Barclays 2007 Annual Report Download - page 31

1
Business review
Barclays PLC Annual Report 2007 29
Income from principal transactions was £30m (2005: £17m), primarily
reflecting the profit realised on a number of equity investments.
As expected, impairment rates trended upwards during the year towards
a more normalised level. Impairment increased 42% (£75m) to £252m
(2005: £177m), with the increase mainly reflecting higher charges from
Medium Business and balance growth. Impairment charges in Larger
Business were stable.
Operating expenses increased 4% (£32m) to £857m (2005: £825m).
Cost growth reflected higher volumes, increased expenditure on front line
staff and the costs of Iveco Finance for a full year. Operating expenses
included a credit of £60m on the sale and leaseback of property. Increased
investment was focused on the acceleration of the rationalisation of
operating sites and technology infrastructure.
The cost:income ratio improved two percentage points to 36%
(2005: 38%).
Profit on disposals of subsidiaries, associates and joint ventures of £76m
(2005: £nil) arose from the sales of interests in vehicle leasing and
European vendor finance businesses.
2007 2006 2005
£m £m £m
Income statement information
Net interest income 1,738 1,702 1,536
Net fee and commission income 749 642 589
Net trading income 92–
Net investment income 47 28 17
Principal transactions 56 30 17
Other income 11 21 17
Total income 2,554 2,395 2,159
Impairment charges (290) (252) (177)
Net income 2,264 2,143 1,982
Operating expenses excluding amortisation of intangible assets (903) (856) (822)
Amortisation of intangible assets (4) (1) (3)
Operating expenses (907) (857) (825)
Share of post-tax results of associates and joint ventures –33
Profit on disposal of subsidiaries, associates and joint ventures 14 76 –
Profit before tax 1,371 1,365 1,160
Balance sheet information
Loans and advances to customers £63.3bn £56.3bn £53.4bn
Customer accounts £60.8bn £57.4bn £50.9bn
Total assets £73.9bn £65.9bn £59.9bn
Performance ratios
Return on average economic capital 30% 37% 31%
Cost:income ratio 36% 36% 38%
Cost:net income ratio 40% 40% 42%
Other financial measures
Risk Tendency £305m £290m £250m
Economic profit £650m £738m £544m
Risk weighted assets £53.8bn £50.0bn £47.1bn
2006/05
Barclays Commercial Bank profit before tax increased 18% (£205m) to
£1,365m (2005: £1,160m), driven by continued strong income growth.
Barclays Commercial Bank maintained its market share of primary
customer relationships. The 2006 result included a £23m (2005: £13m)
contribution from the full year consolidation of Iveco Finance, in which a
51% stake was acquired on 1st June 2005. Profit before business disposals
increased 11% to £1,289m (2005: £1,160m).
Income increased 11% (£236m) to £2,395m (2005: £2,159m), driven
by strong balance sheet growth. The uplift in income was broadly based
across income categories.
Net interest income increased 11% (£166m) to £1,702m (2005:
£1,536m) driven by strong balance sheet growth. There was strong
growth in all business areas and in particular Larger Business. The lending
margin improved slightly. Average customer accounts increased 11% to
£44.8bn (2005: £40.5bn) with good growth across product categories.
The deposit margin was stable.
Net fee and commission income increased 9% (£53m) to £642m
(2005: £589m). There was a strong rise in income from foreign exchange
and derivatives business transacted through Barclays Capital on behalf of
Barclays Commercial Bank customers.