REG - Royal Bk Scot.Grp. - Preliminary Interim Results 2014 <Origin Href="QuoteRef">RBS.L</Origin> - Part 1
06/09/2014 20:35
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RNS Number : 2982N
Royal Bank of Scotland Group PLC
25 July 2014
Contents
Page
Trading update 1
Contacts 6
Preliminary summary consolidated income statement 7
Preliminary summary consolidated balance sheet 8
Analysis of results 9
Segment performance 15
Statutory results
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 2013 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.
Forward-looking statements
This release contains 'forward-looking statements' as that term is defined in the United States Private Securities
Litigation Reform Act of 1995. Forward looking statements are statements that are not historical facts and can be
identified by the use of forward-looking terminology such as statements that include the words 'expect', 'estimate',
'project', 'anticipate', 'believes', 'should', 'intend', 'plan', 'could', 'probability', 'risk', ''Value-at-Risk (VaR)',
'target', 'goal', 'objective', 'will', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on such expressions or by the forward looking nature of discussions of strategy, plans, targets and intentions.
. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties
and other factors which could cause actual results to differ materially from the future results expressed or implied by
such forward-looking statements. The forward-looking statements contained in this release speak only as of the date of this
announcement, and RBS does not undertake to update any forward-looking statement to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events. The information, statements and opinions contained in
this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any
offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or
other financial instruments.
H1 2014 Preliminary interim results
25 July 2014
The Royal Bank of Scotland Group plc ("RBS") is today issuing an update in respect of its financial results for the six
months ended 30 June 2014. The interim results processes are in progress and the financial results are subject to
finalisation and approval by the Board. RBS will announce its 2014 Half Year Results on 1 August 2014.
RBS results for H1 2014 are expected to reflect better than anticipated operating performance, driven by more favourable
credit conditions and good results from RBS Capital Resolution, with a consequential beneficial impact on capital ratios.
Profit before tax is expected to be £2,652 million for H1 2014, up from £1,374 million in H1 2013, with operating profit(1)
at £2,601 million, up from £708 million in H1 2013.
"The results we are posting today show the steady progress we are making as we take the steps to be a much simpler, smaller
and fairer bank. These results show that underneath all the noise and huge restructuring of recent years, RBS is a
fundamentally stronger bank that can deliver good results for customers and shareholders."
"There is progress on all of our key priorities - capital is stronger, costs are lower and customer activity is gradually
improving - although we have only just started with our programme to make it easier for customers to do more business with
us."
"But let me sound a note of caution. We are actively managing down a slate of significant legacy issues. This includes
significant conduct and litigation issues that will likely hit our profits going forward. I am pleased we have had two good
quarters, but no one should get ahead of themselves here - there are bumps in the road ahead of us."
"Today's results are pleasing but no one at this bank is complacent about the challenges ahead."
Ross McEwan, Chief Executive
H1 2014 Preliminary interim results
Key points
H1 2014 performance
● Operating performance in the first half of 2014 was good, with all customer-facing businesses reporting improved operating profits compared with H1 2013. Operating profit(1) of £2,601 million included £514 million of restructuring costs (compared with £271 million in H1 2013) and £250 million of litigation and conduct costs, with £150 million added to provisions for Payment Protection Insurance and £100 million to interest rate swap redress provisions.
● Operating profit(1), excluding restructuring and litigation and conduct costs ('adjusted operating profit'), improved to £3,365 million, compared with £1,599 million in H1 2013.
● Total income declined 6% to £9,978 million. Growth of 3% in Personal & Business Banking (PBB) and 2% in Commercial & Private Banking (CPB) was more than offset by lower income, down 10%, in Corporate & Institutional Banking (CIB), reflecting its smaller balance sheet and reduced risk profile. Net interest margin improved to 2.17%, up 20 basis points compared with H1 2013, with continuing benefits from deposit repricing in PBB and CPB outweighing modest erosion of asset margins.
● Total expenses were 8% lower at £7,108 million, including £514 million of restructuring costs and £250 million of litigation and conduct costs. Operating expenses, excluding restructuring and litigation and conduct costs ('adjusted operating expenses'), were down 8% to £6,344 million. Overall headcount has fallen by 8,000 over the past 12 months.
● Impairment losses declined by £1,881 million to £269 million. All core businesses showed significant reductions in impairment losses as UK and Irish credit conditions continued to improve. In RBS Capital Resolution (RCR) there was a net write-back of provisions, reflecting disposals at favourable prices. At 30 June 2014, risk elements in lending represented 8.3% of gross loans to customers, compared with 9.4% at 31 December 2013.
● Profit before tax was £2,652 million compared with £1,374 million in the first half of 2013, including a gain of £191 million from the sale of the remaining interest in Direct Line Insurance Group in Q1 2014 and a write-down of goodwill of £130 million in Q2 2014. Own credit adjustment was a charge of £51 million compared with a credit of £376 million in H1 2013 which also included a gain of £191 million on redemption of own debt compared with £20 million in H1 2014.
● The tax charge was £733 million, representing 27.6% of profit before tax, and included a £76 million write-off of deferred tax assets.
● The Common Equity Tier 1 capital ratio strengthened to 10.1% from 8.6% at the end of 2013, principally driven by reductions in risk-weighted assets in CIB and RCR and the retained profit for the period. RBS remains on track to achieve its medium-term capital targets.
● After charging the initial £320 million Dividend Access Share retirement dividend, profit attributable to ordinary and B shareholders was £1,425 million. Tangible net asset value per ordinary and B share was 376p at 30 June 2014 compared with 363p at the end of 2013.
Q2 2014 performance
● Operating profit(1) in Q2 2014 was £1,318 million, compared with £174 million in Q2 2013 and £1,283 million in Q1 2014. Restructuring costs totalled £385 million and litigation and conduct costs £250 million. Adjusted operating profit rose to £1,953 million, compared with £893 million in Q2 2013 and £1,412 million in Q1 2014.
● Total income was 10% lower than in Q2 2013 at £4,925 million, with a 4% improvement in UK PBB more than offset by the 13% reduction in CIB, reflecting its smaller balance sheet and lower risk levels. Within CIB, Rates, Currencies and Credit income was £765 million, down 10% from Q2 2013 and 25% from Q1 2014. Citizens Financial Group benefited from a net gain of $283 million on the sale of its Illinois branch network.
H1 2014 Preliminary interim results
Key points (continued)
Q2 2014 performance (continued)
● Adjusted operating expenses were £3,065 million, down 11% from Q2 2013 and 7% from Q1 2014.
● Impairments amounted to a net release of £93 million compared with losses of £1,117 million in Q2 2013 and £362 million in Q1 2014, benefiting from improvements in bad debt flows and latent provision releases totalling £258 million.
● Profit before tax totalled £1,010 million, after a write-down of goodwill of £130 million and a charge of £190 million for own credit. Profit attributable to ordinary and B shareholders was £230 million.
Balance sheet and capital
● Funded assets fell to £736 billion, down £107 billion from June 2013, principally driven by the reduction in CIB's balance sheet and the run-off of RCR and Non-Core assets.
○ In UK PBB gross new mortgage lending totalled £9.8 billion in H1 2014, a market share of 9.9%. Repayments remain high, with the low interest rate environment enabling higher levels of principal repayment.
○ In CPB Commercial Banking, loans and advances in the growable book increased to £64.9 billion, up £2 billion from the prior year, but this was offset by a £2.8 billion decline in the non-growable book, which comprises real estate finance, businesses in restructuring and excess single-name
concentrations.
○ Overall SME applications were 11% higher in H1 2014 than in the prior year and gross new lending was up 31% at £5.0 billion.
● Risk-weighted assets (RWAs) fell to £392 billion at the end of June 2014, down £22 billion from the end of March 2014.
● The CET1 ratio was 10.1%(2) at the end of June 2014, up from 8.6% at the end of 2013 and 9.4% at the end of March 2014 reflecting the attributable profit for the period and lower RWAs.
● The bank's liquid asset buffer was £138 billion at the end of June 2014, up slightly from the first quarter but down from £146 billion at the end of 2013, leaving ample headroom to accommodate lending growth in H2 2014.
RBS Capital Resolution
● Over the course of H1 2014 RCR reduced funded assets by £8 billion, or 28%, to £21 billion. RWA equivalent(3) decreased by £21 billion, or 33%, to £44 billion.
● Operating loss in H1 2014 was £48 million, with an operating profit of £66 million recorded in the second quarter of the year, driven by net impairment releases of £128 million.
● The combined effect of the small operating loss and RWA equivalent reduction was net CET1 capital accretion of £2 billion.
Notes:
(1) Operating profit before tax, own credit adjustments, gain on redemption of own debt, strategic disposals, write-down of goodwill and RFS Holdings minority interest ('operating profit'). Statutory operating profit before tax is expected to be £2,652 million for the half year ended 30 June 2014.
(2) The CET1 ratio includes the benefit of the retained profit for the period. This is subject to approval by the Prudential Regulation Authority, which is expected to be obtained prior to the publication of the Interim Results on 1 August 2014.
(3) RWA equivalent (RWAe) is an internal metric that measures the equity capital employed in segments. RWAe converts both performing and non-performing exposures into a consistent capital measure, being the sum of the regulatory RWAs and the regulatory capital deductions, the latter converted to RWAe by applying a multiplier of 10.
H1 2014 Preliminary interim results
Performance measures(1)
Measure 2013 H1 2014 Medium-term Long-term
Efficiency Cost:income ratio 95% 71% ~55% ~50%
Adjusted cost:income ratio(2) 72% 64%
Returns Return on tangible equity Negative 7% ~9-11% ~12%+
Capital strength(3) Common Equity Tier 1 ratio 8.6% 10.1% ≥12% ≥12%
Notes:
(1) This table contains forecasts with significant contingencies. Please refer to 'Forward-looking statements'.
(2) Excluding restructuring costs and litigation and conduct costs.
(3) CRR end-point basis.
H1 2014 Preliminary interim results
Outlook
These results reflect increasing economic confidence and improvements in asset values seen in RBS's core UK and Irish
markets. Economic growth is expected to continue, although the pace may moderate.
NIM is expected to remain close to H1 levels, with the majority of deposit re-pricing benefits having now taken place.
Income from the fixed income product suite is expected to be lower in the second half of 2014, reflecting both normal
seasonal trends and the continuation of the bank's reduced balance sheet risk appetite.
RBS remains on track to deliver its target of £1 billion cost reductions in 2014. Restructuring costs are expected to be
higher in the second half of 2014 as the pace of activity to reduce costs in later years picks up. A restructuring charge
of around £1.5 billion is expected for 2014, with overall restructuring costs still expected to be around £5 billion over
2014 to 2017 as the change agenda across the bank from economic, legal and regulatory perspectives remains very full.
Credit impairment charges in the second half of the year are expected to remain low, subject to macro economic conditions,
resulting in a full year charge of around £1 billion, although at these low levels there will be volatility from quarter to
quarter.
RCR funded assets are expected to be down from £29 billion at its inception to around £15 to £18 billion at the end of
2014. The overall cost (comprising impairments, disposal losses and running expenses) for RCR to achieve its goals was
originally expected to be around £4.0 to £4.5 billion between 2014 and 2016. In light of the strong performance in the
first half and the more favourable economic environment, these costs are now expected to total around £2.5 to £3.0 billion,
of which c.£0.8 billion in 2014, although outcomes are subject to significant potential volatility.
The bank is making good progress towards achieving its target CET1 ratio of 11% by the end of 2015 and at least 12% by the
end of 2016. However, ongoing conduct and regulatory investigations and litigation continue to present challenges and
uncertainties and are expected to be a drag on capital generation over the coming quarters. The timing and amounts of any
further settlements or redress remain uncertain and could be significant.
Contacts
For analyst enquiries:
Richard O'Connor Head of Investor Relations +44 (0) 20 7672 1758
For media enquiries:
Group Media Centre +44 (0) 131 523 4205
Analysts and investors conference call
RBS will hold an audio Q&A session for analysts and investors on the preliminary interim results for the half year ended 30
June 2014. Details as follows:
Date: Friday 25 July 2014
Time: 9.00 am UK time
Webcast: www.rbs.com/results
Dial in details: International - +44 (0) 1452 568 172UK Free Call - 0800 694 8082US Toll Free - 1 866 966 8024
Preliminary summary consolidated income statement
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 (1) 2014 2014 (1)
£m £m £m £m
Net interest income 5,496 5,442 2,798 2,698
Non-interest income 4,482 5,166 2,127 2,355
Total income 9,978 10,608 4,925 5,053
Staff and non-staff expenses (6,344) (6,859) (3,065) (3,279)
Restructuring costs (514) (271) (385) (129)
Litigation and conduct costs (250) (620) (250) -
Operating expenses (7,108) (7,750) (3,700) (3,408)
Operating profit before impairment losses 2,870 2,858 1,225 1,645
Impairment (losses)/recoveries (269) (2,150) 93 (362)
Operating profit 2,601 708 1,318 1,283
Own credit adjustments (51) 376 (190) 139
Gain on redemption of own debt 20 191 - 20
Strategic disposals (2) 191 - - 191
Write down of goodwill (130) - (130) -
RFS Holdings minority interest 21 99 12 9
Profit before tax 2,652 1,374 1,010 1,642
Tax charge (3) (733) (678) (371) (362)
Profit from continuing operations 1,919 696 639 1,280
Profit from discontinued operations, net of tax 35 138 26 9
Profit for the period 1,954 834 665 1,289
Non-controlling interests (42) (117) (23) (19)
Other owners' dividends (167) (182) (92) (75)
Dividend access share dividend (320) - (320) -
Profit attributable to ordinary and B shareholders 1,425 535 230 1,195
Notes:
(1) As set out in the Q2 Restatement Document dated 21 July 2014, comparative financial information has been restated to reflect: the changes to the RBS structure announced in February 2014, the allocation to reporting segments of a number of one-off and other
items previously reported below the operating profit line; and revisions to the allocation of Central and Treasury costs to reflect the centralisation of services and functions and its internal reorganisation. These restatements do not affect statutory
income statement, balance sheet, other primary statements or regulatory capital measures.
(2) The gain of £191 million resulted from the sale of the bank's remaining stake in Direct Line Insurance Group in Q1 2014.
(3) The tax charge reflects profits in high tax jurisdictions including the US and includes a £76 million write-off of deferred tax assets in Q2 2014.
Preliminary summary consolidated balance sheet
30 June 31 March 31 December
2014 2014 2013
£bn £bn £bn
Cash and balances at central banks 69 70 83
Reverse repurchase agreements and stock borrowing 82 78 76
Loans and advances (net) 414 419 418
Debt securities and equity shares 121 130 122
Other assets (1) 50 49 41
Funded assets 736 746 740
Derivatives 275 278 288
Total assets 1,011 1,024 1,028
Repurchase agreements and stock lending 83 89 85
Deposits 440 437 450
Debt securities in issue 59 62 68
Short positions 39 38 28
Subordinated liabilities 25 24 24
Other liabilities (1) 34 38 28
Liabilities excluding derivatives 680 688 683
Derivatives 270 275 286
Total liabilities 950 963 969
Equity 61 61 59
Total liabilities and equity 1,011 1,024 1,028
Memo items
Tangible equity (2) 43 43 41
Tangible net asset value per ordinary and B share (3,4) 376p 376p 363p
Notes:
(1) Includes disposal groups.
(2) Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
(3) Tangible net asset value (TNAV) per ordinary and B share represents total tangible equity divided by the number of ordinary shares in issue and effect of convertible B shares.
(4) Retained earnings and positive movements in available-for-sale financial assets were largely offset by currency translation losses, due to the strengthening of sterling, leaving TNAV flat compared with 31 March 2014.
Analysis of results
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 2014 2014
Net interest income £m £m £m £m
Net interest income (1) 5,468 5,435 2,784 2,684
Average interest-earning assets (1) 507,268 556,294 502,347 512,244
Net interest margin
- RBS 2.17% 1.97% 2.22% 2.12%
- Personal & Business Banking 3.39% 3.15% 3.40% 3.37%
- Commercial & Private Banking 2.90% 2.69% 2.91% 2.89%
- Citizens Financial Group 2.94% 2.90% 2.93% 2.94%
Note:
(1) Net interest income for the half year ended 30 June 2014 was decreased by £28 million (H1 2013 - £38 million; Q2 2014 - £14 million; Q1 2014 - £14 million) to record interest on financial assets and liabilities designated as at fair value through profit or loss and increased by nil (H1 2013 - £31 million, Q2 2014 - nil; Q1 2014 - nil) in respect of non-recurring adjustments. Average interest-earning assets have also been adjusted.
Key points
H1 2014 compared with H1 2013
· Net interest income improved by 1% to £5,468 million. The increase was consistent across all businesses, with notable improvements in PBB (£97 million, 4%) and CPB (£90 million, 7%).
· Net interest margin (NIM) increased by 20 basis points to 2.17%, driven by deposit repricing initiatives across a number of businesses. The benefit of reduced funding costs outweighed lower yields on assets.
Q2 2014 compared with Q1 2014
· Net interest income improved by 4% to £2,784 million principally driven by improved margins and an additional day in the quarter.
· NIM increased by 10 basis points to 2.22%, driven by lower funding costs, reflecting repricing initiatives across a number of businesses, RCR run-down and a small number of one-off recoveries.
Analysis of results
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 2014 2014
Non-interest income £m £m £m £m
Net fees and commissions 2,118 2,248 1,063 1,055
Income from trading activities 1,482 1,890 626 856
Other operating income 882 1,028 438 444
Total non-interest income 4,482 5,166 2,127 2,355
Key points
H1 2014 compared with H1 2013
· Non-interest income declined by £684 million or 13%, principally reflecting a 22% reduction in income from trading activities, in line with CIB's smaller balance sheet and reduced risk profile.
· A net gain of £170 million ($283 million) was recorded on Citizens' sale of its Illinois branch network.
· Gains on the disposal of available-for-sale securities in Treasury were down £245 million to £215 million for H1 2014 (Q2 2014 - £15 million; Q1 2014 - £200 million).
Q2 2014 compared with Q1 2014
· Non-interest income declined by £228 million or 10%, principally reflecting the seasonality of CIB income and lower disposal income in RCR. This was partly offset by the net gain on sale from Citizens' branch sale.
Analysis of results
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 2014 2014
Operating expenses £m £m £m £m
Staff expenses 3,340 3,585 1,693 1,647
Premises and equipment 1,079 1,079 485 594
Other 1,292 1,479 605 687
Restructuring costs 514 271 385 129
Litigation and conduct costs 250 620 250 -
Administrative expenses 6,475 7,034 3,418 3,057
Depreciation and amortisation 551 716 282 269
Write-down of other intangible assets 82 - - 82
Operating expenses 7,108 7,750 3,700 3,408
Memo item
Adjusted operating expenses (1) 6,344 6,859 3,065 3,279
Performance ratios
Staff costs as a % of total income 33% 34% 34% 33%
Cost:income ratio 71% 73% 75% 67%
Cost:income ratio - adjusted (1) 64% 65% 62% 65%
Note:
(1) Excluding restructuring costs and litigation and conduct costs.
Key points
H1 2014 compared with H1 2013
· Operating expenses were £642 million, 8%, lower. Adjusted operating expenses decreased by £515 million or 8% to £6,344 million. Much of the decrease was achieved in CIB through headcount reductions and tight control of discretionary expenditure. Overall operating expense trends are starting to show the benefits of the reshaping of the bank's cost base.
· Litigation and conducts costs totalled £250 million, with an additional provision of £150 million for Payment Protection Insurance redress recorded in UK PBB and a further £100 million relating to interest rate hedging product redress booked within Commercial Banking and CIB.
· Restructuring costs increased by £243 million to £514 million, including significant charges in relation to Williams & Glyn and to the restructuring of the property portfolio.
Q2 2014 compared with Q1 2014
· Operating expenses were up £292 million, 9% reflecting higher restructuring and litigation and conduct costs. Adjusted operating expenses decreased by £214 million or 7%. This was principally driven by lower staff costs in CIB, operational cost saving initiatives in CPB and lower costs in PBB. This was only partly offset by higher staff costs in RCR.
Analysis of results
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 2014 2014
Impairment losses/(recoveries) £m £m £m £m
Loans 271 2,161 (89) 360
Securities (2) (11) (4) 2
Total impairment losses 269 2,150 (93) 362
Loan impairment losses
- individually assessed 113 1,472 (42) 155
- collectively assessed 348 734 221 127
- latent (180) (36) (258) 78
Customer loans 281 2,170 (79) 360
Bank loans (10) (9) (10) -
Loan impairment losses/(recoveries) 271 2,161 (89) 360
RBS excluding RCR/Non-Core 290 1,258 36 254
RCR (19) n/a (125) 106
Non-Core n/a 903 n/a n/a
RBS 271 2,161 (89) 360
Customer loan impairment charge as a % of
gross loans and advances (1)
RBS excluding RCR/Non-Core 0.2% 0.6% - 0.3%
RCR (0.1%) n/a (1.7%) 1.2%
Non-Core n/a 3.9% n/a n/a
30 June 31 March 31 December
2014 2014 2013
Loan impairment provisions £22.4bn £24.2bn £25.2bn
Risk elements in lending (REIL) £34.1bn £37.4bn £39.4bn
Provision coverage (2) 66% 65% 64%
Notes:
(1) Excludes reverse repurchase agreements and includes disposals groups.
(2) Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
Key points
H1 2014 compared with H1 2013
· Loan impairment losses declined sharply by £1,890 million or 87%, including £180 million of releases of latent provisions (H1 2013 - £36 million). Asset quality continued to improve in the UK and Ireland.
· Loan impairments in RCR amounted to a net recovery of £19 million.
· Provision coverage strengthened to 66% compared with 64% at the end of 2013. REIL were £5.3 billion lower and represented 8.3% of gross customer loans, compared with 9.4% at the end of 2013.
Q2 2014 compared with Q1 2014
· A net recovery of £89 million was recorded in Q2 2014, compared with losses of £360 million in Q1 2014.
· Improvement in loan impairment losses was driven by the release of latent provisions in CPB and CIB and by a strong credit performance in RCR (a net recovery of £125 million compared with losses of £106 million in Q1 2014).
· REIL fell by £3.3 billion. As a percentage of gross loans to customers, REIL declined to 8.3% from 9.0% at 31 March 2014.
Analysis of results
30 June 31 March 31 December
Balance sheet 2014 2014 2013
Funded balance sheet (1) £736bn £746bn £740bn
Total assets £1,011bn £1,024bn £1,028bn
Net loans and advances to customers (2) £387bn £392bn £393bn
Customer deposits (3) £401bn £404bn £418bn
Loan:deposit ratio - RBS excluding RCR/Non-Core (4) 93% 93% 89%
Loan:deposit ratio - RBS (4) 96% 97% 94%
Notes:
(1) Funded balance sheet represents total assets less derivatives.
(2) Excludes reverse repurchase agreements and stock borrowing, and includes disposal groups.
(3) Excludes repurchase agreements and stock lending, and includes disposal groups.
(4) Net of provisions, including disposal groups and excluding repurchase agreements. Excluding disposal groups, the loan:deposit ratio for the Bank at 30 June 2014 was 96% (31 March 2014 - 97%; 31 December 2013 - 94%).
Key points
30 June 2014 compared with 31 March 2014
· Funded assets decreased by £10 billion to £736 billion principally attributable to lower debt securities in CIB coupled with RCR run-down.
· Net loans and advances to customers decreased by £5 billion to £387 billion principally driven by RCR run-down and disposals, the impact of stronger sterling on dollar denominated loans, partly offset by good mortgage balance growth in UK PBB.
· Customer deposits decreased by £3 billion driven by lower balances in Citizens adversely impacted by foreign exchange movements, deposit repricing in Private Banking and lower balances in CIB. This was partly offset by increased deposit balances in UK PBB.
30 June 2014 compared with 31 December 2013
· Funded assets decreased by £4 billion to £736 billion principally driven by RCR run-down.
· Net loans and advances to customers decreased by £6 billion principally driven by RCR run-down and the impact of currency movements.
· Customer deposits fell by £17 billion reflecting a managed run down of surplus liquidity. The customer funding surplus decreased to £14 billion, while the loan:deposit ratio increased by 2 percentage points to 96%.
Analysis of results
Capital ratios
End-point CRR basis (1)
30 June 31 March 31 December
2014 2014 2013 (2)
Risk asset ratios % % %
CET1 (3) 10.1 9.4 8.6
Tier 1 10.1 9.4 8.6
Total 12.4 11.4 10.6
Total RWAs £392bn £414bn £429bn
Notes:
(1) Capital Requirements Regulation (CRR), as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014.
(2) Estimated end-point CRR basis.
(3) Common Equity Tier 1.
Key points
30 June 2014 compared with 31 March 2014
· The CRR end-point CET 1 ratio improved to 10.1%(1) from 9.4%, principally driven by retained earnings and continuing reduction in RWAs and expected loss, after charging the initial DAS dividend of £320 million.
· RWAs decreased by £22 billion principally reflecting the £12 billion fall in CIB driven by risk reductions and £5 billion of run-off and disposals in RCR.
30 June 2014 compared with 31 December 2013
· The CRR end-point CET 1 ratio improved to 10.1%(1) from 8.6%, principally driven by retained earnings and continuing reduction in RWAs and expected loss.
· RWAs decreased by £37 billion principally attributable to the risk reductions in CIB and run-off and disposals in RCR.
Note:
(1) The CET1 ratio includes the benefit of the retained profit for the period. This is subject to approval by the PRA, which is expected to be obtained prior to the publication of the Interim Results on 1 August 2014.
Segment performance
RBS has changed its reporting segments as set out in the Restatement Document released on 21 July 2014. Key measures for
each segment are shown in the tables below, with comparatives restated accordingly.
Half year ended Quarter ended
30 June 30 June 30 June 31 March
2014 2013 2014 2014
£m £m £m £m
Operating profit/(loss)(1) before impairment
losses by segment
UK Personal & Business
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