REG - Royal Bk Scot.Grp. - 1st Quarter Results <Origin Href="QuoteRef">RBS.L</Origin> - Part 3
28/04/2017 07:11
- Part 3: For the preceding part double click ID:nRSb6230Db
2017 2016 2016
Impairment losses/(releases) by segment £m £m £m
UK PBB
Personal advances 28 38 6
Mortgages (18) (39) 4
Business banking 2 (3) -
Cards 20 20 6
Total 32 16 16
Ulster Bank RoI
Mortgages (14) (30) 1
Commercial real estate
- investment 2 (1) (5)
- development (3) (1) (2)
Other lending (9) (15) (7)
Total (24) (47) (13)
Commercial Banking
Commercial real estate 2 8 (2)
Asset and invoice finance 16 21 3
Private sector services (education, health etc) (2) 7 1
Banks & financial institutions 1 - -
Wholesale and retail trade repairs 7 6 3
Hotels and restaurants 3 7 -
Manufacturing 2 1 1
Construction - 13 1
Other 32 20 7
Total 61 83 14
Private Banking 3 (8) 2
RBS International 7 (1) 2
Capital Resolution (45) (130) 196
Williams & Glyn (1)
Retail 8 7 5
Commercial 3 4 1
Total 11 11 6
Central items 1 1 -
Total RBS 46 (75) 223
31 March 31 December 31 March
2017 2016 2016
Analysis of Capital Resolution RWAs by portfolio £bn £bn £bn
Portfolio and GTS 2.8 3.2 8.5
Shipping 2.4 2.8 4.2
Markets 14.0 15.8 22.4
Alawwal Bank 7.8 7.9 7.3
Other 1.7 2.0 2.4
Total credit and market risk RWAs 28.7 31.7 44.8
Operational risk 1.8 2.8 2.8
Total RWAs 30.5 34.5 47.6
Note:
(1) Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented Williams & Glyn has not operated as a separate legal entity.
Segment performance
31 March 31 December 31 March
2017 2016 2016
Loans and advances to customers (gross) by segment (1) £bn £bn £bn
UK PBB
Personal advances 6.1 6.0 6.0
Mortgages 120.6 117.1 108.0
Business banking 6.6 6.4 5.5
Cards 3.7 3.9 3.9
Total 137.0 133.4 123.4
Ulster Bank RoI
Mortgages 15.0 15.3 14.8
Commercial real estate
- investment 0.8 0.7 1.0
- development 0.2 0.2 0.6
- other lending 4.1 3.9 4.2
Total 20.1 20.1 20.6
Commercial Banking
Commercial real estate 17.1 16.9 17.5
Asset and invoice finance 14.2 14.1 14.4
Private sector services (education, health etc) 6.8 6.9 7.0
Banks & financial institutions 8.9 8.9 7.4
Wholesale and retail trade repairs 8.3 8.4 8.3
Hotels and restaurants 3.9 3.7 3.5
Manufacturing 6.3 6.6 6.4
Construction 2.2 2.1 2.2
Other 32.8 33.3 30.8
Total 100.5 100.9 97.5
Private Banking
Personal advances 2.2 2.3 2.6
Mortgages 7.4 7.0 6.8
Other 2.9 2.9 2.2
Total 12.5 12.2 11.6
RBS International
Corporate 6.3 6.2 5.4
Mortgages 2.6 2.6 2.6
Total 8.9 8.8 8.0
Capital Resolution 13.0 13.6 23.4
Williams & Glyn (2)
Retail 12.3 12.3 11.7
Commercial 8.5 8.5 8.7
Total 20.8 20.8 20.4
Central items 0.1 0.3 1.8
Balance sheet
NatWest Markets
Loans and advances to customer (excluding reverse repos) 17.9 17.4 18.6
Loans and advances to banks (excluding reverse repos) (3) 4.9 3.3 5.2
Reverse repos 40.8 38.6 40.4
Securities 25.4 22.0 29.5
Cash and eligible bills 15.0 13.4 12.2
Other 9.9 6.2 10.1
Total funded assets 113.9 100.9 116.0
Notes:
(1) Excludes reverse repurchase agreements and includes disposal groups.
(2) Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented Williams & Glyn has not operated as a separate legal entity.
(3) Excludes disposal groups.
Segment performance
UK Personal & Business Banking
● Operating profit was £494 million compared with £509 million in Q1 2016 with income growth of £102 million, or 8.0%, more than offset by a £16 million increase in impairments and a £109 million higher restructuring charge. Return on equity of 24.8%
compared with 26.1% in Q1 2016. Adjusted operating profit of £629 million was £98 million, or 18.5%, higher than Q1 2016.
● UK PBB continued to deliver support for both personal and business customers with net loans and advances of £135.8 billion up £14.0 billion, or 11.5%, compared with Q1 2016 driven by continued strong growth across key product areas. Gross new mortgage
lending in the quarter of £7.8 billion was 10% higher than Q1 2016 with market share of new mortgages at approximately 13% supporting growth in stock share to approximately 9.0% at 31 March 2017, up from 8.8% at 31 December 2016 and 8.3% at 31 March 2016.
Positive momentum continued across business banking lending with balances up 4.7%, excluding transfers of £0.9 billion as at 31 March 2017, compared with Q1 2016. Margins across asset products were stable with Q4 2016, although we have seen more aggressive
new business pricing in the quarter from competitors.
● Customer deposits increased by £9.4 billion, or 6.9%, to £146.3 billion compared with Q1 2016 largely driven by personal current account balance growth of 12.1%. Continued strong balance growth in Q1 2017 has offset lower hedge income in personal current
accounts.
● We continue to see higher customer retention and deepening relationships from our Reward Account proposition with overall current account attrition 14% lower than Q1 2016. The Reward Account is being re-positioned from 26 June 2017 with a reduced monthly
fee and cashback reduced to 2% from the current 3% level.
● The number of active mobile users has increased by over 4% to 4.3 million since Q4 2016. Our mobile app won Best Banking App at the British Bank Awards, helping maintain strong customer advocacy for our growing number of mobile customers. Total branch
service transactions have reduced by 10% since Q1 2016. In recognition of this customer behaviour shift we have announced the closure of approximately 250 branches over 2017, from 1,315 at the end of 2016. However, we continue to invest in our network and
enhance our digital capabilities for our customers.
● Total income of £1,377 million was £102 million, or 8.0%, higher than Q1 2016. Net interest income increased by £92 million, or 9.0%, principally reflecting strong volume growth and savings re-pricing benefits partially offset by a decline in current
account hedge returns and lower mortgage margins. Non-interest income increased by £10 million, or 3.9%, compared with Q1 2016 primarily due to a £7 million debt sale profit. Compared with Q4 2016, non-interest income increased by £20 million due to an
annual home insurance profit share of £20 million.
● Net interest margin increased by 7 basis points to 3.01% compared with Q4 2016 driven by the full effect of savings re-pricing in November 2016. Mortgage book margins were broadly stable as were the level of average SVR balances from Q4 2016 to Q1 2017 at
around 11% of total mortgage balances.
● Adjusted expenses of £716 million were £12 million, or 1.6%, lower than Q1 2016, with direct costs £17 million, or 7.0%, down due to a 15.0% reduction in FTEs driving reduced staff costs, partially offset by increased technology infrastructure investment
costs. Adjusted cost:income ratio decreased from 57.1% to 52.0%. Compared with Q4 2016, adjusted expenses reduced by £61 million reflecting a £35 million intangible asset write down and a £34 million bank levy charge in Q4 2016, partially offset by higher
technology infrastructure investment in ATM and cash deposit machines and branch refurbishment costs.
● Restructuring costs of £131 million were £109 million higher than Q1 2016 largely due to a £92 million charge for property exits as we rationalise our back office property location strategy and branch distribution network.
● The net impairment charge of £32 million, 9 basis points of gross customer loans, continued to reflect benign credit conditions. Defaults in Q1 2017 continue to remain at very low levels across all portfolios.
● RWAs were £2.0 billion, or 5.8%, lower than Q1 2016 with lending growth more than offset by asset mix benefits from lower card balances and improved credit quality, reflecting the continued benign credit conditions.
Segment performance
Ulster Bank RoI
● An operating profit of E32 million for the quarter compared with E78 million in Q1 2016. The decrease in operating profit primarily reflects the non recurrence of asset disposal benefits in Q1 2016 (E28 million), reduced income on free funds (E14 million)
and an increase in restructuring costs in Q1 2017(E31 million) associated with recent announcements to invest in and transform key segments of the business. Adjusted operating profit of E72 million was E10 million, or 12.2%, lower than Q1 2016. Adjusted
return on equity of 9.3% compared with 9.2% in Q1 2016.
● Ulster Bank RoI added a further E0.2 billion of gross new mortgage lending in the quarter, up 25% compared with Q1 2016. The low yielding tracker mortgage portfolio declined by E0.9 billion to E10.8 billion.
● Customer deposits increased E2.1 billion, or 12.1%, compared with Q1 2016 largely driven by an increase in commercial customer funding. The loan:deposit ratio reduced by 17 percentage points to 114%.
● A non-recurring profit of E28 million relating to asset disposals was recognised in Q1 2016, of which E14 million was reported in income.
● Total income of E168 million was E37 million, or 18.0%, lower than Q1 2016. Excluding the E14 million asset disposal gain, income decreased by E23 million primarily due to reduced income on free funds and a E3 million interim adjustment to the pricing of
FX transactions between Ulster Bank RoI and NatWest Markets, pending completion of a detailed pricing review.
● Compared with Q4 2016 total income increased E12 million, or 7.7%, primarily due to income recognised on a cohort of non performing loans in Q1 2017 which contributed to a 15 basis point increase in net interest margin to 1.74%.
● Adjusted operating expenses of E125 million were E11 million, or 8.1%, lower than Q1 2016, largely reflecting progress in the delivery of cost saving initiatives and one off accrual releases of E8 million in Q1 2017, partially offset by a E4 million
reduction in costs recharged to other business segments. Adjusted cost:income ratio increased from 67.1% to 74.0%. Restructuring costs of E39 million were E31 million higher than Q1 2016 reflecting recent announcements to invest in and restructure the
bank, including the closure of 22 branches.
● Adjusted operating expenses were E44 million lower than Q4 2016 largely driven by intangible asset write-offs and a reduction in costs recharged to other business segments in Q4 2016, in addition to business driven savings and a one off accrual release in
Q1 2017.
● Risk elements in lending reduced by E1.7 billion or 29.8% to E4.0 billion compared with Q1 2016, and benefited from the sale of a portfolio of loans in 2016. As at end Q1 2017, REIL were 17.0% of gross customer loans.
● RWAs of E20.8 billion reduced by E4.9 billion, or 19.1%, compared with Q1 2016 driven by the sale of a portfolio of non-performing loans, combined with adjustments to the mortgage modelling approach and an improvement in the macro economic environment.
RWAs on the tracker mortgage portfolio reduced by E2.5 billion, or 25.3%, compared with Q1 2016 to E7.5 billion.
Segment performance
Commercial Banking
● Operating profit of £254 million compared with £401 million in Q1 2016. Adjusted operating profit of £356 million was £47 million, or 11.7%, lower than Q1 2016, principally reflecting an increased number of specific impairment losses taken in the quarter. An adjusted return on equity of 8.9% compared with 11.2% in Q1 2016.
● Net loans and advances increased by £3.3 billion, or 3.4%, compared with Q1 2016 reflecting increased borrowing across sectors. Compared with Q4 2016, net loans and advances decreased by £0.4 billion as reductions in exposures with weak returns have been partially offset by growth in some segments.
● Total income of £865 million was £12 million, or 1.4%, higher than Q1 2016 principally reflecting higher asset volumes. Net interest margin fell by 12 basis points from Q1 2016 to 1.76% driven by asset margin pressure in a competitive market and lower rate environment. Compared with Q4 2016, net interest margin increased by 8 basis points due to the active re-pricing of the deposit book and asset pricing actions on new lending.
● Adjusted operating expenses increased by £12 million, or 2.8%, compared with Q1 2016, reflecting the non recurrence of one off releases in Q1 2016, with underlying cost reductions of £11 million driven by a 10.0% reduction in front office headcount. Adjusted cost:income ratio was 49.7% compared with 49.0% in Q1 2016.
● Net impairment losses of £61 million, 24 basis points of gross customer loans, were £47 million higher than Q1 2016 with four specific impairment charges totalling £47 million in the quarter.
● RWAs were £77.8 billion, an increase of £2.1 billion compared to Q1 2016, reflecting asset growth partially offset by reduced RWA intensity. Compared with Q4 2016, RWAs reduced by £0.7 billion reflecting planned reductions in exposures with weak returns, partially offset by moderate growth in some segments.
Private Banking
● Operating profit of £33 million was £23 million higher than Q1 2016 principally reflecting lower operating expenses. An adjusted return on equity of 8.6% compared with 5.1% in Q1 2016.
● Total income of £160 million decreased by £5 million, or 3.0%, compared with Q1 2016 as the benefit of increased asset volumes has been more than offset by reduced net interest margin, down 22 basis points to 2.58% primarily reflecting the competitive market and low rate environment.
● Adjusted operating expenses were £24 million, or 17.5%, lower than Q1 2016 at £113 million principally reflecting management actions to reduce operational costs. Adjusted cost:income ratio of 70.6% compared with 83.0% in Q1 2016.
● Net loans and advances increased by £0.9 billion, or 7.8%, to £12.5 billion compared with Q1 2016 driven by mortgages. Assets under management of £17.8 billion were £3.8 billion higher compared with Q1 2016 reflecting underlying growth in net new assets and positive market returns. In addition, investment cash balances were included in assets under management for the first time in Q3 2016. Excluding this, growth was £2.6 billion.
RBS International
● Operating profit of £45 million was £7 million, or 13.5%, lower than Q1 2016 driven by higher operating expenses, partially offset by increased income. An adjusted return on equity of 13.0% compared with 16.3% in Q1 2016.
● Total income increased by £8 million, or 8.9%, to £98 million compared with Q1 2016 reflecting higher asset volumes. Net interest margin was broadly stable on Q1 2016 at 1.41% as asset and liability margin pressures have been offset by mitigating pricing actions.
● Adjusted operating expenses were £8 million, or 22.9%, higher than Q1 2016 at £43 million principally reflecting increased regulatory and remediation costs (a combined £5 million). Adjusted cost:income ratio of 43.9% compared with 38.9% in Q1 2016.
● Net loans and advances to customers increased by £0.9 billion, or 11.3%, to £8.9 billion compared with Q1 2016 principally reflecting balance draw-downs in the funds sector lending portfolio and foreign exchange movements.
● Customer deposits increased by £3.7 billion, or 17.1%, to £25.3 billion principally reflecting the transfer in of the Luxembourg branch from Capital Resolution in Q2 2016 and foreign exchange movements.
Segment performance
NatWest Markets
● An operating profit of £68 million compared with an operating loss of £20 million in Q1 2016. Adjusted operating profit of £187 million compared with an adjusted operating loss of £54 million in Q1 2016, with the improvement principally reflecting an increase in adjusted income. This generated an adjusted return on equity of 7.9% for the quarter.
● Adjusted income increased by £231 million, or 83.4%, to £508 million. The increase reflected a consistent level of customer activity and an improved trading environment compared to a particularly difficult Q1 2016, notably in Rates. Total income, which includes own credit adjustments, increased by £147 million, or 43.1%, to £488 million compared with £341 million in Q1 2016.
● Total expenses increased by £59 million, or 16.3%, principally reflecting an increase in restructuring costs. Adjusted operating expenses of £321 million were £10 million, or 3.0%, lower than Q1 2016, and £17 million lower than Q4 2016 driven by non-repeat of the annual bank levy charge of £13 million.
● Funded assets decreased by £2.1 billion to £113.9 billion compared with Q1 2016. Compared with Q4 2016, funded assets increased by £13.0 billion in the quarter following the seasonally low levels of activity at the end of 2016.
● RWAs decreased by £2.0 billion compared with Q1 2016 to £34.1 billion principally due to business movements, partially offset by an increase due to the weakening of sterling.
Capital Resolution
● RWAs reduced by £4.0 billion in the quarter to £30.5 billion primarily reflecting disposal activity and updates to operational risk.
● An operating loss of £175 million compared with a £301 million loss in Q1 2016. Total income losses of £59 million compared with income of £153 million in Q1 2016, reflecting a £115 million decrease in own credit adjustments and increased disposal losses, up £48 million to £50 million.
● Adjusted expenses of £69 million reduced by £163 million, or 70.3%, compared with Q1 2016, principally reflecting the impact of a 791 reduction in headcount to 254 FTEs by the end Q1 2017.
● A net impairment release of £45 million was recorded in the quarter, compared with a net impairment loss of £196 million in Q1 2016 which was driven by a shipping portfolio charge of £226 million.
● RWAs have fallen by £17.1 billion to £30.5 billion from Q1 2016, primarily due to run-off and loan portfolio disposals. Funded assets have reduced by £21.0 billion to £29.2 billion for the same period.
Williams & Glyn
● Operating profit of £111 million was £30 million, or 37.0%, higher than Q1 2016 due to a £13 million, or 16.9%, reduction in direct expenses and a £20 million restructuring charge incurred in Q1 2016.
● Total income was broadly stable at £206 million compared with Q1 2016. Net interest income was £3 million, or 1.9%, higher driven by retail deposits, largely offset by a £2 million, or 4.7%, reduction in non-interest income.
● Operating expenses of £84 million were £34 million, or 28.8%, lower than Q1 2016 driven by reduced staff and restructuring costs. Direct expenses were £13 million, or 16.9%, lower driven by a substantial reduction in FTEs, down over 1,000 compared with Q1 2016.
● A net impairment loss of £11 million compared with £6 million in Q1 2016, and reflects the continued benign credit conditions.
● Net loans and advances increased by £0.5 billion, or 2.5%, to £20.6 billion compared with Q1 2016 driven by a £0.3 billion increase in mortgage balances.
● Customer deposits were broadly stable at £24.0 billion compared with Q1 2016.
Central items & other
● Central items not allocated represent a charge of £144 million in the quarter compared with a charge of £372 million in Q1 2016. Treasury funding costs were a charge of £52 million, compared with a charge of £286 million in Q1 2016, and included a £52
million foreign exchange loss (Q1 2016 - £52 million gain) and a £18 million charge for volatile items under IFRS (Q1 2016 - £356 million charge). Restructuring costs of £145 million included a £73 million net settlement charge related to the RBS
Netherlands pension scheme. These were partially offset by a £51 million VAT recovery recognised in the quarter.
Selected statutory financial statements
Condensed consolidated income statement for the period ended 31 March 2017
Quarter ended
31 March 31 December 31 March
2017 2016 2016
£m £m £m
Interest receivable 2,732 2,770 2,845
Interest payable (498) (562) (689)
Net interest income (1) 2,234 2,208 2,156
Fees and commissions receivable 822 821 866
Fees and commissions payable (217) (213) (212)
Income from trading activities 399 590 38
Gain on redemption of own debt 2 1 -
Other operating income (28) (191) 216
Non-interest income 978 1,008 908
Total income 3,212 3,216 3,064
Staff costs (1,315) (1,142) (1,323)
Premises and equipment (377) (382) (324)
Other administrative expenses (419) (5,511) (575)
Depreciation and amortisation (342) (249) (178)
Write down of intangible assets - (70) (20)
Operating expenses (2,453) (7,354) (2,420)
Profit/(loss) before impairment (losses)/releases 759 (4,138) 644
Impairment (losses)/releases (46) 75 (223)
Operating profit/(loss) before tax 713 (4,063) 421
Tax charge (327) (244) (80)
Profit/(loss) for the period 386 (4,307) 341
Attributable to:
Non-controlling interests 11 (27) 22
Preference share and other dividends 116 161 94
Dividend access share - - 1,193
Ordinary shareholders 259 (4,441) (968)
386 (4,307) 341
Earnings/(loss) per ordinary share (EPS)
Basic and diluted EPS from continuing and discontinued operations (2) 2.2p (37.7p) (8.3p)
Basic and diluted EPS from continuing operations (2) 2.2p (37.7p) (8.3p)
Notes:
(1) Negative interest on loans and advances is classed as interest payable. Negative interest on customer deposits classed as interest receivable. Q1 2016 has been re-presented accordingly.
(2) There is no dilutive impact in any period.
Selected statutory financial statements
Condensed consolidated statement of comprehensive income for the period ended 31 March 2017
Quarter ended
31 March 31 December 31 March
2017 2016 2016
£m £m £m
Profit/(loss) for the period 386 (4,307) 341
Items that do not qualify for reclassification
Loss on remeasurement of retirement benefit schemes (21) (2) (529)
Loss on fair value of credit in financial liabilities designated at fair value
through profit or loss due to own credit risk (20) - -
Tax (16) 3 143
(57) 1 (386)
Items that do qualify for reclassification
Available-for-sale financial assets 60 68 (8)
Cash flow hedges (189) (750) 946
Currency translation (6) (13) 582
Tax 33 191 (238)
(102) (504) 1,282
Other comprehensive (loss)/income after tax (159) (503) 896
Total comprehensive income/(loss) for the period 227 (4,810) 1,237
Total comprehensive income/(loss) is attributable to:
Non-controlling interests 10 (36) 72
Preference shareholders 40 68 56
Paid-in equity holders 76 93 38
Dividend access share - - 1,193
Ordinary shareholders 101 (4,935) (122)
227 (4,810) 1,237
Selected statutory financial statements
Condensed consolidated balance sheet as at 31 March 2017
31 March 31 December
2017 2016
£m £m
Assets
Cash and balances at central banks 83,160 74,250
Net loans and advances to banks 20,513 17,278
Reverse repurchase agreements and stock borrowing 18,200 12,860
Loans and advances to banks 38,713 30,138
Net loans and advances to customers 326,733 323,023
Reverse repurchase agreements and stock borrowing 27,251 28,927
Loans and advances to customers 353,984 351,950
Debt securities 76,656 72,522
Equity shares 691 703
Settlement balances 9,128 5,526
Derivatives 204,052 246,981
Intangible assets 6,464 6,480
Property, plant and equipment 4,996 4,590
Deferred tax 1,697 1,803
Prepayments, accrued income and other assets 3,642 3,700
Assets of disposal groups 92 13
Total assets 783,275 798,656
Liabilities
Bank deposits 40,276 33,317
Repurchase agreements and stock lending 5,988 5,239
Deposits by banks 46,264 38,556
Customer deposits 351,498 353,872
Repurchase agreements and stock lending 38,978 27,096
Customer accounts 390,476 380,968
Debt securities in issue 28,163 27,245
Settlement balances 9,210 3,645
Short positions 28,519 22,077
Derivatives 196,224 236,475
Provisions for liabilities and charges 11,619 12,836
Accruals and other liabilities 6,938 6,991
Retirement benefit liabilities 186 363
Deferred tax 637 662
Subordinated liabilities 15,514 19,419
Liabilities of disposal groups 14 15
Total liabilities 733,764 749,252
Equity
Non-controlling interests 805 795
Owners' equity*
Called up share capital 11,843 11,823
Reserves 36,863 36,786
Total equity 49,511 49,404
Total liabilities and equity 783,275 798,656
*Owners' equity attributable to:
Ordinary shareholders 41,650 41,462
Other equity owners 7,056 7,147
48,706 48,609
The parent company distributable reserves at 31 March 2017 were £7.9 billion (31 December 2016 - £8.0 billion).
Selected statutory financial statements
Condensed consolidated statement of changes in equity for the period ended 31 March 2017
Share
capital and Total Non
statutory Paid-in Retained Other owners' controlling Total
reserves equity earnings reserves* equity interests equity
£m £m £m £m £m £m £m
At 1 January 2017 41,926 4,582 (12,936) 15,037 48,609 795 49,404
Profit attributable to ordinary shareholders
and other equity owners - - 375 - 375 11 386
Other comprehensive income
- changes in fair value of credit in financial
liabilities designated at fair value through profit
or loss due to own credit risk - - (20) - (20) - (20)
- other amounts recognised in equity - - (21) 128 107 (1) 106
- amounts transferred from equity to profit or loss - - - (289) (289) - (289)
- recycled to profit or loss on disposal
of businesses (1) - - - 27 27 - 27
- tax - - (16) 33 17 - 17
Preference share and other dividends paid - - (116) - (116) - (116)
Shares and securities issued during the period 69 - (4) - 65 - 65
Reclassification of paid-in equity (2) - (91) - - (91) - (91)
Share-based payments - gross - - (38) - (38) - (38)
Movement in own shares held 60 - - - 60 - 60
At 31 March 2017 42,055 4,491 (12,776) 14,936 48,706 805 49,511
31 March
2017
Total equity is attributable to: £m
Non-controlling interests 805
Preference shareholders 2,565
Paid-in equity holders 4,491
Ordinary shareholders 41,650
49,511
*Other reserves consist of:
Merger reserve 10,881
Available-for-sale reserve 287
Cash flow hedging reserve 888
Foreign exchange reserve 2,880
14,936
Notes:
(1) No tax impact.
(2) Paid-in equity reclassified to liabilities as a result of the call of RBS Capital Trust D in March 2017.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with RBS's 2016 Annual Report and Accounts
which was prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted
by the European Union (EU) (together IFRS).
Accounting policies
Ahead of adopting IFRS 9 Financial Instruments from 1 January 2018 RBS has adopted the provisions in respect of the
presentation of gains and losses on financial liabilities designated as at fair value through profit or loss from 1 January
2017. Accordingly, a loss of £20 million has been reported in the Consolidated Statement of Other Comprehensive Income
instead of in the Consolidated Income Statement. Comparatives have not been restated, however, in Q1 2016 a gain of £108
million was included in the Consolidated Income Statement. Own credit adjustments on financial liabilities held for trading
will continue to be recognised in the Consolidated Income Statement, a loss of £29 million was reported in Q1 2017 (Q1 2016
- gain of £148 million).
Apart from the above RBS's principal accounting policies are as set out on pages 297 to 306 of the 2016 Annual Report and
Accounts. Other amendments to IFRS effective for 2017 have not had a material effect on RBS's Q1 2017 results.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of RBS's financial condition
are those relating to goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of
financial instruments. These critical accounting policies and judgements are described on pages 306 to 308 of RBS's 2016
Annual Report and Accounts.
Going concern
Having reviewed RBS's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that
RBS will continue in operational existence for the foreseeable future. Accordingly, the results for the period ended 31
March 2017 have been prepared on a going concern basis.
2. Provisions for liabilities and charges
Payment Other Residential Litigation
protection customer mortgage and other
insurance redress (1) backed securities regulatory Other Total
£m £m £m £m £m £m
At 1 January 2017 1,253 1,105 6,752 1,918 1,808 12,836
Currency translation and other movements - (1) (114) (13) 10 (118)
Charge to income statement - - - 32 204 236
Releases to income statement - (2) - (3) (39) (44)
Provisions utilised (78) (99) - (950) (164) (1,291)
At 31 March 2017 1,175 1,003 6,638 984 1,819 11,619
Note:
(1) Closing provision predominantly relates to investment advice, packaged accounts (including costs) and tracker mortgages.
There are uncertainties as to the eventual cost of redress in relation to certain of the provisions contained in the table
above. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the
amount provided. RBS will continue to monitor the position closely and refresh the underlying assumptions.
3. Litigation, investigations and reviews
RBS's 2016 Annual Report and Accounts issued on 24 February 2017 included comprehensive disclosures about RBS's litigation,
investigations and reviews in Note 31. Set out below are the material developments in these matters since the 2016 Annual
Report & Accounts were published. RBS generally does not disclose information about the establishment or existence of a
provision for a particular matter where disclosure of the information can be expected to prejudice seriously RBS's position
in the matter.
Notes
3. Litigation, investigations and reviews (continued)
Litigation
RMBS-related litigation in the US
RBS is in discussions with the US Federal Housing Finance Agency (FHFA) in relation to its primary lawsuit (which is
described in the 2016 Annual Report & Accounts) but there can be no assurance as to whether such discussions will continue
or result in a settlement. As it has previously stated, RBS reiterates that in connection with its RMBS litigation matters
and RMBS investigations taken as a whole, further substantial provisions and costs may be recognised and, depending upon
the final outcomes, other adverse consequences may occur.
UK 2008 rights issue shareholder litigation
In December 2016 RBS concluded full and final settlements with four of the five shareholder groups representing 78% of
- More to follow, for following part double click ID:nRSb6230DdRecent news on Natwest
See all newsREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Stock Exch Notice - Admission to Trading - 18/12/2025
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - NatWest Group plc - Transaction in Own Shares
AnnouncementREG - Natwest Markets PLC - Publication of Final Terms
Announcement