REG - Royal Bk Scot.Grp. - Final Results <Origin Href="QuoteRef">RBS.L</Origin> - Part 5
23/02/2018 07:06
- Part 5: For the preceding part double click ID:nRSW7507Fd
1,950 7,757
Notes:
(1) To reflect the increased volume of complaints following the FCA's introduction of an August 2019 PPI timebar as outlined in FCA announcement CP17/3 and the introduction of new Plevin (unfair commission) complaint handling rules, RBS increased its provision for PPI by £175m in 2017.
(2) The Group recognised a £750 million provision in 2016 as a consequence of the announcement that HM Treasury is seeking a revised package of remedies that would conclude its remaining State Aid commitments. An additional charge of £50 million was taken in Q2 2017 following further revisions to the package, taking the total provision to £800 million.
(3) Q3 2017 utilisation includes the $4.75 billion payment made following the settlement reached between RBS and the Federal Housing Finance Agency in relation to RBS's issuance and underwriting of RMBS in the US.
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.
Notes
4. Material developments in litigation, investigations and reviews
RBS and certain members of the Group are party to legal proceedings and the subject of investigation and other regulatory
and governmental action ("Matters") in the United Kingdom (UK), the United States (US), the European Union (EU) and other
jurisdictions. Note 31 in the RBS 2017 Annual Report and Accounts, issued on 23 February 2018 and available at
rbs.com/results ("Note 31"), discusses the Matters in which RBS is currently involved and developments to those matters.
Other than the Matters discussed in Note 31, no member of the Group is or has been involved in governmental, legal, or
regulatory proceedings (including those which are pending or threatened) that are expected to be material, individually or
in aggregate. Recent developments in the Matters identified in Note 31 that have occurred since the Q3 2017 results were
issued on 27 October 2017, include, but are not limited to, those set out below.
Litigation
Interest rate hedging products litigation
As previously disclosed, RBS is dealing with a large number of active litigation claims in relation to the sale of interest
rate hedging products (IRHPs). In general claimants allege that the relevant interest rate hedging products were mis-sold
to them, with some also alleging RBS made misrepresentations in relation to LIBOR. Property Alliance Group (PAG) v The
Royal Bank of Scotland plc was the leading case before the English High Court involving both IRHP mis-selling and LIBOR
misconduct allegations. The amount claimed was £34.8 million and the trial ended in October 2016. In December 2016, the
court dismissed all of PAG's claims. PAG appealed that decision, and the appeal hearing closed on 8 February 2018. The
judgment is awaited. The decision (subject to the appeal by PAG) may have significance to other similar LIBOR-related cases
currently pending in the English courts, some of which involve substantial amounts.
The case of London Bridge Holdings Ltd and others v RBS plc remains stayed pending the outcome of the PAG appeal. The sum
claimed in that case is £446.7 million.
As previously disclosed, In addition to claims alleging that IRHPs were mis-sold, RBS has received a number of claims
involving allegations that it breached a legal duty of care in its conduct of the FCA redress programme. These claims have
been brought by customers who are dissatisfied with redress offers made to them through the FCA redress programme. The
claims followed a preliminary decision against another UK bank. RBS has since been successful in opposing an application by
a customer to amend its pleadings to include similar claims against RBS, on the basis that the bank does not owe a legal
duty of care to customers in carrying out the FCA review. An appeal of that decision was dismissed in July 2017 and
permission to further appeal was refused by the UK Supreme Court in December 2017.
Investigations and reviews
RMBS and other securitised products investigations
As previously disclosed and as noted in Note 31 in the 2017 RBS Annual Report and Accounts, in the US, RBS is involved in
reviews, investigations and proceedings by federal and state governmental law enforcement and other agencies and
self-regulatory organisations, including, among others, ongoing active investigations by the US Department of Justice and
several state attorneys general relating primarily to due diligence on and disclosure related to loans purchased for, or
otherwise included in, securitisations and related disclosures.
As at 31 December 2017, the total aggregate of provisions in relation to certain of the RMBS investigations and RMBS
litigation matters (set out under "Litigation, investigations and reviews" in Note 31) was £3.2 billion (US$4.4 billion).
RBS continues to cooperate with the DOJ and with certain state attorneys general in their investigations of RMBS matters.
The duration, timing for resolution and outcome of these investigations and RMBS litigation matters remain uncertain,
including in respect of whether settlements for all or any of such matters may be reached. Further substantial provisions
and costs may be recognised and, depending on the final outcome, other adverse consequences may occur as described above
and in the Risk Factor relating to legal, regulatory and governmental actions and investigations set out on page 372 of the
Annual Report and Accounts.
In December 2017, RBS Financial Products Inc. agreed to pay US$125 million to settle the RMBS investigation of the
California Attorney General. Payment has been made from a previously established provision. RBS is in advanced discussions
with the New York Attorney General to resolve its investigation, although there is no certainty that any settlement will be
reached.
Notes
4. Material developments in litigation, investigations and reviews continued
FCA review of RBS's treatment of SMEs
As previously disclosed, the FCA is conducting a review into the treatment of small and medium enterprise (SME) customers
in RBS's former Global Restructuring Group (GRG) between 2008 and 2013.
The FCA published its final summary of the Skilled Person's report on 28 November 2017. The UK House of Commons Treasury
Select Committee, seeking to rely on Parliamentary powers, published the full version of the Skilled Person's report on 20
February 2018.
FCA investigation into RBS plc's compliance with the Money Laundering Regulations 2007
As previously disclosed, on 21 July 2017, the FCA notified RBS that it was undertaking an investigation into RBS plc's
compliance with the Money Laundering Regulations 2007 in relation to certain customers. Following amendment to the scope of
the investigation, there are currently three areas under review: (1) compliance with Money Laundering Regulations in
respect of Money Service Business customers; (2) compliance with the Terrorism Act 2000 in relation to sanctions screening;
and (3) the Suspicious Transactions regime in relation to the events surrounding a particular customer. The investigations
in all three areas are assessing both criminal and civil culpability. RBS is cooperating with the investigations.
UK retail banking
On 19 December 2017, the UK Competition & Markets Authority (CMA) published directions for RBS and other four other banks,
which set out revised implementation dates for the delivery of certain obligations relating to open banking under the
Retail Banking Market Investigation Order 2017. On 29 January 2018 the CMA published separate directions for RBS, which set
out revised implementation dates for the delivery of certain obligations requiring personal current account overdraft
alerts to be sent to customers under the Order.
Notes
5. Related party transactions
UK Government
The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant
influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arm's length
basis.
Bank of England facilities
In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of
England.
The Group's other transactions with the UK Government include the payment of taxes, principally UK corporation tax and
value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the
bank levy and FSCS levies).
Interests in associates
Transactions with associates have given rise to the following:
2017 2016
£m £m
Loans and advances 130 156
Customer deposits 111 64
Total income 28 30
Operating expenses 23 8
Other related parties
(a) In their roles as providers of finance, Group companies provide development and other types of capital support to
businesses. These investments are made in the normal course of business and on arm's length terms. In some instances, the
investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these
investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24.
(b) The Group recharges The Royal Bank of Scotland Group Pension Fund with the cost of administration services incurred by
it. The amounts involved are not material to the Group.
Full details of the Group's related party transactions for the year ended 31 December 2017 are included in the 2017 Annual
Report and Accounts.
6. Post balance sheet events
Other than matters disclosed, there have been no further significant events between 31 December 2017 and the date of
approval of this announcement.
Statement of directors' responsibilities
The responsibility statement below has been prepared in connection with the Group's full Annual Report and Accounts for the
year ended 31 December 2017.
We, the directors listed below, confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and
fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in
the consolidation taken as a whole; and
· the Strategic Report and Directors' report (incorporating the Business review) include a fair review of the
development and performance of the business and the position of the company and the undertakings included in the
consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Howard Davies Ross McEwan Ewen Stevenson
Chairman Chief Executive Chief Financial Officer
22 February 2018
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies Ross McEwanEwen Stevenson Frank Dangeard Alison Davis Morten Friis Robert Gillespie John HughesPenny Hughes Yasmin JethaBrendan Nelson Sheila Noakes Mike Rogers Mark Seligman Dr Lena Wilson
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 franchise; 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 Promoter 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 2017 Annual Report and other risk factors and 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 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 Brexit and from the outcome of general elections in the UK and changes in
government policies; 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 restructuring and transformation programme, particularly the proposed further restructuring of the NatWest Markets
franchise, 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 dependence of the Group's operations on its IT systems; the exposure of RBS to cyber-attacks
and its ability to defend against such attacks; RBS's ability to achieve its capital, funding, liquidity 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 and transformation initiatives being concurrently implemented; the potential negative impact on RBS's
business of global economic and financial market conditions and other global risks, including risks arising out of
geopolitical events and political developments; 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 (including by competition authorities) 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, including on any
requisite management buffer; 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 application of
stabilisation or resolution powers in significant stress situations; contribution to relevant compensation schemes; the
execution of the run-down and/or sale of certain portfolios and assets; 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.
Presentation of information
In this document, 'RBSG plc' or the 'parent company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the
'Group' refers to RBSG plc and its subsidiaries.
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2016 have been filed with the
Registrar of Companies and those for the year ended 31 December 2017 will be filed with the Registrar of Companies
following the company's Annual General Meeting. The report of the auditor on those statutory accounts was unqualified, did
not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the
Act.
The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed
consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow
statement and related notes presented on pages 33 to 44 inclusive are presented on a statutory basis as described in Note
1.
Key operating indicators
As described in Note 1 on 4 40, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which
constitutes a body of generally accepted accounting principles (GAAP). This document contains a number of adjusted or
alternative performance measures, also known as non-GAAP financial measures. These measures exclude certain items which
management believe are not representative of the underlying performance of the business and which distort period-on-period
comparison. These measures include:
● 'Adjusted' measures of financial performance, principally operating performance before: own credit adjustments; gain or loss on redemption of own debt; strategic disposals; restructuring costs and litigation and conduct costs;
● Performance, funding and credit metrics such as 'return on tangible equity', 'adjusted return on tangible equity' and related RWA equivalents incorporating the effect of capital deductions (RWAes), total assets excluding derivatives (funded assets), net interest margin (NIM) adjusted for items designated at fair value through profit or loss (non-statutory NIM), cost:income ratio, loan:deposit ratio and REIL/impairment provision ratios. These are internal metrics used to measure business performance;
● Personal & Business Banking (PBB) franchise results, combining the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI, Commercial & Private Banking (CPB) franchise results, combining the reportable segments of Commercial Banking and Private Banking and 'core businesses' results combining PBB, CPB, RBS International (RBSI) and NatWest Markets results which are presented to provide investors with a summary of the Group's business performance; and
● Cost savings progress and 2017 target calculated using operating expenses excluding litigation and conduct costs, restructuring costs and the VAT recoveries.
Presentation of operating performance from Q1 2018
As previously indicated, and reflecting the progress RBS has made in resolving its legacy issues and becoming a simpler
bank, from Q1 2018 financial performance and key performance indicators will no longer be reported on an 'adjusted' basis.
We will continue to provide detail of notable items on memorandum lines where they materially distort comparisons with
prior periods.
Segmental reorganisation and business transfers
RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders. To
support this, and in preparation for the UK ring-fencing regime, the previously reported operating segments were realigned
in Q4 2017 and a number of business transfers completed.
Segmental reorganisation
The previously reported operating segments are now realigned and comparatives have been re-presented as follows:
· The former Williams & Glyn reportable operating segment has been integrated into the UK PBB reportable segment;
· The former Capital Resolution reportable operating segment has been integrated into the NatWest Markets reportable
segment, with the exception of the costs in relation to the RMBS claims, which have been transferred to the Central items &
other reportable segment;
· The RBSI reportable operating segment is no longer presented within the CPB franchise.
Business transfers
Unless otherwise stated on 1 October 2017 the following changes were made to RBS's businesses, which impacts its financial
reporting but where comparatives have not been re-presented:
· Shipping and other activities, which were formerly in the Capital Resolution reportable operating segment, were
transferred from the NatWest Markets reportable operating segment to the Commercial Banking reportable operating segment.
· UK PBB Collective Investment Funds (CIFL) business was transferred to the Private Banking reportable operating
segment in order to better serve customers.
· The RBS International (RBSI) reportable operating segment was aligned to the legal entity The Royal Bank of Scotland
International (Holdings) Limited. This predominantly involved transfers from the Private Banking reportable operating
segment, and Services and Functions within Central items & other in preparation for the implementation of the UK
ring-fencing regime.
· Commercial Banking whole business securitisations and relevant financial institutions (RFI) were transferred to
NatWest Markets during December 2017. RFIs are prohibited from being within the ring-fence due to their nature and exposure
to global financial markets. The move is in preparation for the implementation of the UK ring-fencing regime.
Presentation of information
Segmental reorganisation and business transfers continued
Reportable operating segments
Following the changes above the reportable operating segments are as follows, for full business descriptions see page 110
of the Report of the directors and Note 37 in the 2017 Annual Report and Accounts:
Franchise Reportable operating segment
Personal & Business Banking (PBB) UK Personal & Business Banking (UK PBB)
Ulster Bank RoI
Commercial & Private Banking (CPB) Commercial Banking
Private Banking
Other reportable segments RBS International (RBSI)
NatWest Markets
Central items & other
Contacts
Analyst enquiries: Matt Waymark Investor Relations +44 (0) 207 672 1758
Media enquiries: RBS Press Office +44 (0) 131 523 4205
Analyst and investor presentation Fixed Income Web cast and dial in details
Date: Friday 23 February 2018 Friday 23 February 2018 www.rbs.com/results
Time: 9:30 am UK time 1:30 pm UK time International - +44 (0) 20 3009 5755
Conference ID: 3294479 8735879 UK Free Call - 0800 279 6637US Local Dial-In, New York - 1 646 517 5063
Available on www.rbs.com/results
● Announcement and slides
● Annual Report and Accounts 2017
● A financial supplement containing income statement, balance sheet and segment performance for the nine quarters ended 31 December 2017
● Pillar 3 Report 2017
● IFRS 9 Transition Report
Appendix
Segmental income statement reconciliations
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS Natwest items & Total
UK PBB Bank RoI Banking Banking International Markets other RBS
Year ended 31 December 2017 £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 6,477 604 3,484 678 389 1,050 451 13,133
Own credit adjustments - 3 - - - 66 - 69
Loss on redemption of own debt - - - - - - 7 7
Strategic disposals - - - - - (26) (321) (347)
Total income - adjusted 6,477 607 3,484 678 389 1,090 137 12,862
Operating expenses - statutory (3,829) (676) (2,014) (529) (219) (2,201) (933) (10,401)
Restructuring costs - direct 79 27 48 20 5 319 1,067 1,565
- indirect 382 29 119 25 4 117 (676) -
Litigation and conduct costs 210 169 33 39 8 237 589 1,285
Operating expenses - adjusted (3,158) (451) (1,814) (445) (202) (1,528) 47 (7,551)
Impairment (losses)/releases (235) (60) (362) (6) (3) 174 (1) (493)
Operating profit/(loss) - statutory 2,413 (132) 1,108 143 167 (977) (483) 2,239
Operating profit/(loss) - adjusted 3,084 96 1,308 227 184 (264) 183 4,818
Additional information
Return on equity (1) 23.7% (5.0%) 6.6% 6.4% 11.2% (9.0%) nm 2.2%
Return on equity - adjusted (1,2) 30.7% 3.6% 8.2% 11.3% 12.6% (3.7%) nm 8.8%
Cost:income ratio (3) 59.1% 111.9% 56.0% 78.0% 56.3% nm nm 79.0%
Cost:income ratio - adjusted (2,3) 48.8% 74.3% 50.0% 65.6% 51.9% 140.2% nm 58.2%
Year ended 31 December 2016
Income statement
Total income - statutory 6,127 576 3,415 657 374 1,212 229 12,590
Own credit adjustments - (3) - - - (187) 10 (180)
Loss on redemption of own debt - - - - - - 126 126
Strategic disposals - - - - - 81 (245) (164)
Total income - adjusted 6,127 573 3,415 657 374 1,106 120 12,372
Operating expenses - statutory (4,276) (669) (2,467) (549) (174) (2,824) (5,235) (16,194)
Restructuring costs - direct 46 38 25 7 2 75 1,913 2,106
- indirect 198 2 83 30 3 115 (431) -
Litigation and conduct costs 634 172 423 1 - 550 4,088 5,868
Operating expenses - adjusted (3,398) (457) (1,936) (511) (169) (2,084) 335 (8,220)
Impairment (losses)/releases (125) 113 (206) 3 (10) (253) - (478)
Operating profit/(loss) - statutory 1,726 20 742 111 190 (1,865) (5,006) (4,082)
Operating profit/(loss) - adjusted 2,604 229 1,273 149 195 (1,231) 455 3,674
Additional information
Return on equity (1) 16.2% 0.7% 4.1% 5.6% 13.8% (12.5%) nm (17.9%)
Return on equity - adjusted (1,2) 25.1% 8.4% 8.4% 7.8% 14.2% (8.7%) nm 1.6%
Cost:income ratio (3) 69.8% 116.1% 71.0% 83.6% 46.5% nm nm 129.0%
Cost:income ratio - adjusted (2,3) 55.5% 79.8% 54.8% 77.8% 45.2% 188.4% nm 66.0%
For notes refer to page 3 of this appendix.
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest items & Total
UK PBB Bank RoI Banking Banking International Markets other RBS
Quarter ended 31 December 2017 £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 1,548 161 806 191 97 200 54 3,057
Own credit adjustments - - - - - (9) - (9)
Strategic disposals - - - - - (26) (165) (191)
Total income - adjusted 1,548 161 806 191 97 165 (111) 2,857
Operating expenses - statutory (1,266) (254) (575) (194) (66) (583) (468) (3,406)
Restructuring costs - direct 55 2 6 19 3 129 317 531
- indirect 198 2 23 9 - 13 (245) -
Litigation and conduct costs 197 135 27 39 - 51 315 764
Operating expenses - adjusted (816) (115) (519) (127) (63) (390) (81) (2,111)
Impairment (losses)/releases (60) (81) (117) (2) - 26 - (234)
Operating profit/(loss) - statutory 222 (174) 114 (5) 31 (357) (414) (583)
Operating profit/(loss) - adjusted 672 (35) 170 62 34 (199) (192) 512
Additional information
Return on equity (1) 7.8% (26.5%) 1.3% (2.9%) 9.2% (14.0%) nm (6.7%)
Return on equity - adjusted (1,2) 26.2% (5.3%) 3.1% 12.1% 10.4% (8.7%) nm 4.0%
Cost:income ratio (3) 81.8% 157.8% 70.0% 101.6% 68.0% nm nm 111.5%
Cost:income ratio - adjusted (2,3) 52.7% 71.4% 62.8% 66.5% 64.9% nm nm 73.6%
Quarter ended 30 September 2017
Income statement
Total income - statutory 1,757 150 928 166 97 20 39 3,157
Own credit adjustments - - - - - 5 - 5
Total income - adjusted 1,757 150 928 166 97 25 39 3,162
Operating expenses - statutory (819) (129) (443) (103) (59) (526) (64) (2,143)
Restructuring costs - direct 1 1 2 1 2 29 208 244
- indirect 47 8 19 2 - 28 (104) -
Litigation and conduct costs - 1 2 - 8 102 12 125
Operating expenses - adjusted (771) (119) (420) (100) (49) (367) 52 (1,774)
Impairment (losses)/releases (78) 10 (151) 3 2 71 - (143)
Operating profit/(loss) - statutory 860 31 334 66 40 (435) (25) 871
Operating profit/(loss) - adjusted 908 41 357 69 50 (271) 91 1,245
Additional information
Return on equity (1) 34.2% 4.6% 8.6% 13.2% 10.4% (15.4%) nm 4.5%
Return on equity - adjusted (1,2) 36.2% 6.1% 9.3% 13.8% 13.6% (10.3%) nm 8.2%
Cost:income ratio (3) 46.6% 86.0% 45.7% 62.0% 60.8% nm nm 67.5%
Cost:income ratio - adjusted (2,3) 43.9% 79.3% 43.1% 60.2% 50.5% nm nm 55.6%
For notes refer to next page.
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest items & Total
UK PBB Bank RoI Banking Banking International Markets other RBS
Quarter ended 31 December 2016 £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 1,556 137 867 161 96 (8) 407 3,216
Own credit adjustments - - - - - 37 77 114
Gain on redemption of own debt - - - - - - (1) (1)
Total income - adjusted 1,556 137 867 161 96 29 483 3,329
Operating expenses - statutory (1,139) (226) (1,009) (159) (64) (1,149) (3,608) (7,354)
Restructuring costs - direct 1 6 12 6 1 24 957 1,007
- indirect 50 (2) 34 8 1 30 (121) -
Litigation and conduct costs 214 77 407 (1) 1 581 2,849 4,128
Operating expenses - adjusted (874) (145) (556) (146) (61) (514) 77 (2,219)
Impairment (losses)/releases (27) 47 (83) 8 1 130 (1) 75
Operating profit/(loss) - statutory 390 (42) (225) 10 33 (1,027) (3,202) (4,063)
Operating profit/(loss) - adjusted 655 39 228 23 36 (355) 559 1,185
Additional information
Return on equity (1) 15.1% (5.8%) (9.1%) 1.6% 8.8% (27.0%) nm (48.2%)
Return on equity - adjusted (1,2) 26.2% 5.4% 5.3% 4.5% 9.8% (10.3%) nm 8.6%
Cost income ratio (3) 73.2% 165.0% 117.1% 98.8% 66.7% nm nm 230.2%
Cost income ratio - adjusted (2,3) 56.2% 105.8% 62.6% 90.7% 63.5% nm nm 66.3%
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), 16% (RBS International - 12% prior to November 2017) 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, (loss)/gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
(3) Operating lease depreciation included in income (year ended 31 December 2017 - £142 million; year ended December 2016 - £152 million; Q4 2017 - £35 million; Q3 2017 - £35 million; Q4 2016 - £37 million).
Legal Entity Identifier: 2138005O9XJIJN4JPN90
This information is provided by RNS
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