REG - Royal Bk Scot.Grp. - Half Year Report - Part 1 <Origin Href="QuoteRef">RBS.L</Origin> - Part 3
05/08/2016 07:07
- Part 3: For the preceding part double click ID:nRSE3368Gb
in the Shipping portfolio reflecting difficult conditions in some parts of the sector.
· Commercial Banking reported an impairment loss of £103 million compared with a charge of £26 million in H1 2015, with the uplift primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.
· Ulster Bank RoI reported a net impairment release of £27 million compared with a £77 million release in H1 2015.
· REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.9% at 31 December 2015. Provision coverage was 55% compared with 59% at 31 December 2015. Exchange rate movements added £0.8 billion to REIL during H1 2016.
Q2 2016 compared with Q1 2016
· A net impairment loss of £186 million was reported in Q2 2016 compared with a loss of £223 million in Q1 2016.
· Capital Resolution reported a net impairment loss of £67 million compared with a loss of £196 million in Q1 2016 principally reflecting a reduced charge on the Shipping portfolio. Commercial Banking reported a charge of £89 million compared with a charge of £14 million in Q1 2016 with the increase primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.
· REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.6% in Q1 2016.
Q2 2016 compared with Q2 2015
· A net impairment loss of £186 million in Q2 2016 compared with a release of £192 million in Q2 2015. Capital Resolution reported a charge of £67 million compared with a release of £174 million in Q2 2015. Commercial Banking reported a charge of £89 million compared with a charge of £27 million in Q2 2015, with the uplift primarily reflecting a single name charge on the Oil & Gas portfolio.
Analysis of results
Selected credit risk portfolios
30 June 2016 31 December 2015*
Current Potential Current Potential
exposure exposure exposure exposure
Natural Resources (1) £m £m £m £m
Oil & Gas 3,298 6,356 3,544 6,798
Mining & Metals 816 1,941 729 1,823
Electricity 3,374 8,583 2,851 7,683
Water & Waste 5,347 8,665 4,657 8,261
12,835 25,545 11,781 24,565
Commodity Traders (2) 564 1,080 900 1,320
Of which: Natural Resources 427 759 521 752
Shipping 6,765 7,246 6,776 7,301
30 June 2016 31 December 2015*
Current Potential Current Potential
exposure exposure exposure exposure
Emerging markets (1) £m £m £m £m
India 1,330 1,393 1,634 1,733
China 661 860 960 1,150
*Restated - refer to page 17 in Appendix 1 for further details.
Notes:
(1) Refer to Appendix 1 for further details and definitions.
(2) Represent customers in a number of industry sectors, predominantly Natural Resources above.
Key points
· Oil & Gas:Potential exposure decreased by 6.5% due to active credit management and the continued run-off of the North American and Asia-Pacific portfolios. The portfolio in Commercial Banking saw an impairment charge of £97 million in Q2 2016 primarily from a single name.
· Mining & Metals:Potential exposure was relatively unchanged with the increase mainly driven by foreign exchange movements (64% of the portfolio is denominated in US dollars). Excluding the impact of foreign exchange movements, exposure decreased by 2.5%.
· Shipping:Most of the portfolio related to exposure secured by ocean-going vessels managed by Capital Resolution. Excluding foreign exchange impacts, exposure fell by 10%. Impairment provisions were £445 million at 30 June 2016 up from £181 million at 31 December 2015.
· Exposure to most emerging markets decreased in H1 2016 as RBS continued to implement its strategy to withdraw from non-strategic countries.
Analysis of results
Capital and leverage ratios
End-point CRR basis (1) PRA transitional basis
30 June 31 December 30 June 31 December
2016 2015 2016 2015
Risk asset ratios % % % %
CET1 14.5 15.5 14.5 15.5
Tier 1 15.4 16.3 17.7 19.1
Total 19.0 19.6 23.0 24.7
Capital £m £m £m £m
Tangible equity 40,541 40,943 40,541 40,943
Expected loss less impairment provisions (831) (1,035) (831) (1,035)
Prudential valuation adjustment (603) (381) (603) (381)
Deferred tax assets (1,040) (1,110) (1,040) (1,110)
Own credit adjustments (587) (104) (587) (104)
Pension fund assets (209) (161) (209) (161)
Cash flow hedging reserve (1,603) (458) (1,603) (458)
Other deductions (14) (86) (14) (64)
Total deductions (4,887) (3,335) (4,887) (3,313)
CET1 capital 35,654 37,608 35,654 37,630
AT1 capital 1,997 1,997 7,756 8,716
Tier 1 capital 37,651 39,605 43,410 46,346
Tier 2 capital 9,028 8,002 13,043 13,619
Total regulatory capital 46,679 47,607 56,453 59,965
Risk-weighted assets
Credit risk
- non-counterparty 172,500 166,400
- counterparty 26,100 23,400
Market risk 20,900 21,200
Operational risk 25,700 31,600
Total RWAs 245,200 242,600
Leverage (2)
Derivatives 326,000 262,500
Loans and advances 348,500 327,000
Reverse repos 45,800 39,900
Other assets 181,300 186,000
Total assets 901,600 815,400
Derivatives
- netting and variation margin (328,400) (258,600)
- potential future exposures 75,500 75,600
Securities financing transactions gross up 3,200 5,100
Undrawn commitments 63,200 63,500
Regulatory deductions and other adjustments 5,600 1,500
Leverage exposure 720,700 702,500
Tier 1 capital 37,651 39,605
Leverage ratio % 5.2 5.6
Average leverage exposure (3) 717,167
Average Tier 1 capital (3) 38,561
Average leverage ratio % (3) 5.4
Notes:
(1) Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with the effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on AFS securities which have been included from 2015 under the PRA transitional basis.
(2) Based on end-point CRR 1 Tier capital and leverage exposure under the CRR Delegated Act.
(3) Based on averages of last three quarter end positions.
Analysis of results
Key points
· The CET1 ratio decreased by 100 basis points in H1 2016 to 14.5% primarily reflecting management actions to normalise the ownership structure and improve the long-term resilience of RBS. These actions included the final Dividend Access Share payment of £1.2 billion and the accelerated payment of £4.2 billion relating to the outstanding deficit on the pension Main Scheme. Additional litigation and conduct charges contributed to a £2.0 billion reduction in CET1 capital.
· RWAs increased by £2.6 billion to £245.2 billion during H1 2016 reflecting lending growth in UK PBB and Commercial Banking and the adverse impact of exchange rate movements of £7.5 billion mainly due to weakening of sterling following the EU Referendum. These are partially offset by the reductions in RWAs due to disposals and run-off in Capital Resolution and the removal of the element of operational risk RWAs relating to Citizens, following regulatory approval.
· There was a 10 basis points decrease in the CET1 ratio in Q2 2016 driven by a £0.7 billion decrease in CET 1 capital in Q2 2016, offset by £4.3 billion reduction in RWAs. The reduction in RWAs related to disposals and run-off in Capital Resolution, and removal of that element of operational risk RWAs relating to Citizens, following regulatory approval (£3.9 billion); these were partly offset by the weakening of sterling mainly due to the EU Referendum (£4.4 billion).
· Leverage ratio decreased by 40 basis points in H1 2016 to 5.2% driven by growth in mortgages and commercial lending as well as the reduction in Tier 1 capital.
Segment performance
Half year ended 30 June 2016
PBB CPB Central
Ulster Commercial Private RBS Capital Williams items & Total
UK PBB Bank RoI Banking Banking International CIB Resolution & Glyn other (1) RBS
£m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 2,109 198 1,067 226 151 43 168 324 47 4,333
Other non-interest income 506 92 632 105 34 638 (473) 87 (405) 1,216
Total income - adjusted (2) 2,615 290 1,699 331 185 681 (305) 411 (358) 5,549
Own credit adjustments - 3 - - - 137 184 - 126 450
Loss on redemption of own debt - - - - - - - - (130) (130)
Strategic disposals - - - - - - (51) - 246 195
Total income 2,615 293 1,699 331 185 818 (172) 411 (116) 6,064
Direct expenses - staff costs (361) (97) (265) (77) (22) (131) (62) (125) (1,189) (2,329)
- other costs (162) (13) (111) (23) (8) (21) (64) (33) (1,220) (1,655)
Indirect expenses (987) (85) (557) (156) (38) (488) (289) (39) 2,639 -
Operating expenses - adjusted (3) (1,510) (195) (933) (256) (68) (640) (415) (197) 230 (3,984)
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 (2,042) (312) (984) (278) (71) (729) (478) (242) (793) (5,929)
Operating profit/(loss) before impairment losses 573 (19) 715 53 114 89 (650) 169 (909) 135
Impairment (losses)/releases (40) 27 (103) (2) (11) -- (263) (17) -- (409)
Operating profit/(loss) 533 8 612 51 103 89 (913) 152 (909) (274)
Operating profit/(loss) - adjusted (2,3) 1,065 122 663 73 106 41 (983) 197 (128) 1,156
Additional information
Return on equity (4) 11.9% 0.6% 8.1% 5.1% 15.4% 0.8% nm nm nm (10.3%)
Return on equity - adjusted (2,3,4) 25.5% 9.3% 8.9% 7.6% 15.9% (0.5%) nm nm nm (3.2%)
Cost:income ratio 78% 106% 58% 84% 38% 89% nm 59% nm 98%
Cost:income ratio - adjusted (2,3) 58% 67% 55% 77% 37% 94% nm 48% nm 72%
Total assets (£bn) 151.2 24.3 146.3 17.8 24.6 284.0 208.0 24.9 20.5 901.6
Funded assets (£bn) 151.2 24.1 146.3 17.7 24.6 125.6 44.7 24.9 16.5 575.6
Net loans and advances to customers (£bn) 126.0 18.9 99.2 11.8 8.5 21.6 19.9 20.3 0.4 326.6
Risk elements in lending (£bn) 2.3 4.3 2.2 0.1 0.1 -- 2.4 0.4 -- 11.8
Impairment provisions (£bn) (1.5) (2.5) (1.0) - -- -- (1.1) (0.3) (0.1) (6.5)
Customer deposits (£bn) 140.4 14.7 96.7 25.4 24.1 8.3 18.8 23.9 3.5 355.8
Risk-weighted assets (RWAs) (£bn) 37.0 20.9 77.5 8.1 9.6 36.7 42.3 9.9 3.2 245.2
RWA equivalent (£bn) 41.3 20.8 81.5 8.1 9.6 37.2 43.2 10.4 3.3 255.4
Employee numbers (FTEs - thousands) 20.0 3.2 5.9 1.8 0.7 1.3 0.9 5.2 50.2 89.2
For the notes to this table refer to page 30. nm = not meaningful
Segment performance
Quarter ended 30 June 2016
PBB CPB Central
Ulster Commercial Private RBS Capital Williams items & Total
UK PBB Bank RoI Banking Banking International CIB Resolution & Glyn other (1) RBS
£m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,090 93 531 113 76 24 82 162 6 2,177
Other non-interest income 250 42 315 53 19 380 (438) 44 (107) 558
Total income - adjusted (2) 1,340 135 846 166 95 404 (356) 206 (101) 2,735
Own credit adjustments - - - - - 73 76 - 45 194
Loss on redemption of own debt - - - - - - - - (130) (130)
Strategic disposals - - - - - - (45) - 246 201
Total income 1,340 135 846 166 95 477 (325) 206 60 3,000
Direct expenses - staff costs (180) (46) (134) (37) (12) (64) (17) (63) (574) (1,127)
- other costs (99) (2) (62) (9) (3) (7) (31) (18) (475) (706)
Indirect expenses (503) (43) (301) (73) (18) (238) (135) (18) 1,329 -
Operating expenses - adjusted (3) (782) (91) (497) (119) (33) (309) (183) (99) 280 (1,833)
Restructuring costs - direct (38) (18) - - (1) (10) (5) (25) (295) (392)
- indirect (51) (1) (41) (4) (1) (11) (16) - 125 -
Litigation and conduct costs (421) (92) (8) (2) - (38) (16) - (707) (1,284)
Operating expenses (1,292) (202) (546) (125) (35) (368) (220) (124) (597) (3,509)
Operating profit/(loss) before impairment losses 48 (67) 300 41 60 109 (545) 82 (537) (509)
Impairment (losses)/releases (24) 14 (89) - (9) - (67) (11) - (186)
Operating profit/(loss) 24 (53) 211 41 51 109 (612) 71 (537) (695)
Operating profit/(loss) - adjusted (2,3) 534 58 260 47 53 95 (606) 96 179 716
Additional information
Return on equity (4) (0.4%) (8.2%) 4.9% 8.6% 15.0% 4.3% nm nm nm (11.0%)
Return on equity - adjusted (2,3,4) 24.2% 9.0% 6.6% 9.9% 15.7% 3.5% nm nm nm 3.2%
Cost:income ratio 96% 150% 65% 75% 37% 77% nm 60% nm 117%
Cost:income ratio - adjusted (2,3) 58% 67% 59% 72% 35% 76% nm 48% nm 67%
Total assets (£bn) 151.2 24.3 146.3 17.8 24.6 284.0 208.0 24.9 20.5 901.6
Funded assets (£bn) 151.2 24.1 146.3 17.7 24.6 125.6 44.7 24.9 16.5 575.6
Net loans and advances to customers (£bn) 126.0 18.9 99.2 11.8 8.5 21.6 19.9 20.3 0.4 326.6
Risk elements in lending (£bn) 2.3 4.3 2.2 0.1 0.1 - 2.4 0.4 - 11.8
Impairment provisions (£bn) (1.5) (2.5) (1.0) - - - (1.1) (0.3) (0.1) (6.5)
Customer deposits (£bn) 140.4 14.7 96.7 25.4 24.1 8.3 18.8 23.9 3.5 355.8
Risk-weighted assets (RWAs) (£bn) 37.0 20.9 77.5 8.1 9.6 36.7 42.3 9.9 3.2 245.2
RWA equivalent (£bn) 41.3 20.8 81.5 8.1 9.6 37.2 43.2 10.4 3.3 255.4
Employee numbers (FTEs - thousands) 20.0 3.2 5.9 1.8 0.7 1.3 0.9 5.2 50.2 89.2
For the notes to this table refer to page 30. nm = not meaningful
Segment performance
Half year 30 June 2015
PBB CPB Central
Ulster Commercial Private RBS Capital Williams items & Total
UK PBB Bank RoI Banking Banking International CIB Resolution & Glyn other (1) RBS
£m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 2,067 190 981 219 152 30 281 326 172 4,418
Other non-interest income 566 80 676 107 33 797 303 88 35 2,685
Total income - adjusted (2) 2,633 270 1,657 326 185 827 584 414 207 7,103
Own credit adjustments - - - - - 108 142 - 38 288
Strategic disposal - - - - - - (14) - (121) (135)
Total income 2,633 270 1,657 326 185 935 712 414 124 7,256
Direct expenses - staff costs (400) (80) (242) (90) (21) (188) (182) (97) (1,243) (2,543)
- other costs (122) (35) (104) (17) (8) (53) (107) (16) (1,526) (1,988)
Indirect expenses (905) (85) (462) (133) (50) (504) (510) (48) 2,697 -
Operating expenses - adjusted (3) (1,427) (200) (808) (240) (79) (745) (799) (161) (72) (4,531)
Restructuring costs - direct (2) (16) (11) (2) - (41) (169) - (1,229) (1,470)
- indirect (50) - (5) (77) (3) (270) (544) - 949 -
Litigation and conduct costs (365) 9 (59) (2) - (367) (506) - (25) (1,315)
Operating expenses (1,844) (207) (883) (321) (82) (1,423) (2,018) (161) (377) (7,316)
Operating profit/(loss) before impairment losses 789 63 774 5 103 (488) (1,306) 253 (253) (60)
Impairment (losses)/releases (18) 77 (26) 3 (1) 5 319 10 (48) 321
Operating profit/(loss) 771 140 748 8 102 (483) (987) 263 (301) 261
Operating profit/(loss) - adjusted (2,3) 1,188 147 823 89 105 87 104 263 87 2,893
Additional information
Return on equity (4) 17.7% 11.3% 12.2% (0.3%) 18.4% (11.8%) nm nm nm (0.9%)
Return on equity - adjusted (2,3,4) 28.1% 11.9% 13.6% 8.5% 19.0% 0.6% nm nm nm 10.4%
Cost:income ratio 70% 77% 53% 98% 44% 152% nm 39% nm 101%
Cost:income ratio - adjusted (2,3) 54% 74% 49% 74% 43% 90% nm 39% nm 64%
Total assets (£bn) 139.5 21.6 132.1 18.0 23.7 256.6 247.5 23.9 102.1 965.0
Funded assets (£bn) 139.5 21.5 132.1 17.9 23.7 145.4 79.2 23.9 99.5 682.7
Net loans and advances to customers (£bn) 112.9 16.4 88.4 10.9 6.6 22.1 36.7 19.5 66.0 379.5
Risk elements in lending (£bn) 3.1 3.8 2.2 0.2 0.1 - 7.6 0.5 1.2 18.7
Impairment provisions (£bn) (2.2) (2.0) (0.8) - (0.1) - (5.2) (0.3) (0.7) (11.3)
Customer deposits (£bn) 133.2 13.1 89.5 23.2 21.1 8.6 28.0 23.4 72.4 412.5
Risk-weighted assets (RWAs) (£bn) 34.6 19.2 64.0 8.2 7.7 41.8 68.6 10.3 72.0 326.4
RWA equivalent (£bn) 37.4 18.6 70.1 8.2 7.7 42.5 72.8 10.6 72.3 340.2
Employee numbers (FTEs - thousands) 22.8 2.4 5.7 2.0 0.6 1.5 2.0 4.6 50.0 91.6
For the notes to this table refer to page 30. nm = not meaningful
Segment performance
Quarter ended 31 March 2016
PBB CPB Central
Ulster Commercial Private RBS Capital Williams items & Total
UK PBB Bank RoI Banking Banking International CIB Resolution & Glyn other (1) RBS
£m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,019 105 536 113 75 19 86 162 41 2,156
Other non-interest income 256 50 317 52 15 258 (35) 43 (298) 658
Total income - adjusted (2) 1,275 155 853 165 90 277 51 205 (257) 2,814
Own credit adjustments - 3 - - - 64 108 - 81 256
Strategic disposals - - - - - - (6) - - (6)
Total income 1,275 158 853 165 90 341 153 205 (176) 3,064
Direct expenses - staff costs (181) (51) (131) (40) (10) (67) (45) (62) (615) (1,202)
- other costs (63) (11) (49) (14) (5) (14) (33) (15) (745) (949)
Indirect expenses (484) (42) (256) (83) (20) (250) (154) (21) 1,310 -
Operating expenses - adjusted (3) (728) (104) (436) (137) (35) (331) (232) (98) (50) (2,151)
Restructuring costs - direct (13) (6) (1) (1) - - (7) (20) (190) (238)
- indirect (9) - 1 (15) (1) (12) (9) - 45 -
Litigation and conduct costs - - (2) - - (18) (10) - (1) (31)
Operating expenses (750) (110) (438) (153) (36) (361) (258) (118) (196) (2,420)
Operating profit/(loss) before impairment losses 525 48 415 12 54 (20) (105) 87 (372) 644
Impairment (losses)/releases (16) 13 (14) (2) (2) - (196) (6) - (223)
Operating profit/(loss) 509 61 401 10 52 (20) (301) 81 (372) 421
Operating profit/(loss) - adjusted (2,3) 531 64 403 26 53 (54) (377) 101 (307) 440
Additional information
Return on equity (4) 26.1% 8.8% 11.1% 1.5% 16.0% (2.6%) nm nm nm (9.6%)
Return on equity - adjusted (2,3,4) 27.3% 9.2% 11.2% 5.1% 16.3% (4.4%) nm nm nm (9.4%)
Cost:income ratio 59% 70% 51% 93% 40% 106% nm 58% nm 79%
Cost:income ratio - adjusted (2,3) 57% 67% 51% 83% 39% 119% nm 48% nm 76%
Total assets (£bn) 146.3 22.7 139.4 17.4 23.7 255.9 218.8 24.2 34.5 882.9
Funded assets (£bn) 146.3 22.6 139.4 17.3 23.7 116.0 50.2 24.2 31.0 570.7
Net loans and advances to customers (£bn) 121.8 17.9 96.4 11.6 8.0 18.6 22.4 20.1 1.8 318.6
Risk elements in lending (£bn) 2.4 4.5 2.2 0.1 0.1 - 2.2 0.4 - 11.9
Impairment provisions (£bn) (1.6) (2.7) (1.1) - - - (1.0) (0.3) - (6.7)
Customer deposits (£bn) 136.9 13.7 97.1 23.2 21.6 6.7 24.9 24.3 6.6 355
Risk-weighted assets (RWAs) (£bn) 34.7 20.4 75.7 8.6 9.1 36.1 47.6 9.7 7.6 249.5
RWA equivalent (£bn) 37.5 21.7 79.7 8.6 9.1 36.7 48.4 10.1 7.8 259.6
Employee numbers (FTEs - thousands) 21.4 3.2 6.0 1.8 0.7 1.3 1.0 5.5 51.5 92.4
For the notes to this table refer to page 30. nm = not meaningful
Segment performance
Quarter ended 30 June 2015
PBB CPB Central
Ulster Commercial Private RBS Capital Williams items & Total
UK PBB Bank RoI Banking Banking International CIB Resolution & Glyn other (1) RBS
£m £m £m £m £m £m £m £m £m £m
Income statement
Net interest income 1,035 95 499 109 76 16 124 163 98 2,215
Other non-interest income 284 37 369 52 16 327 53 47 169 1,354
Total income - adjusted (2) 1,319 132 868 161 92 343 177 210 267 3,569
Own credit adjustments - - - - - 62 77 - 29 168
Total income 1,319 132 868 161 92 405 254 210 296 3,737
Direct expenses - staff costs (200) (40) (119) (44) (11) (79) (90) (52) (623) (1,258)
- other costs (58) (17) (53) (8) (4) (27) (50) (10) (738) (965)
Indirect expenses (460) (42) (221) (65) (26) (247) (250) (23)
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