Interim Results - Part 7 of 7

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Contents
Trading revenues	2
Structured credit portfolio	3
Market risk capital	4

·	Markets focused on reducing its balance sheet and lowering risk during H1 2013. This combined with a weaker trading performance and market uncertainty following the Federal Reserve's comments about a tapering of quantitative easing, limiting opportunities for income generation. In contrast, H1 2012 performance was stronger as global markets were boosted by the European Central Bank's Long Term Refinancing Operation.

·	The average daily revenue earned by Markets' trading activities in H1 2013 was £12 million, compared with £22 million in H1 2012. The standard deviation of the daily revenues decreased from £16 million to £11 million. The number of days with negative revenue increased to 13 from nine. The most frequent daily revenue range was between £10 million and £15 million, which occurred 27 times. In H1 2012, the most frequent daily revenue range was between £20 million and £25 million, which occurred 19 times.

	Drawn notional					Fair value
	CDOs (1)	CLOs (2)	MBS (3)	Other ABS (4)	Total	CDOs (1)	CLOs (2)	MBS (3)	Other ABS (4)	Total
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

1-2 years	-	-	-	26	26	-	-	-	22	22
3-4 years	-	-	20	48	68	-	-	20	45	65
4-5 years	-	-	39	-	39	-	-	37	-	37
5-10 years	-	399	25	-	424	-	385	20	-	405
>10 years	267	128	228	232	855	112	121	163	141	537

	267	527	312	306	1,412	112	506	240	208	1,066

31 December 2012

1-2 years	-	-	-	80	80	-	-	-	74	74
3-4 years	-	-	27	82	109	-	-	24	76	100
4-5 years	-	-	95	-	95	-	-	86	-	86
5-10 years	-	310	92	-	402	-	295	44	-	339
>10 years	289	279	380	398	1,346	116	256	253	254	879

	289	589	594	560	2,032	116	551	407	404	1,478

(1)	Collateralised debt obligations.
(2)	Collateralised loan obligations.
(3)	Mortgage-backed securities.
(4)	Asset-backed securities.

	30 June 2013				Period end 31 December 2012
	Average (1)	Maximum (1)	Minimum (1)	Period end	Period end 31 December 2012
	£m	£m	£m	£m	£m

Value-at-risk (VaR) (1)	825	875	783	810	825
Stressed VaR (SVaR)	1,185	1,266	1,120	1,134	1,226
Incremental risk charge (IRC)	426	458	405	414	467
All price risk (APR)	12	13	10	12	12

Interim Results - Part 7 of 7

Contents

Key points

Structured credit portfolio

Key point

Market risk capital*

Minimum capital requirements

Key points

Contents

Total eurozone

Eurozone periphery

Eurozone periphery by country: Ireland

Eurozone periphery by country: Spain

Eurozone periphery by country: Italy

Eurozone periphery by country: Portugal

Eurozone periphery by country: Greece

Eurozone periphery by country: Cyprus

Eurozone non-periphery

Eurozone non-periphery: Germany

Eurozone non-periphery: Netherlands

Eurozone non-periphery: France

Eurozone non-periphery: Luxembourg

Eurozone non-periphery: Belgium

Eurozone non-periphery: Other⁽¹⁾

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·	SVaR increased slightly in January as the Markets Delta business repositioned its exposures to longer-dated maturities. The SVaR then decreased over the remainder of H1 2013, reflecting continued de-risking by a number of Markets businesses.

·	The IRC fell in January 2013 as Markets businesses reduced exposures, then increased in April 2013 as the Markets Delta business repositioned its exposure to peripheral eurozone countries. The IRC then fell as the business reduced its exposures to European and peripheral eurozone countries over the remainder of the period.

Contents
Total eurozone	2
Eurozone periphery - total	4
Eurozone periphery - by country	6
Eurozone non-periphery - total	22
Eurozone non-periphery - by country	26

	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	HFT debt securities		Total debt securities	Net		Balance sheet	Off-balance sheet	Total	Gross
	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	Long	Short	Total debt securities	Derivatives	Repos	Balance sheet	Off-balance sheet	Total	Derivatives	Repos
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Government	661	-	-	9,868	38	18,918	9,294	19,492	1,616	-	21,769	49	21,818	4,604	492
Central bank	13,286	-	-	-	-	-	-	-	23	-	13,309	-	13,309	25	5,338
Other banks	4,930	-	-	4,352	(164)	875	685	4,542	21,383	1,316	32,171	4,393	36,564	119,232	33,624
Other FI	3,660	-	-	9,193	(866)	858	363	9,688	7,767	867	21,982	6,740	28,722	14,243	20,763
Corporate	36,983	14,948	8,019	124	-	526	77	573	2,796	23	40,375	28,408	68,783	3,950	665
Personal	19,065	3,612	1,939	-	-	-	-	-	-	-	19,065	785	19,850	-	-

	78,585	18,560	9,958	23,537	(992)	21,177	10,419	34,295	33,585	2,206	148,671	40,375	189,046	142,054	60,882

31 December 2012

Government	678	-	-	11,487	267	17,430	8,469	20,448	1,797	-	22,923	783	23,706	5,307	-
Central bank	21,969	-	-	-	-	-	-	-	35	-	22,004	-	22,004	36	4,648
Other banks	4,257	-	-	5,588	(509)	1,021	611	5,998	25,956	1,161	37,372	4,400	41,772	148,534	28,679
Other FI	4,237	-	-	9,367	(1,081)	1,261	142	10,486	7,595	727	23,045	5,537	28,582	15,055	16,124
Corporate	37,351	14,253	7,451	794	33	311	115	990	3,594	24	41,959	29,061	71,020	4,945	732
Personal	18,512	3,351	1,733	-	-	-	-	-	1	-	18,513	743	19,256	1	-

	87,004	17,604	9,184	27,236	(1,290)	20,023	9,337	37,922	38,978	1,912	165,816	40,524	206,340	173,878	50,183

	30 June 2013				31 December 2012
	Notional		Fair value		Notional		Fair value
	Bought	Sold	Bought	Sold	Bought	Sold	Bought	Sold
CDS by reference entity	£m	£m	£m	£m	£m	£m	£m	£m

Government	45,910	44,223	1,896	(2,065)	40,154	38,580	1,407	(1,405)
Other banks	6,035	5,692	137	(104)	13,249	13,014	266	(217)
Other FI	5,671	4,674	149	(130)	11,015	9,704	104	(92)
Corporate	14,255	11,732	(221)	233	39,639	35,851	(455)	465

	71,871	66,321	1,961	(2,066)	104,057	97,149	1,322	(1,249)

	AQ1		AQ2-AQ3		AQ4-AQ9		AQ10		Total
	Notional	Fair value	Notional	Fair value	Notional	Fair value	Notional	Fair value	Notional	Fair value
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Banks	6,822	245	29,424	893	5,743	221	-	-	41,989	1,359
Other FI	10,784	170	16,386	442	1,734	(12)	978	2	29,882	602

	17,606	415	45,810	1,335	7,477	209	978	2	71,871	1,961

31 December 2012

Banks	8,828	126	34,862	597	8,056	204	-	-	51,746	927
Other FI	23,912	88	23,356	319	4,111	(17)	932	5	52,311	395

	32,740	214	58,218	916	12,167	187	932	5	104,057	1,322

·	Ulster Bank Group's (UBG) Irish exposure comprises personal lending (largely mortgages) and corporate lending and commitments, as well as some lending to financial institutions (refer to the UBG section on page 52 of Appendix 3 for further details). International Banking also has lending and commitments, and Markets has derivatives and repo exposure to financial institutions and large international clients with funding subsidiaries based in Ireland.

·	Total exposure remained broadly unchanged at £42.7 billion, with some increase in personal lending driven by currency movements offset by small decreases in repos, derivatives and debt securities. Risk elements in lending and provisions increased by £1.3 billion and £0.8 billion, respectively with most of it relating to corporate lending.

·	Government and central bank

	Exposure to the central bank fluctuates and is driven by regulatory requirements and deposits of excess liquidity.

·	Financial institutions

	Markets, International Banking and UBG together account for the large majority of the Group's exposure to financial institutions. The main categories are derivatives and repos, where exposure is significantly affected by market movements but much of it is collateralised.

	Repo exposure to banks declined by £0.4 billion as one large position matured.

·	Corporate

	Lending increased slightly to £18.1 billion but was down on a constant currency basis. Commercial real estate lending amounted to £10.7 billion at 30 June 2013 (nearly all in UBG; £7.9 billion of this was in Non-Core), up £0.2 billion due to exchange rate movements. On a constant currency basis, the exposures decreased due to recoveries and write-offs in UBG. Commercial real estate lending included REIL of £8.7 billion, 56% of which were covered by provisions.

·	Personal

	Overall lending increased by £0.6 billion, but declined on a constant currency basis as a result of amortisation. Residential mortgage loans amounted to £17.5 billion at 30 June 2013, including REIL of £3.3 billion with loan provisions of £1.7 billion. The housing market continued to suffer from weak domestic demand, although house prices stabilised at approximately 50% below their 2007 peak.

	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	HFT debt securities		Total debt securities	Net		Balance sheet	Off-balance sheet	Total	Gross
	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	Long	Short	Total debt securities	Derivatives	Repos	Balance sheet	Off-balance sheet	Total	Derivatives	Repos
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Government	42	-	-	688	(101)	4,428	2,853	2,263	108	-	2,413	14	2,427	275	-
Central bank	138	-	-	-	-	-	-	-	-	-	138	-	138	-	431
Other banks	251	-	-	3,715	(388)	102	160	3,657	3,682	88	7,678	81	7,759	24,830	8,027
Other FI	782	-	-	2,069	(376)	268	165	2,172	760	137	3,851	1,206	5,057	1,531	4,520
Corporate	24,008	13,179	7,446	78	-	275	3	350	1,332	-	25,690	5,274	30,964	1,630	-
Personal	18,849	3,590	1,920	-	-	-	-	-	-	-	18,849	652	19,501	-	-

	44,070	16,769	9,366	6,550	(865)	5,073	3,181	8,442	5,882	225	58,619	7,227	65,846	28,266	12,978

31 December 2012

Government	51	-	-	644	(132)	3,686	2,698	1,632	134	-	1,817	16	1,833	361	-
Central bank	107	-	-	-	-	-	-	-	-	-	107	-	107	-	-
Other banks	299	-	-	3,551	(660)	165	131	3,585	4,093	476	8,453	75	8,528	29,706	4,186
Other FI	812	-	-	2,065	(541)	466	40	2,491	746	103	4,152	1,414	5,566	1,557	4,136
Corporate	24,362	12,146	6,757	192	2	128	40	280	1,678	-	26,320	5,414	31,734	2,027	326
Personal	18,292	3,347	1,713	-	-	-	-	-	1	-	18,293	611	18,904	1	-

	43,923	15,493	8,470	6,452	(1,331)	4,445	2,909	7,988	6,652	579	59,142	7,530	66,672	33,652	8,648

	30 June 2013				31 December 2012
	Notional		Fair value		Notional		Fair value
	Bought	Sold	Bought	Sold	Bought	Sold	Bought	Sold
CDS by reference entity	£m	£m	£m	£m	£m	£m	£m	£m

Government	28,778	28,485	1,789	(2,058)	24,785	24,600	1,452	(1,459)
Other banks	1,848	1,762	98	(80)	6,023	5,996	230	(202)
Other FI	1,333	1,151	40	(32)	2,592	2,350	76	(67)
Corporate	2,406	1,700	37	(31)	5,824	5,141	52	(47)

	34,365	33,098	1,964	(2,201)	39,224	38,087	1,810	(1,775)

	AQ1		AQ2-AQ3		AQ4-AQ9		AQ10		Total
	Notional	Fair value	Notional	Fair value	Notional	Fair value	Notional	Fair value	Notional	Fair value
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Banks	3,499	208	14,867	921	4,410	166	-	-	22,776	1,295
Other FI	3,323	192	7,568	465	420	12	278	-	11,589	669

	6,822	400	22,435	1,386	4,830	178	278	-	34,365	1,964

31 December 2012

Banks	3,517	153	14,725	780	5,153	214	-	-	23,395	1,147
Other FI	5,647	240	9,021	401	896	22	265	-	15,829	663

	9,164	393	23,746	1,181	6,049	236	265	-	39,224	1,810

	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	HFT debt securities		Total debt securities	Net		Balance sheet	Off-balance sheet	Total	Gross
	Lending	REIL	Provisions	AFS and LAR debt securities	AFS reserves	Long	Short	Total debt securities	Derivatives	Repos	Balance sheet	Off-balance sheet	Total	Derivatives	Repos
30 June 2013	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m

Government	42	-	-	137	(14)	34	26	145	-	-	187	3	190	6	-
Central bank	116	-	-	-	-	-	-	-	-	-	116	-	116	-	-
Other banks	88	-	-	113	(3)	19	(3)	135	625	88	936	-	936	12,318	3,706
Other FI	519	-	-	85	-	133	11	207	586	137	1,449	656	2,105	1,300	4,484
Corporate	18,062	12,070	6,853	-	-	155	-	155	320	-	18,537	1,785	20,322	333	-
Personal	18,452	3,528	1,891	-	-	-	-	-	-	-	18,452	553	19,005	-	-

	37,279	15,598	8,744	335	(17)	341	34	642	1,531	225	39,677	2,997	42,674	13,957	8,190

31 December 2012

Government	42	-	-	127	(23)	79	56	150	2	-	194	2	196	6	-
Central bank	73	-	-	-	-	-	-	-	-	-	73	-	73	-	-
Other banks	98	-	-	191	(6)	18	1	208	695	476	1,477	-	1,477	15,258	3,547
Other FI	532	-	-	46	-	325	2	369	583	103	1,587	601	2,188	1,365	4,121
Corporate	17,921	11,058	6,226	60	-	-	-	60	411	-	18,392	1,840	20,232	436	326
Personal	17,893	3,286	1,686	-	-	-	-	-	1	-	17,894	515	18,409	1	-

	36,559	14,344	7,912	424	(29)	422	59	787	1,692	579	39,617	2,958	42,575	17,066	7,994

·	Non-Core (included above)

	Non-Core lending was £9.6 billion at 30 June 2013, slightly up due to foreign exchange movements and with adverse market conditions still hampering the sale of assets. The lending portfolio largely consisted of exposures to commercial real estate (83%), retail (4%) and leisure (4%).

·	Exposure to Spain is driven by corporate lending in International Banking, derivative position with large banks in Markets and a sizeable AFS mortgage-backed (largely covered bond) portfolio held within the liquidity portfolio managed by Group Treasury.

·	Group exposure was stable at £13.4 billion, with some reductions in corporate lending and in derivatives exposure to banks alongside an increase in AFS debt securities issued by banks.

·	Government and central bank

	The Group has a trading portfolio of Spanish government debt and CDS exposures that can result in fluctuations between long and short positions for HFT debt securities.

·	Financial institutions

	The Group's largest exposure was the AFS securities (mainly the covered bond portfolio) with a fair value of £5.4 billion at 30 June 2013 - an increase of £0.5 billion due to improving market sentiment for Spanish bonds and the resulting narrowing of spreads and higher prices. The Group monitors the situation closely with periodic stress analyses.

	Derivatives exposure, mostly to Spanish international banks and a few of the large regional banks, and mostly collateralised, decreased by £0.2 billion to £1.0 billion at 30 June 2013, in part as a result of the sale of European CDS positions. Gross repos with large Spanish banks increased by £3.0 billion while net repo exposure remained at nil.

	Lending to non-bank financial institutions decreased to de minimis levels, the result of active risk management.

·	Corporate

	Lending decreased by £0.3 billion to £3.9 billion during H1 2013, due to reductions across a range of sectors. Commercial real estate lending increased slightly as a result of exchange rate movements, to £1.8 billion at 30 June 2013, practically all in Non-Core. The majority of REIL and loan provisions related to commercial real estate lending.

·	Non-Core (included above)

	At 30 June 2013, Non-Core had lending to Spain of £2.7 billion, unchanged since 31 December 2012 due to the euro appreciation and with adverse market conditions preventing the sale of assets. Commercial real estate (65%), construction (14%) and electricity (9%) sectors accounted for the majority of the lending.

·	Exposure to Italy is driven by active trading and derivatives exposure in Markets and corporate lending in International Banking.
e
·	The Group continued to reduce and mitigate its risk through strategic exits where appropriate and through increased collateral requirements. Exposure decreased by £0.7 billion, largely in off-balance sheet exposure to corporates and non-bank financial institutions

·	Government and central bank

	The Group is a market-maker in Italian government bonds with large and fluctuating gross long and short positions in HFT debt securities and an active CDS portfolio. An increase in the net long HFT position in government bonds of £0.5 billion during H1 2013 reflecting yield related net acquisitions was partly matched by an increase in the net bought CDS protection of £0.2 billion.

·	Financial institutions

	The majority of the Group's exposure is to the top five banks. The Group's product offering consists largely of collateralised trading products and, to a lesser extent, short-term uncommitted lending lines for liquidity purposes. Risk is mitigated by fully collateralised facilities.

	The AFS bond exposure to financial institutions was reduced by £0.3 billion due to sales during H1 2013.

·	Corporate

	Lending exposure declined slightly by £0.1 billion during H1 2013, to £1.3 billion. Off-balance sheet exposure decreased £0.3 billion, primarily in the electricity sector.

Interim Results - Part 7 of 7

Contents

Key points

Structured credit portfolio

Key point

Market risk capital*

Minimum capital requirements

Key points

Contents

Total eurozone

Eurozone periphery

Eurozone periphery by country: Ireland

Eurozone periphery by country: Spain

Eurozone periphery by country: Italy

Eurozone periphery by country: Portugal

Eurozone periphery by country: Greece

Eurozone periphery by country: Cyprus

Eurozone non-periphery

Eurozone non-periphery: Germany

Eurozone non-periphery: Netherlands

Eurozone non-periphery: France

Eurozone non-periphery: Luxembourg

Eurozone non-periphery: Belgium

Eurozone non-periphery: Other(1)

Companies

UK 100

Latest directors dealings

Eurozone non-periphery: Other⁽¹⁾

·	Non-Core (included above)

	Non-Core lending was £0.9 billion at 30 June 2013, slightly down from 31 December 2012. The remaining lending was mainly to the commercial real estate (30%), leisure (20%) and electricity (17%) sectors.

·	The Portuguese portfolio, managed from Spain, mainly consists of corporate lending and derivatives trading with the largest local banks. In line with the Group's de-risking strategy, there is no medium-term activity, with the exception of collateralised business.

·	Group exposure declined further during H1 2013 to £1.2 billion, a reduction of £0.2 billion mostly in lending, derivatives and off-balance sheet exposure. Net bought CDS protection increased to £0.2 billion as a result of ongoing management of positions arising from flow trading.

·	Government and central bank

	The Group's exposure to the Portuguese government at 30 June 2013 was unchanged at £0.1 billion, comprising a small AFS debt securities position and very small derivatives and net long HFT positions.

·	Financial institutions

	The remaining exposure was largely focused on the top four systemically important banks. Exposures generally consisted of collateralised trading products.

·	Corporate

	Lending to the telecoms sector and off-balance sheet exposure to the oil and gas sector decreased to almost nil in H1 2013. The largest remaining exposure was to the land, transport & logistics and electricity sectors, focusing on a few large, highly creditworthy clients.

·	Non-Core (included above)

	Non-Core lending to Portugal remained unchanged during H1 2013, at £0.3 billion. The remaining portfolio largely comprised lending to the land, transport & logistics (41%) and electricity (37%) sectors.

·	Government and central bank

	The small HFT position was reduced to nil. The only remaining exposure is a small legacy derivatives exposure to the government of Greece.

·	Financial institutions

	Activity with Greek financial institutions was largely collateralised derivatives exposure, and remained under close scrutiny.

·	Corporate

	Lending exposure was stable at £0.2 billion. The Group's focus was on short-term trade facilities extended to the domestic subsidiaries of international clients, increasingly supported by parental guarantees.

·	Non-Core (included above)

	Non-Core lending to Greece was stable at less than £0.1 billion. The remaining lending portfolio primarily consisted of the following sectors: commercial real estate (51%), construction (32%) and other services (12%).