Barclays 2015 Annual Report Download - page 223

home.barclays/annualreport Barclays PLC Annual Report 2015 I 221
2015 compared to 2014
Statutory profit before tax decreased to £2,073m (2014: £2,256m),
adjusted profit before tax decreased 2% to £5,403m.
Statutory total income net of insurance claims increased 1% to
£25,454m, including adjusting items for a £496m (2014: £461m) gain
on the US Lehman acquisition assets and an own credit gain of £430m
(2014: £34m). 2014 statutory total income net of insurance claims
included a loss of £935m (2015: nil) relating to a revision to the ESHLA
valuation methodology.
Adjusted total income net of insurance claims decreased 5% to
£24,528m, as Non-Core income reduced to a net expense of £164m
following assets and securities rundown, business sales, including the
impact of the sales of the Spanish and UAE retail businesses, and fair
value losses on the ESHLA portfolio of £359m (2014: £156m). Core
income remained in line at £24,692m (2014: £24,678m) reflecting: a
13% increase to £4,927m in Barclaycard, primarily reflecting growth in
US cards; Investment Bank income remaining broadly in line at £7,572m
(2014: £7,588m); a 1% reduction in PCB due to the impact of customer
redress in, and the sale of, the US Wealth business; and a 2% reduction
in Africa Banking as the ZAR depreciated against GBP. On a constant
currency basisa income in Africa Banking increased 7% reflecting good
growth in Retail and Business Banking and corporate banking in South
Africa, and Wealth, Investment Management and Insurance (WIMI).
Net interest income increased 4% to £12,558m, with higher net interest
income in PCB, Barclaycard and Non-Core, partially offset by reductions
in Africa Banking, the Investment Bank and Head Office. Net interest
income for PCB, Barclaycard and Africa Banking increased 5% to
£12,024m due to an increase in average customer assets to £287.7bn
(2014: £280.0bn) with growth in PCB and Barclaycard, partially offset by
reductions in Africa Banking as the ZAR depreciated against GBP. Net
interest margin increased 10bps to 4.18% primarily due to growth in
interest earning lending within Barclaycard.
Credit impairment charges improved 2% to £2,114m, with a loan loss
rate of 47bps (2014: 46bps). This reflected higher recoveries in Europe
and the sale of the Spanish business in Non-Core, and lower
impairments in PCB due to the benign economic environment in the UK
resulting in lower default rates and charges. This was partially offset by a
number of single name exposures in the Investment Bank, and increased
impairment in Barclaycard reflecting asset growth and updates to
impairment model methodologies.
Statutory operating expenses increased 1% to £20,677m. This included
adjusting items for additional UK customer redress provisions of
£2,772m (2014: £1,110m), £1,237m (2014: £1,250m) of additional
provisions for ongoing investigations and litigation including Foreign
Exchange, a £429m (2014: nil) gain on valuation of a component of the
defined retirement benefit liability, £96m (2014: nil) of impairment of
goodwill and other assets relating to businesses being disposed, and
£3m (2014: nil) of losses on sale relating to the Spanish, Portuguese and
Italian businesses.
Adjusted operating expenses decreased 6% to £16,998m as a result of
savings from strategic cost programmes, particularly in the Investment
Bank and PCB, in addition to the continued rundown of Non-Core. Total
compensation costs decreased 6% to £8,339m, with the Investment
Bank reducing 5% to £3,423m, reflecting lower deferred and current
year bonus charges and reduced headcount. Reductions in costs to
achieve of 32% to £793m, and in litigation and conduct charges of 16%
to £378m, were partially offset by costs associated with the
implementation of the structural reform programme and a 3% increase
in the UK bank levy to £476m.
The statutory cost:income ratio remained in line at 81% (2014: 81%).
The adjusted cost:income ratio decreased to 69% (2014: 70%).
Statutory other net expenses increased to £590m (2014: £435m) and
included an adjusting item for losses on sale relating to the Spanish,
Portuguese and Italian businesses of £577m (2014: £446m).
The tax charge of £1,450m (2014: £1,411m) on statutory profit before
tax of £2,073m (2014: £2,256m) represents an effective tax rate of
69.9% (2014: 62.5%). The effective tax rate on adjusted profit before tax
of 31.3% (2014: 31.0%) is less than the effective tax rate on statutory
profit before tax mainly because it excludes the impact of adjusting
items such as non-deductible provisions for ongoing investigations and
litigation including Foreign Exchange and provisions for UK customer
redress. The adjusted measure of profit before tax is considered to
provide a more consistent basis for comparing business performance
between periods as it is more representative of the underlying, ongoing
performance. Consistent with this, the effective tax rate on adjusted
profit before tax is considered a more representative measure of the
Group’s underlying, ongoing tax charge.
Note
a Constant currency results are calculated by converting ZAR results into GBP using the
average exchange rate for 2015.
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