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Royal Bk Scot.Grp. (NWG)

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Friday 05 August, 2016

Royal Bk Scot.Grp.

Half Year Report - Part 1

RNS Number : 3368G
Royal Bank of Scotland Group PLC
05 August 2016
 




 

The Royal Bank of Scotland Group plc

Interim Results 2016

 

                                                                                                                                                  

Contents

Page



Introduction

1

Highlights

3

Summary consolidated results

13

Analysis of results

15

Segment performance

26



Statutory results

60



Condensed consolidated income statement (unaudited)

60

Condensed consolidated statement of comprehensive income (unaudited)

61

Condensed consolidated balance sheet (unaudited)

62

Condensed consolidated statement of changes in equity (unaudited)

63

Condensed consolidated cash flow statement (unaudited)

65

Notes

66



Independent review report to The Royal Bank of Scotland Group plc

109

Risk factors

111

Statement of directors' responsibilities

117



Additional information

118



Share information

118

Financial calendar

118



Forward-looking statements

119



Appendix 1 - Capital and risk management


Appendix 2 - Williams & Glyn


 

 

 

 

 

Introduction

 

Presentation of information

In this document, 'RBSG plc' or the 'company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group' refers to RBSG plc and its subsidiaries.

Statutory results

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 2015 have been filed with the Registrar of Companies. 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.

 

RBS prepares its financial statements in accordance with IFRS as adopted by the European Union (EU). The EU has not adopted the complete text of IAS 39; it has relaxed some of the standard's hedging requirements. RBS has not taken advantage of this relaxation, therefore its financial statements are also prepared in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP).

 

Condensed consolidated financial statements

The unaudited condensed consolidated financial statements for the half year ended 30 June 2016 comprise the following sections of this document:

 

Financial information in the segmental performance section on pages 26 to 59 except for Risk-Weighted Assets (RWAs), RWAs after capital deductions (RWAes), the related metrics, Return on Equity (ROE), Adjusted Return on Equity and Employee numbers.

Statutory results on pages 60 to 108 comprising the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related notes 1 to 19.

Appendix 1 Capital and risk management except for those items indicated as not within the scope of the independent review.

 

The above sections are within the scope of the independent review performed by Ernst & Young LLP (EY). Please see the Independent review report to The Royal Bank of Scotland Group plc on page 109 for further information.

 

Non-GAAP financial measures

The results commentary in this document refers to adjusted measures of financial performance, principally operating performance before own credit adjustments, loss on redemption of own debt, strategic disposals, restructuring costs, litigation and conduct costs, to exclude items which distort period-on-period comparison. These items are excluded on the basis that management believes these are not representative of the underlying performance of the business. In addition, certain ratios including the liquidity coverage ratio, stressed outflow coverage and net stable funding ratio are presented as they are used by management for risk management purposes although they are metrics not yet required to be disclosed by a government, governmental authority or self-regulatory organisation. These measures and performance ratios derived from the reported results, are non-GAAP financial measures.

 

Further, the Group's reportable segments are organised on a franchise basis (combinations of reportable segments). As a result, the presentation of Personal & Business Banking (PBB) combines the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI and is a non-GAAP financial measure. The presentation of Commercial & Private Banking (CPB) combines the reportable segments of Commercial Banking, Private Banking and RBS International (RBSI) and is also a non-GAAP financial measure.

 

Lastly, the presentation of cost savings against 2016 target shown within the Highlights section which excludes litigation and conduct costs, restructuring costs and the impairment of other intangible assets and operating costs of Williams & Glyn, is a non-GAAP financial measure.



Introduction

 

Contacts

 

For analyst enquiries:






Richard O'Connor

Head of Investor Relations

+44 (0) 20 7672 1758




For media enquiries:






Group Media Centre


+44 (0) 131 523 4205

 

Analysts and investors presentation

RBS will be hosting a presentation for analysts and investors which will also be available via live webcast and audio call. The details are as follows:

 

Date:


Friday 5 August 2016

Time:


9.30 am UK time

Conference ID


46989713

Webcast:


www.rbs.com/results

Dial in details:


International - +44 (0) 1452 568 172

UK Free Call - 0800 694 8082

US Toll Free - 1 866 966 8024

 

There will also be a call for fixed income analysts and investors. The details are as follows:

 

Date:


Friday 5 August 2016

Time:


2.30 pm UK time

Conference ID


46974381

Webcast:


www.rbs.com/results

Dial in details:


International - +44 (0) 1452 568 172

UK Free Call - 0800 694 8082

US Toll Free - 1 866 966 8024

 

Available on www.rbs.com/results

 

Interim results 2016 and background slides.

Financial supplement containing income statement and balance sheet information for the nine quarters ending 30 June 2016.

Pillar 3 supplement at 30 June 2016.

 

The European Union Market Abuse Regulation EU 596/2014 requires RBS to disclose that this announcement contains Inside Information, as defined in that Regulation.


Highlights

 

RBS reported an operating loss before tax of £274 million in H1 2016 and an attributable loss(1) of £2,045 million.

 

Across our Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and Corporate & Institutional Banking (CIB) franchises, RBS reported an adjusted operating profit(2) of £2,070 million in H1 2016 and £1,047 million in Q2 2016.

 

Adjusted return on equity across PBB, CPB and CIB was 11% for both H1 2016 and Q2 2016.  Across PBB and CPB, net lending grew by 15% on an annualised basis in H1 2016.

 

Common Equity Tier 1 ratio of 14.5% remains ahead of our 13.0% target. Leverage ratio was 5.2%. 









Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June

Key metrics and ratios

2016 

2015 


2016 

2016 

2015 








Attributable (loss)/profit (£m)

(2,045)

(179)


(1,077)

(968)

280 

Operating (loss)/profit (£m)

(274)

261 


(695)

421 

224 

Operating profit - adjusted (£m) (2)

1,156 

2,893 


716 

440 

1,538 

Net interest margin

2.18%

2.14%


2.21%

2.15%

2.13%

Cost:income ratio

98%

101%


117%

79%

99%

Cost:income ratio - adjusted (3,4)

72%

64%


67%

76%

62%

(Loss)/earnings per share from continuing operations (5)







  - basic

(17.6p)

(2.2p)


(9.3p)

(8.3p)

  - adjusted (3,4)

(5.5p)

18.5p


2.6p

(8.1p)

9.9p

Return on tangible equity (6)

(10.3%)

(0.9%)


(11.0%)

(9.6%)

2.7%

Return on tangible equity - adjusted (3,4.6)

(3.2%)

10.4%


3.2%

(9.4%)

13.5%

Average tangible equity (6)

£39,870m

£42,037m


£39,283m

£40,383m

£41,572m

Average number of ordinary shares







  outstanding during the period (millions)

11,639 

11,481 


11,673 

11,606 

11,511 








PBB, CPB & CIB







Total income - adjusted (£m) (3)

5,801 

5,898 


2,986 

2,815 

2,915 

Operating profit - adjusted (£m) (2)

2,070 

2,439 


1,047 

1,023 

1,221 

Return on tangible equity - adjusted (3,4,6)

10.9%

13.3%


11.0%

10.9%

13.5%


30 June

31 March

31 December

Balance sheet related key metrics and ratios

2016 

2016 

2015 





Tangible net asset value per ordinary share (6)

345p

351p

352p

Loan:deposit ratio (7,8)

92%

90%

89%

Short-term wholesale funding (7,9)

£14.7bn

£16.6bn

£17.2bn

Wholesale funding (7,9)

£55.1bn

£58.9bn

£58.7bn

Liquidity portfolio

£153bn

£157bn

£156bn

Liquidity coverage ratio (10)

116%

121%

136%

Net stable funding ratio (11)

119%

119%

121%

Common Equity Tier 1 ratio

14.5%

14.6%

15.5%

Risk-weighted assets

£245.2bn

£249.5bn

£242.6bn

Leverage ratio (12)

5.2%

5.3%

5.6%

Tangible equity (6)

£40,541m

£40,892m

£40,943m

Number of ordinary shares in issue (millions) (13)

11,755 

11,661 

11,625 

 

Notes:

(1)

Attributable to ordinary shareholders, after payment of the £1,193 million final Dividend Access Share dividend.

(2)

Operating profit before tax excluding own credit adjustments, loss on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.

(3)

Excluding own credit adjustments, loss on redemption of own debt and strategic disposals.

(4)

Excluding restructuring costs and litigation and conduct costs.

(5)

Refer to Note 10 on page 73 for further details.

(6)

Tangible equity is equity attributable to ordinary shareholders less intangible assets.

(7)

Excludes repurchase agreements and stock lending.

(8)

Includes disposal groups.

(9)

Excludes derivative collateral.

(10)

On 1 October 2015 the LCR became the PRA's primary regulatory liquidity standard; UK banks are required to meet a minimum standard of 80% initially, 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 that of other institutions.

(11)

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.

(12)

Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.

(13)

Includes 41 million treasury shares (31 March 2016 - 36 million; 31 December 2015 - 26 million).

 



 

 

H1 2016 Highlights

RBS reported an attributable loss of £2,045 million for H1 2016, which included the final Dividend Access Share (DAS) dividend of £1,193 million in Q1 2016 and £1,315 million of litigation and conduct costs. These included provisions in respect of PPI, following the publication of the FCA Consultation Paper on 2 August 2016, the UK 2008 rights issue shareholder litigation, an industry-wide examination of tracker mortgages in Ulster Bank RoI and other matters in Q2 2016.

H1 2016 operating loss was £274 million compared with an operating profit of £261 million in H1 2015.   

Adjusted operating profit of £1,156 million was £1,737 million lower than H1 2015, principally due to increased losses in Capital Resolution, £1,087 million, and increased IFRS volatility losses(1), £668 million compared with a gain of £80 million in H1 2015. Across our PBB, CPB and CIB franchises, adjusted operating profit of £2,070 million was £369 million, or 15%, lower than H1 2015.

H1 2016 income across PBB and CPB was broadly stable compared with H1 2015 whilst CIB adjusted income of £681 million was £68 million, or 9%, lower than H1 2015, adjusting for transfers(2).

Adjusted operating expenses reduced by £547 million compared with H1 2015, and included a £227 million VAT recovery following agreement with HMRC on recovery rates in previous years. Excluding expenses associated with Williams & Glyn, write-down of intangible assets and the VAT recovery, adjusted operating expenses reduced by £404 million.

Adjusted cost:income ratio was 72% compared with 64% in H1 2015 as the reduction in adjusted operating expenses has been more than offset by lower adjusted income, principally relating to Capital Resolution and IFRS volatility losses.

Risk elements in lending (REIL) as a percentage of gross customer loans was 3.5%, 130 basis points lower than 30 June 2015 and 10 basis points lower than 31 March 2016.

In H1 2016, PBB and CPB net loans and advances grew by 15% on an annualised basis with strong growth across both residential mortgage and commercial lending.



Q2 2016 Highlights

Q2 2016 operating loss of £695 million compared with an operating profit of £421 million in Q1 2016 and £224 million in Q2 2015.

Adjusted operating profit of £716 million was £276 million, or 63%, higher than Q1 2016. A £318 million reduction in adjusted operating expenses, including the benefit of a £227 million VAT recovery, and a £37 million reduction in impairments have been partially offset by a £79 million, or 3%, fall in adjusted income. Across PBB, CPB and CIB, adjusted income increased by £171 million, or 6%, to £2,986 million compared with Q1 2016.   

Across our PBB, CPB and CIB franchises, RBS made an adjusted operating profit of £1,047 million in Q2 2016, £24 million, or 2%, higher than Q1 2016. Adjusted return on equity was 11%, in line with Q1 2016.

RBS has made progress on customer Net Promoter Score (NPS) with improvements across NatWest Personal, Royal Bank Business and Commercial customers in the last year.

Highlights



Highlights

 

H1 2016 Performance Summary

RBS Performance

RBS reported an attributable loss of £2,045 million, compared with a loss of £179 million in H1 2015, which included the final DAS dividend of £1,193 million in Q1 2016 and £1,315 million of litigation and conduct costs. These included provisions in respect of PPI, the UK 2008 rights issue shareholder litigation, an industry-wide examination of tracker mortgages in Ulster Bank RoI and other matters in Q2 2016.

Operating loss was £274 million in H1 2016 compared with an operating profit of £261 million in H1 2015. Adjusted operating profit of £1,156 million was £1,737 million, or 60%, lower than H1 2015.

Net interest margin (NIM) of 2.18% for H1 2016 was 4 basis points higher than H1 2015 as the benefit associated with a reduction in low yielding assets more than offset modest asset margin pressure and mix impacts across PBB and CPB. 

PBB, CPB and CIB Performance

Across our PBB, CPB and CIB franchises, an adjusted operating profit of £2,070 million, was £369 million, or 15%, lower than H1 2015.


UK Personal & Business Banking (UK PBB) adjusted operating profit(3) of £1,065 million was £123 million, or 10%, lower than H1 2015 principally driven by an £83 million, or 6%, increase in adjusted operating expenses reflecting a higher FSCS levy and increased technology investment. Net loans and advances grew by £13.1 billion, or 12%, principally driven by continued strong mortgage growth and we continue to see positive momentum across business and personal unsecured lending.


Ulster Bank RoI adjusted operating profit(3) of £122 million was £25 million, or 17%, lower than H1 2015 principally reflecting a reduced level of impairment releases.


Commercial Banking adjusted operating profit(3) of £663 million was £160 million, or 19%, lower than H1 2015. Adjusted operating expenses, excluding transfers(4), increased by £75 million, or 9%, reflecting intangible asset write downs and increased investment spend, and a single name charge in respect of the Oil & Gas portfolio drove a £77 million increase in impairments. Commercial Banking net loans and advances increased by £6.7 billion, or 8%, adjusting for transfers (4).


Private Banking adjusted operating profit(3) of £73 million was £16 million, or 18%, lower as the business continues to invest in its infrastructure, whilst RBS International (RBSI) adjusted operating profit(3) was stable at £106 million.


CIB adjusted income of £681 million was £68 million, or 9%, lower than H1 2015, excluding transfers(2) with adjusted operating profit(3) of £41 million, £46 million lower than H1 2015. Adjusted expenses reduced by 11%, excluding transfers, as CIB moves towards a lower cost base.



Capital Resolution & Central items

Capital Resolution reported an adjusted operating loss(3) of £983 million, compared with an adjusted operating profit of £104 million in H1 2015; H1 2016 included a net impairment charge of £263 million, primarily related to the Shipping portfolio, compared with a release of £319 million in H1 2015. An additional £220 million valuation reserve was recorded in Q2 2016 following the EU Referendum. RWAs reduced by £26.3 billion from H1 2015 to £42.3 billion.

Central items adjusted operating loss(3) of £128 million compared with a profit of £87 million in H1 2015. H1 2016 included a £668 million charge in respect of IFRS volatility (H1 2015 - £80 million gain), a £227 million VAT recovery and an FX gain of £253 million principally reflecting the significant weakening of sterling against the US dollar following the EU Referendum.



Highlights

 

Q2 2016 Performance Summary

 

RBS Performance

An attributable loss of £1,077 million was reported in Q2 2016 compared with a profit of £280 million in Q2 2015 and a loss of £968 million in Q1 2016, which included the final DAS dividend payment of £1,193 million.

An operating loss of £695 million in Q2 2016 compared with an operating profit of £224 million in Q2 2015 and £421 million in Q1 2016. Adjusted operating profit of £716 million was £822 million lower than Q2 2015 but was £276 million higher than Q1 2016. 

Restructuring costs were £392 million in the quarter, an increase of £154 million compared with Q1 2016, and included £187 million in respect of Williams & Glyn. Litigation and conduct costs of £1,284 million in Q2 2016 compared with £31 million in Q1 2016, and included an additional PPI provision, a provision in respect of the UK 2008 rights issue shareholder litigation, a provision in Ulster Bank RoI principally in respect of an industry-wide examination of tracker mortgages and various other matters.   

The Q2 2016 results included a net strategic disposal gain of £201 million comprising: a £246 million gain on disposal of RBS's stake in Visa Europe and a £45 million loss associated with the sale of our Russian subsidiary.

A loss of £67 million was recognised in Q2 2016 in respect of a cash tender of certain US dollar, sterling and euro senior debt securities. The tender offers were part of the on-going transition to a holding company capital and term funding model in line with regulatory requirements and included securities that RBS considers non-compliant for 'Minimum Requirement for Own Funds and Eligible Liabilities' (MREL) purposes. In addition, RBS recognised a loss of £63 million as a result of the redemption of three RBS NV trust preferred securities as part of simplification of the RBS NV balance sheet and management of our legacy capital securities.

Q2 2016 NIM of 2.21% was 6 basis points higher than Q1 2016. NIM across our PBB and CPB franchises was 2.37% for Q2 2016 compared with 2.38% in Q1 2016. 

Tangible net asset value (TNAV) was 345p per ordinary share at 30 June 2016, a 6p reduction compared with 31 March 2016. The reduction was driven by the attributable loss for the quarter, 8p, a reduction associated with the elimination of the surplus on The Royal Bank of Scotland Group Pension Fund recognised at 31 December 2015 as a result of the revised schedule of contributions, 4p, and the impact of share issuance and other movements, 3p. Partially offsetting, gains were recognised in foreign exchange reserves, 4p, reflecting the weakening of sterling, and cash flow hedging reserves, 5p, as swap rates decreased.



PBB, CPB and CIB Performance

Across our PBB, CPB and CIB franchises, an adjusted operating profit of £1,047 million, was £174 million lower than Q2 2015 but was £24 million higher than Q1 2016.


UK PBB adjusted operating profit(3) of £534 million was £69 million lower than Q2 2015, as a higher FSCS levy charge and increased technology investment drove a £64 million increase in adjusted operating expenses, and was broadly in line with Q1 2016. 


Ulster Bank RoI adjusted operating profit(3)  reduced by £27 million, compared with Q2 2015, to £58 million, principally reflecting reduced impairment releases, and was £6 million lower than Q1 2016.


Commercial Banking adjusted operating profit(3) of £260 million was £188 million lower than Q2 2015 and £143 million lower than Q1 2016. Adjusted operating expenses increased by £61 million to £497 million compared with Q1 2016, reflecting a write down of intangible assets and increased investment spend, and a single name charge in the Oil & Gas portfolio drove a £75 million increase in impairments.


Private Banking adjusted operating profit(3) of £47 million was in line with Q2 2015 but was £21 million higher than Q1 2016. RBSI adjusted operating profit(3) of £53 million was in line with both Q2 2015 and Q1 2016.



Highlights

 


CIB made an adjusted operating profit(3) of £95 million in Q2 2016 compared with losses of £13 million in Q2 2015 and £54 million in Q1 2016. CIB adjusted income of £404 million was £97 million higher than Q2 2015, excluding transfers(2), and was £127 million higher than Q1 2016.



Capital Resolution & Central items

Capital Resolution adjusted operating loss(3) of £606 million was £567 million higher than Q2 2015 and was £229 million up on Q1 2016, principally reflecting an additional £220 million valuation reserve following the EU Referendum. RWAs reduced by £5.3 billion in the quarter to £42.3 billion.

Central items adjusted operating profit(3) of £179 million compared with a profit of £242 million in Q2 2015 and a loss of £307 million in Q1 2016. The quarter included a £227 million VAT recovery, a £201 million FX gain as the US dollar strengthened against sterling and a £312 million charge in respect of IFRS volatility (Q2 2015 - £204 million; Q1 2016 - £356 million).

 

Progress on 2016 targets

Whilst RBS remains committed to achieving its priority targets for 2016, we recognise that market conditions have become more uncertain following the EU Referendum result and we have updated our guidance as follows:

 

Strategy goal

2016 target

H1 2016 Progress

Strength and sustainability

Maintain Bank CET1 ratio of 13%

CET1 ratio of 14.5%

£2 billion AT1 issuance

Continue to plan to issue in 2016, subject to market conditions

Capital Resolution RWAs around £30 billion

RWAs down £6.7 billion to £42.3 billion in H1 2016. Following the EU Referendum, and the resultant significant weakening of sterling, we now anticipate that RWAs will be around £30 - £35 billion at the end of 2016

Customer experience

Narrow the gap to No.1 in NPS in every primary UK brand

Year on year Royal Bank of Scotland Business (Scotland) has narrowed the gap. NatWest Personal and RBSG Commercial have seen improvements in NPS

Simplifying the bank

Reduce operating expenses by £800 million

Operating expenses down £404 million(5) and we remain on track to achieve our target

Supporting growth

Net 4% growth in PBB and CPB customer loans

Net lending in PBB and CPB up 15% on an annualised basis in the half year

Employee engagement

Raise employee engagement to within two points of the GFS norm

Reviewed annually during Q3

 

Notes:

(1)

IFRS volatility arises from the changes to fair value of hedges of loans which do not qualify for hedge accounting under IFRS.

(2)

CIB's results include the following financials for businesses subsequently transferred to Commercial Banking: total income of £78 million for H1 2015 (Q2 2015 - £36 million) and expenses of £23 million for H1 2015 (Q2 2015 - £11 million).

(3)

For unadjusted operating profit and expenses see segment performance on pages 26 to 30.

(4)

The portfolio transfers included operating expenses of £50 million for H1 2016 (Q2 2016 - £26 million) and net loans and advances to customers of £4.1 billion at 30 June 2016.

(5)

Excluding litigation and conduct costs, restructuring costs, write down of other intangible assets, the operating costs of Williams & Glyn and the VAT recovery.



Highlights

 

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 14.5%. The 10 basis point reduction in the quarter was driven by the attributable loss partially offset by the reduction in RWAs. RWAs decreased by £4.3 billion primarily reflecting disposals and run-off in Capital Resolution and a £3.9 billion reduction associated with the removal of Citizens operational risk RWAs following regulatory approval. Partially offsetting, the weakening of sterling, principally following the EU Referendum, increased RWAs by £4.4 billion. Leverage ratio decreased by 10 basis points to 5.2%.

Risk elements in lending (REIL) of £11.8 billion were 3.5% of gross customer loans, down from 3.6% at 31 March 2016 and 4.8% at 30 June 2015.  

RBS continues to reposition and strengthen its balance sheet. In H1 2016, we completed two senior debt issuances (€1.5 billion seven year 2.5% notes and $1.5 billion ten year 4.8% notes) which are eligible to meet RBS's MREL. In addition, we redeemed £2.3 billion of legacy US dollar, sterling and euro senior debt securities, including some that RBS considers non-compliant for MREL purposes. 

In March 2016 RBS made a £4.2 billion payment into The Royal Bank of Scotland Group Pension Fund, being an accelerated payment of existing committed future contributions, and paid the final Dividend Access Share dividend of £1,193 million, actions that have been taken to help the long term resilience and normalise the ownership structure of the Bank.   

During H1 2016 we completed the transfer of the Coutts International businesses in Asia and the Middle East to Union Bancaire Privée, the final milestone in the sale of our International Private Bank.  In addition, we completed the sale of our Russian subsidiary.

We continue to work on our ring fencing plans, which were submitted to the PRA in January 2016, and target operational compliance by 1 January 2019. Legal entity restructuring, including the establishment of a Ring-Fenced Bank Holding company, will begin in H2 2016 details of which will be provided in H2. We are actively liaising with key stakeholders including the regulators and employee representatives, and will engage with the credit rating agencies.

 



Highlights

 

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 was £14.7 billion, representing a market share of approximately 12% compared with a quarter end stock share of 8.6%. We now have 1,001 mortgage advisors supporting our customers, an increase of 15% since H1 2015. We continue to see positive momentum across business banking and personal unsecured lending. Net lending in Commercial Banking increased by £7.9 billion in H1 2016, 17% growth on an annualised basis.

The Reward account continues to show positive momentum and now has 815,000 customer accounts compared with 202,000 as at 31 December 2015.

We continue to make better use of our digital channels to make it simpler to serve our customers and for them to do business with us. NatWest customers can now apply for personal loans or credit cards via the mobile app. We now have 4.1 million active users of our personal mobile app, up 25% in the last year, with 69,000 unsecured products applied for via the mobile app in H1 2016. We became the first UK based bank to launch Android fingerprint authentication, with 37% of app logins now biometric.  

RBS became the first UK Bank to be accredited by the Royal National Institute for Blind People for making the voiceover mode simpler and easier to use for our visually impaired customers. In addition, we launched a new service for British Sign Language (BSL) customers, making it possible to instantly chat with an advisor through a BSL interpreter.

RBS continues to support UK business growth through the launch of three new business accelerator hubs in H1 2016, bringing the total to nine, with a further three more opening in H2 2016. This included the opening of an Entrepreneurial Centre in our Edinburgh headquarters. In addition, NatWest launched a £1 billion lending fund to support small businesses.

RBS is one of only two banks to achieve formal recognition from the Chartered Banker Professional Standards Board for excellence in monitoring the Foundation Standard for Professional Bankers. More than 94% of the in-scope employee population achieved this standard in 2015.



Highlights

 

Customer

RBS remains committed to achieving its target of being number one bank for customer service, trust and advocacy by 2020.

 

We use independent surveys to measure our customers' experience and track our progress against our goal in each of our markets.

 

Net Promoter Score (NPS)

Customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating 'extremely likely' and 0 indicating 'not at all likely'.  Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. NPS is established by subtracting the proportion of detractors from the proportion of promoters.

 

The table below lists all of the businesses for which we have an NPS for 2016. Year-on-year, NatWest Personal Banking, Royal Bank of Scotland Business Banking and Commercial Banking have improved.  In Scotland, we have narrowed the gap to number one in Business Banking. 

 

In recent years, the bank has launched a number of initiatives to make it simpler, fairer and easier to do business, and it continues to deliver on the commitments that it made to its customers in 2014.

 



Q2 2015

Q1 2016

Q2 2016

Year end 2016 target

Personal Banking

NatWest (England & Wales)(1)

8

13

12

15

Royal Bank of Scotland (Scotland)(1)

-10

-6

-7

-5

Ulster Bank (Northern Ireland)(2)

-11

-14

-16

-3

Ulster Bank (Republic of Ireland)(2)

-14

-12

-11

-10

Business Banking

NatWest (England & Wales)(3)

4

9

4

13

Royal Bank of Scotland (Scotland)(3)

-17

-7

-4

2

Ulster Bank Business & Commercial

Ulster Bank (Northern Ireland) (4)

n/a

-10

3

-4

Commercial Banking(5)

10

15

18

17



Highlights

 

Customer Trust

We also use independent experts to measure our customers' trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).

 

Customer trust in RBS has continued to improve and is at its highest in two years. NatWest has not changed since last quarter. Both are currently on track to meet the 2016 year end target.

 



Q2 2015

Q1 2016

Q2 2016

Year end 2016 target

Customer trust(6)

NatWest (England & Wales)

48%

48%

48%

51%

Royal Bank of Scotland (Scotland)

-2%

21%

23%

26%

 

Notes:

(1)

Source: GfK FRS 6 month rolling data. Latest base sizes: NatWest (England & Wales) (3387) Royal Bank of Scotland (Scotland) (527). Based on the question: "How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?"

(2)

Source: Coyne Research 12 month rolling data. Latest base sizes: Ulster Bank NI (372) Ulster Bank RoI (332) Question: "Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely".   

(3)

Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with an annual turnover up to £2 million. Quarterly rolling data. Latest base sizes: NatWest England & Wales (1361), RBS Scotland (438). Weighted by region and turnover to be representative of businesses in England & Wales/Scotland, 4 quarter rolling data.

(4)

Source: Charterhouse Research Business Banking Survey (NI). Latest base size: Ulster (362) Weighted by turnover and industry sector to be representative of businesses in Northern Ireland, 4 quarter rolling data.

In 2016 we switched the source of advocacy measurement for Ulster Bank Corporate NI to the Charterhouse Business Banking Study.  Charterhouse is a recognised, independent syndicate study that provides more frequent reporting of NPS as well as additional diagnostic customer feedback to help us improve the customer experience. 

Ulster Bank Business & Commercial RoI reports annually.

(5)

Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with annual turnover between £2 million and £1 billion.  Latest base size: RBSG Great Britain (972). Weighted by region and turnover to be representative of businesses in Great Britain, 4 quarter rolling data.

(6)

Source: Populus. Latest quarter's data.  Measured as a net of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: NatWest, England & Wales (852), RBS Scotland (185).

 



Highlights

 

Williams & Glyn

 

On 28 April 2016 we announced that there was a significant risk that the separation and divestment of Williams & Glyn will not be achieved by 31 December 2017. RBS remains committed to meeting its State Aid obligations. Work has continued to explore alternative means to achieve separation and divestment and RBS has had positive discussions with a number of interested parties concerning an alternative transaction related to substantially all of the business previously described as Williams & Glyn. These discussions are at a preliminary stage and may or may not lead to a viable transaction.

 

Due to the complexities of Williams & Glyn's separation, whilst good progress has been made on the programme to create a cloned banking platform, the Board concluded that the risks and costs inherent in the programme are such that it would not be prudent to continue with this programme.  RBS will instead prioritise exploring alternative means to achieve divestment.

 

Outlook

The outcome of the UK's EU Referendum has created considerable uncertainty in our core market and we continue to assess all its implications. In the current low rate and low growth environment, achieving our longer term cost:income ratio and return targets by 2019 is likely to be more challenging.

We expect PBB and CPB income to be broadly stable in 2016 compared with 2015 as strong planned balance sheet growth, particularly in mortgages but also in core commercial lending, is balanced by headwinds from the reduction in interchange fees, low interest rates and the uncertain macroeconomic environment. In H1 2016 income across PBB and CPB was broadly stable. CIB income recovered in Q2 2016, following a difficult Q1 2016, and we now expect income to be stable in 2016 compared with 2015.

RBS remains on track to achieve an £800 million cost reduction in 2016. We retain our expectation that cost reduction will exceed any income erosion across our combined PBB, CPB and CIB businesses.

The impairment charge taken during H1 largely related to sector specific issues particularly in the Oil & Gas and Capital Resolution Shipping portfolios. There is a continuing risk of large single name/sector driven events across our portfolios given the uncertain macroeconomic environment. The outcome of the UK's EU Referendum has increased the level of uncertainty however it is too early at this point to quantify the impact of any potential credit losses that may result.

Restructuring costs are expected to remain high in 2016, totalling over £1 billion. The H1 2016 restructuring charge was £630 million, of which £345 million related to Williams & Glyn. 

We expect Capital Resolution disposal losses of approximately £1.5 billion, and we anticipate that we will incur most of the remaining losses in 2016 (2015 - £367 million). Losses of £368 million in H1 2016 include an impairment charge of £264 million in relation to the Shipping portfolio. Following the EU Referendum and the resultant significant weakening of sterling, we now anticipate that Capital Resolution RWAs will be around £30 - £35 billion by the end of 2016.

We continue to deal with a range of uncertainties in the external environment and we will also have to manage conduct-related investigations and litigation, including US RMBS, throughout 2016, and substantial related incremental provisions may be recognised during the remainder of the year.

 


Summary consolidated income statement for the period ended 30 June 2016

 


Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June


2016

2015*


2016

2016

2015*


£m

£m


£m

£m

£m

Net interest income

4,333 

4,418 


2,177 

2,156 

2,215 








Own credit adjustments

450 

288 


194 

256 

168 

Loss on redemption of own debt

(130)


(130)

Strategic disposals

195 

(135)


201 

(6)

Other operating income

1,216 

2,685 


558 

658 

1,354 








Non-interest income

1,731 

2,838 


823 

908 

1,522 








Total income

6,064 

7,256 


3,000 

3,064 

3,737 








Restructuring costs

(630)

(1,470)


(392)

(238)

(1,023)

Litigation and conduct costs

(1,315)

(1,315)


(1,284)

(31)

(459)

Other costs

(3,984)

(4,531)


(1,833)

(2,151)

(2,223)








Operating expenses

(5,929)

(7,316)


(3,509)

(2,420)

(3,705)








Profit/(loss) before impairment (losses)/releases

135 

(60)


(509)

644 

32 

Impairment (losses)/releases

(409)

321 


(186)

(223)

192 








Operating (loss)/profit before tax

(274)

261 


(695)

421 

224 

Tax charge

(340)

(287)


(260)

(80)

(97)








(Loss)/profit from continuing operations

(614)

(26)


(955)

341 

127 








Profit from discontinued operations, net of tax

358 


674 








(Loss)/profit for the period

(614)

332 


(955)

341 

801 















Attributable to:







Non-controlling interests

30 

344 


22 

428 

Other owners

208 

167 


114 

94 

93 

Dividend access share

1,193 


1,193 

Ordinary shareholders

(2,045)

(179)


(1,077)

(968)

280 








Memo:














Total income - adjusted (1)

5,549 

7,103 


2,735 

2,814 

3,569 

Operating expenses - adjusted (2)

(3,984)

(4,531)


(1,833)

(2,151)

(2,223)

Operating profit - adjusted (1,2)

1,156 

2,893 


716 

440 

1,538 

 

*Restated - refer to page 66 for further details

 

Notes:

(1)

Excluding own credit adjustments, loss on redemption of own debt and strategic disposals.

(2)

Excluding restructuring costs and litigation and conduct costs.

 

Details of other comprehensive income are provided on page 61.


Summary consolidated balance sheet as at 30 June 2016

 


30 June 

31 March 

31 December 


2016 

2016 

2015 


£m 

£m 

£m 





Cash and balances at central banks

65,307 

72,083 

79,404 

Net loans and advances to banks (1)

21,763 

19,295 

18,361 

Net loans and advances to customers (1)

326,503 

317,088 

306,334 

Reverse repurchase agreements and stock borrowing

45,778 

42,356 

39,843 

Debt securities and equity shares

84,807 

88,877 

83,458 

Assets of disposal groups (2)

396 

3,405 

3,486 

Other assets

31,047 

27,609 

22,008 





Funded assets

575,601 

570,713 

552,894 

Derivatives

326,023 

312,217 

262,514 





Total assets

901,624 

882,930 

815,408 





Bank deposits (3)

31,377 

31,774 

28,030 

Customer deposits (3)

355,719 

352,344 

343,186 

Repurchase agreements and stock lending

40,881 

39,030 

37,378 

Debt securities in issue

27,148 

29,576 

31,150 

Subordinated liabilities

20,113 

20,870 

19,847 

Derivatives

322,390 

304,789 

254,705 

Liabilities of disposal groups (2)

252 

2,816 

2,980 

Other liabilities

50,017 

47,566 

43,985 





Total liabilities

847,897 

828,765 

761,261 

Non-controlling interests

820 

788 

716 

Owners' equity

52,907 

53,377 

53,431 





Total liabilities and equity

901,624 

882,930 

815,408 

 

Notes:

(1)

Excludes reverse repurchase agreements and stock borrowing.

(2)

Primarily international private banking business at 31 March 2016 and 31 December 2015.

(3)

Excludes repurchase agreements and stock lending.

 


Analysis of results

 


Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June

2016

2015


2016

2016

2015

Net interest income

£m

£m


£m

£m

£m








Net interest income (1)

4,333 

4,418 


2,177 

2,156 

2,215 

RBS














  - UK Personal & Business Banking

2,109 

2,067 


1,090 

1,019 

1,035 

  - Ulster Bank RoI

198 

190 


93 

105 

95 

  - Commercial Banking

1,067 

981 


531 

536 

499 

  - Private Banking

226 

219 


113 

113 

109 

  - RBS International

151 

152 


76 

75 

76 

  - Corporate & Institutional Banking

43 

30 


24 

19 

16 

  - Capital Resolution

168 

281 


82 

86 

124 

  - Williams & Glyn

324 

326 


162 

162 

163 

  - Central items & other

47 

172 


41 

98 








Average interest-earning assets (IEA)







RBS

399,751 

416,319 


396,118 

403,384 

417,248 








  - UK Personal & Business Banking

138,192 

128,485 


140,591 

135,793 

128,957 

  - Ulster Bank RoI

24,233 

23,136 


24,288 

24,178 

23,029 

  - Commercial Banking

117,312 

104,067 


119,768 

114,855 

104,648 

  - Private Banking

16,441 

15,716 


16,622 

16,259 

15,855 

  - RBS International

21,436 

20,527 


21,798 

21,075 

20,416 

  - Corporate & Institutional Banking

11,745 

18,702 


11,923 

11,568 

23,128 

  - Capital Resolution

29,962 

75,727 


29,157 

30,767 

68,544 

  - Williams & Glyn

23,764 

22,703 


24,172 

23,356 

22,769 

  - Central items & other

16,666 

7,256 


7,799 

25,533 

9,902 








Yields, spreads and margins of the banking business














Gross yield on interest-earning assets of the banking business (2)

2.85%

2.96%


2.87%

2.82%

2.91%

Cost of interest-bearing liabilities of banking business

(1.00%)

(1.18%)


(1.00%)

(1.01%)

(1.14%)








Interest spread of banking business (3)

1.85%

1.78%


1.87%

1.81%

1.77%

Benefit from interest-free funds

0.33%

0.36%


0.34%

0.34%

0.36%








Net interest margin (1,4)







RBS

2.18%

2.14%


2.21%

2.15%

2.13%








  - UK Personal & Business Banking (5)

3.07%

3.24%


3.12%

3.02%

3.22%

  - Ulster Bank RoI (5)

1.64%

1.66%


1.54%

1.75%

1.65%

  - Commercial Banking (5)

1.83%

1.90%


1.78%

1.88%

1.91%

  - Private Banking (5)

2.76%

2.81%


2.73%

2.80%

2.76%

  - RBS International (5)

1.42%

1.49%


1.40%

1.43%

1.49%

  - Corporate & Institutional Banking

0.74%

0.32%


0.81%

0.66%

0.28%

  - Capital Resolution

1.13%

0.75%


1.13%

1.12%

0.73%

  - Williams & Glyn

2.74%

2.90%


2.70%

2.79%

2.87%








Average interest rates














Base rate

0.50 

0.50 


0.50 

0.50 

0.50 

London inter-bank three month offered rates







  - Sterling

0.59 

0.57 


0.58 

0.59 

0.57 

  - Eurodollar

0.63 

0.27 


0.64 

0.62 

0.28 

  - Euro

(0.22)

0.02 


(0.26)

(0.19)

(0.01)








For notes to this table refer to next page.









 

Analysis of results









Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June


2016

2015


2016

2016

2015


%

%


%

%

%








Third party customer rates (6)







Third party customer asset rate







  - UK Personal & Business Banking

3.96 

4.19 


3.96 

3.95 

4.18 

  - Ulster Bank RoI (7)

2.20 

2.31 


2.07 

2.33 

2.34 

  - Commercial Banking

2.85 

2.97 


2.82 

2.87 

2.96 

  - Private Banking

3.00 

3.19 


2.97 

3.01 

3.19 

  - RBS International

3.14 

3.08 


3.02 

3.29 

3.01 

Third party customer funding rate







  - UK Personal & Business Banking

(0.54)

(0.69)


(0.46)

(0.62)

(0.67)

  - Ulster Bank RoI (7)

(0.56)

(0.97)


(0.53)

(0.59)

(0.90)

  - Commercial Banking

(0.36)

(0.39)


(0.36)

(0.35)

(0.31)

  - Private Banking

(0.22)

(0.27)


(0.20)

(0.23)

(0.25)

  - RBS International

(0.18)

(0.38)


(0.13)

(0.24)

(0.38)

 

Notes:

(1)

For the purpose of net interest margin (NIM) calculations, no increase (H1 2015 - £8 million; Q2 2016 - nil; Q1 2016 - nil; Q2 2015 - £3 million) was made in respect of interest payable on financial liabilities designated as at fair value through profit or loss. Related average interest-earning assets and average interest-bearing liabilities have also been adjusted.

(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)

PBB NIM was 2.86% (H1 2015 - 3.00%; Q2 2016 - 2.89%; Q1 2016 - 2.83%; Q2 2015 - 2.98%); CPB NIM was 1.87% (H1 2015 - 1.94%; Q2 2016 - 1.83%;

Q1 2016 - 1.91%; Q2 2015 - 1.95%).

(6)

Net interest margin includes Treasury allocations and interest on intercompany borrowings, which are excluded from third party customer rates.

(7)

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.

 



Analysis of results

 


Half year ended


Half year ended


30 June 2016


30 June 2015*


Average




Average




balance

Interest

Rate


balance

Interest

Rate

Average balance sheet

£m

£m

%


£m

£m

%









Assets








Loans and advances to banks

66,179 

115 

0.35 


75,199 

197 

0.53 

Loans and advances to customers

287,575 

5,364 

3.75 


304,857 

5,771 

3.82 

Debt securities

45,997 

177 

0.77 


36,263 

139 

0.77 









Interest-earning assets








  - banking business (1,2)

399,751 

5,656 

2.85 


416,319 

6,107 

2.96 

  - trading business (3)

132,839 




151,588 











Non-interest earning assets

338,903 




493,066 











Total assets

871,493 




1,060,973 











Memo: Funded assets

535,848 




701,616 











Liabilities








Deposits by banks

4,437 

12 

0.54 


6,806 

25 

0.74 

Customer accounts

237,126 

575 

0.49 


243,601 

758 

0.63 

Debt securities in issue

21,742 

298 

2.76 


34,014 

420 

2.49 

Subordinated liabilities

19,837 

442 

4.48 


20,730 

442 

4.30 

Internal funding of trading business

(17,508)

(4)

0.05 


(15,505)

52 

(0.68)









Interest-bearing liabilities








  - banking business (1,2)

265,634 

1,323 

1.00 


289,646 

1,697 

1.18 

  - trading business (3)

141,714 




159,632 











Non-interest-bearing liabilities








  - deposits(4)

84,660 




80,207 



  - other liabilities

325,071 




471,405 



Total equity

54,414 




60,083 











Total liabilities and equity

871,493 




1,060,973 



 

*Restated - refer to page 66 for further details

 

Notes:

(1)

Interest payable has been increased by nil (H1 2015 - £8 million) to record interest on financial liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have also been adjusted.

(2)

Interest income includes amounts (unwind of discount) recognised on impaired loans and receivables. The average balances of such loans are included in average loans and advances to banks and loans and advances to customers.

(3)

Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.

(4)

Of which, PBB - £49 billion, CPB - £28 billion and other - £8 billion (H1 2015; PBB - £44 billion, CPB - £25 billion and other - £11 billion).

 



 

Analysis of results

 

Key points

 

H1 2016 compared with H1 2015

·

Net interest income of £4,333 million decreased £85 million, or 2%, compared with H1 2015 principally driven by a £113 million reduction in Capital Resolution in line with the planned shrinkage of the balance sheet. 



·

NIM was 2.18% for H1 2016, 4 basis points higher than H1 2015 as the benefit associated with reductions in the low yielding 'non-core' assets has been partially offset by modest asset margin pressure and mix impacts across PBB and CPB.

·

In UK PBB, NIM decreased by 17 basis points to 3.07% compared with H1 2015 reflecting the impact of the overall portfolio mix being increasingly weighted towards secured lending and mortgage customers switching from standard variable rate (SVR) to lower rate products. SVR mortgages represented 12% of the mortgage book as at 30 June 2016 compared with 18% a year earlier.

·

Commercial Banking NIM declined by 7 basis points reflecting asset margin pressure and an increased allocation of the low yielding liquidity portfolio.

 

Q2 2016 compared with Q1 2016

·

Net interest income of £2,177 million was £21 million higher than Q1 2016 principally driven by a £71 million increase in UK PBB reflecting deposit re-pricing, strong volume growth and a release of previously suspended credit card interest of £32 million.



·

NIM was 2.21% for Q2 2016, 6 basis points higher than Q1 2016 as low yielding non-core and liquid assets become a smaller proportion of the overall book.

·

NIM for our combined PBB and CPB franchises was 2.37% in Q2 2016 compared with 2.38% in Q1 2016.

·

UK PBB NIM increased by 10 basis points to 3.12% reflecting a one-off release of suspended interest, 9 basis points, and deposit re-pricing whilst Commercial Banking NIM decreased by 10 basis points to 1.78% principally driven by an increased allocation of the low yielding liquidity portfolio.

 

Q2 2016 compared with Q2 2015

·

Net interest income of £2,177 million was £38 million lower than Q2 2015 and included a £42 million reduction in Capital Resolution in line with planned shrinkage of the balance sheet.

·

NIM was 8 basis points higher than Q2 2015 principally reflecting the benefit associated with reductions in the low yielding 'non-core' assets.



Analysis of results

 


Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June

2016

2015


2016

2016

2015

Non-interest income

£m

£m


£m

£m

£m








Net fees and commissions

1,284 

1,595 


630 

654 

783 

(Loss)/income from trading activities

(267)

665 


(157)

(110)

430 

Own credit adjustments

450 

288 


194 

256 

168 

Loss on redemption of own debt

(130)


(130)

-

Strategic disposals

195 

(135)


201 

(6)

Other operating income

199 

425 


85 

114 

141 








Total non-interest income

1,731 

2,838 


823 

908 

1,522 








Memo:







IFRS volatility in Treasury (1)

(668)

80 


(312)

(356)

204 

 

Note:

(1)

IFRS volatility arises from the changes to fair value of hedges of loans which do not qualify for hedge accounting under IFRS.

 

Key points

 

H1 2016 compared with H1 2015

·

Non-interest income was £1,731 million, a reduction of £1,107 million, or 39%, compared with H1 2015. Capital Resolution non-interest income fell by £771 million reflecting planned asset disposals and an additional £220 million funding valuation adjustment in Q2 2016 (H1 2016 - £330 million) following the EU Referendum. CIB income reduced by £130 million reflecting the reduced scale of the business. In addition, we recognised a £668 million charge for volatile items under IFRS compared with an £80 million gain in H1 2015.  Partially offsetting this, we reported a strategic disposal gain of £195 million, versus a loss of £135 million in H1 2015, and recognised an FX gain of £253 million principally reflecting the significant weakening of sterling against the dollar following the EU Referendum.

·

Net fees and commissions decreased by £311 million, or 19%, compared with H1 2015 reflecting the planned Capital Resolution asset run-down, £131 million, lower CIB income, down £133 million, and lower credit card interchange fees in UK PBB, down £41 million. 

·

Losses from trading activities totalled £267 million compared with income of £665 million in H1 2015, reflecting an increased charge for volatile items under IFRS as well as increased losses in Capital Resolution (including an incremental £220 million funding valuation adjustment in Q2 2016).

·

Other operating income of £199 million was £226 million lower than H1 2015 principally reflecting the planned Capital Resolution asset run-down as well as equity disposal and fair value gains of £75 million reported in Commercial Banking in H1 2015.

 

Q2 2016 compared with Q1 2016

·

Non-interest income reduced by £85 million to £823 million.  Capital Resolution non-interest income fell by £474 million reflecting planned asset disposals, including disposal losses of £102 million, and an additional £220 million funding valuation adjustment following the EU Referendum. Partially offsetting, CIB non-interest income increased by £131 million principally reflecting robust levels of customer activity within the Rates business.  In addition, we recognised a £246 million gain on the disposal of our stake in Visa Europe.

 

Q2 2016 compared with Q2 2015

·

Non-interest income reduced by £699 million largely reflecting a £537 million fall in Capital Resolution. In addition, a £312 million IFRS volatility charge was reported compared with a gain of £204 million in Q2 2015.   



Analysis of results

 


Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June

2016

2015*


2016

2016

2015*

Operating expenses

£m

£m


£m

£m

£m








Staff costs

2,329 

2,543 


1,127 

1,202 

1,258 

Premises and equipment

630 

709 


315 

315 

298 

Other administrative expenses

625 

861 


179 

446 

481 

Restructuring costs (see below)

630 

1,470 


392 

238 

1,023 

Litigation and conduct costs

1,315 

1,315 


1,284 

31 

459 








Administrative expenses

5,529 

6,898 


3,297 

2,232 

3,519 

Depreciation and amortisation

352 

418 


174 

178 

186 

Write down of intangible assets

48 


38 

10 








Operating expenses

5,929 

7,316 


3,509 

2,420 

3,705 








Adjusted operating expenses (1)

3,984 

4,531 


1,833 

2,151 

2,223 








Restructuring costs comprise:







  - staff expenses

366 

344 


245 

121 

288 

  - premises, equipment, depreciation and amortisation

24 

330 


15 

42 

  - other

240 

796 


132 

108 

693 









630 

1,470 


392 

238 

1,023 

 Of which Williams & Glyn

345 

259 


187 

158 

126 








Staff costs as a % of total income

38%

35%


38%

39%

34%

Cost:income ratio

98%

101%


117%

79%

99%

Cost:income ratio - adjusted (2)

72%

64%


67%

76%

62%

Employee numbers (FTE - thousands)

89.2 

91.6 


89.2 

92.4 

91.6 

 

*Restated - refer to page 66 for further details

 

Notes:

(1)

Excluding restructuring costs and litigation and conduct costs.

(2)

Excluding own credit adjustments, loss on redemption of own debt ,strategic disposals, restructuring costs and litigation and conduct costs.

 



Analysis of results

 

Key points

 

H1 2016 compared with H1 2015

·

Operating expenses of £5,929 million were £1,387 million, or 19%, lower than H1 2015 reflecting lower restructuring costs of £630 million (H1 2015 - £1,470 million) and a £547 million, or 12%, reduction in adjusted operating expenses.

·

Adjusted operating expenses fell by £547 million, or 12%, from H1 2015 to £3,984 million.  Excluding expenses associated with Williams & Glyn, write down of intangible assets (£48 million) and a £227 million VAT recovery, adjusted operating expenses reduced by £404 million and remain on target to achieve an £800 million reduction for the year.

·

Staff costs of £2,329 million were down £214 million, or 8%, principally reflecting reduced headcount in Capital Resolution and CIB.

·

Restructuring costs of £630 million in H1 2016 included £345 million in respect of Williams & Glyn separation costs.

·

Litigation and conduct costs of £1,315 million included an additional PPI provision following publication of the FCA Consultation Paper on 2 August, a provision in respect of the UK 2008 rights issue shareholder litigation, a provision in Ulster Bank RoI principally in respect of an industry-wide examination of tracker mortgages and various other matters.

 

Q2 2016 compared with Q1 2016

·

Operating expenses of £3,509 million were £1,089 million higher than Q1 2016. A £1,253 million increase in litigation and conduct costs and a £154 million increase in restructuring costs were partially offset by a £318 million reduction in adjusted operating expenses. 

·

Adjusted operating costs of £1,833 million were £318 million lower than Q1 2016 and included a £227 million VAT recovery.

 

Q2 2016 compared with Q2 2015

·

Operating expenses were £196 million lower than Q2 2015 reflecting a £631 million reduction in restructuring costs and a £390 million reduction in adjusted operating expenses, benefiting from a £227 million VAT recovery, partially offset by a £825 million increase in litigation and conduct costs. 

 



Analysis of results


Half year ended


Quarter ended


30 June

30 June


30 June

31 March

30 June

2016

2015


2016

2016

2015

Impairment losses/(releases)

£m

£m


£m

£m

£m








Loan impairment losses/(releases)







  - individually assessed

358 

(120)


172 

186 

(105)

  - collectively assessed

43 


27 

16 

(7)

  - latent

11 

(316)


(10)

21 

(91)








Total loan impairment losses/(releases)

412 

(431)


189 

223 

(203)

Securities

(3)

110 


(3)

11 








Total impairment losses/(releases)

409 

(321)


186 

223 

(192)












30 June

31 March

31 December

Credit metrics (1)




2016

2016

2015








Gross customer loans




£333,017m

£325,339m

£315,111m

Loan impairment provisions




£6,456m

£6,701m

£7,139m

Risk elements in lending (REIL)




£11,789m

£11,867m

£12,157m

Provisions as a % of REIL




55%

57%

59%

REIL as a % of gross customer loans




3.5%

3.6%

3.9%

 

Note:

(1)

Includes disposal groups and excludes reverse repos.

 

Key points 

 

H1 2016 compared with H1 2015

·

A net impairment loss of £409 million was reported in H1 2016 compared with a release of £321 million in H1 2015. 

·

Capital Resolution reported an impairment loss of £263 million compared with a release of £319 million in H1 2015. The charge for the half year included £264 million in relation to exposures in the Shipping portfolio reflecting difficult conditions in some parts of the sector.

·

Commercial Banking reported an impairment loss of £103 million compared with a charge of £26 million in H1 2015, with the uplift primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.

·

Ulster Bank RoI reported a net impairment release of £27 million compared with a £77 million release in H1 2015.

·

REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.9% at 31 December 2015.  Provision coverage was 55% compared with 59% at 31 December 2015. Exchange rate movements added £0.8 billion to REIL during H1 2016.

 

Q2 2016 compared with Q1 2016

·

A net impairment loss of £186 million was reported in Q2 2016 compared with a loss of £223 million in Q1 2016.

·

Capital Resolution reported a net impairment loss of £67 million compared with a loss of £196 million in Q1 2016 principally reflecting a reduced charge on the Shipping portfolio. Commercial Banking reported a charge of £89 million compared with a charge of £14 million in Q1 2016 with the increase primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.

·

REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.6% in Q1 2016.

 

Q2 2016 compared with Q2 2015

·

A net impairment loss of £186 million in Q2 2016 compared with a release of £192 million in Q2 2015. Capital Resolution reported a charge of £67 million compared with a release of £174 million in Q2 2015. Commercial Banking reported a charge of £89 million compared with a charge of £27 million in Q2 2015, with the uplift primarily reflecting a single name charge on the Oil & Gas portfolio.



Analysis of results

 







Selected credit risk portfolios





30 June 2016


31 December 2015*


Current

Potential


Current

Potential


exposure

exposure


exposure

exposure

Natural Resources (1)

£m

£m


£m

£m







Oil & Gas

3,298 

6,356 


3,544 

6,798 

Mining & Metals

816 

1,941 


729 

1,823 

Electricity

3,374 

8,583 


2,851 

7,683 

Water & Waste

5,347 

8,665 


4,657 

8,261 








12,835 

25,545 


11,781 

24,565 







Commodity Traders (2)

564 

1,080 


900 

1,320 

Of which: Natural Resources

427 

759 


521 

752 







Shipping

6,765 

7,246 


6,776 

7,301 

 


30 June 2016


31 December 2015*


Current

Potential


Current

Potential


exposure

exposure


exposure

exposure

Emerging markets (1)

£m

£m


£m

£m







India

1,330 

1,393 


1,634 

1,733 

China

661 

860 


960 

1,150 

 

 

*Restated - refer to page 17 in Appendix 1 for further details.

 

Notes:

(1)

Refer to Appendix 1 for further details and definitions.

(2)

Represent customers in a number of industry sectors, predominantly Natural Resources above.

 

Key points

 

·

Oil & Gas: Potential exposure decreased by 6.5% due to active credit management and the continued run-off of the North American and Asia-Pacific portfolios. The portfolio in Commercial Banking saw an impairment charge of £97 million in Q2 2016 primarily from a single name.

·

Mining & Metals: Potential exposure was relatively unchanged with the increase mainly driven by foreign exchange movements (64% of the portfolio is denominated in US dollars). Excluding the impact of foreign exchange movements, exposure decreased by 2.5%.   

·

Shipping: Most of the portfolio related to exposure secured by ocean-going vessels managed by Capital Resolution. Excluding foreign exchange impacts, exposure fell by 10%. Impairment provisions were £445 million at 30 June 2016 up from £181 million at 31 December 2015.

·

 

Exposure to most emerging markets decreased in H1 2016 as RBS continued to implement its strategy to withdraw from non-strategic countries.



Analysis of results

 

Capital and leverage ratios







End-point CRR basis (1)


PRA transitional basis


30 June 

31 December 


30 June 

31 December 


2016 

2015 


2016 

2015 

Risk asset ratios








CET1

14.5 

15.5 


14.5 

15.5 

Tier 1

15.4 

16.3 


17.7 

19.1 

Total

19.0 

19.6 


23.0 

24.7 







Capital

£m

£m


£m

£m







Tangible equity

40,541 

40,943 


40,541 

40,943 







Expected loss less impairment provisions

(831)

(1,035)


(831)

(1,035)

Prudential valuation adjustment

(603)

(381)


(603)

(381)

Deferred tax assets

(1,040)

(1,110)


(1,040)

(1,110)

Own credit adjustments

(587)

(104)


(587)

(104)

Pension fund assets

(209)

(161)


(209)

(161)

Cash flow hedging reserve

(1,603)

(458)


(1,603)

(458)

Other deductions

(14)

(86)


(14)

(64)







Total deductions

(4,887)

(3,335)


(4,887)

(3,313)







CET1 capital

35,654 

37,608 


35,654 

37,630 

AT1 capital

1,997 

1,997 


7,756 

8,716 







Tier 1 capital

37,651 

39,605 


43,410 

46,346 

Tier 2 capital

9,028 

8,002 


13,043 

13,619 







Total regulatory capital

46,679 

47,607 


56,453 

59,965 







Risk-weighted assets












Credit risk






  - non-counterparty

172,500 

166,400 




  - counterparty

26,100 

23,400 




Market risk

20,900 

21,200 




Operational risk

25,700 

31,600 










Total RWAs

245,200 

242,600 










Leverage (2)












Derivatives

326,000 

262,500 




Loans and advances

348,500 

327,000 




Reverse repos

45,800 

39,900 




Other assets

181,300 

186,000 










Total assets

901,600 

815,400 




Derivatives






  - netting and variation margin

(328,400)

(258,600)




  - potential future exposures

75,500 

75,600 




Securities financing transactions gross up

3,200 

5,100 




Undrawn commitments

63,200 

63,500 




Regulatory deductions and other adjustments

5,600 

1,500 










Leverage exposure

720,700 

702,500 










Tier 1 capital

37,651 

39,605 










Leverage ratio %

5.2 

5.6 










Average leverage exposure (3)

717,167 











Average Tier 1 capital (3)

38,561 











Average leverage ratio % (3)

5.4 





 

Notes:

(1)

Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with the 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 AFS securities which have been included from 2015 under the PRA transitional basis.

(2)

Based on end-point CRR 1 Tier capital and leverage exposure under the CRR Delegated Act.

(3)

Based on averages of last three quarter end positions.

 



 

Analysis of results

 

Key points 

·

The CET1 ratio decreased by 100 basis points in H1 2016 to 14.5% primarily reflecting management actions to normalise the ownership structure and improve the long-term resilience of RBS. These actions included the final Dividend Access Share payment of £1.2 billion and the accelerated payment of £4.2 billion relating to the outstanding deficit on the pension Main Scheme. Additional litigation and conduct charges contributed to a £2.0 billion reduction in CET1 capital.



·

RWAs increased by £2.6 billion to £245.2 billion during H1 2016 reflecting lending growth in UK PBB and Commercial Banking and the adverse impact of exchange rate movements of £7.5 billion mainly due to weakening of sterling following the EU Referendum. These are partially offset by the reductions in RWAs due to disposals and run-off in Capital Resolution and the removal of the element of operational risk RWAs relating to Citizens, following regulatory approval.



·

There was a 10 basis points decrease in the CET1 ratio in Q2 2016 driven by a £0.7 billion decrease in CET 1 capital in Q2 2016, offset by £4.3 billion reduction in RWAs. The reduction in RWAs related to disposals and run-off in Capital Resolution, and removal of that element of operational risk RWAs relating to Citizens, following regulatory approval (£3.9 billion); these were partly offset by the weakening of sterling mainly due to the EU Referendum (£4.4 billion).



·

Leverage ratio decreased by 40 basis points in H1 2016 to 5.2% driven by growth in mortgages and commercial lending as well as the reduction in Tier 1 capital. 

 


Segment performance

 


Half year ended 30 June 2016


PBB


CPB





Central




Ulster


Commercial

Private

RBS



Capital

Williams

 items &

Total


UK PBB

Bank RoI


Banking

Banking

International


CIB

Resolution

& Glyn

other (1)

RBS


£m

£m


£m

£m

£m


£m

£m

£m

£m

£m














Income statement













Net interest income

2,109 

198 


1,067 

226 

151 


43 

168 

324 

47 

4,333 

Other non-interest income

506 

92 


632 

105 

34 


638 

(473)

87 

(405)

1,216 

Total income - adjusted (2)

2,615 

290 


1,699 

331 

185 


681 

(305)

411 

(358)

5,549 

Own credit adjustments



137 

184 

126 

450 

Loss on redemption of own debt



(130)

(130)

Strategic disposals



(51)

246 

195 

Total income

2,615 

293 


1,699 

331 

185 


818 

(172)

411 

(116)

6,064 

Direct expenses - staff costs

(361)

(97)


(265)

(77)

(22)


(131)

(62)

(125)

(1,189)

(2,329)

                           - other costs

(162)

(13)


(111)

(23)

(8)


(21)

(64)

(33)

(1,220)

(1,655)

Indirect expenses

(987)

(85)


(557)

(156)

(38)


(488)

(289)

(39)

2,639 

Operating expenses - adjusted (3)

(1,510)

(195)


(933)

(256)

(68)


(640)

(415)

(197)

230 

(3,984)

Restructuring costs - direct

(51)

(24)


(1)

(1)

(1)


(10)

(12)

(45)

(485)

(630)

                                - indirect

(60)

(1)


(40)

(19)

(2)


(23)

(25)

170 

Litigation and conduct costs

(421)

(92)


(10)

(2)


(56)

(26)

(708)

(1,315)














Operating expenses

(2,042)

(312)


(984)

(278)

(71)


(729)

(478)

(242)

(793)

(5,929)














Operating profit/(loss) before impairment losses

573 

(19)


715 

53 

114 


89 

(650)

169 

(909)

135 

Impairment (losses)/releases

(40)

27 


(103)

(2)

(11)


--

(263)

(17)

--

(409)














Operating profit/(loss)

533 


612 

51 

103 


89 

(913)

152 

(909)

(274)














Operating profit/(loss) - adjusted (2,3)

1,065 

122 


663 

73 

106 


41 

(983)

197 

(128)

1,156 

Additional information













Return on equity (4)

11.9%

0.6%


8.1%

5.1%

15.4%


0.8%

nm

nm

nm

(10.3%)

Return on equity - adjusted (2,3,4)

25.5%

9.3%


8.9%

7.6%

15.9%


(0.5%)

nm

nm

nm

(3.2%)

Cost:income ratio

78%

106%


58%

84%

38%


89%

nm

59%

nm

98%

Cost:income ratio - adjusted (2,3)

58%

67%


55%

77%

37%


94%

nm

48%

nm

72%

Total assets (£bn)

151.2  

24.3  


146.3  

17.8  

24.6  


284.0  

208.0  

24.9  

20.5  

901.6  

Funded assets (£bn)

151.2  

24.1  


146.3  

17.7  

24.6  


125.6  

44.7  

24.9  

16.5  

575.6  

Net loans and advances to customers (£bn)

126.0  

18.9  


99.2  

11.8 

8.5  


21.6  

19.9  

20.3  

0.4  

326.6  

Risk elements in lending (£bn)

2.3  

4.3  


2.2  

0.1 

0.1  


--

2.4  

0.4  

--

11.8  

Impairment provisions (£bn)

(1.5)

(2.5)


(1.0)

--


--

(1.1)

(0.3)

(0.1)

(6.5)

Customer deposits (£bn)

140.4  

14.7  


96.7  

25.4 

24.1  


8.3  

18.8  

23.9  

3.5  

355.8  

Risk-weighted assets (RWAs) (£bn)

37.0  

20.9  


77.5  

8.1 

9.6  


36.7  

42.3  

9.9  

3.2  

245.2  

RWA equivalent (£bn)

41.3  

20.8  


81.5  

8.1 

9.6  


37.2  

43.2  

10.4  

3.3  

255.4  

Employee numbers (FTEs - thousands)

20.0  

3.2  


5.9  

1.8 

0.7  


1.3  

0.9  

5.2  

50.2  

89.2  














For the notes to this table refer to page 30. nm = not meaningful















 

Segment performance

 


Quarter ended 30 June 2016


PBB


CPB





Central




Ulster


Commercial

Private

RBS



Capital

Williams

 items &

Total


UK PBB

Bank RoI


Banking

Banking

International


CIB

Resolution

& Glyn

other (1)

RBS


£m

£m


£m

£m

£m


£m

£m

£m

£m

£m














Income statement













Net interest income

1,090  

93 


531  

113  

76  


24 

82 

162 

2,177 

Other non-interest income

250  

42 


315  

53  

19  


380 

(438)

44 

(107)

558 

Total income - adjusted (2)

1,340  

135 


846  

166  

95  


404 

(356)

206 

(101)

2,735 














Own credit adjustments



73 

76 

45 

194 

Loss on redemption of own debt



(130)

(130)

Strategic disposals



(45)

246 

201 

Total income

1,340  

135 


846  

166  

95  


477 

(325)

206 

60 

3,000 

Direct expenses - staff costs

(180)

(46)


(134)

(37)

(12)


(64)

(17)

(63)

(574)

(1,127)

                           - other costs

(99)

(2)


(62)

(9)

(3)


(7)

(31)

(18)

(475)

(706)

Indirect expenses

(503)

(43)


(301)

(73)

(18)


(238)

(135)

(18)

1,329 

Operating expenses - adjusted (3)

(782)

(91)


(497)

(119)

(33)


(309)

(183)

(99)

280 

(1,833)














Restructuring costs - direct

(38)

(18)


(1)


(10)

(5)

(25)

(295)

(392)

                                - indirect

(51)

(1)


(41)

(4)

(1)


(11)

(16)

125 

Litigation and conduct costs

(421)

(92)


(8)

(2)


(38)

(16)

(707)

(1,284)














Operating expenses

(1,292)

(202)


(546)

(125)

(35)


(368)

(220)

(124)

(597)

(3,509)














Operating profit/(loss) before impairment losses

48  

(67)


300  

41  

60  


109 

(545)

82 

(537)

(509)

Impairment (losses)/releases

(24)

14 


(89)

(9)


(67)

(11)

(186)














Operating profit/(loss)

24  

(53)


211  

41  

51  


109 

(612)

71 

(537)

(695)














Operating profit/(loss) - adjusted (2,3)

534  

58 


260  

47  

53  


95 

(606)

96 

179 

716 

Additional information













Return on equity (4)

(0.4%)

(8.2%)


4.9%

8.6%

15.0%


4.3%

nm

nm

nm

(11.0%)

Return on equity - adjusted (2,3,4)

24.2%

9.0%


6.6%

9.9%

15.7%


3.5%

nm

nm

nm

3.2%

Cost:income ratio

96%

150%


65%

75%

37%


77%

nm

60%

nm

117%

Cost:income ratio - adjusted (2,3)

58%

67%


59%

72%

35%


76%

nm

48%

nm

67%

Total assets (£bn)

151.2  

24.3  


146.3  

17.8  

24.6  


284.0  

208.0  

24.9  

20.5  

901.6  

Funded assets (£bn)

151.2  

24.1  


146.3  

17.7  

24.6  


125.6  

44.7  

24.9  

16.5  

575.6  

Net loans and advances to customers (£bn)

126.0  

18.9  


99.2  

11.8  

8.5  


21.6  

19.9  

20.3  

0.4  

326.6  

Risk elements in lending (£bn)

2.3  

4.3  


2.2  

0.1  

0.1  


2.4  

0.4  

11.8  

Impairment provisions (£bn)

(1.5)

(2.5)


(1.0)


(1.1)

(0.3)

(0.1)

(6.5)

Customer deposits (£bn)

140.4  

14.7  


96.7  

25.4  

24.1  


8.3  

18.8  

23.9  

3.5  

355.8  

Risk-weighted assets (RWAs) (£bn)

37.0  

20.9  


77.5  

8.1  

9.6  


36.7  

42.3  

9.9  

3.2  

245.2  

RWA equivalent (£bn)

41.3  

20.8  


81.5  

8.1  

9.6  


37.2  

43.2  

10.4  

3.3  

255.4  

Employee numbers (FTEs - thousands)

20.0  

3.2  


5.9  

1.8  

0.7  


1.3  

0.9  

5.2  

50.2  

89.2  














For the notes to this table refer to page 30. nm = not meaningful














 

Segment performance

 


Half year 30 June 2015


PBB


CPB





Central




Ulster


Commercial

Private

RBS



Capital

Williams

 items &

Total


UK PBB

Bank RoI


Banking

Banking

International


CIB

Resolution

& Glyn

other (1)

RBS


£m

£m


£m

£m

£m


£m

£m

£m

£m

£m














Income statement













Net interest income

2,067 

190 


981 

219 

152 


30 

281 

326 

172 

4,418 

Other non-interest income

566 

80 


676 

107 

33 


797 

303 

88 

35 

2,685 

Total income - adjusted (2)

2,633 

270 


1,657 

326 

185 


827 

584 

414 

207 

7,103 














Own credit adjustments



108 

142 

38 

288 

Strategic disposal



(14)

(121)

(135)

Total income

2,633 

270 


1,657 

326 

185 


935 

712 

414 

124 

7,256 

Direct expenses - staff costs

(400)

(80)


(242)

(90)

(21)


(188)

(182)

(97)

(1,243)

(2,543)

                           - other costs

(122)

(35)


(104)

(17)

(8)


(53)

(107)

(16)

(1,526)

(1,988)

Indirect expenses

(905)

(85)


(462)

(133)

(50)


(504)

(510)

(48)

2,697 

Operating expenses - adjusted (3)

(1,427)

(200)


(808)

(240)

(79)


(745)

(799)

(161)

(72)

(4,531)














Restructuring costs - direct

(2)

(16)


(11)

(2)


(41)

(169)

(1,229)

(1,470)

                                - indirect

(50)


(5)

(77)

(3)


(270)

(544)

949 

Litigation and conduct costs

(365)


(59)

(2)


(367)

(506)

(25)

(1,315)














Operating expenses

(1,844)

(207)


(883)

(321)

(82)


(1,423)

(2,018)

(161)

(377)

(7,316)














Operating profit/(loss) before impairment losses

789 

63 


774 

103 


(488)

(1,306)

253 

(253)

(60)

Impairment (losses)/releases

(18)

77 


(26)

(1)


319 

10 

(48)

321 














Operating profit/(loss)

771 

140 


748 

102 


(483)

(987)

263 

(301)

261 














Operating profit/(loss) - adjusted (2,3)

1,188 

147 


823 

89 

105 


87 

104 

263 

87 

2,893 

Additional information













Return on equity (4)

17.7%

11.3%


12.2%

(0.3%)

18.4%


(11.8%)

nm

nm

nm

(0.9%)

Return on equity - adjusted (2,3,4)

28.1%

11.9%


13.6%

8.5%

19.0%


0.6%

nm

nm

nm

10.4%

Cost:income ratio

70%

77%


53%

98%

44%


152%

nm

39%

nm

101%

Cost:income ratio - adjusted (2,3)

54%

74%


49%

74%

43%


90%

nm

39%

nm

64%

Total assets (£bn)

139.5 

21.6 


132.1 

18.0 

23.7 


256.6 

247.5 

23.9 

102.1 

965.0 

Funded assets (£bn)

139.5 

21.5 


132.1 

17.9 

23.7 


145.4 

79.2 

23.9 

99.5 

682.7 

Net loans and advances to customers (£bn)

112.9 

16.4 


88.4 

10.9 

6.6 


22.1 

36.7 

19.5 

66.0 

379.5 

Risk elements in lending (£bn)

3.1 

3.8 


2.2 

0.2 

0.1 


7.6 

0.5 

1.2 

18.7 

Impairment provisions (£bn)

(2.2)

(2.0)


(0.8)

(0.1)


(5.2)

(0.3)

(0.7)

(11.3)

Customer deposits (£bn)

133.2 

13.1 


89.5 

23.2 

21.1 


8.6 

28.0 

23.4 

72.4 

412.5 

Risk-weighted assets (RWAs) (£bn)

34.6 

19.2 


64.0 

8.2 

7.7 


41.8 

68.6 

10.3 

72.0 

326.4 

RWA equivalent (£bn)

37.4 

18.6 


70.1 

8.2 

7.7 


42.5 

72.8 

10.6 

72.3 

340.2 

Employee numbers (FTEs - thousands)

22.8 

2.4 


5.7 

2.0 

0.6 


1.5 

2.0 

4.6 

50.0 

91.6 














For the notes to this table refer to page 30. nm = not meaningful














 

Segment performance

 


Quarter ended 31 March 2016


PBB


CPB





Central




Ulster


Commercial

Private

RBS



Capital

Williams

 items &

Total


UK PBB

Bank RoI


Banking

Banking

International


CIB

Resolution

& Glyn

other (1)

RBS


£m

£m


£m

£m

£m


£m

£m

£m

£m

£m














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 (2)

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 (3)

(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

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 (2,3)

531  

64  


403  

26  

53  


(54)

(377)

101  

(307)

440  

Additional information













Return on equity (4)

26.1%

8.8%


11.1%

1.5%

16.0%


(2.6%)

nm

nm

nm

(9.6%)

Return on equity - adjusted (2,3,4)

27.3%

9.2%


11.2%

5.1%

16.3%


(4.4%)

nm

nm

nm

(9.4%)

Cost:income ratio

59%

70%


51%

93%

40%


106%

nm

58%

nm

79%

Cost:income ratio - adjusted (2,3)

57%

67%


51%

83%

39%


119%

nm

48%

nm

76%

Total assets (£bn)

146.3 

22.7 


139.4 

17.4 

23.7