Final Results. Part 4 of 6

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	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m

Assets
Cash and balances at central banks	51,548	36,567	11,830
Net loans and advances to banks	48,777	60,274	70,728
Reverse repurchase agreements and stock borrowing	35,097	37,190	58,771
Loans and advances to banks	83,874	97,464	129,499
Net loans and advances to customers	554,654	587,996	691,976
Reverse repurchase agreements and stock borrowing	41,040	43,463	39,289
Loans and advances to customers	595,694	631,459	731,265
Debt securities	249,095	251,281	253,159
Equity shares	15,960	16,830	22,198
Settlement balances	12,024	28,634	17,812
Derivatives	438,199	552,466	991,495
Intangible assets	14,786	15,339	16,415
Property, plant and equipment	17,773	18,208	17,181
Deferred taxation	6,492	7,667	5,786
Prepayments, accrued income and other assets	18,604	19,664	21,573
Assets of disposal groups	18,432	4,737	480

Total assets	1,522,481	1,680,316	2,218,693

Liabilities
Bank deposits	115,642	138,584	178,943
Repurchase agreements and stock lending	38,006	39,816	83,666
Deposits by banks	153,648	178,400	262,609
Customer deposits	414,251	423,769	460,318
Repurchase agreements and stock lending	68,353	69,465	58,143
Customer accounts	482,604	493,234	518,461
Debt securities in issue	246,329	266,213	269,458
Settlement balances and short positions	50,875	71,891	54,264
Derivatives	421,534	537,522	969,409
Accruals, deferred income and other liabilities	24,624	20,754	24,140
Retirement benefit liabilities	2,715	1,410	1,564
Deferred taxation	2,161	3,275	3,177
Insurance liabilities	7,633	7,480	7,480
Subordinated liabilities	31,538	33,085	43,678
Liabilities of disposal groups	18,857	8,201	138

Total liabilities	1,442,518	1,621,465	2,154,378

Equity
Minority interests	2,227	2,185	5,436
Owners' equity*	77,736	56,666	58,879

Total equity	79,963	58,851	64,315

Total liabilities and equity	1,522,481	1,680,316	2,218,693


* Owners' equity attributable to:
Ordinary and B shareholders	69,890	48,820	45,525
Other equity owners	7,846	7,846	13,354

	77,736	56,666	58,879

	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m

Called-up share capital
At beginning of period	9,898	9,898	2,530
Ordinary shares issued in respect of placing and open offers	4,227	4,227	5,728
Ordinary shares issued in respect of rights issue	-	-	1,531
Ordinary shares issued in respect of capitalisation issue	-	-	101
B shares issued	510	-	-
Preference shares issued in respect of placing and open offer	-	-	5
Other shares issued during the period	-	-	3
Preference shares redeemed during the period	(5)	(5)	-

At end of period	14,630	14,120	9,898

Paid-in equity
At beginning of period	1,073	1,073	1,073
Securities redeemed during the period	(308)	(308)	-
Transfer to retained earnings	(200)	(200)	-

At end of period	565	565	1,073

Share premium account
At beginning of period	27,471	27,471	17,322
Ordinary shares issued in respect of placing and open offer, net of £95 million expenses	1,047	1,047	-
Ordinary shares issued in respect of rights issue, net of £246 million expenses	-	-	10,469
Ordinary shares issued in respect of capitalisation issue	-	-	(101)
Expenses of placing and open offer	-	-	(265)
Other shares issued during the year	-	‑	46
Preference shares redeemed during the period	(4,995)	(4,995)	-

At end of period	23,523	23,523	27,471

Merger reserve
At beginning of period	10,881	10,881	10,881
Issue of B shares, net of £399 million expenses	24,591	-	-
Placing and open offer	-	-	14,273
Transfer to retained earnings	(9,950)	-	(14,273)

At end of period	25,522	10,881	10,881

Available-for-sale reserves
At beginning of period	(3,561)	(3,561)	1,032
Unrealised gains/(losses) in the period	1,202	698	(6,808)
Realised losses in the period	981	866	842
Taxation	(377)	(202)	1,373

At end of period	(1,755)	(2,199)	(3,561)

Cash flow hedging reserve
At beginning of period	(876)	(876)	(555)
Amount recognised in equity during the period	380	437	(603)
Amount transferred from equity to earnings in the period	513	239	198
Taxation	(269)	(189)	84

At end of period	(252)	(389)	(876)

	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m

Foreign exchange reserve
At beginning of period	6,385	6,385	(426)
Retranslation of net assets	(2,322)	(2,041)	11,970
Foreign currency gains/(losses) on hedges of net assets	456	387	(5,801)
Taxation	9	(47)	642

At end of period	4,528	4,684	6,385

Capital redemption reserve
At beginning and end of period	170	170	170

Contingent capital reserve
At beginning of period	-	-	-
Contingent capital agreement - consideration payable	(1,208)	-	-

At end of period	(1,208)	-	-

Retained earnings
At beginning of period	7,542	7,542	21,072
Loss attributable to ordinary and B shareholders and other equity owners	(2,672)	(2,051)	(23,710)
Ordinary dividends paid	-	-	(2,312)
Equity preference dividends paid	(878)	(752)	(536)
Paid-in equity dividends paid, net of tax	(57)	(39)	(60)
Transfer from paid-in equity	200	200	-
Equity owners gain on withdrawal of minority interest
- gross	629	629	-
- taxation	(176)	(176)	-
Transfer from merger reserve	9,950	-	14,273
Actuarial losses recognised in retirement benefit schemes
- gross	(3,756)	-	(1,807)
- taxation	1,043	-	472
Net cost of shares bought and used to satisfy share-based payments	(16)	(15)	(19)
Share-based payments
- gross	325	95	177
- taxation	-	-	(8)

At end of period	12,134	5,433	7,542

Own shares held
At beginning of period	(104)	(104)	(61)
Shares purchased during the period	(33)	(33)	(64)
Shares issued under employee share schemes	16	15	21

At end of period	(121)	(122)	(104)

Owners' equity at end of period	77,736	56,666	58,879

	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m

Minority interests
At beginning of period	5,436	5,436	5,391
Currency translation adjustments and other movements	(152)	(134)	1,158
Profit attributable to minority interests	648	601	412
Dividends paid	(313)	(326)	(285)
Movements in available-for-sale securities
- unrealised gains/(losses) in the period	23	23	(1,304)
- realised gains in the period	(359)	(359)	-
- taxation	-	-	1
Equity raised	9	9	1,071
Equity withdrawn and disposals	(2,436)	(2,436)	(1,008)
Transfer to retained earnings	(629)	(629)	-

At end of period	2,227	2,185	5,436

Total equity at end of period	79,963	58,851	64,315

Total comprehensive income recognised in the statement of changes in equity is attributable as follows:
Minority interests	160	131	267
Preference shareholders	878	752	536
Paid-in equity holders	57	39	60
Ordinary and B shareholders	(5,747)	(2,694)	(23,744)

	(4,652)	(1,772)	(22,881)

·	amortisation of purchased intangible assets;

·	write-down of goodwill and other intangible assets;

·	integration and restructuring costs;

·	gain on redemption of own debt;

·	strategic investments;

·	gains on pensions curtailment; and

·	bonus tax.

Non-interest income (excluding insurance premiums)

Operating expenses

Companies

UK 100

Latest directors dealings

	31 December 2009
	Core	Non-Core	Total	30 September 2009	31 December 2008
	£m	£m	£m	£m	£m

At beginning of period	4,269	5,182	9,451	9,451	4,972
Transfers to disposal groups	(16)	(305)	(321)	(312)	-
Currency translation and other adjustments	423	(851)	(428)	(428)	1,007
Disposals	(62)	(3)	(65)	-	(178)
Amounts written-off	(2,286)	(4,192)	(6,478)	(3,622)	(2,897)
Recoveries of amounts previously written-off	189	136	325	254	261
Charge to income statement	4,567	8,523	13,090	10,058	6,478
Unwind of discount	(163)	(238)	(401)	(277)	(192)

	6,921	8,252	15,173	15,124	9,451

	Year ended		Quarter ended
	31 December 2009	31 December 2008	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m	£m	£m

Gain on sale of investments in:
- Bank of China (1)	236	-	-	(5)	-
- Linea Directa	214	-	2	-	-
- Tesco Personal Finance	-	442	-	-	442
Provision for loss on disposal of:
- Asian branches and businesses	(159)	-	(9)	(150)	-
- Latin American business	(159)	-	(159)	-	-

	132	442	(166)	(155)	442

	Net interest income	Non- interest income	Total income	Operating expenses	Insurance net claims	Impairment losses	Operating profit/(loss)
	£m	£m	£m	£m	£m	£m	£m

Year ended 31 December 2009
UK Retail (1)	3,452	1,629	5,081	(3,039)	(134)	(1,679)	229
UK Corporate	2,292	1,290	3,582	(1,530)	-	(927)	1,125
Wealth	663	446	1,109	(656)	-	(33)	420
Global Banking & Markets (2)	2,375	8,634	11,009	(4,660)	-	(640)	5,709
Global Transaction Services	912	1,575	2,487	(1,475)	-	(39)	973
Ulster Bank	780	254	1,034	(753)	-	(649)	(368)
US Retail & Commercial	1,775	949	2,724	(2,135)	-	(702)	(113)
RBS Insurance	354	4,106	4,460	(759)	(3,635)	(8)	58
Central items	(284)	524	240	53	-	(1)	292

Core	12,319	19,407	31,726	(14,954)	(3,769)	(4,678)	8,325
Non-Core (3)	1,248	(3,549)	(2,301)	(2,447)	(588)	(9,221)	(14,557)
Amortisation of purchased intangible assets	-	-	-	(272)	-	-	(272)
Write-down of goodwill	-	-	-	(363)	-	-	(363)
Integration and restructuring costs	-	-	-	(1,286)	-	-	(1,286)
Gain on redemption of own debt	-	3,790	3,790	-	-	-	3,790
Strategic disposals	-	132	132	-	-	-	132
Gains on pensions curtailment	-	-	-	2,148	-	-	2,148
Bonus tax	-	-	-	(208)	-	-	(208)

	13,567	19,780	33,347	(17,382)	(4,357)	(13,899)	(2,291)
RFS Holdings minority interest	2,937	2,406	5,343	(4,096)	(500)	(1,051)	(304)

Total statutory	16,504	22,186	38,690	(21,478)	(4,857)	(14,950)	(2,595)

(1)	Reallocation of netting of bancassurance claims of £134 million from non-interest income.
(2)	Reallocation of £49 million between net interest income and non-interest income in respect of funding costs of rental assets, and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £181 million.
(3)	Reallocation of £256 million between net interest income and non-interest income in respect of funding costs of rental assets and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £30 million.

(1)	Reallocation of netting of bancassurance claims of £184 million from non-interest income.
(2)	Reallocation of £64 million between net interest income and non-interest income in respect of funding costs of rental assets, and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £50 million.
(3)	Reallocation of £65 million between net interest income and non-interest income in respect of interest on financial assets and liabilities designated as at fair value through profit or loss.
(4)	Reallocation of £380 million between net interest income and non-interest income in respect of funding costs of rental assets and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £128 million.

(1)	Reallocation of netting of bancassurance claims of £17 million from non-interest income.
(2)	Reallocation of £10 million between net interest income and non-interest income in respect of funding costs of rental assets, and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £92 million.
(3)	Reallocation of £64 million between net interest income and non-interest income in respect of funding costs of rental assets and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £3 million.

	Held-for- trading	Designated at fair value through profit or loss	Available- for-sale	Loans and receivables	Other financial instruments (amortised cost)	Finance leases	Other assets/ liabilities	Total
2009	£m	£m	£m	£m	£m	£m	£m	£m

Cash and balances at central banks	-	-	-	51,548	-	-	-	51,548
Loans and advances to banks	45,449	-	-	38,425	-	-	-	83,874
Loans and advances to
customers	41,684	1,981	-	538,669	-	13,360	-	595,694
Debt securities	111,413	2,429	125,382	9,871	-	-	-	249,095
Equity shares	11,318	2,083	2,559	-	-	-	-	15,960
Settlement balances	-	-	-	12,024	-	-	-	12,024
Derivatives (1)	438,199	-		-	-	-	-	438,199
Intangible assets	-	-	-	-	-	-	14,786	14,786
Property, plant and
equipment	-	-	-	-	-	-	17,773	17,773
Deferred taxation	-	-	-	-	-	-	6,492	6,492
Prepayments, accrued income and other assets
Prepayments, accrued income and other assets	-	-	-	1,421	-	-	17,183	18,604
Assets of disposal groups	-	-	-	-	-	-	18,432	18,432

Total assets	648,063	6,493	127,941	651,958	-	13,360	74,666	1,522,481

Deposits by banks	53,609	-	-	-	100,039	-	-	153,648
Customer accounts	52,737	5,256	-	-	424,611	-	-	482,604
Debt securities in issue	3,925	41,444	-	-	200,960	-	-	246,329
Settlement balances and
short positions	40,463	-	-	-	10,412	-	-	50,875
Derivatives (1)	421,534	-	-	-	-	-	-	421,534
Accruals, deferred income
and other liabilities	-	-	-	-	1,888	467	22,269	24,624
Retirement benefit liabilities	-	-	-	-	-	-	2,715	2,715
Deferred taxation	-	-	-	-	-	-	2,161	2,161
Insurance liabilities	-	-	-	-	-	-	7,633	7,633
Subordinated liabilities	-	1,277	-	-	30,261	-	-	31,538
Liabilities of disposal groups	-	-	-	-	-	-	18,857	18,857

Total liabilities	572,268	47,977	-	-	768,171	467	53,635	1,442,518

Equity								79,963

								1,522,481

	Held-for- trading	Designated at fair value through profit or loss	Available- for-sale	Loans and receivables	Other financial instruments (amortised cost)	Finance leases	Other assets/ liabilities	Total
	£m	£m	£m	£m	£m	£m	£m	£m

2008
Cash and balances at
central banks	-	-	-	11,830	-	-	-	11,830
Loans and advances to banks	56,234	-	-	73,265	-	-	-	129,499
Loans and advances to
customers	51,501	2,141	-	663,170	-	14,453	-	731,265
Debt securities	116,159	5,294	118,722	12,984	-	-	-	253,159
Equity shares	13,314	2,075	6,809	-	-	-	-	22,198
Settlement balances	-	-	-	17,812	-	-	-	17,812
Derivatives (1)	991,495	-	-	-	-	-	-	991,495
Intangible assets	-	-	-	-	-	-	16,415	16,415
Property, plant and
equipment	-	-	-	-	-	-	17,181	17,181
Deferred taxation	-	-	-	-	-	-	5,786	5,786
Prepayments, accrued
income and other assets	-	-	-	1,326	-	-	20,247	21,573
Assets of disposal groups	-	-	-	-	-	-	480	480

Total assets	1,228,703	9,510	125,531	780,387	-	14,453	60,109	2,218,693

Deposits by banks	81,154	-	-	-	181,455	-	-	262,609
Customer accounts	55,926	4,349	-	-	458,186	-	-	518,461
Debt securities in issue	3,992	46,022	-	-	219,444	-	-	269,458
Settlement balances and
short positions	42,536	-	-	-	11,728	-	-	54,264
Derivatives (1)	969,409	-	-	-	-	-	-	969,409
Accruals, deferred income
and other liabilities	260	-	-	-	1,619	22	22,239	24,140
Retirement benefit liabilities	-	-	-	-	-	-	1,564	1,564
Deferred taxation	-	-	-	-	-	-	3,177	3,177
Insurance liabilities	-	-	-	-	-	-	7,480	7,480
Subordinated liabilities	-	1,410	-	-	42,268	-	-	43,678
Liabilities of disposal groups	-	-	-	-	-	-	138	138

Total liabilities	1,153,277	51,781	-	-	914,700	22	34,598	2,154,378

Equity								64,315

								2,218,693

	2009	2008
	£m	£m

Credit valuation adjustments:
Monoline insurers	3,796	5,988
CDPCs	499	1,311
Other counterparties	1,588	1,738

	5,883	9,037

Bid-offer and liquidity reserves	2,814	3,260

	8,697	12,297
Debit valuation adjustments:
Debt securities in issue	(2,331)	(2,373)
Derivatives	(467)	(450)

Total debit valuation adjustments	(2,798)	(2,823)

Total reserves (net)	5,899	9,474

	Debt securities in issue
	Held-for -trading (1)	Designated at fair value through profit and loss	Total	Derivatives (2)	Total
	£m	£m	£m	£m	£m

Cumulative own credit adjustment
2009	1,237	1,094	2,331	467	2,798

2008	1,346	1,027	2,373	450	2,823


	£bn	£bn	£bn	£bn	£bn

Book value of underlying liabilities
2009	36.6	13.3	49.9	16.8	66.7

2008	25.5	16.9	42.4	43.5	85.9

	Year ended		Quarter ended
	31 December 2009	31 December 2008	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m	£m	£m

(Loss)/profit before tax	(1,928)	(8,296)	134	(2,077)	(9,473)

Expected tax (credit)/charge at 28% (2008 - 28.5%)	(540)	(2,364)	38	(582)	(2,700)
Unrecognised timing differences	(274)	274	(67)	(223)	186
Other non-deductible items	508	371	400	35	169
Non-taxable items:
- Gain on redemption of own debt	(693)	-	-	-	-
- Other	(410)	(491)	(208)	(27)	(232)
Taxable foreign exchange movements	(1)	80	13	9	64
Foreign profits taxed at other rates	332	271	159	126	206
Losses in year not recognised	715	942	448	83	907
Losses brought forward and utilised	(94)	(11)	(65)	(6)	(11)
Adjustments in respect of prior periods	118	(352)	(69)	9	(290)

Actual tax (credit)/charge	(339)	(1,280)	649	(576)	(1,701)

	Year ended		Quarter ended
	31 December 2009	31 December 2008	31 December 2009	30 September 2009	31 December 2008
	£m	£m	£m	£m	£m

Earnings
Loss from continuing operations attributable to ordinary and B shareholders	(3,535)	(24,220)	(758)	(1,793)	(24,351)
Gain on redemption of paid-in equity	200	-	-	-	-

Adjusted loss from continuing operations attributable to ordinary and B shareholders	(3,335)	(24,220)	(758)	(1,793)	(24,351)

(Loss)/profit from discontinued operations attributable to ordinary and B shareholders	(72)	(86)	(7)	(7)	1

Ordinary shares in issue during the period	51,494	16,563	56,227	56,230	24,241
B shares in issue during the period	1,397	-	5,543	-	-

Weighted average number of ordinary and B shares in issue during the period (millions)	52,891	16,563	61,770	56,230	24,241

Basic loss per ordinary and B share from continuing operations	(6.3p)	(146.2p)	(1.2p)	(3.2p)	(100.5p)
Intangibles amortisation	0.4p	2.1p	0.1p	0.1p	0.2p
Write-down of goodwill and other intangible assets	0.7p	97.8p	0.1p	-	66.8p
Integration and restructuring costs	1.6p	5.9p	0.3p	0.4p	2.3p
Gain on redemption of own debt (1)	(6.8p)	-	-	-	-
Strategic disposals	(0.2p)	(2.7p)	0.3p	0.3p	(1.8p)
Gains on pensions curtailment	(3.0p)	-	(2.6p)	-	-
Bonus tax	0.4p	-	0.3p	-	-

Adjusted loss per ordinary and B share from continuing operations	(13.2p)	(43.1p)	(2.7p)	(2.4p)	(33.0p)
Loss from Non-Core divisions attributable to ordinary and B shareholders	24.9p	63.0p	4.9p	3.1p	27.9p

Core adjusted earnings/(loss) per ordinary and B share from continuing operations	11.7p	19.9p	2.2p	0.7p	(5.1p)
Core impairment losses	7.7p	13.3p	2.2p	1.6p	5.7p

Pre-impairment Core adjusted earnings per ordinary and B share	19.4p	33.2p	4.4p	2.3p	0.6p

Basic loss per ordinary and B share from discontinued operations	(0.1p)	(0.5p)	-	-	-

	Net interest income	Non- interest income	Total income	Operating expenses	Insurance net claims	Impairment losses	Operating profit/(loss)
	£m	£m	£m	£m	£m	£m	£m

Year ended 31 December 2008
UK Retail (1)	3,187	1,935	5,122	(3,196)	(184)	(1,019)	723
UK Corporate	2,448	1,289	3,737	(1,637)	-	(319)	1,781
Wealth	578	481	1,059	(695)	-	(16)	348
Global Banking & Markets (2)	2,326	388	2,714	(3,988)	-	(522)	(1,796)
Global Transaction Services	937	1,494	2,431	(1,375)	-	(54)	1,002
Ulster Bank (3)	708	331	1,039	(715)	-	(106)	218
US Retail & Commercial	1,726	861	2,587	(1,622)	-	(437)	528
RBS Insurance	496	3,934	4,430	(772)	(3,032)	(42)	584
Central items	1,710	(1,198)	512	495	(1)	19	1,025

Core	14,116	9,515	23,631	(13,505)	(3,217)	(2,496)	4,413
Non-Core (4)	1,648	(4,680)	(3,032)	(2,683)	(700)	(4,936)	(11,351)
Amortisation of purchased intangible assets	-	-	-	(443)	-	-	(443)
Write-down of goodwill and other intangible assets	-	-	-	(32,581)	-	-	(32,581)
Integration and restructuring costs	-	-	-	(1,357)	-	-	(1,357)
Strategic disposals	-	442	442	-	-	-	442

	15,764	5,277	21,041	(50,569)	(3,917)	(7,432)	(40,877)
RFS Holdings minority interest	2,911	1,916	4,827	(3,633)	(513)	(640)	41

Total statutory	18,675	7,193	25,868	(54,202)	(4,430)	(8,072)	(40,836)

	Net interest income	Non- interest income	Total income	Operating expenses	Insurance net claims	Impairment losses	Operating profit/(loss)
	£m	£m	£m	£m	£m	£m	£m

Quarter ended 31 December 2009
UK Retail (1)	939	360	1,299	(703)	(17)	(451)	128
UK Corporate	626	322	948	(418)	-	(190)	340
Wealth	161	113	274	(175)	-	(10)	89
Global Banking & Markets (2)	406	1,663	2,069	(1,068)	-	(130)	871
Global Transaction Services	233	404	637	(409)	-	(4)	224
Ulster Bank	194	91	285	(212)	-	(348)	(275)
US Retail & Commercial	423	221	644	(510)	-	(153)	(19)
RBS Insurance	86	1,090	1,176	(190)	(1,156)	-	(170)
Central items	(133)	233	100	(103)	-	(2)	(5)

Core	2,935	4,497	7,432	(3,788)	(1,173)	(1,288)	1,183
Non-Core (3)	511	(403)	108	(685)	(148)	(1,811)	(2,536)
Amortisation of purchased intangible assets	-	-	-	(59)	-	-	(59)
Write-down of goodwill	-	-	-	(52)	-	-	(52)
Integration and restructuring costs	-	-	-	(228)	-	-	(228)
Strategic disposals	-	(166)	(166)	-	-	-	(166)
Gains on pensions curtailment	-	-	-	2,148	-	-	2,148
Bonus tax	-	-	-	(208)	-	-	(208)

	3,446	3,928	7,374	(2,872)	(1,321)	(3,099)	82
RFS Holdings minority interest	821	574	1,395	(1,163)	(193)	(303)	(264)

Total statutory	4,267	4,502	8,769	(4,035)	(1,514)	(3,402)	(182)

(1)	The held-for-trading portfolio consists of wholesale and retail note issuances.
(2)	The effect of changes in foreign exchange rates, new issues and redemptions are not captured separately.

	Total	Level 1	Level 2	Level 3	Level 3 sensitivity (2)
2009	£bn	£bn	£bn	£bn	£m	£m

Assets
Loans and advances:
- banks	45.4	-	45.4	-	-	-
- customers	43.7	-	42.6	1.1	80	(40)

Debt securities
- government	134.1	118.2	15.9	-	-	-
- RMBS	57.1	-	56.6	0.5	30	(10)
- CMBS	4.1	-	4.0	0.1	30	-
- CDOs	3.6	-	2.6	1.0	130	(80)
- CLOs	8.8	-	8.0	0.8	80	(50)
- other ABS	6.1	-	5.2	0.9	120	(40)
- corporate	10.5	-	9.9	0.6	70	(20)
- other (3)	14.9	-	14.7	0.2	10	(30)

	239.2	118.2	116.9	4.1	470	(230)

Equity shares	16.0	12.2	2.5	1.3	260	(200)
Derivatives
- foreign exchange	68.3	-	68.1	0.2	10	-
- interest rate	321.5	0.3	319.7	1.5	80	(100)
- equities	6.4	0.3	5.8	0.3	20	(20)
- commodities	0.3	-	0.3	-	-	-
- credit - APS	1.4	-	-	1.4	1,370	(1,540)
- credit - other	40.3	0.1	37.2	3.0	420	(360)

	438.2	0.7	431.1	6.4	1,900	(2,020)


Total assets	782.5	131.1	638.5	12.9	2,710	(2,490)

Liabilities
Deposits:
- banks	53.6	-	53.6	-	-	-
- customers	58.0	-	57.9	0.1	-	(10)
Debt securities in issue	45.4	-	43.1	2.3	50	(10)
Short positions	40.5	27.1	13.2	0.2	10	(20)
Derivatives
- foreign exchange	63.6	-	63.6	-	-	-
- interest rate	309.3	0.1	308.4	0.8	40	(60)
- equities	9.3	0.8	8.3	0.2	20	(70)
- commodities	0.2	-	0.2	-	-	-
- credit - other	39.1	-	38.2	0.9	80	(100)

	421.5	0.9	418.7	1.9	140	(230)
Other financial liabilities (4)	1.3	-	1.3	-	-	-


Total liabilities	620.3	28.0	587.8	4.5	200	(270)

·	Level 3 assets and liabilities as a proportion of total financial instruments carried at fair value were similar to proportions at the end of 2008.

·	Decrease in loans and advances to customers of £2.0 billion primarily reflected the reclassification of certain leveraged and real estate finance loans from held-for-trading to loans and receivables in first half of the year.

·	The decrease in debt securities of £2.8 billion reflects the sale of the US fund derivative portfolio (£1.6 billion), liquidations and write-downs.

·	Derivative assets include hedges with CDPCs, illiquid credit and interest rate derivatives: The reduction of £3.9 billion included £1 billion transfers to level 2, due to improved observability, and Sempra assets (£0.6 billion) included within disposal groups in 2009.

·	Debt securities in issue were £2.3 billion and comprised structured medium-term notes. The decrease is due to a transfer to level 2 of £1.6 billion of constant proportion portfolio insurance (CPPI) notes reflecting the minimal residual equity component within these notes at 31 December 2009. The decrease in other debt securities in issue of £0.4 billion primarily reflects transfers to level 2, due to improved observability.

·	Derivative liabilities decreased due to Sempra (£0.4 billion) included within disposal groups and transfers to level 2 reflecting improved observability.

(1)	Level 1: valued using quoted prices in active markets, examples include G10 government securities, listed equity shares, certain exchange-traded derivatives, and certain US agency securities.
	Level 2: includes most government agency securities, investment-grade corporate bonds, certain mortgage products, certain bank and bridge loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most physical commodities, investment contracts issued by the Group's life assurance businesses and certain money market securities and loan commitments and most OTC derivatives.
	Level 3: includes cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, unlisted equity shares, certain residual interests in securitisations, super senior tranches of high grade and mezzanine CDOs, other mortgage-based products and less liquid debt securities, certain structured debt securities in issue, and OTC derivatives where valuation depends upon unobservable inputs such as certain credit and exotic derivatives. No gain or loss is recognised on the initial recognition of a financial instrument valued using a technique incorporating significant unobservable data.
(2)	Sensitivity represents the favourable and unfavourable impact respectively on the income statement or the statement of comprehensive income due to reasonably possible changes to valuations using reasonably possible alternative inputs to the Group's valuation techniques or models. Totals for sensitivities are not indicative of the total potential effect on the income statement or the statement of comprehensive income.
(3)	Primarily includes debt securities issued by banks and building societies.
(4)	Comprises subordinated liabilities and write-downs relating to undrawn syndicated loan facilities.

	Reduction in profit or increase in loss as a result of reclassifications for the year ended 2009

		Reclassified in:
	Total	2009	2008
	£m	£m	£m

From held-for-trading to:
Available-for-sale	1,280	-	1,280
Loans and receivables	1,705	37	1,668

	2,985	37	2,948

	Assets reclassified in 2009:	2009 All reclassifications		2008 All reclassifications (1)
	Carrying value	Carrying value	Fair value	Carrying value	Fair value
	£m	£m	£m	£m	£m

From held-for-trading to:
Available-for-sale	-	7,629	7,629	12,047	12,047
Loans and receivables	1,995	12,933	10,644	20,774	16,628

	1,995	20,562	18,273	32,821	28,675

From available-for-sale to:
Loans and receivables	-	869	745	1,016	956

	1,995	21,431	19,018	33,837	29,631

	UK central and local government	US central and local government	Other central and local government	Bank and building society	Asset backed securities	Corporate	Other	Total
	£m	£m	£m	£m	£m	£m	£m	£m

31 December 2009
Held-for-trading	8,128	10,427	50,150	6,103	28,820	6,892	893	111,413
Designated as at fair value
through profit or loss	122	3	385	418	394	1,087	20	2,429
Available-for-sale	18,350	12,789	33,727	7,472	50,464	2,550	30	125,382
Loans and receivables	1	-	-	-	7,924	1,853	93	9,871

	26,601	23,219	84,262	13,993	87,602	12,382	1,036	249,095

30 September 2009
Held-for-trading	4,811	13,888	54,452	8,076	29,611	6,897	502	118,237
Designated as at
fair value through
profit or loss	374	3	391	453	377	1,101	6	2,705
Available-for-sale	11,940	9,146	31,506	10,111	51,787	4,303	439	119,232
Loans and receivables	11	-	1	41	8,848	2,174	32	11,107

	17,136	23,037	86,350	18,681	90,623	14,475	979	251,281

31 December 2008
Held-for-trading	5,373	9,858	37,519	10,947	39,879	11,013	1,570	116,159
Designated as at
fair value through
profit or loss	2,085	510	456	-	236	1,551	456	5,294
Available-for-sale	11,330	6,145	21,735	11,650	62,067	4,588	1,207	118,722
Loans and receivables	-	-	-	114	8,961	3,749	160	12,984

	18,788	16,513	59,710	22,711	111,143	20,901	3,393	253,159

·	54% of the debt securities portfolios were issued by central and local governments and federal agencies compared to 38% at end of 2008.

·	Of the ABS portfolios, nearly 75% was AAA rated and 49% was guaranteed or effectively guaranteed by G10 governments.

·	Part of the decrease in corporate debt securities relates to the unwinding of the US funds derivatives portfolio.

·	63% of corporate debt securities are investment grade.

·	The Group enters into master netting agreements in respect of its derivative activities. These arrangements give the Group a legal right to set-off derivative assets and liabilities with the same counterparty. They do not result in a net presentation in the Group's balance sheet for which IFRS requires an intention to settle net or to realise the asset and settle the liability simultaneously, as well as a legally enforceable right to set-off. These agreements are, however, effective in reducing the Group's credit exposure from derivative assets. The Group has executed master netting agreements with the majority of its derivative counterparties resulting in a significant reduction in its net exposure to derivative assets.

·	Of the £438 billion (30 September 2009 - £552 billion; 31 December 2008 - £991 billion) derivatives assets shown above, £359 billion (30 September 2009 - £459 billion; 31 December 2008 - £834 billion) were under such agreements. Furthermore, the Group holds substantial collateral against this net derivative asset exposure.