Interim Management Statement - Part 7 of 7

RNS Number : 1672Q
Royal Bank of Scotland Group PLC
02 November 2012
 



 

 

 

 

 

 

 

 

Appendix 1

 

Income statement reconciliations

and Segmental analysis

 


 

Appendix 1 Income statement reconciliations and Segmental analysis

 

Income statement reconciliations

 

Quarter ended

 

30 September 2012

 

30 June 2012

 

30 September 2011

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

 

 

 

 

Interest receivable

4,529 

- 

4,529 

 

4,774 

- 

4,774 

 

5,371 

- 

5,371 

Interest payable

(1,656)

(2)

(1,658)

 

(1,801)

(2)

(1,803)

 

(2,293)

(1)

(2,294)

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

2,873 

(2)

2,871 

 

2,973 

(2)

2,971 

 

3,078 

(1)

3,077 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and commissions receivable

1,403 

- 

1,403 

 

1,450 

- 

1,450 

 

1,452 

- 

1,452 

Fees and commissions payable

(341)

- 

(341)

 

(314)

- 

(314)

 

(304)

- 

(304)

Income from trading activities

769 

(435)

334 

 

931 

(274)

657 

 

282 

675 

957 

(Loss)/gain on redemption of own debt

- 

(123)

(123)

 

- 

- 

- 

 

- 

1 

1 

Other operating income (excluding insurance net premium income)

822 

(1,039)

(217)

 

469 

(75)

394 

 

549 

1,835 

2,384 

Insurance net premium income

932 

- 

932 

 

929 

- 

929 

 

1,036 

- 

1,036 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest income

3,585 

(1,597)

1,988 

 

3,465 

(349)

3,116 

 

3,015 

2,511 

5,526 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

6,458 

(1,599)

4,859 

 

6,438 

(351)

6,087 

 

6,093 

2,510 

8,603 

 

 

 

 

 

 

 

 

 

 

 

 

Staff costs

(1,943)

(116)

(2,059)

 

(2,036)

(107)

(2,143)

 

(1,963)

(113)

(2,076)

Premises and equipment

(552)

(45)

(597)

 

(523)

(21)

(544)

 

(584)

(20)

(604)

Other administrative expenses

(770)

(489)

(1,259)

 

(936)

(220)

(1,156)

 

(858)

(104)

(962)

Depreciation and amortisation

(374)

(56)

(430)

 

(382)

(52)

(434)

 

(416)

(69)

(485)

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

(3,639)

(706)

(4,345)

 

(3,877)

(400)

(4,277)

 

(3,821)

(306)

(4,127)

 

 

 

 

 

 

 

 

 

 

 

 

Profit before other operating charges

2,819 

(2,305)

514 

 

2,561 

(751)

1,810 

 

2,272 

2,204 

4,476 

Insurance net claims

(596)

- 

(596)

 

(576)

- 

(576)

 

(734)

- 

(734)

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss) before impairment losses

2,223 

(2,305)

(82)

 

1,985 

(751)

1,234 

 

1,538 

2,204 

3,742 

Impairment losses

(1,176)

- 

(1,176)

 

(1,335)

- 

(1,335)

 

(1,536)

(202)

(1,738)

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

1,047 

(2,305)

(1,258)

 

650 

(751)

(101)

 

2 

2,002 

2,004 


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Income statement reconciliations (continued)

 

 

Quarter ended

 

30 September 2012

 

30 June 2012

 

30 September 2011

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

Managed 

Reallocation 

of one-off 

items 

Statutory 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

1,047 

(2,305)

(1,258)

 

650 

(751)

(101)

 

2 

2,002 

2,004 

Own credit adjustments (1)

(1,455)

1,455 

- 

 

(518)

518 

- 

 

2,622 

(2,622)

- 

Asset Protection Scheme (2)

1 

(1)

- 

 

(2)

2 

- 

 

(60)

60 

- 

Payment Protection Insurance costs

(400)

400 

- 

 

(135)

135 

- 

 

- 

- 

- 

Sovereign debt impairment

- 

- 

- 

 

- 

- 

- 

 

(142)

142 

- 

Interest rate hedge adjustments on impaired available-for-sale

  sovereign debt

- 

- 

- 

 

- 

- 

- 

 

(60)

60 

- 

Amortisation of purchased intangible assets

(47)

47 

- 

 

(51)

51 

- 

 

(69)

69 

- 

Integration and restructuring costs

(257)

257 

- 

 

(213)

213 

- 

 

(233)

233 

- 

(Loss)/gain on redemption of own debt

(123)

123 

- 

 

- 

- 

- 

 

1 

(1)

- 

Strategic disposals

(23)

23 

- 

 

160 

(160)

- 

 

(49)

49 

- 

Bonus tax

- 

- 

- 

 

- 

- 

- 

 

(5)

5 

- 

RFS Holdings minority interest

(1)

1 

- 

 

8 

(8)

- 

 

(3)

3 

- 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit before tax

(1,258)

- 

(1,258)

 

(101)

- 

(101)

 

2,004 

- 

2,004 

Tax charge

(30)

- 

(30)

 

(290)

- 

(290)

 

(791)

- 

(791)

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit from continuing operations

(1,288)

- 

(1,288)

 

(391)

- 

(391)

 

1,213 

- 

1,213 

Profit/(loss) from discontinued operations, net of tax

5 

- 

5 

 

(4)

- 

(4)

 

6 

- 

6 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit for the period

(1,283)

- 

(1,283)

 

(395)

- 

(395)

 

1,219 

- 

1,219 

Non-controlling interests

(3)

- 

(3)

 

5 

- 

5 

 

7 

- 

7 

Preference share dividends

(98)

- 

(98)

 

(76)

- 

(76)

 

- 

- 

- 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit attributable to ordinary and B shareholders

(1,384)

- 

(1,384)

 

(466)

- 

(466)

 

1,226 

- 

1,226 

 

Notes:

(1)

Reallocation of £435 million loss (Q2 2012 - £271 million loss; Q3 2011 - £735 million gain) to income from trading activities and £1,020 million loss (Q2 2012 - £247 million loss; Q3 2011 - £1,887 million gain) to other operating income.

(2)

Reallocation to income from trading activities.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Income statement reconciliations (continued)

 

 

Nine months ended

 

30 September 2012

 

30 September 2011


Managed 

Reallocation 

of one-off 

 items 

Statutory 

 

Managed 

Reallocation 

of one-off 

 items 

Statutory 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

Interest receivable

14,320 

- 

14,320 

 

16,183 

(7)

16,176 

Interest payable

(5,467)

(12)

(5,479)

 

(6,570)

(1)

(6,571)

 

 

 

 

 

 

 

 

Net interest income

8,853 

(12)

8,841 

 

9,613 

(8)

9,605 

 

 

 

 

 

 

 

 

Fees and commissions receivable

4,340 

- 

4,340 

 

4,794 

- 

4,794 

Fees and commissions payable

(945)

- 

(945)

 

(887)

- 

(887)

Income from trading activities

2,964 

(1,761)

1,203 

 

3,071 

(132)

2,939 

Gain on redemption of own debt

- 

454 

454 

 

- 

256 

256 

Other operating income (excluding insurance premium income)

2,016 

(2,586)

(570)

 

2,122 

1,795 

3,917 

Insurance net premium income

2,799 

- 

2,799 

 

3,275 

- 

3,275 

 

 

 

 

 

 

 

 

Non-interest income

11,174 

(3,893)

7,281 

 

12,375 

1,919 

14,294 

 

 

 

 

 

 

 

 

Total income

20,027 

(3,905)

16,122 

 

21,988 

1,911 

23,899 

 

 

 

 

 

 

 

 

Staff costs

(6,200)

(572)

(6,772)

 

(6,382)

(303)

(6,685)

Premises and equipment

(1,625)

(79)

(1,704)

 

(1,703)

(74)

(1,777)

Other administrative expenses

(2,525)

(906)

(3,431)

 

(2,557)

(1,078)

(3,635)

Depreciation and amortisation

(1,150)

(182)

(1,332)

 

(1,192)

(170)

(1,362)

 

 

 

 

 

 

 

 

Operating expenses

(11,500)

(1,739)

(13,239)

 

(11,834)

(1,625)

(13,459)

 

 

 

 

 

 

 

 

Profit before other operating charges

8,527 

(5,644)

2,883 

 

10,154 

286 

10,440 

Insurance net claims

(1,821)

- 

(1,821)

 

(2,439)

- 

(2,439)

 

 

 

 

 

 

 

 

Operating profit before impairment losses

6,706 

(5,644)

1,062 

 

7,715 

286 

8,001 

Impairment losses

(3,825)

- 

(3,825)

 

(5,747)

(1,044)

(6,791)

 

 

 

 

 

 

 

 

Operating profit/(loss)

2,881 

(5,644)

(2,763)

 

1,968 

(758)

1,210 


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Income statement reconciliations (continued)

 

 

Nine months ended

 

30 September 2012

 

30 September 2011

 

Managed 

Reallocation 

of one-off 

 items 

Statutory 

 

Managed 

Reallocation 

of one-off 

 items 

Statutory 

 

£m 

£m 

£m 

 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

Operating profit/(loss)

2,881 

(5,644)

(2,763)

 

1,968 

(758)

1,210 

Own credit adjustments (1)

(4,429)

4,429 

- 

 

2,386 

(2,386)

- 

Asset Protection Scheme (2)

(44)

44 

- 

 

(697)

697 

- 

Payment Protection Insurance costs

(660)

660 

- 

 

(850)

850 

- 

Sovereign debt impairment

- 

- 

- 

 

(875)

875 

- 

Interest rate hedge adjustments on impaired available-for-sale sovereign debt

- 

- 

- 

 

(169)

169 

- 

Amortisation of purchased intangible assets

(146)

146 

- 

 

(169)

169 

- 

Integration and restructuring costs

(930)

930 

- 

 

(586)

586 

- 

Gain on redemption of own debt

454 

(454)

- 

 

256 

(256)

- 

Strategic disposals

129 

(129)

- 

 

(22)

22 

- 

Bonus tax

- 

- 

- 

 

(27)

27 

- 

RFS Holdings minority interest

(18)

18 

- 

 

(5)

5 

- 

 

 

 

 

 

 

 

 

(Loss)/profit before tax

(2,763)

- 

(2,763)

 

1,210 

- 

1,210 

Tax charge

(459)

- 

(459)

 

(1,436)

- 

(1,436)

 

 

 

 

 

 

 

 

Loss from continuing operations

(3,222)

- 

(3,222)

 

(226)

- 

(226)

Profit from discontinued operations, net of tax

6 

- 

6 

 

37 

- 

37 

 

 

 

 

 

 

 

 

Loss for the period

(3,216)

- 

(3,216)

 

(189)

- 

(189)

Non-controlling interests

16 

- 

16 

 

(10)

- 

(10)

Preference share dividends

(174)

- 

(174)

 

- 

- 

- 

 

 

 

 

 

 

 

 

Loss attributable to ordinary and B shareholders

(3,374)

- 

(3,374)

 

(199)

- 

(199)

 

Notes:

(1)

Reallocation of £1,715 million loss (nine months ended 30 September 2011 - £565 million gain) to income from trading activities and £2,714 million loss (nine months ended 30 September 2011 - £1,821 million gain) to other operating income.

(2)

Reallocation to income from trading activities.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Segmental analysis

In January 2012, the Group announced the reorganisation of its wholesale businesses into 'Markets' and 'International Banking'. Divisional results are presented based on the new organisational structure. The Group also revised its allocation of funding and liquidity costs and capital for the new divisional structure as well as for a new methodology. In addition, the Group had previously included movements in the fair value of own derivative liabilities within the Markets operating segment. These movements are now combined with movements in the fair value of own debt in a single measure, 'own credit adjustments' and presented as a reconciling item. Refer to 'presentation of information' on page 4 of the main announcement for further details. Comparatives have been restated accordingly.

 

Analysis of divisional operating profit/(loss)

The following tables provide an analysis of divisional operating profit/(loss) by main income statement captions. The divisional income statements on pages 20 to 62 of the main announcement reflect certain presentational reallocations as described in the notes below. These do not affect the overall operating profit/(loss).

 

Net 

interest 

income 

Non- 

interest 

income 

Total 

income 

Operating 

expenses 

Insurance 

net claims 

Impairment 

(losses)/ 

recoveries 

Operating 

profit/(loss)

Quarter ended 30 September 2012

£m 

£m 

£m 

£m 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

UK Retail

990 

252 

1,242 

(637)

- 

(141)

464 

UK Corporate 

729 

409 

1,138 

(523)

- 

(247)

368 

Wealth

185 

107 

292 

(219)

- 

(8)

65 

International Banking

227 

308 

535 

(348)

- 

(12)

175 

Ulster Bank

163 

50 

213 

(126)

- 

(329)

(242)

US Retail & Commercial

492 

288 

780 

(536)

- 

(21)

223 

Markets (1)

14 

1,028 

1,042 

(753)

- 

6 

295 

Direct Line Group (2)

61 

838 

899 

(194)

(596)

- 

109 

Central items

(67)

334 

267 

(91)

- 

- 

176 

 

 

 

 

 

 

 

 

Core

2,794 

3,614 

6,408 

(3,427)

(596)

(752)

1,633 

Non-Core (3)

79 

(29)

50 

(212)

- 

(424)

(586)

 

 

 

 

 

 

 

 

Managed basis

2,873 

3,585 

6,458 

(3,639)

(596)

(1,176)

1,047 

Reconciling items

 

 

 

 

 

 

 

Own credit adjustments (4)

- 

(1,455)

(1,455)

- 

- 

- 

(1,455)

Asset Protection Scheme (5)

- 

1 

1 

- 

- 

- 

1 

Payment Protection Insurance costs

- 

- 

- 

(400)

- 

- 

(400)

Amortisation of purchased intangible

  assets

- 

- 

- 

(47)

- 

- 

(47)

Integration and restructuring costs

- 

- 

- 

(257)

- 

- 

(257)

Loss on redemption of own debt

- 

(123)

(123)

- 

- 

- 

(123)

Strategic disposals

- 

(23)

(23)

- 

- 

- 

(23)

RFS Holdings minority interest

(2)

3 

1 

(2)

- 

- 

(1)

 

 

 

 

 

 

 

 

Statutory basis

2,871 

1,988 

4,859 

(4,345)

(596)

(1,176)

(1,258)

 

Notes:

(1)

(2)

Total income includes £48 million investment income, of which £29 million is included in net interest income and £19 million in non-interest income. Reallocation of £32 million between non-interest income and net interest income in respect of instalment income.

(3)

Reallocation of £7 million between net interest income and non-interest income in respect of funding costs of rental assets, £12 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £5 million.

(4)

Comprises £435 million loss included in 'Income from trading activities' and £1,020 million loss included in 'Other operating income' on a statutory basis.

(5)

Included in 'Income from trading activities' on a statutory basis.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

income 

Non- 

interest 

income 

 

Total 

income 

 

Operating 

expenses 

Insurance 

net claims 

Impairment 

(losses)/ 

recoveries 

 

Operating 

profit/(loss)

Quarter ended 30 June 2012

£m 

£m 

£m 

£m 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

UK Retail

988 

242 

1,230 

(653)

- 

(140)

437 

UK Corporate

772 

439 

1,211 

(518)

- 

(181)

512 

Wealth

178 

125 

303 

(227)

- 

(12)

64 

International Banking

234 

327 

561 

(367)

- 

(27)

167 

Ulster Bank

160 

46 

206 

(128)

- 

(323)

(245)

US Retail & Commercial

492 

323 

815 

(558)

- 

(28)

229 

Markets

32 

1,034 

1,066 

(796)

- 

(19)

251 

Direct Line Group (1)

68 

866 

934 

(223)

(576)

- 

135 

Central items

1 

110 

111 

(145)

- 

2 

(32)

 

 

 

 

 

 

 

 

Core

2,925 

3,512 

6,437 

(3,615)

(576)

(728)

1,518 

Non-Core (2)

48 

(47)

1 

(262)

- 

(607)

(868)

 

 

 

 

 

 

 

 

Managed basis

2,973 

3,465 

6,438 

(3,877)

(576)

(1,335)

650 

Reconciling items

 

 

 

 

 

 

 

Own credit adjustments (3)

- 

(518)

(518)

- 

- 

- 

(518)

Asset Protection Scheme (4)

- 

(2)

(2)

- 

- 

- 

(2)

Payment Protection Insurance costs

- 

- 

- 

(135)

- 

- 

(135)

Amortisation of purchased intangible

  assets

- 

- 

- 

(51)

- 

- 

(51)

Integration and restructuring costs

- 

- 

- 

(213)

- 

- 

(213)

Strategic disposals

- 

160 

160 

- 

- 

- 

160 

RFS Holdings minority interest

(2)

11 

9 

(1)

- 

- 

8 

 

 

 

 

 

 

 

 

Statutory basis

2,971 

3,116 

6,087 

(4,277)

(576)

(1,335)

(101)

 

Notes:

(1)

Total income includes £73 million investment income, of which £37 million is included in net interest income and £36 million in non-interest income. Reallocation of £31 million between non-interest income and net interest income in respect of instalment income.

(2)

Reallocation of £38 million between net interest income and non-interest income in respect of funding costs of rental assets, £40 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £2 million.

(3)

Comprises £271 million loss included in 'Income from trading activities' and £247 million loss included in 'Other operating income' on a statutory basis.

(4)

Included in 'Income from trading activities' on a statutory basis.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

income 

Non- 

interest 

income 

 

Total 

income 

 

Operating 

expenses 

Insurance 

net claims 

Impairment 

(losses)/ 

recoveries 

 

Operating 

profit/(loss)

Quarter ended 30 September 2011

£m 

£m 

£m 

£m 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

UK Retail

1,086 

292 

1,378 

(673)

- 

(195)

510 

UK Corporate

753 

453 

1,206 

(547)

- 

(230)

429 

Wealth

152 

118 

270 

(221)

- 

(4)

45 

International Banking (1)

293 

357 

650 

(408)

- 

(14)

228 

Ulster Bank

196 

60 

256 

(137)

- 

(327)

(208)

US Retail & Commercial

482 

289 

771 

(563)

- 

(85)

123 

Markets (2)

(9)

456 

447 

(800)

- 

5 

(348)

Direct Line Group (3)

84 

949 

1,033 

(215)

(695)

- 

123 

Central items

(88)

105 

17 

66 

(1)

(4)

78 

 

 

 

 

 

 

 

 

Core

2,949 

3,079 

6,028 

(3,498)

(696)

(854)

980 

Non-Core (4)

129 

(64)

65 

(323)

(38)

(682)

(978)

 

 

 

 

 

 

 

 

Managed basis

3,078 

3,015 

6,093 

(3,821)

(734)

(1,536)

2 

Reconciling items

 

 

 

 

 

 

 

Own credit adjustments (5)

- 

2,622 

2,622 

- 

- 

- 

2,622 

Asset Protection Scheme (6)

- 

(60)

(60)

- 

- 

- 

(60)

Sovereign debt impairment

- 

- 

- 

- 

- 

(142)

(142)

Interest rate hedge adjustments on

  impaired available-for-sale sovereign

  debt

- 

- 

- 

- 

- 

(60)

(60)

Amortisation of purchased

  intangible assets

- 

- 

- 

(69)

- 

- 

(69)

Integration and restructuring costs

- 

- 

- 

(233)

- 

- 

(233)

Gain on redemption of own debt

- 

1 

1 

- 

- 

- 

1 

Strategic disposals

- 

(49)

(49)

- 

- 

- 

(49)

Bonus tax

- 

- 

- 

(5)

- 

- 

(5)

RFS Holdings minority interest

(1)

(3)

(4)

1 

- 

- 

(3)

 

 

 

 

 

 

 

 

Statutory basis

3,077 

5,526 

8,603 

(4,127)

(734)

(1,738)

2,004 

 

Notes:

(1)

Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.

(2)

Reallocation of £3 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.

(3)

Total income includes £72 million investment income, of which £49 million is included in net interest income and £23 million in non-interest income. Reallocation of £35 million between non-interest income and net interest income in respect of instalment income.

(4)

Reallocation of £54 million between net interest income and non-interest income in respect of funding costs of rental assets, £53 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £1 million.

(5)

Comprises £735 million gain included in 'Income from trading activities' and £1,887 million gain included in 'Other operating income' on a statutory basis.

(6)

Included in 'Income from trading activities' on a statutory basis.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

income 

Non- 

interest 

income 

 

Total 

income 

 

Operating 

expenses 

 Insurance 

net claims 

Impairment 

(losses)/ 

recoveries 

 

Operating 

profit/(loss)

Nine months ended 30 September 2012

£m 

£m 

£m 

£m 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

UK Retail

2,979 

760 

3,739 

(1,925)

- 

(436)

1,378 

UK Corporate

2,257 

1,293 

3,550 

(1,574)

- 

(604)

1,372 

Wealth

542 

343 

885 

(681)

- 

(30)

174 

International Banking (1)

712 

926 

1,638 

(1,125)

- 

(74)

439 

Ulster Bank

488 

145 

633 

(384)

- 

(1,046)

(797)

US Retail & Commercial

1,480 

871 

2,351 

(1,729)

- 

(68)

554 

Markets (2)

62 

3,780 

3,842 

(2,457)

- 

(15)

1,370 

Direct Line Group (3)

213 

2,586 

2,799 

(650)

(1,821)

- 

328 

Central items

(71)

341 

270 

(238)

- 

(32)

- 

 

 

 

 

 

 

 

 

Core

8,662 

11,045 

19,707 

(10,763)

(1,821)

(2,305)

4,818 

Non-Core (4)

191 

129 

320 

(737)

- 

(1,520)

(1,937)

 

 

 

 

 

 

 

 

Managed basis

8,853 

11,174 

20,027 

(11,500)

(1,821)

(3,825)

2,881 

Reconciling items

 

 

 

 

 

 

 

Own credit adjustments (5)

- 

(4,429)

(4,429)

- 

- 

- 

(4,429)

Asset Protection Scheme (6)

- 

(44)

(44)

- 

- 

- 

(44)

Payment Protection Insurance costs

- 

- 

- 

(660)

- 

- 

(660)

Amortisation of purchased intangible

  assets

- 

- 

- 

(146)

- 

- 

(146)

Integration and restructuring costs

- 

- 

- 

(930)

- 

- 

(930)

Gain on redemption of own debt

- 

454 

454 

- 

- 

- 

454 

Strategic disposals

- 

129 

129 

- 

- 

- 

129 

RFS Holdings minority interest

(12)

(3)

(15)

(3)

- 

- 

(18)

 

 

 

 

 

 

 

 

Statutory basis

8,841 

7,281 

16,122 

(13,239)

(1,821)

(3,825)

(2,763)

 

Notes:

(1)

Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.

(2)

Reallocation of £5 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.

(3)

Total income includes £211 million investment income, of which £119 million is included in net interest income and £92 million in non-interest income. Reallocation of £94 million between non-interest income and net interest income in respect of instalment income.

(4)

Reallocation of £96 million between net interest income and non-interest income in respect of funding costs of rental assets, £103 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £7 million.

(5)

Comprises £1,715 million loss included in 'Income from trading activities' and £2,714 million loss included in 'Other operating income' on a statutory basis.

(6)

Included in 'Income from trading activities' on a statutory basis.


 

Appendix 1 Income statement reconciliations and Segmental analysis (continued)

 

Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

income 

Non- 

interest 

income 

 

Total 

income 

 

Operating 

expenses 

 Insurance 

net claims 

Impairment 

(losses)/ 

recoveries 

 

Operating 

profit/(loss)

Nine months ended 30 September 2011

£m 

£m 

£m 

£m 

£m 

£m 

£m 

 

 

 

 

 

 

 

 

UK Retail

3,270 

929 

4,199 

(2,039)

- 

(597)

1,563 

UK Corporate

2,334 

1,352 

3,686 

(1,611)

- 

(557)

1,518 

Wealth

477 

347 

824 

(637)

- 

(12)

175 

International Banking (1)

876 

1,086 

1,962 

(1,247)

- 

(112)

603 

Ulster Bank

559 

162 

721 

(415)

- 

(1,057)

(751)

US Retail & Commercial

1,404 

843 

2,247 

(1,626)

- 

(261)

360 

Markets (2)

47 

3,676 

3,723 

(2,734)

- 

19 

1,008 

Direct Line Group (3)

261 

2,888 

3,149 

(637)

(2,183)

- 

329 

Central items

(164)

175 

11 

93 

- 

(2)

102 

 

 

 

 

 

 

 

 

Core

9,064 

11,458 

20,522 

(10,853)

(2,183)

(2,579)

4,907 

Non-Core (4)

549 

917 

1,466 

(981)

(256)

(3,168)

(2,939)

 

 

 

 

 

 

 

 

Managed basis

9,613 

12,375 

21,988 

(11,834)

(2,439)

(5,747)

1,968 

Reconciling items

 

 

 

 

 

 

 

Own credit adjustments (5)

- 

2,386 

2,386 

- 

- 

- 

2,386 

Asset Protection Scheme (6)

- 

(697)

(697)

- 

- 

- 

(697)

Payment Protection Insurance costs

- 

- 

- 

(850)

- 

- 

(850)

Sovereign debt impairment

- 

- 

- 

- 

- 

(875)

(875)

Interest rate hedge adjustments on

impaired available-for-sale

sovereign debt

- 

- 

- 

- 

- 

(169)

(169)

Amortisation of purchased intangible

  assets

- 

- 

- 

(169)

- 

- 

(169)

Integration and restructuring costs

(2)

(3)

(5)

(581)

-

- 

(586)

Gain on redemption of own debt

- 

256 

256 

- 

- 

- 

256 

Strategic disposals

- 

(22)

(22)

- 

- 

- 

(22)

Bonus tax

- 

- 

- 

(27)

- 

- 

(27)

RFS Holdings minority interest

(6)

(1)

(7)

2 

- 

- 

(5)

 

 

 

 

 

 

 

 

Statutory basis

9,605 

14,294 

23,899 

(13,459)

(2,439)

(6,791)

1,210 

 

Notes:

(1)

Reallocation of £30 million between net interest income and non-interest income in respect of funding costs of rental assets.

(2)

Reallocation of £9 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.

(3)

Total income includes £205 million investment income, of which £156 million is included in net interest income and £49 million in non-interest income. Reallocation of £105 million between non-interest income and net interest income in respect of instalment income.

(4)

Reallocation of £159 million between net interest income and non-interest income in respect of funding costs of rental assets, £155 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £4 million.

(5)

Comprises £565 million gain included in 'Income from trading activities' and £1,821 million gain included in 'Other operating income' on a statutory basis.

(6)

Included in 'Income from trading activities' on a statutory basis.


 

 

 

 

 

 

 

 

Appendix 2

 

Businesses outlined for

disposal

 


 

Appendix 2 Businesses outlined for disposal

 

To comply with EC State Aid requirements the Group agreed to make a series of divestments by the end of 2013: the disposal of a majority interest in Direct Line Group, Global Merchant Services and its interest in RBS Sempra Commodities JV. The Group also agreed to dispose of its RBS England and Wales and NatWest Scotland branch-based businesses, along with certain SME and corporate activities across the UK ('UK branch-based businesses'). The disposals of Global Merchant Services and RBS Sempra Commodities JV businesses have now effectively been completed.

 

On 12 October 2012, the Group announced that it had received notification of Santander's decision to pull out of its agreed purchase of certain of the Group's UK branched-based businesses. Santander's decision follows extensive work by both parties to separate the businesses into a largely standalone form and to prepare the business, customers and staff for transfer. RBS intends to initiate a new process of disposal following discussion with HM Treasury and the European Commission.

 

 

The table below shows total income and operating profit of Direct Line Group and the UK branch-based businesses.

 

Total income

 

Operating profit

before impairments

 

Operating profit

 

YTD 

Q3 2012 

FY 2011 

 

YTD 

Q3 2012 

FY 2011 

 

YTD 

Q3 2012 

FY 2011 

 

£m 

£m 

 

£m 

£m 

 

£m 

£m 

 

 

 

 

 

 

 

 

 

Direct Line Group (1)

2,799 

4,286 

 

328 

407 

 

328 

407 

UK branch-based businesses

672 

959 

 

360 

518 

 

262 

319 

 

 

 

 

 

 

 

 

 

Total

3,471 

5,245 

 

688 

925 

 

590 

726 

 

The table below shows the estimated risk-weighted assets, total assets and capital of the businesses identified for disposal.

RWAs


Total assets


Capital


30 September 

2012 

31 December 

2011 


30 September 

2012 

31 December 

2011 


30 September 

2012 

31 December 

2011 


£bn 

£bn 


£bn 

£bn 


£bn 

£bn 










Direct Line Group (1)

n/m 

n/m 

 

13.1 

13.9 

 

3.5 

4.4 

UK branch-based businesses (2)

10.2 

11.1 

 

19.0 

19.3 

 

1.0 

1.1 



 

 

 

 

 

 

 

Total

10.2 

11.1 

 

32.1 

33.2 

 

4.5 

5.5 

 

Notes:

(1)

Total income includes investment income of £211 million (FY 2011 - £302 million). Total assets and estimated capital include approximately £0.9 billion of goodwill, of which £0.7 billion is attributed to Direct Line Group by RBS Group.

(2)

Estimated notional equity based on 10% of RWAs.


 

Appendix 2 Businesses outlined for disposal (continued)

 

Further information on the UK branch-based businesses by division is shown in the tables below:

 

 

Division

 

Total

 

UK 

Retail 

UK 

Corporate 

 

YTD 

Q3 2012 

FY 2011 

 

£m 

£m 

 

£m 

£m 

Income statement

 

 

 

 

 

Net interest income

241 

256 

 

497 

689 

Non-interest income

64 

111 

 

175 

270 

 

 

 

 

 

 

Total income

305 

367 

 

672 

959 

 

 

 

 

 

 

Direct expenses

 

 

 

 

 

  - staff

(53)

(64)

 

(117)

(158)

  - other

(70)

(42)

 

(112)

(166)

Indirect expenses

(46)

(37)

 

(83)

(117)

 

 

 

 

 

 

 

(169)

(143)

 

(312)

(441)

 

 

 

 

 

 

Operating profit before impairment losses

136 

224 

 

360 

518 

Impairment losses

(42)

(56)

 

(98)

(199)

 

 

 

 

 

 

Operating profit

94 

168 

 

262 

319 

 

 

 

 

 

 

Analysis of income by product

 

 

 

 

 

Loans and advances

86 

224 

 

310 

436 

Deposits

58 

108 

 

166 

245 

Mortgages

106 

- 

 

106 

134 

Other

55 

35 

 

90 

144 

 

 

 

 

 

 

Total income

305 

367 

 

672 

959 

 

 

 

 

 

 

Net interest margin

4.64% 

3.03% 

 

3.64% 

3.57% 

Employee numbers

  (full time equivalents rounded to the nearest hundred)

2,700 

1,600 

 

4,300 

4,400 

 

 

Division

 

Total

 

UK 

Retail 

UK 

Corporate 

Markets 

 

30 September 

2012 

31 December 

2011 

 

£bn 

£bn 

£bn 

 

£bn 

£bn 

 

 

 

 

 

 

 

Capital and balance sheet

 

 

 

 

 

 

Total third party assets (excluding mark-to-

  market derivatives)

7.4 

11.2 

- 

 

18.6 

18.9 

Loans and advances to customers (gross)

7.6 

11.7 

- 

 

19.3 

19.5 

Customer deposits

8.5 

12.9 

- 

 

21.4 

21.8 

Derivative assets

- 

- 

0.4 

 

0.4 

0.4 

Derivative liabilities

- 

- 

- 

 

- 

0.1 

Risk elements in lending

0.5 

0.9 

- 

 

1.4 

1.5 

Loan:deposit ratio

86% 

88% 

- 

 

87% 

86% 

Risk-weighted assets

3.5 

6.7 

- 

 

10.2 

11.1 

 


 

Index

Page

Accounting policies

74

Analysis of results

13

19

18

16

13

14

17

15

Available-for-sale reserve

86

Average balance sheet

68

Balance sheet


65

19

Basis of preparation

74

Business divestments


Appendix 2

82

Capital

92

18

93

92

Central items

54


Consolidated financial statements

63

65

63

71

64

74

Contacts

xii

Contingent liabilities and commitments

86


Index (continued)

Page

Debt securities

109

Direct Line Group

48

Dividends

80

Divisional performance

20

54

48

31

44

56

26

23

35

38

29

Earnings per share

81

Employees


76

22

Financial instruments

84

Forward-looking statements

3

Funded assets by division

21

 

Group Chief Executive's comment

iv

Highlights

i

Impairment


16

112

Income statement


63

10

International Banking

31


Index (continued)

Page

Litigation, investigations and reviews

87

Markets

44

Net interest income

13

Non-Core

56

Non-interest income

14

One-off and other items

17

Operating expenses


15

76

Other developments

89

Outlook

xi

Payment Protection Insurance

76

Post balance sheet events

91

Presentation of information

4

Results presentation

xii

Results summary - statutory

9

Risk and balance sheet management

92

92

127

105

97

122

Risk-weighted assets


  By division

22

  Capital

92

 

Segmental analysis

Appendix 1

Share consolidation

80

Index (continued)

Page

Statement of changes in equity

71

Statement of comprehensive income

64

Strategic Plan

xi

Tax

78

UK Corporate

26

UK Retail

23

Ulster Bank

35

US Retail & Commercial

38

Value-at-risk (VaR)

124

Wealth

29

 


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