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SECURITIES AND EXCHANGE COMMISION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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10 3/8% Non-cumulative Preference Shares of nominal value of £1 each | 200,000,000 | |||
8 5/8% Non-cumulative Preference Shares of nominal value of £1 each | 125,000,000 | |||
Series A Fixed/Floating Rate Non-cumulative Preference Shares of nominal value £1 each | 300,000,000 |
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Santander UK plc 2010 Annual Report on Form 20-F |
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This document comprises the Annual Report and Accounts on Form 20-F to the US Securities and Exchange Commission for Santander UK plc (”the Annual Report”). Shares are risk investments, share prices and dividends can fall as well as rise and you may not receive back the full amount you invested. |
2010 Annual Report on Form 20-F
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> | Trading income increased by 5% largely due to balanced growth in customer loans and deposits and effective margin management. Higher lending margins and healthy underlying new business activity were partially offset by the increased costs of deposit acquisition, market funding and liquid asset balances to meet new regulatory requirements; | |
> | Trading expenses were only 2% higher than last year (flat excluding the impact of acquired businesses) as a result of a successful and ongoing cost management strategy. The synergy benefits realised from the Alliance & Leicester integration have been re-invested to fund growth initiatives across the bank, including the ongoing recruitment in Retail operations to support business growth and improve customer service; | |
> | The combination of tightly controlled costs and revenue growth resulted in a further improvement in the trading cost:income ratio to 41% from 42% a year earlier; and | |
> | Trading provisions of £752m were £50m lower than last year. This was a reflection of the low interest rate environment and better than expected unemployment trends in the UK, as well as our continued collection efforts and the overall quality of our mortgage portfolio. We have preserved conservative levels of coverage, and our arrears and repossession levels have remained significantly better than industry benchmarks from the Council of Mortgage Lenders. |
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Chief Executive Officer’s Reviewcontinued
> | launched the Santander Zero Current Account to reward eligible customers with the lowest fees in the market, no overdraft charges and fee-free access to ATMs worldwide. Originally available to mortgage customers the offering was subsequently expanded to eligible customers with an investment or savings product and by the end of the year almost 200,000 customers held a Santander Zero Current Account; | |
> | introduced the Loyalty Tracker Bond which offered market-leading fixed-term rates to eligible customers, attracting deposit flows of £1.3bn during the year; | |
> | waived the 3% balance transfer fee on the Zero Credit Card for all existing customers with a mortgage or a current account with Santander UK or Alliance & Leicester; | |
> | kept the Flexi-ISA open for Santander UK Current Account customers; and | |
> | increased the loan to value (‘LTV’) to 90% on mortgages exclusively available to customers who hold their primary current account with Santander UK, while maintaining prudent lending policies. |
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Chief Executive Officer
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> | projections or expectations of revenues, costs, profit (or loss), earnings (or loss) per share, dividends, capital structure or other financial items or ratios; | |
> | statements of plans, objectives or goals of Santander UK or its management, including those related to products or services; | |
> | statements of future economic performance; and | |
> | statements of assumptions underlying such statements. |
> | the effects of UK economic conditions (e.g. recent decline in housing market, rising unemployment, increased taxation and reduced public spending); | |
> | the effects of conditions in global financial markets (e.g. increased market volatility, reduced credit availability and increased commercial and consumer loan delinquencies); | |
> | the credit quality of borrowers and the soundness of other financial institutions; | |
> | the Group’s ability to access liquidity and funding on financial terms acceptable to it; | |
> | the extent to which regulatory capital and liquidity requirements and any changes to these requirements may limit the Group’s operations; | |
> | the effects of any changes to the credit rating assigned to the Group, any member of the Group or any of their respective debt securities; | |
> | the effects of fluctuations in interest rates, foreign exchange rates, basis spreads, bond and equity prices and other market factors; | |
> | the extent to the Group may be required to record negative fair value adjustments for its financial assets due to changes in market conditions; | |
> | the ability of the Group to manage any future growth effectively (e.g. efficiently managing the operations and employees of expanding businesses and maintaining or growing its existing customer base); | |
> | the ability of the Group to realise the anticipated benefits of its business combinations and the exposure, if any, of the Group to any unknown liabilities or goodwill impairments relating to the acquired businesses; | |
> | the effects of competition, or intensification of such competition, in the financial services markets in which the Group conducts business and the impact of customer perception of the Group’s customer service levels on existing or potential new business; | |
> | the extent which the Group may be exposed to operational losses (e.g. failed internal or external processes, people and systems); | |
> | the ability of the Group to recruit, retain and develop appropriate senior management and skilled personnel; | |
> | the effects of any changes to the reputation of the Group, any member of the Group or any affiliate operating under the Group’s brands; | |
> | the effects of the financial services laws, regulations, administrative actions and policies and any changes thereto in each location in which the Group operates; | |
> | the effects of taxation requirements and any changes thereto in each location in which the Group operates (e.g. the bank levy in the UK); | |
> | the effects of the proposed reform and reorganisation of the structure of the UK financial regulatory authorities and of the UK regulatory framework that applies to members of the Group; | |
> | the effects of any new reforms to the UK mortgage lending market; | |
> | the power of the UK Financial Services Authority (or any overseas regulator) to intervene in response to attempts by customers to seek redress from financial service institutions, including the Group, in case of industry-wide issues; | |
> | the extent to which members of the Group may be responsible for contributing to compensation schemes in the UK in respect of banks and other authorised financial services firms that are unable to meet their obligations to customers; | |
> | the effects which the UK Banking Act 2009 may have, should the HM Treasury, the Bank of England and/or the FSA exercise their powers under this Act in the future against the Company; | |
> | the Group’s dependency on its information technology systems; | |
> | the risk of third parties using the Group as a conduit for illegal activities without the Group’s knowledge; | |
> | the effects of any changes in the pension liabilities and obligations of the Group; and | |
> | Santander UK’s success at managing the risks to which the Group is exposed, including the items above. |
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page 5.
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> | Santander Cards Limited and Santander Cards (UK) Limited (and its subsidiaries), which conduct Santander’s provision of credit cards and related financial products, store cards and other unsecured consumer finance products in the UK, and Santander Cards Ireland Limited, which conducts Santander’s provision of credit finance by way of store cards and credit cards in the Republic of Ireland; | |
> | Santander Consumer (UK) plc (of which the Group already held 49.9%), which carries on Santander’s provision of finance facilities and the contract purchase of motor vehicles and equipment in the UK and also provides wholesale funding which is a facility that offers preferential dealers funding in the UK; and | |
> | Santander PB UK (Holdings) Limited (and its subsidiaries) (of which the Group already held 51% of its subsidiary, Santander Private Banking UK Limited), which carries on Santander’s provision of private banking services in the UK. |
> | Retail Banking— offers residential mortgages, savings and banking and other personal financial products to customers throughout the UK, as well as private banking and other specialist services. Alison Brittain heads retail distribution, business banking, e-commerce and the intermediary channel, while Rami Aboukhair is responsible for private banking. | |
> | Corporate Banking— offers banking services principally to small and medium-sized (‘SME’) UK companies. It also contains certain non-core portfolios. This division is headed by Steve Pateman. | |
> | Global Banking & Markets— provides financial markets sales, trading and risk management services, as well as manufacturing retail structured products. This division is headed by Luis de Sousa. | |
> | Group Infrastructure— This unit includes Asset & Liability Management, Economics, Group Capital and Funding and is headed by Justo Gómez. |
> | Retail Products and Marketing— responsible for integrating and gaining the maximum value from Santander UK’s products, marketing and brand communications to serve Santander UK’s customers better. This division is headed by Miguel-Ángel Rodríguez-Sola. | |
> | Human Resources— responsible for delivering the human resources strategy and personnel support. This division is headed by Karen Fortunato. | |
> | Manufacturing— responsible for all information technology, cost control and operations activity, including service centres. This division is headed by Juan Olaizola. | |
> | Risk— responsible for ensuring that the board of directors (the ‘Board’) and senior management team of Santander UK are provided with an appropriate risk policy and control framework, and to report any material risk issues to the Risk Committee and the Board. This division is headed by José María Nus. | |
> | Internal Audit— responsible for supervising the compliance, effectiveness and efficiency of Santander UK’s internal control systems to manage its risks. This division is headed by Jorge de la Vega. |
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> | Financial Planning, Financial Reporting and Tax, Cost Management & Control— This unit is headed by Mónica Cueva. | |
> | Corporate Services— This unit includes Legal, Secretariat, Compliance and Regulatory Risk Management is headed by Karen Fortunato. | |
> | Service Quality— This unit is headed by Miguel-Ángel Rodríguez-Sola, with Chief Executive Officer oversight given the importance of service quality. | |
> | Communications— This unit reports to Ana Botín. | |
> | Santander Universities in the UK— This unit reports to Rami Aboukhair, with Chief Executive Officer oversight in line with the global Universities structure. |
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i | Source: GfK NOP Financial Research Survey (FRS), 6 months ended 31 December 2010. |
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> | Business Review Summary— this contains an explanation of the basis of Santander UK’s results and any potential changes to that basis in the future; a summarised consolidated income statement with commentary thereon by line item for each segment; a summary of the nature of adjustments between Santander UK’s statutory basis of accounting (as described in Note 1 to the Consolidated Financial Statements) and Santander UK’s management basis of accounting (known as the “trading” basis); | |
> | Key Performance Indicators— this contains a description of the key measures used by management in assessing the success of the business against its strategies and objectives; | |
> | Divisional results— this contains a supplementary summary of the results, and commentary thereon, for each segment. Additional information is provided for the Retail Banking segment due to its significance to the Group’s results; | |
> | Other Material Items— this contains information about the statutory to trading basis adjustments; and | |
> | Balance Sheet Business Review— this contains a description of Santander UK’s significant assets and liabilities and its strategy and reasons for entering into such transactions, including: |
> | Summarised consolidated balance sheet— together with commentary on key movements, as well as analyses of the principal assets and liabilities; | ||
> | Off-Balance Sheet disclosures— a summary of Santander UK’s off-balance sheet arrangements, their business purpose, and importance to Santander UK; | ||
> | Capital disclosures— an analysis of Santander UK’s capital needs and composition; and | ||
> | Liquidity disclosures— an analysis of Santander UK’s sources and uses of liquidity and cash flows. |
> | Retail Banking; | |
> | Corporate Banking; | |
> | Global Banking & Markets; and | |
> | Group Infrastructure. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net interest income | 3,814 | 3,412 | 1,772 | |||||||||
Non-interest income | 1,220 | 1,284 | 1,232 | |||||||||
Total operating income | 5,034 | 4,696 | 3,004 | |||||||||
Administrative expenses | (1,793 | ) | (1,848 | ) | (1,343 | ) | ||||||
Depreciation and amortisation | (275 | ) | (260 | ) | (202 | ) | ||||||
Total operating expenses excluding provisions and charges | (2,068 | ) | (2,108 | ) | (1,545 | ) | ||||||
Impairment losses on loans and advances | (712 | ) | (842 | ) | (348 | ) | ||||||
Provisions for other liabilities and charges | (129 | ) | (56 | ) | (17 | ) | ||||||
Total operating provisions and charges | (841 | ) | (898 | ) | (365 | ) | ||||||
Profit before tax | 2,125 | 1,690 | 1,094 | |||||||||
Taxation charge | (542 | ) | (445 | ) | (275 | ) | ||||||
Profit for the year | 1,583 | 1,245 | 819 | |||||||||
Attributable to: | ||||||||||||
Equity holders of the parent | 1,544 | 1,190 | 811 | |||||||||
Non-controlling interest | 39 | 55 | 8 | |||||||||
Core Tier 1 capital ratio (%) | 11.5 | % | 6.8 | % | 6.2 | % | ||||||
Tier 1 capital ratio (%) | 14.8 | % | 9.5 | % | 8.5 | % | ||||||
Risk weighted assets(1) | 73,563 | 67,438 | 63,425 | |||||||||
(1) | In accordance with the requirements of the UK Financial Services Authority, this included 35.6% of Alliance & Leicester plc’s risk weighted assets at 31 December 2008, reflecting Santander UK’s ownership of that percentage of Alliance & Leicester plc’s ordinary share capital on that date, as described in Business Overview — Summary history. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 3,138 | 2,840 | 1,606 | |||||||||
Corporate Banking | 191 | 182 | (3 | ) | ||||||||
Global Banking & Markets | 6 | 7 | 2 | |||||||||
Group Infrastructure | 479 | 383 | 167 | |||||||||
3,814 | 3,412 | 1,772 | ||||||||||
> | Retail Banking net interest income of £3,138m increased by £298m from £2,840m in 2009, an increase of 10%. The increase was largely driven by balanced growth in customer lending and deposits across a mix of products combined with effective margin management. Retail Banking customer assets increased by £10.1bn or 6% (of which £5.7bn or 3% reflected the inclusion of the Santander Cards and Santander Consumer businesses acquired in October and November 2010, respectively). Retail Banking customer liabilities increased by £6.8bn or 5%. |
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> | Corporate Banking net interest income of £191m increased by £9m from £182m in 2009. The increase was primarily driven by growth in customer loans and deposits to the UK SME market through our network of 25 Corporate Business Centres (SME lending balances increased by 26% and total deposit balances increased by 14%). Net interest margins on loans continued to improve during 2010 as market pricing better reflected incremental higher funding and liquidity costs applied to the business unit. |
> | Global Banking & Markets net interest income of £6m decreased by £1m from £7m in 2009. The decrease was due to increased funding costs offsetting customer asset growth. | |
> | Group Infrastructure net interest income of £479m increased by £96m from £383m in 2009. The income reflected the benefit of higher historic medium-term interest rates being earned on capital, and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. |
> | Retail Banking net interest income of £2,840m increased by £1,234m from £1,606m in 2008. Of the total increase, £690m represented the inclusion of the net interest income in 2009 of Alliance & Leicester. The remaining increase of £544m was largely driven by balanced growth in customer lending and deposits across a mix of products combined with effective margin management, as well as a 17% growth in bank account liability balances and hedging strategies which helped to offset the impact of lower interest rates. |
> | Corporate Banking net interest income of £182m increased by £185m from (£3m) in 2008. Of the total increase, £88m represented the inclusion of the net interest income in 2009 of Alliance & Leicester. The remaining increase of £97m reflected in part the sale of the Porterbrook businesses early in December 2008 (net interest income in 2008 included interest expense of £76m incurred by the Porterbrook businesses, whereas its associated leasing income was classified as non-interest income). |
> | Global Banking & Markets net interest income of £7m increased by £5m from £2m in 2008. Net interest income increased by £6m as a result of the inclusion of the net interest income in 2009 of Alliance & Leicester. However, this was partially offset by a reduction in loan balances during the year. | |
> | Group Infrastructure net interest income of £383m increased by £216m from £167m in 2008. Of the total increase, £56m represented the inclusion of the net interest income in 2009 of Alliance & Leicester. The remaining increase of £160m reflected the benefit of higher historic medium-term interest rates being earned on capital, and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 596 | 689 | 611 | |||||||||
Corporate Banking | 194 | 202 | 249 | |||||||||
Global Banking & Markets | 412 | 382 | 326 | |||||||||
Group Infrastructure | 18 | 11 | 46 | |||||||||
1,220 | 1,284 | 1,232 | ||||||||||
> | Retail Banking non-interest income of £596m decreased by £93m from £689m in 2009. The decrease was largely due to lower investment fees as a result of the mix of sales shifting away from structured investment products towards managed funds (which will yield a trail income in future periods rather than an upfront commission). |
> | Corporate Banking non-interest income of £194m decreased by £8m from £202m in 2009. Asset growth in the core business and strong sales of Global Banking & Markets products resulted in higher fees. However, this was more than offset by lower fees in non-core businesses as Corporate Banking continued to reduce balances in the non-core portfolio. | |
> | Global Banking & Markets non-interest income of £412m increased by £30m from £382m in 2009, reflecting the strong development of underlying customer revenue streams and a number of non-recurring releases of fair value adjustments following the successful de-risking of underlying positions. These benefits were partly offset by a less favourable trading environment resulting from lower spread volatility. | |
> | Group Infrastructure non-interest income of £18m increased by £7m from £11m in 2009. The increase reflected non-recurring gains reported in 2010. These gains included a profit of £87m on the revaluation of the Group’s original holding in Santander Consumer (UK) plc on the acquisition of the remaining shares by the Group, and the profit on disposal of certain businesses in the period of approximately £39m, including James Hay. |
> | Retail Banking non-interest income of £689m increased by £78m from £611m in 2008. Of the total increase, £174m represented the inclusion of the non-interest income in 2009 of Alliance & Leicester. The remaining decrease of £96m was largely due to lower fees on unsecured lending products, as part of our stated strategy to reduce unsecured lending exposures, as well as lower fees from current accounts due to repricing. |
> | Corporate Banking non-interest income of £202m decreased by £47m from £249m in 2008. Non-interest income increased by £161m as a result of the inclusion of the non-interest income in 2009 of Alliance & Leicester. However, this was more than offset by a decrease of £265m reflecting the inclusion in non-interest income in 2008 of the leasing income relating to the Porterbrook businesses which were sold early in December 2008. |
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> | Global Banking & Markets non-interest income of £382m increased by £56m from £326m in 2008. Non-interest income increased by £1m as a result of the inclusion of the non-interest income of Alliance & Leicester. The remaining increase of £55m reflected strong performances in the equity business (linked to sales of retail products through the branch network) and short term markets business, which benefited from a favourable trading environment available from wider spreads in an illiquid market. | |
> | Group Infrastructure non-interest income of £11m decreased by £35m from non interest income of £46m in 2008. Alliance & Leicester contributed £77m of non-interest income in 2009. The remaining decrease of £112m in the year reflected mark-to-market losses and lower gains in 2009 on the buy-back of debt securities compared to 2008. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 1,473 | 1,533 | 1,151 | |||||||||
Corporate Banking | 144 | 168 | 45 | |||||||||
Global Banking & Markets | 128 | 101 | 104 | |||||||||
Group Infrastructure | 48 | 46 | 43 | |||||||||
1,793 | 1,848 | 1,343 | ||||||||||
> | Retail Banking administrative expenses of £1,473m decreased by £60m from £1,533m in 2009. The decrease was largely due to the removal of duplication across back office and support functions due to the integration of Alliance & Leicester and the Bradford & Bingley savings business. Within this framework, the synergy benefits realised have been re-invested to fund growth initiatives across the Group, including the ongoing recruitment in Retail Banking operations to support business growth and improve customer service. Retail Banking administrative expenses included £35m of expenses relating to the Santander Cards and Santander Consumer businesses which were acquired in October and November 2010, respectively. | |
> | Corporate Banking administrative expenses of £144m decreased by £24m from £168m in 2009. The decrease was due to operational efficiencies arising from the integration of Alliance & Leicester, partially offset by investment in the Corporate Business Centre network. The investment included hiring an additional 136 staff over the last twelve months and an increase of 70% in the floor space of the Corporate Business Centre network. | |
> | Global Banking & Markets administrative expenses of £128m increased by £27m from £101m in 2009, reflecting ongoing investment in growth initiatives relating to new products, markets and customer segments. There was a 38% increase in headcount across the customer transaction businesses including the new Gilt Edge Market Making desk. | |
> | Group Infrastructure administrative expenses of £48m increased by £2m from £46m in 2009, reflecting non-recurring expenditure relating to the rebranding of Abbey and the Bradford & Bingley savings business as Santander in January 2010. In addition, higher expenses resulted from the process of transferring the business of Alliance & Leicester plc to Santander UK plc under Part VII of the Financial Services and Markets Act 2000 in May 2010. However, these additional expenses were partially offset by savings due to the sale of the James Hay business in March 2010. |
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> | Retail Banking administrative expenses of £1,533m increased by £382m from £1,151m in 2008. Of the total increase, £373m represented the inclusion of the administrative expenses in 2009 of Alliance & Leicester. A further £61m of the increase was due to expenses related to the Bradford & Bingley savings business since its acquisition in September 2008. The remaining administrative expenses decrease was largely due to the removal of duplications across back office and support functions due to the integration of Alliance & Leicester and the Bradford & Bingley savings business. | |
> | Corporate Banking administrative expenses of £168m increased by £123m from £45m in 2008. Of the total increase, £128m represented the inclusion of the administrative expenses in 2009 of Alliance & Leicester. The remaining decrease of £5m was due to operational efficiencies arising from the integration of Alliance & Leicester and the sale of the Porterbrook business. | |
> | Global Banking & Markets administrative expenses of £101m were slightly lower than £104m in 2008, reflecting strong expense management while increasing income. | |
> | Group Infrastructure administrative expenses of £46m increased by £3m from £43m in 2008, reflecting a slight increase in central costs following the Transfer of Alliance & Leicester and the acquisition of the Bradford & Bingley savings business. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 201 | 170 | 82 | |||||||||
Corporate Banking | 72 | 87 | 117 | |||||||||
Global Banking & Markets | 2 | 3 | 3 | |||||||||
275 | 260 | 202 | ||||||||||
> | Retail Banking depreciation and amortisation of £201m increased by £31m from £170m in 2009. The increase resulted from the continued investment in IT systems in Santander UK in 2009 and 2010 and the integration of Alliance & Leicester and the Bradford & Bingley savings business. | |
> | Corporate Banking depreciation and amortisation of £72m decreased by £15m from £87m in 2009. The decrease reflected lower operating lease depreciation due to lower balances in the non-core portfolio following the continued de-leveraging process. | |
> | Global Banking & Markets depreciation and amortisation of £2m was broadly flat compared with 2009. |
> | Retail Banking depreciation and amortisation of £170m increased by £88m from £82m in 2008. Of the total increase, £35m represented the inclusion of the depreciation and amortisation in 2009 of Alliance & Leicester. The remaining increase of £53m was largely driven by a full year of depreciation of, and further investment in, our IT platform Partenon and increased depreciation costs as a result of growing our lending to SMEs. | |
> | Corporate Banking depreciation and amortisation of £87m decreased by £30m from £117m in 2008. Alliance & Leicester contributed £87m in 2009. The remaining decrease reflected the sale of the Porterbrook businesses which had contributed depreciation expense of £117m in 2008. | |
> | Global Banking & Markets depreciation and amortisation of £3m was unchanged from £3m in 2008. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 615 | 714 | 309 | |||||||||
Corporate Banking | 97 | 31 | (6 | ) | ||||||||
Group Infrastructure | — | 97 | 45 | |||||||||
712 | 842 | 348 | ||||||||||
> | Retail Banking impairment losses on loans and advances of £615m decreased by £99m from £714m in 2009, with the most significant reduction relating to mortgages. This improving performance in difficult economic conditions has been delivered as a result of a high quality mortgage book, effective collection handling and reductions in arrears levels, particularly in the second half of 2010. |
> | Corporate Banking impairment losses on loans and advances of £97m increased by £66m from £31m in 2009. The increase reflected growth and maturity in asset balances over the last two years and some deterioration arising from market conditions. The non-core Corporate Banking portfolios continued to perform in line with our original expectations, with existing impairment loss allowances expected to be sufficient to cover losses inherent in the portfolios. | |
> | Group Infrastructure impairment losses on loans and advances decreased to £nil from £97m in 2009. The overall loss of £nil in 2010 was due to losses and recoveries on disposals of assets in the Treasury asset portfolio offsetting each other whereas in 2009 there were overall losses on disposal. |
> | Retail Banking impairment losses on loans and advances of £714m increased by £405m from £309m in 2008. Of the total increase, £94m represented the inclusion of Alliance & Leicester’s impairment losses in 2009. The remaining increase of £311m was distributed across all products with the largest increase relating to mortgages, as the impact of falling house prices and the lagging effect of unemployment, as expected, started to emerge. Most of the impact came through in the first half of the year, with the second half performance stabilising and in some areas improving. |
> | Corporate Banking impairment losses on loans and advances of £31m increased by £37m from a £6m release in 2008. Of the total increase, £4m represented the inclusion of Alliance & Leicester’s impairment losses in 2009. The low level of impairment losses was a reflection of prudent lending criteria on the relatively immature growth businesses and portfolios (such as SME lending within Corporate Banking). It also reflected impairment loss allowances made on acquisition relating to the non-core portfolios (including aviation and shipping) to reflect expected losses in those portfolios as required under acquisition accounting. The remaining increase of £33m reflected the non-recurrence in 2009 of Corporate Banking impairment loss allowance releases in 2008 relating to non-core businesses and some deterioration arising from market conditions. | |
> | Group Infrastructure impairment losses on loans and advances of £97m increased by £52m from £45m in 2008. Alliance & Leicester contributed £97m in 2009 in respect of the Treasury asset portfolio. The remaining decrease of £45m principally relates to the non-recurrence in 2009 of other impairment loss charges incurred in 2008. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total non-performing loans (‘NPLs’) | 3,717 | 3,613 | 2,378 | |||||||||
Total Group customer assets(1, 2) | 202,090 | 190,067 | 183,345 | |||||||||
Total impairment loss allowances | 1,655 | 1,299 | 1,001 | |||||||||
% | % | % | ||||||||||
NPLs as a % of customer assets | 1.84 | 1.90 | 1.30 | |||||||||
Coverage ratio(3) | 44.53 | 35.95 | 42.09 | |||||||||
Mortgages: | ||||||||||||
NPLs as a % of customer assets | 1.41 | 1.52 | 0.97 | |||||||||
Coverage ratio(3) | 22.45 | 19.87 | 24.03 | |||||||||
(1) | Accrued interest is excluded for purposes of these analyses. | |
(2) | Customer assets include social housing loans and finance leases, and exclude trading assets. | |
(3) | Impairment loss allowances as a percentage of NPLs. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Retail Banking | 129 | 56 | 17 | |||||||||
129 | 56 | 17 | ||||||||||
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Profit before tax | 2,125 | 1,690 | 1,094 | |||||||||
Tax calculated at a tax rate of 28% (2009: 28%, 2008: 28.5%) | 595 | 473 | 310 | |||||||||
Non taxable gain on sale of subsidiary undertakings | (11 | ) | (5 | ) | (11 | ) | ||||||
Non deductible preference dividends paid | 8 | 8 | 8 | |||||||||
Non taxable gain on revaluation of investment in Santander Consumer (UK) plc | (24 | ) | — | — | ||||||||
Effect of non-allowable impairment losses, provisions and other non-equalised items | — | 51 | 19 | |||||||||
Non-taxable dividend income | — | (4 | ) | (5 | ) | |||||||
Effect of non-UK profits and losses | (6 | ) | (8 | ) | (8 | ) | ||||||
Utilisation of capital losses for which credit not previously recognised | — | (3 | ) | — | ||||||||
Effect of change in tax rate on deferred tax provision | 11 | — | — | |||||||||
Adjustment to prior year provisions | (31 | ) | (67 | ) | (38 | ) | ||||||
Tax expense | 542 | 445 | 275 | |||||||||
Effective tax rate | 25.5 | % | 26.3 | % | 25.1 | % | ||||||
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The adjustments consist of: | ||
> | Alliance & Leicester pre-acquisition trading basis results— Following the transfer of Alliance & Leicester plc to the Company in January 2009, the statutory results for the years ended 31 December 2010 and 2009 include the results of the Alliance & Leicester business, whereas the statutory results for the year ended 31 December 2008 do not. In order to enhance the comparability of the results for the three periods, management reviews the 2008 results including the pre-acquisition results of the Alliance & Leicester business for that period. | |
> | Reorganisation and other costs— These comprise implementation costs in relation to strategic change and cost reduction projects, including integration-related expenses, certain impairment losses taken centrally, as well as costs in respect of customer remediation. Management needs to understand the underlying drivers of the cost base that will remain after these exercises are complete, and does not want this view to be clouded by these costs, which are managed independently. | |
> | Depreciation of operating lease assets— The operating lease businesses are managed as financing businesses and, therefore, management needs to see the margin earned on the businesses. Residual value risk is separately managed. As a result, the depreciation is netted against the related income. | |
> | Profit on part sale and revaluation of subsidiaries— These profits are excluded from the results to allow management to understand the underlying performance of the business. In 2010, the profit that arose on the revaluation of the Group’s original holding in Santander Consumer (UK) plc on the acquisition of the remaining shares by the Group was excluded from the trading results. In addition, profits on the sale of James Hay and certain other businesses were excluded. In 2009 there were no such profits. In 2008, the profit on the sale of the Porterbrook businesses was excluded from the trading results. | |
> | Hedging and other variances— The Balance Sheet and Income Statement are subject to mark-to-market volatility including that arising from the accounting for elements of derivatives deemed under IFRS rules to be ineffective as hedges. Volatility also arises on certain assets previously managed on a fair value basis, and hence classified as fair value through profit or loss under IFRS, that are now managed on an accruals basis. Where appropriate, such volatility is separately identified to enable management to view the underlying performance of the business. In addition, other variances include the reversal of coupon payments on certain equity instruments which are treated as interest expense in the trading results but are reported below the profit after tax line for statutory purposes. | |
> | Capital and other charges— These principally comprise internal nominal charges for capital invested in the Group’s businesses. Management implemented this charge to assess the effectiveness of capital investments. |
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Key performance indicator | Note | 2010 | 2009 | 2008 | ||||||||||||
Trading income | 1 | £ | 4,870m | £ | 4,658m | £ | 3,894m | |||||||||
Trading cost:income ratio | 2 | 41 | % | 42 | % | 50 | % | |||||||||
Profit for the year | 3 | £ | 1,583m | £ | 1,245m | £ | 819m | |||||||||
Commercial Banking margin | 4 | 1.91 | % | 1.76 | % | 1.33 | % | |||||||||
Total number of employees | 5 | 19,848 | 19,483 | 22,669 | ||||||||||||
Market share of mortgage stock | 6 | 13.88 | % | 13.50 | % | 12.90 | % | |||||||||
Loan-to-deposit ratio | 7 | 123 | % | 126 | % | 136 | % | |||||||||
Loan-to-value ratio of mortgage stock (indexed) | 8 | 51 | % | 52 | % | 51 | % | |||||||||
Risk-weighted assets(1) | 9 | £ | 73,563m | £ | 67,438m | £ | 63,425m | |||||||||
(1) | In accordance with the requirements of the UK Financial Services Authority, this included 35.6% of Alliance & Leicester plc’s risk weighted assets at 31 December 2008, reflecting Santander UK’s ownership of that percentage of Alliance & Leicester plc’s ordinary share capital on that date, as described in Business Overview — Summary history. |
1. | Trading income | |
Trading income comprises net interest income and non-interest income of Santander UK’s businesses on a trading basis. Discussion and analysis of this data is set out in the “Business Review — Divisional results” on pages 25 to 38. |
2. | Trading cost:income ratio | |
Trading cost:income ratio is defined as trading expenses divided by trading income. Discussion and analysis of trading income and expenses for each business division is set out in the “Business Review — Divisional results” on pages 25 to 38. |
3. | Profit for the year | |
Profit for the year is the statutory consolidated profit after tax for the year. Discussion and analysis of this data is set out in the Group Summary in the “Business Review — Summary” on pages 11 to 21. |
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4. | Commercial Banking margin | |
Commercial Banking margin is defined as the trading net interest income (adjusted to remove net interest income from the run-down Treasury asset portfolio) over average commercial assets (mortgages, unsecured personal loans, corporate loans and overdrafts). Discussion and analysis of this data is set out in the “Business Review — Divisional results” on pages 25 to 38. |
5. | Total number of employees | |
Total number of employees is measured at the year-end and calculated on a full-time equivalent basis. As part of the planning process, headcount targets are set for each division and reviewed on a monthly basis. Further information about employees on a segmental basis is contained in Note 2 to the Consolidated Financial Statements. |
6. | Market share of mortgage stock | |
Market share of mortgage stock represents the book value of the Group’s mortgage assets as a percentage of the total book value of mortgages in the UK market, and is measured at the year-end. Market share of mortgage stock is calculated by reference to data on the size of the UK mortgage market produced by the Bank of England. Discussion and analysis of this data is set out in the “Business Review — Divisional results” on pages 25 to 38. |
7. | Loan-to-deposit ratio | |
Management places a significant emphasis on the loan-to-deposit ratio as part of its focus on maintaining a sustainable funding model. The loan-to-deposit ratio represents the book value of the Group’s commercial assets (i.e. retail and corporate assets) divided by its commercial liabilities (i.e. retail and corporate deposits) and shareholders’ equity, and is measured at the year-end. Discussion and analysis of the loan-to-deposit ratio is set out in the Chief Executive Officer’s Review on page 2 and in the Directors’ Report on page 138. |
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8. | Loan-to-value (‘LTV’) ratio on mortgage stock (indexed) | |
As a result of the difficult economic environment, management placed a significant emphasis on the LTV ratio on mortgage stock in order to ensure that the profit target be achieved. The LTV ratio is calculated as the book value of the Group’s residential mortgages as a percentage of the estimated current market value of the properties against which the mortgages are secured. The current market value is estimated from house price indices by adjusting the value of the property at the time of the origination of the mortgage for changes in house prices from that date to the balance sheet date. The LTV ratio is a measure of the estimated current level of security that the Group possesses on its mortgage loans. |
9. | Risk-weighted assets | |
Risk-weighted assets are a measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the UK Financial Services Authority. In accordance with those requirements, risk-weighted assets at 31 December 2008 included 35.6% of Alliance & Leicester plc’s risk weighted assets at that date, reflecting Santander UK’s ownership of that percentage of Alliance & Leicester plc’s ordinary share capital on that date. |
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Retail | Corporate | Global Banking | Group | |||||||||||||||||
Banking | Banking | & Markets | Infrastructure | Total | ||||||||||||||||
31 December 2010 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income | 3,237 | 212 | 6 | 302 | 3,757 | |||||||||||||||
Non-interest income | 627 | 129 | 412 | (55 | ) | 1,113 | ||||||||||||||
Total trading income | 3,864 | 341 | 418 | 247 | 4,870 | |||||||||||||||
Total trading expenses | (1,649 | ) | (151 | ) | (130 | ) | (48 | ) | (1,978 | ) | ||||||||||
Impairment losses on loans and advances | (615 | ) | (97 | ) | — | (40 | ) | (752 | ) | |||||||||||
Provisions for other liabilities and charges | 1 | — | — | — | 1 | |||||||||||||||
Trading profit before tax | 1,601 | 93 | 288 | 159 | 2,141 | |||||||||||||||
Adjust for: | ||||||||||||||||||||
- Reorganisation and other costs | (155 | ) | — | — | 40 | (115 | ) | |||||||||||||
- Profit on part sale and revaluation of subsidiaries | — | — | — | 126 | 126 | |||||||||||||||
- Hedging and other variances | (31 | ) | — | — | 4 | (27 | ) | |||||||||||||
- Capital and other charges | (99 | ) | (21 | ) | — | 120 | - | |||||||||||||
Profit before tax | 1,316 | 72 | 288 | 449 | 2,125 | |||||||||||||||
Retail | Corporate | Global Banking | Group | |||||||||||||||||
Banking | Banking | & Markets | Infrastructure | Total | ||||||||||||||||
31 December 2009 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income | 2,886 | 212 | 7 | 236 | 3,341 | |||||||||||||||
Non-interest income | 720 | 128 | 382 | 87 | 1,317 | |||||||||||||||
Total trading income | 3,606 | 340 | 389 | 323 | 4,658 | |||||||||||||||
Total trading expenses | (1,613 | ) | (181 | ) | (104 | ) | (46 | ) | (1,944 | ) | ||||||||||
Impairment losses on loans and advances | (714 | ) | (31 | ) | — | (57 | ) | (802 | ) | |||||||||||
Trading profit before tax | 1,279 | 128 | 285 | 220 | 1,912 | |||||||||||||||
Adjust for: | ||||||||||||||||||||
- Reorganisation and other costs | (146 | ) | — | — | (40 | ) | (186 | ) | ||||||||||||
- Hedging and other variances | (17 | ) | — | — | (19 | ) | (36 | ) | ||||||||||||
- Capital and other charges | (60 | ) | (30 | ) | — | 90 | — | |||||||||||||
Profit before tax | 1,056 | 98 | 285 | 251 | 1,690 | |||||||||||||||
Retail | Corporate | Global Banking | Group | |||||||||||||||||
Banking | Banking | & Markets | Infrastructure | Total | ||||||||||||||||
31 December 2008 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income/(expense) | 2,253 | 149 | 11 | (24 | ) | 2,389 | ||||||||||||||
Non-interest income | 848 | 240 | 327 | 90 | 1,505 | |||||||||||||||
Total trading income | 3,101 | 389 | 338 | 66 | 3,894 | |||||||||||||||
Total trading expenses | (1,551 | ) | (239 | ) | (107 | ) | (43 | ) | (1,940 | ) | ||||||||||
Impairment losses on loans and advances | (442 | ) | (44 | ) | — | (3 | ) | (489 | ) | |||||||||||
Trading profit before tax | 1,108 | 106 | 231 | 20 | 1,465 | |||||||||||||||
Adjust for: | ||||||||||||||||||||
- A&L pre-acquisition trading basis results | (254 | ) | (2 | ) | (10 | ) | 102 | (164 | ) | |||||||||||
- Reorganisation and other costs | (121 | ) | — | — | (42 | ) | (163 | ) | ||||||||||||
- Profit on part sale and revaluation of subsidiaries | — | — | — | 40 | 40 | |||||||||||||||
- Hedging and other variances | (8 | ) | — | — | (76 | ) | (84 | ) | ||||||||||||
- Capital and other charges | (67 | ) | (14 | ) | — | 81 | — | |||||||||||||
Profit before tax | 658 | 90 | 221 | 125 | 1,094 | |||||||||||||||
> | Retail Banking trading profit before tax increased by £322m to £1,601m (2009: £1,279m) driven by a strong increase in trading income and reduced impairment losses, with the most significant reduction in impairment losses relating to mortgages. Trading income benefited from balanced growth in customer lending and deposits, combined with effective margin management. In addition, more customers reverted to standard variable rate mortgages, and margins on new business improved in both the mortgage and unsecured loan portfolios in the low interest rate environment. This more than offset the higher cost of retail deposits, the impact of low interest rates, the cost of new term funding and higher costs of liquidity under the UK’s new liquidity regime. |
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These positive income trends were partly offset by lower investment fees combined with lower volume-driven fees on unsecured lending products and mortgage redemptions, and lower banking fees due to the introduction of the Santander Zero account. Retail Banking trading profit before tax includes £14m relating to the Santander Cards and Santander Consumer businesses which were acquired in October and November 2010 respectively. | ||
> | Corporate Banking trading profit before tax decreased by £35m to £93m (2009: £128m). This movement was due to higher impairment losses reflecting the growth and maturity in asset balances over the last two years and some deterioration arising from market conditions, partially offset by lower operating expenses benefiting from integration synergies. Trading income was flat, largely due to the reduction in the non-core portfolio which resulted in income £30m lower than the prior year. This was offset by growth in lending balances to SMEs, and deposits from core corporate customers. | |
> | Global Banking & Markets trading profit before tax increased by £3m to £288m (2009: £285m). Trading income increased, reflecting the strong development of underlying customer revenue streams and a number of non-recurring releases of fair value adjustments following the successful de-risking of underlying positions. These benefits were partly offset by a less favourable trading environment resulting from lower spread volatility. Trading expenses reflected ongoing investment in growth initiatives relating to new products, markets and customer segments. | |
> | Group Infrastructure trading profit before tax decreased by £61m to £159m (2009: £220m). This movement reflected the sale of James Hay in March 2010, and less income earned on the run-down Treasury asset portfolio due to the continued de-leveraging process, with balances reduced by 46% in the year. In addition, certain one-off benefits in 2009 were not repeated in 2010, including profits earned on the buy-back of securitisation debt in 2009. This was offset by the benefit of higher historic medium-term interest rates being earned on capital, and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. |
> | Retail Banking trading profit before tax increased by £171m to £1,279m (2008: £1,108m) driven by a strong increase in trading income, partly offset by higher trading expenses and impairment losses. Trading income benefited from a significant improvement in mortgage margins both in terms of new lending and retention of existing business, as well as increased retention levels on standard variable rate and other longer term products. In addition, the Retail Banking business delivered strong growth in customer deposits, together with effective management of deposit margins in a low interest rate environment. There was also a significant increase in bank account openings and investment product sales. These positive income trends were partly offset by lower fee income from current accounts, a reduction in the volume of mortgage redemptions and lower unsecured lending volumes. Trading expenses increased mainly due to the inclusion of a full year of Bradford & Bingley savings business related expenses. The increase in impairment losses was largely attributable to the residential mortgage and unsecured personal loans portfolios reflecting the impact of market conditions, albeit with mortgage arrears tracking better than expectations and significantly better than our UK peers. | |
> | Corporate Banking trading profit before tax increased by £22m to £128m (2008: £106m). This movement was due to lower operating expenses benefiting from integration synergies and lower impairment losses. Trading income benefitted from higher asset margins as well as robust growth of both assets and liabilities of the core business, albeit this was more than offset by a reduction of £29m caused by reduced balances in the non-core book and the significant increase in the cost of funding being incurred on both the core and non-core books. | |
> | Global Banking & Markets trading profit before tax increased by £54m to £285m (2008: £231m) due predominantly to strong income performances in the equity business (linked to sales of retail products through the branch network) and short term markets business, which benefited from a favourable trading environment available from wider spreads in an illiquid market. | |
> | Group Infrastructure trading profit before tax increased by £200m to £220m (2008: £20m) reflecting the benefit of higher historic medium-term interest rates being earned on capital and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. |
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Combined volumes(2) | ||||||||||||||||
2010 | 2009 | 2008(1) | 2008 | |||||||||||||
Mortgages:(3) | ||||||||||||||||
Gross mortgage lending in the year | £ | 24.2 | bn | £ | 26.4 | bn | £ | 31.8 | bn | £ | 35.2 | bn | ||||
Capital repayments in the year | £ | 18.6 | bn | £ | 18.8 | bn | £ | 20.7 | bn | £ | 29.1 | bn | ||||
Net mortgage lending in the year | £ | 5.6 | bn | £ | 7.6 | bn | £ | 11.1 | bn | £ | 6.1 | bn | ||||
Mortgage stock balance | £ | 172.4 | bn | £ | 166.9 | bn | £ | 159.3 | bn | — | ||||||
Market share — gross mortgage lending(4) | 18.0 | % | 18.4 | % | 12.4 | % | 13.9 | % | ||||||||
Market share — capital repayments(4) | 14.6 | % | 14.3 | % | 9.5 | % | 13.7 | % | ||||||||
Market share — mortgage stock(4) | 13.9 | % | 13.5 | % | 12.9 | % | — | |||||||||
Unsecured personal lending: | ||||||||||||||||
Gross unsecured personal lending in the year | £ | 1.3 | bn | £ | 1.5 | bn | £ | 0.9 | bn | £ | 2.4 | bn | ||||
Unsecured personal lending stock balance(5) | £ | 4.0 | bn | £ | 5.0 | bn | £ | 6.3 | bn | — | ||||||
SME lending: | ||||||||||||||||
SME lending stock balance | £ | 8.5 | bn | £ | 6.7 | bn | £ | 5.8 | bn | — | ||||||
Market share — SME lending stock balance | 3.6 | % | 2.7 | % | 2.3 | % | — | |||||||||
Deposits and investments: | ||||||||||||||||
Customer deposits flows: | ||||||||||||||||
Net deposit flows in the year(6) | £ | 9.6 | bn | £ | 14.9 | bn | £ | 9.5 | bn | £ | 12.6 | bn | ||||
— Of which Retail Banking | £ | 6.8 | bn | £ | 5.6 | bn | £ | 5.3 | bn | £ | 7.2 | bn | ||||
Customer(6, 7) assets and deposits: | ||||||||||||||||
Customer asset stock balance(8) | £ | 202.1 | bn | £ | 190.1 | bn | £ | 183.3 | bn | — | ||||||
Customer deposit stock balance(9) | £ | 153.5 | bn | £ | 143.9 | bn | £ | 129.0 | bn | — | ||||||
Investment and pensions annual premium income(10) | £ | 3.5 | bn | £ | 3.5 | bn | £ | 2.2 | bn | £ | 2.8 | bn | ||||
Banking: | ||||||||||||||||
Bank account openings (000’s) | 1,005 | 1,093 | 606 | 904 | ||||||||||||
Market share — Bank account stock balance | 9.1 | % | 8.9 | % | 8.5 | % | — | |||||||||
Credit card sales(8)(000’s) | 773 | 387 | 395 | 475 | ||||||||||||
(1) | Balances at 31 December 2008 reflect the transfer of Alliance & Leicester plc to the Company with effect from 10 October 2008. 2008 business volumes do not reflect the Transfer. | |
(2) | Includes Alliance & Leicester pre-acquisition business volumes for the year ended 31 December 2008 in order to provide more meaningful comparatives. | |
(3) | Includes Social Housing loans. | |
(4) | Mortgage market shares are estimated internally by reference to data on the size of the UK mortgage market produced by the Bank of England. | |
(5) | Includes UPLs, overdrafts and cahoot and excludes consumer finance and Santander Cards credit cards. | |
(6) | Comprises Retail Banking, Corporate Banking and Global Banking & Markets customer deposits. | |
(7) | Includes Bradford & Bingley savings business net deposit flows from its acquisition in September 2008. | |
(8) | Includes flows (from 1 November 2010) and stock (at 31 December 2010) for the Santander Cards and Santander Consumer businesses acquired in 2010. | |
(9) | Includes Bradford & Bingley deposits acquired in September 2008 and subsequent net inflows. | |
(10) | Annualised equivalent of monthly premiums generated from new business during the year. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net interest income | 3,237 | 2,886 | 2,253 | |||||||||
Non-interest income | 627 | 720 | 848 | |||||||||
Total trading income | 3,864 | 3,606 | 3,101 | |||||||||
Total trading expenses | (1,649 | ) | (1,613 | ) | (1,551 | ) | ||||||
Impairment losses on loans and advances | (615 | ) | (714 | ) | (442 | ) | ||||||
Provisions for other liabilities and charges | 1 | — | — | |||||||||
Trading profit before tax | 1,601 | 1,279 | 1,108 | |||||||||
Adjust for: | ||||||||||||
- A&L pre-acquisition trading basis results | — | — | (254 | ) | ||||||||
- Reorganisation and other costs | (155 | ) | (146 | ) | (121 | ) | ||||||
- Hedging and other variances | (31 | ) | (17 | ) | (8 | ) | ||||||
- Capital and other charges | (99 | ) | (60 | ) | (67 | ) | ||||||
Statutory profit before tax | 1,316 | 1,056 | 658 | |||||||||
2010 | 2009 | 2008 | ||||||||||
Segment balances | £bn | £bn | £bn | |||||||||
Risk weighted assets | 40.0 | 34.6 | 42.1 | |||||||||
Customer assets | 177.8 | 167.7 | 161.9 | |||||||||
Customer deposits | 131.9 | 125.1 | 119.5 | |||||||||
> | Trading net interest income increased by £351m to £3,237m (2009: £2,886m), largely driven by balanced growth in customer lending and deposits across a mix of products combined with effective margin management. Customer assets increased by £10.1bn or 6% (which includes £5.7bn or 3% from the Santander Cards and Santander Consumer businesses, acquired in October and November 2010, respectively). Customer liabilities increased by £6.8bn or 5%. |
> | Trading non-interest income decreased by £93m to £627m (2009: £720m), largely due to lower investment fees as a result of the mix of sales shifting away from structured investment products towards managed funds (which will yield a trail income in future periods rather than an upfront commission). In addition, unsecured lending-related fees reduced, driven by lower volumes (which decreased by 20%). Mortgage fees were adversely affected by lower redemption volumes in line with the market and banking fees were affected by the introduction of the Santander Zero account. Non-interest income included £8m relating to the Santander Cards and Santander Consumer businesses which were acquired in October and November 2010, respectively. |
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> | Trading expenses increased by £36m to £1,649m (2009: £1,613m). The increase was largely due to the inclusion of £37m of expenses relating to the Santander Cards and Santander Consumer businesses which were acquired in October and November 2010, respectively. In addition, depreciation and amortisation increased by £32m as a result of the continued investment in IT systems in Santander UK in 2009 and 2010 including the integration of Alliance & Leicester and the Bradford & Bingley savings business. |
> | Trading impairment losses on loans and advances decreased by £99m to £615m (2009: £714m), with the most significant reduction relating to mortgages. This improving performance in difficult economic conditions has been delivered as a result of a high quality mortgage book, effective collection handling and reductions in arrears levels, particularly in the second half of 2010. |
> | Trading net interest income increased by £633m to £2,886m (2008: £2,253m) largely driven by balanced growth in customer lending and deposits across a mix of products combined with effective margin management, as well as a 17% growth in bank account liability balances and hedging strategies which helped to offset the impact of lower interest rates. |
> | Trading non-interest income decreased by £128m to £720m (2008: £848m), largely due to lower fees on unsecured lending products, as part of our stated strategy to reduce unsecured lending exposures, as well as lower fees from current accounts due to repricing. In addition, mortgage fees were adversely impacted by a reduction in the volume of mortgage redemptions given decreased activity in the market as a result of declining house prices and lower levels of supply. | |
> | Trading expenses increased by £62m to £1,613m (2008: £1,551m). £98m of the increase was due to costs related to Bradford & Bingley’s savings business since its acquisition in September 2008. The remaining decrease of £36m was largely due to the removal of duplications across back office and support functions due to the integration of Alliance & Leicester and Bradford & Bingley’s savings business. | |
> | Trading impairment losses on loans and advances increased by £272m to £714m (2008: £442m) and were distributed across all products, with the largest increase relating to mortgages as the impact of falling house prices and the lagging effect of unemployment, as expected, started to emerge. Most of the impact came through in the first half of the year, with the second half performance stabilising and in some areas improving. |
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> | At 31 December 2010, risk weighted assets of £40.0bn were 16% higher than the previous year reflecting the growth in assets described below. Excluding the impact of acquisitions, the decrease in the year was broadly flat. | |
> | At 31 December 2010, customer assets of £177.8bn were 6% higher than the previous year reflecting the growth in mortgage balances and acquired businesses. Of the increase, £5.7bn or 3% related to the Santander Cards and Santander Consumer businesses which were acquired in October and November 2010, respectively. The remaining growth was driven by mortgages (balances up 3%) underpinned by strong gross mortgage lending and success in retention activities. Partly offsetting this growth was the continued reduction in unsecured personal lending (‘UPL’) balances, which decreased by 19%, where the focus continued to be on lending to existing customers with proven repayment track records. | |
> | At 31 December 2010, customer deposits of £131.9bn were 5% higher than the previous year, a strong performance given the increasingly competitive market. The ISA season in 2010 was particularly successful, while a focus on bank accounts, and specifically higher value, primary accounts, resulted in a 9% increase in personal bank account liabilities. In addition, private banking customer deposits increased by 22% with strong performance in our onshore and offshore operations. |
> | At 31 December 2009, risk weighted assets of £34.6bn were 18% lower than the previous year reflecting enhancements to Retail IRB models. | |
> | At 31 December 2009, customer assets of £167.7bn were 4% higher than the previous year reflecting the growth in mortgage balances. This was partly offset by the continuing reduction in UPL balances, which decreased by 26%. | |
> | At 31 December 2009, customer deposits increased by 5% to £125.1bn. Net inflows benefitted from the alignment of product marketing and pricing strategies across the brands, including the introduction of Abbey products, such as fixed rate bonds and Individual Savings Accounts, and promotional activity in Bradford & Bingley branches. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net interest income | 212 | 212 | 149 | |||||||||
Non-interest income | 129 | 128 | 240 | |||||||||
Total trading income | 341 | 340 | 389 | |||||||||
Total trading expenses | (151 | ) | (181 | ) | (239 | ) | ||||||
Impairment losses on loans and advances | (97 | ) | (31 | ) | (44 | ) | ||||||
Trading profit before tax | 93 | 128 | 106 | |||||||||
Adjust for: | ||||||||||||
– A&L pre-acquisition trading basis results | — | — | (2 | ) | ||||||||
– Capital and other charges | (21 | ) | (30 | ) | (14 | ) | ||||||
Statutory profit before tax | 72 | 98 | 90 | |||||||||
2010 | 2009 | 2008 | ||||||||||
Segment balances | £bn | £bn | £bn | |||||||||
Risk weighted assets | 19.3 | 17.0 | 17.4 | |||||||||
Total customer assets | 22.5 | 21.2 | 20.6 | |||||||||
Core customer assets(1) | 18.7 | 16.3 | 14.4 | |||||||||
Customer deposits | 16.4 | 14.4 | 7.1 | |||||||||
Total SMEs(2) | 8.5 | 6.7 | 5.8 | |||||||||
(1) | Excludes non-core portfolios | |
(2) | Includes commercial mortgages managed within Retail Banking, which form part of the SME market. |
> | Trading net interest income of £212m was in line with the prior year. Net interest income increased as a result of growth in customer loans and deposits to the UK SME market through our network of 25 Corporate Business Centres (SME lending balances increased by 26% and total deposit balances increased by 15%). Net interest margins on loans continued to improve during 2010 as market pricing better reflected incremental higher funding and liquidity costs applied to the business unit. This was offset by a reduced contribution of £20m from the non-core portfolio as Corporate Banking continued to reduce the balances of non-core assets. | |
> | Trading non-interest income of £129m was broadly in line with prior year. Asset growth in the core business and strong sales of Global Banking & Markets products resulted in higher fees. However, this was offset by lower fees in non-core businesses as Corporate Banking continued to reduce balances in the non-core portfolio. | |
> | Trading expenses decreased by £30m to £151m (2009: £181m). The decrease was due to operational efficiencies arising from the integration of Alliance & Leicester, partially offset by investment in the Corporate Business Centre network. The investment included hiring an additional 136 staff over the last twelve months and an increase of 70% in the floor space of the Corporate Business Centre network. | |
> | Trading impairment losses on loans and advances increased by £66m to £97m (2009: £31m). The increase reflected growth and maturity in asset balances over the last two years and some deterioration arising from market conditions. The non-core Corporate Banking portfolios continued to perform in line with our original expectations, with existing impairment loss allowances expected to be sufficient to cover losses inherent in the portfolios. |
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> | Trading net interest income improved by £63m to £212m (2008: £149m). This increase reflected the impact of the sale of the Porterbrook businesses early in December 2008 (net interest income in 2008 included interest expense of £76m incurred by the Porterbrook businesses, whereas its associated leasing income and depreciation were classified as non-interest income). In addition, 2009 reflected some benefit from higher asset margins as new business lending and pricing was altered to reflect the market environment in terms of increased funding costs. Net interest income also improved as a result of robust growth of both assets and liabilities. However, these were offset by the adverse impact of changes to transfer pricing arrangements to reflect higher costs of new term funding and liquid asset balances. | |
> | Trading non-interest income decreased by £112m to £128m (2008: £240m), reflecting the inclusion in non-interest income in 2008 of the leasing income and depreciation relating to the Porterbrook businesses which were sold early in December 2008. In addition, new business lending generated increases in both fees and cross-selling of Global Banking & Markets products. | |
> | Trading expenses decreased by £58m to £181m (2008: £239m). The decrease was due to operational efficiencies arising from the integration of Alliance & Leicester, and the sale of the Porterbrook business. | |
> | Trading impairment losses on loans and advances decreased by £13m to £31m (2008: £44m). The low level of impairment losses was a reflection of prudent lending criteria on the relatively immature growth businesses and portfolios (such as SME lending within Corporate Banking). It also reflected the impairment loss allowances made on acquisition relating to the non-core portfolios (including aviation and shipping) to reflect expected losses in those portfolios as required under acquisition accounting. The decrease of £13m also reflected the non-recurrence in 2009 of Corporate Banking impairment loss allowance releases in 2008 relating to non-core businesses offset by some deterioration arising from market conditions. |
> | At 31 December 2010, risk weighted assets of £19.3bn were 14% higher than the previous year reflecting the growth in assets described below. | |
> | At 31 December 2010, core customer assets of £18.7bn were 15% higher than the previous year driven by a strong performance via our 25 Corporate Business Centres and a broader product offering. We continued to build our growing SME franchise, with lending to this group totalling £8.5bn (including £2.2bn recorded in Retail Banking), an increase of 26% compared to 31 December 2009. | |
> | Customer deposits increased 14% to £16.4bn compared to 31 December 2009 despite increased competition in this market, with the net flows achieved while improving the average term. |
> | At 31 December 2009, risk weighted assets of £17.0bn were 2% lower than the previous year reflecting a reduction in non-core assets. | |
> | At 31 December 2009, core customer assets of £16.3bn were 13% higher than the previous year driven by a strong performance via our 25 Corporate Business Centres. Lending to SMEs amounted to £6.7bn (including £2.2bn recorded in Retail Banking), an increase of more than 16% compared to 31 December 2008. | |
> | Customer deposits more than doubled to £14.4bn compared to 31 December 2008 driven by strong levels of investment by customers seeking to invest with banks with strong credit ratings. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net interest income | 6 | 7 | 11 | |||||||||
Non-interest income | 412 | 382 | 327 | |||||||||
Total trading income | 418 | 389 | 338 | |||||||||
Total trading expenses | (130 | ) | (104 | ) | (107 | ) | ||||||
Trading profit before tax | 288 | 285 | 231 | |||||||||
Adjust for: | ||||||||||||
- A&L pre-acquisition trading basis results | — | — | (10 | ) | ||||||||
Statutory profit before tax | 288 | 285 | 221 | |||||||||
2010 | 2009 | 2008 | ||||||||||
Segment balances | £bn | £bn | £bn | |||||||||
Risk weighted assets | 7.1 | 6.8 | 7.8 | |||||||||
Customer assets | 1.8 | 1.1 | 0.9 | |||||||||
Total assets | 50.0 | 44.8 | 44.5 | |||||||||
Customer deposits | 5.1 | 4.4 | 2.4 | |||||||||
> | Trading net interest income decreased by £1m to £6m (2009: £7m) due to increased funding costs offsetting customer asset growth. | |
> | Trading non-interest income increased by £30m to £412m (2009: £382m) reflecting the strong performance of underlying customer revenue streams and a number of non-recurring releases of fair value adjustments following the successful de-risking of underlying positions. These benefits were partly offset by a less favourable trading environment resulting from lower spread volatility. | |
> | Trading expenses increased by £26m to £130m (2009: £104m), reflecting ongoing investment in growth initiatives relating to new products, markets and customer segments. There was a 38% increase in headcount across the customer transaction businesses, including the new Gilt Edge Market Making desk. |
> | Trading net interest income decreased by £4m to £7m (2008: £11m) reflecting a reduction in loan balances during the year. | |
> | Trading non-interest income increased by £55m to £382m (2008: £327m) reflecting strong performances in the equity business (linked to sales of retail products through the branch network) and short term markets business, which benefited from a favourable trading environment available from wider spreads in an illiquid market. | |
> | Trading expenses of £104m were slightly lower than the previous year (2008: £107m) reflecting strong expense management whilst increasing income. |
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> | At 31 December 2010, risk-weighted assets of £7.1bn were 4% higher than the previous year reflecting the increased asset balances set out below. | |
> | Total assets increased by 12% to £50.0bn compared to 31 December 2009, primarily reflecting increases in the fair values of derivatives, as well as increased customer business in the year. | |
> | Customer assets increased by 64% to £1.8bn compared to 31 December 2009, primarily due to customer drawings on revolving credit facilities towards the end of the year. | |
> | Customer deposits increased 16% to £5.1bn compared to 31 December 2009. Net flows for the year were positive, with an improvement in quality and term. |
> | At 31 December 2009, risk-weighted assets of £6.8bn were 13% lower than the previous year reflecting a reduction in market risk positions. | |
> | Total assets increased by 1% to £44.8bn compared to 31 December 2008, reflecting increased secured lending in the repo market as a result of increased liquidity in the Group. | |
> | Customer assets decreased 22% to £1.1bn compared to 31 December 2008, reflecting lower customer drawings on revolving credit facilities. | |
> | Customer deposits increased by 84% to £4.4bn compared to 31 December 2008 reflecting strong levels of reinvestment by customers, as investors sought to invest in banks with strong credit ratings. |
36
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net interest income/(expense) | 302 | 236 | (24 | ) | ||||||||
Non-interest (expense)/income | (55 | ) | 87 | 90 | ||||||||
Total trading income | 247 | 323 | 66 | |||||||||
Total trading expenses | (48 | ) | (46 | ) | (43 | ) | ||||||
Impairment losses on loans and advances | (40 | ) | (57 | ) | (3 | ) | ||||||
Trading profit before tax | 159 | 220 | 20 | |||||||||
Adjust for: | ||||||||||||
- A&L pre-acquisition trading basis results | — | — | 102 | |||||||||
- Reorganisation and other costs | 40 | (40 | ) | (42 | ) | |||||||
- Profit on part sale and revaluation of subsidiaries | 126 | — | 40 | |||||||||
- Hedging and other variances | 4 | (19 | ) | (76 | ) | |||||||
- Capital and other charges | 120 | 90 | 81 | |||||||||
Statutory profit before tax | 449 | 251 | 125 | |||||||||
> | Trading net interest income increased by £66m to £302m (2009: £236m). The income reflected the benefit of higher historic medium-term interest rates being earned on capital, and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. This was partially offset by a decrease in net interest income from the James Hay business which was sold in March 2010. In addition, net interest income from the run-down Treasury asset portfolio decreased due to the continued de-leveraging process, with balances reduced by 46% in the year, to £5.1bn at the year end. | |
> | Trading non-interest (expense)/income decreased by £142m to £(55)m (2009: £87m), principally due to 2009 including certain one-off benefits not repeated in 2010 (including profits earned on the buy-back of securitisation debt in 2009) and higher losses on disposals of assets in the Treasury asset portfolio which is being run down. In addition, there was a decrease in non interest income from the James Hay business which was sold in March 2010. | |
> | Trading expenses increased slightly by £2m to £48m (2009: £46m). Non-recurring expenditure was incurred relating to the rebranding of Abbey and the Bradford & Bingley savings business as Santander in January 2010. In addition, higher expenses resulted from the process of transferring the business of Alliance & Leicester plc to Santander UK plc under Part VII of the Financial Services and Markets Act 2000 in May 2010. However, these additional expenses were offset in part by savings due to the sale of the James Hay business in March 2010. | |
> | Trading impairment losses on loans and advances decreased by £17m to £40m (2009: £57m). The loss of £40m in 2010 was due to losses on disposals of assets in the Treasury asset portfolio. |
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> | Trading net interest income/(expense) increased by £260m to £236m (2008: £(24)m), reflecting the benefit of higher historic medium-term interest rates being earned on capital and the impact of the application of marginal medium-term funding rates to new business and an increasing proportion of the back book to the extent that there has been customer repricing activity by the business. | |
> | Trading non-interest income decreased by £3m to £87m (2008: £90m), principally due to lower gains in 2009 on the buy-back of debt securities compared to 2008. | |
> | Trading expenses increased by £3m to £46m (2008: £43m) reflecting a slight increase in central costs following the Transfer of Alliance & Leicester and the acquisition of the Bradford & Bingley savings business. | |
> | Trading impairment losses on loans and advances increased by £54m to £57m (2008: £3m) due to the inclusion of the Treasury asset portfolio. These losses were offset by the income on the portfolio, which was classified in net interest income. |
38
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
— | — | 164 | ||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Reorganisation and customer remediation costs | 155 | 146 | 121 | |||||||||
Impairment losses on loans and advances | (40 | ) | 40 | 42 | ||||||||
115 | 186 | 163 | ||||||||||
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
126 | — | 40 | ||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
27 | 36 | 84 | ||||||||||
40
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41
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> | Summarised consolidated balance sheet— A summarised consolidated balance sheet is presented with commentary on key movements. A more detailed consolidated balance sheet is contained in the Consolidated Financial Statements. |
> | Securities— The Group’s strategies and reasons for holding securities are described on pages 48 and 49, as well as: |
> | Analysis by type of issuer,as well as a maturity analysis for available-for-sale debt securities | ||
> | Significant exposuresexceeding 10% of the Group’s shareholders’ funds. |
> | Loans and advances to banks— These assets are described on pages 49 and 50, consisting of: |
> | Geographical analysisfurther analysed between UK and non-UK. | ||
> | Maturity analysisfurther analysed geographically and by interest rate sensitivity. |
> | Loans and advances to customers— These assets are described on pages 50 to 54, consisting of: |
> | Geographical analysisbetween UK and non-UK, further analysed by product. | ||
> | Maturity analysisfurther analysed geographically, by product and by interest rate sensitivity. | ||
> | Impairment loss allowances on loans and advances to customers— cross references are provided to detailed disclosures about the Group’s policy and analyses of impairment loss allowances. | ||
> | Risk elements in the loan portfolio— including potential problem loans and cross border outstandings. | ||
> | Country risk exposuresanalysed between central and local governments, government guaranteed, bank and financial institutions, retail and corporate customers. |
> | Derivative assets and liabilities— The Group’s derivative positions are summarised on page 54. Cross references are provided to other disclosures about the Group’s strategies and reasons for entering into derivative transactions and further detailed analysis of derivative notional amounts and assets and liabilities by type of contract. | |
> | Tangible fixed assets— A summary of the Group’s capital expenditure during the year, together with details of the Group’s property interests and principal sites are described on pages 54 and 55. | |
> | Deposits by banks— These liabilities are summarised on page 55, including average balances during the year, with further analysis geographically. | |
> | Deposits by customers— These liabilities are summarised on pages 55 and 56, including average balances during the year, with further analyses geographically and by customer type. | |
> | Short-term borrowings— These liabilities are summarised on pages 56 and 57, including average balances, maximum balances during the year and related average interest rates. | |
> | Debt securities in issue— The liabilities are summarised on page 57, including cross references to detailed descriptions of the major issuance programmes. | |
> | Retirement benefit obligations— The Group’s pension deficit is set out on page 57. Cross references are provided to other disclosures about the Group’s retirement benefit obligations. | |
> | Contractual obligations— A contractual maturity analysis of the Group’s obligations is set out on page 58. | |
> | Off-balance sheet arrangements— The Group’s off-balance sheet arrangements, including guarantees, commitments, contingencies, and exposures to off-balance sheet entities sponsored by the Group are described on pages 58 and 59. | |
> | Capital management and resources— The Group’s approach to capital management and resources is set out on pages 59 to 61, as well as Pillar 3 disclosures, capital ratios, regulatory capital resources and requirements. | |
> | Funding and Liquidity— These arrangements are described on pages 61 to 64, including a summary of the sources and uses, together with commentary on the Group’s cash flows for the past three years. | |
> | Interest rate sensitivity— An analysis of changes in the Group’s interest income, interest expense and net interest income between changes in volume and changes in rate is presented on page 65. | |
> | Average balance sheets— As period-end statements may not be representative of the Group’s activity throughout the year, average balance sheets for the Group are presented on page 66. The average balance sheets summarise the significant categories of assets and liabilities, together with average interest rates. |
42
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 26,502 | 4,163 | 4,017 | |||||||||
Trading assets | 35,461 | 33,290 | 26,264 | |||||||||
Derivative financial instruments | 24,377 | 22,827 | 35,125 | |||||||||
Financial assets designated at fair value | 6,777 | 12,358 | 11,377 | |||||||||
Loans and advances to banks | 3,852 | 9,151 | 16,001 | |||||||||
Loans and advances to customers | 195,132 | 186,804 | 180,176 | |||||||||
Available for sale securities | 175 | 797 | 2,663 | |||||||||
Loans and receivables securities | 3,610 | 9,898 | 14,107 | |||||||||
Macro hedge of interest rate risk | 1,091 | 1,127 | 2,188 | |||||||||
Property, plant and equipment | 1,705 | 1,250 | 1,202 | |||||||||
Tax, intangibles and other assets | 4,178 | 3,626 | 4,190 | |||||||||
Total assets | 302,860 | 285,291 | 297,310 | |||||||||
Liabilities | ||||||||||||
Deposits by banks | 7,784 | 5,811 | 14,488 | |||||||||
Deposits by customers | 152,643 | 143,893 | 130,245 | |||||||||
Derivative financial instruments | 22,405 | 18,963 | 27,810 | |||||||||
Trading liabilities | 42,827 | 46,152 | 40,738 | |||||||||
Financial liabilities designated at fair value | 3,687 | 4,423 | 5,673 | |||||||||
Debt securities in issue | 51,783 | 47,758 | 58,511 | |||||||||
Subordinated liabilities | 6,372 | 6,949 | 8,863 | |||||||||
Retirement benefit obligations | 173 | 1,070 | 813 | |||||||||
Tax, other liabilities and provisions | 2,912 | 3,050 | 3,472 | |||||||||
Total liabilities | 290,586 | 278,069 | 290,613 | |||||||||
Equity | ||||||||||||
Total shareholders’ equity | 12,274 | 6,506 | 5,986 | |||||||||
Non-controlling interests | — | 716 | 711 | |||||||||
Total equity | 12,274 | 7,222 | 6,697 | |||||||||
Total liabilities and equity | 302,860 | 285,291 | 297,310 | |||||||||
43
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44
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45
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46
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Balance sheet business review section | ||||||||||||||||||||||||||||||||
Loans and | Loans and | Tangible | ||||||||||||||||||||||||||||||
advances | advances to | fixed | Balance | |||||||||||||||||||||||||||||
Balance sheet line item and note | Note | to banks | customers | Securities | Derivatives | assets | Other | sheet total | ||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and balances at central banks | 12 | — | — | — | — | — | 26,502 | 26,502 | ||||||||||||||||||||||||
Trading assets | 13 | 8,281 | 8,659 | 18,521 | — | — | — | 35,461 | ||||||||||||||||||||||||
Derivative financial instruments | 14 | — | — | — | 24,377 | — | — | 24,377 | ||||||||||||||||||||||||
Financial assets designated at fair value | 15 | 11 | 5,468 | 1,298 | — | — | — | 6,777 | ||||||||||||||||||||||||
Loans and advances to banks | 16 | 3,852 | — | — | — | — | — | 3,852 | ||||||||||||||||||||||||
Loans and advances to customers | 17 | — | 195,132 | — | — | — | — | 195,132 | ||||||||||||||||||||||||
Available for sale securities | 21 | — | — | 175 | — | — | — | 175 | ||||||||||||||||||||||||
Loans and receivables securities | 22 | 1,535 | 2,075 | — | — | — | — | 3,610 | ||||||||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | — | 1,091 | 1,091 | |||||||||||||||||||||||||
Property, plant and equipment | 26 | — | — | — | — | 1,705 | — | 1,705 | ||||||||||||||||||||||||
Tax, intangibles and other assets | — | — | — | — | — | 4,178 | 4,178 | |||||||||||||||||||||||||
Total assets | 13,679 | 211,334 | 19,994 | 24,377 | 1,705 | 31,771 | 302,860 | |||||||||||||||||||||||||
Debt | Retirement | |||||||||||||||||||||||||||||||
Deposits by | Deposits by | securities | benefit | Balance | ||||||||||||||||||||||||||||
banks | customers | in issue | Derivatives | obligations | Other | sheet total | ||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | 29 | 7,784 | — | — | — | — | — | 7,784 | ||||||||||||||||||||||||
Deposits by customers | 30 | — | 152,643 | — | — | — | — | 152,643 | ||||||||||||||||||||||||
Derivative financial instruments | 14 | — | — | — | 22,405 | — | — | 22,405 | ||||||||||||||||||||||||
Trading liabilities | 31 | 25,738 | 15,971 | 1,118 | — | — | — | 42,827 | ||||||||||||||||||||||||
Financial liabilities designated at fair value | 32 | — | 5 | 3,682 | — | — | — | 3,687 | ||||||||||||||||||||||||
Debt securities in issue | 33 | — | — | 51,783 | — | — | — | 51,783 | ||||||||||||||||||||||||
Subordinated liabilities | 34 | — | — | 6,372 | — | — | — | 6,372 | ||||||||||||||||||||||||
Retirement benefit obligations | 37 | — | — | — | — | 173 | — | 173 | ||||||||||||||||||||||||
Tax, other liabilities and provisions | — | — | — | — | — | 2,912 | 2,912 | |||||||||||||||||||||||||
Total liabilities | 33,522 | 168,619 | 62,955 | 22,405 | 173 | 2,912 | 290,586 | |||||||||||||||||||||||||
31 December 2009 | ||||||||||||||||||||||||||||||||
Balance sheet business review section | ||||||||||||||||||||||||||||||||
Loans and | Loans and | Tangible | ||||||||||||||||||||||||||||||
advances | advances to | fixed | Balance | |||||||||||||||||||||||||||||
Balance sheet line item and note | Note | to banks | customers | Securities | Derivatives | assets | Other | sheet total | ||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and balances at central banks | 12 | — | — | — | — | — | 4,163 | 4,163 | ||||||||||||||||||||||||
Trading assets | 13 | 6,791 | 9,089 | 17,410 | — | — | — | 33,290 | ||||||||||||||||||||||||
Derivative financial instruments | 14 | — | — | — | 22,827 | — | — | 22,827 | ||||||||||||||||||||||||
Financial assets designated at fair value | 15 | — | 6,379 | 5,979 | — | — | — | 12,358 | ||||||||||||||||||||||||
Loans and advances to banks | 16 | 9,151 | — | — | — | — | — | 9,151 | ||||||||||||||||||||||||
Loans and advances to customers | 17 | — | 186,804 | — | — | — | — | 186,804 | ||||||||||||||||||||||||
Available for sale securities | 21 | — | — | 797 | — | — | — | 797 | ||||||||||||||||||||||||
Loans and receivables securities | 22 | 5,751 | 4,147 | — | — | — | — | 9,898 | ||||||||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | — | 1,127 | 1,127 | |||||||||||||||||||||||||
Property, plant and equipment | 26 | — | — | — | — | 1,250 | — | 1,250 | ||||||||||||||||||||||||
Tax, intangibles and other assets | — | — | — | — | — | 3,626 | 3,626 | |||||||||||||||||||||||||
Total assets | 21,693 | 206,419 | 24,186 | 22,827 | 1,250 | 8,916 | 285,291 | |||||||||||||||||||||||||
Debt | Retirement | |||||||||||||||||||||||||||||||
Deposits by | Deposits by | securities | benefit | Balance | ||||||||||||||||||||||||||||
banks | customers | in issue | Derivatives | obligations | Other | sheet total | ||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | 29 | 5,811 | — | — | — | — | — | 5,811 | ||||||||||||||||||||||||
Deposits by customers | 30 | — | 143,893 | — | — | — | — | 143,893 | ||||||||||||||||||||||||
Derivative financial instruments | 14 | — | — | — | 18,963 | — | — | 18,963 | ||||||||||||||||||||||||
Trading liabilities | 31 | 40,824 | 4,115 | 1,213 | — | — | — | 46,152 | ||||||||||||||||||||||||
Financial liabilities designated at fair value | 32 | 45 | 12 | 4,366 | — | — | — | 4,423 | ||||||||||||||||||||||||
Debt securities in issue | 33 | — | — | 47,758 | — | — | — | 47,758 | ||||||||||||||||||||||||
Subordinated liabilities | 34 | — | — | 6,949 | — | — | — | 6,949 | ||||||||||||||||||||||||
Retirement benefit obligations | 37 | — | — | — | — | 1,070 | — | 1,070 | ||||||||||||||||||||||||
Tax, other liabilities and provisions | — | — | — | — | — | 3,050 | 3,050 | |||||||||||||||||||||||||
Total liabilities | 46,680 | 148,020 | 60,286 | 18,963 | 1,070 | 3,050 | 278,069 | |||||||||||||||||||||||||
47
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> | As part of its treasury trading and global corporates lending activities, which are managed by the Global Banking & Markets division; | |
> | For yield and liquidity purposes, including the Asset and Liability Management portfolio of Group mortgage-backed securities and other asset-backed securities, in Group Infrastructure; and | |
> | In the Treasury asset portfolio in Group Infrastructure which is being run down. Securities in this portfolio that are accounted for as loans and receivables (as described in Note 22 to the Consolidated Financial Statements) are disclosed in the Loans and advances to banks and Loans and advances to customers sections of this Balance Sheet Business Review. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Trading portfolio | ||||||||||||
Debt securities: | ||||||||||||
UK Government | 3,120 | 968 | 191 | |||||||||
US treasury and other US Government agencies and corporations | 130 | 628 | 574 | |||||||||
Other OECD governments | 3,380 | 1,273 | 2,374 | |||||||||
Bank and building society: | ||||||||||||
- Certificates of deposit — Government guaranteed | — | 205 | 3,119 | |||||||||
- Certificates of deposit — Other | 290 | 1,730 | 5,266 | |||||||||
Other issuers: | ||||||||||||
- Floating rate notes — Government guaranteed | 10,586 | 8,090 | 553 | |||||||||
- Floating rate notes | 315 | 3,038 | 4,724 | |||||||||
Ordinary shares and similar securities | 700 | 1,478 | 708 | |||||||||
18,521 | 17,410 | 17,509 | ||||||||||
Available for sale securities | ||||||||||||
Debt securities: | ||||||||||||
UK Government | 125 | 405 | 2,383 | |||||||||
Other issuers — other | — | 342 | 235 | |||||||||
Ordinary shares and similar securities | 50 | 50 | 45 | |||||||||
175 | 797 | 2,663 | ||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||
Debt securities: | ||||||||||||
Bank and building society certificates of deposit | — | 2,220 | — | |||||||||
Other issuers: | ||||||||||||
- Mortgage-backed securities | 859 | 574 | 2,510 | |||||||||
- Other asset-backed securities | 187 | 2,872 | 1,915 | |||||||||
- Other securities | 252 | 313 | 265 | |||||||||
1,298 | 5,979 | 4,690 | ||||||||||
Total | 19,994 | 24,186 | 24,862 | |||||||||
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In more than 3 | In more than 1 | In more than five | In more | |||||||||||||||||||||||||
On | In not more | months but not | year but not more | years but not more | than ten | |||||||||||||||||||||||
demand | than 3 months | more than 1 year | than 5 years | than ten years | years | Total | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
UK Government | — | — | 125 | — | — | — | 125 | |||||||||||||||||||||
Government Guaranteed | — | — | — | — | — | — | — | |||||||||||||||||||||
Weighted average yield for year % | — | — | 0.57 | — | — | — | 0.57 | |||||||||||||||||||||
Trading assets | Available-for-sale | Total | ||||||||||
£m | £m | £m | ||||||||||
UK Government and UK Government guaranteed | 13,011 | 125 | 13,136 | |||||||||
Schweizerische Nationalbank (National Bank of Switzerland) | 3,196 | — | 3,196 | |||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
UK | 13,561 | 21,606 | 28,859 | 12,066 | 11,943 | |||||||||||||||
Non-UK | 118 | 87 | 3,031 | 222 | 93 | |||||||||||||||
13,679 | 21,693 | 31,890 | 12,288 | 12,036 | ||||||||||||||||
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In more than | In more than | In more than | ||||||||||||||||||||||||||
In not more | three months | one year but | five years but | In more | ||||||||||||||||||||||||
On | than three | but not more | not more than | not more than | than ten | |||||||||||||||||||||||
demand | months | than one year | five years | ten years | years | Total | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
UK | 3,676 | 6,851 | 1,152 | 1,252 | 352 | 278 | 13,561 | |||||||||||||||||||||
Non-UK | 117 | 1 | — | — | — | — | 118 | |||||||||||||||||||||
Total | 3,793 | 6,852 | 1,152 | 1,252 | 352 | 278 | 13,679 | |||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||
- Fixed interest rate | 255 | 5,607 | 704 | 451 | 18 | 108 | 7,143 | |||||||||||||||||||||
- Variable interest rate | 2,097 | 303 | 448 | 801 | 334 | 170 | 4,153 | |||||||||||||||||||||
- Non interest-bearing | 1,441 | 942 | — | — | — | — | 2,383 | |||||||||||||||||||||
Total | 3,793 | 6,852 | 1,152 | 1,252 | 352 | 278 | 13,679 | |||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
UK | ||||||||||||||||||||
Advances secured on residential property | 166,065 | 160,457 | 159,168 | 110,857 | 102,096 | |||||||||||||||
Corporate loans | 21,796 | 18,886 | 13,181 | 1,247 | 666 | |||||||||||||||
Finance leases | 2,653 | 1,602 | 1,792 | — | 1 | |||||||||||||||
Other secured advances | 3,941 | 4,079 | 4,206 | 2,960 | 2,305 | |||||||||||||||
Other unsecured advances | 7,734 | 5,249 | 6,745 | 3,263 | 4,104 | |||||||||||||||
Purchase and resale agreements | 8,641 | 8,827 | 1,310 | 3,711 | 5,427 | |||||||||||||||
Loans and receivables securities | 2,075 | 4,147 | 5,663 | — | — | |||||||||||||||
Amounts due from fellow group subsidiaries | 57 | 4,457 | 2,652 | 55 | — | |||||||||||||||
Total UK | 212,962 | 207,704 | 194,717 | 122,093 | 114,599 | |||||||||||||||
Non-UK | ||||||||||||||||||||
Advances secured on residential property | 8 | 9 | 12 | 13 | 19 | |||||||||||||||
Corporate loans | — | 2 | 103 | — | — | |||||||||||||||
Other secured advances | 1 | 2 | 3 | 2 | — | |||||||||||||||
Other unsecured advances | — | 1 | 2 | 2 | 35 | |||||||||||||||
Purchase and resale agreements | 18 | — | — | 13,544 | 14,375 | |||||||||||||||
Total non-UK | 27 | 14 | 120 | 13,561 | 14,429 | |||||||||||||||
Total | 212,989 | 207,718 | 194,837 | 135,654 | 129,028 | |||||||||||||||
Less: impairment loss allowances | (1,655 | ) | (1,299 | ) | (1,001 | ) | (551 | ) | (536 | ) | ||||||||||
Total, net of impairment loss allowances | 211,334 | 206,419 | 193,836 | 135,103 | 128,492 | |||||||||||||||
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In not | In more than | In more than | In more than | |||||||||||||||||||||||||
more than | three months | one year but | five years but | In more | ||||||||||||||||||||||||
On | three | but not more | not more than | not more than | than ten | |||||||||||||||||||||||
demand | months | than one year | five years | ten years | years | Total | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
UK | ||||||||||||||||||||||||||||
Advances secured on residential property | 8 | 1,145 | 3,319 | 18,373 | 22,558 | 120,662 | 166,065 | |||||||||||||||||||||
Corporate loans | 269 | 3,464 | 1,198 | 8,433 | 3,605 | 4,827 | 21,796 | |||||||||||||||||||||
Finance leases | — | 203 | 419 | 1,469 | 216 | 346 | 2,653 | |||||||||||||||||||||
Other secured advances | 426 | 90 | 82 | 443 | 545 | 2,355 | 3,941 | |||||||||||||||||||||
Other unsecured advances | 471 | 877 | 1,874 | 3,852 | 174 | 486 | 7,734 | |||||||||||||||||||||
Purchase and resale agreements | — | 8,641 | — | — | — | — | 8,641 | |||||||||||||||||||||
Loans and receivables securities | 58 | 54 | 9 | 235 | 372 | 1,347 | 2,075 | |||||||||||||||||||||
Amounts due from fellow group subsidiaries | — | 57 | — | — | — | — | 57 | |||||||||||||||||||||
Total UK | 1,232 | 14,531 | 6,901 | 32,805 | 27,470 | 130,023 | 212,962 | |||||||||||||||||||||
Non-UK | ||||||||||||||||||||||||||||
Advances secured on residential property | — | — | — | — | 3 | 5 | 8 | |||||||||||||||||||||
Corporate loans | — | — | — | — | — | — | — | |||||||||||||||||||||
Other secured advances | — | — | — | — | — | 1 | 1 | |||||||||||||||||||||
Other unsecured advances | — | — | — | — | — | — | — | |||||||||||||||||||||
Purchase and resale agreements | — | 2 | — | 16 | — | — | 18 | |||||||||||||||||||||
Total non-UK | — | 2 | — | 16 | 3 | 6 | 27 | |||||||||||||||||||||
Total | 1,232 | 14,533 | 6,901 | 32,821 | 27,473 | 130,029 | 212,989 | |||||||||||||||||||||
Of which: | ||||||||||||||||||||||||||||
- Fixed interest rate | 42 | 9,964 | 3,315 | 11,973 | 10,573 | 52,216 | 88,083 | |||||||||||||||||||||
- Variable interest rate | 1,190 | 4,569 | 3,586 | 20,848 | 16,900 | 77,813 | 124,906 | |||||||||||||||||||||
Total | 1,232 | 14,533 | 6,901 | 32,821 | 27,473 | 130,029 | 212,989 | |||||||||||||||||||||
51
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> | Impaired loans; | |
> | Unimpaired loans contractually past due 90 days or more as to interest or principal; | |
> | Troubled debt restructurings; | |
> | Potential problem loans and advances; and | |
> | Cross border outstandings. |
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Central and local | Government | Banks and financial | ||||||||||||||||||||||
governments(1) | guaranteed | institutions | Retail | Corporate | Total | |||||||||||||||||||
£bn | £bn | £bn | £bn | £bn | £bn | |||||||||||||||||||
UK | 23.7 | 9.8 | 28.8 | 191.4 | 33.6 | 287.3 | ||||||||||||||||||
US | 5.2 | — | 7.8 | 0.1 | 1.5 | 14.6 | ||||||||||||||||||
Switzerland | 3.2 | — | 1.9 | — | — | 5.1 | ||||||||||||||||||
Germany | — | 0.1 | 2.3 | — | 0.2 | 2.6 | ||||||||||||||||||
France | — | 0.2 | 1.8 | — | 0.3 | 2.3 | ||||||||||||||||||
Spain | 0.2 | — | 0.5 | 0.1 | 0.4 | 1.2 | ||||||||||||||||||
Jersey | — | — | — | — | 1.1 | 1.1 | ||||||||||||||||||
Netherlands | — | — | 0.2 | — | 0.8 | 1.0 | ||||||||||||||||||
Australia | — | 0.1 | 0.1 | 0.1 | 0.5 | 0.8 | ||||||||||||||||||
Luxembourg | — | — | 0.2 | — | 0.5 | 0.7 | ||||||||||||||||||
Denmark | — | 0.4 | 0.1 | — | 0.1 | 0.6 | ||||||||||||||||||
Canada | — | — | 0.5 | — | 0.1 | 0.6 | ||||||||||||||||||
Isle of Man | — | — | — | 0.2 | 0.3 | 0.5 | ||||||||||||||||||
Ireland | — | — | 0.1 | — | 0.2 | 0.3 | ||||||||||||||||||
Guernsey | — | — | — | — | 0.3 | 0.3 | ||||||||||||||||||
Cayman Islands | — | — | — | — | 0.3 | 0.3 | ||||||||||||||||||
British Virgin Islands | — | — | — | — | 0.3 | 0.3 | ||||||||||||||||||
Italy | — | — | 0.2 | — | — | 0.2 | ||||||||||||||||||
Japan | — | — | 0.2 | — | — | 0.2 | ||||||||||||||||||
Portugal | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Austria | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Belgium | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Norway | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Finland | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Bermuda | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Singapore | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
All others, each under £50m | — | — | — | — | 0.2 | 0.2 | ||||||||||||||||||
32.3 | 10.6 | 45.1 | 191.9 | 41.0 | 320.9 | |||||||||||||||||||
31 December 2009 | ||||||||||||||||||||||||
Central and local | Government | Banks and financial | ||||||||||||||||||||||
governments(1) | guaranteed | institutions | Retail | Corporate | Total | |||||||||||||||||||
£bn | £bn | £bn | £bn | £bn | £bn | |||||||||||||||||||
UK | 4.6 | 7.8 | 34.6 | 165.3 | 31.6 | 243.9 | ||||||||||||||||||
US | 0.9 | — | 5.4 | 0.1 | 1.6 | 8.0 | ||||||||||||||||||
Germany | 0.3 | 0.1 | 2.8 | 0.1 | — | 3.3 | ||||||||||||||||||
Italy | — | — | 2.9 | — | 0.1 | 3.0 | ||||||||||||||||||
Spain | 0.3 | — | 1.4 | — | 0.6 | 2.3 | ||||||||||||||||||
France | — | 0.2 | 1.2 | — | 0.3 | 1.7 | ||||||||||||||||||
Ireland | — | — | 1.1 | 0.1 | 0.4 | 1.6 | ||||||||||||||||||
Guernsey | — | — | 0.6 | — | 0.7 | 1.3 | ||||||||||||||||||
Luxembourg | — | — | 0.5 | — | 0.5 | 1.0 | ||||||||||||||||||
Netherlands | 0.2 | — | 0.4 | — | 0.3 | 0.9 | ||||||||||||||||||
Australia | — | 0.1 | 0.4 | 0.1 | 0.3 | 0.9 | ||||||||||||||||||
Switzerland | — | — | 0.8 | — | — | 0.8 | ||||||||||||||||||
Denmark | — | 0.4 | 0.2 | — | 0.1 | 0.7 | ||||||||||||||||||
Austria | 0.3 | — | 0.2 | — | 0.1 | 0.6 | ||||||||||||||||||
Cayman Islands | — | — | 0.3 | — | 0.2 | 0.5 | ||||||||||||||||||
Norway | — | — | 0.3 | — | 0.1 | 0.4 | ||||||||||||||||||
Canada | — | — | 0.2 | — | 0.1 | 0.3 | ||||||||||||||||||
Jersey | — | — | 0.1 | — | 0.2 | 0.3 | ||||||||||||||||||
Portugal | 0.1 | — | 0.1 | — | — | 0.2 | ||||||||||||||||||
Isle of Man | — | — | — | 0.2 | — | 0.2 | ||||||||||||||||||
Greece | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Belgium | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Bermuda | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Marshall Islands | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Malaysia | — | — | 0.1 | — | — | 0.1 | ||||||||||||||||||
Gibraltar | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
Nigeria | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
All others, each under £50m | — | — | — | — | 0.1 | 0.1 | ||||||||||||||||||
6.7 | 8.6 | 53.7 | 165.9 | 37.8 | 272.7 | |||||||||||||||||||
(1) | Excludes the exposure on margin given with respect to the Bank of England’s Special Liquidity Scheme. |
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Banks and financial | ||||||||||||
institutions | Corporate | Total | ||||||||||
31 December 2010 | £bn | £bn | £bn | |||||||||
Spain | 2.7 | 0.1 | 2.8 | |||||||||
2.7 | 0.1 | 2.8 | ||||||||||
Banks and financial | ||||||||||||
institutions | Corporate | Total | ||||||||||
31 December 2009 | £bn | £bn | £bn | |||||||||
Spain | 7.9 | 0.9 | 8.8 | |||||||||
United Kingdom | 3.5 | 0.2 | 3.7 | |||||||||
Portugal | 1.4 | 2.0 | 3.4 | |||||||||
US | 1.0 | — | 1.0 | |||||||||
Brazil | 0.1 | — | 0.1 | |||||||||
13.9 | 3.1 | 17.0 | ||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
- held for trading | 21,951 | 21,472 | 31,713 | |||||||||
- held for fair value hedging | 2,426 | 1,355 | 3,412 | |||||||||
24,377 | 22,827 | 35,125 | ||||||||||
Liabilities | ||||||||||||
- held for trading | 20,390 | 16,775 | 25,420 | |||||||||
- held for fair value hedging | 2,015 | 2,188 | 2,390 | |||||||||
22,405 | 18,963 | 27,810 | ||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Property, plant and equipment | 1,705 | 1,250 | 1,202 | |||||||||
Capital expenditure incurred during the year | 759 | 343 | 197 | |||||||||
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Table of Contents
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Year-end balance(1) | 33,522 | 46,680 | 48,982 | |||||||||
Average balance(2) | 37,626 | 34,597 | 34,064 | |||||||||
Average interest rate(2) | 0.68 | % | 1.64 | % | 3.36 | % | ||||||
(1) | The year-end deposits by banks balance includes non-interest bearing items in the course of transmission of £1,274m (2009: £652m, 2008: £1,100m). | |
(2) | Calculated using monthly data. |
Average: year ended 31 December | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
UK | 36,087 | 30,842 | 31,661 | |||||||||
Non-UK | 1,539 | 3,755 | 2,403 | |||||||||
37,626 | 34,597 | 34,064 | ||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Year-end balance | 168,619 | 148,020 | 135,119 | |||||||||
Average balance(1) | 155,612 | 155,623 | 99,056 | |||||||||
Average interest rate(1) | 1.59 | % | 1.50 | % | 3.79 | % | ||||||
(1) | Calculated using monthly data. |
Average: year ended 31 December | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
UK | ||||||||||||
Retail demand deposits | 73,367 | 73,060 | 55,096 | |||||||||
Retail time deposits | 49,780 | 42,873 | 23,590 | |||||||||
Wholesale deposits | 24,002 | 32,587 | 15,026 | |||||||||
147,149 | 148,520 | 93,712 | ||||||||||
Non-UK | ||||||||||||
Retail demand deposits | 2,979 | 3,170 | 1,742 | |||||||||
Retail time deposits | 4,914 | 3,724 | 2,063 | |||||||||
Wholesale deposits | 570 | 209 | 1,539 | |||||||||
8,463 | 7,103 | 5,344 | ||||||||||
155,612 | 155,623 | 99,056 | ||||||||||
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Table of Contents
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Securities sold under repurchase agreements | ||||||||||||
- Year-end balance | 32,922 | 16,294 | 29,934 | |||||||||
- Year-end interest rate | 0.29 | % | 0.39 | % | 1.54 | % | ||||||
- Average balance(1) | 28,414 | 22,963 | 22,426 | |||||||||
- Average interest rate(1) | 0.64 | % | 0.54 | % | 2.69 | % | ||||||
- Maximum balance(1) | 32,922 | 29,816 | 29,934 | |||||||||
Commercial paper | ||||||||||||
- Year-end balance | 5,331 | 7,028 | 4,234 | |||||||||
- Year-end interest rate | 2.10 | % | 1.83 | % | 1.78 | % | ||||||
- Average balance(1) | 5,434 | 5,669 | 4,550 | |||||||||
- Average interest rate(1) | 1.52 | % | 1.64 | % | 3.35 | % | ||||||
- Maximum balance(1) | 6,703 | 7,506 | 6,405 | |||||||||
Borrowings from banks (Deposits by banks)(2) | ||||||||||||
- Year-end balance | 8,202 | 10,570 | 16,249 | |||||||||
- Year-end interest rate | 0.70 | % | 0.41 | % | 2.35 | % | ||||||
- Average balance(1) | 10,038 | 10,908 | 14.451 | |||||||||
- Average interest rate(1) | 0.51 | % | 0.72 | % | 3.27 | % | ||||||
- Maximum balance(1) | 12,211 | 12,739 | 21,517 | |||||||||
Negotiable certificates of deposit | ||||||||||||
- Year-end balance | 8,925 | 9,188 | 9,638 | |||||||||
- Year-end interest rate | 1.31 | % | 1.73 | % | 4.17 | % | ||||||
- Average balance(1) | 11,093 | 7,519 | 12,729 | |||||||||
- Average interest rate(1) | 1.41 | % | 2.69 | % | 4.9 | % | ||||||
- Maximum balance(1) | 14,694 | 9,188 | 15,807 | |||||||||
Other debt securities in issue | ||||||||||||
- Year-end balance | 3,595 | 5,185 | 2.785 | |||||||||
- Year-end interest rate | 1.64 | % | 2.21 | % | 4.70 | % | ||||||
- Average balance(1) | 6,023 | 4,133 | 3,655 | |||||||||
- Average interest rate(1) | 1.99 | % | 2.69 | % | 5.28 | % | ||||||
- Maximum balance(1) | 7,269 | 7,265 | 5,032 | |||||||||
(1) | Calculated using monthly data. | |
(2) | The year-end deposits by banks balance includes non-interest bearing items in the course of transmission of £1,274m (2009: £652m, 2008: £1,100m). |
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In more than three | In more than six | |||||||||||||||||||
Not more than | months but not more | months but not more | In more than | |||||||||||||||||
three months | than six months | than one year | one year | Total | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Certificates of deposit: | ||||||||||||||||||||
- UK | 567 | 317 | 288 | 10 | 1,182 | |||||||||||||||
- Non-UK | 5,879 | 1,162 | 685 | 17 | 7,743 | |||||||||||||||
Wholesale time deposits: | ||||||||||||||||||||
- UK | 1,437 | 13 | 50 | 178 | 1,678 | |||||||||||||||
7,883 | 1,492 | 1,023 | 205 | 10,603 | ||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
Note | £m | £m | £m | |||||||||||||
Trading liabilities | 31 | 1,118 | 1,213 | 1,775 | ||||||||||||
Financial liabilities designated at fair value | 32 | 3,682 | 4,366 | 5,268 | ||||||||||||
Debt securities in issue | 33 | 51,783 | 47,758 | 58,511 | ||||||||||||
Subordinated liabilities | 34 | 6,372 | 6,949 | 8,863 | ||||||||||||
62,955 | 60,286 | 74,417 | ||||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total net liabilities | 173 | 1,070 | 813 | |||||||||
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Table of Contents
Payments due by period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | Over 5 years | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Deposits by banks(1) (2) | 33,522 | 30,295 | 1,082 | 2,064 | 81 | |||||||||||||||
Deposits by customers — repos(1) | 11,112 | 11,112 | — | — | — | |||||||||||||||
Deposits by customers — other(2) | 157,507 | 141,037 | 11,167 | 4,795 | 508 | |||||||||||||||
Derivative financial instruments | 22,405 | 2,530 | 4,355 | 3,256 | 12,264 | |||||||||||||||
Debt securities in issue(3) | 56,583 | 19,055 | 3,673 | 5,577 | 28,278 | |||||||||||||||
Subordinated liabilities | 6,372 | 449 | — | — | 5,923 | |||||||||||||||
Retirement benefit obligations | 173 | 5 | 11 | 11 | 146 | |||||||||||||||
Operating lease obligations | 613 | 78 | 208 | 54 | 273 | |||||||||||||||
Purchase obligations | 713 | 315 | 183 | 123 | 92 | |||||||||||||||
Total | 289,000 | 204,876 | 20,679 | 15,880 | 47,565 | |||||||||||||||
(1) | Securities sold under repurchase agreements. | |
(2) | Includes deposits by banks and deposits by customers that are classified in the balance sheet as trading liabilities. | |
(3) | Includes debt securities in issue that are classified in the balance sheet as trading liabilities and financial liabilities designated at fair value. |
> | It has been normal in the UK to issue cheque guarantee cards to current account customers holding chequebooks, as historically retailers did not generally accept cheques without such form of guarantee. The guarantee was not automatic but depends on the retailer having sight of the cheque guarantee card at the time the purchase is made. The issuing bank is liable to honour these cheques even where the customer does not have sufficient funds in his or her account. The issuing bank’s guarantee liability is in theory the number of cheques written and deposited with retailers multiplied by the amount guaranteed per cheque, which can be between £50 and £100. In practice most customers will only write cheques when they have funds in their account to meet the cheque, and cheques are frequently presented without the benefit of the cheque guarantee. |
> | Standby letters of credit also represent the taking on of credit on behalf of customers when actual funding is not required, normally because a third party is not prepared to accept the credit risk of the Group’s customer. These are also included in the normal impairment loss allowance assessment alongside other forms of credit exposure. | |
> | The Group, as is normal in such activity, gives representations, indemnities and warranties on the sale of subsidiaries, businesses and other assets. The maximum potential amount of any claims made against these is usually significantly higher than actual settlements. Appropriate provisions are made with respect to management’s best estimate of the likely outcome, either at the time of sale, or subsequently if additional information becomes available. |
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2010 | 2009 | |||||||
Core Tier 1 (after deductions) | 11.5 | % | 6.8 | % | ||||
Tier 1 | 14.8 | % | 9.5 | % | ||||
Total capital | 20.6 | % | 17.6 | % | ||||
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2010 | 2009 | |||||||
£m | £m | |||||||
Core Tier 1 capital: | ||||||||
Called up share capital | 3,105 | 2,412 | ||||||
Share premium | 5,620 | 1,857 | ||||||
Retained earnings and other reserves | 2,403 | 2,251 | ||||||
11,128 | 6,520 | |||||||
Deductions from Core Tier 1 capital: | ||||||||
Intangible Assets | (2,265 | ) | (1,541 | ) | ||||
Securitisation positions | (93 | ) | (75 | ) | ||||
Expected losses | (274 | ) | (325 | ) | ||||
(2,632 | ) | (1,941 | ) | |||||
Total Core Tier 1 capital after deductions | 8,496 | 4,579 | ||||||
Non-cumulative Preference Shares | 845 | 833 | ||||||
Innovative Tier 1 instruments | 1,463 | 1,332 | ||||||
Excess on limits for including innovative Tier 1 capital and other Tier 1 capital | 86 | (306 | ) | |||||
Total Tier 1 Capital after deductions | 10,890 | 6,438 | ||||||
Tier 2 capital: | ||||||||
Subordinated debt | 4,721 | 5,516 | ||||||
Excess innovative Tier 1 capital | — | 306 | ||||||
Other | 10 | 10 | ||||||
4,731 | 5,832 | |||||||
Deductions from Tier 2 capital: | ||||||||
Securitisation positions | (93 | ) | (75 | ) | ||||
Expected losses | (360 | ) | (325 | ) | ||||
Total Tier 2 capital after deductions | 4,278 | 5,432 | ||||||
Total Capital Resources | 15,168 | 11,870 | ||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Total shareholders’ equity(Accounting basis. See Consolidated Balance Sheet) | 12,274 | 7,222 | ||||||
Less: Reserve Capital Instruments (See Note 39) | (297 | ) | (297 | ) | ||||
Less: Non-cumulative preference shares and Perpetual Preferred Securities (See Note 39) | (597 | ) | (591 | ) | ||||
Less: available for sale reserve | (10 | ) | (12 | ) | ||||
Pensions adjustment | (221 | ) | 217 | |||||
Changes in liabilities designated as fair value through profit or loss from changes in Group’s own credit risk | (21 | ) | (19 | ) | ||||
Core Tier 1 capital | 11,128 | 6,520 | ||||||
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2010 | 2009 | |||||||
£m | £m | |||||||
Credit Risk — Standardised approach: | ||||||||
Institutions | 12 | 16 | ||||||
Corporates | 783 | 602 | ||||||
Retail | 476 | 208 | ||||||
Secured on real estate property | 184 | 210 | ||||||
Past due items | 50 | 38 | ||||||
Other items | 313 | 254 | ||||||
1,818 | 1,328 | |||||||
Credit Risk — IRB approach: | ||||||||
Retail exposures secured by real estate collateral | 1,814 | 1,732 | ||||||
Qualifying revolving retail | 146 | 149 | ||||||
Other retail | 269 | 298 | ||||||
Institutions | 107 | 188 | ||||||
Corporates | 674 | 581 | ||||||
Other items | 49 | 62 | ||||||
3,059 | 3,010 | |||||||
Counterparty risk capital component | 119 | 213 | ||||||
Operational risk — standardised approach | 612 | 529 | ||||||
Market Risk: | ||||||||
Interest rate Position Risk Requirement (‘PRR’) | 2 | 34 | ||||||
Equity PRR | 19 | 37 | ||||||
Commodity PRR | 24 | 45 | ||||||
Foreign exchange PRR | 15 | 33 | ||||||
Internal models | 217 | 166 | ||||||
277 | 315 | |||||||
Total Pillar 1 capital requirement | 5,885 | 5,395 | ||||||
Risk weighted assets(based on an 8% capital charge) | 73,563 | 67,438 | ||||||
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net cash inflow/(outflow) from operating activities | 11,384 | 2,929 | (21,444 | ) | ||||||||
Net cash (outflow)/inflow from investing activities | (1,324 | ) | 1,433 | 19,402 | ||||||||
Net cash inflow/(outflow) from financing activities | 8,935 | (4,621 | ) | (7,381 | ) | |||||||
Increase/(decrease) in cash and cash equivalents | 18,995 | (259 | ) | (9,423 | ) | |||||||
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2010/2009 | 2009/2008 | |||||||||||||||||||||||
Changes due to | Changes due to | |||||||||||||||||||||||
Total | increase/(decrease) in | Total | increase/(decrease) in | |||||||||||||||||||||
change | Volume | Rate | change | Volume | Rate | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Interest income | ||||||||||||||||||||||||
Loans and advances to banks: | ||||||||||||||||||||||||
- UK | — | 37 | (37 | ) | (284 | ) | 93 | (377 | ) | |||||||||||||||
- Non-UK | (1 | ) | 84 | (85 | ) | (9 | ) | 10 | (19 | ) | ||||||||||||||
Loans and advances to customers: | ||||||||||||||||||||||||
- UK | (23 | ) | 277 | (300 | ) | (573 | ) | 2,651 | (3,224 | ) | ||||||||||||||
- Non-UK | (1 | ) | (1 | ) | — | 2 | — | 2 | ||||||||||||||||
Other interest earning financial assets: | ||||||||||||||||||||||||
- UK | (246 | ) | (154 | ) | (92 | ) | 267 | 848 | (581 | ) | ||||||||||||||
Total interest income | ||||||||||||||||||||||||
- UK | (269 | ) | 160 | (429 | ) | (590 | ) | 3,592 | (4,182 | ) | ||||||||||||||
- Non-UK | (2 | ) | 83 | (85 | ) | (7 | ) | 10 | (17 | ) | ||||||||||||||
(271 | ) | 243 | (514 | ) | (597 | ) | 3,602 | (4,199 | ) | |||||||||||||||
Interest expense | ||||||||||||||||||||||||
Deposits by banks: | ||||||||||||||||||||||||
- UK | (279 | ) | (120 | ) | (159 | ) | 108 | (6 | ) | 114 | ||||||||||||||
Deposits by customers — retail demand deposits: | ||||||||||||||||||||||||
- UK | 201 | 4 | 197 | (1,400 | ) | 771 | (2,171 | ) | ||||||||||||||||
- Non-UK | 14 | (4 | ) | 18 | 12 | 40 | (28 | ) | ||||||||||||||||
Deposits by customers — retail time deposits: | ||||||||||||||||||||||||
- UK | 2 | 151 | (149 | ) | 386 | 445 | (59 | ) | ||||||||||||||||
- Non-UK | 22 | 24 | (2 | ) | (17 | ) | 74 | (91 | ) | |||||||||||||||
Deposits by customers — wholesale deposits: | ||||||||||||||||||||||||
- UK | (71 | ) | 94 | (165 | ) | 120 | 210 | (90 | ) | |||||||||||||||
Subordinated debt: | ||||||||||||||||||||||||
- UK | (7 | ) | (16 | ) | 9 | (63 | ) | 18 | (81 | ) | ||||||||||||||
- Non-UK | 2 | — | 2 | (7 | ) | 10 | (17 | ) | ||||||||||||||||
Debt securities in issue: | ||||||||||||||||||||||||
- UK | (554 | ) | (51 | ) | (503 | ) | (1,159 | ) | (75 | ) | (1,084 | ) | ||||||||||||
- Non-UK | 9 | 17 | (8 | ) | (281 | ) | 75 | (356 | ) | |||||||||||||||
Other interest-bearing liabilities: | ||||||||||||||||||||||||
- UK | (12 | ) | 10 | (22 | ) | 64 | 6 | 58 | ||||||||||||||||
Total interest expense | ||||||||||||||||||||||||
- UK | (720 | ) | 72 | (792 | ) | (1,944 | ) | 1,369 | (3,313 | ) | ||||||||||||||
- Non-UK | 47 | 37 | 10 | (293 | ) | 199 | (492 | ) | ||||||||||||||||
(673 | ) | 109 | (782 | ) | (2,237 | ) | 1,568 | (3,805 | ) | |||||||||||||||
Net interest income | 402 | 134 | 268 | 1,640 | 2,034 | (394 | ) | |||||||||||||||||
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2010 | 2009 | 2008 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
balance | Interest | rate | balance | Interest | rate | balance | Interest | rate | ||||||||||||||||||||||||||||
£m | £m | % | £m | £m | % | £m | £m | % | ||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Loans and advances to banks: | ||||||||||||||||||||||||||||||||||||
- UK | 19,561 | 140 | 0.72 | 15,477 | 140 | 0.90 | 12,702 | 424 | 3.34 | |||||||||||||||||||||||||||
- Non-UK | 4,345 | 14 | 0.32 | 646 | 15 | 2.32 | 454 | 24 | 5.29 | |||||||||||||||||||||||||||
Loans and advances to customers:(3) | ||||||||||||||||||||||||||||||||||||
- UK | 190,239 | 6,798 | 3.57 | 182,800 | 6,821 | 3.73 | 134,557 | 7,393 | 5.49 | |||||||||||||||||||||||||||
- Non-UK | 12 | 1 | 8.33 | 18 | 2 | 11.11 | 18 | 1 | 5.56 | |||||||||||||||||||||||||||
Debt securities: | ||||||||||||||||||||||||||||||||||||
- UK | 6,656 | 94 | 1.41 | 12,141 | 340 | 2.80 | 962 | 73 | 7.59 | |||||||||||||||||||||||||||
Total average interest-earning assets, interest income | 220,813 | 7,047 | 3.19 | 211,082 | 7,318 | 3.47 | 148,693 | 7,915 | 5.32 | |||||||||||||||||||||||||||
Impairment loss allowances | (1,526 | ) | — | — | (1,464 | ) | — | — | (562 | ) | — | — | ||||||||||||||||||||||||
Trading business | 28,593 | — | — | 27,586 | — | — | 35,394 | — | — | |||||||||||||||||||||||||||
Assets designated at fair value through profit and loss | 8,171 | — | — | 12,278 | — | — | 12,769 | — | — | |||||||||||||||||||||||||||
Other non-interest-earning assets | 39,708 | — | — | 36,729 | — | — | 22,885 | — | — | |||||||||||||||||||||||||||
Total average assets | 295,759 | — | — | 286,211 | — | — | 219,179 | — | — | |||||||||||||||||||||||||||
Non-UK assets as a % of total | 1.47 | % | — | — | 0.23 | % | — | — | 0.22 | % | — | — | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Deposits by banks: | ||||||||||||||||||||||||||||||||||||
- UK | (4,651 | ) | (87 | ) | 1.87 | (6,911 | ) | (366 | ) | 5.30 | (7,079 | ) | (258 | ) | 3.64 | |||||||||||||||||||||
Deposits by customers — retail demand:(4) | ||||||||||||||||||||||||||||||||||||
- UK | (73,367 | ) | (1,167 | ) | 1.59 | (73,060 | ) | (966 | ) | 1.32 | (55,096 | ) | (2,365 | ) | 4.29 | |||||||||||||||||||||
- Non-UK | (2,979 | ) | (75 | ) | 2.52 | (3,170 | ) | (61 | ) | 1.92 | (1,742 | ) | (49 | ) | 2.81 | |||||||||||||||||||||
Deposits by customers — retail time:(4) | ||||||||||||||||||||||||||||||||||||
- UK | (49,780 | ) | (934 | ) | 1.88 | (42,873 | ) | (932 | ) | 2.17 | (23,590 | ) | (547 | ) | 2.32 | |||||||||||||||||||||
- Non-UK | (4,914 | ) | (97 | ) | 1.97 | (3,724 | ) | (75 | ) | 2.01 | (2,063 | ) | (92 | ) | 4.46 | |||||||||||||||||||||
Deposits by customers — wholesale:(4) | ||||||||||||||||||||||||||||||||||||
- UK | (18,159 | ) | (151 | ) | 0.83 | (12,796 | ) | (222 | ) | 1.73 | (4,180 | ) | (102 | ) | 2.44 | |||||||||||||||||||||
Bonds and medium-term notes: | ||||||||||||||||||||||||||||||||||||
- UK | (35,073 | ) | (307 | ) | 0.88 | (37,292 | ) | (861 | ) | 2.31 | (38,721 | ) | (2,020 | ) | 5.22 | |||||||||||||||||||||
- Non-UK | (13,825 | ) | (53 | ) | 0.38 | (10,030 | ) | (44 | ) | 0.44 | (8,154 | ) | (325 | ) | 3.99 | |||||||||||||||||||||
Dated and undated loan capital and other subordinated liabilities: | ||||||||||||||||||||||||||||||||||||
- UK | (6,158 | ) | (219 | ) | 3.56 | (6,619 | ) | (226 | ) | 3.41 | (6,221 | ) | (289 | ) | 4.65 | |||||||||||||||||||||
- Non-UK | (661 | ) | (57 | ) | 8.62 | (651 | ) | (55 | ) | 8.45 | (560 | ) | (62 | ) | 11.07 | |||||||||||||||||||||
Other interest-bearing liabilities UK | (1,197 | ) | (86 | ) | 7.18 | (1,045 | ) | (98 | ) | 9.38 | (918 | ) | (34 | ) | 3.7 | |||||||||||||||||||||
Total average interest-bearing liabilities, interest expense | (210,764 | ) | (3,233 | ) | 1.53 | (198,171 | ) | (3,906 | ) | 1.97 | (148,324 | ) | (6,143 | ) | 4.14 | |||||||||||||||||||||
Trading business | (39,673 | ) | — | — | (49,157 | ) | — | — | (41,538 | ) | — | — | ||||||||||||||||||||||||
Liabilities designated at fair value through profit and loss | (5,740 | ) | — | — | (3,556 | ) | — | — | (6,650 | ) | — | — | ||||||||||||||||||||||||
Non-interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
- Other | (29,991 | ) | — | — | (28,142 | ) | — | — | (18,663 | ) | — | — | ||||||||||||||||||||||||
- Shareholders’ funds | (9,591 | ) | — | — | (7,185 | ) | — | — | (4,004 | ) | — | — | ||||||||||||||||||||||||
Total average liabilities and shareholders’ funds | (295,759 | ) | — | — | (286,211 | ) | — | — | (219,179 | ) | — | — | ||||||||||||||||||||||||
Non-UK liabilities as a % of total | 7.57 | % | — | — | 6.14 | % | — | — | 5.71 | % | — | — | ||||||||||||||||||||||||
Interest spread | — | — | 1.66 | — | — | 1.50 | — | — | 1.18 | |||||||||||||||||||||||||||
Net interest margin | — | — | 1.73 | — | — | 1.62 | — | — | 1.19 | |||||||||||||||||||||||||||
(1) | Average balances are based upon monthly data. | |
(2) | The ratio of average interest-earning assets to interest-bearing liabilities for the year ended 31 December 2010 was 104.77% (2009: 106.52%, 2008: 100.25%). | |
(3) | Loans and advances to customers include non-performing loans. See the Risk Management Report — Credit Risk. | |
(4) | Demand deposits, time deposits and wholesale deposits are defined under “Deposits by customers” above. |
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> | Credit Risk | |
> | Market Risk | |
> | Funding and Liquidity Risk | |
> | Operational Risk,and | |
> | Other Risks |
> | Total credit risk exposures and maximum exposure to credit risk— including discussions of measurement tools, the credit risk cycle, and credit risk from other standpoints, particularly significant concentrations. | |
> | Loans and advances: |
> | Analysis of the loans and advances as: neither past due nor impaired, past due but not individually impaired, or individually impaired. Further analysis of credit quality and maturity analyses. | ||
> | Impairment loss allowanceson loans and advances to customers, including movements in impairment loss allowances and recoveries | ||
> | Non-performing loans (‘NPL’) and advances, collections and recoveries, and restructured loans |
> | Segmental disclosures about credit risk: |
> | Retail Banking— including its management, an analysis of types and credit quality, and impairment loss allowances, arrears, recoveries and non-performing loans: |
> | Mortgages— including higher risk loans, credit quality, arrears, non-performing loans, restructuring and refinancing (including forbearance). | ||
> | Banking and consumer credit —analysis of non-performing loans and advances for unsecured loans, finance leases and other secured loans. | ||
> | Other products— consisting of business banking and private banking. |
> | Corporate Banking— including its management, exposures by credit rating and geographical area, the Watchlist, and impairment loss allowances, arrears, recoveries and non-performing loans: | ||
> | Global Banking & Markets— including its management, exposures by credit rating and geographical area, and the Watchlist. | ||
> | Group Infrastructure— including its management, exposures by credit rating and geographical area and the Watchlist. |
> | Retail Banking— including its management. | |
> | Corporate Banking— including its management. | |
> | Global Banking & Markets —including its management and disclosures on short-term, structural and trading risk. | |
> | Group Infrastructure— including its management and disclosure of Net Interest Margin sensitivity and the Market Value of Equity sensitivity, and a description of the types of derivative contracts used. |
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> | Involvement of senior management.Santander UK’s risk committee and the Group units’ senior management committees are structured so as to involve senior management in the overall risk oversight process. | |
> | Independence of the risk function with respect to the business.The segregation of functions between the business areas (which assume risk) and the risk areas entrusted with risk measurement, analysis, control and reporting provides sufficient independence and autonomy for proper risk control. | |
> | Risk as a decision maker.Decisions on credit transactions jointly reviewed by the risk and commercial areas. However, as Risk is independent, it is ultimately the decision maker. | |
> | Definition of powers.The type of activities to be performed, segments, risks to be assumed and risk decisions to be made are clearly defined for each risk taking unit and, if appropriate, for each risk management unit, based on their delegated powers. How transactions and products should be structured, arranged and managed and where they should be accounted for is also defined. | |
> | Risk measurement.Risk measurement takes into account all risk exposures assumed across the business spectrum and uses measures based on risk components and dimensions, over the entire risk cycle, for the management of risk at any given time. From a qualitative standpoint, this integrated vision translates into the use of certain integrating measures, which are mainly the risk capital requirement and return on risk-adjusted capital (‘RORAC’). | |
> | Limitation of risk.The limitation of risk is intended to limit, in an efficient and comprehensive manner, the maximum levels of risk for the various risk measures, based on a knowledge of the risks incurred and supported by the necessary infrastructure for risk management, control and reporting, and to ensure that no undesired risks are assumed and that the risk-based-capital charge, risk exposures and losses do not exceed, in any case, the approved maximum levels. | |
> | Establishment of risk policies and procedures.The risk policies and procedures represent the basic regulatory framework, consisting of frameworks, manuals and operating rules, through which risk activities and processes are regulated. | |
> | Definition and assessment of risk methodologies.Risk methodologies provide the definitions of the internal risk models applicable to the Group and, therefore, stipulate the risk measures, product valuation methods, yield curve and market data series building methods, calculation of risk-based capital requirements and other risk analysis methods, and the respective calibration and testing processes. |
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> | Establishment of risk management frameworks and policies that reflect the principles and standards governing the general modus operandi of Santander UK’s risk activities, based on a corporate risk management framework, which comprises the organisational model and the management model, and on a series of more specific corporate frameworks of the functions reporting to the risk unit. Risk units transpose corporate risk regulations into their internal policies and develop the procedures required to implement them. | |
> | Identification of risks, through the constant review and monitoring of exposures, the assessment of new products and businesses and the specific analysis of singular transactions. | |
> | Measurement of risks using methodologies and models implemented subject to a validation and approval process. | |
> | Definition of the Group’s risk appetite by setting overall and specific limits for the various types of risks, products, customers, groups, sectors and geographical locations. | |
> | Preparation and distribution of reports that are reviewed by the heads of Santander UK management. |
> | Internal ratings and scorings-based models which, by assessing the various qualitative and quantitative risk components by customer and transaction or product, make it possible to estimate, firstly, the probability of default and, subsequently, the expected loss, based on estimates of loss given default. | |
> | Economic capital, as a homogeneous measure of the risk assumed and a basis for the measurement of the management performed. | |
> | RORAC, which is used both as a transaction and product pricing tool (bottom-up approach) and in the analysis of portfolios and units (top-down approach). | |
> | Value at Risk, which is used for controlling market risk and setting the market risk limits for the various trading portfolios. | |
> | Scenario analysis and stress testing to supplement market and credit risk analyses in order to assess the impact of alternative scenarios, even on impairment loss allowances and capital. |
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> | Risk management; | |
> | Risk control; and | |
> | Risk assurance. |
> | Clearly allocating accountability for risk; | |
> | Embedded risk culture, starting at the highest levels of our organisation; | |
> | Creating shareholder value; | |
> | Independent risk assurance and transparency; and | |
> | Embedding UK Financial Services Authority ‘Treating Customers Fairly’ principles into policies and processes. |
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> | Reviews the Risk Report on a monthly basis. The Risk Report is prepared by the Risk Division and highlights all significant risk issues affecting Santander UK; | |
> | Reviews any recommendations made by the Chief Risk Officer and the Risk Oversight Fora, and elevates them to the Board or the Executive Committee as appropriate; | |
> | Reviews risk mandates, where appropriate, on an annual basis; | |
> | Reviews changes in risk policy or appetite that may be recommended by relevant parties from time to time; and | |
> | Reviews proposals for new products or business lines as appropriate. |
> | Risk Framework; | |
> | Risk Appetite; and | |
> | Escalation of risk policy issues that lie outside its authority to approve. |
> | Approves risk delegations; | |
> | Approves risk policy changes that do not require Board approval; and | |
> | Approves risk mandates, where appropriate. |
> | Approves all material aspects of the rating and estimation process, where an Internal Rating Based model has been developed locally and is therefore subject to local validation and local supervisory review; | |
> | Reviews the roles and responsibilities of the relevant risk functions and the internal/external audit functions; and | |
> | Reviews the associated management reports. |
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> | Group-wide risk policies; | |
> | Group-wide risk limits/parameters; | |
> | Approval processes relating to transactions that exceed local risk limits; | |
> | The systematic review of large exposures to clients, sectors, geographical areas and different risk types; and | |
> | Reporting to Banco Santander, S.A.. |
> | Oversight of the risk governance framework; | |
> | Review of the effectiveness of the Group’s internal and external audit processes; | |
> | Review of control policies and procedures including regulatory compliance and financial reporting; | |
> | Identification, assessment and reporting of risks; and | |
> | The risk governance structure and associated compliance with risk control policies and procedures. |
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> | Calculation of economic capital requirement and of the return thereon for the Group’s business units and for business segments and portfolios in order to facilitate an optimal allocation of economic capital. | |
> | Budgeting of capital requirement and RORAC of the Group’s business units. | |
> | Analysis and setting of prices in the decision-making process for transactions or products, such as loan approval. |
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> | Population 1:Risks that are deemed to be material and are mitigated by a combination of internal controls and allocation of capital (both regulatory and economic). | |
> | Population 2:Risks that are deemed to be material but where Santander UK seeks to mitigate its exposure primarily by its internal control arrangements rather than by allocation of capital. |
Risk type | Definition | Population | ||||
Credit Risk (including residual credit and concentration) | Credit riskis the risk of financial loss arising from the default of a customer or counterparty to which the Group has directly provided credit, or for which the Group has assumed a financial obligation, after realising collateral held. | 1 | ||||
Credit risk includes residual credit risk, which arises when credit risk measurement and mitigation techniques prove less effective than expected. | ||||||
In addition, concentration risk, which is part of credit risk, includes large (connected) individual exposures, and significant exposures to groups of counterparties whose likelihood of default is driven by common underlying factors, e.g. sector, economy, geographical location or instrument type. | ||||||
Market Risk (including trading and non-traded) | Market riskis the risk of a reduction in economic value or reported income resulting from a change in the variables of financial instruments including interest rate, equity, credit spread, property and foreign currency risks. | 1 | ||||
Market risk consists of trading and non-traded market risks. Trading market risk includes risks on exposures held with the intention of benefiting from short term price differences in interest rate variations and other market price shifts. Non-traded market risk includes interest rate risk in investment portfolios. | ||||||
Funding and Liquidity Risk | Funding riskis the risk that the Group does not have sufficiently stable and diverse sources of funding or the funding structure is inefficient or a funding programme such as debt issuance subsequently fails. For example, a securitisation arrangement may fail to operate as anticipated or the values of the assets transferred to a funding vehicle do not emerge as expected creating additional risks for the Group and its depositors. Risks arising from the encumbrance of assets are also included within this definition. | 2 | ||||
Liquidity riskis the risk that the Group, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. | ||||||
Operational Risk | Operational riskis the risk of loss to the Group resulting from inadequate or failed internal processes, people and systems, or from external events. This includes regulatory, legal and compliance risk. | 1 | ||||
Other Risks | Other risks consist of business/strategic risk, reputational risk, pension obligation risk and residual value risk. | |||||
Business/strategic riskis the current or prospective risk to earnings and capital arising from changes in the business environment and from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment. This includes pro-cyclicality and capital planning risk. The internal component is the risk related to implementing the strategy. The external component is the risk of the business environment change on the Group’s strategy. | 1 | |||||
Reputational riskis the risk of financial loss or reputational damage arising from treating customers unfairly, a failure to manage risk, a breakdown in internal controls, or poor communication with stakeholders. This includes the risk of decline in the value of the Group’s franchise potentially arising from reduced market share, complexity, tenor and performance of products and distribution mechanisms. The reputational risk arising from operational risk events is managed within the operational risk framework. | 2 | |||||
Pension obligation riskis the risk of an unplanned increase in funding required by the Group’s pension schemes, either because of a loss of net asset value or because of changes in legislation or regulatory action. | 1 | |||||
Residual value riskis the risk that the value of an asset at the end of a contract may be worth less than that required to achieve the minimum return from the transaction that had been assumed at its inception. | 1 |
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Risk Management | Risk Control | Risk | ||||
Board | Assurance | |||||
Credit(including residual credit and concentration) | Retail Banking, Corporate Banking, Global Banking & Markets and Asset and Liability Management (‘ALM’ within Group Infrastructure) | Risk Division — Credit Risk Department | Audit and Risk Committee Internal Audit | |||
Market(including trading and non-traded) | Global Banking & Markets and ALM | Risk Division — Market Risk Department | ||||
Funding and Liquidity | ||||||
- Funding | ALM | Risk Division — Market Risk Department | ||||
- Liquidity | ALM | Risk Division — Market Risk Department | ||||
Operational | ||||||
- Non-regulatory | All | Risk Division — Enterprise & Operational Risk Department | ||||
- Regulatory | All | Finance Department Legal & Compliance | ||||
Other | ||||||
- Business/strategic | CEO supported by Executive Committee | Chief Risk Officer | ||||
- Reputational | CEO supported by Executive Committee | Chief Risk Officer | ||||
- Pension obligation | CEO supported by Pensions Committee | Risk Division — Market Risk Department | ||||
- Residual value | CEO supported by Risk Committee | Risk Division — Credit Risk Department | ||||
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> | Non-standardised customers are defined as those to which a risk analyst has been assigned. This category includes wholesale banking customers, medium and large corporate customers and financial institutions. Risk management is performed through expert analysis supplemented by decision-making support tools based on internal risk assessment models. | |
> | Standardised customers are those which have not been expressly assigned a risk analyst. This category generally includes individuals and individual entrepreneurs and small businesses not classified as non-standardised customers. Management of these risks is based on internal risk assessment and automatic decision-making models, and supported by teams of analysts specialising in this type of risk when the model is not comprehensive enough or is not sufficiently accurate. |
> | Retail exposures consist of residential mortgages, banking, and other personal financial services products and are managed by the Retail Banking division. | |
> | Corporate exposures consist of loans, bank accounts, treasury services, asset finance, cash transmission, trade finance and invoice discounting to small and medium-sized (‘SME’) UK companies and specialist businesses. Corporate exposures are managed by the Corporate Banking division. | |
> | Wholesale exposures consist of deposits with central banks, loans and debt securities issued or guaranteed by central and local governments (‘sovereign exposures’) and other exposures. Sovereign exposures are managed by the Asset and Liability Management Committee in the Group Infrastructure division and by the Short Term Markets desk in Global Banking & Markets. The Group’s other exposures arise in connection with a variety of purposes: |
> | As part of its treasury trading and global corporates lending activities, which are managed by the Global Banking & Markets division; | ||
> | For yield and liquidity purposes, including the Asset and Liability Management Committee portfolio of asset-backed securities, which are managed by the Group Infrastructure division; and | ||
> | In the Treasury asset portfolio which is being run down. This is managed by the Group Infrastructure division. |
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2010 | 2009 | |||||||
£m | £m | |||||||
Balances with central banks | 25,569 | 3,453 | ||||||
Trading assets | 21,034 | 20,143 | ||||||
Securities purchased under resale agreements | 15,073 | 16,229 | ||||||
Derivative financial instruments | 24,377 | 22,827 | ||||||
Financial assets designated at fair value | 6,777 | 12,358 | ||||||
Available-for-sale securities | 175 | 797 | ||||||
Loan and receivable securities | 3,610 | 9,898 | ||||||
Loans and advances to customers | 195,132 | 186,804 | ||||||
Loans and advances to banks | 3,206 | 6,069 | ||||||
Other | 6,185 | 4,335 | ||||||
Total exposure(1) | 301,138 | 282,913 | ||||||
(1) | In addition, the Group is exposed to credit risk in respect of guarantees granted, loan commitments and stock borrowing and lending agreements. The estimated maximum exposure to credit risk is described in Note 38 to the Consolidated Financial Statements. |
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> | Pre-sale:this phase includes the risk planning and target setting processes, determination of the Group’s risk appetite, approval of new products, risk analysis and credit rating process, and limit setting per counterparty. Limits can be established either through the framework of pre-approved or pre-classified limits or by the granting of a specific approval. | |
> | Sale:this is the decision-making phase for both transactions under pre-classified limits and those which have received specific approval. | |
> | Post-sale:this phase comprises the risk monitoring, measurement and control processes and the recovery process. |
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> | It determines the sensitivity of risk factors (PD, LGD) to macroeconomic variables. | |
> | It characterises benchmark scenarios. | |
> | It identifies “break-off scenarios” (the levels above which the sensitivity of the risk factors to macroeconomic variables is more accentuated) and the distance of these break-off scenarios from the current situation and the benchmark scenarios. | |
> | It estimates the expected loss associated with each scenario and the changes in the risk profile of each portfolio arising from variations in macroeconomic variables. |
> | Unemployment rate; | |
> | House prices; | |
> | GDP; | |
> | Interest rates; and | |
> | Inflation rate. |
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> | To collect payments in arrears so that accounts return to performing status. If this is not possible within a reasonable time period, the aim is to fully or partially recover debts, regardless of their status for accounting or management purposes. | |
> | To maintain and strengthen the relationship with customers, paying attention to customer payment behaviour. |
> | the residential mortgage portfolio and unsecured personal lending businesses in Retail Banking; | |
> | secured lending and derivatives exposures to companies, real estate entities and social housing associations, as well as portfolios of assets inconsistent with the Group’s future strategy such as shipping and aviation in Corporate Banking; | |
> | unsecured lending and derivatives exposure to banks and other financial institutions in Global Banking & Markets; and | |
> | the Treasury asset portfolio in Group Infrastructure. |
Group | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Corporate | Global Banking | Corporate | Global Banking & | |||||||||||||
Banking | & Markets | Banking | Markets | |||||||||||||
Country | % | % | % | % | ||||||||||||
UK | 90 | 81 | 88 | 81 | ||||||||||||
Rest of Europe | 5 | 18 | 6 | 13 | ||||||||||||
US | 2 | — | 2 | 2 | ||||||||||||
Other, including non-OECD | 3 | 1 | 4 | 4 | ||||||||||||
100 | 100 | 100 | 100 | |||||||||||||
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Group | ||||||||||||||||||||||||
Neither past | Past due but | Impairment | Total | |||||||||||||||||||||
due nor | not individually | Individually | loss | carrying | ||||||||||||||||||||
impaired | impaired | impaired | Total | allowances | value | |||||||||||||||||||
Statutory balance sheet line items | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Trading assets | ||||||||||||||||||||||||
- Loans and advances to banks | 8,281 | — | — | 8,281 | — | 8,281 | ||||||||||||||||||
- Loans and advances to customers | 8,659 | — | — | 8,659 | — | 8,659 | ||||||||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||||||||||
- Loans and advances to banks | 11 | — | — | 11 | — | 11 | ||||||||||||||||||
- Loans and advances to customers | 5,468 | — | — | 5,468 | — | 5,468 | ||||||||||||||||||
Loans and advances to banks | ||||||||||||||||||||||||
- Placements with other banks | 3,206 | — | — | 3,206 | — | 3,206 | ||||||||||||||||||
- Amounts due from parent | 646 | — | — | 646 | — | 646 | ||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | 161,168 | 3,735 | 1,170 | 166,073 | (526 | ) | 165,547 | |||||||||||||||||
- Corporate loans | 15,395 | 256 | 677 | 16,328 | (396 | ) | 15,932 | |||||||||||||||||
- Finance leases | 2,600 | 21 | 32 | 2,653 | (19 | ) | 2,634 | |||||||||||||||||
- Other secured advances | 3,607 | 274 | 61 | 3,942 | (77 | ) | 3,865 | |||||||||||||||||
- Other unsecured advances | 7,131 | 233 | 370 | 7,734 | (637 | ) | 7,097 | |||||||||||||||||
- Amounts due from fellow subsidiaries | 57 | — | — | 57 | — | 57 | ||||||||||||||||||
Loans and receivables securities | 3,600 | — | 16 | 3,616 | (6 | ) | 3,610 | |||||||||||||||||
Total loans and advances | 219,829 | 4,519 | 2,326 | 226,674 | (1,661 | ) | 225,013 | |||||||||||||||||
Company | ||||||||||||||||||||||||
Neither past | Past due but | Impairment | Total | |||||||||||||||||||||
due nor | not individually | Individually | loss | carrying | ||||||||||||||||||||
impaired | impaired | impaired | Total | allowances | value | |||||||||||||||||||
Statutory balance sheet line items | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||||||||||
- Loans and advances to banks | 55 | — | — | 55 | — | 55 | ||||||||||||||||||
- Loans and advances to customers | 44 | — | — | 44 | — | 44 | ||||||||||||||||||
Loans and advances to banks | ||||||||||||||||||||||||
- Placements with other banks | 1,118 | — | — | 1,118 | — | 1,118 | ||||||||||||||||||
- Amounts due from parent | 3 | — | — | 3 | — | 3 | ||||||||||||||||||
- Amounts due from subsidiaries | 114,836 | — | — | 114,836 | — | 114,836 | ||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | 161,152 | 3,735 | 1,170 | 166,057 | (524 | ) | 165,533 | |||||||||||||||||
- Corporate loans | 5,075 | 160 | 494 | 5,729 | (140 | ) | 5,589 | |||||||||||||||||
- Other secured advances | 3,175 | 242 | 53 | 3,470 | (77 | ) | 3,393 | |||||||||||||||||
- Other unsecured advances | 3,642 | 118 | 258 | 4,018 | (399 | ) | 3,619 | |||||||||||||||||
- Amounts due from fellow subsidiaries | 46 | — | — | 46 | — | 46 | ||||||||||||||||||
- Amounts due from subsidiaries | 1,043 | — | 316 | 1,359 | (316 | ) | 1,043 | |||||||||||||||||
Loans and receivables securities | 5,368 | — | 16 | 5,384 | (6 | ) | 5,378 | |||||||||||||||||
Total loans and advances | 295,557 | 4,255 | 2,307 | 302,119 | (1,462 | ) | 300,657 | |||||||||||||||||
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Group | ||||||||||||||||||||||||
Neither past | Past due but | Impairment | Total | |||||||||||||||||||||
due nor | not individually | Individually | loss | carrying | ||||||||||||||||||||
impaired | impaired | impaired | Total | allowances | value | |||||||||||||||||||
Statutory balance sheet line items | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Trading assets | ||||||||||||||||||||||||
- Loans and advances to banks | 6,791 | — | — | 6,791 | — | 6,791 | ||||||||||||||||||
- Loans and advances to customers | 9,089 | — | — | 9,089 | — | 9,089 | ||||||||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||||||||||
- Loans and advances to customers | 6,379 | — | — | 6,379 | — | 6,379 | ||||||||||||||||||
Loans and advances to banks | ||||||||||||||||||||||||
- Placements with other banks | 1,605 | — | — | 1,605 | — | 1,605 | ||||||||||||||||||
- Amounts due from parent | 5,995 | — | — | 5,995 | — | 5,995 | ||||||||||||||||||
- Amounts due from associates | 1,551 | — | — | 1,551 | — | 1,551 | ||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | 155,295 | 4,097 | 1,074 | 160,466 | (484 | ) | 159,982 | |||||||||||||||||
- Corporate loans | 11,836 | 166 | 507 | 12,509 | (357 | ) | 12,152 | |||||||||||||||||
- Finance leases | 1,566 | 19 | 17 | 1,602 | (2 | ) | 1,600 | |||||||||||||||||
- Other secured advances | 3,571 | 127 | 121 | 3,819 | (62 | ) | 3,757 | |||||||||||||||||
- Other unsecured advances | 4,505 | 220 | 525 | 5,250 | (394 | ) | 4,856 | |||||||||||||||||
- Amounts due from fellow subsidiaries | 4,457 | — | — | 4,457 | — | 4,457 | ||||||||||||||||||
Loans and receivables securities | 9,870 | — | 34 | 9,904 | (6 | ) | 9,898 | |||||||||||||||||
Total loans and advances | 222,510 | 4,629 | 2,278 | 229,417 | (1,305 | ) | 228,112 | |||||||||||||||||
Company | ||||||||||||||||||||||||
Neither past | Past due but | Impairment | Total | |||||||||||||||||||||
due nor | not individually | Individually | loss | carrying | ||||||||||||||||||||
impaired | impaired | impaired | Total | allowances | value | |||||||||||||||||||
Statutory balance sheet line items | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||||||||||
- Loans and advances to banks | 160 | — | — | 160 | — | 160 | ||||||||||||||||||
- Loans and advances to customers | 45 | — | — | 45 | — | 45 | ||||||||||||||||||
Loans and advances to banks | ||||||||||||||||||||||||
- Placements with other banks | 995 | — | — | 995 | — | 995 | ||||||||||||||||||
- Amounts due from parent | 1 | — | — | 1 | — | 1 | ||||||||||||||||||
- Amounts due from associates | 1 | — | — | 1 | — | 1 | ||||||||||||||||||
- Amounts due from subsidiaries | 108,661 | — | — | 108,661 | — | 108,661 | ||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | 118,240 | 3,626 | 880 | 122,746 | (395 | ) | 122,351 | |||||||||||||||||
- Other secured advances | 3,530 | 117 | 112 | 3,759 | (55 | ) | 3,704 | |||||||||||||||||
- Other unsecured advances | 4,362 | 188 | 486 | 5,036 | (351 | ) | 4,685 | |||||||||||||||||
- Amounts due from fellow subsidiaries | 71 | — | — | 71 | — | 71 | ||||||||||||||||||
- Amounts due from subsidiaries | 938 | — | 98 | 1,036 | (98 | ) | 938 | |||||||||||||||||
Total loans and advances | 237,004 | 3,931 | 1,576 | 242,511 | (899 | ) | 241,612 | |||||||||||||||||
Group | ||||||||||||||||
Good | Satisfactory | Higher Risk | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Trading assets | ||||||||||||||||
- Loans and advances to banks | 8,035 | 191 | 55 | 8,281 | ||||||||||||
- Loans and advances to customers | 8,659 | — | — | 8,659 | ||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||
- Loans and advances to banks | 11 | — | — | 11 | ||||||||||||
- Loans and advances to customers | 5,468 | — | — | 5,468 | ||||||||||||
Loans and advances to banks | ||||||||||||||||
- Placements with other banks | 3,193 | — | 13 | 3,206 | ||||||||||||
- Amounts due from parent | 646 | — | — | 646 | ||||||||||||
Loans and advances to customers | ||||||||||||||||
- Advances secured on residential property | 148,086 | 12,542 | 540 | 161,168 | ||||||||||||
- Corporate loans | 10,211 | 4,768 | 416 | 15,395 | ||||||||||||
- Finance leases | 1,165 | 1,370 | 65 | 2,600 | ||||||||||||
- Other secured advances | 1,670 | 1,655 | 282 | 3,607 | ||||||||||||
- Other unsecured advances | 1,086 | 5,805 | 240 | 7,131 | ||||||||||||
- Amounts due from fellow subsidiaries | 57 | — | — | 57 | ||||||||||||
Loans and receivables securities | 2,457 | 486 | 657 | 3,600 | ||||||||||||
Total loans and advances | 190,744 | 26,817 | 2,268 | 219,829 | ||||||||||||
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Company | ||||||||||||||||
Good | Satisfactory | Higher Risk | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||
- Loans and advances to banks | 55 | — | — | 55 | ||||||||||||
- Loans and advances to customers | 44 | — | — | 44 | ||||||||||||
Loans and advances to banks | ||||||||||||||||
- Placements with other banks | 1,105 | — | 13 | 1,118 | ||||||||||||
- Amounts due from parent | 3 | — | — | 3 | ||||||||||||
- Amounts due from subsidiaries | 114,836 | — | — | 114,836 | ||||||||||||
Loans and advances to customers | ||||||||||||||||
- Advances secured on residential property | 148,072 | 12,540 | 540 | 161,152 | ||||||||||||
- Corporate loans | 1,576 | 3,320 | 179 | 5,075 | ||||||||||||
- Other secured advances | 1,470 | 1,456 | 249 | 3,175 | ||||||||||||
- Other unsecured advances | 555 | 2,965 | 122 | 3,642 | ||||||||||||
- Amounts due from fellow subsidiaries | 46 | — | — | 46 | ||||||||||||
- Amounts due from subsidiaries | 1,043 | — | — | 1,043 | ||||||||||||
Loans and receivables securities | 4,256 | 486 | 626 | 5,368 | ||||||||||||
Total loans and advances | 273,061 | 20,767 | 1,729 | 295,557 | ||||||||||||
Group | ||||||||||||||||
Good | Satisfactory | Higher Risk | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Trading assets | ||||||||||||||||
- Loans and advances to banks | 6,610 | 181 | — | 6,791 | ||||||||||||
- Loans and advances to customers | 9,089 | — | — | 9,089 | ||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||
- Loans and advances to customers | 6,379 | — | — | 6,379 | ||||||||||||
Loans and advances to banks | ||||||||||||||||
- Placements with other banks | 1,605 | — | — | 1,605 | ||||||||||||
- Amounts due from parent | 5,995 | — | — | 5,995 | ||||||||||||
- Amounts due from associates | 1,551 | — | — | 1,551 | ||||||||||||
Loans and advances to customers | ||||||||||||||||
- Advances secured on residential property | 141,820 | 13,023 | 452 | 155,295 | ||||||||||||
- Corporate loans | 7,276 | 4,444 | 116 | 11,836 | ||||||||||||
- Finance leases | 1,452 | 114 | — | 1,566 | ||||||||||||
- Other secured advances | 1,412 | 2,065 | 94 | 3,571 | ||||||||||||
- Other unsecured advances | 1,212 | 3,184 | 109 | 4,505 | ||||||||||||
- Amounts due from fellow subsidiaries | 4,457 | — | — | 4,457 | ||||||||||||
Loans and receivables securities | 4,217 | 5,645 | 8 | 9,870 | ||||||||||||
Total loans and advances | 193,075 | 28,656 | 779 | 222,510 | ||||||||||||
Company | ||||||||||||||||
Good | Satisfactory | Higher Risk | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Financial assets designated at fair value through profit and loss | ||||||||||||||||
- Loans and advances to banks | 160 | — | — | 160 | ||||||||||||
- Loans and advances to customers | 45 | — | — | 45 | ||||||||||||
Loans and advances to banks | ||||||||||||||||
- Placements with other banks | 995 | — | — | 995 | ||||||||||||
- Amounts due from parent | 1 | — | — | 1 | ||||||||||||
- Amounts due from associates | 1 | — | — | 1 | ||||||||||||
- Amounts due from subsidiaries | 108,661 | — | — | 108,661 | ||||||||||||
Loans and advances to customers | ||||||||||||||||
- Advances secured on residential property | 105,848 | 11,939 | 453 | 118,240 | ||||||||||||
- Other secured advances | 1,531 | 1,912 | 87 | 3,530 | ||||||||||||
- Other unsecured advances | 1,172 | 3,084 | 106 | 4,362 | ||||||||||||
- Amounts due from fellow subsidiaries | 71 | — | — | 71 | ||||||||||||
- Amounts due from subsidiaries | 938 | — | — | 938 | ||||||||||||
Total loans and advances | 219,423 | 16,935 | 646 | 237,004 | ||||||||||||
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Retail Lending | Wholesale and | |||||||||||||||
Expected loss | Probability of default | Probability of default | Corporate Lending | |||||||||||||
Financial statements description | Unsecured(1) | Secured(2) | Business Banking(3) | Probability of default | ||||||||||||
Good | 0.0 – 0.5 | % | 0.0 – 0.5 | %(4) | 0.0 – 0.5 | % | 0.0 – 0.5 | % | ||||||||
Satisfactory | 0.5 – 12.5 | % | 0.5 – 12.5 | % | 0.5 – 12.5 | % | 0.5 – 12.5 | % | ||||||||
Higher Risk | 12.5 | %+ | 12.5 | %+(5) | 12.5 | %+ | 12.5 | %+ | ||||||||
(1) | Unsecured consists of other unsecured advances to individuals. | |
(2) | Secured consists of advances to individuals secured on residential property. | |
(3) | Business Banking consists of other secured advances and other unsecured advances to small businesses. | |
(4) | Or a loan-to-value (‘LTV’) ratio of less than 75%. | |
(5) | Or an LTV ratio exceeding 75%. |
Good | There is a very high likelihood that the asset will not default and will be recovered in full. The exposure has a negligible or low probability of default. Such exposure also exhibits a strong capacity to meet financial commitments and only exceptionally shows any period of delinquency. | |
Satisfactory | There is a high likelihood that the asset will be recovered and is therefore of no cause for concern to the Group. The asset has low to moderate probability of default, strong recovery rates and may typically show only short periods of delinquency. Typically these are high loan-to-value mortgages or most unsecured lending. Moderate to high application scores, credit bureau scores or behavioural scores characterise this credit quality. | |
Higher Risk | All rated accounts that are not viewed as Good or Satisfactory are rated as Higher Risk. The assets are characterised by some concern over the obligor’s ability to make payments when due. There may also be doubts over the value of collateral or security provided. However, the borrower or counterparty is continuing to make payments when due i.e. the assets have not yet converted to actual delinquency and is expected to settle all outstanding amounts of principal and interest. |
Group | ||||||||||||||||||||||||
Past due up | Past due 1-2 | Past due 2-3 | Past due 3-6 | Past due 6 | ||||||||||||||||||||
to 1 month | months | months | months | months and over | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | — | 1,444 | 827 | 1,031 | 433 | 3,735 | ||||||||||||||||||
- Corporate loans | — | — | — | 256 | — | 256 | ||||||||||||||||||
- Finance leases | — | 16 | 2 | 3 | — | 21 | ||||||||||||||||||
- Other secured advances | — | 48 | 40 | 72 | 114 | 274 | ||||||||||||||||||
- Other unsecured advances | 59 | 108 | 29 | 23 | 14 | 233 | ||||||||||||||||||
Total loans and advances | 59 | 1,616 | 898 | 1,385 | 561 | 4,519 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Past due up | Past due 1-2 | Past due 2-3 | Past due 3-6 | Past due 6 | ||||||||||||||||||||
to 1 month | months | months | months | months and over | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | — | 1,444 | 827 | 1,031 | 433 | 3,735 | ||||||||||||||||||
- Corporate loans | — | — | — | 160 | — | 160 | ||||||||||||||||||
- Other secured advances | — | 42 | 35 | 64 | 101 | 242 | ||||||||||||||||||
- Other unsecured advances | 54 | 25 | 14 | 11 | 14 | 118 | ||||||||||||||||||
Total loans and advances | 54 | 1,511 | 876 | 1,266 | 548 | 4,255 | ||||||||||||||||||
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Group | ||||||||||||||||||||||||
Past due up | Past due 1-2 | Past due 2-3 | Past due 3-6 | Past due 6 | ||||||||||||||||||||
to 1 month | months | months | months | months and over | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | — | 1,532 | 886 | 1,111 | 568 | 4,097 | ||||||||||||||||||
- Corporate loans | — | — | — | 166 | — | 166 | ||||||||||||||||||
- Finance leases | — | — | — | 19 | — | 19 | ||||||||||||||||||
- Other secured advances | — | 41 | 13 | 17 | 56 | 127 | ||||||||||||||||||
- Other unsecured advances | 99 | 43 | 20 | 30 | 28 | 220 | ||||||||||||||||||
Total loans and advances | 99 | 1,616 | 919 | 1,343 | 652 | 4,629 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Past due up | Past due 1-2 | Past due 2-3 | Past due 3-6 | Past due 6 | ||||||||||||||||||||
to 1 month | months | months | months | months and over | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Loans and advances to customers | ||||||||||||||||||||||||
- Advances secured on residential property | — | 1,369 | 803 | 992 | 462 | 3,626 | ||||||||||||||||||
- Other secured advances | — | 38 | 12 | 16 | 51 | 117 | ||||||||||||||||||
- Other unsecured advances | 94 | 39 | 19 | 24 | 12 | 188 | ||||||||||||||||||
Total loans and advances | 94 | 1,446 | 834 | 1,032 | 525 | 3,931 | ||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Observed impairment loss allowances | ||||||||||||||||||||
Advances secured on residential properties — UK | 369 | 313 | 174 | 74 | 45 | |||||||||||||||
Corporate loans — UK | 271 | 185 | 13 | — | — | |||||||||||||||
Finance leases — UK | 2 | 1 | — | — | 1 | |||||||||||||||
Other secured advances — UK | 55 | 50 | 37 | 32 | 73 | |||||||||||||||
Unsecured personal advances — UK | 381 | 341 | 227 | 250 | 243 | |||||||||||||||
Total observed impairment loss allowances | 1,078 | 890 | 451 | 356 | 362 | |||||||||||||||
Incurred but not yet observed impairment loss allowances | ||||||||||||||||||||
Advances secured on residential properties — UK | 157 | 171 | 184 | 102 | 60 | |||||||||||||||
Corporate loans — UK | 125 | 172 | 289 | — | — | |||||||||||||||
Finance leases — UK | 17 | 1 | 1 | — | — | |||||||||||||||
Other secured advances — UK | 22 | 12 | 11 | 8 | 3 | |||||||||||||||
Unsecured personal advances — UK | 256 | 53 | 65 | 85 | 111 | |||||||||||||||
Total incurred but not yet observed impairment loss allowances | 577 | 409 | 550 | 195 | 174 | |||||||||||||||
Total impairment loss allowances | 1,655 | 1,299 | 1,001 | 551 | 536 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Impairment loss allowances at 1 January | 1,299 | 1,001 | 551 | 536 | 394 | |||||||||||||||
Amounts written off | ||||||||||||||||||||
Advances secured on residential properties — UK | (42 | ) | (84 | ) | (32 | ) | (9 | ) | (11 | ) | ||||||||||
Corporate loans — UK | (68 | ) | — | — | — | — | ||||||||||||||
Finance leases — UK | (5 | ) | (4 | ) | — | (1 | ) | — | ||||||||||||
Other secured advances — UK | (48 | ) | (17 | ) | (9 | ) | (24 | ) | (27 | ) | ||||||||||
Unsecured personal advances — UK | (448 | ) | (425 | ) | (262 | ) | (339 | ) | (205 | ) | ||||||||||
Total amounts written off | (611 | ) | (530 | ) | (303 | ) | (373 | ) | (243 | ) | ||||||||||
Observed impairment losses charged against profit | ||||||||||||||||||||
Advances secured on residential properties — UK | 98 | 223 | 132 | 38 | 35 | |||||||||||||||
Corporate loans — UK | 154 | 172 | 13 | — | — | |||||||||||||||
Finance leases — UK | 6 | 5 | — | — | — | |||||||||||||||
Other secured advances — UK | 53 | 30 | 14 | (17 | ) | (25 | ) | |||||||||||||
Unsecured personal advances — UK | 488 | 539 | 239 | 346 | 289 | |||||||||||||||
Total observed impairment losses charged against profit | 799 | 969 | 398 | 367 | 299 | |||||||||||||||
Incurred but not yet observed impairment losses charged against profit | (53 | ) | (141 | ) | (4 | ) | 21 | 86 | ||||||||||||
Total impairment losses charged against profit | 746 | 828 | 394 | 388 | 385 | |||||||||||||||
Assumed through transfers of entities under common control | 221 | — | 359 | — | — | |||||||||||||||
Impairment loss allowances at the end of the year | 1,655 | 1,299 | 1,001 | 551 | 536 | |||||||||||||||
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Advances secured on residential properties — UK | 1 | 1 | 1 | 2 | 2 | |||||||||||||||
Corporate loans — UK | 12 | 23 | — | — | — | |||||||||||||||
Finance leases — UK | 1 | 1 | — | — | — | |||||||||||||||
Other secured advances — UK | — | — | 12 | 6 | 7 | |||||||||||||||
Unsecured personal advances — UK | 20 | 30 | 33 | 36 | 32 | |||||||||||||||
Total amount recovered | 34 | 55 | 46 | 44 | 41 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Non-performing loans and advances that are impaired | 1,843 | 1,613 | 1,143 | 296 | 375 | |||||||||||||||
Non-performing loans and advances that are not impaired | 1,874 | 2,000 | 1,235 | 596 | 451 | |||||||||||||||
Total non-performing loans and advances(2) | 3,717 | 3,613 | 2,378 | 892 | 826 | |||||||||||||||
Total Group customer assets(3,4) | 202,090 | 190,067 | 183,345 | 118,399 | 109,035 | |||||||||||||||
Total Group impairment loss allowances | 1,655 | 1,299 | 1,001 | 551 | 536 | |||||||||||||||
% | % | % | % | % | ||||||||||||||||
Non-performing loans and advances as a % of customers assets | 1.84 | 1.90 | 1.30 | 0.75 | 0.76 | |||||||||||||||
Coverage ratio(5) | 44.53 | 35.95 | 42.09 | 61.77 | 64.89 | |||||||||||||||
(1) | Loans and advances are classified as non-performing typically when the counterparty fails to make payments when contractually due for three months or longer. | |
(2) | All non-performing loans continue accruing interest. | |
(3) | Accrued interest is excluded for purposes of these analyses. | |
(4) | Customer assets include social housing loans and finance leases, and exclude trading assets. | |
(5) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
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2010 | 2009 | 2008 | ||||||||||
£bn | £bn | £bn | ||||||||||
Advances secured on residential properties(1) | 165.8 | 160.6 | 153.2 | |||||||||
Other secured advances(2) | ||||||||||||
- Commercial mortgages | 2.2 | 2.2 | 2.3 | |||||||||
- Other | 0.4 | — | — | |||||||||
Unsecured loans | ||||||||||||
- Overdrafts(3) | 0.5 | 0.6 | 0.6 | |||||||||
- Unsecured Personal Loans(3,4) | 3.4 | 4.2 | 5.7 | |||||||||
- Other loans (cards and consumer) (3) | 3.8 | — | — | |||||||||
Finance leases(5) | 1.5 | — | — | |||||||||
Other loans | 0.2 | 0.1 | 0.1 | |||||||||
Total | 177.8 | 167.7 | 161.9 | |||||||||
(1) | Excludes loans to UK Social Housing Associations, which are managed within Corporate Banking, accrued interest and other items. | |
(2) | Additional commercial mortgages of £1.3bn (2009: £1.6bn, 2008 £1.5bn) are managed and classified within Corporate Banking. | |
(3) | Overdrafts, UPLs and other loans relating to cards and consumer are disclosed within unsecured loans and other loans in Note 17. | |
(4) | Includes cahoot UPLs of £0.2bn (2009: £0.3bn, 2008 £0.4bn). | |
(5) | Additional finance leases of £1.2bn are managed and classified within Corporate Banking. |
2010 | 2009 | 2008 | ||||||||||
£bn | £bn | £bn | ||||||||||
As at 1 January | 160.6 | 153.2 | 104.5 | |||||||||
Gross mortgage lending in the year | 23.9 | 26.1 | 31.8 | |||||||||
Capital repayments in the year | (18.6 | ) | (18.8 | ) | (20.7 | ) | ||||||
Acquired through business combinations | — | — | 37.6 | |||||||||
Other(2) | — | 0.1 | — | |||||||||
As at 31 December | 165.9 | 160.6 | 153.2 | |||||||||
(1) | Excludes loans to UK Social Housing Associations, which are managed and classified within Corporate Banking. | |
(2) | Transfers between segments. |
2010 | 2009 | 2008 | ||||||||||
£bn | £bn | £bn | ||||||||||
As at 1 January | 5.0 | 6.3 | 7.2 | |||||||||
Gross lending in the year | 1.3 | 1.5 | 0.9 | |||||||||
Capital repayments in the year | (2.4 | ) | (2.8 | ) | (1.8 | ) | ||||||
Acquired through business combinations | 0.1 | — | — | |||||||||
As at 31 December | 4.0 | 5.0 | 6.3 | |||||||||
(1) | Includes UPLs, overdrafts and cahoot and excludes consumer finance and Santander Cards credit cards. |
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2010 | 2009 | 2008 | ||||||||||
Loan-to-value analysis: | ||||||||||||
New business | ||||||||||||
< 75% | 74 | % | 83 | % | 62 | % | ||||||
75% – 90% | 26 | % | 17 | % | 36 | % | ||||||
> 90% | — | — | 2 | % | ||||||||
100 | % | 100 | % | 100 | % | |||||||
Average loan-to-value of new business (at inception) | 62 | % | 61 | % | 65 | % | ||||||
Stock | ||||||||||||
< 75% | 67 | % | 61 | % | 67 | % | ||||||
75% – 90% | 22 | % | 22 | % | 22 | % | ||||||
90% – 100% | 7 | % | 10 | % | 7 | % | ||||||
>100% i.e. negative equity | 4 | % | 7 | % | 4 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Average loan-to-value of stock (indexed) | 51 | % | 52 | % | 51 | % | ||||||
(1) | Excludes any fees added to the loan, and only includes the drawn loan amount, not drawdown limits. |
2010 | 2009 | 2008 | ||||||||||
Borrower profile: | ||||||||||||
New business | ||||||||||||
First-time buyers | 21 | % | 17 | % | 11 | % | ||||||
Home movers | 47 | % | 37 | % | 25 | % | ||||||
Remortgagers | 32 | % | 46 | % | 64 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Of which:(2) | ||||||||||||
- Interest-only loans | 34 | % | 36 | % | 53 | % | ||||||
- Flexi loans | 19 | % | 9 | % | 14 | % | ||||||
- Loans with original LTV >100% | — | — | — | |||||||||
Stock | ||||||||||||
First-time buyers | 18 | % | 17 | % | 16 | % | ||||||
Home movers | 39 | % | 38 | % | 39 | % | ||||||
Remortgagers | 43 | % | 45 | % | 45 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Of which: (2) | ||||||||||||
- Interest-only loans | 42 | % | 43 | % | 43 | % | ||||||
- Flexi loans | 19 | % | 18 | % | 18 | % | ||||||
- Loans with original LTV >100% | — | — | — | |||||||||
(1) | Excludes any fees added to the loan, and only includes the drawn loan amount, not drawdown limits. | |
(2) | Where a loan exhibits more than one of the higher risk criteria, it is included in all the applicable categories. |
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2010 | 2009 | 2008 | ||||||||||
Average earnings multiple (at inception) | 2.9 | 2.8 | 3.0 | |||||||||
> | Santander UK, by Collections & Recoveries, utilising the Group’s operational centres and involves the use of selected third party specialists where appropriate. | |
> | Additional outsourced providers, using operational centres approved by the Group as sufficiently capable to deal with the Group customers to the high standards expected by the Group. |
> | Predicting customer behaviours and treating customers fairly: By monitoring and modelling customer profiles and designing and implementing appropriate customer communication and repayment strategies, the Group’s collections and recoveries strategies are designed to balance treating customers fairly with prioritising monies owed to the Group by the customer. | |
> | Negotiation:Ongoing communication and negotiation with the customer are the dominant criteria in recovery management at any time during the life of the account (even the legal phase) so as to meet the objective of recovering the highest amount as quickly as possible and at the least cost. | |
> | Monitoring customer repayment promises: It is essential that agreements or promises agreed with the customer for the repayment of debts are monitored and evaluated to ensure that they are reducing the indebtedness of the customer and are cost effective for the organisation (i.e. adding positive financial value over operational costs). | |
An agreement or promise is defined as any transaction in which a firm commitment is made with the customer, in relation to a specific payment schedule. In most instances, where repayment is maintained in accordance with the promise, fees and charges to the account are withheld. Where the customer fails to meet their obligations, enforcement activity will resume where appropriate. This will involve statutory notice of default, termination of agreement and the account may be referred to debt recovery agents. | ||
> | Management aimed at the customer: Effective collections management is focussed on assisting the customer in finding workable and sustainable repayment solutions based on the customer’s personal financial circumstances and needs. This approach engenders and builds customer loyalty and the priority of repayment to the Group. Understanding customers enables the Group to arrange repayment solutions which are best for the customer whilst meeting the financial objectives of the Group. | |
> | Customer relationship management: Collections & Recoveries will have sight of information about some of a customer’s other Santander UK retail products (e.g. banking, unsecured personal loan and mortgage) and this will be taken into consideration when agreeing repayment plans. For example, a repayment plan for unsecured personal loans will not be agreed if such a plan compromises the customer’s ability to repay their Santander UK bank account. This approach reduces the risk of duplicating collections and recoveries activity and associated costs (e.g. payment of fees to external companies and the fees of lawyers taking the same measures). | |
> | Standardisation and automation of recovery proceedings:Standard processes are defined based on the number of payments or cycles of delinquency. Strategies are defined to automate the production of legislatively required documentation (such as Consumer Credit Act (‘CCA’) statutory notices of default) and to automate, so far as is possible, the transfer of customers to appropriate post write-off recovery action at pre-defined strategy stages. Documentation is converted and stored in electronic format, except where this is not permitted for legal reasons. | |
> | Ongoing management and coordination between all parties involved: Appropriate coordination is required between Santander UK internal collection departments, outsource and in-source collections services providers and in-house and outsourced post write-off collection agents in order to assure a smooth transfer of cases from one area to another and to quickly resolve any problems which might arise. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total mortgages non-performing loans and advances(1, 2) | 2,343 | 2,436 | 1,490 | |||||||||
Total mortgage asset(2) | 165,772 | 160,552 | 153,343 | |||||||||
Total impairment loan loss allowances for mortgages | 526 | 484 | 358 | |||||||||
% | % | % | ||||||||||
Mortgages non-performing loans and advances as a percentage of total mortgage asset | 1.41 | 1.52 | 0.97 | |||||||||
Coverage ratio(3) | 22.45 | 19.87 | 24.03 | |||||||||
(1) | Mortgages are classified as non-performing when the counterparty fails to make a payment when contractually due for three months or longer. | |
(2) | Accrued interest is excluded for purposes of these analyses. | |
(3) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total mortgages non-performing loans and advances | 2,343 | 2,436 | 1,490 | |||||||||
Of which: | ||||||||||||
- Interest only loans | 1,608 | 1,665 | 1,001 | |||||||||
- Flexi loans | 226 | 251 | 218 | |||||||||
- Loans with original LTV > 100% | 22 | 25 | 11 | |||||||||
(1) | Where a loan exhibits more than one of the higher risk criteria, it is included in all the applicable categories. |
2010 | 2009 | 2008 | ||||||||||||||||||||||
Volume | Value(1) | Volume | Value(1) | Volume | Value(1) | |||||||||||||||||||
‘000 | £m | ‘000 | £m | ‘000 | £m | |||||||||||||||||||
Performing | 1,588 | 160,867 | 1,564 | 155,380 | 1,532 | 148,838 | ||||||||||||||||||
Early arrears(2) | 23 | 2,439 | 25 | 2,625 | 29 | 2,886 | ||||||||||||||||||
Late arrears(3) | 21 | 2,343 | 22 | 2,436 | 14 | 1,490 | ||||||||||||||||||
Properties in possession | 1 | 123 | 1 | 110 | 1 | 129 | ||||||||||||||||||
1,633 | 165,772 | 1,612 | 160,551 | 1,576 | 153,343 | |||||||||||||||||||
(1) | Excludes accrued interest. | |
(2) | Early arrears refer to mortgages that are between 31 days and 90 days in arrears. | |
(3) | Late arrears refer to mortgages that are over 90 days in arrears. |
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CML(2) | ||||||||||||||||||||||||
Group(1) | (unaudited) | |||||||||||||||||||||||
Higher risk loans(3) | Remaining | |||||||||||||||||||||||
Interest-only | Flexible | Loans with original | loan | |||||||||||||||||||||
Mortgage arrears | loans | loans | LTV > 100% | portfolio | Total(3) | |||||||||||||||||||
(Percentage of total mortgage loans by number) | ||||||||||||||||||||||||
31 to 60 days in arrears: | ||||||||||||||||||||||||
31 December 2008 | 0.57 | 0.11 | — | 0.56 | 1.19 | — | ||||||||||||||||||
31 December 2009 | 0.45 | 0.07 | 0.01 | 0.51 | 1.00 | — | ||||||||||||||||||
31 December 2010 | 0.41 | 0.06 | — | 0.47 | 0.92 | — | ||||||||||||||||||
61 to 90 days in arrears: | ||||||||||||||||||||||||
31 December 2008 | 0.32 | 0.06 | — | 0.30 | 0.65 | — | ||||||||||||||||||
31 December 2009 | 0.27 | 0.04 | — | 0.29 | 0.58 | — | ||||||||||||||||||
31 December 2010 | 0.23 | 0.03 | — | 0.26 | 0.51 | — | ||||||||||||||||||
Over 3 to 6 months in arrears: | ||||||||||||||||||||||||
31 December 2008 | 0.31 | 0.06 | — | 0.28 | 0.62 | 1.01 | ||||||||||||||||||
31 December 2009 | 0.41 | 0.05 | 0.01 | 0.36 | 0.80 | 0.97 | ||||||||||||||||||
31 December 2010 | 0.36 | 0.05 | — | 0.33 | 0.72 | 0.87 | ||||||||||||||||||
Over 6 to 12 months in arrears: | ||||||||||||||||||||||||
31 December 2008 | 0.13 | 0.03 | — | 0.11 | 0.26 | 0.62 | ||||||||||||||||||
31 December 2009 | 0.22 | 0.04 | — | 0.16 | 0.40 | 0.81 | ||||||||||||||||||
31 December 2010 | 0.20 | 0.03 | — | 0.15 | 0.37 | 0.69 | ||||||||||||||||||
Over 12 months in arrears: | ||||||||||||||||||||||||
31 December 2008 | 0.02 | — | — | 0.02 | 0.05 | 0.25 | ||||||||||||||||||
31 December 2009 | 0.09 | 0.03 | — | 0.07 | 0.17 | 0.60 | ||||||||||||||||||
31 December 2010 | 0.11 | 0.02 | — | 0.08 | 0.20 | 0.55 | ||||||||||||||||||
(1) | Group data is not readily available for arrears less than 31 days. | |
(2) | Council of Mortgage Lenders data is not available for arrears less than three months. | |
(3) | Where a loan exhibits more than one of the higher risk criteria, it is included in all the applicable categories. As a result, the total of the mortgage arrears for higher risk loans and remaining loan portfolio will not agree to the total mortgage arrears percentages. |
We will: | ||
> | Ensure that we adopt a reasonable approach to the time over which any arrears should be repaid, having particular regard to the need to establish a payment plan which is feasible in terms of the borrower’s circumstances. | |
> | Allow the borrower (unless we have good reason not to) to change the date on which the payment is due or the method of making payment and will give the customer a written explanation of our reasons if we refuse the request. | |
> | Consider all refinance options that may include extending the mortgage term or movement to interest only as per the latest policy guidelines. | |
> | Not automatically capitalise arrears, but will consider capitalisation subject to the satisfaction of policy guidelines. | |
> | Advise the borrower to obtain advice from various debt counselling agencies that provide free and impartial advice to the general public, and will work with all such parties to assist the borrower if the customer wants us to. | |
> | Provide the borrower with a complete written update of any alternative repayment arrangements agreed. | |
> | Not put pressure on customers through excessive phone calls or correspondence, or by contact at unreasonable hours. | |
> | Have regard to a borrowers circumstances and any knowledge we may have of a borrowers working pattern or religious faith. | |
> | Retain adequate records of all dealings with our customers. | |
> | Keep our customers informed by sending regular statements which will include any arrears charges incurred. | |
> | Regularly assess and review our charges to ensure that they are not excessive. | |
> | Provide the borrower with a written update of any alternative repayment arrangements agreed, if they request it. | |
> | Have regard to general law including the UK Data Protection Act. |
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We will: | ||
> | Treat borrowers fairly, equally and with courtesy at all times having regard to their personal and financial circumstances. | |
> | Ensure that all written communication will stress our commitment to treating customer fairly, ensure that agreed procedures/consequences are fully explained, confirm all costs that will be debited and explain our complaints process if needed. | |
> | Ensure that every telephone call with the borrower will require appropriate security steps being undertaken to confirm identification and records of the content made. | |
> | Ensure that our collectors have a fully documented development/training plan and that there is a monitoring process for performance management | |
> | Ensure that our collectors are independently monitored for call quality on a monthly basis. | |
> | Ensure that our appointed suppliers have a fully documented training plan for new starters; they will have a monitoring process for performance management and follow Santander UK’s documented complaints process. | |
> | Advise the borrower to obtain advice from various debt counselling agencies that provide free and impartial advice to the general public, and will work with all such parties to assist the borrower if the customer wants us to. | |
> | Give the customer reasonable time (breathing space) to consider all available options. | |
> | Take account of the borrower’s financial circumstances when arranging a payment plan but if we cannot agree such a plan we may continue with enforcement activity which will involve statutory default notice, termination of agreement and referral to debt recovery agents where appropriate. | |
> | Ensure that policies are clear on how we will deal with customers with serious or terminal illness, mental health problems or disability. | |
> | Ensure that our offices are open for extended hours and are adequately resourced at all times. | |
> | Ensure that senior management will have access to relevant and timely information to evidence TCF measures are operating effectively. |
> | Wherever possible, rehabilitation tools are used to encourage customers to find their own way out of difficulties but this solution should be agreeable to the Group. | |
> | The Group will be sympathetic and not make unreasonable demands of the customer. | |
> | Customer retention, where appropriate, is important and helping customers through difficult times can improve loyalty. | |
> | Guarantors are pursued only after it is established that the borrower is unable or unwilling to fulfil their contractual arrangements or if contact with the borrower cannot be made. | |
> | Litigation and repossession is the last resort. |
> | The Group will be open, honest and communicative with customers. Dialogue with the customer will be established as soon as possible and maintained through the collections and recoveries process. Telephone, letters, home visits, text messages and engagement of external agents may be used to establish contact. | |
> | The Group will, where appropriate, establish why the arrears have arisen and identify whether the problem is short or long term. Wherever possible, further difficulties should be prevented. | |
> | The Group will ensure that the customer understands that collection action is being taken and the reason for this as well as the likely consequences if the account is not brought up to date immediately. | |
> | The Group seeks to gain the customers commitment to deal with the problem. | |
> | All contact with the customer will be recorded in the ‘collections history database’ which is a part of the collections system. | |
> | Customers able to bring their account into order without assistance (‘self cures’) do not need to be contacted by Collections & Recoveries. |
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a) | Use of external agents— external agents may be engaged to trace customers during the collection and recoveries phase. Remuneration is on a fixed fee basis. The Group manages external agents and suppliers to ensure that they follow a consistent approach to any collections and recoveries activity, and relevant management information is received from them in a consistent style. In addition, suppliers are audited and reviewed to ensure that: |
> | they are fully compliant with TCF, MCOB and other UK Financial Services Authority requirements | ||
> | training, audit and review meeting notes are fully documented; and | ||
> | supplier contracts are referenced to TCF and MCOB requirements. |
b) | Field collections- Field visits are undertaken by agents acting as full representatives of Santander UK visiting a mortgaged property in person. Field visits are only used where the borrower is two or more instalments in arrears and has not responded satisfactorily to other forms of communication. Where unauthorised letting or abandonment of the property is suspected, a field visit may be made irrespective of the arrears situation. | |
c) | Exercise the legal right of set-off— other designated bank accounts may be combined to clear the arrears and any other fees, charges or sums which are due but not to make principal repayments. Right of set-off may only be performed on available funds; this does not include funds in a bank account intended for priority debts such as rent or council tax. If a payment arrangement is in place, right to set-off will not apply. The repayment period also cannot be extended to defer collection or arrears. | |
d) | Arrears fees —An arrears fee charge is typically raised on the anniversary of a missed payment i.e. when payment has not been received before the next payment is due and/or on the anniversary of a missed payment when the customer has not kept to an agreed repayment plan with Collections & Recoveries (i.e. a broken promise). A customer will only be charged a maximum of one fixed fee per month. |
2010 | 2010 | 2009 | 2009 | |||||||||||||
£m | % | £m | % | |||||||||||||
Mortgages restructured during the year (1, 2) | 569 | 100 | �� | 491 | 100 | |||||||||||
Of which(3): | ||||||||||||||||
- Interest only loans | 254 | 45 | 208 | 42 | ||||||||||||
- Flexi loans | 18 | 3 | 34 | 7 | ||||||||||||
- Loans with original LTV >100% | 1 | — | 1 | — | ||||||||||||
(1) | All mortgages originated by the Group are first charge. | |
(2) | Mortgages are included within the year that they were restructured. | |
(3) | Where a loan exhibits more than one of the higher risk criteria, it is included in all the applicable categories. |
a) | Payment arrangements— discretion exists to vary the repayment schedule to allow customers to bring the account up to date. The objective is to bring the account up to date as soon as possible. | |
If a customer has repeatedly broken previous arrangements to the extent that the advisor does not believe the payment arrangement will be adhered to, payment arrangements are not agreed without an upfront payment. If a payment arrangement is refused, the customer is notified of this in writing, as per requirements under the pre-action protocol. In the event a customer breaks an arrangement, Santander UK will wait at least 15 business days before passing them to litigation / continuing with litigation, as per requirements under the pre-action protocol. New arrangements will not be agreed in these fifteen days; however the original arrangement may be reinstated. | ||
b) | Refinancing— Collections & Recoveries may offer to pay off an existing mortgage and replace it with a new one, only to accounts in arrears or with significant financial difficulties or if customer is up to date but states they are experiencing financial hardship. Collections & Recoveries may offer a term extension or interest only concession. The eligibility criteria for refinancing are: |
> | If the account is at least one instalment in arrears, or | ||
> | If the customer has been consistently underpaying their instalment (for at least the last two months) then this can be taken as evidence of financial hardship, or | ||
> | If the customer claims a medium term temporary change in financial circumstances has caused financial distress, the customer must supply evidence in writing of this before they can be considered for refinancing. Pre-delinquent customers are not required to submit evidence of financial hardship. |
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To qualify for either a term extension or an interest only concession, affordability is assessed, and the customer must also meet the specific criteria detailed below, in addition to the eligibility criteria for refinancing. The customer must be made aware of the implications of refinancing and appropriate confirmation of this received from them. |
> | Term Extensions— the repayment period/program may be extended to reduce monthly repayments if all other collections tools have been exhausted. Customers may be offered a term extension where they are up-to-date but showing evidence of financial difficulties, or are already in the Collections & Recoveries process, and no other refinancing has been performed in the last 12 months. The term can be extended to no more than 40 years and the customer must be no more than 75 years old at the end of the revised term of the mortgage. | ||
> | Interest Only Concessions— the monthly repayment may be reduced to interest payment only with capital repayment deferred if all other collections tools have been exhausted and a term extension is either not possible or affordable. Customers may be offered an interest only concession where they are up-to-date but showing evidence of financial difficulties, or are already in the Collections & Recoveries process. Interest only concessions are offered up to a two year maximum period, after which a review is carried out and a further extension may be granted depending on customer circumstances. Periodic reviews of the customer financial situation are undertaken to assess when the customer can afford to return to the repayment method. In 2010, the Group’s processes were enhanced to introduce a new affordability tool which increased the emphasis placed on factors such as affordability and overall customer indebtedness. |
> | Three or more missed instalments and having reached the end of strategy. | |
> | Upon breaking an agreement while having more than three missed instalments. Accounts are given at least 15 business days to make up the payment missed under the agreement before being passed to litigation as per the pre-action protocol. | |
> | Legal disputes. | |
> | Voluntary repossession. |
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Group | Group | Group | CML (unaudited) | |||||||||||||
Number of | Value | Percentage of total mortgage loans by number | ||||||||||||||
Properties in possession | properties | £m | % | % | ||||||||||||
31 December 2008 | 969 | 130 | 0.06 | 0.21 | ||||||||||||
31 December 2009 | 820 | 110 | 0.05 | 0.14 | ||||||||||||
31 December 2010 | 873 | 123 | 0.05 | 0.11 | ||||||||||||
> | The Group’s ownership of the loan. | |
> | The validity of the legal charge securing the loan. | |
> | The effectiveness of title insurance on the property securing the loan. | |
> | The loan’s compliance with any applicable loan criteria established under the transaction structure. | |
> | The loan’s compliance with applicable laws. | |
> | Whether the mortgage property was occupied by the borrower. | |
> | Whether the mortgage loan was originated in conformity with the originator’s lending criteria. | |
> | The detailed data concerning the mortgage loan that was included on the mortgage loan schedule. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total unsecured non-performing loans and advances(1,2) | 236 | 260 | 397 | |||||||||
Total unsecured customer assets(2) | 7,693 | 4,979 | 6,251 | |||||||||
Total impairment loan loss allowances for unsecured loans and advances | 637 | 394 | 292 | |||||||||
% | % | % | ||||||||||
Non-performing loans as a percentage of unsecured customer assets | 3.07 | 5.22 | 6.35 | |||||||||
Coverage ratio(3) | 269.92 | 151.54 | 73.55 | |||||||||
(1) | Unsecured loans and advances are classified as non-performing when the counterparty fails to make a payment when contractually due for three months or longer. | |
(2) | Includes UPLs, overdrafts, cahoot, consumer finance and credit cards. Accrued interest is excluded for purposes of these analyses. | |
(3) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
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2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total finance leases and other secured non-performing loans and advances(1,2) | 204 | 208 | 94 | |||||||||
Total finance leases and other secured customer assets(2) | 4,314 | 2,216 | 2,276 | |||||||||
Total impairment loan loss allowances for finance leases and other secured loans and advances(3) | 90 | 57 | 44 | |||||||||
% | % | % | ||||||||||
Non-performing loans as a % of finance leases and other secured customer assets | 4.73 | 9.39 | 4.13 | |||||||||
Coverage ratio(4) | 44.12 | 27.40 | 46.81 | |||||||||
(1) | Finance leases and other secured loans are classified as non-performing when the counterparty fails to make a payment when contractually due for three months or longer. | |
(2) | Accrued interest is excluded for purposes of these analyses. | |
(3) | Excludes impairment loss allowances on commercial mortgages that are managed within Corporate Banking. | |
(4) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Observed impairment loss allowances | ||||||||||||||||||||
Advances secured on residential properties — UK | 369 | 313 | 174 | 74 | 45 | |||||||||||||||
Finance leases — UK | 2 | — | — | — | 1 | |||||||||||||||
Other secured advances — UK | 55 | 50 | 37 | 32 | 73 | |||||||||||||||
Unsecured advances — UK | 381 | 341 | 227 | 250 | 243 | |||||||||||||||
Total observed impairment loss allowances | 807 | 704 | 438 | 356 | 362 | |||||||||||||||
Incurred but not yet observed impairment loss allowances | ||||||||||||||||||||
Advances secured on residential properties — UK | 157 | 171 | 184 | 102 | 60 | |||||||||||||||
Finance leases — UK | 16 | — | — | — | — | |||||||||||||||
Other secured advances — UK | 22 | 12 | 11 | 8 | 3 | |||||||||||||||
Unsecured advances — UK | 256 | 53 | 65 | 85 | 111 | |||||||||||||||
Total incurred but not yet observed impairment loss allowances | 451 | 236 | 260 | 195 | 174 | |||||||||||||||
Total impairment loss allowances | 1,258 | 940 | 698 | 551 | 536 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Impairment loss allowances at 1 January | 940 | 698 | 551 | 536 | 394 | |||||||||||||||
Amounts written off | ||||||||||||||||||||
Advances secured on residential properties — UK | (42 | ) | (84 | ) | (32 | ) | (9 | ) | (11 | ) | ||||||||||
Finance leases — UK | (2 | ) | — | — | — | — | ||||||||||||||
Other secured advances — UK | (48 | ) | (17 | ) | (9 | ) | (25 | ) | (27 | ) | ||||||||||
Unsecured advances — UK | (448 | ) | (399 | ) | (262 | ) | (339 | ) | (205 | ) | ||||||||||
Total amounts written off | (540 | ) | (500 | ) | (303 | ) | (373 | ) | (243 | ) | ||||||||||
Observed impairment losses charged against/(released into) profit | ||||||||||||||||||||
Advances secured on residential properties — UK | 98 | 223 | 132 | 38 | 35 | |||||||||||||||
Finance leases — UK | 4 | — | — | — | — | |||||||||||||||
Other secured advances — UK | 53 | 30 | 14 | (17 | ) | (25 | ) | |||||||||||||
Unsecured advances — UK | 488 | 513 | 239 | 346 | 289 | |||||||||||||||
Total observed impairment losses charged against profit | 643 | 766 | 385 | 367 | 299 | |||||||||||||||
Incurred but not yet observed impairment losses (released into)/charged against profit | (6 | ) | (24 | ) | (17 | ) | 21 | 86 | ||||||||||||
Total impairment losses charged against profit (including discontinued operations) | 637 | 742 | 368 | 388 | 385 | |||||||||||||||
Assumed through transfers of entities under common control | 221 | — | 82 | — | — | |||||||||||||||
Impairment loss allowances at the end of the year | 1,258 | 940 | 698 | 551 | 536 | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Advances secured on residential properties — UK | 1 | 1 | 1 | 2 | 2 | |||||||||||||||
Finance leases — UK | 1 | — | — | — | — | |||||||||||||||
Other secured advances — UK | — | — | 12 | 6 | 7 | |||||||||||||||
Unsecured advances — UK | 20 | 30 | 33 | 36 | 32 | |||||||||||||||
Total amount recovered | 22 | 31 | 46 | 44 | 41 | |||||||||||||||
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Retail Banking non-performing loans and advances that are impaired(2) | 1,166 | 1,124 | 746 | 296 | 375 | |||||||||||||||
Retail Banking non-performing loans and advances that are not impaired | 1,617 | 1,780 | 1,235 | 596 | 451 | |||||||||||||||
Total Retail Banking non-performing loans and advances(3) | 2,783 | 2,904 | 1,981 | 892 | 826 | |||||||||||||||
Total Retail Banking customer assets(4) | 177,779 | 167,747 | 161,870 | 111,396 | 103,328 | |||||||||||||||
Total Retail Banking impairment loan loss allowances(5) | 1,253 | 935 | 694 | 551 | 536 | |||||||||||||||
% | % | % | % | % | ||||||||||||||||
Non-performing loans and advances as a % of customers assets | 1.57 | 1.73 | 1.22 | 0.80 | 0.80 | |||||||||||||||
Coverage ratio(6) | 45.02 | 32.20 | 35.03 | 61.77 | 64.89 | |||||||||||||||
(1) | Loans and advances are classified as non-performing typically when the counterparty fails to make payments when contractually due for three months or longer. | |
(2) | Non-performing loans against which an impairment loss allowance has been established. | |
(3) | All non-performing loans are UK and continue accruing interest. | |
(4) | Excludes accrued interest. | |
(5) | Excludes the portion of impairment loss allowances on commercial mortgages that are managed within Corporate Banking. | |
(6) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
2010 | 2009 | |||||||
£m | £m | |||||||
Restructured loans(1) | 607 | 514 | ||||||
(1) | Loans are included within the year that they were restructured. |
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2010 | 2009 | 2008 | ||||||||||
£bn | £bn | £bn | ||||||||||
SME(1) | 6.2 | 4.5 | 3.5 | |||||||||
Social housing(2) | 6.6 | 6.3 | 6.0 | |||||||||
Real estate(3) | 3.3 | 2.9 | 2.4 | |||||||||
Other(4) | 2.6 | 2.6 | 2.6 | |||||||||
18.7 | 16.3 | 14.5 | ||||||||||
Non-core: | ||||||||||||
- Aviation | 0.9 | 1.0 | 1.1 | |||||||||
- Shipping | 1.2 | 1.7 | 1.8 | |||||||||
- Other(5) | 1.7 | 2.2 | 3.2 | |||||||||
3.8 | 4.9 | 6.1 | ||||||||||
Total | 22.5 | 21.2 | 20.6 | |||||||||
(1) | Includes corporate loans and commercial mortgages (within other secured loans) classified as Loans and advances to customers in Note 17. | |
(2) | Includes loans held at amortised cost shown in Note 17 to the Consolidated Financial Statements and loans designated at fair value through profit or loss. Also excludes social housing bonds of £0.3bn (2009: £0.3bn, 2008: £0.2bn) designated at fair value through profit or loss. | |
(3) | Includes corporate loans classified as Loans and advances to customers in Note 17. | |
(4) | Includes corporate loans and finance leases classified as Loans and advances to customers in Note 17 and Operating lease assets in Note 26. | |
(5) | Includes corporate loans and finance leases classified as Loans and advances to customers in Note 17. |
2010 | 2009 | |||||||
£bn | £bn | |||||||
SME | 5.6 | 4.2 | ||||||
Social housing | 9.2 | 8.6 | ||||||
Real estate | 6.1 | 4.6 | ||||||
Other | 4.8 | 4.2 | ||||||
25.7 | 21.6 | |||||||
Non-core: | ||||||||
- Aviation | 1.0 | 1.0 | ||||||
- Shipping | 1.4 | 2.0 | ||||||
- Structured Finance | 2.1 | 2.5 | ||||||
- Other | 0.7 | 0.8 | ||||||
5.2 | 6.3 | |||||||
Total | 30.9 | 27.9 | ||||||
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Corporate – SME | Corporate – Other | Real Estate | Social Housing | Non-core | Total | |||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
AAA | — | 26 | 92 | — | — | 118 | ||||||||||||||||||
AA | 182 | — | — | 1,865 | — | 2,047 | ||||||||||||||||||
A | 227 | 604 | 798 | 6,153 | 321 | 8,103 | ||||||||||||||||||
BBB | 814 | 3,195 | 2,527 | 1,206 | 2,207 | 9,949 | ||||||||||||||||||
BB | 1,515 | 909 | 2,478 | 10 | 1,883 | 6,795 | ||||||||||||||||||
B | 40 | 107 | 82 | — | 334 | 563 | ||||||||||||||||||
CCC | 36 | — | 7 | — | 63 | 106 | ||||||||||||||||||
D | 34 | 1 | 84 | — | 354 | 473 | ||||||||||||||||||
Other(3) | 2,747 | — | — | — | — | 2,747 | ||||||||||||||||||
Total | 5,595 | 4,842 | 6,068 | 9,234 | 5,162 | 30,901 | ||||||||||||||||||
Corporate – SME | Corporate – Other | Real Estate | Social Housing | Non-core | Total | |||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
AAA | — | 27 | 89 | — | — | 116 | ||||||||||||||||||
AA | 176 | 50 | — | 1,009 | 310 | 1,545 | ||||||||||||||||||
A | 237 | 542 | 487 | 5,686 | 638 | 7,590 | ||||||||||||||||||
BBB | 334 | 2,602 | 1,670 | 1,801 | 3,070 | 9,477 | ||||||||||||||||||
BB | 647 | 832 | 2,080 | 100 | 1,727 | 5,386 | ||||||||||||||||||
B | 27 | 97 | 180 | — | 204 | 508 | ||||||||||||||||||
CCC | 11 | 5 | 5 | — | 67 | 88 | ||||||||||||||||||
D | 38 | 73 | 99 | — | 199 | 409 | ||||||||||||||||||
Other(3) | 2,767 | — | — | — | — | 2,767 | ||||||||||||||||||
Total | 4,237 | 4,228 | 4,610 | 8,596 | 6,215 | 27,886 | ||||||||||||||||||
(1) | The committed facilities exposure includes OTC derivatives and commercial mortgages. | |
(2) | All exposures are internally rated. External ratings are taken into consideration in the rating process, where available. | |
(3) | Individual exposures of £1m or less. |
Corporate – SME | Corporate – Other | Real Estate | Social Housing | Non-core | Total | |||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
UK | 5,530 | 4,571 | 6,068 | 9,234 | 2,563 | 27,966 | ||||||||||||||||||
Rest of Europe | 65 | 171 | — | — | 1,155 | 1,391 | ||||||||||||||||||
US | — | — | — | — | 505 | 505 | ||||||||||||||||||
Other, including non-OECD | — | 100 | — | — | 939 | 1,039 | ||||||||||||||||||
Total | 5,595 | 4,842 | 6,068 | 9,234 | 5,162 | 30,901 | ||||||||||||||||||
Corporate – SME | Corporate – Other | Real Estate | Social Housing | Non-core | Total | |||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
UK | 4,215 | 3,883 | 4,610 | 8,596 | 3,341 | 24,645 | ||||||||||||||||||
Rest of Europe | 20 | 211 | — | — | 1,348 | 1,579 | ||||||||||||||||||
US | — | — | — | — | 511 | 511 | ||||||||||||||||||
Other, including non-OECD | 2 | 134 | — | — | 1,015 | 1,151 | ||||||||||||||||||
Total | 4,237 | 4,228 | 4,610 | 8,596 | 6,215 | 27,886 | ||||||||||||||||||
Impairment loss allowances(2) | ||||||||||||||||||||||||||||||||||||||||||||
Portfolio | Monitor | Monitor | Active | Active | Workout | Workout | NPL(1) | NPL | Observed | IBNO | ||||||||||||||||||||||||||||||||||
2010 | £m | £m | % | £m | % | £m | % | £m | % | £m | £m | |||||||||||||||||||||||||||||||||
Corporate — SME | 5,595 | 302 | 5 | 145 | 3 | 290 | 5 | 242 | 4 | 62 | 22 | |||||||||||||||||||||||||||||||||
Corporate — Other | 4,842 | 155 | 3 | 131 | 3 | 114 | 2 | 54 | 1 | 5 | 4 | |||||||||||||||||||||||||||||||||
Real Estate | 6,068 | 454 | 7 | 408 | 7 | 609 | 10 | 417 | 7 | 99 | 31 | |||||||||||||||||||||||||||||||||
Social Housing | 9,234 | 179 | 2 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Non-core | 5,162 | 1,097 | 21 | 377 | 7 | 424 | 8 | 353 | 7 | 139 | 71 | |||||||||||||||||||||||||||||||||
Total | 30,901 | 2,187 | 7 | 1,061 | 3 | 1,437 | 5 | 1,066 | 3 | 305 | 128 | |||||||||||||||||||||||||||||||||
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Impairment loss allowances(2) | ||||||||||||||||||||||||||||||||||||||||||||
Portfolio | Monitor | Monitor | Active | Active | Workout | Workout | NPL(1) | NPL | Observed | IBNO | ||||||||||||||||||||||||||||||||||
2009 | £m | £m | % | £m | % | £m | % | £m | % | £m | £m | |||||||||||||||||||||||||||||||||
Corporate — SME | 4,237 | 332 | 8 | 121 | 3 | 204 | 5 | 163 | 4 | 56 | 17 | |||||||||||||||||||||||||||||||||
Corporate — Other | 4,228 | 236 | 6 | 22 | 1 | 84 | 2 | 70 | 2 | 36 | — | |||||||||||||||||||||||||||||||||
Real Estate | 4,610 | 586 | 13 | 376 | 8 | 213 | 5 | 206 | 4 | 40 | 20 | |||||||||||||||||||||||||||||||||
Social Housing | 8,596 | 500 | 6 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Non-core | 6,215 | 1,232 | 20 | 539 | 9 | 434 | 7 | 368 | 6 | 130 | 136 | |||||||||||||||||||||||||||||||||
Total | 27,886 | 2,886 | 10 | 1,058 | 4 | 935 | 3 | 807 | 3 | 262 | 173 | |||||||||||||||||||||||||||||||||
(1) | Includes committed facilities and swaps. | |
(2) | Includes impairment loss allowances on commercial mortgages managed by Corporate Banking Credit Risk. |
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Total Corporate Banking customer assets in arrears | 698 | 533 | 143 | |||||||||
Total Corporate Banking customer assets(1) | 23,353 | 22,167 | 21,475 | |||||||||
Corporate Banking customer assets in arrears as a % of Corporate Banking customer assets | 2.99 | % | 2.40 | % | 0.67 | % | ||||||
(1) | Corporate Banking customer assets include large corporate customer assets managed within Global Banking & Markets, social housing loans and finance leases. |
> | Initially by the relationship manager and, for non standardised cases, the credit partner, and | |
> | Subsequently by Workouts & Collections where the circumstances of the case become more critical or specialist expertise is required. |
a) | Payment arrangements— discretion exists to vary the repayment schedule to allow customers to bring the account up to date. Repayments may be re-profiled to better reflect the forecast cashflows of the business or pending asset disposals. The objective is to bring the account up to date as soon as possible. |
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b) | Refinancing— The Group may offer a term extension or interest only concession provided that the forecasts indicate that the borrower will be able to meet the revised payment arrangements. |
> | Term Extensions— the term of the credit facility may be extended to reduce the regular periodic repayments if all other collections tools have been exhausted, and where as a minimum, the interest can be serviced and there is a realistic prospect of full or improved recoveries in the foreseeable future. Customers may be offered a term extension where they are up-to-date but showing evidence of financial difficulties, or are already in the Workouts & Collections process. | ||
> | Interest Only Concessions— the regular periodic repayment may be reduced to interest payment only for a limited period with capital repayment deferred if all other collections tools have been exhausted and a term extension is either not possible or affordable. Customers may be offered an interest only concession where they are up-to-date but showing evidence of financial difficulties, or are already in the Workouts & Collections process. Periodic reviews of the customer financial situation are undertaken to assess when the customer can afford to return to the repayment method. |
c) | Other— The Group may also pursue other solutions, in limited circumstances, as follows: |
> | Provision of additional security or guarantees— Where a borrower has unencumbered assets, these may be charged as new or additional security in return for the Group restructuring existing facilities. Alternatively, the Group may take a guarantee from other companies within the borrower’s group and/or major shareholders provided it can be established the proposed guarantor has the resources to support such a commitment. | ||
> | Resetting of covenants and trapping surplus cashflow— Financial covenants may be reset at levels which more accurately reflect the current and forecast trading position of the borrower. This may also be accompanied by a requirement for all surplus cash after operating costs to be trapped and used in reduction of the Group’s lending. | ||
> | Seeking additional equity— Where a business is over-leveraged, fresh equity capital will be sought from existing or new investors to adjust the capital structure in conjunction with the Group agreeing to restructure the residual debt. | ||
> | Debt-for-equity swaps— In circumstances where a borrower’s balance sheet is materially over-leveraged but the underlying business is viewed as capable of being turned around, the Group may agree to reduce the debt by exchanging a portion of it for equity in the company. This will typically only be done alongside new cash equity being raised, the implementation of a detailed business plan to effect a turnaround in the prospects of the business, and satisfaction with management’s ability to deliver the strategy. |
> | Agreeing with the borrower an orderly sale of assets outside insolvency to pay down the Group’s debt; | |
> | Arranging for the refinance of the debt with another lender; or | |
> | Sale of the debt where a secondary market exists (either individual loans or on occasion as a portfolio sale). |
> | Pursuing its rights through an insolvency process; | |
> | Optimising the sale proceeds of any collateral held; and | |
> | Seeking compensation from third parties, as appropriate. |
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2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Observed impairment loss allowances | ||||||||||||||||||||
Corporate loans — UK | 271 | 185 | 13 | — | — | |||||||||||||||
Finance leases — UK | — | 1 | — | — | — | |||||||||||||||
Total observed impairment loss allowances | 271 | 186 | 13 | — | — | |||||||||||||||
Incurred but not yet observed impairment loss allowances | ||||||||||||||||||||
Corporate loans — UK | 125 | 172 | 289 | — | — | |||||||||||||||
Finance leases — UK | 1 | 1 | 1 | — | — | |||||||||||||||
Total incurred but not yet observed impairment loss allowances | 126 | 173 | 290 | — | — | |||||||||||||||
Total impairment loss allowances | 397 | 359 | 303 | — | — | |||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Impairment loss allowances at the start of the year | 359 | 303 | — | — | — | |||||||||||||||
Amounts written off: | ||||||||||||||||||||
- Corporate loans — UK | (68 | ) | — | — | — | — | ||||||||||||||
- Finance leases — UK | (3 | ) | (4 | ) | — | — | — | |||||||||||||
Total amounts written off | (71 | ) | (4 | ) | — | — | — | |||||||||||||
Observed impairment losses charged against profit: | ||||||||||||||||||||
- Corporate loans — UK | 154 | 172 | 13 | — | — | |||||||||||||||
- Finance leases — UK | 2 | 5 | — | — | — | |||||||||||||||
Total observed impairment losses charged against profit | 156 | 177 | 13 | — | — | |||||||||||||||
Incurred but not yet observed impairment losses charged against/ (released into) profit | (47 | ) | (117 | ) | 13 | — | — | |||||||||||||
Total impairment losses charged against profit | 109 | 60 | 26 | — | — | |||||||||||||||
Assumed through transfers of entities under common control | — | — | 277 | — | — | |||||||||||||||
Impairment loss allowances at the end of the year | 397 | 359 | 303 | — | — | |||||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Corporate loans — UK | 12 | 23 | — | |||||||||
Finance Leases — UK | — | 1 | — | |||||||||
Total amount recovered | 12 | 24 | — | |||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Corporate Banking non-performing loans and advances that are impaired | 677 | 490 | 397 | |||||||||
Corporate Banking non-performing loans and advances that are not impaired | 257 | 219 | — | |||||||||
Total Corporate Banking non-performing loans and advances(2) | 934 | 709 | 397 | |||||||||
Total Corporate Banking customer assets(3) | 23,353 | 22,167 | 21,475 | |||||||||
Total Corporate Banking impairment loan loss allowances(4) | 402 | 363 | 307 | |||||||||
% | % | % | ||||||||||
Non-performing loans and advances as a % of customer assets | 4.00 | % | 3.20 | % | 1.85 | % | ||||||
Coverage ratio(5) | 43.04 | % | 51.20 | % | 77.33 | % | ||||||
(1) | Loans and advances are classified as non-performing typically when the counterparty fails to make payments when contractually due for three months or longer or where it is deemed unlikely that the counterparty will be able to maintain payments. | |
(2) | All non-performing loans continue accruing interest. | |
(3) | Corporate Banking customer assets include large corporate customer assets managed within Global Banking & Markets, social housing loans and finance leases. Accrued interest is excluded for purposes of these analyses. | |
(4) | Includes impairment loss allowances on commercial mortgages. | |
(5) | Impairment loan loss allowances as a percentage of non-performing loans and advances. |
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2010 | 2009 | 2008 | ||||||||||
£bn | £bn | £bn | ||||||||||
Short-term markets(1) | 24.3 | 26.6 | 19.8 | |||||||||
Customer Assets(2) | 1.8 | 1.1 | 0.9 | |||||||||
Derivatives | 20.1 | 16.0 | 21.3 | |||||||||
Other(3) | 3.8 | 1.1 | 2.5 | |||||||||
Total | 50.0 | 44.8 | 44.5 | |||||||||
(1) | Comprises reverse repos and government debt securities. | |
(2) | Includes loans and advances to customers. | |
(3) | Principally comprises UK treasury bills and equities. |
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Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
AAA | 18,420 | — | 9 | 18,429 | ||||||||||||
AA | 87 | 194 | 287 | 568 | ||||||||||||
A | — | 1,815 | 643 | 2,458 | ||||||||||||
BBB and below | — | 2,439 | 236 | 2,675 | ||||||||||||
Total | 18,507 | 4,448 | 1,175 | 24,130 | ||||||||||||
Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009 | £m | £m | £m | £m | ||||||||||||
AAA | 11,857 | — | 228 | 12,085 | ||||||||||||
AA | 2 | — | 592 | 594 | ||||||||||||
A | 26 | 69 | 2,433 | 2,528 | ||||||||||||
BBB and below | — | 219 | 358 | 577 | ||||||||||||
Total | 11,885 | 288 | 3,611 | 15,784 | ||||||||||||
(1) | External ratings are applied to all exposures where available. |
Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
UK | 14,875 | 3,857 | 755 | 19,487 | ||||||||||||
Rest of Europe | 3,496 | 453 | 344 | 4,293 | ||||||||||||
US | — | — | 44 | 44 | ||||||||||||
Rest of the world | 136 | 138 | 32 | 306 | ||||||||||||
Total | 18,507 | 4,448 | 1,175 | 24,130 | ||||||||||||
Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009 | £m | £m | £m | £m | ||||||||||||
UK | 10,207 | 150 | 2,366 | 12,723 | ||||||||||||
Rest of Europe | 1,313 | 66 | 729 | 2,108 | ||||||||||||
US | 182 | 1 | 193 | 376 | ||||||||||||
Rest of the world | 183 | 71 | 323 | 577 | ||||||||||||
Total | 11,885 | 288 | 3,611 | 15,784 | ||||||||||||
Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
AAA | 34 | — | — | 34 | ||||||||||||
AA | — | — | 75 | 75 | ||||||||||||
A | — | 53 | 164 | 217 | ||||||||||||
BBB and below | — | 273 | 66 | 339 | ||||||||||||
Total | 34 | 326 | 305 | 665 | ||||||||||||
Banks and | ||||||||||||||||
Global | Financial | |||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009 | £m | £m | £m | £m | ||||||||||||
AAA | 50 | — | 8 | 58 | ||||||||||||
AA | — | — | 54 | 54 | ||||||||||||
A | — | — | 181 | 181 | ||||||||||||
BBB and below | — | 150 | 226 | 376 | ||||||||||||
Total | 50 | 150 | 469 | 669 | ||||||||||||
(1) | External ratings are applied to all exposures where available. |
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2010 | 2009 | 2008 | ||||||||||
£bn | £bn | bn | ||||||||||
Balances at central banks | 25.6 | 3.5 | 3.2 | |||||||||
Treasury asset portfolio | 5.1 | 9.6 | 14.1 | |||||||||
Collateral | 9.1 | 6.0 | 4.7 | |||||||||
Other assets | 7.8 | 28.2 | 45.4 | |||||||||
Total | 47.6 | 47.3 | 67.4 | |||||||||
Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
AAA | 31,327 | 1,863 | 317 | 33,507 | ||||||||||||
AA | 184 | 172 | 468 | 824 | ||||||||||||
A | — | 61 | 2,435 | 2,496 | ||||||||||||
BBB and below | — | 216 | 584 | 800 | ||||||||||||
Total | 31,511 | 2,312 | 3,804 | 37,627 | ||||||||||||
Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009(2) | £m | £m | £m | £m | ||||||||||||
AAA | 12,360 | 4,493 | 162 | 17,015 | ||||||||||||
AA | 89 | 914 | 6,176 | 7,179 | ||||||||||||
A | — | 114 | 11,091 | 11,205 | ||||||||||||
BBB and below | — | 986 | 2,267 | 3,253 | ||||||||||||
Total | 12,449 | 6,507 | 19,696 | 38,652 | ||||||||||||
(1) | External ratings are applied to all exposures where available. | |
(2) | 2009 included exposures to subsidiaries previously outside the Santander UK plc Group, Santander Cards Limited and Santander Consumer (UK) plc. In 2010, the Company acquired those businesses and the Group’s exposures to them were eliminated on consolidation. Following consolidation, credit exposures arising in those businesses have been reported within the Retail Banking and Corporate Banking divisions. |
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Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
UK | 25,862 | 763 | 1,340 | 27,965 | ||||||||||||
Rest of Europe | 183 | 711 | 1,840 | 2,734 | ||||||||||||
US | 5,139 | 705 | 429 | 6,273 | ||||||||||||
Rest of world | 327 | 133 | 195 | 655 | ||||||||||||
Total | 31,511 | 2,312 | 3,804 | 37,627 | ||||||||||||
Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009(1) | £m | £m | £m | £m | ||||||||||||
UK | 10,525 | 607 | 6,875 | 18,007 | ||||||||||||
Rest of Europe | 1,085 | 4,247 | 9,958 | 15,290 | ||||||||||||
US | 448 | 615 | 1,768 | 2,831 | ||||||||||||
Rest of world | 391 | 1,038 | 1,095 | 2,524 | ||||||||||||
Total | 12,449 | 6,507 | 19,696 | 38,652 | ||||||||||||
(1) | External ratings are applied to all exposures where available. | |
(2) | 2009 included exposures to subsidiaries previously outside the Santander UK plc Group, Santander Cards Limited and Santander Consumer (UK) plc. In 2010, the Company acquired those businesses and the Group’s exposures to them were eliminated on consolidation. Following consolidation, credit exposures arising in those businesses have been reported within the Retail Banking and Corporate Banking divisions. |
Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2010 | £m | £m | £m | £m | ||||||||||||
AAA | 5,314 | — | — | 5,314 | ||||||||||||
AA | — | — | 316 | 316 | ||||||||||||
A | — | — | 1,132 | 1,132 | ||||||||||||
BBB and below | — | — | — | — | ||||||||||||
Total | 5,314 | — | 1,448 | 6,762 | ||||||||||||
Banks and | ||||||||||||||||
Financial | ||||||||||||||||
Sovereign | Corporates | Institutions | Total | |||||||||||||
2009(2) | £m | £m | £m | £m | ||||||||||||
AAA | 7,083 | — | — | 7,083 | ||||||||||||
AA | — | — | 534 | 534 | ||||||||||||
A | — | — | 2,419 | 2,419 | ||||||||||||
BBB and below | — | — | — | — | ||||||||||||
Total | 7,083 | — | 2,953 | 10,036 | ||||||||||||
(1) | External ratings are applied to all exposures where available. | |
(2) | 2009 included exposures to subsidiaries previously outside the Santander UK plc Group, Santander Cards Limited and Santander Consumer (UK) plc. In 2010, the Company acquired those businesses and the Group’s exposures to them were eliminated on consolidation. Following consolidation, credit exposures arising in those businesses have been reported within the Retail Banking and Corporate Banking divisions. |
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> | Short-term liquid market riskcovers activities where exposures are subject to frequent change and could be closed out over a short-time horizon. Most of the exposure is generated by Global Banking & Markets. | |
> | Structural market riskincludes exposures arising as a result of the structure of portfolios of assets and liabilities, or where the liquidity of the market is such that the exposure could not be closed out over a short-time horizon. The risk exposure is generated by features inherent in either a product or portfolio and normally presented over the life of the portfolio or product. Such exposures are a result of the decision to undertake specific business activities, can take a number of different forms, and are generally managed over a longer-time horizon. |
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Actual Exposure at 31 December | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Group trading instruments | £m | £m | £m | |||||||||
Interest rate risks | 3.0 | 3.4 | 7.4 | |||||||||
Equity risks | 1.9 | 1.4 | 1.7 | |||||||||
Credit spread risks | 0.6 | 1.6 | 2.7 | |||||||||
Property risks | 2.9 | 8.5 | 9.6 | |||||||||
Other risks(1) | 0.3 | 0.6 | 1.3 | |||||||||
Correlation offsets(2) | (1.4 | ) | (3.3 | ) | (3.5 | ) | ||||||
Total correlated one-day Value at Risk | 7.3 | 12.2 | 19.2 | |||||||||
Exposure for the year ended 31 December | ||||||||||||||||||||||||||||||||||||
Average exposure | Highest exposure | Lowest exposure | ||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | ||||||||||||||||||||||||||||
Group trading instruments | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||||
Interest rate risks | 3.5 | 5.5 | 5.1 | 6.1 | 8.8 | 7.9 | 2.2 | 2.3 | 3.5 | |||||||||||||||||||||||||||
Equity risks | 1.9 | 2.0 | 2.8 | 2.7 | 3.8 | 5.0 | 1.4 | 1.1 | 1.4 | |||||||||||||||||||||||||||
Credit spread risks | 1.1 | 3.6 | 1.8 | 1.6 | 4.8 | 4.0 | 0.6 | 1.6 | 0.7 | |||||||||||||||||||||||||||
Property risks | 5.6 | 8.6 | 6.6 | 9.1 | 9.8 | 10.5 | 2.9 | 7.8 | 4.5 | |||||||||||||||||||||||||||
Other risks(1) | 0.3 | 1.0 | 0.9 | 0.8 | 1.4 | 1.4 | 0.2 | 0.4 | 0.3 | |||||||||||||||||||||||||||
Correlation offsets(2) | (2.2 | ) | (4.4 | ) | (3.1 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||
Total correlated one-day Value at Risk | 10.2 | 16.3 | 14.1 | 15.4 | 19.8 | 20.5 | 6.6 | 11.7 | 11.3 | |||||||||||||||||||||||||||
(1) | Other risks include foreign exchange risk. | |
(2) | The highest and lowest exposure figures reported for each risk type did not necessarily occur on the same day as the highest and lowest total correlated one-day Value-at-Risk. A corresponding correlation offset effect cannot be calculated and is therefore omitted from the above table. |
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> | Global limits approved by Banco Santander, S.A.’s Board Risk Committee; | |
> | Limits and triggers approved by Head of Wholesale Risk; and | |
> | Local sub-limits set to control the exposures retained within individual business areas. |
2010 | 2009 | |||||||
£m | £m | |||||||
Net Interest Margin Sensitivity to +100 basis points shift in yield curve | 309 | (38 | ) | |||||
Market Value of Equity Sensitivity to +100 basis points shift in yield curve | 410 | 2 | ||||||
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Activity | Risk | Type of hedge | ||
Management of the return on variable rate assets financed by shareholders’ funds and net non-interest-bearing liabilities. | Reduced profitability due to falls in interest rates. | Receive fixed interest rate swaps. | ||
Management of the basis between administered rate assets and liabilities and wholesale market rates. | Reduced profitability due to adverse changes in the basis spread. | Basis swaps. | ||
Management of repricing profile of wholesale funding. | Reduced profitability due to adverse movement in wholesale interest rates when large volumes of wholesale funding are repriced. | Forward rate agreements. | ||
Fixed rate lending and investments. | Sensitivity to increases in interest rates. | Pay fixed interest rate swaps. | ||
Fixed rate retail and wholesale funding. | Sensitivity to falls in interest rates. | Receive fixed interest rate swaps. | ||
Equity-linked retail funding. | Sensitivity to increases in equity market indices. | Receive equity swaps. | ||
Management of other net interest income on retail activities. | Sensitivity of income to changes in interest rates. | Interest rate swaps. | ||
Issuance of products with embedded equity options. | Sensitivity to changes in underlying index and index volatility causing option exercise. | Interest rate swaps combined with equity options. | ||
Lending and investments. | Sensitivity to weakening credit quality. | Purchase credit default swaps and total return swaps. | ||
Lending and issuance of products with embedded interest rate options. | Sensitivity to changes in underlying rate and rate volatility causing option exercise. | Interest rate swaps plus caps/floors. | ||
Investment in, and issuance of, bonds with put/call features. | Sensitivity to changes in rates causing option exercise. | Interest rate swaps combined with swaptions(1) and other matched options. | ||
(1) | A swaption is an option on a swap that gives the holder the right but not the obligation to buy or sell a swap. |
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> | Customer deposits; | |
> | Secured and unsecured money-market funding (including unsecured cash, repo, CD and CP issuance); | |
> | Senior debt issuance (including discrete bond issues and MTNs); | |
> | Mortgage-backed funding (including securitisation and covered bond issuance); and | |
> | Subordinated debt and capital issuance (although the primary purpose is not funding). |
2010 | 2009 | |||||||
£bn | £bn | |||||||
Money market funding(1) | 20.1 | 24.5 | ||||||
Securitisation(2) | 18.1 | 16.1 | ||||||
Covered bonds(2) | 9.8 | 4.6 | ||||||
Securities sold under agreements to repurchase and other funding(3) | 15.5 | 18.6 | ||||||
Senior unsecured funding(2,4) | 9.8 | 10.8 | ||||||
Capital instruments(5) | 6.4 | 7.1 | ||||||
Total Wholesale funding | 79.7 | 81.7 | ||||||
(1) | Includes deposits by banks and customers (accounted for as trading liabilities), certificates of deposit and commercial paper. | |
(2) | Includes derivatives hedging the debt issuances. | |
(3) | Comprise securities sold under agreements to repurchase (including retained mortgage backed notes) primarily used for medium term funding. | |
(4) | Includes debt securities in issue excluding securitisation, covered bond, commercial papers and certificate of deposits. | |
(5) | Includes subordinated debt and certain instruments included in equity. |
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Key liquidity risk | Definition | |||
Retail funding risk | Risk of loss of customer deposits. | |||
Wholesale secured and unsecured funding risk | Risk of wholesale unsecured and secured deposits failing to roll over. | |||
Intra-day liquidity risk | Risk of intra-day systems dislocation following direct or indirect participation in payment or settlement systems. | |||
Off-balance sheet liquidity risk | Risk of insufficent financial resources required to service off-balance sheet assets or commitments. | |||
Derivatives and contingent liquidity risks | Risk of ratings downgrades that could trigger events leading to increased outflows of financial resources, for example, to cover additional margin or collateral requirements. | |||
> | Liquidity Management (‘Line 1’) to the Finance Director, and | |
> | Liquidity Risk Control (‘Line 2’) to the Chief Risk Officer. |
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2010 | 2009 | |||||||
£bn | £bn | |||||||
Cash at central banks | 25 | 4 | ||||||
Government bonds | 15 | 10 | ||||||
Core liquid assets | 40 | 14 | ||||||
High quality bonds | 6 | 13 | ||||||
Other liquid assets(1) | 16 | 25 | ||||||
Total liquid assets | 62 | 52 | ||||||
(1) | Includes own issuances of £14.6bn at 31 December 2010 (2009: £19.1bn). |
> | Liquid assets— a buffer of liquid assets is held to cover unexpected demands on cash in extreme but plausible stress scenarios. In the Group’s case, the largest stress events include large and unexpected deposit withdrawals by retail customers and a loss of unsecured wholesale funding. | |
> | Intra-day collateral management— to ensure that adequate collateral is available to support payments in each payment or settlement system in which the Group participates, as they fall due. |
> | Structural balance sheet shape— to manage the extent of maturity transformation (investment of shorter term funding in longer term assets), the funding of non-marketable assets with wholesale funding and the extent to which non-marketable assets can be used to generate liquidity. | |
> | Wholesale funding strategy— to avoid over-reliance on any individual counterparty, currency, market or product, or group of counterparties, currencies, markets or products that may become highly correlated in a stress scenario; and to avoid excessive concentrations in the maturity of wholesale funding. | |
> | Wholesale funding capacity— to maintain and promote counterparty relationships, monitor line availability and ensure funding capacity is maintained through ongoing use of lines and markets. |
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Group | ||||||||||||||||||||||||
Up to 3 | 3-12 | 1-5 | Over 5 | |||||||||||||||||||||
Demand | months | months | years | years | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Deposits by banks | 3,478 | 876 | 48 | 3,230 | 211 | 7,843 | ||||||||||||||||||
Deposits by customers | 104,664 | 9,124 | 24,282 | 15,146 | 526 | 153,742 | ||||||||||||||||||
Trading liabilities | 1,329 | 35,088 | 4,229 | 1,770 | 705 | 43,121 | ||||||||||||||||||
Financial liabilities designated at fair value | — | 1,331 | 542 | 861 | 1,058 | 3,792 | ||||||||||||||||||
Debt securities in issue | — | 12,138 | 4,998 | 12,526 | 24,286 | 53,948 | ||||||||||||||||||
Loan commitments | 14,886 | 3,149 | 815 | 3,165 | 8,643 | 30,658 | ||||||||||||||||||
Subordinated liabilities | — | 533 | 309 | 1,639 | 9,733 | 12,214 | ||||||||||||||||||
124,357 | 62,239 | 35,223 | 38,337 | 45,162 | 305,318 | |||||||||||||||||||
Derivative financial instruments | — | 74 | 19 | 201 | 2,070 | 2,364 | ||||||||||||||||||
Total financial liabilities | 124,357 | 62,313 | 35,242 | 38,538 | 47,232 | 307,682 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Up to 3 | 3-12 | 1-5 | Over 5 | |||||||||||||||||||||
Demand | months | months | years | years | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Deposits by banks | 25,556 | 40,329 | 29,439 | 42,223 | 10,621 | 148,168 | ||||||||||||||||||
Deposits by customers | 97,850 | 7,528 | 21,135 | 8,945 | 40,871 | 176,329 | ||||||||||||||||||
Financial liabilities designated at fair value | — | 32 | — | 1 | — | 33 | ||||||||||||||||||
Debt securities in issue | — | 1,337 | 214 | 1,633 | — | 3,184 | ||||||||||||||||||
Loan commitments | 2,535 | 3,067 | 188 | 1,140 | 3,315 | 10,245 | ||||||||||||||||||
Subordinated liabilities | — | 533 | 309 | 1,639 | 8,681 | 11,162 | ||||||||||||||||||
125,941 | 52,826 | 51,285 | 55,581 | 63,488 | 349,121 | |||||||||||||||||||
Derivative financial instruments | — | — | — | — | — | — | ||||||||||||||||||
Total financial liabilities | 125,941 | 52,826 | 51,285 | 55,581 | 63,488 | 349,121 | ||||||||||||||||||
Group | ||||||||||||||||||||||||
Up to 3 | 3-12 | 1-5 | Over 5 | |||||||||||||||||||||
Demand | months | months | years | years | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Deposits by banks | 3,716 | 1,918 | 25 | 159 | — | 5,818 | ||||||||||||||||||
Deposits by customers | 105,157 | 7,169 | 18,228 | 13,476 | 654 | 144,684 | ||||||||||||||||||
Trading liabilities | 2,864 | 37,554 | 3,204 | 2,430 | 443 | 46,495 | ||||||||||||||||||
Financial liabilities designated at fair value | — | 1,012 | 619 | 2,318 | 487 | 4,436 | ||||||||||||||||||
Debt securities in issue | — | 12,327 | 7,313 | 5,856 | 23,859 | 49,355 | ||||||||||||||||||
Loan commitments | 35,723 | 11,835 | 963 | 1,734 | 2,323 | 52,578 | ||||||||||||||||||
Subordinated liabilities | — | 260 | 330 | 1,750 | 10,406 | 12,746 | ||||||||||||||||||
147,460 | 72,075 | 30,682 | 27,723 | 38,172 | 316,112 | |||||||||||||||||||
Derivative financial instruments | — | 54 | 341 | 1,723 | 255 | 2,373 | ||||||||||||||||||
Total financial liabilities | 147,460 | 72,129 | 31,023 | 29,446 | 38,427 | 318,485 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Up to 3 | 3-12 | 1-5 | Over 5 | |||||||||||||||||||||
Demand | months | months | years | years | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Deposits by banks | 3,333 | 24,000 | 10,564 | 73,944 | 7,567 | 119,408 | ||||||||||||||||||
Deposits by customers | 77,240 | 15,933 | 12,468 | 15,302 | 44,581 | 165,524 | ||||||||||||||||||
Loan commitments | 8,441 | — | 34 | — | — | 8,475 | ||||||||||||||||||
Subordinated liabilities | — | 198 | 290 | 1,540 | 7,994 | 10,022 | ||||||||||||||||||
89,014 | 40,131 | 23,356 | 90,786 | 60,142 | 303,429 | |||||||||||||||||||
Derivative financial instruments | — | — | — | — | 437 | 437 | ||||||||||||||||||
Total financial liabilities | 89,014 | 40,131 | 23,356 | 90,786 | 60,579 | 303,866 | ||||||||||||||||||
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> | use of Risk Self-Assessments; | |
> | use of Key Risk Indicators to monitor risks and set tolerance levels; | |
> | capture and analysis of losses and incidents; and | |
> | scenario analysis. |
> | The creation of 1,000 UK-based customer-facing roles in branches and call centres to help improve customer service at the busiest times. | |
> | All of the Group’s 25 million customers were brought together from the three different banks and given access to more than 1,400 branches (including agencies) in the UK. | |
> | A dedicated complaints helpline was set up, staffed by a team of complaints experts to deal with problems that arise both quickly and decisively. | |
> | Improvements to the bank account switcher process were made to make it quicker and simpler for customers, and to reduce the likelihood of errors. |
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Bank & | ||||||||||||||||||||||||||||||||||||||||||||||||
Type of Financial Instrument analysed further | OECD | building | ||||||||||||||||||||||||||||||||||||||||||||||
Deriv- | Sub- | Govt | society | |||||||||||||||||||||||||||||||||||||||||||||
FRNs | ABS | CDO | CLO | Loans | atives | Other | total | debts | CDs | Total | ||||||||||||||||||||||||||||||||||||||
Balance sheet line item | Note | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||||||||||
Trading assets — debt securities | 13 | 10,901 | — | — | — | — | — | — | 10,901 | 6,630 | 290 | 17,821 | ||||||||||||||||||||||||||||||||||||
Derivatives — equity & credit contracts | 14 | — | — | — | — | — | 38 | — | 38 | — | — | 38 | ||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value — debt securities | 15 | — | 1,046 | 12 | — | — | — | 240 | 1,298 | — | — | 1,298 | ||||||||||||||||||||||||||||||||||||
Loans and advances to banks | 16 | — | — | — | — | 3,852 | — | — | 3,852 | — | — | 3,852 | ||||||||||||||||||||||||||||||||||||
Available-for-sale — debt securities | 21 | — | — | — | — | — | — | — | — | 125 | — | 125 | ||||||||||||||||||||||||||||||||||||
Loans and receivables securities | 22 | 1,652 | 1,772 | 37 | 112 | — | — | 37 | 3,610 | — | — | 3,610 | ||||||||||||||||||||||||||||||||||||
12,553 | 2,818 | 49 | 112 | 3,852 | 38 | 277 | 19,699 | 6,755 | 290 | 26,744 | ||||||||||||||||||||||||||||||||||||||
Bank & | ||||||||||||||||||||||||||||||||||||||||||||||||
Type of Financial Instrument analysed further | OECD | building | ||||||||||||||||||||||||||||||||||||||||||||||
Deriv- | Sub- | Govt | society | |||||||||||||||||||||||||||||||||||||||||||||
FRNs | ABS | CDO | CLO | Loans | atives | Other | total | debts | CDs | Total | ||||||||||||||||||||||||||||||||||||||
Balance sheet line item | Note | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||||||||||
Trading assets — debt securities | 13 | 11,128 | — | — | — | — | — | — | 11,128 | 2,869 | 1,935 | 15,932 | ||||||||||||||||||||||||||||||||||||
Financial assets designated at fair value — debt securities | 15 | — | 3,446 | 50 | — | — | — | 263 | 3,759 | — | 2,220 | 5,979 | ||||||||||||||||||||||||||||||||||||
Loans and advances to banks | 16 | — | — | — | — | 9,151 | — | — | 9,151 | — | — | 9,151 | ||||||||||||||||||||||||||||||||||||
Available-for-sale — debt securities | 21 | 342 | — | — | — | — | — | — | 342 | 405 | — | 747 | ||||||||||||||||||||||||||||||||||||
Loans and receivables securities | 22 | 6,749 | 2,245 | 80 | 639 | — | — | 185 | 9,898 | — | — | 9,898 | ||||||||||||||||||||||||||||||||||||
18,219 | 5,691 | 130 | 639 | 9,151 | — | 448 | 34,278 | 3,274 | 4,155 | 41,707 | ||||||||||||||||||||||||||||||||||||||
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2010 Income statement movement(1) | ||||||||||||||||||||
Nominal | Book value | Fair value | Fair value changes | Impairment losses | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Floating rate notes | 12,519 | 12,553 | 12,490 | 47 | — | |||||||||||||||
Asset-backed securities | 2,949 | 2,818 | 2,597 | 60 | — | |||||||||||||||
Collateralised debt obligations | 84 | 49 | 52 | (1 | ) | — | ||||||||||||||
Collateralised loan obligations | 127 | 112 | 94 | (3 | ) | — | ||||||||||||||
Loans | 3,852 | 3,852 | 3,852 | — | — | |||||||||||||||
Derivatives | 657 | 38 | 38 | — | — | |||||||||||||||
Other investments | 282 | 277 | 276 | 2 | — | |||||||||||||||
20,470 | 19,699 | 19,399 | 105 | — | ||||||||||||||||
2009 Income statement movement(1) | ||||||||||||||||||||
Nominal | Book value | Fair value | Fair value changes | Impairment losses | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Floating rate notes | 18,267 | 18,219 | 18,129 | 49 | (6 | ) | ||||||||||||||
Asset-backed securities | 5,893 | 5,691 | 5,424 | 1 | (31 | ) | ||||||||||||||
Collateralised debt obligations | 215 | 130 | 130 | (15 | ) | (3 | ) | |||||||||||||
Collateralised loan obligations | 703 | 639 | 606 | (21 | ) | — | ||||||||||||||
Loans | 9,151 | 9,151 | 9,151 | — | — | |||||||||||||||
Other investments | 453 | 448 | 449 | 16 | (4 | ) | ||||||||||||||
34,682 | 34,278 | 33,889 | 30 | (44 | ) | |||||||||||||||
(1) | Amounts in respect of assets held at the balance sheet date i.e. not including amounts relating to assets sold during the year. |
FRNs | Other | Total | ||||||||||
£m | £m | £m | ||||||||||
AAA | 10,794 | 2,847 | 13,641 | |||||||||
AA+ | — | 348 | 348 | |||||||||
AA | 633 | 1,869 | 2,502 | |||||||||
A | 770 | 1,366 | 2,136 | |||||||||
BBB | 277 | 76 | 353 | |||||||||
Below BBB | 16 | 161 | 177 | |||||||||
Unrated | — | 242 | 242 | |||||||||
Total | 12,490 | 6,909 | 19,399 | |||||||||
FRNs | Other | Total | ||||||||||
£m | £m | £m | ||||||||||
AAA | 10,828 | 5,416 | 16,244 | |||||||||
AA+ | 83 | — | 83 | |||||||||
AA | 2,271 | 7,250 | 9,521 | |||||||||
A | 3,803 | 2,335 | 6,138 | |||||||||
BBB | 550 | 306 | 856 | |||||||||
Below BBB | 594 | 191 | 785 | |||||||||
Unrated | — | 262 | 262 | |||||||||
Total | 18,129 | 15,760 | 33,889 | |||||||||
(1) | External ratings are applied to all exposures, where available. |
> | Income statement movement by geographical location of issuer or counterparty; | |
> | Vintage by geographical location of issuer or counterparty, where applicable; | |
> | Income statement movement by credit rating of issuer or counterparty; and | |
> | Vintage by credit rating of issuer or counterparty, where applicable. |
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2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 9,984 | 80 | 10,093 | 10,081 | 101 | 18 | — | |||||||||||||||||||||
Italy | 141 | 1 | 139 | 134 | 95 | (3 | ) | — | ||||||||||||||||||||
Spain | 598 | 5 | 593 | 575 | 96 | (11 | ) | — | ||||||||||||||||||||
Rest of Europe | 1,199 | 9 | 1,123 | 1,102 | 92 | 41 | — | |||||||||||||||||||||
US | 139 | 1 | 131 | 125 | 90 | 6 | — | |||||||||||||||||||||
Rest of the world | 458 | 4 | 474 | 473 | 103 | (4 | ) | — | ||||||||||||||||||||
Total | 12,519 | 100 | 12,553 | 12,490 | 100 | 47 | — | |||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 9,913 | 53 | 9,953 | 9,938 | 100 | 85 | (6 | ) | ||||||||||||||||||||
Italy | 653 | 4 | 650 | 650 | 100 | (3 | ) | — | ||||||||||||||||||||
Spain | 1,546 | 9 | 1,527 | 1,510 | 98 | (16 | ) | — | ||||||||||||||||||||
Rest of Europe | 3,943 | 22 | 3,910 | 3,897 | 99 | 1 | — | |||||||||||||||||||||
US | 699 | 4 | 651 | 633 | 91 | (24 | ) | — | ||||||||||||||||||||
Rest of the world | 1,513 | 8 | 1,528 | 1,501 | 99 | 6 | — | |||||||||||||||||||||
Total | 18,267 | 100 | 18,219 | 18,129 | 99 | 49 | (6 | ) | ||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 10,728 | 86 | 10,794 | 10,794 | 101 | 26 | — | |||||||||||||||||||||
AA | 647 | 5 | 642 | 633 | 98 | (14 | ) | — | ||||||||||||||||||||
A | 810 | 7 | 797 | 770 | 95 | 30 | — | |||||||||||||||||||||
BBB | 302 | 2 | 295 | 277 | 92 | 4 | — | |||||||||||||||||||||
Below BBB | 32 | — | 25 | 16 | 50 | 1 | — | |||||||||||||||||||||
Total | 12,519 | 100 | 12,553 | 12,490 | 100 | 47 | — | |||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 10,757 | 59 | 10,828 | 10,828 | 101 | 135 | — | |||||||||||||||||||||
AA+ | 83 | — | 83 | 83 | 100 | — | — | |||||||||||||||||||||
AA | 2,297 | 13 | 2,270 | 2,271 | 99 | (16 | ) | — | ||||||||||||||||||||
A | 3,925 | 21 | 3,865 | 3,803 | 97 | (52 | ) | — | ||||||||||||||||||||
BBB | 589 | 3 | 570 | 550 | 94 | (16 | ) | — | ||||||||||||||||||||
Below BBB | 616 | 4 | 603 | 594 | 96 | (2 | ) | (6 | ) | |||||||||||||||||||
Total | 18,267 | 100 | 18,219 | 18,129 | 99 | 49 | (6 | ) | ||||||||||||||||||||
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2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | ||||||||||||||||||||||||||||
ABS | 218 | 7 | 226 | 226 | 104 | (2 | ) | — | ||||||||||||||||||||
MBS | 941 | 31 | 953 | 910 | 97 | 15 | — | |||||||||||||||||||||
1,159 | 38 | 1,179 | 1,136 | 98 | 13 | — | ||||||||||||||||||||||
US | ||||||||||||||||||||||||||||
ABS | 520 | 18 | 474 | 439 | 84 | (5 | ) | — | ||||||||||||||||||||
MBS | 227 | 8 | 181 | 124 | 55 | 21 | — | |||||||||||||||||||||
747 | 26 | 655 | 563 | 75 | 16 | — | ||||||||||||||||||||||
Rest of Europe | ||||||||||||||||||||||||||||
ABS | 253 | 9 | 245 | 234 | 93 | 35 | — | |||||||||||||||||||||
MBS | 576 | 20 | 548 | 476 | 83 | (2 | ) | — | ||||||||||||||||||||
829 | 29 | 793 | 710 | 86 | 33 | — | ||||||||||||||||||||||
Rest of the world | ||||||||||||||||||||||||||||
ABS | 43 | 1 | 35 | 35 | 81 | — | — | |||||||||||||||||||||
MBS | 171 | 6 | 156 | 153 | 89 | (2 | ) | — | ||||||||||||||||||||
214 | 7 | 191 | 188 | 88 | (2 | ) | — | |||||||||||||||||||||
Total | 2,949 | 100 | 2,818 | 2,597 | 88 | 60 | — | |||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | ||||||||||||||||||||||||||||
ABS | 142 | 2 | 141 | 140 | 99 | — | — | |||||||||||||||||||||
MBS | 912 | 16 | 878 | 791 | 87 | (26 | ) | — | ||||||||||||||||||||
1,054 | 18 | 1,019 | 931 | 88 | (26 | ) | — | |||||||||||||||||||||
US | ||||||||||||||||||||||||||||
ABS | 553 | 9 | 506 | 483 | 87 | (41 | ) | (5 | ) | |||||||||||||||||||
MBS | 292 | 5 | 218 | 125 | 43 | (26 | ) | (20 | ) | |||||||||||||||||||
845 | 14 | 724 | 608 | 72 | (67 | ) | (25 | ) | ||||||||||||||||||||
Rest of Europe | ||||||||||||||||||||||||||||
ABS | 300 | 5 | 288 | 283 | 94 | 12 | (6 | ) | ||||||||||||||||||||
MBS | 3,542 | 60 | 3,511 | 3,463 | 98 | 85 | — | |||||||||||||||||||||
3,842 | 65 | 3,799 | 3,746 | 98 | 97 | (6 | ) | |||||||||||||||||||||
Rest of the world | ||||||||||||||||||||||||||||
MBS | 152 | 3 | 149 | 139 | 91 | (3 | ) | — | ||||||||||||||||||||
152 | 3 | 149 | 139 | 91 | (3 | ) | — | |||||||||||||||||||||
Total | 5,893 | 100 | 5,691 | 5,424 | 92 | 1 | (31 | ) | ||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
UK | ||||||||||||||||||||||||||||||||
ABS | 218 | 12 | — | 6 | — | 53 | 41 | — | ||||||||||||||||||||||||
MBS | 941 | 51 | — | 23 | 6 | 44 | 27 | — | ||||||||||||||||||||||||
1,159 | 63 | — | 20 | 5 | 45 | 30 | — | |||||||||||||||||||||||||
US | ||||||||||||||||||||||||||||||||
ABS | 520 | 21 | — | 23 | 70 | 7 | — | — | ||||||||||||||||||||||||
MBS | 227 | 20 | — | 19 | 40 | 23 | 18 | — | ||||||||||||||||||||||||
747 | 41 | — | 23 | 61 | 11 | 5 | — | |||||||||||||||||||||||||
Rest of Europe | ||||||||||||||||||||||||||||||||
ABS | 253 | 6 | — | 20 | 33 | 15 | 32 | — | ||||||||||||||||||||||||
MBS | 576 | 31 | — | 23 | 2 | 30 | 45 | — | ||||||||||||||||||||||||
829 | 37 | — | 22 | 12 | 26 | 40 | — | |||||||||||||||||||||||||
Rest of the world | ||||||||||||||||||||||||||||||||
ABS | 43 | — | — | 100 | — | — | — | — | ||||||||||||||||||||||||
MBS | 171 | 4 | — | — | — | — | 100 | — | ||||||||||||||||||||||||
214 | 4 | — | 20 | — | — | 80 | — | |||||||||||||||||||||||||
Total | 2,949 | 145 | — | 21 | 21 | 28 | 30 | — | ||||||||||||||||||||||||
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Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
UK | ||||||||||||||||||||||||||||||||
ABS | 142 | 3 | — | 27 | 4 | 54 | 15 | — | ||||||||||||||||||||||||
MBS | 912 | 68 | — | 35 | 10 | 26 | 29 | — | ||||||||||||||||||||||||
1,054 | 71 | — | 34 | 9 | 30 | 27 | — | |||||||||||||||||||||||||
US | ||||||||||||||||||||||||||||||||
ABS | 553 | 31 | — | 27 | 66 | 6 | 1 | — | ||||||||||||||||||||||||
MBS | 292 | 35 | 11 | 23 | 37 | 26 | 14 | — | ||||||||||||||||||||||||
845 | 66 | 11 | 26 | 56 | 13 | 5 | — | |||||||||||||||||||||||||
Rest of Europe | ||||||||||||||||||||||||||||||||
ABS | 300 | 5 | — | 25 | 3 | 42 | 30 | — | ||||||||||||||||||||||||
MBS | 3,542 | 46 | — | 80 | 1 | 9 | 10 | — | ||||||||||||||||||||||||
3,842 | 51 | — | 76 | 1 | 11 | 12 | — | |||||||||||||||||||||||||
Rest of the world | ||||||||||||||||||||||||||||||||
MBS | 152 | 6 | — | 34 | 3 | 3 | 60 | — | ||||||||||||||||||||||||
152 | 6 | — | 34 | 3 | 3 | 60 | — | |||||||||||||||||||||||||
Total | 5,893 | 194 | 11 | 60 | 11 | 15 | 14 | — | ||||||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | ||||||||||||||||||||||||||||
ABS | 742 | 25 | 689 | 651 | 88 | 21 | — | |||||||||||||||||||||
MBS | 1,333 | 45 | 1,327 | 1,245 | 93 | 12 | — | |||||||||||||||||||||
2,075 | 70 | 2,016 | 1,896 | 91 | 33 | — | ||||||||||||||||||||||
AA+ | ||||||||||||||||||||||||||||
ABS | 108 | 4 | 106 | 106 | 98 | 7 | — | |||||||||||||||||||||
MBS | 234 | 8 | 218 | 215 | 92 | 3 | — | |||||||||||||||||||||
342 | 12 | 324 | 321 | 94 | 10 | — | ||||||||||||||||||||||
AA | ||||||||||||||||||||||||||||
ABS | 12 | — | 10 | 7 | 58 | (1 | ) | — | ||||||||||||||||||||
MBS | 133 | 5 | 120 | 93 | 70 | — | — | |||||||||||||||||||||
145 | 5 | 130 | 100 | 69 | (1 | ) | — | |||||||||||||||||||||
A | ||||||||||||||||||||||||||||
ABS | 79 | 3 | 86 | 84 | 106 | — | — | |||||||||||||||||||||
MBS | 47 | 1 | 40 | 30 | 64 | (2 | ) | — | ||||||||||||||||||||
126 | 4 | 126 | 114 | 90 | (2 | ) | — | |||||||||||||||||||||
BBB | ||||||||||||||||||||||||||||
ABS | 19 | — | 17 | 15 | 79 | — | — | |||||||||||||||||||||
MBS | 20 | 1 | 15 | 12 | 60 | 3 | — | |||||||||||||||||||||
39 | 1 | 32 | 27 | 69 | 3 | — | ||||||||||||||||||||||
Below BBB | ||||||||||||||||||||||||||||
ABS | 74 | 3 | 72 | 71 | 96 | 1 | — | |||||||||||||||||||||
MBS | 148 | 5 | 118 | 68 | 46 | 16 | — | |||||||||||||||||||||
222 | 8 | 190 | 139 | 63 | 17 | — | ||||||||||||||||||||||
Total | 2,949 | 100 | 2,818 | 2,597 | 88 | 60 | — | |||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | ||||||||||||||||||||||||||||
ABS | 803 | 14 | 761 | 734 | 91 | (21 | ) | — | ||||||||||||||||||||
MBS | 3,730 | 63 | 3,667 | 3,553 | 95 | 58 | — | |||||||||||||||||||||
4,533 | 77 | 4,428 | 4,287 | 95 | 37 | — | ||||||||||||||||||||||
AA | ||||||||||||||||||||||||||||
ABS | 10 | — | 8 | 7 | 70 | (1 | ) | — | ||||||||||||||||||||
MBS | 364 | 6 | 348 | 313 | 86 | (8 | ) | — | ||||||||||||||||||||
374 | 6 | 356 | 320 | 86 | (9 | ) | — | |||||||||||||||||||||
A | ||||||||||||||||||||||||||||
ABS | 56 | 1 | 51 | 50 | 89 | (4 | ) | — | ||||||||||||||||||||
MBS | 582 | 10 | 574 | 564 | 97 | (5 | ) | — | ||||||||||||||||||||
638 | 11 | 625 | 614 | 96 | (9 | ) | — | |||||||||||||||||||||
BBB | ||||||||||||||||||||||||||||
ABS | 67 | 1 | 66 | 65 | 97 | (1 | ) | — | ||||||||||||||||||||
MBS | 51 | 1 | 42 | 34 | 67 | (7 | ) | — | ||||||||||||||||||||
118 | 2 | 108 | 99 | 84 | (8 | ) | — | |||||||||||||||||||||
Below BBB | ||||||||||||||||||||||||||||
ABS | 59 | 1 | 49 | 49 | 83 | (1 | ) | (11 | ) | |||||||||||||||||||
MBS | 171 | 3 | 125 | 55 | 32 | (9 | ) | (20 | ) | |||||||||||||||||||
230 | 4 | 174 | 104 | 45 | (10 | ) | (31 | ) | ||||||||||||||||||||
Total | 5,893 | 100 | 5,691 | 5,424 | 92 | 1 | (31 | ) | ||||||||||||||||||||
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Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
AAA | ||||||||||||||||||||||||||||||||
ABS | 742 | 31 | — | 18 | 51 | 18 | 12 | — | ||||||||||||||||||||||||
MBS | 1,333 | 73 | — | 24 | 5 | 36 | 36 | — | ||||||||||||||||||||||||
2,075 | 104 | — | 22 | 21 | 29 | 28 | — | |||||||||||||||||||||||||
AA | ||||||||||||||||||||||||||||||||
ABS | 120 | 6 | — | 30 | 55 | 3 | 12 | — | ||||||||||||||||||||||||
MBS | 367 | 15 | — | 9 | 3 | 34 | 54 | — | ||||||||||||||||||||||||
487 | 21 | — | 14 | 16 | 27 | 43 | — | |||||||||||||||||||||||||
A | ||||||||||||||||||||||||||||||||
ABS | 79 | 1 | — | 45 | 1 | 54 | — | — | ||||||||||||||||||||||||
MBS | 47 | 4 | — | 10 | 58 | 2 | 30 | — | ||||||||||||||||||||||||
126 | 5 | — | 32 | 22 | 34 | 12 | — | |||||||||||||||||||||||||
BBB | ||||||||||||||||||||||||||||||||
ABS | 19 | 1 | — | 50 | 34 | 16 | — | — | ||||||||||||||||||||||||
MBS | 20 | 2 | — | 1 | 99 | — | — | — | ||||||||||||||||||||||||
39 | 3 | — | 25 | 67 | 8 | — | — | |||||||||||||||||||||||||
Below BBB | ||||||||||||||||||||||||||||||||
ABS | 74 | — | — | 22 | — | — | 78 | — | ||||||||||||||||||||||||
MBS | 148 | 12 | — | 25 | 25 | 28 | 22 | — | ||||||||||||||||||||||||
222 | 12 | — | 25 | 17 | 18 | 40 | — | |||||||||||||||||||||||||
Total | 2,949 | 145 | — | 21 | 21 | 28 | 30 | — | ||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
AAA | ||||||||||||||||||||||||||||||||
ABS | 803 | 37 | — | 27 | 45 | 18 | 10 | — | ||||||||||||||||||||||||
MBS | 3,730 | 115 | — | 71 | 4 | 9 | 16 | — | ||||||||||||||||||||||||
4,533 | 152 | — | 63 | 11 | 11 | 15 | — | |||||||||||||||||||||||||
AA | ||||||||||||||||||||||||||||||||
ABS | 10 | 1 | — | 29 | 41 | 30 | — | — | ||||||||||||||||||||||||
MBS | 364 | 15 | 5 | 5 | 6 | 65 | 24 | — | ||||||||||||||||||||||||
374 | 16 | 5 | 6 | 7 | 63 | 24 | — | |||||||||||||||||||||||||
A | ||||||||||||||||||||||||||||||||
ABS | 56 | 1 | — | — | — | 100 | — | — | ||||||||||||||||||||||||
MBS | 582 | 3 | — | 95 | 3 | — | 2 | — | ||||||||||||||||||||||||
638 | 4 | — | 86 | 3 | 9 | 2 | — | |||||||||||||||||||||||||
BBB | ||||||||||||||||||||||||||||||||
ABS | 67 | — | — | 55 | — | 11 | 34 | — | ||||||||||||||||||||||||
MBS | 51 | 4 | — | 49 | 40 | 11 | — | — | ||||||||||||||||||||||||
118 | 4 | — | 53 | 17 | 11 | 19 | — | |||||||||||||||||||||||||
Below BBB | ||||||||||||||||||||||||||||||||
ABS | 59 | — | — | — | 27 | 47 | 26 | — | ||||||||||||||||||||||||
MBS | 171 | 18 | 6 | 22 | 23 | 35 | 20 | — | ||||||||||||||||||||||||
230 | 18 | 6 | 16 | 24 | 38 | 22 | — | |||||||||||||||||||||||||
Total | 5,893 | 194 | 11 | 60 | 11 | 15 | 14 | — | ||||||||||||||||||||||||
Original vintage | ||||||||||||||||||||||||
Nominal | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||
Asset Type | £m | % | % | % | % | % | ||||||||||||||||||
Prime lending | 2,795 | 21 | 21 | 28 | 30 | — | ||||||||||||||||||
ALT-A | 154 | 17 | 46 | 11 | 26 | — | ||||||||||||||||||
Total | 2,949 | 21 | 21 | 28 | 30 | — | ||||||||||||||||||
Original vintage | ||||||||||||||||||||||||
Nominal | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||
Asset Type | £m | % | % | % | % | % | ||||||||||||||||||
Prime lending | 5,663 | 61 | 10 | 15 | 14 | — | ||||||||||||||||||
ALT-A | 224 | 34 | 40 | 17 | 9 | — | ||||||||||||||||||
Sub-prime | 6 | — | — | — | 100 | — | ||||||||||||||||||
Total | 5,893 | 60 | 11 | 15 | 14 | — | ||||||||||||||||||
129
Table of Contents
Original | ||||||||||||||||||||||||||||||||||||
Fair value | 2010 Income statement movement | exposure | Original | |||||||||||||||||||||||||||||||||
Fair | as % of | Fair value | Impairment | to sub- | credit | |||||||||||||||||||||||||||||||
Nominal value | Book value | value | nominal | changes | losses | prime | enhancement | |||||||||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | % | % | |||||||||||||||||||||||||||
UK | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Rest of Europe | 1 | 1 | 1 | 1 | 100 | — | — | — | — | |||||||||||||||||||||||||||
US | 83 | 99 | 48 | 51 | 61 | (1 | ) | — | — | 13 | ||||||||||||||||||||||||||
Total | 84 | 100 | 49 | 52 | 62 | (1 | ) | — | — | 13 | ||||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||||||
Fair value | 2010 Income statement movement | Original | Original | |||||||||||||||||||||||||||||||||
as % of | Fair value | Impairment | exposure to | credit | ||||||||||||||||||||||||||||||||
Nominal value | Book value | Fair value | nominal | changes | losses | sub-prime | enhancement | |||||||||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | % | % | |||||||||||||||||||||||||||
UK | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Rest of Europe | 2 | 1 | 2 | 2 | 100 | (1 | ) | — | — | — | ||||||||||||||||||||||||||
US | 213 | 99 | 128 | 128 | 60 | (14 | ) | (3 | ) | 11 | 30 | |||||||||||||||||||||||||
Total | 215 | 100 | 130 | 130 | 60 | (15 | ) | (3 | ) | 11 | 30 | |||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
ABS CDO | ||||||||||||||||||||||||||||||||
UK | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Rest of Europe | 1 | — | — | — | 100 | — | — | — | ||||||||||||||||||||||||
US | 21 | 3 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
22 | 3 | — | 95 | 5 | — | — | — | |||||||||||||||||||||||||
Synthetic CDO | ||||||||||||||||||||||||||||||||
US | 16 | 4 | — | — | 100 | — | — | — | ||||||||||||||||||||||||
16 | 4 | — | — | 100 | — | — | — | |||||||||||||||||||||||||
Other CDO | ||||||||||||||||||||||||||||||||
US | 46 | 6 | — | 49 | 1 | 21 | 29 | — | ||||||||||||||||||||||||
46 | 6 | — | 49 | 1 | 21 | 29 | — | |||||||||||||||||||||||||
Total | 84 | 13 | — | 52 | 21 | 11 | 16 | — | ||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
ABS CDO | ||||||||||||||||||||||||||||||||
UK | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Rest of Europe | 2 | — | — | 50 | 50 | — | — | — | ||||||||||||||||||||||||
US | 48 | 15 | 14 | 33 | 65 | 2 | — | — | ||||||||||||||||||||||||
50 | 15 | 14 | 34 | 64 | 2 | |||||||||||||||||||||||||||
Synthetic CDO | ||||||||||||||||||||||||||||||||
US | 95 | 11 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
95 | 11 | — | 100 | — | — | — | — | |||||||||||||||||||||||||
Other CDO | ||||||||||||||||||||||||||||||||
US | 70 | 8 | 1 | 38 | 5 | 24 | 33 | — | ||||||||||||||||||||||||
70 | 8 | 1 | 38 | 5 | 24 | 33 | — | |||||||||||||||||||||||||
Total | 215 | 34 | 15 | 64 | 17 | 8 | 11 | — | ||||||||||||||||||||||||
Original | ||||||||||||||||||||||||||||||||||||
Fair value | 2010 Income statement movement | exposure | Original | |||||||||||||||||||||||||||||||||
Fair | as % of | Fair value | Impairment | to sub- | credit | |||||||||||||||||||||||||||||||
Nominal value | Book value | value | nominal | changes | losses | prime | enhancement | |||||||||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | % | % | |||||||||||||||||||||||||||
AAA | 10 | 12 | 5 | 8 | 80 | (1 | ) | — | — | — | ||||||||||||||||||||||||||
AA | 12 | 14 | 10 | 10 | 83 | — | — | — | 13 | |||||||||||||||||||||||||||
A | 15 | 18 | 11 | 8 | 53 | (1 | ) | — | — | 23 | ||||||||||||||||||||||||||
BBB | 6 | 7 | 3 | 5 | 83 | (1 | ) | — | — | 18 | ||||||||||||||||||||||||||
Below BBB | 41 | 49 | 20 | 21 | 51 | 2 | — | — | 9 | |||||||||||||||||||||||||||
Total | 84 | 100 | 49 | 52 | 62 | (1 | ) | — | — | 13 | ||||||||||||||||||||||||||
130
Table of Contents
Fair value | 2010 Income statement movement | Original | Original | |||||||||||||||||||||||||||||||||
as % of | Fair value | Impairment | exposure to | credit | ||||||||||||||||||||||||||||||||
Nominal value | Book value | Fair value | nominal | changes | losses | sub-prime | enhancement | |||||||||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | % | % | |||||||||||||||||||||||||||
AAA | 16 | 7 | 8 | 8 | 50 | (1 | ) | — | — | 26 | ||||||||||||||||||||||||||
AA | 64 | 30 | 48 | 48 | 75 | (5 | ) | — | 1 | 13 | ||||||||||||||||||||||||||
A | 17 | 8 | 7 | 7 | 41 | (1 | ) | — | 10 | — | ||||||||||||||||||||||||||
BBB | 23 | 11 | 15 | 15 | 65 | (1 | ) | — | 1 | 1 | ||||||||||||||||||||||||||
Below BBB | 95 | 44 | 52 | 52 | 55 | (7 | ) | (3 | ) | 6 | 2 | |||||||||||||||||||||||||
Total | 215 | 100 | 130 | 130 | 60 | (15 | ) | (3 | ) | 11 | 30 | |||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
ABS CDO | ||||||||||||||||||||||||||||||||
AAA | 1 | — | — | 4 | 96 | — | — | — | ||||||||||||||||||||||||
BBB | 6 | 1 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
Below BBB | 15 | 2 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
22 | 3 | — | 95 | 5 | — | — | — | |||||||||||||||||||||||||
Synthetic CDO | ||||||||||||||||||||||||||||||||
Below BBB | 16 | 4 | — | — | 100 | — | — | — | ||||||||||||||||||||||||
16 | 4 | — | — | 100 | — | — | — | |||||||||||||||||||||||||
Other CDO | ||||||||||||||||||||||||||||||||
AAA | 9 | — | — | 100 | — | — | — | — | ||||||||||||||||||||||||
AA | 12 | 2 | — | 97 | 3 | — | — | — | ||||||||||||||||||||||||
A | 15 | 4 | — | 1 | 2 | 7 | 90 | — | ||||||||||||||||||||||||
Below BBB | 10 | — | — | 7 | — | 93 | — | — | ||||||||||||||||||||||||
46 | 6 | — | 49 | 1 | 21 | 29 | — | |||||||||||||||||||||||||
Total | 84 | 13 | — | 52 | 21 | 11 | 16 | — | ||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
ABS CDO | ||||||||||||||||||||||||||||||||
AAA | 12 | 6 | — | — | 100 | — | — | — | ||||||||||||||||||||||||
AA | 12 | 3 | 2 | 100 | — | — | — | — | ||||||||||||||||||||||||
A | 1 | — | — | 100 | — | — | — | — | ||||||||||||||||||||||||
BBB | 5 | 1 | 2 | 100 | — | — | — | — | ||||||||||||||||||||||||
Below BBB | 20 | 5 | 10 | — | 95 | 5 | — | — | ||||||||||||||||||||||||
50 | 15 | 14 | 34 | 64 | 2 | — | — | |||||||||||||||||||||||||
Synthetic CDO | ||||||||||||||||||||||||||||||||
A | 15 | 1 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
BBB | 16 | 3 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
Below BBB | 64 | 7 | — | 100 | — | — | — | — | ||||||||||||||||||||||||
95 | 11 | — | 100 | — | — | — | — | |||||||||||||||||||||||||
Other CDO | ||||||||||||||||||||||||||||||||
AAA | 4 | 1 | — | 67 | — | 33 | — | — | ||||||||||||||||||||||||
AA | 52 | 7 | 1 | 39 | — | 11 | 50 | — | ||||||||||||||||||||||||
A | 1 | — | — | — | 100 | — | — | — | ||||||||||||||||||||||||
BBB | 2 | — | — | 50 | 50 | — | — | — | ||||||||||||||||||||||||
Below BBB | 11 | — | — | 31 | — | 69 | — | — | ||||||||||||||||||||||||
70 | 8 | 1 | 38 | 5 | 24 | 33 | — | |||||||||||||||||||||||||
Total | 215 | 34 | 15 | 64 | 17 | 8 | 11 | — | ||||||||||||||||||||||||
131
Table of Contents
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 17 | 13 | 15 | 10 | 59 | (3 | ) | — | ||||||||||||||||||||
Rest of Europe | 37 | 29 | 32 | 26 | 70 | (1 | ) | — | ||||||||||||||||||||
US | 73 | 58 | 65 | 58 | 79 | 1 | — | |||||||||||||||||||||
Total | 127 | 100 | 112 | 94 | 74 | (3 | ) | — | ||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 93 | 13 | 87 | 82 | 88 | (5 | ) | — | ||||||||||||||||||||
Rest of Europe | 42 | 6 | 36 | 28 | 67 | (5 | ) | — | ||||||||||||||||||||
US | 568 | 81 | 516 | 496 | 87 | (11 | ) | — | ||||||||||||||||||||
Total | 703 | 100 | 639 | 606 | 86 | (21 | ) | — | ||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
UK | 17 | 9 | — | 25 | — | 75 | — | — | ||||||||||||||||||||||||
Rest of Europe | 37 | 6 | — | 24 | — | 30 | 46 | — | ||||||||||||||||||||||||
US | 73 | 41 | — | 41 | — | 26 | 33 | — | ||||||||||||||||||||||||
Total | 127 | 56 | — | 34 | — | 34 | 32 | — | ||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Country | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
UK | 93 | 13 | — | 14 | 59 | 14 | 13 | — | ||||||||||||||||||||||||
Rest of Europe | 42 | 8 | — | 22 | 5 | 42 | 31 | — | ||||||||||||||||||||||||
US | 568 | 122 | — | 82 | 4 | 10 | 4 | — | ||||||||||||||||||||||||
Total | 703 | 143 | — | 70 | 11 | 12 | 7 | — | ||||||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 3 | 2 | 3 | 3 | 100 | (1 | ) | — | ||||||||||||||||||||
AA | 26 | 21 | 23 | 19 | 73 | (3 | ) | — | ||||||||||||||||||||
A | 36 | 28 | 32 | 29 | 81 | 1 | — | |||||||||||||||||||||
BBB | 59 | 47 | 51 | 41 | 69 | (1 | ) | — | ||||||||||||||||||||
Below BBB | 3 | 2 | 3 | 2 | 67 | 1 | — | |||||||||||||||||||||
Total | 127 | 100 | 112 | 94 | 74 | (3 | ) | — | ||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 202 | 29 | 185 | 176 | 87 | (7 | ) | — | ||||||||||||||||||||
AA | 254 | 36 | 225 | 218 | 86 | (1 | ) | — | ||||||||||||||||||||
A | 181 | 26 | 161 | 157 | 87 | (4 | ) | — | ||||||||||||||||||||
BBB | 56 | 8 | 49 | 39 | 70 | (7 | ) | — | ||||||||||||||||||||
Below BBB | 10 | 1 | 19 | 16 | 160 | (2 | ) | — | ||||||||||||||||||||
Total | 703 | 100 | 639 | 606 | 86 | (21 | ) | — | ||||||||||||||||||||
132
Table of Contents
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2010 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
AAA | 3 | 3 | — | — | — | 92 | 8 | — | ||||||||||||||||||||||||
AA | 26 | 20 | — | 33 | — | — | 67 | — | ||||||||||||||||||||||||
A | 36 | 20 | — | 57 | — | 43 | — | — | ||||||||||||||||||||||||
BBB | 59 | 13 | — | 18 | — | 42 | 40 | — | ||||||||||||||||||||||||
Below BBB | 3 | — | — | 100 | — | — | — | — | ||||||||||||||||||||||||
Total | 127 | 56 | — | 34 | — | 34 | 32 | — | ||||||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||||||
Original credit | Original sub- | Original vintage | ||||||||||||||||||||||||||||||
Nominal | enhancements | prime exposure | Pre-2005 | 2005 | 2006 | 2007 | 2008-2009 | |||||||||||||||||||||||||
Credit rating | £m | £m | £m | % | % | % | % | % | ||||||||||||||||||||||||
AAA | 202 | 41 | — | 43 | 28 | 24 | 5 | — | ||||||||||||||||||||||||
AA | 254 | 51 | — | 92 | 6 | 2 | — | — | ||||||||||||||||||||||||
A | 181 | 38 | — | 84 | — | 8 | 8 | — | ||||||||||||||||||||||||
BBB | 56 | 12 | — | 24 | — | 34 | 42 | — | ||||||||||||||||||||||||
Below BBB | 10 | 1 | — | 70 | 30 | — | — | — | ||||||||||||||||||||||||
Total | 703 | 143 | — | 70 | 11 | 12 | 7 | — | ||||||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 1,461 | 38 | 1,461 | 1,461 | 100 | — | — | |||||||||||||||||||||
Spain | 646 | 16 | 646 | 646 | 100 | — | — | |||||||||||||||||||||
France | 727 | 19 | 727 | 727 | 100 | — | — | |||||||||||||||||||||
Rest of Europe | 24 | 1 | 24 | 24 | 100 | — | — | |||||||||||||||||||||
US | 970 | 25 | 970 | 970 | 100 | — | — | |||||||||||||||||||||
Rest of the world | 24 | 1 | 24 | 24 | 100 | — | — | |||||||||||||||||||||
Total | 3,852 | 100 | 3,852 | 3,852 | 100 | — | — | |||||||||||||||||||||
2009 | ||||||||||||||||||||||||||||
2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Country | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
UK | 1,405 | 15 | 1,405 | 1,405 | 100 | — | — | |||||||||||||||||||||
Spain | 5,995 | 66 | 5,995 | 5,995 | 100 | — | — | |||||||||||||||||||||
France | 2 | — | 2 | 2 | 100 | — | — | |||||||||||||||||||||
Rest of Europe | 1,472 | 16 | 1,472 | 1,472 | 100 | — | — | |||||||||||||||||||||
US | 118 | 1 | 118 | 118 | 100 | — | — | |||||||||||||||||||||
Rest of the world | 159 | 2 | 159 | 159 | 100 | — | — | |||||||||||||||||||||
Total | 9,151 | 100 | 9,151 | 9,151 | 100 | — | — | |||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 939 | 25 | 939 | 939 | 100 | — | — | |||||||||||||||||||||
AA | 1,704 | 44 | 1,704 | 1,704 | 100 | — | — | |||||||||||||||||||||
AA- | 36 | 1 | 36 | 36 | 100 | — | — | |||||||||||||||||||||
A+ | 151 | 4 | 151 | 151 | 100 | — | — | |||||||||||||||||||||
A | 1,007 | 26 | 1,007 | 1,007 | 100 | — | — | |||||||||||||||||||||
BB+ | 2 | — | 2 | 2 | 100 | — | — | |||||||||||||||||||||
D | 13 | — | 13 | 13 | 100 | — | — | |||||||||||||||||||||
Total | 3,852 | 100 | 3,852 | 3,852 | 100 | — | — | |||||||||||||||||||||
133
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2009 Income statement movement | ||||||||||||||||||||||||||||
Fair value as | Fair value | Impairment | ||||||||||||||||||||||||||
Nominal value | Book value | Fair value | % of nominal | changes | losses | |||||||||||||||||||||||
Credit rating | £m | % | £m | £m | % | £m | £m | |||||||||||||||||||||
AAA | 955 | 10 | 955 | 955 | 100 | — | — | |||||||||||||||||||||
AA | 6,482 | 71 | 6,482 | 6,482 | 100 | — | — | |||||||||||||||||||||
AA- | 19 | — | 19 | 19 | 100 | — | — | |||||||||||||||||||||
A+ | 142 | 2 | 142 | 142 | 100 | — | — | |||||||||||||||||||||
A | 1,415 | 15 | 1,415 | 1,415 | 100 | — | — | |||||||||||||||||||||
BBB- | 138 | 2 | 138 | 138 | 100 | — | — | |||||||||||||||||||||
Total | 9,151 | 100 | 9,151 | 9,151 | 100 | — | — | |||||||||||||||||||||
2010 Income statement movement | ||||||||||||||||||||
Contract/notional amount | Fair value | Fair value changes | Impairment losses | |||||||||||||||||
Country | £m | % | £m | £m | £m | |||||||||||||||
UK | — | — | — | — | — | |||||||||||||||
Rest of Europe | 584 | 89 | 25 | — | — | |||||||||||||||
US | 73 | 11 | 13 | — | — | |||||||||||||||
Total | 657 | 100 | 38 | — | — | |||||||||||||||
(b) | Income statement movement by credit rating of issuer or counterparty |
2010 Income statement movement | ||||||||||||||||||||
Contract/notional amount | Fair value | Fair value changes | Impairment losses | |||||||||||||||||
Credit rating | £m | % | £m | £m | £m | |||||||||||||||
AA | 559 | 85 | 21 | — | — | |||||||||||||||
A | 98 | 15 | 17 | — | — | |||||||||||||||
Total | 657 | 100 | 38 | — | — | |||||||||||||||
Book value | Fair value | Book value | Fair value | |||||||||||||
2010 | 2010 | 2009 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Principal Protected Notes | 37 | 35 | 24 | 26 | ||||||||||||
Other | 240 | 241 | 424 | 423 | ||||||||||||
277 | 276 | 448 | 449 | |||||||||||||
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As at 31 December 2010
Chief Executive Officer
Chief Risk Officer
Executive Director, Retail Distribution
Deputy Chairman
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> | An analysis of the Group’s development and performance during the year is contained in the “Business Review — Summary” on pages 11 to 21. | |
> | A further detailed analysis of the business divisions is contained in the “Business Review — Divisional results” on pages 25 to 38. |
> | An analysis of the Group’s business volumes is contained in the “Business Review — Divisional results” on pages 27 to 29. | |
> | The Balance Sheet Business Review can be found on pages 42 to 66, including details of capital expenditure on page 54, contractual obligations and off-balance sheet arrangements on page 58, a review of capital management and resources on pages 59 to 61, and funding and liquidity on pages 61 to 64. | |
> | The Group’s key performance indicators are described in the “Business Review — Summary” on pages 22 to 24. |
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> | Budgets and forecasts | |
Since the acquisition of the Company by Banco Santander, S.A., the Group has a history of profitable operations. Management prepares a 3-year plan (the ‘3-Year Plan’) that forecasts balance sheet, income and margin, by product, with a particular focus on the forthcoming year. |
> | Review and reforecast | ||
The 3-Year Plan, its assumptions, forecast results and key sensitivities are reviewed by senior management and presented to the Executive Committee, the Board of Directors and to senior executives of Banco Santander, S.A.. The budget is reforecast frequently and reviewed by the Executive Committee and the Board of Directors. As part of the budgets and planning process, a particular emphasis is placed on ensuring the sustainability of earnings, and achieving and maintaining a high level of operating efficiency in the Group (measured by the trading cost:income ratio) to enable competitive products to be developed for customers. | |||
> | Stress testing | ||
To assess the Group’s ability to adapt to various market challenges, the budgets are “stress tested” as part of the Group’s internal capital adequacy assessment process (‘ICAAP’) under Basel II. Different scenarios are modelled, including a severe scenario, and senior management makes an assessment of how this would affect the Group’s profit and funding plans. |
> | Borrowing requirements and liability management | |
The Group’s financial plans are constructed to ensure that they allow the Group to meet its financial obligations as they fall due, both with respect to maturing existing liabilities and future borrowing requirements. On 3 August 2010, Banco Santander, S.A. through a Spanish-based subsidiary Santusa Holding, S.L., injected £4,456m of equity capital into the Company. The capital was used to support the reorganisation of certain Banco Santander, S.A. group companies in the UK as described in Note 49 to the Consolidated Financial Statements and will be used to support organic and inorganic growth. |
> | Contingent liabilities | |
The Directors, via the Audit and Risk Committee, also consider the Group’s exposure to contingent liabilities. This consideration addresses contingent liabilities experienced by the Group in the past, such as legal proceedings, guarantees, operating lease commitments, product misselling liabilities, and those arising in respect of the UK Financial Services Compensation Scheme, but also considers whether there are any new contingencies. Contingent liabilities are captured on a timely basis for purposes of disclosure in the Annual Report and Accounts, and the interim financial statements. Information about guarantees to third parties, tax contingencies and other contingencies are gathered and disclosed. Data about the Group’s operating lease commitments are also captured. |
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Non-trading guarantees require the approval of the Chief Executive Officer or the Financial Controller or, in their absence, the Finance Director or any two Company Executive Directors or one Company Executive Director and the Company Secretary. This provision forms part of the Company’s Corporate Governance Framework (other Financial Delegated Authorities). | ||
> | Products and markets | |
The Directors review information about the major aspects of the economic environment within which the Group operates at monthly Board meetings. This information includes an economic update which contains data on key economic and market trends. In addition, the Group’s Economic Analysis team monitors and provides information to the Board on current and prospective economic and market developments. Retail financial markets, such as the housing market, are a major focus for analysing current trends and potential developments. |
> | Financial risk management | |
The Group’s risk management focuses on major areas of risk, namely credit risk, market risk, liquidity risk, and operational risk. The Risk Management Report sets out in detail how the Group manages these risks. | ||
> | Financial adaptability | |
The Directors also consider the ability of the Group to take effective action to alter the amounts and timing of cash flows so that it can respond to unexpected needs or opportunities. Such financial adaptability mitigates the areas of financial risk above in considering the appropriateness of the going concern presumption in relation to the Group. In determining the financial adaptability of the Group, the Directors have considered the ability of the Group to: |
> | Obtain new sources of finance | ||
The Group minimises refinancing risk by sourcing funds from a variety of markets as appropriate and subject to consideration of the appropriate leverage ratio and funding mix for the Group, and in particular customer deposit levels and medium-term financing. The Group actively manages its relationships with existing providers of funding and considers new sources of funds as and when they arise. |
– | money markets: both unsecured (including interbank and customer deposits, and issuances of certificates of deposit and commercial paper) and secured (including repos in open market operations); | ||
– | debt capital markets (including discrete bond issues and medium term notes); | ||
– | mortgage-backed funding (including securitisation and covered bond issuance); and | ||
– | capital instruments (although primarily issued to maintain capital ratios). |
> | Obtain financial support from other group companies | ||
For liquidity purposes, the Group operates on a stand-alone basis. However, in case of stress conditions, it would consult with its ultimate parent company, Banco Santander, S.A., about financial support. | |||
> | Continue business by making limited reductions in the level of operations or by making use of alternative resources | ||
The Group maintains and regularly updates a Contingency Funding Plan to cover potential extreme scenarios. In addition, the 3-Year Plan is stressed, as part of the ICAAP process, to ensure that the Group can accommodate extreme scenarios and the impact this would have on the 3-Year Plan and profits. In accommodating these extreme scenarios, various management levers would be utilised, including the encashment of certain liquid assets and a reduction in new business in Retail and Corporate Banking. |
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Director | Title | Date of resignation | ||
António Horta-Osório | Chief Executive Officer | 1 December 2010 | ||
Antonio Lorenzo | Chief Finance Officer | 1 December 2010 | ||
Juan Colombás | Chief Risk Officer | 1 December 2010 | ||
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£ | ||||
Salaries and fees | 4,270,326 | |||
Performance-related payments(1) | 500,000 | |||
Other taxable benefits | - | |||
Total remuneration excluding pension contributions | 4,770,326 | |||
Pension contributions | - | |||
Compensation for loss of office | - | |||
4,770,326 | ||||
(1) | In line with the UK Financial Services Authority Remuneration Code, a proportion of the performance-related payment was deferred. Further details can be found in Note 46 to the Consolidated Financial Statements. |
Salary and | Other | Performance related | LTIP | Total | ||||||||||||||||||||
fees | Benefits(1) | payments(2) | ||||||||||||||||||||||
Paid | Deferred | |||||||||||||||||||||||
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||
Ana Botín (appointed 1 December 2010) | - | - | - | - | - | - | ||||||||||||||||||
Alison Brittain | 564 | - | 156 | 344 | 111 | 1,175 | ||||||||||||||||||
Juan Colombás (resigned 1 December 2010) | 490 | 148 | - | - | - | 638 | ||||||||||||||||||
António Horta-Osório (resigned 1 December 2010) | 797 | 665 | - | - | - | 1,462 | ||||||||||||||||||
Antonio Lorenzo (resigned 1 December 2010) | 450 | 86 | - | - | - | 536 | ||||||||||||||||||
Sub total | 2,301 | 899 | 156 | 344 | 111 | 3,811 | ||||||||||||||||||
Chairman | ||||||||||||||||||||||||
Terence Burns | 520 | - | - | - | - | 520 | ||||||||||||||||||
Non-Executive Directors | ||||||||||||||||||||||||
Jane Barker | 100 | - | - | - | - | 100 | ||||||||||||||||||
Roy Brown | 120 | - | - | - | - | 120 | ||||||||||||||||||
José María Carballo | 100 | - | - | - | - | 100 | ||||||||||||||||||
José María Fuster | - | - | - | - | - | - | ||||||||||||||||||
Juan Rodriguez Inciarte | - | - | - | - | - | - | ||||||||||||||||||
Rosemary Thorne | 130 | - | - | - | - | 130 | ||||||||||||||||||
Keith Woodley | 100 | - | - | - | - | 100 | ||||||||||||||||||
Sub total | 1,070 | - | - | - | - | 1,070 | ||||||||||||||||||
Total | 3,371 | 899 | 156 | 344 | 111 | 4,881 | ||||||||||||||||||
(1) | Other benefits comprise cash and non-cash benefits. | |
(2) | In line with the UK Financial Services Authority Remuneration Code, a proportion of the performance-related payment was deferred. Further details can be found in Note 46 to the Consolidated Financial Statements. |
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Individual 1 | Individual 2 | Individual 3 | Individual 4 | Individual 5 | ||||||||||||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
Fixed remuneration (including any non-cash and taxable benefits) | 765 | 341 | 496 | 399 | 518 | |||||||||||||||
Variable remuneration (cash — paid) | 149 | 147 | 128 | 142 | 116 | |||||||||||||||
Variable remuneration (cash — deferred) | 341 | 503 | 262 | 308 | 134 | |||||||||||||||
2010 Remuneration | 1,255 | 991 | 886 | 849 | 768 | |||||||||||||||
Long Term Incentive Plan (outcome contingent on future performance) | 101 | 34 | 100 | 104 | 54 | |||||||||||||||
Sign-on award | - | - | - | - | - | |||||||||||||||
Severance award | - | - | - | - | - | |||||||||||||||
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> | Abide by all relevant laws and regulations. | |
> | Act with integrity in all their business actions on the Group’s behalf. | |
> | Not use their authority or office for personal gain. | |
> | Conduct business relationships in a transparent manner. | |
> | Reject all improper practices or dealings they may be exposed to. | |
> | Be individually responsible for keeping to the Code of Conduct. |
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> | Policies and procedures that relate to the maintenance of records that fairly and accurately reflect the transactions and disposition of assets. | |
> | Controls providing reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with IFRS, and that receipts and expenditures are being made only as authorised by management. | |
> | Controls providing reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material effect on the financial statements. |
> | so far as the Director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and | |
> | the Director has taken all steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. |
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> | properly select and apply accounting policies; | |
> | present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; | |
> | provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and | |
> | make an assessment of the Company’s ability to continue as a going concern. |
Company Secretary
17 March 2011
2 Triton Square, Regent’s Place, London NW1 3AN
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Financial Statements | ||
151 | ||
152 | ||
152 | ||
153 | ||
154 | ||
155 | ||
156 | ||
157 | ||
157 | ||
158 | ||
159 |
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Chartered Accountants and Registered Auditors
London, United Kingdom
17 March 2011
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2010 | 2009 | 2008 | ||||||||||||||
Notes | £m | £m | £m | |||||||||||||
Interest and similar income | 3 | 7,047 | 7,318 | 7,915 | ||||||||||||
Interest expense and similar charges | 3 | (3,233 | ) | (3,906 | ) | (6,143 | ) | |||||||||
Net interest income | 3,814 | 3,412 | 1,772 | |||||||||||||
Fee and commission income | 4 | 902 | 986 | 768 | ||||||||||||
Fee and commission expense | 4 | (203 | ) | (162 | ) | (97 | ) | |||||||||
Net fee and commission income | 699 | 824 | 671 | |||||||||||||
Net trading and other income | 5 | 521 | 460 | 561 | ||||||||||||
Total operating income | 5,034 | 4,696 | 3,004 | |||||||||||||
Administration expenses | 6 | (1,793 | ) | (1,848 | ) | (1,343 | ) | |||||||||
Depreciation and amortisation | 7 | (275 | ) | (260 | ) | (202 | ) | |||||||||
Total operating expenses excluding provisions and charges | (2,068 | ) | (2,108 | ) | (1,545 | ) | ||||||||||
Impairment losses on loans and advances | 9 | (712 | ) | (842 | ) | (348 | ) | |||||||||
Provisions for other liabilities and charges | 9 | (129 | ) | (56 | ) | (17 | ) | |||||||||
Total operating provisions and charges | (841 | ) | (898 | ) | (365 | ) | ||||||||||
Profit before tax | 2,125 | 1,690 | 1,094 | |||||||||||||
Taxation charge | 10 | (542 | ) | (445 | ) | (275 | ) | |||||||||
Profit for the year | 1,583 | 1,245 | 819 | |||||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | 1,544 | 1,190 | 811 | |||||||||||||
Non-controlling interest | 39 | 55 | 8 | |||||||||||||
2010 | 2009 | 2008 | ||||||||||||||
Notes | £m | £m | £m | |||||||||||||
Profit for the year | 1,583 | 1,245 | 819 | |||||||||||||
Other comprehensive income/(expense): | ||||||||||||||||
Actuarial gains/(losses) on retirement benefit obligations | 37 | 25 | (606 | ) | (44 | ) | ||||||||||
(Losses)/gains on available-for-sale securities | 21 | (1 | ) | (6 | ) | 8 | ||||||||||
Exchange differences on translation of foreign operations | — | (4 | ) | 28 | ||||||||||||
Tax on above items | 10 | (9 | ) | 171 | 8 | |||||||||||
Net gain/(loss) recognised directly in equity | 15 | (445 | ) | — | ||||||||||||
Gains on available-for-sale securities transferred to profit or loss on sale | (2 | ) | (2 | ) | — | |||||||||||
Tax on items transferred to profit or loss | 10 | 1 | 1 | — | ||||||||||||
Net transfers to profit | (1 | ) | (1 | ) | — | |||||||||||
Total other comprehensive income/(expense) for the year before tax | 22 | (618 | ) | (8 | ) | |||||||||||
Tax relating to components of other comprehensive income/(expense) | 10 | (8 | ) | 172 | 8 | |||||||||||
Total comprehensive income for the year | 1,597 | 799 | 819 | |||||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | 1,558 | 744 | 811 | |||||||||||||
Non-controlling interest | 39 | 55 | 8 | |||||||||||||
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2010 | 2009 | |||||||||||
Notes | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 12 | 26,502 | 4,163 | |||||||||
Trading assets | 13 | 35,461 | 33,290 | |||||||||
Derivative financial instruments | 14 | 24,377 | 22,827 | |||||||||
Financial assets designated at fair value | 15 | 6,777 | 12,358 | |||||||||
Loans and advances to banks | 16 | 3,852 | 9,151 | |||||||||
Loans and advances to customers | 17 | 195,132 | 186,804 | |||||||||
Available-for-sale securities | 21 | 175 | 797 | |||||||||
Loans and receivables securities | 22 | 3,610 | 9,898 | |||||||||
Macro hedge of interest rate risk | 1,091 | 1,127 | ||||||||||
Investment in associated undertakings | 24 | 2 | 75 | |||||||||
Intangible assets | 25 | 2,178 | 1,446 | |||||||||
Property, plant and equipment | 26 | 1,705 | 1,250 | |||||||||
Current tax assets | 277 | 85 | ||||||||||
Deferred tax assets | 27 | 566 | 946 | |||||||||
Other assets | 28 | 1,155 | 1,074 | |||||||||
Total assets | 302,860 | 285,291 | ||||||||||
Liabilities | ||||||||||||
Deposits by banks | 29 | 7,784 | 5,811 | |||||||||
Deposits by customers | 30 | 152,643 | 143,893 | |||||||||
Derivative financial instruments | 14 | 22,405 | 18,963 | |||||||||
Trading liabilities | 31 | 42,827 | 46,152 | |||||||||
Financial liabilities designated at fair value | 32 | 3,687 | 4,423 | |||||||||
Debt securities in issue | 33 | 51,783 | 47,758 | |||||||||
Subordinated liabilities | 34 | 6,372 | 6,949 | |||||||||
Other liabilities | 35 | 2,026 | 2,323 | |||||||||
Provisions | 36 | 185 | 91 | |||||||||
Current tax liabilities | 492 | 300 | ||||||||||
Deferred tax liabilities | 27 | 209 | 336 | |||||||||
Retirement benefit obligations | 37 | 173 | 1,070 | |||||||||
Total liabilities | 290,586 | 278,069 | ||||||||||
Equity | ||||||||||||
Share capital | 39 | 3,999 | 2,709 | |||||||||
Share premium | 39 | 5,620 | 1,857 | |||||||||
Retained earnings | 2,628 | 1,911 | ||||||||||
Other reserves | 27 | 29 | ||||||||||
Total shareholders’ equity | 12,274 | 6,506 | ||||||||||
Non-controlling interests | 41 | — | 716 | |||||||||
Total equity | 12,274 | 7,222 | ||||||||||
Total liabilities and equity | 302,860 | 285,291 | ||||||||||
Chief Executive Officer
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Other reserves | ||||||||||||||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||||||
Available | currency | Non- | ||||||||||||||||||||||||||||||||||
Share | Share | for sale | translation | Retained | controlling | |||||||||||||||||||||||||||||||
capital | premium | reserve | reserve | earnings | Total | interest | Total | |||||||||||||||||||||||||||||
Notes | £m | £m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||||||||
1 January 2008 | 148 | 1,857 | 13 | (7 | ) | 1,333 | 3,344 | 98 | 3,442 | |||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 811 | 811 | 8 | 819 | ||||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | 8 | 28 | (44 | ) | (8 | ) | — | (8 | ) | |||||||||||||||||||||||||
Tax on other comprehensive income | — | — | (3 | ) | — | 11 | 8 | — | 8 | |||||||||||||||||||||||||||
Dividends | 40 | — | — | — | — | (450 | ) | (450 | ) | — | (450 | ) | ||||||||||||||||||||||||
Issue of ordinary shares | 39 | 1,000 | — | — | — | — | 1,000 | — | 1,000 | |||||||||||||||||||||||||||
Capital contribution | 39 | — | 1,264 | — | — | 17 | 1,281 | — | 1,281 | |||||||||||||||||||||||||||
Assumed through business combinations | 39 | — | — | — | — | — | — | 605 | 605 | |||||||||||||||||||||||||||
31 December 2008 | 1,148 | 3,121 | 18 | 21 | 1,678 | 5,986 | 711 | 6,697 | ||||||||||||||||||||||||||||
1 January 2009 | 1,148 | 3,121 | 18 | 21 | 1,678 | 5,986 | 711 | 6,697 | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 1,190 | 1,190 | 55 | 1,245 | ||||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | (8 | ) | (4 | ) | (606 | ) | (618 | ) | — | (618 | ) | |||||||||||||||||||||||
Tax on other comprehensive income | — | — | 2 | — | 170 | 172 | — | 172 | ||||||||||||||||||||||||||||
Dividends and other distributions | 40, 41 | — | — | — | — | (521 | ) | (521 | ) | (50 | ) | (571 | ) | |||||||||||||||||||||||
Reclassification of RCIs | 39 | 297 | — | — | — | — | 297 | — | 297 | |||||||||||||||||||||||||||
Transfer to share capital | 39 | 1,264 | (1,264 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||
31 December 2009 | 2,709 | 1,857 | 12 | 17 | 1,911 | 6,506 | 716 | 7,222 | ||||||||||||||||||||||||||||
1 January 2010 | 2,709 | 1,857 | 12 | 17 | 1,911 | 6,506 | 716 | 7,222 | ||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | 1,544 | 1,544 | 39 | 1,583 | ||||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | (3 | ) | — | 25 | 22 | — | 22 | |||||||||||||||||||||||||||
Tax on other comprehensive income | — | — | 1 | — | (9 | ) | (8 | ) | — | (8 | ) | |||||||||||||||||||||||||
Dividends and other distributions | 40, 41 | — | — | — | — | (815 | ) | (815 | ) | (17 | ) | (832 | ) | |||||||||||||||||||||||
Issue of preference shares | 39 | 300 | — | — | — | — | 300 | — | 300 | |||||||||||||||||||||||||||
Redemption of A&L preference shares | 41 | — | — | — | — | — | — | (294 | ) | (294 | ) | |||||||||||||||||||||||||
Reclassification of Perpetual Preferreds | 39, 41 | 297 | — | — | — | — | 297 | (297 | ) | — | ||||||||||||||||||||||||||
Issue of ordinary shares | 39 | 693 | 3,763 | — | — | — | 4,456 | — | 4,456 | |||||||||||||||||||||||||||
Acquisition of non-controlling interest | 49 | — | — | — | — | (28 | ) | (28 | ) | (147 | ) | (175 | ) | |||||||||||||||||||||||
31 December 2010 | 3,999 | 5,620 | 10 | 17 | 2,628 | 12,274 | — | 12,274 | ||||||||||||||||||||||||||||
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2010 | 2009 | 2008 | ||||||||||||||
Notes | £m | £m | £m | |||||||||||||
Net cash flow from/(used in) operating activities | ||||||||||||||||
Profit for the year | 1,583 | 1,245 | 819 | |||||||||||||
Adjustments for: | ||||||||||||||||
Non cash items included in net profit | 3,136 | (24 | ) | 1,297 | ||||||||||||
Change in operating assets | 6,239 | 7,776 | (30,381 | ) | ||||||||||||
Change in operating liabilities | 1,557 | (2,351 | ) | 209 | ||||||||||||
Income taxes (paid)/received | (131 | ) | 2 | 43 | ||||||||||||
Effects of exchange rate differences | (1,000 | ) | (3,719 | ) | 6,569 | |||||||||||
Net cash flow from/(used in) operating activities | 42 | 11,384 | 2,929 | (21,444 | ) | |||||||||||
Net cash flow (used in)/from investing activities | ||||||||||||||||
Acquisition of businesses, net of cash acquired | 42,49 | (1,418 | ) | — | 18,667 | |||||||||||
Dividends received from associates | — | — | 2 | |||||||||||||
Investment in associates | 24 | — | (35 | ) | (8 | ) | ||||||||||
Disposal of subsidiaries, net of cash disposed | 42 | 250 | — | 1,605 | ||||||||||||
Purchase of tangible and intangible fixed assets | 25, 26 | (873 | ) | (463 | ) | (278 | ) | |||||||||
Proceeds from sale of tangible and intangible fixed assets | 91 | 60 | 15 | |||||||||||||
Purchase of non-trading securities | (1,225 | ) | (1,133 | ) | (891 | ) | ||||||||||
Proceeds from sale of non-trading securities | 1,851 | 3,004 | 290 | |||||||||||||
Net cash flow (used in)/from investing activities | (1,324 | ) | 1,433 | 19,402 | ||||||||||||
Net cash flow from/(used in) financing activities | ||||||||||||||||
Issue of ordinary share capital | 39 | 4,456 | — | 1,000 | ||||||||||||
Issue of loan capital | 21,409 | 1,556 | — | |||||||||||||
Repayment of loan capital | (15,973 | ) | (5,895 | ) | (7,786 | ) | ||||||||||
Dividends paid on ordinary shares | 40 | (900 | ) | (225 | ) | (574 | ) | |||||||||
Dividends paid on preference shares classified in equity | 40 | (19 | ) | — | — | |||||||||||
Dividends paid on Reserve Capital Instruments | 40 | (21 | ) | (21 | ) | (21 | ) | |||||||||
Interest paid on preference shares classified in non-controlling interest | — | (19 | ) | — | ||||||||||||
Interest paid on Perpetual Preferred Securities classified in non-controlling interest | 41 | (17 | ) | (17 | ) | — | ||||||||||
Net cash flow from/(used in) financing activities | 8,935 | (4,621 | ) | (7,381 | ) | |||||||||||
Net increase/(decrease) in cash and cash equivalents | 18,995 | (259 | ) | (9,423 | ) | |||||||||||
Cash and cash equivalents at beginning of the year | 26,364 | 27,675 | 34,056 | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents | 141 | (1,052 | ) | 3,042 | ||||||||||||
Cash and cash equivalents at the end of the year | 42 | 45,500 | 26,364 | 27,675 | ||||||||||||
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2010 | 2009 | |||||||||||
Notes | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 12 | 21,408 | 3,266 | |||||||||
Derivative financial instruments | 14 | 2,994 | 2,539 | |||||||||
Financial assets designated at fair value | 15 | 5,126 | 37,145 | |||||||||
Loans and advances to banks | 16 | 115,957 | 109,658 | |||||||||
Loans and advances to customers | 17 | 179,223 | 131,749 | |||||||||
Available-for-sale securities | 21 | 38 | 30 | |||||||||
Loans and receivables securities | 22 | 5,378 | 2 | |||||||||
Macro hedge of interest rate risk | 114 | — | ||||||||||
Investment in subsidiary undertakings | 23 | 6,869 | 7,038 | |||||||||
Investment in associated undertakings | 24 | 1 | 76 | |||||||||
Intangible assets | 25 | 1,407 | 552 | |||||||||
Property, plant and equipment | 26 | 1,204 | 561 | |||||||||
Current tax assets | 212 | — | ||||||||||
Deferred tax assets | 27 | 379 | 428 | |||||||||
Other assets | 28 | 1,005 | 651 | |||||||||
Total assets | 341,315 | 293,695 | ||||||||||
Liabilities | ||||||||||||
Deposits by banks | 29 | 146,240 | 116,414 | |||||||||
Deposits by customers | 30 | 170,579 | 159,187 | |||||||||
Derivative financial instruments | 14 | 1,099 | 3,353 | |||||||||
Financial liabilities designated at fair value | 32 | 30 | — | |||||||||
Debt securities in issue | 33 | 3,177 | — | |||||||||
Subordinated liabilities | 34 | 6,438 | 6,119 | |||||||||
Other liabilities | 35 | 1,796 | 1,611 | |||||||||
Provisions | 36 | 156 | 74 | |||||||||
Current tax liabilities | 14 | 92 | ||||||||||
Retirement benefit obligations | 37 | 177 | 922 | |||||||||
Total liabilities | 329,706 | 287,772 | ||||||||||
Equity | ||||||||||||
Share capital | 39 | 3,999 | 2,709 | |||||||||
Share premium | 39 | 5,620 | 1,857 | |||||||||
Retained earnings | 1,983 | 1,350 | ||||||||||
Available for sale reserve | 7 | 7 | ||||||||||
Total shareholders’ equity | 11,609 | 5,923 | ||||||||||
Total liabilities and equity | 341,315 | 293,695 | ||||||||||
Chief Executive Officer
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2010 | 2009 | 2008 | ||||||||||||||
Notes | £m | £m | £m | |||||||||||||
Profit for the year | 1,391 | 747 | 1,328 | |||||||||||||
Other comprehensive income/(expenses): | ||||||||||||||||
Actuarial gains/(losses) on retirement benefit obligations | 37 | 67 | (414 | ) | (43 | ) | ||||||||||
Losses on available-for-sale securities | 21 | — | — | (4 | ) | |||||||||||
Tax on items taken directly to equity | (20 | ) | 116 | 12 | ||||||||||||
Net loss recognised directly in equity | 47 | (298 | ) | (35 | ) | |||||||||||
Gains on available-for-sale securities transferred to profit or loss on sale | — | — | — | |||||||||||||
Tax on items transferred to profit | — | — | — | |||||||||||||
Net transfers to profit | — | — | — | |||||||||||||
Total other comprehensive income/(expense) for the year before tax | 67 | (414 | ) | (47 | ) | |||||||||||
Tax relating to components of other comprehensive income/(expense) | (20 | ) | 116 | 12 | ||||||||||||
Total comprehensive income for the year | 1,438 | 449 | 1,293 | |||||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | 1,438 | 449 | 1,293 | |||||||||||||
Share | Share | Available for | Retained | |||||||||||||||||||||
Capital | Premium | sale reserve | earnings | Total | ||||||||||||||||||||
Notes | £m | £m | £m | £m | £m | |||||||||||||||||||
1 January 2008 | 148 | 1,857 | 11 | 575 | 2,591 | |||||||||||||||||||
Profit for the year | — | — | — | 1,328 | 1,328 | |||||||||||||||||||
Other comprehensive income for the year | — | — | (4 | ) | (43 | ) | (47 | ) | ||||||||||||||||
Tax on other comprehensive income | — | — | — | 12 | 12 | |||||||||||||||||||
Issue of ordinary shares | 39 | 1,000 | — | — | — | 1,000 | ||||||||||||||||||
Dividends | 40 | — | — | — | (450 | ) | (450 | ) | ||||||||||||||||
31 December 2008 | 1,148 | 1,857 | 7 | 1,422 | 4,434 | |||||||||||||||||||
1 January 2009 | 1,148 | 1,857 | 7 | 1,422 | 4,434 | |||||||||||||||||||
Profit for the year | — | — | — | 747 | 747 | |||||||||||||||||||
Other comprehensive income for the year | — | — | — | (414 | ) | (414 | ) | |||||||||||||||||
Tax on other comprehensive income | — | — | — | 116 | 116 | |||||||||||||||||||
Capital contribution | 39 | 1,264 | — | — | — | 1,264 | ||||||||||||||||||
Dividends | 40 | — | — | — | (521 | ) | (521 | ) | ||||||||||||||||
Reclassification of Reserve Capital Instruments | 39 | 297 | — | — | — | 297 | ||||||||||||||||||
31 December 2009 | 2,709 | 1,857 | 7 | 1,350 | 5,923 | |||||||||||||||||||
1 January 2010 | 2,709 | 1,857 | 7 | 1,350 | 5,923 | |||||||||||||||||||
Profit for the year | — | — | — | 1,391 | 1,391 | |||||||||||||||||||
Other comprehensive income for the year | — | — | — | 67 | 67 | |||||||||||||||||||
Tax on other comprehensive income | — | — | — | (20 | ) | (20 | ) | |||||||||||||||||
Issue of preference shares | 39 | 300 | — | — | — | 300 | ||||||||||||||||||
Reclassification of Perpetual Preferreds | 39 | 297 | — | — | — | 297 | ||||||||||||||||||
Issue of ordinary shares | 39 | 693 | 3,763 | — | — | 4,456 | ||||||||||||||||||
Other movements | — | — | — | 10 | 10 | |||||||||||||||||||
Dividends | 40 | — | — | — | (815 | ) | (815 | ) | ||||||||||||||||
31 December 2010 | 3,999 | 5,620 | 7 | 1,983 | 11,609 | |||||||||||||||||||
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2010 | 2009 | 2008 | ||||||||||||||
Notes | £m | £m | £m | |||||||||||||
Net cash flow from/(used in) operating activities | ||||||||||||||||
Profit for the year | 1,391 | 747 | 1,328 | |||||||||||||
Adjustments for: | ||||||||||||||||
Non cash items included in net profit | 2,580 | (207 | ) | 2,038 | ||||||||||||
Change in operating assets | (35,575 | ) | 1,103 | (80,636 | ) | |||||||||||
Change in operating liabilities | 43,708 | (6,166 | ) | 128,109 | ||||||||||||
Income taxes (paid)/received | (99 | ) | 21 | 80 | ||||||||||||
Effects of exchange rate differences | (27 | ) | (268 | ) | 897 | |||||||||||
Net cash flow from/(used in) operating activities | 42 | 11,978 | (4,770 | ) | 51,816 | |||||||||||
Net cash flow used in investing activities | ||||||||||||||||
Increase in investment in subsidiaries | 23 | (1,451 | ) | — | (598 | ) | ||||||||||
Investment in associates | 24 | — | (35 | ) | (708 | ) | ||||||||||
Disposal of subsidiaries, net of cash disposed | 772 | — | 111 | |||||||||||||
Purchase of tangible and intangible fixed assets | 25,26 | (783 | ) | (209 | ) | (174 | ) | |||||||||
Proceeds from sale of tangible and intangible fixed assets | 47 | 18 | 11 | |||||||||||||
Purchase of non-trading securities | — | (9 | ) | (9 | ) | |||||||||||
Proceeds from sale and redemption of non-dealing securities | — | 3 | 8 | |||||||||||||
Net cash flow used in investing activities | (1,415 | ) | (232 | ) | (1,359 | ) | ||||||||||
Net cash flow from/(used in) financing activities | ||||||||||||||||
Issue of ordinary share capital | 39 | 4,456 | — | 1,000 | ||||||||||||
Repayment of loan capital | (2,804 | ) | (557 | ) | (253 | ) | ||||||||||
Dividends paid on ordinary shares | 40 | (900 | ) | (225 | ) | (574 | ) | |||||||||
Dividends paid on preference shares classified in equity | 40 | (19 | ) | — | — | |||||||||||
Dividends paid on Reserve Capital Instruments | 40 | (21 | ) | (21 | ) | (21 | ) | |||||||||
Net cash flow from/(used in) financing activities | 712 | (803 | ) | 152 | ||||||||||||
Net increase/(decrease) in cash and cash equivalents | 11,275 | (5,805 | ) | 50,609 | ||||||||||||
Cash and cash equivalents at beginning of the year | 55,398 | 61,203 | 10,594 | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents | — | — | — | |||||||||||||
Cash and cash equivalents at the end of the year | 42 | 66,673 | 55,398 | 61,203 | ||||||||||||
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a) | IFRS 3 “Business Combinations” — In January 2008, the IASB issued an amendment to IFRS 3 which clarifies and changes certain elements of accounting for a business combination, including the measurement and accounting for non-controlling interests, contingent consideration, step acquisitions and acquisition-related costs and also widens the scope of the standard. There are also associated amendments to IAS 27, IAS 28 and IAS 31. |
> | IFRS 3 (2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition (previously referred to as ‘minority’ interests) either at fair value or at the non-controlling interests’ share of recognised identifiable net assets of the acquiree. | ||
> | IFRS 3 (2008) changes the recognition and subsequent accounting requirements for contingent consideration. Previously, contingent consideration was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured reliably; any subsequent adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised Standard, contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of the acquisition only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the date of acquisition. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss. |
> | IFRS 3 (2008) requires the application of acquisition accounting only at the point where control is achieved, for a business combination achieved in stages (step acquisition). If an acquirer has a pre-existing equity interest in an acquiree and increases its equity interest sufficiently to achieve control, it must remeasure its previously-held equity interest in the acquiree at acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss. Once control is achieved, all other increases and decreases in ownership interests are treated as transactions among equity holders and reported within equity. Goodwill does not arise on any increase, and no gain or loss is recognised on any decrease. | ||
> | IFRS 3 (2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred, whereas previously they were accounted for as part of the cost of the acquisition. | ||
> | IFRS 3 (2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree. |
The adoption of IFRS 3 (2008) has affected the accounting for the Group’s acquisition in the current year of the 100% of Santander Cards Limited, Santander Cards (UK) Limited (and its subsidiaries) and Santander Cards Ireland Limited, the 50.1% of Santander Consumer (UK) plc that it did not already own and the 49% of Santander Private Banking UK Limited (and its subsidiaries) that it did not already own (by way of the purchase of 100% of its holding company, Santander PB UK (Holdings) Limited), as described in Note 49. |
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b) | IAS 27 “Consolidated and Separate Financial Statements” — In January 2008, the IASB issued an amendment to IAS 27, to reflect the amendment in IFRS 3. The changes in the accounting policy have been applied prospectively from 1 January 2010. The application of IAS 27 (2008) has resulted in changes in the Group’s accounting policies for changes in ownership interests in subsidiaries. |
> | Specifically, the revised Standard has affected the Group’s accounting policies regarding changes in ownership interests in its subsidiaries that do not result in loss of control. In prior years, in the absence of specific requirements in IFRSs, increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised, when appropriate; for decreases in interests in existing subsidiaries that did not involve a loss of control, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in profit or loss. Under IAS 27 (2008), all such increases or decreases are dealt with in equity, with no impact on goodwill or profit or loss. | ||
> | When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the revised Standard requires the Group to derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss. |
The adoption of IAS 27 (2008) has affected the accounting for the Group’s acquisition in the current year of the 49% of Santander Private Banking UK Limited (and its subsidiaries) that it did not already own (by way of the purchase of 100% of its holding company, Santander PB UK (Holdings) Limited), as described in Note 49. The change in policy resulted in the difference between the consideration paid and the non-controlling interests recognised being recognised directly in equity, instead of in profit or loss. In addition, the cash consideration paid in the current year has been included in cash flows from investing activities. | ||
c) | IAS 28 “Investment in Associates” and IAS 31 “Interest in Joint Ventures” — In January 2008, the IASB made consequential amendments to IAS 28 and IAS 31 to extend the changes in IAS 27. The principle adopted in IAS 27 (2008) that a change in accounting basis is recognised as a disposal and re-acquisition of any retained interest at fair value is extended to IAS 28 and IAS 31 as follows: |
> | IAS 28 is amended such that for a change in equity interest in an associate, the investor remeasures at acquisition date fair value any investment retained in the former associate, with any consequential gain or loss compared to its carrying amount under IAS 28 recognised in profit or loss. | ||
> | IAS 31 is amended such that for a change in joint control interest in an entity, the investor remeasures at fair value any investment retained in the former jointly controlled entity, with any consequential gain or loss compared to its carrying amount under IAS 31 recognised in profit or loss. | ||
> | Any amount that has previously been recognised in other comprehensive income, and that would be reclassified to profit or loss following a disposal, is similarly reclassified to profit or loss. |
The adoption of IAS 28 (2008) has affected the accounting for the Group’s acquisition in the current year of the 50.1% of Santander Consumer (UK) plc that it did not already own, as described in Note 49. |
a) | IFRS 9 “Financial Instruments” — In November 2009, the IASB issued IFRS 9 and in October 2010, issued an amendment to IFRS 9 which introduce new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. IFRS 9 is effective for annual periods beginning on or after 1 January 2013. |
> | IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 ‘Financial Instruments: Recognition and Measurement’ to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. | ||
> | The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognised in profit or loss. |
The Group anticipates that IFRS 9 will be adopted in the Group’s financial statements for the annual period beginning on or after 1 January 2013 and that the application of the new Standard may have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. |
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b) | IFRS 7 “Financial Instruments: Disclosures” — In October 2010, the IASB issued amendments to IFRS 7 that increase the disclosure requirements for transactions involving transfers of financial assets. The amendments are intended to provide greater transparency around risk exposures when a financial asset is transferred but the transferor retains some level of continuing exposure in the asset. The amendments also require disclosures where transfers of financial assets are not evenly distributed throughout the period. The amendments to IFRS 7 are effective for annual periods beginning on or after 1 July 2011, with earlier application permitted. |
c) | IAS 24 “Related Party Transactions” — In November 2009, the IASB issued amendments to IAS 24, effective for annual periods beginning on or after 1 January 2011, with earlier application permitted. The revised standard modifies the definition of a related party and simplifies disclosures for government-related entities. |
> | the activities of the SPE are being conducted on behalf of the Group according to the Group’s specific business needs so that it obtains benefits from the SPE’s operation; | |
> | the Group has the decision-making powers to obtain the majority of the benefits of the activities of the SPE or, by setting up an ‘autopilot’ mechanism, the Group has delegated those decision-making powers; | |
> | the Group has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks arising from the activities of the SPE; or | |
> | the Group retains the majority of the residual or ownership risks related to the SPE or its assets in order to obtain benefits from its activities. |
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Owner-occupied properties | Not exceeding 50 years | |
Office fixtures and equipment | 3 to 15 years | |
Computer software | 3 to 7 years | |
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Level 1: | Unadjusted quoted prices for identical assets or liabilities in an active market that the Group has the ability to access at the measurement date. Level 1 positions include debt securities, equity securities, exchange traded derivatives and short positions in securities. |
Level 2: | Quoted prices in markets that are not active, quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or liability. Level 2 positions include loans and advances to banks, loans and advances to customers, equity securities, exchange rate derivatives, interest rate derivatives, equity and credit derivatives, debt securities, deposits by banks, deposits by customers and debt securities in issue. |
Level 3: | Inputs to the pricing or valuation techniques that are significant to the overall fair value measurement of the asset or liability are unobservable. Level 3 positions include equity securities, exchange rate derivative, equity and credit derivatives, loans and advances to customers, debt securities, and debt securities in issue. |
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> | Incurred but have not yet been identified (i.e. IBNO losses); and | |
> | Observed. |
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> | historical loss experience in portfolios of similar credit risk characteristics (for example, by product); | |
> | the estimated period between impairment occurring and the loss being identified and evidenced by the establishment of an observed loss allowance against the individual loan (known as the emergence period, which is discussed below); and | |
> | management’s experienced judgement as to whether current economic and credit conditions are such that the actual level of inherent losses at the balance sheet date is likely to be greater or less than that suggested by historical experience. |
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> | where an asset has a payment default which has been outstanding for 90 days or more; | |
> | where non-payment defaults have occurred and/or where it has become evident that a workout or rescheduling exercise is to be undertaken; or | |
> | where it has become evident that the value of any security is no longer considered adequate. |
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> | Retail Banking; | |
> | Corporate Banking; | |
> | Global Banking & Markets; and | |
> | Group Infrastructure. |
> | Retail Bankingoffers a comprehensive range of banking products and related financial services (residential mortgages, savings and banking, and other personal financial services products) to customers throughout the UK. It serves customers through the Santander UK network of branches and ATMs, as well as through telephone and internet channels. It also offers private banking and other specialist banking services in the UK, and offshore banking. | |
> | Corporate Bankingprovides a range of banking services principally to small and medium-sized (‘SME’) UK companies (with revenues between £1m and £25m) through its network of 25 Corporate Business Centres and specialist businesses. A broad range of banking products is offered including loans, bank accounts, deposits, treasury services, asset finance, cash transmission, trade finance and invoice discounting. The specialist businesses within Corporate Banking service customers in various business sectors including Real Estate, Social Housing and Infrastructure. Corporate Banking is also responsible for managing certain non-core portfolios, including aviation and shipping. | |
> | Global Banking & Marketsis a financial markets business focused on providing value added financial services to large corporates not serviced by Corporate Banking (being, in general, large multinationals) and financial institutions, as well as to the rest of Santander UK’s business (including the Retail Banking and Corporate Banking divisions). It is structured into five main product areas: Rates, Foreign exchange and money markets, Equity, Credit and Transaction Banking. In addition, large and complex clients are covered by teams organised along industry lines. Rates covers sales and trading activity for fixed income products. Foreign exchange offers a range of foreign exchange products and money markets runs securities lending/borrowing and repo businesses. Equity covers equity derivatives, property derivatives and commodities. Equity derivatives activities include the manufacture of structured products sold to retail and corporate customers of both the Group and of other financial institutions who sell them on to their customers. Credit originates loan and bond transactions in primary markets as well as their intermediation in secondary markets. Transaction Banking provides lending and cash management services, including deposit taking and trade finance. | |
> | Group Infrastructureconsists of Asset and Liability Management (‘ALM’), which is also responsible for Group capital and funding, and the Treasury asset portfolio that is being run down. ALM is responsible for managing the Group’s structural balance sheet composition and strategic and tactical liquidity risk management. This includes short-term, medium-term, covered bond and securitisation funding programmes. ALM’s responsibilities also include management of Santander UK’s banking products and structural exposure to interest rates. |
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> | Alliance & Leicester pre-acquisition trading basis results— Following the transfer of Alliance & Leicester plc to the Company in January 2009, the statutory results for the years ended 31 December 2010 and 2009 include the consolidated results of the Alliance & Leicester business, whereas the statutory results for the year ended 31 December 2008 do not. In order to enhance the comparability of the results for the three periods, management reviews the 2008 results including the pre-acquisition results of the Alliance & Leicester business for that period. | |
> | Reorganisation and other costs— These comprise implementation costs in relation to strategic change and cost reduction projects, including integration-related expenses, certain impairment losses taken centrally, as well as costs in respect of customer remediation. Management needs to understand the underlying drivers of the cost base that will remain after these exercises are complete, and does not want this view to be clouded by these costs, which are managed independently. | |
> | Hedging and other variances— The Balance Sheet and Income Statement are subject to mark-to-market volatility including that arising from the accounting for elements of derivatives deemed under IFRS rules to be ineffective as hedges. Volatility also arises on certain assets previously managed on a fair value basis, and hence classified as fair value through profit or loss under IFRS, that are now managed on an accruals basis. Where appropriate, such volatility is separately identified to enable management to view the underlying performance of the business. In addition, other variances include the reversal of coupon payments on certain equity instruments which are treated as interest expense in the trading results but are reported below the profit after tax line for statutory purposes. | |
> | Profit on part sale and revaluation of subsidiaries— These profits are excluded from the results to allow management to understand the underlying performance of the business. In 2010, the profit that arose on the revaluation of the Group’s original holding in Santander Consumer (UK) plc on the acquisition of the remaining shares by the Group was excluded from the trading results. In addition, profits on the sale of James Hay and certain other businesses were excluded from the trading results. In 2009 there were no such profits. In 2008, the profit on the sale of the Porterbrook business was excluded from the trading results. | |
> | Depreciation of operating lease assets— The operating lease businesses are managed as financing businesses and, therefore, management needs to see the margin earned on the businesses. Residual value risk is separately managed. As a result, the depreciation is netted against the related income in the trading results. | |
> | Capital and other charges— These principally comprise internal nominal charges for capital invested in the Group’s businesses. Management implemented this charge to assess the effectiveness of capital investments. |
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Global | ||||||||||||||||||||||||||||
Retail | Corporate | Banking & | Group | |||||||||||||||||||||||||
Banking | Banking | Markets | Infrastructure | Total | Adjustments | Group Total | ||||||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Net interest income | 3,237 | 212 | 6 | 302 | 3,757 | 57 | 3,814 | |||||||||||||||||||||
Non-interest income/(expenses) | 627 | 129 | 412 | (55 | ) | 1,113 | 107 | 1,220 | ||||||||||||||||||||
Total trading income | 3,864 | 341 | 418 | 247 | 4,870 | 164 | 5,034 | |||||||||||||||||||||
Administration expenses | (1,481 | ) | (144 | ) | (128 | ) | (48 | ) | (1,801 | ) | 8 | (1,793 | ) | |||||||||||||||
Depreciation & amortisation | (168 | ) | (7 | ) | (2 | ) | — | (177 | ) | (98 | ) | (275 | ) | |||||||||||||||
Total trading expenses | (1,649 | ) | (151 | ) | (130 | ) | (48 | ) | (1,978 | ) | (90 | ) | (2,068 | ) | ||||||||||||||
Impairment losses on loans and advances | (615 | ) | (97 | ) | — | (40 | ) | (752 | ) | 40 | (712 | ) | ||||||||||||||||
Provisions for other liabilities and charges | 1 | — | — | — | 1 | (130 | ) | (129 | ) | |||||||||||||||||||
Trading profit before tax | 1,601 | 93 | 288 | 159 | 2,141 | (16 | ) | 2,125 | ||||||||||||||||||||
Adjust for: | ||||||||||||||||||||||||||||
- Reorganisation and other costs | (155 | ) | — | — | 40 | (115 | ) | |||||||||||||||||||||
- Profit on part sale and revaluation of subs | — | — | — | 126 | 126 | |||||||||||||||||||||||
- Hedging and other variances | (31 | ) | — | — | 4 | (27 | ) | |||||||||||||||||||||
- Capital and other charges | (99 | ) | (21 | ) | — | 120 | — | |||||||||||||||||||||
Profit before tax | 1,316 | 72 | 288 | 449 | 2,125 | |||||||||||||||||||||||
Revenue from external customers | 5,348 | 557 | 427 | (1,462 | ) | 4,870 | ||||||||||||||||||||||
Inter-segment revenue | (1,484 | ) | (216 | ) | (9 | ) | 1,709 | — | ||||||||||||||||||||
Total trading income | 3,864 | 341 | 418 | 247 | 4,870 | |||||||||||||||||||||||
Customer assets | 177,779 | 22,463 | 1,848 | — | 202,090 | |||||||||||||||||||||||
Total assets(1) | 183,020 | 22,242 | 50,015 | 47,583 | 302,860 | |||||||||||||||||||||||
Customer deposits | 131,919 | 16,437 | 5,142 | — | 153,498 | |||||||||||||||||||||||
Total liabilities | 136,975 | 17,493 | 51,868 | 84,250 | 290,586 | |||||||||||||||||||||||
Average number of staff | 17,838 | 622 | 252 | 242 | 18,954 | |||||||||||||||||||||||
(1) | Includes customer assets, net of impairment loss allowances. |
Net | Non- | Depreciation | Impairment | Provisions for | Profit | |||||||||||||||||||||||
interest | interest | Administration | and | losses on loans | other liabilities | before | ||||||||||||||||||||||
income | income | expenses | amortisation | and advances | and charges | tax | ||||||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Reorganisation and other costs | — | — | 8 | (33 | ) | 40 | (130 | ) | (115 | ) | ||||||||||||||||||
Depreciation on operating lease assets | — | 65 | — | (65 | ) | — | — | — | ||||||||||||||||||||
Profit on part sale and revaluation of subs | — | 126 | — | — | — | — | 126 | |||||||||||||||||||||
Hedging and other variances | 57 | (84 | ) | — | — | — | — | (27 | ) | |||||||||||||||||||
57 | 107 | 8 | (98 | ) | 40 | (130 | ) | (16 | ) | |||||||||||||||||||
181
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Global | ||||||||||||||||||||||||||||
Retail | Corporate | Banking & | Group | |||||||||||||||||||||||||
Banking | Banking | Markets | Infrastructure | Total | Adjustments | Group Total | ||||||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Net interest income | 2,886 | 212 | 7 | 236 | 3,341 | 71 | 3,412 | |||||||||||||||||||||
Non-interest income | 720 | 128 | 382 | 87 | 1,317 | (33 | ) | 1,284 | ||||||||||||||||||||
Total trading income | 3,606 | 340 | 389 | 323 | 4,658 | 38 | 4,696 | |||||||||||||||||||||
Administration expenses | (1,477 | ) | (168 | ) | (101 | ) | (46 | ) | (1,792 | ) | (56 | ) | (1,848 | ) | ||||||||||||||
Depreciation & amortisation | (136 | ) | (13 | ) | (3 | ) | — | (152 | ) | (108 | ) | (260 | ) | |||||||||||||||
Total trading expenses | (1,613 | ) | (181 | ) | (104 | ) | (46 | ) | (1,944 | ) | (164 | ) | (2,108 | ) | ||||||||||||||
Impairment losses on loans and advances | (714 | ) | (31 | ) | — | (57 | ) | (802 | ) | (40 | ) | (842 | ) | |||||||||||||||
Provisions for other liabilities and charges | — | — | — | — | — | (56 | ) | (56 | ) | |||||||||||||||||||
Trading profit before tax | 1,279 | 128 | 285 | 220 | 1,912 | (222 | ) | 1,690 | ||||||||||||||||||||
Adjust for: | ||||||||||||||||||||||||||||
- Reorganisation and other costs | (146 | ) | — | — | (40 | ) | (186 | ) | ||||||||||||||||||||
- Hedging and other variances | (17 | ) | — | — | (19 | ) | (36 | ) | ||||||||||||||||||||
- Capital and other charges | (60 | ) | (30 | ) | — | 90 | — | |||||||||||||||||||||
Profit before tax | 1,056 | 98 | 285 | 251 | 1,690 | |||||||||||||||||||||||
Revenue from external customers | 5,590 | 610 | 389 | (1,931 | ) | 4,658 | ||||||||||||||||||||||
Inter-segment revenue | (1,984 | ) | (270 | ) | — | 2,254 | — | |||||||||||||||||||||
Total trading income | 3,606 | 340 | 389 | 323 | 4,658 | |||||||||||||||||||||||
Customer assets | 167,747 | 21,198 | 1,122 | — | 190,067 | |||||||||||||||||||||||
Total assets(1) | 172,045 | 21,135 | 44,782 | 47,329 | 285,291 | |||||||||||||||||||||||
Customer deposits | 125,091 | 14,442 | 4,357 | — | 143,890 | |||||||||||||||||||||||
Total liabilities | 128,747 | 14,825 | 43,719 | 90,778 | 278,069 | |||||||||||||||||||||||
Average number of staff | 19,646 | 539 | 243 | 293 | 20,721 | |||||||||||||||||||||||
(1) | Includes customer assets, net of impairment loss allowances. |
Net | Non- | Depreciation | Impairment | Provisions for | Profit | |||||||||||||||||||||||
interest | interest | Administration | and | losses on loans | other liabilities | before | ||||||||||||||||||||||
income | income | expenses | amortisation | and advances | and charges | tax | ||||||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Reorganisation and other costs | — | — | (56 | ) | (34 | ) | (40 | ) | (56 | ) | (186 | ) | ||||||||||||||||
Depreciation on operating lease assets | — | 74 | — | (74 | ) | — | — | — | ||||||||||||||||||||
Hedging and other variances | 71 | (107 | ) | — | — | — | — | (36 | ) | |||||||||||||||||||
71 | (33 | ) | (56 | ) | (108 | ) | (40 | ) | (56 | ) | (222 | ) | ||||||||||||||||
Retail | Global Banking | Group | ||||||||||||||||||
Banking | Corporate Banking | & Markets | Infrastructure | Total | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Net interest income | 690 | 88 | 6 | 56 | 840 | |||||||||||||||
Non-interest income | 174 | 161 | 1 | 77 | 413 | |||||||||||||||
Total operating income | 864 | 249 | 7 | 133 | 1,253 | |||||||||||||||
Administration expenses | (373 | ) | (128 | ) | — | — | (501 | ) | ||||||||||||
Depreciation and amortisation | (35 | ) | (87 | ) | — | — | (122 | ) | ||||||||||||
Total operating expenses excluding provisions and charges | (408 | ) | (215 | ) | — | — | (623 | ) | ||||||||||||
Impairment losses on loans and advances | (94 | ) | (4 | ) | — | (97 | ) | (195 | ) | |||||||||||
Total operating provisions and charges | (94 | ) | (4 | ) | — | (97 | ) | (195 | ) | |||||||||||
Profit before tax | 362 | 30 | 7 | 36 | 435 | |||||||||||||||
182
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Global | ||||||||||||||||||||||||||||
Retail | Corporate | Banking & | Group | |||||||||||||||||||||||||
Banking | Banking | Markets | Infrastructure | Total | Adjustments | Group Total | ||||||||||||||||||||||
2008 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Net interest income | 2,253 | 149 | 11 | (24 | ) | 2,389 | (617 | ) | 1,772 | |||||||||||||||||||
Non-interest income | 848 | 240 | 327 | 90 | 1,505 | (273 | ) | 1,232 | ||||||||||||||||||||
Total trading income | 3,101 | 389 | 338 | 66 | 3,894 | (890 | ) | 3,004 | ||||||||||||||||||||
Administration expenses | (1,463 | ) | (219 | ) | (104 | ) | (43 | ) | (1,829 | ) | 486 | (1,343 | ) | |||||||||||||||
Depreciation & amortisation | (88 | ) | (20 | ) | (3 | ) | — | (111 | ) | (91 | ) | (202 | ) | |||||||||||||||
Total trading expenses | (1,551 | ) | (239 | ) | (107 | ) | (43 | ) | (1,940 | ) | 395 | (1,545 | ) | |||||||||||||||
Impairment losses on loans and advances | (442 | ) | (44 | ) | — | (3 | ) | (489 | ) | 141 | (348 | ) | ||||||||||||||||
Provisions for other liabilities and charges | — | — | — | — | — | (17 | ) | (17 | ) | |||||||||||||||||||
Trading profit before tax | 1,108 | 106 | 231 | 20 | 1,465 | (371 | ) | 1,094 | ||||||||||||||||||||
Adjust for: | ||||||||||||||||||||||||||||
- A&L pre-acquisition trading basis results | (254 | ) | (2 | ) | (10 | ) | 102 | (164 | ) | |||||||||||||||||||
- Reorganisation and other costs | (121 | ) | — | — | (42 | ) | (163 | ) | ||||||||||||||||||||
- Profit on part sale and revaluation of subs | — | — | — | 40 | 40 | |||||||||||||||||||||||
- Hedging and other variances | (8 | ) | — | — | (76 | ) | (84 | ) | ||||||||||||||||||||
- Capital and other charges | (67 | ) | (14 | ) | — | 81 | — | |||||||||||||||||||||
Profit before tax | 658 | 90 | 221 | 125 | 1,094 | |||||||||||||||||||||||
Revenue from external customers | 5,419 | 772 | 380 | (2,677 | ) | 3,894 | ||||||||||||||||||||||
Inter-segment revenue | (2,318 | ) | (383 | ) | (42 | ) | 2,743 | — | ||||||||||||||||||||
Total trading income | 3,101 | 389 | 338 | 66 | 3,894 | |||||||||||||||||||||||
Customer assets | 161,870 | 20,575 | 900 | — | 183,345 | |||||||||||||||||||||||
Total assets(1) | 164,917 | 20,537 | 44,488 | 67,368 | 297,310 | |||||||||||||||||||||||
Customer deposits | 119,483 | 7,131 | 2,372 | — | 128,986 | |||||||||||||||||||||||
Total liabilities | 123,110 | 7,152 | 34,632 | 125,719 | 290,613 | |||||||||||||||||||||||
Average number of staff | 14,414 | 175 | 300 | 190 | 15,079 | |||||||||||||||||||||||
(1) | Includes customer assets, net of impairment loss allowances. |
Net | Non- | Depreciation | Impairment | Provisions for | Profit | |||||||||||||||||||||||
interest | interest | Administration | and | losses on loans | other liabilities | before | ||||||||||||||||||||||
income | income | expenses | amortisation | and advances | and charges | tax | ||||||||||||||||||||||
2008 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
A&L pre-acquisition trading basis results | (617 | ) | (330 | ) | 552 | 48 | 183 | — | (164 | ) | ||||||||||||||||||
Reorganisation and other costs | — | (16 | ) | (66 | ) | (22 | ) | (42 | ) | (17 | ) | (163 | ) | |||||||||||||||
Depreciation on operating lease assets | — | 117 | — | (117 | ) | — | — | — | ||||||||||||||||||||
Profit on part sale and revaluation of subs | — | 40 | — | — | — | — | 40 | |||||||||||||||||||||
Hedging and other variances | — | (84 | ) | — | — | — | — | (84 | ) | |||||||||||||||||||
(617 | ) | (273 | ) | 486 | (91 | ) | 141 | (17 | ) | (371 | ) | |||||||||||||||||
Retail | Corporate | Global Banking | Group | |||||||||||||||||
Banking | Banking | & Markets | Infrastructure | Total | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Net interest income | 580 | 138 | 9 | (110 | ) | 617 | ||||||||||||||
Non-interest income | 213 | 108 | 1 | 8 | 330 | |||||||||||||||
Total trading income | 793 | 246 | 10 | (102 | ) | 947 | ||||||||||||||
Administration expenses | (378 | ) | (174 | ) | — | — | (552 | ) | ||||||||||||
Depreciation and amortisation | (28 | ) | (20 | ) | — | — | (48 | ) | ||||||||||||
Total operating expenses excluding provisions and charges | (406 | ) | (194 | ) | — | — | (600 | ) | ||||||||||||
Impairment losses on loans and advances | (133 | ) | (50 | ) | — | — | (183 | ) | ||||||||||||
Total operating provisions and charges | (133 | ) | (50 | ) | — | — | (183 | ) | ||||||||||||
Trading profit/(loss) before tax | 254 | 2 | 10 | (102 | ) | 164 | ||||||||||||||
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Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
United Kingdom | 4,989 | 4,625 | 2,974 | |||||||||
Other | 45 | 71 | 30 | |||||||||
5,032 | 4,696 | 3,004 | ||||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
United Kingdom | 3,954 | 2,842 | ||||||
Other | 6 | 4 | ||||||
3,960 | 2,846 | |||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Interest and similar income: | ||||||||||||
Loans and advances to banks | 154 | 155 | 448 | |||||||||
Loans and advances to customers | 6,799 | 6,823 | 7,394 | |||||||||
Other interest-earning financial assets | 94 | 340 | 73 | |||||||||
Total interest and similar income | 7,047 | 7,318 | 7,915 | |||||||||
Interest expense and similar charges: | ||||||||||||
Deposits by banks | (87 | ) | (366 | ) | (258 | ) | ||||||
Deposits by customers | (2,424 | ) | (2,256 | ) | (3,155 | ) | ||||||
Subordinated debt | (276 | ) | (281 | ) | (351 | ) | ||||||
Debt securities in issue | (360 | ) | (905 | ) | (2,345 | ) | ||||||
Other interest-bearing financial liabilities | (86 | ) | (98 | ) | (34 | ) | ||||||
Total interest expense and similar charges | (3,233 | ) | (3,906 | ) | (6,143 | ) | ||||||
Net interest income | 3,814 | 3,412 | 1,772 | |||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Fee and commission income: | ||||||||||||
Retail products | 662 | 674 | 461 | |||||||||
Insurance products | 134 | 158 | 155 | |||||||||
Asset management | 106 | 154 | 152 | |||||||||
Total fee and commission income | 902 | 986 | 768 | |||||||||
Fee and commission expense: | ||||||||||||
Other fees paid | (203 | ) | (162 | ) | (97 | ) | ||||||
Total fee and commission expense | (203 | ) | (162 | ) | (97 | ) | ||||||
Net fee and commission income | 699 | 824 | 671 | |||||||||
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Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net trading and funding of other items by the trading book | 391 | 187 | 54 | |||||||||
Income from operating lease assets | 84 | 95 | 223 | |||||||||
Income on assets designated at fair value through profit or loss | 245 | 95 | 916 | |||||||||
Expense on liabilities designated at fair value through profit or loss | (111 | ) | (117 | ) | (435 | ) | ||||||
(Losses)/gains on derivatives managed with assets/liabilities held at fair value through profit or loss | (154 | ) | 230 | (396 | ) | |||||||
Share of profit from associate | 25 | 5 | (2 | ) | ||||||||
Profit/(loss) on sale of available-for-sale assets | — | — | — | |||||||||
Profit on revaluation of associate (See Note 49) | 87 | — | — | |||||||||
Profit on sale of subsidiary undertakings | 39 | — | 40 | |||||||||
Loss on sale of fixed assets | (2 | ) | — | (17 | ) | |||||||
Hedge ineffectiveness and other | (83 | ) | (35 | ) | 178 | |||||||
521 | 460 | 561 | ||||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Staff costs: | ||||||||||||
Wages and salaries | 641 | 697 | 545 | |||||||||
Social security costs | 65 | 71 | 45 | |||||||||
Pensions costs: - defined contribution plans | 42 | 20 | 8 | |||||||||
- defined benefit plans | 25 | 55 | 47 | |||||||||
Other personnel costs | 62 | 62 | 50 | |||||||||
835 | 905 | 695 | ||||||||||
Property, plant and equipment expenses | 214 | 227 | 182 | |||||||||
Information technology expenses | 337 | 311 | 201 | |||||||||
Other administration expenses | 407 | 405 | 265 | |||||||||
1,793 | 1,848 | 1,343 | ||||||||||
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Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Depreciation of property, plant and equipment | 220 | 238 | 195 | |||||||||
Amortisation of intangible fixed assets | 55 | 22 | 7 | |||||||||
275 | 260 | 202 | ||||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Audit fees: | ||||||||||||
- Fees payable to the Company’s auditor for the audit of the Group’s annual accounts | 1.7 | 1.9 | 1.6 | |||||||||
- Fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries pursuant to legislation | 1.7 | 2.3 | 1.6 | |||||||||
Total audit fees | 3.4 | 4.2 | 3.2 | |||||||||
Non-audit fees: | ||||||||||||
Other assurance services | ||||||||||||
- Other services pursuant to legislation | 0.5 | 1.2 | 0.7 | |||||||||
- Tax compliance services | — | — | — | |||||||||
- Other assurance | 0.9 | 0.4 | 0.8 | |||||||||
Total other assurance services | 1.4 | 1.6 | 1.5 | |||||||||
Other services | ||||||||||||
- Tax services | 1.1 | 0.7 | 0.4 | |||||||||
- Other services | 0.1 | — | — | |||||||||
Total other services | 1.2 | 0.7 | 0.4 | |||||||||
Total non-audit fees | 2.6 | 2.3 | 1.9 | |||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Impairment losses on loans and advances: | ||||||||||||
- loans and advances to customers (Note 17) | 746 | 828 | 394 | |||||||||
- loans and advances to banks (Note 16) | — | — | — | |||||||||
- loans and receivables securities (Note 22) | — | 69 | — | |||||||||
Recoveries of loans and advances (Note 17) | (34 | ) | (55 | ) | (46 | ) | ||||||
712 | 842 | 348 | ||||||||||
Impairment losses on available-for-sale financial assets (Note 21) | — | — | — | |||||||||
— | — | — | ||||||||||
Provisions for other liabilities and charges: (Note 36) | ||||||||||||
- New and increased allowances | 131 | 59 | 58 | |||||||||
- Provisions released | (2 | ) | (3 | ) | (41 | ) | ||||||
129 | 56 | 17 | ||||||||||
Total impairment losses and provisions charged to the income statement | 841 | 898 | 365 | |||||||||
186
Table of Contents
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Current tax: | ||||||||||||
UK corporation tax on profit of the year | 185 | 124 | 218 | |||||||||
Adjustments in respect of prior years | (33 | ) | (117 | ) | (65 | ) | ||||||
Total current tax | 152 | 7 | 153 | |||||||||
Deferred tax: | ||||||||||||
Origination and reversal of temporary differences | 377 | 388 | 95 | |||||||||
Change in rate of UK corporation tax | 11 | — | — | |||||||||
Adjustments in respect of prior years | 2 | 50 | 27 | |||||||||
Total deferred tax | 390 | 438 | 122 | |||||||||
Tax on profit for the year | 542 | 445 | 275 | |||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Profit before tax | 2,125 | 1,690 | 1,094 | |||||||||
Tax calculated at a tax rate of 28% (2009: 28%, 2008: 28.5%) | 595 | 473 | 310 | |||||||||
Non taxable gain on sale of subsidiary undertakings | (11 | ) | (5 | ) | (11 | ) | ||||||
Non deductible preference dividends paid | 8 | 8 | 8 | |||||||||
Non taxable gain on revaluation of investment in Santander Consumer (UK) plc | (24 | ) | — | — | ||||||||
Effect of non-allowable impairment losses, provisions and other non-equalised items | — | 51 | 19 | |||||||||
Non-taxable dividend income | — | (4 | ) | (5 | ) | |||||||
Effect of non-UK profits and losses | (6 | ) | (8 | ) | (8 | ) | ||||||
Utilisation of capital losses for which credit not previously recognised | — | (3 | ) | — | ||||||||
Effect of change in tax rate on deferred tax provision | 11 | — | — | |||||||||
Adjustment to prior year provisions | (31 | ) | (67 | ) | (38 | ) | ||||||
Tax expense | 542 | 445 | 275 | |||||||||
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Table of Contents
Group | ||||||||||||
Before tax | After tax | |||||||||||
amount | Total tax | amount | ||||||||||
£m | £m | £m | ||||||||||
Actuarial gains on retirement benefit obligations | 25 | (9 | ) | 16 | ||||||||
Movements in available-for-sale financial assets: | ||||||||||||
- Losses due to changes in fair value | (1 | ) | — | (1 | ) | |||||||
- Gains transferred to profit or loss on sale | (2 | ) | 1 | (1 | ) | |||||||
Other comprehensive income | 22 | (8 | ) | 14 | ||||||||
Group | ||||||||||||
Before tax | After tax | |||||||||||
amount | Total tax | amount | ||||||||||
£m | £m | £m | ||||||||||
Actuarial losses on retirement benefit obligations | (606 | ) | 170 | (436 | ) | |||||||
Movements in available-for-sale financial assets: | ||||||||||||
- Losses due to changes in fair value | (6 | ) | 1 | (5 | ) | |||||||
- Gains transferred to profit or loss on sale | (2 | ) | 1 | (1 | ) | |||||||
Exchange differences on translation of foreign operations | (4 | ) | — | (4 | ) | |||||||
Other comprehensive income | (618 | ) | 172 | (446 | ) | |||||||
Group | ||||||||||||
Before tax | After tax | |||||||||||
amount | Total tax | amount | ||||||||||
£m | £m | £m | ||||||||||
Actuarial losses on retirement benefit obligations | (44 | ) | 11 | (33 | ) | |||||||
Movements in available-for-sale financial assets: | ||||||||||||
- Gains due to changes in fair value | 8 | (3 | ) | 5 | ||||||||
- Gains transferred to profit or loss on sale | — | — | — | |||||||||
Exchange differences on translation of foreign operations | 28 | — | 28 | |||||||||
Other comprehensive income | (8 | ) | 8 | — | ||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Cash in hand | 933 | 710 | 927 | 308 | ||||||||||||
Balances with central banks | 25,569 | 3,453 | 20,481 | 2,958 | ||||||||||||
26,502 | 4,163 | 21,408 | 3,266 | |||||||||||||
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Table of Contents
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Loans and advances to banks - securities purchased under resale agreements | 5,775 | 4,320 | ||||||
- other | 2,506 | 2,471 | ||||||
Loans and advances to customers - securities purchased under resale agreements | 8,652 | 8,827 | ||||||
- other | 7 | 262 | ||||||
Debt securities | 17,821 | 15,932 | ||||||
Equity securities | 700 | 1,478 | ||||||
35,461 | 33,290 | |||||||
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Issued by public bodies: | ||||||||
- Government securities | 6,630 | 2,869 | ||||||
Issued by other issuers: | ||||||||
- Bank and building society certificates of deposit: Government guaranteed | — | 205 | ||||||
- Bank and building society certificates of deposit: Other | 290 | 1,730 | ||||||
- Floating rate notes: Government guaranteed | 10,586 | 8,090 | ||||||
- Floating rate notes: Other | 315 | 3,038 | ||||||
17,821 | 15,932 | |||||||
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Debt securities: | ||||||||
- Listed in the UK | 13,322 | 12,803 | ||||||
- Listed elsewhere | 4,499 | 3,129 | ||||||
17,821 | 15,932 | |||||||
Equity securities: | ||||||||
- Listed in the UK | 698 | 1,183 | ||||||
- Listed elsewhere | 2 | 295 | ||||||
700 | 1,478 | |||||||
> | Marketing derivatives to end users and hedging the resulting exposures efficiently; and | |
> | The management of trading exposure reflected on the Group’s balance sheet. |
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Table of Contents
Group | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for trading | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 53,357 | 2,539 | 564 | |||||||||
- Foreign exchange swaps and forwards | 17,106 | 90 | 384 | |||||||||
70,463 | 2,629 | 948 | ||||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 479,527 | 14,471 | 13,671 | |||||||||
- Caps, floors and swaptions(1) | 69,223 | 2,682 | 2,748 | |||||||||
- Futures | 39,840 | 3 | 10 | |||||||||
- Forward rate agreements | 37,479 | 8 | 18 | |||||||||
626,069 | 17,164 | 16,447 | ||||||||||
Equity and credit contracts: | ||||||||||||
- Equity index and similar products | 41,482 | 1,033 | 2,557 | |||||||||
- Equity index options | 40,279 | 741 | 145 | |||||||||
- Credit default swaps and similar products | 3,114 | 384 | 293 | |||||||||
84,875 | 2,158 | 2,995 | ||||||||||
Total derivative assets and liabilities held for trading | 781,407 | 21,951 | 20,390 | |||||||||
Group | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for fair value hedging | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 6,729 | 906 | 108 | |||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 46,081 | 1,520 | 1,907 | |||||||||
Total derivative assets and liabilities held for fair value hedging | 52,810 | 2,426 | 2,015 | |||||||||
Total recognised derivative assets and liabilities | 834,217 | 24,377 | 22,405 | |||||||||
Company | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for trading | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 876 | 107 | 27 | |||||||||
- Foreign exchange swaps and forwards | 324 | 5 | 4 | |||||||||
1,200 | 112 | 31 | ||||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 47,416 | 1,597 | 846 | |||||||||
- Caps, floors and swaptions(1) | 1,646 | 24 | 24 | |||||||||
49,062 | 1,621 | 870 | ||||||||||
Equity and credit contracts: | ||||||||||||
- Equity index and similar products | 363 | 37 | 197 | |||||||||
- Credit default swaps and similar products | 111 | — | 1 | |||||||||
474 | 37 | 198 | ||||||||||
Total derivative assets and liabilities held for trading | 50,736 | 1,770 | 1,099 | |||||||||
(1) | A swaption is an option on a swap that gives the holder the right but not the obligation to buy or sell a swap. |
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Company | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for fair value hedging | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 1,823 | 890 | — | |||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 5,406 | 334 | — | |||||||||
Total derivative assets and liabilities held for fair value hedging | 7,229 | 1,224 | — | |||||||||
Total recognised derivative assets and liabilities | 57,965 | 2,994 | 1,099 | |||||||||
2009 | ||||||||||||
Group | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for trading | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 113,036 | 3,101 | 409 | |||||||||
- Foreign exchange swaps and forwards | 22,496 | 164 | 112 | |||||||||
135,532 | 3,265 | 521 | ||||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 554,709 | 14,905 | 11,393 | |||||||||
- Caps, floors and swaptions(1) | 80,075 | 1,767 | 2,570 | |||||||||
- Futures | 89,379 | 4 | — | |||||||||
- Forward rate agreements | 77,170 | 56 | 61 | |||||||||
801,333 | 16,732 | 14,024 | ||||||||||
Equity and credit contracts: | ||||||||||||
- Equity index and similar products | 46,238 | 881 | 1,311 | |||||||||
- Equity index options | 30,160 | 563 | 871 | |||||||||
- Credit default swaps and similar products | 3,737 | 31 | 48 | |||||||||
80,135 | 1,475 | 2,230 | ||||||||||
Total derivative assets and liabilities held for trading | 1,017,000 | 21,472 | 16,775 | |||||||||
2009 | ||||||||||||
Group | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for fair value hedging | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 6,515 | 860 | — | |||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 45,093 | 495 | 2,188 | |||||||||
Equity and credit contracts: | ||||||||||||
- Equity index and similar products | — | — | — | |||||||||
Total derivative assets and liabilities held for fair value hedging | 51,608 | 1,355 | 2,188 | |||||||||
Total recognised derivative assets and liabilities | 1,068,608 | 22,827 | 18,963 | |||||||||
2009 | ||||||||||||
Company | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for trading | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 19,983 | 123 | 2,810 | |||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 57,029 | 1,093 | 1 | |||||||||
- Caps, floors and swaptions(1) | 146 | 2 | — | |||||||||
57,175 | 1,095 | 1 | ||||||||||
Equity and credit contracts: | ||||||||||||
- Equity index and similar products | 273 | 38 | 190 | |||||||||
Total derivative assets and liabilities held for trading | 77,431 | 1,256 | 3,001 | |||||||||
2009 | ||||||||||||
Company | ||||||||||||
Contract/notional amount | Fair value assets | Fair value liabilities | ||||||||||
Derivatives held for fair value hedging | £m | £m | £m | |||||||||
Exchange rate contracts: | ||||||||||||
- Cross-currency swaps | 1,846 | 796 | — | |||||||||
Interest rate contracts: | ||||||||||||
- Interest rate swaps | 4,797 | 487 | 352 | |||||||||
Total derivative assets and liabilities held for fair value hedging | 6,643 | 1,283 | 352 | |||||||||
Total recognised derivative assets and liabilities | 84,074 | 2,539 | 3,353 | |||||||||
(1) | A swaption is an option on a swap that gives the holder the right but not the obligation to buy or sell a swap. |
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Table of Contents
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Net (losses)/gains: | ||||||||||||
- on hedging instruments | (13 | ) | 647 | 39 | ||||||||
- on hedged items attributable to hedged risks | 38 | (579 | ) | 53 | ||||||||
25 | 68 | 92 | ||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Loans and advances to banks | 11 | — | 55 | 160 | ||||||||||||
Loans and advances to customers | 5,468 | 6,379 | 44 | 45 | ||||||||||||
Debt securities | 1,298 | 5,979 | 5,027 | 36,940 | ||||||||||||
6,777 | 12,358 | 5,126 | 37,145 | |||||||||||||
> | Loans and advances to banks,which are managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy. Information about them is provided on that basis to the Group’s key management personnel. | |
> | Loans and advances to customers,representing certain loans secured on residential property to housing associations. These would otherwise have been measured at amortised cost with the associated derivatives used to economically hedge the risk held for trading and measured at fair value through profit or loss. | |
> | Debt securities,representing holdings of bank and building society certificates of deposit of £nil (2009: £2,220m), asset-backed securities of £1,046m (2009: £3,446m) and other debt securities of £252m (2009: £313m): |
> | The bank and building society certificates of deposit were held for yield purposes. They were managed and their performance evaluated on a fair value basis in accordance with a documented strategy, and information about them was provided on that basis to the Group’s key management personnel. | ||
> | Asset-backed securities of £977m (2009: £207m) are managed and their performance evaluated on a fair value basis in accordance with a documented strategy, and information about them is provided on that basis to the Group’s key management personnel. | ||
Other asset-backed securities of £69m (2009: £3,239m) which, at the date of their acquisition, were managed, and their performance evaluated, on a fair value basis in accordance with a documented investment strategy, and information about them was provided on that basis to the Group’s key management personnel. Almost all of these securities are now managed on an accruals basis, but are not eligible for reclassification under IAS 39. | |||
> | Other debt securities, representing reversionary property securities and collateralised synthetic obligations. The reversionary property securities are managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy. Information about them is provided on that basis to the Group’s key management personnel. The collateralised synthetic obligations contain embedded derivatives which would otherwise require bifurcation and separate recognition as derivatives. |
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Table of Contents
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Bank and building society certificates of deposit | — | 2,220 | ||||||
Other issuers: | ||||||||
- Mortgage-backed securities | 859 | 574 | ||||||
- Other asset-backed securities | 187 | 2,872 | ||||||
- Other securities | 252 | 313 | ||||||
1,298 | 5,979 | |||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Listed in the UK | 646 | — | 5,015 | 18,463 | ||||||||||||
Listed elsewhere | 75 | 3,224 | — | 18,016 | ||||||||||||
Unlisted | 577 | 2,755 | 12 | 461 | ||||||||||||
1,298 | 5,979 | 5,027 | 36,940 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Placements with other banks - securities purchased under resale agreements | — | — | — | — | ||||||||||||
- other | 3,206 | 1,605 | 1,118 | 995 | ||||||||||||
Amounts due from parent | 646 | 5,995 | 3 | 1 | ||||||||||||
Amounts due from associated undertakings | — | 1,551 | — | 1 | ||||||||||||
Amounts due from subsidiaries | — | — | 114,836 | 108,661 | ||||||||||||
3,852 | 9,151 | 115,957 | 109,658 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Repayable: | £m | £m | £m | £m | ||||||||||||
On demand | 1,250 | 1,457 | 2,680 | 5,551 | ||||||||||||
In not more than 3 months | 1,529 | 5,055 | 42,910 | 46,580 | ||||||||||||
In more than 3 months but not more than 1 year | 53 | 2,390 | 21,958 | 14,552 | ||||||||||||
In more than 1 year but not more than 5 years | 529 | 95 | 32,921 | 21,951 | ||||||||||||
In more than 5 years | 491 | 154 | 15,488 | 21,024 | ||||||||||||
3,852 | 9,151 | 115,957 | 109,658 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Advances secured on residential properties | 166,073 | 160,466 | 166,057 | 122,746 | ||||||||||||
Corporate loans | 16,328 | 12,509 | 5,729 | — | ||||||||||||
Finance leases | 2,653 | 1,602 | — | — | ||||||||||||
Other secured advances | 3,942 | 3,819 | 3,470 | 3,759 | ||||||||||||
Other unsecured advances | 7,734 | 5,250 | 4,018 | 5,036 | ||||||||||||
Amounts due from fellow group subsidiaries | 57 | 4,457 | 46 | 71 | ||||||||||||
Amounts due from subsidiaries | — | — | 1,359 | 1,036 | ||||||||||||
Loans and advances to customers | 196,787 | 188,103 | 180,679 | 132,648 | ||||||||||||
Less: impairment loss allowances | (1,655 | ) | (1,299 | ) | (1,456 | ) | (899 | ) | ||||||||
Loans and advances to customers, net of impairment loss allowances | 195,132 | 186,804 | 179,223 | 131,749 | ||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Advances secured on residential properties | 166,073 | 160,466 | 166,057 | 122,746 | ||||||||||||
Other secured advances | 3,942 | 3,819 | 3,470 | 3,759 | ||||||||||||
Unsecured loans: | ||||||||||||||||
- Overdrafts | 505 | 482 | 505 | 476 | ||||||||||||
- UPLs | 4,146 | 4,641 | 3,242 | 4,495 | ||||||||||||
Other loans | 3,083 | 127 | 271 | 65 | ||||||||||||
Corporate loans: | ||||||||||||||||
- SME | 4,842 | 2,806 | 1,199 | — | ||||||||||||
- Social housing | 1,687 | 336 | 87 | — | ||||||||||||
- Real estate | 3,304 | 2,889 | 1,690 | — | ||||||||||||
- Other corporate | 3,273 | 2,423 | 2,753 | — | ||||||||||||
- Non-core: | ||||||||||||||||
- Aviation | 918 | 1,047 | — | — | ||||||||||||
- Shipping | 1,151 | 1,729 | — | — | ||||||||||||
- Other | 1,597 | 2,080 | — | — | ||||||||||||
Finance leases | ||||||||||||||||
- Consumer finance | 1,556 | — | — | — | ||||||||||||
- Other corporate | 653 | 801 | — | — | ||||||||||||
Amounts due from fellow group subsidiaries | 57 | 4,457 | 46 | 71 | ||||||||||||
Amounts due from subsidiaries | — | — | 1,359 | 1,036 | ||||||||||||
Loans and advances to customers | 196,787 | 188,103 | 180,679 | 132,648 | ||||||||||||
Less: impairment loss allowances | (1,655 | ) | (1,299 | ) | (1,456 | ) | (899 | ) | ||||||||
Loans and advances to customers, net of impairment loss allowances | 195,132 | 186,804 | 179,223 | 131,749 | ||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Repayable: | £m | £m | £m | £m | ||||||||||||
On demand | 1,160 | 997 | 1,172 | 534 | ||||||||||||
In no more than 3 months | 4,282 | 6,591 | 2,660 | 1,575 | ||||||||||||
In more than 3 months but not more than 1 year | 6,709 | 4,909 | 4,802 | 3,311 | ||||||||||||
In more than 1 year but not more than 5 years | 32,056 | 26,411 | 23,668 | 14,653 | ||||||||||||
In more than 5 years | 152,580 | 149,195 | 148,377 | 112,575 | ||||||||||||
Loans and advances to customers | 196,787 | 188,103 | 180,679 | 132,648 | ||||||||||||
Less: impairment loss allowances | (1,655 | ) | (1,299 | ) | (1,456 | ) | (899 | ) | ||||||||
Loans and advances to customers, net of impairment loss allowances | 195,132 | 186,804 | 179,223 | 131,749 | ||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Gross investment in finance leases and hire purchase contracts: | £m | £m | £m | £m | ||||||||||||
Within 1 year | 736 | 240 | — | — | ||||||||||||
Between 1-5 years | 1,752 | 543 | — | — | ||||||||||||
In more than 5 years | 877 | 1,570 | — | — | ||||||||||||
3,365 | 2,353 | — | — | |||||||||||||
Unearned future finance income on finance leases and hire purchase contracts | (712 | ) | (751 | ) | — | — | ||||||||||
Net investment in finance leases and hire purchase contracts | 2,653 | 1,602 | — | — | ||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Within 1 year | 622 | 188 | — | — | ||||||||||||
Between 1-5 years | 1,469 | 423 | — | — | ||||||||||||
In more than 5 years | 562 | 991 | — | — | ||||||||||||
2,653 | 1,602 | — | — | |||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Fixed rate | 75,452 | 77,427 | 70,998 | 62,222 | ||||||||||||
Variable rate | 121,335 | 110,676 | 109,681 | 70,426 | ||||||||||||
Less: impairment loss allowances | (1,655 | ) | (1,299 | ) | (1,456 | ) | (899 | ) | ||||||||
195,132 | 186,804 | 179,223 | 131,749 | |||||||||||||
Group | ||||||||||||||||||||||||
Loans secured | Other | Other | ||||||||||||||||||||||
on residential | Corporate | Finance | secured | unsecured | ||||||||||||||||||||
property | Loans | Leases | advances | advances | Total | |||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
As at 1 January 2010: | ||||||||||||||||||||||||
- Individually assessed | 313 | 185 | 1 | 50 | 341 | 890 | ||||||||||||||||||
- Collectively assessed | 171 | 172 | 1 | 12 | 53 | 409 | ||||||||||||||||||
484 | 357 | 2 | 62 | 394 | 1,299 | |||||||||||||||||||
Charge/(release) to the income statement: | ||||||||||||||||||||||||
- Individually assessed | 98 | 154 | 6 | 53 | 488 | 799 | ||||||||||||||||||
- Collectively assessed | (14 | ) | (47 | ) | (1 | ) | 10 | (1 | ) | (53 | ) | |||||||||||||
84 | 107 | 5 | 63 | 487 | 746 | |||||||||||||||||||
Write offs | (42 | ) | (68 | ) | (5 | ) | (48 | ) | (448 | ) | (611 | ) | ||||||||||||
Assumed via transfers of entities under common control | — | — | 17 | — | 204 | 221 | ||||||||||||||||||
At 31 December 2010: | ||||||||||||||||||||||||
- Individually assessed | 369 | 271 | 2 | 55 | 381 | 1,078 | ||||||||||||||||||
- Collectively assessed | 157 | 125 | 17 | 22 | 256 | 577 | ||||||||||||||||||
526 | 396 | 19 | 77 | 637 | 1,655 | |||||||||||||||||||
Group | ||||||||||||||||||||||||
Loans secured | Other | Other | ||||||||||||||||||||||
on residential | Corporate | Finance | secured | unsecured | ||||||||||||||||||||
property | Loans | leases | advances | advances | Total | |||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
As at 1 January 2009 | ||||||||||||||||||||||||
- Individually assessed | 174 | 13 | — | 37 | 227 | 451 | ||||||||||||||||||
- Collectively assessed | 184 | 289 | 1 | 11 | 65 | 550 | ||||||||||||||||||
358 | 302 | 1 | 48 | 292 | 1,001 | |||||||||||||||||||
Charge/(release) to the income statement: | ||||||||||||||||||||||||
- Individually assessed | 223 | 172 | 5 | 30 | 539 | 969 | ||||||||||||||||||
- Collectively assessed | (13 | ) | (117 | ) | — | 1 | (12 | ) | (141 | ) | ||||||||||||||
210 | 55 | 5 | 31 | 527 | 828 | |||||||||||||||||||
Write offs | (84 | ) | — | (4 | ) | (17 | ) | (425 | ) | (530 | ) | |||||||||||||
At 31 December 2009: | ||||||||||||||||||||||||
- Individually assessed | 313 | 185 | 1 | 50 | 341 | 890 | ||||||||||||||||||
- Collectively assessed | 171 | 172 | 1 | 12 | 53 | 409 | ||||||||||||||||||
484 | 357 | 2 | 62 | 394 | 1,299 | |||||||||||||||||||
Group | ||||||||||||||||||||||||
Loans secured | Other | Other | ||||||||||||||||||||||
on residential | Corporate | Finance | secured | unsecured | ||||||||||||||||||||
property | Loans | leases | advances | advances | Total | |||||||||||||||||||
2008 | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
As at 1 January 2008: | ||||||||||||||||||||||||
- Individually assessed | 74 | — | — | 32 | 250 | 356 | ||||||||||||||||||
- Collectively assessed | 102 | — | — | 8 | 85 | 195 | ||||||||||||||||||
176 | — | — | 40 | 335 | 551 | |||||||||||||||||||
Charge/(release) to the income statement: | ||||||||||||||||||||||||
- Individually assessed | 132 | 13 | — | 14 | 239 | 398 | ||||||||||||||||||
- Collectively assessed | 21 | 13 | — | 3 | (41 | ) | (4 | ) | ||||||||||||||||
153 | 26 | — | 17 | 198 | 394 | |||||||||||||||||||
Write offs | (32 | ) | — | — | (9 | ) | (262 | ) | (303 | ) | ||||||||||||||
Assumed via transfer of entities under common control | 61 | 276 | 1 | — | 21 | 359 | ||||||||||||||||||
At 31 December 2008: | ||||||||||||||||||||||||
- Individually assessed | 174 | 13 | — | 37 | 227 | 451 | ||||||||||||||||||
- Collectively assessed | 184 | 289 | 1 | 11 | 65 | 550 | ||||||||||||||||||
358 | 302 | 1 | 48 | 292 | 1,001 | |||||||||||||||||||
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Company | ||||||||||||||||||||||||||||
Loans secured | Amounts | Other | Other | |||||||||||||||||||||||||
on residential | due from | Corporate | Finance | secured | unsecured | |||||||||||||||||||||||
property | subsidiaries | Loans | leases | advances | advances | Total | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
As at 1 January 2010 | 395 | 98 | — | — | 55 | 351 | 899 | |||||||||||||||||||||
Charge/(release) to the income statement | 53 | (43 | ) | 16 | — | 63 | 437 | 526 | ||||||||||||||||||||
Transfer from Alliance & Leicester plc | 118 | 261 | 146 | — | — | 46 | 571 | |||||||||||||||||||||
Write offs | (42 | ) | — | (22 | ) | — | (41 | ) | (435 | ) | (540 | ) | ||||||||||||||||
At 31 December 2010 | 524 | 316 | 140 | — | 77 | 399 | 1,456 | |||||||||||||||||||||
As at 1 January 2009 | 297 | 113 | — | — | 42 | 270 | 722 | |||||||||||||||||||||
Charge/(release) to the income statement | 182 | (15 | ) | — | — | 31 | 421 | 619 | ||||||||||||||||||||
Write offs | (84 | ) | — | — | — | (18 | ) | (340 | ) | (442 | ) | |||||||||||||||||
At 31 December 2009 | 395 | 98 | — | — | 55 | 351 | 899 | |||||||||||||||||||||
As at 1 January 2008 | 176 | 136 | — | — | 11 | 331 | 654 | |||||||||||||||||||||
Charge/(release) to the income statement | 153 | (23 | ) | — | — | 32 | 197 | 359 | ||||||||||||||||||||
Write offs | (32 | ) | — | — | — | (1 | ) | (258 | ) | (291 | ) | |||||||||||||||||
At 31 December 2008 | 297 | 113 | — | — | 42 | 270 | 722 | |||||||||||||||||||||
Group | ||||||||||||||||||||||||
Loans secured | Other | Other | ||||||||||||||||||||||
on residential | Corporate | Finance | secured | unsecured | ||||||||||||||||||||
property | Loans | leases | advances | advances | Total | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
2010 | 1 | 12 | 1 | — | 20 | 34 | ||||||||||||||||||
2009 | 1 | 23 | 1 | — | 30 | 55 | ||||||||||||||||||
2008 | 1 | — | — | 12 | 33 | 46 | ||||||||||||||||||
2010 | 2009 | |||||||
Gross | Gross | |||||||
assets | assets | |||||||
securitised | securitised | |||||||
£m | £m | |||||||
Master Trust Structures: | ||||||||
- Holmes | 13,359 | 53,569 | ||||||
- Fosse | 14,045 | 6,447 | ||||||
- Langton | 41,915 | 8,530 | ||||||
Other securitisation structures: | ||||||||
- Bracken | 5,948 | 6,736 | ||||||
75,267 | 75,282 | |||||||
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2010 | 2009 | |||||||||||||||||||||||||||
Issued to | Issued to | |||||||||||||||||||||||||||
Gross | Santander | Gross | Santander | |||||||||||||||||||||||||
assets | Notes in | UK plc as | assets | Notes in | UK plc as | |||||||||||||||||||||||
Closing date | securitised | issue | collateral | securitised | issue | collateral | ||||||||||||||||||||||
Securitisation company | of securitisation | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Holmes Financing (No. 1) plc | 26 July 2000 | — | — | — | 275 | 275 | — | |||||||||||||||||||||
Holmes Financing (No. 9) plc | 8 December 2005 | — | — | — | 1,053 | 1,658 | — | |||||||||||||||||||||
Holmes Financing (No. 10) plc | 8 August 2006 | — | — | — | 1,526 | 1,639 | — | |||||||||||||||||||||
Holmes Master Issuer plc — 2006/1 | 28 November 2006 | — | — | — | 1,767 | 2,015 | — | |||||||||||||||||||||
Holmes Master Issuer plc — 2007/1 | 28 March 2007 | 3,148 | 4,001 | — | 3,392 | 4,985 | — | |||||||||||||||||||||
Holmes Master Issuer plc — 2007/2 | 20 June 2007 | 2,271 | 2,852 | — | 4,319 | 5,263 | — | |||||||||||||||||||||
Holmes Master Issuer 2 plc — 2007/3 | 21 December 2007 | — | — | — | 7,259 | — | 8,914 | |||||||||||||||||||||
Holmes Master Issuer 2 plc — 2008/1 | 10 April 2008 | — | — | — | 8,240 | — | 9,103 | |||||||||||||||||||||
Holmes Master Issuer 2 plc — 2008/2 | 19 December 2008 | — | — | — | 12,758 | — | 13,209 | |||||||||||||||||||||
Holmes Master Issuer plc — 2010/1 | 12 November 2010 | 2,930 | 2,339 | 600 | — | — | — | |||||||||||||||||||||
Beneficial interest in mortgages held by Holmes Trustees Ltd | 5,010 | — | — | 12,980 | — | — | ||||||||||||||||||||||
13,359 | 9,192 | 600 | 53,569 | 15,835 | 31,226 | |||||||||||||||||||||||
Less: Held by the Group | (496 | ) | (1,131 | ) | ||||||||||||||||||||||||
Total securitisations (See Note 33) | 8,696 | 14,704 | ||||||||||||||||||||||||||
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2010 | 2009 | |||||||||||||||||||||||||||
Issued to | Issued to | |||||||||||||||||||||||||||
Gross | Santander | Gross | Santander | |||||||||||||||||||||||||
assets | Notes in | UK plc as | assets | Notes in | UK plc as | |||||||||||||||||||||||
Closing date | securitised | issue | collateral | securitised | issue | collateral(1) | ||||||||||||||||||||||
Securitisation company | of securitisation | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Fosse Master Issuer plc | 28 November 2006 | 1,538 | 1,622 | — | 1,859 | 1,924 | — | |||||||||||||||||||||
Fosse Master Issuer plc | 1 August 2007 | 1,677 | 1,768 | — | 2,050 | 2,080 | — | |||||||||||||||||||||
Fosse Master Issuer plc | 21 August 2008 | 230 | 243 | — | 287 | 314 | — | |||||||||||||||||||||
Fosse Master Issuer plc | 12 March 2010 | 1,695 | 1,406 | 389 | — | — | — | |||||||||||||||||||||
Fosse Master Issuer plc | 3 June 2010 | 1,576 | 1,411 | 251 | — | — | — | |||||||||||||||||||||
Fosse Master Issuer plc | 27 July 2010 | 3,799 | 3,507 | 500 | — | — | — | |||||||||||||||||||||
Fosse Master Issuer plc | 9 September 2010 | 1,212 | 1,282 | — | — | — | — | |||||||||||||||||||||
Beneficial interest in mortgages held by Fosse Master Trust Ltd | 2,318 | — | — | 2,251 | — | — | ||||||||||||||||||||||
14,045 | 11,239 | 1,140 | 6,447 | 4,318 | — | |||||||||||||||||||||||
Less: Held by the Group | (171 | ) | (215 | ) | ||||||||||||||||||||||||
Total securitisations (See Note 33) | 11,068 | 4,103 | ||||||||||||||||||||||||||
(1) | Issued to Alliance & Leicester plc until 28 May 2010, as described below. |
2010 | 2009 | |||||||||||||||||||||||||||
Issued to | Issued to | |||||||||||||||||||||||||||
Gross | Santander | Gross | Santander | |||||||||||||||||||||||||
assets | Notes in | UK plc as | assets | Notes in | UK plc as | |||||||||||||||||||||||
Closing date | securitised | issue | collateral | securitised | issue | collateral(1) | ||||||||||||||||||||||
Securitisation company | of securitisation | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Langton Securities (2008-1) plc | 25 January 2008 | 1,166 | — | 1,191 | 1,227 | — | 1,228 | |||||||||||||||||||||
Langton Securities (2008-2) plc | 5 March 2008 | 1,388 | — | 1,419 | 2,210 | — | 2,211 | |||||||||||||||||||||
Langton Securities (2008-3) plc | 17 June 2008 | 3,327 | — | 3,400 | 3,521 | — | 3,522 | |||||||||||||||||||||
Langton Securities (2010-1) plc (1) | 1 October 2010 | 10,063 | — | 10,286 | — | — | — | |||||||||||||||||||||
Langton Securities (2010-1) plc (2) | 12 October 2010 | 13,005 | — | 13,292 | — | — | — | |||||||||||||||||||||
Langton Securities (2010-2) plc | 12 October 2010 | 6,625 | — | 6,772 | — | — | — | |||||||||||||||||||||
Beneficial interest in mortgages held by Langton Master Trust Ltd | 6,341 | — | — | 1,572 | — | — | ||||||||||||||||||||||
41,915 | — | 36,360 | 8,530 | — | 6,961 | |||||||||||||||||||||||
(1) | Issued to Alliance & Leicester plc until 28 May 2010, as described below. |
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Table of Contents
2010 | 2009 | |||||||||||||||||||||||||||
Issued to | Issued to | |||||||||||||||||||||||||||
Gross | Santander | Gross | Santander | |||||||||||||||||||||||||
assets | Notes in | UK plc as | assets | Notes in | UK plc as | |||||||||||||||||||||||
Closing date | securitised | issue | collateral | securitised | issue | collateral(1) | ||||||||||||||||||||||
Securitisation company | of securitisation | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Bracken Securities plc | 11 October 2007 | 5,948 | — | 6,070 | 6,736 | — | 6,909 | |||||||||||||||||||||
(1) | Issued to Alliance & Leicester plc until 28 May 2010, as described below. |
2010 | 2009 | |||||||||||||||
Gross | Gross | |||||||||||||||
assets | Notes in | assets | Notes in | |||||||||||||
assigned | issue | assigned | issue | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Euro 25bn Global Covered Bond Programme | 23,440 | 15,606 | 15,150 | 10,367 | ||||||||||||
Less: Held by the Group | (5,015 | ) | (5,012 | ) | ||||||||||||
Total Covered Bonds (See Note 33) | 10,591 | 5,355 | ||||||||||||||
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Table of Contents
Group | ||||||||||||||||||||||||||||
Guaranteed | Santander | Abbey | Trust | |||||||||||||||||||||||||
Investment | Marylebone | UK | National | Preferred | ||||||||||||||||||||||||
Products | Road 3 | Foundation | Pension | entities | Conduits | Total | ||||||||||||||||||||||
31 December 2010 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Loans and advances to banks | — | — | — | 2 | — | — | 2 | |||||||||||||||||||||
Available for sale securities | — | — | 11 | 125 | — | — | 136 | |||||||||||||||||||||
Other assets | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||
Total assets | — | — | 11 | 128 | — | — | 139 | |||||||||||||||||||||
Group | ||||||||||||||||||||||||||||
Guaranteed | Santander | Abbey | Trust | |||||||||||||||||||||||||
Investment | Marylebone | UK | National | Preferred | ||||||||||||||||||||||||
Products | Road 3 | Foundation | Pension | entities | Conduits | Total | ||||||||||||||||||||||
31 December 2009 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Financial assets designated at fair value | — | — | — | — | — | 50 | 50 | |||||||||||||||||||||
Loans and advances to banks | — | — | 1 | 5 | — | 36 | 42 | |||||||||||||||||||||
Loan and receivables securities | — | — | — | — | — | 414 | 414 | |||||||||||||||||||||
Available for sale securities | — | — | 10 | 745 | — | — | 755 | |||||||||||||||||||||
Total assets | — | — | 11 | 750 | — | 500 | 1,261 | |||||||||||||||||||||
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Table of Contents
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Trading assets | 39 | 94 | ||||||
> | Full derecognition occurs when the Group transfers its contractual right to receive cash flows from the financial assets, or retains the right but assumes an obligation to pass on the cash flows from the asset, and transfers substantially all the risks and rewards of ownership. The risks include credit, interest rate, currency, prepayment and other price risks. | |
> | Partial derecognition occurs when the Group sells or otherwise transfers financial assets in such a way that some but not substantially all of the risks and rewards of ownership are transferred but control is retained. These financial assets are recognised on the balance sheet to the extent of the Group’s continuing involvement. |
Group | ||||||||||||||||
2010 | 2010 | 2009 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Carrying | Carrying | Carrying | Carrying | |||||||||||||
amount of | amount of | amount of | amount of | |||||||||||||
transferred | associated | transferred | associated | |||||||||||||
Nature of transaction | assets | liabilities | assets | liabilities | ||||||||||||
Sale and Repurchase agreements (See Note 43) | 71,510 | 67,431 | 65,683 | 61,068 | ||||||||||||
Securitisations (See Note 18) | 75,267 | 19,764 | 75,282 | 18,807 | ||||||||||||
146,777 | 87,195 | 140,965 | 79,875 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Debt securities | 125 | 747 | — | — | ||||||||||||
Equity securities | 50 | 50 | 38 | 30 | ||||||||||||
175 | 797 | 38 | 30 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Debt securities: | ||||||||||||||||
- Listed in the UK | 125 | 747 | — | — | ||||||||||||
- Listed elsewhere | — | — | — | — | ||||||||||||
- Unlisted | — | — | — | — | ||||||||||||
125 | 747 | — | — | |||||||||||||
Equity securities: | ||||||||||||||||
- Listed in the UK | 12 | 11 | — | — | ||||||||||||
- Listed elsewhere | 8 | 9 | 8 | — | ||||||||||||
- Unlisted | 30 | 30 | 30 | 30 | ||||||||||||
50 | 50 | 38 | 30 | |||||||||||||
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Table of Contents
In not more | In more than 3 | In more than 1 | In more than five | |||||||||||||||||||||||||
On | than 3 | months but not | year but not more | years but not more | In more than | |||||||||||||||||||||||
demand | months | more than 1 year | than 5 years | than ten years | ten years | Total | ||||||||||||||||||||||
2010 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Issued by public bodies: | ||||||||||||||||||||||||||||
- UK Government | — | — | 125 | — | — | — | 125 | |||||||||||||||||||||
Weighted average yield for year % | — | — | 0.57 | — | — | — | 0.57 | |||||||||||||||||||||
In not more | In more than 3 | In more than 1 | In more than five | |||||||||||||||||||||||||
On | than 3 | months but not | year but not more | years but not more | In more than | |||||||||||||||||||||||
demand | months | more than 1 year | than 5 years | than ten years | ten years | Total | ||||||||||||||||||||||
2009 | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||
Issued by public bodies: | ||||||||||||||||||||||||||||
- UK Government | — | — | 405 | — | — | — | 405 | |||||||||||||||||||||
Issued by other issuers: | ||||||||||||||||||||||||||||
- Government Guaranteed | — | 91 | — | 251 | — | — | 342 | |||||||||||||||||||||
Weighted average yield for year % | — | 1.45 | 0.49 | 2.88 | — | — | 1.41 | |||||||||||||||||||||
Group | Company | |||||||
£m | £m | |||||||
At 1 January 2010 | 797 | 30 | ||||||
Additions | 1,225 | — | ||||||
Transfer from Alliance & Leicester plc | — | 8 | ||||||
Redemptions and maturities | (1,846 | ) | — | |||||
Movement in fair value | (1 | ) | — | |||||
At 31 December 2010 | 175 | 38 | ||||||
Group | Company | |||||||
£m | £m | |||||||
At 1 January 2009 | 2,663 | 25 | ||||||
Additions | 1,133 | 8 | ||||||
Redemptions and maturities | (3,001 | ) | (3 | ) | ||||
Amortisation of discount | 8 | — | ||||||
Movement in fair value | (6 | ) | — | |||||
At 31 December 2009 | 797 | 30 | ||||||
Group | Company | |||||||
£m | £m | |||||||
At 1 January 2008 | 40 | 28 | ||||||
Additions | 1,222 | 9 | ||||||
Acquired through business combinations | 1,658 | — | ||||||
Redemptions and maturities | (286 | ) | (8 | ) | ||||
Amortisation of discount | 21 | — | ||||||
Movement in fair value | 8 | (4 | ) | |||||
At 31 December 2008 | 2,663 | 25 | ||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Floating rate notes | 1,652 | 6,749 | 1,652 | — | ||||||||||||
Asset-backed securities | 1,778 | 2,251 | 3,546 | — | ||||||||||||
Collateralised debt obligations | 37 | 80 | 37 | — | ||||||||||||
Collateralised loan obligations | 112 | 639 | 112 | — | ||||||||||||
Other | 37 | 185 | 37 | 2 | ||||||||||||
Loan and receivable securities | 3,616 | 9,904 | 5,384 | 2 | ||||||||||||
Less: Impairment allowances | (6 | ) | (6 | ) | (6 | ) | — | |||||||||
Loan and receivable securities, net of impairment allowances | 3,610 | 9,898 | 5,378 | 2 | ||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
As at 1 January | 6 | — | — | — | ||||||||||||
Charge to the income statement | — | 69 | — | — | ||||||||||||
Transfer from Alliance & Leicester plc | — | — | 6 | — | ||||||||||||
Write offs | — | (63 | ) | — | — | |||||||||||
As at 31 December | 6 | 6 | 6 | — | ||||||||||||
Company | ||||||||||||
Cost | Impairment | Net book value | ||||||||||
£m | £m | £m | ||||||||||
At 1 January 2010 | 7,343 | (305 | ) | 7,038 | ||||||||
Additions | 1,826 | (7 | ) | 1,819 | ||||||||
Reduction in investment in A&L plc as a result of FSMA transfer (See Note 48) | (1,159 | ) | (57 | ) | (1,216 | ) | ||||||
Disposals /repayment of investment | (776 | ) | 4 | (772 | ) | |||||||
At 31 December 2010 | 7,234 | (365 | ) | 6,869 | ||||||||
Company | ||||||||||||
Cost | Impairment | Net book value | ||||||||||
£m | £m | £m | ||||||||||
At 1 January 2009 | 5,252 | (105 | ) | 5,147 | ||||||||
Additions | 2,136 | (211 | ) | 1,925 | ||||||||
Disposals within the Group/repayment of investment | (45 | ) | 11 | (34 | ) | |||||||
At 31 December 2009 | 7,343 | (305 | ) | 7,038 | ||||||||
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Table of Contents
Principal subsidiary | Nature of business | % Interest held | Country of incorporation or registration | |||||||
Abbey National International Limited | Personal finance | 100 | Jersey | |||||||
Abbey National North America LLC* | Funding | 100 | United States | |||||||
Abbey National Treasury Services plc | Treasury operations | 100 | England & Wales | |||||||
Alliance & Leicester International Limited* | Offshore deposit taking | 100 | Isle of Man | |||||||
Bradford & Bingley International Limited | Bank, deposit taker | 100 | Isle of Man | |||||||
Cater Allen Limited* | Bank, deposit taker | 100 | England & Wales | |||||||
* | Held indirectly through subsidiary companies. |
Group | Company | |||||||
£m | £m | |||||||
At 1 January 2010 | 75 | 76 | ||||||
Share of results | 25 | — | ||||||
Transfer to investment in subsidiary | (98 | ) | (75 | ) | ||||
At 31 December 2010 | 2 | 1 | ||||||
Group | Company | |||||||
£m | £m | |||||||
At 1 January 2009 | 35 | 741 | ||||||
Additional investment | 35 | 35 | ||||||
Share of results | 5 | — | ||||||
Transfer to investment in subsidiary | — | (700 | ) | |||||
At 31 December 2009 | 75 | 76 | ||||||
Country of | Assets | Liabilities | Income | Profit | % interest | |||||||||||||||||||||||
Name | Nature of business | registration | £m | £m | £m | £m | held | |||||||||||||||||||||
PSA Finance plc | Personal finance | England and Wales | 3 | — | — | — | 50.0 | |||||||||||||||||||||
Country of | Assets | Liabilities | Income | Profit | % interest | |||||||||||||||||||||||
Name | Nature of business | registration | £m | £m | £m | £m | held | |||||||||||||||||||||
PSA Finance plc | Personal finance | England and Wales | 3 | — | — | — | 50.0 | |||||||||||||||||||||
Santander Consumer (UK) plc | Consumer finance | England and Wales | 2,361 | (2,215 | ) | 134 | 11 | 49.9 | ||||||||||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Cost | ||||||||||||||||
At 1 January | 1,285 | 1,281 | 419 | 419 | ||||||||||||
Transfer from Alliance & Leicester plc | — | — | 774 | — | ||||||||||||
Acquisitions | 631 | 4 | 1 | — | ||||||||||||
At 31 December | 1,916 | 1,285 | 1,194 | 419 | ||||||||||||
Accumulated impairment | ||||||||||||||||
At 1 January and 31 December | 22 | 22 | — | — | ||||||||||||
Net book value | 1,894 | 1,263 | 1,194 | 419 | ||||||||||||
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Table of Contents
Goodwill | Key | Discount | Growth | |||||||||||||||||||
Business Division | Cash-Generating Unit | £m | Basis of valuation | assumptions | rate | Rate(1) | ||||||||||||||||
Retail Banking | Personal financial services | 1,169 | Value in use: cash flow | 3 year plan | 11.6 | % | 10 | % | ||||||||||||||
Retail Banking | Santander Cards | 456 | Value in use: cash flow | 3 year plan | 11.6 | % | 10 | % | ||||||||||||||
Retail Banking | Santander Consumer | 175 | Value in use: cash flow | 3 year plan | 11.6 | % | 10 | % | ||||||||||||||
Retail Banking | Cater Allen Private Bank | 90 | Value in use: cash flow | 3 year plan | 11.6 | % | 10 | % | ||||||||||||||
Retail Banking | Other | 4 | Value in use: cash flow | 3 year plan | 11.6 | % | 10 | % | ||||||||||||||
1,894 | ||||||||||||||||||||||
2009 | ||||||||||||||||||||||
Goodwill | Key | Discount | Growth | |||||||||||||||||||
Business Division | Cash-Generating Unit | £m | Basis of valuation | assumptions | rate | Rate(1) | ||||||||||||||||
Retail Banking | Alliance & Leicester | 774 | Value in use: cash flow | 3 year plan | 10.1 | % | 10 | % | ||||||||||||||
Retail Banking | Bradford & Bingley savings business | 395 | Value in use: cash flow | 3 year plan | 10.1 | % | 5 | % | ||||||||||||||
Retail Banking | Cater Allen Private Bank | 90 | Value in use: cash flow | 3 year plan | 10.1 | % | 10 | % | ||||||||||||||
Retail Banking | Other | 4 | Value in use: cash flow | 3 year plan | 10.1 | % | 10 | % | ||||||||||||||
1,263 | ||||||||||||||||||||||
(1) | For three years, with a terminal growth rate of nil applied thereafter. |
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Cost | ||||||||||||||||
At 1 January | 212 | 95 | 151 | 72 | ||||||||||||
Additions | 114 | 120 | 82 | 82 | ||||||||||||
Acquired through business combinations | 45 | — | — | — | ||||||||||||
Transferred from Alliance & Leicester plc | — | — | 87 | — | ||||||||||||
Disposals | (3 | ) | (3 | ) | — | (3 | ) | |||||||||
At 31 December | 368 | 212 | 320 | 151 | ||||||||||||
Accumulated amortisation / impairment | ||||||||||||||||
At 1 January | 29 | 7 | 18 | 7 | ||||||||||||
Transferred from Alliance & Leicester plc | — | — | 41 | — | ||||||||||||
Charge for the year | 55 | 22 | 48 | 11 | ||||||||||||
At 31 December | 84 | 29 | 107 | 18 | ||||||||||||
Net book value | 284 | 183 | 213 | 133 | ||||||||||||
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Table of Contents
Group | ||||||||||||||||||||
Office fixtures | Computer | Operating lease | ||||||||||||||||||
Property | and equipment | software | assets | Total | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Cost: | ||||||||||||||||||||
At 1 January 2010 | 471 | 639 | 387 | 328 | 1,825 | |||||||||||||||
Acquired through business combinations | — | 6 | 1 | — | 7 | |||||||||||||||
Disposed of through disposal of business | (3 | ) | (1 | ) | — | — | (4 | ) | ||||||||||||
Additions | 556 | 159 | 12 | 32 | 759 | |||||||||||||||
Disposals | (12 | ) | (105 | ) | — | (108 | ) | (225 | ) | |||||||||||
At 31 December 2010 | 1,012 | 698 | 400 | 252 | 2,362 | |||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||
At 1 January 2010 | 51 | 342 | 166 | 16 | 575 | |||||||||||||||
Disposed of through disposal of business | (2 | ) | (1 | ) | — | — | (3 | ) | ||||||||||||
Charge for the year | 24 | 78 | 53 | 65 | 220 | |||||||||||||||
Disposals | (2 | ) | (69 | ) | — | (64 | ) | (135 | ) | |||||||||||
At 31 December 2010 | 71 | 350 | 219 | 17 | 657 | |||||||||||||||
Net book value | 941 | 348 | 181 | 235 | 1,705 | |||||||||||||||
Group | ||||||||||||||||||||
Office fixtures | Computer | Operating lease | ||||||||||||||||||
Property | and equipment | software | assets | Total | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Cost: | ||||||||||||||||||||
At 1 January 2009 | 346 | 570 | 385 | 348 | 1,649 | |||||||||||||||
Additions | 126 | 120 | 16 | 81 | 343 | |||||||||||||||
Disposals | (1 | ) | (51 | ) | (14 | ) | (101 | ) | (167 | ) | ||||||||||
At 31 December 2009 | 471 | 639 | 387 | 328 | 1,825 | |||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||
At 1 January 2009 | 30 | 312 | 105 | — | 447 | |||||||||||||||
Charge for the year | 21 | 81 | 61 | 75 | 238 | |||||||||||||||
Disposals | — | (51 | ) | — | (59 | ) | (110 | ) | ||||||||||||
At 31 December 2009 | 51 | 342 | 166 | 16 | 575 | |||||||||||||||
Net book value | 420 | 297 | 221 | 312 | 1,250 | |||||||||||||||
Company | ||||||||||||||||
Office fixtures | Computer | |||||||||||||||
Property | and equipment | software | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Cost: | ||||||||||||||||
At 1 January 2010 | 123 | 597 | 315 | 1,035 | ||||||||||||
Transfer from Alliance & Leicester plc | 256 | 201 | — | 457 | ||||||||||||
Additions | 549 | 145 | 7 | 701 | ||||||||||||
Disposals | (12 | ) | (105 | ) | — | (117 | ) | |||||||||
At 31 December 2010 | 916 | 838 | 322 | 2,076 | ||||||||||||
Accumulated depreciation: | ||||||||||||||||
At 1 January 2010 | 30 | 349 | 95 | 474 | ||||||||||||
Transfer from Alliance & Leicester plc | 170 | 160 | — | 330 | ||||||||||||
Charge for the year | 17 | 68 | 52 | 137 | ||||||||||||
Disposals | (2 | ) | (67 | ) | — | (69 | ) | |||||||||
At 31 December 2010 | 215 | 510 | 147 | 872 | ||||||||||||
Net book value | 701 | 328 | 175 | 1,204 | ||||||||||||
Company | ||||||||||||||||
Office fixtures | Computer | |||||||||||||||
Property | and equipment | software | Total | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Cost: | ||||||||||||||||
At 1 January 2009 | 112 | 498 | 315 | 925 | ||||||||||||
Additions | 11 | 101 | 15 | 127 | ||||||||||||
Disposals | — | (2 | ) | (15 | ) | (17 | ) | |||||||||
At 31 December 2009 | 123 | 597 | 315 | 1,035 | ||||||||||||
Accumulated depreciation: | ||||||||||||||||
At 1 January 2009 | 22 | 299 | 35 | 356 | ||||||||||||
Charge for the year | 8 | 52 | 60 | 120 | ||||||||||||
Disposals | — | (2 | ) | — | (2 | ) | ||||||||||
At 31 December 2009 | 30 | 349 | 95 | 474 | ||||||||||||
Net book value | 93 | 248 | 220 | 561 | ||||||||||||
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Table of Contents
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
In no more than 1 year | 49 | 72 | ||||||
In more than 1 year but no more than 5 years | 77 | 99 | ||||||
In more than 5 years | 9 | 26 | ||||||
135 | 197 | |||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
At 1 January | 610 | 869 | 428 | 452 | ||||||||||||
Income statement charge | (390 | ) | (438 | ) | (272 | ) | (149 | ) | ||||||||
(Charged)/credited to other comprehensive income: | ||||||||||||||||
- retirement benefit obligations | (9 | ) | 170 | (20 | ) | 116 | ||||||||||
- available-for-sale financial assets | — | 2 | — | — | ||||||||||||
(9 | ) | 172 | (20 | ) | 116 | |||||||||||
Acquired through business combinations | 50 | 7 | — | 9 | ||||||||||||
Transfer of Alliance & Leicester plc | — | — | 243 | — | ||||||||||||
Disposal of subsidiary undertaking | 96 | — | — | — | ||||||||||||
At 31 December | 357 | 610 | 379 | 428 | ||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Deferred tax liabilities | ||||||||||||||||
Accelerated tax depreciation | (122 | ) | (236 | ) | — | — | ||||||||||
Other temporary differences | (87 | ) | (100 | ) | — | — | ||||||||||
(209 | ) | (336 | ) | — | — | |||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Deferred tax assets | ||||||||||||||||
Pensions and other post retirement benefits | 50 | 306 | 49 | 264 | ||||||||||||
Accelerated book depreciation | 137 | 178 | 48 | 55 | ||||||||||||
IAS 32 & IAS 39 transitional adjustments | 91 | 78 | 48 | 72 | ||||||||||||
Impairment loss allowances and other provisions | 12 | 13 | — | — | ||||||||||||
Other temporary differences | 30 | 74 | (12 | ) | 37 | |||||||||||
Tax losses carried forward | 246 | 297 | 246 | — | ||||||||||||
566 | 946 | 379 | 428 | |||||||||||||
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Table of Contents
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Accelerated tax depreciation | (32 | ) | (133 | ) | 24 | |||||||
Pensions and other post-retirement benefits | (223 | ) | (104 | ) | (63 | ) | ||||||
Impairment loss allowances and other provisions | (1 | ) | — | — | ||||||||
IAS 32 & IAS 39 transition adjustments | (21 | ) | (11 | ) | (20 | ) | ||||||
Tax losses carried forward | (38 | ) | (63 | ) | (100 | ) | ||||||
Other temporary differences | (75 | ) | (127 | ) | 37 | |||||||
(390 | ) | (438 | ) | (122 | ) | |||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Trade and other receivables | 982 | 881 | 870 | 515 | ||||||||||||
Prepayments | 74 | 75 | 54 | 48 | ||||||||||||
Accrued income | 24 | 30 | 6 | — | ||||||||||||
General insurance assets | 75 | 88 | 75 | 88 | ||||||||||||
1,155 | 1,074 | 1,005 | 651 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Items in the course of transmission | 1,274 | 652 | 1,248 | 570 | ||||||||||||
Deposits by banks — securities sold under repurchase agreements | 2,548 | — | — | — | ||||||||||||
Amounts due to subsidiaries | — | — | 143,952 | 115,564 | ||||||||||||
Amounts due to fellow subsidiaries | 646 | 1,846 | — | 20 | ||||||||||||
Amounts due to ultimate parent(1) | 949 | 644 | 101 | 29 | ||||||||||||
Other deposits | 2,367 | 2,669 | 939 | 231 | ||||||||||||
7,784 | 5,811 | 146,240 | 116,414 | |||||||||||||
(1) | Includes securities sold under repurchase agreements. |
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Repayable: | ||||||||||||||||
On demand | 3,478 | 3,716 | 25,556 | 3,333 | ||||||||||||
In not more than 3 months | 871 | 1,916 | 40,115 | 23,732 | ||||||||||||
In more than 3 months but not more than 1 year | 41 | 24 | 29,177 | 10,203 | ||||||||||||
In more than 1 year but not more than 5 years | 3,188 | 155 | 41,168 | 71,927 | ||||||||||||
In more than 5 years | 206 | — | 10,224 | 7,219 | ||||||||||||
7,784 | 5,811 | 146,240 | 116,414 | |||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Current and demand accounts: | ||||||||||||||||
- interest-bearing | 29,616 | 31,247 | 23,501 | 14,853 | ||||||||||||
- non interest-bearing | 2,085 | 1,595 | 2,017 | 571 | ||||||||||||
Savings accounts | 74,608 | 75,921 | 71,397 | 53,937 | ||||||||||||
Time deposits | 45,748 | 34,657 | 33,023 | 25,216 | ||||||||||||
Amounts due to subsidiaries | — | — | 40,412 | 79 | ||||||||||||
Amounts due to fellow subsidiaries | 586 | 473 | 229 | 64,531 | ||||||||||||
152,643 | 143,893 | 170,579 | 159,187 | |||||||||||||
Repayable: | ||||||||||||||||
On demand | 104,664 | 105,157 | 97,850 | 77,240 | ||||||||||||
In no more than 3 months | 8,938 | 7,046 | 7,220 | 15,611 | ||||||||||||
In more than 3 months but no more than 1 year | 24,027 | 18,059 | 20,689 | 12,028 | ||||||||||||
In more than 1 year but not more than 5 years | 14,527 | 13,017 | 7,021 | 13,029 | ||||||||||||
In more than 5 years | 487 | 614 | 37,799 | 41,279 | ||||||||||||
152,643 | 143,893 | 170,579 | 159,187 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Deposits by banks - securities sold under repurchase agreements | 21,411 | 35,794 | — | — | ||||||||||||
- other | 4,327 | 5,030 | — | — | ||||||||||||
Deposits by customers - securities sold under repurchase agreements | 11,112 | 69 | — | — | ||||||||||||
- other | 4,859 | 4,046 | — | — | ||||||||||||
Short positions in securities and unsettled trades | 1,118 | 1,071 | — | — | ||||||||||||
Debt securities in issue | — | 142 | — | — | ||||||||||||
42,827 | 46,152 | — | — | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Deposits by banks | — | 45 | — | — | ||||||||||||
Deposits by customers | 5 | 12 | 5 | — | ||||||||||||
Debt securities in issue - US$4bn Euro Commercial Paper Programme | 898 | 662 | — | — | ||||||||||||
- US$40bn Euro Medium Term Note Programme | 24 | — | 24 | — | ||||||||||||
- US$20bn Euro Medium Term Note Programme | 1,741 | 2,945 | — | — | ||||||||||||
- Euro 2bn Structured Notes | 930 | 675 | — | — | ||||||||||||
- Other bonds | 80 | 84 | 1 | — | ||||||||||||
Warrants | 9 | — | — | — | ||||||||||||
3,687 | 4,423 | 30 | — | |||||||||||||
210
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211
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Bonds and medium term notes: | ||||||||||||||||
- Euro 25bn Global Covered Bond Programme | 10,591 | 5,355 | — | — | ||||||||||||
- US$20bn euro Medium Term Note Programme (See Note 32) | 4,893 | 2,166 | — | — | ||||||||||||
- US$40bn euro Medium Term Note Programme | 3,177 | 5,876 | 3,177 | — | ||||||||||||
- US$20bn Commercial Paper Programme | 4,433 | 6,366 | — | — | ||||||||||||
- Certificates of deposit in issue | 8,925 | 9,188 | — | — | ||||||||||||
32,019 | 28,951 | 3,177 | — | |||||||||||||
Securitisation programmes: | ||||||||||||||||
- Holmes | 8,696 | 14,704 | — | — | ||||||||||||
- Fosse | 11,068 | 4,103 | — | — | ||||||||||||
51,783 | 47,758 | 3,177 | — | |||||||||||||
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Group | Company | |||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
Issue currency | Interest rate | Maturity | £m | £m | £m | £m | ||||||||||||||||||
euro | 0.00% - 3.99 | % | Up to 2010 | — | 2,452 | — | — | |||||||||||||||||
2010 - 2011 | 1,858 | — | 574 | — | ||||||||||||||||||||
2012 - 2019 | 8,797 | 5,415 | 1,415 | — | ||||||||||||||||||||
2020 - 2029 | 1,083 | 1,600 | — | — | ||||||||||||||||||||
2030 - 2059 | 5,876 | 3,976 | — | — | ||||||||||||||||||||
4.00% - 4.99 | % | 2020 - 2029 | 1,316 | 1,362 | — | — | ||||||||||||||||||
5.00% - 7.99 | % | Up to 2010 | — | 276 | — | — | ||||||||||||||||||
US dollar | 0.00% - 3.99 | % | Up to 2011 | 11,783 | 14,676 | 635 | — | |||||||||||||||||
2012 - 2019 | 2,166 | 618 | — | — | ||||||||||||||||||||
2020 - 2029 | 1,251 | 3,841 | — | — | ||||||||||||||||||||
2030 - 2039 | 577 | 556 | — | — | ||||||||||||||||||||
2040 - 2059 | 3,186 | 3,194 | — | — | ||||||||||||||||||||
4.00% - 5.99 | % | Up to 2010 | — | 20 | — | — | ||||||||||||||||||
2011 - 2019 | 35 | 49 | 35 | — | ||||||||||||||||||||
Pounds sterling | 0.00% - 3.99 | % | Up to 2010 | — | 963 | — | — | |||||||||||||||||
2010 - 2011 | 1,646 | — | 112 | — | ||||||||||||||||||||
2012 - 2019 | 2,345 | 1,643 | 70 | — | ||||||||||||||||||||
2020 - 2029 | 437 | 838 | — | — | ||||||||||||||||||||
2030 - 2059 | 6,757 | 3,739 | — | — | ||||||||||||||||||||
4.00% - 5.99 | % | Up to 2010 | — | 155 | — | — | ||||||||||||||||||
2010 - 2011 | 211 | — | 209 | — | ||||||||||||||||||||
2012 - 2059 | 1,884 | 815 | — | — | ||||||||||||||||||||
6.00% - 6.99 | % | Up to 2010 | — | 471 | — | — | ||||||||||||||||||
2012 - 2019 | 87 | 351 | 87 | — | ||||||||||||||||||||
Other currencies | 0.00% - 5.99 | % | Up to 2010 | — | 337 | — | — | |||||||||||||||||
2010 - 2011 | 9 | — | — | — | ||||||||||||||||||||
2012 - 2019 | 289 | 47 | 40 | — | ||||||||||||||||||||
2020 - 2029 | 177 | 352 | — | — | ||||||||||||||||||||
6.00% - 6.87 | % | Up to 2011 | 8 | — | — | — | ||||||||||||||||||
2012 - 2019 | 5 | 12 | — | — | ||||||||||||||||||||
51,783 | 47,758 | 3,177 | — | |||||||||||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
£325m Sterling Preference Shares | 344 | 344 | 344 | 344 | ||||||||||||
£175m Fixed/Floating Rate Tier One Preferred Income Capital Securities | 201 | 195 | 201 | 195 | ||||||||||||
US$1,000m Non-Cumulative Trust Preferred Securities | 870 | 813 | — | — | ||||||||||||
Undated subordinated liabilities | 2,151 | 2,144 | 2,151 | 2,144 | ||||||||||||
Dated subordinated liabilities | 2,806 | 3,453 | 3,742 | 3,436 | ||||||||||||
6,372 | 6,949 | 6,438 | 6,119 | |||||||||||||
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Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
10.0625% Exchangeable subordinated capital securities | 205 | 204 | 205 | 204 | ||||||||||||
5.56% Subordinated guaranteed notes (Yen 15,000m) | 142 | 123 | 142 | 123 | ||||||||||||
5.50% Subordinated guaranteed notes (Yen 5,000m) | 47 | 41 | 47 | 41 | ||||||||||||
Fixed/Floating Rate Subordinated notes (Yen 5,000m) | 46 | 39 | 46 | 39 | ||||||||||||
10 Year step-up perpetual callable subordinated notes | 318 | 344 | 318 | 344 | ||||||||||||
7.50% 15 Year step-up perpetual callable subordinated notes | 507 | 497 | 507 | 497 | ||||||||||||
7.375% 20 Year step-up perpetual callable subordinated notes | 215 | 209 | 215 | 209 | ||||||||||||
7.125% 30 Year step-up perpetual callable subordinated notes | 327 | 311 | 327 | 311 | ||||||||||||
Fixed to floating rate perpetual callable subordinated notes | 344 | 376 | 344 | 376 | ||||||||||||
2,151 | 2,144 | 2,151 | 2,144 | |||||||||||||
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Table of Contents
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
4.625% Subordinated notes 2011 (euro 500m) | 449 | 478 | 449 | 478 | ||||||||||||
10.125% Subordinated guaranteed bond 2023 | 225 | 220 | — | — | ||||||||||||
11.50% Subordinated guaranteed bond 2017 | 225 | 226 | — | — | ||||||||||||
11.59% Subordinated loan stock 2017 | — | — | 226 | 226 | ||||||||||||
10.18% Subordinated loan stock 2023 | — | — | 225 | 220 | ||||||||||||
7.95% Subordinated notes 2029 (US$1,000m) | 891 | 805 | 891 | 805 | ||||||||||||
6.50% Subordinated notes 2030 | 182 | 174 | 182 | 174 | ||||||||||||
Subordinated notes 2030 (US$1,000m) | — | — | 870 | 813 | ||||||||||||
5.25% Subordinated notes 2015 | — | 210 | — | 210 | ||||||||||||
Subordinated floating rate EURIBOR notes 2015 | — | 445 | — | 445 | ||||||||||||
Subordinated floating rate EURIBOR notes 2016 | — | — | 65 | 65 | ||||||||||||
5.875% Subordinated notes 2031 | 92 | 80 | 92 | — | ||||||||||||
5.25% Subordinated notes 2023 | 130 | 119 | 130 | — | ||||||||||||
Subordinated floating rate EURIBOR notes 2017 | 129 | 134 | 129 | — | ||||||||||||
Subordinated floating rate US$ LIBOR notes 2015 | — | 92 | — | — | ||||||||||||
Subordinated floating rate EURIBOR notes 2017 | 86 | 88 | 86 | — | ||||||||||||
9.625% Subordinated notes 2023 | 397 | 382 | 397 | — | ||||||||||||
2,806 | 3,453 | 3,742 | 3,436 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
In no more than 3 months | 449 | — | 449 | — | ||||||||||||
In more than 1 year but no more than 5 years | — | 478 | — | 478 | ||||||||||||
In more than 5 years | 2,357 | 2,975 | 3,293 | 2,958 | ||||||||||||
Undated | 3,566 | 3,496 | 2,696 | 2,683 | ||||||||||||
6,372 | 6,949 | 6,438 | 6,119 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Trade and other payables | 1,962 | 2,263 | 1,796 | 1,611 | ||||||||||||
Deferred income | 64 | 60 | — | — | ||||||||||||
2,026 | 2,323 | 1,796 | 1,611 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Leases which expire | £m | £m | £m | £m | ||||||||||||
Within 1 year | 2 | 2 | 5 | — | ||||||||||||
Between 1-5 years | 4 | 7 | 22 | — | ||||||||||||
In more than 5 years | — | — | 12 | — | ||||||||||||
6 | 9 | 39 | — | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Leases which expire | £m | £m | £m | £m | ||||||||||||
Within 1 year | 3 | 3 | 7 | — | ||||||||||||
Between 1-5 years | 4 | 7 | 28 | — | ||||||||||||
In more than 5 years | — | — | 13 | — | ||||||||||||
7 | 10 | 48 | — | |||||||||||||
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Table of Contents
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Leases which expire | £m | £m | £m | £m | ||||||||||||
Within 1 year | 3 | 1 | — | — | ||||||||||||
Between 1-5 years | 4 | 8 | — | — | ||||||||||||
7 | 9 | — | — | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
At 1 January | 91 | 207 | 74 | 99 | ||||||||||||
Additional provisions | 131 | 59 | 130 | 44 | ||||||||||||
Acquired through business combinations | 31 | — | — | 30 | ||||||||||||
Provisions released | (2 | ) | (3 | ) | — | (3 | ) | |||||||||
Disposal of subsidiary undertakings | (1 | ) | — | — | — | |||||||||||
Used during the year | (87 | ) | (189 | ) | (70 | ) | (96 | ) | ||||||||
Reclassifications | 22 | 17 | 22 | — | ||||||||||||
At 31 December | 185 | 91 | 156 | 74 | ||||||||||||
To be settled: | ||||||||||||||||
Within 12 months | 169 | 90 | 141 | 73 | ||||||||||||
In more than 12 months | 16 | 1 | 15 | 1 | ||||||||||||
185 | 91 | 156 | 74 | |||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Assets/(liabilities) | ||||||||||||||||
Funded defined benefit pension scheme | 43 | 1 | 39 | — | ||||||||||||
Funded defined benefit pension scheme | (189 | ) | (1,048 | ) | (189 | ) | (922 | ) | ||||||||
Unfunded defined benefit pension scheme | (14 | ) | (13 | ) | (14 | ) | — | |||||||||
Net defined benefit obligation | (160 | ) | (1,060 | ) | (164 | ) | (922 | ) | ||||||||
Post-retirement medical benefits (unfunded) | (13 | ) | (10 | ) | (13 | ) | — | |||||||||
Total net liabilities | (173 | ) | (1,070 | ) | (177 | ) | (922 | ) | ||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Actuarial (gains)/losses on defined benefit schemes | (28 | ) | 605 | (14 | ) | 414 | ||||||||||
Actuarial loss on unfunded medical benefit plans | 3 | 1 | 3 | — | ||||||||||||
Total net actuarial (gains)/losses(1) | (25 | ) | 606 | (11 | ) | 414 | ||||||||||
(1) | The total net actuarial gain for the Company in 2010 differs from the actuarial gain of £67m disclosed in the Statement of Comprehensive Income due to a recharge of Company contributions to subsidiaries during the year. |
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Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
Current service cost | 35 | 44 | 55 | |||||||||
Past service cost | 5 | 50 | 16 | |||||||||
Gain on settlements or curtailments | — | — | (2 | ) | ||||||||
Expected return on pension scheme assets | (317 | ) | (285 | ) | (237 | ) | ||||||
Interest cost | 357 | 326 | 264 | |||||||||
80 | 135 | 96 | ||||||||||
Group | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Present value of defined benefit obligation | (6,716 | ) | (6,308 | ) | (5,175 | ) | (4,581 | ) | (4,264 | ) | ||||||||||
Fair value of plan assets | 6,556 | 5,248 | 4,372 | 3,602 | 3,230 | |||||||||||||||
Net defined benefit obligation | (160 | ) | (1,060 | ) | (803 | ) | (979 | ) | (1,034 | ) | ||||||||||
Company | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Present value of defined benefit obligation | (6,705 | ) | (4,805 | ) | (3,944 | ) | (4,559 | ) | (4,241 | ) | ||||||||||
Fair value of plan assets | 6,541 | 3,883 | 3,147 | 3,577 | 3,208 | |||||||||||||||
Net defined benefit obligation | (164 | ) | (922 | ) | (797 | ) | (982 | ) | (1,033 | ) | ||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Balance at 1 January | (6,308 | ) | (5,175 | ) | (4,805 | ) | (3,944 | ) | ||||||||
Current service cost | (35 | ) | (44 | ) | (14 | ) | (26 | ) | ||||||||
Interest cost | (357 | ) | (326 | ) | (356 | ) | (249 | ) | ||||||||
Employee contributions | (10 | ) | (11 | ) | (10 | ) | (6 | ) | ||||||||
Past service cost | (5 | ) | (50 | ) | (5 | ) | (35 | ) | ||||||||
Actuarial loss | (207 | ) | (935 | ) | (220 | ) | (723 | ) | ||||||||
Actual benefit payments | 206 | 233 | 206 | 178 | ||||||||||||
Transfer from Alliance & Leicester plc | — | — | (1,501 | ) | — | |||||||||||
Balance at 31 December | (6,716 | ) | (6,308 | ) | (6,705 | ) | (4,805 | ) | ||||||||
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Table of Contents
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Balance at 1 January | 5,248 | 4,372 | 3,883 | 3,147 | ||||||||||||
Expected return on scheme assets | 317 | 284 | 313 | 209 | ||||||||||||
Actuarial gain/(loss) on scheme assets | 235 | 330 | 234 | 309 | ||||||||||||
Company contributions paid | 880 | 390 | 883 | 390 | ||||||||||||
Contributions paid by subsidiaries and fellow group subsidiaries | 72 | 94 | 72 | — | ||||||||||||
Employee contributions | 10 | 11 | 10 | 6 | ||||||||||||
Actual benefit payments | (206 | ) | (233 | ) | (206 | ) | (178 | ) | ||||||||
Transfer from Alliance & Leicester plc | — | — | 1,352 | — | ||||||||||||
Balance at 31 December | 6,556 | 5,248 | 6,541 | 3,883 | ||||||||||||
Group | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Actuarial (gain)/loss on scheme assets | (235 | ) | (330 | ) | 862 | (33 | ) | 9 | ||||||||||||
Experience (gain)/loss on scheme liabilities | (76 | ) | (34 | ) | 51 | 80 | (25 | ) | ||||||||||||
Loss/(gain) from changes in actuarial assumptions | 283 | 969 | (869 | ) | 66 | (203 | ) | |||||||||||||
Actuarial loss/(gain) on scheme liabilities | 207 | 935 | (818 | ) | 146 | (228 | ) | |||||||||||||
Total net actuarial (gain)/loss | (28 | ) | 605 | 44 | 113 | (219 | ) | |||||||||||||
Company | ||||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
£m | £m | £m | £m | £m | ||||||||||||||||
Actuarial (gain)/loss on scheme assets | (234 | ) | (309 | ) | 836 | (33 | ) | — | ||||||||||||
Experience (gain)/loss on scheme liabilities | (65 | ) | (33 | ) | 51 | 81 | (20 | ) | ||||||||||||
Loss/(gain) from changes in actuarial assumptions | 285 | 756 | (844 | ) | 68 | (160 | ) | |||||||||||||
Actuarial loss/(gain) on scheme liabilities | 220 | 723 | (793 | ) | 149 | (180 | ) | |||||||||||||
Total net actuarial (gain)/loss | (14 | ) | 414 | 43 | 116 | (180 | ) | |||||||||||||
> | To maintain a portfolio of suitable assets of appropriate quality, suitability and liquidity which will generate income and capital growth to meet, together with new contributions from members and the employers, the cost of current and future benefits which the pension scheme provides, as set out in the trust deed and rules. | |
> | To limit the risk of the assets failing to meet the liabilities, over the long-term and on a shorter-term basis as required by prevailing legislation. | |
> | To minimise the long-term costs of the pension scheme by maximising the return on the assets whilst having regard to the objectives shown above. |
219
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Group | ||||||||||||||||||||||||
Expected rate | Expected | |||||||||||||||||||||||
Fair value of scheme assets | of return | Fair value of scheme assets | rate of return | |||||||||||||||||||||
2010 | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||||||
£m | % | % | £m | % | % | |||||||||||||||||||
UK equities | 1,009 | 15 | 7.8 | 1,045 | 20 | 8.1 | ||||||||||||||||||
Overseas equities | 1,196 | 18 | 8.1 | 1,027 | 20 | 8.5 | ||||||||||||||||||
Corporate bonds | 1,404 | 22 | 5.2 | 1,503 | 29 | 6.2 | ||||||||||||||||||
Government fixed interest bonds | 1,515 | 23 | 4.4 | 686 | 13 | 3.9 | ||||||||||||||||||
Government index linked bonds | 869 | 13 | 4.4 | 664 | 13 | 3.9 | ||||||||||||||||||
Property funds | 77 | 1 | 6.2 | 58 | 1 | 6.3 | ||||||||||||||||||
Cash | 187 | 3 | 4.7 | 177 | 3 | 4.1 | ||||||||||||||||||
Other assets | 299 | 5 | 8.0 | 88 | 1 | 8.3 | ||||||||||||||||||
6,556 | 100 | 6.1 | 5,248 | 100 | 6.4 | |||||||||||||||||||
Company | ||||||||||||||||||||||||
Expected rate | Expected | |||||||||||||||||||||||
Fair value of scheme assets | of return | Fair value of scheme assets | rate of return | |||||||||||||||||||||
2010 | 2010 | 2010 | 2009 | 2009 | 2009 | |||||||||||||||||||
£m | % | % | £m | % | % | |||||||||||||||||||
UK equities | 1,006 | 15 | 7.8 | 760 | 20 | 8.1 | ||||||||||||||||||
Overseas equities | 1,194 | 18 | 8.1 | 757 | 20 | 8.5 | ||||||||||||||||||
Corporate bonds | 1,403 | 22 | 5.2 | 1,169 | 30 | 6.2 | ||||||||||||||||||
Government fixed interest bonds | 1,515 | 23 | 4.4 | 438 | 11 | 3.9 | ||||||||||||||||||
Government index linked bonds | 869 | 13 | 4.4 | 536 | 14 | 3.9 | ||||||||||||||||||
Property funds | 77 | 1 | 6.2 | — | — | 6.3 | ||||||||||||||||||
Cash | 183 | 3 | 4.7 | 169 | 4 | 4.1 | ||||||||||||||||||
Other assets | 294 | 5 | 8.0 | 54 | 1 | 8.3 | ||||||||||||||||||
6,541 | 100 | 6.1 | 3,883 | 100 | 6.4 | |||||||||||||||||||
> | Equities | Long-term median real rate of return experienced after considering projected moves in asset indices | ||
> | Corporate bonds | Gross redemption yields at the balance sheet date, less a margin for default risk | ||
> | Government bonds | Gross redemption yields at the balance sheet date | ||
> | Property funds | Average of returns for UK equities and government bonds | ||
> | Cash | Expected long term bank rate, after considering projected inflation rate |
Group | ||||||||||||||||||||||||
Internal models based on | ||||||||||||||||||||||||
Quoted prices in active markets | market observable data | Total | ||||||||||||||||||||||
Category of plan assets | £m | % | £m | % | £m | % | ||||||||||||||||||
UK equities | 991 | 15 | 18 | — | 1,009 | 15 | ||||||||||||||||||
Overseas equities | 1,196 | 19 | — | — | 1,196 | 19 | ||||||||||||||||||
Corporate bonds | 1,404 | 22 | — | — | 1,404 | 22 | ||||||||||||||||||
Government fixed interest bonds | 1,515 | 24 | — | — | 1,515 | 24 | ||||||||||||||||||
Government index linked bonds | 869 | 14 | — | — | 869 | 14 | ||||||||||||||||||
Property funds | — | — | 77 | 2 | 77 | 2 | ||||||||||||||||||
Other | 284 | 4 | 15 | — | 299 | 4 | ||||||||||||||||||
Total | 6,259 | 98 | 110 | 2 | 6,369 | 100 | ||||||||||||||||||
220
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Group | ||||||||||||||||||||||||
Internal models based on | ||||||||||||||||||||||||
Quoted prices in active markets | market observable data | Total | ||||||||||||||||||||||
Category of plan assets | £m | % | £m | % | £m | % | ||||||||||||||||||
UK equities | 1,045 | 21 | — | — | 1,045 | 21 | ||||||||||||||||||
Overseas equities | 1,027 | 20 | — | — | 1,027 | 20 | ||||||||||||||||||
Corporate bonds | 1,503 | 30 | — | — | 1,503 | 30 | ||||||||||||||||||
Government fixed interest bonds | 686 | 13 | — | — | 686 | 13 | ||||||||||||||||||
Government index linked bonds | 664 | 13 | — | — | 664 | 13 | ||||||||||||||||||
Property funds | — | — | 58 | 1 | 58 | 1 | ||||||||||||||||||
Other | — | — | 88 | 2 | 88 | 2 | ||||||||||||||||||
Total | 4,925 | 97 | 146 | 3 | 5,071 | 100 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Internal models based on | ||||||||||||||||||||||||
Quoted prices in active markets | market observable data | Total | ||||||||||||||||||||||
Category of plan assets | £m | % | £m | % | £m | % | ||||||||||||||||||
UK equities | 988 | 15 | 18 | — | 1,006 | 15 | ||||||||||||||||||
Overseas equities | 1,194 | 19 | — | — | 1,194 | 19 | ||||||||||||||||||
Corporate bonds | 1,403 | 22 | — | — | 1,403 | 22 | ||||||||||||||||||
Government Fixed Interest | 1,515 | 24 | — | — | 1,515 | 24 | ||||||||||||||||||
Government Index Linked | 869 | 14 | — | — | 869 | 14 | ||||||||||||||||||
Property funds | — | — | 77 | 2 | 77 | 2 | ||||||||||||||||||
Other | 284 | 4 | 10 | — | 294 | 4 | ||||||||||||||||||
Total | 6,253 | 98 | 105 | 2 | 6,358 | 100 | ||||||||||||||||||
Company | ||||||||||||||||||||||||
Internal models based on | ||||||||||||||||||||||||
Quoted prices in active markets | market observable data | Total | ||||||||||||||||||||||
Category of plan assets | £m | % | £m | % | £m | % | ||||||||||||||||||
UK equities | 760 | 21 | — | — | 760 | 21 | ||||||||||||||||||
Overseas equities | 757 | 20 | — | — | 757 | 20 | ||||||||||||||||||
Corporate bonds | 1,169 | 32 | — | — | 1,169 | 32 | ||||||||||||||||||
Government Fixed Interest | 438 | 12 | — | — | 438 | 12 | ||||||||||||||||||
Government Index Linked | 536 | 14 | — | — | 536 | 14 | ||||||||||||||||||
Other | — | — | 54 | 1 | 54 | 1 | ||||||||||||||||||
Total | 3,660 | 99 | 54 | 1 | 3,714 | 100 | ||||||||||||||||||
Group and Company | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
% | % | % | ||||||||||
To determine benefit obligations: | ||||||||||||
- Discount rate for scheme liabilities | 5.4 | 5.8 | 6.4 | |||||||||
- General price inflation | 3.5 | 3.4 | 3.0 | |||||||||
- General salary increase | 3.5 | 3.4 | 3.5 | |||||||||
- Expected rate of pension increase | 3.4 | 3.3 | 3.0 | |||||||||
To determine net periodic benefit cost: | ||||||||||||
- Discount rate | 5.8 | 6.4 | 5.8 | |||||||||
- Expected rate of pension increase | 3.4 | 3.0 | 3.5 | |||||||||
- Expected rate of return on plan assets | 6.1 | 6.4 | 6.7 | |||||||||
Medical cost trend rates: | ||||||||||||
- Initial rate | 6.0 | 5.5 | 6.0 | |||||||||
- Ultimate rate | 6.0 | 4.5 | 4.5 | |||||||||
- Year of ultimate rate | 2013 | 2013 | 2013 | |||||||||
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�� | ||||||||||||
Years | Years | Years | ||||||||||
Longevity at 60 for current pensioners, on the valuation date: | ||||||||||||
- Males | 28.7 | 27.6 | 27.5 | |||||||||
- Females | 29.3 | 30.0 | 29.9 | |||||||||
Longevity at 60 for future pensioners currently aged 40, on the valuation date: | ||||||||||||
- Males | 31.0 | 29.7 | 29.6 | |||||||||
- Females | 30.9 | 31.3 | 31.2 | |||||||||
Increase/(decrease) | ||||||||||
2010 | 2009 | |||||||||
£m | £m | |||||||||
Discount rate | Change in pension obligation at year end from a 25 bps increase | (370 | ) | (345 | ) | |||||
Change in pension cost for the year from a 25 bps increase | (5 | ) | (6 | ) | ||||||
General price inflation | Change in pension obligation at year end from a 25 bps increase | 359 | 332 | |||||||
Change in pension cost for the year from a 25 bps increase | 19 | 21 | ||||||||
Expected rate of return on plan assets | Change in pension cost for the year from a 25 bps increase | 17 | 13 | |||||||
Mortality | Change in pension obligation at year end from each additional year of longevity assumed | 193 | 141 | |||||||
Year ending 31 December: | £m | |||
2011 | 218 | |||
2012 | 233 | |||
2013 | 249 | |||
2014 | 266 | |||
2015 | 284 | |||
Five years ended 2020 | 1,744 | |||
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Table of Contents
Year ending 31 December: | £m | |||
2011 | 209 | |||
2012 | 84 | |||
2013 | 70 | |||
2014 | 70 | |||
2015 | 70 | |||
2016 | 70 | |||
2017 | 70 | |||
2018 | 70 | |||
2019 | 70 | |||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Guarantees given to subsidiaries | — | — | 121,241 | 156,580 | ||||||||||||
Guarantees given to third parties | 210 | 194 | 82 | — | ||||||||||||
Formal standby facilities, credit lines and other commitments with original term to maturity of: | ||||||||||||||||
- One year or less | 3,289 | 5,570 | 2,584 | 3,423 | ||||||||||||
- More than one year | 24,388 | 4,982 | 4,682 | 1,738 | ||||||||||||
Other contingent liabilities | 8 | 8 | �� | 8 | 8 | |||||||||||
27,895 | 10,754 | 128,597 | 161,749 | |||||||||||||
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Table of Contents
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
£m | £m | £m | £m | |||||||||||||
Rental commitments under non-cancellable operating leases expiring: | ||||||||||||||||
- No later than 1 year | 78 | 115 | 71 | 94 | ||||||||||||
- Later than 1 year but no later than 5 years | 262 | 384 | 236 | 322 | ||||||||||||
- Later than 5 years | 273 | 470 | 248 | 412 | ||||||||||||
613 | 969 | 555 | 828 | |||||||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
£m | £m | £m | ||||||||||
In respect of minimum rentals | 108 | 116 | 107 | |||||||||
Less: sub-lease rentals | — | — | (1 | ) | ||||||||
108 | 116 | 106 | ||||||||||
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Table of Contents
Group and Company | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Ordinary share capital | 3,105 | 2,412 | ||||||
£300m fixed/floating rate non-cumulative callable preference shares | 300 | — | ||||||
£300m Step-up Callable Perpetual Reserve Capital Instruments | 297 | 297 | ||||||
£300m Step Up Callable Perpetual Preferred Securities | 297 | — | ||||||
3,999 | 2,709 | |||||||
Ordinary shares | £300m Preference | £325m Preference | Preference shares | Preference shares | ||||||||||||||||||||
Issued and fully paid | of £0.10 each | shares of £1 each | shares of £1 each | of US$0.01 each | of euro 0.01 each | Total | ||||||||||||||||||
share capital | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
At 1 January 2009 | 1,148 | — | 325 | — | — | 1,473 | ||||||||||||||||||
Shares issued | 1,264 | — | — | — | — | 1,264 | ||||||||||||||||||
At 31 December 2009 | 2,412 | — | 325 | — | — | 2,737 | ||||||||||||||||||
Shares issued | 693 | 300 | — | — | — | 993 | ||||||||||||||||||
At 31 December 2010 | 3,105 | 300 | 325 | — | — | 3,730 | ||||||||||||||||||
Group | Company | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Share premium | £m | £m | £m | £m | ||||||||||||
At 1 January | 1,857 | 3,121 | 1,857 | 1,857 | ||||||||||||
Shares issued | 3,763 | — | 3,763 | — | ||||||||||||
Transfer to ordinary shares | — | (1,264 | ) | — | — | |||||||||||
At 31 December | 5,620 | 1,857 | 5,620 | 1,857 | ||||||||||||
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Group | Group | |||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
Pence per | Pence per | Pence per | 2010 | 2009 | 2008 | |||||||||||||||||||
share | share | share | £m | £m | £m | |||||||||||||||||||
Ordinary shares (equity): | ||||||||||||||||||||||||
In respect of current year — first interim | 1.29 | 2.07 | 15.14 | 400 | 500 | 225 | ||||||||||||||||||
In respect of current year — second interim | 1.21 | — | 1.96 | 375 | — | 225 | ||||||||||||||||||
2.50 | 2.07 | 17.10 | 775 | 500 | 450 | |||||||||||||||||||
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Non-controlling interest in subsidiary | — | 125 | ||||||
£300m Step-up Callable Perpetual Preferred Securities | — | 297 | ||||||
£300m Fixed/Floating Rate Non-cumulative Callable Preference Shares | — | 294 | ||||||
— | 716 | |||||||
226
Table of Contents
Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
At 1 January | 716 | 711 | ||||||
Reclassifications | (297 | ) | — | |||||
Purchase of non-controlling interest | (147 | ) | — | |||||
Redemptions | (294 | ) | — | |||||
Share of profit | 39 | 55 | ||||||
Distributions | (17 | ) | (50 | ) | ||||
At 31 December | — | 716 | ||||||
Group | Company | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Profit for the year | 1,583 | 1,245 | 819 | 1,391 | 747 | 1,328 | ||||||||||||||||||
Non-cash items included in net profit | ||||||||||||||||||||||||
Depreciation and amortisation | 275 | 260 | 202 | 185 | 132 | 81 | ||||||||||||||||||
(Increase)/decrease in prepayments and accrued income | (43 | ) | 262 | (126 | ) | (243 | ) | 1,024 | (902 | ) | ||||||||||||||
Increase/(decrease) in accruals and deferred income | 1,212 | (2,171 | ) | 346 | 1,425 | (2,016 | ) | 1,260 | ||||||||||||||||
Profit on sale of subsidiary and associated undertakings | (39 | ) | — | (40 | ) | — | — | — | ||||||||||||||||
Amortisation of discounts on debt securities | — | (8 | ) | (21 | ) | — | — | — | ||||||||||||||||
Provisions for liabilities and charges | 129 | 56 | 17 | 130 | 41 | 16 | ||||||||||||||||||
Impairment losses | 746 | 897 | 394 | 829 | 830 | 302 | ||||||||||||||||||
Corporation tax charge | 542 | 445 | 275 | 247 | 288 | 126 | ||||||||||||||||||
Other non-cash items | 314 | 235 | 250 | 7 | (506 | ) | 1,155 | |||||||||||||||||
4,719 | 1,221 | 2,116 | 3,971 | 540 | 3,366 | |||||||||||||||||||
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Table of Contents
Group | Company | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
Changes in operating assets and liabilities | £m | £m | £m | £m | £m | £m | ||||||||||||||||||
Net increase in cash and balances held at central banks | (14 | ) | — | — | (47 | ) | — | — | ||||||||||||||||
Net (increase)/decrease in trading assets | (1,453 | ) | (1,636 | ) | 9,398 | — | — | — | ||||||||||||||||
Net (increase)/decrease in derivative assets | (1,550 | ) | 12,298 | (23,096 | ) | (455 | ) | 196 | (2,046 | ) | ||||||||||||||
Net decrease/(increase) in financial assets designated at fair value | 5,609 | (981 | ) | 465 | 32,020 | 10,218 | (39,863 | ) | ||||||||||||||||
Net decrease/(increase) in loans and advances to banks & customers | 2,810 | (3,008 | ) | (16,959 | ) | (66,921 | ) | (10,146 | ) | (38,835 | ) | |||||||||||||
Net decrease/(increase) in other assets | 837 | 1,103 | (189 | ) | (172 | ) | 835 | 108 | ||||||||||||||||
Net increase/(decrease) in deposits by banks and customers | 5,705 | 6,647 | (3,652 | ) | 40,146 | (2,731 | ) | 123,614 | ||||||||||||||||
Net increase/(decrease) in derivative liabilities | 3,442 | (8,847 | ) | 16,979 | (2,253 | ) | (2,041 | ) | 4,342 | |||||||||||||||
Net (decrease)/increase in trading liabilities | (3,323 | ) | 5,533 | (14,054 | ) | — | (739 | ) | 739 | |||||||||||||||
Net (decrease)/increase in financial liabilities designated at fair value | (723 | ) | (1,238 | ) | (3,284 | ) | 24 | — | — | |||||||||||||||
Net (decrease)/increase in debt securities in issue | (1,258 | ) | (3,077 | ) | 5,027 | 6,238 | 1 | — | ||||||||||||||||
Net decrease in other liabilities | (2,286 | ) | (1,369 | ) | (807 | ) | (447 | ) | (656 | ) | (586 | ) | ||||||||||||
Effects of exchange rate differences | (1,000 | ) | (3,719 | ) | 6,569 | (27 | ) | (268 | ) | 897 | ||||||||||||||
Net cash flow from/(used in) operating activities before tax | 11,515 | 2,927 | (21,487 | ) | 12,077 | (4,791 | ) | 51,736 | ||||||||||||||||
Income tax (paid)/received | (131 | ) | 2 | 43 | (99 | ) | 21 | 80 | ||||||||||||||||
Net cash flow from/(used in) operating activities | 11,384 | 2,929 | (21,444 | ) | 11,978 | (4,770 | ) | 51,816 | ||||||||||||||||
Group | Company | |||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Cash and balances with central banks | 26,502 | 4,163 | 4,017 | 21,408 | 3,266 | 2,456 | ||||||||||||||||||
Less: regulatory minimum cash balances (See Note 12) | (198 | ) | (184 | ) | (171 | ) | (185 | ) | (138 | ) | (114 | ) | ||||||||||||
26,304 | 3,979 | 3,846 | 21,223 | 3,128 | 2,342 | |||||||||||||||||||
Debt securities | 2,604 | 1,966 | 5,208 | — | — | — | ||||||||||||||||||
Net trading other cash equivalents | 13,814 | 13,708 | 6,295 | — | — | — | ||||||||||||||||||
Net non trading other cash equivalents | 2,778 | 6,711 | 12,326 | 45,450 | 52,270 | 58,861 | ||||||||||||||||||
Cash and cash equivalents | 45,500 | 26,364 | 27,675 | 66,673 | 55,398 | 61,203 | ||||||||||||||||||
Group | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net assets disposed of: | £m | £m | £m | |||||||||
Loans and advances to banks | 50 | — | — | |||||||||
Loans and advances to customers | 518 | — | — | |||||||||
Property, plant & equipment | 1 | — | 2,134 | |||||||||
Current tax accounts | — | — | 8 | |||||||||
Other assets | 4 | — | 60 | |||||||||
Deposits by banks | (26 | ) | — | (8 | ) | |||||||
Deposits by customers | (222 | ) | — | — | ||||||||
Other liabilities | (7 | ) | — | (163 | ) | |||||||
Other provisions | (1 | ) | — | (2 | ) | |||||||
Current tax liabilities | (10 | ) | — | (19 | ) | |||||||
Deferred tax liabilities | (96 | ) | — | (446 | ) | |||||||
Retirement benefit obligations | — | — | 1 | |||||||||
211 | — | 1,565 | ||||||||||
Profit on disposal | 39 | — | 40 | |||||||||
250 | — | 1,605 | ||||||||||
Satisfied by: | ||||||||||||
Cash and cash equivalents | 250 | — | 1,605 | |||||||||
Less: Cash and cash equivalents in subsidiaries sold | — | — | — | |||||||||
Net cash inflow of sale | 250 | — | 1,605 | |||||||||
228
Table of Contents
Group | ||||||||||||
Alliance & | Bradford & Bingley | |||||||||||
Leicester | savings business | Total | ||||||||||
Net assets acquired: | £m | £m | £m | |||||||||
Assets | ||||||||||||
Cash and balances at central banks | 666 | 18,613 | 19,279 | |||||||||
Derivative financial instruments | 2,111 | — | 2,111 | |||||||||
Financial assets designated at fair value | 492 | — | 492 | |||||||||
Loans and advances to banks | 423 | 1,549 | 1,972 | |||||||||
Loans and advances to customers | 50,349 | — | 50,349 | |||||||||
Available-for-sale securities | 1,658 | 3 | 1,661 | |||||||||
Loans and receivables securities | 14,253 | — | 14,253 | |||||||||
Intangible assets | 17 | 4 | 21 | |||||||||
Property, plant and equipment | 273 | 44 | 317 | |||||||||
Other assets | 2,051 | 449 | 2,500 | |||||||||
Liabilities | ||||||||||||
Deposits by banks | (10,216 | ) | — | (10,216 | ) | |||||||
Deposits by customers | (39,765 | ) | (20,434 | ) | (60,199 | ) | ||||||
Derivative financial instruments | (933 | ) | — | (933 | ) | |||||||
Financial liabilities designated at fair value | (1,421 | ) | — | (1,421 | ) | |||||||
Debt securities in issue | (17,146 | ) | — | (17,146 | ) | |||||||
Subordinated liabilities | (1,296 | ) | — | (1,296 | ) | |||||||
Other liabilities | (1,009 | ) | (11 | ) | (1,020 | ) | ||||||
Net identified assets and liabilities | 507 | 217 | 724 | |||||||||
Goodwill | 774 | 395 | 1,169 | |||||||||
Consideration | 1,281 | 612 | 1,893 | |||||||||
Satisfied by: | ||||||||||||
Cash and cash equivalents | — | 612 | 612 | |||||||||
Less: Cash and cash equivalents in businesses acquired | (666 | ) | (18,613 | ) | (19,279 | ) | ||||||
Net cash inflow acquired | (666 | ) | (18,001 | ) | (18,667 | ) | ||||||
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Group | ||||||||
2010 | 2009 | |||||||
£m | £m | |||||||
Treasury bills and other eligible securities | 36,132 | 38,767 | ||||||
Cash | 1,915 | 2,088 | ||||||
Loans and advances to customers — securitisations and covered bonds | 85,038 | 73,629 | ||||||
Debt securities | 34,960 | 26,265 | ||||||
Equity securities | 543 | — | ||||||
158,588 | 140,749 | |||||||
b) | Collateral held as security for assets: |
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2010 | 2009 | 2008 | ||||||||||
Risk free interest rate | 1.7%-5.2 | % | 2.5%-3.5 | % | 2.9%-6.5 | % | ||||||
Dividend growth | 8 | % | 10 | % | 10 | % | ||||||
Expected volatility of underlying shares based upon historical volatility over five years | 20.3%-39.4 | % | 29.0%-34.4 | % | 20.2%-29.6 | % | ||||||
Expected lives of options granted under 3, 5 & 7 year schemes | 3, 5 & 7 years | 3, 5 & 7 years | 3, 5 & 7 years | |||||||||
Weighted average | ||||||||
Number of options | exercise price | |||||||
Sharesave Schemes | ‘000s | £ | ||||||
2010 | ||||||||
Options outstanding at the start of the year | 8,713 | 7.24 | ||||||
Options granted during the year | 3,360 | 6.46 | ||||||
Options exercised during the year | (73 | ) | 7.54 | |||||
Options forfeited during the year | (3,073 | ) | 6.82 | |||||
Options outstanding at the end of the year | 8,927 | 7.09 | ||||||
Options exercisable at the end of the year | 8,927 | 7.09 | ||||||
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Weighted average | ||||||||
Number of options | exercise price | |||||||
Sharesave Schemes | ‘000s | £ | ||||||
2009 | ||||||||
Options outstanding at the start of the year | 6,142 | 7.00 | ||||||
Options granted during the year | 4,528 | 7.26 | ||||||
Options exercised during the year | (679 | ) | 3.85 | |||||
Options forfeited during the year | (1,278 | ) | 7.48 | |||||
Options outstanding at the end of the year | 8,713 | 7.24 | ||||||
Options exercisable at the end of the year | 8,713 | 7.24 | ||||||
2008 | ||||||||
Options outstanding at the start of the year | 5,684 | 3.18 | ||||||
Options granted during the year | 5,197 | 7.69 | ||||||
Options exercised during the year | (4,507 | ) | 3.07 | |||||
Options forfeited during the year | (231 | ) | 5.91 | |||||
Options expired during the year | (1 | ) | 8.07 | |||||
Options outstanding at the end of the year | 6,142 | 7.00 | ||||||
Options exercisable at the end of the year | — | — | ||||||
Options outstanding | ||||||||
Weighted average remaining | Weighted average | |||||||
contractual life | exercise price | |||||||
Range of exercise prices | years | £ | ||||||
2010 | ||||||||
Between £3 and £4 | 1 | 3.84 | ||||||
Between £6 and £7 | 5 | 6.46 | ||||||
Between £7 and £8 | 3 | 7.48 | ||||||
2009 | ||||||||
Between £3 and £4 | 1 | 3.13 | ||||||
Between £7 and £8 | 3 | 7.46 | ||||||
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Percentage of maximum | Percentage of maximum shares to be | |||||||||
Banco Santander, S.A.’s place in the | shares to be delivered | Banco Santander, S.A.’s place in the | delivered | |||||||
TSR ranking | % | EPS growth ranking | % | |||||||
1st to 6th | 50 | 1st to 6th | 50 | |||||||
7th | 43 | 7th | 43 | |||||||
8th | 36 | 8th | 36 | |||||||
9th | 29 | 9th | 29 | |||||||
10th | 22 | 10th | 22 | |||||||
11th | 15 | 11th | 15 | |||||||
12th and below | — | 12th and below | — | |||||||
Percentage of maximum shares to be delivered | ||||
Banco Santander, S.A.’s place in the TSR ranking | % | |||
1st to 5th | 100.0 | |||
6th | 82.5 | |||
7th | 65.0 | |||
8th | 47.5 | |||
9th | 30.0 | |||
10th and below | — | |||
Number of awards | ||||
Long Term Incentive Plan | 000s | |||
2010 | ||||
Conditional awards outstanding at the beginning of the year | 5,711 | |||
Conditional awards granted during the year | 2,264 | |||
Conditional awards exercised during the year | (1,644 | ) | ||
Conditional awards forfeited or cancelled during the year | (233 | ) | ||
Conditional awards outstanding at the end of the year | 6,098 | |||
2009 | ||||
Conditional awards outstanding at the beginning of the year | 4,680 | |||
Conditional awards granted during the year | 2,274 | |||
Conditional awards exercised during the year | (1,068 | ) | ||
Conditional awards forfeited or cancelled during the year | (175 | ) | ||
Conditional awards outstanding at the end of the year | 5,711 | |||
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Weighted average | ||||||||
Number of options | Exercise price | |||||||
Executive Share Option scheme | ‘000s | £ | ||||||
2010 | ||||||||
Options outstanding and exercisable at the start and end of the year | 12 | 4.54 | ||||||
2009 | ||||||||
Options outstanding and exercisable at the start and end of the year | 12 | 4.54 | ||||||
2008 | ||||||||
Options outstanding at the start of the year | 144 | 4.15 | ||||||
Options exercised during the year | (11 | ) | 4.14 | |||||
Options forfeited during the year | (121 | ) | 4.11 | |||||
Options outstanding at the end of the year | 12 | 4.54 | ||||||
Options exercisable at the end of the year | 12 | 4.54 | ||||||
Options outstanding | ||||||||
Weighted average remaining | Weighted average | |||||||
contractual life | exercise price | |||||||
Range of exercise prices | years | £ | ||||||
2010 | ||||||||
Between £4 and £5 | 3 | 4.54 | ||||||
2009 | ||||||||
Between £4 and £5 | 4 | 4.54 | ||||||
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Number of | Aggregate amount | |||||||
Persons | outstanding | |||||||
No. | £000 | |||||||
Other Key Management Personnel* — loans | ||||||||
2010 | 3 | 678 | ||||||
2009 | 2 | 835 | ||||||
* | Other Key Management Personnel are defined as the Board and the Executive Committee of the Company who served during the year. The above excludes any overdraft facilities provided to Directors, Other Key Management Personnel and their connected persons in the ordinary course of business. |
Number of directors | Amounts in respect of directors, | |||||||
and Other Key | Other Key Management Personnel(1) | |||||||
Management Personnel(1) | and their connected persons | |||||||
2010 | No. | £000 | ||||||
Secured loans, unsecured loans and overdrafts | ||||||||
Loans at 1 January | 4 | 838 | ||||||
Net movements in the year | (1 | ) | (160 | ) | ||||
Loans at 31 December | 3 | 678 | ||||||
Deposit, bank and instant access accounts and investments | ||||||||
Deposits, bank instant access accounts and investments at 1 January | 15 | 7,379 | ||||||
Net movements in the year | (2 | ) | 2,721 | |||||
Deposit, bank and instant access accounts and investments at 31 December | 13 | 10,100 | ||||||
(1) | Other Key Management Personnel are defined as the Board and the Executive Committee of the Company who served during the year. |
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Number of directors | Amounts in respect of directors, | |||||||
and Other Key | Other Key Management Personnel(1) | |||||||
Management Personnel(1) | and their connected persons | |||||||
2010 | No. | £000 | ||||||
Life assurance policies | ||||||||
Life assurance policies at 1 January | 3 | 1,888 | ||||||
Net movements in the year | (3 | ) | (1,888 | ) | ||||
Life assurance policies at 31 December(2) | — | — | ||||||
Number of directors | Amounts in respect of directors, | |||||||
and Other Key | Other Key Management Personnel(1) | |||||||
Management Personnel(1) | and their connected persons | |||||||
2009 | No. | £000 | ||||||
Secured loans, unsecured loans and overdrafts | ||||||||
Loans outstanding at 1 January | 5 | 647 | ||||||
Net movements in the year | (1 | ) | 191 | |||||
Loans outstanding at 31 December | 4 | 838 | ||||||
Deposit, bank and instant access accounts and investments | ||||||||
Deposits, bank instant access accounts and investments at 1 January | 16 | 4,463 | ||||||
Net movements in the year | (1 | ) | 2,916 | |||||
Deposit, bank and instant access accounts and investments at 31 December | 15 | 7,379 | ||||||
Life assurance policies | ||||||||
Life assurance policies at 1 January | 1 | 1,026 | ||||||
Net movements in the year | 2 | 862 | ||||||
Life assurance policies at 31 December | 3 | 1,888 | ||||||
(1) | Other Key Management Personnel are defined as the Board and the Executive Committee of the Company who served during the year. | |
(2) | On 10 March 2010, Santander Private Banking UK Limited completed the disposal of James Hay Holdings Limited, together with its five subsidiary companies, by the sale of 100% of James Hay Holdings Limited’s shares to IFG UK Holdings Limited, a subsidiary of IFG Group. As a result, any life assurance policies held with James Hay Holdings Limited or any of its subsidiaries are no longer considered related party transactions. |
2010 | 2009 | 2008 | ||||||||||
Key management compensation | £ | £ | £ | |||||||||
Short-term employee benefits | 9,388,377 | 12,172,113 | 13,016,060 | |||||||||
Post employment benefits | 342,575 | 319,319 | 306,902 | |||||||||
Other long term benefits | — | — | — | |||||||||
Termination benefits | — | 1,162,500 | — | |||||||||
Share-based payments | 1,745,747 | 2,192,509 | 1,572,973 | |||||||||
11,476,699 | 15,846,441 | 14,895,935 | ||||||||||
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Group | ||||||||||||||||||||||||||||||||||||||||
Interest, fees and | Interest, fees and | Amounts owed by | Amounts owed | |||||||||||||||||||||||||||||||||||||
other income received | other expenses paid | related parties | to related parties | |||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||||||||
Parent company | (326 | ) | (99 | ) | (537 | ) | 96 | 47 | 509 | 2,593 | 7,809 | (3,919 | ) | (2,965 | ) | |||||||||||||||||||||||||
Fellow subsidiaries | (325 | ) | (563 | ) | (383 | ) | 674 | 412 | 377 | 331 | 7,113 | (3,639 | ) | (4,567 | ) | |||||||||||||||||||||||||
Associates | (40 | ) | (26 | ) | (23 | ) | — | 1 | 2 | — | 2,092 | — | (13 | ) | ||||||||||||||||||||||||||
(691 | ) | (688 | ) | (943 | ) | 770 | 460 | 888 | 2,924 | 17,014 | (7,558 | ) | (7,545 | ) | ||||||||||||||||||||||||||
Company | ||||||||||||||||||||||||||||||||||||||||
Interest, fees and | Interest, fees and | Amounts owed by | Amounts owed | |||||||||||||||||||||||||||||||||||||
other income received | other expenses paid | related parties | to related parties | |||||||||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||||||||
Parent company | (4 | ) | (32 | ) | (55 | ) | 66 | 5 | — | 10 | 1 | (1,424 | ) | (632 | ) | |||||||||||||||||||||||||
Subsidiaries | (3,284 | ) | (4,229 | ) | (6,654 | ) | 5,278 | 6,399 | 8,312 | 125,737 | 149,175 | (186,387 | ) | (184,460 | ) | |||||||||||||||||||||||||
Fellow subsidiaries | (243 | ) | (224 | ) | (261 | ) | 476 | 307 | 253 | 215 | 71 | (2,340 | ) | (1,839 | ) | |||||||||||||||||||||||||
Associates | — | — | (2 | ) | — | — | — | — | 1 | — | — | |||||||||||||||||||||||||||||
(3,531 | ) | (4,485 | ) | (6,972 | ) | 5,820 | 6,711 | 8,565 | 125,962 | 149,248 | (190,151 | ) | (186,931 | ) | ||||||||||||||||||||||||||
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Company | ||||
Net assets transferred: | £m | |||
Assets | ||||
Cash and balances at central banks | 474 | |||
Derivative financial instruments | 639 | |||
Financial assets designated at fair value | 43 | |||
Loans and advances to banks | 35,027 | |||
Loans and advances to customers | 50,264 | |||
Available-for-sale securities | 8 | |||
Loans and receivables securities | 7,715 | |||
Macro hedge of interest rate risk | 204 | |||
Investment in subsidiaries | (1,216 | ) | ||
Intangible assets | 820 | |||
Property, plant and equipment | 127 | |||
Other assets, tax assets and lease assets | 1,015 | |||
Liabilities | ||||
Deposits by banks | 45,407 | |||
Deposits by customers | 41,796 | |||
Derivative financial instruments | 440 | |||
Trading liabilities | 3 | |||
Financial liabilities designated at fair value | 34 | |||
Debt securities in issue | 5,351 | |||
Subordinated liabilities | 929 | |||
Other liabilities, tax liabilities, provisions and retirement benefit obligations | 856 | |||
Net assets | 1,586 | |||
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> | Santander Cards Limited and Santander Cards (UK) Limited (and its subsidiaries), which conduct the Banco Santander, S.A. group’s provision of store cards to retailers, credit cards, related financial products and other unsecured consumer finance products in the UK, and Santander Cards Ireland Limited, which conducts the Santander group’s provision of credit finance by way of credit cards and store cards in the Republic of Ireland; | |
> | Santander Consumer (UK) plc (of which the Group already held 49.9%), which carries on the Banco Santander, S.A. group’s provision of finance facilities and the contract purchase of motor vehicles and equipment in the UK and also provides wholesale funding which is a facility that offers preferential dealers funding in the UK; and | |
> | Santander PB UK (Holdings) Limited (and its subsidiaries), (of which the Group already held 51% of its subsidiary Santander Private Banking UK Ltd) which carries on the Group’s provision of private banking services in the UK; |
2010 | Group | |||||||||||
Cards | Consumer | Total | ||||||||||
Net assets acquired: | £m | £m | £m | |||||||||
Assets | ||||||||||||
Loans and advances to banks | 63 | 50 | 113 | |||||||||
Loans and advances to customers | 2,509 | 2,721 | 5,230 | |||||||||
Other assets | 199 | 27 | 226 | |||||||||
Liabilities | ||||||||||||
Deposits by banks | (1,905 | ) | (2,524 | ) | (4,429 | ) | ||||||
Deposits by customers | (57 | ) | — | (57 | ) | |||||||
Other liabilities | (174 | ) | (78 | ) | (252 | ) | ||||||
Net identified assets and liabilities | 635 | 196 | 831 | |||||||||
Fair value of 49.9% interest previously held | — | (186 | ) | (186 | ) | |||||||
Goodwill | 456 | 175 | 631 | |||||||||
Consideration | 1,091 | 185 | 1,276 | |||||||||
Satisfied by: | ||||||||||||
Cash and cash equivalents | (1,091 | ) | (185 | ) | (1,276 | ) | ||||||
Less: Cash and cash equivalents in businesses acquired | 13 | 20 | 33 | |||||||||
Net cash outflow | (1,078 | ) | (165 | ) | (1,243 | ) | ||||||
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Table of Contents
2010 | Gross contractual amounts | Estimated uncollectible gross | ||||||||||
Fair value | receivable | contractual amountsreceivable | ||||||||||
£m | £m | £m | ||||||||||
Loans and advances to banks | 398 | 398 | — | |||||||||
Loans and advances to customers | 5,313 | 5,637 | 324 | |||||||||
5,711 | 6,035 | 324 | ||||||||||
Group | ||||||||||||||||||||||||||||||||
Held at fair value | Held at amortised cost | Non- | Total | |||||||||||||||||||||||||||||
31 December 2010 | Trading | Derivatives | Designated | Available- | Financial | Financial | financial | |||||||||||||||||||||||||
designated | at fair value | for-sale | assets at | liabilities at | assets/ | |||||||||||||||||||||||||||
as hedges | through P&L | amortised cost | amortised cost | liabilities | ||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash & balances at central banks | — | — | — | — | 26,502 | — | — | 26,502 | ||||||||||||||||||||||||
Trading assets | 35,461 | — | — | — | — | — | — | 35,461 | ||||||||||||||||||||||||
Derivative financial instruments | 21,951 | 2,426 | — | — | — | — | — | 24,377 | ||||||||||||||||||||||||
Financial assets designated at FVTPL | — | — | 6,777 | — | — | — | — | 6,777 | ||||||||||||||||||||||||
Loans and advances to banks | — | — | — | — | 3,852 | — | — | 3,852 | ||||||||||||||||||||||||
Loans and advances to customers | — | — | — | — | 195,132 | — | — | 195,132 | ||||||||||||||||||||||||
Available-for-sale securities | — | — | — | 175 | — | — | — | 175 | ||||||||||||||||||||||||
Loans and receivables securities | — | — | — | — | 3,610 | — | — | 3,610 | ||||||||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | 1,091 | — | — | 1,091 | ||||||||||||||||||||||||
Investment in associates | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||
Intangible assets | — | — | — | — | — | — | 2,178 | 2,178 | ||||||||||||||||||||||||
Property, plant and equipment | — | — | — | — | — | — | 1,705 | 1,705 | ||||||||||||||||||||||||
Current tax assets | — | — | — | — | — | — | 277 | 277 | ||||||||||||||||||||||||
Deferred tax assets | — | — | — | — | — | — | 566 | 566 | ||||||||||||||||||||||||
Other assets | — | — | — | — | 1,081 | — | 74 | 1,155 | ||||||||||||||||||||||||
57,412 | 2,426 | 6,777 | 175 | 231,268 | — | 4,802 | 302,860 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | — | — | — | — | — | 7,784 | — | 7,784 | ||||||||||||||||||||||||
Deposits by customers | — | — | — | — | — | 152,643 | — | 152,643 | ||||||||||||||||||||||||
Derivative financial liabilities | 20,390 | 2,015 | — | — | — | — | — | 22,405 | ||||||||||||||||||||||||
Trading liabilities | 42,827 | — | — | — | — | — | — | 42,827 | ||||||||||||||||||||||||
Financial liabilities designated at FVTPL | — | — | 3,687 | — | — | — | — | 3,687 | ||||||||||||||||||||||||
Debt securities in issue | — | — | — | — | — | 51,783 | — | 51,783 | ||||||||||||||||||||||||
Subordinated liabilities | — | — | — | — | — | 6,372 | — | 6,372 | ||||||||||||||||||||||||
Other liabilities | — | — | — | — | — | 1,962 | 64 | 2,026 | ||||||||||||||||||||||||
Provisions | — | — | — | — | — | — | 185 | 185 | ||||||||||||||||||||||||
Current tax liabilities | — | — | — | — | — | — | 492 | 492 | ||||||||||||||||||||||||
Deferred tax liabilities | — | — | — | — | — | — | 209 | 209 | ||||||||||||||||||||||||
Retirement benefit obligations | — | — | — | — | — | — | 173 | 173 | ||||||||||||||||||||||||
63,217 | 2,015 | 3,687 | — | — | 220,544 | 1,123 | 290,586 | |||||||||||||||||||||||||
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Company | ||||||||||||||||||||||||||||||||
Held at fair value | Held at amortised cost | Non- | Total | |||||||||||||||||||||||||||||
31 December 2010 | Trading | Derivatives | Designated | Available- | Financial | Financial | financial | |||||||||||||||||||||||||
designated | at fair value | for-sale | assets at | liabilities at | assets/ | |||||||||||||||||||||||||||
as hedges | through P&L | amortised cost | amortised cost | liabilities | ||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and balances at central banks | — | — | — | — | 21,408 | — | — | 21,408 | ||||||||||||||||||||||||
Derivative financial instruments | 1,770 | 1,224 | — | — | — | — | — | 2,994 | ||||||||||||||||||||||||
Financial assets designated at FVTPL | — | — | 5,126 | — | — | — | — | 5,126 | ||||||||||||||||||||||||
Loans and advances to banks | — | — | — | — | 115,957 | — | — | 115,957 | ||||||||||||||||||||||||
Loans and advances to customers | — | — | — | — | 179,223 | — | — | 179,223 | ||||||||||||||||||||||||
Available for sale securities | — | — | — | 38 | — | — | — | 38 | ||||||||||||||||||||||||
Loans and receivables securities | — | — | — | — | 5,378 | — | — | 5,378 | ||||||||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | 114 | — | — | 114 | ||||||||||||||||||||||||
Investment in subsidiary undertakings | — | — | — | — | — | — | 6,869 | 6,869 | ||||||||||||||||||||||||
Investment in associated undertakings | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||||
Intangible assets | — | — | — | — | — | — | 1,407 | 1,407 | ||||||||||||||||||||||||
Property, plant and equipment | — | — | — | — | — | — | 1,204 | 1,204 | ||||||||||||||||||||||||
Current tax assets | — | — | — | — | — | — | 212 | 212 | ||||||||||||||||||||||||
Deferred tax assets | — | — | — | — | — | — | 379 | 379 | ||||||||||||||||||||||||
Other assets | — | — | — | — | 951 | — | 54 | 1,005 | ||||||||||||||||||||||||
1,770 | 1,224 | 5,126 | 38 | 323,031 | — | 10,126 | 341,315 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | — | — | — | — | — | 146,240 | — | 146,240 | ||||||||||||||||||||||||
Deposits by customers | — | — | — | — | — | 170,579 | — | 170,579 | ||||||||||||||||||||||||
Derivative financial liabilities | 1,099 | — | — | — | — | — | — | 1,099 | ||||||||||||||||||||||||
Financial liabilities designated at FVTPL | — | — | 30 | — | — | — | — | 30 | ||||||||||||||||||||||||
Debt securities in issue | — | — | — | — | — | 3,177 | — | 3,177 | ||||||||||||||||||||||||
Subordinated liabilities | — | — | — | — | — | 6,438 | — | 6,438 | ||||||||||||||||||||||||
Other liabilities | — | — | — | — | — | 1,796 | — | 1,796 | ||||||||||||||||||||||||
Provisions | — | — | — | — | — | — | 156 | 156 | ||||||||||||||||||||||||
Current tax liabilities | — | — | — | — | — | — | 14 | 14 | ||||||||||||||||||||||||
Deferred tax liabilities | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Retirement benefit obligations | — | — | — | — | — | — | 177 | 177 | ||||||||||||||||||||||||
1,099 | — | 30 | — | — | 328,230 | 347 | 329,706 | |||||||||||||||||||||||||
Group | ||||||||||||||||||||||||||||||||
Held at fair value | Held at amortised cost | Non- | Total | |||||||||||||||||||||||||||||
31 December 2009 | Trading | Derivatives | Designated at | Available- | Financial | Financial | financial | |||||||||||||||||||||||||
designated | fair value | for-sale | assets at | liabilities at | assets/ | |||||||||||||||||||||||||||
as hedges | through P&L | amortised cost | amortised cost | liabilities | ||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash & balances at central banks | — | — | — | — | 4,163 | — | — | 4,163 | ||||||||||||||||||||||||
Trading assets | 33,290 | — | — | — | — | — | — | 33,290 | ||||||||||||||||||||||||
Derivative financial instruments | 21,472 | 1,355 | — | — | — | — | — | 22,827 | ||||||||||||||||||||||||
Financial assets designated at FVTPL | — | — | 12,358 | — | — | — | — | 12,358 | ||||||||||||||||||||||||
Loans and advances to banks | — | — | — | — | 9,151 | — | — | 9,151 | ||||||||||||||||||||||||
Loans and advances to customers | — | — | — | — | 186,804 | — | — | 186,804 | ||||||||||||||||||||||||
Available-for-sale securities | — | — | — | 797 | — | — | — | 797 | ||||||||||||||||||||||||
Loans and receivables securities | — | — | — | — | 9,898 | — | — | 9,898 | ||||||||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | 1,127 | — | — | 1,127 | ||||||||||||||||||||||||
Investment in associates | — | — | — | — | — | — | 75 | 75 | ||||||||||||||||||||||||
Intangible assets | — | — | — | — | — | — | 1,446 | 1,446 | ||||||||||||||||||||||||
Property, plant and equipment | — | — | — | — | — | — | 1,250 | 1,250 | ||||||||||||||||||||||||
Current tax assets | — | — | — | — | — | — | 85 | 85 | ||||||||||||||||||||||||
Deferred tax assets | — | — | — | �� | — | — | — | 946 | 946 | |||||||||||||||||||||||
Other assets | — | — | — | — | 999 | — | 75 | 1,074 | ||||||||||||||||||||||||
54,762 | 1,355 | 12,358 | 797 | 212,142 | — | 3,877 | 285,291 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | — | — | — | — | — | 5,811 | — | 5,811 | ||||||||||||||||||||||||
Deposits by customers | — | — | — | — | — | 143,893 | — | 143,893 | ||||||||||||||||||||||||
Derivative financial liabilities | 16,775 | 2,188 | — | — | — | — | — | 18,963 | ||||||||||||||||||||||||
Trading liabilities | 46,152 | — | — | — | — | — | — | 46,152 | ||||||||||||||||||||||||
Financial liabilities designated at FVTPL | — | — | 4,423 | — | — | — | — | 4,423 | ||||||||||||||||||||||||
Debt securities in issue | — | — | — | — | — | 47,758 | — | 47,758 | ||||||||||||||||||||||||
Subordinated liabilities | — | — | — | — | — | 6,949 | — | 6,949 | ||||||||||||||||||||||||
Other liabilities | — | — | — | — | — | 2,263 | 60 | 2,323 | ||||||||||||||||||||||||
Provisions | — | — | — | — | — | — | 91 | 91 | ||||||||||||||||||||||||
Current tax liabilities | — | — | — | — | — | — | 300 | 300 | ||||||||||||||||||||||||
Deferred tax liabilities | — | — | — | — | — | — | 336 | 336 | ||||||||||||||||||||||||
Retirement benefit obligations | — | — | — | — | — | — | 1,070 | 1,070 | ||||||||||||||||||||||||
62,927 | 2,188 | 4,423 | — | — | 206,674 | 1,857 | 278,069 | |||||||||||||||||||||||||
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Company | ||||||||||||||||||||||||||||||||
Held at fair value | Held at amortised cost | Non- | Total | |||||||||||||||||||||||||||||
31 December 2009 | Trading | Derivatives | Designated | Available- | Financial | Financial | Financial | |||||||||||||||||||||||||
designated | at fair value | for-sale | assets at | liabilities at | assets/ | |||||||||||||||||||||||||||
as hedges | through P&L | amortised cost | amortised cost | liabilities | ||||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash & balances at central banks | — | — | — | — | 3,266 | — | — | 3,266 | ||||||||||||||||||||||||
Derivative financial instruments | 1,256 | 1,283 | — | — | — | — | — | 2,539 | ||||||||||||||||||||||||
Financial assets designated at FVTPL | — | — | 37,145 | — | — | — | — | 37,145 | ||||||||||||||||||||||||
Loans and advances to banks | — | — | — | — | 109,658 | — | — | 109,658 | ||||||||||||||||||||||||
Loans and advances to customers | — | — | — | — | 131,749 | — | — | 131,749 | ||||||||||||||||||||||||
Available-for-sale securities | — | — | — | 30 | — | — | — | 30 | ||||||||||||||||||||||||
Loans and receivables securities | — | — | — | — | 2 | — | — | 2 | ||||||||||||||||||||||||
Investment in subsidiaries | — | — | — | — | — | — | 7,038 | 7,038 | ||||||||||||||||||||||||
Investment in associates | — | — | — | — | — | — | 76 | 76 | ||||||||||||||||||||||||
Intangible assets | — | — | — | — | — | — | 552 | 552 | ||||||||||||||||||||||||
Property, plant and equipment | — | — | — | — | — | — | 561 | 561 | ||||||||||||||||||||||||
Deferred tax assets | — | — | — | — | — | — | 428 | 428 | ||||||||||||||||||||||||
Other assets | — | — | — | — | 513 | — | 138 | 651 | ||||||||||||||||||||||||
1,256 | 1,283 | 37,145 | 30 | 245,188 | — | 8,793 | 293,695 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits by banks | — | — | — | — | — | 116,414 | — | 116,414 | ||||||||||||||||||||||||
Deposits by customers | — | — | — | — | — | 159,187 | — | 159,187 | ||||||||||||||||||||||||
Derivative financial liabilities | 3,001 | 352 | — | — | — | — | — | 3,353 | ||||||||||||||||||||||||
Subordinated liabilities | — | — | — | — | — | 6,119 | — | 6,119 | ||||||||||||||||||||||||
Other liabilities | — | — | — | — | — | 1,611 | — | 1,611 | ||||||||||||||||||||||||
Provisions | — | — | — | — | — | — | 74 | 74 | ||||||||||||||||||||||||
Current tax liabilities | — | — | — | — | — | — | 92 | 92 | ||||||||||||||||||||||||
Retirement benefit obligations | — | — | — | — | — | — | 922 | 922 | ||||||||||||||||||||||||
3,001 | 352 | — | — | — | 283,331 | 1,088 | 287,772 | |||||||||||||||||||||||||
Group | ||||||||||||
31 December 2010 | Carrying value | Fair value | Surplus/(deficit) | |||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 26,502 | 26,502 | — | |||||||||
Loans and advances to banks | 3,852 | 3,852 | — | |||||||||
Loans and advances to customers | 195,132 | 200,546 | 5,414 | |||||||||
Loans and receivables securities | 3,610 | 3,310 | (300 | ) | ||||||||
Liabilities | ||||||||||||
Deposits by banks | 7,784 | 7,923 | (139 | ) | ||||||||
Deposits by customers | 152,643 | 153,419 | (776 | ) | ||||||||
Debt securities in issue | 51,783 | 51,874 | (91 | ) | ||||||||
Subordinated liabilities | 6,372 | 7,752 | (1,380 | ) | ||||||||
Company | ||||||||||||
31 December 2010 | Carrying value | Fair value | Surplus/(deficit) | |||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 21,408 | 21,408 | — | |||||||||
Loans and advances to banks | 115,957 | 116,406 | 449 | |||||||||
Loans and advances to customers | 179,223 | 184,471 | 5,248 | |||||||||
Loans and receivables securities | 5,378 | 5,078 | (300 | ) | ||||||||
Liabilities | ||||||||||||
Deposits by banks | 146,240 | 147,969 | (1,729 | ) | ||||||||
Deposits by customers | 170,579 | 171,360 | (781 | ) | ||||||||
Debt securities in issue | 3,177 | 3,200 | (23 | ) | ||||||||
Subordinated liabilities | 6,438 | 7,818 | (1,380 | ) | ||||||||
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Group | ||||||||||||
31 December 2009 | Carrying value | Fair value | Surplus/(deficit) | |||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 4,163 | 4,163 | — | |||||||||
Loans and advances to banks | 9,151 | 9,151 | — | |||||||||
Loans and advances to customers | 186,804 | 192,164 | 5,360 | |||||||||
Loans and receivables securities | 9,898 | 9,447 | (451 | ) | ||||||||
Liabilities | ||||||||||||
Deposits by banks | 5,811 | 5,811 | — | |||||||||
Deposits by customers | 143,893 | 144,608 | (715 | ) | ||||||||
Debt securities in issue | 47,758 | 47,483 | 275 | |||||||||
Subordinated liabilities | 6,949 | 7,902 | (953 | ) | ||||||||
Company | ||||||||||||
31 December 2009 | Carrying value | Fair value | Surplus/(deficit) | |||||||||
£m | £m | £m | ||||||||||
Assets | ||||||||||||
Cash and balances at central banks | 3,266 | 3,266 | — | |||||||||
Loans and advances to banks | 109,658 | 111,131 | 1,473 | |||||||||
Loans and advances to customers | 131,749 | 136,518 | 4,769 | |||||||||
Liabilities | ||||||||||||
Deposits by banks | 116,414 | 119,341 | (2,927 | ) | ||||||||
Deposits by customers | 159,187 | 159,814 | (627 | ) | ||||||||
Subordinated liabilities | 6,119 | 7,059 | (940 | ) | ||||||||
The Directors believe that the carrying value of the variable rate loans may be assumed to be their fair value.
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Group | ||||||||||||||||||||||||||||||||||||||
31 December 2010 | Internal models based on | |||||||||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||||||||
active markets | observable data | unobservable data | Valuation | |||||||||||||||||||||||||||||||||||
Balance sheet category | (Level 1) | (Level 2) | (Level 3) | Total | technique | |||||||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||
Trading assets | Loans and advances to banks | — | — | 8,281 | 12 | — | — | 8,281 | 12 | A | ||||||||||||||||||||||||||||
Loans and advances to customers | — | — | 8,659 | 13 | — | — | 8,659 | 13 | A | |||||||||||||||||||||||||||||
Debt securities | 17,821 | 27 | — | — | — | — | 17,821 | 27 | — | |||||||||||||||||||||||||||||
Equity securities | 699 | 1 | — | — | 1 | — | 700 | 1 | B | |||||||||||||||||||||||||||||
Derivative assets | Exchange rate contracts | — | — | 3,474 | 5 | 61 | — | 3,535 | 5 | A | ||||||||||||||||||||||||||||
Interest rate contracts | 3 | — | 18,681 | 28 | — | — | 18,684 | 28 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | 500 | 1 | 1,488 | 2 | 170 | — | 2,158 | 3 | B & D | |||||||||||||||||||||||||||||
Financial assets at FVTPL | Loans and advances to banks | — | — | 11 | — | — | — | 11 | — | A | ||||||||||||||||||||||||||||
Loans and advances to customers | — | — | 5,418 | 8 | 50 | — | 5,468 | 8 | A | |||||||||||||||||||||||||||||
Debt securities | — | — | 977 | 2 | 321 | 1 | 1,298 | 3 | A | |||||||||||||||||||||||||||||
Available-for-sale financial assets | Debt securities | 125 | — | — | — | — | — | 125 | — | — | ||||||||||||||||||||||||||||
Equity securities | 12 | — | 38 | — | — | — | 50 | — | B | |||||||||||||||||||||||||||||
Total assets at fair value | 19,160 | 29 | 47,027 | 70 | 603 | 1 | 66,790 | 100 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Trading liabilities | Deposits by banks | — | — | 25,738 | 37 | — | — | 25,738 | 37 | A | ||||||||||||||||||||||||||||
Deposits by customers | — | — | 15,971 | 23 | — | — | 15,971 | 23 | A | |||||||||||||||||||||||||||||
Short positions | 1,118 | 2 | — | — | — | — | 1,118 | 2 | — | |||||||||||||||||||||||||||||
Debt securities in issue | — | — | — | — | — | — | — | — | A | |||||||||||||||||||||||||||||
Derivative liabilities | Exchange rate contracts | — | — | 1,056 | 2 | — | — | 1,056 | 2 | A | ||||||||||||||||||||||||||||
Interest rate contracts | 10 | — | 18,344 | 27 | — | — | 18,354 | 27 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | 55 | — | 2,838 | 4 | 102 | — | 2,995 | 4 | B | |||||||||||||||||||||||||||||
Financial liabilities at FVTPL | Deposits by customers | — | — | 5 | — | — | — | 5 | — | A | ||||||||||||||||||||||||||||
Debt securities in issue | — | — | 3,545 | 5 | 137 | — | 3,682 | 5 | A | |||||||||||||||||||||||||||||
Total liabilities at fair value | 1,183 | 2 | 67,497 | 98 | 239 | — | 68,919 | 100 | ||||||||||||||||||||||||||||||
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Group | ||||||||||||||||||||||||||||||||||||||
31 December 2009 | Internal models based on | |||||||||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||||||||
active markets | observable data | unobservable data | Valuation | |||||||||||||||||||||||||||||||||||
Balance sheet category | (Level 1) | (Level 2) | (Level 3) | Total | technique | |||||||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||
Trading assets | Loans and advances to banks | — | — | 6,791 | 10 | — | — | 6,791 | 10 | A | ||||||||||||||||||||||||||||
Loans and advances to customers | — | — | 9,089 | 13 | — | — | 9,089 | 13 | A | |||||||||||||||||||||||||||||
Debt securities | 15,932 | 23 | — | — | — | — | 15,932 | 23 | — | |||||||||||||||||||||||||||||
Equity securities | 1,471 | 2 | — | — | 7 | — | 1,478 | 2 | B | |||||||||||||||||||||||||||||
Derivative assets | Exchange rate contracts | — | — | 4,088 | 6 | 37 | — | 4,125 | 6 | A | ||||||||||||||||||||||||||||
Interest rate contracts | 4 | — | 17,223 | 25 | — | — | 17,227 | 25 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | 258 | — | 1,060 | 2 | 157 | — | 1,475 | 2 | B | |||||||||||||||||||||||||||||
Financial assets at FVTPL | Loans and advances to customers | — | — | 6,116 | 9 | 263 | — | 6,379 | 9 | A | ||||||||||||||||||||||||||||
Debt securities | — | — | 4,498 | 7 | 1,481 | 2 | 5,979 | 9 | A | |||||||||||||||||||||||||||||
Available-for-sale financial assets | Debt securities | 747 | 1 | — | — | — | — | 747 | 1 | — | ||||||||||||||||||||||||||||
Equity securities | 20 | — | 30 | — | — | — | 50 | — | B | |||||||||||||||||||||||||||||
Total assets at fair value | 18,432 | 26 | 48,895 | 72 | 1,945 | 2 | 69,272 | 100 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Trading liabilities | Deposits by banks | — | — | 40,824 | 59 | — | — | 40,824 | 59 | A | ||||||||||||||||||||||||||||
Deposits by customers | — | — | 4,115 | 6 | — | — | 4,115 | 6 | A | |||||||||||||||||||||||||||||
Short positions | 1,071 | 2 | — | — | — | — | 1,071 | 2 | — | |||||||||||||||||||||||||||||
Debt securities in issue | — | — | 142 | — | — | — | 142 | — | A | |||||||||||||||||||||||||||||
Derivative liabilities | Exchange rate contracts | — | — | 521 | 1 | — | — | 521 | 1 | A | ||||||||||||||||||||||||||||
Interest rate contracts | — | — | 16,212 | 23 | — | — | 16,212 | 23 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | 29 | — | 1,941 | 3 | 260 | — | 2,230 | 3 | B | |||||||||||||||||||||||||||||
Financial liabilities at FVTPL | Deposits by banks | — | — | 45 | — | — | — | 45 | — | A | ||||||||||||||||||||||||||||
Deposits by customers | — | — | 12 | — | — | — | 12 | — | A | |||||||||||||||||||||||||||||
Debt securities in issue | — | — | 4,257 | 6 | 109 | — | 4,366 | 6 | A | |||||||||||||||||||||||||||||
Total liabilities at fair value | 1,100 | 2 | 68,069 | 98 | 369 | — | 69,538 | 100 | ||||||||||||||||||||||||||||||
Company | ||||||||||||||||||||||||||||||||||||||
31 December 2010 | Internal models based on | |||||||||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||||||||
active markets | observable data | unobservable data | Valuation | |||||||||||||||||||||||||||||||||||
Balance sheet category | (Level 1) | (Level 2) | (Level 3) | Total | technique | |||||||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||
Derivative assets | Exchange rate contracts | — | — | 1,002 | 12 | — | — | 1,002 | 12 | A | ||||||||||||||||||||||||||||
Interest rate contracts | — | — | 1,955 | 24 | — | — | 1,955 | 24 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | — | — | 37 | — | — | — | 37 | — | B | |||||||||||||||||||||||||||||
Financial assets at FVTPL | Loans and advances to banks | — | — | 55 | 1 | — | — | 55 | 1 | A | ||||||||||||||||||||||||||||
Loans and advances to customers | — | — | 44 | 1 | — | — | 44 | 1 | A | |||||||||||||||||||||||||||||
Debt securities | — | — | 5,015 | 62 | 12 | — | 5,027 | 62 | A | |||||||||||||||||||||||||||||
Available-for-sale financial assets | Debt securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Equity securities | — | — | 38 | — | — | — | 38 | — | B | |||||||||||||||||||||||||||||
Total assets at fair value | — | — | 8,146 | 100 | 12 | — | 8,158 | 100 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Derivative liabilities | Exchange rate contracts | — | — | 31 | 3 | — | — | 31 | 3 | A | ||||||||||||||||||||||||||||
Interest rate contracts | — | — | 870 | 77 | — | — | 870 | 77 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | — | — | 198 | 18 | — | — | 198 | 18 | B | |||||||||||||||||||||||||||||
Financial liabilities at FVTPL | Deposits by customers | — | — | 5 | — | — | — | 5 | — | A | ||||||||||||||||||||||||||||
Debt securities in issue | — | — | 25 | 2 | — | — | 25 | 2 | A | |||||||||||||||||||||||||||||
Total liabilities at fair value | — | — | 1,129 | 100 | — | — | 1,129 | 100 | ||||||||||||||||||||||||||||||
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Company | ||||||||||||||||||||||||||||||||||||||
31 December 2009 | Internal models based on | |||||||||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||||||||
active markets | observable data | unobservable data | Valuation | |||||||||||||||||||||||||||||||||||
Balance sheet category | (Level 1) | (Level 2) | (Level 3) | Total | technique | |||||||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||
Derivative assets | Exchange rate contracts | — | — | 919 | 2 | — | — | 919 | 2 | A | ||||||||||||||||||||||||||||
Interest rate contracts | — | — | 1,582 | 4 | — | — | 1,582 | 4 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | — | — | 38 | — | — | — | 38 | — | B | |||||||||||||||||||||||||||||
Financial assets at FVTPL | Loans and advances to banks | — | — | 160 | 1 | — | — | 160 | 1 | A | ||||||||||||||||||||||||||||
Loans and advances to customers | — | — | 45 | — | — | — | 45 | — | A | |||||||||||||||||||||||||||||
Debt securities | — | — | 36,940 | 93 | — | — | 36,940 | 93 | A | |||||||||||||||||||||||||||||
Available-for-sale financial assets | Debt securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Equity securities | — | — | 30 | — | — | — | 30 | — | B | |||||||||||||||||||||||||||||
Total assets at fair value | — | — | 39,714 | 100 | — | — | 39,714 | 100 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Derivative liabilities | Exchange rate contracts | — | — | 2,810 | 84 | — | — | 2,810 | 84 | A | ||||||||||||||||||||||||||||
Interest rate contracts | — | — | 353 | 10 | — | — | 353 | 10 | A & C | |||||||||||||||||||||||||||||
Equity and credit contracts | — | — | 190 | 6 | — | — | 190 | 6 | B | |||||||||||||||||||||||||||||
Total liabilities at fair value | — | — | 3,353 | 100 | — | — | 3,353 | 100 | ||||||||||||||||||||||||||||||
Group | ||||||||||||||||||||||||||||||||
31 December 2010 | Internal models based on | |||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||
Product | active markets | observable data | unobservable data | Total | ||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Government and government-guaranteed debt securities | 6,755 | 10 | — | — | — | — | 6,755 | 10 | ||||||||||||||||||||||||
Asset-backed securities | — | — | 977 | 2 | 321 | 1 | 1,298 | 3 | ||||||||||||||||||||||||
Floating rate notes | 10,901 | 16 | — | — | — | — | 10,901 | 16 | ||||||||||||||||||||||||
Other debt securities | 290 | 1 | — | — | 50 | — | 340 | 1 | ||||||||||||||||||||||||
UK Social housing association loans | — | — | 5,418 | 8 | — | — | 5,418 | 8 | ||||||||||||||||||||||||
Term deposits and money market instruments | — | — | 16,951 | 25 | — | — | 16,951 | 25 | ||||||||||||||||||||||||
Exchange rate derivatives | — | — | 3,474 | 5 | 61 | — | 3,535 | 5 | ||||||||||||||||||||||||
Interest rate derivatives | 3 | — | 18,681 | 28 | — | — | 18,684 | 28 | ||||||||||||||||||||||||
Equity & credit derivatives | 500 | 1 | 1,488 | 2 | 170 | — | 2,158 | 3 | ||||||||||||||||||||||||
Ordinary shares and similar securities | 711 | 1 | 38 | — | 1 | — | 750 | 1 | ||||||||||||||||||||||||
19,160 | 29 | 47,027 | 70 | 603 | 1 | 66,790 | 100 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Exchange rate derivatives | — | — | 1,056 | 2 | — | — | 1,056 | 2 | ||||||||||||||||||||||||
Interest rate derivatives | 10 | — | 18,344 | 27 | — | — | 18,354 | 27 | ||||||||||||||||||||||||
Equity & credit derivatives | 55 | — | 2,838 | 4 | 102 | — | 2,995 | 4 | ||||||||||||||||||||||||
Deposits and debt securities in issue | 1,118 | 2 | 45,259 | 65 | — | — | 46,377 | 67 | ||||||||||||||||||||||||
Debt securities in issue | — | �� | — | — | — | 137 | — | 137 | — | |||||||||||||||||||||||
1,183 | 2 | 67,497 | 98 | 239 | — | 68,919 | 100 | |||||||||||||||||||||||||
Group | ||||||||||||||||||||||||||||||||
31 December 2009 | Internal models based on | |||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||
Product | active markets | observable data | unobservable data | Total | ||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Government and government-guaranteed debt securities | 3,479 | 4 | — | — | — | — | 3,479 | 4 | ||||||||||||||||||||||||
Asset-backed securities | — | — | 4,498 | 7 | 1,481 | 2 | 5,979 | 9 | ||||||||||||||||||||||||
Floating rate notes | 11,128 | 16 | — | — | — | — | 11,128 | 16 | ||||||||||||||||||||||||
Other debt securities | 2,072 | 4 | — | — | 263 | — | 2,335 | 4 | ||||||||||||||||||||||||
UK Social housing association loans | — | — | 6,116 | 9 | — | — | 6,116 | 9 | ||||||||||||||||||||||||
Term deposits and money market instruments | — | — | 15,880 | 23 | — | — | 15,880 | 23 | ||||||||||||||||||||||||
Exchange rate derivatives | — | — | 4,088 | 6 | 37 | — | 4,125 | 6 | ||||||||||||||||||||||||
Interest rate derivatives | 4 | — | 17,223 | 25 | — | — | 17,227 | 25 | ||||||||||||||||||||||||
Equity & credit derivatives | 258 | — | 1,060 | 2 | 157 | — | 1,475 | 2 | ||||||||||||||||||||||||
Ordinary shares and similar securities | 1,491 | 2 | 30 | — | 7 | — | 1,528 | 2 | ||||||||||||||||||||||||
18,432 | 26 | 48,895 | 72 | 1,945 | 2 | 69,272 | 100 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Exchange rate derivatives | — | — | 521 | 1 | — | — | 521 | 1 | ||||||||||||||||||||||||
Interest rate derivatives | — | — | 16,208 | 23 | — | — | 16,212 | 23 | ||||||||||||||||||||||||
Equity & credit derivatives | 29 | — | 1,945 | 3 | 260 | — | 2,230 | 3 | ||||||||||||||||||||||||
Deposits | — | — | 49,395 | 71 | — | — | 49,395 | 71 | ||||||||||||||||||||||||
Debt securities in issue | 1,071 | 2 | — | — | 109 | — | 1,180 | 2 | ||||||||||||||||||||||||
1,100 | 2 | 68,069 | 98 | 369 | — | 69,538 | 100 | |||||||||||||||||||||||||
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Company | ||||||||||||||||||||||||||||||||
31 December 2010 | Internal models based on | |||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||
Product | active markets | observable data | unobservable data | Total | ||||||||||||||||||||||||||||
£m | % | £m | % | £m | �� | % | £m | % | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Asset-backed securities | — | — | 5,015 | 62 | 12 | — | 5,027 | 62 | ||||||||||||||||||||||||
UK Social housing association loans | — | — | 44 | 1 | — | — | 44 | 1 | ||||||||||||||||||||||||
Term deposits and money market instruments | — | — | 55 | 1 | — | — | 55 | 1 | ||||||||||||||||||||||||
Exchange rate derivatives | — | — | 1,002 | 12 | — | — | 1,002 | 12 | ||||||||||||||||||||||||
Interest rate derivatives | — | — | 1,955 | 24 | — | — | 1,955 | 24 | ||||||||||||||||||||||||
Equity & credit derivatives | — | — | 37 | — | — | — | 37 | — | ||||||||||||||||||||||||
Ordinary shares and similar securities | — | — | 38 | — | — | — | 38 | — | ||||||||||||||||||||||||
— | — | 8,146 | 100 | 12 | — | 8,158 | 100 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Exchange rate derivatives | — | — | 31 | 3 | — | — | 31 | 3 | ||||||||||||||||||||||||
Interest rate derivatives | — | — | 870 | 77 | — | — | 870 | 77 | ||||||||||||||||||||||||
Equity & credit derivatives | — | — | 198 | 18 | — | — | 198 | 18 | ||||||||||||||||||||||||
Deposits and debt securities in issue | — | — | 30 | 2 | — | — | 30 | 2 | ||||||||||||||||||||||||
— | — | 1,129 | 100 | — | — | 1,129 | 100 | |||||||||||||||||||||||||
Company | ||||||||||||||||||||||||||||||||
31 December 2009 | Internal models based on | |||||||||||||||||||||||||||||||
Quoted prices in | Market | Significant | ||||||||||||||||||||||||||||||
Product | active markets | observable data | unobservable data | Total | ||||||||||||||||||||||||||||
£m | % | £m | % | £m | % | £m | % | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Asset-backed securities | — | — | 36,940 | 93 | — | — | 36,940 | 93 | ||||||||||||||||||||||||
UK Social housing association loans | — | — | 45 | — | — | — | 45 | — | ||||||||||||||||||||||||
Term deposits and money market instruments | — | — | 160 | 1 | — | — | 160 | 1 | ||||||||||||||||||||||||
Exchange rate derivatives | — | — | 919 | 2 | — | — | 919 | 2 | ||||||||||||||||||||||||
Interest rate derivatives | — | — | 1,582 | 4 | — | — | 1,582 | 4 | ||||||||||||||||||||||||
Equity & credit derivatives | — | — | 38 | — | — | — | 38 | — | ||||||||||||||||||||||||
Ordinary shares and similar securities | — | — | 30 | — | — | — | 30 | — | ||||||||||||||||||||||||
— | — | 39,714 | 100 | — | — | 39,714 | 100 | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Exchange rate derivatives | — | — | 2,810 | 84 | — | — | 2,810 | 84 | ||||||||||||||||||||||||
Interest rate derivatives | — | — | 353 | 10 | — | — | 353 | 10 | ||||||||||||||||||||||||
Equity & credit derivatives | — | — | 190 | 6 | — | — | 190 | 6 | ||||||||||||||||||||||||
— | — | 3,353 | 100 | — | — | 3,353 | 100 | |||||||||||||||||||||||||
A | In the valuation of financial instruments requiring static hedging (for example interest rate and currency derivatives) and in the valuation of loans and advances and deposits, the ‘present value’ method is used. Expected future cash flows are discounted using the interest rate curves of the applicable currencies. The interest rate curves are generally observable market data and reference yield curves derived from quoted interest rates in appropriate time bandings, which match the timings of the cashflows and maturities of the instruments. |
B | In the valuation of equity financial instruments requiring dynamic hedging (principally equity securities, options and other structured instruments), proprietary local volatility and stochastic volatility models are used. These types of models are widely accepted in the financial services industry. Observable market inputs used in these models include the bid-offer spread, foreign currency exchange rates, volatility and correlation between indices. In limited circumstances, other inputs may be used in these models that are based on data other than observable market data, such as the Halifax’s UK House Price Index (‘HPI’) volatility, HPI forward growth, HPI spot rate, and mortality. |
C | In the valuation of financial instruments exposed to interest rate risk that require either static or dynamic hedging (such as interest rate futures, caps and floors, and options), the present value method (futures), Black’s model (caps/floors) and the Hull/White and Markov functional models (Bermudan options) are used. These types of models are widely accepted in the financial services industry. The significant inputs used in these models are observable market data, including appropriate interest rate curves, volatilities, correlations and exchange rates. In limited circumstances, other inputs may be used in these models that are based on data other than observable market data, such as HPI volatility, HPI forward growth, HPI spot rate and mortality. |
D | In the valuation of linear instruments such as credit risk and fixed-income derivatives, credit risk is measured using dynamic models similar to those used in the measurement of interest rate risk. In the case of non-linear instruments, if the portfolio is exposed to credit risk such as credit derivatives, the probability of default is determined using the par spread level. The main inputs used to determine the underlying cost of credit of credit derivatives are quoted credit risk premiums and the correlation between the quoted credit derivatives of various issuers. |
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2010 | 2009 | |||||||
£m | £m | |||||||
Risk-related: | ||||||||
- Bid-offer and trade specific adjustments | 62 | 139 | ||||||
- Uncertainty | 49 | 68 | ||||||
- Credit risk adjustment | 15 | 8 | ||||||
126 | 215 | |||||||
Model-related: | ||||||||
- Model limitation | 25 | 21 | ||||||
Day One profits | — | — | ||||||
151 | 236 | |||||||
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> | when the counterparty is resident and/or incorporated in an emerging market and seeks to sell a non-domestic currency in exchange for its home currency; | |
> | when the trade involves the purchase of an equity put option from a counterparty whose shares are the subject of the option; | |
> | the purchase of credit protection from a counterparty who is closely associated with the reference entity of the credit default swap or total return swap; and | |
> | the purchase of credit protection on an asset type which is highly concentrated in the exposure of the counterparty selling the credit protection. |
> | the extent to which prices may be expected to represent genuine traded or tradeable prices; | |
> | the degree of similarity between financial instruments; | |
> | the degree of consistency between different sources; | |
> | the process followed by the pricing provider to derive the data; | |
> | the elapsed time between the date to which the market data relates and the balance sheet date; and | |
> | the manner in which the data was sourced. |
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> | The logic within valuation models; | |
> | The inputs to those models; | |
> | Any adjustments required outside the valuation models; and | |
> | Where possible, model outputs. |
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Balance sheet | Amount recognised in | |||||||||||||||||||||||
value | income/(expense) | |||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | 2008 | ||||||||||||||||||||
Balance sheet line item | Category | Financial instrument product type | £m | £m | £m | £m | £m | |||||||||||||||||
1. Trading assets | Equity securities | Property unit trusts | 1 | 7 | — | (1 | ) | 16 | ||||||||||||||||
2. Derivative assets | Exchange rate contracts | Cross-currency swaps | 61 | 37 | 42 | 14 | 5 | |||||||||||||||||
3. Derivative assets | Equity and credit contracts | Reversionary property interests | 67 | 73 | (6 | ) | (4 | ) | 3 | |||||||||||||||
4. Derivative assets | Credit contracts | Credit default swaps | 38 | — | — | — | — | |||||||||||||||||
5. Derivative assets | Equity contracts | Options and forwards | 65 | 84 | (8 | ) | (5 | ) | 91 | |||||||||||||||
6. FVTPL | Loans and advances to customers | Roll-up mortgage portfolio | 50 | 263 | 5 | (36 | ) | 58 | ||||||||||||||||
7. FVTPL | Debt securities | Reversionary property securities | 240 | 262 | 2 | (4 | ) | 1 | ||||||||||||||||
8. FVTPL | Debt securities | Portuguese mortgage-backed securities | — | — | — | — | (144 | ) | ||||||||||||||||
Other asset-backed securities | 69 | 1,169 | 53 | 62 | (184 | ) | ||||||||||||||||||
9. FVTPL | Debt securities | Collateralised synthetic obligations | 12 | 50 | (2 | ) | — | — | ||||||||||||||||
10. Derivative liabilities | Equity contracts | Options and forwards | (102 | ) | (260 | ) | 99 | (82 | ) | (94 | ) | |||||||||||||
11. FVTPL | Debt securities in issue | Non-vanilla debt securities | (137 | ) | (109 | ) | (42 | ) | (23 | ) | (5 | ) | ||||||||||||
Total net assets | 364 | 1,576 | — | — | — | |||||||||||||||||||
Total income/(expense) | — | — | 143 | (79 | ) | (253 | ) | |||||||||||||||||
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These debt securities are valued with the assistance of valuations prepared by an independent, specialist valuation firm. The intrinsic valuation analysis features two key themes:
> | Analysis of the transaction structure including subordination levels, relevant performance triggers and underlying cash collateral held within the vehicles. This analysis is particularly relevant to recognising the differing structural features of the various securities and the material impact that they can have on the ability of the structure to withstand underlying defaults. | |
> | Analysis of the credit quality of the underlying assets within the vehicles. This involves a structured risk categorisation methodology, which includes an initial assessment of issuer credit default swap spreads and credit ratings, before a qualitative overview is undertaken in order to confirm the final risk categorisation of the various assets. Once the assets have been confirmed into an appropriate risk category they are then allocated an expected default probability in relation to their remaining tenor to maturity. Finally, expected recovery rates are overlaid to the default probabilities in order to produce expected loss figures for the underlying assets. |
Assets | Liabilities | |||||||||||||||||||||||||||
Trading | Derivatives | Fair value | Total | Derivatives | Fair value | Total | ||||||||||||||||||||||
Assets | through P&L | through P&L | ||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
At 1 January 2010 | 7 | 194 | 1,744 | 1,945 | (260 | ) | (109 | ) | (369 | ) | ||||||||||||||||||
Total gains/(losses) recognised in profit/(loss): | ||||||||||||||||||||||||||||
- Fair value movements | — | 28 | 58 | 86 | 99 | (42 | ) | 57 | ||||||||||||||||||||
- Foreign exchange and other movements | — | (16 | ) | 3 | (13 | ) | — | 10 | 10 | |||||||||||||||||||
Purchases | — | 38 | — | 38 | — | — | — | |||||||||||||||||||||
Sales | (6 | ) | — | (1,275 | ) | (1,281 | ) | — | — | — | ||||||||||||||||||
Settlements | — | (13 | ) | (159 | ) | (172 | ) | 59 | 4 | 63 | ||||||||||||||||||
At 31 December 2010 | 1 | 231 | 371 | 603 | (102 | ) | (137 | ) | (239 | ) | ||||||||||||||||||
Total gains/(losses) recognised in profit/(loss) relating to those assets and liabilities held at the end of the year | — | 12 | 61 | 73 | 99 | (32 | ) | 67 |
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Assets | Liabilities | |||||||||||||||||||||||||||
Trading | Derivatives | Fair value | Total | Derivatives | Fair value | Total | ||||||||||||||||||||||
Assets | through P&L | through P&L | ||||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
At 1 January 2009 | 37 | 154 | 4,629 | 4,820 | (169 | ) | (247 | ) | (416 | ) | ||||||||||||||||||
Total gains/(losses) recognised in profit/(loss): | ||||||||||||||||||||||||||||
- Fair value movements | (1 | ) | 5 | 22 | 26 | (82 | ) | (23 | ) | (105 | ) | |||||||||||||||||
- Foreign exchange and other movements | (3 | ) | 43 | (106 | ) | (66 | ) | (18 | ) | 5 | (13 | ) | ||||||||||||||||
Purchases/issues | — | — | 30 | 30 | — | — | — | |||||||||||||||||||||
Sales | (26 | ) | — | (121 | ) | (147 | ) | — | — | — | ||||||||||||||||||
Settlements | — | (8 | ) | (499 | ) | (507 | ) | 9 | 156 | 165 | ||||||||||||||||||
Transfers in | — | — | 50 | 50 | — | — | — | |||||||||||||||||||||
Transfers out | — | — | (2,261 | ) | (2,261 | ) | — | — | — | |||||||||||||||||||
At 31 December 2009 | 7 | 194 | 1,744 | 1,945 | (260 | ) | (109 | ) | (369 | ) | ||||||||||||||||||
Total gains/(losses) recognised in profit/(loss) relating to those assets and liabilities held at the end of the year | (4 | ) | 48 | (84 | ) | (40 | ) | (100 | ) | (18 | ) | (118 | ) |
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Reflected in income statement | ||||||||||||||||||
Favourable | Unfavourable | |||||||||||||||||
Balance sheet note line item and product | Fair value | Assumptions | Shift | changes | changes | |||||||||||||
£m | £m | £m | ||||||||||||||||
1. Trading assets— Equity securities: | 1 | Estimated discount to asset value | 10 | % | — | — | ||||||||||||
— Property unit trusts | ||||||||||||||||||
3. Derivative assets— Equity and credit contracts: | 67 | HPI Forward growth rate | 1 | % | 10 | (10 | ) | |||||||||||
—Reversionary property derivatives | HPI Spot rate | 10 | % | 7 | (7 | ) | ||||||||||||
Mortality rate | 2 yrs | 1 | (1 | ) | ||||||||||||||
4. Derivative assets— Equity and credit contracts: | 38 | Probability of default | 20 | % | 12 | (12 | ) | |||||||||||
— Credit default swaps | ||||||||||||||||||
5. Derivative assets— Equity and credit contracts: | 65 | HPI Forward growth rate | 1 | % | 7 | (7 | ) | |||||||||||
— Options and forwards | HPI Spot rate | 10 | % | 4 | (4 | ) | ||||||||||||
HPI Volatility | 1 | % | 1 | (1 | ) | |||||||||||||
6. FVTPL— Loans and advances to customers: | 50 | HPI Forward growth rate | 1 | % | 1 | (1 | ) | |||||||||||
— Roll-up mortgage portfolio | HPI Spot rate | 10 | % | — | — | |||||||||||||
HPI Volatility | 1 | % | — | — | ||||||||||||||
Mortality rate | 2 yrs | — | — | |||||||||||||||
7. FVTPL— Debt securities: | 240 | HPI Forward growth rate | 1 | % | 20 | (20 | ) | |||||||||||
— Reversionary property securities | HPI Spot rate | 10 | % | 23 | (23 | ) | ||||||||||||
Mortality rate | 2 yrs | 3 | (3 | ) | ||||||||||||||
8. FVTPL— Debt securities: | 69 | Credit spread | 3 | % | 3 | (3 | ) | |||||||||||
— Other asset-backed securities | ||||||||||||||||||
9. FVTPL— Debt securities: | 12 | Probability of default | 20 | % | 8 | (1 | ) | |||||||||||
— Collateralised synthetic obligations | ||||||||||||||||||
10. Derivative liabilities— Equity and credit contracts: | (102 | ) | HPI Forward growth rate | 1 | % | 4 | (4 | ) | ||||||||||
— Options and forwards | HPI Spot rate | 10 | % | 13 | (17 | ) | ||||||||||||
HPI Volatility | 1 | % | 2 | (2 | ) | |||||||||||||
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Reflected in income statement | ||||||||||||||||||
Favourable | Unfavourable | |||||||||||||||||
Balance sheet note line item and product | Fair value | Assumptions | Shift | changes | changes | |||||||||||||
£m | £m | £m | ||||||||||||||||
1. Trading assets— Equity securities: | 7 | Estimated discount to asset value | 10 | % | 1 | (1 | ) | |||||||||||
— Property unit trusts | ||||||||||||||||||
3. Derivative assets— Equity and credit contracts: | 73 | HPI Forward growth rate | 1 | % | 11 | (11 | ) | |||||||||||
—Reversionary property derivatives | HPI Spot rate | 10 | % | 8 | (8 | ) | ||||||||||||
Mortality rate | 2 yrs | 1 | (1 | ) | ||||||||||||||
5. Derivative assets— Equity and credit contracts: | 84 | HPI Forward growth rate | 1 | % | 3 | (3 | ) | |||||||||||
— Options and forwards | HPI Spot rate | 10 | % | 3 | (2 | ) | ||||||||||||
HPI Volatility | 1 | % | 1 | (1 | ) | |||||||||||||
6. FVTPL— Loans and advances to customers: | 263 | HPI Forward growth rate | 1 | % | 28 | (28 | ) | |||||||||||
— Roll-up mortgage portfolio | HPI Spot rate | 10 | % | 9 | (11 | ) | ||||||||||||
HPI Volatility | 1 | % | 5 | (5 | ) | |||||||||||||
Mortality rate | 2 yrs | 7 | (6 | ) | ||||||||||||||
7. FVTPL— Debt securities: | 262 | HPI Forward growth rate | 1 | % | 24 | (24 | ) | |||||||||||
— Reversionary property securities | HPI Spot rate | 10 | % | 27 | (27 | ) | ||||||||||||
Mortality rate | 2 yrs | 5 | (5 | ) | ||||||||||||||
8. FVTPL— Debt securities: | 1,169 | Credit spread | 75 bps | 15 | (15 | ) | ||||||||||||
— Other asset-backed securities | ||||||||||||||||||
9. FVTPL— Debt securities: | 50 | Probability of default | 20 | % | 24 | (6 | ) | |||||||||||
— Collateralised synthetic obligations | ||||||||||||||||||
10. Derivative liabilities— Equity and credit contracts: | (260 | ) | HPI Forward growth rate | 1 | % | 14 | (14 | ) | ||||||||||
— Options and forwards | HPI Spot rate | 10 | % | 32 | (37 | ) | ||||||||||||
HPI Volatility | 1 | % | 2 | (2 | ) | |||||||||||||
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2010 | 2009 | |||||||
£m | £m | |||||||
Core Tier 1 capital | 11,128 | 6,520 | ||||||
Deductions from Core Tier 1 capital | (2,632 | ) | (1,941 | ) | ||||
Total Core Tier 1 capital after deductions | 8,496 | 4,579 | ||||||
Other Tier 1 capital | 2,394 | 1,859 | ||||||
Total Tier 1 capital after deductions | 10,890 | 6,438 | ||||||
Tier 2 capital | 4,731 | 5,832 | ||||||
Deductions from Tier 2 capital | (453 | ) | (400 | ) | ||||
Total Tier 2 capital after deductions | 4,278 | 5,432 | ||||||
Total Capital Resources | 15,168 | 11,870 | ||||||
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The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2010 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income | 1,794 | 359 | 1,673 | (12 | ) | 3,814 | ||||||||||||||
Fee, commission, net trading, and other income | 2,047 | 719 | (188 | ) | (1,358 | ) | 1,220 | |||||||||||||
Total operating income | 3,841 | 1,078 | 1,485 | (1,370 | ) | 5,034 | ||||||||||||||
Administration expenses | (1,368 | ) | (195 | ) | (280 | ) | 50 | (1,793 | ) | |||||||||||
Depreciation and amortisation | (185 | ) | (6 | ) | (82 | ) | (2 | ) | (275 | ) | ||||||||||
Impairment losses and provisions | (650 | ) | (69 | ) | (103 | ) | (19 | ) | (841 | ) | ||||||||||
Profit/(loss) before tax | 1,638 | 808 | 1,020 | (1,341 | ) | 2,125 | ||||||||||||||
Taxation charge | (247 | ) | (138 | ) | (80 | ) | (77 | ) | (542 | ) | ||||||||||
Profit/(loss) for the year | 1,391 | 670 | 940 | (1,418 | ) | 1,583 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2009 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income | 1,985 | 41 | 1,396 | (10 | ) | 3,412 | ||||||||||||||
Fee, commission, net trading, and other income | 963 | 720 | 138 | (537 | ) | 1,284 | ||||||||||||||
Total operating income | 2,948 | 761 | 1,534 | (547 | ) | 4,696 | ||||||||||||||
Administration expenses | (1,136 | ) | (144 | ) | (547 | ) | (21 | ) | (1,848 | ) | ||||||||||
Depreciation and amortisation | (132 | ) | (3 | ) | (129 | ) | 4 | (260 | ) | |||||||||||
Impairment losses and provisions | (645 | ) | (30 | ) | (650 | ) | 427 | (898 | ) | |||||||||||
Profit/(loss) before tax | 1,035 | 584 | 208 | (137 | ) | 1,690 | ||||||||||||||
Taxation (charge)/credit | (288 | ) | (29 | ) | 63 | (191 | ) | (445 | ) | |||||||||||
Profit/(loss) for the year | 747 | 555 | 271 | (328 | ) | 1,245 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2008 | £m | £m | £m | £m | £m | |||||||||||||||
Net interest income | 1,185 | 198 | 391 | (2 | ) | 1,772 | ||||||||||||||
Fee, commission, net trading, and other income | 1,807 | 180 | 490 | (1,245 | ) | 1,232 | ||||||||||||||
Total operating income | 2,992 | 378 | 881 | (1,247 | ) | 3,004 | ||||||||||||||
Administration expenses | (1,114 | ) | (136 | ) | (92 | ) | (1 | ) | (1,343 | ) | ||||||||||
Depreciation and amortisation | (81 | ) | (3 | ) | (118 | ) | — | (202 | ) | |||||||||||
Impairment losses and provisions | (343 | ) | (26 | ) | 27 | (23 | ) | (365 | ) | |||||||||||
Profit/(loss) before tax | 1,454 | 213 | 698 | (1,271 | ) | 1,094 | ||||||||||||||
Taxation charge | (126 | ) | (10 | ) | (204 | ) | 65 | (275 | ) | |||||||||||
Profit/(loss) for the year | 1,328 | 203 | 494 | (1,206 | ) | 819 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
At 31 December 2010 | £m | £m | £m | £m | £m | |||||||||||||||
Cash and balances at central banks | 21,408 | 5,088 | 6 | — | 26,502 | |||||||||||||||
Trading assets | — | 35,110 | 351 | — | 35,461 | |||||||||||||||
Derivative financial instruments | 2,994 | 23,277 | 3,154 | (5,048 | ) | 24,377 | ||||||||||||||
Financial assets designated at fair value | 5,126 | 6,468 | 241 | (5,058 | ) | 6,777 | ||||||||||||||
Loans and advances to banks | 115,957 | 146,398 | 67,310 | (325,813 | ) | 3,852 | ||||||||||||||
Loans and advances to customers | 179,223 | 34,935 | 31,728 | (50,754 | ) | 195,132 | ||||||||||||||
Available-for-sale securities | 38 | — | 137 | — | 175 | |||||||||||||||
Loans and receivables securities | 5,378 | 626 | 1,685 | (4,079 | ) | 3,610 | ||||||||||||||
Macro hedge of interest rate risk | 114 | 908 | 101 | (32 | ) | 1,091 | ||||||||||||||
Investment in subsidiary undertakings | 6,869 | 2,187 | 1,609 | (10,665 | ) | — | ||||||||||||||
Investment in associated undertakings | 1 | — | — | 1 | 2 | |||||||||||||||
Intangible assets | 1,407 | 26 | 135 | 610 | 2,178 | |||||||||||||||
Property, plant and equipment | 1,204 | 22 | 380 | 99 | 1,705 | |||||||||||||||
Current tax assets | 212 | 40 | 24 | 1 | 277 | |||||||||||||||
Deferred tax assets | 379 | 25 | 139 | 23 | 566 | |||||||||||||||
Other assets | 1,005 | 65 | 400 | (315 | ) | 1,155 | ||||||||||||||
Total assets | 341,315 | 255,175 | 107,400 | (401,030 | ) | 302,860 | ||||||||||||||
Deposits by banks | 146,240 | 136,701 | 30,389 | (305,546 | ) | 7,784 | ||||||||||||||
Deposits by customers | 170,579 | 13,989 | 39,593 | (71,518 | ) | 152,643 | ||||||||||||||
Derivative financial instruments | 1,099 | 25,043 | 1,397 | (5,134 | ) | 22,405 | ||||||||||||||
Trading liabilities | — | 42,827 | — | — | 42,827 | |||||||||||||||
Financial liabilities designated at fair value | 30 | 3,595 | 62 | — | 3,687 | |||||||||||||||
Debt securities in issue | 3,177 | 29,226 | 26,610 | (7,230 | ) | 51,783 | ||||||||||||||
Subordinated liabilities | 6,438 | — | 1,619 | (1,685 | ) | 6,372 | ||||||||||||||
Other liabilities | 1,796 | 182 | 337 | (289 | ) | 2,026 | ||||||||||||||
Provisions | 156 | — | 29 | — | 185 | |||||||||||||||
Current tax liabilities | 14 | 357 | 121 | — | 492 | |||||||||||||||
Deferred tax liabilities | — | — | 168 | 41 | 209 | |||||||||||||||
Retirement benefit obligations | 177 | — | (4 | ) | — | 173 | ||||||||||||||
Total liabilities | 329,706 | 251,920 | 100,321 | (391,361 | ) | 290,586 | ||||||||||||||
Total shareholders’ equity | 11,609 | 3,255 | 7,079 | (9,669 | ) | 12,274 | ||||||||||||||
Total liabilities and equity | 341,315 | 255,175 | 107,400 | (401,030 | ) | 302,860 | ||||||||||||||
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The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
At 31 December 2009 | £m | £m | £m | £m | £m | |||||||||||||||
Cash and balances at central banks | 3,266 | 448 | 449 | — | 4,163 | |||||||||||||||
Trading assets | — | 24,976 | 30,321 | (22,007 | ) | 33,290 | ||||||||||||||
Derivative financial instruments | 2,539 | 23,129 | 8,422 | (11,263 | ) | 22,827 | ||||||||||||||
Financial assets designated at fair value | 37,145 | 12,000 | 313 | (37,100 | ) | 12,358 | ||||||||||||||
Loans and advances to banks | 109,658 | 166,020 | 156,075 | (422,602 | ) | 9,151 | ||||||||||||||
Loans and advances to customers | 131,749 | 20,266 | 105,421 | (70,632 | ) | 186,804 | ||||||||||||||
Available-for-sale securities | 30 | — | 767 | — | 797 | |||||||||||||||
Loans and receivables securities | 2 | 896 | 12,244 | (3,244 | ) | 9,898 | ||||||||||||||
Macro hedge of interest rate risk | — | 682 | 504 | (59 | ) | 1,127 | ||||||||||||||
Investment in subsidiary undertakings | 7,038 | 2,185 | 2,291 | (11,514 | ) | — | ||||||||||||||
Investment in associated undertakings | 76 | — | — | (1 | ) | 75 | ||||||||||||||
Intangible assets | 552 | 8 | 132 | 754 | 1,446 | |||||||||||||||
Property, plant and equipment | 561 | 6 | 583 | 100 | 1,250 | |||||||||||||||
Current tax assets | — | 3 | 82 | — | 85 | |||||||||||||||
Deferred tax assets | 428 | 21 | 401 | 96 | 946 | |||||||||||||||
Other assets | 651 | 67 | 548 | (192 | ) | 1,074 | ||||||||||||||
Total assets | 293,695 | 250,707 | 318,553 | (577,664 | ) | 285,291 | ||||||||||||||
Deposits by banks | 116,414 | 166,169 | 81,097 | (357,869 | ) | 5,811 | ||||||||||||||
Deposits by customers | 159,187 | 17,601 | 110,834 | (143,729 | ) | 143,893 | ||||||||||||||
Derivative financial instruments | 3,353 | 24,330 | 2,711 | (11,431 | ) | 18,963 | ||||||||||||||
Trading liabilities | — | 13,315 | 47,159 | (14,322 | ) | 46,152 | ||||||||||||||
Financial liabilities designated at fair value | — | 4,282 | 141 | — | 4,423 | |||||||||||||||
Debt securities in issue | — | 21,631 | 63,888 | (37,761 | ) | 47,758 | ||||||||||||||
Subordinated liabilities | 6,119 | — | 2,933 | (2,103 | ) | 6,949 | ||||||||||||||
Other liabilities | 1,611 | 135 | 762 | (185 | ) | 2,323 | ||||||||||||||
Other provisions | 74 | — | 17 | — | 91 | |||||||||||||||
Current tax liabilities | 92 | 57 | 151 | — | 300 | |||||||||||||||
Deferred tax liabilities | — | — | 272 | 64 | 336 | |||||||||||||||
Retirement benefit obligations | 922 | — | 148 | — | 1,070 | |||||||||||||||
Total liabilities | 287,772 | 247,520 | 310,113 | (567,336 | ) | 278,069 | ||||||||||||||
Total shareholders’ equity | 5,923 | 3,187 | 8,440 | (10,328 | ) | 7,222 | ||||||||||||||
Total liabilities and equity | 293,695 | 250,707 | 318,553 | (577,664 | ) | 285,291 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2010 | £m | £m | £m | £m | £m | |||||||||||||||
Net cash flow from/(used in) operating activities | 11,978 | 31,158 | (62,367 | ) | 30,615 | 11,384 | ||||||||||||||
Net cash flow (used in)/from investing activities | (1,415 | ) | (39 | ) | 130 | — | (1,324 | ) | ||||||||||||
Net cash flow from/(used in) financing activities | 712 | 5,979 | 2,297 | (53 | ) | 8,935 | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents | 11,275 | 37,098 | (59,940 | ) | 30,562 | 18,995 | ||||||||||||||
Cash and cash equivalents at beginning of the year | 55,398 | 49,327 | 72,506 | (150,867 | ) | 26,364 | ||||||||||||||
Effects of exchange rate changes on cash and cash equivalents | — | 287 | (146 | ) | — | 141 | ||||||||||||||
Cash and cash equivalents at end of the year | 66,673 | 86,712 | 12,420 | (120,305 | ) | 45,500 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2009 | £m | £m | £m | £m | £m | |||||||||||||||
Net cash flow (used in)/from operating activities | (4,770 | ) | 12,150 | 46,722 | (51,173 | ) | 2,929 | |||||||||||||
Net cash flow (used in)/from investing activities | (232 | ) | 126 | 1,539 | — | 1,433 | ||||||||||||||
Net cash flow (used in)/from financing activities | (803 | ) | — | (3,737 | ) | (81 | ) | (4,621 | ) | |||||||||||
Net (decrease)/increase in cash and cash equivalents | (5,805 | ) | 12,276 | 44,524 | (51,254 | ) | (259 | ) | ||||||||||||
Cash and cash equivalents at beginning of the year | 61,203 | 38,020 | 28,065 | (99,613 | ) | 27,675 | ||||||||||||||
Effects of exchange rate changes on cash and cash equivalents | — | (969 | ) | (83 | ) | — | (1,052 | ) | ||||||||||||
Cash and cash equivalents at end of the year | 55,398 | 49,327 | 72,506 | (150,867 | ) | 26,364 | ||||||||||||||
The Company | ANTS plc | Other | Adjustments | Consolidated | ||||||||||||||||
For the year ended 31 December 2008 | £m | £m | £m | £m | £m | |||||||||||||||
Net cash flow from/(used in) operating activities | 51,816 | 6,658 | (25,370 | ) | (54,548 | ) | (21,444 | ) | ||||||||||||
Net cash flow (used in)/from investing activities | (1,359 | ) | 38 | 20,723 | — | 19,402 | ||||||||||||||
Net cash flow from/(used in) financing activities | 152 | (161 | ) | (7,372 | ) | — | (7,381 | ) | ||||||||||||
Net increase/(decrease) in cash and cash equivalents | 50,609 | 6,535 | (12,019 | ) | (54,548 | ) | (9,423 | ) | ||||||||||||
Cash and cash equivalents at beginning of the year | 10,594 | 29,137 | 39,390 | (45,065 | ) | 34,056 | ||||||||||||||
Effects of exchange rate changes on cash and cash equivalents | — | 2,348 | 694 | — | 3,042 | |||||||||||||||
Cash and cash equivalents at end of the year | 61,203 | 38,020 | 28,065 | (99,613 | ) | 27,675 | ||||||||||||||
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2010(1) | 2010 | 2009 | 2008(2)(3) | 2007 | 2006 | |||||||||||||||||||
$m | £m | £m | £m | £m | £m | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and balances at central banks | 40,792 | 26,502 | 4,163 | 4,017 | 1,038 | 888 | ||||||||||||||||||
Trading assets | 54,582 | 35,461 | 33,290 | 26,264 | 56,427 | 62,314 | ||||||||||||||||||
Derivative financial instruments | 37,521 | 24,377 | 22,827 | 35,125 | 9,951 | 8,336 | ||||||||||||||||||
Financial assets designated at fair value | 10,431 | 6,777 | 12,358 | 11,377 | 11,783 | 8,713 | ||||||||||||||||||
Loans and advances to banks | 5,929 | 3,852 | 9,151 | 16,001 | 3,441 | 2,242 | ||||||||||||||||||
Loans and advances to customers | 300,347 | 195,132 | 186,804 | 180,176 | 112,147 | 103,146 | ||||||||||||||||||
Available for sale securities | 269 | 175 | 797 | 2,663 | 40 | 23 | ||||||||||||||||||
Loans and receivables securities | 5,557 | 3,610 | 9,898 | 14,107 | — | — | ||||||||||||||||||
Macro hedge of interest rate risk | 1,679 | 1,091 | 1,127 | 2,188 | 217 | — | ||||||||||||||||||
Investment in associated undertakings | 3 | 2 | 75 | 35 | 29 | 22 | ||||||||||||||||||
Intangible assets | 3,353 | 2,178 | 1,446 | 1,347 | 90 | 90 | ||||||||||||||||||
Property, plant and equipment | 2,624 | 1,705 | 1,250 | 1,202 | 2,692 | 2,497 | ||||||||||||||||||
Current tax assets | 426 | 277 | 85 | 212 | 197 | 223 | ||||||||||||||||||
Deferred tax assets | 871 | 566 | 946 | 1,274 | 665 | 804 | ||||||||||||||||||
Other assets | 1,778 | 1,155 | 1,074 | 1,322 | 906 | 2,507 | ||||||||||||||||||
Total assets | 466,162 | 302,860 | 285,291 | 297,310 | 199,623 | 191,805 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Deposits by banks | 11,981 | 7,784 | 5,811 | 14,488 | 7,923 | 6,656 | ||||||||||||||||||
Deposits by customers | 234,948 | 152,643 | 143,893 | 130,245 | 69,650 | 66,519 | ||||||||||||||||||
Derivative financial instruments | 34,486 | 22,405 | 18,963 | 27,810 | 9,931 | 10,218 | ||||||||||||||||||
Trading liabilities | 65,919 | 42,827 | 46,152 | 40,738 | 54,916 | 57,604 | ||||||||||||||||||
Financial liabilities designated at fair value | 5,675 | 3,687 | 4,423 | 5,673 | 7,538 | 8,151 | ||||||||||||||||||
Debt securities in issue | 79,704 | 51,783 | 47,758 | 58,511 | 35,712 | 28,998 | ||||||||||||||||||
Subordinated liabilities | 9,808 | 6,372 | 6,949 | 8,863 | 6,151 | 6,675 | ||||||||||||||||||
Macro hedge of interest rate risk | — | — | — | — | — | 174 | ||||||||||||||||||
Other liabilities | 3,119 | 2,026 | 2,323 | 2,342 | 2,337 | 1,616 | ||||||||||||||||||
Provisions | 285 | 185 | 91 | 207 | 131 | 180 | ||||||||||||||||||
Current tax liabilities | 757 | 492 | 300 | 518 | 369 | 300 | ||||||||||||||||||
Deferred tax liabilities | 322 | 209 | 336 | 405 | 544 | 564 | ||||||||||||||||||
Retirement benefit obligations | 266 | 173 | 1,070 | 813 | 979 | 1,034 | ||||||||||||||||||
Total liabilities | 447,270 | 290,586 | 278,069 | �� | 290,613 | 196,181 | 188,689 | |||||||||||||||||
Share capital | 6,155 | 3,999 | 2,709 | 1,148 | 148 | 148 | ||||||||||||||||||
Share premium account | 8,650 | 5,620 | 1,857 | 3,121 | 1,857 | 1,857 | ||||||||||||||||||
Retained earnings | 4,045 | 2,628 | 1,911 | 1,678 | 1,333 | 1,116 | ||||||||||||||||||
Other reserves | 42 | 27 | 29 | 39 | 6 | (5 | ) | |||||||||||||||||
Total shareholders’ equity | 18,892 | 12,274 | 6,506 | 5,986 | 3,344 | 3,116 | ||||||||||||||||||
Non-controlling interest | — | — | 716 | 711 | 98 | — | ||||||||||||||||||
Total equity | 18,892 | 12,274 | 7,222 | 6,697 | 3,442 | 3,116 | ||||||||||||||||||
Total liabilities and equity | 466,162 | 302,860 | 285,291 | 297,310 | 199,623 | 191,805 | ||||||||||||||||||
(1) | Amounts stated in dollars have been translated from sterling at the rate of £1.00 - $1.5392, the noon buying rate on 31 December 2010. | |
(2) | From 2008, issuances of commercial paper and certificates of deposit have been used to fund commercial banking operations. As a result, such issuances have been classified as debt securities in issue. In previous years, similar debt issuances were used to fund the Group’s trading operations and therefore were classified as trading liabilities. | |
(3) | The Transfer of Alliance & Leicester plc to the Group was accounted for with effect from 10 October 2008. |
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2010(1) | 2010 | 2009 | 2008(2) | 2007 | 2006(3) | |||||||||||||||||||
$m | £m | £m | £m | £m | £m | |||||||||||||||||||
Net interest income | 5,870 | 3,814 | 3,412 | 1,772 | 1,499 | 1,228 | ||||||||||||||||||
Net fee and commission income | 1,076 | 699 | 824 | 671 | 695 | 699 | ||||||||||||||||||
Dividend income | — | — | — | — | 1 | 1 | ||||||||||||||||||
Net trading and other income | 802 | 521 | 460 | 561 | 587 | 542 | ||||||||||||||||||
Total operating income | 7,748 | 5,034 | 4,696 | 3,004 | 2,782 | 2,470 | ||||||||||||||||||
Administration expenses | (2,760 | ) | (1,793 | ) | (1,848 | ) | (1,343 | ) | (1,369 | ) | (1,420 | ) | ||||||||||||
Depreciation and amortisation | (423 | ) | (275 | ) | (260 | ) | (202 | ) | (205 | ) | (215 | ) | ||||||||||||
Total operating expenses, exc provisions and charges | (3,183 | ) | (2,068 | ) | (2,108 | ) | (1,545 | ) | (1,574 | ) | (1,635 | ) | ||||||||||||
Impairment losses on loans and advances | (1,096 | ) | (712 | ) | (842 | ) | (348 | ) | (344 | ) | (344 | ) | ||||||||||||
Provisions for other liabilities and charges | (198 | ) | (129 | ) | (56 | ) | (17 | ) | — | (63 | ) | |||||||||||||
Total operating provisions and charges | (1,294 | ) | (841 | ) | (898 | ) | (365 | ) | (344 | ) | (407 | ) | ||||||||||||
Profit on continuing operations before tax | 3,271 | 2,125 | 1,690 | 1,094 | 864 | 428 | ||||||||||||||||||
Tax on profit on continuing operations | (834 | ) | (542 | ) | (445 | ) | (275 | ) | (179 | ) | (115 | ) | ||||||||||||
Profit on continuing operations after tax | 2,437 | 1,583 | 1,245 | 819 | 685 | 313 | ||||||||||||||||||
Loss on discontinued operations after tax | — | — | — | — | — | (245 | ) | |||||||||||||||||
Profit for the year | 2,437 | 1,583 | 1,245 | 819 | 685 | 68 | ||||||||||||||||||
Attributable to: | ||||||||||||||||||||||||
Equity holders of the parent | 2,377 | 1,544 | 1,190 | 811 | 685 | 68 | ||||||||||||||||||
Non-controlling interest | 60 | 39 | 55 | 8 | — | — | ||||||||||||||||||
(1) | Amounts stated in dollars have been translated from sterling at the rate of £1.00 - $1.5392, the noon buying rate on 31 December 2010. | |
(2) | The Transfer of Alliance & Leicester plc to the Group was accounted for with effect from 10 October 2008. | |
(3) | In the third quarter of 2006 the Group sold its life insurance business. |
2010 | 2009 | 2008(1) | 2007 | 2006(2) | ||||||||||||||||
% | % | % | % | % | ||||||||||||||||
Profitability ratios: | ||||||||||||||||||||
Return on assets (3) | 0.54 | 0.43 | 0.37 | 0.34 | 0.03 | |||||||||||||||
Return on ordinary shareholders’ funds(4) | 16.51 | 17.33 | 20.45 | 22.08 | 2.20 | |||||||||||||||
Commercial Banking margin(5) | 1.91 | 1.76 | 1.33 | 1.40 | 1.36 | |||||||||||||||
Trading cost-to-income ratio(6) | 41 | 42 | 50 | 50 | 55 | |||||||||||||||
Dividend payout ratio(7) | 49 | 40 | 55 | 54 | 304 | |||||||||||||||
Capital ratios: | ||||||||||||||||||||
Equity to assets ratio(8) | 3.24 | 2.51 | 1.83 | 1.52 | 1.54 | |||||||||||||||
Core Tier 1 capital(9) | 11.5 | 6.8 | 6.2 | 5.4 | 5.6 | |||||||||||||||
Tier 1 capital(9) | 14.8 | 9.5 | 8.5 | 7.3 | 8.0 | |||||||||||||||
Ratio of earnings to fixed charges:(10) | ||||||||||||||||||||
- Excluding interest on retail deposits | 362.67 | 202.42 | 136.61 | 132.74 | 122.57 | |||||||||||||||
- Including interest on retail deposits | 165.73 | 143.27 | 117.81 | 115.58 | 109.70 | |||||||||||||||
(1) | The Transfer of Alliance & Leicester plc to the Group was accounted for with effect from 10 October 2008. | |
(2) | In the third quarter of 2006 the Group sold its life insurance business. | |
(3) | Profit after tax divided by average total assets. | |
(4) | Profit after tax divided by average ordinary shareholders’ funds. | |
(5) | Commercial Banking margin is defined as trading net interest income (adjusted to remove net interest income from the run down Treasury asset portfolio) over average commercial assets (mortgages, unsecured personal loans, corporate loans and overdrafts). | |
(6) | The trading cost-to-income ratio is defined as trading expenses from continuing operations divided by trading income from continuing operations. The Company’s board of directors reviews discrete financial information for each of its segments that includes measures of operating results, assets and liabilities, which are measured on a ‘trading’ basis. The trading basis differs from the statutory basis as a result of the application of various adjustments. See Note 1 to the Consolidated Financial Statements. | |
(7) | Ordinary equity dividends declared divided by profit after tax. | |
(8) | Average ordinary shareholders’ funds divided by average total assets. | |
(9) | From 1 January 2008, the Group has managed its capital requirements on a Basel II basis, as described in Note 51 to the Consolidated Financial Statements. Prior years have been presented on a Basel I basis. | |
(10) | For the purpose of calculating the ratios of earnings to fixed charges, earnings consist of profit on continuing operations before tax plus fixed charges. Fixed charges consist of interest payable, including the amortisation of discounts and premiums on debt securities in issue. |
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High | Low | Average(1) | Period end | |||||||||||||
Calendar period | US$ Rate | US$ Rate | US$ Rate | US$ Rate | ||||||||||||
Years ended 31 December: | ||||||||||||||||
2010 | 1.64 | 1.43 | 1.55 | 1.54 | ||||||||||||
2009 | 1.70 | 1.37 | 1.57 | 1.62 | ||||||||||||
2008 | 2.03 | 1.44 | 1.85 | 1.46 | ||||||||||||
2007 | 2.11 | 1.92 | 2.00 | 1.98 | ||||||||||||
2006 | 1.98 | 1.73 | 1.84 | 1.96 | ||||||||||||
Months ended: | ||||||||||||||||
March 2011(2) | 1.63 | 1.60 | 1.62 | 1.60 | ||||||||||||
February 2011 | 1.62 | 1.60 | 1.61 | 1.62 | ||||||||||||
January 2011 | 1.60 | 1.55 | 1.58 | 1.60 | ||||||||||||
December 2010 | 1.59 | 1.54 | 1.56 | 1.54 | ||||||||||||
November 2010 | 1.63 | 1.56 | 1.60 | 1.56 | ||||||||||||
October 2010 | 1.60 | 1.57 | 1.59 | 1.60 | ||||||||||||
September 2010 | 1.59 | 1.53 | 1.56 | 1.57 | ||||||||||||
(1) | The average of the noon buying rates on the last business day of each month during the relevant period. | |
(2) | With respect to March 2011 for the period from 1 March to 11 March. |
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> | manage efficiently the operations and employees of expanding businesses; | |
> | maintain or grow its existing customer base; | |
> | assess the value, strengths and weaknesses of investment or acquisition candidates; | |
> | finance strategic investments or acquisitions; | |
> | fully integrate strategic investments, or newly established entities or acquisitions in line with its strategy; | |
> | align its current information technology systems adequately with those of an enlarged Group; | |
> | apply its risk management policy effectively to an enlarged Group; and | |
> | manage a growing number of entities without over-committing management or losing key personnel. |
> | Santander Cards Limited, Santander Cards UK Limited (and its subsidiaries) and Santander Cards Ireland Limited; | |
> | Santander Consumer (UK) plc (of which the Company already held 49.9%); and | |
> | Santander PB UK (Holdings) Limited (of which the Company already held 51%) and its subsidiaries, (together, the “Reorganisation”) |
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> | certain aspects of the Group’s business may be determined by the Bank of England, the FSA, HM Treasury, the Financial Ombudsman Service (“FOS”) or the courts as not being conducted in accordance with applicable laws or regulations, or, in the case of the Financial Ombudsman Service, with what is fair and reasonable in the Ombudsman’s opinion; | |
> | the alleged misselling of financial products, resulting in disciplinary action or requirements to amend sales processes, withdraw products, or provide restitution to affected customers, all of which may require additional provisions. | |
> | the Group holds accounts for entities that might be or are subject to interest from various regulators, including the Serious Fraud Office, those in the US and others. The Group is not aware of any current investigation into the Group as a result of any such enquiries but cannot exclude the possibility of the Group’s conduct being reviewed as part of any such investigations; and | |
> | the Group may be liable for damages to third parties harmed by the conduct of its business. |
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> | an individual who is neither resident nor ordinarily resident in the UK; or | |
> | a company which is not resident in the UK. |
> | domiciled for the purposes of the convention in the US; and | |
> | is not for the purposes of the convention a national of the UK; | |
will not be subject to UK inheritance tax on: | ||
> | the individual’s death; or | |
> | on a gift of the shares during the individual’s lifetime. |
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Regent’s Place
London
NW1 3AN
2 Triton Square
Regent’s Place
London
NW1 3AN
0870-607-6000
0871-384-2000
+44 (0) 121-415-7188 (overseas)
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Term used in the Annual Report | US equivalent or brief description of meaning | |
Accounts | Financial statements | |
Allotted | Issued | |
Articles of Association | Bylaws | |
Attributable profit | Net income | |
Balance sheet | Statement of financial position | |
Bills | Notes | |
Called up share capital | Ordinary shares or common stock and preferred stock, issued and fully paid | |
Capital allowances | Tax depreciation allowances | |
Creditors | Payables | |
Current account | Checking account | |
Dealing | Trading | |
Debtors | Receivables | |
Deferred tax | Deferred income tax | |
Depreciation | Amortisation | |
Fees and commissions payable | Fees and commissions expense | |
Fees and commissions receivable | Fees and commissions income | |
Finance lease | Capital lease | |
Freehold | Ownership with absolute rights in perpetuity | |
Interest payable | Interest expense | |
Interest receivable | Interest income | |
Loans and advances | Lendings | |
Loan capital | Long-term debt | |
Members | Shareholders | |
Nominal value | Par value | |
One-off | Non-recurring | |
Ordinary shares | Common stock | |
Preference shares | Preferred stock | |
Premises | Real estate | |
Profit | Income | |
Provisions | Liabilities | |
Share capital | Ordinary shares, or common stock, and preferred stock | |
Shareholders | Stockholders | |
Share premium account | Additional paid-in capital | |
Shares in issue | Shares outstanding | |
Undistributable reserves | Restricted surplus | |
Write-offs | Charge-offs | |
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Term used in the Annual Report | Definition | |
Advanced Internal Rating Based Approach (‘AIRB’) | A method for calculating credit risk capital requirements using the Group’s internal Probability of Default (‘PD’), Loss Given Default (‘LGD’) and Exposure at Default (‘EAD’) models. The UK Financial Services Authority approved the Group’s application of the AIRB approach to the Group’s credit portfolios with effect from 1 January 2008. | |
Advanced measurement approach (‘AMA’) | A method for calculating the operational capital requirement, under Basel II which uses the Group’s internal operational risk measurement system, subject to the approval of the UK Financial Services Authority. | |
Alternative A-paper (‘Alt-A’) | Alternative A-paper are mortgage loans with a higher credit quality than sub-prime loans but with features that disqualify the borrower from a traditional prime loan. Alt-A lending characteristics include limited documentation; high loan-to-value ratio; secured on non- owner occupied properties; and debt-to-income ratio above normal limits. | |
Arrears | Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an outstanding loan is unpaid or overdue. Such a customer is also said to be in a state of delinquency. When a customer is in arrears, his entire outstanding balance is said to be delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue. Corporate customers may also be considered non-performing prior to being behind in fulfilling their obligations. This can happen when a significant restructuring exercise begins. | |
Asset backed products | Asset backed products are debt and derivative products that are linked to the cash flow of a referenced asset. This category includes asset backed loans; collateralised debt obligations (‘CDOs’); collateralised loan obligations (‘CLOs’); asset-backed credit derivatives (‘ABS CDS’); asset backed and mortgage backed securities. | |
Asset Backed Securities (‘ABS’) | Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages but could also include leases, credit card receivables, motor vehicles, student loans. In the case of Collateralised Debt Obligations, the referenced pool may be ABS or other classes of assets. Payments on the securities depend primarily on the cash flows generated by the assets in the underlying pool and other rights designed to assure timely payment, such as guarantees or other credit enhancements. ABS are issued by a special purpose entity following a securitisation. Collateralised bond obligations, collateralised debt obligations, collateralised loan obligations and residential mortgage backed securities are all types of ABS. | |
Asset margin | Interest earned on customer assets relative to the average internal funding rate, divided by average customer assets, expressed as an annualised percentage. | |
Average balances | Average balances which make up the average balance sheet are based upon monthly averages. | |
Backstop facility | A standby facility that is a liquidity arrangement whereby another party agrees to make a payment should the primary party not do so. | |
Bank levy | A levy that applies to certain UK banks and building societies and the UK operations of foreign banks from 1 January 2011. The bank levy was announced in the Government June 2010 budget and will be introduced via legislation in the Finance Bill 2011. It is designed to encourage less risky funding, and complements the wider agenda to improve regulatory standards and enhance financial stability. | |
Basel II | A supervisory framework for the risk and capital management of banks issued by the Basel Committee on Banking Supervision, in the form of the ‘International Convergence of Capital Measurement and Capital Standards’. In the European Union, Basel II was implemented by the Capital Requirements Directive (CRD) with effect from 1 January 2007. In the UK, the Financial Services Authority implemented the CRD by including it in UK Financial Services Authority rules which took effect from 1 January 2007. | |
Basel III | As part of a strengthening of the resilience of the global banking system, Basel III will replace Basel II in phased implementation between 2013 and 2019. | |
Basis point | One hundredth of a per cent (i.e. 0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or yields on securities. | |
BIPRU | The prudential sourcebook for banks, building societies and investment firms which sets out the UK Financial Services Authority’s capital requirements. | |
Business / Strategic risk | The current or prospective risk to earnings and capital arising from changes in the business environment and from adverse business decisions, improper implementation of decisions or lack of responsiveness to changes in the business environment. This includes pro-cyclicality and capital planning risk. The internal component is the risk related to implementing the strategy. The external component is the risk of the business environment change on the firm’s strategy. |
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Term used in the Annual Report | Definition | |
Collateralised bond obligation (‘CBO’) | A security backed by the repayments from a pool of bonds, some of which may be sub-investment grade but because of their different types of credit risk, they are considered to be sufficiently diversified to be of investment grade. | |
Collateralised Debt Obligation (‘CDO’) | Securities issued by a third party which reference Asset Backed Securities (defined above) and/or certain other related assets purchased by the issuer. The underlying asset portfolios are debt obligations: either bonds (collateralised bond obligations) or loans (collateralised loan obligations) or both. The credit exposure underlying synthetic CDOs derives from credit default swaps. The CDOs issued by an individual vehicle are usually divided in different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated). Losses are borne first by the equity securities, next by the junior securities, and finally by the senior securities; junior tranches offer higher coupons (interest payments) to compensate for their increased risk. | |
Collateralised Loan Obligation (‘CLO’) | A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches). | |
Collateralised Synthetic Obligation (‘CSO’) | A form of synthetic collateralised debt obligation that does not hold assets like bonds or loans but invests in credit default swaps (‘CDSs’) or other non-cash assets to gain exposure to a portfolio of fixed income assets. | |
Collectively assessed loan impairment | Impairment losses assessment on a collective basis for loans that are part of homogeneous pools of similar loans and that are not individually significant, using appropriate statistical techniques. For each portfolio where the impairment loss allowance is assessed on a collective basis, the impairment loss allowance is calculated as the product of the number of accounts in the portfolio, the estimated proportion of accounts that will be written off, or repossessed in the case of mortgage loans (loss propensity), the estimated proportion of such cases that will result in a loss (loss factor) and the average loss incurred (loss per case) based on historical experience. Separate assessments are performed with respect to observed losses and inherent losses. | |
Commercial Banking margin | The trading net interest income (adjusted to remove net interest income from the run down Treasury asset portfolio) over average commercial assets (mortgages, unsecured personal loans, corporate loans and overdrafts). | |
Commercial lending | Loans secured on UK commercial property, and corporate loans. | |
Commercial Mortgage Backed Securities (‘CMBS’) | Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). | |
Commercial Real Estate | Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets. | |
Commercial Paper | An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date. Commercial paper can be issued as an unsecured obligation of the Group and is usually issued for periods ranging from one week up to nine months. However, the depth and reliability of some CP markets means that issuers can repeatedly roll over CP issuance and effectively achieve longer term funding. CP can also be issued in a wide range of denominations and can be either discounted or interest-bearing. | |
Commodity products | These products are exchange traded and OTC derivatives based on a commodity underlying (e.g. metals, precious metals, oil and oil related, power and natural gas). | |
Concentration risk | An element of credit risk and includes large (connected) individual exposures, and significant exposures to groups of counterparts whose likelihood of default is driven by common underlying factors, e.g. sector, economy, geographical location or instrument type. | |
Conduit | A financial vehicle that holds asset-backed debt such as mortgages, vehicle loans and credit card receivables, all financed with short-term loans (generally commercial paper) that use the asset-backed debt as collateral. The profitability of a conduit depends on the ability to roll over maturing short-term debt at a cost that is lower than the returns earned from asset-backed securities held in the portfolio. | |
Consumer credit | Personal banking services comprising current account products, credit cards and unsecured personal loans. | |
Contractual maturity | The final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal will be repaid and interest is due to be paid. | |
Core Tier 1 capital | Called-up share capital and eligible reserves plus equity non-controlling interests, less intangible assets and deductions relating to the excess of expected loss over regulatory impairment loss allowance and securitisation positions as specified by the UK Financial Services Authority. |
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Term used in the Annual Report | Definition | |
Core Tier 1 capital ratio | Core Tier 1 capital as a percentage of risk weighted assets. | |
Cost:income ratio | Operating expenses as a percentage of total income. The Group calculates cost: income ratio on a trading basis. | |
Coverage ratio | Impairment loss allowances as a percentage of total non-performing loans and advances. | |
Covered bonds | A bond backed by a pool of mortgage loans. The mortgages remain on the issuer’s balance sheet. The issuing bank can change the make-up of the loan pool or the terms of the loans to preserve credit quality. Covered bonds thus have a higher risk weighting than mortgage-backed securities because the holder is exposed to both the non-payment of the mortgages and the financial health of the issuer. | |
Credit conversion factors (‘CCFs’) | The portion of an off-balance sheet commitment drawn in the event of a future default. The conversion factor is expressed as a percentage. The conversion factor is used to calculate the exposure at default (EAD). | |
Credit Default Swap (‘CDS’) | A credit derivative contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer in the event of a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency. | |
Credit derivative | A contractual agreement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. The buyer of the credit derivative pays a periodic fee in return for a payment by the protection seller upon the occurrence, if any, of a credit event defined at the inception of the transaction. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency. Credit derivatives include credit default swaps, total return swaps and credit swap options. | |
Credit enhancement | See ‘Liquidity and Credit enhancements’. | |
Credit market exposures | Relates to commercial real estate and leveraged finance businesses that have been significantly impacted by the continued deterioration in the global credit markets. The exposures include positions subject to fair value movements in the Income Statement, positions that are classified as loans and advances and available for sale. | |
Credit risk | The risk of financial loss arising from the default of a customer or counterparty to which the Group has directly provided credit, or for which the Group has assumed a financial obligation, after realising collateral held. Credit risk includes residual credit risk and concentration risk. | |
Credit risk adjustment | An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties. It is measured as a lifetime expected loss for each counterparty based on the probability of default, the loss given default and the expected exposure of the OTC derivative position with the counterparty. | |
Credit risk loans (‘CRLs’) | A loan becomes a credit risk loan when evidence of deterioration has been observed, for example a missed payment or other breach of covenant. A loan may be reported in one of three categories: impaired loans, accruing past due 90 days or more or impaired and restructured loans. These may include loans which, while impaired, are still performing but have associated individual impairment allowances raised against them. | |
Credit risk mitigation | A technique to reduce the credit risk associated with an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection. | |
Credit spread | The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to accept a lower credit quality. | |
Credit valuation adjustment (‘CVA’) | The difference between the risk-free value of a portfolio of trades and the market value which takes into account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the counterparty due to any failure to perform on contractual agreements. | |
Currency swap | An arrangement in which two parties exchange specific principal amounts of different currencies at inception and subsequently interest payments on the principal amounts. Often, one party pays a fixed interest rate, while the other pays a floating exchange rate (though there are also fixed-fixed and floating-floating arrangements). At the maturity of the swap, the principal amounts are usually re-exchanged. | |
Customer accounts / customer deposits | Money deposited by all individuals and companies that are not credit institutions. They include demand, savings and time deposits; securities sold under repurchase agreements; and other short term deposits. Such funds are recorded as liabilities in the Group’s balance sheet under Deposits by Customers, Trading Liabilities or Financial Liabilities designated at Fair Value. |
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Term used in the Annual Report | Definition | |
Debit valuation adjustment (‘DVA’) | The opposite of credit valuation adjustment. It is the difference between the risk-free value of a portfolio of trades and the market value which takes into account the Group’s risk of default. The DVA, therefore, represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the Group due to any failure to perform on contractual agreements. The DVA decreases the value of a liability to take into account a reduction in the remaining balance that would be settled should the Group default or not perform in terms of contractual agreements. | |
Debt restructuring | This occurs when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as reducing the debt or interest charged on the loan. | |
Debt securities | Transferable instruments creating or acknowledging indebtedness. They include debentures, bonds, certificates of deposit, notes and commercial paper. The holder of a debt security is typically entitled to the payment of principal and interest, together with other contractual rights under the terms of the issue, such as the right to receive certain information. Debt securities are generally issued for a fixed term and redeemable by the issuer at the end of that term. Debt securities can be secured or unsecured. The Group has classified most of its debt securities under ‘debt securities in issue’. | |
Debt securities in issue | Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are liabilities of the Group and include commercial paper, certificates of deposit, bonds and medium-term notes. | |
Deferred tax asset | Income taxes that are recoverable in future periods as a result of deductible temporary differences and the carry-forward of tax losses and unused tax credits. Temporary differences arise due to timing differences between the accounting value of an asset or liability recorded and their value for tax purposes (tax base) that result in tax deductible amounts in future periods. | |
Deferred tax liability | Income taxes that are payable in future periods as a result of taxable temporary differences. Temporary differences arise due to timing differences between the accounting value of an asset or liability and their value for tax purposes (tax base) that result in taxable amounts in future periods. | |
Defined benefit obligation | The present value of expected future payments required to settle the obligations of a defined benefit plan resulting from employee service. The Group determines the present value of the defined benefit obligation by the estimated future cash outflows using interest rates of high quality corporate bonds, which have terms to maturity closest to the terms of the related liability, adjusted where necessary. | |
Defined benefit plan | A pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The employer’s obligation can be more or less than its contributions to the fund. | |
Defined contribution plan | A pension plan under which the Group pays fixed contributions as they fall due into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods, i.e. the employer’s obligation is limited to its contributions to the fund. | |
Delinquency | See ‘Arrears’. | |
Deposits by banks | Money deposited by banks and other credit institutions. They include money-market deposits, securities sold under repurchase agreements, and other short term deposits. Such funds are recorded as liabilities in the Group’s balance sheet under Deposits by Banks Trading Liabilities or Financial Liabilities designated at Fair Value. | |
Derivative | A contract or agreement whose value changes with changes in an underlying index such as interest rates, foreign exchange rates, share prices or indices and which requires no initial investment or an initial investment that is smaller than would be required for other types of contracts with a similar response to market factors. The principal types of derivatives are: swaps, forwards, futures and options. | |
Discontinued operation | A component of the Group that either has been disposed of or is classified as held for sale. A discontinued operation is either: a separate major line of business or geographical area of operations or part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or a subsidiary acquired exclusively with a view to resale. | |
Dividend payout ratio | Ordinary equity dividends proposed divided by profit after tax. | |
Earnings at Risk (‘EaR’) | The sensitivity of earnings (net income) to movement in market rates measured at approximately 99th percentile. | |
Economic capital | An internal measure of the minimum equity and preference capital required for the Group to maintain its credit rating based upon its risk profile. |
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Term used in the Annual Report | Definition | |
Effective interest rate | The interest rate that discounts the estimated future cash payments or receipts over the expected life of the instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the future cash flows are estimated after considering all the contractual terms of the instrument excluding future credit losses. | |
Effective Interest method | A method of calculating the amortised cost or carrying value of a financial asset or financial liability (or group of financial assets or liabilities) and of allocating the interest income or interest expense over the expected life of the asset or liability | |
Effective tax rate | The actual tax on profits on ordinary activities as a percentage of profit on ordinary activities before taxation. | |
Equity products | These products are linked to equity markets. This category includes listed equities, exchange traded derivatives, equity derivatives, preference shares and contract for difference (‘CFD’) products. | |
Equity risk | The potential for loss of income or decrease in the value of net assets caused by movements in the market price of equities or equity instruments, arising from the Group’s positions, either long or short, in such equity-based instruments. | |
Equity structural hedge | An interest rate hedge which functions to reduce the impact of the volatility of short-term interest rate movements on equity positions on the balance sheet that do not reprice with market rates. | |
Expected loss | The Group measure of anticipated loss for exposures captured under an internal ratings-based credit risk approach for capital adequacy calculations. It is measured as the Group-modelled view of anticipated loss based on Probability of Default, Loss Given Default and Exposure at Default, with a one-year time horizon. | |
Exposure | The maximum loss that a financial institution might suffer if a borrower, counterparty or group fails to meet their obligations or assets and off-balance sheet positions have to be realised. | |
Exposure at default (‘EAD’) | The estimation of the extent to which the Group may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit. | |
Fair value adjustment | An adjustment to the fair value of a financial instrument which is determined using a valuation technique (level 2 and level 3) to include additional factors that would be considered by a market participant that are not incorporated within the valuation model. | |
Financial Services Compensation Scheme (‘FSCS’) | The UK’s statutory fund of last resort for customers of authorised financial services firms, established under the Financial Services and Markets Act (‘FSMA’) 2000. The FSCS can pay compensation to customers if a UK Financial Services Authority authorised firm is unable, or likely to be unable, to pay claims against it (for instance, an authorised bank is unable to pay claims by depositors). The FSCS is funded by levies on firms authorised by the UK Financial Services Authority, including Santander UK and other members of the Group. | |
First/Second Charge | First charge (also known as first lien): debt that places its holder first in line to collect compensation from the sale of the underlying collateral in the event of a default on the loan. Second charge (also known as second lien): debt that is issued against the same collateral as higher charge debt but that is subordinate to it. In the case of default, compensation for this debt will only be received after the first charge has been repaid and thus represents a riskier investment than the first charge. | |
Forbearance | An arrangement which allows a mortgage customer to repay a monthly amount which is lower than their contractual monthly payment for a short period. This period is usually for no more than 12 months and is negotiated with the customer by the mortgage collectors. Strategies used to assist borrowers in financial difficulty, include capitalising loan arrears arising from repayment arrangement and refinancing (either extending loan terms or converting loans to an interest-only basis) | |
Foreclosure | A legal process by which the holder of a legal charge, usually a lender, obtains a court ordered termination of a mortgagor’s equitable right of redemption. The foreclosure process is a lender selling or repossessing a parcel of real property, after the borrower has failed to comply with an agreement between the lender and borrower. Usually, the violation is a default in payment of a promissory note, secured by a charge on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that “the lender has foreclosed its mortgage”. | |
Foundation Internal Risk-based (‘IRB’) approach | A method for calculating credit risk capital requirements using the Group’s internal Probability of Default models but with supervisory estimates of Loss Given Default and conversion factors for the calculation of Exposure at default. |
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Term used in the Annual Report | Definition | |
Full time equivalent | Full time equivalent employee units are the on-job hours paid for employee services divided by the number of ordinary-time hours normally paid for a full-time staff member when on the job (or contract employee where applicable). | |
Funded/unfunded | Exposures where the notional amount of the transaction is either funded or unfunded. Represents exposures where a commitment to provide future funding has been made and the funds have been released/not released. | |
Funding risk | The risk that the Group, although solvent, has funding programmes such as debt issuance that subsequently fail. For example, a securitisation arrangement may fail to operate as anticipated or the values of the assets transferred to a funding vehicle do not emerge as expected creating additional risks for the bank and its depositors. Risks arising from the encumbrance of assets are also included within this definition. | |
Futures contract | A contract between two parties to buy or sell a financial instrument or commodity of standardised quantity and quality at a specified future date at a price agreed today (the futures price). Futures differ from forward contracts in that they are traded on recognised exchanges (futures exchange) and rarely result in actual delivery; most contracts are closed out prior to maturity by acquisition of an offsetting position. | |
FX products | These products are derivatives linked to the foreign exchange market. This category includes FX spot and forward contracts; FX swaps; FX options. | |
G20 (G-20 or Group of Twenty) | The Group of Twenty Finance Ministers and Central Bank Governors is a group of finance ministers and central bank governors from 20 major economies: 19 countries (including UK, France, Canada, Australia, USA, South Africa, Japan, China) and the European Union, established in 1999 to promote open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. Since then, the heads of the G20 nations have met semi-annually at G20 summits. | |
GAAP | A body of generally accepted accounting principles such as IFRS. | |
Gain on acquisition | The amount by which the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, recognised in a business combination, exceeds the cost of the combination. | |
Home Loans | A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a residential mortgage. | |
Impaired loans | Loans where an individual identified impairment loss allowance has been raised and also include loans which are fully collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing. | |
Impairment loss allowance | A loss allowance held on the balance sheet as a result of the raising of a charge against profit for the incurred loss inherent in the lending book. An impairment loss allowance may either be identified or unidentified and individual or collective. | |
Impairment losses | The raising of a charge against profit for the incurred loss inherent in the lending book following an impairment review. For financial assets carried at amortised cost, impairment losses are recognised in the income statement and the carrying amount of the financial asset or group of financial assets is reduced by establishing an allowance for impairment losses. For available-for-sale financial assets, the cumulative loss including impairment losses is removed from equity and recognised in the income statement. | |
Individually assessed loan impairment | Impairment is measured individually for assets that are individually significant. For these assets, the Group measures the amount of the impairment loss as the difference between the carrying amount of the asset or group of assets and the present value of the estimated future cash flows from the asset or group of assets discounted at the original effective interest rate of the asset. | |
Interest rate products | Products with a payoff linked to interest rates. This category includes interest rate swaps, swaptions, caps and exotic interest rate derivatives. | |
Interest rate swap | A derivative contract under which two counterparties agree to exchange periodic interest payments on a predetermined monetary principal, the notional amount. | |
Interest spread | The difference between the difference between the gross yield on average interest-earning assets and the interest rate paid on average interest-bearing liabilities. | |
Internal Capital Adequacy Assessment Process (‘ICAAP’) | The Group’s own assessment of its regulatory capital requirements, as part of Basel II. It takes into account the regulatory and commercial environment in which the Group operates, the Group’s risk appetite, the management strategy for each of the Group’s material risks and the impact of appropriate adverse scenarios and stresses on the Group’s capital requirements. |
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Term used in the Annual Report | Definition | |
Internal ratings-based approach (‘IRB’) | The Group’s method, under Basel II framework, of calculating credit risk capital requirements using internal, rather than supervisory, estimates of risk parameters. It is a more sophisticated technique in credit risk management and can be Foundation IRB or Advanced IRB. | |
International Accounting Standards Board (‘IASB’) | The independent standard-setting body of the IASC Foundation. Its members are responsible for the development and publication of International Financial Reporting Standards (‘IFRS’) and for approving Interpretations of IFRS as developed by the IFRS Interpretations Committee (previously International Financial Reporting Interpretations Committee) (‘IFRIC’). | |
Investment grade | A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB. | |
ISDA | International Swaps and Derivatives Association. | |
ISDA Master agreement | Standardised contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into. | |
Jaws | The difference between the growth in cost and the growth in income | |
Key management personnel | Directors and the Executive Committee of Santander UK plc. | |
Level 1 | The fair value of these financial instruments is based on unadjusted quoted prices for identical assets or liabilities in an active market that the Group has the ability to access at the measurement date. | |
Level 2 | The fair value of these financial instruments is based on quoted prices in markets that are not active or quoted prices for similar assets or liabilities, recent market transactions, inputs other than quoted market prices for the asset or liability that are observable either directly or indirectly for substantially the full term, and inputs to valuation techniques that are derived principally from or corroborated by observable market data through correlation or other statistical means for substantially the full term of the asset or liability. | |
Level 3 | The fair value of these financial instruments is based on inputs to the pricing or valuation techniques that are significant to the overall fair value measurement of the asset or liability are unobservable. | |
Leveraged Finance | Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt: EBITDA) typically arising from private equity sponsor led acquisitions of the businesses concerned. | |
Liquid assets | Cash and short term deposits principally held to manage the day-to-day requirements of the business. | |
Liquidity and Credit enhancements | Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over collateralization. Liquidity enhancement makes funds available if required, for other reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper. | |
Liquidity risk | The risk that the Group, although solvent, either does not have available sufficient financial resources to enable it to meet its obligations as they fall due, or can secure them only at excessive cost. | |
Loan impairment loss allowance | See ‘Impairment loss allowance’. | |
Loan loss rate | Defined as total credit impairment charge (excluding available for sale assets and reverse repurchase agreements) divided by gross loans and advances to customers and banks (at amortised cost). | |
Loan modification | A process by which the terms of a loan are modified either temporarily or permanently, including changes to the rate and/or the payment. Modification may also lead to a re-ageing of the account. | |
Loan to deposit ratio | The ratio of the book value of the Group’s commercial assets (i.e. retail and corporate banking assets) divided by its commercial liabilities (i.e. retail and corporate banking deposits, and shareholders’ funds). | |
Loan to value ratio (‘LTV’) | The amount of a first mortgage charge as a percentage of the total appraised value of real property. The LTV ratio is used in determining the appropriate level of risk for the loan and therefore the price of the loan to the borrower. LTV ratios may be expressed in a number of ways, including origination LTV and indexed LTV. Origination LTVs use the current outstanding loan balance and the value of the property at origination of the loan. Indexed LTVs use the current outstanding loan value and the current value of the property (which is estimated using one or more external house price indices). | |
Loans past due | Loans are past due when a counterparty has failed to make a payment when contractually due. |
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Term used in the Annual Report | Definition | |
Loss Given Default (‘LGD’) | The fraction of Exposure at Default (defined above) that will not be recovered following default. LGD comprises the actual loss (the part that is not recovered), together with the economic costs associated with the recovery process. | |
Market risk | The risk of a reduction in economic value or reported income resulting from a change in the variables of financial instruments including interest rate, equity, credit spread, property and foreign currency risks. Market risk consists of trading and non-traded market risks. Trading market risk includes risks on exposures held with the intention of benefiting from short term price differences in interest rate variations and other market price shifts. Non-traded market risk includes, inter alia, interest rate risk in investment portfolios. | |
Master netting agreement | An industry standard agreement which facilitates netting of transactions (such as financial assets and liabilities including derivatives) in jurisdictions where netting agreements are recognised and have legal force. The netting arrangements do not generally result in an offset of balance sheet assets and liabilities for accounting purposes, as transactions are usually settled on a gross basis. | |
Medium Term Notes (‘MTNs’) | Corporate notes (or debt securities) continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon; with a fixed maturity date (non-callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as senior, unsecured debt. | |
Mezzanine capital | A financing instrument that combines debt and equity characteristics, representing a claim on a company’s assets which is senior only to that of common shares. It can be structured either as debt (typically an unsecured and subordinated note) or preferred shares. | |
Monoline | An entity which specialises in providing credit protection to the holders of debt instruments in the event of default by a debt security counterparty. This protection is typically held in the form of derivatives such as credit default swaps referencing the underlying exposures held. | |
Monoline Wrapped | Debt instruments for which credit enhancement or protection by a monoline insurer has been obtained. The wrap is credit protection against the notional and principal interest cash flows due to the holders of debt instruments in the event of default in payment of these by the underlying counterparty. Therefore, if a security is monoline wrapped its payments of principal and interest are guaranteed by a monoline insurer. | |
Mortgage Backed Securities (‘MBS’) | Securities that represent interests in groups of mortgages, which may be on residential or commercial properties. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). When the MBS references mortgages with different risk profiles, the MBS is classified according to the highest risk class. | |
Mortgage vintage | The year the mortgage was issued. | |
Mortgage-related securities | Securities which are referenced to underlying mortgages. See RMBS, CMBS and MBS. | |
Mortgage servicing rights | The rights of a mortgage servicer to collect mortgage payments and forward them, after deducting a fee, to the mortgage lender. | |
Negative equity mortgages | Equates to the value of the asset less the outstanding balance on the loan. It arises when the value of the property purchased is below the balance outstanding on the loan. | |
Net Equity | The change in shareholders’ equity between one period and another. | |
Net Interest Income | The difference between interest received on assets and interest paid on liabilities. | |
Net interest margin | Net interest income as a percentage of average interest-earning assets. | |
Non-asset backed debt instruments | These products are debt instruments. This category includes government bonds; US agency bonds; corporate bonds; commercial paper; certificates of deposit; convertible bonds; corporate bonds and issued notes. | |
Non-GAAP financial measure | A financial measure that measures historical or future financial performance, financial position or cash flows but which excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. Non-GAAP financial measures are not a substitute for GAAP measures. | |
Non-investment grade | A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of BB+ or below. |
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Term used in the Annual Report | Definition | |
Non-performing loans | In the Retail Banking business, loans and advances are classified as non-performing typically when the counterparty fails to make payments when contractually due for three months or longer. In the Corporate Banking business, loans and advances are classified as non-performing either when payments are more than three months past due or where there are reasonable doubts about full repayment (principal and interest) under the contractual terms. | |
Non-traded market risk | See ‘Market risk’. | |
Notional collateral | Collateral based on the notional amount of a financial instrument. | |
Operational risk | The risk of loss to the Group, resulting from inadequate or failed internal processes, people and systems, or from external events. This includes regulatory, legal and compliance risk. | |
Option | A derivative contract that gives the holder the right but not the obligation to buy (or sell) a specified amount of the underlying physical or financial commodity, at a specific price, at an agreed date or over an agreed period. Options can be exchange-traded or traded over-the- counter. | |
Organisation for Economic Co-operation and Development (‘OECD’) | The Organisation for Economic Co-operation and Development is an international economic organisation founded in 1961 to stimulate economic progress and world trade. It defines itself as a forum of countries committed to democracy and the market economy. To date, it comprises of 34 member countries including (but not limited to) key European countries, the United States, Canada and Japan. | |
Overdraft | A line of credit established through a customer’s bank account and contractually repayable on demand | |
Over the counter (‘OTC’) derivatives | Contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. They offer flexibility because, unlike standardised exchange-traded products, they can be tailored to fit specific needs. | |
Own credit | The effect of the Group’s own credit standing on the fair value of financial liabilities. | |
Past due | A financial asset such as a loan is past due when the counterparty has failed to make a payment when contractually due. In the Group’s retail loans book, a loan or advance is considered past due when any contractual payments have been missed. In the Group’s corporate loans book, a loan or advance is considered past due when 90 days past due, and also when the Group has reason to believe that full repayment of the loan is in doubt. | |
Pension obligation risk | The risk of an unplanned increase in funding required by the Group’s pension schemes, either because of a loss of net asset value or because of changes in legislation or regulatory action. | |
Potential Credit Risk Loans (‘PCRLs’) | Comprise the outstanding balances to Potential Problem Loans (defined below) and the three categories of Credit Risk Loans (defined above). | |
Potential problem loans | Loans other than non-accrual loans, accruing loans which are contractually overdue 90 days or more as to principal or interest and troubled debt restructurings where known information about possible credit problems of the borrower causes management to have serious doubts about the borrower’s ability to meet the loan’s repayment terms. | |
Prime / prime mortgage loans | Loans of a higher credit quality and those which would be expected to satisfy the criteria for inclusion into Government programmes. These loans are made to borrowers with good credit records and a monthly income that is at least three to four times greater than their monthly housing expense (mortgage payments plus taxes and other debt payments). These borrowers provide full documentation and generally have reliable payment histories. | |
Principal transactions | Principal transactions comprise net trading income and net investment income. | |
Private equity investments | Private equity is equity securities in operating companies not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. | |
Probability of default (‘PD’) | The likelihood that a loan will not be repaid and will fall into default. PD may be calculated for each client who has a loan (normally applicable to wholesale customers/clients) or for a portfolio of clients with similar attributes (normally applicable to retail customers). To calculate PD, the Group assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. Multiple rating methodologies may be used to inform the rating decision on individual large credits, such as internal and external models, rating agency ratings, and for wholesale assets market information such as credit spreads. For smaller credits, a single source may suffice such as the result from an internal rating model. |
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Term used in the Annual Report | Definition | |
Product structural hedge | An interest rate hedge which functions to reduce the impact of volatility of short-term interest rate movements on balance sheet positions that can be matched to a specific product, e.g. customer balances that do not re-price with market rates. | |
Regular way purchase | A purchase of a financial asset under a contract whose terms require delivery of the asset within the timeframe established generally by regulation or convention in the market place concerned. | |
Regulatory capital | The amount of capital that the Group holds, determined in accordance with rules established by the UK Financial Services Authority for the consolidated Group and by local regulators for individual Group companies. | |
Renegotiated loans | Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan. | |
Reputational risk | The risk of financial loss or reputational damage arising from treating customers unfairly, a failure to manage risk, a breakdown in internal controls, or poor communication with stakeholders. This includes the risk of decline in the value of the Group’s franchise potentially arising from reduced market share, complexity, tenor and performance of products and distribution mechanisms. The reputational risk arising from operational risk events is managed within the operational risk framework. | |
Residential mortgage | See ‘Home Loans’. | |
Residential Mortgage Backed Securities (‘RMBS’) | Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). | |
Residual credit risk | An element of credit risk which arises when credit risk measurement and mitigation techniques prove less effective than expected. | |
Residual value (of an asset) | The estimated amount that the Group would currently obtain from disposal of an asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. | |
Residual value risk | The risk that the value of an asset at the end of a contract may be worth less than that required to achieve the minimum return from the transaction that had been assumed at its inception. | |
Restricted shares | Awards of the Group’s ordinary shares to which employees will normally become entitled, generally between one and three years, subject to remaining an employee. | |
Restructured loans | Loans where, for economic or legal reasons related to the debtor’s financial difficulties, a concession has been granted to the debtor that would not otherwise be considered. Where the concession results in the expected cash flows discounted at the original effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised. | |
Retail Internal Risk-based (‘IRB’) approach | The Group’s internal method of calculating credit risk capital requirements for its key retail portfolios. The UK Financial Services Authority approved the Group’s application of the retail IRB approach to the Group’s credit portfolios with effect from 1 January 2008. | |
Retail Loans | Loans to individuals rather than institutions, including residential mortgage lending and banking and consumer credit. Residential mortgage lending is secured against residential property. Banking and consumer credit is unsecured lending, including current accounts, credit cards and personal loans, which may be used for various customer uses including car purchases, medical care, home repair and holidays. | |
Return on average shareholders’ equity | Calculated as profit for the year attributable to equity holders of the Parent divided by the average shareholders’ equity for the year, excluding non-controlling interests. | |
Return on average total assets | Profit for the year attributable to equity holders of the Parent divided by the average total assets for the year, excluding non-controlling interests. | |
Risk appetite | The level of risk (types and quantum) that the Group is willing to accept (or not accept) to safeguard the interests of shareholders whilst achieving business objectives. | |
Risk weighted assets | A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the UK Financial Services Authority. |
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Term used in the Annual Report | Definition | |
Sale and repurchase agreement | In a sale and repurchase agreement one party, the seller, sells a financial asset to another party, the buyer, under commitments to reacquire the asset at a later date. The buyer at the same time agrees to resell the asset at the same later date. From the seller’s perspective such agreements are securities sold under repurchase agreements (‘repos’) and from the buyer’s securities purchased under commitments to resell (‘reverse repos’). | |
Second charge / lien | See ‘First/Second charge’. | |
Securities sold under a repurchase agreement (‘repo’) | A repurchase agreement that allows a borrower to use a financial security as collateral for a cash loan at a fixed rate of interest. With a security sold under a repurchase agreement or a repo, the borrower agrees to sell a security to the lender subject to a commitment to repurchase the asset at a specified price on a given date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction (buying the security and agreeing to sell in the future), it is a security purchased under commitments to resell or a reverse repo. | |
Securities purchased under commitment to resell (‘reverse repo’) | See ‘Securities sold under a repurchase agreement’. | |
Securitisation | Securitisation is a process by which a group of assets, usually loans, are aggregated into a pool, which is used to back the issuance of new securities. Securitisation is the process by which ABS (asset backed securities) are created. A company sells assets to an SPE (special purpose entity) which then issues securities backed by the assets, based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors. Assets used in securitisations include mortgages to create mortgage-backed securities or residential mortgage-backed securities (‘RMBS’) as well as commercial mortgage-backed securities. The Group has established several securitisation structures as part of its funding and capital management activities. | |
Short-term borrowings | Defined by the US Securities and Exchange Commission (‘SEC’) as amounts payable for short-term obligations that are US Federal funds purchased and securities sold under repurchase agreements, commercial paper, borrowings from banks, borrowings from factors or other financial institutions and any other short-term borrowings reflected on the balance sheet. | |
Small and medium sized enterprises (‘SMEs’) | Companies principally with annual turnover between £1m and £25m. | |
Special Purpose Entities (‘SPEs’) or Special Purpose Vehicles (‘SPVs’) | Entities that are created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoing activities. Transactions with SPEs/SPVs take a number of forms, including: | |
> The provision of financing to fund asset purchases, or commitments to provide finance for future purchases. > Derivative transactions to provide investors in the SPE/SPV with a specified exposure. > The provision of liquidity or backstop facilities which may be drawn upon if the SPE/SPV experiences future funding difficulties. > Direct investment in the notes issued by SPEs/SPVs. | ||
Standardised approach | In relation to credit risk, a method for calculating credit risk capital requirements under Basel II, using External Credit Assessment Institutions (‘ECAI’) ratings and supervisory risk weights. The Standardised approach is less risk-sensitive than IRB (see ‘IRB’ defined above). In relation to operational risk, a method of calculating the operational capital requirement under Basel II, by the application of a supervisory defined percentage charge to the gross income of eight specified business lines. | |
Strategic risk | See ‘Business / strategic risk’. | |
Structural hedge | See ‘Product structural hedge’. | |
Structured Investment Vehicles (‘SIVs’) | Special Purpose Entities which invest in diversified portfolios of interest earning assets to take advantage of the spread differentials between the assets in the SIV and the funding cost. | |
Structural liquidity | The liquidity available from current positions — principally unpledged marketable assets and holdings of term liabilities with long remaining lives. | |
Structured finance/notes | A structured note is an instrument which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency. |
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Term used in the Annual Report | Definition | |
Subordination | The state of prioritising repayments of principal and interest on debt to a creditor lower than repayments to other creditors by the same debtor. That is, claims of a security are settled by a debtor to a creditor only after the claims of securities held by other creditors of the same debtor have been settled. | |
Subordinated liabilities | Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer. | |
Sub-Prime | Defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default. | |
Tier 1 capital | A measure of a bank’s financial strength defined by the UK Financial Services Authority. It captures Core Tier 1 capital plus other Tier 1 securities in issue, but is subject to a deduction in respect of material holdings in financial companies. | |
Tier 1 capital ratio | The ratio expresses Tier 1 capital as a percentage of risk weighted assets. | |
Tier 2 capital | Defined by the UK Financial Services Authority. Broadly, it includes qualifying subordinated debt and other Tier 2 securities in issue, eligible collective impairment allowances, unrealised available for sale equity gains and revaluation reserves. It is subject to deductions relating to the excess of expected loss over regulatory impairment allowance, securitisation positions and material holdings in financial companies. | |
Total shareholder return | Defined as the value created for shareholders through share price appreciation, plus reinvested dividend payments. | |
Trading basis (Trading income, trading expenses, trading provisions) | The basis on which financial information for each reporting segment, including measures of operating results, assets and liabilities, are measured and reviewed by the Board. The segments are managed primarily on their results prepared on such basis. The trading basis differs from the statutory basis as a result of the application of various adjustments as described below. Management considers that the trading basis provides the most appropriate way of evaluating the performance of the business. The adjustments consist of: | |
Alliance & Leicester pre-acquisition trading basis results — Following the transfer of Alliance & Leicester plc to the Company in January 2009, the statutory results for the years ended 31 December 2010 and 2009 include the results of the Alliance & Leicester business, whereas the statutory results for the year ended 31 December 2008 do not. In order to enhance the comparability of the results for the three periods, management reviews the 2008 results including the pre-acquisition results of the Alliance & Leicester group for that period. | ||
Reorganisation and other costs — These comprise implementation costs in relation to the cost reduction projects, including integration-related expenses, certain impairment losses taken centrally, as well as costs in respect of customer remediation. Management needs to understand the underlying drivers of the cost base that will remain after these exercises are complete, and does not want this view to be clouded by these costs, which are managed independently. | ||
Depreciation of operating lease assets — The operating lease businesses are managed as financing businesses and, therefore, management needs to see the margin earned on the businesses. Residual value risk is separately managed. As a result, the depreciation is netted against the related income | ||
Profit on part sale and revaluation of subsidiaries — These profits are excluded from the results to allow management to understand the underlying performance of the business. | ||
Hedging and other variances — The Balance Sheet and Income Statement are subject to mark-to-market volatility including that arising from the accounting for elements of derivatives deemed under IFRS rules to be ineffective as hedges. Volatility also arises on certain assets previously managed on a fair value basis, and hence classified as fair value through profit or loss under IFRS, that are now managed on an accruals basis. Where appropriate, such volatility is separately identified to enable management to view the underlying performance of the business. In addition, other variances include the reversal of coupon payments on certain equity instruments which are treated as interest expense in the trading results but are reported below the profit after tax line for statutory purposes. | ||
Capital and other charges — These principally comprise internal nominal charges for capital invested in the Group’s businesses. Management implemented this charge to assess the effectiveness of capital investments. |
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Term used in the Annual Report | Definition | |
Trading market risk | See ‘Market risk’. | |
Troubled debt restructurings | Comprise those loans that are troubled debt restructurings but that are not included in either non-accrual loans or in accruing loans which are contractually overdue 90 days or more as to principal or interest. A restructuring of a loan is a troubled debt restructuring if the lender, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. | |
Unaudited | Unaudited financial information is information that has not been subjected to the audit procedures undertaken by the Group’s auditors to enable them to express an opinion on the Group’s financial statements. | |
Unfunded | See ‘Funded / unfunded’. | |
Unsecured personal lending (‘UPL’) | A loan made to an individual that is not collateralised by a charge on specific assets of the borrower. In the event of the bankruptcy of the borrower, unsecured creditors have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors. As a result, the unsecured creditors may realise a smaller proportion of their claims than the secured creditors. The Group’s unsecured personal lending comprises unsecured loans, credit cards and overdrafts to individuals. | |
Value at Risk (‘VaR’) | An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level. | |
Write-Down | After an advance has been identified as impaired and is subject to an impairment allowance, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable. | |
Wrong-way risk | An aggravated form of concentration risk and arises when there is an adverse correlation between the counterparty’s probability of default and the mark-to-market value of the underlying transaction. |
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1. | The financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and | |
2. | The management report, which is incorporated into the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face. |
Chief Executive Officer
17 March 2011
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Part I | ||||||||
1 | Identity of Directors, Senior Management and Advisers | * | ||||||
2 | Offer Statistics and Expected Timetable | * | ||||||
3 | Key Information | Selected Financial Data | 263 | |||||
Capitalisation and Indebtedness | * | |||||||
Reasons for the Offer and use of Proceeds | * | |||||||
Risk Factors | 266 | |||||||
4 | Information on the Company | History and Development of the Company | 6 | |||||
Business Overview | 6 | |||||||
Organisational Structure | 7 | |||||||
Property, Plant and Equipment | 54 | |||||||
4A | Unresolved Staff Comments | N/a | ||||||
5 | Operating and Financial Review and Prospects | Operating Results | 13 | |||||
Liquidity and Capital Resources | 59 | |||||||
Research and Development, Patents and Licenses, etc | N/a | |||||||
Trend Information | 2 | |||||||
Off-Balance Sheet Arrangements | 58 | |||||||
Contractual Obligations | 58 | |||||||
6 | Directors, Senior Management and Employees | Directors and senior management | 135 | |||||
Compensation | 141 | |||||||
Board Practices | 140 | |||||||
Employees | 143 | |||||||
Share Ownership | 143 | |||||||
7 | Major Shareholders and Related Party Transactions | Major Shareholders | 277 | |||||
Related Party Transactions | 142, 235 | |||||||
Interests of Experts and Counsel | * | |||||||
8 | Financial Information | Consolidated Statements and Other Financial | 152 | |||||
Information | ||||||||
Significant Changes | 12, 137 | |||||||
9 | The Offer and Listing | Offer Listing and Details | * | |||||
Plan of Distribution | * | |||||||
Markets | N/a | |||||||
Selling shareholders | * | |||||||
Dilution | * | |||||||
Expenses of the Issue | * | |||||||
10 | Additional Information | Share Capital | * | |||||
Articles of Association | 279 | |||||||
Material Contracts | 41 | |||||||
Exchange Controls | N/a | |||||||
Taxation | 277 | |||||||
Dividends and Paying Agents | * | |||||||
Statements by Experts | * | |||||||
Documents on Display | 278 | |||||||
Subsidiary Information | N/a | |||||||
11 | Quantitative and Qualitative Disclosures about Market Risk | 112 | ||||||
12 | Description of Securities Other Than Equity Securities | Debt Securities | * | |||||
Warrants and Rights | * | |||||||
Other Securities | * | |||||||
American Depositary Shares | * | |||||||
Part II | ||||||||
13 | Defaults, Dividend Arrearages and Delinquencies | N/a | ||||||
14 | Material Modifications to the Rights of Security Holders and Use of Proceeds | N/a | ||||||
15 | Controls and Procedures | Disclosure Controls and Procedures | 146 | |||||
Management’s Annual Report on Internal Control | 146 | |||||||
over Financial Reporting | ||||||||
Attestation Report of the Registered Public | N/a | |||||||
Accounting Firm | ||||||||
Changes in Internal Control Over Financial Reporting | 146 | |||||||
16A | Audit Committee Financial Expert | 140 | ||||||
16B | Code of Ethics | 144 | ||||||
16C | Principal Accountant Fees and Services | 186 | ||||||
16D | Exemptions from the Listing Standards for Audit Committees | N/a | ||||||
16E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | N/a | ||||||
16F | Change in Registrant’s Certifying Accountant | N/a | ||||||
16G | Corporate Governance | N/a | ||||||
Part III | ||||||||
17 | Financial Statements | N/a | ||||||
18 | Financial Statements | 152 | ||||||
19 | Exhibits | Filed with SEC | ||||||
* | Not required for an Annual Report. |
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By: | /s/ Ana Botín | |||
Chief Executive Officer |
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1.1 | Articles of Association of Santander UK plc2 |
4.1 | Cross guarantee agreement between Abbey National plc and Alliance & Leicester plc dated 19 March 20093 | |
7.1 | Statement of ratio of earnings to fixed charges4 | |
8.1 | List of Subsidiaries of Santander UK plc | |
12.1 | CEO Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12.2 | Financial Controller Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
13.1 | Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
15.1 | Consent of Deloitte LLP4 |
1 | Documents concerning Santander UK plc referred to within the Annual Report on Form 20-F 2010 may be inspected at 2 Triton Square, Regent’s Place, London NW1 3AN, the principal executive offices and registered address of Santander UK plc. | |
2 | As previously furnished with the Securities and Exchange Commission on the Form 6-K dated 10 March 2010 of Santander UK plc. | |
3 | As previously filed with the Securities and Exchange Commission on pages 148 through 150 of the Form 20-F dated 19 March 2009 of Abbey National plc. | |
4 | Incorporated by reference into Registration Statement Nos. 333-10232, 333-11320 on Forms F-3. |