REG - Royal Bk Scot.Grp. - Segmental Reporting Restatement Document

NatwestAnnouncement

17/04/2019 11:25

RNS Number : 5059W
Royal Bank of Scotland Group PLC
17 April 2019
 



 
 
 
 
 
 
Segmental Reporting Restatement
Document
 
April 2019
 
 
 
 
 
 
 




The Royal Bank of Scotland Group plc
 
Overview of business re-segmentation
This announcement sets out changes to RBS's operating segments and consequent changes in results presentation. The announcement contains re-presented financial results for the year ended 31 December 2018 and, is presented to aid comparison of RBS's quarter ended 31 March 2019 results with prior periods. Re-presented financial information for the quarters ended 31 December 2018 and 31 March 2018 are included.
 
Segmental reorganisation
RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders. To support this, the following previously reported operating segments are now realigned, with comparatives re-presented:
 
·      Effective from 1 January 2019, Business Banking has been transferred from UK Personal and Business Banking (UK PBB) to Commercial Banking as the nature of the business, including distribution channels, products and customers, are more closely aligned to the Commercial Banking (CB) business. Concurrent with the transfer, UK PBB has been renamed to UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed  Personal & Ulster. The Commercial & Private Banking franchise has also been renamed to Commercial & Private.
 
Quarter ended 31 March 2019 results
RBS's results for the quarter ended 31 March 2019 will be announced on Friday 26 April 2019. These results will be reported on the new structure and reporting basis as described above.
 
In conjunction with this Segmental Reporting Restatement Document, a financial supplement showing re-presented financial information for the last nine quarters is available at www.rbs.com/results.   
 
Forward-looking statements
This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that 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 RBSG's future economic results, business plans and current strategies.  In particular, this document includes forward-looking statements relating to RBSG in respect of, but not limited to: its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital and operational targets), its access to adequate sources of liquidity and funding, increasing competition from new incumbents and  disruptive technologies, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, LIBOR, EURIBOR and other benchmark reform and RBSG's exposure to economic and political risks (including with respect to Brexit and climate change), operational risk, conduct risk, cyber and IT risk and credit rating risk.  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 conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBSG's actual results are discussed in RBSG's UK 2018 Annual Report and Accounts (ARA) and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBSG'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 RBSG 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.
 
Document roadmap
Pages 2 to 5 of this document show the income statement, selected balance sheet line items and key metrics for the new reportable segments for the year and quarter ended 31 December 2018 and for the quarter ended 31 March 2018. The Re-segmentation reconciliation Appendix - summarises how Business Banking area is allocated to the reportable operating segment Commercial Banking.
 
For further information contact:
 
Alexander Holcroft
Investor Relations
+44 (0) 207 672 1982
 
Group Media Centre
+44 (0)131 523 4205




Re-presented customer segments
 















































 








Year ended 31 December 2018


 








Personal & Ulster






Commercial & Private






















 








UK Personal


Ulster Bank






Commercial


Private


RBS


NatWest






Central items


Total


 








Banking (1)


RoI






Banking


Banking


International


Markets






& other (2)


RBS


 




Income statement


£m


£m






£m


£m


£m


£m






£m


£m


 
















































 




Net interest income


4,283 


444 






2,855 


518 


466 


112 






(22)


8,656 


 




Non-interest income


771 


166 






1,747 


257 


128 


1,238 






347 


4,654 


 




Own credit adjustments


- 


- 






- 


- 


- 


92 






- 


92 


 
















































 




Total income


5,054 


610 






4,602 


775 


594 


1,442 






325 


13,402 


 
















































 




Direct expenses










































 




  - staff


(698)


(202)






(739)


(161)


(102)


(557)






(1,190)


(3,649)


 




  - other


(266)


(103)






(255)


(66)


(67)


(241)






(2,712)


(3,710)


 




Indirect expenses


(1,464)


(185)






(1,294)


(229)


(91)


(415)






3,678 


- 


 




Strategic costs










































 




  - direct


(41)


(2)






(33)


- 


(3)


(195)






(730)


(1,004)


 




  - indirect


(185)


(20)






(122)


(21)


(6)


(43)






397 


- 


 




Litigation and conduct costs


(213)


(71)






(44)


(1)


9 


(153)






(809)


(1,282)


 
















































 




Operating expenses


(2,867)


(583)






(2,487)


(478)


(260)


(1,604)






(1,366)


(9,645)


 
















































 




Operating profit/(loss) before impairment (losses)/releases


2,187 


27 






2,115 


297 


334 


(162)






(1,041)


3,757 


 




Impairment (losses)/releases


(339)


(15)






(147)


6 


2 


92 






3 


(398)


 
















































 




Operating profit/(loss)


1,848 


12 






1,968 


303 


336 


(70)






(1,038)


3,359 


 
















































 




Key metrics












































Return on equity (3)


24.7%


0.5%






12.1%


15.4%


24.4%


(2.0%)






nm


4.8%




Net interest margin


2.67%


1.79%






1.96%


2.52%


1.71%


0.40%






nm


1.98%




Cost:income ratio (4)


56.7%


95.6%






52.8%


61.7%


43.8%


111.2%






nm


71.7%




Loan impairment rate


0.23%


0.08%






0.14%


nm


nm


nm






nm


0.13%






















































As at 31 December 2018




Capital and balance sheet


£bn


£bn






£bn


£bn


£bn


£bn






£bn


£bn




Total assets


171.0 


25.2 






166.4 


22.0 


28.4 


244.5 






36.7 


694.2 




Funded assets (5)


171.0 


25.2 






166.4 


22.0 


28.4 


111.4 






36.5 


560.9 




Net loans to customers - amortised cost


148.9 


18.8 






101.4 


14.3 


13.3 


8.4 






- 


305.1 




Impairment provisions


(1.1)


(0.8)






(1.3)


- 


- 


(0.1)






- 


(3.3)




Customer deposits


145.3 


18.0 






134.4 


28.4 


27.5 


2.6 






4.7 


360.9 




Risk-weighted assets (RWAs)


34.3 


14.7 






78.4 


9.4 


6.9 


44.9 






0.1 


188.7 




RWA equivalent (RWAes)


35.5 


14.7 






79.7 


9.5 


6.9 


50.0 






0.2 


196.5 




Employee numbers (FTEs - thousands) (6)


21.7 


3.1 






10.3 


1.9 


1.7 


4.8 






23.6 


67.1 


















































For notes to this table refer to page 5.






































































 
Re-presented customer segments
 





















































Quarter ended 31 December 2018








Personal & Ulster






Commercial & Private




























 UK Personal


Ulster Bank






Commercial


Private


RBS


NatWest






Central items


Total








Banking (1)


RoI






Banking


Banking


International


Markets






& other (2)


RBS




Income statement


£m


£m






£m


£m


£m


£m






£m


£m


















































Net interest income


1,061 


110 






724 


133 


123 


30 






(5)


2,176 




Non-interest income


185 


37 






392 


65 


32 


89 






49 


849 




Own credit adjustments


- 


- 






- 


- 


- 


33 






- 


33 


















































Total income


1,246 


147 






1,116 


198 


155 


152 






44 


3,058 


















































Direct expenses












































  - staff


(166)


(53)






(185)


(39)


(25)


(128)






(263)


(859)




  - other


(80)


(27)






(77)


(22)


(22)


(65)






(870)


(1,163)




Indirect expenses


(414)


(52)






(403)


(72)


(35)


(123)






1,099 


- 




Strategic costs












































  - direct


(27)


(3)






(5)


- 


(1)


(89)






(230)


(355)




  - indirect


(63)


(12)






(57)


(10)


(2)


(22)






166 


- 




Litigation and conduct costs


(7)


(17)






(37)


- 


(1)


(28)






(2)


(92)


















































Operating expenses


(757)


(164)






(764)


(143)


(86)


(455)






(100)


(2,469)


















































Operating profit/(loss) before impairment (losses)/releases


489 


(17)






352 


55 


69 


(303)






(56)


589 




Impairment (losses)/releases


(142)


19 






(5)


8 


2 


100 






1 


(17)


















































Operating profit/(loss)


347 


2 






347 


63 


71 


(203)






(55)


572 


















































Key metrics


























































































Return on equity (3)


17.2%


0.4%






8.3%


12.3%


20.0%


(9.2%)






nm


3.5%




Net interest margin


2.60%


1.73%






1.96%


2.49%


1.81%


0.39%






nm


1.95%




Cost:income ratio (4)


60.8%


111.6%






67.5%


72.2%


55.5%


299.3%






nm


80.5%




Loan impairment rate


0.38%


(0.39%)






0.02%


nm


nm


nm






nm


0.02%




For the notes to this table refer to page 5.















































 
Re-presented customer segments







Quarter ended 31 March 2018








Personal & Ulster






Commercial & Private




























UK Personal


Ulster Bank






Commercial


Private


RBS


NatWest






Central items


Total








Banking (1)


RoI






Banking


Banking


International


Markets






& other (2)


RBS








£m


£m






£m


£m


£m


£m






£m


£m


















































Net interest income


1,068 


106 






683 


123 


104 


36 






26 


2,146 




Non-interest income


230 


40 






475 


61 


33 


380 






(84)


1,135 




Own credit adjustments


- 


- 






- 


- 


- 


21 






- 


21 


















































Total income


1,298 


146 






1,158 


184 


137 


437 






(58)


3,302 


















































Direct expenses












































  - staff


(178)


(49)






(188)


(43)


(24)


(165)






(317)


(964)




  - other


(65)


(19)






(47)


(14)


(15)


(53)






(606)


(819)




Indirect expenses


(374)


(47)






(311)


(55)


(20)


(102)






909 


- 




Strategic costs












































  - direct


(7)


(1)






(6)


(1)


- 


(17)






(177)


(209)




  - indirect


(61)


(3)






(42)


(8)


(1)


(6)






121 


- 




Litigation and conduct costs


(1)


(9)






(1)


- 


1 


(6)






(3)


(19)


















































Operating expenses


(686)


(128)






(595)


(121)


(59)


(349)






(73)


(2,011)


















































Operating profit/(loss) before impairment (losses)/releases


612 


18 






563 


63 


78 


88 






(131)


1,291 




Impairment (losses)/releases


(68)


(8)






(12)


(1)


- 


9 






2 


(78)


















































Operating profit/(loss)


544 


10 






551 


62 


78 


97 






(129)


1,213 


















































For the notes to this table refer to page 5.































 
Re-presented customer segments
 







Quarter ended 31 March 2018








Personal & Ulster






Commercial & Private




























UK Personal


Ulster Bank






 Commercial


Private


RBS


NatWest






Central items


 Total




Key metrics


Banking (1)


RoI






Banking


Banking


International


Markets






& other (2)


RBS


















































Return on equity (3)


29.9%


1.6%






13.6%


12.5%


23.2%


2.0%






nm


9.3%




Net interest margin


2.73%


1.80%






1.91%


2.51%


1.57%


0.54%






nm


2.04%




Cost:income ratio (4)


52.9%


87.7%






50.0%


65.8%


43.1%


79.9%






nm


60.5%




Loan impairment rate


0.18%


0.16%






0.05%


nm


nm


nm






nm


nm




































































































As at 31 March 2018




Capital and balance sheet


£bn


£bn






£bn


£bn


£bn


£bn






£bn


£bn


















































Total assets


166.3 


23.4 






165.6 


20.4 


28.0 


283.8 






51.0 


738.5 




Funded assets (5)


166.3 


23.3 






165.5 


20.4 


28.0 


135.2 






50.0 


588.7 




Net loans to customers - amortised cost (£bn)


145.9 


19.0 






102.9 


13.7 


13.1 


9.4 






(0.2)


303.8 




Impairment provisions


(1.3)


(1.2)






(1.5)


(0.1)


- 


(0.2)






0.1 


(4.2)




Customer deposits


142.9 


16.4 






131.1 


25.3 


26.9 


3.8 






8.1 


354.5 




Risk-weighted assets (RWAs)


31.5 


16.9 






84.3 


9.4 


7.0 


53.1 






0.5 


202.7 




RWA equivalent (RWAes)


32.2 


17.4 






88.9 


9.4 


7.0 


56.5 






0.9 


212.3 




Employee  numbers (FTEs - thousands) (6)


24.5 


3.0 






10.7 


1.9 


1.7 


5.7 






23.4 


70.9 

















































nm = not meaningful
 
Notes:



(1)
(2)


Reportable operating segment UK Personal and Business Banking renamed to UK Personal Banking to reflect re-segmentation.
Central items include unallocated transactions which principally comprise volatile items under IFRS and RMBS related charges.




(3)


RBS's CET 1 target is approximately 14% 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 share dividends is divided by average notional equity allocated at different rates of 14% (Ulster Bank RoI), 12% (Commercial Banking), 13.5% (Private Banking), 16% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets equivalents (RWAes) incorporating the effect of capital deductions. RBS return on equity is calculated using profit for the period attributable to ordinary shareholders over tangible net asset value.




(4)


Operating lease depreciation included in income for the year ended 31 December 2018 - £121 million; Q4 2018 - £32 million; Q1 2018 - £31 million.




(5)


Funded assets exclude derivative assets.




(6)


On 1 January 2018, 7,600 employees on a FTE basis were transferred from Central items to UK Personal Banking, 200 to Ulster Bank RoI, 3,700 to Commercial Banking and 400 to Private Banking.



 




 
 
 
 
 
 
 
 
Appendix
 
Re-segmentation reconciliations
 




UK Personal Banking (operating segment within the Personal & Ulster franchise)
 







Year ended






Quarter ended






Quarter ended








31 December 2018






31 December 2018






31 March 2018








Previously














Previously














Previously
















reported


To


Total






reported


To


Total






reported


To


Total








UK PBB


CB


UK PB(1)






UK PBB


CB


UK PB(1)






UK PBB


CB


UK PB(1)




Income statement


£m


£m


£m






£m


£m


£m






£m


£m


£m






















































Net interest income


5,098 


(815)


4,283 






1,267 


(206)


1,061 






1,259 


(191)


1,068 




Non-interest income


1,184 


(413)


771 






290 


(105)


185 






332 


(102)


230 






















































Total income


6,282 


(1,228)


5,054 






1,557 


(311)


1,246 






1,591 


(293)


1,298 






















































Direct expenses
















































  - staff


(890)


192 


(698)






(208)


42 


(166)






(229)


51 


(178)




  - other


(300)


34 


(266)






(93)


13 


(80)






(70)


5 


(65)




Indirect expenses


(1,801)


337 


(1,464)






(522)


108 


(414)






(456)


82 


(374)




Strategic costs
















































  - direct


(54)


13 


(41)






(28)


1 


(27)






(12)


5 


(7)




  - indirect


(221)


36 


(185)






(84)


21 


(63)






(68)


7 


(61)




Litigation and conduct costs


(216)


3 


(213)






(6)


(1)


(7)






(1)


- 


(1)






















































Operating expenses


(3,482)


615 


(2,867)






(941)


184 


(757)






(836)


150 


(686)






















































Operating profit before impairment
















































  losses


2,800 


(613)


2,187 






616 


(127)


489 






755 


(143)


612 




Impairment losses


(342)


3 


(339)






(125)


(17)


(142)






(57)


(11)


(68)






















































Operating profit


2,458 


(610)


1,848 






491 


(144)


347 






698 


(154)


544 






















































Key metrics


































































































Return on equity (2)


24.3%


0.4%


24.7%






18.6%


(1.4%)


17.2%






27.9%


2.0%


29.9%




Net interest margin


2.78%


(0.11%)


2.67%






2.73%


(0.13%)


2.60%






2.81%


(0.08%)


2.73%




Cost:income ratio


55.4%


1.3%


56.7%






60.4%


0.4%


60.8%






52.5%


0.4%


52.9%




Loan impairment rate


0.21%


0.02%


0.23%






0.31%


0.07%


0.38%






0.14%


0.04%


0.18%



 







31 December 2018






31 March 2018








Previously














Previously
















reported


To


Total






reported


To


Total








UK PBB


CB


UK PB(1)






UK PBB


CB


UK PB(1)




Capital and balance sheet


£bn


£bn


£bn






£bn


£bn


£bn








































































Loans to customers - amortised cost


163.7 


(13.7)


150.0 






162.1 


(14.9)


147.2 




Impairment provisions


(1.4)


0.3 


(1.1)






(1.6)


0.3 


(1.3)






































Net loans to customers - amortised cost


162.3 


(13.4)


148.9 






160.5 


(14.6)


145.9 




Funded assets


194.2 


(23.2)


171.0 






190.3 


(24.0)


166.3 




Customer deposits


184.1 


(38.8)


145.3 






180.3 


(37.4)


142.9 




Loan:deposit ratio


88%


14%


102%






89%


13%


102%




Risk-weighted assets


45.1 


(10.8)


34.3 






43.4 


(11.9)


31.5 



 



Notes:




(1)


Reportable operating segment UK Personal and Business Banking renamed to UK Personal Banking to reflect re-segmentation.




(2)


Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity based on 15% of the monthly average of segmental Risk-weighted assets equivalents (RWAes), incorporating the effect of capital deductions, assuming 28% tax rate. Return on equity is calculated using profit for the period attributable to ordinary shareholders.







 
Commercial Banking (operating segment within the Commercial & Private franchise)
 







Year ended






Quarter ended






Quarter ended








31 December 2018






31 December 2018






31 March 2018








Previously


From


Total






Previously


From


Total






Previously


From


Total








reported CB


UK PB


CB






reported CB


UK PB


CB






reported CB


UK PB


CB




Income statement


£m


£m


£m






£m


£m


£m






£m


£m


£m






















































Net interest income


2,040 


815 


2,855 






518 


206 


724 






492 


191 


683 




Non-interest income


1,334 


413 


1,747 






287 


105 


392 






373 


102 


475 






















































Total income


3,374 


1,228 


4,602 






805 


311 


1,116 






865 


293 


1,158 






















































Direct expenses
















































  - staff


(547)


(192)


(739)






(143)


(42)


(185)






(137)


(51)


(188)




  - other


(221)


(34)


(255)






(64)


(13)


(77)






(42)


(5)


(47)




Indirect expenses


(957)


(337)


(1,294)






(295)


(108)


(403)






(229)


(82)


(311)




Strategic costs
















































  - direct


(20)


(13)


(33)






(4)


(1)


(5)






(1)


(5)


(6)




  - indirect


(86)


(36)


(122)






(36)


(21)


(57)






(35)


(7)


(42)




Litigation and conduct costs


(41)


(3)


(44)






(38)


1 


(37)






(1)


- 


(1)






















































Operating expenses


(1,872)


(615)


(2,487)






(580)


(184)


(764)






(445)


(150)


(595)






















































Operating profit before impairment
















































  (losses)/releases


1,502 


613 


2,115 






225 


127 


352 






420 


143 


563 




Impairment (losses)/releases


(144)


(3)


(147)






(22)


17 


(5)






(23)


11 


(12)






















































Operating profit


1,358 


610 


1,968 






203 


144 


347 






397 


154 


551 






















































Key metrics


































































































Return on equity (1)


10.2%


1.9%


12.1%






5.5%


2.8%


8.3%






12.2%


1.4%


13.6%




Net interest margin


1.67%


0.29%


1.96%






1.66%


0.30%


1.96%






1.64%


0.27%


1.91%




Cost:income ratio


53.8%


(1.0%)


52.8%






70.9%


(3.4%)


67.5%






49.6%


0.4%


50.0%




Loan impairment rate


0.16%


0.02%


0.14%






0.10%


0.08%


0.02%






0.10%


0.05%


0.05%



 







31 December 2018






31 March 2018








Previously


From


Total






Previously


From


Total








reported CB


UK PB


CB






reported CB


UK PB


CB




Capital and balance sheet


£bn


£bn


£bn






£bn


£bn


£bn








































































Loans to customers - amortised cost


89.0 


13.7 


102.7 






89.5 


14.9 


104.4 




Impairment provisions


(1.0)


(0.3)


(1.3)






(1.2)


(0.3)


(1.5)






































Net loans to customers - amortised cost


88.0 


13.4 


101.4 






88.3 


14.6 


102.9 




Funded assets


143.2 


23.2 


166.4 






141.5 


24.0 


165.5 




Customer deposits


95.6 


38.8 


134.4 






93.7 


37.4 


131.1 




Loan:deposit ratio


92%


(16%)


76%






94%


(14%)


80%




Risk-weighted assets


67.6 


10.8 


78.4 






72.4 


11.9 


84.3 



 
Note:



(1)


Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity based on 11% of the monthly average of segmental Risk-weighted assets equivalents (RWAes), incorporating the effect of capital deductions, assuming 28% tax rate. Return on equity is calculated using profit for the period attributable to ordinary shareholders.
 
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