TIDM12ZB
RNS Number : 6733G
Barclays Bank UK PLC
28 July 2021
Barclays Bank UK PLC
Interim Results Announcement
30 June 2021
Table of Contents
Results Announcement Page
Notes 1
Financial Review 2
Risk Management
-- Risk Management and Principal Risks 4
-- Credit Risk 6
-- Treasury and Capital Risk 16
Statement of Directors' Responsibilities 19
Independent Review Report to Barclays Bank UK PLC 20
Condensed Consolidated Financial Statements 21
Financial Statement Notes 26
Other Information 38
BARCLAYS BANK UK PLC, 1 CHURCHILL PLACE, LONDON, E14 5HP, UNITED
KINGDOM. TELEPHONE: +44 (0) 20 7116 1000. COMPANY NO. 9740322
Notes
Barclays Bank UK PLC is a wholly-owned subsidiary of Barclays
PLC. The consolidation of Barclays Bank UK PLC and its subsidiaries
is referred to as the Barclays Bank UK Group. The term Barclays
Group refers to Barclays PLC. Unless otherwise stated, the income
statement analysis compares the six months ended 30 June 2021 to
the corresponding six months of 2020 and balance sheet analysis as
at 30 June 2021 with comparatives relating to 31 December 2020. The
abbreviations 'GBPm' and 'GBPbn' represent millions and thousands
of millions of Pounds Sterling 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 given point in
time.
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/investor-relations/reports-and-events/latest-financial-results.
The information in this announcement, which was approved by the
Board of Directors on 27 July 2021, does not comprise statutory
accounts within the meaning of Section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2020 which
contained an unmodified 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.
The Barclays Bank UK Group is an issuer in the debt capital
markets and meets with investors via formal road-shows and other ad
hoc meetings. The Barclays Bank UK Group expects that from time to
time over the coming half year it will meet with investors to
discuss these results and other matters relating to the Barclays
Bank UK Group.
Forward-looking statements
This document contains certain forward-looking statements with
respect to the Barclays Bank UK Group. Barclays 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. Forward-looking statements can be made in writing
but also may be made verbally by members of the management of the
Barclays Bank UK Group (including, without limitation, during
management presentations to financial analysts) in connection with
this document. Examples of forward-looking statements include,
among others, statements or guidance regarding or relating to the
Barclays Bank UK Group's future financial position, income growth,
assets, impairment charges, provisions, business strategy, capital,
leverage and other regulatory ratios, capital distributions
(including dividend pay-out ratios and expected payment
strategies), 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, projected employee numbers, IFRS 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. The forward-looking
statements speak only as at the date on which they are made.
Forward-looking statements may be affected by changes in
legislation, the development of standards and interpretations under
IFRS, including 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,
the Barclays Bank UK Group's ability along with governments and
other stakeholders to measure, manage and mitigate the impacts of
climate change effectively, 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;
macroeconomic and business conditions in the UK and in any
systemically important economy which impacts the UK; 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 entity within the Barclays Bank UK
Group or any securities issued by such entities; direct and
indirect impacts of the coronavirus (COVID-19) pandemic;
instability as a result of the UK's exit from the European Union
("EU"), the effects of the EU-UK Trade and Cooperation Agreement
and the disruption that may subsequently result in the UK; the risk
of cyber-attacks, information or security breaches or technology
failures on the Barclays Bank UK Group's reputation, business or
operations; and the success of future acquisitions, disposals and
other strategic transactions. A number of these influences and
factors are beyond the Barclays Bank UK Group's control. As a
result, the Barclays Bank UK Group's actual financial position,
future results, capital distributions, capital, leverage or other
regulatory ratios or other financial and non-financial metrics or
performance measures may differ materially from the statements or
guidance set forth in the Barclays Bank UK Group's forward-looking
statements. Additional risks and factors which may impact the
Barclays Bank UK Group's future financial condition and performance
are identified in Barclays Bank UK PLC's 2020 Annual Report, which
is available on barclays.com.
Subject to Barclays' obligations under the applicable laws and
regulations of any relevant jurisdiction, (including, without
limitation, the UK), 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 UK Group results
for the half year ended 30.06.21 30.06.20
GBPm GBPm % Change
=============================================== ======== ======== ========
Total income 3,167 3,240 (2)
Credit impairment releases/(charges) 443 (1,055)
=============================================== ======== ======== ========
Net operating income 3,610 2,185 65
Operating expenses (2,243) (2,188) (3)
Litigation and conduct (28) (11)
=============================================== ======== ======== ========
Total operating expenses (2,271) (2,199) (3)
Profit on disposal of subsidiaries, associates
and joint ventures - 12
=============================================== ======== ======== ========
Profit/(loss) before tax 1,339 (2)
Tax (charge)/credit (176) 91
=============================================== ======== ======== ========
Profit after tax 1,163 89
Attributable to:
=============================================== ======== ======== ========
Equity holders of the parent 1,077 (5)
Other equity instrument holders 86 94 (9)
=============================================== ======== ======== ========
Profit after tax 1,163 89
As at As at
30.06.21 31.12.20
Balance sheet information GBPm GBPm % Change
========= ========= ========
Assets
Loans and advances at amortised cost 219,064 211,649 4
Cash and balances at central banks 53,159 35,218 51
Liabilities
Deposits at amortised cost 255,503 240,535 6
As at As at
30.06.21 31.12.20
=====================================
Capital and liquidity metrics GBPbn GBPbn
===================================== ========= =========
Common equity tier 1 (CET1) ratio(1) 16.0% 15.6%
Liquidity pool 80 60
Liquidity coverage ratio 203% 160%
1 CET1 capital ratio is calculated applying the IFRS 9 transitional
arrangements of the Capital Requirements Regulation (CRR) as amended
by the Capital Requirements Regulation II (CRR II). For further
detail on the application of CRR and CRR II in the UK, see page
17.
Financial Review
Barclays Bank UK Group overview
Barclays Bank UK PLC is the ring-fenced bank within the Barclays
Group. The Barclays Bank UK Group contains the majority of the
Barclays Group's Barclays UK division, including the Personal
Banking, Business Banking and Barclaycard Consumer UK businesses
other than the Barclays Partner Finance business.
Barclays Bank UK Group performance
-- H121 profit before tax was GBP1,339m (H120: GBP2m loss before tax).
The Barclays Bank UK Group continued to deliver growth in balances
throughout H121, increasing mortgage lending by GBP6.9bn and growing
deposits by GBP15.0bn, adding to a strong liquidity position
-- Total income decreased 2% to GBP3,167m, consisting of:
- Personal Banking income increased 6% to GBP1,970m reflecting strong
growth in mortgages alongside improved margins, balance growth
in deposits and the non-recurrence of COVID-19 customer support
actions, partially offset by deposit margin compression from lower
interest rates and lower unsecured lending balances
- Barclaycard Consumer UK income decreased 25% to GBP605m as reduced
borrowing and continued payments by customers resulted in a lower
level of interest earning lending (IEL) balances
- Business Banking income increased 19% to GBP684m due to lending
and deposit balance growth from GBP12.1bn of government scheme
lending and the non-recurrence of COVID-19 and related customer
support actions, partially offset by deposit margin compression
from lower interest rates
- This was partially offset by an expense of GBP92m in Head Office
due to the impact of hedge accounting
-- Credit impairment net release of GBP443m (H120: GBP1,055m charge)
driven by an improved macroeconomic outlook used in the Q221 scenario
refresh. The primary driver is a reduction in the anticipated peak
of UK unemployment with the majority of this provision release
in UK cards and personal loans. As at 30 June 2021, 30 and 90 day
arrears rates in UK cards were 1.4% (H120: 2.0%) and 0.6% (H120:
1.0%) respectively
-- Total operating expenses increased 3% to GBP2,271m reflecting investment
spend and higher operational and customer service costs, including
ongoing financial assistance, partially offset by efficiency savings
-- The tax charge for H121 was GBP176m (H120: GBP91m credit). This
includes the GBP191m tax benefit recognised for the re-measurement
of the Barclays Bank UK Group's deferred tax assets as a result
of the UK corporation tax rate increase from 19% to 25% from 1
April 2023
Balance sheet, capital and liquidity
-- Loans and advances at amortised cost increased 4% to GBP219.1bn
predominantly from GBP6.9bn of mortgage growth following continued
strong flow of new applications as well as strong customer retention,
offset by a GBP1.8bn decrease in the Education, Social Housing
and Local Authority (ESHLA) portfolio and GBP1.5bn lower unsecured
lending balances, albeit loans and advances in Barclaycard Consumer
UK stabilised in Q221
-- Deposits at amortised cost increased 6% to GBP255.5bn reflecting
an increase of GBP11.3bn and GBP3.7bn in Personal Banking and Business
Banking respectively, further strengthening the liquidity position
-- Cash and balances at central banks increased 51% to GBP53.2bn due
to an increased liquidity pool, predominantly driven by an increase
in customer deposits
-- The Barclays Bank UK Group CET1 ratio as at 30 June 2021 was 16.0%,
which is above regulatory capital minimum requirements
-- The Barclays Bank UK Group liquidity pool increased to GBP80bn
(December 2020: GBP60bn) and the liquidity coverage ratio (LCR)
increased to 203% (December 2020: 160%) driven by continued deposit
growth and further borrowing from the Bank of England's Term Funding
Scheme with additional incentives for SMEs, which were partly offset
by increased mortgage lending
Risk Management
Risk m anagement and p rincipal r isks
The roles and responsibilities of the business groups, Risk and
Compliance, in the management of risk in the Barclays Bank UK Group
are defined in the Enterprise Risk Management Framework. The
purpose of the framework is to identify the principal risks of the
Barclays Bank UK Group, the process by which the Barclays Bank UK
Group sets its appetite for these risks in its business activities,
and the consequent limits which it places on related risk
taking.
The framework identifies eight principal risks: credit risk,
market risk, treasury and capital risk, operational risk, model
risk, conduct risk, reputation risk and legal risk. Further detail
on these risks and how they are managed is available in the
Barclays Bank UK PLC Annual Report 2020 (pages 32 to 51) or online
at home.barclays/annualreport.
Material existing and emerging risks
There have been no significant changes to these principal risks
or previously identified material existing and emerging risks in
the period other than an update to the risk relating to the impact
of benchmark interest rates on the Barclays Bank UK Group as a
result of developments relating to benchmark reform, as set out
below.
Impact of benchmark interest rate reforms on the Barclays Bank
UK Group
For several years, global regulators and central banks have been
driving international efforts to reform key benchmark interest
rates and indices, such as the London Interbank Offered Rate
(LIBOR), which are used to determine the amounts payable under a
wide range of transactions and make them more reliable and robust.
This has resulted in significant changes to the methodology and
operation of certain benchmarks and indices, the adoption of
alternative "risk-free" reference rates (RFRs) and the proposed
discontinuation of certain reference rates (including LIBOR), with
further changes anticipated, including legislative proposals to
deal with 'tough legacy' contracts that cannot convert into or
cannot add fall-back RFRs. The consequences of reform are
unpredictable and may have an adverse impact on any financial
instruments linked to, or referencing, any of these benchmark
interest rates.
The Barclays Bank UK Group predominantly offers products which
reference central bank rates rather than LIBOR and other indices
which are likely to be subject to reform. Consequently, the product
offering and business model are unlikely to be significantly
affected. Nevertheless, there are other ways the Barclays Bank UK
Group could be affected.
Uncertainty as to the nature of such potential changes, the
availability and/or suitability of alternative RFRs, the
participation of customers and third-party market participants in
the transition process and associated challenges with respect to
required documentation changes, and other reforms may adversely
affect a broad range of transactions (including any securities,
loans and derivatives which use LIBOR to determine the amount of
interest payable that are included in the Barclays Bank UK Group's
financial assets and liabilities) that use these reference rates
and indices and introduce a number of risks for the Barclays Bank
UK Group, including, but not limited to:
-- Conduct risk: in undertaking actions to transition away from using
certain reference rates (such as LIBOR) to new alternative RFRs,
the Barclays Bank UK Group faces conduct risks. These may lead
to customer complaints, regulatory sanctions or reputational impact
if the Barclays Bank UK Group is considered to be (among other
things) (i) undertaking market activities that are manipulative
or create a false or misleading impression, (ii) misusing sensitive
information or not identifying or appropriately managing or mitigating
conflicts of interest, (iii) providing customers with inadequate
advice, misleading information, unsuitable products or unacceptable
service, (iv) not taking a consistent approach to remediation for
customers in similar circumstances, (v) unduly delaying the communication
and migration activities in relation to client exposure, leaving
them insufficient time to prepare or (vi) colluding or inappropriately
sharing information with competitors.
-- Litigation risk: members of the Barclays Bank UK Group may face
legal proceedings, regulatory investigations and/or other actions
or proceedings regarding (among other things) (i) the conduct risks
identified above, (ii) the interpretation and enforceability of
provisions in LIBOR-based contracts, and (iii) the Barclays Bank
UK Group's preparation and readiness for the replacement of LIBOR
with alternative RFRs.
-- Financial risk: the valuation of certain of the Barclays Bank
UK Group's financial assets and liabilities may change. Moreover,
transitioning to alternative RFRs may impact the ability of members
of the Barclays Bank UK Group to calculate and model amounts receivable
by them on certain financial assets and determine the amounts payable
on certain financial liabilities (such as debt securities issued
by them) because currently alternative RFRs (such as the Sterling
Overnight Index Average (SONIA) and the Secured Overnight Financing
Rate (SOFR)) are look-back rates whereas term rates (such as LIBOR)
allow borrowers to calculate at the start of any interest period
exactly how much is payable at the end of such interest period.
This may have an adverse effect on the Barclays Bank UK Group's
cash flows.
-- Operational risk: changes to existing reference rates and indices,
discontinuation of any reference rate or index and transition to
alternative RFRs may require changes to the Barclays Bank UK Group's
IT systems, trade reporting infrastructure, operational processes,
and controls. In addition, if any reference rate or index (such
as LIBOR) is no longer available to calculate amounts payable,
the Barclays Bank UK Group may incur additional expenses in amending
documentation for new and existing transactions and/or effecting
the transition from the original reference rate or index to a new
reference rate or index.
-- Accounting ris k: an inability to apply hedge accounting in accordance
with IAS 39 could lead to increased volatility in the Barclays
Bank UK Group's financial results and performance.
Any of these factors may have an adverse effect on the Barclays
Bank UK Group's business, results of operations, financial
condition and prospects.
For further details on the impacts of benchmark interest rate
reforms on the Barclays Bank UK Group, see Note 35 to Barclays Bank
UK PLC's audited financial statements for the year ended 31
December 2020 and Note 17.
Loans and advances at amortised cost by product
The table below p resents a breakdown of loans and advances at
amortised cost and the impairment allowance with stage allocation
by asset classification.
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, as expected
credit loss (ECL) is not reported separately. 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.
Stage 2
============================
<=30 >30
Not days days
Stage past past past Stage
As at 30.06.21 1 due due due Total 3 Total(1)
Gross exposure GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 134,528 17,348 1,645 680 19,673 1,218 155,419
Credit cards, unsecured loans
and other retail lending 11,066 3,070 117 73 3,260 1,113 15,439
Wholesale loans 46,870 2,3065 18 2,329 1,425 50,624
============================== ======= ====== ==== ===== ====== ===== ========
Total 192,464 22,724 1,767 771 25,262 3,756 221,482
Impairment allowance
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 8 195 6 30 48 86
Credit cards, unsecured loans
and other retail lending 205 858 59 50 967 760 1,932
Wholesale loans 143 65- 1 66 191 400
============================== ======= ====== ==== ==== ====== ===== ========
Total 356 942 64 57 1,063 999 2,418
Net exposure
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 134,520 17,329 1,640 674 19,643 1,170 155,333
Credit cards, unsecured loans
and other retail lending 10,861 2,212 58 23 2,293 353 13,507
Wholesale loans 46,727 2,2415 17 2,263 1,234 50,224
============================== ======= ====== ==== ===== ====== ===== ========
Total 192,108 21,782 1,703 714 24,199 2,757 219,064
Coverage ratio %% %% %% %
============================== ======= ===== ==== ==== ===== ==== =======
Home loans - 0.1 0.3 0.9 0.2 3.9 0.1
Credit cards, unsecured loans
and other retail lending 1.9 27.9 50.4 68.5 29.7 68.3 12.5
Wholesale loans 0.3 2.8- 5.6 2.8 13.4 0.8
============================== ======= ====== ==== ===== ====== ===== ========
Total 0.2 4.1 3.6 7.4 4.2 26.6 1.1
As at 31.12.20
Gross exposure GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 129,012 15,890 1,732 789 18,411 1,135 148,558
Credit cards, unsecured loans
and other retail lending 11,823 4,350 143 110 4,603 1,270 17,696
Wholesale loans 42,073 4,978 10 76 5,064 1,407 48,544
============================== ======= ====== ===== ===== ====== ===== ========
Total 182,908 25,218 1,885 975 28,078 3,812 214,798
Impairment allowance
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 27 177 8 32 45 104
Credit cards, unsecured loans
and other retail lending 259 1,261 68 82 1,411 957 2,627
Wholesale loans 36 1601 2 163 219 418
============================== ======= ====== ==== ==== ====== ===== ========
Total 322 1,438 76 92 1,606 1,221 3,149
Net exposure
============================== ======= ====== ===== ===== ====== ===== ========
Home loans 128,985 15,873 1,725 781 18,379 1,090 148,454
Credit cards, unsecured loans
and other retail lending 11,564 3,089 75 28 3,192 313 15,069
Wholesale loans 42,037 4,8189 74 4,901 1,188 48,126
============================== ======= ====== ==== ===== ====== ===== ========
Total 182,586 23,780 1,809 883 26,472 2,591 211,649
Coverage ratio %% %% %% %
============================== ======= ===== ==== ==== ===== ==== =======
Home loans - 0.1 0.4 1.0 0.2 4.0 0.1
Credit cards, unsecured loans
and other retail lending 2.2 29.0 47.6 74.5 30.7 75.4 14.8
Wholesale loans 0.1 3.2 10.0 2.6 3.2 15.6 0.9
============================== ======= ====== ===== ===== ====== ===== ========
Total 0.2 5.7 4.0 9.4 5.7 32.0 1.5
1 Other financial assets 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,
accrued income and sundry debtors. These have a total gross exposure
of GBP26.4bn (December 2020: GBP30.7bn) and an impairment allowance
of GBP3m (December 2020: GBP15m). This comprises GBP1m (December
2020: GBP4m) on GBP26.4bn Stage 1 assets (December 2020: GBP30.1bn),
GBP2m (December 2020: GBP3m) on GBP22m Stage 2 assets (December
2020: GBP588m) and GBPnil (December 2020: GBP8m) on GBPnil Stage
3 other assets (December 2020: GBP10m). Loan commitments and financial
guarantee contracts have total ECL of GBP136m (December 2020: GBP293m).
Movement in gross exposure and impairment allowance including
provisions for loan commitments and financial guarantees
The following tables present a reconciliation of the opening to
the closing balance of the exposure and impairment allowance. An
explanation of the terms 12-month ECL, lifetime ECL and
credit-impaired is included in the Barclays Bank UK PLC Annual
Report 2020 on page 139. Transfers between stages in the tables
have been reflected as if they had taken place at the beginning of
the year. The movements are measured over a 6-month period.
Loans and advances at amortised cost
Stage 1 Stage 2 Stage 3 Total
Gross Gross Gross Gross
exposure ECL exposure ECL exposure ECL exposure ECL
Home loans GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ========= ===== ========= ===== ========= ===== ========= =====
As at 1 January 2021 129,012 27 18,411 32 1,135 45 148,558 104
-----
Transfers from Stage
1 to Stage 2 (6,088) (2) 6,088 2 - - - -
Transfers from Stage
2 to Stage 1 3,367 6 (3,367) (6) - - - -
Transfers to Stage
3 (90) - (293) (3) 383 3 - -
Transfers from Stage
3 7 - 84 - (91) - - -
Business activity
in the year 18,406 1 380 1 - - 18,786 2
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk
parameter changes (4,185) (23) (620) 5 (70) 9 (4,875) (9)
Final repayments (5,901) (1) (1,010) (1) (137) (7) (7,048) (9)
Disposals - - - - - - - -
Write-offs(1) - - - - (2) (2) (2) (2)
=========================== ========= ===== ========= ===== ========= ===== ========= =====
As at 30 June 2021(2) 134,528 8 19,673 30 1,218 48 155,419 86
Credit cards, unsecured loans and other retail lending
As at 1 January 2021 11,823 259 4,603 1,411 1,270 957 17,696 2,627
-----
Transfers from Stage
1 to Stage 2 (1,029) (40) 1,029 40 - - - -
Transfers from Stage
2 to Stage 1 1,757 511 (1,757) (511) - - - -
Transfers to Stage
3 (127) (5) (285) (154) 412 159 - -
Transfers from Stage
3 16 8 18 8 (34) (16) - -
Business activity
in the year 903 13 35 8 10 3 948 24
Changes to models
used for calculation(3) - (2) - (6) - 14 - 6
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk
parameter changes(4) (1,785) (521) (336) 182 (47) 91 (2,168) (248)
Final repayments (492) (18) (47) (11) (64) (33) (603) (62)
Disposals(5) - - - - (82) (63) (82) (63)
Write-offs(1) - - - - (352) (352) (352) (352)
=========================== ========= ===== ========= ===== ========= ===== ========= =====
As at 30 June 2021(2) 11,066 205 3,260 967 1,113 760 15,439 1,932
1 In H121, gross write-offs amounted to GBP380m (H120: GBP304m) and
post write-off recoveries amounted to GBP16m (H120: GBP14m). Net
write-offs represent gross write-offs less post write-off recoveries
and amounted to GBP364m (H120: GBP290m).
2 Other financial assets 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,
accrued income and sundry debtors. These have a total gross exposure
of GBP26.4bn (December 2020: GBP30.7bn) and an impairment allowance
of GBP3m (December 2020: GBP15m). This comprises GBP1m (December
2020: GBP4m) on GBP26.4bn Stage 1 assets (December 2020: GBP30.1bn),
GBP2m (December 2020: GBP3m) on GBP22m Stage 2 assets (December
2020: GBP588m) and GBPnil (December 2020: GBP8m) on GBPnil Stage
3 other assets (December 2020: GBP10m).
3 Changes to models used for calculation include a GBP6m movement
in Credit cards, unsecured loans and retail lending. These reflect
methodology changes made during the year. Barclays continually
review the output of models to determine accuracy of the ECL calculation
including review of model monitoring, external benchmarking and
experience of model operation over an extended period of time.
This ensures that the models used continue to reflect the risks
inherent across the businesses.
4 Transfers and risk parameter changes include a GBP0.3bn net release
in ECL arising from a reclassification of GBP2.2bn gross loans
and advances from Stage 2 to Stage 1 in Credit cards, unsecured
loans and other retail lending. The reclassification followed a
review of back-testing of results which indicated that accuracy
of origination probability of default characteristics require management
adjustments to correct and was first established in Q220.
5 The GBP82m disposals reported within Credit cards, unsecured loans
and other retail lending portfolio relate to debt sales undertaken
during the period.
Stage 1 Stage 2 Stage 3 Total
Gross Gross Gross Gross
exposure ECL exposure ECL exposure ECL exposure ECL
Wholesale loans GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================== ========= ==== ========= ==== ========= ==== ========= =====
As at 1 January 2021 42,073 36 5,064 163 1,407 219 48,544 418
-----
Transfers from Stage
1 to Stage 2 (606) (2) 606 2 - - - -
Transfers from Stage
2 to Stage 1 3,113 77 (3,113) (77) - - - -
Transfers to Stage
3 (151) - (121) (6) 272 6 - -
Transfers from Stage
3 120 13 101 5 (221) (18) - -
Business activity in
the year 6,154 3 58 1 113 7 6,325 11
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk parameter
changes (1,805) 17 (162) (19) (105) 4 (2,072) 2
Final repayments (1,373) (1) (104) (3) (15) (1) (1,492) (5)
Disposals(1) (655) - - - - - (655) -
Write-offs(2) - - - - (26) (26) (26) (26)
============================== ========= ==== ========= ==== ========= ==== ========= =====
As at 30 June 2021(3) 46,870 143 2,329 66 1,425 191 50,624 400
Reconciliation of ECL movement to impairment charge/(release)
for the period GBPm
========= -----
Home loans (16)
Credit cards, unsecured loans and other retail lending (280)
Wholesale loans 8
ECL movement excluding assets derecognised due to disposals
and write-offs (288)
Recoveries and reimbursements (16)
Exchange and other
adjustments(4) 22
Impairment charge on loan commitments and other financial
guarantees (158)
Impairment charge on other financial assets(3) (3)
========= =====
Income statement release for the period (443)
1 The GBP0.7bn disposal reported within Wholesale loans relates to
the sale of debt securities as part of Group Treasury operations.
2 In H121, gross write-offs amounted to GBP380m (H120: GBP304m) and
post write-off recoveries amounted to GBP16m (H120: GBP14m). Net
write-offs represent gross write-offs less post write-off recoveries
and amounted to GBP364m (H120: GBP290m).
3 Other financial assets 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,
accrued income and sundry debtors. These have a total gross exposure
of GBP26.4bn (December 2020: GBP30.7bn) and an impairment allowance
of GBP3m (December 2020: GBP15m). This comprises GBP1m (December
2020: GBP4m) on GBP26.4bn Stage 1 assets (December 2020: GBP30.1bn),
GBP2m (December 2020: GBP3m) on GBP22m Stage 2 assets (December
2020: GBP588m) and GBPnil (December 2020: GBP8m) on GBPnil Stage
3 other assets (December 2020: GBP10m).
4 Includes interest and fees in suspense.
Loan commitments and financial guarantees
Stage 1 Stage 2 Stage 3 Total
Gross Gross Gross Gross
exposure ECL exposure ECL exposure ECL exposure ECL
Home loans GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== ========= ===== ========= ===== ========= ==== ========= =====
As at 1 January 2021 11,737 - 513 - 1 - 12,251 -
Net transfers between
stages (74) - 71 - 3 - - -
Business activity
in the year 6,281 - - - - - 6,281 -
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk
parameter changes (7,392) - (17) - (1) - (7,410) -
Limit management and
final repayments (150) - (22) - - - (172) -
=========================== ========= ===== ========= ===== ========= ==== ========= =====
As at 30 June 2021 10,402 - 545 - 3 - 10,950 -
Credit cards, unsecured loans and other retail lending
As at 1 January 2021 44,139 16 5,827 275 196 - 50,162 291
Net transfers between
stages 2,211 209 (2,276) (210) 65 1 - -
Business activity
in the year 234 - 9 - - - 243 -
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk
parameter changes (3,039) (209) (112) 62 (17) - (3,168) (147)
Limit management and
final repayments (460) (3) (43) (5) (53) (1) (556) (9)
=========================== ========= ===== ========= ===== ========= ==== ========= =====
As at 30 June 2021 43,085 13 3,405 122 191 - 46,681 135
Wholesale loans
=========================== ========= ===== ========= ===== ========= ==== ========= =====
As at 1 January 2021 3,250 - 830 2 67 - 4,147 2
Net transfers between
stages 586 1 (584) (1) (2) - - -
Business activity
in the year 29 - - - - - 29 -
Net drawdowns, repayments,
net re-measurement
and movement due to
exposure and risk
parameter changes (283) - (7) - - - (290) -
Limit management and
final repayments (218) - (151) (1) - - (369) (1)
=========================== ========= ===== ========= ===== ========= ==== ========= =====
As at 30 June 2021 3,364 1 88 - 65 - 3,517 1
Management adjustments to models for impairment
Management adjustments to impairment models are made in the
ordinary course of business in order to reflect changes in policy
or correct model performance issues identified through model
monitoring. These adjustments remain in place until they are
incorporated into future model development and are then retired. In
addition, they may also be made in response to circumstances or
uncertainty at the period end and this is particularly true of the
ongoing COVID-19 pandemic.
Total management adjustments to impairment allowance are
presented by product below.
Overview of management adjustments to models for impairment
allowance(1)
As at 30.06.21 As at 31.12.20
=========================== ===========================
Management Proportion Management Proportion
adjustments of total adjustments of total
to impairment impairment to impairment impairment
allowances allowances allowances allowances
GBPm % GBPm %
======================================== ============== =========== ============== ===========
Home loans 61 70.9 77 74.0
Credit cards, unsecured loans and other
retail lending 572 27.7 247 8.5
Wholesale loans 163 40.6 102 24.3
======================================== ============== =========== ============== ===========
Total 796 31.2 426 12.4
Management adjustments to models for impairment allowance(1)
Impairment
allowance Economic Total
pre management uncertainty Other impairment
adjustments(2) adjustments adjustments allowance
As at 30.06.21 GBPm GBPm GBPm GBPm
================================== =============== ============ ============ ===========
Home loans 25 19 42 86
Credit cards, unsecured loans and
other retail lending 1,495 615 (43) 2,067
Wholesale loans 238 35 128 401
================================== =============== ============ ============ ===========
Total 1,758 669 127 2,554
As at 31.12.20
================================== =============== ============ ============ ===========
Home loans 27 - 77 104
Credit cards, unsecured loans and
other retail lending 2,671 634 (387) 2,918
Wholesale loans 318 42 60 420
================================== =============== ============ ============ ===========
Total 3,016 676 (250) 3,442
1 Positive values relate to an increase in impairment allowance.
2 Includes GBP1.6bn (December 2020: GBP2.8bn) of modelled ECL, GBP0.1bn
(December 2020: GBP0.1bn) of individually assessed impairments
and GBP0.1bn (December 2020: GBP0.1bn) ECL from non-modelled exposures.
Economic uncertainty adjustments
The COVID-19 pandemic has impacted the global economy since
early 2020 and macroeconomic forecasts indicate longer-term impacts
that will result in higher unemployment levels and customer and
client stress. However, to date, little real credit deterioration
has occurred, largely as a result of government and other support
measures. Observed 30-day arrears rates have reduced in UK cards
1.4% (December 2020: 1.7%; December 2019: 1.7%) due to payment
holidays granted to customers impacted by COVID-19 which reduced
the delinquency entrance rate and overall flow through delinquency.
However, uncertainty remains as government and other support
measures taper down as to whether these schemes have either averted
or delayed credit losses.
In order to address this uncertainty, adjustments to the
modelled provisions were made in 2020. COVID-19 related economic
uncertainty adjustments of GBP0.7bn (December 2020: GBP0.7bn)
continue to be recognised, specifically to address whether support
measures have averted or delayed credit losses. However, within
this, the approach has been refined and uncertainty is now captured
in two distinct ways: firstly, the identification of specific
customers and clients who may be more vulnerable to the withdrawal
of relief and secondly, macroeconomic and risk parameter
uncertainties which are applied at a portfolio level.
A summary of the adjustments is provided below:
-- A GBP0.4bn adjustment has been applied to customers and clients
considered potentially vulnerable to the withdrawal of government
and other support schemes. We have specifically considered the
impact of furlough schemes ending (equivalent to UK unemployment
increasing to 7.2%). In wholesale portfolios, the populations identified
are specific clients who may exhibit greater cross default risk
between COVID-19 and other financing exposures, including clients
with Bounce Back Loans in Business Banking.
-- Expert judgement has been used to adjust the probability of default
at portfolio level to pre-COVID-19 levels to reflect the impact
of temporary support measures on underlying customer and client
behaviour. Following a refinement to methodology, this has reduced
to GBP0.3bn from GBP0.6bn in December 2020. A GBP(0.1)bn PMA to
recognise government guarantees remains in place.
Other adjustments
Home loans: The low average LTV nature of the UK home loans
portfolio means that modelled ECL estimates are low in all but the
most severe economic scenarios. An adjustment is held to maintain
an appropriate level of ECL.
Credit cards, unsecured loans and other retail lending: This
materially relates to a net release in ECL due to reclassification
of loans and advances from Stage 2 to Stage 1 in credit cards and
unsecured loans. The reclassification followed a review of
back-testing of results which indicated that the accuracy of
origination probability of default characteristics require
management adjustments to correct and was first established in
Q220.
Wholesale loans: Represents the net of adjustments in Business
Banking for model inaccuracies informed by back-testing.
Credit Risk
Measurement uncertainty
The Barclays Bank UK Group uses a five-scenario model to
calculate ECL. An external consensus forecast is assembled from key
sources, including HM Treasury (short and medium-term forecasts)
and Bloomberg (based on median of economic forecasts), which forms
the Baseline scenario. In addition, two adverse scenarios (Downside
1 and Downside 2) and two favourable scenarios (Upside 1 and Upside
2) are derived, with associated probability weightings. The adverse
scenarios are calibrated to a broadly similar severity to internal
stress tests and stress scenarios provided by regulators whilst
also considering IFRS 9 specific sensitivities and non-linearity.
Downside 2 is benchmarked to the Bank of England's stress scenarios
and to the most severe scenario from Moody's inventory, but is not
designed to be the same. The favourable scenarios are calibrated to
reflect upside risks to the Baseline scenario to the extent that is
broadly consistent with recent favourable benchmark scenarios. All
scenarios are regenerated at a minimum semi-annually. The scenarios
include four economic variables, (GDP, unemployment, House Price
Index (HPI) and base rate), and expanded variables using
statistical models based on historical correlations. The upside and
downside shocks are designed to evolve over a five-year stress
horizon, with all five scenarios converging to a steady state after
approximately eight years.
Macroeconomic indicators were refreshed in Q221, with key
drivers for the baseline scenario more optimistic than Q420,
resulting in a net ECL provision release. In the Baseline scenario,
UK GDP returns to the pre-pandemic level by mid-2022 with peak UK
unemployment of just over 6% in Q421. In the Upside 2 scenario,
effective fiscal stimulus measures, including public investments in
infrastructure and skills, provide a boost to demand and
confidence, which in turn leads to economic activity returning to
the pre-COVID-19 pandemic levels by the end of 2021. Unemployment
levels in the UK decline back below 5% by H222. In the Downside 2
scenario supply and distribution issues slow the vaccination
process and the emergence of new virus variants that are not
susceptible to the existing vaccines fuels the outbreak again
resulting in full national lockdowns in Q321. This leads to
significant falls in GDP in Q321 and unemployment reaching
c.10%.
Although the macroeconomic outlook has improved, the Barclays
Bank UK Group's view on uncertainty remains unchanged, believing
potential credit deterioration could be seen once government
support is removed, particularly in vulnerable areas of the
portfolio. In response, economic uncertainty PMAs remained
relatively stable at c.GBP0.7bn. For further details see page
10.
Limited defaults have been observed to date in response to the
COVID-19 pandemic, partly as a result of government and bank
support measures. However, such support measures are scheduled to
taper down from Q321 bringing with it uncertainty. Despite
improvement in macroeconomic variables in the period, unemployment
remains at elevated levels but portfolios are yet to respond, and
may not do so until support measures fall away.
The methodology for estimating probability weights for each of
the scenarios involves a comparison of the distribution of key
historical macroeconomic variables against the forecast paths of
the five scenarios. The range of forecast paths generated in the
calculation of the weights at 30 June 2021 is slightly narrower
than 31 December 2020 due to lower levels of uncertainty. The
Upside 2 and Downside 2 scenarios are therefore nearer the tails of
the distribution than previously resulting in lower weights. See
page 14 for probability weightings used at H121.
The tables below show the key consensus macroeconomic variables
used in the scenarios (3-year annual paths), the probability
weights applied to each scenario and the macroeconomic variables by
scenario using 'specific bases' i.e. the most extreme position of
each variable in the context of the scenario, for example, the
highest unemployment for downside scenarios and the lowest
unemployment for upside scenarios. The 5-year average table
provides additional transparency.
Baseline average economic variables used in the calculation of ECL
2021 2022 2023
As at 30.06.21 % % %
======================================= ========== ========== ========
UK GDP(1) 4.9 5.6 2.3
UK unemployment(2) 5.8 5.7 5.1
UK HPI(3) (0.5) 0.3 3.1
UK bank rate 0.1 0.2 0.4
As at 31.12.20
======================================= ========== ========== ========
UK GDP(1) 6.3 3.3 2.6
UK unemployment(2) 6.7 6.4 5.8
UK HPI(3) 2.4 2.3 5.0
UK bank rate - (0.1) -
1 Average Real GDP seasonally adjusted change in year.
2 Average UK unemployment rate 16-year+.
3 Change in average yearly UK HPI = Halifax All Houses, All Buyers
index, relative to prior year end.
Downside 2 average economic variables used in the calculation of
ECL
2021 2022 2023
As at 30.06.21 % % %
=================== ====== ====== =====
UK GDP(1) (1.7) 2.0 5.2
UK unemployment(2) 7.3 8.2 6.6
UK HPI(3) (5.8) (5.8) 0.2
UK bank rate 0.1 - -
As at 31.12.20
=================== ====== ====== =====
UK GDP(1) (3.9) 6.5 2.6
UK unemployment(2) 8.0 9.3 7.8
UK HPI(3) (13.6) (10.8) 0.5
UK bank rate (0.2) (0.2) (0.1)
1 Average Real GDP seasonally adjusted change in year.
2 Average UK unemployment rate 16-year+.
3 Change in average yearly UK HPI = Halifax All Houses, All Buyers
index, relative to prior year end.
Downside 1 average economic variables used in the calculation of ECL
2021 2022 2023
As at 30.06.21 % % %
======================================== =========== ========== ========
UK GDP(1) 0.6 4.4 4.2
UK unemployment(2) 6.4 6.6 5.6
UK HPI(3) (3.1) (2.7) 1.7
UK bank rate 0.1 0.1 0.2
As at 31.12.20
======================================== =========== ========== ========
UK GDP(1) 0.1 6.6 3.2
UK unemployment(2) 7.3 8.0 6.9
UK HPI(3) (6.7) (3.5) 1.7
UK bank rate (0.1) (0.1) -
1 Average Real GDP seasonally adjusted change in year.
2 Average UK unemployment rate 16-year+.
3 Change in average yearly UK HPI = Halifax All Houses, All Buyers
index, relative to prior year end.
Upside 2 average economic variables used in the calculation of ECL
2021 2022 2023
As at 30.06.21 % % %
========================================= ========= ========= ========
UK GDP(1) 6.8 9.4 4.0
UK unemployment(2) 5.5 4.9 4.4
UK HPI(3) 4.6 9.9 11.3
UK bank rate 0.1 0.4 0.6
As at 31.12.20
========================================= ========= ========= ========
UK GDP(1) 12.2 5.3 3.9
UK unemployment(2) 6.2 5.5 4.8
UK HPI(3) 6.6 10.4 10.8
UK bank rate 0.1 0.3 0.3
1 Average Real GDP seasonally adjusted change in year.
2 Average UK unemployment rate 16-year+.
3 Change in average yearly UK HPI = Halifax All Houses, All Buyers
index, relative to prior year end.
Upside 1 average economic variables used in the calculation of ECL
2021 2022 2023
As at 30.06.21 % % %
========================================= ========= ========= ========
UK GDP(1) 5.9 7.3 3.0
UK unemployment(2) 5.6 5.2 4.7
UK HPI(3) 1.5 4.5 7.4
UK bank rate 0.1 0.2 0.6
As at 31.12.20
========================================= ========= ========= ========
UK GDP(1) 9.3 3.9 3.4
UK unemployment(2) 6.4 6.0 5.2
UK HPI(3) 4.6 6.1 6.1
UK bank rate 0.1 0.1 0.3
1 Average Real GDP seasonally adjusted change in year.
2 Average UK unemployment rate 16-year+.
3 Change in average yearly UK HPI = Halifax All Houses, All Buyers
index, relative to prior year end.
Scenario probability weighting
Upside Upside Downside Downside
2 1 Baseline 1 2
% % % % %
=============================== ====== ====== ======== ======== ========
As at 30.06.21
Scenario probability weighting 19.6 24.5 26.4 16.9 12.6
=============================== ====== ====== ======== ======== ========
As at 31.12.20
Scenario probability weighting 20.2 24.2 24.7 15.5 15.4
Specific bases show the most extreme position of each variable
in the context of the scenario, for example, the highest
unemployment for downside scenarios, average unemployment for
baseline scenarios and lowest unemployment for upside scenarios.
GDP and HPI downside and upside scenario data represents the lowest
and highest points relative to the start point in the 20 quarter
period.
Macroeconomic variables (specific bases)(1)
Upside Upside Downside Downside
2 1 Baseline 1 2
As at 30.06.21 % % % % %
=================== ====== ====== ======== ======== ========
UK GDP(2) 25.9 20.2 3.3 (4.2) (8.1)
UK unemployment(3) 4.1 4.3 5.1 7.5 9.8
UK HPI(4) 48.2 25.5 1.6 (5.8) (11.8)
UK bank rate(3) 0.1 0.1 0.4 0.3 0.1
As at 31.12.20
=================== ====== ====== ======== ======== ========
UK GDP(2) 14.2 8.8 0.7 (22.1) (22.1)
UK unemployment(3) 4.0 4.0 5.7 8.4 10.1
UK HPI(4) 48.2 30.8 3.6 (4.5) (18.3)
UK bank rate(3) 0.1 0.1 - 0.6 0.6
1 UK GDP = Real GDP growth seasonally adjusted; UK unemployment =
UK unemployment rate 16-year+; UK HPI = Halifax All Houses, All
Buyers Index. 20 quarter period starts from Q121 (2020: Q120).
2 Maximum growth relative to Q420 (2020: Q419), based on 20 quarter
period in Upside scenarios; 5-year yearly average Compound Annual
Growth Rate (CAGR) in Baseline; minimum growth relative to Q420
(2020: Q419), based on 20 quarter period in Downside scenarios.
3 Lowest quarter in 20 quarter period in Upside scenarios; 5-year
average in Baseline; highest quarter in 20 quarter period in Downside
scenarios.
4 Maximum growth relative to Q420 (2020: Q419), based on 20 quarter
period in Upside scenarios; 5-year quarter end CAGR in Baseline;
minimum growth relative to Q420 (2020: Q419), based on 20 quarter
period in Downside scenarios.
Average basis represents the average quarterly value of
variables in the 20 quarter period with GDP and HPI based on yearly
average and quarterly CAGRs respectively.
Macroeconomic variables (5-year averages)(1)
Upside Upside Downside Downside
2 1 Baseline 1 2
As at 30.06.21 % % % % %
=================== ====== ====== ======== ======== ========
UK GDP(2) 5.2 4.2 3.3 2.6 1.8
UK unemployment(3) 4.6 4.8 5.1 5.7 6.5
UK HPI(4) 8.2 4.7 1.6 - (1.6)
UK bank rate(3) 0.7 0.6 0.4 0.2 -
As at 31.12.20
=================== ====== ====== ======== ======== ========
UK GDP(2) 2.5 1.6 0.7 0.1 (0.9)
UK unemployment(3) 5.0 5.3 5.7 6.5 7.2
UK HPI(4) 8.2 5.5 3.6 (0.2) (3.6)
UK bank rate(3) 0.3 0.2 - - (0.1)
1 UK GDP = Real GDP growth seasonally adjusted; UK unemployment =
UK unemployment rate 16-year+; UK HPI = Halifax All Houses, All
Buyers Index.
2 5-year yearly average CAGR, starting 2020 (2020: 2019).
3 5-year average. Period based on 20 quarters from Q121 (2020: Q120).
4 5-year quarter end CAGR, starting Q420 (2020: Q419).
Treasury and Capital Risk
Funding and liquidity
Overview
The Barclays Bank UK Group liquidity pool increased to GBP80bn
(December 2020: GBP60bn) and the LCR increased to 203% (December
2020: 160%) driven by continued deposit growth and further
borrowing from the Bank of England's Term Funding Scheme with
additional incentives for SMEs, which were partly offset by
increased mortgage lending.
Liquidity risk stress testing
The liquidity risk stress assessment measures 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.
The CRR (as amended by CRR II) LCR requirement takes into
account the relative stability of different sources of funding and
potential incremental funding requirements in a stress. The LCR is
designed to promote short-term resilience of a bank's liquidity
risk profile by holding sufficient high quality liquid assets to
survive an acute stress scenario lasting for 30 days.
As at 30 June 2021, the Barclays Bank UK Group held eligible
liquid assets well above 100% of the net stress outflows to its
internal and regulatory requirements. A significant portion of the
liquidity pool was held in cash and deposits with central banks.
The liquidity pool was held entirely within Barclays Bank UK
PLC.
As at As at
30.06.21 31.12.20
GBPbn GBPbn
================================================ ========= =========
Barclays Bank UK Group liquidity pool 80 60
%%
================================================ ========= ========
Barclays Bank UK Group liquidity coverage ratio 203 160
Capital and leverage
The disclosures below provide key capital metrics for the
Barclays Bank UK Group with further information on its risk profile
included in the Barclays Bank UK PLC Pillar 3 Report H1 2021,
expected to be published on 13 August 2021, and which will be
available at
home.barclays/investor-relations/reports-and-events/latest-financial-results.
Following the withdrawal of the UK from the EU, any references
to CRR as amended by CRR II mean, unless otherwise specified, CRR
as amended by CRR II, as it forms part of UK law pursuant to the
European Union (Withdrawal) Act 2018 and subject to the temporary
transitional powers (TTP) available to UK regulators to delay or
phase-in on-shoring changes to UK regulatory requirements arising
at the end of the transition period until 31 March 2022, as at the
applicable reporting date. With effect from 26 June 2021, the
Financial Services Act 2021 amended CRR as amended by CRR II in
part. The amendments included an extension to the application of
CRR II settlement netting to the CRR leverage exposure which was
due to expire on 27 June 2021 under CRR II quick fix measures.
Throughout the TTP period, the Bank of England and PRA will
continue to review the UK regulatory framework and the Group
disclosures will reflect the amended framework as applicable at the
effective reporting date.
On 26 April 2019, a prudential backstop was implemented for
qualifying exposures originating after 26 April 2019 that have been
non-performing for more than 2 years. Where minimum coverage
requirements for qualifying non-performing exposures are not met,
the difference must be deducted from CET1 capital. Different
conversion factors are applied for secured and unsecured exposures
depending on the length of time the exposures have been
non-performing. For 2021 the conversion factor applied to secured
non-performing exposures is 0% and for unsecured non-performing is
35% prior to any coverage being applied. For H121 the impact to
CET1 capital is immaterial.
As at As at
Capital ratios(1,2) 30.06.21 31.12.20
========================= ========= =========
CET1 16.0% 15.6%
Tier 1 (T1) 19.6% 19.2%
Total regulatory capital 24.1% 23.9%
Capital resources GBPm GBPm
============================ ====== ======
CET1 capital 11,330 11,247
T1 capital 13,890 13,807
Total regulatory capital 17,088 17,178
Risk weighted assets (RWAs) 71,014 72,025
1 Capital and RWAs are calculated applying the IFRS 9 transitional
arrangements of the CRR as amended by CRR II.
2 The fully loaded CET1 ratio was 15.5%, with GBP11,029m of CET1
capital and GBP70,984m of RWAs, calculated without applying the
transitional arrangements of the CRR as amended by CRR II.
The Barclays Bank UK Group is required to disclose an average UK
leverage ratio which is based on capital on the last day of each
month in the quarter and an exposure measure for each day in the
quarter. The Barclays Bank UK Group is also required to disclose a
UK leverage ratio based on capital and exposure on the last day of
the quarter. Both approaches exclude qualifying claims on central
banks from the leverage exposures and include the PRA's adoption of
CRR II settlement netting.
On 29 June 2021, the Financial Policy Committee and PRA issued a
consultation paper on proposed changes to the UK leverage ratio
framework. The consultation states the intention to move to a
single UK leverage ratio requirement meaning that the CRR leverage
ratio will no longer apply for UK banks from 1 January 2022.
Minimum requirements for the Barclays Bank UK Group remain
unchanged and whilst largely upholding the existing framework, some
technical changes to the exposure measure have been proposed that
will align to the Basel III standards.
As at 30 June 2021, the Barclays Bank UK Group average UK
leverage ratio was 5.6% which is above the leverage ratio
requirement.
As at As at
30.06.21 31.12.20
=============================
Leverage ratios(1) GBPm GBPm
============================= ========= =========
Average UK leverage ratio(2) 5.6% 5.6%
Average T1 capital 13,913 13,793
Average UK leverage exposure 247,213 245,992
UK leverage ratio 5.6% 5.6%
T1 capital 13,890 13,807
UK leverage exposure 247,974 245,176
1 Capital and leverage are calculated applying the IFRS 9 transitional
arrangements of the CRR as amended by CRR II.
2 The CET1 capital held against the 0.35% O-SII additional leverage
ratio buffer was GBP0.9bn and against the 0.0% countercyclical
leverage ratio buffer was GBPnil.
Statement of Directors' Responsibilities
The Directors (the names of whom are set out below) are required
to prepare the financial statements on a going concern basis unless
it is not appropriate to do so. In making this assessment, the
directors have considered information relating to present and
future conditions. 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 21 to 25 have been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as adopted by
the United Kingdom (UK), and that the interim management report
herein includes a fair review of the information required by
Disclosure Guidance and Transparency Rule 4.2.7R namely:
-- an indication of important events that have occurred during the
six months ended 30 June 2021 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.
Signed on 27 July 2021 on behalf of the Board by
Matt Hammerstein James Mack
Barclays Bank UK Group Chief Executive Barclays Bank UK Group
Chief Financial Officer
Barclays Bank UK PLC Board of Directors:
Chair Executive Directors Non-Executive Directors
Crawford Gillies Matt Hammerstein Avid Larizadeh Duggan
James Mack Michael Jary
Kathryn Matthews
Chris Pilling
Andrew Ratcliffe
David Thorburn
Independent Review Report to Barclays Bank UK PL C
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 2021 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 2021;
-- 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 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK 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 latest annual
financial statements of the Barclays Bank UK Group are prepared in
accordance with International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and the next annual financial statements will be prepared in
accordance with UK-adopted international accounting standards. 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 for use in the UK.
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.
Michael McGarry
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London, E14 5GL
27 July 2021
Condensed Consolidated Financial Statements
Condensed consolidated income statement (unaudited)
Half year Half year
ended ended
30.06.21 30.06.20
Notes(1) GBPm GBPm
=============================================== ======== ========= =========
Interest and similar income 2,828 3,149
Interest and similar expense (329) (516)
=============================================== ======== ========= =========
Net interest income 2,499 2,633
Fee and commission income 3 702 667
Fee and commission expense 3 (109) (149)
=============================================== ======== ========= =========
Net fee and commission income 3 593 518
Other income 75 89
=============================================== ======== ========= =========
Total income 3,167 3,240
Credit impairment releases/(charges) 443 (1,055)
=============================================== ======== ========= =========
Net operating income 3,610 2,185
Staff costs (659) (647)
Infrastructure, administration and general
expenses (1,584) (1,541)
Litigation and conduct (28) (11)
=============================================== ======== ========= =========
Operating expenses (2,271) (2,199)
Profit on disposal of subsidiaries, associates
and joint ventures - 12
=============================================== ======== ========= =========
Profit/(loss) before tax 1,339 (2)
Tax (charge)/credit 4 (176) 91
=============================================== ======== ========= =========
Profit after tax 1,163 89
Attributable to:
=============================================== ======== ========= =========
Equity holders of the parent 1,077 (5)
Other equity instrument holders 86 94
=============================================== ======== ========= =========
Profit after tax 1,163 89
1 For notes to the Financial Statements see pages 26 to 37.
Condensed consolidated statement of comprehensive income
(unaudited)
Half year Half year
ended ended
30.06.21 30.06.20
Notes(1) GBPm GBPm
================================================ ======== ========= =========
Profit after tax 1,163 89
Other comprehensive income that may be recycled
to profit or loss:(2)
================================================ ======== ========= =========
Fair value through other comprehensive income
reserve 12 (53) 1
Cash flow hedging reserve 12 (279) 258
================================================ ======== ========= =========
Other comprehensive income that may be recycled
to profit or loss (332) 259
Total comprehensive income for the period 831 348
1 For notes to the Financial Statements see pages 26 to 37.
2 Reported net of tax.
Condensed consolidated balance sheet (unaudited)
As at As at
30.06.21 31.12.20
Assets Notes(1) GBPm GBPm
================================================ ======== ========= =========
Cash and balances at central banks 53,159 35,218
Cash collateral and settlement balances 3,722 4,345
Loans and advances at amortised cost 219,064 211,649
Reverse repurchase agreements and other similar
secured lending 1,691 133
Trading portfolio assets 110 298
Financial assets at fair value through the
income statement 2,968 3,432
Derivative financial instruments 1,125 550
Financial assets at fair value through other
comprehensive income 22,202 26,026
Goodwill and intangible assets 7 3,527 3,527
Property, plant and equipment 642 737
Current tax assets - 75
Deferred tax assets 4 1,086 780
Other assets 631 728
================================================ ======== ========= =========
Total assets 309,927 287,498
Liabilities
================================================ ======== ========= =========
Deposits at amortised cost 255,503 240,535
Cash collateral and settlement balances 1,281 455
Repurchase agreements and other similar secured
borrowing 11,993 7,178
Debt securities in issue 8,931 7,503
Subordinated liabilities 8 10,455 9,869
Trading portfolio liabilities 848 1,265
Derivative financial instruments 459 880
Current tax liabilities 232 -
Other liabilities 1,836 1,906
Provisions 9 608 880
================================================ ======== ========= =========
Total liabilities 292,146 270,471
Equity
================================================ ======== ========= =========
Called up share capital and share premium 10 5 5
Other reserves 12 141 473
Retained earnings 15,075 13,989
================================================ ======== ========= =========
Shareholders' equity attributable to ordinary
shareholders of the parent 15,221 14,467
Other equity instruments 11 2,560 2,560
================================================ ======== ========= =========
Total equity 17,781 17,027
Total liabilities and equity 309,927 287,498
1 For notes to the Financial Statements see pages 26 to 37.
Condensed consolidated statement of changes in equity
(unaudited)
Called
up share
capital
and share Other equity Retained
premium(1) instruments(1) Other reserves(1) earnings Total equity
Half year ended 30.06.21 GBPm GBPm GBPm GBPm GBPm
======================================= =========== =============== ================= ========= ============
Balance as at 1 January 2021 5 2,560 473 13,989 17,027
Profit after tax - 86 - 1,077 1,163
Fair value through other comprehensive
income reserve - - (53) - (53)
Cash flow hedges - - (279) - (279)
Other - - - - -
======================================= =========== =============== ================= ========= ============
Total comprehensive income
for the period - 86 (332) 1,077 831
Issue of shares under employee
share schemes - - - 21 21
Coupons paid on other equity
instruments - (86) - - (86)
Vesting of employee share schemes - - - (11) (11)
Other movements - - - (1) (1)
======================================= =========== =============== ================= ========= ============
Balance as at 30 June 2021 5 2,560 141 15,075 17,781
Half year ended 31.12.20
======================================= =========== =============== ================= ========= ============
Balance as at 1 July 2020 5 2,560 442 13,779 16,786
Profit after tax - 86 - 204 290
Fair value through other comprehensive
income reserve - - 71 - 71
Cash flow hedges - - (40) - (40)
Other - - - 1 1
======================================= =========== =============== ================= ========= ============
Total comprehensive income
for the period - 86 31 205 322
Issue of shares under employee
share schemes - - - 2 2
Coupons paid on other equity
instruments - (86) - - (86)
Vesting of employee share schemes - - - (1) (1)
Other movements - - - 4 4
======================================= =========== =============== ================= ========= ============
Balance as at 31 December 2020 5 2,560 473 13,989 17,027
Half year ended 30.06.20
======================================= =========== =============== ================= ========= ============
Balance as at 1 January 2020 5 2,560 183 13,765 16,513
Profit after tax - 94 - (5) 89
Fair value through other comprehensive
income reserve - - 1 - 1
Cash flow hedges - - 258 - 258
======================================= =========== =============== ================= ========= ============
Total comprehensive income
for the period - 94 259 (5) 348
Issue of shares under employee
share schemes - - - 29 29
Coupons paid on other equity
instruments - (94) - - (94)
Vesting of employee share schemes - - - (11) (11)
Dividends paid - - - (220) (220)
Capital contribution from Barclays
PLC - - - 220 220
Other movements - - - 1 1
======================================= =========== =============== ================= ========= ============
Balance as at 30 June 2020 5 2,560 442 13,779 16,786
1 Details of share capital, other equity instruments and other reserves
are shown on pages 32 to 33.
Condensed consolidated cash flow statement (unaudited)
Half year Half year
ended ended
30.06.21 30.06.20(1)
GBPm GBPm
======================================================== ========= ============
Profit/(loss) before tax 1,339 (2)
Adjustment for non-cash items (273) (160)
Net increase in loans and advances at amortised
cost(2) (3,452) (7,246)
Net increase in deposits at amortised cost 14,968 20,049
Net increase in debt securities in issue 1,428 3,757
Net increase in repurchase and reverse repurchase
agreements 3,257 1,117
Changes in other operating assets and liabilities(3) 153 (1,241)
Corporate income tax paid (53) (23)
======================================================== ========= ============
Net cash from operating activities 17,367 16,251
Net cash from investing activities(2) (559) (4,407)
Net cash from financing activities 786 1,902
Effect of exchange rates on cash and cash equivalents - 294
======================================================== ========= ============
Net increase in cash and cash equivalents 17,594 14,040
Cash and cash equivalents at beginning of the period(3) 38,417 27,510
======================================================== ========= ============
Cash and cash equivalents at end of the period(3) 56,011 41,550
1 H120 comparative figures have been restated to make the condensed
cash flow statement more relevant following a review of the disclosure
and the accounting policies applied. Amendments have been made
to the classification of cash collateral reported within cash and
cash equivalents and to the presentation of items within net cash
flows from operating and investing activities. Footnotes 2 and
3 below quantify the impact of the changes to the respective cash
flow categories in H120 and provide further detail.
2 Movements in cash and cash equivalents relating to debt securities
at amortised cost were previously shown within loans and advances
at amortised cost in operating activities. These debt securities
holdings are now considered to be part of the investing activity
performed by the Barclays Bank UK Group following a change in accounting
policy and have been presented within investing activities in H121.
Comparatives have been restated. The effect of this change was
to reclassify GBP2,065m of net cash outflows from operating activities
to investing activities in H120.
3 Cash and cash equivalents have been restated to exclude cash collateral
and settlement balances, with the exception of balances that the
Barclays Bank UK Group holds at central banks related to payment
schemes. The effect of this change decreased cash and cash equivalents
by GBP857m as at 30 June 2020. As a result, net cash from operating
activities decreased by GBP1,740m in H120, representing the net
increase in the cash collateral and settlement balances line item
in this period.
Financial Statement Notes
1. Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2021 have been prepared in accordance
with the Disclosure and Transparency Rules (DTR) of the UK's
Financial Conduct Authority (FCA) and IAS 34, Interim Financial
Reporting, as published by the International Accounting Standards
Board (IASB) and adopted by the UK. The condensed consolidated
interim financial statements should be read in conjunction with the
annual financial statements for the year ended 31 December 2020.
The annual financial statements for the year ended 31 December 2020
were prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
in accordance with International Financial Reporting Standards
(IFRS) and interpretations (IFRICs) as issued by the IASB and
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union as well as adopted by the UK. UK adopted IFRS
and EU adopted IFRS are currently the same and were the same as at
31 December 2020.
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 UK PLC Annual Report 2020.
1. Going concern
The financial statements are prepared on a going concern basis,
as the Directors are satisfied that the Barclays Bank UK Group and
parent company have the resources to continue in business for a
period of at least 12 months from approval of the interim financial
statements. In making this assessment, the Directors have
considered a wide range of information relating to present and
future conditions and includes a review of a working capital report
(WCR). The WCR is used by the Directors to assess the future
performance of the business and that it has the resources in place
that are required to meet its ongoing regulatory requirements. The
WCR also includes an assessment of the impact of internally
generated stress testing scenarios on the liquidity and capital
requirement forecasts. The stress tests used were based upon an
assessment of reasonably possible downside economic scenarios that
the Barclays Bank UK Group could experience.
The WCR indicated that the Barclays Bank UK Group had sufficient
capital in place to support its future business requirements and
remained above its regulatory minimum requirements in the internal
stress scenarios.
2. Other disclosures
The Credit risk disclosures on pages 6 to 15 form part of these
interim financial statements.
2. Segmental reporting
Analysis of results by business
Barclaycard Barclays
Personal Consumer Business Bank UK
Banking UK Banking Head Office Group
Half year ended 30.06.21 GBPm GBPm GBPm GBPm GBPm
===================================== ======== =========== ======== =========== ========
Total income 1,970 605 684 (92) 3,167
Credit impairment releases/(charges) 50 398 (5) - 443
===================================== ======== =========== ======== =========== ========
Net operating income/(expenses) 2,020 1,003 679 (92) 3,610
Operating costs (1,553) (259) (424) (7) (2,243)
Litigation and conduct - (20) (2) (6) (28)
===================================== ======== =========== ======== =========== ========
Total operating expenses (1,553) (279) (426) (13) (2,271)
Other net income - - - - -
===================================== ======== =========== ======== =========== ========
Profit/(loss) before tax 467 724 253 (105) 1,339
As at 30.06.21 GBPbn GBPbn GBPbn GBPbn GBPbn
===================================== ======== =========== ======== =========== ========
Total assets 216.5 9.3 83.8 0.3 309.9
Barclaycard Barclays
Personal Consumer Business Bank UK
Banking UK Banking Head Office Group
Half year ended 30.06.20 GBPm GBPm GBPm GBPm GBPm
===================================== ======== =========== ======== =========== ========
Total income 1,863 810 575 (8) 3,240
Credit impairment charges (255) (697) (103) - (1,055)
===================================== ======== =========== ======== =========== ========
Net operating income/(expenses) 1,608 113 472 (8) 2,185
Operating costs (1,544) (260) (359) (25) (2,188)
Litigation and conduct (4) (3) (4) - (11)
===================================== ======== =========== ======== =========== ========
Total operating expenses (1,548) (263) (363) (25) (2,199)
Other net income 12 - - - 12
===================================== ======== =========== ======== =========== ========
Profit/(loss) before tax 72 (150) 109 (33) (2)
As at 31.12.20 GBPbn GBPbn GBPbn GBPbn GBPbn
===================================== ======== =========== ======== =========== ========
Total assets 201.0 10.6 75.8 0.1 287.5
Income by geographic region
The Barclays Bank UK Group generates income from business
activities in the UK.
3. Net fee and commission income
Fee and commission income is disaggregated below and includes a
total for fees in scope of IFRS 15, Revenue from Contracts with
Customers:
Barclaycard Barclays
Personal Consumer Business Bank UK
Banking UK Banking Head Office Group
Half year ended 30.06.21 GBPm GBPm GBPm GBPm GBPm
============================== ======== =========== ======== =========== ========
Fee type
Transactional 289 48 71 - 408
Advisory 83 - - - 83
Other 165 - 46 - 211
============================== ======== =========== ======== =========== ========
Total revenue from contracts
with customers 537 48 117 - 702
Other non-contract fee income - - - - -
============================== ======== =========== ======== =========== ========
Fee and commission income 537 48 117 - 702
Fee and commission expense (96) (10) (3) - (109)
============================== ======== =========== ======== =========== ========
Net fee and commission income 441 38 114 - 593
Barclaycard Barclays
Personal Consumer Business Bank UK
Banking UK Banking Head Office Group
Half year ended 30.06.20 GBPm GBPm GBPm GBPm GBPm
============================== ======== =========== ======== =========== ========
Fee type
Transactional 283 47 56 - 386
Advisory 79 - - - 79
Other 150 7 45 - 202
============================== ======== =========== ======== =========== ========
Total revenue from contracts
with customers 512 54 101 - 667
Other non-contract fee income - - - - -
============================== ======== =========== ======== =========== ========
Fee and commission income 512 54 101 - 667
Fee and commission expense (133) (9) (7) - (149)
============================== ======== =========== ======== =========== ========
Net fee and commission income 379 45 94 - 518
Transactional fees are service charges on deposit accounts, cash
management services and transactional processing fees. These
include interchange and merchant fee income generated from credit
and bank card usage.
Advisory fees are generated from wealth management services.
Other relates to various fee types which individually do not
amount to 10% or greater of the Barclays Bank UK Group total fee
and commission income.
4. T ax
The tax charge for H121 was GBP176m (H120: GBP91m credit), which
includes a benefit recognised as a result of the increase in the UK
corporation tax rate and absent this benefit the tax charge would
have been GBP367m. The H120 tax credit included a benefit
recognised for re-measurement of the Barclays Bank UK Group's UK
deferred tax assets as a result of UK corporation tax previously
being maintained at a rate of 19%.
In its Budget held in March 2021, the UK Government announced
that the UK rate of corporation tax will increase from 19% to 25%
from 1 April 2023. This legislative change has been enacted,
resulting in the Barclays Bank UK Group's deferred tax assets
increasing by GBP187m with a tax benefit in the income statement of
GBP191m and a tax charge within other comprehensive income of
GBP4m.
The UK Government also announced that it will undertake a review
of the additional 8% banking surcharge during 2021. The Budget
Report issued on 3 March 2021 outlines that "the government will
set out how it intends to ensure that the combined rate of tax on
banks' profits does not increase substantially from its current
level". Any subsequent reduction in the banking surcharge arising
from the Government's review would result in a tax charge in the
income statement and tax credit within the other comprehensive
income upon enactment as the Barclays Bank UK Group's deferred tax
assets are again re-measured and decreased, the timing of which is
uncertain but is expected to occur in H122.
The deferred tax asset of GBP1,086m (December 2020: GBP780m)
includes GBPnil (December 2020: GBPnil) relating to tax losses.
5. Dividends on ordinary shares
Half year Half year
ended ended
30.06.21 30.06.20
Dividends paid during the period GBPm GBPm
====================================== ========= =========
Full year dividend paid during period - 220
An interim dividend in respect of the six months ended 30 June
2021 of GBP510m will be paid on 2 August 2021.
6. Fair value of financial instruments
This section should be read in conjunction with Note 15, Fair
value of financial instruments of the Barclays Bank UK PLC Annual
Report 2020, which provides more detail about accounting policies
adopted and 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 the Barclays Bank UK 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 30.06.21 GBPm GBPm GBPm GBPm
==================================== ======= ========== ============= =======
Trading portfolio assets 98 12 - 110
Financial assets designated at fair
value through income statement - 96 2,872 2,968
Derivative financial instruments - 1,125 - 1,125
Financial assets designated at fair
value through other comprehensive
income 6,011 16,191 - 22,202
==================================== ======= ========== ============= =======
Total assets 6,109 17,424 2,872 26,405
Trading portfolio liabilities (848) - - (848)
Derivative financial instruments - (459) - (459)
==================================== ======= ========== ============= =======
Total liabilities (848) (459) - (1,307)
As at 31.12.20
==================================== ======= ========== ============= =======
Trading portfolio assets 52 246 - 298
Financial assets designated at fair
value through income statement - 130 3,302 3,432
Derivative financial instruments - 550 - 550
Financial assets designated at fair
value through other comprehensive
income 6,887 19,139 - 26,026
==================================== ======= ========== ============= =======
Total assets 6,939 20,065 3,302 30,306
Trading portfolio liabilities (1,060) (205) - (1,265)
Derivative financial instruments - (880) - (880)
==================================== ======= ========== ============= =======
Total liabilities (1,060) (1,085) - (2,145)
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 2020: no material
transfers between Level 1 and Level 2).
Level 3 movement analysis
The following table summarises the movements in the Level 3
balance 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.
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.
Total gains
and losses
in the period
recognised
in the income
statement Transfers
As at Trading Other As at
01.01.21 Purchases Sales Issues Settle-ments income(1) income In Out 30.06.21
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ========= ========= ===== ====== ============ ========== ======= ===== ==== =========
Non-asset backed
loans 3,301 - - - (300) (129) - - - 2,872
Other 1 - - - (1) - - - - -
====================== ========= ========= ===== ====== ============ ========== ======= ===== ==== =========
Financial assets
at fair value through
the income statement 3,302 - - - (301) (129) - - - 2,872
Total gains
and losses
in the period
recognised
in the income
statement Transfers
As at Trading Other As at
01.01.20 Purchases Sales Issues Settle-ments income(1) income In Out 30.06.20
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
====================== ========= ========= ===== ====== ============ ========== ======= ===== ==== =========
Non-asset backed
loans 3,530 - - - (298) 271 - - (59) 3,444
Other 3 6 - - (5) - - - - 4
====================== ========= ========= ===== ====== ============ ========== ======= ===== ==== =========
Financial assets
at fair value through
the income statement 3,533 6 - - (303) 271 - - (59) 3,448
1 Trading income represents gains on Level 3 financial assets which
is offset by losses on derivative hedges disclosed within Level
2.
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:
Half year ended 30.06.21 Half year ended 30.06.20
============================ ============================
Income statement Income statement
===================== =====================
Trading Other Trading Other
income income Total income income Total
GBPm GBPm GBPm GBPm GBPm GBPm
====================== ========== ========= ===== ========== ========= =====
Financial assets at
fair value through
the income statement (129) - (129) 271 - 271
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
The following table discloses the sensitivity to changes in
credit spreads used in determining the fair value of non-asset
backed loans:
As at 30.06.21 As at 31.12.20
======================== ========================
Favourable Unfavourable Favourable Unfavourable
changes changes changes changes
GBPm GBPm GBPm GBPm
======================= ========== ============ ========== ============
Non-asset backed loans 73 (138) 86 (220)
The effect of stressing unobservable inputs to a 90th percentile
confidence interval of a potential range of values, alongside
considering the impact of using alternative models, would be to
increase fair values by up to GBP73m (December 2020: GBP86m) or to
decrease fair values by up to GBP138m (December 2020: GBP220m). All
the potential effect would impact profit and loss. The asymmetry in
the favourable and unfavourable changes in the sensitivity analysis
is attributable to investing and funding costs with the prudential
valuation framework contributing to the unfavourable side only.
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 GBP12m
(December 2020: GBP13m) for financial instruments measured at fair
value and GBP211m (December 2020: GBP217m) for financial
instruments carried at amortised cost. The decrease of GBP1m
(December 2020: GBPnil) in financial instruments measured at fair
value is driven by amortisation and releases of GBP1m (December
2020: GBP2m) offset by additions of GBPnil (December 2020: GBP2m).
The decrease of GBP6m (December 2020: GBP7m) in financial
instruments carried at amortised cost is driven by amortisation and
releases of GBP6m (December 2020: GBP12m) offset by additions of
GBPnil (December 2020: GBP5m).
Portfolio exemption
The Barclays Bank UK 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 UK 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.
Comparison of carrying amounts and fair values for assets and
liabilities not held at fair value
The following table summarises the fair value of financial
assets and liabilities measured at amortised cost on the Barclays
Bank UK Group balance sheet:
As at 30.06.21 As at 31.12.20
===================== =====================
Carrying Carrying
amount Fair value amount Fair value
Financial assets GBPm GBPm GBPm GBPm
======================================== ========= ========== ========= ==========
Loans and advances at amortised cost 219,064 217,917 211,649 209,612
Reverse repurchase agreements and
other similar secured lending 1,691 1,691 133 133
Financial liabilities
======================================== ========= ========== ========= ==========
Deposits at amortised cost (255,503) (255,516) (240,535) (240,555)
Repurchase agreements and other similar
secured borrowing (11,993) (11,993) (7,178) (7,178)
Debt securities in issue (8,931) (9,241) (7,503) (7,897)
Subordinated liabilities (10,455) (10,959) (9,869) (10,344)
7. Goodwill and intangible assets
Goodwill and intangible assets are allocated to business
operations according to business segments as follows:
As at 30.06.21 As at 31.12.20
============================ ============================
Goodwill Intangibles Total Goodwill Intangibles Total
GBPm GBPm GBPm GBPm GBPm GBPm
================= ======== =========== ===== ======== =========== =====
Personal Banking 2,718 - 2,718 2,718 - 2,718
Business Banking 629 - 629 629 - 629
Barclaycard UK 179 1 180 179 1 180
================= ======== =========== ===== ======== =========== =====
Total 3,526 1 3,527 3,526 1 3,527
The Barclays Bank UK Group performed an impairment review to
assess the recoverability of its goodwill and intangible asset
balances as at 31 December 2020. The outcome of this review is
disclosed on pages 163 to 165 of the Barclays Bank UK PLC Annual
Report 2020. The review highlighted that there had been a
significant reduction in the value in use of the Personal Banking
and Business Banking cash generating units. No impairment was
recognised as a result of the review as value in use exceeded
carrying amount. Since the 2020 impairment review, management have
observed improvements in the UK macroeconomic environment and
interest rate outlook. The Barclays Bank UK Group's goodwill and
intangible assets have been reviewed for indicators of impairment
in the period, with no indicators being identified.
8. Subordinated liabilities
Half year
ended Year ended
30.06.21 31.12.20
GBPm GBPm
================================ ========= ==========
Opening balance as at 1 January 9,869 7,688
Issuances 1,025 3,694
Redemptions (142) (1,425)
Other (297) (88)
================================ ========= ==========
Closing balance 10,455 9,869
Issuances comprise GBP1,025m of intra-group loans from Barclays
PLC. Redemptions comprise GBP142m of intra-group loans from
Barclays PLC.
Other movements predominantly comprise foreign exchange
movements and fair value hedge adjustments.
9. Provisions
As at As at
30.06.21 31.12.20
GBPm GBPm
========================================================== ========= =========
Customer redress 339 422
Redundancy and restructuring 27 63
Undrawn contractually committed facilities and guarantees 136 293
Onerous contracts 2 16
Sundry and other provisions 104 86
========================================================== ========= =========
Total 608 880
10. Called up share capital
As at 30 June 2021, the issued ordinary share capital of
Barclays Bank UK PLC comprised 505m (December 2020: 505m) ordinary
shares of GBP0.01 each. There were no issuances or redemptions in
the six months to 30 June 2021.
11. Other equity instruments
Other equity instruments of GBP2,560m (December 2020: GBP2,560m)
are AT1 securities issued to Barclays PLC. Barclays PLC uses funds
from market issuances to purchase AT1 securities from Barclays Bank
UK PLC. There have been no issuances or redemptions in the six
months to 30 June 2021.
The AT1 securities are perpetual securities with no fixed
maturity and are structured to qualify as AT1 instruments under
prevailing capital rules applicable as at the relevant issue date.
AT1 securities are undated and are redeemable, at the option of
Barclays Bank UK PLC, in whole at the initial call date, or on any
fifth anniversary after the initial call date. In addition, the AT1
securities are redeemable, at the option of Barclays Bank UK PLC,
in whole in the event of certain changes in the tax or regulatory
treatment of the securities. Any redemptions require the prior
consent of the PRA.
12. Other reserves
As at As at
30.06.21 31.12.20
GBPm GBPm
====================================================== ========= =========
Fair value through other comprehensive income reserve (10) 43
Cash flow hedging reserve 62 341
Other reserves and other shareholders' equity 89 89
====================================================== ========= =========
Total 141 473
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.
As at 30 June 2021, there was a debit balance of GBP10m
(December 2020: GBP43m credit) in the fair value through other
comprehensive income reserve. The loss of GBP53m is principally
driven by GBP48m of net gains transferred to net profit and a
GBP23m loss from the decrease in fair value of bonds due to
increased bond yields, along with an impairment release of GBP2m.
This is partially offset by a tax credit of GBP21m.
Cash f low h edg ing r eserve
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 2021, there was a credit balance of GBP62m
(December 2020: GBP341m credit) in the cash flow hedging reserve.
The decrease of GBP279m principally reflects a GBP307m decrease in
the fair value of interest rate swaps held for hedging purpose as
major interest rate forward curves increased and GBP67m of gains
transferred to the income statement. This is partially offset by a
tax credit of GBP95m.
Other reserves and other shareholders' equity
Other reserves and other shareholders' equity relate to the
merger reserve for Barclays Bank UK Group and the Group
Reconstruction Relief for Barclays Bank UK PLC, in respect of the
transfer of the UK banking business, which occurred on 1 April
2018.
As at 30 June 2021, there was a credit balance of GBP89m
(December 2020: GBP89m credit) in other reserves and shareholders'
equity. There has been no movement since December 2020.
13. Contingent liabilities and commitments
The following table summarises the nominal principal amount of
contingent liabilities and commitments which are not recorded on
the balance sheet:
As at As at
30.06.21 31.12.20
Contingent liabilities GBPm GBPm
======================================================= ========= =========
Guarantees and letters of credit pledged as collateral
security 435 500
Performance guarantees, acceptances and endorsements 150 150
======================================================= ========= =========
Total 585 650
Commitments
======================================================= ========= =========
Standby facilities, credit lines and other commitments 60,563 65,910
In addition to the above, Note 14, Legal, competition and
regulatory matters details out further contingent liabilities where
it is not practicable to disclose an estimate of the potential
financial effect on the Barclays Bank UK Group.
14. Legal, competition and regulatory matters
The Barclays Bank UK Group faces legal, competition and
regulatory challenges, many of which are beyond our control. The
extent of the impact 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.
The recognition of provisions in relation to such matters
involves critical accounting estimates and judgments in accordance
with the relevant accounting policies applicable to Note 9,
Provisions. We have not disclosed an estimate of the potential
financial impact or effect on the Barclays Bank UK Group of
contingent liabilities where it is not currently practicable to do
so. Various matters detailed in this note seek damages of an
unspecified amount. While certain matters specify the damages
claimed, such claimed amounts do not necessarily reflect the
Barclays Bank UK Group's potential financial exposure in respect of
those matters.
Investigation into UK cards' affordability
The FCA is investigating certain aspects of the affordability
assessment processes used by Barclays Bank UK PLC and Barclays Bank
PLC for credit card applications made to Barclays' UK credit card
business. Barclays is providing information in cooperation with the
investigation.
HM Revenue & Customs (HMRC) assessments concerning UK Value
Added Tax
In 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
correspond to assessments of GBP181m (inclusive of interest), of
which Barclays would expect to attribute an amount of approximately
GBP128m to Barclays Bank UK PLC and GBP53m to Barclays Bank PLC.
HMRC's decision has been appealed to the First Tier Tribunal (Tax
Chamber).
Local authority civil actions concerning LIBOR
Following settlement by Barclays Bank PLC of various
governmental investigations concerning certain benchmark interest
rate submissions, in the UK, certain local authorities have brought
claims against Barclays Bank PLC and Barclays Bank UK PLC asserting
that they entered into loans in reliance on misrepresentations made
by Barclays Bank PLC in respect of its conduct in relation to
LIBOR. The loans were originally entered into with Barclays Bank
PLC, but Barclays Bank UK PLC is now the lender of record. Barclays
Bank PLC and Barclays Bank UK PLC were successful in their
applications to strike out the claims. One local authority has
obtained permission to pursue an appeal against this decision,
while the claims brought by the other local authorities have been
settled on terms such that the parties have agreed not to pursue
these claims and to bear their own costs.
General
The Barclays Bank UK Group is engaged in various other legal,
competition and regulatory matters in the jurisdictions in which it
operates. The Barclays Bank UK Group is subject to legal
proceedings brought by and against members of the Barclays Bank UK
Group 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 management and protection,
intellectual property, money laundering, financial crime,
employment, environmental and other statutory and common law
issues.
The Barclays Bank UK 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 it is or has been engaged. The Barclays Bank UK
Group 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 UK 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 (including formerly
active matters or those matters arising after the date of this
note) will not be material to Barclays Bank UK PLC's results,
operations or cash flow for a particular period, depending on,
among other things, the amount of the loss resulting from the
matter(s) and the amount of profit otherwise reported for the
reporting period.
15. Related party transactions
Related party transactions in the half year ended 30 June 2021
were similar in nature to those disclosed in the Barclays Bank UK
PLC Annual Report 2020.
Amounts included in the Barclays Bank UK Group's financial
statements with other Barclays Group companies are as follows:
Half year ended Half year ended
30.06.21 30.06.20
===================== =====================
Fellow Fellow
Parent subsidiaries Parent subsidiaries
GBPm GBPm GBPm GBPm
=================== ====== ============= ====== =============
Total income (147) 44 (146) 57
Operating expenses (16) (1,158) (22) (1,100)
As at 30.06.21 As at 31.12.20
Fellow Fellow
Parent subsidiaries Parent subsidiaries
GBPm GBPm GBPm GBPm
=================== ====== ============= ====== =============
Total assets 12 729 15 706
Total liabilities 10,362 1,319 9,588 1,664
Except for the above, no related party transactions that have
taken place in the half year ended 30 June 2021 have materially
affected the financial position or performance of the Barclays Bank
UK Group during this period.
16. Interest rate benchmark reform
Following the financial crisis, the reform and replacement of
benchmark interest rates such as LIBOR has become a priority for
global regulators. The FCA and other global regulators have
instructed market participants to prepare for the cessation of
LIBOR after the end of 2021, and to adopt RFRs. While it is
expected that most reforms affecting the Barclays Bank UK Group
will be completed by the end of 2021, consultations and regulatory
changes are in progress and as certain US Dollar tenors will
continue to be published up to mid-2023, significant remediation
efforts will continue beyond the end of 2021.
How the Barclays Group is managing the transition to alternative
benchmark rates
Barclays has established a Group-wide LIBOR Transition
Programme, further detail is available in the Barclays Bank UK PLC
Annual Report 2020 (page 180).
In March 2021, the FCA announced the dates that panel bank
submissions for all LIBOR settings will cease, after which
representative LIBOR rates will no longer be available, these are:
immediately after 31 December 2021, in the case of all sterling,
euro, Swiss franc and Japanese yen settings, and the 1-week and
2-month US dollar settings; and immediately after 30 June 2023, in
the case of the remaining US dollar settings. Throughout 2021, the
FCA will consult with market participants to require continued
publication on a 'synthetic' basis for some sterling LIBOR settings
and, for 1 additional year, some Japanese yen LIBOR settings.
Approaches to the transition of exposure vary by currency,
product and counterparty. The rates to which counterparties are
being transitioned are endorsed by the regulators. We are making
disclosures as part of the transition to clarify the rate to be
applied and the potential risks inherent in the transition. In line
with regulatory expectations, and according to the regulatory
endorsed timetable, the Barclays Bank UK Group is actively engaging
with counterparties to transition or include appropriate fallback
provisions and transition mechanisms in its floating rate assets
and liabilities with maturities after 2021, when most IBORs are
expected to cease to be published, or will be published on a
non-representative basis for a limited time.
Barclays is working with central clearing counterparties where
the transition of cleared derivative contracts will follow a
market-wide, standardised approach to reform. Barclays is working
to the UK Risk Free Rate Working Group (RFRWG) target of completion
of active conversion of, and/or addition of robust fallbacks to
legacy GBP LIBOR contracts, where viable by the end of Q321.
Additionally, plans are in place to address non-GBP and other
official sector industry milestones and targets.
Progress made during H121
Building on the progress made in 2020, the Barclays Bank UK
Group has delivered further alternative RFR product capabilities
and alternatives to LIBOR across loans, bonds and derivatives.
Client outreach is progressing to plan and we have continued to
engage actively with customers and counterparties to transition or
include the appropriate fallback provisions. The Barclays Bank UK
Group has in place detailed plans, processes and procedures to
support the transition of the remainder during 2021. Barclays has
adhered to the ISDA IBOR Fallbacks Protocol for its major
derivative dealing entities and we continue to track progress and
engage with clients on their own adherence. Following the progress
made during 2020, the Barclays Bank UK Group continues to deliver
technology and business process changes in preparation for LIBOR
cessation and transitions to RFRs that will be necessary during
2021 and beyond in line with official sector expectations and
milestones.
The Barclays Bank UK Group met the Q121 UK RFRWG milestone to
cease initiation of GBP LIBOR linked loans, securitisations or
linear derivatives. The Barclays Bank UK Group has put in place
controls so that any exceptions or exemptions are approved, and is
taking a similar approach to forthcoming cessation milestones.
17. Barclays Bank UK PLC parent condensed balance sheet
As at As at
30.06.21 31.12.20
Assets GBPm GBPm
=========================================================== ========= =========
Cash and balances at central banks 53,159 35,218
Cash collateral and settlement balances 3,596 4,345
Loans and advances at amortised cost 219,509 212,033
Reverse repurchase agreements and other similar
secured lending 1,691 133
Trading portfolio assets 110 298
Financial assets at fair value through the income
statement 2,968 3,432
Derivative financial instruments 1,125 550
Financial assets at fair value through other comprehensive
income 22,202 26,026
Investments in subsidiaries 441 441
Goodwill and intangible assets 3,379 3,379
Property, plant and equipment 642 737
Current tax assets - 77
Deferred tax assets 1,086 780
Other assets 573 522
=========================================================== ========= =========
Total assets 310,481 287,971
Liabilities
=========================================================== ========= =========
Deposits at amortised cost 256,114 241,091
Cash collateral and settlement balances 1,135 455
Repurchase agreements and other similar secured
borrowing 11,993 7,178
Debt securities in issue 8,931 7,503
Subordinated liabilities 10,455 9,869
Trading portfolio liabilities 848 1,265
Derivative financial instruments 459 880
Current tax liabilities 228 -
Other liabilities 1,791 1,700
Provisions 586 857
=========================================================== ========= =========
Total liabilities 292,540 270,798
Equity
=========================================================== ========= =========
Called up share capital and share premium 5 5
Other equity instruments 2,560 2,560
Other reserves 244 575
Retained earnings 15,132 14,033
=========================================================== ========= =========
Total equity 17,941 17,173
Total liabilities and equity 310,481 287,971
Investment in subsidiar ies
The investment in subsidiaries of GBP441m (December 2020:
GBP441m) predominantly relates to investments in Barclays Insurance
Services Company Limited, Barclays Investment Solutions Limited and
Barclays Asset Management Limited. Barclays Bank UK PLC considers
the carrying value of its investment in subsidiaries to be fully
recoverable.
Other Information
Results timetable(1) Date
============================================================= =============================
2021 Annual Report 23 February 2022
For further information please contact
Investor relations Media relations
============================================================= ===============================
Thomas Hoskin +44 (0) 20 7116
Chris Manners +44 (0) 20 7773 2136 4755
More information on Barclays Bank UK 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: 9740322.
1 Note that this date is provisional and subject to change.
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END
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