Treasury & Asset Management
2007 Performance
Underlying profit before tax in Treasury & Asset Management decreased by 21% to £275m (2006 £350m) which includes a negative fair value adjustment relating to certain debt securities of £227m (2006 positive fair value adjustment of £2m). Treasury’s performance reflects the turmoil in global financial markets and the related difficult market conditions in the second half of 2007. Excluding these effects, there was strong growth in both underlying income and operating profit. Notwithstanding the difficult conditions faced by the market, we have a strong credit portfolio and no credit provisions were required in the period. Asset Management’s profit growth was strong reflecting the growth in assets under management to £117.8bn (2006 £107.8bn) and increased performance fees in Invista.
Risk Weighted Assets (‘RWAs’) on a Basel l basis have increased by 73% to £26.0bn (2006 £15.0bn) mainly due to the drawdown of Grampian liquidity facilities, increased banking book assets and the impact of widening credit spreads.
| Income Statement | Year ended 31.12.2007 £m |
Year ended 31.12.2006 £m |
| Net interest income | 164 | 205 |
| Underlying non-interest income | 449 | 415 |
| Net trading income (excluding fair value adjustments)* | 357 | 247 |
| Fair value adjustments* | (227) | 2 |
| Net trading income | 130 | 249 |
| Fees and commission income | 267 | 186 |
| Fees and commission expense | (49) | (43) |
| Other operating income | 105 | 22 |
| Share of (losses)/profits of associates and jointly controlled entities | (4) | 1 |
| Underlying net operating income | 613 | 620 |
| Underlying operating expenses | (342) | (292) |
| Staff | (205) | (171) |
| Accommodation, repairs and maintenance | (3) | (1) |
| Technology | (10) | (10) |
| Marketing and communication | (6) | (6) |
| Depreciation: Property and equipment and intangible assets | (4) | (4) |
| Other | (72) | (78) |
| Sub total | (300) | (270) |
| Recharges: | ||
| Technology | (7) | (6) |
| Accommodation | (14) | (14) |
| Other shared services | (21) | (2) |
| Underlying operating profit | 271 | 328 |
| Non-operating income | 4 | 22 |
| Underlying profit before tax | 275 | 350 |
| Net interest margin (bps)** | 5 | 7 |
| Cost:income ratio | 55.8% | 47.1% |
| Insight’s funds under management | £109.1bn | £98.6bn |
| Invista’s funds under management | £8.7bn | £9.2bn |
| Risk weighted assets | £26.0bn | £15.0bn |
* Relating to certain debt securities.
** Net interest margin has been calculated as net interest income divided by average interest earning assets excluding securities classified as trading assets but including lending to other members of the Group.