Barclays 2005 Annual Report Download - page 117

Barclays PLC
Annual Report 2005 115
3.3
Operating expenses increased 40% (£223m) to £779m (2004: £556m)
as a result of higher performance based expenses, significant
investment in key growth initiatives and ongoing investment in
infrastructure required to support business growth. The cost:income
ratio improved to 59% (2004: 62%).
Total headcount rose by 400 to 2,300 (2004: 1,900). Headcount
increased in all regions, across product groups and the support
functions, reflecting the investments made to support strategic
initiatives.
Total assets under management increased 24% (£172bn) to £881bn
(2004: £709bn). The growth included £48bn of net new assets, £53bn
attributable to favourable exchange rate movements and £71bn as a
result of market movements. In US$ terms, the increase in assets under
management to US$1,513bn from US$1,362bn (2004) included
US$88bn of net new assets and US$121bn of market movements,
partially offset by adverse exchange rate movements of US$58bn.
BGI manages assets denominated in numerous currencies although
the majority are held in US dollars.
Wealth Management
2005 2004
£m £m
Net interest income 335 303
Net fee and commission income 589 529
Net trading income ––
Net investment income 5–
Principal transactions 5–
Other income (1) 7
Total income 928 839
Impairment charges and other
credit provisions (2) 1
Net income 926 840
Operating expenses excluding amortisation
of intangible assets (752) (729)
Amortisation of intangible assets (2) (1)
Operating expenses (754) (730)
Profit before tax 172 110
Wealth Management profit before tax increased 56% (£62m) to
£172m (2004: £110m), driven by broad based-income growth and
improved cost efficiency.
Total income increased 11% (£89m) to £928m (2004: £839m).
Net interest income increased 11% (£32m) to £335m (2004: £303m)
reflecting strong growth in loans and deposits. Total average customer
deposits increased 12% to £23bn (2004: £20.6bn) driven by strong
growth from offshore and private banking clients. Total average loans
increased 22% to £4.4bn (2004: £3.6bn), reflecting growth from
corporate clients in the offshore business.
Net fee and commission income increased 11% (£60m) to £589m
(2004: £529m). The increase was driven principally by sales of
investment products to private banking and financial planning clients,
stronger equity markets and higher client transaction volumes.
Operating expenses increased 3% (£24m) to £754m (2004: £730m).
The business is being reorganised to establish an integrated global
operating model and efficiency savings have enabled the funding of
significant restructuring expenditure and the initiation of major
investment programmes in people and infrastructure. The cost:income
ratio improved six percentage points to 81% (2004: 87%).
The integration of the Gerrard business continued to make good
progress with profits well ahead of 2004.
Total customer funds, comprising customer deposits and assets under
management, increased to £78.3bn (31st December 2004: £70.8bn).
Multi-Manager assets increased to £6bn (31st December 2004:
£1.6bn); this growth included existing customer assets.
Wealth management – closed life assurance activities
2005 2004
£m £m
Net interest income (13) (53)
Net fee and commission income 44 –
Net trading income ––
Net investment income 259 596
Principal transactions 259 596
Net premiums from insurance contracts 195 362
Other income 11 4
Total income 496 909
Net claims and benefits on
insurance contracts (375) (818)
Total income, net of insurance claims 121 91
Operating expenses (127) (143)
Loss before tax (6) (52)
Wealth Management closed life assurance activities loss before tax
reduced to £6m (2004: loss of £52m), predominantly due to lower
funding and redress costs in 2005.
Profit before tax excluding customer redress costs of £85m was £79m
(2004: £45m).
From 1st January 2005, following the application of IAS 39 and IFRS 4,
life assurance products are divided into investment contracts and
insurance contracts. Investment income from assets backing
investment contracts, and the corresponding movement in investment
contract liabilities, has been presented on a net basis in other income.
In addition, these standards have impacted the reporting of net claims
and benefits paid.
Total income decreased to £496m (2004: £909m), largely due to the
application of IFRS. The decrease was offset by a broadly similar
reduction in net claims and benefits.
Operating expenses decreased 11% (£16m) to £127m (2004: £143m).
Costs relating to redress for customers decreased to £85m (2004:
£97m) and other operating expenses decreased 9% (£4m) to £42m
(2004: £46m).