Barclays 2015 Annual Report Download - page 224

222 I Barclays PLC Annual Report 2015 home.barclays/annualreport
Financial review
Income statement commentary
2014 compared to 2013
Statutory profit before tax decreased to £2,256m (2013: £2,868m),
adjusted profit before tax increased 8% to £5,502m.
Statutory total income net of insurance claims decreased 9% to
£25,288m including adjusting items for an own credit gain of £34m
(2013: loss of £220m), a £461m (2013: £259m) gain on the US Lehman
acquisition assets and a valuation revision of £935m (2013: nil) relating
to changes in discount rates applied in the valuation methodology of the
ESHLA loan portfolio held at fair value.
Adjusted total income net of insurance claims decreased 8% to
£25,728m, reflecting a 54% reduction in Non-Core following assets and
securities rundown and business disposals, a 12% reduction in the
Investment Bank, driven by a decrease in the Markets business,
particularly Macro, and a 9% reduction in Africa Banking, due to adverse
currency movements, partially offset by growth in Barclaycard and PCB.
Net interest income increased 4% to £12,080m, with higher net interest
income in PCB, the Investment Bank and Barclaycard, partially offset by
reductions in Africa Banking, Head Office and Non-Core. Net interest
income for PCB, Barclaycard and Africa Banking increased 4% to
£11,435m driven by strong savings income growth in PCB, and volume
growth in Barclaycard, partially offset by a reduction in Africa Banking
due to currency movements. This resulted in a net interest margin of
4.08% (2013: 4.02%).
Credit impairment charges improved 29% to £2,168m, with a loan loss
rate of 46bps (2013: 64bps). This reflected the non-recurrence of
impairments on single name exposures, impairment releases on the
wholesale portfolio, and improved performance in Europe within
Non-Core. Within the Core business there were lower impairments in
PCB due to the improving UK economic environment, particularly
impacting Corporate Banking which benefited from one-off releases and
lower defaults from large UK corporate clients, and reduced impairments
in the Africa Banking South Africa mortgages portfolio.
As a result, statutory net operating income for the Group decreased 7%
to £23,120m. Net adjusted operating income excluding movements in
own credit, the gains on US Lehman acquisition assets and the revision
of the ESHLA valuation methodology decreased 5% to £23,560m.
Statutory operating expenses reduced 7% to £20,429m. This included
adjusting items for an additional PPI redress provision of £1,270m,
resulting in a full year net charge of £1,110m (2013: £2,000m) in relation
to UK customer redress, £1,250m (2013: £173m) of provisions for
ongoing investigations and litigation including Foreign Exchange and
goodwill impairment of nil (2013: £79m). Adjusted operating expenses
decreased 8% to £18,069m, driven by savings from strategic cost
programmes, including a 5% reduction in headcount and currency
movements. Total compensation costs decreased 8% to £8,891m, with
the Investment Bank reducing 9% to £3,620m, reflecting reduced
headcount, and lower deferred and current year bonus charges. Costs to
achieve were £1,165m (2013: £1,209m) and the UK bank levy was
£462m (2013: £504m).
The statutory cost:income ratio increased to 81% (2013: 79%). The
adjusted cost:income ratio excluding movements in own credit, the
gains on US Lehman acquisition assets, provisions for UK customer
redress, the provision for ongoing investigations and litigation including
Foreign Exchange, the revision of the ESHLA valuation methodology and
goodwill impairment decreased to 70% (2013: 71%).
Statutory other net expense increased to £435m (2013: £24m) including
an adjusting item for a loss on the sale of the Spanish business of
£446m, which completed on 2 January 2015. In addition, accumulated
currency translation reserve losses of approximately £100m were
recognised on completion in Q115.
The tax charge was £1,411m (2013: £1,571m) on statutory profit before
tax of £2,256m (2013: £2,868m), representing an effective tax rate of
62.5% (2013: 54.8%). The effective tax rate on adjusted profit before tax
decreased to 31.0% (2013: 39.9%). 2013 included a charge of £440m
relating to the write-down of deferred tax assets in Spain.