REG - Royal Bk Scot.Grp. - Half-year Report <Origin Href="QuoteRef">RBS.L</Origin> - Part 12
04/08/2017 07:08
- Part 12: For the preceding part double click ID:nRSD0890Nk
6.9 82 5.7 103 217
Property and construction 37,641 1,406 457 3.7 33 1.2 1 83
Other 112,265 2,386 978 2.1 41 0.9 68 366
Latent - - 328 - - - 11 -
Total 307,704 5,691 2,690 1.8 47 0.9 160 677
Europe
Personal - mortgages 15,617 3,175 874 20.3 28 5.6 7 6
- unsecured 394 47 43 11.9 91 10.9 2 6
Property and construction 1,178 73 67 6.2 92 5.7 (3) 16
Other 4,083 247 140 6.0 57 3.4 (10) 20
Latent - - 73 - - - (12) -
Total 21,272 3,542 1,197 16.7 34 5.6 (16) 48
Total banks 20,697 - - - - - - -
Note:
(1) Mortgages are reported in sectors other than personal mortgages by certain businesses based on the nature of the relationship with the customer.
Appendix 1 Capital and risk management
Credit risk: Balance sheet analysis (continued)
Loans, provisions and related credit metrics: sector analysis (continued)
Credit metrics
REIL Provisions
as a % of Provisions as a % of Impairment
Gross gross as a % gross losses/ Amounts
loans REIL Provisions loans of REIL loans (releases) written-off
31 December 2016 £m £m £m % % % £m £m
Central and local government 6,091 1 1 - 100 - 1 2
Finance 33,083 61 51 0.2 84 0.2 (2) 17
Personal - mortgages (1) 153,319 4,091 1,019 2.7 25 0.7 222 290
- unsecured 14,492 1,113 900 7.7 81 6.2 138 396
Property 34,756 1,370 489 3.9 36 1.4 (162) 1,485
Construction 4,247 264 137 6.2 52 3.2 8 153
of which: commercial real estate 26,265 1,407 511 5.4 36 1.9 (184) 1,483
Manufacturing 9,609 173 90 1.8 52 0.9 13 90
Finance leases and instalment credit 12,269 139 79 1.1 57 0.6 8 12
Retail, wholesale and repairs 12,823 283 182 2.2 64 1.4 39 169
Transport and storage 6,428 1,388 422 21.6 30 6.6 419 301
Health, education and leisure 11,526 381 129 3.3 34 1.1 8 75
Hotels and restaurants 6,079 211 107 3.5 51 1.8 13 116
Utilities 3,938 95 50 2.4 53 1.3 (20) 2
Other 18,818 740 399 3.9 54 2.1 68 587
Latent - - 400 - - - (216) -
Total customers 327,478 10,310 4,455 3.1 43 1.4 537 3,695
Of which:
UK
Personal - mortgages 137,427 943 143 0.7 15 0.1 (4) 3
- unsecured 14,198 1,060 853 7.5 80 6.0 132 362
Property and construction 37,942 1,543 537 4.1 35 1.4 (98) 676
Other 115,833 3,133 1,299 2.7 41 1.1 666 629
Latent - - 318 - - - (12) -
Total 305,400 6,679 3,150 2.2 47 1.0 684 1,670
Europe
Personal - mortgages 15,548 3,144 872 20.2 28 5.6 226 287
- unsecured 265 52 46 19.6 88 17.4 5 11
Property and construction 1,055 85 84 8.1 99 8.0 (56) 933
Other 3,920 279 165 7.1 59 4.2 (156) 665
Latent - - 83 - - - (204) -
Total 20,788 3,560 1,250 17.1 35 6.0 (185) 1,896
Total banks 17,291 - - - - - - -
Note:
(1) Mortgages are reported in sectors other than personal mortgages by certain businesses based on the
nature of the relationship with the customer.
Appendix 1 Capital and risk management
Credit risk: Balance sheet analysis (continued)
Debt securities and AFS reserves
The table below shows debt securities by issuer and IAS 39 measurement classifications. The Other Financial Institutions
category includes US government sponsored agencies and securitisation entities, the latter principally relating to
asset-backed securities (ABS). Ratings are based on the lowest of Standard & Poor's, Moody's and Fitch.
Central and local government Banks Other Corporate Total
Financial Of which
UK US Other Institutions ABS
30 June 2017 £m £m £m £m £m £m £m £m
Held-for-trading (HFT) 3,629 5,924 19,849 1,897 2,926 641 34,866 887
Designated as at fair value - - - - - - - -
Available-for-sale (AFS) 15,449 8,286 12,795 2,201 4,018 108 42,857 2,019
Loans and receivables - 19 - 1,118 2,615 146 3,898 3,733
Held-to-maturity (HTM) 4,548 - - - - - 4,548 -
Total 23,626 14,229 32,644 5,216 9,559 895 86,169 6,639
Short positions (HFT) (4,542) (3,443) (20,268) (456) (971) (180) (29,860) -
Ratings
AAA - - 10,130 2,386 6,352 15 18,883 4,003
AA to AA+ 23,626 14,229 5,153 593 673 60 44,334 279
A to AA- - - 11,387 266 1,544 236 13,433 808
BBB- to A- - - 5,466 1,437 437 218 7,558 1,187
Non-investment grade - - 508 149 300 108 1,065 233
Unrated - - - 385 253 258 896 129
Available-for-sale
AFS reserves (gross of tax) 123 12 122 4 123 (1) 383 5
Gross unrealised gains 682 99 359 8 34 1 1,183 11
Gross unrealised losses (42) (42) (24) (3) (9) (2) (122) (1)
31 December 2016
Held-for-trading 2,615 4,133 14,087 821 2,299 549 24,504 886
Designated as at fair value - - 25 - 2 - 27 -
Available-for-sale 10,581 6,953 15,678 1,852 4,072 118 39,254 2,263
Loans and receivables - - - - 3,774 194 3,968 3,814
Held-to-maturity 4,769 - - - - - 4,769 -
Total 17,965 11,086 29,790 2,673 10,147 861 72,522 6,963
Short positions (HFT) (2,644) (4,989) (13,346) (334) (640) (121) (22,074) -
Ratings
AAA - - 11,478 1,610 6,024 36 19,148 3,993
AA to AA+ 17,965 11,086 5,533 481 720 34 35,819 244
A to AA- - - 9,727 238 2,128 150 12,243 1,627
BBB- to A- - - 2,737 155 698 378 3,968 645
Non-investment grade - - 315 69 458 31 873 381
Unrated - - - 120 119 232 471 73
Available-for-sale
AFS reserves (gross of tax) 79 (66) 190 5 144 (6) 346 46
Gross unrealised gains 768 56 504 8 93 2 1,431 75
Gross unrealised losses (16) (123) (13) (1) (43) (2) (198) (32)
· Held-for-trading: Assets and short positions increased largely due to trading activity in NatWest Markets, including trading in Japanese government and eurozone bonds. Higher UK gilt balances reflected market-making activity and client flow trading.
· Available-for-sale: The increase in UK government securities reflected liquidity portfolio management, as gilts offered higher capital adjusted returns relative to central bank cash balances. Reductions in other government securities, principally euro, reflected lower collateral requirements.
Appendix 1 Capital and risk management
Credit risk: Balance sheet analysis (continued)
Derivatives and valuation reserves
The table below shows derivatives by type of contract. The master netting agreements and collateral shown below do not
result in a net presentation on the balance sheet under IFRS.
30 June 2017 31 December 2016
Notional Assets Liabilities Notional Assets Liabilities
£bn £m £m £bn £m £m
Interest rate (5) 17,383 139,219 126,605 17,973 170,524 158,485
Exchange rate 4,146 53,586 56,938 4,451 75,442 77,148
Credit 30 475 425 42 682 557
Equity and commodity 9 251 193 25 333 285
Balance sheet 21,568 193,531 184,161 22,491 246,981 236,475
Counterparty mark-to-market netting (153,703) (153,703) (197,288) (197,288)
Cash collateral (23,249) (20,484) (28,742) (20,417)
Securities collateral (6,522) (4,312) (8,435) (11,048)
Net exposure 10,057 5,662 12,516 7,722
Banks (1) 712 831 1,260 1,339
Other financial institutions (2) 2,924 2,185 3,090 2,897
Corporate (3) 5,631 2,533 7,348 3,393
Government (4) 790 113 818 93
Net exposure 10,057 5,662 12,516 7,722
UK 5,827 2,309 7,065 3,009
Europe 2,620 2,412 3,466 3,215
US 853 535 930 673
RoW 757 406 1,055 825
Net exposure 10,057 5,662 12,516 7,722
Valuation reserves £m £m
Funding valuation adjustments (FVA) 736 936
Credit valuation adjustments (CVA) 454 618
Bid-offer reserves 327 334
Product and deal specific 554 643
Valuation reserves 2,071 2,531
Notes:
(1) Transactions with certain counterparties with whom RBS has netting arrangements but collateral is not posted on a daily basis: certain transactions with specific terms that may not fall within netting and collateral arrangements; derivative positions in certain jurisdictions, for example China, where the collateral arrangements are not deemed to be legally enforceable.
(2) Transactions with securitisation vehicles and funds where collateral posting is contingent on RBS's external rating.
(3) Predominantly large corporate with whom RBS may have netting arrangements in place, but operational capability does not support collateral posting.
(4) Sovereigns and supranational entities with one way collateral arrangements in their favour.
(5) The notional amount of interest rate derivatives include £11,045 billion (31 December 2016 - £9,724 billion) in respect of contracts cleared through central clearing counterparties. The associated derivatives assets and liabilities including variation margin reflected IFRS offset of £29 billion (31 December 2016 - £51 billion) and £29 billion (31 December 2016 - £51 billion) respectively.
(6) Valuation reserves reflect adjustments to mid-market valuations to cover bid-offer spread, liquidity and credit risk.
· The decrease in foreign exchange derivative fair values reflected the US dollar weakening against the yen, the euro and sterling during the period. The interest rate derivative decrease in fair values reflected the upward movement in euro and sterling yields.
· Foreign exchange notional reductions were driven by maturities, buyouts and foreign exchange retranslation. Interest rate notionals also declined as participation in tear-up cycles and Capital Resolution wind-downs more than offset new trading activity in NatWest Markets.
· Overall exposure was an asset position broadly flat from the prior year.
· FVA reduced during H1 2017. This reflected a reduction in exposure due to market moves together with an increase in funding costs included in the discount rate applied to derivative cash flows.
· The reduction in CVA resulted from a reduction in exposure due to market moves, together with tightening credit spreads and trade close-outs.
· Product and deal-specific reserves decreased primarily due to trade close-outs and novations.
Appendix 1 Capital and risk management
Market risk
Market risk is the risk of losses arising from fluctuations in interest rates, credit spreads, foreign currency rates,
equity prices, commodity prices and other factors, such as market volatilities, that may lead to a reduction in earnings,
economic value or both.
Key developments (Not within the scope of EY's review report)
● During H1 2017, revised non-traded and traded market risk appetite metrics were approved by the Board and cascaded to the franchises.
● Political events during the half-year, notably elections in the UK, France and the Netherlands, resulted in periods of market volatility. UK and European interest rates remained at historically low levels, although the US Federal Reserve began raising interest rates. Both non-traded and traded market risk remained within set appetite throughout H1 2017.
● Non-traded market risk VaR peaked at £83.1 million, mainly driven by an increase in the proportion of bonds held within Treasury's liquidity portfolio, which was aimed at investing surplus cash, rather than meeting increased liquidity requirements. The appreciation of foreign currency bonds within this portfolio, primarily US and German sovereign debt, also contributed.
● Traded VaR increased on an average basis compared to both H1 2016 and H2 2016. In H1 2016, traded VaR was at a reduced level as a result of concerns over the stability of the financial sector. The traded VaR level normalised in H2 2016, followed by a marginal increase in H1 2017.
Non-trading portfolios
Value-at-risk
The following table presents 1-day internal banking book VaR at a 99% confidence level, analysed by type of risk.
Half year ended
30 June 2017 30 June 2016 31 December 2016
Period Period Period
Average Max Min end Average Max Min end Average Max Min end
£m £m £m £m £m £m £m £m £m £m £m £m
Interest rate 8.6 12.6 6.3 7.6 7.5 10.1 6.1 6.2 11.8 19.3 4.7 18.0
Euro 3.2 4.1 2.3 2.3 3.0 3.5 2.1 3.1 3.1 3.8 2.1 3.8
Sterling 7.7 13.8 5.0 5.1 7.0 10.9 4.8 4.8 13.4 23.7 5.0 20.6
US dollar 3.1 4.9 2.1 4.9 2.9 4.7 1.6 1.6 2.9 4.3 1.7 2.1
Other 1.1 1.1 1.0 1.0 2.1 2.4 1.8 1.8 1.4 1.8 1.1 1.1
Credit spread 70.0 82.4 62.0 62.0 50.9 57.8 41.6 57.8 63.5 66.6 61.3 62.9
Structural FX rate 10.3 11.4 9.3 11.4 11.8 15.5 10.7 15.5 15.1 19.6 10.5 10.5
Pipeline risk 0.8 1.1 0.6 0.9 0.8 1.2 0.2 0.8 0.4 0.5 0.3 0.5
Diversification (1) (18.8) (27.0) (20.6) (20.6) (27.0) (20.2)
Total 70.9 83.1 54.9 54.9 50.4 59.7 41.5 59.7 63.8 71.7 60.0 71.7
Note:
(1) RBS benefits from diversification as it reduces risk by allocating positions across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
● On an average basis, total non-traded VaR increased during H1 2017 compared to both H1 2016 and H2 2016 due to the increase in the proportion of bonds held within Treasury's liquidity portfolio, as explained above.
● On a period-end basis, total non-traded VaR decreased, driven by credit spread VaR, which fell due to a change in the source of the market data used for the VaR model.
Appendix 1 Capital and risk management
Market risk: Non-trading portfolios (continued)
Sensitivity of projected net interest earnings (Not within the scope of EY's review report)
The following table shows the sensitivity of net interest earnings, over the next 12 months, to an immediate upward or
downward change of 25 and 100 basis points to all interest rates. All yield curves are expected to move in parallel, except
for interest rates that are assumed to floor at zero per cent or, for euro rates, at the current negative rate. The result
of the scenario is compared to a base-case scenario using market-implied levels of future interest rates at 30 June 2017.
The main driver of earnings sensitivity relates to interest rate pass-through assumptions on customer products. The
scenario also captures the impact of the reinvestment of maturing structural hedges at higher or lower rates than the
base-case earnings sensitivity. As the forward-looking horizon is limited to one year, the impact of maturing structural
hedges being reinvested at higher or lower rates is relatively low.
The scenario results should not be considered predictive of future performance. They assume no management or customer
response to changes in the interest rate environment. The analysis is also limited to interest earnings rather than
non-interest earnings.
Euro Sterling US dollar Other Total
30 June 2017 £m £m £m £m £m
+25 basis point shift in yield curves 16 176 15 1 208
-25 basis point shift in yield curves (4) (273) (10) (3) (290)
+100 basis point shift in yield curves 60 620 57 2 739
-100 basis point shift in yield curves (5) (480) (55) (7) (547)
30 June 2016
+25 basis point shift in yield curves - 49 16 3 68
-25 basis point shift in yield curves - (125) (16) 1 (140)
+100 basis point shift in yield curves (20) 393 65 11 449
-100 basis point shift in yield curves - (298) (46) 3 (341)
31 December 2016
+25 basis point shift in yield curves 4 79 11 2 96
-25 basis point shift in yield curves (1) (222) (11) (2) (236)
+100 basis point shift in yield curves 9 436 42 13 500
-100 basis point shift in yield curves (2) (337) (30) (9) (378)
· Interest income sensitivity increased in H1 2017 across all scenarios.
· Changes in assumed pass-through rates on customer products as well as the impact of Treasury activity were the main drivers of the increase in positive sensitivity to higher rates at 30 June 2017 compared with 31 December 2016.
· Higher market implied levels of future interest rates at 30 June 2017 compared with 31 December 2016 were a significant driver of the more adverse sensitivity to lower interest rates at 30 June 2017. Wholesale market interest rates fell further in the
downward 100 basis-point scenario before they hit an assumed zero per cent floor. As customer deposit rates are much less affected by downward interest-rate shifts, profit margins compress. Although the sensitivity was more adverse, the higher market
curve also resulted in a higher base-case income forecast. Therefore the absolute level of income may be unaffected.
Appendix 1 Capital and risk management
Market risk: Non-trading portfolios (continued)
Structural hedging (Not within the scope of EY's review report)
RBS has the benefit of a significant pool of stable, non and low interest bearing liabilities, principally comprising
equity and money transmission accounts. These balances are usually hedged, either by investing directly in longer-term
fixed rate assets or by the use of interest rate swaps, in order to provide a consistent and predictable revenue stream.
After hedging RBS's net interest rate exposure externally, Treasury allocates income to products or equity in structural
hedges by reference to the relevant interest rate swap curve. Over time, the hedging programme has built up a portfolio of
interest rate swaps that provide a basis for stable income attribution. The programme aims to track a time series of
medium-term swap rates, but the yield will be affected by changes in product volumes and RBS's capital composition.
The table below presents the incremental income allocation (above 3-month LIBOR), the average notional and the overall
yield (including 3-month LIBOR) associated with the product and equity hedges managed by Treasury.
Half year ended
30 June 2017 30 June 2016 31 December 2016
Incremental Average Overall Incremental Average Overall Incremental Average Overall
income notional yield income notional yield income notional yield
£m £bn % £m £bn % £m £bn %
Equity structural hedging 317 28 2.48 310 35 2.35 323 32 2.41
Product structural hedging 334 98 1.04 315 87 1.28 320 93 1.13
Total 651 126 1.36 625 122 1.59 643 125 1.47
The table below presents the incremental income associated with product structural hedges at segment level. These relate to
the main UK banking businesses except Private Banking and RBS International.
Half year ended
Net interest earnings - impact of product structural hedging 30 June 30 June 31 December
2017 2016 2016
£m £m £m
UK Personal & Business Banking 191 170 176
Commercial Banking 116 118 117
Capital Resolution 2 6 4
Williams & Glyn 25 21 23
Total 334 315 320
· Interest rates remained low across H1 2017, with a significant upward shift only occurring the last few days of the period. As a result, the overall yield (including 3-month LIBOR) fell compared to 31 December 2016, reflecting the combined impact of lower equity hedges and maturing hedges being reinvested at lower market rates.
· The fall in the average notional of the equity hedge primarily reflected the decline in the equity base resulting from the provision for various investigations and litigation matters.
· The increase in the average notional of the product hedge reflected growth in current account balances.
· As at 30 June 2017, the 10-year and 5-year sterling swap rates were 1.27% and 0.91% respectively. The market rate matching the amortising structure of the sterling proportion of the total structural hedge was 0.83%.
Appendix 1 Capital and risk management
Foreign exchange risk
The table below shows structural foreign currency exposures.
Net Structural
Net investments foreign currency Residual
investments in foreign Net exposures structural
in foreign operations investment pre-economic Economic foreign currency
operations NCI (1) excluding NCI hedges hedges hedges (2) exposures
30 June 2017 £m £m £m £m £m £m £m
US dollar (878) - (878) 1,239 361 (361) -
Euro 6,795 114 6,681 (518) 6,163 (2,203) 3,960
Other non-sterling 3,007 668 2,339 (1,267) 1,072 (485) 587
8,924 782 8,142 (546) 7,596 (3,049) 4,547
31 December 2016
US dollar (595) - (595) (28) (623) - (623)
Euro 6,085 (4) 6,089 (582) 5,507 (2,289) 3,218
Other non-sterling 3,366 761 2,605 (1,491) 1,114 (625) 489
8,856 757 8,099 (2,101) 5,998 (2,914) 3,084
Notes:
(1) Non-controlling interests (NCI) represents the structural foreign exchange exposure not attributable to owners equity.
(2) Economic hedges mainly represent US dollar and euro preference shares in issue that are treated as equity under IFRS and do not qualify as hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the extent that there are net assets in overseas operations available.
· Following the recognition of further RMBS provisions in US subsidiaries in Q1 2017, hedges of US dollar exposure to RMBS were documented as net investment hedges. This was the main driver of the increase in reported structural foreign currency exposures during H1 2017.
· Changes in foreign currency exchange rates affect equity in proportion to the structural foreign currency exposures. For example, a 5% strengthening or weakening in foreign currencies against sterling would respectively result in a gain or loss of £0.4 billion in equity.
Appendix 1 Capital and risk management
Trading portfolios
Traded internal VaR
The table below presents the internal value-at-risk (VaR) for trading portfolios split by type of market risk exposure. The
internal traded 99% one-day VaR captures trading book positions for all products, locations and legal entities.
Half year ended
30 June 2017 30 June 2016 31 December 2016
Period Period Period
Average Max Min end Average Max Min end Average Max Min end
Traded VaR (1-day 99%) £m £m £m £m £m £m £m £m £m £m £m £m
General interest rate (1) 14.6 24.5 8.8 11.3 12.3 22.3 7.8 10.2 12.6 19.3 7.8 16.9
Specific interest rate (2) 11.1 14.3 8.8 9.9 8.4 12.5 5.8 9.7 10.6 13.7 8.0 9.7
Currency 4.7 7.9 2.5 5.0 4.0 9.0 1.0 4.3 5.2 14.3 2.4 5.4
Equity 1.2 1.9 0.6 1.3 0.5 2.1 0.2 0.5 0.6 2.0 0.3 1.9
Commodity 0.4 1.3 0.1 0.5 0.6 1.7 0.2 0.8 0.8 2.4 0.2 0.3
Diversification (3) (12.2) (12.5) (10.4) (9.6) (11.1) (10.4)
Total 19.8 25.2 13.9 15.5 15.4 27.3 9.9 15.9 18.7 29.3 13.2 23.8
Note:
(1) General interest rate risk arises from the impact of changes in interest rates and volatilities on cash instruments and derivatives. This includes interest rate tenor basis risk and cross-currency basis risk.
(2) Specific interest rate risk arises from the impact of changes in the credit spreads of sovereign bonds, corporate bonds, securitised products and credit derivatives.
(3) RBS benefits from diversification as it reduces risk by allocating positions across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
● Traded VaR fluctuated throughout H1 2017, reflecting political developments, market events, customer flows and other macroeconomic factors. Throughout the period, the VaR was managed within risk appetite.
● On an average basis, traded VaR in H1 2017 increased marginally compared to H2 2016, mainly due to refinements to the VaR methodology used for certain credit products. Average traded VaR also increased more significantly compared to H1 2016 as the risk profile in the earlier period had been reduced compared to normal levels due to concerns over the stability of the financial sector.
Appendix 1 Capital and risk management
Other risks (Not within the scope of EY's review report)
Key developments
Operational risk
● A single RBS-wide Risk & Control Assessment methodology was established in 2016. By the end of H1 2017, approximately 120 assessments had been completed across RBS. These were designed to reflect the end-to-end customer journeys of the most material products, processes and services as well as to enable a consistent, holistic view of RBS's key risks and their mitigation.
● Cyber security and associated risks remain an industry concern. In May and June 2017, organisations around the world - including a number of UK entities - were subjected to two separate high-profile cyber attacks. However, there were no associated impacts on RBS. In both cases, reviews were carried out in order to improve and develop RBS's cyber risk management and defence strategy.
Conduct & regulatory risk
● The FCA has announced a strategic review of business models in the retail banking sector. The review is expected to consider the full range of personal banking products and services, as well as SME banking. The FCA expects to produce a project update in H1 2018, explaining its preliminary analysis and conclusions.
● The remediation of PPI continued, with the FCA publishing its rules and guidance on the PPI complaints deadline and how firms should deal with Plevin complaints. The FCA confirmed it will implement a two-year deadline along with Plevin rules from 29 August 2017.
Appendix 2
Segmental income statement reconciliations
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest Capital Williams items & Total
UK PBB Bank RoI Banking Banking International Markets Resolution & Glyn other RBS
Half year ended 30 June 2017 £m £m £m £m £m £m £m £m £m £m
Income statement
Total income - statutory 2,755 293 1,750 321 195 932 (102) 417 358 6,919
Own credit adjustments - 3 - - - 48 22 - - 73
Loss on redemption of own debt - - - - - - - - 7 7
Strategic disposals - - - - - - - - (156) (156)
Total income - adjusted 2,755 296 1,750 321 195 980 (80) 417 209 6,843
Operating expenses - statutory (1,586) (293) (996) (232) (94) (775) (539) (158) (179) (4,852)
Restructuring costs - direct 23 24 40 - - 30 130 - 543 790
- indirect 137 19 77 14 4 73 4 - (328) -
Litigation and conduct costs 13 33 4 - - 34 272 - 40 396
Operating expenses - adjusted (1,413) (217) (875) (218) (90) (638) (133) (158) 76 (3,666)
Impairment (losses)/releases (72) 11 (94) (7) (5) (1) 78 (25) (1) (116)
Operating profit/(loss) - statutory 1,097 11 660 82 96 156 (563) 234 178 1,951
Operating profit/(loss) - adjusted 1,270 90 781 96 100 341 (135) 234 284 3,061
Additional information
Return on equity (1) 27.8% 0.8% 8.2% 7.7% 13.1% 2.3% nm 22.2% nm 5.6%
Return on equity - adjusted (1,2) 32.4% 6.8% 10.1% 9.3% 13.7% 7.2% nm 22.2% nm 11.5%
Cost:income ratio (3) 57.6% 100.0% 55.1% 72.3% 48.2% 83.2% nm 37.9% nm 69.8%
Cost:income ratio - adjusted (2,3) 51.3% 73.3% 47.9% 67.9% 46.2% 65.1% nm 37.9% nm 53.1%
Half year ended 30 June 2016
Income statement
Total income - statutory 2,615 293 1,699 331 185 818 (172) 411 (116) 6,064
Own credit adjustments - (3) - - - (137) (184) - (126) (450)
Loss on redemption of own debt - - - - - - - - 130 130
Strategic disposals - - - - - - 51 - (246) (195)
Total income - adjusted 2,615 290 1,699 331 185 681 (305) 411 (358) 5,549
Operating expenses - statutory (2,042) (312) (984) (278) (71) (729) (478) (242) (793) (5,929)
Restructuring costs - direct 51 24 1 1 1 10 12 45 485 630
- indirect 60 1 40 19 2 23 25 - (170) -
Litigation and conduct costs 421 92 10 2 - 56 26 - 708 1,315
Operating expenses - adjusted (1,510) (195) (933) (256) (68) (640) (415) (197) 230 (3,984)
Impairment (losses)/releases (40) 27 (103) (2) (11) - (263) (17) - (409)
Operating profit/(loss) - statutory 533 8 612 51 103 89 (913) 152 (909) (274)
Operating profit/(loss) - adjusted 1,065 122 663 73 106 41 (983) 197 (128) 1,156
Additional information
Return on equity (1) 11.9% 0.6% 8.1% 5.1% 15.4% 0.8% nm 14.3% nm (10.3%)
Return on equity - adjusted (1,2) 25.5% 9.3% 8.9% 7.6% 15.9% (0.5%) nm 18.6% nm (3.2%)
Cost:income ratio (3) 78.1% 106.5% 56.1% 84.0% 38.4% 89.1% nm 58.9% nm 97.7%
Cost:income ratio - adjusted (2,3) 57.7% 67.2% 53.0% 77.3% 36.8% 94.0% nm 47.9% nm 71.4%
Segmental income statement reconciliations
PBB CPB Central
Ulster Commercial Private RBS NatWest Capital Williams items & Total
UK PBB Bank RoI
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