REG - Royal Bk Scot.Grp. - Half Yearly Report: Part 2 <Origin Href="QuoteRef">RBS.L</Origin> - Part 2
30/07/2015 07:10
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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
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