Barclays 2007 Annual Report Download - page 49

1
Business review
Barclays PLC Annual Report 2007 47
Business net interest income is derived from the interest rate earned on
average assets or paid on average liabilities relative to the average Bank
of England base rate, local equivalents for international businesses or the
rate managed by the bank using derivatives. The margin is expressed as
annualised business interest income over the relevant average balance.
Asset and liability margins cannot be added together as they are relative
to the average Bank of England base rate, local equivalent for international
businesses or the rate managed by the bank using derivatives. The benefit
of capital attributed to these businesses is excluded from the calculation
of business margins and business net interest income.
Average balances are calculated on daily averages for most UK banking
operations and monthly averages elsewhere.
Within the reconciliation of Group net interest income, there is an amount
captured as Other. This relates to the benefit of capital excluded from the
business margin calculation, Head office functions and other operations
and net funding on non-customer assets and liabilities.
2007/06
UK Retail Banking assets margin decreased 12 basis points to 1.20%
(2006: 1.32%) principally due to the increased proportion of mortgages
and the contraction in unsecured loans. UK Retail Banking liabilities
margin increased 10 basis points to 2.15% (2006: 2.05%) due to pricing
initiatives and changes in the product mix.
Barclays Commercial Bank assets margin decreased by 12 basis points
to 1.80% (2006: 1.92%) due to changes in the product mix. Barclays
Commercial Bank liabilities margin remained broadly stable at 1.49%
(2006: 1.46%).
Barclaycard assets margin decreased 54 basis points to 6.59%
(2006: 7.13%) due to higher average base rates across core markets
and an increased weighting to secured lending.
International Retail and Commercial Banking – excluding Absa assets
margin of 1.32% (2006: 1.29%) was broadly stable. International Retail
and Commercial Banking – excluding Absa liabilities margin decreased
15 basis points to 1.91% (2006: 2.06%) primarily driven by changes in
the product and country mix.
International Retail and Commercial Banking – Absa assets margin
decreased 9 basis points to 2.86% (2006: 2.95%) due to increased
competition, increases in interest rates and changes in the product mix.
The liabilities margin increased 35 basis points to 3.25% (2006: 2.90% a)
driven by a re-pricing of customer deposits and higher interest rates.
Barclays Wealth assets margin increased 3 basis points to 1.11%
(2006: 1.08%) due to changes in the product mix. The liabilities
margin decreased seven basis points to 1.03% (2006: 1.10%) due
to competitive pricing.
The impact of the structural hedge on customer balances has been
included within business margins and has smoothed the impact of
changing interest rates before the impact of changes in product mix
or product pricing.
2006/05
UK Retail Banking assets margin decreased 11 basis points to 1.32%
(2005: 1.43%). The mortgage margin has been impacted by changed
assumptions used in the calculation of effective interest rates, a higher
proportion of new mortgages and base rate changes. This was partially
offset by increased contributions from non-mortgage assets. UK Retail
Banking liabilities margin was stable at 2.05% (2005: 2.02%).
Barclays Commercial Bank assets margin improved to 1.92%
(2005: 1.87%). Barclays Commercial Bank liabilities margin was stable
at 1.46% (2005: 1.46%).
Barclaycard assets margin was stable at 7.13% (2005: 7.11%).
International Retail and Commercial Banking – excluding Absa assets
margin decreased 7 basis points to 1.29% (2005: 1.36%) partly reflecting
a greater share of mortgage assets as a proportion of the total book in
continental Europe. International Retail and Commercial Banking –
excluding Absa liabilities margin was stable at 2.06% (2005: 2.03%).
International Retail and Commercial Banking – Absa assets margin
decreased 57 basis points to 2.95% (2005b: annualised 3.52%) reflecting
a higher proportion of mortgage assets and competitive pressures in
mortgages and asset finance. International Retail and Commercial
Banking – Absa liabilities margin increased 51 basis points to 2.90%
(2005b: annualised 2.39%).
Barclays Wealth assets margin increased 12 basis points to 1.08%
(2005: 0.96%) largely reflecting higher margins on new lending business
and a small increase in mortgage margins. The liabilities margin increased
6 basis points to 1.10% (2005: 1.04%) principally due to a slight increase
in currency deposit spreads.
Notes
aIRCB – Absa liabilities business margins, average balances and business net interest
income for 2006 have been restated to reflect changes.
bFor 2005, this reflects the period from 27th July until 31st December 2005.