Barclays 2005 Annual Report Download - page 114

Financial review
Analysis of results by business
Analysis of Results by Business
The following section analyses the Group’s performance within the
businesses. Inter-business activities are included within these figures.
The total income and expenditure for the businesses therefore does
not necessarily equate to the amounts reported in the Group’s results.
UK Banking
2005 2004
£m £m
Net interest income 3,990 3,477
Net fee and commission income 1,776 1,936
Net trading income ––
Net investment income 31 5
Principal transactions 31 5
Net premiums from insurance contracts 280 249
Other income 26 37
Total income 6,103 5,704
Net claims and benefits on
insurance contracts (58) (46)
Total income, net of insurance claims 6,045 5,658
Impairment charges and other credit provisions (344) (199)
Net income 5,701 5,459
Operating expenses excluding amortisation
of intangible assets (3,240) (3,239)
Amortisation of intangible assets (3) (2)
Operating expenses (3,243) (3,241)
Share of post-tax results of associates and
joint ventures (3) 5
Profit on disposal of associates and
joint ventures –42
Profit before tax 2,455 2,265
UK Banking profit before tax increased 8% (£190m) to £2,455m (2004:
£2,265m) driven by good income growth and strong cost management.
UK Banking has targeted a cost:income ratio reduction of two
percentage points per annum in 2005, 2006 and 2007. This has been
exceeded in 2005 as the cost:income ratio improved by three
percentage points to 54% (2004: 57%). UK Banking has continued to
make good progress towards achieving its strategic aims of delivering
integrated banking solutions to customers, enhancing the customer
service experience, capturing revenue growth opportunities and
improving productivity.
UK Retail Banking
2005 2004
£m £m
Net interest income 2,174 2,059
Net fee and commission income 1,112 1,123
Net trading income ––
Net investment income 91
Principal transactions 91
Net premiums from insurance contracts 280 249
Other income 17 26
Total income 3,592 3,458
Net claims and benefits on
insurance contracts (58) (46)
Total income, net of insurance claims 3,534 3,412
Impairment charges and other credit provisions (142) (60)
Net income 3,392 3,352
Operating expenses (2,359) (2,433)
Share of post-tax results of associates
and joint ventures (6) 2
Profit on disposal of associates and
joint ventures –42
Profit before tax 1,027 963
UK Retail Banking profit before tax increased 7% (£64m) to £1,027m
(2004: £963m). Profit before tax increased 12% excluding the impact
of a £42m profit on disposal of a stake in Edotech in 2004.
Total income net of insurance claims increased 4% (£122m) to
£3,534m (2004: £3,412m). The full-year growth compares favourably
with 1% growth reported for the first half of 2005. There was good
growth in current accounts, Small Business and UK Premier, whilst
income from retail savings was weaker. The application of IAS 32 and
IAS 39 from 1st January 2005, in particular Effective Interest Rate
requirements, resulted in the reclassification of certain lending related
fees from net fee and commission income to net interest income.
Net interest income increased 6% (£115m) to £2,174m (2004:
£2,059m). Growth was driven by higher contributions from Mortgages
and Small Business, partly offset by some margin pressure on savings
and deposits. Excluding the impact of the application of IAS 32 and
IAS 39 from 1st January 2005, net interest income increased 3%.
UK residential mortgage balances ended the period at £59.6bn (2004:
£61.7bn). The mortgage business continued to focus on higher margin
new business which resulted in an improved new business spread.
Gross advances were £11.5bn which represented a market share of
4%. The loan to value ratio within the mortgage book on a current
valuation basis averaged 35% (2004: 35%). There was strong balance
growth in non-mortgage loans, as Small Business average loan
balances increased 14% and within Personal Customers, average
overdraft balances increased 8%.
Total average customer deposit balances increased 6% to £72.4bn
(2004: £68.5bn). There was strong growth in UK Premier average
balances of 11%, and good growth in Small Business average deposits
of 5%. Within Personal Customers, retail savings average balances
increased 5% and current account average balances increased 3%.
Barclays PLC
Annual Report 2005
112