TIDM96ES
RNS Number : 5634W
Barclays Bank PLC
02 August 2018
Barclays Bank PLC
Interim Results Announcement
30 June 2018
Table of Contents
Results Announcement Page
Notes 1
Financial Review 2-3
Risk Management
* Risk Management and Principal Risks 4
* Treasury and Capital Risk 5-6
* Credit Risk 7
* Market Risk 8
Statement of Directors' Responsibilities 9
Independent Review Report to Barclays Bank PLC 10
Condensed Consolidated Financial Statements 11-16
Financial Statement Notes 17-56
Other Information 57
BARCLAYS BANK PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED
KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 1026167.
Notes
The term Barclays Bank Group refers to Barclays Bank PLC
together with its subsidiaries. Unless otherwise stated, the income
statement analysis compares the six months ended 30 June 2018 to
the corresponding six months of 2017 and balance sheet analysis as
at 30 June 2018 with comparatives relating to 31 December 2017. The
abbreviations 'GBPm' and 'GBPbn' represent millions and thousands
of millions of Pounds Sterling respectively; the abbreviations '$m'
and '$bn' represent millions and thousands of millions of US
Dollars respectively; the abbreviations 'EURm' and 'EURbn'
represent millions and thousands of millions of Euros
respectively.
There are a number of key judgement areas, for example
impairment calculations, which are based on models and which are
subject to ongoing adjustment and modifications. Reported numbers
reflect best estimates and judgements at the date these interim
results were approved.
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 results
glossary that can be accessed at home.barclays/results.
The information in this announcement, which was approved by the
Board of Directors on 1 August 2018, does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2017, which
included certain information required for the Joint Annual Report
on Form 20-F of Barclays PLC and Barclays Bank PLC to the US
Securities and Exchange Commission (SEC) and which contained an
unqualified audit report under Section 495 of the Companies Act
2006 (which did not make any statements under Section 498 of the
Companies Act 2006) have been delivered to the Registrar of
Companies in accordance with Section 441 of the Companies Act
2006.
These results will be furnished as a Form 6-K to the SEC as soon
as practicable following their publication. Once furnished with the
SEC, copies of the Form 6-K will also be available from the
Barclays Investor Relations website at home.barclays/results and
from the SEC's website at www.sec.gov.
Barclays Bank Group is a frequent issuer in the debt capital
markets and regularly meets with investors via formal road-shows
and other ad hoc meetings. Consistent with its usual practice, the
Barclays Bank Group expects that from time to time over the coming
half year it will meet with investors globally to discuss these
results and other matters relating to the Barclays Bank Group.
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 the Barclays Bank Group. Barclays Bank
Group cautions readers that no forward-looking statement is a
guarantee of future performance and that actual results or other
financial condition or performance measures 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', 'projected', 'expect',
'estimate', 'intend', 'plan', 'goal', 'believe', 'achieve' or other
words of similar meaning. Examples of forward-looking statements
include, among others, statements or guidance regarding or relating
to the Barclays Bank Group's future financial position, income
growth, assets, impairment charges, provisions, business strategy,
capital, leverage and other regulatory ratios, projected levels of
growth in the banking and financial markets, projected costs or
savings, any commitments and targets, estimates of capital
expenditures, plans and objectives for future operations, IFRS 9
impacts 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. These may
be affected by changes in legislation, the development of standards
and interpretations under International Financial Reporting
Standards including the implementation of IFRS 9, evolving
practices with regard to the interpretation and application of
accounting and regulatory standards, the outcome of current and
future legal proceedings and regulatory investigations, future
levels of conduct provisions, the policies and actions of
governmental and regulatory authorities, geopolitical risks and the
impact of competition. In addition, factors including (but not
limited to) the following may have an effect: capital, leverage and
other regulatory rules applicable to past, current and future
periods; UK, US, Eurozone and global macroeconomic and business
conditions; the effects of any volatility in credit markets; market
related risks such as changes in interest rates and foreign
exchange rates; effects of changes in valuation of credit market
exposures; changes in valuation of issued securities; volatility in
capital markets; changes in credit ratings of any entities within
the Barclays Bank Group or any securities issued by such entities;
the potential for one or more countries exiting the Eurozone; the
implications of the exercise by the United Kingdom of Article 50 of
the Treaty of Lisbon and the disruption that may result in the UK
and globally from the withdrawal of the United Kingdom from the
European Union; and the success of future acquisitions, disposals
and other strategic transactions. A number of these influences and
factors are beyond the Barclays Bank Group's control. As a result,
the Barclays Bank Group's actual future results and capital and
leverage ratios may differ materially from the plans, goals,
expectations and guidance set forth in the Barclays Bank Group's
forward-looking statements. Additional risks and factors which may
impact the Barclays Bank Group's future financial condition and
performance are identified in our filings with the SEC (including,
without limitation, our Annual Report on Form 20-F for the fiscal
year ended 31 December 2017), which are available on the SEC's
website at www.sec.gov.
Subject to our obligations under the applicable laws and
regulations of the United Kingdom and the United States in relation
to disclosure and ongoing information, we undertake no obligation
to update publicly or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Financial Review
Barclays Bank Group results
for the half year ended 30.06.18 30.06.17
GBPm GBPm % Change
=================================================================== ======== ======== ========
Total income 7,253 7,301 (1)
Credit impairment charges and other provisions (156) (656) 76
=================================================================== ======== ======== ========
Net operating income 7,097 6,645 7
Operating expenses excluding litigation and conduct (4,757) (5,111) 7
Litigation and conduct (1,627) (48)
=================================================================== ======== ======== ========
Operating expenses (6,384) (5,159) (24)
Other net income 12 245 (95)
=================================================================== ======== ======== ========
Profit before tax 725 1,731 (58)
Tax charge (378) (430) 12
=================================================================== ======== ======== ========
Profit after tax in respect of continuing operations 347 1,301 (73)
Loss after tax in respect of discontinued operations(1) (47) (2,030) 98
Non-controlling interests in respect of continuing operations 1 (2)
Non-controlling interests in respect of discontinued operations(1) - (140)
Other equity instrument holders (310) (301) (3)
=================================================================== ======== ======== ========
Attributable loss (9) (1,172) 99
1 Barclays Bank PLC transferred its UK banking business on 1 April
2018 to Barclays Bank UK PLC. Results relating to the UK banking
business for the three months ended 31 March 2018 and for the six
months ended 30 June 2017 have been reported as a discontinued
operation. The comparative period also included results relating
to Barclays Africa Group Limited (BAGL) for the five months ended
31 May 2017.
Barclays Bank Group performance
Overview
Barclays Bank PLC consists of the Corporate and Investment Bank
(CIB), Consumer, Cards and Payments and Head Office. Following the
court approval of the ring-fencing transfer scheme in March 2018,
the UK banking business largely comprising Personal Banking,
Barclaycard Consumer UK and Business Banking was transferred to
Barclays Bank UK PLC on 1 April 2018, to meet the regulatory
ring-fencing requirement in accordance with the Financial Services
(Banking Reform) Act 2013 and related legislation.
Income statement
-- Profit before tax decreased 58% to GBP725m driven by a loss in
Head Office of GBP1,887m (H117: GBP222m) due to a settlement relating
to Residential Mortgage-Backed Securities (RMBS) with the US Department
of Justice (DoJ) and a 27% reduction in Consumer, Cards and Payments
to GBP677m. This was partially offset by a 16% increase in CIB
to GBP1,935m and the non-recurrence of losses associated with the
former Non-Core division, which was closed on 1 July 2017
-- The 10% depreciation of average USD against GBP adversely impacted
profits and income, and positively impacted credit impairment charges
and operating expenses
-- Total income decreased 1% to GBP7,253m
- CIB income remained broadly flat at GBP5,373m (H117: GBP5,384m)
as Markets income increased 9%, offset by a decrease in Banking
income of 5%
- Consumer, Cards and Payments income decreased 11% to GBP2,137m
driven by the non-recurrence of a GBP192m gain relating to an
asset sale in US cards and a GBP74m valuation gain on Barclays
Bank's preference shares in Visa Inc. in H117, partially offset
by continued underlying growth in US cards and a GBP53m gain
on sale of a US cards portfolio in H118
- Head Office income decreased to an expense of GBP257m (H117:
income of GBP46m) driven by hedge accounting, partially offset
by a one-off gain of GBP155m from the settlement of receivables
relating to the Lehman Brothers acquisition
-- Credit impairment charges decreased 76% to GBP156m including portfolio
adjustments as IFRS 9 continues to embed
- CIB credit impairment charges decreased to a release of GBP182m
(H117: charge of GBP50m) primarily due to single name recoveries
and updated macroeconomic forecasts
- Consumer, Cards and Payments credit impairment charges decreased
40% to GBP343m reflecting improved macroeconomic forecasts in
the US, the impact of repositioning of the US cards portfolio
towards a lower risk mix and repayment of certain US card balances
following higher than expected seasonality
-- Operating expenses increased 24% to GBP6,384m
- CIB operating expenses decreased 4% to GBP3,628m driven by the
reduction of restructuring and structural reform costs, and the
reduced impact of the change in compensation awards introduced
in Q416, partially offset by continued investment
- Consumer, Cards and Payments operating expenses increased 13%
to GBP1,134m including continued growth and investment, primarily
within the US cards and merchant acquiring businesses, and higher
litigation and conduct charges
- Head Office operating expenses increased to GBP1,622m (H117:
GBP101m) due to increased litigation and conduct costs, including
a settlement of GBP1.4bn relating to RMBS with the US DoJ
-- Other net income decreased to GBP12m (H117: GBP245m) due to the
non-recurrence of a gain of GBP109m on the sale of Barclays Bank's
share in VocaLink to MasterCard and a gain of GBP76m on the sale
of a joint venture in Japan in H117
-- Loss after tax in respect of discontinued operations of GBP47m
(H117: GBP2,030m) included the results for the three months ended
31 March 2018 relating to the UK banking business that was transferred
to Barclays Bank UK PLC. H117 included results relating to BAGL
and the UK banking business
-- The effective tax rate increased to 52.1% (H117: 24.8%) mainly
due to litigation and conduct costs which are non-deductible for
tax purposes. This was partially offset by the reduction in the
US federal corporate income tax rate under the US Tax Cuts and
Jobs Act and the beneficial impact of adjustments to prior periods
that have been recognised in H118
Balance sheet
-- Loans and advances at amortised cost decreased GBP189.8bn to GBP134.8bn
due to the disposal of the UK banking business to Barclays Bank
UK PLC and the impact of IFRS 9
-- Derivative financial instrument assets and liabilities decreased
GBP9.0bn to GBP229.0bn and GBP13.3bn to GBP225.1bn respectively,
due to an increase in major interest rate forward curves and the
adoption of daily settlement under the London Clearing House (LCH),
partially offset by increased foreign exchange derivative volumes
-- Financial assets at fair value through the income statement increased
GBP26.2bn to GBP142.4bn primarily due to the impact of IFRS 9 and
increased reverse repurchase agreements activity. This was partially
offset by the disposal of the UK banking business to Barclays Bank
UK PLC
-- Deposits at amortised cost decreased GBP205.2bn to GBP194.0bn,
primarily due to the disposal of the UK banking business to Barclays
Bank UK PLC and the impact of IFRS 9
Other matters
-- In H118 Barclays reached a settlement with the US DoJ to resolve
the civil complaint brought by the DoJ in December 2016 relating
to RMBS sold by Barclays between 2005 and 2007. Barclays paid a
civil monetary penalty of $2,000m (GBP1,420m) in H118
-- On 21 May 2018 Barclays announced that the Crown Court had dismissed
all of the charges that had been brought by the Serious Fraud Office
(SFO) against Barclays PLC and Barclays Bank PLC regarding matters
which arose in the context of Barclays' capital raisings in 2008.
On 23 July 2018 the SFO made an application to the High Court seeking
to reinstate against Barclays PLC and Barclays Bank PLC all of
the charges dismissed by the Crown Court. Barclays intends to defend
the application brought by the SFO
-- On 1 August 2018 Barclays Bank PLC transferred the equity ownership
of its subsidiary Barclays Africa Group Holdings Limited (BAGHL)
to Barclays PLC through a dividend in specie. Accordingly, BAGHL
ceased to be a subsidiary of Barclays Bank PLC and became a direct
subsidiary of the ultimate parent, Barclays PLC. The value of this
dividend, representing the historic cost of investment of Barclays
PLC in BAGHL and its subsidiaries, was GBP269m
Risk Management
Risk management and Principal Risks
The roles and responsibilities of the business groups, Risk and
Compliance, in the management of risk in Barclays Bank Group are
defined in the Barclays Group's Enterprise Risk Management
Framework. The purpose of the framework is to identify the
Principal Risks of the Barclays Group, the process by which the
Barclays Group sets its appetite for these risks in its business
activities, and the consequent limits which it places on related
risk taking. The Barclays Group framework identifies eight
Principal Risks: Credit risk; Market risk; Treasury and Capital
risk; Operational risk; Conduct risk; Reputation risk; Model risk;
and Legal risk. Further detail on these risks and how they are
managed is available in the Barclays Bank PLC Annual Report 2017
available at home.barclays/annualreport. There have been no
significant changes to these Principal Risks in the period nor are
any expected for the remaining six months of the financial
year.
The following section gives an overview of Treasury and Capital
risk, Credit risk and Market risk for the period.
Treasury and Capital Risk
Capital and leverage
Barclays Bank PLC is currently regulated by the Prudential
Regulation Authority (PRA) on a solo-consolidated basis. Barclays
Bank PLC solo-consolidated comprises Barclays Bank PLC plus certain
additional subsidiaries, subject to PRA approval. The disclosures
below provide key capital metrics for Barclays Bank PLC
solo-consolidated with further information on its risk profile
included in the Barclays PLC Pillar 3 Report H1 2018.
As at
Capital ratios(1,2,3) 30.06.18
============================ =========
Common equity tier 1 (CET1) 13.0%
Tier 1 (T1) 17.6%
Total regulatory capital 21.9%
Capital resources GBPbn
===================================== =====
CET1 capital 24.3
T1 capital 33.0
Total regulatory capital 41.0
Total risk weighted assets (RWAs)(1) 187.6
Capital Requirements Regulation (CRR) leverage ratio(1)
======================================================== ====
CRR leverage ratio 4.1%
T1 capital 33.0
CRR leverage exposure 808
1 Capital, RWAs and leverage are calculated applying the transitional
arrangements of the CRR. This includes IFRS 9 transitional arrangements
and the grandfathering of CRR non-compliant capital instruments.
2 The fully loaded CET1 ratio was 12.2%, with GBP22.4bn of CET1 capital
and GBP184.5bn of RWAs, calculated without applying the transitional
arrangements of the CRR.
3 The Barclays PLC CET1 ratio, as is relevant for assessing against
the conversion trigger in Barclays Bank PLC Tier 2 Contingent Capital
Notes, was 13.0%. For this calculation CET1 capital and RWAs are
calculated applying the transitional arrangements under the CRR,
including the IFRS 9 transitional arrangements. The benefit of
the Financial Services Authority (FSA) October 2012 interpretation
of the transitional provisions, relating to the implementation
of CRD IV, expired in December 2017.
Funding and liquidity
Barclays Bank Group has adopted the Barclays Group liquidity
risk management policies. The Barclays Bank PLC Board sets the
liquidity risk appetite (LRA) based on the internal liquidity risk
model and external regulatory requirements, namely the liquidity
coverage ratio (LCR). The Treasury and Capital risk function is
responsible for the management and governance of the liquidity risk
mandate defined by the Barclays Bank PLC Board and the production
of the internal liquidity adequacy assessment process (ILAAP).
Treasury has the primary responsibility for managing liquidity risk
within the set LRA.
For the purpose of liquidity management, Barclays Bank PLC and
its subsidiary Barclays Capital Securities Limited, a UK broker
dealer entity, are monitored on a combined basis by the PRA under a
Domestic Liquidity Sub-Group (Barclays Bank PLC DoLSub)
arrangement.
The liquidity risk stress tests assess the potential contractual
and contingent stress outflows under a range of scenarios, which
are then used to determine the size of the liquidity pool that is
immediately available to meet anticipated outflows if a stress
occurs. The scenarios include a 30 day Barclays specific stress
event, a 90 day market-wide stress event and a 30 day combined
scenario consisting of both a Barclays specific and market-wide
stress event. Barclays Bank Group maintains a range of management
actions for use in a liquidity stress, which are documented in the
Barclays Group recovery plan.
As at 30 June 2018, Barclays Bank PLC DoLSub held eligible
liquidity assets in excess of 100% of the net stress outflows to
their internal and regulatory requirements. The proportion of the
liquidity pool between cash and deposits with central banks,
government bonds and other eligible securities is broadly similar
to the Barclays Group. A significant portion of the liquidity pool
is located in Barclays Bank PLC. The residual portion of the
liquidity pool, which is predominantly in the US subsidiaries, is
held against entity-specific stress outflows and local regulatory
requirements.
As at
30.06.18
GBPbn
========================================================= ========
Barclays Bank Group liquidity pool 171
%
========================================================= ========
Barclays Bank PLC DoLSub CRD IV liquidity coverage ratio 145
Credit Risk
Barclays Bank PLC has adopted IFRS 9, Financial Instruments
effective from 1 January 2018 which has resulted in key changes to
the classification and measurement of financial assets, and the
quantification of impairment allowances based on expected credit
losses (ECLs).
The disclosure of the accounting policies, key concepts and
judgements used in the application of expected loss methodology is
included in Note 1, Basis of preparation on pages 17 to 22.
Disclosures relating to the initial application of IFRS 9 and the
impact of the transition from IAS 39, Financial Instruments:
Recognition and Measurement to IFRS 9 is included in Note 19,
Transition disclosures on pages 53 to 55. The information as at 31
December 2017 on an IAS 39 basis is not directly comparable and
hence not disclosed.
Loans and advances at amortised cost by product
The table below presents a breakdown of loans and advances at
amortised cost and the impairment allowance with stage allocation
by asset classification.
Stage 2
===============================
<=30 >30
days days
Stage Not past past past Stage
As at 30.06.18(1) 1 due due due Total 3 Total(1)
Gross exposure GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ======= ======== ===== ====== ====== ===== ========
Home loans 11,407 767 96 185 1,048 1,212 13,667
Credit cards, unsecured loans
and other retail lending 24,334 6,661 447 386 7,494 1,860 33,688
Corporate loans 81,261 8,104 392 566 9,062 1,087 91,410
============================== ======= ======== ===== ====== ====== ===== ========
Total 117,002 15,532 935 1,137 17,604 4,159 138,765
Impairment allowance
============================== ======= ======== ===== ====== ====== ===== ========
Home loans 38 34 13 10 57 290 385
Credit cards, unsecured loans
and other retail lending 271 898 126 154 1,178 1,306 2,755
Corporate loans 90 238 10 12 260 455 805
============================== ======= ======== ===== ====== ====== ===== ========
Total 399 1,170 149 176 1,495 2,051 3,945
Net exposure
============================== ======= ======== ===== ====== ====== ===== ========
Home loans 11,369 733 83 175 991 922 13,282
Credit cards, unsecured loans
and other retail lending 24,063 5,763 321 232 6,316 554 30,933
Corporate loans 81,171 7,866 382 554 8,802 632 90,605
============================== ======= ======== ===== ====== ====== ===== ========
Total 116,603 14,362 786 961 16,109 2,108 134,820
Coverage ratio %% %% %% %
============================== ======= ======= ===== ===== ====== ==== ========
Home loans 0.3 4.4 13.5 5.4 5.4 23.9 2.8
Credit cards, unsecured loans
and other retail lending 1.1 13.5 28.2 39.9 15.7 70.2 8.2
Corporate loans 0.1 2.9 2.6 2.1 2.9 41.9 0.9
============================== ======= ======== ===== ====== ====== ===== ========
Total 0.3 7.5 15.9 15.5 8.5 49.3 2.8
1 Other financial assets on balance sheet subject to impairment not
included in the table above, include cash collateral and settlement
balances and financial assets at fair value through other comprehensive
income. These have a total gross exposure of GBP143.7bn and impairment
allowance of GBP7m. In addition, there are off-balance sheet loan
commitments and financial guarantee contracts with a gross exposure
of GBP263.7bn and provision of GBP202m.
Market Risk
Analysis of management value at risk (VaR)
The table below shows the total management VaR on a diversified
basis by risk factor. Total management VaR is calculated with a
one-day holding period.
Limits are applied against each risk factor VaR as well as total
management VaR, which are then cascaded further by risk managers to
each business.
Management VaR (95%) by asset
class(1)
Half year ended Half year ended Half year ended
30.06.18 31.12.17 30.06.17
======================== ======================== ========================
Average High(2) Low(2) Average High(2) Low(2) Average High(2) Low(2)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================= ======= ======= ====== ======= ======= ====== ======= ======= ======
Credit risk 11 16 8 10 17 8 13 18 10
Interest rate
risk 9 18 4 8 15 5 7 15 4
Equity risk 7 12 4 8 12 4 8 14 4
Basis risk 5 7 4 5 6 3 5 6 4
Spread risk 5 9 3 5 8 3 4 6 3
Foreign exchange
risk 3 7 2 4 7 2 3 5 2
Commodity risk 1 2 - 2 3 1 2 3 1
Inflation risk 3 4 2 2 3 2 2 4 1
Diversification
effect (24) n/a n/a (26) n/a n/a (24) n/a n/a
================= ======= ======= ====== ======= ======= ====== ======= ======= ======
Total management
VaR 20 27 15 18 24 14 20 26 17
1 Includes the UK banking business and BAGL for the three months
ended 31 March 2018 and for the comparative periods.
2 The high and low VaR figures reported for each category did not
necessarily occur on the same day as the high and low VaR reported
as a whole. Consequently a diversification effect balance for the
high and low VaR figures would not be meaningful and is therefore
omitted from the above table.
Average management VaR was largely stable when compared to
H217.
Statement of Directors' Responsibilities
Each of the Directors (the names of whom are set out below)
confirm that to the best of their knowledge, the condensed
consolidated interim financial statements set out on pages 11 to 16
have been prepared in accordance with International Accounting
Standard 34, Interim Financial Reporting, as adopted by the
European Union (EU), and that the interim management report herein
includes a fair review of the information required by Disclosure
Guidance and Transparency Rules 4.2.7R and 4.2.8R namely:
-- an indication of important events that have occurred during the
six months ended 30 June 2018 and their impact on the condensed
consolidated interim financial statements, and a description
of the principal risks and uncertainties for the remaining six
months of the financial year
-- any related party transactions in the six months ended 30 June
2018 that have materially affected the financial position or
performance of Barclays Bank Group during that period and any
changes in the related party transactions described in the last
Annual Report that could have a material effect on the financial
position or performance of Barclays Bank Group in the six months
ended 30 June 2018.
Signed on 1 August 2018 on behalf of the Board by
James E Staley Tushar Morzaria
Barclays Bank Group Chief Executive Barclays Bank Group Chief Financial Officer
Barclays Bank PLC Board of Directors:
Chairman Executive Directors Non-executive Directors
Sir Gerry Grimstone James E Staley Peter Bernard
Tushar Morzaria Helen Keelan
Tim Throsby Maria Richter
Jeremy Scott
Alex Thursby
Hélène Vletter-van Dort
Independent Review Report to Barclays Bank PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the Interim Results Announcement for the
six months ended 30 June 2018 which comprises:
-- the condensed consolidated income statement and condensed consolidated
statement of comprehensive income for the period then ended;
-- the condensed consolidated balance sheet as at 30 June 2018;
-- the condensed consolidated statement of changes in equity for the
period then ended;
-- the condensed consolidated cash flow statement for the period then
ended; and
-- the related explanatory notes
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Interim Results Announcement for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with IAS 34, Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the Interim
Results Announcement and consider whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The Interim Results Announcement is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the Interim Results Announcement in accordance with
the DTR of the UK FCA.
As disclosed in Note 1, Basis of preparation, the annual
financial statements of the Barclays Bank Group are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU. The directors are responsible for preparing the
condensed set of financial statements included in the Interim
Results Announcement in accordance with IAS 34 as adopted by the
EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the Interim Results
Announcement based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
KPMG LLP
Chartered Accountants
15 Canada Square
London, E14 5GL
1 August 2018
Condensed Consolidated Financial Statements
Condensed consolidated income statement (unaudited)
Half year ended Half year ended
30.06.18 30.06.17
Continuing operations Notes(1) GBPm GBPm
====================================================================== ========== =============== ===============
Net interest income 1,501 2,097
Net fee and commission income 5 2,862 3,021
Net trading income 2,319 1,685
Net investment income 494 468
Other income 77 30
====================================================================== ========== =============== ===============
Total income 7,253 7,301
Credit impairment charges and other provisions (156) (656)
====================================================================== ========== =============== ===============
Net operating income 7,097 6,645
Staff costs (2,438) (2,205)
Administration and general expenses (3,946) (2,954)
Operating expenses (6,384) (5,159)
Profit on disposal of undertakings and share of results of associates and
joint ventures 12 245
========================================================================== ====== =============== ===============
Profit before tax 725 1,731
Tax charge 6 (378) (430)
====================================================================== ========== =============== ===============
Profit after tax in respect of continuing operations 347 1,301
Loss after tax in respect of discontinued operations 3 (47) (2,030)
====================================================================== ========== =============== ===============
Profit/(loss) after tax 300 (729)
Attributable to:
====================================================================== ========== =============== ===============
Equity holders of the parent (9) (1,172)
Other equity instrument holders 310 301
====================================================================== ========== =============== ===============
Total equity holders of the parent 301 (871)
Non-controlling interests in respect of continuing operations 7 (1) 2
Non-controlling interests in respect of discontinued operations 7 - 140
====================================================================== ========== =============== ===============
Profit/(loss) after tax 300 (729)
1 For notes to the Financial Statements see pages 17 to 56.
Condensed consolidated statement of comprehensive income (unaudited)
Half year ended Half year ended
30.06.18 30.06.17
Notes(1) GBPm GBPm
========================================================================== ======== =============== ===============
Profit/(loss) after tax 300 (729)
Profit after tax in respect of continuing operations 347 1,301
Loss after tax in respect of discontinued operations (47) (2,030)
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations(2)
:
===================================================================================================== ===============
Currency translation reserve 15 350 (629)
Available for sale reserve(3) 15 - 96
Fair value through other comprehensive income reserve(3) 15 (221) -
Cash flow hedging reserve 15 (403) (382)
Other 10 14
========================================================================== ======== =============== ===============
Other comprehensive loss that may be recycled to profit or loss from
continuing operations (264) (901)
Other comprehensive income/(loss) not recycled to profit or loss from continuing operations(2)
:
===================================================================================================== ===============
Retirement benefit remeasurements 12 (54) (29)
Fair value through other comprehensive income reserve(3) 15 (267) -
Own credit 15 (73) 22
========================================================================== ======== =============== ===============
Other comprehensive loss not recycled to profit or loss from continuing
operations (394) (7)
Other comprehensive loss for the period from continuing operations (658) (908)
Other comprehensive (loss)/income for the period from discontinued
operations 3 (3) 1,301
Total comprehensive income/(loss) for the period:
========================================================================== ======== =============== ===============
Total comprehensive (loss)/income for the period, net of tax from
continuing operations (311) 393
Total comprehensive loss for the period, net of tax from discontinued
operations 3 (50) (729)
========================================================================== ======== =============== ===============
Total comprehensive loss for the period (361) (336)
Attributable to:
===================================================================================================== ===============
Equity holders of the parent (360) (446)
Non-controlling interests (1) 110
========================================================================== ======== =============== ===============
Total comprehensive loss for the period (361) (336)
1 For notes to the Financial Statements see pages 17 to 56.
2 Reported net of tax.
3 Following the adoption of IFRS 9, Financial Instruments on 1 January
2018, the fair value through other comprehensive income reserve
was introduced replacing the available for sale reserve.
Condensed consolidated balance sheet (unaudited)
As at As at
30.06.18(2) 31.12.17(3)
Assets Notes(1) GBPm GBPm
========================================================================= ======== =========== ===========
Cash and balances at central banks 121,800 171,036
Cash collateral and settlement balances 91,549 77,172
Loans and advances at amortised cost 134,820 324,590
Reverse repurchase agreements and other similar secured lending 533 12,546
Trading portfolio assets 116,554 113,755
Financial assets at fair value through the income statement 142,443 116,282
Derivative financial instruments 229,002 237,987
Financial investments - 58,963
Financial assets at fair value through other comprehensive income 53,302 -
Investments in associates and joint ventures 713 718
Goodwill and intangible assets 1,330 4,885
Property, plant and equipment 951 1,519
Current tax assets 6 1,272 376
Deferred tax assets 6 3,247 3,352
Retirement benefit assets 12 1,124 966
Other assets 2,944 4,003
Assets included in disposal groups classified as held for sale 3 1,761 1,193
========================================================================= ======== =========== ===========
Total assets 903,345 1,129,343
Liabilities
========================================================================= ======== =========== ===========
Deposits at amortised cost 193,990 399,189
Cash collateral and settlement balances 85,448 68,143
Repurchase agreements and other similar secured borrowing 8,645 40,338
Debt securities in issue 57,905 69,386
Subordinated liabilities 10 17,190 24,193
Trading portfolio liabilities 45,965 37,352
Financial liabilities designated at fair value 212,393 173,718
Derivative financial instruments 225,089 238,345
Current tax liabilities 6 667 494
Retirement benefit liabilities 12 265 287
Other liabilities 4,601 8,862
Provisions 11 1,233 3,302
Liabilities included in disposal groups classified as held for sale 3 1,762 -
========================================================================= ======== =========== ===========
Total liabilities 855,153 1,063,609
Equity
========================================================================= ======== =========== ===========
Called up share capital and share premium 13 14,453 14,453
Other reserves 15 3,071 3,808
Retained earnings 23,754 38,490
========================================================================= ======== =========== ===========
Shareholders' equity attributable to ordinary shareholders of the parent 41,278 56,751
Other equity instruments 14 6,912 8,982
========================================================================= ======== =========== ===========
Total equity excluding non-controlling interests 48,190 65,733
Non-controlling interests 7 2 1
========================================================================= ======== =========== ===========
Total equity 48,192 65,734
Total liabilities and equity 903,345 1,129,343
1 For notes to the Financial Statements see pages 17 to 56.
2 Does not include the UK banking business which was transferred
on 1 April 2018 to Barclays Bank UK PLC. For details of the disposal
of the business, refer to Note 2, Disposal of business and transfer
of ownership of subsidiary on pages 23 to 24.
3 Barclays Bank Group introduced changes to the balance sheet presentation
as at 31 December 2017 as a result of the adoption of new accounting
policies on 1 January 2018. Further detail on the adoption of new
accounting policies can be found in Note 1, Basis of preparation
on pages 17 to 22, within Note 19, Transition disclosures on pages
53 to 55 and the Credit risk disclosures on page 7.
Condensed consolidated statement of changes in equity (unaudited)
Called up
share capital
and share Other equity Other Retained Non-controlling
premium(1) instruments(1) reserves(1) earnings Total interests(2) Total equity
Half year ended
30.06.18 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ============= ============== ============= ============== ======== =============== ============
Balance as at
31 December
2017 14,453 8,982 3,808 38,490 65,733 1 65,734
Effects of
changes in
accounting
policies (136) (2,014) (2,150) (2,150)
=============== ============= ============== ============= ============== ======== =============== ============
Balance as at 1
January 2018 14,453 8,982 3,672 36,476 63,583 1 63,584
Continuing
operations
Profit after
tax - 310 - 38 348 (1) 347
Currency
translation
movements - - 350 - 350 - 350
Fair value
through other
comprehensive
income reserve - - (488) - (488) - (488)
Cash flow
hedges - - (403) - (403) - (403)
Retirement
benefit
remeasurements - - - (54) (54) - (54)
Own credit - - (73) - (73) - (73)
Other - - - 10 10 - 10
=============== ============= ============== ============= ============== ======== =============== ============
Total
comprehensive
income net of
tax from
continuing
operations - 310 (614) (6) (310) (1) (311)
Total
comprehensive
income net of
tax from
discontinued
operations - - (3) (47) (50) - (50)
=============== ============= ============== ============= ============== ======== =============== ============
Total
comprehensive
income for the
period - 310 (617) (53) (360) (1) (361)
Issue and - - - - - - -
exchange of
other equity
instruments
Equity settled
share schemes - - - 208 208 - 208
Other equity
instruments
coupons paid - (310) - 84 (226) - (226)
Vesting of
employee share
schemes - - - (421) (421) - (421)
Dividends paid - - - (14,274) (14,274) - (14,274)
Capital
contribution
from Barclays
PLC - - - 2,000 2,000 - 2,000
Net equity
impact of UK
banking
business
disposal - (2,070) 16 (236) (2,290) - (2,290)
Other movements - - - (30) (30) 2 (28)
=============== ============= ============== ============= ============== ======== =============== ============
Balance as at
30 June 2018 14,453 6,912 3,071 23,754 48,190 2 48,192
Half year ended
31.12.17
=============== ============= ============== ============= ============== ======== =============== ============
Balance as at 1
July 2017 14,455 7,736 4,571 39,321 66,083 84 66,167
Continuing -
operations
Profit after
tax - 338 - (1,409) (1,071) 2 (1,069)
Currency
translation
movements - - (681) - (681) - (681)
Available for
sale
investments - - 333 - 333 - 333
Cash flow
hedges - - (392) - (392) - (392)
Retirement
benefit
remeasurements - - - 82 82 - 82
Own credit - - (33) - (33) - (33)
Other - - - (21) (21) - (21)
=============== ============= ============== ============= ============== ======== =============== ============
Total
comprehensive
income net of
tax from
continuing
operations - 338 (773) (1,348) (1,783) 2 (1,781)
Total
comprehensive
income net of
tax from
discontinued
operations - - - 644 644 - 644
=============== ============= ============== ============= ============== ======== =============== ============
Total
comprehensive
income for the
period - 338 (773) (704) (1,139) 2 (1,137)
Issue and
exchange of
other equity
instruments - 1,246 - - 1,246 - 1,246
Equity settled
share schemes - - - 550 550 - 550
Other equity
instruments
coupons paid - (338) - 92 (246) - (246)
Redemption of
preference
shares (2) - 3 (209) (208) - (208)
Vesting of - - - - - - -
employee share
schemes
Dividends paid - - - (617) (617) - (617)
Net equity
impact of
partial BAGL
disposal - - - - - (19) (19)
Other movements - - 7 57 64 (66) (2)
=============== ============= ============== ============= ============== ======== =============== ============
Balance as at
31 December
2017 14,453 8,982 3,808 38,490 65,733 1 65,734
1 Details of share capital, other equity instruments and other reserves
are shown on pages 40 to 41.
2 Details of non-controlling interests are shown on page 29.
Condensed consolidated statement of changes in equity (unaudited)
Called up
share capital
and share Other equity Other Retained Non-controlling
premium(1) instruments(1) reserves(1) earnings Total interests(2) Total equity
Half year ended
30.06.17 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=============== ============= ============== ============== ============== ======= =============== ============
Balance as at
31 December
2016 14,462 6,486 4,295 42,190 67,433 3,522 70,955
Effects of
changes in
accounting
policies - - (175) 175 - - -
=============== ============= ============== ============== ============== ======= =============== ============
Balance as at 1
January 2017 14,462 6,486 4,120 42,365 67,433 3,522 70,955
Continuing -
operations
Profit after
tax - 301 - 998 1,299 2 1,301
Currency
translation
movements - - (628) - (628) (1) (629)
Available for
sale
investments - - 96 - 96 - 96
Cash flow
hedges - - (382) - (382) - (382)
Retirement
benefit
remeasurements - - - (29) (29) - (29)
Own credit - - 22 - 22 - 22
Other - - - 14 14 - 14
=============== ============= ============== ============== ============== ======= =============== ============
Total
comprehensive
income net of
tax from
continuing
operations - 301 (892) 983 392 1 393
Total
comprehensive
income net of
tax from
discontinued
operations - - 1,332 (2,170) (838) 109 (729)
=============== ============= ============== ============== ============== ======= =============== ============
Total
comprehensive
income for the
period - 301 440 (1,187) (446) 110 (336)
Issue and
exchange of
other equity
instruments - 1,250 - - 1,250 - 1,250
Equity settled - - - - - - -
share schemes
Other equity
instruments
coupons paid - (301) - 82 (219) - (219)
Redemption of
preference
shares (7) - 11 (1,134) (1,130) - (1,130)
Vesting of
employee share
schemes - - - (78) (78) - (78)
Dividends paid - - - (299) (299) (173) (472)
Net equity
impact of
partial BAGL
disposal - - - (359) (359) (3,443) (3,802)
Other movements - - - (69) (69) 68 (1)
=============== ============= ============== ============== ============== ======= =============== ============
Balance as at
30 June 2017 14,455 7,736 4,571 39,321 66,083 84 66,167
1 Details of share capital, other equity instruments and other reserves
are shown on pages 40 to 41.
2 Details of non-controlling interests are shown on page 29.
Condensed consolidated cash flow statement (unaudited)
Half year ended Half year ended
30.06.18 30.06.17
Continuing operations Note(1) GBPm GBPm
=========================================================================== ======= =============== ===============
Profit before tax 725 1,731
Adjustment for non-cash items 2,240 1,768
Changes in operating assets and liabilities(2) (8,925) 29,840
Corporate income tax paid (166) (518)
=========================================================================== ======= =============== ===============
Net cash from operating activities (6,126) 32,821
Net cash transferred as part of the UK banking business disposal (37,331) -
Other investing activities (6,030) 2,240
=========================================================================== ======= =============== ===============
Net cash from investing activities (43,361) 2,240
Net cash from financing activities (1,937) 1,057
Effect of exchange rates on cash and cash equivalents 404 (1,106)
=========================================================================== ======= =============== ===============
Net (decrease)/increase in cash and cash equivalents from continuing
operations (51,020) 35,012
Net cash from discontinued operations 3 (468) 1,282
=========================================================================== ======= =============== ===============
Net (decrease)/increase in cash and cash equivalents (51,488) 36,294
Cash and cash equivalents at beginning of the period 204,452 143,932
=========================================================================== ======= =============== ===============
Cash and cash equivalents at end of the period 152,964 180,226
1 For notes to the Financial Statements see pages 17 to 56.
2 Includes cash equivalents transferred as part of the UK banking
business disposal.
Financial Statement Notes
1. Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2018 have been prepared in accordance
with the DTR of the UK's Financial Conduct Authority (the UK FCA)
and with IAS 34, Interim Financial Reporting, as published by the
International Accounting Standards Board (IASB) and adopted by the
EU. The condensed consolidated interim financial statements should
be read in conjunction with the annual financial statements for the
year ended 31 December 2017, which have been prepared in accordance
with IFRSs as published by the IASB and as adopted by the EU.
The accounting policies and methods of computation used in these
condensed consolidated interim financial statements are the same as
those used in the Barclays Bank PLC Annual Report 2017, except as
disclosed below.
1. IFRS 9 Financial Instruments
IFRS 9, Financial Instruments, which replaced IAS 39, Financial
Instruments: Recognition and Measurement, was applied effective
from 1 January 2018, including the early adoption of 'Prepayment
Features with Negative Compensation (Amendments to IFRS 9)' which
was endorsed by the EU in March 2018. IFRS 9 includes an accounting
policy choice to continue to apply hedge accounting in accordance
with IAS 39, which Barclays Bank Group has decided to apply.
IFRS 9 was applied retrospectively by adjusting the opening
balance sheet at the date of initial application, and comparative
periods have not been restated.
(i) Changes in presentation
The following voluntary changes in presentation have been made
as a result of the review of accounting presentation following the
adoption of IFRS 9, and is expected to provide more relevant
information to the users of the financial statements. These
presentational changes have no effect on the measurement of these
items and therefore had no impact on retained earnings or profit
for any period. The effect of these presentational changes on
transition are included in the reconciliation on pages 54 to 55 and
are noted below:
-- 'Items in the course of collection from other banks' and 'prepayments,
accrued income and other assets' are reported in 'other assets'.
Equally, 'items in the course of collection due to other banks'
and 'accruals, deferred income and other liabilities' are reported
in 'other liabilities';
-- 'Loans and advances to banks' and 'loans and advances to customers'
have been disaggregated and are now reported in 'loans and advances
at amortised cost' and 'cash collateral and settlement balances';
-- 'Deposits from banks' and 'customer accounts' have been disaggregated
and are now reported in 'deposits at amortised cost' and 'cash
collateral and settlement balances';
-- 'Financial assets designated at fair value' are now reported within
'financial assets at fair value through the income statement';
-- The majority of available for sale assets which were previously
reported in 'financial investments' are now reported in 'financial
assets at fair value through other comprehensive income'; and
-- Held to maturity assets which were previously reported in 'financial
investments' are now reported in 'loans and advances at amortised
cost'.
(ii) Application of IFRS 9
The accounting policies which have been applied effective from 1
January 2018 as a result of adopting IFRS 9 are as follows.
IFRS 9 requires financial assets to be classified on the basis
of two criteria:
i) the business model within which financial assets are managed; and
ii) their contractual cash flow characteristics (whether the cash flows
represent 'solely payments of principal and interest' (SPPI)).
Business models were determined on initial application of IFRS
9. Barclays Bank Group assesses the business model criteria at a
portfolio level. Information that is considered in determining the
applicable business model includes (i) policies and objectives for
the relevant portfolio, (ii) how the performance and risks of the
portfolio are managed, evaluated and reported to management, and
(iii) the frequency, volume and timing of sales in prior periods,
sales expectation for future periods, and the reasons for such
sales.
The contractual cash flow characteristics of financial assets
are assessed with reference to whether the cash flows represent
SPPI. In assessing whether contractual cash flows are SPPI
compliant, interest is defined as consideration primarily for the
time value of money and the credit risk of the principal
outstanding. The time value of money is defined as the element of
interest that provides consideration only for the passage of time
and not consideration for other risks or costs associated with
holding the financial asset. Terms that could change the
contractual cash flows so that it would not meet the condition for
SPPI are considered, including: (i) contingent and leverage
features, (ii) non-recourse arrangements and (iii) features that
could modify the time value of money.
(iii) Financial instruments measured at amortised cost
Financial assets that are held in a business model to collect
the contractual cash flows and that contain contractual terms that
give rise on specified dates to cash flows that are SPPI, are
measured at amortised cost. The carrying value of these financial
assets at initial recognition includes any directly attributable
transaction costs.
In determining whether the business model is a 'hold to collect'
model, the objective of the business model must be to hold the
financial asset to collect contractual cash flows rather than
holding the financial asset for trading or short-term profit taking
purposes. While the objective of the business model must be to hold
the financial asset to collect contractual cash flows this does not
mean Barclays Bank Group is required to hold the financial assets
until maturity. When determining if the business model objective is
to collect contractual cash flows Barclays Bank Group will consider
past sales and expectations about future sales.
(iv) Financial assets measured at fair value through other comprehensive
income ('FVOCI')
Financial assets that are debt instruments held in a business
model that is achieved by both collecting contractual cash flows
and selling, and that contain contractual terms that give rise on
specified dates to cash flows that are SPPI, are measured at FVOCI.
They are subsequently remeasured at fair value and changes therein
(except for those relating to impairment, interest income and
foreign currency exchange gains and losses) are recognised in other
comprehensive income, until the assets are sold. Upon disposal, the
cumulative gains and losses in other comprehensive income are
recognised in the income statement in net investment income.
In determining whether the business model is achieved by both
collecting contractual cash flows and selling financial assets, it
is determined that both collecting contractual cash flows and
selling financial assets are integral to achieving the objective of
the business model. When determining if the business model is
achieved by both collecting contractual cash flows and selling
financial assets, Barclays Bank Group will consider past sales and
expectations about future sales.
(v) Equity securities
For equity securities that are not held for trading, Barclays
Bank Group may make an irrevocable election to present subsequent
changes in the fair value of the instrument in other comprehensive
income (except for dividend income which is recognised in profit or
loss). Gains or losses on the derecognition of these equity
securities are not transferred to profit or loss. These assets are
also not subject to the impairment requirements and therefore no
amounts are recycled to the income statement. Where Barclays Bank
Group has not made the irrevocable election to present subsequent
changes in the fair value of the instrument in other comprehensive
income, equity securities are measured at fair value through profit
or loss.
(vi) Financial instruments designated at fair value through profit or
loss
Financial assets, other than those held for trading, are
classified in this category if they are so irrevocably designated
at inception and the use of the designation removes or
significantly reduces an accounting mismatch.
Subsequent changes in fair value are recognised in the income
statement in net investment income.
Financial liabilities can be designated at fair value through
profit or loss if they meet one or more of the criteria set out
below and are so designated irrevocable at inception:
-- the use of the designation removes or significantly reduces an
accounting mismatch;
-- when a group of financial assets and liabilities or a group of
financial liabilities is managed and its performance is evaluated
on a fair value basis, in accordance with a documented risk management
or investment strategy; or
-- where the financial liability contains one or more non-closely
related embedded derivatives.
Subsequent changes in fair value are recognised in the income
statement in net investment income, except if reporting it in
trading income reduces an accounting mismatch.
(vii) Financial assets at fair value through profit or loss
Financial assets that are held for trading are recognised at
fair value through profit or loss.
In addition, financial assets are held at fair value through
profit or loss if they do not contain contractual terms that give
rise on specified dates to cash flows that are SPPI, or if the
financial asset is not held in a business model that is either (i)
a business model to collect the contractual cash flows or (ii) a
business model that is achieved by both collecting contractual cash
flows and selling. Subsequent changes in fair value for these
instruments are recognised in the income statement in net
investment income, except if reporting it in trading income reduces
an accounting mismatch.
(viii) Derivatives
Derivative instruments are contracts whose value is derived from
one or more underlying financial instruments or indices defined in
the contract. All derivative instruments are held at fair value
through profit or loss, except for derivatives that are in a
designated cash flow or net investment hedge accounting
relationship. This includes terms included in a contract or
financial liability (the host), which, had it been a standalone
contract, would have met the definition of a derivative. If these
are separated from the host, i.e. when the economic characteristics
of the embedded derivative are not closely related with those of
the host contract and the combined instrument is not measured at
fair value through profit or loss, then they are accounted for in
the same way as derivatives. For financial assets, the requirements
are whether the financial asset contain contractual terms that give
rise on specified dates to cash flows that are SPPI, and
consequently the requirements for accounting for embedded
derivatives are not applicable to financial assets.
(ix) Impairment
Entities are required to recognise expected credit losses (ECLs)
based on unbiased forward-looking information for all financial
assets at amortised cost, lease receivables, debt financial assets
at fair value through other comprehensive income, loan commitments
and financial guarantee contracts. Intercompany exposures,
including loan commitments and financial guarantee contracts, are
also in scope under IFRS 9.
At the reporting date, an allowance (or provision for loan
commitments and financial guarantees) is required for the 12 month
ECLs. If the credit risk has significantly increased since initial
recognition (Stage 1), an allowance (or provision) should be
recognised for the lifetime ECLs for financial instruments for
which the credit risk has increased significantly since initial
recognition (Stage 2) or which are credit impaired (Stage 3).
The measurement of ECL is calculated using three main
components: (i) probability of default (PD), (ii) loss given
default (LGD) and (iii) the exposure at default (EAD).
The 12 month ECL is calculated by multiplying the 12 month PD,
LGD and the EAD. The 12 month and lifetime PDs represent the PD
occurring over the next 12 months and the remaining maturity of the
instrument respectively. The EAD represents the expected balance at
default, taking into account the repayment of principal and
interest from the balance sheet date to the default event together
with any expected drawdowns of committed facilities. The LGD
represents expected losses on the EAD given the event of default,
taking into account, among other attributes, the mitigating effect
of collateral value at the time it is expected to be realised and
the time value of money.
Determining a significant increase in credit risk since initial
recognition:
Barclays Bank Group assesses when a significant increase in
credit risk has occurred based on quantitative and qualitative
assessments. Exposures are considered to have resulted in a
significant increase in credit risk and are moved to Stage 2
when:
i) Quantitative test
The annualised cumulative weighted average lifetime PD has
increased by more than an agreed threshold relative to the
equivalent at origination.
PD deterioration thresholds are defined as percentage increases,
and are set at an origination score band and segment level to
ensure the test appropriately captures significant increases in
credit risk at all risk levels. Generally, thresholds are inversely
correlated to the origination PD, i.e. as the origination PD
increases, the threshold value reduces.
The assessment of materiality, i.e. at what point a PD increase
is deemed 'significant', is based upon analysis of the portfolios'
risk profile against a common set of principles and performance
metrics, incorporating expert credit judgement where
appropriate.
For existing/historic exposures where origination point
scores/data are no longer available or do not represent a
comparable estimate of lifetime PD, a proxy origination score is
defined, based upon:
-- Back-population of the approved lifetime PD score either
to origination date or, where this is not feasible, as far
back as possible, (subject to a data start point no later
than 1 January 2015); or
-- Use of available historic account performance data and other
customer information, to derive a comparable 'proxy' estimation
of origination PD.
ii) Qualitative test
Accounts meet the portfolio's 'high risk' criteria and are
subject to closer credit monitoring.
High risk customers may not be in arrears but either through an
event or an observed behaviour exhibit potential credit distress.
The definition and assessment of high risk includes as wide a range
of information as reasonably available, including industry and
Barclays Bank Group wide customer level data wherever possible or
relevant.
Whilst the high risk populations applied for IFRS 9 impairment
purposes are aligned with risk management processes, they are also
regularly reviewed and validated to ensure that they capture any
incremental segments where there is evidence of credit
deterioration.
iii) Backstop criteria
Accounts that are 30 calendar days or more past due. The 30 days
past due criteria is a backstop rather than a primary driver of
moving exposures into Stage 2.
Exposures will move back to Stage 1 once they no longer meet the
criteria for a significant increase in credit risk and when any
cure criteria used for credit risk management are met. This is
subject to all payments being up to date and the customer
evidencing ability and willingness to maintain future payments.
Barclays Bank Group does not rely on the low credit risk
exemption which would assume facilities of investment grade are not
significantly deteriorated. Determining the PD at initial
recognition requires management estimates.
Management overlays and other exceptions to model outputs are
applied only if consistent with the objective of identifying
significant increases in credit risk.
(x) Forward-looking information
Credit losses are the expected cash shortfalls from what is
contractually due over the expected life of the financial
instrument, discounted at the original effective interest rate
(EIR). ECLs are the unbiased probability-weighted credit losses
determined by evaluating a range of possible outcomes and
considering future economic conditions. When there is a non-linear
relationship between forward-looking economic scenarios and their
associated credit losses, five forward-looking economic scenarios
are considered to ensure a sufficient unbiased representative
sample of the complete distribution is included in determining the
expected loss. Stress testing methodologies are leveraged within
forecasting economic scenarios.
The measurement of ECL involves increased complexity and
judgement, including estimation of PDs, LGD, a range of unbiased
future economic scenarios, estimation of expected lives, and
estimation of EAD and assessing significant increases in credit
risk. Impairment charges will tend to be more volatile and will be
recognised earlier. Unsecured products with longer expected lives,
such as revolving credit cards, are the most impacted.
Barclays Group utilises an external consensus forecast as the
baseline scenario. In addition, two adverse and two favourable
scenarios are derived, with associated probability weightings. The
adverse scenarios are calibrated to a similar severity to internal
stress tests, whilst also incorporating IFRS 9 specific
sensitivities and non-linearity. The most adverse scenarios are
benchmarked to the Bank of England's annual cyclical scenarios and
to the most severe scenarios from Moody's inventory, but are not
designed to be the same. The favourable scenarios are calibrated to
be symmetric to the adverse scenarios, subject to a ceiling
calibrated to relevant recent favourable benchmark scenarios. The
scenarios include six core variables, (GDP, unemployment and House
Price Index in both the UK and US markets), and expanded variables
using statistical models based on historical correlations. The
probability weights of the scenarios are estimated such that the
baseline (reflecting current consensus outlook) has the highest
weight and the weights of adverse and favourable scenarios depend
on the deviation from the baseline; the further from the baseline,
the smaller the weight. A single set of five scenarios is used
across all portfolios and all five weights are normalised to equate
to 100%. The impacts across the portfolios are different because of
the sensitivities of each of the portfolios to specific
macro-economic variables, for example, mortgages are highly
sensitive to house prices and base rates, and credit cards and
unsecured consumer loans are highly sensitive to unemployment.
(xi) Definition of default, credit impaired assets, write-offs, and
interest income recognition
The definition of default for the purpose of determining ECLs
has been aligned to the Regulatory Capital CRR Article 178
definition of default, which considers indicators that the debtor
is unlikely to pay, includes exposures in forbearance and is no
later than when the exposure is more than 90 days past due or 180
days past due in the case of UK mortgages. When exposures are
identified as credit impaired or purchased or originated as such
interest income is calculated on the carrying value net of the
impairment allowance.
Credit impaired is when the exposure has defaulted which is also
anticipated to align to when an exposure is identified as
individually impaired.
Uncollectible loans are written off against the related
allowance for loan impairment on completion of Barclays Bank
Group's internal processes and when all reasonably expected
recoverable amounts have been collected. Subsequent recoveries of
amounts previously written off are credited to the income
statement.
(xii) Loan modifications and renegotiations that are not credit-impaired
When modification of a loan agreement occurs as a result of
commercial restructuring activity rather than due to credit risk of
the borrower, an assessment must be performed to determine whether
the terms of the new agreement are substantially different from the
terms of the existing agreement. This assessment considers both the
change in cash flows arising from the modified terms as well as the
change in overall instrument risk profile.
Where terms are substantially different, the existing loan will
be derecognised and new loan recognised at fair value, with any
difference in valuation recognised immediately within the income
statement, subject to observability criteria.
Where terms are not substantially different, the loan carrying
value will be adjusted to reflect the present value of modified
cash flows discounted at the original EIR, with any resulting gain
or loss recognised immediately within the income statement as a
modification gain or loss.
(xiii) Expected life
Lifetime ECLs must be measured over the expected life. This is
restricted to the maximum contractual life and takes into account
expected prepayment, extension, call and similar options. The
exceptions are certain revolver financial instruments, such as
credit cards and bank overdrafts, that include both a drawn and an
undrawn component where the entity's contractual ability to demand
repayment and cancel the undrawn commitment does not limit the
entity's exposure to credit losses to the contractual notice
period. The expected life for these revolver facilities is expected
to be behavioural life. Where data is insufficient or analysis
inconclusive, an additional 'maturity factor' may be incorporated
to reflect the full estimated life of the exposures, based upon
experienced judgement and/or peer analysis. Potential future
modifications of contracts are not taken into account when
determining the expected life or EAD until they occur.
(xiv) Discounting
ECLs are discounted at the EIR at initial recognition or an
approximation thereof and consistent with income recognition. For
loan commitments the EIR is the rate that is expected to apply when
the loan is drawn down and a financial asset is recognised. Issued
financial guarantee contracts are discounted at the risk free rate.
Lease receivables are discounted at the rate implicit in the lease.
For variable/floating rate financial assets, the spot rate at the
reporting date is used and projections of changes in the variable
rate over the expected life are not made to estimate future
interest cash flows or for discounting.
(xv) Modelling techniques
ECLs are calculated by multiplying three main components, being
the PD, LGD and the EAD, discounted at the original EIR. The
regulatory Basel Committee of Banking Supervisors (BCBS) ECL
calculations are leveraged for IFRS 9 modelling but adjusted for
key differences which include:
-- BCBS requires 12 month through the economic cycle losses whereas
IFRS 9 requires 12 months or lifetime point in time losses based
on conditions at the reporting date and multiple forecasts of the
future economic conditions over the expected lives
-- IFRS 9 models do not include certain conservative BCBS model floors
and downturn assessments and require discounting to the reporting
date at the original EIR rather than using the cost of capital
to the date of default
-- Management adjustments are made to modelled output to account for
situations where known or expected risk factors and information
have not been considered in the modelling process, for example
forecast economic scenarios for uncertain political events; and
-- ECL is measured at the individual financial instrument level, however
a collective approach where financial instruments with similar
risk characteristics are grouped together, with apportionment to
individual financial instruments, is used where effects can only
be seen at a collective level, for example for forward-looking
information
For the IFRS 9 impairment assessment, Barclays Bank Group's risk
models are used to determine the PD, LGD and EAD. For Stage 2 and
3, Barclays Bank Group applies lifetime PDs but uses 12 month PDs
for Stage 1. The ECL drivers of PD, EAD and LGD are modelled at an
account level which considers vintage, among other credit factors.
Also, the assessment of significant increase in credit risk is
based on the initial lifetime PD curve, which accounts for the
different credit risk underwritten over time.
(xvi) Forbearance
A financial asset is subject to forbearance when it is modified
due to the credit distress of the borrower. A modification made to
the terms of an asset due to forbearance will typically be assessed
as a non-substantial modification that does not result in
derecognition of the original loan, except in circumstances where
debt is exchanged for equity.
Both performing and non-performing forbearance assets are
classified as Stage 3 except where it is established that the
concession granted has not resulted in diminished financial
obligation and that no other regulatory definitions of default
criteria has been triggered, in which case the asset is classified
as Stage 2. The minimum probationary period for non-performing
forbearance is 12 months and for performing forbearance, 24 months.
Hence, a minimum of 36 months is required for non-performing
forbearance to move out of a forborne state.
No financial instrument in forbearance can transfer back to
Stage 1 until all of the Stage 2 thresholds are no longer met and
can only move out of Stage 3 when no longer credit impaired.
2. IFRS 15 Revenue from Contracts with Customers
IFRS 15, Revenue from Contracts with Customers, which replaced
IAS 18, Revenue and IAS 11, Construction Contracts, was applied
effective from 1 January 2018. It applies to all contracts with
customers except leases, financial instruments and insurance
contracts. The standard establishes a more systematic approach for
revenue measurement and recognition by introducing a five-step
model governing revenue recognition. The five-step model requires
Barclays Bank Group to (i) identify the contract with the customer,
(ii) identify each of the performance obligations included in the
contract, (iii) determine the amount of consideration in the
contract, (iv) allocate the consideration to each of the identified
performance obligations and (v) recognise revenue as each
performance obligation is satisfied.
There are no significant impacts from the adoption of IFRS 15 in
relation to the timing of when Barclays Bank Group recognises
revenues or when revenue should be recognised gross as a principal
or net as an agent. Therefore, Barclays Bank Group will continue to
recognise fee and commission income charged for services provided
by Barclays Bank Group as the services are provided (for example on
completion of the underlying transaction). Revenue recognition for
trading income and net investment income are recognised based on
requirements of IFRS 9.
3. Going concern
Having reassessed the Principal Risks, the directors considered
it appropriate to adopt the going concern basis of accounting in
preparing the interim financial information.
2. Disposal of business and transfer of ownership of subsidiary
Following the court approval of the ring-fencing transfer scheme
on 9 March 2018, the UK banking business largely comprising
Personal Banking, Barclaycard Consumer UK and Business Banking
customers, and related assets and liabilities was transferred to
Barclays Bank UK PLC on 1 April 2018, to meet the regulatory
ring-fencing requirement under the Financial Services (Banking
Reform) Act 2013 and related legislation.
The net assets transferred to Barclays Bank UK PLC on 1 April
2018 amounted to GBP16.0bn of which GBP12.9bn was transferred in
exchange for one ordinary share with the remaining net assets
transferred for no consideration. Following the transfer of the UK
banking business on 1 April 2018, Barclays Bank PLC transferred the
equity ownership in Barclays Bank UK PLC to Barclays PLC through a
dividend in specie on the same day. The equity ownership in
Barclays Bank UK PLC comprised net assets of GBP16.3bn, of which
GBP0.3bn was already held by Barclays Bank UK PLC prior to the
transfer of the UK banking business. Accordingly, Barclays Bank UK
PLC ceased to be a subsidiary of Barclays Bank PLC and became a
direct subsidiary of the ultimate parent, Barclays PLC.
The condensed consolidated financial statements of Barclays Bank
Group as at 30 June 2018 include the results of Barclays Bank UK
PLC and its subsidiaries for the three months ended 31 March 2018,
the date prior to the transfer of ownership to Barclays PLC.
The transfer of the ownership of Barclays Bank UK PLC to
Barclays PLC has resulted in a material change to the consolidated
financial position and results of Barclays Bank Group in comparison
to the prior period. The impact on the individual balance sheet
line items as a result of the transfer of ownership is explained
below:
Disposal of
Barclays Bank As at
As at 01.01.18(1) UK PLC(2) Other movement for the period 30.06.18
Assets GBPm GBPm GBPm GBPm
======================================== ================= =============== ============================= =========
Cash and balances at central banks 171,036 (37,331) (11,905) 121,800
Cash collateral and settlement balances 74,769 (2,317) 19,097 91,549
Loans and advances at amortised cost 317,744 (184,655) 1,731 134,820
Reverse repurchase agreements and other
similar secured lending 597 (415) 351 533
Trading portfolio assets 114,168 - 2,386 116,554
Other financial assets at fair value
through the income statement 140,211 (5,616) 7,848 142,443
Derivative financial instruments 237,987 (108) (8,877) 229,002
Financial assets at fair value through
other comprehensive income 53,288 (5,544) 5,558 53,302
Property, plant and equipment 1,519 (510) (58) 951
Investment in associates and joint
ventures 699 - 14 713
Goodwill and intangible assets 4,885 (3,537) (18) 1,330
Current tax assets 376 - 896 1,272
Deferred tax assets 3,979 (747) 15 3,247
Retirement benefit assets 966 - 158 1,124
Other assets 4,119 (1,382) 207 2,944
Assets included in disposal groups held
for sale 1,193 - 568 1,761
======================================== ================= =============== ============================= =========
Total assets 1,127,536 (242,162) 17,971 903,345
Liabilities
======================================== ================= =============== ============================= =========
Deposits at amortised cost 380,329 (190,472) 4,133 193,990
Cash collateral and settlement balances 65,925 - 19,523 85,448
Repurchase agreements and other similar
secured borrowing 15,053 (11,567) 5,159 8,645
Debt securities in issue 69,386 (12,303) 822 57,905
Subordinated liabilities 24,193 (3,019) (3,984) 17,190
Trading portfolio liabilities 37,352 (1,765) 10,378 45,965
Financial liabilities designated at fair
value 220,083 - (7,690) 212,393
Derivative financial instruments 238,345 (6) (13,250) 225,089
Current tax liabilities 494 (677) 850 667
Retirement benefit liabilities 287 - (22) 265
Other liabilities 8,862 (1,518) (2,743) 4,601
Provisions 3,643 (2,289) (121) 1,233
Liabilities included in disposal groups
classified as held for sale - - 1,762 1,762
======================================== ================= =============== ============================= =========
Total liabilities 1,063,952 (223,616) 14,817 855,153
1 The balance sheet as at 30 June 2018 is on an IFRS 9 basis and
hence the IFRS 9 balance sheet as at 1 January 2018 has been used
to disclose the disposal of the UK banking business. For further
details refer to Note 19, Transition disclosures on pages 53 to
55.
2 The movement in net assets relating to the disposal of Barclays
Bank UK PLC of GBP18,546m is stated after the elimination of internal
balances between Barclays Bank PLC and Barclays Bank UK PLC on
1 April 2018 of GBP2,231m.
The narrative below provides further granularity of the items
transferred as part of the disposal of the UK banking business to
Barclays Bank UK PLC. The items transferred included (but were not
limited to):
-- Loans and advances at amortised cost of GBP184,655m related to
the UK banking business. The portfolio transferred included home
loans of GBP133,641m, credit cards and unsecured loans of GBP22,621m,
and corporate loans of GBP27,396m
-- Derivative assets and liabilities disposed consisted of those designated
in hedge accounting relationships. The notional amount at the date
of transfer was GBP3,313m, the fair value of the derivative assets
was GBP108m and the fair value of the derivative liabilities was
GBP6m
-- The disposed assets measured at fair value through the income statement
consisted of loans and advances of GBP4,233m, and reverse repurchase
agreements and other similar secured lending of GBP1,383m
-- Property, plant and equipment with a net book value of GBP510m
(gross cost of GBP971m and accumulated depreciation of GBP461m)
-- Goodwill relating to the UK banking business with a net book value
of GBP3,526m, and licences and other intangible assets with a net
book value amounting to GBP11m (gross cost of GBP90m, and accumulated
amortisation and impairment of GBP79m)
-- Deferred tax asset balances of GBP747m and current tax liabilities
of GBP677m relating to the UK banking business
-- Other assets included prepayments of GBP106m, items in the course
of collection of GBP588m, sundry receivables of GBP535m and accrued
income of GBP146m
-- Deposits at amortised cost of GBP190,472m consisted of current,
savings and time deposits of UK banking business customers, and
deposits with banks
-- Debt securities in issue transferred consisted of covered bonds
of GBP8,302m and other debt securities of GBP4,001m
-- Other liabilities included accruals and deferred income of GBP278m,
and sundry creditors of GBP1,160m
The transfer of equity ownership in Barclays Bank UK PLC had no
impact on the share capital and share premium of Barclays Bank PLC.
Other equity instruments reduced by GBP2,070m relating to
additional tier 1 (AT1) securities transferred to Barclays Bank UK
PLC. The fair value through other comprehensive income reserve
increased GBP16m and retained earnings reduced GBP14,261m.
3. Discontinued operations and held for sale assets
Discontinued operations
As a result of the transfer of the equity ownership in Barclays
Bank UK PLC to Barclays PLC on 1 April 2018, the UK banking
business largely comprising of Personal Banking, Barclaycard
Consumer UK and Business Banking customers, and related assets and
liabilities met the requirement for presentation as a discontinued
operation in Barclays Bank PLC. As such, the results, which have
been presented as profit after tax in respect of discontinued
operations on the face of the Barclays Bank Group income statement,
are analysed in the income statement below. The income statement,
statement of other comprehensive income and statement of cash flows
for the half year ended 30 June 2018 represent the UK banking
business results as a discontinued operation up to 31 March 2018,
compared to six months for the half year ended 30 June 2017. The
statements for the half year ended 30 June 2017 also include the
results and cash flows for BAGL for the five months ended 31 May
2017.
Half year Half year
ended ended
30.06.18(1) 30.06.17(2)
Disposal groups income statement GBPm GBPm
================================================== =========== ===========
Net interest income 1,449 3,862
Net fee and commission income 296 1,107
Net trading income (5) 133
Net investment income 6 89
Other income 2 68
================================================== ----------- ===========
Total income 1,748 5,259
Credit impairment charges and other provisions (201) (575)
================================================== =========== ===========
Net operating income 1,547 4,684
Staff costs (321) (1,737)
Administration and general expenses (1,135) (3,093)
================================================== =========== ===========
Operating expenses (1,456) (4,830)
Share of post-tax results of associates and joint
ventures - 4
================================================== =========== ===========
Profit/(loss) before tax 91 (142)
Tax charge (138) (453)
================================================== =========== ===========
Loss after tax(3) (47) (595)
Attributable to:
================================================== =========== ===========
Equity holders of the parent (47) (735)
Non-controlling interests - 140
================================================== =========== ===========
Loss after tax(3) (47) (595)
1 Included UK banking business results for the period from 1 January
2018 to 31 March 2018.
2 Included UK banking business results for the period from 1 January
2017 to 30 June 2017 and BAGL results for the period from 1 January
2017 to 31 May 2017.
3 Total loss after tax in respect of discontinued operations in H117
was GBP2,030m, which comprised of GBP595m loss after tax, GBP60m
loss on the sale of BAGL and GBP1,375m loss on recycling of other
comprehensive loss on reserves relating to the disposal of BAGL.
Of the GBP595m loss after tax, GBP760m loss related to BAGL results
and GBP165m profit related to the UK banking business.
Half year Half year
ended ended
30.06.18(1) 30.06.17(2)
==========================================================
Statement of other comprehensive income from discontinued
operations GBPm GBPm
========================================================== =========== ===========
Available for sale reserve - (3)
Fair value through other comprehensive income reserve (3) -
Currency translation reserves - (38)
Cash flow hedging reserves - 19
========================================================== ----------- ===========
Other comprehensive loss, net of tax from discontinued
operations (3) (22)
1 Included UK banking business other comprehensive income for the
period from 1 January 2018 to 31 March 2018.
2 Included UK banking business other comprehensive income for the
period from 1 January 2017 to 30 June 2017 and BAGL other comprehensive
income for the period from 1 January 2017 to 31 May 2017.
Half year Half year
ended ended
30.06.18(1) 30.06.17(2)
======================================================
Cash flows from discontinued operations GBPm GBPm
====================================================== =========== ===========
Net cash flows from operating activities (402) 2,098
Net cash flows from investing activities 54 (414)
Net cash flows from financing activities (120) (373)
Effect of exchange rates on cash and cash equivalents - (29)
====================================================== ----------- ===========
Net (decrease)/increase in cash and cash equivalents (468) 1,282
1 Included UK banking business cash flows for the period from 1 January
2018 to 31 March 2018.
2 Included UK banking business cash flows for the period from 1 January
2017 to 30 June 2017 and BAGL cash flows for the period from 1
January 2017 to 31 May 2017.
Assets included in disposal groups classified as held for sale
and associated liabilities
The disposal group classified as held for sale as at 30 June
2018 primarily consisted of the Smart Investor portfolio. The Smart
Investor portfolio is due to be transferred from Barclays Bank PLC
to Barclays Bank UK PLC in H218. The disposal group classified as
held for sale as at 31 December 2017 primarily consisted of a
portfolio of Barclaycard US receivables which was sold in H118.
Total assets classified as held for sale as at 30 June 2018 were
GBP1,761m (December 2017: GBP1,193m) including loans and advances
at amortised cost of GBP1,658m (December 2017: GBP1,164m). Total
liabilities classified as held for sale as at 30 June 2018 were
GBP1,762m (December 2017: GBPnil) including deposits at amortised
cost of GBP1,660m (December 2017: GBPnil).
4. Segmental reporting
Following the transfer of the UK banking business which largely
comprised of Personal Banking, Barclaycard Consumer UK and Business
Banking to Barclays Bank UK PLC on 1 April 2018, and the subsequent
transfer of ownership of Barclays Bank UK PLC to Barclays PLC on
the same day, the Barclays Bank Group activities have been
segmented into CIB, Consumer, Cards and Payments, and Head Office.
Comparatives have been restated to reflect the new
segmentation.
The segment results below reflect the continuing operations of
Barclays Bank PLC and hence the UK banking business is excluded as
it meets the requirement to be presented as a discontinued
operation under IFRS 5, Non-current Assets Held for Sale and
Discontinued Operations.
Analysis of results by business
Corporate Consumer,
and Investment Cards and Barclays
Bank Payments Head Office Bank Group
Half year ended 30.06.18 GBPm GBPm GBPm GBPm
===================================== =============== ========== =========== ===========
Total income(1) 5,373 2,137 (257) 7,253
Credit impairment releases/(charges)
and other provisions 182 (343) 5 (156)
===================================== =============== ========== =========== ===========
Net operating income/(expenses) 5,555 1,794 (252) 7,097
Operating expenses (3,628) (1,134) (1,622) (6,384)
Other net income/(expenses)(2) 8 17 (13) 12
===================================== =============== ========== =========== ===========
Profit/(loss) before tax from
continuing operations 1,935 677 (1,887) 725
Corporate Consumer,
and Investment Cards Barclays Barclays
Bank and Payments Head Office Non-Core(3) Bank Group
Half year ended 30.06.17 GBPm GBPm GBPm GBPm GBPm
================================ =============== ============= =========== ============ ===========
Total income 5,384 2,398 46 (527) 7,301
Credit impairment charges and
other provisions (50) (575) (1) (30) (656)
================================ =============== ============= =========== ============ ===========
Net operating income/(expenses) 5,334 1,823 45 (557) 6,645
Operating expenses (3,779) (1,000) (101) (279) (5,159)
Other net income/(expenses)(2) 115 99 (166) 197 245
================================ =============== ============= =========== ============ ===========
Profit/(loss) before tax from
continuing operations 1,670 922 (222) (639) 1,731
1 GBP176m of certain legacy capital instrument funding costs are
now charged to Head Office, the impact of which would have been
materially the same if the charges had been included in H117.
2 Other net income/(expenses) represents the share of post-tax results
of associates and joint ventures, profit (or loss) on disposal
of subsidiaries, associates and joint ventures and gains on acquisitions.
3 Barclays Non-Core segment was closed on 1 July 2017, with financial
performance subsequently reported in CIB, Head Office and the UK
banking business.
Split of income by geographic region(1) Half year Half year
ended ended
========================================
30.06.18 30.06.17
========================================
GBPm GBPm
======================================== ========= =========
UK 2,118 2,120
Europe 1,026 724
Americas 3,735 4,053
Africa and Middle East 62 138
Asia 312 266
======================================== ========= =========
Total 7,253 7,301
1 The geographic region is based on counterparty location.
5. Fee and commission income
Fee and commission income is disaggregated below and includes a
total for fees in scope of IFRS 15, Revenues from Contracts with
Customers:
Corporate and Investment Bank Consumer, Cards and Payments Head Office Total
Half year ended 30.06.18 GBPm GBPm GBPm GBPm
===================================== ============================= ============================ =========== =====
Fee type
Transactional 185 1,072 - 1,257
Advisory 340 37 - 377
Brokerage and execution 553 30 - 583
Underwriting and syndication 1,368 - - 1,368
Other 3 78 16 97
===================================== ============================= ============================ =========== =====
Total revenue from contracts with
customers 2,449 1,217 16 3,682
Other non-contract fee income 55 - - 55
===================================== ============================= ============================ =========== =====
Fee and commission income 2,504 1,217 16 3,737
Fee and commission expense (337) (538) - (875)
===================================== ============================= ============================ =========== =====
Net fee and commission income 2,167 679 16 2,862
Transactional fees are service charges on deposit accounts, cash
management services and transactional processing fees. This
includes interchange and merchant fee income generated from credit
and bank card usage.
Advisory fees are generated from asset management services and
advisory services related to mergers, acquisitions and financial
restructuring.
Brokerage and execution fees are earned for executing client
transactions with exchanges and over-the-counter markets and
assisting clients in clearing transactions.
Underwriting and syndication fees are earned for the
distribution of client equity or debt securities, and the
arrangement and administration of a loan syndication. This includes
commitment fees to provide loan financing.
6. Tax
Assets Liabilities
================== ==================
As at As at As at As at
30.06.18 31.12.17 30.06.18 31.12.17
Current and deferred tax assets and
liabilities GBPm GBPm GBPm GBPm
==================================== ======== ======== ======== ========
Current tax 1,272 376 (667) (494)
Deferred tax 3,247 3,352 - -
==================================== ======== ======== ======== ========
Total 4,519 3,728 (667) (494)
The deferred tax asset of GBP3,247m (December 2017: GBP3,352m)
included GBP2,663m (December 2017: GBP2,647m) related to amounts in
the US, with the majority of the remaining GBP584m (December 2017:
GBP705m) related to amounts in the UK. Of the total deferred tax
asset, GBP488m (December 2017: GBP596m) related to tax losses and
GBP2,759m (December 2017: GBP2,756m) related to temporary
differences.
In H118 the regulatory ring-fencing requirement was implemented
resulting in a transfer of substantial deferred tax assets and
current tax liabilities to Barclays Bank UK PLC. This has caused
the current tax assets of Barclays Bank PLC to have increased in
H118. The decrease in deferred tax assets was largely offset by the
recognition of deferred tax assets relating to the additional
impairment from the adoption of IFRS 9.
The tax charge for H118 was GBP378m (H117: GBP430m),
representing an effective tax rate of 52.1% (H117: 24.8%). The
effective tax rate is substantially higher than the UK statutory
tax rate of 19% (2017: 19.25%) primarily due to charges for
litigation and conduct which are non-deductible for tax
purposes.
7. Non-controlling interests
Profit attributable Equity attributable
to to
non-controlling interests non-controlling interests
============================ ============================
Half year Half year
ended ended As at As at
30.06.18 30.06.17 30.06.18 31.12.17
GBPm GBPm GBPm GBPm
================================ ============= ============= ============= =============
Barclays Africa Group Limited - 140 - -
Other non-controlling interests (1) 2 2 1
================================ ============= ============= ============= =============
Total (1) 142 2 1
8. Dividends on ordinary shares
Half year Half year
ended 30.06.18 ended 30.06.17
Dividends paid during the period GBPm GBPm
================================= =============== ===============
Ordinary shares(1) 14,168 165
Preference shares 106 134
================================== =============== ===============
Total 14,274 299
1 Included the dividend in specie of GBP14bn paid to Barclays PLC
for transferring the equity ownership in Barclays Bank UK PLC.
On 1 August 2018, Barclays Bank PLC paid a dividend in specie of
GBP269m to Barclays PLC for transferring the equity ownership in
its subsidiary BAGHL. Additionally, an interim dividend for 2018 of
GBP149m will be paid on 11 September 2018.
9. Fair value of financial instruments
This section should be read in conjunction with Note 17, Fair
value of financial instruments of the Barclays Bank PLC Annual
Report 2017 and Note 1, Basis of preparation on pages 17 to 22,
which provides more detail about accounting policies adopted,
valuation methodologies used in calculating fair value and the
valuation control framework which governs oversight of valuations.
There have been no changes in the accounting policies adopted or
the valuation methodologies used.
Valuation
The following table shows Barclays Bank Group's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and balance sheet
classification:
Valuation technique using
===================================
Quoted Significant
market Observable unobservable
prices inputs inputs
(Level (Level (Level
1) 2) 3) Total
As at 30.06.18 GBPm GBPm GBPm GBPm
======================================= ======== ========== ============= =========
Trading portfolio assets 55,851 56,862 3,841 116,554
Financial assets at fair value through
the income statement 5,497 133,267 3,679 142,443
Derivative financial instruments 4,374 219,562 5,066 229,002
Financial assets at fair value through
other comprehensive income 23,305 29,892 105 53,302
Investment property - - 11 11
Total assets 89,027 439,583 12,702 541,312
Trading portfolio liabilities (25,047) (20,918) - (45,965)
Financial liabilities designated
at fair value - (212,056) (337) (212,393)
Derivative financial instruments (3,863) (215,933) (5,293) (225,089)
Total liabilities (28,910) (448,907) (5,630) (483,447)
As at 31.12.17
======================================= ======== ========== ============= =========
Trading portfolio assets 63,925 47,853 1,977 113,755
Financial assets at fair value through
the income statement 4,347 104,188 7,747 116,282
Derivative financial assets 3,786 228,867 5,334 237,987
Available for sale investments 22,841 30,618 395 53,854
Investment property - - 116 116
Assets included in disposal groups
classified as held for sale - - 29 29
======================================= ======== ========== ============= =========
Total assets 94,899 411,526 15,598 522,023
Trading portfolio liabilities (20,905) (16,443) (4) (37,352)
Financial liabilities designated
at fair value - (173,238) (480) (173,718)
Derivative financial liabilities (3,631) (229,517) (5,197) (238,345)
Total liabilities (24,536) (419,198) (5,681) (449,415)
The following table shows Barclays Bank Group's assets and
liabilities that are held at fair value disaggregated by valuation
technique (fair value hierarchy) and product type:
Assets Liabilities
Valuation technique using Valuation technique using
-------------------------------- ================================== ===================================
Quoted Significant Quoted
market Observable unobservable market Observable Significant
prices inputs inputs prices inputs unobservable
(Level (Level (Level (Level (Level inputs
1) 2) 3) 1) 2) (Level 3)
As at 30.06.18 GBPm GBPm GBPm GBPm GBPm GBPm
================================ ======= ========== ============= ======== ========== =============
Interest rate derivatives - 126,010 2,362 - (119,337) (2,747)
Foreign exchange derivatives - 71,828 126 - (70,392) (146)
Credit derivatives - 9,470 1,151 - (9,332) (226)
Equity derivatives 4,374 10,496 1,425 (3,863) (15,138) (2,172)
Commodity derivatives - 1,758 2 - (1,734) (2)
Government and government
sponsored debt 43,762 54,729 25 (9,721) (15,792) -
Corporate debt - 13,971 881 - (5,681) -
Certificates of deposit,
commercial paper and
other money market instruments - 12,933 - - (32,709) (48)
Reverse repurchase and
repurchase agreements - 118,263 - - (137,315) -
Non-asset backed loans - 9,990 3,592 - - -
Asset backed securities - 2,108 592 - (216) -
Issued debt - - - - (40,993) (289)
Equity cash products 40,882 7,115 139 (15,326) (110) -
Private equity investments 9 - 1,088 - - -
Other(1) - 912 1,319 - (158) -
================================ ======= ========== ============= ======== ========== =============
Total 89,027 439,583 12,702 (28,910) (448,907) (5,630)
As at 31.12.17
================================ ======= ========== ============= ======== ========== =============
Interest rate derivatives - 150,325 2,718 - (143,890) (2,867)
Foreign exchange derivatives - 54,907 160 - (53,346) (124)
Credit derivatives - 11,357 1,386 - (11,312) (240)
Equity derivatives 3,786 9,848 1,064 (3,631) (18,527) (1,961)
Commodity derivatives - 2,430 6 - (2,442) (5)
Government and government
sponsored debt 34,782 49,853 49 (13,079) (13,116) -
Corporate debt - 15,098 871 - (3,580) (4)
Certificates of deposit,
commercial paper and
other money market instruments - 1,491 - - (7,377) (250)
Reverse repurchase and
repurchase agreements - 100,038 - - (126,691) -
Non-asset backed loans - 5,710 6,657 - - -
Asset backed securities - 1,837 626 - (221) -
Issued debt - - - - (38,177) (214)
Equity cash products 56,323 7,733 112 (7,826) (388) -
Private equity investments 8 1 817 - - (16)
Assets and liabilities
held for sale - - 29 - - -
Other(1) - 898 1,103 - (131) -
================================ ======= ========== ============= ======== ========== =============
Total 94,899 411,526 15,598 (24,536) (419,198) (5,681)
1 Other includes commercial real estate loans, fund and fund-linked
products, asset backed loans, physical commodities and investment
property.
Assets and liabilities reclassified between Level 1 and Level
2
During the period, there were no material transfers between
Level 1 and Level 2 (period ended December 2017: GBP3,807m
government bonds assets and GBP1,023m/GBP(950)m of commodity
derivative assets and liabilities transferred from Level 1 to Level
2).
Level 3 movement analysis
The following table summarises the movements in the balances of
Level 3 assets and liabilities during the period. The table shows
gains and losses and includes amounts for all financial assets and
liabilities that are held at fair value transferred to and from
Level 3 during the period. Transfers have been reflected as if they
had taken place at the beginning of the year.
Asset and liability moves between Level 2 and Level 3 are
primarily due to i) an increase or decrease in observable market
activity related to an input or ii) a change in the significance of
the unobservable input, with assets and liabilities classified as
Level 3 if an unobservable input is deemed significant.
Level 3 Total gains and
movement losses in the
analysis period recognised
in the income
statement Transfers
=================== ============
Total gains
or losses
recognised in
other
As at Trading Other comprehensive
01.01.18(1) Purchases Sales(2) Issues Settle-ments income income income In Out As at 30.06.18
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Government and
government
sponsored debt 49 11 - - - - - - - (35) 25
Corporate debt 871 35 (17) - (23) 6 - - 15 (6) 881
Non-asset backed
loans 166 2,239 (239) - - 2 - - 11 (6) 2,173
Asset backed
securities 627 100 (99) - - (11) - - 5 (30) 592
Equity cash
products 68 - (7) - - 35 - - 75 (52) 119
Other 196 4 (4) - (10) (21) - - 24 (138) 51
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Trading
portfolio
assets 1,977 2,389 (366) - (33) 11 - - 130 (267) 3,841
Non-asset backed
loans 6,073 16 (4,432) - (238) 4 - - - (4) 1,419
Equity cash
products 8 11 - - - - - - - - 19
Private equity
investments 688 295 (37) - - - 53 - - (14) 985
Other 750 2,359 (1,967) - - 4 110 - - - 1,256
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Financial assets
at fair value
through the
income
statement 7,519 2,681 (6,436) - (238) 8 163 - - (18) 3,679
Equity cash
products 36 - (17) - - - - - - (18) 1
Private equity
investments 129 - (12) - - - - - - (14) 103
Other 40 - (39) - - - - - - - 1
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Financial assets
at fair value
through other
comprehensive
income 205 - (68) - - - - - - (32) 105
Investment
property 116 - (104) - (5) - 4 - - - 11
Trading
portfolio
liabilities (4) - 2 - - - - - 2 - -
Certificates of
deposit,
commercial
paper and other
money market
instruments (250) - 202 - - - - - - - (48)
Issued debt (214) - - (4) 4 19 - - (219) 125 (289)
Other (16) - 16 - 2 - (2) - - - -
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Financial
liabilities
designated at
fair value (480) - 218 (4) 6 19 (2) - (219) 125 (337)
Interest rate
derivatives (150) - - - 96 (46) - - (343) 58 (385)
Foreign exchange
derivatives 37 - - - (17) (30) - - 8 (18) (20)
Credit
derivatives 1,146 2 3 - (15) (210) - - 1 (2) 925
Equity
derivatives (896) 22 (431) - 221 129 - - 33 175 (747)
Commodity - - - - - - - - - - -
derivatives
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Net derivative
financial
Instruments(3) 137 24 (428) - 285 (157) - - (301) 213 (227)
Assets and - - - - - - - - - - -
liabilities held
for sale
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Total 9,470 5,094 (7,182) (4) 15 (119) 165 - (388) 21 7,072
Net assets held -
for sale
measured at fair
value on
non-recurring
basis
================ =========== ========= ======== ====== ============ ======= ========== ============= ===== ===== ===============
Total 9,470 5,094 (7,182) (4) 15 (119) 165 - (388) 21 7,072
1 Balances as at 1 January 2018 include the IFRS 9 transition impact.
Balances as at 31 December 2017 have been presented on an IAS 39
basis.
2 On 1 April 2018, GBP4.4bn of non-asset backed loans were transferred
as part of the disposal of the UK banking business.
3 Derivative financial instruments are represented on a net basis.
On a gross basis, derivative financial assets were GBP5,066m and
derivative financial liabilities were GBP5,293m.
Level 3 movement Total gains
analysis and losses
in the period
recognised
in the income
statement Transfers
================ ===========
Total gains
or losses
recognised
in other
As at Settle- Trading Other comprehensive As at
01.01.17 Purchases Sales ments income income income In Out 30.06.17
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Government and
government
sponsored
debt 3 37 - - - - - - - 40
Corporate debt 969 56 (71) (2) 14 - - 27 (30) 963
Non-asset backed
loans 151 369 (87) (21) (2) - - - (7) 403
Asset backed
securities 515 46 (69) (9) 3 - - - - 486
Equity cash products 77 32 (7) - (13) - - 2 - 91
Other 350 2 (40) (24) (7) - - 11 (30) 262
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Trading portfolio
assets 2,065 542 (274) (56) (5) - - 40 (67) 2,245
Non-asset backed
loans 8,616 - - (1,706) 79 - - - - 6,989
Private equity
investments 562 31 (106) - (3) 36 - 28 (58) 490
Other 769 2,013 (1,265) (59) 24 100 - - - 1,582
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Financial assets
at fair value
through the income
statement 9,947 2,044 (1,371) (1,765) 100 136 - 28 (58) 9,061
Equity cash products 73 - - - - 2 1 6 (42) 40
Private equity
investments 294 - (45) - - (2) 23 34 - 304
Other 5 - (1) (1) - - 1 - - 4
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Available for
sale investments 372 - (46) (1) - - 25 40 (42) 348
Investment property 81 62 - - - (2) - - - 141
Trading portfolio
liabilities (7) - (4) 1 - - - - - (10)
Certificates
of deposit,
commercial
paper and other
money market
instruments (319) - - - - 1 - (31) 92 (257)
Issued debt (298) - - 71 - - - - - (227)
Other (223) - - 27 - (3) - - - (199)
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Financial
liabilities
designated at
fair value (840) - - 98 - (2) - (31) 92 (683)
Interest rate
derivatives 899 27 12 15 (130) - - 419 (202) 1,040
Foreign exchange
derivatives 81 - - (16) 2 5 - (3) (54) 15
Credit derivatives 1,370 - 3 (19) (263) - - (71) - 1,020
Equity derivatives (970) 67 (222) 11 78 - - (45) (1) (1,082)
Commodity
derivatives (5) - - - 3 - - - 7 5
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Net derivative
financial
instruments(1) 1,375 94 (207) (9) (310) 5 - 300 (250) 998
Assets and
liabilities
held for sale 574 - (574) - - - - - - -
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Total 13,567 2,742 (2,476) (1,732) (215) 137 25 377 (325) 12,100
Net liabilities
held for sale
measured at fair
value on
non-recurring
basis (1,339)
==================== ========= ========= ======= ======= ======= ======= ============== ==== ===== =========
Total 10,761
1 Derivative financial instruments are presented on a net basis.
On a gross basis, derivative financial assets were GBP7,872m and
derivative financial liabilities were GBP6,874m.
Unrealised gains and losses on Level 3 financial assets and
liabilities
The following table discloses the unrealised gains and losses
recognised in the period arising on Level 3 financial assets and
liabilities held at the period end.
Income statement
=====================
Trading Other comprehensive
income Other income income Total
Half year ended 30.06.18 GBPm GBPm GBPm GBPm
===================================== ======= ============ =================== =====
Trading portfolio assets (3) - - (3)
Financial assets at fair value
through the income statement 7 116 - 123
Financial liabilities designated
at fair value 18 - - 18
Net derivative financial instruments (155) - - (155)
===================================== ======= ============ =================== =====
Total (133) 116 - (17)
Half year ended 30.06.17
===================================== ======= ============ =================== =====
Trading portfolio assets (25) - - (25)
Financial assets at fair value
through the income statement 73 102 - 175
Available for sale investments - - 25 25
Financial liabilities designated
at fair value 45 (2) - 43
Net derivative financial instruments (305) - - (305)
===================================== ======= ============ =================== =====
Total (212) 100 25 (87)
Valuation techniques and sensitivity analysis
Sensitivity analysis is performed on products with significant
unobservable inputs (Level 3) to generate a range of reasonably
possible alternative valuations. The sensitivity methodologies
applied take account of the nature of valuation techniques used, as
well as the availability and reliability of observable proxy and
historical data and the impact of using alternative models.
Sensitivity analysis of valuations using unobservable inputs
Favourable changes Unfavourable changes
----------------------------- ==================== ======================
Income Income
statement Equity statement Equity
As at 30.06.18 GBPm GBPm GBPm GBPm
============================= ============ ====== ============= =======
Interest rate derivatives 94 - (144) -
Foreign exchange derivatives 9 - (14) -
Credit derivatives 132 - (78) -
Equity derivatives 96 - (97) -
Commodity derivatives 1 - (1) -
Corporate debt 4 - (4) -
Non-asset backed loans 88 - (207) -
Asset backed securities - - - -
Equity cash products 93 - (166) -
Private equity investments 157 - (172) -
Other(1) 2 - (2) -
============================= ============ ====== ============= =======
Total 676 - (885) -
As at 31.12.17
============================= ============ ====== ============= =======
Interest rate derivatives 114 - (138) -
Foreign exchange derivatives 6 - (6) -
Credit derivatives 106 - (79) -
Equity derivatives 99 - (99) -
Commodity derivatives 3 - (3) -
Corporate debt 4 - (3) -
Non-asset backed loans 243 - (468) -
Asset backed securities 1 - - -
Equity cash products 12 24 (8) (24)
Private equity investments 133 13 (138) (13)
Other(1) 5 - (5) -
============================= ============ ====== ============= =======
Total 726 37 (947) (37)
1 Other includes commercial real estate loans, fund and fund-linked
products, asset backed loans, physical commodities and investment
property.
The effect of stressing unobservable inputs to a range of
reasonably possible alternatives alongside considering the impact
of using alternative models, would be to increase fair values by up
to GBP676m (December 2017: GBP763m) or to decrease fair values by
up to GBP885m (December 2017: GBP984m) with substantially all the
potential effect impacting profit and loss rather than
reserves.
Significant unobservable inputs
The valuation techniques and significant unobservable inputs for
assets and liabilities recognised at fair value and classified as
Level 3 are consistent with Note 17, Fair value of financial
instruments in the Barclays Bank PLC Annual Report 2017. The
description of the significant unobservable inputs and the
sensitivity of fair value measurement of the instruments
categorised as Level 3 assets or liabilities to increases in
significant unobservable inputs is also found in Note 17, Fair
value of financial instruments of the Barclays Bank PLC Annual
Report 2017. Assets and liabilities included in disposal groups
classified as held for sale are not included as these are measured
at fair value on a non-recurring basis.
Fair value adjustments
Key balance sheet valuation adjustments are quantified
below:
As at As at
30.06.18 31.12.17
GBPm GBPm
======== ========
Exit price adjustments derived from market bid-offer spreads (397) (391)
Uncollateralised derivative funding (38) (45)
Derivative credit valuation adjustments (123) (103)
Derivative debit valuation adjustments 184 131
-- Exit price adjustments increased GBP6m to GBP397m as a result of
movements in market bid offer spreads
-- Uncollateralised derivative funding decreased GBP7m to GBP38m as
a result of changes in underlying derivative exposures
-- Credit Valuation Adjustments (CVA) increased GBP20m to GBP123m
as a result of widening in counterparty credit spreads
-- Debit Valuation Adjustments (DVA) increased GBP53m to GBP184m as
a result of widening in Barclays' credit spreads
Portfolio exemption
Barclays Bank Group uses the portfolio exemption in IFRS 13,
Fair Value Measurement to measure the fair value of groups of
financial assets and liabilities. Instruments are measured using
the price that would be received to sell a net long position (i.e.
an asset) for a particular risk exposure or to transfer a net short
position (i.e. a liability) for a particular risk exposure in an
orderly transaction between market participants at the balance
sheet date under current market conditions. Accordingly, the
Barclays Bank Group measures the fair value of the group of
financial assets and liabilities consistently with how market
participants would price the net risk exposure at the measurement
date.
Unrecognised gains as a result of the use of valuation models
using unobservable inputs
The amount that has yet to be recognised in income that relates
to the difference between the transaction price (the fair value at
initial recognition) and the amount that would have arisen had
valuation models using unobservable inputs been used on initial
recognition, less amounts subsequently recognised, is GBP124m
(December 2017: GBP109m) for financial instruments measured at fair
value and GBP31m (December 2017: GBP253m) for financial instruments
carried at amortised cost. The increase in financial instruments
measured at fair value of GBP25m was driven by additions GBP44m
(December 2017: GBP34m) offset by a transfer out of GBP15m
(December 2017: GBPnil) to Barclays Bank UK PLC and GBP14m
(December 2017: GBP104m) of amortisation and releases. The decrease
of GBP222m in financial instruments carried at amortised cost was
driven by the transfer out of GBP222m (December 2017: GBPnil) to
Barclays Bank UK PLC and GBP1m (December 2017: GBP22m) of
amortisation and releases offset by additions of GBP1m (December
2017: GBP119m).
Third party credit enhancements
Structured and brokered certificates of deposit issued by
Barclays Bank Group are insured up to $250,000 per depositor by the
Federal Deposit Insurance Corporation (FDIC) in the United States.
The FDIC is funded by premiums that the Barclays Bank Group and
other banks pay for deposit insurance coverage. The carrying value
of these issued certificates of deposit that are designated under
the IFRS 9 fair value option includes this third party credit
enhancement. The on-balance sheet value of these brokered
certificates of deposit amounted to GBP3,862m (December 2017:
GBP4,070m).
Comparison of carrying amounts and fair values for assets and
liabilities not held at fair value
Valuation methodologies employed in calculating the fair value
of financial assets and liabilities measured at amortised cost are
consistent with the Barclays Bank PLC Annual Report 2017
disclosure.
The following table summarises the fair value of financial
assets and liabilities measured at amortised cost on the Barclays
Bank Group's balance sheet:
As at 30.06.18
Carrying amount Fair value
Financial assets GBPm GBPm
Cash collateral and settlement balances 91,549 91,549
Loans and advances at amortised cost
-Home loans 13,282 12,352
-Credit cards, unsecured loans and other retail lending 29,298 31,306
- Finance lease receivables 3,120 3,222
-Corporate loans 89,120 88,199
Reverse repurchase agreements and other similar secured lending 533 533
Assets included in disposal groups classified as held for sale(1) 1,658 1,658
Financial liabilities
Deposits at amortised cost
-Banks (39,685) (39,685)
-Current and demand accounts (71,876) (71,876)
-Savings accounts (27,681) (27,697)
-Other time deposits (54,748) (54,748)
Cash collateral and settlement balances (85,448) (85,448)
Repurchase agreements and other similar secured borrowing (8,645) (8,645)
Debt securities in issue (57,905) (58,342)
Subordinated liabilities (17,190) (18,251)
Liabilities included in disposal groups classified as held for sale(1) (1,660) (1,660)
As at 31.12.17
Carrying amount Fair value
Financial assets GBPm GBPm
Cash collateral and settlement balances 77,172 77,172
Loans and advances at amortised cost
-Home loans 147,002 145,262
-Credit cards, unsecured loans and other retail lending 55,767 55,106
-Finance lease receivables 2,854 2,964
-Corporate loans(2) 124,076 122,209
Reverse repurchase agreements and other similar secured lending 12,546 12,546
Assets included in disposal groups classified as held for sale 1,164 1,195
Financial liabilities
Deposits at amortised cost
-Banks (12,336) (12,341)
-Current and demand accounts (146,255) (146,232)
-Savings accounts (134,339) (134,369)
-Other time deposits (106,259) (106,325)
Cash collateral and settlement balances (68,143) (68,143)
Repurchase agreements and other similar secured borrowing (40,338) (40,338)
Debt securities in issue (69,386) (70,824)
Subordinated liabilities (24,193) (25,451)
Liabilities included in disposal groups classified as held for sale - -
1 For disposal groups measured at carrying amount, items at amortised
cost are included above. Non-financial assets (GBP0.1bn) and liabilities
(GBP0.1bn) within disposal groups measured at carrying amount are
excluded from these disclosures.
2 Corporate loans as at 31 December 2017 include Held to maturity
balance of GBP5.1bn.
10. Subordinated liabilities
Half year ended Year ended
30.06.18 31.12.17
GBPm GBPm
Opening balance as at 1 January 24,193 23,871
Issuances - 3,041
Redemptions (3,075) (1,378)
Other(1) (3,928) (1,341)
Closing balance 17,190 24,193
1 Includes the transfer of subordinated liabilities of GBP3,019m
on 1 April 2018 as part of the disposal of the UK banking business.
Redemptions totalling GBP3,075m include GBP500m Fixed/Floating
Rate Subordinated Callable Notes, EUR1,750m 6% Fixed Rate
Subordinated Notes (GBP1,532m), $1,000m 7.75% Contingent Capital
Notes (GBP713m), $99m 7.7% Undated Subordinated Notes (GBP72m),
EUR40m Floating Rate Subordinated Notes 2018 (GBP35m), EUR235m CMS
Linked Subordinated Notes (GBP206m), JPY 1,500m ShinGinko Tokyo
Limited (GBP10m) and JPY 1,000m The Daisan Bank Limited
(GBP7m).
11. Provisions
As at As at
30.06.18 31.12.17
GBPm GBPm
Payment Protection Insurance (PPI) redress - 1,606
Other customer redress 179 639
Legal, competition and regulatory matters 463 435
Redundancy and restructuring 67 106
Undrawn contractually committed facilities and guarantees(1) 202 79
Onerous contracts 74 143
Sundry provisions 248 294
Total 1,233 3,302
1 The balance as at 30 June 2018 includes IFRS 9 expected credit
losses on committed facilities and guarantees
The provision balances related to the UK banking business which
were transferred on 1 April 2018 consisted of GBP1,698m for PPI,
GBP412m for other customer redress, GBP2m for legal, competition
and other regulatory matters, GBP16m for redundancy and
restructuring, GBP87m for undrawn contractual commitments, GBP48m
for onerous contracts and GBP26m for sundry provisions.
12. Retirement benefits
As at 30 June 2018, Barclays Bank Group's IAS 19 pension surplus
across all schemes was GBP0.9bn (December 2017: GBP0.7bn). The UK
Retirement Fund (UKRF), which is Barclays Bank Group's main scheme,
had an IAS 19 pension surplus of GBP1.1bn (December 2017:
GBP1.0bn). The movement for the UKRF was driven by an increase in
the discount rate, payment of deficit contributions, and lower
expected future price inflation, offset by lower than assumed asset
returns, and new early retirement and cash commutation factors.
UKRF funding valuations
The scheme actuary prepares an annual update of the UKRF funding
position in addition to the full triennial actuarial valuation. The
latest annual update was carried out as at 30 September 2017 and
showed a deficit of GBP4.8bn and a funding level of 86.8%.
The last triennial actuarial valuation of the UKRF had an
effective date of 30 September 2016 and was completed in July 2017.
This valuation showed a funding deficit of GBP7.9bn and a funding
level of 81.5%.
The improvement in funding position between 30 September 2016
and 30 September 2017 was largely due to payment of deficit
contributions, higher than assumed asset returns, higher government
bond yields and transfers out of the scheme.
The recovery plan agreed as part of the 2016 triennial actuarial
valuation requires Barclays Bank PLC to pay deficit contributions
of GBP0.5bn per annum between 2018 and 2020, followed by GBP1.0bn
per annum between 2021 and 2026. The deficit reduction
contributions are in addition to the regular contributions to meet
the Barclays Group's share of the cost of benefits accruing over
each year. The agreement with the UKRF Trustee also takes into
account the changes to the Barclays Group structure that were
implemented as a result of ring-fencing. Barclays Bank PLC remains
as the principal employer of the UKRF. Additional support measures
agreed include a collateral arrangement, joint participation of
Barclays Bank UK PLC until 2025, and support from Barclays PLC
should Barclays Bank PLC not pay the deficit contributions to the
UKRF.
The next triennial actuarial valuation of the UKRF is due to be
completed in 2020 with an effective date of 30 September 2019.
13. Called up share capital and share premium
Ordinary shares
As at 30 June 2018 the issued ordinary share capital of Barclays
Bank PLC comprised of 2,342 million (December 2017: 2,342 million)
ordinary shares of GBP1 each.
Preference shares
As at 30 June 2018 the issued preference share capital of
Barclays Bank PLC comprised of 1,000 Sterling Preference Shares of
GBP1 each (December 2017: 1,000); 31,856 Euro Preference Shares of
EUR100 each (December 2017: 31,856); 58,133 US Dollar Preference
shares of $100 each (December 2017: 58,133); and 106 million US
Dollar Preference Shares of $0.25 each (December 2017: 106
million).
Ordinary Preference Share
share capital share capital premium Total share capital and share premium
Half year ended 30.06.18 GBPm GBPm GBPm GBPm
Opening balance 2,342 19 12,092 14,453
Movements - - - -
Closing balance 2,342 19 12,092 14,453
14. Other equity instruments
Other equity instruments of GBP6,912m (December 2017: GBP8,982m)
include AT1 securities issued to Barclays PLC by Barclays Bank PLC.
The GBP2,070m decrease in AT1 securities was due to the transfer to
Barclays Bank UK PLC.
The AT1 securities are perpetual securities with no fixed
maturity and are structured to qualify as AT1 instruments under CRD
IV. AT1 securities are undated and are repayable, at the option of
Barclays Bank PLC, in whole at the initial call date, or on any
fifth anniversary after the initial call date. In addition, the AT1
securities are repayable, at the option of Barclays Bank PLC, in
whole in the event of certain changes in the tax or regulatory
treatment of the securities. Any repayments require the prior
consent of the PRA.
15. Other reserves As at As at
30.06.18 31.12.17
GBPm GBPm
Currency translation reserve 3,434 3,084
Available for sale reserve - 396
Fair value through other comprehensive income reserve (215) -
Cash flow hedging reserve (219) 184
Own credit reserve (252) (179)
Other reserves 323 323
Total 3,071 3,808
Currency translation reserve
The currency translation reserve represents the cumulative gains
and losses on the retranslation of Barclays Bank Group's net
investment in foreign operations, net of the effects of
hedging.
As at 30 June 2018, there was a credit balance of GBP3,434m
(December 2017: GBP3,084m credit) in the currency translation
reserve. The GBP350m credit movement principally reflected the
strengthening of USD against GBP.
Fair value through other comprehensive income reserve
The fair value through other comprehensive income reserve
represents the unrealised change in the fair value through other
comprehensive income investments since initial recognition.
Following the adoption of IFRS 9, accumulated fair value changes of
GBP260m previously recognised in the available for sale reserve are
now recorded in fair value through other comprehensive income.
As at 30 June 2018, there was a debit balance of GBP215m
(December 2017: GBP396m credit in the available for sale reserve)
in the fair value through other comprehensive income reserve. The
decrease of GBP611m is driven by a GBP136m transfer to retained
earnings on IFRS 9 transition and a GBP329m reduction primarily due
to changes in fair value of BAGL shares. There was also GBP151m of
net gains transferred to net profit and a tax credit of GBP33m with
the remaining balance related to exchange and other movements.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative gains
and losses on effective cash flow hedging instruments that will be
recycled to the income statement when the hedged transactions
affect profit or loss.
As at 30 June 2018, there was a debit balance of GBP219m
(December 2017: GBP184m credit) in the cash flow hedging reserve.
The decrease of GBP403m principally reflected a GBP376m decrease in
the fair value of interest rate swaps held for hedging purposes as
interest rate forward curves increased and GBP161m of gains
transferred to net profit, partially offset by a tax credit of
GBP134m.
Own credit reserve
The own credit reserve reflects the cumulative own credit gains
and losses on financial liabilities at fair value. Amounts in the
own credit reserve is not recycled to profit or loss in future
periods.
As at 30 June 2018, the amount of own credit recognised in the
Barclays Bank Group's other comprehensive income was a debit
balance of GBP252m (December 2017: GBP179m debit). The movement of
GBP73m is mainly attributable to the tightening of Barclays'
funding spreads of GBP98m offset by tax of GBP25m.
Other reserves
As at 30 June 2018, there was a credit balance of GBP323m
(December 2017: GBP323m credit) in other reserves relating to
redeemed ordinary and preference shares issued by Barclays Bank
Group.
16. Contingent liabilities and commitments
As at As at
30.06.18 31.12.17
Contingent liabilities GBPm GBPm
Guarantees and letters of credit pledged as collateral
security 14,051 14,275
Performance guarantees, acceptances and endorsements 4,329 4,737
Total 18,380 19,012
Commitments
Documentary credits and other short-term trade related
transactions 1,055 812
Standby facilities, credit lines and other commitments 244,246 314,761
Total 245,301 315,573
Contingent liabilities and commitment balances transferred to
Barclays Bank UK PLC as part of the business disposal included
guarantees and letters of credit pledged as collateral security of
GBP793m and standby facilities, credit lines and other commitments
of GBP67,791m.
Further details on contingent liabilities relating to legal,
competition and regulatory matters can be found in Note 17, Legal,
competition and regulatory matters.
17. Legal, competition and regulatory matters
Barclays Bank PLC and the Barclays Bank Group face legal,
competition and regulatory challenges, many of which are beyond our
control. The extent of the impact on Barclays of these matters
cannot always be predicted but may materially impact our
operations, financial results, condition and prospects. Matters
arising from a set of similar circumstances can give rise to either
a contingent liability or a provision, or both, depending on the
relevant facts and circumstances.
In connection with the implementation of structural reform in
the UK, on 1 April 2018, the UK banking business was transferred
from Barclays Bank PLC to Barclays Bank UK PLC, a separate
subsidiary of Barclays PLC. This transfer included the rights and
liabilities in respect of certain of the matters described below
(which are also disclosed in the financial statements of Barclays
Bank UK PLC), although Barclays Bank PLC may remain the party on
record to the relevant proceedings.
Investigations into certain advisory services agreements and
other matters and civil action
The UK Serious Fraud Office (SFO), the Financial Conduct
Authority (FCA), the US Department of Justice (DoJ) and the US
Securities and Exchange Commission (SEC) have been conducting
investigations into certain advisory services agreements entered
into by Barclays Bank PLC.
Background information
Barclays Bank PLC entered into two advisory services agreements
with Qatar Holding LLC (Qatar Holding) in June and October 2008
(the Agreements). The FCA commenced an investigation into whether
the Agreements may have related to Barclays PLC's capital raisings
in June and November 2008 (the Capital Raisings). The existence of
the June 2008 advisory services agreement was disclosed, but the
entry into the advisory services agreement in October 2008 and the
fees payable under the Agreements, which amounted to a total of
GBP322m payable over a period of five years, were not disclosed in
the announcements or public documents relating to the Capital
Raisings. The SFO also commenced an investigation into the
Agreements and into a $3bn loan (the Loan) provided by Barclays
Bank PLC in November 2008 to the State of Qatar.
SFO Proceedings
In June 2017, the SFO charged Barclays PLC with two offences of
conspiring with certain former senior officers and employees of
Barclays to commit fraud by false representations relating to the
Agreements and one offence of unlawful financial assistance
contrary to section 151 of the Companies Act 1985 in relation to
the Loan. In February 2018, the SFO also charged Barclays Bank PLC
with the same offence in respect of the Loan. In May 2018, the
Crown Court dismissed all charges against Barclays PLC and Barclays
Bank PLC. In July 2018, the SFO made an application to the High
Court seeking to reinstate against Barclays PLC and Barclays Bank
PLC all of the charges dismissed by the Crown Court. Barclays
intends to defend the application brought by the SFO.
FCA Proceedings and other investigations
In September 2013, the FCA issued warning notices (the Notices)
finding that, while Barclays PLC and Barclays Bank PLC believed at
the time of the execution of the Agreements that there should be at
least some unspecified and undetermined value to be derived from
them, the primary purpose of the Agreements was not to obtain
advisory services but to make additional payments, which would not
be disclosed, for the Qatari participation in the Capital Raisings.
The Notices concluded that Barclays PLC and Barclays Bank PLC were
in breach of certain disclosure-related listing rules and Barclays
PLC was also in breach of Listing Principle 3 (the requirement to
act with integrity towards holders and potential holders of the
Company's shares). In this regard, the FCA considers that Barclays
PLC and Barclays Bank PLC acted recklessly. The financial penalty
provided in the Notices against Barclays is GBP50m. Barclays PLC
and Barclays Bank PLC continue to contest the findings. The FCA
action has been stayed due to the SFO proceedings.
In addition, the DoJ and the SEC have been conducting
investigations relating to the Agreements.
Civil Action
In January 2016, PCP Capital Partners LLP and PCP International
Finance Limited (PCP) served a claim on Barclays Bank PLC seeking
damages for fraudulent misrepresentation and deceit, arising from
alleged statements made by Barclays Bank PLC to PCP in relation to
the terms on which securities were to be issued to potential
investors, allegedly including PCP, in the November 2008 capital
raising. PCP seeks damages of up to GBP1,477m (plus interest from
November 2017) and costs. Barclays Bank PLC is defending the claim
and trial is scheduled to commence in October 2019.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period. PCP has made a
claim against Barclays Bank PLC for damages of up to GBP1,477m plus
interest and costs. This amount does not necessarily reflect
Barclays Bank PLC's potential financial exposure if a ruling were
to be made against it in that matter.
Investigations into certain business relationships
In 2012, the DoJ and SEC commenced investigations in relation to
whether certain relationships with third parties who assist
Barclays PLC to win or retain business are compliant with the US
Foreign Corrupt Practices Act. Various regulators in other
jurisdictions are also being briefed on the investigations.
Separately, Barclays is cooperating with the DoJ and SEC in
relation to an investigation into certain of its hiring practices
in Asia and elsewhere and is keeping certain regulators in other
jurisdictions informed.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Investigations relating to whistleblowing systems and
controls
In April 2017, the FCA and the Prudential Regulation Authority
(PRA) commenced investigations into the Barclays Group Chief
Executive Officer (CEO), as to his individual conduct and senior
manager responsibilities relating to Barclays' whistleblowing
programme and to his attempt in 2016 to identify the author of a
letter that was treated by Barclays Bank PLC as a whistleblow, and
into Barclays Bank PLC, as to its responsibilities relating to the
attempt by the CEO to identify the author of the letter, as well as
Barclays' systems and controls and culture relating to
whistleblowing.
In May 2018, the FCA and PRA published final notices confirming
their finding that the CEO's actions in relation to this matter
represented a breach of Individual Conduct Rule 2 (requirement to
act with due skill, care and diligence). There were no findings by
the FCA or PRA that the CEO acted with a lack of integrity nor any
findings that he lacked fitness and propriety to continue to
perform his role as Barclays Group Chief Executive Officer.
In respect of its investigation relating to Barclays Bank PLC,
the FCA and PRA concluded that they would not take enforcement
action in respect of this matter. However, each of Barclays Bank
PLC and Barclays Bank UK PLC have agreed to be subject to
requirements to report to the FCA and PRA on certain aspects of
their whistleblowing programmes.
Barclays also continues to provide information to, and cooperate
with, authorities in the US with respect to this matter.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Investigations into LIBOR and other benchmarks
Regulators and law enforcement agencies, including certain
competition authorities, from a number of governments have been
conducting investigations relating to Barclays Bank PLC's
involvement in manipulating certain financial benchmarks, such as
LIBOR and EURIBOR.
Background information
In 2012, Barclays Bank PLC announced that it had reached
settlements with the Financial Services Authority (FSA) (as
predecessor to the FCA), the US Commodity Futures Trading
Commission (CFTC) and the DoJ in relation to their investigations
concerning certain benchmark interest rate submissions, and
Barclays Bank PLC paid total penalties of GBP290m. The settlement
with the DoJ was made by entry into a Non-Prosecution Agreement
(NPA) which has now expired. Barclays PLC, Barclays Bank PLC and
Barclays Capital Inc. (BCI) have reached settlements with certain
other regulators and law enforcement agencies. Barclays Bank PLC
continues to respond to requests for information from the SFO in
relation to its ongoing LIBOR investigation, including in respect
of Barclays Bank PLC. The investigation by the prosecutor's office
in Trani, Italy also remains pending.
Claimed amounts/Financial impact
Aside from the settlements discussed above, it is not currently
practicable to provide an estimate of the financial impact of the
actions described on Barclays or what effect they might have upon
Barclays' operating results, cash flows or financial position in
any particular period.
LIBOR and other benchmark civil actions
A number of individuals and corporates in a range of
jurisdictions have threatened or brought civil actions against
Barclays and other banks in relation to LIBOR and/or other
benchmarks.
Background information
Following settlement of the investigations referred to above in
'Investigations into LIBOR and other Benchmarks' various
individuals and corporates in a range of jurisdictions have
threatened or brought civil actions against Barclays. While certain
cases have been dismissed or settled subject to approval from the
court (and in the case of class actions, the right of class members
to opt out of the settlement and to seek to file their own claims),
other actions remain pending and their ultimate impact is
unclear.
USD LIBOR Cases in MDL Court
The majority of the USD LIBOR cases, which have been filed in
various US jurisdictions, have been consolidated for pre-trial
purposes before a single judge in the US District Court in the
Southern District of New York (SDNY) (MDL Court).
The complaints are substantially similar and allege, amongst
other things, that Barclays PLC, Barclays Bank PLC, BCI and other
financial institutions individually and collectively violated
provisions of the US Sherman Antitrust Act (Antitrust Act), the US
Commodity Exchange Act (CEA), the US Racketeer Influenced and
Corrupt Organizations Act (RICO), the Securities Exchange Act of
1934 and various state laws by manipulating USD LIBOR rates.
Certain of the proposed class actions have been settled. Claims
purportedly brought on behalf of plaintiffs that (i) engaged in USD
LIBOR-linked over-the-counter transactions; (ii) purchased USD
LIBOR-linked financial instruments on an exchange; (iii) purchased
USD LIBOR-linked debt securities; or (iv) issued loans linked to
USD LIBOR have been settled for $120m, $20m, $7.1m and $4m
respectively. The settlements remain subject to final court
approval and/or the right of class members to opt out of the
settlement and to seek to file their own claims.
The remaining putative class actions and individual actions seek
unspecified damages with the exception of five lawsuits, in which
the plaintiffs are seeking a combined total in excess of $1.25bn in
actual damages against all defendants, including Barclays Bank PLC,
plus punitive damages. Some of the lawsuits also seek trebling of
damages under the Antitrust Act and RICO.
EURIBOR Case in the SDNY
In 2015, $94m was paid in settlement of a EURIBOR-related class
action. The court entered an order granting final approval of
Barclays' settlement in May 2018.
Additional USD LIBOR Case in the SDNY
In 2015, an individual action against Barclays Bank PLC and
other panel bank defendants was dismissed by the SDNY. The
plaintiff alleged that the panel bank defendants conspired to
increase USD LIBOR, which caused the value of bonds pledged as
collateral for a loan to decrease, ultimately resulting in the sale
of the bonds at a low point in the market. In March 2018, the court
denied the plaintiff's motion for leave to amend its complaint and
dismissed the case. The plaintiff's appeal of the court's order is
pending.
Sterling LIBOR Case in SDNY
In 2015, a putative class action was filed in the SDNY against
Barclays Bank PLC and other Sterling LIBOR panel banks by a
plaintiff involved in exchange-traded and over-the-counter
derivatives that were linked to Sterling LIBOR. The complaint
alleges, among other things, that defendants manipulated the
Sterling LIBOR rate between 2005 and 2010 and, in so doing,
committed CEA, Antitrust Act, and RICO violations. In early 2016,
this class action was consolidated with an additional putative
class action making similar allegations against Barclays Bank PLC
and BCI and other Sterling LIBOR panel banks. The defendants'
motion to dismiss is pending.
Japanese Yen LIBOR Cases in SDNY
In 2012, a putative class action was filed in the SDNY against
Barclays Bank PLC and other Japanese Yen LIBOR panel banks by a
plaintiff involved in exchange-traded derivatives. The complaint
also names members of the Japanese Bankers Association's Euroyen
Tokyo Interbank Offered Rate (Euroyen TIBOR) panel, of which
Barclays Bank PLC is not a member. The complaint alleges, amongst
other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates
and breaches of the CEA and Antitrust Act between 2006 and 2010. In
2014, the court dismissed the plaintiff's antitrust claims in full,
but the plaintiff's CEA claims remain pending. Discovery is
ongoing.
In March 2017, a second putative class action concerning Yen
LIBOR which was filed in the SDNY against Barclays PLC, Barclays
Bank PLC and BCI was dismissed in full. The complaint makes similar
allegations to the 2012 class action. The plaintiffs have appealed
the dismissal.
SIBOR/SOR Case in the SDNY
A putative class action filed in the SDNY against Barclays PLC,
Barclays Bank PLC, BCI and other defendants, alleging manipulation
of the Singapore Interbank Offered Rate (SIBOR) and Singapore Swap
Offer Rate (SOR) was dismissed by the court in relation to claims
against Barclays for failure to state a claim. The plaintiffs
amended their complaint in September 2017, and the defendants'
motion to dismiss is pending.
Non-US Benchmarks Cases
In addition to US actions, legal proceedings have been brought
or threatened against Barclays in connection with alleged
manipulation of LIBOR and EURIBOR and other benchmarks in the UK, a
number of other jurisdictions in Europe, Israel and Argentina.
Additional proceedings in non-US jurisdictions may be brought in
the future.
Claimed amounts/Financial impact
Aside from the settlements discussed above, it is not currently
practicable to provide an estimate of any further financial impact
of the actions described on Barclays or what effect they might have
upon Barclays' operating results, cash flows or financial position
in any particular period.
Foreign Exchange investigations
Various regulatory and enforcement authorities across multiple
jurisdictions have been investigating a range of issues associated
with Foreign Exchange sales and trading, including electronic
trading.
Background information
In 2015 Barclays reached settlements with the CFTC, the DoJ, the
New York State Department of Financial Services (NYDFS), the Board
of Governors of the Federal Reserve System (Federal Reserve) and
the FCA (together, the 2015 Resolving Authorities) in relation to
investigations into certain sales and trading practices in the
Foreign Exchange market. In connection with these settlements,
Barclays paid total penalties of approximately $2.38bn and agreed
to undertake certain remedial actions.
Under the plea agreement with the DoJ, in addition to a criminal
fine, Barclays PLC agreed to a term of probation of three years
during which Barclays PLC, including its subsidiaries, must,
amongst other things, (i) commit no crime whatsoever in violation
of the federal laws of the US, (ii) implement and continue to
implement a compliance program designed to prevent and detect the
conduct that gave rise to the plea agreement, (iii) report credible
evidence of criminal violations of US antitrust or fraud laws to
the relevant US authority, and (iv) strengthen its compliance and
internal controls as required by relevant regulatory or enforcement
agencies. In January 2017, the US District Court for the District
of Connecticut accepted the plea agreement and in accordance with
the agreement sentenced Barclays PLC to pay $650m as a fine and
$60m for violating the NPA (which amounts are part of the $2.38bn
referred to above) and to serve three years of probation from the
date of the sentencing order. Barclays also continues to provide
relevant information to certain of the 2015 Resolving
Authorities.
The full text of the DoJ plea agreement, the orders of the CFTC,
NYDFS and Federal Reserve, and the Final Notice issued by the FCA
related to the settlements referred to above are publicly available
on the 2015 Resolving Authorities' respective websites.
The European Commission is one of several authorities conducting
an investigation into certain trading practices in the Foreign
Exchange market.
The DoJ has also conducted an investigation into conduct
relating to certain trading activities in connection with certain
transactions during 2011 and 2012. Barclays has been providing
information to the DoJ and other relevant authorities reviewing
this conduct. In February 2018, the DoJ concluded its investigation
into conduct relating to certain trading activities in connection
with one of these transactions. The DoJ issued a letter closing its
investigation of Barclays in exchange for, among other things,
Barclays' agreement to pay $12.9m in disgorgement and restitution,
which can be offset by any settlement amount paid as civil
restitution. In January 2018, a Barclays employee currently under
suspension was indicted in connection with this matter.
Claimed amounts/Financial impact
Aside from the settlements discussed above, and a provision of
GBP240m recognised in Q417, it is not currently practicable to
provide an estimate of any further financial impact of the actions
described on Barclays or what effect they might have on Barclays'
operating results, cash flows or financial position in any
particular period.
Civil actions in respect of Foreign Exchange
A number of individuals and corporates in a range of
jurisdictions have threatened or brought civil actions against
Barclays and other banks in relation to Foreign Exchange.
Background information
Following settlement of certain investigations referred to above
in 'Foreign Exchange Investigations' a number of individuals and
corporates in a range of jurisdictions have threatened or brought
civil actions against Barclays and other banks in relation to
Foreign Exchange or may do so in future. Certain of these cases
have been dismissed or have been settled subject to final approval
from the relevant court (and in the case of class actions, the
right of class members to opt out of the settlement and to seek to
file their own claims).
Consolidated FX Action
In 2014, a number of civil actions filed in the SDNY on behalf
of proposed classes of plaintiffs alleging manipulation of Foreign
Exchange markets under the Antitrust Act and New York state law and
naming several international banks as defendants, including
Barclays Bank PLC, were combined into a single consolidated action
(Consolidated FX Action). In 2015, Barclays Bank PLC and BCI
settled the Consolidated FX Action and paid $384m. Certain class
members have opted out of the settlement and some of these may seek
to file their own claims. The settlement is also subject to final
court approval.
ERISA FX Action
Since 2015, several civil actions have been filed in the SDNY on
behalf of proposed classes of plaintiffs purporting to allege
different legal theories of injury (other than those alleged in the
Consolidated FX Action) related to alleged manipulation of Foreign
Exchange rates, including claims under the US Employee Retirement
Income Security Act (ERISA) statute (ERISA Claims), and naming
several international banks as defendants, including Barclays PLC,
Barclays Bank PLC and BCI. The Court has dismissed the ERISA
Claims.
Retail Basis Action
A putative action was filed in the Northern District of
California (and subsequently transferred to the SDNY) against
several international banks, including Barclays PLC and BCI, on
behalf of a putative class of individuals that exchanged currencies
on a retail basis at bank branches (Retail Basis Claims). The Court
has ruled that the Retail Basis Claims are not covered by the
settlement agreement in the Consolidated FX Action. The Court
subsequently dismissed all Retail Basis Claims against Barclays and
all other defendants. The plaintiffs amended their complaint and
sought to expand the action to include credit card, debit card and
wire transactions, which expansion the Court denied. The plaintiffs
have asked the Court to reconsider the expansion decision.
State Law FX Action
In 2016, a putative class action was filed in the SDNY under
federal, New York and California law on behalf of proposed classes
of stockholders of Exchange Traded Funds and others who supposedly
were indirect investors in FX Instruments. The defendants
(including Barclays) moved to dismiss the action. The plaintiffs'
counsel then amended the complaint to bring claims on behalf of a
proposed class of investors under federal and various state laws
who traded FX Instruments through FX dealers or brokers not alleged
to have manipulated Foreign Exchange Rates. A different group of
plaintiffs subsequently filed another action based on the same
theories and asserted substantively similar claims. These two
actions have been consolidated and a consolidated complaint was
filed in June 2017. The defendants (including Barclays) have moved
to dismiss the action.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of any
further financial impact of the actions described above on Barclays
or what effect they might have upon Barclays' operating results,
cash flows or financial position in any particular period.
Civil actions in respect of ISDAFIX
In 2014, a number of ISDAFIX related civil actions were filed in
the SDNY on behalf of proposed class of plaintiffs, alleging that
Barclays Bank PLC, a number of other banks and one broker violated
the Antitrust Act and several state laws by engaging in a
conspiracy to manipulate the USD ISDAFIX. In 2016, Barclays Bank
PLC and BCI entered into a settlement agreement with plaintiffs to
resolve the consolidated action and paid $30m, fully resolving all
ISDAFIX-related claims that were or could have been brought by the
class. The court entered an order granting final approval of the
settlement in June 2018.
Claimed amounts/Financial impact
The principal financial impact of the actions described on
Barclays is reflected in the settlement described above.
Metals investigations
Barclays Bank PLC has provided information to the DoJ, the CFTC
and other authorities in connection with investigations into metals
and metals-based financial instruments.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Civil actions in respect of the gold and silver fix
A number of civil complaints, each on behalf of a proposed class
of plaintiffs, have been consolidated and transferred to the SDNY.
The complaints allege that Barclays Bank PLC and other members of
The London Gold Market Fixing Ltd. manipulated the prices of gold
and gold derivative contracts in violation of the CEA, the
Antitrust Act, and state antitrust and consumer protection laws.
Also in the US, a proposed class of plaintiffs filed a complaint
against a number of banks, including Barclays Bank PLC, BCI and
Barclays Capital Services Ltd., alleging manipulation of the price
of silver in violation of the CEA and antitrust laws. The court has
dismissed this action as against the Barclays entities.
Civil actions have also been filed in Canadian courts against
Barclays PLC, Barclays Bank PLC, Barclays Capital Canada Inc., BCI
and Barclays Capital PLC on behalf of proposed classes of
plaintiffs alleging manipulation of gold and silver prices in
violation of Canadian law.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
US residential and commercial mortgage-related activity and
litigation
There have been various investigations and civil litigation
relating to secondary market trading of US Residential
Mortgage-Backed Securities (RMBS) and US Commercial Mortgage-Backed
Securities (CMBS).
Background information
Barclays' activities within the US residential mortgage sector
during the period from 2005 through 2008 included:
-- sponsoring and underwriting of approximately $39bn of private-label
securitisations;
-- economic underwriting exposure of approximately $34bn for other
private-label securitisations;
-- sales of approximately $0.2bn of loans to government sponsored
enterprises (GSEs);
-- sales of approximately $3bn of loans to others; and
-- sales of approximately $19.4bn of loans (net of approximately $500m
of loans sold during this period and subsequently repurchased)
that were originated and sold to third parties by mortgage originator
affiliates of an entity that Barclays acquired in 2007 (Acquired
Subsidiary)
DoJ Civil Action
In December 2016, the DoJ filed a civil complaint against
Barclays Bank PLC, Barclays PLC, BCI, Barclays Group US Inc.,
Barclays US LLC, BCAP LLC, Securitized Asset Backed Receivables LLC
and Sutton Funding LLC, as well as two former employees, in the US
District Court in the Eastern District of New York (EDNY)
containing a number of allegations, including mail and wire fraud,
relating to mortgage-backed securities sold between 2005 and 2007.
In March 2018, Barclays reached a settlement with the DoJ to
resolve this complaint for a civil monetary penalty of $2bn which
was paid in H118.
RMBS Repurchase Requests
Barclays was the sole provider of various loan-level
representations and warranties (R&Ws) with respect to:
-- approximately $5bn of Barclays sponsored securitisations;
-- approximately $0.2bn of sales of loans to GSEs; and
-- approximately $3bn of loans sold to others
In addition, the Acquired Subsidiary provided R&Ws on all of
the $19.4bn of loans it sold to third parties.
R&Ws on the remaining Barclays sponsored securitisations
were primarily provided by third-party originators directly to the
securitisation trusts with a Barclays subsidiary, such as the
depositor for the securitisation, providing more limited R&Ws.
There are no stated expiration provisions applicable to most
R&Ws made by Barclays, the Acquired Subsidiary or these third
parties.
Under certain circumstances, Barclays and/or the Acquired
Subsidiary may be required to repurchase the related loans or make
other payments related to such loans if the R&Ws are
breached.
The unresolved repurchase requests received on or before 30 June
2018 associated with all R&Ws made by Barclays or the Acquired
Subsidiary on loans sold to GSEs and others and private-label
activities had an original unpaid principal balance of
approximately $2.1bn at the time of such sale.
The unresolved repurchase requests discussed above relate to
civil actions that have been commenced by the trustees for certain
RMBS securitisations in which the trustees allege that Barclays
and/or the Acquired Subsidiary must repurchase loans that violated
the operative R&Ws. Such trustees and other parties making
repurchase requests have also alleged that the operative R&Ws
may have been violated with respect to a greater (but unspecified)
amount of loans than the amount of loans previously stated in
specific repurchase requests made by such trustees. This litigation
is ongoing.
In May 2018, the Acquired Subsidiary agreed to a settlement of a
civil action relating to claims for indemnification for losses
allegedly suffered by a loan purchaser as a result of alleged
breaches of R&Ws provided by the Acquired Subsidiary in
connection with loan sales to the purchaser during the period 1997
to 2007.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of any
further financial impact of the actions described on Barclays or
what effect they might have upon Barclays' operating results, cash
flows or financial position in any particular period.
Alternative trading systems and high-frequency trading
The SEC, the New York State Attorney General (NYAG) and
regulators in certain other jurisdictions investigated a range of
issues associated with alternative trading systems (ATSs),
including dark pools, and the activities of high-frequency
traders.
Background information
In 2014, the NYAG filed a complaint (NYAG Complaint) against
Barclays PLC and BCI in the Supreme Court of the State of New York
alleging, amongst other things, that Barclays PLC and BCI engaged
in fraud and deceptive practices in connection with LX, Barclays'
SEC-registered ATS. In February 2016, Barclays reached separate
settlement agreements with the SEC and the NYAG to resolve those
agencies' claims against Barclays PLC and BCI relating to the
operation of LX and paid $35m to each.
Barclays PLC and BCI have been named in a purported class action
by an institutional financial services firm under California law
based on allegations similar to those in the NYAG Complaint. In
October 2016, the federal court in California granted the motion of
Barclays PLC and BCI to dismiss the entire complaint and the
plaintiffs have appealed the court's decision. In July 2018, the
court of appeals affirmed the dismissal.
Following the filing of the NYAG Complaint, Barclays PLC and BCI
were also named in a putative shareholder securities class action
along with certain current and former executives (Shareholder Class
Action). The plaintiffs claim that holders of Barclays American
Depository Receipts (ADRs) suffered damages when the ADRs declined
in value as a result of the allegations in the NYAG Complaint. A
motion to dismiss the complaint filed by the defendants (including
Barclays PLC and BCI), was granted in part and denied in part by
the court. In February 2016, the court certified the action as a
class action. In November 2017, the appellate court affirmed the
class certification.
Claimed amounts/Financial impact
The class actions seek unspecified monetary damages and
injunctive relief. It is not currently practicable to provide an
estimate of the financial impact of the actions described on
Barclays or what effect they might have upon Barclays' operating
results, cash flows or financial position in any particular
period.
Electricity market action
In 2013, the US Federal Energy Regulatory Commission (FERC)
filed a civil action against Barclays Bank PLC in connection with
allegations that Barclays Bank PLC manipulated the electricity
markets in the Western US. The action was settled for $105m ($70m
penalty and $35m disgorgement) which was paid in 2017. In 2015, a
civil class action complaint seeking damages of $139.3m was filed
in the US District Court for the SDNY against Barclays Bank PLC by
Merced Irrigation District, a California utility company, asserting
antitrust allegations in connection with purported manipulation of
the electricity markets in and around California. The action has
been settled in principle for $29m (subject to final court approval
and to the right of class members to opt out of the settlement and
to seek to file their own claims).
Claimed amounts/Financial impact
Barclays does not expect the financial impact of the actions
described above to be material to Barclays' operating results, cash
flows or financial position.
Treasury auction securities civil actions and related
matters
Various civil actions have been filed against Barclays Bank PLC,
BCI and other financial institutions alleging violations of
antitrust and other laws relating to the markets for US Treasury
securities and Supranational, Sovereign and Agency securities.
Certain governmental authorities are also conducting investigations
relating to trading of certain government securities in various
markets.
Background information
Numerous putative class action complaints have been filed in US
Federal Court against Barclays Bank PLC, BCI and other financial
institutions that have served as primary dealers in US Treasury
securities. Those actions have been consolidated and in November
2017, plaintiffs in the putative class action filed a consolidated
amended complaint in the US Federal Court in New York against the
defendants as well as certain corporations that operate electronic
trading platforms on which US Treasury securities are traded. The
complaint purports to assert claims under US federal antitrust laws
and state common law based on allegations that defendants (i)
conspired to manipulate the US Treasury securities market and/or
(ii) conspired to prevent the creation of certain platforms by
boycotting or threatening to boycott such trading platforms. The
defendants have filed a motion to dismiss.
In addition, certain plaintiffs have filed a related, direct
action against BCI and certain other financial institutions that
have served as primary dealers in US Treasury securities. This
complaint alleges that defendants conspired to fix and manipulate
the US Treasury securities market in violation of US federal
antitrust laws, the CEA and state common law.
In 2017, Barclays PLC, Barclays Bank PLC, BCI, Barclays Services
Limited, Barclays Capital Securities Limited and certain other
financial institutions were named as defendants in a civil
antitrust complaint that alleges that the defendants engaged in a
conspiracy to fix prices and restrain competition in the market for
US dollar-denominated Supranational, Sovereign and Agency bonds
from 2005 through 2015. The defendants have moved to dismiss the
action.
Certain governmental authorities are conducting investigations
into activities relating to the trading of certain government
securities in various markets and Barclays has been providing
information to various authorities on an ongoing basis.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Mexican Government Bond civil action
Barclays PLC, Barclays Bank PLC, BCI, Barclays Bank Mexico,
S.A., and Grupo Financiero Barclays Mexico, S.A., together with
other financial institutions that deal in Mexican government bonds
(MGB) are named as defendants in several putative class actions
which were consolidated in the SDNY in June 2018. The class actions
allege antitrust and state law claims arising out of an alleged
conspiracy to fix the prices of MGB from 2006 through mid-2017.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
American Depositary Shares
Barclays PLC, Barclays Bank PLC and various former members of
Barclays Bank PLC's Board of Directors have been named as
defendants in a securities class action consolidated in the SDNY
that alleges misstatements and omissions in offering documents for
certain American Depositary Shares issued by Barclays Bank PLC in
April 2008 with an original face amount of approximately $2.5
billion (the April 2008 Offering). The plaintiffs assert claims
under the Securities Act of 1933, alleging misstatements and
omissions concerning (amongst other things) Barclays Bank PLC's
portfolio of mortgage-related (including US subprime-related)
securities, Barclays Bank PLC's exposure to mortgage and credit
market risk, and Barclays Bank PLC's financial condition. The
plaintiffs have not specifically alleged the amount of their
damages. In June 2016, the SDNY certified the action as a class
action. In September 2017, the SDNY granted the defendants' motion
for summary judgment. The plaintiffs are appealing this
decision.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the action described on Barclays or what effect
that it might have upon Barclays' operating results, cash flows or
financial position in any particular period.
BDC Finance L.L.C.
BDC Finance L.L.C. (BDC) has filed a complaint against Barclays
Bank PLC alleging breach of contract in connection with a portfolio
of total return swaps governed by an ISDA Master Agreement
(collectively, the Agreement).
Background information
In 2008, BDC filed a complaint in the NY Supreme Court alleging
that Barclays Bank PLC breached the Agreement when it failed to
transfer approximately $40m of alleged excess collateral in
response to BDC's 2008 demand (Demand).
BDC asserts that under the Agreement Barclays Bank PLC was not
entitled to dispute the Demand before transferring the alleged
excess collateral and that even if the Agreement entitled Barclays
Bank PLC to dispute the Demand before making the transfer, Barclays
Bank PLC failed to dispute the Demand. BDC demands damages
totalling $298m plus attorneys' fees, expenses, and pre-judgement
interest. A trial on liability issues concluded in April 2017 and
the court's decision is pending.
In 2011, BDC's investment advisor, BDCM Fund Adviser, L.L.C. and
its parent company, Black Diamond Capital Holdings, L.L.C. also
sued Barclays Bank PLC and BCI in Connecticut State Court for
unspecified damages allegedly resulting from Barclays Bank PLC's
conduct relating to the Agreement, asserting claims for violation
of the Connecticut Unfair Trade Practices Act and tortious
interference with business and prospective business relations. The
parties agreed to stay this case.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period. BDC has made claims
against Barclays totalling $298m plus attorneys' fees, expenses,
and pre-judgement interest. This amount does not necessarily
reflect Barclays' potential financial exposure if a ruling were to
be made against it.
Civil actions in respect of the US Anti-Terrorism Act
Civil complaints against Barclays Bank PLC and other banks
allege engagement in a conspiracy and violation of the US
Anti-Terrorism Act (ATA).
Background information
An amended civil complaint (the Amended Complaint), filed in the
US Federal Court in the EDNY by a group of approximately 350
plaintiffs, alleges that Barclays Bank PLC and a number of other
banks engaged in a conspiracy and violated the ATA by facilitating
US dollar denominated transactions for the Government of Iran and
various Iranian banks, which in turn funded Hezbollah and other
attacks that injured or killed the plaintiffs' family members. The
plaintiffs seek to recover for pain, suffering and mental anguish
pursuant to the provisions of the ATA, which allows for the
tripling of any proven damages and attorneys' fees. Defendants have
moved to dismiss the Amended Complaint. In November 2017, a
separate civil complaint was filed in the US Federal Court in the
SDNY by a group of approximately 160 plaintiffs, alleging claims
under the ATA against Barclays Bank PLC and a number of other banks
substantially similar to those in the Amended Complaint. The
defendants have moved to dismiss this complaint.
In May 2018, a civil complaint was filed in the US Federal Court
in the Middle District of Florida by a single plaintiff acting for
himself alleging claims under the ATA against Barclays Bank PLC and
a number of other banks. Barclays Bank PLC has not been served with
this complaint. In July 2018, the court dismissed the complaint
subject to the right of the plaintiff to file a revised
complaint.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Interest rate swap and credit default swap US civil actions
Barclays PLC, Barclays Bank PLC, and BCI, together with other
financial institutions are defendants in interest rate swap and
credit default swap antitrust civil actions in the SDNY.
Background information
Barclays PLC, Barclays Bank PLC, and BCI, together with other
financial institutions that act as market makers for interest rate
swaps (IRS), Trade Web, and ICAP, are named as defendants in
several antitrust class actions which were consolidated in the SDNY
in 2016. The complaints allege defendants conspired to prevent the
development of exchanges for IRS and demand unspecified money
damages, treble damages and legal fees. Plaintiffs include certain
swap execution facilities, as well as buy-side investors. The
buy-side investors claim to represent a class that transacted in
fixed-for-floating IRS with defendants in the US from 2008 to the
present, including, for example, US retirement and pension funds,
municipalities, university endowments, corporations, insurance
companies and investment funds. The case is in discovery.
In June 2017, a separate suit was filed in the US District Court
in the SDNY against the same financial institution defendants in
the IRS cases, including Barclays PLC, Barclays Bank PLC, and BCI,
claiming that certain conduct alleged in the IRS cases also caused
plaintiff to suffer harm with respect to the Credit Default Swaps
market. Defendants have moved to dismiss this action. Separately,
in June 2018, trueEX LLC filed an antitrust class action in the
SDNY against eleven financial institutions that act as dealers in
the IRS market, including Barclays Bank PLC and BCI, alleging that
the defendants unlawfully conspired to block trueEX from
successfully entering the market with its IRS trading platform.
trueEX LLC also alleges that the defendants more generally
boycotted other anonymous, all-to-all IRS trading platforms.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Portuguese Competition Authority investigation
The Portuguese Competition Authority is investigating whether
competition law was infringed by the exchange of information about
retail credit products amongst 15 banks in Portugal, including
Barclays, over a period of 11 years with particular reference to
mortgages, consumer lending and lending to small and medium
enterprises. Barclays is cooperating with the investigation.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the action described on Barclays or what effect
they might have upon Barclays' operating results, cash flows or
financial position in any particular period.
Investigation into suspected money laundering related to foreign
exchange transactions in South African operation
Absa Bank Limited, which was a subsidiary within the Barclays
Group at the relevant time, identified potentially fraudulent
activity by certain of its customers using advance payments for
imports in 2014 and 2015 to effect foreign exchange transfers from
South Africa to beneficiary accounts located in East Asia, the UK,
Europe and the US. As a result, Barclays conducted a review of
relevant activity, processes, systems and controls. Barclays is
continuing to provide information to relevant authorities as part
of Barclays' ongoing cooperation.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the actions described on Barclays or what
effect they might have upon Barclays' operating results, cash flows
or financial position in any particular period.
Investigations relating to retail structured deposits and
capital protected structured notes
In 2015, the FCA commenced an enforcement investigation relating
to the design, manufacture and sale of structured deposits by
Barclays from November 2009. The investigation is at an advanced
stage. In January 2018, the FCA also commenced an enforcement
investigation relating to the design, manufacture and sale of
capital protected structured notes by Barclays from June 2008 to
July 2014.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the investigations on Barclays or what effect
they might have upon Barclays' operating results, cash flows or
financial position in any particular period.
Investigation into collections and recoveries relating to
unsecured lending
In February 2018, the FCA commenced an enforcement investigation
in relation to whether or not Barclays, from July 2015, implemented
effective systems and controls with respect to collections and
recoveries and whether or not it paid due consideration to the
interests of customers in default and arrears.
Claimed amounts/Financial impact
It is not currently practicable to provide an estimate of the
financial impact of the investigation on Barclays or what effect
that it might have upon Barclays' operating results, cash flows or
financial position in any particular period.
HM Revenue & Customs (HMRC) assessments concerning UK Value
Added Tax
In March 2018 HMRC issued notices that have the effect of
removing certain overseas subsidiaries that have operations in the
UK from Barclays' UK VAT group, in which group supplies between
members are generally free from VAT. The notices have retrospective
effect and unless withdrawn by HMRC would correspond to assessments
of approximately GBP184m, inclusive of interest, of which Barclays
would expect to attribute an amount of approximately GBP130m to
Barclays Bank UK PLC and GBP54m to Barclays Bank PLC. At Barclays'
request, HMRC is conducting a further review, and if the
assessments are not withdrawn Barclays is able to challenge the
assessments by initiating proceedings with the First Tier Tribunal
(Tax Chamber).
Claimed amounts/Financial impact
The total amount of the HMRC assessments is approximately
GBP184m, inclusive of interest.
General
Barclays Bank PLC and its subsidiaries are engaged in various
other legal, competition and regulatory matters in the UK and US
and a number of other overseas jurisdictions. The Barclays Bank
Group is subject to legal proceedings brought by and against
Barclays which arise in the ordinary course of business from time
to time, including (but not limited to) disputes in relation to
contracts, securities, debt collection, consumer credit, fraud,
trusts, client assets, competition, data protection, money
laundering, financial crime, employment, environmental and other
statutory and common law issues.
The Barclays Bank Group is also subject to enquiries and
examinations, requests for information, audits, investigations and
legal and other proceedings by regulators, governmental and other
public bodies in connection with (but not limited to) consumer
protection measures, compliance with legislation and regulation,
wholesale trading activity and other areas of banking and business
activities in which Barclays is or has been engaged. Barclays is
cooperating with the relevant authorities and keeping all relevant
agencies briefed as appropriate in relation to these matters and
others described in this note on an ongoing basis.
At the present time, Barclays Bank PLC does not expect the
ultimate resolution of any of these other matters to have a
material adverse effect on its financial position. However, in
light of the uncertainties involved in such matters and the matters
specifically described in this note, there can be no assurance that
the outcome of a particular matter or matters will not be material
to Barclays Bank PLC's results, operations or cash flow for a
particular period, depending on, amongst other things, the amount
of the loss resulting from the matter(s) and the amount of profit
otherwise reported for the reporting period.
18. Related party transactions
The disposal of the UK banking business to Barclays Bank UK PLC
and transfer of ownership of Barclays Bank UK PLC to Barclays PLC
has materially affected the financial position and the performance
of the Barclays Bank Group during this period with regards to its
related party transactions. Refer to Note 2, Disposal of business
and transfer of ownership of subsidiary for further details,
including intra-group balances.
Parent company
The parent company, which is also the ultimate parent company,
is Barclays PLC, which holds 100% of the issued ordinary shares of
Barclays Bank PLC.
Fellow subsidiaries
Transactions between the Barclays Bank Group and other
subsidiaries of the parent company meet the definition of related
party transactions.
Amounts included in the Barclays Bank Group's financial
statements with other Barclays Group companies are as follows:
Fellow
Parent subsidiaries
Half year ended 30.06.18 GBPm GBPm
Total income (77) 1
Operating expenses (72) (2,045)
As at 30.06.18
Total assets 662 2,749
Total liabilities 21,437 2,588
Except for the above, no related party transactions that have
taken place in the half year ended 30 June 2018 have materially
affected the financial position or performance of the Barclays Bank
Group during this period.
19. Transition disclosures
Impairment allowance reconciliations
Reconciliation from IAS 39 to IFRS 9 - financial assets under
IFRS 9 subject to an increase in impairment allowance
The table below reconciles the closing impairment allowances for
financial assets in accordance with IAS 39, and provisions for loan
commitments and financial guarantee contracts in accordance with
IAS 37, Provisions, Contingent Liabilities and Contingent Assets as
at 31 December 2017, and the opening ECLs determined in accordance
with IFRS 9 as at 1 January 2018.
Reconciliation of
impairment allowance
and provisions
As at 31.12.17 As at 01.01.18
Impairment allowance
under IAS 39 or
provisions under IAS Reclassification Additional IFRS 9 Impairment allowance
37 impact impairment allowance under IFRS 9
GBPm GBPm GBPm GBPm
Loans and advances at
amortised cost and
other assets(1) 4,652 (52) 2,508 7,108
Available for sale
investments/financial
assets at fair value
through other
comprehensive
income 38 (38) 3 3
Total on-balance sheet 4,690 (90) 2,511 7,111
Provision for undrawn
contractually
committed facilities
and guarantee
contracts 79 - 341 420
Total impairment and
provision 4,769 (90) 2,852 7,531
1 Included impairment of GBP5m for cash collateral and settlement balances
and GBP1m for other assets.
-- The introduction of IFRS 9 increased the total impairment allowance
held by Barclays Bank PLC by GBP2.76bn, from GBP4.8bn as at 31
December 2017 to GBP7.5bn as at 1 January 2018, as a result of
earlier recognition of impairment allowances. The movement in allowance
during H118 is provided below.
-- The reclassification impact is due to assets moving to fair value
through income statement treatment that do not have an impairment
allowance under IFRS 9.
Movement in loans and advances at amortised cost
The table below presents an analysis of the movement in exposure
and the impairment allowance for the period.
Gross exposure Impairment Net exposure
allowance
Half year ended 30.06.18(1) GBPm GBPm GBPm
Opening balance 324,846 7,102 317,744
Disposal of business (187,591) (2,936) (184,655)
Movement during the period 1,510 (221) 1,731
Closing balance 138,765 3,945 134,820
1 Other financial assets on balance sheet subject to impairment not
included in the table above, include cash collateral and settlement
balances and financial assets at fair value through other comprehensive
income. These have a total gross exposure of GBP143.7bn and impairment
allowance of GBP7m. In addition, there are off-balance sheet loan
commitments and financial guarantee contracts with a gross exposure
of GBP263.7bn and provision of GBP202m.
Balance sheet movement - impact of transition to IFRS 9 and IFRS 15
The table below presents the impact of the changes to balance sheet presentation and of the
transition to IFRS 9 and IFRS 15 on Barclays Bank PLC's balance sheet showing separately the
changes arising from reclassification and any associated remeasurement, and the impact of
increased impairment.
As at As at As at
31.12.17 31.12.17 01.01.18
Published Balance Revised IFRS 9
IAS 39 sheet IAS 39 IFRS 9 classification IFRS 9 IFRS 9
carrying presentation carrying IFRS 15 presentation and impairment carrying
amount changes(1) amount impact(1) changes(1) measurement change amount
Assets GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Cash and
balances at
central banks 171,036 - 171,036 - - - - 171,036
Items in the
course of
collection
from other
banks 2,153 (2,153) - - - - - -
Loans and
advances to
banks 36,209 (36,209) - - - - - -
Loans and
advances to
customers 365,553 (365,553) - - - - - -
Cash
collateral
and
settlement
balances - 77,172 77,172 - - (2,398) (5) 74,769
Loans and
advances at
amortised
cost - 324,590 324,590 - 5,109 (9,453) (2,502) 317,744
Reverse
repurchase
agreements
and other
similar
secured
lending 12,546 - 12,546 - - (11,949) - 597
Trading
portfolio
assets 113,755 - 113,755 - - 413 - 114,168
Financial
assets
designated at
fair value 116,282 (116,282) - - - - - -
Financial
assets at
fair value
through the
income
statement(2) - 116,282 116,282 - - 23,929 - 140,211
Derivative
financial
instruments 237,987 - 237,987 - - - - 237,987
Financial
investments 58,963 - 58,963 - (57,463) (1,500) - -
Financial
assets at
fair value
through other
comprehensive
income - - - - 52,354 934 - 53,288
Investments in
associates
and joint
ventures 718 - 718 - - (19) - 699
Goodwill and
intangible
assets 4,885 - 4,885 - - - - 4,885
Property,
plant and
equipment 1,519 - 1,519 - - - - 1,519
Current tax
assets 376 - 376 - - - - 376
Deferred tax
assets 3,352 - 3,352 (22) - - 649 3,979
Retirement
benefit
assets 966 - 966 - - - - 966
Prepayments,
accrued
income and
other assets 1,850 (1,850) - - - - - -
Other assets - 4,003 4,003 89 - 28 (1) 4,119
Assets
included in
disposal
groups
classified as
held for sale 1,193 - 1,193 - - - - 1,193
Total assets 1,129,343 - 1,129,343 67 - (15) (1,859) 1,127,536
1 For further details, refer to Note 1, Basis of preparation on pages
17 to 22.
2 Comprised of mandatory fair value assets of GBP130.2bn and designated
fair value assets of GBP10.0bn.
As at As at As at
31.12.17 31.12.17 01.01.18
Published Balance Revised IFRS 9
IAS 39 sheet IAS 39 IFRS 9 classification IFRS 9 IFRS 9
carrying presentation carrying IFRS 15 presentation and impairment carrying
amount changes(1) amount impact(1) changes measurement change amount
Liabilities GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Deposits from
banks 37,906 (37,906) - - - - - -
Deposits at
amortised cost - 399,189 399,189 - - (18,860) - 380,329
Items in the
course of
collection due
to other banks 446 (446) - - - - - -
Customer
accounts 429,426 (429,426) - - - - - -
Cash collateral
and settlement
balances - 68,143 68,143 - - (2,218) - 65,925
Repurchase
agreements and
other similar
secured
borrowing 40,338 - 40,338 - - (25,285) - 15,053
Debt securities
in issue 69,386 - 69,386 - - - - 69,386
Subordinated
liabilities 24,193 - 24,193 - - - - 24,193
Trading
portfolio
liabilities 37,352 - 37,352 - - - - 37,352
Financial
liabilities
designated at
fair value 173,718 - 173,718 - - 46,365 - 220,083
Derivative
financial
instruments 238,345 - 238,345 - - - - 238,345
Current tax
liabilities 494 - 494 - - - - 494
Deferred tax - - - - - - - -
liabilities
Retirement
benefit
liabilities 287 - 287 - - - - 287
Accruals,
deferred income
and other
liabilities 8,416 (8,416) - - - - - -
Other
liabilities - 8,862 8,862 - - - - 8,862
Provisions 3,302 - 3,302 - - - 341 3,643
Total
liabilities 1,063,609 - 1,063,609 - - 2 341 1,063,952
Equity
Called up share
capital and
share premium 14,453 - 14,453 - - - - 14,453
Other reserves 3,808 - 3,808 - - (139) 3 3,672
Retained
earnings 38,490 - 38,490 67 - 122 (2,203) 36,476
Other equity
instruments 8,982 - 8,982 - - - - 8,982
Total equity
excluding
non-controlling
interests 65,733 - 65,733 67 - (17) (2,200) 63,583
Non-controlling
interests 1 - 1 - - - - 1
Total equity 65,734 - 65,734 67 - (17) (2,200) 63,584
Total
liabilities and
equity 1,129,343 - 1,129,343 67 - (15) (1,859) 1,127,536
1 For further details, refer to Note 1, Basis of preparation on pages
17 to 22.
IFRS 9 classification and measurement
This column represents the changes to the balance sheet from
classification and measurement. The net effect is a decrease in
shareholders' equity of GBP17m, with no significant offsetting
movements. The classification changes include the transfer of
certain Barclays International Prime Services and Equities
positions from an amortised cost to a fair value approach.
IFRS 9 impairment change
Additional impairment from the adoption of IFRS 9 is shown in
the impairment change column. The increase in impairment results in
the recognition of a deferred tax asset that will amortise to
current tax over time. The post-tax impact is a reduction in
shareholders' equity of GBP2.2bn. Impairment allowance under IFRS 9
considers both the drawn and the undrawn counterparty exposure. For
retail portfolios, the total impairment allowance is allocated to
the drawn exposure to the extent that the allowance does not exceed
the exposure. Any excess is reported on the liability side of the
balance sheet as a provision. For wholesale portfolios the
impairment allowance on the undrawn exposure is reported on the
liability side of the balance sheet as a provision.
20. Barclays Bank PLC parent condensed balance sheet
As at As at
30.06.18 31.12.17(1)
Assets GBPm GBPm
Cash and balances at central banks 115,924 165,713
Cash collateral and settlement balances 80,263 61,545
Loans and advances at amortised cost 163,028 364,670
Reverse repurchase agreements and other similar secured lending 3,796 22,964
Trading portfolio assets 80,903 79,836
Financial assets at fair value through the income statement(2) 168,108 117,182
Derivative financial instruments 228,839 232,288
Financial investments - 54,583
Financial assets at fair value through other comprehensive income 50,854 -
Investment in associates and joint ventures 138 165
Investment in subsidiaries 14,307 14,614
Goodwill and intangible assets 161 3,498
Property, plant and equipment 116 565
Current tax assets 1,008 115
Deferred tax assets 1,651 1,863
Retirement benefit schemes 1,122 959
Other assets 2,321 4,440
Assets included in disposal groups classified as held for sale 1,761 -
Total assets 914,300 1,125,000
Liabilities
Deposits at amortised cost 228,174 427,185
Cash collateral and settlement balances 71,763 59,258
Repurchase agreements and other similar secured borrowing 15,579 49,883
Debt securities in issue 46,133 55,874
Subordinated liabilities 17,217 24,203
Trading portfolio liabilities 56,384 41,542
Financial liabilities designated at fair value 206,255 169,044
Derivative financial instruments 225,022 229,227
Current tax liabilities 439 242
Retirement benefit liabilities 145 149
Other liabilities 2,992 7,331
Provisions 974 3,028
Liabilities included in disposal groups classified as held for sale 1,762 -
Total liabilities 872,839 1,066,966
Equity
Called up share capital and share premium 14,453 14,453
Other reserves 421 1,093
Retained earnings 19,675 33,506
Other equity instruments 6,912 8,982
Total equity 41,461 58,034
Total liabilities and equity 914,300 1,125,000
1 Barclays Bank PLC introduced changes to the balance sheet presentation
as at 31 December 2017 as a result of the adoption of new accounting
policies on 1 January 2018. The impact of this is as follows: 'Items
in the course of collection from other banks' (December 2017: GBP1,011m)
and 'prepayments, accrued income and other assets' (December 2017:
GBP3,429m) are reported in 'other assets' (December 2017: GBP4,440m).
Equally, 'items in the course of collection due to other banks'
(December 2017: GBP446m) and 'accruals, deferred income and other
liabilities' (December 2017: GBP6,885m) are reported in 'other
liabilities' (December 2017: GBP7,331m). 'Loans and advances to
banks' (December 2017: GBP37,255m) and 'loans and advances to customers'
(December 2017: GBP388,960) have been disaggregated, with GBP364,670m
of these balances now reported in 'loans and advances at amortised
cost' and GBP61,545m now reported in 'cash collateral and settlement
balances'. 'Deposits from banks' (December 2017: GBP38,364m) and
'customer accounts' (December 2017: GBP448,079m) have been disaggregated
with GBP427,185m of these balances now reported in 'deposits at
amortised cost' and GBP59,258m now reported in 'cash collateral
and settlement balances'.
2 Comprised of both designated and mandatory fair value assets.
Other Information
Results timetable(1) Date
2018 Annual Report 21 February 2019
% Change(3)
Exchange rates(2) 30.06.18 31.12.17 30.06.17 31.12.17 30.06.17
Period end - USD/GBP 1.32 1.35 1.30 (2%) 2%
6 month average - USD/GBP 1.38 1.32 1.26 5% 10%
3 month average - USD/GBP 1.36 1.33 1.28 2% 6%
Period end - EUR/GBP 1.13 1.13 1.14 - (1%)
6 month average - EUR/GBP 1.14 1.12 1.16 2% (2%)
3 month average - EUR/GBP 1.14 1.13 1.16 1% (2%)
For further information please contact
Investor relations Media relations
Lisa Bartrip +44 (0) 20 7773 0708 Thomas Hoskin +44 (0) 20 7116
4755
More information on Barclays Bank PLC can be
found on our website: home.barclays.
Registered office
1 Churchill Place, London, E14 5HP, United Kingdom. Tel: +44
(0) 20 7116 1000. Company number: 1026167.
1 Note that this date is provisional and subject to change.
2 The average rates shown above are derived from daily spot rates
during the year.
3 The change is the impact to GBP reported information.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SSISFEFASEIA
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