Interim Results - Part 7 of 7

RNS Number : 7943K

Royal Bank of Scotland Group PLC

02 August 2013

 



Appendix 4

Market risk

Appendix 4 Market risk

Contents
Trading revenues	2
Structured credit portfolio	3
Market risk capital	4

Appendix 4 Market risk (continued)

Trading revenues*

The graph below shows the daily distribution of trading and related revenues for Markets for the half years ended 30 June 2013 and 30 June 2012.

http://www.rns-pdf.londonstockexchange.com/rns/7943K_-2013-8-1.pdf 

Note:

(1)	The effect of any month end adjustments, not attributable to a specific daily market move, is spread evenly over the trading days in that specific month.

Key points

·	Markets focused on reducing its balance sheet and lowering risk during H1 2013. This combined with a weaker trading performance and market uncertainty following the Federal Reserve's comments about a tapering of quantitative easing, limiting opportunities for income generation. In contrast, H1 2012 performance was stronger as global markets were boosted by the European Central Bank's Long Term Refinancing Operation.
·	The average daily revenue earned by Markets' trading activities in H1 2013 was £12 million, compared with £22 million in H1 2012. The standard deviation of the daily revenues decreased from £16 million to £11 million. The number of days with negative revenue increased to 13 from nine. The most frequent daily revenue range was between £10 million and £15 million, which occurred 27 times. In H1 2012, the most frequent daily revenue range was between £20 million and £25 million, which occurred 19 times.

*Not within the scope of Deloitte LLP's review report

Appendix 4 Market risk (continued)

Structured credit portfolio

The structured credit portfolio is within Non-Core. These assets are managed on a third party asset and risk-weighted assets basis. The table below shows the open market risk in the structured credit portfolio.

	Drawn notional						Fair value
	CDOs (1)	CLOs (2)	MBS (3)	Other  ABS (4)	Total		CDOs (1)	CLOs (2)	MBS (3)	Other  ABS (4)	Total
30 June 2013	£m	£m	£m	£m	£m		£m	£m	£m	£m	£m
1-2 years	-	-	-	26	26		-	-	-	22	22
3-4 years	-	-	20	48	68		-	-	20	45	65
4-5 years	-	-	39	-	39		-	-	37	-	37
5-10 years	-	399	25	-	424		-	385	20	-	405
>10 years	267	128	228	232	855		112	121	163	141	537
	267	527	312	306	1,412		112	506	240	208	1,066
31 December 2012
1-2 years	-	-	-	80	80		-	-	-	74	74
3-4 years	-	-	27	82	109		-	-	24	76	100
4-5 years	-	-	95	-	95		-	-	86	-	86
5-10 years	-	310	92	-	402		-	295	44	-	339
>10 years	289	279	380	398	1,346		116	256	253	254	879
	289	589	594	560	2,032		116	551	407	404	1,478

Notes:

(1)	Collateralised debt obligations.
(2)	Collateralised loan obligations.
(3)	Mortgage-backed securities.
(4)	Asset-backed securities.

Key point

·	The drawn notional and fair value decreased to £1.4 billion and £1.1 billion respectively reflecting the sale of underlying assets from CDO collateral pools and legacy conduits. The reductions were across all asset classes.

Appendix 4 Market risk (continued)

Market risk capital*

Minimum capital requirements

The following table analyses the principal model-based contributors to the market risk minimum capital requirement, calculated in accordance with Basel 2.5.

	30 June 2013				Period end  31 December  2012
	Average (1)	Maximum (1)	Minimum (1)	Period end
	£m	£m	£m	£m	£m
Value-at-risk (VaR) (1)	825	875	783	810	825
Stressed VaR (SVaR)	1,185	1,266	1,120	1,134	1,226
Incremental risk charge (IRC)	426	458	405	414	467
All price risk (APR)	12	13	10	12	12

Note:

(1)	The average, maximum and minimum are based on the monthly Pillar 1 model based capital requirements.

Key points

·	SVaR increased slightly in January as the Markets Delta business repositioned its exposures to longer-dated maturities. The SVaR then decreased over the remainder of H1 2013, reflecting continued de-risking by a number of Markets businesses.
·	The IRC fell in January 2013 as Markets businesses reduced exposures, then increased in April 2013 as the Markets Delta business repositioned its exposure to peripheral eurozone countries. The IRC then fell as the business reduced its exposures to European and peripheral eurozone countries over the remainder of the period.

*Not within the scope of Deloitte LLP's review report

Appendix 5

Country risk

Appendix 5 Country risk

Contents
Total eurozone	2
Eurozone periphery - total	4
Eurozone periphery - by country	6
Eurozone non-periphery - total	22
Eurozone non-periphery - by country	26

Appendix 5 Country risk (continued)

Total eurozone

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	661	-	-		9,868	38		18,918	9,294		19,492		1,616	-		21,769		49		21,818		4,604	492
Central bank	13,286	-	-		-	-		-	-		-		23	-		13,309		-		13,309		25	5,338
Other banks	4,930	-	-		4,352	(164)		875	685		4,542		21,383	1,316		32,171		4,393		36,564		119,232	33,624
Other FI	3,660	-	-		9,193	(866)		858	363		9,688		7,767	867		21,982		6,740		28,722		14,243	20,763
Corporate	36,983	14,948	8,019		124	-		526	77		573		2,796	23		40,375		28,408		68,783		3,950	665
Personal	19,065	3,612	1,939		-	-		-	-		-		-	-		19,065		785		19,850		-	-
	78,585	18,560	9,958		23,537	(992)		21,177	10,419		34,295		33,585	2,206		148,671		40,375		189,046		142,054	60,882
31 December 2012
Government	678	-	-		11,487	267		17,430	8,469		20,448		1,797	-		22,923		783		23,706		5,307	-
Central bank	21,969	-	-		-	-		-	-		-		35	-		22,004		-		22,004		36	4,648
Other banks	4,257	-	-		5,588	(509)		1,021	611		5,998		25,956	1,161		37,372		4,400		41,772		148,534	28,679
Other FI	4,237	-	-		9,367	(1,081)		1,261	142		10,486		7,595	727		23,045		5,537		28,582		15,055	16,124
Corporate	37,351	14,253	7,451		794	33		311	115		990		3,594	24		41,959		29,061		71,020		4,945	732
Personal	18,512	3,351	1,733		-	-		-	-		-		1	-		18,513		743		19,256		1	-
	87,004	17,604	9,184		27,236	(1,290)		20,023	9,337		37,922		38,978	1,912		165,816		40,524		206,340		173,878	50,183

Appendix 5 Country risk (continued)

Total eurozone (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	45,910	44,223		1,896	(2,065)		40,154	38,580		1,407	(1,405)
Other banks	6,035	5,692		137	(104)		13,249	13,014		266	(217)
Other FI	5,671	4,674		149	(130)		11,015	9,704		104	(92)
Corporate	14,255	11,732		(221)	233		39,639	35,851		(455)	465
	71,871	66,321		1,961	(2,066)		104,057	97,149		1,322	(1,249)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	6,822	245		29,424	893		5,743	221		-	-		41,989	1,359
Other FI	10,784	170		16,386	442		1,734	(12)		978	2		29,882	602
	17,606	415		45,810	1,335		7,477	209		978	2		71,871	1,961
31 December 2012
Banks	8,828	126		34,862	597		8,056	204		-	-		51,746	927
Other FI	23,912	88		23,356	319		4,111	(17)		932	5		52,311	395
	32,740	214		58,218	916		12,167	187		932	5		104,057	1,322

Appendix 5 Country risk (continued)

Eurozone periphery

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	42	-	-		688	(101)		4,428	2,853		2,263		108	-		2,413		14		2,427		275	-
Central bank	138	-	-		-	-		-	-		-		-	-		138		-		138		-	431
Other banks	251	-	-		3,715	(388)		102	160		3,657		3,682	88		7,678		81		7,759		24,830	8,027
Other FI	782	-	-		2,069	(376)		268	165		2,172		760	137		3,851		1,206		5,057		1,531	4,520
Corporate	24,008	13,179	7,446		78	-		275	3		350		1,332	-		25,690		5,274		30,964		1,630	-
Personal	18,849	3,590	1,920		-	-		-	-		-		-	-		18,849		652		19,501		-	-
	44,070	16,769	9,366		6,550	(865)		5,073	3,181		8,442		5,882	225		58,619		7,227		65,846		28,266	12,978
31 December 2012
Government	51	-	-		644	(132)		3,686	2,698		1,632		134	-		1,817		16		1,833		361	-
Central bank	107	-	-		-	-		-	-		-		-	-		107		-		107		-	-
Other banks	299	-	-		3,551	(660)		165	131		3,585		4,093	476		8,453		75		8,528		29,706	4,186
Other FI	812	-	-		2,065	(541)		466	40		2,491		746	103		4,152		1,414		5,566		1,557	4,136
Corporate	24,362	12,146	6,757		192	2		128	40		280		1,678	-		26,320		5,414		31,734		2,027	326
Personal	18,292	3,347	1,713		-	-		-	-		-		1	-		18,293		611		18,904		1	-
	43,923	15,493	8,470		6,452	(1,331)		4,445	2,909		7,988		6,652	579		59,142		7,530		66,672		33,652	8,648

Appendix 5 Country risk (continued)

Eurozone periphery (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	28,778	28,485		1,789	(2,058)		24,785	24,600		1,452	(1,459)
Other banks	1,848	1,762		98	(80)		6,023	5,996		230	(202)
Other FI	1,333	1,151		40	(32)		2,592	2,350		76	(67)
Corporate	2,406	1,700		37	(31)		5,824	5,141		52	(47)
	34,365	33,098		1,964	(2,201)		39,224	38,087		1,810	(1,775)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	3,499	208		14,867	921		4,410	166		-	-		22,776	1,295
Other FI	3,323	192		7,568	465		420	12		278	-		11,589	669
	6,822	400		22,435	1,386		4,830	178		278	-		34,365	1,964
31 December 2012
Banks	3,517	153		14,725	780		5,153	214		-	-		23,395	1,147
Other FI	5,647	240		9,021	401		896	22		265	-		15,829	663
	9,164	393		23,746	1,181		6,049	236		265	-		39,224	1,810

Appendix 5 Country risk (continued)

Eurozone periphery by country: Ireland

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	42	-	-		137	(14)		34	26		145		-	-		187		3		190		6	-
Central bank	116	-	-		-	-		-	-		-		-	-		116		-		116		-	-
Other banks	88	-	-		113	(3)		19	(3)		135		625	88		936		-		936		12,318	3,706
Other FI	519	-	-		85	-		133	11		207		586	137		1,449		656		2,105		1,300	4,484
Corporate	18,062	12,070	6,853		-	-		155	-		155		320	-		18,537		1,785		20,322		333	-
Personal	18,452	3,528	1,891		-	-		-	-		-		-	-		18,452		553		19,005		-	-
	37,279	15,598	8,744		335	(17)		341	34		642		1,531	225		39,677		2,997		42,674		13,957	8,190
31 December 2012
Government	42	-	-		127	(23)		79	56		150		2	-		194		2		196		6	-
Central bank	73	-	-		-	-		-	-		-		-	-		73		-		73		-	-
Other banks	98	-	-		191	(6)		18	1		208		695	476		1,477		-		1,477		15,258	3,547
Other FI	532	-	-		46	-		325	2		369		583	103		1,587		601		2,188		1,365	4,121
Corporate	17,921	11,058	6,226		60	-		-	-		60		411	-		18,392		1,840		20,232		436	326
Personal	17,893	3,286	1,686		-	-		-	-		-		1	-		17,894		515		18,409		1	-
	36,559	14,344	7,912		424	(29)		422	59		787		1,692	579		39,617		2,958		42,575		17,066	7,994

Appendix 5 Country risk (continued)

Eurozone periphery by country: Ireland (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	2,599	2,607		38	(78)		2,486	2,525		72	(71)
Other banks	1	1		-	-		43	32		1	(2)
Other FI	343	279		5	(14)		759	677		21	(33)
Corporate	174	113		(9)	9		236	165		(17)	17
	3,117	3,000		34	(83)		3,524	3,399		77	(89)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	211	-		1,443	23		14	-		-	-		1,668	23
Other FI	465	12		848	(6)		136	5		-	-		1,449	11
	676	12		2,291	17		150	5		-	-		3,117	34
31 December 2012
Banks	214	6		1,461	41		32	(1)		-	-		1,707	46
Other FI	528	16		970	7		319	8		-	-		1,817	31
	742	22		2,431	48		351	7		-	-		3,524	77

Appendix 5 Country risk (continued)

Eurozone periphery by country: Ireland (continued)

Key points*

·	Ulster Bank Group's (UBG) Irish exposure comprises personal lending (largely mortgages) and corporate lending and commitments, as well as some lending to financial institutions (refer to the UBG section on page 52 of Appendix 3 for further details). International Banking also has lending and commitments, and Markets has derivatives and repo exposure to financial institutions and large international clients with funding subsidiaries based in Ireland.
·	Total exposure remained broadly unchanged at £42.7 billion, with some increase in personal lending driven by currency movements offset by small decreases in repos, derivatives and debt securities. Risk elements in lending and provisions increased by £1.3 billion and £0.8 billion, respectively with most of it relating to corporate lending.

·	Government and central bank
	Exposure to the central bank fluctuates and is driven by regulatory requirements and deposits of excess liquidity.

·	Financial institutions
	Markets, International Banking and UBG together account for the large majority of the Group's exposure to financial institutions. The main categories are derivatives and repos, where exposure is significantly affected by market movements but much of it is collateralised.
	Repo exposure to banks declined by £0.4 billion as one large position matured.

·	Corporate
	Lending increased slightly to £18.1 billion but was down on a constant currency basis. Commercial real estate lending amounted to £10.7 billion at 30 June 2013 (nearly all in UBG; £7.9 billion of this was in Non-Core), up £0.2 billion due to exchange rate movements. On a constant currency basis, the exposures decreased due to recoveries and write-offs in UBG. Commercial real estate lending included REIL of £8.7 billion, 56% of which were covered by provisions.

·	Personal
	Overall lending increased by £0.6 billion, but declined on a constant currency basis as a result of amortisation. Residential mortgage loans amounted to £17.5 billion at 30 June 2013, including REIL of £3.3 billion with loan provisions of £1.7 billion. The housing market continued to suffer from weak domestic demand, although house prices stabilised at approximately 50% below their 2007 peak.

·	Non-Core (included above)
	Non-Core lending was £9.6 billion at 30 June 2013, slightly up due to foreign exchange movements and with adverse market conditions still hampering the sale of assets. The lending portfolio largely consisted of exposures to commercial real estate (83%), retail (4%) and leisure (4%).

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone periphery by country: Spain

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		44	(5)		973	432		585		9	-		594		11		605		34	-
Other banks	15	-	-		3,532	(377)		42	94		3,480		1,026	-		4,521		40		4,561		4,244	3,627
Other FI	6	-	-		1,820	(376)		78	68		1,830		17	-		1,853		50		1,903		43	-
Corporate	3,918	652	353		-	-		47	-		47		374	-		4,339		1,624		5,963		388	-
Personal	341	62	29		-	-		-	-		-		-	-		341		57		398		-	-
	4,280	714	382		5,396	(758)		1,140	594		5,942		1,426	-		11,648		1,782		13,430		4,709	3,627
31 December 2012
Government	-	-	-		37	(10)		786	403		420		18	-		438		14		452		56	-
Central bank	6	-	-		-	-		-	-		-		-	-		6		-		6		-	-
Other banks	1	-	-		3,169	(634)		100	76		3,193		1,254	-		4,448		42		4,490		5,116	610
Other FI	59	-	-		1,661	(540)		96	18		1,739		26	-		1,824		139		1,963		50	-
Corporate	4,260	601	246		4	-		36	18		22		456	-		4,738		1,373		6,111		472	-
Personal	340	61	27		-	-		-	-		-		-	-		340		56		396		-	-
	4,666	662	273		4,871	(1,184)		1,018	515		5,374		1,754	-		11,794		1,624		13,418		5,694	610

Appendix 5 Country risk (continued)

Eurozone periphery by country: Spain (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	6,702	6,709		430	(450)		5,934	5,905		361	(359)
Other banks	291	249		5	(2)		1,583	1,609		34	(30)
Other FI	812	715		31	(14)		1,209	1,061		47	(28)
Corporate	680	426		12	(7)		2,263	2,011		7	(4)
	8,485	8,099		478	(473)		10,989	10,586		449	(421)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	583	32		3,191	210		978	51		-	-		4,752	293
Other FI	1,165	55		2,266	125		210	5		92	-		3,733	185
	1,748	87		5,457	335		1,188	56		92	-		8,485	478
31 December 2012
Banks	646	27		3,648	168		1,409	65		-	-		5,703	260
Other FI	2,335	72		2,539	109		324	8		88	-		5,286	189
	2,981	99		6,187	277		1,733	73		88	-		10,989	449

Appendix 5 Country risk (continued)

Eurozone periphery by country: Spain (continued)

Key points*

·	Exposure to Spain is driven by corporate lending in International Banking, derivative position with large banks in Markets and a sizeable AFS mortgage-backed (largely covered bond) portfolio held within the liquidity portfolio managed by Group Treasury.
·	Group exposure was stable at £13.4 billion, with some reductions in corporate lending and in derivatives exposure to banks alongside an increase in AFS debt securities issued by banks.

·	Government and central bank
	The Group has a trading portfolio of Spanish government debt and CDS exposures that can result in fluctuations between long and short positions for HFT debt securities.

·	Financial institutions
	The Group's largest exposure was the AFS securities (mainly the covered bond portfolio) with a fair value of £5.4 billion at 30 June 2013 - an increase of £0.5 billion due to improving market sentiment for Spanish bonds and the resulting narrowing of spreads and higher prices. The Group monitors the situation closely with periodic stress analyses.
	Derivatives exposure, mostly to Spanish international banks and a few of the large regional banks, and mostly collateralised, decreased by £0.2 billion to £1.0 billion at 30 June 2013, in part as a result of the sale of European CDS positions. Gross repos with large Spanish banks increased by £3.0 billion while net repo exposure remained at nil.
	Lending to non-bank financial institutions decreased to de minimis levels, the result of active risk management.

·	Corporate
	Lending decreased by £0.3 billion to £3.9 billion during H1 2013, due to reductions across a range of sectors. Commercial real estate lending increased slightly as a result of exchange rate movements, to £1.8 billion at 30 June 2013, practically all in Non-Core. The majority of REIL and loan provisions related to commercial real estate lending.

·	Non-Core (included above)
	At 30 June 2013, Non-Core had lending to Spain of £2.7 billion, unchanged since 31 December 2012 due to the euro appreciation and with adverse market conditions preventing the sale of assets. Commercial real estate (65%), construction (14%) and electricity (9%) sectors accounted for the majority of the lending.

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone periphery by country: Italy

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		430	(66)		3,396	2,378		1,448		73	-		1,521		-		1,521		81	-
Central bank	22	-	-		-	-		-	-		-		-	-		22		-		22		-	431
Other banks	148	-	-		-	-		22	67		(45)		1,434	-		1,537		41		1,578		7,495	-
Other FI	256	-	-		163	-		37	71		129		113	-		498		497		995		114	-
Corporate	1,298	56	14		35	-		55	-		90		513	-		1,901		1,590		3,491		780	-
Personal	24	-	-		-	-		-	-		-		-	-		24		13		37		-	-
	1,748	56	14		628	(66)		3,510	2,516		1,622		2,133	-		5,503		2,141		7,644		8,470	431
31 December 2012
Government	9	-	-		408	(81)		2,781	2,224		965		80	-		1,054		-		1,054		131	-
Central bank	21	-	-		-	-		-	-		-		-	-		21		-		21		-	-
Other banks	200	-	-		125	(8)		42	54		113		1,454	-		1,767		33		1,800		8,428	3
Other FI	218	-	-		357	(1)		23	1		379		99	-		696		671		1,367		100	-
Corporate	1,392	34	5		87	2		85	22		150		664	-		2,206		1,900		4,106		938	-
Personal	23	-	-		-	-		-	-		-		-	-		23		12		35		-	-
	1,863	34	5		977	(88)		2,931	2,301		1,607		2,297	-		5,767		2,616		8,383		9,597	3

Appendix 5 Country risk (continued)

Eurozone periphery by country: Italy (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	15,824	15,622		1,024	(1,199)		13,181	13,034		717	(754)
Other banks	1,299	1,280		84	(74)		3,537	3,488		163	(139)
Other FI	170	152		4	(3)		616	607		8	(5)
Corporate	848	520		11	(8)		2,580	2,295		28	(20)
	18,141	17,574		1,123	(1,284)		19,914	19,424		916	(918)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	2,127	134		8,350	576		3,055	79		-	-		13,532	789
Other FI	1,049	78		3,381	253		62	3		117	-		4,609	334
	3,176	212		11,731	829		3,117	82		117	-		18,141	1,123
31 December 2012
Banks	2,113	81		7,755	432		3,252	105		-	-		13,120	618
Other FI	2,120	96		4,344	194		218	8		112	-		6,794	298
	4,233	177		12,099	626		3,470	113		112	-		19,914	916

Appendix 5 Country risk (continued)

Eurozone periphery by country: Italy (continued)

Key points*

·	Exposure to Italy is driven by active trading and derivatives exposure in Markets and corporate lending in International Banking.
e
·	The Group continued to reduce and mitigate its risk through strategic exits where appropriate and through increased collateral requirements. Exposure decreased by £0.7 billion, largely in off-balance sheet exposure to corporates and non-bank financial institutions

·	Government and central bank
	The Group is a market-maker in Italian government bonds with large and fluctuating gross long and short positions in HFT debt securities and an active CDS portfolio. An increase in the net long HFT position in government bonds of £0.5 billion during H1 2013 reflecting yield related net acquisitions was partly matched by an increase in the net bought CDS protection of £0.2 billion.

·	Financial institutions
	The majority of the Group's exposure is to the top five banks. The Group's product offering consists largely of collateralised trading products and, to a lesser extent, short-term uncommitted lending lines for liquidity purposes. Risk is mitigated by fully collateralised facilities.
	The AFS bond exposure to financial institutions was reduced by £0.3 billion due to sales during H1 2013.

·	Corporate
	Lending exposure declined slightly by £0.1 billion during H1 2013, to £1.3 billion. Off-balance sheet exposure decreased £0.3 billion, primarily in the electricity sector.

·	Non-Core (included above)
	Non-Core lending was £0.9 billion at 30 June 2013, slightly down from 31 December 2012. The remaining lending was mainly to the commercial real estate (30%), leisure (20%) and electricity (17%) sectors.

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone periphery by country: Portugal

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		77	(16)		24	17		84		18	-		102		-		102		18	-
Other banks	-	-	-		70	(8)		19	2		87		308	-		395		-		395		393	694
Other FI	-	-	-		1	-		20	15		6		44	-		50		3		53		44	-
Corporate	261	212	149		43	-		15	-		58		67	-		386		214		600		71	-
Personal	6	-	-		-	-		-	-		-		-	-		6		8		14		-	-
	267	212	149		191	(24)		78	34		235		437	-		939		225		1,164		526	694
31 December 2012
Government	-	-	-		72	(18)		28	15		85		17	-		102		-		102		17	-
Other banks	-	-	-		66	(12)		5	-		71		380	-		451		-		451		481	26
Other FI	-	-	-		1	-		21	11		11		38	-		49		3		52		38	-
Corporate	336	253	188		41	-		7	-		48		79	-		463		247		710		82	-
Personal	7	-	-		-	-		-	-		-		-	-		7		8		15		-	-
	343	253	188		180	(30)		61	26		215		514	-		1,072		258		1,330		618	26

Appendix 5 Country risk (continued)

Eurozone periphery by country: Portugal (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	3,651	3,545		297	(331)		3,182	3,134		302	(275)
Other banks	254	229		8	(3)		856	863		31	(30)
Other FI	8	5		-	(1)		8	5		-	(1)
Corporate	447	381		7	(8)		426	353		3	(7)
	4,360	4,160		312	(343)		4,472	4,355		336	(313)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	542	39		1,842	109		363	36		-	-		2,747	184
Other FI	527	37		1,040	92		12	(1)		34	-		1,613	128
	1,069	76		2,882	201		375	35		34	-		4,360	312
31 December 2012
Banks	480	34		1,805	133		460	45		-	-		2,745	212
Other FI	534	38		1,126	88		35	(2)		32	-		1,727	124
	1,014	72		2,931	221		495	43		32	-		4,472	336

Appendix 5 Country risk (continued)

Eurozone periphery by country: Portugal (continued)

Key points*

·	The Portuguese portfolio, managed from Spain, mainly consists of corporate lending and derivatives trading with the largest local banks. In line with the Group's de-risking strategy, there is no medium-term activity, with the exception of collateralised business.
·	Group exposure declined further during H1 2013 to £1.2 billion, a reduction of £0.2 billion mostly in lending, derivatives and off-balance sheet exposure. Net bought CDS protection increased to £0.2 billion as a result of ongoing management of positions arising from flow trading.

·	Government and central bank
	The Group's exposure to the Portuguese government at 30 June 2013 was unchanged at £0.1 billion, comprising a small AFS debt securities position and very small derivatives and net long HFT positions.

·	Financial institutions
	The remaining exposure was largely focused on the top four systemically important banks. Exposures generally consisted of collateralised trading products.

·	Corporate
	Lending to the telecoms sector and off-balance sheet exposure to the oil and gas sector decreased to almost nil in H1 2013. The largest remaining exposure was to the land, transport & logistics and electricity sectors, focusing on a few large, highly creditworthy clients.

·	Non-Core (included above)
	Non-Core lending to Portugal remained unchanged during H1 2013, at £0.3 billion. The remaining portfolio largely comprised lending to the land, transport & logistics (41%) and electricity (37%) sectors.

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone periphery by country: Greece

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		-	-		-	-		-		8	-		8		-		8		136	-
Other banks	-	-	-		-	-		-	-		-		279	-		279		-		279		370	-
Other FI	1	-	-		-	-		-	-		-		-	-		1		-		1		-	-
Corporate	199	31	21		-	-		-	-		-		38	-		237		18		255		38	-
Personal	13	-	-		-	-		-	-		-		-	-		13		10		23		-	-
	213	31	21		-	-		-	-		-		325	-		538		28		566		544	-
31 December 2012
Government	-	-	-		-	-		9	-		9		17	-		26		-		26		151	-
Central bank	7	-	-		-	-		-	-		-		-	-		7		-		7		-	-
Other banks	-	-	-		-	-		-	-		-		299	-		299		-		299		411	-
Other FI	1	-	-		-	-		-	8		(8)		-	-		(7)		-		(7)		-	-
Corporate	179	38	38		-	-		-	-		-		44	-		223		18		241		61	-
Personal	14	-	-		-	-		-	-		-		-	-		14		9		23		-	-
	201	38	38		-	-		9	8		1		360	-		562		27		589		623	-

Appendix 5 Country risk (continued)

Eurozone periphery by country: Greece (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Other banks	3	3		1	(1)		4	4		1	(1)
Corporate	257	260		16	(17)		319	317		31	(33)
	260	263		17	(18)		323	321		32	(34)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	36	3		39	3		-	-		-	-		75	6
Other FI	117	10		33	1		-	-		35	-		185	11
	153	13		72	4		-	-		35	-		260	17
31 December 2012
Banks	64	5		54	6		-	-		-	-		118	11
Other FI	130	18		42	3		-	-		33	-		205	21
	194	23		96	9		-	-		33	-		323	32

Appendix 5 Country risk (continued)

Eurozone periphery by country: Greece (continued)

Key points*

·

The Group's exposure to Greece is managed in line with the Group's de-risking strategy. The remaining Greek exposure at 30 June 2013 was £0.6 billion. The majority of this was derivative exposure to banks (itself in part collateralised). The rest was mostly corporate lending, including exposure to local subsidiaries of international companies.

·	Government and central bank
	The small HFT position was reduced to nil. The only remaining exposure is a small legacy derivatives exposure to the government of Greece.

·	Financial institutions
	Activity with Greek financial institutions was largely collateralised derivatives exposure, and remained under close scrutiny.

·	Corporate
	Lending exposure was stable at £0.2 billion. The Group's focus was on short-term trade facilities extended to the domestic subsidiaries of international clients, increasingly supported by parental guarantees.

·	Non-Core (included above)
	Non-Core lending to Greece was stable at less than £0.1 billion. The remaining lending portfolio primarily consisted of the following sectors: commercial real estate (51%), construction (32%) and other services (12%).

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone periphery by country: Cyprus

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		-	-		1	-		1		-	-		1		-		1		-	-
Other banks	-	-	-		-	-		-	-		-		10	-		10		-		10		10	-
Other FI	-	-	-		-	-		-	-		-		-	-		-		-		-		30	36
Corporate	270	158	56		-	-		3	3		-		20	-		290		43		333		20	-
Personal	13	-	-		-	-		-	-		-		-	-		13		11		24		-	-
	283	158	56		-	-		4	3		1		30	-		314		54		368		60	36
31 December 2012
Government	-	-	-		-	-		3	-		3		-	-		3		-		3		-	-
Other banks	-	-	-		-	-		-	-		-		11	-		11		-		11		12	-
Other FI	2	-	-		-	-		1	-		1		-	-		3		-		3		4	15
Corporate	274	162	54		-	-		-	-		-		24	-		298		36		334		38	-
Personal	15	-	-		-	-		-	-		-		-	-		15		11		26		-	-
	291	162	54		-	-		4	-		4		35	-		330		47		377		54	15

Appendix 5 Country risk (continued)

Eurozone non-periphery

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	619	-	-		9,180	139		14,490	6,441		17,229		1,508	-		19,356		35		19,391		4,329	492
Central bank	13,148	-	-		-	-		-	-		-		23	-		13,171		-		13,171		25	4,907
Other banks	4,679	-	-		637	224		773	525		885		17,701	1,228		24,493		4,312		28,805		94,402	25,597
Other FI	2,878	-	-		7,124	(490)		590	198		7,516		7,007	730		18,131		5,534		23,665		12,712	16,243
Corporate	12,975	1,769	573		46	-		251	74		223		1,464	23		14,685		23,134		37,819		2,320	665
Personal	216	22	19		-	-		-	-		-		-	-		216		133		349		-	-
	34,515	1,791	592		16,987	(127)		16,104	7,238		25,853		27,703	1,981		90,052		33,148		123,200		113,788	47,904
31 December 2012
Government	627	-	-		10,843	399		13,744	5,771		18,816		1,663	-		21,106		767		21,873		4,946	-
Central bank	21,862	-	-		-	-		-	-		-		35	-		21,897		-		21,897		36	4,648
Other banks	3,958	-	-		2,037	151		856	480		2,413		21,863	685		28,919		4,325		33,244		118,828	24,493
Other FI	3,425	-	-		7,302	(540)		795	102		7,995		6,849	624		18,893		4,123		23,016		13,498	11,988
Corporate	12,989	2,107	694		602	31		183	75		710		1,916	24		15,639		23,647		39,286		2,918	406
Personal	220	4	20		-	-		-	-		-		-	-		220		132		352		-	-
	43,081	2,111	714		20,784	41		15,578	6,428		29,934		32,326	1,333		106,674		32,994		139,668		140,226	41,535

Appendix 5 Country risk (continued)

Eurozone non-periphery (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	17,132	15,738		107	(7)		15,369	13,980		(45)	54
Other banks	4,187	3,930		39	(24)		7,226	7,018		36	(15)
Other FI	4,338	3,523		109	(98)		8,423	7,354		28	(25)
Corporate	11,849	10,032		(258)	264		33,815	30,710		(507)	512
	37,506	33,223		(3)	135		64,833	59,062		(488)	526

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	3,323	37		14,557	(28)		1,333	55		-	-		19,213	64
Other FI	7,461	(22)		8,818	(23)		1,314	(24)		700	2		18,293	(67)
	10,784	15		23,375	(51)		2,647	31		700	2		37,506	(3)
31 December 2012
Banks	5,311	(27)		20,137	(183)		2,903	(10)		-	-		28,351	(200)
Other FI	18,265	(152)		14,335	(82)		3,215	(39)		667	5		36,482	(268)
	23,576	(179)		34,472	(265)		6,118	(49)		667	5		64,833	(488)

Appendix 5 Country risk (continued)

Eurozone non-periphery (continued)

Key points*

·	The Group holds a major diversified portfolio in eurozone non-periphery countries with significant exposures to financial institutions and corporates, notably in Germany, the Netherlands and France, and as part of the Group's liquidity portfolio, significant exposure to the German central bank.
·	Exposure decreased during H1 2013, particularly in liquidity held with the Bundesbank and in derivatives positions with banks in most countries. In line with exposure reductions, net bought CDS protection referencing entities in eurozone non-periphery countries declined by £1.6 billion.

·	Government and central bank
	The Group held significant short-term surplus liquidity with central banks because of credit risk and capital considerations, and limited alternative investment opportunities. This exposure also fluctuates as part of the Group's asset and liability management. Germany: AFS government bond positions decreased by £1.3 billion largely in line with liquidity portfolio management strategies. The net long HFT position in German government bonds in Markets increased by £1.5 billion, driven by market opportunities. France: the net long HFT position in Markets declined in H1 2013 by £1.4 billion, as part of normal flow trading activity in the rates business.

·	Financial institutions
	The sale of a significant part of the European CDS positions by Markets in Q2 resulted in major reductions in gross derivatives and some reductions in net derivatives to CDS counterparties - banks and other financial institutions - in Germany, France, the Netherlands and, to a lesser degree, Belgium and other eurozone countries. France: lending to banks increased by £0.5 billion in H1 2013, largely as a result of transaction with a large bank. Luxembourg: repo exposure, mostly to funds, increased by £0.4 billion and lending to financial services companies increased by £0.3 billion in the same period.

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone non-periphery (continued)

Key points* (continued)

·	Corporate
	Germany: lending to corporate clients fell by £0.4 billion, as a result of reductions in the oil and gas and media sectors. Netherlands: lending to corporate clients increased by £0.5 billion, in the construction and electricity sectors. Off-balance sheet exposure decreased in telecommunications sector by £0.3 billion. Luxembourg: off-balance sheet exposure to corporate clients increased by £0.5 billion due to increase in the land, transport & logistics, automotive and food & consumer sectors.

·	Non-Core lending (included above)
	Germany: exposure decreased slightly to £2.7 billion at 30 June 2013. Most of the lending was in the commercial real estate (65%) and leisure (15%) sectors. Netherlands: Non-Core lending decreased slightly to £1.9 billion. Most of the lending was in the commercial real estate (58%) and securitisations (19%) sectors. France: exposure was £1.4 billion at 30 June 2013, a decline of £0.2 billion and mainly comprised public sector (35%), commercial real estate (24%) and construction (16%) exposures.

*Not within the scope of Deloitte LLP's review report

Appendix 5 Country risk (continued)

Eurozone non-periphery: Germany

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		6,768	218		7,255	2,244		11,779		537	-		12,316		-		12,316		1,487	-
Central bank	10,643	-	-		-	-		-	-		-		-	-		10,643		-		10,643		-	-
Other banks	633	-	-		109	-		350	370		89		4,665	425		5,812		83		5,895		39,844	6,063
Other FI	167	-	-		379	(18)		77	45		411		3,041	230		3,849		1,933		5,782		3,609	5,406
Corporate	3,395	476	180		-	-		16	-		16		262	23		3,696		5,135		8,831		486	494
Personal	81	1	-		-	-		-	-		-		-	-		81		25		106		-	-
	14,919	477	180		7,256	200		7,698	2,659		12,295		8,505	678		36,397		7,176		43,573		45,426	11,963
31 December 2012
Government	-	-	-		8,103	453		5,070	1,592		11,581		533	-		12,114		735		12,849		1,656	-
Central bank	20,018	-	-		-	-		-	-		-		-	-		20,018		-		20,018		-	-
Other banks	660	-	-		668	10		280	332		616		5,558	183		7,017		139		7,156		50,998	4,935
Other FI	460	-	-		285	(23)		95	30		350		3,046	116		3,972		933		4,905		3,911	3,066
Corporate	3,756	460	152		207	14		11	2		216		339	24		4,335		5,462		9,797		637	406
Personal	83	1	-		-	-		-	-		-		-	-		83		25		108		-	-
	24,977	461	152		9,263	454		5,456	1,956		12,763		9,476	323		47,539		7,294		54,833		57,202	8,407

Appendix 5 Country risk (continued)

Eurozone non-periphery: Germany (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	4,808	4,658		5	9		4,288	4,191		4	-
Other banks	966	809		9	(9)		2,849	2,696		13	(11)
Other FI	851	640		(3)	3		2,385	2,172		(16)	18
Corporate	2,940	2,496		(120)	110		10,526	9,644		(257)	261
	9,565	8,603		(109)	113		20,048	18,703		(256)	268

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	1,032	(9)		3,759	(32)		340	(4)		-	-		5,131	(45)
Other FI	1,467	(29)		2,470	(25)		497	(10)		-	-		4,434	(64)
	2,499	(38)		6,229	(57)		837	(14)		-	-		9,565	(109)
31 December 2012
Banks	1,968	(22)		6,263	(87)		940	(7)		-	-		9,171	(116)
Other FI	5,047	(70)		5,103	(55)		727	(15)		-	-		10,877	(140)
	7,015	(92)		11,366	(142)		1,667	(22)		-	-		20,048	(256)

Appendix 5 Country risk (continued)

Eurozone non-periphery: Netherlands

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	18	-	-		986	31		1,469	923		1,532		32	-		1,582		29		1,611		1,350	-
Central bank	2,488	-	-		-	-		-	-		-		-	-		2,488		-		2,488		-	4,789
Other banks	789	-	-		222	223		182	94		310		5,273	177		6,549		3,576		10,125		12,396	1,780
Other FI	1,360	-	-		5,921	(467)		191	54		6,058		1,813	3		9,234		1,329		10,563		4,353	260
Corporate	4,229	512	159		19	-		67	8		78		356	-		4,663		6,187		10,850		559	-
Personal	21	-	-		-	-		-	-		-		-	-		21		12		33		-	-
	8,905	512	159		7,148	(213)		1,909	1,079		7,978		7,474	180		24,537		11,133		35,670		18,658	6,829
31 December 2012
Government	7	-	-		1,052	57		1,248	993		1,307		36	-		1,350		29		1,379		1,662	-
Central bank	1,822	-	-		-	-		-	-		-		2	-		1,824		-		1,824		2	4,648
Other banks	496	-	-		575	136		252	86		741		6,667	309		8,213		3,471		11,684		16,558	3,074
Other FI	1,785	-	-		6,107	(508)		242	17		6,332		1,908	45		10,070		1,311		11,381		5,087	2,335
Corporate	3,720	508	156		66	2		29	28		67		476	-		4,263		6,650		10,913		648	-
Personal	26	-	-		-	-		-	-		-		-	-		26		12		38		-	-
	7,856	508	156		7,800	(313)		1,771	1,124		8,447		9,089	354		25,746		11,473		37,219		23,957	10,057

Appendix 5 Country risk (continued)

Eurozone non-periphery: Netherlands (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	1,497	1,369		41	(20)		1,352	1,227		(12)	11
Other banks	259	244		2	(1)		659	695		(1)	2
Other FI	1,759	1,615		26	(24)		3,080	2,799		20	(23)
Corporate	3,024	2,263		(43)	47		7,943	6,852		(93)	87
	6,539	5,491		26	2		13,034	11,573		(86)	77

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	357	-		2,111	3		180	24		-	-		2,648	27
Other FI	1,991	(10)		957	12		243	(5)		700	2		3,891	(1)
	2,348	(10)		3,068	15		423	19		700	2		6,539	26
31 December 2012
Banks	763	(17)		3,112	(32)		539	(3)		-	-		4,414	(52)
Other FI	4,990	(33)		2,046	7		917	(13)		667	5		8,620	(34)
	5,753	(50)		5,158	(25)		1,456	(16)		667	5		13,034	(86)

Appendix 5 Country risk (continued)

Eurozone non-periphery: France

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	496	-	-		647	(39)		4,037	2,279		2,405		320	-		3,221		6		3,227		432	492
Other banks	3,037	-	-		257	1		121	49		329		4,396	342		8,104		496		8,600		34,820	13,102
Other FI	112	-	-		676	(1)		268	81		863		818	154		1,947		1,479		3,426		1,639	5,947
Corporate	2,260	347	141		-	-		136	57		79		598	-		2,937		7,572		10,509		925	-
Personal	75	-	-		-	-		-	-		-		-	-		75		76		151		-	-
	5,980	347	141		1,580	(39)		4,562	2,466		3,676		6,132	496		16,284		9,629		25,913		37,816	19,541
31 December 2012
Government	494	-	-		537	(41)		5,186	2,064		3,659		257	-		4,410		3		4,413		270	-
Central bank	9	-	-		-	-		-	-		-		-	-		9		-		9		-	-
Other banks	2,498	-	-		730	5		184	27		887		5,608	58		9,051		591		9,642		41,782	11,581
Other FI	124	-	-		757	(4)		252	51		958		833	392		2,307		1,106		3,413		1,721	2,743
Corporate	2,426	116	71		218	16		116	15		319		724	-		3,469		7,685		11,154		1,147	-
Personal	71	-	-		-	-		-	-		-		-	-		71		75		146		-	-
	5,622	116	71		2,242	(24)		5,738	2,157		5,823		7,422	450		19,317		9,460		28,777		44,920	14,324

Appendix 5 Country risk (continued)

Eurozone non-periphery: France (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	5,319	4,547		112	(77)		4,989	4,095		76	(66)
Other banks	2,849	2,757		27	(13)		3,443	3,337		23	(5)
Other FI	1,076	656		(7)	6		1,789	1,374		(8)	9
Corporate	3,898	3,482		(41)	51		11,435	10,618		(106)	112
	13,142	11,442		91	(33)		21,656	19,424		(15)	50

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	1,211	20		5,199	29		527	21		-	-		6,937	70
Other FI	2,781	17		3,030	4		394	-		-	-		6,205	21
	3,992	37		8,229	33		921	21		-	-		13,142	91
31 December 2012
Banks	1,779	14		7,102	(15)		921	6		-	-		9,802	5
Other FI	5,995	(12)		4,798	(5)		1,061	(3)		-	-		11,854	(20)
	7,774	2		11,900	(20)		1,982	3		-	-		21,656	(15)

Appendix 5 Country risk (continued)

Eurozone non-periphery: Luxembourg

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Central bank	17	-	-		-	-		-	-		-		-	-		17		-		17		-	-
Other banks	95	-	-		-	-		29	(1)		30		374	213		712		3		715		532	3,085
Other FI	973	-	-		40	-		39	15		64		1,035	329		2,401		726		3,127		2,324	3,060
Corporate	1,717	389	73		-	-		25	8		17		103	-		1,837		1,986		3,823		104	-
Personal	3	-	-		-	-		-	-		-		-	-		3		2		5		-	-
	2,805	389	73		40	-		93	22		111		1,512	542		4,970		2,717		7,687		2,960	6,145
31 December 2012
Government	13	-	-		-	-		-	-		-		-	-		13		-		13		-	-
Other banks	99	-	-		8	-		8	6		10		485	77		671		-		671		650	2,215
Other FI	717	-	-		51	(1)		198	4		245		821	68		1,851		719		2,570		2,343	2,951
Corporate	1,817	940	287		-	-		19	23		(4)		156	-		1,969		1,469		3,438		164	-
Personal	4	-	-		-	-		-	-		-		-	-		4		2		6		-	-
	2,650	940	287		59	(1)		225	33		251		1,462	145		4,508		2,190		6,698		3,157	5,166

Appendix 5 Country risk (continued)

Eurozone non-periphery: Luxembourg (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Other FI	652	612		93	(83)		1,169	1,009		32	(29)
Corporate	764	670		(27)	26		1,388	1,238		(9)	10
	1,416	1,282		66	(57)		2,557	2,247		23	(19)

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	39	9		437	31		16	(1)		-	-		492	39
Other FI	656	9		156	24		112	(6)		-	-		924	27
	695	18		593	55		128	(7)		-	-		1,416	66
31 December 2012
Banks	96	4		611	23		63	(1)		-	-		770	26
Other FI	1,111	(12)		361	12		315	(3)		-	-		1,787	(3)
	1,207	(8)		972	35		378	(4)		-	-		2,557	23

Appendix 5 Country risk (continued)

Eurozone non-periphery: Belgium

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	-	-	-		448	(48)		998	515		931		87	-		1,018		-		1,018		326	-
Central bank	-	-	-		-	-		-	-		-		1	-		1		-		1		1	-
Other banks	98	-	-		-	-		-	7		(7)		2,265	57		2,413		6		2,419		3,228	1,169
Other FI	220	-	-		-	-		2	3		(1)		280	-		499		41		540		311	428
Corporate	635	9	8		-	-		5	-		5		124	-		764		1,261		2,025		218	171
Personal	19	21	19		-	-		-	-		-		-	-		19		8		27		-	-
	972	30	27		448	(48)		1,005	525		928		2,757	57		4,714		1,316		6,030		4,084	1,768
31 December 2012
Government	-	-	-		828	(44)		1,269	711		1,386		103	-		1,489		-		1,489		404	-
Other banks	186	-	-		2	-		2	2		2		2,618	50		2,856		7		2,863		4,035	1,256
Other FI	249	-	-		-	-		-	-		-		239	-		488		30		518		252	-
Corporate	414	50	15		14	-		6	-		20		180	-		614		1,263		1,877		270	-
Personal	22	3	20		-	-		-	-		-		-	-		22		8		30		-	-
	871	53	35		844	(44)		1,277	713		1,408		3,140	50		5,469		1,308		6,777		4,961	1,256

Appendix 5 Country risk (continued)

Eurozone non-periphery: Belgium (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	2,106	1,883		(4)	11		1,890	1,674		(31)	29
Other banks	106	113		1	(1)		212	222		1	(1)
Corporate	100	81		-	-		301	276		(1)	1
	2,312	2,077		(3)	10		2,403	2,172		(31)	29

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	228	5		1,175	(14)		143	11		-	-		1,546	2
Other FI	93	-		666	(5)		7	-		-	-		766	(5)
	321	5		1,841	(19)		150	11		-	-		2,312	(3)
31 December 2012
Banks	244	(2)		1,156	(17)		281	(3)		-	-		1,681	(22)
Other FI	178	-		505	(9)		39	-		-	-		722	(9)
	422	(2)		1,661	(26)		320	(3)		-	-		2,403	(31)

Appendix 5 Country risk (continued)

 Eurozone non-periphery: Other⁽¹⁾

	Lending	REIL	Provisions		AFS and  LAR debt  securities	AFS  reserves		HFT debt securities			Total debt  securities		Net			Balance  sheet		Off-balance   sheet		Total		Gross
								Long	Short				Derivatives	Repos								Derivatives	Repos
30 June 2013	£m	£m	£m		£m	£m		£m	£m		£m		£m	£m		£m		£m		£m		£m	£m
Government	105	-	-		331	(23)		731	480		582		532	-		1,219		-		1,219		734	-
Central bank	-	-	-		-	-		-	-		-		22	-		22		-		22		24	118
Other banks	27	-	-		49	-		91	6		134		728	14		903		148		1,051		3,582	398
Other FI	46	-	-		108	(4)		13	-		121		20	14		201		26		227		476	1,142
Corporate	739	36	12		27	-		2	1		28		21	-		788		993		1,781		28	-
Personal	17	-	-		-	-		-	-		-		-	-		17		10		27		-	-
	934	36	12		515	(27)		837	487		865		1,323	28		3,150		1,177		4,327		4,844	1,658
31 December 2012
Government	126	-	-		323	(26)		971	411		883		734	-		1,743		-		1,743		954	-
Central bank	-	-	-		-	-		-	-		-		33	-		33		-		33		34	-
Other banks	19	-	-		54	-		130	27		157		927	8		1,111		117		1,228		4,805	1,432
Other FI	90	-	-		102	(4)		8	-		110		2	3		205		24		229		184	893
Corporate	856	33	13		97	(1)		2	7		92		41	-		989		1,118		2,107		52	-
Personal	14	-	-		-	-		-	-		-		-	-		14		10		24		-	-
	1,105	33	13		576	(31)		1,111	445		1,242		1,737	11		4,095		1,269		5,364		6,029	2,325

For the note to this table refer to the following page.

Appendix 5 Country risk (continued)

Eurozone non-periphery: Other⁽¹⁾ (continued)

	30 June 2013						31 December 2012
	Notional			Fair value			Notional			Fair value
	Bought	Sold		Bought	Sold		Bought	Sold		Bought	Sold
CDS by reference entity	£m	£m		£m	£m		£m	£m		£m	£m
Government	3,402	3,281		(47)	70		2,850	2,793		(82)	80
Other banks	7	7		-	-		63	68		-	-
Corporate	1,123	1,040		(27)	30		2,222	2,082		(41)	41
	4,532	4,328		(74)	100		5,135	4,943		(123)	121

CDS bought protection: counterparty analysis by internal asset quality band

	AQ1			AQ2-AQ3			AQ4-AQ9			AQ10			Total
	Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value		Notional	Fair value
30 June 2013	£m	£m		£m	£m		£m	£m		£m	£m		£m	£m
Banks	456	12		1,876	(45)		127	4		-	-		2,459	(29)
Other FI	473	(9)		1,539	(33)		61	(3)		-	-		2,073	(45)
	929	3		3,415	(78)		188	1		-	-		4,532	(74)
31 December 2012
Banks	461	(4)		1,893	(55)		159	(2)		-	-		2,513	(61)
Other FI	944	(25)		1,522	(32)		156	(5)		-	-		2,622	(62)
	1,405	(29)		3,415	(87)		315	(7)		-	-		5,135	(123)

Note:

(1)	Comprises Austria, Estonia, Finland, Malta, Slovakia and Slovenia.

Appendix 6

Income statement reconciliations

Appendix 6 Income statement reconciliations

	Half year ended
	30 June 2013				30 June 2012
	Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory
	£m	£m	£m		£m	£m	£m
Interest receivable	8,560	-	8,560		9,635	-	9,635
Interest payable	(3,118)	(5)	(3,123)		(3,805)	(10)	(3,815)
Net interest income	5,442	(5)	5,437		5,830	(10)	5,820
Fees and commissions receivable	2,708	-	2,708		2,935	-	2,935
Fees and commissions payable	(460)	-	(460)		(380)	-	(380)
Income from trading activities	1,890	174	2,064		2,193	(1,326)	867
Gain on redemption of own debt	-	191	191		-	577	577
Other operating income	1,028	304	1,332		1,107	(1,547)	(440)
Non-interest income	5,166	669	5,835		5,855	(2,296)	3,559
Total income	10,608	664	11,272		11,685	(2,306)	9,379
Staff costs	(3,585)	(142)	(3,727)		(4,116)	(429)	(4,545)
Premises and equipment	(1,079)	(25)	(1,104)		(1,062)	(28)	(1,090)
Other administrative expenses	(1,479)	(702)	(2,181)		(1,498)	(396)	(1,894)
Depreciation and amortisation	(637)	(99)	(736)		(757)	(126)	(883)
Operating expenses	(6,780)	(968)	(7,748)		(7,433)	(979)	(8,412)
Operating profit before impairment losses	3,828	(304)	3,524		4,252	(3,285)	967
Impairment losses	(2,150)	-	(2,150)		(2,649)	-	(2,649)
Operating profit/(loss)	1,678	(304)	1,374		1,603	(3,285)	(1,682)

Appendix 6 Income statement reconciliations (continued)

	Half year ended
	30 June 2013				30 June 2012
	Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory
	£m	£m	£m		£m	£m	£m
Operating profit/(loss)	1,678	(304)	1,374		1,603	(3,285)	(1,682)
Own credit adjustments (1)	376	(376)	-		(2,974)	2,974	-
Payment Protection Insurance costs	(185)	185	-		(260)	260	-
Interest Rate Hedging Products redress and related costs	(50)	50	-		-	-	-
Regulatory and legal actions	(385)	385	-		-	-	-
Integration and restructuring costs	(271)	271	-		(619)	619	-
Gain on redemption of own debt	191	(191)	-		577	(577)	-
Asset Protection Scheme (2)	-	-	-		(45)	45	-
Amortisation of purchased intangible assets	(79)	79	-		(99)	99	-
Strategic disposals	-	-	-		152	(152)	-
RFS Holdings minority interest	99	(99)	-		(17)	17	-
Profit/(loss) before tax	1,374	-	1,374		(1,682)	-	(1,682)
Tax charge	(678)	-	(678)		(399)	-	(399)
Profit/(loss) from continuing operations	696	-	696		(2,081)	-	(2,081)
Profit from discontinued operations, net of tax	138	-	138		106	-	106
Profit/(loss) for the period	834	-	834		(1,975)	-	(1,975)
Non-controlling interests	(117)	-	(117)		25	-	25
Preference share and other dividends	(182)	-	(182)		(82)	-	(82)
Profit/(loss) attributable to ordinary and B shareholders	535	-	535		(2,032)	-	(2,032)

Notes:

(1)	Reallocation (H1 2013 - £175 million gain; H1 2012 - £1,280 million loss) to income from trading activities and (H1 2013 - £201 million gain; H1 2012 - £1,694 million loss) to other operating income.
(2)	Reallocation to income from trading activities.

Appendix 6 Income statement reconciliations (continued)

	Quarter ended
	30 June 2013				31 March 2013				30 June 2012
	Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory
	£m	£m	£m		£m	£m	£m		£m	£m	£m
Interest receivable	4,281	-	4,281		4,279	-	4,279		4,701	-	4,701
Interest payable	(1,511)	(3)	(1,514)		(1,607)	(2)	(1,609)		(1,794)	(2)	(1,796)
Net interest income	2,770	(3)	2,767		2,672	(2)	2,670		2,907	(2)	2,905
Fees and commissions receivable	1,392	-	1,392		1,316	-	1,316		1,450	-	1,450
Fees and commissions payable	(250)	-	(250)		(210)	-	(210)		(201)	-	(201)
Income from trading activities	874	75	949		1,016	99	1,115		929	(274)	655
Gain/(loss) on redemption of own debt	-	242	242		-	(51)	(51)		-	-	-
Other operating income	661	59	720		367	245	612		435	(75)	360
Non-interest income	2,677	376	3,053		2,489	293	2,782		2,613	(349)	2,264
Total income	5,447	373	5,820		5,161	291	5,452		5,520	(351)	5,169
Staff costs	(1,764)	(76)	(1,840)		(1,821)	(66)	(1,887)		(1,945)	(92)	(2,037)
Premises and equipment	(526)	(22)	(548)		(553)	(3)	(556)		(511)	(17)	(528)
Other administrative expenses	(801)	(617)	(1,418)		(678)	(85)	(763)		(804)	(207)	(1,011)
Depreciation and amortisation	(308)	(41)	(349)		(329)	(58)	(387)		(374)	(52)	(426)
Operating expenses	(3,399)	(756)	(4,155)		(3,381)	(212)	(3,593)		(3,634)	(368)	(4,002)
Operating profit before impairment losses	2,048	(383)	1,665		1,780	79	1,859		1,886	(719)	1,167
Impairment losses	(1,117)	-	(1,117)		(1,033)	-	(1,033)		(1,335)	-	(1,335)
Operating profit/(loss)	931	(383)	548		747	79	826		551	(719)	(168)

Appendix 6 Income statement reconciliations (continued)

	Quarter ended
	30 June 2013				31 March 2013				30 June 2012
	Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory		Managed	One-off items  reallocation	Statutory
	£m	£m	£m		£m	£m	£m		£m	£m	£m
Operating profit/(loss)	931	(383)	548		747	79	826		551	(719)	(168)
Own credit adjustments (1)	127	(127)	-		249	(249)	-		(518)	518	-
Payment Protection Insurance costs	(185)	185	-		-	-	-		(135)	135	-
Interest Rate Hedging Products redress and related costs	-	-	-		(50)	50	-		-	-	-
Regulatory and legal actions	(385)	385	-		-	-	-		-	-	-
Integration and restructuring costs	(149)	149	-		(122)	122	-		(181)	181	-
Gain/(loss) on redemption of own debt	242	(242)	-		(51)	51	-		-	-	-
Asset Protection Scheme (2)	-	-	-		-	-	-		(2)	2	-
Amortisation of purchased intangible assets	(38)	38	-		(41)	41	-		(51)	51	-
Strategic disposals	6	(6)	-		(6)	6	-		160	(160)	-
RFS Holdings minority interest	(1)	1	-		100	(100)	-		8	(8)	-
Profit/(loss) before tax	548	-	548		826	-	826		(168)	-	(168)
Tax charge	(328)	-	(328)		(350)	-	(350)		(261)	-	(261)
Profit/(loss) for continuing operations	220	-	220		476	-	476		(429)	-	(429)
Profit from discontinued operations, net of tax	9	-	9		129	-	129		13	-	13
Profit/(loss) for the period	229	-	229		605	-	605		(416)	-	(416)
Non-controlling interests	14	-	14		(131)	-	(131)		11	-	11
Preference share and other dividends	(101)	-	(101)		(81)	-	(81)		(82)	-	(82)
Profit/(loss) attributable to ordinary and B shareholders	142	-	142		393	-	393		(487)	-	(487)

Notes:

(1)	Reallocation (Q2 2013 - £76 million gain; Q1 2013 - £99 million gain; Q2 2012 - £271 million loss) to income from trading activities and (Q2 2013 - £51 million gain; Q1 2013 - £150 million gain; Q2 2012 - £247 million loss) to other operating income.
(2)	Reallocation to income from trading activities.

 

END

 

 

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