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99,520 2,318 101,838 15,253 2,884 18,137 8,653 99 8,752 18,571 357 18,928
Total portfolio average LTV (3) 61% 73% 61% 99% 128% 104% 52% 80% 53% 66% 69% 66%
Average LTV on new originations
during the half year (3) 71% 70% 59% 68%
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Key loan portfolios: Residential mortgages (continued)
UK PBB Ulster Bank Private Banking CFG
Loan-to-value ratio by value Non- Non- Non- Non-
Performing performing Total Performing performing Total Performing performing Total Performing performing Total
£m £m £m £m £m £m £m £m £m £m £m £m
31 December 2013
<= 50% 26,392 313 26,705 2,025 170 2,195 3,400 16 3,416 4,669 98 4,767
> 50% and <= 70% 34,699 591 35,290 1,837 195 2,032 3,397 20 3,417 5,529 89 5,618
> 70% and <= 90% 28,920 854 29,774 2,326 288 2,614 1,337 44 1,381 5,553 110 5,663
> 90% and <= 100% 4,057 315 4,372 1,214 162 1,376 87 7 94 1,309 39 1,348
> 100% and <= 110% 1,790 182 1,972 1,302 182 1,484 87 15 102 752 22 774
> 110% and <= 130% 552 100 652 2,509 461 2,970 27 6 33 637 17 654
> 130% and <= 150% 37 5 42 2,202 549 2,751 4 4 8 183 5 188
> 150% - - - 2,385 1,227 3,612 24 6 30 102 4 106
Total with LTVs 96,447 2,360 98,807 15,800 3,234 19,034 8,363 118 8,481 18,734 384 19,118
Other (2) 511 20 531 - - - 215 5 220 463 3 466
Total 96,958 2,380 99,338 15,800 3,234 19,034 8,578 123 8,701 19,197 387 19,584
Total portfolio average LTV (3) 62% 75% 62% 103% 130% 108% 51% 77% 51% 67% 69% 67%
Average LTV on new originations
during the year (3) 67% 73% 52% 68%
Notes:
(1) Includes residential mortgages and home equity loans and lines (refer to page 46 for a breakdown of balances).
(2) Where no indexed LTV is held.
(3) Average LTV weighted by value is calculated using the LTV on each individual mortgage and applying a weighting based on the value of each mortgage.
Appendix 1 Capital and risk management
Key loan portfolios: Residential mortgages* (continued)
Key points
UK PBB
· The UK PBB mortgage portfolio was £101.8 billion at 30 June 2014. This showed an increase of 2.5% from 31 December 2013. The portfolio included £10.0 billion (31 December 2013 - £9.1 billion) of residential buy-to-let lending.
· At 30 June 2014, approximately 51% of the portfolio consisted of fixed rate mortgages. Mortgages featuring a combination of fixed and variable rates made up 4% of the portfolio. The remainder were variable rate mortgages (including those on managed rates).
The interest only proportion of the total portfolio was 24%. A further 7% of mortgages were on a combination of interest only plus capital and interest repayments.
· Based on the Halifax Price Index at March 2014, the portfolio average indexed LTV by volume was 53.4% (31 December 2013 - 54.1%) and 61.0% by weighted value of debt outstanding (31 December 2013 - 62.0%). The ratio of total outstanding balances to total
indexed property valuations was 44.5% (31 December 2013 - 45.1%).
· Gross new mortgage lending amounted to £9.8 billion in H1 2014 and included £873 million of lending with an LTV of greater than 90% under the government-guaranteed Help To Buy scheme. The new mortgage business average LTV by volume was 68.2% compared to
62.7% at 31 December 2013, including the effect of the Help-to-Buy scheme. The average LTV calculated by weighted value was 70.8% (31 December 2013 - 66.6%).
· All new mortgage business was subject to a comprehensive assessment. This included: i) an affordability test which featured a stressed interest rate that is higher than the customer pay rate; ii) loan to income ratio caps; iii) credit scoring; iv) a
maximum loan-to-value of 90% with the exception of the government-backed Help-To-Buy mortgages (from the fourth quarter of 2013), New Buy and My New Home products where lending of up to 95% is provided; and v) a range of policy rules that restricted the
availability of credit to borrowers with higher risk characteristics, for example those exhibiting a high level of indebtedness or adverse payment behaviour on previous borrowings.
· The arrears rate (defined as more than three payments in arrears, excluding repossessions and shortfalls post property sale), fell to 1.1% (31 December 2013 - 1.3%). The number of properties repossessed in H1 2014 was 657 compared with 796 in H2 2013.
Arrears rates remained sensitive to economic developments and the interest rate environment.
· The impairment charge for mortgage loans was £5 million in H1 2014 compared with £26 million in H1 2013 and £5 million in H2 2013. The decline reflected stable default rates and one-off reductions in loss rates as valuations improved on properties held as
security on defaulted debt.
Ulster Bank
· Ulster Bank's residential mortgage portfolio was £18.1 billion at 30 June 2014, with 88% held in the Republic of Ireland and 12% in Northern Ireland. At constant exchange rates, the portfolio decreased 1.4 % from 31 December 2013 (£19.0 billion) as a result of amortisations exceeding the value of new business in the period. The portfolio included £2.1 billion (12%) of residential buy-to-let loans.
· Approximately 66% of the portfolio consisted of tracker rate loans, 23% variable rate loans and 11% fixed rate loans. Interest only represented the remaining 8% of the portfolio.
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Key loan portfolios: Residential mortgages* (continued)
Key points (continued)
Ulster Bank (continued)
· The portfolio average indexed LTV fell 4% during H1 2014 to 104% (31 December 2013 - 108%) reflecting positive house price index trends over the previous 12 months.
· The average individual LTV on new originations was 70% in 2014 (31 December 2013 - 73%).
· The arrears rate (defined as more than three payments in arrears, excluding repossessions and shortfalls after property sale), fell to 15.9% (31 December 2013 - 17.0%). The number of properties repossessed in H1 2014 was 169 compared with 262 for the full year of 2013. Arrears rates remained sensitive to economic developments.
· The impairment charge for mortgage loans for H1 was £36 million for H1 2014, compared with £91 million at H1 2013.
CFG
· CFG's real estate portfolio consisted of £6.4 billion (31 December 2013 - £5.9 billion) of residential mortgages (1% in second lien position) and £12.5 billion (31 December 2013 - £13.5 billion) of home equity loans and lines (first and second liens). Home equity loans and lines included 44% in first lien position. CFG continued to focus on its 'footprint states' of New England, Mid Atlantic and Mid West regions. At 30 June 2014, 82% of the portfolio was within footprint (31 December 2013 - 84%).
· The serviced-by-others (SBO) book decreased from £1.4 billion at 31 December 2013 to £1.3 billion at 30 June 2014. The arrears rate of the SBO portfolio remained stable at 1.5% during the period. The reduction in the charge-off rate from 4.4% annualised during the fourth quarter of 2013 to 2.3% during the second quarter of 2014 was driven by better than expected recoveries.
· The weighted average LTV of the portfolio was broadly stable during the period. The weighted average LTV of the portfolio, excluding the SBO portfolio, was 59% (31 December 2013 - 64%).
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Key loan portfolios (continued)
Interest only retail loans*
The bank's interest only retail loan portfolios include interest only mortgage lending in PBB, CPB and CFG portfolios of
home equity lines of credit (HELOC) and interest only mortgage portfolios.
30 June 2014 31 December 2013
Mortgages Other loans Mortgages Other loans
£bn £bn £bn £bn
Variable rate 32.2 1.9 34.8 1.3
Fixed rate 9.3 0.1 8.0 0.1
Interest only loans 41.5 2.0 42.8 1.4
Mixed repayment (1) 8.5 - 8.3 -
Total 50.0 2.0 51.1 1.4
Note:
(1) Mortgages with partial interest only and partial capital repayments.
Key points
· The bank continued to reduce its exposure to interest only mortgages in H1. UK PBB ceased offering interest only mortgages to residential owner occupied customers with effect from 1 December 2012. Interest only repayment terms remain an option for buy-to-let mortgages.
· Ulster Bank withdrew interest only as a standard mortgage offering for new lending in the Republic of Ireland in 2010 and in Northern Ireland in 2012. Interest only mortgages are now granted on a very limited basis to high net worth customers or those granted forbearance.
· CFG offers its customers interest only mortgages and conventional HELOC which enter an amortising repayment period after the interest only period.
· CPB offers interest only mortgages to its high net worth customers.
Based on its historical analyses of customers' behaviour, the bank recognises impairment provisions in respect of loans in
its interest only portfolios (PBB - two years; CFG - one year) that are approaching their contractual maturity. These
impairment provisions are reassessed as new trends and data become available.
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Key loan portfolios: Interest only retail loans* (continued)
The tables below analyse the bank's interest only mortgage and HELOC portfolios (excluding mixed repayment mortgages) by
originating business, by type, and by contractual year of maturity.
Bullet Total Proportion of
principal Conversion mortgage
repayment to amortising lending
30 June 2014 £bn £bn £bn %
UK PBB 24.6 - 24.6 24.2
Ulster Bank 0.7 0.9 1.6 8.8
Private Banking 6.0 - 6.0 68.6
CFG 0.2 9.1 9.3 49.1
Total 31.5 10.0 41.5
31 December 2013
UK PBB 25.4 - 25.4 25.6
Ulster Bank 0.7 1.4 2.1 11.0
Private Banking 6.0 - 6.0 69.0
CFG 0.4 8.9 9.3 47.5
Total 32.5 10.3 42.8
2014 (1) 2015-16 2017-21 2022-26 2027-31 2032-41 After Total
2041
30 June 2014 £bn £bn £bn £bn £bn £bn £bn £bn
Bullet principal repayment (2) 1.0 2.7 6.7 5.7 7.6 7.4 0.4 31.5
Conversion to amortising (2,3) 0.5 2.3 5.0 2.2 - - - 10.0
Total 1.5 5.0 11.7 7.9 7.6 7.4 0.4 41.5
2014 (1) 2015-16 2017-21 2022-26 2027-31 2032-41 After Total
2041
31 December 2013 £bn £bn £bn £bn £bn £bn £bn £bn
Bullet principal repayment (2) 0.9 2.1 6.0 7.6 7.9 7.5 0.5 32.5
Conversion to amortising (2,3) 1.9 6.0 2.2 0.1 - 0.1 - 10.3
Total 2.8 8.1 8.2 7.7 7.9 7.6 0.5 42.8
Notes:
(1) 2014 includes pre-2014 maturity exposure.
(2) Includes £2.2 billion (31 December 2013 - £2.3 billion) of repayment mortgages that have been granted interest only concessions (forbearance).
(3) Maturity date relates to the expiry of the interest only period.
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Key loan portfolios: Interest only retail loans* (continued)
UK PBB
· UK PBB's interest only mortgages require full principal repayment (a 'bullet' payment) at the time of maturity. Typically such loans have remaining terms of between 14 and 19 years. Customers are reminded of the need to have an adequate repayment vehicle
in place during the mortgage term.
· Of the bullet loans that matured in the six months to 31 December 2013, 63% had been fully repaid by 30 June 2014. The unpaid balance totalled £48 million, of which 96% of loans continued to meet agreed payment arrangements (including balances with a term
extension agreed on either a capital and interest or interest only basis). Of the £48 million unpaid balance, 66% of the loans had an indexed LTV of 70% or less with 10% above 90%. Customers may be offered an extension to the term of an interest only
mortgage or a conversion of such a mortgage to a capital and interest mortgage, subject to affordability and characteristics such as their income and ultimate repayment vehicle. The majority of term extensions in UK PBB are classified as forbearance and
subject to the associated higher provision cover.
Ulster Bank
· Ulster Bank's interest only mortgages require full principal repayment (a 'bullet' payment) at the time of maturity; or payment of both capital and interest from the end of the interest only period - typically seven years - so that customers meet their contractual repayment obligations. Contact strategies are in place for appropriate customers to remind them of the need to repay the principal at the end of the mortgage term.
· Of the bullet mortgages that matured in the six months to 31 December 2013 (£2.3 million), 36% had fully repaid by 30 June 2014 leaving residual balances of £1.5 million, 80% of which were meeting the terms of a revised repayment schedule. Of the amortising loans that matured in the six months to 31 December 2013 (£109 million), 64% were either fully repaid or meeting the terms of a revised repayment schedule.
CFG
· CFG had a closed book of interest only HELOC loans at 30 June 2014 of £0.3 billion at 30 June 2014, for which repayment of principal is due at maturity. It also had an interest only portfolio comprising loans that convert to amortising after an interest only period that is typically 10 years (£10.0 billion at 30 June 2014 of which £9.1 billion were HELOCs). The majority of the bullet loans are due to mature between 2014 and 2015.
· Of the bullet loans that matured in the six months to 31 December 2013, 74% had fully been refinanced or repaid by 30 June 2014 with residual balances of £22 million. 65% (of £22 million) of which were up-to-date with their payments. For those loans that convert to amortising, the typical uplift in payments was 169% (average uplift calculated at £139 per month).
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Key loan portfolios: Interest only retail loans* (continued)
The tables below analyse the bank's retail mortgage and HELOC portfolios split between interest only mortgages (excluding
mixed repayment mortgages) and other mortgage loans.
Interest only
30 June 2014 Bullet principal Conversion
repayment to amortising Other Total
£bn £bn £bn £bn
Arrears status
Current 30.4 9.4 99.5 139.3
1 to 90 days in arrears 0.6 0.4 2.9 3.9
90+ days in arrears 0.5 0.2 3.8 4.5
Total 31.5 10.0 106.2 147.7
31 December 2013
Arrears status
Current 31.2 9.6 97.0 137.8
1 to 90 days in arrears 0.7 0.4 2.8 3.9
90+ days in arrears 0.6 0.3 4.1 5.0
Total 32.5 10.3 103.9 146.7
30 June 2014 Interest
only Other Total
£bn £bn £bn
Current LTV
<= 50% 12.1 27.2 39.3
> 50% and <= 70% 14.7 33.4 48.1
> 70% and <= 90% 9.5 29.0 38.5
> 90% and <= 100% 2.3 5.1 7.4
> 100% and <= 110% 1.3 2.5 3.8
> 110% and <= 130% 0.8 3.1 3.9
> 130% and <= 150% 0.4 2.4 2.8
> 150% 0.4 2.5 2.9
Total with LTVs 41.5 105.2 146.7
Other - 1.0 1.0
Total 41.5 106.2 147.7
31 December 2013
Current LTV
<= 50% 10.8 26.3 37.1
> 50% and <= 70% 14.6 31.8 46.4
> 70% and <= 90% 10.8 28.6 39.4
> 90% and <= 100% 2.6 4.6 7.2
> 100% and <= 110% 1.5 2.8 4.3
> 110% and <= 130% 0.9 3.4 4.3
> 130% and <= 150% 0.5 2.5 3.0
> 150% 0.7 3.1 3.8
Total with LTVs 42.4 103.1 145.5
Other 0.4 0.8 1.2
Total 42.8 103.9 146.7
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Credit risk assets*
RBS uses a range of measures for credit risk exposures. The internal measure used is credit risk assets. The balance sheet
related credit risk analyses on pages 23 to 50 supplement this material. Credit risk assets (CRA) consist of lending,
counterparty exposure and contingent obligations. Refer to page 230 of the 2013 Annual Report and Accounts for a full
description.
30 June 31 December
2014 2013
Analysis by business unit £m £m
UK PBB 129,027 127,586
Ulster Bank 29,647 33,129
PBB 158,674 160,715
Commercial Banking 79,483 81,142
Private Banking 19,297 19,819
CPB 98,780 100,961
CIB 141,984 147,784
Central items 56,297 66,745
CFG 56,756 53,411
RCR 39,150 n/a
Non-Core n/a 43,340
551,641 572,956
Key points
● There was an overall reduction of 4% in CRA. This was driven by falls in exposure to sovereigns (£11.6 billion), property (£5.2 billion) and other FIs (£4 billion).
● CIB CRAs fell 4%, driven by a reduction in exposure to the sovereigns and other FI sectors.
● UK PBB CRA increased by £1.4 billion reflecting a £2.5 billion increase in mortgages offset by decreasing unsecured lending.
● CFG CRAs increased by 6%. This was driven by the transfer of personal exposure previously managed by the Non-Core division and an increase in exposure to the sovereign sector.
● The RCR portfolio included £21.4 billion of property-related CRAs, £4.3 billion in the transport sector, £2.6 billion to retail & leisure and £2.7 billion to other FIs. Geographically, 43% of the portfolio was located in Western Europe (excluding the UK), 40% in the UK, 10% in Central and Eastern Europe and the Middle East and Africa, and 7% in the rest of the world. Refer to the RCR section for further information.
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Credit risk assets*(continued)
Sector and geographical regional analyses
Western RBS
Europe North Asia Latin excl.
UK (excl. UK) America Pacific America Other (1) Total RCR RCR
30 June 2014 £m £m £m £m £m £m £m £m £m
Personal 128,592 17,619 28,265 1,553 67 797 176,893 176,647 246
Banks 2,523 26,415 4,220 8,310 1,220 1,956 44,644 42,699 1,945
Other financial institutions 21,626 8,954 8,358 2,383 1,359 958 43,638 40,977 2,661
Sovereign (2) 39,640 7,371 23,922 2,859 24 674 74,490 73,872 618
Property 47,502 15,491 6,543 1,118 221 479 71,354 49,915 21,439
Natural resources 7,536 4,558 5,927 3,647 406 2,258 24,332 21,974 2,358
Manufacturing 9,213 4,716 6,348 2,580 95 1,176 24,128 23,396 732
Transport (3) 10,211 3,989 3,860 1,597 97 8,619 28,373 24,030 4,343
Retail and leisure 16,904 3,484 5,036 896 52 514 26,886 24,265 2,621
Telecommunications, media
and technology 2,833 2,470 3,258 1,338 9 420 10,328 9,760 568
Business services 16,245 2,539 5,545 728 1,230 288 26,575 24,956 1,619
302,825 97,606 101,282 27,009 4,780 18,139 551,641 512,491 39,150
Western
Europe North Asia Latin RBS excl. Non-
UK (excl. UK) America Pacific America Other (1) Total Non-Core Core
31 December 2013 £m £m £m £m £m £m £m £m £m
Personal 127,620 18,751 28,616 1,418 61 656 177,122 174,798 2,324
Banks 2,506 25,085 3,133 9,670 1,192 1,771 43,357 43,010 347
Other financial institutions 23,080 10,363 9,164 2,633 1,320 1,100 47,660 43,849 3,811
Sovereign (2) 55,041 8,685 18,203 3,394 37 687 86,047 84,726 1,321
Property 49,639 18,673 6,206 929 286 795 76,528 53,569 22,959
Natural resources 6,698 4,587 6,189 3,669 214 2,087 23,444 21,412 2,032
Manufacturing 8,843 4,962 6,208 2,278 120 1,397 23,808 23,276 532
Transport (3) 10,332 3,936 3,959 1,800 163 9,435 29,625 24,086 5,539
Retail and leisure 16,338 3,924 4,977 738 91 517 26,585 24,562 2,023
Telecommunications, media
and technology 3,356 2,591 3,401 1,403 29 491 11,271 9,810 1,461
Business services 16,527 2,733 6,053 757 1,233 206 27,509 26,518 991
319,980 104,290 96,109 28,689 4,746 19,142 572,956 529,616 43,340
Notes:
(1) Comprises Central and Eastern Europe, the Middle East, Central Asia and Africa, and supranationals such as the World Bank.
(2) Includes central bank exposures.
(3) Excludes net investment in operating leases in shipping and aviation portfolios as they are accounted for as property, plant and equipment. However, operating leases are included in the monitoring and management of these portfolios.
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Credit risk assets*: Sector and geographical regional analyses (continued)
Key points
● Market conditions and the development of the bank's strategy had a significant impact on the composition of its portfolios during H1 2014, there was:
○ An £11.6 billion decrease in exposures to sovereign counterparties, driven by a decrease in RBS's deposits with central banks;
○ A £5.2 billion fall in exposures to the property sector; and
○ A £4.0 billion decline in exposures to other financial institutions.
● The sovereign portfolio comprised exposures to central governments, central banks and sub-sovereigns such as local authorities, primarily in the bank's key markets in the
UK, Western Europe and the US. Exposure predominantly comprised cash balances placed with central banks such as the Bank of England, the Federal Reserve and the European
Central Bank. Consequently, the asset quality of this portfolio remained high with 92% assigned an internal rating in the AQ1 asset quality band. Exposure to sovereigns
fluctuates according to the bank's liquidity requirements and cash positions, which determine the level of cash placed with central banks.
● Exposure to the property sector totalled £71.4 billion at 30 June 2014, the majority of which related to commercial real estate. The remainder comprised lending to
housing associations (12%), construction companies (10%), and building material groups (3%), which remained stable during the period. See the commercial real estate
section for further details.
● The banking sector was one of the largest in the RBS portfolio with exposure totalling £44.6 billion. Exposures were well diversified geographically, largely
collateralised, and tightly controlled through the combination of a single name concentration framework and a suite of credit policies specifically tailored to ensure
compliance with sector and country limits. The increase in exposure during H1 2014 was primarily due to increased activity with counterparties located in Western Europe.
This was offset by falls in exposure to counterparties in the Asia & Pacific region.
● Exposure to other financial institutions was made up of exposures to a range of financial companies, the largest of which were funds (24%) securitisation vehicles (22%)
and financial intermediaries (13%) including broker dealers and central counterparties (CCPs). The fall in exposure took place across a number of areas, and was caused by
idiosyncratic factors and market developments.
● Exposure to the transport sector included asset-backed exposure to ocean-going vessels. A £1.3 billion fall in exposure was achieved during the period due to disposals,
run-off and foreign exchange movements. Defaulted assets (AQ10) in the shipping sector represented 9% of the total exposure to this sector (31 December 2013 - 9%).
Appendix 1 Capital and risk management
Credit risk assets* (continued)
Asset quality
30 June 2014 31 December 2013
RBS excl. RBS excl.
Probability of RCR RCR Total Total Non-Core Non-Core Total Total
AQ band default range £m £m £m % £m £m £m %
AQ1 0% - 0.034% 117,853 2,542 120,395 21.8 129,197 3,319 132,516 23.1
AQ2 0.034% - 0.048% 22,913 766 23,679 4.3 22,942 1,485 24,427 4.3
AQ3 0.048% - 0.095% 40,632 568 41,200 7.5 41,325 700 42,025 7.3
AQ4 0.095% - 0.381% 127,618 1,751 129,369 23.5 114,258 5,737 119,995 20.9
AQ5 0.381% - 1.076% 79,575 1,837 81,412 14.8 77,676 2,585 80,261 14.0
AQ6 1.076% - 2.153% 35,610 2,514 38,124 6.9 44,476 3,138 47,614 8.3
AQ7 2.153% - 6.089% 28,608 3,164 31,772 5.8 31,504 2,060 33,564 5.9
AQ8 6.089% - 17.222% 7,983 1,575 9,558 1.7 9,492 899 10,391 1.8
AQ9 17.222% - 100% 4,753 987 5,740 1.0 6,741 771 7,512 1.3
AQ10 100% 14,396 22,891 37,287 6.8 21,814 20,743 42,557 7.4
Other (1) 32,550 555 33,105 6.0 30,191 1,903 32,094 5.6
512,491 39,150 551,641 100 529,616 43,340 572,956 100
Note:
(1) Largely comprises assets covered by the standardised approach, for which a probability of default equivalent to those assigned to assets covered by the internal ratings based approach is not available.
RCR RBS excl. RCR Total
% of % of % of
sector sector sector
credit risk credit risk credit risk
AQ10 assets AQ10 assets AQ10 assets
AQ10 credit risk assets by sector £m % £m % £m %
30 June 2014
Property 17,459 81.4 3,268 6.5 20,727 29.0
Personal 223 90.6 8,140 4.6 8,363 4.7
Retail & Leisure 1,658 63.3 1,086 4.5 2,744 10.2
Transport 1,384 31.9 295 1.2 1,679 5.9
Business Services 857 52.9 792 3.2 1,649 6.2
Other 1,310 14.7 815 0.4 2,125 1.0
Total 22,891 58.5 14,396 2.8 37,287 6.8
Non-Core RBS excl. Non-Core Total
% of % of % of
sector sector sector
credit risk credit risk credit risk
AQ10 assets AQ10 assets AQ10 assets
31 December 2013 £m % £m % £m %
Property 17,437 75.9 6,907 12.9 24,344 31.8
Personal 230 9.9 8,736 5.0 8,966 5.1
Retail & Leisure 1,166 57.6 1,820 7.4 2,986 11.2
Transport 553 10.0 1,262 5.2 1,815 6.1
Business Services 298 30.1 1,421 5.4 1,719 6.2
Other 1,059 11.1 1,668 0.7 2,727 1.2
Total 20,743 47.9 21,814 4.1 42,557 7.4
*Not within the scope of Deloitte LLP's review report
Appendix 1 Capital and risk management
Credit risk assets*: Asset quality(continued)
Key points
● Changes in asset quality of credit risk exposures in H1 2014 reflected the changes in composition of the portfolio, market conditions and the run-off of RCR assets.
● The decrease in the AQ1 band reflected the decrease in exposure to sovereigns. The increase in the AQ4 band was caused by the recalibration of models for UK personal mortgages to reflect continued improvements in observed default rates.
● The proportion of exposure in the AQ10 band fell to 6.8% of the total portfolio. This was driven by RCR's accelerated disposal strategy and the economic climate. The proportion of exposure in AQ10 fell in all sectors that have experienced difficult market conditions in the past few years, including the shipping portfolio.
*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 the
Risk and balance sheet management - Market risk section in the 2013 Annual Report and Accounts. There were no material
changes to market risk methodologies or models during H1 2014.
Trading portfolios
Value-at-risk
The tables below analyse the internal value-at-risk (VaR) for RBS trading portfolios segregated by type of market risk
exposure, and between CIB and RCR or Non-Core.
Half year ended Year ended
30 June 2014 30 June 2013 31 December 2013
Average Period end Maximum Minimum Average Period end Maximum Minimum Average
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