Barclays 2012 Annual Report Download - page 26

Group Finance Director’s review
Continuing prudent management means
that our capital, liquidity and funding
remain strong.
“We have delivered adjusted profit
before tax of £7bn in 2012. Our capital,
liquidity and funding remain strong,
with our Core Tier 1 ratio at 10.9%.”
Chris Lucas
Group Finance Director
In 2012 we made good progress across most of our businesses, with
adjusted profits increasing significantly, reflecting higher income and
improvements in credit impairment and cost reductions.
Income statement
Adjusted profit before tax increased 26% to £7,048m. Statutory profit
decreased to £246m (2011: £5,879m). Adjusted results provide a more
consistent basis for comparing business performance between periods
and principally excludes own credit charge of £4,579m (2011: gain of
£2,708m), gain on disposal of BlackRock, Inc. investment of £227m
(2011: impairment/loss of £1,858m), £1,600m (2011: £1,000m)
provision for PPI redress, and £850m (2011: £nil) provision for interest
rate hedging products redress.
Adjusted income was up 2% at £29,043m despite challenging
economic conditions, the continuing low interest rate environment
and non-recurrence of £1,061m gains from the disposal of hedging
instruments in 2011. Within this, adjusted income in the Investment
Bank grew 13% to £11,722m reflecting improved trading conditions.
The net interest margin in Retail and Business Banking, Corporate
Banking and Wealth and Investment Management fell 18bps to
1.85%, 14bps of which resulted from reduced contribution from
Group hedging activities. This shows the relative stability of our
customer margins.
Credit impairment charges were down 5% at £3,596m, principally
reflecting improvements in Barclaycard, Corporate Banking and UKRBB.
This was partially offset by higher charges in the Investment Bank,
Africa RBB and Europe RBB.
Adjusted operating expenses were down 3% to £18,539m, with
non-performance costs decreasing 3% to £16,114m after absorbing
regulatory penalties of £290m (2011: £nil) relating to the industry-wide
investigation into the setting of interbank offered rates and a £345m
(2011: £325m) UK bank levy charge. Performance costs reduced 4% to
£2,425m despite an increase in the charge for bonuses deferred from
prior years to £1,223m (2011: £995m).
The adjusted cost: income ratio decreased to 64% (2011: 67%).
The tax charge on adjusted profits increased to £2,025m (2011:
£1,325m), giving an adjusted effective tax rate of 28.7% (2011: 23.7%).
The tax charge on statutory profits decreased to £482m (2011:
£1,928m) after including a tax credit of £1,543m (2011: charge of
£603m) on the charge for own credit, provisions for PPI and interest
rate hedging product redress and other adjusting items, which mainly
received relief at the UK rate of 24.5% (2011: 26.5%), resulting in a
significant increase in the statutory effective tax rate.
Balance sheet
Total loans and advances declined to £466bn (2011: £479bn) with
increases in UK mortgage lending and Barclaycard offset by reductions
in lending in the Investment Bank, Europe RBB and Corporate Banking.
barclays.com/annualreport24 I Barclays PLC Annual Report 2012