Business description

Introduction Barclays is a UK-based financial services group engaged primarily in banking, investment banking and asset management. In terms of assets employed, Barclays is one of the largest financial services groups in the UK. The Group also operates in many other countries around the world and is a leading provider of co-ordinated global services to multinational corporations and financial institutions in the world’s main financial centres. The results for Barclays for 2000 are reported separately for the following activities: Retail Financial Services, Barclaycard, Corporate Banking, Barclays Capital, Barclays Global Investors, Other operations and Head office functions. The results for Retail Financial Services and Corporate Banking are reported after allocating the costs of shared support functions, the UK branch network and other common infrastructure. The results for Retail Financial Services include those of The Woolwich following its acquisition on 25th October 2000 and excludes Barclaycard which is now presented separately. Retail Financial Services Retail Financial Services (RFS) brings together the Group’s retail interests around the world. The business has three principal strategic aims: To become the customers’ first choice as the provider of innovative and dependable financial solutions. To become a market leader for affluent and wealthy customers in the UK and continental Europe by building on the Group’s strong customer base. To use The Woolwich’s proven capabilities in the mortgage and savings markets in order to boost the Group’s competitive position. The position of RFS has been greatly strengthened by the acquisition of The Woolwich. In addition, the recently announced strategic alliance with Legal & General will enable RFS to provide one stop provision of ‘best of breed’ products across the full range of distribution channels for the benefit of customers. RFS is organised into three major business groupings, Retail Customers, The Woolwich and Wealth Management. Retail Customers Retail customers provides a wide range of services and products to personal and small business customers throughout the UK and to personal and corporate customers in parts of Africa. These services are provided through a network of branches and ATMs and through direct channels such as the telephone and the internet. At the heart of Retail Customers are the core relationship banking products of current accounts and money transmission, savings and loans. These provide customers with the ability to manage their financial affairs on a day to day basis. Longer term and more complex needs are met from a full range of long term lending and investment products. The business aim is to be the customers’ first choice for dependable financial solutions in an environment of rapidly changing customer attitudes, demands and buying behaviours by: Increasing convenience and access to products and services. Ensuring the Bank’s products and services are appropriate and relevant to customers’ needs. Key to this success is the ongoing development and enhancement of new delivery channels, while continuing to invest significantly in the branch network. The result is the creation of a true multi-channel bank in the UK with more than 500,000 Open plan customers and almost 1.7m customers banking on-line with Barclays at the end of 2000. Barclays was the first UK bank to launch a free internet service. Barclaycall and Businesscall continue to provide 24-hour telephone access for 1.2m personal and small business customers. In UK Small Business, the launch of the joint venture with Freeserve (Clearlybusiness.com) to provide a small business portal in the UK for services, information and advice needed to start and run a successful small business, further strengthened Barclays position as the UK’s leading on-line bank by number of customers. It is through continued investment in customer information systems, and the wealth of customer data that these provide, that the creation and development of the right products and services are achieved. The Woolwich The Woolwich provides a wide range of personal financial services, primarily to individuals in the UK, combined with the provision of financial advice through one of the largest independent advisory companies in the country. The Woolwich’s emphasis has been on innovation and the application of technology to deliver customised solutions through its Open Plan proposition. Since its acquisition by Barclays, The Woolwich is the mortgage specialist within the Barclays Group. The Woolwich’s strategy has been to integrate the emerging distribution channels into its core business and to develop multi-product offerings. This has enhanced The Woolwich’s brand by delivering tangible benefits to customers and increasing the depth of their relationships with The Woolwich. Open Plan customers can view all their Woolwich relationships including mortgage, savings, investment and insurance on one statement and can deal with all the various products through any available channel. Key elements of The Woolwich strategy are: Expansion of the Open Plan customer base while maintaining multi-product holdings of at least 3 products per customer. Developing the mortgage franchise of the Barclays Group and expanding the UK market share of mortgage lending. Expansion of the Group’s Independent Financial Advice operation. Developing distribution capabilities and access to customers through strategic partnerships with like-minded organisations. The target of 500,000 customers for Open Plan by the end of 2000 was exceeded and the penetration rate of products per customer is significantly above the rest of The Woolwich and market average at three products per customer. An outright purchase of the Sedgwick Independent Financial Advisory business has considerably strengthened the Group’s overall IFA position. During the year The Woolwich further developed its service to customers. The first UK mobile banking service was launched to customers in April and this was further enhanced by the launch of digital television access in September. The Woolwich is still the only UK retail bank to enable customers to see balances, pay bills and transfer money between accounts at branches, via the telephone, via the internet, via WAP mobile phone and via digital television. As part of the enlarged Barclays Group, The Woolwich aims to extend its Open Plan offering to a wider customer base to the benefit of both customers and shareholders. Wealth Management Wealth Management serves affluent and high net worth clients globally with bespoke, relationship-based services in the areas of banking, asset management, broking and long-term financial planning. Wealth Management serves over 1 million clients across 34 countries worldwide and manages £74bn in client funds. The business has extensive geographical diversity with over a third of clients based outside the UK, mainly in France, Iberia and the Caribbean. Wealth Management aims to be recognised as the pre-eminent European Wealth player. This will be achieved by doing more business with its customers and growing assets under management. Clients will be offered a distinctive proposition with five main features: Single relationship across banking and investment. Professional and proactive financial planning advice. World class investment products at great value. A single picture of a client’s financial affairs. Seamless, multi-channel service. Last year saw the launch of a major transformation programme. Investment grew to £33m as this programme began to strengthen the customer propositions, including: The launch of a new programme to enable UK launch Premier relationship managers to offer “one stop” advice across banking and investment. By the year end, 70 managers were trained and successfully selling investment products. The commitment of a major investment to build a leading edge multi-channel distribution platform, which will offer clients seamless service across electronic and physical channels with real-time information update. The launch of innovative “direct” channel propositions which substantially increased internet usage. The number of registered internet users grew from 73,000 to 225,000 and the proportion of total stockbroking retail deals executed across the internet rose to 34% over the year. During the year a multi-currency internet service for offshore clients, an on-line portfolio nominee offering and a WAP broking service in the UK were launched. In 2001, the business transformation programme will continue and accelerate: 350 UK Premier relationship managers will be qualified and supported by a leading edge financial planning tool. The multi-channel platform will be implemented across the UK and offshore markets. Internet users are targeted to grow to 400,000, a 78% increase, as functionality is substantially upgraded. The funds supermarket, which was launched as a telephone based service in 1998, will be rolled out on-line. Two further initiatives are to be put in place to deliver the target customer proposition: World class investment products are to be launched with “best of breed” multi-funds from Legal & General and a move to independent advice in the UK. A single picture of a client’s financial affairs will be offered by leveraging our leading Stockbrokers nominee service and using new aggregation technologies. Barclaycard Barclaycard is the leading credit card business in Europe* and it offers a full range of credit card services to individual customers, together with card payment facilities to retailers and other businesses. Barclaycard is building on its position as the leading European consumer credit and payment business by continuing to expand in the UK, Germany, France, Spain and Greece, and delivering business opportunities in the internet arena. Continued strategic investment to enhance customer data management techniques has helped develop and tailor more sophisticated customer products and services. This has assisted the delivery of high levels of recruitment and increased lending growth. New initiatives included the balance consolidation offer with no fixed expiry, which was a first in the UK market. Barclaycard was the first UK credit card on the internet and offers a range of internet services including bill payment and on-line statement and transaction information. The number of registered users for this service has risen to 390,000. IndigoSquare, Barclaycard’s internet-based shopping portal joint venture, was launched in October and provides an easy to use on-line retail shopping facility. With the potential to become an important non-traditional revenue stream, IndigoSquare is targeted to have 500,000 users by the end of 2001. Barclaycard’s European operation continues to grow with increases in revenues, extended credit balances and cards issued. The international business is now web-enabled, providing a springboard for development and expansion in 2001. During 2001 Barclaycard expects to: Further develop the use of information management techniques to increase cross sales income in its core UK business. Leverage its status in continental Europe as a well recognised brand to enter attractive and emerging new markets. Seize the opportunities in e-commerce of internet card penetration, the preferred payment method on the web, by offering e-commerce solutions to business retailers and by leveraging the Barclaycard brand to enhance consumer confidence and increase card spend. Corporate Banking Corporate Banking provides relationship banking to the Group’s corporate customers. UK customers are served by a network of 1,200 relationship managers who provide access to an extensive range of products and services. Customers are also offered access to business centres in the rest of Europe, the United States and the Middle East. In addition an office in Miami provides finance and correspondent banking services to the Group’s customers in Latin America. Barclays Capital’s strong position in the wholesale market ensures that larger corporate customers have access to the capital markets and to specialist investment banking products which complement Corporate Banking’s product and service range. Corporate Banking has a strong competitive position in the UK, where almost a quarter of middle market companies bank with Barclays. Opportunities for growth exist within the UK, through customer acquisition and increased product penetration, and in the rest of Europe, where Corporate Banking’s presence exceeds that of its UK and many of its European competitors. In 2000, Corporate Banking completed the implementation of mobile working for its 1,200 corporate relationship managers in the UK. ‘Barclays in a briefcase’ provides managers with laptop computers enabling access to relevant customer data, communication facilities and credit assessment software. This means relationship managers can spend more time working with their customers, understanding their businesses and establishing a strong foundation for a long-term relationship. More than 40,000 customers are registered to use electronic banking, up 45% in 12 months, enabling customers to access their account information and make transactions electronically. Barclays B2B.com, the Barclays business-to-business electronic services portal was unveiled in April 2000. Customer recruitment commenced in October and by the year end, more than 2,000 businesses had registered to trade on-line. The portal aims to provide a range of internet-based business services designed to change the way UK businesses trade with one another and will over time provide a direct channel for the sale and delivery of a number of business services. In collaboration with Accenture and Oracle, Barclays B2B.com was created to enable the delivery of business services to companies primarily with a turnover of between £5m and £250m. Its initial offering, the Barclays B2B Exchange, enables buyers to benefit from lower processing costs and increased management information. The Business Banking strategic business unit was created in the second half of the year, bringing together the Bank’s small business and middle market banking businesses, making Barclays the only UK bank with a single division providing seamless banking support to companies from start-up to flotation; and delivering to businesses the full range of products and services which they require to grow and thrive. Serving the whole small and medium sized enterprise market from one division will allow all customers to benefit from the Bank’s relationship approach and technological investment providing a uniform “feel” across Business Banking. Product and service developments will provide customers with greater flexibility and convenience in their dealings with the Bank while maximising the value derived from customer relationships. During 2001 Corporate Banking intends to: Introduce a range of distinctive new value propositions that will provide better customer choice and strengthen relationships. Provide a comprehensive, integrated set of services to enable a company to undertake its day to day activities more efficiently and effectively. Barclays Capital Barclays Capital conducts the Group’s investment banking business. Barclays Capital operates in the wholesale markets to provide corporate, institutional and government clients with solutions to their financing and risk management needs. Barclays Capital is the Group’s principal point of access to the wholesale markets and provides financing and risk management products to the Group’s other businesses. Barclays Capital’s business model focuses on two broad areas of activity where the Group has a strong and growing competitive presence: Rates which includes sales, trading and research relating to government bonds, money markets, foreign exchange, commodities and their related derivative instruments; and Credit, which includes origination, sales, trading and research relating to loans, securitised assets, corporate bonds and their related derivative instruments, equity derivatives and private equity investment. During 2000 Barclays Capital continued to capture profitable growth opportunities, especially in continental Europe, where the capital markets are developing rapidly following the introduction of the euro. Significant progress was made in all of Barclays Capital’s core businesses during the year. It lead managed 225 bond issues (1999 156), with a total value of US$48bn (1999 US$36bn). This included transactions for a wide range of European, US and Asian issuers in all major issuing currencies. In the sterling bond market, Barclays Capital led a higher volume and a greater number of new issues than any other institution. Barclays Capital maintained its position as one of the leading UK government bond and sterling derivatives dealers. In the syndicated loans market, Barclays Capital arranged financings in excess of US$115bn (1999 US$59bn). It held its position as the top arranger of syndicated credits in Europe, Middle East and Africa and ended the year No.4 worldwide (1999 – No.6). International Financing Review (IFR) named Barclays Capital “European Loan Trading House of the Year” for the second year running. Barclays Capital is well positioned for rapid organic growth, as a result of its tailored investment programme in both technology and intellectual property, combined with the growing appetite for credit products amongst European investors and the increasing recognition of Europe amongst global borrowers as a deep and liquid international capital market. Barclays Capital will continue to implement its existing growth strategy based on a distinctive business model, offering a broad span of debt-focused financing and risk management services, combined with specialist niches in commodities and equities. During 2001 it will seek to: Build on its investment in technology and intellectual capital to further develop distribution capability and client penetration in Europe and worldwide. Leverage Group relationships with large corporate borrowers to bring a greater number of issuers to the international bond markets. Leverage institutional relationships through the delivery of a wider product range, including derivative products across all asset classes. Broaden the product offering in respect of advisory services linked to financing and risk management. Continue to improve capital efficiency and internal controls. Exploit cost-efficient technological opportunities through electronic delivery of integrated research and execution services to clients. Barclays Global Investors Barclays Global Investors (BGI) is the world’s largest institutional asset manager and has some of the most sophisticated investing institutions amongst its 1,800 clients. BGI offers advanced active and indexed asset management services for institutional clients. The objective of advanced active management is to outperform market benchmarks by the application of disciplined investment processes. The objective of indexed management is to replicate the performance of market benchmarks. In addition to these activities, BGI is a major lender of securities. BGI’s activities are carried out from eleven locations in eight countries. BGI continually invests in its business to ensure it maintains its strong competitive position in this market. Over twenty-five years ago BGI introduced the world’s first index fund. Today it manages funds on behalf of 1800 clients in over 36 countries and has £435bn of assets under management in index funds. BGI continues to build on its expertise as the world’s largest index fund manager to develop advanced active strategies, which use quantitative methods to outperform an index. Advanced active funds now account for approximately 21%, or £115bn, of assets under management, making BGI the largest quantitative active manager in the world. Almost 50% of BGI revenues now come from these value-added products. Exchange traded funds (ETFs) are index funds that are bought and sold like shares on a national exchange. In 2000 BGI introduced an ETF to the London market. In 2001 BGI expects to strengthen its leading position in one of the fastest growing sectors of the financial services industry. In order to do this it intends to: Develop new products with the intention of improving the performance of its existing active products and broadening its reach into market segments beyond that of the defined benefit market. Increase the profitability of index products by extending the range of its value chain. This will include expanded security lending activities, an improved cash management product set and improved cross selling to index clients. Develop products to meet the growing demand by individual investors for institutional quality products. This will also involve entering the individual investor channel through Exchange Traded Funds and Defined Contribution plan. Develop an increasing market share through investment in high growth areas such as Europe through leveraging the existing Barclays distribution network and third party partnerships. Other operations Property management includes Barclays Group Property Services which is responsible for the management of the Group’s operational premises and property related services. Property costs also include the central administration of certain operational property costs. Central services includes a variety of activities which support the operating businesses, and Service Provision which provides central information technology services. Management of Group capital is the earnings on that part of the Group’s capital which is not allocated to business groups. Allocations to business groups are based generally on weighted risk assets. Management of Group capital also includes residual balances arising from centrally managed transition activities. Head office functions Head office functions comprise the Group’s central executive, Group finance, corporate communications, human resources and Group risk. Competition The financial services environment remains competitive and the industry is experiencing structural change driven by technological change, development of new distribution channels and increasing customer sophistication as well as an increasing tendency to globalisation in some markets. New entrants to the market continue to appear confirming the competitive environment and low barriers to entry in the sector. The Group believes it is well positioned to respond to these developments and continues to develop its strategy to enable it to meet competitive challenges. Changes in reporting of Group structure in 2000 From 1st January 2000, Barclaycard became a separate business unit. Retail Financial Services now comprises Retail Customers, Wealth Management, and, from 25th October 2000, The Woolwich. Within Other operations, costs relating to the central administration of certain operational property costs have been combined with Barclays Group Property Services under the heading Property management. Comparative figures have been restated for the above changes, where appropriate. Changes in accounting presentation The Group’s share of the results of joint ventures and associated undertakings are shown separately below operating profit having previously been included in Other operating income. For the purposes of business group analysis the share of the results is still included in Operating profit. There have been no other changes in accounting presentation from that reflected in the 1999 Annual report. Recent developments On 16th January, 2001 Barclays PLC and Legal & General Group Plc (Legal & General) announced their intention to form a strategic alliance under which Barclays Bank PLC would, subject to regulatory approval, sell Legal & General branded life, pension (including stakeholder pension) and investment products through its UK distribution network. Group structure During 2000, significant changes were announced to the Group’s organisational structure, moving from five major business groups to an organisation based on a larger number of smaller strategic business units, or SBUs, which are supported by shared services. Each SBU is tasked with identifying and implementing value-maximising strategies, and achieving these by creating advantage for customers, through superior products and services. The Group’s reporting in 2001 will reflect this new structure.