Interim Results Announcement for the six months ended 30 September 2005
Contents
Introduction
Results highlights
Business and financial review
Statutory Information
Consolidated statutory income statement
Consolidated statutory balance sheet
Consolidated statutory statement of recognised income and expense
Consolidated statutory cash flow statement
Notes to the interim results announcement (statutory basis)
Additional information
Pro-forma Information
Consolidated pro-forma income statement
Notes to the Interim Results Announcement (pro-forma basis)
Independent review report
Other information
Contacts
Introduction
The 2005/06 interim results have been prepared using International Financial Reporting Standards ("IFRS"). IFRS differ from UK GAAP which was used in the preparation of previous financial statements. The impact of implementation of IFRS on 2004/05 financial results was published in a restatement on 22 September 2005. This restatement also included the provisional accounting policies which have been adopted by the Group in preparing the 2005/06 interim results.
Underlying Results
Under IFRS the 2005/06 financial results include the full effects of the introduction of fair valuation of derivatives and hedge accounting. The effects of net losses from fair value accounting volatility and hedge ineffectiveness have been excluded to arrive at the 2005/06 underlying results in order that comparable business performance and trends are clearly identifiable. Underlying profit before tax of £261.0m equates to operating profit before tax of £254.7m adjusted for net losses from fair value accounting volatility of £6.3m
Statutory Results
The 2005/06 interim results have been prepared in accordance with IFRS standards which have been, or are expected to be, endorsed by the EU and in effect for the year ended 4 April 2006. In accordance with IFRS transitional arrangements certain of these standards were only effective from 5 April 2005. These standards have therefore not been applied in the preparation of the restated 2004/05 statutory based comparatives as included on pages 12 to 24.
Pro-forma Results
To facilitate comparison and understanding of the 2005/06 interim results, pro-forma 2004/05 comparatives have also been prepared and included on pages 27 to 30. These show how the 2004/05 comparatives would have looked, where it is possible to determine what the impact would have been, if all the standards had been effective in 2004/05. In particular the pro-forma comparatives illustrate the impacts of the changes to effective yield recognition of fees/costs and the more stringent evidence testing required for raising loan impairment provisions. However, they do not show the full impact from all the IAS 39 accounting rules as hedges and financial assets to be fair valued were only designated and documented from 5 April 2005.
Change in Interim Reporting Date
The Group has changed its interim reporting date from the 4 October to the 30 September. Coinciding this date with a calendar month end reduces the complexity and associated costs that would have otherwise been incurred on the transition to IFRS. However the 4 October 2004 interim reporting date for the comparative information has not been adjusted. The 4 April year-end date remains unchanged.
Results highlights
Nationwide Building Society today announced its interim results for the period ended 30 September 2005.
REVIEW
Nationwide's strategic objective is to deliver value to its membership whilst retaining sufficient profit to support continued investment in the business and the future growth of the balance sheet.
The success of this strategy is evidenced by our delivering a broad range of financial services products which has enabled us to increase underlying profit before tax by 16.7% to £261.0m compared with the pro-forma profit of £223.7m to 4 October 2004. Taking account of net losses from fair value accounting volatility of £6.3m, profit before tax was £254.7m up 13.9% on a pro-forma basis. Assets grew by 5.5% from £111.6bn at the last year end to £117.7bn. Our member base grew by around 400,000 during the half year and is in excess of 11 million.
During the first half of the year we generated an estimated £350m (4 October 2004 - £300m) in the form of pricing benefit to our members by offering better rates and by charging lower fees and charges than our competitors. This is in addition to the £175.3m (4 October 2004 pro-forma - £158.9m) that we retained in the business, an increase of 10.3% on the same period last year.
The underlying cost to income ratio improved to 61.0% (4 October 2004 pro-forma - 62.4%).
Last year we announced the investment of £300m in a six year programme to ensure that our branch, telephones and other access channels are maintained at the modern standards expected by our members. Since then excellent progress has been made in improving and modernising our distribution channels. We have refurbished nearly 100 branches, made a number of investments in our Agency Network, launched a new telephone banking service and provided text alerting for both mortgage and current account members. In addition, we continue to make good progress in improving the functionality of our Internet Bank.
FINANCIAL & BUSINESS HIGHLIGHTS
Financial
- underlying profit before tax was up 16.7% to £261.0m (4 October 2004 pro-forma - £223.7m)
- profit before tax, including net losses from fair value accounting volatility of £6.3m, was up 13.9% to £254.7m (4 October 2004 pro-forma - £223.7m)
- retained earnings up 10.3% to £175.3m (4 October 2004 pro-forma -£158.9m)
- members' pricing benefit delivered equivalent of £350m (4 October 2004 - £300m)
- total assets up 5.5% to £117.7bn (4 April 2005 - £111.6bn)
- underlying ratio of costs to income reduced to 61.0% (4 October 2004 pro-forma - 62.4%)
Mortgages
- gross advances of £10.8bn representing a market share of 7.3% (4 October 2004 - £13.7bn, 8.7%)
- retention of mortgage business has continued to be strong with principal repaid representing a market share of 6.9% (4 October 2004 - 6.3%), well below our par share of 9.0%
- net lending of £4.0bn representing a market share of 8.3% (4 October 2004 - £7.4bn, 13.7%)
- proportion of secured lending more than three months in arrears remains at 0.31% against an industry average of 0.87% (Council of Mortgage Lenders figure as at June 2005)
Savings
- balances increased by £4.1bn from £72.6bn at 4 April 2005 to £76.7bn at 30 September 2005
- 9.4% market share of the change in balances (4 October 2004 - 9.3%), ahead of our par share of 8.2%
- monthly Income 65+ attracted around £600m deposits into over 40,000 accounts (launched in July 2005)
Banking & Consumer Lending
- gross personal loan lending increased by 29% to £701m (4 October 2004 - £542m)
- new credit card accounts issued totalled 133,000 (4 October 2004 - 114,000)
- total credit card accounts up 12% to 891,000 (4 April 2005 - 796,000)
- number of current accounts grew 8% to 3,407,000 (4 April 2005 - 3,150,000)
Life Assurance and Investments
- net equity ISA sales were 4.9% of the market (4 October 2004 - 3.8%) against a par share of 3.2%
- new Unit Trust accounts up 58% to 46,000 (4 October 2004 - 29,000)
- market share of Child Trust Fund estimated at over 17%
Commercial Lending
- gross advances of £2.2bn (4 October 2004 - £2.0bn), a growth of 10%
CHIEF EXECUTIVE'S REVIEW
Philip Williamson, chief executive, said "Once again we have delivered a strong performance in a highly competitive market. Far from being a building society purely focused on mortgages and savings, we are now competing very effectively in the current account, credit card and personal loan markets. During the past six months we have successfully launched a new savings product aimed at meeting the needs of those aged 65 or over and built upon our strong position in the children's savings market by taking a significant market share in the Child Trust Fund market."
"We are continuing with our £300 million customer service improvement programme and by the end of March 2006, we will have opened our fifth UK regional call centre, in Wakefield. 3,000 new members are joining us every day because we make them better off than the banks - that's why we now have a growing membership base in excess of 11 million people."
Business And Financial Review
Mortgages
We provide a comprehensive range of very competitive mortgage products both directly (through branches, over the phone and via the Internet) and through intermediaries. Unlike the majority of other lenders, all our mortgage products are available to both new and existing customers. We believe it is unfair to offer attractive deals to new customers which are not available to long standing existing customers.
The mortgage market was very competitive in the first half year, particularly in introduced business. Against this backdrop, Nationwide Group achieved £4.0bn of net lending (4 October 2004 - £7.4bn), representing a market share of 8.3% (4 October 2004 - 13.7%) against a par market share of 9.0%. We have successfully maintained a high quality mortgage book, which continues to have a very low risk profile.
- the UK experienced a slightly weaker mortgage market during the first half of 2005/06, following the housing market slowdown. Gross advances in the six months to September 2005 were £148bn (down 6% on the same period last year), although remortgaging has continued to support the market, accounting for 42% of total market lending
- Nationwide Group's gross lending in the first half was £10.8bn, a market share of 7.3% (4 October 2004 - 8.7%) in highly competitive market conditions in particular in the re-mortgage market
- we were again successful in retaining borrowers. Our policy of selling simple mortgage products available to all borrowers, pricing our standard variable rate mortgage lower than our major competitors - on average 0.5% lower over the six months - and an active policy of customer contact enabled us to retain borrowers with maturing fixed rate and tracker rate mortgage products. Our 6.9% market share of principal repaid in the Group was well below our mortgage par share of 9.0%
Asset quality remains very strong. Our responsible approach to lending has ensured that our arrears levels are better than industry averages. The average loan to value (LTV) of the total book is 37% (4 April 2005 - 37%) and the average LTV on new lending was 52% over the first 6 months (4 October 2004 - 53%).
Residential mortgage cases 3 months or more in arrears have reduced by 4% over the past twelve months. Nationwide continues to significantly outperform the secured lending market with the proportion of total secured lending cases currently more than three months in arrears being 0.31% (4 April 2005 - 0.31%) against an industry average of 0.87% (CML figures as at June 2005).
Savings
The competition for retail funds remained strong during the year in a market that was larger than experienced over the same period last year. Despite this continued competition, we achieved a 9.4% (4 October 2004 - 9.3%) share of the overall increase in UK retail savings, representing a £4.1bn (4 October 2004 - £3.6bn) increase in our members' savings balances. This compares favourably with a par share of 8.2%. Total retail member deposits as at 30 September 2005 amounted to £76.7bn (4 April 2005 - £72.6bn).
In July we launched Monthly Income 65+ a branch based account specifically for members aged 65 and over and this has attracted around £600m in balances into over 40,000 accounts. This product, together with our e-Savings account, has proved particularly popular in terms of attracting net receipts.
Banking & Consumer Lending - Personal Loans
Gross unsecured personal loan lending increased by 29% to £701m (4 October 2004 - £542m), driven by our competitive pricing. This performance is particularly strong given that the gross lending market is estimated to be £2.7bn, or 10%, lower than the same period last year. Net lending reflected the same strong performance with a market share of 3.6% (4 October 2004 - 2.2%). Unsecured personal loans balances amounted to £1.7bn (4 April 2005 - £1.5bn).
We adopt a cautious approach to all of our lending activities, particularly unsecured lending. We rejected approximately one in every two unsecured loan applications received in the half year, the same level as last year. We already have other relationships with nearly three quarters of those to whom we provide personal loans.
For unsecured personal lending, the value of loans over 30 days in arrears as a percentage of total loans remains stable at 4.2% (4 October 2004 - 4.2%) around 40% lower than the average of the members of the Finance and Leasing Association.
Banking & Consumer Lending - Credit Cards
With over 1,300 brands available in the UK, the Society continues to differentiate its credit card through no charges for international use and a positive order of payments (allocating payments to clear the most expensive debt first).
In the six months ending 30 September 2005 we issued 133,000 new credit card accounts (4 October 2004 - 114,000) taking the total accounts up to 891,000 (4 April 2005 - 796,000) and the total cards in issue to almost 1.2m (4 April 2005 - 1.1m). Balances outstanding on credit cards as at 30 September 2005 increased by 14.6% to £654m (4 April 2005 - £567m).
For our credit card accounts, the value of loans over 30 days in arrears as a percentage of total card accounts is 5.7% (4 October 2004 - 5.9%) around 30% lower than the average of the members of APACS.
Banking & Consumer Lending - Current Accounts
The Society's current account, FlexAccount, is a key product in developing and retaining customers. We offer a highly competitive account with a range of good value features including up to 3% credit interest. Use of our Internet Banking service continues to increase.
The total number of Nationwide current accounts has now passed 3.4m (4 April 2005 - 3.1m), with the number of current accounts growing by 260,000 in the first six months of this financial year.
General Insurance
During this half year over 144,000 general insurance covers were sold and our general insurance book stood at over 1.5m covers as at 30 September 2005. We typically use leading insurers as third-party underwriters. This provides us with an important source of non-interest income and we earned £34.3m (4 October 2004 - £33.9m) from commission so far this year.
Life Assurance and Investments
The Society, through its wholly owned subsidiaries, Nationwide Life Limited (NL) and Nationwide Unit Trust Managers Limited (NUTM), writes a range of investment and protection products.
The personal investment products include unit trusts, pension contracts, guaranteed equity bonds and equity individual savings accounts (ISAs). At 30 September 2005 unit trust funds under management held by our customers amounted to approximately £2.3bn (4 April 2005 - £2.0bn). Following last year's re-launch of its full range of investments, abolishing initial charges and introducing a £20 minimum investment, NUTM has recorded 46,000 sales compared with 29,000 in the comparable period last year (this excludes Equity Child Trust Funds).
Nationwide is one of only four high street providers to offer the choice of an equity or cash based Child Trust Fund. Almost 200,000 applications have been received, with around 60% opting for a cash investment and around 40% opting for the equity based product. Nationwide has a market share estimated at over 17% for this product.
Commercial Lending
Commercial mortgage lending was strong in the first half totalling £2.2bn (4 October 2004 - £2.0bn), representing an increase of 10%, with gross balances outstanding of £13.4bn (4 April 2005 - £12.8bn).
Asset quality remains strong. Commercial lending arrears levels of three months or more have improved year on year from 82 to 66 cases.
We remain the lender with the largest volume of funding commitments to Registered Social Landlords ('RSLs') and this represents £4.2bn of our Commercial Loan Book. Many RSLs have seen their businesses mature, particularly those that originally received the transfer of municipal housing stock from local authorities. Whilst there have been fewer new stock transfers this year there have been several refinancings and increases in borrowing as RSLs respond to government initiatives on efficiency and new housebuilding especially in the south east.
Treasury
Total wholesale funding was broadly flat with balances at 30 September 2005 of £30.3bn (4 April 2005 - £29.9bn), representing a funding ratio of 28.3% (4 April 2005 - 29.1%).
During the first 6 months we successfully executed a 5 year sterling transaction for £500m with strong demand from our UK investor base. In addition the funding programmes were updated and the EMTN and US MTN programmes are fully compliant with the new EU Prospective Directive.
Increasing importance continues to be placed on diversifying our global investor base through our investor relations activities and we will be introducing a covered bond programme by the end of the year.
Our short and medium term credit ratings from the major rating agencies have remained stable during the period. They are as follows:
| Short term | Long term | |
|---|---|---|
| Fitch IBCA | F1+ | AA- |
| Moody's | P-1 | Aa3 |
| S&P | A-1 | A+ |
Outlook
We anticipate a fairly benign outlook for the economy in 2006 and this is reflected in our views of the housing and lending markets. House price growth cooled significantly in 2005, but in a controlled way and consistent with the soft landing that we spoke of at the start of the year. We expect that house prices will remain fairly flat, with some modest falls in the early part of 2006. However we expect that these falls will be confined to the first half of 2006 and that the annual rate of house price growth will be close to zero by the end of the year.
Gross mortgage lending is expected to remain at around the same level as 2005 and the proportion of loans for house purchase and remortgaging are expected to remain broadly similar. Softer house prices are expected to encourage activity which will translate into lending for house purchase. Remortgaging is also expected to continue to be important, but will be driven by pricing rather than the desire to withdraw equity. Strong competition among lenders and interest rate reductions are the motivations behind this. Net lending will be affected by lower levels of equity withdrawal but will remain fairly robust, albeit lower than last year.
As unemployment remains low, earnings continue to grow in real terms and lower interest rates feed into lower debt repayments, residual income feeding into savings is expected to hold up. Overall we expect deposits to be at around the same levels as last year. Competition in the liquid market will also be a positive factor encouraging more saving deposits although we expect that there will be some increased competition from equity investments.
There will continue to be strong competition as lenders seek to maintain and boost their respective market shares in the savings and mortgage markets.
To improve our financial strength, we will continue our strategy to increase profit year on year whilst maintaining the distribution of substantial pricing benefits to our members. To achieve this, we will work to grow in all of our key markets, look for further improvements in our efficiency and continue to apply stringent controls over our asset quality.
FINANCIAL REVIEW
Profit
The Group has seen a strong growth in profit with underlying profit before tax increasing 16.7% to £261.0m (4 October 2004 pro forma - £223.7m). Profit after tax increased by 10.3% to £175.3m (4 October 2004 pro-forma - £158.9m). The solvency ratio at 30 September 2005 was 11.0% (5 April 2005 - 11.1%).
Net Interest Income
Group net interest income was flat for the first six months of this year compared with the same period last year at £592.3m (4 October 2004 pro forma - £592.0m). The average net interest margin for the period was 1.06% (4 October 2004 pro forma - 1.09%). This reduction was the consequence of continued competition causing downward pressure on the spread between savings and lending rates. The popularity of lower margin fixed and tracker mortgage products, for both new and remortgage business, together with large inflows in higher rated e-Savings and ISA accounts continues to narrow margins. This narrowing was further impacted by the average differential between Libor and base rate in the first half of this year being 8 basis points compared with 31 basis points for the corresponding period last year.
Net fee and commission income
Net fee and commission income was up 16.0% to £131.4m (4 October 2004 pro forma - £113.3). The increase is the result of increases across a range of fees, particularly in banking where fee increases for misuse of accounts has brought us more closely in line with the market whilst maintaining our competitive position.
Income from other financial assets at fair value, net premiums from insurance and net claims from insurance
All of these items relate to our life assurance business. Under IFRS, this business is consolidated in the Group on a line by line basis. Taking account of other life assurance line items in the income statement, the post tax profit on this business was £13.1m (4 October 2004 - £14.0m). The fall in profit compared to 4 October 2004 reflects lower volumes of new business largely as a result of lower direct mortgage business.
Income from investments
The income in the half year predominantly arises from the realisation of an investment in equity shares.
Net losses from fair value accounting volatility
Following the introduction of IFRS all derivatives entered into by Nationwide, which under UK GAAP were held off balance sheet, are now recorded on the balance sheet at fair value with any fair value movements being taken to the income statement.
Where effective hedge accounting relationships can be established, the movement in the fair value of the derivative instrument is offset in full or in part by opposite movements in fair value of the underlying asset or liability being hedged. Any ineffectiveness arising from different movements in fair value will trend to zero over time so any recorded ineffectiveness is excluded from underlying results in that accounting period.
In addition, we enter into certain derivative contracts which although efficient economically cannot be included in effective hedge accounting relationships. Consequently, although the implicit interest cost of the underlying instrument and associated derivatives are included in "Net interest income" in the income statement, fair value movements on such derivatives are included in "Net losses from fair value accounting volatility". These fair value movements are therefore also excluded from underlying results as they will not be realised in cash terms.
Accordingly the £6.3m net loss from fair value accounting volatility has been added back to arrive at underlying profit. In future periods if net gains are recorded these will similarly be deducted in calculating underlying profit.
Other operating income
Other operating income comprises rent receivable, revaluation gains and losses on investment properties and some other sundry items of income. Other operating income has increased to £15.5m (4 October 2004 - £6.4m). Last year, other operating income was adversely impacted by reparation costs following a fire in one of our investment properties and the impact of this has reversed out in the current period.
Administrative expenses and depreciation and amortisation
Total administrative expenses including depreciation and amortisation increased by £13.5m, or 3.0%, to £474.4m (4 October 2004 - £460.9m). This was against a year on year increase in total assets of 9.0%. The pension charge increased by £4.3m and the depreciation charge by £3.6m. The latter increase arises from the spend incurred to date on our £300m investment programme.
As a result of increases in income, the underlying costs to income ratio, one of our principal measures of efficiency, has shown a continued improvement as follows:
| 6 months to 30 September 2005 | Year ended 4 April 2005 (pro forma basis) |
6 months to 4 October 2004 (pro forma basis) |
|
|---|---|---|---|
| Cost to income ratio | 61.0% | 62.1% | 62.4% |
The underlying ratio of costs to income is calculated by dividing the sum of administrative expenses plus depreciation and amortisation by operating income adjusted to add back net losses from fair value accounting volatility and hedge ineffectiveness, less net claims from our life assurance business.
Impairment provision on loans and advances
The total charge for bad and doubtful debts increased by £8.7m to £34.5m (4 October 2004 pro-forma - £25.8m). The additional charge relates to an increase against our unsecured portfolio of £11.3m offset by a reduction of £2.6m in the Commercial portfolio. The charge in respect of residential mortgages remained around the same level as last year. In line with others in the industry we have experienced increasing arrears levels on our unsecured lending portfolio. The additional charge on the unsecured portfolio arises from a combination of growth in the book and increased arrears levels. The reduction in charge for the Commercial portfolio principally reflects recoveries made.
Provisions for contingent liabilities and commitments
Like many other distributors of savings and investment products, Nationwide faces a level of concern on the part of current and former members and customers about the value of some life assurance products and investment policies, particularly endowment policies sold principally before 1990 by the Society, intended as repayment vehicles for mortgage borrowings. Against a background of falling investment returns it is possible that the value of some investment policies will not be sufficient to fully repay mortgages on maturity. Complaints from members, who claim they did not appreciate the risk, are reviewed on an individual basis and with reference to the circumstances prevailing at the date the policies were sold. In some cases this gives rise to the payment of compensation to put the borrower in the equivalent position as if the mortgage had been written on capital repayment terms.
Provisions raised include £7.0m (4 October 2004 - £20.0m) for the cost of customer redress related to current and potential future endowment review claims based on current trends and investment performance.
Amounts written off investment securities
Under IFRS, amounts can only be provided where there is a significant and prolonged decline in the fair value of the asset below its cost. There is no charge in the period (4 October 2004 pro-forma - £7.2m).
Taxation
The effective rate of tax was 31.2% (4 October 2004 pro-forma - 29.0%), compared with the standard rate of corporation tax of 30%. Under IAS 12 the tax charges in respect of the life assurance subsidiary are included on an actual basis rather than using the 30% 'gross up' permitted under UK GAAP. Stripping out the life assurance subsidiary, the effective rate of tax was 29.6% (4 October 2004 pro forma - 29.5%).
Capital
Regulatory capital stood at £6.8bn (5 April 2005 - £6.6bn) with the Group's total solvency ratio remaining strong at 11.0% (5 April 2005 - 11.1%). The Tier 1 solvency ratio stood at 8.8% (5 April 2005 - 8.8%). The Tier 2 ratio stands at 2.8% (5 April 2005 - 2.8%) reflecting low levels of subordinated debt. Both ratios remain well in excess of the minimum established by the Society's regulator.
Pricing Benefit
The estimated pricing benefit is calculated by comparing the price of each of our products (including interest rates, fees and charges) with the equivalent products of our main competitors.
| Pricing Benefit distributed to members | 6 months to 30 September 2005 | 6 months to 4 October 2004 | Year ended 4 April 2005 |
|---|---|---|---|
| £m | £m | £m | |
| Benefit to borrowers | 120 | 101 | 216 |
| Benefit to savers | 130 | 125 | 259 |
| Benefit to members with other products | 100 | 74 | 169 |
| Total | 350 | 300 | 644 |
The pricing benefit to borrowers has increased from that at the same period last year largely due to the competitive pricing maintained on fixed rate and tracker mortgages. The benefits to savers are marginally up. Across the other products, personal loans and credit cards performed strongly in delivering member value.
Consolidated statutory income statement
For the period ended 30 September 2005
| Period to 30 Sept 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) | ||
|---|---|---|---|---|
| Notes | £m | £m | £m | |
| Interest receivable and similar income | 3 | 2,768.0 | 2,436.8 | 5,139.1 |
| Interest expense and similar charges | 4 | 2,175.7 | 1,831.9 | 3,947.5 |
| Net interest income | 592.3 | 604.9 | 1,191.6 | |
| Fees and commissions receivable | 133.7 | 172.8 | 384.0 | |
| Fees and commissions payable | 2.3 | 63.2 | 102.8 | |
| Net fee and commission income | 131.4 | 109.6 | 281.2 | |
| Income from other financial assets at fair value | 15 | 69.0 | 10.6 | 55.6 |
| Income from investments | 7.1 | 0.2 | 0.3 | |
| Net losses from fair value accounting volatility | (6.3) | - | - | |
| Net premiums from insurance | 15 | 62.6 | 84.4 | 155.6 |
| Other operating income | 15.5 | 6.4 | 17.6 | |
| Operating income | 871.6 | 816.1 | 1,701.9 | |
| Net claims from insurance | 15 | 99.6 | 69.3 | 152.4 |
| Administrative expenses | 5 | 416.3 | 406.4 | 833.2 |
| Depreciation | 5 | 58.1 | 54.5 | 107.1 |
| Operating profit before provisions | 297.6 | 285.9 | 609.2 | |
| Impairment provision on loans and advances | 6 | 34.5 | 20.1 | 46.6 |
| Provisions for contingent liabilities and commitments | 7 | 8.4 | 20.8 | 46.7 |
| Amounts written off investment securities | 8 | - | 3.6 | 2.0 |
| Operating profit before tax | 254.7 | 241.4 | 513.9 | |
| Taxation | 79.4 | 70.2 | 146.9 | |
| Net Profit for the period | 175.3 | 171.2 | 367.0 | |
In accordance with the transitional rules on first-time adoption of IFRS, the 2004/05 statutory comparatives do not follow IAS 32 'Financial Instruments: Disclosure and Presentation', IAS 39 'Financial Instruments: Recognition and Measurement', and IFRS 4 'Insurance Contracts' but instead follow applicable UK GAAP requirements.
Underlying profit before tax of £261.0m equates to operating profit before tax of £254.7m adjusted for net losses from fair value accounting volatility of £6.3m
Consolidated statutory balance sheet
As at 30 September 2005
| At 30 September 2005 (Unaudited) |
At 4 October 2004 (Unaudited) |
At 4 April 2005 (Unaudited) | ||
|---|---|---|---|---|
| Notes | £m | £m | £m | |
| ASSETS | ||||
| Cash and balances with the Bank of England | 437.4 | 367.4 | 362.5 | |
| Loans and advances to banks | 1,304.3 | 2,167.9 | 751.6 | |
| Investment securities - available for sale | 13,910.9 | 13,941.8 | 14,145.0 | |
| Derivative financial instruments | 418.1 | - | - | |
| Fair value adjustment for portfolio hedged risk | 276.3 | - | - | |
| Other financial instruments at fair value | 1,825.2 | 970.7 | 1,825.2 | |
| Loans and advances to customers | 9 | 97,751.5 | 88,785.7 | 92,721.9 |
| Investments in equity shares | 15.3 | 11.1 | 14.9 | |
| Intangible fixed assets | 44.9 | 49.9 | 44.2 | |
| Property, plant and equipment | 624.8 | 566.8 | 620.0 | |
| Investment properties | 257.5 | 248.7 | 242.6 | |
| Accrued income and expenses prepaid | 340.0 | 395.4 | 366.7 | |
| Deferred tax assets | 90.7 | 127.8 | 81.9 | |
| Other assets | 388.4 | 377.7 | 420.3 | |
| Total assets | 117,685.3 | 108,010.9 | 111,596.8 | |
| LIABILITIES | ||||
| Shares | 76,748.0 | 69,485.5 | 72,594.1 | |
| Deposits from banks | 2,690.6 | 2,857.6 | 2,453.3 | |
| Other deposits | 3,277.8 | 3,354.0 | 2,802.4 | |
| Due to customers | 2,463.3 | 1,979.3 | 2,257.0 | |
| Debt securities in issue | 21,862.0 | 21,731.9 | 22,377.6 | |
| Derivative financial instruments | 777.1 | - | - | |
| Fair value adjustment for portfolio hedged risk | 11.4 | - | - | |
| Insurance contracts liabilities | 1,132.7 | 1,129.9 | 1,132.1 | |
| Other liabilities | 427.3 | 272.1 | 404.9 | |
| Provisions for liabilities and charges | 7 | 44.7 | 60.0 | 55.2 |
| Accruals and deferred income | 778.5 | 688.3 | 367.2 | |
| Subordinated liabilities | 1,515.8 | 943.9 | 1,439.8 | |
| Subscribed capital | 745.3 | 692.0 | 692.2 | |
| Current tax liabilities | 122.9 | 78.1 | 105.8 | |
| Retirement benefit obligations | 358.6 | 465.1 | 351.6 | |
| Total liabilities | 112,956.0 | 103,737.7 | 107,033.2 | |
| General reserve | 10 | 4,564.5 | 4,187.3 | 4,460.6 |
| Revaluation reserve | 11 | 103.0 | 85.9 | 103.0 |
| Available for sale reserve | 12 | 61.8 | - | - |
| Total equity & liabilities | 117,685.3 | 108,010.9 | 111,596.8 | |
In accordance with the transitional rules on first-time adoption of IFRS, the 2004/05 statutory comparatives do not follow IAS 32 'Financial Instruments: Disclosure and Presentation', IAS 39 'Financial Instruments: Recognition and Measurement', and IFRS 4 'Insurance Contracts' but instead follow applicable UK GAAP requirements.
Consolidated statutory statement of recognised income and expense
For the period ended 30 September 2005
| Period at 30 September 2005 (Unaudited) |
Period at 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) | |
|---|---|---|---|
| Net profit for the period | 175.3 | 171.2 | 367.0 |
| Adoption of IFRS 4 and IAS 39 | 20.7 | - | - |
| Available for sale investments - Net fair value gain |
16.3 | - | - |
| Property revaluation | - | - | 24.9 |
| Actuarial (loss)/gain on retirement benefit obligations | (62.1) | (4.5) | 104.9 |
| Taxation on items through equity | 15.5 | 1.5 | (38.2) |
| Total recognised income and expense for the period | 165.7 | 168.2 | 458.6 |
In accordance with the transitional rules on first-time adoption of IFRS, the 2004/05 statutory comparatives do not follow IAS 32 'Financial Instruments: Disclosure and Presentation', IAS 39 'Financial Instruments: Recognition and Measurement', and IFRS 4 'Insurance Contracts' but instead follow applicable UK GAAP requirements.
Consolidated statutory cash flow statement
For the period ended 30 September 2005
| Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
year ended 4 April 2005 (Unaudited) | ||
|---|---|---|---|---|
| Notes | £m | £m | £m | |
| Cash flows from operating activities | 13 | 138.6 | (2,064.2) | (3,646.4) |
| Purchase of investment securities | (5,785.5) | (7,495.1) | (12,122.9) | |
| Sale and maturity of investment securities | 5,505.0 | 9,619.7 | 15,623.2 | |
| Purchase of property, plant and equipment | (67.5) | (60.6) | (126.0) | |
| Sale of property, plant and equipment | 2.9 | 3.9 | 12.0 | |
| Purchase of intangible fixed assets | (21.0) | (4.6) | (9.3) | |
| Cash flow from investing activities | (366.1) | 2,063.3 | 3,377.0 | |
| Issue of subordinated liabilities | - | - | 513.9 | |
| Cash flows from financing activities | - | - | 513.9 | |
| Net (decrease)/increase in cash | (227.5) | (0.9) | 244.5 | |
| Cash and cash equivalents at start of period | 4,266.3 | 4,013.6 | 4,013.6 | |
| Cash and cash equivalents at end of period | 13 | 4,038.8 | 4,012.7 | 4,258.1 |
An explanation of the significant changes between the cash flow statement prepared under UK GAAP and IFRS is included in Note 13 to this Interim Results Announcement.
On adoption of IAS 39 certain components of the cash equivalents were re-stated from cost to fair value, this resulted in a net increase of cash and cash equivalents at 5 April 2005 by £8.2 million from £4,258.1 million to £4,266.3 million.
Notes To The Interim Results Announcement (statutory basis)
1. Changes in reporting period
These interim results have been prepared as at 30 September 2005 and show the financial performance for the period from, and including, 5 April 2005 to this date. Historically the interim announcement has been prepared for the 6 month period between 5 April and 4 October each year. The reason for the change of reporting period is to coincide the interim date with a calendar month end to reduce the complexity and associated costs that would otherwise be incurred on transition to IFRS. The 4 April year end accounting reference date remains unchanged. Therefore, comparative periods for the income statement, the statement of recognised income and expense and the cash flow statement together with related notes are not directly comparable.
2. Basis of preparation
The accounting polices adopted by the Group in the preparation of its 2005/06 interim results and those which the Group currently expects to adopt in its annual accounts for the year ending 4 April 2006 are disclosed in the Group's 'Restatement of 2004/05 Financial Results to International Financial Reporting Standards' ("2004/05 Restatement") document published on 22 September 2005. Copies of this document are available at www.nationwide.co.uk/about_nationwide/results_accounts/. The accounting policies and disclosures adopted reflect the Group's current view of best practice. They are in accordance with IFRS standards which have been, or are expected to be, endorsed by the EU and in effect for the year ending 4 April 2006.
IFRS is subject to on-going review and endorsement by the EU or possible amendment by interpretative guidance from the International Accounting Standards Board (IASB) and is therefore subject to change. In addition practice may develop with regard to interpretation and application of the standards or further standards may be introduced with the option for early adoption. We will update our results for any such changes should they occur. The Group's first annual IFRS statements may, therefore, be prepared in accordance with different accounting policies to those used in this document.
The impact of the implementation of IFRS on the Group's results for 2004/05 was published in the 2004/05 Restatement. This document includes reconciliations between UK GAAP and IFRS for the consolidated income statement for the six months ended 4 October 2004 and the year ended 4 April 2005; the consolidated balance sheet at 4 April 2004, 4 October 2004, 4 April 2005 and 5 April 2005; and the consolidated statement of recognised income and expense at 4 October 2004 and 4 April 2005.
Comparative information for 2004/05 has been restated to take into account the requirements of all of the standards except for IAS 32, IAS 39 and IFRS 4. In accordance with the requirements of IFRS, these standards have been implemented with effect from 5 April 2005 and the balance sheet at this date has been adjusted accordingly. Consequently the statutory income statements for the periods ended 4 October 2004 and 30 September 2005 are not on a comparable basis.
To enable a further analysis of the results, in addition to the statutory comparatives for the income statements for the year ended 4 April 2005 and the 6 months ended 4 October 2004, pro-forma comparatives have been prepared and can be found on page 27 of this document.
| 3) Interest receivable and similar income | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| On loans fully secured on residential property | 2,164.9 | 1,882.6 | 3,988.5 |
| On other loans | 362.3 | 333.4 | 672.9 |
| On investment securities | 260.4 | 273.7 | 574.5 |
| On other liquid assets | 20.8 | 50.8 | 92.7 |
| Other interest receivable | 0.6 | - | 7.0 |
| Net expense on financial instruments hedging assets | (43.5) | (103.7) | (196.5) |
| Pension interest | 2.5 | - | - |
| Total | 2,768.0 | 2,436.8 | 5,139.1 |
| 4) Interest expense and similar charges | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| On shares | 1,529.9 | 1,300.7 | 2,769.7 |
| On subscribed capital | 23.0 | 23.7 | 47.3 |
| On deposits and other borrowings | |||
| - Subordinated liabilities | 31.4 | 23.3 | 48.9 |
| - Other | 569.0 | 479.6 | 1,046.2 |
| Net expense on financial instruments hedging liabilities | 22.4 | 0.6 | 29.4 |
| Pension interest | - | 4.0 | 6.0 |
| Total | 2,175.7 | 1,831.9 | 3,947.5 |
| 5) Administrative expenses and depreciation and amortisation | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Employee costs | |||
| - Wages and salaries | 168.8 | 170.0 | 341.9 |
| - Social security costs | 14.8 | 14.8 | 29.6 |
| - Pension costs | 39.9 | 35.6 | 76.2 |
| 223.5 | 220.4 | 447.7 | |
| Other administration expenses | 192.8 | 186.0 | 385.5 |
| 416.3 | 406.4 | 833.2 | |
| Depreciation and amortisation | 58.1 | 54.5 | 107.1 |
| Total | 474.4 | 460.9 | 940.3 |
| 6) Impairment provisions on loans and advances | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Impairment charge for the period | |||
| Loans fully secured on residential property: | |||
| Collective | 1.8 | - | - |
| Individual | (0.3) | - | - |
| General provision | - | - | - |
| Specific provision | - | (0.7) | (0.3) |
| 1.5 | (0.7) | (0.3) | |
| Loans fully secured on land: | |||
| Collective | 0.9 | - | - |
| Individual | (3.8) | - | - |
| General provision | - | - | - |
| Specific provision | - | (1.0) | (1.4) |
| (2.9) | (1.0) | (1.4) | |
| Other loans: | |||
| Collective | 35.9 | - | - |
| Individual | - | - | - |
| General provision | - | 0.2 | 0.2 |
| Specific provision | - | 21.6 | 48.1 |
| (35.9) | 21.8 | 48.3 | |
| Total | 34.5 | 20.1 | 46.6 |
| Impairment provision at the end of the period | |||
| Loans fully secured on residential property: | |||
| Collective | 32.5 | - | - |
| Individual | (0.3) | - | - |
| General provision | - | 99.9 | 99.9 |
| Specific provision | - | 5.6 | 5.9 |
| 32.8 | 105.5 | 105.8 | |
| Loans fully secured on land: | |||
| Collective | 22.4 | - | - |
| Individual | 5.5 | - | - |
| General provision | - | 60.0 | 60.0 |
| Specific provision | - | 9.0 | 7.1 |
| 27.9 | 69.0 | 67.1 | |
| Other loans: | |||
| Collective | 95.3 | - | - |
| Individual | - | - | - |
| General provision | - | 4.4 | 4.4 |
| Specific provision | - | 43.5 | 50.0 |
| 95.3 | 47.9 | 54.4 | |
| Total | 156.0 | 222.4 | 227.3 |
These provisions have been deducted from the appropriate asset values in the balance sheet.
| 7) Provisions for contingent liabilities and commitments | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Provision charge for the period: | |||
| Customer redress | 8.3 | 20.8 | 46.7 |
| Vacant premises and property rectification | 0.1 | - | - |
| Total | 8.4 | 20.8 | 46.7 |
| Provision balances at the end of the period: | |||
| Customer redress | 38.9 | 53.3 | 49.0 |
| Vacant premises and property rectification | 2.0 | 2.6 | 2.3 |
| Other provisions | 3.8 | 4.1 | 3.9 |
| Total | 44.7 | 60.0 | 55.2 |
| 8) Amounts written off investment securities | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Provision charge/(release) for the period: | |||
| Individually assessed | - | - | - |
| Collectively assessed | - | - | - |
| Specific provisions | - | (1.3) | 12.1 |
| General provisions | - | 4.9 | (10.1) |
| Total | - | 3.6 | 2.0 |
| Provision balances at end of period: | |||
| Individually assessed | - | - | - |
| Collectively assessed | - | - | - |
| Specific provisions | - | 0.6 | 14.1 |
| General provisions | - | 30.7 | 15.7 |
| Total | - | 31.3 | 29.8 |
| 9) Loans and advances to customers | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Loans fully secured on residential property | 86,639.1 | 78,454.8 | 82,303.2 |
| Other loans: | |||
| Loans fully secured on land | 7,485.7 | 7,499.5 | 7,300.5 |
| Other | 3,434.7 | 2,831.4 | 3,118.2 |
| 10,920.4 | 10,330.9 | 10,418.7 | |
| 97,559.5 | 88,785.7 | 92,721.9 | |
| Fair value adjustment for micro hedged risk | 192.0 | - | - |
| Total | 97,751.53 | 88,785.7 | 92,721.9 |
Loans fully secured on land include £737.5m (4 October 2004 - £819.0m, 4 April 2005 - £719.4m) of loans which are fully secured on residential property but are classified as 'loans fully secured on land' in accordance with the Building Societies Act 1997.
| 10) General reserve | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| Movements in general reserve were as follows: | £m | £m | £m |
| At 4 April 2005 | 4,460.6 | - | - |
| Adoption of IAS 39 and IFRS 4 | (27.9) | - | - |
| Opening balance | 4,432.7 | 4,019.1 | 4,019.1 |
| Total profit for the period | 175.3 | 171.2 | 367.0 |
| Actuarial (loss)/gain on retirement benefit obligations net of tax | (43.5) | (3.0) | 73.5 |
| Transfer from the revaluation reserve | - | - | 1.0 |
| Closing balance | 4,564.5 | 4,187.3 | 4,460.6 |
The general reserve includes £89.0m (4 October 2004 - £85.9m, 4 April 2005 - £93.1m) of unrealised profit in respect of the increase in the value of the Group's long term life assurance business.
| 11) Revaluation reserve | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| Movements in the revaluation reserve were as follows: | £m | £m | £m |
| Opening balance | 103.0 | 85.9 | 85.9 |
| Revaluation increase on land and buildings | - | - | 24.9 |
| (Increase) of deferred tax liability on revaluation of land and buildings | - | - | (6.8) |
| Transfer to the general reserve | - | - | (1.0) |
| Closing balance | 103.0 | 85.9 | 103.0 |
| 12) Available for sale reserve | Period to 30 September 2005 (Unaudited) |
|---|---|
| Movements in the available for sale reserve were as follows: | £m |
| At 4 April 2005 | - |
| Adoption of IAS 39 | 48.6 |
| At 5 April 2005 | 48.6 |
| Movement in fair value | 16.3 |
| Tax on fair value movement | (3.1) |
| Closing balance | 61.8 |
| 13) Notes to the cash flow statement | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) |
|---|---|---|---|
| £m | £m | £m | |
| Cash flows from operating activities | |||
| Operating profit | 254.7 | 241.4 | 513.9 |
| Net increase in impairment provisions | 10.7 | 0.6 | 5.4 |
| Amounts written off fixed asset investments | - | 3.6 | 2.0 |
| Depreciation and amortisation | 58.1 | 54.5 | 107.1 |
| (Profit) on sale of tangible fixed assets | (0.1) | (0.2) | (2.1) |
| Interest on subordinated liabilities | 31.4 | 23.3 | 48.9 |
| Interest on subscribed capital | 23.0 | 23.7 | 47.3 |
| Loss on revaluation of investment properties | - | 2.7 | 2.4 |
| Net losses from fair value accounting volatility | 6.3 | - | - |
| Cash generated from operations | 384.1 | 349.6 | 724.9 |
| Changes in operating assets | |||
| Loans and advances to banks | (13.8) | (6.8) | (16.2) |
| Investment securities | (316.3) | (216.1) | (177.2) |
| Derivative financial instruments and fair value adj for portfolio hedged risk | (694.4) | - | - |
| Other financial instruments at fair value | - | 19.5 | (835.0) |
| Loans and advances to customers | (5,040.3) | (8,080.1) | (12,021.2) |
| Other operating assets | 44.9 | (264.7) | (235.6) |
| Changes in operating liabilities | |||
| Shares | 4,153.9 | 3,541.6 | 6,650.2 |
| Deposits from banks | 237.3 | 340.4 | (342.4) |
| Other deposits and customer deposits | 681.7 | (11.2) | (1.1) |
| Derivative financial liabilities and fair value adj for portfolio hedged risk | 782.2 | - | - |
| Debt securities in issue | (515.6) | 2,025.4 | 2,671.1 |
| Insurance contract liabilities | 0.6 | 23.0 | 25.2 |
| Retirement benefit obligations | 7.0 | 14.6 | 10.4 |
| Other operating liabilities | 539.8 | 301.7 | 97.9 |
| Cash generated from operations | 251.1 | (1,963.1) | (3,449.0) |
| Interest paid on subordinated liabilities | (20.9) | (12.9) | (46.7) |
| Interest paid on subscribed capital | (23.4) | (23.4) | (46.9) |
| Taxation | (68.2) | (64.8) | (103.8) |
| Cash flows from operating activities | 138.6 | (2,064.2) | (3,646.4) |
| Cash and cash equivalents | |||
| Cash and balances with the Bank of England | 437.4 | 367.4 | 362.5 |
| Loans and advances to other banks repayable in 3 months or less | 1,059.5 | 1,946.3 | 520.6 |
| Investment securities with a maturity period of 3 months or less | 2,541.9 | 1,699.0 | 3,375.0 |
| 4,038.8 | 4,012.7 | 4,258.1 | |
On adoption of IAS 39 certain components of the cash equivalents were re-stated from cost to fair value, this resulted in a net increase of cash and cash equivalents at 5 April 2005 by £8.2 million from £4,258.1 million to £4,266.3 million
The group is required to maintain balances with the Bank of England which, at 30 September 2005, amounted to £133.5 million (4 April 2005: £125.9 million). These balances are included within Loans and advances to banks on the balance sheet and are not included in the cash and cash equivalents in the cash flow statement as they are not liquid in nature.
Explanation of the significant adjustments to the cash flow statement prepared under IFRS
Under IFRS the cash flow statement is prepared to reconcile the movement in cash and cash equivalents, under UK GAAP only the movement in cash was reconciled. Cash, under IFRS and UK GAAP, comprises cash in hand and demand deposits. In addition cash equivalents comprise balances of highly liquid investments with a maturity of three months or less from the date of acquisition. A number of debt securities included as liquid resources under UK GAAP and some loans and advances to banks are included as cash equivalents since they have a maturity period of three months or less from the date of acquisition or issue.
| 14) Segmental reporting | Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) | ||||
|---|---|---|---|---|---|---|
| Profit before tax £m |
Total assets £m |
Net assets £m |
Profit before tax £m |
Total assets £m |
Net assets £m | |
| Retail | 113.0 | 87,683.7 | 2,353.3 | 117.7 | 78,274.1 | 2,404.4 |
| Commercial | 84.2 | 13,632.8 | 615.9 | 85.2 | 12,731.0 | 598.2 |
| Group | 57.5 | 16,368.8 | 1,760.1 | 38.5 | 17,005.8 | 1,270.6 |
| 254.7 | 117,685.3 | 4,729.3 | 241.4 | 108,010.9 | 4,273.2 | |
| 14) Segmental reporting | Period to 4 April 2005 (Unaudited) | ||
|---|---|---|---|
| Profit before tax £m |
Total assets £m |
Net assets £m | |
| Retail | 268.5 | 82,835.0 | 2,384.2 |
| Commercial | 158.1 | 12,997.5 | 575.2 |
| Group | 87.3 | 15,764.3 | 1,604.2 |
| 513.9 | 111,596.8 | 4,563.6 | |
The Group operates entirely in the UK and the Isle of Man and accordingly no geographical analysis has been presented.
15) Life assurance business income statement
Under IFRS, our life assurance business is consolidated in the Group on a line by line basis. A summarised life assurance business income statement is set out below to clarify the impact on the Group.
| Period to 30 September 2005 (Unaudited) |
Period to 4 October 2004 (Unaudited) |
Year ended 4 April 2005 (Unaudited) | |
|---|---|---|---|
| £m | £m | £m | |
| Net interest income | 4.9 | 4.5 | 8.4 |
| Net fee and commission income | (6.6) | (6.1) | (12.6) |
| Income from other financial assets at fair value | 69.0 | 10.6 | 55.6 |
| Net premiums from insurance | 62.6 | 84.4 | 155.6 |
| Operating income | 129.9 | 93.4 | 207.0 |
| Net claims from insurance | 99.6 | 69.3 | 152.4 |
| Administrative expenses | 5.4 | 5.6 | 11.4 |
| Operating profit before tax | 24.9 | 18.5 | 43.2 |
| Taxation | 11.8 | 4.5 | 9.6 |
| Net profit for the period | 13.1 | 14.0 | 33.6 |
The increase in income from other financial assets at fair value is reflective of the movement in equity markets. A substantial amount of our life business is single premium and this can lead to volatility in net premiums. Net claims include change in insurance contract liabilities and will be impacted by changes in investment return on policyholder assets and net premiums. The taxation charge includes tax due on policyholder returns as well as tax on profit.
Additional Information
(a) Capital structure
| At 30 September 2005 | At 5 April 2005 (note i) | |
|---|---|---|
| £m | £m | |
| Tier 1 | ||
| General reserve | 4,564.5 | 4,432.7 |
| Permanent interest bearing shares (note ii) | 700.0 | 700.0 |
| Pension fund deficit add back (note iii) | 152.3 | 113.0 |
| Intangible assets | (44.9) | (44.2) |
| 5,371.9 | 5,201.5 | |
| Tier 2 | ||
| Revaluation reserve | 103.0 | 103.0 |
| Subordinated debt (note ii) | 1,463.5 | 1,446.9 |
| Collective impairment allowance | 150.2 | 132.5 |
| 1,716.7 | 1,682.4 | |
| Deductions | 322.2 | 309.1 |
| Total capital | 6,766.4 | 6,574.8 |
| Risk weighted assets (£bn) | 61.1 | 59.1 |
| Tier 1 ratio | ||