In 2003, the management of Barclays Bank resolved to put our foot on the accelerator of performance. There were two main reasons. We saw an opportunity to create faster growth in shareholder value. And we thought it was important to develop our capabilities around the world so that, when customers chose a bank in the markets in which we operate, they would think of Barclays first.
This spring, we announced our results for 2006. They represented the best performance in the bank’s 300-year history. Net profits rose 35 percent, to £7,136 million (about US$13 million), and earnings and dividends per share went up 32 percent and 17 percent, respectively. We have made an emphatic turnaround in our flagship United Kingdom retail banking business, and we have sustained high performance levels in our investment banking business (called Barclays Capital) and our commercial banking activity. Approximately 50 percent of profits now come from outside the U.K., compared with 25 percent three years ago. We are also well positioned to deliver further growth, both organic and through acquisition, in the years ahead. For example, Barclays’ 2005 acquisition of the South African bank Absa has made it a market leader on the African continent. We regularly evaluate other possible combinations, big and small.
These results did not take place by accident. They represent the successful execution of that 2003 decision to transform Barclays from a company with disparate operations in many different countries to a unified global enterprise, one that now serves 27 million people. We were not certain we would succeed, and we don’t take our continuing success for granted. But we have learned, in the past four years, some universal principles that allow us to keep moving forward.
Setting a Vision: To “Earn, Invest, and Grow.” At many times in its long history, Barclays has been a formidable force in international banking. And Barclays is an iconic brand. But in recent years, because our portfolio was excessively concentrated in the United Kingdom, the fortunes of our shareholders were dependent on the vicissitudes of doing business in one country. This also made us curiously lacking in self-confidence, relative to the Barclays of 30 or 40 years before. So we set ourselves the task of increasing the rate of profit growth by diversifying our business base, strengthening our retail and commercial banking activities outside the U.K., and expanding such global businesses as Barclays Capital, Barclays Global Investors (asset management), Barclays Wealth (private banking), and Barclaycard (credit cards, loans, and insurance products).
The new vision has been easy to articulate but quite difficult to accomplish. We know that our shareholders will not accept a profit growth holiday while we invest for future growth. To grow and maintain profitability simultaneously, we rely on the fundamental health of the Barclays franchise: its standing in the minds of employees, in the communities where it operates, and, most of all, among customers. Furthermore, all our employees understand that they are expected to focus their efforts on two primary tasks. The first is serving customers brilliantly. The second is complying with legal and regulatory requirements, and maintaining the financial controls that preserve our license to do business and justify the trust that our customers place in us.
Adopting a Universal Banking Model. Barclays serves customers who range from individual mortgage holders in Manchester, England, to corporations managing their risks by means of complex derivatives in different tax jurisdictions around the world. Increasingly, however, customers cannot be served in silos; for instance, our mortgage business in Spain is facilitated by our ability, through Barclays Capital, to securitize that risk to investors. So we seek opportunities to sell and deliver services across internal boundaries. We promote synergies both within our two main divisions — global retail and commercial banking (GRCB) and investment banking and investment management (IBIM) — and between them.