REG - Royal Bk Scot.Grp. - Interim Management Statement
The Royal Bank of Scotland Group plc
Q3 2018 Interim Management Statement
RBS reported an operating profit before tax of £961 million for Q3 2018, compared with £871 million in Q3 2017, and £2,787 million for the year to date.
●
Q3 2018 attributable profit of £448 million and £1,336 million for the year to date.
Income stable in a competitive market:
●
Income increased by £268 million, or 2.7%, for the year to date compared with 2017. Excluding NatWest Markets and Central items and notable items in UK PBB and Commercial Banking, income was broadly stable.
●
Q3 2018 income increased by £485 million, or 15.4%, compared with Q3 2017 principally reflecting indemnity insurance recoveries of £272 million and lower disposal losses.
●
Q3 2018 net interest margin of 1.93% decreased by 8 basis points compared with Q2 2018. Excluding one-off items, net interest margin was down 5 basis points, of which 3 basis points related to competitive pressure and 2 basis points due to higher average liquidity balances.
Lower costs through continued transformation and increased digitisation:
●
Compared with 2017, other expenses for the year to date decreased by £183 million, or 3.3%, excluding VAT releases in 2017, and FTEs reduced by 6.8%.
●
We continue to transition from physical to digital services. 6.2 million customers now regularly use our mobile app, 14% higher than Q4 2017. In UK PBB, total digital sales increased by 22% for the year to date, representing 43% of all sales.
Strong capital position:
●
CET1 ratio of 16.7% increased by 60 basis points in the quarter reflecting further RWA reductions and the attributable profit for Q3 2018.
●
RWAs decreased by £4.3 billion in the quarter primarily reflecting reductions in NatWest Markets and the impact of capital initiatives in Commercial Banking.
●
We have taken an additional £100 million impairment charge reflecting the more uncertain economic outlook and a further net £60 million impairment charge in our Irish business in relation to ongoing sales from our loan book to further reduce the level of non performing loans. Underlying credit conditions remained benign during the quarter.
●
Following final settlement with the US Department of Justice, RBS declared a 2p interim dividend on 14 August 2018.
Outlook and recent developments (1)
We retain the outlook guidance we provided in the 2017 Annual Results document.
Further to previously announced plans to be operationally ready to serve our European Economic Area (EEA) customers when the UK leaves the European Union on 29 March 2019, we have received approval from the Dutch regulator (DNB) for the repurposing of the existing NatWest Markets N.V. (formerly RBS N.V.) banking licence.
Note:
(1)
The targets, expectations and trends (including but not limited to impairment provisions) in this document represent management's current expectations and are subject to change, including as a result of the "Risk Factors" on pages 372 to 402 of the 2017 Annual Report and Accounts and the Summary Risk Factors on pages 48 and 49 of the 2018 Interim Results. These statements constitute forward-looking statements; refer to Forward-looking statements in this document.
Business performance summary
Nine months ended
Quarter ended
30 September
30 September
30 September
30 June
30 September
Performance key metrics and ratios
2018
2017
2018
2018
2017
Operating profit before tax
£2,787m
£2,822m
£961m
£613m
£871m
Profit attributable to ordinary shareholders
£1,336m
£1,331m
£448m
£96m
£392m
Net interest margin
1.99%
2.16%
1.93%
2.01%
2.12%
Average interest earning assets
£435,218m
£419,450m
£443,092m
£434,928m
£430,962m
Cost:income ratio (1)
69.1%
69.1%
66.7%
80.0%
67.5%
Earnings per share
- basic
11.1p
11.2p
3.7p
0.8p
3.3p
- basic fully diluted
11.1p
11.2p
3.7p
0.8p
3.3p
Return on tangible equity
5.3%
5.2%
5.4%
1.1%
4.5%
Average tangible equity
£33,699m
£33,964m
£33,492m
£33,522m
£34,465m
Average number of ordinary shares
outstanding during the period (millions)
- basic
11,998
11,840
12,034
12,003
11,886
- fully diluted (2)
12,053
11,913
12,083
12,062
11,943
30 September
30 June
31 December
Balance sheet related key metrics and ratios
2018
2018
2017
Total assets
£719.9bn
£748.3bn
£738.1bn
Funded assets
£587.3bn
£597.2bn
£577.2bn
Loans and advances to customers (excludes reverse repos)
£319.6bn
£320.0bn
£323.2bn
Impairment provisions (3)
£3.9bn
£3.9bn
£3.8bn
Customer deposits (excludes repos)
£366.0bn
£366.3bn
£367.0bn
Liquidity coverage ratio (LCR)
158%
167%
152%
Liquidity portfolio
£195bn
£198bn
£186bn
Net stable funding ratio (NSFR) (4)
139%
140%
132%
Loan:deposit ratio
87%
87%
88%
Total wholesale funding
£78bn
£75bn
£70bn
Short-term wholesale funding
£14bn
£13bn
£18bn
Common Equity Tier (CET1) ratio
16.7%
16.1%
15.9%
Total capital ratio
22.1%
21.5%
21.3%
Pro forma CET 1 ratio, pre 2018 dividend accrual (5)
16.8%
16.2%
15.9%
Risk-weighted assets (RWAs)
£194.5bn
£198.8bn
£200.9bn
CRR leverage ratio
5.4%
5.2%
5.3%
UK leverage ratio
6.3%
6.0%
6.1%
Tangible net asset value (TNAV) per ordinary share
288p
287p
294p
Tangible net asset value (TNAV) per ordinary share - fully diluted
287p
286p
292p
Tangible equity
£34,672m
£34,564m
£35,164m
Number of ordinary shares in issue (millions)
12,048
12,028
11,965
Number of ordinary shares in issue (millions) - fully diluted (2,6)
12,091
12,095
12,031
Notes:
(1)
Operating lease depreciation included in income for the nine months ended 30 September 2018 - £89 million; Q3 2018 - £32 million (nine months ended 30 September 2017 - £107 million; Q2 2018 - £26 million; Q3 2017 - £35 million).
(2)
Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q3 2018 were 49 million shares and for the nine months ended 30 September 2018 were 55 million shares; (Q2 2018 - £59 million, Q3 2017 - £57 million; nine months ended 30 September 2017 - £73 million and as at 30 September 2018 were 43 million shares (30 June 2018 - 67 million shares; 31 December 2017 - 66 million shares).
(3)
30 September 2018 and 30 June 2018 prepared under IFRS 9, 31 December 2017 prepared under IAS 39. Refer to Note 2 for further details.
(4)
In November 2016, the European Commission published its proposal for NSFR rules within the EU as part of its CRR2 package of regulatory reforms. CRR2 NSFR is expected to become the regulatory requirement in future within the EU and the UK. RBS has changed its policy on the NSFR to align with its interpretation of the CRR2 proposals with effect from 1 January 2018. The pro forma CRR2 NSFR at 31 December 2017 under CRR2 proposals is estimated to be 139%.
(5)
The pro forma CET 1 ratio at 30 September 2018 excludes a charge of £120 million (1p per share) that is a reasonably foreseeable final dividend, related to Q3 2018 profits. The 30 June 2018 ratio excluded a charge of £240 million (2p per share) that was a reasonably foreseeable interim dividend related to H1 2018 profits.
(6)
Includes 9 million treasury shares (30 June 2018 - 9 million shares; 31 December 2017 - 16 million shares).
Business performance summary
Summary consolidated income statement for the period ended 30 September 2018
Nine months ended
Quarter ended
30 September
30 September
30 September
30 June
30 September
2018
2017
2018
2018
2017
£m
£m
£m
£m
£m
Net interest income
6,480
6,776
2,154
2,180
2,304
Own credit adjustments
59
(78)
20
18
(5)
Loss on redemption of own debt
-
(7)
-
-
-
Strategic disposals
-
156
-
-
-
Other non-interest income
3,805
3,229
1,468
1,202
858
Non-interest income
3,864
3,300
1,488
1,220
853
Total income
10,344
10,076
3,642
3,400
3,157
Litigation and conduct costs
(1,190)
(521)
(389)
(782)
(125)
Strategic costs
(649)
(1,034)
(299)
(141)
(244)
Other expenses
(5,337)
(5,440)
(1,753)
(1,801)
(1,774)
Operating expenses
(7,176)
(6,995)
(2,441)
(2,724)
(2,143)
Profit before impairment losses
3,168
3,081
1,201
676
1,014
Impairment losses(1)
(381)
(259)
(240)
(63)
(143)
Operating profit before tax
2,787
2,822
961
613
871
Tax charge
(1,139)
(992)
(398)
(412)
(265)
Profit for the period
1,648
1,830
563
201
606
Attributable to:
Non-controlling interests
6
21
22
(23)
(8)
Other owners
306
478
93
128
222
Ordinary shareholders
1,336
1,331
448
96
392
Notable items within total income
IFRS volatility in Central items (2)
(34)
175
77
17
21
Insurance indemnity
272
-
272
-
-
of which:
NatWest Markets
165
-
165
-
-
Central items & other
107
-
107
-
-
UK PBB debt sale gain
26
176
-
-
168
FX gains/losses in Central items & other
(7)
(175)
(11)
19
(67)
Commercial Banking fair value and disposal gain/(loss)
179
52
(13)
115
52
NatWest Markets legacy business disposal (losses)/gains
(43)
(549)
14
(41)
(446)
Notable items within expenses
Litigation and conduct costs
(1,190)
(521)
(389)
(782)
(125)
of which: US RMBS
(823)
(222)
(21)
(803)
-
of which: DoJ
(1,040)
-
-
(1,040)
-
Nomura
241
-
-
241
-
of which: PPI
(200)
-
(200)
-
-
of which: Ulster Bank RoI
(54)
(34)
(37)
(8)
(1)
VAT recovery in Central items & other
-
80
-
-
29
Notes:
(1)
30 September 2018 and 30 June 2018 prepared under IFRS 9, 31 December 2017 and 30 September 2017 prepared under IAS 39. Refer to Note 2 for further information on the impact of IFRS 9 on classification and basis of preparation.
(2)
IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
Business performance summary
Personal & Business Banking - UK Personal & Business Banking
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
£m
£m
£m
£bn
£bn
£bn
Total income
1,564
1,570
1,757
Net loans & advances
Operating expenses
(959)
(746)
(819)
to customers
163.2
161.9
161.7
Impairment losses
(70)
(90)
(78)
Customer deposits
183.4
182.2
180.6
Operating profit
535
734
860
RWAs
45.4
43.4
43.0
Return on equity
20.9%
30.0%
34.2%
Net interest margin
2.76%
2.81%
2.83%
Q3 2018 performance
●
UK PBB now has 6.2 million regular mobile app users, 19% higher than Q3 2017 and 14% higher than Q4 2017, supporting 71% digital penetration of active current account customers. Total digital sales increased by 22% in the year to date compared with the prior period, representing 43% of all sales, compared with 36% in the prior period. In personal banking, 56% of personal loans and 60% of mortgage switching was done digitally in the year to date. In business banking, 89% of current accounts and 66% of loans less than £50,000 were originated digitally in the year to date.
●
Total income was £193 million, or 11.0%, lower than Q3 2017 reflecting a £168 million debt sale gain in Q3 2017 and £11 million transfer of the Collective Investment business to Private Banking. Excluding these items, income was £14 million, or 0.9%, lower than Q3 2017, including an £8 million reduction in overdraft fees. Net interest margin decreased by 5 basis points to 2.76% compared with Q2 2018 driven by ongoing mortgage margin compression partly offset by improving deposit margins as interest rates rise.
●
Operating expenses were £140 million, or 17.1%, higher than Q3 2017 driven by increased litigation and conduct costs of £206 million, of which £200 million related to Payment Protection Insurance. Excluding litigation and conduct costs, operating expenses were £66 million, or 8.1%, lower driven by reduced headcount reflecting continued operating efficiencies.
●
Net loans and advances increased by 0.8% compared with Q2 2018. Gross new mortgage lending in Q3 2018 was £8.2 billion. Mortgage new business market share was approximately 12% in Q3 2018, supporting stock share of 10%, with mortgage approval share of approximately 13%.
●
RWAs increased by £2.0 billion compared with Q2 2018 primarily reflecting model updates, particularly mortgages.
Personal & Business Banking - Ulster Bank RoI
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
€m
€m
€m
€bn
€bn
€bn
Total income
169
190
166
Net loans & advances
Operating expenses
(188)
(140)
(141)
to customers
21.6
21.6
22.0
Impairment
Customer deposits
20.4
19.9
19.8
(losses)/releases
(68)
39
11
RWAs
18.6
19.0
20.2
Operating (loss)/profit
(87)
89
36
Return on equity
(12.7%)
12.5%
4.6%
Net interest margin
1.72%
1.91%
1.58%
Q3 2018 performance
●
Total income increased by €3 million, or 1.8%, compared with Q3 2017 reflecting an increase in lending income and lower cost of deposits, with a 14 basis point increase in net interest margin, largely offset by a reduction in income from free funds. Compared with Q2 2018, net interest margin decreased by 19 basis points primarily reflecting a €13 million one-off funding benefit in the prior quarter.
●
Operating expenses increased by €47 million, or 33.3%, compared with Q3 2017 principally due to higher litigation and conduct costs, largely relating to customer remediation and project costs associated with legacy business issues.
●
A net impairment loss of €68 million includes a provision for a further non performing loan sale that we expect would result in a material reduction in our non performing exposure ratio.
●
RWAs reduced by €0.4 billion compared with Q2 2018 principally reflecting an improvement in credit metrics.
Business performance summary
Commercial & Private Banking - Commercial Banking
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
£m
£m
£m
£bn
£bn
£bn
Total income
789
915
928
Net loans & advances
Operating expenses
(443)
(404)
(443)
to customers
90.1
90.7
97.0
Impairment
Customer deposits
96.4
96.4
98.0
(losses)/releases
(103)
4
(151)
RWAs
69.0
71.7
71.8
Operating profit
243
515
334
Return on equity
6.6%
15.9%
8.6%
Net interest margin
1.71%
1.66%
1.74%
Comparisons with prior periods are impacted by the transfer of shipping and other activities from NatWest Markets, the transfer of whole business securitisations and Relevant Financial Institutions to NatWest Markets in preparation for ring-fencing and the transfer of the funds and trustee depository business to RBS International. The net impact of the transfers on Q3 2017 operating profit would have been to reduce income by £81 million, operating expenses by £2 million and impairments by £34 million. The net impact on the Q2 2018 balance sheet would have been to reduce net loans and advances by £0.2 billion and RWAs by £0.4 billion. The variances in the commentary below have been adjusted for the impact of these transfers unless otherwise stated.
Q3 2018 performance (comparisons adjusted for transfers)
●
After successfully testing Bankline mobile with 750 customers, we will be launching in the Apple app store in Q4 2018. We are now onboarding 90% of new customers digitally, up from 75% as at the end of 2017 with a greater than 50% reduction in time taken to complete the application.
●
Total income of £789 million was £58 million, or 6.8%, lower than Q3 2017, reflecting £13 million of fair value and disposal losses compared with £28 million of gains in Q3 2017 and lower asset volumes. On an unadjusted basis, net interest margin of 1.71% increased by 5 basis points compared with Q2 2018 due to continued progress on pricing.
●
Operating expenses were £2 million lower than Q3 2017 reflecting lower staff costs through headcount reductions, partially offset by increased strategic, litigation and conduct costs.
●
Net impairment losses were £14 million lower than Q3 2017 reflecting lower single name charges.
●
Net loans and advances decreased by £0.4 billion compared with Q2 2018 principally reflecting the impact of active capital management, although we continue to grow in target sectors.
●
RWAs decreased by £2.3 billion compared with Q2 2018 primarily reflecting the net impact of capital initiatives.
Commercial & Private Banking - Private Banking
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
£m
£m
£m
£bn
£bn
£bn
Total income
195
198
166
Net loans & advances
Operating expenses
(110)
(104)
(103)
to customers
14.2
13.8
13.5
Impairment
Customer deposits
27.2
26.4
26.9
(losses)/releases
(1)
--
3
RWAs
9.5
9.4
9.1
Operating profit
84
94
66
AUM
21.8
21.3
21.5
Return on equity
17.3%
19.3%
13.2%
Net interest margin
2.54%
2.54%
2.39%
Comparisons with prior periods are impacted by the transfer of the Collective Investment Fund business from UK PBB and by the transfers of Coutts Crown Dependency and the International Client Group Jersey to RBS International. The net impact of the transfers on Q3 2017 operating profit would have been to increase income by £9 million and increase operating expenses by £3 million. The variances in the commentary below have been adjusted for the impact of these transfers, unless otherwise stated.
Q3 2018 performance (comparisons adjusted for transfers)
●
Total Income of £195 million was £20 million, or 11.4%, higher than Q3 2017, principally reflecting increased assets under management, higher lending volumes and increased deposit income. Compared with Q2 2018, net interest margin remained stable at 2.54%.
●
Operating expenses increased by £4 million compared with Q3 2017, as increased back-office operations costs have been partially offset by lower staff expenses, reflecting an 9.5% reduction in headcount.
●
Net loans and advances increased by £0.4 billion compared with Q2 2018 principally reflecting continued targeted growth in mortgage lending, whilst capital efficient lending has kept RWAs broadly stable.
●
Assets under management increased by £0.5 billion compared with Q2 2018, reflecting new business inflows and investment performance. In addition, Private Banking manages a further £7.1 billion of assets under management which sit in other parts of the Group. Total assets under management increased by 1.2%.
Business performance summary
RBS International
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
£m
£m
£m
£bn
£bn
£bn
Total income
155
147
97
Net loans & advances
Operating expenses
(60)
(55)
(59)
to customers
13.0
13.0
8.7
Impairment
Customer deposits
27.0
28.5
29.0
(losses)/releases
(3)
3
2
RWAs
6.9
6.8
5.1
Operating profit
92
95
40
Return on equity
26.9%
27.9%
10.4%
Net interest margin
1.73%
1.72%
1.39%
Comparisons with prior periods are impacted by the transfer of the funds and trustee depositary business from Commercial Banking and by the transfers of Coutts Crown Dependency and the International Client Group from Private Banking. The net impact of the transfers on Q3 2017 would have increased income by £44 million and increased operating expenses by £3 million. The variances in the commentary below have been adjusted for the impact of these transfers, unless otherwise stated.
Q3 2018 performance (comparisons adjusted for transfers)
●
Total Income of £155 million was £14 million, or 9.9%, higher than Q3 2017 principally reflecting deposit margin benefits. Net interest margin increased by 1 basis point compared with Q2 2018 reflecting funding benefits partially offset by an increase in deposits placed with central banks.
●
Operating expenses were £2 million lower than Q3 2017 as a reduction in conduct costs has been partially offset by increased back-office costs, associated with becoming a non ring-fenced bank.
●
Net loans and advances were stable compared with Q2 2018. Customer deposits decreased by £1.5 billion, or 5.3%, reflecting higher outflows of short term placements in the Funds sector since June.
NatWest Markets(1)
Quarter ended
As at
30 September
30 June
30 September
30 September
30 June
31 December
2018
2018
2017
2018
2018
2017
£m
£m
£m
£bn
£bn
£bn
Total income
569
284
20
Funded assets
120.9
134.5
118.7
Operating expenses
(478)
(322)
(526)
RWAs
46.5
50.1
52.9
Impairment
(losses)/releases
(4)
(13)
71
Operating profit/(loss)
87
(51)
(435)
Return on equity
1.8%
(3.0%)
(15.4%)
Note:
(1) The NatWest Markets operating segment should not be assumed to be the same as the NatWest Markets Plc legal entity or group following completion of the capital reduction on 2 July 2018.
Comparisons with prior periods are impacted by the transfer of shipping and other activities to Commercial Banking and the transfer of whole business securitisations and Relevant Financial Institutions from Commercial Banking in preparation for ring-fencing. The net impact of the transfers on Q3 2017 operating profit would have been to increase total income by £40 million, reduce the impairment release by £34 million and reduce operating expenses by £1 million.
Q3 2018 performance (comparisons adjusted for transfers)
●
Total income increased by £509 million to £569 million compared with Q3 2017 primarily reflecting indemnity insurance recoveries in the quarter of £165 million and non recurring disposal losses in the legacy business in Q3 2017. Income of £331 million in the core business decreased by £70 million compared with Q3 2017 reflecting more muted market conditions, although customer activity remained stable.
●
Operating expenses decreased by £47 million, or 9.0%, compared with Q3 2017 reflecting reductions in both the core and legacy businesses, partially offset by higher strategic costs, up £36 million to £93 million, and litigation and conduct costs, up £11 million to £113 million.
●
Funded assets decreased by £13.6 billion compared with Q2 2018 as the business continues to manage leverage exposure in line with becoming a non ring-fenced bank.
●
RWAs decreased by £3.6 billion in the quarter as core RWAs reduced by £2.3 billion, primarily reflecting lower market risk, and legacy RWAs reduced by £1.3 billion. RWAs of £46.5 billion include £5.8 billion relating to Alawwal.
Central items & other
●
Central items not allocated represented a charge of £4 million in Q3 2018, principally reflecting strategic costs of £131 million, partially offset by indemnity insurance recoveries of £107 million.
Business performance summary
End-point CRR basis
30 September
30 June
31 December
2018
2018
2017
Risk asset ratios
%
%
%
CET1
16.7
16.1
15.9
Tier 1
18.8
18.1
17.9
Total
22.1
21.5
21.3
Capital
£m
£m
£m
Tangible equity
34,672
34,564
35,164
Expected loss less impairment provisions
(606)
(636)
(1,286)
Prudential valuation adjustment
(574)
(608)
(496)
Deferred tax assets
(731)
(746)
(849)
Own credit adjustments
(264)
(224)
(90)
Pension fund assets
(283)
(316)
(287)
Cash flow hedging reserve
370
151
(227)
Other adjustments for regulatory purposes
(129)
(235)
28
Total deductions
(2,217)
(2,614)
(3,207)
CET1 capital
32,455
31,950
31,957
AT1 capital
4,051
4,051
4,041
Tier 1 capital
36,506
36,001
35,998
Tier 2 capital
6,455
6,659
6,765
Total regulatory capital
42,961
42,660
42,763
Risk-weighted assets
Credit risk
- non-counterparty
142,500
144,000
144,700
- counterparty
14,100
15,100
15,400
Market risk
15,500
17,300
17,000
Operational risk
22,400
22,400
23,800
Total RWAs
194,500
198,800
200,900
Leverage (1)
Cash and balances at central banks
106,500
102,600
98,300
Derivatives
132,600
151,100
160,800
Loans and advances
337,200
338,100
339,400
Reverse repos
29,800
38,900
40,700
Other assets
113,800
117,600
98,900
Total assets
719,900
748,300
738,100
Derivatives
- netting and variation margin
(136,900)
(153,400)
(161,700)
- potential future exposures
42,700
46,200
49,400
Securities financing transactions gross up
1,700
2,700
2,300
Undrawn commitments
49,500
50,700
53,100
Regulatory deductions and other adjustments
(700)
(1,200)
(2,100)
CRR Leverage exposure
676,200
693,300
679,100
CRR leverage ratio%
5.4
5.2
5.3
UK leverage exposure (2)
580,300
597,700
587,100
UK leverage ratio% (2)
6.3
6.0
6.1
Notes:
(1)
Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.
(2)
Based on end-point CRR Tier 1 capital and UK leverage exposures reflecting the post EU referendum measures announced by the Bank of England in the third quarter of 2016.
Segment performance
Segment performance
Quarter ended 30 September 2018
PBB
CPB
Central
Ulster
Commercial
Private
RBS
NatWest
items &
Total
UK PBB
Bank RoI
Banking
Banking
International
Markets
other (1)
RBS
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
Net interest income
1,289
110
525
133
124
15
(42)
2,154
Other non-interest income
275
41
264
62
31
534
261
1,468
Own credit adjustments
-
-
-
-
-
20
-
20
Total income
1,564
151
789
195
155
569
219
3,642
Direct expenses - staff costs
(221)
(51)
(131)
(39)
(26)
(120)
(299)
(887)
- other costs
(76)
(31)
(57)
(16)
(12)
(61)
(613)
(866)
Indirect expenses
(415)
(45)
(221)
(52)
(19)
(91)
843
-
Strategic costs - direct
-
(1)
(8)
1
(2)
(78)
(211)
(299)
- indirect
(41)
(2)
(17)
(4)
(1)
(15)
80
-
Litigation and conduct costs
(206)
(37)
(9)
-
-
(113)
(24)
(389)
Operating expenses
(959)
(167)
(443)
(110)
(60)
(478)
(224)
(2,441)
Operating profit/(loss) before impairment (losses)/releases
605
(16)
346
85
95
91
(5)
1,201
Impairment (losses)/releases
(70)
(60)
(103)
(1)
(3)
(4)
1
(240)
Operating profit/(loss)
535
(76)
243
84
92
87
(4)
961
Additional information
Return on equity (2)
20.9%
(12.7%)
6.6%
17.3%
26.9%
1.8%
nm
5.4%
Cost:income ratio (3)
61.3%
110.6%
54.3%
56.4%
38.7%
84.0%
nm
66.7%
Loan impairment rate
0.17%
1.18%
0.45%
nm
nm
nm
nm
0.30%
Net interest margin (%)
2.76%
1.72%
1.71%
2.54%
1.73%
0.22%
nm
1.93%
Third party customer asset rate
3.39%
2.42%
2.89%
2.91%
2.29%
nm
nm
nm
Third party customer funding rate
(0.29%)
(0.20%)
(0.33%)
(0.26%)
(0.11%)
nm
nm
nm
Average interest earning assets (£bn)
185.2
25.4
122.0
20.8
28.4
26.7
34.6
443.1
Total assets (£bn)
195.6
25.3
144.0
21.4
29.0
253.3
51.3
719.9
Funded assets (£bn)
195.6
25.3
144.0
21.4
29.0
120.9
51.1
587.3
Net loans and advances to customers (£bn)
163.2
19.2
90.1
14.2
13.0
19.7
0.2
319.6
Impairment provisions (£bn)(4)
(1.4)
(1.2)
(1.0)
(0.1)
-
(0.2)
-
(3.9)
Customer deposits (£bn)
183.4
18.1
96.4
27.2
27.0
12.8
1.1
366.0
Risk-weighted assets (RWAs) (£bn)
45.4
16.5
69.0
9.5
6.9
46.5
0.7
194.5
RWA equivalent
47.1
16.6
72.5
9.5
6.9
49.9
0.7
203.2
Employee numbers (FTEs - thousands)
24.8
3.1
8.1
1.9
1.7
4.9
24.1
68.6
For the notes to this table, refer to page 10. nm = not meaningful
Segment performance
Nine months ended 30 September 2018
PBB
CPB
Central
Ulster
Commercial
Private
RBS
NatWest
items &
Total
UK PBB
Bank RoI
Banking
Banking
International
Markets
other (1)
RBS
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
Net interest income
3,831
334
1,522
385
343
82
(17)
6,480
Other non-interest income
894
129
1,047
192
96
1,149
298
3,805
Own credit adjustments
-
-
-
-
-
59
-
59
Total income
4,725
463
2,569
577
439
1,290
281
10,344
Direct expenses - staff costs
(682)
(149)
(404)
(122)
(77)
(429)
(927)
(2,790)
- other costs
(207)
(76)
(157)
(44)
(45)
(176)
(1,842)
(2,547)
Indirect expenses
(1,279)
(133)
(662)
(157)
(56)
(292)
2,579
-
Strategic costs - direct
(26)
1
(16)
-
(2)
(106)
(500)
(649)
- indirect
(137)
(8)
(50)
(11)
(4)
(21)
231
-
Litigation and conduct costs
(210)
(54)
(3)
(1)
10
(125)
(807)
(1,190)
Operating expenses
(2,541)
(419)
(1,292)
(335)
(174)
(1,149)
(1,266)
(7,176)
Operating profit/(loss) before impairment (losses)/releases
2,184
44
1,277
242
265
141
(985)
3,168
Impairment (losses)/releases
(217)
(34)
(122)
(2)
-
(8)
2
(381)
Operating profit/(loss)
1,967
10
1,155
240
265
133
(983)
2,787
Additional information
Return on equity (2)
26.2%
0.5%
11.6%
16.3%
26.0%
0.2%
nm
5.3%
Cost:income ratio (3)
53.8%
90.5%
48.5%
58.1%
39.6%
89.1%
nm
69.1%
Loan impairment rate
0.18%
0.22%
0.18%
nm
nm
nm
nm
0.16%
Net interest margin %
2.79%
1.81%
1.67%
2.53%
1.67%
0.41%
nm
1.99%
Third party customer asset rate %
3.41%
2.40%
2.81%
2.87%
2.38%
nm
nm
nm
Third party customer funding rate %
(0.28%)
(0.21%)
(0.32%)
(0.21%)
(0.10%)
nm
nm
nm
Average interest earning assets (£bn)
183.4
24.7
121.8
20.3
27.4
27.0
30.6
435.2
Total assets (£bn)
195.6
25.3
144.0
21.4
29.0
253.3
51.3
719.9
Funded assets (£bn)
195.6
25.3
144.0
21.4
29.0
120.9
51.1
587.3
Net loans and advances to customers (£bn)
163.2
19.2
90.1
14.2
13.0
19.7
0.2
319.6
Impairment provisions (£bn) (4)
(1.4)
(1.2)
(1.0)
(0.1)
-
(0.2)
-
(3.9)
Customer deposits (£bn)
183.4
18.1
96.4
27.2
27.0
12.8
1.1
366.0
Risk-weighted assets (RWAs) (£bn)
45.4
16.5
69.0
9.5
6.9
46.5
0.7
194.5
RWA equivalent (RWAes) (£bn)
47.1
16.6
72.5
9.5
6.9
49.9
0.7
203.2
Employee numbers (FTEs - thousands)
24.8
3.1
8.1
1.9
1.7
4.9
24.1
68.6
For the notes to this table refer to the following page. nm = not meaningful.
Condensed consolidated income statement for the period ended 30 September 2018 (unaudited)
Nine months ended
Quarter ended
30 September
30 September
30 September
30 June
30 September
2018
2017
2018
2018
2017
£m
£m
£m
£m
£m
Interest receivable
8,224
8,280
2,780
2,742
2,818
Interest payable
(1,744)
(1,504)
(626)
(562)
(514)
Net interest income (1)
6,480
6,776
2,154
2,180
2,304
Fees and commissions receivable
2,433
2,492
787
833
826
Fees and commissions payable
(671)
(652)
(220)
(244)
(204)
Income from trading activities
1,346
832
499
382
(52)
Loss on redemption of own debt
-
(7)
-
-
-
Other operating income
756
635
422
249
283
Non-interest income
3,864
3,300
1,488
1,220
853
Total income
10,344
10,076
3,642
3,400
3,157
Staff costs
(3,108)
(3,576)
(1,022)
(1,031)
(1,129)
Premises and equipment
(972)
(1,041)
(328)
(274)
(363)
Other administrative expenses
(2,521)
(1,736)
(885)
(1,237)
(528)
Depreciation and amortisation
(544)
(630)
(206)
(175)
(119)
Write down of other intangible assets
(31)
(12)
-
(7)
(4)
Operating expenses
(7,176)
(6,995)
(2,441)
(2,724)
(2,143)
Profit before impairment losses
3,168
3,081
1,201
676
1,014
Impairment losses
(381)
(259)
(240)
(63)
(143)
Operating profit before tax
2,787
2,822
961
613
871
Tax charge
(1,139)
(992)
(398)
(412)
(265)
Profit for the period
1,648
1,830
563
201
606
Attributable to:
Non-controlling interests
6
21
22
(23)
(8)
Preference share and other dividends
306
478
93
128
222
Ordinary shareholders
1,336
1,331
448
96
392
Earnings per ordinary share (EPS)
Earnings per ordinary share (2)
11.1p
11.2p
3.7p
0.8p
3.3p
Notes:
(1)
Negative interest on loans and advances is reported as interest payable. Negative interest on customer deposits is reported as interest receivable.
(2)
There is no dilutive impact in any period.
Notes to segment performance on pages 8 and 9.
Notes:
(1) Central items include unallocated transactions which principally comprise volatile items under IFRS and RMBS related charges.
(2) RBS's CET 1 target is in excess of 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 14% (Ulster Bank RoI), 11% (Commercial Banking), 13.5% (Private Banking), 16% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). RBS Return on equity is calculated using profit for the period attributable to ordinary shareholders.
(3) Operating lease depreciation included in income for the nine months ended 30 September 2018 - £89 million; Q3 2018 - £32 million.
(4) Prepared under IFRS 9. Refer to Note 2 for further details.
Condensed consolidated statement of comprehensive income for the period ended 30 September 2018 (unaudited)
Nine months ended
Quarter ended
30 September
30 September
30 September
30 June
30 September
2018
2017
2018
2018
2017
£m
£m
£m
£m
£m
Profit for the period
1,648
1,830
563
201
606
Items that do not qualify for reclassification
Profit/(loss) on remeasurement of retirement benefit schemes
72
(26)
72
-
-
Profit/(loss) on fair value of credit in financial liabilities DFV
through profit or loss due to own credit risk
109
(107)
14
34
(30)
Fair value through other comprehensive income (FVOCI) (1)
61
-
58
3
-
Funding commitment to retirement benefit schemes (2)
(2,000)
-
-
(2,000)
-
Tax
487
(5)
(13)
513
3
(1,271)
(138)
131
(1,450)
(27)
Items that do qualify for reclassification
FVOCI financial assets (1)
31
37
(168)
68
8
Cash flow hedges
(822)
(983)
(301)
63
(372)
Currency translation
120
82
102
91
(21)
Tax
224
237
127
(29)
76
(447)
(627)
(240)
193
(309)
Other comprehensive loss after tax
(1,718)
(765)
(109)
(1,257)
(336)
Total comprehensive (loss)/income for the period
(70)
1,065
454
(1,056)
270
Total comprehensive (loss)/income is attributable to:
Non-controlling interests
28
30
57
(18)
(19)
Preference shareholders
94
155
20
56
70
Paid-in equity holders
212
323
73
72
152
Ordinary shareholders
(404)
557
304
(1,166)
67
(70)
1,065
454
(1,056)
270
Notes:
(1)
Refer to Note 2 for further information on the impact of IFRS 9 on classification and basis of preparation, periods ended 30 September 2018 and 30 June 2018 prepared under IFRS 9 and periods ended 30 September 2017 under IAS 39.
(2)
On 17 April 2018 RBS agreed a Memorandum of Understanding (MoU) with the Trustees of the RBS Group Pension Fund in connection with the requirements of ring-fencing. NatWest Markets Plc cannot continue to be a participant in the Main section and separate arrangements are required for its employees. Under the MoU, NatWest Bank Plc will make a contribution of £2 billion to strengthen funding of the Main section in recognition of the changes in covenant. The contribution was paid on 9 October 2018.
Condensed consolidated balance sheet as at 30 September 2018 (unaudited)
30 September
31 December
2018
2017
£m
£m
Assets
Cash and balances at central banks
106,503
98,337
Net loans and advances to banks
17,625
16,254
Reverse repurchase agreements and stock borrowing
9,468
13,997
Loans and advances to banks
27,093
30,251
Net loans and advances to customers
319,577
323,184
Reverse repurchase agreements and stock borrowing
20,339
26,735
Loans and advances to customers
339,916
349,919
Debt securities
85,662
78,933
Equity shares
604
450
Settlement balances
11,213
2,517
Derivatives
132,574
160,843
Intangible assets
6,581
6,543
Property, plant and equipment
4,247
4,602
Deferred tax
1,781
1,740
Prepayments, accrued income and other assets
3,512
3,726
Assets of disposal groups
202
195
Total assets
719,888
738,056
Liabilities
Bank deposits
39,634
39,479
Repurchase agreements and stock lending
7,993
7,419
Deposits by banks
47,627
46,898
Customer deposits
365,985
367,034
Repurchase agreements and stock lending
33,113
31,002
Customer accounts
399,098
398,036
Debt securities in issue
39,067
30,559
Settlement balances
10,625
2,844
Short positions
27,676
28,527
Derivatives
125,333
154,506
Provisions for liabilities and charges
3,247
7,757
Accruals and other liabilities
5,602
6,392
Retirement benefit liabilities
2,128
129
Deferred tax
476
583
Subordinated liabilities
10,341
12,722
Liabilities of disposal groups
1
10
Total liabilities
671,221
688,963
Equity
Non-controlling interests
791
763
Owners' equity*
Called up share capital
12,048
11,965
Reserves
35,828
36,365
Total equity
48,667
49,093
Total liabilities and equity
719,888
738,056
*Owners' equity attributable to:
Ordinary shareholders
41,253
41,707
Other equity owners
6,623
6,623
47,876
48,330
Condensed consolidated statement of changes in equity for the period ended 30 September 2018 (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 2018
12,809
4,058
17,130
14,333
48,330
763
49,093
Implementation of IFRS 9 on 1 January 2018 (1)
-
-
(105)
34
(71)
-
(71)
Profit attributable to ordinary shareholders
and other equity owners
-
-
1,642
-
1,642
6
1,648
Other comprehensive income
- Realised gains in period on FVOCI equity shares
-
-
8
(8)
-
-
-
- Funding commitment to retirement benefit
schemes (2)
-
-
(2,000)
-
(2,000)
-
(2,000)
- Changes in fair value of credit in financial
liabilities at fair value through profit or loss
-
-
109
-
109
-
109
- Other amounts recognised in equity
-
-
72
(177)
(105)
22
(83)
- Amount transferred from equity to earnings
-
-
-
(545)
(545)
-
(545)
- Recycled to profit or loss on disposal of
businesses (3)
-
-
-
90
90
-
90
- Tax
-
-
493
218
711
-
711
Ordinary share dividends paid
-
-
(241)
-
(241)
-
(241)
Preference share and other dividends paid
-
-
(306)
-
(306)
-
(306)
Shares and securities issued during the period
222
-
(2)
-
220
-
220
Share-based payments - gross
-
-
23
-
23
-
23
Movement in own shares held
19
-
-
-
19
-
19
At 30 September 2018
13,050
4,058
16,823
13,945
47,876
791
48,667
30 September
2018
Total equity is attributable to:
£m
Non-controlling interests
791
Preference shareholders
2,565
Paid-in equity holders
4,058
Ordinary shareholders
41,253
48,667
*Other reserves consist of:
Merger reserve
10,881
Fair value through other comprehensive income reserve
361
Cash flow hedging reserve
(370)
Foreign exchange reserve
3,073
13,945
Notes:
(1)
Refer to Note 2 for further information.
(2)
On 17 April 2018 RBS agreed a Memorandum of Understanding (MoU) with the Trustees of the RBS Group Pension Fund in connection with the requirements of ring-fencing. NatWest Markets Plc cannot continue to be a participant in the Main section and separate arrangements are required for its employees. Under the MoU, NatWest Bank Plc will make a contribution of £2 billion to strengthen funding of the Main section in recognition of the changes in covenant. The contribution was paid on 9 October 2018.
(3)
No tax impact.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with RBS's 2017 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards 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).
2. Accounting policies
In July 2014, the IASB published IFRS 9 'Financial instruments' with an effective date of 1 January 2018. For further details see pages 261 and 262 of the Group's 2017 Annual Report and Accounts, the RBS Group February 2018 IFRS 9 Transition report and Appendix 1 of the Group's 2018 Interim Results. There has been no restatement of accounts prior to 2018. The impact on the Group's balance sheet at 1 January 2018 is as follows:
Impact of IFRS 9
Expected
31 December
Classification &
credit
1 January
2017
measurement
losses
Tax
2018
£m
£m
£m
£m
£m
Cash and balances at central banks
98,337
-
(1)
-
98,336
Net loans and advances to banks
30,251
-
(3)
-
30,248
Net loans and advances to customers
349,919
517
(524)
-
349,912
Debt securities and equity shares
79,383
44
(3)
-
79,424
Other assets
19,323
-
-
25
19,348
Total assets
738,056
561
(531)
25
738,111
Total liabilities
688,963
-
85
41
689,089
Total equity
49,093
561
(616)
(16)
49,022
Total liabilities and equity
738,056
561
(531)
25
738,111
Total
Key differences in moving from IAS 39 to IFRS 9 on impairment loss
£m
31 December 2017 - IAS 39 impairment provision (1)
3,832
Removal of IAS 39 latent provision
(390)
IFRS 9 12 month expected credit loss (ECL) on Stage 1 and 2
513
Increase in Stage 2 ECL to lifetime (discounted)
356
Stage 3 loss estimation (EAD, LGD)
73
Impact of multiple economic scenarios
64
1 January 2018 - IFRS 9 ECL
4,448
Note:
(1) IAS 39 includes £28 million relating to AFS and LAR debt securities and £3,814 million relating to loans less £10 million on loans that are now carried at fair value.
The Group's principal accounting policies are as set out on pages 251 to 263 of the Group's 2017 Annual Report and Accounts. From 1 January 2018 the accounting policies have been updated to reflect the adoption of IFRS 9 as mentioned above. Other than in relation to IFRS 9 other amendments to IFRS effective for 2018, including IFRS 15 'Revenue from contracts with customers', IFRS 2 'Share-based payments' and IAS 40 'Investment Property' have not had a material effect on the Group's 2018 Interim Results.
Notes
2. Accounting policies continued
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 the Group's financial condition are those relating to 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 259 to 261 of the Group's 2017 Annual Report and Accounts. From 1 January 2018, the previous critical accounting policy relating to loan impairment provisions has been superseded on the adoption of IFRS 9 for which details are included in the RBS Group February 2018 IFRS 9 Transition report and Appendix 1 of the Group's 2018 Interim Results.
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 2018 have been prepared on a going concern basis.
3. Provisions for liabilities and charges
Litigation
Payment
Other
and other
protection
customer
regulatory
insurance
redress
DoJ (1)
(incl. RMBS)
Other
Total
£m
£m
£m
£m
£m
£m
At 1 January 2018
1,053
870
3,243
641
1,950
7,757
Implementation of IFRS 9 on 1 January 2018 (2)
-
-
-
-
85
85
Currency translation and other movements
-
(5)
(119)
(4)
(1)
(129)
Charge to income statement
-
19
-
3
111
133
Releases to income statement
-
(10)
(1)
(5)
(15)
(31)
Provisions utilised
(152)
(115)
(90)
(52)
(100)
(509)
At 31 March 2018
901
759
3,033
583
2,030
7,306
RMBS transfers (1)
-
-
(567)
567
-
-
Currency translation and other movements
-
-
209
32
(24)
217
Charge to income statement
-
46
1,040
23
93
1,202
Releases to income statement
-
(51)
-
(305)
(119)
(475)
Provisions utilised
(156)
(104)
-
(189)
(806)
(1,255)
At 30 June 2018
745
650
3,715
711
1,174
6,995
Transfer from accruals and other liabilities
-
3
-
-
-
3
Currency translation and other movements
-
1
46
12
11
70
Charge to income statement
200
55
-
133
33
421
Releases to income statement
-
(6)
-
(10)
(48)
(64)
Provisions utilised
(142)
(112)
(3,761)
(35)
(128)
(4,178)
At 30 September 2018
803
591
-
811
1,042
3,247
Notes:
(1)
RMBS provision has been redesignated 'DoJ' and the remaining RMBS litigation matters transferred to Litigation and other regulatory as of 1 April 2018 to reflect progress on resolution.
(2)
Refer to Note 2 for further details.
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.
4. Litigation, investigations and reviews
RBS's 2018 Interim Results, issued on 3 August 2018, included comprehensive disclosures about RBS's litigation, investigations and reviews in Note 11. Set out below are the material developments in these matters since the 2018 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
London Interbank Offered Rate (LIBOR) and other rates litigation
Certain members of the Group were named as defendants in a class action relating to alleged manipulation of the Singapore Interbank Offered Rate (SGD SIBOR) and Singapore Swap Offer Rate (SOR), which is pending in the United States District Court for the Southern District of New York.
Notes
4. Litigation, investigations and reviews continued
On 5 October 2018, the court issued its decision on defendants' motion to dismiss the amended complaint in this matter. The court permitted certain antitrust claims to proceed against NatWest Markets Plc and certain other non-RBS defendants, but dismissed all other claims.
TeraExchange antitrust litigation
RBS companies, including RBSG, are among the defendants in an antitrust case filed by TeraExchange in which TeraExchange alleges that the defendants conspired to boycott its credit default swap trading platform. On 1 October 2018, the United States District Court for the Southern District of New York dismissed all claims against RBS companies.
Total Value Annuity litigation
A class action lawsuit was filed in May 2018 in the United States District Court for Kansas alleging that NatWest Markets Plc conspired with Security Benefit Life Insurance Company and others to defraud purchasers of the Total Value Annuity issued by Security Benefit Life Insurance Company. On 24 October 2018, the plaintiff voluntarily dismissed all claims against NatWest Markets Plc.
Thornburg adversary proceeding
Certain RBS companies, including NatWest Markets Plc and NatWest Markets Securities Inc., as well as several other financial institutions, are defendants in an adversary proceeding filed in the US bankruptcy court in Maryland by the trustee for TMST, Inc. (formerly known as Thornburg Mortgage, Inc.). The trustee seeks recovery of transfers made under certain restructuring agreements as, among other things, avoidable fraudulent and preferential conveyances and transfers. On 27 September 2018, the RBS defendants reached an agreement to settle all claims against them for US$23.5 million. The settlement is subject to approval by the bankruptcy court, and the amount is covered by a provision existing as of 30 September 2018.
Investigations and reviews
Residential mortgage-backed securities (RMBS) and other securitised products investigations
On 14 August 2018, RBSG (together with its subsidiaries) announced that it had reached a final settlement with the US Department of Justice (DOJ) to resolve its investigation into the issuance and underwriting of RMBS, involving a civil monetary penalty of US$4.9 billion. The settlement amount, which was paid in September, was covered by existing provisions.
In October 2017, NatWest Markets Securities Inc. entered into a non-prosecution agreement (NPA) with the United States Attorney for the District of Connecticut (USAO) in connection with alleged misrepresentations to counterparties relating to secondary trading in various form of asset-backed securities. In the NPA, the USAO agreed not to file criminal charges relating to certain conduct and information described in the NPA if NatWest Markets Securities Inc. complies with the NPA during its term. In October 2018, NatWest Markets Securities Inc. agreed to a six-month extension of the NPA while the USAO reviews the circumstances of an unrelated matter reported during the course of the NPA.
Payment Protection Insurance (PPI)
An additional provision of £200 million was taken at Q3 2018, reflecting greater than predicted complaints volumes. RBS has made provisions totalling £5.3 billion to date for PPI claims, of which £4.5 billion had been utilised by 30 September 2018.
US dollar processing consent order
In December 2013, RBS and NatWest Markets Plc entered into a consent Cease and Desist Order (US Dollar Processing Order) with the Board of Governors of the Federal Reserve System (Federal Reserve) with respect to compliance with OFAC regulations by RBS's global business lines outside the US. RBS made investments in technology, hired and trained personnel, and revised compliance, risk management and other policies and procedures. On 16 October 2018, the Federal Reserve announced the termination of the US Dollar Processing Order.
5. Post balance sheet events
Alawwal Bank announced in 2017 that it was entering into merger discussions with Saudi British Bank. On 4 October 2018, they announced that terms had been agreed and that they anticipated being able to complete the transaction in H1 2019.
On 9 October 2018 NatWest Bank Plc contributed £2 billion to the Main section of the RBS pension fund. This was a consequence of implementing ring fencing requirements envisaged by the Memorandum of Understanding with the Trustee dated 14 April 2018.
Other than mentioned, there have been no further significant events between 30 September 2018 and the date of approval of this announcement.
Additional information
Presentation of information
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 2017 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 14, 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 measures 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:
●
Performance, funding and credit metrics such as 'return on tangible equity', and related RWA equivalents incorporating the effect of capital deductions (RWAes), total assets excluding derivatives (funded assets), net interest margin (NIM) adjusted for items designated at fair value through profit or loss (non-statutory NIM), cost:income ratio and loan:deposit ratio. These are internal metrics used to measure business performance;
●
Personal & Business Banking (PBB) franchise results, combining the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI, Commercial & Private Banking (CPB) franchise results, combining the reportable segments of Commercial Banking and Private Banking.
●
The Group also presents a pro forma CET1 ratio which is on an adjusted basis, this has not been prepared in accordance with Regulation S-X and should be read in conjunction with the notes provided as well as the section "Forward-looking statements" below.
Contacts
Analyst enquiries:
Matt Waymark
Investor Relations
+44 (0) 207 672 1758
Media enquiries:
RBS Press Office
+44 (0) 131 523 4205
Analyst and investor call
Web cast and dial in details
Date:
Friday 26 October 2018
Time:
9:00 am UK time
International - +44 (0) 20 3009 5755
Conference ID:
3892346
UK Free Call - 0800 279 6637
US Local Dial-In, New York - 1 646 517 5063
Available on www.rbs.com/results
●
Q3 2018 Interim Management Statement and background slides.
●
A financial supplement containing income statement, balance sheet and segment performance for the nine quarters ended 30 September 2018.
●
Pillar 3 supplement at 30 September 2018.
Forward looking statements
This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including (but not limited to) those related to RBS and its subsidiaries' regulatory capital position and funding requirements, financial position, ongoing litigation and regulatory investigations, profitability and financial performance (including financial performance targets and expectations), structural reform and the implementation of the UK ring-fencing regime, the implementation of RBS's restructuring and transformation programme, impairment losses and credit exposures under certain specified scenarios, increasing competition from new incumbents and disruptive technologies and RBS's exposure to political and economic risks (including with respect to Brexit), operational risk, conduct risk, cyber and IT risk and credit rating risk. In addition, forward-looking statements may include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. 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, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations and general economic and political 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 2017 Annual Report and Accounts (ARA) and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBS's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and RBS does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.
Legal Entity Identifier: 2138005O9XJIJN4JPN90
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDQRTBRBDGUUDBGIU
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