REG - Royal Bk Scot.Grp. - Half-year Report <Origin Href="QuoteRef">RBS.L</Origin> - Part 5
04/08/2017 07:08
- Part 5: For the preceding part double click ID:nRSD0890Nd
market-leading brands such as NatWest,
Royal Bank of Scotland, Lombard and Mentor.
● Our NatWest brand has the number one NPS in England and Wales(1). This reflects the positive steps we are taking to improve customer experience; making banking with us easier, less time consuming and adding real value to every interaction. Our strategy
will continue to focus on end-to-end business performance aimed at improving customer service, trust and advocacy.
● Overall net lending volumes have reduced since H1 2016, however, we have successfully achieved growth during H1 2017 in target segments, including 6% annualised growth in the core SME and Commercial book. The transformation of our lending proposition means
62% of lending decisions can be communicated in five days, and we have further simplified the new lending process for loans less than £25,000 through the launch of digital self-serve account opening for SMEs. In addition, Lombard has been named 'Best
Leasing & Asset Finance Provider' at the Business Moneyfacts Awards for a ninth time.
● Our Bankline online digital platform, now used by 90% of our active customer base and with 400,000 payments processed daily, has been independently rated as market leading for digital customer experience, and we are now launching an upgraded version.
During the first half we launched the ClearSpend mobile app, helping corporate card customers exercise better control and oversight of spending on company accounts. We also continued the build out of Esme, our digital 24/7 online lending platform and
progressed development of a range of new modular business solutions to expand and improve our customer offering.
● We continue to provide enhanced support for UK entrepreneurs through our award-winning E-Spark partnership, supporting 1,736 companies to secure £151 million investment and created 3,152 jobs since inception, and now have nationwide coverage with 12 hubs
in England, Scotland, Wales and Ireland.
Financial performanceH1 2017 compared with H1 2016
● Operating profit of £660 million in H1 2017 compared with £612 million in H1 2016. Adjusted operating profit of £781 million was £118 million, or 17.8%, higher than H1 2016 reflecting lower adjusted operating expenses and higher income.
● Total income increased by £51 million, or 3.0%, to £1,750 million driven by increased deposit volumes and re-pricing benefits, partially offset by margin pressure. Active re-pricing of assets and deposits has been offset by wider asset margin pressure in a
lower rate environment causing net interest margin to fall by 8 basis points to 1.75%.
● Adjusted operating expenses of £875 million were £58 million, or 6.2%, lower than H1 2016, principally reflecting the impact of a 700 reduction in headcount to 5,200 and a £25 million intangible asset write-down in H1 2016.
● Net impairment losses of £94 million, 19 basis points of gross customer loans, were £9 million lower than H1 2016.
● Net loans and advances decreased by £1.1 billion to £98.1 billion, compared with H1 2016. Whilst overall net lending volumes have reduced since H1 2016, we have successfully achieved growth during H1 2017 in target segments, including 6% annualised growth
in the core SME and Commercial book.
● RWAs of £76.2 billion reduced by £1.3 billion, or 1.7%, compared with H1 2016 as planned reductions in exposures with weak returns have been offset by lending growth in some segments.
Commercial Banking
Q2 2017 compared with Q1 2017
● Operating profit of £406 million was £152 million higher than Q1 2017, principally reflecting lower restructuring costs and lower impairment losses. Adjusted operating profit of £425 million was £69 million higher than Q1 2017 reflecting lower impairment losses, lower adjusted operating expenses and higher income.
● Total income increased by £20 million, or 2.3%, to £885 million compared with Q1 2017. Net interest margin reduced by 3 basis point to 1.73% due to continuing asset margin pressure.
● Adjusted operating expenses decreased by £21 million, or 4.7%, to £427 million as headcount continued to be reduced and discretionary expenditure remained tightly controlled.
● Net impairment losses of £33 million, 13 basis points of gross customer loans, were £28 million lower than Q1 2017 with one specific impairment charge of £12 million in the quarter.
Q2 2017 compared with Q2 2016
● Adjusted operating profit of £425 million was £165 million, or 63.5%, higher than Q2 2016 due to lower adjusted expenses, lower impairment losses and higher income.
● Total income of £885 million was £39 million, or 4.6%, higher than Q2 2016 reflecting deposit volume growth and re-pricing actions.
● Adjusted operating expenses decreased by £70 million, or 14.1%, to £427 million reflecting reduced headcount and a £25 million intangible asset write-down in Q2 2016.
(1) Source: Charterhouse Research Business Banking Survey, YE Q2 2017. Commercial £2m+ in England & Wales (NatWest sample size, excluding don't knows: 606). 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.
Private Banking
Half year ended Quarter ended
30 June 30 June 30 June 31 March 30 June
2017 2016 2017 2017 2016
Income statement £m £m £m £m £m
Net interest income 226 226 114 112 113
Net fees and commissions 83 94 41 42 48
Other non-interest income 12 11 6 6 5
Non-interest income 95 105 47 48 53
Total income 321 331 161 160 166
Direct expenses
- staff costs (74) (77) (36) (38) (37)
- other costs (12) (23) (5) (7) (9)
Indirect expenses (132) (156) (64) (68) (73)
Restructuring costs
- direct - (1) - - -
- indirect (14) (19) (3) (11) (4)
Litigation and conduct costs - (2) - - (2)
Operating expenses (232) (278) (108) (124) (125)
Operating profit before impairment losses 89 53 53 36 41
Impairment losses (7) (2) (4) (3) -
Operating profit 82 51 49 33 41
Operating expenses - adjusted (1) (218) (256) (105) (113) (119)
Operating profit - adjusted (1) 96 73 52 44 47
Analysis of income by business
Investments 51 50 26 25 22
Banking 270 281 135 135 144
Total income 321 331 161 160 166
Performance ratios
Return on equity (2) 7.7% 5.1% 9.6% 6.0% 8.6%
Return on equity - adjusted (1,2) 9.3% 7.6% 10.3% 8.6% 9.9%
Net interest margin 2.52% 2.76% 2.47% 2.58% 2.73%
Cost:income ratio 72.3% 84.0% 67.1% 77.5% 75.3%
Cost:income ratio - adjusted (1) 67.9% 77.3% 65.2% 70.6% 71.7%
Notes:
(1) Excluding restructuring costs and litigation and conduct costs.
(2) Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity (based on 14% (15% prior to Q1 2017) of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes)), assuming 28% tax rate.
Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average
notional equity (based on 14% (15% prior to Q1 2017) of the monthly average of segmental risk-weighted assets incorporating
the effect of capital deductions (RWAes)), assuming 28% tax rate.
Private Banking
30 June 31 March 31 December
2017 2017 2016
Capital and balance sheet £bn £bn Change £bn Change
Loans and advances to customers (gross)
- Personal 2.2 2.2 - 2.3 (4%)
- Mortgages 7.7 7.4 4% 7.0 10%
- Other 2.9 2.9 - 2.9 -
Total loans and advances to customers (gross) 12.8 12.5 2% 12.2 5%
Total assets 19.6 18.1 8% 18.6 5%
Funded assets 19.6 18.1 8% 18.5 6%
Assets under management (1) 17.9 17.8 1% 17.0 5%
Risk elements in lending 0.1 0.1 - 0.1 -
Provision coverage (2) 43% 29% 1,400bp 30% 1,300bp
Customer deposits 26.1 25.7 2% 26.6 (2%)
Loan:deposit ratio (excluding repos) 49% 49% - 46% 300bp
Risk-weighted assets
- Credit risk (non-counterparty) 8.0 7.7 4% 7.5 7%
- Operational risk 1.0 1.0 - 1.1 (9%)
Total risk-weighted assets 9.0 8.7 3% 8.6 5%
Notes:
(1) Comprises assets under management, assets under custody and investment cash.
(2) Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
Private Banking
Key points
Private Banking adjusted operating profit increase by £23 million, or 31.5%, compared with H1 2016, driving an increase in
adjusted return on equity from 7.6% to 9.3%. A £38 million, or 14.8%, decrease in adjusted operating expenses was supported
by a 5.6% reduction in front office headcount. Net loans and advances increased by 8.5% to £12.8 billion and assets under
management increased by 14.0% to £17.9 billion compared with H1 2016, adjusting for a change in accounting treatment of
certain customer deposits.
Serving our customers
● Our Private Banking business offers high net-worth clients private banking, wealth planning and investment management services through Coutts and Adam & Company. Significant progress has been made in re-focusing the business on deep and lasting customer relationships and we continue to drive forward with its goal of being the leading UK private bank and wealth manager.
● Strong loan growth, driven by UK mortgages, has been supported by new products and a proactive pricing strategy to gain market share. The addition of market-leading multi-currency functionality to the Coutts Debit Card, allowing clients to access their funds globally without incurring any charges, is driving greater client engagement.
● Our funds have achieved top quartile returns across one, three and five year time frames, and Coutts Invest was successfully rolled out to eligible clients in the first half of the year providing a cost effective, self select investment solution.
Financial performanceH1 2017 compared with H1 2016
● Operating profit increased by £31 million, or 60.8%, to £82 million compared with H1 2016. Adjusted operating profit of £96 million was £23 million, or 31.5%, higher than H1 2016 principally reflecting lower adjusted operating expenses, partially offset by lower income. An adjusted return on equity of 9.3% compared with 7.6% in H1 2016.
● Total income of £321 million decreased by £10 million, or 3.0%, compared with H1 2016 largely due to lower margins and lower advice fees. Net interest margin fell 24 basis points to 2.52% reflecting the competitive market and lower rate environment.
● Adjusted operating expenses of £218 million decreased by £38 million, or 14.8%, compared with H1 2016 largely reflecting management actions to reduce costs. Staff costs reduced by £3 million, or 3.9%, reflecting a 5.6% reduction in front office headcount.
● Net loans and advances of £12.8 billion were £1.0 billion, or 8.5%, higher than H1 2016 principally driven by growth in mortgages. Assets under management of £17.9 billion were £3.3 billion, or 22.6%, higher than H1 2016, reflecting both organic growth and favourable market conditions. Investment cash balances were included in assets under management for the first time in Q3 2016. Excluding this, growth was £2.2 billion.
● RWAs of £9.0 billion were £0.9 billion, or 11.1%, higher than H1 2016, primarily due to increased mortgage lending.
Q2 2017 compared with Q1 2017
● Adjusted operating profit of £52 million was £8 million, or 18.2%, higher than Q1 2017 reflecting lower operating expenses. Adjusted return on equity of 10.3% compared with 8.6% in Q1 2017.
● Total income of £161 million increased by £1 million on Q1 2017 as higher asset volumes more than offset a reduced net interest margin, down 11 basis points to 2.47% primarily reflecting the competitive market and low rate environment.
● Adjusted operating expenses reduced by £8 million, or 7.1%, reflecting management actions to reduce operational costs. An adjusted cost:income ratio of 65.2% compared with 70.6% in Q1 2017.
Q2 2017 compared with Q2 2016
● Adjusted operating profit increased by £5 million, or 10.6%, to £52 million. Adjusted return on equity of 10.3% compared with 9.9% in Q2 2016.
● Total income of £161 million was £5 million, or 3.0%, lower than Q2 2016 reflecting reduced fee income.
● Adjusted expenses decreased £14 million, or 11.8%, to £105 million, principally reflecting the impact of a 100 reduction in headcount to 1,700.
RBS International
Half year ended Quarter ended
30 June 30 June 30 June 31 March 30 June
2017 2016 2017 2017 2016
Income statement £m £m £m £m £m
Net interest income 161 151 81 80 76
Net fees and commissions 22 25 10 12 14
Other non-interest income 12 9 6 6 5
Non-interest income 34 34 16 18 19
Total income 195 185 97 98 95
Direct expenses
- staff costs (23) (22) (11) (12) (12)
- other costs (7) (8) (4) (3) (3)
Indirect expenses (60) (38) (32) (28) (18)
Restructuring costs
- direct - (1) - - (1)
- indirect (4) (2) (1) (3) (1)
Operating expenses (94) (71) (48) (46) (35)
Operating profit before impairment (losses)/releases 101 114 49 52 60
Impairment (losses)/releases (5) (11) 2 (7) (9)
Operating profit 96 103 51 45 51
Operating expenses - adjusted (1) (90) (68) (47) (43) (33)
Operating profit - adjusted (1) 100 106 52 48 53
Performance ratios
Return on equity (2) 13.1% 15.4% 14.0% 12.0% 15.0%
Return on equity - adjusted (1,2) 13.7% 15.9% 14.3% 13.0% 15.7%
Net interest margin 1.35% 1.42% 1.30% 1.41% 1.40%
Cost:income ratio 48.2% 38.4% 49.5% 46.9% 36.8%
Cost:income ratio - adjusted (1) 46.2% 36.8% 48.5% 43.9% 34.7%
30 June 31 March 31 December
2017 2017 2016
Capital and balance sheet £bn £bn Change £bn Change
Loans and advances to customers (gross)
- Corporate 6.1 6.3 (3%) 6.2 (2%)
- Mortgages 2.7 2.6 4% 2.6 4%
Total loans and advances to customers (gross) 8.8 8.9 (1%) 8.8 -
Total assets 24.7 25.1 (2%) 23.4 6%
Funded assets 24.7 25.1 (2%) 23.4 6%
Risk elements in lending 0.1 0.1 - 0.1 -
Provision coverage (3) 40% 54% (1,400bp) 35% 500bp
Customer deposits 25.5 25.3 1% 25.2 1%
Loan:deposit ratio (excluding repos) 34% 35% (100bp) 35% (100bp)
Risk-weighted assets
- Credit risk (non-counterparty) 8.7 8.8 (1%) 8.8 (1%)
- Operational risk 0.7 0.7 - 0.7 -
Total risk-weighted assets 9.4 9.5 (1%) 9.5 (1%)
Notes:
(1) Excluding restructuring costs.
(2) Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity (based on 12% of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes)), assuming 10% tax rate.
(3) Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
RBS International
Key points
RBS International (RBSI) income increased by £10 million, or 5.4%, compared with H1 2016 reflecting increased lending and
deposit volumes. Adjusted operating expenses increased by £22 million, or 32.4%, as the business absorbs additional
regulatory costs and invests for the future as RBSI prepares to be a bank outside of the ring-fence. Despite this, adjusted
return on equity remained robust at 13.7%.
Serving our customers
● RBSI continues to deliver strong support to retail, commercial, corporate and financial institution customers in Jersey, Guernsey, Isle of Man, Gibraltar and Luxembourg by leveraging a strong multi-currency banking platform combined with a comprehensive product suite.
● We are shaping the future of the business, which will become the key hub for Funds sector customers. We have received regulatory approval for our London branch, which marks an important milestone in ensuring we are compliant with ring-fencing legislation.
● We continue to deliver strong support to our personal customers, including gross new mortgage lending of £235 million in H1 2017, representing 9% of our total mortgage book.
● 86% of our non-personal customers use our digital banking platform and we are investing in enhancing the digital customer experience further in 2017 and into 2018. We are expanding our product suite by launching a new notice deposit account in July 2017.
Financial performanceH1 2017 compared with H1 2016
● Operating profit of £96 million was £7 million, or 6.8%, lower than H1 2016 due to higher operating expenses, partially offset by higher income.
● Total income of £195 million was £10 million, or 5.4%, higher than H1 2016 principally reflecting increased volumes. Net interest margin of 1.35% was 7 basis points lower as margin pressures outweigh mitigating pricing actions.
● Adjusted operating expenses increased by £22 million, or 32.4%, to £90 million principally reflecting increased regulatory costs related to becoming a bank outside of the ring-fence.
● Net loans and advances increased by £0.3 billion, or 3.5%, compared with H1 2016 to £8.8 billion reflecting underlying business growth and foreign exchange movements.
● Customer deposits increased by £1.4 billion, or 5.8%, to £25.5 billion principally reflecting increase call volumes in the Funds sector.
Q2 2017 compared with Q1 2017
● Adjusted operating profit of £52 million was £4 million, or 8.3%, higher than Q1 2017 reflecting lower impairments, partially offset by higher adjusted operating expenses.
Q2 2017 compared with Q2 2016
● Adjusted operating profit of £52 million reduced by £1 million, or 1.9%, compared with Q2 2016, reflecting higher adjusted expenses.
● Total income increased by £2 million, or 2.1%, to £97 million as increased lending volumes more than offset margin pressures.
● Adjusted operating expenses of £47 million were £14 million, or 42.4%, higher than Q2 2016 reflecting increased regulatory costs related to becoming a bank outside of the ring-fence.
NatWest Markets
Half year ended Quarter ended
30 June 30 June 30 June 31 March 30 June
2017 2016 2017 2017 2016
Income statement £m £m £m £m £m
Net interest income from banking activities 42 43 13 29 24
Net fees and commissions 27 17 11 16 6
Income from trading activities 908 620 445 463 374
Own credit adjustments (48) 137 (28) (20) 73
Other operating income 3 1 3 - -
Non-interest income 890 775 431 459 453
Total income 932 818 444 488 477
Direct expenses
- staff costs (297) (131) (142) (155) (64)
- other costs (99) (21) (48) (51) (7)
Indirect expenses (242) (488) (127) (115) (238)
Restructuring costs
- direct (30) (10) (10) (20) (10)
- indirect (73) (23) (25) (48) (11)
Litigation and conduct costs (34) (56) (3) (31) (38)
Operating expenses (775) (729) (355) (420) (368)
Operating profit before impairment losses 157 89 89 68 109
Impairment losses (1) - (1) - -
Operating profit 156 89 88 68 109
Total income - adjusted (1) 980 681 472 508 404
Operating expenses - adjusted (2) (638) (640) (317) (321) (309)
Operating profit - adjusted (1,2) 341 41 154 187 95
Analysis of income by product
Rates 612 385 287 325 264
Currencies 256 266 128 128 122
Financing 187 91 99 88 49
Other (75) (61) (42) (33) (31)
Total excluding own credit adjustments 980 681 472 508 404
Own credit adjustments (48) 137 (28) (20) 73
Total income 932 818 444 488 477
Notes:
(1) Excluding restructuring costs and litigation and conduct costs.
(2) Excluding own credit adjustments.
NatWest Markets
Half year ended Quarter ended
30 June 30 June 30 June 31 March 30 June
Performance ratios 2017 2016 2017 2017 2016
Return on equity (1) 2.3% 0.8% 2.9% 1.7% 4.3%
Return on equity - adjusted (1,2) 7.2% (0.5%) 6.6% 7.9% 3.5%
Net interest margin 0.50% 0.74% 0.31% 0.68% 0.81%
Cost:income ratio 83.2% 89.1% 80.0% 86.1% 77.1%
Cost:income ratio - adjusted (1) 65.1% 94.0% 67.2% 63.2% 76.5%
30 June 31 March 31 December
2017 2017 2016
Capital and balance sheet £bn £bn Change £bn Change
Loans and advances to customers (gross) (3) 17.7 17.9 (1%) 17.4 2%
Loans and advances to banks (4) 4.4 4.9 (10%) 3.3 33%
Reverse repos 36.8 40.8 (10%) 38.6 (5%)
Securities 28.3 25.4 11% 22.0 29%
Cash and eligible bills 17.0 15.0 13% 13.4 27%
Other 12.8 9.9 29% 6.2 106%
Total assets 230.9 225.3 2% 240.0 (4%)
Funded assets 117.0 113.9 3% 100.9 16%
Customer deposits (excluding repos) 8.1 8.0 1% 8.4 (4%)
Bank deposits (excluding repos) 7.5 7.8 (4%) 9.8 (23%)
Repos 31.6 30.7 3% 27.3 16%
Debt securities in issue 5.9 6.0 (2%) 5.4 9%
Loan:deposit ratio (excluding repos) 219% 224% (500bp) 208% 1,100bp
Risk-weighted assets
- credit risk
- non-counterparty 5.8 5.3 9% 5.5 5%
- counterparty 11.0 13.1 (16%) 14.1 (22%)
- market risk 11.4 12.2 (7%) 11.6 (2%)
- operational risk 3.5 3.5 - 4.0 (13%)
Total risk-weighted assets 31.7 34.1 (7%) 35.2 (10%)
Notes:
(1) Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity (based on 15% of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes)), assuming 28% tax rate.
(2) Excluding own credit adjustments, restructuring costs and litigation and conduct costs.
(3) Excludes reverse repos.
(4) Excluding reverse repos and disposal groups.
NatWest Markets
Key points
NatWest Markets adjusted income increased by £299 million, or 43.9%, to £980 million. This reflected high levels of
customer activity and an improved Q1 2017 trading environment compared to a particularly difficult Q1 2016. Although
customer activity eased somewhat in Q2 2017, NatWest Markets continued to navigate the more challenging markets well.
Adjusted operating expenses were stable as ongoing cost reductions have been offset by the impact of investment spend that
was previously capitalised in H1 2016. RWAs of £31.7 billion were £5.0 billion lower than H1 2016 and reduced by £3.5
billion in the first half.
Serving our customers
NatWest Markets continued to focus on customers:
● Leveraging its global hubs the business has led major capital raising transactions in the UK, Europe and the US for both
corporate customers and financial institutions.
● NatWest Markets continues to simplify processes and invest in improving the customer experience. The Agile Markets platform, for
example, provides customers with both simple and complex financial markets trading, analysis and post-trade functionality.
Financial performanceH1 2017 compared with H1 2016
● Operating profit was £156 million compared with £89 million in H1 2016, driven by higher income, partially offset by increased
restructuring costs. H1 2017 adjusted operating profit was £341 million compared with £41 million in H1 2016 reflecting higher
adjusted income.
● Adjusted income increased by £299 million, or 43.9%, to £980 million. This reflected high levels of customer activity and an
improved Q1 2017 trading environment compared to a particularly difficult Q1 2016. Although customer activity eased somewhat in
Q2 2017, NatWest Markets continued to navigate the more challenging markets well. Income from Financing doubled to £187 million,
reflecting an improved performance across all areas of the business and the impact of the difficult market conditions seen in H1
2016. Total income, which includes own credit adjustments, increased by £114 million to £932 million in H1 2017.
● Adjusted operating expenses were stable at £638 million as the impact of investment spend previously capitalised in H1 2016 was
offset by ongoing cost reductions. The majority of NatWest Markets Functions and Services staff have now been aligned directly
to NatWest Markets, with employee numbers now reported within NatWest Markets and the associated costs through direct expenses.
● Funded assets decreased by £8.6 billion, or 6.8%, to £117.0 billion. H1 2016 included a spike in funded assets due to heightened
customer activity and the impact of the rapid depreciation in sterling following the EU referendum.
● RWAs decreased by £5.0 billion to £31.7 billion compared with H1 2016. The reduction primarily reflects lower levels of
counterparty and market risk, due to both a spike immediately after the EU referendum in H1 2016 as well as further counterparty
and market risk reductions, through mitigation activities and business initiatives, since H1 2016.
Q2 2017 compared with Q1 2017
● Operating profit was £88 million compared with £68 million in Q1 2017, with the increase reflecting lower expenses partially
offset by lower income. Adjusted operating profit was £154 million compared with £187 million in Q1 2017.
● Total income decreased by £44 million to £444 million. Adjusted income reduced by £36 million to £472 million as customer
activity eased following a particularly strong Q1 2017.
● Total expenses decreased by £65 million to £355 million, reflecting lower restructuring costs and lower litigation and conduct
costs.
● RWAs reduced by £2.4 billion to £31.7 billion due to a lower level of counterparty and market risk during Q2 2017 compared with
Q1 2017.
Q2 2017 compared with Q2 2016
● Operating profit was £88 million compared with £109 million in Q2 2016 principally reflecting lower income. Adjusted operating profit was £154 million compared with £95 million in Q2 2016, driven by higher adjusted income, partially offset by higher adjusted expenses.
● Total income decreased by £33 million to £444 million. Adjusted income improved by £68 million, or 16.8%, to £472 million primarily reflecting improvements in Financing and Rates, with income up £50 million and £23 million respectively.
● Adjusted operating expenses increased by £8 million, or 2.6%, reflecting the impact of investment spend previously capitalised in Q2 2016.
Capital Resolution
Half year ended Quarter ended
30 June 30 June 30 June 31 March 30 June
2017 2016 2017 2017 2016
Income statement £m £m £m £m £m
Net interest income 24 168 (9) 33 82
Net fees and commissions 14 54 7 7 24
Income from trading activities (163) (552) (87) (76) (478)
Other operating income 45 25 61 (16) 16
Own credit adjustments (22) 184 (15) (7) 76
Strategic disposals - (51) - - (45)
Non-interest income (126) (340) (34) (92) (407)
Total income (102) (172) (43) (59) (325)
Direct expenses
- staff costs (26) (62) (10) (16) (17)
- operating lease depreciation - (6) - - (3)
- other costs (19) (58) (10) (9) (28)
Indirect expenses (88) (289) (44) (44) (135)
Restructuring costs
- direct (130) (12) (60) (70) (5)
- indirect (4) (25) 12 (16) (16)
Litigation and conduct costs (272) (26) (266) (6) (16)
Operating expenses (539) (478) (378) (161) (220)
Operating loss before impairment releases/(losses) (641) (650) (421) (220) (545)
Impairment releases/(losses) 78 (263) 33 45 (67)
Operating loss (563) (913) (388) (175) (612)
Total income - adjusted (1) (80) (305) (28) (52) (356)
Operating expenses - adjusted (2) (133) (415) (64) (69) (183)
Operating loss - adjusted (1,2) (135) (983) (59) (76) (606)
Analysis of income by portfolio
Portfolio and GTS 36 75 20 16 23
Shipping 7 31 2 5 15
Markets (7) (389) (23) 16 (360)
Other (13) 31 26 (39) 23
Income excluding disposals and own credit adjustments 23 (252) 25 (2) (299)
Disposal (losses) (103) (104) (53) (50) (102)
Own credit adjustments (22) 184 (15) (7) 76
Total (102) (172) (43) (59) (325)
Notes:
(1) Excluding own credit adjustments and strategic disposals.
(2) Excluding restructuring costs and litigation and conduct costs.
Capital Resolution
30 June 31 March 31 December
2017 2017 2016
Capital and balance sheet £bn £bn Change £bn Change
Loans and advances to customers (gross) 10.7 13.0 (18%) 13.6 (21%)
Loan impairment provisions (0.6) (0.7) (14%) (0.8) (25%)
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