Interim Results 2009. Part 3

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NATWEST GROUP (NWG)

UK 100

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	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
	£m	£m	£m	£m	£m	£m

Net interest income	3,117	3,538	6,655	4,038	3,463	7,501

Non-interest income (excluding insurance net premium income)	1,703	3,776	5,479	10	1,279	1,289
Insurance net premium income	1,301	1,356	2,657	1,423	1,438	2,861

Total income	6,121	8,670	14,791	5,471	6,180	11,651
Operating expenses	(4,066)	(4,667)	(8,733)	(4,487)	(3,906)	(8,393)

Profit before other operating charges	2,055	4,003	6,058	984	2,274	3,258
Insurance net claims	(925)	(966)	(1,891)	(949)	(978)	(1,927)

Operating profit before impairment losses	1,130	3,037	4,167	35	1,296	1,331
Impairment losses	(4,663)	(2,858)	(7,521)	(823)	(656)	(1,479)

Group operating (loss)/profit*	(3,533)	179	(3,354)	(788)	640	(148)
Amortisation of purchased intangible assets	(55)	(85)	(140)	(175)	(87)	(262)
Integration and restructuring costs	(355)	(379)	(734)	(242)	(74)	(316)
Write-down of goodwill	(311)	-	(311)	-	-	-
Gain on redemption of own debt	3,790	-	3,790	-	-	-
Strategic disposals	212	241	453	-	-	-

(Loss)/profit before tax	(252)	(44)	(296)	(1,205)	479	(726)
Tax	640	(228)	412	434	(131)	303

Profit/(loss) from continuing operations	388	(272)	116	(771)	348	(423)
Loss from discontinued operations	(13)	(45)	(58)	(21)	(20)	(41)

Profit/(loss) for the period	375	(317)	58	(792)	328	(464)
Minority interests	(83)	(471)	(554)	(127)	(21)	(148)
Preference share and other dividends	(432)	(114)	(546)	(133)	(82)	(215)

(Loss)/profit attributable to ordinary shareholders	(140)	(902)	(1,042)	(1,052)	225	(827)

Cost:income ratio	66.4%	53.8%	59.0%	82.0%	63.2%	72.0%
Net interest margin	1.60%	1.78%	1.69%	2.15%	1.99%	2.07%
Risk-weighted assets	£547.3bn	£575.7bn	£547.3bn	£491.7bn	£549.0bn	£491.7bn
Non-performing loans	£30.7bn	£23.7bn	£30.7bn	£8.8bn	£8.2bn	£8.8bn
Provision balance as % of NPL/PPLs	44%	45%	44%	55%	67%	56%

	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
	£m	£m	£m	£m	£m	£m
Operating profit/(loss) before impairment losses
UK Retail	499	378	877	502	452	954
UK Corporate	494	378	872	524	511	1,035
Wealth	137	103	240	98	92	190
Global Banking & Markets	1,188	3,922	5,110	(101)	1,233	1,132
Global Transaction Services	269	240	509	248	249	497
Ulster Bank	78	71	149	108	82	190
US Retail & Commercial	136	182	318	190	227	417
RBS Insurance	142	81	223	192	108	300
Central items	(313)	486	173	652	18	670

Core	2,630	5,841	8,471	2,413	2,972	5,385
Non-Core	(1,500)	(2,804)	(4,304)	(2,378)	(1,676)	(4,054)

Operating profit before impairment losses	1,130	3,037	4,167	35	1,296	1,331

Included in the above are movements in fair value of own debt of:
Global Banking & Markets	(483)	647	164	174	410	584
Central items	(477)	384	(93)	30	198	228

	(960)	1,031	71	204	608	812

Impairment losses by division
UK Retail	470	354	824	213	227	440
UK Corporate	450	101	551	54	42	96
Wealth	16	6	22	3	2	5
Global Banking & Markets	(32)	269	237	(40)	57	17
Global Transaction Services	4	9	13	3	1	4
Ulster Bank	90	67	157	7	11	18
US Retail & Commercial	146	223	369	64	62	126
RBS Insurance	1	5	6	-	-	-
Central items	1	(3)	(2)	(35)	(1)	(36)

Core	1,146	1,031	2,177	269	401	670
Non-Core	3,517	1,827	5,344	554	255	809

Total impairment losses	4,663	2,858	7,521	823	656	1,479

	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
	£m	£m	£m	£m	£m	£m

Operating profit/(loss) by division
UK Retail	29	24	53	289	225	514
UK Corporate	44	277	321	470	469	939
Wealth	121	97	218	95	90	185
Global Banking & Markets	1,220	3,653	4,873	(61)	1,176	1,115
Global Transaction Services	265	231	496	245	248	493
Ulster Bank	(12)	4	(8)	101	71	172
US Retail & Commercial	(10)	(41)	(51)	126	165	291
RBS Insurance	141	76	217	192	108	300
Central items	(314)	489	175	687	19	706

Core	1,484	4,810	6,294	2,144	2,571	4,715
Non-Core	(5,017)	(4,631)	(9,648)	(2,932)	(1,931)	(4,863)

Group operating (loss)/profit	(3,533)	179	(3,354)	(788)	640	(148)


Loan impairment losses	4,520	2,276	6,796	750	656	1,406
Impairment losses on available-for-sale securities	143	582	725	73	-	73

	4,663	2,858	7,521	823	656	1,479


Loan impairment charge as % of gross loans and advances excluding reverse repurchase agreements	2.98%	1.34%	2.24%	0.49%	0.43%	0.46%

	£bn	£bn		£bn	£bn
Risk-weighted assets by division
UK Retail	54.0	49.6		44.7	42.4
UK Corporate	85.1	81.6		84.9	93.0
Wealth	10.5	10.8		10.4	9.8
Global Banking & Markets	126.6	153.1		137.7	196.4
Global Transaction Services	16.7	17.9		16.9	16.1
Ulster Bank	26.2	26.2		21.5	24.4
US Retail & Commercial	55.6	64.3		44.8	44.9
Other	8.6	7.8		8.2	10.8

Core	383.3	411.3		369.1	437.8
Non-Core	164.0	164.4		122.6	111.2

Total risk-weighted assets	547.3	575.7		491.7	549.0

	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
Income statement	£m	£m	£m	£m	£m	£m

Net interest income	877	807	1,684	767	763	1,530

Net fees and commissions - banking	321	337	658	416	398	814
Other non-interest income (net of insurance claims)	69	53	122	73	66	139

Non-interest income	390	390	780	489	464	953

Total income	1,267	1,197	2,464	1,256	1,227	2,483

Direct expenses
- staff	(214)	(214)	(428)	(220)	(225)	(445)
- other	(103)	(118)	(221)	(105)	(114)	(219)
Indirect expenses	(451)	(487)	(938)	(429)	(436)	(865)

	(768)	(819)	(1,587)	(754)	(775)	(1,529)

Operating profit before impairment losses	499	378	877	502	452	954
Impairment losses	(470)	(354)	(824)	(213)	(227)	(440)

Operating profit	29	24	53	289	225	514

Analysis of income by product:
Personal advances	307	302	609	315	318	633
Mortgages	272	208	480	99	120	219
Personal deposits	349	392	741	521	477	998
Bancassurance	70	52	122	71	61	132
Cards	212	204	416	212	206	418
Other	57	39	96	38	45	83

Total income	1,267	1,197	2,464	1,256	1,227	2,483

Analysis of impairment by sector:
Mortgages	41	22	63	7	6	13
Personal	299	195	494	120	135	255
Cards	130	137	267	86	86	172

Total impairment	470	354	824	213	227	440

Loan impairment charge as % of gross customer loans and advances
Mortgages	0.21%	0.12%	0.16%	0.04%	0.04%	0.04%
Personal	8.48%	5.27%	7.01%	3.10%	3.58%	3.29%
Cards	8.52%	9.13%	8.75%	5.06%	4.99%	5.06%

	1.94%	1.50%	1.70%	0.93%	1.02%	0.96%

Notes:
(1)	Return on equity is based on divisional operating profit after tax, divided by divisional notional equity (based on regulatory capital).
(2)	Adjusted cost:income ratio is based on total income and operating expenses after netting insurance claims against total income.

	30 June 2009	31 March 2009	30 June 2008	31 March 2008
	£m	£m	£m	£m

Assets
Cash and balances at central banks	34,302	20,384	35,208	13,310
Inter-bank lending	48,624	60,258	43,570	49,435
Reverse repurchase agreements and stock borrowing	35,076	44,828	107,767	164,622
Loans and advances to banks	83,700	104,981	151,337	214,057
Net loans and advances to customers	593,277	671,077	603,577	606,482
Reverse repurchase agreements and stock borrowing	47,485	46,561	85,960	134,391
Loans and advances to customers	640,762	717,638	689,537	740,873
Debt securities	229,059	248,904	244,238	266,807
Equity shares	14,220	14,281	33,348	36,841
Settlement balances	23,244	24,446	27,606	40,075
Derivatives	555,890	868,657	414,655	460,287
Intangible assets	15,117	16,371	28,444	28,451
Property, plant and equipment	16,292	17,561	14,647	17,387
Deferred taxation	7,573	6,298	1,092	3,172
Prepayments, accrued income and other assets	20,620	20,692	18,190	11,881
Assets of disposal groups	3,666	170	4,208	1,131

Total assets	1,644,445	2,060,488	1,662,510	1,834,272

Liabilities
Inter-bank deposits	135,601	179,425	142,438	153,352
Repurchase agreements and stock lending	44,142	54,677	112,212	156,685
Deposits by banks	179,743	234,102	254,650	310,037
Customer deposits	415,267	436,339	443,331	445,623
Repurchase agreements and stock lending	75,015	78,505	92,375	141,150
Customer accounts	490,282	524,844	535,706	586,773
Debt securities in issue	248,710	258,493	240,263	245,038
Settlement balances and short positions	60,282	63,281	84,073	110,690
Derivatives	534,632	836,662	407,455	451,681
Accruals, deferred income and other liabilities	21,543	28,037	25,623	26,374
Retirement benefit liabilities	1,363	1,534	375	417
Deferred taxation	3,344	3,168	1,915	3,577
Insurance liabilities	7,186	7,400	7,532	7,626
Subordinated liabilities	32,106	43,511	34,617	33,440
Liabilities of disposal groups	7,465	15	2,856	388

Total liabilities	1,586,656	2,001,047	1,595,065	1,776,041

Equity:
Minority interests	2,123	3,428	5,808	5,083
Equity owners’	55,666	56,013	61,637	53,148

Total equity	57,789	59,441	67,445	58,231


Total liabilities and equity	1,644,445	2,060,488	1,662,510	1,834,272

		Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
		£bn	£bn		£bn	£bn

Performance ratios
Return on equity (1)		2.0%	1.6%	1.8%	21.7%	18.1%	19.3%
Net interest margin		3.73%	3.50%	3.62%	3.48%	3.56%	3.52%
Cost:income ratio		59.2%	68.7%	63.7%	57.8%	62.4%	60.0%

Capital and balance sheet
Loans and advances to customers - gross
- mortgages		76.9	73.5		69.7	66.6
- personal		14.1	14.8		15.5	15.1
- cards		6.1	6.0		6.8	6.9
Customer deposits (excluding bancassurance)		83.4	80.3		76.6	77.0
Loan:deposit ratio (excluding repos)		116.4%	117.4%		120.1%	115.1%
AUMs - excluding deposits		4.7	4.6		6.6	6.5
Non-performing loans		4.5	4.1		3.3	3.2

Risk-weighted assets		54.0	49.6		44.7	42.4

Note:
(1)	Return on equity is based on divisional operating profit after tax, divided by divisional notional equity (based on 7% of divisional risk-weighted assets, adjusted for capital deductions).

	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
Income statement	£m	£m	£m	£m	£m	£m

Net interest income	533	473	1,006	589	605	1,194

Net fees and commissions	205	182	387	196	181	377
Other non-interest income	91	91	182	113	105	218

Non-interest income	296	273	569	309	286	595

Total income	829	746	1,575	898	891	1,789

Direct expenses
- staff	(170)	(172)	(342)	(181)	(187)	(368)
- other	(40)	(66)	(106)	(68)	(69)	(137)
Indirect expenses	(125)	(130)	(255)	(125)	(124)	(249)

	(335)	(368)	(703)	(374)	(380)	(754)

Operating profit before impairment losses	494	378	872	524	511	1,035
Impairment losses	(450)	(101)	(551)	(54)	(42)	(96)

Operating profit	44	277	321	470	469	939

Analysis of income by business:
Corporate and commercial lending	365	327	692	405	387	792
Asset and invoice finance	123	110	233	125	120	245
Corporate deposits	258	286	544	307	266	573
Other	83	23	106	61	118	179

Total income	829	746	1,575	898	891	1,789


Analysis of impairment by sector:
Manufacturing	17	4	21	7	3	10
Housebuilding and construction	55	6	61	2	3	5
Property	156	11	167	6	1	7
Asset & invoice finance	80	20	68	24	13	38
Other	142	60	234	15	22	36

		Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
		£bn	£bn		£bn	£bn

Performance ratios
Return on equity (1)		1.7%	11.6%	6.3%	19.6%	18.0%	19.6%
Net interest margin		2.29%	1.99%	2.14%	2.55%	2.73%	2.64%
Cost:income ratio		40.4%	49.3%	44.6%	41.7%	42.7%	42.2%

Capital and balance sheet

Total assets		106.0	108.7		108.2	105.6
Loans and advances to customers - gross
- Manufacturing		4.8	5.1		4.5	4.3
- Housebuilding and construction		5.3	5.7		5.4	5.2
- Property		32.9	32.4		29.2	27.3
- Asset and invoice finance		8.8	8.6		8.3	8.6
- Other		50.6	53.6		57.0	56.4

Customer deposits		84.1	81.2		83.9	84.3
Loan:deposit ratio (excluding repos)		121.8%	129.7%		124.5%	120.8%
Non-performing loans		2.4	2.0		0.9	1.1

Risk-weighted assets		85.1	81.6		84.9	93.0

Note:
(1)	Return on equity is based on divisional operating profit after tax, divided by divisional notional equity (based on 8% of divisional risk-weighted assets, adjusted for capital deductions).

	Q2 2009	Q1 2009	H1 2009	Q2 2008	Q1 2008	H1 2008
Income statement	£m	£m	£m	£m	£m	£m

Net interest income from banking activities	712	848	1,560	340	528	868

Net fees and commissions receivable	424	304	728	443	200	643
Income from trading activities	1,357	4,376	5,733	914	1,320	2,234
Other operating income (net of related funding costs)	(98)	(93)	(191)	(137)	68	(69)

Non-interest income	1,683	4,587	6,270	1,220	1,588	2,808

Total income	2,395	5,435	7,830	1,560	2,116	3,676

Direct expenses
- staff	(773)	(1,014)	(1,787)	(1,131)	(472)	(1,603)
- other	(233)	(306)	(539)	(381)	(259)	(640)
Indirect expenses	(201)	(193)	(394)	(149)	(152)	(301)

	(1,207)	(1,513)	(2,720)	(1,661)	(883)	(2,544)

Operating profit/(loss) before impairment losses	1,188	3,922	5,110	(101)	1,233	1,132
Impairment losses	32	(269)	(237)	40	(57)	(17)

Operating profit/(loss)	1,220	3,653	4,873	(61)	1,176	1,115


Analysis of income by product:
Rates - money markets	567	789	1,356	237	263	500
Rates - flow	567	1,375	1,942	597	806	1,403
Currencies	391	585	976	324	375	699
Commodities	239	228	467	334	15	349
Equities	362	371	733	345	216	561
Credit markets	654	798	1,452	(760)	(268)	(1,028)
Portfolio management and origination	98	642	740	309	299	608
Fair value of own debt	(483)	647	164	174	410	584

Total income	2,395	5,435	7,830	1,560	2,116	3,676


Analysis of impairment by sector: