Segmental Reporting Restatement Document

RNS Number : 5059W
Royal Bank of Scotland Group PLC
17 April 2019
 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segmental Reporting Restatement

Document

 

April 2019

 

 

 

 

 

 

 


The Royal Bank of Scotland Group plc

 

Overview of business re-segmentation

This announcement sets out changes to RBS's operating segments and consequent changes in results presentation. The announcement contains re-presented financial results for the year ended 31 December 2018 and, is presented to aid comparison of RBS's quarter ended 31 March 2019 results with prior periods. Re-presented financial information for the quarters ended 31 December 2018 and 31 March 2018 are included.

RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders. To support this, the following previously reported operating segments are now realigned, with comparatives re-presented:

 

·      Effective from 1 January 2019, Business Banking has been transferred from UK Personal and Business Banking (UK PBB) to Commercial Banking as the nature of the business, including distribution channels, products and customers, are more closely aligned to the Commercial Banking (CB) business. Concurrent with the transfer, UK PBB has been renamed to UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed  Personal & Ulster. The Commercial & Private Banking franchise has also been renamed to Commercial & Private.

 

RBS's results for the quarter ended 31 March 2019 will be announced on Friday 26 April 2019. These results will be reported on the new structure and reporting basis as described above.

 

In conjunction with this Segmental Reporting Restatement Document, a financial supplement showing re-presented financial information for the last nine quarters is available at www.rbs.com/results.   

 

Forward-looking statements

This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as RBSG's future economic results, business plans and current strategies.  In particular, this document includes forward-looking statements relating to RBSG in respect of, but not limited to: its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital and operational targets), its access to adequate sources of liquidity and funding, increasing competition from new incumbents and  disruptive technologies, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, LIBOR, EURIBOR and other benchmark reform and RBSG's exposure to economic and political risks (including with respect to Brexit and climate change), operational risk, conduct risk, cyber and IT risk and credit rating risk.  Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations and general economic conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBSG's actual results are discussed in RBSG's UK 2018 Annual Report and Accounts (ARA) and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBSG's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and RBSG does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.

 

Pages 2 to 5 of this document show the income statement, selected balance sheet line items and key metrics for the new reportable segments for the year and quarter ended 31 December 2018 and for the quarter ended 31 March 2018. The Re-segmentation reconciliation Appendix - summarises how Business Banking area is allocated to the reportable operating segment Commercial Banking.

 

For further information contact:

 

Alexander Holcroft

Investor Relations

+44 (0) 207 672 1982

 

Group Media Centre

+44 (0)131 523 4205


Re-presented customer segments

 












 


Year ended 31 December 2018

 


Personal & Ulster


Commercial & Private






 


UK Personal

Ulster Bank


Commercial

Private

RBS

NatWest


Central items

Total

 


Banking (1)

RoI


Banking

Banking

International

Markets


& other (2)

RBS

 

Income statement

£m

£m


£m

£m

£m

£m


£m

£m

 












 

Net interest income

4,283 

444 


2,855 

518 

466 

112 


(22)

8,656 

 

Non-interest income

771 

166 


1,747 

257 

128 

1,238 


347 

4,654 

 

Own credit adjustments


92 


92 

 












 

Total income

5,054 

610 


4,602 

775 

594 

1,442 


325 

13,402 

 












 

Direct expenses











 

  - staff

(698)

(202)


(739)

(161)

(102)

(557)


(1,190)

(3,649)

 

  - other

(266)

(103)


(255)

(66)

(67)

(241)


(2,712)

(3,710)

 

Indirect expenses

(1,464)

(185)


(1,294)

(229)

(91)

(415)


3,678 

 

Strategic costs











 

  - direct

(41)

(2)


(33)

(3)

(195)


(730)

(1,004)

 

  - indirect

(185)

(20)


(122)

(21)

(6)

(43)


397 

 

Litigation and conduct costs

(213)

(71)


(44)

(1)

(153)


(809)

(1,282)

 












 

Operating expenses

(2,867)

(583)


(2,487)

(478)

(260)

(1,604)


(1,366)

(9,645)

 












 

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

2,187 

27 


2,115 

297 

334 

(162)


(1,041)

3,757 

 

Impairment (losses)/releases

(339)

(15)


(147)

92 


(398)

 












 

Operating profit/(loss)

1,848 

12 


1,968 

303 

336 

(70)


(1,038)

3,359 

 












 

Key metrics











Return on equity (3)

24.7%

0.5%


12.1%

15.4%

24.4%

(2.0%)


nm

4.8%

Net interest margin

2.67%

1.79%


1.96%

2.52%

1.71%

0.40%


nm

1.98%

Cost:income ratio (4)

56.7%

95.6%


52.8%

61.7%

43.8%

111.2%


nm

71.7%

Loan impairment rate

0.23%

0.08%


0.14%

nm

nm

nm


nm

0.13%













As at 31 December 2018

Capital and balance sheet

£bn

£bn


£bn

£bn

£bn

£bn


£bn

£bn

Total assets

171.0 

25.2 


166.4 

22.0 

28.4 

244.5 


36.7 

694.2 

Funded assets (5)

171.0 

25.2 


166.4 

22.0 

28.4 

111.4 


36.5 

560.9 

Net loans to customers - amortised cost

148.9 

18.8 


101.4 

14.3 

13.3 

8.4 


305.1 

Impairment provisions

(1.1)

(0.8)


(1.3)

(0.1)


(3.3)

Customer deposits

145.3 

18.0 


134.4 

28.4 

27.5 

2.6 


4.7 

360.9 

Risk-weighted assets (RWAs)

34.3 

14.7 


78.4 

9.4 

6.9 

44.9 


0.1 

188.7 

RWA equivalent (RWAes)

35.5 

14.7 


79.7 

9.5 

6.9 

50.0 


0.2 

196.5 

Employee numbers (FTEs - thousands) (6)

21.7 

3.1 


10.3 

1.9 

1.7 

4.8 


23.6 

67.1 












For notes to this table refer to page 5.













 

Re-presented customer segments

 













Quarter ended 31 December 2018


Personal & Ulster


Commercial & Private







 UK Personal

Ulster Bank


Commercial

Private

RBS

NatWest


Central items

Total


Banking (1)

RoI


Banking

Banking

International

Markets


& other (2)

RBS

Income statement

£m

£m


£m

£m

£m

£m


£m

£m












Net interest income

1,061 

110 


724 

133 

123 

30 


(5)

2,176 

Non-interest income

185 

37 


392 

65 

32 

89 


49 

849 

Own credit adjustments


33 


33 












Total income

1,246 

147 


1,116 

198 

155 

152 


44 

3,058 












Direct expenses











  - staff

(166)

(53)


(185)

(39)

(25)

(128)


(263)

(859)

  - other

(80)

(27)


(77)

(22)

(22)

(65)


(870)

(1,163)

Indirect expenses

(414)

(52)


(403)

(72)

(35)

(123)


1,099 

Strategic costs











  - direct

(27)

(3)


(5)

(1)

(89)


(230)

(355)

  - indirect

(63)

(12)


(57)

(10)

(2)

(22)


166 

Litigation and conduct costs

(7)

(17)


(37)

(1)

(28)


(2)

(92)












Operating expenses

(757)

(164)


(764)

(143)

(86)

(455)


(100)

(2,469)












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

489 

(17)


352 

55 

69 

(303)


(56)

589 

Impairment (losses)/releases

(142)

19 


(5)

100 


(17)












Operating profit/(loss)

347 


347 

63 

71 

(203)


(55)

572 












Key metrics






















Return on equity (3)

17.2%

0.4%


8.3%

12.3%

20.0%

(9.2%)


nm

3.5%

Net interest margin

2.60%

1.73%


1.96%

2.49%

1.81%

0.39%


nm

1.95%

Cost:income ratio (4)

60.8%

111.6%


67.5%

72.2%

55.5%

299.3%


nm

80.5%

Loan impairment rate

0.38%

(0.39%)


0.02%

nm

nm

nm


nm

0.02%

For the notes to this table refer to page 5.













 

Re-presented customer segments


Quarter ended 31 March 2018


Personal & Ulster


Commercial & Private







UK Personal

Ulster Bank


Commercial

Private

RBS

NatWest


Central items

Total


Banking (1)

RoI


Banking

Banking

International

Markets


& other (2)

RBS


£m

£m


£m

£m

£m

£m


£m

£m












Net interest income

1,068 

106 


683 

123 

104 

36 


26 

2,146 

Non-interest income

230 

40 


475 

61 

33 

380 


(84)

1,135 

Own credit adjustments


21 


21 












Total income

1,298 

146 


1,158 

184 

137 

437 


(58)

3,302 












Direct expenses











  - staff

(178)

(49)


(188)

(43)

(24)

(165)


(317)

(964)

  - other

(65)

(19)


(47)

(14)

(15)

(53)


(606)

(819)

Indirect expenses

(374)

(47)


(311)

(55)

(20)

(102)


909 

Strategic costs











  - direct

(7)

(1)


(6)

(1)

(17)


(177)

(209)

  - indirect

(61)

(3)


(42)

(8)

(1)

(6)


121 

Litigation and conduct costs

(1)

(9)


(1)

(6)


(3)

(19)












Operating expenses

(686)

(128)


(595)

(121)

(59)

(349)


(73)

(2,011)












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

612 

18 


563 

63 

78 

88 


(131)

1,291 

Impairment (losses)/releases

(68)

(8)


(12)

(1)


(78)












Operating profit/(loss)

544 

10 


551 

62 

78 

97 


(129)

1,213 












For the notes to this table refer to page 5.









 

Re-presented customer segments

 


Quarter ended 31 March 2018


Personal & Ulster


Commercial & Private







UK Personal

Ulster Bank


 Commercial

Private

RBS

NatWest


Central items

 Total

Key metrics

Banking (1)

RoI


Banking

Banking

International

Markets


& other (2)

RBS












Return on equity (3)

29.9%

1.6%


13.6%

12.5%

23.2%

2.0%


nm

9.3%

Net interest margin

2.73%

1.80%


1.91%

2.51%

1.57%

0.54%


nm

2.04%

Cost:income ratio (4)

52.9%

87.7%


50.0%

65.8%

43.1%

79.9%


nm

60.5%

Loan impairment rate

0.18%

0.16%


0.05%

nm

nm

nm


nm

nm
























As at 31 March 2018

Capital and balance sheet

£bn

£bn


£bn

£bn

£bn

£bn


£bn

£bn












Total assets

166.3 

23.4 


165.6 

20.4 

28.0 

283.8 


51.0 

738.5 

Funded assets (5)

166.3 

23.3 


165.5 

20.4 

28.0 

135.2 


50.0 

588.7 

Net loans to customers - amortised cost (£bn)

145.9 

19.0 


102.9 

13.7 

13.1 

9.4 


(0.2)

303.8 

Impairment provisions

(1.3)

(1.2)


(1.5)

(0.1)

(0.2)


0.1 

(4.2)

Customer deposits

142.9 

16.4 


131.1 

25.3 

26.9 

3.8 


8.1 

354.5 

Risk-weighted assets (RWAs)

31.5 

16.9 


84.3 

9.4 

7.0 

53.1 


0.5 

202.7 

RWA equivalent (RWAes)

32.2 

17.4 


88.9 

9.4 

7.0 

56.5 


0.9 

212.3 

Employee  numbers (FTEs - thousands) (6)

24.5 

3.0 


10.7 

1.9 

1.7 

5.7 


23.4 

70.9 












nm = not meaningful

 

Notes:

(1)

(2)

Reportable operating segment UK Personal and Business Banking renamed to UK Personal Banking to reflect re-segmentation.

Central items include unallocated transactions which principally comprise volatile items under IFRS and RMBS related charges.

(3)

RBS's CET 1 target is approximately 14% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference share dividends is divided by average notional equity allocated at different rates of 14% (Ulster Bank RoI), 12% (Commercial Banking), 13.5% (Private Banking), 16% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets equivalents (RWAes) incorporating the effect of capital deductions. RBS return on equity is calculated using profit for the period attributable to ordinary shareholders over tangible net asset value.

(4)

Operating lease depreciation included in income for the year ended 31 December 2018 - £121 million; Q4 2018 - £32 million; Q1 2018 - £31 million.

(5)

Funded assets exclude derivative assets.

(6)

On 1 January 2018, 7,600 employees on a FTE basis were transferred from Central items to UK Personal Banking, 200 to Ulster Bank RoI, 3,700 to Commercial Banking and 400 to Private Banking.

 


 

 

 

 

 

 

 

 

Appendix

 

Re-segmentation reconciliations

 


UK Personal Banking (operating segment within the Personal & Ulster franchise)

 


Year ended


Quarter ended


Quarter ended


31 December 2018


31 December 2018


31 March 2018


Previously




Previously




Previously




reported

To

Total


reported

To

Total


reported

To

Total


UK PBB

CB

UK PB(1)


UK PBB

CB

UK PB(1)


UK PBB

CB

UK PB(1)

Income statement

£m

£m

£m


£m

£m

£m


£m

£m

£m













Net interest income

5,098 

(815)

4,283 


1,267 

(206)

1,061 


1,259 

(191)

1,068 

Non-interest income

1,184 

(413)

771 


290 

(105)

185 


332 

(102)

230 













Total income

6,282 

(1,228)

5,054 


1,557 

(311)

1,246 


1,591 

(293)

1,298 













Direct expenses












  - staff

(890)

192 

(698)


(208)

42 

(166)


(229)

51 

(178)

  - other

(300)

34 

(266)


(93)

13 

(80)


(70)

(65)

Indirect expenses

(1,801)

337 

(1,464)


(522)

108 

(414)


(456)

82 

(374)

Strategic costs












  - direct

(54)

13 

(41)


(28)

(27)


(12)

(7)

  - indirect

(221)

36 

(185)


(84)

21 

(63)


(68)

(61)

Litigation and conduct costs

(216)

(213)


(6)

(1)

(7)


(1)

(1)













Operating expenses

(3,482)

615 

(2,867)


(941)

184 

(757)


(836)

150 

(686)













Operating profit before impairment












  losses

2,800 

(613)

2,187 


616 

(127)

489 


755 

(143)

612 

Impairment losses

(342)

(339)


(125)

(17)

(142)


(57)

(11)

(68)













Operating profit

2,458 

(610)

1,848 


491 

(144)

347 


698 

(154)

544 













Key metrics
























Return on equity (2)

24.3%

0.4%

24.7%


18.6%

(1.4%)

17.2%


27.9%

2.0%

29.9%

Net interest margin

2.78%

(0.11%)

2.67%


2.73%

(0.13%)

2.60%


2.81%

(0.08%)

2.73%

Cost:income ratio

55.4%

1.3%

56.7%


60.4%

0.4%

60.8%


52.5%

0.4%

52.9%

Loan impairment rate

0.21%

0.02%

0.23%


0.31%

0.07%

0.38%


0.14%

0.04%

0.18%

 


31 December 2018


31 March 2018


Previously




Previously




reported

To

Total


reported

To

Total


UK PBB

CB

UK PB(1)


UK PBB

CB

UK PB(1)

Capital and balance sheet

£bn

£bn

£bn


£bn

£bn

£bn

















Loans to customers - amortised cost

163.7 

(13.7)

150.0 


162.1 

(14.9)

147.2 

Impairment provisions

(1.4)

0.3 

(1.1)


(1.6)

0.3 

(1.3)









Net loans to customers - amortised cost

162.3 

(13.4)

148.9 


160.5 

(14.6)

145.9 

Funded assets

194.2 

(23.2)

171.0 


190.3 

(24.0)

166.3 

Customer deposits

184.1 

(38.8)

145.3 


180.3 

(37.4)

142.9 

Loan:deposit ratio

88%

14%

102%


89%

13%

102%

Risk-weighted assets

45.1 

(10.8)

34.3 


43.4 

(11.9)

31.5 

 

Notes:

(1)

Reportable operating segment UK Personal and Business Banking renamed to UK Personal Banking to reflect re-segmentation.

(2)

Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity based on 15% of the monthly average of segmental Risk-weighted assets equivalents (RWAes), incorporating the effect of capital deductions, assuming 28% tax rate. Return on equity is calculated using profit for the period attributable to ordinary shareholders.


 

Commercial Banking (operating segment within the Commercial & Private franchise)

 


Year ended


Quarter ended


Quarter ended


31 December 2018


31 December 2018


31 March 2018


Previously

From

Total


Previously

From

Total


Previously

From

Total


reported CB

UK PB

CB


reported CB

UK PB

CB


reported CB

UK PB

CB

Income statement

£m

£m

£m


£m

£m

£m


£m

£m

£m













Net interest income

2,040 

815 

2,855 


518 

206 

724 


492 

191 

683 

Non-interest income

1,334 

413 

1,747 


287 

105 

392 


373 

102 

475 













Total income

3,374 

1,228 

4,602 


805 

311 

1,116 


865 

293 

1,158 













Direct expenses












  - staff

(547)

(192)

(739)


(143)

(42)

(185)


(137)

(51)

(188)

  - other

(221)

(34)

(255)


(64)

(13)

(77)


(42)

(5)

(47)

Indirect expenses

(957)

(337)

(1,294)


(295)

(108)

(403)


(229)

(82)

(311)

Strategic costs












  - direct

(20)

(13)

(33)


(4)

(1)

(5)


(1)

(5)

(6)

  - indirect

(86)

(36)

(122)


(36)

(21)

(57)


(35)

(7)

(42)

Litigation and conduct costs

(41)

(3)

(44)


(38)

(37)


(1)

(1)













Operating expenses

(1,872)

(615)

(2,487)


(580)

(184)

(764)


(445)

(150)

(595)













Operating profit before impairment












  (losses)/releases

1,502 

613 

2,115 


225 

127 

352 


420 

143 

563 

Impairment (losses)/releases

(144)

(3)

(147)


(22)

17 

(5)


(23)

11 

(12)













Operating profit

1,358 

610 

1,968 


203 

144 

347 


397 

154 

551 













Key metrics
























Return on equity (1)

10.2%

1.9%

12.1%


5.5%

2.8%

8.3%


12.2%

1.4%

13.6%

Net interest margin

1.67%

0.29%

1.96%


1.66%

0.30%

1.96%


1.64%

0.27%

1.91%

Cost:income ratio

53.8%

(1.0%)

52.8%


70.9%

(3.4%)

67.5%


49.6%

0.4%

50.0%

Loan impairment rate

0.16%

0.02%

0.14%


0.10%

0.08%

0.02%


0.10%

0.05%

0.05%

 


31 December 2018


31 March 2018


Previously

From

Total


Previously

From

Total


reported CB

UK PB

CB


reported CB

UK PB

CB

Capital and balance sheet

£bn

£bn

£bn


£bn

£bn

£bn

















Loans to customers - amortised cost

89.0 

13.7 

102.7 


89.5 

14.9 

104.4 

Impairment provisions

(1.0)

(0.3)

(1.3)


(1.2)

(0.3)

(1.5)









Net loans to customers - amortised cost

88.0 

13.4 

101.4 


88.3 

14.6 

102.9 

Funded assets

143.2 

23.2 

166.4 


141.5 

24.0 

165.5 

Customer deposits

95.6 

38.8 

134.4 


93.7 

37.4 

131.1 

Loan:deposit ratio

92%

(16%)

76%


94%

(14%)

80%

Risk-weighted assets

67.6 

10.8 

78.4 


72.4 

11.9 

84.3 

 

Note:

(1)

Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity based on 11% of the monthly average of segmental Risk-weighted assets equivalents (RWAes), incorporating the effect of capital deductions, assuming 28% tax rate. Return on equity is calculated using profit for the period attributable to ordinary shareholders.

 

Legal Entity Identifier: 2138005O9XJIJN4JPN90

 

 


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