REG - Royal Bk Scot.Grp. - Interim Management Statement <Origin Href="QuoteRef">RBS.L</Origin> - Part 1

NatwestAnnouncement

28/10/2016 07:06

RNS Number : 6780N
Royal Bank of Scotland Group PLC
28 October 2016

The Royal Bank of Scotland Group plc
Q3 2016 Results
Contents
Page


Introduction
1
Forward-looking statements 
2
Highlights
3
Summary consolidated results
9
Analysis of results
11
Segment performance
18
Selected statutory financial statements
27
Notes
31
Appendix 1 - Parent company information 

Appendix 2 - Segmental income statement reconciliation


Introduction
In this document, 'RBSG plc' or the 'parent company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group' refers to RBSG plc and its subsidiaries. 
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2015 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
Key operating indicators
As described in Note 1 on page 31, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles ('GAAP'). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP financial measures. These measure exclude certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These measures include:
'Adjusted' measures of financial performance, principally operating performance before own credit adjustments; gain or loss on redemption of own debt; strategic disposals; restructuring costs and litigation and conduct costs (refer to Appendix 2 for reconciliations of the statutory to adjusted basis);
'Return on tangible equity', 'adjusted return on tangible equity' and related RWA equivalents incorporating the effect of capital deductions (RWAes), total assets excluding derivatives (funded assets) and net interest margin (NIM) adjusted for designated at fair value through profit or loss items (non-statutory NIM) which are internal metrics used to measure business performance;
Personal & Business Banking (PBB) franchise, combining the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI; and Commercial & Private Banking (CPB) franchise, combining the reportable segments of Commercial Banking, Private Banking and RBS International (RBSI); and
Cost savings progress and 2016 target calculated using operating expenses excluding litigation and conduct costs, restructuring costs, the impairment of other intangible assets, the operating costs of Williams & Glyn and the VAT recovery.


Introduction
Contacts
For analyst enquiries:


Alexander Holcroft
Investor Relations
+44 (0) 20 7672 1758



For media enquiries:


RBS Press Office

+44 (0) 131 523 4205
Analysts and investors conference call
RBS will hold an audio Q&A session for analysts and investors on the results for the quarter ended 30 September 2016. Details are as follows:
Date:

Friday 28 October 2016
Time:

9.00 am UK time 
Conference ID:

95686059
Webcast:

www.rbs.com/results
Dial in details:

International - +44 (0) 1452 568 172
UK Free Call - 0800 694 8082
US Toll Free - 1 866 966 8024
Available on www.rbs.com/results
Q3 2016 results and background slides;
Financial supplement containing income statement and balance sheet information for the five quarters ending 30 September 2016; and 
Pillar 3 supplement at 30 September 2016.

Forward-looking statements
This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including those related to RBS and its subsidiaries' regulatory capital position and requirements, financial position, future pension funding requirements, on-going litigation and regulatory investigations, profitability, impairment losses and credit exposures under certain specified scenarios. In addition, forward-looking statements may include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "believes", "risk", "estimates" and words of similar import. These statements concern or may affect future matters, such as RBS's future economic results, business plans and current strategies. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBS's actual results are discussed in RBS's UK Annual Report and Accounts and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBS's Reports on Form 6-K and most recent Annual Report on Form 20-F. The forward-looking statements contained in this announcement speak only as of the date of this announcement and RBS does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.

Highlights
RBS reported an operating profit before tax of 255 million, and an attributable loss(1) of 469 million in Q3 2016 which included restructuring costs of 469 million, litigation and conduct costs of 425 million and a 300 million deferred tax asset impairment.
Across our Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and Corporate & Institutional Banking (CIB) franchises, RBS reported an adjusted operating profit of 1,331 million. RBS has generated over 1 billion of adjusted operating profit across PBB, CPB and CIB in each quarter this year. Adjusted return on equity across PBB, CPB and CIB was 14% for Q3 2016.
Common Equity Tier 1 ratio of 15.0% increased by 50 basis points in the quarter and remains ahead of our 13% target. Leverage ratio increased by 40 basis points to 5.6% principally reflecting the 2 billion Additional Tier 1 (AT1) issuance.








Nine months ended

Quarter ended

30 September
30 September

30 September
30 June
30 September
Key metrics and ratios
2016
2015

2016
2016
2015







Attributable (loss)/profit
(2,514m)
761m

(469m)
(1,077m)
940m
Operating (loss)/profit
(19m)
247m

255m
(695m)
(14m)
Operating profit - adjusted (2)
2,489m
3,719m

1,333m
716m
826m
Net interest margin 
2.18%
2.12%

2.17%
2.21%
2.09%
Cost:income ratio 
94%
101%

88%
117%
103%
Cost:income ratio - adjusted (3,4)
66%
67%

58%
67%
75%
(Loss)/earnings per share from continuing operations






 - basic
(21.5p)
(3.2p)

(3.9p)
(9.3p)
(1.0p)
 - adjusted (3,4)
(1.6p)
24.1p

3.9p
2.6p
5.6p
Return on tangible equity (5,6)
(8.5%)
2.4%

(4.8%)
(11.0%)
9.0%
Return on tangible equity - adjusted (3,4,6)
(0.6%)
12.4%

4.6%
3.2%
16.3%
Average tangible equity (6)
39,516m
42,050m

38,696m
39,283m
41,911m
Average number of ordinary shares 






 outstanding during the period (millions)
11,668
11,503

11,724
11,673
11,546







PBB, CPB & CIB






Total income - adjusted (3)
8,916m
8,750m

3,115m
2,986m
2,852m
Operating profit - adjusted (2)
3,401m
3,558m

1,331m
1,047m
1,119m
Return on tangible equity - adjusted (3,4,6) 
12.0%
13.1%

14.2%
11.0%
12.6%





30 September 
30 June 
31 December 
Balance sheet related key metrics and ratios
2016
2016
2015




Tangible net asset value (TNAV) per ordinary share (6)
338p
345p
352p
Loan:deposit ratio (7,8)
91%
92%
89%
Short-term wholesale funding (7,9)
14bn
15bn
17bn
Wholesale funding (7,9)
56bn
55bn
59bn
Liquidity portfolio
149bn
153bn
156bn
Liquidity coverage ratio (LCR) (10)
112%
116%
136%
Net stable funding ratio (NSFR) (11)
119%
119%
121%
Common Equity Tier 1 (CET1) ratio
15.0%
14.5%
15.5%
Risk-weighted assets (RWAs)
235.2bn
245.2bn
242.6bn
Leverage ratio (12)
5.6%
5.2%
5.6%
Tangible equity (6)
39,822m
40,541m
40,943m
Number of ordinary shares in issue (millions) (13)
11,792
11,755
11,625
Notes:
(1)
Attributable to ordinary shareholders.
(2)
Operating profit before tax excluding own credit adjustments, (loss)/gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
(3)
Excluding own credit adjustments, (loss)/gain on redemption of own debt and strategic disposals.
(4)
Excluding restructuring costs and litigation and conduct costs.
(5)
Calculated using (loss)/profit for the period attributable to ordinary shareholders.
(6)
Tangible equity is equity attributable to ordinary shareholders less intangible assets.
(7)
Excludes repurchase agreements and stock lending.
(8)
Includes disposal groups.
(9)
Excludes derivative collateral.
(10)
On 1 October 2015 the LCR became the Prudential Regulation Authority's (PRA) primary regulatory liquidity standard; UK banks are required to meet a minimum standard of 80% initially, rising to 100% by 1 January 2018. The published LCR excludes Pillar 2 add-ons. RBS calculates the LCR using its own interpretation of the EU LCR Delegated Act, which may change over time and may not be fully comparable with that of other institutions.
(11)
NSFR for all periods have been calculated using RBS's current interpretations of the revised BCBS guidance on NSFR issued in late 2014. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS's ratio may not be comparable with those of other financial institutions.
(12)
Based on end-point Capital Requirements Regulation (CRR) Tier 1 capital and leverage exposure under the CRR Delegated Act. 
(13)
Includes 41 million treasury shares (30 June 2016 - 41 million; 31 December 2015 - 26 million).


Highlights
Q3 2016 RBS performance summary
RBS reported an attributable loss of 469 million in Q3 2016 compared with a profit of 940 million in Q3 2015 which included a 1,147 million gain on loss of control of Citizens. Q3 2016 included a 469 million restructuring cost, 425 million of litigation and conduct costs and a 300 million deferred tax asset impairment. The attributable loss for the first nine months of the year was 2,514 million and operating loss before tax was 19 million.
Q3 2016 operating profit of 255 million compared with an operating loss of 14 million in Q3 2015. Adjusted operating profit of 1,333 million was 507 million, or 61%, higher than Q3 2015 reflecting increased income and reduced expenses. 
Income across PBB and CPB was 2% higher than Q3 2015, adjusting for transfers(1), and was stable for the year to date, as increased lending volumes more than offset reduced margins. CIB adjusted income increased by 71% to 526 million, adjusting for transfers(1), the highest quarterly income for the year, driven by Rates, which benefited from sustained customer activity and favourable market conditions following the EU referendum and central bank actions.
NIM of 2.17% for Q3 2016 was 8 basis points higher than Q3 2015, as the benefit associated with the reduction in low yielding assets more than offset modest asset margin pressure and mix impacts across the core franchises. NIM fell 4 basis points compared with Q2 2016 reflecting asset and liability margin pressure. 
PBB and CPB net loans and advances have increased by 13% on an annualised basis since the start of 2016, with strong growth across both residential mortgages and commercial lending.
Excluding expenses associated with Williams & Glyn(2), write down of intangible assets and the Q2 VAT recovery, adjusted operating expenses have been reduced by 695 million for the year to date. Adjusted cost:income ratio for the year to date was 66% compared with 67% in the prior year. Across PBB, CPB and CIB cost:income ratio of 60% year to date was stable compared with 2015.
Restructuring costs were 469 million in the quarter, a reduction of 378 million compared with Q3 2015. Williams & Glyn restructuring costs of 301 million include 127 million of termination costs associated with the decision to discontinue the programme to create a cloned banking platform. 
Litigation and conduct costs of 425 million include an additional charge in respect of the recent settlement with the National Credit Union Administration Board to resolve two outstanding lawsuits in the United States relating to residential mortgage backed securities.
RBS has reviewed the recoverability of its deferred tax asset and, in light of the weaker economic outlook and recently enacted restrictions on carrying forward losses, an impairment of 300 million has been recognised in Q3 2016. This action has reduced TNAV per share by 3p. 
TNAV per share reduced by 7p in the quarter to 338p principally reflecting the attributable loss, 4p, and a loss on redemption of preference shares, 4p, partially offset by gains recognised in foreign exchange reserves.
Refer to the following page for footnotes.


Highlights
PBB, CPB and CIB performance
Across our three customer facing businesses, PBB, CPB and CIB, adjusted operating profit of 1,331 million, was 212 million higher than Q3 2015.

UK Personal and Business Banking (UK PBB) adjusted operating profit of 591 million was 14 million higher than Q3 2015 as increased income and lower adjusted operating expenses more than offset increased impairment losses. 

Ulster Bank RoI adjusted operating profit of 68 million compared with 108 million in Q3 2015 reflecting one-off income gains in Q3 2015 and reduced impairment releases. 

Commercial Banking adjusted operating profit of 382 million was 7 million higher than Q3 2015, principally reflecting a 1% increase in income, adjusting for transfers(3). 

Private Banking(4) adjusted operating profit of 53 million was 16 million higher than Q3 2015, benefiting from a 13 million VAT recovery, whilst RBS International (RBSI) was broadly stable at 53 million.

CIB adjusted income of 526 million was 71% higher than Q3 2015, adjusting for transfers(1), principally driven by Rates. Adjusted operating profit of 184 million compared with a loss of 30 million in Q3 2015.
Capital Resolution & Central items
Capital Resolution adjusted operating loss of 118 million compared with a loss of 245 million in Q3 2015. The Q3 2016 loss included a 190 million impairment loss on the shipping portfolio and a 160 million valuation adjustment gain. RWAs reduced by 3.7 billion in the quarter to 38.6 billion
Central items adjusted operating profit of 24 million compared with a loss of 163 million in Q3 2015 and included a 97 million foreign exchange (FX) reserve recycling gain and other gains partially offset by a 150 million charge in respect of IFRS volatility(5) (Q3 2015 - 125 million charge).
Progress on 2016 targets
Strategy goal 
2016 target 
Q3 2016 Progress 
Strength and sustainability
Maintain Bank CET1 ratio of 13%
CET1 ratio of 15.0%
2 billion AT1 issuance
2.0 billion equivalent issued in Q3 2016
Capital Resolution RWAs around 30-35 billion
RWAs down 10.4 billion to 38.6 billion for the year to date 
Customer experience 
Narrow the gap to No.1 in Net Promoter Score (NPS) in every primary UK brand
Year on year Commercial Banking(6) has seen an improvement in NPS and is the highest it has ever been.
Simplifying the bank
Reduce operating expenses by 800 million
Operating expenses down 695 million(7)
Supporting growth
Net 4% growth in PBB and CPB customer loans
Net customer loans in PBB and CPB are up 13% on an annualised basis for the year to date
Employee engagement
Raise employee engagement to within two points of the GFS norm
Down 3 points to within 6 points of GFS norm
Notes:
(1)
CIB's results include the following financials for businesses subsequently transferred to Commercial Banking: total income of 98 million for nine months ended 2015 (Q3 2015 - 20 million).
(2)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK.
(3)
The business transfers included: total income of 42 million (Q3 2015 - nil); operating expenses of 25 million (Q3 2015 - nil) and impairments of 7 million (Q3 2015 - nil).
(4)
Private Banking serves high net worth individuals through Coutts and Adam & Co.
(5)
IFRS volatility arises from the changes to fair value of hedges of loans which do not qualify for hedge accounting under IFRS.
(6)
2m+ combination of NatWest & Royal Bank of Scotland in GB (954) Question: "How likely would you be to recommend (bank)". Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
(7)
Cost saving target and progress for the nine months ended 2016 calculated using operating expenses excluding restructuring costs 1,099 million (2015 - 2,317 million), litigation and conduct costs 1,740 (2015 - 1,444), write down of other intangible assets of 48 million (2015 - nil), the operating costs of Williams and Glyn 296 million (2015 - 252 million) and the VAT recovery 227 million.


Highlights
Building a stronger RBS
RBS is progressing with its plan to build a strong, simple, fair bank for customers and shareholders.
CET1 remains ahead of our 13% target at 15.0%, a 50 basis point increase compared with Q2 2016 driven by a 10.0 billion reduction in RWAs principally reflecting a 5.1 billion reduction in UK PBB, largely due to the unwind of mortgage risk parameter model uplifts taken in the first half, and 3.7 billion of disposals and run-off in Capital Resolution. 
On 10 August 2016 RBS announced that it had successfully completed the pricing of US$2.65 billion 8.625% AT1 capital notes, with 4.0 billion equivalent now issued since August 2015. 
In addition, on 7 September 2016 we successfully issued US$2.65 billon seven year senior debt which is eligible to meet RBS's 'Minimum Requirement for Own Funds and Eligible Liabilities', with 4.2 billion equivalent issued this year. 
Leverage ratio increased by 40 basis points to 5.6% largely driven by the AT1 issuance.
Risk elements in lending (REIL) of 12.6 billion were 3.8% of gross customer loans, down from 4.5% at 30 September 2015. 
In June 2016, the triennial funding valuation of the Main Scheme of The Royal Bank of Scotland Group Pension Fund was agreed which showed that as at 31 December 2015 the value of liabilities exceeded the value of assets by 5.8 billion. In March 2016, to mitigate this anticipated deficit, RBS made a cash payment of 4.2 billion. The next triennial valuation is due to occur at the end of 2018 with agreement on any additional contributions by the end of March 2020. As at 30 September 2016, the Main Scheme had an unrecognised surplus reflected by a ratio of asset to liabilities of c.115% under IAS19 valuation principles.The surplus is unrecognised because the trustee's power to enhance member benefits could consume that surplus meaning that RBS does not control its ability to realise an asset.The existence of the asset, albeit unrecognised, does limit RBS's exposure to changes in actuarial assumptions and investment performance.
Building the number one bank for customer service, trust and advocacy in the UK
RBS continued to deliver strong support for both household and business customers. Within UK PBB, gross new mortgage lending of 7.9 billion was 12% higher than Q3 2015. Our market share of gross new mortgage lending in Q3 2016 was approximately 12% compared with a stock share of 8.7%. Commercial Banking net loans and advances have grown by an annualised 12% since the start of the year.
The Reward account continues to show positive momentum and now has over one million fee-paying customers compared with 202,000 at 31 December 2015.
We continue to make better use of our digital channels to make it simpler to serve our customers and for them to do business with us. We now have more than 4.3 million customers regularly using our mobile app, with over 20% of our customers now exclusively using digital banking for their day to day banking needs. We anticipate that this number will continue to grow as we make more of our products and services available digitally. Our new 'Online Account Opening' service allows start up business customers to submit an application online in just ten minutes and get a sort code and account number in under an hour. 


Highlights
Investment in subsidiaries and distributable reserves
As part of the Q3 2016 results we have reviewed the value of the investments in subsidiaries held in the parent company, RBSG plc, and in light of the deterioration in the economic outlook we have reduced the carrying value of the investments by 6.0 billion to 44.7 billion. This has the effect of reducing distributable reserves of RBSG plc by 6.0 billion to 7.2 billion. Whilst this level of distributable reserves does not impact upon our ability to pay coupons on existing securities, it is our intention to implement a capital reorganisation in 2017 in order to increase parent company distributable reserves, providing greater flexibility for future distributions and preference share redemptions. The capital reduction will be subject to shareholder approval (to be sought at the next Annual General Meeting) and court approval. The reorganisation in carrying value of the parent company's investment in its subsidiaries does not impact upon the Group's consolidated regulatory capital, including CET1, or tangible net asset value. 
Recent developments
Work has continued to explore means to achieve separation and divestment of the business previously described as Williams & Glyn. RBS has had positive discussions with a number of interested parties concerning a transaction related to substantially all of the business. These discussions are ongoing and may or may not lead to a viable transaction. However, none of the proposals under discussion can deliver full separation and divestment by 31 December 2017. RBS is therefore in discussion with HM Treasury, and expects further engagement with the European Commission, to agree a solution with regards to its State Aid obligations.

As we no longer intend to pursue divestment by way of an Initial Public Offering, on 21 October 2016 RBS redeemed the 600 million exchangeable bond issued to a consortium of investors, led by Centerbridge and Corsair, in 2013 in accordance with the terms of the bond.


Highlights
Outlook
The current low interest rate and low growth environment presents a range of uncertainties which could impact the performance of our core business. Whilst we remain committed to achieving our long term cost:income ratio and returns targets, set out in 2014, we now do not expect to achieve these by 2019 as previously indicated. We also recognise that the ongoing discussions around further tightening of regulatory capital rules could result in RWA inflation in the medium term.
We expect PBB and CPB income to be broadly stable in 2016 compared with 2015 as strong planned balance sheet growth, particularly in mortgages but also in core commercial lending, is balanced by headwinds from low interest rates and the uncertain macroeconomic environment. We now anticipate that CIB will report a modest increase in income in 2016 compared with 2015.
RBS remains on track to achieve an 800 million cost reduction in 2016 after achieving a 695 million reduction in the first nine months of the year. Core franchise profitability will be adversely impacted by the annual bank levy charge in Q4 2016, around 200 million, and expense inflation associated with weaker sterling. We retain our expectation that the adjusted cost:income ratio across our combined PBB, CPB and CIB businesses will improve in 2016 compared with 2015. We plan to provide further cost guidance for 2017 as part of the 2016 year end results. 
We do not anticipate a material change to the current impairment loss rate for 2016. The impairment charges taken during 2016 year to date largely relate to sector specific issues particularly in the shipping portfolio and oil and gas sector. We recognise the continuing risk of large single name/sector driven events across our portfolios given the uncertain macroeconomic environment. In the current environment there is an increased level of uncertainty; however it continues to be too early at this point to quantify the impact of potential credit losses that may result.
We now anticipate a restructuring charge of around 1.5 billion in 2016 compared with previous guidance of over 1.0 billion, as a result of additional Williams & Glyn charges in respect of the decision to discontinue the programme to create a cloned banking platform.
We now expect Capital Resolution disposal losses to total approximately 2.0 billion, up from the previous guidance of 1.5 billion. Total losses to date have been 997 million (of which 2015; 367 million and 2016 year to date; 630 million) including an impairment charge of 454 million in relation to the shipping portfolio during 2016 year to date. We anticipate that Capital Resolution RWAs will be in the range 30-35 billion by the end of 2016. Excluding RBS's stake in Saudi Hollandi Bank (7.9 billion at Q3 2016), we would expect RWAs to be in the range 15-20 billion by end 2017.
We continue to deal with a range of uncertainties in the external environment and also manage conduct-related investigations and litigation, including US RMBS. Substantial additional charges and costs may be recognised in the coming quarters which would have an impact on the Group's level of capital.
In view of the above, the timing of returning excess capital to shareholders through dividends or buybacks remains uncertain.

Summary consolidated income statement for the period ended 30 September 2016 

Nine months ended

Quarter ended 

30 September
30 September

30 September
30 June
30 September

2016
2015*

2016
2016
2015*

m
m

m
m
m
Net interest income
6,500
6,605

2,167
2,177
2,187







Own credit adjustments
294
424

(156)
194
136
(Loss)/gain on redemption of own debt
(127)
-

3
(130)
-
Strategic disposals
164
(135)

(31)
201
-
Other operating income
2,543
3,545

1,327
558
860







Non-interest income
2,874
3,834

1,143
823
996







Total income 
9,374
10,439

3,310
3,000
3,183







Restructuring costs
(1,099)
(2,317)

(469)
(392)
(847)
Litigation and conduct costs 
(1,740)
(1,444)

(425)
(1,284)
(129)
Other costs
(6,001)
(6,831)

(2,017)
(1,833)
(2,300)







Operating expenses
(8,840)
(10,592)

(2,911)
(3,509)
(3,276)







Profit/(loss) before impairment (losses)/releases
534
(153)

399
(509)
(93)
Impairment (losses)/releases
(553)
400

(144)
(186)
79







Operating (loss)/profit before tax
(19)
247

255
(695)
(14)
Tax (charge)/credit
(922)
(284)

(582)
(260)
3







Loss from continuing operations
(941)
(37)

(327)
(955)
(11)
Profit from discontinued operations, 






 net of tax
-
1,451

-
-
1,093







(Loss)/profit for the period
(941)
1,414

(327)
(955)
1,082







Attributable to:






Non-controlling interests
37
389

7
8
45
Other owners
343
264

135
114
97
Dividend access share 
1,193
-

-
-
-
Ordinary shareholders
(2,514)
761

(469)
(1,077)
940














Memo:













Total income - adjusted (1)
9,043
10,150

3,494
2,735
3,047
Operating expenses - adjusted (2)
(6,001)
(6,831)

(2,017)
(1,833)
(2,300)
Operating profit - adjusted (1,2)
2,489
3,719

1,333
716
826







*Restated - refer to page 31 for further details






Notes:
(1)
Excluding own credit adjustments, (loss)/gain on redemption of own debt and strategic disposals.
(2)
Excluding restructuring costs and litigation and conduct costs.
Details of other comprehensive income are provided on page 28.

Summary consolidated balance sheet as at 30 September 2016 

30 September
30 June
31 December

2016
2016
2015

m
m
m




Cash and balances at central banks
69,254
65,307
79,404
Net loans and advances to banks (1)
19,741
21,763
18,361
Net loans and advances to customers (1)
326,736
326,503
306,334
Reverse repurchase agreements and stock borrowing
45,955
45,778
39,843
Debt securities and equity shares
80,512
84,807
83,458
Assets of disposal groups (2)
13
396
3,486
Other assets 
27,118
31,047
22,008




Funded assets
569,329
575,601
552,894
Derivatives
283,049
326,023
262,514




Total assets
852,378
901,624
815,408




Bank deposits (3)
32,172
31,377
28,030
Customer deposits (3)
358,844
355,719
343,186
Repurchase agreements and stock lending
36,408
40,881
37,378
Debt securities in issue
28,357
27,148
31,150
Subordinated liabilities
19,162
20,113
19,847
Derivatives
275,364
322,390
254,705
Liabilities of disposal groups (2)
15
252
2,980
Other liabilities 
47,728
50,017
43,985




Total liabilities
798,050
847,897
761,261
Non-controlling interests
853
820
716
Owners' equity
53,475
52,907
53,431




Total liabilities and equity
852,378
901,624
815,408




Contingent liabilities and commitments
151,394
151,433
153,752
Notes:
(1)
Excludes reverse repurchase agreements and stock borrowing.
(2)
Primarily international private banking business at 31 December 2015.
(3)
Excludes repurchase agreements and stock lending.

Analysis of results

Nine months ended 

Quarter ended

30 September
30 September

30 September
30 June
30 September
2016
2015

2016
2016
2015
Net interest income
m
m

m
m
m







Net interest income (1)






RBS
6,500
6,605

2,167
2,177
2,187







 - UK Personal & Business Banking
3,194
3,122

1,085
1,090
1,055
 - Ulster Bank RoI
304
280

106
93
90
 - Commercial Banking
1,601
1,485

534
531
504
 - Private Banking
338
328

112
113
109
 - RBS International
226
225

75
76
73
 - Corporate & Institutional Banking
75
59

32
24
29
 - Capital Resolution
195
359

27
82
78
 - Williams & Glyn
488
493

164
162
167
 - Central items & other
79
254

32
6
82







Average interest-earning assets (IEA)






RBS
398,943
415,463

397,345
396,118
413,778







 - UK Personal & Business Banking
140,696
129,359

145,649
140,591
131,406
 - Ulster Bank RoI
24,835
23,244

26,026
24,288
23,456
 - Commercial Banking
119,496
104,686

123,817
119,768
105,905
 - Private Banking
16,621
15,770

16,978
16,622
15,878
 - RBS International
22,073
20,432

23,332
21,798
20,244
 - Corporate & Institutional Banking
11,817
18,696

11,960
11,923
18,686
 - Capital Resolution
27,407
67,659

22,352
29,157
51,786
 - Williams & Glyn
24,044
22,810

24,597
24,172
23,020
 - Central items & other
11,954
12,807

2,634
7,799
23,397







Yields, spreads and margins of the banking business













Gross yield on interest-earning assets 






 of the banking business (2)
2.82%
2.92%

2.78%
2.87%
2.84%
Cost of interest-bearing liabilities of banking business
(0.98%)
(1.15%)

(0.92%)
(1.00%)
(1.09%)







Interest spread of banking business (3)
1.84%
1.77%

1.86%
1.87%
1.75%
Benefit from interest-free funds
0.34%
0.35%

0.31%
0.34%
0.34%







Net interest margin (1,4)






RBS
2.18%
2.12%

2.17%
2.21%
2.09%







 - UK Personal & Business Banking (5)
3.03%
3.23%

2.96%
3.12%
3.19%
 - Ulster Bank RoI (5)
1.64%
1.61%

1.62%
1.54%
1.52%
 - Commercial Banking (5)
1.79%
1.90%

1.72%
1.78%
1.89%
 - Private Banking (5)
2.72%
2.78%

2.62%
2.73%
2.72%
 - RBS International (5)
1.37%
1.47%

1.28%
1.40%
1.43%
 - Corporate & Institutional Banking
0.85%
0.42%

1.06%
0.81%
0.62%
 - Capital Resolution
0.95%
0.71%

0.48%
1.13%
0.60%
 - Williams & Glyn
2.71%
2.89%

2.65%
2.70%
2.88%
Third party customer rates (6)






Third party customer asset rate






 - UK Personal & Business Banking
3.90%
4.18%

3.79%
3.96%
4.15%
 - Ulster Bank RoI (7)
2.19%
2.29%

2.17%
2.07%
2.26%
 - Commercial Banking
2.81%
2.96%

2.74%
2.82%
2.93%
 - Private Banking
2.95%
3.18%

2.86%
2.97%
3.12%
 - RBS International
3.08%
3.10%

2.95%
3.02%
3.11%
Third party customer funding rate






 - UK Personal & Business Banking
(0.50%)
(0.68%)

(0.44%)
(0.46%)
(0.65%)
 - Ulster Bank RoI (7)
(0.53%)
(0.92%)

(0.46%)
(0.53%)
(0.82%)
 - Commercial Banking
(0.35%)
(0.38%)

(0.32%)
(0.36%)
(0.36%)
 - Private Banking
(0.20%)
(0.26%)

(0.18%)
(0.20%)
(0.25%)
 - RBS International
(0.15%)
(0.33%)

(0.10%)
(0.13%)
(0.25%)
For the notes to this table refer to the next page.

Analysis of results
Notes: 
(1)
For the purpose of net interest margin (NIM) calculations, no decrease for the nine months ended 2016 (nine months ended 2015 - 12 million) and no decrease for Q3 2016 (Q2 2016 - nil; Q3 2015 - 4 million) was made in respect of interest on financial assets and liabilities designated as at fair value through profit or loss. Related average interest-earning assets and average interest-bearing liabilities have also been adjusted.
(2)
Gross yield is the interest earned on average interest-earning assets as a percentage of average interest-earning assets.
(3)
Interest spread is the difference between the gross yield and interest paid on average interest-bearing liabilities as a percentage of average interest-bearing liabilities. 
(4)
Net interest margin is net interest income as a percentage of average interest-earning assets.
(5)
PBB NIM was 2.82% (nine months ended 2015 - 2.98%; Q3 2016 - 2.76%; Q2 2016 - 2.89%; Q3 2015 - 2.93%). CPB NIM was 1.83% (nine months ended 2015 - 1.93%; Q3 2016 - 1.75%; Q2 2016 - 1.83%; Q3 2015 - 1.92%).
(6)
Net interest margin includes Treasury allocations and interest on intercompany borrowings, which are excluded from third party customer rates.
(7)
Ulster Bank Ireland DAC manages its funding and liquidity requirements locally. Its liquid asset portfolios and non-customer related funding sources are included within its net interest margin, but excluded from its third party asset and liability rates.
Key points
 
Net interest income of 2,167 million decreased by 20 million, or 1%, compared with Q3 2015 principally driven by a 51 million reduction in Capital Resolution in line with the planned shrinkage of the balance sheet. Across our PBB and CPB franchises, net interest income increased by 81 million, or 4%, reflecting increased lending.
 
NIM was 2.17% for Q3 2016, 8 basis points higher than Q3 2015 as the benefit associated with reductions in the low yielding 'non-core' assets has been partially offset by modest asset margin pressure and mix impacts across PBB and CPB. 
NIM decreased by 4 basis points compared with Q2 2016 reflecting asset and liability margin pressure across PBB and CPB and a release of previously suspended credit card interest in Q2 2016. 
NIM across the combined PBB and CPB franchises was 2.27% in Q3 2016 compared with 2.45% in Q3 2015 and 2.37% in Q2 2016.
 
UK PBB, NIM decreased by 23 basis points to 2.96% reflecting the change in mix of our asset base towards mortgage lending from unsecured lending, mortgage customers switching from standard variable rate (SVR) and lower returns on current account structural hedges. SVR mortgages represented 12% of the mortgage book compared with 15% a year earlier. Compared with Q2 2016, UK PBB NIM reduced by 16 basis points reflecting a 22 million reduction in suspended interest releases, 6 basis points, and asset and liability margin pressure. 
 
Commercial Banking NIM decreased by 17 basis points to 1.72%, compared with Q3 2015, principally reflecting asset margin pressure.
 
Structural hedges of 122 billion as at 30 September 2016 generated a benefit of 0.9 billion through net interest income for the year to date. Around 72% of these hedges are part of a five year rolling hedge programme that will progressively roll-off over the coming years.


Analysis of results








Nine months ended
Quarter ended

30 September
30 September

30September
30 June
30 September
2016
2015*

2016
2016
2015*
Operating expenses
m
m

m
m
m







Staff costs 
3,457
3,824

1,128
1,127
1,281
Premises and equipment
951
1,061

321
315
352
Other administrative expenses
1,018
1,338

393
179
477
Restructuring costs (see below)
1,099
2,317

469
392
847
Litigation and conduct costs
1,740
1,444

425
1,284
129







Administrative expenses
8,265
9,984

2,736
3,297
3,086
Depreciation and amortisation
527
608

175
174
190
Write down of intangible assets
48
-

-
38
-







Operating expenses
8,840
10,592

2,911
3,509
3,276







Adjusted operating expenses (1)
6,001
6,831

2,017
1,833
2,300







Restructuring costs comprise:






 - staff expenses
525
625

159
245
281
 - premises, equipment, depreciation and amortisation 
57
705

33
15
375
 - other
517
987

277
132
191








1,099
2,317

469
392
847
Of which: Williams & Glyn 
646
449

301
187
190







Staff costs as a % of total income 
37%
37%

34%
38%
40%
Cost:income ratio
94%
101%

88%
117%
103%
Cost:income ratio - adjusted (2)
66%
67%

58%
67%
75%
Employee numbers (FTE - thousands)
82.5
92.4

82.5
89.2
92.4
*Restated - refer to page 31 for further details.
Notes:
(1)
Excluding restructuring costs and litigation and conduct costs.
(2)
Excluding own credit adjustments, (loss)/gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
Key points
 
Operating expenses of 2,911 million were 365 million, or 11%, lower than Q3 2015 reflecting a 378 million reduction in restructuring costs and a 283 million reduction in adjusted operating expenses, partially offset by a 296 million increase in litigation and conduct expenses.
 
Adjusted operating expenses reduced by 283 million, or 12%, compared with Q3 2015 to 2,017 million. Excluding expenses associated with Williams & Glyn, write down of intangible assets (48 million) and a 227 million VAT recovery, adjusted expenses reduced by 695 million for the year to date, and we remain on target to achieve an 800 million reduction for the year.
 
Staff costs of 1,128 million were down 153 million, or 12%, compared with Q3 2015, reflecting a 9,900 reduction in FTEs.
 
Restructuring costs of 469 million compared with 847 million in Q3 2015. Williams & Glyn restructuring costs of 301 million include 127 million of termination costs associated with the decision to discontinue the programme to create a cloned banking system. 
 
Litigation and conduct costs of 425 million include an additional charge in respect of the recent settlement with the National Credit Union Administration Board to resolve two outstanding lawsuits in the United States relating to residential mortgage backed securities.


Analysis of results

Nine months ended

Quarter ended

30September
30 September

30September
30 June
30 September
2016
2015

2016
2016
2015
Impairment losses/(releases)
m
m

m
m
m







Loan impairment losses/(releases)






 - individually assessed
575
(135)

217
172
(15)
 - collectively assessed
219
(8)

176
27
(13)
 - latent
(191)
(380)

(202)
(10)
(64)







Customer loans
603
(523)

191
189
(92)
Bank loans
-
(4)

-
-
(4)







Total loan impairment losses/(releases)
603
(527)

191
189
(96)
Securities
(50)
127

(47)
(3)
17







Total impairment losses/(releases)
553
(400)

144
186
(79)

30September
30 June
31 December
Credit metrics (1)
2016
2016
2015




Gross customer loans
332,917m
333,017m
315,111m
Loan impairment provisions
6,181m
6,456m
7,139m
Risk elements in lending (REIL)
12,625m
11,789m
12,157m
Provisions as a % of REIL
49%
55%
59%
REIL as a % of gross customer loans
3.8%
3.5%
3.9%
Note:
(1)
Includes disposal groups and excludes reverse repos.
Key points 
 
A net impairment loss of 144 million was reported in Q3 2016 compared with a release of 79 million in Q3 2015 and a loss of 186 million in Q2 2016. 
 
Capital Resolution reported a net impairment loss of 120 million in Q3 2016 compared with a release of 50 million in Q3 2015. The loss for the quarter included a 190 million charge (year to date - 454 million) in respect of the shipping portfolio reflecting difficult conditions in some parts of the sector. 
Commercial Banking reported an impairment loss of 20 million for Q3 2016 compared with 16 million in Q3 2015 and 89 million in Q2 2016. Q2 2016 included a single name charge taken in respect of the oil and gas portfolio.
Ulster Bank RoI reported a net impairment release of 48 million in Q3 2016 compared with 75 million in Q3 2015. The Q3 2016 impairment release included a write back associated with the sale of a portfolio of loans partially offset by additional provisions in respect of mortgages. On completion in Q4 2016, the portfolio sale is expected to reduce gross customer loans in Ulster Bank RoI by 1.8 billion and reduce REIL as a percentage of gross customer loans by around 6 percentage points. 
REIL increased by 836 million in the quarter to 12,625 million, principally relating to the shipping portfolio along with the implementation of a revised mortgage methodology in Ulster Bank RoI and foreign exchange movements. REIL represented 3.8% of gross customer loans compared with 3.5% at 30 June 2016 and 3.9% at 31 December 2015. Provision coverage was 49% compared with 55% at 30 June 2016 and 59% at 31 December 2015.


Analysis of results












Selected credit risk portfolios






















30 September 2016

30 June 2016

31 December 2015

CE (1)
PE (1)
EAD (2)

CE (1)
PE (1)
EAD (2)

CE (1)
PE (1)
EAD (2)
Natural resources
m
m
m

m
m
m

m
m
m












Oil and gas
2,989
6,000
4,739

3,298
6,356
5,039

3,544
6,798
5,606
Mining and metals
652
1,782
1,375

816
1,941
1,608

729
1,823
1,555
Electricity
3,256
8,466
5,782

3,374
8,583
5,940

2,851
7,683
5,205
Water and waste
5,875
8,772
7,381

5,347
8,665
6,679

4,657
8,261
5,873













12,772
25,020
19,277

12,835
25,545
19,266

11,781
24,565
18,239












Shipping 
5,514
6,043
6,154

6,765
7,246
7,496

6,776
7,301
7,509
Notes:
(1)
Current exposure (CE) and potential exposure (PE) are both net of impairment provisions and credit valuation adjustments and after the effect of risk transfer. For a full description of what is included and excluded from current and potential exposure refer to page 16 of Appendix 1 of the Interim Results 2016.
(2)
Exposure at default (EAD) reflects an estimate of the extent to which a bank will be exposed under a specific facility on the default of a customer or counterparty.
Uncommitted undrawn facilities are excluded from current exposure but included within EAD; therefore EAD can exceed current exposure.
Key points
 
Oil and gas - Exposure to the sector remained stable and there was no material change in the credit quality of the portfolio during the quarter. Provisions increased by 10 million to 167 million. AQ10 potential exposure, net of provisions, was 178 million (30 June 2016 - 207 million). Exposures classified as risk of credit loss were minimal. 
 
Mining and metals - The sector continued to be affected by a slowdown in demand and the oversupply of key metal commodities. RBS's strategic focus in this sector is on investment grade customers and there was no material change in the credit quality during the quarter. Provisions also remained stable. AQ10 potential exposure, net of provisions was 56 million (30 June 2016 - 82 million). Exposures classified as risk of credit loss were minimal.
 
Shipping - The reduction in exposure was due to disposals and loan amortisation. Challenging market conditions continued to affect vessel values in the bulk and container sectors, where values remain severely depressed and close to historic lows, and also in the tanker sector, where values have reduced from recent highs. Portfolio credit quality deteriorated during the quarter as a result of the difficult market conditions. Impairment charges of 190 million partially offset by write offs of 58 million in Q3 2016 increased provisions by 126 million to 571 million (30 June 2016 - 445 million; 31 December 2015 - 181 million). AQ10 current exposure, net of provisions, was 1,031 million (30 June 2016 - 579 million). In addition 775 million of current exposure was classified as at risk of credit loss (30 June 2016 - 78 million).


Analysis of results
Capital and leverage ratios








End-point CRR basis (1)

PRA transitional basis

30September
30 June
31 December

30September
30 June
31 December

2016
2016
2015

2016
2016
2015
Risk asset ratios
%
%
%

%
%
%








CET1 
15.0
14.5
15.5

15.0
14.5
15.5
Tier 1
16.7
15.4
16.3

19.1
17.7
19.1
Total
20.6
19.0
19.6

24.1
23.0
24.7








Capital
m
m
m

m
m
m








Tangible equity
39,822
40,541
40,943

39,822
40,541
40,943








Expected loss less impairment provisions
(862)
(831)
(1,035)

(862)
(831)
(1,035)
Prudential valuation adjustment
(734)
(603)
(381)

(734)
(603)
(381)
Deferred tax assets
(838)
(1,040)
(1,110)

(838)
(1,040)
(1,110)
Own credit adjustments
(435)
(587)
(104)

(435)
(587)
(104)
Pension fund assets
(209)
(209)
(161)

(209)
(209)
(161)
Cash flow hedging reserve
(1,565)
(1,603)
(458)

(1,565)
(1,603)
(458)
Other deductions
(9)
(14)
(86)

(9)
(14)
(64)








Total deductions
(4,652)
(4,887)
(3,335)

(4,652)
(4,887)
(3,313)








CET1 capital
35,170
35,654
37,608

35,170
35,654
37,630
AT1 capital
4,041
1,997
1,997

9,662
7,756
8,716
Tier 1 capital
39,211
37,651
39,605

44,832
43,410
46,346
Tier 2 capital
9,181
9,028
8,002

11,773
13,043
13,619








Total regulatory capital
48,392
46,679
47,607

56,605
56,453
59,965








Risk-weighted assets















Credit risk







 - non-counterparty
166,600
172,500
166,400




 - counterparty
25,100
26,100
23,400




Market risk
17,800
20,900
21,200




Operational risk
25,700
25,700
31,600












Total RWAs
235,200
245,200
242,600












Leverage (2)















Derivatives
283,000
326,000
262,500




Loans and advances
346,500
348,500
327,000




Reverse repos
46,000
45,800
39,900




Other assets
176,900
181,300
186,000












Total assets
852,400
901,600
815,400




Derivatives







 - netting and variation margin
(281,700)
(328,400)
(258,600)




 - potential future exposures
64,100
75,500
75,600




Securities financing transactions gross up
2,200
3,200
5,100




Undrawn commitments
62,100
63,200
63,500




Regulatory deductions and other







 adjustments
4,100
5,600
1,500












Leverage exposure 
703,200
720,700
702,500












Tier 1 capital
39,211
37,651
39,605












Leverage ratio % 
5.6
5.2
5.6












Average leverage exposure (3)
717,056
717,167













Average Tier 1 capital (3)
38,919
38,561













Average leverage ratio % (3)
5.4
5.4





Notes:
(1)
CRR as implemented by the PRA in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on available-for-sale securities which have been included from 2015 under the PRA transitional basis.
(2)
Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.
(3)
Based on averages of the last four quarter end positions. 


Analysis of results
Key points
CET1 ratio decreased by 50 basis points in the nine months to 30 September 2016 to 15.0% primarily reflecting management actions to normalise the ownership structure and improve the long-term resilience of RBS. These actions included the final Dividend Access Share payment of 1.2 billion and the accelerated payment of 4.2 billion relating to the deficit on the Main Scheme of The Royal Bank of Scotland Group Pension Fund, both in March 2016. Litigation and conduct charges contributed to a 2.0 billion reduction in CET1 capital.
Tier 1 capital benefitted from the successful issuance of 2 billion of AT1 capital notes in August 2016. Total end-point CRR compliant AT1 capital now stands at 4.0 billion.
RWAs decreased by 7.4 billion to 235.2 billion during the nine months to 30 September 2016.

Credit risk RWAs have remained relatively flat as lending growth in UK PBB and Commercial Banking and the adverse impact of foreign exchange movements following the EU referendum were offset by reductions due to disposals and run-off in Capital Resolution.

The impact of market volatility throughout 2016 and implementation of new risk metric models in CIB and Capital Resolution led to an increase of 1.7 billion in counterparty credit risk RWAs.

Market risk RWAs reduced by 3.4 billion driven by disposals of securitisations and lower US dollar position in Treasury.

Operational risk RWAs decreased by 5.9 billion as a result of the annual recalculation and the removal of the element relating to Citizens following regulatory approval.
There was a 50 basis points increase in the CET1 ratio in Q3 2016 driven primarily by a 10.0 billion reduction in RWAs. RWA reduction reflected disposals and run-off in Capital Resolution, the unwind of mortgage model recalibrations booked by UK PBB in H1 2016 and lower non-modelled market risk.
Leverage ratio increased by 40 basis points in the period to 5.6% driven by the issuance of AT1 instruments in August 2016.
The proforma leverage ratio reflecting the post EU referendum measures announced by the Bank of England in Q3 2016 was estimated at 6.1%.
RBS's PRA minimum leverage ratio requirement of 3% has been supplemented with an additional GSII leverage ratio buffer of 0.13125%, equivalent to 923 million of CET1 capital at 30 September 2016.

Segment performance

Nine months ended 30 September 2016

PBB

CPB 




Central



Ulster

Commercial
Private
RBS


Capital
Williams
items &
Total

UK PBB
BankRoI

Banking
Banking
International

CIB 
Resolution
& Glyn (1)
other (2)
RBS

m
m 

m
m
m

m
m
m
m
m
Income statement 












Net interest income
3,194
304

1,601
338
226

75
195
488
79
6,500
Other non-interest income
757
132

947
158
52

1,132
(325)
132
(442)
2,543
Total income - adjusted (3)
3,951
436

2,548
496
278

1,207
(130)
620
(363)
9,043
Own credit adjustments
-
3

-
-
-

82
142
-
67
294
Loss on redemption of own debt 
-
-

-
-
-

-
-
-
(127)
(127)
Strategic disposals
-
-

-
-
-

-
(81)
-
245
164
Total income 
3,951
439

2,548
496
278

1,289
(69)
620
(178)
9,374
Direct expenses - staff costs
(529)
(150)

(392)
(115)
(33)

(192)
(79)
(190)
(1,777)
(3,457)
 - other costs
(221)
(32)

(166)
(32)
(13)

(28)
(81)
(46)
(1,925)
(2,544)
Indirect expenses
(1,478)
(130)

(822)
(218)
(62)

(762)
(428)
(60)
3,960
-
Operating expenses - adjusted (4) 
(2,228)
(312)

(1,380)
(365)
(108)

(982)
(588)
(296)
258
(6,001)
Restructuring costs - direct
(50)
(32)

(13)
(1)
(1)

(16)
(35)
(57)
(894)
(1,099)
 - indirect
(86)
(4)

(49)
(22)
(2)

(50)
(35)
-
248
-
Litigation and conduct costs
(420)
(95)

(16)
(2)
1

(62)
(257)
-
(889)
(1,740)
Operating expenses
(2,784)
(443)

(1,458)
(390)
(110)

(1,110)
(915)
(353)
(1,277)
(8,840)
Profit/(loss) before impairment (losses)/releases
1,167
(4)

1,090
106
168

179
(984)
267
(1,455)
534
Impairment (losses)/releases
(67)
66

(123)
(5)
(11)

-
(383)
(31)
1
(553)
Operating profit/(loss)
1,100
62

967
101
157

179
(1,367)
236
(1,454)
(19)
Operating profit/(loss) - adjusted (3,4)
1,656
190

1,045
126
159

225
(1,101)
293
(104)
2,489
Additional information












Return on equity (5)
17.0%
3.1%

8.5%
7.0%
15.4%

1.6%
nm
nm
nm
(8.5%)
Return on equity - adjusted (3,4,5)
26.4%
9.5%

9.4%
8.9%
15.6%

2.4%
nm
nm
nm
(0.6%)
Cost:income ratio
70%
101%

57%
79%
40%

86%
nm
57%
nm
94%
Cost:income ratio - adjusted (3,4)
56%
72%

54%
74%
39%

81%
nm
48%
71%
66%
Total assets (bn)
155.4
25.3

152.6
18.2
26.9

249.7
176.7
25.7
21.9
852.4
Funded assets (bn) (6)
155.4
25.2

152.6
18.1
26.9

112.5
34.9
25.7
18.0
569.3
Net loans and advances to customers (bn)
129.6
19.5

99.8
11.8
8.7

19.9
16.7
20.6
0.1
326.7
Risk elements in lending (bn)
2.1
4.8

2.1
0.1
0.1

- 
2.9
0.4
0.1
12.6
Impairment provisions (bn)
(1.4)
(2.3)

(1.0)
- 
- 

- 
(1.2)
(0.2)
- 
(6.1)
Customer deposits (bn)
143.7
15.1

98.1
25.3
25.5

9.7
16.8
24.0
0.6 
358.8
Risk-weighted assets (RWAs) (bn)
31.9
21.4

77.6
8.2
9.6

36.6
38.6
9.7
1.6 
235.2
RWA equivalent (bn) (5)
35.4
22.8

82.3
8.2
9.6

37.2
39.8
10.2
1.9 
247.4
Employee numbers (FTEs - thousands)
18.7
3.2

5.8
1.8
0.8

1.3
0.7
5.0
45.2 
82.5













For the notes to this table refer to page 19. nm = not meaningful













Segment performance

Quarter ended 30 September 2016

PBB

CPB 




Central



Ulster

Commercial
Private
RBS


Capital
Williams
items &
Total

UK PBB
BankRoI

Banking
Banking
International

CIB 
Resolution
& Glyn (1)
other (2)
RBS

m
m 

m
m
m

m
m
m
m
m
Income statement 












Net interest income
1,085
106

534
112
75

32
27
164
32
2,167
Other non-interest income
251
40

315
53
18

494
148
45
(37)
1,327













Total income adjusted (3)
1,336
146

849
165
93

526
175
209
(5)
3,494
Own credit adjustments
-
-

-
-
-

(55)
(42)
-
(59)
(156)
Gain on redemption of own debt
-
-

-
-
-

-
-
-
3
3
Strategic disposals
-
-

-
-
-

-
(30)
-
(1)
(31)
Total income
1,336
146

849
165
93

471
103
209
(62)
3,310
Direct expenses - staff costs
(168)
(53)

(127)
(38)
(11)

(61)
(17)
(65)
(588)
(1,128)
 - other costs
(59)
(19)

(55)
(9)
(5)

(7)
(17)
(13)
(705)
(889)
Indirect expenses
(491)
(45)

(265)
(62)
(24)

(274)
(139)
(21)
1,321
-
Operating expenses - adjusted (4) 
(718)
(117)

(447)
(109)
(40)

(342)
(173)
(99)
28
(2,017)
Restructuring costs - direct
1
(8)

(12)
-
-

(6)
(23)
(12)
(409)
(469)
 - indirect
(26)
(3)

(9)
(3)
-

(27)
(10)
-
78
-
Litigation and conduct costs
1
(3)

(6)
-
1

(6)
(231)
-
(181)
(425)













Operating expenses
(742)
(131)

(474)
(112)
(39)

(381)
(437)
(111)
(484)
(2,911)













Profit/(loss) before impairment (losses)/releases
594
15

375
53
54

90
(334)
98
(546)
399
Impairment (losses)/releases
(27)
39

(20)
(3)
-

-
(120)
(14)
1
(144)













Operating profit/(loss)
567
54

355
50
54

90
(454)
84
(545)
255













Operating profit/(loss) - adjusted (3,4)
591
68

382
53
53

184
(118)
96
24
1,333
Additional information












Return on equity (5)
27.1%
7.8%

9.5%
11.1%
15.4%

3.1%
nm
nm
nm
(4.8%)
Return on equity - adjusted (3,4,5)
28.3%
9.9%

10.4%
11.8%
15.1%

8.0%
nm
nm
nm
4.6%
Cost:income ratio
56%
90%

56%
68%
42%

81%
nm
53%
nm
88%
Cost:income ratio - adjusted (3,4)
54%
80%

53%
66%
43%

65%
99%
47%
nm
58%
Total assets (bn)
155.4
25.3

152.6
18.2
26.9

249.7
176.7
25.7
21.9
852.4
Funded assets (bn) (6)
155.4
25.2

152.6
18.1
26.9

112.5
34.9
25.7
18.0
569.3
Net loans and advances to customers (bn)
129.6
19.5

99.8
11.8
8.7

19.9
16.7
20.6
0.1
326.7
Risk elements in lending (bn)
2.1
4.8

2.1
0.1
0.1

-
2.9
0.4
0.1
12.6
Impairment provisions (bn)
(1.4)
(2.3)

(1.0)
-
-

-
(1.2)
(0.2)
-
(6.1)
Customer deposits (bn)
143.7
15.1

98.1
25.3
25.5

9.7
16.8
24.0
0.6
358.8
Risk-weighted assets (RWAs) (bn) 
31.9
21.4

77.6
8.2
9.6

36.6
38.6
9.7
1.6
235.2
RWA equivalent (bn) (5)
35.4
22.8

82.3
8.2
9.6

37.2
39.8
10.2
1.9
247.4
Employee numbers (FTEs - thousands)
18.7
3.2

5.8
1.8
0.8

1.3
0.7
5.0
45.2
82.5
Notes:
(1)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK.
(2)
Central items include unallocated transactions which principally comprise volatile items under IFRS.
(3)
Excluding own credit adjustments, (loss)/gain on redemption of own debt and strategic disposals.
(4)
Excluding restructuring costs and litigation and conduct costs.
(5)
RBS's CET 1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by notional equity allocated at different rates of 11% (Commercial Banking and Ulster Bank RoI), 12% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect capital deductions (RWAes). RBS Return on equity is calculated using profit for the period attributable to ordinary shareholders.
(6)
Funded assets exclude derivative assets.

Segment performance

Nine months ended

Quarter ended 

30 September
30 September

30 September
30 June
30 September

2016
2015

2016
2016
2015
Total income by segment 
m
m

m
m
m







UK PBB






Personal advances
630
570

216
210
185
Personal deposits
547
566

186
195
186
Mortgages
1,733
1,736

596
573
591
Cards
464
481

148
174
159
Business banking
544
546

188
181
182
Other
33
47

2
7
10
Total 
3,951
3,946

1,336
1,340
1,313







Ulster Bank RoI






Corporate
142
109

43
43
38
Retail
291
246

96
95
91
Other
6
79

7
(3)
35







Total income
439
434

146
135
164







Commercial Banking






Commercial lending
1,372
1,223

472
464
380
Deposits
365
352

116
124
123
Asset and invoice finance
537
542

181
179
184
Other
274
340

80
79
113
Total 
2,548
2,457

849
846
800







Private Banking






Investments
74
65

24
22
20
Banking
422
421

141
144
140
Total 
496
486

165
166
160







RBS International
278
272

93
95
87







CIB






Rates
719
557

348
258
160
Currencies
394
295

128
122
96
Financing
183
260

78
55
32
Other
(89)
(55)

(28)
(31)
20
Total excluding own credit adjustments
1,207
1,057

526
404
308
Own credit adjustments
82
186

(55)
73
78
Businesses transferred to Commercial Banking
-
98

-
-
20
Total 
1,289
1,341

471
477
406







Capital Resolution






APAC portfolio (1)
(3)
68

(5)
1
17
Americas portfolio
11
52

1
3
5
EMEA portfolio (2)
27
62

8
9
15
Legacy loan portfolio
(8)
155

31
(25)
22
Shipping
37
66

6
15
21
Markets
(177)
212

212
(360)
58
Global Transaction Services
107
277

24
35
48
Other
42
(84)

11
23
(46)
Total excluding disposals and own credit 






 adjustments
36
808

288
(299)
140
Disposal losses
(247)
(187)

(143)
(102)
(89)
Own credit adjustments
142
180

(42)
76
38
Total
(69)
801

103
(325)
89







Williams & Glyn (3)






Retail
351
355

120
116
119
Commercial
269
270

89
90
92
Total
620
625

209
206
211







Central items 
(178)
77

(62)
60
(47)
Total RBS 
9,374
10,439

3,310
3,000
3,183
Notes:
(1)
Asia-Pacific portfolio.
(2)
European, the Middle East and African portfolio.
(3)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprisesRBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. 


Segment performance

Nine months ended 

Quarter ended 

30 September
30 September

30 September
30 June
30 September

2016
2015

2016
2016
2015
Impairment losses/(releases) by segment 
m
m

m
m
m 
UK PBB






Personal advances
46
56

26
14
12
Mortgages
17
(1)

(1)
14
(9)
Business banking
(7)
(55)

(8)
1
3
Cards
11
11

10
(5)
3
Other
-
9

-
-
(7)
Total 
67
20

27
24
2







Ulster Bank RoI






Mortgages
59
(94)

60
(2)
(36)
Commercial real estate






- investment
(23)
2

(18)
-
(1)
- development
(19)
1

(12)
(5)
(2)
Other lending
(83)
(40)

(69)
(7)
(15)
Total 
(66)
(131)

(39)
(14)
(54)







Commercial Banking






Commercial real estate
(4)
10
.
(6)
4
4
Asset and invoice finance
14
1

1
10
(2)
Private sector services (education, health etc)
1
5

-
-
2
Banks & financial institutions
2
1

1
1
-
Wholesale and retail trade repairs
9
3

10
(4)
3
Hotels and restaurants
20
-

21
(1)
1
Manufacturing
2
1

-
1
1
Construction
5
5

-
4
3
Other (1)
74
16

(7)
74
4
Total 
123
42

20
89
16







Private Banking
5
1

3
-
4







RBS International
11
-

-
9
(1)







Corporate & Institutional Banking
-
(5)

-
-
-







Capital Resolution
383
(369)

120
67
(50)







Williams & Glyn (2)






Retail
21
15

11
5
3
Commercial
10
(20)

3
6
2
Total
31
(5)

14
11
5







Central items 
(1)
47

(1)
-
(1)
Total RBS
553
(400)

144
186
(79)











30 September
30 June
31 December




2016
2016
2015
Analysis of Capital Resolution RWAs by portfolio


m
m
m 
APAC portfolio (3)



0.1
0.2
0.5
Americas portfolio



0.3
0.3
1.0
EMEA portfolio (4)



1.2
1.1
1.2
Legacy loan portfolio



2.0
2.2
3.7
Shipping



3.5
4.0
4.5
Markets



17.1
19.2
20.7
Global Transaction Services



1.8
2.5
3.6
Saudi Hollandi Bank



7.9
7.9
6.9
Other



1.9
2.1
2.9
Total credit and market risk RWAs



35.8
39.5
45.0
Operational risk



2.8
2.8
4.0
Total RWAs



38.6
42.3
49.0
Notes:
(1)
Includes a single name charge taken in respect of the oil and gas portfolio.
(2)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprisesRBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK.
(3)
Asia-Pacific portfolio.
(4)
European, the Middle East and Africa portfolio. 


Segment Performance

30 September
30 June
31 December

2016
2016
2015
Loans and advances to customers (gross) by segment (1)
bn 
bn 
bn 
UK PBB



Personal advances
6.0
6.0
6.0
Mortgages
114.7
111.4
104.8
Business banking
6.4
6.2
5.3
Cards
3.9
3.9
4.1
Other
- 
- 
1.4
Total 
131.0
127.5
121.6




Ulster Bank RoI



Mortgages
16.0
15.6
13.8
Commercial real estate



- investment
1.0
1.0
0.7
- development
0.4
0.4
0.2
- other lending
4.4
4.4
3.9
Total 
21.8
21.4
18.6




Commercial Banking



Commercial real estate
17.5
17.8
16.7
Asset and invoice finance
15.0
14.8
14.4
Private sector services (education, health etc)
6.9
6.8
6.7
Banks & financial institutions
8.9
8.2
7.1
Wholesale and retail trade repairs
8.2
8.2
7.5
Hotels and restaurants
3.6
3.6
3.3
Manufacturing
6.4
7.0
5.3
Construction
2.0
2.1
2.1
Other
32.3
31.7
28.9
Total 
100.8
100.2
92.0




Private Banking



Personal advances
2.3
2.5
2.7
Mortgages
6.7
6.8
6.5
Other
2.8
2.5
2.0
Total
11.8
11.8
11.2




RBS International



Corporate
6.1
5.9
4.5
Mortgages
2.6
2.6
2.5
Other
-
-
0.4
Total 
8.7
8.5
7.4




Capital Resolution
17.9
21.0
25.9




Williams & Glyn (2)



Retail
12.2
12.1
11.6
Commercial
8.6
8.5
8.7
Total 
20.8
20.6
20.3




Central items 
0.1
0.5
2.0




Balance sheet



Corporate & Institutional Banking



Reverse repos
42.7
43.1
38.6
Loans and advances to customer (gross)
19.9
21.6
16.1
Loans and advances to banks (gross) (3)
5.9
6.3
5.7
Securities
26.4
30.1
23.7
Cash and eligible bills 
6.4
10.3
14.3
Other 
11.2
14.2
4.9
Total funded assets
112.5
125.6
103.3
Notes:
(1)
Excludes reverse repurchase agreements and includes disposal groups.
(2)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprisesRBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK.
(3)
Excludes disposal groups.

Segment performance
UK Personal & Business Banking
Operating profit was 567 million compared with 549 million in Q3 2015 with 2% income growth and a 3% reduction in operating expenses partially offset by a modestly higher impairment charge. Compared with Q2 2016, adjusted operating profit improved by 57 million to 591 million principally due to a 42 million FSCS levy charge included in the prior quarter. Adjusted return on equity of 28% compared with 29% in Q3 2015.
UK PBB continued to deliver support for both personal and business customers with net loans and advances of 129.6 billion up 13.3 billion, or 11%, compared with Q3 2015, primarily due to mortgage growth. Gross new mortgage lending in the quarter of 7.9 billion was 12% higher with market share of new mortgages at approximately 12% supporting a growth in stock share to 8.7%.
The Reward proposition continues to show positive momentum and now has more than one million customer accounts with improved levels of customer engagement. In addition, we continue to make better use of digital channels, with over 4.3 million customers regularly using our mobile app.
Total income of 1,336 million was 23 million, or 2%, higher than Q3 2015. Net interest income increased by 30 million, or 3%, principally reflecting strong volume growth and savings re-pricing benefits partially offset by asset margin pressure. Net interest margin declined by 23 basis points to 2.96% reflecting the change in mix of the asset base towards mortgage lending from unsecured lending, mortgage customers switching from standard variable rate (SVR) and lower returns on current account structural hedges. SVR mortgages represented 12% of the total mortgage book (Q3 2015 - 15%). Non-interest income reduced by 7 million, or 3%, primarily due to reduced credit card interchange fees, 13 million, and higher cash back payments on the Reward account. 
Adjusted expenses reduced by 16 million, or 2%, compared with Q3 2015 with a 43 million, or 16%, reduction in direct costs, primarily due to an 18% reduction in FTEs driving lower staff costs, partially offset by increased technology investment in the business. Compared with Q2 2016 adjusted expenses reduced by 64 million principally reflecting a 42 million FSCS levy charge in Q2 2016 and a 12 million reduction in staff costs as FTEs reduced a further 1,300 in the quarter. 
The net impairment charge of 27 million, which continues to reflect benign credit conditions, increased by 25 million compared with Q3 2015 primarily due to reduced portfolio provision releases. Default levels remain low across all portfolios.
RWAs were 1.4 billion, or 4%, lower than Q3 2015 with lending growth more than offset by improved overall credit quality. The reduction of 5.1 billion in the quarter principally reflects the unwind of mortgage risk parameter model recalibrations taken in H1 2016 and improved credit quality.


Segment performance
Ulster Bank RoI
Operating profit of 69 million was 74 million lower than Q3 2015 primarily reflecting a lower net impairment release and one-off income gains in Q3 2015. Adjusted operating profit of 81 million was 8 million higher than Q2 2016 as a 31 million increase in net impairment releases was partially offset by 19 million one-off accrual releases in Q2 2016. 
Ulster Bank RoI built upon its strong H1 2016 performance in mortgage lending, adding a further 0.3 billion of gross new lending in the quarter, up 51% compared with Q3 2015. The low yielding tracker mortgage portfolio declined by a further 0.3 billion to 11.1 billion.
Total income of 171 million was 57 million lower than Q3 2015 due to reduced income on free funds and one off in Q3 2015, including a 17 million profit on the sale of a buy-to-let mortgage portfolio, as well as a 33 million gain realised on the closure of a foreign exchange exposure. 
Adjusted operating expenses reduced by 15 million, or 10%, compared with Q3 2015 to 138 million. Compared with Q2 2016 adjusted expenses increased by 22 million primarily due to one-off accrual releases of 19 million in Q2 2016. 
The Q3 2016 impairment release of 48 million included a net impairment write back associated with the sale of a portfolio of loans, partially offset by additional provisions in respect of mortgages.
REILs were 5.6 billion in Q3 2016, increasing 0.4 billion on Q2 2016 primarily driven by a widening of the definition of non-performing loans which are considered to be impaired to include multiple forbearance arrangements and probationary mortgages. The amendment to the definition does not have a material impact on provisions. It is expected that the sale of a portfolio of loans will materially reduce Ulster Bank RoI REIL when complete in Q4 2016.
Credit metrics continue to benefit from the improving economic environment supporting a reduction in RWAs of 7% to 24.7 billion compared with Q3 2015. RWAs on the tracker mortgage portfolio reduced by 1.1 billion, or 10%, compared with Q3 2015 to 9.6 billion.
Commercial Banking
Operating profit of 355 million in Q3 2016 compared with 376 million in Q3 2015. Adjusted operating profit of 382 million was 7 million higher than Q3 2015 and was 122 million higher than Q2 2016, principally reflecting a single name impairment charge taken in respect of the oil and gas portfolio in Q2 2016. Adjusted return on equity of 10.4% compared with 12.3% in Q3 2015.
Total income increased by 49 million to 849 million compared with Q3 2015. Excluding the impact of business transfers(1), income increased by 1% largely reflecting increased asset and liability volumes. Net interest margin fell by 17 basis points from Q3 2015 to 1.72% driven by asset margin pressure in a competitive market and low rate environment.
Excluding business transfers(1), adjusted operating expenses increased by 13 million compared with Q3 2015 but reduced by 53 million compared to Q2 2016 reflecting cost efficiencies and a 25 million intangible asset write down in Q2 2016. 
Net impairment losses of 20 million were 4 million higher than Q3 2015 and 69 million lower than Q2 2016 reflecting the non-repeat of a single name charge taken in respect of the oil and gas portfolio.
Net loans and advances, adjusting for the impact of business transfers(1), increased by 6.5 billion from Q3 2015, principally reflecting increased borrowing across mid and large corporate customers. Net loans and advances continued to grow in the quarter, up 0.6 billion, but at a slower rate than in H1 2016. 
RWAs were 77.6 billion, an increase of 6.9 billion compared to Q3 2015, adjusting for business transfers(1), reflecting asset growth partially offset by reduced RWA intensity. 
Note:
(1)
The business transfers included: total income of 42 million (Q2 2016 - 53 million; Q3 2015 - nil); operating expenses of 25 million (Q2 2016 - 22 million; Q3 2015 - nil); impairments of 7 million (Q2 2016 7 million; Q3 2015 - nil) net loans and advances to customers of 4.2 billion (30 June 2016 - 5.2 billion; 30 September 2015 - nil); and RWAs of 6.5 billion (30 June 2016 - 8.5 billion; 30 September 2015 - nil). 


Segment performance
Private Banking
Operating profit of 50 million was 12 million higher than Q3 2015 and was 9 million higher than Q2 2016. Adjusted return on equity of 11.8% compared with 7.1% in Q3 2015.
Total income of 165 million increased by 5 million, 3%, compared with Q3 2015 as the benefit of increased asset volumes has been partially offset by reduced net interest margin, down 10 basis points to 2.62% reflecting the lower interest rate environment.
Adjusted operating expenses were 8% lower than Q3 2015 at 109 million principally reflecting management actions to reduce operational costs and a 13 million VAT recovery.
Net loans and advances increased 6% to 11.8 billion, due to increased mortgage lending, and customer deposits grew by 11% to 25.3 billion compared with Q3 2015. Assets under management(1) increased by 3.1 billion to 16.6 billion reflecting market and underlying growth. In addition, investment cash balances were included in assets under management for the first time in Q3 2016, excluding this, growth was 1.7 billion.
RBS International
Operating profit of 54 million was 8% higher than Q3 2015 driven by increased income. Adjusted return on equity of 15.1% compared with 18.8% in Q3 2015.
Total income increased 7% compared with Q3 2015 to 93 million driven by increased asset volumes partially offset by lower asset margins. 
Net loans and advances to customers increased by 1.7 billion to 8.7 billion compared with Q3 2015 principally reflecting balance draw-downs in the funds sector lending portfolio and foreign exchange movements.
Customer deposits increased by 3.2 billion to 25.5 billion reflecting the transfer in of the Luxembourg branch from Capital Resolution in Q2 2016 and foreign exchange movements.
Corporate & Institutional Banking (CIB)
An operating profit of 90 million compared with an operating loss of 109 million in Q3 2015. Adjusted operating profit of 184 million compared with an adjusted operating loss of 30 million in Q3 2015, with the improvement principally reflecting an increase in adjusted income. 
Adjusted income, excluding a 20 million movement associated with the transfer of portfolios to Commercial Banking(2), increased by 218 million to 526 million. The increase was primarily driven by an increase in Rates, reflecting sustained customer activity and favourable market conditions following the EU referendum and central bank actions. Total income, which includes own credit adjustments, increased by 65 million, or 16%, to 471 million compared with 406 million in Q3 2015.
Operating expenses reduced by 134 million, or 26%, to 381 million compared with 515 million in Q3 2015 principally reflecting lower restructuring costs. Adjusted operating expenses fell by 16 million, or 4%, to 342 million as the business reshaping and FTE reductions were partially offset by the impact of investment spend that was previously capitalised. 
RWAs increased by 3.7 billion compared with Q3 2015 to 36.6 billion, adjusting for the impact of transfers to Commercial Banking(2), principally due to model updates and the impact of market volatility throughout 2016. 
Notes:
(1)
AUM's constitute assets under management, assets under custody and investment cash.
(2)
CIB's results include the following financials for businesses subsequently transferred to Commercial Banking: total income of 98 million for nine months ended 2015 (Q3 2015 - 20 million) and RWAs of 5.9 billion as at 30 September 2015.


Segment performance
Capital Resolution 
RWAs reduced by 3.7 billion in the quarter to 38.6 billion reflecting disposal activity, partially offset by an increase due to the weakening of sterling.
Funded assets reduced by 9.8 billion in Q3 2016 to 34.9 billion with the most significant reductions across Markets and GTS. 
An operating loss of 454 million in Q3 2016 compared with a loss of 798 million in Q3 2015 and a loss of 612 million in Q2 2016. 
Total income of 103 million increased by 428 million compared with Q2 2016 primarily due to a 160 million partial reversal of the 220 million additional funding valuation adjustment made in Q2 2016 following the EU referendum.
Adjusted operating expenses of 173 million were 50% lower than Q3 2015 principally reflecting a reduction in FTE and associated cost efficiencies. 
A net impairment loss of 120 million in the quarter, compared with 67 million in Q2 2016, and included a charge of 190 million in respect of the shipping portfolio. An impairment release of 50 million was reported in Q3 2015.
RWAs have fallen by 21.1 billion to 38.6 billion from Q3 2015, primarily due to run-off and loan portfolio disposals. Funded assets have reduced by 31.1 billion to 34.9 billion for the same period.
Williams & Glyn
Operating profit reduced by 31 million to 84 million compared with Q3 2015, whilst adjusted operating profit reduced by 19 million to 96 million. Adjusted operating profit was in line with Q2 2016.
Total income was broadly stable compared with Q3 2015 at 209 million as the growth in the balance sheet has been more than offset by net interest margin reduction. Net interest margin of 2.65% was 23 basis points lower than Q3 2015 and was 5 basis points lower than Q2 2016. 
Adjusted operating expenses increased by 8 million, or 9%, to 99 million compared with Q3 2015, reflecting previous activity undertaken to create a standalone entity. Compared with Q2 2016, adjusted operating expenses were flat. 
A net impairment loss of 14 million was reported in Q3 2016 compared with a loss of 5 million in Q3 2015. 
Net loans and advances increased by 0.6 billion, or 3%, to 20.6 billion compared with Q3 2015. Gross mortgage lending increased by 0.7 billion, or 7%, to 10.9 billion and commercial lending was 0.3 billion, or 3%, lower at 8.6 billion. 
Central items & other
Central items not allocated represented a charge of 545 million in Q3 2016, an increase of 207 million compared with Q3 2015. Treasury funding costs were a charge of 177 million (compared with a charge of 117 million in Q3 2015) driven by a 150 million IFRS volatility charge. Restructuring costs in the quarter included 289 million relating to Williams & Glyn (Q3 2015 - 190 million). Partially offsetting this was a gain of 97 million was recognised arising from a partial recycling of the accumulated foreign exchange reserve triggered by a capital reduction in a foreign subsidiary.

Selected statutory financial statements 
Condensed consolidated income statement for the period ended 30 September 2016 (unaudited)

Nine months ended

Quarter ended

30September
30 September

30September
30 June
30 September
2016
2015*

2016
2016
2015*

m
m

m
m
m







Interest receivable
8,432
9,070

2,776
2,827
2,963
Interest payable
(1,932)
(2,465)

(609)
(650)
(776)







Net interest income
6,500
6,605

2,167
2,177
2,187







Fees and commissions receivable
2,519
2,838

843
810
880
Fees and commissions payable
(592)
(558)

(200)
(180)
(195)
Income from trading activities
384
1,045

401
(55)
170
(Loss)/gain on redemption of own debt
(127)
-

3
(130)
-
Other operating income
690
509

96
378
141







Non-interest income
2,874
3,834

1,143
823
996







Total income
9,374
10,439

3,310
3,000
3,183







Staff costs
(3,982)
(4,449)

(1,287)
(1,372)
(1,562)
Premises and equipment
(1,006)
(1,380)

(354)
(328)
(635)
Other administrative expenses
(3,234)
(3,096)

(1,095)
(1,564)
(730)
Depreciation and amortisation
(529)
(994)

(175)
(176)
(282)
Write down of other intangible assets
(89)
(673)

-
(69)
(67)







Operating expenses
(8,840)
(10,592)

(2,911)
(3,509)
(3,276)







Profit/(loss) before impairment (losses)/releases
534
(153)

399
(509)
(93)
Impairment (losses)/releases
(553)
400

(144)
(186)
79







Operating (loss)/profit before tax
(19)
247

255
(695)
(14)
Tax (charge)/credit
(922)
(284)

(582)
(260)
3







Loss from continuing operations
(941)
(37)

(327)
(955)
(11)
Profit from discontinued operations, net of tax
-
1,451

-
-
1,093







(Loss)/profit for the period
(941)
1,414

(327)
(955)
1,082






.
Attributable to:






Non-controlling interests
37
389

7
8
45
Preference share and other dividends
343
264

135
114
97
Dividend access share 
1,193
-

-
-
-
Ordinary shareholders
(2,514)
761

(469)
(1,077)
940







(Loss)/earnings per ordinary share (EPS) (1)






Basic EPS from continuing and discontinued operations
(21.5p)
6.6p

(3.9p)
(9.3p)
8.1p
Basic EPS from continuing operations
(21.5p)
(3.2p)

(3.9p)
(9.3p)
(1.0p)
*Restated - refer to page 31 for further details
Note:
(1)
There was no dilutive impact in any period.

Selected statutory financial statements 
Condensed consolidated statement of comprehensive income for the period ended 30 September 2016(unaudited)

Nine months ended

Quarter ended

30September
30 September

30September
30 June
30 September

2016
2015*

2016
2016
2015*

m
m

m
m
m
(Loss)/profit for the period
(941)
1,414

(327)
(955)
1,082
Items that do not qualify for reclassification






(Loss)/gain on remeasurement of retirement benefit schemes
(1,047)
20

(52)
(466)
3
Tax 
285
(4)

12
130
(1)

(762)
16

(40)
(336)
2
Items that do qualify for reclassification






Available-for-sale financial assets
(162)
(95)

(67)
(87)
(50)
Cash flow hedges
1,515
(302)

(66)
635
408
Currency translation
1,276
(1,177)

205
489
(604)
Tax
(297)
106

63
(122)
(38)

2,332
(1,468)

135
915
(284)
Other comprehensive income/(loss) after tax
1,570
(1,452)

95
579
(282)







Total comprehensive income/(loss) for the period
629
(38)

(232)
(376)
800







Total comprehensive income/(loss) is attributable to:






Non-controlling interests
157
357

32
53
58
Preference shareholders
192
223

79
57
80
Paid-in equity holders
151
41

56
57
17
Dividend access share
1,193
-

-
-
-
Ordinary shareholders
(1,064)
(659)

(399)
(543)
645

629
(38)

(232)
(376)
800
*Restated - refer to page 31 for further details

Selected statutory financial statements 
Condensed consolidated balance sheet as at 30 September 2016 (unaudited)

30 September
30 June
31 December
2016
2016
2015

m
m
m




Assets



Cash and balances at central banks
69,254
65,307
79,404
Net loans and advances to banks
19,741
21,763
18,361
Reverse repurchase agreements and stock borrowing
12,251
14,458
12,285
Loans and advances to banks
31,992
36,221
30,646
Net loans and advances to customers
326,736
326,503
306,334
Reverse repurchase agreements and stock borrowing
33,704
31,320
27,558
Loans and advances to customers
360,440
357,823
333,892
Debt securities
79,784
84,058
82,097
Equity shares
728
749
1,361
Settlement balances
10,298
13,405
4,116
Derivatives
283,049
326,023
262,514
Intangible assets
6,506
6,525
6,537
Property, plant and equipment
4,490
4,589
4,482
Deferred tax
1,684
2,217
2,631
Prepayments, accrued income and other assets
4,140
4,311
4,242
Assets of disposal groups
13
396
3,486




Total assets
852,378
901,624
815,408




Liabilities



Bank deposits
32,172
31,377
28,030
Repurchase agreements and stock lending
6,557
11,611
10,266
Deposits by banks
38,729
42,988
38,296
Customer deposits
358,844
355,719
343,186
Repurchase agreements and stock lending
29,851
29,270
27,112
Customer accounts
388,695
384,989
370,298
Debt securities in issue
28,357
27,148
31,150
Settlement balances
10,719
11,262
3,390
Short positions
19,882
21,793
20,809
Derivatives
275,364
322,390
254,705
Provisions, accruals and other liabilities
15,954
15,627
15,115
Retirement benefit liabilities
526
511
3,789
Deferred tax
647
824
882
Subordinated liabilities
19,162
20,113
19,847
Liabilities of disposal groups
15
252
2,980




Total liabilities
798,050
847,897
761,261




Equity



Non-controlling interests
853
820
716
Owners' equity*



Called up share capital
11,792
11,756
11,625
Reserves
41,683
41,151
41,806




Total equity
54,328
53,727
54,147




Total liabilities and equity
852,378
901,624
815,408




*Owners' equity attributable to:



Ordinary shareholders
46,328
47,066
47,480
Other equity owners
7,147
5,841
5,951





53,475
52,907
53,431

Selected statutory financial statements 
Condensed consolidated statement of changes in equity for the period ended 30 September 2016 (unaudited)

Share 







capital and



Total
Non


statutory
Paid-in
Retained 
Other
owners'
controlling
Total 

reserves
equity
earnings
reserves*
equity
interests
equity

m
m
m
m
m
m
m
At 1 January 2016
41,485
2,646
(4,020)
13,320
53,431
716
54,147
(Loss)/profit attributable to ordinary


(978)

(978)
37
(941)
 shareholders and other equity owners







Other comprehensive income







- amount recognised in equity


(1,047)
3,748
2,701
120
2,821
- amount transferred from equity to profit or loss



(1,198)
(1,198)

(1,198)
- recycled to profit or loss on 







 disposal of businesses (1)



(41)
(41)

(41)
- tax


285
(297)
(12)

(12)
Dividend access share dividend


(1,193)

(1,193)

(1,193)
Preference share and other dividends paid


(343)

(343)

(343)
Shares and securities issued during the period (2)
405
2,046
(10)

2,441

2,441
Redemption of preference shares (3)


(1,160)

(1,160)

(1,160)
Redemption of paid-in equity (4)

(110)
(21)

(131)

(131)
Share-based payments - gross


(13)

(13)

(13)
Movement in own shares held
(29)



(29)

(29)
Equity withdrawn





(20)
(20)
At 30 September 2016
41,861
4,582
(8,500)
15,532
53,475
853
54,328















30September







2016
Total equity is attributable to:




m
Non-controlling interests






853
Preference shareholders






2,565
Paid-in equity holders






4,582
Ordinary shareholders






46,328







54,328
*Other reserves consist of:






Merger reserve






10,881
Available-for-sale reserve






188
Cash flow hedging reserve






1,565
Foreign exchange reserve






2,898







15,532
Notes:
(1)
No tax impact.
(2)
AT1 capital notes totalling 2.0 billion issued in August 2016.
(3)
In September 2016, non-cumulative US dollar preference shares were redeemed at their original issue price of US$1.5 billon. The nominal value of 0.3 million was transferred from share capital to capital redemption reserve and ordinary owners' equity was reduced by 0.4 billion in respect of the movement in exchange rates since issue.
(4)
Paid-in equity reclassified to liabilities as a result of the call of RBS Capital Trust C in May 2016 (redeemed in July 2016).

Notes
1. Basis of preparation 
The consolidated financial statements should be read in conjunction with RBS's 2015 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS). 
Accounting policies 
RBS's principal accounting policies are set out on pages 267 to 280 of the 2015 Annual Report and Accounts. Amendments to IFRSs effective for 2016 have not had a material effect on RBS's Q3 2016 results.
Pensions
In Q4 2015, RBS changed its accounting policy for the recognition of surpluses in its defined benefit pension schemes: in particular, the policy for determining whether or not it has an unconditional right to a refund of surpluses in its employee pension funds. Where RBS has a right to a refund, this is not deemed unconditional if pension fund trustees can unilaterally enhance benefits for plan members. The amended policy was applied retrospectively and prior periods restated. For further details, refer to pages 267 to 268 of RBS's 2015 Annual Report and Accounts.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of RBS's financial condition are those relating to pensions, goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on pages 276 to 279 of RBS's 2015 Annual Report and Accounts.
Going concern
Having reviewed RBS's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that RBS will continue in operational existence for the foreseeable future. Accordingly, the results for the period ended 30 September 2016 have been prepared on a going concern basis.
2. Pensions
In June 2016, the triennial funding valuation of the Main Scheme of The Royal Bank of Scotland Group Pension Fund was agreed which showed that at 31 December 2015 the value of liabilities exceeded the value of assets. In March 2016, to mitigate this anticipated deficit, RBS made a cash payment of 4.2 billion. The next triennial valuation is due to occur at the end of 2018 with agreement on any additional contributions by the end of March 2020.
As at 30 September 2016, the Main Scheme had an unrecognised surplus under IAS19 valuation principles.The surplus is unrecognised because the trustee's power to enhance member benefits could consume that surplus meaning that RBS does not control its ability to realise an asset. The existence of the asset, albeit unrecognised, limits RBS's exposure to changes in actuarial assumptions and investment performance. 
Notes
3. Provisions for liabilities and charges



Regulatory and legal actions




Interest






Payment
rate
Other
Foreign 
Litigation



protection
hedging
customer
exchange
and other
Property


insurance
products
redress (1)
investigations
regulatory
and other
Total

m
m
m
m
m
m
m








At 1 January 2016
996
149
672
306
3,985
1,258
7,366
Transfer from accruals and other liabilities
-
-
-
-
-
19
19
Transfer 
-
-
21
(35)
85
(71)
-
Currency translation and other movements
-
-
-
10
126
28
164
Charge to income statement 
-
-
11
-
34
79
124
Releases to income statement 
-
-
(8)
-
(1)
(19)
(28)
Provisions utilised
(85)
(41)
(63)
-
(24)
(69)
(282)
At 31 March 2016
911
108
633
281
4,205
1,225
7,363
Transfer from accruals and other liabilities
-
-
35
-
5
14
54
Transfer 
50
-
(50)
-
-
-
-
Currency translation and other movements
-
-
8
23
336
20
387
Charge to income statement 
400
-
117
-
779
233
1,529
Releases to income statement 
-
-
(5)
-
(12)
(95)
(112)
Provisions utilised
(114)
(30)
(50)
-
(141)
(146)
(481)
At 30 June 2016
1,247
78
688
304
5,172
1,251
8,740
Transfer from accruals and other liabilities
-
-
-
-
17
-
17
Currency translation and other movements 
-
-
-
5
94
19
118
Charge to income statement 
-
-
16
-
469
191
676
Releases to income statement 
-
-
(12)
-
(48)
(8)
(68)
Provisions utilised
(102)
(10)
(69)
-
(105)
(176)
(462)
At 30 September 2016
1,145
68
623
309
5,599
1,277
9,021
Note:
(1)
Closing provision predominantly relates to investment advice, packaged accounts (including costs) and tracker mortgages. 
There are uncertainties as to the eventual cost of redress in relation to certain of the provisions contained in the table above. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the amount provided. RBS will continue to monitor the position closely and refresh the underlying assumptions. 
4. Litigation, investigations and reviews 
RBS's 2016 interim results issued on 5 August 2016 included comprehensive disclosures about RBS's litigation, investigations and reviews in Note 15. Set out below are the material developments in these matters since the 2016 interim results were published. RBS generally does not disclose information about the establishment or existence of a provision for a particular matter where disclosure of the information can be expected to prejudice seriously RBS's position in the matter.
Litigation
Other securitisation and securities related litigation in the US 
On 27 September 2016, RBS Securities Inc. (RBSSI) settled the two mortgage-backed securities (MBS) litigations that the National Credit Union Administration Board has been litigating on behalf of US Central Federal Credit Union and Western Corporate Federal Credit Union. The settlement amount of US$1.1 billion was substantially covered by provisions existing at 30 June 2016. 
Notes
4. Litigation, investigations and reviews (continued)
RBS continues to litigate various other MBS-related civil claims identified in its 2016 interim results, including those of the Federal Housing Finance Agency, and to respond to investigations by the civil and criminal divisions of the U.S. Department of Justice and various other members of the RMBS Working Group of the Financial Fraud Enforcement Task Force (including several state attorneys general). MBS litigation and investigations may require provisions in future periods that in aggregate could be materially in excess of existing provisions.
London Interbank Offered Rate (LIBOR)
As previously disclosed, certain members of the Group have been named as defendants in a number of class actions and individual claims filed in the US with respect to the setting of LIBOR and certain other benchmark interest rates. On 16 August 2016, a class action complaint was filed in the United States District Court for the Southern District of New York against certain Group companies (including RBSG plc and The Royal Bank of Scotland N.V.) and a number of other financial institutions.The complaint alleges that the defendants conspired to manipulate the Australian Bank Bill Swap Reference Rate (BBSW) and asserts claims under the U.S. antitrust laws, the Commodity Exchange Act, RICO (Racketeer Influenced and Corrupt Organizations Act), and the common law. RBS anticipates making a motion to dismiss the complaint.
FX antitrust litigation 
On 26 September 2016, a class action complaint was filed in the United States District Court for the Southern District of New York asserting claims on behalf of "indirect purchasers" of FX instruments. The complaint defines "indirect purchasers" as persons who were indirectly affected by FX instruments that others entered into directly with defendant banks or on exchanges. It is alleged that certain RBS companies and other defendant banks caused damages to the "indirect purchasers" by conspiring to restrain trade in the FX spot market. The complaint seeks damages and other relief under federal, California, and New York antitrust laws. RBS anticipates making a motion to dismiss the complaint.
Investigations and reviews 
Connecticut Department of Banking
As previously disclosed, in June 2016, RBSSI, a U.S. broker-dealer, reached an agreement in principle to resolve investigations by the office of the Attorney General of Connecticut on behalf of the Connecticut Department of Banking, concerning RBSSI's underwriting and issuance of mortgage-backed securities and the potential consequences to RBSSI of The Royal Bank of Scotland plc's (RBS plc's) May 2015 FX-related guilty plea. The agreement became final on 3 October 2016 through the publication by the Department of Banking of two agreed consent orders without RBSSI admitting or denying the Department of Banking's allegations. As required by the RMBS consent order, in addition to making certain undertakings, RBSSI has paid US$120 million to the State of Connecticut to resolve the investigation. The amount was covered by a provision that had previously been established. Pursuant to the FX consent order, RBSSI agreed, among other things, to certify to the Department of Banking its compliance with various obligations undertaken in connection with RBS plc's FX-related guilty plea and FX-related resolutions with the Commodity Futures Trading Commission and Board of Governors of the Federal Reserve System.
FCA review of RBS's treatment of SMEs
The FCA published an update on 4 October 2016 confirming that it had received the final Skilled Person's report and that there were a number of steps for the FCA to complete before being in a position to share its final findings. RBS has been given the opportunity to review that report.
Notes
4. Litigation, investigations and reviews (continued)
UK retail banking
On 9 August 2016, the Competition & Markets Authority (CMA) published its final report on retail banking. The CMA concluded that there are a number of competition concerns in the provision of personal current accounts (PCAs), business current accounts and SME lending, particularly around low levels of customers searching and switching, resulting in banks not being put under enough competitive pressure, and new products and new banks not attracting customers quickly enough. 
Thefinal report set out remedies to address these concerns. These include remedies to make it easier for customers to compare products, ensure customers benefit from technological advantages around open banking, improve the current account switching service and provide PCA overdraft customers with greater control over their charges, along with additional measures targeted at SME customers.
The CMA has also been reviewing the undertakings given by certain banks following the Competition Commission's 2002 investigation into SME banking (SME Undertakings). On 9 August 2016, the CMA announced itsfinal decision, which is thatthe SME Undertakings should be revoked, with the exception of the prohibition on the ability of certain named banks, including RBS, to bundle (i.e. sell together) business current accounts and SME lending. 
At this stage there remains uncertainty around the financial impact of the proposed remedies and it is not practicable to estimate the potential impact on RBS, which may be material.
FCA wholesale sector competition review
On 18 October 2016, the FCA published its final report following its market study into investment and corporate banking. It found that whilst many clients feel well served by primary capital market services there were some areas where improvements could be made to encourage competition, particularly for smaller clients. It set out a package of remedies, including prohibiting the use of restrictive contractual clauses and ending league table misrepresentation by asking league table providers to review their recognition criteria. The FCA is to undertake further consultation with regards to the prohibition on restrictive contractual clauses. Subject to this consultation, the FCA expects to publish the final rules regarding these restrictive contractual clauses in early 2017. 
Enforcement proceedings and investigations in relation to Coutts & Co Ltd
As previously disclosed, the Swiss Financial Market Supervisory Authority (FINMA) is taking enforcement proceedings against Coutts & Co Ltd (Coutts), a member of RBS incorporated in Switzerland, with regard to certain client accounts held with Coutts relating to allegations in connection with the Malaysian sovereign wealth fund 1MDB. The proceedings are at an advanced stage. Coutts is also cooperating with investigations, one of which is at an advanced stage and may conclude in the near term, and enquiries from authorities in other jurisdictions in relation to the same subject matter. The outcomes of such proceedings, investigations and enquiries are uncertain but may include financial penalties and/or regulatory sanctions.
5. Post balance sheet events
Other than matters disclosed, there have been no further significant events between 30 September 2016 and the date of approval of this announcement.

Appendix 1
Parent company information

Appendix 1 Parent company information
Balance sheet at 30 September 2016

30September
31 December

2016
2015
m
m



Assets


Investments in Group undertakings
44,712
52,129
Loans to subsidiaries
28,782
22,416
Debt securities
418
1,119
Derivatives
576
217
Prepayments, accrued income and other assets
4
3



Total assets
74,492
75,884



Liabilities


Deposits from subsidiaries
935
907
Debt securities in issue
8,210
5,049
Derivatives
99
65
Provisions, accruals and other liabilities
1,057
183
Subordinated liabilities
10,394
9,366



Total liabilities
20,695
15,570
Owners' equity
53,797
60,314



Total liabilities and equity
74,492
75,884



Owners' equity 


Called-up share capital 
11,792
11,625
Paid-in equity
4,478
2,438
Share premium account
25,663
25,425
Cash flow hedging reserve
118
32
Capital redemption reserve
4,542
4,542
Retained earnings
7,204
16,252

53,797
60,314
Investments in Group undertakings 
Investments in Group undertakings are carried at cost less impairment. Movements during the period were as follows:

2016
m
At 1 January
52,129
Currency translation and other adjustments
29
Redemption of preference shares issued by RBS plc
(1,446)
Impairment of investment in RBS plc
(6,000)
At 30 September
44,712
In Q3 2016 RBS reviewed the value of RBSG plc's (the parent company's) investments in subsidiaries and in light of the deterioration in the economic outlook reduced the carrying value of the investments by 6.0 billion to 44.7 billion. 
Distributable reserves
Owners' equity includes 7.2 billion of distributable reserves at 30 September 2016 (31 December 2015 - 16.3 billion). The decrease in the period includes a 6.0 billion impairment to the carrying value of investments in subsidiaries in Q3 as described above, the redemption in Q3 of preference shares issued to third parties (1.2 billion), the Dividend Access Share payment in Q1 (1.2 billion) and other dividends paid (0.3 billion). 

Appendix 2
Segmental income statement reconciliations

Appendix 2 Segmental income statement reconciliations

PBB

CPB 




Central



Ulster

Commercial
Private
RBS


Capital
Williams
items &
Total

UK PBB
BankRoI

Banking
Banking
International

CIB 
Resolution
& Glyn
other
RBS
Nine months ended 30 September 2016
m
m 

m
m
m

m
m
m
m
m













Income statement 












Total income - statutory
3,951
439

2,548
496
278

1,289
(69)
620
(178)
9,374
Own credit adjustments
-
(3)

-
-
-

(82)
(142)
-
(67)
(294)
Loss on redemption of own debt 
-
-

-
-
-

-
-
-
127
127
Strategic disposals
-
-

-
-
-

-
81
-
(245)
(164)
Total income - adjusted
3,951
436

2,548
496
278

1,207
(130)
620
(363)
9,043
Operating expenses - statutory
(2,784)
(443)

(1,458)
(390)
(110)

(1,110)
(915)
(353)
(1,277)
(8,840)
Restructuring costs - direct
50
32

13
1
1

16
35
57
894
1,099
 - indirect
86
4

49
22
2

50
35
-
(248)
-
Litigation and conduct costs
420
95

16
2
(1)

62
257
-
889
1,740
Operating expenses - adjusted
(2,228)
(312)

(1,380)
(365)
(108)

(982)
(588)
(296)
258
(6,001)
Impairment (losses)/releases
(67)
66

(123)
(5)
(11)

-
(383)
(31)
1
(553)
Operating profit/(loss) - adjusted
1,656
190

1,045
126
159

225
(1,101)
293
(104)
2,489













Additional information












Return on equity (1)
17.0%
3.1%

8.5%
7.0%
15.4%

1.6%
nm
nm
nm
(8.5%)
Return on equity - adjusted (1,2)
26.4%
9.5%

9.4%
8.9%
15.6%

2.4%
nm
nm
nm
(0.6%)
Cost income ratio
70%
101%

57%
79%
40%

86%
nm
57%
nm
94%
Cost income ratio - adjusted (2)
56%
72%

54%
74%
39%

81%
nm
48%
71%
66%













Nine months ended 30 September 2015*












Income statement 












Total income - statutory
3,946
434

2,457
486
272

1,341
801
625
77
10,439
Own credit adjustments
-
-

-
-
-

(186)
(180)
-
(58)
(424)
Strategic disposals
-
-

-
-
-

-
14
-
121
135
Total income - adjusted
3,946
434

2,457
486
272

1,155
635
625
140
10,150
Operating expenses - statutory
(2,606)
(322)

(1,291)
(439)
(120)

(1,938)
(2,955)
(252)
(669)
(10,592)
Restructuring costs - direct
7
19

12
-
-

44
359
-
1,876
2,317
 - indirect
73
2

3
78
5

418
844
-
(1,423)
-
Litigation and conduct costs
365
(9)

59
2
-

373
607
-
47
1,444
Operating expenses - adjusted
(2,161)
(310)

(1,217)
(359)
(115)

(1,103)
(1,145)
(252)
(169)
(6,831)
Impairment (losses)/releases
(20)
131

(42)
(1)
-

5
369
5
(47)
400
Operating profit/(loss) - adjusted
1,765
255

1,198
126
157

57
(141)
378
(76)
3,719













Additional information












Return on equity (1)
20.8%
13.1%

12.3%
2.0%
18.2%

(10.1%)
nm
nm
nm
2.4%
Return on equity - adjusted (1,2)
28.3%
13.8%

13.2%
7.9%
18.8%

(0.5%)
nm
nm
nm
12.4%
Cost income ratio
66%
74%

53%
90%
44%

145%
nm
40%
nm
101%
Cost income ratio - adjusted (2)
55%
71%

50%
74%
42%

95%
nm
40%
nm
67%













*Restated - refer to page 31 of the main document for further details. 

























For the notes to this table refer to page 3. 














Appendix 2 Segmental income statement reconciliations

PBB

CPB 




Central



Ulster

Commercial
Private
RBS


Capital
Williams
items &
Total

UK PBB
BankRoI

Banking
Banking
International

CIB 
Resolution
& Glyn
other
RBS
Quarter ended 30 September 2016
m
m 

m
m
m

m
m
m
m
m













Income statement 












Total income - statutory
1,336
146

849
165
93

471
103
209
(62)
3,310
Own credit adjustments
-
-

-
-
-

55
42
-
59
156
Gain on redemption of own debt 
-
-

-
-
-

-
-
-
(3)
(3)
Strategic disposals
-
-

-
-
-

-
30
-
1
31
Total income - adjusted
1,336
146

849
165
93

526
175
209
(5)
3,494
Operating expenses - statutory
(742)
(131)

(474)
(112)
(39)

(381)
(437)
(111)
(484)
(2,911)
Restructuring costs - direct
(1)
8

12
-
-

6
23
12
409
469
 - indirect
26
3

9
3
-

27
10
-
(78)
-
Litigation and conduct costs
(1)
3

6
-
(1)

6
231
-
181
425
Operating expenses - adjusted
(718)
(117)

(447)
(109)
(40)

(342)
(173)
(99)
28
(2,017)
Impairment (losses)/releases
(27)
39

(20)
(3)
-

-
(120)
(14)
1
(144)
Operating profit/(loss) - adjusted
591
68

382
53
53

184
(118)
96
24
1,333













Additional information












Return on equity (1)
27.1%
7.8%

9.5%
11.1%
15.4%

3.1%
nm
nm
nm
(4.8%)
Return on equity- adjusted (1,2)
28.3%
9.9%

10.4%
11.8%
15.1%

8.0%
nm
nm
nm
4.6%
Cost income ratio
56%
90%

56%
68%
42%

81%
nm
53%
nm
88%
Cost income ratio - adjusted (2)
54%
80%

53%
66%
43%

65%
99%
47%
nm
58%













Quarter ended 30 June 2016












Income statement 












Total income - statutory
1,340
135

846
166
95

477
(325)
206
60
3,000
Own credit adjustments
-
-

-
-
-

(73)
(76)
-
(45)
(194)
Loss on redemption of own debt 
-
-

-
-
-

-
-
-
130
130
Strategic disposals
-
-

-
-
-

-
45
-
(246)
(201)
Total income - adjusted
1,340
135

846
166
95

404
(356)
206
(101)
2,735
Operating expenses - statutory
(1,292)
(202)

(546)
(125)
(35)

(368)
(220)
(124)
(597)
(3,509)
Restructuring costs - direct
38
18

-
-
1

10
5
25
295
392
 - indirect
51
1

41
4
1

11
16
-
(125)
-
Litigation and conduct costs
421
92

8
2
-

38
16
-
707
1,284
Operating expenses - adjusted
(782)
(91)

(497)
(119)
(33)

(309)
(183)
(99)
280
(1,833)
Impairment (loss)/releases
(24)
14

(89)
-
(9)

-
(67)
(11)
-
(186)
Operating profit/(loss) - adjusted
534
58

260
47
53

95
(606)
96
179
716













Additional information












Return on equity (1)
(0.4%)
(8.2%)

4.9%
8.6%
15.0%

4.3%
nm
nm
nm
(11.0%)
Return on equity - adjusted (1,2)
24.2%
9.0%

6.6%
9.9%
15.7%

3.5%
nm
nm
nm
3.2%
Cost income ratio
96%
150%

65%
75%
37%

77%
nm
60%
nm
117%
Cost income ratio - adjusted (2)
58%
67%

59%
72%
35%

76%
nm
48%
nm
67%













For the notes to this table refer to page 3.














Appendix 2 Segmental income statement reconciliations

PBB

CPB 




Central



Ulster

Commercial
Private
RBS


Capital
Williams
items &
Total

UK PBB
BankRoI

Banking
Banking
International

CIB 
Resolution
& Glyn
other
RBS
Quarter ended 30 September 2015*
m
m 

m
m
m

m
m
m
m
m













Income statement 












Total income - statutory
1,313
164

800
160
87

406
89
211
(47)
3,183
Own credit adjustments
-
-

-
-
-

(78)
(38)
-
(20)
(136)
Total income - adjusted
1,313
164

800
160
87

328
51
211
(67)
3,047
Operating expenses - statutory
(762)
(115)

(408)
(118)
(38)

(515)
(937)
(91)
(292)
(3,276)
Restructuring costs - direct
5
3

1
(2)
-

3
190
-
647
847
 - indirect
23
2

(2)
1
2

148
300
-
(474)
-
Litigation and conduct costs
-
-

-
-
-

6
101
-
22
129
Operating expenses - adjusted
(734)
(110)

(409)
(119)
(36)

(358)
(346)
(91)
(97)
(2,300)
Impairment (losses)/releases
(2)
54

(16)
(4)
1

-
50
(5)
1
79
Operating profit/(loss) - adjusted
577
108

375
37
52

(30)
(245)
115
(163)
826













Additional information












Return on equity (1)
27.2%
16.7%

12.3%
7.4%
18.0%

(6.4%)
nm
nm
nm
9.0%
Return on equity - adjusted (1,2)
28.7%
17.5%

12.3%
7.1%
18.8%

(2.7%)
nm
nm
nm
16.3%
Cost income ratio
58%
70%

51%
74%
44%

127%
nm
43%
nm
103%
Cost income ratio - adjusted (2)
56%
67%

51%
74%
41%

109%
nm
43%
nm
75%













*Restated - refer to page 31 of the main document for further details. 












Notes:
(1)
RBS's CET 1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by notional equity allocated at different rates of 11% (Commercial Banking and Ulster Bank RoI), 12% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect capital deductions (RWAes). RBS Return on equity is calculated using profit for the period attributable to ordinary shareholders.
(2)
Excluding own credit adjustments, (loss)/gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.

This information is provided by RNS
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  END
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