RNS No 1031u
BARCLAYS PLC
17th February 1998
PART 1
BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 1997
Page
Summary 1
Financial highlights 3
Chief Executive's review 4
Summary of results 7
Consolidated profit and loss account 8
Consolidated balance sheet 9
Financial review 10
Additional information 33
Notes 35
Consolidated statement of changes in
shareholders' funds 44
Statement of total recognised gains and losses 44
Other information 45
The information in this announcement does not comprise statutory accounts
within the meaning of Section 240 of the Companies Act 1985. Statutory
accounts, which are combined with the Group's Annual report on Form 20-F to
the US Securities and Exchange Commission and which contain an unqualified
audit report, will be delivered to the Registrar of Companies in accordance
with Section 242 of the Companies Act 1985. The annual report will be
posted to shareholders on 25th March 1998.
BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 0171 699 5000
BARCLAYS PLC - SUMMARY
RESULTS FOR YEAR TO 31ST DECEMBER 1997
1997 1996
#m #m
Operating profit before 2,715 2,471
provisions*
Provisions for bad and 227 215
doubtful debts
Operating profit for the 2,484 2,247
ongoing business*
Former BZW businesses** (219) (11)
Exceptional items (425) 70
Write-down of leases (77) -
Life-fund charge (28) -
Write-down of fixed asset (19) -
investments
Profit before tax 1,716 2,306
Tax charge (542) (620)
Profit attributable to 1,130 1,639
shareholders
Earnings per share 74.4p 104.2p
Earnings per share for the 109.1p 100.2p
ongoing business
Dividend per share 37.0p 31.5p
* Figures are stated prior to the impact of the Finance (No. 2) Act 1997
("Finance Act") and excluding the operating loss of the former BZW
businesses.
** Former BZW businesses is made up of the equities, equity capital
markets and mergers and acquisition advisory businesses together with all
of the investment banking business in Australasia. Since October 1997
these businesses have either been sold or closed, or are subject to a sale
contract or are being restructured.
- Earnings per share for the ongoing business rose by 9% to 109.1 pence
and operating profit by 11% to #2,484 million.
- The post-tax return on average shareholders' funds for the ongoing
business remained high at 21.8% (1996: 22.1%).
- The dividend increased by 17% with a final dividend of 23.5p per share
(1996: 20p) making 37p per share for the year (1996: 31.5p).
BARCLAYS PLC - SUMMARY
- Within Personal Banking operating profit rose by 12% to #832 million*
(1996: #745 million) with improvements in both net interest income and fees
and commissions. Operating profit for Business Banking increased by 25% to
#974 million* (1996: #778 million) benefiting in particular from continued
high levels of releases and recoveries as well as lower levels of new and
increased provisions, reflecting both the current stage in the economic
cycle and improved asset quality and risk control procedures.
- There were increased contributions from Cross-border Services and the
Asset Management Group, where assets under management and advice grew to
#308 billion from #237 billion. Adjusting for the reduction in the
contribution from problem country debt management, operating profit for
International and Private Banking rose by 9% to #201 million (1996: #184
million). The successful managing down of transition portfolios in France
and the United States continued; Businesses in Transition produced an
operating profit of #99 million (1996: #75 million).
- Total provisions for bad and doubtful debts rose by 6% to #227 million.
Risk tendency fell to around #670 million (1996: around #700 million).
- The Group's total exposure to South Korea, Indonesia and Thailand was
#1.2 billion of which #10 million was non-performing. The Group raised an
additional #45 million of general provision in 1997 to cover country risk.
- In October 1997, Barclays announced a reorganisation of its investment
banking business. The Group has refocused its continuing investment banking
business and renamed it Barclays Capital. In 1997 Barclays Capital
increased operating profit by 23% to #248 million (1996: #201 million).
- The former BZW businesses reported a #219 million operating loss (1996:
operating loss of #11 million) as a result of uncertainty surrounding their
future and difficult market conditions. The bulk of the 1997 loss occurred
in the last quarter.
- Exceptional items included the #340 million loss on sale and
restructuring of BZW, plus associated goodwill written-off of #129 million.
It also included a #44 million profit on disposal of undertakings elsewhere
in the Group.
- UK profit sharing for eligible staff increased to #101 million (1996:
#96 million), equivalent to 9.5% (1996: 9%) of salary for eligible staff.
- At 31st December 1997 shareholders' funds stood at #7.6 billion (1996:
#7.3 billion) and the Tier 1 ratio at 7.3% (1996: 7.6%). As a result of
further progress made during 1997 in managing down the bad debt book, the
Group now estimates that it needs shareholders' funds of #6.4 billion to
#6.8 billion to support its current business.
- The Group intends to resume its programme of returning capital to
shareholders. In the absence of compelling alternative uses for the money,
it plans to return capital of around #500 million to shareholders in 1998.
A limiting factor in this decision has been the Group's advance corporation
tax capacity; the proposed abolition of this tax in April 1999 is likely to
allow more flexibility in the management of the capital base.
BARCLAYS PLC
FINANCIAL HIGHLIGHTS
1997 1996 Change
RESULTS #m #m %
Net interest income* 4,107 3,943 4
Non-interest income* 3,216 3,126 3
Operating income* 7,323 7,069 4
Operating expenses* (4,608) (4,598) 0
Operating profit before 2,715 2,471 10
provisions*
Provisions for bad and doubtful (227) (215) 6
debts
Operating profit for the ongoing 2,484 2,247 11
business*
Former BZW businesses (219) (11) -
Exceptional items (425) 70 -
Write-down of leases (77) - -
Life-fund charge (28) - -
Write down of fixed asset (19) - -
investments
Profit before tax 1,716 2,306 (26)
Profit attributable to 1,130 1,639 (31)
shareholders
Profit retained 567 1,160 (51)
*Figures are stated prior to the impact of the Finance Act and excluding
results of the former BZW businesses.
BALANCE SHEET
Shareholders' funds 7,620 7,267 5
Loan capital 2,868 3,031 (5)
Total capital resources 10,873 10,674 2
Total assets 234,657 186,002 26
Weighted risk assets 108,327 98,391 10
PER ORDINARY SHARE p p
Earnings 74.4 104.2 (29)
Earnings for the ongoing business 109.1 100.2 9
Dividend 37.0 31.5 17
Net asset value 498 472 6
PERFORMANCE RATIO % %
Post-tax return on average 15.0 22.8
shareholders' funds
Post-tax return on average
shareholders' funds for the 21.8 22.1
ongoing business
RISK ASSET RATIO
Tier 1 7.3 7.6
Total 10.0 10.4
GROUP YIELDS, SPREADS & MARGINS % %
Gross yield 7.64 7.43
Interest spread 2.67 2.64
Interest margin 3.42 3.33
BARCLAYS PLC
CHIEF EXECUTIVE'S REVIEW
1997 was a year of sound underlying progress for Barclays, with particularly
pleasing performances from Business Banking, Personal Banking and Barclays
Capital. Adjusting for the operating loss of the former BZW businesses and
other one-off items, operating profit rose by 11% to #2,484 million and
earnings per share by 9% to 109.1 pence. On the same basis, return on
equity remained high at 21.8%. The dividend is being increased by 17% to a
total of 37 pence.
For the most part, economic conditions - especially in the UK - remained as
favourable as in the last few years. Such conditions foster intensified
competition, a feature of all areas of our business in 1997. This
competition is increasingly international in nature. It is linked to some
extent to the planned introduction of the single European currency and is
likely to accelerate industry consolidation, both domestic and cross-border.
In addition, the economic problems of East Asia, coming at a time when the
UK business cycle has reached a fairly mature stage, suggest that conditions
may become a little more difficult in the next couple of years.
Against this background we continue to work on further product and service
improvements, while managing both costs and capital usage as vigorously as
ever. The pace and nature of competition, our commitment to offer customers
the best through improved service and innovation, and the need to ensure an
appropriate return to shareholders, have led us to make a number of changes
to the Group over recent months. Above all, we aim to concentrate rather
than dissipate resources.
In early autumn we concluded that our plans to create a full service
investment bank in BZW were unlikely to succeed, given the rapidly changing
economics of the industry and structural weaknesses particularly within our
equity business. We therefore took the decision to dispose of our equities,
equity capital markets and mergers and acquisition advisory businesses. We
agreed a series of sales, to CSFB of operations in Europe and parts of Asia,
and to ABN-Amro of the investment banking business in Australasia, around
the end of the year.
The disposal process was not easy - not least because the complexity of the
BZW infrastructure necessitated that we disentangle the business in the
public gaze - and the withdrawal was costly. We took a charge of #340
million in 1997 to cover these costs. Additionally, the trading performance
of those parts of BZW offered for sale - an operating loss of #219 million -
reflected the inevitable uncertainty surrounding those businesses following
the announcement of the sale. We are convinced that shareholders will be
better off as a result of our decision; it makes strategic and economic
sense, will remove a major distraction and will allow us to run the Group
more cohesively.
The majority of BZW's capital and profitability has been retained and
brought together as Barclays Capital, which comprises our fixed income,
foreign exchange, derivatives, debt-related structuring, lending and private
equity operations. With its strong positions in credit markets and its
improving franchise in government bonds, foreign exchange and derivatives,
Barclays Capital will not only be developed in its own right but will work
powerfully with other activities across the Group.
Considerable management effort over the last few years has been directed at
reshaping the Group's business to reflect customer requirements. In 1995 we
separated our biggest single business, UK Banking Services, into three
sectors: Personal Banking, Business Banking and Cross-border Services,
enabling us to focus on the very different needs and dynamics of each. We
also moved the asset management business out of the investment bank,
recognising the different pattern of the earnings streams.
BARCLAYS PLC
In 1998 we have begun to develop this thinking further, refining the
structure of the Group to reflect our customers' needs and the pace and
nature of competition. From April, businesses from around the Group that
serve the same markets will be brought together into four management
groupings, transcending national boundaries. Together with Barclays Capital
these businesses are retail financial services, corporate banking and
Barclays Global Investors.
We are creating a new retail financial services group bringing together all
our retail interests around the world. It will comprise Personal Banking
within the UK, the offshore personal element of Cross-border Services, our
continental European Retail Banking Group, private banking, our African and
Caribbean operations and the retail elements of the Asset Management Group.
Our UK small business activities, which share many characteristics with the
personal sector, will also be included. The retail financial services group
will be a very significant business, allowing us to address our customers'
needs in a much more co-ordinated way. In pro-forma terms it would have
accounted for 52% of the ongoing operating profit in 1997.
UK Business Banking, together with the business banking elements of Cross-
border Services and the Middle East and Latin American operations, will form
a corporate banking group with international reach and will work closely
with Barclays Capital to build wider access to capital markets for its
customers. In pro-forma terms the business would have accounted for 37% of
the ongoing operating profit in 1997.
Barclays Global Investors, our institutional asset management operation,
will continue to be run as a distinct business. At 31st December 1997 it
had #308 billion of assets under management and advice.
All of this change within the Group is underpinned by our relentless focus
on the management of costs and capital. In 1997 our net investment spend
taken to the profit and loss account or capitalised was #645 million. This
large figure reflects our determination to drive forward business
development: essential in an increasingly demanding competitive environment.
We are investing to ensure that our systems are Year 2000 compliant; this
spend is expected to be around #250 million in the period from 1st January
1997 to the end of 2000. We anticipate investment of around #150 million to
seek to ensure that from 1st January 1999 Barclays can provide a full range
of services and products in the Euro to UK business customers and the retail
customers of our continental European network. Most of this investment will
occur in 1998. The Group is absorbing these costs as part of its ongoing
investment spend.
The improvement in our risk management has contributed a great deal to the
performance of the Group over the last few years. Our measurement
techniques continue to improve as does the quality of our lending book. As
a result we estimate that the risk tendency - a prediction of the cyclically
adjusted average annual credit loss levels in future years - has fallen from
around #700 million to around #670 million.
We have taken a rigorous and conservative approach to the management of all
aspects of our lending business. In 1997, the Group's total exposure to
Korea, Indonesia and Thailand - the three countries in which IMF support
programmes are in place - was #1.2 billion of which only #10 million was non-
performing. The Group raised an additional #45 million of general provision
to cover country risk.
Rigour in the management of capital remains of fundamental importance to the
Group. As a result of further progress made during 1997 in managing down
our bad debt book, we now estimate that we need shareholders' funds of #6.4
billion to #6.8 billion, compared with a figure at 31st December 1997 of
#7.6 billion.
BARCLAYS PLC
We continued to buy back shares in 1997. As a result of the BZW sale
announcement and subsequent disposal process, however, it was not possible
for the Group to repurchase shares in the latter part of the year. We
therefore completed some #350 million of our planned #700 million
buy-back target for the year.
We intend to resume our programme of returning capital to shareholders. In
the absence of compelling alternative uses for the money, we plan to return
capital of around #500 million to shareholders in 1998. A limiting factor
in this decision has been the Group's advance corporation tax capacity; the
proposed abolition of the tax in April 1999 is likely to allow more
flexibility in the way we manage our capital base.
It is impossible to disregard the pace of change in the financial services
industry. 1997 proved that this change is both very real and very fast.
Our competitors in retail banking now include organisations which have very
different starting points in terms of their relationships with customers.
We are redefining our own relationships with customers through the progress
we have made, and continue to strive for, in improvements in customer choice
and service. We are building on our understanding and experience of
customers' often complex financial needs to provide a co-ordinated range of
products and services that is second to none. Trust, convenience and value
lie at the heart of our relationship with customers.
Our staff play a crucial part in delivering this. Their roles are
increasingly customer focused, requiring new skills and greater flexibility
in working methods. We have recognised this through the introduction of new
pay and personnel policies which seek to reward personal achievement and
enable all employees to be eligible for performance-related bonuses. Change
brings a degree of uncertainty for us all but it also brings greater
opportunities - opportunities we must and will seize in order to protect and
advance the progress we have made.
Martin Taylor
Chief Executive
BARCLAYS PLC
SUMMARY OF RESULTS
PROFIT BEFORE TAX 1997 1996
UK Banking Services #m #m
- Personal Banking - before impact 832 745
of Finance Act
- Business Banking - before impact 974 778
of Finance Act
- Cross-border Services 150 138
Barclays Capital 248 201
Asset Management Group 72 70
International and Private Banking 229 242
Businesses in Transition 99 75
Other operations (56) 65
Head office functions (52) (54)
Goodwill amortisation (12) (13)
2,484 2,247
Former BZW businesses (219) (11)
Exceptional items (425) 70
Write-down of leases (77) -
Life-fund charge (28) -
Write-down of fixed asset (19) -
investments
1,716 2,306
TOTAL ASSETS
UK Banking Services
- Personal Banking 28,940 27,838
- Business Banking 32,329 32,128
- Cross-border Services 3,600 2,787
Barclays Capital 134,814 90,651
Former BZW businesses 8,477 7,521
Asset Management Group 253 166
International and Private Banking 13,242 12,313
Businesses in Transition 637 1,868
Other operations and Head office 4,178 5,049
functions
Life fund assets attributable to 8,187 5,681
policyholders
234,657 186,002
WEIGHTED RISK ASSETS
UK Banking Services
- Personal Banking 19,723 18,291
- Business Banking 33,208 32,269
- Cross-border Services 2,925 2,109
Barclays Capital 35,084 28,898
Former BZW businesses 4,078 3,107
Asset Management Group 304 208
International and Private Banking 7,781 7,498
Businesses in Transition 659 1,427
Other operations* 4,565 4,584
108,327 98,391
* including supervisory
adjustments
BARCLAYS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
1997 1996
#m #m
Interest receivable 9,204 8,730
Interest payable (5,091) (4,821)
Write-down of leases (77) -
Profit on redemption/repurchase of 2 32
loan capital
Net interest income 4,038 3,941
Net fees and commissions 2,979 2,945
receivable
Dealing profits 374 414
Other operating income 228 248
Life-fund charge (28) -
Total non-interest income 3,553 3,607
Operating income 7,591 7,548
Administration expenses - staff (3,035) (2,980)
costs
Administration expenses - other (1,896) (1,807)
Depreciation and amortisation (269) (301)
Operating expenses (5,200) (5,088)
Operating profit before provisions 2,391 2,460
Provisions for bad and doubtful (227) (215)
debts
Provisions for contingent (4) (9)
liabilities and commitments
Operating profit 2,160 2,236
Exceptional items (425) 70
Write-down of fixed asset (19) -
investments
Profit on ordinary activities 1,716 2,306
before tax
Tax on profit on ordinary (542) (620)
activities
Profit on ordinary activities 1,174 1,686
after tax
Minority interests (equity and non- (44) (47)
equity)
Profit for the financial year
attributable to the members of 1,130 1,639
Barclays PLC
Dividends (563) (479)
Profit retained for the financial 567 1,160
year
Earnings per ordinary share 74.4p 104.2p
Earnings per ordinary share for 109.1p 100.2p
the ongoing business
Dividend per ordinary share:
Interim 13.5p 11.5p
Final (payable 5th May 1998) 23.5p 20.0p
BARCLAYS PLC
CONSOLIDATED BALANCE SHEET
1997 1996
Assets: #m #m
Cash and balances at central banks 750 729
Items in course of collection from 2,564 3,021
other banks
Treasury bills and other eligible 6,106 4,472
bills
Loans and advances to banks
- banking 21,729 16,125
- trading 15,155 12,898
36,884 29,023
Loans and advances to customers
- banking 74,111 72,977
- trading 25,712 16,441
99,823 89,418
Debt securities and equity shares 55,361 34,180
Interests in associated 57 86
undertakings
Intangible fixed assets - goodwill 191 222
Tangible fixed assets 2,016 2,092
Other assets 22,718 17,078
226,470 180,321
Life fund assets attributable to 8,187 5,681
policyholders
Total assets 234,657 186,002
Liabilities:
Deposits by banks
- banking 30,511 21,636
- trading 13,968 12,520
44,479 34,156
Customer accounts
- banking 89,647 83,421
- trading 18,791 13,143
108,438 96,564
Debt securities in issue 20,366 11,834
Items in course of collection due 1,676 1,596
to other banks
Other liabilities 40,638 25,497
Undated loan capital: convertible 304 292
to preference shares
Undated loan capital: 1,353 1,343
non-convertible
Dated loan capital: 1,211 1,396
non-convertible
Other subordinated liabilities: 59 56
non-convertible
218,524 172,734
Minority interests and
shareholders' funds:
Minority interests: equity 61 65
Minority interests: non-equity 265 255
Called up share capital 1,530 1,542
Reserves 6,090 5,725
Shareholders' funds: equity 7,620 7,267
7,946 7,587
226,470 180,321
Life fund liabilities to 8,187 5,681
policyholders
Total liabilities and 234,657 186,002
shareholders' funds
BARCLAYS PLC
FINANCIAL REVIEW
Results by nature of income and expense
Movements in the exchange rates used to translate the results of certain of
the Group's overseas businesses impact on the comparison of reported results
between 1997 and 1996. The main areas affected are International and
Private Banking, Asset Management Group, Barclays Capital and the former BZW
businesses. Adjusting for the impact of exchange rate translation
differences and the Finance Act, income and costs rose by approximately 5%
and 6% respectively in 1997. There is no significant impact on operating
profit.
Net interest income 1997 1996
#m #m
Interest receivable 9,204 8,730
Interest payable (5,091) (4,821)
Profit on redemption/repurchase 2 32
of loan capital
4,115 3,941
Write-down of leases (77) -
4,038 3,941
Net interest income rose by #204m or 5%, before one-off profits on
redemption/repurchase of loan capital and the write-down of leases following
the Finance Act. Adjusting for these, the loss of interest resulting from
share repurchases, the impact of exchange rate movements and business
disposals, underlying net interest income increased by 9%.
Personal Banking net interest income rose by 10%, reflecting growth in
consumer lending and mortgages as well as current accounts and other deposit
products. Margins were maintained in the personal sector, in part because
of changes in product mix. There was also strong growth in Business Banking
interest income mainly because of higher levels of deposits, which more than
compensated for a slight decline in overall lending margins.
Adjusted for exchange rate movements, net interest income in International
and Private Banking was some 6% higher than in 1996.
Overall banking business net margins rose slightly from 3.33% to 3.42%.
There was an improvement in the domestic margin, which rose by 0.15% to
4.48%, largely in the second half of the year. A narrowing in the gap
between the managed interest rate earned on Group capital and market rates
of interest led to a reduced contribution to the net margin from the central
management of Group interest rate exposure of approximately 0.11% (1996:
0.19%). This was compensated for by increases in the domestic benefit of
free funds and also a widening of the domestic spread. There was a
reduction in the international margin, particularly in the second half year,
reflecting changes in the currency mix and volumes.
Interest forgone on non-performing lendings at #147m was #20m lower than in
1996.
BARCLAYS PLC
Yields, spreads and margins - banking business
Domestic business is transacted by UK Banking Services, Barclays Capital and
the Group Treasury operation and is conducted primarily in sterling.
International business is transacted by Barclays Capital, mainly with
customers domiciled outside the United Kingdom, and by overseas branches and
subsidiaries. International business is conducted primarily in foreign
currencies and includes foreign currency loan capital.
The yields, spreads and margins shown below have been computed on this
basis, which generally reflects the domicile of the borrower. They exclude
profits and losses on the redemption/repurchase of loan capital and the one-
off write-down of leases.
1997 1996
% %
Gross yield (i)
Group 7.64 7.43
Domestic 8.36 7.97
International 6.24 6.50
Interest spread (ii)
Group 2.67 2.64
Domestic 3.41 3.29
International 1.24 1.57
Interest margin (iii)
Group 3.42 3.33
Domestic 4.48 4.33
International 1.34 1.61
Average UK base rate 6.57 5.96
Notes
(i) Gross yield is the interest rate earned on average interest earning
assets.
(ii) Interest spread is the difference between the interest rate earned on
average interest earning assets and the interest rate paid on average
interest bearing liabilities.
(iii) Interest margin is net interest income as a percentage of average
interest earning assets.
Average interest earning assets and liabilities - banking business
1997 1996
Average interest earning assets #m #m
Group 120,407 117,518
Domestic 79,697 74,254
International 40,710 43,264
Average interest bearing
liabilities
Group 102,408 100,728
Domestic 62,444 57,751
International 39,964 42,977
BARCLAYS PLC
Net fees and commissions 1997 1996
#m #m
Fees and commissions receivable 3,197 3,168
Less: fees and commissions payable (218) (223)
2,979 2,945
Fees and commissions includes #327m (1996: #341m) earned by former BZW
businesses.
Excluding the impact of exchange rate movements and the contribution from
former BZW businesses, fees and commissions grew by some 5%. Growth in
retail banking and asset management commissions in both the UK and overseas
compensated for lower levels of commission elsewhere. UK Banking Services
fees and commissions includes #71m (1996: #64m) in respect of foreign
exchange income on customer transactions with Barclays Capital.
Within Personal Banking, growth related to volume increases in current
accounts, credit card and consumer lending products. In Asset Management
Group, the European Retail Banking Group and Barclays Private Banking,
commission levels benefited from increased levels of assets under management
as a result of higher volumes of institutional and retail funds and market
performance in the year. In Business Banking there was a 3% reduction in
fees and commissions largely because of lower money transmission income and
lower income from loan default and account control fees. This was partially
offset by an increase in new business activity and growth in foreign
exchange related income.
Commissions in Barclays Capital were at similar levels to 1996 as was
mergers and acquisitions advisory income in the former BZW businesses.
Equities commissions were affected by the uncertainty surrounding the sale
announcement of certain BZW businesses in the last quarter of the year and
by lower volumes following the introduction of the London Order Driven
Market system.
Dealing profits 1997 1996
#m #m
Interest rate related 187 202
Foreign exchange and commodities 132 71
Equities and other 55 141
374 414
Excluding the contribution from former BZW businesses of #32m (1996: #126m),
dealing profits increased by 19% or #54m.
In Barclays Capital, dealing profits increased by 26%, primarily as a result
of a strong performance in foreign exchange, together with improved results
from derivatives and sterling fixed income. The emerging markets business
generated strong revenues and there was also a significant improvement in
the commodities business. The credit businesses were adversely affected in
the final quarter of the year by the widening of credit spreads as a result
of the impact of turbulence in the Asian markets.
Equities and other dealing profits were significantly lower than in 1996
largely because of a number of factors creating poor trading conditions
during the year. These were uncertainties in the UK market leading up to
the May 1997 general election and in anticipation of and following the
Budget proposals, resulting in some #30m of mark-to-market losses in equity
derivatives, the absence of certain products following the changes in the
tax treatment of trading dividends and an #8m reduction due to a change in
accounting treatment of dividend income. Additionally, in the second half
of the year, revenues were adversely affected by uncertainties surrounding
the sale announcement of certain BZW businesses.
BARCLAYS PLC
Other operating income 1997 1996
#m #m
Income from associated 16 23
undertakings
Dividend income from equity shares 20 20
Profits on disposal of investment 46 29
securities
Increase in shareholders' interest 47 61
in the long-term assurance fund
Property rentals 39 36
Other income 60 79
228 248
Life-fund charge (28) -
200 248
Income from associated undertakings declined as a result of reduced
contributions from Korea Merchant Banking Corporation and Malaysian
International Merchant Bank. The Group has also written down its investment
in these businesses (see Write-down of fixed asset investments on page 17).
The increased profit on the disposal of investment securities arose largely
from realisations by Private Equity in the ordinary course of business.
The contribution from the shareholders' interest in the long-term assurance
fund declined due to a further #25m provision for the cost of redress for
personal pension customers (non-priority cases). There was also a one-off
charge of #28m in 1997 arising from changes in economic assumptions relating
to the long-term assurance fund as a result of the Finance Act.
The higher level of Other income in 1996 was attributable to Camden Motors,
the motor trading business, which was sold in that year.
BARCLAYS PLC
Administrative expenses - staff 1997 1996
costs
#m #m
Salaries and accrued incentive 2,380 2,274
payments
Social security costs 200 214
Pension costs 65 80
Post-retirement health care 23 18
UK profit sharing 101 96
Other staff costs 266 298
3,035 2,980
Staff reduction and relocation 66 105
costs included above
Number of staff at period end:
UK Banking Services* 52,600 52,700
Barclays Capital and former BZW 7,400 7,300
businesses
Asset Management Group 3,600 3,400
International and Private Banking 15,800 17,700
Businesses in Transition 700 1,100
Other operations 2,700 2,600
Head office functions 400 400
Group total world wide 83,200 85,200
of which United Kingdom 61,100 60,800
*UK Banking Services figures exclude 1,000 Barclays Life advisers and field
sales managers (1996: 900) and 1,200 administrative staff (1996: 1,100)
whose costs are borne within the long-term assurance fund.
Staff costs
Adjusting for changes in exchange rates, staff costs rose by 5% in 1997,
largely because of increased salaries and accrued incentive payments in
Barclays Capital and former BZW businesses reflecting additional staff
retention costs arising from the sale announcement of certain BZW businesses
and also the full year's impact of staff recruitment in certain areas made
in 1996. Overall, staff costs in the former BZW businesses were some #60m
higher than in 1996.
In UK Banking Services, a further fall in average staff numbers and lower
staff reduction expenses (mainly reported in other costs) enabled the rise
in staff costs to be kept at 3% overall.
Staff reduction and relocation costs reported above do not include costs
reported within the exceptional loss on the sale or restructuring of BZW.
On this basis, these costs were #39m lower than in 1996, with reductions in
UK Banking Services and France in Transition being offset by higher costs in
Africa.
The decrease in pension contributions in 1997 mainly reflects reductions in
overseas schemes. Following an actuarial review of the surplus in the
Group's main UK scheme, contributions to that scheme will be reduced from
2.5% of pensionable salaries in 1997 to nil in 1998.
Staff numbers fell by 2,000 in 1997 mainly because of reductions in Africa,
the Caribbean and in Businesses in Transition. These were offset by new
jobs created in Asset Management Group in response to business growth and
investment. There was a small net fall in UK Banking Services numbers in
the year, where reductions from further centralisation of back office
support functions were partially offset by the creation of new customer
service roles.
BARCLAYS PLC
Administrative expenses - other 1997 1996
#m #m
Property and equipment expenses:
Hire of equipment 35 28
Property rentals 217 199
Other property and equipment 619 612
expenses
871 839
Stationery, postage and telephones 245 221
Advertising and market promotion 215 201
Travel, accommodation and 133 140
entertainment
Subscriptions and publications 37 34
Securities clearing and other 74 67
operational expenses
Sundry losses, provisions and 78 74
write-offs
Statutory and regulatory audit and 6 8
accountancy fees
Consultancy fees 103 80
Professional fees 99 96
Other expenses 35 47
1,896 1,807
The rise in administrative costs reflects increases in property and
equipment costs of #32m and in other costs of #57m, reflecting in part
increased business volumes and higher levels of IT and other project costs.
Property and equipment costs increased as a result of the one-off impact of
the investment bank's move to Canary Wharf in 1997.
Other property and equipment expenses includes a continuing high level of
expenditure on software and systems development in a wide range of customer
service and operational areas. Euro implementation and Year 2000
expenditure also contributed to the increase in costs.
The increase in other administrative costs arose largely within UK Banking
Services in the second half of the year and reflected increases in
advertising, customer communication and investment costs across a number of
areas.
Depreciation and amortisation 1997 1996
#m #m
Property depreciation 106 107
Equipment depreciation 170 175
Goodwill amortisation 12 13
Loss on sale of equipment 3 6
Write-back of surplus properties (22) -
269 301
Property depreciation includes a charge of #7m in respect of the local head
office in Paris which was sold during the year. The write-back of surplus
properties represents the recovery of amounts previously written off against
certain City of London properties which have now been sold. Other gains on
property disposals totalling #13m have been included in other operating
income.
MORE TO FOLLOW
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