Barclays 2003 Annual Report Download - page 86

84
Results by Nature of Income and Expense
Comparative figures have been restated as a result of the changes in
accounting policy and accounting presentation as set out on pages 118
and 119.
Net interest income
Net interest income
2003 2002 2001
£m £m £m
Interest receivable 12,427 12,044 13,458
Interest payable (5,823) (5,839) (7,492)
6,604 6,205 5,966
Group net interest income increased by 6% to £6,604m, reflecting
growth in balances which more than offset a 14 basis point fall versus
2002 in the Group net interest margin to 2.61% (2002: 2.75%).
The Group net interest margin of 2.61% (2002: 2.75%) includes 0.48%
(2002: 0.55%) arising from the benefit of free funds. A component of
the benefit of free funds is the hedge against short-term interest rate
movements. The contribution of the hedge in 2003 was 0.19%
(2002: 0.22%).
Average interest earning assets increased by 12% to £253bn
(2002: £225bn), primarily due to a £9bn increase in average loans and
advances to customers, largely in Personal Financial Services, Barclaycard
and Business Banking and an £18bn increase in average holdings of debt
securities balances, predominantly in Barclays Capital.
Domestic average interest earning assets increased by 7% to £162bn
(2002: £152bn), predominantly driven by the £5bn increase in Business
Banking average lending balances and a £4bn increase in average
mortgage balances in Personal Financial Services. International average
interest earning assets increased by 23% to £90bn (2002: £73bn),
primarily driven by an increase in Barclays Capital wholesale activities.
The 14 basis points fall in the Group net interest margin was primarily
attributable to a fall in the international net interest margin and a
change in the mix of both assets and liabilities.
The domestic net interest margin rose by 3 basis points to 3.64%
(2002: 3.61%), reflecting active management of margins across the UK
businesses in competitive market conditions. Net interest margin
improved relative to 2002 in mortgages and consumer finance and
remained stable in retail savings and corporate lending.
The reduction of 19 basis points in the international margin was mainly
as a result of an increase in higher quality assets in Barclays Capital, the
conversion to associate status of the Caribbean business, a change in the
currency mix of the portfolio and the general fall in global interest rates.
0
4
2
6
8
10
2001 2002 2003£bn
12
16
Net interest income
Interest payable
Interest receivable
14
5.97
7.49
6.20
5.84
6.60
5.83
13.46
12.04 12.43
Financial Review
Results by Nature of Income and Expense
Net interest income in 2002 increased by 4% to £6,205m (2001: £5,966),
reflecting growth in the average interest earning assets by 10% to
£225bn. This was primarily due to a £6bn increase in UK mortgage
balances, £4bn increase in debt securities holdings and £5bn of lending
to banks.
In 2002, overall banking margins were 16 basis points down on 2001 to
2.75%. The adverse impact on the margin was largely due to the low
interest rate environment, the competitive market conditions in the UK,
particularly in the mortgage market, an increase in the non performing
loans in the US and the managing down of the higher yielding South
American Corporate Banking business.
In 2002, the benefit of free funds fell 0.08% to 0.33% as a result of the
reduction in interest rates. However, the overall benefit of free funds on a
hedged basis rose to 0.55% reflecting an increase in the effective rate of
the hedge more than offsetting the fall in the liability interest rate.
Prevailing average interest rates
2003 2002 2001
%%%
United Kingdom:
Barclays Bank PLC base rate 3.69 4.00 5.12
London Inter-Bank Offered
Rate (LIBOR):
three-month sterling 3.74 4.06 5.04
three-month eurodollar 1.21 1.80 3.78
United States prime rate 4.12 4.68 6.92
Average interest earning assets and liabilities –
banking business
2003 2002 2001
£m £m £m
Average interest earning assets:
Group 252,737 225,178 205,017
Domestic 162,434 151,810 141,087
International 90,303 73,368 63,930
Average interest bearing
liabilities:
Group 224,778 199,708 184,105
Domestic 136,939 130,045 122,422
International 87,839 69,663 61,683