REG - Royal Bk Scot.Grp. - 1st Quarter Results <Origin Href="QuoteRef">RBS.L</Origin> - Part 4
28/04/2017 07:06
- Part 4: For the preceding part double click ID:nRSb6230Dc
the
claims by value. Further, RBS has recently concluded a full and final settlement, without any admission of liability, with
shareholders representing around 40% by value of the remaining claimant group. As part of this further settlement, RBS has
made available an additional sum in respect of the costs incurred by the remaining group of claimants since December 2016,
subject to claim validation. RBS has now reached a resolution with shareholders representing 87% of the original claims by
value in the litigation. Should the remaining group's claim not be settled with all claimants, the court timetable provides
that a trial of the preliminary issue of whether the rights issue prospectus contained untrue and misleading statements
and/or improper omissions will commence on 22 May 2017.
London Interbank Offered Rate (LIBOR)
As previously disclosed, certain members of the Group have been named as defendants in US class actions relating to alleged
manipulation of various interest rate benchmarks, each of which is pending in the United States District Court for the
Southern District of New York. On 10 March 2017, the court in the action relating primarily to over-the-counter derivatives
allegedly linked to JPY LIBOR and Euroyen TIBOR dismissed the case on the ground that the plaintiffs lack standing. The
plaintiffs are seeking to amend their complaint in an attempt to address the deficiencies identified by the court in its
dismissal order.
FX antitrust litigation
As previously disclosed, RBS plc is a defendant in an FX-related antitrust class action pending in the United States
District Court for the Southern District of New York, on behalf of an alleged class of "consumers and end-user businesses."
On 24 March 2017, the court granted a motion to dismiss the complaint in this matter on the ground that the purported class
lacks standing to pursue antitrust claims.
Claim by the US Federal Deposit Insurance Corporation
On 10 March 2017, the US Federal Deposit Insurance Corporation (FDIC), on behalf of 39 failed US banks, issued a claim in
the High Court of Justice of England and Wales against RBS, other LIBOR panel banks and the British Bankers' Association,
alleging collusion with respect to the setting of USD LIBOR. The action alleges that the defendants breached English and
European competition law as well as asserting common law claims of fraud under US law. The FDIC previously asserted many of
the same USD LIBOR-related claims against RBS and others in a lawsuit pending in the United States District Court for the
Southern District of New York, though most of the claims in that case have been dismissed as a result of a series of
rulings by that court.
Investigations and reviews
Payment Protection Insurance (PPI)
On 2 March 2017, the FCA published Policy Statement 17/3 containing its final rules and guidance on PPI complaint handling.
The Policy Statement made clear the FCA's intention to implement a two year PPI complaints deadline with effect from 29
August 2017, bringing an end to new PPI complaints in August 2019. New rules for the handling of Plevin complaints will
also come into force on 29 August 2017. The proposals in the Policy Statement are largely as previously anticipated and RBS
does not currently consider that an additional provision will be required.
Recent media coverage indicates that a claims management company may issue judicial review proceedings challenging the
FCA's proposed 2019 deadline.
Notes
3. Litigation, investigations and reviews (continued)
Supervisory investigation in relation to Coutts & Co Ltd
On 11 April 2017, the Hong Kong Monetary Authority (HKMA) announced that its supervisory investigation in relation to the
Hong Kong branch of Coutts & Co Ltd (a member of the Group incorporated in Switzerland) had revealed breaches of local
anti-money laundering requirements for which the HKMA has imposed financial penalties of HKD 7 million.
Regulator requests concerning certain historic Russian transactions
Recent media coverage has highlighted an alleged money laundering scheme involving Russian entities between 2010 and 2014.
Allegedly certain European banks, including RBS and 16 other UK based financial institutions, and certain US banks, were
involved in processing certain transactions associated with this scheme. In common with other banks, RBS is responding to
requests for information from the FCA, PRA and regulators in other jurisdictions.
4. Post balance sheet events
Other than matters disclosed, there have been no further significant events between 31 March 2017 and the date of approval
of this announcement.
Forward-looking statements
Cautionary statement regarding forward-looking statements
Certain sections in this document contain 'forward-looking statements' as that term is defined in the United States Private
Securities Litigation Reform Act of 1995, such as statements that include the words 'expect', 'estimate', 'project',
'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)',
'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions.
In particular, this document includes forward-looking statements relating, but not limited to: future profitability and
performance, including financial performance targets such as return on tangible equity; cost savings and targets, including
cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other
impacts thereof; structural reform and the implementation of the UK ring-fencing regime; the implementation of RBS's
transformation programme, including the further restructuring of the NatWest Markets business; the satisfaction of the
Group's residual EU State Aid obligations; the continuation of RBS's balance sheet reduction programme, including the
reduction of risk-weighted assets (RWAs) and the timing thereof; capital and strategic plans and targets; capital,
liquidity and leverage ratios and requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other regulatory
buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and
credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent
of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges;
future pension contributions; RBS's exposure to political risks, operational risk, conduct risk, cyber and IT risk and
credit rating risk and to various types of market risks, including as interest rate risk, foreign exchange rate risk and
commodity and equity price risk; customer experience including our Net Promotor Score (NPS); employee engagement and gender
balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent
risks, uncertainties and other factors, both external and relating to the Group's strategy or operations, which may result
in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes
expressed or implied by such forward-looking statements. In addition certain of these disclosures are dependent on choices
relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and
estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual
future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not
be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim
any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our
strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the
accuracy of forward-looking statements we describe in this document, including in the risk factors and other uncertainties
set out in the Group's 2016 Annual Report on Form 20-F and other materials filed with, or furnished to, the US Securities
and Exchange Commission, and other uncertainties discussed in this document. These include the significant risks for RBS
presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is or may be
subject to (including active civil and criminal investigations) and any resulting material adverse effect on RBS of
unfavourable outcomes and the timing thereof (including where resolved by settlement); economic, regulatory and political
risks, including as may result from the uncertainty arising from the EU Referendum; RBS's ability to satisfy its residual
EU State Aid obligations and the timing thereof; RBS's ability to successfully implement the significant and complex
restructuring required to be undertaken in order to implement the UK ring-fencing regime and related costs; RBS's ability
to successfully implement the various initiatives that are comprised in its transformation programme, particularly the
proposed further restructuring of the NatWest Markets business, the balance sheet reduction programme and its significant
cost-saving initiatives and whether RBS will be a viable, competitive, customer focused and profitable bank especially
after its restructuring and the implementation of the UK ring-fencing regime; the exposure of RBS to cyber-attacks and its
ability to defend against such attacks; RBS's ability to achieve its capital and leverage requirements or targets which
will depend in part on RBS's success in reducing the size of its business and future profitability as well as developments
which may impact its CET1 capital including additional litigation or conduct costs, additional pension contributions,
further impairments or accounting changes; ineffective management of capital or changes to regulatory requirements relating
to capital adequacy and liquidity or failure to pass mandatory stress tests; RBS's ability to access sufficient sources of
capital, liquidity and funding when required; changes in the credit ratings of RBS, RBS entities or the UK government;
declining revenues resulting from lower customer retention and revenue generation in light of RBS's strategic refocus on
the UK; as well as increasing competition from new incumbents and disruptive technologies.
Forward-looking statements
In addition, there are other risks and uncertainties that could adversely affect our results, ability to implement our
strategy, cause us to fail to meet our targets or the accuracy of forward-looking statements in this document. These
include operational risks that are inherent to RBS's business and will increase as a result of RBS's significant
restructuring initiatives being concurrently implemented; the potential negative impact on RBS's business of global
economic and financial market conditions and other global risks; the impact of a prolonged period of low interest rates or
unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices,
commodity prices, equity prices; basis, volatility and correlation risks; the extent of future write-downs and impairment
charges caused by depressed asset valuations; deteriorations in borrower and counterparty credit quality; heightened
regulatory and governmental scrutiny and the increasingly regulated environment in which RBS operates as well as
divergences in regulatory requirements in the jurisdictions in which RBS operates; the risks relating to RBS's IT systems
or a failure to protect itself and its customers against cyber threats, reputational risks; risks relating to increased
pension liabilities and the impact of pension risk on RBS's capital position; risks relating to the failure to embed and
maintain a robust conduct and risk culture across the organisation or if its risk management framework is ineffective;
RBS's ability to attract and retain qualified personnel; limitations on, or additional requirements imposed on, RBS's
activities as a result of HM Treasury's investment in RBS; the value and effectiveness of any credit protection purchased
by RBS; risks relating to the reliance on valuation, capital and stress test models and any inaccuracies resulting
therefrom or failure to accurately reflect changes in the micro and macroeconomic environment in which RBS operates, risks
relating to changes in applicable accounting policies or rules which may impact the preparation of RBS's financial
statements or adversely impact its capital position; the impact of the recovery and resolution framework and other
prudential rules to which RBS is subject; the recoverability of deferred tax assets by the Group; and the success of RBS in
managing the risks involved in the foregoing.
The forward-looking statements contained in this document speak only as at the date hereof, and RBS does not assume or
undertake any obligation or responsibility to update any forward-looking statement to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable
legislation or an offer to sell or solicit of any offer to buy any securities or financial instruments or any advice or
recommendation with respect to such securities or other financial instruments.
Appendix
Segmental Income statement reconciliations
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest Capital Williams items & Total
UK PBB Bank RoI Banking Banking International Markets Resolution & Glyn other RBS
Quarter ended 31 March 2017 £m £m £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 1,377 145 865 160 98 488 (59) 206 (68) 3,212
Own credit adjustments - 1 - - - 20 7 - 1 29
Gain on redemption of own debt - - - - - - - - (2) (2)
Total income - adjusted 1,377 146 865 160 98 508 (52) 206 (69) 3,239
Operating expenses - statutory (851) (142) (550) (124) (46) (420) (161) (84) (75) (2,453)
Restructuring costs - direct 20 19 39 - - - 70 - 429 577
- indirect 111 15 60 11 3 68 16 - (284) -
Litigation and conduct costs 4 - 3 - - 31 6 - 10 54
Operating expenses - adjusted (716) (108) (448) (113) (43) (321) (69) (84) 80 (1,822)
Impairment (losses)/releases (32) 24 (61) (3) (7) - 45 (11) (1) (46)
Operating profit/(loss) - statutory 494 27 254 33 45 68 (175) 111 (144) 713
Operating profit/(loss) - adjusted 629 62 356 44 48 187 (76) 111 10 1,371
Additional information
Return on equity (1) 24.8% 4.0% 5.7% 6.0% 12.0% 1.7% nm nm nm 3.1%
Return on equity - adjusted (1,2) 32.0% 9.3% 8.9% 8.6% 13.0% 7.9% nm nm nm 9.7%
Cost income ratio (3) 61.8% 97.9% 62.0% 77.5% 46.9% 86.1% nm 40.8% nm 76.1%
Cost income ratio - adjusted (2,3) 52.0% 74.0% 49.7% 70.6% 43.9% 63.2% nm 40.8% nm 55.8%
Quarter ended 31 December 2016
Income statement
Total income - statutory 1,339 137 867 161 96 285 (293) 217 407 3,216
Own credit adjustments - - - - - 29 8 - 77 114
Gain on redemption of own debt - - - - - - - - (1) (1)
Total income - adjusted 1,339 137 867 161 96 314 (285) 217 483 3,329
Operating expenses - statutory (1,042) (226) (1,009) (159) (64) (850) (3,340) (97) (567) (7,354)
Restructuring costs - direct 1 6 12 6 1 3 21 - 957 1,007
- indirect 50 (2) 34 8 1 43 (13) - (121) -
Litigation and conduct costs 214 77 407 (1) 1 466 3,156 - (192) 4,128
Operating expenses - adjusted (777) (145) (556) (146) (61) (338) (176) (97) 77 (2,219)
Impairment (losses)/releases (16) 47 (83) 8 1 - 130 (11) (1) 75
Operating profit/(loss) - statutory 281 (42) (225) 10 33 (565) (3,503) 109 (161) (4,063)
Operating profit/(loss) - adjusted 546 39 228 23 36 (24) (331) 109 559 1,185
Additional information
Return on equity (1) 13.5% (5.8%) (9.1%) 1.6% 8.8% (30.2%) nm nm nm (48.2%)
Return on equity - adjusted (1,2) 27.8% 5.4% 5.3% 4.5% 9.8% (2.7%) nm nm nm 8.6%
Cost income ratio (3) 77.8% 165.0% 117.1% 98.8% 66.7% nm nm 44.7% nm 230.2%
Cost income ratio - adjusted (2,3) 58.0% 105.8% 62.6% 90.7% 63.5% 107.6% nm 44.7% nm 66.3%
For notes to this table refer to page 3
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest Capital Williams items & Total
UK PBB Bank RoI Banking Banking International Markets Resolution & Glyn other RBS
Quarter ended 31 March 2016 £m £m £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 1,275 158 853 165 90 341 153 205 (176) 3,064
Own credit adjustments - (3) - - - (64) (108) - (81) (256)
Strategic disposals - - - - - - 6 - - 6
Total income - adjusted 1,275 155 853 165 90 277 51 205 (257) 2,814
Operating expenses - statutory (750) (110) (438) (153) (36) (361) (258) (118) (196) (2,420)
Restructuring costs - direct 13 6 1 1 - - 7 20 190 238
- indirect 9 - (1) 15 1 12 9 - (45) -
Litigation and conduct costs - - 2 - - 18 10 - 1 31
Operating expenses - adjusted (728) (104) (436) (137) (35) (331) (232) (98) (50) (2,151)
Impairment (losses)/releases (16) 13 (14) (2) (2) - (196) (6) - (223)
Operating profit/(loss) - statutory 509 61 401 10 52 (20) (301) 81 (372) 421
Operating profit/(loss) - adjusted 531 64 403 26 53 (54) (377) 101 (307) 440
Additional information
Return on equity (1) 26.1% 8.8% 11.1% 1.5% 16.0% (2.6%) nm nm nm (9.6%)
Return on equity - adjusted (1,2) 27.3% 9.2% 11.2% 5.1% 16.3% (4.4%) nm nm nm (9.4%)
Cost income ratio (3) 58.8% 69.6% 49.3% 92.7% 40.0% 105.9% nm 57.6% nm 78.7%
Cost income ratio - adjusted (2,3) 57.1% 67.1% 49.0% 83.0% 38.9% 119.5% nm 47.8% nm 76.1%
Notes:
(1) RBS's CET1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by notional
equity allocated at different rates of 14% (Ulster Bank RoI - 11% prior to Q1 2017), 11% (Commercial Banking), 14% (Private Banking - 15% prior to Q1 2017), 12% (RBS International) and 15% for all other segments, of the monthly average of segmental risk
-weighted assets incorporating the effect of capital deductions (RWAes). RBS Return on equity is calculated using profit for the period attributable to ordinary shareholders.
(2) Excluding own credit adjustments, gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
(3) Operating lease depreciation included in income (Q1 2017 - £36 million; Q4 2016 - £37 million and Q1 2016 - £38 million).
Legal Entity Identifier: 2138005O9XJIJN4JPN90
This information is provided by RNS
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