Barclays 2007 Annual Report Download - page 37

1
Business review
Barclays PLC Annual Report 2007 35
2006/05
International Retail and Commercial Banking – excluding Absa profit before
tax increased 76% (£223m) to £518m (2005: £295m), including a gain on
the disposal of the interest in FirstCaribbean International Bank of £247m.
This reflected good growth in continental Europe offset by a decline in
profits in Africa caused by higher impairment, and increased costs
reflecting a step change in the rate of organic investment in the business.
Income increased 7% (£64m) to £1,046m (2005: £982m).
Net interest income increased 8% (£47m) to £604m (2005: £557m),
reflecting strong balance sheet growth in continental Europe, Africa and
the Middle East, and the development of the corporate business in Spain.
Total average customer loans increased 20% to £27.2bn (2005: £22.7bn).
Mortgage balance growth in continental Europe was particularly strong,
with average Euro balances up 22%. There was a modest decline in lending
margins partly driven by a greater share of mortgage assets as a proportion
of the total book in continental Europe. Average customer deposits
increased 16% to £10.4bn (2005: £9.0bn), with deposit margins stable.
Net fee and commission income increased 16% (£50m) to £366m
(2005: £316m). This reflected a strong performance from the Spanish
funds business, where average assets under management increased
11%, together with very strong growth in France, including the first full
year contribution of the ING Ferri business which was acquired on
1st July 2005. Net fee and commission income showed solid growth in
Africa and the Middle East.
Principal transactions decreased £36m to £83m (2005: £119m).
2005 included £23m from the redemption of preference shares in
FirstCaribbean International Bank.
Impairment charges increased £27m to £41m (2005: £14m). This
reflected the absence of one-off recoveries of £12m which arose in 2005
in Africa and the Middle East, and strong balance sheet growth across
the businesses.
Operating expenses increased 9% (£62m) to £774m (2005: £712m).
This included gains from the sale and leaseback of property in Spain
of £55m. Operating expenses also included incremental investment
expenditure of £25m to expand the distribution network and enhance
IT and operational capabilities.
Barclays Spain continued to perform strongly. Profit before tax increased
21% (£30m) to £171m (2005: £141m), excluding net one-off gains on
asset sales of £32m (2005: £8m) and integration costs of £43m (2005:
£57m). This was driven by the continued realisation of benefits from
Banco Zaragozano, together with strong growth in assets under
management and solid growth in mortgages.
Africa and the Middle East profit before tax decreased 9% (£12m) to
£126m (2005: £138m) driven by higher impairment charges reflecting
one-off recoveries of £12m that arose in 2005 and an increase in
investment expenditure.
Profit before tax increased strongly in Portugal reflecting good flows of
new customers and increased business volumes. France also performed
well as a result of good organic growth and the acquisition of ING Ferri.
The profit on disposal of subsidiaries, associate and joint ventures of
£247m (2005: £nil) comprised the gain on the sale of Barclays interest
in FirstCaribbean International Bank. The share of post-tax results of
FirstCaribbean International Bank included in 2006 was £41m (2005: £37m).
2007 2006 2005
£m £m £m
Income statement information
Net interest income 753 604 557
Net fee and commission income 425 366 316
Net trading income 68 17 31
Net investment income 109 66 88
Principal transactions 177 83 119
Net premiums from insurance contracts 145 111 129
Other income 920 23
Total income 1,509 1,184 1,144
Net claims and benefits incurred under insurance contracts (170) (138) (162)
Total income net of insurance claims 1,339 1,046 982
Impairment charges (79) (41) (14)
Net income 1,260 1,005 968
Operating expenses excluding amortisation of intangible assets (1,007) (765) (706)
Amortisation of intangible assets (16) (9) (6)
Operating expenses (1,023) (774) (712)
Share of post-tax results of associates and joint ventures 140 39
Profit on disposal of subsidiaries, associates and joint ventures 8247 –
Profit before tax 246 518 295
Balance sheet information
Loans and advances to customers £39.3bn £29.0bn £25.3bn
Customer accounts £15.7bn £11.0bn £10.2bn
Total assets £52.2bn £38.2bn £34.0bn
Performance ratios
Return on average economic capital 11% 36% 17%
Cost:income ratio 76% 74% 73%
Cost:net income ratio 81% 77% 74%
Other financial measures
Risk Tendency £220m £75m £75m
Economic profit £20m £309m £89m
Risk weighted assets £29.7bn £20.1bn £20.2bn