Barclays PLC - Final Results - Part 1
16 Fevereiro 1999 - 5:31AM
UK Regulatory
RNS No 6724e
BARCLAYS PLC
16th February 1999
PART ONE
Barclays PLC
1998 Results Announcement
BARCLAYS PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR 1998
Page
Summary 1
Financial highlights 3
Annual review 4
Summary of results 6
Consolidated profit and loss account 7
Consolidated profit and loss account for the ongoing business 8
Consolidated balance sheet 9
Financial review 10
Additional information 38
Notes 39
Consolidated statement of changes in shareholders' funds 51
Statement of total recognised gains and losses 51
Summary consolidated cashflow statement 52
Other information 54
The information in this announcement, which was approved by the Board of
Directors on 15th February 1999, 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 22nd March 1999.
BARCLAYS PLC, 54 LOMBARD STREET, LONDON EC3P 3AH, TELEPHONE 0171 699 5000
16th February 1999
BARCLAYS PLC - SUMMARY
RESULTS FOR YEAR TO 31ST DECEMBER 1998
1998 1997
#m #m
Operating profit before provisions* 2,562 2,715
Provisions for bad and doubtful (492) (227)
debts
Provisions for contingent (76) (4)
liabilities and commitments**
Operating profit for the ongoing 1,994 2,484
business*
Former BZW businesses (33) (219)
Exceptional items (net) 1 (425)
Write-down of leases (40) (77)
Life-fund charge - (28)
Write-down of fixed asset (4) (19)
investments
Profit before tax 1,918 1,716
Tax charge (538) (542)
Profit attributable to shareholders 1,335 1,130
Earnings per share 88.4p 74.4p
Earnings per share for the ongoing 90.9p 109.1p
business*
Dividend per share 43.0p 37.0p
* Figures exclude the results of the former BZW businesses and are stated
prior to the impact of the Finance (No. 2) Act 1997 and the Finance Act
1998.
**The 1998 provision relates to the settlement of the Atlantic litigation.
(Further details are set out on page 38).
- Profit before tax increased by 12% to #1,918 million (1997: #1,716
million). Operating profit for the ongoing business was #1,994 million
(1997: #2,484 million).
- Post-tax return on average shareholders' funds improved to 17% (1997:
15%) and earnings per share rose 19% to 88.4p (1997: 74.4p).
- The dividend increased by 16% with a second interim dividend of 27.5p
(1997: 23.5p) making 43p per share for the year (1997: 37p).
- Retail Financial Services showed a strong increase in operating profits
of 18% to #1,519 million (1997: #1,287 million*). Total income improved by
8% reflecting, in particular, strong growth in the United Kingdom for
mortgages, consumer lending, retail savings, the insurance business and at
Barclaycard.
- Corporate Banking performed well with operating profits increasing 6%
to #972 million* (1997: #921 million*). Good growth in net interest income
and fees and commissions benefited from improved lending volumes, a rise in
deposit volumes and increased customer related foreign exchange income. The
business benefited from low levels of new and increased specific provisions
and continued releases and recoveries.
- Barclays Capital which sustained an operating loss of #265 million
(1997: operating profit #252 million), was severely impacted by the turmoil
in the global markets during the second half of the year. Dealing losses on
non-customer related proprietary trading (including Russia) were #205
million. There was also a provisions charge against exposure to Russian
counterparties of #130 million (with a further #23 million in Corporate
Banking). Within these poor results a number of core businesses achieved
record profits.
- Barclays Global Investors' profits were #52 million (1997: #51
million). Adjusting for disposals, underlying operating profit increased by
15%. Total assets under management grew to #370 billion at 31st December
1998 (31st December 1997: #308 billion).
- The contribution from Transition businesses (excluding former BZW
businesses) fell to #48 million (1997: #93 million) as the portfolio was
managed down. No significant releases and recoveries are likely in the
future.
- There was an increase of #128 million to #184 million in the deficit
from Other operations, over half of which resulted from increased interest
allocations to businesses, reflecting higher short-term interest rates and
increased levels of regulatory capital employed.
- Costs for the Group's ongoing business increased by 5% in part
reflecting increased spending in respect of euro preparations and Year 2000
compliance.
- Total provisions for bad and doubtful debts excluding exposure to
Russia rose to #339 million from #227 million, primarily because of lower
levels of releases and recoveries. Risk Tendency, the Group's estimated
levels of annualised future credit losses averaged across the cycle,
increased from #670 million to around #700 million reflecting volume growth
particularly in consumer and corporate lending. This was partly offset by
improved quality in the overall portfolio.
- Shareholders' funds were #7.9 billion at 31st December 1998 (31st
December 1997: #7.6 billion) and the tier 1 ratio 7.4% (1997: 7.3%). The
Group estimates it needs shareholders' funds of #6.6 billion to #7.0 billion
to support its current business and to allow for future growth.
- The Group returned #500 million of capital to shareholders through
share buy-backs during the year. Current expectations are to buy back
capital of around #500 million in 1999.
BARCLAYS PLC
FINANCIAL HIGHLIGHTS
1998 1997
RESULTS #m #m
Net interest income* 4,357 4,107
Non-interest income* 3,063 3,216
Operating income* 7,420 7,323
Operating expenses* (4,858) (4,608)
Operating profit before provisions* 2,562 2,715
Provisions for bad and doubtful (492) (227)
debts
Provisions for contingent (76) (4)
liabilities and commitments
Operating profit* 1,994 2,484
Former BZW businesses (33) (219)
Exceptional items 1 (425)
Write-down of leases (40) (77)
Life-fund charge - (28)
Write-down of fixed asset (4) (19)
investments
Profit before tax 1,918 1,716
Profit attributable to shareholders 1,335 1,130
Profit retained 689 567
*Figures exclude the results of the former BZW businesses and are stated
prior to the impact of the Finance (No. 2) Act 1997 and the Finance Act
1998.
BALANCE SHEET
Shareholders' funds 7,923 7,620
Loan capital 3,734 2,868
Total capital resources 11,971 10,873
Total assets 219,494 232,429
Weighted risk assets 109,781 108,327
PER ORDINARY SHARE p p
Earnings 88.4 74.4
Earnings for the ongoing business 90.9 109.1
Dividend 43.0 37.0
Net asset value 525 498
PERFORMANCE RATIO % %
Post-tax return on average 17.0 15.0
shareholders' funds
Post-tax return on average
shareholders' funds for the ongoing 17.4 21.8
business
RISK ASSET RATIO
Tier 1 7.4 7.3
Total 10.7 10.0
GROUP YIELDS, SPREADS & MARGINS % %
Gross yield 7.81 7.64
Interest spread 2.69 2.67
Interest margin 3.42 3.42
EXCHANGE RATES US$/# US$/#
Period end 1.66 1.65
Average 1.66 1.64
BARCLAYS PLC
ANNUAL REVIEW
Barclays profit for 1998 was #1,918 million. Earnings per share stood at
88.4p. Post-tax return on equity was 17%. This was achieved against a
background of a weakening economic climate in the United Kingdom and much of
the rest of the world as well as turbulent conditions in the international
credit markets. Barclays contribution to the settlement of the long
standing Atlantic litigation resulted in a charge of #76 million, which also
had a detrimental effect on the Group's results.
We have continued to reshape our business around the changing demands of our
customers. From April 1998 Barclays was organised into four business groups
- Retail Financial Services, Barclays Global Investors, Corporate Banking
and Barclays Capital. Our overseas operations - substantial businesses in
themselves - were incorporated into this framework. Each business has
international capability and presence. We are now organised so that we
reflect our customers' needs, offering the right service and right product
at the right time.
Retail Financial Services provides a broad range of services and products
through multiple delivery channels serving a substantial customer base.
Profit before tax grew strongly by 18% to #1,519 million. This reflected
good performances from UK mortgages, consumer lending and savings, and from
the insurance and stockbroking business. Barclaycard continues to trade
strongly in the intensely competitive cards market. Elsewhere there were
good contributions from Barclays Offshore Services, European Retail Banking
and Barclays Private Banking. The businesses in Africa and the Caribbean
performed well.
Corporate Banking had another good year and continued to build on its
strength in the UK medium and large corporate sectors where it held strong
market shares. The business is investing further, with particular emphasis
on payments and liquidity management, so that it can provide customers with
a European capability and international reach. The euro conversion
programme was extremely successful and we are now able to provide a wide
range of euro products. Profit before tax increased by 6% to #972 million
partly as a result of strong volume growth in both assets and liabilities.
It also benefited from low provisions reflecting high levels of releases and
recoveries, which are not expected to occur in 1999.
Corporate Banking and Barclays Capital are becoming more closely aligned in
the interests of our large corporate and institutional customers who are
becoming more sophisticated in the services they require and their attitude
to credit. This is a continuing strategic priority.
Barclays Capital recorded an operating loss of #265 million in 1998 compared
to an operating profit of #252 million in 1997. Its results were dominated
by two factors; the Russian government's default on its domestic debt
obligations in August and the ensuing effect on credit markets around the
world. Default by a major country on its domestic currency debt is a rare
event. That said, management took a number of actions. We have closed non-
client related proprietary trading activities, reduced emerging market and
corporate bond positions and managed down our financing exposure to hedge
funds without incurring any losses. Weighted risk assets and total assets
reduced by 18% and 23% respectively in the second half of the year.
Barclays Global Investors (BGI) is deepening its relationships with
institutional clients through the development of a broader, enhanced product
range. BGI continues to invest in building a leading global institutional
fund management business maintaining its position in the market as a world
leader. Operating profit improved slightly to #52 million (1997: #51
million). Adjusting for disposals, underlying profit rose by 15%. Total
assets under management grew by 20% to #370 billion during the year.
Costs grew by 5% for the ongoing business. Part of this increase is
associated with euro and Year 2000 preparations, on which we spent a total
of #160 million on the euro and Year 2000 (1997: #60 million). In 1999 and
thereafter, we expect to spend no more than #120 million.
We recognise the need to reduce costs, which have been the subject of
considerable attention for all of the businesses during the second half of
the year. We expect that in 1999 total underlying and investment costs will
be held at 1998 levels. The business transformation programme announced by
Barclaycard in September is one example of what we are seeking to achieve,
the effect of which should reduce its costs by 15% over the course of the
next three years.
Our capital position remains strong, with a tier 1 ratio of 7.4% and the
risk asset ratio at 10.7%. We continue to remain disciplined in the level
of capital we maintain in the business and estimate that we need
shareholders' funds of #6.6 billion to #7.0 billion for our current
portfolio of businesses, allowing for future growth potential. The total
dividend for the year is being increased by 16% to 43.0p. We continue to
maintain a progressive dividend policy and believe that cover of slightly
over two times remains appropriate over the economic cycle.
In 1998 we returned #500 million of capital to shareholders through share
buy-backs. Our current expectations are to buy-back capital of around #500
million in 1999.
The UK economy has entered a more difficult phase over the last six months.
In recent years we have enhanced our risk management techniques, improving
both the quality and spread of our retail and corporate lending portfolios.
In 1998 our strong growth in chosen lending sectors reflects increased
corporate merger and acquisition financing requirements, a switch to
traditional bank finance from debt capital raisings, increased market share
as a result of the work we have done to enhance our overall customer
relationship and a better confidence in our understanding of the risk. We
believe our businesses are well prepared to meet the more challenging
business climate.
We are delighted with the appointment of Michael O'Neill as Group Chief
Executive who will join us at the end of next month. He has a proven track
record and under his leadership the Group will benefit from his knowledge
and experience in the financial services industry.
We ended last year and began 1999 on a strong note. Neither the Russian
losses nor the management changes in November caused the Group to pause in
its forward momentum. All four divisions are currently performing strongly,
business quality is good and the Group is well capitalised. The April
reorganisation has been successfully implemented and the prospects for cost
reduction and revenue enhancement are good.
Andrew Buxton Sir Peter Middleton
Chairman Deputy Chairman and Chief Executive
MORE TO FOLLOW
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