REG - Royal Bk Scot.Grp. - Half Yearly Report - Part 1 <Origin Href="QuoteRef">RBS.L</Origin> - Part 6
29/10/2014 09:16
- Part 6: For the preceding part double click ID:nRSA9698Ne
· Net interest income was up $29 million, or 4% at $838 million driven by a larger investment portfolio, loan growth and the impact of day count.
Citizens Financial Group (US dollar)
Key points (continued)
Q2 2014 compared with Q1 2014 (continued)
· Average loans and advances were up 2%, driven by higher commercial loans, auto loan organic growth and purchases and a strategic initiative to purchase residential mortgages.
· Excluding the gain on the sale of the Illinois retail branches of $283 million in Q2 2014, non-interest income was broadly in line with the prior quarter.
· Excluding restructuring costs of $115 million, total expenses were up $34 million, or 4%, at $862 million due to higher incentives as Q1 2014 included incentive reversals for prior year plans.
· Impairment losses decreased by $68 million to $53 million for the quarter due to lower charge-offs of $19 million and a reserve release in Q2 2014 of $19 million reflecting asset quality improvements, compared to a reserve build in Q1 2014 of $34 million.
Q2 2014 compared with Q2 2013
· Excluding the impact of the Illinois retail branch sale, $283 million net gain, and restructuring costs, $115 million (Q2 2013 - $3 million), operating profit increased by $36 million, or 14%, driven by higher net interest income partially offset by higher expenses.
· Income and expense drivers are consistent with H1 2014 compared with H1 2013.
· Impairment losses were broadly in line with prior year despite the Non-Core transfer.
RBS Capital Resolution
RCR is managed and analysed by four business pillars - Ulster Bank, Real Estate Finance, Corporate and Markets. Real Estate
Finance excludes commercial real estate lending in Ulster Bank.
Half year
ended Quarter ended
30 June 30 June 31 March
2014 2014 2014
£m £m £m
Income statement
Net interest income/(expense) 11 16 (5)
Net fees and commissions 31 17 14
Income from trading activities (1) (53) (69) 16
Other operating income (1) 119 71 48
Non-interest income 97 19 78
Total income 108 35 73
Direct expenses
- staff (89) (51) (38)
- other (32) (14) (18)
Indirect expenses (55) (32) (23)
Operating expenses (176) (97) (79)
Operating loss before impairment losses (68) (62) (6)
Impairment recoveries/(losses) (1) 20 128 (108)
Operating (loss)/profit (48) 66 (114)
Total income
Ulster Bank 1 14 (13)
Real Estate Finance 96 13 83
Corporate (14) (12) (2)
Markets 25 20 5
Total income 108 35 73
Impairment (recoveries)/losses
Ulster Bank (15) (67) 52
Real Estate Finance (34) (123) 89
Corporate 39 73 (34)
Markets (10) (11) 1
Total impairment (recoveries)/losses (20) (128) 108
Loan impairment charge as % of gross customer loans and advances (2)
Ulster Bank (0.2%) (1.9%) 1.3%
Real Estate Finance (0.9%) (6.6%) 4.1%
Corporate 1.0% 3.7% (1.5%)
Markets (2.0%) (3.6%) -
Total (0.1%) (1.7%) 1.2%
Notes:
(1) Q2 2014 results included £225 million (Q1 2014 - £56 million) of net gains from the disposal of assets, comprising £6 million gain (Q1 2014 - £5 million loss) in income from trading activities, £38 million of losses (Q1 2014 - £3 million) in other operating income and £257 million (Q1 2014 - £64 million) release of impairment provisions.
(2) Includes disposal groups.
RBS Capital Resolution
30 June 31 March
2014 2014
£bn £bn
Capital and balance sheet
Loans and advances to customers (gross) (1) 30.0 34.0
Loan impairment provisions (14.4) (15.7)
Net loans and advances to customers 15.6 18.3
Debt securities 1.9 2.2
Total funded assets 20.9 24.3
Total third party assets (including derivatives) 34.4 38.8
Risk elements in lending 20.4 23.0
Provision coverage (2) 71% 68%
Risk-weighted assets (3)
- Credit risk
- non-counterparty 22.6 29.6
- counterparty 8.2 5.7
- Market risk 4.3 5.2
35.1 40.5
Gross loans and advances to customers (1)
Ulster Bank 13.9 15.5
Real Estate Finance 7.4 8.6
Corporate 7.8 9.1
Markets 0.9 0.8
30.0 34.0
Funded assets
Ulster Bank 3.5 4.4
Real Estate Finance (3) 6.7 7.7
Corporate 7.4 8.6
Markets 3.3 3.6
20.9 24.3
Risk weighted assets (4)
Ulster Bank 2.3 2.8
Real Estate Finance 6.4 11.5
Corporate 15.1 14.7
Markets 11.3 11.5
35.1 40.5
RWA equivalent (RWAe) (5)
Ulster Bank 4.5 6.7
Real Estate Finance 10.5 13.4
Corporate 16.6 17.0
Markets 11.9 13.8
43.5 50.9
Notes:
(1) Includes disposal groups.
(2) Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(3) Real Estate Finance funded assets comprise those in the UK (£4.4 billion), Germany (£1.0 billion), Spain (£0.5 billion) and other geographies (£0.8 billion).
(4) On a fully loaded Basel 3 basis risk-weighted assets at 1 January 2014 were £46.7 billion.
(5) RWA equivalent (RWAe) is an internal metric that measures the equity capital employed in divisions. RWAe converts both performing and non-performing exposures into a consistent capital measure, being the sum of the regulatory RWAs and the regulatory capital deductions, the latter converted to RWAe by applying a multiplier. The Group applies a CET 1 ratio of 10%; this results in an end point CRR RWAe conversion multiplier of 10.
RBS Capital Resolution
Funded assets and RWAe
Non-performing (1) Performing (1) Total
Funded assets RWAe Capital Funded assets RWAe Capital Funded assets RWAe Capital
Gross Net RWA deducts Gross Net RWA deducts (2) Gross Net RWA deducts
30 June 2014 £bn £bn £bn £bn £m £bn £bn £bn £bn £m £bn £bn £bn £bn £m
Ulster Bank 13.0 2.6 4.4 - 446 1.1 0.9 0.1 2.3 (229) 14.1 3.5 4.5 2.3 217
Real Estate Finance 5.0 2.7 4.1 0.3 389 4.1 4.0 6.4 6.1 16 9.1 6.7 10.5 6.4 405
Corporate 2.6 1.2 1.8 - 184 6.3 6.2 14.8 15.1 (28) 8.9 7.4 16.6 15.1 156
Markets 0.1 0.1 0.5 0.2 34 3.2 3.2 11.4 11.1 30 3.3 3.3 11.9 11.3 64
Total RCR 20.7 6.6 10.8 0.5 1,053 14.7 14.3 32.7 34.6 (211) 35.4 20.9 43.5 35.1 842
31 March 2014
Ulster Bank 14.6 3.6 6.3 0.1 622 1.1 0.8 0.4 2.7 (235) 15.7 4.4 6.7 2.8 387
Real Estate Finance 5.4 2.9 2.9 0.3 260 4.9 4.8 10.5 11.2 (76) 10.3 7.7 13.4 11.5 184
Corporate 2.9 1.2 2.1 0.1 209 7.5 7.4 14.9 14.6 28 10.4 8.6 17.0 14.7 237
Markets 0.2 0.2 0.3 - 26 3.4 3.4 13.5 11.5 205 3.6 3.6 13.8 11.5 231
Total RCR 23.1 7.9 11.6 0.5 1,117 16.9 16.4 39.3 40.0 (78) 40.0 24.3 50.9 40.5 1,039
1 January 2014
Ulster Bank 14.8 3.7 7.6 0.2 738 1.4 1.1 1.3 3.1 (179) 16.2 4.8 8.9 3.3 559
Real Estate Finance 7.2 4.2 6.1 0.3 580 5.8 5.3 12.5 13.2 (75) 13.0 9.5 18.6 13.5 505
Corporate 3.3 1.7 2.9 0.2 269 8.1 8.1 18.2 16.2 208 11.4 9.8 21.1 16.4 477
Markets 0.2 0.1 0.6 - 58 4.7 4.7 15.8 13.5 233 4.9 4.8 16.4 13.5 291
Total RCR 25.5 9.7 17.2 0.7 1,645 20.0 19.2 47.8 46.0 187 45.5 28.9 65.0 46.7 1,832
Notes:
(1) Performing assets are those with an internal asset quality band of AQ1 - 9; and non-performing assets are in AQ10 with a probability of default being 100%.
(2) The negative capital deductions are a result of the latent loss provisions held in respect of the performing portfolio.
(3) Capital deductions relating to expected loss less impairment provisions were £823 million (31 March 2014 - £960 million; 1 January 2014 - £1,774 million).
RBS Capital Resolution
Funded assets
1 April 30 June
2014 Net run-off Disposals (1) Impairments Other 2014
Quarter ended 30 June 2014 £bn £bn £bn £bn £bn £bn
Ulster Bank 4.4 (0.1) (0.8) 0.1 (0.1) 3.5
Real Estate Finance 7.7 (0.4) (0.6) 0.1 (0.1) 6.7
Corporate 8.6 (0.8) (0.2) (0.1) (0.1) 7.4
Markets 3.6 (0.1) (0.2) - - 3.3
Total 24.3 (1.4) (1.8) 0.1 (0.3) 20.9
1 January 31 March
2014 Net run-off Disposals (1) Impairments Other 2014
Quarter ended 31 March 2014 £bn £bn £bn £bn £bn £bn
Ulster Bank 4.8 (0.1) (0.2) (0.1) - 4.4
Real Estate Finance 9.5 (1.2) (0.5) (0.1) - 7.7
Corporate 9.8 (0.7) (0.5) - - 8.6
Markets 4.8 (0.5) (0.7) - - 3.6
Total 28.9 (2.5) (1.9) (0.2) - 24.3
Risk-weighted assets
1 April Risk Other (3) 30 June
2014 Net run-off Disposals (1) parameters (2) Impairments 2014
Quarter ended 30 June 2014 £bn £bn £bn £bn £bn £bn £bn
Ulster Bank 2.8 - (0.1) (0.4) - - 2.3
Real Estate Finance 11.5 (0.2) (0.6) (4.2) - (0.1) 6.4
Corporate 14.7 (0.6) (0.5) 2.2 (0.4) (0.3) 15.1
Markets 11.5 (1.6) (0.7) 2.2 - (0.1) 11.3
Total 40.5 (2.4) (1.9) (0.2) - (0.5) 35.1
1 January Risk Other (3) 31 March
2014 Net run-off Disposals (1) parameters (2) Impairments 2014
Quarter ended 31 March 2014 £bn £bn £bn £bn £bn £bn £bn
Ulster Bank 3.3 (0.5) - - - - 2.8
Real Estate Finance 13.5 (1.6) (0.1) (0.3) - - 11.5
Corporate 16.4 (0.3) (0.5) (0.8) - (0.1) 14.7
Markets 13.5 (0.2) (0.6) (1.2) - - 11.5
Total 46.7 (2.6) (1.2) (2.3) - (0.1) 40.5
For the notes to this table refer to the following page.
RBS Capital Resolution
Capital deductions
1 April Net run-off Risk Impairments Other (3) 30 June
2014 Disposals (1) parameters (2) 2014
Quarter ended 30 June 2014 £m £m £m £m £m £m £m
Ulster Bank 387 (26) (103) 17 (46) (12) 217
Real Estate Finance 184 (81) (29) 242 101 (12) 405
Corporate 237 (23) (62) 97 (83) (10) 156
Markets 231 (9) (79) (79) - - 64
Total 1,039 (139) (273) 277 (28) (34) 842
1 January Net run-off Risk Impairments Other (3) 31 March
2014 Disposals (1) parameters (2) 2014
Quarter ended 31 March 2014 £m £m £m £m £m £m £m
Ulster Bank 559 (2) (14) (135) (17) (4) 387
Real Estate Finance 505 (211) (59) 31 (78) (4) 184
Corporate 477 (71) 17 (159) (27) - 237
Markets 291 - - (56) - (4) 231
Total 1,832 (284) (56) (319) (122) (12) 1,039
RWA equivalent
1 April Net run-off Risk Impairments Other (3) 30 June
2014 Disposals (1) parameters (2) 2014
Quarter ended 30 June 2014 £bn £bn £bn £bn £bn £bn £bn
Ulster Bank 6.7 (0.3) (1.1) (0.2) (0.5) (0.1) 4.5
Real Estate Finance 13.4 (1.0) (0.9) (1.8) 1.0 (0.2) 10.5
Corporate 17.0 (0.8) (1.1) 3.2 (1.2) (0.5) 16.6
Markets 13.8 (1.7) (1.5) 1.4 - (0.1) 11.9
Total 50.9 (3.8) (4.6) 2.6 (0.7) (0.9) 43.5
1 January Net run-off Risk Impairments Other (3) 31 March
2014 Disposals (1) parameters (2) 2014
Quarter ended 31 March 2014 £bn £bn £bn £bn £bn £bn £bn
Ulster Bank 8.9 (0.5) (0.1) (1.4) (0.2) - 6.7
Real Estate Finance 18.6 (3.7) (0.7) - (0.8) - 13.4
Corporate 21.1 (1.0) (0.3) (2.4) (0.3) (0.1) 17.0
Markets 16.4 (0.2) (0.6) (1.7) - (0.1) 13.8
Total 65.0 (5.4) (1.7) (5.5) (1.3) (0.2) 50.9
Notes:
(1) Includes all aspects relating to disposals, including associated removal of deductions from regulatory capital.
(2) Principally reflects credit migration and other technical adjustments.
(3) Includes fair value adjustments and foreign exchange movements.
RBS Capital Resolution
Gross loans and advances, REIL and related impairments
Credit metrics YTD
REIL as a Provisions Provisions Impairment YTD
Gross % of gross as a % as a % of charge/ Amounts
loans (1) REIL Provisions loans of REIL gross loans (gain) (2) written-off
30 June 2014 £bn £bn £bn % % % £m £m
By sector:
Commercial real estate
- investment 10.7 8.2 4.4 77 54 41 (35) 839
- development 7.6 7.0 6.1 92 87 80 (65) 222
Asset finance 2.5 0.9 0.4 36 44 16 19 21
Other corporate 9.1 4.3 3.5 47 81 38 71 532
Other 0.1 - - - - - - 5
30.0 20.4 14.4 68 71 48 (10) 1,619
By donating segment
and sector
Ulster Bank
Commercial real estate
- investment 4.5 4.3 2.7 96 63 60 (42) 126
- development 6.5 6.4 5.8 98 91 89 (79) 192
Other corporate 2.9 2.3 2.1 79 91 72 106 157
Total Ulster Bank 13.9 13.0 10.6 94 82 76 (15) 475
Commercial Banking
Commercial real estate
- investment 2.2 1.3 0.5 59 38 23 33 51
- development 0.8 0.5 0.2 63 40 25 15 11
Asset finance - - - - - - - 3
Other corporate 1.2 0.6 0.4 50 67 33 30 113
Other - - - - - - - 4
Total Commercial Banking 4.2 2.4 1.1 57 46 26 78 182
CIB
Commercial real estate
- investment 4.0 2.6 1.2 65 46 30 (26) 662
- development 0.3 0.1 0.1 33 100 33 (1) 19
Asset finance 2.5 0.9 0.4 36 44 16 19 18
Other corporate 5.0 1.4 1.0 28 71 20 (65) 262
Other 0.1 - - - - - - 1
Total CIB 11.9 5.0 2.7 42 54 23 (73) 962
Total 30.0 20.4 14.4 68 71 48 (10) 1,619
Of which:
UK 13.9 8.0 5.0 58 63 36 (71) 1,057
Europe 15.0 12.0 9.2 80 77 61 78 553
US 0.3 0.1 - 33 - - (8) 2
RoW 0.8 0.3 0.2 38 67 25 (9) 7
30.0 20.4 14.4 68 71 48 (10) 1,619
Banks 0.6 - - - - - (10) -
Notes:
(1) Includes disposal groups.
(2) Impairment losses include those relating to AFS securities; sector analyses above include allocation of latent impairment charges.
Impairment losses include those relating to AFS securities; sector analyses above include allocation of latent impairment
charges.
RBS Capital Resolution
Gross loans and advances, REIL and related impairments (continued)
Impairment
Gross charge/ Amounts
loans (1) Provisions (gain) (2) written-off
31 March 2014 £bn £bn £m £m
By donating segment and sector
Ulster Bank
Commercial real estate
- investment 5.4 3.1 47 3
- development 7.1 6.2 (29) 31
Other corporate 3.0 2.0 34 25
Total Ulster Bank 15.5 11.3 52 59
Commercial Banking
Commercial real estate
- investment 2.4 0.5 52 1
- development 0.7 0.3 13 1
Other corporate 1.7 0.5 16 25
Other - - - 5
Total Commercial Banking 4.8 1.3 81 32
CIB
Commercial real estate
- investment 5.1 1.4 34 370
- development 0.3 0.1 10 3
Asset finance 2.5 0.4 8 -
Other corporate 5.6 1.2 (47) 326
Other 0.2 - (30) -
Total CIB 13.7 3.1 (25) 699
Total 34.0 15.7 108 790
Banks 0.7 - - -
Notes:
(1) Includes disposal groups.
(2) Impairment losses include those relating to AFS securities; sector analyses above include allocation of latent impairment charges.
Impairment losses include those relating to AFS securities; sector analyses above include allocation of latent impairment
charges.
RBS Capital Resolution
Key points
H1 2014
· Funded assets have reduced by £8 billion, or 28%, to £21 billion since inception on 1 January 2014, driven by disposals and run-off.
· RWA equivalent decreased by £21 billion, or 33%, to £44 billion during H1 2014. This primarily reflects disposals and run-off, supplemented by methodology changes and lower operational and market risk RWAs.
· The operating loss of £48 million benefited from £281 million of disposal gains and recoveries in H1 2014 with underlying impairments of £301 million.
· The net effect of the operating loss and RWA equivalent (RWAe) reduction resulted in net CET1 accretion of £2 billion.
Q2 2014 compared with Q1 2014
Capital
· RWAe reduction of £7 billion, to £44 billion, reflects a combination of disposals, run-off and lower market risk RWAs.
· The operating focus in the quarter was on capital intensive positions to maximise the capital accretion benefit. Reductions in these positions were achieved in a capital accretive manner and consistent with our asset management principles. Disposal activity was spread across all sectors, with the most notable reductions in the Ulster Bank and Real Estate business pillars.
Funded assets
· Funded assets fell to £21 billion, a reduction of £3 billion, or 14%, during the quarter.
· The reduction was achieved by a mixture of run-off and disposals, and continued to benefit from a combination of strong liquidity in the market and asset demand in specific sectors. The first major disposal in Ireland was completed in Q2 2014 which reduced funded assets by £0.5 billion.
· The percentage mix of assets across each of the business pillars remained broadly stable.
Operating performance
· Operating profit for the second quarter was £66 million, a £180 million improvement compared with Q1 2014 and included a £36 million latent provision release reflecting improving credit conditions. The operating performance also benefited from a number of disposal gains and recoveries with good pricing in the market and efficient execution.
· The favourable market conditions were reflected in higher than anticipated sale prices for assets disposed of in the quarter, resulting in disposal gains of £225 million, primarily through the write back of impairment provisions, compared with £56 million in Q1 2014.
· The net effect of the operating profit of £66 million and RWAe reduction of £7 billion(1)resulted in net CET1 accretion of £0.8 billion in the quarter.
Funding employed
· RCR continues to be funded primarily by RBS Treasury and has no material third party deposits.
· A run off profile of 85% over three years has been assumed for RCR's asset base with the associated funding cost being calculated from Treasury issuance maturing in line with the run down of the RCR balance sheet.
Note
(1) Capital equivalent - £0.7 billion at an internal CET1 ratio of 10%.
This information is provided by RNS
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