# Barclays PLC Annual Review 2011 ## Cover Image As part of our Citizenship agenda, we focus on empowering young people with the necessary financial, entrepreneurial and life skills to achieve economic independence and security. Barclays supports Cycle into Work, an initiative developed and delivered by our social enterprise partner Bikeworks, which helps disadvantaged Londoners to learn key skills and find employment in the cycling industry. The community investment programme supports Bikeworks to work in partnership with homeless hostels and shelters in London to reach vulnerable young people, offering them bicycle building and maintenance courses. Employees also volunteer as mentors to help participants improve their confidence, communication skills and job prospects, as well as provide them with opportunities for team work and social interaction. Trainees access on-the-job training and professional qualifications in bike mechanics alongside tailored personal development support. Graduates of the programme are then supported to access employment opportunities with Barclays Cycle Hire and cycling retailers in London. [www.bikeworks.org.uk](http://www.bikeworks.org.uk) --- ## Important Information The term ‘Barclays PLC Group’ or the ‘Group’ means Barclays PLC together with its subsidiaries and the term ‘Barclays Bank PLC Group’ means Barclays Bank PLC together with its subsidiaries. ‘Barclays’ and ‘Group’ are terms which are used to refer to either of the preceding groups when the subject matter is identical. The term ‘Company’, ‘Parent Company’ or ‘Parent’ refers to Barclays PLC and the term ‘Bank’ refers to Barclays Bank PLC. In this report, the abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling respectively; the abbreviations ‘US$m’ and ‘US$bn’ represent millions and thousands of millions of US Dollars respectively and ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros respectively. Unless otherwise stated, the income statement analyses compare the 12 months to 31 December 2011 to the corresponding 12 months of 2010 and balance sheet comparisons, relate to the corresponding position at 31 December 2010. Unless otherwise stated, all disclosed figures relate to continuing operations. Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the glossary online at [www.barclays.com/annualreport](http://www.barclays.com/annualreport). A hard copy can be provided on request by contacting Barclays Investor Relations, Barclays PLC, 1 Churchill Place, London E14 5HP. Adjusted profit before tax and adjusted performance measures have been presented to provide a more consistent basis for comparing business performance between periods. Adjusted profit before tax is explained further on page 22 and defined in the online glossary at [www.barclays.com/annualreport](http://www.barclays.com/annualreport) ### Forward-looking statements This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition and performance. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as “may”, “will”, “seek”, “continue”, “aim”, “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe” or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group’s future financial position, income growth, assets, impairment charges, business strategy, capital ratios, leverage, payment of dividends, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditures and plans and objectives for future operations and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic, Eurozone and global economic and business conditions, the effects of continued volatility in credit markets, market related risks such as changes in interest rates and exchange rates, effects of changes in valuation of credit market exposures, changes in valuation of issued notes, the policies and actions of governmental and regulatory authorities (including requirements regarding capital and Group structures and the potential for one or more countries exiting the Euro), changes in legislation, the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of current and future litigation, the success of future acquisitions and other strategic transactions and the impact of competition – a number of such factors being beyond the Group’s control. As a result, the Group’s actual future results may differ materially from the plans, goals, and expectations set forth in the Group’s forward looking statements. Any forward-looking statements made herein are as at the date they are made. Except as required by the UK Financial Services Authority (FSA), the London Stock Exchange plc (LSE) or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly updates or revisions to forward-looking statements to reflect any change in Barclays expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has filed or may file with the LSE and/or the SEC. The Annual Report includes certain information required to be included in the joint Barclays PLC and Barclays Bank PLC Annual Report on Form 20-F for 2011. Form 20-F will contain as exhibits certificates pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, signed by the Chief Executive and the Group Finance Director. --- ## Strategic Report Index ### Your 2011 Barclays Annual Report We have changed the way we present and organise our reporting to help make it easier to understand. Within the strategic report you will find the following icon which indicates where you can obtain more detailed information. | Section | Description | Page | | :--- | :--- | :--- | | Barclays at a glance | An overview of the Group and its performance in 2011 | 02 | | Group Chairman’s statement | The Chairman presents a review of the year and the key events and impacts on our business | 04 | | Chief Executive’s review | The Chief Executive presents a summary of our performance and priorities looking forward | 06 | | Market and operating environment | The environment in which we operate and run our business influences the strategy we employ | 08 | | Our strategy and business model | What we do to increase shareholder returns and deliver on our strategy | 10 | | Board of Directors and Executive Committee | An overview of the Group’s leadership team | 12 | | Governance | How the Board and its committees support the delivery of strategic priorities | 14 | | Risk management | There are risks associated with running our business that both shape our strategy and require careful management | 16 | | Citizenship | How we use our resources and expertise to create long term value for all our stakeholders | 18 | | Key performance indicators | How we monitor and evaluate our performance against our strategy | 20 | | Finance Director’s review | Review of the financial performance of the Group in 2011 | 22 | | Summary financial statements | Summary of the audited financial statements of the Group | 24 | | Divisional review | The business heads give an overview of each of their businesses | 26 | | Summary remuneration report | Details how we reward performance within the Group and among our senior management | 30 | Shareholder capital and other information: Page 33 Shareholder information: Page 34 --- ## Barclays at a glance Barclays universal banking model continues to be a competitive strength. Revenues remained resilient overall, reflecting the strength of our customer franchise and the balanced mix of our business. We have intensified our cost discipline while selectively investing in growth areas that support our execution priorities. **Total income** £32,292m Total income up 3% on 2010. Adjusted income excluding own credit and debt buy-backs down 8% **Credit impairment** £3,802m Credit impairment improved 33% on 2010 **Profit before tax** £5,879m Profit before tax down 3%. Adjusted profit before tax down 2% and broadly balanced across the retail and investment banking businesses **Liquidity pool** £152bn Liquidity pool remained strong, in line with 2010 **Core Tier 1 ratio** 11.0% Core Tier 1 ratio strengthened from 10.8% at year end 2010 **Return on equity** 5.8% Return on average shareholders' equity down on prior year due to worse than predicted macro economic conditions. Adjusted return on average shareholders' equity 6.6% **Gross new lending to UK** £45.0bn Gross new lending to UK households and businesses of £45.0bn and Project Merlin lending targets exceeded by 13% **Institutional funding** $1 trillion Raised over $1trn of funding for institutions, including almost $400bn for governments and public sector entities **People supported** 2,000,000 Supported over 2 million people, primarily building their enterprise, employment and money management skills, including helping 3,500 people to find employment through a range of programmes ### Charts *Net tangible asset value per share:* 2009: 337p, 2010: 346p, 2011: 391p *Adjusted profit before tax:* 2009: £4,942m, 2010: £5,707m, 2011: £5,590m *Dividends per share:* 2009: 2.5p, 2010: 5.5p, 2011: 6.0p --- ## Why we report by segment and geography Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. ### Retail and Business Banking 1. **UK Retail and Business Banking – £4,656m**: A leading UK high street bank providing current account and savings products and Woolwich branded mortgages. Also provides unsecured loans and general insurance as well as banking and money transmission services to small and medium sized businesses. 2. **Europe Retail and Business Banking – £1,226m**: Provide retail services, including credit cards, in Spain, Italy, Portugal and France, as well as lending to small and medium sized businesses. 3. **Africa Retail and Business Banking – £3,767m**: Provides retail, corporate and credit card services across Africa and the Indian Ocean. 4. **Barclaycard – £4,095m**: An international payments business service provider to retail and business customers including credit cards and consumer lending. ### Corporate and Investment Banking 5. **Barclays Capital – £10,335m**: The investment banking division providing large corporate, government and institutional clients with solutions to meet their strategic advisory, financing and risk management needs. 6. **Barclays Corporate – £2,912m**: Provides integrated banking solutions to large corporates, financial institutions and multi-nationals in the UK and internationally. 7. **Barclays Wealth – £1,744m**: The wealth management division focusing on private and intermediary clients worldwide, providing international and private banking, fiduciary services and brokerage. 8. **Investment Management – £53m**: Manages the Group’s economic interest in BlackRock, Inc. *Head Office Functions and Other Operations* – (£334m): Comprise head office and central support functions and consolidation adjustments. This figure excludes own credit gain of £2,708m and gains on debt buy-backs of £1,130m. --- ## Group Chairman’s statement "Our performance in 2011 reflected the challenging economic environment in which we operated." Marcus Agius, Group Chairman ### Your Chairman’s view The Chairman’s primary role is to provide leadership to the Board, creating the conditions for overall Board effectiveness and ensuring that Barclays satisfies its legal and regulatory responsibilities. Here he takes the opportunity to provide his views on the performance of Barclays, the Board, and thoughts on current economic conditions. Market conditions in the second half of the year were particularly difficult as investor nervousness over global economic growth prospects grew and concerns about the fiscal deficit of certain Eurozone countries became acute. The Board is resolved to navigate the current difficult economic environment safely, ensuring that Barclays is positioned to continue to be profitable and successful in the future. We are also committed to acting as responsible corporate citizens. The Board and I are very conscious that returns to shareholders have been unacceptably low in recent years. The urgent priority is to improve Return on Equity. **Remuneration** Remuneration remains our policy that we only pay for performance, not failure. The difficult economic environment and the impact of regulation on investment banking lessened competition for talent in 2011, and performance related pay across the Group reduced significantly. **Citizenship** Barclays has always taken its role in society seriously. Citizenship is about contributing to growth in the real economy, the way we do business, and supporting our communities. Our community investment increased by 15% to £63m in 2011. **Board Changes** The only Board change during the year was the retirement of Sir Richard Broadbent as Deputy Chairman in September. --- ## Chief Executive’s review "When we’re at our best, we serve the real economy by doing our best for all our stakeholders: our customers and clients, the communities we serve, our people and our shareholders." Bob Diamond, Chief Executive 2011 was marked by a challenging market and economic environment. Our solid performance relative to global peers demonstrates the strength of our universal banking model. **Capital, Funding and Liquidity** Our capital position remains rock solid. Our Core Tier 1 ratio stands at 11% and we have a liquidity pool of £152bn. **Returns** Return on equity is the financial measure that correlates most closely with shareholder value. Our 13% return target was a vital factor in helping us make disciplined choices. While our returns today remain unsatisfactory, we have made progress. **Income growth** In UK Retail and Business Banking net operating income grew 11%, Barclaycard net income was up 21%, our African business net income grew 11% in local currencies, and Wealth Management had its third successive year of double digit income growth. **Citizenship** We exceeded our Project Merlin targets by 13% and delivered £44bn to UK business. We helped 108,000 businesses start up, and helped corporates and institutions raise $1 trillion of financing through the capital markets globally. **Looking forward to 2012** We enter 2012 in a stronger position. We recognise that to achieve our return target we need to improve profitability substantially, and we are determined to do that. --- ## Market and operating environment 2011 saw further clarity from regulators with implementation of the third Capital Requirements Directive and the final report from the Independent Commission on Banking. The year also saw difficult conditions due to the Eurozone crisis and a slowdown in economic growth. ### Market factors **Economic growth** The year saw downward revisions of global GDP forecasts, impacting Barclays income growth as customers and clients were more conservative. **Eurozone crisis and funding** Funding requirements of certain Eurozone governments caused market dislocations. **Regulatory factors** * **Basel and the Capital Requirements Directive (CRD):** Regulations (CRD3) implemented on 31 December 2011. * **Independent Commission on Banking (ICB):** Submitted in September 2011; government white paper expected in 2012. * **Dodd-Frank Act (DFA):** Enacted in the US in July 2010; impact remains unclear. --- ## Understanding Business Conditions ### Regulatory timeline * **2011:** Basel 2.5 (CRD3) implemented on 31 December * **H1 2012:** UK Government to publish White Paper on banking reform * **Q1 2013:** Implementation of RWA calculations under Basel 3 (CRD4) * **H1 2013:** Financial Services Act to be implemented * **2013 – 2015:** Expected enactment of UK Government White Paper * **2014 – 2018:** Phasing in of capital deductions under Basel 3 * **2019:** Implementation of UK Government White Paper * **2022:** Full compliance with US Dodd-Frank Act --- ## Our strategy and business model Barclays moves, lends, invests and protects money for customers and clients worldwide. **Our purpose:** To help individuals, institutions and economies progress and grow. **Our vision:** One of the premier globally integrated universal banks providing superior benefits to each of our stakeholders (customers, shareholders, colleagues, and communities). **Our execution:** 1. **Operational Excellence:** Deliver cost effective, high quality solutions. 2. **Risk Management:** Increase resilience by matching, balancing, and diversifying income and funding. 3. **Financial Discipline:** Allocate capital efficiently to maximise returns. --- ## Implementing our strategy Our focus is on execution and delivering our promises in four key areas: 1. **Capital, Funding and Liquidity:** Rock solid capital positions allow us to meet future requirements. 2. **Returns:** Improve return on equity to ultimately increase shareholder returns. 3. **Income Growth:** Generate income growth across major businesses. 4. **Citizenship:** Contributing to growth in the real economy and supporting our communities. --- ## Board of Directors The non-executive Directors are independent of management. Their role is to advise and constructively challenge management and monitor the success of management in delivering the agreed strategy within the risk appetite and control framework set by the Board. * **Marcus Agius (65):** Group Chairman * **Bob Diamond (60):** Chief Executive * **David Booth (57):** Non-executive Director, Chairman of the Board Risk Committee * **Alison Carnwath (59):** Non-executive Director, Chairman of the Board Remuneration Committee * **Fulvio Conti (64):** Non-executive Director * **Simon Fraser (52):** Non-executive Director * **Reuben Jeffery III (58):** Non-executive Director * **Sir Andrew Likierman (68):** Non-executive Director * **Chris Lucas (51):** Group Finance Director * **Dambisa Moyo (43):** Non-executive Director * **Sir Michael Rake (64):** Senior Independent Director, Chairman of the Board Audit Committee * **Sir John Sunderland (66):** Non-executive Director --- ## Governance ### Board Committee oversight * **Board Corporate Governance and Nominations Committee:** Group Chairman and four independent non-executive Directors. * **Board Audit Committee:** Five independent non-executive Directors. * **Board Risk Committee:** Five independent non-executive Directors. * **Board Remuneration Committee:** Three independent non-executive Directors and the Group Chairman. * **Board Citizenship Committee:** Group Chairman and two independent non-executive Directors. --- ## Risk management Banking involves risks that must be understood and managed to successfully deliver sustainable returns and play our key role in supporting wider economic growth. ### Four Principal Risks 1. **Credit risk:** Financial loss if customers, clients or market counterparties fail to fulfil contractual obligations. 2. **Market risk:** Financial loss due to being unable to hedge the balance sheet at prevailing market levels. 3. **Funding risk:** Includes Liquidity risk (unable to meet obligations as they fall due), Capital risk (unable to maintain appropriate capital ratios), and Structural risk (impact on balance sheet from changes in interest rates or foreign exchange rates). 4. **Operational risk:** Risk of direct or indirect impacts from human factors, failed internal processes/systems, or external events. --- ## Citizenship At Barclays, we have a clear sense of our business purpose: to help individuals, businesses and economies progress and grow. ### Our Citizenship strategy * **Contributing to growth:** We are committed to increasing lending to businesses and have exceeded our Project Merlin targets. * **The way we do business:** We seek to reinforce our integrity every day. * **Supporting our communities:** Our role goes far beyond what we deliver through our core business activities; in 2011 we invested £63.5m in community programmes. --- ## Key performance indicators ### Capital * **Core Tier 1 ratio:** 2009: 10.0%, 2010: 10.8%, 2011: 11.0% ### Returns * **Return on equity:** 2009: 6.7%, 2010: 7.2%, 2011: 5.8% ### Income growth * **Total income:** 2009: £29,123m, 2010: £31,440m, 2011: £32,292m ### Citizenship * **Gross new lending to UK households and businesses:** 2009: £35.0bn, 2010: £43.5bn, 2011: £45.0bn --- ## Finance Director’s review We have delivered resilient profits in 2011 despite the difficult trading environment in the second half of the year. Our capital, funding and liquidity positions remained strong throughout 2011. **Income Statement** Adjusted profit before tax was £5.6bn. Statutory profits were £5.9bn. Credit impairment charges decreased 33% to £3,802m. **Balance Sheet** Net tangible asset value per share increased 13% to 391p. --- ## Summary consolidated income statement For the year ended 31 December 2011 | Continuing operations | 2011 (£m) | 2010 (£m) | | :--- | :--- | :--- | | Total income | 33,033 | 32,204 | | Total income net of insurance claims | 32,292 | 31,440 | | Credit impairment charges and other provisions | (3,802) | (5,672) | | Impairment of investment in BlackRock, Inc. | (1,800) | – | | Net operating income | 26,690 | 25,768 | | Operating expenses | (20,777) | (19,971) | | Profit before tax | 5,879 | 6,065 | | Profit after tax | 3,951 | 4,549 | --- ## Summary consolidated balance sheet As at 31 December 2011 | Assets | 2011 (£m) | 2010 (£m) | | :--- | :--- | :--- | | Total assets | 1,563,527 | 1,489,645 | | Total liabilities | 1,498,331 | 1,427,383 | | Total shareholders’ equity | 65,196 | 62,262 | | Total liabilities and shareholders’ equity | 1,563,527 | 1,489,645 | --- ## Divisional review: Retail and Business Banking Retail and Business Banking (RBB) has performed strongly in 2011 with two businesses, UK RBB and Barclaycard, delivering returns well above our 2013 goal. Adjusted profit before tax in Retail and Business Banking increased 48% in 2011. --- ## Divisional review: Corporate and Investment Banking Against a backdrop of challenging economic and market conditions, results for Barclays Capital were resilient compared with the industry, and the business held or gained market share. The substantial improvements for Barclays Corporate turned an adjusted loss of £388m in 2010 into an adjusted profit of £126m in 2011. --- ## Divisional review: Barclays Wealth In 2011, Barclays Wealth demonstrated its third successive year of double digit income growth, with 12% growth to £1.7bn and 27% growth in profit before tax to £207m. --- ## Summary Remuneration Report In 2011, total incentive awards were down 26% across the Group compared with a 3% reduction in profit. Bonuses for our executive Directors and our eight highest paid senior executive officers were down 48% versus 2010 on a “like-for-like” basis. ### Executive Directors’ total remuneration | | 2011 (£000) | 2010 (£000) | | :--- | :--- | :--- | | **Bob Diamond** | | | | Total of salary and bonus | 4,050 | 6,750 | | Total remuneration | 6,300 | 9,000 | | **Chris Lucas** | | | | Total of salary and bonus | 2,600 | 2,563 | | Total remuneration | 3,933 | 3,896 | --- ## Share capital and other information As at 31 December 2011, the Company’s issued ordinary share capital totalled 12,199,474,154. **Substantial shareholders:** * BlackRock, Inc. 7.06% * Qatar Holding LLC 8.41% * Nexus Capital Investing Ltd 6.98% * Legal & General Group Plc 3.99% --- ## Shareholder information * **Barclays Shareholder Helpline (UK):** 0871 384 2055 * **Barclays Shareholder Helpline (outside UK):** +44 121 415 7004 * **Email:** [questions@share-registers.co.uk](mailto:questions@share-registers.co.uk) * **Share price info:** [www.barclays.com/investorrelations](http://www.barclays.com/investorrelations)