Barclays 2005 Annual Report Download - page 109

Barclays PLC
Annual Report 2005 107
3.3
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
page 146.
Net interest income
2005 2004(a)
£m £m
Interest income(b) 17,232 13,880
Interest expense (9,157) (7,047)
Net interest income 8,075 6,833
Group net interest income increased 18% (£1,242m) to £8,075m
(2004: £6,833m). The inclusion of Absa added net interest income
of £514m in the second half of 2005. Group net interest income
excluding Absa grew 11% reflecting growth in average balances across
all businesses. Growth in net interest income was strongest in UK
Banking, particularly reflecting the growth in UK Business Banking
average lending and deposit balances. Net interest income also
improved in Barclaycard and International Retail and Commercial
Banking as a result of strong growth in balances.
In 2005, interest income relating to reverse repurchase agreements has
been included within other interest income. In 2004, such income was
classified within the loans and advances to banks and the loans and
advances to customers categories. Expenditure relating to repurchase
agreements has been treated accordingly and is included within other
interest expense. In 2004 the expenditure was included within deposits
from banks and customer accounts.
14.1
17.3
Non-interest income
Interest income
Total income net of insurance claims £bn
18
16
14
12
10
8
6
4
2
0
8.1
9.2
6.8
7.3
2005 2004
Financial review
Results by nature of income and expense
A component of the benefit of free funds included in Group net
interest income is the structural hedge which functions to reduce
the impact of the volatility of short-term interest rate movements.
The contribution of the structural hedge has decreased to £145m
(2004: £304m), largely due to the impact of higher short-term interest
rates and lower medium-term rates. The reduced contribution from
the structural hedge has impacted the interest earned on shareholders’
funds and reported liability margins.
Interest income includes £76m accrued on impaired loans, reflecting
the application of IAS 32.
2005 2004
13.9
17.2
9.1
8.1
7.1
6.8
18
16
14
12
10
8
6
4
2
0Net interest income
Interest expense
Interest income
Net interest income £bn
Notes
(a) Does not include IAS 32, IAS 39 or IFRS 4 which became effective from
1st January 2005. Further explanation is provided on page 134.
(b) Following application of IAS 32 and IAS 39 there are a number of
reclassifications, which affect the year on year comparisons of interest
income and expense:
– Certain lending related fees and commissions transferred to net
interest income.
– The interest expense of certain capital instruments transferred
to minority interests.