Group Finance Director's Report
Non-interest Income
Underlying non-interest income increased by 18% to £5,589m (2006 £4,717m). Following the financial market dislocation, the full year profit outcome in 2007 is impacted by a £227m negative fair value adjustment to investments held within Treasury division. These investments primarily relate to floating rate notes and asset backed securities. This adjustment is expected to reverse out over time as no impairments have been incurred in respect of these investments.
Net fees and commissions have increased by 8%, where growth in Corporate, due to higher underwriting fees, and in Treasury & Asset Management, has more than offset a fall in Retail in respect of lower Credit Card fees. Profit on the sale of investment securities increased to £496m, mainly reflecting realisations in the Corporate Investment portfolio. Net operating lease income increased by 47%, reflecting the full consolidation of Lex, which became a fully owned subsidiary on 31 May 2006.
| Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
|
| Fees and commission income | 2,378 | 2,175 |
| Fees and commission expense | (1,118) | (1,012) |
| Net earned premiums on insurance contracts | 5,616 | 5,648 |
| Net trading income | 178 | 292 |
| Change in value of in-force long term assurance business | 16 | 282 |
| Other operating income: | ||
| Profit on sale of investment securities | 496 | 307 |
| Operating lease rental income | 1,322 | 1,042 |
| Net investment income related to insurance and investment business | 4,710 | 6,306 |
| Other income | 486 | 135 |
| Non-interest income | 14,084 | 15,175 |
| Impairment on investment securities | (60) | (71) |
| Operating lease depreciation | (985) | (812) |
| Change in investment contract liabilities | (2,538) | (2,910) |
| Net claims incurred on insurance contracts | (2,952) | (2,328) |
| Net change in insurance contract liabilities | (2,244) | (3,894) |
| Change in unallocated surplus | 50 | (569) |
| Share of profits of associates and jointly controlled entities | 234 | 126 |
| Underlying non-interest income | 5,589 | 4,717 |
Underlying non-interest income analysed by division:
| Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
|
| Retail | 1,304 | 1,352 |
| Corporate | 1,746 | 1,053 |
| Insurance & Investment | 1,591 | 1,494 |
| International | 499 | 404 |
| Treasury & Asset Management | 449 | 415 |
| Underlying non-interest income (excluding Drive) | 5,589 | 4,718 |
| Drive | (1) | |
| Underlying non-interest income (including Drive) | 5,589 | 4,717 |