Barclays

All sites | Careers | Contact Us | Accessibility

Barclays applied International Financial Reporting Standards (IFRS) with effect from 1st January 2004, with the exception of IAS 32, IAS 39 and IFRS 4, which were applied from 1st January 2005. The effect of applying IFRS is discussed further in the Basis of Preparation. At Group level, whilst individual line items may have been significantly affected, we believe the application of IAS 32, IAS 39 and IFRS 4 has not had a material impact on attributable profits or earnings per share but has significantly increased balance sheet footings. We have previously reported in detail on the line items which would be affected by IFRS and the outcomes have been consistent with our earlier expectations.

Our strong credit rating and disciplined approach to capital management remain sources of competitive advantage. Our capital management policies are designed to optimise the returns to shareholders whilst maintaining our rating. At the end of 2005, our tier 1 capital ratio was 7%.

Over the past two years we have consciously sought to address the extent to which we are carrying surplus capital and to use our resources more intensively. In 2004, we bought back approximately £700m in shares and we have changed the mix of our core capital in both 2004 and 2005 by introducing preference shares into the capital base. In 2005, we acquired Absa Group Limited without issuing ordinary equity, made a number of other smaller acquisitions and paid dividends of £1.6bn. Despite this we ended the year with a tier 1 ratio only marginally changed from the level post the impact of IFRS at the beginning of the year. This resulted from the strong cash flow generation of our business portfolio and the efficient management of the balance sheet through the use of the capital markets.

During 2006 we expect continued strong growth in capital investment in our businesses to support organic growth for our tier 1 capital ratio to move towards our target of 7.25% through the combination of the impact of retained earnings and continued efficient use of the capital markets.

We expect the UK economy to show reasonable growth in 2006, but the credit environment in the consumer sector is likely to remain challenging. Impairment charges in the UK small and medium business sector have been exceptionally low in the recent past and may trend towards more normal levels in 2006. The healthy global economy should provide a positive backdrop for all our businesses this year. We start 2006 with strong income momentum throughout Barclays and this positions us well for another year of good earnings growth.

Naguib Kheraj
Group Finance Director

• Economic profit is defined in the Chairman's statement.
• Total income net of insurance claims.
• Includes other credit provisions.
• Share of post-tax results of associates and joint ventures (together with profit on disposal of associates and joint ventures, where relevant).
• Profit before tax.
• Operating expenses compared to total income net of insurance claims.
• Absa has changed its financial year-end to 31st December to conform with Barclays, the comparable period comprises unaudited results for the nine months ended 31st December 2004.