REG - Royal Bk Scot.Grp. - Final Results - Part 1 <Origin Href="QuoteRef">RBS.L</Origin> - Part 6

NatwestAnnouncement

26/02/2015 07:13

- Part 6: For the preceding part double click  ID:nRSZ9135Fe 

with a loss of £2,882 million in 2013. This included litigation and conduct costs of £994 million compared with   
    £2,441 million a year before. The adjusted operating result improved from a loss of £239 million in 2013 to a profit of £397 million in 2014. This movement was primarily 
    driven by substantial reductions in expenses, partially offset by lower income. Net impairment releases totalled £9 million compared with a net impairment charge of £680 
    million in 2013.                                                                                                                                                          
                                                                                                                                                                              
 ·  Total income declined by 21%, reflecting reduced deployment of resources and difficult trading conditions, characterised by subdued levels of client activity and limited 
    market volatility:                                                                                                                                                        
    ○                                                                                                                                                                         Rates suffered from a weak trading performance in Q4 2014. This, combined with subdued client flow and balance sheet de-risking, reduced income.                                                                                                             
    ○                                                                                                                                                                         Currencies income declined in a highly competitive market as both market volatility and client activity remained subdued for much of the year. Some volatility returned in Q4 2014, boosting income in the Options business in particular.                   
    ○                                                                                                                                                                         Credit reduced RWAs by 61% in 2014, including the wind-down of Credit Trading and the US asset- backed products (ABP) business. This impacted income, as did the year on year weakening in corporate investment grade debt capital market issuance in EMEA.  
    ○                                                                                                                                                                         Income from Global Transaction Services dipped by 7%, primarily as a result of the disposal of the Global Travel Money Service business in Q4 2013. The underlying business was stable.                                                                      
    ○                                                                                                                                                                         Run-off and recovery businesses incurred a loss of £103 million.                                                                                                                                                                                             
                                                                                                                                                                              
 ·  Operating expenses fell by £2,360 million driven primarily by lower litigation and conduct costs. Adjusted expenses decreased by £1,006 million, or 22%, reflecting the   
    continued focus on cost savings across both business and support areas.                                                                                                   
                                                                                                                                                                              
 ·  Net impairment releases totalled £9 million compared with a net impairment charge of £680 million in 2013, reflecting a reduction in latent loss provisions and a low     
    level of new impairments. This contrasted with 2013 which included substantial impairments related to the establishment of RCR.                                           
                                                                                                                                                                              
 ·  Funded assets fell by 10% reflecting the focus on core product areas including the wind-down of Credit Trading and the US ABP businesses.                                 
                                                                                                                                                                              
 ·  RWAs were managed down by £40.0 billion from £147.1 billion on 1 January 2014 to £107.1 billion on 31 December 2014. The 27% reduction was driven by a sustained programme 
    of risk and business reductions, notably in Credit due to the wind-down of the US asset-backed products business (down £15 billion over the same period to £4 billion).   
 
 
Corporate & Institutional Banking 
 
Key points (continued) 
 
Q4 2014 compared with Q3 2014 
 
 ·  An operating loss of £643 million, compared with a loss of £557 million in Q3 2014, primarily reflected lower income, higher restructuring and indirect costs, partially offset by lower litigation and conduct costs of £382 million compared with £562 million in Q3 2014. Adjusted operating loss totalled £173 million compared with a profit of £21 million in Q3. RWAs continued to fall, down 13% to £107.1 billion in Q4 2014.  
                                                                                                                                                                                                                                                                                                                                                                                                                                            
 ·  Reduced income, most notably in Rates and Credit, was driven by a weak trading performance as markets reacted to increasing concerns about the Eurozone economy and challenging macroeconomic conditions more broadly. This was partially offset by Currencies, where higher income was driven by increased currency volatility.                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                            
 ·  Operating expenses fell by £108 million, driven by lower litigation and conduct costs and lower staff expenses. This was partially offset by higher restructuring costs and indirect expenses, the latter reflecting the timing of the UK bank levy, which cost £93 million in the quarter.                                                                                                                                             
                                                                                                                                                                                                                                                                                                                                                                                                                                            
 ·  RWAs fell by 13%, driven by risk reduction and specific business initiatives, notably in Credit where the US asset-backed products business is being wound down.                                                                                                                                                                                                                                                                        
 
 
Q4 2014 compared with Q4 2013 
 
 ·  Operating loss declined from £2,667 million in Q4 2013 to £643 million in Q4 2014. The improvement was driven by lower expenses, primarily litigation and conduct costs, and lower impairments, partially offset by reduced income.  
                                                                                                                                                                                                                                         
 ·  Lower income, primarily in Rates and Credit, reflected risk and balance sheet reductions since the end of 2013 and a weak trading performance in Q4 2014.                                                                            
                                                                                                                                                                                                                                         
 ·  Operating expenses fell by £1,994 million, driven by lower litigation and conduct costs. Adjusted expenses declined by £542 million reflecting the continued focus on reducing the cost base.                                        
 
 
Central items 
 
                              Year ended                Quarter ended  
                              31 December  31 December                 31 December  30 September  31 December  
 2014                         2013                      2014           2014         2013          
                              £m           £m                          £m           £m            £m           
                                                                                                               
 Central items not allocated  (850)        647                         (622)        (319)         (61)         
 
 
Funding and operating costs have been allocated to operating segments based on direct service usage, the requirement for
market funding and other appropriate drivers where services span more than one segment. 
 
Residual unallocated items relate to volatile corporate items that do not naturally reside within a division. 
 
Key points 
 
2014 compared with 2013 
 
 ·  Central items not allocated represented a charge of £850 million compared with a credit of £647 million in 2013. The change includes lower gains on the disposal of available-for-sale securities in Treasury, which were down £575 million to £149 million in  
    2014, along with a £309 million higher restructuring charge relating to the Williams & Glyn franchise. In addition 2014 includes a charge of £247 million write-down of previously capitalised software development expenditure and £134 million lower income   
    from investments in associates. In addition, unallocated Treasury funding costs, including volatile items under IFRS, were £437 million in the year versus £282 million in 2013.                                                                                
 
 
Q4 2014 compared with Q3 2014 
 
 ·  Central items not allocated represented a charge of £622 million in Q4 2014 compared with a charge of £319 million in Q3 2014. Q4 included a £247 million software write-down. In addition, unallocated Treasury funding costs, including volatile items under IFRS, were £323 million in the quarter versus £111 million in Q3 2014. The previous quarter also included £72 million of available-for-sale disposal losses.  
 
 
Q4 2014 compared with Q4 2013 
 
 ·  Central items not allocated represented a charge of £622 million in Q4 2014 compared with a charge of £61 million in Q4 2013. This reflected the software write off, higher restructuring charges relating to the Williams & Glyn franchise and lower gains on the disposal of available-for-sale securities in Treasury, which were down £108 million to £6 million in Q4 2014.  
 
 
Citizens Financial Group (£ Sterling) 
 
                                    Year ended                Quarter ended  
                                    31 December  31 December                 31 December  30 September  31 December  
 2014                               2013                      2014           2014         2013          
                                    £m           £m                          £m           £m            £m           
                                                                                                                     
 Income statement                                                                                                    
 Net interest income                2,013        1,892                       533          493           468          
                                                                                                                     
 Net fees and commissions           709          761                         185          174           182          
 Other non-interest income          359          312                         48           41            58           
                                                                                                                     
 Non-interest income                1,068        1,073                       233          215           240          
                                                                                                                     
 Total income                       3,081        2,965                       766          708           708          
                                                                                                                     
 Direct expenses                                                                                                     
 - staff costs                      (1,030)      (1,091)                     (263)        (255)         (249)        
 - other costs                      (990)        (986)                       (258)        (231)         (251)        
 Indirect expenses                  -            (111)                       -            -             (31)         
 Restructuring costs                (103)        (16)                        (21)         (13)          (11)         
                                                                                                                     
 Operating expenses                 (2,123)      (2,204)                     (542)        (499)         (542)        
                                                                                                                     
 Profit before impairment losses    958          761                         224          209           166          
 Impairment losses                  (197)        (156)                       (47)         (46)          (46)         
                                                                                                                     
 Operating profit                   761          605                         177          163           120          
                                                                                                                     
 Operating expenses - adjusted (1)  (2,020)      (2,188)                     (521)        (486)         (531)        
                                                                                                                     
 Operating profit - adjusted (1)    864          621                         198          176           131          
                                                                                                                     
 Average exchange rate - US$/£      1.647        1.565                       1.582        1.669         1.619        
 
 
Note: 
 
 (1)  Excluding restructuring costs.  
 
 
                                                                                                                                 
 Key metrics                                    Year ended                Quarter ended  
                                                31 December  31 December                 31 December  30 September  31 December  
 2014                                           2013                      2014           2014         2013          
                                                                                                                                 
 Performance ratios                                                                                                              
 Return on equity (1)                           6.6%         5.7%                        5.7%         5.6%          4.7%         
 Return on equity - adjusted (1,2)              7.5%         5.8%                        6.4%         6.1%          5.1%         
 Net interest margin                            2.88%        2.91%                       2.86%        2.82%         2.91%        
 Cost:income ratio                              69%          74%                         71%          71%           77%          
 Cost:income ratio - adjusted (2)               66%          74%                         68%          69%           75%          
 Loan impairment charge as % of gross customer                                                                                   
 loans and advances                             0.3%         0.3%                        0.3%         0.3%          0.4%         
 
 
Notes: 
 
 (1)  Return on equity is based on operating profit after tax divided by average notional equity (based on 12% of the monthly average of RWAs; RWAs in 2013 are on a Basel 2.5 basis).                                                                                                                                             
 (2)  Excluding restructuring costs.                                                                                                                                                                                                                                                                                               
 (3)  From Q1 2015 business segment return on equity will be calculated based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the