EXHIBIT 7.1
7.1 Explanation of ratio calculations
| Year ended 31 December | 3 months ended 31 December 1999 | Year ended 30 September | ||||||||||
| 2002 | 2001 | 2000 | 1999 | 1998 | ||||||||
| Other financial data in accordance with UK | ||||||||||||
| GAAP(1): | ||||||||||||
| Earnings per ordinary share - pence | 68.4 | 67.6 | 66.9 | 28.6 | 87.5 | 75.5 | ||||||
| Diluted earnings per ordinary share - pence(2) | 67.4 | 66.3 | 66.2 | 28.1 | 86.3 | 74.4 | ||||||
| Adjusted earnings per ordinary share - pence | 144.1 | 127.9 | 101.2 | 22.2 | 87.5 | 74.4 | ||||||
| Dividends per ordinary share - pence | 43.7 | 38.0 | 33.0 | - | 28.5 | 24.6 | ||||||
| Dividend payout ratio | 64.3 | % | 58.1 | % | 56.1 | % | - | 32.9 | % | 32.8 | % | |
| Share price per ordinary share at period end - £(3) | 14.88 | 16.72 | 15.82 | 10.98 | 13.03 | 6.70 | ||||||
| Market capitalisation at period end - £bn | 43.2 | 47.8 | 42.4 | 9.8 | 11.6 | 5.9 | ||||||
| Net asset value per ordinary share - £ | 8.12 | 7.79 | 7.08 | 3.35 | 3.09 | 2.31 | ||||||
| Return on average total assets(4) | 0.50 | % | 0.53 | % | 0.58 | % | 1.15 | % | 0.92 | % | 0.88 | % |
| Return on average ordinary shareholders’ equity(5) | 8.4 | % | 8.9 | % | 9.9 | % | 34.1 | % | 32.0 | % | 28.0 | % |
| Adjusted return on average ordinary shareholders’ equity(6) | 17.6 | % | 16.8 | % | 14.9 | % | 37.1 | % | 33.2 | % | 29.9 | % |
| Average shareholders’ equity as a percentage of average total assets | 6.9 | % | 7.2 | % | 7.2 | % | 4.8 | % | 4.1 | % | 4.0 | % |
| Risk asset ratio - Tier 1 | 7.3 | % | 7.1 | % | 6.9 | % | 7.7 | % | 8.1 | % | 6.6 | % |
| - Total | 11.7 | % | 11.5 | % | 11.5 | % | 11.2 | % | 12.1 | % | 11.2 | % |
| Ratio of earnings to combined fixed charges | ||||||||||||
| and preference share dividends(7) | ||||||||||||
| - including interest on deposits | 1.73 | 1.49 | 1.32 | 1.46 | 1.33 | 1.26 | ||||||
| - excluding interest on deposits | 5.12 | 4.45 | 3.49 | 4.77 | 3.99 | 3.81 | ||||||
| Ratio of earnings to fixed charges only(7) | ||||||||||||
| - including interest on deposits | 1.82 | 1.55 | 1.37 | 1.52 | 1.37 | 1.29 | ||||||
| - excluding interest on deposits | 7.13 | 6.52 | 4.81 | 6.63 | 5.06 | 4.84 | ||||||
| Other financial data in accordance with US | ||||||||||||
| GAAP: | ||||||||||||
| Basic earnings per ordinary share - pence | 107.9 | 74.7 | 89.5 | 26.8 | 76.7 | 62.2 | ||||||
| Diluted earnings per ordinary share - pence(2) | 106.3 | 73.2 | 88.5 | 26.4 | 75.7 | 61.3 | ||||||
| Dividends per ordinary share - pence | 39.7 | 34.5 | 29.8 | - | 25.7 | 22.3 | ||||||
| Dividend payout ratio | 36.7 | % | 45.7 | % | 20.6 | % | - | 33.5 | % | 35.9 | % | |
| Return on average total assets(4) | 0.75 | % | 0.57 | % | 0.77 | % | 0.27 | % | 0.78 | % | 0.71 | % |
| Return on average ordinary shareholders’ equity(5) | 12.1 | % | 8.8 | % | 12.0 | % | 6.3 | % | 19.9 | % | 14.0 | % |
| Average shareholders’ equity as a percentage of average total assets | 7.3 | % | 7.7 | % | 7.7 | % | 5.7 | % | 5.2 | % | 5.0 | % |
| Ratio of earnings to combined fixed charges, | ||||||||||||
| preference share dividends and perpetual regulatory securities interest(7) | ||||||||||||
| - including interest on deposits | 1.97 | 1.51 | 1.41 | 1.45 | 1.31 | 1.24 | ||||||
| - excluding interest on deposits | 6.49 | 4.63 | 4.19 | 4.65 | 3.73 | 3.58 | ||||||
| Ratio of earnings to fixed charges only(7) | ||||||||||||
| - including interest on deposits | 2.07 | 1.59 | 1.46 | 1.50 | 1.34 | 1.26 | ||||||
| - excluding interest on deposits | 9.03 | 6.98 | 5.77 | 6.46 | 4.73 | 4.55 | ||||||
| Notes: | |
| (1) | All prior periods have been restated, where appropriate, following the implementation of FRS 19 in 2002. The year ended 31 December 2001 has also been restated, where appropriate, following the issuance of UITF 33 in February 2002. |
| (2) | Convertible preference shares totalling £200 million (2001 and 2000 - £800 million), €750 million (2001 and 2000 - €750 million) and $1,900 million (2001 and 2000 - $1,900 million) have not been included in the computation of diluted earnings per share as their effect is anti-dilutive. Interest payments on the $1,200 million (2001 - $1,200 million) perpetual regulatory securities may be settled by the issue of ordinary shares at the option of the company and have not been included in the computation of diluted earnings per share as their effect is also anti-dilutive. |
| (3) | The share prices at 31 December 1999, 30 September 1999 and 30 September 1998 have not been adjusted for the bonus issue in July 2000, of Additional Value Shares in connection with the acquisition of NatWest. |
| (4) | Return on average total assets represents profit attributable to ordinary shareholders as a percentage of average total assets. |
| (5) | Return on average ordinary shareholders’ equity represents profit attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders’ equity. |
| (6) | Adjusted return on average ordinary shareholders’ equity represents profit attributable to ordinary shareholders before integration costs, goodwill amortisation and the AVS divided, expressed as a percentage of average ordinary shareholders’ equity. |
| (7) | For this purpose, earnings consist of income before tax and minority interests, plus fixed charges less the unremitted income of associated undertakings (share of profits less dividends received). Fixed charges consist of total interest expense, including or excluding interest on deposits and debt securities in issue, as appropriate, and the proportion of rental expense deemed representative of the interest factor (one third of total rental expenses). |
