Barclays 2005 Annual Report Download - page 116

Barclays Capital
2005 2004
£m £m
Net interest income 926 991
Net fee and commission income 724 603
Net trading income 2,194 1,463
Net investment income 401 297
Principal transactions 2,595 1,760
Other income 25 21
Total income 4,270 3,375
Impairment charges and other
credit provisions (103) (102)
Net income 4,167 3,273
Operating expenses excluding amortisation
of intangible assets (2,894) (2,253)
Amortisation of intangible assets (1) –
Operating expenses (2,895) (2,253)
Profit before tax 1,272 1,020
Barclays Capital delivered record profit before tax and net income.
Profit before tax increased 25% (£252m) to £1,272m (2004: £1,020m)
as a result of the very strong income performance driven by higher
business volumes and client activity levels. Net income increased 27%
(£894m) to £4,167m (2004: £3,273m).
Total income increased 27% (£895m) to £4,270m (2004: £3,375m) as
a result of strong growth across Rates and Credit Businesses. Income
by asset category was broadly based with particularly strong growth
delivered by credit products, commodities, currency products and
equity products. Income by geography was well spread with significant
growth in the US. Areas of investment in 2004, such as commodities,
commercial mortgage backed securities and equity derivatives,
performed well, delivering significant income growth. Market risk was
well controlled with average DVaR falling 6% to £32m (2004: £34m)
as a result of increased diversification across asset classes.
Secondary income, comprising principal transactions (net trading
income and net investment income) and net interest income, is mainly
generated from providing financing and client risk management
solutions. This increased 28% (£770m) to £3,521m (2004: £2,751m).
Net trading income increased 50% (£731m) to £2,194m (2004:
£1,463m) with very strong contributions across the Rates and Credit
Businesses; commodities, foreign exchange, fixed income and credit
derivatives performed particularly well. These results were 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. Net investment income increased 35% (£104m) to £401m
(2004: £297m) driven by realisations from credit products. Net interest
income decreased 7% (£65m) to £926m (2004: £991m) reflecting
flattening yield curves and the impact of IAS 32 and IAS 39.
Primary income, comprising net fee and commission income from
advisory and origination activities, grew 20% (£121m) to £724m
(2004: £603m). This reflected higher volumes and continued market
share gains in a number of key markets, with strong performances
from both bonds and loans.
Other income of £25m (2004: £21m) primarily reflected income from
operating leases.
Impairment charges of £103m (2004: £102m) were in line with the
prior year reflecting the stable wholesale credit environment.
Operating expenses increased 28% (£642m) to £2,895m (2004:
£2,253m), reflecting higher business volumes and the ongoing costs
associated with staff hired during 2004 and 2005 as part of the
business expansion plan. Performance related costs increased due to
the strong profit performance. Investment expenditure, primarily in the
front office, continued to be significant although less than 2004 as
headcount growth slowed. The cost:net income ratio remained stable
at 69% (2004: 69%). Total staff costs to net income of 56% was
in line with 2004 levels. Approximately half of operating expenses
comprised performance related pay, discretionary investment spend
and short-term contractor resource, consistent with 2004.
Total headcount increased by 1,200 during 2005 to 9,000
(2004: 7,800). Growth occurred across all regions with over half
of the increase in the front office, spread across product, client
coverage and distribution.
Barclays Global Investors
2005 2004
£m £m
Net interest income 17 5
Net fee and commission income 1,297 882
Net trading income 23
Net investment income 43
Principal transactions 66
Total income 1,320 893
Operating expenses excluding amortisation
of intangible assets (775) (555)
Amortisation of intangible assets (4) (1)
Operating expenses (779) (556)
Share of post-tax results of associates
and joint ventures 1(2)
Profit on disposal of associates
and joint ventures –1
Profit before tax 542 336
Barclays Global Investors (BGI) delivered another year of outstanding
financial results, achieving record revenues and profit before tax.
The performance was spread across a diverse range of products,
distribution channels and geographies. Profit before tax increased
61% (£206m) to £542m (2004: £336m) reflecting substantial income
growth and focused investment spend.
Net fee and commission income increased 47% (£415m) to £1,297m
(2004: £882m), driven by significant increases in management,
incentive and securities lending revenues. Higher margin assets under
management, strong investment performance and higher market levels
contributed to the significant income growth, which was strong across
all areas, particularly in the active and iShares businesses.
Investment performance remained very good for the majority of active
funds as they outperformed their respective benchmarks. The growth
in global iShares continued apace, with related assets under
management up 66% (£45bn) to £113bn (2004: £68bn).
Barclays PLC
Annual Report 2005
114
Financial review
Analysis of results by business