Results by nature of income and expense

Net interest income
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2007 2006 2005
£m £m £m
Cash and balances with central banks  145  91  9 
Available for sale investments  2,580  2,811  2,272 
Loans and advances to banks  1,416  903  690 
Loans and advances to customers  19,559  16,290  12,944 
Other  1,608  1,710  1,317 
Interest income  25,308  21,805  17,232 
Deposits from banks  (2,720) (2,819) (2,056)
Customer accounts  (4,110) (3,076) (2,715)
Debt securities in issue  (6,651) (5,282) (3,268)
Subordinated liabilities  (878) (777) (605)
Other  (1,339) (708) (513)
Interest expense  (15,698) (12,662) (9,157)
Net interest income  9,610  9,143  8,075 

2007/06

Group net interest income increased 5% (£467m) to £9,610m (2006: £9,143m) reflecting balance sheet growth across a number of businesses.

Group net interest income reflects structural hedges which function to reduce the impact of the volatility of short-term interest rate movements on equity and customer balances that do not re-price with market rates.

The contribution of structural hedges relative to average base rates decreased to £351m expense (2006: £26m income), largely due to the smoothing effect of the structural hedge on changes in interest rates.

Other interest expense principally includes interest on repurchase agreements and hedging activity.

2006/05

Group net interest income increased 13% (£1,068m) to £9,143m (2005: £8,075m). The inclusion of Absa contributed net interest income of £1,138m
(2005 b : £516m). Group net interest income excluding Absa grew 6%.

The contribution of the structural hedge decreased to £26m (2005: £145m), largely due to the impact of relatively higher short-term interest rates and lower medium-term rates.

Business margins
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2007 2006 2005
% % %
UK Retail Banking assets 1.20 1.32 1.43
UK Retail Banking liabilities 2.15 2.05 2.02
Barclays Commercial Bank assets 1.80 1.92 1.87
Barclays Commercial Bank liabilities 1.49 1.46 1.46
Barclaycard assets 6.59 7.13 7.11
IRCB – ex Absa assets 1.32 1.29 1.36
IRCB – ex Absa liabilities 1.91 2.06 2.03
IRCB – Absa assets 2.86 2.95 3.52
IRCB – Absa liabilities a 3.25 2.90 2.39
Barclays Wealth assets 1.11 1.08 0.96
Barclays Wealth liabilities 1.03 1.10 1.04

Average balances
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2007 2006 2005
£m £m £m
UK Retail Banking assets 78,502 73,593 74,138
UK Retail Banking liabilities 81,848 76,498 71,003
Barclays Commercial Bank assets 53,600 52,018 43,985
Barclays Commercial Bank liabilities 46,367 44,839 40,545
Barclaycard assets 19,191 17,918 16,102
IRCB – ex Absa assets 33,321 27,210 22,743
IRCB – ex Absa liabilities 12,484 10,423 8,983
IRCB – Absa assets 26,132 24,388 20,225
IRCB – Absa liabilities a 11,659 11,071 13,388
Barclays Wealth assets 7,403 5,543 4,712
Barclays Wealth liabilities 31,151 27,744 26,136

Business net interest income
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2007 2006 2005
£m £m £m
UK Retail Banking assets 939 970 1,062
UK Retail Banking liabilities 1,763 1,566 1,436
Barclays Commercial Bank assets 963 999 823
Barclays Commercial Bank liabilities 693 655 592
Barclaycard assets 1,266 1,278 1,144
IRCB – ex Absa assets 439 349 310
IRCB – ex Absa liabilities 238 216 183
IRCB – Absa assets 746 719 308
IRCB – Absa liabilities a 379 321 138
Barclays Wealth assets 82 60 45
Barclays Wealth liabilities 320 306 273
Business assets total net
interest income 4,435 4,375 3,692
Business liabilities total net
interest income 3,393 3,064 2,622
Business net interest income 7,828 7,439 6,314

Reconciliation of business interest income to Group net interest income
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2007 2006 2005
£m £m £m
Business net interest income 7,828 7,439 6,314
Other:
– Barclays Capital 1,179 1,158 1,065
– Barclays Global Investors (8) 10 15
– Other 611 536 681
Group net interest income 9,610 9,143 8,075

Notes
a
IRCB-Absa liabilities business margins, average balances and business net interest income for 2006 have been restated to reflect changes in Group structure.
b
For 2005, this reflects the period from 27th July until 31st December 2005.

Business net interest income is derived from the interest rate earned on average assets or paid on average liabilities relative to the average Bank of England base rate, local equivalents for international businesses or the rate managed by the bank using derivatives. The margin is expressed as annualised business interest income over the relevant average balance. Asset and liability margins cannot be added together as they are relative to the average Bank of England base rate, local equivalent for international businesses or the rate managed by the bank using derivatives. The benefit of capital attributed to these businesses is excluded from the calculation of business margins and business net interest income.

Average balances are calculated on daily averages for most UK banking operations and monthly averages elsewhere.

Within the reconciliation of Group net interest income, there is an amount captured as Other. This relates to the benefit of capital excluded from the business margin calculation, Head office functions and other operations and net funding on non-customer assets and liabilities.

2007/06

UK Retail Banking assets margin decreased 12 basis points to 1.20% (2006: 1.32%) principally due to the increased proportion of mortgages and the contraction in unsecured loans. UK Retail Banking liabilities margin increased 10 basis points to 2.15% (2006: 2.05%) due to pricing initiatives and changes in the product mix.

Barclays Commercial Bank assets margin decreased by 12 basis points to 1.80% (2006: 1.92%) due to changes in the product mix. Barclays Commercial Bank liabilities margin remained broadly stable at 1.49% (2006: 1.46%).

Barclaycard assets margin decreased 54 basis points to 6.59% (2006: 7.13%) due to higher average base rates across core markets and an increased weighting to secured lending.

International Retail and Commercial Banking – excluding Absa assets margin of 1.32% (2006: 1.29%) was broadly stable. International Retail and Commercial Banking – excluding Absa liabilities margin decreased 15 basis points to 1.91% (2006: 2.06%) primarily driven by changes in the product and country mix.

International Retail and Commercial Banking – Absa assets margin decreased 9 basis points to 2.86% (2006: 2.95%) due to increased competition, increases in interest rates and changes in the product mix. The liabilities margin increased 35 basis points to 3.25% (2006: 2.90% a ) driven by a re-pricing of customer deposits and higher interest rates.

Barclays Wealth assets margin increased 3 basis points to 1.11% (2006: 1.08%) due to changes in the product mix. The liabilities margin decreased seven basis points to 1.03% (2006: 1.10%) due to competitive pricing.

The impact of the structural hedge on customer balances has been included within business margins and has smoothed the impact of changing interest rates before the impact of changes in product mix or product pricing.

2006/05

UK Retail Banking assets margin decreased 11 basis points to 1.32% (2005: 1.43%). The mortgage margin has been impacted by changed assumptions used in the calculation of effective interest rates, a higher proportion of new mortgages and base rate changes. This was partially offset by increased contributions from non-mortgage assets. UK Retail Banking liabilities margin was stable at 2.05% (2005: 2.02%).

Barclays Commercial Bank assets margin improved to 1.92% (2005: 1.87%). Barclays Commercial Bank liabilities margin was stable at 1.46% (2005: 1.46%).

Barclaycard assets margin was stable at 7.13% (2005: 7.11%).

International Retail and Commercial Banking – excluding Absa assets margin decreased 7 basis points to 1.29% (2005: 1.36%) partly reflecting a greater share of mortgage assets as a proportion of the total book in continental Europe. International Retail and Commercial Banking – excluding Absa liabilities margin was stable at 2.06% (2005: 2.03%).

International Retail and Commercial Banking – Absa assets margin decreased 57 basis points to 2.95% (2005 b : annualised 3.52%) reflecting a higher proportion of mortgage assets and competitive pressures in mortgages and asset finance. International Retail and Commercial Banking – Absa liabilities margin increased 51 basis points to 2.90% (2005 b : annualised 2.39%).

Barclays Wealth assets margin increased 12 basis points to 1.08% (2005: 0.96%) largely reflecting higher margins on new lending business and a small increase in mortgage margins. The liabilities margin increased 6 basis points to 1.10% (2005: 1.04%) principally due to a slight increase in currency deposit spreads.

Notes
a
IRCB – Absa liabilities business margins, average balances and business net interest income for 2006 have been restated to reflect changes.
b
For 2005, this reflects the period from 27th July until 31st December 2005.
Net fee and commission income
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2007 2006 2005
£m £m £m
Brokerage fees 109 70 64
Investment management fees 1,787 1,535 1,250
Securities lending 241 185 151
Banking and credit related fees
and commissions 6,363 6,031 4,805
Foreign exchange commission 178 184 160
Fee and commission income 8,678 8,005 6,430
Fee and commission expense (970) (828) (725)
Net fee and commission income 7,708 7,177 5,705

2007/06

Net fee and commission income increased 7% (£531m) to £7,708m (2006: £7,177m).

Fee and commission income rose 8% (£673m) to £8,678m (2006: £8,005m) reflecting increased management and securities lending fees in Barclays Global Investors, increased client assets and higher transactional income in Barclays Wealth and higher income generated from lending fees in Barclays Commercial Bank. Fee income in Barclays Capital increased primarily due to the acquisition of HomEq.

2006/05

Net fee and commission income increased 26% (£1,472m) to £7,177m (2005: £5,705m). The inclusion of Absa contributed net fee and commission income of £850m (2005 a : £334m). Group net fee and commission income excluding Absa grew 18%, reflecting growth across all businesses.

Fee and commission income rose 24% (£1,575m) to £8,005m (2005: £6,430m). The inclusion of Absa contributed fee and commission income of £896m (2005 a : £386m). Excluding Absa, fee and commission income grew 18%, driven by a broadly based performance across the Group, particularly within Barclays Global Investors.

Fee and commission expense increased 14% (£103m) to £828m (2005: £725m), reflecting the growth in Barclaycard US. Absa contributed fee and commission expense of £46m (2005 a : £52m).

Principal transactions
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2007 2006 2005
£m £m £m
Rates related business 4,162 2,848 1,732
Credit related business (403) 766 589
Net trading income 3,759 3,614 2,321

Net gain from disposal
of available for sale assets 560 307 120
Dividend income 26 15 22
Net gain from financial
instruments designated at
fair value 293 447 389
Other investment income 337 193 327
Net investment income 1,216 962 858
Principal transactions 4,975 4,576 3,179

2007/06

Principal transactions increased 9% (£399m) to £4,975m (2006: £4,576m).

Net trading income increased 4% (£145m) to £3,759m (2006: £3,614m). The majority of the Group’s net trading income arises in Barclays Capital. Growth in the Rates related business reflects very strong performances in fixed income, commodities, foreign exchange, equity and prime services. The Credit related business includes net losses from credit market turbulence and the benefits of widening credit spreads on the fair value of issued notes.

Net investment income increased 26% (£254m) to £1,216m (2006: £962m). The cumulative gain from disposal of available for sale assets increased 82% (£253m) to £560m (2006: £307m) largely as a result of a number of private equity realisations and divestments. Net income from financial instruments designated at fair value decreased by 34% (£154m) largely due to lower growth in the value of linked insurance assets within Barclays Wealth.

Fair value movements on insurance assets included within net investment income contributed £113m (2006: £205m).

2006/05

Net trading income increased 56% (£1,293m) to £3,614m (2005: £2,321m) due to excellent performances in Barclays Capital Rates and Credit businesses, in particular in commodities, fixed income, equities, credit derivatives and emerging markets. This was driven by higher volumes of client – led activity and favourable market conditions. The inclusion of Absa contributed net trading income of £60m (2005 a : £9m). Group net trading income excluding Absa grew 54%.

Net investment income increased 12% (£104m) to £962m (2005: £858m). The inclusion of Absa contributed net investment income of £144m (2005 a : £62m). Group net investment income excluding Absa increased 3%.

The cumulative gain from disposal of available for sale assets increased 156% (£187m) to £307m (2005: £120m) driven by investment realisations, primarily in Private Equity.

Fair value movements on certain assets and liabilities have been reported within net trading income or within net investment income depending on the nature of the transaction. Fair value movements on insurance assets included within net investment income contributed £205m (2005: £317m).

Note
a
For 2005, this reflects the period from 27th July until 31st December 2005.

Other income
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2007 2006 2005
£m £m £m
Increase in fair value of assets held
in respect of linked liabilities to
customers under investment
contracts 5,592 7,417 9,234
Increase in liabilities to customers
under investment contracts (5,592) (7,417) (9,234)
Property rentals 53 55 54
Loss on part disposal of Monument
credit card portfolio (27) – –
Other 162 159 93
Other income 188 214 147

Certain asset management products offered to institutional clients by Barclays Global Investors are recognised as investment contracts. Accordingly the invested assets and the related liabilities to investors are held at fair value and changes in those fair values are reported within other income.

Impairment charges and other credit provisions
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2007 2006 2005
£m £m £m
Impairment charges on loans and advances
– New and increased impairment
allowances 2,871 2,722 2,129
– Releases (338) (389) (333)
– Recoveries (227) (259) (222)
Impairment charges on loans
and advances 2,306 2,074 1,574
Other credit provisions
Charges/(credits) in respect of undrawn
contractually committed facilities
and guarantees 476 (6) (7)
Impairment charges on loans and
advances and other credit provisions 2,782 2,068 1,567
Impairment charges on available
for sale assets 13 86 4
Impairment charges and other
credit provisions 2,795 2,154 1,571
Impairment charges and other credit
provisions on ABS CDO Super Senior
and other credit market exposures
included above:
Impairment charges on loans
and advances 313 – –
Charges in respect of undrawn facilities 469 – –
Impairment charges and other credit
provisions on ABS CDO Super senior
and other credit market positions 782 – –

2007/06

Total impairment charges and other credit provisions increased 30% (£641m) to £2,795m (2006: £2,154m).

Impairment charges on loans and advances and other credit provisions increased 35% (£714m) to £2,782m (2006: £2,068m) reflecting charges of £782m against ABS CDO Super Senior and other credit market positions.

Impairment charges on loans and advances and other credit provisions as a percentage of Group total loans and advances increased to 0.71% (2006: 0.65%); total loans and advances grew 23% to £389,290m (2006: £316,561m).

Retail

Retail impairment charges on loans and advances fell 11% (£204m) to £1,605m (2006: £1,809m). Retail impairment charges as a percentage of period end total loans and advances reduced to 0.98% (2006: 1.30%); total retail loans and advances increased 18% to £164,062m (2006: £139,350m).

Barclaycard impairment charges improved 21% (£229m) to £838m (2006: £1,067m) reflecting reduced flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. We made changes to our impairment methodologies to standardise our approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by the increase in impairment charges in Barclaycard International and secured consumer lending.

Impairment charges in UK Retail Banking decreased by £76m (12%) to £559m (2006: £635m), reflecting lower charges in unsecured Consumer Lending and Local Business driven by improved collection processes, reduced flows into delinquency, lower arrears trends and stable charge-offs. In UK Home Finance, asset quality remained strong and mortgage charges remained negligible. Mortgage delinquencies as a percentage of outstandings remained stable and amounts charged off were low.

Impairment charges in International Retail and Commercial Banking – excluding Absa rose by £38m (93%) to £79m (2006: £41m) reflecting very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007.

Arrears in some of International Retail and Commercial Banking – Absa’s retail portfolios deteriorated in 2007, driven by interest rate increases in 2006 and 2007 resulting in pressure on collections.

Wholesale and corporate

Wholesale and corporate impairment charges on loans and advances increased £436m to £701m (2006: £265m). Wholesale and corporate impairment charges as a percentage of period end total loans and advances increased to 0.31% (2006: 0.15%); total loans and advances grew 27% to £225,228m (2006: £177,211m).

Barclays Capital impairment charges and other credit provisions of £846m included a charge of £782m against ABS CDO Super Senior and other credit market exposures and £58m net of fees relating to drawn leveraged finance positions.

The impairment charge in Barclays Commercial Bank increased £38m (15%) to £290m (2006: £252m), primarily due to higher impairment charges in Larger Business, partially offset by a lower charge in Medium Business due to a tightening of the lending criteria.

Impairment charges (continued)
2006/05

Total impairment charges increased 37% (£583m) to £2,154m (2005: £1,571m).

Impairment charges on loans and advances and other credit provisions increased 32% (£501m) to £2,068m (2005: £1,567m). Excluding Absa, the increase was 26% (£395m) and largely reflected the continued challenging credit environment in UK unsecured retail lending through 2006. The wholesale and corporate sectors remained stable with a low level of defaults.

The Group impairment charges on loans and advances and other credit provisions as a percentage of year-end total loans and advances of £316,561m (2005: £303,451m) increased to 0.65% (2005: 0.52%).

Retail

Retail impairment charges on loans and advances and other credit provisions increased to £1,809m (2005: £1,254m), including £99m (2005 a : £10m) in respect of Absa. Retail impairment charges on loans and advances amounted to 1.30% (2005 b : 0.93%) as a percentage of year-end total loans and advances of £139,350m (2005 b : £134,420m), including balances in Absa of £20,090m (2005: £20,836m).

In the UK retail businesses, household cash flows remained under pressure leading to a deterioration in consumer credit quality. High debt levels and changing social attitudes to bankruptcy and debt default contributed to higher levels of insolvency and increased impairment charges. In UK cards and unsecured consumer lending, the flows of new delinquencies and the levels of arrears balances declined in the second half of 2006, reflecting more selective customer recruitment, limit management and improved collections.

In UK Home Finance, delinquencies were flat and amounts charged-off remained low. The weaker external environment led to increased credit delinquency in Local Business, where there were both higher balances on caution status and higher flows into delinquency, which both stabilised towards the year end.

Wholesale and corporate

In the wholesale and corporate businesses, impairment charges on loans and advances and other credit provisions decreased to £259m (2005: £313m), including £27m (2005 a : £10m) in respect of Absa. The fall was due mainly to recoveries in Barclays Capital as a result of the benign wholesale credit environment. This was partially offset by an increase in Barclays Commercial Bank, reflecting higher charges in Medium Business and growth in lending balances.

The wholesale and corporate impairment charge was 0.15% (2005 b : 0.19%) as a percentage of year-end total loans and advances to banks and to customers of £177,211m (2005 b : £169,031m), including balances in Absa of £9,299m (2005: £9,731m).

In Absa, impairment charges increased to £126m (2005 b : £20m) reflecting a full year of business and normalisation of credit conditions in South Africa following a period of low interest rates.

Impairment on available for sale assets

The total impairment charges in Barclays Capital included losses of £83m (2005: £nil) on an available for sale portfolio where an intention to sell caused the losses to be viewed as other than temporary in nature. These losses in 2006 were primarily due to interest rate movements, rather than credit deterioration, with a corresponding gain arising on offsetting derivatives recognised in net trading income.

Operating expenses
2007 2006 2005
£m £m £m
Staff costs (refer to page 51) 8,405 8,169 6,318
Administrative expenses 3,978 3,980 3,443
Depreciation 467 455 362
Impairment loss – property and
equipment and intangible assets 16 21 9
Operating lease rentals 414 345 316
Gain on property disposals (267) (432) –
Amortisation of intangible assets 186 136 79
Operating expenses 13,199 12,674 10,527

2007/06

Operating expenses grew 4% (£525m) to £13,199m (2006: £12,674m). The increase was driven by growth of 3% (£236m) in staff costs to £8,405m (2006: £8,169m) and lower gains on property disposals.

Administrative expenses remained flat at £3,978m (2006: £3,980m) reflecting good cost control across all businesses.

Operating lease rentals increased 20% (£69m) to £414m (2006: £345m), primarily due to increased property held under operating leases.

Operating expenses were reduced by gains from the sale of property of £267m (2006: £432m) as the Group continued the sale and leaseback of some of its freehold portfolio, principally in UK Banking.

Amortisation of intangible assets increased 37% (£50m) to £186m (2006: £136m) primarily reflecting the amortisation of mortgage servicing rights relating to the acquisition of HomEq in November 2006.

The Group cost:income ratio improved two percentage points to 57% (2006: 59%).

2006/05

Operating expenses increased 20% (£2,147m) to £12,674m (2005: £10,527m). The inclusion of Absa contributed operating expenses of £1,496m (2005 a : £664m). Group operating expenses excluding Absa grew 13%, reflecting a higher level of business activity and an increase in performance related pay.

Administrative expenses increased 16% (£537m) to £3,980m (2005: £3,443m). The inclusion of Absa contributed administrative expenses of £579m (2005 a : £257m). Group administrative expenses excluding Absa grew 7% principally as a result of higher business activity in UK Banking and Barclays Capital.

Operating lease rentals increased 9% (£29m) to £345m (2005: £316m). The inclusion of Absa contributed operating lease rentals of £73m (2005 a : £27m), which more than offset the absence of double occupancy costs incurred in 2005, associated with the Head office relocation to Canary Wharf.

Operating expenses were reduced by gains from the sale of property of £432m (2005: £nil) as the Group took advantage of historically low yields on property to realise gains on some of its freehold portfolio.

Amortisation of intangible assets increased 72% (£57m) to £136m (2005: £79m) primarily reflecting the inclusion of Absa for the full year.

The Group cost:income ratio improved to 59% (2005: 61%). This reflected improved productivity. The Group cost:net income ratio was 65% (2005: 67%).

Notes
a
For 2005, this reflects the period from 27th July until 31st December 2005.
b
In 2005 the analysis of loans and advances to customers between retail business and wholesale and corporate business has been reclassified to reflect enhanced methodology implementation.
Staff costs
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2007 2006 2005
£m £m £m
Salaries and accrued incentive payments 6,993 6,635 5,036
Social security costs 508 502 412
Pension costs
– defined contribution plans 141 128 76
– defined benefit plans 150 282 271
Other post-retirement benefits 10 30 27
Other 603 592 496
Staff costs 8,405 8,169 6,318

2007/06

Staff costs increased 3% (£236m) to £8,405m (2006: £8,169m).

Salaries and accrued incentive payments rose 5% (£358m) to £6,993m (2006: £6,635m), reflecting increased permanent and fixed term staff worldwide.

Defined benefit plans pension costs decreased 47% (£132m) to £150m (2006: £282m). This was mainly due to lower service costs.

2006/05

Staff costs increased 29% (£1,851m) to £8,169m (2005: £6,318m). The inclusion of Absa contributed staff costs of £694m (2005 a : £296m). Group staff costs excluding Absa rose 24%.

Salaries and accrued incentive payments rose 32% (£1,599m) to £6,635m (2005: £5,036m), principally due to increased performance related payments and the full year inclusion of Absa. The inclusion of Absa contributed salaries and incentive payments of £615m (2005 a : £276m). Group salaries and accrued incentive payments excluding Absa rose 26%.

Staff numbers
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2007 2006 2005
UK Banking 41,200 42,600 41,100
UK Retail Banking 32,800 34,500 33,300
Barclays Commercial Bank 8,400 8,100 7,800
Barclaycard 7,800 8,500 7,700
IRCB 58,300 47,800 45,200
IRCB – ex Absa 22,100 13,900 12,500
IRCB – Absa 36,200 33,900 32,700
Barclays Capital 16,200 13,200 9,900
Barclays Global Investors 3,400 2,700 2,300
Barclays Wealth 6,900 6,600 6,200
Head office functions and
other operations 1,100 1,200 900
Total Group permanent staff worldwide 134,900 122,600 113,300

2007/06

Staff numbers are shown on a full-time equivalent basis. Total Group permanent and fixed term contract staff comprised 61,900 (2006: 62,400) in the UK and 73,000 (2006: 60,200) internationally.

UK Retail Banking headcount decreased 1,700 to 32,800 (2006: 34,500), due to efficiency initiatives in back office operations and the transfer of operations personnel to Barclays Commercial Bank. Barclays Commercial Bank headcount increased 300 to 8,400 (2006: 8,100) due to the transfer of operations personnel from UK Retail Banking and additional investment in front line staff to drive improved geographical coverage.

Barclaycard staff numbers decreased 700 to 7,800 (2006: 8,500), due to efficiency initiatives implemented across the UK operation and the sale of part of the Monument card portfolio, partially offset by an increase in the International cards businesses.

International Retail and Commercial Banking staff numbers increased 10,500 to 58,300 (2006: 47,800). International Retail and Commercial Banking – excluding Absa staff numbers increased 8,200 to 22,100 (2006: 13,900) due to growth in the distribution network. International Retail and Commercial Banking – Absa staff numbers increased 2,300 to 36,200 (2006: 33,900), reflecting growth in the business and distribution network.

Barclays Capital staff numbers increased 3,000 to 16,200 (2006: 13,200) including 800 from the acquisition of EquiFirst. This reflected further investment in the front office, systems development and control functions to support continued business expansion. The majority of organic growth was in Asia Pacific.

Barclays Global Investors staff numbers increased 700 to 3,400 (2006: 2,700). Headcount increased in all geographical regions and across product groups and the support functions, reflecting continued investment to support further growth.

Barclays Wealth staff numbers increased 300 to 6,900 (2006: 6,600) principally due to the acquisition of Walbrook and increased client facing professionals.

Note
a
For 2005, this reflects the period from 27th July until 31st December 2005.
Staff numbers (continued)
2006/05

Total Group permanent and contract staff comprised 62,400 (2005: 59,100) in the UK and 60,200 (2005: 54,200) internationally.

UK Banking staff numbers increased 1,500 to 42,600 (2005: 41,100), primarily reflecting the inclusion in UK Retail Banking of mortgage processing staff involved in activities previously outsourced.

Barclaycard staff numbers rose 800 to 8,500 (2005: 7,700), reflecting growth of 400 in Barclaycard US and increases in operations and customer-facing staff in the UK.

International Retail and Commercial Banking increased staff numbers 2,600 to 47,800 (2005: 45,200). International Retail and Commercial Banking – excluding Absa increased staff numbers by 1,400 to 13,900 (2005: 12,500), mainly due to growth in continental Europe and Africa. International Retail and Commercial Banking – Absa increased staff numbers by 1,200 to 33,900 (2005: 32,700), reflecting continued growth in the business.

Barclays Capital staff numbers increased 3,300 during 2006 to 13,200 (2005: 9,900) and included 1,300 from the acquisition of HomEq. Organic growth was broadly based across all regions and reflected further investments in the front office, systems development and control functions to support continued business expansion.

Barclays Global Investors increased staff numbers 400 to 2,700 (2005: 2,300) spread across regions, product groups and support functions, reflecting continued investment to support strategic initiatives.

Barclays Wealth staff numbers rose 400 to 6,600 (2005: 6,200) to support the continued expansion of the business, including increased hiring of client-facing staff.

Head office functions and other operations staff numbers grew 300 to 1,200 (2005: 900) primarily reflecting the centralisation of functional activity and the increased regulatory environment and audit demands as a result of the expansion of business areas.

Share of post-tax results of associates and joint ventures

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2007 2006 2005
£m £m £m
Profit from associates 33 53 53
Profit/(loss) from joint ventures 9 (7) (8)
Share of post-tax results of
associates and joint ventures 42 46 45

2007/06

The overall share of post-tax results of associates and joint ventures decreased £4m to £42m (2006: £46m). The share of results from associates decreased £20m mainly due to the sale of FirstCaribbean International Bank (2006: £41m) at the end of 2006, partially offset by an increased contribution from private equity associates. The share of results from joint ventures increased by £16m mainly due to the contribution from private equity entities.

2006/05

The share of post-tax results of associates and joint ventures increased 2% (£1m) to £46m (2005: £45m).

Of the £46m share of post-tax results of associates and joint ventures, FirstCaribbean International Bank contributed £41m (2005: £37m).

Profit on disposal of subsidiaries, associates and joint ventures

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2007 2006 2005
£m £m £m
Profit on disposal of subsidiaries,
associates and joint ventures 28 323 –

2007/06

The profit on disposal in 2007 relates mainly to the disposal of the Group’s shareholdings in Gabetti Property Solutions (£8m) and Intelenet Global Services (£13m).

2006/05

The profit on disposal of subsidiaries, associates and joint ventures includes £247m profit on disposal of FirstCaribbean International Bank and £76m from the sale of interests in vehicle leasing and vendor finance businesses.

Tax

The overall tax charge is explained in the following table:

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2007 2006 2005
£m £m £m
Profit before tax 7,076 7,136 5,280
Tax charge at average UK
corporation tax rate of 30% 2,123 2,141 1,584
Prior year adjustments (37) 24 (133)
Differing overseas tax rates (77) (17) (35)
Non-taxable gains and income
(including amounts offset by
unrecognised tax losses) (136) (393) (129)
Share-based payments 72 27 (12)
Deferred tax assets not
previously recognised (158) (4) (7)
Change in tax rates 24 4 3
Other non-allowable expenses 170 159 168
Overall tax charge 1,981 1,941 1,439
Effective tax rate 28% 27% 27%

2007/06

The tax charge for the period was based on a UK corporation tax rate of 30% (2006: 30%). The effective rate of tax for 2007, based on profit before tax, was 28.0% (2006: 27.2%). The effective tax rate differed from 30% as it took account of the different tax rates applied to profits earned outside the UK, non-taxable gains and income and adjustments to prior year tax provisions. The forthcoming change in the UK rate of corporation tax from 30% to 28% on 1st April 2008 led to an additional tax charge in 2007 as a result of its effect on the Group’s net deferred tax asset. The effective tax rate for 2007 was higher than the 2006 rate, principally because there was a higher level of profit on disposals of subsidiaries, associates and joint ventures offset by losses or exemptions in 2006.

2006/05

The charge for the period is based upon a UK corporation tax rate of 30% for the calendar year 2006 (2005: 30%). The effective rate of tax for 2006, based on profit before tax, was 27.2% (2005: 27.3%). The effective tax rate differs from 30% as it takes account of the different tax rates which are applied to the profits earned outside the UK, disallowable expenditure, certain non-taxable gains and adjustments to prior year tax provisions. The effective tax rate for 2006 is consistent with the prior period. The tax charge for the year includes £1,234m (2005: £961m) arising in the UK and £707m (2005: £478m) arising overseas.

The profit on disposal of subsidiaries, associates and joint ventures of £323m was substantially offset by losses or exemptions. The effective tax rate on profit before business disposals was 28.5%.

Economic profit

Economic profit comprises:

  • – Profit after tax and minority interests; less
  • – Capital charge (average shareholders’ equity and goodwill excluding minority interests multiplied by the Group cost of capital).

The Group cost of capital has been applied at a uniform rate of 9.5% a . The costs of servicing preference shares are included in minority interests, and so preference shares are excluded from average shareholders’ equity for economic profit purposes.

Reconciliation of economic profit
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2007 2006 2005
£m £m £m
Profit attributable to equity
holders of the parent 4,417 4,571 3,447
Addback of amortisation charged
on acquired intangible assets b 137 83 29
Profit for economic profit purposes 4,554 4,654 3,476
Average shareholders’ equity
for economic profit purposes c , d
(rounded to nearest £50m) 23,800 20,500 18,150
Post-tax cost of equity 9.5% 9.5% 9.5%
Capital charge (2,264) (1,950) (1,724)
Economic profit 2,290 2,704 1,752

Notes
a
The Group's cost of capital has changed from 1st January 2008 to 10.5%.
b
Amortisation charged for purchased intangibles, adjusted for tax and minority interests.
c
Average ordinary shareholders’ equity for Group economic profit calculation is the sum of adjusted equity and reserves plus goodwill and intangible assets arising on acquisition, but excludes preference shares.
d
Averages for the period will not correspond exactly to period end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentation purposes only.