Interim Management Statement - Part 5 of 5

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NATWEST GROUP (NWG)

UK 100

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	Quarter ended 31 March 2013
	Managed	One-off items reallocation	DLG results to 12/3/13 (1)	Statutory
	£m	£m	£m	£m

Interest receivable	4,336	-	(57)	4,279
Interest payable	(1,614)	(2)	7	(1,609)

Net interest income	2,722	(2)	(50)	2,670

Fees and commissions receivable	1,317	-	(1)	1,316
Fees and commissions payable	(284)	-	74	(210)
Income from trading activities	1,015	99	1	1,115
Loss on redemption of own debt	-	(51)	-	(51)
Other operating income (2)	381	245	(14)	612
Insurance net premium income	699	-	(699)	-

Non-interest income	3,128	293	(639)	2,782

Total income	5,850	291	(689)	5,452

Staff costs	(1,893)	(67)	73	(1,887)
Premises and equipment	(580)	(10)	34	(556)
Other administrative expenses	(731)	(86)	54	(763)
Depreciation and amortisation	(339)	(58)	10	(387)

Operating expenses	(3,543)	(221)	171	(3,593)

Profit before insurance net claims and impairment losses	2,307	70	(518)	1,859
Insurance net claims	(445)	-	445	-

Operating profit before impairment losses	1,862	70	(73)	1,859
Impairment losses	(1,033)	-	-	(1,033)

Operating profit	829	70	(73)	826

	Quarter ended 31 March 2013
	Managed	One-off items reallocation	DLG results to 12/3/13 (1)	Statutory
	£m	£m	£m	£m

Operating profit	829	70	(73)	826
Own credit adjustments (3)	249	(249)	-	-
Interest Rate Hedging Products redress and related costs	(50)	50	-	-
Integration and restructuring costs (4)	(131)	131	-	-
Loss on redemption of own debt	(51)	51	-	-
Amortisation of purchased intangible assets	(41)	41	-	-
Strategic disposals	66	(66)	-	-
RFS Holdings minority interest	100	(100)	-	-

Profit including the results of Direct Line Group discontinued operations	971	(72)	(73)	826
Direct Line Group discontinued operations	(145)	72	73	-

Profit before tax	826	-	-	826
Tax charge	(350)	-	-	(350)

Profit from continuing operations	476	-	-	476

Profit from discontinued operations, net of tax
- Direct Line Group	127	-	-	127
- Other	2	-	-	2

Profit from discontinued operations, net of tax	129	-	-	129

Profit for the period	605	-	-	605
Non-controlling interests	(131)	-	-	(131)
Preference share and other dividends	(81)	-	-	(81)

Profit attributable to ordinary and B shareholders	393	-	-	393

(1)	The statutory results of Direct Line Group, which is classified as a discontinued operation.
(2)	Includes the Group's share of profit of Direct Line Group as an associated undertaking of £7 million from 13 March 2013.
(3)	Reallocation of £99 million gain to income from trading activities and £150 million gain to other operating income.
(4)	Includes £9 million in Direct Line Group.

	Quarter ended
	31 December 2012				31 March 2012
	Managed	One-off items reallocation	DLG (1)	Statutory	Managed	One-off items reallocation	DLG (1)	Statutory
	£m	£m	£m	£m	£m	£m	£m	£m

Interest receivable	4,517	-	(78)	4,439	5,017	-	(83)	4,934
Interest payable	(1,675)	(3)	12	(1,666)	(2,010)	(8)	(1)	(2,019)

Net interest income	2,842	(3)	(66)	2,773	3,007	(8)	(84)	2,915

Fees and commissions receivable	1,375	-	(1)	1,374	1,487	-	(2)	1,485
Fees and commissions payable	(324)	(1)	80	(245)	(290)	-	111	(179)
Income from trading activities	567	(97)	4	474	1,264	(1,052)	-	212
Gain on redemption of own debt	-	-	-	-	-	577	-	577
Other operating income	381	(138)	(16)	227	725	(1,472)	(53)	(800)
Insurance net premium income	919	-	(919)	-	938	-	(938)	-

Non-interest income	2,918	(236)	(852)	1,830	4,124	(1,947)	(882)	1,295

Total income	5,760	(239)	(918)	4,603	7,131	(1,955)	(966)	4,210

Staff costs	(1,467)	(312)	123	(1,656)	(2,249)	(349)	90	(2,508)
Premises and equipment	(573)	(73)	54	(592)	(550)	(13)	1	(562)
Other administrative expenses	(723)	(1,834)	51	(2,506)	(819)	(197)	133	(883)
Depreciation and amortisation	(384)	(138)	24	(498)	(394)	(74)	11	(457)
Write down of goodwill and other intangible assets	-	(124)	-	(124)	-	-	-	-

Operating expenses	(3,147)	(2,481)	252	(5,376)	(4,012)	(633)	235	(4,410)

Profit/(loss) before insurance net claims and impairment losses	2,613	(2,720)	(666)	(773)	3,119	(2,588)	(731)	(200)
Insurance net claims	(606)	-	606	-	(649)	-	649	-

Operating profit/(loss) before impairment losses	2,007	(2,720)	(60)	(773)	2,470	(2,588)	(82)	(200)
Impairment losses	(1,454)	-	-	(1,454)	(1,314)	-	-	(1,314)

Operating profit/(loss)	553	(2,720)	(60)	(2,227)	1,156	(2,588)	(82)	(1,514)

	Quarter ended
	31 December 2012				31 March 2012
	Managed	One-off items reallocation	DLG (1)	Statutory	Managed	One-off items reallocation	DLG (1)	Statutory
	£m	£m	£m	£m	£m	£m	£m	£m

Operating profit/(loss)	553	(2,720)	(60)	(2,227)	1,156	(2,588)	(82)	(1,514)
Own credit adjustments (2)	(220)	220	-	-	(2,456)	2,456	-	-
Payment Protection Insurance costs	(450)	450	-	-	(125)	125	-	-
Interest Rate Hedging Products redress and related costs	(700)	700	-	-	-	-	-	-
Regulatory fines	(381)	381	-	-	-	-	-	-
Integration and restructuring costs	(620)	620	-	-	(460)	460	-	-
Gain on redemption of own debt	-	-	-	-	577	(577)	-	-
Write-down of goodwill and other intangible assets	(518)	518	-	-	-	-	-	-
Asset Protection Scheme (3)	-	-	-	-	(43)	43	-	-
Amortisation of purchased intangible assets	(32)	32	-	-	(48)	48	-	-
Strategic disposals	(16)	16	-	-	(8)	8	-	-
Bank levy	(175)	175	-	-	-	-	-	-
RFS Holdings minority interest	(2)	2	-	-	(25)	25	-	-

Loss including the results of Direct Line Group discontinued operations	(2,561)	394	(60)	(2,227)	(1,432)	-	(82)	(1,514)
Direct Line Group discontinued operations	334	(394)	60	-	(82)	-	82	-

Loss before tax	(2,227)	-	-	(2,227)	(1,514)	-	-	(1,514)
Tax charge	(39)	-	-	(39)	(138)	-	-	(138)

Loss from continuing operations	(2,266)	-	-	(2,266)	(1,652)	-	-	(1,652)

Interim Management Statement - Part 5 of 5

Credit risk: Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)

REIL flow statement

Credit risk: Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)

Impairment provisions flow statement

Credit risk: Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)

Credit risk: Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)

Impairment charge analysis

Credit risk: Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)

Impairment charge analysis (continued)

Credit risk: Loans and related credit metrics(continued)

Wholesale renegotiations

Retail forbearance

Key loan portfolios

Commercial real estate

Ulster Bank Group (Core and Non-Core)

Country risk: Eurozone periphery by country: Ireland

Country risk: Eurozone periphery by country: Spain

Country risk: Eurozone periphery by country: Italy

Country risk: Eurozone periphery by country: Portugal

Country risk: Eurozone periphery by country: Greece

Country risk: Eurozone periphery by country: Cyprus

Companies

UK 100

Latest directors dealings

(1)	The statutory results of Direct Line Group, which is classified as a discontinued operation.
(2)	Reallocation (Q4 2012 - £98 million loss; Q1 2012 - £1,009 million loss) to income from trading activities and (Q4 2012 - £122 million loss; Q1 2012 - £1,447 million loss) to other operating income.
(3)	Reallocation to income from trading activities.

	Net interest income	Non- interest income	Total income	Operating expenses	Insurance net claims	Impairment losses	Operating profit/(loss)
Quarter ended 31 March 2013	£m	£m	£m	£m	£m	£m	£m

UK Retail	965	226	1,191	(634)	-	(80)	477
UK Corporate	706	378	1,084	(541)	-	(185)	358
Wealth	169	104	273	(212)	-	(5)	56
International Banking	197	285	482	(333)	-	(55)	94
Ulster Bank	154	54	208	(132)	-	(240)	(164)
US Retail & Commercial	471	292	763	(555)	-	(19)	189
Markets	30	1,010	1,040	(746)	-	(16)	278
Direct Line Group (1)	49	647	696	(162)	(445)	-	89
Central items	18	2	20	(63)	-	-	(43)

Core	2,759	2,998	5,757	(3,378)	(445)	(600)	1,334
Non-Core (2)	(37)	130	93	(165)	-	(433)	(505)

Managed basis	2,722	3,128	5,850	(3,543)	(445)	(1,033)	829
Reconciling items
Own credit adjustments (3)	-	249	249	-	-	-	249
Interest Rate Hedging Products redress and related costs	-	-	-	(50)	-	-	(50)
Integration and restructuring costs	-	-	-	(131)	-	-	(131)
Loss on redemption of own debt	-	(51)	(51)	-	-	-	(51)
Amortisation of purchased intangible assets	-	-	-	(41)	-	-	(41)
Strategic disposals	-	66	66	-	-	-	66
RFS Holdings minority interest	(2)	101	99	1	-	-	100

Statutory basis including the results of Direct Line Group discontinued operations	2,720	3,493	6,213	(3,764)	(445)	(1,033)	971
Direct Line Group discontinued operations (4)	(50)	(711)	(761)	171	445	-	(145)

Statutory basis	2,670	2,782	5,452	(3,593)	-	(1,033)	826

(1)	Total income includes £27 million of investment income, £25 million in net interest income and £2 million in non-interest income. Reallocation of £24 million between non-interest income and net interest income in respect of instalment income.
(2)	Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(3)	Comprises £99 million gain included in 'Income from trading activities' and £150 million gain included in 'Other operating income' on a statutory basis.
(4)	Included within Direct Line Group discontinued operations are the managed basis divisional results of Direct Line Group (DLG), certain DLG related activities in Central items, and related one-off and other items including integration and restructuring costs.

(1)	Reallocation of £3 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(2)	Total income includes £32 million of investment income, £35 million in net interest income and £(3) million in non-interest income. Reallocation of £32 million between non-interest income and net interest income in respect of instalment income.
(3)	Reallocation of £6 million between net interest income and non-interest income in respect of funding costs of rental assets, £12 million, offset by £6 million to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(4)	Comprises £98 million loss included in 'Income from trading activities' and £122 million loss included in 'Other operating income' on a statutory basis.
(5)	Included within Direct Line Group discontinued operations are the managed basis divisional results of Direct Line Group (DLG), certain DLG related activities in Central items; and related one-off and other items including write-down of goodwill, integration and restructuring costs and strategic disposals.

(1)	Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2)	Reallocation of £8 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3)	Total income includes £90 million of investment income, £53 million in net interest income and £37 million in non-interest income. Reallocation of £31 million between non-interest income and net interest income in respect of instalment income.
(4)	Reallocation of £51 million between net interest income and non-interest income in respect of funding costs of rental assets.
(5)	Comprises £1,009 million loss included in 'Income from trading activities' and £1,447 million loss included in 'Other operating income' on a statutory basis.
(6)	Included in 'Income from trading activities' on a statutory basis.
(7)	Included within Direct Line Group discontinued operations are the managed basis divisional results of Direct Line Group (DLG), certain DLG related activities in Central items; and related one-off and other items including integration and restructuring costs and strategic disposals.

	31 March 2013			31 December 2012
	Balance sheet	Disposal groups (1)	Gross of disposal groups	Balance sheet	Disposal groups (2)	Gross of disposal groups
	£m	£m	£m	£m	£m	£m

Assets
Cash and balances at central banks	86,718	16	86,734	79,290	18	79,308
Net loans and advances to banks	34,025	105	34,130	29,168	2,112	31,280
Reverse repurchase agreements and stock borrowing	43,678	-	43,678	34,783	-	34,783
Loans and advances to banks	77,703	105	77,808	63,951	2,112	66,063
Net loans and advances to customers	432,360	1,058	433,418	430,088	1,863	431,951
Reverse repurchase agreements and stock borrowing	59,427	-	59,427	70,047	-	70,047
Loans and advances to customers	491,787	1,058	492,845	500,135	1,863	501,998
Debt securities	153,248	33	153,281	157,438	7,186	164,624
Equity shares	11,861	6	11,867	15,232	5	15,237
Settlement balances	15,805	-	15,805	5,741	-	5,741
Derivatives	432,435	2	432,437	441,903	15	441,918
Intangible assets	13,928	-	13,928	13,545	750	14,295
Property, plant and equipment	9,482	121	9,603	9,784	223	10,007
Deferred tax	3,280	-	3,280	3,443	-	3,443
Other financial assets	-	-	-	-	924	924
Prepayments, accrued income and other assets	10,200	221	10,421	7,820	742	8,562
Assets of disposal groups (3)	1,726	(1,562)	164	14,013	(13,838)	175

Total assets	1,308,173	-	1,308,173	1,312,295	-	1,312,295

(1)	Disposal groups at 31 March 2013 primarily comprise a number of RBS NV businesses.
(2)	Disposal groups at 31 December 2012 primarily comprised Direct Line Group (DLG). To comply with EC state aid requirements, the Group agreed to cede control of DLG by the end of 2013 and divest completely by the end of 2014. Following the successful initial public offering in Q4 2012, in which the Group sold 34.7% of its shareholding, DLG was classified as a disposal group and discontinued operation on 31 December 2012. On 13 March 2013, the Group sold a further 16.8% of the share capital of DLG and now holds 48.5% of the issued ordinary share capital in DLG. Consequently, the minority share of DLG still held by the Group is recognised as an associated undertaking and no longer as either a disposal group or discontinued operation at 31 March 2013. The Group recognised a gain on disposal of £72 million in Q1 2013. This gain is recorded in other income within discontinued operations. On initial classification as held-for-sale, disposal groups are required to be measured at the lower of carrying amount and fair value less costs to sell. Accordingly, at 31 December 2012, DLG's carrying amount exceeded its fair value less costs to sell (based on the quoted price for DLG shares on 31 December 2012) by £394 million and goodwill attributable to DLG was written down by this amount. The write down was recorded in other expenses within discontinued operations in Q4 2012.
(3)	Residual assets and liabilities of disposal groups relate to businesses acquired as part of the ABN AMRO acquisition in 2007 with a view to disposal rather than use.

	Page

Credit risk	2
Loans and related credit metrics	2
Loans, REIL, provisions and impairments	2
Sector and geographical regional analyses	2
REIL flow statement	8
Impairment provisions flow statement	9
Impairment charge analysis	11
Wholesale renegotiations	13
Retail forbearance	14
Key loan portfolios	15
Commercial real estate	15
Ulster Bank Group (Core and Non-Core)	17
Debt securities: AFS reserves by issuer	19
Country risk	20
Overview	20
Eurozone periphery by country	22
- Ireland	22
- Spain	23
- Italy	24
- Portugal	25
- Greece	26
- Cyprus	27

					Credit metrics
31 March 2013		Gross loans £m	REIL £m	Provisions £m	REIL as a % of gross loans %	Provisions as a % of REIL %	Provisions as a % of gross loans %	Impairment charge £m	Amounts written-off £m

Government (1)		10,272	-	-	-	-	-	-	-
Finance		42,726	651	354	1.5	54	0.8	30	-
Personal	- mortgages	151,281	6,871	1,973	4.5	29	1.3	176	76
	- unsecured	30,884	2,876	2,370	9.3	82	7.7	138	198
Property		70,537	20,598	9,936	29.2	48	14.1	384	464
Construction		8,368	1,437	711	17.2	49	8.5	95	37
Manufacturing		24,115	749	374	3.1	50	1.6	30	13
Finance leases (2)		13,990	320	219	2.3	68	1.6	(2)	68
Retail, wholesale and repairs		22,225	1,147	642	5.2	56	2.9	28	40
Transport and storage		18,671	934	230	5.0	25	1.2	24	145
Health, education and leisure		17,045	1,232	567	7.2	46	3.3	41	13
Hotels and restaurants		8,562	1,667	740	19.5	44	8.6	30	29
Utilities		6,464	253	98	3.9	39	1.5	42	-
Other		29,665	2,168	1,216	7.3	56	4.1	71	73
Latent		-	-	1,957	-	-	-	(51)	-

		454,805	40,903	21,387	9.0	52	4.7	1,036	1,156

of which:
UK
- residential mortgages		110,212	2,374	458	2.2	19	0.4	16	5
- personal lending		18,770	2,414	2,103	12.9	87	11.2	94	145
- property		51,745	9,519	3,932	18.4	41	7.6	178	442
- construction		6,532	1,070	511	16.4	48	7.8	61	37
- other		123,766	3,648	2,521	2.9	69	2.0	82	135
Europe
- residential mortgages		18,362	3,372	1,300	18.4	39	7.1	116	3
- personal lending		1,614	232	213	14.4	92	13.2	9	11
- property		14,584	10,741	5,851	73.6	54	40.1	213	18
- construction		1,411	320	170	22.7	53	12.0	11	-
- other		26,621	4,742	3,046	17.8	64	11.4	166	235
US
- residential mortgages		22,387	1,098	207	4.9	19	0.9	44	68
- personal lending		9,358	230	54	2.5	23	0.6	35	41
- property		3,832	153	30	4.0	20	0.8	(7)	4
- construction		385	41	25	10.6	61	6.5	23	-
- other		30,415	433	660	1.4	152	2.2	2	10
RoW
- residential mortgages		320	27	8	8.4	30	2.5	-	-
- personal lending		1,142	-	-	-	-	-	-	1
- property		376	185	123	49.2	66	32.7	-	-
- construction		40	6	5	15.0	83	12.5	-	-
- other		12,933	298	170	2.3	57	1.3	(7)	1

		454,805	40,903	21,387	9.0	52	4.7	1,036	1,156

Banks		34,249	139	119	0.4	86	0.3	-	-

(1)	Includes central and local government.
(2)	Includes instalment credit.

	31 March 2013			31 December 2012
	Balance sheet	Disposal groups (1)	Gross of disposal groups	Balance sheet	Disposal groups (2)	Gross of disposal groups
	£m	£m	£m	£m	£m	£m

Liabilities
Bank deposits	54,536	-	54,536	57,073	1	57,074
Repurchase agreements and stock lending	39,575	-	39,575	44,332	-	44,332
Deposits by banks	94,111	-	94,111	101,405	1	101,406
Customer deposits	437,437	800	438,237	433,239	753	433,992
Repurchase agreements and stock lending	88,658	-	88,658	88,040	-	88,040
Customer accounts	526,095	800	526,895	521,279	753	522,032
Debt securities in issue	92,740	-	92,740	94,592	-	94,592
Settlement balances	14,640	-	14,640	5,878	-	5,878
Short positions	30,610	-	30,610	27,591	-	27,591
Derivatives	429,881	2	429,883	434,333	7	434,340
Accruals, deferred income and other liabilities	15,630	158	15,788	14,801	2,679	17,480
Retirement benefit liabilities	3,533	-	3,533	3,884	-	3,884
Deferred tax	1,019	-	1,019	1,141	-	1,141
Insurance liabilities	-	-	-	-	6,193	6,193
Subordinated liabilities	27,788	-	27,788	26,773	529	27,302
Liabilities of disposal groups (3)	961	(960)	1	10,170	(10,162)	8

Total liabilities	1,237,008	-	1,237,008	1,241,847	-	1,241,847

					Credit metrics
31 December 2012		Gross loans £m	REIL £m	Provisions £m	REIL as a % of gross loans %	Provisions as a % of REIL %	Provisions as a % of gross loans %	Impairment charge £m	Amounts written-off £m

Government (1)		9,853	-	-	-	-	-	-	-
Finance		42,198	592	317	1.4	54	0.8	64	175
Personal	- mortgages	149,625	6,549	1,824	4.4	28	1.2	163	91
	- unsecured	32,212	2,903	2,409	9.0	83	7.5	168	199
Property		72,219	21,223	9,859	29.4	46	13.7	624	237
Construction		8,049	1,483	640	18.4	43	8.0	-	30
Manufacturing		23,787	755	357	3.2	47	1.5	54	67
Finance leases (2)		13,609	442	294	3.2	67	2.2	-	116
Retail, wholesale and repairs		21,936	1,143	644	5.2	56	2.9	70	100
Transport and storage		18,341	834	336	4.5	40	1.8	89	65
Health, education and leisure		16,705	1,190	521	7.1	44	3.1	21	32
Hotels and restaurants		7,877	1,597	726	20.3	45	9.2	33	54
Utilities		6,631	118	21	1.8	18	0.3	-	-
Other		30,057	2,177	1,240	7.2	57	4.1	37	251
Latent		-	-	1,960	-	-	-	80	-

		453,099	41,006	21,148	9.1	52	4.7	1,403	1,417

of which:
UK
- residential mortgages		109,530	2,440	457	2.2	19	0.4	31	10
- personal lending		20,498	2,477	2,152	12.1	87	10.5	89	121
- property		53,730	10,521	3,944	19.6	37	7.3	356	120
- construction		6,507	1,165	483	17.9	41	7.4	(17)	19
- other		122,029	3,729	2,611	3.1	70	2.1	291	453
Europe
- residential mortgages		17,836	3,092	1,151	17.3	37	6.5	103	42
- personal lending		1,905	226	208	11.9	92	10.9	9	-
- property		14,634	10,347	5,766	70.7	56	39.4	273	61
- construction		1,132	289	146	25.5	51	12.9	18	10
- other		27,424	4,451	2,996	16.2	67	10.9	186	208
US
- residential mortgages		21,929	990	208	4.5	21	0.9	27	39
- personal lending		8,748	199	48	2.3	24	0.5	67	76
- property		3,343	170	29	5.1	17	0.9	(3)	28
- construction		388	8	1	2.1	13	0.3	(1)	1
- other		29,354	352	630	1.2	179	2.1	(15)	26

					Credit metrics
31 March 2013		Gross loans £m	REIL £m	Provisions £m	REIL as a % of gross loans %	Provisions as a % of REIL %	Provisions as a % of gross loans %	Impairment charge £m	Amounts written-off £m

Government (1)		1,417	-	-	-	-	-	-	-
Finance		1,899	446	189	23.5	42	10.0	13	-
Personal	- mortgages	2,845	322	134	11.3	42	4.7	24	36
	- unsecured	974	206	108	21.1	52	11.1	14	16
Property		27,080	16,053	8,286	59.3	52	30.6	295	322
Construction		2,046	677	305	33.1	45	14.9	23	21
Manufacturing		1,389	251	149	18.1	59	10.7	8	2
Finance leases (2)		4,448	189	130	4.2	69	2.9	(1)	61
Retail, wholesale and repairs		945	370	209	39.2	56	22.1	1	3
Transport and storage		3,871	389	143	10.0	37	3.7	17	107
Health, education and leisure		858	453	233	52.8	51	27.2	(1)	3
Hotels and restaurants		939	554	260	59.0	47	27.7	8	7
Utilities		1,424	110	51	7.7	46	3.6	-	-
Other		2,788	735	376	26.4	51	13.5	23	49
Latent		-	-	666	-	-	-	13	-

		52,923	20,755	11,239	39.2	54	21.2	437	627

of which:
UK
- personal lending		46	29	22	63.0	76	47.8	3	1
- property		16,765	6,860	3,118	40.9	45	18.6	118	302
- construction		1,379	418	178	30.3	43	12.9	16	20
- other		11,837	1,014	848	8.6	84	7.2	6	34
Europe
- residential mortgages		386	33	28	8.5	85	7.3	-	-
- personal lending		368	86	72	23.4	84	19.6	2	2
- property		9,734	9,086	5,109	93.3	56	52.5	176	18
- construction		664	257	127	38.7	49	19.1	8	-
- other		4,739	2,146	1,223	45.3	57	25.8	77	194
US
- residential mortgages		2,459	289	106	11.8	37	4.3	24	36
- personal lending		554	91	14	16.4	15	2.5	9	12
- property		426	61	18	14.3	30	4.2	1	2
- construction		3	2	-	66.7	-	-	(1)	-
- other		1,117	97	214	8.7	221	19.2	5	4
RoW

					Credit metrics
31 December 2012		Gross loans £m	REIL £m	Provisions £m	REIL as a % of gross loans %	Provisions as a % of REIL %	Provisions as a % of gross loans %	Impairment charge £m	Amounts written-off £m

Government (1)		1,368	-	-	-	-	-	-	-
Finance		2,540	407	168	16.0	41	6.6	28	22
Personal	- mortgages	2,855	320	133	11.2	42	4.7	14	48
	- unsecured	965	186	103	19.3	55	10.7	31	25
Property		28,617	16,551	8,185	57.8	49	28.6	398	193
Construction		2,029	726	290	35.8	40	14.3	(21)	12
Manufacturing		1,553	259	132	16.7	51	8.5	4	32
Finance leases (2)		4,408	283	187	6.4	66	4.2	(8)	108
Retail, wholesale and repairs		1,094	352	205	32.2	58	18.7	19	32
Transport and storage		3,751	394	224	10.5	57	6.0	44	52
Health, education and leisure		935	429	222	45.9	52	23.7	1	18
Hotels and restaurants		986	555	253	56.3	46	25.7	(7)	22
Utilities		1,500	108	16	7.2	15	1.1	-	-
Other		3,742	803	446	21.5	56	11.9	41	169
Latent		-	-	635	-	-	-	129	-

		56,343	21,373	11,199	37.9	52	19.9	673	733

of which:
UK
- residential mortgages		19	-	-	-	-	-	-	-
- personal lending		55	23	19	41.8	83	34.5	-	-
- property		18,198	7,744	3,048	42.6	39	16.7	284	86
- construction		1,406	494	182	35.1	37	12.9	(40)	10
- other		13,316	1,067	874	8.0	82	6.6	83	304
Europe
- residential mortgages		390	32	27	8.2	84	6.9	(1)	25
- personal lending		365	83	70	22.7	84	19.2	3	1
- property		9,738	8,695	5,081	89.3	58	52.2	116	56
- construction		619	229	107	37.0	47	17.3	20	1
- other		5,206	2,171	1,285	41.7	59	24.7	170	122
US
- residential mortgages		2,446	288	106	11.8	37	4.3	15	23
- personal lending		539	80	14	14.8	18	2.6	25	23
- property		496	58	16	11.7	28	3.2	-	23
- construction		4	3	1	75.0	33	25.0	(1)	1
- other		1,087	100	198	9.2	198	18.2	4	6

	UK Retail	UK Corporate	Wealth	International Banking	Ulster Bank	US Retail & Commercial	Markets	Other	Core	Non- Core	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

At 1 January 2013	4,569	5,452	248	422	7,533	1,146	396	-	19,766	21,374	41,140
Currency translation	-	5	3	24	254	76	14	-	376	528	904
Additions	267	935	50	179	518	139	8	1	2,097	939	3,036
Transfers (1)	(44)	26	-	107	-	-	-	-	89	31	120
Transfers to performing book	-	(40)	(1)	-	-	-	-	-	(41)	(33)	(74)
Repayments	(222)	(821)	(40)	(28)	(326)	(29)	(6)	-	(1,472)	(1,456)	(2,928)
Amounts written-off	(142)	(228)	(1)	(62)	(27)	(69)	-	-	(529)	(627)	(1,156)

At 31 March 2013	4,428	5,329	259	642	7,952	1,263	412	1	20,286	20,756	41,042

	Non-Core (by donating division)
	UK Corporate	International Banking	Ulster Bank	US Retail & Commercial	Other	Total
	£m	£m	£m	£m	£m	£m

At 1 January 2013	2,622	6,907	11,399	418	28	21,374
Currency translation	3	162	336	27	-	528
Additions	416	115	362	45	1	939
Transfers (1)	31	-	-	-	-	31
Transfers to performing book	(31)	-	(2)	-	-	(33)
Repayments	(451)	(782)	(212)	(10)	(1)	(1,456)
Amounts written-off	(137)	(375)	(62)	(51)	(2)	(627)

At 31 March 2013	2,453	6,027	11,821	429	26	20,756

Quarter ended 31 December 2012

Individually assessed	-	164	15	86	61	(4)	322	16	1	339	479	818
Collectively assessed	114	72	-	(1)	195	60	440	-	-	440	65	505
Latent loss	(21)	(4)	1	(47)	62	(37)	(46)	(3)	-	(49)	129	80

Loans to customers	93	232	16	38	318	19	716	13	1	730	673	1,403
Loans to banks	-	-	-	(1)	-	-	(1)	-	-	(1)	-	(1)
Securities	-	2	-	-	-	4	6	9	7	22	30	52

Charge to income statement	93	234	16	37	318	23	721	22	8	751	703	1,454

	Quarter ended 31 March 2013			Year ended 31 December 2012
Sector	Performing £m	Non- performing £m	Provision coverage %	Performing £m	Non- performing £m	Provision coverage %

Property	507	216	18	1,954	3,288	18
Transport	52	100	18	832	99	23
Telecommunications, media and technology	16	27	-	237	341	46
Retail and leisure	64	40	-	487	111	34
Other	111	41	-	792	245	28

	750	424	14	4,302	4,084	22

●	Renegotiations completed in Q1 2013, were £1.2 billion (year ended 31 December 2012 - £8.4 billion). Renegotiations continue at a high level as difficult economic conditions persist in the UK and Ireland, particularly in the real estate markets, and the Group continues its active problem debt management.

●	Renegotiations are likely to remain significant: at 31 March 2013, loans totalling £13.8 billion (31 December 2012 - £13.7 billion) were in the process of being renegotiated but had not yet reached legal completion (they are not included in the table above). 62% of completed and 92% of "in progress" renegotiated cases in Q1 2013 were managed by GRG.

●	Renegotiated loans above may have been subject to one or more covenant waivers or modifications. In addition, loans totalling £0.7 billion were granted financial covenant concessions only during the period. These loans are not included in the table above.

	No missed payments		1-3 months in arrears		>3 months in arrears		Total
	Balance	Provision	Balance	Provision	Balance	Provision	Balance	Provision	Forborne balances
	£m	£m	£m	£m	£m	£m	£m	£m	%

31 March 2013
UK Retail (1,2)	4,159	21	416	18	452	61	5,027	100	5.1
Ulster Bank (1,2)	950	104	528	58	545	205	2,023	367	10.3
RBS Citizens	-	-	183	22	181	14	364	36	1.6
Wealth	48	-	-	-	23	1	71	1	0.8

	5,157	125	1,127	98	1,201	281	7,485	504	5.0

31 December 2012

UK Retail (1,2)	4,006	20	388	16	450	64	4,844	100	4.9
Ulster Bank (1,2)	915	100	546	60	527	194	1,988	354	10.4
RBS Citizens	-	-	179	25	160	10	339	35	1.6
Wealth	38	-	-	-	7	-	45	-	0.5

	4,959	120	1,113	101	1,144	268	7,216	489	4.9

(1)	Includes all forbearance arrangements whether relating to the customer's lifestyle changes or financial difficulty.
(2)	Includes the current stock position of forbearance deals agreed since early 2008 for UK Retail and early 2009 for Ulster Bank.

●	The UK Retail definition of forbearance is broad and includes mortgages where customers have made changes to contractual terms, including those where customers are up-to-date on payments and are not necessarily evidencing signs of financial stress. The reported figures above include stock dating back to 1 January 2008. The forbearance stock continues to grow, influenced by the fixed start date and the permanent nature of certain changes to contractual terms, for example, term extensions, historic interest only conversions and capitalisations.

●	At 31 March 2013, stock levels of £5.0 billion represented 5% of the total mortgage assets, a 4% increase in Q1 2013. The flow of new forbearance in the quarter (£463 million) was slightly lower than the average of the preceding four quarters (£498 million).

●	Approximately 83% of assets subject to forbearance were up-to-date with payments (compared with approximately 97% of the assets not subject to forbearance activity). The provision cover on assets subject to forbearance was around 4.5 times that on assets not subject to forbearance.

●	Of the total stock of assets subject to historic or current forbearance treatment, 44% were term extensions (31 December 2012 - 47%), 25% interest-only conversions (31 December 2012 - 25%) and 18% capitalisations of arrears (31 December 2012 - 19%). The stock of cases subject to interest-only conversions reflects legacy policy; conversions to interest-only loans are no longer permitted on residential mortgages.

●	The Ulster Bank definition of forbearance is broad and includes mortgages where customers have made changes to contractual terms, including those where customers are up-to-date on payments and are not necessarily evidencing signs of financial stress. The reported figures include stock dating back to early 2009.

●	At 31 March 2013, 10.3% of total mortgage assets (£2.0 billion) were subject to a forbearance arrangement (31 December 2012 - 10.4%, £2.0 billion). The majority of these forbearance arrangements were in the performing book (73%) and not 90 days past due. The flow of new forbearance in the quarter (£609 million) was lower than the average of the preceding four quarters (£794 million).

●	The majority of the forbearance arrangements offered by Ulster Bank are currently short term, accounting for 83% of assets subject to forbearance at 31 March 2013. These are offered for periods of one to three years and are based on the customer's ability to pay. Additional treatment options recently developed by Ulster Bank will lead to a shift to more long term arrangements over time where customer circumstances require it.

●	Of these short term forbearance types, the largest category at 31 March 2013 was interest-only conversions, accounting for 43% of total assets subject to forbearance. The other categories of temporary forbearance were payment concessions: positive and negative amortisation agreements (27% and 8% of the total, respectively); and payment holidays (5%).

●	The provision cover on performing assets subject to forbearance was approximately eight times higher than that on performing assets not subject to forbearance.

	31 March 2013			31 December 2012
	Investment	Development	Total	Investment	Development	Total
By division (1)	£m	£m	£m	£m	£m	£m

Core
UK Corporate	22,300	3,904	26,204	22,504	4,091	26,595
Ulster Bank	3,620	746	4,366	3,575	729	4,304
US Retail & Commercial	3,964	3	3,967	3,857	3	3,860
International Banking	815	301	1,116	849	315	1,164
Markets	172	35	207	630	57	687

	30,871	4,989	35,860	31,415	5,195	36,610

Non-Core
UK Corporate	2,504	885	3,389	2,651	983	3,634
Ulster Bank	3,451	7,574	11,025	3,383	7,607	10,990
US Retail & Commercial	360	-	360	392	-	392
International Banking	9,709	122	9,831	11,260	154	11,414

	16,024	8,581	24,605	17,686	8,744	26,430

Total	46,895	13,570	60,465	49,101	13,939	63,040

By geography (1)	Investment			Development
	Commercial	Residential	Total	Commercial	Residential	Total	Total
	£m	£m	£m	£m	£m	£m	£m

31 March 2013
UK (excluding NI) (2)	24,380	5,544	29,924	813	4,362	5,175	35,099
Ireland (ROI and NI) (2)	4,704	1,010	5,714	2,240	5,789	8,029	13,743
Western Europe (other)	5,797	364	6,161	24	42	66	6,227
US	3,779	994	4,773	-	4	4	4,777
RoW (2)	323	-	323	69	227	296	619

	38,983	7,912	46,895	3,146	10,424	13,570	60,465

31 December 2012

UK (excluding NI) (2)	25,864	5,567	31,431	839	4,777	5,616	37,047
Ireland (ROI and NI) (2)	4,651	989	5,640	2,234	5,712	7,946	13,586
Western Europe (other)	5,995	370	6,365	22	33	55	6,420
US	4,230	981	5,211	-	15	15	5,226
RoW (2)	454	-	454	65	242	307	761

	41,194	7,907	49,101	3,160	10,779	13,939	63,040

(1)	Excludes commercial real estate lending in Wealth as these loans are generally supported by personal guarantees in addition to collateral. This portfolio, which totalled £1.3 billion at 31 March 2013 (31 December 2012 - £1.4 billion), continues to perform in line with expectations and requires minimal provisions.
(2)	ROI: Republic of Ireland; NI: Northern Ireland; RoW: Rest of World.

·	In line with Group strategy, the overall exposure to commercial real estate fell by 4% during the first quarter. Most of the decrease was in Non-Core and was the result of repayments, asset sales and write-offs. The Non-Core portfolio totalled £24.6 billion (41% of the portfolio) at 31 March 2013 (31 December 2012 - £26.4 billion or 42% of the portfolio).

·	The reduction in Markets was caused by a decrease in the inventory of US commercial real estate earmarked for securitisation, following successful issuances.

·	The average interest coverage ratios for UK Corporate (Core and Non-Core), International Banking (Non-Core) were 3.05x and 1.29x, respectively, at 31 March 2013 (31 December 2012 - 2.96x and 1.30x). The US Retail & Commercial portfolio is managed on the basis of debt service coverage, which includes scheduled principal amortisation. The average debt service coverage for this portfolio (Core and Non-Core) was 1.45x at 31 March 2013 (31 December 2012 - 1.34x). As a number of different approaches are used within the Group and across geographies to calculate interest coverage ratios, they may not be comparable for different portfolio types and organisations.

	Total		Non-Core
	31 March 2013	31 December 2012	31 March 2013	31 December 2012

Lending (gross)	£60.5bn	£63.0bn	£24.6bn	£26.4bn
Of which REIL	£21.4bn	£22.1bn	£16.5bn	£17.1bn
Provisions	£10.2bn	£10.1bn	£8.4bn	£8.3bn
REIL as a % of gross loans to customers	35.4%	35.1%	67.1%	64.8%
Provisions as a % of REIL	48%	46%	51%	49%

				Credit metrics
	Gross loans	REIL	Provisions	REIL as a % of gross loans	Provisions as a % of REIL	Provisions as a % of gross loans	Impairment charge	Amounts written-off
Sector analysis	£m	£m	£m	%	%	%	£m	£m

31 March 2013
Core
Mortgages	19,672	3,432	1,659	17.4	48	8.4	90	5
Commercial real estate
- investment	3,620	1,543	649	42.6	42	17.9	46	-
- development	746	384	213	51.5	55	28.6	14	-
Other corporate	7,792	2,384	1,499	30.6	63	19.2	75	8
Other lending	1,270	209	206	16.5	99	16.2	15	14

	33,100	7,952	4,226	24.0	53	12.8	240	27

Non-Core
Commercial real estate
- investment	3,451	3,039	1,489	88.1	49	43.1	47	10
- development	7,574	7,437	4,918	98.2	66	64.9	155	46
Other corporate	1,621	1,259	777	77.7	62	47.9	38	1

	12,646	11,735	7,184	92.8	61	56.8	240	57

Ulster Bank Group
Mortgages	19,672	3,432	1,659	17.4	48	8.4	90	5
Commercial real estate
- investment	7,071	4,582	2,138	64.8	47	30.2	93	10
- development	8,320	7,821	5,131	94.0	66	61.7	169	46
Other corporate	9,413	3,643	2,276	38.7	62	24.2	113	9
Other lending	1,270	209	206	16.5	99	16.2	15	14

	45,746	19,687	11,410	43.0	58	24.9	480	84

·	At 31 March 2013, Ulster Bank Group accounted for 10% of the Group's total gross loans to customers (31 December 2012 - 10%) and 8% of the Group's Core gross loans to customers (31 December 2012 - 8%). Ulster Bank's financial performance continues to be influenced by the challenging economic climate in Ireland, with impairments remaining elevated as high unemployment, coupled with higher taxation and limited liquidity in the economy, all continue to depress the property market and domestic spending. However, there has been some modest improvement in the outlook with key economic indicators such as tax revenue, house price indices and GDP growth forecast stabilising.

·	The impairment charge of £480 million for Q1 2013 (Q4 2012 - £681 million) was driven by a combination of new defaulting customers and higher provisions on existing defaulted cases due primarily to deteriorating security values.

·	Provisions as a percentage of REIL increased marginally from 57% at the year end, to 58% in Q1 2013, principally as a result of the deterioration in the value of the commercial real estate development portfolio. Ulster Bank impairment provisions take into account recovery strategies for its commercial real estate portfolio, reflecting limited liquidity in Irish commercial and development property.

·	The Core impairment charge for Q1 2013 was £240 million (Q4 2012 - £318 million) with a quarterly decrease driven by lower defaults on mortgage and other corporate portfolios.

·	The Non-Core impairment charge for Q1 2013 was £240 million, a decrease of £123 million from Q4 2012. The commercial real estate sector accounted for £202 million (84%) of the total Non-Core Q1 2013 impairment charge.

	31 March 2013				31 December 2012
	UK	US	Other (1)	Total	UK	US	Other (1)	Total
	£m	£m	£m	£m	£m	£m	£m	£m

Government (2)	8,273	19,097	13,313	40,683	9,774	19,046	16,155	44,975
Banks	583	106	6,435	7,124	1,085	357	7,419	8,861
Other financial institutions	2,601	9,399	9,518	21,518	2,861	10,613	10,416	23,890
Corporate	27	12	176	215	1,318	719	1,130	3,167

Total	11,484	28,614	29,442	69,540	15,038	30,735	35,120	80,893

Of which ABS	2,942	13,762	12,713	29,417	3,558	14,209	12,976	30,743

AFS reserves (gross)	618	629	(849)	398	667	763	(1,277)	153

(1)	Includes eurozone countries as detailed on the following page.
(2)	Includes central and local government.

·	At 31 March 2013, sterling had depreciated 6.2% against the US dollar and 3.6% against the euro, compared with 31 December 2012. This resulted in exposures denominated in these currencies (and in other currencies linked to the same) increasing in sterling terms.

·	Balance sheet and off-balance sheet exposures to many countries shown in the table on page 96 continued to decline during Q1 2013, as the Group maintained a cautious stance and many clients reduced debt levels. In Ireland and a few Asian countries, exposure increased, largely owing to exchange rate movements. Reductions were seen notably in derivatives and repos. Non-Core lending exposure declined further in most countries as the Group continued to execute its disposal strategy.

·	Most of the Group's country risk exposure is in International Banking (primarily trade facilities, other lending and off-balance sheet exposure to corporates), Markets (mostly derivatives and repos with financial institutions, and HFT debt securities), Ulster Bank (mostly lending exposure to corporates and consumers in Ireland) and Group Treasury (cash balances at central banks and AFS debt securities including Spanish covered bonds).

·	Eurozone - Balance sheet exposure declined with reductions in most countries. This reflected a drop in liquidity held with the Bundesbank, lending write-offs, active exposure management and debt reduction efforts by bank clients.

·	Eurozone periphery - Balance sheet exposure was broadly stable, but with an increase in Ireland reflecting exchange rate movements offset by reductions in Italy and Portugal.

	○	Ireland - Lending and off-balance sheet exposure increased by £0.8 billion and £0.2 billion, respectively, but declined on a constant currency basis. Repo exposure to banks declined by £0.4 billion.
	○	Spain - Lending exposure decreased primarily in the telecommunications and commercial real estate sectors. The fair value of AFS debt securities increased by £0.5 billion due to favourable market sentiment for Spanish bonds.
	○	Italy - AFS debt securities decreased by £0.3 billion due to redemptions.
	○	Portugal - Modest further reductions took place in lending exposure to the commercial real estate sector, off-balance sheet exposure to the oil and gas sector and derivatives exposure to banks.
	○	Greece - Derivatives exposure to banks and off-balance sheet exposure increased slightly because of exchange rate movements.
	○	Cyprus - Balance sheet exposure to Cyprus amounted to £0.3 billion at 31 March 2013, comprising mainly lending exposure to special purpose vehicles incorporated in Cyprus but with assets and cash flows largely elsewhere.