REG - Royal Bk Scot.Grp. - Half Yearly Report: Part 2 <Origin Href="QuoteRef">RBS.L</Origin> - Part 1

NatwestAnnouncement

30/07/2015 07:10

RNS Number : 5088U
Royal Bank of Scotland Group PLC
30 July 2015
Appendix 1
Capital and risk management

Appendix 1 Capital and risk management
Presentation of information
1
General overview 
2
Capital management
Pillar 2A and MDA
5
Capital resources
7
Leverage exposure
8
Risk-weighted assets
9
Liquidity and funding risk
Liquidity risk
13
Funding risk
15
Credit risk
Loans and related credit metrics
17
Debt securities
22
Derivatives
23
Key loan portfolios
25
Market risk
Trading portfolios
34
Non-trading portfolios
36
Country risk
Key points
40
Country exposures
42
Presentation of information
The assets and liabilities of disposal groups are presented as single lines in the consolidated balance sheet as required by IFRS. As allowed by IFRS, exposures, measures and ratios in this Appendix include disposal groups, primarily relating to CFG and international private banking, on a line-by-line basis. A summary of this presentation is set out in Appendix 2. 
The disclosures in this appendix supplement disclosures in Analysis of results - Balance sheet related key metrics and ratios; Impairment losses; Capital and leverage ratios. An overview by risk type is included in the General overview, supporting analyses and additional detailed commentary are included in specific risk sections.


Appendix 1 Capital and risk management
General overview*
RBS's main risks are described in Capital and risk management - Risk coverage in the 2014 Annual Report and Accounts. The table below is an overview of these risks, including any developments during H1 2015.
Risk type
Overview
Capital and leverage
 RBS's CET1 ratio: continued to strengthen from 11.2% at the end of 2014 to 12.3% at 30 June 2015, an improvement of 110 basis points. 
 Key milestones were:
o the reduction of CFG ownership interest to 40.8%; and
o the continued run down of RCR and CIB assets.
 RWAs: continued to decline with a 30 billion reduction from the 2014 year end to 326 billion, 26 billion above the year end 2015 target of 300 billion, following reductions in CIB (19.1 billion) and RCR (7.6 billion).
 Leverage ratio (under the revised 2014 Basel III leverage ratio framework and the 2015 CRR Delegated Act): 4.6% compared with 4.2% at the end of 2014 reflecting capital strength and leverage exposure reduction, from 940 billion to 875 billion, principally in CIB.
 RBS plans to issue 4-5 billion of end-point CRR compliant Additional Tier 1, of which 2 billion is planned to be issued in 2015.
Liquidity and funding
 Liquidity position continues to be robust: the liquidity portfolio of 161 billion at 30 June 2015 covered short-term wholesale funding by more than six times. Excluding CFG, the liquidity portfolio was 148 billion. Short-term wholesale funding reduced to 25 billion, due to term debt maturities.
 Liquidity portfolio increased by 10.8 billion in the six months to 30 June 2015 mainly driven by CIB and RCR run-down, Citizens share disposals and continuation of sales from RBS N.V. treasury portfolio. 
 Liquidity coverage ratio (LCR) improved by five percentage points to 117% since the year end; excluding Citizens the LCR was 118%. From 1 October 2015, RBS will be required by the PRA to have a LCR of at least 80%. 
 Net stable funding ratio (NSFR) at 30 June 2015 was 115% in total and 112% excluding Citizens, broadly unchanged from 2014 year end.
 The loan:deposit ratio fell to 92% at 30 June 2015, primarily reflecting asset reductions and a stable deposit base.
 Based on its current assessment of the Financial Stability Board's proposals, RBS may issue 3-5 billion of qualifying debt per annum between 2015 and 2019 to meet future total loss absorbing capacity requirements.
Conduct and legal
RBS continued to remediate historical conduct issues. RBS co-operated with global regulators on investigations into the foreign exchange market and the more significant penalties were settled. Litigation and conduct costs were 1.3 billion in H1 2015 compared with 0.25 billion in H1 2014. The conduct risk framework was further embedded in Conduct and Regulatory Affairs' new operating model, focussing assurance coverage and testing towards customer outcomes.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
General overview* (continued)
Risk type
Overview
Credit
 RBS's credit risk exposures continued to fall overall, with an improvement in credit quality and a net release of impairment provisions in H1 2015. RCR disposals - particularly in the commercial real estate sector in Ireland - contributed significantly to the reductions in exposure and to the provision release. These results also reflect benign economic and market conditions in the UK and Ireland, better liquidity and increased collateral values. Lower sector and asset/product class limits were implemented following the new CIB strategy.
 The growth in UK PBB gross mortgage lending was within credit risk appetite and against a backdrop of sustained house price growth in 2015 that has outstripped earnings growth. Economic fundamentals continue to look strong, helping to underpin mild improvements in the UK housing and mortgage market.
 From a low of US$45 per barrelin January 2015, oil prices recovered to US$61per barrel by theend of June 2015. However, the market is still considered to be oversupplied and the outlook is uncertain. Risk appetite to the oil and gas sector was further reduced during H1 2015 following a review in March 2015, with continued focus on ensuring that the portfolio remains high investment grade.
 Overall credit metrics strengthened in the first half of 2015 principally reflecting RCR disposals but also improvements in economic conditions: 
o Credit risk RWAs fell by 23 billion or 8% to 273 billion at 30 June 2015 from 
 295 billion at the 2014 year end primarily reflecting CIB portfolio sales and
 risk reduction and RCR disposal strategy. 
o Impairment provisions of 11.3 billion (2014 - 18.0 billion) covered risk  elements in lending (REIL) of 18.7 billion (2014 - 28.2 billion) by 60% (2014  - 64%). 
o CRE lending fell to 36.4 billion from 43.3 billion at the end of 2014, of which  7.2 billion (2014 - 13.3 billion) was in REIL with provision coverage of 64%  (2014 - 68%).
Market
Average trading internal VaR decreased to 21.8 million (H1 2014 - 30.6 million; FY 2014 - 27.8 million), largely in credit spread VaR, reflecting the continued exit from the US asset-backed products trading business. Market risk RWAs decreased by 1.7 billion to 22.3 billion, driven by a decline in the standardised risk capital charge reflecting reduced securitisation exposures in the trading book, partly offset by a small increase in the Pillar 1 risk capital charge. 
Non-trading interest rate VaR was lower as RBS positioned its structural interest rate closer to the neutral position prescribed by its risk management policy
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
General overview* (continued)
Risk type
Overview
Country
RBS continued to maintain a cautious stance as it becomes a UK-centred bank with a focus on Western Europe. Total eurozone net balance sheet exposure decreased by 12 billion or 12% to 85.6 billion in the first half of 2015. Eurozone periphery exposures decreased by 7.4 billion or 24%, to 24.0 billion. Most of this reduction was in Italy, driven by maturity of derivative transactions and higher short positions due to uncertainty around Greece, and in Ireland, reflecting RCR portfolio sales and currency movements. Total exposure to Greece was reduced from 0.4 billion to 110 million and 86 million after the effect of credit mitigation. Exposure to Russia remained under strict control and continued to be reviewed regularly against international sanctions.
Operational
The risks associated with RBS's transformation plan are being closely monitored. Separate to this activity, in June, there was a one or two day delay to payments applied to some customer accounts. A detailed investigation is underway into the root cause of the problem - the findings will be used to reduce the risk of recurrence.
Regulatory
The level of regulatory risk remained high, given the large volume of regulatory change still impacting the industry. Various legacy conduct issues also continued to be managed.
Reputational
The most material threats to RBS's reputation continued to be as a result of conduct and operational-related matters: RBS was the subject of investigations and review by a number of regulators, some of which resulted in fines and public censure. The failure of IT systems in June 2015 also impacted customers, with reputational damage to the bank.
Business
RBS further reduced its business risk profile by continuing to scale back CIB's business activities and by pursuing RCR's asset disposal strategy.
Strategic
2015 has seen further progress in RBS's shift towards the UK and the retail and commercial banking segments to achieve a lower risk profile. Capital ratios continued to increase further towards targets which, when attained, will provide RBS with increased strategic options
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Capital management
RBS aims to maintain an appropriate level of capital to meet its business needs and regulatory requirements, and operates within an agreed risk appetite. The appropriate level of capital is determined based on the dual aims of: (i) meeting minimum regulatory capital requirements; and (ii) ensuring RBS maintains sufficient capital to uphold customer, investor and rating agency confidence in the organisation, thereby supporting its business franchises and funding capacity. For a description of the capital management framework, governance and basis of preparation refer to Capital management in the 2014 Annual Report and Accounts.
Pillar 2A and MDA
RBS's current Pillar 2A requirement is 3.4% of RWAs (31 December 2014 - 3.5%). From 1 January 2015, 56% of the total Pillar 2A or 1.9% of RWAs is required to be met from CET1 capital. Pillar 2A is a point in time regulatory assessment of the amount of capital that is required to be held to meet the overall financial adequacy rules. This PRA assessment may change over time, including as a result of at least an annual assessment and supervisory review of RBS's Internal Capital Adequacy Assessment Process (ICAAP); the latest ICAAP based on the end of 2014 data was completed in May 2015. 
RBS's capital risk appetite framework, which informs its capital targets, includes consideration of the maximum distributable amount (MDA) requirements. These requirements are expected to be phased in from 2016, with full implementation by 2019. 
Based on current capital requirements, on the illustrative assumption that current estimates of Pillar 2A remain constant, RBS estimates that its 'fully phased' CET1 MDA requirement would be 10.4% in 2019, assuming RBS's current risk profile is unchanged. It should be noted that this estimate does not reflect the anticipated impact of RBS's planned restructuring and balance sheet risk reduction programmes, changes in the regulatory framework or other factors that could impact target CET1 ratios. This estimated 2019 MDA requirement comprises:
4.5% Pillar 1 minimum CET1 ratio;
2.5% Capital conservation buffer;
1.9% Pillar 2A CET1 ratio; and
1.5% Global Systemically Important Institution buffer.
Based on the assumptions above, assuming a 13% steady state CET1 capital ratio is achieved, RBS currently estimates that it would have headroom of 2.6% to fully phased MDA trigger in 2019. This headroom will be subject to ongoing review to accommodate regulatory and other changes.


Appendix 1 Capital and risk management
Developments in prudential regulation
The European Union Capital Requirements Regulation (CRR) is in transition until 2019. Recent developments are set out below.
Capital 
The Basel Committee on Banking Supervision (BCBS) has consulted on implementing capital floors, and the expectation is that the framework design will be based on a standardised methodology that is currently being revised. 
Systemic capital buffers - Global Systemically Important Banks (G-SIB) are assessed according to methodology set out by BCBS, and an additional loss absorbency requirement has been set according to the size. An annual assessment of size is undertaken and RBS is currently required to hold a 1.5% buffer. Additional requirements are being set for domestic (D-SIB) by the EBA (up to 2%) and for ring-fenced banks by the Financial Policy Committee of the Bank of England (up to 3%). 
BCBS is still considering its proposals on the possible inclusion of interest rate risk in the banking book within Pillar 1 capital rather than the existing Pillar 2 treatment. Similarly, there is a possibility that operational risk charges will be moved from Pillar 2 to Pillar 1 capital.
A comprehensive review by BCBS into the market risk framework (Fundamental Review of the Trading Book) is likely to result in changes to the banking book/trading book boundary, replacing VaR with an expected shortfall model and new, more risk sensitive standardised methodologies which will need to be calculated for the entire book, regardless of whether a firm has permission to use a modelled approach.
BCBS has finalised rules for the capital requirements of securitisation positions. There is a new hierarchy of methods, as well as changes to the methodologies. The new rules, effective from 1 January 2018, aim to reduce reliance on credit rating agencies, although their use will still be permitted subject to local approval, reduce cliff effects seen in the current rules, and enhance risk sensitivity.
PRA has published a new approach to setting Pillar 2 capital requirements, replacing the capital planning buffer with a 'PRA buffer'. Broadly this follows the consultation paper of January 2015.
Disclosure requirements required by regulators will be more frequent, more extensive and much more standardised (Pillar 3). BCBS requirements will be introduced from the end of 2016 and the more detailed EU requirements are being phased in during late 2015.
Leverage ratio 
The PRA is consulting on implementation of a UK leverage ratio framework, expected to come into force from 2016, which will incorporate a systemic capital buffer and a countercyclical buffer when establishing the minimum leverage ratio for banks. There will also be disclosures and related measurement bases for exposures.
Recovery & resolution planning 
The Financial Stability Board is continuing impact studies on Total Loss Absorbency Capacity (TLAC) for G-SIBs with an expectation of final proposals to be issued in late 2015 for implementation in 2019. Minimum requirement for eligible liabilities (MREL) is the EU equivalent of TLAC but is not restricted to G-SIBs. The required amount will be set on a case by case basis by resolution authorities, with the Bank of England proposing that MREL be aligned to TLAC.


Appendix 1 Capital and risk management
Capital resources








End-point CRR basis (1)

PRA transitional basis (1)

30 June
31 March
31 December

30 June
31 March
31 December
2015
2015
2014

2015
2015
2014

m
m
m

m
m
m








Shareholders' equity (excluding







 non-controlling interests)







Shareholders' equity 
56,064
56,808
57,246

56,064
56,808
57,246
Preference shares - equity
(4,313)
(4,313)
(4,313)

(4,313)
(4,313)
(4,313)
Other equity instruments
(634)
(634)
(784)

(634)
(634)
(784)

51,117
51,861
52,149

51,117
51,861
52,149








Regulatory adjustments and deductions







Own credit
345
609
500

345
609
500
Defined benefit pension fund 







 adjustment 
(250)
(245)
(238)

(250)
(245)
(238)
Cash flow hedging reserve
(435)
(1,109)
(1,029)

(435)
(1,109)
(1,029)
Deferred tax assets
(1,206)
(1,140)
(1,222)

(1,206)
(1,140)
(1,222)
Prudential valuation adjustments
(366)
(393)
(384)

(366)
(393)
(384)
Goodwill and other intangible assets
(7,198)
(7,619)
(7,781)

(7,198)
(7,619)
(7,781)
Expected losses less impairments
(1,319)
(1,512)
(1,491)

(1,319)
(1,512)
(1,491)
Other regulatory adjustments
(635)
(327)
(585)

(612)
(305)
(855)









(11,064)
(11,736)
(12,230)

(11,041)
(11,714)
(12,500)








CET1 capital
40,053
40,125
39,919

40,076
40,147
39,649








Additional Tier 1 (AT1) capital







Qualifying instruments and related 







 share premium subject to phase out
-
-
-

6,709
5,092
5,820
Qualifying instruments issued by







 subsidiaries and held by third parties
-
-
-

-
1,114
1,648








AT1 capital
-
-
-

6,709
6,206
7,648








Tier 1 capital
40,053
40,125
39,919

46,785
46,353
47,117








Qualifying Tier 2 capital







Qualifying instruments and related 







 share premium 
5,433
5,734
5,542

10,141
6,254
6,136
Qualifying instruments issued by







 subsidiaries and held by third parties
2,748
2,955
3,175

3,432
6,716
7,490








Tier 2 capital
8,181
8,689
8,717

13,573
12,970
13,626








Total regulatory capital
48,234
48,814
48,636

60,358
59,323
60,743
Note:
(1) 
Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for the end-point CRR basis with the exception of unrealised gains on available-for-sale (AFS) securities which has been included from 2015 for the PRA transitional basis.


Appendix 1 Capital and risk management
Capital resources (continued)
Capital flow statement*
The table below analyses the movement in end-point CRR CET1 and Tier 2 capital for the half year ended 30 June 2015.

CET1
Tier 2
Total

m
m
m




At 1 January 2015
39,919
8,717
48,636
Loss for the year net of movements in fair value of own credit
(308)
-
(308)
Share capital and reserve movements in respect of employee share schemes
161
-
161
Ordinary shares issued
150
-
150
Foreign exchange reserve
(1,166)
-
(1,166)
AFS reserves
(55)
-
(55)
Decrease in goodwill and intangibles deduction
583
-
583
Deferred tax assets
16
-
16
Prudential valuation adjustments
18
-
18
Excess of expected loss over impairment provisions
172
-
172
Dated subordinated debt issues/(maturities)
-
(50)
(50)
Net dated subordinated debt/grandfathered instruments
-
(76)
(76)
Foreign exchange movements
-
(400)
(400)
Other movements
563
(10)
553




At 30 June 2015
40,053
8,181
48,234
Leverage exposure
Basis of preparation*
The leverage exposure set out on page 24 of the main announcement is based on the revised 2014 Basel III leverage ratio framework and the 2015 CRR Delegated Act. Additional analysis of derivative notionals and undrawn commitments, two of the major components contributing to the leverage exposure is set out below.
The table below analyses the derivative notionals by maturity for contracts other than credit derivatives, and credit derivatives by qualifying and non-qualifying.





Credit derivatives (2)


Derivatives other than credit derivatives (1)


Non-


<1 year 
1-5 years 
>5 years 

Qualifying
qualifying
Total 
Derivative notionals
bn 
bn 
bn 

bn 
bn 
bn 
30 June 2015







Interest rate
9,642
6,631
3,850



20,123
Exchange rate
3,403
505
288



4,196
Equity 
42
16
2



60
Credit 




78
22
100








Total
13,087
7,152
4,140

78
22
24,479








31 December 2014















Interest rate
11,069
10,423
5,839



27,331
Exchange rate
3,649
720
306



4,675
Equity 
42
33
2



77
Commodities
1
-
-



1
Credit




99
26
125








Total
14,761
11,176
6,147

99
26
32,209
Notes:
(1) 
Derivative potential future exposures (PFE) are calculated based on the notional value of the contracts and is dependent on the type of contract. For contracts other than credit derivatives the PFE is based on the type and maturity of the contract after the effect of netting arrangements. 
(2)
The PFE on credit derivatives is based on add-on factors determined by the asset quality of the referenced instrument. Qualifying credit derivatives attract a PFE add-on of 5% and have reference securities issued by public sector entities, multilateral development banks or other investment grade issuers. Non-qualifying credit derivatives attract a PFE add-on of 10%.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Leverage exposure (continued)
Weighted undrawn commitments*










Ulster
Commercial
Private 

Central



UK PBB
Bank
Banking
Banking
CIB
items
CFG
RCR
Total
30 June 2015
bn
bn
bn
bn
bn
bn
bn
bn
bn










Unconditionally cancellable items (1)
3.2
0.4
1.2
0.1
3.6
2.6
1.8
-
12.9
Items with a 20% CCF
0.1
-
0.4
-
2.0
0.1
0.3
-
2.9
Items with a 50% CCF
5.4
0.6
15.0
0.7
22.5
0.8
7.9
0.3
53.2
Items with a 100% CCF
0.1
0.1
2.2
0.4
7.7
3.6
1.4
0.2
15.7











8.8
1.1
18.8
1.2
35.8
7.1
11.4
0.5
84.7










31 December 2014



















Unconditionally cancellable items (1)
3.1
0.1
1.0
0.2
2.4
-
1.8
-
8.6
Items with a 20% CCF
0.4
-
0.7
0.1
3.2
-
0.4
-
4.8
Items with a 50% CCF
4.8
1.0
9.8
1.4
36.8
1.6
7.8
0.5
63.7
Items with a 100% CCF
0.1
0.3
2.2
0.8
10.2
3.9
1.5
0.3
19.3











8.4
1.4
13.7
2.5
52.6
5.5
11.5
0.8
96.4
Note:
(1)
Based on a 10% credit conversion factor.

Risk-weighted assets*
The tables below analyse the movement in RWAs on the end-point CRR basis during H1 2015, by key drivers.

Credit risk RWAs

Non-counterparty
Counterparty
Total

bn
bn
bn




At 1 January 2015
264.7
30.4
295.1
Foreign exchange movement
(3.5)
0.1
(3.4)
Business movements
(12.9)
(3.3)
(16.2)
Risk parameter changes
(4.1)
-
(4.1)
Methodology changes
(0.2)
-
(0.2)
Model updates
0.7
(0.1)
0.6
Other changes
0.3
0.4
0.7




At 30 June 2015
245.0
27.5
272.5




Modelled (1)
143.7
24.2
167.9
Non-modelled
101.3
3.3
104.6





245.0
27.5
272.5

Market risk RWAs
Operational


CIB
Other
Total
riskRWAs
Total

bn
bn
bn
bn
bn






At 1 January 2015 
18.9
5.1
24.0
36.8
60.8
Business and market movements
(0.8)
(0.9)
(1.7)
(5.2)
(6.9)






At 30 June 2015 
18.1
4.2
22.3
31.6
53.9






Modelled (1)
15.4
3.3
18.7
-
18.7
Non-modelled
2.7
0.9
3.6
31.6
35.2







18.1
4.2
22.3
31.6
53.9
Note:
(1) 
Modelled refers to advanced internal ratings (AIRB) basis for non-counterparty credit risk, internal model method (IMM) for counterparty credit risk, and value-at-risk and related models for market risk. These principally relate to CIB (71.8 billion) and Commercial Banking (50.5 billion).
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Risk-weighted assets* (continued)
The table below analyses the movement in end-point CRR RWAs by segment during the half year.












Ulster
Commercial
Private

Central




UK PBB
Bank
Banking
Banking
CIB
items
CFG
RCR
Total 
Total RWAs
bn 
bn 
bn 
bn 
bn 
bn 
bn 
bn 
bn 










At 1 January 2015
42.8
23.8
64.0
11.5
107.1
16.3
68.4
22.0
355.9
Foreign exchange movement
-
(1.5)
(0.3)
0.1
(1.0)
-
(0.3)
(0.4)
(3.4)
Business movements
(0.6)
(0.4)
1.1
(0.8)
(18.3)
(0.6)
1.7
(5.2)
(23.1)
Risk parameter changes (1)
(1.3)
(0.7)
(0.2)
-
0.3
(0.2)
-
(2.0)
(4.1)
Methodology changes (2)
-
-
(0.2)
-
-
-
-
-
(0.2)
Model updates (3)
(0.2)
-
-
-
1.4
(0.6)
-
-
0.6
Other changes 
0.3
-
2.5
(1.0)
(1.5)
0.4
-
-
0.7










At 30 June 2015
41.0
21.2
66.9
9.8
88.0
15.3
69.8
14.4
326.4










Credit risk









 - non-counterparty
32.0
19.6
60.7
8.2
38.6
14.1
64.0
7.8
245.0
 - counterparty
-
0.1
-
-
22.9
0.6
0.9
3.0
27.5
Market risk
-
-
-
0.1
18.1
0.1
-
4.0
22.3
Operational risk
9.0
1.5
6.2
1.5
8.4
0.5
4.9
(0.4)
31.6










Total RWAs
41.0
21.2
66.9
9.8
88.0
15.3
69.8
14.4
326.4
Key points
RWAs fell by 29.5 billion to 326.4 billion in the first half of 2015 principally in CIB and RCR.
CIB reduced RWAs by 19 billion to 88 billion in line with expected business run-off as it implemented the new strategy. These reductions included:

regional loan portfolio disposals and run-offs (6.8 billion), including US corporate loan portfolio sales to Mizuho (3.2 billion);

US asset-backed product exit (2.3 billion);

other trading portfolio disposals (2.1 billion);

restructuring of certain derivative transactions (1.7 billion); and

run down of the trade finance in GTS in line with contractual maturities (3.2 billion).
RCR disposal and run-off strategy continued to progress, resulting in RWA reductions of 7.6 billion.
Improvements in credit quality metrics contributed to RWA decreases in Ulster Bank and UK PBB.
Sterling strengthening against the euro and US dollar resulted in lower RWAs in Ulster Bank and CIB.
Commercial Banking RWAs at 30 June 2015 included the transfer of UK Corporate coverage from CIB (2.3 billion) and Private Banking RBSI (1.5 billion).
Annual recalculation of operational risk resulted in a 5.2 billion RWA reduction, primarily 3.4 billion in CIB and 0.4 billion in both UK PBB and Private Banking.
In terms of RWA density for AIRB portfolios:

other sovereign density decreased from 25% to 17% following the sale of term loans in RCR;

non-bank financial institution density increased from 38% to 45% primarily reflecting close-out of a large low risk-weighted exposure and implementation of new LGD and PD models;

commercial property RWA density increased overall principally due to the impact of RCR disposals, including defaulted assets; and

the increase in RWA density for oil and gas and mining and metal sectors reflected implementation of the new large corporate PD model for mining exposures.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Risk-weighted assets* (continued)
EAD and RWA density 
The tables below show exposure at default (EAD) after credit risk mitigation (CRM), RWAs, and related RWA density by sector cluster. 













EAD post CRM (1,2)

RWAs (1)

RWA density

AIRB
STD
Total

AIRB
STD
Total

AIRB
STD
Total
30 June 2015
m
m
m

m
m
m

%
%
%












Sector cluster











Sovereign











Central banks
47,477
55,729
103,206

1,868
1
1,869

4
-
2
Central government
16,564
12,287
28,851

1,652
162
1,814

10
1
6
Other sovereign
3,958
7,473
11,431

671
327
998

17
4
9












Total sovereign
67,999
75,489
143,488

4,191
490
4,681

6
1
3












Financial institutions (FI)











Banks
27,831
2,387
30,218

12,822
569
13,391

46
24
44
Other FI (2)
35,420
20,727
56,147

15,982
9,380
25,362

45
45
45
SSPEs (3)
14,282
2,326
16,608

5,480
4,078
9,558

38
175
58












Total FI
77,533
25,440
102,973

34,284
14,027
48,311

44
55
47












Corporates











Property











 - UK
42,808
3,493
46,301

21,824
3,478
25,302

51
100
55
 - Ireland
4,077
15
4,092

912
15
927

22
100
23
 - Other Western Europe
3,526
484
4,010

1,520
503
2,023

43
104
50
 - US
1,036
8,024
9,060

519
8,059
8,578

50
100
95
 - RoW
1,639
361
2,000

1,115
335
1,450

68
93
73












Total property
53,086
12,377
65,463

25,890
12,390
38,280

49
100
58
Natural resources











 - Oil and gas
11,145
2,043
13,188

5,401
1,856
7,257

48
91
55
 - Mining and metals
2,438
613
3,051

2,058
641
2,699

84
105
88
 - Other
13,793
974
14,767

5,227
759
5,986

38
78
41
Transport











 - Shipping
6,322
2,731
9,053

4,186
2,745
6,931

66
101
77
 - Other
19,794
3,091
22,885

8,310
2,734
11,044

42
88
48
Manufacturing
25,070
8,408
33,478

10,801
8,219
19,020

43
98
57
Retail and leisure
21,388
8,095
29,483

12,786
7,981
20,767

60
99
70
Services
21,919
7,973
29,892

12,901
8,028
20,929

59
101
70
TMT(4)
10,131
2,785
12,916

5,513
2,671
8,184

54
96
63












Total corporates
185,086
49,090
234,176

93,073
48,024
141,097

50
98
60












Personal











Mortgages











 - UK
117,153
7,803
124,956

10,123
3,188
13,311

9
41
11
 - Ireland
13,992
35
14,027

11,416
16
11,432

82
46
81
 - Other Western Europe
198
324
522

16
136
152

8
42
29
 - US
132
20,629
20,761

10
10,061
10,071

8
49
49
 - RoW
422
724
1,146

37
284
321

9
39
28












Total mortgages
131,897
29,515
161,412

21,602
13,685
35,287

16
46
22
Other personal
30,446
17,239
47,685

12,366
12,801
25,167

41
74
53












Total personal
162,343
46,754
209,097

33,968
26,486
60,454

21
57
29
Other items
4,118
17,885
22,003

2,364
15,543
17,907

57
87
81












Total
497,079
214,658
711,737

167,880
104,570
272,450

34
49
38












For the notes to this table refer to the following page.


















*Not within the scope of Deloitte LLP's review report







Appendix 1 Capital and risk management
Risk-weighted assets*: EAD and RWA density (continued)

EAD post CRM (1,2)

RWAs (1)

RWA density 

AIRB
STD
Total

AIRB
STD
Total

AIRB
STD
Total
31 December 2014
m
m
m

m
m
m

%
%
%












Sector cluster











Sovereign











Central banks
44,007
50,539
94,546

1,632
78
1,710

4
-
2
Central government
16,373
9,944
26,317

1,775
61
1,836

11
1
7
Other sovereign
4,936
6,548
11,484

1,250
386
1,636

25
6
14












Total sovereign
65,316
67,031
132,347

4,657
525
5,182

7
1
4












Financial institutions (FI)











Banks
32,777
2,081
34,858

15,089
488
15,577

46
23
45
Other FI (2)
41,420
22,535
63,955

15,585
9,960
25,545

38
44
40
SSPEs (3)
17,504
2,634
20,138

6,216
4,410
10,626

36
167
53












Total FI
91,701
27,250
118,951

36,890
14,858
51,748

40
55
44












Corporates











Property











 - UK
48,081
3,463
51,544

23,736
3,390
27,126

49
98
53
 - Ireland
7,541
31
7,572

1,283
33
1,316

17
106
17
 - Other Western Europe
4,625
431
5,056

2,321
445
2,766

50
103
55
 - US
1,334
7,481
8,815

722
7,551
8,273

54
101
94
 - RoW
2,048
284
2,332

1,296
249
1,545

63
88
66












Total property
63,629
11,690
75,319

29,358
11,668
41,026

46
100
54
Natural resources











 - Oil and gas
15,704
1,876
17,580

6,864
1,665
8,529

44
89
49
 - Mining and metals
3,744
635
4,379

2,602
660
3,262

69
104
74
 - Other
16,173
1,070
17,243

6,367
861
7,228

39
80
42
Transport











 - Shipping
8,332
2,571
10,903

5,790
2,575
8,365

69
100
77
 - Other
21,268
3,297
24,565

9,176
2,865
12,041

43
87
49
Manufacturing
29,450
8,430
37,880

12,673
8,257
20,930

43
98
55
Retail and leisure
24,564
8,262
32,826

14,940
8,027
22,967

61
97
70
Services
23,489
8,426
31,915

13,327
8,350
21,677

57
99
68
TMT(4)
13,555
2,790
16,345

7,079
2,806
9,885

52
101
60












Total corporates
219,908
49,047
268,955

108,176
47,734
155,910

49
97
58












Personal











Mortgages











 - UK
113,884
7,794
121,678

10,651
3,121
13,772

9
40
11
 - Ireland
15,544
37
15,581

13,137
18
13,155

85
49
84
 - Other Western Europe
193
311
504

16
124
140

8
40
28
 - US
131
21,088
21,219

10
10,352
10,362

8
49
49
 - RoW
407
589
996

39
232
271

10
39
27












Total mortgages
130,159
29,819
159,978

23,853
13,847
37,700

18
46
24
Other personal
31,628
15,971
47,599

13,233
11,805
25,038

42
74
53












Total personal
161,787
45,790
207,577

37,086
25,652
62,738

23
56
30
Other items
4,465
18,363
22,828

3,012
16,580
19,592

67
90
86












Total
543,177
207,481
750,658

189,821
105,349
295,170

35
51
39
Notes:
(1)
Regulatory permissions to model counterparty credit risk exposure is independent from the scope of applying AIRB methodology. As such, standardised EAD and RWA will incorporate an element of modelled counterparty credit risk exposure.
(2)
Exposure at default post credit risk mitigation reflects an estimate of the extent to which a bank will be exposed under a specific facility, in the event of the default of a counterparty; AIRB: advanced internal ratings based; STD: standardised.
(3)
Non-bank financial institutions, such as US agencies, insurance companies, pension funds, hedge and leverage funds, broker-dealers and non-bank subsidiaries of banks.
(4)
Securitisation structured purpose entities primarily relate to securitisation related vehicles.
(5)
Telecommunications, media and technology.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Liquidity and funding risk
Liquidity and funding risk is the risk that RBS is unable to meet its financial obligations, including financing wholesale maturities or customer deposit withdrawals, as and when they fall due. The risk arises through the maturity transformation role that banks perform. It is dependent on RBS specific factors such as maturity profile, composition of sources and uses of funding, the quality and size of the liquidity portfolio as well as broader market factors, such as wholesale market conditions alongside depositor and investor behaviour. For a description of the liquidity and funding risk framework, governance and basis of preparation refer to Capital and risk management - Liquidity and funding risk in the 2014 Annual Report and Accounts.
Liquidity and related metrics*
The table below sets out the key liquidity and related metrics monitored by RBS.

30 June 2015




RBS 
31 March
31 December
RBS
excluding CFG 
2015
2014





Liquidity portfolio
161bn
148bn
157bn
151bn
Stressed outflow coverage (SCR) (1)
215%
235%
187%
186%
LCR (2)
117%
118%
112%
112%
NSFR (3)
115%
112%
110%
112%
Loan:deposit ratio
92%
91%
95%
95%
Notes:
(1)
RBS's liquidity risk appetite is measured by reference to the liquidity portfolio as a percentage of stressed contractual and behavioural outflows under the worst of three internal severe stress scenarios (a market-wide stress, an idiosyncratic stress and a combination of both) in accordance with PRA guidance on Individual Liquidity Adequacy Assessment.
(2)
Within the EU, the LCR is due to come into effect from 1 October 2015 on a phased basis, and replace the current PRA regime from this date. RBS monitors the LCR based on its internal interpretations of the EU Delegated Act rules for the implementation of the LCR. Consequently, RBS's ratio may change over time and may not be comparable with those of other financial institutions.
(3)
Pending further guidelines from the EU and the PRA, RBS uses its own interpretation of the proposals from the BCBS recommendations to calculate the NSFR. Consequently RBS's ratio may change over time and may not be comparable with those of other financial institutions. The ratio is due to come into effect from 1 January 2018.
Liquidity portfolio
The table below shows RBS's liquidity portfolio by product, liquidity value and carrying value. Liquidity value is lower than carrying value as it is stated after discounts applied by the Bank of England and other central banks to instruments, within the secondary liquidity portfolio, eligible for discounting.

Liquidity value

Period end

Average

UK DLG(1)
CFG
Other
Total

Quarter
H1 2015
30 June 2015
m
m
m
m

m
m








Cash and balances at central banks 
73,218
1,183
1,406
75,807

71,113
66,392
Central and local government bonds 







 AAA rated governments
3,932
12
1,033
4,977

5,609
6,529
 AA- to AA+ rated governments and US agencies
10,202
9,845
2,852
22,899

21,154
20,285
 Below AA rated governments
-
-
-
-

80
91
 Local government
-
-
-
-

-
24









14,134
9,857
3,885
27,876

26,843
26,929








Primary liquidity
87,352
11,040
5,291
103,683

97,956
93,321
Secondary liquidity (2)
54,667
2,085
1,022
57,774

57,586
57,024








Total liquidity value
142,019
13,125
6,313
161,457

155,542
150,345








Total carrying value
177,485
14,199
7,262
198,946



For the notes to this table refer to the following page.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Liquidity portfolio (continued)

Liquidity value

Period end

Average

UK DLG (1)
CFG
Other
Total

Quarter
Year
31 December 2014
m
m
m
m

m
m








Cash and balances at central banks 
66,409
1,368
633
68,410

61,777
61,956
Central and local government bonds 







 AAA rated governments and US agencies
5,609
-
2,289
7,898

8,729
5,935
 AA- to AA+ rated governments
6,902
9,281
1,448
17,631

16,589
12,792
 Below AA rated governments
-
-
100
100

-
-
 Local government
-
-
82
82

79
21









12,511
9,281
3,919
25,711

25,397
18,748








Primary liquidity
78,920
10,649
4,552
94,121

87,174
80,704
Secondary liquidity (2)
53,055
2,290
1,189
56,534

57,582
56,017








Total liquidity value
131,975
12,939
5,741
150,655

144,756
136,721








Total carrying value
167,016
13,914
6,055
186,985



Notes:
(1)
The PRA regulated UK Defined Liquidity Group (UK DLG) comprises the RBS's five licensed deposit-taking UK banks: The Royal Bank of Scotland plc, National Westminster Bank Plc, Ulster Bank Limited, Coutts & Company and Adam & Company. In addition, certain of RBS's significant operating subsidiaries - RBS N.V., Citizens Financial Group Inc. and Ulster Bank Ireland Limited - hold liquidity portfolios of liquid assets that comply with local regulations that may differ from PRA rules.
(2)
Comprises assets eligible for discounting at the Bank of England and other central banks. 


Appendix 1 Capital and risk management
Funding risk
The composition of RBS's balance sheet is a function of the broad array of product offerings and diverse markets served by its businesses. Active management of both asset and liability portfolios is designed to optimise the liquidity profile, while ensuring adequate coverage of all cash requirements under extreme stress conditions.
The table below summarises the key funding metrics.











Short-term wholesale

Total wholesale

Net inter-bank
funding (1)
funding
funding (2)

Excluding
Including

Excluding
Including

Deposits
Loans (3)
Net
derivative
derivative
derivative
derivative
inter-bank
collateral
collateral
collateral
collateral
funding

bn
bn

bn
bn

bn
bn
bn










30 June 2015
25.0
47.0

76.4
98.4

13.5
(12.3)
1.2
31 March 2015
27.2
55.3

84.0
112.1

14.3
(14.8)
(0.5)
31 December 2014
27.8
53.3

90.5
116.0

15.4
(13.3)
2.1
30 September 2014
31.4
53.9

94.4
116.9

16.5
(18.2)
(1.7)
30 June 2014
33.6
55.1

101.6
123.1

17.7
(19.3)
(1.6)
Notes:
(1)
Short-term wholesale funding is funding with a residual maturity of less than one year.
(2)
Excludes derivative cash collateral.
(3)
Principally short-term balances.








The table below shows RBS's principal funding sources excluding repurchase agreements (repos). 









30 June 2015

31 December 2014

Short-term
Long-term


Short-term
Long-term


less than
more than
Total

less than
more than
Total
1 year
1 year
1 year
1 year

m
m
m

m
m
m








Deposits by banks







derivative cash collateral
21,993
-
21,993

25,503
-
25,503
other deposits
11,938
1,521
13,459

13,137
2,294
15,431









33,931
1,521
35,452

38,640
2,294
40,934
Debt securities in issue







commercial paper 
154
-
154

625
-
625
certificates of deposit 
1,413
196
1,609

1,695
149
1,844
medium-term notes 
7,842
22,199
30,041

7,741
29,007
36,748
covered bonds
2,625
3,861
6,486

1,284
5,830
7,114
securitisations 
8
4,699
4,707

10
5,564
5,574









12,042
30,955
42,997

11,355
40,550
51,905
Subordinated liabilities
1,057
18,852
19,909

3,274
19,857
23,131








Notes issued
13,099
49,807
62,906

14,629
60,407
75,036








Wholesale funding
47,030
51,328
98,358

53,269
62,701
115,970








Customer deposits







derivative cash collateral (1)
11,133
-
11,133

13,003
-
13,003
financial institution deposits
47,274
1,547
48,821

46,359
1,422
47,781
personal deposits
188,191
5,337
193,528

185,781
6,121
191,902
corporate deposits
157,200
1,832
159,032

159,782
2,403
162,185








Total customer deposits 
403,798
8,716
412,514

404,925
9,946
414,871








Total funding excluding repos
450,828
60,044
510,872

458,194
72,647
530,841








Of which CFG:







Wholesale funding
4,529
1,332
5,861




Total customer deposits
62,064
1,727
63,791




Total funding excluding repos
66,593
3,059
69,652




Note:
(1)
Cash collateral includes 10,220 million (31 December 2014 - 12,036 million) from financial institutions.


Appendix 1 Capital and risk management
Funding risk (continued)
Repos totalled 68.8 billion at 30 June 2015, of which 2.4 billion related to CFG compared with 64.6 billion and 2.4 billion respectively at 31 December 2014.
Customer deposits insured through deposit guarantee schemes totalled 163 billion (2014 - 160 billion), the more material of them being UK Financial Services Compensation Scheme (FSCS), 113 billion (2014 - 112 billion); US Federal Insurance Corporation relating to CFG, 40 billion (2014 - 37 billion) and Republic of Ireland's Deposit Guarantee Scheme, 6 billion (2014 - 7 billion). FSCS deposit protection will decrease from the current limit of 85,000 to 75,000 with effect from 1 January 2016.
RBS is currently subject to the UK bank levy on its consolidated liabilities and equity after taking account of certain exemptions such as regulatory Tier 1 capital, insured deposits and liabilities subject to legally enforceable netting arrangements. The July 2015 Budget Statement, proposed a phased reduction of the bank levy rate from the existing rate of 0.21% to 0.18% from 1 January 2016 and subsequent annual reductions to 0.1% from January 2021. There will also be a change in the bank levy's scope from 1 January 2021, such that UK headquartered banks will be subject to bank levy only on their UK balance sheet liabilities. Total liabilities at 30 June 2015 excluding CFG were 829 billion (2014 - 919 billion) of which 82% (2014 - 81%) related to transactions recorded in UK offices. 

Appendix 1 Capital and risk management
Credit risk
Credit risk is the risk of financial loss due to the failure of a customer or counterparty to meet its obligation to settle outstanding amounts. For a description of the bank's credit risk framework, governance, policies and methodologies refer to Capital and risk management - Credit risk in the 2014 Annual Report and Accounts.

Loans and related credit metrics
The tables below show gross loans and advances (excluding reverse repos) and related credit metrics by segment.Risk elements in lending (REIL) comprise impaired loans and accruing loans past due 90 days or more as to principal or interest. Impaired loans are all loans (including loans subject to forbearance) for which an impairment provision has been established. For collectively-assessed loans, impairment loss provisions are not allocated to individual loans and the entire portfolio is included in impaired loans. Accruing loans past due 90 days or more comprise loans past due 90 days where no impairment loss is expected.




Credit metrics



Gross loans to
REIL
Provisions
REIL as a %

Provisions 
YTD

of gross
Provisions
as a % of
Impairment
YTD
loans to
as a %
gross loans
losses/
Amounts
Banks
Customers
customers
of REIL
to customers
(releases)
written-off
30 June 2015
m 
m 
m 
m 
%
%
%
m
m










UK PBB
1,023
130,688
3,232
2,131
2.5
66
1.6
(17)
439
Ulster Bank
2,495
22,603
4,190
2,410
18.5
58
10.7
(52)
46










PBB
3,518
153,291
7,422
4,541
4.8
61
3.0
(69)
485










Commercial Banking
510
91,009
2,284
898
2.5
39
1.0
27
120
Private Banking
1,176
13,520
150
47
1.1
31
0.3
(3)
1










CPB
1,686
104,529
2,434
945
2.3
39
0.9
24
121










CIB
13,717
57,956
221
143
0.4
65
0.2
(29)
28
Central items
2,385
2,039
1
1
-
100
-
(2)
-
CFG
1,438
61,960
1,240
532
2.0
43
0.9
89
156
RCR
567
11,006
7,396
5,141
67.2
69
46.7
(355)
4,981











23,311
390,781
18,714
11,303
4.8
60
2.9
(342)
5,771










31 December 2014



















UK PBB
641
129,848
3,778
2,604
2.9
69
2.0
268
728
Ulster Bank
1,381
24,719
4,775
2,711
19.3
57
11.0
(365)
131










PBB
2,022
154,567
8,553
5,315
5.5
62
3.4
(97)
859










Commercial Banking
486
86,008
2,506
955
2.9
38
1.1
77
436
Private Banking
972
16,599
226
76
1.4
34
0.5
(5)
37










CPB
1,458
102,607
2,732
1,031
2.7
38
1.0
72
473










CIB
16,910
72,957
197
206
0.3
105
0.3
(7)
-
Central items
2,178
619
7
6
1.1
86
1.0
(12)
55
CFG
1,728
60,142
1,330
536
2.2
40
0.9
194
300
RCR
516
21,909
15,400
10,946
70.3
71
50.0
(1,320)
3,591











24,812
412,801
28,219
18,040
6.8
64
4.4
(1,170)
5,278


Appendix 1 Capital and risk management
Loans and related credit metrics (continued)
Key points
Loans to banks decreased by 1.5 billion with a strategy-driven reduction of 3.2 billion in CIB, which was partially offset by some increases in other segments. Liquidity management saw an increase in Ulster Bank of 1.1 billion and 0.4 billion in UK PBB.


Customer loans fell by 22.0 billion: CIB decreased by 15.0 billion and RCR by 10.9 billion; Commercial Banking and UK PBB saw net growth of 5.0 billion and 0.8 billion respectively.


Risk elements in lending (REIL) at 18.7 billion was 4.8% of gross customer loans, a significant improvement on the 28.2 billion (or 6.8%) six months ago. This reflects the success of RCR's disposal strategy, particularly in relation to Irish assets. REIL is now covered 60% by impairment provisions, lower than 64% as a result of the disposals.


In UK PBB, gross customer loans increased by 0.8 billion to 130.7 billion. Mortgage lending was up by 2.2 billion, 1.8 billion in Q2 2015, reflecting targeted growth partially offset by decreases in unsecured lending. Impairments and credit metrics continued to improve. REIL as a percentage of gross loans fell from 2.9% to 2.5% due to repayments of 494 million, reflecting improved asset quality and write-offs of 439 million. Impairment release reflected recoveries on the back of improved economic conditions.


Ulster Bank: gross customers lending was 2.1 billion lower primarily driven by the weakening euro. Significant growth in new lending volumes was more than offset by continued customer deleveraging including a reduction in the tracker mortgage portfolio. Improved economic conditions and lower observable defaults have resulted in recoveries contributing to an impairment release of 52 million.


In Commercial Banking, gross customer lending increased by 5.0 billion, of which 2.4 billion related to transfers from Private Banking and 2.1 billion to transfers from CIB, partially offset by a 0.5 billion decrease in legacy portfolios. REIL as a percentage of gross loans continued to decrease falling from 2.9% to 2.5%. The overall reduction in REIL reflects a low number of new individual cases.


CIB: gross loans fell by 15.0 billion largely through asset disposals throughout the regions, repayments and exit of non-strategic clients in GTS and included sectors such as oil and gas and shipping. There were also transfers to Commercial Banking (2.1 billion). REIL increases were seen in shipping, electric and gas sectors.


CFG gross loans to customers increased by 1.8 billion or 3.0% to 62.0 billion, reflecting growth in the retail and wholesale portfolio. Impairments and REIL were broadly unchanged.


RCR saw a significant reduction in gross customer loans - 6.5 billion in commercial real estate, 3.3 billion in other corporate and 1.1 billion in asset finance - as the execution of its disposal and run-down strategy continued. REIL fell by 8.0 billion to 7.4 billion and provisions decreased by 5.8 billion to 5.1 billion as a consequence. This contributed to the significant improvements in credit metrics in both RCR and RBS overall.

Appendix 1 Capital and risk management
Loans and related credit metrics: Risk elements in lending








RBS 



UK
Ulster 
Commercial 
Private 

Central 

excluding 



PBB
Bank 
Banking 
Banking 
CIB
items 
CFG
RCR
RCR 
Total

m
m
m
m
m
m
m
m
m
m











At 1 January 2015
3,778
4,775
2,506
226
197
7
1,330
12,819
15,400
28,219
Currency translation










and other adjustments
(17)
(384)
91
(80)
(18)
(6)
(5)
(419)
(784)
(1,203)
Additions
687
294
397
10
90
-
140
1,618
692
2,310
Transfers (1)
(121)
-
4
1
-
-
-
(116)
(5)
(121)
Transfers to










 performing book
(162)
(41)
(93)
-
-
-
-
(296)
(28)
(324)
Repayments










 and disposals
(494)
(408)
(501)
(6)
(20)
-
(69)
(1,498)
(2,898)
(4,396)
Amounts written-off
(439)
(46)
(120)
(1)
(28)
-
(156)
(790)
(4,981)
(5,771)











At 30 June 2015
3,232
4,190
2,284
150
221
1
1,240
11,318
7,396
18,714
Note:
(1)
Represents transfers between REIL and potential problem loans.
Impairment provisions 
The movement in loan impairment provisions by segment is shown in the table below.








RBS 



UK 
Ulster 
Commercial 
Private 

Central

excluding 



PBB
Bank 
Banking 
Banking 
CIB
items
CFG
RCR 
RCR
Total

m
m
m
m
m
m
m
m
m
m











At 1 January 2015
2,604
2,711
955
76
206
6
536
7,094
10,946
18,040
Currency translation










 and other adjustments
(7)
(209)
37
(24)
(10)
(3)
(5)
(221)
(466)
(687)
Disposal of subsidiaries
-
-
-
-
-
-
(1)
(1)
-
(1)
Amounts written-off
(439)
(46)
(120)
(1)
(28)
-
(156)
(790)
(4,981)
(5,771)
Recoveries of amounts










 previously written-off
21
24
8
-
4
-
69
126
22
148
Charged to income statement










- continuing operations
(17)
(52)
27
(3)
(29)
(2)
-
(76)
(355)
(431)
- discontinued operations
-
-
-
-
-
-
89
89
-
89
Unwind of discount 
(31)
(18)
(9)
(1)
-
-
-
(59)
(25)
(84)











At 30 June 2015
2,131
2,410
898
47
143
1
532
6,162
5,141
11,303











Individually assessed










- banks
-
-
-
-
1
-
-
1
25
26
- customers
6
32
481
44
111
1
82
757
4,966
5,723
Collectively assessed
1,890
2,118
329
-
-
-
171
4,508
100
4,608
Latent
235
260
88
3
31
-
279
896
50
946












2,131
2,410
898
47
143
1
532
6,162
5,141
11,303

Appendix 1 Capital and risk management
Loans and related credit metrics:Loans, REIL, provisions and impairments
The tables below show gross loans and advances to banks and customers (excluding reverse repos) and related credit metrics by sector and geography (by location of lending office).















Credit metrics


30 June 2015



REIL as a
Provisions
Provisions

Impairment

Gross


% of gross
as a %
as a % of

losses/
Amounts
loans
REIL
Provisions
loans
of REIL
gross loans

(releases)
written-off
m
m
m
%
%
%

m
m










Central and local government
7,644
15
10
0.2
67
0.1

9
-
Finance
37,464
258
172
0.7
67
0.5

(5)
52
Personal 
- mortgages
150,222
4,951
1,319
3.3
27
0.9

17
120

- unsecured
30,187
1,705
1,389
5.6
81
4.6

144
351
Property
44,127
7,105
4,559
16.1
64
10.3

(45)
3,952
Construction
5,639
489
335
8.7
69
5.9

(44)
216
of which: CRE
36,396
7,191
4,608
19.8
64
12.7

(65)
3,948
Manufacturing 
20,127
351
243
1.7
69
1.2

4
65
Finance leases (1)
13,835
119
90
0.9
76
0.7

(3)
16
Retail, wholesale and repairs
16,860
655
444
3.9
68
2.6

-
173
Transport and storage
11,233
625
254
5.6
41
2.3

-
252
Health, education and leisure
14,995
512
234
3.4
46
1.6

-
122
Hotels and restaurants
7,475
581
315
7.8
54
4.2

10
240
Utilities 
4,698
100
45
2.1
45
1.0

(15)
20
Other
26,275
1,220
922
4.6
76
3.5

(83)
183
Latent
-
-
946
-
-
-

(331)
n/a










Customers
390,781
18,686
11,277
4.8
60
2.9

(342)
5,762










Geographic regional analysis









UK - residential mortgages
115,661
1,235
174
1.1
14
0.2

15
23
 - personal lending
14,964
1,454
1,254
9.7
86
8.4

84
287
 - property
34,009
3,760
1,768
11.1
47
5.2

65
1,957
 - construction
3,915
398
245
10.2
62
6.3

48
169
 - other
112,252
2,431
1,684
2.2
69
1.5

(295)
474











Total

280,801
9,278
5,125
3.3
55
1.8

(83)
2,910











Europe - residential mortgages
14,052
2,801
1,001
19.9
36
7.1

(42)
16
 - personal lending
1,171
57
52
4.9
91
4.4

(6)
3
 - property
3,967
3,271
2,747
82.5
84
69.2

(101)
1,993
 - construction
1,251
86
86
6.9
100
6.9

(91)
47
 - other
12,515
1,658
1,510
13.2
91
12.1

(86)
615











Total

32,956
7,873
5,396
23.9
69
16.4

(326)
2,674











US - residential mortgages
20,508
915
144
4.5
16
0.7

44
81
 - personal lending
12,306
177
66
1.4
37
0.5

66
61
 - property
5,574
50
20
0.9
40
0.4

(8)
2
 - construction
450
-
-
-
-
-

(1)
-
 - other
29,505
157
346
0.5
220
1.2

(32)
12











Total

68,343
1,299
576
1.9
44
0.8

69
156











RoW - residential mortgages
1
-
-
-
-
-

-
-
 - personal lending
1,746
17
17
1.0
100
1.0

-
-
 - property
577
24
24
4.2
100
4.2

(1)
-
 - construction
23
5
4
21.7
80
17.4

-
-
 - other
6,334
190
135
3.0
71
2.1

(1)
22











Total

8,681
236
180
2.7
76
2.1

(2)
22











Customers
390,781
18,686
11,277
4.8
60
2.9

(342)
5,762











Banks
23,311
28
26
0.1
93
0.1

-
9
Note:
(1)
Includes instalment credit.


Appendix 1 Capital and risk management
Loans and related credit metrics:Loans, REIL, provisions and impairments (continued)














Credit metrics


31 December 2014



REIL as a
Provisions
Provisions
Impairment

Gross


% of gross
as a %
as a % of
losses/
Amounts
loans
REIL
Provisions
loans
of REIL
gross loans
(releases)
written-off
m
m
m
%
%
%
m
m









Central and local government
9,079
1
1
-
100
-
(1)
-
Finance
39,611
364
234
0.9
64
0.6
(5)
23
Personal 
- mortgages
150,572
5,634
1,521
3.7
27
1.0
36
236

- unsecured
29,155
1,964
1,585
6.7
81
5.4
401
737
Property
51,546
13,021
8,918
25.3
68
17.3
(1,083)
2,625
Construction
5,657
971
612
17.2
63
10.8
76
202
of which: CRE
43,317
13,345
9,027
30.8
68
20.8
(1,067)
2,750
Manufacturing 
22,035
461
322
2.1
70
1.5
(26)
188
Finance leases (1)
14,030
156
113
1.1
72
0.8
-
75
Retail, wholesale and repairs
18,498
956
645
5.2
67
3.5
106
160
Transport and storage
14,299
1,146
500
8.0
44
3.5
37
211
Health, education and leisure
15,932
734
366
4.6
50
2.3
9
349
Hotels and restaurants
7,969
1,094
574
13.7
52
7.2
(40)
109
Utilities 
4,825
156
85
3.2
54
1.8
16
5
Other
29,593
1,519
1,208
5.1
80
4.1
(10)
349
Latent
-
-
1,316
-
-
-
(676)
-









Customers
412,801
28,177
18,000
6.8
64
4.4
(1,160)
5,269









Geographic regional analysis







UK - residential mortgages
113,521
1,394
191
1.2
14
0.2
(23)
76
 - personal lending
15,923
1,674
1,452
10.5
87
9.1
290
546
 - property
37,547
6,026
3,676
16.0
61
9.8
(221)
1,917
 - construction
4,098
676
361
16.5
53
8.8
(1)
175
 - other
113,782
3,287
2,467
2.9
75
2.2
(146)
847










Total

284,871
13,057
8,147
4.6
62
2.9
(101)
3,561










Europe - residential mortgages
15,629
3,268
1,178
20.9
36
7.5
(10)
10
 - personal lending
1,051
76
66
7.2
87
6.3
9
66
 - property
8,021
6,907
5,197
86.1
75
64.8
(862)
699
 - construction
1,055
289
245
27.4
85
23.2
78
24
 - other
19,104
2,860
2,361
15.0
83
12.4
(440)
561










Total

44,860
13,400
9,047
29.9
68
20.2
(1,225)
1,360










US - residential mortgages








 - residential mortgages
21,203
957
150
4.5
16
0.7
69
150
 - personal lending
11,164
195
49
1.7
25
0.4
102
125
 - property
5,332
64
19
1.2
30
0.4
2
7
 - construction
413
1
1
0.2
100
0.2
-
1
 - other
31,338
200
342
0.6
171
1.1
1
39










Total

69,450
1,417
561
2.0
40
0.8
174
322










RoW - residential mortgages
219
15
2
6.8
13
0.9
-
-
 - personal lending
1,017
19
18
1.9
95
1.8
-
-
 - property
646
24
26
3.7
108
4.0
(2)
2
 - construction
91
5
5
5.5
100
5.5
(1)
2
 - other
11,647
240
194
2.1
81
1.7
(5)
22










Total

13,620
303
245
2.2
81
1.8
(8)
26









Customers
412,801
28,177
18,000
6.8
64
4.4
(1,160)
5,269









Banks
24,812
42
40
0.2
95
0.2
(10)
9
Note:
(1)
Includes instalment credit.

Appendix 1 Capital and risk management
Debt securities
The table below shows debt securities by issuer, IFRS measurement classifications and external rating. Ratings are based on the lowest of Standard & Poor's, Moody's and Fitch. US central and local government includes US federal agencies. The other financial institutions category includes US government-sponsored agencies and securitisation entities, the latter principally relating to asset-backed securities (ABS).

Central and local government
Banks
Other
Corporate
Total


financial

Of which
UK
US
Other
institutions

ABS 
30 June 2015
m
m
m
m
m
m
m

m










Held-for-trading (HFT)
4,352
4,624
23,129
1,446
5,100
825
39,476

982
Designated as at fair value
-
-
109
-
1
-
110

-
Available-for-sale (AFS)
7,021
12,631
10,721
1,916
13,506
147
45,942

18,937
Loans and receivables 
-
-
-
249
2,541
122
2,912

2,496
Held-to-maturity (HTM)
4,932
-
-
-
-
-
4,932

-










Long positions
16,305
17,255
33,959
3,611
21,148
1,094
93,372

22,415










AAA
-
6
9,366
1,867
5,827
-
17,066

4,707
AA to AA+
16,305
17,249
10,695
422
9,997
101
54,769

15,037
A to AA-
-
-
9,204
1,058
2,303
198
12,763

476
BBB- to A-
-
-
4,537
64
828
247
5,676

434
Non-investment grade
-
-
157
49
1,045
514
1,765

862
Unrated
-
-
-
151
1,148
34
1,333

899











16,305
17,255
33,959
3,611
21,148
1,094
93,372

22,415










Of which US agencies
-
6,945
-
-
8,077
-
15,022

14,202










Short positions (HFT)
(6,104)
(4,897)
(12,123)
(531)
(736)
(163)
(24,554)

-










Available-for-sale









Gross unrealised gains
353
185
290
6
266
6
1,106

286
Gross unrealised losses
(9)
(151)
(10)
(1)
(131)
(1)
(303)

(213)










31 December 2014



















Held-for-trading
6,218
7,709
24,451
1,499
7,372
1,977
49,226

3,559
Designated as at fair value
-
-
111
2
4
-
117

-
Available-for-sale 
4,747
11,011
11,058
3,404
14,585
161
44,966

18,884
Loans and receivables
-
-
-
185
2,774
137
3,096

2,734
Held-to-maturity
4,537
-
-
-
-
-
4,537

-










Long positions
15,502
18,720
35,620
5,090
24,735
2,275
101,942

25,177










AAA
-
6
15,533
1,319
6,086
77
23,021

4,762
AA to AA+
15,502
18,714
9,879
283
12,215
117
56,710

16,956
A to AA-
-
-
4,958
2,670
2,534
340
10,502

688
BBB- to A-
-
-
4,822
277
1,184
772
7,055

853
Non-investment grade
-
-
331
61
1,247
603
2,242

1,060
Unrated
-
-
97
480
1,469
366
2,412

858











15,502
18,720
35,620
5,090
24,735
2,275
101,942

25,177










Of which US agencies
-
6,222
-
-
10,860
-
17,082

16,053










Short positions (HFT)
(4,167)
(6,413)
(10,276)
(557)
(674)
(731)
(22,818)

-










Available-for-sale









Gross unrealised gains
451
210
541
8
361
6
1,577

389
Gross unrealised losses
(1)
(117)
(3)
(1)
(158)
(2)
(282)

(257)


Appendix 1 Capital and risk management
Debt securities (continued)
Key points 
HFT: Holdings of government and ABS decreased, principally in US bonds, following continuing exits from US asset-backed products business, focus on balance sheet and RWA reduction and risk mitigation. The decrease in other government bonds was driven by a decrease in Germany as bund yields reached historic lows in Q1 2015, largely offset by higher Japanese treasury bills, reflecting favourable rates, used for collateral upgrades. The increase in short positions (largely Italy, Germany and Spain) reflected hedging of reverse repo collateral following liquidity concerns and uncertainty around Greece. The increase in UK government short positions reflected positioning ahead of expected interest rate rise.


AFS: Holdings of UK and US government bonds increased due to purchases by Treasury reflecting liquidity portfolio mix management and price optimisation. CFG switched from asset-backed securities to US government bonds as part of RWA and liquidity coverage ratio management.


Market concerns and consequent lower bond prices resulted in lower gross unrealised gains and higher gross unrealised losses relating to AFS debt securities. Lower gains also reflected sales and redemptions in Treasury.

Derivatives
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 2015

31 December 2014


Notional (1)
Assets
Liabilities

Notional (1)
Assets
Liabilities


bn
m
m

bn
m
m










Interest rate (2)
20,123
216,983
204,738

27,331
269,912
259,971

Exchange rate 
4,196
61,566
65,228

4,675
78,707
83,781

Credit 
100
1,704
1,681

125
2,254
2,615

Equity and commodity
60
2,032
2,133

78
3,119
3,582












282,285
273,780


353,992
349,949

Counterparty mark-to-market netting

(228,780)
(228,780)


(295,315)
(295,315)

Cash collateral

(28,295)
(25,627)


(33,272)
(30,203)

Securities collateral 

(6,999)
(8,299)


(7,013)
(14,437)










Net exposure

18,211
11,074


18,392
9,994










Net exposure by sector








Banks

1,357
2,065


1,875
1,534

Other financial institutions

6,205
5,313


4,035
3,721

Corporate

9,820
3,585


11,186
4,382

Government

829
111


1,296
357












18,211
11,074


18,392
9,994










Net exposure by region of counterparty 







UK

9,708
4,524


9,037
3,233

Europe

4,818
2,395


5,628
3,521

US

1,344
1,867


1,544
1,280

RoW

2,341
2,288


2,183
1,960












18,211
11,074


18,392
9,994

Notes:
(1)
Includes exchange traded contracts of 2,620 billion (31 December 2014 - 2,436 billion) principally interest rate. Trades are generally closed out daily hence carrying values were insignificant; assets 3 million (31 December 2014 - 8 million); liabilities 81 million (31 December 2014 - 119 million).
(2)
Interest rate notional includes 12,007 billion (31 December 2014 - 18,452 billion) in respect of contracts with central clearing counterparties to the extent related assets and liabilities are offset.


Appendix 1 Capital and risk management
Derivatives (continued)
Key points 
Over-the-counter derivative notionals reduced from 29.8 trillion to 21.9 trillion in the six months to 30 June 2015 reflecting active participation in trade compression cycles, as well as targeted bilateral tear-ups.
The carrying value of derivative assets and liabilities at 30 June 2015 have been materially impacted by changes in market rates:

Interest rate contracts: Fair values decreased by approximately 20% in the first half of 2015 due to an upward shift in yields, based on the expectation of interest rate rises in the US and UK. Eurozone yields also increased following favourable economic outlook.

Foreign exchange contracts: Fair value decreases from targeted tear-ups and risk reductions have more than offset the impact of US dollar strengthening against the euro (9%) and Japanese yen (3%).

Credit derivatives: fair values decreased despite widening credit spreads due to Greek debt crisis concerns as RBS continued to de-risk the credit default swap portfolio.

Appendix 1 Capital and risk management
Key loan portfolios*
The internal measure used for credit risk management is credit risk assets (CRA) and consists of lending, derivatives after the effect of enforceable netting arrangements and contingent obligations.
The table below summarises CRA by sector and geographic region.
30 June 2015

Wholesale



Banks and


Natural
Retail and


Of which:
Personal
other FIs
Sovereign
Property
resources
leisure
Other
Total
 RCR
m
m
m
m
m
m
m
m
m










UK
130,302
25,382
50,922
39,438
8,099
14,618
40,062
308,823
7,168
Western Europe (excl. UK)
15,113
33,644
11,025
7,523
3,232
2,418
11,485
84,440
6,241
North America
33,113
12,779
22,465
7,308
5,057
5,945
19,892
106,559
556
RoW (1)
3,383
9,916
3,599
1,511
3,703
597
11,933
34,642
2,936










Total
181,911
81,721
88,011
55,780
20,091
23,578
83,372
534,464
16,901










of which: RCR
90
2,621
30
7,458
2,746
796
3,160
16,901
n/a










Flow into forbearance (2)
1,625
88
-
1,934
412
454
902
5,415
1,420
of which: RCR
-
11
-
1,060
36
145
168
1,420
n/a










AQ10
7,477
715
1
8,003
258
1,278
2,397
20,129
7,662
of which: RCR
75
304
-
5,540
150
483
1,110
7,662
n/a
31 December 2014



















UK
129,091
27,560
45,308
44,401
7,825
15,539
40,199
309,923
11,579
Western Europe (excl. UK)
16,802
37,156
6,855
11,858
4,030
3,221
13,162
93,084
12,159
North America
32,449
13,367
27,162
6,846
7,070
5,736
21,642
114,272
851
RoW (1)
2,406
13,406
3,039
1,875
5,685
1,188
17,187
44,786
5,061










Total
180,748
91,489
82,364
64,980
24,610
25,684
92,190
562,065
29,650










of which: RCR
203
3,587
536
14,819
2,910
1,828
5,767
29,650
n/a










Flow into forbearance (2)
4,350
60
-
5,416
377
984
1,956
13,143
4,839
of which: RCR
-
29
-
3,551
28
535
696
4,839
n/a










AQ10
8,424
638
1
14,743
263
2,329
3,662
30,060
16,099
of which: RCR
182
423
-
11,886
112
1,355
2,141
16,099
n/a
Notes:
(1)
Rest of World comprises Asia Pacific, Central and Eastern Europe, the Middle East, Central Asia and Africa, and supranationals such as the World Bank.
(2)
Completed during the period.
Key points
The CRA decrease reflected a continued focus on risk reduction and improving overall credit quality.


CRA decreased in all regions and sectors except sovereign where CRA increased by 7%, reflecting Treasury activity. UK CRA (excluding RCR) increased by 1%, in personal (mainly mortgage lending).


For wholesale loans, the flow into forbearance decreased during H1 2015 compared with H2 2014 in line with improving market conditions and RCR's disposal strategy. Of the total forbearance granted, 54% related to non-performing loans with a provision coverage of 48% (2014 - 62%).
The property sector remained the most significant contributor to the forborne portfolio. There was an increase in forbearance granted in the natural resources sector driven by counterparties in the oil and gas sector (refer to page 28 for further sector information).


RCR is on track to complete its targeted run-down by the end of 2015, with CRA down by 43% to 16.9 billion. Non-performing exposures decreased significantly to 7.7 billion (2014 - 16.1 billion) driven by the disposal strategy and the improving economic climate.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key loan portfolios* (continued)
The following key portfolios are discussed in more detail: commercial real estate (within property); oil and gas (within natural resources); shipping (within other); and personal portfolios.

Commercial real estate (CRE)
The CRE sector comprises exposures to entities involved in the development of, or investment in, commercial and residential properties (including house builders). The analysis of lending below is gross of impairment provisions and excludes rate risk management and contingent obligations

Investment

Development


Commercial
Residential
Total

Commercial
Residential
Total
Total
By geography 
m
m
m

m
m
m
m









30 June 2015








UK (excluding NI (1))
15,959
4,351
20,310

541
3,393
3,934
24,244
Ireland (ROI and NI (1))
1,519
312
1,831

614
2,022
2,636
4,467
Western Europe (other)
947
29
976

110
22
132
1,108
US
4,489
1,362
5,851

-
5
5
5,856
RoW (1)
415
16
431

41
249
290
721










23,329
6,070
29,399

1,306
5,691
6,997
36,396









31 December 2014

















UK (excluding NI (1))
17,327
4,757
22,084

600
3,446
4,046
26,130
Ireland (ROI and NI (1))
2,864
740
3,604

1,499
4,469
5,968
9,572
Western Europe (other)
1,222
53
1,275

189
24
213
1,488
US
4,063
1,358
5,421

-
59
59
5,480
RoW (1)
406
22
428

34
185
219
647










25,882
6,930
32,812

2,322
8,183
10,505
43,317
Note:
(1)
ROI: Republic of Ireland; NI: Northern Ireland; RoW: Rest of World.
Key points  
Overall gross CRE lending fell in the first half of 2015 mostly in RCR (6.5 billion) due to asset sales, repayments, and write-offs. 


The RCR portfolio contains legacy CIB, Commercial Bank and Ulster Bank assets and now represents 17% of the total portfolio (2014 - 29%). Geographically, 57% (3.5 billion) of the remaining RCR portfolio is located in Ireland (ROI and NI), with the UK (excluding NI) accounting for 28% (1.7 billion) and the remainder (1.0 billion) in Western Europe and the RoW. 


The reduction of the commercial investment UK sub-sector is almost entirely driven by reductions of 1.3 billion in RCR. RCR divestments in the development sub-sector have also led to the portfolio being more weighted towards the investment sub-sector. 


The increase in US exposure was predominantly driven by higher business volumes in CFG, in line with risk appetite and business strategy. 
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key loan portfolios*:Commercial real estate (continued)

RBS excluding RCR

RCR

Total
LTV ratio by value

Non-



Non-



Non-

Performing
performing
Total

Performing
performing
Total
Performing
performing
Total
m
m
m

m
m
m
m
m
m












30 June 2015











<= 50%
10,147
139
10,286

243
18
261

10,390
157
10,547
> 50% and <= 70%
8,500
249
8,749

387
87
474

8,887
336
9,223
> 70% and <= 90%
1,944
356
2,300

76
391
467

2,020
747
2,767
> 90% and <= 100%
374
106
480

79
42
121

453
148
601
> 100% and <= 110%
185
145
330

42
173
215

227
318
545
> 110% and <= 130%
174
156
330

29
385
414

203
541
744
> 130% and <= 150%
77
128
205

2
120
122

79
248
327
> 150%
331
410
741

44
1,582
1,626

375
1,992
2,367












Total with LTVs
21,732
1,689
23,421

902
2,798
3,700

22,634
4,487
27,121
Minimal security (1)
13
38
51

-
1,206
1,206

13
1,244
1,257
Other
6,316
420
6,736

16
1,266
1,282

6,332
1,686
8,018












Total
28,061
2,147
30,208

918
5,270
6,188

28,979
7,417
36,396












Total portfolio 











 average LTV (2)
56%
140%
62%

74%
287%
236%

56%
232%
85%
31 December 2014























<= 50%
9,833
220
10,053

300
45
345

10,133
265
10,398
> 50% and <= 70%
8,750
301
9,051

602
173
775

9,352
474
9,826
> 70% and <= 90%
2,285
409
2,694

220
554
774

2,505
963
3,468
> 90% and <= 100%
343
134
477

41
116
157

384
250
634
> 100% and <= 110%
168
148
316

56
211
267

224
359
583
> 110% and <= 130%
326
201
527

49
438
487

375
639
1,014
> 130% and <= 150%
135
128
263

6
404
410

141
532
673
> 150%
305
495
800

65
4,160
4,225

370
4,655
5,025












Total with LTVs
22,145
2,036
24,181

1,339
6,101
7,440

23,484
8,137
31,621
Minimal security (1)
33
38
71

-
3,168
3,168

33
3,206
3,239
Other
5,956
546
6,502

34
1,921
1,955

5,990
2,467
8,457












Total
28,134
2,620
30,754

1,373
11,190
12,563

29,507
13,810
43,317












Total portfolio 











 average LTV (2)
56%
133%
62%

75%
338%
291%

57%
287%
116%
Notes:
(1)
Total portfolio average LTV is presented net of loans with minimal security given that the anticipated recovery rate is less than 10%. Provisions are marked against these loans where required to reflect the relevant asset quality and recovery profile. 
(2)
Weighted average by exposure.
Key points 
The reductions in the higher LTV bands occurred mostly in the RCR book originated by Ulster Bank, Commercial Banking and CIB, reflecting valuation improvements, reductions through repayments, asset sales and write-offs - principally for non-performing assets.


Interest payable by customers on performing loans secured by investment property was covered 1.8x (2014 - 1. 6x) and 3.1x (2014 - 2.9x) within RCR and rest of RBS, respectively. 
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Key loan portfolios* (continued)
Oil and gas
RBS's exposure to oil and gas sector in terms of CRA and total exposure (including committed but undrawn facilities), is set out below.

30 June 2015

31 December 2014

CRA
Total

CRA
Total
By segment
m
m

m
m






CIB
5,311
12,801

8,297
20,278
Commercial Banking
1,033
2,202

671
1,035
CFG
1,362
2,323

1,251
2,134
RCR
257
295

352
457
Others
63
200

101
243







8,026
17,821

10,672
24,147
The tables below provide a breakdown of CIB's oil and gas sector exposure which represents 72% of RBS's exposure to this sector (including committed but undrawn exposure) split by sub-sector and geography. The analysis is based on RBS's sector concentration framework.


Western 







Europe 
North 
Asia 
Latin 



UK
(excl. UK)
America 
America 
Pacific 
CEEMA (1)
Total 
30 June 2015
m 
m 
m 
m 
m 
m 
m 








Producers (incl. integrated oil companies)
285
903
2,129
231
118
594
4,260
Oilfield service providers
312
801
701
252
-
138
2,204
Other wholesale and trading activities
147
486
465
747
-
47
1,892
Refineries
1
102
2,022
287
21
6
2,439
Pipelines
1
372
1,542
36
-
55
2,006









746
2,664
6,859
1,553
139
840
12,801








Including committed undrawn exposures















Of which: exploration and production 
5
43
1,131
99
43
-
1,321








31 December 2014















Producers (incl. integrated oil companies)
833
1,101
4,822
263
115
848
7,982
Oilfield service providers
153
675
1,007
742
-
535
3,112
Other wholesale and trading activities
295
794
683
907
-
122
2,801
Refineries
1
177
2,700
591
141
67
3,677
Pipelines
96
48
2,359
49
33
121
2,706









1,378
2,795
11,571
2,552
289
1,693
20,278








Including committed undrawn exposures







Of which: exploration and production
145
3
3,118
115
150
37
3,568
Note:
(1)
Includes exposures to Central and Eastern Europe as well as the Middle East and Africa.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key loan portfolios*: Oil and gas(continued)
Key points
Overall exposure decreased by 2.6 billion (CRA) and 6.3 billion (total exposure), in line with strategy as a result of active portfolio management and asset disposals, principally in CIB. The small increase in CPB reflected transfers from CIB.
The price of crude oil recovered from a low of US$45 per barrel in January 2015 to US$61 per barrel at 30 June 2015. The price of natural gas is not highly correlated to oil prices and is determined regionally. US natural gas prices have been relatively stable compared with the recent price of crude oil. 
Exposures continue to be closely managed through ongoing customer and sub-sector reviews, and stress testing. Risk appetite was reduced during 2014 with further reductions in 2015 (in part due to asset disposals). Further stress analysis of the portfolio was carried out in 2015 and limits were again reduced with a continued focus on ensuring that the portfolio remains heavily weighted towards investment grade customers. As part of the bank's strategic review, limits for Americas and Asia-Pacific have been significantly reduced.
The sub-sector in which a customer operates is a primary consideration for assessing credit risk. Current areas of focus for stress testing and more active credit risk management include those customers involved in exploration and production (E&P) and oilfield service providers. E&P customers represent approximately 10% of CIB's exposure to the oil and gas sector. 
Customers involved in E&P are most immediately exposed to the oil price decline. At 30 June 2015, 97% of these were within the producers sub-sector. Companies involved in this area have already introduced capital spending reductions to conserve cash. In turn, this reduced spending is likely to have an adverse impact on oilfield service providers. This is due to the E&P companies buying less products and services from the oilfield service providers, and demanding lower prices for those they do purchase.
The other principal components of CIB's exposure to producers are Integrated Oil Companies (IOCs) and National Oil Companies (NOCs). IOCs and NOCs are less vulnerable to the oil price decline due to scale, diversification and in the case of NOC, explicit support from governments.
At 30 June 2015 78% (2014 - 83%) of the CIB total portfolio exposure was investment grade (AQ1-AQ4 or equivalent to BBB- and above). 
The committed lending exposure included legal commitments to syndicated bank facilities, with tenors up to five years. These committed facilities are for general corporate purposes - including funding operating needs and capital expenditures - and are available as long as counterparties comply with the terms of the credit agreement. Contingent obligations relate to guarantees, letters of credit and suretyships provided to customers.
RBS had no high-yield bond or loan underwriting positions as at 30 June 2015 (2014 - US$86 million high-yield loan underwritings in the Americas).
There has been a small number of forbearance events, usually involving the relaxation of financial covenants to give customers more financial flexibility. Most forbearance has involved customers in the E&P and oilfield services sub-sectors where earnings have been more immediately and materially impacted by the downturn.
At 30 June 2015, Watchlist Red (performing customers who show signs of declining creditworthiness and so require active management) outside RCR totalled 310 million (2014 - 88 million), of which 98 million (2014 - 5 million) was managed by Restructuring.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key loan portfolios*
Shipping
RBS's exposure to the shipping sector is as follows:

30 June
31 December

2015
2014
By segment
m
m



CIB
6,338
6,700
RCR
1,463
2,855
Other
828
803




8,629
10,358
Key points
Of the total exposure to shipping, 6.6 billion (2014 - 7.9 billion) related to asset-backed ocean-going vessels, the rest predominantly related to shipbuilding and inland water transport. The decrease during H1 2015 reflected scheduled loan repayments, secondary sales and prepayments. 5.3 billion (2014 - 5.7 billion) of the asset-backed ocean-going vessel exposure was in CIB. The main concentration risks were in the dry bulk sector which represented 36% of our exposure (2014 - 38%); tankers at 27% (2014 - 29%) and containers at 17% (2014 - 17%). The remaining exposures comprise gas (including liquid petroleum and natural gases), 11% (2014 - 10%) and others 7% (2014 - 6%).


Conditions remained depressed in the bulk market during H1 2015 as a result of vessel oversupply and a slowdown in commodity demand from China. Tanker market conditions are currently favourable and container markets over the last 12 months have stabilised but remain weak in comparison to historic averages. The container market is subject to oversupply on certain lines such as the Asia - Europe line and carriers are struggling to implement general freight rate rises as a result. Rates remain relatively stable at present but downside risks exist over the next 12-18 months. The majority of the RBS portfolio is insulated by long-term charters, which provide more stable long-term fixed cash flows.


The majority of ship-secured exposure is extended against recently-built vessels. Across the portfolio (including RCR) the average age of mortgaged vessels is 7.2 years (2014 - 6.4 years). Less than 3% of the core book is secured by vessels that are more than 15 years old and around 82% (2014 - 87%) is secured by vessels built in the last ten years. Due to strategic considerations, RBS has significantly reduced commitments to new builds and, as a result, the average age of the portfolio has risen. RBS continues to provide new lending against second-hand vessels and on some new-build deliveries.


A key protection for RBS is the minimum security covenant. The overall loan-to-value (LTV) of the portfolio at 30 June 2015 was 84% (2014 - 77%) with RCR standing at 101% (2014 - 92%) and RBS excluding RCR at 79% (2014 - 73%). Amortisation across the portfolio is approximately 7% per annum excluding early repayments. Asset values fall as markets deteriorate and rise as they improve. Therefore even if exposure falls, the overall LTV position may rise or fall depending on the underlying value of the vessels. The dry bulk sub-sector has seen asset value reductions of around 20-30% in H1 2015 (15-20% in Q1 2015) with dry bulk market values dropping to a 30-year low in February 2015, which led to a rise in the average LTV.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Key loan portfolios* (continued)
Personal portfolios
This section summarises personal portfolios by type, segment and related credit metrics.
Overview of personal portfolios split by product type and segment*




















30 June 2015

31 December 2014

UK
Ulster
Private
Commercial 



UK
Ulster
Private
Commercial 



PBB
Bank
Banking
Banking (1)
CFG
Total

PBB
Bank
Banking
Banking (1)
CFG
Total

m
m
m
m
m
m

m
m
m
m
m
m














Mortgages 
105,407
15,935
6,521
2,504
20,540
150,907

103,235
17,506
6,414
2,475
21,122
150,752
Of which:













Interest only variable rate 
14,397
987
3,944
823
9,138
29,289

15,165
1,238
3,952
858
9,637
30,850
Interest only fixed rate 
9,683
24
1,574
36
286
11,603

9,122
25
1,520
27
292
10,986
Mixed (capital and interest only)
6,425
178
10
-
987
7,600

6,820
204
-
-
788
7,812
Buy-to-let
12,886
1,896
403
822
140
16,147

11,602
2,091
538
850
147
15,228
Forbearance
4,465
3,557
48
42
403
8,515

4,873
3,880
51
49
409
9,262














Forbearance arrears status













 - Current
3,823
2,168
47
36
330
6,404

4,158
2,231
51
40
310
6,790
 - 1-3 months in arrears
330
624
1
3
19
977

364
689
-
3
34
1,090
 - >3 months in arrears
312
765
-
3
54
1,134

351
960
-
6
65
1,382














Other lending
11,724
517
4,582
84
12,174
29,081

12,335
591
5,108
78
10,924
29,036














Total lending
117,131
16,452
11,103
2,588
32,714
179,988

115,570
18,097
11,522
2,553
32,046
179,788














Mortgage LTV ratios













 - Total portfolio
57%
89%
53%
62%
65%
61%

57%
92%
51%
51%
67%
62%
 - New business
70%
77%
45%
65%
67%
67%

71%
75%
45%
56%
68%
68%
 - Performing
57%
85%
53%
60%
65%
61%

57%
88%
51%
51%
67%
61%
 - Non-performing
66%
114%
76%
172%
69%
89%

67%
115%
79%
81%
73%
91%
Mortgage REIL
1,058
2,887
26
65
912
4,948

1,218
3,362
95
1
946
5,622
Note:
(1)
Relates to Royal Bank of Scotland International (RBSI) business. 
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Key points* 
UK PBB
The UK PBB personal mortgage portfolio increased by 2.1% to 105.4 billion, of which 92.5 billion (31 December 2014 - 91.6 billion) was owner occupied and 12.9 billion (31 December 2014 - 11.6 billion) was buy-to-let. Of the total portfolio approximately 26 billion related to properties in the south east of England, while 19 billion related to properties in Greater London.
Gross new mortgage lending amounted to 9.1 billion in H1 2015 with an average LTV by weighted value of 70.4% (2014 - 70.5%). Lending to owner-occupiers during this period was 7.5 billion (2014 - 16.6 billion) and had an average LTV by weighted value of 71.5% (2014 - 71.7%). Buy-to-let lending was 1.6 billion (2014 - 3.1 billion) with an average LTV by weighted value of 65.1% (2014 - 63.9%).
Based on the Halifax House Price Index at March 2015, the portfolio average indexed LTV by volume was 50.4% (2014 - 50.4%) and 57.4% by weighted value of debt outstanding (2014 - 57.3%).
Fixed interest rate products of varying time durations accounted for approximately 60% of the mortgage portfolio with 3% a combination of fixed and variable rates and the remainder variable rate. Approximately 17% of owner-occupied mortgages were on interest-only terms with a bullet repayment and 7% were on a combination of interest-only and capital and interest. The remainder were capital and interest. 63% of the buy-to-let mortgages were on interest-only terms and 3% on a combination of interest only and capital and interest.
The arrears rate fell from 1.0% in December 2014 to 0.9% at the end of June 2015. The number of properties repossessed in H1 2015 was also lower (338 compared with 472 in H2 2014). This reflected improvements in the UK economy and underlying asset quality
The flow of new forbearance was 315 million in H1 2015 compared with 367 million in H2 2014. The value of mortgages subject to forbearance has decreased by 8% since the year end to 4.5 billion (equivalent to 4.2% of the total mortgage book) as a result of improved market conditions and methodology changes.
There was an overall small release of impairment provision for personal mortgages in H1 2015 compared with a small charge in H1 2014. Reduced REIL balances and a fall in the instances of forborne mortgages drove the release in latent and PD90 provisions as well as lower LGDs.
Ulster Bank
Ulster Bank's residential mortgage portfolio totalled 15.9 billion at 30 June 2015, with 86% in the Republic of Ireland and 14% in Northern Ireland. Excluding the impact of exchange rate movements, the portfolio decreased by 1.3% from 31 December 2014 as a result of amortisation a portion of which related to the tracker mortgage portfolio. The volume of new business has increased reflecting continuing market demand.
The interest-rate product mix was approximately 63% of the mortgage portfolio on tracker-rate products, 23% on variable-rate products and 14% on fixed rate. Interest-only represented 6% of the total portfolio. 
The portfolio average indexed LTV decreased from 92% at 31 December 2014 to 89% at 30 June 2015 and reflected positive house price index trends over the last six months. 
At 30 June 2015, 22.3% of total mortgage assets (3.6 billion) were subject to a forbearance arrangement, a decrease of 8.3% (0.3 billion) from 31 December 2014. Excluding the impact of exchange rate movements, the value of mortgage assets subject to a forbearance arrangement has decreased by 276 million (4.8%).
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key points* (continued)
Ulster Bank (continued)
The number of customers approaching Ulster Bank for the first time in respect to forbearance assistance declined through H1 2015. The majority (78%) of forbearance arrangements were less than 90 days in arrears.
There was an overall release of impairment provisions for personal mortgages in H1 2015 compared with a charge in H1 2014. Reducing defaulted balances have reduced loss expectations driving collective and latent releases.
CFG 
The mortgage portfolio at 30 June 2015 consisted of 8 billion of residential mortgages (1% in second lien position) and 12.5 billion of home equity loans and lines of credit (HELOC) - first and second liens. Home equity consisted of 46% in first lien position. A Serviced By Others (SBO) portfolio, which is predominantly (95%) second lien, is included in the home equity book. Excluding the effect of exchange rates, the portfolio decreased 2% from the 2014 year end as a result of contraction in HELOC and run-off in the construction legacy serviced by others portfolios.


CFG continued to focus on its footprint states of New England, Mid-Atlantic and the Mid-West. At 30 June 2015, 16.7 billion (81% of the total portfolio) was within footprint. 


The SBO portfolio, which was closed to new purchases in Q3 2007, decreased from 1.3 billion in Q1 2015 to 1.1 billion in Q2 2015.


The overall mortgage portfolio credit characteristics are stable with a weighted average LTV of 65% at 30 June 2015. The weighted average LTV of the portfolio, excluding SBO, was 63%.


CFG participates in the US-government mandated Home Affordable Modification Program (HAMP), as well as its own proprietary programme. The 12-month default rate, on a value basis, for customers who were granted forbearance, was 17.4% in H1 2015 (2014 - 15%). The increase in default rate was driven by a regulatory requirement to start tracking co-borrower bankruptcies. Additionally, many HAMP mortgages, which receive a below market rate for five years, began to reset at higher rates to adjust to the market rate, increasing defaults.
*Not within the scope of Deloitte LLP's review report

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. For a description of market risk framework, governance, policies and methodologies, refer to Capital and risk management - Market risk in the 2014 Annual Report and Accounts. There were no material changes to market risk methodologies or models during H1 2015.
Trading portfolios
Value-at-risk
The table below presents the internal value-at-risk (VaR) for trading portfolios split by type of market risk exposure and by business area. The internal traded 99% one-day VaR captures all trading book positions. By contrast, the regulatory VaR-based charges take into account only regulator-approved products, locations and legal entities and are based on a ten-day, rather than a one-day, holding period for market risk capital calculations.
















Half year ended

Year ended

30 June 2015

30 June 2014

31 December 2014

Average
Period end
Maximum
Minimum

Average
Period end
Maximum
Minimum

Average
Period end
Maximum
Minimum
Trading VaR (1-day 99%)
m
m
m
m

m
m
m
m

m
m
m
m















Interest rate
16.0
11.7
29.8
10.8

16.7
14.9
39.8
10.9

17.4
16.9
39.8
10.8
Credit spread
12.5
7.6
16.4
7.5

28.3
24.4
42.8
20.9

23.1
14.2
42.8
13.4
Currency
5.3
5.4
7.8
3.3

5.4
3.0
8.5
2.0

4.7
5.5
9.7
1.0
Equity
2.4
1.2
6.1
1.0

3.5
2.5
6.0
2.1

3.0
3.7
6.5
1.2
Commodity
0.5
0.7
2.2
0.2

0.6
0.7
1.4
0.3

0.6
0.4
2.5
0.3
Diversification (1)

(11.6)




(24.8)




(18.2)

















Total
21.8
15.0
30.1
15.0

30.6
20.7
58.2
20.7

27.8
22.5
58.2
17.1















CIB
21.1
14.2
29.8
14.0

28.2
21.3
48.8
20.5

26.3
21.3
48.8
15.5
RCR
3.1
2.8
4.5
2.6

6.0
3.5
16.2
3.3

4.5
3.0
16.2
2.6
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.
Key points
During H1 2015, trading book exposure continued to decline. The markets exhibited higher volatility and reduced liquidity, resulting from a number of macroeconomic factors, including ongoing political and economic uncertainty in Europe and growing concerns regarding economic slowdown in China.
The period end and average total traded internal VaR were lower than in 2014, primarily in credit spread VaR resulting from the ongoing exit of the US asset-backed products (ABP) trading business.

Appendix 1 Capital and risk management
Trading portfolios (continued)
Capital charges*
The total market risk minimum capital requirement calculated in accordance with CRR was 1,786 million at 30 June 2015 (31 December 2014 - 1,917 million), representing RWAs of 22.3 billion (31 December 2014 - 24.0 billion). It comprised two categories: (i) the Pillar 1 model-based position risk requirement (PRR) of 1,497 million (31 December 2014 - 1,458 million), which in turn comprised several modelled charges; and (ii) the standardised PRR of 289 million (31 December 2014 - 459 million), which also had several components.
The components of the Pillar 1 model-based PRR are presented in the table below. 











31 December


2014

Average
Maximum 
Minimum 
Period end
Period end
30 June 2015
m
m
m
m
m






Value-at-risk
362
400
333
400
329
Stressed VaR (SVaR)
527
555
492
555
511
Incremental risk charge (IRC)
294
348
271
288
299
Risk not in VaR (RNIV)
284
319
227
254
319










1,497
1,458
Key points
The total model-based PRR increased by 3% in the half year to 30 June 2015, driven by higher VaR and SVaR based capital charges, offset somewhat by the lower RNIV capital charge.


The VaR and SVaR capital charges together increased by 14%, reflecting increased positioning by the rates business during Q2 2015, notably relating to euro rates, following market euro sell-off in May.


The RNIV charge fell by 20%, primarily in stressed RNIVs following reductions in inflation basis risk in the rates business.


Standardised charges were 37% or 170 million lower than at the 2014 year end, primarily driven by reduced securitisation exposures in the trading book reflecting the continuation of the US ABP exit, UK ABP risk reduction and the continuation of RCR disposals.


All entities maintained a green status relating to regulatory back-testing during H1 2015 except for NatWest Plc, which had six exceptions during the 250 business days ending 30 June 2015, mainly driven by market volatility. This resulted in a 49 million increase to market risk RWAs.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Non-trading portfolios
Non-trading VaR
Average VaR for RBS's non-trading book, comprising predominantly available-for-sale portfolios, was 2.9 million for H1 2015 compared with 4.8 million for H1 2014 and 4.4 million for H2 2014. This was largely driven by a decline in the credit spread VaR as a result of the ongoing RCR run-down. The period end VaR decreased from 3.8 million at 31 December 2014 to 2.0 million at 30 June 2015.
Non-traded interest rate risk 
Non-traded interest rate risk affects earnings arising from banking activities. This excludes positions in financial instruments which are classified as held-for-trading. The methodology relating to interest rate risk is detailed in Capital and risk management - Market risk - Non-traded market risk in the 2014 Annual Report and Accounts. 
Non-traded interest rate risk VaR metrics are based on interest rate repricing gaps at the reporting date. The table below captures the risk resulting from mismatches in the repricing dates of assets and liabilities. This includes any mismatch between structural hedges and stable non and low interest bearing liabilities such as equity and money transmission accounts as regards their interest rate repricing behavioural profile. Other customer products and associated funding and hedging transactions as well as non-financial assets and liabilities such as property, plant and equipment are also included.
VaR does not provide a dynamic measurement of interest rate risk since static underlying repricing gap positions are assumed. Changes in customer behaviour under varying interest rate scenarios are captured by way of earnings at risk measures. VaR relating to non-traded interest rate risk for RBS's retail and commercial banking activities at a 99% confidence level and a currency analysis at the period end were as follows:






Average
Period end
Maximum
Minimum
Six months ended
m
m
m
m





30 June 2015
17
13
25
11
30 June 2014
64
68
79
45
31 December 2014
37
23
56
23







30 June
30 June
31 December

2015
2014
2014

m
m
m





Euro

2
3
2
Sterling

13
8
12
US dollar

14
73
27
Other

4
3
3
Key point
In H1 2015, interest rate VaR was lower on average than in 2014 as RBS continued to steer its structural interest rate exposure more closely to the neutral duration prescribed in its risk management policy. The reduction in the US dollar VaR reflects reduced exposure to US dollar fixed rate assets, which helped to achieve the alignment to policy.


Appendix 1 Capital and risk management
Non-trading portfolios (continued)
Sensitivity of net interest income*
Earnings sensitivity to rate movements is derived from a central forecast over a 12 month period. Market implied forward rates and new business volume, mix and pricing consistent with business assumptions are used to generate a base case earnings forecast, which is then subjected to interest rate shocks. The variance between the central forecast and the shock gives an indication of sensitivity to interest rate movements.
The following table shows the sensitivity of net interest income, over the next 12 months, to an immediate upward or downward change of 100 basis points to all interest rates. The main drivers of earnings sensitivity relate to interest rate pass-through assumptions on customer products, reinvestment rate assumptions for maturing product and equity structural hedges and mismatches in the re-pricing dates of loans and deposits. In addition, the table includes the impact of a gradual 400 basis point steepening (bear steepener) and a gradual 300 basis point flattening (bull flattener) of the yield curve at tenors greater than a year. 
The scenarios represent annualised interest rate stresses of a scale deemed sufficient to trigger a modification in customer behaviour. The asymmetry in the steepening and flattening scenarios reflects the difference in the expected behaviour of interest rates as they approach zero.













Of which

Euro
Sterling
US dollar
Other
Total
CFG
30 June 2015
m
m
m
m
m
m







+ 100 basis point shift in yield curves
7
365
135
12
519
155
- 100 basis point shift in yield curves
(9)
(397)
(109)
(30)
(545)
(104)
Bear steepener




377
112
Bull flattener




(130)
(85)







31 December 2014













+ 100 basis point shift in yield curves
(28)
347
214
(17)
516
154
- 100 basis point shift in yield curves
(34)
(298)
(87)
(12)
(431)
(85)
Bear steepener




406
105
Bull flattener




(116)
(58)
Key points
Excluding Citizens, 258 million of the benefit of the immediate 100 basis point upward change in interest rates relates to interest rate pass-through assumptions on customer savings accounts. 
Earnings sensitivity for the downward change of 100 basis points increased from December 2014, due to higher interest rate expectations in the market for the next 12 months.
Structural hedging*
Banks generally have the benefit of a significant pool of stable, non and low interest bearing liabilities, principally comprising equity and money transmission accounts. These balances, known as net free funds 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 the net interest rate exposure of the bank 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 to the product and equity hedges.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Non-trading portfolios (continued)
Product hedging*
Product structural hedges are used to reduce the volatility on earnings related to specific products, primarily customer deposits. The balances are primarily hedged with medium-term interest rate swaps, so that reported income is less sensitive to movements in short-term interest rates.
The table below shows the impact on net interest income associated with product hedges managed by Treasury. These relate to the main UK banking businesses except Private Banking. The figures shown represent the incremental contribution of the hedge relative to short-term wholesale cash rates.





Six months ended
Net interest income
30 June
30 June
31 December
2015
2014
2014
m
m
m




Product hedges



UK Personal & Business Banking
210
184
209
Commercial Banking
101
81
99
Corporate & Institutional Banking
39
37
38




Total product hedges
350
302
346
Key points
As short-term interest rates remained close to historically low levels in H1 2015, the incremental impact of product hedges relative to wholesale cash rates remained positive. 
In H1 2015, the all-in yield was 1.5%, slightly lower than in H2 2014 (1.6%), due to low levels of interest rates, and similar to H1 2014 (1.5%).
Equity hedging*
Equity structural hedges are also used to reduce the volatility on earnings arising from returns on equity. The hedges managed by Treasury relate mainly to the UK banking businesses and contributed 0.4 billion to these businesses in H1 2015 (H1 2014 and H2 2014 - 0.4 billion), which is an incremental benefit relative to short-term wholesale cash rates. In H1 2015, the all-in yield was 2.4%, slightly lower than in H1 2014 (2.6%) and H2 2014 (2.5%) due to the low levels of interest rates. 
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Non-trading portfolios (continued)
Foreign exchange risk
The only material non-traded open currency positions are the structural foreign exchange exposures arising from investments in foreign subsidiaries, branches and associates and their related currency funding. These exposures are assessed and managed by Treasury to predefined risk appetite levels under delegated authority from the ALCo. Treasury seeks to limit the potential volatility impact on RBS's CET1 ratio from exchange rate movements by maintaining a structural open currency position.Gains or losses arising from the retranslation of net investments in overseas operations are recognisedin equity and reduce the sensitivity of capital ratios to foreign exchange rate movements primarily arising fromthe retranslation of non-sterling-denominatedRWAs. Sensitivity is minimised where, for a given currency, the ratio of the structural open position to RWAs equals RBS's CET1 ratio. The sensitivity of the CET1 capital ratio to exchange rates is monitored monthly and reported to the ALCo at least quarterly.
Foreign exchange exposures arising from customer transactions are sold down by businesses on a regular basis in line with RBS policy.





Structural 





Net assets

foreign currency

Residual 

Net assets 

of overseas 
Net
exposures

structural
of overseas

operations
investment
pre-economic
Economic
foreign currency
operations
NCI (1)
excluding NCI
hedges
hedges
hedges (2)
exposures
30 June 2015
m
m
m
m
m
m
m








US dollar
11,302
(4,968)
6,334
(1,910)
4,424
(3,605)
819
Euro
5,210
(56)
5,154
(205)
4,949
(1,894)
3,055
Other non-sterling
3,962
(483)
3,479
(2,777)
702
-
702









20,474
(5,507)
14,967
(4,892)
10,075
(5,499)
4,576








31 December 2014















US dollar
11,402
(2,321)
9,081
(3,683)
5,398
(4,034)
1,364
Euro
6,076
(39)
6,037
(192)
5,845
(2,081)
3,764
Other non-sterling
4,178
(456)
3,722
(2,930)
792
-
792









21,656
(2,816)
18,840
(6,805)
12,035
(6,115)
5,920
Notes:
(1)
Non-controlling interests (NCI) represents the structural foreign exchange exposure not attributable to owners' equity, which consisted mainly of CFG in US dollar.
(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.
Key points
Structural foreign currency exposures before and after economic hedges were 2.0 billion and 1.3 billion respectively lower, mainly due to changes below:

Net assets of overseas operations declined by 1.2 billion, largely due to the strength of sterling against other currencies, especially the euro, which depreciated significantly during the period.

Non-controlling interests increased by 2.7 billion, mainly as a result of the partial disposal of Citizens during Q1 2015.

Net investment hedges decreased by 1.9 billion, mainly due to the partial disposal of Citizens, partly offset by an increase in the hedging of the remaining Citizens holdings.
Economic hedges, which consist of equity capital securities in issue, decreased by 0.6 billion reflecting redemptions of certain equity securities during Q1 2015.
A 5% strengthening in foreign currencies against sterling would result in a gain or loss of 0.5 billion in equity (2014 - 0.6 billion). 

Appendix 1 Capital and risk management
Country risk
Country risk is the risk of losses occurring as a result of either a country event or unfavourable country operating conditions. As country events may simultaneously affect all or many individual exposures to a country, country event risk is a concentration risk. Refer to Capital and risk management - Credit risk in the 2014 Annual Report and Accounts for other types of concentration risk such as product, sector or single-name concentration and Country risk for governance, monitoring, management and definitions.
Key points*
The comments below relate to changes in country exposures in H1 2015 unless indicated otherwise.
Net balance sheet and off-balance sheet exposure to most countries declined across most products. RBS continues to maintain a cautious stance as it becomes a more UK-centred bank with an international focus on Western Europe. In addition, many clients continued to reduce debt levels. The US dollar and the euro depreciated against sterling by 0.7% and 8.9% respectively, contributing to the decline in exposure.


Total eurozone net balance sheet exposure decreased by 12.0 billion or 12%, to 85.6 billion.

The depreciation of the euro played a significant role in the reduction.

The main reductions were in HFT government bonds in Germany, Italy and Spain; in derivatives exposure (mostly to banks) in the Netherlands, Italy and Germany; and in lending in Ireland, Italy and Spain.

Notional bought and sold credit default swaps (CDS) continued its downward trend in line with the bank's general reduction in trading. Net bought CDS protection on eurozone exposures was broadly unchanged.

Net lending in RCR roughly halved to 2.0 billion for the eurozone as a whole, including 0.8 billion in Ireland and 0.5 billion in Spain, with CRE accounting for broadly half of the total.


Eurozone periphery net balance sheet exposure decreased by 7.4 billion or 24%, to 24.0 billion.

Ireland - exposure fell by 2.5 billion or 11% to 20.2 billion, with exposure to corporates and households (mostly mortgage lending) decreasing by 1.5 billion each, largely reflecting currency movements and portfolio sales in RCR. Provisions fell by 3.3 billion to 5.1 billion, largely as a result of these sales. Ulster Bank's cash deposits with the Central Bank of Ireland increased by 0.7 billion, again reflecting the proceeds of the RCR portfolio sales.

Spain - exposure decreased by 1.2 billion to 2.1 billion. This largely reflected reductions in net HFT government bonds, the result of client demand and perceived peripheral eurozone risks triggered by the Greek crisis, and corporate lending (mostly RCR exposure to the commercial real estate, construction and transport sectors). Off-balance sheet exposure, mostly to corporates, decreased by 0.5 billion.

Italy - exposure fell by 3.2 billion to 1.1 billion, reflecting reductions in net HFT government bonds, driven by client demand and eurozone risks, and the maturity of a few large derivatives transactions with banks and corporate loans. Off-balance sheet exposure, largely to corporate clients, decreased by 0.7 billion. RBS will continue to service core clients in Italy.

Portugal - exposure decreased by 0.3 billion to 0.5 billion, due to decreases in net HFT government bonds, derivatives to banks and corporate lending.
*Not within the scope of Deloitte LLP's review report


Appendix 1 Capital and risk management
Key points* (continued)

Greece - net balance sheet exposure decreased to 110 million (down from 0.4 billion), mostly as a result of sales of derivatives positions. The remaining exposure comprised mostly lending and collateralised derivatives exposure to corporate clients, including local subsidiaries of international companies. Total exposure after risk mitigation was approximately 86 million, about a quarter of this in RCR. Contingency planning for any downside scenarios had been refreshed when capital controls were introduced in late June.

Estimated funding mismatches at risk of redenomination at 30 June 2015 were: 


- Ireland - 3.5 billion, down from 4.0 billion, due principally to lower lending.


- Spain - 0.5 billion (broadly unchanged).


- Italy - minimal, down from 1.5 billion due to lower derivatives and HFT exposure, and lower 
 lending.


- Portugal - minimal, down from 0.5 billion, due to lower HFT, derivatives and lending.


The net positions for Greece and Cyprus remained minimal.
Germany - net balance sheet exposure fell by 4.3 billion to 22.3 billion, in net HFT bonds, derivatives and SFT exposure to financial institutions and corporate lending. This was partially offset by an increase of 3.9 billion in cash deposits with the Bundesbank. Off-balance sheet exposure, mostly to corporates, decreased by 0.9 billion.
France - net balance sheet exposure rose by 1.3 billion to 17.4 billion. Exposure to banks increased by 1.0 billion, principally because of the build-up of cash balances with a French bank for the redemption during Q3 2015 of outstanding notes issued by RBS. AFS bonds rose by 0.5 billion, as part of Treasury liquidity management. Off-balance sheet exposure, largely to corporates, fell by 1.0 billion.
Netherlands - net balance sheet exposure decreased by 1.8 billion, mainly because derivatives exposure was reduced to a few major banks. Net HFT debt securities increased by 0.8 billion, driven by client demand and market opportunities. This was largely offset by decreases in AFS debt securities. Off-balance sheet exposure to the corporate sector and financial institutions fell by a combined 1.4 billion.
Other eurozone - net HFT government bonds increased by 0.5 billion to 1.4 billion, driven by opportunities in the Finnish and Austrian bond markets.
Japan - net HFT government bond exposure increased by 4.2 billion to 7.2 billion. This exposure was driven by collateral trading in London, with the increase in outright holdings reflecting reduced access to local repo markets following RBS's decision to exit its Japanese onshore business. Nostro balances with the central bank also increased, by 1.0 billion. These balances fluctuate on a daily basis depending on RBS excess yen liquidity held in London and Tokyo. Derivatives exposure to banks and in corporate lending decreased by a combined 0.8 billion.
China - net balance sheet exposure decreased by 1.2 billion to 2.4 billion, with reductions mostly in corporate lending, driven by the new international strategy. The portfolio is focused on the largest banks and corporates. Stress tests indicate that the impact of an economic downturn scenario on credit losses would be limited.
India - net balance sheet exposure fell by 0.3 billion to 1.7 billion, with reductions mostly in corporate lending, reflecting the bank's new UK-centred strategy.
Russia - net balance sheet exposure decreased by 0.2 billion to 1.6 billion which included 0.9 billion of corporate lending and 0.7 billion of bank lending. Around one-third of the bank lending risk was transferred to third-party investors through credit-linked notes. The exposure continues to be closely monitored and reviewed against all international sanctions, with strict credit restrictions placed on new business.
*Not within the scope of Deloitte LLP's review report

Appendix 1 Capital and risk management
Country risk: Country exposures


























Net balance sheet exposure

Analysis of net balance sheet exposures

Off-



CDS



Sovereign
Central
Other
Other




Net

Debt securities

Net
balance
Total

notional less

Gross
banks
banks
FI
Corporate
Personal
Total
lending

AFS/LAR
HFT (net)

Derivatives
SFT
sheet
exposure

fair value

Derivatives
SFT
30 June 2015
m
m
m
m
m
m
m

m

m
m

m
m

m

m

m

m
m

























Eurozone 
























Ireland
292
1,326
541
732
4,174
13,116
20,181

18,959

20
511

691
-

2,429

22,610

(38)

2,001
1,384
Spain
(168)
1
447
44
1,683
77
2,084

1,579

-
(175)

677
3

1,449

3,533

(294)

2,959
608
Italy
(1,338)
12
1,583
262
527
25
1,071

612

23
(1,356)

1,790
2

1,303

2,374

(483)

6,231
2,020
Portugal
(41)
-
165
73
263
7
467

226

18
(2)

225
-

185

652

(104)

261
199
Greece
6
-
3
1
80
20
110

64

-
6

40
-

21

131

(33)

40
-
Cyprus
-
-
-
-
44
14
58

43

-
-

15
-

12

70

-

15
-

























Eurozone
























 periphery
(1,249)
1,339
2,739
1,112
6,771
13,259
23,971

21,483

61
(1,016)

3,438
5

5,399

29,370

(952)

11,507
4,211

























Germany
5,509
6,538
3,175
5,149
1,871
83
22,325

8,092

6,377
(38)

7,650
244

5,168

27,493

(2,320)

31,029
6,690
France
5,775
2
8,048
1,505
1,965
83
17,378

4,306

2,404
3,929

6,418
321

7,562

24,940

(2,452)

32,703
18,824
Netherlands
612
803
3,964
5,687
1,751
31
12,848

3,061

1,079
3,356

5,333
19

7,940

20,788

(716)

16,213
1,937
Belgium
1,234
-
2,085
54
302
22
3,697

442

539
642

1,956
118

774

4,471

(161)

2,446
942
Luxembourg
-
23
254
1,043
999
7
2,326

1,584

309
48

368
17

1,182

3,508

(21)

500
2,461
Other 
1,851
11
817
67
268
18
3,032

400

275
1,424

864
69

810

3,842

(523)

3,514
210

























Total
























 eurozone
13,732
8,716
21,082
14,617
13,927
13,503
85,577

39,368

11,044
8,345

26,027
793

28,835

114,412

(7,145)

97,912
35,275

























Japan
7,377
1,968
1,324
550
99
31
11,349

2,334

-
7,200

1,795
20

626

11,975

(26)

7,532
2,752
China
156
169
954
200
847
32
2,358

1,982

90
-

255
31

152

2,510

21

359
6,131
India
476
60
44
199
867
34
1,680

1,153

367
109

51
-

545

2,225

(45)

111
63
Russia
8
11
661
39
854
45
1,618

1,545

8
(3)

68
-

91

1,709

(101)

83
-
These tables show RBS exposure at 30 June 2015 and 31 December 2014 by country of operation of the counterparty, except exposures to governments and individuals which are shown by country of residence.Balance sheet exposures are shown net of loan impairment provisions. Countries shown are those where the balance sheet exposure exceeded 1 billion and which had ratings of A+ or below from Standard and Poor's, Moody's or Fitch at 30 June 2015, as well as selected eurozone countries. The exposures are stated before taking into account risk mitigants, such as guarantees, insurance or collateral (with the exception of reverse repos). Exposures relating to ocean-going vessels are not included as they cannot be meaningfully assigned to specific countries from a country risk perspective. Refer to the 2014 Annual Report and Accounts for definitions, including securities financing transactions (SFT).


Appendix 1 Capital and risk management
Country exposures (continued)


























Net balance sheet exposure

Analysis of net balance sheet exposures

Off-



CDS



Sovereign
Central
Other
Other




Net

Debt securities

Net
balance
Total

notional
Gross

banks
banks
FI
Corporate
Personal
Total
lending

AFS/LAR
HFT (net)

Derivatives
SFT
sheet
exposure

less fair value
Derivatives
SFT

31 December 2014
m
m
m
m
m
m
m

m

m
m

m
m

m

m

m
m
m


























Eurozone 
























Ireland
239
587
726
839
5,653
14,593
22,637

21,176

56
413

991
1

2,922

25,559

(48)
2,330
1,464

Spain
251
-
583
164
2,184
88
3,270

2,024

47
364

835
-

1,923

5,193

(312)
3,913
422

Italy
112
15
2,519
368
1,187
25
4,226

1,095

169
5

2,957
-

2,031

6,257

(625)
9,192
823

Portugal
111
-
246
97
322
8
784

282

20
152

330
-

222

1,006

(155)
390
613

Greece
8
-
258
1
92
17
376

63

-
8

305
-

23

399

(8)
416
-

Cyprus
-
-
-
-
113
14
127

108

-
-

19
-

16

143

-
19
-


























Eurozone
























 periphery
721
602
4,332
1,469
9,551
14,745
31,420

24,748

292
942

5,437
1

7,137

38,557

(1,148)
16,260
3,322


























Germany
12,301
2,681
3,940
5,496
2,083
86
26,587

4,601

7,121
5,653

8,317
895

6,090

32,677

(1,749)
39,275
8,704

France
5,203
3
7,089
1,924
1,774
81
16,074

2,931

1,951
4,034

6,392
766

8,586

24,660

(2,406)
41,132
17,598

Netherlands
72
926
5,557
5,981
2,130
29
14,695

3,582

1,690
2,509

6,830
84

9,323

24,018

(815)
20,986
3,573

Belgium
803
3
2,330
93
396
21
3,646

579

274
375

2,334
84

858

4,504

(219)
3,374
932

Luxembourg
(1)
19
556
645
781
5
2,005

968

329
70

461
177

1,475

3,480

(53)
701
2,628

Other 
1,689
19
762
132
533
16
3,151

612

456
930

1,148
5

1,047

4,198

(562)
4,818
302


























Total
























 eurozone
20,788
4,253
24,566
15,740
17,248
14,983
97,578

38,021

12,113
14,513

30,919
2,012

34,516

132,094

(6,952)
126,546
37,059


























Japan
3,257
1,007
1,927
514
325
33
7,063

1,633

3
3,043

2,358
26

844

7,907

(25)
10,129
10,005

China
329
130
1,011
363
1,674
41
3,548

2,886

243
62

243
114

531

4,079

(4)
244
4,770

India
526
85
133
156
1,053
36
1,989

1,336

415
132

106
-

639

2,628

(47)
180
-

Russia
39
14
711
101
915
50
1,830

1,673

39
-

118
-

167

1,997

(166)
202
-


Appendix 2
Income statement reconciliations
and balance sheet pre and post disposal groups

Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

Half year ended

30 June 2015

Non-
Reallocation of
Presentational

Statutory
statutory
one-off items
adjustments (1)
CFG (2)
m
m
m
m
m






Interest receivable
7,329
-
-
(1,222)
6,107
Interest payable
(1,807)
-
-
118
(1,689)






Net interest income
5,522
-
-
(1,104)
4,418






Fees and commissions receivable
2,347
-
-
(389)
1,958
Fees and commissions payable
(381)
-
-
18
(363)
Income from trading activities
734
210
-
(69)
875
Other operating income 
478
(57)
-
(53)
368






Non-interest income
3,178
153
-
(493)
2,838






Total income
8,700
153
-
(1,597)
7,256






Staff costs
(3,075)
-
(348)
568
(2,855)
Premises and equipment
(859)
-
(47)
161
(745)
Other administrative expenses
(1,133)
-
(1,523)
290
(2,366)
Depreciation and amortisation
(418)
-
(294)
-
(712)
Restructuring costs
(1,503)
-
1,503
-
-
Litigation and conduct costs
(1,315)
-
1,315
-
-
Write down of goodwill and other intangible assets
-
-
(606)
-
(606)






Operating expenses
(8,303)
-
-
1,019
(7,284)






Profit/(loss) before impairment releases
397
153
-
(578)
(28)
Impairment releases
232
-
-
89
321






Operating profit
629
153
-
(489)
293
Own credit adjustments (3)
288
(288)
-
-
-
Strategic disposals
(135)
135
-
-
-
Citizens discontinued operations
(489)
-
-
489
-






Profit before tax
293
-
-
-
293
Tax charge
(293)
-
-
-
(293)






Profit for continuing operations
-
-
-
-
-






Profit from discontinued operations, net of tax





 - Citizens
354
-
-
-
354
 - Other
4
-
-
-
4






Profit from discontinued operations, net of tax
358
-
-
-
358






Profit for the period
358
-
-
-
358
Non-controlling interests
(344)
-
-
-
(344)
Preference share and other dividends
(167)
-
-
-
(167)






Loss attributable to ordinary and B shareholders
(153)
-
-
-
(153)
Notes:
(1)
Reallocation of restructuring costs and litigation and conduct costs into the statutory operating expense lines. 
(2)
The statutory results of Citizens Financial Group (CFG), which is classified as a discontinued operation.
(3)
Reallocation of 210 million gain (H1 2014 - 11 million gain; Q2 2015 - 115 million gain; Q1 2015 - 95 million gain; Q2 2014 - 84 million loss) to income from trading activities and 78 million gain (H1 2014 - 62 million loss; Q2 2015 - 53 million gain; Q1 2015 - 25 million gain; Q2 2014 - 106 million loss) to other operating income.


Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

Half year ended

30 June 2014

Non-
Reallocation of
Presentational

Statutory
statutory
one-off items
adjustments (1)
CFG (2)
m
m
m
m
m






Interest receivable
7,621
-
-
(1,077)
6,544
Interest payable
(2,125)
(3)
-
90
(2,038)






Net interest income
5,496
(3)
-
(987)
4,506






Fees and commissions receivable
2,605
-
-
(362)
2,243
Fees and commissions payable
(487)
-
-
12
(475)
Income from trading activities
1,482
11
-
(43)
1,450
Gain on redemption of own debt
-
20
-
-
20
Other operating income 
882
154
-
(231)
805






Non-interest income
4,482
185
-
(624)
4,043






Total income
9,978
182
-
(1,611)
8,549






Staff costs
(3,340)
-
(196)
539
(2,997)
Premises and equipment
(1,079)
-
(196)
149
(1,126)
Other administrative expenses
(1,292)
(1)
(369)
305
(1,357)
Depreciation and amortisation
(551)
-
(3)
88
(466)
Restructuring costs
(514)
-
514
-
-
Litigation and conduct costs
(250)
-
250
-
-
Write down of goodwill and other intangible assets
(82)
(130)
-
-
(212)






Operating expenses
(7,108)
(131)
-
1,081
(6,158)






Profit before impairment losses
2,870
51
-
(530)
2,391
Impairment losses
(269)
-
-
104
(165)






Operating profit
2,601
51
-
(426)
2,226
Own credit adjustments (3)
(51)
51
-
-
-
Gain on redemption of own debt
20
(20)
-
-
-
Write down of goodwill
(130)
130
-
-
-
Strategic disposals
191
(191)
-
-
-
Citizens discontinued operations
(426)
-
-
426
-
RFS Holdings minority interest
21
(21)
-
-
-






Profit before tax
2,226
-
-
-
2,226
Tax charge
(592)
-
-
-
(592)






Profit for continuing operations
1,634
-
-
-
1,634






Profit from discontinued operations, net of tax





 - Citizens
285
-
-
-
285
 - Other
35
-
-
-
35






Profit from discontinued operations, net of tax
320
-
-
-
320






Profit for the period
1,954
-
-
-
1,954
Non-controlling interests
(42)
-
-
-
(42)
Preference share and other dividends
(487)
-
-
-
(487)






Profit attributable to ordinary and B shareholders
1,425
-
-
-
1,425
For the notes to this table refer to page 1.


Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

Quarter ended

30 June 2015

Non-
Reallocation of
Presentational

Statutory
statutory
one-off items
adjustments (1)
CFG (2)
m
m
m
m
m






Interest receivable
3,643
-
-
(612)
3,031
Interest payable
(877)
-
-
61
(816)






Net interest income
2,766
-
-
(551)
2,215






Fees and commissions receivable
1,169
-
-
(200)
969
Fees and commissions payable
(195)
-
-
9
(186)
Income from trading activities
464
115
-
(34)
545
Other operating income 
165
53
-
(24)
194






Non-interest income
1,603
168
-
(249)
1,522






Total income
4,369
168
-
(800)
3,737






Staff costs
(1,517)
-
(293)
280
(1,530)
Premises and equipment
(372)
-
(37)
83
(326)
Other administrative expenses
(622)
-
(559)
154
(1,027)
Depreciation and amortisation
(186)
-
(14)
-
(200)
Restructuring costs
(1,050)
-
1,050
-
-
Litigation and conduct costs
(459)
-
459
-
-
Write down of goodwill and other intangible assets
-
-
(606)
-
(606)






Operating expenses
(4,206)
-
-
517
(3,689)






Profit before impairment releases
163
168
-
(283)
48
Impairment releases
141
-
-
51
192






Operating profit
304
168
-
(232)
240
Own credit adjustments (3)
168
(168)
-
-
-
Citizens discontinued operations
(232)
-
-
232
-






Profit before tax
240
-
-
-
240
Tax charge
(100)
-
-
-
(100)






Profit from continuing operations
140
-
-
-
140






Profit from discontinued operations, net of tax





 - Citizens
674
-
-
-
674
 - Other
-
-
-
-
-






Profit from discontinued operations, net of tax
674
-
-
-
674






Profit for the period
814
-
-
-
814
Non-controlling interests
(428)
-
-
-
(428)
Preference share and other dividends
(93)
-
-
-
(93)






Profit attributable to ordinary and B shareholders
293
-
-
-
293
For the notes to this table refer to page 1.


Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

Quarter ended

31 March 2015

Non-
Reallocation of
Presentational

Statutory
statutory
one-off items
adjustments (1)
CFG (2)
m
m
m
m
m






Interest receivable
3,686
-
-
(610)
3,076
Interest payable
(930)
-
-
57
(873)






Net interest income
2,756
-
-
(553)
2,203






Fees and commissions receivable
1,178
-
-
(189)
989
Fees and commissions payable
(186)
-
-
9
(177)
Income from trading activities
270
95
-
(35)
330
Other operating income 
313
(110)
-
(29)
174






Non-interest income
1,575
(15)
-
(244)
1,316






Total income
4,331
(15)
-
(797)
3,519






Staff costs
(1,558)
-
(55)
288
(1,325)
Premises and equipment
(487)
-
(10)
78
(419)
Other administrative expenses
(511)
-
(964)
136
(1,339)
Depreciation and amortisation
(232)
-
(280)
-
(512)
Restructuring costs
(453)
-
453
-
-
Litigation and conduct costs
(856)
-
856
-
-






Operating expenses
(4,097)
-
-
502
(3,595)






Profit/(loss) before impairment releases
234
(15)
-
(295)
(76)
Impairment releases
91
-
-
38
129






Operating profit
325
(15)
-
(257)
53
Own credit adjustments (3)
120
(120)
-
-
-
Strategic disposals
(135)
135
-
-
-
Citizens discontinued operations
(257)
-
-
257
-






Profit before tax
53
-
-
-
53
Tax charge
(193)
-
-
-
(193)






Loss from continuing operations
(140)
-
-
-
(140)






Loss from discontinued operations, net of tax





 - Citizens
(320)
-
-
-
(320)
 - Other
4
-
-
-
4






Loss from discontinued operations, net of tax
(316)
-
-
-
(316)






Loss for the period
(456)
-
-
-
(456)
Non-controlling interests
84
-
-
-
84
Preference share and other dividends
(74)
-
-
-
(74)






Loss attributable to ordinary and B shareholders
(446)
-
-
-
(446)
For the notes to this table refer to page 1.


Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

Quarter ended

30 June 2014

Non-
Reallocation of
Presentational

Statutory
statutory
one-off items
adjustments (1)
CFG (2)
m
m
m
m
m






Interest receivable
3,822
(1)
-
(542)
3,279
Interest payable
(1,024)
1
-
43
(980)






Net interest income
2,798
-
-
(499)
2,299






Fees and commissions receivable
1,314
-
-
(188)
1,126
Fees and commissions payable
(251)
-
-
7
(244)
Income from trading activities
626
(85)
-
(13)
528
Other operating income 
438
(93)
-
(191)
154






Non-interest income
2,127
(178)
-
(385)
1,564






Total income
4,925
(178)
-
(884)
3,863






Staff costs
(1,693)
1
(153)
287
(1,558)
Premises and equipment
(485)
-
(137)
76
(546)
Other administrative expenses
(605)
(2)
(344)
171
(780)
Depreciation and amortisation
(282)
1
(1)
45
(237)
Restructuring costs
(385)
-
385
-
-
Litigation and conduct costs
(250)
-
250
-
-
Write down of goodwill and other intangible assets
-
(130)
-
-
(130)






Operating expenses
(3,700)
(130)
-
579
(3,251)






Profit before impairment releases
1,225
(308)
-
(305)
612
Impairment releases
93
-
-
31
124






Operating profit
1,318
(308)
-
(274)
736
Own credit adjustments (3)
(190)
190
-
-
-
Write down of goodwill
(130)
130
-
-
-
Citizens discontinued operations
(274)
-
-
274
-
RFS Holdings minority interest
12
(12)
-
-
-






Profit before tax
736
-
-
-
736
Tax charge
(278)
-
-
-
(278)






Profit from continuing operations
458
-
-
-
458






Profit from discontinued operations, net of tax





 - Citizens
181
-
-
-
181
 - Other
26
-
-
-
26






Profit from discontinued operations, net of tax
207
-
-
-
207






Profit for the period
665
-
-
-
665
Non-controlling interests
(23)
-
-
-
(23)
Preference share and other dividends
(412)
-
-
-
(412)






Profit attributable to ordinary and B shareholders
230
-
-
-
230
For the notes to this table refer to page 1.

Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

30 June 2015

31 December 2014



Gross of 



Gross of 
Balance 
Disposal 
disposal 
Balance 
Disposal 
disposal 
sheet 
groups (1) 
groups 
sheet 
groups (2) 
groups 

m 
m 
m 

m 
m 
m 








Assets







Cash and balances at central banks
81,900
842
82,742

74,872
622
75,494
Net loans and advances to banks
20,714
2,571
23,285

23,027
1,745
24,772
Reverse repurchase agreements and stock borrowing
20,807
157
20,964

20,708
-
20,708
Loans and advances to banks
41,521
2,728
44,249

43,735
1,745
45,480
Net loans and advances to customers
314,993
64,511
379,504

334,251
60,550
394,801
Reverse repurchase agreements and stock borrowing
46,799
-
46,799

43,987
-
43,987
Loans and advances to customers
361,792
64,511
426,303

378,238
60,550
438,788
Debt securities
77,187
16,185
93,372

86,649
15,293
101,942
Equity shares
3,363
583
3,946

5,635
572
6,207
Settlement balances
9,630
598
10,228

4,667
-
4,667
Derivatives
281,857
428
282,285

353,590
402
353,992
Intangible assets
7,198
752
7,950

7,781
583
8,364
Property, plant and equipment
4,874
609
5,483

6,167
503
6,670
Deferred tax
1,479
-
1,479

1,540
-
1,540
Prepayments, accrued income and







other assets
4,829
1,835
6,664

5,878
1,741
7,619
Assets of disposal groups
89,071
(89,071)
-

82,011
(82,011)
-








Total assets
964,701
-
964,701

1,050,763
-
1,050,763








Liabilities







Bank deposits
30,978
4,474
35,452

35,806
5,128
40,934
Repurchase agreements and stock lending
21,612
1,942
23,554

24,859
1,666
26,525
Deposits by banks
52,590
6,416
59,006

60,665
6,794
67,459
Customer deposits
342,023
70,491
412,514

354,288
60,583
414,871
Repurchase agreements and stock lending
44,750
467
45,217

37,351
706
38,057
Customer accounts
386,773
70,958
457,731

391,639
61,289
452,928
Debt securities in issue
41,819
1,178
42,997

50,280
1,625
51,905
Settlement balances
7,335
8
7,343

4,503
-
4,503
Short positions
24,561
-
24,561

23,029
-
23,029
Derivatives
273,589
191
273,780

349,805
144
349,949
Accruals, deferred income andother liabilities
13,962
834
14,796

13,346
683
14,029
Retirement benefit liabilities
1,869
184
2,053

2,579
197
2,776
Deferred tax
363
393
756

500
362
862
Subordinated liabilities
19,683
226
19,909

22,905
226
23,131
Liabilities of disposal groups
80,388
(80,388)
-

71,320
(71,320)
-








Total liabilities
902,932
-
902,932

990,571
-
990,571
Notes:
(1)
Primarily Citizens and international private banking.
(2)
Primarily Citizens.
(3)
Excludes reverse repos.


Appendix 2 Income statement reconciliations and balance sheet pre and post disposal groups

30 June 2015

31 December 2014



Gross of 



Gross of 
Balance 
Disposal 
disposal 
Balance 
Disposal 
disposal 
sheet 
groups (1) 
groups 
sheet 
groups (2) 
groups 
Selected financial data
m 
m 
m 

m 
m 
m 








Gross loans and advances to customers
325,718
65,063
390,781

351,711
61,090
412,801
Customer loan impairment provisions
(10,725)
(552)
(11,277)

(17,460)
(540)
(18,000)
Net loans and advances to customers (3)
314,993
64,511
379,504

334,251
60,550
394,801








Gross loans and advances to banks
20,740
2,571
23,311

23,067
1,745
24,812
Bank loan impairment provisions
(26)
-
(26)

(40)
-
(40)
Net loans and advances to banks (3)
20,714
2,571
23,285

23,027
1,745
24,772








Total loan impairment provisions
(10,751)
(552)
(11,303)

(17,500)
(540)
(18,040)








Customer REIL
17,426
1,260
18,686

26,842
1,335
28,177
Bank REIL
28
-
28

42
-
42
REIL
17,454
1,260
18,714

26,884
1,335
28,219








Gross unrealised gains on debt securities
895
211
1,106

1,316
261
1,577
Gross unrealised losses on debt securities
(174)
(129)
(303)

(145)
(137)
(282)
For the notes to this table refer to page 6.

Appendix 3
Go-forward Bank profile

Appendix 3 Go-forward Bank profile 
RBS is committed to a leaner, less volatile business based around its core franchises of PBB and CPB. To achieve this goal a number of initiatives have been announced which include, but are not limited to, the restructuring of CIB into CIB Go-forward and CIB Capital Resolution, the divestment of the remaining stake in Citizens, the exit of Williams & Glyn and the continued run down of RCR. Significant progress towards these exits is expected in 2015. The following table illustrates the impact on certain key performance measures of these initiatives by showing the 'Go-forward' profile of the bank and the segments, businesses and portfolios which it intends to exit. This information is presented to illustrate the strategy and its impact on the business and is on a non-statutory basis and should be read in conjunction with the notes below as well as the section titled Forward-looking statements.


















Go-forward Bank profile

Exit Bank










CIB

International



Total


UK
Ulster
Commercial
Private
CIB Go-
Other Go-
Total Go-

Capital
Williams
private


Other
Exit
Total

PBB (1)
Bank
Banking
Banking (2)
forward (3)
forward (4)
forward

Resolution (3)
& Glyn (5)
banking
Citizens
RCR
investments
Bank
RBS
Quarter ended 30 June 2015
bn
bn
bn
bn
bn
bn
bn

bn
bn
bn
bn
bn
bn
bn
bn

















Total income
1.3
0.2
0.9
0.2
0.4
0.1
3.1

0.1
0.2
0.1
0.8
0.1
-
1.3
4.4
Operating expenses 
















 - adjusted (6)
(0.7)
(0.2)
(0.4)
(0.1)
(0.4)
0.1
(1.7)

(0.3)
(0.1)
-
(0.5)
(0.1)
-
(1.0)
(2.7)
Impairment (losses)/releases
-
-
-
-
-
-
-

-
-
-
(0.1)
0.2
-
0.1
0.1

















Operating profit/(loss) - adjusted (6)
0.6
-
0.5
0.1
-
0.2
1.4

(0.2)
0.1
0.1
0.2
0.2
-
0.4
1.8

















Funded assets
116
26
95
12
149
105
503

62
20
5
83
8
1
179
682
Net loans and advances to 
















 customers
109
20
90
11
27
2
259

31
20
3
61
6
-
121
380
Customer deposits 
128
19
97
23
22
2
291

27
23
7
64
1
-
122
413
Risk-weighted assets (7)
31
21
67
8
43
8
178

45
11
2
70
14
6
148
326
Return on equity - adjusted (6,8,9)
36%
11%
14%
5%
nm
nm
16%

nm
nm
9%
7%
nm
10%
5%
11%

















Quarter ended 31 March 2015

































Total income
1.2
0.2
0.8
0.1
0.6
-
2.9

0.3
0.2
-
0.8
0.1
-
1.4
4.3
Operating expenses 
















 - adjusted (6)
(0.6)
(0.1)
(0.4)
(0.2)
(0.4)
-
(1.7)

(0.4)
(0.1)
(0.1)
(0.5)
-
-
(1.1)
(2.8)
Impairment releases
-
-
-
-
-
-
-

-
-
-
-
0.1
-
0.1
0.1

















Operating profit/(loss) - adjusted (6)
0.6
0.1
0.4
(0.1)
0.2
-
1.2

(0.1)
0.1
(0.1)
0.3
0.2
-
0.4
1.6

















Funded assets
115
27
93
12
162
94
503

86
20
6
87
11
1
211
714
Net loans and advances to 
















 customers
107
21
89
11
36
1
265

41
20
3
63
8
-
135
400
Customer deposits 
126
19
99
22
24
2
292

34
22
8
66
1
-
131
423
Risk-weighted assets
32
22
66
8
45
9
182

58
11
2
72
17
7
167
349
Return on equity - adjusted (6,8,9)
35%
6%
12%
4%
nm
nm
12%

nm
nm
8%
7%
nm
10%
7%
10%

















For notes to these tables refer to page 3.















Appendix 3 Go-forward Bank profile 


















Go-forward Bank profile

Exit Bank










CIB

International



Total


UK
Ulster
Commercial
Private
CIB Go-
Other Go-
Total Go-

Capital
Williams
private


Other
Exit
Total
Half year ended and as at
PBB (1)
Bank
Banking
Banking (2)
forward (3)
forward (4)
forward

Resolution (3)
& Glyn (5)
banking
Citizens
RCR
investments
Bank
RBS
30 June 2015
bn
bn
bn
bn
bn
bn
bn

bn
bn
bn
bn
bn
bn
bn
bn

















Total income
2.5
0.4
1.7
0.3
1.0
0.1
6.0

0.4
0.4
0.1
1.6
0.2
-
2.7
8.7
Operating expenses 
















 - adjusted (6)
(1.3)
(0.3)
(0.8)
(0.3)
(0.8)
0.1
(3.4)

(0.7)
(0.2)
(0.1)
(1.0)
(0.1)
-
(2.1)
(5.5)
Impairment (losses)/releases
-
-
-
-
-
-
-

-
-
-
(0.1)
0.3
-
0.2
0.2

















Operating profit/(loss) - adjusted (6)
1.2
0.1
0.9
-
0.2
0.2
2.6

(0.3)
0.2
-
0.5
0.4
-
0.8
3.4

















Funded assets
116
26
95
12
149
105
503

62
20
5
83
8
1
179
682
Net loans and advances to 
















 customers 
109
20
90
11
27
2
259

31
20
3
61
6
-
121
380
Customer deposits 
128
19
97
23
22
2
291

27
23
7
64
1
-
122
413
Risk-weighted assets (7)
31
21
67
8
43
8
178

45
11
2
70
14
6
148
326
Return on equity - adjusted (6,8,9)
36%
9%
13%
4%
nm
nm
14%

nm
nm
9%
7%
nm
10%
6%
10%

















For the notes to this table refer to the following page.















Appendix 3 Go-forward Bank profile 


















Go-forward Bank profile 

Exit Bank












International



Total


UK
Ulster
Commercial
Private
CIB Go-
Other Go-
Total Go-

CIB Capital
Williams
private


Other
Exit 
Total
Year ended and as at 
PBB (1)
Bank
Banking
Banking (2)
forward (3)
forward (4)
forward

Resolution(3)
& Glyn (5)
banking
Citizens
RCR
investments
Bank
RBS
31 December 2014
bn
bn
bn
bn
bn
bn
bn

bn
bn
bn
bn
bn
bn
bn
bn

















Total income 
5.2
0.8
3.2
0.9
2.2
(0.1)
12.2

1.7
0.9
0.2
3.1
-
0.1
6.0
18.2
Operating expenses 
















 - adjusted (6)
(3.0)
(0.6)
(1.6)
(0.7)
(1.9)
0.1
(7.7)

(1.7)
(0.5)
(0.2)
(2.0)
(0.3)
-
(4.7)
(12.4)
Impairment (losses)/releases 
(0.2)
0.4
(0.1)
-
-
-
0.1

-
(0.1)
-
(0.2)
1.3
0.1
1.1
1.2

















Operating profit - adjusted (6)
2.0
0.6
1.5
0.2
0.3
-
4.6

-
0.3
-
0.9
1.0
0.2
2.4
7.0

















Funded assets
115
28
89
15
146
87
480

95
20
5
81
15
1
217
697
Net loans and advances to 
















 customers 
108
22
85
13
31
-
259

42
20
3
60
11
-
136
395
Customer deposits 
127
21
87
29
23
1
288

36
22
8
61
1
-
128
416
Risk-weighted assets
33
24
64
10
43
10
184

64
10
2
68
22
6
172
356
Return on equity - adjusted (6,8,9)
29%
17%
11%
12%
nm
nm
11%

nm
nm
10%
7%
nm
3%
7%
9%
Notes:
(1)
Excludes Williams & Glyn.
(2)
Excludes international private banking reclassified to disposal groups. 
(3)
The CIB segment is being restructured into Go-forward and CIB Capital Resolution elements. The split is subject to further refinement.
(4)
Other Go-forward is primarily Centre, which includes the liquidity portfolio.
(5)
Does not reflect the cost base, funding and capital profile of a standalone bank. Operating expenses include charges based on an attribution of support provided by RBS to Williams & Glyn. Expenses incurred by Williams & Glyn were 91 million (Q1 2015 - 80 million; H1 2015 - 171 million; FY 2014 - 352 million).
(6)
Excludes restructuring and litigation and conduct costs.
(7)
CIB RWAs 43 billion includes 9 billion of RWAs related to businesses that will transfer out of CIB, comprising the Western European large corporate portfolio (expected to move to Commercial Banking in H2 2015) and UK Transaction Services (to Commercial Banking in 2016).
(8)
ROE iscalculated using operating profit after tax on a non-statutory basis adjusted for preference share dividends divided by average notional equity (based on 13% of average RWAe).
(9)
PBB adjusted ROE Q2 2015 - 29% (Q1 2015 - 27%; H1 2015 - 28%; FY 2014 - 26%). CPB adjusted ROE Q2 2015 - 13% (Q1 2015 - 11%; H1 2015 - 12%; FY 2014 - 11%). Excluding IFRS volatility gain of Q2 2015 - 205 million (Q1 2015 - loss 123 million; H1 2015 - gain 82 million; FY 2014 - loss 468 million), the Go-forward Bank's adjusted return on equity was Q2 2015 - 14% (Q1 2015 - 13%; H1 2015 - 14%; FY 2014 - 13%).


Appendix 3 Go-forward Bank profile 

30 June 2015

31 December 2014

TPAs
RWAs

TPAs
RWAs
CIB Capital Resolution by product
m
m

m
m






APAC portfolio (1)
6.1
3.4

7.7
4.2
Americas portfolio
3.4
4.3

4.6
7.8
EMEA portfolio (2)
5.9
4.3

9.9
6.8
Shipping
5.3
4.5

5.7
4.4
Markets
34.1
20.0

54.2
28.6
GTS
6.3
8.0

11.3
11.2
Other
1.2
0.7

1.6
0.8






Total
62.3
45.2

95.0
63.8
Notes:
(1)
Asia-Pacific portfolio.
(2)
European, the Middle East and Africa portfolio.

Appendix 4
Williams & Glyn

Appendix 4 Williams & Glyn
In accordance with a commitment to the European Commission, RBS agreedto dispose of its Williams & Glyn business (RBS England and Wales and NatWest Scotland branch-based businesses, along with certain SME and corporate activities across the UK).
RBS is creating a standalone banking entity supported by a bespoke technology solution to facilitate the disposal of its Williams & Glyn business through an Initial Public Offering (IPO). Following the conclusion of a 600 million pre-IPO investment from a consortium of investors led by global financial services specialists Corsair Capital and Centerbridge Partners, and including the Church Commissioners for England and RIT Capital Partners plc, the Williams & Glyn business continues to make progress towards its IPO.
The pre-IPO investment took the form of a 600 million bond issued by RBS. This will be exchangeable for a significant non-controlling interest in Williams & Glyn at the time of its IPO. The bond will convert into Williams & Glyn shares at the IPO price, subject to a minimum ownership level which will be linked to the tangible book value of Williams & Glyn prior to the IPO, and in any case no more than a stake of 49%. To the extent the maximum ownership level is reached, the bond will be partially redeemed in cash such that the consortium of investors will receive a total value of 600 million of cash and shares at the IPO price. At the IPO, subject to RBS's consent, the Investors will have the option to acquire up to 10% additionally at the IPO price, subject to their pro forma ownership being no more than 49% in aggregate.
Set out below are the income statement and key balance sheet metrics in respect of the Williams & Glyn business. This represents the financial performance of Williams & Glyn prepared on a carve out internally managed basis illustrating a current view of the business. During the periods presented, Williams & Glyn has been an integral part of RBS and has not operated as a separate legal entity. These figures do not necessarily reflect the cost base, funding and capital profile of a standalone bank.

Half year ended
Year ended

30 June
30 June
31 December

2015
2014
2014

m
m
m




Income statement



Net interest income
328
331
668
Non-interest income
98
104
210




Total income
426
435
878
Operating expenses (1)
(232)
(253)
(512)




Profit before impairment losses
194
182
366
Impairment releases/(losses)
10
(31)
(54)




Operating profit (2)
204
151
312




Analysis of income by business



Retail
237
249
503
Corporate 
189
186
375




Total income
426
435
878




Analysis of impairments by business



Retail
12
26
47
Corporate 
(22)
5
7




Total impairment (releases)/losses 
(10)
31
54




Loan impairment charge as % of gross customer loans and advances (excluding



 reverse repurchase agreements) by business



Retail
0.21%
0.46%
0.42%
Corporate 
(0.51%)
0.11%
0.08%




Total
(0.10%)
0.31%
0.27%
Notes:
(1)
Does not reflect the cost base, funding and capital profile of a standalone bank. Operating expenses include charges based on an attribution of support provided by RBS to W&G. Expenses incurred by W&G were: H1 2014 - 173 million; FY 2014 - 352 million; H1 2015 - 171 million.
(2)
Operating profit includes; 7 million profit in Commercial Banking (H1 2014 - 8 million profit; FY 2014 - 14 million profit); 1 million profit in RCR (H1 2014 - 1 million profit; FY 2014 - 3 million profit); 60 million loss in Central items (H1 2014 - 81 million loss; FY 2014 - 160 million loss); the remainder of W&G is reported in UK PBB.


Appendix 4 Further analysis of Williams & Glyn
Key metrics
Half year ended
Year

ended

30 June
30 June
31 December
2015
2014
2014




Performance ratio



Net interest margin
3.39%
3.39%
3.43%







30 June
31 December

30 June

2015
2014

2014

bn
bn
Change
bn
Change






Capital and balance sheet





Loans and advances to customers (gross)





- Retail
11.3
11.3
-
11.4
(0.9%)
- Corporate 
8.6
8.7
(1.1%)
8.8
(2.3%)






Total loans and advances to customers 
19.9
20.0
(0.5%)
20.2
(1.5%)
Loan impairment provisions
(0.4)
(0.4)
-
(0.4)
-






Net loans and advances to customers
19.5
19.6
(0.5%)
19.8
(1.5%)






Total assets
19.8
20.0
(1.0%)
20.2
(2.0%)
Funded assets
19.7
19.7
-
20.0
(1.5%)






Customer deposits





- Retail
10.9
10.3
5.8%
10.0
9.0%
- Corporate 
12.5
11.7
6.8%
11.8
5.9%






Total customer deposits
23.4
22.0
6.4%
21.8
7.3%






Loan:deposit ratio (excluding repos)
85%
91%
(600bp)
93%
(800bp)






Risk-weighted assets (1)
10.5
10.4
1.0%
11.1
(5.4%)
Note:
(1)
RWAs on an end-point CRR basis.
Key points
Operating profit increased to 204 million in H1 2015 compared with 151 million in H1 2014, driven mainly by lower operating expenses and net impairment releases.


Total income of 426 million compared with 435 million in H1 2014. Net interest income was broadly flat with improved deposit income from higher balances and stronger margins, offset by lower asset income as a result of margin compression. Non-interest income was down 6 million to 98 million reflecting lower fee income.


Net interest margin has remained flat at 3.39%.


Operating expenses fell 21 million to 232 million in H1 2015 compared with 253 million in H1 2014 reflecting lower FSCS levy and compensation costs and lower fraud levels, partially offset by an increase in staff expenses as the business prepares for divestment.


Impairment release for H1 2015 were 10 million compared with a net charge of 31 million for H1 2014, as a result of lower levels of defaults across all portfolios and portfolio provision releases.


Deposits grew by 1.4 billion to 23.4 billion in H1 2015.

Appendix 5
Parent company financial statements

Appendix 5 Parent company financial statements
RBSG plc - Balance sheet at 30 June 2015

30 June
31 December

2015
2014
m
m



Assets


Loans and advances to banks
22,720
24,490
Loans and advances to customers
302
299
Debt securities
467
911
Investments in Group undertakings
54,852
54,858
Derivatives
138
179
Prepayments, accrued income and other assets
48
193



Total assets
78,527
80,930



Liabilities


Deposits by banks
1,209
1,202
Debt securities in issue
6,333
7,510
Derivatives
38
30
Accruals, deferred income and other liabilities
21
165
Subordinated liabilities
8,814
10,708



Total liabilities
16,415
19,615
Owners' equity
62,112
61,315



Total liabilities and equity
78,527
80,930
Owners' equity includes 17.9 billion of distributable reserves at 30 June 2015 (31 December 2014 - 17.5 billion). RBS intends to redeem US$1.9 billion of its outstanding Series M, N, P and Q non-cumulative dollar preference shares, represented by American depositary shares, on 1 September 2015. The redemption of these securities will reduce the parent company's distributable reserves by approximately 1.2 billion.


Appendix 5 Parent company financial statements
RBSG plc - Statement of changes in equity for the period ended 30 June 2015





Half year


ended
Year ended

30 June
31 December

2015
2014

m
m



Called-up share capital


At beginning of period
6,877
6,714
Ordinary shares issued
104
163



At end of period
6,981
6,877



Paid-in equity


At beginning and end of period
431
431



Share premium account


At beginning of period
25,052
24,667
Ordinary shares issued
254
385



At end of period
25,306
25,052



Merger reserve


At beginning and end of period
2,341
2,341



Capital redemption reserve


At beginning and end of period
9,131
9,131



Retained earnings


At beginning of period
17,483
17,033
Profit attributable to ordinary and B shareholders and other equity owners
598
1,128
Equity preference dividends paid
(143)
(330)
Paid-in equity dividends paid, net of tax
(16)
(28)
Dividend access share dividend
-
(320)



At end of period
17,922
17,483



Owners' equity at end of period
62,112
61,315



Total equity is attributable to:


Preference shareholders
4,313
4,313
Paid-in equity holders
431
431
Ordinary and B shareholders
57,368
56,571




62,112
61,315

This information is provided by RNS
The company news service from the London Stock Exchange
  END
IR LIFVFDFIIVIE