Amounts in accordance with IFRS

Summary consolidated income statement – IFRS	2006 $m	2006 £m	2005 £m	2004 £m
Net interest income	20,753	10,596	9,918	9,071
Non-interest income (1)	34,091	17,406	15,984	14,320
Total income	54,844	28,002	25,902	23,391
Operating expenses (2,3,4)	24,443	12,480	11,946	10,362
Insurance net claims	8,731	4,458	4,313	4,260
Operating profit before impairment losses	21,670	11,064	9,643	8,769
Impairment losses	3,678	1,878	1,707	1,485
Operating profit before tax	17,992	9,186	7,936	7,284
Tax	5,267	2,689	2,378	1,995
Profit for the year	12,725	6,497	5,558	5,289
Minority interests	204	104	57	177
Preference dividends	374	191	109	256
Profit attributable to ordinary shareholders	12,147	6,202	5,392	4,856

Notes:

(1) Includes gain on sale of strategic investment of £333 million in 2005.

(2) Includes loss on sale of subsidiaries of £93 million in 2005.

(3) Includes integration expenditure of £134 million for the year ended 31 December 2006 (2005 – £458 million; 2004 – £520 million).

(4) Includes purchased intangibles amortisation of £94 million for the year ended 31 December 2006 (2005 – £97 million; 2004 – £45 million).

Summary consolidated balance sheet - IFRS	2006 $m	2006 £m	2005 £m	2004 £m
Loans and advances	1,076,249	549,499	487,813	408,324
Debt securities and equity shares	275,683	140,755	130,266	98,631
Derivatives and settlement balances	243,074	124,106	101,668	23,482
Other assets	111,781	57,072	57,080	57,685
Total assets	1,706,787	871,432	776,827	588,122
Shareholders’ equity	78,789	40,227	35,435	33,905
Minority interests	10,308	5,263	2,109	3,492
Subordinated liabilities	54,163	27,654	28,274	20,366
Total capital resources	143,260	73,144	65,818	57,763
Deposits	1,011,352	516,365	453,274	383,198
Derivatives, settlement balances and short positions	328,238	167,588	140,426	51,866
Other liabilities	223,937	114,335	117,309	95,295
Total liabilities and equity	1,706,787	871,432	776,827	588,122

Other financial data based upon IFRS	2006	2005	2004
Earnings per ordinary share – pence	194.7	169.4	157.4
Diluted earnings per ordinary share – pence (1)	193.2	168.3	155.9
Adjusted earnings per ordinary share – pence	200.0	175.9	170.2
Dividends per ordinary share – pence	77.3	60.6	52.5
Dividend payout ratio (2)	45%	41%	35%
Share price per ordinary share at year end – £	19.93	17.55	17.52
Market capitalisation at year end – £bn	62.8	56.1	55.6
Net asset value per ordinary share – £	11.59	10.14	9.26
Return on average total assets (3)	0.74%	0.73%	0.94%
Return on average ordinary shareholders’ equity (4)	18.5%	17.5%	18.3%
Adjusted return on average ordinary shareholders’ equity (5)	19.0%	18.2%	18.9%
Average shareholders’ equity as a percentage of average total assets	4.4%	4.5%	5.9%
Risk asset ratio – Tier 1	7.5%	7.6%	7.0%
Risk asset ratio – Total	11.7%	11.7%	11.7%
Ratio of earnings to combined fixed charges and preference share dividends (6)
– including interest on deposits	1.62	1.67	1.88
– excluding interest on deposits	6.12	6.05	7.43
Ratio of earnings to fixed charges only (6)
– including interest on deposits	1.64	1.69	1.94
– excluding interest on deposits	6.87	6.50	9.70

Notes:

(1) All the convertible preference shares have a dilutive effect in 2006 and 2005 and as such have been included in the computation of diluted earnings per share. In 2004 their effect was anti-dilutive.

(2) Dividend payout ratio represents the interim dividend paid and final dividend proposed as a percentage of profit attributable to ordinary shareholders before integration costs, amortisation of purchased intangibles and net gain on sale of strategic investments and subsidiaries (net of tax).

(3) Return on average total assets represents profit attributable to ordinary shareholders as a percentage of average total assets.

(4) Return on average ordinary shareholders’ equity represents profit attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ equity.

(5) Adjusted return on average ordinary shareholders’ equity represents profit attributable to ordinary shareholders before integration costs, amortisation of purchased intangibles and net gain on sale of strategic investments and subsidiaries expressed as a percentage of average ordinary shareholders’ equity.

(6) For this purpose, earnings consist of income before tax and minority interests, plus fixed charges less the unremitted income of associated undertakings (share of profits less dividends received). Fixed charges consist of total interest expense, including or excluding interest on deposits and debt securities in issue, as appropriate, and the proportion of rental expense deemed representative of the interest factor (one third of total rental expenses).

Analysis of loans and advances to customers – IFRS

The following table analyses loans and advances to customers before provisions by remaining maturity, geographical area and type of customer. Overdrafts are included in the ‘Within 1 year’ category.

	Within 1 year £m	After 1 but within 5 years £m	After 5 years £m	2006 Total £m	2005 £m	2004 £m
UK
Central and local government	6,573	2	157	6,732	3,340	1,866
Manufacturing	9,768	582	701	11,051	11,615	6,292
Construction	6,271	1,037	943	8,251	7,274	5,024
Finance	23,522	938	557	25,017	27,091	24,638
Service industries and business activities	26,603	8,446	8,838	43,887	40,687	30,867
Agriculture, forestry and fishing	1,275	542	950	2,767	2,645	2,481
Property	26,767	6,559	5,970	39,296	32,899	26,448
Individuals – home mortgages	19,542	2,055	49,287	70,884	65,286	57,535
Individuals – other	11,537	3,783	12,602	27,922	26,323	26,459
Finance leases and installment credit	3,175	4,410	6,633	14,218	13,909	13,044
Accrued interest	1,308	104	85	1,497	1,250
Total domestic	136,341	28,458	86,723	251,522	232,319	194,654
Overseas residents	64,558	2,450	2,234	69,242	52,234	48,183
Total UK offices	200,899	30,908	88,957	320,764	284,553	242,837
Overseas
US	38,706	20,481	32,979	92,166	90,606	74,027
Rest of the World	27,832	10,266	19,798	57,896	45,951	34,555
Total Overseas offices	66,538	30,747	52,777	150,062	136,557	108,582
Loans and advances to customers – gross	267,437	61,655	141,734	470,826	421,110	351,419
Loan impairment provisions				(3,933)	(3,884)	(4,168)
Loans and advances to customers – net				466,893	417,226	347,251
Fixed rate	45,644	24,480	45,116	115,240	100,748	101,227
Variable rate	221,793	37,175	96,618	355,586	320,362	250,192
Loans and advances to customers – gross	267,437	61,655	141,734	470,826	421,110	351,419

Cross border exposures

Cross border exposures are defined as loans to banks and customers (including finance lease and instalment credit receivables) and other monetary assets, including non-local currency claims of overseas offices on local residents.

The Group monitors the geographical breakdown of these exposures based on the country of domicile of the borrower or guarantor of ultimate risk. The table below sets out the Group’s cross border outstandings in excess of 0.75% of Group total assets (including acceptances), which totalled £871.4 billion at 31 December 2006 (2005 – £776.8 billion; 2004 – £588.5 billion). None of these countries has experienced repayment difficulties that have required refinancing of outstanding debt.

	2006 £m	2005 £m	2004 £m
United States	43,718	34,246	28,795
Germany	20,130	18,395	14,050
France	18,136	13,402	9,604
Netherlands	12,407	8,026	8,871
Spain	9,341	7,392	5,249
Cayman Islands	9,063	11,813	7,258
Republic of Ireland	8,530	6,008	*
Norway	7,768	*	*
Japan	7,725	*	*
Italy	7,506	*	*
Switzerland	7,262	7,061	*
China	6,574	*	*

* Less than 0.75% of Group total assets.

Loan impairment provisions

For a discussion of the factors considered in determining the amount of the provisions, see ‘Loan impairment’ on page 86 and ‘Critical accounting polices – Loan impairment provisions’ on page 136.

The following table shows the elements of loan impairment provisions.

	IFRS
	2006 £m	2005 £m	2004 £m
Provisions at the beginning of the year
Domestic	2,759	2,675	2,408
Foreign	1,128	1,470	1,477
	3,887	4,145	3,885
Currency translation and other adjustments
Domestic	(17)	(7)	(8)
Foreign	(44)	58	(90)
	(61)	51	(98)
Acquisitions of businesses
Domestic	—	—	2
Foreign	—	—	288
	—	—	290
Amounts written-off
Domestic	(1,360)	(1,252)	(901)
Foreign	(481)	(788)	(548)
	(1,841)	(2,040)	(1,449)
Recoveries of amounts written-off in previous years
Domestic	119	97	85
Foreign	96	75	59
	215	172	144
Charged to income statement
Domestic	1,663	1,376	960
Foreign	214	327	442
	1,877	1,703	1,402
Unwind of discount
Domestic	(127)	(130)	—
Foreign	(15)	(14)	—
	(142)	(144)	—
Provisions at the end of the year (1)
Domestic	3,037	2,759	2,546
Foreign	898	1,128	1,628
	3,935	3,887	4,174
Gross loans and advances to customers
Domestic	251,522	232,319	194,654
Foreign	219,304	188,791	156,765
	470,826	421,110	351,419
Closing customer provisions as a % of gross loans and advances to customers (2)
Domestic	1.21%	1.19%	1.31%
Foreign	0.41%	0.60%	1.04%
Total	0.84%	0.92%	1.19%
Customer charge to income statement as a % of gross loans and advances to customers
Domestic	0.66%	0.59%	0.49%
Foreign	0.10%	0.17%	0.28%
Total	0.40%	0.40%	0.40%

Notes:

(1) Includes closing provisions against loans and advances to banks of £2 million (2005 – £3 million; 2004 – £6 million).

(2) Closing customer provisions exclude closing provisions against loans and advances to banks.

The following table shows additional information in respect of the loan impairment provisions.

	IFRS
	2006 £m	2005 £m	2004 £m
Loans and advances to customers (gross)	470,826	421,110	351,419
Loan impairment provisions at end of year:
– customers	3,933	3,884
– banks	2	3
Specific provisions – customers			3,607
Specific provisions – banks			6
General provision			561
	3,935	3,887	4,174
Customer provision at end of year as % of loans and advances to customers at end of year:
Specific provisions			1.03%
General provision			0.16%
			1.19%
Average loans and advances to customers (gross)	445,766	402,473	299,430
As a % of average loans and advances to customers during the year:
Total customer provisions charged to income statement	0.42%	0.42%	0.47%
Amounts written-off (net of recoveries) – customers	0.36%	0.46%	0.44%

Analysis of closing loan impairment provisions

The following table analyses customer loan impairment provisions by geographical area and type of domestic customer.

	IFRS
	2006		2005		2004
	Closing provision £m	% of loans to total loans %	Closing provision £m	% of loans to total loans %	Closing provision £m	% of loans to total loans %
Domestic
Central and local government	—	1.4	—	0.8	—	0.6
Manufacturing	94	2.4	138	2.8	127	1.8
Construction	63	1.8	74	1.7	71	1.4
Finance	33	5.3	104	6.4	54	7.0
Service industries and business activities	647	9.3	647	9.7	516	8.8
Agriculture, forestry and fishing	25	0.6	26	0.6	23	0.7
Property	70	8.3	63	7.8	64	7.5
Individuals – home mortgages	37	15.1	36	15.5	32	16.4
Individuals – other	1,826	5.9	1,513	6.3	1,277	7.5
Finance leases and instalment credit	103	3.0	88	3.3	122	3.7
Accrued interest	—	0.3	—	0.3
Total domestic	2,898	53.4	2,689	55.2	2,286	55.4
Foreign	442	46.6	652	44.8	1,321	44.6
Impaired book provisions	3,340	100.0	3,341	100.0		100.0
Latent book provisions	593		543
Specific provisions					3,607
General provision					561
Total provisions	3,933		3,884		4,168

Analysis of write-offs

The following table analyses amounts written-off by geographical area and type of domestic customer.

	IFRS
	2006 £m	2005 £m	2004 £m
Domestic
Manufacturing	41	40	55
Construction	29	17	12
Finance	17	21	19
Service industries and business activities	212	176	163
Agriculture, forestry and fishing	5	4	9
Property	6	25	33
Individuals – home mortgages	5	4	4
Individuals – others	1,021	948	516
Finance leases and instalment credit	24	15	90
Total domestic	1,360	1,250	901
Foreign	481	788	548
Total write-offs (1)	1,841	2,038	1,449

Note:

(1) Excludes £2 million written-off in respect of loans and advances to banks in 2005.

Analysis of recoveries

The following table analyses recoveries of amounts written-off by geographical area and type of domestic customer.

	IFRS
	2006 £m	2005 £m	2004 £m
Domestic
Manufacturing	—	1	1
Construction	—	1	—
Finance	—	—	2
Service industries and business activities	5	2	1
Property	1	2	—
Individuals – home mortgages	—	—	1
Individuals – others	101	84	78
Finance leases and instalment credit	12	7	2
Total domestic	119	97	85
Foreign	96	75	59
Total recoveries	215	172	144

Risk elements in lending and potential problem loans

The Group’s loan control and review procedures do not include the classification of loans as non-accrual, accruing past due, restructured and potential problem loans, as defined by the SEC in the US. The following table shows the estimated amount of loans that would be reported using the SEC’s classifications. The figures are stated before deducting the value of security held or related provisions.

IFRS require interest to be recognised on a financial asset (or a group of financial assets) after impairment at the rate of interest used to discount recoveries when measuring the impairment loss. Thus, interest on impaired financial assets is credited to profit or loss as the discount on expected recoveries unwinds. Despite this, such assets are not considered performing. All loans that have an impairment provision are classified as non-accrual. This is a change from practice in 2004 and earlier years where certain loans with provisions were classified as past due 90 days or potential problem loans (and interest accrued on them).

	IFRS
	2006 £m	2005 £m	2004 £m
Loans accounted for on a non-accrual basis (2):
Domestic	5,420	4,977	3,658
Foreign	812	949	1,075
Total	6,232	5,926	4,733
Accruing loans which are contractually overdue 90 days or more as to principal or interest (3):
Domestic	81	2	634
Foreign	24	7	79
Total	105	9	713
Loans not included above which are classified as ‘troubled debt restructurings’ by the SEC:
Domestic	—	2	14
Foreign	—	—	10
Total	—	2	24
Total risk elements in lending	6,337	5,937	5,470
Potential problem loans (4)
Domestic	47	14	173
Foreign	5	5	107
Total potential problem loans	52	19	280
Closing provisions for impairment as a % of total risk elements in lending	62%	65%	76%
Closing provisions for impairment as a % of total risk elements in lending and potential problem loans	62%	65%	72%
Risk elements in lending as a % of gross lending to customers excluding reverse repos	1.55%	1.60%	1.83%

Notes:

(1) For the analysis above, 'Domestic' consists of the United Kingdom domestic transactions of the Group. 'Foreign' comprises the Group’s transactions conducted through offices outside the UK and through those offices in the UK specifically organised to service international banking transactions.

(2) All loans against which an impairment provision is held are reported in the non-accrual category.

(3) Loans where an impairment event has taken place but no impairment recognised. This category is used for fully collateralised non-revolving credit facilities.

(4) Loans for which an impairment event has occurred but no impairment provision is necessary. This category is used for fully collateralised advances and revolving credit facilities where identification as 90 days overdue is not feasible.

	IFRS
	2006 £m	2005 £m	2004 £m
Gross income not recognised but which would have been
recognised under the original terms of non-accrual and restructured loans
Domestic	370	334	235
Foreign	77	62	58
	447	396	293
Interest on non-accrual and restructured loans included in net interest income
Domestic	142	130	58
Foreign	15	14	7
	157	144	65

Analysis of deposits – product analysis

The following table shows the distribution of the Group’s deposits by type and geographical area:

	IFRS
	2006 £m	2005 £m	2004 £m
UK
Domestic:
Demand deposits – interest-free	39,149	28,833	22,307
Demand deposits – interest-bearing	118,315	91,564	72,938
Time deposits – savings	31,656	27,091	21,012
Time deposits – other	80,496	73,097	76,995
Overseas residents:
Demand deposits – interest-free	573	396	387
Demand deposits – interest-bearing	37,729	26,663	16,965
Time deposits – savings	1,122	1,108	1,209
Time deposits – other	51,568	53,997	52,629
Total UK offices	360,608	302,749	264,442
Overseas
Demand deposits – interest-free	12,173	13,248	10,371
Demand deposits – interest-bearing	27,441	17,886	12,975
Time deposits – savings	19,049	21,691	21,153
Time deposits – other	97,094	97,700	74,257
Total overseas offices (see below)	155,757	150,525	118,756
Total deposits	516,365	453,274	383,198
Held-for-trading	104,249	66,712
Designated as at fair value through profit or loss	3,922	3,683
Amortised cost	408,194	382,879
Banking business			302,383
Trading business			80,815
Total deposits	516,365	453,274	383,198
Overseas
US	115,121	120,405	86,677
Rest of the World	40,636	30,120	32,079
Total overseas	155,757	150,525	118,756

Short term borrowings

	IFRS
	2006 £m	2005 £m	2004 £m
Commercial paper
Outstanding at year end	12,675	14,110	8,391
Maximum outstanding at any month end during the year	14,402	16,853	8,391
Approximate average amount during the year	13,225	15,329	7,450
Approximate weighted average interest rate during the year	4.9%	3.7%	1.9%
Approximate weighted average interest rate at year end	5.0%	4.2%	2.6%
Other short term borrowings
Outstanding at year end	122,576	105,483	95,381
Maximum outstanding at any month end during the year	130,867	117,913	96,356
Approximate average amount during the year	112,008	100,681	85,496
Approximate weighted average interest rate during the year	4.5%	3.4%	2.9%
Approximate weighted average interest rate at year end	4.5%	3.5%	3.1%

Average interest rates during the year are computed by dividing total interest expense by the average amount borrowed. Average interest rates at year end are average rates for a single day and as such may reflect one-day market distortions which may not be indicative of generally prevailing rates. Original maturities of commercial paper are not in excess of one year. ‘Other short-term borrowings’ consist principally of borrowings in the money markets included within ‘Deposits by banks’ and ‘Customer accounts’ in the accounts, and generally have original maturities of one year or less.

Certificates of deposit and other time deposits

The following table shows details of the Group’s certificates of deposit and other time deposits over $100,000 or equivalent by remaining maturity.

	Within 3 months £m	Over 3 months but within 6 months £m	Over 6 months but within 12 months £m	Over 12 months £m	2006 Total £m
UK based companies and branches
Certificates of deposit	7,654	1,556	1,674	201	11,085
Other time deposits	67,175	3,637	3,049	5,701	79,562
Overseas based companies and branches
Certificates of deposit	8,647	853	122	—	9,622
Other time deposits	22,783	2,799	2,909	6,847	35,338
Total	106,259	8,845	7,754	12,749	135,607

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