We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register to chat with like-minded investors on our interactive forums.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Royal Bank Of Scotland Group Plc | LSE:RBS | London | Ordinary Share | GB00B7T77214 | ORD 100P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.90 | 121.35 | 121.40 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMRBS
RNS Number : 6230D
Royal Bank of Scotland Group PLC
28 April 2017
The Royal Bank of Scotland Group plc
Q1 2017 results
Contents Page ====================================================== ==== Introduction 1 Highlights 2 Summary consolidated results 7 Analysis of results 9 Segment performance 15 Selected statutory financial statements 25 Notes 29 Forward-looking statements 32 Appendix - Segmental income statement reconciliations ====================================================== ====
Contacts
Hot Features
Premium
Analyst +44 (0) 207
enquiries: Matt Waymark Investor Relations 672 1758
RBS Press +44 (0) 131
Media enquiries: Office 523 4205
Analysts and investors conference call
Analyst and investor Web cast and dial
call in details
-------------- -------------------- -------------------
Date: Friday 28 April www.rbs.com/results
2017
Time: 12 pm UK time International - +44
1452 568 172
Conference ID: 58172437 UK Free Call - 0800
694 8082
US Toll Free - 1
866 966 8024
-------------- -------------------- -------------------
Available on www.rbs.com/results
-- Q1 2017 results and background slides.
-- A financial supplement containing income statement,
balance sheet and segment performance information
for the nine quarters ended 31 March 2017.
-- Pillar 3 supplement at 31 March 2017.
-- Globally Systemically Important Banks template
as of and for the year ended 31 December 2016.
Introduction
In this document, 'RBSG plc' or the 'parent company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group' refers to RBSG plc and its subsidiaries.
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2016 will be filed with the Registrar of Companies following the company's Annual General Meeting. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
In this document Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity, which continues to be reported as a separate operating segment.
Key operating indicators
As described in Note 1 on page 29, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP financial measures. These measures exclude certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These
measures include:
-- 'Adjusted' measures of financial performance, principally
operating performance before: own credit adjustments;
gain or loss on redemption of own debt; strategic
disposals; restructuring costs; litigation and
conduct costs and write down of goodwill (refer
to the Appendix for reconciliations of the statutory
to adjusted basis);
-- Performance, funding and credit metrics such as
'return on tangible equity', 'adjusted return on
tangible equity' and related RWA equivalents incorporating
the effect of capital deductions (RWAes), total
assets excluding derivatives (funded assets), net
interest margin (NIM) adjusted for items designated
at fair value through profit or loss (non-statutory
NIM), cost:income ratio, loan:deposit ratio and
REIL/impairment provision ratios. These are internal
metrics used to measure business performance;
-- Personal & Business Banking (PBB) franchise, combining
the reportable segments of UK Personal & Business
Banking (UK PBB) and Ulster Bank RoI; and Commercial
& Private Banking (CPB) franchise, combining the
reportable segments of Commercial Banking, Private
Banking and RBS International (RBSI); and
-- Cost savings progress and 2017 target calculated
using operating expenses excluding litigation and
conduct costs, restructuring costs, write down
of goodwill and the VAT recoveries.
Highlights
RBS reported an operating profit before tax of GBP713 million for Q1 2017 and an attributable profit(1) of GBP259 million.
Across our Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and NatWest Markets (NWM) businesses, RBS reported an adjusted operating profit(2) of GBP1,326 million, an increase of GBP303 million, or 30%, compared with Q1 2016. Adjusted return on equity across PBB, CPB and NatWest Markets was 13.8% compared with 10.9% in Q1 2016.
Common Equity Tier 1 ratio increased by 70 basis points in the quarter to 14.1%, and remains ahead of our 13.0% target.
Quarter ended
====================================
31 March 31 December 31 March
Key metrics and ratios 2017 2016 2016
===================================== ========== =========== ===========
Attributable profit/(loss) GBP259m (GBP4,441m) (GBP968m)
Operating profit/(loss) GBP713m (GBP4,063m) GBP421m
Operating profit - adjusted (2) GBP1,371m GBP1,185m GBP440m
Net interest margin 2.24% 2.19% 2.15%
Cost:income ratio (3) 76.1% 230.2% 78.7%
Cost:income ratio - adjusted (3,4,5) 55.8% 66.3% 76.1%
Earnings/(loss) per share from
continuing operations
- basic 2.2p (37.7p) (8.3p)
- adjusted (4,5) 7.1p 7.0p (8.1p)
Return on tangible equity (6,7) 3.1% (48.2%) (9.6%)
Return on tangible equity - adjusted
(4,5,7) 9.7% 8.6% (9.4%)
Average tangible equity (6) GBP33,357m GBP36,855m GBP40,383m
Average number of ordinary shares
outstanding during the period
(millions) 11,793 11,766 11,606
===================================== ========== =========== ===========
PBB, CPB & NWM
Total income - adjusted (4) GBP3,154m GBP2,914m GBP2,815m
Operating profit - adjusted (2) GBP1,326m GBP848m GBP1,023m
Return on tangible equity - adjusted
(4,5,6) 13.8% 8.5% 10.9%
===================================== ========== =========== ===========
31 March 31 December
Balance sheet related key metrics and
ratios 2017 2016
================================================= =========== ===========
Tangible net asset value (TNAV) per ordinary
share (7) 297p 296p
Liquidity coverage ratio (LCR) (8) 129% 123%
Liquidity portfolio GBP160bn GBP164bn
Net stable funding ratio (NSFR) (9) 120% 121%
Loan:deposit ratio (10,11) 93% 91%
Short-term wholesale funding (10,12) GBP16bn GBP14bn
Wholesale funding (10,12) GBP67bn GBP59bn
Common Equity Tier 1 (CET1) ratio 14.1% 13.4%
Risk-weighted assets (RWAs) GBP221.7bn GBP228.2bn
CRR leverage ratio (13) 5.0% 5.1%
UK leverage ratio (14) 5.7% 5.6%
Tangible equity (7) GBP35,186m GBP34,982m
Number of ordinary shares in issue (millions)
(15) 11,842 11,823
================================================= =========== ===========
Notes:
(1) Attributable to ordinary shareholders.
(2) Operating profit before tax excluding own credit adjustments, gain on redemption
of own debt, strategic disposals, restructuring costs and litigation and
conduct costs.
(3) Operating lease depreciation included in income (Q1 2017 - GBP36 million;
Q4 2016 - GBP37 million and Q1 2016 - GBP38 million).
(4) Excluding own credit adjustments, gain on redemption of own debt and strategic
disposals.
(5) Excluding restructuring costs and litigation and conduct costs.
(6) Calculated using profit/(loss) for the period attributable to ordinary shareholders.
(7) Tangible equity is equity attributable to ordinary shareholders less intangible
assets. The dilutive impact was 2p (31 December 2016 - 2p).
(8) On 1 October 2015 the LCR became the Prudential
Regulation Authority's (PRA) primary regulatory
liquidity standard; UK banks are required to
meet a minimum standard of 90% from 1 January
2017, rising to 100% by 1 January 2018. The published
LCR excludes Pillar 2 add-ons. RBS calculates
the LCR using its own interpretation of the EU
LCR Delegated Act, which may change over time
and may not be fully comparable with those of
other institutions.
(9) NSFR for all periods have been calculated using
RBS's current interpretations of the revised
BCBS guidance on NSFR issued in late 2014. Therefore,
reported NSFR will change over time with regulatory
developments. Due to differences in interpretation,
RBS's ratio may not be comparable with those
of other financial institutions.
(10) Excludes repurchase agreements and stock lending.
(11) Includes disposal groups.
(12) Excludes derivative collateral.
(13) Based on end-point Capital Requirements Regulation
(CRR) Tier 1 capital and leverage exposure under
the CRR Delegated Act.
(14) Based on end-point CRR Tier 1 capital and UK
leverage exposures reflecting the post EU referendum
measures announced by the Bank of England in
the third quarter of 2016.
(15) Includes 28 million treasury shares (31 December
2016 - 39 million).
Highlights
Q1 2017 RBS Performance Summary
-- RBS reported an attributable profit of GBP259
million for Q1 2017 compared with a loss of GBP968
million in Q1 2016 which included payment of
the final Dividend Access Share (DAS) dividend
of GBP1,193 million.
-- Q1 2017 operating profit of GBP713 million compared
with GBP421 million in Q1 2016. An adjusted operating
profit of GBP1,371 million was GBP931 million
higher than Q1 2016.
-- Adjusted income of GBP3,239 million was GBP425
million, or 15.1%, higher than Q1 2016. NatWest
Markets adjusted income of GBP508 million was
GBP231 million, or 83.4%, higher than Q1 2016
reflecting consistent customer activity and an
improved trading environment compared to a particularly
difficult Q1 2016. Across PBB and CPB, income
was GBP108 million, or 4.3%, higher supported
by asset growth.
-- Net interest margin (NIM) of 2.24% for Q1 2017
was 9 basis points higher than Q1 2016, as the
benefit associated with the reduction in low
yielding assets more than offset asset margin
pressure and mix impacts across the core businesses.
NIM increased by 5 basis points compared with
Q4 2016 principally driven by deposit re-pricing
in UK PBB and Commercial Banking.
-- Excluding a GBP51 million VAT recovery, adjusted
operating expenses have reduced by GBP278 million,
or 12.9%, compared with Q1 2016. The adjusted
cost:income ratio for Q1 2017 was 55.8% compared
with 76.1% in Q1 2016. Across the core PBB, CPB
and NatWest Markets businesses, adjusted cost:income
ratio of 54.9% compared with 62.4% in Q1 2016.
-- Restructuring costs were GBP577 million in the
quarter, an increase of GBP339 million compared
with Q1 2016, and included a charge of GBP235
million relating to the reduction of our property
portfolio.
-- Litigation and conduct costs of GBP54 million
comprised a number of small charges.
-- A net impairment loss of GBP46 million, 6 basis
points of gross customer loans, compared with
a loss of GBP223 million in Q1 2016, with the
reduction principally reflecting a GBP226 million
shipping impairment in Q1 2016. REIL represented
2.9% of gross customer loans compared with 3.6%
at 31 March 2016 and 3.1% at 31 December 2016.
-- PBB and CPB net loans and advances have increased
by 5.6% on an annualised basis in Q1 2017 principally
driven by mortgage growth within UK PBB.
-- Tangible net asset value (TNAV) (1) per share
increased by 1p from Q4 2016 to 297p.
PBB, CPB and NatWest Markets operating performance
-- Across our three customer facing businesses,
PBB, CPB and NatWest Markets, adjusted operating
profit of GBP1,326 million was GBP303 million,
or 29.6%, higher than Q1 2016.
-- UK PBB adjusted operating profit of GBP629 million
was GBP98 million, or 18.5%, higher than Q1
2016. Total income of GBP1,377 million was GBP102
million, or 8.0%, higher than Q1 2016 driven
by increased lending, with net loans and advances
11.5% higher at GBP135.8 billion.
-- Ulster Bank RoI adjusted operating profit of
GBP62 million was GBP2 million, or 3.1%, lower
than Q1 2016 reflecting an asset disposal gain
in Q1 2016 and reduced income on free funds,
partially offset by an increased net impairment
release.
-- Commercial Banking adjusted operating profit
of GBP356 million was GBP47 million, or 11.7%,
lower than Q1 2016 primarily driven by an increased
impairment charge. Income was GBP12 million,
or 1.4%, higher at GBP865 million with the benefit
of increased net loans and advances, up 3.4%
to GBP99.7 billion, offset by margin pressure,
down 12 basis points to 1.76%.
-- Private Banking(2) adjusted operating profit
of GBP44 million was GBP18 million, or 69.2%,
higher than Q1 2016 driven by a GBP24 million,
or 17.5%, reduction in adjusted operating expenses,
principally reflecting various management actions
to improve operational efficiency.
-- RBS International adjusted operating profit
of GBP48 million reduced by GBP5 million, or
9.4%, compared with Q1 2016 driven by an GBP8
million, or 22.9%, increase in adjusted operating
expenses principally reflecting increased regulatory
and remediation costs.
-- NatWest Markets adjusted income of GBP508 million
was GBP231 million, or 83.4%, higher than Q1
2016 reflecting the benefit of consistent customer
activity and an improved trading environment
compared to a particularly difficult Q1 2016,
notably in the Rates business. An adjusted operating
profit of GBP187 million compared with a loss
of GBP54 million for Q1 2016.
Notes:
(1) Tangible equity is equity attributable to ordinary shareholders less intangible
assets. The dilutive impact was 2p ( 31 December 2016 - 2p)
(2) Private Banking serves high net worth individuals through Coutts and Adam
& Co.
Highlights
Capital Resolution & Central items operating performance
-- Capital Resolution adjusted operating loss of
GBP76 million compared with a loss of GBP377
million in Q1 2016 reflecting modest disposal
losses and impairments of GBP5 million and a
70.3% reduction in adjusted operating expenses
to GBP69 million. RWAs reduced by a further GBP4.0
billion in the quarter to GBP30.5 billion.
-- Central items adjusted operating profit of GBP10
million compared with a loss of GBP307 million
in Q1 2016 and included a GBP18 million loss
in respect of IFRS volatility (Q1 2016 - GBP356
million loss). In addition, a VAT recovery of
GBP51 million was recognised in the quarter.
Building a stronger RBS
RBS is progressing with its plan to build a strong, simple, fair bank for customers and shareholders.
-- CET1 remains ahead of our 13% target at 14.1%,
a 70 basis point increase on Q4 2016 driven by
a GBP6.5 billion reduction in RWAs and the GBP259
million attributable profit.
-- RWAs decreased by GBP6.5 billion compared with
Q4 2016 principally reflecting GBP4.0 billion
of disposals and run-off in Capital Resolution
and planned RWA reductions in the core businesses.
Excluding volume growth, RWAs across PBB, CPB
and NatWest Markets reduced by GBP3.2 billion
(PBB GBP0.7 billion, CPB GBP1.4 billion and NatWest
Markets GBP1.1 billion) during Q1 2017, and we
remain committed to achieving at least a GBP20
billion gross reduction by the end of 2018.
-- On 1 March 2017, RBS issued EUR1.5 billion Senior
holding company (RBSG) debt which it expects
to be eligible to meet its 'Minimum Requirement
for Own Funds and Eligible Liabilities' (MREL).
Total MREL eligible securities are now GBP55.3
billion, or 24.9% of RWAs.
-- Leverage ratio reduced by 10 basis points to
5.0% driven by increased lending exposure.
-- Risk elements in lending (REIL) of GBP9.7 billion
were GBP0.6 billion lower than 31 December 2016
and represented 2.9% of gross customer loans,
compared with 3.1% at 31 December 2016 and 3.6%
as at 31 March 2016. Excluding REIL in Capital
Resolution and Ulster Bank RoI, REIL were GBP4.1
billion or 1.4% of the respective gross customer
loans.
-- As at 31 March 2017, there has been no material
change to the surplus ratio of assets to liabilities
in the Main Scheme of The Royal Bank of Scotland
Group Pension Fund which at 31 December was c.115%
under IAS valuation principles.
-- RBS has continued to utilise the Bank of England's
Term Funding Scheme. A further GBP9 billion has
been drawn since 31 December 2016, taking total
RBS participation to GBP14 billion as at 31 March
2017.
Building the number one bank for customer service, trust and advocacy in the UK
-- RBS continued to deliver strong support for both
household and business customers. Within UK PBB,
gross new mortgage lending of GBP7.8 billion
was 10% higher than Q1 2016 with market share
of new mortgages at approximately 13% supporting
growth in stock share to approximately 9.0%,
up from 8.8% at 31 December 2016 and 8.3% at
31 March 2016. Positive momentum continued across
business banking lending with balances up 4.7%,
excluding transfers of GBP0.9 billion as at 31
March 2017, compared with Q1 2016.
-- RBS continues to enhance the functionality of
its mobile app. Customers can now view remaining
ISA allowances, register their travel plans,
and apply for loans and credit cards. There are
also improved transaction descriptions to help
customers manage their finances and spot transactions
they do not recognise. We now have 4.3 million
customers regularly using our mobile app in the
UK, over 4% higher than Q4 2016. Nearly 80% of
our commercial customers' interaction with us
is via digital channels.
-- In February 2017, RBS launched a fully automated
lending platform, ESME, to originate unsecured
SME lending of up to GBP150,000. Where our credit
risk appetite permits, these loans can be processed
and funded within an hour, responding to our
customers' desire for speed and simplicity.
-- RBS launched 'Royal Bank Assist', our artificial
intelligence-based, 'always-on' online support
on the Royal Bank of Scotland website, supported
by IBM Watson and LivePerson, answering our top
80 customer questions and getting customers to
the right place to meet their needs more quickly.
-- RBS has launched a dedicated team of 1,200 TechXperts,
who are in our branches helping customers make
the most of online and mobile banking, providing
advice on how to stay safe and secure.
Highlights
Capital reorganisation
-- It is our intention to implement a capital reorganisation
in 2017 in order to increase the distributable
reserves of the parent company, RBSG plc, providing
greater flexibility for future distributions
and preference share redemptions. We intend to
seek shareholder approval to reduce the share
premium account by around GBP25 billion and to
cancel the capital redemption reserve of around
GBP5 billion. This will, subject to approval
by shareholders and regulators, and confirmation
by the Court of Session in Edinburgh, increase
RBSG plc distributable reserves by around GBP30
billion. As at 31 March 2017, distributable reserves
were GBP7.9 billion.
IFRS 9
-- Ahead of adopting IFRS 9 Financial Instruments
from 1 January 2018, RBS has adopted the provisions
in respect of the presentation of gains and losses
on financial liabilities at fair value that are
not held for trading from 1 January 2017. Accordingly,
a loss of GBP20 million has been reported in
the Consolidated Statement of Other Comprehensive
Income instead of in the Consolidated Income
Statement. Comparatives have not been restated,
however, in Q1 2016 a gain of GBP108 million
was included in the Consolidated Income Statement.
Own credit adjustments on financial liabilities
held for trading will continue to be recognised
in the Consolidated Income Statement, a loss
of GBP29 million was reported in Q1 2017 (Q1
2016 - gain of GBP148 million).
Williams & Glyn
-- On 17 February 2017, RBS announced that it had
been informed by HM Treasury (HMT) that the Commissioner
responsible for EU competition policy planned
to propose to the College of Commissioners to
open proceedings to gather evidence on an alternative
plan for RBS to meet its remaining state aid
obligations. On 4 April 2017, the European Commission
announced that it had opened an in-depth investigation
into whether this alternative plan was an appropriate
replacement for the existing requirement to achieve
separation and divestment of Williams & Glyn
by 31 December 2017.
Progress on 2017 targets
RBS remains committed to achieving its priority targets for 2017.
Strategy
goal 2017 target Q1 2017 Progress
------------------- --------------------------- -------------------------------
Strength Maintain bank CET1 CET1 ratio of 14.1%;
and sustainability ratio of 13% up 70 basis points from
Q4 2016
------------------- --------------------------- -------------------------------
Customer Significantly increase The March 2017 NatWest
experience NPS or maintain No.1 Personal NPS score was
in chosen customer the highest seen since
segments we started to track it
in 2009
Commercial Banking is
a market leader for customer
advocacy, seeing a significant
improvement in NPS since
Q1 2013 and as of Q1
2017 we have more promoters
of our brand than ever
before
------------------- --------------------------- -------------------------------
Simplifying Reduce operating expenses Operating expenses down
the bank by at least GBP750 GBP278 million, or 12.9%,
million (1) excluding the VAT recovery
------------------- --------------------------- -------------------------------
Supporting Net 3% growth on total Net customer loans in
growth PBB and CPB loans PBB and CPB are up 5.6%
to customers on an annualised basis
for the year to date;
47% of the total full
year target
------------------- --------------------------- -------------------------------
Employee Improve employee engagement Reviewed bi-annually
engagement
------------------- --------------------------- -------------------------------
Note:
(1) Cost saving target and progress 2017 calculated using operating expenses
excluding restructuring costs, litigation and conduct costs, write down
of goodwill and VAT recoveries.
Highlights
Outlook (1)
-- We retain the 2017 full year guidance and medium
term outlook we provided in the 2016 Annual Results
document. In addition, and subject to providing
fully for remaining significant legacy issues
in 2017, our expectation remains that we will
be profitable in 2018.
-- We anticipate that adjusted operating profit
will be lower in Q2 2017 compared with Q1 2017
reflecting expected reduced income in NatWest
Markets, coupled with increased adjusted operating
expenses, in part due to the absence of the Q1
2017 VAT recovery in Q2 2017. Separately, we
expect to recognise a gain on the sale of RBS's
stake in Vocalink of approximately GBP160 million
during the quarter.
Recent developments
-- RBS N.V.'s associate Alawwal Bank announced on
25 April 2017 that it was starting merger discussions
with Saudi British Bank (SABB). The 40% stake
in Alawwal Bank is the remaining significant
shared asset of the RFS Consortium.
Note:
(1) The targets, expectations and trends discussed in this section represent management's current expectations and are subject to change, including as a result of the factors described in this document and in the "Risk Factors" on pages 432 to 463 of the Annual Report and Accounts 2016. These statements constitute forward-looking statements; refer to Forward-looking statements in this announcement.
Summary consolidated income statement for the period ended 31 March 2017
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
GBPm GBPm GBPm
================================================ ======== =========== ========
Net interest income 2,234 2,208 2,156
================================================ ======== =========== ========
Own credit adjustments (29) (114) 256
Gain on redemption of own debt 2 1 -
Strategic disposals - - (6)
Other operating income 1,005 1,121 658
================================================ ======== =========== ========
Non-interest income 978 1,008 908
================================================ ======== =========== ========
Total income 3,212 3,216 3,064
================================================ ======== =========== ========
Restructuring costs (577) (1,007) (238) Litigation and conduct costs (54) (4,128) (31) Other costs (1,822) (2,219) (2,151) ================================================ ======== =========== ======== Operating expenses (2,453) (7,354) (2,420) ================================================ ======== =========== ======== Profit/(loss) before impairment (losses)/releases 759 (4,138) 644 Impairment (losses)/releases (46) 75 (223) ================================================ ======== =========== ======== Operating profit/(loss) before tax 713 (4,063) 421 Tax charge (327) (244) (80) ================================================ ======== =========== ======== Profit/(loss) for the period 386 (4,307) 341 ================================================ ======== =========== ======== Attributable to: Non-controlling interests 11 (27) 22 Other owners 116 161 94 Dividend access share - - 1,193 Ordinary shareholders 259 (4,441) (968) ================================================ ======== =========== ======== Notable items memo Adjusted basis Total income - adjusted (1) 3,239 3,329 2,814 Operating expenses - adjusted (2) (1,822) (2,219) (2,151) Operating profit - adjusted (1,2) 1,371 1,185 440 Within adjusted total income IFRS volatility in Central items (3) (18) 308 (356) FX (losses)/gains in Central items (52) 140 52 Capital Resolution disposal losses (50) (325) 4 Unwind of securitisations in the property portfolio (105) - - Within adjusted operating expenses VAT recovery in Central items 51 - - Bank levy - (190) - Within restructuring costs Property exit costs (235) - - Williams & Glyn restructuring costs (12) (810) (158) Within impairment (losses)/releases Capital Resolution impairment releases/(losses) 45 130 (196) Capital Resolution shipping portfolio impairment releases/(losses) 4 30 (226) Ulster Bank RoI impairment releases 24 47 13 Commercial Banking impairment losses (61) (83) (14) ================================================ ======== =========== ========
Notes:
(1) Excluding own credit adjustments, gain on redemption of own debt and strategic
disposals.
(2) Excluding restructuring costs and litigation and conduct costs.
(3) IFRS volatility relates to loans which are economically hedged but for which
hedge accounting is not permitted under IFRS.
Details of other comprehensive income are provided on page 26.
Summary consolidated balance sheet as at 31 March 2017
31 March 31 December
2017 2016
GBPm GBPm
======================================== ======== ===========
Cash and balances at central banks 83,160 74,250
Net loans and advances to banks (1) 20,513 17,278
Net loans and advances to customers
(1) 326,733 323,023
Reverse repurchase agreements and stock
borrowing 45,451 41,787
Debt securities and equity shares 77,347 73,225
Assets of disposal groups 92 13
Other assets 25,927 22,099
======================================== ======== ===========
Funded assets 579,223 551,675
Derivatives 204,052 246,981
======================================== ======== ===========
Total assets 783,275 798,656
======================================== ======== ===========
Bank deposits (2) 40,276 33,317
Customer deposits (2) 351,498 353,872
Repurchase agreements and stock lending 44,966 32,335
Debt securities in issue 28,163 27,245
Subordinated liabilities 15,514 19,419
Derivatives 196,224 236,475
Provisions for liabilities and charges 11,619 12,836
Liabilities of disposal groups 14 15
Other liabilities 45,490 33,738
======================================== ======== ===========
Total liabilities 733,764 749,252
Non-controlling interests 805 795
Owners' equity 48,706 48,609
======================================== ======== ===========
Total liabilities and equity 783,275 798,656
======================================== ======== ===========
Contingent liabilities and commitments 148,324 150,691
======================================== ======== ===========
Notes:
(1) Excludes reverse repurchase agreements and stock
borrowing.
(2) Excludes repurchase agreements and stock lending.
Analysis of results
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Net interest income GBPm GBPm GBPm
===================================== ======== =========== ========
Net interest income
RBS 2,234 2,208 2,156
- UK Personal & Business Banking 1,111 1,093 1,019
- Ulster Bank RoI 105 105 105
- Commercial Banking 567 542 536
- Private Banking 112 111 113
- RBS International 80 77 75
- NatWest Markets 29 29 19
- Capital Resolution 33 44 86
- Williams & Glyn 165 170 162
- Central items & other 32 37 41
Average interest-earning assets
(IEA)
RBS 405,122 401,548 403,384
- UK Personal & Business Banking 149,581 147,703 135,793
- Ulster Bank RoI 24,424 26,259 24,178
- Commercial Banking 130,885 128,174 114,855
- Private Banking 17,597 17,679 16,259
- RBS International 22,949 22,793 21,075
- NatWest Markets 17,192 14,085 11,568
- Capital Resolution 16,771 19,696 30,767
- Williams & Glyn 25,170 25,145 23,356
- Central items & other 553 14 25,533
===================================== ======== =========== ========
Yields, spreads and margins of
the banking business
===================================== ======== =========== ========
Gross yield on interest-earning
assets
of the banking business (1,2) 2.70% 2.72% 2.82%
Cost of interest-bearing liabilities
of banking business (1) (0.69%) (0.82%) (1.01%)
===================================== ======== =========== ========
Interest spread of the banking
business (1,3) 2.01% 1.90% 1.81%
Benefit from interest-free funds 0.23% 0.29% 0.34%
Net interest margin (4)
RBS 2.24% 2.19% 2.15%
- UK Personal & Business Banking 3.01% 2.94% 3.02%
- Ulster Bank RoI 1.74% 1.59% 1.75%
- Commercial Banking 1.76% 1.68% 1.88%
- Private Banking 2.58% 2.50% 2.80%
- RBS International 1.41% 1.34% 1.43%
- NatWest Markets 0.68% 0.82% 0.66%
- Capital Resolution 0.80% 0.89% 1.12%
- Williams & Glyn 2.66% 2.69% 2.79%
===================================== ======== =========== ========
Third party customer rates (5)
================================== ======= ======= =======
Third party customer asset rate
- UK Personal & Business Banking 3.57% 3.64% 3.95%
- Ulster Bank RoI (6) 2.47% 2.20% 2.33%
- Commercial Banking 2.67% 2.65% 2.87%
- Private Banking 2.71% 2.76% 3.01%
- RBS International 2.75% 2.93% 3.29%
Third party customer funding rate
- UK Personal & Business Banking (0.17%) (0.28%) (0.62%)
- Ulster Bank RoI (6) (0.40%) (0.42%) (0.59%) - Commercial Banking (0.14%) (0.27%) (0.35%) - Private Banking (0.07%) (0.12%) (0.23%) - RBS International (0.03%) (0.08%) (0.24%) ================================== ======= ======= ======= For the notes to this table refer to the following page.
Analysis of results
Notes:
(1) For the purpose of calculating gross yields and interest spread, interest
receivable has been decreased by GBP18 million and interest payable has
been decreased by GBP18 million in respect of negative interest relating
to both financial assets and financial liabilities that attracted negative
interest.
(2) Gross yield is the interest earned on average interest-earning assets as
a percentage of average interest-earning assets.
(3) Interest spread is the difference between the gross yield and interest paid
on average interest-bearing liabilities as a percentage of average interest-bearing
liabilities.
(4) Net interest margin is net interest income as a percentage of average interest-earning
assets.
(5) Net interest margin includes Treasury allocations and interest on intercompany
borrowings, which are excluded from third party customer rates.
(6) Ulster Bank Ireland DAC manages its funding and liquidity requirements locally.
Its liquid asset portfolios and non-customer related funding sources are
included within its net interest margin, but excluded from its third party
asset and liability rates.
Net interest income
Key points
-- Net interest income of GBP2,234 million was GBP78 million, or 3.6%, higher
than Q1 2016 principally reflecting higher volumes in UK PBB, up GBP92 million
or 9.0%, and Commercial Banking, up GBP31 million or 5.8%. Partially offsetting,
Capital Resolution reduced by GBP53 million in line with the planned shrinkage
of the balance sheet.
-- NIM of 2.24% for Q1 2017 was 9 basis points higher than Q1 2016, as the
benefit associated with the reduction in low yielding assets more than offset
asset margin pressure and mix impacts across the core businesses. NIM increased
by 5 basis points compared with Q4 2016 largely driven by increases in UK
PBB and Commercial Banking associated with deposit book re-pricing.
-- Across PBB and CPB, NIM reduced by 6 basis points to 2.32% compared with
Q1 2016, but increased by 8 basis points compared with Q4 2016.
-- UK PBB NIM decreased by 1 basis point compared with Q1 2016 to 3.01% principally
reflecting a decline in current account hedge returns and reduced mortgage
margins, partially offset by savings re-pricing benefits. Compared with
Q4 2016, NIM increased by 7 basis points driven by the full effect of savings
re-pricing in November 2016.
-- Ulster Bank RoI NIM of 1.74% increased by 15 basis points compared with
Q4 2016 principally reflecting income recognised on a cohort of non performing
loans in Q1 2017.
-- Commercial Banking NIM fell by 12 basis points from Q1 2016 to 1.76% driven
by asset margin pressure in a competitive market and lower rate environment.
Compared with Q4 2016, NIM increased by 8 basis points due to the active
re-pricing of the deposit book and asset pricing actions on new lending.
-- Private Banking NIM of 2.58% reduced by 22 basis points compared with Q1
2016 reflecting the competitive market and low rate environment.
-- Structural hedges of GBP126 billion generated a benefit of GBP0.3 billion
through net interest income for Q1 2017.
Analysis of results
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Non-interest income GBPm GBPm GBPm
====================================== ======== =========== ========
Net fees and commissions 605 608 654
Income/(loss) from trading activities 428 622 (110)
Own credit adjustments (OCA) (29) (114) 256
Gain on redemption of own debt 2 1 -
Strategic disposals - - (6)
Other operating income (28) (109) 114
====================================== ======== =========== ========
Total non-interest income 978 1,008 908
====================================== ======== =========== ========
Key points
-- Non-interest income was GBP978 million, an increase of GBP70 million, or
7.7%, compared with Q1 2016. NatWest Markets non-interest income increased
by GBP137 million, or 42.5%, to GBP459 million reflecting consistent customer
activity and an improved trading environment compared to a particularly
difficult Q1 2016, partially offset by an GBP84 million adverse movement
in OCA. Central items non-interest income improved by GBP117 million principally
reflecting a reduction in IFRS volatility losses, GBP18 million compared
with GBP356 million in Q1 2016, partially offset by a GBP52 million FX loss
(compared with a GBP52 million gain in Q1 2016) and a GBP105 million charge
in respect of the unwind of securitisations relating to our property portfolio.
Partially offsetting, Capital Resolution non-interest income was a loss
of GBP92 million compared with a gain of GBP67 million in Q1 2016 reflecting
a GBP115 million adverse movement in OCA and increased disposal losses,
GBP50 million compared with GBP2 million in Q1 2016.
-- Income from trading activities increased by GBP538 million compared with
Q1 2016 largely reflecting reduced IFRS volatility losses and increased
NatWest Markets income.
-- Other operating income decreased by GBP142 million compared with Q1 2016
largely reflecting a GBP105 million charge in respect of the unwind of securitisations
relating to our property portfolio.
Analysis of results
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Operating expenses GBPm GBPm GBPm
===================================== ======== =========== ========
Staff costs 1,024 1,025 1,202
Premises and equipment 310 346 315
Other administrative expenses 320 601 446
Restructuring costs (see below) 577 1,007 238
Litigation and conduct costs 54 4,128 31
===================================== ======== =========== ========
Administrative expenses 2,285 7,107 2,232
Depreciation and amortisation 168 178 178
Write down of intangible assets - 69 10
===================================== -------- ----------- --------
Operating expenses 2,453 7,354 2,420
===================================== ======== =========== ========
Adjusted operating expenses (1) 1,822 2,219 2,151
===================================== ======== =========== ========
Restructuring costs comprise:
- staff expenses 291 117 121
- premises, equipment, depreciation
and amortisation 241 107 9
- other 45 783 108
===================================== ======== =========== ========
577 1,007 238
===================================== ======== =========== ========
Staff costs as a % of total income 31.9% 31.9% 39.2%
Cost:income ratio (2) 76.1% 230.2% 78.7%
Cost:income ratio - adjusted (2,3) 55.8% 66.3% 76.1%
Employee numbers (FTE - thousands) 76.2 77.8 92.4
===================================== ======== =========== ========
Notes:
(1) Excluding restructuring costs and litigation and conduct costs.
(2) Operating lease depreciation included in income (Q1 2017 - GBP36 million;
Q4 2016 - GBP37 million and Q1 2016 - GBP38 million).
(3) Excluding restructuring costs, litigation and conduct costs, own credit
adjustments, gain on redemption of own debt and strategic disposals.
Key points
-- Total operating expenses of GBP2,453 million were GBP33 million, or 1.4%,
higher than Q1 2016 reflecting a GBP339 million increase in restructuring
costs and a GBP23 million increase in litigation and conduct costs, partially
offset by a GBP329 million, or 15.3%, reduction in adjusted operating expenses.
-- Excluding a GBP51 million VAT recovery, adjusted operating expenses reduced
by GBP278 million, or 12.9%, compared with Q1 2016 and we remain on target
to achieve a GBP750 million reduction for the full year. The cost reduction
was principally driven by Capital Resolution, down GBP163 million or 70.3%,
and Central items, down GBP79 million, excluding the VAT recovery. Across
PBB, CPB and NatWest Markets, adjusted operating expenses reduced by GBP22
million, or 1.2%.
-- Staff costs of GBP1,024 million, were GBP178 million, or 14.8%, lower than
Q1 2016 underpinned by a 16,200, or 17.5%, reduction in FTEs.
-- Restructuring costs of GBP577 million included a GBP235 million charge associated
with the planned reduction of our property portfolio, a GBP73 million net
settlement relating to the RBS Netherlands pension scheme and a GBP70 million
charge in Capital Resolution, primarily in respect of Asia-Pacific restructuring.
-- Litigation and conduct costs of GBP54 million were GBP23 million higher
than Q1 2016 and reflected a number of small items.
-- Compared with Q4 2016, adjusted operating expenses reduced by GBP397 million
principally reflecting the GBP190 million UK bank levy charge and a GBP69
million write down of intangible assets in Q4 2016 and a GBP51 million VAT
recovery in Q1 2017.
Analysis of results
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Impairment losses/(releases) GBPm GBPm GBPm
======================================== ======== =========== ========
Loan impairment losses/(releases)
- individually assessed 42 (40) 186
- collectively assessed 38 (1) 16
- latent 4 (25) 21
======================================== ======== =========== ========
Total loan impairment losses/(releases) 84 (66) 223
Securities (38) (9) -
======================================== ======== =========== ========
Total impairment losses/(releases) 46 (75) 223
======================================== ======== =========== ========
31 March 31 December 31 March
Credit metrics (1) 2017 2016 2016
==================================== =========== =========== ===========
Gross customer loans GBP330,843m GBP327,478m GBP325,339m
Loan impairment provisions GBP4,110m GBP4,455m GBP6,701m
Risk elements in lending (REIL) GBP9,726m GBP10,310m GBP11,867m
Provisions as a % of REIL 42% 43% 57%
REIL as a % of gross customer loans 2.9% 3.1% 3.6%
Provisions as a % of gross customer
loans 1.2% 1.4% 2.1%
==================================== =========== =========== ===========
Note:
(1) Includes disposal groups and excludes reverse repos.
Key points
-- A net impairment loss of GBP46 million, 6 basis points of gross customer
loans, compared with a loss of GBP223 million in Q1 2016.
-- Capital Resolution reported a net impairment release of GBP45 million in
Q1 2017 compared with a loss of GBP196 million in Q1 2016 which included
a GBP226 million charge in respect of the shipping portfolio.
-- Commercial Banking reported a net impairment loss of GBP61 million in Q1
2017, GBP47 million higher than Q1 2016 with four specific impairment charges
totalling GBP47 million in the quarter.
-- REIL reduced by GBP2,141 million, compared with Q1 2016, to GBP9,726 million
reflecting Capital Resolution run-down and a portfolio sale in Ulster Bank
RoI partially offset by an increase in the shipping portfolio, foreign exchange
movements and the implementation of a revised mortgage methodology in Ulster
Bank RoI. REIL represented 2.9% of gross customer loans compared with 3.6%
at 31 March 2016 and 3.1% at 31 December 2016. Provision coverage was 42%
compared with 57% at 31 March 2016 and 43% at 31 December 2016.
-- Excluding REIL in Capital Resolution and Ulster Bank RoI, REIL were GBP4.1
billion or 1.4% of the respective gross customer loans.
Capital and leverage
Key points
-- CET1 has increased by 70 basis points to 14.1% as a result of the attributable
profit and the reduction in RWAs in the period.
-- RWAs have decreased by GBP6.5 billion to GBP221.7 billion primarily driven
by a GBP4.0 billion reduction in Capital Resolution reflecting disposal
and run offs in line with exit strategy and a GBP1.1 billion reduction in
NatWest Markets principally due to business movements. Excluding volume
growth, RWAs across PBB, CPB and NatWest Markets reduced by GBP3.2 billion
during Q1 2017.
-- Operational risk RWAs have decreased by GBP1.9 billion as a result of the
annual recalculation.
-- Leverage ratio decreased marginally to 5.0% as increased lending exposure
was offset by movements in capital.
Capital and leverage ratios
End-point CRR
basis (1)
======================
31 March 31 December
2017 2016
Risk asset ratios % %
============================================ ========= ===========
CET1 14.1 13.4
Tier 1 15.9 15.2
Total 19.2 19.2
============================================ ========= ===========
Capital GBPm GBPm
============================================ ========= ===========
Tangible equity 35,186 34,982
============================================ ========= ===========
Expected loss less impairment provisions (1,396) (1,371)
Prudential valuation adjustment (377) (532)
Deferred tax assets (887) (906)
Own credit adjustments (245) (304)
Pension fund assets (186) (208)
Cash flow hedging reserve (888) (1,030)
Other deductions 45 (8)
============================================ ========= ===========
Total deductions (3,934) (4,359)
CET1 capital 31,252 30,623
AT1 capital 4,041 4,041
============================================ ========= ===========
Tier 1 capital 35,293 34,664
Tier 2 capital 7,370 9,161
============================================ ========= ===========
Total regulatory capital 42,663 43,825
============================================ ========= ===========
Risk-weighted assets
============================================ ========= ===========
Credit risk
- non-counterparty 160,100 162,200
- counterparty 20,800 22,900
Market risk 17,000 17,400
Operational risk 23,800 25,700
============================================ ========= ===========
Total RWAs 221,700 228,200
============================================ ========= ===========
Leverage (2)
============================================ ========= ===========
Derivatives 204,100 247,000
Loans and advances 347,200 340,300
Reverse repos 45,500 41,800
Other assets 186,500 169,600
============================================ ========= ===========
Total assets 783,300 798,700
Derivatives
- netting and variation margin (204,200) (241,700)
- potential future exposures 63,400 65,300
Securities financing transactions gross
up 2,800 2,300
Undrawn commitments 55,100 58,600
Regulatory deductions and other adjustments 300 100
============================================ ========= ===========
CRR leverage exposure 700,700 683,300
============================================ ========= ===========
Tier 1 capital 35,293 34,664
============================================ ========= ===========
CRR leverage ratio % 5.0 5.1
============================================ ========= ===========
UK leverage exposure (3) 622,200 614,600
============================================ ========= ===========
UK leverage ratio % (3) 5.7 5.6
============================================ ========= ===========
Notes:
(1) CRR as implemented by the PRA in the UK, with effect from 1 January 2014.
All regulatory adjustments and deductions to CET1 have been applied in full
for both bases with the exception of unrealised gains on available-for-sale
securities which have been included from 2015 under the PRA transitional
basis.
(2) Based on end-point CRR Tier 1 capital and leverage exposure under the CRR
Delegated Act.
(3) Based on end-point CRR Tier 1 capital and UK leverage exposures reflecting
the post EU referendum measures announced by the Bank of England in the
third quarter of 2016.
Segment performance
Quarter ended 31 March 2017
==================================================================================================
PBB CPB Central
============= ==================================
items
Ulster Commercial Private RBS NatWest Capital Williams & Total
UK Bank & Glyn other
PBB RoI Banking Banking International Markets Resolution (1) (2) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Net interest income 1,111 105 567 112 80 29 33 165 32 2,234
Other non-interest income 266 41 298 48 18 479 (85) 41 (101) 1,005
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income - adjusted
(3) 1,377 146 865 160 98 508 (52) 206 (69) 3,239
Own credit adjustments - (1) - - - (20) (7) - (1) (29)
Gain on redemption of
own debt - - - - - - - - 2 2
Total income 1,377 145 865 160 98 488 (59) 206 (68) 3,212
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Direct expenses - staff
costs (163) (49) (125) (38) (12) (71) (16) (53) (497) (1,024)
-
other
costs (64) (12) (55) (7) (3) (17) (9) (11) (620) (798)
Indirect expenses (489) (47) (268) (68) (28) (233) (44) (20) 1,197 -
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses -
adjusted (4) (716) (108) (448) (113) (43) (321) (69) (84) 80 (1,822)
Restructuring costs -
direct (20) (19) (39) - - - (70) - (429) (577)
- indirect (111) (15) (60) (11) (3) (68) (16) - 284 -
Litigation and conduct
costs (4) - (3) - - (31) (6) - (10) (54)
Operating expenses (851) (142) (550) (124) (46) (420) (161) (84) (75) (2,453)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 526 3 315 36 52 68 (220) 122 (143) 759
Impairment (losses)/releases (32) 24 (61) (3) (7) - 45 (11) (1) (46)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss) 494 27 254 33 45 68 (175) 111 (144) 713
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- adjusted (3,4) 629 62 356 44 48 187 (76) 111 10 1,371
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Additional information
Return on equity (5) 24.8% 4.0% 5.7% 6.0% 12.0% 1.7% nm nm nm 3.1%
Return on equity - adjusted
(3,4,5) 32.0% 9.3% 8.9% 8.6% 13.0% 7.9% nm nm nm 9.7%
Cost:income ratio (6) 61.8% 97.9% 62.0% 77.5% 46.9% 86.1% nm 40.8% nm 76.1%
Cost:income ratio - adjusted
(3,4,6) 52.0% 74.0% 49.7% 70.6% 43.9% 63.2% nm 40.8% nm 55.8%
Total assets (GBPbn) 159.1 24.7 153.3 18.1 25.1 225.3 119.2 25.8 32.7 783.3
Funded assets (GBPbn)
(7) 159.1 24.6 153.3 18.1 25.1 113.9 29.2 25.8 30.1 579.2
Net loans and advances
to customers (GBPbn) 135.8 19.0 99.7 12.5 8.9 17.9 12.3 20.6 - 326.7
Risk elements in lending
(GBPbn) 1.9 3.5 1.7 0.1 0.1 - 2.1 0.3 - 9.7
Impairment provisions
(GBPbn) (1.2) (1.1) (0.8) - - - (0.7) (0.2) (0.1) (4.1)
Customer deposits (GBPbn) 146.3 16.6 97.2 25.7 25.3 8.0 7.6 24.0 0.8 351.5
Risk-weighted assets
(RWAs) (GBPbn) 32.7 17.7 77.8 8.7 9.5 34.1 30.5 9.7 1.0 221.7
RWA equivalent (GBPbn)
(5) 35.7 18.9 81.8 8.7 9.5 36.0 32.7 10.2 1.2 234.7
Employee numbers (FTEs
- thousands) 18.2 3.1 5.4 1.7 0.8 1.2 0.3 4.3 41.2 76.2
================================ ----- ------ ---------- ------- ------------- ------- ---------- -------- ------- -------
For the notes to this table
refer to page 17. nm = not
meaningful
Segment performance
Quarter ended 31 December 2016
====================================================================================================
PBB CPB Central
=============== ==================================
items
Ulster Commercial Private RBS NatWest Capital Williams & Total
Bank & Glyn other
UK PBB RoI Banking Banking International Markets Resolution (1) (2) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Net interest income 1,093 105 542 111 77 29 44 170 37 2,208
Other non-interest income 246 32 325 50 19 285 (329) 47 446 1,121
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income adjusted
(3) 1,339 137 867 161 96 314 (285) 217 483 3,329
Own credit adjustments - - - - - (29) (8) - (77) (114)
Gain on redemption of
own debt - - - - - - - - 1 1
Total income 1,339 137 867 161 96 285 (293) 217 407 3,216
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Direct expenses - staff
costs (161) (57) (130) (39) (12) (64) (23) (60) (479) (1,025)
-
other
costs (72) (23) (69) (12) (4) (7) (3) (13) (991) (1,194)
Indirect expenses (544) (65) (357) (95) (45) (267) (150) (24) 1,547 -
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses -
adjusted (4) (777) (145) (556) (146) (61) (338) (176) (97) 77 (2,219)
Restructuring costs -
direct (1) (6) (12) (6) (1) (3) (21) - (957) (1,007)
- indirect (50) 2 (34) (8) (1) (43) 13 - 121 -
Litigation and conduct
costs (214) (77) (407) 1 (1) (466) (3,156) - 192 (4,128)
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses (1,042) (226) (1,009) (159) (64) (850) (3,340) (97) (567) (7,354)
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 297 (89) (142) 2 32 (565) (3,633) 120 (160) (4,138)
Impairment (losses)/releases (16) 47 (83) 8 1 - 130 (11) (1) 75
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss) 281 (42) (225) 10 33 (565) (3,503) 109 (161) (4,063)
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- adjusted (3,4) 546 39 228 23 36 (24) (331) 109 559 1,185
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Additional information
Return on equity (5) 13.5% (5.8%) (9.1%) 1.6% 8.8% (30.2%) nm nm nm (48.2%)
Return on equity - adjusted
(3,4,5) 27.8% 5.4% 5.3% 4.5% 9.8% (2.7%) nm nm nm 8.6%
Cost:income ratio (6) 77.8% 165.0% 117.1% 98.8% 66.7% nm nm 44.7% nm 230.2%
Cost:income ratio - adjusted
(3,4,6) 58.0% 105.8% 62.6% 90.7% 63.5% 107.6% nm 44.7% nm 66.3%
Total assets (GBPbn) 155.6 24.1 150.5 18.6 23.4 240.0 132.5 25.8 28.2 798.7
Funded assets (GBPbn)
(7) 155.6 24.0 150.5 18.5 23.4 100.9 27.6 25.8 25.4 551.7
Net loans and advances
to customers (GBPbn) 132.1 18.9 100.1 12.2 8.8 17.4 12.8 20.6 0.1 323.0
Risk elements in lending
(GBPbn) 2.0 3.5 1.9 0.1 0.1 - 2.3 0.4 - 10.3
Impairment provisions
(GBPbn) (1.3) (1.2) (0.8) - - - (0.8) (0.2) (0.2) (4.5)
Customer deposits (GBPbn) 145.8 16.1 97.9 26.6 25.2 8.4 9.5 24.2 0.2 353.9
Risk-weighted assets
(RWAs) (GBPbn) 32.7 18.1 78.5 8.6 9.5 35.2 34.5 9.6 1.5 228.2
RWA equivalent (GBPbn)
(5) 35.7 19.5 82.6 8.6 9.5 37.2 37.5 10.1 1.7 242.4
Employee numbers (FTEs
- thousands) 18.3 3.1 5.5 1.7 0.8 1.2 0.4 4.5 42.3 77.8
================================ ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
For the notes to this table
refer to page 17. nm = not
meaningful.
Segment performance
Quarter ended 31 March 2016
==================================================================================================
PBB CPB Central
============= ==================================
items
Ulster Commercial Private RBS NatWest Capital Williams & Total
UK Bank & Glyn other
PBB RoI Banking Banking International Markets Resolution (1) (2) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Net interest income 1,019 105 536 113 75 19 86 162 41 2,156
Other non-interest income 256 50 317 52 15 258 (35) 43 (298) 658
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income - adjusted
(3) 1,275 155 853 165 90 277 51 205 (257) 2,814
Own credit adjustments - 3 - - - 64 108 - 81 256
Strategic disposals - - - - - - (6) - - (6)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income 1,275 158 853 165 90 341 153 205 (176) 3,064
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Direct expenses - staff
costs (181) (51) (131) (40) (10) (67) (45) (62) (615) (1,202)
-
other
costs (63) (11) (49) (14) (5) (14) (33) (15) (745) (949)
Indirect expenses (484) (42) (256) (83) (20) (250) (154) (21) 1,310 -
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses -
adjusted (4) (728) (104) (436) (137) (35) (331) (232) (98) (50) (2,151)
Restructuring costs -
direct (13) (6) (1) (1) - - (7) (20) (190) (238)
- indirect (9) - 1 (15) (1) (12) (9) - 45 -
Litigation and conduct
costs - - (2) - - (18) (10) - (1) (31)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses (750) (110) (438) (153) (36) (361) (258) (118) (196) (2,420)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 525 48 415 12 54 (20) (105) 87 (372) 644
Impairment (losses)/releases (16) 13 (14) (2) (2) - (196) (6) - (223)
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss) 509 61 401 10 52 (20) (301) 81 (372) 421
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- adjusted (3,4) 531 64 403 26 53 (54) (377) 101 (307) 440
================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Additional information
Return on equity (5) 26.1% 8.8% 11.1% 1.5% 16.0% (2.6%) nm nm nm (9.6%)
Return on equity - adjusted
(3,4,5) 27.3% 9.2% 11.2% 5.1% 16.3% (4.4%) nm nm nm (9.4%)
Cost:income ratio (6) 58.8% 69.6% 49.3% 92.7% 40.0% 105.9% nm 57.6% nm 78.7%
Cost:income ratio - adjusted
(3,4,6) 57.1% 67.1% 49.0% 83.0% 38.9% 119.5% nm 47.8% nm 76.1%
Total assets (GBPbn) 146.3 22.7 139.4 17.4 23.7 255.9 218.8 24.2 34.5 882.9
Funded assets (GBPbn)
(7) 146.3 22.6 139.4 17.3 23.7 116.0 50.2 24.2 31.0 570.7 Net loans and advances to customers (GBPbn) 121.8 17.9 96.4 11.6 8.0 18.6 22.4 20.1 1.8 318.6 Risk elements in lending (GBPbn) 2.4 4.5 2.2 0.1 0.1 - 2.2 0.4 - 11.9 Impairment provisions (GBPbn) (1.6) (2.7) (1.1) - - - (1.0) (0.3) - (6.7) Customer deposits (GBPbn) 136.9 13.7 97.1 23.2 21.6 6.7 24.9 24.3 6.6 355.0 Risk-weighted assets (RWAs) (GBPbn) 34.7 20.4 75.7 8.6 9.1 36.1 47.6 9.7 7.6 249.5 RWA equivalent (GBPbn) (5) 37.5 21.7 79.7 8.6 9.1 36.7 48.4 10.1 7.8 259.6 Employee numbers (FTEs - thousands) 21.4 3.2 6.0 1.8 0.7 1.3 1.0 5.5 51.5 92.4 ================================ ===== ====== ========== ======= ============= ======= ========== ======== ======= ======= nm = not meaningful.
Notes:
(1) Williams & Glyn refers to the business formerly intended to be divested
as a separate legal entity and comprises RBS England and Wales branch-based
businesses, along with certain small and medium enterprises and corporate
activities across the UK. During the period presented W&G has not operated
as a separate legal entity.
(2) Central items include unallocated transactions which principally comprise
volatile items under IFRS and balances in relation to international private
banking for Q1 2016.
(3) Excluding own credit adjustments, gain on redemption of own debt and strategic
disposals.
(4) Excluding restructuring costs and litigation and conduct costs.
(5) RBS's CET 1 target is 13% 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
dividends is divided by notional equity allocated at different rates of
14% (Ulster Bank RoI - 11% prior to Q1 2017), 11% (Commercial Banking),
14% (Private Banking - 15% prior to Q1 2017), 12% (RBS International)
and 15% for all other segments, of the monthly average of segmental risk-weighted
assets incorporating the effect of capital deductions (RWAes). RBS Return
on equity is calculated using profit for the period attributable to ordinary
shareholders.
(6) Operating lease depreciation included in income (Q1 2017 - GBP36 million;
Q4 2016 - GBP37 million and Q1 2016 - GBP38 million).
(7) Funded assets exclude derivative assets.
Segment performance
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Total income by segment GBPm GBPm GBPm
======================================= ======== =========== ========
UK PBB
Personal advances 225 215 204
Personal deposits 204 184 168
Mortgages 590 598 564
Cards 137 150 142
Business banking 194 188 182
Other 27 4 15
======================================= ======== =========== ========
Total 1,377 1,339 1,275
======================================= ======== =========== ========
Ulster Bank RoI
Corporate 45 34 56
Retail 100 101 100
Other - 2 2
Total 145 137 158
======================================= ======== =========== ========
Commercial Banking
Commercial lending 468 503 436
Deposits 123 109 125
Asset and invoice finance 171 175 177
Other 103 80 115
======================================= ======== =========== ========
Total 865 867 853
======================================= ======== =========== ========
Private Banking
Investments 25 23 28
Banking 135 138 137
======================================= ======== =========== ========
Total 160 161 165
======================================= ======== =========== ========
RBS International 98 96 90
======================================= ======== =========== ========
NatWest Markets
Rates 325 129 121
Currencies 128 157 144
Financing 88 78 42
Other (33) (50) (30)
======================================= ======== =========== ========
Total excluding own credit adjustments 508 314 277
Own credit adjustments (20) (29) 64
======================================= ======== =========== ========
Total 488 285 341
======================================= ======== =========== ========
Capital Resolution
Portfolio and GTS 16 34 52
Shipping 5 6 16
Markets 16 6 (29)
Other (39) (6) 8
======================================= ======== =========== ========
Total excluding disposals and
own credit adjustments (2) 40 47
Disposal losses (50) (325) (2)
Own credit adjustments (7) (8) 108
======================================= ======== =========== ========
Total (59) (293) 153
======================================= ======== =========== ========
Williams & Glyn (1)
Retail 119 129 115
Commercial 87 88 90
======================================= ======== =========== ========
Total 206 217 205
======================================= ======== =========== ========
Central items (68) 407 (176)
======================================= ======== =========== ========
Total RBS 3,212 3,216 3,064
======================================= ======== =========== ========
Note:
(1) Williams & Glyn refers to the business formerly
intended to be divested as a separate legal entity
and comprises RBS England and Wales branch-based
businesses, along with certain small and medium
enterprises and corporate activities across the
UK. During the period presented Williams & Glyn
has not operated as a separate legal entity.
Segment performance
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
Impairment losses/(releases) by
segment GBPm GBPm GBPm
==================================== ======== =========== ========
UK PBB
Personal advances 28 38 6
Mortgages (18) (39) 4
Business banking 2 (3) -
Cards 20 20 6
Total 32 16 16
==================================== ======== =========== ========
Ulster Bank RoI
Mortgages (14) (30) 1
Commercial real estate
- investment 2 (1) (5)
- development (3) (1) (2)
Other lending (9) (15) (7)
==================================== ======== =========== ========
Total (24) (47) (13)
==================================== ======== =========== ========
Commercial Banking
Commercial real estate 2 8 (2)
Asset and invoice finance 16 21 3
Private sector services (education,
health etc) (2) 7 1
Banks & financial institutions 1 - -
Wholesale and retail trade repairs 7 6 3
Hotels and restaurants 3 7 -
Manufacturing 2 1 1
Construction - 13 1
Other 32 20 7
==================================== ======== =========== ========
Total 61 83 14
==================================== ======== =========== ========
Private Banking 3 (8) 2
==================================== ======== =========== ========
RBS International 7 (1) 2
==================================== ======== =========== ========
Capital Resolution (45) (130) 196
==================================== ======== =========== ========
Williams & Glyn (1)
Retail 8 7 5
Commercial 3 4 1
==================================== ======== =========== ========
Total 11 11 6
==================================== ======== =========== ========
Central items 1 1 -
==================================== ======== =========== ========
Total RBS 46 (75) 223
==================================== ======== =========== ========
31 March 31 December 31 March
2017 2016 2016
Analysis of Capital Resolution
RWAs by portfolio GBPbn GBPbn GBPbn
==================================== ======== =========== ========
Portfolio and GTS 2.8 3.2 8.5
Shipping 2.4 2.8 4.2
Markets 14.0 15.8 22.4
Alawwal Bank 7.8 7.9 7.3
Other 1.7 2.0 2.4
==================================== ======== =========== ========
Total credit and market risk RWAs 28.7 31.7 44.8
Operational risk 1.8 2.8 2.8
==================================== ======== =========== ========
Total RWAs 30.5 34.5 47.6
==================================== ======== =========== ========
Note:
(1) Williams & Glyn refers to the business formerly
intended to be divested as a separate legal entity
and comprises RBS England and Wales branch-based
businesses, along with certain small and medium
enterprises and corporate activities across the
UK. During the period presented Williams & Glyn
has not operated as a separate legal entity.
Segment performance
31 March 31 December 31 March
2017 2016 2016
Loans and advances to customers
(gross) by segment (1) GBPbn GBPbn GBPbn
======================================= ======== =========== ========
UK PBB
Personal advances 6.1 6.0 6.0
Mortgages 120.6 117.1 108.0
Business banking 6.6 6.4 5.5
Cards 3.7 3.9 3.9
Total 137.0 133.4 123.4
======================================= ======== =========== ========
Ulster Bank RoI
Mortgages 15.0 15.3 14.8
Commercial real estate
- investment 0.8 0.7 1.0
- development 0.2 0.2 0.6
- other lending 4.1 3.9 4.2
======================================= ======== =========== ========
Total 20.1 20.1 20.6
======================================= ======== =========== ========
Commercial Banking
Commercial real estate 17.1 16.9 17.5
Asset and invoice finance 14.2 14.1 14.4
Private sector services (education,
health etc) 6.8 6.9 7.0
Banks & financial institutions 8.9 8.9 7.4
Wholesale and retail trade repairs 8.3 8.4 8.3
Hotels and restaurants 3.9 3.7 3.5
Manufacturing 6.3 6.6 6.4
Construction 2.2 2.1 2.2
Other 32.8 33.3 30.8
======================================= ======== =========== ========
Total 100.5 100.9 97.5
======================================= ======== =========== ========
Private Banking
Personal advances 2.2 2.3 2.6
Mortgages 7.4 7.0 6.8
Other 2.9 2.9 2.2
======================================= ======== =========== ========
Total 12.5 12.2 11.6
======================================= ======== =========== ========
RBS International
Corporate 6.3 6.2 5.4
Mortgages 2.6 2.6 2.6
Total 8.9 8.8 8.0
======================================= ======== =========== ========
Capital Resolution 13.0 13.6 23.4
======================================= ======== =========== ========
Williams & Glyn (2)
Retail 12.3 12.3 11.7
Commercial 8.5 8.5 8.7
======================================= ======== =========== ========
Total 20.8 20.8 20.4
======================================= ======== =========== ========
Central items 0.1 0.3 1.8
======================================= ======== =========== ========
Balance sheet
NatWest Markets
======================================= ======== =========== ========
Loans and advances to customer
(excluding reverse repos) 17.9 17.4 18.6
Loans and advances to banks (excluding
reverse repos) (3) 4.9 3.3 5.2
Reverse repos 40.8 38.6 40.4
Securities 25.4 22.0 29.5
Cash and eligible bills 15.0 13.4 12.2
Other 9.9 6.2 10.1
======================================= ======== =========== ========
Total funded assets 113.9 100.9 116.0
======================================= ======== =========== ========
Notes:
(1) Excludes reverse repurchase agreements and includes
disposal groups.
(2) Williams & Glyn refers to the business formerly
intended to be divested as a separate legal entity
and comprises RBS England and Wales branch-based
businesses, along with certain small and medium
enterprises and corporate activities across the
UK. During the period presented Williams & Glyn
has not operated as a separate legal entity.
(3) Excludes disposal groups.
Segment performance
UK Personal & Business Banking
-- Operating profit was GBP494 million compared
with GBP509 million in Q1 2016 with income growth
of GBP102 million, or 8.0%, more than offset
by a GBP16 million increase in impairments and
a GBP109 million higher restructuring charge.
Return on equity of 24.8% compared with 26.1%
in Q1 2016. Adjusted operating profit of GBP629
million was GBP98 million, or 18.5%, higher than
Q1 2016.
-- UK PBB continued to deliver support for both
personal and business customers with net loans
and advances of GBP135.8 billion up GBP14.0 billion,
or 11.5%, compared with Q1 2016 driven by continued
strong growth across key product areas. Gross
new mortgage lending in the quarter of GBP7.8
billion was 10% higher than Q1 2016 with market
share of new mortgages at approximately 13% supporting
growth in stock share to approximately 9.0% at
31 March 2017, up from 8.8% at 31 December 2016
and 8.3% at 31 March 2016. Positive momentum
continued across business banking lending with
balances up 4.7%, excluding transfers of GBP0.9
billion as at 31 March 2017, compared with Q1
2016. Margins across asset products were stable
with Q4 2016, although we have seen more aggressive
new business pricing in the quarter from competitors.
-- Customer deposits increased by GBP9.4 billion,
or 6.9%, to GBP146.3 billion compared with Q1
2016 largely driven by personal current account
balance growth of 12.1%. Continued strong balance
growth in Q1 2017 has offset lower hedge income
in personal current accounts.
-- We continue to see higher customer retention
and deepening relationships from our Reward Account
proposition with overall current account attrition
14% lower than Q1 2016. The Reward Account is
being re-positioned from 26 June 2017 with a
reduced monthly fee and cashback reduced to 2%
from the current 3% level.
-- The number of active mobile users has increased
by over 4% to 4.3 million since Q4 2016. Our
mobile app won Best Banking App at the British
Bank Awards, helping maintain strong customer
advocacy for our growing number of mobile customers.
Total branch service transactions have reduced
by 10% since Q1 2016. In recognition of this
customer behaviour shift we have announced the
closure of approximately 250 branches over 2017,
from 1,315 at the end of 2016. However, we continue
to invest in our network and enhance our digital
capabilities for our customers.
-- Total income of GBP1,377 million was GBP102 million,
or 8.0%, higher than Q1 2016. Net interest income
increased by GBP92 million, or 9.0%, principally
reflecting strong volume growth and savings re-pricing
benefits partially offset by a decline in current
account hedge returns and lower mortgage margins.
Non-interest income increased by GBP10 million,
or 3.9%, compared with Q1 2016 primarily due
to a GBP7 million debt sale profit. Compared
with Q4 2016, non-interest income increased by
GBP20 million due to an annual home insurance
profit share of GBP20 million.
-- Net interest margin increased by 7 basis points
to 3.01% compared with Q4 2016 driven by the
full effect of savings re-pricing in November
2016. Mortgage book margins were broadly stable
as were the level of average SVR balances from
Q4 2016 to Q1 2017 at around 11% of total mortgage
balances.
-- Adjusted expenses of GBP716 million were GBP12
million, or 1.6%, lower than Q1 2016, with direct
costs GBP17 million, or 7.0%, down due to a 15.0%
reduction in FTEs driving reduced staff costs,
partially offset by increased technology infrastructure
investment costs. Adjusted cost:income ratio
decreased from 57.1% to 52.0%. Compared with
Q4 2016, adjusted expenses reduced by GBP61 million
reflecting a GBP35 million intangible asset write
down and a GBP34 million bank levy charge in
Q4 2016, partially offset by higher technology
infrastructure investment in ATM and cash deposit
machines and branch refurbishment costs.
-- Restructuring costs of GBP131 million were GBP109
million higher than Q1 2016 largely due to a
GBP92 million charge for property exits as we
rationalise our back office property location
strategy and branch distribution network.
-- The net impairment charge of GBP32 million, 9
basis points of gross customer loans, continued
to reflect benign credit conditions. Defaults
in Q1 2017 continue to remain at very low levels
across all portfolios.
-- RWAs were GBP2.0 billion, or 5.8%, lower than
Q1 2016 with lending growth more than offset
by asset mix benefits from lower card balances
and improved credit quality, reflecting the continued
benign credit conditions.
Segment performance
Ulster Bank RoI
-- An operating profit of EUR32 million for the
quarter compared with EUR78 million in Q1 2016.
The decrease in operating profit primarily reflects
the non recurrence of asset disposal benefits
in Q1 2016 (EUR28 million), reduced income on
free funds (EUR14 million) and an increase in
restructuring costs in Q1 2017(EUR31 million)
associated with recent announcements to invest
in and transform key segments of the business.
Adjusted operating profit of EUR72 million was
EUR10 million, or 12.2%, lower than Q1 2016.
Adjusted return on equity of 9.3% compared with
9.2% in Q1 2016.
-- Ulster Bank RoI added a further EUR0.2 billion
of gross new mortgage lending in the quarter,
up 25% compared with Q1 2016. The low yielding
tracker mortgage portfolio declined by EUR0.9
billion to EUR10.8 billion.
-- Customer deposits increased EUR2.1 billion, or
12.1%, compared with Q1 2016 largely driven by
an increase in commercial customer funding. The
loan:deposit ratio reduced by 17 percentage points
to 114%.
-- A non-recurring profit of EUR28 million relating
to asset disposals was recognised in Q1 2016,
of which EUR14 million was reported in income.
-- Total income of EUR168 million was EUR37 million,
or 18.0%, lower than Q1 2016. Excluding the EUR14
million asset disposal gain, income decreased
by EUR23 million primarily due to reduced income
on free funds and a EUR3 million interim adjustment
to the pricing of FX transactions between Ulster
Bank RoI and NatWest Markets, pending completion
of a detailed pricing review.
-- Compared with Q4 2016 total income increased
EUR12 million, or 7.7%, primarily due to income
recognised on a cohort of non performing loans
in Q1 2017 which contributed to a 15 basis point
increase in net interest margin to 1.74%.
-- Adjusted operating expenses of EUR125 million
were EUR11 million, or 8.1%, lower than Q1 2016,
largely reflecting progress in the delivery of
cost saving initiatives and one off accrual releases
of EUR8 million in Q1 2017, partially offset
by a EUR4 million reduction in costs recharged
to other business segments. Adjusted cost:income
ratio increased from 67.1% to 74.0%. Restructuring
costs of EUR39 million were EUR31 million higher
than Q1 2016 reflecting recent announcements
to invest in and restructure the bank, including
the closure of 22 branches.
-- Adjusted operating expenses were EUR44 million
lower than Q4 2016 largely driven by intangible
asset write-offs and a reduction in costs recharged
to other business segments in Q4 2016, in addition
to business driven savings and a one off accrual
release in Q1 2017.
-- Risk elements in lending reduced by EUR1.7 billion
or 29.8% to EUR4.0 billion compared with Q1 2016,
and benefited from the sale of a portfolio of
loans in 2016. As at end Q1 2017, REIL were 17.0%
of gross customer loans.
-- RWAs of EUR20.8 billion reduced by EUR4.9 billion,
or 19.1%, compared with Q1 2016 driven by the
sale of a portfolio of non-performing loans,
combined with adjustments to the mortgage modelling
approach and an improvement in the macro economic
environment. RWAs on the tracker mortgage portfolio
reduced by EUR2.5 billion, or 25.3%, compared
with Q1 2016 to EUR7.5 billion.
Segment performance
Commercial Banking
-- Operating profit of GBP254 million compared with
GBP401 million in Q1 2016. Adjusted operating
profit of GBP356 million was GBP47 million, or
11.7%, lower than Q1 2016, principally reflecting
an increased number of specific impairment losses
taken in the quarter. An adjusted return on equity
of 8.9% compared with 11.2% in Q1 2016.
-- Net loans and advances increased by GBP3.3 billion,
or 3.4%, compared with Q1 2016 reflecting increased
borrowing across sectors. Compared with Q4 2016,
net loans and advances decreased by GBP0.4 billion
as reductions in exposures with weak returns
have been partially offset by growth in some
segments.
-- Total income of GBP865 million was GBP12 million,
or 1.4%, higher than Q1 2016 principally reflecting
higher asset volumes. Net interest margin fell
by 12 basis points from Q1 2016 to 1.76% driven
by asset margin pressure in a competitive market
and lower rate environment. Compared with Q4
2016, net interest margin increased by 8 basis
points due to the active re-pricing of the deposit
book and asset pricing actions on new lending.
-- Adjusted operating expenses increased by GBP12
million, or 2.8%, compared with Q1 2016, reflecting
the non recurrence of one off releases in Q1
2016, with underlying cost reductions of GBP11
million driven by a 10.0% reduction in front
office headcount. Adjusted cost:income ratio
was 49.7% compared with 49.0% in Q1 2016.
-- Net impairment losses of GBP61 million, 24 basis
points of gross customer loans, were GBP47 million
higher than Q1 2016 with four specific impairment
charges totalling GBP47 million in the quarter.
-- RWAs were GBP77.8 billion, an increase of GBP2.1
billion compared to Q1 2016, reflecting asset
growth partially offset by reduced RWA intensity.
Compared with Q4 2016, RWAs reduced by GBP0.7
billion reflecting planned reductions in exposures
with weak returns, partially offset by moderate
growth in some segments.
Private Banking
-- Operating profit of GBP33 million was GBP23 million
higher than Q1 2016 principally reflecting lower
operating expenses. An adjusted return on equity
of 8.6% compared with 5.1% in Q1 2016.
-- Total income of GBP160 million decreased by GBP5
million, or 3.0%, compared with Q1 2016 as the
benefit of increased asset volumes has been more
than offset by reduced net interest margin, down
22 basis points to 2.58% primarily reflecting
the competitive market and low rate environment.
-- Adjusted operating expenses were GBP24 million,
or 17.5%, lower than Q1 2016 at GBP113 million
principally reflecting management actions to
reduce operational costs. Adjusted cost:income
ratio of 70.6% compared with 83.0% in Q1 2016.
-- Net loans and advances increased by GBP0.9 billion,
or 7.8%, to GBP12.5 billion compared with Q1
2016 driven by mortgages. Assets under management
of GBP17.8 billion were GBP3.8 billion higher
compared with Q1 2016 reflecting underlying growth
in net new assets and positive market returns.
In addition, investment cash balances were included
in assets under management for the first time
in Q3 2016. Excluding this, growth was GBP2.6
billion.
RBS International
-- Operating profit of GBP45 million was GBP7 million,
or 13.5%, lower than Q1 2016 driven by higher
operating expenses, partially offset by increased
income. An adjusted return on equity of 13.0%
compared with 16.3% in Q1 2016.
-- Total income increased by GBP8 million, or 8.9%,
to GBP98 million compared with Q1 2016 reflecting
higher asset volumes. Net interest margin was
broadly stable on Q1 2016 at 1.41% as asset and
liability margin pressures have been offset by
mitigating pricing actions.
-- Adjusted operating expenses were GBP8 million,
or 22.9%, higher than Q1 2016 at GBP43 million
principally reflecting increased regulatory and
remediation costs (a combined GBP5 million).
Adjusted cost:income ratio of 43.9% compared
with 38.9% in Q1 2016.
-- Net loans and advances to customers increased
by GBP0.9 billion, or 11.3%, to GBP8.9 billion
compared with Q1 2016 principally reflecting
balance draw-downs in the funds sector lending
portfolio and foreign exchange movements.
-- Customer deposits increased by GBP3.7 billion,
or 17.1%, to GBP25.3 billion principally reflecting
the transfer in of the Luxembourg branch from
Capital Resolution in Q2 2016 and foreign exchange
movements.
Segment performance
NatWest Markets
-- An operating profit of GBP68 million compared
with an operating loss of GBP20 million in Q1
2016. Adjusted operating profit of GBP187 million
compared with an adjusted operating loss of GBP54
million in Q1 2016, with the improvement principally
reflecting an increase in adjusted income. This
generated an adjusted return on equity of 7.9%
for the quarter.
-- Adjusted income increased by GBP231 million,
or 83.4%, to GBP508 million. The increase reflected
a consistent level of customer activity and an
improved trading environment compared to a particularly
difficult Q1 2016, notably in Rates. Total income,
which includes own credit adjustments, increased
by GBP147 million, or 43.1%, to GBP488 million
compared with GBP341 million in Q1 2016.
-- Total expenses increased by GBP59 million, or
16.3%, principally reflecting an increase in
restructuring costs. Adjusted operating expenses
of GBP321 million were GBP10 million, or 3.0%,
lower than Q1 2016, and GBP17 million lower than
Q4 2016 driven by non-repeat of the annual bank
levy charge of GBP13 million.
-- Funded assets decreased by GBP2.1 billion to
GBP113.9 billion compared with Q1 2016. Compared
with Q4 2016, funded assets increased by GBP13.0
billion in the quarter following the seasonally
low levels of activity at the end of 2016.
-- RWAs decreased by GBP2.0 billion compared with
Q1 2016 to GBP34.1 billion principally due to
business movements, partially offset by an increase
due to the weakening of sterling.
Capital Resolution
-- RWAs reduced by GBP4.0 billion in the quarter
to GBP30.5 billion primarily reflecting disposal
activity and updates to operational risk.
-- An operating loss of GBP175 million compared
with a GBP301 million loss in Q1 2016. Total
income losses of GBP59 million compared with
income of GBP153 million in Q1 2016, reflecting
a GBP115 million decrease in own credit adjustments
and increased disposal losses, up GBP48 million
to GBP50 million.
-- Adjusted expenses of GBP69 million reduced by
GBP163 million, or 70.3%, compared with Q1 2016,
principally reflecting the impact of a 791 reduction
in headcount to 254 FTEs by the end Q1 2017.
-- A net impairment release of GBP45 million was
recorded in the quarter, compared with a net
impairment loss of GBP196 million in Q1 2016
which was driven by a shipping portfolio charge
of GBP226 million.
-- RWAs have fallen by GBP17.1 billion to GBP30.5
billion from Q1 2016, primarily due to run-off
and loan portfolio disposals. Funded assets have
reduced by GBP21.0 billion to GBP29.2 billion
for the same period.
Williams & Glyn
-- Operating profit of GBP111 million was GBP30
million, or 37.0%, higher than Q1 2016 due to
a GBP13 million, or 16.9%, reduction in direct
expenses and a GBP20 million restructuring charge
incurred in Q1 2016.
-- Total income was broadly stable at GBP206 million
compared with Q1 2016. Net interest income was
GBP3 million, or 1.9%, higher driven by retail
deposits, largely offset by a GBP2 million, or
4.7%, reduction in non-interest income.
-- Operating expenses of GBP84 million were GBP34
million, or 28.8%, lower than Q1 2016 driven
by reduced staff and restructuring costs. Direct
expenses were GBP13 million, or 16.9%, lower
driven by a substantial reduction in FTEs, down
over 1,000 compared with Q1 2016.
-- A net impairment loss of GBP11 million compared
with GBP6 million in Q1 2016, and reflects the
continued benign credit conditions.
-- Net loans and advances increased by GBP0.5 billion,
or 2.5%, to GBP20.6 billion compared with Q1
2016 driven by a GBP0.3 billion increase in mortgage
balances.
-- Customer deposits were broadly stable at GBP24.0
billion compared with Q1 2016.
Central items & other
-- Central items not allocated represent a charge
of GBP144 million in the quarter compared with
a charge of GBP372 million in Q1 2016. Treasury
funding costs were a charge of GBP52 million,
compared with a charge of GBP286 million in Q1
2016, and included a GBP52 million foreign exchange
loss (Q1 2016 - GBP52 million gain) and a GBP18
million charge for volatile items under IFRS
(Q1 2016 - GBP356 million charge). Restructuring
costs of GBP145 million included a GBP73 million
net settlement charge related to the RBS Netherlands
pension scheme. These were partially offset by
a GBP51 million VAT recovery recognised in the
quarter.
Selected statutory financial statements
Condensed consolidated income statement for the period ended 31 March 2017
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
GBPm GBPm GBPm
====================================== ======== =========== ========
Interest receivable 2,732 2,770 2,845
Interest payable (498) (562) (689)
====================================== ======== =========== ========
Net interest income (1) 2,234 2,208 2,156
====================================== ======== =========== ========
Fees and commissions receivable 822 821 866
Fees and commissions payable (217) (213) (212)
Income from trading activities 399 590 38
Gain on redemption of own debt 2 1 -
Other operating income (28) (191) 216
====================================== ======== =========== ========
Non-interest income 978 1,008 908
====================================== ======== =========== ========
Total income 3,212 3,216 3,064
====================================== ======== =========== ========
Staff costs (1,315) (1,142) (1,323)
Premises and equipment (377) (382) (324)
Other administrative expenses (419) (5,511) (575)
Depreciation and amortisation (342) (249) (178)
Write down of intangible assets - (70) (20)
====================================== ======== =========== ========
Operating expenses (2,453) (7,354) (2,420)
====================================== ======== =========== ========
Profit/(loss) before impairment
(losses)/releases 759 (4,138) 644
Impairment (losses)/releases (46) 75 (223)
====================================== ======== =========== ========
Operating profit/(loss) before
tax 713 (4,063) 421
Tax charge (327) (244) (80)
Profit/(loss) for the period 386 (4,307) 341
====================================== ======== =========== ========
Attributable to:
Non-controlling interests 11 (27) 22
Preference share and other dividends 116 161 94
Dividend access share - - 1,193
Ordinary shareholders 259 (4,441) (968)
====================================== ======== =========== ========
386 (4,307) 341
====================================== ======== =========== ========
Earnings/(loss) per ordinary share
(EPS)
Basic and diluted EPS from continuing
and discontinued operations (2) 2.2p (37.7p) (8.3p)
Basic and diluted EPS from continuing
operations (2) 2.2p (37.7p) (8.3p)
====================================== ======== =========== ========
Notes:
(1) Negative interest on loans and advances is classed
as interest payable. Negative interest on customer
deposits classed as interest receivable. Q1 2016
has been
re-presented accordingly.
(2) There is no dilutive impact in any period.
Selected statutory financial statements
Condensed consolidated statement of comprehensive income for the period ended 31 March 2017
Quarter ended
===============================
31 March 31 December 31 March
2017 2016 2016
GBPm GBPm GBPm
=============================================== ======== =========== ========
Profit/(loss) for the period 386 (4,307) 341
=============================================== ======== =========== ========
Items that do not qualify for reclassification
Loss on remeasurement of retirement
benefit schemes (21) (2) (529)
Loss on fair value of credit in
financial liabilities designated
at fair value
through profit or loss due to
own credit risk (20) - -
Tax (16) 3 143
=============================================== ======== =========== ========
(57) 1 (386)
=============================================== ======== =========== ========
Items that do qualify for reclassification
Available-for-sale financial assets 60 68 (8)
Cash flow hedges (189) (750) 946
Currency translation (6) (13) 582
Tax 33 191 (238)
=============================================== ======== =========== ========
(102) (504) 1,282
=============================================== ======== =========== ========
Other comprehensive (loss)/income
after tax (159) (503) 896
=============================================== ======== =========== ========
Total comprehensive income/(loss)
for the period 227 (4,810) 1,237
=============================================== ======== =========== ========
Total comprehensive income/(loss)
is attributable to:
Non-controlling interests 10 (36) 72
Preference shareholders 40 68 56
Paid-in equity holders 76 93 38
Dividend access share - - 1,193
Ordinary shareholders 101 (4,935) (122)
=============================================== ======== =========== ========
227 (4,810) 1,237
=============================================== ======== =========== ========
Selected statutory financial statements
Condensed consolidated balance sheet as at 31 March 2017
31 March 31 December
2017 2016
GBPm GBPm
======================================== ======== ===========
Assets
Cash and balances at central banks 83,160 74,250
======================================== ======== ===========
Net loans and advances to banks 20,513 17,278
Reverse repurchase agreements and stock
borrowing 18,200 12,860
======================================== ======== ===========
Loans and advances to banks 38,713 30,138
======================================== ======== ===========
Net loans and advances to customers 326,733 323,023
Reverse repurchase agreements and stock
borrowing 27,251 28,927
======================================== ======== ===========
Loans and advances to customers 353,984 351,950
Debt securities 76,656 72,522
Equity shares 691 703
Settlement balances 9,128 5,526
Derivatives 204,052 246,981
Intangible assets 6,464 6,480
Property, plant and equipment 4,996 4,590
Deferred tax 1,697 1,803
Prepayments, accrued income and other
assets 3,642 3,700
Assets of disposal groups 92 13
======================================== ======== ===========
Total assets 783,275 798,656
======================================== ======== ===========
Liabilities
======================================== ======== ===========
Bank deposits 40,276 33,317
Repurchase agreements and stock lending 5,988 5,239
======================================== ======== ===========
Deposits by banks 46,264 38,556
======================================== ======== ===========
Customer deposits 351,498 353,872
Repurchase agreements and stock lending 38,978 27,096
======================================== ======== ===========
Customer accounts 390,476 380,968
Debt securities in issue 28,163 27,245
Settlement balances 9,210 3,645
Short positions 28,519 22,077
Derivatives 196,224 236,475
Provisions for liabilities and charges 11,619 12,836
Accruals and other liabilities 6,938 6,991
Retirement benefit liabilities 186 363
Deferred tax 637 662
Subordinated liabilities 15,514 19,419
Liabilities of disposal groups 14 15
======================================== ======== ===========
Total liabilities 733,764 749,252
Equity
======================================== ======== ===========
Non-controlling interests 805 795
Owners' equity*
Called up share capital 11,843 11,823
Reserves 36,863 36,786
======================================== ======== ===========
Total equity 49,511 49,404
======================================== ======== ===========
Total liabilities and equity 783,275 798,656
======================================== ======== ===========
*Owners' equity attributable to:
Ordinary shareholders 41,650 41,462
Other equity owners 7,056 7,147
======================================== ======== ===========
48,706 48,609
======================================== ======== ===========
The parent company distributable reserves at 31 March 2017 were GBP7.9 billion (31 December 2016 - GBP8.0 billion).
Selected statutory financial statements
Condensed consolidated statement of changes in equity for the period ended 31 March 2017
Share
capital
and Total Non
statutory Paid-in Retained Other owners' controlling Total
reserves equity earnings reserves* equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ========= ======= ======== ========= ======= =========== ========
At 1 January 2017 41,926 4,582 (12,936) 15,037 48,609 795 49,404
Profit attributable
to ordinary shareholders
and other equity owners - - 375 - 375 11 386
Other comprehensive
income
- changes in fair
value of credit in
financial
liabilities designated
at fair value through
profit
or loss due to own
credit risk - - (20) - (20) - (20)
- other amounts recognised
in equity - - (21) 128 107 (1) 106
- amounts transferred
from equity to profit
or loss - - - (289) (289) - (289)
- recycled to profit
or loss on disposal
of businesses (1) - - - 27 27 - 27
- tax - - (16) 33 17 - 17
Preference share and
other dividends paid - - (116) - (116) - (116)
Shares and securities
issued during the period 69 - (4) - 65 - 65
Reclassification of
paid-in equity (2) - (91) - - (91) - (91)
Share-based payments
- gross - - (38) - (38) - (38)
Movement in own shares
held 60 - - - 60 - 60
At 31 March 2017 42,055 4,491 (12,776) 14,936 48,706 805 49,511
============================ ========= ======= ======== ========= ======= =========== ========
31 March
2017
Total equity is attributable
to: GBPm
======== ========= ======= =========== ========
Non-controlling interests 805
Preference shareholders 2,565
Paid-in equity holders 4,491
Ordinary shareholders 41,650
============================ ========= ======= ======== ========= ======= =========== ========
49,511
========
*Other reserves consist
of:
======= ======== ========= ======= =========== ========
Merger reserve 10,881
Available-for-sale
reserve 287
Cash flow hedging reserve 888
Foreign exchange reserve 2,880
============================ ========= ======= ======== ========= ======= =========== ========
14,936
========
Notes:
(1) No tax impact.
(2) Paid-in equity reclassified to liabilities as a result of the call of RBS
Capital Trust D in March 2017.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with RBS's 2016 Annual Report and Accounts which was prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).
Accounting policies
Ahead of adopting IFRS 9 Financial Instruments from 1 January 2018 RBS has adopted the provisions in respect of the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss from 1 January 2017. Accordingly, a loss of GBP20 million has been reported in the Consolidated Statement of Other Comprehensive Income instead of in the Consolidated Income Statement. Comparatives have not been restated, however, in Q1 2016 a gain of GBP108 million was included in the Consolidated Income Statement. Own credit adjustments on financial liabilities held for trading will continue to be recognised in the Consolidated Income Statement, a loss of GBP29 million was reported in Q1 2017 (Q1 2016 - gain of GBP148 million).
Apart from the above RBS's principal accounting policies are as set out on pages 297 to 306 of the 2016 Annual Report and Accounts. Other amendments to IFRS effective for 2017 have not had a material effect on RBS's Q1 2017 results.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of RBS's financial condition are those relating to goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on pages 306 to 308 of RBS's 2016 Annual Report and Accounts.
Going concern
Having reviewed RBS's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that RBS will continue in operational existence for the foreseeable future. Accordingly, the results for the period ended 31 March 2017 have been prepared on a going concern basis.
2. Provisions for liabilities and charges
Payment Other Residential Litigation
and
protection customer mortgage other
redress backed
insurance (1) securities regulatory Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
===================== ========== ========= =========== ========== ===== =======
At 1 January 2017 1,253 1,105 6,752 1,918 1,808 12,836
Currency translation
and other movements - (1) (114) (13) 10 (118)
Charge to income
statement - - - 32 204 236
Releases to income
statement - (2) - (3) (39) (44)
Provisions utilised (78) (99) - (950) (164) (1,291)
===================== ========== ========= =========== ========== ===== =======
At 31 March 2017 1,175 1,003 6,638 984 1,819 11,619
===================== ========== ========= =========== ========== ===== =======
Note:
(1) Closing provision predominantly relates to investment advice, packaged accounts
(including costs) and tracker mortgages.
There are uncertainties as to the eventual cost of redress in relation to certain of the provisions contained in the table above. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the amount provided. RBS will continue to monitor the position closely and refresh the underlying assumptions.
3. Litigation, investigations and reviews
RBS's 2016 Annual Report and Accounts issued on 24 February 2017 included comprehensive disclosures about RBS's litigation, investigations and reviews in Note 31. Set out below are the material developments in these matters since the 2016 Annual Report & Accounts were published. RBS generally does not disclose information about the establishment or existence of a provision for a particular matter where disclosure of the information can be expected to prejudice seriously RBS's position in the matter.
Notes
3. Litigation, investigations and reviews (continued)
Litigation
RMBS-related litigation in the US
RBS is in discussions with the US Federal Housing Finance Agency (FHFA) in relation to its primary lawsuit (which is described in the 2016 Annual Report & Accounts) but there can be no assurance as to whether such discussions will continue or result in a settlement. As it has previously stated, RBS reiterates that in connection with its RMBS litigation matters and RMBS investigations taken as a whole, further substantial provisions and costs may be recognised and, depending upon the final outcomes, other adverse consequences may occur.
UK 2008 rights issue shareholder litigation
In December 2016 RBS concluded full and final settlements with four of the five shareholder groups representing 78% of the claims by value. Further, RBS has recently concluded a full and final settlement, without any admission of liability, with shareholders representing around 40% by value of the remaining claimant group. As part of this further settlement, RBS has made available an additional sum in respect of the costs incurred by the remaining group of claimants since December 2016, subject to claim validation. RBS has now reached a resolution with shareholders representing 87% of the original claims by value in the litigation. Should the remaining group's claim not be settled with all claimants, the court timetable provides that a trial of the preliminary issue of whether the rights issue prospectus contained untrue and misleading statements and/or improper omissions will commence on 22 May 2017.
London Interbank Offered Rate (LIBOR)
As previously disclosed, certain members of the Group have been named as defendants in US class actions relating to alleged manipulation of various interest rate benchmarks, each of which is pending in the United States District Court for the Southern District of New York. On 10 March 2017, the court in the action relating primarily to over-the-counter derivatives allegedly linked to JPY LIBOR and Euroyen TIBOR dismissed the case on the ground that the plaintiffs lack standing. The plaintiffs are seeking to amend their complaint in an attempt to address the deficiencies identified by the court in its dismissal order.
FX antitrust litigation
As previously disclosed, RBS plc is a defendant in an FX-related antitrust class action pending in the United States District Court for the Southern District of New York, on behalf of an alleged class of "consumers and end-user businesses." On 24 March 2017, the court granted a motion to dismiss the complaint in this matter on the ground that the purported class lacks standing to pursue antitrust claims.
Claim by the US Federal Deposit Insurance Corporation
On 10 March 2017, the US Federal Deposit Insurance Corporation (FDIC), on behalf of 39 failed US banks, issued a claim in the High Court of Justice of England and Wales against RBS, other LIBOR panel banks and the British Bankers' Association, alleging collusion with respect to the setting of USD LIBOR. The action alleges that the defendants breached English and European competition law as well as asserting common law claims of fraud under US law. The FDIC previously asserted many of the same USD LIBOR-related claims against RBS and others in a lawsuit pending in the United States District Court for the Southern District of New York, though most of the claims in that case have been dismissed as a result of a series of rulings by that court.
Investigations and reviews
Payment Protection Insurance (PPI)
On 2 March 2017, the FCA published Policy Statement 17/3 containing its final rules and guidance on PPI complaint handling. The Policy Statement made clear the FCA's intention to implement a two year PPI complaints deadline with effect from 29 August 2017, bringing an end to new PPI complaints in August 2019. New rules for the handling of Plevin complaints will also come into force on 29 August 2017. The proposals in the Policy Statement are largely as previously anticipated and RBS does not currently consider that an additional provision will be required.
Recent media coverage indicates that a claims management company may issue judicial review proceedings challenging the FCA's proposed 2019 deadline.
Notes
3. Litigation, investigations and reviews (continued)
Supervisory investigation in relation to Coutts & Co Ltd
On 11 April 2017, the Hong Kong Monetary Authority (HKMA) announced that its supervisory investigation in relation to the Hong Kong branch of Coutts & Co Ltd (a member of the Group incorporated in Switzerland) had revealed breaches of local anti-money laundering requirements for which the HKMA has imposed financial penalties of HKD 7 million.
Regulator requests concerning certain historic Russian transactions
Recent media coverage has highlighted an alleged money laundering scheme involving Russian entities between 2010 and 2014. Allegedly certain European banks, including RBS and 16 other UK based financial institutions, and certain US banks, were involved in processing certain transactions associated with this scheme. In common with other banks, RBS is responding to requests for information from the FCA, PRA and regulators in other jurisdictions.
4. Post balance sheet events
Other than matters disclosed, there have been no further significant events between 31 March 2017 and the date of approval of this announcement.
Forward-looking statements
Cautionary statement regarding forward-looking statements
Certain sections in this document contain 'forward-looking statements' as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include 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.
In particular, this document includes forward-looking statements relating, but not limited to: future profitability and performance, including financial performance targets such as return on tangible equity; cost savings and targets, including cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other impacts thereof; structural reform and the implementation of the UK ring-fencing regime; the implementation of RBS's transformation programme, including the further restructuring of the NatWest Markets business; the satisfaction of the Group's residual EU State Aid obligations; the continuation of RBS's balance sheet reduction programme, including the reduction of risk-weighted assets (RWAs) and the timing thereof; capital and strategic plans and targets; capital, liquidity and leverage ratios and requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other regulatory buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges; future pension contributions; RBS's exposure to political risks, operational risk, conduct risk, cyber and IT risk and credit rating risk and to various types of market risks, including as interest rate risk, foreign exchange rate risk and commodity and equity price risk; customer experience including our Net Promotor Score (NPS); employee engagement and gender balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to the Group's strategy or operations, which may result in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes expressed or implied by such forward-looking statements. In addition certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements we describe in this document, including in the risk factors and other uncertainties set out in the Group's 2016 Annual Report on Form 20-F and other materials filed with, or furnished to, the US Securities and Exchange Commission, and other uncertainties discussed in this document. These include the significant risks for RBS presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is or may be subject to (including active civil and criminal investigations) and any resulting material adverse effect on RBS of unfavourable outcomes and the timing thereof (including where resolved by settlement); economic, regulatory and political risks, including as may result from the uncertainty arising from the EU Referendum; RBS's ability to satisfy its residual EU State Aid obligations and the timing thereof; RBS's ability to successfully implement the significant and complex restructuring required to be undertaken in order to implement the UK ring-fencing regime and related costs; RBS's ability to successfully implement the various initiatives that are comprised in its transformation programme, particularly the proposed further restructuring of the NatWest Markets business, the balance sheet reduction programme and its significant cost-saving initiatives and whether RBS will be a viable, competitive, customer focused and profitable bank especially after its restructuring and the implementation of the UK ring-fencing regime; the exposure of RBS to cyber-attacks and its ability to defend against such attacks; RBS's ability to achieve its capital and leverage requirements or targets which will depend in part on RBS's success in reducing the size of its business and future profitability as well as developments which may impact its CET1 capital including additional litigation or conduct costs, additional pension contributions, further impairments or accounting changes; ineffective management of capital or changes to regulatory requirements relating to capital adequacy and liquidity or failure to pass mandatory stress tests; RBS's ability to access sufficient sources of capital, liquidity and funding when required; changes in the credit ratings of RBS, RBS entities or the UK government; declining revenues resulting from lower customer retention and revenue generation in light of RBS's strategic refocus on the UK; as well as increasing competition from new incumbents and disruptive technologies.
Forward-looking statements
In addition, there are other risks and uncertainties that could adversely affect our results, ability to implement our strategy, cause us to fail to meet our targets or the accuracy of forward-looking statements in this document. These include operational risks that are inherent to RBS's business and will increase as a result of RBS's significant restructuring initiatives being concurrently implemented; the potential negative impact on RBS's business of global economic and financial market conditions and other global risks; the impact of a prolonged period of low interest rates or unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices; basis, volatility and correlation risks; the extent of future write-downs and impairment charges caused by depressed asset valuations; deteriorations in borrower and counterparty credit quality; heightened regulatory and governmental scrutiny and the increasingly regulated environment in which RBS operates as well as divergences in regulatory requirements in the jurisdictions in which RBS operates; the risks relating to RBS's IT systems or a failure to protect itself and its customers against cyber threats, reputational risks; risks relating to increased pension liabilities and the impact of pension risk on RBS's capital position; risks relating to the failure to embed and maintain a robust conduct and risk culture across the organisation or if its risk management framework is ineffective; RBS's ability to attract and retain qualified personnel; limitations on, or additional requirements imposed on, RBS's activities as a result of HM Treasury's investment in RBS; the value and effectiveness of any credit protection purchased by RBS; risks relating to the reliance on valuation, capital and stress test models and any inaccuracies resulting therefrom or failure to accurately reflect changes in the micro and macroeconomic environment in which RBS operates, risks relating to changes in applicable accounting policies or rules which may impact the preparation of RBS's financial statements or adversely impact its capital position; the impact of the recovery and resolution framework and other prudential rules to which RBS is subject; the recoverability of deferred tax assets by the Group; and the success of RBS in managing the risks involved in the foregoing.
The forward-looking statements contained in this document speak only as at the date hereof, and RBS does not assume or undertake any obligation or responsibility to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicit of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.
Appendix
Segmental Income statement reconciliations
Segmental income statement reconciliations
PBB CPB Central
=============== ==================================
items
Ulster Commercial Private RBS NatWest Capital Williams & Total
Bank
UK PBB RoI Banking Banking International Markets Resolution & Glyn other RBS
Quarter ended 31 March
2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Total income - statutory 1,377 145 865 160 98 488 (59) 206 (68) 3,212
Own credit adjustments - 1 - - - 20 7 - 1 29
Gain on redemption of
own debt - - - - - - - - (2) (2)
Total income - adjusted 1,377 146 865 160 98 508 (52) 206 (69) 3,239
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses - statutory (851) (142) (550) (124) (46) (420) (161) (84) (75) (2,453)
Restructuring costs -
direct 20 19 39 - - - 70 - 429 577
-
indirect 111 15 60 11 3 68 16 - (284) -
Litigation and conduct
costs 4 - 3 - - 31 6 - 10 54
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses - adjusted (716) (108) (448) (113) (43) (321) (69) (84) 80 (1,822)
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Impairment (losses)/releases (32) 24 (61) (3) (7) - 45 (11) (1) (46)
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- statutory 494 27 254 33 45 68 (175) 111 (144) 713
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- adjusted 629 62 356 44 48 187 (76) 111 10 1,371
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Additional information
Return on equity (1) 24.8% 4.0% 5.7% 6.0% 12.0% 1.7% nm nm nm 3.1%
Return on equity - adjusted
(1,2) 32.0% 9.3% 8.9% 8.6% 13.0% 7.9% nm nm nm 9.7%
Cost income ratio (3) 61.8% 97.9% 62.0% 77.5% 46.9% 86.1% nm 40.8% nm 76.1%
Cost income ratio - adjusted
(2,3) 52.0% 74.0% 49.7% 70.6% 43.9% 63.2% nm 40.8% nm 55.8%
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Quarter ended 31 December
2016
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Total income - statutory 1,339 137 867 161 96 285 (293) 217 407 3,216
Own credit adjustments - - - - - 29 8 - 77 114
Gain on redemption of
own debt - - - - - - - - (1) (1)
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income - adjusted 1,339 137 867 161 96 314 (285) 217 483 3,329
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses - statutory (1,042) (226) (1,009) (159) (64) (850) (3,340) (97) (567) (7,354)
Restructuring costs -
direct 1 6 12 6 1 3 21 - 957 1,007
-
indirect 50 (2) 34 8 1 43 (13) - (121) -
Litigation and conduct
costs 214 77 407 (1) 1 466 3,156 - (192) 4,128
Operating expenses - adjusted (777) (145) (556) (146) (61) (338) (176) (97) 77 (2,219)
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Impairment (losses)/releases (16) 47 (83) 8 1 - 130 (11) (1) 75
========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss) - statutory 281 (42) (225) 10 33 (565) (3,503) 109 (161) (4,063) ========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= ======= Operating profit/(loss) - adjusted 546 39 228 23 36 (24) (331) 109 559 1,185 ========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= ======= Additional information Return on equity (1) 13.5% (5.8%) (9.1%) 1.6% 8.8% (30.2%) nm nm nm (48.2%) Return on equity - adjusted (1,2) 27.8% 5.4% 5.3% 4.5% 9.8% (2.7%) nm nm nm 8.6% Cost income ratio (3) 77.8% 165.0% 117.1% 98.8% 66.7% nm nm 44.7% nm 230.2% Cost income ratio - adjusted (2,3) 58.0% 105.8% 62.6% 90.7% 63.5% 107.6% nm 44.7% nm 66.3% ========================================== ======= ====== ========== ======= ============= ======= ========== ======== ======= ======= For notes to this table refer to page 3
Segmental income statement reconciliations
PBB CPB Central
============= ==================================
items
Ulster Commercial Private RBS NatWest Capital Williams & Total
UK Bank
PBB RoI Banking Banking International Markets Resolution & Glyn other RBS
Quarter ended 31 March
2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Income statement
Total income - statutory 1,275 158 853 165 90 341 153 205 (176) 3,064
Own credit adjustments - (3) - - - (64) (108) - (81) (256)
Strategic disposals - - - - - - 6 - - 6
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Total income - adjusted 1,275 155 853 165 90 277 51 205 (257) 2,814
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses - statutory (750) (110) (438) (153) (36) (361) (258) (118) (196) (2,420)
Restructuring costs -
direct 13 6 1 1 - - 7 20 190 238
-
indirect 9 - (1) 15 1 12 9 - (45) -
Litigation and conduct
costs - - 2 - - 18 10 - 1 31
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating expenses - adjusted (728) (104) (436) (137) (35) (331) (232) (98) (50) (2,151)
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Impairment (losses)/releases (16) 13 (14) (2) (2) - (196) (6) - (223)
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- statutory 509 61 401 10 52 (20) (301) 81 (372) 421
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Operating profit/(loss)
- adjusted 531 64 403 26 53 (54) (377) 101 (307) 440
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Additional information
Return on equity (1) 26.1% 8.8% 11.1% 1.5% 16.0% (2.6%) nm nm nm (9.6%)
Return on equity - adjusted
(1,2) 27.3% 9.2% 11.2% 5.1% 16.3% (4.4%) nm nm nm (9.4%)
Cost income ratio (3) 58.8% 69.6% 49.3% 92.7% 40.0% 105.9% nm 57.6% nm 78.7%
Cost income ratio - adjusted
(2,3) 57.1% 67.1% 49.0% 83.0% 38.9% 119.5% nm 47.8% nm 76.1%
========================================= ===== ====== ========== ======= ============= ======= ========== ======== ======= =======
Notes:
(1) RBS's CET1 target is 13% 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
dividends is divided by notional equity allocated at different rates of
14% (Ulster Bank RoI - 11% prior to Q1 2017), 11% (Commercial Banking),
14% (Private Banking - 15% prior to Q1 2017), 12% (RBS International)
and 15% for all other segments, of the monthly average of segmental risk-weighted
assets incorporating the effect of capital deductions (RWAes). RBS Return
on equity is calculated using profit for the period attributable to ordinary
shareholders.
(2) Excluding own credit adjustments, gain on redemption of own debt, strategic
disposals, restructuring costs and litigation and conduct costs.
(3) Operating lease depreciation included in income (Q1 2017 - GBP36 million;
Q4 2016 - GBP37 million and Q1 2016 - GBP38 million).
Legal Entity Identifier: 2138005O9XJIJN4JPN90
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRFMMGZDLNDGNZM
(END) Dow Jones Newswires
April 28, 2017 02:01 ET (06:01 GMT)
1 Year Royal Bank Of Scotland Chart |
1 Month Royal Bank Of Scotland Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
