Interim Management Statement

RNS Number : 6738V
Royal Bank of Scotland Group PLC
05 November 2010
 



 

Statutory results

 

The condensed consolidated financial statements and related notes presented on pages 133 to 142 inclusive are on a statutory basis and include the results and financial position of RFS Holdings (RFS), the entity that acquired ABN AMRO. The interests of the State of the Netherlands and Santander in RFS are included in minority interests.

 

Legal separation of ABN AMRO Bank NV took place on 1 April 2010 from which date the results of ABN AMRO attributable to the Consortium members (RBSG, the Dutch State following its acquisition of Fortis, and Santander) are classified as discontinued operations.  The income statements for 2009 have been represented accordingly.

 

 

 

 

 



Condensed consolidated income statement

for the period ended 30 September 2010

 


Quarter ended


 

Nine months ended


30 September

 2010 

30 June 

2010 

30 September* 

2009  


30 September 

2010 

30 September* 

2009  


£m 

£m 

£m  


£m 

£m  








Interest receivable

5,584 

5,888 

5,693 


17,164 

20,334 

Interest payable

(2,173)

(2,212)

(2,573)


(6,535)

(10,365)








Net interest income

3,411 

3,676 

3,120 


10,629 

9,969 








Fees and commissions receivable

2,037 

2,053 

1,919 


6,141 

6,385 

Fees and commissions payable

(611)

(579)

(545)


(1,762)

(1,896)

Income from trading activities

277 

2,110 

1,088 


4,153 

3,052 

Gain on redemption of own debt

553 


553 

3,790 

Other operating income (excluding insurance

  premium income)

(317)

346 

(77)


476 

569 

Insurance net premium income

1,289 

1,278 

1,301 


3,856 

3,958 








Non-interest income

2,675 

5,761 

3,686 


13,417 

15,858 








Total income

6,086 

9,437 

6,806 


24,046 

25,827 








Staff costs

(2,423)

(2,365)

(2,363)


(7,477)

(7,499)

Premises and equipment

(611)

(547)

(631)


(1,693)

(1,909)

Other administrative expenses

(914)

(1,022)

(1,062)


(2,947)

(3,265)

Depreciation and amortisation

(603)

(519)

(534)


(1,604)

(1,566)

Write-down of goodwill and other intangible

  assets


(311)








Operating expenses

(4,551)

(4,453)

(4,590)


(13,721)

(14,550)








Profit before other operating charges and impairment losses

1,535 

4,984 

2,216 


10,325 

11,277 

Insurance net claims

(1,142)

(1,323)

(1,145)


(3,601)

(3,036)

Impairment losses

(1,953)

(2,487)

(3,279)


(7,115)

(10,800)








Operating (loss)/profit before tax

(1,560)

1,174 

(2,208)


(391)

(2,559)

Tax credit/(charge)

295 

(825)

617 


(637)

1,073 








(Loss)/profit from continuing operations

(1,265)

349 

(1,591)


(1,028)

(1,486)








Loss on distribution of ABN AMRO Bank NV to the State of the Netherlands and Santander

(1,019)


(1,019)

Other profits from discontinued

  operations, net of tax

18 


331 

30 








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

18 

(1,019)


(688)

30 








Loss for the period

(1,247)

(670)

(1,591)


(1,716)

(1,456)

Minority interests

101 

946 

36 


703 

(595)

Preference share and other dividends

(19)

(245)


(124)

(791)








(Loss)/profit attributable to ordinary and B shareholders

(1,146)

257 

(1,800)


(1,137)

(2,842)








Basic (loss)/earnings per ordinary and B share from continuing operations

(1.1p)

0.8p 

(3.2p)


(0.5p)

(5.2p)








Basic loss per ordinary and B share from

  discontinued operations


(0.1p)

 

* restated for the reclassification of the results attributable to other Consortium Members as discontinued operations.



Condensed consolidated statement of comprehensive income

for the period ended 30 September 2010

 


Quarter ended


 

Nine months ended


30 September 

2010 

30 June 

2010 

30 September 

2009 


30 September 

2010 

30 September 

2009 


£m 

 £m 

£m 


£m 

 £m 








Loss for the period

(1,247)

(670)

(1,591)


(1,716)

(1,456)








Other comprehensive income







Available-for-sale financial assets

235 

93 

3,079 


743 

1,419 

Cash flow hedges

553 

1,449 

(90)


1,807 

274 

Currency translation

(647)

(91)

1,777 


47 

(2,504)

Tax on other comprehensive income

(256)

(331)

(857)


(702)

(379)








Other comprehensive (loss)/income for the period, net of tax

(115)

1,120 

3,909 


1,895 

(1,190)








Total comprehensive (loss)/income for the period

(1,362)

450 

2,318 


179 

(2,646)








Attributable to







Minority interests

(117)

(457)

1,075 


(249)

(743)

Preference shareholders

242 


105 

752 

Paid-in equity holders

19 


19 

39 

Ordinary and B shareholders

(1,245)

888 

998 


304 

(2,694)









(1,362)

450 

2,318 


179 

(2,646)

 



Financial review

Operating loss

Operating loss before tax for the quarter was £1,560 million compared with a profit of £1,174 million in the second quarter of 2010.

 

Total income

Total income decreased 36% to £6,086 million in the quarter.

 

Net interest income fell by 7% to £3,411 million.

 

Non-interest income decreased to £2,675 million from £5,761 million in the second quarter of 2010.

 

Operating expenses

Operating expenses increased to £4,551 million of which integration and restructuring costs were £311 million compared with £254 million in the second quarter of 2010.

 

Net insurance claims

Bancassurance and general insurance claims, after reinsurance, decreased by 14% to £1,142 million.

 

Impairment losses

Impairment losses were £1,953 million, compared with £2,487 million in the second quarter of 2010.

 

Taxation

The tax credit for the third quarter of 2010 was £295 million compared with a tax charge of £825 million in the second quarter of 2010.

 

Earnings

Basic earnings per ordinary share including discontinued operations was a loss of 1.1p per share compared with earnings of 0.8p for the second quarter of 2010.

 

Capital

Capital ratios at 30 September 2010 were Core Tier 1 of 10.2%, Tier 1 of 12.5% and Total of 13.5%.

 



Condensed consolidated balance sheet

at 30 September 2010

 


30 September 

2010 

30 June 

2010 

31 December 

2009 

(audited)


£m 

£m 

£m 





Assets




Cash and balances at central banks

61,416 

29,591 

52,261 

Net loans and advances to banks

60,334 

54,489 

56,656 

Reverse repurchase agreements and stock borrowing

48,407 

47,663 

35,097 

Loans and advances to banks

108,741 

102,152 

91,753 

Net loans and advances to customers

528,049 

539,375 

687,353 

Reverse repurchase agreements and stock borrowing

44,503 

39,396 

41,040 

Loans and advances to customers

572,552 

578,771 

728,393 

Debt securities

226,410 

236,260 

267,254 

Equity shares

21,755 

17,326 

19,528 

Settlement balances

22,874 

20,718 

12,033 

Derivatives

548,805 

522,871 

441,454 

Intangible assets

14,369 

14,482 

17,847 

Property, plant and equipment

17,398 

17,608 

19,397 

Deferred taxation

5,909 

5,839 

7,039 

Prepayments, accrued income and other assets

11,908 

14,095 

20,985 

Assets of disposal groups

17,450 

22,340 

18,542 





Total assets

1,629,587 

1,582,053 

1,696,486 





Liabilities




Bank deposits

80,304 

96,710 

104,138 

Repurchase agreements and stock lending

41,465 

44,165 

38,006 

Deposits by banks

121,769 

140,875 

142,144 

Customer deposits

420,639 

420,890 

545,849 

Repurchase agreements and stock lending

87,287 

70,655 

68,353 

Customer accounts

507,926 

491,545 

614,202 

Debt securities in issue

235,083 

217,317 

267,568 

Settlement balances

20,628 

19,730 

10,413 

Short positions

44,004 

42,994 

40,463 

Derivatives

543,397 

508,966 

424,141 

Accruals, deferred income and other liabilities

23,667 

24,867 

30,327 

Retirement benefit liabilities

2,637 

2,611 

2,963 

Deferred taxation

2,270 

2,195 

2,811 

Insurance liabilities

6,782 

6,521 

10,281 

Subordinated liabilities

27,890 

27,523 

37,652 

Liabilities of disposal groups

16,154 

17,615 

18,890 





Total liabilities

1,552,207 

1,502,759 

1,601,855 





Equity




Minority interests

1,780 

2,492 

16,895 

Owners' equity*




  Called up share capital

15,029 

15,029 

14,630 

  Reserves

60,571 

61,773 

63,106 





Total equity

77,380 

79,294 

94,631 





Total liabilities and equity

1,629,587 

1,582,053 

1,696,486 





* Owners' equity attributable to:




Ordinary and B shareholders

70,856 

72,058 

69,890 

Other equity owners

4,744 

4,744 

7,846 






75,600 

76,802 

77,736 



 

Commentary on condensed consolidated balance sheet

 

Total assets of £1,629.6 billion at 30 September 2010 were up £47.5 billion, 3%, compared with 30 June 2010.

 

Cash and balances at central banks were up £31.8 billion, 108% to £61.4 billion.

 

Loans and advances to banks increased by £6.6 billion, 6%, to £108.7 billion. Reverse repurchase agreements and stock borrowing ('reverse repos') were up £0.7 billion, 2% to £48.4 billion and bank placings rose £5.8 billion, 11%, to £60.3 billion as a result of increased placings on the inter-bank markets.

 

Loans and advances to customers decreased £6.2 billion, 1%, to £572.6 billion. Within this reverse repos were up £5.1 billion, 13% to £44.5 billion. Excluding reverse repos, customer lending decreased by £11.3 billion, 2%, to £528.0 billion or by £9.8 billion before impairment provisions. This reflected reductions, in constant currency terms, in Non-Core of £6.8 billion, together with declines in UK Corporate £1.7 billion, Global Transaction Services, £1.2 billion, Global Banking & Markets, £1.2 billion and US Retail & Commercial, £1.1 billion together with the effect of exchange rate movements, £0.2 billion. These were offset by growth in UK Retail, £1.9 billion, and Wealth, £0.6 billion.

 

Equity shares increased £4.4 billion, 26%, to £21.8 billion driven by increased holdings within Global Banking & Markets.

 

Settlement balances rose £2.2 billion, 10%, to £22.9 billion as a result of customer activity principally within Global Banking & Markets.

 

Movements in the value of derivative assets, up £25.9 billion, 5%, to £548.8 billion, and liabilities, up £34.4 billion, 7%, to £543.4 billion, primarily reflect changes in interest rates, currency movements, with Sterling strengthening against the US dollar offset in part by weakening against the Euro, and growth in trading volumes.

 

Assets of disposal groups reduced by £4.9 billion, 22%, to £17.5 billion resulting primarily from the completion of disposals of RBS Sempra's Oil, Metals and European Gas & Power business, the Eurosales Finance businesses in France and Germany and certain of the Group's Asian and Latin American businesses.

 

Deposits by banks declined £19.1 billion, 14%, to £121.8 billion, reflecting reduced inter-bank deposits, down £16.4 billion, 17%, to £80.3 billion and decreased repurchase agreements and stock lending ('repos'), down £2.7 billion, 6%, to £41.5 billion. 

 

Customer accounts rose £16.4 billion, 3%, to £507.9 billion. Within this, repos increased £16.6 billion, 24%, to £87.3 billion.  Excluding repos, customer deposits were down £0.3 billion, to £420.6 billion, with reductions, in constant currency terms, in Global Banking & Markets, £4.8 billion, Wealth, £1.4 billion and Ulster Bank, £0.2 billion, together with the effect of exchange rate movements of £1.5 billion. This was partially offset by growth in UK Corporate, £2.6 billion, Global Transaction Services, £2.3 billion, UK Retail, £1.4 billion and US Retail & Commercial, £1.1 billion.



Commentary on condensed consolidated balance sheet

 

Debt securities in issue were up £17.8 billion, 8%, to £235.1 billion, principally as a result of the Group's capital raising programme in the third quarter, coupled with movements in Global Banking & Markets.

 

Liabilities of disposal groups declined £1.5 billion, 8%, to £16.2 billion primarily reflecting the completion of several disposals in the quarter.

 

Owners' equity reduced by £1.2 billion, 2%, to £75.6 billion. The attributable loss for the period, £1.1 billion, and exchange rate movements, £0.7 billion, were offset in part by an increase in cash flow hedging reserves, £0.4 billion, and reduced losses in available-for-sale reserves £0.2 billion.

 



Condensed consolidated statement of changes in equity

for the period ended 30 September 2010

 


Nine months 

 ended 

30 September 

2010 

Six months 

 ended 

30 June 

2010 

Year ended 

31 December 

 2009 

(audited)


£m 

£m 

£m 





Called-up share capital




At beginning of period

14,630 

14,630 

9,898 

Ordinary shares issued in respect of placing and open offers

4,227 

B shares issued

510 

Other shares issued during the period

402 

401 

Preference shares redeemed during the period

(2)

(2)

(5)





At end of period

15,030 

15,029 

14,630 





Paid-in equity




At beginning of period

565 

565 

1,073 

Securities redeemed during the period

(132)

(132)

(308)

Transfer to retained earnings

(2)

(2)

(200)





At end of period

431 

431 

565 





Share premium account




At beginning of period

23,523 

23,523 

27,471 

Ordinary shares issued in respect of placing and open offer, net of £95 million expenses

1,047 

Other shares issued during the period

217 

217 

Preference shares redeemed during the period

(4,995)

Redemption of preference shares classified as debt

118 

118 





At end of period

23,858 

23,858 

23,523 





Merger reserve




At beginning of period

25,522 

25,522 

10,881 

Issue of B shares, net of £399 million expenses

24,591 

Transfer to retained earnings

(12,250)

(12,250)

(9,950)





At end of period

13,272 

13,272 

25,522 





Available-for-sale reserves




At beginning of period

(1,755)

(1,755)

(3,561)

Unrealised gains in the period

1,327 

647 

1,202 

Realised (gains)/losses in the period

(535)

(127)

981 

Taxation

(263)

(208)

(377)

Recycled to profit or loss on disposal of businesses, net of £6 million tax

(16)

(16)





At end of period

(1,242)

(1,459)

(1,755)





Cash flow hedging reserve




At beginning of period

(252)

(252)

(876)

Amount recognised in equity during the period

329 

(58)

380 

Amount transferred from equity to earnings in the period

138 

17 

513 

Taxation

(154)

(269)

Recycled to profit or loss on disposal of businesses, net of £20 million tax 

58 

58 





At end of period

119 

(235)

(252)



Condensed consolidated statement of changes in equity

for the period ended 30 September 2010 (continued)

 


Nine months 

 ended 

30 September 

2010 

Six months 

 ended 

30 June 

2010 

Year ended 

 31 December 

 2009 

(audited)


£m 

£m 

£m 





Foreign exchange reserve




At beginning of period

4,528 

4,528 

6,385 

Retranslation of net assets

997 

1,775 

(2,322)

Foreign currency (losses)/gains on hedges of net assets

(452)

(609)

456 

Taxation

29 

72 

Recycled to profit or loss on disposal of businesses

(17)

(11)





At end of period

5,085 

5,755 

4,528 





Capital redemption reserve




At beginning of period

170 

170 

170 

Preference shares redeemed during the period





At end of period

172 

172 

170 





Contingent capital reserve




At beginning of period

(1,208)

(1,208)

Contingent capital agreement - consideration payable  

(1,208)





At end of period

(1,208)

(1,208)

(1,208)





Retained earnings




At beginning of period

12,134 

12,134 

7,542 

(Loss)/profit attributable to ordinary shareholders and other equity owners




- continuing operations

(985)

163 

(2,600)

- discontinued operations

(28)

(30)

(72)

Equity preference dividends paid

(105)

(105)

(878)

Paid-in equity dividends paid, net of tax

(19)

(19)

(57)

Transfer from paid-in equity




- gross

200 

- taxation

(1)

(1)

Equity owners gain on withdrawal of minority interest




- gross

40 

40 

629 

- taxation

(11)

(11)

(176)

Redemption of equity preference shares

(2,968)

(2,968)

Gain on redemption of equity preference shares

609 

609 

Redemption of preference shares classified as debt

(118)

(118)

Transfer from merger reserve

12,250 

12,250 

9,950 

Actuarial losses recognised in retirement benefit schemes




- gross

(3,756)

- taxation

1,043 

Net cost of shares bought and used to satisfy share-based payments 

(11)

(9)

(16)

Share-based payments




- gross

103 

61 

325 

- taxation

12 





At end of period

20,904 

22,003 

12,134 





Own shares held




At beginning of period

(121)

(121)

(104)

Shares purchased during the period

(711)

(704)

(33)

Shares issued under employee share schemes

11 

16 





At end of period

(821)

(816)

(121)





Owners' equity at end of period

75,600 

76,802 

77,736 

 



Condensed consolidated statement of changes in equity

for the period ended 30 September 2010 (continued)

 


Nine months 

 ended 

30 September 

2010 

Six months 

 ended 

30 June 

2010 

Year ended 

31 December 

2009 

(audited)


£m 

£m 

£m 





Minority interests




At beginning of period

16,895 

16,895 

21,619 

Currency translation adjustments and other movements

(481)

(461)

(1,434)

(Loss)/profit attributable to minority interests




- continuing operations

(43)

74 

382 

- discontinued operations

(660)

(676)

(33)

Dividends paid

(4,217)

(4,171)

(313)

Movements in available-for-sale securities




- unrealised (losses)/gains in the period

(54)

22 

299 

- realised losses/(gains) in the period

36 

(3)

(466)

- taxation

(36)

- recycled to profit or loss on disposal of discontinued operations, net of

  £2 million tax

(7)

(7)

Movements in cash flow hedging reserves




- amount recognised in equity during the period

(99)

(165)

(209)

- taxation

33 

47 

59 

- recycled to profit or loss on disposal of discontinued operations, net of £340 million tax

1,021 

1,036 

Actuarial gains recognised in retirement benefit schemes




- gross

91 

- taxation

Equity raised

501 

501 

Equity withdrawn and disposals

(11,110)

(10,561)

(2,445)

Transfer to retained earnings

(40)

(40)

(629)





At end of period

1,780 

2,492 

16,895 





Total equity at end of period

77,380 

79,294 

94,631 





Total comprehensive income/(loss) recognised in the statement of

  changes in equity is attributable as follows:




Minority interests

(249)

(132)

(1,346)

Preference shareholders

105 

105 

878 

Paid-in equity holders

19 

19 

57 

Ordinary and B shareholders

304 

1,549 

(5,747)






179 

1,541 

(6,158)

 



 

Notes on statutory results

 

1. Basis of preparation

Having reviewed the Group's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future.  Accordingly, the IMS for the nine months ended 30 September 2010 has been prepared on a going concern basis.

 

2. Litigation and investigations developments

Except for the developments noted below, there have been no material changes to the litigation or investigations as disclosed in the Interim Results for the six months ended 30 June 2010.

 

Payment Protection Insurance ("PPI")

The FSA published its final policy statement on 10 August 2010 and instructed firms to implement the measures contained in it by 1 December 2010. The new rules impose significant changes with respect to the handling of mis-selling PPI complaints. On 8 October 2010, the British Bankers' Association filed an application for judicial review of the FSA's policy statement and of related guidance issued by the Financial Ombudsman Service.

 



 

Additional information

 

Statutory results

Financial information contained in this document does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2009 have been filed with the Registrar of Companies. The report of the auditors on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

 


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