Group Finance Director's Report
Cost:income Ratio
The Group cost:income ratio remained stable at 40.9% (2006 41.0%)
| Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
|
| Underlying operating expenses | 5,274 | 4,865 |
| Underlying net interest income | 7,314 | 7,146 |
| Underlying non-interest income | 5,589 | 4,718 |
| Underlying net operating income | 12,903 | 11,864 |
| % | % | |
| Group cost:income ratio | 40.9 | 41.0 |
Divisional cost:income ratios are summarised below:
| Year ended 31.12.2007 % |
Year ended 31.12.2006 % |
|
| Retail | 39.7 | 38.4 |
| Corporate | 23.2 | 26.9 |
| International | 45.0 | 44.6 |
| Treasury & Asset Management | 55.8 | 47.1 |
Group Items
Group Items principally comprises the expenses of managing the Group, including technology so far as it is not devolved to divisions, accommodation and other shared services such as cheque clearing, mailing, etc. The costs of technology, accommodation and other shared services (other than those borne directly by Group Functions) are subsequently recharged to divisions according to their usage and are shown under the operating expense analysis for each division. Group Items has increased by £96m (40%) compared to last year, of which £75m is due to the implementation costs of our cost efficiency programme.
| Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
|
| Staff | 318 | 291 |
| Accommodation, repairs and maintenance | 363 | 345 |
| Technology | 104 | 91 |
| Marketing and communication | 65 | 67 |
| Depreciation: Property and equipment and intangible assets | 199 | 192 |
| Other | 272 | 200 |
| Sub total | 1,321 | 1,186 |
| Less Recharges: | ||
| Technology | (368) | (365) |
| Accommodation | (377) | (365) |
| Other shared services | (239) | (215) |
| Total | 337 | 241 |
Taxation
Changes in corporation tax rates have resulted in a reduction to the deferred tax net liabilities of the Group of £178m at December 2007, which has been excluded from our underlying results.
The tax charge for the year of £1,365m (2006 £1,772m) includes £18m (2006 £220m) in respect of the tax charge levied on life companies for policyholder tax and a decrease of £178m in respect of the change in the corporation tax rate. Excluding these items results in an effective rate of 28.0% (2006 28.3%). Included within the tax charge of £1,365m was overseas tax of £293m (2006 £206m).