Barclays 2013 Annual Report Download - page 270

Non-customer net interest income
Non-customer net interest income decreased to £1,051m (2012: £1,210m) reflecting a reduction in the non-customer generated margin of 5bps
to 0.16%. Group hedging activities continue to utilise structural interest rate hedges to mitigate the impact of the low interest environment on
customer liabilities and the Group’s equity.
Product structural hedges generated a lower contribution of £843m (2012: £962m), as hedges were maintained in this period of continued low
interest rates. Based on the current interest rate curves and the ongoing hedging strategy, fixed rate returns on product structural hedges are
expected to make a significant contribution in 2014.
The contribution from equity structural hedges RBB, Barclaycard, Corporate Banking and Wealth and Investment Management remained broadly
constant at £337m (2012: £317m).
Other Group net interest income
Head office net interest income decreased £240m to a net expense of £165m reflecting the cost of funding surplus liquidity due to growth in
customer deposits across the Group offset by an adjustment to the carrying value of subordinated liabilities.
Investment Bank net interest decreased to £349m (2012: £530m) primarily due to a reduction in interest income from Exit Quadrant assets.
Total contribution to Group net interest income from structural hedge income is down £140m to £1.6bn (2012: £1.7bn).
Net interest margin
The net interest margin for RBB, Corporate Banking and Wealth and Investment Management decreased 8bps to 1.76% (2012: 1.84%), reflecting
the reduction in contribution from customer liabilities and Group hedging activities, combined with a reduced contribution from the higher
margins in Africa RBB as the ZAR depreciated against GBP. The net interest margin is expressed as a percentage of the sum of average customer
assets and liabilities, to reflect the impact of the margin generated on retail and commercial banking liabilities.
The net interest margin, expressed as a percentage of average customer assets increased from 3.47% to 3.50% in 2013.
Net interest margin and customer asset and liability margins reflect movements in the Group’s internal funding rates which are based on the cost
to the Group of alternative funding in wholesale markets. The Group’s internal funding rate prices intra-group funding and liquidity to
appropriately give credit to businesses with net surplus liquidity and charges those businesses in need of wholesale funding at a rate that is driven
by prevailing market rates and includes a term premium. The objective is to price internal funding for assets and liabilities in line with the cost of
alternative funding, which ensures there is a consistency between retail and wholesale source.
An analysis is provided on the following page for Retail and Business Banking, Corporate Banking and Wealth and Investment Management for
each of the component parts of net interest income.
UK RBB
%
Europe
RBB
%
Africa
RBB
%
Barclaycard
%
Corporate
Banking
%
Wealth and
Investment
Management
%
Total
%
2013
Customer asset margin 1.22 0.43 3.10 9.39 1.33 0.86 2.19
Customer liability margin 0.89 0.40 2.73 (0.29) 0.97 0.97 1.00
Customer net interest margin 1.06 0.43 2.95 8.48 1.12 0.94 1.60
Non-customer generated margin 0.23 0.36 0.21 (0.19) 0.09 0.10 0.16
Net interest margin 1.29 0.79 3.16 8.29 1.21 1.04 1.76
Average customer assets (£m) 134,297 39,387 27,330 36,276 66,724 22,418 326,432
Average customer liabilities (£m) 128,310 13,887 18,093 3,741 97,558 60,596 322,185
2012
Customer asset margin 1.07 0.46 3.10 9.56 1.17 0.65 2.09
Customer liability margin 0.97 0.38 2.75 (0.60) 1.11 1.12 1.12
Customer net interest margin 1.02 0.44 2.97 9.18 1.14 0.99 1.63
Non-customer generated margin 0.33 0.34 0.22 (0.52) 0.10 0.24 0.21
Net interest margin 1.35 0.78 3.19 8.66 1.24 1.23 1.84
Average customer assets (£m) 124,275 39,996 32,155 33,470 69,041 19,670 318,607
Average customer liabilities (£m) 111,753 14,824 19,610 1,286 85,620 50,083 283,176
Financial review
Margins and balances continued
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268 Barclays PLC Annual Report 2013