Interim Management Statement

RNS Number : 5062L

Royal Bank of Scotland Group PLC

07 May 2010

 

Statutory results

The condensed consolidated financial statements and related notes presented on pages 123 to 131 inclusive are on a statutory basis and include the results and financial position of ABN AMRO.  The interests of the State of the Netherlands and Santander in RFS Holdings are included in minority interests. 

Condensed consolidated income statement

for the period ended 31 March 2010

In the income statement below, amortisation of purchased intangible assets and integration and restructuring costs are included in operating expenses. 

	Quarter ended
	31 March  2010	31 December*   2009	31 March*  2009
	£m	£m	£m
Interest receivable	5,692	5,977	7,450
Interest payable	(2,150)	(2,558)	(3,886)
Net interest income	3,542	3,419	3,564
Fees and commissions receivable	2,051	2,353	2,276
Fees and commissions payable	(572)	(894)	(691)
Income from trading activities	1,766	709	1,666
Other operating income (excluding insurance premium income)	447	304	750
Net insurance premium income	1,289	1,308	1,356
Non-interest income	4,981	3,780	5,357
Total income	8,523	7,199	8,921
Staff costs - excluding curtailment gains	(2,689)	(2,494)	(2,761)
- pension schemes curtailment gains	-	2,148	-
Premises and equipment	(535)	(685)	(661)
Other administrative expenses	(1,011)	(1,184)	(1,160)
Depreciation and amortisation	(482)	(600)	(560)
Write-down of goodwill and other intangible assets	-	(52)	-
Operating expenses	(4,717)	(2,867)	(5,142)
Profit before other operating charges and impairment losses	3,806	4,332	3,779
Net insurance claims	(1,136)	(1,321)	(966)
Impairment losses	(2,675)	(3,099)	(2,858)
Operating loss before tax	(5)	(88)	(45)
Tax charge	(107)	(644)	(210)
Loss from continuing operations	(112)	(732)	(255)
Profit/(loss) from discontinued operations, net of tax	313	(135)	(50)
Profit/(loss) for the period	201	(867)	(305)
Minority interests	(344)	246	(483)
Other owners' dividends	(105)	(144)	(114)
Loss attributable to ordinary shareholders	(248)	(765)	(902)
*Operating expenses include:
Integration and restructuring costs:
- administrative expenses	(165)	(221)	(374)
- depreciation and amortisation	(3)	(7)	(5)
	(168)	(228)	(379)
Amortisation of purchased intangible assets	(65)	(59)	(85)
	(233)	(287)	(464)

* restated for the reclassification of the results attributable to other Consortium Members as discontinued operations.

Condensed consolidated statement of comprehensive income

for the period ended 31 March 2010

	Quarter ended
	31 March  2010	31 December   2009	31 March  2009
	£m	£m	£m
Profit/(loss) for the period	201	(867)	(305)
Other comprehensive income:
Available-for-sale financial assets	415	597	(3,107)
Cash flow hedges	(195)	410	(296)
Currency translation	785	(796)	(555)
Actuarial losses on defined benefit plans	-	(3,665)	-
Tax on other comprehensive income	(115)	809	738
Other comprehensive income/(loss) for the period, net of tax	890	(2,645)	(3,220)
Total comprehensive income/(loss) for the period	1,091	(3,512)	(3,525)
Attributable to:
Minority interests	325	(603)	(743)
Preference shareholders	(105)	126	114
Paid-in equity holders	-	18	-
Ordinary and B shareholders	871	(3,053)	(2,896)
	1,091	(3,512)	(3,525)

Financial review

Operating loss

Operating loss before tax for the quarter was £5 million compared with a loss of £88 million in the fourth quarter of 2009.

Total income

Total income increased 18% to £8,523 million in the quarter.

Net interest income increased by 4% to £3,542 million.

Non-interest income increased to £4,981 million from £3,780 million in the fourth quarter of 2009.

Operating expenses

Operating expenses increased to £4,717 million of which integration and restructuring costs were £168 million compared with £228 million in Q4 2009. Expenses in the fourth quarter of 2009 benefited from gains on pensions curtailment of £2,148 million; adjusting for this, expenses fell by 6%.

Net insurance claims

Bancassurance and general insurance claims, after reinsurance, decreased by 14% to £1,136 million.

Impairment losses

Impairment losses were £2,675 million, compared with £3,099 million in the fourth quarter of 2009.

Taxation

The tax charge for the first quarter of 2010 was £107 million compared with £644 million in the fourth quarter of 2009.

Earnings

Basic earnings per ordinary share, including discontinued operations, improved from a loss of 1.2p to a loss of 0.2p in the quarter.

Capital

Capital ratios at 31 March 2010 were 9.5% (Core Tier 1), 12.5% (Tier 1) and 14.5% (Total).

Condensed consolidated balance sheet

at 31 March 2010

	31 March  2010	31 December  2009  (audited)
	£m	£m
Assets
Cash and balances at central banks	42,008	52,261
Net loans and advances to banks	56,528	56,656
Reverse repurchase agreements and stock borrowing	43,019	35,097
Loans and advances to banks	99,547	91,753
Net loans and advances to customers	553,905	687,353
Reverse repurchase agreements and stock borrowing	52,906	41,040
Loans and advances to customers	606,811	728,393
Debt securities	252,116	267,254
Equity shares	21,054	19,528
Settlement balances	24,369	12,033
Derivatives	462,272	441,454
Intangible assets	14,683	17,847
Property, plant and equipment	18,248	19,397
Deferred taxation	6,540	7,039
Prepayments, accrued income and other assets	14,534	20,985
Assets of disposal groups	203,530	18,542
Total assets	1,765,712	1,696,486
Liabilities
Bank deposits	98,294	104,138
Repurchase agreements and stock lending	48,083	38,006
Deposits by banks	146,377	142,144
Customer deposits	425,102	545,849
Repurchase agreements and stock lending	81,144	68,353
Customer accounts	506,246	614,202
Debt securities in issue	239,212	267,568
Settlement balances and short positions	70,632	50,876
Derivatives	444,223	424,141
Accruals, deferred income and other liabilities	28,466	30,327
Retirement benefit liabilities	2,682	2,963
Deferred taxation	2,295	2,811
Insurance liabilities	7,711	10,281
Subordinated liabilities	31,936	37,652
Liabilities of disposal groups	196,892	18,890
Total liabilities	1,676,672	1,601,855
Equity
Minority interests	10,364	16,895
Owners' equity*
Called up share capital	15,031	14,630
Reserves	63,645	63,106
Total equity	89,040	94,631
Total liabilities and equity	1,765,712	1,696,486
*Owners' equity attributable to:
Ordinary shareholders	70,830	69,890
Other equity owners	7,846	7,846
	78,676	77,736

Commentary on condensed consolidated balance sheet 

Total assets of £1,765.7 billion at 31 March 2010 were up £69.2 billion, 4%, compared with 31 December 2009.

Cash and balances at central banks were down £10.3 billion, 20% to £42.0 billion primarily due to reduced placings of short-term cash surpluses.

Loans and advances to banks increased by £7.8 billion, 8%, to £99.5 billion but rose £15.7 billion excluding the transfer to disposal groups of the RFS Minority Interest.  Of the £15.7 billion, reverse repurchase agreements and stock borrowing ('reverse repos') were up £7.9 billion, 23% to £43.0 billion and bank placings rose £7.8 billion, 16%, to £56.5 billion, largely as a result of increased wholesale funding activity in Global Banking & Markets and Ulster Bank.

Loans and advances to customers decreased by £121.6 billion, 17% to £606.8 billion.  Excluding the transfer of the RFS Minority Interest to disposal groups, lending was up £11.1 billion, 2%.  Within the £11.1 billion,  reverse repos increased £11.9 billion, 29% to £52.9 billion. Customer lending decreased by £0.8 billion to £553.9 billion but grew by £0.9 billion before impairment provisions.  This reflected growth in UK Corporate & Commercial, £2.7 billion, Global Transaction Services, £1.4 billion, UK Retail, £0.9 billion and Wealth, £0.8 billion and the effect of exchange rate movements, £8.8 billion, following the weakening of sterling against the US dollar since the year end.  These were partially offset by planned reductions in Non-Core of £10.0 billion, together with declines in Ulster Bank, £1.1 billion, US Retail & Commercial, £0.9 billion and Global Banking & Markets, £1.8 billion.  

Debt securities declined by £15.1 billion, 6% to £252.1 billion largely reflecting the transfer of the RFS Minority Interest to disposal groups.  

Equity shares were up £1.5 billion, 8% at £21.1 billion or £5.1 billion, 32% excluding transfers to disposal groups.  Growth was principally due to increased holdings in Global Banking & Markets.

Settlement balances rose £12.3 billion to £24.4 billion as a result of increased customer activity from seasonal year end lows.

The value of derivative assets was up £20.8 billion, 5% to £462.3 billion, and liabilities, up £20.1 billion, 5%, to £444.2 billion.  Excluding the RFS Minority Interest transfer to disposal groups, assets were up £24.1 billion, 5%, to £462.3 billion, and liabilities, up £22.7 billion, 5%, to £444.2 billion, primarily reflecting changes in interest rates, the weakening of sterling against the US dollar and growth in trading volumes.

Growth in assets and liabilities of disposal groups principally reflects the inclusion of the RFS Minority Interest, excluding those items which have shared ownership between the consortium members, together with the Global Merchant Services business and increases in respect of the Group's retail and commercial activities in Asia and Latin America.

Deposits by banks were up £4.2 billion, 3%, at £146.4 billion but declined by £5.4 billion, 4%, to £148.3 billion excluding the RFS Minority Interest. Of the £5.4 billion, reduced inter-bank deposits, down £15.5 billion, 13%, to £100.2 billion, principally in Group Treasury, were offset in part by increased repurchase agreements and stock lending ('repos'), up £10.1 billion, 27%, to £48.1 billion.

Commentary on condensed consolidated balance sheet (continued)

Customer accounts were down £108.0 billion, 18%, at £506.2 billion but up £23.6 billion, 5% following the RFS Minority Interest transfer to disposal groups. Within the £23.6 billion, repos increased £12.8 billion, 19%, to £81.1 billion. Excluding repos, customer deposits were up £10.8 billion, 3%, to £425.1 billion, reflecting growth in UK Corporate & Commercial, £3.6 billion, UK Retail, £2.3 billion, Global Transaction Services, £2.1 billion, Ulster Bank, £1.7 billion and Wealth, £0.8 billion, together with exchange rate movements of £6.3 billion. This was partially offset by reductions in Non-Core, £3.0 billion, US Retail & Commercial, £1.7 billion and Global Banking & Markets, £1.1 billion.

Debt securities in issue were down £28.4 billion, 11% to £239.2 billion. Excluding the transfer of the RFS minority interest, they declined £7.1 billion, 3%, mainly as a result of reductions in Global Banking & Markets.

Subordinated liabilities decreased £5.7 billion, 15% to £31.9 billion but increased £0.4 billion, 1% excluding transfers to disposal groups. The conversion of £0.6 billion non-cumulative US dollar preference shares and the redemption of £0.5 billion dated loan capital were more than offset by the effect of exchange rate movements and other adjustments of £1.5 billion.

Equity minority interests decreased by £6.5 billion, 39%, to £10.4 billion mainly due to net equity withdrawals of £4.2 billion and dividends of £2.7 billion paid to the RFS minority interests less attributable profits of £0.3 billion.

Owners' equity increased by £0.9 billion, 1% to £78.7 billion. The issue of £0.6 billion ordinary shares on conversion of the US dollar non-cumulative preference shares classified as debt and exchange rate movements, £0.7 billion, were partially offset by an increase in own shares held of £0.4 billion.

Condensed consolidated statement of changes in equity

for the period ended 31 March 2010

	31 March  2010	31 December  2009  (audited)
	£m	£m
Called-up share capital
At beginning of period	14,630	9,898
Ordinary shares issued in respect of placing and open offers	-	4,227
B shares issued	-	510
Other shares issued during the period	401	-
Preference shares redeemed during the period	-	(5)
At end of period	15,031	14,630
Paid-in equity
At beginning of period	565	1,073
Securities redeemed during the period	-	(308)
Transfer to retained earnings	-	(200)
At end of period	565	565
Share premium account
At beginning of period	23,523	27,471
Ordinary shares issued in respect of placing and open offer, net of £95 million expenses	-	1,047
Other shares issued during the period	217	-
Preference shares redeemed during the period	-	(4,995)
At end of period	23,740	23,523
Merger reserve
At beginning of period	25,522	10,881
Issue of B shares, net of £399 million expenses	-	24,591
Transfer to retained earnings	(12,250)	(9,950)
At end of period	13,272	25,522
Available-for-sale reserves
At beginning of period	(1,755)	(3,561)
Unrealised gains in the period	528	1,202
Realised (gains)/losses in the period	(147)	981
Taxation	(153)	(377)
At end of period	(1,527)	(1,755)
Cash flow hedging reserve
At beginning of period	(252)	(876)
Amount recognised in equity during the period	(11)	380
Amount transferred from equity to earnings in the period	10	513
Taxation	(19)	(269)
At end of period	(272)	(252)

Condensed consolidated statement of changes in equity

for the period ended 31 March 2010 (continued)

	31 March  2010	31 December  2009  (audited)
	£m	£m
Foreign exchange reserve
At beginning of period	4,528	6,385
Retranslation of net assets	1,109	(2,322)
Foreign currency (losses)/gains on hedges of net assets	(420)	456
Taxation	12	9
At end of period	5,229	4,528
Capital redemption reserve
At beginning and end of period	170	170
Contingent capital reserve
At beginning of period	(1,208)	-
Contingent capital agreement - consideration payable	-	(1,208)
At end of period	(1,208)	(1,208)
Retained earnings
At beginning of period	12,134	7,542
Loss attributable to ordinary and B shareholders and other equity owners	(143)	(2,672)
Equity preference dividends paid	(105)	(878)
Paid-in equity dividends paid, net of tax	-	(57)
Transfer from paid-in equity	-	200
Equity owners gain on withdrawal of minority interest
- gross	-	629
- taxation	-	(176)
Transfer from merger reserve	12,250	9,950
Actuarial losses recognised in retirement benefit schemes
- gross	-	(3,756)
- taxation	-	1,043
Net cost of shares bought and used to satisfy share-based payments	(7)	(16)
Share-based payments
- gross	35	325
- taxation	-	-
At end of period	24,164	12,134
Own shares held
At beginning of period	(121)	(104)
Shares purchased during the period	(374)	(33)
Shares issued under employee share schemes	7	16
At end of period	(488)	(121)
Owners' equity at end of period	78,676	77,736

Condensed consolidated statement of changes in equity

for the period ended 31 March 2010 (continued)

	31 March  2010	31 December  2009  (audited)
	£m	£m
Minority interests
At beginning of period	16,895	21,619
Currency translation adjustments and other movements	96	(1,434)
Profit attributable to minority interests	344	349
Dividends paid	(2,674)	(313)
Movements in available-for-sale securities
- unrealised gains in the period	25	299
- realised losses/(gains) in the period	9	(466)
- taxation	(3)	(36)
Movements in cash flow hedging reserves
- amount recognised in equity during the period	(195)	(209)
- amount transferred from equity to earnings during the period	1	-
- taxation	48	59
Actuarial losses recognised in retirement benefit schemes
- gross	-	91
- taxation	-	1
Equity raised	511	9
Equity withdrawn and disposals	(4,693)	(2,445)
Transfer to retained earnings	-	(629)
At end of period	10,364	16,895
Total equity at end of period	89,040	94,631
Total comprehensive income/(loss) recognised in the statement of changes in   equity is attributable as follows:
Minority interests	325	(1,346)
Preference shareholders	(105)	878
Paid-in equity holders	-	57
Ordinary and B shareholders	871	(5,747)
	1,091	(6,158)

Additional information

Statutory results

Financial information contained in this document does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 ('the Act').  The statutory accounts for the year ended 31 December 2009 will be filed with the Registrar of Companies. The auditors have reported on these accounts: their report was unqualified and did not contain a statement under section 498(2) or (3) of the Act.

 

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