REG - Royal Bk Scot.Grp. - Final Results - Part 2 <Origin Href="QuoteRef">RBS.L</Origin> - Part 4

NatwestAnnouncement

26/02/2015 07:14

- Part 4: For the preceding part double click  ID:nRSZ9136Fc 

(103)       3      (86)        351    (274)       493                      366         96      
 Private Banking     8                                                             (10)                        -      -           1      (4)         9      (14)        69                       -           7       
 CPB                 232                                                           (95)                        124    (103)       4      (90)        360    (288)       562                      366         103     
                                                                                                                                                                                                                     
 CIB                 88                                                            (63)                        -      -           1      (33)        89     (96)        110                      -           96      
 Central items       11                                                            (23)                        -      -           -      -           11     (23)        1                        -           5       
 CFG                 36                                                            -                           142    -           16     -           194    -           83                       157         296     
 RCR                 761                                                           (1,760)                     220    (235)       -      (306)       981    (2,301)     10,565                   150         231     
 Total               1,149                                                         (1,959)                     1,037  (722)       201    (876)       2,387  (3,557)     11,377                   5,347       1,316   
 
 
Appendix 1 Capital and risk management 
 
Loans and related credit metrics (continued) 
 
Key points 
 
 ·                              Loans to banks decreased by £2.8 billion in the year to £24.8 billion. This reflected RWA-focused reductions in trade finance (£5.4 billion) being partially offset by derivative collateral increase, both in CIB,  as well as Ulster Bank's increased cash    
                                deposits with Central Bank of Ireland ahead of new regulatory liquidity requirements.                                                                                                                                                                           
 ·                              Overall customer loans fell by £5.0 billion to £412.8 billion reflecting RCR disposal strategy being partly offset by increases in CFG and UK PBB.                                                                                                              
 ·                              There has been a significant increase in CFG lending across a broad range of industry sectors, including residential mortgages, auto loans and commercial loans, in line with business strategy and risk appetite.  Exchange rate movements also contributed to 
                                the increase.                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                
 ·                              UK PBB's mortgage book grew strongly by £3.9 billion to £103.2 billion as advisor capacity increased (refer to Key credit portfolios for more details). This was partially offset by lower unsecured lending.                                                   
                                                                                                                                                                                                                                                                                                
 ·                              Property and construction lending fell by £11.4 billion, of which £9.3 billion related to commercial real estate lending. Refer to Key loan portfolios for more details.                                                                                        
                                                                                                                                                                                                                                                                                                
 ·                              REIL decreased by £11.2 billion to £28.2 billion, a 28% reduction in the year from £39.4 billion, across all segments except CFG. REIL as a proportion of gross loans improved to 6.8% from 9.4% in 2013 reflecting sales and repayments of £10.2 billion (£6.9 
                                billion in RCR), write-offs of £5.3 billion (£3.6 billion in RCR), transfers to performing book of £1.5 billion, partially offset by new impaired loans of £7.1 billion (£3.0 billion in RCR). The execution of the RCR strategy, resulted in a number of       
                                disposals of REIL in the year.                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                
 ·                              Loan impairment provision coverage of REIL remained stable at 64% and now stands at £18.0 billion, a £7.2 billion reduction in the year. Provision coverage of gross loans has declined steadily during 2014 and is now 4.4% compared with 6.0% at the end of   
                                2013. The reduction in provision reflected write-offs of £5.3 billion (£3.6 billion in RCR) and impairment releases of £3.6 billion (£2.3 billion in RCR) partially offset by new charges of £2.4 billion (£1.0 billion in RCR) and currency and other          
                                movements.                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                
 ·                              Disposal of assets by RCR, primarily in the second half of the year, at higher than anticipated sale prices together with favourable market conditions in Ireland and the UK resulted in impairment releases. Overall, there was a net loan impairment release  
                                of £1.2 billion includes £1.3 billion in RCR, for 2014.                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                
 ·                              Commercial real estate gross lending reduced by £9.3 billion to £43.3 billion; related REIL is almost half of total REIL and has a provision coverage of 68%. Of the total CRE REIL of £13.3 billion, £11.1 billion is in RCR.                                  
                                                                                                                                                                                                                                                                                                
 Within the business segments:  
 ·                              RCR REIL decreased by £8.7 billion or 36% to £15.4 billion from £24.1 billion at 1 January 2014, primarily due to a mixture of asset disposals and write-offs. Provision coverage of REIL and REIL as a proportion of loans were both around 70%.               
 ·                              In Ulster Bank, REIL as a proportion of loans decreased to 19% from 27% in 2013 and provision coverage of REILs reduced to 57% from 64% in 2013 mainly reflecting asset transfers to RCR on 1 January 2014, improved market conditions and higher collateral    
                                values also contributed.                                                                                                                                                                                                                                        
 ·                              Commercial Banking REIL as a proportion of loans decreased to 2.9% from 5.0% in 2013, REIL decreased by 41% (£1.8 billion) to £2.5 billion, with £0.6 billion of the reduction due to the creation of RCR. REIL reductions in the year were mainly due to lower 
                                individual cases, albeit some increases were seen in the fourth quarter, and reductions in collectively assessed provisions due to improved credit conditions.                                                                                                  
 
 
Appendix 1 Capital and risk management 
 
Loans and related credit metrics: Risk elements in lending 
 
Risk elements in lending (REIL) comprise impaired loans and accruing loans past due 90 days or more as to principal or
interest. Impaired loans are all loans (including loans subject to forbearance) for which an impairment provision has been
established; for collectively assessed loans, impairment loss provisions are not allocated to individual loans and the
entire portfolio is included in impaired loans. Accruing loans past due 90 days or more comprise loans past due 90 days
where no impairment loss is expected. 
 
                                                                                        RBS                                     
                        UK       Ulster   Commercial  Private           Central         excluding                               
                        PBB      Bank     Banking     Banking  CIB      items    CFG    RCR        RCR      Non-Core  Total     
                        £m       £m       £m          £m       £m       £m       £m     £m         £m       £m        £m        
                                                                                                                                
 At 31 December 2013    4,663    8,466    4,276       277      1,661    1        1,034  20,378     -        19,014    39,392    
 Non-Core dissolution                                                                                                           
 and RCR creation       137      (3,547)  (560)       -        (1,421)  -        289    (5,102)    24,116   (19,014)  -         
                                                                                                                                
 At 1 January 2014      4,800    4,919    3,716       277      240      1        1,323  15,276     24,116   -         39,392    
 Currency translation                                                                                                           
 and other adjustments  -        (250)    -           (3)      1        6        75     (171)      (885)    -         (1,056)   
 Additions              1,353    555      1,716       58       100      -        335    4,117      2,951    -         7,068     
 Transfers (1)          (309)    -        31          (15)     4        -        -      (289)      29       -         (260)     
 Transfers to                                                                                                                   
 performing book        (326)    (120)    (582)       (3)      (92)     -        -      (1,123)    (337)    -         (1,460)   
 Repayments                                                                                                                     
 and disposals          (1,012)  (198)    (1,884)     (51)     (56)     -        (103)  (3,304)    (6,883)  -         (10,187)  
 Amounts written-off    (728)    (131)    (491)       (37)     -        -        (300)  (1,687)    (3,591)  -         (5,278)   
                                                                                                                                
 At 31 December 2014    3,778    4,775    2,506       226      197      7        1,330  12,819     15,400   -         28,219    
 
 
Note: 
 
 (1)  Represents transfers between REIL and potential problem loans.  
 
 
The movement in loan impairment provisions by segment is shown in the table below. 
 
                                                                                        RBS                                    
                            UK     Ulster   Commercial  Private         Central         excluding                              
                            PBB    Bank     Banking     Banking  CIB    items    CFG    RCR        RCR      Non-Core  Total    
                            £m     £m       £m          £m       £m     £m       £m     £m         £m       £m        £m       
                                                                                                                               
 At 31 December 2013        2,957  5,378    1,617       120      976    66       272    11,386     -        13,839    25,225   
 Non-Core dissolution                                                                                                          
 and RCR creation (1)       150    (1,985)  (306)       -        (766)  -        246    (2,661)    16,500   (13,839)  -        
                                                                                                                               
 At 1 January 2014          3,107  3,393    1,311       120      210    66       518    8,725      16,500   -         25,225   
 Currency translation                                                                                                          
 and other adjustments      -      (172)    10          (1)      1      7        21     (134)      (555)    -         (689)    
 Disposal of subsidiaries   -      -        -           -        -      -        -      -          (6)      -         (6)      
 Amounts written-off        (728)  (131)    (436)       (37)     -      (55)     (300)  (1,687)    (3,591)  -         (5,278)  
 Recoveries of amounts                                                                                                         
 previously written-off     24     23       12          2        2      -        103    166        39       -         205      
 Charged to income                                                                                                             
 statement                                                                                                                     
 - continuing operations    268    (365)    77          (5)      (7)    (12)     -      (44)       (1,320)  -         (1,364)  
 - discontinued operations  -      -        -           -        -      -        194    194        -        -         194      
 Unwind of discount         (67)   (37)     (19)        (3)      -      -        -      (126)      (121)    -         (247)    
                                                                                                                               
 At 31 December 2014        2,604  2,711    955         76       206    6        536    7,094      10,946   -         18,040   
                                                                                                                               
 Individually assessed                                                                                                         
 - banks                    -      -        -           -        1      -        -      1          39       -         40       
 - customers                14     42       493         69       109    1        83     811        10,526   -         11,337   
 Collectively assessed      2,319  2,355    366         -        -      -        157    5,197      150      -         5,347    
 Latent                     271    314      96          7        96     5        296    1,085      231      -         1,316    
                                                                                                                               
                            2,604  2,711    955         76       206    6        536    7,094      10,946   -         18,040   
 
 
Note: 
 
 (1)  Transfers in Non-core dissolution and RCR creation includes amounts in relation to latent.  
 
 
Appendix 1 Capital and risk management 
 
Loans and related credit metrics: Loans, REIL, provisions and impairments 
 
The tables below analyse gross loans and advances to banks and customers (excluding reverse repos) and related credit
metrics by sector and geography (by location of lending office). 
 
                                                                                                                                                      
                                                                     Credit metrics                           
 31 December 2014                                                    REIL as a       Provisions   Provisions             Impairment            
 Gross                                                   % of gross  as a %          as a % of                charge/    Amounts      
 loans                          REIL         Provisions  loans       of REIL         gross loans              (release)  written-off  
 £m                             £m