Interim Results - Part 3

Royal Bank of Scotland Group PLC 7 August 2001 PART 3 THE ROYAL BANK OF SCOTLAND GROUP plc CONTENTS Page STATUTORY RESULTS Foreword 2 Consolidated profit and loss account 3 Consolidated balance sheet 5 Statement of consolidated total recognised gains and losses 6 Reconciliation of movements in consolidated shareholders' funds 6 Consolidated cash flow statement 7 Notes 8 INDEPENDENT REVIEW REPORT BY THE AUDITORS 10 CONTACTS 11 THE ROYAL BANK OF SCOTLAND GROUP plc FOREWORD In this announcement, the consolidated profit and loss account for the six months ended 30 June 2001 is presented with the results for the six months ended 30 June 2000 and the 15 months ended 31 December 2000. Commentary on these results is of limited benefit as the prior periods include National Westminster Bank Plc ('NatWest') from the date of acquisition, 6 March 2000. For a detailed discussion of the Group's performance, reference should be made to the pro forma results. Pro forma results The Group has also released a separate announcement in which the results for the six months ended 30 June 2001 are presented with the pro forma results for the six months ended 30 June 2000 and the pro forma results for the year ended 31 December 2000. The pro forma results assume that the acquisition of NatWest took place on 1 January 1999. This approach facilitates meaningful comparisons with the prior period. THE ROYAL BANK OF SCOTLAND GROUP plc CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited) Audited 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Interest receivable 7,400 5,641 14,494 Interest payable 4,147 3,393 8,707 -------- -------- -------- Net interest income 3,253 2,248 5,787 -------- -------- -------- Dividend income 24 19 54 Fees and commissions receivable 2,209 1,514 3,885 Fees and commissions payable (459) (293) (746) Dealing profits 689 385 1,003 Other operating income 505 353 959 -------- -------- -------- 2,968 1,978 5,155 General insurance - earned premiums 817 621 1,608 - reinsurance (216) (171) (442) -------- -------- -------- Non-interest income 3,569 2,428 6,321 -------- -------- --------- Total income 6,822 4,676 12,108 -------- -------- --------- Administrative expenses - staff costs 1,882 1,427 3,547 - premises and equipment 419 316 817 - other 915 648 1,615 Depreciation and amortisation - tangible fixed assets 429 331 786 - goodwill 318 208 541 -------- -------- -------- Operating expenses 3,963 2,930 7,306 -------- -------- -------- Profit before other operating charges 2,859 1,746 4,802 General insurance - gross claims 585 462 1,205 - reinsurance (167) (139) (347) -------- -------- -------- Profit before provisions for bad and doubtful debts 2,441 1,423 3,944 Provisions for bad and doubtful debts 367 232 629 Amounts written off fixed asset investments 2 25 42 -------- -------- -------- Operating profit 2,072 1,166 3,273 Profit on disposal of businesses - - 100 -------- -------- -------- Profit on ordinary activities before tax 2,072 1,166 3,373 -------- -------- -------- THE ROYAL BANK OF SCOTLAND GROUP plc CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited) Audited 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Profit on ordinary activities before tax 2,072 1,166 3,373 Tax on profit on ordinary activities 746 414 1,157 -------- -------- -------- Profit on ordinary activities after tax 1,326 752 2,216 Minority interests 44 18 47 -------- -------- -------- Profit after minority interests 1,282 734 2,169 Preference dividends 178 128 322 -------- -------- -------- Profit attributable to ordinary shareholders 1,104 606 1,847 Ordinary dividends 313 253 882 -------- -------- -------- Retained profit 791 353 965 -------- -------- -------- Basic earnings per ordinary share 41.1p 30.1p 90.0p -------- -------- -------- Adjusted earnings per ordinary share (Note 3) 62.6p 45.9p 126.4p -------- -------- -------- Diluted earnings per ordinary share 40.4p 29.7p 88.9p -------- -------- -------- Comparative figures relating to the 15 months ended 31 December 2000 and as at that date do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 ('the Act'). The statutory accounts for that period have been filed with the Registrar of Companies and have been reported on by the auditors under Section 235 of the Act. The report of the auditors was unqualified and did not contain a statement under Section 237(2) or (3) of the Act. 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 policyholders 10,344 10,258 10,699 ----------- ----------- --------- 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 STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited) Audited 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Profit attributable to ordinary shareholders 1,104 606 1,847 Currency translation adjustments and other movements (13) 42 26 Revaluation of premises - - 24 ------- ------- ------- Total recognised gains and losses 1,091 648 1,897 ------- ------- ------- RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited) Audited 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Profit attributable to ordinary shareholders 1,104 606 1,847 Ordinary dividends (313) (253) (882) ------- ------- ------- Retained profit for the period 791 353 965 Issue of ordinary and preference shares 643 17,423 18,032 Redemption of preference shares - - (300) Other recognised gains and losses (13) 42 50 Currency translation adjustment on share premium account 150 166 184 Other movements - - (17) ---------- ---------- ---------- Net increase in shareholders' funds 1,571 17,984 18,914 Opening shareholders' funds 23,116 4,457 4,202 ---------- ---------- ---------- Closing shareholders' funds 24,687 22,441 23,116 ---------- ---------- ---------- THE ROYAL BANK OF SCOTLAND GROUP plc CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2001 (unaudited) Audited 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Net cash inflow from operating activities 6,183 4,353 11,328 Dividends received from associated undertakings 1 2 2 Returns on investments and servicing of finance (547) (392) (1,096) Taxation (369) (136) (727) Capital expenditure and financial investment (663) (1,353) (5,982) Acquisitions and disposals (37) (1,510) (2,920) Ordinary equity dividends paid (353) (181) (386) -------- -------- -------- Net cash inflow before financing 4,215 783 219 Financing 313 3,875 4,606 -------- -------- -------- Increase in cash 4,528 4,658 4,825 -------- -------- -------- THE ROYAL BANK OF SCOTLAND GROUP plc NOTES 1. Accounting policies and presentation There have been no changes to the Group's principal accounting policies as set out on pages 49 to 51 of the 2000 Report and Accounts. 2. Taxation The charge for taxation is based on a UK corporation tax rate of 30% (2000 - 30%). The tax charge of £746 million on profits of £2,072 million for the six months ended 30 June 2001 is equivalent to 36% of pre-tax profit. This is higher than the standard UK tax rate of 30%, mainly due to goodwill amortisation, which is not allowable for UK tax purposes. 3. Earnings per share The earnings per share have been calculated as follows: 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Earnings: Profit attributable to ordinary 1,104 606 1,847 shareholders ------- ------- ------- Number of shares - millions Weighted average number of ordinary shares: In issue during the period 2,687 2,015 2,053 Effect of dilutive share options and convertible non-equity shares 48 25 26 -------- -------- -------- In issue during the period - diluted 2,735 2,040 2,079 -------- -------- -------- Basic earnings per share 41.1p 30.1p 90.0p Goodwill amortisation 11.6p 10.2p 25.8p Integration costs 9.9p 5.6p 14.0p Profit on sale of businesses - - (3.4p) -------- -------- --------- Adjusted earnings per share 62.6p 45.9p 126.4p -------- -------- --------- Adjusted earnings are calculated by adjusting the profit attributable to ordinary shareholders for the after tax effect of goodwill amortisation, integration costs and profits or losses on disposals of businesses. THE ROYAL BANK OF SCOTLAND GROUP plc NOTES (continued) 4. Reconciliation of operating profit to net cash inflow from operating activities 6 months 6 months 15 months ended ended ended 30 June 30 June 31 December 2001 2000 2000 £m £m £m Operating profit 2,072 1,166 3,273 Increase in prepayments and accrued income (240) (30) (1,151) Interest on subordinated liabilities 371 267 750 Increase in accruals and deferred income 246 244 2,236 Depreciation and amortisation of tangible and intangible fixed assets 747 539 1,327 Other trading items (53) (33) (370) ---------- ---------- ---------- Net cash inflow from trading activities 3,143 2,153 6,065 Increase in loans and advances to banks and customers (14,145) (5,056) (17,600) Increase in deposits by banks and 4,159 12,242 30,557 customers Decrease/(increase) in bills and 3,682 (1,353) (1,628) securities Increase/(decrease) in debt securities in 10,440 1,686 (659) issue Other assets and liabilities and non-cash (1,096) (5,319) (5,407) items ---------- ---------- --------- Net cash inflow from operating activities 6,183 4,353 11,328 ---------- ---------- --------- 5. Ordinary dividends The directors have declared an interim dividend of 11.0p per share on the ordinary shares. This interim dividend will be paid on 12 October 2001 to shareholders registered on 17 August 2001. As an alternative to cash, a scrip dividend election is to be offered and shareholders will receive details of this by letter. 6. Auditors' review The interim financial statements have been reviewed by the Group's auditors, Deloitte & Touche, and their review report is set out on page 10. 7. Interim report and Form 6-K An interim report is being sent to shareholders. An interim report on Form 6-K is being furnished to the Securities and Exchange Commission in the US. Copies of both documents will be available at the Company's registered office at 36 St Andrew Square, Edinburgh EH2 2YB. 8. Final results The Group's results for the year ended 31 December 2001 will be announced on Thursday 28 February 2002. THE ROYAL BANK OF SCOTLAND GROUP plc INDEPENDENT REVIEW REPORT TO THE ROYAL BANK OF SCOTLAND GROUP plc Introduction We have been instructed by the company to review the financial information for the six months ended 30 June 2001 which comprises the profit and loss account, the balance sheet, the statement of total recognised gains and losses, the reconciliation of movements in shareholders' funds, the cash flow statement and related notes 1 to 8. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2001. Deloitte & Touche Chartered Accountants Edinburgh 6 August 2001 THE ROYAL BANK OF SCOTLAND GROUP plc CONTACTS Fred Watt Group Finance Director 020 7427 8412 0131 523 2028 Grahame Whitehead Deputy Group Finance Director 020 7427 9450 0131 523 2970 7 August 2001 END

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