Barclays 2014 Annual Report Download - page 227

barclays.com/annualreport Barclays PLC Annual Report 2014 I 225
2014 compared to 2013
Statutory profit before tax decreased to £2,256m (2013: £2,868m),
adjusted profit before tax increased 12% to £5,502m.
Statutory total income net of insurance claims decreased 9% to
£25,288m including adjusting items for an own credit gain of £34m
(2013: loss of £220m), a £461m (2013: £259m) gain on the US Lehman
acquisition assets and a valuation revision of £935m (2013: £nil) relating
to changes in discount rates applied in the valuation methodology of the
ESHLA loan portfolio held at fair value.
Adjusted total income net of insurance claims decreased 8% to
£25,728m, reflecting a 54% reduction in BNC following assets and
securities run-down, and business disposals, a 12% reduction in the
Investment Bank, driven by a decrease in the Markets business,
particularly Macro, and a 9% reduction in Africa Banking, due to adverse
currency movements, partially offset by growth in Barclaycard and PCB.
Net interest income increased 4% to £12,080m, with higher net interest
income in PCB, the Investment Bank and Barclaycard, partially offset by
reductions in Africa Banking, Head Office and BNC. Net interest income
for PCB, Barclaycard and Africa Banking increased 4% to £11,435m
driven by strong savings income growth in PCB, and volume growth in
Barclaycard, partially offset by a reduction in Africa Banking due to
currency movements. This resulted in a net interest margin of 4.08%
(2013: 4.02%).
Credit impairment charges improved 29% to £2,168m, with a loan loss
rate of 46bps (2013: 64bps). This reflected the non-recurrence of
impairments on single name exposures, impairment releases on the
wholesale portfolio, and improved performance in Europe within BNC.
Within the Core business there were lower impairments in PCB due to
the improving UK economic environment, particularly impacting
Corporate Banking which benefitted from one-off releases and lower
defaults from large UK corporate clients, and reduced impairments in
the Africa Banking South Africa mortgages portfolio.
As a result, statutory net operating income for the Group decreased 7%
to £23,120m. Net adjusted operating income excluding movements in
own credit, the gains on US Lehman acquisition assets and the ESHLA
valuation revision decreased 5% to £23,560m.
Statutory operating expenses reduced 7% to £20,429m. This includes
adjusting items for an additional PPI redress provision of £1,270m,
resulting in a full year net charge of £1,110m (2013: £2,000m) in
relation to PPI and interest rate hedging redress, £1,250m (2013: £nil)
provision for ongoing investigations and litigation relating to Foreign
Exchange and goodwill impairment of £nil (2013: £79m). Adjusted
operating expenses decreased 9% to £18,069m, driven by savings from
Transform programmes, including a 5% reduction in headcount and
currency movements. Total compensation costs decreased 8% to
£8,891m, with the Investment Bank reducing 9% to £3,620m, reflecting
reduced headcount, and lower deferred and current year bonus
charges. Costs to achieve Transform were £1,165m (2013: £1,209m)
and the UK bank levy was £462m (2013: £504m).
The statutory cost: income ratio increased to 81% (2013: 79%). The
adjusted cost: income ratio excluding movements in own credit, the
gains on US Lehman acquisition assets, provisions for PPI and interest
rate hedging redress, the provision for ongoing investigations and
litigation relating to Foreign Exchange, the ESHLA valuation revision
and goodwill impairment decreased to 70% (2013: 71%).
Statutory other net expense increased to £435m (2013: £24m)
including an adjusting item for a loss on the announced sale of the
Spanish business of £446m, which completed on 2 January 2015. In
addition, accumulated currency translation reserve losses of
approximately £100m will be recognised on completion in Q115.
The tax charge was £1,411m (2013: £1,571m) on statutory profit before
tax of £2,256m (2013: £2,868m), representing an effective tax rate of
62.5% (2013: 54.8%). The effective tax rate on adjusted profit before
tax decreased to 31.0% (2013: 40.0%). 2013 included a charge of
£440m relating to the write-down of deferred tax assets in Spain.
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