Barclays 2005 Annual Report Download - page 110

Financial review
Results by nature of income and expense
Net fee and commission
2005 2004
£m £m
Fee and commission income 6,430 5,509
Less: fee and commission expense (725) (662)
Net fee and commission income 5,705 4,847
Net fee and commission income increased 18% (£858m) to £5,705m
(2004: £4,847m) reflecting good growth across all businesses. The
inclusion of Absa increased net fee and commission income by £334m
in the second half of 2005. Group net fee and commission income
excluding Absa grew 11%. Excluding the application of IAS 32 and
IAS 39 net fee and commission income increased 20%.
Fee and commission income rose 17% (£921m) to £6,430m (2004:
£5,509m). The inclusion of Absa increased fee and commission
income by £386m. Excluding Absa, fee and commission income grew
by 10%. The growth was driven by Barclays Global Investors, reflecting
strong growth in net new assets, strong investment performance and
higher market levels, and by Barclays Capital, as a result of increased
business volumes and higher market share. In addition, Barclaycard fee
and commission income increased as a result of higher contributions
from Barclaycard Business and FirstPlus and the inclusion of
Barclaycard US for the full year. Fee and commission expense increased
10% (£63m) to £725m (2004: £662m), largely reflecting the inclusion
of Absa which added £52m.
Total foreign exchange income was £648m (2004: £520m) and
consisted of revenues earned from both retail and wholesale activities.
The foreign exchange income earned on customer transactions by
UK Retail Banking, UK Business Banking, International Retail and
Commercial Banking, Barclaycard, Barclays Global Investors and Wealth
Management, both externally and with Barclays Capital, is reported in
those respective business units, within fee and commission income.
The foreign exchange income earned in Barclays Capital is reported
within trading income.
Principal transactions
2005 2004
£m £m
Net trading income
Rates related business 1,732 1,141
Credit related business 589 346
Principal transactions 2,321 1,487
Most of the Group’s trading income is generated in Barclays Capital.
Net trading income increased 56% (£834m) to £2,321m (2004:
£1,487m) due to strong performances across Barclays Capital Rates
and Credit businesses, in particular from commodities, foreign
exchange, fixed income and credit derivatives. This was driven by the
continued return on prior-year investments and higher volumes of
client-led activity across a broad range of products and geographical
regions. Group net trading income excluding £9m of Absa income,
grew 55%.
Net investment income
2005 2004
£m £m
Cumulative gain from disposal of available
for sale assets/investment securities 120 45
Dividend income 22 17
Net income from financial instruments
designated at fair value 389 n/a
Income from assets backing insurance policies n/a 717
Other investment income 327 248
Net investment income 858 1,027
Net investment income decreased 16% (£169m) to £858m (2004:
£1,027m). The inclusion of Absa increased net investment income by
£62m in the second half of 2005. Group net investment income
excluding Absa decreased 22%.
Following the application of IAS 39 at 1st January 2005, certain assets
and liabilities have been designated at fair value. Fair value movements
on these items have been reported within net trading income or within
net investment income depending on the nature of the transaction.
Fair value movements on insurance assets included within net
investment income contributed £317m.
From 1st January 2005, investment and insurance contracts are
separately accounted for in accordance with IAS 39 and IFRS 4. This
has resulted in investment income and the corresponding movement
in investment contract liabilities being presented on a net basis within
other income. In 2004, all contracts were accounted for as insurance
contracts and the gross income relating to these contracts was reported
as income from assets backing insurance policies.
Other income
2005 2004
£m £m
Increase in fair value of assets held in respect
of linked liabilities to customers under
investment contracts 9,234 n/a
Increase in liabilities held in respect of linked
liabilities to customers under
investment contracts (9,234) n/a
Property rentals 54 46
Other income 93 85
Other income 147 131
In accordance with IAS 39, from 1st January 2005 certain asset
management products offered to institutional clients by Barclays Global
Investors are recognised as investment contracts. This results in a
substantial increase in the fair value of assets held in respect of linked
liabilities to customers under investment contracts and in the related
liabilities.
Barclays PLC
Annual Report 2005
108