Retail
2007 Performance
Underlying profit before tax in Retail decreased by 13% to £2,049m (2006 £2,364m), predominantly reflecting more subdued growth at lower margins. Underlying net operating income fell by 2% whilst underlying operating expenses were just 1% higher. As a result the cost:income ratio increased to 39.7% (2006 38.4%).
Credit experience unfolded largely as expected with the impairment losses in the second half of the year (£616m) lower than that in the first half (£678m), resulting in a full year charge of £1,294m (2006 £1,097m), an increase of 18%. However, impaired loans fell to 2.59% (2006 2.72%) of closing advances, reflecting improvements in both secured and unsecured portfolios.
Mortgage sales improved in the second half following a disappointing first half performance. Savings and Bank Account sales were strong throughout the year whilst lower sales in unsecured lending reflected our continued cautious approach and reduced appetite for such risk.
| Income Statement | Year ended
31.12.2007 £m |
Year ended
31.12.2006 £m |
| Underlying net interest income | 4,099 | 4,188 |
| Underlying non-interest income | 1,304 | 1,352 |
| Mortgages and Savings | 488 | 493 |
| Banking | 471 | 428 |
| Business Banking | 41 | 31 |
| Personal Loans | 123 | 109 |
| Credit Cards | 245 | 286 |
| Other | 50 | 49 |
| Fees and commission income | 1,418 | 1,396 |
| Fees and commission expense | (114) | (66) |
| Other operating income | 31 | 20 |
| Share of (losses)/profits of associates and jointly controlled entities | (9) | 2 |
| Impairment on investment securities | (22) | |
| Underlying net operating income | 5,403 | 5,540 |
| Underlying operating expenses | (2,147) | (2,127) |
| Staff | (1,086) | (1,056) |
| Accommodation, repairs and maintenance | (9) | (10) |
| Technology | (52) | (54) |
| Marketing and communication | (174) | (179) |
| Depreciation: Property and equipment and intangible assets | (70) | (69) |
| Other | (84) | (101) |
| Sub total | (1,475) | (1,469) |
| Recharges: | ||
| Technology | (257) | (263) |
| Accommodation | (274) | (262) |
| Other shared services | (141) | (133) |
| Underlying operating profit before provisions | 3,256 | 3,413 |
| Impairment losses on loans and advances | (1,294) | (1,097) |
| Underlying operating profit | 1,962 | 2,316 |
| Non-operating income | 87 | 48 |
| Underlying profit before tax | 2,049 | 2,364 |
| Net interest margin | 1.66% | 1.78% |
| Impairment losses as a % of average advances | 0.53% | 0.48% |
| Cost:income ratio | 39.7% | 38.4% |
| Loans and advances to customers | £253.4bn | £237.7bn |
| Risk weighted assets | £117.6bn | £112.4bn |
| Customer deposits | £158.3bn | £144.6bn |