Barclays 2014 Annual Report Download - page 228

226 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Financial review
Income statement commentary
2013 compared to 2012
Statutory profit before tax increased to £2,868m (2012: £797m) and
adjusted profit before tax decreased 35% to £4,908m.
Statutory total income net of insurance claims increased 12% to
£27,935m including adjusting items for an own credit loss of £220m
(2012: £4,579m), £259m (2012: £nil) gain on US Lehman acquisition
assets and a gain on disposal of investment in Blackrock, Inc. of £nil
(2012: £227m). Adjusted total income net of insurance claims
decreased 5% to £27,896m reflecting a 29% reduction in BNC, a 6%
reduction in the Investment Bank, driven by a decrease in the Markets
business, particularly Macro, and a 6% reduction in Africa Banking,
due to currency movements partially offset by growth in Barclaycard
and PCB.
Net interest income was broadly stable at £11,600m (2012: £11,654m),
with lower net interest income in BNC, Head Office and Africa Banking
offset by increases in Barclaycard, the Investment Bank and PCB. Net
interest income for PCB, Barclaycard and Africa Banking increased 3% to
£10,967m driven by growth in customer assets, partially offset by
contributions from Group structural hedging activities.
Credit impairment charges improved 8% to £3,071m, with a loan loss
rate of 64bps (2012: 70bps). This reflected lower impairments in the
wholesale businesses and improved arrears rates in Africa Banking,
particularly on South Africa home loans. This, however, was partially
offset by the non-recurrence of impairment releases in 2012 in PCB and
Barclaycard, and the Edcon acquisition in Africa Banking.
As a result, statutory net operating income for the Group after
impairment charges increased 15% to £24,864m. Adjusted net
operating income excluding movements in own credit, the gain on US
Lehman acquisition assets and the gain on disposal of investment in
Blackrock Inc. decreased 5% to £24,825m.
Statutory operating expenses increased 5% to £21,972m including
adjusting items for an additional PPI and interest rate hedging provision
of £2,000m (2012: £2,450m) based on an updated best estimate of
future redress and associated costs and goodwill impairment of £79m
(2012: £nil). Adjusted operating expenses increased 7% to £19,893m,
reflecting £1,209m (2012: £nil) of costs to achieve Transform, £220m
provisions for litigation and regulatory penalties in Q413 in the
Investment Bank, mainly relating to the US residential mortgage-related
business and UK bank levy of £504m (2012: £345m).
The statutory cost: income ratio decreased to 79% (2012: 84%).
The adjusted cost: income ratio excluding movements in own credit, the
gain on US Lehman acquisition assets, the gain on disposal of investment
in Blackrock Inc., provisions for PPI and interest rate hedging products
redress, and goodwill impairment increased to 71% (2012: 63%).
The tax charge was £1,571m (2012: £616m) on statutory profit before
tax of £2,868m (2012: £797m), representing a statutory effective tax
rate of 54.8% (2012: 77.3%). The effective tax rate on adjusted profit
before tax increased to 40.0% (2012: 28.4%), mainly due to a charge of
£440m reflecting the write-down of deferred tax assets in Spain. The
adjusted effective tax rate excluding the write-down was 31.0% (2012:
28.4%), which primarily reflected profits outside the UK taxed at local
statutory tax rates that are higher than the UK statutory tax rates of
23.25% (2012: 24.5%) and the impact of the increase in the non-
deductible UK bank levy to £504m (2012: £345m).