Financial Review
Presentation of Results

The statutory results and comparative figures are reported in these financial statements in accordance with the special provisions of the Companies Act 1985 laid down specifically for banking groups and to reflect best practice in the banking sector. During 1996, we aligned our reporting date with that of the majority of financial services companies, and consequently the statutory comparative period is the 11 month period to 31 December 1996. In order to aid comparison, 12 month comparative numbers are incorporated on the face of the consolidated profit and loss account. A detailed explanation of the approach adopted to accounting for the conversion process is included in the Accounting Policies set out in the Notes to the Financial Statements.

The completion of the transfer of the business of Clerical, Medical and General Life Assurance Society (Clerical Medical) took place on 31 December 1996 and the results for the year ended 31 December 1997 incorporate a full year's contribution from that business.

Accounting Policies
There have been no changes in the year ended 31 December 1997 in respect of the accounting policies previously applied by Halifax Building Society in preparing its Annual Accounts for the period ended 31 December 1996. Changes to accounting presentation have been made to bring the accounting treatment of the relevant items into line with the Companies Act 1985 requirements and best practice in the banking sector. These changes are set out in detail in Note 1a of the Notes to the Financial Statements.

Analysis of Results
A segmental analysis of the profit and loss account for the year ended 31 December 1997 is set out below:


Retail Operations £m Consumer Credit
£m 		Personal Lines Insurance £m Long Term Savings & Protection £m Treasury £m Group Items £m Total £m
Net interest income 1,996 114 3 11 89 102 2,315
Commission, fees and other income 273 19 185 154 1 10 642
Total income 2,269 133 188 165 90 112 2,957
Operating expenses (897) (60) (46) (36) (16) (151) (1,206)
Provisions (74) (31) - - 3 - (102)
Profit 1,298 42 142 129 77 (39) 1,649
1996 1,087 39 139 46 91 28 1,430

 
Roger Boyes
Group Finance Director
In order to analyse net interest margin by business sector, internal funds transfer pricing is applied to the average funding or liquidity gap in each sector. Interest rates used for transfer pricing have been determined to eliminate interest rate risk, reducing the volatility of earnings in the business sectors. The level of central funding takes account of the capital notionally absorbed by each business sector, with reference to the Group's Bank of England regulatory requirements. Costs have been assigned to each sector based on resources consumed.

Group Items represents those items not directly attributable to the business sectors. These include central costs considered to be part of the sustaining costs of the Group, the results of certain non-core business activities and the net interest income derived from capital not allocated to business sectors.