REG - Royal Bk Scot.Grp. - 1st Quarter Results <Origin Href="QuoteRef">RBS.L</Origin> - Part 2
15/07/2015 15:25
- Part 2: For the preceding part double click ID:nRSd7782La
items under IFRS and higher income from trading activities in CIB.
Q1 2015 compared with Q1 2014
· Net interest income increased by £58 million or 2% with improvements in deposit margin in PBB and in Commercial Banking.
· Non-interest income declined by £780 million or 33%, primarily reflecting lower income from trading activities, driven by risk and balance sheet reductions in CIB including the wind-down of the US asset- backed products business.
· Losses on the disposal of available-for-sale securities in Treasury totalled £27 million compared with a gain of £203 million in Q1 2014.
· NIM increased by 14 basis points to 2.26%, with improvements in CPB. The UK PBB margin was stable and the Ulster Bank margin was down reflecting lower return on free funds and an increase in the liquid asset portfolio.
Analysis of results
Operating expenses
Quarter ended
31 March 31 December 31 March
2015 2014 2014
Operating expenses £m £m £m
Staff expenses 1,558 1,455 1,647
Premises and equipment 487 525 594
Other 511 827 687
Restructuring costs* 453 563 129
Litigation and conduct costs 856 1,164 -
Administrative expenses 3,865 4,534 3,057
Depreciation and amortisation 232 250 269
Write down of intangible assets - 74 82
Operating expenses 4,097 4,858 3,408
Adjusted operating expenses (1) 2,788 3,131 3,279
*Restructuring costs comprise:
- staff expenses 55 134 43
- premises, equipment, depreciation and amortisation 290 31 61
- other 108 398 25
Restructuring costs 453 563 129
Staff costs as a % of total income 36% 38% 33%
Cost:income ratio 95% 126% 67%
Cost:income ratio - adjusted (1) 64% 81% 65%
Employee numbers (FTEs - thousands) 109.2 108.7 116.7
Note:
(1) Excluding restructuring costs and litigation and conduct costs.
Key points
Q1 2015 compared with Q4 2014
· Operating expenses decreased by £761 million or 16% to £4,097 million. Adjusted operating expenses declined by £343 million or 11% to £2,788 million.
· Litigation and conducts costs totalled £856 million compared with £1,164 million in Q4 2014.
· Restructuring costs decreased by £110 million to £453 million, including a £277 million write-down of the value of US premises and £133 million in relation to Williams & Glyn.
Q1 2015 compared with Q1 2014
· Operating expenses increased by £689 million or 20% to £4,097 million. Adjusted operating expenses declined by £491 million or 15% to £2,788 million.
· Litigation and conducts costs totalled £856 million in Q1 2015 against a nil charge in Q1 2014.
· Restructuring costs increased by £324 million to £453 million, principally due to the property related charge in the US.
Analysis of results
Impairment (releases)/losses
Quarter ended
31 March 31 December 31 March
2015 2014 2014
Impairment (releases)/losses £m £m £m
Loans (190) (638) 360
Securities 99 15 2
Total impairment (releases)/losses (91) (623) 362
Loan impairment (releases)/losses
- individually assessed (6) (502) 155
- collectively assessed 69 (85) 127
- latent (253) (51) 78
Loan impairment (releases)/losses (190) (638) 360
RBS excluding RCR (30) 53 254
RCR (160) (691) 106
RBS loan impairment (releases)/losses (190) (638) 360
Customer loan impairment (releases)/losses as a % of gross loans
and advances (1)
RBS (0.2%) (0.6%) 0.3%
RBS excluding RCR - 0.1% 0.3%
RCR (4.2%) (12.6%) 1.2%
31 March 31 December 31 March
2015 2014 2014
Loan impairment provisions
- RBS £13.8bn £18.0bn £24.2bn
- RBS excluding RCR £6.6bn £7.1bn £8.5bn
- RCR £7.2bn £10.9bn £15.7bn
Risk elements in lending
- RBS £22.3bn £28.2bn £37.4bn
- RBS excluding RCR £12.1bn £12.8bn £14.4bn
- RCR £10.2bn £15.4bn £23.0bn
Provisions as a % of REIL
- RBS 62% 64% 65%
- RBS excluding RCR 55% 55% 59%
- RCR 70% 71% 68%
REIL as a % of gross customer loans
- RBS 5.4% 6.8% 9.0%
- RBS excluding RCR 3.0% 3.3% 3.8%
- RCR 68% 70% 68%
Note:
(1) Excludes reverse repurchase agreements and includes disposals groups.
Analysis of results
Risk elements in lending (REIL) and loan impairment provisions
Quarter ended 31 March 2015
REIL Impairment provisions (1)
RBS RBS
excl. RCR RCR Total excl. RCR RCR Total
£m £m £m £m £m £m
At beginning of period 12,819 15,400 28,219 7,094 10,946 18,040
Currency translation and other adjustments (257) (593) (850) (142) (407) (549)
Additions 805 372 1,177
Transfers between REIL and potential problem loans (52) - (52)
Transfer to performing book (144) (16) (160)
Repayments and disposals (761) (1,733) (2,494)
Amounts written-off (357) (3,205) (3,562) (357) (3,205) (3,562)
Recoveries of amounts previously written-off 80 11 91
Release to the income statement from continuing operations (68) (160) (228)
Charge to the income statement from discontinued operations 38 - 38
Unwind of discount (2) (30) (15) (45)
At end of period 12,053 10,225 22,278 6,615 7,170 13,785
Notes:
(1) Includes provisions relating to loans and advances to banks of £38 million.
(2) Recognised in interest income.
Key points
Q1 2015 compared with Q4 2014
· Net impairment releases decreased by £532 million to £91 million at Q1 2015. Releases were recorded across most core businesses, notably in CIB (£44 million), and in RCR (£109 million) and included releases of latent provisions totalling £253 million compared with £51 million in Q4 2014.
· REIL decreased by £5.9 billion, primarily in RCR, reflecting the completion of a sizeable loan portfolio sale. This loan sale also contributed to the £3.3 billion reduction in gross commercial real estate (CRE) lending to £40.0 billion.
· The £84 million increase in securities losses, included in impairments, related to a small number of single name exposures, predominantly an exposure in the RBS N.V. liquidity portfolio.
Q1 2015 compared with Q1 2014
· Net impairment releases totalled £91 million compared with a net impairment loss of £362 million in Q1 2014. Releases including latent provision releases of £253 million compared with a loss of £78 million in Q1 2014, were recorded across most core segments, notably in CIB (£44 million), and in RCR (£109 million).
Analysis of results
Loans and related credit metrics: Loans, REIL, provisions and impairments
The table below analyses gross loans and advances to banks and customers (excluding reverse repos) and related credit
metrics by sector and geography (by location of lending office).
Credit metrics
31 March 2015 REIL as a Provisions Provisions Impairment
Gross % of gross as a % as a % of losses/ Amounts
loans REIL Provisions loans of REIL gross loans (releases) written-off
£m £m £m % % % £m £m
Central and local government 9,725 17 9 0.2 53 0.1 8 -
Finance 44,326 316 207 0.7 66 0.5 (5) 15
Personal - mortgages 150,200 5,239 1,402 3.5 27 0.9 15 60
- unsecured 31,042 1,790 1,506 5.8 84 4.9 102 187
Property 47,810 8,922 5,916 18.7 66 12.4 (115) 2,568
Construction 5,464 637 426 11.7 67 7.8 (32) 140
of which: CRE 40,040 9,056 5,985 22.6 66 14.9 (135) 2,581
Manufacturing 22,360 377 262 1.7 69 1.2 - 49
Finance leases (1) 13,991 147 102 1.1 69 0.7 (2) 6
Retail, wholesale and repairs 18,116 761 501 4.2 66 2.8 (5) 117
Transport and storage 13,547 1,146 536 8.5 47 4.0 66 44
Health, education and leisure 15,743 608 291 3.9 48 1.8 (2) 66
Hotels and restaurants 7,918 855 475 10.8 56 6.0 16 91
Utilities 5,704 106 48 1.9 45 0.8 (14) 19
Other 27,954 1,318 1,017 4.7 77 3.6 31 200
Latent - - 1,049 - - - (253) n/a
Customers 413,900 22,239 13,747 5.4 62 3.3 (190) 3,562
Geographic regional analysis
UK
- residential mortgages 114,015 1,326 187 1.2 14 0.2 10 10
- personal lending 15,329 1,523 1,360 9.9 89 8.9 55 155
- property 36,248 4,757 2,770 13.1 58 7.6 (53) 834
- construction 4,166 441 257 10.6 58 6.2 (60) 44
- other 120,227 3,219 2,254 2.7 70 1.9 (89) 137
Europe
- residential mortgages 14,455 2,909 1,058 20.1 36 7.3 (18) 11
- personal lending 1,377 61 61 4.4 100 4.4 2 -
- property 5,184 4,073 3,097 78.6 76 59.7 (52) 1,733
- construction 803 188 162 23.4 86 20.2 27 96
- other 16,735 2,040 1,747 12.2 86 10.4 (38) 442
US
- residential mortgages 21,730 1,004 157 4.6 16 0.7 23 39
- personal lending 12,371 189 68 1.5 36 0.5 45 32
- property 5,703 67 24 1.2 36 0.4 (9) 1
- construction 438 2 2 0.5 100 0.5 1 -
- other 32,891 204 369 0.6 181 1.1 (22) 4
RoW
- personal lending 1,965 17 17 0.9 100 0.9 - -
- property 675 25 25 3.7 100 3.7 (1) -
- construction 57 6 5 10.5 83 8.8 - -
- other 9,531 188 127 2.0 68 1.3 (11) 24
Customers 413,900 22,239 13,747 5.4 62 3.3 (190) 3,562
Banks 29,328 39 38 0.1 97 0.1 - -
Note:
(1) Includes instalment credit.
Analysis of results
Capital and leverage ratios
End-point CRR basis (1) PRA transitional basis
31 March 31 December 31 March 31 December
2015 2014 2015 2014
Risk asset ratios % % % %
CET1 11.5 11.2 11.5 11.1
Tier 1 11.5 11.2 13.3 13.2
Total 14.0 13.7 17.0 17.1
Capital £m £m £m £m
Tangible equity 44,242 44,368 44,242 44,368
Expected loss less impairment provisions (1,512) (1,491) (1,512) (1,491)
Prudential valuation adjustment (393) (384) (393) (384)
Deferred tax assets (1,140) (1,222) (1,140) (1,222)
Own credit adjustments 609 500 609 500
Pension fund assets (245) (238) (245) (238)
Other deductions (1,436) (1,614) (1,414) (1,884)
Total deductions (4,117) (4,449) (4,095) (4,719)
CET1 capital 40,125 39,919 40,147 39,649
AT1 capital - - 6,206 7,468
Tier 1 capital 40,125 39,919 46,353 47,117
Tier 2 capital 8,689 8,717 12,970 13,626
Total regulatory capital 48,814 48,636 59,323 60,743
Risk-weighted assets
Credit risk
- non-counterparty 263,000 264,700 263,000 264,700
- counterparty 31,200 30,400 31,200 30,400
Market risk 22,800 24,000 22,800 24,000
Operational risk 31,600 36,800 31,600 36,800
Total RWAs 348,600 355,900 348,600 355,900
Leverage (2)
Derivatives 391,100 354,000
Loans and advances 429,400 419,600
Reverse repos 69,900 64,700
Other assets 214,200 212,500
Total assets 1,104,600 1,050,800
Derivatives
- netting (379,200) (330,900)
- potential future exposures 96,000 98,800
Securities financing transactions gross up 20,200 25,000
Undrawn commitments 94,900 96,400
Regulatory deductions and other adjustments (3) 900 (600)
Leverage exposure 937,400 939,500
Leverage ratio % 4.3 4.2
Notes:
(1) Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for the end-point CRR basis with the exception of unrealised gains on AFS securities which has been included from 2015 for the PRA transitional basis.
(2) Based on end-point CRR Tier 1 capital and revised 2014 Basel III leverage ratio framework.
(3) The change in regulatory adjustments was driven by the increase in disallowable settlement balances.
Analysis of results
Key points
Q1 2015 compared with Q4 2014
· The end-point CRR CET1 ratio improved to 11.5% from 11.2%, reflecting a reduction in RWAs.
· CET1 capital has improved by £0.2 billion in the quarter. The current period loss has been offset by a reduction in other intangibles and deferred tax deductions.
· The leverage ratio improved by 10 basis points to 4.3% reflecting both increased CET1 capital and reduced leverage exposure driven by higher derivatives netting offsetting higher funded assets.
· RWAs have decreased by £7.3 billion in the quarter principally due to the annual recalculation of the operational risk charge resulting in a decrease of £5.2 billion, reductions in non-modelled market risk of £1.2 billion and disposals, partially offset by the effect of foreign currency movements in credit risk and counterparty risk RWAs.
· RCR RWAs reduced by £4.8 billion principally reflecting disposals and write-offs and repayments of £3.2 billion, £1.6 billion of risk parameter and other changes, including £0.6 billion due to counterparties moving into default.
· CIB RWAs decreased by £4.3 billion due to portfolio reduction of £3.2 billion, partly offset by the impact of credit risk model changes of £1 billion and foreign exchange movements of £0.7 billion. The operational risk recalculation resulted in a further decrease of £3.3 billion.
· The increase of £3.6 billion in Citizens Financial Group RWAs related primarily to the appreciation of the dollar against sterling.
· Ulster Bank's RWAs decreased by £1.4 billion is due to the euro weakening against sterling in the quarter of £1.2 billion and the operational risk recalculation decrease.
Segment performance
Quarter ended 31 March 2015
PBB CPB CIB
Ulster Commercial Private Central Total
UK PBB Bank Total Banking Banking Total items (1) CFG RCR RBS
£m £m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,143 133 1,276 546 128 674 202 62 553 (11) 2,756
Non-interest income 309 57 366 276 86 362 602 (130) 244 131 1,575
Total income 1,452 190 1,642 822 214 1,036 804 (68) 797 120 4,331
Direct expenses
- staff costs (216) (60) (276) (129) (76) (205) (180) (583) (289) (25) (1,558)
- other costs (70) (17) (87) (54) (12) (66) (78) (786) (207) (6) (1,230)
Indirect expenses (460) (63) (523) (225) (98) (323) (540) 1,403 - (17) -
Restructuring costs
- direct - - - - - - (16) (431) (6) - (453)
- indirect (30) 1 (29) (1) 1 - (275) 304 - - -
Litigation and conduct costs (354) - (354) - (2) (2) (500) - - - (856)
Operating expenses (1,130) (139) (1,269) (409) (187) (596) (1,589) (93) (502) (48) (4,097)
Profit/(loss) before impairment losses 322 51 373 413 27 440 (785) (161) 295 72 234
Impairment releases/(losses) 26 - 26 (1) 1 - 44 (50) (38) 109 91
Operating profit/(loss) 348 51 399 412 28 440 (741) (211) 257 181 325
Additional information
Operating expenses - adjusted (£m) (2) (746) (140) (886) (408) (186) (594) (798) 34 (496) (48) (2,788)
Operating profit/(loss) - adjusted (£m) (2) 732 50 782 413 29 442 50 (84) 263 181 1,634
Return on equity (3) 15.4% 6.2% 12.3% 11.9% 4.4% 10.9% (17.1%) nm 7.2% nm (4.1%)
Return on equity - adjusted (2,3) 34.3% 6.1% 25.2% 11.9% 4.6% 11.0% (0.4%) nm 7.4% nm 5.6%
Cost:income ratio 78% 73% 77% 50% 87% 58% 198% nm 63% nm 95%
Cost:income ratio - adjusted (2) 51% 74% 54% 50% 87% 57% 99% nm 62% nm 64%
Funded assets (£bn) 134.6 26.5 161.1 93.3 17.8 111.1 248.4 90.6 91.3 11.1 713.6
Total assets (£bn) 134.6 26.6 161.2 93.3 17.9 111.2 623.8 93.8 91.8 22.8 1,104.6
Risk-weighted assets (RWAs) (£bn) 42.6 22.4 65.0 65.5 10.2 75.7 102.8 15.9 72.0 17.2 348.6
RWA equivalent (£bn) (4) 46.4 21.5 67.9 71.0 10.2 81.2 105.1 16.2 72.2 21.7 364.3
Net loans and advances to customers (£bn) 127.4 20.5 147.9 88.8 14.0 102.8 76.7 1.4 63.4 8.0 400.2
Risk elements in lending (£bn) 3.6 4.4 8.0 2.4 0.1 2.5 0.2 - 1.4 10.2 22.3
Impairment provisions (£bn) (2.4) (2.5) (4.9) (0.9) (0.1) (1.0) (0.1) - (0.6) (7.2) (13.8)
Customer deposits (£bn) 148.0 19.2 167.2 99.0 29.6 128.6 58.4 1.5 65.8 1.1 422.6
Employee numbers (FTEs - thousands) 24.2 4.3 28.5 6.2 2.8 9.0 3.5 50.1 17.5 0.6 109.2
For the notes to this table refer to page 18. nm = not meaningful
Segment performance
Quarter ended 31 December 2014
PBB CPB CIB
Ulster Commercial Private Central Total
UK PBB Bank Total Banking Banking Total items (1) CFG RCR RBS
£m £m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,209 150 1,359 521 175 696 222 128 533 (23) 2,915
Non-interest income 323 54 377 310 92 402 469 (374) 233 (162) 945
Total income 1,532 204 1,736 831 267 1,098 691 (246) 766 (185) 3,860
Direct expenses
- staff costs (220) (65) (285) (118) (75) (193) (63) (610) (263) (41) (1,455)
- other costs (82) (19) (101) (73) (21) (94) (100) (1,094) (258) (29) (1,676)
Indirect expenses (564) (78) (642) (284) (132) (416) (659) 1,742 - (25) -
Restructuring costs
- direct (2) - (2) - (6) (6) (49) (485) (21) - (563)
- indirect (16) 4 (12) (13) (2) (15) (39) 69 - (3) -
Litigation and conduct costs (650) 19 (631) (62) (90) (152) (382) 1 - - (1,164)
Operating expenses (1,534) (139) (1,673) (550) (326) (876) (1,292) (377) (542) (98) (4,858)
(Loss)/profit before impairment losses (2) 65 63 281 (59) 222 (601) (623) 224 (283) (998)
Impairment (losses)/releases (41) 104 63 (33) - (33) (42) 1 (47) 681 623
Operating (loss)/profit (43) 169 126 248 (59) 189 (643) (622) 177 398 (375)
Additional information
Operating expenses - adjusted (£m) (2) (866) (162) (1,028) (475) (228) (703) (822) 38 (521) (95) (3,131)
Operating profit/(loss) - adjusted (£m) (2) 625 146 771 323 39 362 (173) (207) 198 401 1,352
Return on equity (3) (3.5%) 20.2% 3.3% 6.8% (12.9%) 4.0% (13.8%) nm 5.3% nm (49.6%)
Return on equity - adjusted (2,3) 29.6% 17.5% 25.1% 9.2% 6.2% 8.8% (4.8%) nm 5.9% nm (37.3%)
Cost:income ratio 100% 68% 96% 66% 122% 80% 187% nm 71% nm 126%
Cost:income ratio - adjusted (2) 57% 79% 59% 57% 85% 64% 119% nm 68% nm 81%
Funded assets (£bn) 134.3 27.5 161.8 89.4 20.4 109.8 241.1 84.7 84.5 14.9 696.8
Total assets (£bn) 134.3 27.6 161.9 89.4 20.5 109.9 577.2 87.9 84.9 29.0 1,050.8
Risk-weighted assets (£bn) 42.8 23.8 66.6 64.0 11.5 75.5 107.1 16.3 68.4 22.0 355.9
RWA equivalent (£bn) (4) 46.6 22.3 68.9 69.8 11.5 81.3 108.9 16.6 68.6 27.3 371.6
Net loans and advances to customers (£bn) 127.2 22.0 149.2 85.1 16.5 101.6 72.8 0.6 59.6 11.0 394.8
Risk elements in lending (£bn) 3.8 4.8 8.6 2.5 0.2 2.7 0.2 - 1.3 15.4 28.2
Impairment provisions (£bn) (2.6) (2.7) (5.3) (1.0) (0.1) (1.1) (0.2) - (0.5) (10.9) (18.0)
Customer deposits (£bn) 148.7 20.6 169.3 86.8 36.1 122.9 59.4 1.5 60.6 1.2 414.9
Employee numbers (FTEs - thousands) 24.1 4.4 28.5 6.2 3.3 9.5 3.7 48.9 17.4 0.7 108.7
For the notes to this table refer to page 18. nm = not meaningful
Segment performance
Quarter ended 31 March 2014
PBB CPB CIB
Ulster Commercial Private Central Total
UK PBB Bank Total Banking Banking Total items (1) CFG RCR RBS
£m £m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,124 154 1,278 488 170 658 179 103 488 (8) 2,698
Non-interest income 339 47 386 282 103 385 1,172 102 229 81 2,355
Total income 1,463 201 1,664 770 273 1,043 1,351 205 717 73 5,053
Direct expenses (224) (63) (287) (133) (76) (209) (270) (592) (251) (38) (1,647)
- other costs (127) (17) (144) (62) (15) (77) (110) (1,034) (249) (18) (1,632)
Indirect expenses (524) (63) (587) (213) (108) (321) (593) 1,524 - (23) -
Restructuring costs
- direct - - - - - - (13)
- More to follow, for following part double click ID:nRSd7782LcRecent news on Natwest
See all newsREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Natwest Markets PLC - Publication of Final Terms
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - NatWest Group plc - Holdings in Company - MFS
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
Announcement