Barclays 2008 Annual Report Download - page 51

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Business review
Barclays PLC Annual Report 2008 49
Impairment charges increased 42% (£122m) to £414m (2007:
£292m) primarily reflecting higher impairment losses in Larger Business,
particularly in the final quarter as the UK corporate credit environment
deteriorated. Impairment as a percentage of period-end loans and
advances to customers and banks increased to 0.60% (2007: 0.45%).
Operating expenses increased 14% (£134m) to £1,063m (2007:
£929m) reflecting lower gains on the sale of property of £10m (2007:
£40m), investment in a new payments capability (2008: £69m, 2007:
£42m), growth in the operating lease business (2008: £31m, 2007: £7m)
and investment in risk and operations infrastructure, sales force capability
and product specialists.
2007/06
Barclays Commercial Bank profit before tax decreased £5m to £1,357m
(2006: £1,362m) due to continued good income growth partially offset
by lower gains from business disposals. Profit before business disposals
increased 4% to £1,343m (2006: £1,286m).
Income increased 7% (£160m) to £2,564m (2006: £2,404m). Non-
interest income increased to 32% of total income (2006: 29%), reflecting
continuing focus on cross sales and efficient balance sheet utilisation.
There was very strong growth in net fee and commission income, which
increased 17% (£107m) to £750m (2006: £643m) due to very strong
performance in lending fees. There was also good growth in transaction
related income, foreign exchange and derivatives transactions undertaken
on behalf of clients.
Net interest income improved 2% (£37m) to £1,747m (2006:
£1,710m). Average customer lendings increased 3% to £53.9bn (2006:
£52.3bn) and 5%, excluding the impact of the vehicle leasing and
European vendor finance businesses sold in 2006. Average customer
accounts grew 4% to £46.4bn (2006: £44.8bn). The asset margin
decreased by 12 basis points to 1.80%, reflecting an increased focus on
higher quality lending and competitive market conditions. The liabilities
margin remained broadly stable at 1.49%.
Income from principal transactions primarily reflecting venture capital
and other equity realisations increased 87% (£26m) to £56m (2006:
£30m).
Impairment charges increased 15% (£39m) to £292m (2006:
£253m), mainly due to a higher level of impairment losses in Larger
Business as impairment trended towards risk tendency. There was a
reduction in impairment levels in Medium Business due to a tightening of
the lending criteria.
Operating expenses increased 7% (£61m) to £929m (2006: £868m).
Operating expenses are net of gains of £39m (2006: £60m) on the sale of
property. Growth in operating expenses was focused on continuing
investment in operations, infrastructure, and new initiatives in product
development and sales capability.
Barclays Commercial Bank
2008 2007 2006
£m £m £m
Income statement information
Net interest income 1,757 1,747 1,710
Net fee and commission income 861 750 643
Net trading income 392
Net investment income 19 47 28
Principal transactions 22 56 30
Other income 105 11 21
Total income 2,745 2,564 2,404
Impairment charges and other credit provisions (414) (292) (253)
Net income 2,331 2,272 2,151
Operating expenses excluding amortisation of intangible assets (1,048) (924) (867)
Amortisation of intangible assets (15) (5) (1)
Operating expenses (1,063) (929) (868)
Share of post-tax results of associates and joint ventures (2) –3
Profit on disposal of subsidiaries, associates and joint ventures –14 76
Profit before tax 1,266 1,357 1,362
Balance sheet information
Loans and advances to customers £67.5bn £63.7bn £56.6bn
Loans and advances to customers including those designated at fair value £80.5bn £70.7bn £62.1bn
Customer accounts £60.6bn £60.8bn £57.4bn
Total assets £84.0bn £74.6bn £66.2bn
Performance ratios
Return on average economic capital 26% 30% 36%
Cost:income ratio 39% 36% 36%
Cost:net income ratio 46% 41% 40%
Other financial measures
Risk Tendency £400m £305m £300m
Economic profit £544m £635m £729m
Risk weighted assetsa£63.1bn £57.0bn £50.3bn
Note
aRisk weighted assets for 2008 and 2007 are calculated under Basel II. 2006 is calculated under Basel I.