Amounts in accordance with UK GAAP

Summary consolidated profit and loss account – UK GAAP	2004 £m	2003 £m	2002 £m
Net interest income	9,208	8,301	7,849
Non-interest income	13,546	10,980	9,167
Total income	22,754	19,281	17,016
Operating expenses excluding goodwill amortisation (1)	9,931	8,753	8,738
Goodwill amortisation	915	763	731
General insurance claims (net)	3,480	2,195	1,350
Profit before provisions	8,428	7,570	6,197
Provisions for bad and doubtful debts	1,428	1,461	1,286
Amounts written off fixed asset investments	83	33	59
Profit on ordinary activities before tax	6,917	6,076	4,852
Tax on profit on ordinary activities	2,155	1,888	1,582
Profit on ordinary activities after tax	4,762	4,188	3,270
Minority interests (including non-equity)	250	210	133
Preference dividends – non-equity	256	261	305
	4,256	3,717	2,832
Additional Value Shares dividend – non-equity	—	1,463	798
Profit attributable to ordinary shareholders	4,256	2,254	2,034

Note:

(1) Includes integration expenditure of £269 million for the year ended 31 December 2004 (2003 – £229 million; 2002 – £957 million).

Summary consolidated balance sheet – UK GAAP	2004 £m	2003 £m	2002 £m
Loans and advances to banks (net of provisions)	58,260	51,891	44,296
Loans and advances to customers (net of provisions)	345,469	252,531	223,324
Debt securities and equity shares	94,171	82,249	68,928
Intangible fixed assets	17,576	13,131	12,697
Other assets	67,991	54,626	61,793
Total assets	583,467	454,428	411,038
Called up share capital	822	769	754
Share premium account	12,964	8,175	7,608
Other reserves	10,856	11,307	11,922
Profit and loss account	7,223	5,847	4,787
Shareholders’ funds	31,865	26,098	25,071
Minority interests	3,829	2,713	1,839
Subordinated liabilities	20,366	16,998	13,965
Total capital resources	56,060	45,809	40,875
Deposits by banks	99,081	67,323	54,720
Customer accounts	285,062	236,963	219,161
Debt securities in issue	58,960	41,016	33,938
Other liabilities	84,304	63,317	62,344
Total liabilities	583,467	454,428	411,038

Other financial data based upon UK GAAP	2004	2003	2002
Earnings per ordinary share – pence	138.0	76.9	70.6
Diluted earnings per ordinary share – pence (1)	136.9	76.3	69.6
Adjusted earnings per ordinary share – pence	172.5	157.2	146.3
Dividends per ordinary share – pence	58.0	50.3	43.7
Dividend payout ratio	43.2%	66.1%	62.3%
Share price per ordinary share at period end – £	17.52	16.46	14.88
Market capitalisation at period end – £bn	55.6	48.8	43.2
Net asset value per ordinary share – £	8.62	7.82	7.43
Return on average total assets (2)	0.82%	0.51%	0.52%
Return on average equity shareholders’ funds (3)	16.0%	9.8%	8.8%
Adjusted return on average equity shareholders’ funds (4)	20.1%	20.1%	18.3%
Average shareholders’ equity as a percentage
of average total assets	5.7%	5.9%	6.8%
Risk asset ratio – Tier 1	7.0%	7.4%	7.3%
Risk asset ratio – Total	11.7%	11.8%	11.7%
Ratio of earnings to combined fixed charges and preference
share dividends (5)
– including interest on deposits	1.84	1.95	1.74
– excluding interest on deposits	7.09	7.08	5.20
Ratio of earnings to fixed charges only (5)
– including interest on deposits	1.90	2.04	1.83
– excluding interest on deposits	9.26	9.73	7.24

Notes:

(1) Convertible preference shares have not been included in the computation of diluted earnings per share as their effect was anti-dilutive.

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

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

(4) Adjusted return on average equity shareholders’ funds represents profit attributable to ordinary shareholders before integration costs, goodwill amortisation and the AVS dividend, in 2003 and 2002 expressed as a percentage of average equity shareholders’ funds.

(5) 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

The following table analyses loans and advances to customers before provisions by geographical area and type of customer.

	UK GAAP
	2004 £m	2003 £m	2002 £m
UK
Central and local government	1,866	1,217	1,521
Manufacturing	6,292	6,384	7,386
Construction	5,024	3,960	3,468
Finance	25,157	18,948	12,396
Service industries and business activities	30,850	29,290	26,022
Agriculture, forestry and fishing	2,480	2,562	2,463
Property	26,445	19,670	15,939
Individuals – home mortgages	57,529	48,117	42,101
Individuals – other	27,863	25,526	22,255
Finance leases and instalment credit	13,083	11,703	11,723
Total domestic	196,589	167,377	145,274
Overseas residents	44,053	27,168	23,657
Total UK Offices	240,642	194,545	168,931
Overseas
US	74,045	40,373	41,008
Rest of the World	35,004	21,535	17,305
Total overseas offices	109,049	61,908	58,313
Loans and advances to customers – gross	349,691	256,453	227,244
Provisions for bad and doubtful debts	(4,222)	(3,922)	(3,920)
Loans and advances to customers – net	345,469	252,531	223,324
Fixed rate	100,729	81,918	80,326
Variable rate	248,962	174,535	146,918
Loans and advances to customers – gross	349,691	256,453	227,244

Cross border exposures

The table below sets out the Group’s cross border outstandings in excess of 0.75% of Group total assets (including acceptances), which totalled £583.8 billion at 31 December 2004 (2003 – £455.0 billion). None of these countries has experienced repayment difficulties that have required refinancing of outstanding debt.

	UK GAAP
	2004 £m	2003 £m
United States	28,795	14,618
Germany	14,050	15,073
France	9,604	7,524
Netherlands	8,871	6,830
Cayman Islands	7,258	6,666
Spain	5,249	3,421
Japan	4,610	4,141

Provisions for bad and doubtful debts

The following table shows the elements of provisions for bad and doubtful debts under UK GAAP.

	UK GAAP
	2004 £m	2003 £m	2002 £m
Provisions at the beginning of the year
Domestic	2,452	2,581	2,467
Foreign	1,477	1,346	1,186
	3,929	3,927	3,653
Currency translation and other adjustments
Domestic	(8)	(2)	(4)
Foreign	(90)	(60)	(58)
	(98)	(62)	(62)
Acquisitions of businesses
Domestic	2	—	11
Foreign	288	50	12
	290	50	23
Amounts written-off
Domestic	(920)	(1,097)	(743)
Foreign	(548)	(422)	(293)
	(1,468)	(1,519)	(1,036)
Recoveries of amounts written-off in previous
Domestic	88	38	37
Foreign	59	34	26
	147	72	63
Charged to profit and loss account
Domestic	986	932	813
Foreign	442	529	473
	1,428	1,461	1,286
Provisions at the end of the year (1)
Domestic	2,600	2,452	2,581
Foreign	1,628	1,477	1,346
	4,228	3,929	3,927
Gross loans and advances to customers
Domestic	196,589	167,377	145,274
Foreign	153,102	89,076	81,970
	349,691	256,453	227,244
Closing customer provisions as a % of gross loans and advances to customers (2)
Domestic	1.32%	1.46%	1.78%
Foreign	1.06%	1.65%	1.63%
	1.21%	1.53%	1.72%
Customer charge against profit as a % of gross loans and advances to customers
Domestic	0.50%	0.56%	0.56%
Foreign	0.29%	0.59%	0.58%
	0.41%	0.57%	0.57%

Notes:

(1) Includes closing provisions against loans and advances to banks of £6 million in 2004 (2003 – £7 million; 2002 – £7 million).

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

The following table shows additional information with respect to the provisions for bad and doubtful debts under UK GAAP.

	UK GAAP
	2004 £m	2003 £m	2002 £m
Loans and advances to customers (gross)	349,691	256,453	227,244
Provisions at end of year:
Specific provisions – customers	3,648	3,356	3,323
Specific provisions – banks	6	7	7
General provision	574	566	597
	4,228	3,929	3,927
Customer provision at end of year as % of loans and advances to customers at end of year:
Specific provisions	1.04%	1.31%	1.46%
General provision	0.17%	0.22%	0.26%
	1.21%	1.53%	1.72%
Average loans and advances to customers (gross)	298,150	245,798	211,206
As a % of average loans and advances to customers during the year:
Total customer provisions charged to profit and loss	0.48%	0.59%	0.61%
Amounts written-off (net of recoveries) – customers	0.44%	0.59%	0.46%

Analysis of closing provisions for bad and doubtful debts

The following table analyses customer provisions for bad and doubtful debts by geographical area and type of domestic customer.

	UK GAAP
	2004		2003		2002
	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	—	0.5	—	0.5	—	0.6
Manufacturing	127	1.8	156	2.5	205	3.2
Construction	71	1.4	56	1.5	65	1.5
Finance	54	7.2	34	7.4	71	5.5
Service industries and business activities	516	8.8	599	11.4	699	11.5
Agriculture, forestry and fishing	23	0.7	20	1.0	29	1.1
Property	64	7.6	58	7.7	40	7.0
Individuals – home mortgages	32	16.5	35	18.8	60	18.5
Individuals – other	1,318	8.0	1,003	9.9	855	9.8
Finance leases and instalment credit	122	3.7	136	4.6	208	5.2
Total domestic	2,327	56.2	2,097	65.3	2,232	63.9
Foreign	1,321	43.8	1,259	34.7	1,091	36.1
Specific provisions	3,648	100.0	3,356	100.0	3,323	100.0
General provision	574		566		597
Total provisions	4,222		3,922		3,920

Analysis of write-offs

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

	UK GAAP
	2004 £m	2003 £m	2002 £m
Domestic
Manufacturing	55	99	111
Construction	12	22	18
Finance	19	54	35
Service industries and business activities	163	393	180
Agriculture, forestry and fishing	9	4	10
Property	33	6	9
Individuals – home mortgages	4	2	2
Individuals - others	535	357	333
Finance leases and instalment credit	90	160	45
Total domestic	920	1,097	743
Foreign	548	422	293
Total write-offs (1)	1,468	1,519	1,036

Note:

(1) Includes amounts written-off in respect of loans and advances to banks of £1 million in 2002.

Analysis of recoveries

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

	UK GAAP
	2004 £m	2003 £m	2002 £m
Domestic
Manufacturing	1	—	1
Finance	2	—	—
Service industries and business activities	1	3	1
Property	—	—	1
Individuals – home mortgages	1	—	—
Individuals – others	81	26	27
Finance leases and instalment credit	2	9	7
Total domestic	88	38	37
Foreign	59	34	26
Total recoveries	147	72	63

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 incorporate estimates and are stated before deducting the value of security held or related provisions.

	UK GAAP
	2004 £m	2003 £m	2002 £m
Loans accounted for on a non-accrual basis (3):
Domestic	3,705	3,221	3,077
Foreign	1,075	1,211	1,098
Total	4,780	4,432	4,175
Accruing loans which are contractually overdue 90 days or more as to principal or interest (4)
Domestic	646	561	363
Foreign	79	81	129
Total	725	642	492
Loans not included above which are classified as 'troubled debt restructurings' by the SEC:
Domestic	14	53	144
Foreign	10	30	60
Total	24	83	204
Total risk elements in lending	5,529	5,157	4,871
Potential problem loans (5)
Domestic	173	492	639
Foreign	107	99	544
Total potential problem loans	280	591	1,183
Closing provisions for bad and doubtful debts as a % of total risk elements in lending	76%	76%	80%
Closing provisions for bad and doubtful debts as a % of total risk elements in lending and potential problem loans	73%	68%	65%
Risk elements in lending as a % of gross loans and advances to customers excluding reverse repos	1.86%	2.22%	2.37%

Notes:

(1) For the analysis above, ‘Domestic’ consists of the UK 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) The classification of a loan as non-accrual, past due 90 days or troubled debt restructuring does not necessarily indicate that the principal of the loan is uncollectable in whole or in part. Collection depends in each case on the individual circumstances of the loan, including the adequacy of any collateral securing the loan and therefore classification of a loan as non-accrual, past due 90 days or troubled debt restructuring does not always require that a provision be made against such a loan. In accordance with the Group’s provisioning policy for bad and doubtful debts, it is considered that adequate provisions for the above risk elements in lending have been made.

(3) The Group’s UK banking subsidiary undertakings account for loans on a non-accrual basis from the point in time at which the collectability of interest is in significant doubt. Certain subsidiary undertakings of the Group, principally Citizens, generally account for loans on a non-accrual basis when interest or principal is past due 90 days.

(4) Overdrafts generally have no fixed repayment schedule and consequently are not included in this category.

(5) Loans that are current as to the payment of principal and interest but in respect of which management has serious doubts about the ability of the borrower to comply with contractual repayment terms. Substantial security is held in respect of these loans and appropriate provisions have already been made in accordance with the Group’s provisioning policy for bad and doubtful debts.

	UK GAAP
	2004 £m	2003 £m	2002 £m
Gross income not recognised but which would have been recognised under the original terms of non-accrual and restructured loans
Domestic	237	237	234
Foreign	58	55	73
	295	292	307
Interest on non-accrual and restructured loans included in net interest income
Domestic	58	60	47
Foreign	7	3	7
	65	63	54

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