REG - Royal Bk Scot.Grp. - Final Results
14/02/2020 07:00
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RNS Number : 0305D Royal Bank of Scotland Group PLC 14 February 2020
Annual Results
For the year ended 31 December 2019
The Royal Bank of Scotland Group plc
2019 RBS performance summary
RBS reported an operating profit before tax of £4,232 million and an
attributable profit of £3,133 million and proposes a final ordinary dividend
of 3 pence and a 5 pence special dividend.
In a challenging market RBS has exceeded all of its 2019 financial targets:
cost reduction above target; net lending growth ahead of target; RWAs below
guidance; and 22 pence of total distributions to shareholders in 2019, while
maintaining a CET1 ratio of 16.2%.
● Return on tangible equity of 9.4% for 2019 and 4.7% excluding FX recycling
gains.
● Q4 2019 operating profit before tax of £1,546 million and an attributable
profit of £1,410 million, or £176 million excluding FX recycling gains.
● FY 2019 attributable profit of £3,133 million, or £1,561 million excluding
FX recycling gains.
Supporting our customers through continued lending growth
● We continue to achieve net lending growth at attractive returns in a
challenging market. Across UK Personal Banking, Ulster Bank RoI, Commercial
Banking and Private Banking, net loans to customers increased by 3.7% in 2019,
exceeding our 2-3% growth target.
● UK Personal Banking gross new mortgage lending was £33.3 billion in 2019
compared with £30.4 billion in 2018. Commercial Banking gross new lending was
£19.5 billion in 2019.
● 2019 net impairment losses of £696 million equate to 21 basis points of gross
customer loans, compared with 13 basis points in 2018. The cost of risk
remains below our view of a normalised blended long term loss rate of 30-40
basis points.
Continuing competitive market
● Reflecting challenging market conditions and ongoing margin pressure, across
the retail and commercial businesses income, excluding notable items,
decreased by 2.6% compared with 2018.
● 2019 Bank net interest margin (NIM) of 1.99% decreased by 10 basis points
compared with 2018. Q4 2019 Bank NIM of 1.93% was 4 basis points lower than Q3
2019 primarily reflecting competitive pressures in the mortgage business as
front book margins remain lower than back book.
● Natwest Markets core income of £1,082 million was £177 million, or 14.1%,
lower than 2018 largely reflecting a challenging third quarter in the Rates
business.
● A cost reduction of £310 million was achieved during 2019, ahead of our £300
million target for the year.
Capital generation
● The Bank maintained a CET1 ratio of 16.2% despite accruing £2.7 billion of
distributions to shareholders and a £0.4 billion post tax charge in respect
of foreseeable pension contributions. Excluding the impact of the Alawwal bank
merger and PPI, the Bank generated c.110 basis points of capital from
attributable profits and c.60 basis points from a reduction in RWAs and other
capital movements.
● RWAs reduced by £9.5 billion during 2019 to £179.2 billion, below our £185
-190 billion guidance, in part reflecting a £4.7 billion reduction associated
with the Alawwal bank merger.
Parent Company name change
Today, we have announced that we plan to rename our parent company. The Royal
Bank of Scotland Group plc is intended to be renamed NatWest Group plc later
this year.
Outlook((1))
RBS, like all companies, continues to deal with a range of significant risks
and uncertainties in the external economic, political and regulatory
environment. Our central economic forecast, which supports our corporate plan,
is in line with consensus as at the end of December 2019 and shows average UK
GDP growth of around 1.6% from 2019 to 2023 and continued low interest rates;
we expect a base rate cut in the short term and then flat thereafter. Given
the current uncertainties we will continue to actively monitor and react to
market conditions.
2020 Outlook
In the current environment, and recognising ongoing market uncertainty, we
continue to expect challenges on income. In addition, we anticipate that
regulatory changes will adversely impact income in our personal business by
around £200 million.
We plan ongoing operating cost take out by reducing operating expenses
excluding strategic costs, litigation and conduct costs and operating lease
depreciation costs by £250 million in 2020 compared with 2019. We expect to
incur £0.8-1.0 billion of strategic costs during 2020 resulting from a
refocussing of NatWest Markets and the continued resizing of the Group's cost
base. We anticipate that NatWest Markets exit, restructuring and disposal
costs will be around £0.6 billion in 2020, with around £0.4 billion as
disposal losses through income and £0.2 billion through strategic costs.
We expect to remain below our through-the-cycle impairment loss rate
assumption of 30-40 basis points, although the potential impact on the real
economy of ongoing political uncertainties and geopolitical tensions could
affect our credit loss outcome. The threat from single name and sector driven
events remains.
We are targeting lending growth of greater than 3% across our retail and
commercial franchises.
We expect to end 2020 with risk weighted assets (RWAs) of around £185-190
billion including an estimated £10.5 billion increase associated with the
implementation of Bank of England mortgage floors, with NatWest Markets RWAs
reducing by around £6-8 billion in the year.
RBS Group (RBSG) capital and funding plans focus on issuing £2-4 billion of
MREL-compliant instruments, of which we would expect around £1 billion to be
issued under our Green, Social and Sustainable Bond Framework, up to £1.5
billion of AT1 and up to £2.5 billion of Tier 2 instruments. As in prior
years, we will continue to target other funding sources to diversify our
funding structure, including senior secured from NatWest Bank subject to
funding and liquidity considerations.
Medium term outlook
We expect to achieve a return on tangible equity of 9-11% in the medium to
long term. In addition, we expect ongoing operating cost take-out.
Within NatWest Markets franchise, we anticipate that RWAs will reduce to
around £20 billion in the medium term, which, after accounting for strategic
costs and disposal losses, is expected to be capital ratio accretive in year
one and over the course of the transition plan period.
We anticipate that the overall RWA impact of Basel 3 amendments to be around
5-10% and phased across 2021 to 2023, with the details still subject to
regulatory uncertainty on both quantum and timing.
RBS Group capital distributions
We expect to maintain ordinary dividends of around 40% of attributable profit.
We retain our guidance of CET1 ratio to be approximately 14% at the end of
2021, and we will target a reduction to 13-14% in the medium to long term. We
have shareholder and regulatory approval to carry out directed buybacks of the
UK government stake in RBS but recognise that any exercise of this authority
would be dependent upon HMT's intentions and is limited to 4.99% of issued
share capital in any 12 month period. As a reminder, we have also committed to
make further pre-tax contributions to the pension scheme of up to £1.5
billion in aggregate from 1 January 2020 linked to future distributions to RBS
shareholders.
NatWest Markets Plc
Whilst we have announced a refocusing of the business, NatWest Markets Plc
remains a regulated entity and is targeting to maintain a CET1 ratio above
15%, MREL ratio of at least 30%, leverage ratio of at least 4%, and to reduce
RWAs by around £14-18 billion in the medium term.
NatWest Markets Plc, as a standalone bank, plans to issue £3-5 billion of
term senior unsecured instruments in 2020.
Note:
(1) The targets, expectations and trends discussed in this section represent RBS
Group's and NatWest Markets Plc's management current expectations and are
subject to change, including as a result of the factors described in the "Risk
Factors" section on pages 281 to 295 of RBS Group's 2019 Annual Report and
Accounts and pages 143 to 156 of NatWest Markets Plc's 2019 Annual Report and
Accounts. These statements constitute forward-looking statements; refer to
Forward-looking statements in this document.
Business performance summary
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
Performance key metrics and ratios 2019 2018 2019 2019 2018
Operating profit/(loss) before tax £4,232m £3,359m £1,546m (£8m) £572m
Profit/(loss) attributable to ordinary shareholders £3,133m £1,622m £1,410m (£315m) £286m
Bank net interest margin (RBS NIM excluding NWM) (1) 1.99% 2.09% 1.93% 1.97% 2.07%
Bank average interest earning assets (RBS excluding NWM) (1) £413bn £409bn £420bn £416bn £412bn
Cost:income ratio (1) 65.1% 71.7% 59.4% 92.9% 80.5%
Loan impairment rate (2) 21bps 13bps 19bps 26bps 2bps
Earnings per share
- basic 26.0p 13.5p 11.7p (2.6p) 2.4p
- basic fully diluted 25.9p 13.4p 11.6p (2.6p) 2.3p
Return on tangible equity (1) 9.4% 4.8% 17.7% (3.8%) 3.5%
Average tangible equity £33bn £33bn £32bn £33bn £33bn
Average number of ordinary shares
outstanding during the period (millions)
- basic 12,067 12,009 12,078 12,075 12,040
- fully diluted (3) 12,102 12,061 12,114 12,106 12,081
31 December 30 September 31 December
Balance sheet related key metrics and ratios 2019 2019 2018
Total assets £723.0bn £776.5bn £694.2bn
Funded assets (1) £573.0bn £600.7bn £560.9bn
Loans to customers - amortised cost £326.9bn £319.5bn £305.1bn
Impairment provisions £3.7bn £3.8bn £3.8bn
Customer deposits £369.2bn £369.7bn £360.9bn
Liquidity coverage ratio (LCR) 152% 148% 158%
Liquidity portfolio £199bn £193bn £198bn
Net stable funding ratio (NSFR) (4) 141% 140% 141%
Loan:deposit ratio (1) 89% 86% 85%
Total wholesale funding £75bn £78bn £74bn
Short-term wholesale funding £19bn £19bn £15bn
Common Equity Tier (CET1) ratio 16.2% 15.7% 16.2%
Total capital ratio 21.2% 20.5% 21.8%
Pro forma CET 1 ratio, pre dividend and charges (5) 17.0% 15.9% 16.9%
Risk-weighted assets (RWAs) £179.2bn £189.5bn £188.7bn
CRR leverage ratio 5.1% 5.0% 5.4%
UK leverage ratio 5.8% 5.7% 6.2%
Tangible net asset value (TNAV) per ordinary share 268p 272p 287p
Tangible net asset value (TNAV) per ordinary share - fully diluted (1,3) 267p 272p 286p
Tangible equity £32,371m £32,930m £34,566m
Number of ordinary shares in issue (millions) 12,094 12,094 12,049
Number of ordinary shares in issue (millions) - fully diluted (3,6) 12,138 12,124 12,088
Notes:
(1) Refer to the Appendix for details of the basis of preparation and
reconciliation of non-financial and performance measures.
(2) Refer to Note 2 for details of the representation of interest in suspense
provisions. The loan impairment rates for 2018 were recalculated and there was
no impact on the rates.
(3) Includes the effect of dilutive share options and convertible securities.
Dilutive shares on an average basis for Q4 2019 were 36 million shares and for
the year ended 31 December 2019 were 35 million shares; (year ended 31
December 2018 - 52 million shares, Q3 2019 - 31 million shares, Q4 2018 - 41
million shares), and as at 31 December 2019 were 44 million shares (30
September 2019 - 30 million shares; 31 December 2018 - 39 million shares).
(4) NSFR reported in line with CRR2 regulations finalised in June 2019.
(5) The pro forma CET 1 ratio at 31 December 2019 excludes a foreseeable charge of
£365 million, £362 million (3p per share) for a final dividend and £606
million (5p per share) for a special dividend (30 September 2019 - £362
million (3p per share)). 31 December 2018 excluded a charge of £422 million
(3.5p per share) for the final dividend and £904 million (7.5p per share) for
the special dividend.
(6) Includes 15 million shares by the Employee Benefit Trust (30 September 2019 -
16 million shares; 31 December 2018 - 8 million shares).
Chief Executive's Statement
We champion potential, helping people, families and businesses to thrive.
Dear shareholders,
It is a privilege to be writing to you as CEO of the company that I joined as
a graduate more than 25 years ago. I am truly excited by the opportunity to
lead the Bank as we set out a new commitment to become a Purpose-led
organisation, which will champion the potential of people, families and
businesses across the communities we serve.
A period of unprecedented disruption
We, like our customers, are living in a period of unprecedented disruption -
whether it is the struggle to get on the housing ladder or starting a
business, the rapid growth of disruptive technology, an ageing population, the
emergence of the gig economy or the existential impact of climate change. The
way people live is changing, and their expectations of companies are changing
too. I firmly believe in response, we have to adopt a new approach that moves
away from a view that is defined by products and transactions, and uses the
strength of the relationships we have with all of our stakeholders as the real
test of our progress.
This disruption is happening against the backdrop of a highly uncertain
economic environment. UK economic growth remains subdued, compared to its
historic trend, and interest rates are likely to be lower for longer. This has
an impact on our ability to generate net interest income. Business confidence
continues to be affected by the UK's departure from the EU as our customers
await certainty over the future terms of trade. Consumer confidence on the
other hand continues to be supported by a relatively strong UK employment
market and we are seeing good volumes in our mortgage business as a result. We
still see opportunities to grow in our key target markets despite some of
these challenging trends.
Purpose-led organisation - Building more sustainable returns
Today marks a new era, as we provide an update to our plans and a new Purpose
for the Bank that will help us become a more sustainable business, delivering
better outcomes for our customers and our shareholders.
We are privileged to play a central role in the UK economy. That brings with
it, a deep responsibility to the communities we serve and to wider society.
That is why we have a refreshed Purpose:
We champion potential, helping people, families and businesses to thrive.
We won't get everything right every time, but this simple expression will be
the standard to which we will hold ourselves.
Sustainable returns, however, can only come from a sustainable business model
and building a Purpose-led bank must underpin the services we provide. It also
means we must play our role in tackling the issues which hold people, families
and businesses back.
The Board and management team have worked together to define an approach to
becoming a Purpose-led organisation based on balancing the interests of all
our stakeholders. As part of this, we have worked with the not-for-profit
organisation a Blueprint for Better Business.
We have informed our approach using their framework that identifies the need
to be: Honest and Fair with Customers and Suppliers; A Good Citizen; A
Guardian for Future Generations; and A Responsible and Responsive Employer as
key drivers to becoming a more sustainable business. In addition, we have
analysed what is driving the changes in our own customer behaviours and the
subsequent trends borne from their experiences. This forms the building blocks
for the plans we are setting out today.
It is essential that our Purpose underpins our strategy and the decisions we
make on the future direction of the business. At a practical level, we have
been reviewing how to embed Purpose within Board forums and processes to
ensure it is a central part of how we work. We are very clear that our Purpose
must apply across the whole organisation and to everything we do. We are also
clear that getting this right will take time.
Three initial areas of focus where we can make a substantial impact
We have identified three areas of focus where we can make a substantial impact
in addressing challenges that threaten to hold people, families and businesses
back:
● Enterprise, and the barriers that too many face to starting a business;
● Learning, and what we can do to improve financial capability and confidence
for our customers, as well as establishing a dynamic learning culture for our
employees; and
● Climate, and the role we can play in accelerating the transition to a low
carbon economy.
We have set out some significant ambitions across these three areas that will
deliver important benefits for our customers and the wider economy.
Chief Executive's Statement continued
An ambition to take the lead in combating the causes of climate change
Today, we are setting a bold new ambition - to be a leading bank in the UK
& Republic of Ireland helping to address the climate challenge; by making
our own operations net carbon zero in 2020 and climate positive by 2025, and
by driving material reductions in the climate impact of our financing
activity. We are setting ourselves the challenge to at least halve the climate
impact of our financing activity by 2030, and intend to do what is necessary
to achieve alignment with the 2015 Paris Agreement.
This will be a significant challenge as we, like others, do not yet fully
understand what this will require and how it will be achieved, not least as
there is currently no standard industry methodology or approach. Solving this
will require UK and international industry, regulators and experts to come
together and find solutions. We are determined to not just play our part, but
to lead on the collaboration and co-operation that is so critical to
influencing the transition to a low carbon economy.
As a systemic UK bank, we must play an active role and these market leading
ambitions underline our position. This is not only the right thing to do, it
will give us the opportunity to do more business with our customers, as they
transition to a low carbon economy.
We are already taking positive steps in the right direction. This year we
became one of the Founding Signatories of the United Nations Environment
Programme Finance Initiative (UNEP FI) Principles for Responsible Banking,
committing to begin strategically aligning our business with the UN
Sustainable Development Goals (SDGs) and the 2015 Paris Agreement. We have
been reviewing specific SDGs with relevance to our Purpose focus areas of
Climate Change, Enterprise and Learning.
The Bank continues to support the Financial Stability Board's Task Force on
Climate-related Financial Disclosures (TCFD) - a voluntary set of guidelines
encouraging consistent climate-related disclosures in annual reporting. In
2019, we were one of the first companies worldwide to commit to all the
Climate Group initiatives on electric vehicles (EV100), energy productivity
(EP100), and renewable power (RE100).
In November 2019 we issued the first exclusively social bond under ICMA's
Social Bond Principles in the UK by any financial institution. The impact of
the lending funded by this bond will be reported 12 months after issuance,
measuring the number of jobs created and retained in some of the UK's most
deprived areas.
This is good progress, but we can, and will, do more.
Improving financial confidence and becoming a learning organisation
We also know that we have a responsibility to help our customers improve their
financial confidence. Our UK-wide financial education programme, MoneySense
has now been running for 25 years. We can help children in schools and at home
understand the value and importance of finance from an early age. We will
target reaching 2.5 million people through financial capability interactions
each year. The more confidence our customers have, the more opportunity we
will have to provide services to them.
I also want to build the confidence and capability of our employees. We
already have one of the most qualified workforces in the UK. Today I am
setting a target to have all front-line staff professionally accredited within
the first twelve months of being in role.
Removing barriers to enterprise
As the largest supporter of UK business, we already offer a wide range of
support to those who want to start a new business. But we also know that for
many, it remains harder than it should be. We are committed to helping create
an additional 50,000 new businesses across the UK by 2023, through inspiring
and supporting over 500,000 people to consider enterprise as a career option.
Our focus will be on under-represented populations, with women making up at
least 60% of those we support and more than 20% being Black, Asian, Minority
Ethnic-led businesses. We will also make sure that at least 75% of the people
we support are in regions outside of London and the South East. By helping to
tackle the barriers to starting a business, there will be more opportunities
to help companies grow.
Starting with strong foundations, but with much more to do
We have built strong foundations, but our performance doesn't yet match its
full potential and we need to support our customers better at the key moments
in their lives. This means running a bank that is safe, simple and smart -
supporting our customers with what they need and also making some tough
choices in order to deliver for shareholders and colleagues.
Safe
Safety and soundness must underpin everything we do. Intelligent risk-taking
is why banks exist - to find valuable and sustainable uses for the resources
in the economy, and to help customers achieve their ambitions. We have strong
capital and liquidity positions and are well placed to help our customers
succeed. In today's digital world, our operational resilience and keeping our
customers' data safe are top priorities. We can never lose sight of this, even
as we look to grow. We have announced today that we will reduce our Common
Equity Tier 1 ratio (CET 1) over the medium to long-term to around 13-14%.
This will ensure that the Bank remains safe, and also allow room for further
capital distributions.
Chief Executive's Statement continued
Simple
We are still too complicated for our customers. Much of the potential value in
this Bank is locked in business lines and business models that are too complex
and generating too little return. This complexity also creates 'bad costs' -
costs that provide no benefit to customers.
This applies to parts of our NatWest Markets business, where we have shrunk
over time but we could do more to increase its focus on our corporate and
institutional customers and their needs.
Today we are announcing that we will reduce the size of this business by
around half, as measured by Risk Weighted Assets, managing down and optimising
low-returning capital and inefficient activities. We will build a much smaller
and simpler part of the business which will bring customers closer to the
services they need, reduce costs and release capital for shareholders.
This action will refocus our NatWest Markets products and services on our
corporate and institutional customers. We estimate that for 2019, our
corporate and institutional customers represented around £75 billion of Risk
Weighted Asset equivalents but only generated returns of around 2% on an
underlying basis and excluding strategic costs and litigation and conduct
costs. We believe that as we refocus NatWest Markets, corporate and
institutional customers in the medium to long term will represent around £60
billion of Risk Weighted Asset equivalents and returns will improve to around
8%.
Driving out bad costs also means simplifying our core customer journeys, like
our account opening and lending application processes. Aligning and
accelerating the transformation of these with more automation and less manual
processing will save money, deliver better controls and improve service.
We are targeting an overall cost reduction this year of £250 million.
Smart
Taking a disciplined approach to cost means we can make smart investment
choices, investing to improve our services across our retail and commercial
customer bases. We will continue to explore the potential for partnerships
across industries, and within banking, that can help us innovate faster and
ensure our investment is wisely spent.
We already have strong relationships with millions of customers in this
country, but we can deepen them even further by building propositions that
provide support throughout their financial lives. This may mean looking to
increase our presence in certain areas including through partnerships, where
relevant, to ensure we are helping our customers meet their needs and
ambitions.
In recent years we have dramatically increased the focus on innovation across
the Bank. This has positioned us well with partners, opened up new income
lines and helped improve our time-to-market in a number of critical areas.
There is an amazing opportunity for NatWest to use its brand and market
presence to connect new technology solutions with the problems that hold back
potential in the personal, professional and business lives of our customers.
This must, however, also be matched by the financial discipline to call time
on ventures that don't deliver and that can't deliver a big enough impact for
our customers and investors.
By simplifying our innovation focus, and being disciplined on the internal
allocation of capital, we will strengthen the core of the Bank. By making
smarter investments in services for our customers we will deepen our leading
positions in personal, business, commercial and corporate banking.
Delivering sustainable returns
Championing the potential of people, families and businesses is not an add-on
to our strategy, it is our strategy. I firmly believe this new Purpose-led
approach is what will deliver reliable returns for our shareholders, year in,
year out.
We will target a return on tangible equity of 9%-11% from a CET 1 ratio of
13%-14% in the medium to long-term. Subject to shareholder approval of our
2019 final and special dividends, we will have returned £4.2 billion to
shareholders, with £2.6 billion returned to UK taxpayers since 2018. We have
a clear plan to continue to return capital to our shareholders over time.
I know from experience, that we only succeed when our customers and wider
communities succeed. I am confident that the strategy I have outlined will
deliver sustainable long-term shareholder returns and will also build a Bank
that the UK and Republic of Ireland can be proud of. We will create lasting
value when we champion the potential of those we serve. That is our Purpose
and our Strategy.
Business performance summary
Our ambition is to build the best bank for customers in the UK and Republic of
Ireland
Customer Advocacy and Trust Scores
Our brands are our main connection with customers. Each takes a clear and
differentiated position with the aim of helping us strengthen our relationship
with them. For this reason we track customer advocacy for our key brands using
the net promoter score (NPS) - a commonly used metric in banking and other
industries across the world.
We are seeing early signs of improvement, but we still have much to do. We
are determined to make a difference with the things that matter most to our
customers. We listen to customer feedback and, via our closed-loop feedback
programme, respond to any issues that they identify. Through fixing our core
processes we will get our core service right first time more consistently
while at the same time innovating to deliver better solutions.
The tables below show NPS and Trust scores for our key brands.
Personal Banking
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
NatWest 15 13 11 11 11
Royal Bank of Scotland (14) (9) (10) (14) (17)
Ulster Bank Northern Ireland (10) (5) 1 (3) (10)
Ulster Bank Republic of Ireland (18) (15) (11) (7) (6)
Source: Ipsos MORI FRS 6 month rolling data. Latest base sizes: 2,829 for
NatWest (England & Wales); 451 for Royal Bank of Scotland (Scotland).
Based on the question: "How likely is it that you would recommend (brand) to a
relative, friend or colleague in the next 12 months for current account
banking?" Base: Claimed main banked current account customers.
Source: Coyne Research 12 month rolling data. Question: "Please indicate to
what extent you would be likely to recommend (brand) to your friends or family
using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely
likely". Latest base sizes: 352 Northern Ireland; 1,424 Republic of
Ireland.
Business Banking
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
NatWest (7) (9) (9) (8) (9)
Royal Bank of Scotland (25) (31) (36) (36) (36)
Source: Savanta MarketVue Business Banking, YE Q4 2019. Based on interviews
with businesses with an annual turnover up to £2 million. Latest base sizes:
1104 for NatWest (England & Wales), 416 for Royal Bank of Scotland
(Scotland). Question: "How likely would you be to recommend (bank)". Base:
Claimed main bank. Data weighted by region and turnover to be representative
of businesses in Great Britain.
Commercial Banking
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
NatWest 23 23 20 20 21
Royal Bank of Scotland 9 16 21 18 20
Source: Savanta MarketVue Business Banking, YE Q4 2019. Based on interviews
with businesses with an annual turnover over £2 million. Latest base sizes:
586 for NatWest (England & Wales), 100 for Royal Bank of Scotland
(Scotland). Question: "How likely would you be to recommend (bank)". Base:
Claimed main bank. Data weighted by region and turnover to be representative
of businesses in Great Britain.
Trust
We also use independent experts to measure our customers' trust in the bank.
Each quarter we ask customers to what extent they trust or distrust their bank
to do the right thing. The score is a net measure of those customers that
trust their bank (a lot or somewhat) minus those that distrust their bank (a
lot or somewhat).
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
NatWest 62 62 61 60 56
Royal Bank of Scotland 39 47 38 28 27
Source: Populus. Latest quarter's data. Measured as a net % of those that
trust Royal Bank of Scotland/NatWest to do the right thing, less those that do
not. Latest base sizes: 531 for NatWest (England & Wales), 214 for Royal
Bank of Scotland (Scotland).
Summary consolidated income statement for the period ended 31 December 2019
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018* 2019 2019 2018*
£m £m £m £m £m
Net interest income 8,047 8,656 2,037 2,006 2,176
Own credit adjustments (80) 92 (22) (12) 33
Strategic disposals 1,035 - - - -
Other non-interest income 5,251 4,654 2,218 909 849
Non-interest income 6,206 4,746 2,196 897 882
Total income 14,253 13,402 4,233 2,903 3,058
Litigation and conduct costs (895) (1,282) (85) (750) (92)
Strategic costs (1,381) (1,004) (537) (215) (355)
Other expenses (7,049) (7,359) (1,905) (1,733) (2,022)
Operating expenses (9,325) (9,645) (2,527) (2,698) (2,469)
Profit before impairment losses 4,928 3,757 1,706 205 589
Impairment losses (696) (398) (160) (213) (17)
Operating profit/(loss) before tax 4,232 3,359 1,546 (8) 572
Tax charge (432) (1,208) (37) (201) (118)
Profit/(loss) for the period 3,800 2,151 1,509 (209) 454
Attributable to:
Ordinary shareholders 3,133 1,622 1,410 (315) 286
Other owners 406 537 99 105 182
Non-controlling interests 261 (8) - 1 (14)
Notable items within total income
Alawwal bank merger gain in NatWest Markets 444 - - - -
FX recycling gain in Central items & other (1) 1,459 - 1,169 - -
Legacy liability release in Central items & other 256 - - - -
Insurance indemnity - 357 - - 85
of which:
NatWest Markets - 165 - - -
Central items & other - 192 - - 85
IFRS volatility in Central items & other (2) 9 (59) 43 (51) (25)
UK Personal Banking debt sale gain 49 61 31 16 35
FX gains/(losses) in Central items & other 21 (46) (1) 2 (39)
Commercial Banking fair value and disposal (loss)/gain (16) 169 1 - (10)
NatWest Markets legacy business disposal (loss)/gain (35) (86) - (8) (43)
Notable items within operating expenses
Push payment fraud costs (38) - (13) (7) -
Litigation and conduct costs (895) (1,282) (85) (750) (92)
of which:
US RMBS 169 (823) - 162 -
PPI (900) (200) - (900) -
*Restated for IAS 12 'Income taxes', refer to Note 2 for further details.
Notes:
(1) Includes £290 million arising on the completion of the Alawwal bank merger in
June 2019, £1,102 million arising on the liquidation of RFS Holdings and £67
million in relation to dividends in UBI DAC.
(2) IFRS volatility relates to loans which are economically hedged but for which
hedge accounting is not permitted under IFRS.
Business performance summary
Income statement overview
2019 compared with 2018
● Total income increased by £851 million, or 6.3%. Excluding notable items,
income decreased by £813 million, or 6.3%, due to a reduction in retail and
commercial income, lower NatWest Markets income and increased Treasury funding
costs, reflecting increased MREL costs and lower structural hedge income.
Across the retail and commercial businesses, income decreased by £301
million, or 2.6%, excluding notable items, principally reflecting margin
pressure in a challenging market.
● Bank NIM of 1.99% was 10 basis points lower than 2018, principally reflecting
competitive pressures within the personal business and a flattening yield
curve.
● Excluding strategic, litigation and conduct costs, operating expenses reduced
by £310 million, ahead of target, despite incurring an additional £38
million of authorised push payment fraud costs in line with new industry
practice. In line with the reduction in costs, headcount was c.3,100, or 4.6%,
lower than 2018.
● Strategic costs of £1,381 million included: a £470 million charge relating
to the reduction in our property portfolio; £299 million of technology costs;
a £178 million charge in NatWest Markets relating to both the wind-down of
the legacy business and ongoing development of the core business
infrastructure; with the remaining charge largely relating to restructuring
costs to achieve cost efficiencies across front and back book operations.
● Litigation and conduct costs included a £900 million PPI charge and a £169
million reimbursement under indemnification agreements relating to US
residential mortgage-backed securities (RMBS).
● The net impairment loss of £696 million, 21 basis points of gross customer
loans, increased by £298 million compared with 2018, transitioning from a
very benign period towards a more normalised external credit environment, as
well as the impact of a small number of large individual commercial charges.
The cost of risk remained below the view of our normalised blended long term
loss rate of 30 to 40 basis points.
● The tax charge for 2019 is lower than the UK statutory rate reflecting the
impact of the Alawwal bank merger gain on disposal, the FX recycling gain on
the liquidation of RFS Holdings, a £206 million deferred tax credit on the
recognition of tax losses following the transfer of business under the
ring-fencing regulations and adjustments in respect of prior periods. These
factors have been partially offset by the impact of conduct charges, the
banking surcharge and a £144 million reduction in the carrying value of
deferred tax assets in respect of losses in the UK and Ireland.
● Non-controlling interests includes a charge of £274 million in relation to
the minority share of the gain recognised on completion of the Alawwal bank
merger.
Q4 2019 compared with Q3 2019
● Q4 2019 income includes £1,169 million of FX recycling gains largely
associated with the transfer of NatWest Markets N.V. ownership to NatWest
Markets Plc. Excluding notable items, retail and commercial income was £55
million lower whilst NatWest Markets core income increased by £12 million to
£196 million.
● Bank NIM of 1.93% was 4 basis points lower than Q3 2019 primarily reflecting
competitive pressures in the mortgage business as front book margins remain
lower than back book.
● Excluding strategic, litigation and conduct costs, operating expenses
increased by £172 million primarily reflecting the annual UK bank levy
charge. Headcount reduced by c.1,700, or 2.6%.
● The Q4 2019 tax charge includes an £86 million charge relating to reducing
the carrying value of the deferred tax asset in respect of losses in the UK
and a £65 million credit associated with FX recycling gains.
.
Q4 2019 compared with Q4 2018
● Across the retail and commercial businesses, income decreased by £114
million, or 4.0%, excluding notable items, principally reflecting margin
pressure in a challenging market. NatWest Markets core income was 2.0% lower
at £196 million.
● Excluding strategic, litigation and conduct costs, operating expenses reduced
by £117 million, or 5.8%.
Business performance summary
UK Personal Banking
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Total income 4,866 5,054 1,195 1,224 1,246
Operating expenses (3,618) (2,867) (788) (1,601) (757)
Impairment losses (393) (339) (81) (131) (142)
Operating profit/(loss) 855 1,848 326 (508) 347
Return on equity 9.6% 24.7% 14.9% (26.8%) 17.2%
Net interest margin 2.47% 2.67% 2.32% 2.44% 2.60%
Cost:income ratio 74.4% 56.7% 65.9% 130.8% 60.8%
Loan impairment rate 25bps 23bps 20bps 34bps 38bps
£bn £bn £bn
Net loans to customers (amortised cost) 158.9 154.6 148.9
Customer deposits 150.3 147.9 145.3
RWAs 37.8 37.5 34.3
Almost three quarters of our current account customers are now digitally
active, with growing engagement and continued improvements to their digital
experience making it easier for our customers everyday. Total digital sales
volumes increased by 30% compared with 2018, representing 53% of all sales.
63% of personal unsecured loan sales, 66% of credit card accounts and 56% of
current accounts opened were via the digital channel.
2019 compared with 2018
● Total income was £188 million, or 3.7%, lower than 2018, impacted by lower
overall mortgage margins, an IFRS 9 accounting change for interest in suspense
recoveries of £29 million and a £12 million decrease in debt sale gains,
partially offset by strong lending growth.
● Net interest margin decreased by 20 basis points reflecting mortgage margin
pressure, as front book margins remain lower than back book margin and the
book re-prices to the current rate.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £25 million, or 1.0%, reflecting a 6.5% reduction in headcount
from digital process simplification and back office rationalisation and lower
property costs, partially offset by increased fraud costs due to a revised
customer refund approach for authorised push payment scams, annual pay award,
and increased investment and technology costs.
● Litigation and conduct costs include a £900 million charge in respect of PPI
claims following greater than predicted complaints volumes in the lead up to
the 29 August 2019 deadline.
● Impairment losses were £54 million higher than 2018 reflecting lending growth
and lower debt sale recoveries, partially offset by interest in suspense
recoveries following an IFRS 9 accounting change and a £25 million lower
charge for economic uncertainty than in 2018. Default rates increased slightly
since 2018, but, the overall trend flattened in the second half of the year
as a result of unsecured risk appetite tightening.
● Net loans to customers increased by £10.0 billion, or 6.7%, to £158.9
billion. The business has maintained a prudent approach to risk and pricing in
a very competitive market, with gross new mortgage lending in 2019 of £33.3
billion, 9.6% higher than 2018. Mortgage new business market share increased
to approximately 12.5%, supporting a stock share of around 10.2% up from 9.8%
in 2018. Momentum also continued in personal advances and credit cards,
increasing by 11.8% and 7.5% respectively.
● Customer deposits increased by £5.0 billion, or 3.4%, as growth continued
across current accounts and savings.
● RWAs increased by £3.5 billion, or 10.2%, principally due to strong lending,
£2.2 billion, mortgage predictive loss adjustments, £0.6 billion, and an
increase linked to IFRS 16 changes, £0.7 billion.
Q4 2019 compared with Q3 2019
● Total income was £29 million lower than Q3 2019 reflecting a £19 million
charge following an annual review of mortgage customer repayment behaviour,
lower seasonal debit and credit card fee income and the implementation of
certain overdraft fee changes, partly offset by £15 million higher debt sale
gains. Strong volume growth in Q4 2019 largely offset product margin dilution.
Net interest margin decreased by 12 basis points reflecting mortgage margin
pressure and the mortgage customer repayment behaviour charge.
● Excluding strategic, litigation and conduct costs, operating expenses were
£33 million higher than Q3 2019, largely reflecting the inclusion of the
annual bank levy charge.
● Gross new mortgage lending was £10.4 billion, the highest quarter of new
mortgage lending in 2019, representing approximately 15% new business market
share.
Q4 2019 compared with Q4 2018
● Total income was £51 million lower than Q4 2018, primarily driven by mortgage
margin pressure, interest in suspense recoveries and lower debt sale gains.
● Excluding strategic, litigation and conduct costs, operating expenses were
£18 million lower than Q4 2018 due to headcount reductions, partially offset
by increased fraud costs.
Business performance summary
Ulster Bank RoI
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
€m €m €m €m €m
Total income 647 689 162 161 165
Operating expenses (630) (657) (162) (146) (184)
Impairment releases/(losses) 38 (17) (5) 19 21
Operating profit/(loss) 55 15 (5) 34 2
Return on equity 2.3% 0.5% (1.0%) 5.8% 0.4%
Net interest margin 1.59% 1.79% 1.57% 1.55% 1.73%
Cost:income ratio 97.4% 95.6% 100.7% 90.3% 111.6%
Loan impairment rate (17)bps 8bps 9bps (34)bps (38)bps
€bn €bn €bn
Net loans to customers (amortised cost) 21.4 21.4 21.0
Customer deposits 21.7 21.3 20.1
RWAs 15.3 15.0 16.4
Ulster Bank RoI continued to strengthen its digital proposition in 2019
through enhancements to digital and mobile customer offerings. 70% of active
current account customers are now on digital channels, with 48% using the
mobile app which now includes new app services to enable customers to lock and
unlock their debit cards, create savings goals and explore how they are
spending their money.
2019 compared with 2018
● Total income was €42 million, or 6.1% lower than 2018 primarily reflecting
reduced income from non-performing loans (NPLs) following the sale of a
portfolio of assets, largely completed in 2018, and an income reduction from
an IFRS 9 accounting change in 2019 for interest in suspense recoveries of
€23 million, with an offsetting impact in impairments. These movements
contributed to a 20 basis points decrease in net interest margin compared with
2018.
● Excluding strategic, conduct and litigation costs, operating expenses
decreased by €16 million, or 2.9%, due to reduced project and pension costs
and other efficiencies which resulted in a headcount reduction of 6.5%,
partially offset by higher levies and increased risk and compliance costs.
● A net impairment release of €38 million reflects improvements in the
performance of the loan portfolio and the accounting change for interest in
suspense recoveries, partially offset by a charge for economic uncertainty.
● Net loans to customers increased by €0.4 billion, or 1.9%, reflecting strong
lending in both the personal and commercial sectors, partially offset by
concluding the sale of a portfolio of NPLs, €0.1 billion, and a continued
reduction in the tracker mortgage book. Tracker mortgage balances reduced by
€0.7 billion, or 8.4% compared with 2018, with Tracker balances accounting
for 38.2% of total net loans at the end of 2019. The business maintained a
prudent approach to risk and pricing in a competitive market, with gross new
lending of €3.0 billion in 2019, 13.0% higher than 2018.
● Customer deposits increased by €1.6 billion, or 8.0%, supporting a reduction
in the loan:deposit ratio to 98% from 105%.
● RWAs reduced by €1.1 billion, or 6.7%, principally reflecting an improvement
in credit metrics and the impact of the NPL sale.
Q4 2019 compared with Q3 2019
● Total income remained broadly stable at €162 million and net interest margin
increased two basis points to 1.57% compared with Q3 2019.
● Total operating expenses increased by €16 million, or 11.0%, primarily
reflecting an increase in strategic costs relating to a restructuring
programme, partly offset by one-off credits to the pension charge.
● Impairment losses of €5 million reflect the impact of mortgage model
recalibration, partially offset by the net impact of an improvement in the
performance of the NPL portfolio.
● RWAs increased by €0.3 billion largely due to model recalibrations.
Q4 2019 compared with Q4 2018
● Total income decreased by €3 million, or 1.8%, reflecting lower income on
NPLs and the IFRS 9 accounting change, partially offset by higher other
income.
● Total operating expenses decreased by €22 million, or 12.0%, primarily
reflecting lower conduct and pension costs and the benefits from cost saving
initiatives.
Business performance summary
Commercial Banking
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Total income 4,318 4,602 1,076 1,077 1,116
Operating expenses (2,600) (2,487) (700) (638) (764)
Impairment losses (391) (147) (81) (108) (5)
Operating profit 1,327 1,968 295 331 347
Return on equity 8.4% 12.1% 7.6% 8.4% 8.3%
Net interest margin 1.95% 1.96% 1.94% 1.90% 1.96%
Cost:income ratio 58.9% 52.8% 63.9% 57.9% 67.5%
Loan impairment rate 38bps 14bps 32bps 42bps 2bps
£bn £bn £bn
Net loans to customers (amortised cost) 101.2 101.5 101.4
Customer deposits 135.0 135.7 134.4
RWAs 72.5 77.0 78.4
Notes:
(1) New drawn lending and any re-financing resulting in a new facility or
the opening of a new account, excluding Overdrafts and Supplier Finance.
(2) RWA intensity is defined as total risk weighted assets divided by
total loans to customers (amortised cost).
Commercial Banking continues to focus on increasing customer interactions
through digital channels. In 2019, NatWest became the first UK bank to launch
biometric secure authentication for all business payments via Bankline mobile.
Conversation volumes with our chat bot Cora have increased to c.16,500 per
month since inception in December 2018.
2019 compared with 2018
● Total income decreased by £284 million, or 6.2%, reflecting asset disposal
and fair value gains of £169 million in 2018, compared with a £16 million
loss in 2019, combined with lower deposit income and lower non-interest
income. Net interest margin decreased by 1 basis point in comparison to 2018
as a result of lower deposit income, with lending margins broadly stable.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £51 million, or 2.2%, reflecting lower back office operations
costs and VAT recoveries, partially offset by £17 million higher operating
lease depreciation, £9 million authorised push payment fraud costs in line
with new industry practice, and higher remediation, innovation and technology
spend.
● Impairment losses of £391 million include a small number of single name
charges, IFRS 9 modelling adjustments and charges in respect of increased
economic uncertainty.
● Commercial Banking gross new lending((1)) was £19.5 billion in 2019. Net
loans to customers decreased by £0.2 billion as planned reductions in EU
divestment and Large Corporates & Institutions Western European transfers
to NatWest Markets of £0.6 billion were partially offset by growth across the
business. Lending across Business Banking, SME & Mid-Corporate and
Specialised business increased by £1.1 billion, or 2.1%.
● RWAs decreased by £5.9 billion due to model improvements, active capital
management and business transfers of £2.4 billion, resulting in a RWA
intensity((2)) of 70.7% in comparison to 76.3% in 2018.
Q4 2019 compared with Q3 2019
● Total income remained stable, whilst net interest margin increased by 4 basis
points in comparison to Q3 2019, mainly due to an annual review related to
customer repayment behaviour changes, partially offset by lower deposit
income.
● Excluding strategic, litigation and conduct costs, operating expenses
increased by £15 million, or 2.7%, as the annual UK bank levy charge was
partially offset by VAT recoveries.
● Impairment losses decreased by £27 million reflecting charges in respect of
increased economic uncertainty in Q3 2019.
● Net loans to customers decreased by £0.3 billion mainly due to reductions in
EU Divestment.
● RWAs decreased by £4.5 billion due to model improvements, active capital
management and business transfers of £0.3 billion.
Q4 2019 compared with Q4 2018
● Total income decreased by £40 million, or 3.6%, mainly due to lower deposit
income and lower non-interest income.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £88 million, or 13.2%, due to VAT recoveries and lower back
office operations costs.
● Impairment losses increased by £76 million, principally due to higher single
name charges and IFRS 9 modelling adjustments.
Commercial Banking continues to focus on increasing customer interactions
through digital channels. In 2019, NatWest became the first UK bank to launch
biometric secure authentication for all business payments via Bankline mobile.
Conversation volumes with our chat bot Cora have increased to c.16,500 per
month since inception in December 2018.
2019 compared with 2018
●
Total income decreased by £284 million, or 6.2%, reflecting asset disposal
and fair value gains of £169 million in 2018, compared with a £16 million
loss in 2019, combined with lower deposit income and lower non-interest
income. Net interest margin decreased by 1 basis point in comparison to 2018
as a result of lower deposit income, with lending margins broadly stable.
●
Excluding strategic, litigation and conduct costs, operating expenses
decreased by £51 million, or 2.2%, reflecting lower back office operations
costs and VAT recoveries, partially offset by £17 million higher operating
lease depreciation, £9 million authorised push payment fraud costs in line
with new industry practice, and higher remediation, innovation and technology
spend.
●
Impairment losses of £391 million include a small number of single name
charges, IFRS 9 modelling adjustments and charges in respect of increased
economic uncertainty.
●
Commercial Banking gross new lending((1)) was £19.5 billion in 2019. Net
loans to customers decreased by £0.2 billion as planned reductions in EU
divestment and Large Corporates & Institutions Western European transfers
to NatWest Markets of £0.6 billion were partially offset by growth across the
business. Lending across Business Banking, SME & Mid-Corporate and
Specialised business increased by £1.1 billion, or 2.1%.
●
RWAs decreased by £5.9 billion due to model improvements, active capital
management and business transfers of £2.4 billion, resulting in a RWA
intensity((2)) of 70.7% in comparison to 76.3% in 2018.
Q4 2019 compared with Q3 2019
●
Total income remained stable, whilst net interest margin increased by 4 basis
points in comparison to Q3 2019, mainly due to an annual review related to
customer repayment behaviour changes, partially offset by lower deposit
income.
●
Excluding strategic, litigation and conduct costs, operating expenses
increased by £15 million, or 2.7%, as the annual UK bank levy charge was
partially offset by VAT recoveries.
●
Impairment losses decreased by £27 million reflecting charges in respect of
increased economic uncertainty in Q3 2019.
●
Net loans to customers decreased by £0.3 billion mainly due to reductions in
EU Divestment.
●
RWAs decreased by £4.5 billion due to model improvements, active capital
management and business transfers of £0.3 billion.
Q4 2019 compared with Q4 2018
●
Total income decreased by £40 million, or 3.6%, mainly due to lower deposit
income and lower non-interest income.
●
Excluding strategic, litigation and conduct costs, operating expenses
decreased by £88 million, or 13.2%, due to VAT recoveries and lower back
office operations costs.
●
Impairment losses increased by £76 million, principally due to higher single
name charges and IFRS 9 modelling adjustments.
Business performance summary
Private Banking
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Total income 777 775 195 198 198
Operating expenses (486) (478) (135) (119) (143)
Impairment releases 6 6 1 2 8
Operating profit 297 303 61 81 63
Return on equity 15.4% 15.4% 12.0% 16.8% 12.3%
Net interest margin 2.40% 2.52% 2.30% 2.35% 2.49%
Cost:income ratio 62.5% 61.7% 69.2% 60.1% 72.2%
£bn £bn £bn
Net loans to customers (amortised cost) 15.5 15.2 14.3
Customer deposits 28.4 28.2 28.4
RWAs 10.1 10.0 9.4
Assets Under Management (AUMs) 23.2 22.5 19.8
Assets Under Administration (AUAs) (1) 7.2 7.1 6.6
Assets Under Management and Administration (AUMA) 30.4 29.6 26.4
Note:
(1) Private Banking manages assets under management portfolios on behalf
of UK Personal Banking and RBSI. Prior to Q4 2018, the assets under management
portfolios of UK Personal Banking and RBSI were not included. Private Banking
receives a management fee from UK Personal Banking and clients of RBSI in
respect of providing this service.
Private banking offers a service-led, digitally enabled experience for its
clients, with approximately 75% of eligible clients banking with us digitally.
Our client servicing model utilises both digital and telephony through
Coutts24 and Adam24, which have client satisfaction ratings of 96% and 92%
respectively. Coutts Connect, our social platform which allows clients to
network and build working relationships with one another, now has over 1,700
active users since launching in 2018.
2019 compared with 2018
● Total income increased by £2 million, or 0.3%, as volume growth and one-off
benefits were partially offset by lower deposit income. Net interest margin
decreased by 12 basis points compared with 2018 primarily due to deposit
margin pressure.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £17 million, or 3.7%, primarily reflecting lower back office
operations costs.
● A net impairment release of £6 million reflected a number of one-off
releases.
● Net loans to customers increased by £1.2 billion, or 8.4%, mainly due to
mortgage lending, relative to an increase in RWAs of £0.7 billion, or 7.4%.
● Total assets under management in Private Banking increased by £3.4 billion,
or 17.2%, reflecting positive investment performance of £2.7 billion and net
new business inflows of £0.7 billion.
● Total assets under management and administration overseen by Private Banking
increased by £4.0 billion, or 15.2%, reflecting positive investment
performance of £3.2 billion and net new business inflows of £0.8 billion.
Q4 2019 compared with Q3 2019
● Total income decreased by £3 million, or 1.5%, as one-off benefits related to
hedging income gains recognised in Q3 2019 were partially offset by volume
growth in Q4 2019. Net interest margin decreased by 5 basis points compared to
Q3 2019 primarily due to lower deposit funding benefits.
● Excluding strategic, litigation and conduct costs, operating expenses
increased by £14 million, or 13.2%, primarily due to the annual UK bank levy
charge.
● Net loans to customers increased by £0.3 billion, or 2%, reflecting mortgage
lending.
● Total assets under management in Private Banking increased by £0.7 billion,
or 3.1%, reflecting positive investment performance of £0.4 billion and net
new business inflows of £0.3 billion.
● Total assets under management and administration overseen by Private Banking
increased by £0.8 billion, or 2.7%, reflecting positive investment
performance of £0.4 billion and net new business inflows of £0.4 billion.
Q4 2019 compared with Q4 2018
● Total income decreased by £3 million, or 1.5%, as lower deposit income was
partially offset by volume growth.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £13 million, or 9.8%, reflecting lower back office operations
costs and a number of one-off items.
Business performance summary
RBS International
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Total income 610 594 150 150 155
Operating expenses (264) (260) (83) (62) (86)
Impairment (losses)/releases (2) 2 (5) - 2
Operating profit 344 336 62 88 71
Return on equity 25.7% 24.4% 17.3% 26.0% 20.0%
Net interest margin 1.60% 1.71% 1.47% 1.55% 1.81%
Cost:income ratio 43.3% 43.8% 55.3% 41.3% 55.5%
£bn £bn £bn
Net loans to customers (amortised cost) 14.1 13.8 13.3
Customer deposits 30.1 29.1 27.5
RWAs 6.5 6.5 6.9
RBS International's existing personal customers can now open individual
savings accounts in an average time of 8 minutes rather than 14 days, with
over 3,000 new accounts opened this year using the automated process. Digital
adoption in personal banking has increased by more than 17%. Over 90% of
non-personal customers who provided feedback find our electronic banking
platform, eQ easy or extremely easy to use, with 18 new features introduced
into eQ through 2019 as part of our ongoing investment in the platform.
2019 compared with 2018
● Total income increased by £16 million, or 2.7%, due to increased customer
lending and deposits in Institutional and Local Banking. Institutional Banking
contributed 63% to income in 2019, with Local Banking 31% and Depositary
Services 6%. Net interest margin decreased by 11 basis points compared with
2018 as deposit margins reduced due to falling interest rates in the second
half of the year along with mortgage margin pressure.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased £16 million, or 6.2%, reflecting a £24 million reduction in back
office operations costs, partially offset by higher investment spend relating
to the digital proposition.
● Net loans to customers increased by £0.8 billion, or 6.0%, reflecting a Funds
business transfer of £0.5 billion from NatWest Markets and higher volumes in
Institutional and Local Banking.
● Customer deposits increased by £2.6 billion primarily reflecting activity in
the Funds sector and £1.1 billion growth in term and notice deposits.
● RWAs decreased by £0.4 billion as the impact of model updates was partially
offset by increased lending and business transfers.
Q4 2019 compared with Q3 2019
● Total income was stable at £150 million as higher non utilisation fees were
offset by lower deposit funding margins. Net interest margin decreased by 8
basis points compared with Q3 2019 primarily due to lower interest rates in
the US and Europe reducing deposit margins.
● Excluding strategic, litigation and conduct costs, operating expenses
increased by £21 million, or 36.8%, primarily due to the bank levy charge and
increased project costs relating to building the business' digital
proposition.
● Net loans to customers increased by £0.3 billion reflecting a Funds business
transfer of £0.5 billion from NatWest Markets, partially offset by short term
customer activity in the Funds Sector.
● Customer deposits increased by £1.0 billion primarily due to activity in the
Funds Sector.
Q4 2019 compared with Q4 2018
● Total income decreased by £5 million, or 3.2%, reflecting margin compression
as a result of US and European Central Bank rate reductions.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased £4 million, or 4.9%, primarily due to lower back office operations
costs.
Business performance summary
NatWest Markets(1)
Year ended and as at Quarter ended and as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Total income 1,342 1,442 250 150 152
Of which: Core income excluding own credit adjustments 1,082 1,259 196 184 200
Of which: Legacy income 340 91 76 (23) (81)
Of which: Own credit adjustments (OCA) (80) 92 (22) (11) 33
Operating expenses (1,418) (1,604) (392) (348) (455)
Impairment releases 51 92 10 5 100
Operating loss (25) (70) (132) (193) (203)
Return on equity (3.2%) (2.0%) (6.5%) (8.7%) (9.2%)
Cost:income ratio 105.7% 111.2% 156.8% 232.0% 299.3%
£bn £bn £bn
Funded assets 116.2 142.7 111.4
RWAs 37.9 43.8 44.9
Note:
(1) The NatWest Markets operating segment is not the same as the NatWest Markets
Plc legal entity or group. For 2019, NatWest Markets Plc entity includes
NatWest Markets N.V. from the 29 November 2019 only, whereas the NatWest
Markets franchise excludes the Central items & other segment. For periods
prior to Q4 2019, NatWest Markets N.V. was also excluded from the NatWest
Markets Plc entity.
NatWest Markets continued to play a leading role in market structural reform.
We were first-to-market with our Realised Rate calculator and we acted as the
sole solicitation agent for the first ever LIBOR to SONIA bond amendment
issued in the market.
2019 compared with 2018
● Total income decreased by £100 million, or 6.9%, reflecting lower core income
and own credit adjustments (OCA), partially offset by increased legacy income
following the £444 million gain on the merger of Alawwal bank with SABB.
● A core income reduction of £177 million, or 14.1%, was due to challenging
market conditions, most significantly in Q3 2019 when the business was
impacted by weak performance in the Rates business.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £35 million, or 2.9%.
● A net impairment release of £51 million compared with a release of £92
million in 2018, both reflecting a small number of legacy cases.
● RWAs decreased by £7.0 billion driven by the £4.7 billion reduction
following the merger of Alawwal bank with SABB and other legacy reductions.
Q4 2019 compared with Q3 2019
● Total income increased by £100 million, or 66.7%, primarily reflecting higher
legacy income from a release following the closure of a specific exposure.
● Excluding strategic, litigation and conduct costs, operating expenses
increased by £14 million, or 5.0%, reflecting the annual UK bank levy charge
and the timing of one-off expense items.
● RWAs decreased by £5.9 billion due to a £2.5 billion reduction in market
risk and a £2.4 billion decrease in counterparty risk, primarily in the core
business.
Q4 2019 compared with Q4 2018
● Total income increased by £98 million, or 64.5%, primarily reflecting higher
legacy income due to a release following the closure of a specific exposure.
● Excluding strategic, litigation and conduct costs, operating expenses
decreased by £20 million, or 6.3%, driven by the timing of one-off expense
items.
● An impairment release of £10 million compared with a release of £100 million
in Q4 2018. The Q4 2018 release was driven by a small number of legacy cases.
Central items & other
Year ended and as at Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Central items not allocated 1,385 (1,038) 939 162 (55)
Of which: Litigation and conduct costs 141 (809) (43) (171) (2)
Of which: FX recycling gain (1) 1,459 - 1,169 - -
Note:
(1) Includes £290 million arising on the completion of the Alawwal bank
merger in June 2019, £1,102 million arising on the liquidation of RFS
Holdings and £67 million in relation to dividends in UBI DAC.
● Central items not allocated include £1,459 million of FX recycling gains, a
£169 million reimbursement under indemnification agreements relating to US
residential mortgage-backed securities (RMBS) and strategic costs of £450
million. FY 2018 included a litigation and conduct charge of £809 million,
principally in respect of the settlement with the US Department of Justice.
Business performance summary
End-point CRR basis
31 December 30 September 31 December
2019 2019 2018
Risk asset ratios % % %
CET1 16.2 15.7 16.2
Tier 1 18.5 17.9 18.4
Total 21.2 20.5 21.8
Capital £m £m £m
Tangible equity 32,371 32,930 34,566
Expected loss less impairment provisions (167) (620) (654)
Prudential valuation adjustment (431) (466) (494)
Deferred tax assets (757) (732) (740)
Own credit adjustments (118) (234) (405)
Pension fund assets (474) (401) (394)
Cash flow hedging reserve (35) (336) 191
Foreseeable ordinary and special dividends (968) (362) (1,326)
Foreseeable charges (365) - -
Other adjustments for regulatory purposes (2) (6) (105)
Total deductions (3,317) (3,157) (3,927)
CET1 capital 29,054 29,773 30,639
AT1 capital 4,051 4,051 4,051
Tier 1 capital 33,105 33,824 34,690
Tier 2 capital 4,900 4,980 6,483
Total regulatory capital 38,005 38,804 41,173
Risk-weighted assets
Credit risk 131,000 136,200 137,900
Counterparty credit risk 12,600 15,000 13,600
Market risk 13,000 15,700 14,800
Operational risk 22,600 22,600 22,400
Total RWAs 179,200 189,500 188,700
Leverage (1)
Cash and balances at central banks 77,900 84,300 88,900
Trading assets 76,700 91,600 75,100
Derivatives 150,000 175,800 133,300
Financial assets 399,100 396,400 377,500
Other assets 19,300 28,400 19,400
Total assets 723,000 776,500 694,200
Derivatives
- netting and variation margin (157,800) (189,800) (141,300)
- potential future exposures 43,000 47,200 42,100
Securities financing transactions gross up 2,200 1,700 2,100
Undrawn commitments 42,500 43,900 50,300
Regulatory deductions and other adjustments (9,000) (9,400) (2,900)
CRR Leverage exposure 643,900 670,100 644,500
CRR leverage ratio% 5.1 5.0 5.4
UK leverage exposure (2) 570,300 589,500 559,500
UK leverage ratio% (2) 5.8 5.7 6.2
Notes:
(1) Based on end-point CRR Tier 1 capital and leverage exposure under the CRR
Delegated Act.
(2) Based on end-point CRR Tier 1 capital and UK leverage exposures reflecting the
post EU referendum measures announced by the Bank of England in the third
quarter of 2016.
Segment performance
Year ended 31 December 2019
Central
UK Personal Ulster Commercial Private RBS NatWest items & Total
Banking Bank RoI Banking Banking International Markets other (1) RBS
£m £m £m £m £m £m £m £m
Income statement
Net interest income 4,130 400 2,842 521 478 (188) (136) 8,047
Non-interest income 736 167 1,476 256 132 1,166 1,318 5,251
Own credit adjustments - - - - - (80) - (80)
Strategic disposals - - - - - 444 591 1,035
Total income 4,866 567 4,318 777 610 1,342 1,773 14,253
Direct expenses - staff costs (612) (197) (748) (162) (120) (626) (1,102) (3,567)
- other costs (360) (96) (296) (66) (57) (202) (2,405) (3,482)
Indirect expenses (1,431) (177) (1,193) (211) (67) (350) 3,429 -
Strategic costs - direct (17) (33) (63) (2) (12) (178) (1,076) (1,381)
- indirect (273) (27) (238) (36) (8) (44) 626 -
Litigation and conduct costs (925) (22) (62) (9) - (18) 141 (895)
Operating expenses (3,618) (552) (2,600) (486) (264) (1,418) (387) (9,325)
Operating profit/(loss) before impairment (losses)/releases 1,248 15 1,718 291 346 (76) 1,386 4,928
Impairment (losses)/releases (393) 34 (391) 6 (2) 51 (1) (696)
Operating profit/(loss) 855 49 1,327 297 344 (25) 1,385 4,232
Additional information
Return on equity (2) 9.6% 2.3% 8.4% 15.4% 25.7% (3.2%) nm 9.4%
Cost:income ratio (2) 74.4% 97.4% 58.9% 62.5% 43.3% 105.7% nm 65.1%
Total assets (£bn) 182.3 25.4 165.4 23.3 31.7 263.9 31.0 723.0
Funded assets (£bn) 182.3 25.4 165.4 23.3 31.7 116.2 28.7 573.0
Net loans to customers - amortised cost (£bn) 158.9 18.2 101.2 15.5 14.1 8.4 10.6 326.9
Loan impairment rate (2) 25bps (18)bps 38bps nm nm nm nm 21bps
Impairment provisions (£bn) (1.4) (0.8) (1.3) - - (0.1) (0.1) (3.7)
Impairment provisions - stage 3 (£bn) (0.8) (0.7) (1.0) - - (0.1) (0.1) (2.7)
Customer deposits (£bn) 150.3 18.5 135.0 28.4 30.1 3.7 3.2 369.2
Risk-weighted assets (RWAs) (£bn) 37.8 13.0 72.5 10.1 6.5 37.9 1.4 179.2
RWA equivalent (RWAe) (£bn) 38.2 13.2 72.8 10.1 6.7 40.5 1.7 183.2
Employee numbers (FTEs - thousands) 20.3 2.9 10.2 1.9 1.8 5.0 21.9 64.0
Average interest earning assets (£bn) 167.2 25.1 145.9 21.7 29.9 35.4 nm 448.6
Net interest margin 2.47% 1.59% 1.95% 2.40% 1.60% (0.53%) nm 1.79%
Third party customer asset rate (3) 3.22% 2.27% 3.16% 2.91% 2.89% nm nm nm
Third party customer funding rate (3) (0.38%) (0.16%) (0.43%) (0.43%) (0.13%) nm nm nm
For the notes to this table, refer to page 22. nm = not meaningful.
Segment performance
Year ended 31 December 2018
Central
UK Personal Ulster Commercial Private RBS NatWest items & Total
Banking Bank RoI Banking Banking International Markets other (1) RBS
£m £m £m £m £m £m £m £m
Income statement
Net interest income 4,283 444 2,855 518 466 112 (22) 8,656
Non-interest income 771 166 1,747 257 128 1,238 347 4,654
Own credit adjustments - - - - - 92 - 92
Total income 5,054 610 4,602 775 594 1,442 325 13,402
Direct expenses - staff costs (698) (202) (739) (161) (102) (557) (1,190) (3,649)
- other costs (266) (103) (255) (66) (67) (241) (2,712) (3,710)
Indirect expenses (1,464) (185) (1,294) (229) (91) (415) 3,678 -
Strategic costs - direct (41) (2) (33) - (3) (195) (730) (1,004)
- indirect (185) (20) (122) (21) (6) (43) 397 -
Litigation and conduct costs (213) (71) (44) (1) 9 (153) (809) (1,282)
Operating expenses (2,867) (583) (2,487) (478) (260) (1,604) (1,366) (9,645)
Operating profit/(loss) before impairment (losses)/releases 2,187 27 2,115 297 334 (162) (1,041) 3,757
Impairment (losses)/releases (339) (15) (147) 6 2 92 3 (398)
Operating profit/(loss) 1,848 12 1,968 303 336 (70) (1,038) 3,359
Additional information
Return on equity (2) 24.7% 0.5% 12.1% 15.4% 24.4% (2.0%) nm 4.8%
Cost:income ratio (2) 56.7% 95.6% 52.8% 61.7% 43.8% 111.2% nm 71.7%
Total assets (£bn) 171.0 25.2 166.4 22.0 28.4 244.5 36.7 694.2
Funded assets (£bn) 171.0 25.2 166.4 22.0 28.4 111.4 36.5 560.9
Net loans to customers - amortised cost (£bn) 148.9 18.8 101.4 14.3 13.3 8.4 - 305.1
Loan impairment rate (2) 23bps 8bps 14bps nm nm nm nm 13bps
Impairment provisions (£bn) (1.2) (1.0) (1.4) - - (0.2) - (3.8)
Impairment provisions - stage 3 (£bn) (0.7) (0.8) (1.1) - - (0.2) - (2.8)
Customer deposits (£bn) 145.3 18.0 134.4 28.4 27.5 2.6 4.7 360.9
Risk-weighted assets (RWAs) (£bn) 34.3 14.7 78.4 9.4 6.9 44.9 0.1 188.7
RWA equivalent (RWAe) (£bn) 35.5 14.7 79.7 9.5 6.9 50.0 0.2 196.5
Employee numbers (FTEs - thousands) 21.7 3.1 10.3 1.9 1.7 4.8 23.6 67.1
Average interest earning assets (£bn) 160.6 24.8 145.3 20.5 27.3 27.9 nm 437.0
Net interest margin 2.67% 1.79% 1.96% 2.52% 1.71% 0.40% nm 1.98%
Third party customer asset rate (3) 3.36% 2.41% 3.02% 2.89% 2.88% nm nm nm
Third party customer funding rate (3) (0.31%) (0.20%) (0.30%) (0.25%) (0.09%) nm nm nm
For the notes to this table, refer to page 22. nm = not meaningful.
Segment performance
Quarter ended 31 December 2019
Central
UK Personal Ulster Commercial Private RBS NatWest items & Total
Banking Bank RoI Banking Banking International Markets other (1) RBS
£m £m £m £m £m £m £m £m
Income statement
Net interest income 1,012 98 715 130 117 (4) (31) 2,037
Non-interest income 183 42 361 65 33 276 1,258 2,218
Own credit adjustments - (1) - - - (22) 1 (22)
Total income 1,195 139 1,076 195 150 250 1,228 4,233
Direct expenses - staff costs (142) (38) (180) (40) (31) (118) (286) (835)
- other (101) (26) (67) (14) (20) (74) (768) (1,070)
costs
Indirect expenses (399) (46) (330) (66) (27) (104) 972 -
Strategic costs - direct (9) (21) (26) (2) (3) (74) (402) (537)
- (130) (8) (85) (6) (2) (7) 238 -
indirect
Litigation and conduct costs (7) (1) (12) (7) - (15) (43) (85)
Operating expenses (788) (140) (700) (135) (83) (392) (289) (2,527)
Operating profit before impairment (losses)/releases 407 (1) 376 60 67 (142) 939 1,706
Impairment (losses)/releases (81) (4) (81) 1 (5) 10 - (160)
Operating profit/(loss) 326 (5) 295 61 62 (132) 939 1,546
Additional information
Return on equity (2) 14.9% (1.0%) 7.6% 12.0% 17.3% (6.5%) nm 17.7%
Cost:income ratio (2) 65.9% 100.7% 63.9% 69.2% 55.3% 156.8% nm 59.4%
Total assets (£bn) 182.3 25.4 165.4 23.3 31.7 263.9 31.0 723.0
Funded assets (£bn) 182.3 25.4 165.4 23.3 31.7 116.2 28.7 573.0
Net loans to customers - amortised cost (£bn) 158.9 18.2 101.2 15.5 14.1 8.4 10.6 326.9
Loan impairment rate (2) 20bps 8bps 32bps nm nm nm nm 19bps
Impairment provisions (£bn) (1.4) (0.8) (1.3) - - (0.1) (0.1) (3.7)
Impairment provisions - stage 3 (£bn) (0.8) (0.7) (1.0) - - (0.1) (0.1) (2.7)
Customer deposits (£bn) 150.3 18.5 135.0 28.4 30.1 3.7 3.2 369.2
Risk-weighted assets (RWAs) (£bn) 37.8 13.0 72.5 10.1 6.5 37.9 1.4 179.2
RWA equivalent (RWAe) (£bn) 38.2 13.2 72.8 10.1 6.7 40.5 1.7 183.2
Employee numbers (FTEs - thousands) 20.3 2.9 10.2 1.9 1.8 5.0 21.9 64.0
Average interest earning assets (£bn) 172.9 24.8 146.4 22.4 31.6 36.6 nm 456.2
Net interest margin 2.32% 1.57% 1.94% 2.30% 1.47% (0.04%) nm 1.77%
Third party customer asset rate (3) 3.09% 2.23% 3.15% 2.86% 2.79% nm nm nm
Third party customer funding rate (3) (0.38%) (0.15%) (0.43%) (0.40%) (0.09%) nm nm nm
For the notes to this table, refer to page 22. nm = not meaningful.
Segment performance
Quarter ended 30 September 2019
Central
UK Personal Ulster Commercial Private RBS NatWest items & Total
Banking Bank RoI Banking Banking International Markets other (1) RBS
£m £m £m £m £m £m £m £m
Income statement
Net interest income 1,034 102 703 130 119 (62) (20) 2,006
Non-interest income 190 43 374 68 31 223 (20) 909
Own credit adjustments - - - - - (11) (1) (12)
Total income 1,224 145 1,077 198 150 150 (41) 2,903
Direct expenses - staff costs (157) (53) (194) (40) (30) (159) (258) (891)
- other costs (95) (22) (74) (17) (14) (42) (578) (842)
Indirect expenses (357) (43) (294) (49) (13) (81) 837 -
Strategic costs - direct (12) (3) (5) - (4) (55) (136) (215)
- indirect (68) (9) (67) (13) (1) (7) 165 -
Litigation and conduct costs (912) (1) (4) - - (4) 171 (750)
Operating expenses (1,601) (131) (638) (119) (62) (348) 201 (2,698)
Operating (loss)/profit before impairment (losses)/releases (377) 14 439 79 88 (198) 160 205
Impairment (losses)/releases (131) 17 (108) 2 - 5 2 (213)
Operating (loss)/profit (508) 31 331 81 88 (193) 162 (8)
Additional information
Return on equity (2) (26.8%) 5.8% 8.4% 16.8% 26.0% (8.7%) nm (3.8%)
Cost:income ratio (2) 130.8% 90.3% 57.9% 60.1% 41.3% 232.0% nm 92.9%
Total assets (£bn) 176.7 26.1 166.6 22.6 31.2 318.3 35.0 776.5
Funded assets (£bn) 176.7 26.0 166.6 22.6 31.2 142.7 34.9 600.7
Net loans to customers - amortised cost (£bn) 154.6 19.0 101.5 15.2 13.8 9.1 6.3 319.5
Loan impairment rate (2) 34bps (34)bps 42bps nm nm nm nm 26bps
Impairment provisions (£bn) (1.4) (0.8) (1.3) - - (0.2) (0.1) (3.8)
Impairment provisions - stage 3 (£bn) (0.8) (0.8) (1.0) - - (0.2) - (2.8)
Customer deposits (£bn) 147.9 18.8 135.7 28.2 29.1 3.3 6.7 369.7
Risk-weighted assets (RWAs) (£bn) 37.5 13.3 77.0 10.0 6.5 43.8 1.4 189.5
RWA equivalent (RWAe) (£bn) 38.4 13.6 78.1 10.0 6.6 48.9 1.7 197.3
Employee numbers (FTEs - thousands) 21.0 3.0 10.4 1.9 1.8 5.1 22.5 65.7
Average interest earning assets (£bn) 168.1 26.2 146.7 22.0 30.4 38.6 nm 454.4
Net interest margin 2.44% 1.55% 1.90% 2.35% 1.55% (0.64%) nm 1.75%
Third party customer asset rate (3) 3.22% 2.23% 3.11% 2.87% 2.91% nm nm nm
Third party customer funding rate (3) (0.38%) (0.15%) (0.43%) (0.43%) (0.14%) nm nm nm
For the notes to this table, refer to the following page. nm = not meaningful.
Segment performance
Quarter ended 31 December 2018
Central
UK Personal Ulster Commercial Private RBS NatWest items & Total
Banking Bank RoI Banking Banking International Markets other (1) RBS
£m £m £m £m £m £m £m £m
Income statement
Net interest income 1,061 110 724 133 123 30 (5) 2,176
Non-interest income 185 37 392 65 32 89 49 849
Own credit adjustments - - - - - 33 - 33
Total income 1,246 147 1,116 198 155 152 44 3,058
Direct expenses - staff costs (166) (53) (185) (39) (25) (128) (263) (859)
- other costs (80) (27) (77) (22) (22) (65) (870) (1,163)
Indirect expenses (414) (52) (403) (72) (35) (123) 1,099 -
Strategic costs - direct (27) (3) (5) - (1) (89) (230) (355)
- indirect (63) (12) (57) (10) (2) (22) 166 -
Litigation and conduct costs (7) (17) (37) - (1) (28) (2) (92)
Operating expenses (757) (164) (764) (143) (86) (455) (100) (2,469)
Operating profit/(loss) before impairment (losses)/releases 489 (17) 352 55 69 (303) (56) 589
Impairment (losses)/releases (142) 19 (5) 8 2 100 1 (17)
Operating profit/(loss) 347 2 347 63 71 (203) (55) 572
Additional information
Return on equity (2) 17.2% 0.4% 8.3% 12.3% 20.0% (9.2%) nm 3.5%
Cost:income ratio (2) 60.8% 111.6% 67.5% 72.2% 55.5% 299.3% nm 80.5%
Total assets (£bn) 171.0 25.2 166.4 22.0 28.4 244.5 36.7 694.2
Funded assets (£bn) 171.0 25.2 166.4 22.0 28.4 111.4 36.5 560.9
Net loans to customers - amortised cost (£bn) 148.9 18.8 101.4 14.3 13.3 8.4 - 305.1
Loan impairment rate (2) 38bps (38)bps 2bps nm nm nm nm 2bps
Impairment provisions (£bn) (1.2) (1.0) (1.4) - - (0.2) - (3.8)
Impairment provisions - stage 3 (£bn) (0.7) (0.8) (1.1) - - (0.2) - (2.8)
Customer deposits (£bn) 145.3 18.0 134.4 28.4 27.5 2.6 4.7 360.9
Risk-weighted assets (RWAs) (£bn) 34.3 14.7 78.4 9.4 6.9 44.9 0.1 188.7
RWA equivalent (RWAe) (£bn) 35.5 14.7 79.7 9.5 6.9 50.0 0.2 196.5
Employee numbers (FTEs - thousands) 21.7 3.1 10.3 1.9 1.7 4.8 23.6 67.1
Average interest earning assets (£bn) 161.7 25.2 146.7 21.2 26.9 30.4 nm 442.1
Net interest margin 2.60% 1.73% 1.96% 2.49% 1.81% 0.39% nm 1.95%
Third party customer asset rate (3) 3.33% 2.43% 3.19% 2.94% 2.98% nm nm nm
Third party customer funding rate (3) (0.36%) (0.18%) (0.42%) (0.38%) (0.09%) nm nm nm
nm = not meaningful
Notes:
(1) Central items and other include unallocated transactions, including
volatile items under IFRS, items related to Alawwal bank merger and a US RMBS
related reimbursement.
(2) Refer to the Appendix for further details of preparation and
reconciliation of non-IFRS performance measures where relevant.
(3) UBI DAC and RBS International manage their funding and liquidity
requirements locally. Their liquidity asset portfolios and non-customer
related funding sources are included within their net interest margin, but
excluded from their third party asset and liability rates.
Condensed consolidated income statement for the period ended 31 December
2019
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018* 2019 2019 2018*
£m £m £m £m £m
Interest receivable 11,375 11,049 2,901 2,921 2,825
Interest payable (3,328) (2,393) (864) (915) (649)
Net interest income (1) 8,047 8,656 2,037 2,006 2,176
Fees and commissions receivable 3,359 3,218 789 808 785
Fees and commissions payable (848) (861) (175) (186) (190)
Income from trading activities 932 1,507 138 195 161
Other operating income 2,763 882 1,444 80 126
Non-interest income 6,206 4,746 2,196 897 882
Total income 14,253 13,402 4,233 2,903 3,058
Staff costs (4,018) (4,122) (990) (1,000) (1,014)
Premises and equipment (1,259) (1,383) (436) (265) (411)
Other administrative expenses (2,828) (3,372) (743) (1,222) (851)
Depreciation and amortisation (1,176) (731) (323) (232) (187)
Impairment of other intangible assets (44) (37) (35) 21 (6)
Operating expenses (9,325) (9,645) (2,527) (2,698) (2,469)
Profit before impairment losses 4,928 3,757 1,706 205 589
Impairment losses (696) (398) (160) (213) (17)
Operating profit/(loss) before tax 4,232 3,359 1,546 (8) 572
Tax charge (432) (1,208) (37) (201) (118)
Profit/(loss) for the period 3,800 2,151 1,509 (209) 454
Attributable to:
Ordinary shareholders 3,133 1,622 1,410 (315) 286
Other owners 406 537 99 105 182
Non-controlling interests 261 (8) - 1 (14)
Earnings/(loss) per ordinary share 26.0p 13.5p 11.7p (2.6p) 2.4p
Earnings/(loss) per ordinary share - fully diluted 25.9p 13.4p 11.6p (2.6p) 2.3p
*Restated for IAS12 'income taxes'. Refer to Accounting policy 1, Other
amendments to IFRS, for further details.
Note:
(1) Negative interest on loans is reported as interest payable. Negative interest
on customer deposits is reported as interest receivable.
Condensed consolidated statement of comprehensive income for the period ended
31 December 2019
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018* 2019 2019 2018*
£m £m £m £m £m
Profit/(loss) for the period 3,800 2,151 1,509 (209) 454
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes
- contributions in preparation for ring-fencing (1) - (2,053) - - (53)
- other movements (142) 86 (46) (28) 14
(Loss)/profit on fair value of credit in financial liabilities
designated at FVTPL due to own credit risk (189) 200 (74) (19) 91
FVOCI financial assets (71) 48 21 (130) (13)
Tax 28 502 4 (2) 15
(374) (1,217) (95) (179) 54
Items that do qualify for reclassification
FVOCI financial assets (14) 7 (11) 9 (24)
Cash flow hedges 294 (581) (394) 286 241
Currency translation (1,836) 310 (1,538) (57) 190
Tax (170) 189 23 (71) (35)
(1,726) (75) (1,920) 167 372
Other comprehensive (loss)/income after tax (2,100) (1,292) (2,015) (12) 426
Total comprehensive income/(loss) for the period 1,700 859 (506) (221) 880
Total comprehensive income/(loss) is attributable to:
Ordinary shareholders 1,044 305 (580) (326) 709
Preference shareholders 39 182 9 10 88
Paid-in equity holders 367 355 90 95 94
Non-controlling interests 250 17 (25) - (11)
1,700 859 (506) (221) 880
*Restated for IAS12 'income taxes'. Refer to Accounting policy 1, Other
amendments to IFRS, for further details.
Note:
(1) On 17 April 2018, RBS agreed a Memorandum of Understanding (MoU) with the
Trustees of the RBS Group Pension Fund in connection with the requirements of
ring-fencing. NatWest Markets Plc could not continue to be a participant in
the Main section and separate arrangements were required for its employees.
Under the MoU, NWB Plc made a contribution of £2 billion on 9 October 2018 to
strengthen funding of the Main section in recognition of the changes in
covenant. Also under the MoU, NWM Plc made a £53 million contribution to the
NWM section in Q1 2019.
Condensed consolidated balance sheet as at 31 December 2019
31 December 30 September 31 December
2019 2019 2018
£m £m £m
Assets
Cash and balances at central banks 77,858 84,252 88,897
Trading assets 76,745 91,605 75,119
Derivatives 150,029 175,760 133,349
Settlement balances 4,387 12,962 2,928
Loans to banks - amortised cost 10,689 12,440 12,947
Loans to customers - amortised cost 326,947 319,493 305,089
Other financial assets 61,452 64,488 59,485
Intangible assets 6,622 6,646 6,616
Other assets 8,310 8,861 9,805
Total assets 723,039 776,507 694,235
Liabilities
Bank deposits 20,493 22,095 23,297
Customer deposits 369,247 369,708 360,914
Settlement balances 4,069 11,862 3,066
Trading liabilities 73,949 87,374 72,350
Derivatives 146,879 173,750 128,897
Other financial liabilities 45,220 47,508 39,732
Subordinated liabilities 9,979 10,200 10,535
Other liabilities 9,647 9,864 8,954
Total liabilities 679,483 732,361 647,745
Equity
Ordinary shareholders' interests 38,993 39,576 41,182
Other owners' interests 4,554 4,554 4,554
Owners' equity 43,547 44,130 45,736
Non-controlling interests 9 16 754
Total equity 43,556 44,146 46,490
Total liabilities and equity 723,039 776,507 694,235
Condensed consolidated statement of changes in equity for the period ended 31
December 2019
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Called-up share capital - at 1 January 12,049 11,965 12,094 12,091 12,048
Ordinary shares issued 45 84 - 3 1
At 31 December 12,094 12,049 12,094 12,094 12,049
Paid-in equity - at 1 January and 31 December 4,058 4,058 4,058 4,058 4,058
Share premium account - at 1 January 1,027 887 1,094 1,089 1,026
Ordinary shares issued 67 140 - 5 1
At 31 December 1,094 1,027 1,094 1,094 1,027
Merger reserve - at 1 January and 31 December 10,881 10,881 10,881 10,881 10,881
FVOCI reserve - at 1 January 343 255 125 265 361
Implementation of IFRS 9 on 1 January 2018 - 34 - - -
Unrealised (losses)/gains (107) 97 (11) (141) (11)
Realised (gains)/losses (90) (42) 27 16 (20)
Tax (8) (1) (3) (15) 13
At 31 December 138 343 138 125 343
Cash flow hedging reserve - at 1 January (191) 227 336 117 (370)
Amount recognised in equity (1) 573 (63) (285) 334 231
Amount transferred from equity to earnings (2) (279) (518) (109) (48) 10
Tax (68) 163 93 (67) (62)
At 31 December (3) 35 (191) 35 336 (191)
Foreign exchange reserve - at 1 January 3,278 2,970 2,924 2,982 3,073
Retranslation of net assets (428) 195 (381) (77) 196
Foreign currency losses on hedges of net assets (2) 83 (33) 61 21 (43)
Tax (110) 23 (116) (2) 19
Recycled to profit or loss on disposal of businesses (4) (1,480) 123 (1,145) - 33
At 31 December (3) 1,343 3,278 1,343 2,924 3,278
Retained earnings - at 1 January 14,312 17,130 12,663 14,784 16,823
Implementation of IFRS 9 on 1 January 2018 - (105) - - -
Implementation of IFRS 16 on 1 January 2019 (5) (187)
Profit/(loss) attributable to ordinary shareholders and
other equity owners 3,539 2,159 1,509 (210) 468
Equity preference dividends paid (39) (182) (9) (10) (88)
Paid-in equity dividends paid (367) (355) (90) (95) (94)
Ordinary dividends paid (3,018) (241) - (1,691) -
Redemption of equity preference shares (6) - (2,805) - - (2,805)
Realised gains in period on FVOCI equity shares 112 6 (6) 4 1
Remeasurement of the retirement benefit schemes
- contributions in preparation for ring-fencing (7) - (2,053) - - (53)
- other movements (142) 86 (46) (28) 14
- tax 24 539 (1) 7 23
Changes in fair value of credit in financial liabilities
designated at fair value through profit or loss
- gross (189) 200 (74) (19) 91
- tax 20 (33) 6 4 (13)
Shares issued under employee share schemes (6) (2) (2) - -
Share-based payments (113) (32) (4) (83) (55)
At 31 December 13,946 14,312 13,946 12,663 14,312
Condensed consolidated statement of changes in equity for the period ended 31
December 2019
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
Own shares held - at 1 January (21) (43) (45) (46) (24)
Shares issued under employee share schemes 39 87 5 1 5
Own shares acquired (60) (65) (2) - (2)
At 31 December (42) (21) (42) (45) (21)
Owners' equity at 31 December 43,547 45,736 43,547 44,130 45,736
Non-controlling interests - at 1 January 754 763 16 16 791
Currency translation adjustments and other movements (11) 25 (25) (1) 3
(Loss)/profit attributable to non-controlling interests 261 (8) - 1 (14)
Dividends paid (5) (5) (5) - (5)
Equity raised (8) 45 - - -
Equity withdrawn and disposals (9) (1,035) (21) 23 - (21)
At 31 December 9 754 9 16 754
Total equity at 31 December 43,556 46,490 43,556 44,146 46,490
Total equity is attributable to:
Ordinary shareholders 38,993 41,182 38,993 39,576 41,182
Preference shareholders 496 496 496 496 496
Paid-in equity holders 4,058 4,058 4,058 4,058 4,058
Non-controlling interests 9 754 9 16 754
43,556 46,490 43,556 44,146 46,490
Notes:
(1) The amount credited to the cash flow hedging reserve comprised £585 million
(2018 - £166 million debit) in relation to interest rate hedges lesser debit
of £12 million (2018 - £103 million credit) in relation to foreign exchange
hedges.
(2) The cash flow hedging reserve was reduced by £243 million in relation to
interest rate hedges (2018 - £493 million) credited net interest income and
reduced by £36 million (2018 - £25 million) in relation to foreign exchange
hedging which was credited to net interest income.
(3) The hedging element of the cash flow hedging reserve and foreign exchange
reserve relates mainly to de-designated hedges.
(4) Includes £290 million recycled on completion of the Alawwal bank merger in
June 2019 (with a further £48m shown in Tax), £1,102 million recycled on the
subsequent liquidation of RFS Holdings B.V. (with a further £65m shown in
Tax), and £67m attributable to the capital repayment by UBI DAC. The
Alawwal bank merger resulted in the derecognition of the associate investment
in Alawwal bank and recognition of a new investment in SABB held at FVOCI.
The recycling gains arising from the liquidation of RFS Holdings BV and
capital repayment by UBIDAC have been calculated using the step-by-step method
in IFRIC 16 'Hedges of a Net Investment in a Foreign Operation' and by
reference to the proportion of capital repaid. Amount recycled also includes
£2,661 million related with historical hedge relationship taken to non
interest income.
(5) Refer to Note 2 for further information on the impact of IFRS 16
implementation.
(6) During 2018, non-cumulative US dollar, Euro and Sterling preference shares
were redeemed.
(7) On 17 April 2018 RBS agreed a Memorandum of Understanding (MoU) with the
Trustees of the RBS Group Pension Fund in connection with the requirements of
ring-fencing. NWM Plc cannot contribute to be a participant in the Main
section and separate arrangements are required for its employees. Under the
MoU, NWB Plc made a contribution of £2 billion on 9 October 2018 to
strengthen funding of the Main section in recognition of the changes in
covenant. Also under the MoU, NWM Plc made a £53 million contribution to the
NWM section in Q1 2019.
(8) Capital injection from RFS Holdings B.V Consortium members.
(9) Distributed to RFS Holding B.V. Consortium members on completion of the
Alawwal bank merger.
Condensed consolidated cash flow statement for the period ended 31 December
2019
Year ended
31 December 31 December
2019 2018
£m £m
Operating activities
Operating profit before tax 4,232 3,359
Adjustments for non-cash items 3,282 1,937
Net cash outflow from trading activities 7,514 5,296
Changes in operating assets and liabilities (10,929) (11,537)
Net cash flows from operating activities before tax (3,415) (6,241)
Income taxes paid (278) (466)
Net cash flows from operating activities (3,693) (6,707)
Net cash flows from investing activities (716) (7,994)
Net cash flows from financing activities (1) (1,956) 356
Effects of exchange rate changes on cash and cash equivalents (1,983) 676
Net decrease in cash and cash equivalents (8,348) (13,669)
Cash and cash equivalents at beginning of year 108,936 122,605
Cash and cash equivalents at end of year 100,588 108,936
Note:
(1) 2018 has been re-presented to align the balance sheet classification. MREL
was previously presented in Operating activities and is now presented in
Financing activities.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction
with RBS's 2019 Annual Report and Accounts which were prepared in accordance
with International Financial Reporting Standards issued by the International
Accounting Standards Board (IASB) and interpretations issued by the IFRS
Interpretations Committee of the IASB as adopted by the European Union (EU)
(together IFRS).
Going concern
Having reviewed RBS's forecasts, projections and other relevant evidence, the
directors have a reasonable expectation that RBS will continue in operational
existence for the foreseeable future. Accordingly, the results for the period
ended 31 December 2019 have been prepared on a going concern basis.
Re-segmentation
Effective from 1 January 2019, Business Banking was transferred from UK
Personal & Business Banking (UK PBB) to Commercial Banking as the nature
of the business, including distribution channels, products and customers, are
more closely aligned to the Commercial Banking business. Concurrent with the
transfer, UK PBB was renamed UK Personal Banking and the previous franchise
combining UK PBB (now UK Personal Banking) and Ulster Bank RoI was renamed
Personal & Ulster. Reportable segmental comparatives have been re-stated.
Franchises
RBS continues to deliver on its plan to build a strong, simple and fair bank
for both customers and shareholders. To help develop and deliver this
strategy, in the fourth quarter of 2019, Commercial & Private Banking
(CPB), combining the reportable segments of Commercial Banking and Private
Banking ceased to operate as one business area and the franchise Personal
& Ulster, combining the reportable segments of UK Personal Banking and
Ulster Bank RoI was also disbanded. The reportable operating segments remain
unchanged and no comparatives have been restated.
2. Accounting policies
RBS's principal accounting policies are as set out on pages 208 to 212 of the
2019 Annual Report and Accounts. From 1 January 2019, the accounting policies
have been updated to reflect the adoption of the below.
Adoption of new accounting standard - Leases
RBS has adopted IFRS 16 'Leases' with effect from 1 January 2019, replacing
IAS 17 'Leases'. RBS has applied IFRS 16 on a modified retrospective basis
without restating prior years. For further details, see Accounting policy 9
and Note 22 of RBS's 2019 Annual Report and Accounts.
Amendments to existing accounting standards
IAS 12 'Income taxes' was amended with effect from 1 January 2019. The income
statement now includes any tax relief on the servicing cost of instruments
classified as equity. For further details, see Note 7 of RBS's 2019 Annual
Report and Accounts.
Revised accounting policy - Presentation of interest in recoveries
In March 2019 the IFRS Interpretations Committee (IFRIC) issued an agenda
decision on the presentation of unrecognised interest when a credit-impaired
financial asset (commonly referred to as a 'Stage 3' financial asset) is
subsequently paid in full or is no longer credit-impaired. This concluded that
the difference arising from the additional interest recovered must be
recognised as a reversal of impairment rather than within interest revenue.
This affects both recognition and the reversal of the ECL allowance.
RBS Group changed its accounting policy in line with the IFRIC decision.
Hence, the gross carrying amount of the financial assets within the scope of
the provisions of the decision, as well as the associated ECL allowance on the
statement of financial position, have been adjusted by £460 million and the
comparative period restated by £455 million with no effect on equity. The
coverage ratio for the current and comparative periods have been adjusted and
restated accordingly.
In addition, until 1 January 2019, interest in suspense recoveries were
presented as a component of interest receivable within Net interest income.
From 1 January 2019 interest in suspense recoveries are presented within
Impairment losses. It amounted to £64 million for the year ended 31 December
2019. Comparatives have not been rested on the grounds of materiality.
For further details see Accounting policies of RBS's 2019 Annual Report and
Accounts.
IAS 39 'Financial Instruments: Recognition and Measurement', IFRS 9 'Financial
Instruments' and IFRS 7 'Financial Instruments: Disclosures' - In September
2019, the IASB published amendments to address the issues arising from the
replacement of existing IBOR based interest rate benchmarks with alternative
nearly risk-free interest rates (RFRs) in the context of hedge accounting.
These amendments allow hedging relationships affected by the IBOR reform to be
accounted for as continuing hedges. RBS has early adopted these amendments for
the annual reporting period ending on 31 December 2019.
The amendments provide relief on key areas of hedge accounting most notably
the hedge effectiveness assessment and the ability to identify LIBOR-based
cash flows for the purpose of designation (re-designation) during the period
of the Reform. Additional disclosures are shown in note 10 of RBS's 2019
Annual Report and Accounts.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to
the portrayal of RBS's financial condition are those relating to deferred tax,
fair value of financial instruments, loan impairment provisions, goodwill, and
provisions for liabilities and charges. These critical accounting policies and
judgements are described on page 212 of RBS's 2019 Annual Report and Accounts.
Notes
3. Provisions for liabilities and charges
Payment Other Litigation and
protection customer other regulatory
insurance (1) redress (incl. RMBS) Other (2) Total
£m £m £m £m £m
At 1 January 2019 695 536 783 990 3,004
Implementation of IFRS 16 on 1 January 2019 (3) - - - (170) (170)
Other movements - (11) (6) (18) (35)
Charge to income statement - 17 5 33 55
Releases to income statement - (12) (9) (16) (37)
Provisions utilised (136) (81) (6) (114) (337)
At 31 March 2019 559 449 767 705 2,480
Other movements - 7 3 25 35
Charge to income statement - 64 18 100 182
Releases to income statement - (11) (33) (70) (114)
Provisions utilised (116) (90) (28) (79) (313)
At 30 June 2019 443 419 727 681 2,270
Other movements - (6) 19 30 43
Charge to income statement 900 29 14 69 1,012
Releases to income statement - (14) (32) (25) (71)
Provisions utilised (99) (70) (227) (66) (462)
At 30 September 2019 1,244 358 501 689 2,792
Other movements - (8) (22) (12) (42)
Transfer - 35 (35) - -
Charge to income statement - 31 51 232 314
Releases to income statement - (11) (37) (50) (98)
Provisions utilised (88) (91) (32) (78) (289)
At 31 December 2019 1,156 314 426 781 2,677
Notes:
(1) The balance at 31 December 2019 includes provisions held in relation
to offers made in 2018 and earlier years of £97 million.
(2) Materially comprises provisions relating to property closures and
restructuring costs.
(3) Refer to Note 2 for further information on the impact of the
implementation of IFRS 16.
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.
Payment protection insurance
An additional provision of £0.9 billion was taken during Q3 2019, reflecting
greater than predicted complaints volumes in the lead up to the 29 August 2019
deadline for making new PPI complaints. RBS Group has made provisions
totalling £6.2 billion to date for PPI claims, of which £5.0 billion had
been utilised by 31 December 2019.
The table below shows the sensitivity of the provision to reasonable changes
in the principal assumptions in relation to claims which are still being
processed, all other assumptions remaining the same. RBS Group have received
4.9m claims as at the 29th August 2019 deadline.
Sensitivity
Consequential
Claims change in
Processed as at Claims still Change in provision
Assumption 31 December 2019 to process assumption £m
Average redress (1) £1,631 £1,552 +/-£150 +/-74
No PPI % (2) 28% 60% +/-3% +/-13
Uphold rate (3) 85% 94% +/-2% +/-16
Notes:
(1) Average redress for PPI (mis-sale) and Plevin (commission) pay outs
(2) No PPI % relates to cases where no PPI policy exists. Submissions
submitted close to the statutory deadline have shown a much higher incidence
of no product with the Group.
(3) Average uphold rate per customer initiated claims received directly
by RBS, including those received via CMCs, to end of timebar for both PPI
(mis-sale) and Plevin (commission), excluding those for which no PPI policy
exists.
Notes
4. Material developments in litigation, investigations and reviews
RBSG plc and certain members of RBS 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 26 in the 2019 Annual Report and
Accounts, issued on 14 February 2020 and available at RBS.com ("Note 26"),
discusses the Matters in which RBS Group is currently involved and
developments to those matters. Other than the Matters discussed in Note 26, no
member of RBS 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 26 that have occurred since the Q3 2019
Interim Management Statement was issued on 24 October 2019, include, but are
not limited to, those set out below.
Litigation
FX antitrust litigation
On 11 December 2019, an application seeking an opt-out collective proceedings
order was filed in the UK Competition Appeal Tribunal ('the CAT') against RBSG
plc, NWM Plc and other banks. The application has been brought on behalf of
persons who, between 18 December 2007 and 31 January 2013, entered into a
relevant FX spot or outright forward transaction in the EEA with a relevant
financial institution or on an electronic communications network. A similar
application was filed in the CAT on 29 July 2019 and which was previously
disclosed. It is anticipated that the CAT will determine which of the two
opt-out applications should be permitted to represent the class.
Investigations and reviews
Investment advice review
As previously disclosed, RBS Group undertook a past business review of
investment advice provided during 2010 to 2015. During October 2019, the FCA
notified RBS Group of its intention to appoint a Skilled Person under section
166 of the Financial Services and Markets Act 2000 to conduct a review of
whether that past business review was subject to appropriate governance and
accountability and led to appropriate customer outcomes. RBS Group is
co-operating with the Skilled Person's review, which is expected to conclude
during Q1 2020.
US investigations relating to fixed-income securities
In the US, RBS Group companies have in recent years been involved in
investigations relating to, among other things, issuance, underwriting and
trading in RMBS and other mortgage-backed securities and collateralised debt
obligations (CDOs). Investigations by the US Department of Justice (DoJ) and
several state attorneys general relating to the issuance and underwriting of
RMBS were previously resolved. Certain other state attorneys general have
sought information regarding similar issues, and RBS Group is aware that at
least one such investigation is ongoing.
In October 2017, NWMSI entered into a non-prosecution agreement (NPA) with the
United States Attorney for the District of Connecticut (USAO) in connection
with alleged misrepresentations to counterparties relating to secondary
trading in various forms of asset-backed securities. In the NPA, the USAO
agreed not to file criminal charges relating to certain conduct and
information described in the NPA, conditioned on NWMSI and affiliated
companies complying with the NPA's reporting and conduct requirements during
its term, including by not engaging in conduct during the NPA that the USAO
determines was a felony under federal or state law or a violation of the
anti-fraud provisions of the United States securities law.
The RBS Group's NatWest Markets business is currently responding to a separate
criminal investigation by the USAO concerning unrelated securities trading in
2018 by certain former traders of NWM Plc, involving alleged spoofing, which
was reported in connection with the NPA. In January 2020, the NPA was extended
for a fourth time (for three additional months) to
accommodate advanced discussions with the USAO and the DoJ concerning
potential resolution of the criminal investigation into alleged spoofing as
well as the impact of that conduct and any such resolution on the status of
the NPA and the potential consequences thereof. The duration and outcome of
these matters remain uncertain, including in respect of whether settlement may
be reached. Material adverse collateral consequences, in addition to further
substantial costs and the recognition of further provisions may occur
depending on the outcome of the investigation, as further described in the
Risk Factor relating to legal, regulatory and governmental actions and
investigations set out in the Annual Report & Accounts on page 293.
US/Swiss tax programme
As previously disclosed, in December 2015, Coutts & Co Ltd., a member of
RBS Group, incorporated in Switzerland, entered into a four-year
non-prosecution agreement (the NPA) with the U.S. Department of Justice (DoJ)
that required it to pay a penalty of US$78.5million. This was entered into as
part of the DoJ's programme for Swiss banks, related to its investigations of
the role that Swiss banks played in concealing the assets of US tax payers in
offshore accounts (US related accounts). On 20 December 2019, Coutts & Co.
Ltd. agreed to pay an additional $US27.9 million penalty relating to
additional US related accounts that is had not identified and disclosed to DoJ
at the time the NPA was executed in 2015. The additional penalty amount has
been paid. The four-year term of the NPA has now expired, though certain
document preservation and cooperation obligations continue.
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 RBS Group. RBS 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, RBS Group may from time to time access
market-wide facilities provided by the Bank of England. RBS 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).
Other related parties
(a) In their roles as providers of finance, RBS 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) RBS 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 RBS Group.
Full details of RBS Group's related party transactions for the year ended 31
December 2019 are included in the 2019 Annual Report and Accounts.
6. Dividends
In 2019 RBS paid an interim dividend of £241 million, or 2.0p per ordinary
share and a special dividend of £1,449 million, or 12.0p per share. In
addition, the company proposes a final dividend of £364 million, or 3.0p per
ordinary share and a further special dividend of £606 million, or 5.0p per
ordinary share.
The final and special dividends recommended by directors are subject to
shareholders' approval at the Annual General Meeting on 29 April 2020. If
approved, payment will be made on 4 May 2020 to shareholders on the register
at the close of business on 27 March 2020. The ex-dividend date will be 26
March 2020.
7. Post balance sheet events
RBS Group intends to refocus the NatWest Markets business and estimates it
will incur exit, restructuring and disposal costs of around £0.6 billion in
2020. This estimate may be revised as plans to refocus the business are
finalised.
Statement of directors' responsibilities
The responsibility statement below has been prepared in connection with RBS
Group's full Annual Report and Accounts for the year ended 31 December 2019.
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 consolidated 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 Alison Rose-Slade Katie Murray
Chairman Group Chief Executive Officer Group Chief Financial Officer
13 February 2020
Board of directors
Chairman Executive directors Non-executive directors
Howard Davies Alison Rose Frank Dangeard
Katie Murray Alison Davis
Patrick Flynn
Morten Friis
Robert Gillespie
Baroness Noakes
Mike Rogers
Mark Seligman
Lena Wilson
Additional information
Presentation of information
In this document, 'RBSG plc' or the 'parent company' refers to The Royal Bank
of Scotland Group plc, and 'RBS' or 'RBS 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 2018 have been
filed with the Registrar of Companies and those for the year ended 31 December
2019 will be filed with the register of companies following the 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.
MAR - Inside Information
This announcement contains information that qualified or may have qualified as
inside information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 (MAR) for The Royal Bank of Scotland Group plc. For
the purposes of MAR and Article 2 of Commission Implementing Regulation (EU)
2016/1055, this announcement is made by Alexander Holcroft, Head of Investor
Relations for The Royal Bank of Scotland Group plc.
Non-IFRS financial information
RBS prepares its financial statements in accordance with IFRS as issued by the
IASB and as adopted by the European Union, 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
or non-IFRS performance measures. These measures are adjusted for certain
items which management believe are not representative of the underlying
performance of the business and which distort period-on-period comparison.
These non-IFRS financial measures are not measures within the scope of IFRS
and are not a substitute for IFRS financial measures. Refer to the Appendix
Non-IFRS financial measures for further information and calculations of
non-IFRS financial measures included throughout this document, and, where
relevant, the most directly comparable IFRS financial measures.
Contacts
Analyst enquiries: Alexander Holcroft, Investor Relations +44 (0) 20 7672 1982
Media enquiries: RBS Press Office +44 (0) 131 523 4205
Analyst and investor meeting and call Fixed income call Webcast and dial in details
Date: Friday 14 February 2020 Friday 14 February 2020 www.rbs.com/results (http://www.rbs.com/results)
Time: 9:00 am UK time 1:00 pm UK time International: +44 (0) 203 057 6566
Conference ID: 5394186 1075557 UK Free Call: 0800 279 5995
US Local Dial-In, New York: +1 646 741 2115
Available on www.rbs.com/results (http://www.rbs.com/results)
● Announcement and slides.
● 2019 Annual Report and Accounts.
● A financial supplement containing income statement, balance sheet and segment
performance for the nine quarters ended 31 December 2019.
● Pillar 3 Report.
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; implementation of the RBS Group's strategy; litigation and government
and regulatory investigations, including the timing and financial and other
impacts thereof; the implementation of the Alternative Remedies Package; the
continuation of the RBS Group'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; the
RBS Group's exposure to political risk, economic risk, climate change risk,
operational risk, conduct risk, cyber and IT risk and credit rating risk and
to various types of market risks, including 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 RBS Group's strategy or
operations, which may result in the RBS 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 RBS 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
RBS Group's 2019 Annual Report and Accounts and other risk factors and
uncertainties discussed in this document. These include the significant risks
for the RBS Group presented by: strategic risk (including in respect of: the
implementation and execution of the RBS Group's Purpose-led Strategy,
including as it relates to the re-alignment of the NWM franchise and the RBS
Group's climate ambition and the risk that the RBS Group may not achieve its
targets); operational and IT resilience risk (including in respect of: the RBS
Group being subject to cyberattacks; operational risks inherent in the RBS
Group's business; exposure to third party risks including as a result of
outsourcing and its use of new technologies and innovation, as well as related
regulatory and market changes; the RBS Group's operations being highly
dependent on its IT systems; the RBS Group relying on attracting, retaining
and developing senior management and skilled personnel and maintaining good
employee relations; the RBS Group's risk management framework; and
reputational risk), economic and political risk (including in respect of:
prevailing uncertainty regarding the terms of the UK's withdrawal from the
European Union; increased political and economic risks and uncertainty in the
UK and global markets; climate change and the transition to a low carbon
economy; HM Treasury's ownership of RBSG plc and the possibility that it may
exert a significant degree of influence over the RBS Group; changes in
interest rates and changes in foreign currency exchange rates), financial
resilience risk (including in respect of: the RBS Group's ability to meet
targets and make discretionary capital distributions; the highly competitive
markets in which the RBS Group operates; deterioration in borrower and
counterparty credit quality; the ability of the RBS Group to meet prudential
regulatory requirements for capital and MREL, or to manage its capital
effectively; the ability of the RBS Group to access adequate sources of
liquidity and funding; changes in the credit ratings of RBSG plc, any of its
subsidiaries or any of its respective debt securities; the RBS Group's ability
to meet requirements of regulatory stress tests; possible losses or the
requirement to maintain higher levels of capital as a result of limitations or
failure of various models; sensitivity of the RBS Group's financial statements
to underlying accounting policies, judgments, assumptions and estimates;
changes in applicable accounting policies; the value or effectiveness of any
credit protection purchased by the RBS Group; the level and extent of future
impairments and write-downs, including with respect to goodwill; and the
application of UK statutory stabilisation or resolution powers) and legal,
regulatory and conduct risk (including in respect of: the RBS Group's
businesses being subject to substantial regulation and oversight; the RBS
Group complying with regulatory requirements; legal, regulatory and
governmental actions and investigations (including the final number of PPI
claim and their amounts); the replacement of LIBOR, EURIBOR and other IBOR
rates to alternative risk free rates; heightened regulatory and governmental
scrutiny (including by competition authorities); implementation of the
Alternative Remedies Package and the costs related thereto; and changes in tax
legislation).
The forward-looking statements contained in this document speak only as at the
date hereof, and the RBS Group 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
Non-IFRS financial measures
Appendix - Non-IFRS financial measures
As described in Note 1, 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 or non-IFRS
performance measures. These measures are adjusted for certain items which
management believe are not representative of the underlying performance of the
business and which distort period-on-period comparison. These non-IFRS
measures are not measures within the scope of IFRS and are not a substitute
for IFRS measures. These measures include:
Measure Basis of preparation Additional analysis or reconciliation
RBS return on tangible equity Annualised profit for the period attributable to ordinary shareholders divided Table I
by average tangible equity. Average tangible equity is total equity less
intangible assets and other owners' equity.
RBS return on tangible equity excluding PPI and FX recycling gains. Annualised profit for the period attributable to ordinary shareholders, Table I
adjusted for the PPI charge and FX recycling gains, for the period divided by
average tangible equity. Average tangible equity is total equity less
intangible assets and other owners' equity.
Segmental return on tangible equity Annualised segmental operating profit adjusted for tax and for preference Table I
share dividends divided by average notional equity, allocated at an operating
segment specific rate, of the period average segmental risk-weighted assets
incorporating the effect of capital deductions (RWAes).
Operating expenses analysis - management view The management analysis of strategic disposals in other income and operating Table II
expenses shows strategic costs and litigation and conduct costs in separate
lines. These amounts are included in staff, premises and equipment and other
administrative expenses in the statutory analysis.
Cost:income ratio Total operating expenses less operating lease depreciation divided by total Table III
income less operating lease depreciation.
Commentary - adjusted periodically for specific items RBS and segmental business performance commentary have been adjusted for the Notable items within total income and operating expenses on page 8,
impact of specific items such as the Alawwal bank merger, FX recycling gains,
push payments fraud costs, strategic, litigation and conduct costs (detailed Strategic, litigation and conduct costs - pages 17 to 21.
on pages 17 to 21).
Bank net interest margin (NIM) Net interest income of the banking business less the NatWest Markets (NWM) Table IV
element as a percentage of interest-earning assets of the banking business
less the NWM element.
Performance metrics not defined under IFRS((1))
Measure Basis of preparation Additional analysis or reconciliation
Loan:deposit ratio Net customer loans held at amortised cost divided by total customer deposits. Table V
Tangible net asset value (TNAV) Tangible equity divided by the number of ordinary shares in issue. Tangible Page 3
equity is ordinary shareholders' interest less intangible assets.
NIM Net interest income of the banking business as a percentage of Page 3
interest-earning assets of the banking business.
Funded assets Total assets less derivatives. Pages 17 to 21
ECL loss rate The annualised loan impairment charge divided by gross customer loans. Pages 17 to 21
Note:
(1) Metric based on GAAP measures, included as not defined under IFRS and reported
for compliance with ESMA adjusted performance measure rules.
In Q1 2019, RBS introduced a new adjusted performance metric, Bank NIM,
which is calculated as RBS net interest income and interest-earning assets
less NWM net interest income and interest-earning assets. Bank NIM is believed
by management to more accurately reflect the performance of the business as
net interest income is not considered a main income stream for the NWM
segment.
Appendix - Non-IFRS financial measures
I. Return on tangible equity
Year ended or as at Quarter ended or as at
31 December 31 December 31 December 30 September 31 December
RBS return on tangible equity 2019 2018 2019 2019 2018
Profit/(loss) attributable to ordinary shareholders (£m) 3,133 1,622 1,410 (315) 286
Annualised profit/(loss) attributable to ordinary shareholders (£m) 5,640 (1,260) 1,144
Adjustment for PPI provision for Q3 2019 (£m) 900
Adjustment for FX recycling gains (£m) (1,572)
Adjusted profit attributable to ordinary shareholders (£m) 1,561 585
Annualised adjusted profit attributable to ordinary
shareholders (£m) 2,340
Average total equity (£m) 45,160 48,483 43,860 45,579 47,667
Adjustment for other owners equity and intangibles (£m) (11,960) (14,997) (11,952) (12,226) (14,765)
Adjusted total tangible equity (£m) 33,200 33,486 31,908 33,353 32,902
Return on tangible equity (%) 9.4% 4.8% 17.7% (3.8%) 3.5%
Return on tangible equity adjusting for impact of:
- PPI provision (%) 7.0%
- FX recycling gains (%) 4.7%
UK Ulster
Personal Bank Commercial Private RBS NatWest
Year ended 31 December 2019 Banking RoI Banking Banking International Markets
Operating profit (£m) 855 49 1,327 297 344 (25)
Adjustment for tax (£m) (236) - (372) (83) (48) 7
Preference share cost allocation (£m) (74) - (163) (18) (11) (64)
Adjusted attributable profit (£m) 545 49 792 196 285 (82)
Adjustment for Alawwal bank merger gain (£m) - - - - - (150)
Adjusted attributable profit/(loss) (£m) 545 49 792 196 285 (232)
Average RWAe (£bn) 37.7 14.0 78.2 9.8 6.9 48.0
Equity factor 15.0% 15.0% 12.0% 13.0% 16.0% 15.0%
RWAe applying equity factor (£bn) 5.7 2.1 9.4 1.3 1.1 7.2
Return on equity 9.6% 2.3% 8.4% 15.4% 25.7% (3.2%)
Year ended 31 December 2018*
Operating profit (£m) 1,848 12 1,968 303 336 (70)
Adjustment for tax (£m) (510) - (549) (85) (47) 20
Preference share cost allocation (£m) (80) - (188) (23) (18) (108)
Adjusted attributable profit (£m) 1,258 12 1,231 195 271 (158)
Average RWAe (£bn) 34.0 17.0 85.0 9.4 7.0 53.8
Equity factor 15.0% 14.0% 12.0% 13.5% 16.0% 15.0%
RWAe applying equity factor (£bn) 5.1 2.4 10.2 1.3 1.1 8.1
Return on equity 24.7% 0.5% 12.1% 15.4% 24.4% (2.0%)
*Prior period data has been restated for the business re-segmentation
completed in Q1 2019. Refer to Note 1 for further details.
Appendix - Non-IFRS financial measures
I. Return on tangible equity
UK Ulster
Personal Bank Commercial Private RBS NatWest
Quarter ended 31 December 2019 Banking RoI Banking Banking International Markets
Operating profit/(loss) (£m) 326 (5) 295 61 62 (132)
Adjustment for tax (£m) (91) - (83) (17) (9) 37
Preference share cost allocation (£m) (18) - (41) (4) (6) (14)
Adjusted attributable profit/(loss) (£m) 217 (5) 171 40 47 (109)
Annualised adjusted attributable profit/(loss) (£m) 868 (20) 684 160 188 (436)
Average RWAe (£bn) 38.7 13.2 74.9 10.1 6.9 45.0
Equity factor 15.0% 15.0% 12.0% 13.0% 16.0% 15.0%
RWAe applying equity factor (£bn) 5.8 2.0 9.0 1.3 1.1 6.7
Return on equity 14.9% (1.0%) 7.6% 12.0% 17.3% (6.5%)
Quarter ended 30 September 2019
Operating (loss)/profit (£m) (508) 31 331 81 88 (193)
Adjustment for tax (£m) 142 - (92) (23) (12) 54
Preference share cost allocation (£m) (18) - (41) (4) (5) (20)
Adjusted attributable (loss)/profit (£m) (384) 31 198 54 71 (159)
Annualised adjusted attributable (loss)/profit (£m) (1,536) 124 792 216 284 (636)
Average RWAe (£bn) 38.2 14.2 78.8 9.9 6.8 48.7
Equity factor 15.0% 15.0% 12.0% 13.0% 16.0% 15.0%
RWAe applying equity factor (£bn) 5.7 2.1 9.5 1.3 1.1 7.3
Return on equity (26.8%) 5.8% 8.4% 16.8% 26.0% (8.7%)
Quarter ended 31 December 2018*
Operating profit/(loss) (£m) 347 2 347 63 71 (203)
Adjustment for tax (£m) (97) - (97) (18) (10) 57
Preference share cost allocation (£m) (20) - (47) (6) (4) (27)
Adjusted attributable profit/(loss) (£m) 230 2 203 39 57 (173)
Annualised adjusted attributable profit/(loss) (£m) 920 8 812 156 228 (692)
Average RWAe (£bn) 35.6 15.7 81.1 9.6 7.1 50.2
Equity factor 15.0% 14.0% 12.0% 13.5% 16.0% 15.0%
RWAe applying equity factor (£bn) 5.3 2.2 9.7 1.3 1.1 7.5
Return on equity 17.2% 0.4% 8.3% 12.3% 20.0% (9.2%)
*Prior period data has been restated for the business re-segmentation
completed in Q1 2019. Refer to Note 1 for further details.
Appendix - Non-IFRS financial measures
II. Operating expenses analysis
Statutory analysis (1,2)
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
Operating expenses £m £m £m £m £m
Staff expenses (4,018) (4,122) (990) (1,000) (1,014)
Premises and equipment (1,259) (1,383) (436) (265) (411)
Other administrative expenses (2,828) (3,372) (743) (1,222) (851)
Administrative expenses (8,105) (8,877) (2,169) (2,487) (2,276)
Depreciation and amortisation (1,176) (731) (323) (232) (187)
Impairment of other intangible assets (44) (37) (35) 21 (6)
Total operating expenses (9,325) (9,645) (2,527) (2,698) (2,469)
Non-statutory analysis
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
Operating expenses £m £m £m £m £m
Staff expenses (3,567) (3,649) (835) (891) (859)
Premises and equipment (1,020) (1,241) (290) (237) (369)
Other administrative expenses (1,638) (1,787) (560) (405) (623)
Strategic costs (1) (1,381) (1,004) (537) (215) (355)
Litigation and conduct costs (2) (895) (1,282) (85) (750) (92)
Administrative expenses (8,501) (8,963) (2,307) (2,498) (2,298)
Depreciation and amortisation (824) (645) (204) (221) (165)
Impairment of other intangible assets - (37) (16) 21 (6)
Total (9,325) (9,645) (2,527) (2,698) (2,469)
Notes:
(1) On a statutory, or GAAP, basis, strategic costs are included within
staff, premises and equipment, depreciation and amortisation, impairment of
other intangible assets and other administrative expenses. Strategic costs
relate to restructuring provisions, related costs and projects that are
transformational in nature.
(2) On a statutory, or GAAP, basis, litigation and conduct costs are
included within other administrative expenses.
III. Cost:income ratio
UK Ulster
Personal Bank Commercial Private RBS NatWest Central items RBS
Banking RoI Banking Banking International Markets & other Group
Year ended 31 December 2019 £m £m £m £m £m £m £m £m
Operating expenses (3,618) (552) (2,600) (486) (264) (1,418) (387) (9,325)
Operating lease depreciation - - 138 - - - - 138
Adjusted operating expenses (3,618) (552) (2,462) (486) (264) (1,418) (387) (9,187)
Total income 4,866 567 4,318 777 610 1,342 1,773 14,253
Operating lease depreciation - - (138) - - - - (138)
Adjusted total income 4,866 567 4,180 777 610 1,342 1,773 14,115
Cost:income ratio 74.4% 97.4% 58.9% 62.5% 43.3% 105.7% nm 65.1%
Year ended 31 December 2018
Operating expenses (2,867) (583) (2,487) (478) (260) (1,604) (1,366) (9,645)
Operating lease depreciation - - 121 - - - - 121
Adjusted operating expenses (2,867) (583) (2,366) (478) (260) (1,604) (1,366) (9,524)
Total income 5,054 610 4,602 775 594 1,442 325 13,402
Operating lease depreciation - - (121) - - - - (121)
Adjusted total income 5,054 610 4,481 775 594 1,442 325 13,281
Cost:income ratio 56.7% 95.6% 52.8% 61.7% 43.8% 111.2% nm 71.7%
*Prior period data has been restated for the business re-segmentation
completed in Q1 2019. Refer to Note 1 for further details.
Appendix - Non-IFRS financial measures
III. Cost:income ratio
UK Ulster
Personal Bank Commercial Private RBS NatWest Central items RBS
Banking RoI Banking Banking International Markets & other Group
£m £m £m £m £m £m £m £m
Quarter ended 31 December 2019
Operating expenses (788) (140) (700) (135) (83) (392) (289) (2,527)
Operating lease depreciation - - 35 - - - - 35
Adjusted operating expenses (788) (140) (665) (135) (83) (392) (289) (2,492)
Total income 1,195 139 1,076 195 150 250 1,228 4,233
Operating lease depreciation - - (35) - - - - (35)
Adjusted total income 1,195 139 1,041 195 150 250 1,228 4,198
Cost:income ratio 65.9% 100.7% 63.9% 69.2% 55.3% 156.8% nm 59.4%
Quarter ended 30 September 2019
Operating expenses (1,601) (131) (638) (119) (62) (348) 201 (2,698)
Operating lease depreciation - - 35 - - - - 35
Adjusted operating expenses (1,601) (131) (603) (119) (62) (348) 201 (2,663)
Total income 1,224 145 1,077 198 150 150 (41) 2,903
Operating lease depreciation - - (35) - - - - (35)
Adjusted total income 1,224 145 1,042 198 150 150 (41) 2,868
Cost:income ratio 130.8% 90.3% 57.9% 60.1% 41.3% 232.0% nm 92.9%
Quarter ended 31 December 2018
Operating expenses (757) (164) (764) (143) (86) (455) (100) (2,469)
Operating lease depreciation - - 32 - - - - 32
Adjusted operating expenses (757) (164) (732) (143) (86) (455) (100) (2,437)
Total income 1,246 147 1,116 198 155 152 44 3,058
Operating lease depreciation - - (32) - - - - (32)
Adjusted total income 1,246 147 1,084 198 155 152 44 3,026
Cost:income ratio 60.8% 111.6% 67.5% 72.2% 55.5% 299.3% nm 80.5%
IV. Net interest margin
Year ended or as at Quarter ended or as at
31 December 31 December 31 December 30 September 31 December
2019 2018 2019 2019 2018
£m £m £m £m £m
RBS net interest income 8,047 8,656 2,037 2,006 2,176
NWM net interest income 188 (112) 4 62 (30)
Net interest income excluding NWM 8,235 8,544 2,041 2,068 2,146
Annualised net interest income 8,082 7,959 8,633
Annualised net interest income excluding NWM 8,097 8,205 8,514
Average interest earning assets (IEA) 448,556 436,957 456,164 454,429 442,116
NWM average IEA 35,444 27,851 36,594 38,616 30,407
Bank average IEA excluding NWM 413,112 409,106 419,570 415,813 411,709
Net interest margin 1.79% 1.98% 1.77% 1.75% 1.95%
Bank net interest margin (RBS NIM excluding NWM) 1.99% 2.09% 1.93% 1.97% 2.07%
V. Loan:deposit ratio
As at
31 December 31 December
2019 2018
£bn £bn
Loans to customers - amortised cost 326,947 305,089
Customer deposits 369,247 360,914
Loan:deposit ratio (%) 89% 85%
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