Barclays 2015 Annual Report Download - page 265

home.barclays/annualreport Barclays PLC Annual Report 2015 I 263
Notes to the financial statements
The notes included in this section focus on the results and performance of the Group. Information on the income generated, expenditure
incurred, segmental performance, tax, earnings per share and dividends are included here.
2 Segmental reporting
Presentation of segmental reporting
The Group’s segmental reporting is in accordance with IFRS 8 Operating Segments. Operating segments are reported in a manner consistent with
the internal reporting provided to the Executive Committee, which is responsible for allocating resources and assessing performance of the
operating segments, and has been identified as the chief operating decision maker. All transactions between business segments are conducted on
an arm’s-length basis, with intra-segment revenue and costs being eliminated in Head Office. Income and expenses directly associated with each
segment are included in determining business segment performance.
An analysis of the Group’s performance by business segment and income by geographic segment is included on pages 225 and 226. Further details
on each of the segments are provided on pages 227 to 241.
3 Net interest income
Accounting for interest income and expense
The Group applies IAS 39 Financial Instruments: Recognition and Measurement. Interest income on loans and advances at amortised cost,
available for sale debt investments, and interest expense on financial liabilities held at amortised cost, are calculated using the effective interest
method which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities.
The effective interest method requires the Group to estimate future cash flows, in some cases based on its experience of customers’ behaviour,
considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities. Due to the large number of
product types (both assets and liabilities), in the normal course of business there are no individual estimates that are material to the results or
financial position.
2015
£m
2014
£m
2013
£m
Cash and balances with central banks 158 193 219
Available for sale investments 1,387 1,615 1,804
Loans and advances to banks 541 446 468
Loans and advances to customers 14,732 14,677 15,613
Other 383 432 211
Interest income 17,201 17,363 18,315
Deposits from banks (177) (199) (201)
Customer accounts (930) (1,473) (2,656)
Debt securities in issue (1,722) (1,922) (2,176)
Subordinated liabilities (1,644) (1,622) (1,572)
Other (170) (67) (110)
Interest expense (4,643) (5,283) (6,715)
Net interest income 12,558 12,080 11,600
Interest income includes £149m (2014: £153m) accrued on impaired loans.
Other interest income principally includes interest income relating to reverse repurchase agreements and hedging activity. Similarly, other interest
expense principally includes interest expense relating to repurchase agreements and hedging activity.
Included in net interest income is hedge ineffectiveness as detailed on page 275.
2015
Net interest income increased by 4% to £12,558m, driven by margin improvement in Barclaycard and Africa Banking, and volume growth in both PCB
and Barclaycard. This was partially offset by a decrease in Head Office due to a reduction in interest income on AFS investments. Interest income
decreased by 1% to £17,201m, driven by a decline in income on AFS investments which fell 14% to £1,387m. Interest expense decreased 12% to
£4,643m, driven by reduced interest expense on customer accounts falling by 37% to £930m.
2014
Net interest income increased by 4% to £12,080m, driven by improvements in PCB savings margins and volume growth in Barclaycard, partially offset
by a reduction in Africa Banking due to currency movements and the sale and rundown of assets in Non-Core. Interest income decreased by 5% to
£17,363m, driven by a reduction in income from loans and advances to customers which fell 6% to £14,677m. Interest expense reduced 21% to
£5,283m, driven by a reduction in interest on customer accounts of £1,183m to £1,473m.
Performance/return
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