Interim Results
Royal Bank of Scotland Group PLC
7 August 2001
PART 1
THE ROYAL BANK OF SCOTLAND GROUP plc
FOREWORD
The acquisition of National Westminster Bank Plc ('NatWest') on 6 March 2000
has had a significant effect on the Group's financial position. Comparison
with the prior year on a statutory basis (which includes NatWest from 6 March
2000) is of limited benefit. Accordingly, in order to provide more meaningful
and relevant comparatives the results for the six months to 30 June 2000 are
on a pro forma basis and assume that the acquisition of NatWest took place on
1 January 1999.
The results for the six months ended 30 June 2001 are also presented with the
statutory results for the six months ended 30 June 2000 in a separate
announcement.
For the purposes of this announcement goodwill amortisation and integration
costs are shown separately in the profit and loss account. In the statutory
announcement these items are included in the profit and loss account captions
prescribed by the Companies Act.
THE ROYAL BANK OF SCOTLAND GROUP plc
FINANCIAL HIGHLIGHTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 Increase 2000
£m £m % £m
Total income 6,822 5,974 14 12,358
-------- -------- --------
Total expenses 3,284 3,330 (1) 6,614
-------- -------- --------
Operating profit before provisions 3,120 2,321 34 5,046
-------- -------- --------
Profit before tax, goodwill
amortisation
and integration costs 2,751 2,011 37 4,401
-------- -------- --------
Profit before tax 2,072 1,511 37 3,332
-------- -------- --------
Cost:income ratio 48.1% 55.7% 53.5%
-------- -------- --------
Adjusted earnings per ordinary share 62.6p 46.1p 36 102.0p
-------- -------- --------
Sir George Mathewson, Chairman of The Royal Bank of Scotland Group plc said:-
'All our businesses are performing well, and integration is fully on track. We
are pleased with these results as they demonstrate our continuing strong
income growth and a cost:income ratio that has been substantially reduced in
the last 12 months. Provisions have increased largely as a consequence of
growth in our lending. Credit quality remains strong in absolute terms and we
continue to see a flow of business with a good credit profile at attractive
margins.
'Clearly we are faced with a wide range of economic scenarios. We consider
that it would be inadvisable for us to assume that any one outlook will
prevail. We remain confident that the strength, diversity and flexibility of
our business will enable us to continue to deliver superior performance for
our shareholders in any credible economic scenario.'
THE ROYAL BANK OF SCOTLAND GROUP plc
CONTENTS Page
Overview of results 4
Consolidated profit and loss account 6
Consolidated balance sheet 8
Divisional performance 9
Corporate Banking and Financial Markets 10
Retail Banking 11
Retail Direct 12
Manufacturing 13
Wealth Management 14
Direct Line Insurance Group 15
Ulster Bank 16
Citizens 17
Central items 18
Notes 19
Integration information 24
Average balance sheet 25
Average interest rates, yields, spreads and margins 26
Risk elements in lending 27
Market risk 28
Regulatory ratios and other information 29
INDEPENDENT REVIEW REPORT BY THE AUDITORS 30
CONTACTS 31
THE ROYAL BANK OF SCOTLAND GROUP plc
OVERVIEW OF RESULTS
Profit before tax, goodwill amortisation and integration costs increased by
37%, £740 million, from £2,011 million to £2,751 million.
Net interest income increased by 13%, £385 million, to £3,253 million. Good
growth was achieved in both corporate and personal lending and deposits.
Average interest-earning assets of the Group's banking business increased by
11%, including 17% growth in average loans and advances to customers. Net
interest margin of the banking business was unchanged at 3.0%.
Non-interest income, excluding general insurance, grew by 12%, £312 million,
to £2,968 million. Fees and commissions receivable increased by 12%, £239
million, to £2,209 million. Dealing profits were up by 20%, £115 million, to £
689 million. Other operating income was £505 million, an increase of 3%, £16
million.
General insurance premium income, after reinsurance, increased by 34%, £151
million, to £601 million.
Total income increased by 14%, £848 million, to £6,822 million.
Operating expenses, excluding goodwill amortisation and integration costs,
fell by 1%, £46 million, to £3,284 million. Staff expenses were down 5%, £88
million to £1,659 million. Staff numbers fell by 4%, 3,600 to 95,600. Other
expenses were up 3%, £42 million, to £1,625 million.
Group cost:income ratio improved from 55.7% to 48.1%.
General insurance claims, after reinsurance, increased by 29%, £95 million, to
£418 million.
Operating profit before provisions increased by 34%, £799 million, to £3,120
million.
Total provisions were up 19%, £59 million to £369 million. Within this, the
charge for bad and doubtful debts was up £83 million and amounts written off
investments were down £24 million. Total provisions for bad and doubtful debts
amounted to £3,226 million (30 June 2000: £3,066 million) equivalent to 80%
(30 June 2000: 79%) of risk elements in lending.
Goodwill amortisation was £318 million and relates primarily to the goodwill
arising on the acquisition of NatWest which is being written off over 20
years.
Integration costs, which is expenditure incurred in respect of cost reduction
and income enhancement targets related to the acquisition of NatWest, were £
361 million compared with £189 million in the six months ended 30 June 2000.
The tax charge was £746 million, equivalent to 36% of profit before tax of £
2,072 million. Adjusting for goodwill amortisation, the effective rate was
31%.
Profit attributable to ordinary shareholders, after tax, minority interests
and preference dividends increased by 42%, £325 million to £1,104 million.
Earnings per share, adjusted for goodwill amortisation and integration costs,
increased by 36%, from 46.1p to 62.6p.
Interim dividend, up 16% to 11.0p per ordinary share, is covered 5.4 times by
earnings before goodwill amortisation and integration costs.
Group post-tax return on equity, excluding goodwill, increased from 35.8% to
43.3%.
Group total assets were £341 billion at 30 June 2001, of which £266 billion
related to banking business and £75 billion to trading business. Loans and
advances to customers at 30 June 2001 were £179 billion, up 15% from £156
billion.
Capital ratios at 30 June 2001 were 7.2% (tier 1) and 11.4% (total).
Recent developments
On 17 July 2001, the Group announced that Citizens had entered into
agreements, subject to US regulatory consents, to acquire the retail, small
business and certain middle market banking businesses of Mellon Financial
Corporation for a cash consideration of approximately US$2.1 billion.
On 18 July 2001, the Group placed 140 million new ordinary shares at 1475p per
share raising £2.065 billion.
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited)
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Interest receivable 7,400 7,059 14,626
Interest payable 4,147 4,191 8,697
-------- -------- --------
Net interest income 3,253 2,868 5,929
-------- -------- --------
Dividend income 24 17 46
Fees and commissions receivable 2,209 1,970 4,079
Fees and commissions payable (459) (394) (804)
Dealing profits 689 574 1,131
Other operating income 505 489 998
-------- -------- --------
2,968 2,656 5,450
General insurance
- earned premiums 817 621 1,346
- reinsurance (216) (171) (367)
-------- -------- --------
Non-interest income 3,569 3,106 6,429
-------- -------- ---------
Total income 6,822 5,974 12,358
-------- -------- ---------
Administrative expenses
- staff costs 1,659 1,747 3,440
- premises and equipment 404 425 839
- other 812 769 1,566
Depreciation of tangible fixed assets 409 389 769
-------- -------- --------
Operating expenses 3,284 3,330 6,614
-------- -------- --------
Profit before other operating charges 3,538 2,644 5,744
General insurance
- gross claims 585 462 982
- reinsurance (167) (139) (284)
-------- -------- --------
Operating profit before provisions 3,120 2,321 5,046
Provisions for bad and doubtful debts 367 284 602
Amounts written off fixed asset investments 2 26 43
-------- -------- --------
Group operating profit before goodwill
amortisation and integration costs 2,751 2,011 4,401
Goodwill amortisation 318 311 635
Integration costs 361 189 434
-------- -------- --------
Group profit before tax 2,072 1,511 3,332
-------- -------- --------
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited)
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Group profit before tax 2,072 1,511 3,332
Tax 746 548 1,171
-------- -------- --------
Group profit after tax 1,326 963 2,161
Minority interests 44 22 54
-------- -------- --------
Profit after minority interests 1,282 941 2,107
Preference dividends 178 162 328
-------- -------- --------
Profit attributable to ordinary shareholders 1,104 779 1,779
-------- -------- --------
Basic earnings per ordinary share 41.1p 29.4p 66.9p
-------- -------- --------
Adjusted earnings per ordinary share (Note 6) 62.6p 46.1p 102.0p
-------- -------- ---------
THE ROYAL BANK OF SCOTLAND GROUP plc
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2001 (unaudited)
Audited
30 June 30 June 31
December
2001 2000 2000
£m £m £m
Assets
Cash and balances at central banks 2,639 2,533 3,049
Items in the course of collection from other 3,799 3,916 2,961
banks
Treasury bills and other eligible bills 3,882 5,332 3,316
Loans and advances to banks 39,748 37,324 32,061
Loans and advances to customers 179,389 156,292 168,076
Debt securities 53,721 52,995 57,789
Equity shares 1,609 1,302 1,553
Interests in associated undertakings 115 87 83
Intangible fixed assets 11,821 12,121 12,080
Tangible fixed assets 6,934 6,263 6,121
Other assets 22,455 14,607 18,034
Prepayments and accrued income 4,422 3,175 4,182
----------- ----------- ---------
330,534 295,947 309,305
Long-term assurance assets attributable to
policyholders 10,344 10,258 10,699
----------- ----------- ---------
Total assets 340,878 306,205 320,004
----------- ----------- ---------
Liabilities
Deposits by banks 35,627 33,618 35,130
Items in the course of transmission to other 1,851 1,854 1,707
banks
Customer accounts 180,964 166,221 177,302
Debt securities in issue 29,847 23,614 19,407
Other liabilities 37,234 30,426 32,959
Accruals and deferred income 7,448 5,427 7,172
Provisions for liabilities and charges
- deferred taxation 1,298 1,168 1,224
- other provisions 316 327 306
Subordinated liabilities
- dated loan capital 6,404 6,177 6,316
- undated loan capital including convertible 4,255 3,915 4,120
debt
Minority interests
- equity (15) 199 (34)
- non-equity 618 560 580
Shareholders' funds
- equity 20,215 18,622 19,081
- non-equity 4,472 3,819 4,035
----------- ----------- ---------
330,534 295,947 309,305
Long-term assurance liabilities to 10,344 10,258 10,699
policyholders
----------- ----------- ---------
Total liabilities 340,878 306,205 320,004
----------- ----------- ---------
Memorandum items:
Contingent liabilities and commitments 115,343 99,699 105,102
----------- ----------- ---------
THE ROYAL BANK OF SCOTLAND GROUP plc
DIVISIONAL PERFORMANCE
The results of each division before goodwill amortisation and integration
costs are detailed below.
Pro forma Pro forma
Half-year Half-year Profit Full year
2001 2000 increase 2000
£m £m % £m
Corporate Banking and Financial Markets 1,505 1,337 13 2,730
Retail Banking 1,377 1,202 15 2,467
Retail Direct 241 177 36 373
-------- -------- --------
Contribution before manufacturing costs 3,123 2,716 15 5,570
Manufacturing (778) (859) 9 (1,660)
-------- -------- --------
Operating profit 2,345 1,857 26 3,910
Wealth Management 234 200 17 405
Direct Line Insurance Group 112 76 47 201
Ulster Bank 119 96 24 200
Citizens 233 167 40 349
Central items (292) (385) 24 (664)
-------- -------- --------
Group operating profit before goodwill
amortisation and integration costs 2,751 2,011 37 4,401
-------- -------- --------
THE ROYAL BANK OF SCOTLAND GROUP plc
CORPORATE BANKING AND FINANCIAL MARKETS
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Net interest income 994 885 1,793
Non-interest income 1,525 1,398 2,856
-------- -------- --------
Total income 2,519 2,283 4,649
Direct expenses
- staff costs 547 499 998
- other 149 150 310
- operating lease depreciation 188 188 388
-------- -------- --------
Contribution before provisions 1,635 1,446 2,953
Provisions 130 109 223
-------- -------- --------
Contribution 1,505 1,337 2,730
-------- -------- --------
Direct cost:income ratio (%) 35.1 36.7 36.5
Total assets (£bn) 205.8 186.2 191.1
Loans and advances to customers (gross) (£bn) 92.5 81.2 87.6
Employees at period end - permanent 12,300 13,000 12,400
- temporary 800 700 700
--------- --------- ---------
- total 13,100 13,700 13,100
--------- --------- ---------
Corporate Banking and Financial Markets provides an integrated range of
products and services to its mid-sized and large corporate and institutional
customers in the UK and overseas including corporate and commercial banking,
treasury and capital markets products, structured and leveraged finance, trade
finance, leasing and factoring.
Contribution was up 13%, £168 million to £1,505 million.
Total income was up 10%, £236 million to £2,519 million. Net interest income
was up 12%, £109 million to £994 million, mainly reflecting growth in lending.
Non-interest income was up 9%, £127 million to £1,525 million reflecting
strong results from Financial Markets. Increased fees receivable in Corporate
Banking and higher dealing profits in Financial Markets were partly offset by
a reduced contribution from the Private Equity business.
Direct expenses, were up 6%, £47 million to £884 million, primarily due to
higher performance related bonuses in Financial Markets reflecting higher
income. Staff numbers fell by 4%, 600, to 13,100. The direct cost:income ratio
improved from 36.7% to 35.1%.
Provisions were up 19%, £21 million to £130 million, with an increase in
provisions for bad debts, reflecting growth in lending and a relatively low
level of specific provision in the first half of 2000 being offset by a
reduction in the amounts written off investments.
THE ROYAL BANK OF SCOTLAND GROUP plc
RETAIL BANKING
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Net interest income 1,280 1,180 2,418
Non-interest income 609 546 1,128
-------- -------- --------
Total income 1,889 1,726 3,546
Direct expenses
- staff costs 339 371 736
- other 89 85 210
-------- -------- --------
Contribution before provisions 1,461 1,270 2,600
Provisions for bad and doubtful debts 84 68 133
-------- -------- --------
Contribution 1,377 1,202 2,467
-------- -------- --------
Direct cost:income ratio (%) 22.7 26.4 26.7
Total assets (£bn) 59.2 53.8 57.9
Loans and advances to customers (gross) (£bn) 46.0 41.1 44.3
Employees at period end - permanent 27,900 30,300 27,700
- temporary 1,400 1,500 1,200
--------- --------- ---------
- total 29,300 31,800 28,900
--------- --------- ---------
Retail Banking provides a wide range of banking, insurance and other related
financial services to individuals and small businesses. These services are
delivered from a network of RBS and NatWest branches throughout Great Britain
and through alternative distribution channels.
Contribution before integration costs increased by 15%, £175 million to £1,377
million.
Total income was up 9%, £163 million to £1,889 million. Net interest income
was 8%, £100 million higher at £1,280 million, reflecting strong volume
growth. Loans to customers, excluding mortgages, were up 18% to £19 billion.
Mortgage lending grew by 8%, to £27 billion. Average deposits were 7%, £3.2
billion higher. The account base continues to grow in both banks, with
increased market share of current accounts. NatWest maintained its market
leading position for small business relationships.
Non-interest income increased by 12%, £63 million to £609 million, resulting
from growth in packaged accounts, up 48% to 1.8 million accounts, together
with benefits from integration initiatives.
Direct expenses at £428 million were down 6%, £28 million as a result of
integration savings. Staff numbers were down 8%, 2,500, to 29,300. The
increase in staff numbers since 31 December 2000 reflects business growth and
the higher number of temporary staff working on integration projects. The
direct cost:income ratio improved from 26.4% to 22.7%.
Provisions for bad and doubtful debts were up 24%, £16 million to £84 million,
reflecting growth in lending.
THE ROYAL BANK OF SCOTLAND GROUP plc
RETAIL DIRECT
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Net interest income 319 256 516
Non-interest income 317 265 565
----- ----- -------
Total income 636 521 1,081
Direct expenses
- staff costs 79 83 154
- other 192 155 327
----- ----- -----
Contribution before provisions 365 283 600
Provisions for bad and doubtful debts 124 106 227
----- ----- -----
Contribution 241 177 373
----- ----- -----
Direct cost:income ratio (%) 42.6 45.7 44.5
Total assets (£bn) 15.7 13.3 14.4
Loans and advances to customers (gross) (£bn) 15.5 12.7 14.1
Employees at period end - permanent 5,300 5,700 5,200
- temporary 700 700 600
-------- -------- --------
- total 6,000 6,400 5,800
-------- -------- --------
Retail Direct issues a comprehensive range of credit, charge and debit cards
to personal and corporate customers and engages in merchant acquisition and
processing facilities for retail businesses. It also includes: Tesco Personal
Finance, Virgin Direct Personal Finance, Direct Line Financial Services and
Lombard Direct, the Group's internet banking platform and Comfort Card
European businesses, all of them offering products to customers through direct
channels.
Contribution rose by 36%, £64 million to £241 million.
Total income was up 22%, £115 million to £636 million driven by strong
performances in Cards and Tesco Personal Finance ('TPF'). Net interest income
was up 25%, £63 million to £319 million, reflecting higher average cards
balances, up 11% to £7.2 billion. The total number of cards in issue grew by
10% to 13.1 million. In Virgin Direct Personal Finance mortgage balances were
up 91% to £3.0 billion.
Non-interest income increased 20%, £52 million to £317 million, primarily as a
result of increased revenues from retailers and higher interchange income.
Non-interest income in TPF grew by 96%, driven by increased volumes,
particularly ATM and motor insurance income.
Direct expenses at £271 million were 14%, £33 million higher, as a result of
increased business volumes and marketing activity, partly offset by lower
staff costs due to reduced staff numbers. The direct cost:income ratio
improved from 45.7% to 42.6%.
Provisions for bad and doubtful debts increased by 17%, £18 million to £124
million, due to the increase in lending.
THE ROYAL BANK OF SCOTLAND GROUP plc
MANUFACTURING
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Staff costs 194 274 490
Other costs 584 585 1,170
----- ----- -------
Total manufacturing costs 778 859 1,660
----- ----- -------
Analysis:
Group Technology 299 401 723
Property 255 239 486
Customer support and other operations 224 219 451
----- ----- -------
Total manufacturing costs 778 859 1,660
----- ----- -------
Employees at period end - permanent 16,500 17,900 17,200
- temporary 2,800 2,000 2,000
--------- --------- ---------
- total 19,300 19,900 19,200
--------- --------- ---------
Manufacturing supports the customer facing businesses of Corporate Banking and
Financial Markets, Retail Banking and Retail Direct and provides operational
technology, account management, money transmission, property and other
services.
Total manufacturing costs of £778 million, were 9%, £81 million lower. The
reduction reflects integration savings. In particular, technology costs were
down 25%, £102 million, as de-duplication initiatives have taken effect. Costs
of customer support and other operations increased by 2%, £5 million due to
business growth and the realignment of activities to enhance customer service,
particularly in telephony and branch support. Notwithstanding an increase in
the number of staff working on integration initiatives, staff numbers fell by
3%, 600 to 19,300.
THE ROYAL BANK OF SCOTLAND GROUP plc
WEALTH MANAGEMENT
Pro Pro
forma forma
Half-year Half-year Full
year
2001 2000 2000
£m £m £m
Net interest income 231 204 425
Non-interest income 241 237 463
----- ----- -----
Total income 472 441 888
Expenses
- staff costs 150 153 303
- other 92 91 185
----- ----- -----
Profit before provisions 230 197 400
Net release of provisions for bad and doubtful 4 3 5
debts
----- ----- -----
Profit before integration costs 234 200 405
----- ----- -----
Cost:income ratio (%) 51.3 55.3 55.0
Total assets (£bn) 12.1 10.2 10.4
Employees at period end - permanent 6,200 6,200 6,200
- temporary 600 600 600
--------- -------- --------
- total 6,800 6,800 6,800
--------- -------- --------
Wealth Management comprises Coutts Group, Adam & Company and the offshore
banking businesses - The Royal Bank of Scotland International and NatWest
Offshore. The Coutts Group focuses on private banking through the Coutts and
NatWest Private Banking brands. Adam & Company is a private bank operating
primarily in Scotland. The offshore businesses deliver retail banking services
to local and expatriate customers, and corporate banking and treasury services
to corporate, intermediary and institutional clients.
Profit before integration costs increased by 17%, £34 million to £234 million.
Total income was up 7%, £31 million to £472 million. Net interest income grew
by 13%, £27 million to £231 million, driven largely by higher deposits as
customers moved out of equity investments, and a higher volume of lending,
principally in offshore banking.
Non-interest income increased 2%, £4 million to £241 million. The decline in
equity market values and the consequent effect on fees earned on assets under
management constrained income growth.
Expenses were 1%, £2 million lower at £242 million. The cost:income ratio
improved from 55.3% to 51.3%.
There was a net release of provisions for bad and doubtful debts of £4 million
(2000: release of £3 million).
THE ROYAL BANK OF SCOTLAND GROUP plc
DIRECT LINE INSURANCE GROUP
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Earned premiums 817 621 1,346
Reinsurers' share (216) (171) (367)
------- ------- -------
Insurance premium income 601 450 979
Net interest income 60 43 98
Non-interest income 18 37 78
------ ------- -------
Total income 679 530 1,155
Expenses
- staff costs 68 58 124
- other 81 73 132
Gross claims 585 462 982
Reinsurers' share (167) (139) (284)
------- ------ ------
Profit before goodwill amortisation and
integration costs 112 76 201
------- ------ ------
In-force policies (000)
- Motor 3,617 2,939 3,219
- Home 1,143 1,036 1,055
Combined operating ratio (%) 87.0 86.6 86.2
Total assets (£bn) 2.9 2.2 2.5
Insurance reserves (£m) 1,336 1,226 1,221
Employees at period end - permanent 7,300 6,300 6,600
- temporary 200 100 100
-------- -------- --------
- total 7,500 6,400 6,700
-------- -------- --------
Direct Line Insurance Group sells and underwrites retail and wholesale
insurance on the telephone and the internet to customers. The Direct Division
sells general insurance and motor breakdown services direct to the customer,
whilst Green Flag is a leading wholesale provider of insurance and motoring
related services. Through its International Division, Direct Line sells
insurance in Spain and Japan, and has recently announced plans to expand into
Germany and Italy.
Profit before goodwill amortisation and integration costs increased by 47%, £
36 million to £112 million.
Total income was up 28%, £149 million to £679 million. Earned premiums grew
strongly, up 32%, £196 million to £817 million due to increased policy numbers
and higher average premiums. Gross claims were up 27%, £123 million at £585
million with continued lower claims experience being offset by the larger
number of in-force policies. Net premium income increased by 34%, £151 million
to £601 million and net claims rose 29%, £95 million to £418 million.
Non-interest income fell as a result of increased commissions payable and a
reduction in investment gains.
Expenses were up 14%, £18 million to £149 million reflecting business
expansion including the costs of establishing overseas operations.
Motor in-force policies increased by 23% and home in-force policies were up
10%.
THE ROYAL BANK OF SCOTLAND GROUP plc
ULSTER BANK
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Net interest income 166 139 294
Non-interest income 89 88 172
----- ----- -----
Total income 255 227 466
Expenses
- staff costs 70 70 144
- other 56 50 103
----- ----- -----
Profit before provisions 129 107 219
Provisions for bad and doubtful debts 10 11 19
----- ----- -----
Profit before integration costs 119 96 200
----- ----- -----
Cost:income ratio (%) 49.4 52.9 53.0
Total assets (£bn) 12.2 11.1 11.1
Employees at period end - permanent 4,300 4,500 4,400
- temporary 400 300 200
-------- -------- --------
- total 4,700 4,800 4,600
-------- -------- --------
Average exchange rate - Euro/£ 1.605 1.635 1.642
Spot exchange rate - Euro/£ 1.660 1.581 1.606
Ulster Bank provides a comprehensive range of retail and wholesale financial
services in Northern Ireland and the Republic of Ireland. Retail Banking has a
network of branches throughout Ireland and operates in the personal, small
business and wealth management sectors. Corporate Banking and Financial
Markets provides a wide range of services in the corporate and institutional
markets.
Profit before integration costs of £119 million was 24%, £23 million higher.
At constant exchange rates profit before integration costs rose by 23%, £22
million.
Total income increased by 12%, £28 million to £255 million. Net interest
income rose by 19%, £27 million to £166 million reflecting strong volume
growth in customer loans and deposits. Average loans and advances to customers
increased by 19%.
Non-interest income was up £1 million to £89 million, with an increase in
dealing profits being offset by a reduction in fees and commissions.
Expenses rose by 5%, £6 million to £126 million due mainly to additional
depreciation on property and equipment and operating lease assets and costs
related to the preparation for the introduction of euro notes and coins. The
cost:income ratio improved from 52.9% to 49.4%.
Provisions for bad and doubtful debts were down £1 million to £10 million.
THE ROYAL BANK OF SCOTLAND GROUP plc
CITIZENS
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Net interest income 370 317 667
Non-interest income 147 111 247
----- ----- -----
Total income 517 428 914
Expenses
- staff costs 146 141 290
- other 110 105 235
----- ----- -----
Profit before provisions 261 182 389
Provisions for bad and doubtful debts 28 15 40
----- ----- -----
Profit before goodwill amortisation 233 167 349
----- ----- -----
Cost:income ratio (%) 49.5 57.5 57.4
Total assets (£bn) 22.6 19.6 20.3
Employees at period end - permanent 7,200 7,300 7,200
- temporary 100 200 100
-------- -------- --------
- total 7,300 7,500 7,300
-------- -------- --------
Average exchange rate - US$/£ 1.440 1.569 1.516
Spot exchange rate - US$/£ 1.405 1.515 1.493
Citizens is engaged in retail and corporate banking activities through its
branch network in the states of Rhode Island, Connecticut, Massachusetts and
New Hampshire and is the second largest bank in New England. The acquisition
of the regional retail and commercial businesses of Mellon Bank will expand
Citizens' presence to the states of Pennsylvania, Delaware and New Jersey.
This acquisition is subject to regulatory approvals and is expected to
complete in the final quarter of 2001.
Profit before goodwill amortisation was up 40%, £66 million to £233 million
reflecting strong organic growth and exchange rate movements. At constant
exchange rates the increase was 28%, £51 million.
Net interest income rose by 17%, £53 million to £370 million mainly due to
deposit growth, partially offset by a slight reduction in interest spread.
Non-interest income was up 32%, £36 million to £147 million reflecting growth
in deposit service charges, mortgage banking and ATM and debit card income.
Expenses at £256 million were 4%, £10 million higher due to exchange rate
movements. The cost:income ratio improved from 57.5% to 49.5%.
Provisions for bad and doubtful debts were £28 million compared with £15
million in 2000 reflecting growth in customer lending and the economic
environment in the US.
THE ROYAL BANK OF SCOTLAND GROUP plc
CENTRAL ITEMS
Pro forma Pro forma
Half-year Half-year Full year
2001 2000 2000
£m £m £m
Funding costs 102 105 217
Central department costs
- staff costs 48 65 114
- other 37 63 107
Other corporate items - net 105 152 226
------ ------ ------
Loss before goodwill amortisation and
integration costs 292 385 664
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Employees at period end - permanent 1,400 1,700 1,400
- temporary 200 200 200
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- total 1,600 1,900 1,600
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The Centre comprises group and corporate functions which provide services to
the operating divisions.
The loss before goodwill amortisation and integration costs reduced by £93
million to £292 million. The first half of 2000 included £44 million of
expenses relating to Citizens' acquisition of UST in January 2000.
Staff numbers at 1,600 were 16%, 300 lower reflecting integration savings.
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