REG - Royal Bk Scot.Grp. - Half Yearly Report - Part 3 <Origin Href="QuoteRef">RBS.L</Origin> - Part 3
29/10/2014 09:17
- Part 3: For the preceding part double click ID:nRSA9700Nb
76.5 76.5
Debt securities 0.9 - 5.5 55.6 2.7 64.7 57 17.0 31.9 - - 113.6
Equity shares - - 0.5 5.3 - 5.8 66 - 3.0 - - 8.8
Settlement balances - - - - - - - - - - 5.5 5.5
Derivatives - - - - - - - - - - 288.0 288.0
Intangible assets - - - - - - - - - - 12.4 12.4
Property, plant and equipment - - - - 0.4 0.4 5 - - 7.5 - 7.9
Deferred tax - - - - - - - - - - 3.5 3.5
Prepayments, accrued income and other assets - - - - - - - - - - 8.6 8.6
Assets of disposal groups - - - - - - - - - - 0.2 0.2
50.9 16.7 34.4 60.9 8.6 171.5 166.8 101.5 183.1 405.0 1,027.9
Securities retained 17.4
Total liquidity portfolio 184.2
Liabilities secured
Intra-Group - secondary liquidity (19.1) - - - - (19.1)
Intra-Group - other (18.4) - - - - (18.4)
Third-party (6) (7.8) (9.0) (34.4) (85.1) (6.0) (142.3)
(45.3) (9.0) (34.4) (85.1) (6.0) (179.8)
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Balance sheet encumbrance(continued)
Notes:
(1) Includes cash, coin and nostro balance held with the Bank of England as collateral against notes in circulation.
(2) Encumbered assets are those that have been pledged to provide security for the liability shown above and are therefore not available to secure funding or to meet other collateral needs.
(3) Unencumbered readily realisable assets are those assets on the balance sheet that can be readily used to meet funding or collateral requirements and comprise:
(a) Liquidity portfolio: cash balances at central banks, high quality debt securities and loans that have been pre-positioned with central banks. In addition, the liquidity portfolio includes securitisations of own assets which has reduced over the years and has been replaced by loans.
(b) Other readily realisable assets: including assets that have been enabled for use with central banks; and unencumbered debt securities.
(4) Unencumbered other realisable assets are those assets on the balance sheet that are available for funding and collateral purposes but are not readily realisable in their current form. These assets include loans that could be prepositioned with central banks but have not been subject to internal and external documentation review and diligence work.
(5) Assets that cannot be encumbered include:
(a) derivatives, reverse repurchase agreements and trading related settlement balances.
(b) non-financial assets such as intangibles, prepayments and deferred tax.
(c) assets in disposal groups.
(d) loans that cannot be pre-positioned with central banks based on criteria set by the central banks, primary US, including those relating to date of origination and level of documentation.
(e) non-recourse invoice financing balances and certain shipping loans whose terms and structure prohibit their use as collateral.
(6) In accordance with market practice RBS employs securities recognised on the balance sheet, and securities received under reverse repo transactions as collateral for repos. Secured derivative liabilities now reflect net positions that are collateralised by balance sheet assets.
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
the Risk and balance sheet management - Credit risk section - of the 2013 Annual Report and Accounts.
Financial assets
Exposure summary
The table below analyses financial asset exposures, both gross and net of offset arrangements as well as credit mitigation
and enhancement.
Collateral Exposure post
Gross IFRS Carrying Non-IFRS Real estate Credit credit mitigation
exposure offset (1) value (2) offset (3) Cash (4) Securities (5) Residential (6) Commercial (6) enhancement (7) and enhancement
30 June 2014 £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
Cash and balances at central banks 68.7 - 68.7 - - - - - - 68.7
Lending 419.3 (3.8) 415.5 (35.5) (1.8) (3.2) (146.0) (61.2) (4.8) 163.0
Reverse repos 133.9 (52.2) 81.7 (7.2) - (74.4) - - - 0.1
Debt securities 112.8 - 112.8 - - - - - (0.7) 112.1
Equity shares 7.8 - 7.8 - - - - - - 7.8
Settlement balances 24.2 (4.5) 19.7 - - - - - - 19.7
Derivatives 461.5 (186.6) 274.9 (227.6) (26.4) (4.9) - - (15.1) 0.9
Total 1,228.2 (247.1) 981.1 (270.3) (28.2) (82.5) (146.0) (61.2) (20.6) 372.3
Short positions (39.0) - (39.0) - - - - - - (39.0)
Net of short positions 1,189.2 (247.1) 942.1 (270.3) (28.2) (82.5) (146.0) (61.2) (20.6) 333.3
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Financial assets (continued)
Collateral Exposure post
Gross IFRS Carrying Non-IFRS Real estate Credit credit mitigation
exposure offset (1) value (2) offset (3) Cash (4) Securities (5) Residential (6) Commercial (6) enhancement (7) and enhancement
31 December 2013 £bn £bn £bn £bn £bn £bn £bn £bn £bn £bn
Cash and balances at central banks 82.7 - 82.7 - - - - - - 82.7
Lending 423.6 (3.4) 420.2 (37.2) (1.6) (2.7) (145.4) (60.0) (3.9) 169.4
Reverse repos 117.2 (40.7) 76.5 (11.4) - (65.0) - - - 0.1
Debt securities 113.6 - 113.6 - - - - - (1.3) 112.3
Equity shares 8.8 - 8.8 - - - - - - 8.8
Settlement balances 8.2 (2.7) 5.5 (0.3) - - - - - 5.2
Derivatives 553.7 (265.7) 288.0 (241.3) (24.4) (6.0) - - (7.3) 9.0
Total 1,307.8 (312.5) 995.3 (290.2) (26.0) (73.7) (145.4) (60.0) (12.5) 387.5
Short positions (28.0) - (28.0) - - - - - - (28.0)
Net of short positions 1,279.8 (312.5) 967.3 (290.2) (26.0) (73.7) (145.4) (60.0) (12.5) 359.5
Notes:
(1) Relates to offset arrangements that comply with IFRS criteria and transactions cleared through and novated to central clearing houses, primarily London Clearing House and US Government Securities Clearing Corporation.
(2) The carrying value on the balance sheet represents the exposure to credit risk by class of financial instrument.
(3) Balance sheet offset reflects the amounts by which the bank's credit risk is reduced through master netting and cash management pooling arrangements. Derivative master netting agreements include cash pledged with counterparties in respect of net derivative liability positions and are included in lending in the table above.
(4) Includes cash collateral pledged by counterparties based on daily mark-to-market movements of net derivative positions with the counterparty.
(5) Securities collateral represent the fair value of securities received from counterparties, mainly relating to reverse repo transactions as part of netting arrangements.
(6) Property valuations are capped at the loan value and reflect the application of haircuts in line with regulatory rules to indexed valuations. Commercial collateral includes ships and plant and equipment collateral.
(7) Credit enhancement comprises credit derivatives (bought protection) and guarantees and reflects notional amounts less fair value and notional amounts respectively.
Key points
● The major components of net exposures are cash and balances at central banks, unsecured commercial, corporate and bank loans, debt securities and short-term settlement balances.
● Of the £112 billion of debt securities, £34 billion are asset-backed but underlying collateral is not reflected above as the bank only has access to cashflows from the collateral.
Appendix 1 Capital and risk management
Financial assets (continued)
Asset quality
The table below analyses the bank's financial assets excluding debt securities by internal asset quality (AQ) ratings. Debt
securities are analysed by external ratings and are therefore excluded from the table below and are set out on page 33.
Loans and advances
Banks (1) Customers Settlement
Cash and Derivative Derivative balances and
balances at Reverse cash Bank Reverse cash Customer other financial Contingent
central banks repos collateral loans Total repos collateral loans Total assets Derivatives Commitments liabilities Total Total
30 June 2014 £m £m £m £m £m £m £m £m £m £m £m £m £m £m %
Total
AQ1 66,802 7,614 1,976 4,063 13,653 34,525 9,982 39,075 83,582 7,028 65,652 68,390 8,810 313,917 28.5
AQ2 - 5,097 3,949 1,126 10,172 69 1,630 18,475 20,174 748 61,994 19,148 1,745 113,981 10.4
AQ3 1,542 2,952 1,728 4,492 9,172 5,182 3,314 28,596 37,092 3,476 93,223 26,781 7,086 178,372 16.2
AQ4 321 9,636 1,571 7,567 18,774 8,483 1,677 114,339 124,499 5,358 42,919 39,446 3,807 235,124 21.4
AQ5 3 1,484 361 1,298 3,143 4,441 442 67,179 72,062 1,314 7,269 35,442 2,299 121,532 11.1
AQ6 - 815 42 150 1,007 189 27 38,141 38,357 244 2,265 11,256 1,046 54,175 4.9
AQ7 - 565 21 189 775 653 36 29,124 29,813 112 550 9,760 830 41,840 3.8
AQ8 2 - 1 54 55 - 6 7,059 7,065 - 486 779 97 8,484 0.8
AQ9 - - 5 316 321 - 1 9,544 9,545 31 91 998 260 11,246 1.0
AQ10 - - - - - - - 919 919 9 457 1,027 114 2,526 0.2
Past due - - - - - - - 7,141 7,141 1,362 - - - 8,503 0.8
Impaired - - - 60 60 - - 32,241 32,241 - - - - 32,301 2.9
Impairment
provision - - - (50) (50) - - (22,396) (22,396) - - - - (22,446) (2.0)
68,670 28,163 9,654 19,265 57,082 53,542 17,115 369,437 440,094 19,682 274,906 213,027 26,094 1,099,555 100
For the note to this table refer to the following page.
Appendix 1 Capital and risk management
Financial assets: Asset quality (continued)
Loans and advances
Banks (1) Customers Settlement
Cash and Derivative Derivative balances and
balances at Reverse cash Bank Reverse cash Customer other financial Contingent
central banks repos collateral loans Total repos collateral loans Total assets Derivatives Commitments liabilities Total Total
31 December 2013 £m £m £m £m £m £m £m £m £m £m £m £m £m £m %
Total
AQ1 80,305 5,885 2,043 6,039 13,967 30,233 10,042 34,395 74,670 2,707 71,497 64,453 6,739 314,338 28.2
AQ2 1 4,744 4,930 672 10,346 996 1,899 17,695 20,590 192 69,949 28,717 2,940 132,735 11.9
AQ3 1,873 2,164 1,502 2,347 6,013 1,857 3,796 29,364 35,017 746 94,678 23,126 7,057 168,510 15.1
AQ4 479 9,864 1,451 7,031 18,346 10,642 1,894 99,258 111,794 470 39,157 40,984 4,430 215,660 19.3
AQ5 - 1,776 416 662 2,854 5,403 297 77,045 82,745 717 8,826 33,507 2,087 130,736 11.7
AQ6 - 1,823 1 157 1,981 82 38 39,324 39,444 59 1,487 14,138 1,426 58,535 5.3
AQ7 - 301 - 237 538 684 50 30,279 31,013 22 978 7,437 918 40,906 3.7
AQ8 3 - - 48 48 - 10 8,482 8,492 58 132 1,183 119 10,035 0.9
AQ9 - - - 34 34 - 41 16,944 16,985 - 641 1,020 317 18,997 1.7
AQ10 - - - - - - - 730 730 - 695 1,274 137 2,836 0.3
Past due - - - - - - - 9,068 9,068 620 - - - 9,688 0.9
Impaired - - - 70 70 - - 37,101 37,101 - - - - 37,171 3.3
Impairment
provision - - - (63) (63) - - (25,162) (25,162) - - - - (25,225) (2.3)
82,661 26,557 10,343 17,234 54,134 49,897 18,067 374,523 442,487 5,591 288,040 215,839 26,170 1,114,922 100
Note:
(1) Excludes items in the course of collection from other banks of £1,523 million (31 December 2013 - £1,454 million).
Appendix 1 Capital and risk management
Financial assets: Asset quality (continued)
Key points
● Overall asset quality improved slightly with AQ1-AQ4 (investment grade of BBB- or above) increasing from 75% at 31 December 2013 to 77% at 30 June 2014 reflecting improving credit conditions and disposals and run-down in RCR.
● Cash and balances at central banks decreased £14.0 billion reflecting the management of surplus liquidity.
● Asset quality trends improved with loans to banks and customers rated AQ1 (equivalent to AA or above) up by £3 billion. Recalibration of retail and business banking models using updated data trends from the last three years resulted in a significant upward shift between AQ5 and below to AQ4.
● Gross derivatives decreased 5% to £274.9 billion with the proportion AQ1-AQ4 stable at 96%.
● Past due loans decreased £1.1 billion or 11% driven mainly by CFG (£1.0 billion) and a decrease in Ulster Bank (£0.3 billion) reflecting increased work with customers in arrears.
● Loan impairment provisions decreased £2.8 billion mainly in relation to RCR disposals and run-off (£2.0 billion).
Appendix 1 Capital and risk management
Loans and related credit metrics
The tables below analyse gross loans and advances (excluding reverse repos) and the related credit metrics by business
unit.
Credit metrics
Gross loans to REIL Provisions REIL as a %
of gross Provisions Year-to-date
loans to as a % Impairment Amounts
Banks Customers customers of REIL charge written-off
30 June 2014 £m £m £m £m % % £m £m
UK PBB 900 129,243 4,278 2,821 3.3 66 148 407
Ulster Bank 3,036 25,708 4,861 3,285 18.9 68 57 33
PBB 3,936 154,951 9,139 6,106 5.9 67 205 440
Commercial Banking 861 85,142 2,860 1,162 3.4 41 31 201
Private Banking 1,426 16,618 239 93 1.4 39 - 24
CPB 2,287 101,760 3,099 1,255 3.0 40 31 225
CIB 19,405 69,154 105 177 0.2 nm (36) -
Centre 2,513 848 3 3 0.4 nm (12) 56
CFG 277 52,221 1,307 500 2.5 38 102 147
RCR 551 30,014 20,428 14,405 68.1 71 (19) 1,619
RBS 28,969 408,948 34,081 22,446 8.3 66 271 2,487
31 December 2013
UK PBB 760 127,781 4,663 2,957 3.6 63 497 967
Ulster Bank 591 31,446 8,466 5,378 26.9 64 1,774 277
PBB 1,351 159,227 13,129 8,335 8.2 63 2,271 1,244
Commercial Banking 701 85,071 4,276 1,617 5.0 38 652 587
Private Banking 1,531 16,764 277 120 1.7 43 29 15
CPB 2,232 101,835 4,553 1,737 4.5 38 681 602
CIB 20,550 69,080 1,661 976 2.4 59 598 360
Centre 2,670 341 1 66 0.3 nm 65 -
CFG 406 50,551 1,034 272 2.0 26 151 284
Non-Core 431 36,718 19,014 13,839 51.8 73 4,646 1,856
RBS 27,640 417,752 39,392 25,225 9.4 64 8,412 4,346
Appendix 1 Capital and risk management
Loans and related credit metrics (continued)
Key points
· Gross loans and advances to customers decreased by £8.8 billion or 2% to £408.9 billion; excluding the impact of foreign exchange the movement was £6.3 billion mainly driven by disposals and run off in RCR. REIL fell by 13% to £34.1 billion. Provision coverage strengthened to 66% compared with 64% at the end of 2013 and REIL were 8.3% of gross customer loans compared with 9.4% as at 31 December 2013. Asset quality continued to improve across the board.
· Impairment charge for the first half of 2014 was significantly lower at £271 million compared with the prior year including £180 million of latent provision releases primarily reflecting more favourable credit conditions.
· 30% of the £56.9 billion property loans were REIL, with a provision coverage of 66%. 20% of property loans carry a provision. Refer to page 41 for an analysis of commercial real estate in RCR.
· Strong mortgage lending in UK PBB of £2.5 billion was offset by a fall in unsecured lending of £1.1 billion. Impairment charges and credit metrics continued to show improving trends with REIL as a percentage of gross loans falling to 3.3% from 3.6% at 31 December 2013 reflecting improved asset quality and lower default trends. Write-offs of £0.4 billion reflected the continued write-off of legacy balances.
· Ulster Bank loans, excluding the impact of foreign exchange and transfers to RCR, were £0.5 billion lower than at the year end mainly as customers deleveraged. Impairment charges were significantly lower at £57 million in the first half of 2014 reflecting the transfer of underperforming assets to RCR and the ongoing reduction in mortgage arrears.
· Lending in CPB remained broadly stable with REIL, excluding the impact of the transfers to RCR, decreasing by £0.7 billion with write-offs and repayments outpacing new provisions.
· CFG loans showed growth of £1.2 billion excluding the impact of foreign exchange with impairment charges of £102 million, higher than the prior year due to the transfer in Q1 of serviced-by-others, home equity and other portfolios in Non-Core. Credit metrics remained broadly stable.
Appendix 1 Capital and risk management
Loans and related credit metrics: Loans, REIL, provisions and impairments
The tables below analyse 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 2014 REIL as a Provisions Provisions Year-to-date
Gross % of gross as a % as a % of Impairment Amounts
loans REIL Provisions loans of REIL gross loans charge written-off
£m £m £m % % % £m £m
Central and local government 8,191 5 4 0.1 80 - 3 -
Finance 34,166 466 318 1.4 68 0.9 43 13
Personal - mortgages 148,237 5,871 1,731 4.0 29 1.2 110 109
- unsecured 27,482 2,102 1,754 7.6 83 6.4 261 420
Property 56,908 17,315 11,490 30.4 66 20.2 (113) 1,189
Construction 6,261 1,190 737 19.0 62 11.8 68 65
Manufacturing 22,491 651 472 2.9 73 2.1 (38) 38
Finance leases (1) 13,252 195 150 1.5 77 1.1 (1) 38
Retail, wholesale and repairs 18,031 1,072 773 5.9 72 4.3 111 97
Transport and storage 14,415 1,303 631 9.0 48 4.4 32 31
Health, education and leisure 15,374 855 478 5.6 56 3.1 (13) 212
Hotels and restaurants 8,055 1,341 770 16.6 57 9.6 (4) 33
Utilities 5,432 120 76 2.2 63 1.4 3 1
Other 30,653 1,534 1,223 5.0 80 4.0 (1) 241
Latent - - 1,789 - - - (180) -
408,948 34,020 22,396 8.3 66 5.5 281 2,487
of which:
UK
- residential mortgages 112,252 1,713 292 1.5 17 0.3 14 23
- personal lending 16,279 1,786 1,578 11.0 88 9.7 210 348
- property 40,585 7,943 4,366 19.6 55 10.8 (33) 828
- construction 4,616 873 491 18.9 56 10.6 26 44
- other 109,618 3,489 2,515 3.2 72 2.3 (71) 514
Europe
- residential mortgages 16,482 3,213 1,288 19.5 40 7.8 59 11
- personal lending 1,104 120 120 10.9 100 10.9 5 8
- property 10,978 9,279 7,081 84.5 76 64.5 (81) 355
- construction 1,240 308 237 24.8 77 19.1 42 21
- other 21,695 3,558 3,382 16.4 95 15.6 24 179
US
- residential mortgages 19,115 927 147 4.8 16 0.8 37 75
- personal lending 9,056 179 39 2.0 22 0.4 46 64
- property 4,476 69 19 1.5 28 0.4 1 2
- construction 371 1 1 0.3 100 0.3 - -
- other 27,838 260 609 0.9 234 2.2 12 8
RoW
- residential mortgages 388 18 4 4.6 22 1.0 - -
- personal lending 1,043 17 17 1.6 100 1.6 - -
- property 869 24 24 2.8 100 2.8 - 4
- construction 34 8 8 23.5 100 23.5 - -
- other 10,909 235 178 2.2 76 1.6 (10) 3
408,948 34,020 22,396 8.3 66 5.5 281 2,487
Banks 28,969 61 50 0.2 82 0.2 (10) -
For the note to this table refer to the following page.
Appendix 1 Capital and risk management
Loans and related credit metrics: Loans, REIL, provisions and impairments (continued)
Credit metrics
31 December 2013 REIL as a Provisions Provisions Year-to-date
Gross % of gross as a % as a % of Impairment Amounts
loans REIL Provisions loans of REIL gross loans charge written-off
£m £m £m % % % £m £m
Central and local government 8,643 2 2 - 100 - 2 -
Finance 35,948 593 292 1.6 49 0.8 4 72
Personal - mortgages 148,533 6,025 1,799 4.1 30 1.2 392 441
- unsecured 28,160 2,417 1,909 8.6 79 6.8 415 861
Property 62,292 20,283 13,189 32.6 65 21.2 5,130 1,642
Construction 6,331 1,334 774 21.1 58 12.2 291 160
Manufacturing 21,377 742 559 3.5 75 2.6 195 104
Finance leases (1) 13,587 263 190 1.9 72 1.4 16 121
Retail, wholesale and repairs 19,574 1,187 783 6.1 66 4.0 268 128
Transport and storage 16,697 1,491 635 8.9 43 3.8 487 229
Health, education and leisure 16,084 1,324 756 8.2 57 4.7 359 119
Hotels and restaurants 6,942 1,427 812 20.6 57 11.7 281 194
Utilities 4,960 131 80 2.6 61 1.6 54 23
Other 28,624 2,103 1,370 7.3 65 4.8 489 212
Latent - - 2,012 - - - 44 -
417,752 39,322 25,162 9.4 64 6.0 8,427 4,306
of which:
UK
- residential mortgages 110,515 1,900 319 1.7 17 0.3 39 180
- personal lending 17,098 2,052 1,718 12.0 84 10.0 264 681
- property 44,252 9,797 5,190 22.1 53 11.7 2,014 950
- construction 4,691 941 515 20.1 55 11.0 194 159
- other 110,466 4,684 3,202 4.2 68 2.9 1,091 537
Europe
- residential mortgages 17,540 3,155 1,303 18.0 41 7.4 195 26
- personal lending 1,267 141 129 11.1 91 10.2 19 26
- property 13,177 10,372 7,951 78.7 77 60.3 3,131 659
- construction 979 351 227 35.9 65 23.2 72 -
- other 22,620 4,057 3,498 17.9 86 15.5 1,012 465
US
- residential mortgages 19,901 951 173 4.8 18 0.9 161 233
- personal lending 8,722 207 45 2.4 22 0.5 114 151
- property 4,279 85 19 2.0 22 0.4 (11) 25
- construction 313 34 24 10.9 71 7.7 25 1
- other 27,887 198 589 0.7 297 2.1 65 131
RoW
- residential mortgages 577 19 4 3.3 21 0.7 (3) 2
- personal lending 1,073 17 17 1.6 100 1.6 18 3
- property 584 29 29 5.0 100 5.0 (4) 8
- construction 348 8 8 2.3 100 2.3 - -
- other 11,463 324 202 2.8 62 1.8 31 69
417,752 39,322 25,162 9.4 64 6.0 8,427 4,306
Banks 27,640 70 63 0.3 90 0.2 (15) 40
Note:
(1) Includes instalment credit.
Appendix 1 Capital and risk management
Debt securities
The table below analyses debt securities by issuer and IFRS measurement classifications. US central and local government
includes US federal agencies. The 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 2014 £m £m £m £m £m £m £m £m
Held-for-trading (HFT) 5,978 7,805 28,908 1,821 9,089 2,292 55,893 6,940
Designated as at fair value - - 104 - 17 - 121 14
Available-for-sale (AFS) 3,905 11,613 10,052 5,521 17,436 171 48,698 24,104
Loans and receivables - - - 160 3,224 142 3,526 3,139
Held-to-maturity (HTM) 4,556 - - - - - 4,556 -
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