of which approximately $2.6bn was outstanding as at 30 June 2013. Cumulative losses reported on these RMBS as at 30 June 2013 were approximately $0.5bn. If Barclays were to lose these cases Barclays believes it could incur a loss of up to the outstanding amount of the RMBS at the time of judgment (taking into account further principal payments after 30 June 2013), plus any cumulative losses on the RMBS at such time and any interest, fees and costs, less the market value of the RMBS at such time. Barclays has estimated the total market value of the RMBS as at 30 June 2013 to be approximately $1.6bn. Barclays may be entitled to indemnification for a portion of any losses. These figures do not include two related class actions brought on behalf of a putative class of investors in RMBS issued by Countrywide and underwritten by BCI and other underwriters, in which Barclays is indemnified by Countrywide.
 


 

 
Financial Statement Notes
 
 
Devonshire Trust
 
 
On 13 January 2009, Barclays commenced an action in the Ontario Superior Court (Court) seeking an order that its early terminations earlier that day of two credit default swaps under an ISDA Master Agreement with the Devonshire Trust (Devonshire), an asset-backed commercial paper conduit trust, were valid. On the same day, Devonshire purported to terminate the swaps on the ground that Barclays had failed to provide liquidity support to Devonshire's commercial paper when required to do so. On 7 September 2011, the Court ruled that Barclays’ early terminations were invalid, Devonshire's early terminations were valid and, consequently, Devonshire was entitled to receive back from Barclays cash collateral of approximately C$533m together with accrued interest thereon. Barclays appealed the Court's decision to the Court of Appeal for Ontario (Court of Appeal).  On 26 July 2013, the Court of Appeal delivered its decision dismissing Barclays’ appeal.  Barclays is currently considering its options with respect to the decision.  If the Court of Appeal’s decision were to be unaffected by future proceedings, Barclays estimates that its loss would be approximately C$500m, less impairment provisions recognised to date. Barclays has updated these provisions to take full account of the Court of Appeal’s decision.
 
 
LIBOR Civil Actions
 
 
Barclays and other banks have been named as defendants in class action and non-class action lawsuits pending in United States Federal Courts in connection with their roles as contributor panel banks to US Dollar LIBOR, the first of which was filed on 15 April 2011. The complaints are substantially similar and allege, amongst other things, that Barclays and the other banks individually and collectively violated various provisions of the Sherman Act, the US Commodity Exchange Act, the Racketeer Influenced and Corrupt Organizations Act (RICO) and various state laws by suppressing or otherwise manipulating US Dollar LIBOR rates.  The lawsuits seek an unspecified amount of damages and trebling of damages under the Sherman and RICO Acts. The proposed class actions purport to be brought on behalf of (amongst others) plaintiffs that (i) engaged in US Dollar LIBOR-linked over-the-counter transactions; (ii) purchased US Dollar LIBOR-linked financial instruments on an exchange; (iii) purchased US Dollar LIBOR-linked debt securities; (iv) purchased adjustable-rate mortgages linked to US Dollar LIBOR; or (v) issued loans linked to US Dollar LIBOR. The majority of the US Dollar LIBOR cases are consolidated before one United States District Court in the Southern District of New York. On 29 March 2013, that court issued a decision dismissing the majority of claims against Barclays and other panel bank defendants in six leading cases. Following the decision, various plaintiffs in those six cases have sought permission from the court to either file an amended complaint or appeal an aspect of the decision. These requests are still under consideration by the court. Other plaintiffs filed a new action in state court based on the same allegations. Defendants, including Barclays, have removed that action to federal court and are currently seeking to have it transferred back to the same judge who is handling the consolidated action. Additionally, a number of other actions before that same judge remain stayed, pending resolution of the various pending requests.
 
 
Until there are further proceedings and the various pending requests are resolved, the ultimate impact of this decision will be unclear, although it is possible that the decision will be interpreted by courts to affect other litigation, including the actions described below, some of which concern different benchmark interest rates.
 
 
An additional individual US Dollar LIBOR action was commenced on 13 February 2013 in the United States District Court for the Southern District of New York against Barclays and other banks. Plaintiffs allege that defendants conspired to increase US Dollar LIBOR, which caused the value of bonds pledged as collateral for a loan to decrease, ultimately resulting in the sale of the bonds at the bottom of the market. This action has been assigned to a different judge in the Southern District of New York, and is proceeding on a different schedule than is the consolidated action, with a motion to dismiss to be fully submitted to the court by the end of 2013.
 
 
An additional class action was commenced on 30 April 2012 in the United States District Court for the Southern District of New York against Barclays and other Japanese Yen LIBOR panel banks by plaintiffs involved in exchange-traded derivatives. The complaint also names members of the Japanese Bankers Association’s Euroyen Tokyo Interbank Offered Rate (TIBOR) panel, of which Barclays is not a member. The complaint alleges, amongst other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates and breaches of US antitrust laws between 2006 and 2010.
 
 
A further class action was commenced on 6 July 2012 in the District Court against Barclays and other EURIBOR panel banks by plaintiffs that purchased or sold EURIBOR-related financial instruments. The complaint alleges, amongst other things, manipulation of the EURIBOR rate and breaches of the Sherman Act and the US Commodity Exchange Act beginning as early as 1 January 2005 and continuing through to 31 December 2009. On 23 August 2012, the plaintiffs voluntarily dismissed the complaint.
 
 
On 12 February 2013, a class action was commenced against Barclays and other EURIBOR panel banks by plaintiffs that purchased or sold a NYSE LIFFE EURIBOR futures contract. The complaint alleges manipulation of the EURIBOR rate and violations of the Sherman Act beginning as early as 1 June 2005 and continuing through 30 June 2010. The action is currently pending in the United States District Court for the Southern District of New York.
 
Financial Statement Notes
 
 
In addition, Barclays has been granted conditional leniency from the Antitrust Division of the US Department of Justice (DOJ) in connection with potential US antitrust law violations with respect to financial instruments that reference EURIBOR.
 
 
As a result of that grant of conditional leniency, Barclays is eligible for (i) a limit on liability to actual rather than treble damages if damages were to be awarded in any civil antitrust action under US antitrust law based on conduct covered by the conditional leniency and (ii) relief from potential joint-and-several liability in connection with such civil antitrust action, subject to Barclays satisfying the DOJ and the court presiding over the civil litigation of its satisfaction of its cooperation obligations.
 
 
Barclays has also been named as a defendant along with four current and former officers and directors of Barclays in a proposed securities class action pending in the United States District Court for the Southern District of New York in connection with Barclays’ role as a contributor panel bank to LIBOR. The complaint principally alleges that Barclays’ Annual Reports for the years 2006 to 2011 contained misstatements and omissions concerning (amongst other things) Barclays’ compliance with its operational risk management processes and certain laws and regulations. The complaint also alleged that Barclays’ daily US Dollar LIBOR submissions constituted false statements in violation of US securities law. The complaint was brought on behalf of a proposed class consisting of all persons or entities that purchased American Depositary Receipts sponsored by Barclays on an American securities exchange between 10 July 2007 and 27 June 2012. The complaint asserts claims under Sections 10(b) and 20(a) of the US Securities Exchange Act 1934.  On 13 May 2013, the court granted Barclays’ motion to dismiss the complaint in its entirety.  Plaintiffs’ motion for reconsideration of that dismissal was denied on 13 June 2013.  Plaintiffs filed a notice of appeal with the United States Court of Appeals for the Second Circuit on 12 July 2013.
 
 
It is not practicable to provide an estimate of the financial impact of the potential exposure of any of the actions described or what effect, if any, that they might have upon operating results, cash flows or Barclays’ financial position in any particular period.
 
 
FERC Investigation
 
 
See Note 21.
 
 
Other
 
 
Barclays is engaged in various other legal proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it which arise in the ordinary course of business, including debt collection, consumer claims and contractual disputes. Barclays does not expect the ultimate resolution of any of these proceedings to which Barclays is party to have a material adverse effect on its results of operations, cash flows or the financial position of the Group and Barclays has not disclosed the contingent liabilities associated with these claims either because they cannot reliably be estimated or because such disclosure could be prejudicial to the conduct of the claims. Provisions have been recognised for those cases where Barclays is able reliably to estimate the probable loss where the probable loss is not de minimis.
 


Financial Statement Notes
 
21.Competition and Regulatory Matters
 
 
This note highlights some of the key competition and regulatory challenges facing Barclays, many of which are beyond our control. The extent of the impact of these matters on Barclays and the impact on Barclays of any other competition and regulatory matters in which Barclays is or may in the future become involved cannot always be predicted but may materially impact our businesses and earnings.
 
 
Structural Reform
 
 
There is continuing political and regulatory scrutiny of the banking industry which, in some cases, is leading to increased or changing regulation which is likely to have a significant effect on the structure and management of the Group.
 
 
On 4 February 2013, the UK Government introduced the Financial Services (Banking Reform) Bill (Bill) to the House of Commons. The Bill will give the UK authorities the powers to implement key recommendations of the Independent Commission on Banking by requiring, amongst other things: (i) the separation of the UK and EEA retail banking activities of UK banks in a legally distinct, operationally separate and economically independent entity (so called ring fencing); (ii) the increase of the loss-absorbing capacity of ring-fenced banks and UK headquartered global systemically important banks to levels higher than the Basel 3 guidelines and (iii) preference to deposits protected under the Financial Services Compensation Scheme if a bank enters insolvency. The Bill also establishes a reserve power for the Prudential Regulation Authority to enforce full separation of UK banks under certain circumstances.  The Bill has completed its passage through the House of Commons and is currently before the House of Lords.
 
 
The Bill is primarily an enabling statute which provides HM Treasury with the requisite powers to implement the policy underlying the Bill through secondary legislation. On 8 March 2013, the UK Government published draft secondary legislation. The UK Government intends that both primary and secondary legislation will be in place by May 2015 and that UK banks will be required to be compliant by 1 January 2019.  
 
 
On 19 June 2013 the Parliamentary Commission on Banking Standards (PCBS) published its final report on the UK Banking sector, which is expected to result in further changes to draft primary and secondary legislation. The PCBS’s report recommends, amongst other things: (i) a new “senior persons” regime for individuals in the banking sector to ensure full accountability for decisions made; (ii) reforms to the remuneration of senior management and other influential bank staff to better align risk and reward; and (iii) sanctions and enforcement, including a new criminal offence of reckless misconduct. The UK Government published its response to the PCBS’s report on 8 July 2013, in which it endorses the report’s principal findings and commits to implementing a number of its recommendations.
 
 
The US Dodd-Frank Wall Street Reform and Consumer Protection Act is expected, amongst other things, to require the US subsidiaries of foreign banks operating in the US to be held under a US intermediate holding company subject to a comprehensive set of prudential and supervisory requirements prescribed by US regulators. The full impact on Barclays’ businesses and markets will not be known until the principal implementing rules are adopted in final form by governmental authorities, a process which is underway and is expected to take effect over several years.
 
 
On 2 October 2012 a high-level expert group chaired by Erkki Liikanen submitted a report (Liikanen Report) to the European Commission (Commission) on reform of the structure of the EU banking sector. The Liikanen Report contains five key recommendations, including the mandatory separation of proprietary trading and other high-risk trading activities (subject to thresholds) from deposit taking banks. The Commission is considering the impact of the Liikanen Report’s recommendations on growth and the safety and integrity of financial services in the EU, particularly in light of its current proposed legislative reforms, and will publish proposals on structural separation of banks in Q3 2013. Legislation is not expected to be finalised until 2015, at the earliest. The full impact on Barclays’ businesses and markets will not be known until principal implementing rules are adopted in final form by the Commission and other European legislative authorities.    
 
 
Interchange
 
 
The Office of Fair Trading, as well as other competition authorities elsewhere in Europe, continues to investigate Visa and MasterCard credit and debit interchange rates. The key risks arising from the investigations comprise the potential for fines imposed by competition authorities, follow on litigation and proposals for new legislation. It is not currently possible to predict the likelihood or potential financial impact of these risks on Barclays.
 
 
London Interbank Offered Rate
 
 
The FCA, the US Commodity Futures Trading Commission (CFTC), the SEC, the DOJ Fraud Section (DOJ-FS) and Antitrust Division (DOJ-AD), the Commission, the UK Serious Fraud Office, the Monetary Authority of Singapore, the Japan Financial Services Agency, the prosecutors’ office in Trani, Italy and various US state attorneys general are amongst various authorities conducting investigations (Investigations) into submissions made by Barclays and other financial institutions to the bodies that set or compile various financial benchmarks, such as the London Interbank Offered Rate (LIBOR) and the Euro Interbank Offered Rate (EURIBOR).
 
 
On 27 June 2012, Barclays announced that it had reached settlements with the Financial Services Authority (FSA) (as predecessor to the FCA), the CFTC and the DOJ-FS in relation to their investigations and Barclays agreed to pay total penalties of £290m in 2012. The settlements were made by entry into a Settlement Agreement with the FSA, a Non-Prosecution Agreement (NPA) with the DOJ-FS and a Settlement Order Agreement with the CFTC (CFTC Order). In addition, Barclays has been granted conditional leniency from the DOJ-AD in connection with potential US antitrust law violations with respect to financial instruments that reference EURIBOR.
 
 
The terms of the Settlement Agreement with the FSA are confidential. However, the Final Notice of the FSA, which imposed a financial penalty of £59.5m, is publicly available on the website of the FCA. This sets out the FSA’s reasoning for the penalty, references the settlement principles and sets out the factual context and justification for the terms imposed.  Summaries of the NPA and the CFTC Order are set out below. The full text of the NPA and the CFTC Order are publicly available on the websites of the DOJ and the CFTC, respectively.
 
 
In addition to a $200m civil monetary penalty, the CFTC Order requires Barclays to cease and desist from further violations of specified provisions of the US Commodity Exchange Act and take specified steps to ensure the integrity and reliability of its benchmark interest rate submissions, including LIBOR and EURIBOR, and improve related internal controls.  Amongst other things, the CFTC Order requires Barclays to:
 
 
·  
make its submissions based on certain specified factors, with Barclays’ transactions being given the greatest weight, subject to certain specified adjustments and considerations;
 
 
·  
implement firewalls to prevent improper communications including between traders and submitters;
 
 
·  
prepare and retain certain documents concerning submissions and retain relevant communications;
 
 
·  
implement auditing, monitoring and training measures concerning its submissions and related processes;
 
 
·  
make regular reports to the CFTC concerning compliance with the terms of the CFTC Order;
 
 
·  
use best efforts to encourage the development of rigorous standards for benchmark interest rates; and
 
 
·  
continue to cooperate with the CFTC’s ongoing investigation of benchmark interest rates.
 
 
As part of the NPA, Barclays agreed to pay a $160m penalty.  In addition, the DOJ agreed not to prosecute Barclays for any crimes (except for criminal tax violations, as to which the DOJ cannot and does not make any agreement) related to Barclays’ submissions of benchmark interest rates, including LIBOR and EURIBOR, contingent upon Barclays’ satisfaction of specified obligations under the NPA.  In particular, under the NPA, Barclays agreed for a period of two years from 26 June 2012, amongst other things, to:
 
 
·  
commit no US crime whatsoever;
 
 
·  
truthfully and completely disclose non-privileged information with respect to the activities of Barclays, its officers and employees, and others concerning all matters about which the DOJ inquires of it, which information can be used for any purpose, except as otherwise limited in the NPA;
 
 
·  
bring to the DOJ’s attention all potentially criminal conduct by Barclays or any of its employees that relates to fraud or violations of the laws governing securities and commodities markets; and
 
 
·  
bring to the DOJ’s attention all criminal or regulatory investigations, administrative proceedings or civil actions brought by any governmental authority in the US by or against Barclays or its employees that alleges fraud or violations of the laws governing securities and commodities markets.
 
 
Barclays also agreed to cooperate with the DOJ and other government authorities in the US in connection with any investigation or prosecution arising out of the conduct described in the NPA, which commitment shall remain in force until all such investigations and prosecutions are concluded. Barclays also continues to cooperate with the other ongoing investigations.
 
 
Following the settlements announced on 27 June 2012, 38 US state attorneys general commenced their own investigations into LIBOR, EURIBOR and the Tokyo Interbank Offered Rate.  The New York Attorney General, on behalf of this coalition of attorneys general, issued a subpoena dated 17 July 2012 to Barclays (and subpoenas to a number of other banks) to produce wide-ranging information and has since issued additional information requests to Barclays for both documents and transactional data. Barclays is responding to these requests on a rolling basis.  Barclays has also entered into confidentiality agreements with the coalition of attorneys general as well as a tolling agreement which is set to expire on 1 April 2014.  
 
 

 
Financial Statement Notes
 
 
It is not practicable to provide an estimate of the financial impact of these matters or what effect, if any, that the matters might have upon operating results, cash flows or Barclays’ financial position in any particular period.
 
 
For a discussion of litigation arising in connection with the Investigations see Note 20.
 
 

 
 
FERC Investigation  
 
 
The United States Federal Energy Regulatory Commission (FERC) Office of Enforcement has been investigating the Group’s power trading in the western US with respect to the period from late 2006 through 2008. On 31 October 2012, the FERC issued a public Order to Show Cause and Notice of Proposed Penalties (Order and Notice) against Barclays Bank PLC in relation to this matter.  In the Order and Notice the FERC asserts that Barclays Bank PLC violated the FERC’s Anti-Manipulation Rule by manipulating the electricity markets in and around California from November 2006 to December 2008, and proposed civil penalties and profit disgorgement to be paid by Barclays Bank PLC. On 16 July 2013 the FERC issued an Order Assessing Civil Penalties in which it assessed a $435m civil penalty against Barclays Bank PLC and ordered Barclays Bank PLC to disgorge an additional $34.9m of profits plus interest (both of which are consistent with the amounts it proposed in the Order and Notice). In order to attempt to collect the penalty and disgorgement amount, FERC must file a civil action in federal court. Barclays intends to vigorously defend this matter.
 
 
Credit Default Swap (CDS) Antitrust Investigations
 
Both the Commission and the DOJ-AD have commenced investigations in the CDS market (in 2011 and 2009, respectively).  On 1 July 2013 the Commission addressed a Statement of Objections to Barclays and 12 other banks, Markit and ISDA. The case relates to concerns that certain banks took collective action to delay and prevent the emergence of exchange traded credit derivative products. If the Commission does reach a decision in this matter it has indicated that it intends to impose sanctions. The Commission’s sanctions can include fines. The DOJ-AD’s investigation is a civil investigation and relates to similar issues. Putative class actions alleging similar issues have also been filed in the US. The timing of these cases is uncertain and it is not possible to provide an estimate of the potential financial impact of this matter on Barclays.
 
Other Regulatory Investigations  
 
The FCA and the Serious Fraud Office are both investigating certain commercial agreements between Barclays and Qatari interests and whether these may have related to Barclays’ capital raisings in June and November 2008. The FCA investigation involves four current and former senior employees, including Chris Lucas, Group Finance Director, as well as Barclays. The FCA enforcement investigation began in July 2012 and the Serious Fraud Office commenced its investigation in August 2012.
 
The FCA provided its preliminary findings against Barclays on 27 June 2013 in respect of some of these commercial agreements.  Barclays has responded on 25 July 2013 contesting the FCA’s preliminary findings.   Barclays expects further developments in the near term.
 
In October 2012 Barclays was informed by the DOJ and the SEC that they had commenced an investigation into whether the Group's relationships with third parties who assist Barclays to win or retain business are compliant with the United States Foreign Corrupt Practices Act.  The DOJ and the SEC are also investigating the commercial agreements and the US Federal Reserve has requested to be kept informed of these matters.  
 
Barclays is co-operating with all the authorities fully. It is not possible to estimate the financial impact upon Barclays should any adverse findings be made.

22.Related Party Transactions
 
Related party transactions in the half year ended 30 June 2013 were similar in nature to those disclosed in the Group’s 2012 Annual Report. No related party transactions that have taken place in the six months to 30 June 2013 have materially affected the financial position or the performance of the Group during this period and there were no changes in the related parties transactions described in the 2012 Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

 

 

 
Financial Statement Notes
 
23.Segmental Reporting
 

Analysis of results by business 
  
UK RBB
Europe RBB
Africa RBB
Barclaycard
Half Year Ended 30 June 2013 
  
£m
£m
£m
£m
Total income net of insurance claims 
  
2,202 
352 
1,352 
2,343 
Credit impairment charges and other provisions 
  
(178)
(142)
(208)
(616)
Net operating income 
  
2,024 
210 
1,144 
1,727 
Operating expenses 
  
(1,393)
(422)
(926)
(963)
Provision for PPI redress 
  
(660)
- 
- 
(690)
Provision for interest rate hedging products redress 
  
- 
- 
- 
- 
Costs to achieve Transform 
  
(27)
(356)
(9)
(5)
Other net income/(expense)1 
  
28 
(141)
3 
16 
(Loss)/profit before tax 
  
(28)
(709)
212 
85 
Total assets  
  
159,515 
48,674 
37,500 
39,224 
Analysis of results by business 
Investment Bank
 
Corporate Banking
Wealth and Investment Management
Head Office
and Other
Operations
Group Total
Half Year Ended 30 June 2013 continued 
£m
£m
£m
£m
£m
Total income/(expense) net of insurance claims 
6,473 
1,552 
931 
(48)
15,157 
Credit impairment charges and other provisions 
(181) 
(258)
(49)
1 
(1,631)
Net operating income/(expense) 
6,292 
1,294 
882 
(47)
13,526 
Operating expenses 
(3,751)
(852)
(810)
(24)
(9,141)
Provision for PPI redress 
- 
- 
- 
- 
(1,350)
Provision for interest rate hedging products redress 
- 
(650)
- 
  
(650)
Costs to achieve Transform 
(169)
(41)
(33)
- 
(640)
Other net income/(expense)1 
17 
1 
8 
- 
(68)
Profit /(loss) before tax  
2,389 
(248)
47 
(71)
1,677 
Total assets  
1,043,786 
120,377 
36,475 
47,182 
1,532,733 
  
          

Analysis of results by business 
  
UK RBB
Europe RBB
Africa RBB
Barclaycard
Half Year Ended 31 December 2012 
  
£m
£m
£m
£m
Total income net of insurance claims 
  
2,200 
329 
1,435 
2,232 
Credit impairment charges and other provisions 
  
(147)
(132)
(318)
(557)
Net operating income 
  
2,053 
197 
1,117 
1,675 
Operating expenses 
  
(1,407)
(378)
(961)
(940)
Provision for PPI redress 
  
(880)
- 
- 
(420)
UK Bank Levy 
  
(17)
(20)
(24)
(16)
Other net income1 
  
4 
6 
7 
12 
(Loss)/profit before tax  
  
(247)
(195)
139 
311 
Total assets  
  
134,554 
46,119 
42,228 
38,156 


Analysis of results by business 
Investment Bank
 
Corporate Banking
Wealth and Investment Management
Head Office
and Other
Operations
Group Total
Half Year Ended 31 December 2012 continued 
£m
£m
£m
£m
£m
Total income/(expense) net of insurance claims 
5,315 
1,463 
926 
(1,665)
12,235 
Credit impairment charges and other provisions 
(2)
(454)
(19)
(1)
(1,630)
Net operating income/(expense) 
5,313 
1,009 
907 
(1,666)
10,605 
Operating expenses 
(3,381)
(833)
(730)
(67)
(8,697)
Provision for PPI redress 
- 
- 
- 
- 
(1,300)
Provision for interest rate hedging products redress 
- 
(400)
- 
- 
(400)
UK Bank levy 
(206)
(39)
(4)
(19)
(345)
Other net income/(expense)1 
22 
12 
2 
(2)
63 
Profit /(loss) before tax  
1,748 
(251)
175 
(1,754)
(74)
Total assets  
1,073,663 
87,841 
24,480 
41,294 
1,488,335 
  
          


 
1  
Other income/(losses) represents: share of post-tax results of associates and joint ventures; profit or (loss) on disposal of subsidiaries, associates and joint ventures; and gains on acquisitions.
 

Financial Statement Notes
 
Analysis of results by business 
  
 
 
 
 
UK RBB
 
 
 
 
Europe RBB
 
 
 
 
Africa RBB
 
 
 
 
Barclaycard
Half Year Ended 30 June 2012 
  
£m
£m
£m
£m
Total income net of insurance claims 
  
2,184 
379 
1,493 
2,112 
Credit impairment charges and other provisions 
  
(122)
(125)
(314)
(492)
Net operating income 
  
2,062 
254 
1,179 
1,620 
Operating expenses 
  
(1,470)
(409)
(999)
(886)
Provision for PPI redress 
  
(300)
- 
- 
- 
Other net income1 
  
- 
7 
3 
17 
Profit /(loss) before tax  
- 
292 
(148)
183 
751 
Total assets  
  
129,652 
47,066 
44,348 
35,444 
Analysis of results by business 
Investment Bank
 
Corporate Banking
Wealth and Investment Management
Head Office
and Other
Operations
Group Total
Half Year Ended 30 June 2012 continued 
£m
£m
£m
£m
£m
Total income/(expense) net of insurance claims 
6,460 
1,583 
894 
(2,331)
12,774 
Credit impairment charges and other provisions 
(202)
(431)
(19)
(5)
(1,710)
Net operating income/(expense) 
6,258 
1,152 
875 
(2,336)
11,064 
Operating expenses 
(4,044)
(839)
(775)
(98)
(9,520)
Provision for PPI redress 
- 
- 
- 
- 
(300)
Provision for interest rate hedging products redress 
- 
(450)
- 
- 
(450)
Other net income/(expense)1 
28 
(2)
(1)
25 
77 
Profit/(loss) before tax  
2,242 
(139)
99 
(2,409)
871 
Total assets  
1,223,950 
89,865 
23,390 
35,341 
1,629,056 

  
      
  
      
  
Adjusted2
  
Statutory
Income by Geographic Region3 
30.06.13
30.06.12
  
  
30.06.13
30.06.12
  
 
£m
£m
% Change
  
£m
£m
% Change

UK 
5,914 
6,893 
(14)
  
6,000 
3,948 
52 
Europe 
2,306 
2,404 
(4)
  
2,306 
2,404 
(4)
Americas 
4,028 
3,269 
23 
  
4,028 
3,496 
15 
Africa and Middle East 
2,116 
2,336 
(9)
  
2,116 
2,336 
(9)
Asia 
707 
590 
20 
  
707 
590 
20 
Total   
15,071 
 15,492 
(3)
  
15,157 
 12,774 
19 


 
 
1  
Other income/(losses) represents: share of post-tax results of associates and joint ventures; profit or (loss) on disposal of subsidiaries, associates and joint ventures; and gains on acquisitions.
2  
Income by geography and profit before tax excludes the impact of £86m (2012: loss of £2,945m) own credit gain and £nil (2012: gain of £227m) gain on disposal of strategic investment in BlackRock, Inc.
3  
Total income net of insurance claims based on counterparty location.

 

 
CRD IV Appendices
 
 
CRD IV transitional own funds disclosure
 
At the PRA’s request, Barclays is disclosing the estimated components of regulatory capital presented on both a first year transitional and fully loaded basis as at 30 June 2013. This disclosure has been prepared using the format set out in Annex VI of the EBA consultation paper ‘Draft Implementing Technical Standards on Disclosure for Own Funds by Institutions’. The final impact of CRD IV is dependent on technical standards to be finalised by the European Banking Authority (EBA) and on the final UK implementation of the rules. The basis of preparation can be found on page 51.
 

 
As at
  
As at
 
30.06.13
  
30.06.13
 
Transitional
Transitional
Fully loaded
 
Position Yr 1
Impacts Yr 1
Position
Common Equity Tier 1 (CET1) capital: instruments and reserves
£m
£m
£m
Capital instruments and the related share premium accounts
13,763 
- 
13,763 
Retained earnings
36,336 
- 
36,336 
Accumulated other comprehensive income (and other reserves)
778 
- 
778 
Minority Interests (amount allowed in consolidated CET1)
2,105 
(381)
1,724 
Common Equity Tier 1 capital before regulatory adjustments
52,982 
(381)
52,601 
       
Common Equity Tier 1 capital: regulatory adjustments
      
Additional value adjustments
(2,111)
- 
(2,111)
Intangible assets (net of related tax liability)
(1,517)
(6,066)
(7,583)
Deferred tax assets that rely on future profitability excluding those arising from temporary differences
(376)
(1,505)
(1,881)
Fair value reserves related to gains or losses on cash flow hedges
(1,001)
- 
(1,001)
Negative amounts resulting from the calculation of expected loss amounts
 
(365)
(1,462)
(1,827)
Gains or losses on liabilities at fair value resulting from own credit
525 
(272)
253 
Other regulatory adjustments
 (150)
- 
(150)
Direct and indirect holdings by an institution of own CET1 instruments
(242)
- 
(242)
Direct and indirect holdings by the institution of the CET1 instruments of relevant entities where the institution does not have a significant investment in those entities (amount above the 10% threshold and net of eligible short positions) (negative amount)
(496)
(1,983)
(2,479)
Mitigation of non-significant holdings in relevant entities
496 
1,983 
2,479 
Regulatory Adjustments relating to unrealised gains and losses:
(506)
506 
- 
of which unrealised gains on available for sale debt securities
(350)
350 
- 
of which unrealised gains on available for sale equity
(137)
137 
- 
of which property revaluation reserve
(19)
19 
- 
Adjustments to CET1 capital with regard to additional filters and deductions required pre CRR - Defined benefit pension adjustment
9 
(9)
- 
Total regulatory adjustments to Common equity Tier 1
(5,734)
(8,808)
(14,542)
Common Equity Tier 1 capital
47,248 
(9,189)
38,059 
       
Additional Tier 1 (AT1) capital: instruments
      
Capital instruments and the related share premium accounts issued by Barclays Bank PLC
9,323 
(9,323)
- 
of which: classified as equity under IFRS
5,868 
(5,868)
- 
of which: classified as liabilities under IFRS
3,455 
(3,455)
- 
Qualifying AT1 capital (including minority interests) issued by subsidiaries and held by third parties
347 
(143)
204 
Amount of qualifying items subject to phase out from AT1
(1,926)
1,926 
- 
Additional Tier 1 capital before regulatory adjustments
7,744 
(7,540)
204 
       
 
 
CRD IV Appendices
 
 
 
 
 
 
 
 
 
As at
  
 
 
 
 
 
 
 
 
As at
 
30.06.13
  
30.06.13
 
Transitional
Transitional
Fully loaded
 
Position Yr 1
Impacts Yr 1
Position
Additional Tier 1 capital: regulatory adjustments
£m
£m
£m
Direct and indirect holdings of own AT1 Instruments
(7)
7 
- 
Direct and indirect holdings of the AT1 instruments of relevant entities where the institution does not have a significant investment in those entities (amount above the 10% threshold and net of eligible short positions) (negative amount)
(304)
193 
(111)
Mitigation of non-significant holdings in relevant entities
304 
(193)
111 
Residual amounts deducted from AT1 capital with regard to deduction from CET1 capital during the transitional period:
(6,797)
6,797 
- 
of which intangible assets
(6,066)
6,066 
- 
of which shortfall of provisions to expected losses
(731)
731 
- 
Total regulatory adjustments to Additional Tier 1 capital
(6,804)
6,804 
- 
Additional Tier 1 capital
940 
(736)
204 
Tier 1 capital (T1 = CET1 + AT1)
48,188 
(9,925)
38,263 
       
Tier 2 (T2) capital: instruments and provisions
      
Capital instruments and the related share premium accounts issued by Barclays Bank PLC
17,211 
2,464 
19,675 
Qualifying own funds instruments included in T2 capital (including minority interests) issued by subsidiaries and held by third parties
669 
(397)
272 
Amount of qualifying items subject to phase out from T2
(655)
655 
- 
Tier 2 capital before regulatory adjustments
17,225 
2,722 
19,947 
       
Tier 2 capital: regulatory adjustments
      
Direct and indirect holdings of own T2 instruments and subordinated loans
(58)
28 
(30)
Direct and indirect holdings of the T2 instruments and subordinated loans of relevant entities where the institution does not have a significant investment in those entities (amount above 10% threshold and net of eligible short positions) (negative amount)
(861)
(2,035)
(2,896)
Mitigation of non-significant holdings in relevant entities
861 
2,035 
2,896 
Direct and indirect holdings of T2 instruments where the institution has a significant investment in those entities (net of eligible short positions)
(1)
- 
(1)
Residual amounts deducted from T2 capital with regard to deduction from CET1 capital during the transitional period:
(731)
731 
- 
of which shortfall of provisions to expected losses
(731)
731 
- 
Amount to be deducted from T2 capital with regard to additional filters and deductions required pre CRR:
(869)
869 
- 
of which unrealised gains on available for sale equity
137 
(137)
- 
of which property revaluation reserve
19 
(19)
- 
of which connected lending of a capital nature
(261)
261 
- 
of which non material non qualifying holdings
(764)
764 
- 
Total regulatory adjustments to Tier 2 capital
(1,659)
1,628 
(31)
Tier 2 capital
15,566 
4,350 
19,916 
Total capital (TC = T1 + T2) 1
63,754 
(5,575)
58,179 
       
Capital instruments subject to phase-out arrangements
      
Current cap on CET1 instruments subject to phase out arrangements
- 
- 
- 
Amount excluded from CET1 due to cap
- 
- 
- 
Current cap on AT1 instruments subject to phase out arrangements
9,629 
(9,629)
- 
Amount excluded from AT1 due to cap
(1,926) 
1,926
- 
Current cap on T2 instruments subject to phase out arrangements
3,276 
(3,276)
- 
Amount excluded from T2 due to cap
(655)
655 
- 

 

Shareholder Information
 
 
Listing
 
The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. Trading on the New York Stock Exchange is in the form of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinary shares of 25p each and is evidenced by an ADR. The ADR depositary is JP Morgan Chase Bank, whose international telephone number is +1-651-453-2128, domestic telephone number is 1-800-990-1135 and address is JPMorgan Chase Bank, PO Box 64504, St. Paul, MN 55164-0504, USA.
 
 
Barclays PLC Scrip Dividend Programme
 
Shareholders may have their dividends reinvested in Barclays shares by joining the Barclays PLC Scrip Dividend Programme (the Programme).  At the Barclays 2013 Annual General Meeting, shareholders approved the introduction of the Programme to replace the Barclays Dividend Reinvestment Plan. The Programme will enable shareholders, if they wish, to receive new fully paid ordinary shares in Barclays PLC instead of a cash dividend, without incurring dealing costs or stamp duty.  The Programme will initially be offered for the second interim dividend, to be paid on 13 September 2013, and for any dividends paid thereafter (subject to the Directors making the Programme available for each dividend).
 
For further details, including the full Terms and Conditions and information about how to join or leave the Programme, please visit Barclays.com/dividends or alternatively contact: The Registrar to Barclays, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA United Kingdom, or by telephoning 0871 384 20554 from the UK or +44 121 415 7004 from overseas.




 

 
Shareholder Information
 



Results Timetable1 
Date
    
  
  

Ex-dividend date 
7 August 2013
  
Dividend Record date 
9 August 2013
  
Scrip reference share price set and made available to shareholders 
14 August 2013
  
  
Cut off time of 4.30 pm (London time) for the receipt of Mandate Forms or Revocation Forms (as applicable) 
22 August 2013
  
  
Dividend Payment date /first day of dealing in New Shares 
13 September 2013
  
Q3 2013 Interim Management Statement 
30 October 2013
  
  
      
  
  
For qualifying US and Canadian resident ADR holders, the second interim dividend of 1p per ordinary share becomes 4p per ADS (representing four shares). The ADR depositary will post the second interim dividend on 13 September 2013 to ADR holders on the record at close of business on 9 August 2013. 
  
      
  
  
  
Half Year
Half Year
Half Year
  
  
  
Ended
Ended
Ended
Change 
Change 
Exchange Rates2 
30.06.13
31.12.12
30.06.12
31.12.123 
30.06.123 
Period end - US$/£ 
1.52 
1.62 
1.57 
6% 
3% 
Average - US$/£ 
1.54 
1.60 
1.58 
3% 
2% 
Period end - €/£ 
1.17 
1.23 
1.24 
5% 
6% 
Average - €/£ 
1.18 
1.25 
1.22 
6% 
3% 
Period end - ZAR/£ 
15.11 
13.74 
12.83 
(10%) 
(18%) 
Average - ZAR/£ 
14.20 
13.58 
12.52 
(5%) 
(13%) 
  
      
  
  
Share Price Data 
    
30.06.13
31.12.12 
30.06.12 
Barclays PLC (p) 
    
278.45 
262.40  
162.85  
Absa Group Limited (ZAR) 
    
148.50 
164.00  
141.20  
  
      
  
  
For Further Information Please Contact 
      
  
  
  
      
  
  
Investor Relations 
Media Relations 
  

Charlie Rozes +44 (0) 20 7116 5752 
Giles Croot +44 (0) 20 7116 6132 
  
  
      
  
  
More information on Barclays can be found on our website: www.barclays.com 
  


 
Registered Office
 
1 Churchill Place, London, E14 5HP, United Kingdom. Tel: +44 (0) 20 7116 1000. Company number: 48839
 
 
Registrar
 
The Registrar to Barclays, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA United Kingdom.
 
 
Tel: 0871 384 20554 from the UK or +44 121 415 7004 from overseas.
 
 



 
1  
Note that these announcement dates are provisional and subject to change.  Any changes to the Scrip Dividend Programme dates will be made available at Barclays.com/dividends
2  
The average rates shown above are derived from daily spot rates during the year used to convert foreign currency transactions into Sterling for accounting    purposes.  
3  
The change is the impact to Sterling reported information.
4  
Calls cost 8p per minute plus network extras.  Lines open 8.30am to 5.30pm UK time, Monday to Friday excluding UK public holidays.
 


 
 
Index
 
Africa Retail and Business Banking
20
  
Liquidity pool
56
Accounting policies
97
  
Loans and advances to customers and banks
64
Administration and general expenses
100
  
Margins and balances
41
Balance sheet
13
  
Market risk
45
Balance sheet leverage
54
  
Net interest income
98
Barclaycard
22
  
Non-controlling interests
101
Capital ratios
46
  
Other reserves
120
Capital resources
47
  
Performance highlights
2
Cash flow statement
15
  
Principal risks
44
Competition and regulatory matters
126
  
Provisions
118
Contingent liabilities and commitments
120
  
Results by quarter
10
Corporate Banking
27
  
Results timetable
134
Country exposures (selected Eurozone)
85
  
Retail credit risk
69
Credit impairment charges and other credit provisions
66
  
Retail forbearance programmes
78
Credit risk
63
  
Retirement benefits
119
Credit risk loans
64
  
Returns and equity by business
37
Derivative financial instruments
102
  
Risk weighted assets
48
Dividends on ordinary shares
101
  
Share capital
120
Earnings per share
101
  
Share price data
134
Europe Retail and Business Banking
18
  
Staff costs
99
Exit Quadrant Business Units
40
  
Statement of profit or loss and other comprehensive income
12
Financial instruments held at fair value
103
  
Statement of changes in equity
14
Finance Director’s review
5
  
Taxation
100
Funding and liquidity
55
  
Tier 1 capital ratio
46
Head Office and Other Operations
32
  
Total assets
63
Income statement
11
  
UK Retail and Business Banking
16
Investment Bank
24
  
Wealth and Investment Management
30
Legal proceedings
122
  
Wholesale credit risk
80
         
         
         
         
 
The glossary of terms can be found on:
http://group.barclays.com/about-barclays/investor-relations#institutional-investors