Financial review

	Potential credit risk lendings The US Securities and Exchange Commission (SEC) requires potential credit risk lendings to be analysed by categories which reflect US lending and accounting practices. These differ to some extent from those employed in the UK. In particular:
	US banks may write off problem lendings more quickly than is the practice in the UK. As a result, Barclays may report a somewhat higher level of lendings than if it had followed such US practice and also a higher level of potential credit risk lendings.
	US banks typically stop accruing interest when loans are overdue by 90 days or more, or when recovery is doubtful. In accordance with the UK Statement of Recommended Practice on Advances, Barclays continues to charge interest to a doubtful customer’s account for collection purposes, but the interest is suspended and excluded from interest income in the profit and loss account. This addition of interest continues until such time as its recovery is considered to be unlikely. While such practice does not affect net income in comparison with that followed in the United States, it again has the effect of increasing the reported level of potential credit risk lendings. The amount of this difference at 31st December 2000 was £93m (1999 £80m).
	The table which follows presents an analysis of potential credit risk lendings in accordance with the SEC guidelines. Additional categories of disclosure are included, however, to record lendings where interest continues to be accrued and where either interest is being suspended or specific provisions have been raised. Normal US banking practice would be to place such lendings on non-accrual status. The amounts, the geographical presentation of which is based on the location of the office recording the transaction, are stated before deduction of the value of security held, the specific provisions carried or interest suspended.

	Non-performing lendings
		2000 £m	1999 £m	1998 £m	1997 £m	1996 £m
	Non-accrual lendings: UK	1,223	1,007	985	911	1,084
	Foreign – credit risk	316	244	282	309	455
	Accruing lendings where interest is being suspended: UK	351	326	266	234	358
	Foreign – credit risk	145	110	118	153	170
	Other accruing lendings against which provisions have been made: UK	873	423	457	408	492
	Foreign – credit risk	149	130	134	117	232
	Sub totals: UK	2,447	1,756	1,708	1,553	1,934
	Foreign – credit risk	610	484	534	579	857
	Accruing lendings 90 days overdue, against which no provisions have been made: UK	296	343	309	388	473
	Foreign – credit risk	18	18	19	14	20
	Reduced rate lendings: UK	6	6	7	37	38
	Foreign – credit risk	-	2	-	-	-
	Total non-performing lendings: UK	2,749	2,105	2,024	1,978	2,445
	Foreign – credit risk	628	504	553	593	877
		3,377	2,609	2,577	2,571	3,322
	The increase in UK non-performing lending primarily relates to the inclusion of The Woolwich (£592m). The residual increase largely arose in Barclaycard and Barclays Capital.
	Potential problem lendings In addition to the data above, lendings which are current as to payment of principal and interest, but where there exists serious doubt as to the ability of the borrower to comply with repayment terms in the near future (potential problem lendings), were as follows:
		2000 £m	1999 £m	1998 £m	1997 £m	1996 £m
	UK	0.7	0.6	0.6	0.6	0.9
	Foreign	0.4	0.1	0.1	0.1	0.1
		1.1	0.7	0.7	0.7	1.0
		%	%	%	%	%
	Total provision coverage of: credit risk non-performing lendings	70.7	76.4	75.2	71.8	65.6
	total potential credit risk lendings	53.3	60.0	59.4	56.3	50.4
	The increase in foreign potential problems lendings reflect exposures held by both Barclays Capital and Corporate Banking. The high level of security held against the exposures included following the acquisition of The Woolwich reduces the level of provisions required and consequently this reduces the Group’s coverage ratios. Excluding balances and provisions relating to The Woolwich, the coverage would be 81.2% and 58.1% respectively.

	Interest forgone on non-performing lendings
		2000 £m	1999 £m	1998 £m
	Interest income that would have been recognised under original contractual terms	246	165	182
	Interest income included in profit	(48)	(45)	(63)
	Interest forgone	198	120	119