Interim Management Statement

RNS Number : 7468W
Royal Bank of Scotland Group PLC
29 April 2016
 
 

 

The Royal Bank of Scotland Group plc

Q1 2016 Results

 

Contents

Page

 

 

Introduction

1

Highlights

3

Analysis of results

9

Segment performance

19

Selected statutory financial statements

27

Notes

32

Forward-looking statements

37

Appendix 1 - Additional segment information

 

Appendix 2 - Additional capital resources, RWA and leverage information

 

 

Introduction

 

Presentation of information

In this document, 'RBSG plc' or the 'company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group' refers to RBSG plc and its subsidiaries. The results commentary in this document refers to measures of financial performance, principally operating performance before own credit adjustments, loss on redemption of own debt, write down of goodwill, strategic disposals, restructuring costs and litigation and conduct costs, to exclude items which distort period-on-period comparison.  These measures, derived from the reported results, are non-GAAP financial measures.

 

Statutory results

The consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity and related notes presented on pages 32 to 36 inclusive are on a statutory basis.

 

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2015 will be filed with the Registrar of Companies following the company's Annual General Meeting. The report of the auditor 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.

 

Restatements

Pension accounting policy

As set out in the 'Basis of preparation', in Q4 2015 RBS revised its accounting policy for determining whether or not it has an unconditional right to a refund of surpluses in its employee pension funds. The change was applied retrospectively and comparatives restated.

 

RBS also made certain changes to its financial reporting in Q4 2015 as follows.

 

●

revised reportable segments;

●

a change to the treatment of one-off and other items;

●

allocation of central balance sheet items;

●

revised treasury allocations; and

●

revised segmental return on equity.

 

Comparatives for Q1 2015 have been restated accordingly. For further information refer to the Restatement document issued on 4 February 2016, available on www.investors.rbs.com/restatement.


Introduction

 

Analysts and investors conference call

RBS will be hosting a call for analysts and investors on the results for the period ended 31 March 2016. Details are as follows:

 

Date:

 

Friday 29 April 2016

Time:

 

9:00 am UK time

Conference ID

 

89104610

Webcast:

 

www.rbs.com/results

Dial in details:

 

International - +44 (0) 1452 568 172

UK Free Call - 0800 694 8082

US Toll Free - 1 866 966 8024

 

 

Announcement and slides are available on www.rbs.com/results

 

Financial supplement

A Financial supplement containing income statement and balance sheet information for each of the nine quarters ended 31 March 2016 is available on www.rbs.com/results.

 

Globally Systemically Important Institutions template as of and for the year ended 31 December 2015 is available on www.rbs.com/results.

 

Contacts

For analyst enquiries:

 

 

Richard O'Connor

Head of Investor Relations

+44 (0) 20 7672 1758

 

 

 

For media enquiries:

 

 

RBS Press Office

 

+44 (0) 131 523 4205

 

Highlights

 

RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders, and remains committed to delivering its 2016 targets. RBS reported a profit before tax of £421 million for Q1 2016. An attributable loss of £968 million included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the UK Government.

 

Income was broadly stable compared with Q1 2015 across our core Personal & Business Banking (PBB) and Commercial & Private Banking (CPB) franchises. In Q1 2016, core PBB and CPB net loans and advances grew by 15% on an annualised basis with strong growth in both the mortgage and commercial businesses. RBS has made good progress on customer Net Promoter Score (NPS) in the last year, although there still remains much to do. Common Equity Tier 1 ratio (CET1) of 14.6% remains in excess of target. Adjusted return on equity(1) across our core PBB, CPB and CIB franchises was 10.9% in Q1 2016.

 

As a result of further extensive analysis on the separation and divestment of Williams & Glyn throughout Q1 2016, we have recently concluded that there is a significant risk that this will not be achieved by 31 December 2017 and alternative means to achieve this are being explored.

 

●

An attributable loss(2) of £968 million in Q1 2016 compared with £459 million in Q1 2015. Excluding the final DAS dividend of £1,193 million, the Bank made an attributable profit(2) of £225 million notwithstanding IFRS volatility(3) losses of £356 million, restructuring costs of £238 million and an impairment charge of £223 million largely related to its shipping portfolio. An own credit adjustment gain of £256 million was recorded in Q1 2016.

●

Operating profit was £421 million in Q1 2016 compared with £37 million in Q1 2015. Adjusted operating profit(4) of £440 million in Q1 2016 was down from £1,355 million in Q1 2015 primarily due to Capital Resolution and the IFRS volatility charge. 

 

○

UK Personal & Business Banking (UK PBB) adjusted operating profit(5) of £531 million was £54 million, or 9%, lower than in Q1 2015.  Adjusting for the impact of business transfers(6), net loans and advances increased by £11.2 billion compared with Q1 2015 primarily driven by strong mortgage growth. Total income fell by 3% compared with Q1 2015 reflecting margin pressure and reduced fee income, but was 2% higher than Q4 2015 as margins stabilised.

 

○

Commercial Banking adjusted operating profit(5) of £403 million was 7% up on Q1 2015.  Excluding the impact of transfers(7), net loans and advances increased by £4.0 billion helping to drive an 8% increase in income.

 

○

Ulster Bank RoI adjusted operating profit(5) was stable at £64 million compared with Q1 2015.

 

○

Private Banking adjusted operating profit(5) was 40% lower at £26 million, as the business continues to invest in its infrastructure, whilst RBS International adjusted operating profit(5) was stable compared with Q1 2015 at £53 million, with return on equity remaining strong at 16%.

 

○

CIB recorded income of £341 million in Q1 2016. Adjusted income of £277 million was £165 million lower than Q1 2015, excluding a £42 million transfer of portfolios to Commercial Banking, reflecting difficult market conditions and the reduced scale of the business. An adjusted operating loss(5) of £54 million compared with a £100 million profit in Q1 2015. Adjusted expenses reduced by 16% as CIB moves towards a sustainable cost base.

 

○

Capital Resolution reported an adjusted operating loss(5) of £377 million, compared with an operating profit of £143 million in Q1 2015. A net impairment charge of £196 million was recognised in Q1 2016, principally in relation to the shipping portfolio. RWAs reduced by £36.7 billion from Q1 2015 to £47.6 billion.


Highlights

 

●

Net interest margin (NIM) was stable compared with Q1 2015 at 2.15% as the benefit from reductions in the low yielding non-core assets has been largely offset by modest asset margin pressure and mix impacts across the core franchises.

●

Adjusted operating expenses(5) were down by £157 million compared with Q1 2015.  Excluding expenses associated with Williams & Glyn and write down of intangible assets, adjusted operating expenses were down £189 million.

●

Restructuring costs were £238 million in the quarter, down £209 million, or 47%, compared with Q1 2015.  Litigation and conduct costs of £31 million compared with £856 million in Q1 2015 and £2,124 million in Q4 2015, which included additional provisions for mortgage-backed securities and foreign exchange litigation in the US, additional PPI provisions and other customer redress. 

●

Further to the announcement on 27 January 2016, RBS made a payment of £4.2 billion during March to The Royal Bank of Scotland Group Pension Fund, being an accelerated payment of existing committed future contributions. The impact of the £4.2 billion accelerated payment was largely reflected in the year end financial statements; the incremental impact of the accelerated payment being made during March was to reduce the CET1 ratio by around 30 basis points. 

●

Tangible net asset value (TNAV) was 351p per ordinary share at 31 March 2016, broadly stable in the quarter. A 14p reduction due to the payment of the final Dividend Access Share dividend and the accelerated pension payment was offset by gains recognised in foreign exchange reserves (5p) reflecting the strengthening of the US dollar and the euro, and cash flow hedging reserves (8p) as swap rates decreased.

 

Progress on 2016 targets

RBS remains committed to achieving all its priority targets for 2016

 

Strategy goal

2016 target

Q1 2016 Progress

Strength and sustainability

Maintain Bank CET1 ratio of 13%

CET1 ratio of 14.6%

£2 billion AT1 issuance

Continue to plan to issue in 2016, subject to market conditions

Capital Resolution RWAs around £30 billion

RWAs down £1.4 billion to £47.6 billion despite adverse exchange rate and interest rate movements

Customer experience

Narrow the gap to No.1 in NPS in every primary UK brand

Year on year Ulster Bank Personal (NI) has narrowed the gap, and our NatWest and Royal Bank brands show improvements in NPS

Simplifying the bank

Reduce operating expenses by £800 million

Operating expenses down £189 million(8); on track

Supporting growth

Net 4% growth in PBB and CPB customer loans

Net lending in PBB and CPB up 15% on an annualised basis in the quarter

Employee engagement

Raise employee engagement to within two points of the GFS norm

Reviewed annually during Q3

 

Notes:

(1)

Excluding restructuring costs, litigation and conduct costs, write down of goodwill, own credit adjustments, loss on redemption of own debt and strategic disposals.

(2)

Attributable to ordinary shareholders.

(3)

IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.

(4)

Operating profit/(loss) before tax, own credit adjustments, loss on redemption of own debt, strategic disposals and excluding restructuring costs, litigation and conduct costs and write down of goodwill.

(5)

For unadjusted operating profit and expenses see segment performance on pages 19 to 21.

(6)

The transfer of Ulster Bank Northern Ireland commercial activities to Commercial Banking on 1 January 2016 represented £1.1 billion of net loans and advances.

(7)

The portfolio transfers included net loans and advances to customers of £7.3 billion (£6.2 billion at point of transfer)

(8)

Excluding litigation and conduct costs, restructuring costs, write down of goodwill and other intangible assets and the operating costs of Williams & Glyn.

Highlights

 

Building a stronger RBS

●

RBS remains on track with its plan to build a strong, simple, fair bank for customers and shareholders.

●

CET1 ratio remains ahead of our 13% target. The 90 basis points reduction in the CET1 ratio during the quarter was largely due to the payment of the final Dividend Access Share dividend, 50 basis points, and the accelerated pension payment, 30 basis points, actions that have been taken to normalise the ownership structure and increase the long-term resilience of the Bank.

●

RWAs increased by £6.9 billion during the quarter to £249.5 billion driven by strong loan growth alongside market volatility and exchange rate movements as sterling weakened over the quarter. Although market conditions have been difficult in Q1 2016, we remain on track to reduce RWAs by £19 billion in Capital Resolution to around £30 billion by the end of 2016.

●

RBS's leverage ratio reduced from 5.6% to 5.3% principally due to the attributable loss in the quarter. RBS continues to plan to issue £2 billion AT1 capital notes in 2016, subject to market conditions, which will provide further balance sheet resilience.

●

RBS successfully completed two senior unsecured debt issuances: €1.5 billion seven year 2.5% notes and $1.5 billion ten year 4.8% notes. The debt will be eligible to meet RBS's Minimum Requirement for Own Funds and Eligible Liabilities (MREL) and forms a significant part of our targeted £3-5 billion senior debt issuance for 2016.

●

On 8 April 2016, RBS successfully completed the cash tender of £2.3 billion of certain US dollar, sterling and euro senior debt securities.  The tender offers were part of the on-going transition to a holding company capital and term funding model in line with regulatory requirements and included securities that RBS considers non-compliant for MREL purposes. RBS will recognise a loss of c.£66 million in its Q2 2016 results in relation to the tender offer. Over the last six months to the end of April, RBS has reduced term funding by £11.7 billion.    

●

On 11 April 2016, we completed the successful transfer of the Coutts International businesses in Asia and the Middle East to Union Bancaire Privée, the final milestone in the sale of our International Private Bank. We also completed the sale of our Russian subsidiary in early April.

●

RBS continued to deliver strong support for both household and business customers. Within UK PBB, gross new mortgage lending almost doubled from a subdued Q1 2015 performance to £7.0 billion. Our flow market share in Q1 2016 was approximately 11.4% compared with stock share of 8.3%. Buy-to-let new mortgage lending was £1.5 billion compared with £0.8 billion in Q1 2015 and £1.3 billion in Q4 2015. We now have nearly 1,000 mortgage advisors supporting our customers, an increase of over 20% since the beginning of 2015. Net new lending in Commercial Banking totalled £6.5 billion. Q1 2016 represents the fifth successive quarter of net lending growth in Commercial Banking.

●

The Reward account continues to show positive momentum and now has 539,000 fee-paying customers compared with 202,000 at 31 December 2015.

●

We continue to make better use of our digital channels to make it simpler to serve our customers and for them to do business with us.  Online mortgage renewals more than doubled to £3.0 billion compared with Q1 2015, and NatWest customers can now apply for personal loans or credit cards via the mobile app. Active users of our mobile app increased by 20% over the last year, with over 200,000 new users in Q1 2016.

Highlights

 

Customer

RBS remains committed to achieving its target of being number one bank for customer service, trust and advocacy by 2020.

 

We use independent surveys to measure our customers' experience and track our progress against our goal in each of our markets.

 

Net Promoter Score (NPS)

Customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating 'extremely likely' and 0 indicating 'not at all likely'.  Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. NPS is established by subtracting the proportion of detractors from the proportion of promoters.

 

The table below lists all of the businesses for which we have an NPS for 2016. Year-on-year, NatWest Personal Banking, NatWest Business Banking and Royal Bank of Scotland Personal Banking have seen significant improvements in NPS. 

 

In recent years, the bank has launched a number of initiatives to make it simpler, fairer and easier to do business, and it continues to deliver on the commitments that it made to its customers in 2014.

 

 

 

Q1 2015

Q4 2015

Q1 2016

Year end 2016 target

Personal Banking

NatWest (England & Wales)(1)

5

9

13

15

Royal Bank of Scotland (Scotland)(1)

-18

-9

-6

-5

Ulster Bank (Northern Ireland)(2)

-18

-9

-14

-3

Ulster Bank (Republic of Ireland)(2)

-16

-14

-12

-10

Business Banking

NatWest (England & Wales)(3)

-6

9

9

13

Royal Bank of Scotland (Scotland)(3)

-17

-7

-7

2

Ulster Bank Corporate

Ulster Bank (Northern Ireland) (4)

n/a

-19

-10

-4

Ulster Bank (Republic of Ireland) (5)

n/a

-21

n/a

-15

Commercial Banking(6)

12

9

15

17

Highlights

 

Customer Trust

We also use independent experts to measure our customers' trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).

 

Customer trust in RBS has continued to improve and is at its highest in two years. NatWest has not changed since last quarter - both are currently on track to meet the 2016 year end target.

 

 

 

Q1 2015

Q4 2015

Q1 2016

Year end 2016 target

Customer trust(7)

NatWest (England & Wales)

44%

48%

48%

51%

Royal Bank of Scotland (Scotland)

10%

14%

21%

26%

 

Notes:

(1)

Source: GfK FRS 6 month rolling data. Latest base sizes: NatWest (England & Wales) (3464) Royal Bank of Scotland (Scotland) (607). Based on the question: "How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?"

(2)

Source: Coyne Research 12 month rolling data. Latest base sizes: Ulster Bank NI (359) Ulster Bank RoI (344) Question: "Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely".   

(3)

Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with an annual turnover up to £2 million. Quarterly rolling data. Latest base sizes: NatWest England & Wales (1347), RBS Scotland (425). Weighted by region and turnover to be representative of businesses in England & Wales/Scotland, 4 quarter rolling data.

(4)

Source: Charterhouse Research Business Banking Survey (NI). Latest base size: Ulster (383) Weighted by turnover and industry sector to be representative of businesses in Northern Ireland, 4 quarter rolling data.

In 2016 we switched the source of advocacy measurement for Ulster Bank Corporate NI to the Charterhouse Business Banking Study.  Charterhouse is a recognised, independent syndicate study that provides more frequent reporting of NPS as well as additional diagnostic customer feedback to help us improve the customer experience.  The Q4 2015 figure has been restated to reflect this.

(5)

Source: PWC Republic of Ireland Business Banking Tracker. Data collected annually. Latest base sizes: Ulster Bank RoI (222). Weighted by turnover to be representative of businesses in the Republic of Ireland.

(6)

Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with annual turnover between £2 million and £1 billion.  Latest base size: RBSG Great Britain (888). Weighted by region and turnover to be representative of businesses in Great Britain, 4 quarter rolling data.

(7)

Source: Populus. Latest quarter's data.  Measured as a net of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: NatWest, England & Wales (920), RBS Scotland (199).

 


Highlights

 

Outlook

●

We expect PBB and CPB income to be broadly stable in 2016 compared with 2015 as strong planned balance sheet growth, particularly in mortgages but also in core commercial lending, is balanced by headwinds from low interest rates and the uncertain macroeconomic environment.  In Q1 2016 income was broadly stable across the combined PBB and CPB business. Compared with 2015, we expect to see modest income erosion in CIB following a difficult Q1 2016, albeit performance improved towards the end of the quarter.

●

RBS remains on track to achieve an £800 million cost reduction in 2016 after achieving a £189 million reduction in the first quarter. We retain our expectation that cost reduction will exceed any income erosion across our combined core businesses. We will incur a charge of approximately £50 million in respect of the Financial Services Compensation Scheme (FSCS) levy in our Q2 2016 results.

●

We anticipate a modest net impairment charge for the year in our core franchises. The impairment charge taken in the quarter largely related to the shipping portfolio and we continue to anticipate additional net impairments in the Capital Resolution business. We also recognise the increased risk of large single name events across our portfolios given the uncertain macroeconomic environment.

●

Restructuring costs are expected to remain high in 2016, totalling over £1 billion. 

●

We expect Capital Resolution disposal losses of approximately £1.5 billion over the period 2015-19, and we anticipate that we will incur most of the remaining losses in 2016 (2015 - £367 million). Losses in Q1 2016 almost entirely comprise the £226 million impairment relating to the shipping portfolio. Although market conditions have been difficult in Q1 2016, Capital Resolution remains on track to reduce RWAs to around £30 billion by the end of 2016 following a £1.4 billion reduction in Q1 2016.     

●

We continue to deal with a range of uncertainties in the external environment, not least those caused by the forthcoming referendum on the UK's continuing membership of the European Union.  We will also have to manage conduct-related investigations and litigation, including US RMBS, throughout 2016, and substantial related incremental provisions may be recognised during the year.

 

 

Williams & Glyn

●

RBS announced an update on its plans to divest Williams & Glyn on 28 April 2016. Since the last update provided with the 2015 Annual Results, we have undertaken further extensive analysis on the separation and divestment of Williams & Glyn. As a result of this analysis, we have concluded that there is a significant risk that the separation and divestment to which we are committed will not be achieved by 31 December 2017. Due to the complexities of Williams & Glyn's customer and product mix, the programme to create a cloned banking platform continues to be very challenging and the timetable to achieve separation is uncertain. RBS is exploring alternative means to achieve separation and divestment. The overall financial impact on RBS is now likely to be significantly greater than previously estimated.

 

 

Analysis of results

 

Summary consolidated income statement for the period ended 31 March 2016

 

 

Quarter ended

 

31 March

31 December

31 March

 

2016 

2015 

2015*

 

£m

£m

£m

Net interest income

2,156 

2,162 

2,203 

 

 

 

 

Own credit adjustments

256 

(115)

120 

Loss on redemption of own debt

- 

(263)

- 

Strategic disposals

(6)

(22)

(135)

Other operating income

658 

722 

1,331 

 

 

 

 

Non-interest income

908 

322 

1,316 

 

 

 

 

Total income

3,064 

2,484 

3,519 

 

 

 

 

Litigation and conduct costs

(31)

(2,124)

(856)

Restructuring costs

(238)

(614)

(447)

Write down of goodwill

- 

(498)

- 

Other costs

(2,151)

(2,525)

(2,308)

 

 

 

 

Operating expenses

(2,420)

(5,761)

(3,611)

 

 

 

 

Profit/(loss) before impairment (losses)/releases

644 

(3,277)

(92)

Impairment (losses)/releases

(223)

327 

129 

 

 

 

 

Operating profit/(loss) before tax

421 

(2,950)

37 

Tax (charge)/credit

(80)

261 

(190)

 

 

 

 

Profit/(loss) from continuing operations

341 

(2,689)

(153)

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

- 

90 

(316)

 

 

 

 

Profit/(loss) for the period

341 

(2,599)

(469)

 

 

 

 

Attributable to:

 

 

 

Non-controlling interests

22 

20 

(84)

Other owners

94 

121 

74 

Dividend access share

1,193 

- 

- 

Loss attributable to ordinary shareholders

(968)

(2,740)

(459)

 

 

 

 

 

 

 

 

Memo:

 

 

 

 

 

 

 

Total income - adjusted (1)

2,814 

2,884 

3,534 

Operating expenses - adjusted (2)

(2,151)

(2,525)

(2,308)

Operating profit - adjusted (1,2)

440 

686 

1,355 

 

 

 

 

*Restated, refer to Note 1 on page 32 for further details.

 

 

 

 

 

 

 

 

Key metrics and ratios

 

 

 

 

 

 

 

Net interest margin

2.15%

2.10%

2.15%

Cost:income ratio

79%

232%

103%

Cost:income ratio - adjusted (1,2)

76%

88%

65%

(Loss)/earnings per ordinary share from continuing operations

 

 

 

  - basic

(8.3p)

(24.5p)

(2.2p)

  - adjusted (1,2)

(8.1p)

5.1p

8.6p

Return on tangible equity (3)

(9.6%)

(26.5%)

(4.3%)

Return on tangible equity - adjusted (1,2,3)

(9.4%)

6.6%

7.4%

Average tangible equity (3)

£40,383m

£41,319m

£42,392m

Average number of ordinary shares outstanding during the period (millions)

11,606 

11,554 

11,451 

 

Notes:

(1)

Excluding own credit adjustments, loss on redemption of own debt and strategic disposals.

(2)

Excluding restructuring costs, litigation and conduct costs and write down of goodwill.

(3)

Tangible equity is equity attributable to ordinary shareholders less intangible assets.

 

Analysis of results

 

Summary consolidated balance sheet as at 31 March 2016

 

31 March 

31 December 

 

2016 

2015 

 

£m 

£m 

 

 

 

Cash and balances at central banks

72,083 

79,404 

Net loans and advances to banks (1)

19,295 

18,361 

Net loans and advances to customers (1)

317,088 

306,334 

Reverse repurchase agreements and stock borrowing

42,356 

39,843 

Debt securities and equity shares

88,877 

83,458 

Assets of disposal groups (2)

3,405 

3,486 

Other assets

27,609 

22,008 

 

 

 

Funded assets

570,713 

552,894 

Derivatives

312,217 

262,514 

 

 

 

Total assets

882,930 

815,408 

 

 

 

Bank deposits (3)

31,774 

28,030 

Customer deposits (3)

352,344 

343,186 

Repurchase agreements and stock lending

39,030 

37,378 

Debt securities in issue

29,576 

31,150 

Subordinated liabilities

20,870 

19,847 

Derivatives

304,789 

254,705 

Liabilities of disposal groups (2)

2,816 

2,980 

Other liabilities

47,566 

43,985 

 

 

 

Total liabilities

828,765 

761,261 

Non-controlling interests

788 

716 

Owners' equity

53,377 

53,431 

 

 

 

Total liabilities and equity

882,930 

815,408 

 

 

 

Contingent liabilities and commitments

150,729 

153,752 

 

Balance sheet related key metrics and ratios

 

 

 

 

 

Tangible net asset value per ordinary share (4)

351p

352p

Loan:deposit ratio (3,5)

90%

89%

Short-term wholesale funding (3,6)

£16.6bn

£17.2bn

Wholesale funding (3,6)

£58.9bn

£58.7bn

Liquidity portfolio

£157bn

£156bn

Liquidity coverage ratio (LCR) (7)

121%

136%

Net stable funding ratio (NSFR) (8)

119%

121%

Tangible equity (9)

£40,892m

£40,943m

Number of ordinary shares in issue (millions) (10)

11,661 

11,625 

Common Equity Tier 1 ratio

14.6%

15.5%

Risk-weighted assets

£249.5bn

£242.6bn

Leverage ratio (11)

5.3%

5.6%

 

Notes:

(1)

Excludes reverse repurchase agreements and stock borrowing.

(2)

Primarily international private banking business.

(3)

Excludes repurchase agreements and stock lending.

(4)

Tangible net asset value per ordinary share represents tangible equity divided by the number of ordinary shares in issue.

(5)

Includes disposal groups.

(6)

Excludes derivative collateral.

(7)

On 1 October 2015 the LCR became the PRA's primary regulatory liquidity standard; UK banks are required to meet a minimum standard of 80% initially, rising to 100% by 1 January 2018. The published LCR excludes Pillar 2 add-ons. RBS calculates the LCR using its own interpretation of the EU LCR Delegated Act, which may change over time and may not be fully comparable with that of other institutions.

(8)

NSFR for all periods have been calculated using RBS's current interpretations of the revised BCBS guidance on NSFR issued in late 2014. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS's ratio may not be comparable with those of other financial institutions.

(9)

Tangible equity is equity attributable to ordinary shareholders less intangible assets.

(10)

Includes 36 million Treasury shares (31 December 2015 - 26 million).

(11)

Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.

 

 

Analysis of results

 

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015

Net interest income

£m

£m

£m

 

 

 

 

Net interest income (1)

 

 

 

RBS

2,156 

2,162 

2,203 

 

 

 

 

  - UK Personal & Business Banking

1,019 

1,030 

1,032 

  - Ulster Bank RoI

105 

85 

95 

  - Commercial Banking

536 

512 

482 

  - Private Banking

113 

108 

110 

  - RBS International

75 

78 

76 

  - Corporate & Institutional Banking

19 

28 

14 

  - Capital Resolution

86 

6 

157 

  - Williams & Glyn

162 

165 

163 

  - Central items & other

41 

150 

74 

 

 

 

 

Average interest-earning assets (IEA)

 

 

 

RBS

403,384 

407,061 

415,380 

 

 

 

 

  - UK Personal & Business Banking

135,793 

134,687 

127,973 

  - Ulster Bank RoI

24,178 

23,195 

23,244 

  - Commercial Banking

114,855 

111,600 

103,479 

  - Private Banking

16,259 

16,025 

15,575 

  - RBS International

21,075 

20,773 

20,639 

  - Corporate & Institutional Banking

11,568 

10,190 

14,227 

  - Capital Resolution

30,767 

39,875 

82,990 

  - Williams & Glyn

23,356 

23,327 

22,636 

  - Central items & other

25,533 

27,389 

4,617 

 

 

 

 

 

 

 

 

Yields, spreads and margins of the banking business

 

 

 

 

 

 

 

Gross yield on interest-earning assets of the banking business (2)

2.82%

2.78%

3.00%

Cost of interest-bearing liabilities of banking business

(1.01%)

(1.00%)

(1.22%)

 

 

 

 

Interest spread of banking business (3)

1.81%

1.78%

1.78%

Benefit from interest-free funds

0.34%

0.32%

0.37%

 

 

 

 

Net interest margin (1,4)

 

 

 

RBS

2.15%

2.10%

2.15%

 

 

 

 

  - UK Personal & Business Banking (5)

3.02%

3.03%

3.27%

  - Ulster Bank RoI (5)

1.75%

1.45%

1.66%

  - Commercial Banking (5)

1.88%

1.82%

1.89%

  - Private Banking (5)

2.80%

2.67%

2.86%

  - RBS International (5)

1.43%

1.49%

1.49%

  - Corporate & Institutional Banking

0.66%

1.09%

0.40%

  - Capital Resolution

1.12%

0.06%

0.77%

  - Williams & Glyn

2.79%

2.81%

2.92%

 

Third party customer rates (6)

 

 

 

Third party customer asset rate

 

 

 

  - UK Personal & Business Banking

3.95%

4.00%

4.21%

  - Ulster Bank RoI (7)

2.33%

2.19%

2.28%

  - Commercial Banking

2.87%

2.84%

2.98%

  - Private Banking

3.01%

3.06%

3.19%

  - RBS International

3.29%

3.09%

3.15%

Third party customer funding rate

 

 

 

  - UK Personal & Business Banking

(0.62%)

(0.63%)

(0.71%)

  - Ulster Bank RoI (7)

(0.59%)

(0.74%)

(1.05%)

  - Commercial Banking

(0.35%)

(0.36%)

(0.39%)

  - Private Banking

(0.23%)

(0.25%)

(0.28%)

  - RBS International

(0.24%)

(0.24%)

(0.45%)

 

Analysis of results

 

Key points

·

Net interest income of £2,156 million was down £47 million, or 2%, compared with £2,203 million in Q1 2015 principally driven by a 45% reduction in Capital Resolution to £86 million in line with the planned shrinkage of the balance sheet. Partially offsetting, Commercial Banking net interest income increased £54 million, or 11%, to £536 million reflecting increased asset volumes. Q1 2016 net interest income benefits from one additional day compared with Q1 2015, £24 million, and is impacted by one fewer day compared with Q4 2015, £24 million. 

·

NIM for RBS of 2.15% was stable compared with Q1 2015 as the benefit associated with reductions in the low yielding 'non-core' assets has been offset by modest asset margin pressure and mix impacts across the core franchises.  NIM was 5 basis points higher than Q4 2015 principally reflecting rundown of the low yielding 'non-core' assets.

·

NIM for our combined core PBB and CPB franchises was 2.38% in Q1 2016 compared with 2.50% in Q1 2015 and 2.35% in Q4 2015.

·

In UK PBB, NIM declined by 25 basis points to 3.02% compared with Q1 2015 reflecting lower current account hedge income, the impact of the overall portfolio mix being increasingly weighted towards secured lending and mortgage customers switching from standard variable rate (SVR) to lower rate products. SVR balances represented 16% of the mortgage book at 31 March 2016 compared with 20% a year earlier and 17% at the end of Q4 2015.  NIM was broadly stable compared with Q4 2015.

·

Commercial Banking NIM was broadly stable compared with Q1 2015.

 

Notes:                                                                                                                                           

(1)

For the purpose of net interest margin (NIM) calculations, no decrease (Q4 2015 - £3 million; Q1 2015 - £5 million) was made in respect of interest on financial assets and liabilities designated as at fair value through profit or loss. Related average interest-earning assets and average interest-bearing liabilities have also been adjusted.

(2)

Gross yield is the interest earned on average interest-earning assets as a percentage of average interest-earning assets.

(3)

Interest spread is the difference between the gross yield and interest paid on average interest-bearing liabilities as a percentage of average interest-bearing liabilities.

(4)

Net interest margin is net interest income as a percentage of average interest-earning assets.

(5)

PBB NIM was 2.83% (Q4 2015 - 2.80%; Q1 2015 - 3.02%); CPB NIM was 1.91% (Q4 2015 - 1.87%; Q1 2015 - 1.94%).

(6)

Net interest margin includes Treasury allocations and interest on intercompany borrowings, which are excluded from third party customer rates.

(7)

Ulster Bank Ireland Limited manages its funding and liquidity requirements locally. Its liquid asset portfolios and non-customer related funding sources are included within its net interest margin, but excluded from its third party asset and liability rates.

 


Analysis of results

 

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015

Non-interest income

£m

£m

£m

 

 

 

 

Net fees and commissions

654 

653 

812 

Income from trading activities

(110)

59 

235 

Own credit adjustments

256 

(115)

120 

Loss on redemption of own debt

- 

(263)

- 

Strategic disposals

(6)

(22)

(135)

Other operating income

114 

10 

284 

 

 

 

 

Total non-interest income

908 

322 

1,316 

 

 

 

 

Memo:

 

 

 

IFRS volatility in Treasury

(356)

59 

(123)

 

Note:

(1)

IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.

 

Key points

·

Non-interest income was £908 million, a reduction of £408 million, or 31%, compared with £1,316 million in Q1 2015. The reduction principally reflects a £234 million fall in Capital Resolution due to planned asset disposals, a £233 million increase in the charge for volatile items under IFRS (£356 million in Q1 2016 compared with £123 million in Q1 2015) and a £194 million reduction in CIB, reflecting a challenging market and the reduced scale of the business. Partially offsetting, strategic disposal losses were £135 million in Q1 2015, largely in respect of International Private Banking.

 

 

·

Compared with Q4 2015, non-interest income was £586 million higher principally reflecting an own credit adjustment gain of £256 million compared with a charge of £115 million in Q4 2015, a £263 million loss on redemption of own debt in Q4 2015 and a reduction in Capital Resolution losses.  Partially offsetting, a £356 million charge for volatile items under IFRS was reported in the quarter compared with a gain of £59 million in Q4 2015.

 

 

·

Net fees and commissions fell by £158 million, or 19%, compared with Q1 2015 to £654 million reflecting the planned Capital Resolution asset run-down, £59 million, lower CIB income, down £104 million, and lower interchange fees in UK PBB, down £25 million.

 

 

·

Losses from trading activities totalled £110 million in Q1 2016 compared with income of £235 million in Q1 2015, reflecting an increased charge for volatile items under IFRS as well as income reductions across CIB and Capital Resolution.

 

 

·

Other operating income of £114 million was £170 million lower than Q1 2015 principally reflecting planned Capital Resolution run-down.

 


Analysis of results

 

 

 

 

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015*

Operating expenses

£m

£m

£m

 

 

 

 

Staff costs

1,202 

1,072 

1,285 

Premises and equipment

315 

422 

411 

Other administrative expenses

446 

786 

380 

Restructuring costs (see below)

238 

614 

447 

Litigation and conduct costs

31 

2,124 

856 

 

 

 

 

Administrative expenses

2,232 

5,018 

3,379 

Depreciation and amortisation

178 

170 

232 

Write down of goodwill

- 

498 

- 

Write down of other intangible assets

10 

75 

- 

 

 

 

 

Operating expenses

2,420 

5,761 

3,611 

 

 

 

 

Adjusted operating expenses (1)

2,151 

2,525 

2,308 

 

 

 

 

Restructuring costs comprise:

 

 

 

  - staff expenses

121 

205 

56 

  - premises, equipment, depreciation and amortisation

9 

41 

288 

  - other

108 

368 

103 

 

 

 

 

 

238 

614 

447 

 

 

 

 

Staff costs as a % of total income

39%

43%

37%

Cost:income ratio

79%

232%

103%

Cost:income ratio - adjusted (2)

76%

88%

65%

Employee numbers (FTE - thousands)

92.4 

91.5 

91.7 

 

*Restated, refer to Note 1 on page 32 for further details.

 

Notes:

(1)

Excluding restructuring costs, litigation and conduct costs, and write down of goodwill.

(2)

Excluding restructuring costs, litigation and conduct costs, write down of goodwill, own credit adjustments, loss on redemption of own debt and strategic disposals.

 

 

Key points

·

Total operating expenses of £2,420 million were £1,191 million, or 33%, lower than Q1 2015 principally reflecting lower litigation and conduct costs of £31 million (Q1 2015 - £856 million) and lower restructuring costs of £238 million (Q1 2015 - £447 million).

·

Adjusted operating expenses fell by £157 million, or 7%, from Q1 2015 to £2,151 million.  Excluding expenses associated with Williams & Glyn and the write down of intangible assets, adjusted operating expenses reduced by £189 million and remain on target to achieve an £800 million reduction for the year.

·

Staff costs of £1,202 million were down £83 million, or 6%, on Q1 2015 reflecting reduced headcount in CIB and Capital Resolution.

·

Restructuring costs of £238 million in the quarter principally related to the Williams & Glyn separation, £158 million.

·

Litigation and conduct costs of £31 million were significantly lower than recorded in previous quarters which included additional provisions for mortgage-backed securities and foreign exchange litigation in the US, additional PPI provisions and other customer redress.

 


Analysis of results

 

 

Quarter ended

 

31 March

31 December

31 March

2016 

2015 

2015 

Impairment losses/(releases)

£m

£m

£m

 

 

 

 

Loan impairment losses/(releases)

 

 

 

  - individually assessed

186 

(271)

(15)

  - collectively assessed

16 

(27)

12 

  - latent

21 

(28)

(225)

 

 

 

 

Total loan impairment losses/(releases)

223 

(326)

(228)

Securities

- 

(1)

99 

 

 

 

 

Total impairment losses/(releases)

223 

(327)

(129)

 

 

31 March 

31 December 

31 March 

Credit metrics (1)

2016 

2015 

2015 

 

 

 

 

Gross customer loans

£325,339m

£315,111m

£413,900m

Loan impairment provisions

£6,701m

£7,139m

£13,785m

Risk elements in lending (REIL)

£11,867m

£12,157m

£22,278m

Provisions as a % of REIL

57%

59%

62%

REIL as a % of gross customer loans

3.6%

3.9%

5.4%

 

Note:

(1)

Includes disposal groups and excludes reverse repos.

 

Key points 

·

A net impairment loss of £223 million was reported in Q1 2016 compared with a release of £129 million in Q1 2015 and a release of £327 million in Q4 2015.

·

Capital Resolution reported an impairment loss of £196 million compared with a release of £145 million in Q1 2015.  The charge for the quarter included £226 million (Q4 2015 - £83 million; Q1 2015 - £59 million) in relation to exposures in the shipping portfolio reflecting difficult conditions in some parts of the sector.

·

Provision coverage decreased from 59% at 31 December 2015 to 57% at 31 March 2016.

 


 

Analysis of results

 

 

 

 

 

 

 

 

 

Selected credit risk portfolios

 

 

 

 

 

 

31 March 2016

 

31 December 2015

 

CRA (1)

TCE (2)

EAD (3)

 

CRA (1)

TCE (2)

EAD (3)

£m

£m

£m

 

£m

£m

£m

 

 

 

 

 

 

 

 

Oil & Gas

3,518 

6,735 

5,225 

 

3,533 

6,609 

5,606 

Mining & Metals

1,050 

1,998 

1,465 

 

1,134 

2,105 

1,555 

Electricity

3,606 

8,344 

6,055 

 

2,848 

7,454 

5,205 

Water & Waste

5,125 

6,290 

6,242 

 

4,835 

5,948 

5,873 

 

 

 

 

 

 

 

 

 

13,299 

23,367 

18,987 

 

12,350 

22,116 

18,239 

 

 

 

 

 

 

 

 

Commodity Traders (4)

668 

1,187 

1,215 

 

749 

1,117 

1,350 

Of which: Natural Resources

506 

889 

796 

 

548 

772 

776 

 

 

 

 

 

 

 

 

Shipping

6,894 

7,380 

7,140 

 

7,140 

7,688 

7,509 

 

Notes:

(1)

Credit risk assets (CRA) consist of lending gross of impairment provisions and derivative exposures after netting and contingent obligations.

(2)

Total committed exposure (TCE) comprises CRA, securities financing transactions after netting, banking book debt securities and committed undrawn facilities.

(3)

Exposure at default (EAD) reflects an estimate of the extent to which a bank will be exposed under a specific facility on the default of a customer or counterparty.

Uncommitted undrawn facilities are excluded from TCE but included within EAD; therefore EAD can exceed TCE.

(4)

Commodity Traders represent customers in a number of industry sectors, predominantly Natural Resources above.

 

Key points

·

Oil & Gas - The portfolio remained broadly unchanged. Non-performing loans increased to £182 million (31 December 2015 - £138 million) reflecting the continued challenging market environment.

·

Mining & Metals - Exposure continued to reduce in Q1 2016 predominantly due to proactive credit management. The sector remains under stress and continues to be subject to heightened monitoring. Non-performing loans increased to £101 million (31 December 2015 - £48 million).

·

Commodity Traders - Exposure is mainly to the largest independent physical commodity traders, funding is predominantly short-dated and used for working capital.

·

Shipping - Following deterioration in market values and charter rates to historic lows in the dry bulk sector, provisions increased from £181 million to £374 million in Q1 2016. Non-performing loans increased to £827 million (31 December 2015 - £434 million).

 

 

 

31 March 2016

 

31 December 2015

 

Balance

Total

 

Balance

Total

 

sheet

exposure

 

sheet

exposure

Emerging markets (1)

£m

£m

 

£m

£m

 

 

 

 

 

 

India

1,412 

1,646 

 

1,563 

1,879 

China

1,004 

1,028 

 

1,054 

1,094 

 

Note:

(1)

Balance sheet and total exposures include banking and trading book debt securities and are net of impairment provisions in respect of lending - refer to the Capital and

Risk management section of the 2015 Annual Report and Accounts for detailed definitions and additional disclosures.

 

 

 

Key points

·

Exposure to most emerging markets decreased in Q1 2016 in line with the RBS strategy to focus on home markets in the UK and the Republic of Ireland.   

 

 

·

Exposure in China was stable in Q1 2016. The drop in exposure to India mainly reflected reductions in corporate lending.

 

 

 


Analysis of results

 

Capital and leverage ratios

 

 

 

 

 

 

End-point CRR basis (1)

 

PRA transitional basis

 

31 March 

31 December 

 

31 March 

31 December 

 

2016 

2015 

 

2016 

2015 

Risk asset ratios

% 

% 

 

% 

% 

 

 

 

 

 

 

CET1

14.6 

15.5 

 

14.6 

15.5 

Tier 1

15.4 

16.3 

 

17.7 

19.1 

Total

18.8 

19.6 

 

22.9 

24.7 

 

 

 

 

 

 

Capital

£m

£m

 

£m

£m

 

 

 

 

 

 

Tangible equity

40,892 

40,943 

 

40,892 

40,943 

 

 

 

 

 

 

Expected loss less impairment provisions

(936)

(1,035)

 

(936)

(1,035)

Prudential valuation adjustment

(408)

(381)

 

(408)

(381)

Deferred tax assets

(1,075)

(1,110)

 

(1,075)

(1,110)

Own credit adjustments

(371)

(104)

 

(371)

(104)

Pension fund adjustment

(458)

(161)

 

(458)

(161)

Other deductions

(1,214)

(544)

 

(1,214)

(522)

 

 

 

 

 

 

Total deductions

(4,462)

(3,335)

 

(4,462)

(3,313)

 

 

 

 

 

 

CET1 capital

36,430 

37,608 

 

36,430 

37,630 

AT1 capital

1,997 

1,997 

 

7,756 

8,716 

Tier 1 capital

38,427 

39,605 

 

44,186 

46,346 

Tier 2 capital

8,422 

8,002 

 

13,028 

13,619 

 

 

 

 

 

 

Total regulatory capital

46,849 

47,607 

 

57,214 

59,965 

 

 

 

 

 

 

Risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

Credit risk

 

 

 

 

 

  - non-counterparty

171,600 

166,400 

 

 

 

  - counterparty

27,100 

23,400 

 

 

 

Market risk

21,200 

21,200 

 

 

 

Operational risk

29,600 

31,600 

 

 

 

 

 

 

 

 

 

Total RWAs

249,500 

242,600 

 

 

 

 

 

 

 

 

 

Leverage (2)

 

 

 

 

 

 

 

 

 

 

 

Derivatives

312,200 

262,500 

 

 

 

Loans and advances

338,600 

327,000 

 

 

 

Reverse repos

42,500 

39,900 

 

 

 

Other assets

189,600 

186,000 

 

 

 

 

 

 

 

 

 

Total assets

882,900 

815,400 

 

 

 

Derivatives

 

 

 

 

 

  - netting

(303,500)

(258,600)

 

 

 

  - potential future exposures

75,900 

75,600 

 

 

 

Securities financing transactions gross up

7,100 

5,100 

 

 

 

Undrawn commitments

62,300 

63,500 

 

 

 

Regulatory deductions and other adjustments

3,600 

1,500 

 

 

 

 

 

 

 

 

 

Leverage exposure

728,300 

702,500 

 

 

 

 

 

 

 

 

 

Tier 1 capital

38,427 

39,605 

 

 

 

 

 

 

 

 

 

Leverage ratio %

5.3 

5.6 

 

 

 

 

Notes:

(1)

Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on AFS securities which have been included from 2015 under the PRA transitional basis.

(2)

Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.

 


Analysis of results

 

Key points

●

CET1 ratio of 14.6% fell by 90 basis points in the quarter reflecting lower CET1 capital as well as higher RWAs.

 

 

●

CET1 capital decreased by £1.2 billion due to the payment of the final DAS dividend (50 basis points impact on CET1 ratio) and the accelerated pension payment (30 basis points).

 

 

●

RWAs have increased by £6.9 billion in the quarter to £249.5 billion reflecting loan growth in the core franchises alongside market volatility and exchange rate movements as sterling weakened (£3.3 billion).

 

 

●

Increases in non-counterparty credit risk RWAs (£5.2 billion) and counterparty risk RWAs (£3.7 billion) were partly offset by a £2.0 billion reduction associated with the annual recalculation of operational risk RWAs.

●

The increase in credit risk RWAs was principally across Commercial Banking (£3.9 billion), UK PBB (£1.5 billion) and RBSI (£0.8 billion). Partially offsetting, Capital Resolution reduced by £1.8 billion in line with planned run-down.

 

○

Commercial Banking and RBSI credit risk RWAs increased as a result of asset growth and the impact of foreign exchange movements.  

 

○

UK PBB credit risk RWAs increased due to mortgage lending growth and a recalibration of mortgage risk parameter models.

 

 

●

Counterparty risk RWAs increased in the quarter in CIB and Capital Resolution driven by market volatility and the implementation of new risk parameter models.

 

 

●

Leverage ratio decreased in the quarter from 5.6% to 5.3% due to lower Tier 1 capital (as discussed above) and an increase in funded assets reflecting loan growth.

 

 

Segment performance

 

Quarter ended 31 March 2016

 

PBB

 

CPB

 

 

 

 

Central

 

 

 

Ulster

 

Commercial

Private

RBS

 

 

Capital

Williams

 items &

Total

 

UK PBB

Bank RoI

 

Banking

Banking

International

 

CIB

Resolution

& Glyn

other (1)

RBS

 

£m

£m

 

£m

£m

£m

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

1,019  

105  

 

536  

113  

75  

 

19  

86  

162  

41  

2,156  

Other non-interest income

256  

50  

 

317  

52  

15  

 

258  

(35)

43  

(298)

658  

Total income - adjusted (2)

1,275  

155  

 

853  

165  

90  

 

277  

51  

205  

(257)

2,814  

 

 

 

 

 

 

 

 

 

 

 

 

 

Own credit adjustments

- 

3  

 

- 

- 

- 

 

64  

108  

- 

81  

256  

Strategic disposals

- 

- 

 

- 

- 

- 

 

- 

(6)

- 

- 

(6)

Total income

1,275  

158  

 

853  

165  

90  

 

341  

153  

205  

(176)

3,064  

Direct expenses - staff costs

(181)

(51)

 

(131)

(40)

(10)

 

(67)

(45)

(62)

(615)

(1,202)

                           - other costs

(63)

(11)

 

(49)

(14)

(5)

 

(14)

(33)

(15)

(745)

(949)

Indirect expenses

(484)

(42)

 

(256)

(83)

(20)

 

(250)

(154)

(21)

1,310  

-  

Operating expenses - adjusted (3)

(728)

(104)

 

(436)

(137)

(35)

 

(331)

(232)

(98)

(50)

(2,151)

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring costs - direct

(13)

(6)

 

(1)

(1)

- 

 

- 

(7)

(20)

(190)

(238)

                                - indirect

(9)

- 

 

1  

(15)

(1)

 

(12)

(9)

- 

45  

- 

Litigation and conduct costs

- 

- 

 

(2)

- 

- 

 

(18)

(10)

- 

(1)

(31)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

(750)

(110)

 

(438)

(153)

(36)

 

(361)

(258)

(118)

(196)

(2,420)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before impairment losses

525  

48  

 

415  

12  

54  

 

(20)

(105)

87  

(372)

644  

Impairment releases/(losses)

(16)

13  

 

(14)

(2)

(2)

 

- 

(196)

(6)

- 

(223)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

509  

61  

 

401  

10  

52  

 

(20)

(301)

81  

(372)

421  

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss) - adjusted (2,3)

531  

64  

 

403  

26  

53  

 

(54)

(377)

101  

(307)

440  

Additional information

 

 

 

 

 

 

 

 

 

 

 

 

Return on equity (4)

26.1%

8.8%

 

11.1%

1.5%

16.0%

 

(2.6%)

nm

nm

nm

(9.6%)

Return on equity - adjusted (2,3,4)

27.3%

9.2%

 

11.2%

5.1%

16.3%

 

(4.4%)

nm

nm

nm

(9.4%)

Cost:income ratio

59%

70%

 

51%

93%

40%

 

106%

nm

58%

nm

79%

Cost:income ratio - adjusted (2,3)

57%

67%

 

51%

83%

39%

 

119%

nm

48%

nm

76%

Total assets (£bn)

146.3 

22.7 

 

139.4 

17.4 

23.7 

 

255.9 

218.8 

24.2 

34.5 

882.9 

Funded assets (£bn)

146.3 

22.6 

 

139.4 

17.3 

23.7 

 

116.0 

50.2 

24.2 

31.0 

570.7 

Net loans and advances to customers (£bn)

121.8 

17.9 

 

96.4 

11.6 

8.0 

 

18.6 

22.4 

20.1 

1.8 

318.6 

Risk elements in lending (£bn)

2.4 

4.5 

 

2.2 

0.1  

0.1  

 

- 

2.2  

0.4  

- 

11.9  

Impairment provisions (£bn)

(1.6)

(2.7)

 

(1.1)

- 

- 

 

- 

(1.0)

(0.3)

- 

(6.7)

Customer deposits (£bn)

136.9 

13.7 

 

97.1  

23.2 

21.6 

 

6.7 

24.9 

24.3 

6.6 

355.0 

Risk-weighted assets (RWAs) (£bn)

34.7 

20.4 

 

75.7  

8.6 

9.1 

 

36.1 

47.6 

9.7 

7.6 

249.5 

RWA equivalent (£bn)

37.5 

21.7 

 

79.7  

8.6 

9.1 

 

36.7 

48.4 

10.1 

7.8 

259.6 

Employee numbers (FTEs - thousands)

21.4 

3.2 

 

6.0 

1.8 

0.7 

 

1.3 

1.0 

5.5 

51.5 

92.4 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the notes to this table refer to page 21. nm = not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

Segment performance

 

Quarter ended 31 December 2015

 

PBB

 

CPB

 

 

 

 

Central

 

 

 

Ulster

 

Commercial

Private

RBS

 

 

Capital

Williams

 items &

Total

 

UK PBB

Bank RoI

 

Banking

Banking

International

 

CIB

Resolution

& Glyn

other (1)

RBS

 

£m

£m

 

£m

£m

£m

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

1,030 

85 

 

512 

108 

78 

 

28 

6 

165 

150 

2,162 

Other non-interest income

224 

31 

 

285 

50 

17 

 

224 

(239)

43 

87 

722 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income adjusted (2)

1,254 

116 

 

797 

158 

95 

 

252 

(233)

208 

237 

2,884 

Own credit adjustments

- 

- 

 

- 

- 

- 

 

(66)

(5)

- 

(44)

(115)

Loss on redemption of own debt

- 

- 

 

- 

- 

- 

 

- 

- 

- 

(263)

(263)

Strategic disposals

- 

- 

 

- 

- 

- 

 

- 

(24)

- 

2 

(22)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

1,254 

116 

 

797 

158 

95 

 

186 

(262)

208 

(68)

2,484 

Direct expenses - staff costs

(199)

(40)

 

(124)

(43)

(12)

 

(63)

(54)

(61)

(476)

(1,072)

                            - other costs

(82)

(28)

 

(80)

(7)

(5)

 

(50)

(54)

(24)

(1,123)

(1,453)

Indirect expenses

(596)

(49)

 

(380)

(109)

(24)

 

(251)

(286)

(22)

1,717 

- 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses - adjusted (3)

(877)

(117)

 

(584)

(159)

(41)

 

(364)

(394)

(107)

118 

(2,525)

Restructuring costs - direct

(31)

7 

 

(40)

(7)

- 

 

- 

(21)

(28)

(494)

(614)

                                 - indirect

(56)

(1)

 

(14)

12 

1 

 

(62)

(83)

- 

203 

- 

Litigation and conduct costs

(607)

4 

 

8 

(10)

- 

 

(5)

(1,498)

- 

(16)

(2,124)

Write down of goodwill

- 

- 

 

- 

(498)

- 

 

- 

- 

- 

- 

(498)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

(1,571)

(107)

 

(630)

(662)

(40)

 

(431)

(1,996)

(135)

(189)

(5,761)

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss)/profit before impairment losses

(317)

9 

 

167 

(504)

55 

 

(245)

(2,258)

73 

(257)

(3,277)

Impairment releases/(losses)

27 

10 

 

(27)

(12)

- 

 

- 

356 

(20)

(7)

327 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating (loss)/profit

(290)

19 

 

140 

(516)

55 

 

(245)

(1,902)

53 

(264)

(2,950)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss) - adjusted (2,3)

404 

9 

 

186 

(13)

54 

 

(112)

(271)

81 

348 

686 

Additional information

 

 

 

 

 

 

 

 

 

 

 

 

Return on equity (4)

(16.8%)

3.0%

 

3.1%

(118.9%)

19.1%

 

(15.1%)

nm

nm

nm

(26.5%)

Return on equity - adjusted (2,3,4)

19.8%

1.4%

 

4.6%

(4.4%)

18.7%

 

(7.6%)

nm

nm

nm

6.6%

Cost:income ratio

125%

92%

 

79%

419%

42%

 

232%

nm

65%

nm

232%

Cost:income ratio - adjusted (2,3)

70%

101%

 

73%

101%

43%

 

144%

nm

51%

nm

88%

Total assets (£bn)

143.9 

21.3 

 

133.5 

17.0 

23.1 

 

215.3 

201.5 

24.1 

35.7 

815.4 

Funded assets (£bn)

143.9 

21.2 

 

133.5 

17.0 

23.1 

 

103.3 

53.4 

24.1 

33.4 

552.9 

Net loans and advances to customers (£bn)

119.8 

16.7 

 

91.3 

11.2 

7.3 

 

16.1 

23.6 

20.0 

2.0 

308.0 

Risk elements in lending (£bn)

2.7 

3.5 

 

1.9 

0.1 

0.1 

 

- 

3.4 

0.5 

- 

12.2 

Impairment provisions (£bn)

(1.8)

(1.9)

 

(0.7)

- 

(0.1)

 

- 

(2.3)

(0.3)

- 

(7.1)

Customer deposits (£bn)

137.8 

13.1 

 

88.9 

23.1 

21.3 

 

5.7 

26.0 

24.1 

6.0 

346.0 

Risk-weighted assets (RWAs) (£bn)

33.3 

19.4 

 

72.3 

8.7 

8.3 

 

33.1 

49.0 

9.9 

8.6 

242.6 

RWA equivalent (£bn)

35.5 

20.4 

 

77.6 

8.7 

8.3 

 

33.4 

50.3 

10.4 

8.8 

253.4 

Employee numbers (FTEs - thousands)

22.4 

2.5 

 

5.8 

1.9 

0.7 

 

1.3 

1.4 

5.1 

50.4 

91.5 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the notes to this table refer to page 21. nm = not meaningful

 

 

 

 

 

 

 

 

 

 

 

 

Segment performance

 

Quarter ended 31 March 2015

 

PBB

 

CPB

 

 

 

 

Central

 

 

 

Ulster

 

Commercial

Private

RBS

 

 

Capital

Williams

items &

Total

 

UK PBB

Bank RoI

 

Banking

Banking

International

 

CIB

Resolution

& Glyn

other (1)

RBS

 

£m

£m

 

£m

£m

£m

 

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

1,032 

95 

 

482 

110 

76 

 

14 

157 

163 

74 

2,203 

Other non-interest income

282 

43 

 

307 

55 

17 

 

470 

250 

41 

(134)

1,331 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income - adjusted (2)

1,314 

138 

 

789 

165 

93 

 

484 

407 

204 

(60)

3,534 

Own credit adjustments

- 

- 

 

- 

- 

- 

 

46 

65 

- 

9 

120 

Strategic disposals

- 

- 

 

- 

- 

- 

 

- 

(14)

- 

(121)

(135)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income

1,314 

138 

 

789 

165 

93 

 

530 

458 

204 

(172)

3,519 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct expenses - staff costs

(200)

(40)

 

(123)

(46)

(10)

 

(109)

(92)

(45)

(620)

(1,285)

                           - other costs

(64)

(18)

 

(51)

(9)

(4)

 

(26)

(57)

(6)

(788)

(1,023)

Indirect expenses

(445)

(43)

 

(241)

(68)

(24)

 

(257)

(260)

(25)

1,363 

- 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses - adjusted (3)

(709)

(101)

 

(415)

(123)

(38)

 

(392)

(409)

(76)

(45)

(2,308)

Restructuring costs - direct

- 

- 

 

- 

- 

- 

 

- 

(16)

- 

(431)

(447)

                                - indirect

(30)

1 

 

1 

3 

(2)

 

(91)

(184)

- 

302 

- 

Litigation and conduct costs

(354)

- 

 

- 

(2)

- 

 

(334)

(166)

- 

- 

(856)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

(1,093)

(100)

 

(414)

(122)

(40)

 

(817)

(775)

(76)

(174)

(3,611)

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before impairment losses

221 

38 

 

375 

43 

53 

 

(287)

(317)

128 

(346)

(92)

Impairment (losses)/releases

(20)

25 

 

1 

1 

(2)

 

8 

145 

21 

(50)

129 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss)

201 

63 

 

376 

44 

51 

 

(279)

(172)

149 

(396)

37 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit/(loss) - adjusted (2,3)

585 

62 

 

375 

43 

53 

 

100 

143 

149 

(155)

1,355 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional information *

 

 

 

 

 

 

 

 

 

 

 

 

Return on equity (4)

8.4%

10.1%

 

12.4%

7.8%

18.8%

 

(13.3%)

nm

nm

nm

(4.3%)

Return on equity - adjusted (2,3,4)

27.2%

9.9%

 

12.4%

7.5%

19.5%

 

3.0%

nm

nm

nm

7.4%

Cost:income ratio

83%

72%

 

52%

74%

43%

 

154%

nm

37%

nm

103%

Cost:income ratio - adjusted (2,3)

54%

73%

 

53%

75%

41%

 

81%

nm

37%

nm

65%

Total assets (£bn)

137.8 

21.7 

 

131.1 

17.3 

24.3 

 

308.7 

338.7 

23.7 

101.6 

1,104.9 

Funded assets (£bn)

137.8 

21.6 

 

131.1 

17.3 

24.3 

 

152.1 

108.3 

23.7 

97.7 

713.9 

Net loans and advances to customers (£bn)

111.7 

16.7 

 

86.2 

11.1 

7.2 

 

31.6 

48.5 

19.5 

67.7 

400.2 

Risk elements in lending (£bn)

3.4 

4.0 

 

2.3 

0.1 

0.1 

 

- 

10.4 

0.6 

1.4 

22.3 

Impairment provisions (£bn)

(2.4)

(2.1)

 

(0.8)

(0.1)

(0.1)

 

- 

(7.3)

(0.4)

(0.6)

(13.8)

Customer deposits (£bn)

131.6 

13.5 

 

90.0 

22.0 

22.7 

 

11.2 

34.6 

22.1 

74.9 

422.6 

Risk-weighted assets (RWAs) (£bn)

35.9 

20.4 

 

63.1 

8.4 

7.9 

 

43.8 

84.3 

10.5 

74.3 

348.6 

RWA equivalent (£bn)

38.6 

19.3 

 

69.7 

8.4 

7.9 

 

44.5 

90.1 

11.1 

74.7 

364.3 

Employee numbers (FTEs - thousands)

22.7 

2.4 

 

5.8 

2.0 

0.6 

 

1.6 

2.3 

4.4 

49.9 

91.7 

nm = not meaningful. *Restated - refer to page 32 for further details.

 

 

 

 

 

 

 

Notes:

(1)

Central items includes unallocated costs and assets which principally comprise volatile items under IFRS and balances in relation to Citizens for Q1 2015 and international private banking.

(2)

Excluding own credit adjustments, gains/(losses) on redemption of own debt and strategic disposals. Tax on these items was a £59 million charge in Q1 2016 (Q4 2015 - £72 million credit; Q1 2015 - £25 million charge).

(3)

Excluding restructuring costs, litigation and conduct costs and write down of goodwill. Tax on these items was £60 million in Q1 2016 (Q4 2015 - £141 million; Q1 2015 - £104 million).

(4)

RBS's CET 1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by notional equity allocated at different rates of 11% (Commercial Banking and Ulster Bank RoI), 12% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets after capital deductions (RWAes). Franchise adjusted (2,3) return on equity was 10.9% (Return on equity for Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and CIB combined).

 

 

 

Segment performance

 

Q1 2016 compared to Q1 2015

 

UK Personal & Business Banking

●

UK PBB operating profit of £509 million improved from a £201 million profit in Q1 2015 and a £290 million loss in Q4 2015 largely due to the absence of litigation and conduct costs.  Adjusted operating profit of £531 million was down £54 million, or 9%, from Q1 2015, but was £127 million, or 31%, higher than Q4 2015 principally reflecting the UK bank levy charge, £45 million, and write down of intangible assets, £48 million, in Q4 2015.

●

Mortgage activity continued to strengthen with applications up 61% from £6.4 billion in Q1 2015 to £10.3 billion providing a strong forward pipeline for Q2 2016. Gross new lending almost doubled to £7.0 billion. Market share of new mortgages was approximately 11.4% compared with a stock share of 8.3% helping to support mortgage balance growth of 13%.

●

Further steps were taken during the quarter to enhance customer experience in digital channels, including the ability for NatWest customers to apply for a personal loan or credit card via our mobile app.

●

The Reward account continues to show positive momentum and now has 539,000 fee-paying customers, compared with 202,000 at 31 December 2015. We are seeing positive evidence of increased levels of engagement and continue to embed the product across our population of main bank customers.

●

Excluding the impact of business transfers(1),net loans and advances grew by £11.2 billion, or 10%, from Q1 2015, principally driven by mortgages, and increased by £3.2 billion from Q4 2015 with continued strong mortgage growth and positive momentum in business and personal unsecured lending.

●

Income of £1,275 million was 3% down on Q1 2015, or 2% excluding the impact of business transfers(1), but was 2% higher than Q4 2015 as margins stabilised. Net interest margin was 25bps lower than Q1 2015 at 3.02% reflecting lower current account hedge income, the impact of asset growth being skewed towards mortgages, and mortgage customers switching from standard variable rate (SVR) to lower rate products. SVR balances represented 16% of the mortgage book at 31 March 2016 compared with 20% a year earlier and 17% at the end of Q4 2015. Non-interest income reduced by £26 million, or 9%, to £256 million reflecting reduced interchange fees on credit and debit cards after regulatory changes and cash-back payments following the launch of the Reward account.

●

Total expenses were 31% lower than Q1 2015 at £750 million principally driven by the absence of litigation and conduct charges.  Adjusted operating expenses increased by 3% to £728 million reflecting increased technology investment in the business partly offset by lower direct staff costs as headcount efficiencies continue.

●

In addition, plans were announced to reorganise our investment advice and protection businesses, including the launch of an online investment platform, and to enhance and streamline our distribution model. 

●

The net impairment charge of £16 million reflects continued benign credit conditions.

 

Note:

(1)

The business transfers included: net loans and advances of £1.1 billion, customer deposits of £2.0 billion and total income of £13 million in Q1 2015 comparatives have not been restated.

Segment performance

 

Ulster Bank RoI

●

Ulster Bank RoI recorded an operating profit of €78 million, down 6% on Q1 2015 due to a lower level of impairment releases. Adjusted operating profit was stable at €82 million compared with Q1 2015 and was €66 million higher than Q4 2015.  

●

A non-recurring profit of €28 million relating to asset disposals has been recognised in Q1 2016, of which €14 million was reported in income.

●

Income increased by 11% from Q1 2015 to €205 million. Excluding the benefit of asset disposals, underlying business income growth, driven by deposit re-pricing and new business lending, was partly offset by reduced income on free funds. Net interest margin increased by 9 basis points to 1.75%.

●

Adjusted operating expenses remained flat at €136 million compared with Q1 2015 despite a €6 million increase in regulatory levies. Total operating expenses increased by 7% reflecting higher restructuring costs primarily relating to asset disposals. The adjusted cost:income ratio reduced to 67% compared with 73% in Q1 2015. A realignment of costs within direct expenses resulted in an increase in staff costs in Q1 2016 with an offsetting reduction in other costs.  This reflects the re-allocation of 640 staff from UK PBB to align with current management responsibilities following the separation of the Northern Ireland and Republic of Ireland businesses.   

●

A net impairment release of €17 million was largely driven by asset disposals which benefited from improved market conditions. Underlying credit metrics also continue to benefit from the improving economic environment and RWAs reduced by 9% to €25.7 billion compared with Q1 2015.

●

New lending indicators remain positive, underpinned by the continued improvement in Irish economic conditions, with gross new mortgage lending increasing by 32% to €0.2 billion compared with Q1 2015. Net loans and advances to customers(1) reduced by €0.6 billion from Q1 2015 and include a reduction of €0.9 billion in the low yielding tracker mortgage portfolio to €11.6 billion.

 

Commercial Banking

●

Commercial Banking reported an operating profit of £401 million, up 7% from Q1 2015.  Return on equity was 11% compared with 12% in the prior year.

●

Net loans and advances, adjusting for the impact of transfers(2), increased by £4.0 billion from Q1 2015 to £96.4 billion and increased by £3.9 billion compared with Q4 2015, principally reflecting increased borrowing by large UK and Western Europe corporate customers. The increase compared with Q1 2015 comprised £6.5 billion of net new lending, partially offset by £2.5 billion of strategic run-off and disposals. Excluding the transferred businesses, customer deposits of £97.1 billion were up £5.0 billion on Q1 2015 and £6.1 billion on Q4 2015.     

●

Total income of £853 million was 8% higher than Q1 2015 largely reflecting increased asset volumes, supplemented by the impact of portfolio transfers. Net interest margin of 1.88% remained broadly stable compared with Q1 2015 but has increased by 6 basis points compared with Q4 2015 driven by reduced funding costs.

●

Operating expenses increased by 6% from Q1 2015 to £438 million largely due to the impact of the portfolio transfers. Adjusted operating expenses fell by £148 million from Q4 2015 principally due to the UK bank levy charge of £103 million in the prior quarter.

●

Net impairment losses were £14 million compared with a release of £1 million in Q1 2015. Impairments remained at low levels.

●

RWAs were £75.7 billion, an increase of £12.6 billion on Q1 2015 reflecting asset growth and portfolio transfers of £9.9 billion partially offset by active portfolio management.

Notes:

(1)

Gross loans and advances to customers at 31 March 2016 include €1.0 billion (€0.2 billion net of impairment provisions) of largely non-performing balances transferred from Capital Resolution on 1 January 2016. Comparatives have not been restated.

(2)

The portfolio transfers included: total income of £51 million (Q4 2015 - £47 million; Q1 2015 - nil); operating expenses of £25 million (Q4 2015 - £12 million; Q1 2015 - nil); net loans and advances to customers of £7.3 billion (31 December 2015 - £5.0 billion; 31 March 2015 - nil); customer deposits of £2.0 billion (31 December 2015 and 31 March 2015 - nil); and RWAs of £9.9 billion (31 December 2015 - £8.4 billion; 31 March 2015 - nil). The portfolio transfers were as follows: Q2 2015 - UK corporate loan; Q4 2015 - Western European corporate loan; Q1 2016 - Ulster Bank NI commercial and RCR residual portfolios. Comparatives have not been restated. Asset growth in transferred businesses achieved since Q4 is included in underlying commercial business.

Segment performance

 

Private Banking

●

Private Banking made an operating profit of £10 million, £34 million lower than Q1 2015. The £516 million loss reported in Q4 2015 included a £498 million goodwill impairment charge.

●

Net loans and advances increased 5% to £11.6 billion, due to increased mortgage lending, and customer deposits grew by 5% to £23.2 billion from Q1 2015. Assets under management reduced by £0.3 billion to £14.0 billion reflecting adverse market conditions.

●

Total income at £165 million was in line with Q1 2015 as the benefit of an increase in net interest margin was offset by a more competitive market in investments and transactional flows driving down net fees and commissions. Income was up £7 million compared with Q4 2015 due to an increase in net interest margin reflecting reduced funding costs.

●

Adjusted operating expenses were 11% higher than Q1 2015 at £137 million reflecting increased infrastructure costs absorbed from the sale of the international business, partially offset by reduced staff costs as employee numbers declined by over 10%. Adjusted operating expenses fell by £22 million from Q4 2015 driven by the Q4 2015 UK bank levy charge of £22 million.

 

RBS International

 

●

RBS International (RBSI) reported an operating profit of £52 million, broadly in line with Q1 2015.

●

Net loans and advances to customers increased by 11% to £8.0 billion from Q1 2015 principally reflecting balance drawdowns in the corporate lending portfolio. Customer deposits fell by £1.1 billion to £21.6 billion due to planned re-pricing activity.

●

Total income fell 3% from Q1 2015 to £90 million driven by lower deposit margins partially offset by increased asset volumes.
     

 

Corporate & Institutional Banking (CIB)

●

CIB reported an operating loss of £20 million compared with an operating loss of £279 million in Q1 2015. The adjusted operating loss for the quarter was £54 million compared with a profit of £100 million in Q1 2015. The reduction was driven by lower income partially offset by lower adjusted expenses, down £61 million, or 16%, compared with Q1 2015.

●

Total income reduced by £189 million, or 36%, to £341 million compared with £530 million in Q1 2015. Adjusted income of £277 million was £165 million lower than Q1 2015, excluding a £42 million movement associated with the transfer of portfolios to Commercial Banking, driven by reductions in Rates and Financing reflecting the difficult market conditions in Q1 2016 and the reduced scale of the business. Currencies performed robustly in Q1 2016, which contrasted with Q1 2015 when a loss relating to the removal of the Swiss Franc's peg to the Euro was incurred. Adjusted income was 10% higher than in Q4 2015 (£277 million compared with £252 million).

●

Operating expenses reduced by £456 million, or 56%, to £361 million compared with £817 million in Q1 2015. Adjusted operating expenses fell by £61 million, or 16%, to £331 million as business reshaping and headcount reductions continued.  Adjusted operating expenses fell by £33 million compared with Q4 2015 principally reflecting the UK bank levy charge of £24 million in the prior quarter.

●

Funded assets fell by £36.1 billion to £116.0 billion compared with £152.1 billion in Q1 2015.  Excluding the impact of transfers(1), funded assets fell by £15.1 billion as business reshaping continues.

●

RWAs were stable compared with Q1 2015 at £36.1 billion, adjusting for the impact of transfers to Commercial Banking. The £3.0 billion increase from Q4 2015 was principally due to model updates and the impact of market volatility in Q1 2016.

 

Note:

(1)

The portfolio transfers included third party assets of £16 billion of Short Term Money markets business to Treasury and £5 billion to Commercial Banking. Comparatives have not been restated.

Segment performance

 

Capital Resolution

●

RWAs reduced by £1.4 billion in the quarter to £47.6 billion reflecting a moderate level of disposal activity, partially offset by an increase associated with the weakening of sterling in the quarter and the lowering of rates.

●

Funded assets reduced by £3.2 billion in Q1 2016 to £50.2 billion with the most significant reductions across Markets and Shipping. 

●

An operating loss of £301 million was recorded in Q1 2016 compared with a £172 million loss in Q1 2015. Total income of £153 million has fallen by £305 million compared with Q1 2015 but increased by £415 million compared with Q4 2015 primarily due to lower disposal losses and favourable own credit adjustments. Q1 income includes £109 million in respect of an expected distribution to successful plaintiffs in the Madoff related class action.

●

Adjusted expenses of £232 million reduced £177 million, or 43%, compared with Q1 2015, principally reflecting the impact of a 1,300 reduction in headcount, and by £162 million, or 41%, compared with Q4 2015. 

●

A net impairment charge of £196 million was recorded in the quarter principally comprising charges relating to a number of shipping assets (£226 million).  Impairment releases of £145 million and £356 million were reported in Q1 2015 and Q4 2015 respectively.

●

RWAs have fallen by £36.7 billion to £47.6 billion from Q1 2015, primarily due to run-off and loan portfolio disposals. Funded assets have reduced by £58.1 billion to £50.2 billion for the same period.

 

Central items & other

●

Central items not allocated represented a charge of £372 million in the quarter compared with a £396 million charge in Q1 2015. Treasury funding costs, including a £356 million charge for volatile items under IFRS, were a charge of £286 million, versus a charge of £108 million in Q1 2015. Restructuring costs in the quarter include a £138 million charge relating to Williams & Glyn. These were offset in part by an OCA gain of £81 million as spreads widened, and a gain of £2 million on the disposal of available-for-sale securities in Treasury (Q1 2015 - £27 million charge).

 


Segment performance

 

Williams & Glyn

●

W&G's reported segmental results reflect the contribution made by W&G's ongoing business to RBS. These figures do not reflect the cost base, funding, liquidity and capital profile of W&G as a standalone bank and do not contain certain customer portfolios which are currently reported through other segments within RBS.

●

Progress has been made in a number of areas necessary to becoming a standalone bank including the majority of employee roles having now been filled, the transfer of over 5,000 people onto W&G terms and conditions and the resegmentation of commercial customers to an operating model fit for a challenger bank.

●

New lending increased by 50% to £1.4 billion compared with Q1 2015. Notably, new mortgages were up 107% to £581 million, driven by a more buoyant market, greater productivity and more competitive pricing, while commercial increased by 29% to £740 million.

●

This momentum has been a key driver of the 3% year on year increase in net loans and advances to £20.1 billion at the end of Q1 2016.

●

Momentum continued across both personal and commercial deposits delivering a £2.2 billion, or 10%, increase in total deposits over the last 12 months to £24.3 billion.

●

Operating profit of £81 million was down 46% from Q1 2015 largely due to increased operating expenses, as the business continued to build central functions incurring restructuring costs to do so, and increased impairments following a significant release in Q1 2015.

●

Total income was stable at £205 million compared with Q1 2015 as mortgage margin pressures have largely been offset by increased asset volumes.

●

Operating expenses were £118 million, an increase of £42 million, or 55%, on Q1 2015 as the business continued to build central functions and operations, including £20 million of IT restructuring spend.

●

Net impairment losses totalled £6 million compared with a net release of £21 million in Q1 2015. The charge was £14 million lower due to a large specific impairment taken in Q4 2015.

 

 

Selected statutory financial statements

 

Consolidated income statement for the period ended 31 March 2016

 

 

Quarter ended

 

31 March

31 December

31 March

2016 

2015 

2015*

 

£m 

£m 

£m 

 

 

 

 

Interest receivable

2,829 

2,855 

3,076 

Interest payable

(673)

(693)

(873)

 

 

 

 

Net interest income

2,156 

2,162 

2,203 

 

 

 

 

Fees and commissions receivable

866 

904 

989 

Fees and commissions payable

(212)

(251)

(177)

Income from trading activities

38 

15 

330 

Loss on redemption of own debt

- 

(263)

- 

Other operating income

216 

(83)

174 

 

 

 

 

Non-interest income

908 

322 

1,316 

 

 

 

 

Total income

3,064 

2,484 

3,519 

 

 

 

 

Staff costs

(1,323)

(1,277)

(1,341)

Premises and equipment

(324)

(447)

(419)

Other administrative expenses

(575)

(3,192)

(1,339)

Depreciation, amortisation and write downs

(178)

(186)

(512)

Write down of goodwill and other intangible assets

(20)

(659)

- 

 

 

 

 

Operating expenses

(2,420)

(5,761)

(3,611)

 

 

 

 

Profit/(loss) before impairment losses

644 

(3,277)

(92)

Impairment (losses)/releases

(223)

327 

129 

 

 

 

 

Operating profit/(loss) before tax

421 

(2,950)

37 

Tax (charge)/credit

(80)

261 

(190)

 

 

 

 

Profit/(loss) from continuing operations

341 

(2,689)

(153)

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

- 

90 

(316)

 

 

 

 

Profit/(loss) for the period

341 

(2,599)

(469)

 

 

 

 

Attributable to:

 

 

 

Non-controlling interests

22 

20 

(84)

Preference share and other dividends

94 

121 

74 

Dividend access share

1,193 

- 

- 

Ordinary shareholders

(968)

(2,740)

(459)

 

 

 

 

 

341 

(2,599)

(469)

 

 

 

 

Loss per ordinary share (EPS)

 

 

 

Basic and diluted EPS from continuing and discontinued operations

(8.3p)

(23.6p)

(4.0p)

Basic and diluted EPS from continuing operations

(8.3p)

(24.5p)

(2.2p)

 

* Restated, refer to Note 1 on page 32 for further details.

 

Selected statutory financial statements

 

Consolidated statement of comprehensive income for the period ended 31 March 2016

 

Quarter ended

 

31 March

31 December

31 March

2016 

2015 

2015*

 

£m 

£m 

£m 

 

 

 

 

Profit/(loss) for the period

341 

(2,599)

(469)

 

 

 

 

Items that do not qualify for reclassification

 

 

 

(Loss)/gain on remeasurement of retirement benefit schemes

(529)

(93)

3 

Tax

143 

310 

- 

 

 

 

 

 

(386)

217 

3 

 

 

 

 

Items that do qualify for reclassification

 

 

 

Available-for-sale financial assets

(8)

139 

202 

Cash flow hedges

946 

(398)

124 

Currency translation

582 

(4)

11 

Tax

(238)

2 

(102)

 

 

 

 

 

1,282 

(261)

235 

 

 

 

 

Other comprehensive income/(loss) after tax

896 

(44)

238 

 

 

 

 

Total comprehensive income/(loss) for the period

1,237 

(2,643)

(231)

 

 

 

 

Total comprehensive income/(loss) is attributable to:

 

 

 

Non-controlling interests

72 

13 

47 

Preference shareholders

56 

74 

70 

Paid-in equity holders

38 

47 

4 

Dividend access share

1,193 

- 

- 

Ordinary shareholders

(122)

(2,777)

(352)

 

 

 

 

 

1,237 

(2,643)

(231)

 

* Restated, refer to Note 1 on page 32 for further details.

 

Key points

●

Following payment of the outstanding deficit reduction contributions of £4.2 billion, there was a surplus in RBS's main pension scheme which has been restricted to the recoverable amount (£413 million - refer to Note 3 on page 32), resulting in a pre-tax charge of £529 million during the quarter.

 

 

●

Cash flow hedging gains in the quarter principally result from decreases in sterling swap rates across the maturity profile of the portfolio.

 

 

●

Currency translation gains for the quarter have primarily resulted from the weakening of sterling against the euro and the US dollar.
     

 

 

Selected statutory financial statements

 

Consolidated balance sheet as at 31 March 2016

 

 

31 March

31 December

2016 

2015 

 

£m 

£m 

 

 

 

Assets

 

 

Cash and balances at central banks

72,083 

79,404 

Net loans and advances to banks

19,295 

18,361 

Reverse repurchase agreements and stock borrowing

15,037 

12,285 

Loans and advances to banks

34,332 

30,646 

Net loans and advances to customers

317,088 

306,334 

Reverse repurchase agreements and stock borrowing

27,319 

27,558 

Loans and advances to customers

344,407 

333,892 

Debt securities

87,622 

82,097 

Equity shares

1,255 

1,361 

Settlement balances

9,331 

4,116 

Derivatives

312,217 

262,514 

Intangible assets

6,534 

6,537 

Property, plant and equipment

4,552 

4,482 

Deferred tax

2,160 

2,631 

Prepayments, accrued income and other assets

5,032 

4,242 

Assets of disposal groups

3,405 

3,486 

 

 

 

Total assets

882,930 

815,408 

 

 

 

Liabilities

 

 

Bank deposits

31,774 

28,030 

Repurchase agreements and stock lending

12,120 

10,266 

Deposits by banks

43,894 

38,296 

Customer deposits

352,344 

343,186 

Repurchase agreements and stock lending

26,910 

27,112 

Customer accounts

379,254 

370,298 

Debt securities in issue

29,576 

31,150 

Settlement balances

8,808 

3,390 

Short positions

22,666 

20,809 

Derivatives

304,789 

254,705 

Provisions, accruals and other liabilities

14,748 

15,115 

Retirement benefit liabilities

519 

3,789 

Deferred tax

825 

882 

Subordinated liabilities

20,870 

19,847 

Liabilities of disposal groups

2,816 

2,980 

 

 

 

Total liabilities

828,765 

761,261 

 

 

 

Equity

 

 

Non-controlling interests

788 

716 

Owners' equity*

 

 

  Called up share capital

11,662 

11,625 

  Reserves

41,715 

41,806 

 

 

 

Total equity

54,165 

54,147 

 

 

 

Total liabilities and equity

882,930 

815,408 

 

 

 

* Owners' equity attributable to:

 

 

Ordinary shareholders

47,426 

47,480 

Other equity owners

5,951 

5,951 

 

 

 

 

53,377 

53,431 

 

The parent company's distributable reserves at 31 March 2016 were £15.3 billion (31 December 2015 - £16.3 billion).

 

Selected statutory financial statements

 

Consolidated statement of changes in equity for the period ended 31 March 2016

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015*

£m

£m

£m

 

 

 

 

Called-up share capital

 

 

 

At beginning of period

11,625 

6,984 

6,877 

Ordinary shares issued

37 

51 

48 

Conversion of B shares (1)

- 

4,590 

- 

 

 

 

 

At end of period

11,662 

11,625 

6,925 

 

 

 

 

Paid-in equity

 

 

 

At beginning of period

2,646 

2,646 

784 

Redeemed/reclassified

- 

- 

(150)

 

 

 

 

At end of period

2,646 

2,646 

634 

 

 

 

 

Share premium account

 

 

 

At beginning of period

25,425 

25,315 

25,052 

Ordinary shares issued

85 

110 

112 

 

 

 

 

At end of period

25,510 

25,425 

25,164 

 

 

 

 

Merger reserve

 

 

 

At beginning of period

10,881 

13,222 

13,222 

Transfer to retained earnings

- 

(2,341)

- 

At end of period

 

10,881 

10,881 

13,222 

 

 

 

 

Available-for-sale reserve

 

 

 

At beginning of period

307 

210 

299 

Unrealised (losses)/gains

(3)

139 

39 

Realised (gains)/losses

(5)

2 

106 

Tax

(1)

(44)

(26)

Transfer to retained earnings

- 

- 

(47)

 

 

 

 

At end of period

298 

307 

371 

 

 

 

 

Cash flow hedging reserve

 

 

 

At beginning of period

458 

810 

1,029 

Amount recognised in equity

1,233 

(65)

498 

Amount transferred from equity to earnings

(287)

(333)

(386)

Tax

(263)

46 

(41)

Transfer to retained earnings

- 

- 

9 

 

 

 

 

At end of period

1,141 

458 

1,109 

 

 

 

 

 

Foreign exchange reserve

 

 

 

At beginning of period

1,674 

1,679 

3,483 

Retranslation of net assets

628 

17 

494 

Foreign currency losses on hedges of net assets

(67)

(26)

(566)

Tax

26 

- 

(14)

Transfer to retained earnings

- 

- 

(618)

Recycled to profit or loss on disposal of businesses

(29)

4 

- 

 

 

 

 

At end of period

2,232 

1,674 

2,779 

 

 

 

 

 

Capital redemption reserve

 

 

 

At beginning of period

4,542 

9,132 

9,131 

Conversion of B shares (1)

- 

(4,590)

- 

 

 

 

 

 

At end of period

4,542 

4,542 

9,131 

 

* Restated, refer to Note 1 on page 32 for further details.

 

Notes:

(1)

In October 2015, all B shares were converted into ordinary shares of £1 each.

(2)

See Note 3 - Pensions.

(3)

Relates to the secondary offering of Citizens in March 2015.

 


 

Selected statutory financial statements

 

Consolidated statement of changes in equity for the period ended 31 March 2016

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015*

 

£m

£m

£m

 

 

 

 

Retained earnings

 

 

 

At beginning of period

(4,020)

(3,851)

(4,001)

Profit/(loss) attributable to ordinary shareholders and other equity owners

 

 

 

  - continuing operations

319 

(2,709)

(174)

  - discontinued operations

- 

90 

(211)

Equity preference dividends paid

(56)

(74)

(70)

Paid-in equity dividends paid, net of tax

(38)

(47)

(4)

Dividend access share dividend

(1,193)

- 

- 

Transfer from available-for-sale reserve

- 

- 

47 

Transfer from cash flow hedging reserve

- 

- 

(9)

Transfer from foreign exchange reserve

- 

- 

618 

Transfer from merger reserve

- 

2,341 

- 

Costs of placing Citizens equity

- 

- 

(29)

(Loss)/gain on remeasurement of retirement benefit schemes (2)

 

 

 

  - gross

(529)

(87)

3 

  - tax

143 

310 

- 

Shares issued under employee share schemes

(7)

(1)

(56)

Share-based payments

 

 

 

  - gross

(25)

12 

4 

  - tax

- 

(4)

- 

Reclassification of paid-in equity

- 

- 

(27)

 

 

 

 

At end of period

(5,406)

(4,020)

(3,909)

 

 

 

 

Own shares held

 

 

 

At beginning of period

(107)

(108)

(113)

Disposal of own shares

11 

1 

2 

Shares issued under employee share schemes

(33)

- 

- 

 

 

 

 

At end of period

(129)

(107)

(111)

 

 

 

 

Owners' equity at end of period

53,377 

53,431 

55,315 

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

 

At beginning of period

716 

703 

2,946 

Currency translation adjustments and other movements

50 

1 

83 

Profit/(loss) attributable to non-controlling interests

 

 

 

  - continuing operations

22 

20 

21 

  - discontinued operations

- 

- 

(105)

Dividends paid

- 

- 

(11)

Movements in available-for-sale securities

 

 

 

  - unrealised (losses)/gains

- 

(2)

57 

  - tax

- 

- 

(21)

Movements in cash flow hedging reserve

 

 

 

  - amount recognised in equity

- 

- 

12 

Actuarial losses recognised in retirement benefit schemes

 

 

 

  - gross

- 

(6)

- 

Equity raised (3)

- 

- 

2,491 

 

 

 

 

At end of period

788 

716 

5,473 

 

 

 

 

Total equity at end of period

54,165 

54,147 

60,788 

 

 

 

 

Total equity is attributable to:

 

 

 

Non-controlling interests

788 

716 

5,473 

Preference shareholders

3,305 

3,305 

4,313 

Paid-in equity holders

2,646 

2,646 

634 

Ordinary shareholders

47,426 

47,480 

50,368 

 

 

 

 

 

54,165 

54,147 

60,788 

* Restated, refer to Note 1 on page 32 for further details.

 

 

 

 

Notes

 

1. Basis of preparation

The consolidated financial statements should be read in conjunction with RBS's 2015 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).

 

Accounting policies

RBS's principal accounting policies are set out on pages 267 to 280 of the 2015 Annual Report and Accounts. Amendments to IFRSs effective for 2016 have not had a material effect on RBS's Q1 2016 results.

 

Pensions

In the fourth quarter of 2015, the Group changed its accounting policy for the recognition of surpluses in its defined benefit pension schemes: in particular, the policy for determining whether or not it has an unconditional right to a refund of surpluses in its employee pension funds. Where the Group has a right to a refund, this is not deemed unconditional if pension fund trustees can enhance benefits for plan members. The amended policy was been applied retrospectively and prior periods restated. For further details, see pages 267 to 268 of RBS's 2015 Annual Report and Accounts.

 

Critical accounting policies and key sources of estimation uncertainty

The judgements and assumptions that are considered to be the most important to the portrayal of RBS's financial condition are those relating to pensions, goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on pages 276 to 280 of RBS's 2015 Annual Report and Accounts.

 

Going concern

Having reviewed RBS's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that RBS will continue in operational existence for the foreseeable future. Accordingly, the financial information for the period ended 31 March 2016 have been prepared on a going concern basis.

 

 

2. Dividend Access Share

In March 2016, RBS completed the normalisation of its capital structure: the final dividend of £1.2 billion was paid in respect of the Dividend Access Share (DAS) owned by the UK Government and the DAS re-designated a single B ordinary share which was then cancelled.

 

 

3. Pensions

In the first quarter of 2016 RBS agreed with the Trustee of the RBS main pension scheme a statement of funding principles in relation to an actuarial valuation as at 31 December 2015. RBS and the Trustee also updated the existing schedule of contributions and recovery plan to reflect the £4.2 billon contribution paid to the fund in March 2016. At 31 March 2016 £413 million of the surplus in the fund has been recognised on the consolidated balance sheet: the amount recoverable from the scheme in the form of future economic benefits.

 

Notes

 

4. Provisions for liabilities and charges

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory and legal actions

 

 

 

 

 

Other

FX

Other

 

 

 

 

 

 

 customer

investigations/

regulatory

 

Property

 

 

PPI

IRHP

 redress (1)

litigation

provisions

Litigation

and other

Total

 

£m

£m

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

 

 

At 1 January 2016

996 

149 

672 

306 

41 

3,944 

1,258 

7,366 

Transfer from accruals and other liabilities

- 

- 

- 

- 

- 

- 

19 

19 

Transfer

- 

- 

21 

(35)

(21)

106 

(71)

- 

Currency translation and other movements

- 

- 

- 

10 

2 

124 

28 

164 

Charge to income statement (2)

- 

- 

11 

- 

1 

33 

79 

124 

Releases to income statement (2)

- 

- 

(8)

- 

- 

(1)

(19)

(28)

Provisions utilised

(85)

(41)

(63)

- 

- 

(24)

(69)

(282)

 

 

 

 

 

 

 

 

 

At 31 March 2016

911 

108 

633 

281 

23 

4,182 

1,225 

7,363 

 

Notes:

(1)

Closing provision predominantly relates to investment advice and packaged accounts.

(2)

Relates to continuing operations.

 

There are uncertainties as to the eventual cost of redress in relation to the provisions contained in the table above. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the amount provided.

 

 

5. Litigation, investigations and reviews

RBS's 2015 Annual Report & Accounts issued on 26 February 2016 included comprehensive disclosures about RBS's litigation, investigations and reviews in Note 30. Set out below are the material developments in these matters since the 2015 Annual Report & Accounts was published.

 

Litigation

 

Interest rate swaps antitrust litigation

On 18 April 2016, an antitrust complaint was filed in the United States District Court for the Southern District of New York against RBS plc and other members of the Group, as well as a number of other interest rate swap dealers. The plaintiff, TeraExchange, alleges that it would have successfully established exchange-like trading of interest rate swaps if the defendant dealers had not unlawfully conspired to prevent that from happening through boycotts and other means, in violation of the U.S. antitrust laws. The complaint contains allegations of collusion between the dealers similar to those contained in the interest rate swap antitrust class actions that RBS has previously disclosed. RBS anticipates moving to dismiss the claims asserted in these matters.

 

Weiss v. National Westminster Bank Plc (NatWest)

As previously disclosed, NatWest is defending a lawsuit filed by a number of US nationals (or their estates, survivors, or heirs) who were victims of terrorist attacks in Israel. The plaintiffs allege that NatWest is liable for damages arising from those attacks pursuant to the US Anti-terrorism Act because NatWest previously maintained bank accounts and transferred funds for the Palestine Relief & Development Fund, an organisation which plaintiffs allege solicited funds for Hamas, the alleged perpetrator of the attacks. On 28 March 2013, the trial court (the United States District Court for the Eastern District of New York) granted summary judgment in favour of NatWest on the issue of scienter, but on 22 September 2014, that summary judgment ruling was vacated by the United States Court of Appeals for the Second Circuit. The appeals court returned the case to the trial court for consideration of NatWest's other asserted grounds for summary judgment and, if necessary, for trial. On 31 March 2016, the trial court denied a motion by NatWest to dismiss the case in which NatWest had argued that the court lacked personal jurisdiction over NatWest. The schedule for the remainder of the matter, including trial, has not been set, but NatWest intends to assert other grounds for summary judgment that the trial court has not previously ruled upon.


Notes

 

5. Litigation, investigations and reviews

 

Investigations and reviews

 

Loan securitisation business investigations

As previously disclosed, ongoing matters include, among others, an active investigation by the attorney general of Connecticut, on behalf of the Connecticut Department of Banking, relating primarily to due diligence on and disclosure related to loans purchased for, or otherwise included in, securitisations and related disclosures. On 31 August 2015, the Connecticut Department of Banking issued two letters to RBS Securities Inc., indicating that it is has concluded that RBS Securities Inc. may have violated the Connecticut Uniform Securities Act when underwriting MBS, noting RBS plc's May 2015 FX-related guilty plea. Discussions relating to a possible resolution are ongoing.

 

Foreign exchange related investigations

As previously disclosed, in July 2014 the Serious Fraud Office in the UK (SFO) announced that it was launching a criminal investigation into allegations of fraudulent conduct in the foreign exchange market, apparently involving multiple financial institutions. On 15 March 2016, the SFO announced that it was closing its investigation, having concluded that, based on the information and material obtained, there was insufficient evidence for a realistic prospect of conviction.

 

FCA review of RBS's treatment of SMEs

As previously disclosed, in January 2014, the FCA appointed a Skilled Person to review RBS's treatment of UK small and medium sized business customers with credit exposures of up to £20 million whose relationship was managed within RBS's Global Restructuring Group or within similar units within RBS's Corporate Banking Division that were focussed on customers in financial difficulties. RBS is cooperating fully with the FCA in its review.

 

On 13 April 2016 the FCA announced that it had received the Skilled Person's draft final report, is carefully considering the contents and will discuss the findings with the Skilled Person. RBS will have an opportunity to respond to the Skilled Person's findings before any substantive announcement by the FCA, the timing of which has not been determined.

 

UK retail banking

As previously disclosed, in November 2014 the Competition & Markets Authority (CMA) made its final decision to proceed with a market investigation reference (MIR) in respect of retail banking. In October 2015, the CMA published its summary of provisional findings, concluding that there are a number of competition concerns in the provision of personal current accounts (PCAs), business current accounts and SME lending. At the same time, the CMA published a notice of possible remedies to address its concerns, including measures to make it easier for customers to compare products, and requiring banks to help raise public awareness of, and confidence in, switching bank accounts.

 

On 7 March 2016, the CMA announced that it is extending the MIR by 3 months with a revised statutory deadline of 12 August 2016. The CMA also published a supplemental notice of possible remedies which sets out four additional remedies focussed on PCA overdrafts, in addition to the remedies set out in the October 2015 notice of possible remedies. The provisional decision on remedies is now expected to be published in May 2016.


Notes

 

5. Litigation, investigations and reviews

 

FCA wholesale sector competition review

As previously disclosed, on 9 July 2014, the FCA launched a review of competition in the wholesale sector to identify any areas which may merit further investigation through an in-depth market study.

 

The initial review was an exploratory exercise and focused primarily on competition in wholesale securities and investment markets, and related activities such as corporate banking. It commenced with a three month consultation exercise, including a call for inputs from stakeholders. Following this consultation period, the FCA published its feedback statement on 19 February 2015 which announced that the FCA was to undertake a market study into investment and corporate banking and potentially into asset management. The terms of reference for the investment and corporate banking market study were published on 22 May 2015. On 13 April 2016, the FCA published its interim report on the investment and corporate banking market study which sets out various proposed remedies, including the following: measures designed to improve clients' ability to appoint banks that best suit their needs; measures to ensure that conflicts are properly managed; and improvements to the Initial Public Offering (IPO) process. The FCA has indicated that it will publish its final report in Summer 2016.

 

On 18 November 2015, the FCA also announced that a market study would be undertaken into asset management. The FCA has said that it intends to publish an interim report in Summer 2016 with the final report expected in early 2017. At this stage, as there remains considerable uncertainty around the outcome of these reviews it is not practicable reliably to estimate the aggregate impact, if any, on RBS which may be material.

 

FCA request concerning Mossack Fonseca

In common with other banks, RBS received a letter from the FCA on 4 April 2016 requesting information about any relationship RBS has with the Panama-based law firm Mossack Fonseca or any individuals named in recent media coverage in connection with the same. RBS has responded to the FCA setting out details of the limited services provided to Mossack Fonseca and its clients and is continuing its internal review, as well as monitoring all new information published.

 

Opening of enforcement proceedings by FINMA against Coutts & Co Ltd 

The Swiss Financial Market Supervisory Authority (FINMA) has opened enforcement proceedings against Coutts & Co Ltd (Coutts), a member of the RBS Group incorporated in Switzerland, with regard to certain client accounts held with Coutts. Coutts is also cooperating with authorities in other jurisdictions in relation to connected accounts.

Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland Limited

On 22 December 2015, the Central Bank of Ireland (CBI) announced that it had written to a number of lenders requiring them to put in place a robust plan and framework to review the treatment of customers who have been sold mortgages with a tracker interest rate or with a tracker interest rate entitlement. The CBI stated that the intended purpose of the review was to identify any cases where customers' contractual rights under the terms of their mortgage agreements were not fully honoured, or where lenders did not fully comply with various regulatory requirements and standards regarding disclosure and transparency for customers. The CBI has required Ulster Bank Ireland Limited (UBIL), a member of the RBS Group, incorporated in the Republic of Ireland, to participate in this review and UBIL is co-operating with the CBI in this regard. Separately, on 15 April, the CBI notified UBIL that it was also commencing an investigation under its Administrative Sanctions Procedure into suspected breaches of the Consumer Protection Code 2006 during the period 4 August 2006 to 30 June 2008 in relation to certain customers who switched from tracker mortgages to fixed rate mortgages.

 

Notes

 

6. Recent developments

 

Liability management exercise

In April 2016, RBS completed cash tenders of certain US dollar, sterling and euro senior debt securities totalling £2.3 billion (equivalent).

 

Issue of new ordinary shares

In April 2016, 37.6 million new ordinary shares were issued for £85 million for the purposes of partly neutralising the impact of 2016 coupon payments on discretionary hybrid capital from a Common Equity Tier 1 capital perspective, as explained in the Full Year 2015 results announcement.

 

March 2016 Budget

In the Budget on 16 March 2016, the UK Government announced its intention to further restrict the use of tax losses carried forward by UK banks. If these measures are enacted, they would be taken into consideration in any future reviews of the recoverability of the bank's deferred tax assets associated with UK tax losses. The Budget is likely to be enacted around July 2016.

 

 

7. Post balance sheet events

Other than matters disclosed, there have been no further significant events between 31 March 2016 and the date of approval of this announcement.

 

Forward-looking statements

 

Certain sections in this document contain 'forward-looking statements' as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words 'expect', 'estimate', 'project', 'anticipate', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions.

 

In particular, this document includes forward-looking statements relating, but not limited to: The Royal Bank of Scotland Group's (RBS) restructuring which includes the separation and divestment of Williams & Glyn, the proposed restructuring of RBS's CIB business, the implementation of the UK ring-fencing regime, the implementation of a major development program to update RBS's IT infrastructure and the continuation of its balance sheet reduction programme, as well as capital and strategic plans, divestments, capitalisation, portfolios, net interest margin, capital and leverage ratios and requirements liquidity, risk-weighted assets (RWAs), RWA equivalents (RWAe), Pillar 2A, return on equity (ROE), profitability, cost:income ratios, loan:deposit ratios, AT1 and other funding plans, funding and credit risk profile; litigation, government and regulatory investigations RBS's future financial performance; the level and extent of future impairments and write-downs; including with respect to Goodwill; future pension contributions and RBS's exposure to political risks, operational risk, conduct risk and credit rating risk and to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates, targets and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain market risk disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

 

Other factors that could adversely affect our results and the accuracy of forward-looking statements in this document include the risk factors and other uncertainties discussed in the Annual Report and Accounts 2015. These include the significant risks for RBS presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is subject to (including active civil and criminal investigations) and any resulting material adverse effect on RBS of unfavourable outcomes (including where resolved by settlement); the uncertainty relating to the referendum on the UK's membership of the European Union and the consequences of it; the separation and divestment of Williams & Glyn; RBS's ability to successfully implement the various initiatives that are comprised in its restructuring plan, particularly the proposed restructuring of its CIB business and the balance sheet reduction programme as well as the significant restructuring required to be undertaken by RBS in order to implement the UK ring fencing regime; the significant changes, complexity and costs relating to the implementation of its restructuring, the separation and divestment of Williams & Glyn and the UK ring-fencing regime; whether RBS will emerge from its restructuring and the UK ring-fencing regime as a viable, competitive, customer focused and profitable bank; RBS's ability to achieve its capital and leverage requirements or targets which will depend on RBS's success in reducing the size of its business and future profitability; ineffective management of capital or changes to regulatory requirements relating to capital adequacy and liquidity or failure to pass mandatory stress tests; the ability to access sufficient sources of capital, liquidity and funding when required; changes in the credit ratings of RBS or the UK government; declining revenues resulting from lower customer retention and revenue generation in light of RBS's strategic refocus on the UK the impact of global economic and financial market conditions (including low or negative interest rates) as well as increasing competition. In addition, there are other risks and uncertainties. These include operational risks that are inherent to RBS's business and will increase as a result of RBS's significant restructuring; the potential negative impact on RBS's business of actual or perceived global economic and financial market conditions and other global risks; the impact of unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices; basis, volatility and correlation risks; heightened regulatory and governmental scrutiny and the increasingly regulated environment in which RBS operates; the risk of failure to realise the benefit of RBS's substantial investments in its information technology and systems, the risk of failing to preventing a failure of RBS's IT systems or to protect itself and its customers against cyber threats, reputational risks; risks relating to the failure to embed and maintain a robust conduct and risk culture across the organisation or if its risk management framework is ineffective; risks relating to increased pension liabilities and the impact of pension risk on RBS's capital position; increased competitive pressures resulting from new incumbents and disruptive technologies; RBS's ability to attract and retain qualified personnel; HM Treasury exercising influence over the operations of RBS; limitations on, or additional requirements imposed on, RBS's activities as a result of HM Treasury's investment in RBS; the extent of future write-downs and impairment charges caused by depressed asset valuations; deteriorations in borrower and counterparty credit quality; the value and effectiveness of any credit protection purchased by RBS; risks relating to the reliance on valuation, capital and stress test models and any inaccuracies resulting therefrom or failure to accurately reflect changes in the micro and macroeconomic environment in which RBS operates, risks relating to changes in applicable accounting policies or rules which may impact the preparation of RBS's financial statements; the impact of the recovery and resolution framework and other prudential rules to which RBS is subject the recoverability of deferred tax assets by the Group; and the success of RBS in managing the risks involved in the foregoing.

 

The forward-looking statements contained in this document speak only as at the date hereof, and RBS does not assume or undertake any obligation or responsibility to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicit of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.

 

 

 

 

 

 

 

 

 

Appendix 1

Additional segment information

 

 

Appendix 1 UK Personal & Business Banking

 

 

 

 

 

Quarter ended

 

31 March

31 December

31 March

 

2016 

2015 

2015 

Income statement

£m 

£m 

£m 

 

 

 

 

Net interest income

1,019 

1,030 

1,032 

 

 

 

 

Net fees and commissions

255 

220 

267 

Other non-interest income

1 

4 

15 

 

 

 

 

Non-interest income

256 

224 

282 

 

 

 

 

Total income

1,275 

1,254 

1,314 

Direct expenses

 

 

 

  - staff costs

(181)

(199)

(200)

  - other costs

(63)

(82)

(64)

Indirect expenses

(484)

(596)

(445)

Restructuring costs

 

 

 

  - direct

(13)

(31)

- 

  - indirect

(9)

(56)

(30)

Litigation and conduct costs

- 

(607)

(354)

 

 

 

 

Operating expenses

(750)

(1,571)

(1,093)

 

 

 

 

Operating profit/(loss) before impairment (losses)/releases

525 

(317)

221 

Impairment (losses)/releases

(16)

27 

(20)

 

 

 

 

Operating profit/(loss)

509 

(290)

201 

 

 

 

 

Operating expenses - adjusted (1)

(728)

(877)

(709)

 

 

 

 

Operating profit - adjusted (1)

531 

404 

585 

 

 

 

 

Analysis of income by product

 

 

 

Personal advances

204 

177 

199 

Personal deposits

166 

181 

181 

Mortgages

564 

569 

571 

Cards

142 

140 

168 

Business banking

175 

180 

180 

Other

24 

7 

15 

 

 

 

 

Total income

1,275 

1,254 

1,314 

 

 

 

 

Analysis of impairments by sector

 

 

 

Personal advances

6 

13 

31 

Mortgages

4 

5 

5 

Business banking

- 

(24)

(40)

Cards

6 

(1)

5 

Other

- 

(20)

19 

 

 

 

 

Total impairment losses/(releases)

16 

(27)

20 

 

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Personal advances

6.0  

6.0 

6.4 

  - Mortgages

108.0  

104.8 

96.0 

  - Business banking

5.5  

5.3 

5.9 

  - Cards

3.9  

4.1 

4.3 

  - Others

- 

1.4 

1.5 

 

 

 

 

Total loans and advances to customers (gross)

123.4  

121.6 

114.1 

 

Notes:

(1)

Excluding restructuring costs, litigation and conduct costs and write down of goodwill.

(2)

Excluding own credit adjustments, gains/(losses) on redemption of own debt and strategic disposals.

(3)

Does not reflect the cost base, funding, liquidity and capital profile of a standalone bank. Operating expenses include charges based on an attribution of support provided by RBS to Williams & Glyn.

(4)

Asia-Pacific portfolio.

(5)

European, the Middle East and Africa portfolio.

Appendix 1 Ulster Bank RoI

 

 

 

 

 

Quarter ended

 

31 March

31 December

31 March

 

2016

2015 

2015

Income statement

€m

€m

€m

 

 

 

 

Net interest income

136  

118  

128  

 

 

 

 

Net fees and commissions

27  

28  

29  

Other non-interest income

38  

16  

28  

Own credit adjustment

4  

-  

-  

 

 

 

 

Non-interest income

69  

44  

57  

 

 

 

 

Total income

205  

162  

185  

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(66)

(55)

(54)

  - other costs

(15)

(37)

(25)

Indirect expenses

(55)

(68)

(57)

Restructuring costs

 

 

 

  - direct

(8)

9  

-  

  - indirect

- 

(1)

1  

Litigation and conduct costs

- 

5  

-  

 

 

 

 

Operating expenses

(144)

(147)

(135)

 

 

 

 

Operating profit before impairment releases

61  

15  

50  

Impairment releases

17  

14  

33  

 

 

 

 

Operating profit

78  

29  

83  

 

 

 

 

Total income - adjusted (2)

201  

162  

185  

 

 

 

 

Operating expenses - adjusted (1)

(136)

(160)

(136)

 

 

 

 

Operating profit - adjusted (1,2)

82  

16  

82  

 

 

 

 

 

 

 

 

Analysis of income by business

 

 

 

Corporate

73  

53 

50 

Retail

130  

105 

103 

Other

2  

4 

32 

 

 

 

 

Total income

205  

162 

185 

 

 

 

 

Analysis of impairments by sector

 

 

 

Mortgages

2  

29 

(25)

Commercial real estate

 

 

 

  - investment

(6)

4 

1 

  - development

(2)

(2)

- 

Other corporate

(12)

(42)

(9)

Other lending

1  

(3)

- 

 

 

 

 

Total impairment releases

(17)

(14)

(33)

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

€bn

€bn

€bn

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Mortgages

18.6  

18.8 

19.5 

  -Commercial real estate

 

 

 

  - investment

1.2  

0.9 

1.4 

  - development

0.7  

0.3 

0.4 

  - Other corporate

5.0  

4.8 

4.2 

  - Other lending

0.5  

0.5 

0.6 

 

 

 

 

Total loans and advances to customers (gross)

26.0  

25.3 

26.1 

 

 

 

 

 

For the notes to this table refer to page 1.

 

Appendix 1 Commercial Banking

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015

Income statement

£m

£m

£m

 

 

 

 

Net interest income

536 

512 

482 

Net fees and commissions

262 

258 

230 

Other non-interest income

55 

27 

77 

Non-interest income

317 

285 

307 

 

 

 

 

Total income

853 

797 

789 

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(131)

(124)

(123)

  - other costs

(14)

(44)

(15)

  - operating lease costs

(35)

(36)

(36)

Indirect expenses

(256)

(380)

(241)

Restructuring costs

 

 

 

  - direct

(1)

(40)

- 

  - indirect

1 

(14)

1 

Litigation and conduct costs

(2)

8 

- 

Operating expenses

(438)

(630)

(414)

 

 

 

 

Operating profit before impairment (losses)/releases

415 

167 

375 

Impairment (losses)/releases

(14)

(27)

1 

 

 

 

 

Operating profit

401 

140 

376 

 

 

 

 

Operating expenses - adjusted (1)

(436)

(584)

(415)

 

 

 

 

Operating profit - adjusted (1)

403 

186 

375 

 

 

 

 

Analysis of income by business

 

 

 

Commercial lending

436  

411 

388 

Deposits

125  

125 

111 

Asset and invoice finance

177  

168 

178 

Other

115  

93 

112 

 

 

 

 

Total income

853  

797 

789 

 

 

 

 

Analysis of impairments by sector

 

 

 

Commercial real estate

(2)

8 

(4)

Asset and invoice finance

3  

8 

1 

Private sector services (education, health, etc)

1  

4 

3 

Banks & financial institutions

- 

(1)

- 

Wholesale and retail trade repairs

3  

- 

(2)

Hotels and restaurants

- 

(2)

(3)

Manufacturing

1  

- 

1 

Construction

1  

1 

- 

Other

7  

9 

3 

 

 

 

 

Total impairment losses/(releases)

14  

27 

(1)

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Commercial real estate

17.5  

16.7 

16.7 

  - Asset and invoice finance

14.4  

14.4 

13.9 

  - Private sector services (education, health etc)

7.0  

6.7 

7.0 

  - Banks & financial institutions

7.4  

7.1 

5.3 

  - Wholesale and retail trade repairs

8.3  

7.5 

7.0 

  - Hotels and restaurants

3.5  

3.3 

3.3 

  - Manufacturing

6.4  

5.3 

4.2 

  - Construction

2.2  

2.1 

1.8 

  - Other

30.8  

28.9 

27.8 

 

 

 

 

Total loans and advances to customers (gross)

97.5  

92.0 

87.0 

 

For the notes to this table refer to page 1.

Appendix 1 Private Banking

 

 

Quarter ended

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Income statement

£m 

£m 

£m 

 

 

 

 

Net interest income

113 

108 

110 

 

 

 

 

Net fees and commissions

46 

44 

50 

Other non-interest income

6 

6 

5 

 

 

 

 

Non-interest income

52 

50 

55 

 

 

 

 

Total income

165 

158 

165 

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(40)

(43)

(46)

  - other costs

(14)

(7)

(9)

Indirect expenses

(83)

(109)

(68)

Restructuring costs

 

 

 

  - direct

(1)

(7)

- 

  - indirect

(15)

12 

3 

Litigation and conduct costs

- 

(10)

(2)

Write down of goodwill

- 

(498)

- 

 

 

 

 

Operating expenses

(153)

(662)

(122)

 

 

 

 

Operating profit/(loss) before impairment (losses)/releases

12 

(504)

43 

Impairment (losses)/releases

(2)

(12)

1 

 

 

 

 

Operating profit/(loss)

10 

(516)

44 

 

 

 

 

Operating expenses - adjusted (1)

(137)

(159)

(123)

 

 

 

 

Operating profit/(loss) - adjusted (1)

26 

(13)

43 

 

 

 

 

 

 

 

 

Analysis of income by business

 

 

 

Investments

28 

21 

24 

Banking

137 

137 

141 

 

 

 

 

Total income

165 

158 

165 

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Personal

2.6  

2.7 

2.7 

  - Mortgages

6.8  

6.5 

6.3 

  - Other

2.2  

2.0 

2.2 

 

 

 

 

Total loans and advances to customers (gross)

11.6  

11.2 

11.2 

 

For the notes to this table refer to page 1.

 

Appendix 1 RBS International

 

 

Quarter ended

 

31 March

31 December

31 March

2016

2015 

2015

Income statement

£m

£m

£m

 

 

 

 

Net interest income

75 

78 

76 

 

 

 

 

Net fees and commissions

11 

12 

10 

Other non-interest income

4 

5 

7 

 

 

 

 

Non-interest income

15 

17 

17 

 

 

 

 

Total income

90 

95 

93 

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(10)

(12)

(10)

  - other costs

(5)

(5)

(4)

Indirect expenses

(20)

(24)

(24)

Restructuring costs

 

 

 

  - indirect

(1)

1 

(2)

 

 

 

 

Operating expenses

(36)

(40)

(40)

 

 

 

 

Operating profit before impairment losses

54 

55 

53 

Impairment losses

(2)

- 

(2)

 

 

 

 

Operating profit

52 

55 

51 

 

 

 

 

Operating expenses - adjusted (1)

(35)

(41)

(38)

 

 

 

 

Operating profit - adjusted (1)

53 

54 

53 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Corporate

5.4  

4.5 

4.6 

  - Mortgages

2.6  

2.5 

2.5 

  - Other

- 

0.4 

0.2 

 

 

 

 

Total loans and advances to customers (gross)

8.0  

7.4 

7.3 

 

For the notes to this table refer to page 1.

 

Appendix 1 Corporate & Institutional Banking

 

 

Quarter ended

 

31 March

31 December

31 March

2016 

2015 

2015

Income statement

£m

£m

£m

 

 

 

 

Net interest income from banking activities

19 

28 

14 

 

 

 

 

Net fees and commissions

11 

66 

115 

Income from trading activities

246 

203 

340 

Other operating income

1 

(45)

15 

Own credit adjustments

64 

(66)

46 

 

 

 

 

Non-interest income

322 

158 

516 

 

 

 

 

Total income

341 

186 

530 

Direct expenses

 

 

 

  - staff costs

(67)

(63)

(109)

  - other costs

(14)

(50)

(26)

Indirect expenses

(250)

(251)

(257)

Restructuring costs

 

 

 

  - indirect

(12)

(62)

(91)

Litigation and conduct costs

(18)

(5)

(334)

 

 

 

 

Operating expenses

(361)

(431)

(817)

 

 

 

 

Operating loss before impairment releases

(20)

(245)

(287)

Impairment releases

-  

-  

8 

 

 

 

 

Operating loss

(20)

(245)

(279)

 

 

 

 

Total income - adjusted (2)

277 

252 

484 

 

 

 

 

Operating expenses - adjusted (1)

(331)

(364)

(392)

 

 

 

 

Operating (loss)/profit - adjusted (1,2)

(54)

(112)

100 

 

 

 

 

Analysis of income by product

 

 

 

Rates

114 

136 

222 

Currencies

144 

95 

90 

Financing

49 

23 

155 

Banking/Other

(30)

(2)

(25)

 

 

 

 

Total excluding own credit adjustments

277 

252 

442 

Own credit adjustments

64 

(66)

46 

Businesses transferred to Commercial Banking

- 

- 

42 

 

 

 

 

Total income

341 

186 

530 

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customer (gross, excluding reverse repos)

18.6 

16.1 

31.6 

Loans and advances to banks (excluding reverse repos)

5.2 

5.7 

2.5 

Reverse repos

40.4 

38.6 

60.1 

Securities

29.5 

23.7 

34.3 

Cash and eligible bills

12.2 

14.3 

10.5 

Other

10.1 

4.9 

13.0 

 

 

 

 

Funded assets

116.0 

103.3 

152.1 

 

For the notes to this table refer to page 1.

 

Appendix 1 Capital Resolution

 

Quarter ended

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Income statement

£m 

£m 

£m 

 

 

 

 

Net interest income

86 

6 

157 

 

 

 

 

Net fees and commissions

30 

5 

89 

Income from trading activities

(74)

(264)

(26)

Other operating income

9 

20 

187 

Own credit adjustments

108 

(5)

65 

Strategic disposals

(6)

(24)

(14)

 

 

 

 

Non-interest income

67 

(268)

301 

 

 

 

 

Total income

153 

(262)

458 

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(45)

(54)

(92)

  - other costs

(33)

(54)

(57)

Indirect expenses

(154)

(286)

(260)

Restructuring costs

 

 

 

  - direct

(7)

(21)

(16)

  - indirect

(9)

(83)

(184)

Litigation and conduct costs

(10)

(1,498)

(166)

 

 

 

 

Operating expenses

(258)

(1,996)

(775)

 

 

 

 

Operating loss before impairment (losses)/releases

(105)

(2,258)

(317)

Impairment (losses)/releases

(196)

356 

145 

 

 

 

 

Operating loss

(301)

(1,902)

(172)

 

 

 

 

Total income - adjusted (2)

51 

(233)

407 

 

 

 

 

Operating expenses - adjusted (1)

(232)

(394)

(409)

 

 

 

 

Operating (loss)/profit - adjusted (1,2)

(377)

(271)

143 

 

 

 

 

 

 

 

 

Analysis of income by portfolio

 

 

 

APAC portfolio (4)

1 

6  

25  

Americas portfolio

7 

8  

23  

EMEA portfolio (5)

10 

14  

26  

Legacy loan portfolio

(14)

(26)

107  

Shipping

16 

14  

24  

Markets

(29)

(32)

95  

GTS

48 

69  

126  

Other

8 

(130)

(46)

 

 

 

 

Income excluding disposals and own credit adjustments

47 

(77)

380  

Disposal (losses)/gains

(2)

(180)

13  

Own credit adjustments

108 

(5)

65  

 

 

 

 

Total income

153 

(262)

458  

 

Appendix 1 Capital Resolution

 

 

 

 

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Analysis of RWA by portfolio

£bn 

£bn 

£bn 

APAC portfolio (4)

0.3 

0.5 

3.9 

Americas portfolio

0.6 

1.0 

8.6 

EMEA portfolio (5)

1.2 

1.2 

5.1 

Legacy loan portfolio

3.1 

3.7 

7.9 

Shipping

4.2 

4.5 

5.5 

Markets

22.4 

20.7 

30.4 

GTS

3.3 

3.6 

8.7 

Saudi Hollandi Bank

7.3 

6.9 

6.4 

Other

2.4 

2.9 

3.8 

 

 

 

 

Total credit and market risk

44.8 

45.0 

80.3 

Operational risk

2.8 

4.0 

4.0 

 

 

 

 

Total RWAs

47.6 

49.0 

84.3 

 

Balance sheet

 

 

 

 

 

 

 

Total loans and advances to customers (gross)

23.4 

25.9 

55.8 

Loan impairment provisions

(1.0)

(2.3)

(7.3)

 

 

 

 

Net loans and advances to customers

22.4 

23.6 

48.5 

 

 

 

 

Funded assets

50.2 

53.4 

108.3 

 

For the notes to this table refer to page 1.

 

Appendix 1 Williams & Glyn

 

 

 

 

 

Quarter ended

 

31 March

31 December

31 March

 

2016 

2015 

2015 

Income statement (3)

£m 

£m 

£m 

 

 

 

 

Net interest income

162 

165 

163 

 

 

 

 

Net fees and commissions

40 

40 

38 

Other non-interest income

3 

3 

3 

 

 

 

 

Non-interest income

43 

43 

41 

 

 

 

 

Total income

205 

208 

204 

 

 

 

 

Direct expenses

 

 

 

  - staff costs

(62)

(61)

(45)

  - other costs

(15)

(24)

(6)

Indirect expenses

(21)

(22)

(25)

Restructuring costs

 

 

 

  - direct

(20)

(28)

- 

Operating expenses

(118)

(135)

(76)

 

 

 

 

Operating profit before impairment (losses)/releases

87 

73 

128 

Impairment (losses)/releases

(6)

(20)

21 

 

 

 

 

Operating profit

81 

53 

149 

 

 

 

 

Operating expenses - adjusted (1)

(98)

(107)

(76)

 

 

 

 

Operating profit - adjusted (1)

101 

81 

149 

 

 

 

 

Analysis of income by product

 

 

 

Retail

115 

117 

117 

Commercial

90 

91 

87 

 

 

 

 

Total income

205 

208 

204 

 

 

 

 

Analysis of impairments by sector

 

 

 

Retail

5 

1 

5 

Commercial

1 

19 

(26)

 

 

 

 

Total impairment losses/(releases)

6 

20 

(21)

 

 

 

 

 

 

31 March 

31 December 

31 March 

 

2016 

2015 

2015 

Balance sheet (3)

£bn 

£bn 

£bn 

 

 

 

 

Loans and advances to customers (gross)

 

 

 

  - Retail

11.7  

11.6 

11.2 

  - Commercial

8.7  

8.7 

8.7 

 

 

 

 

Total loans and advances to customers (gross)

20.4  

20.3 

19.9 

 

For the notes to this table refer to page 1.

 

 

 

 

 

 

 

 

 

Appendix 2

Additional capital resources, RWA and leverage information

 

 

Appendix 2 Additional capital resources, RWA and leverage information

 

Capital resources, RWAs and leverage based on the relevant local regulatory capital transitional arrangements for the significant legal entities within the Group are set at below.

 

 

31 March 2016

 

31 December 2015

 

RBS plc

NatWest Plc

UBIL (1)

 

RBS plc

NatWest Plc

UBIL (1)

Risk asset ratios

%

%

%

 

%

%

%

 

 

 

 

 

 

 

 

CET1

14.3 

11.9 

29.8 

 

16.0 

11.6 

29.6 

Tier 1

15.3 

11.9 

29.8 

 

17.1 

11.6 

29.6 

Total

23.5 

19.4 

32.5 

 

25.3 

19.6 

32.1 

 

 

 

 

 

 

 

 

Capital (2)

£m

£m

£m

 

£m

£m

£m

 

 

 

 

 

 

 

 

Tangible equity

49,181 

12,255 

6,316 

 

49,212 

10,784 

5,753 

 

 

 

 

 

 

 

 

Expected loss less impairment provisions

(299)

(634)

- 

 

(395)

(703)

(22)

Prudential valuation adjustment

(403)

(1)

- 

 

(349)

(1)

- 

Deferred tax assets

(198)

(621)

(226)

 

(252)

(622)

(210)

Own credit adjustments

(176)

- 

- 

 

17 

- 

- 

Pension fund adjustment

(143)

(285)

89 

 

(138)

- 

142 

Instruments of financial sector entities where

 

 

 

 

 

 

 

  the institution has a significant investment

(20,079)

(3,067)

- 

 

(15,680)

(2,837)

- 

Other adjustments for regulatory purposes

(203)

(35)

(112)

 

1 

533 

27 

 

 

 

 

 

 

 

 

Total deductions

(21,501)

(4,643)

(249)

 

(16,796)

(3,630)

(63)

 

 

 

 

 

 

 

 

CET1 capital

27,680 

7,612 

6,067 

 

32,416 

7,154 

5,690 

AT1 capital

1,976 

- 

- 

 

2,318 

17 

- 

Tier 1 capital

29,656 

7,612 

6,067 

 

34,734 

7,171 

5,690 

Tier 2 capital

15,777 

4,806 

540 

 

16,607 

4,966 

485 

 

 

 

 

 

 

 

 

Total regulatory capital

45,433 

12,418 

6,607 

 

51,341 

12,137 

6,175 

 

 

 

 

 

 

 

 

Risk-weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit risk

 

 

 

 

 

 

 

  - non-counterparty - advanced IRB

58,665 

42,300 

17,534 

 

57,790 

39,231 

16,761 

  - non-counterparty - standardised

75,605 

13,437 

1,184 

 

88,654 

15,191 

968 

  - counterparty

25,278 

434 

459 

 

21,769 

402 

345 

Market risk

18,808 

524 

39 

 

19,073 

570 

7 

Operational risk

14,861 

7,209 

1,124 

 

15,615 

6,361 

1,148 

 

 

 

 

 

 

 

 

Total RWAs

193,217 

63,904 

20,340 

 

202,901 

61,755 

19,229 

 

 

 

 

 

 

 

 

Leverage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives

315,940 

2,780 

753 

 

265,601 

2,086 

657 

Loans and advances

181,522 

209,834 

21,101 

 

175,906 

207,632 

19,876 

Reverse repos

34,515 

- 

- 

 

31,096 

- 

- 

Other assets

201,615 

10,570 

2,378 

 

196,579 

10,674 

2,245 

 

 

 

 

 

 

 

 

Total assets

733,592 

223,184 

24,232 

 

669,182 

220,392 

22,778 

Derivatives

 

 

 

 

 

 

 

  - netting

(305,353)

(2,011)

(122)

 

(260,076)

(1,451)

(99)

  - potential future exposures

77,234 

186 

249 

 

76,804 

196 

246 

Securities financing transactions gross up

8,462 

- 

- 

 

5,162 

- 

- 

Undrawn commitments

43,916 

10,064 

1,204 

 

46,309 

9,890 

1,021 

Regulatory deductions and other adjustments

(19,509)

(5,371)

(226)

 

(15,827)

(5,221)

(212)

Exclusion of core UK-group exposures

(20,433)

(67,899)

- 

 

(18,919)

(70,752)

-

 

 

 

 

 

 

 

 

Leverage exposure

517,909 

158,153 

25,337 

 

502,635 

153,054 

23,734 

 

 

 

 

 

 

 

 

Tier 1 capital

29,656 

7,612 

6,067 

 

34,734 

7,171 

5,690 

 

 

 

 

 

 

 

 

Leverage ratio %

5.7 

4.8 

23.9 

 

6.9 

4.7 

24.0 

 

Notes:

(1)

Ulster Bank Ireland Limited (UBIL) broadly aligns with the segment Ulster Bank RoI.

(2)

Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on AFS securities which have been included from 2015 under the PRA transitional basis.

 


 

Appendix 2 Additional capital resources, RWA and leverage information

 

Key points

The key driver of the movements is the annual phasing-in of the CRR transition rules. The significant investment deduction has increased reflecting an incremental 10% increase in the percentage of significant investments which are treated as a capital deduction and a commensurate 10% decrease in the percentage of significant investments which are treated as risk-weighted assets.

 

 

●

RBS plc - The impact of the annual phasing-in is a reduction of 80 basis points. Also, CET1 has decreased as a result of the capital injection into NatWest Plc in the period. RWAs have decreased by £9.7 billion predominantly as a result of the significant investment change referred to above which reduced RWAs by £14.8 billion partly offset by an increase in counterparty risk RWAs of £3.5 billion.

 

 

●

NatWest Plc - The impact of the annual phasing-in is a reduction of 50 basis points. Also, CET1 has increased as a result of the capital injection from RBS plc offset by the impact of the pension payment of £4.2 billion to the Main Scheme, being an accelerated payment of existing committed future contributions. RWAs increased by £2.1 billion driven by the risk parameter recalibration of mortgage PDs and annual recalculation of operational risk RWAs offset by the changed treatment of significant investments referred to above.

 

 

●

UBIL - CET1 ratio has increased to 29.8% in the period. RWAs have decreased from €26.2 billion to €25.7 billion as a result of reduced exposures and risk parameter improvements. In sterling terms, RWAs have increased by £1.1 billion as a result of the appreciation of the euro against sterling.

     

 


This information is provided by RNS
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