The Financial Performance Of Barclays Finance Essay

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The following report is aimed at comment the findings of Barclays PLC financial performance analysis. The first section presents an internal and external analysis. The second comments a series of financial ratios. Finally, the last section concludes.

Introduction

Banks are an important part of the financial system. They channel financial resources from individuals who have surpluses to individuals who lack capital. Banks transfer these assets in the form of loans. Loans are evaluated and classified according to the default probability (risk). In this manner, Banks assure that lenders invest their wealth in trustable projects, that is, economically viable (Arnold, G., 2008). Banks, then, subside the research task from lenders and allow them to get a safe and constant return rates in a determined timeframe and conditions (Valdez, S., 2007). As any business, Banks are aimed at increasing the wealth of the owners. Banks employ accounting systems and economic models to measure their financial performance. Accounting and economic models evaluate: 1) whether the wealth of the owners is augmenting, and 2) at what extent (Atril, P., McLaney, E., 2008). They provide several financial indicators which help business’ management to control the enterprise performance; among them, the financial ratios are widely used. The purpose of this report is to comment the findings discuss how bank (Barclays PLC) overall performance should be evaluated. The first section presents a review of Barclays’ internal and external performance. The second section evaluates Barclays’ financial performance. Finally, the last section concludes.

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A review of Barclays’ internal and external performance

Barclays is one of the worldwide leaders in financial services. It was founded in 1690 in the UK. Barclays has operations in 50 countries spanning over Europe, the US, and Africa. Its headquarters are located London, UK and employs 153,800 people worldwide (BARCLAYS, 2009). Barclays’ retail banking includes personal customers, home finance, local business, consumer lending and financial planning (DATAMONITOR, 2010).

Internal performance

Barclays’ capital strength has provided the company with resilience to cope adverse market conditions. For example, the company’s liquidity pool increased to £127 billion at 31st December 2009 from £43 billion in 2008. Hence, cash flows allow the bank to negotiate better selling conditions in their product portfolio (BARCLAYS, 2009). Barclays has kept its lending growth volume regardless global economic situation. The bank has reduced its derivative assets; therefore, its balance sheet size has been reduced (BARCLAYS, 2009). However, Barclays’ operations are threatened by its weakness in cost management. Its subsidiaries in Western Europe registered detrimental costs in 2009. Thus, the bank may face difficulties in its expansion plans (BARCLAYS, 2009). On the other hand, Barclays’ mobile banking services have experienced a significant growth due to smart phones popularization. This new service portfolio is likely to reduce workload in bank’s branches;

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