Corporate Markets

2007
£m		 2006
£m		 2005
£m
Net interest income from banking activities 4,111 3,805 3,442
Non-interest income 6,211 6,488 5,348
Total income 10,322 10,293 8,790
Direct expenses  
– staff costs 2,457 2,539 2,007
– other 732 628 536
– operating lease depreciation 684 736 733
  3,873 3,903 3,276
Contribution before impairment losses 6,449 6,390 5,514
Impairment losses 219 274 335
Contribution 6,230 6,116 5,179
Allocation of Manufacturing costs 582 575 555
Operating profit 5,648 5,541 4,624
       
  £bn £bn £bn
Total assets* 682.1 472.4 409.2
Loans and advances to customers – gross*    
– banking book 221.7 181.1 158.7
– trading book 20.0 15.4 11.8
Rental assets 12.0 13.9 13.2
Customer deposits* 159.5 132.6 111.1
Risk-weighted assets 257.2 231.2 202.6

*excluding repos and reverse repos


2007 compared with 2006

Corporate Markets grew operating profit in 2007 by 2% to £5,648 million, notwithstanding difficult conditions in global credit markets. Total income was flat at £10,322 million, as the credit market deterioration in the second half of the year resulted in substantial write-downs in Global Banking & Markets income, but good progress in UK Corporate Banking combined with tight expense control and declining impairments lifted profits.

Average loans and advances to customers, excluding reverse repos, grew by 17% and average customer deposits (excluding repos) by 19%. The portfolio remains well diversified by counterparty, sector and geography, and the average credit grade continues to improve. Assets grew strongly outside the UK, particularly in Western Europe and Asia. Overall corporate credit conditions remained benign, and impairment losses represented 0.1% of loans and advances to customers. Risk-weighted assets rose by 11%.

2006 compared with 2005

Corporate Markets achieved a strong performance in 2006, with excellent results across many of our businesses. Total income, after deducting operating lease depreciation, rose by 19% to £9,557 million with contribution growing by 18% to £6,116 million. Operating profit rose by 20% to £5,541 million.

Average loans and advances grew by 19% and average customer deposits by 17%. Our portfolio remains well diversified by counterparty, sector and geography and balanced in credit distribution. Assets grew strongly outside the UK, particularly in Western Europe. Overall credit conditions remained benign, and impairment losses represented 0.14% of loans and advances to customers.

Average risk-weighted assets rose by 12%, with disciplined capital allocation and increasing returns. The ratio of operating profit to average risk-weighted assets improved from 2.3% to 2.5%.