Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
7 August 2019
Commission file number: 001-10306
Form 6-K
The Royal Bank of Scotland Group plc
Gogarburn
PO Box 1000
Edinburgh EH12 1HQ
Scotland
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):o
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
If Yes is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-
This report on Form 6-K, except for any information contained on any websites linked or documents referred to in this report, shall be deemed incorporated by reference into the companys Registration Statement on Form F-3 (File No. 333-222022) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.
Forward-looking statements
Cautionary statement regarding forward-looking statements
Certain sections in this document contain forward-looking statements as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include 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. In particular, this document includes forward-looking statements relating, but not limited to: future profitability and performance, including financial performance targets such as return on tangible equity; cost savings and targets, including cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other impacts thereof; the implementation of the Alternative Remedies Package; the continuation of the Groups balance sheet reduction programme, including the reduction of risk-weighted assets (RWAs) and the timing thereof; capital and strategic plans and targets; capital, liquidity and leverage ratios and requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other regulatory buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges; the Groups exposure to political risk, economic risk, climate change risk, operational risk, conduct risk, cyber and IT risk and credit rating risk and to various types of market risks, including interest rate risk, foreign exchange rate risk and commodity and equity price risk; customer experience including our Net Promotor Score (NPS); employee engagement and gender balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to the Groups strategy or operations, which may result in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes expressed or implied by such forward-looking statements. In addition, certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Groups expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements we describe in this document, including in the risk factors and other uncertainties set out in the Groups 2018 Annual Report on Form 20-F and other materials filed with, or furnished to, the US Securities and Exchange Commission, and other risk factors and uncertainties discussed in this document. These include the significant risks for the Group presented by: operational and IT resilience risk (including in respect of: the Group being subject to cyberattacks; operational risks inherent in the Groups business; exposure to third party risks including as a result of outsourcing and its use of new technologies and innovation, as well as related regulatory and market changes; the Groups operations being highly dependent on its IT systems; the Group relying on attracting, retaining and developing senior management and skilled personnel and maintaining good employee relations; the Groups risk management framework; and reputational risk), economic and political risk (including in respect of: prevailing uncertainty on the terms of the UKs withdrawal from the European Union; the Groups plans for continuity of business impacted by the UKs expected departure from the EU; increased political and economic risks and uncertainty in the UK and global markets; climate change and the transition to a low carbon economy; HM Treasurys ownership of RBSG and the possibility that it may exert a significant degree of influence over the Group; continued low interest rates and changes in foreign currency exchange rates), financial resilience risk (including in respect of: the Groups ability to meet targets and make discretionary capital distributions to shareholders; the highly competitive markets in which the Group operates; deterioration in borrower and counterparty credit quality; the ability of the Group to meet prudential regulatory requirements for capital and MREL, or to manage its capital effectively; the ability of the Group to access adequate sources of liquidity and funding; changes in the credit ratings of RBSG, any of its subsidiaries or any of its respective debt securities; the Groups ability to meet requirements of regulatory stress tests; possible losses or the requirement to maintain higher levels of capital as a result of limitations or failure of various models; sensitivity of the Groups financial statements to underlying accounting policies, judgements, assumptions and estimates; changes in applicable accounting policies or rules; the value or effectiveness of any credit protection purchased by the Group; the level and extent of future impairments and write-downs, including with respect to goodwill; and the application of UK statutory stabilisation or resolution powers) and legal, regulatory and conduct risk (including in respect of: the Groups businesses being subject to substantial regulation and oversight; the Group complying with regulatory requirements in respect of its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, legal, regulatory and governmental actions and investigations; the replacement of LIBOR, EURIBOR and other benchmark rates; heightened regulatory and governmental scrutiny (including by competition authorities); implementation of the Alternative Remedies Package and the costs related thereto; and changes in tax legislation).
Introduction
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.
Any information contained on any websites linked or report references in this report is for information only and shall not be deemed to be incorporated by reference in this report.
RBS filed Form 6-K on 30 April 2019 to restate or represent certain disclosures in the Groups annual report on Form 20-F for the year ended 31 December 2018, filed on 28 February 2019, in connection with the re-segmentation completed in Q1 2019 and effective from 1 January 2019 and changes in reporting standard IAS12 Income taxes effective from 1 January 2019.
Non-IFRS financial measures
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 or non-IFRS performance measures. These measures are adjusted for certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures.
Refer to Appendix 2 for further information and calculations of non-IFRS performance measures included throughout this document, and the most directly comparable IFRS measures.
The Royal Bank of Scotland Group plc
Interim Results for the period ending 30 June 2019
RBS reported an operating profit before tax of £2,694 million, an attributable profit of £2,038 million and a return on tangible equity of 12.1% for H1 2019.
· |
Return on tangible equity was 12.1%. Excluding items associated with the Alawwal bank merger, as announced on 17 June 2019, H1 2019 return on tangible equity was 7.5%. |
· |
Q2 2019 operating profit before tax was £1,681 million with an attributable profit of £1,331 million and return on tangible equity of 15.8%. |
· |
RBS announces an interim ordinary dividend of 2p and a special dividend of 12p, representing £1.7 billion being returned to shareholders. |
Supporting our customers through continued lending growth
· |
UK Personal Banking (UK PB) gross new mortgage lending was £14.3 billion in H1 2019. Commercial Banking grew lending by £1.5 billion across SME & Mid-Corporates, Specialised business and Business Banking, while we continue to see large corporates delay financing reflecting Brexit uncertainty. NatWest Markets (NWM) helped customers raise c.£140 billion in debt capital markets in H1 2019(1). |
· |
We continue to target net lending growth across UK PB, Ulster Bank RoI, Commercial Banking and Private Banking at attractive returns. Net loans to customers increased by 2.5% on an annualised basis, increasing from £283.4 billion to £287.0 billion. |
· |
H1 2019 net impairment loss of £323 million, 21 basis points of gross customer loans, increased by £182 million compared with H1 2018 primarily reflecting a small number of single name charges in Commercial Banking. The cost of risk remains below our view of a normalised long term loss rate of 30-40 basis points. |
· |
Cost reduction of £173 million was achieved in H1 2019. |
Continuing competitive market
· |
Income increased by 6.2% compared with H1 2018. Income decreased by 1.7% compared with H1 2018 excluding NWM, central items and notable items (2). |
· |
Net interest margin(NIM) was 1.78%. Bank net interest margin (NIM) of 2.02% was 5 basis points lower than Q1 2019 primarily reflecting competitive pressures in the mortgage business and the contraction of the yield curve. Commercial Banking NIM remained broadly stable in Q2 2019. |
Capital generation
· |
CET1 ratio of 16.0% decreased by 20 basis points compared with Q1 2019. CET1 ratio of 16.0% which, excluding the impact of the Alawwal bank merger and the dividend accrual, represents underlying capital generation of c.15 basis points in Q2 2019. |
· |
RWAs decreased by £2.3 billion in Q2 2019 as a result of a reduction due to the Alawwal bank merger, partially offset by increases in NWM and UK PB. |
2019 outlook unchanged(3)
We retain the outlook we provided in the 2018 Annual Report on Form 20-F. We anticipate a further £1.2 billion of FX recycling gains in H2 2019 upon the transfer of ownership of NWM N.V. to NWM Plc, subject to regulatory approval, which is capital and TNAV neutral.
2020 outlook(3)
Given current market conditions, continued economic and political uncertainty and the contraction of the yield curve, it is very unlikely that we will achieve our target return on tangible equity of more than 12% and cost:income ratio of less than 50% in 2020. These remain our strategic targets and we believe they are achievable in the medium term.
Notes:
(1) NatWest Markets has acted as Active Bookrunner for Issuers across Corporate, FI and SSA sectors, helping them to raise c. £140 billion in debt capital markets in H1 2019.
(2) Refer to page 5 for notable items relating to UKPB and Commercial Banking, and to pages 16 and 17 for NWM and Central items for H1 2019 and H1 2018 respectively.
(3) The targets, expectations and trends discussed in this section represent managements current expectations and are subject to change, including as a result of the factors described in the Risk Factors section on pages 265 to 275 of the 2018 Annual Report and Accounts on Form 20-F and pages 54 and 55 of this document. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
Business performance summary
|
Half year ended |
|
Quarter ended | |||
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
Performance key metrics and ratios (1) |
2019 |
2018 |
|
2019 |
2019 |
2018 |
Operating profit before tax |
£2,694m |
£1,826m |
|
£1,681m |
£1,013m |
£613m |
Profit attributable to ordinary shareholders |
£2,038m |
£888m |
|
£1,331m |
£707m |
£96m |
Net interest margin (NIM) (1) |
1.83% |
2.02% |
|
1.78% |
1.89% |
2.01% |
Bank net interest margin (RBS NIM excluding NWM) (1) |
2.04% |
2.13% |
|
2.02% |
2.07% |
2.11% |
Average interest earning assets |
£440bn |
£431bn |
|
£445bn |
£436bn |
£435bn |
Cost:income ratio (1) |
57.2% |
70.4% |
|
52.6% |
63.4% |
80.0% |
Earnings per share |
|
|
|
|
|
|
- basic |
16.9p |
7.4p |
|
11.0p |
5.9p |
0.8p |
- basic fully diluted |
16.8p |
7.4p |
|
11.0p |
5.8p |
0.8p |
Return on tangible equity (1) |
12.1% |
5.3% |
|
15.8% |
8.3% |
1.1% |
Average tangible equity |
£34bn |
£34bn |
|
£34bn |
£34bn |
£34bn |
Average number of ordinary shares |
|
|
|
|
|
|
outstanding during the period (millions) |
|
|
|
|
|
|
- basic |
12,058 |
11,980 |
|
12,069 |
12,047 |
12,003 |
- fully diluted (2) |
12,096 |
12,039 |
|
12,104 |
12,087 |
12,062 |
|
|
|
|
|
|
|
|
30 June |
31 March |
31 December | |||
Balance sheet related key metrics and ratios (1) |
2019 |
2019 |
2018 | |||
Total assets |
£729.9bn |
£719.1bn |
£694.2bn | |||
Funded assets (1) |
£584.3bn |
£585.1bn |
£560.9bn | |||
Loans to customers - amortised cost |
£310.6bn |
£306.4bn |
£305.1bn | |||
Impairment provisions |
£3.2bn |
£3.1bn |
£3.3bn | |||
Loan impairment rate (1) |
30bps |
11bps |
2bps | |||
Customer deposits |
£361.6bn |
£355.2bn |
£360.9bn | |||
|
|
|
| |||
Liquidity coverage ratio (LCR) |
154% |
153% |
158% | |||
Liquidity portfolio |
£203bn |
£190bn |
£198bn | |||
Net stable funding ratio (NSFR) (3) |
140% |
137% |
141% | |||
Loan:deposit ratio (1) |
86% |
86% |
85% | |||
Total wholesale funding |
£78bn |
£77bn |
£74bn | |||
Short-term wholesale funding |
£19bn |
£19bn |
£15bn | |||
|
|
|
| |||
Common Equity Tier (CET1) ratio |
16.0% |
16.2% |
16.2% | |||
Total capital ratio |
20.9% |
21.1% |
21.8% | |||
Pro forma CET 1 ratio, pre dividend accrual (4) |
17.1% |
16.3% |
16.9% | |||
Risk-weighted assets (RWAs) |
£188.5bn |
£190.8bn |
£188.7bn | |||
CRR leverage ratio |
5.2% |
5.2% |
5.4% | |||
UK leverage ratio |
5.9% |
6.0% |
6.2% | |||
|
|
|
| |||
Tangible net asset value (TNAV) per ordinary share |
290p |
289p |
287p | |||
Tangible net asset value (TNAV) per ordinary share - fully diluted (1,2) |
289p |
288p |
286p | |||
Tangible equity |
£35,036m |
£34,962m |
£34,566m | |||
Number of ordinary shares in issue (millions) (5) |
12,091 |
12,090 |
12,049 | |||
Number of ordinary shares in issue (millions) - fully diluted (2,5) |
12,124 |
12,129 |
12,088 |
Notes:
(1) |
Refer to Appendix 2 for details of basis of preparation and reconciliation of non-IFRS financial and performance measures where relevant. |
(2) |
Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for H1 2019 were 38 million shares and for Q2 2019 were 35 million shares; (Q1 2019 - 40 million shares, H1 2018 - 59 million shares; Q2 2018 - 59 million shares), and as at 30 June 2019 were 33 million shares (31 March 2019 - 39 million shares; 31 December 2018 - 39 million shares). |
(3) |
NSFR reported in line with CRR2 regulations finalised in June 2019. |
(4) |
The pro forma CET 1 ratio at 30 June 2019 excluded a charge of £241 million (2p per share) for the interim dividend, a special dividend of £1,449 million (12p per share) and a foreseeable final dividend related to interim profits of £363 million (3p per share). 31 March 2019 excluded a charge of £241 million (2p per share) for the Q1 2019 foreseeable dividend. 31 December 2018 excluded a charge of £422 million (3.5p per share) for the final dividend and £904 million (7.5p per share) for the special dividend paid following the Annual General Meeting held on 25 April 2019. |
(5) |
Includes 17 million treasury shares (31 March 2019 - 24 million shares; 31 December 2018 - 8 million shares). |
Re-segmentation
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 business. Concurrent with the transfer, UK PBB has been renamed UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed Personal & Ulster. Comparatives have been re-stated.
Non-IFRS financial measures
This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations where appropriate of, refer to Appendix 2 of this document.
Summary consolidated income statement for the period ended 30 June 2019 | ||||||
|
|
|
|
|
|
|
|
Half year ended
|
|
Quarter ended
| |||
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
Net interest income |
4,004 |
4,326 |
|
1,971 |
2,033 |
2,180 |
|
|
|
|
|
|
|
Own credit adjustments |
(46) |
39 |
|
(3) |
(43) |
18 |
Strategic disposals |
1,035 |
- |
|
1,035 |
- |
- |
Other non-interest income |
2,124 |
2,337 |
|
1,077 |
1,047 |
1,202 |
|
|
|
|
|
|
|
Non-interest income |
3,113 |
2,376 |
|
2,109 |
1,004 |
1,220 |
|
|
|
|
|
|
|
Total income |
7,117 |
6,702 |
|
4,080 |
3,037 |
3,400 |
|
|
|
|
|
|
|
Litigation and conduct costs |
(60) |
(801) |
|
(55) |
(5) |
(782) |
Strategic costs |
(629) |
(350) |
|
(434) |
(195) |
(141) |
Other expenses |
(3,411) |
(3,584) |
|
(1,673) |
(1,738) |
(1,801) |
|
|
|
|
|
|
|
Operating expenses |
(4,100) |
(4,735) |
|
(2,162) |
(1,938) |
(2,724) |
|
|
|
|
|
|
|
Profit before impairment losses |
3,017 |
1,967 |
|
1,918 |
1,099 |
676 |
Impairment losses |
(323) |
(141) |
|
(237) |
(86) |
(63) |
|
|
|
|
|
|
|
Operating profit before tax |
2,694 |
1,826 |
|
1,681 |
1,013 |
613 |
Tax charge |
(194) |
(709) |
|
22 |
(216) |
(396) |
|
|
|
|
|
|
|
Profit for the period |
2,500 |
1,117 |
|
1,703 |
797 |
217 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
Ordinary shareholders |
2,038 |
888 |
|
1,331 |
707 |
96 |
Other owners |
202 |
245 |
|
102 |
100 |
144 |
Non-controlling interests |
260 |
(16) |
|
270 |
(10) |
(23) |
|
|
|
|
|
|
|
Notable items within total income |
|
|
|
|
|
|
Alawwal bank merger gain in NatWest Markets |
444 |
- |
|
444 |
- |
- |
FX recycling gain in Central items & other |
290 |
- |
|
290 |
- |
- |
Legacy liability release in Central items & other |
256 |
- |
|
256 |
- |
- |
IFRS volatility in Central items & other(1) |
17 |
(111) |
|
21 |
(4) |
17 |
UK PB debt sale gain |
2 |
26 |
|
- |
2 |
- |
FX gains in Central items & other |
20 |
4 |
|
- |
20 |
19 |
Commercial Banking fair value and disposal (loss)/gain |
(17) |
192 |
|
(15) |
(2) |
115 |
NatWest Markets legacy business disposal |
(27) |
(57) |
|
(23) |
(4) |
(41) |
|
|
|
|
|
|
|
Notable items within operating expenses |
|
|
|
|
|
|
Push payment fraud costs |
(18) |
- |
|
(18) |
|
|
Litigation and conduct costs |
(60) |
(801) |
|
(55) |
(5) |
(782) |
of which: US RMBS |
7 |
(802) |
|
7 |
- |
(803) |
of which: DoJ |
- |
(1,040) |
|
- |
- |
(1,040) |
Nomura |
- |
241 |
|
- |
- |
241 |
Note:
(1) |
IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS. |
Income statement overview
Income
Total income increased by £415 million, or 6.2%, compared with H1 2018 principally due to a £444 million gain relating to the Alawwal bank merger completion, FX recycling gains of £290 million and a £256 million legacy liability release, partially offset by lower central Treasury income, reflecting increased MREL costs and lower structural hedge income. Excluding NatWest Markets, Central items on page 16 and 17 and notable items for UK Personal Banking and Commercial Banking on page 5, income decreased by 1.7% compared with H1 2018 reflecting continuing margin pressure.
NIM was 1.83%. Bank NIM of 2.04% was 9 basis points lower than H1 2018 primarily reflecting competitive pressures within the personal business, while in Commercial Banking NIM increased by 3 basis points.
Operating expenses
Operating expenses decreased by £635 million, or 13.4%, compared with H1 2018 primarily reflecting a £741 million reduction in litigation and conduct costs, principally due to the net RMBS charge in H1 2018, partially offset by a £279 million increase in strategic costs.
Other expenses reduced by £173 million compared with H1 2018, despite an additional £18 million of authorised push payment fraud costs in line with new industry practice. The majority of the reduction in expenses is in Central items and reflects one-off releases in H1 2019 and innovation and other costs that were held centrally in H1 2018 which are now allocated to the franchises. Headcount reduced by c.3,400, or 4.9%, compared with H1 2018.
Impairments
A net impairment loss of £323 million, 21 basis points of gross customer loans, increased by £182 million compared with H1 2018 primarily reflecting a small number of single name charges in Commercial Banking and lower recoveries in UK PB, resulting from debt sales in recent years.
Tax
The tax charge includes a £215 million deferred tax asset credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS Plc under ring-fencing regulations.
Non-controlling interests
Includes a charge of £274 million in relation to the gain recognised on completion of the Alawwal bank merger.
Business performance summary
Building the best bank for customers in the UK and Republic of Ireland
Customer Advocacy and Trust Scores
Our brands are our main connection with customers. Each takes a clear and differentiated position with the aim of helping us strengthen our relationship with them. For this reason we track customer advocacy for our key brands using the net-promoter score (NPS) a commonly-used metric in banking and other industries across the world.
We know that we still have much to do. Our recent programme of branch closures has had a detrimental impact on NPS, particularly for the Royal Bank of Scotland. Scores here are recovering in Personal Banking, and we are optimistic the same will happen in Business Banking. We are determined to make a difference with the things that matter most to our customers. We are fixing our core processes to get our service right first time more consistently while at the same time innovating to deliver better solutions.
The tables below show NPS and Trust scores for our key brands.
Personal Banking
|
Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
NatWest |
12 |
13 |
12 |
11 |
11 |
11 |
Royal Bank of Scotland |
(14) |
(21) |
(22) |
(17) |
(14) |
(10) |
Ulster Bank Northern Ireland |
(6) |
(11) |
(9) |
(10) |
(3) |
1 |
Ulster Bank Republic of Ireland |
(5) |
(7) |
(6) |
(6) |
(7) |
(11) |
Source: Ipsos MORI FRS 6 month rolling data. Latest base sizes: 3,111 for NatWest (England & Wales); 421 for Royal Bank of Scotland (Scotland). Based on the question: How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking? Base: Claimed main banked current account customers.
Source: Coyne Research 12 month rolling data. Question: Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely. Latest base sizes: 254 Northern Ireland; 292 Republic of Ireland
Business Banking
|
Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
NatWest |
(10) |
(6) |
(5) |
(9) |
(8) |
(9) |
Royal Bank of Scotland |
(22) |
(23) |
(29) |
(36) |
(36) |
(36) |
Source: MarketVue Business Banking from Savanta Q2 2019. Based on interviews with businesses with an annual turnover up to £2 million. Latest base sizes: 1098 for NatWest (England & Wales), 442 for Royal Bank of Scotland (Scotland). Question: How likely would you be to recommend (bank). Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
Commercial Banking
|
Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
NatWest |
23 |
22 |
21 |
21 |
20 |
20 |
Royal Bank of Scotland |
10 |
17 |
21 |
20 |
18 |
21 |
Source: MarketVue Business Banking from Savanta Q2 2019. Based on interviews with businesses with an annual turnover over £2 million. Latest base sizes: 550 for NatWest (England & Wales), 89 for Royal Bank of Scotland (Scotland). Question: How likely would you be to recommend (bank). Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
Trust
We also use independent experts to measure our customers trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).
|
Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
NatWest |
59 |
58 |
64 |
56 |
60 |
61 |
Royal Bank of Scotland |
15 |
27 |
25 |
27 |
28 |
38 |
Source: Populus. Latest quarters data. Measured as a net % of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: 908 for NatWest (England & Wales), 188 for Royal Bank of Scotland (Scotland).
Business performance summary
Personal & Ulster
UK Personal Banking
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
|
2,447 |
2,551 |
|
1,202 |
1,245 |
1,253 |
Operating expenses |
|
(1,229) |
(1,291) |
|
(594) |
(635) |
(605) |
Impairment losses |
|
(181) |
(131) |
|
(69) |
(112) |
(63) |
Operating profit |
|
1,037 |
1,129 |
|
539 |
498 |
585 |
Return on equity |
|
25.6% |
31.4% |
|
26.5% |
24.7% |
33.0% |
Net interest margin |
|
2.57% |
2.71% |
|
2.51% |
2.62% |
2.68% |
Cost:income ratio |
|
50.2% |
50.6% |
|
49.4% |
51.0% |
48.3% |
|
|
|
|
|
As at | ||
|
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
|
£bn |
£bn |
£bn |
Net loans to customers - amortised cost |
|
|
|
|
151.9 |
150.6 |
148.9 |
Customer deposits |
|
|
|
|
147.5 |
145.7 |
145.3 |
RWAs |
|
|
|
|
37.0 |
35.8 |
34.3 |
Loan impairment rate |
|
|
|
|
18bps |
30bps |
38bps |
H1 2019 compared with H1 2018 | |
· |
UK PB now has 6.3 million regular mobile app users, with 74% of active current account customers being regular digital users. Total digital sales volumes increased by 19% representing 48% of all sales in H1 2019. 60% of personal unsecured loan sales were via the digital channel, 4% higher than H1 2018. 55% of current accounts opened in H1 2019 were via the digital channel, with digital volumes 56% higher. |
· |
Total income was £104 million, or 4.1%, lower impacted by a £24 million reduction in debt sale gains, £7 million lower annual insurance profit share and an IFRS 9 accounting change for interest in suspense recoveries of £14 million, offset in impairments. Excluding these items, income was £59 million, or 2.3%, lower reflecting continued competitive pressure impacting mortgage margins, partially offset by increased deposit income. |
· |
Operating expenses were £62 million or 4.8% lower. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses were £33 million, or 2.8%, lower driven by decreased staff costs associated with a 9.0% reduction in headcount and one off releases, partially offset by increased fraud costs of £15 million due to a revised customer refund approach for authorised push payments scams, annual pay award and innovation costs. |
· |
Impairments were £50 million higher reflecting lower recoveries as a result of debt sales in recent years and IFRS 9 model adjustments. The underlying default charge has increased slightly compared with H1 2018 primarily due to higher loan volumes over the past two years. Default rates in H1 2019 remain broadly stable. |
· |
Net loans to customers increased by £4.2 billion, or 2.8%, as a result of strong gross new mortgage lending and lower redemptions. Gross new mortgage lending in H1 2019 was £14.3 billion with market flow share of approximately 12%, supporting a stock share of approximately 10%. |
· |
Customer deposits increased by £4.0 billion, or 2.8%, as growth continued across current accounts and savings. |
· |
RWAs increased by £5.0 billion, or 15.6%, primarily reflecting ongoing predictive loss model recalibrations, higher lending volumes and an increase in RWAs related to the property portfolio following the introduction of IFRS 16. |
Q2 2019 compared with Q1 2019 | |
· |
Total income was £43 million, or 3.5%, lower due to decreased savings deposit margins from the lower yield curve and continued pressure on mortgage margins. Net interest margin was 11 basis points lower due to continued pressures from both mortgages and the lower yield curve impacting savings deposit margin. |
· |
Net loans to customers increased by £1.3 billion, or 0.9%, as a result of gross new lending of both mortgages and loans. Gross new mortgage lending in the quarter was £6.7 billion. Mortgage approval share was around 13% in Q2 2019 up from 11% in Q1 2019.
|
Q2 2019 compared with Q2 2018 | |
· |
Total income decreased by £51 million, or 4.1%, primarily reflecting lower mortgage margins. |
· |
Operating expenses were £11 million or 1.8% lower. Excluding strategic, litigation and conduct costs on page 18 and 20, operating expenses were £26 million, or 4.6%, lower driven by decreased staff costs associated with a 9.0% reduction in headcount and one off releases, partially offset by increased fraud costs of £10 million due to a revised customer refund approach for authorised push payments scams and annual pay award. |
Business performance summary
Ulster Bank RoI
|
Half year ended |
|
Quarter ended | |||
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
283 |
312 |
|
138 |
145 |
166 |
Operating expenses |
(281) |
(252) |
|
(145) |
(136) |
(124) |
Impairment releases |
21 |
26 |
|
10 |
11 |
34 |
Operating profit |
23 |
86 |
|
3 |
20 |
76 |
Return on equity |
2.1% |
7.0% |
|
0.6% |
3.8% |
12.5% |
Net interest margin |
1.63% |
1.85% |
|
1.62% |
1.65% |
1.91% |
Cost:income ratio |
99.3% |
80.8% |
|
105.1% |
93.8% |
74.7% |
|
|
|
|
As at | ||
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
£bn |
£bn |
£bn |
Net loans to customers - amortised cost |
|
|
|
19.0 |
18.2 |
18.8 |
Customer deposits |
|
|
|
19.0 |
17.5 |
18.0 |
RWAs |
|
|
|
14.2 |
14.2 |
14.7 |
Loan impairment rate |
|
|
|
(20)bps |
(23)bps |
(39)bps |
H1 2019 compared with H1 2018 | |
· |
Ulster Bank RoI continues to deliver digital enhancements that improve and simplify the everyday banking experience for customers. The successful launch of paperless processes for everyday banking products has made it easier and quicker for customers to move from application to drawdown. 70% of Ulster Bank RoIs active personal current account customers are choosing to bank through digital channels. Mobile payments and transfers increased by 30% compared with H1 2018. |
· |
Total income was £29 million, or 9.3% (31 million, or 8.7%), lower primarily reflecting a decrease in income associated with the sale of a portfolio of non-performing loans (NPL), an IFRS 9 accounting change for interest in suspense recoveries of £9 million (10 million) and one-off benefits in Q2 2018. |
· |
Operating expenses were £29 million, or 11.5% (37 million, or 13.0%), higher. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses were £11 million or 4.8% (15 million, or 5.7%), higher largely reflecting the continued focus on strengthening the banks risk and compliance environment and higher levies. |
· |
The net impairment release of £21 million (24 million) principally reflects the net impact of an improvement in the performance of the NPL portfolio, NPL deleveraging and a change in accounting treatment of interest in suspense. |
· |
Net loans to customers decreased by £0.1 billion, or 0.5% (0.4 billion, or 1.9%), primarily driven by the sale of a portfolio of non-performing loans of £0.5 billion (0.6 billion) in 2018. New lending of £1.4 billion (1.6 billion) is 50.1% (48.2% in euro terms) higher, with strong growth across all key segments. |
· |
Customer deposits increased by £1.7 billion, or 9.8% (1.8 billion, or 9.2%), supporting an 11 percentage point reduction in the loan to deposit ratio to 100%. |
· |
Risk weighted assets decreased by £2.6 billion, or 15.5% (3.2 billion, or 16.8%), largely due to the sale of a portfolio of NPLs in 2018 and an improvement in credit metrics, reflecting a more positive economic environment. |
Q2 2019 compared with Q1 2019 | |
· |
Total income was £7 million, or 4.8% (8 million, or 4.8%), lower largely due to a £9 million (11 million) one-off benefit following a restructure of interest rate swaps on free funds in Q1 2019. Net interest margin was 3 basis points lower, primarily due to an increase in cash placements. |
· |
Net loans to customers increased by £0.8 billion, or 4.4% (0.1 billion, or 0.5%), while customer deposits increased by £1.5 billion, or 8.6% (1.0 billion, or 4.9%). |
Q2 2019 compared with Q2 2018 | |
· |
Total income decreased by £28 million, or 16.9% (32 million, or 16.8%), primarily reflecting a reduction in income associated with the NPL portfolio and non-recurring funding and asset sale income benefits in Q2 2018. |
· |
A net impairment release of £10 million (11 million) principally reflects the net impact of improvement in the performance of the NPL portfolio, non-performing lending deleveraging and a change in the accounting treatment of interest in suspense. |
Business performance summary
Commercial
Commercial Banking
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
|
2,165 |
2,390 |
|
1,083 |
1,082 |
1,232 |
Operating expenses |
|
(1,262) |
(1,140) |
|
(622) |
(640) |
(545) |
Impairment losses |
(202) |
(35) |
|
(197) |
(5) |
(23) | |
Operating profit |
|
701 |
1,215 |
|
264 |
437 |
664 |
Return on equity |
|
8.8% |
15.1% |
|
6.2% |
11.5% |
16.4% |
Net interest margin |
|
1.98% |
1.95% |
|
1.97% |
1.99% |
1.98% |
Cost:income ratio |
|
56.9% |
46.4% |
|
56.1% |
57.8% |
43.0% |
|
|
|
|
|
|
As at |
|
|
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
|
£bn |
£bn |
£bn |
Net loans to customer (amortised cost) |
|
|
101.4 |
100.8 |
101.4 | ||
Customer deposits |
|
|
|
|
133.4 |
131.8 |
134.4 |
RWAs |
|
|
|
|
77.8 |
78.1 |
78.4 |
Loan impairment rate |
|
|
|
|
77bps |
2bps |
2bps |
H1 2019 compared with H1 2018 | |
· |
The Bankline mobile app now has over 12,000 users, up from c.2,500 in Q1 2019, of which over 3,500 are daily users. Our customer support chatbot, Cora, now processes over 7,000 conversations a month, with consistently positive feedback. The improved lending journey continues to provide a decision in principle in under 24 hours for approximately 74% of loans. |
· |
Total income decreased by £225 million, or 9.4%, reflecting asset disposal and fair value gains of £192 million in H1 2018 in comparison to £17 million asset disposal and fair value losses in H1 2019 combined with lower non-interest income, partially offset by higher deposit income. |
· |
Operating expenses were £122 million or 10.7% higher. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses were £13 million, or 1.2%, higher primarily reflecting an £11 million one-off item in Q1 2018, £11 million higher operating lease depreciation, increased remediation, innovation and technology spend, partially offset by £28 million lower back office operational costs. |
· |
Impairments were £167 million higher primarily reflecting a small number of single name charges and releases related to data quality improvements in the prior year. |
· |
Net loans to customers were £1.2 billion, or 1.2%, lower due to capital actions taken in H2 2018, business transfers of £0.9 billion and reductions relating to EU divestment, partially offset by growth of £1.3 billion across SME & Mid-Corporates, Specialised business and Business Banking. Net loans to customers remained stable in the first half of 2019 at £101.4 billion with reductions relating to EU divestment and Large Corporates & Institutions offset by growth of £1.5 billion across SME & Mid-Corporates, Specialised business and Business Banking. |
· |
Customer deposits decreased by £1.7 billion, due to business transfers of £1.0 billion to RBSI in H2 2018 and net outflows of £0.7 billion supporting a loan:deposit ratio of 76%. |
· |
RWAs decreased by £5.3 billion, or 6.4%, driven by active capital management in H2 2018 and business transfers of £1.9 billion, partially offset by model updates and underlying business growth. |
Q2 2019 compared with Q1 2019 | |
· |
Total income remained stable at £1,083 million as balance growth was partially offset by £15 million of asset disposal and fair value losses in comparison with a £2 million loss in Q1 2019. Net interest margin was broadly stable, reducing by 2 basis points largely due to lower deposit funding benefits. |
· |
Operating expenses were £18 million or 2.8% lower. Excluding strategic, litigation and conduct costs mentioned on page 18 and 19, operating expenses were £50 million lower, due to a reduction in back office operational costs. |
· |
Impairments of £197 million increased by £192 million primarily reflecting a small number of single name charges in the second quarter. |
· |
Net loans to customers increased by £0.6 billion to £101.4 billion as growth across SME & Mid-Corporates, Specialised business and Business Banking was partially offset by £0.4 billion Large Corporates & Institutions Western European transfers to NatWest Markets and planned reductions in EU divestment. |
Q2 2019 compared with Q2 2018 | |
· |
Total income decreased by £149 million, or 12.1%, reflecting asset disposal and fair value losses of £15 million compared to asset disposal and fair value gains of £115 million in Q2 2018 and lower non-interest income. |
Business performance summary
Private Banking
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
|
384 |
382 |
|
191 |
193 |
198 |
Operating expenses |
|
(232) |
(225) |
|
(115) |
(117) |
(104) |
Impairment releases/(losses) |
|
3 |
(1) |
|
(1) |
4 |
- |
Operating profit |
|
155 |
156 |
|
75 |
80 |
94 |
Return on equity |
|
16.6% |
15.8% |
|
15.9% |
17.1% |
19.3% |
Net interest margin |
|
2.48% |
2.53% |
|
2.44% |
2.52% |
2.54% |
Cost:income ratio |
|
60.4% |
58.9% |
|
60.2% |
60.6% |
52.5% |
|
|
|
|
|
As at | ||
|
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
|
£bn |
£bn |
£bn |
Net loans to customers (amortised cost) |
|
|
|
|
14.7 |
14.4 |
14.3 |
Customer deposits |
|
|
|
|
28.0 |
26.9 |
28.4 |
RWAs |
|
|
|
|
9.7 |
9.6 |
9.4 |
|
|
|
|
|
|
|
|
AUMs |
|
|
|
|
21.9 |
21.0 |
19.8 |
Assets Under Administration (1) |
|
|
|
|
7.0 |
6.8 |
6.6 |
Total Assets Under Management and Administration (AUMA) |
|
|
|
|
28.9 |
27.8 |
26.4 |
Note:
(1) Private Banking manages assets under management portfolios on behalf of UK PB and RBSI. Prior to Q4 2018, the assets under management portfolios of UK PB and RBSI were not included. Private Banking receives a management fee from UK PB and clients of RBSI in respect of providing this service.
H1 2019 compared with H1 2018 | |
· |
Private Banking offers a service-led, digitally enabled experience for its clients with 74% of clients registered for digital banking, 85% of whom are active users. Coutts Connect, the social platform which allows clients to network and build working relationships, continues to attract users with a 10% increase in registered clients in the quarter. Over 1,500 clients are registered, with over 70% of conversations on a client to client basis. |
· |
Total income remained broadly stable as net interest income increased by £9 million due to deposit income benefits and asset and deposit volume growth, whilst non interest income reduced by £7 million due to movements in investment income one-offs. |
· |
Operating expenses were £7 million or 3.1% higher. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses were £3 million lower reflecting decreased back office operational costs, partially offset by one-off non staff related costs. |
· |
Impairments were £4 million lower primarily due to data quality improvements and single name releases. |
· |
Net loans to customers increased by £0.9 billion, or 6.5%, primarily driven by mortgage lending. |
· |
Customer deposits increased by £1.6 billion, or 6.1%, as Q4 2018 inflows were maintained. |
· |
RWAs increased by £0.3 billion, or 3.2%, relative to 6.5% growth in net loans to customers. |
· |
Assets under management in Private Banking remained broadly stable. For the year to date, growth of £2.1 billion reflects positive investment performance of £1.9 billion following adverse market movements in Q4 2018 and net new business of £0.2 billion. |
· |
Total assets under management overseen by Private Banking increased by £0.4 billion to £28.9 billion in comparison to H1 2018. For the year to date growth of £2.5 billion reflects £2.3 billion investment performance and net new business of £0.2 billion. |
Q2 2019 compared with Q1 2019 | |
· |
Total income remained broadly stable as reduced deposit funding benefits were partially offset by balance growth and higher investment income. Net interest margin decreased by 8 basis points to 2.44% mainly due to lower deposit funding benefits. |
· |
Operating expenses were £2 million or 1.7% lower. Excluding strategic, litigation and conduct costs mentioned on page 18 and 19, operating expenses were £7 million lower due to a reduction in back office operational costs. |
· |
Impairments were £5 million higher due to single name releases in Q1 2019. |
· |
Net loans to customers increased by £0.3 billion driven by mortgage lending. |
· |
Assets under management in Private Banking increased by £0.9 billion driven by investment performance of £0.7 billion and net new business of £0.2 billion. |
· |
Total assets under management overseen by Private Banking increased by £1.1 billion as a result of investment performance of £0.9 billion and net new business of £0.2 billion.
|
Q2 2019 compared with Q2 2018 | |
· |
Total income reduced by £7 million, or 3.5%, due to lower non interest income as a result of a £4 million one-off benefit in Q2 2018 related to MIFID II and a £3 million one-off investment income charge in Q2 2019. |
Business performance summary
RBS International
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
|
310 |
284 |
|
159 |
151 |
147 |
Operating expenses |
|
(119) |
(114) |
|
(60) |
(59) |
(55) |
Impairment releases |
|
3 |
3 |
|
2 |
1 |
3 |
Operating profit |
|
194 |
173 |
|
101 |
93 |
95 |
Return on equity |
|
29.7% |
25.7% |
|
30.8% |
28.6% |
27.9% |
Net interest margin |
|
1.69% |
1.64% |
|
1.68% |
1.70% |
1.72% |
Cost:income ratio |
|
38.4% |
40.1% |
|
37.7% |
39.1% |
37.4% |
|
|
|
|
|
As at | ||
|
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
|
£bn |
£bn |
£bn |
Net loans to customers (amortised cost) |
|
|
|
|
13.6 |
13.3 |
13.3 |
Customer deposits |
|
|
|
|
28.1 |
27.6 |
27.5 |
RWAs |
|
|
|
|
6.9 |
7.0 |
6.9 |
H1 2019 compared with H1 2018 | |
· |
The migration of customers to the new Institutional Banking electronic platform is now complete, improving the customer experience, functionality and resilience of the platform. The Retail mobile banking app has seen a 9% increase in registrations in 2019 and 40% of Local Banking customers are now regular digital users. As part of the strategy to make RBS International an easier bank to deal with, it launched straight through processing for existing customers to open new savings accounts online. 66% of savings accounts opened since launch have used the process without need for paper or a signature. |
· |
Total income was £26 million, or 9.2%, higher driven by higher customer deposit margins, £12 million, and £5 million due to higher lending primarily in the Institutional Banking sector. |
· |
Operating expenses were £5 million, or 4.4% higher principally resulting from a £10 million litigation and conduct provision release in the prior year. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses were £12 million, or 9.9%, lower driven by a reduction in back office costs. |
· |
A net impairment release of £3 million remained stable compared with prior year, reflecting a number of one-off releases. |
· |
Net loans to customers were £0.6 billion, or 4.6%, higher as a result of higher volumes in the Institutional Banking sector. |
· |
Customer deposits decreased £0.3 billion, or 1.1% as a result of lower short term inflows in Institutional Banking in H1 2019 compared with the prior year, partially offset by a £1.0 billion transfer from Commercial Banking in H2 2018 and underlying growth in the Funds sector in H1 2019. |
· |
RWAs were £0.1 billion, or 1.5%, higher as a result of increased lending balances. |
· |
H1 2019 return on equity of 29.7% compared with 25.7% in H1 2018. |
Q2 2019 compared with Q1 2019 | |
· |
Total income was £8 million higher due to increased lending and funding income partially offset by lower non utilisation fees. Net interest margin is 2 basis points lower due to lower returns on investment of surplus deposits. |
· |
Net loans to customers were £0.3 billion higher reflecting increased lending in the Institutional Banking sector. |
Q2 2019 compared with Q2 2018 | |
· |
Total expenses were £5 million, or 9.1%, higher following a £9 million litigation and conduct release in Q2 2018 partially offset by lower remediation spend. |
Business performance summary
NatWest Markets(1)
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Total income |
|
942 |
721 |
|
686 |
256 |
284 |
of which: Core income excluding own credit adjustments |
702 |
728 |
|
325 |
377 |
316 | |
of which: Legacy income |
|
287 |
(46) |
|
366 |
(79) |
(50) |
Own credit adjustments |
|
(47) |
39 |
|
(5) |
(42) |
18 |
Operating expenses |
|
(678) |
(671) |
|
(344) |
(334) |
(322) |
Impairment releases/(losses) |
|
36 |
(4) |
|
20 |
16 |
(13) |
Operating profit/(loss) |
|
300 |
46 |
|
362 |
(62) |
(51) |
Return on equity |
|
1.0% |
(0.5%) |
|
4.4% |
(2.4%) |
(3.0%) |
Cost:income ratio |
|
72.0% |
93.1% |
|
50.1% |
130.5% |
113.4% |
|
|
|
|
|
As at | ||
|
|
|
|
|
30 June |
31 March |
31 December |
|
|
|
|
|
2019 |
2019 |
2018 |
|
|
|
|
|
£bn |
£bn |
£bn |
Funded assets |
|
|
|
|
133.4 |
138.8 |
111.4 |
RWAs |
|
|
|
|
41.4 |
44.6 |
44.9 |
Note:
(1) The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity or group. NatWest Markets Plc entity includes the Central items & other segment but excludes NatWest Markets N.V. for statutory reporting. Refer to NatWest Markets Plc and NatWest Markets N.V. interim results that were released on 2 August 2019 for further details.
H1 2019 compared with H1 2018 | |
· |
NatWest Markets continues to use technology to enhance the way it provides smart solutions to clients. For example, physical data centres are in the process of being moved to the cloud; new collaboration channels such as Symphony allows us to engage and transact with clients in new ways and machine learning across written customer communication helps us understand and eliminate common client problems. |
· |
Total income increased by £221 million, or 30.7%, to £942 million including a £444 million gain relating to the Alawwal bank merger completion. Income in the core business fell by £26 million, or 3.6%. Customer activity remained robust in difficult market conditions but the business was impacted by higher funding costs associated with becoming a standalone non ring-fenced bank. Own credit adjustments deteriorated by £86 million reflecting the tightening of credit spreads in H1 2019. |
· |
Operating expenses were £7 million or 1.0% higher. Excluding strategic, litigation and conduct costs mentioned on page 16 and 17, operating expenses continued to fall, down £25 million, or 4.0%, reflecting lower back office operations costs. |
· |
RWAs decreased by £8.7 billion reflecting the reduction in Alawwal bank RWAs from £5.8 billion to £1.1 billion and other legacy reductions. The remaining Alawwal bank RWAs reflect NWM Plcs holding following the merger. |
Q2 2019 compared with Q1 2019 | |
· |
Total income increased by £430 million primarily reflecting the Alawwal bank gain in legacy. Income in the core business fell by £52 million reflecting the impact of difficult market conditions. |
· |
RWAs decreased by £3.2 billion reflecting the Alawwal bank reduction, partially offset by an increase in the core business primarily due to increased credit risk as a result of customer activity in the banking book and the transfer of Western European clients from Commercial Banking. |
· |
Operating expenses were £10 million or 3.0% higher. Excluding strategic, litigation and conduct costs mentioned on page 18 and 19, operating expenses continued to fall, down £20 million in the quarter primarily due to lower back office operations costs. |
Q2 2019 compared with Q2 2018 | |
· |
Total income increased by £402 million primarily reflecting the Alawwal gain in legacy. Income in the core business increased by £9 million, or 2.8% as customer activity remained robust in difficult market conditions, although Q2 2018 was impacted by some turbulence in European bond markets. |
· |
Operating expenses were £22 million or 6.8% higher. Excluding strategic, litigation and conduct costs mentioned on page 18 and 20, operating expenses continued to fall, down £15 million, or 4.9%, due to lower back office operations costs. |
Business performance summary
Central items & other
|
|
Half year ended |
|
Quarter ended | |||
|
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
|
|
£m |
£m |
|
£m |
£m |
£m |
Central items not allocated |
|
284 |
(979) |
|
337 |
(53) |
(850) |
· |
Central items not allocated represented a gain of £284 million in H1 2019 primarily reflecting FX recycling gains of £290 million and a legacy liability release of £256 million, both relating to the Alawwal merger, partially offset by strategic costs of £315 million. Other expenses decreased by £124 million compared with H1 2018 primarily due to one-off releases in H1 2019 and innovation and other costs that were held centrally in 2018 that are now allocated to the franchises. |
Impact of Alawwal bank merger
The impact on profit of the Alawwal bank merger is summarised below:
|
|
Segment |
|
|
Legal entity | ||
|
|
|
Central |
|
|
|
|
|
|
NatWest |
items & |
|
|
|
|
|
|
Markets |
other |
RBS |
|
RBS |
NWM N.V. |
|
|
£m |
£m |
£m |
|
£m |
£m |
Alawwal bank merger gain |
|
444 |
- |
444 |
|
(12) |
456 |
Legacy liability release |
|
- |
256 |
256 |
|
256 |
- |
FX recycling gain |
|
- |
290 |
290 |
|
290 |
- |
Impact on non-interest income |
|
444 |
546 |
990 |
|
534 |
456 |
|
|
|
|
|
|
|
|
Impact on RBS profit before tax |
|
|
|
990 |
|
|
|
Tax credit |
|
|
|
41 |
|
|
|
Profit after tax |
|
|
|
1,031 |
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Ordinary shareholders |
|
|
|
757 |
|
|
|
Non-controlling interests |
|
|
|
274 |
|
|
|
Business performance summary
Capital and leverage ratios
The table below sets out the key Capital and Leverage ratios on an end-point basis. |
|
End-point CRR basis (1) | ||
|
|
30 June |
|
31 December |
|
|
2019 |
|
2018 |
Capital adequacy ratios |
|
% |
|
% |
CET1 |
|
16.0 |
|
16.2 |
Tier 1 |
|
18.2 |
|
18.4 |
Total |
|
20.9 |
|
21.8 |
|
|
|
|
|
Capital |
|
£m |
|
£m |
Tangible equity |
|
35,036 |
|
34,566 |
Expected loss less impairment provisions |
|
(726) |
|
(654) |
Prudential valuation adjustment |
|
(419) |
|
(494) |
Deferred tax assets |
|
(869) |
|
(740) |
Own credit adjustments |
|
(261) |
|
(405) |
Pension fund assets |
|
(400) |
|
(394) |
Cash flow hedging reserve |
|
(117) |
|
191 |
Foreseeable dividends |
|
(2,053) |
|
(1,326) |
Other deductions |
|
- |
|
(105) |
Total deductions |
|
(4,845) |
|
(3,927) |
|
|
|
|
|
CET1 capital |
|
30,191 |
|
30,639 |
AT1 capital |
|
4,051 |
|
4,051 |
|
|
|
|
|
Tier 1 capital |
|
34,242 |
|
34,690 |
Tier 2 capital |
|
5,119 |
|
6,483 |
Total regulatory capital |
|
39,361 |
|
41,173 |
Risk-weighted assets |
|
|
|
|
Credit risk |
|
137,100 |
|
137,900 |
Counterparty credit risk |
|
14,200 |
|
13,600 |
Market risk |
|
14,600 |
|
14,800 |
Operational risk |
|
22,600 |
|
22,400 |
Total RWAs |
|
188,500 |
|
188,700 |
Leverage |
|
|
|
|
Cash and balances at central banks |
|
85,400 |
|
88,900 |
Trading assets |
|
85,400 |
|
75,100 |
Derivatives |
|
145,600 |
|
133,300 |
Financial assets |
|
389,200 |
|
377,500 |
Other assets |
|
24,300 |
|
19,400 |
Total assets |
|
729,900 |
|
694,200 |
Derivatives |
|
|
|
|
- netting and variation margin |
|
(156,600) |
|
(141,300) |
- potential future exposures |
|
44,100 |
|
42,100 |
Securities financing transactions gross up |
|
1,900 |
|
2,100 |
Undrawn commitments |
|
49,300 |
|
50,300 |
Regulatory deductions and other adjustments |
|
(9,500) |
|
(2,900) |
CRR leverage exposure |
|
659,100 |
|
644,500 |
CRR leverage ratio % |
|
5.2 |
|
5.4 |
UK leverage exposure (2) |
|
576,600 |
|
559,500 |
UK leverage ratio % (2) |
|
5.9 |
|
6.2 |
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
|
Half year ended 30 June 2019 | |||||||||
|
Personal & Ulster |
|
Commercial & Private |
|
|
|
Central |
| ||
|
UK Personal |
Ulster |
|
Commercial |
Private |
RBS |
|
NatWest |
items & |
Total |
|
Banking |
Bank RoI |
|
Banking |
Banking |
International |
|
Markets |
other (1) |
RBS |
|
£m |
£m |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
Income statement |
|
|
|
|
|
|
|
|
|
|
Net interest income |
2,084 |
200 |
|
1,424 |
261 |
242 |
|
(122) |
(85) |
4,004 |
Non-interest income |
363 |
82 |
|
741 |
123 |
68 |
|
667 |
80 |
2,124 |
Own credit adjustments |
- |
1 |
|
- |
- |
- |
|
(47) |
- |
(46) |
Strategic disposals |
- |
- |
|
- |
- |
- |
|
444 |
591 |
1,035 |
Total income |
2,447 |
283 |
|
2,165 |
384 |
310 |
|
942 |
586 |
7,117 |
Direct expenses |
|
|
|
|
|
|
|
|
|
|
- staff costs |
(313) |
(106) |
|
(374) |
(82) |
(59) |
|
(349) |
(558) |
(1,841) |
- other costs |
(164) |
(48) |
|
(155) |
(35) |
(23) |
|
(86) |
(1,059) |
(1,570) |
Indirect expenses |
(675) |
(88) |
|
(569) |
(96) |
(27) |
|
(165) |
1,620 |
- |
Strategic costs |
|
|
|
|
|
|
|
|
|
|
- direct |
4 |
(9) |
|
(32) |
- |
(5) |
|
(49) |
(538) |
(629) |
- indirect |
(75) |
(10) |
|
(86) |
(17) |
(5) |
|
(30) |
223 |
- |
Litigation and conduct costs |
(6) |
(20) |
|
(46) |
(2) |
- |
|
1 |
13 |
(60) |
Operating expenses |
(1,229) |
(281) |
|
(1,262) |
(232) |
(119) |
|
(678) |
(299) |
(4,100) |
Operating profit before impairment (losses)/releases |
1,218 |
2 |
|
903 |
152 |
191 |
|
264 |
287 |
3,017 |
Impairment (losses)/releases |
(181) |
21 |
|
(202) |
3 |
3 |
|
36 |
(3) |
(323) |
Operating profit |
1,037 |
23 |
|
701 |
155 |
194 |
|
300 |
284 |
2,694 |
Additional information |
|
|
|
|
|
|
|
|
|
|
Return on equity (2) |
25.6% |
2.1% |
|
8.8% |
16.6% |
29.7% |
|
1.0% |
nm |
12.1% |
Cost:income ratio (2) |
50.2% |
99.3% |
|
56.9% |
60.4% |
38.4% |
|
72.0% |
nm |
57.2% |
Loan impairment rate (2) |
24bps |
(21)bps |
|
39bps |
nm |
nm |
|
nm |
nm |
21bps |
Impairment provisions (£bn) |
(1.2) |
(0.7) |
|
(1.2) |
- |
- |
|
(0.1) |
- |
(3.2) |
Impairment provisions - stage 3 (£bn) |
(0.7) |
(0.6) |
|
(0.9) |
- |
- |
|
(0.1) |
- |
(2.3) |
Net interest margin |
2.57% |
1.63% |
|
1.98% |
2.48% |
1.69% |
|
(0.73%) |
nm |
1.83% |
Third party customer asset rate |
3.28% |
2.30% |
|
3.20% |
2.95% |
1.75% |
|
nm |
nm |
nm |
Third party customer funding rate |
(0.37%) |
(0.17%) |
|
(0.43%) |
(0.44%) |
(0.14%) |
|
nm |
nm |
nm |
Average interest earning assets (£bn) |
163.8 |
24.7 |
|
145.3 |
21.2 |
28.8 |
|
33.3 |
23.2 |
440.3 |
Total assets (£bn) |
173.9 |
26.4 |
|
165.6 |
21.9 |
30.4 |
|
278.9 |
32.8 |
729.9 |
Funded assets (£bn) |
173.9 |
26.4 |
|
165.6 |
21.9 |
30.4 |
|
133.4 |
32.7 |
584.3 |
Net loans to customers - amortised cost (£bn) |
151.9 |
19.0 |
|
101.4 |
14.7 |
13.6 |
|
9.3 |
0.7 |
310.6 |
Customer deposits (£bn) |
147.5 |
19.0 |
|
133.4 |
28.0 |
28.1 |
|
2.8 |
2.8 |
361.6 |
Risk-weighted assets (RWAs) (£bn) |
37.0 |
14.2 |
|
77.8 |
9.7 |
6.9 |
|
41.4 |
1.5 |
188.5 |
RWA equivalent (RWAes) (£bn) |
38.1 |
14.5 |
|
79.3 |
9.7 |
7.0 |
|
46.1 |
1.8 |
196.5 |
Employee numbers (FTEs - thousands) |
21.3 |
3.1 |
|
10.5 |
1.9 |
1.8 |
|
5.0 |
23.0 |
66.6 |
|
|
|
|
|
|
|
|
|
|
|
For the notes to this table refer to page 20. nm = not meaningful |
|
|
|
|
|
|
|
|
|
|
Segment performance
|
Half year ended 30 June 2018 | |||||||||
|
Personal & Ulster |
|
Commercial & Private |
|
|
|
Central |
| ||
|
UK Personal |
Ulster |
|
Commercial |
Private |
RBS |
|
NatWest |
items & |
Total |
|
Banking |
Bank RoI |
|
Banking |
Banking |
International |
|
Markets |
other (1) |
RBS |
|
£m |
£m |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
Income statement |
|
|
|
|
|
|
|
|
|
|
Net interest income |
2,139 |
224 |
|
1,400 |
252 |
219 |
|
67 |
25 |
4,326 |
Non-interest income |
412 |
88 |
|
990 |
130 |
65 |
|
615 |
37 |
2,337 |
Own credit adjustments |
- |
- |
|
- |
- |
- |
|
39 |
- |
39 |
Total income |
2,551 |
312 |
|
2,390 |
382 |
284 |
|
721 |
62 |
6,702 |
Direct expenses |
|
|
|
|
|
|
|
|
|
|
- staff costs |
(360) |
(98) |
|
(374) |
(83) |
(51) |
|
(309) |
(628) |
(1,903) |
- other costs |
(117) |
(45) |
|
(114) |
(28) |
(33) |
|
(115) |
(1,229) |
(1,681) |
Indirect expenses |
(708) |
(88) |
|
(597) |
(105) |
(37) |
|
(201) |
1,736 |
- |
Strategic costs |
|
|
|
|
|
|
|
|
|
|
- direct |
(14) |
2 |
|
(20) |
(1) |
- |
|
(28) |
(289) |
(350) |
- indirect |
(85) |
(6) |
|
(44) |
(7) |
(3) |
|
(6) |
151 |
- |
Litigation and conduct costs |
(7) |
(17) |
|
9 |
(1) |
10 |
|
(12) |
(783) |
(801) |
Operating expenses |
(1,291) |
(252) |
|
(1,140) |
(225) |
(114) |
|
(671) |
(1,042) |
(4,735) |
Operating profit/(loss) before impairment (losses)/releases |
1,260 |
60 |
|
1,250 |
157 |
170 |
|
50 |
(980) |
1,967 |
Impairment (losses)/releases |
(131) |
26 |
|
(35) |
(1) |
3 |
|
(4) |
1 |
(141) |
Operating profit/(loss) |
1,129 |
86 |
|
1,215 |
156 |
173 |
|
46 |
(979) |
1,826 |
Additional information |
|
|
|
|
|
|
|
|
|
|
Return on equity (2) |
31.4% |
7.0% |
|
15.1% |
15.8% |
25.7% |
|
(0.5%) |
nm |
5.3% |
Cost:income ratio (2) |
50.6% |
80.8% |
|
46.4% |
58.9% |
40.1% |
|
93.1% |
nm |
70.4% |
Loan impairment rate (2) |
18bps |
(26)bps |
|
7bps |
nm |
nm |
|
nm |
nm |
9bps |
Impairment provisions (£bn) |
(1.1) |
(1.1) |
|
(1.5) |
(0.1) |
- |
|
(0.2) |
0.1 |
(3.9) |
Impairment provisions - stage 3 (£bn) |
(0.7) |
(1.0) |
|
(1.3) |
- |
- |
|
(0.1) |
- |
(3.1) |
Net interest margin |
2.71% |
1.85% |
|
1.95% |
2.53% |
1.64% |
|
0.50% |
nm |
2.02% |
Third party customer asset rate |
3.38% |
2.39% |
|
2.93% |
2.85% |
2.44% |
|
nm |
nm |
nm |
Third party customer funding rate |
(0.29%) |
(0.21%) |
|
(0.26%) |
(0.18%) |
(0.09%) |
|
nm |
nm |
nm |
Average interest earning assets (£bn) |
159.3 |
24.4 |
|
144.8 |
20.1 |
26.9 |
|
27.1 |
28.6 |
431.2 |
Total assets (£bn) |
168.4 |
24.9 |
|
165.7 |
20.9 |
29.8 |
|
285.0 |
53.6 |
748.3 |
Funded assets (£bn) |
168.4 |
24.8 |
|
165.7 |
20.9 |
29.8 |
|
134.5 |
53.1 |
597.2 |
Net loans to customers - amortised cost (£bn) |
147.7 |
19.1 |
|
102.6 |
13.8 |
13.0 |
|
8.1 |
(0.2) |
304.1 |
Customer deposits (£bn) |
143.5 |
17.3 |
|
135.1 |
26.4 |
28.4 |
|
3.6 |
4.7 |
359.0 |
Risk-weighted assets (RWAs) (£bn) |
32.0 |
16.8 |
|
83.1 |
9.4 |
6.8 |
|
50.1 |
0.6 |
198.8 |
RWA equivalent (RWAes) (£bn) |
32.7 |
17.3 |
|
86.5 |
9.5 |
6.8 |
|
54.1 |
1.0 |
207.9 |
Employee numbers (FTEs - thousands) |
23.4 |
3.1 |
|
10.7 |
1.9 |
1.7 |
|
5.6 |
23.6 |
70.0 |
For the notes to this table refer to page 20. nm = not meaningful. |
|
|
|
|
|
|
|
|
|
|
Segment performance
|
Quarter ended 30 June 2019 | |||||||||
|
Personal & Ulster |
|
Commercial & Private |
|
|
|
Central |
| ||
|
UK Personal |
Ulster |
|
Commercial |
Private |
RBS |
|
NatWest |
items & |
Total |
|
Banking |
Bank RoI |
|
Banking |
Banking |
International |
|
Markets |
other (1) |
RBS |
|
£m |
£m |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
Income statement |
|
|
|
|
|
|
|
|
|
|
Net interest income |
1,032 |
102 |
|
716 |
129 |
125 |
|
(91) |
(42) |
1,971 |
Non-interest income |
170 |
35 |
|
367 |
62 |
34 |
|
338 |
71 |
1,077 |
Own credit adjustments |
- |
1 |
|
- |
- |
- |
|
(5) |
1 |
(3) |
Strategic disposals |
- |
- |
|
- |
- |
- |
|
444 |
591 |
1,035 |
Total income |
1,202 |
138 |
|
1,083 |
191 |
159 |
|
686 |
621 |
4,080 |
Direct expenses |
|
|
|
|
|
|
|
|
|
|
- staff costs |
(155) |
(54) |
|
(184) |
(41) |
(31) |
|
(176) |
(264) |
(905) |
- other costs |
(90) |
(22) |
|
(80) |
(17) |
(10) |
|
(38) |
(511) |
(768) |
Indirect expenses |
(297) |
(41) |
|
(260) |
(45) |
(13) |
|
(76) |
732 |
- |
Strategic costs |
|
|
|
|
|
|
|
|
|
|
- direct |
4 |
(4) |
|
(12) |
- |
(3) |
|
(31) |
(388) |
(434) |
- indirect |
(49) |
(5) |
|
(50) |
(10) |
(3) |
|
(17) |
134 |
- |
Litigation and conduct costs |
(7) |
(19) |
|
(36) |
(2) |
- |
|
(6) |
15 |
(55) |
Operating expenses |
(594) |
(145) |
|
(622) |
(115) |
(60) |
|
(344) |
(282) |
(2,162) |
Operating profit/(loss) before impairment (losses)/releases |
608 |
(7) |
|
461 |
76 |
99 |
|
342 |
339 |
1,918 |
Impairment (losses)/releases |
(69) |
10 |
|
(197) |
(1) |
2 |
|
20 |
(2) |
(237) |
Operating profit |
539 |
3 |
|
264 |
75 |
101 |
|
362 |
337 |
1,681 |
Additional information |
|
|
|
|
|
|
|
|
|
|
Return on equity (2) |
26.5% |
0.6% |
|
6.2% |
15.9% |
30.8% |
|
4.4% |
nm |
15.8% |
Cost:income ratio (2) |
49.4% |
105.1% |
|
56.1% |
60.2% |
37.7% |
|
50.1% |
nm |
52.6% |
Loan impairment rate (2) |
18bps |
(20)bps |
|
77bps |
nm |
nm |
|
nm |
nm |
30bps |
Impairment provisions (£bn) |
(1.2) |
(0.7) |
|
(1.2) |
- |
- |
|
(0.1) |
- |
(3.2) |
Impairment provisions - stage 3 (£bn) |
(0.7) |
(0.6) |
|
(0.9) |
- |
- |
|
(0.1) |
- |
(2.3) |
Net interest margin |
2.51% |
1.62% |
|
1.97% |
2.44% |
1.68% |
|
(1.05%) |
nm |
1.78% |
Third party customer asset rate |
3.25% |
2.29% |
|
3.18% |
2.89% |
1.79% |
|
nm |
nm |
nm |
Third party customer funding rate |
(0.38%) |
(0.15%) |
|
(0.42%) |
(0.45%) |
(0.13%) |
|
nm |
nm |
nm |
Average interest earning assets (£bn) |
164.8 |
25.3 |
|
146.1 |
21.2 |
29.8 |
|
34.4 |
23.2 |
444.8 |
Total assets (£bn) |
173.9 |
26.4 |
|
165.6 |
21.9 |
30.4 |
|
278.9 |
32.8 |
729.9 |
Funded assets (£bn) |
173.9 |
26.4 |
|
165.6 |
21.9 |
30.4 |
|
133.4 |
32.7 |
584.3 |
Net loans to customers - amortised cost (£bn) |
151.9 |
19.0 |
|
101.4 |
14.7 |
13.6 |
|
9.3 |
0.7 |
310.6 |
Customer deposits (£bn) |
147.5 |
19.0 |
|
133.4 |
28.0 |
28.1 |
|
2.8 |
2.8 |
361.6 |
Risk-weighted assets (RWAs) (£bn) |
37.0 |
14.2 |
|
77.8 |
9.7 |
6.9 |
|
41.4 |
1.5 |
188.5 |
RWA equivalent (RWAes) (£bn) |
38.1 |
14.5 |
|
79.3 |
9.7 |
7.0 |
|
46.1 |
1.8 |
196.5 |
Employee numbers (FTEs - thousands) |
21.3 |
3.1 |
|
10.5 |
1.9 |
1.8 |
|
5.0 |
23.0 |
66.6 |
For the notes to this table refer to page 20. nm = not meaningful
Segment performance
|
|
Quarter ended 31 March 2019 |
| ||||||||||||||
|
|
Personal & Ulster |
|
Commercial & Private |
|
|
|
|
|
Central |
|
|
| ||||
|
|
UK Personal |
|
Ulster |
|
Commercial |
|
Private |
|
RBS |
|
NatWest |
|
items & |
|
Total |
|
|
|
Banking |
|
Bank RoI |
|
Banking |
|
Banking |
|
International |
|
Markets |
|
other (1) |
|
RBS |
|
|
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
1,052 |
|
98 |
|
708 |
|
132 |
|
117 |
|
(31) |
|
(43) |
|
2,033 |
|
Non-interest income |
|
193 |
|
47 |
|
374 |
|
61 |
|
34 |
|
329 |
|
9 |
|
1,047 |
|
Own credit adjustments |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(42) |
|
(1) |
|
(43) |
|
Total income |
|
1,245 |
|
145 |
|
1,082 |
|
193 |
|
151 |
|
256 |
|
(35) |
|
3,037 |
|
Direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- staff costs |
|
(158) |
|
(52) |
|
(190) |
|
(41) |
|
(28) |
|
(173) |
|
(294) |
|
(936) |
|
- other costs |
|
(74) |
|
(26) |
|
(75) |
|
(18) |
|
(13) |
|
(48) |
|
(548) |
|
(802) |
|
Indirect expenses |
|
(378) |
|
(47) |
|
(309) |
|
(51) |
|
(14) |
|
(89) |
|
888 |
|
- |
|
Strategic costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- direct |
|
- |
|
(5) |
|
(20) |
|
- |
|
(2) |
|
(18) |
|
(150) |
|
(195) |
|
- indirect |
|
(26) |
|
(5) |
|
(36) |
|
(7) |
|
(2) |
|
(13) |
|
89 |
|
- |
|
Litigation and conduct costs |
|
1 |
|
(1) |
|
(10) |
|
- |
|
- |
|
7 |
|
(2) |
|
(5) |
|
Operating expenses |
|
(635) |
|
(136) |
|
(640) |
|
(117) |
|
(59) |
|
(334) |
|
(17) |
|
(1,938) |
|
Operating profit/(loss) before impairment (losses)/releases |
|
610 |
|
9 |
|
442 |
|
76 |
|
92 |
|
(78) |
|
(52) |
|
1,099 |
|
Impairment (losses)/releases |
|
(112) |
|
11 |
|
(5) |
|
4 |
|
1 |
|
16 |
|
(1) |
|
(86) |
|
Operating profit/(loss) |
|
498 |
|
20 |
|
437 |
|
80 |
|
93 |
|
(62) |
|
(53) |
|
1,013 |
|
Additional information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on equity (2) |
|
24.7% |
|
3.8% |
|
11.5% |
|
17.1% |
|
28.6% |
|
(2.4%) |
|
nm |
|
8.3% |
|
Cost:income ratio (2) |
|
51.0% |
|
93.8% |
|
57.8% |
|
60.6% |
|
39.1% |
|
130.5% |
|
nm |
|
63.4% |
|
Loan impairment rate (2) |
|
30bps |
|
(23)bps |
|
2bps |
|
nm |
|
nm |
|
nm |
|
nm |
|
11bps |
|
Impairment provisions (£bn) |
|
(1.2) |
|
(0.7) |
|
(1.0) |
|
- |
|
- |
|
(0.1) |
|
(0.1) |
|
(3.1) |
|
Impairment provisions - stage 3 (£bn) |
|
(0.6) |
|
(0.6) |
|
(0.8) |
|
- |
|
- |
|
(0.1) |
|
- |
|
(2.1) |
|
Net interest margin |
|
2.62% |
|
1.65% |
|
1.99% |
|
2.52% |
|
1.70% |
|
(0.39%) |
|
nm |
|
1.89% |
|
Third party customer asset rate |
|
3.31% |
|
2.32% |
|
3.22% |
|
3.01% |
|
1.72% |
|
nm |
|
nm |
|
nm |
|
Third party customer funding rate |
|
(0.37%) |
|
(0.19%) |
|
(0.47%) |
|
(0.42%) |
|
(0.15%) |
|
nm |
|
nm |
|
nm |
|
Average interest earning assets (£bn) |
|
162.9 |
|
24.1 |
|
144.6 |
|
21.2 |
|
27.8 |
|
32.1 |
|
23.1 |
|
435.8 |
|
Total assets (£bn) |
|
172.2 |
|
24.8 |
|
165.4 |
|
21.7 |
|
28.9 |
|
272.8 |
|
33.3 |
|
719.1 |
|
Funded assets (£bn) |
|
172.2 |
|
24.8 |
|
165.4 |
|
21.7 |
|
28.9 |
|
138.8 |
|
33.3 |
|
585.1 |
|
Net loans to customers - amortised cost (£bn) |
|
150.6 |
|
18.2 |
|
100.8 |
|
14.4 |
|
13.3 |
|
9.1 |
|
- |
|
306.4 |
|
Customer deposits (£bn) |
|
145.7 |
|
17.5 |
|
131.8 |
|
26.9 |
|
27.6 |
|
2.7 |
|
3.0 |
|
355.2 |
|
Risk-weighted assets (RWAs) (£bn) |
|
35.8 |
|
14.2 |
|
78.1 |
|
9.6 |
|
7.0 |
|
44.6 |
|
1.5 |
|
190.8 |
|
RWA equivalent (RWAes) (£bn) |
|
36.8 |
|
14.2 |
|
79.9 |
|
9.6 |
|
7.1 |
|
49.1 |
|
2.0 |
|
198.7 |
|
Employee numbers (FTEs - thousands) |
|
21.6 |
|
3.1 |
|
10.3 |
|
1.9 |
|
1.7 |
|
5.0 |
|
23.3 |
|
66.9 |
|
For the notes to this table refer to page 20. nm = not meaningful. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment performance
|
|
Quarter ended 30 June 2018 |
| ||||||||||||||
|
|
Personal & Ulster |
|
Commercial & Private |
|
|
|
|
|
Central |
|
|
| ||||
|
|
UK Personal |
|
Ulster |
|
Commercial |
|
Private |
|
RBS |
|
NatWest |
|
items & |
|
Total |
|
|
|
Banking |
|
Bank RoI |
|
Banking |
|
Banking |
|
International |
|
Markets |
|
other (1) |
|
RBS |
|
|
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
1,071 |
|
118 |
|
717 |
|
129 |
|
115 |
|
31 |
|
(1) |
|
2,180 |
|
Non-interest income |
|
182 |
|
48 |
|
515 |
|
69 |
|
32 |
|
235 |
|
121 |
|
1,202 |
|
Own credit adjustments |
|
- |
|
- |
|
- |
|
- |
|
- |
|
18 |
|
- |
|
18 |
|
Total income |
|
1,253 |
|
166 |
|
1,232 |
|
198 |
|
147 |
|
284 |
|
120 |
|
3,400 |
|
Direct expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- staff costs |
|
(182) |
|
(49) |
|
(186) |
|
(40) |
|
(27) |
|
(144) |
|
(311) |
|
(939) |
|
- other costs |
|
(52) |
|
(26) |
|
(67) |
|
(14) |
|
(18) |
|
(62) |
|
(623) |
|
(862) |
|
Indirect expenses |
|
(334) |
|
(41) |
|
(286) |
|
(50) |
|
(17) |
|
(99) |
|
827 |
|
- |
|
Strategic costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- direct |
|
(7) |
|
3 |
|
(14) |
|
- |
|
- |
|
(11) |
|
(112) |
|
(141) |
|
- indirect |
|
(24) |
|
(3) |
|
(2) |
|
1 |
|
(2) |
|
- |
|
30 |
|
- |
|
Litigation and conduct costs |
|
(6) |
|
(8) |
|
10 |
|
(1) |
|
9 |
|
(6) |
|
(780) |
|
(782) |
|
Operating expenses |
|
(605) |
|
(124) |
|
(545) |
|
(104) |
|
(55) |
|
(322) |
|
(969) |
|
(2,724) |
|
Operating profit/(loss) before impairment (losses)/releases |
|
648 |
|
42 |
|
687 |
|
94 |
|
92 |
|
(38) |
|
(849) |
|
676 |
|
Impairment (losses)/releases |
|
(63) |
|
34 |
|
(23) |
|
- |
|
3 |
|
(13) |
|
(1) |
|
(63) |
|
Operating profit/(loss) |
|
585 |
|
76 |
|
664 |
|
94 |
|
95 |
|
(51) |
|
(850) |
|
613 |
|
Additional information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on equity (2) |
|
33.0% |
|
12.5% |
|
16.4% |
|
19.3% |
|
27.9% |
|
(3.0%) |
|
nm |
|
1.1% |
|
Cost:income ratio (2) |
|
48.3% |
|
74.7% |
|
43.0% |
|
52.5% |
|
37.4% |
|
113.4% |
|
nm |
|
80.0% |
|
Loan impairment rate (2) |
|
17bps |
|
(67)bps |
|
9bps |
|
nm |
|
nm |
|
nm |
|
nm |
|
8bps |
|
Impairment provisions (£bn) |
|
(1.1) |
|
(1.1) |
|
(1.5) |
|
(0.1) |
|
- |
|
(0.2) |
|
0.1 |
|
(3.9) |
|
Impairment provisions - stage 3 |
|
(0.7) |
|
(1.0) |
|
(1.3) |
|
- |
|
- |
|
(0.1) |
|
- |
|
(3.1) |
|
Net interest margin (2) |
|
2.68% |
|
1.91% |
|
1.98% |
|
2.54% |
|
1.72% |
|
0.46% |
|
nm |
|
2.01% |
|
Third party customer asset rate |
|
3.36% |
|
2.40% |
|
2.96% |
|
2.82% |
|
2.34% |
|
nm |
|
nm |
|
nm |
|
Third party customer funding rate |
|
(0.29%) |
|
(0.21%) |
|
(0.26%) |
|
(0.17%) |
|
(0.11%) |
|
nm |
|
nm |
|
nm |
|
Average interest earning assets (£bn) |
|
160.1 |
|
24.8 |
|
144.9 |
|
20.3 |
|
26.9 |
|
27.0 |
|
30.9 |
|
434.9 |
|
Total assets (£bn) |
|
168.4 |
|
24.9 |
|
165.7 |
|
20.9 |
|
29.8 |
|
285.0 |
|
53.6 |
|
748.3 |
|
Funded assets (£bn) |
|
168.4 |
|
24.8 |
|
165.7 |
|
20.9 |
|
29.8 |
|
134.5 |
|
53.1 |
|
597.2 |
|
Net loans to customers - amortised cost (£bn) |
|
147.7 |
|
19.1 |
|
102.6 |
|
13.8 |
|
13.0 |
|
8.1 |
|
(0.2) |
|
304.1 |
|
Customer deposits (£bn) |
|
143.5 |
|
17.3 |
|
135.1 |
|
26.4 |
|
28.4 |
|
3.6 |
|
4.7 |
|
359.0 |
|
Risk-weighted assets (RWAs) (£bn) |
|
32.0 |
|
16.8 |
|
83.1 |
|
9.4 |
|
6.8 |
|
50.1 |
|
0.6 |
|
198.8 |
|
RWA equivalent (RWAes) (£bn) |
|
32.7 |
|
17.3 |
|
86.5 |
|
9.5 |
|
6.8 |
|
54.1 |
|
1.0 |
|
207.9 |
|
Employee numbers (FTEs - thousands) |
|
23.4 |
|
3.1 |
|
10.7 |
|
1.9 |
|
1.7 |
|
5.6 |
|
23.6 |
|
70.0 |
|
nm = not meaningful. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1) Central items include unallocated transactions, including volatile items under IFRS, items related to Alawwal bank merger and RMBS related charges.
(2) Refer to Appendix 2 for details of basis of preparation and reconciliation of non-IFRS performance measures where relevant.
Condensed consolidated income statement for the period ended 30 June 2019 (unaudited)
|
Half year ended | |
|
30 June |
30 June |
2019 |
2018* | |
|
£m |
£m |
Interest receivable |
5,553 |
5,444 |
Interest payable |
(1,549) |
(1,118) |
Net interest income |
4,004 |
4,326 |
Fees and commissions receivable |
1,762 |
1,646 |
Fees and commissions payable |
(487) |
(451) |
Income from trading activities |
599 |
847 |
Other operating income |
1,239 |
334 |
Non-interest income |
3,113 |
2,376 |
Total income |
7,117 |
6,702 |
Operating expenses |
(4,100) |
(4,735) |
Profit before impairment losses |
3,017 |
1,967 |
Impairment losses |
(323) |
(141) |
Operating profit before tax |
2,694 |
1,826 |
Tax charge |
(194) |
(709) |
Profit for the period |
2,500 |
1,117 |
Attributable to: |
|
|
Ordinary shareholders |
2,038 |
888 |
Other owners |
202 |
245 |
Non-controlling interests |
260 |
(16) |
Earnings per ordinary share |
16.9p |
7.4p |
Earnings per ordinary share - fully diluted |
16.8p |
7.4p |
* Restated. Refer to Note 2 for further details.
Condensed consolidated statement of comprehensive income for the period ended 30 June 2019 (unaudited)
|
Half year ended | |
|
30 June |
30 June |
|
2019 |
2018* |
|
£m |
£m |
Profit for the period |
2,500 |
1,117 |
Items that do not qualify for reclassification |
|
|
Remeasurement of retirement benefit scheme |
|
|
- contributions in preparation for ring-fencing (1) |
- |
(2,000) |
- other movements |
(68) |
- |
(Loss)/profit on fair value of credit in financial liabilities designated at FVTPL due to own credit risk |
(96) |
95 |
Fair value through other comprehensive income (FVOCI) financial assets |
38 |
3 |
Tax |
26 |
500 |
|
(100) |
(1,402) |
Items that do qualify for reclassification |
|
|
Fair value through other comprehensive income (FVOCI) financial assets |
(12) |
199 |
Cash flow hedges |
402 |
(521) |
Currency translation |
(241) |
18 |
Tax |
(122) |
97 |
|
27 |
(207) |
Other comprehensive loss after tax |
(73) |
(1,609) |
Total comprehensive income/(loss) for the period |
2,427 |
(492) |
Attributable to: |
|
|
Ordinary shareholders |
1,950 |
(708) |
Preference shareholders |
20 |
74 |
Paid-in equity holders |
182 |
171 |
Non-controlling interests |
275 |
(29) |
|
2,427 |
(492) |
* Restated. Refer to Note 2 for further details.
Note:
(1) |
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 could not continue to be a participant in the Main section and separate arrangements were required for its employees. Under the MoU, NatWest Plc made a contribution of £2 billion on 9 October 2018 to strengthen funding of the Main section in recognition of the changes in covenant. In Q1 2019, NatWest Markets Plc paid a contribution of £53 million to the new NatWest Markets section relating to the non-ring fenced bank. |
Condensed consolidated balance sheet as at 30 June 2019 (unaudited)
|
30 June |
31 December |
2019 |
2018 | |
|
£m |
£m |
Assets |
|
|
Cash and balances at central banks |
85,380 |
88,897 |
Trading assets |
85,364 |
75,119 |
Derivatives |
145,594 |
133,349 |
Settlement balances |
8,438 |
2,928 |
Loans to banks - amortised cost |
12,935 |
12,947 |
Loans to customers - amortised cost |
310,631 |
305,089 |
Other financial assets |
65,634 |
59,485 |
Intangible assets |
6,631 |
6,616 |
Other assets |
9,262 |
9,805 |
Total assets |
729,869 |
694,235 |
Liabilities |
|
|
Bank deposits |
23,093 |
23,297 |
Customer deposits |
361,626 |
360,914 |
Settlement balances |
7,619 |
3,066 |
Trading liabilities |
84,135 |
72,350 |
Derivatives |
141,697 |
128,897 |
Other financial liabilities |
46,485 |
39,732 |
Subordinated liabilities |
9,808 |
10,535 |
Other liabilities |
9,169 |
8,954 |
Total liabilities |
683,632 |
647,745 |
Equity |
|
|
Ordinary shareholders interests |
41,667 |
41,182 |
Other owners interests |
4,554 |
4,554 |
Owners equity |
46,221 |
45,736 |
Non-controlling interests |
16 |
754 |
Total equity |
46,237 |
46,490 |
Total liabilities and equity |
729,869 |
694,235 |
|
|
|
Condensed consolidated statement of changes in equity for the period ended 30 June 2019 (unaudited)
|
Half year ended | ||
|
30 June |
30 June | |
2019 |
2018 | ||
£m |
£m | ||
Called-up share capital - at beginning of period |
12,049 |
11,965 | |
Ordinary shares issued |
42 |
63 | |
At end of period |
12,091 |
12,028 | |
Paid-in equity - at beginning and end of period |
4,058 |
4,058 | |
Share premium account - at beginning of period |
1,027 |
887 | |
Ordinary shares issued |
62 |
108 | |
At end of period |
1,089 |
995 | |
Merger reserve - at beginning and end of period |
10,881 |
10,881 | |
Fair value through other comprehensive income reserve - at beginning of period |
343 |
255 | |
Implementation of IFRS 9 on 1 January 2018 |
- |
34 | |
Unrealised gains |
45 |
203 | |
Realised gains |
(133) |
(3) | |
Tax |
10 |
(47) | |
At end of period |
265 |
442 | |
Cash flow hedging reserve - at beginning of period |
(191) |
227 | |
Amount recognised in equity |
524 |
(156) | |
Amount transferred from equity to earnings |
(122) |
(365) | |
Tax |
(94) |
143 | |
At end of period |
117 |
(151) | |
Foreign exchange reserve - at beginning of period |
3,278 |
2,970 | |
Retranslation of net assets |
30 |
(58) | |
Foreign currency gains on hedges of net assets |
1 |
14 | |
Tax |
8 |
1 | |
Recycled to profit or loss on disposal of businesses (1) |
(335) |
74 | |
At end of period |
2,982 |
3,001 | |
Retained earnings - at beginning of period |
|
14,312 |
17,130 |
Implementation of IFRS 9 on 1 January 2018 |
- |
(105) | |
Implementation of IFRS 16 on 1 January 2019 (2) |
(187) |
- | |
Profit attributable to ordinary shareholders and other equity owners |
2,240 |
1,133 | |
Equity preference dividends paid |
|
(20) |
(74) |
Paid-in equity dividends paid |
|
(182) |
(171) |
Ordinary dividends paid |
|
(1,327) |
- |
Realised gains in period on FVOCI equity shares |
114 |
3 | |
Remeasurement of retirement benefit schemes |
|
| |
- contributions in preparation for ring-fencing (3) |
- |
(2,000) | |
- other movements |
|
(68) |
- |
- tax |
|
18 |
516 |
Changes in fair value of credit in financial liabilities designated at fair value through profit or loss |
|
| |
- gross |
|
(96) |
95 |
- tax |
|
10 |
(16) |
Shares issued under employee share schemes |
(4) |
(2) | |
Share-based payments |
(26) |
18 | |
At end of period |
|
14,784 |
16,527 |
|
|
|
|
For the notes to this table, refer to the following page. |
|
|
Condensed consolidated statement of changes in equity for the period ended 30 June 2019 (unaudited) continued
|
|
Half year ended | |
|
|
30 June |
30 June |
|
|
2019 |
2018 |
|
|
£m |
£m |
Own shares held - at beginning of period |
(21) |
(43) | |
Purchase of own shares |
(58) |
(63) | |
Shares issued under employee share schemes |
33 |
82 | |
At end of period |
|
(46) |
(24) |
Owners equity at end of period |
|
46,221 |
47,757 |
Non-controlling interests - at beginning of period |
754 |
763 | |
Currency translation adjustments and other movements |
|
15 |
(12) |
Profit/(loss) attributable to non-controlling interests |
260 |
(16) | |
Movements in fair value through other comprehensive income - unrealised losses |
|
- |
(1) |
Equity raised (4) |
|
45 |
- |
Equity withdrawn and disposals (5) |
|
(1,058) |
- |
At end of period |
|
16 |
734 |
Total equity at end of period |
|
46,237 |
48,491 |
Total equity is attributable to: |
|
|
|
Ordinary shareholders |
|
41,667 |
41,134 |
Preference shareholders |
|
496 |
2,565 |
Paid-in equity holders |
4,058 |
4,058 | |
Non-controlling interests |
|
16 |
734 |
|
|
46,237 |
48,491 |
Notes:
(1) |
Includes £338 million arising on the completion of the Alawwal bank merger in June 2019, of which £48 million relates to tax. The merger resulted in the de-recognition of the associate investment in Alawwal bank and recognition of a new investment in SABB held at fair value through other comprehensive income (FVOCI). Further impacts in relation to the transaction are disclosed in Note 3 and 6. |
(2) |
Refer to Note 2 for further information on the impact of IFRS 16 implementation. |
(3) |
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 could not continue to be a participant in the Main section and separate arrangements were required for its employees. Under the MoU, NatWest Plc made a contribution of £2 billion on 9 October 2018 to strengthen funding of the Main section in recognition of the changes in covenant. In Q1 2019 NatWest Markets Plc paid a contribution of £53 million to the new NatWest Markets section relating to the non-ring fenced bank. |
(4) |
Capital injection from RFS Holdings B.V. Consortium Members. |
(5) |
Distribution to RFS Holdings B.V. Consortium Members on completion of the Alawwal bank merger. |
Condensed consolidated cash flow statement for the period ended 30 June 2019 (unaudited)
|
Half year ended | |
|
30 June |
30 June |
|
2019 |
2018 |
|
£m |
£m |
Operating activities |
|
|
Operating profit before tax |
2,694 |
1,826 |
Adjustments for non-cash items |
(2,428) |
(1,280) |
Net cash inflow from trading activities |
266 |
546 |
Changes in operating assets and liabilities |
9,939 |
9,408 |
Net cash flows from operating activities before tax |
10,205 |
9,954 |
Income taxes paid |
(192) |
(156) |
Net cash flows from operating activities |
10,013 |
9,798 |
Net cash flows from investing activities |
(5,776) |
(3,769) |
Net cash flows from financing activities |
(2,689) |
(2,307) |
Effects of exchange rate changes on cash and cash equivalents |
211 |
38 |
Net increase in cash and cash equivalents |
1,759 |
3,760 |
Cash and cash equivalents at beginning of year |
108,811 |
122,605 |
Cash and cash equivalents at end of year |
110,570 |
126,365 |
|
|
|
Notes
1. Basis of preparation
The Group condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting. They should be read in conjunction with RBSs 2018 Annual Report on Form 20-F 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).
Going concern
The Groups business activities and financial position, and the factors likely to affect its future development and performance are discussed on pages 1 to 53. The risk factors which could materially affect the Groups future results are described on pages 54 and 55.
Having reviewed the Groups forecasts, projections and other relevant evidence, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future. Accordingly, the results for the half year ended 30 June 2019 have been prepared on a going concern basis.
Re-segmentation
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 business. Concurrent with the transfer, UK PBB has been renamed UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed Personal & Ulster. Comparatives have been re-stated or represented. Refer to Note 4, Segmental analysis and the disclosures in the Capital and risk management section, as marked, where the impact is reflected. Refer to the Form 6-K filed on 30 April 2019 which provides details of the re-stated comparatives.
2. Accounting policies
The Groups principal accounting policies are as set out on pages 186 to 190 of the 2018 Annual Report on Form 20-F and are unchanged other than as presented below.
Changes in reporting standards
IAS 12 Income taxes was revised with effect from 1 January 2019. The income statement is now required to include any tax relief on the servicing cost of instruments classified as equity. Relief of £67 million was recognised in the statement of changes in equity for the year ended 31 December 2018; this and prior periods have been restated. Refer to the Form 6-K filed on 30 April 2019 for further details.
Presentation of interest in suspense recoveries
Until 1 January 2019, interest in suspense recoveries were presented as a component of interest receivable within Net interest income. It amounted to £31 million for the period ended 30 June 2019. From 1 January 2019 interest in suspense recoveries is presented within impairment charges; prior periods were presented as income. Comparatives have not been restated.
Revised Accounting policy 10 - Leases
The Group has adopted IFRS 16 Leases with effect from 1 January 2019, replacing IAS 17 Leases. The Group has applied IFRS 16 on a modified retrospective basis without restating prior years. Accounting policy 10 presented in the 2018 Annual Report on Form 20-F has been updated as follows:
As lessor
Finance lease contracts are those which transfer substantially all the risks and rewards of ownership of an asset to a customer. All other contracts with customers to lease assets are classified as operating leases.
Loans to customers include finance lease receivables measured at the net investment in the lease, comprising the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Interest receivable includes finance lease income recognised at a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review; if there is a reduction in their value, income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.
Rental income from operating leases is recognised in other operating income on a straight-line basis over the lease term unless another systematic basis better represents the time pattern of the assets use. Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives.
As lessee
On entering a new lease contract, the Group recognises a right of use asset and a liability to pay future rentals. The liability is measured at the present value of future lease payments discounted at the applicable incremental borrowing rate. The right of use asset is depreciated over the shorter of the term of the lease and the useful economic life, subject to review for impairment. Short term and low value leased assets are expensed on a systematic basis.
Notes
2. Accounting policies continued
For further details see page 190 of RBSs 2018 Annual Report on Form 20-F. The impact on RBSs balance sheet at 1 January 2019 is as follows:
|
£bn |
Retained earnings at 1 January 2019 |
14.3 |
Loans to customers - Finance leases |
0.2 |
Other assets - Net right of use assets |
1.3 |
- Recognition of lease liabilities |
(1.9) |
- Provision for onerous leases |
0.2 |
Other liabilities |
(1.7) |
Net impact on retained earnings |
(0.2) |
Retained earnings at 1 January 2019 |
14.1 |
Operating lease commitments reported under IAS 17 were £2.7 billion which resulted in lease liabilities recognised under IFRS 16 of £1.9 billion. The difference is primarily because of the different treatment of termination and extension options; and discounting the contractual lease payments under IFRS 16.
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 Groups 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 page 190 of the 2018 Annual Report on Form 20-F.
Notes
3. Analysis of income, expenses and impairment losses
|
Half year ended | |
|
30 June |
30 June |
|
2019 |
2018 |
|
£m |
£m |
Loans to customers - amortised cost |
4,848 |
4,978 |
Loans to banks - amortised cost |
346 |
236 |
Other financial assets |
359 |
230 |
Interest receivable |
5,553 |
5,444 |
Balances by banks |
144 |
113 |
Customer deposits |
599 |
415 |
Other financial liabilities |
481 |
337 |
Subordinated debt |
245 |
226 |
Internal funding of trading businesses |
80 |
27 |
Interest payable |
1,549 |
1,118 |
Net interest income (1) |
4,004 |
4,326 |
Net fees and commissions |
1,275 |
1,195 |
Foreign exchange |
219 |
336 |
Interest rate |
397 |
275 |
Credit |
31 |
187 |
Own credit adjustment |
(46) |
39 |
Equities, commodities and other |
(2) |
10 |
Income from trading activities |
599 |
847 |
Operating lease and other rental income |
127 |
128 |
Changes in the fair value of financial assets and liabilities designated as at fair value through profit or loss |
19 |
(7) |
Changes in fair value of other financial assets fair value through profit or loss |
31 |
(42) |
Hedge ineffectiveness |
21 |
(69) |
Loss on disposal of amortised cost assets |
- |
22 |
Profit on disposal of fair value through other comprehensive income assets |
16 |
1 |
Profit on sale of property, plant and equipment |
15 |
21 |
Share of (loss)/profits of associated entities |
(22) |
17 |
Profit/(loss) on disposal of subsidiaries and associates (2) |
1,037 |
(9) |
Other income |
(5) |
272 |
Other operating income |
1,239 |
334 |
Total non-interest income |
3,113 |
2,376 |
Total income |
7,117 |
6,702 |
Salaries |
(1,455) |
(1,520) |
Variable compensation |
(185) |
(148) |
Social security costs |
(156) |
(158) |
Pension costs |
(162) |
(169) |
Other |
(70) |
(91) |
Staff costs |
(2,028) |
(2,086) |
Premises and equipment |
(558) |
(644) |
Depreciation and amortisation (3) |
(621) |
(338) |
Other administrative expenses (4) |
(863) |
(1,636) |
Administrative expenses |
(2,042) |
(2,618) |
Write down of goodwill and other intangible assets |
(30) |
(31) |
Operating expenses |
(4,100) |
(4,735) |
Impairment losses |
(323) |
(141) |
Impairments as a % of gross loans to customers |
0.21% |
0.09% |
Notes:
(1) |
Negative interest on loans is reported as interest payable. Negative interest on customer deposits is reported as interest receivable. |
(2) |
Includes a gain of £444 million (523 million), a legacy liability release of £256 million and an FX recycling gain of £290 million on completion of the Alawwal bank merger. |
(3) |
Half year ended 30 June 2019 includes a property impairment of £133 million and accelerated depreciation of £66 million in relation to the planned reduction of the Group property portfolio and depreciation charges in relation to the right of use assets recognised following the adoption of IFRS 16 (previously leasing costs in relation to these were included in premises and equipment). For further details on the adoption of IFRS 16 refer to Note 2. |
(4) |
Includes litigation and conduct costs, net of amounts recovered. Refer to Note 9 for further details. |
Notes
4. Segmental analysis
The business is organised into the following franchises and reportable segments:
· |
Personal & Ulster, comprising two reportable segments, UK Personal Banking (UK PB) and Ulster Bank RoI; |
· |
Commercial & Private Banking (CPB), comprising two reportable segments: Commercial Banking and Private Banking; |
· |
RBS International (RBSI) which is a single reportable segment; |
· |
NatWest Markets (NWM), which is a single reportable segment; and |
· |
Central items & other which comprises corporate functions. |
Analysis of operating profit/(loss)
The following tables provide a segmental analysis of operating profit/(loss) by main income statement captions.
|
Net |
|
Other non- |
|
|
Impairment |
|
interest |
Net fees and |
interest |
Total |
Operating |
(losses)/ |
Operating | |
income |
commissions |
income |
income |
expenses |
releases |
profit/(loss) | |
Half year ended 30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
UK Personal Banking |
2,084 |
366 |
(3) |
2,447 |
(1,229) |
(181) |
1,037 |
Ulster Bank RoI |
200 |
51 |
32 |
283 |
(281) |
21 |
23 |
Personal & Ulster |
2,284 |
417 |
29 |
2,730 |
(1,510) |
(160) |
1,060 |
Commercial Banking |
1,424 |
661 |
80 |
2,165 |
(1,262) |
(202) |
701 |
Private Banking |
261 |
111 |
12 |
384 |
(232) |
3 |
155 |
Commercial & Private Banking |
1,685 |
772 |
92 |
2,549 |
(1,494) |
(199) |
856 |
RBS International |
242 |
53 |
15 |
310 |
(119) |
3 |
194 |
NatWest Markets |
(122) |
48 |
1,016 |
942 |
(678) |
36 |
300 |
Central items & other |
(85) |
(15) |
686 |
586 |
(299) |
(3) |
284 |
Total |
4,004 |
1,275 |
1,838 |
7,117 |
(4,100) |
(323) |
2,694 |
Half year ended 30 June 2018* |
|
|
|
|
|
|
|
UK Personal Banking |
2,139 |
359 |
53 |
2,551 |
(1,291) |
(131) |
1,129 |
Ulster Bank RoI |
224 |
43 |
45 |
312 |
(252) |
26 |
86 |
Personal & Ulster |
2,363 |
402 |
98 |
2,863 |
(1,543) |
(105) |
1,215 |
Commercial Banking |
1,400 |
631 |
359 |
2,390 |
(1,140) |
(35) |
1,215 |
Private Banking |
252 |
116 |
14 |
382 |
(225) |
(1) |
156 |
Commercial & Private Banking |
1,652 |
747 |
373 |
2,772 |
(1,365) |
(36) |
1,371 |
RBS International |
219 |
52 |
13 |
284 |
(114) |
3 |
173 |
NatWest Markets |
67 |
(7) |
661 |
721 |
(671) |
(4) |
46 |
Central items & other |
25 |
1 |
36 |
62 |
(1,042) |
1 |
(979) |
Total |
4,326 |
1,195 |
1,181 |
6,702 |
(4,735) |
(141) |
1,826 |
* Restated. Refer to Note 1 for further details. |
|
|
|
|
|
|
|
|
Half year ended | ||||||
|
30 June 2019 |
|
30 June 2018* | ||||
|
|
Inter |
|
|
|
Inter |
|
|
External |
segment |
Total |
|
External |
segment |
Total |
Total revenue |
£m |
£m |
£m |
|
£m |
£m |
£m |
UK Personal Banking |
3,118 |
32 |
3,150 |
|
3,096 |
30 |
3,126 |
Ulster Bank RoI |
309 |
2 |
311 |
|
339 |
- |
339 |
Personal & Ulster |
3,427 |
34 |
3,461 |
|
3,435 |
30 |
3,465 |
Commercial Banking |
2,173 |
63 |
2,236 |
|
2,354 |
42 |
2,396 |
Private Banking |
343 |
120 |
463 |
|
333 |
88 |
421 |
Commercial & Private Banking |
2,516 |
183 |
2,699 |
|
2,687 |
130 |
2,817 |
RBS International |
319 |
15 |
334 |
|
235 |
79 |
314 |
NatWest Markets |
1,494 |
510 |
2,004 |
|
953 |
259 |
1,212 |
Central items & other |
1,397 |
(742) |
655 |
|
961 |
(498) |
463 |
Total |
9,153 |
- |
9,153 |
|
8,271 |
- |
8,271 |
* Restated. Refer to Note 1 for further details. |
|
|
|
|
|
|
|
Notes
4. Segmental analysis continued
Analysis of net fees and commissions
|
Personal & Ulster |
|
Commercial & Private |
|
|
Central |
| ||
|
UK Personal |
Ulster |
|
Commercial |
Private |
RBS |
NatWest |
items |
|
|
Banking |
Bank RoI |
|
Banking |
Banking |
International |
Markets |
& other |
Total |
Half year ended 30 June 2019 |
£m |
£m |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
Fees and commissions receivable |
|
|
|
|
|
|
|
|
|
- Lending (credit facilities) |
266 |
18 |
|
204 |
1 |
18 |
35 |
- |
542 |
- Payment services |
154 |
21 |
|
323 |
17 |
12 |
15 |
- |
542 |
- Credit and debit card fees |
189 |
10 |
|
84 |
6 |
1 |
- |
- |
290 |
- Underwriting fees |
- |
- |
|
- |
- |
- |
100 |
- |
100 |
- Investment management, trustee and fiduciary services |
22 |
2 |
|
3 |
91 |
20 |
- |
- |
138 |
- Other |
36 |
6 |
|
82 |
12 |
3 |
88 |
(77) |
150 |
Total |
667 |
57 |
|
696 |
127 |
54 |
238 |
(77) |
1,762 |
|
|
|
|
|
|
|
|
|
|
Fees and commissions payable |
(301) |
(6) |
|
(35) |
(16) |
(1) |
(190) |
62 |
(487) |
Net fees and commissions |
366 |
51 |
|
661 |
111 |
53 |
48 |
(15) |
1,275 |
|
|
|
|
|
|
|
|
|
|
Half year ended 30 June 2018* |
|
|
|
|
|
|
|
|
|
Fees and commissions receivable |
|
|
|
|
|
|
|
|
|
- Lending (credit facilities) |
208 |
15 |
|
183 |
1 |
17 |
39 |
- |
463 |
- Payment services |
101 |
12 |
|
267 |
17 |
11 |
1 |
- |
409 |
- Credit and debit card fees |
222 |
12 |
|
86 |
6 |
- |
- |
- |
326 |
- Underwriting fees |
- |
- |
|
22 |
- |
- |
93 |
- |
115 |
- Investment management, trustee and fiduciary services |
25 |
2 |
|
- |
95 |
21 |
- |
- |
143 |
- Other |
37 |
5 |
|
99 |
12 |
3 |
90 |
(56) |
190 |
Total |
593 |
46 |
|
657 |
131 |
52 |
223 |
(56) |
1,646 |
|
|
|
|
|
|
|
|
|
|
Fees and commissions payable |
(234) |
(3) |
|
(26) |
(15) |
- |
(230) |
57 |
(451) |
Net fees and commissions |
359 |
43 |
|
631 |
116 |
52 |
(7) |
1 |
1,195 |
* Restated. Refer to Note 1 for further details.
Total assets and liabilities
|
30 June 2019 |
|
31 December 2018* | ||
Assets |
Liabilities |
|
Assets |
Liabilities | |
|
£m |
£m |
|
£m |
£m |
|
|
|
|
|
|
UK Personal Banking |
173,860 |
150,573 |
|
171,011 |
148,793 |
Ulster Bank RoI |
26,430 |
21,933 |
|
25,193 |
21,189 |
|
|
|
|
|
|
Personal & Ulster |
200,290 |
172,506 |
|
196,204 |
169,982 |
|
|
|
|
|
|
Commercial Banking |
165,594 |
139,098 |
|
166,478 |
139,803 |
Private Banking |
21,909 |
28,188 |
|
21,983 |
28,554 |
|
|
|
|
|
|
Commercial & Private Banking |
187,503 |
167,286 |
|
188,461 |
168,357 |
|
|
|
|
|
|
RBS International |
30,413 |
28,325 |
|
28,398 |
27,663 |
NatWest Markets |
278,949 |
261,084 |
|
244,531 |
227,399 |
Central items & other |
32,714 |
54,431 |
|
36,641 |
54,344 |
|
|
|
|
|
|
Total |
729,869 |
683,632 |
|
694,235 |
647,745 |
* Restated. Refer to Note 1 for further details.
Notes
5. Tax
The actual tax charge differs from the expected tax charge computed by applying the standard UK corporation tax rate of 19% (2018 - 19%), as analysed below.
|
Half year ended | |
|
30 June |
30 June |
2019 |
2018 | |
|
£m |
£m |
|
|
|
Profit before tax |
2,694 |
1,826 |
|
|
|
Expected tax charge |
(512) |
(347) |
Losses and temporary differences in period where no deferred tax assets recognised |
(2) |
(8) |
Foreign profits taxed at other rates |
5 |
1 |
Items not allowed for tax |
|
|
- losses on disposals and write-downs |
(46) |
(26) |
- UK bank levy |
(15) |
(16) |
- regulatory and legal actions |
(5) |
(154) |
- other disallowable items |
(40) |
(34) |
Non-taxable items |
|
|
- Alawwal bank merger gain disposal |
212 |
- |
- other |
26 |
8 |
Taxable foreign exchange movements |
- |
(5) |
Losses brought forward and utilised |
21 |
18 |
Increase/(reduction) in carrying value of deferred tax in respect of UK losses |
215 |
(15) |
Banking surcharge |
(155) |
(188) |
Tax credit paid-in equity |
- |
32 |
Adjustments in respect of prior periods |
102 |
25 |
|
|
|
Actual tax charge |
(194) |
(709) |
The tax charge includes a £215 million deferred tax asset credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS Plc under ring-fencing regulations.
At 30 June 2019, the Group has recognised a deferred tax asset of £1,499 million (31 December 2018 - £1,412 million) and a deferred tax liability of £463 million (31 December 2018 - £454 million). These include amounts recognised in respect of UK trading losses of £848 million (31 December 2018 - £675 million). Under UK tax legislation, these UK losses can be carried forward indefinitely. The Finance Act 2016 limited the offset of the UK banking losses carried forward to 25% of taxable profits. The Group has considered the carrying value of this asset as at 30 June 2019 and concluded that it is recoverable based on future profit projections.
Notes
6. Profit attributable to non-controlling interests
|
Half year ended | |
|
30 June |
30 June |
2019 |
2018 | |
|
£m |
£m |
|
|
|
RFS Holdings B.V. Consortium Members (1) |
258 |
(17) |
Other |
2 |
1 |
|
|
|
Profit/(loss) attributable to non-controlling interests |
260 |
(16) |
Note:
(1) Includes a gain of £274 million recognised on completion of the Alawwal Bank merger.
7. Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair value in trading portfolios.
|
30 June |
31 December |
|
2019 |
2018 |
Assets |
£m |
£m |
Loans |
|
|
Reverse repos |
28,176 |
24,759 |
Collateral given |
22,063 |
19,036 |
Other loans |
1,651 |
1,308 |
Total loans |
51,890 |
45,103 |
Securities |
|
|
Central and local government |
|
|
- UK |
5,365 |
6,834 |
- US |
6,093 |
4,689 |
- other |
16,341 |
13,498 |
Other securities |
5,675 |
4,995 |
Total securities |
33,474 |
30,016 |
Total |
85,364 |
75,119 |
|
|
|
Liabilities |
|
|
Deposits |
|
|
Repos |
32,087 |
25,645 |
Collateral received |
23,204 |
20,187 |
Other deposits |
2,335 |
1,788 |
Total deposits |
57,626 |
47,620 |
Debt securities in issue |
1,495 |
903 |
Short positions |
25,014 |
23,827 |
Total |
84,135 |
72,350 |
Notes
8. Financial instruments: classification
The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9. Assets and liabilities outside the scope of IFRS 9 are shown within other assets and other liabilities.
|
|
|
Amortised |
Other |
|
MFVTPL (1,2) |
FVOCI (3) |
cost |
assets |
Total | |
Assets |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
Cash and balances at central banks |
- |
- |
85,380 |
|
85,380 |
Trading assets |
85,364 |
- |
|
|
85,364 |
Derivatives |
145,594 |
|
|
|
145,594 |
Settlement balances |
- |
- |
8,438 |
|
8,438 |
Loans to banks - amortised cost |
|
|
12,935 |
|
12,935 |
Loans to customers - amortised cost |
|
|
310,631 |
|
310,631 |
Other financial assets |
1,130 |
51,250 |
13,254 |
|
65,634 |
Intangible assets |
- |
- |
- |
6,631 |
6,631 |
Other assets |
|
|
|
9,262 |
9,262 |
|
|
|
|
|
|
30 June 2019 |
232,088 |
51,250 |
430,638 |
15,893 |
729,869 |
|
|
|
|
|
|
Cash and balances at central banks |
- |
- |
88,897 |
|
88,897 |
Trading assets |
75,119 |
- |
|
|
75,119 |
Derivatives |
133,349 |
|
|
|
133,349 |
Settlement balances |
- |
- |
2,928 |
|
2,928 |
Loans to banks - amortised cost |
|
|
12,947 |
|
12,947 |
Loans to customers - amortised cost |
|
|
305,089 |
|
305,089 |
Other financial assets |
1,638 |
46,077 |
11,770 |
|
59,485 |
Intangible assets |
- |
- |
- |
6,616 |
6,616 |
Other assets |
|
|
|
9,805 |
9,805 |
|
|
|
|
|
|
31 December 2018 |
210,106 |
46,077 |
421,631 |
16,421 |
694,235 |
|
|
|
|
|
|
|
Held-for- |
|
Amortised |
Other |
|
trading (1) |
DFV (4) |
cost |
liabilities |
Total | |
Liabilities |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
Bank deposits |
- |
- |
23,093 |
|
23,093 |
Customer deposits |
- |
- |
361,626 |
|
361,626 |
Settlement balances |
- |
- |
7,619 |
|
7,619 |
Trading liabilities |
84,135 |
- |
|
|
84,135 |
Derivatives |
141,697 |
- |
|
|
141,697 |
Other financial liabilities |
- |
2,494 |
43,991 |
|
46,485 |
Subordinated liabilities |
- |
763 |
9,045 |
|
9,808 |
Other liabilities |
- |
- |
2,146 |
7,023 |
9,169 |
|
|
|
|
|
|
30 June 2019 |
225,832 |
3,257 |
447,520 |
7,023 |
683,632 |
|
|
|
|
|
|
Bank deposits |
- |
- |
23,297 |
|
23,297 |
Customer deposits |
- |
- |
360,914 |
|
360,914 |
Settlement balances |
- |
- |
3,066 |
|
3,066 |
Trading liabilities |
72,350 |
- |
|
|
72,350 |
Derivatives |
128,897 |
- |
|
|
128,897 |
Other financial liabilities |
- |
2,840 |
36,892 |
|
39,732 |
Subordinated liabilities |
- |
867 |
9,668 |
|
10,535 |
Other liabilities |
- |
- |
2,218 |
6,736 |
8,954 |
|
|
|
|
|
|
31 December 2018 |
201,247 |
3,707 |
436,055 |
6,736 |
647,745 |
Notes:
(1) |
Includes derivatives held for hedging purposes. |
(2) |
Mandatory fair value through profit or loss. |
(3) |
Fair value through other comprehensive income. |
(4) |
Designated as at fair value through profit or loss. |
Notes
8. Financial instruments: classification continued
The Groups financial assets and liabilities include: |
|
|
|
30 June |
31 December |
|
2019 |
2018 |
|
£m |
£m |
Reverse repos |
|
|
Loans to banks - amortised cost |
2,162 |
3,539 |
Loans to customers - amortised cost |
683 |
9 |
Trading assets |
28,176 |
24,759 |
|
|
|
Repos |
|
|
Bank deposits |
3,715 |
941 |
Customer deposits |
1,004 |
3,774 |
Trading liabilities |
32,087 |
25,645 |
Carried at fair value - valuation hierarchy
Disclosures relating to the control environment, valuation techniques and related aspects pertaining to financial instruments measured at fair value are included in the 2018 Annual Report on Form 20-F. Valuation, sensitivity methodologies and inputs at 30 June 2019 are consistent with those described in Note 12 to the 2018 Annual Report on Form 20-F.
The tables below show financial instruments carried at fair value on the balance sheet by valuation hierarchy - level 1, level 2 and level 3 and valuation sensitivities for level 3 balances.
|
30 June 2019 |
|
31 December 2018 | ||||||
|
Level 1 |
Level 2 |
Level 3 |
|
Level 1 |
Level 2 |
Level 3 | ||
|
£m |
£m |
£m |
|
£m |
£m |
£m | ||
|
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
| ||
Trading assets |
|
|
|
|
|
|
| ||
Loans |
- |
51,616 |
274 |
|
- |
44,983 |
120 | ||
Securities |
24,247 |
8,885 |
342 |
|
22,003 |
7,312 |
701 | ||
Derivatives |
5 |
143,994 |
1,595 |
|
- |
131,513 |
1,836 | ||
Other financial assets |
|
|
|
|
|
|
| ||
Loans |
- |
425 |
63 |
|
- |
768 |
136 | ||
Securities |
43,434 |
8,014 |
444 |
|
40,132 |
6,172 |
507 | ||
|
|
|
|
|
|
|
| ||
Total financial assets held at fair value |
67,686 |
212,934 |
2,718 |
|
62,135 |
190,748 |
3,300 | ||
Liabilities |
|
|
|
|
|
|
|
| |
Trading liabilities |
|
|
|
|
|
|
|
| |
Deposits |
- |
57,258 |
368 |
|
- |
47,243 |
377 |
| |
Debt securities in issue |
- |
1,415 |
80 |
|
- |
791 |
112 |
| |
Short positions |
19,656 |
5,358 |
- |
|
18,941 |
4,886 |
- |
| |
Derivatives |
4 |
140,507 |
1,186 |
|
- |
127,709 |
1,188 |
| |
Other financial liabilities |
|
|
|
|
|
|
|
| |
Debt securities in issue |
- |
2,234 |
156 |
|
- |
2,348 |
280 |
| |
Other deposits |
- |
104 |
- |
|
- |
212 |
- |
| |
Subordinated liabilities |
- |
763 |
- |
|
- |
867 |
- |
| |
Total financial liabilities held at fair value |
19,660 |
207,639 |
1,790 |
|
18,941 |
184,056 |
1,957 |
| |
Notes:
(1) |
Level 1 Instruments valued using unadjusted quoted prices in active and liquid markets for identical financial instruments. Examples include government bonds, listed equity shares and certain exchange-traded derivatives. Level 2 - Instruments valued using valuation techniques that have observable inputs. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products, including CLOs, most bank loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most notes issued, and certain money market securities and loan commitments and most OTC derivatives. Level 3 - Instruments valued using a valuation technique where at least one input which could have a significant effect on the instruments valuation, is not based on observable market data. Examples include cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, certain emerging markets and derivatives with unobservable model inputs. |
(2) |
Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instruments were transferred. There were no significant transfers between level 1 and level 2. |
Notes
8. Financial instruments: carried at fair value - valuation hierarchy continued
|
30 June 2019 |
|
31 December 2018 | ||||
|
Level 3 |
Favourable |
Unfavourable |
|
Level 3 |
Favourable |
Unfavourable |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Trading assets |
|
|
|
|
|
|
|
Loans |
274 |
10 |
(10) |
|
120 |
10 |
(10) |
Securities |
342 |
10 |
- |
|
701 |
20 |
(10) |
Derivatives |
|
|
|
|
|
|
|
Interest rate |
1,326 |
200 |
(200) |
|
1,487 |
120 |
(120) |
Foreign exchange |
123 |
10 |
(10) |
|
130 |
10 |
(10) |
Other |
146 |
10 |
(10) |
|
219 |
10 |
(20) |
Other financial assets |
|
|
|
|
|
|
|
Loans |
63 |
- |
- |
|
136 |
10 |
(20) |
Securities |
444 |
40 |
(30) |
|
507 |
50 |
(30) |
Total financial assets held at fair value |
2,718 |
280 |
(260) |
|
3,300 |
230 |
(220) |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Trading liabilities |
|
|
|
|
|
|
|
Deposits |
368 |
40 |
(40) |
|
377 |
40 |
(40) |
Debt securities in issue |
80 |
- |
- |
|
112 |
10 |
(10) |
Derivatives |
|
|
|
|
|
|
|
Interest rate |
802 |
100 |
(100) |
|
808 |
70 |
(70) |
Foreign exchange |
304 |
10 |
(10) |
|
279 |
10 |
(10) |
Other |
80 |
- |
- |
|
101 |
- |
(10) |
Other financial liabilities |
|
|
|
|
|
|
|
Debt securities in issue |
156 |
- |
- |
|
280 |
10 |
(10) |
Total financial liabilities held at fair value |
1,790 |
150 |
(150) |
|
1,957 |
140 |
(150) |
Movement in level 3 portfolios
|
Half year ended 2019 |
|
Half year ended 2018 | ||||||
|
|
Other |
|
|
|
|
Other |
|
|
|
Trading |
financial |
Total |
Total |
|
Trading |
financial |
Total |
Total |
|
assets (2) |
assets (3) |
assets |
liabilities |
|
assets (2) |
assets (3) |
assets |
liabilities |
|
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
At 1 January |
2,657 |
643 |
3,300 |
1,957 |
|
2,692 |
530 |
3,222 |
2,187 |
Amount recorded in the income statement (1) |
(113) |
4 |
(109) |
260 |
|
(21) |
64 |
43 |
(233) |
Amount recorded in the statement of comprehensive income |
- |
75 |
75 |
- |
|
- |
17 |
17 |
- |
Level 3 transfers in |
158 |
2 |
160 |
161 |
|
513 |
84 |
597 |
198 |
Level 3 transfers out |
(462) |
(53) |
(515) |
(239) |
|
(181) |
(1) |
(182) |
(107) |
Issuances |
- |
- |
- |
23 |
|
- |
- |
- |
24 |
Purchases |
290 |
2 |
292 |
216 |
|
596 |
17 |
613 |
191 |
Settlements |
(73) |
(6) |
(79) |
(171) |
|
(473) |
- |
(473) |
(108) |
Sales |
(249) |
(157) |
(406) |
(419) |
|
(632) |
(79) |
(711) |
(122) |
Foreign exchange and other adjustments |
3 |
(3) |
- |
2 |
|
1 |
2 |
3 |
- |
|
|
|
|
|
|
|
|
|
|
At 30 June |
2,211 |
507 |
2,718 |
1,790 |
|
2,495 |
634 |
3,129 |
2,030 |
|
|
|
|
|
|
|
|
|
|
Amounts recorded in the income statement in respect of balances held at year end |
|
|
|
|
|
|
|
|
|
- unrealised |
(112) |
2 |
(110) |
260 |
|
(16) |
24 |
8 |
(222) |
- realised |
- |
- |
- |
- |
|
5 |
4 |
9 |
7 |
Notes:
(1) |
There were £383 million net losses on trading assets and liabilities (30 June 2018 - £195 million gains) recorded in income from trading activities. Net gains on other instruments of £14 million (30 June 2018 - £81 million gains) were recorded in other operating income and interest income as appropriate. |
(2) |
Trading assets comprise assets held at fair value in trading portfolios. |
(3) |
Other financial assets comprise fair value through other comprehensive income, designated at fair value through profit or loss and other fair value through profit or loss. |
Notes
8. Financial instruments: fair value of financial instruments not carried at fair value
The following table shows the carrying value and fair value of financial instruments carried at amortised cost on the balance sheet.
Items where fair value |
|
|
|
|
| |
|
approximates |
|
|
Fair value hierarchy level | ||
|
carrying value |
Carrying value |
Fair value |
Level 1 |
Level 2 |
Level 3 |
30 June 2019 |
£bn |
£bn |
£bn |
£bn |
£bn |
£bn |
|
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
Cash and balances at central banks |
85.4 |
|
|
|
|
|
Settlement balances |
8.4 |
|
|
|
|
|
Loans to banks |
0.2 |
12.7 |
12.7 |
- |
4.9 |
7.8 |
Loans to customers |
|
310.6 |
307.4 |
- |
1.0 |
306.4 |
Other financial assets |
|
|
|
|
|
|
Securities |
|
13.3 |
13.5 |
7.2 |
4.1 |
2.2 |
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
Bank deposits |
4.2 |
18.9 |
18.7 |
- |
12.7 |
6.0 |
Customer deposits |
307.2 |
54.4 |
54.5 |
- |
7.4 |
47.1 |
Settlement balances |
7.6 |
|
|
|
|
|
Other financial liabilities |
|
|
|
|
|
|
Debt securities in issue |
|
44.0 |
45.9 |
- |
43.7 |
2.2 |
Subordinated liabilities |
|
9.0 |
10.1 |
- |
10.0 |
0.1 |
Other liabilities - notes in circulation |
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
Financial assets |
|
|
|
|
|
|
Cash and balances at central banks |
88.9 |
|
|
|
|
|
Settlement balances |
2.9 |
|
|
|
|
|
Loans to banks |
0.5 |
12.4 |
12.4 |
- |
9.2 |
3.2 |
Loans to customers |
|
305.1 |
301.7 |
- |
0.5 |
301.2 |
Other financial assets |
|
|
|
|
|
|
Securities |
|
11.8 |
11.8 |
7.3 |
3.0 |
1.5 |
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
Bank deposits |
4.2 |
19.1 |
18.5 |
- |
13.9 |
4.6 |
Customer deposits |
307.1 |
53.8 |
54.6 |
- |
10.4 |
44.2 |
Settlement balances |
3.1 |
|
|
|
|
|
Other financial liabilities |
|
|
|
|
|
|
Debt securities in issue |
|
36.9 |
38.6 |
- |
36.9 |
1.7 |
Subordinated liabilities |
|
9.7 |
10.0 |
- |
9.9 |
0.1 |
Other liabilities - notes in circulation |
2.2 |
|
|
|
|
|
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Quoted market values are used where available; otherwise, fair values have been estimated based on discounted expected future cash flows and other valuation techniques. These techniques involve uncertainties and require assumptions and judgments covering prepayments, credit risk and discount rates. Furthermore, there is a wide range of potential valuation techniques. Changes in these assumptions would affect estimated fair values. The fair values reported would not necessarily be realised in an immediate sale or settlement.
Notes
9. Provisions for liabilities and charges
|
Payment |
Other |
Litigation and |
|
|
|
protection |
customer |
other regulatory |
|
|
|
insurance (1) |
redress |
(incl. RMBS) |
Other (2) |
Total |
|
£m |
£m |
£m |
£m |
£m |
At 1 January 2019 |
695 |
536 |
783 |
990 |
3,004 |
Implementation of IFRS 16 on 1 January 2019 (3) |
- |
- |
- |
(170) |
(170) |
ECL impairment release |
- |
- |
- |
(3) |
(3) |
Transfer to accruals and other liabilities |
- |
(4) |
- |
1 |
(3) |
Currency translation and other movements |
- |
(7) |
(6) |
(16) |
(29) |
Charge to income statement |
- |
17 |
5 |
33 |
55 |
Releases to income statement |
- |
(12) |
(9) |
(16) |
(37) |
Provisions utilised |
(136) |
(81) |
(6) |
(114) |
(337) |
At 31 March 2019 |
559 |
449 |
767 |
705 |
2,480 |
ECL impairment charge |
- |
- |
- |
21 |
21 |
Transfer from accruals and other liabilities |
- |
4 |
- |
- |
4 |
Currency translation and other movements |
- |
3 |
3 |
4 |
10 |
Charge to income statement |
- |
64 |
18 |
100 |
182 |
Releases to income statement |
- |
(11) |
(33) |
(70) |
(114) |
Provisions utilised |
(116) |
(90) |
(28) |
(79) |
(313) |
At 30 June 2019 |
443 |
419 |
727 |
681 |
2,270 |
Notes:
(1) |
30 June 2019 includes provisions held in relation to offers made from 2018 and earlier years of £99 million. |
(2) |
Materially comprises provisions relating to property closures and restructuring costs. |
(3) |
Refer to Note 2 for further information on the impact of IFRS 16 implementation. |
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.
Payment protection insurance
The Groups provision reflects the increased volume of complaints following the FCAs introduction of an August 2019 PPI timebar as outlined in FCA announcement CP17/3 and the introduction of new Plevin (unfair commission) complaint handling rules.
The principal assumptions underlying the Groups provision in respect of PPI sales are: assessment of the total number of complaints that the Group will receive; the proportion of these that will result in redress; and the average cost of such redress. The number of complaints has been estimated from an analysis of the Groups portfolio of PPI policies sold by vintage and by product. Estimates of the percentage of policyholders that will lodge complaints (the take up rate) and of the number of these that will be upheld (the uphold rate) have been established based on recent experience, guidance in FCA policy statements and the expected rate of responses from proactive customer contact. The average redress assumption is based on recent experience and FCA calculation rules. The table below shows the sensitivity of the provision to changes in the principal assumptions (all other assumptions remaining the same).
|
|
|
Sensitivity | |
Assumptions |
Actual to date |
Future expected |
Change in assumption % |
Consequential change in provision £m |
Customer initiated complaints (1) |
2,968k |
95k |
+/- 5 |
+/- 7 |
Uphold rate (2) |
88% |
90% |
+/- 1 |
+/- 1 |
Average redress (3) |
£1,657 |
£1,559 |
+/- 5 |
+/- 7 |
Processing costs per claim (4) |
£148 |
£317 |
+/- 20k claims |
+/- 6 |
Notes:
(1) Claims received directly by RBS to date, including those received via CMCs and Plevin (commission) only. Excluding those for proactive mailings and where no PPI policy exists.
(2) Average uphold rate per customer initiated claims received directly by RBS including those received via CMCs, to end of timebar for both PPI (mis-sale) and Plevin (commission), excluding those for which no PPI policy exists.
(3) Average redress for PPI (mis-sale) and Plevin (commission) pay-outs.
(4) Processing costs per claim on a valid complaints basis, includes direct staff costs and associated overhead - excluding FOS fees.
On 5 February 2019 the Official Receiver appointed Deloitte to assist in the identification of potential claimants in respect of PPI. We are evaluating data suggesting 250,000 to 300,000 such claimants. The extent of the Groups share of any obligation in respect of ensuing claims cannot be ascertained with sufficient reliability for inclusion in the provision at 30 June 2019.
Background information for all material provisions is given in Note 13.
Notes
10. Dividends
The 2018 final and special dividends recommended were approved by shareholders at the Annual General Meeting on 25 April 2019 and the payment made on 30 April 2019 to shareholders on the register at the close of business on 22 March 2019.
RBS announces an interim dividend for 2019 of £241 million, or 2p per ordinary share. In addition, the company announces a further special dividend of £1,449 million, or 12p per ordinary share.
The interim and special dividends will be paid on 20 September 2019 to shareholders on the register at close of business on 16 August 2019. The ex-dividend date will be 15 August 2019.
11. Loan impairment provisions
Loan exposure and impairment metrics
The table below summarises loans and related credit impairment measures on an IFRS 9 basis.
|
30 June |
31 December |
|
2019 |
2018 |
|
£m |
£m |
Loans - amortised cost |
|
|
Stage 1 |
291,984 |
285,985 |
Stage 2 |
25,705 |
26,097 |
Stage 3 |
7,325 |
7,718 |
|
325,014 |
319,800 |
ECL provisions (1) |
|
|
Stage 1 |
280 |
285 |
Stage 2 |
682 |
763 |
Stage 3 |
2,340 |
2,320 |
|
3,302 |
3,368 |
ECL provision coverage (2) |
|
|
Stage 1 (%) |
0.10 |
0.10 |
Stage 2 (%) |
2.65 |
2.92 |
Stage 3 (%) |
31.95 |
30.06 |
|
1.02 |
1.05 |
Impairment losses |
|
|
ECL charge (3) |
323 |
398 |
Stage 1 |
(140) |
(143) |
Stage 2 |
101 |
292 |
Stage 3 |
362 |
249 |
ECL loss rate - annualised (basis points) |
19.88 |
12.45 |
Amounts written off |
452 |
1,494 |
Notes:
(1) Includes £4 million (31 December 2018 - £5 million) related to assets at FVOCI.
(2) ECL provisions coverage is ECL provisions divided by loans - amortised cost.
(3) Includes a £30 million charge (31 December 2018 - £3 million charge) related to other financial assets, of which nil (31 December 2018 - £1 million charge) related to assets at FVOCI and a £28 million charge (31 December 2018 - £31 million release) related to contingent liabilities.
12. Contingent liabilities and commitments
|
30 June |
31 December |
|
2019 |
2018 |
|
£m |
£m |
|
|
|
Guarantees |
2,793 |
3,952 |
Other contingent liabilities |
2,410 |
3,052 |
Standby facilities, credit lines and other commitments |
120,862 |
119,879 |
|
|
|
Contingent liabilities and commitments |
126,065 |
126,883 |
Contingent liabilities arise in the normal course of RBSs business; credit exposure is subject to the banks normal controls. The amounts shown do not, and are not intended to, provide any indication of RBSs expectation of future losses.
Notes
13. Litigation, investigations and reviews
The Royal Bank of Scotland Group plc (the company or RBSG) and certain members of the Group are party to legal proceedings and the subject of investigation and other regulatory and governmental action (Matters) in the United Kingdom (UK), the United States (US), the European Union (EU) and other jurisdictions.
RBS recognises a provision for a liability in relation to these Matters when it is probable that an outflow of economic benefits will be required to settle an obligation resulting from past events, and a reliable estimate can be made of the amount of the obligation.
In many proceedings and investigations, it is not possible to determine whether any loss is probable or to estimate reliably the amount of any loss, either as a direct consequence of the relevant proceedings and investigations or as a result of adverse impacts or restrictions on RBSs reputation, businesses and operations. Numerous legal and factual issues may need to be resolved, including through potentially lengthy discovery and document production exercises and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a liability can reasonably be estimated for any claim. RBS cannot predict if, how, or when such claims will be resolved or what the eventual settlement, damages, fine, penalty or other relief, if any, may be, particularly for claims that are at an early stage in their development or where claimants seek substantial or indeterminate damages.
There are situations where RBS may pursue an approach that in some instances leads to a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, or in order to take account of the risks inherent in defending claims or investigations, even for those Matters for which RBS believes it has credible defences and should prevail on the merits. The uncertainties inherent in all such Matters affect the amount and timing of any potential outflows for both Matters with respect to which provisions have been established and other contingent liabilities.
The future outflow of resources in respect of any Matter may ultimately prove to be substantially greater than or less than the aggregate provision that RBS has recognised. Where (and as far as) liability cannot be reasonably estimated, no provision has been recognised. RBS expects that in future periods, additional provisions, settlement amounts and customer redress payments will be necessary, in amounts that are expected to be substantial in some instances.
For a discussion of certain risks associated with the Groups litigation, investigations and reviews, see the Risk Factor relating to legal, regulatory and governmental actions and investigations set out in RBSs 2018 Annual Report and Accounts on page 261 and in RBSs 2018 Annual Report on Form 20-F on page 274.
Litigation
Residential mortgage-backed securities (RMBS) litigation in the US
RBS companies continue to defend RMBS-related claims in the US in which plaintiffs allege that certain disclosures made in connection with the relevant offerings of RMBS contained materially false or misleading statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans underlying the RMBS were issued. The remaining RMBS lawsuits against RBS companies consist of cases filed by the Federal Home Loan Banks of Boston and Seattle and the Federal Deposit Insurance Corporation that together involve the issuance of less than US$1 billion of RMBS issued primarily from 2005 to 2007. In addition, NatWest Markets Securities Inc. previously agreed to settle a purported RMBS class action entitled New Jersey Carpenters Health Fund v. Novastar Mortgage Inc. et al. for US$55.3 million, which was paid into escrow pending court approval of the settlement, which was granted on 11 March 2019, but which is now the subject of an appeal by a class member who does not want to participate in the settlement.
London Interbank Offered Rate (LIBOR) and other rates litigation
NatWest Markets Plc and certain other members of the Group, including RBSG, are defendants in a number of class actions and individual claims pending in the US (primarily in the United States District Court for the Southern District of New York (SDNY)) with respect to the setting of LIBOR and certain other benchmark interest rates. The complaints allege that certain members of the Group and other panel banks violated various federal laws, including the US commodities and antitrust laws, and state statutory and common law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives in various markets through various means.
Several class actions relating to USD LIBOR, as well as more than two dozen non-class actions concerning USD LIBOR, are part of a co-ordinated proceeding in the SDNY. In December 2016, the SDNY held that it lacks personal jurisdiction over
Notes
13. Litigation, investigations and reviews continued
NatWest Markets Plc with respect to certain claims. As a result of that decision, all Group companies have been dismissed from each of the USD LIBOR-related class actions (including class actions on behalf of over-the-counter plaintiffs, exchange-based purchaser plaintiffs, bondholder plaintiffs, and lender plaintiffs), but seven non-class cases in the co-ordinated proceeding remain pending against Group defendants. The dismissal of Group companies for lack of personal jurisdiction is the subject of a pending appeal to the United States Court of Appeals for the Second Circuit.
Among the non-class claims dismissed by the SDNY in December 2016 were claims that the Federal Deposit Insurance Corporation (FDIC) had asserted on behalf of certain failed US banks. In July 2017, the FDIC, on behalf of 39 failed US banks, commenced substantially similar claims against RBS companies and others in the High Court of Justice of England and Wales. The action alleges that the defendants breached English and European competition law as well as asserting common law claims of fraud under US law.
In addition, there are two class actions relating to JPY LIBOR and Euroyen TIBOR, both pending before the same judge in the SDNY. In the first class action, which relates to Euroyen TIBOR futures contracts, the court dismissed the plaintiffs antitrust claims in March 2014, but declined to dismiss their claims under the Commodity Exchange Act for price manipulation, and the case is proceeding in the discovery phase. The second class action relates to other derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR. The court dismissed that case in March 2017 on the ground that the plaintiffs lack standing. The plaintiffs have commenced an appeal of that decision.
There is also a class action relating to the Singapore Interbank Offered Rate and Singapore Swap Offer Rate pending in the SDNY. In that case, the court denied defendants motion to dismiss on 5 October 2018 in a ruling that would have permitted certain antitrust claims to proceed against NatWest Markets Plc and other non-RBS defendants. However, on 26 July 2019, the court determined that the named plaintiffs asserting such claims do not have standing and therefore dismissed the case. The dismissal is subject to appeal.
Four other class action complaints were filed against RBS companies in the SDNY, each relating to a different reference rate. In the case relating to Pound Sterling LIBOR, the court dismissed all claims against RBS companies, for various reasons, on 21 December 2018, and plaintiffs are seeking reconsideration of that decision. In the case relating to the Australian Bank Bill Swap Reference Rate, the court dismissed all claims against RBS companies for lack of personal jurisdiction on 26 November 2018, but plaintiffs have filed an amended complaint, which is the subject of a further motion to dismiss. In the case relating to Euribor, the court dismissed all claims against RBS companies for lack of personal jurisdiction in February 2017, but in June 2019, the plaintiffs commenced an appeal of that decision. In the case relating to Swiss Franc LIBOR, the court dismissed all claims against all defendants on various grounds in September 2017, but held that it has personal jurisdiction over NatWest Markets Plc and allowed the plaintiffs to replead their complaint. Defendants renewed motion to dismiss the amended complaint relating to Swiss Franc LIBOR remains pending.
NatWest Markets Plc has also been named as a defendant in a motion to certify a class action relating to LIBOR in the Tel Aviv District Court in Israel. NatWest Markets Plc has filed a motion for cancellation of service. If the motion is successful then the current action will be brought to an end, although the claimants may seek to re-raise the claim in the future.
NatWest Markets Plc is defending a claim in the High Court in London brought by London Bridge Holdings Ltd and others, in which the claimants allege LIBOR manipulation in connection with the sale of interest rate hedging products. The quantified sum claimed in that case is £446.7 million.
Details of UK litigation claims in relation to the alleged mis-sale of interest rate hedging products (IRHPs) involving LIBOR-related allegations are set out under Interest rate hedging products and similar litigation on page 39.
In January 2019, a class action antitrust complaint was filed in the SDNY alleging that the defendants (USD ICE LIBOR panel banks and affiliates) have conspired to suppress USD ICE LIBOR from 2014 to the present by submitting incorrect information to ICE about their borrowing costs. The RBS defendants are RBSG, NatWest Markets Plc, NatWest Markets Securities Inc., and NatWest Plc.
FX antitrust litigation
NatWest Markets Plc, NatWest Markets Securities Inc. and / or RBSG, are defendants in several cases relating to NatWest Markets Plcs foreign exchange (FX) business, each of which is pending before the same federal judge in the SDNY.
Notes
13. Litigation, investigations and reviews continued
In 2015, NatWest Markets Plc paid US$255 million to settle the consolidated antitrust class action on behalf of persons who entered into over-the-counter FX transactions with defendants or who traded FX instruments on exchanges. That settlement received final court approval in August 2018. On 7 November 2018, some members of the settlement class who opted out of the settlement filed their own non-class complaint in the SDNY asserting antitrust claims against NatWest Markets Plc, NatWest Markets Securities Inc. and other banks. On 31 December 2018, some of the same claimants, as well as others, filed proceedings in the High Court in London, asserting competition claims against NatWest Markets Plc and several other banks. The claim was served on 25 April 2019.
Two other FX-related class actions remain pending in the SDNY. First, there is a class action on behalf of consumers and end-user businesses, which is proceeding against NatWest Markets Plc in the discovery phase following the SDNYs denial of the defendants motions to dismiss in March 2018. Second, there is a class action on behalf of indirect purchasers of FX instruments (which plaintiffs define as persons who transacted FX instruments with retail foreign exchange dealers that transacted directly with defendant banks). That case is proceeding in discovery against NatWest Markets Securities Inc. and other defendants following the SDNYs denial of defendants motion to dismiss on 25 October 2018. On 20 May 2019, NatWest Markets Plc was dismissed from the case for lack of personal jurisdiction, but plaintiffs are seeking permission to replead their complaint to establish jurisdiction.
On 27 May 2019, a class action was filed in the Federal Court of Australia against NatWest Markets Plc and other banks on behalf of persons who bought or sold currency through FX spots or forwards between 1 January 2008 and 15 October 2013 with a total transaction value exceeding AUS $0.5m. RBSG has been named in the action as a cartel party, but is not a defendant. The claim was served on 28 June 2019.
On 29 July 2019, an application for a collective proceedings order was filed in the UK Competition Appeal Tribunal against RBSG, NatWest Markets Plc and other banks on behalf of persons who, between 18 December 2007 and 31 January 2013, entered into a relevant FX spot or outright forward transaction in the EEA with a relevant financial institution or on an electronic communications network.
Two motions to certify FX-related class actions have been filed in the Tel Aviv District Court in Israel. RBSG and NatWest Markets Securities Inc. have been named as defendants in the first motion. The Royal Bank of Scotland plc has been named in the second. These motions have not been served.
Certain other foreign exchange transaction related claims have been or may be threatened. RBS cannot predict whether any of these claims will be pursued, but expects that some may.
Government securities antitrust litigation
NatWest Markets Securities Inc. and certain other US broker-dealers are defendants in a consolidated antitrust class action pending in the SDNY on behalf of persons who transacted in US Treasury securities or derivatives based on such instruments, including futures and options. The plaintiffs allege that defendants rigged the US Treasury securities auction bidding process to deflate prices at which they bought such securities and colluded to increase the prices at which they sold such securities to plaintiffs. The defendants motion to dismiss this matter remains pending.
Class action antitrust claims commenced in March 2019 are pending in the SDNY against NatWest Markets Plc, NatWest Markets Securities Inc. and other banks. The complaints allege a conspiracy among dealers of Euro-denominated bonds issued by European central banks (EGBs), to widen the bid-ask spreads they quoted to customers, thereby increasing the prices customers paid for the EGBs or decreasing the prices at which customers sold the bonds. The class consists of those who purchased or sold EGBs in the US between 2007 and 2012.
Swaps antitrust litigation
NatWest Markets Plc and other members of the Group, including RBSG, as well as a number of other interest rate swap dealers, are defendants in several cases pending in the SDNY alleging violations of the US antitrust laws in the market for interest rate swaps. There is a consolidated class action complaint on behalf of persons who entered into interest rate swaps with the defendants, as well as non-class action claims by three swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that the swap execution facilities would have successfully established exchange-like trading of interest rate swaps if the defendants had not unlawfully conspired to prevent that from happening through boycotts and other means. Discovery in these cases is ongoing.
Notes
13. Litigation, investigations and reviews continued
In addition, in June 2017, TeraExchange filed a complaint against RBS companies, including RBSG, as well as a number of other credit default swap dealers, in the SDNY. TeraExchange alleges it would have established exchange-like trading of credit default swaps if the defendant dealers had not engaged in an unlawful antitrust conspiracy. On 1 October 2018, the court dismissed all claims against RBS companies.
Madoff
NatWest Markets N.V. (NWM N.V.) is a defendant in two actions filed by Irving Picard, as trustee for the bankruptcy estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in bankruptcy court in New York. In both cases, the trustee alleges that certain transfers received by NWM N.V. amounted to fraudulent conveyances that should be clawed back for the benefit of the Madoff estate.
In the primary action, filed in December 2010, the trustee originally sought to recover US$75.8 million in redemptions that NWM N.V. allegedly received from certain Madoff feeder funds and US$162.1 million that NWM N.V. allegedly received from certain swap counterparties. In August 2018, due to a court ruling in a related matter, the trustee voluntarily dismissed a portion of this claim (relating to US$74.6 million received from certain swap counterparties) without prejudice to refiling at a later date. In June 2019, the trustee filed a motion for leave to file an amended complaint, seeking to clawback a total of US$276.3 million, including the previously voluntarily dismissed US$74.6 million, that NWM N.V. allegedly received in redemptions from certain Madoff feeder funds and swap counterparties. NWM N.V. intends to oppose the motion for leave to amend and otherwise seek dismissal of the amended complaint. In the second action, filed in October 2011, the trustee seeks to recover an additional US$21.8 million. In November 2016, the bankruptcy court dismissed this case on international comity grounds, and that decision was appealed. On 25 February 2019, the United States Court of Appeals for the Second Circuit reversed the bankruptcy courts decision. If the U.S. Supreme Court declines to review the matter, the case will return to the bankruptcy court for further proceedings.
Interest rate hedging products and similar litigation
RBS is dealing with a number of active litigation claims in the UK in relation to the alleged mis-selling of interest rate hedging products (IRHPs). In general claimants allege that the relevant IRHPs were mis-sold to them, with some also alleging that misrepresentations were made in relation to LIBOR. Claims have been brought by customers who were considered under the UK Financial Conduct Authority (FCA) redress programme for IRHPs, as well as customers who were outside of the scope of that programme, which was closed to new entrants in March 2015. RBS remains exposed to potential claims from customers who were either ineligible to be considered for redress or who are dissatisfied with their redress offers.
Property Alliance Group (PAG) v NatWest Markets Plc was the leading case before the English High Court involving both IRHP mis-selling and LIBOR misconduct allegations. The amount claimed was £34.8 million. Following dismissal by the Court of all PAGs claims in December 2016, PAG appealed to the Court of Appeal, which dismissed the appeal in March 2018. In July 2018 the Supreme Court declined the request from PAG for permission to appeal an aspect of the judgment relating to implied representations of Sterling LIBOR rates. The Court of Appeals decision may impact other IRHP and LIBOR-related cases currently pending in the English courts, some of which involve substantial amounts.
Separately, NatWest Markets Plc is defending claims filed in France by five French local authorities relating to structured interest rate swaps. The plaintiffs allege, among other things, that the swaps are void for being illegal transactions, that they were mis-sold, and that information / advisory duties were breached. Of the remaining claims, two are being appealed to the Supreme Court and one remains to be heard before the lower court.
Tax dispute
HMRC issued a tax assessment in 2012 against RBSG for approximately £86 million regarding a value-added-tax (VAT) matter in relation to the trading of European Union Allowances (EUAs) by a joint venture subsidiary in 2009. RBSG has lodged an appeal, which is still to be heard, before the First-tier Tribunal (Tax), a specialist tax tribunal, challenging the assessment (the Tax Dispute). In the event that the assessment is upheld, interest and costs would be payable, and a penalty of up to 100 per cent of the VAT held to have been legitimately denied by HMRC could also be levied. Separately, NatWest Markets Plc is a named defendant in civil proceedings before the High Court brought in 2015 by ten companies (all in liquidation) (the Liquidated Companies) and their respective liquidators (together, the Claimants). The Liquidated Companies previously traded in EUAs in 2009 and are alleged to be defaulting traders within (or otherwise connected to) the EUA supply chains forming the subject of
Notes
13. Litigation, investigations and reviews continued
the Tax Dispute. The Claimants claim approximately £71.4 million plus interest and costs and allege that NatWest Markets Plc dishonestly assisted the directors of the Liquidated Companies in the breach of their statutory duties and/or knowingly participated in the carrying on of the business of the Liquidated Companies with intent to defraud creditors. The trial in that matter concluded on 20 July 2018 and judgment is awaited.
US Anti-Terrorism Act litigation
NatWest Plc is defending lawsuits filed in the United States District Court for the Eastern District of New York by a number of US nationals (or their estates, survivors, or heirs) who were victims of terrorist attacks in Israel. The plaintiffs allege that NatWest Plc is liable for damages arising from those attacks pursuant to the US Anti-Terrorism Act because NatWest Plc previously maintained bank accounts and transferred funds for the Palestine Relief & Development Fund, an organisation which plaintiffs allege solicited funds for Hamas, the alleged perpetrator of the attacks.
In October 2017, the trial court dismissed claims against NatWest Plc with respect to two of the 18 terrorist attacks at issue. In March 2018, the trial court granted a request by NatWest Plc for leave to file a renewed summary judgment motion in respect of the remaining claims, and in March 2019, the court granted summary judgment in favour of NatWest Plc. The plaintiffs have commenced an appeal of the judgment to the United States Court of Appeals for the Second Circuit.
NWM N.V. and certain other financial institutions, are defendants in several actions pending in the United States District Courts for the Eastern and Southern Districts of New York, filed by a number of US nationals (or their estates, survivors, or heirs), most of whom are or were US military personnel, who were killed or injured in attacks in Iraq between 2003 and 2011. NatWest Markets Plc is also a defendant in some of these cases.
The attacks at issue in the cases were allegedly perpetrated by Hezbollah and certain Iraqi terror cells allegedly funded by the Islamic Republic of Iran. According to the plaintiffs allegations, the defendants are liable for damages arising from the attacks because they allegedly conspired with Iran and certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi terror cells, in violation of the US Anti-Terrorism Act, by agreeing to engage in stripping of transactions initiated by the Iranian banks so that the Iranian nexus to the transactions would not be detected. The first of these actions was filed in the United States District Court for the Eastern District of New York in November 2014. On 27 July 2018, the magistrate judge in that case issued a report to the district court recommending that the district court deny the defendants pending motion to dismiss. NWM N.V. has requested that the district court grant the motion to dismiss notwithstanding the magistrates recommendation. Another action, filed in 2017, was dismissed on 28 March 2019. The dismissal is subject to re-pleading by the plaintiffs or appeal. The other actions are either subject to a pending motion to dismiss, or will be the subject of such a motion in due course.
Securities underwriting litigation
NatWest Markets Securities Inc. is an underwriter defendant in several securities class actions in the US in which plaintiffs generally allege that an issuer of public debt or equity securities, as well as the underwriters of the securities (including NatWest Markets Securities Inc.), are liable to purchasers for misrepresentations and omissions made in connection with the offering of such securities.
Investigations and reviews
RBSs businesses and financial condition can be affected by the actions of various governmental and regulatory authorities in the UK, the US, the EU and elsewhere. RBS has engaged, and will continue to engage, in discussions with relevant governmental and regulatory authorities, including in the UK, the US, the EU and elsewhere, on an ongoing and regular basis, and in response to informal and formal inquiries or investigations, regarding operational, systems and control evaluations and issues including those related to compliance with applicable laws and regulations, including consumer protection, business conduct, competition/anti-trust, anti-bribery, anti-money laundering and sanctions regimes.
The NatWest Markets business in particular has been providing, and continues to provide, information regarding a variety of matters, including, for example, the setting of benchmark rates and related derivatives trading, conduct in the foreign exchange market, and various issues relating to the issuance, underwriting, and sales and trading of fixed-income securities, including structured products and government securities, some of which have resulted, and others of which may result, in investigations or proceedings.
Notes
13. Litigation, investigations and reviews continued
Any matters discussed or identified during such discussions and inquiries may result in, among other things, further inquiry or investigation, other action being taken by governmental and regulatory authorities, increased costs being incurred by RBS, remediation of systems and controls, public or private censure, restriction of RBSs business activities and/or fines. Any of the events or circumstances mentioned in this paragraph or below could have a material adverse effect on RBS, its business, authorisations and licences, reputation, results of operations or the price of securities issued by it.
RBS is co-operating fully with the investigations and reviews described below.
US investigations relating to fixed-income securities
In the US, RBS companies have in recent years been involved in investigations relating to, among other things, issuance, underwriting and trading in RMBS and other mortgage-backed securities and collateralised debt obligations (CDOs). Investigations by the US Department of Justice (DoJ) and several state attorneys general relating to the issuance and underwriting of RMBS were previously resolved. Certain other state attorneys general have sought information regarding similar issues, and RBS is aware that at least one such investigation is ongoing.
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 forms 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 NPAs reporting and conduct requirements during its term.
The NatWest Markets business is currently responding to a criminal investigation concerning unrelated securities trading by certain traders in 2018, which was reported to the USAO during the course of the NPA. In April 2019, NatWest Markets Securities Inc. agreed to a second six-month extension of the NPA so that the USAO could review the circumstances of that unrelated matter.
Foreign exchange related investigations
In May and June 2019, RBSG and NatWest Markets Plc reached settlements totalling approximately EUR 275 million in connection with the EC and certain other related competition law investigations into FX trading. The aggregate amount is fully covered by existing provisions in NatWest Markets Plc. NatWest Markets Plc continues to co-operate with ongoing investigations from competition authorities on similar issues relating to past FX trading. The exact timing and amount of future financial penalties, related risks and collateral consequences remain uncertain and may be material.
In 2014 and 2015, NatWest Markets Plc paid significant penalties to resolve investigations into its FX business by the FCA, the CFTC, the DoJ, and the Board of Governors of the Federal Reserve System (Federal Reserve). As part of its plea agreement with the DoJ, NatWest Markets Plc pled guilty to a one-count information charging an antitrust conspiracy occurring between as early as December 2007 to at least April 2010. NatWest Markets Plc admitted that it knowingly, through one of its Euro/US dollar currency traders, joined and participated in a conspiracy to eliminate competition in the purchase and sale of the Euro/US dollar currency pair exchanged in the FX spot market. On 5 January 2017, the United States District Court for the District of Connecticut imposed a sentence on NatWest Markets Plc consisting of a US$395 million fine and a three-year probation, which among other things, prohibits NatWest Markets Plc from committing another crime in violation of US law or engaging in the FX trading practices that form the basis for the charged crime and requires NatWest Markets Plc to implement a compliance program designed to prevent and detect the unlawful conduct at issue and to strengthen its compliance and internal controls as required by other regulators (including the FCA and the CFTC). A violation of the terms of probation could lead to the imposition of additional penalties.
As part of the settlement with the Federal Reserve, NatWest Markets Plc and NatWest Markets Securities Inc. entered into a cease and desist order (the FX Order). In the FX Order, which is publicly available and will remain in effect until terminated by the Federal Reserve, NatWest Markets Plc and NatWest Markets Securities Inc. agreed to take certain remedial actions with respect to FX activities and certain other designated market activities, including the creation of an enhanced written internal controls and compliance program, an improved compliance risk management program, and an enhanced internal audit program. NatWest Markets Plc and NatWest Markets Securities Inc. are obligated to implement and comply with these programs as approved by the Federal Reserve, and are also required to conduct, on an annual basis, a review of applicable compliance policies and procedures and a risk-focused sampling of key controls.
Notes
13. Litigation, investigations and reviews continued
FCA review of RBSs treatment of SMEs
In 2014, the FCA appointed an independent Skilled Person under section 166 of the Financial Services and Markets Act 2000 to review RBSs treatment of SME customers whose relationship was managed by RBSs Global Restructuring Group (GRG) in the period 1 January 2008 to 31 December 2013.
The Skilled Person delivered its final report to the FCA during September 2016, and the FCA published an update in November 2016. In response, RBS announced redress steps for SME customers in the UK and the Republic of Ireland that were in GRG between 2008 and 2013. These steps were (i) an automatic refund of certain complex fees; and (ii) a new complaints process, overseen by an independent third party. The complaints process closed on 22 October 2018 for new complaints in the UK and 31 December 2018 in the Republic of Ireland, with the exception of a small cohort of potential complainants in the Republic of Ireland for whom there is an extended deadline until 31 August 2019.
RBS provisions to date totalled £481 million in respect of the above redress steps, of which £328 million had been utilised by 30 June 2019.
The FCA published a summary of the Skilled Persons report in November 2017. The UK House of Commons Treasury Select Committee, seeking to rely on Parliamentary powers, published the full version of the Skilled Persons report in February 2018. In July 2018, the FCA confirmed that it had concluded its investigation and that it did not intend to take disciplinary or prohibitory action against any person in relation to these matters. On 13 June 2019, the FCA published a full report explaining how it had reached that conclusion.
Investment advice review
As a result of an FSA review in 2013, the FCA required RBS to carry out a past business review and customer contact exercise on a sample of historic customers who received investment advice on certain lump sum products, during the period from March 2012 until December 2012. The review was conducted by an independent Skilled Person under section 166 of the Financial Services and Markets Act 2000. Redress was paid to certain customers in that sample group.
RBS later agreed with the FCA that it would carry out a wider review/remediation exercise relating to certain investment, insurance and pension sales from 1 January 2011 to 1 April 2015. That exercise is now complete. Phase 2 (covering sales in 2010) started in April 2018 and, with the exception of a small cohort of former customers for whom there is an extended completion date, is targeted for material completion by the end of September 2019.
In addition, RBS agreed with the FCA that it would carry out a remediation exercise, for a specific customer segment who were sold a particular structured product. Redress was paid to certain customers who took out the structured product.
RBS provisions in relation to these matters at 30 June 2019 were less than £10 million.
Packaged accounts
RBS has had dedicated resources in place since 2013 to investigate and resolve packaged account complaints on an individual basis. RBS provisions for this matter to date totalled £444 million, of which £411 million had been utilised by 30 June 2019. The FCA conducted a thematic review of packaged bank accounts across the UK from October 2014 to April 2016, the results of which were published in October 2016. RBS made amendments to its sales process and complaints procedures to address the findings from that review.
FCA investigation into RBSs compliance with the Money Laundering Regulations 2007
In July 2017, the FCA notified RBS that it was undertaking an investigation into RBSs compliance with the Money Laundering Regulations 2007 in relation to certain customers. There are currently two areas under review: (1) compliance with Money Laundering Regulations in respect of Money Service Business customers; and (2) the Suspicious Transactions regime in relation to the events surrounding particular customers. The investigations in both areas are assessing both criminal and civil culpability. RBS is cooperating with the investigations, including responding to several information requests from the FCA.
Notes
13. Litigation, investigations and reviews continued
Systematic Anti-Money Laundering Programme assessment
In December 2018, the FCA commenced a Systematic Anti-Money Laundering Programme assessment of RBS. The FCA provided its written findings to RBS on 28 June 2019, and RBS is considering these. It is not yet possible to assess the likely impact of this matter.
Payment Protection Insurance (PPI)
Since 2011, RBS has been implementing the FCAs policy statement for the handling of complaints about the mis-selling of PPI (Policy Statement 10/12). In August 2017, the FCAs new rules and guidance on PPI complaints handling (Policy Statement 17/3) came into force. The Policy Statement introduced new so called Plevin rules, under which customers may be eligible for redress if the bank earned a high level of commission from the sale of PPI, but did not disclose this detail at the point of sale. The Policy Statement also introduced a two year PPI deadline, due to expire on 29 August 2019, before which new PPI complaints must be made. RBS is implementing the Policy Statement.
RBS has made provisions totalling £5.3 billion to date for PPI claims of which £4.9 billion had been utilised by 30 June 2019.
FCA mortgages market study
In December 2016, the FCA launched a market study into the provision of mortgages. On 26 March 2019 the final report was published. This found that competition was working well for many customers but also proposed remedies to help customers shop around more easily for mortgages. A period of consultation is underway and the FCA has indicated that it intends to provide updates on the remedies in due course.
FCA strategic review of retail banking models
In May 2017 the FCA announced a strategic review of retail banking models. The FCA used the review to understand how these models operate, including how free if in credit banking is paid for and the impact of changes such as increased use of digital channels and reduced branch usage.
On 18 December 2018, the FCA published its final report containing a number of findings, including that personal current accounts are an important source of competitive advantage for major banks. Following the review, the FCA is to continue to monitor retail banking models, analyse new payments business models and undertake exploratory work to understand certain aspects of SME banking.
US/Swiss tax programme
In December 2015, Coutts & Co Ltd., a member of the Group incorporated in Switzerland, entered into a non-prosecution agreement (the NPA) with the DoJ. This was entered into as part of the DoJs programme for Swiss banks, related to its investigations of the role that Swiss banks played in concealing the assets of US tax payers in offshore accounts (US related accounts). Coutts & Co Ltd. paid a US$78.5 million penalty and acknowledged responsibility for certain conduct set forth in a statement of facts accompanying the agreement. Under the NPA, which has a term of four years, Coutts & Co Ltd. is required, among other things, to provide certain information, cooperate with the DoJs investigations, and commit no US federal offences. If Coutts & Co Ltd. abides by the NPA, the DoJ will not prosecute it for certain tax-related and monetary transaction offences in connection with US related accounts.
Since the signing of the NPA in 2015, Coutts & Co Ltd identified and disclosed to the DoJ a number of US related accounts that were not included in its original submission supporting the NPA. As a result of this, Coutts & Co Ltd agreed with the DoJ to undertake additional review work, which began in October 2018 and is now largely complete. This additional review work identified further US related accounts, which are being discussed with the DoJ.
Enforcement proceedings and investigations in relation to Coutts & Co Ltd
In February 2017, the Swiss Financial Market Supervisory Authority (FINMA) took enforcement action against Coutts & Co Ltd with regard to failures of money laundering checks and controls on certain client accounts that were connected with the Malaysian sovereign wealth fund, 1MDB, and were held with Coutts & Co Ltd. FINMA accordingly required Coutts & Co Ltd to disgorge profits of CHF 6.5 million. There are two administrative criminal proceedings pending before the Swiss Finance Department against two former employees of Coutts & Co Ltd. In addition, the Monetary Authority of Singapore (MAS)s supervisory examination of Coutts & Co Ltds Singapore branch revealed breaches of anti-money laundering requirements. MAS imposed on Coutts & Co Ltd financial penalties amounting to SGD 2.4 million in December 2016.
In addition, Coutts & Co Ltd continues to assist with investigations and enquiries from authorities where requested to do so.
Notes
13. Litigation, investigations and reviews continued
Response to reports concerning certain historic Russian and Lithuanian transactions
Media coverage in March 2019 highlighted an alleged money laundering scheme involving Russian and Lithuanian entities between 2006 and 2013. The media reports alleged that certain European banks, including ABN AMRO and Coutts, and at least one US bank, were involved in processing certain transactions associated with this scheme. RBS has responded to regulatory requests for information.
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC
In December 2015, the Central Bank of Ireland (CBI) announced that it had written to a number of lenders requiring them to put in place a robust plan and framework to review the treatment of customers who had been sold mortgages with a tracker interest rate or with a tracker interest rate entitlement. The CBI stated that the intended purpose of the review was to identify any cases where customers contractual rights under the terms of their mortgage agreements were not fully honoured, or where lenders did not fully comply with various regulatory requirements and standards regarding disclosure and transparency for customers. The CBI required Ulster Bank Ireland DAC (UBI DAC), a member of the Group incorporated in the Republic of Ireland, to participate in this review. UBI DAC submitted its phase 2 report to the CBI in March 2017, identifying impacted customers. The redress and compensation phase (phase 3) has now concluded although an appeals process is currently anticipated to run until approximately Q3 2020.
RBS has made provisions totalling 312 million (£279 million) to date for this matter, of which 252million (£226 million) had been utilised by 30 June 2019.
Separately, in April 2016, the CBI notified UBI DAC that it was also commencing an investigation under its Administrative Sanctions Procedure into suspected breaches of the Consumer Protection Code 2006 during the period 4 August 2006 to 30 June 2008 in relation to certain customers who switched from tracker mortgages to fixed rate mortgages. This investigation remains ongoing and UBI DAC continues to co-operate with the CBI.
As part of an internal review of the wider retail and commercial loan portfolios extending from the tracker mortgage examination programme, UBI DAC identified further legacy business issues. A programme remains ongoing to identify and remediate impacted customers. RBS has made provisions totalling 167 million (£150 million), of which 66 million (£59 million) had been utilised by 30 June 2019.
Notes
14. Related party transactions
UK Government
The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arms length basis.
Bank of England facilities
In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of England. The Groups other transactions with the UK Government include the payment of taxes, principally UK corporation tax and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the bank levy and FSCS levies).
Other related parties
(a) In their roles as providers of finance, Group companies provide development and other types of capital support to businesses. These investments are made in the normal course of business and on arms length terms. In some instances, the investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24.
(b) The Group recharges The Royal Bank of Scotland Group Pension Fund with the cost of administration services incurred by it. The amounts involved are not material to the Group.
Full details of the Groups related party transactions for the year ended 31 December 2018 are included in the 2018 Annual Report on Form 20-F.
15. Post balance sheet events
Other than as disclosed in this document there have been no significant events between 30 June 2019 and the date of approval of this announcement which would require a change to, or additional disclosure, in the announcement.
16. Date of approval
This announcement was approved by the Board of Directors on 1 August 2019.
Notes
17. Consolidating financial information
NatWest Markets Plc (NWM Plc) is a wholly owned subsidiary of The Royal Bank of Scotland Group plc (RBSG plc) and was able to offer and sell certain securities in the US from time to time pursuant to a registration statement on Form F-3 filed with the SEC with a full and unconditional guarantee from RBSG plc.
NWM Plc utilises an exception provided in Rule 3-10 of Regulation S-X, and therefore does not file its financial statements with the SEC. In accordance with the requirements to qualify for the exception, presented below is condensed consolidating financial information for:
· |
RBSG plc on a stand-alone basis as guarantor; |
· |
NWM Plc on a stand-alone basis as issuer; |
· |
Non-guarantor Subsidiaries of RBSG plc and NWM Plc on a combined basis (Subsidiaries); |
· |
Consolidation adjustments; and |
· |
RBSG plc consolidated amounts (RBSG Group). |
Under IAS 27, RBSG plc and NWM Plc account for investments in their subsidiary undertakings at cost less impairment. Rule 3-10 of Regulation S-X requires a company to account for its investments in subsidiary undertakings using the equity method, which would decrease the results for the period of RBSG plc and increase NWM Plc in the information below by £224 million and £52 million respectively for the half year ended 30 June 2019 (decrease £32,713 million and increase £1,316 million, respectively, for the half year ended 30 June 2018).
The net assets of RBSG plc and NWM Plc in the information below would also be decreased by £9,210 million and increased by £282 million respectively at 30 June 2019 (decreased by £8,651 million and increased by £165 million respectively at 31 December 2018).
NWM Plc Disposal groups and discontinued operations NatWest Holdings Limited (NatWest Holdings)
In preparation for ring-fencing, the transfer of the NWM Plc Personal Banking (PB), Commercial & Private Banking (CPB) and certain parts of Central items and NatWest Markets to subsidiaries of NatWest Holdings was completed on 30 April 2018. Accordingly, all of the NWM Plc activities to be undertaken by NatWest Holdings and its subsidiaries are classified as disposal groups in the NWM Plc accounts at 30 June 2018 and presented as discontinued operations. On 29 June 2018, the distribution of NatWest Holdings by NWM plc to RBSG plc was approved and accounted for as income by RBSG plc.
Notes
17. Consolidating financial information continued
Income statement
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
For the six months ended 30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Net interest income |
|
(331) |
|
(102) |
|
4,212 |
|
225 |
|
4,004 |
|
Non-interest income |
|
2,903 |
|
622 |
|
2,107 |
|
(2,519) |
|
3,113 |
|
Total income |
|
2,572 |
|
520 |
|
6,319 |
|
(2,294) |
|
7,117 |
|
Operating expenses |
|
(37) |
|
(456) |
|
(3,522) |
|
(85) |
|
(4,100) |
|
Impairment releases/(losses) |
|
2 |
|
34 |
|
(395) |
|
36 |
|
(323) |
|
Operating profit/(loss) before tax |
|
2,537 |
|
98 |
|
2,402 |
|
(2,343) |
|
2,694 |
|
Tax (charge)/credit |
|
(73) |
|
55 |
|
(480) |
|
304 |
|
(194) |
|
Profit/(loss) for the period |
|
2,464 |
|
153 |
|
1,922 |
|
(2,039) |
|
2,500 |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shareholders |
|
2,262 |
|
123 |
|
1,766 |
|
(2,113) |
|
2,038 |
|
Preference shareholders |
|
20 |
|
- |
|
- |
|
- |
|
20 |
|
Paid-in equity holders |
|
182 |
|
30 |
|
154 |
|
(184) |
|
182 |
|
Non-controlling interests |
|
- |
|
- |
|
2 |
|
258 |
|
260 |
|
|
|
2,464 |
|
153 |
|
1,922 |
|
(2,039) |
|
2,500 |
|
Statement of comprehensive income
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
For the six months ended 30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Profit/(loss) for the period |
|
2,464 |
|
153 |
|
1,922 |
|
(2,039) |
|
2,500 |
|
Items that do not qualify for reclassification |
|
|
|
|
|
|
|
|
|
|
|
Remeasurement of retirement benefit scheme |
|
|
|
|
|
|
|
|
|
|
|
-other movements |
|
- |
|
- |
|
(68) |
|
- |
|
(68) |
|
Changes in fair value of credit in financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
designated at FVTPL due to own credit risk |
|
- |
|
(39) |
|
(57) |
|
- |
|
(96) |
|
Fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
(FVOCI) financial assets |
|
- |
|
(52) |
|
39 |
|
51 |
|
38 |
|
Tax |
|
- |
|
31 |
|
(5) |
|
- |
|
26 |
|
|
|
- |
|
(60) |
|
(91) |
|
51 |
|
(100) |
|
Items that do qualify for reclassification |
|
|
|
|
|
|
|
|
|
|
|
Fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
(FVOCI) financial assets |
|
- |
|
26 |
|
(38) |
|
- |
|
(12) |
|
Cash flow hedges |
|
7 |
|
53 |
|
358 |
|
(16) |
|
402 |
|
Currency translation |
|
- |
|
44 |
|
5 |
|
(290) |
|
(241) |
|
Tax |
|
(1) |
|
(12) |
|
(98) |
|
(11) |
|
(122) |
|
|
|
6 |
|
111 |
|
227 |
|
(317) |
|
27 |
|
Other comprehensive income/(loss) after tax |
|
6 |
|
51 |
|
136 |
|
(266) |
|
(73) |
|
Total comprehensive income/(loss) for the period |
|
2,470 |
|
204 |
|
2,058 |
|
(2,305) |
|
2,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shareholders |
|
2,268 |
|
174 |
|
1,903 |
|
(2,395) |
|
1,950 |
|
Preference shareholders |
|
20 |
|
- |
|
- |
|
- |
|
20 |
|
Paid-in equity holders |
|
182 |
|
30 |
|
154 |
|
(184) |
|
182 |
|
Non-controlling interests |
|
- |
|
- |
|
1 |
|
274 |
|
275 |
|
|
|
2,470 |
|
204 |
|
2,058 |
|
(2,305) |
|
2,427 |
|
Notes
17. Consolidating financial information continued
Income statement
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
For the six months ended 30 June 2018 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Net interest income |
|
(136) |
|
(72) |
|
3,468 |
|
1,066 |
|
4,326 |
|
Non-interest income |
|
33,980 |
|
62 |
|
1,459 |
|
(33,125) |
|
2,376 |
|
Total income |
|
33,844 |
|
(10) |
|
4,927 |
|
(32,059) |
|
6,702 |
|
Operating expenses |
|
(60) |
|
(627) |
|
(2,756) |
|
(1,292) |
|
(4,735) |
|
Impairment losses |
|
(4) |
|
(13) |
|
(69) |
|
(55) |
|
(141) |
|
Operating profit/(loss) before tax |
|
33,780 |
|
(650) |
|
2,102 |
|
(33,406) |
|
1,826 |
|
Tax credit/(charge) |
|
66 |
|
37 |
|
(621) |
|
(191) |
|
(709) |
|
Profit/(loss) from continuing operations |
|
33,846 |
|
(613) |
|
1,481 |
|
(33,597) |
|
1,117 |
|
Profit/(loss) from discontinued operations, net of tax |
|
- |
|
262 |
|
- |
|
(262) |
|
- |
|
Profit/(loss) for the period |
|
33,846 |
|
(351) |
|
1,481 |
|
(33,859) |
|
1,117 |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shareholders |
|
33,601 |
|
(351) |
|
1,480 |
|
(33,842) |
|
888 |
|
Preference shareholders |
|
74 |
|
- |
|
- |
|
- |
|
74 |
|
Paid-in equity holders |
|
171 |
|
- |
|
- |
|
- |
|
171 |
|
Non-controlling interests |
|
- |
|
- |
|
1 |
|
(17) |
|
(16) |
|
|
|
33,846 |
|
(351) |
|
1,481 |
|
(33,859) |
|
1,117 |
|
Statement of comprehensive income
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
For the six months ended 30 June 2018 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Profit/(loss) for the year |
|
33,846 |
|
(351) |
|
1,481 |
|
(33,859) |
|
1,117 |
|
Items that do not qualify for reclassification |
|
|
|
|
|
|
|
|
|
|
|
Remeasurement of retirement benefit scheme |
|
|
|
|
|
|
|
|
|
|
|
-contributions in preparation for ring-fencing |
|
- |
|
- |
|
(2,000) |
|
- |
|
(2,000) |
|
Changes in fair value of credit in financial liabilities |
|
|
|
|
|
|
|
|
|
|
|
designated at FVTPL due to own credit risk |
|
- |
|
59 |
|
36 |
|
- |
|
95 |
|
Fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
(FVOCI) financial assets |
|
- |
|
- |
|
(3) |
|
6 |
|
3 |
|
Tax |
|
- |
|
(16) |
|
516 |
|
- |
|
500 |
|
|
|
- |
|
43 |
|
(1,451) |
|
6 |
|
(1,402) |
|
Items that do qualify for reclassification |
|
|
|
|
|
|
|
|
|
|
|
Fair value through other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
(FVOCI) financial assets |
|
- |
|
(323) |
|
532 |
|
(10) |
|
199 |
|
Cash flow hedges |
|
28 |
|
234 |
|
(433) |
|
(350) |
|
(521) |
|
Currency translation |
|
- |
|
56 |
|
(393) |
|
355 |
|
18 |
|
Tax |
|
(5) |
|
27 |
|
(20) |
|
95 |
|
97 |
|
|
|
23 |
|
(6) |
|
(314) |
|
90 |
|
(207) |
|
Other comprehensive profit/(loss) after tax |
|
23 |
|
37 |
|
(1,765) |
|
96 |
|
(1,609) |
|
Total comprehensive income/(loss) for the period |
|
33,869 |
|
(314) |
|
(284) |
|
(33,763) |
|
(492) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shareholders |
|
33,624 |
|
(314) |
|
(286) |
|
(33,732) |
|
(708) |
|
Preference shareholders |
|
74 |
|
- |
|
- |
|
- |
|
74 |
|
Paid-in equity holders |
|
171 |
|
- |
|
- |
|
- |
|
171 |
|
Non-controlling interests |
|
- |
|
- |
|
2 |
|
(31) |
|
(29) |
|
|
|
33,869 |
|
(314) |
|
(284) |
|
(33,763) |
|
(492) |
|
Notes
17. Consolidating financial information continued
Balance sheet
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
At 30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks |
|
- |
|
12,874 |
|
72,505 |
|
1 |
|
85,380 |
|
Trading assets |
|
- |
|
64,784 |
|
20,704 |
|
(124) |
|
85,364 |
|
Derivatives |
|
1,083 |
|
147,840 |
|
7,603 |
|
(10,932) |
|
145,594 |
|
Settlement balances |
|
- |
|
6,305 |
|
2,133 |
|
- |
|
8,438 |
|
Loans to banks - amortised cost |
|
- |
|
628 |
|
12,293 |
|
14 |
|
12,935 |
|
Loans to customers - amortised cost |
|
- |
|
8,541 |
|
302,108 |
|
(18) |
|
310,631 |
|
Amounts due from holding company and fellow subsidiaries |
|
26,536 |
|
11,539 |
|
14,276 |
|
(52,351) |
|
- |
|
Other financial assets |
|
260 |
|
12,833 |
|
52,799 |
|
(258) |
|
65,634 |
|
Intangible assets |
|
- |
|
- |
|
6,329 |
|
302 |
|
6,631 |
|
Other assets |
|
56,823 |
|
2,034 |
|
10,330 |
|
(59,925) |
|
9,262 |
|
Total assets |
|
84,702 |
|
267,378 |
|
501,080 |
|
(123,291) |
|
729,869 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Bank deposits |
|
- |
|
3,593 |
|
19,501 |
|
(1) |
|
23,093 |
|
Customer deposits |
|
- |
|
2,046 |
|
359,553 |
|
27 |
|
361,626 |
|
Amounts due to holding company and fellow subsidiaries |
|
916 |
|
21,071 |
|
30,364 |
|
(52,351) |
|
- |
|
Settlement balances |
|
- |
|
6,067 |
|
1,552 |
|
- |
|
7,619 |
|
Trading liabilities |
|
- |
|
61,617 |
|
22,642 |
|
(124) |
|
84,135 |
|
Derivatives |
|
722 |
|
144,533 |
|
7,374 |
|
(10,932) |
|
141,697 |
|
Other financial liabilities |
|
20,016 |
|
17,962 |
|
8,488 |
|
19 |
|
46,485 |
|
Subordinated liabilities |
|
7,337 |
|
626 |
|
1,990 |
|
(145) |
|
9,808 |
|
Other liabilities |
|
280 |
|
1,490 |
|
7,991 |
|
(592) |
|
9,169 |
|
Total liabilities |
|
29,271 |
|
259,005 |
|
459,455 |
|
(64,099) |
|
683,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners equity |
|
55,431 |
|
8,373 |
|
41,612 |
|
(59,195) |
|
46,221 |
|
Non-controlling interests |
|
- |
|
- |
|
13 |
|
3 |
|
16 |
|
Total equity |
|
55,431 |
|
8,373 |
|
41,625 |
|
(59,192) |
|
46,237 |
|
Total liabilities and equity |
|
84,702 |
|
267,378 |
|
501,080 |
|
(123,291) |
|
729,869 |
|
Notes
17. Consolidating financial information continued
Balance sheet
|
|
|
|
|
|
|
|
Consolidation |
|
RBSG |
|
|
|
RBSG plc |
|
NWM Plc |
|
Subsidiaries |
|
adjustments |
|
Group |
|
At 31 December 2018 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Cash and balances at central banks |
|
- |
|
11,095 |
|
77,802 |
|
- |
|
88,897 |
|
Trading assets |
|
- |
|
61,990 |
|
13,228 |
|
(99) |
|
75,119 |
|
Derivatives (1) |
|
543 |
|
134,291 |
|
1,232 |
|
(2,717) |
|
133,349 |
|
Settlement balances |
|
- |
|
1,421 |
|
1,507 |
|
- |
|
2,928 |
|
Loans to banks - amortised cost |
|
- |
|
454 |
|
12,527 |
|
(34) |
|
12,947 |
|
Loans to customers - amortised cost |
|
- |
|
7,908 |
|
297,200 |
|
(19) |
|
305,089 |
|
Amounts due from holding company and fellow subsidiaries (1) |
|
22,791 |
|
11,800 |
|
16,877 |
|
(51,468) |
|
- |
|
Other financial assets |
|
241 |
|
10,995 |
|
48,481 |
|
(232) |
|
59,485 |
|
Intangible assets |
|
- |
|
- |
|
6,314 |
|
302 |
|
6,616 |
|
Other assets |
|
56,773 |
|
2,087 |
|
10,968 |
|
(60,023) |
|
9,805 |
|
Total assets |
|
80,348 |
|
242,041 |
|
486,136 |
|
(114,290) |
|
694,235 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Bank deposits |
|
- |
|
2,777 |
|
20,596 |
|
(76) |
|
23,297 |
|
Customer deposits |
|
- |
|
2,390 |
|
358,531 |
|
(7) |
|
360,914 |
|
Amounts due to holding company and fellow subsidiaries (1) |
|
635 |
|
23,505 |
|
27,328 |
|
(51,468) |
|
- |
|
Settlement balances |
|
- |
|
1,977 |
|
1,089 |
|
- |
|
3,066 |
|
Trading liabilities |
|
- |
|
54,540 |
|
17,909 |
|
(99) |
|
72,350 |
|
Derivatives (1) |
|
445 |
|
129,974 |
|
1,195 |
|
(2,717) |
|
128,897 |
|
Other financial liabilities |
|
16,821 |
|
16,279 |
|
6,625 |
|
7 |
|
39,732 |
|
Subordinated liabilities |
|
7,941 |
|
659 |
|
2,058 |
|
(123) |
|
10,535 |
|
Other liabilities |
|
119 |
|
1,018 |
|
8,378 |
|
(561) |
|
8,954 |
|
Total liabilities |
|
25,961 |
|
233,119 |
|
443,709 |
|
(55,044) |
|
647,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners equity |
|
54,387 |
|
8,922 |
|
42,416 |
|
(59,989) |
|
45,736 |
|
Non-controlling interests |
|
- |
|
- |
|
11 |
|
743 |
|
754 |
|
Total equity |
|
54,387 |
|
8,922 |
|
42,427 |
|
(59,246) |
|
46,490 |
|
Total liabilities and equity |
|
80,348 |
|
242,041 |
|
486,136 |
|
(114,290) |
|
694,235 |
|
Note:
(1) Represented to include amounts due from (or to) RBSG Plc or NWM Plc only.
Notes
17. Consolidating financial information continued
Cash flow statement
|
|
|
|
Consolidation |
RBSG |
RBSG plc |
NWM Plc |
Subsidiaries |
adjustments |
Group | |
For the six months ended 30 June 2019 |
£m |
£m |
£m |
£m |
£m |
Net cash flows from operating activities |
4,125 |
7,886 |
2,567 |
(4,565) |
10,013 |
Net cash flows from investing activities |
(521) |
(3,478) |
(2,530) |
753 |
(5,776) |
Net cash flows from financing activities |
(2,632) |
(450) |
(6,288) |
6,681 |
(2,689) |
Effects of exchange rate changes on cash and cash equivalents |
7 |
55 |
180 |
(31) |
211 |
Net increase/(decrease) in cash and cash equivalents |
979 |
4,013 |
(6,071) |
2,838 |
1,759 |
Cash and cash equivalents at 1 January 2019 |
307 |
24,575 |
91,212 |
(7,283) |
108,811 |
Cash and cash equivalents at 30 June 2019 |
1,286 |
28,588 |
85,141 |
(4,445) |
110,570 |
For the six months ended 30 June 2018 |
|
|
|
|
|
Net cash flows from operating activities |
273 |
25,094 |
(17,109) |
1,540 |
9,798 |
Net cash flows from investing activities |
- |
(617) |
(51,681) |
48,529 |
(3,769) |
Net cash flows from financing activities |
(345) |
(1,082) |
(1,925) |
1,045 |
(2,307) |
Effects of exchange rate changes on cash and cash equivalents |
(1) |
708 |
(192) |
(477) |
38 |
Net (decrease)/increase in cash and cash equivalents |
(73) |
24,103 |
(70,907) |
50,637 |
3,760 |
Cash and cash equivalents at 1 January 2018 |
245 |
13,058 |
196,214 |
(86,912) |
122,605 |
Cash and cash equivalents at 30 June 2018 |
172 |
37,161 |
125,307 |
(36,275) |
126,365 |
Trust preferred securities
The Group has issued trust preferred securities through trusts 100% owned by the Group (through partnership interests held by RBSG Capital Corporation and RBS) which meet the definition of a finance subsidiary in Regulation S-X, Rule 3-10. The securities represent undivided beneficial interests in the assets of the trusts, which consist of partnership preferred securities representing non-cumulative perpetual preferred limited partnership interests issued by Delaware limited partnerships. The Royal Bank of Scotland Group plc has provided subordinated guarantees for the benefit of the holders of the trust preferred securities and the partnership preferred securities. Under the terms of the guarantees, the Group has fully and unconditionally guaranteed on a subordinated basis, payments on such trust preferred securities and partnership preferred securities, to the extent they are due to be paid and have not been paid by, or on behalf of the trusts and the partnerships, as the case may be. Following implementation of IFRS 10 the trusts are no longer consolidated by the Group, for those securities that were classified as subordinated liabilities, the Groups outstanding instruments with the trusts are classified as subordinated liabilities.
Summary risk factors
Summary of our principal risks and uncertainties
Set out below is a summary of certain risks which could adversely affect the Group; it should be read in conjunction with the Capital and risk management section of the Groups 2018 Annual Report and Accounts and Form 20-F. This summary should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties or of the Groups 2018 Annual Report and Accounts or Form 20-F risk factor disclosures. A fuller description of these and other risk factors is included on pages 253 to 263 of the 2018 Annual Report and Accounts and on pages 265 to 275 of the Groups Form 20-F which should be read together with the Groups other public disclosures.
Operational and IT resilience risk
· |
The Group is subject to increasingly sophisticated and frequent cyberattacks. |
· |
Operational risks are inherent in the Groups businesses, particularly under its new ring-fenced structure. |
· |
The Group is exposed to third party risks including as a result of outsourcing and its use of new technologies and innovation, as well as related regulatory and market changes. Failure to effectively manage these risks could adversely affect the Group. |
· |
The Groups operations are highly dependent on its IT systems, and any IT failure could adversely affect the Group. |
· |
The Group relies on attracting, retaining and developing senior management and skilled personnel, and is required to maintain good employee relations. |
· |
A failure in the Groups risk management framework could adversely affect the Group, including its ability to achieve its strategic objectives. |
· |
The Groups operations are subject to inherent reputational risk. |
Economic and political risk
· |
Prevailing uncertainty on the terms of the UKs withdrawal from the European Union is adversely affecting the Group. The UK is currently expected to leave the European Union on 31 October 2019. |
· |
The Group has executed the core aspects of its plans for continuity of business impacted by the UKs expected departure from the EU, including obtaining certain regulatory permissions on which it will rely going forward. There remains uncertainty as to the final scope and extent of the implementation of these plans and their impact on the Group due to the prevailing political and regulatory uncertainty. |
· |
The Group faces increased political and economic risks and uncertainty in the UK and global markets. |
· |
The Group expects to face significant risks in connection with climate change and the transition to a low carbon economy, which may cause negative financial impacts for the Group. |
· |
HM Treasury (or UKGI on its behalf) could exercise a significant degree of influence over the Group and further offers or sales of the Groups shares held by HM Treasury may affect the price of securities issued by the Group. |
· |
Continued low interest rates have significantly affected and will continue to affect the Groups business and results. |
· |
Changes in foreign currency exchange rates may affect the Groups results and financial position. |
Financial resilience risk
· |
The Group may not meet targets and be in a position to make discretionary capital distributions to its shareholders. |
· |
The Group operates in markets that are highly competitive, with increasing competitive pressures and technology disruption. |
· |
The Group has significant exposure to counterparty and borrower risk. |
· |
The Group may not meet the prudential regulatory requirements for capital and MREL, or manage its capital effectively, which could trigger certain management actions or recovery options. |
· |
The Group may not be able to adequately access sources of liquidity and funding. |
· |
Any reduction in the credit rating assigned to RBSG, any of its subsidiaries or any of its respective debt securities could adversely affect the availability of funding for the Group, reduce the Groups liquidity position and increase its cost of funding. |
· |
The Group may be adversely affected if it fails to meet the requirements of regulatory stress tests. |
· |
The Group could incur losses or be required to maintain higher levels of capital as a result of limitations or failure of various models. |
· |
The Groups financial statements are sensitive to the underlying accounting policies, judgements, estimates and assumptions. |
· |
Changes in accounting standards may materially impact the Groups financial results. |
· |
The value or effectiveness of any credit protection that the Group has purchased depends on the value of the underlying assets and the financial condition of the insurers and counterparties. |
· |
The Groups results could be adversely affected if an event triggers the recognition of a goodwill impairment. |
· |
The Group may become subject to the application of UK statutory stabilisation or resolution powers which may result in, among other actions, the write-down or conversion of certain of the Groups securities, including its ordinary shares. |
Summary risk factors
Legal, regulatory and conduct risk
· |
The Groups businesses are subject to substantial regulation and oversight, which are constantly evolving and may adversely affect the Group. |
· |
The Group is required to comply with regulatory requirements in respect of its ongoing compliance with the UK ring-fencing regime and to ensure operational continuity in resolution; |
· |
The Group is subject to a number of legal, regulatory, and governmental actions and investigations including conduct-related reviews and redress projects, the outcomes of which are inherently difficult to predict, and which could have an adverse effect on the Group. |
· |
The Group may not effectively manage the transition of LIBOR and other IBOR rates to alternative risk free rates. |
· |
The Group operates in markets that are subject to intense scrutiny by the competition authorities. |
· |
The cost of implementing the Alternative Remedies Package could be higher than originally forecasted.. |
· |
Changes in tax legislation or failure to generate future taxable profits may impact the recoverability of certain deferred tax assets recognised by the Group. |
Statement of directors responsibilities
We, the directors listed below, confirm that to the best of our knowledge:
· the condensed financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting;
· the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
· the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties transactions and changes therein).
By order of the Board
Howard Davies |
Ross McEwan |
Katie Murray |
Chairman |
Chief Executive |
Chief Financial Officer |
1 August 2019
Board of directors
Chairman |
Executive directors |
Non-executive directors |
Howard Davies |
Ross McEwan Katie Murray
|
Frank Dangeard Alison Davis Patrick Flynn Morten Friis Robert Gillespie Brendan Nelson Baroness Noakes Mike Rogers Mark Seligman Dr Lena Wilson |
Additional information
Share information
|
30 June |
31 March |
31 December |
Ordinary share price |
222.0p |
247.0p |
216.7p |
|
|
|
|
Number of ordinary shares in issue (millions) |
12,091 |
12,090 |
12,049 |
Additional information
Other financial data
The following table shows RBSs issued and fully paid share capital, owners equity and indebtedness on a consolidated basis in accordance with IFRS as at 30 June 2019.
|
As at 2019 |
|
£m |
Share capital - allotted, called up and fully paid |
|
Ordinary shares of £1 |
12,091 |
Retained income and other reserves |
34,130 |
Owners equity |
46,221 |
|
|
RBS indebtedness |
|
Subordinated liabilities |
9,808 |
Debt securities in issue |
47,876 |
Total indebtedness |
57,684 |
Total capitalisation and indebtedness |
103,905 |
Under IFRS, certain preference shares are classified as debt and are included in subordinated liabilities in the table above.
The information contained in the table above has not changed materially since 30 June 2019.
|
|
Year ended 31 December | ||||
|
Half year ended |
2018 |
2017 |
2016 |
2015 |
2014 |
Return on average total assets (1) |
0.6% |
0.2% |
0.1% |
(0.8%) |
(0.2%) |
(0.3%) |
Return on average ordinary shareholders equity (2) |
10.1% |
4.0% |
1.9% |
(15.3%) |
(4.0%) |
(6.5%) |
Average total equity as a percentage of average total assets |
6.3% |
7.2% |
7.0% |
6.2% |
6.0% |
5.8% |
Dividend payout ratio |
65.1% |
14.9% |
- |
- |
- |
- |
Notes:
(1) Return on average total assets represents profit/(loss) attributable to ordinary shareholders as a percentage of average total assets.
(2) Return on average ordinary shareholders equity represents profit/(loss) attributable to ordinary shareholders expressed as a percentage of average ordinary shareholders equity.
Appendix 1
Capital and risk management
Document navigation
The following are contained within this appendix:
· |
Capital, liquidity and funding risk (pages 1 to 7); |
· |
Credit risk Economic loss drivers(page 8); |
· |
Credit risk Banking activities (page 9); |
· |
Credit risk Banking activities segmental exposure (pages 10 to 12); |
· |
Credit risk Banking activities sector analysis (pages 13 to 15); |
· |
Credit risk Banking activities personal portfolio (pages 16 to 20); |
· |
Credit risk Banking activities CRE (pages 21); |
· |
Credit risk Banking activities flow statements (pages 22 to 28); |
· |
Credit risk Asset quality (pages 29 to 33); |
· |
Credit risk Trading activities (pages 34 to 36); |
· |
Credit risk Cross border exposure (page 36); |
· |
Non-traded market risk (pages 37 to 41); |
· |
Traded market risk (page 41); and |
· |
Other risks (page 42) |
RBS Interim Results 2019
Appendix 1 Capital and risk management
Capital, liquidity and funding risk
Key developments
· |
The CET1 ratio decreased by 20 basis points to 16.0% as a result of the £2.0 billion attributable profit, offset by a foreseeable 5p ordinary dividend accrual of £0.6 billion, 12p special dividend of £1.4 billion and the impact of IFRS 16. |
· |
RWAs decreased by £0.2 billion in H1 2019. Credit risk decreased by £0.8 billion driven by the completion of the merger of Alawwal bank and SABB reducing credit risk by £4.6 billion, offset by increases in credit risk driven by the £1.3 billion uplift due to adoption of IFRS 16 from 1 January 2019, an increase due to PD calibrations affecting asset quality and growth in asset size. Counterparty credit risk increased primarily due to increased exposures. |
· |
The leverage ratio decreased to 5.2% driven by decreased capital. |
· |
The total loss absorbing capital ratio of 32.1% is above the BOE requirement of 24.0% by 1 January 2020. |
· |
In the first half of 2019, RBSG issued £3.0 billion new MREL eligible senior debt and redeemed a 1.0 billion Tier 2 security, with £0.5 billion of non-MREL RBSG senior debt also being repaid on maturity during the period. In subsidiaries, NWB issued a £750 million covered bond and NatWest Markets Plc maintained active issuance programmes for senior unsecured and secured notes, with net issuance of around £3 billion in the period. |
· |
RBSG participation in the Bank of Englands Term Funding Scheme reduced by £4 billion. |
· |
The liquidity coverage ratio decreased from 158% to 154% driven by reductions in NWM Plcs liquidity position due to seasonally low outflows at 31 December 2018. |
· |
The net stable funding ratio was relatively consistent at 140% compared to 141% for FY 2018. |
Minimum capital requirements
The Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum ratios of capital to RWAs that the Group is expected to have to meet under the end-point CRR requirements applicable from 1 January 2019. These ratios apply at the consolidated group level. Different minimum capital requirements may apply to individual legal entities or sub-groups.
Minimum requirements |
Type |
CET1 |
Total Tier 1 |
Total capital |
System wide |
Pillar 1 minimum requirements |
4.5% |
6.0% |
8.0% |
|
Capital conservation buffer |
2.5% |
2.5% |
2.5% |
|
Countercyclical capital buffer (1) |
0.7% |
0.7% |
0.7% |
|
G-SIB buffer (2) |
1.0% |
1.0% |
1.0% |
Bank specific |
Pillar 2A (4) |
2.0% |
2.7% |
3.6% |
Total (excluding PRA buffer) (5) |
|
10.7% |
12.9% |
15.8% |
Capital ratios at 30 June 2019 |
|
16.0% |
18.2% |
20.9% |
Notes:
(1) |
The countercyclical capital buffer (CCyB) applied to UK designated assets is set by the Financial Policy Committee (FPC). The UK CCyB is currently 1.0% (effective from November 2018). The Republic of Ireland CCyB is currently 0.0%, the CBI have announced an increase to 1.0% effective July 2019. Foreign exposures may be subject to different CCyB rates depending on the rate set in those jurisdictions. Firm specific CCyB is based on a weighted average at CCyBs applicable to countries in which the Bank has exposures. |
(2) |
Globally systemically important banks (G-SIBs), as designated by the Financial Stability Board (FSB), are subject to an additional capital buffer of between 1.0% and 3.5%. In November 2018 the FSB announced that RBS is no longer a G-SIB. From 1 January 2020, RBS will be released from this global buffer requirement. |
(3) |
The Group will be subject to a systemic risk buffer (SRB) and this will apply at the ring-fenced bank sub-group level rather than at the consolidated group level. As from 1 August 2019 NWH will be subject to a Systemic Risk Buffer of 1.5%. Where the Systemic Risk Buffer is greater than the G-SII buffer, the PRA may require the consolidated group to hold a higher level of capital through the PRA buffer and Leverage Ratio Group add-on. |
(4) |
From 1 January 2015, UK banks have been required to meet at least 56% of its Pillar 2A capital requirement with CET1 capital and with balance with Additional Tier 1 and/or Tier 2 capital. Additional capital requirements under Pillar 2A may be specified by the PRA as a ratio or as an absolute value. The table sets out an implied ratio to cover the full value of Pillar 2A requirements. |
(5) |
The Group may be subject to a PRA buffer requirement as set by the PRA. The PRA buffer consists of two components: - A risk management and governance buffer that is set as a scalar, up to 40% of the Pillar 1 and Pillar 2A requirements. - A buffer to cover stress risks informed by the results of the BoE concurrent stress testing results. - The PRA requires that the level of this buffer is not publicly disclosed. |
(6) |
The capital conservation buffer, the countercyclical capital buffer, the G-SIB buffer and systemic risk buffer (where applicable) make up the combined buffer. If the Group fails to meet the combined buffer requirement, it is subject to restrictions on distributions on CET1 instruments, discretionary coupons on AT1 instruments and on payment of variable remuneration or discretionary pension benefits. These restrictions are calculated by reference to the Groups Maximum Distributable Amount (MDA). Where a PRA buffer is applicable, the MDA trigger is below the PRA buffer and MDA restrictions are not automatically triggered if the Group fails to meet its PRA buffer. The MDA is calculated as the amount of interim or year-end profits not yet incorporated into CET1 capital multiplied by a factor ranging from 0 to 0.6 depending on the size of the CET1 shortfall against the combined buffer. |
RBS Interim Results 2019
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Capital flow statement
Refer to Business performance summary - Capital and leverage for information on Capital, RWAs and leverage and the Pillar 3 supplement for capital and leverage relating to significant subsidiaries and also CRR templates. The table below analyses the movement in end-point CRR CET1, AT1 and Tier 2 capital for the half year ended 30 June 2019.
|
CET1 |
AT1 |
Tier 2 |
Total |
|
£m |
£m |
£m |
£m |
At 1 January 2019 |
30,639 |
4,051 |
6,483 |
41,173 |
Profit for the year |
711 |
- |
- |
711 |
Own credit |
144 |
- |
- |
144 |
Share capital and reserve movements in respect of employee share schemes |
49 |
- |
- |
49 |
Foreign exchange reserve |
(296) |
- |
- |
(296) |
FVOCI reserves |
(78) |
- |
- |
(78) |
Goodwill and intangibles deduction |
(15) |
- |
- |
(15) |
Deferred tax assets |
(129) |
- |
- |
(129) |
Prudential valuation adjustments |
75 |
- |
- |
75 |
Expected loss less impairment |
(72) |
- |
- |
(72) |
Net dated subordinated debt/grandfathered instruments |
- |
- |
(1,400) |
(1,400) |
Foreign exchange movements |
- |
- |
36 |
36 |
Foreseeable ordinary and special dividends |
(728) |
- |
- |
(728) |
Other movements |
(109) |
- |
- |
(109) |
At 30 June 2019 |
30,191 |
4,051 |
5,119 |
39,361 |
Risk-weighted assets
The table below analyses the movement in RWAs on the end-point CRR basis during the half year, by key drivers.
|
|
Counterparty |
|
Operational |
|
|
Credit risk |
credit risk |
Market risk |
risk |
Total RWAs |
£bn |
£bn |
£bn |
£bn |
£bn | |
At 1 January 2019 |
137.9 |
13.6 |
14.8 |
22.4 |
188.7 |
Foreign exchange movement |
0.1 |
- |
- |
- |
0.1 |
Business movements (1) |
2.9 |
0.4 |
(0.4) |
0.2 |
3.1 |
Risk parameter changes (2) |
0.7 |
0.1 |
- |
- |
0.8 |
Model updates (3) |
0.2 |
- |
0.2 |
- |
0.4 |
Other movements (4) |
(4.7) |
0.1 |
- |
- |
(4.6) |
At 30 June 2019 |
137.1 |
14.2 |
14.6 |
22.6 |
188.5 |
RBS Interim Results 2019
The table below analyses segmental RWAs.
|
Personal & Ulster |
|
Commercial & Private |
|
|
Central |
| ||
|
|
Ulster |
|
Commercial |
Private |
|
NatWest |
items |
|
Total RWAs |
UK PB |
Bank RoI |
|
Banking |
Banking |
RBSI |
Markets |
& other |
Total |
£bn |
£bn |
|
£bn |
£bn |
£bn |
£bn |
£bn |
£bn | |
At 1 January 2019 * |
34.3 |
14.7 |
|
78.4 |
9.4 |
6.9 |
44.9 |
0.1 |
188.7 |
Foreign exchange movement |
- |
- |
|
0.1 |
- |
- |
- |
- |
0.1 |
Business movements (1) |
1.4 |
(0.1) |
|
1.0 |
0.3 |
0.2 |
- |
0.3 |
3.1 |
Risk parameter changes (2) |
1.3 |
(0.4) |
|
(0.2) |
- |
- |
0.1 |
- |
0.8 |
Model updates (3) |
- |
- |
|
0.2 |
- |
- |
0.2 |
- |
0.4 |
Other movements (4) |
- |
- |
|
(1.7) |
- |
(0.2) |
(3.8) |
1.1 |
(4.6) |
At 30 June 2019 |
37.0 |
14.2 |
|
77.8 |
9.7 |
6.9 |
41.4 |
1.5 |
188.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit risk |
29.3 |
13.2 |
|
68.5 |
8.4 |
6.1 |
10.1 |
1.5 |
137.1 |
Counterparty credit risk |
0.1 |
- |
|
0.2 |
0.1 |
- |
13.8 |
- |
14.2 |
Market risk |
0.1 |
- |
|
0.3 |
- |
- |
14.2 |
- |
14.6 |
Operational risk |
7.5 |
1.0 |
|
8.8 |
1.2 |
0.8 |
3.3 |
- |
22.6 |
Total RWAs |
37.0 |
14.2 |
|
77.8 |
9.7 |
6.9 |
41.4 |
1.5 |
188.5 |
*Restated. Refer to Note 1 of the main announcement for further details.
Notes:
(1) |
Included within business movements is the £1.3 billion uplift in credit risk due to adoption of IFRS 16 from 1 January 2019. |
(2) |
Risk parameter changes relate to asset quality metrics of customers and counterparties such as probability of default (PD) and loss given default (LGD). |
(3) |
Model updates relates primarily to revision in LGD models for the UK mid-corporate portfolios. |
(4) |
Other primarily reflects the reduction following the Alawwal bank merger. Other also reflects assets which have transferred between Commercial Banking, RBSI, Central items and NatWest Markets. |
RBS Interim Results 2019
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Capital resources
|
30 June 2019 |
|
31 December 2018 | ||
|
|
PRA |
|
|
PRA |
End-point |
transitional |
|
End-point |
transitional | |
|
CRR basis |
basis |
|
CRR basis |
basis |
|
£m |
£m |
|
£m |
£m |
Shareholders equity (excluding non-controlling interests) |
|
|
|
|
|
Shareholders equity |
46,221 |
46,221 |
|
45,736 |
45,736 |
Preference shares - equity |
(496) |
(496) |
|
(496) |
(496) |
Other equity instruments |
(4,058) |
(4,058) |
|
(4,058) |
(4,058) |
|
41,667 |
41,667 |
|
41,182 |
41,182 |
Regulatory adjustments and deductions |
|
|
|
|
|
Own credit |
(261) |
(261) |
|
(405) |
(405) |
Defined benefit pension fund adjustment |
(400) |
(400) |
|
(394) |
(394) |
Cash flow hedging reserve |
(117) |
(117) |
|
191 |
191 |
Deferred tax assets |
(869) |
(869) |
|
(740) |
(740) |
Prudential valuation adjustments |
(419) |
(419) |
|
(494) |
(494) |
Goodwill and other intangible assets |
(6,631) |
(6,631) |
|
(6,616) |
(6,616) |
Expected losses less impairments |
(726) |
(726) |
|
(654) |
(654) |
Foreseeable ordinary and special dividends |
(2,053) |
(2,053) |
|
(1,326) |
(1,326) |
Other regulatory adjustments |
- |
- |
|
(105) |
(105) |
|
(11,476) |
(11,476) |
|
(10,543) |
(10,543) |
CET1 capital |
30,191 |
30,191 |
|
30,639 |
30,639 |
Additional Tier 1 (AT1) capital |
|
|
|
|
|
Qualifying instruments and related share premium |
4,051 |
4,051 |
|
4,051 |
4,051 |
Qualifying instruments and related share premium subject to phase out |
- |
1,398 |
|
- |
1,393 |
Qualifying instruments issued by subsidiaries and held by third parties |
|
|
|
|
|
subject to phase out |
- |
140 |
|
- |
140 |
AT1 capital |
4,051 |
5,589 |
|
4,051 |
5,584 |
Tier 1 capital |
34,242 |
35,780 |
|
34,690 |
36,223 |
Qualifying Tier 2 capital |
|
|
|
|
|
Qualifying instruments and related share premium |
4,969 |
5,054 |
|
6,301 |
6,386 |
Qualifying instruments issued by subsidiaries and held by third parties |
150 |
1,498 |
|
182 |
1,565 |
Tier 2 capital |
5,119 |
6,552 |
|
6,483 |
7,951 |
Total regulatory capital |
39,361 |
42,332 |
|
41,173 |
44,174 |
RBS Interim Results 2019
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Loss absorbing capital
The following table illustrates the components of estimated loss absorbing capital (LAC) in RBSG plc and operating subsidiaries and includes external issuances only. The table is prepared on a transitional basis, including the benefit of regulatory capital instruments issued from operating companies, to the extent they meet the current MREL criteria.
|
30 June 2019 |
|
31 December 2018 | ||||||
|
|
Balance |
|
|
|
|
Balance |
|
|
|
Par |
sheet |
Regulatory |
LAC |
|
Par |
sheet |
Regulatory |
LAC |
|
value (1) |
value |
value (2) |
value (3) |
|
value (1) |
value |
value (2) |
value (3) |
|
£bn |
£bn |
£bn |
£bn |
|
£bn |
£bn |
£bn |
£bn |
CET1 capital (4) |
30.2 |
30.2 |
30.2 |
30.2 |
|
30.6 |
30.6 |
30.6 |
30.6 |
|
|
|
|
|
|
|
|
|
|
Tier 1 capital: end-point CRR compliant AT1 |
|
|
|
|
|
|
|
|
|
of which: RBSG (holdco) |
4.0 |
4.0 |
4.0 |
4.0 |
|
4.0 |
4.0 |
4.0 |
4.0 |
of which: RBSG operating subsidiaries (opcos) |
- |
- |
- |
- |
|
- |
- |
- |
- |
|
4.0 |
4.0 |
4.0 |
4.0 |
|
4.0 |
4.0 |
4.0 |
4.0 |
|
|
|
|
|
|
|
|
|
|
Tier 1 capital: end-point CRR non compliant |
|
|
|
|
|
|
|
|
|
of which: holdco |
1.4 |
1.6 |
1.4 |
0.5 |
|
1.4 |
1.6 |
1.4 |
0.5 |
of which: opcos |
0.1 |
0.1 |
0.1 |
0.1 |
|
0.1 |
0.1 |
0.1 |
0.1 |
|
1.5 |
1.7 |
1.5 |
0.6 |
|
1.5 |
1.7 |
1.5 |
0.6 |
|
|
|
|
|
|
|
|
|
|
Tier 2 capital: end-point CRR compliant |
|
|
|
|
|
|
|
|
|
of which: holdco |
5.9 |
6.1 |
5.0 |
4.3 |
|
6.8 |
6.7 |
6.3 |
5.1 |
of which: opcos |
0.5 |
0.5 |
0.3 |
0.5 |
|
0.5 |
0.5 |
0.3 |
0.5 |
|
6.4 |
6.6 |
5.3 |
4.8 |
|
7.3 |
7.2 |
6.6 |
5.6 |
|
|
|
|
|
|
|
|
|
|
Tier 2 capital: end-point CRR non compliant |
|
|
|
|
|
|
|
|
|
of which: holdco |
0.1 |
0.1 |
0.1 |
0.1 |
|
0.1 |
0.1 |
0.1 |
0.1 |
of which: opcos |
1.6 |
2.0 |
1.3 |
1.7 |
|
1.9 |
2.0 |
1.4 |
1.6 |
|
1.7 |
2.1 |
1.4 |
1.8 |
|
2.0 |
2.1 |
1.5 |
1.7 |
|
|
|
|
|
|
|
|
|
|
Senior unsecured debt securities issued by: |
|
|
|
|
|
|
|
|
|
RBSG holdco |
19.4 |
20.0 |
- |
19.2 |
|
16.8 |
16.8 |
- |
15.5 |
RBS opcos |
20.6 |
20.5 |
- |
- |
|
17.1 |
16.9 |
- |
- |
|
40.0 |
40.5 |
- |
19.2 |
|
33.9 |
33.7 |
- |
15.5 |
Total |
83.8 |
85.0 |
42.4 |
60.6 |
|
79.3 |
79.3 |
44.2 |
58.0 |
|
|
|
|
|
|
|
|
|
|
RWAs |
|
|
|
188.5 |
|
|
|
|
188.7 |
CRR leverage exposure |
|
|
|
659.1 |
|
|
|
|
644.5 |
|
|
|
|
|
|
|
|
|
|
LAC as a ratio of RWAs |
|
|
|
32.1% |
|
|
|
|
30.7% |
LAC as a ratio of CRR leverage exposure |
|
|
|
9.2% |
|
|
|
|
9.0% |
Notes:
(1) |
Par value reflects the nominal value of securities issued. |
(2) |
Regulatory capital instruments issued from operating companies are included in the transitional LAC calculation, to the extent they meet the current MREL criteria. |
(3) |
LAC value reflects RBSs interpretation of the Bank of Englands approach to setting a minimum requirement for own funds and eligible liabilities (MREL), published in June 2018. MREL policy and requirements remain subject to further potential development, as such RBS estimated position remains subject to potential change. Liabilities excluded from LAC include instruments with less than one year remaining to maturity, structured debt, operating company senior debt, and other instruments that do not meet the MREL criteria. The LAC calculation includes eligible Tier 1 and Tier 2 securities before the application of any regulatory caps or adjustments. |
(4) |
Corresponding shareholders equity was £46.2 billion (31 December 2018 - £45.7 billion). |
(5) |
Regulatory amounts reported for AT1, Tier 1 and Tier 2 instruments are before grandfathering restrictions imposed by CRR. |
RBS Interim Results 2019
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Funding sources
The table below shows the carrying values of the principal funding sources based on contractual maturity. Balance sheet captions include balances held at all classifications under IFRS 9 but excludes derivative cash collateral.
|
30 June 2019 |
|
31 December 2018 | ||||
|
Short-term |
Long-term |
|
|
Short-term |
Long-term |
|
|
less than |
more than |
|
|
less than |
more than |
|
|
1 year |
1 year |
Total |
|
1 year |
1 year |
Total |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
Personal and corporate deposits |
|
|
|
|
|
|
|
Personal (1) |
180,503 |
1,376 |
181,879 |
|
178,293 |
1,499 |
179,792 |
Corporate (2) |
132,323 |
272 |
132,595 |
|
131,575 |
142 |
131,717 |
|
312,826 |
1,648 |
314,474 |
|
309,868 |
1,641 |
311,509 |
|
|
|
|
|
|
|
|
Financial institutions deposits |
|
|
|
|
|
|
|
Banks (3) |
6,581 |
13,315 |
19,896 |
|
6,758 |
15,865 |
22,623 |
Non-bank financial institutions (NBFI) (4) |
46,977 |
1,092 |
48,069 |
|
46,800 |
564 |
47,364 |
|
53,558 |
14,407 |
67,965 |
|
53,558 |
16,429 |
69,987 |
|
|
|
|
|
|
|
|
Debt securities in issue |
|
|
|
|
|
|
|
Commercial papers (CPs) and certificates of deposits (CDs) |
3,192 |
16 |
3,208 |
|
3,157 |
- |
3,157 |
Medium-term notes |
7,651 |
29,662 |
37,313 |
|
4,928 |
25,596 |
30,524 |
Covered bonds |
1,252 |
4,888 |
6,140 |
|
- |
5,367 |
5,367 |
Securitisations |
- |
1,215 |
1,215 |
|
- |
1,375 |
1,375 |
|
12,095 |
35,781 |
47,876 |
|
8,085 |
32,338 |
40,423 |
|
|
|
|
|
|
|
|
Subordinated liabilities |
134 |
9,674 |
9,808 |
|
299 |
10,236 |
10,535 |
|
|
|
|
|
|
|
|
Repos (5) |
|
|
|
|
|
|
|
Sovereign |
1,479 |
- |
1,479 |
|
405 |
- |
405 |
Financial institutions |
34,431 |
424 |
34,855 |
|
29,664 |
- |
29,664 |
Corporate |
472 |
- |
472 |
|
291 |
- |
291 |
|
36,382 |
424 |
36,806 |
|
30,360 |
- |
30,360 |
|
|
|
|
|
|
|
|
Total funding |
414,995 |
61,934 |
476,929 |
|
402,170 |
60,644 |
462,814 |
|
|
|
|
|
|
|
|
Of which: available in resolution (6) |
- |
25,943 |
25,943 |
|
- |
22,909 |
22,909 |
|
|
|
|
|
|
|
|
CET 1 capital |
|
|
30,191 |
|
|
|
30,639 |
CRR Leverage exposure |
|
|
659,105 |
|
|
|
644,498 |
Funded assets |
|
|
584,274 |
|
|
|
560,886 |
|
|
|
|
|
|
|
|
Funding coverage of CET 1 capital |
|
|
16 |
|
|
|
15 |
Funding as a % of leverage exposure |
|
|
72% |
|
|
|
72% |
Funding as a % of funded assets |
|
|
82% |
|
|
|
83% |
Funding available in resolution as a % of CET1 capital |
|
|
86% |
|
|
|
75% |
Funding available in resolution as a % of leverage exposure |
|
|
4% |
|
|
|
4% |
Notes:
(1) Includes £104 million (31 December 2018 - £206 million) of DFV deposits included in other financial liabilities balance sheet.
(2) Includes £1,027 million (31 December 2018 - £428 million) of HFT deposits included in trading liabilities.
(3) Includes £519 million (31 December 2018 - £267 million) of HFT deposits included in trading liabilities on the balance sheet. Includes £10 billion (31 December 2018 - £14 billion) relating to Term Funding Scheme participation and £1.8 billion (31 December 2018 - £1.8 billion) relating to RBSs participation in central bank financing operations under the European Central Banks Targeted Long-term refinancing operations.
(4) Includes £789 million (31 December 2018 - £1,093 million) of HFT deposits included in trading liabilities and nil (31 December 2018 £7 million) of DFV deposits included in other financial liabilities on the balance sheet.
(5) Includes HFT repos of £32,087 million (31 December 2018 - £25,645 million) and amortised cost repos of £4,719 million (31 December 2018 - £4,715 million).
(6) Eligible liabilities (as defined in the Banking Act 2009 as amended from time to time) that meet the eligibility criteria set out in the regulations, rules, policies, guidelines, or statements of the Bank of England including the Statement of Policy published by the Bank of England in June 2018. The balance consists of £19 billion (31 December 2018 - £16 billion) under debt securities in issue (senior MREL) and £7 billion (31 December 2018 - £7 billion) under subordinated liabilities.
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Liquidity portfolio
The table below shows the liquidity portfolio by product, liquidity value and by carrying value.
|
Liquidity value | ||||||
|
30 June 2019 |
31 December 2018 | |||||
|
|
UK DoL |
|
|
|
UK DoL |
|
|
RBSG (1) |
Sub (2) |
NWM Plc |
|
RBSG (1) |
Sub (2) |
NWM Plc |
|
£m |
£m |
£m |
|
£m |
£m |
£m |
Cash and balances at central banks |
83,979 |
56,173 |
12,783 |
|
83,781 |
59,745 |
11,005 |
Central and local government bonds |
|
|
|
|
|
|
|
AAA rated governments |
5,914 |
2,458 |
1,532 |
|
8,188 |
4,386 |
615 |
AA- to AA+ rated governments |
|
|
|
|
|
|
|
and US agencies |
41,013 |
30,427 |
4,260 |
|
35,683 |
25,845 |
5,256 |
Below AA rated governments |
1,594 |
- |
1,274 |
|
- |
- |
- |
|
48,521 |
32,885 |
7,066 |
|
43,871 |
30,231 |
5,871 |
|
|
|
|
|
|
|
|
Primary liquidity |
132,500 |
89,058 |
19,849 |
|
127,652 |
89,976 |
16,876 |
Secondary liquidity (3) |
70,575 |
69,652 |
344 |
|
70,231 |
69,642 |
344 |
Total liquidity value |
203,075 |
158,710 |
20,193 |
|
197,882 |
159,618 |
17,220 |
|
|
|
|
|
|
|
|
Total carrying value |
232,653 |
187,874 |
20,408 |
|
225,039 |
186,340 |
17,388 |
Notes:
(1) |
RBSG includes UK DoLSub, NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios. These include RBS International, NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios that comply with local regulations that may differ from PRA rules. |
(2) |
UK DoLSub comprises RBSGs four licensed deposit-taking UK banks within the ring-fenced bank: National Westminster Bank Plc, The Royal Bank of Scotland plc, Coutts & Co and Ulster Bank Limited. |
(3) |
Secondary liquidity represents assets pre-positioned with central bank refinancing facilities. Liquidity value is lower than carrying value as it is stated after discounts applied by the Bank of England and other central banks to instruments. |
Appendix 1 Capital and risk management
Credit risk
Economic loss drivers
A full description of the framework for incorporating economic loss drivers in to IFRS9 ECL calculations is provided in the Groups 2018 Annual Report and Accounts and Form 20-F. It includes a description of the approach adopted on multiple economic scenarios for both Personal and Wholesale portfolios.
The table and commentary below provides an update on the base case economics used at June 2019, and also the multiple economic scenarios used for Personal portfolios.
The average over the five year horizon (2019 to 2023) for the central base case and two upside and downside scenarios used for ECL modelling are set out below.
|
30 June 2019 |
|
31 December 2018 | ||||||||
|
Upside 2 |
Upside 1 |
Base case |
Downside 1 |
Downside 2 |
|
Upside 2 |
Upside 1 |
Base case |
Downside 1 |
Downside 2 |
|
% |
% |
% |
% |
% |
|
% |
% |
% |
% |
% |
UK |
|
|
|
|
|
|
|
|
|
|
|
GDP - change |
2.5 |
2.2 |
1.6 |
1.3 |
0.9 |
|
2.6 |
2.3 |
1.7 |
1.5 |
1.1 |
Unemployment |
3.2 |
3.7 |
4.7 |
5.4 |
6.5 |
|
3.3 |
3.8 |
5.0 |
5.6 |
6.9 |
House Price Inflation - change |
4.7 |
3.7 |
1.7 |
1.0 |
(0.9) |
|
4.3 |
3.3 |
1.7 |
1.1 |
(0.5) |
Bank of England base rate |
1.3 |
1.2 |
1.0 |
0.1 |
- |
|
1.7 |
1.3 |
1.1 |
0.5 |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Republic of Ireland |
|
|
|
|
|
|
|
|
|
|
|
GDP - change |
5.3 |
4.3 |
3.5 |
3.1 |
2.4 |
|
4.3 |
3.6 |
3.0 |
3.1 |
2.8 |
Unemployment |
4.1 |
4.5 |
5.1 |
5.9 |
6.7 |
|
4.2 |
4.6 |
5.2 |
6.0 |
6.8 |
House Price Inflation - change |
10.0 |
7.3 |
3.9 |
2.8 |
(0.1) |
|
9.2 |
6.8 |
4.0 |
3.2 |
0.8 |
European Central Bank base rate |
1.5 |
0.8 |
0.1 |
- |
- |
|
1.3 |
0.8 |
0.3 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
World GDP - change |
3.9 |
3.4 |
2.8 |
2.5 |
2.0 |
|
3.6 |
3.2 |
2.7 |
2.5 |
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
Probability weight |
12.7 |
14.8 |
30.0 |
29.7 |
12.7 |
|
12.8 |
17.0 |
30.0 |
25.6 |
14.6 |
Probability weightings of scenarios
RBSs approach to IFRS 9 multiple economic scenarios in Personal involves selecting a suitable set of discrete scenarios to characterise the distribution of risks in the economic outlook and assigning appropriate probability weights to those scenarios. This involves the following steps:
· |
Scenario selection Two upside and two downside scenarios from Moodys inventory of scenarios were chosen. The aim is to obtain downside scenarios that are not as severe as stress tests, so typically they have a severity of around one in ten and one in five of approximate likelihood, along with corresponding upsides. |
· |
Severity assessment Having selected the most appropriate scenarios their severity is then assessed based on the behaviour of UK GDP by calculating a variety of measures such as average growth, deviation from baseline and peak to trough falls. These measures are compared against a set of 1,000 model runs, following which, a percentile in the distribution is established which most closely corresponds to the scenario. |
· |
Probability assignment Having established the relevant percentile points, probability weights are assigned to ensure that the scenarios produce an unbiased result. If the severity assessment step shows the scenarios to be broadly symmetric, then this will result in a symmetric probability weight (same probability weight above and below the base case). However, if the downsides are not as extreme as the upsides, then a higher probability weight is allocated to the downsides to ensure the unbiasedness requirement is satisfied. This adjustment is made purely to restore unbiasedness, not to address any relative skew in the distribution of risks in the economic outlook. |
Appendix 1 Capital and risk management
Credit risk Banking activities
Introduction
This section covers the credit risk profile of RBSs banking activities. Banking activities include a small number of portfolios that were carried at fair value.
Financial instruments within the scope of the IFRS 9 ECL framework
Refer to Note 8 of the main announcement for balance sheet analysis of financial assets that are classified as amortised cost (AC) or fair value through other comprehensive income (FVOCI), the starting point for IFRS 9 ECL framework assessment.
Financial assets
Of the total third party £485.1 billion AC and FVOCI balance (gross of ECL), £472 billion or 97% was within the scope of the IFRS 9 ECL framework and comprised by stage: Stage 1 £438.8 billion; Stage 2 £25.9 billion; and Stage 3 £7.3 billion (31 December 2018 £463.9 billion of which Stage 1 £430.1 billion; Stage 2 £26.1 billion; and Stage 3 £7.7 billion). Total assets within IFRS 9 ECL scope comprised the following by balance sheet caption and stage:
· |
Loans: £325 billion of which Stage 1 £292 billion; Stage 2 £25.7 billion; and Stage 3 £7.3 billion (31 December 2018 £319.8 billion of which Stage 1 £286.0 billion; Stage 2 £26.1 billion; and Stage 3 £7.7 billion). |
· |
Other financial assets: £147 billion of which Stage 1 £146.8 billion; Stage 2 £0.2 billion; and Stage 3 nil (31 December 2018 £144.1 billion of which Stage 1 £144.1 billion; Stage 2 nil; and Stage 3 nil). |
Those assets outside the framework were as follows:
· |
Settlement balances, items in the course of collection, cash balances and other non-credit risk assets of £10.1 billion. These were assessed as having no ECL unless there was evidence that they were credit impaired. |
· |
Equity shares of £1.1 billion as not within the IFRS 9 ECL framework by definition. |
· |
Fair value adjustments of £1.1 billion on loans hedged by interest rate swaps, where the underlying loan was within the IFRS 9 ECL scope. |
· |
Group-originated securitisations, where ECL was captured on the underlying loans of £0.4 billion. |
· |
Commercial cards which operate in a similar manner to charge cards, with balances repaid monthly via mandated direct debit with the underlying risk of loss captured within the customers linked current account of £0.4 billion. |
Contingent liabilities and commitments
In addition to contingent liabilities and commitments disclosed in Note 12 of the main announcement, reputationally-committed limits are also included in the scope of the IFRS 9 ECL framework. These are offset by £4 billion out of scope balances primarily related to facilities that, if drawn, would not be classified as AC or FVOCI, or undrawn limits relating to financial assets exclusions. Total contingent liabilities (including financial guarantees) and commitments within IFRS 9 ECL scope of £177.4 billion comprised Stage 1; £171.3 billion; Stage 2 £5.4 billion; and Stage 3 £0.7 billion.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Portfolio summary segment analysis
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
|
|
Ulster |
Commercial |
Private |
|
|
Central items |
|
|
UK PB |
Bank RoI |
Banking |
Banking |
RBSI |
NWM |
& other |
Total |
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Loans - amortised cost |
|
|
|
|
|
|
|
|
Stage 1 |
137,384 |
19,684 |
90,287 |
14,198 |
15,011 |
9,539 |
5,881 |
291,984 |
Stage 2 |
13,515 |
1,638 |
9,237 |
531 |
426 |
229 |
129 |
25,705 |
Stage 3 |
1,827 |
2,171 |
2,340 |
173 |
99 |
715 |
- |
7,325 |
|
152,726 |
23,493 |
101,864 |
14,902 |
15,536 |
10,483 |
6,010 |
325,014 |
ECL provisions (1) |
|
|
|
|
|
|
|
|
Stage 1 |
99 |
28 |
123 |
12 |
4 |
8 |
6 |
280 |
Stage 2 |
417 |
56 |
187 |
9 |
2 |
10 |
1 |
682 |
Stage 3 |
710 |
588 |
926 |
19 |
16 |
81 |
- |
2,340 |
|
1,226 |
672 |
1,236 |
40 |
22 |
99 |
7 |
3,302 |
ECL provisions coverage (2) |
|
|
|
|
|
|
|
|
Stage 1 (%) |
0.07 |
0.14 |
0.14 |
0.08 |
0.03 |
0.08 |
0.10 |
0.10 |
Stage 2 (%) |
3.09 |
3.42 |
2.02 |
1.69 |
0.47 |
4.37 |
0.78 |
2.65 |
Stage 3 (%) |
38.86 |
27.08 |
39.57 |
10.98 |
16.16 |
11.33 |
- |
31.95 |
|
0.80 |
2.86 |
1.21 |
0.27 |
0.14 |
0.94 |
0.12 |
1.02 |
Impairment losses |
|
|
|
|
|
|
|
|
ECL charge (3) |
181 |
(21) |
202 |
(3) |
(3) |
(36) |
3 |
323 |
Stage 1 |
(53) |
(24) |
(55) |
(5) |
(3) |
(2) |
2 |
(140) |
Stage 2 |
103 |
(38) |
38 |
(1) |
- |
(2) |
1 |
101 |
Stage 3 |
131 |
41 |
219 |
3 |
- |
(32) |
- |
362 |
ECL loss rate - annualised (basis points) |
23.70 |
(17.88) |
39.66 |
(4.03) |
(3.86) |
(68.68) |
9.98 |
19.88 |
Amounts written-off |
90 |
72 |
276 |
1 |
2 |
11 |
- |
452 |
31 December 2018* |
|
|
|
|
|
|
|
|
Loans - amortised cost |
|
|
|
|
|
|
|
|
Stage 1 |
134,836 |
17,822 |
91,034 |
13,750 |
13,383 |
8,196 |
6,964 |
285,985 |
Stage 2 |
13,245 |
2,080 |
9,518 |
531 |
289 |
407 |
27 |
26,097 |
Stage 3 |
1,908 |
2,308 |
2,448 |
225 |
101 |
728 |
- |
7,718 |
|
149,989 |
22,210 |
103,000 |
14,506 |
13,773 |
9,331 |
6,991 |
319,800 |
ECL provisions (1) |
|
|
|
|
|
|
|
|
Stage 1 |
101 |
35 |
124 |
13 |
6 |
6 |
- |
285 |
Stage 2 |
430 |
114 |
194 |
10 |
3 |
12 |
- |
763 |
Stage 3 |
597 |
638 |
942 |
20 |
17 |
106 |
- |
2,320 |
|
1,128 |
787 |
1,260 |
43 |
26 |
124 |
- |
3,368 |
ECL provisions coverage (2) |
|
|
|
|
|
|
|
|
Stage 1 (%) |
0.07 |
0.20 |
0.14 |
0.09 |
0.04 |
0.07 |
- |
0.10 |
Stage 2 (%) |
3.25 |
5.48 |
2.04 |
1.88 |
1.04 |
2.95 |
- |
2.92 |
Stage 3 (%) |
31.29 |
27.64 |
38.48 |
8.89 |
16.83 |
14.56 |
- |
30.06 |
|
0.75 |
3.54 |
1.22 |
0.30 |
0.19 |
1.33 |
- |
1.05 |
Impairment losses |
|
|
|
|
|
|
|
|
ECL charge (3) |
339 |
15 |
147 |
(6) |
(2) |
(92) |
(3) |
398 |
ECL loss rate - annualised (basis points) |
22.60 |
6.75 |
14.27 |
(4.14) |
(1.45) |
(98.60) |
(4.29) |
12.45 |
Amounts written-off |
445 |
372 |
572 |
7 |
9 |
89 |
- |
1,494 |
*Restated. Refer to Note 1 of the main announcement for further details.
Notes:
(1) Includes £4 million (31 December 2018 £5 million) related to assets at FVOCI.
(2) ECL provisions coverage is ECL provisions divided by loans - amortised cost.
(3) Includes a £30 million charge (31 December 2018 £3 million charge) related to other financial assets, of which nil (31 December 2018 £1 million charge) related to assets at FVOCI; and a £28 million charge (31 December 2018 £31 million release) related to contingent liabilities.
Key points
· |
Total ECL provisions reduced slightly in the first half of 2019. The reduced ECL requirement in Stage 1 and Stage 2 performing exposures offset a small increased provisioning requirement in Stage 3 exposures. The ECL requirement arising from the economic uncertainty associated with Brexit is formally reviewed by the Provisions Committee at the end of each quarter. As at the end of H1 2019, the modelled impact remained unchanged from the year end at £101 million. |
· |
In UK PB, the ECL levels remained broadly stable in Stage 1 and Stage 2 with the increase in Stage 3 including the effect of a loss rate model adjustment on unsecured lending. In addition, the value of new defaults was higher than write-offs and debt repayments by customers, and unlike in 2018, there were no debt sales in H1 2019. |
· |
In Ulster Bank RoI, the reduction in ECL was driven by ongoing improvements in the portfolio performance and the completion of the remainder of the Banks 2018 sale of non-performing loans in H1 2019. |
· |
In Commercial Banking, the ECL balance reduced marginally with write-offs of legacy positions more than offsetting the small number of significant individual charges during the period. |
· |
The impairment charge for the half year was £323 million (20 basis points annualised), remaining below the longer term view of normalised loss rates of between 30 and 40 basis points. The charge in Q2 2019 was higher than Q1, driven by a small number of significant individual charges within Commercial Banking. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Segmental loans and impairment metrics
The table below shows gross loans and ECL, by segment and stage, within the scope of the ECL framework.
|
Gross loans |
|
ECL provisions (2) | ||||||||||
|
|
Stage 2 (1) |
|
|
|
|
Stage 2 (1) |
|
| ||||
|
Stage 1 |
<30 DPD |
>30 DPD |
Total |
Stage 3 |
Total |
|
Stage 1 |
<30 DPD |
>30 DPD |
Total |
Stage 3 |
Total |
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
£m |
£m |
UK PB |
137,384 |
12,900 |
615 |
13,515 |
1,827 |
152,726 |
|
99 |
371 |
46 |
417 |
710 |
1,226 |
Ulster Bank RoI |
19,684 |
1,583 |
55 |
1,638 |
2,171 |
23,493 |
|
28 |
51 |
5 |
56 |
588 |
672 |
Personal (3) |
11,304 |
1,082 |
37 |
1,119 |
2,000 |
14,423 |
|
9 |
23 |
3 |
26 |
490 |
525 |
Wholesale |
8,380 |
501 |
18 |
519 |
171 |
9,070 |
|
19 |
28 |
2 |
30 |
98 |
147 |
Commercial Banking |
90,287 |
8,891 |
346 |
9,237 |
2,340 |
101,864 |
|
123 |
181 |
6 |
187 |
926 |
1,236 |
Private Banking |
14,198 |
356 |
175 |
531 |
173 |
14,902 |
|
12 |
4 |
5 |
9 |
19 |
40 |
Personal |
11,324 |
203 |
51 |
254 |
157 |
11,735 |
|
4 |
3 |
- |
3 |
15 |
22 |
Wholesale |
2,874 |
153 |
124 |
277 |
16 |
3,167 |
|
8 |
1 |
5 |
6 |
4 |
18 |
RBS International |
15,011 |
417 |
9 |
426 |
99 |
15,536 |
|
4 |
2 |
- |
2 |
16 |
22 |
Personal |
2,610 |
36 |
7 |
43 |
86 |
2,739 |
|
1 |
1 |
- |
1 |
12 |
14 |
Wholesale |
12,401 |
381 |
2 |
383 |
13 |
12,797 |
|
3 |
1 |
- |
1 |
4 |
8 |
NatWest Markets |
9,539 |
229 |
- |
229 |
715 |
10,483 |
|
8 |
10 |
- |
10 |
81 |
99 |
Central items and other |
5,881 |
129 |
- |
129 |
- |
6,010 |
|
6 |
1 |
- |
1 |
- |
7 |
Total loans |
291,984 |
24,505 |
1,200 |
25,705 |
7,325 |
325,014 |
|
280 |
620 |
62 |
682 |
2,340 |
3,302 |
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
162,622 |
14,221 |
710 |
14,931 |
4,070 |
181,623 |
|
113 |
398 |
49 |
447 |
1,227 |
1,787 |
Wholesale |
129,362 |
10,284 |
490 |
10,774 |
3,255 |
143,391 |
|
167 |
222 |
13 |
235 |
1,113 |
1,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018* |
|
|
|
|
|
|
|
|
|
|
|
|
|
UK PB |
134,836 |
12,521 |
725 |
13,245 |
1,908 |
149,989 |
|
101 |
382 |
48 |
430 |
597 |
1,128 |
Ulster Bank RoI |
17,822 |
1,968 |
112 |
2,080 |
2,308 |
22,210 |
|
35 |
103 |
11 |
114 |
638 |
787 |
Personal (3) |
11,059 |
1,353 |
105 |
1,458 |
2,153 |
14,670 |
|
13 |
73 |
11 |
84 |
530 |
627 |
Wholesale |
6,763 |
615 |
7 |
622 |
155 |
7,540 |
|
22 |
30 |
- |
30 |
108 |
160 |
Commercial Banking |
91,034 |
9,087 |
430 |
9,518 |
2,448 |
103,000 |
|
124 |
186 |
8 |
194 |
942 |
1,260 |
Private Banking |
13,750 |
380 |
151 |
531 |
225 |
14,506 |
|
13 |
5 |
5 |
10 |
20 |
43 |
Personal |
10,803 |
183 |
25 |
208 |
203 |
11,214 |
|
5 |
3 |
- |
3 |
17 |
25 |
Wholesale |
2,947 |
197 |
126 |
323 |
22 |
3,292 |
|
8 |
2 |
5 |
7 |
3 |
18 |
RBS International |
13,383 |
274 |
15 |
289 |
101 |
13,773 |
|
6 |
3 |
- |
3 |
17 |
26 |
NatWest Markets |
8,196 |
407 |
- |
407 |
728 |
9,331 |
|
6 |
12 |
- |
12 |
106 |
124 |
Central items and other |
6,964 |
27 |
- |
27 |
- |
6,991 |
|
- |
- |
- |
- |
- |
- |
Total loans |
285,985 |
24,664 |
1,433 |
26,097 |
7,718 |
319,800 |
|
285 |
691 |
72 |
763 |
2,320 |
3,368 |
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
159,553 |
14,106 |
865 |
14,971 |
4,351 |
178,875 |
|
122 |
458 |
59 |
517 |
1,158 |
1,797 |
Wholesale |
126,432 |
10,558 |
568 |
11,126 |
3,367 |
140,925 |
|
163 |
233 |
13 |
246 |
1,162 |
1,571 |
*Restated. Refer to Note 1 of the main announcement for further details. | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the notes to this table refer to the following page. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Segmental loans and impairment metrics
The table below shows gross loans and ECL provisions, by days past due, by segment and stage, within the scope of the ECL framework.
|
ECL provisions coverage |
|
ECL | |||||||
|
|
Stage 2 (1,2) |
|
|
|
Total |
|
Amounts | ||
|
Stage 1 |
<30 DPD |
>30 DPD |
Total |
Stage 3 |
Total |
|
charge |
Loss rate |
written-off |
30 June 2019 |
% |
% |
% |
% |
% |
% |
|
£m |
basis points |
£m |
UK PB |
0.07 |
2.88 |
7.48 |
3.09 |
38.86 |
0.80 |
|
181 |
23.70 |
90 |
Ulster Bank RoI |
0.14 |
3.22 |
9.09 |
3.42 |
27.08 |
2.86 |
|
(21) |
(17.88) |
72 |
Personal (3) |
0.08 |
2.13 |
8.11 |
2.32 |
24.50 |
3.64 |
|
(10) |
(13.87) |
64 |
Wholesale |
0.23 |
5.59 |
11.11 |
5.78 |
57.31 |
1.62 |
|
(11) |
(24.26) |
8 |
Commercial Banking |
0.14 |
2.04 |
1.73 |
2.02 |
39.57 |
1.21 |
|
202 |
39.66 |
276 |
Private Banking |
0.08 |
1.12 |
2.86 |
1.69 |
10.98 |
0.27 |
|
(3) |
(4.03) |
1 |
Personal |
0.04 |
1.48 |
- |
1.18 |
9.55 |
0.19 |
|
(3) |
(5.11) |
1 |
Wholesale |
0.28 |
0.65 |
4.03 |
2.17 |
25.00 |
0.57 |
|
- |
- |
- |
RBS International |
0.03 |
0.48 |
- |
0.47 |
16.16 |
0.14 |
|
(3) |
(3.86) |
2 |
Personal |
0.04 |
2.78 |
- |
2.33 |
13.95 |
0.51 |
|
(1) |
(7.30) |
2 |
Wholesale |
0.02 |
0.26 |
- |
0.26 |
30.77 |
0.06 |
|
(2) |
(3.13) |
- |
NatWest Markets |
0.08 |
4.37 |
- |
4.37 |
11.33 |
0.94 |
|
(36) |
(68.68) |
11 |
Central items and other |
0.10 |
0.78 |
- |
0.78 |
- |
0.12 |
|
3 |
9.98 |
- |
Total loans |
0.10 |
2.53 |
5.17 |
2.65 |
31.95 |
1.02 |
|
323 |
19.88 |
452 |
Of which: |
|
|
|
|
|
|
|
|
|
|
Personal |
0.07 |
2.80 |
6.90 |
2.99 |
30.15 |
0.98 |
|
167 |
18.39 |
157 |
Wholesale |
0.13 |
2.16 |
2.65 |
2.18 |
34.19 |
1.06 |
|
156 |
21.76 |
295 |
|
|
|
|
|
|
|
|
|
|
|
31 December 2018* |
|
|
|
|
|
|
|
|
|
|
UK PB |
0.07 |
3.05 |
6.62 |
3.25 |
31.29 |
0.75 |
|
339 |
22.6 |
445 |
Ulster Bank RoI |
0.20 |
5.23 |
9.82 |
5.48 |
27.64 |
3.54 |
|
15 |
6.8 |
372 |
Personal (3) |
0.12 |
5.40 |
10.48 |
5.76 |
24.62 |
4.27 |
|
20 |
13.6 |
343 |
Wholesale |
0.33 |
4.88 |
- |
4.82 |
69.68 |
2.12 |
|
(5) |
(6.6) |
29 |
Commercial Banking |
0.14 |
2.05 |
1.86 |
2.04 |
38.48 |
1.22 |
|
147 |
14.3 |
572 |
Private Banking |
0.09 |
1.32 |
3.31 |
1.88 |
8.89 |
0.30 |
|
(6) |
(4.1) |
7 |
Personal |
0.05 |
1.64 |
- |
1.44 |
8.37 |
0.22 |
|
(6) |
(5.4) |
5 |
Wholesale |
0.27 |
1.02 |
3.97 |
2.17 |
13.64 |
0.55 |
|
- |
- |
2 |
RBS International |
0.04 |
1.09 |
- |
1.04 |
16.83 |
0.19 |
|
(2) |
(1.5) |
9 |
NatWest Markets |
0.07 |
2.95 |
- |
2.95 |
14.56 |
1.33 |
|
(92) |
(98.6) |
89 |
Central items and other |
- |
- |
- |
- |
- |
- |
|
(3) |
(4.3) |
- |
Total loans excluding |
|
|
|
|
|
|
|
|
|
|
balances at central banks |
0.10 |
2.80 |
5.02 |
2.92 |
30.06 |
1.05 |
|
398 |
12.5 |
1,494 |
Personal |
0.08 |
3.25 |
6.82 |
3.45 |
26.61 |
1.00 |
|
354 |
19.8 |
776 |
Wholesale |
0.13 |
2.21 |
2.29 |
2.21 |
34.51 |
1.11 |
|
44 |
3.1 |
718 |
Total loans |
0.08 |
2.80 |
5.02 |
2.92 |
30.06 |
0.83 |
|
398 |
9.8 |
1,494 |
|
|
|
|
|
|
|
|
|
|
|
*Restated. Refer to Note 1 of the main announcement for further details.
Notes:
(1) 30 DPD 30 days past due, the mandatory 30 days past due backstop is prescribed by IFRS 9 for significant increase in credit risk.
(2) ECL provisions on contingent liabilities and commitments are included within the Financial assets section so as not to distort ECL coverage ratios.
(3) Includes a £1 million charge and a £1 million write off (31 December 2018 £1 million and £3 million) related to the business banking portfolio in Ulster Bank RoI.
(4) Balances at central banks in scope for ECL are £84.1 billion (31 December 2018 - £87.2 billion). ECL provision related to these balances is £3 million (31 December 2018 - £2 million).
Key points
· |
For UK PB, the annualised loss rate of 24 basis points compared to 23 basis points for 2018, with the impairment charge for underlying new defaults broadly stable in H1 2019. The overall coverage level increased slightly driven by the uplift in Stage 3 which included the effect of a loss rate model adjustment on unsecured lending. The reduction in the total value of Stage 3 exposures reflected a methodology refinement in the mortgage portfolio. |
· |
In Ulster Bank RoI, the P&L benefited from a provision release due to improvements in the portfolio performance reflective of the prevailing macro economic environment. |
· |
In Commercial Banking, the loss rate of 40 basis points increased from 2018 reflecting a small number of individual charges and a reduction in the level of impairment releases. The coverage level remained stable at 1.21%. |
· |
In NatWest Markets, the negative loss rate reflected the impact of impairment releases on the legacy portfolio and included a £27 million gain on purchased or originated credit impaired assets. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Portfolio summary sector analysis
The table below shows financial assets and off-balance sheet exposures gross of ECL and related ECL provisions, impairment and past due by sector, asset quality and geographical region based on the country of operation of the customer.
|
Personal |
|
Wholesale |
|
Total | |||||||
|
|
Credit |
Other |
|
|
|
|
|
|
|
|
|
|
Mortgages (1) |
cards |
personal |
Total |
|
Property |
Corporate |
FI |
Sovereign |
Total |
|
|
30 June 2019 |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
£m |
|
£m |
Loans by geography |
167,499 |
4,181 |
9,943 |
181,623 |
|
36,918 |
71,708 |
27,035 |
7,730 |
143,391 |
|
325,014 |
- UK |
152,515 |
4,085 |
9,467 |
166,067 |
|
33,910 |
59,111 |
17,312 |
3,428 |
113,761 |
|
279,828 |
- RoI |
14,119 |
96 |
223 |
14,438 |
|
1,225 |
4,131 |
194 |
3,662 |
9,212 |
|
23,650 |
- Other Europe |
274 |
- |
90 |
364 |
|
1,387 |
3,927 |
4,308 |
334 |
9,956 |
|
10,320 |
- RoW |
591 |
- |
163 |
754 |
|
396 |
4,539 |
5,221 |
306 |
10,462 |
|
11,216 |
Loans by asset quality (2,3) |
167,499 |
4,181 |
9,943 |
181,623 |
|
36,918 |
71,708 |
27,035 |
7,730 |
143,391 |
|
325,014 |
- AQ1-AQ4 |
105,736 |
24 |
1,070 |
106,830 |
|
15,740 |
23,161 |
25,792 |
7,574 |
72,267 |
|
179,097 |
- AQ5-AQ8 |
57,317 |
3,955 |
7,935 |
69,207 |
|
19,548 |
46,230 |
1,219 |
150 |
67,147 |
|
136,354 |
- AQ9 |
1,144 |
62 |
310 |
1,516 |
|
114 |
605 |
2 |
1 |
722 |
|
2,238 |
- AQ10 |
3,302 |
140 |
628 |
4,070 |
|
1,516 |
1,712 |
22 |
5 |
3,255 |
|
7,325 |
Loans by stage |
167,499 |
4,181 |
9,943 |
181,623 |
|
36,918 |
71,708 |
27,035 |
7,730 |
143,391 |
|
325,014 |
- Stage 1 |
152,647 |
2,831 |
7,144 |
162,622 |
|
33,252 |
61,854 |
26,537 |
7,719 |
129,362 |
|
291,984 |
- Stage 2 |
11,550 |
1,210 |
2,171 |
14,931 |
|
2,150 |
8,142 |
476 |
6 |
10,774 |
|
25,705 |
- Stage 3 |
3,302 |
140 |
628 |
4,070 |
|
1,516 |
1,712 |
22 |
5 |
3,255 |
|
7,325 |
Weighted average 12 months PDs * |
|
|
|
|
|
|
|
|
|
|
|
|
- IFRS 9 (%) |
0.33 |
4.15 |
2.84 |
0.55 |
|
0.73 |
0.91 |
0.12 |
0.07 |
0.71 |
|
0.61 |
- Basel (%) |
0.83 |
3.82 |
4.02 |
1.06 |
|
0.98 |
1.59 |
0.22 |
0.08 |
1.07 |
|
1.07 |
ECL provisions by geography |
739 |
224 |
824 |
1,787 |
|
424 |
1,050 |
32 |
9 |
1,515 |
|
3,302 |
- UK |
236 |
221 |
805 |
1,262 |
|
361 |
681 |
17 |
6 |
1,065 |
|
2,327 |
- RoI |
503 |
3 |
19 |
525 |
|
40 |
116 |
1 |
1 |
158 |
|
683 |
- Other Europe |
- |
- |
- |
- |
|
21 |
139 |
12 |
1 |
173 |
|
173 |
- RoW |
- |
- |
- |
- |
|
2 |
114 |
2 |
1 |
119 |
|
119 |
ECL provisions by stage |
739 |
224 |
824 |
1,787 |
|
424 |
1,050 |
32 |
9 |
1,515 |
|
3,302 |
- Stage 1 |
16 |
36 |
61 |
113 |
|
44 |
103 |
11 |
9 |
167 |
|
280 |
- Stage 2 |
96 |
100 |
251 |
447 |
|
41 |
185 |
9 |
- |
235 |
|
682 |
- Stage 3 |
627 |
88 |
512 |
1,227 |
|
339 |
762 |
12 |
- |
1,113 |
|
2,340 |
ECL provisions coverage (%) |
0.44 |
5.36 |
8.29 |
0.98 |
|
1.15 |
1.46 |
0.12 |
0.12 |
1.06 |
|
1.02 |
- Stage 1 (%) |
0.01 |
1.27 |
0.85 |
0.07 |
|
0.13 |
0.17 |
0.04 |
0.12 |
0.13 |
|
0.10 |
- Stage 2 (%) |
0.83 |
8.26 |
11.56 |
2.99 |
|
1.91 |
2.27 |
1.89 |
- |
2.18 |
|
2.65 |
- Stage 3 (%) |
18.99 |
62.86 |
81.53 |
30.15 |
|
22.36 |
44.51 |
54.55 |
- |
34.19 |
|
31.95 |
ECL charge |
3 |
26 |
138 |
167 |
|
22 |
134 |
(2) |
2 |
156 |
|
323 |
ECL loss rate (%) |
- |
1.24 |
2.78 |
0.18 |
|
0.12 |
0.37 |
(0.01) |
0.05 |
0.22 |
|
0.20 |
Amounts written-off |
71 |
35 |
51 |
157 |
|
173 |
112 |
10 |
- |
295 |
|
452 |
Other financial assets by asset quality (3) |
- |
- |
- |
- |
|
- |
710 |
12,490 |
133,781 |
146,981 |
|
146,981 |
- AQ1-AQ4 |
- |
- |
- |
- |
|
- |
115 |
11,825 |
133,781 |
145,721 |
|
145,721 |
- AQ5-AQ8 |
- |
- |
- |
- |
|
- |
587 |
659 |
- |
1,246 |
|
1,246 |
- AQ9 |
- |
- |
- |
- |
|
- |
8 |
3 |
- |
11 |
|
11 |
- AQ10 |
- |
- |
- |
- |
|
- |
- |
3 |
- |
3 |
|
3 |
Off-balance sheet |
12,883 |
16,768 |
12,390 |
42,041 |
|
16,230 |
53,157 |
26,949 |
39,064 |
135,400 |
|
177,441 |
Loan commitments |
12,883 |
16,768 |
12,380 |
42,031 |
|
15,538 |
50,061 |
25,356 |
39,064 |
130,019 |
|
172,050 |
Financial guarantees |
- |
- |
10 |
10 |
|
692 |
3,096 |
1,593 |
- |
5,381 |
|
5,391 |
Off-balance sheet by asset quality (3) |
12,883 |
16,768 |
12,390 |
42,041 |
|
16,230 |
53,157 |
26,949 |
39,064 |
135,400 |
|
177,441 |
- AQ1-AQ4 |
11,830 |
309 |
9,455 |
21,594 |
|
11,983 |
36,462 |
25,443 |
39,049 |
112,937 |
|
134,531 |
- AQ5-AQ8 |
1,043 |
16,166 |
2,924 |
20,133 |
|
4,125 |
16,349 |
1,504 |
15 |
21,993 |
|
42,126 |
- AQ9 |
1 |
4 |
11 |
16 |
|
8 |
88 |
- |
- |
96 |
|
112 |
- AQ10 (4) |
9 |
289 |
- |
298 |
|
114 |
258 |
2 |
- |
374 |
|
672 |
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Portfolio summary sector analysis
|
Personal |
|
Wholesale |
|
Total | |||||||
|
|
Credit |
Other |
|
|
|
|
|
|
|
|
|
|
Mortgages (1) |
cards |
personal |
Total |
|
Property |
Corporate |
FI |
Sovereign |
Total |
|
|
31 December 2018 |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
£m |
|
£m |
Loans by geography |
165,081 |
4,216 |
9,578 |
178,875 |
|
36,707 |
72,240 |
25,011 |
6,967 |
140,925 |
|
319,800 |
- UK |
150,233 |
4,112 |
9,117 |
163,462 |
|
33,855 |
60,657 |
11,611 |
3,089 |
109,212 |
|
272,674 |
- RoI |
14,350 |
104 |
233 |
14,687 |
|
1,114 |
3,733 |
392 |
2,497 |
7,736 |
|
22,423 |
- Other Europe |
102 |
- |
67 |
169 |
|
1,395 |
3,760 |
5,903 |
1,088 |
12,146 |
|
12,315 |
- RoW |
396 |
- |
161 |
557 |
|
343 |
4,090 |
7,105 |
293 |
11,831 |
|
12,388 |
Loans by asset quality (2,3) |
165,081 |
4,216 |
9,578 |
178,875 |
|
36,707 |
72,240 |
25,011 |
6,967 |
140,925 |
|
319,800 |
- AQ1-AQ4 |
104,989 |
35 |
1,040 |
106,064 |
|
16,133 |
22,587 |
22,397 |
6,802 |
67,919 |
|
173,983 |
- AQ5-AQ8 |
55,139 |
3,990 |
7,736 |
66,865 |
|
18,815 |
47,651 |
2,574 |
161 |
69,201 |
|
136,066 |
- AQ9 |
1,287 |
69 |
239 |
1,595 |
|
74 |
359 |
5 |
- |
438 |
|
2,033 |
- AQ10 |
3,666 |
122 |
563 |
4,351 |
|
1,685 |
1,643 |
35 |
4 |
3,367 |
|
7,718 |
Loans by stage |
165,081 |
4,216 |
9,578 |
178,875 |
|
36,707 |
72,240 |
25,011 |
6,967 |
140,925 |
|
319,800 |
- Stage 1 |
149,760 |
2,851 |
6,942 |
159,553 |
|
33,145 |
61,844 |
24,502 |
6,941 |
126,432 |
|
285,985 |
- Stage 2 |
11,655 |
1,243 |
2,073 |
14,971 |
|
1,877 |
8,753 |
474 |
22 |
11,126 |
|
26,097 |
- Stage 3 |
3,666 |
122 |
563 |
4,351 |
|
1,685 |
1,643 |
35 |
4 |
3,367 |
|
7,718 |
Weighted average 12 months PDs * |
|
|
|
|
|
|
|
|
|
|
|
|
- IFRS 9 (%) |
0.32 |
4.03 |
2.77 |
0.54 |
|
0.75 |
0.97 |
0.14 |
0.06 |
0.75 |
|
0.62 |
- Basel (%) |
0.84 |
3.52 |
3.50 |
1.04 |
|
0.95 |
1.43 |
0.23 |
0.06 |
1.01 |
|
1.03 |
ECL provisions by geography |
839 |
230 |
728 |
1,797 |
|
588 |
941 |
41 |
1 |
1,571 |
|
3,368 |
- UK |
237 |
227 |
707 |
1,171 |
|
518 |
615 |
27 |
1 |
1,161 |
|
2,332 |
- RoI |
602 |
3 |
21 |
626 |
|
43 |
125 |
2 |
- |
170 |
|
796 |
- Other Europe |
- |
- |
- |
- |
|
22 |
53 |
10 |
- |
85 |
|
85 |
- RoW |
- |
- |
- |
- |
|
5 |
148 |
2 |
- |
155 |
|
155 |
ECL provisions by stage |
839 |
230 |
728 |
1,797 |
|
588 |
941 |
41 |
1 |
1,571 |
|
3,368 |
- Stage 1 |
23 |
38 |
61 |
122 |
|
43 |
107 |
12 |
1 |
163 |
|
285 |
- Stage 2 |
150 |
120 |
247 |
517 |
|
39 |
200 |
7 |
- |
246 |
|
763 |
- Stage 3 |
666 |
72 |
420 |
1,158 |
|
506 |
634 |
22 |
- |
1,162 |
|
2,320 |
ECL provisions coverage (%) |
0.51 |
5.46 |
7.60 |
1.00 |
|
1.60 |
1.30 |
0.16 |
0.01 |
1.11 |
|
1.05 |
- Stage 1 (%) |
0.02 |
1.33 |
0.88 |
0.08 |
|
0.13 |
0.17 |
0.05 |
0.01 |
0.13 |
|
0.10 |
- Stage 2 (%) |
1.29 |
9.65 |
11.92 |
3.45 |
|
2.08 |
2.28 |
1.48 |
- |
2.21 |
|
2.92 |
- Stage 3 (%) |
18.17 |
59.02 |
74.60 |
26.61 |
|
30.03 |
38.59 |
62.86 |
- |
34.51 |
|
30.06 |
ECL charge |
57 |
87 |
210 |
354 |
|
30 |
13 |
3 |
(2) |
44 |
|
398 |
ECL loss rate (%) |
0.03 |
2.06 |
2.19 |
0.20 |
|
0.08 |
0.02 |
0.01 |
(0.03) |
0.03 |
|
0.12 |
Amounts written-off |
368 |
79 |
329 |
776 |
|
292 |
395 |
31 |
- |
718 |
|
1,494 |
Other financial assets by asset quality (3) |
- |
- |
- |
- |
|
105 |
652 |
8,838 |
134,546 |
144,141 |
|
144,141 |
- AQ1-AQ4 |
- |
- |
- |
- |
|
105 |
10 |
8,110 |
134,546 |
142,771 |
|
142,771 |
- AQ5-AQ8 |
- |
- |
- |
- |
|
- |
642 |
721 |
- |
1,363 |
|
1,363 |
- AQ9 |
- |
- |
- |
- |
|
- |
- |
4 |
- |
4 |
|
4 |
- AQ10 |
- |
- |
- |
- |
|
- |
- |
3 |
- |
3 |
|
3 |
Off-balance sheet |
13,228 |
16,613 |
12,229 |
42,070 |
|
16,044 |
52,730 |
28,761 |
29,277 |
126,812 |
|
168,882 |
Loan commitments |
13,228 |
16,613 |
12,229 |
42,070 |
|
15,335 |
48,569 |
26,684 |
29,276 |
119,864 |
|
161,934 |
Financial guarantees |
- |
- |
- |
- |
|
709 |
4,161 |
2,077 |
1 |
6,948 |
|
6,948 |
Off-balance sheet by asset quality (3) |
13,228 |
16,613 |
12,229 |
42,070 |
|
16,044 |
52,730 |
28,761 |
29,277 |
126,812 |
|
168,882 |
- AQ1-AQ4 |
12,116 |
422 |
9,103 |
21,641 |
|
11,945 |
36,134 |
27,364 |
29,262 |
104,705 |
|
126,346 |
- AQ5-AQ8 |
1,101 |
15,900 |
3,116 |
20,117 |
|
3,928 |
16,390 |
1,397 |
15 |
21,730 |
|
41,847 |
- AQ9 |
1 |
8 |
10 |
19 |
|
6 |
46 |
- |
- |
52 |
|
71 |
- AQ10 (4) |
10 |
283 |
- |
293 |
|
165 |
160 |
- |
- |
325 |
|
618 |
Notes:
(1) Includes £0.6 billion (31 December 2018 £0.7 billion) secured lending in Private Banking, in line with ECL calculation methodology.
(2) AQ10 includes £0.7 billion (31 December 2018 £0.6 billion) of RoI mortgages which are not currently considered defaulted for capital calculation purposes for RoI but included in Stage 3.
(3) AQ bandings are based on Basel PDs and mapping is as follows:
Internal asset quality band |
Probability of default range |
Indicative S&P rating |
AQ1 |
0% - 0.034% |
AAA to AA |
AQ2 |
0.034% - 0.048% |
AA to AA- |
AQ3 |
0.048% - 0.095% |
A+ to A |
AQ4 |
0.095% - 0.381% |
BBB+ to BBB- |
AQ5 |
0.381% - 1.076% |
BB+ to BB |
AQ6 |
1.076% - 2.153% |
BB- to B+ |
AQ7 |
2.153% - 6.089% |
B+ to B |
AQ8 |
6.089% - 17.222% |
B- to CCC+ |
AQ9 |
17.222% - 100% |
CCC to C |
AQ10 |
100% |
D |
(4) £0.3 billion (December 2018 - £0.3 billion) AQ10 Personal balances primarily relate to loan commitments, the draw down of which is effectively prohibited.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Portfolio summary sector analysis
Wholesale forbearance
The table below shows Wholesale forbearance, Heightened Monitoring and Risk of Credit Loss by sector. Personal forbearance is disclosed on the next page.
|
|
FI |
|
Property |
|
Sovereigns |
|
Other corporate |
|
Total |
30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
Forbearance (flow) |
|
3 |
|
284 |
|
- |
|
1,594 |
|
1,881 |
Heightened Monitoring and Risk of Credit Loss |
|
88 |
|
1,082 |
|
- |
|
3,771 |
|
4,941 |
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
Forbearance (flow) |
|
14 |
|
305 |
|
- |
|
2,247 |
|
2,566 |
Heightened Monitoring and Risk of Credit Loss |
|
100 |
|
503 |
|
16 |
|
4,145 |
|
4,764 |
Key points
· Loans by stage The percentage of exposure in Stage 1 and Stage 2 was broadly unchanged from the 2018 year end. The reduction in value of mortgage Stage 3 exposures included a methodology change in the UK PB portfolio and also the completion of the remainder of Ulster Bank RoIs 2018 sale of non-performing loans in H1 2019.
· Weighted average 12 months PDs In Wholesale, Basel PDs, which are based on a through-the-cycle approach, tend to be higher than point-in-time best estimate IFRS 9 PDs, which reflect the current state in the economic cycle. Basel PDs also include an element of conservatism associated with the regulatory capital framework. In Personal, the Basel PDs, which are point-in-time estimates, also tend to be higher also reflecting conservatism (conservatism is higher in mortgages than other products), and an element of default rate under-prediction in the IFRS 9 PD models. This overall default rate under-prediction was mitigated by net ECL modelling overlays of approximately £30 million at H1 2019, pending model calibrations being implemented. The IFRS 9 PD for credit cards was higher than the Basel equivalent and reflected the relative sensitivity of the IFRS 9 model to forward-looking economic drivers, as well as an IFRS 9 model over-prediction mitigated within the ECL overlay.
· ECL provision by stage and coverage The majority of ECL by value in both Personal and Wholesale was in Stage 3. Provision coverage was progressively higher by stage reflecting the lifetime nature of losses in both Stage 2 and Stage 3. In the Personal portfolio, provision coverage was materially lower in mortgages relative to credit cards and other personal unsecured products reflecting the secured nature of the facilities. For Wholesale exposures, security and enterprise value mitigated losses in Stage 3.
· In mortgages, the reduction in Stage 1 and Stage 2 ECL was driven by the movement of exposures into Stage 3 following a regulatory driven revision to the definition of default in the Ulster Bank RoI business. The corresponding increase in Stage 3 ECL was offset by the completion of the remainder of Ulster Bank RoIs 2018 sale of non-performing loans in H1 2019. The increase in ECL and provision coverage on Other personal included the effect of a loss rate model adjustment.
· The ECL impairment charge for the half year was £323 million (20 basis points annualised), remaining below the longer term view of normalised loss rates of 30 to 40 basis points. The charge in Q2 2019 was higher than Q1, driven by a small number of significant individual charges.
· Completed Wholesale forbearance in the six months to 30 June 2019 was £1.9 billion compared to £2.6 billion for the full year 2018. Forbearance during the period was largely driven by Services, Retail & Leisure, Property and Transport sectors. The volume of customers completing forbearance was similar to 2018. However, exposure levels increased due to a small number of entities with large exposures. The portfolio continues to be monitored closely with targeted sector reviews.
· Heightened Monitoring and Risk of Credit Loss The volume of customers classified as Heightened Monitoring or Risk of Credit Loss remained similar to December 2018 with exposure increasing from £4.8 billion to £4.9 billion in the period to 30 June 2019. The increase in exposures was driven by the Heightened Monitoring portfolio. With ongoing economic and political uncertainty, key wholesale sectors continue to be reviewed at senior credit forums with business appetite and underwriting standards tightened where necessary.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Personal portfolio
Disclosures in the Personal portfolio section include drawn exposure (gross of provisions).
|
30 June 2019 |
|
31 December 2018 | ||||||||
|
UK |
Ulster |
Private |
|
|
|
UK |
Ulster |
Private |
|
|
|
PB |
Bank RoI |
Banking |
RBSI |
Total |
|
PB |
Bank RoI |
Banking |
RBSI |
Total |
Personal lending |
£m |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
£m |
Mortgages |
140,929 |
14,181 |
9,474 |
2,661 |
167,245 |
|
138,250 |
14,361 |
9,082 |
2,684 |
164,377 |
of which: |
|
|
|
|
|
|
|
|
|
|
|
Owner occupied |
125,719 |
13,070 |
8,302 |
1,756 |
148,847 |
|
122,642 |
13,105 |
7,953 |
1,781 |
145,481 |
Buy-to-let |
15,210 |
1,111 |
1,172 |
905 |
18,398 |
|
15,608 |
1,256 |
1,129 |
903 |
18,896 |
Interest only - variable |
7,062 |
179 |
3,585 |
431 |
11,257 |
|
8,358 |
188 |
3,871 |
489 |
12,906 |
Interest only - fixed |
12,632 |
10 |
4,275 |
226 |
17,143 |
|
12,229 |
12 |
3,636 |
187 |
16,064 |
Mixed (1) |
6,088 |
63 |
2 |
22 |
6,175 |
|
6,036 |
68 |
2 |
18 |
6,124 |
Impairment provision (2) |
215 |
502 |
5 |
13 |
735 |
|
212 |
602 |
5 |
16 |
835 |
Other personal lending (3) |
12,179 |
317 |
1,654 |
52 |
14,202 |
|
11,633 |
330 |
1,676 |
55 |
13,694 |
Impairment provision (2) |
1,003 |
22 |
17 |
1 |
1,043 |
|
909 |
25 |
19 |
1 |
954 |
Total personal lending |
153,108 |
14,498 |
11,128 |
2,713 |
181,447 |
|
149,883 |
14,691 |
10,758 |
2,739 |
178,071 |
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage LTV ratios |
|
|
|
|
|
|
|
|
|
|
|
- Total portfolio |
57% |
61% |
56% |
58% |
57% |
|
56% |
62% |
56% |
58% |
57% |
- Stage 1 |
57% |
58% |
56% |
57% |
57% |
|
56% |
58% |
56% |
57% |
56% |
- Stage 2 |
59% |
66% |
56% |
66% |
60% |
|
58% |
67% |
58% |
55% |
59% |
- Stage 3 |
56% |
74% |
58% |
91% |
67% |
|
55% |
77% |
58% |
99% |
69% |
- Buy-to-let |
53% |
63% |
53% |
53% |
54% |
|
53% |
64% |
53% |
53% |
54% |
- Stage 1 |
52% |
60% |
53% |
53% |
53% |
|
53% |
58% |
53% |
52% |
53% |
- Stage 2 |
58% |
68% |
58% |
48% |
59% |
|
57% |
72% |
53% |
57% |
60% |
- Stage 3 |
59% |
76% |
61% |
67% |
68% |
|
58% |
78% |
68% |
75% |
71% |
Gross new mortgage lending |
13,957 |
612 |
1,015 |
173 |
15,757 |
|
29,555 |
1,015 |
1,846 |
353 |
32,769 |
of which: |
|
|
|
|
|
|
|
|
|
|
|
Owner occupied exposure |
13,480 |
606 |
929 |
113 |
15,128 |
|
28,608 |
1,004 |
1,689 |
241 |
31,542 |
Weighted average LTV |
70% |
75% |
64% |
73% |
70% |
|
69% |
73% |
62% |
68% |
69% |
Buy-to-let exposure |
477 |
5 |
86 |
60 |
628 |
|
947 |
11 |
157 |
112 |
1,227 |
Weighted average LTV |
62% |
59% |
57% |
64% |
61% |
|
61% |
57% |
55% |
61% |
60% |
Interest only variable rate |
13 |
- |
309 |
3 |
325 |
|
43 |
- |
697 |
13 |
753 |
Interest only fixed rate |
567 |
- |
500 |
30 |
1,097 |
|
1,189 |
- |
764 |
43 |
1,996 |
Mixed (1) |
461 |
- |
- |
- |
461 |
|
912 |
1 |
- |
- |
913 |
Mortgage forbearance |
|
|
|
|
|
|
|
|
|
|
|
Forbearance flow |
254 |
169 |
9 |
3 |
435 |
|
446 |
210 |
11 |
16 |
683 |
Forbearance stock |
1,289 |
2,429 |
7 |
12 |
3,737 |
|
1,338 |
2,645 |
8 |
17 |
4,008 |
Current |
683 |
1,265 |
4 |
10 |
1,962 |
|
724 |
1,291 |
6 |
14 |
2,035 |
1-3 months in arrears |
351 |
204 |
3 |
1 |
559 |
|
350 |
261 |
- |
1 |
612 |
>3 months in arrears |
255 |
960 |
- |
1 |
1,216 |
|
264 |
1,093 |
2 |
3 |
1,362 |
Notes:
(1) Includes accounts which have an interest only sub-account and a capital and interest sub-account to provide a more comprehensive view of interest only exposures.
(2) For UK PB this excludes a non material amount of provisions held on relatively small legacy portfolios.
(3) Other lending comprises unsecured lending except for Private Banking, which includes both secured and unsecured lending. Other Lending excludes loans that that are commercial in nature.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Personal portfolio
Key points
· The overall credit risk profile of the Personal portfolio, and its performance against credit risk appetite, remained stable during 2019.
· In UK PB, lending grew by £2.7 billion in the first six months with new lending partly offset by mortgage redemptions and repayments. In Ulster Bank RoI, the reduction in the mortgage portfolio was primarily driven by the completion of the remainder of Ulster Bank RoIs 2018 sale of non-performing loans in H1 2019, as well as portfolio amortisation and redemptions outweighing new lending in the first half of 2019.
· New mortgage lending was higher than in H1 2018. The existing mortgage stock and new business were closely monitored against agreed risk appetite parameters. These included loan-to-value ratios, loan-to-income ratios, buy-to-let concentrations, new-build concentrations and credit quality. Underwriting standards were maintained during the period.
· Mortgage growth was driven by the owner-occupied portfolio. New mortgages in the buy-to-let portfolio remained subdued as tax and regulatory changes in the UK affected borrower activity.
· The mortgage portfolio loan-to-value ratio increased slightly in the UK, reflecting slower UK house price growth.
· The stock of lending in Greater London and the South East was 42% of the UK PB portfolio. (31 December 2018 42%). The average weighted loan-to-value for these regions was 52% (31 December 2018 51%) compared to 57% for all regions.
· By value, the proportion of mortgages on interest only and mixed terms (capital and interest only) reduced, driven by fewer buy-to-let mortgages and low volumes of owner occupier interest only new business.
· As at 30 June 2019, 85% of customers in the UK PB mortgage portfolio were on fixed rates (47% on five-year deals). In addition, 97% of all new mortgage completions were fixed-rate deals (62% of which were five-year deals), as customers sought to minimise the impact of potential rate rises.
· The growth in unsecured lending during the first six months of 2019 was driven by the UK PB unsecured loans portfolio. The bank also reintroduced 0% balance transfer credit cards during the period which has increased credit card exposure. Unsecured new business increased 2% in the first half of 2019 (compared to H2 2018), reflecting product offering differences, pricing initiatives, and increased marketing activity.
· Unsecured credit quality improved modestly, reflecting active portfolio management with tightening implemented across loan and credit card portfolios in H1 2019 to ensure that performance of higher risk customers remained within risk appetite.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Personal portfolio
Mortgage LTV distribution by stage
The table below shows gross mortgage lending and related ECL by LTV band. Mortgage lending not within the scope of IFRS 9 ECL reflected portfolios carried at fair value.
|
Mortgages |
|
ECL provisions |
|
ECL provisions coverage (2) | |||||||||||
|
|
|
|
Not within |
|
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS 9 ECL |
|
Gross new |
|
|
|
|
|
|
|
|
|
|
UK PB |
Stage 1 |
Stage 2 |
Stage 3 |
scope |
Total |
lending |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total (1) |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
% |
% |
% |
% |
<50% |
46,571 |
3,362 |
511 |
140 |
50,584 |
2,045 |
|
1 |
18 |
63 |
82 |
|
- |
0.5 |
12.3 |
0.2 |
>50% and <70% |
44,371 |
3,679 |
465 |
40 |
48,555 |
3,873 |
|
2 |
25 |
38 |
65 |
|
- |
0.7 |
8.2 |
0.1 |
>70% and <80% |
21,454 |
1,702 |
153 |
8 |
23,317 |
3,578 |
|
2 |
12 |
12 |
26 |
|
- |
0.7 |
8.0 |
0.1 |
>80% and <90% |
13,419 |
1,191 |
84 |
4 |
14,698 |
3,868 |
|
2 |
12 |
8 |
22 |
|
- |
1.0 |
9.7 |
0.1 |
>90% and <100% |
3,210 |
241 |
25 |
5 |
3,481 |
511 |
|
1 |
5 |
3 |
9 |
|
- |
2.0 |
11.8 |
0.2 |
>100% and <110% |
50 |
36 |
9 |
1 |
96 |
- |
|
- |
2 |
2 |
4 |
|
0.1 |
4.3 |
17.5 |
3.2 |
>110% and <130% |
57 |
36 |
9 |
2 |
104 |
- |
|
- |
2 |
2 |
4 |
|
0.1 |
5.4 |
24.1 |
3.9 |
>130% and <150% |
22 |
23 |
6 |
- |
51 |
- |
|
- |
1 |
1 |
2 |
|
0.1 |
5.7 |
15.4 |
4.4 |
>150% |
4 |
9 |
4 |
- |
17 |
- |
|
- |
- |
1 |
1 |
|
0.1 |
5.2 |
30.6 |
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with LTVs |
129,158 |
10,279 |
1,266 |
200 |
140,903 |
13,875 |
|
8 |
77 |
130 |
215 |
|
- |
0.7 |
10.3 |
0.2 |
Other |
22 |
3 |
1 |
- |
26 |
82 |
|
- |
- |
- |
- |
|
0.1 |
4.5 |
48.1 |
2.2 |
Total |
129,180 |
10,282 |
1,267 |
200 |
140,929 |
13,957 |
|
8 |
77 |
130 |
215 |
|
- |
0.7 |
10.3 |
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<50% |
47,111 |
3,423 |
516 |
153 |
51,203 |
4,779 |
|
2 |
16 |
64 |
82 |
|
- |
0.5 |
12.4 |
0.2 |
>50% and <70% |
44,037 |
3,632 |
459 |
49 |
48,177 |
8,535 |
|
2 |
23 |
39 |
64 |
|
- |
0.6 |
8.5 |
0.1 |
>70% and <80% |
20,345 |
1,490 |
135 |
15 |
21,985 |
7,434 |
|
1 |
11 |
11 |
23 |
|
- |
0.7 |
8.1 |
0.1 |
>80% and <90% |
12,733 |
1,118 |
81 |
12 |
13,944 |
7,524 |
|
2 |
12 |
8 |
22 |
|
- |
1.1 |
10.0 |
0.2 |
>90% and <100% |
2,343 |
178 |
24 |
7 |
2,552 |
1,104 |
|
1 |
4 |
3 |
8 |
|
- |
2.4 |
12.1 |
0.3 |
>100% and <110% |
57 |
35 |
8 |
1 |
101 |
- |
|
- |
2 |
1 |
3 |
|
0.1 |
4.6 |
14.1 |
2.8 |
>110% and <130% |
53 |
41 |
9 |
2 |
105 |
- |
|
- |
2 |
1 |
3 |
|
0.1 |
5.4 |
14.6 |
3.4 |
>130% and <150% |
23 |
23 |
6 |
- |
52 |
- |
|
- |
1 |
1 |
2 |
|
0.1 |
6.2 |
13.4 |
4.3 |
>150% |
3 |
9 |
3 |
- |
15 |
- |
|
- |
1 |
1 |
2 |
|
0.1 |
6.2 |
17.3 |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total with LTVs |
126,705 |
9,949 |
1,241 |
239 |
138,134 |
29,376 |
|
8 |
72 |
129 |
209 |
|
- |
0.7 |
10.4 |
0.2 |
Other |
96 |
13 |
4 |
3 |
116 |
179 |
|
- |
1 |
2 |
3 |
|
- |
4.7 |
53.5 |
2.6 |
Total |
126,801 |
9,962 |
1,245 |
242 |
138,250 |
29,555 |
|
8 |
73 |
131 |
212 |
|
- |
0.7 |
10.5 |
0.2 |
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Personal portfolio
|
Mortgages |
|
ECL provisions |
|
ECL provisions coverage (2) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ulster Bank RoI |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
30 June 2019 |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
% |
% |
% |
% |
<50% |
4,120 |
333 |
518 |
4,971 |
|
2 |
5 |
79 |
86 |
|
- |
1.4 |
15.2 |
1.7 |
>50% and <70% |
3,537 |
252 |
448 |
4,237 |
|
1 |
4 |
70 |
75 |
|
- |
1.4 |
15.6 |
1.8 |
>70% and <80% |
1,392 |
134 |
233 |
1,759 |
|
1 |
2 |
48 |
51 |
|
- |
1.5 |
20.6 |
2.9 |
>80% and <90% |
1,077 |
121 |
241 |
1,439 |
|
1 |
2 |
61 |
64 |
|
0.1 |
1.8 |
25.4 |
4.4 |
>90% and <100% |
540 |
97 |
204 |
841 |
|
- |
2 |
64 |
66 |
|
0.1 |
1.9 |
31.1 |
7.8 |
>100% and <110% |
247 |
59 |
158 |
464 |
|
- |
2 |
52 |
54 |
|
0.1 |
2.9 |
33.2 |
11.7 |
>110% and <130% |
149 |
44 |
168 |
361 |
|
- |
1 |
69 |
70 |
|
0.2 |
3.2 |
40.9 |
19.5 |
>130% and <150% |
19 |
8 |
51 |
78 |
|
- |
- |
25 |
25 |
|
0.3 |
5.9 |
49.3 |
33.1 |
>150% |
8 |
2 |
21 |
31 |
|
- |
- |
11 |
11 |
|
0.3 |
10.2 |
52.7 |
36.3 |
Total with LTVs |
11,089 |
1,050 |
2,042 |
14,181 |
|
5 |
18 |
479 |
502 |
|
0.1 |
1.7 |
23.4 |
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<50% |
3,818 |
374 |
463 |
4,655 |
|
1 |
5 |
40 |
46 |
|
- |
1.4 |
8.6 |
1.0 |
>50% and <70% |
3,567 |
365 |
459 |
4,391 |
|
2 |
10 |
47 |
59 |
|
- |
2.7 |
10.3 |
1.3 |
>70% and <80% |
1,564 |
190 |
241 |
1,995 |
|
1 |
11 |
52 |
64 |
|
0.1 |
5.5 |
21.5 |
3.2 |
>80% and <90% |
1,059 |
184 |
272 |
1,515 |
|
2 |
15 |
82 |
99 |
|
0.2 |
8.3 |
30.2 |
6.5 |
>90% and <100% |
570 |
154 |
261 |
985 |
|
2 |
17 |
99 |
118 |
|
0.4 |
11.1 |
37.7 |
11.9 |
>100% and <110% |
197 |
80 |
207 |
484 |
|
2 |
10 |
85 |
97 |
|
0.9 |
12.8 |
41.1 |
20.1 |
>110% and <130% |
51 |
35 |
179 |
265 |
|
- |
6 |
84 |
90 |
|
0.8 |
16.6 |
47.0 |
34.0 |
>130% and <150% |
5 |
5 |
37 |
47 |
|
- |
1 |
20 |
21 |
|
0.3 |
19.1 |
54.7 |
45.2 |
>150% |
10 |
1 |
13 |
24 |
|
- |
1 |
7 |
8 |
|
2.1 |
27.2 |
58.9 |
33.5 |
Total with LTVs |
10,841 |
1,388 |
2,132 |
14,361 |
|
10 |
76 |
516 |
602 |
|
0.1 |
5.4 |
24.2 |
4.2 |
Notes:
(1) Excludes a non-material amount of provisions held on relatively small legacy portfolios.
(2) ECL provisions coverage is ECL provisions divided by drawn exposure.
Key points
· |
The UK mortgage portfolio LTV ratio increased slightly reflecting slower UK house price growth. In Ulster Bank RoI the small changes to portfolio level LTVs were mainly driven by the implementation of an enhanced indexation methodology that improves the granularity of information at individual mortgage account level. |
|
|
· |
ECL coverage rates increased through the LTV bands with both UK PB and Ulster Bank RoI having only limited exposures in the highest LTV bands. The relatively high coverage level in the lowest LTV band for UK PB included the effect of the modelling approach that recognised an element of expected loss on mortgages that are not subject to formal repossession activity, and also discounting expected recoveries over time. Similarly in Ulster Bank RoI, the relatively high coverage level in the lower LTV bands is driven by the implementation of a new modelling methodology that applies higher losses to these LTV bands. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Personal portfolio
UK PB Mortgage LTV distribution by region
|
|
50% |
80% |
100% |
|
|
Weighted |
|
|
|
|
<50% |
<80% |
<100% |
<150% |
>150% |
Total |
average LTV |
Other |
Total |
Total |
LTV ratio value |
£m |
£m |
£m |
£m |
£m |
£m |
% |
£m |
£m |
% |
30 June 2019 |
|
|
|
|
|
|
|
|
|
|
South East |
13,336 |
18,064 |
4,099 |
11 |
- |
35,510 |
56 |
8 |
35,518 |
25 |
Greater London |
13,792 |
9,442 |
837 |
4 |
- |
24,075 |
47 |
4 |
24,079 |
17 |
Scotland |
3,591 |
5,987 |
1,188 |
2 |
- |
10,768 |
58 |
1 |
10,769 |
8 |
North West |
4,029 |
7,830 |
2,140 |
5 |
- |
14,004 |
60 |
3 |
14,007 |
10 |
South West |
4,265 |
7,089 |
1,323 |
7 |
- |
12,684 |
57 |
2 |
12,686 |
9 |
West Midlands |
2,791 |
5,653 |
1,735 |
5 |
- |
10,184 |
61 |
1 |
10,185 |
7 |
Rest of the UK |
8,780 |
17,807 |
6,856 |
218 |
17 |
33,678 |
63 |
7 |
33,685 |
24 |
Total |
50,584 |
71,872 |
18,178 |
252 |
17 |
140,903 |
57 |
26 |
140,929 |
100 |
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
South East |
14,699 |
17,147 |
2,843 |
8 |
- |
34,697 |
53 |
27 |
34,724 |
25 |
Greater London |
12,928 |
9,614 |
1,298 |
3 |
- |
23,843 |
48 |
19 |
23,862 |
17 |
Scotland |
3,205 |
5,612 |
1,844 |
11 |
- |
10,672 |
60 |
8 |
10,680 |
8 |
North West |
4,163 |
7,756 |
1,970 |
6 |
- |
13,895 |
59 |
12 |
13,907 |
10 |
South West |
4,231 |
6,843 |
1,292 |
8 |
- |
12,374 |
57 |
9 |
12,383 |
9 |
West Midlands |
3,036 |
5,642 |
1,192 |
4 |
- |
9,874 |
58 |
7 |
9,881 |
7 |
Rest of the UK |
8,942 |
17,548 |
6,056 |
217 |
16 |
32,779 |
62 |
34 |
32,813 |
24 |
Total |
51,204 |
70,162 |
16,495 |
257 |
16 |
138,134 |
56 |
116 |
138,250 |
100 |
Commercial real estate (CRE)
The CRE portfolio comprises exposures to entities involved in the development of, or investment in, commercial and residential properties (including house builders but excluding housing associations, construction and the building materials sub-sector). The sector is reviewed regularly at senior executive committees. Reviews include portfolio credit quality, capital consumption and control frameworks. All disclosures in the CRE section are based on current exposure (gross of provisions). Current exposure is defined as: loans; the amount drawn under a credit facility plus accrued interest; contingent obligations; the issued amount of guarantee or letter or credit; derivatives the mark-to-market value, netted where netting agreements exist and net of legally enforceable collateral.
|
30 June 2019 |
|
31 December 2018 | ||||||
|
UK |
RoI |
Other |
Total |
|
UK |
RoI |
Other |
Total |
By geography and sub sector (1) |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
Investment |
|
|
|
|
|
|
|
|
|
Residential (2) |
4,571 |
382 |
27 |
4,980 |
|
4,426 |
363 |
54 |
4,843 |
Office (3) |
3,014 |
150 |
621 |
3,785 |
|
2,889 |
164 |
651 |
3,704 |
Retail (4) |
5,239 |
52 |
126 |
5,417 |
|
5,168 |
40 |
92 |
5,300 |
Industrial (5) |
2,351 |
54 |
106 |
2,511 |
|
2,270 |
51 |
176 |
2,497 |
Mixed/other (6) |
3,340 |
214 |
38 |
3,592 |
|
3,221 |
180 |
123 |
3,524 |
|
18,515 |
852 |
918 |
20,285 |
|
17,974 |
798 |
1,096 |
19,868 |
|
|
|
|
|
|
|
|
|
|
Development |
|
|
|
|
|
|
|
|
|
Residential (2) |
2,639 |
152 |
20 |
2,811 |
|
2,715 |
122 |
124 |
2,961 |
Office (3) |
118 |
- |
- |
118 |
|
192 |
- |
- |
192 |
Retail (4) |
103 |
7 |
1 |
111 |
|
94 |
7 |
1 |
102 |
Industrial (5) |
120 |
2 |
- |
122 |
|
119 |
2 |
12 |
133 |
Mixed/other (6) |
27 |
3 |
- |
30 |
|
32 |
2 |
- |
34 |
|
3,007 |
164 |
21 |
3,192 |
|
3,152 |
133 |
137 |
3,422 |
Total |
21,522 |
1,016 |
939 |
23,477 |
|
21,126 |
931 |
1,233 |
23,290 |
Notes:
(1) |
Geographical splits are based on country of collateral risk. |
(2) |
Residential properties including houses, flats and student accommodation. |
(3) |
Office properties including offices in central business districts, regional headquarters and business parks. |
(4) |
Retail properties including high street retail, shopping centres, restaurants, bars and gyms. |
(5) |
Industrial properties including distribution centres, manufacturing and warehouses. |
(6) |
Mixed usage or other properties that do not fall within the other categories above. Mixed generally relates to a mixture of retail/office with residential. |
Appendix 1 Capital and risk management
Credit risk: Banking activities continued
Commercial real estate
CRE LTV distribution by stage
The table below shows CRE current exposure and related ECL by LTV band.
|
Current exposure (gross of provisions) (1,2) |
|
ECL provisions |
|
ECL provisions coverage (4) | ||||||||||
|
|
|
|
Not within |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS 9 ECL |
|
|
|
|
|
|
|
|
|
|
|
|
Stage 1 |
Stage 2 |
Stage 3 |
scope (3) |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
% |
% |
% |
% |
<50% |
8,836 |
264 |
45 |
794 |
9,939 |
|
8 |
5 |
12 |
25 |
|
0.1 |
1.8 |
26.3 |
0.3 |
>50% and <70% |
4,674 |
464 |
79 |
781 |
5,998 |
|
6 |
6 |
12 |
24 |
|
0.1 |
1.3 |
14.9 |
0.5 |
>70% and <80% |
266 |
92 |
36 |
15 |
409 |
|
1 |
1 |
9 |
11 |
|
0.3 |
1.1 |
24.8 |
2.7 |
>80% and <90% |
70 |
7 |
22 |
2 |
101 |
|
- |
- |
4 |
4 |
|
0.4 |
4.7 |
16.3 |
4.2 |
>90% and <100% |
14 |
4 |
24 |
1 |
43 |
|
- |
1 |
12 |
13 |
|
0.7 |
15.1 |
50.4 |
29.3 |
>100% and <110% |
24 |
4 |
12 |
- |
40 |
|
- |
- |
4 |
4 |
|
0.4 |
5.0 |
36.1 |
11.7 |
>110% and <130% |
13 |
12 |
114 |
4 |
143 |
|
- |
1 |
29 |
30 |
|
0.7 |
5.0 |
24.7 |
20.9 |
>130% and <150% |
7 |
3 |
5 |
- |
15 |
|
- |
- |
2 |
2 |
|
1.0 |
14.1 |
48.4 |
20.2 |
>150% |
37 |
5 |
30 |
- |
72 |
|
- |
1 |
20 |
21 |
|
0.6 |
10.8 |
68.4 |
29.3 |
Total with LTVs |
13,941 |
855 |
367 |
1,597 |
16,760 |
|
15 |
15 |
104 |
134 |
|
0.1 |
1.7 |
28.2 |
0.9 |
Total portfolio average LTV (%) |
44% |
55% |
101% |
48% |
46% |
|
n/a |
n/a |
n/a |
n/a |
|
n/a |
n/a |
n/a |
n/a |
Other (5) |
2,217 |
283 |
716 |
309 |
3,525 |
|
3 |
4 |
51 |
58 |
|
0.1 |
1.6 |
7.1 |
1.8 |
Development (6) |
2,667 |
194 |
144 |
187 |
3,192 |
|
10 |
3 |
73 |
86 |
|
0.4 |
1.7 |
50.8 |
2.9 |
Total |
18,824 |
1,332 |
1,227 |
2,093 |
23,477 |
|
28 |
22 |
228 |
278 |
|
0.2 |
1.6 |
18.6 |
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<50% |
8,229 |
245 |
52 |
795 |
9,321 |
|
7 |
4 |
14 |
25 |
|
0.1 |
1.7 |
26.4 |
0.3 |
>50% and <70% |
4,769 |
297 |
78 |
703 |
5,847 |
|
6 |
6 |
14 |
26 |
|
0.1 |
2.0 |
17.8 |
0.5 |
>70% and <80% |
394 |
43 |
33 |
6 |
476 |
|
1 |
1 |
8 |
10 |
|
0.3 |
2.6 |
23.4 |
2.1 |
>80% and <90% |
55 |
11 |
24 |
2 |
92 |
|
- |
- |
5 |
5 |
|
0.3 |
3.4 |
20.9 |
6.1 |
>90% and <100% |
31 |
7 |
20 |
1 |
59 |
|
- |
- |
7 |
7 |
|
0.6 |
5.1 |
34.9 |
12.9 |
>100% and <110% |
53 |
4 |
15 |
- |
72 |
|
- |
- |
5 |
5 |
|
0.3 |
4.2 |
34.6 |
7.6 |
>110% and <130% |
22 |
3 |
111 |
4 |
140 |
|
- |
- |
22 |
22 |
|
0.4 |
5.4 |
19.4 |
16.0 |
>130% and <150% |
6 |
10 |
10 |
- |
26 |
|
- |
1 |
4 |
5 |
|
0.9 |
6.3 |
40.6 |
18.1 |
>150% |
30 |
6 |
42 |
- |
78 |
|
- |
1 |
29 |
30 |
|
0.5 |
9.8 |
69.6 |
38.1 |
Total with LTVs |
13,589 |
626 |
385 |
1,511 |
16,111 |
|
14 |
13 |
108 |
135 |
|
0.1 |
2.1 |
27.9 |
0.9 |
Total portfolio average LTV (%) |
- |
1 |
1 |
- |
- |
|
n/a |
n/a |
n/a |
n/a |
|
n/a |
n/a |
n/a |
n/a |
Other (5) |
2,655 |
133 |
784 |
185 |
3,757 |
|
4 |
5 |
50 |
59 |
|
0.2 |
4.0 |
6.3 |
1.7 |
Development (6) |
2,865 |
205 |
178 |
174 |
3,422 |
|
11 |
3 |
80 |
94 |
|
0.4 |
1.6 |
44.8 |
2.9 |
Total |
19,109 |
964 |
1,347 |
1,870 |
23,290 |
|
29 |
21 |
238 |
288 |
|
0.2 |
2.3 |
17.6 |
1.3 |
Notes:
(1) Comprises gross lending, interest rate hedging derivatives and other assets carried at fair value that are managed as pert of the overall CRE portfolio.
(2) The exposure in Stage 3 mainly related to legacy assets.
(3) Includes exposures relating to non-modelled portfolios and other exposures carried at fair value, including derivatives.
(4) ECL provisions coverage is ECL provisions divided by current exposure.
(5) Relates mainly to business banking, rate risk management products and unsecured corporate lending. The low Stage 3 ECL provisions coverage was driven by a single large exposure, which has been written down to the expected recoverable amount.
(6) Related to the development of commercial and residential properties. LTV is not a meaningful measure for this type of lending activity.
Key points
|
Overall The majority of the CRE portfolio was managed in the UK within Commercial Banking and Private Banking. Business appetite and strategy remain aligned across the segments. |
|
2019 trends The portfolio remained broadly unchanged in size and composition, although activity in the commercial property market in H1 2019 has been slower than in previous years. While the office and industrial sub-sectors have remained relatively resilient to date, rents and values in the retail sub-sector and market liquidity have declined significantly. The risk of a disorderly exit from the EU persists. The mainstream residential CRE market remained resilient, supported by high employment and a competitive mortgage market. However, liquidity has been markedly reduced for higher value homes and values in London reduced slightly from recent highs. The build to rent market continues to grow, backed by very strong demand from institutional investors. |
|
Credit quality Despite the challenges in the sub-sector, the CRE retail portfolio had a low default rate, with a limited number of new defaults. The sub-sector was monitored on a regular basis and credit quality was in line with the wider CRE portfolio. |
|
Risk appetite Lending criteria for commercial real estate are considered conservative, with lower leverage required for new London office originations, in addition to parts of the retail sector. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
The flow statements that follow show the main ECL and related income statement movements. They also show the changes in ECL as well as the changes in related financial assets used in determining ECL. Due to differences in scope, exposures in this section may therefore differ from those reported in other tables in the credit risk section, principally in relation to exposures in Stage 1 and Stage 2. These differences do not have a material ECL impact. Other points to note:
· Financial assets presented in the flow statements include treasury liquidity portfolios, comprising balances at central banks and debt securities, as well as loans. Both modelled and non-modelled portfolios are included.
· Stage transfers (for example, exposures moving from Stage 1 to Stage 2) are a key feature of ECL movements, with the net re-measurement cost of transitioning to a worse stage being a primary driver of income statement charges. Similarly there is an ECL benefit for accounts improving stage.
· Changes in risk parameters shows the reassessment of the ECL within a given stage, including any ECL overlays and residual income statement gains or losses at the point of write-off or accounting write-down.
· Other (P&L only items) includes any subsequent changes in the value of written-down assets (for example, fortuitous recoveries) along with other direct write-off items such as direct recovery costs. Other (P&L only items) affects the income statement but does not affect balance sheet ECL movements.
· Amounts written-off represent the gross asset written-down against accounts with ECL, including the net asset write-down for any debt sale activity.
· There were small ECL flows from Stage 3 to Stage 1. This does not however indicate that accounts returned from Stage 3 to Stage 1 directly. On a similar basis, there were flows from Stage 1 to Stage 3 including transfers due to unexpected default events. The small number of write-offs in Stage 1 and Stage 2 reflect the effect of portfolio debt sales and also staging at the start of the analysis period.
· The impact of model changes during H1 2019 was not material at a RBS Group-wide level or in the portfolios disclosed below.
· Reporting enhancements since 31 December 2018 now mean all movements are captured monthly and aggregated. Previously, for example, the main Personal portfolios were prepared on a six month movement basis.
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
| ||||||||
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
|
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
Group total |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
At 1 January 2019 |
|
422,541 |
|
297 |
|
27,360 |
|
772 |
|
7,796 |
|
2,327 |
|
457,697 |
|
3,396 |
|
Currency translation and other adjustments |
|
227 |
|
(2 |
) |
(2 |
) |
(2 |
) |
97 |
|
- |
|
322 |
|
(4 |
) |
Transfers from Stage 1 to Stage 2 |
|
(13,427 |
) |
(54 |
) |
13,427 |
|
54 |
|
- |
|
- |
|
- |
|
- |
|
Transfers from Stage 2 to Stage 1 |
|
10,781 |
|
167 |
|
(10,781 |
) |
(167 |
) |
- |
|
- |
|
- |
|
- |
|
Transfers to Stage 3 |
|
(216 |
) |
(3 |
) |
(1,663 |
) |
(136 |
) |
1,879 |
|
139 |
|
- |
|
- |
|
Transfers from Stage 3 |
|
241 |
|
15 |
|
727 |
|
64 |
|
(968 |
) |
(79 |
) |
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
|
|
(140 |
) |
|
|
279 |
|
|
|
307 |
|
|
|
446 |
|
Changes in risk parameters (model inputs) |
|
|
|
(37 |
) |
|
|
(138 |
) |
|
|
172 |
|
|
|
(3 |
) |
Other changes in net exposure |
|
(7,654 |
) |
37 |
|
(2,257 |
) |
(40 |
) |
(892 |
) |
(32 |
) |
(10,803 |
) |
(35 |
) |
Other (P&L only items) |
|
|
|
- |
|
|
|
- |
|
|
|
(85 |
) |
|
|
(85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
|
|
(140 |
) |
|
|
101 |
|
|
|
362 |
|
|
|
323 |
|
Amounts written-off |
|
- |
|
- |
|
(4 |
) |
(4 |
) |
(448 |
) |
(448 |
) |
(452 |
) |
(452 |
) |
Other movements |
|
|
|
- |
|
|
|
- |
|
|
|
(46 |
) |
|
|
(46 |
) |
At 30 June 2019 |
|
412,493 |
|
280 |
|
26,807 |
|
682 |
|
7,464 |
|
2,340 |
|
446,764 |
|
3,302 |
|
Net carrying amount |
|
412,213 |
|
|
|
26,125 |
|
|
|
5,124 |
|
|
|
443,462 |
|
|
|
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
The following flow statements show the material portfolios underpinning the Group flow statements.
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
| ||||||||
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
|
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
UK PB - mortgages |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
At 1 January 2019 |
|
127,671 |
|
10 |
|
10,241 |
|
74 |
|
1,216 |
|
132 |
|
139,128 |
|
216 |
|
Transfers from Stage 1 to Stage 2 |
|
(3,535 |
) |
(1 |
) |
3,535 |
|
1 |
|
- |
|
- |
|
- |
|
- |
|
Transfers from Stage 2 to Stage 1 |
|
2,507 |
|
8 |
|
(2,507 |
) |
(8 |
) |
- |
|
- |
|
- |
|
- |
|
Transfers to Stage 3 |
|
(8 |
) |
- |
|
(324 |
) |
(11 |
) |
332 |
|
11 |
|
- |
|
- |
|
Transfers from Stage 3 |
|
12 |
|
1 |
|
188 |
|
15 |
|
(200 |
) |
(16 |
) |
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
|
|
(8 |
) |
|
|
15 |
|
|
|
9 |
|
|
|
16 |
|
Changes in risk parameters (model inputs) |
|
|
|
- |
|
|
|
(2 |
) |
|
|
32 |
|
|
|
30 |
|
Other changes in net exposure |
|
1,559 |
|
(1 |
) |
(742 |
) |
(6 |
) |
(119 |
) |
(7 |
) |
698 |
|
(14 |
) |
Other (P&L only items) |
|
|
|
- |
|
|
|
- |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
|
|
(9 |
) |
|
|
7 |
|
|
|
20 |
|
|
|
18 |
|
Amounts written-off |
|
- |
|
- |
|
(1 |
) |
(1 |
) |
(11 |
) |
(11 |
) |
(12 |
) |
(12 |
) |
Other movements |
|
|
|
- |
|
|
|
- |
|
|
|
(18 |
) |
|
|
(18 |
) |
At 30 June 2019 |
|
128,206 |
|
9 |
|
10,390 |
|
77 |
|
1,218 |
|
132 |
|
139,814 |
|
218 |
|
Net carrying amount |
|
128,197 |
|
|
|
10,313 |
|
|
|
1,086 |
|
|
|
139,596 |
|
|
|
Key points
· ECL remained broadly stable across all stages.
· ECL transfers from Stage 3 back to Stage 1 and Stage 2 were higher than those in unsecured lending, due to the higher cure activity typically seen in mortgages.
· The increase in Stage 3 ECL changes in risk parameters reflected the monthly assessment of the loss requirement, capturing underlying portfolio movements.
· Write-off occurs once the repossessed property has been sold and there is a residual shortfall balance remaining outstanding. Write-off would typically be within five years from default but can be longer.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
| ||||||||
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
|
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
UK PB - credit cards |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
At 1 January 2019 |
|
2,632 |
|
36 |
|
1,226 |
|
118 |
|
106 |
|
71 |
|
3,964 |
|
225 |
|
Transfers from Stage 1 to Stage 2 |
|
(617 |
) |
(11 |
) |
617 |
|
11 |
|
- |
|
- |
|
- |
|
- |
|
Transfers from Stage 2 to Stage 1 |
|
522 |
|
35 |
|
(522 |
) |
(35 |
) |
- |
|
- |
|
- |
|
- |
|
Transfers to Stage 3 |
|
(10 |
) |
- |
|
(65 |
) |
(21 |
) |
75 |
|
21 |
|
- |
|
- |
|
Transfers from Stage 3 |
|
- |
|
- |
|
5 |
|
3 |
|
(5 |
) |
(3 |
) |
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
|
|
(25 |
) |
|
|
73 |
|
|
|
28 |
|
- |
|
76 |
|
Changes in risk parameters (model inputs) |
|
|
|
(10 |
) |
|
|
(51 |
) |
|
|
8 |
|
- |
|
(53 |
) |
Other changes in net exposure |
|
23 |
|
9 |
|
(64 |
) |
- |
|
(15 |
) |
(1 |
) |
(56 |
) |
8 |
|
Other (P&L only items) |
|
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
|
|
(26 |
) |
|
|
22 |
|
|
|
30 |
|
|
|
26 |
|
Amounts written off |
|
- |
|
- |
|
- |
|
- |
|
(35 |
) |
(35 |
) |
(35 |
) |
(35 |
) |
Other movements |
|
|
|
- |
|
|
|
- |
|
|
|
(3 |
) |
|
|
(3 |
) |
At 30 June 2019 |
|
2,550 |
|
34 |
|
1,197 |
|
98 |
|
126 |
|
86 |
|
3,873 |
|
218 |
|
Net carrying amount |
|
2,516 |
|
|
|
1,099 |
|
|
|
40 |
|
|
|
3,655 |
|
|
|
Key points
· Overall ECL reduced slightly over the period. This was mainly due to lower Stage 2 ECL, reflecting a recalibration of the modelled loss rate to align to observed experience. The increase in Stage 3 exposures and ECL reflected the impact of business-as-usual default flows, which have been broadly stable in 2019.
· The portfolio continued to experience cash recoveries after write-off which are reported in other (P&L only items). These benefited the income statement without affecting ECL. The level has reduced compared to prior years reflecting the debt sales executed in 2018.
· Charge-off (analogous to partial write-off) typically occurs after 12 missed payments.
UK PB - Other personal unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2019 |
|
5,073 |
|
54 |
|
1,970 |
|
239 |
|
495 |
|
394 |
|
7,538 |
|
687 |
|
Currency translation and other adjustments |
|
217 |
|
- |
|
10 |
|
- |
|
6 |
|
2 |
|
233 |
|
2 |
|
Transfers from Stage 1 to Stage 2 |
|
(1,213 |
) |
(20 |
) |
1,213 |
|
20 |
|
- |
|
- |
|
- |
|
- |
|
Transfers from Stage 2 to Stage 1 |
|
593 |
|
40 |
|
(593 |
) |
(40 |
) |
- |
|
- |
|
- |
|
- |
|
Transfers to Stage 3 |
|
(6 |
) |
- |
|
(161 |
) |
(56 |
) |
167 |
|
56 |
|
- |
|
- |
|
Transfers from Stage 3 |
|
2 |
|
- |
|
18 |
|
5 |
|
(20 |
) |
(5 |
) |
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
|
|
(31 |
) |
|
|
114 |
|
|
|
48 |
|
- |
|
131 |
|
Changes in risk parameters (model inputs) |
|
|
|
2 |
|
|
|
(23 |
) |
|
|
56 |
|
- |
|
35 |
|
Other changes in net exposure |
|
736 |
|
11 |
|
(296 |
) |
(17 |
) |
(18 |
) |
(4 |
) |
422 |
|
(10 |
) |
Other (P&L only items) |
|
|
|
- |
|
|
|
- |
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
|
|
(18 |
) |
|
|
74 |
|
|
|
81 |
|
|
|
137 |
|
Amounts written off |
|
- |
|
- |
|
- |
|
- |
|
(43 |
) |
(43 |
) |
(43 |
) |
(43 |
) |
Other movements |
|
|
|
- |
|
|
|
- |
|
|
|
(12 |
) |
|
|
(12 |
) |
At 30 June 2019 |
|
5,402 |
|
56 |
|
2,161 |
|
242 |
|
587 |
|
492 |
|
8,150 |
|
790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
|
5,346 |
|
|
|
1,919 |
|
|
|
95 |
|
|
|
7,360 |
|
|
|
Key points
· The overall increase in ECL was driven by Stage 3 exposures which included the effect of a loss rate model adjustment. Furthermore, the value of new defaults was higher than write-offs and customer debt repayments, and unlike in 2018, there were no debt sales in H1 2019.
· There was a modest increase in the rate of default over the last six months from a low level addressed through the tightening of risk appetite.
· Stage 1 and Stage 2 ECL remained broadly stable.
· The portfolio continued to experience cash recoveries after write-off which are reported in other (P&L only items). These benefited the income statement without affecting ECL. The level has reduced compared to prior years reflecting the debt sales executed in 2018.
· Write-off occurs once recovery activity with the customer has been concluded and there are no further recoveries expected, but no later than six years after default.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
| ||||||||
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
Financial |
|
|
|
|
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
assets |
|
ECL |
|
Ulster Bank RoI - mortgages |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
At 1 January 2019 |
|
10,782 |
|
11 |
|
1,394 |
|
75 |
|
2,137 |
|
516 |
|
14,313 |
|
602 |
|
Currency translation and other adjustments |
|
4 |
|
(1 |
) |
(8 |
) |
(2 |
) |
(2 |
) |
(1 |
) |
(6 |
) |
(4 |
) |
Transfers from Stage 1 to Stage 2 |
|
(739 |
) |
(3 |
) |
739 |
|
3 |
|
- |
|
- |
|
- |
|
- |
|
Transfers from Stage 2 to Stage 1 |
|
889 |
|
14 |
|
(889 |
) |
(14 |
) |
- |
|
- |
|
- |
|
- |
|
Transfers to Stage 3 |
|
(35 |
) |
(2 |
) |
(236 |
) |
(25 |
) |
271 |
|
27 |
|
- |
|
- |
|
Transfers from Stage 3 |
|
8 |
|
- |
|
121 |
|
22 |
|
(129 |
) |
(22 |
) |
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
|
|
(11 |
) |
|
|
1 |
|
|
|
- |
|
|
|
(10 |
) |
Changes in risk parameters (model inputs) |
|
|
|
(4 |
) |
|
|
(40 |
) |
|
|
23 |
|
|
|
(21 |
) |
Other changes in net exposure |
|
96 |
|
1 |
|
(64 |
) |
- |
|
(177 |
) |
(2 |
) |
(145 |
) |
(1 |
) |
Other (P&L only items) |
|
|
|
- |
|
|
|
- |
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
|
|
(14 |
) |
|
|
(39 |
) |
|
|
41 |
|
|
|
(12 |
) |
Amounts written off |
|
- |
|
- |
|
(2 |
) |
(2 |
) |
(55 |
) |
(55 |
) |
(57 |
) |
(57 |
) |
Other movements |
|
|
|
- |
|
|
|
- |
|
|
|
(7 |
) |
|
|
(7 |
) |
At 30 June 2019 |
|
11,005 |
|
5 |
|
1,055 |
|
18 |
|
2,045 |
|
479 |
|
14,105 |
|
502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
|
11,000 |
|
|
|
1,037 |
|
|
|
1,566 |
|
|
|
13,603 |
|
|
|
Key points
· The overall ECL reduction reflected the completion of the remainder of Ulster Bank RoIs 2018 sale of non-performing loans in H1 2019 and ongoing improvements in underlying portfolio performance.
· The transfers into Stage 3 were reflective of the implementation of an enhanced Stage 3 definition, with £230 million of exposures re-classified as Stage 3 assets under the new definition.
· The reduction in Stage 2 ECL was driven by the implementation of the enhanced Stage 3 definition and the re-allocation of post-model adjustments to Stage 3 assets.
· Write-off generally occurs once the repossessed property has been sold and there is a residual shortfall balance remaining outstanding which has been deemed irrecoverable. There is no set time period within which write-offs can occur.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total | ||||
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
Commercial Banking - excluding business banking |
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
At 1 January 2019 |
81,485 |
108 |
|
9,393 |
155 |
|
2,358 |
785 |
|
93,236 |
1,048 |
Currency translation and other adjustments |
86 |
(3) |
|
(10) |
1 |
|
94 |
(3) |
|
170 |
(5) |
Inter-Group transfers |
(319) |
- |
|
19 |
- |
|
(1) |
13 |
|
(301) |
13 |
Transfers from Stage 1 to Stage 2 |
(5,804) |
(10) |
|
5,804 |
10 |
|
- |
- |
|
- |
- |
Transfers from Stage 2 to Stage 1 |
4,801 |
43 |
|
(4,801) |
(43) |
|
- |
- |
|
- |
- |
Transfers to Stage 3 |
(107) |
- |
|
(716) |
(11) |
|
823 |
11 |
|
- |
- |
Transfers from Stage 3 |
189 |
10 |
|
363 |
8 |
|
(552) |
(18) |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
(43) |
|
|
41 |
|
|
185 |
|
|
183 |
Changes in risk parameters (model inputs) |
|
(5) |
|
|
(1) |
|
|
22 |
|
|
16 |
Other changes in net exposure |
2,453 |
6 |
|
(982) |
(7) |
|
(403) |
1 |
|
1,068 |
- |
Other (P&L only items) |
|
- |
|
|
- |
|
|
(15) |
|
|
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
(42) |
|
|
33 |
|
|
193 |
|
|
184 |
Amounts written off |
- |
- |
|
- |
- |
|
(247) |
(247) |
|
(247) |
(247) |
Other movements |
|
- |
|
|
- |
|
|
- |
|
|
- |
Unwinding of discount |
|
- |
|
|
- |
|
|
(3) |
|
|
(3) |
At 30 June 2019 |
82,784 |
106 |
|
9,070 |
153 |
|
2,072 |
746 |
|
93,926 |
1,005 |
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
82,678 |
|
|
8,917 |
|
|
1,326 |
|
|
92,921 |
|
Key points
· ECL decreased with write-offs exceeding the level of impairment charges on new into default cases.
· Stage 1 and Stage 2 ECL remained largely unchanged during H1 2019. Changes to risk parameters in Stage 1 and Stage 2 largely reflected improvements in underlying credit risk metrics which were partially offset by regular updates to certain underlying models.
· Growth in Stage 1 assets represented new business during the period. Stage 2 balances reduced as new transfers-in were offset by repayments and loans transferring to Stage 1.
· Stage 3 income statement charges increased during the period compared to 2018. This was due to a small number of individually significant impairment charges which also impacted the transfers to Stage 3 during the period.
Commercial - business banking |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2019 |
6,303 |
22 |
|
897 |
43 |
|
235 |
153 |
|
7,435 |
218 |
Currency translation and other adjustments |
- |
- |
|
1 |
- |
|
- |
- |
|
1 |
- |
Transfers from Stage 1 to Stage 2 |
(483) |
(3) |
|
483 |
3 |
|
- |
- |
|
- |
- |
Transfers from Stage 2 to Stage 1 |
353 |
10 |
|
(353) |
(10) |
|
- |
- |
|
- |
- |
Transfers to Stage 3 |
(9) |
- |
|
(70) |
(10) |
|
79 |
10 |
|
- |
- |
Transfers from Stage 3 |
4 |
1 |
|
13 |
3 |
|
(17) |
(4) |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
(9) |
|
|
25 |
|
|
26 |
|
|
42 |
Changes in risk parameters (model inputs) |
|
(6) |
|
|
(16) |
|
|
28 |
|
|
6 |
Other changes in net exposure |
199 |
2 |
|
(130) |
(4) |
|
(33) |
(5) |
|
36 |
(7) |
Other (P&L only items) |
|
- |
|
|
- |
|
|
(21) |
|
|
(21) |
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
(13) |
|
|
5 |
|
|
28 |
|
|
20 |
Amounts written off |
- |
- |
|
- |
- |
|
(29) |
(29) |
|
(29) |
(29) |
Other movements |
|
- |
|
|
- |
|
|
(2) |
|
|
(2) |
At 30 June 2019 |
6,367 |
17 |
|
841 |
34 |
|
235 |
177 |
|
7,443 |
228 |
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
6,350 |
|
|
807 |
|
|
58 |
|
|
7,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key points
· The overall increase in ECL was driven by Stage 3 including the effect of a loss rate model adjustment. The reduction in Stage 1 and Stage 2 ECL was driven by calibrations to the ECL models.
· The flow of new defaults in the period increased slightly compared to 2018. This increase reflected an uplift in default rates within the Business Banking portfolio (in particular for low value, unsecured lending, representing 14% of Business Banking stock), which has been addressed through a tightening of risk appetite.
· The portfolio continues to benefit from cash recoveries post write-off, which are reported as other (P&L only items).
· Write-off occurs once recovery activity with the customer has been concluded and there are no further recoveries expected, but no later than five years after default.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total | ||||
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
NatWest Markets (1) |
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
At 1 January 2019 |
32,758 |
7 |
|
732 |
14 |
|
708 |
112 |
|
34,198 |
133 |
Currency translation and other adjustments |
38 |
1 |
|
(2) |
- |
|
- |
(1) |
|
36 |
- |
Inter-Group transfers |
(57) |
- |
|
8 |
- |
|
1 |
(13) |
|
(48) |
(13) |
Transfers from Stage 1 to Stage 2 |
(190) |
- |
|
190 |
- |
|
- |
- |
|
- |
- |
Transfers from Stage 2 to Stage 1 |
281 |
2 |
|
(281) |
(2) |
|
- |
- |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
(2) |
|
|
1 |
|
|
- |
|
|
(1) |
Changes in risk parameters (model inputs) |
|
(2) |
|
|
(1) |
|
|
(6) |
|
|
(9) |
Other changes in net exposure |
1,204 |
2 |
|
(193) |
(2) |
|
1 |
- |
|
1,012 |
- |
Other (P&L only items) |
|
- |
|
|
- |
|
|
(26) |
|
|
(26) |
|
|
|
|
|
|
|
|
|
|
|
|
Income statement releases |
|
(2) |
|
|
(2) |
|
|
(32) |
|
|
(36) |
Amounts written-off |
- |
- |
|
- |
- |
|
(11) |
(11) |
|
(11) |
(11) |
Other movements |
|
- |
|
|
- |
|
|
- |
|
|
- |
At 30 June 2019 |
34,034 |
8 |
|
454 |
10 |
|
699 |
81 |
|
35,187 |
99 |
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
34,026 |
|
|
444 |
|
|
618 |
|
|
35,088 |
|
Note:
(1) Reflects NatWest Markets segment and includes NWM N.V..
Key points
· Stage 3 financial assets included £193 million (31 December 2018 - £166 million) purchased or originated credit impaired (POCI) assets. No ECL impairment was held on these positions and a £27 million impairment recovery was recognised on these POCI assets during H1 (included in other (P&L only items).
· Stage 1 and Stage 2 changes to risk parameters reflected an improvement in underlying credit risk metrics.
· The increase in Stage 1 exposure was due to a combination of new transactions and increased short-term placements with governments and central banks following changes made for ring-fencing.
Private Banking |
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2019 |
13,950 |
14 |
|
519 |
10 |
|
232 |
19 |
|
14,701 |
43 |
Currency translation and other adjustments |
(3) |
- |
|
- |
(1) |
|
- |
1 |
|
(3) |
- |
Transfers from Stage 1 to Stage 2 |
(284) |
(1) |
|
284 |
1 |
|
- |
- |
|
- |
- |
Transfers from Stage 2 to Stage 1 |
304 |
4 |
|
(304) |
(4) |
|
- |
- |
|
- |
- |
Transfers to Stage 3 |
(25) |
- |
|
(48) |
- |
|
73 |
- |
|
- |
- |
Transfers from Stage 3 |
7 |
- |
|
1 |
4 |
|
(8) |
(4) |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
(3) |
|
|
1 |
|
|
- |
|
|
(2) |
Changes in risk parameters (model inputs) |
|
(3) |
|
|
(1) |
|
|
6 |
|
|
2 |
Other changes in net exposure |
532 |
1 |
|
(33) |
(1) |
|
(86) |
(3) |
|
413 |
(3) |
Other (P&L only items) |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Income statement (releases)/charges |
|
(5) |
|
|
(1) |
|
- |
3 |
|
|
(3) |
Amounts written off |
|
- |
|
|
- |
|
(1) |
(1) |
|
(1) |
(1) |
Unwinding of discount |
|
- |
|
|
- |
|
- |
- |
|
- |
- |
At 30 June 2019 |
14,481 |
12 |
|
419 |
9 |
|
210 |
19 |
|
15,110 |
40 |
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
14,469 |
|
|
410 |
|
|
191 |
|
|
15,070 |
|
Key points
· ECL reduced marginally due to an improvement in underlying Stage 1 and Stage 2 credit quality.
· Stage 1 exposure increased during the period reflecting growth in mortgages with minimal ECL impact due to high credit quality. The reduction in Stage 2 exposure was a result of both repayment of debt and the transfer of assets to Stage 1.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Flow statements
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total | ||||
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
Financial |
|
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
|
assets |
ECL |
RBS International |
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
At 1 January 2019 |
26,749 |
6 |
|
276 |
4 |
|
95 |
17 |
|
27,120 |
27 |
Currency translation and other adjustments |
(55) |
- |
|
(1) |
- |
|
1 |
- |
|
(55) |
- |
Inter-Group transfers |
(598) |
- |
|
(27) |
(1) |
|
- |
- |
|
(625) |
(1) |
Transfers from Stage 1 to Stage 2 |
(342) |
(2) |
|
342 |
2 |
|
- |
- |
|
- |
- |
Transfers from Stage 2 to Stage 1 |
276 |
3 |
|
(276) |
(3) |
|
- |
- |
|
- |
- |
Transfers to Stage 3 |
(10) |
- |
|
(17) |
- |
|
27 |
- |
|
- |
- |
Transfers from Stage 3 |
8 |
- |
|
6 |
- |
|
(14) |
- |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net re-measurement of ECL on stage transfer |
|
(3) |
|
|
1 |
|
|
- |
|
|
(2) |
Changes in risk parameters (model inputs) |
|
(1) |
|
|
- |
|
|
3 |
|
|
2 |
Other changes in net exposure |
1,424 |
1 |
|
132 |
(1) |
|
(14) |
(2) |
|
1,542 |
(2) |
Other (P&L only items) |
|
- |
|
|
- |
|
|
(1) |
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Income statement releases |
|
(3) |
|
|
- |
|
|
- |
|
|
(3) |
Amounts written off |
- |
- |
|
- |
- |
|
(2) |
(2) |
|
(2) |
(2) |
Other movements |
|
- |
|
|
- |
|
|
- |
|
|
- |
At 30 June 2019 |
27,452 |
4 |
|
435 |
2 |
|
93 |
16 |
|
27,980 |
22 |
|
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount |
27,448 |
|
|
433 |
|
|
77 |
|
|
27,958 |
|
Key points
· The level of ECL reduced in all stages during the period.
· In Stage 1, the increase in exposure was partly due to new lending, but mainly due to the management of a liquidity portfolio across banks and sovereign bond holdings, with low credit risk and minimal ECL.
· The increase in Stage 2 exposure was driven by a combination of flows from Stage 1 and balance increases on a small number of individual exposures in the Wholesale portfolio where credit quality deteriorated in the period. Increases in Stage 2 exposures were largely limited to specific sectors.
· Stage 2 ECL reduced in the period because exposure transferring in carried lower ECL than exposure that transferred from Stage 2.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Stage 2 decomposition arrears status and contributing factors
The tables below show Stage 2 decomposition for the Personal and Wholesale portfolios.
|
UK mortgages |
|
RoI mortgages |
|
Other mortgages |
|
Credit cards |
|
Other |
|
Total | ||||||
30 June 2019 |
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m | |
Personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently in arrears (>30 DPD) |
529 |
12 |
|
31 |
2 |
|
- |
- |
|
15 |
5 |
|
91 |
19 |
|
666 |
38 |
Currently up-to-date |
9,973 |
66 |
|
1,016 |
16 |
|
1 |
- |
|
1,195 |
95 |
|
2,080 |
232 |
|
14,265 |
409 |
- PD deterioration |
4,058 |
54 |
|
338 |
11 |
|
- |
- |
|
765 |
73 |
|
1,324 |
182 |
|
6,485 |
320 |
- Up-to-date, PD persistence |
1,365 |
3 |
|
40 |
- |
|
- |
- |
|
327 |
14 |
|
465 |
28 |
|
2,197 |
45 |
- Other driver (adverse credit, forbearance etc) |
4,550 |
9 |
|
638 |
5 |
|
1 |
- |
|
103 |
8 |
|
291 |
22 |
|
5,583 |
44 |
Total Stage 2 |
10,502 |
78 |
|
1,047 |
18 |
|
1 |
- |
|
1,210 |
100 |
|
2,171 |
251 |
|
14,931 |
447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently in arrears (>30 DPD) |
658 |
10 |
|
90 |
10 |
|
3 |
- |
|
17 |
6 |
|
88 |
22 |
|
856 |
48 |
Currently up-to-date |
9,612 |
64 |
|
1,292 |
66 |
|
- |
- |
|
1,226 |
114 |
|
1,985 |
225 |
|
14,115 |
469 |
- PD deterioration |
3,855 |
54 |
|
680 |
44 |
|
- |
- |
|
778 |
85 |
|
1,255 |
176 |
|
6,568 |
359 |
- Up-to-date, PD persistence |
1,448 |
5 |
|
54 |
1 |
|
- |
- |
|
337 |
17 |
|
440 |
26 |
|
2,279 |
49 |
- Other driver (adverse credit, forbearance etc) |
4,309 |
5 |
|
558 |
21 |
|
- |
- |
|
111 |
12 |
|
290 |
23 |
|
5,268 |
61 |
Total Stage 2 |
10,270 |
74 |
|
1,382 |
76 |
|
3 |
- |
|
1,243 |
120 |
|
2,073 |
247 |
|
14,971 |
517 |
Key points
· |
ECL coverage remained higher for accounts that are more than 30 days past due. Also in line with expectations, accounts exhibiting PD deterioration have a higher ECL coverage than accounts in Stage 2 for other reasons. |
· |
The ECL reduction in the Ulster Bank RoI mortgages portfolio reflected the movement of exposures into Stage 3 following a regulatory driven revision to the definition of default in that business. |
|
Property |
|
Corporate |
|
FI |
|
Other |
|
Total | |||||
30 June 2019 |
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
|
Loans |
ECL |
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
£m |
£m | |
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently in arrears (>30 DPD) |
182 |
7 |
|
316 |
6 |
|
1 |
- |
|
- |
- |
|
499 |
13 |
Currently up-to-date |
1,968 |
34 |
|
7,826 |
179 |
|
475 |
9 |
|
6 |
- |
|
10,275 |
222 |
- PD deterioration |
865 |
21 |
|
4,712 |
123 |
|
384 |
7 |
|
4 |
- |
|
5,965 |
151 |
- Up-to-date, PD persistence |
45 |
1 |
|
152 |
3 |
|
2 |
- |
|
- |
- |
|
199 |
4 |
- Other driver (forbearance, RoCL etc) |
1,058 |
12 |
|
2,962 |
53 |
|
89 |
2 |
|
2 |
- |
|
4,111 |
67 |
Total Stage 2 |
2,150 |
41 |
|
8,142 |
185 |
|
476 |
9 |
|
6 |
- |
|
10,774 |
235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently in arrears (>30 DPD) |
255 |
7 |
|
315 |
5 |
|
1 |
- |
|
- |
- |
|
571 |
12 |
Currently up-to-date |
1,622 |
32 |
|
8,438 |
195 |
|
473 |
7 |
|
22 |
- |
|
10,555 |
234 |
- PD deterioration |
924 |
23 |
|
5,564 |
138 |
|
281 |
6 |
|
8 |
- |
|
6,777 |
167 |
- Up-to-date, PD persistence |
57 |
1 |
|
170 |
5 |
|
4 |
- |
|
- |
- |
|
231 |
6 |
- Other driver (forbearance, RoCL etc) |
641 |
8 |
|
2,704 |
52 |
|
188 |
1 |
|
14 |
- |
|
3,547 |
61 |
Total Stage 2 |
1,877 |
39 |
|
8,753 |
200 |
|
474 |
7 |
|
22 |
- |
|
11,126 |
246 |
Key points
· |
The ECL coverage was broadly consistent in total. Coverage can, however, vary across categories or sectors reflecting the individual characteristics of the customer and exposure type. |
· |
The reduction in Stage 2 exposure was primarily due to improvements in PDs in the corporate portfolio. An increase in the RoCL portfolio, driven by a small number of large cases, increased the other driver category. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Stage 2 decomposition by a significant increase in credit risk trigger
30 June 2019 |
UK mortgages |
|
RoI mortgages |
|
Other mortgages |
|
Credit cards |
|
Other |
|
Total | ||||||
£m |
% |
|
£m |
% |
|
£m |
% |
|
£m |
% |
|
£m |
% |
|
£m |
% | |
Personal trigger (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PD movement |
4,458 |
42.5 |
|
362 |
34.5 |
|
- |
- |
|
780 |
64.5 |
|
1,379 |
63.5 |
|
6,979 |
46.7 |
PD persistence |
1,366 |
13.0 |
|
40 |
3.8 |
|
- |
- |
|
328 |
27.1 |
|
467 |
21.5 |
|
2,201 |
14.7 |
Adverse credit bureau recorded with credit reference agency |
3,124 |
29.7 |
|
- |
- |
|
- |
- |
|
58 |
4.8 |
|
96 |
4.4 |
|
3,278 |
22.0 |
Forbearance support provided |
189 |
1.8 |
|
4 |
0.4 |
|
- |
- |
|
- |
- |
|
13 |
0.6 |
|
206 |
1.4 |
Customers in collections |
147 |
1.4 |
|
96 |
9.2 |
|
- |
- |
|
3 |
0.2 |
|
34 |
1.6 |
|
280 |
1.9 |
Other reasons (2) |
1,110 |
10.6 |
|
545 |
52.1 |
|
1 |
100 |
|
41 |
3.4 |
|
157 |
7.2 |
|
1,854 |
12.4 |
Days past due >30 |
108 |
1.0 |
|
- |
- |
|
- |
- |
|
- |
- |
|
25 |
1.2 |
|
133 |
0.9 |
|
10,502 |
100 |
|
1,047 |
100 |
|
1 |
100 |
|
1,210 |
100 |
|
2,171 |
100 |
|
14,931 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal trigger (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PD movement |
4,273 |
41.6 |
|
767 |
55.6 |
|
- |
- |
|
793 |
63.8 |
|
1,307 |
63.0 |
|
7,140 |
47.7 |
PD persistence |
1,450 |
14.1 |
|
54 |
3.9 |
|
- |
- |
|
338 |
27.2 |
|
440 |
21.2 |
|
2,282 |
15.2 |
Adverse credit bureau recorded with credit reference agency |
2,996 |
29.2 |
|
- |
- |
|
- |
- |
|
61 |
4.9 |
|
101 |
4.9 |
|
3,158 |
21.1 |
Forbearance support provided |
206 |
2.0 |
|
2 |
0.1 |
|
- |
- |
|
- |
- |
|
13 |
0.6 |
|
221 |
1.5 |
Customers in collections |
144 |
1.4 |
|
57 |
4.1 |
|
- |
- |
|
5 |
0.4 |
|
36 |
1.7 |
|
242 |
1.6 |
Other reasons (2) |
982 |
9.6 |
|
502 |
36.3 |
|
- |
- |
|
46 |
3.7 |
|
151 |
7.3 |
|
1,681 |
11.2 |
Days past due >30 |
219 |
2.1 |
|
- |
- |
|
3 |
100 |
|
- |
- |
|
25 |
1.2 |
|
247 |
1.6 |
|
10,270 |
100 |
|
1,382 |
100 |
|
3 |
100 |
|
1,243 |
100 |
|
2,073 |
100 |
|
14,971 |
100 |
Key point
· |
PD remained the primary driver of credit deterioration, which including persistence, accounted for the majority of movements to Stage 2. High risk back-stops, for example, forbearance and adverse credit bureau, provide additional valuable discrimination particularly in mortgages. |
|
Property |
|
Corporate |
|
FI |
|
Other |
|
Total | |||||
30 June 2019 |
£m |
% |
|
£m |
% |
|
£m |
% |
|
£m |
% |
|
£m |
% |
Wholesale trigger (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PD movement |
883 |
40.9 |
|
4,756 |
58.3 |
|
384 |
80.7 |
|
4 |
66.7 |
|
6,027 |
55.9 |
PD persistence |
45 |
2.1 |
|
153 |
1.9 |
|
2 |
0.4 |
|
- |
- |
|
200 |
1.9 |
Risk of Credit Loss |
767 |
35.7 |
|
2,162 |
26.6 |
|
66 |
13.9 |
|
- |
- |
|
2,995 |
27.8 |
Forbearance support provided |
62 |
2.9 |
|
159 |
2.0 |
|
- |
- |
|
- |
- |
|
221 |
2.1 |
Customers in collections |
10 |
0.5 |
|
44 |
0.5 |
|
- |
- |
|
- |
- |
|
54 |
0.5 |
Other reasons (3) |
227 |
10.6 |
|
634 |
7.8 |
|
23 |
4.8 |
|
2 |
33.3 |
|
886 |
8.2 |
Days past due >30 |
156 |
7.3 |
|
234 |
2.9 |
|
1 |
0.2 |
|
- |
- |
|
391 |
3.6 |
|
2,150 |
100 |
|
8,142 |
100 |
|
476 |
100 |
|
6 |
100 |
|
10,774 |
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale trigger (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PD movement |
940 |
50.1 |
|
5,617 |
64.2 |
|
281 |
59.3 |
|
8 |
36.4 |
|
6,845 |
61.5 |
PD persistence |
57 |
3.0 |
|
171 |
2.0 |
|
4 |
0.8 |
|
- |
- |
|
232 |
2.1 |
Risk of Credit Loss |
321 |
17.1 |
|
1,964 |
22.4 |
|
103 |
21.7 |
|
- |
- |
|
2,388 |
21.5 |
Forbearance support provided |
65 |
3.5 |
|
209 |
2.4 |
|
- |
- |
|
- |
- |
|
274 |
2.5 |
Customers in collections |
9 |
0.5 |
|
43 |
0.5 |
|
- |
- |
|
- |
- |
|
52 |
0.5 |
Other reasons (3) |
251 |
13.4 |
|
525 |
6.0 |
|
85 |
17.9 |
|
14 |
63.6 |
|
875 |
7.9 |
Days past due >30 |
234 |
12.5 |
|
224 |
2.6 |
|
1 |
0.2 |
|
- |
- |
|
460 |
4.1 |
|
1,877 |
100 |
|
8,753 |
100 |
|
474 |
100 |
|
22 |
100 |
|
11,126 |
100 |
Notes:
(1) |
The table is produced on a hierarchical basis from top to bottom, for example, accounts with PD deterioration may also trigger backstop(s) but are only reported under PD deterioration |
(2) |
Includes customers that have accessed payday lending, interest only mortgages past end of term, a small number of mortgage customers on a highly flexible mortgage significantly behind outline repayment plan and customers breaching risk appetite thresholds for new business acquisition. In the RoI mortgage portfolio, this reflected customers who remained in probation following the conclusion of forbearance support, exposures breaching risk appetite thresholds for new business acquisition and exposures classified as non-performing exposures under European Banking Authority requirements |
(3) |
Includes customers where a PD assessment cannot be undertaken due to missing PDs. |
Key point
· |
PD remained the primary driver of credit deterioration, which including persistence, accounted for 58% of Stage 2 exposure. The Risk of Credit Loss framework accounted for a further 28%, an increase from 22% at 31 December 2018, driven by a small number of large cases. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Stage 3 vintage analysis
The table below shows estimated vintage analysis of the material Stage 3 portfolios totalling 90% of the Stage 3 loans of £7.3 billion.
|
30 June 2019 |
31 December 2018 | ||||
|
UK PB |
Ulster Bank RoI |
|
UK PB |
Ulster Bank RoI |
|
|
mortgages |
mortgages |
Wholesale |
mortgages |
mortgages |
Wholesale |
Stage 3 loans (£bn) |
1.3 |
2.0 |
3.2 |
1.2 |
2.1 |
3.4 |
Vintage (time in default): |
|
|
|
|
|
|
<1 year |
28% |
16% |
30% |
26% |
7% |
22% |
1-3 years |
22% |
27% |
13% |
21% |
12% |
19% |
3-5 years |
12% |
12% |
8% |
14% |
14% |
9% |
5-10 years |
32% |
41% |
49% |
35% |
63% |
50% |
>10 years |
6% |
4% |
- |
4% |
4% |
- |
|
100% |
100% |
100% |
100% |
100% |
100% |
Key points
· |
Mortgages The proportion of the Stage 3 defaulted population which have been in default for over five years reflected RBSs support for customers in financial difficulty. When customers continue to engage constructively with RBS making regular payments, RBS continues to support them. RBSs provisioning approach can retain customers in Stage 3 for a life-time loss provisioning calculation even when their arrears status reverts to below 90 days past due. |
· |
Wholesale The value of Stage 3 loans in default for 5-10 years mainly reflects customers in a protracted formal insolvency process or subject to litigation or a complaints process. |
Asset quality
The table below shows asset quality bands of gross loans and ECL by stage for the Personal portfolio.
|
Gross loans |
|
ECL provisions |
|
ECL provisions coverage | ||||||||||
30 June 2019 |
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
Total |
|
Stage 1 |
Stage 2 |
Stage 3 |
|
Total |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
% |
% |
% |
|
% | |
UK mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
95,880 |
3,640 |
|
99,520 |
|
5 |
10 |
|
15 |
|
0.01 |
0.27 |
|
|
0.02 |
AQ5-AQ8 |
44,773 |
6,053 |
|
50,826 |
|
5 |
46 |
|
51 |
|
0.01 |
0.76 |
|
|
0.10 |
AQ9 |
44 |
809 |
|
853 |
|
- |
22 |
|
22 |
|
- |
2.72 |
|
|
2.58 |
AQ10 |
|
|
1,316 |
1,316 |
|
|
|
148 |
148 |
|
|
|
11.25 |
|
11.25 |
|
140,697 |
10,502 |
1,316 |
152,515 |
|
10 |
78 |
148 |
236 |
|
0.01 |
0.74 |
11.25 |
|
0.15 |
RoI mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
5,356 |
161 |
|
5,517 |
|
2 |
1 |
|
3 |
|
0.04 |
0.62 |
|
|
0.05 |
AQ5-AQ8 |
5,730 |
598 |
|
6,328 |
|
4 |
11 |
|
15 |
|
0.07 |
1.84 |
|
|
0.24 |
AQ9 |
3 |
288 |
|
291 |
|
- |
6 |
|
6 |
|
- |
2.08 |
|
|
2.06 |
AQ10 (1) |
|
|
1,983 |
1,983 |
|
|
|
479 |
479 |
|
|
|
24.16 |
|
24.16 |
|
11,089 |
1,047 |
1,983 |
14,119 |
|
6 |
18 |
479 |
503 |
|
0.05 |
1.72 |
24.16 |
|
3.56 |
Other mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
698 |
1 |
|
699 |
|
- |
- |
|
- |
|
- |
- |
|
|
- |
AQ5-AQ8 |
163 |
- |
|
163 |
|
- |
- |
|
- |
|
- |
- |
|
|
- |
AQ9 |
- |
- |
|
- |
|
- |
- |
|
- |
|
- |
- |
|
|
- |
AQ10 |
|
|
3 |
3 |
|
|
|
- |
- |
|
|
|
- |
|
- |
|
861 |
1 |
3 |
865 |
|
- |
- |
- |
- |
|
- |
- |
- |
|
- |
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
24 |
- |
|
24 |
|
- |
- |
|
- |
|
- |
- |
|
|
- |
AQ5-AQ8 |
2,803 |
1,152 |
|
3,955 |
|
36 |
85 |
|
121 |
|
1.28 |
7.38 |
|
|
3.06 |
AQ9 |
4 |
58 |
|
62 |
|
- |
15 |
|
15 |
|
- |
25.86 |
|
|
24.19 |
AQ10 |
|
|
140 |
140 |
|
|
|
88 |
88 |
|
|
|
62.86 |
|
62.86 |
|
2,831 |
1,210 |
140 |
4,181 |
|
36 |
100 |
88 |
224 |
|
1.27 |
8.26 |
62.86 |
|
5.36 |
Other personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
1,014 |
56 |
|
1,070 |
|
4 |
6 |
|
10 |
|
0.39 |
10.71 |
|
|
0.93 |
AQ5-AQ8 |
6,046 |
1,889 |
|
7,935 |
|
54 |
185 |
|
239 |
|
0.89 |
9.79 |
|
|
3.01 |
AQ9 |
84 |
226 |
|
310 |
|
3 |
60 |
|
63 |
|
3.57 |
26.55 |
|
|
20.32 |
AQ10 |
|
|
628 |
628 |
|
|
|
512 |
512 |
|
|
|
81.53 |
|
81.53 |
|
7,144 |
2,171 |
628 |
9,943 |
|
61 |
251 |
512 |
824 |
|
0.85 |
11.56 |
81.53 |
|
8.29 |
Total personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
102,972 |
3,858 |
|
106,830 |
|
11 |
17 |
|
28 |
|
0.01 |
0.44 |
|
|
0.03 |
AQ5-AQ8 |
59,515 |
9,692 |
|
69,207 |
|
99 |
327 |
|
426 |
|
0.17 |
3.37 |
|
|
0.62 |
AQ9 |
135 |
1,381 |
|
1,516 |
|
3 |
103 |
|
106 |
|
2.22 |
7.46 |
|
|
6.99 |
AQ10 |
|
|
4,070 |
4,070 |
|
|
|
1,227 |
1,227 |
|
|
|
30.15 |
|
30.15 |
|
162,622 |
14,931 |
4,070 |
181,623 |
|
113 |
447 |
1,227 |
1,787 |
|
0.07 |
2.99 |
30.15 |
|
0.98 |
For the notes to this table refer to the following page.
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Asset quality
|
|
Gross loans |
|
ECL Provisions |
|
ECL provisions coverage | ||||||||||||||||||
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
31 December 2018 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
% |
|
% |
|
% |
|
% |
UK mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
95,618 |
|
3,621 |
|
|
|
99,239 |
|
6 |
|
11 |
|
|
|
17 |
|
0.01 |
|
0.30 |
|
|
|
0.02 |
AQ5-AQ8 |
|
42,771 |
|
5,845 |
|
|
|
48,616 |
|
6 |
|
46 |
|
|
|
52 |
|
0.01 |
|
0.79 |
|
|
|
0.11 |
AQ9 |
|
32 |
|
804 |
|
|
|
836 |
|
- |
|
17 |
|
|
|
17 |
|
- |
|
2.11 |
|
|
|
2.03 |
AQ10 |
|
|
|
|
|
1,541 |
|
1,541 |
|
|
|
- |
|
151 |
|
151 |
|
|
|
- |
|
9.80 |
|
9.80 |
|
|
138,421 |
|
10,270 |
|
1,541 |
|
150,232 |
|
12 |
|
74 |
|
151 |
|
237 |
|
0.01 |
|
0.72 |
|
9.80 |
|
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RoI mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
5,164 |
|
226 |
|
|
|
5,390 |
|
4 |
|
5 |
|
|
|
9 |
|
0.08 |
|
2.21 |
|
|
|
0.17 |
AQ5-AQ8 |
|
5,668 |
|
717 |
|
|
|
6,385 |
|
7 |
|
32 |
|
|
|
39 |
|
0.12 |
|
4.46 |
|
|
|
0.61 |
AQ9 |
|
12 |
|
439 |
|
|
|
451 |
|
- |
|
39 |
|
|
|
39 |
|
- |
|
8.88 |
|
|
|
8.65 |
AQ10 (1) |
|
|
|
|
|
2,124 |
|
2,124 |
|
|
|
|
|
515 |
|
515 |
|
|
|
|
|
24.25 |
|
24.25 |
|
|
10,844 |
|
1,382 |
|
2,124 |
|
14,350 |
|
11 |
|
76 |
|
515 |
|
602 |
|
0.10 |
|
5.50 |
|
24.25 |
|
4.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
359 |
|
1 |
|
|
|
360 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- |
AQ5-AQ8 |
|
136 |
|
2 |
|
|
|
138 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- |
AQ10 |
|
|
|
|
|
1 |
|
1 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
- |
|
|
495 |
|
3 |
|
1 |
|
499 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit cards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
34 |
|
1 |
|
|
|
35 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- |
AQ5-AQ8 |
|
2,810 |
|
1,180 |
|
|
|
3,990 |
|
38 |
|
103 |
|
|
|
141 |
|
1.35 |
|
8.73 |
|
|
|
3.53 |
AQ9 |
|
7 |
|
62 |
|
|
|
69 |
|
- |
|
17 |
|
|
|
17 |
|
- |
|
27.42 |
|
|
|
24.64 |
AQ10 |
|
|
|
|
|
122 |
|
122 |
|
|
|
|
|
72 |
|
72 |
|
|
|
|
|
59.02 |
|
59.02 |
|
|
2,851 |
|
1,243 |
|
122 |
|
4,216 |
|
38 |
|
120 |
|
72 |
|
230 |
|
1.33 |
|
9.65 |
|
59.02 |
|
5.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
997 |
|
43 |
|
|
|
1,040 |
|
4 |
|
5 |
|
|
|
9 |
|
0.40 |
|
11.63 |
|
|
|
0.87 |
AQ5-AQ8 |
|
5,889 |
|
1,847 |
|
|
|
7,736 |
|
55 |
|
186 |
|
|
|
241 |
|
0.93 |
|
10.07 |
|
|
|
3.12 |
AQ9 |
|
56 |
|
183 |
|
|
|
239 |
|
2 |
|
56 |
|
|
|
58 |
|
3.57 |
|
30.60 |
|
|
|
24.27 |
AQ10 |
|
|
|
|
|
563 |
|
563 |
|
|
|
|
|
420 |
|
420 |
|
|
|
|
|
74.60 |
|
74.60 |
|
|
6,942 |
|
2,073 |
|
563 |
|
9,578 |
|
61 |
|
247 |
|
420 |
|
728 |
|
0.88 |
|
11.92 |
|
74.60 |
|
7.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AQ1-AQ4 |
|
102,172 |
|
3,892 |
|
|
|
106,064 |
|
14 |
|
21 |
|
|
|
35 |
|
0.01 |
|
0.54 |
|
|
|
0.03 |
AQ5-AQ8 |
|
57,274 |
|
9,591 |
|
|
|
66,865 |
|
106 |
|
367 |
|
|
|
473 |
|
0.19 |
|
3.83 |
|
|
|
0.71 |
AQ9 |
|
107 |
|
1,488 |
|
|
|
1,595 |
|
2 |
|
129 |
|
|
|
131 |
|
1.87 |
|
8.67 |
|
|
|
8.21 |
AQ10 |
|
|
|
|
|
4,351 |
|
4,351 |
|
|
|
|
|
1,158 |
|
1,158 |
|
|
|
|
|
26.61 |
|
26.61 |
|
|
159,553 |
|
14,971 |
|
4,351 |
|
178,875 |
|
122 |
|
517 |
|
1,158 |
|
1,797 |
|
0.08 |
|
3.45 |
|
26.61 |
|
1.00 |
Note:
(1) AQ10 includes £0.7 billion (31 December 2018 £0.6 billion) RoI mortgages which are not currently considered defaulted for capital calculation purposes for RoI but included in Stage 3.
Key points
· |
Overall credit quality remained broadly stable with some movements at product level. Mortgage exposures have a higher proportion in AQ1-AQ4 than unsecured borrowing. |
· |
The relatively high level of Stage 3 impaired assets (AQ10) in RoI mortgages reflected their legacy mortgage portfolio and the residual effects from the financial crisis. For UK mortgages, the reduction in value of Stage 3 exposures included the effect of a methodology change. |
· |
In other personal, the relatively high level of exposures in AQ10 reflected the fact that impaired assets can be held on balance sheet with commensurate ECL provision for up to six years after default. The increase in ECL included the effect of a loss rate model adjustment. Furthermore, the value of new defaults was higher than write-offs and customer debt repayments, and unlike in 2018, there were no debt sales in H1 2019. |
· |
ECL provisions coverage shows the expected pattern with higher coverage in the poorer asset quality bands, and also by stage. |
· |
In Ulster Bank RoI mortgages, the reduction in Stage 1 and Stage 2 ECL was driven by the movement of exposures into Stage 3 following a regulatory driven revision to the definition of default in that business. The corresponding increase in Stage 3 ECL was offset by the completion of the remainder of Ulster Bank RoIs 2018 sale of non-performing loans in H1 2019. |
Appendix 1 Capital and risk management
Credit risk Banking activities continued
Asset quality
The table below shows asset quality bands of gross loans and ECL by stage for the Wholesale portfolio.
|
|
Gross loans |
|
ECL provisions |
|
ECL provisions coverage |
| ||||||||||||||||||
|
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total |
|
Stage 1 |
|
Stage 2 |
|
Stage 3 |
|
Total | |
30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
% |
|
% |
|
% |
|
% | |
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
15,375 |
|
365 |
|
|
|
15,740 |
|
7 |
|
8 |
|
|
|
15 |
|
0.05 |
|
2.19 |
|
|
|
0.10 | |
AQ5-AQ8 |
|
17,838 |
|
1,710 |
|
|
|
19,548 |
|
37 |
|
27 |
|
|
|
64 |
|
0.21 |
|
1.58 |
|
|
|
0.33 | |
AQ9 |
|
39 |
|
75 |
|
|
|
114 |
|
- |
|
6 |
|
|
|
6 |
|
- |
|
8.00 |
|
|
|
5.26 | |
AQ10 |
|
|
|
|
|
1,516 |
|
1,516 |
|
|
|
|
|
339 |
|
339 |
|
|
|
|
|
22.36 |
|
22.36 | |
|
|
33,252 |
|
2,150 |
|
1,516 |
|
36,918 |
|
44 |
|
41 |
|
339 |
|
424 |
|
0.13 |
|
1.91 |
|
22.36 |
|
1.15 | |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
22,324 |
|
837 |
|
|
|
23,161 |
|
11 |
|
15 |
|
|
|
26 |
|
0.05 |
|
1.79 |
|
|
|
0.11 | |
AQ5-AQ8 |
|
39,298 |
|
6,932 |
|
|
|
46,230 |
|
91 |
|
156 |
|
|
|
247 |
|
0.23 |
|
2.25 |
|
|
|
0.53 | |
AQ9 |
|
232 |
|
373 |
|
|
|
605 |
|
1 |
|
14 |
|
|
|
15 |
|
0.43 |
|
3.75 |
|
|
|
2.48 | |
AQ10 |
|
|
|
|
|
1,712 |
|
1,712 |
|
|
|
|
|
762 |
|
762 |
|
|
|
|
|
44.51 |
|
44.51 | |
|
|
61,854 |
|
8,142 |
|
1,712 |
|
71,708 |
|
103 |
|
185 |
|
762 |
|
1,050 |
|
0.17 |
|
2.27 |
|
44.51 |
|
1.46 | |
Financial institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
25,527 |
|
265 |
|
|
|
25,792 |
|
5 |
|
7 |
|
|
|
12 |
|
0.02 |
|
2.64 |
|
|
|
0.05 | |
AQ5-AQ8 |
|
1,010 |
|
209 |
|
|
|
1,219 |
|
6 |
|
1 |
|
|
|
7 |
|
0.59 |
|
0.48 |
|
|
|
0.57 | |
AQ9 |
|
- |
|
2 |
|
|
|
2 |
|
- |
|
1 |
|
|
|
1 |
|
- |
|
50.00 |
|
|
|
50.00 | |
AQ10 |
|
|
|
|
|
22 |
|
22 |
|
|
|
|
|
12 |
|
12 |
|
|
|
|
|
54.55 |
|
54.55 | |
|
|
26,537 |
|
476 |
|
22 |
|
27,035 |
|
11 |
|
9 |
|
12 |
|
32 |
|
0.04 |
|
1.89 |
|
54.55 |
|
0.12 | |
Sovereign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
7,570 |
|
4 |
|
|
|
7,574 |
|
9 |
|
- |
|
|
|
9 |
|
0.12 |
|
- |
|
|
|
0.12 | |
AQ5-AQ8 |
|
148 |
|
2 |
|
|
|
150 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- | |
AQ9 |
|
1 |
|
- |
|
|
|
1 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- | |
AQ10 |
|
|
|
|
|
5 |
|
5 |
|
|
|
|
|
- |
|
- |
|
|
|
|
|
- |
|
- | |
|
|
7,719 |
|
6 |
|
5 |
|
7,730 |
|
9 |
|
- |
|
- |
|
9 |
|
0.12 |
|
- |
|
- |
|
0.12 | |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
70,796 |
|
1,471 |
|
|
|
72,267 |
|
32 |
|
30 |
|
|
|
62 |
|
0.05 |
|
2.04 |
|
|
|
0.09 | |
AQ5-AQ8 |
|
58,294 |
|
8,853 |
|
|
|
67,147 |
|
134 |
|
184 |
|
|
|
318 |
|
0.23 |
|
2.08 |
|
|
|
0.47 | |
AQ9 |
|
272 |
|
450 |
|
|
|
722 |
|
1 |
|
21 |
|
|
|
22 |
|
0.37 |
|
4.67 |
|
|
|
3.05 | |
AQ10 |
|
|
|
|
|
3,255 |
|
3,255 |
|
|
|
|
|
1,113 |
|
1,113 |
|
|
|
|
|
34.19 |
|
34.19 | |
|
|
129,362 |
|
10,774 |
|
3,255 |
|
143,391 |
|
167 |
|
235 |
|
1,113 |
|
1,515 |
|
0.13 |
|
2.18 |
|
34.19 |
|
1.06 | |
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
15,740 |
|
393 |
|
|
|
16,133 |
|
8 |
|
9 |
|
|
|
17 |
|
0.05 |
|
2.29 |
|
|
|
0.11 | |
AQ5-AQ8 |
|
17,397 |
|
1,418 |
|
|
|
18,815 |
|
35 |
|
26 |
|
|
|
61 |
|
0.20 |
|
1.83 |
|
|
|
0.32 | |
AQ9 |
|
8 |
|
66 |
|
|
|
74 |
|
- |
|
4 |
|
|
|
4 |
|
- |
|
6.06 |
|
|
|
5.41 | |
AQ10 |
|
|
|
|
|
1,685 |
|
1,685 |
|
|
|
|
|
506 |
|
506 |
|
|
|
|
|
30.03 |
|
30.03 | |
|
|
33,145 |
|
1,877 |
|
1,685 |
|
36,707 |
|
43 |
|
39 |
|
506 |
|
588 |
|
0.13 |
|
2.08 |
|
30.03 |
|
1.60 | |
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
21,814 |
|
773 |
|
|
|
22,587 |
|
13 |
|
14 |
|
|
|
27 |
|
0.06 |
|
1.81 |
|
|
|
0.12 | |
AQ5-AQ8 |
|
40,004 |
|
7,647 |
|
|
|
47,651 |
|
93 |
|
171 |
|
|
|
264 |
|
0.23 |
|
2.24 |
|
|
|
0.55 | |
AQ9 |
|
26 |
|
333 |
|
|
|
359 |
|
1 |
|
15 |
|
|
|
16 |
|
3.85 |
|
4.50 |
|
|
|
4.46 | |
AQ10 |
|
|
|
|
|
1,643 |
|
1,643 |
|
|
|
|
|
634 |
|
634 |
|
|
|
|
|
38.59 |
|
38.59 | |
|
|
61,844 |
|
8,753 |
|
1,643 |
|
72,240 |
|
107 |
|
200 |
|
634 |
|
941 |
|
0.17 |
|
2.28 |
|
38.59 |
|
1.30 | |
Financial institutions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
22,150 |
|
247 |
|
|
|
22,397 |
|
5 |
|
5 |
|
|
|
10 |
|
0.02 |
|
2.02 |
|
|
|
0.04 | |
AQ5-AQ8 |
|
2,352 |
|
222 |
|
|
|
2,574 |
|
7 |
|
2 |
|
|
|
9 |
|
0.30 |
|
0.90 |
|
|
|
0.35 | |
AQ9 |
|
- |
|
5 |
|
|
|
5 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- | |
AQ10 |
|
|
|
|
|
35 |
|
35 |
|
|
|
|
|
22 |
|
22 |
|
|
|
|
|
62.86 |
|
62.86 | |
|
|
24,502 |
|
474 |
|
35 |
|
25,011 |
|
12 |
|
7 |
|
22 |
|
41 |
|
0.05 |
|
1.48 |
|
62.86 |
|
0.16 | |
Sovereign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
6,780 |
|
22 |
|
|
|
6,802 |
|
1 |
|
- |
|
|
|
1 |
|
0.01 |
|
- |
|
|
|
0.01 | |
AQ5-AQ8 |
|
161 |
|
- |
|
|
|
161 |
|
- |
|
- |
|
|
|
- |
|
- |
|
- |
|
|
|
- | |
AQ10 |
|
|
|
|
|
4 |
|
4 |
|
|
|
|
|
- |
|
- |
|
|
|
|
|
- |
|
- | |
|
|
6,941 |
|
22 |
|
4 |
|
6,967 |
|
1 |
|
- |
|
- |
|
1 |
|
0.01 |
|
- |
|
- |
|
0.01 | |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
AQ1-AQ4 |
|
66,484 |
|
1,435 |
|
|
|
67,919 |
|
27 |
|
28 |
|
|
|
55 |
|
0.04 |
|
1.95 |
|
|
|
0.08 | |
AQ5-AQ8 |
|
59,914 |
|
9,287 |
|
|
|
69,201 |
|
135 |
|
199 |
|
|
|
334 |
|
0.23 |
|
2.14 |
|
|
|
0.48 | |
AQ9 |
|
34 |
|
404 |
|
|
|
438 |
|
1 |
|
19 |
|
|
|
20 |
|
2.94 |
|
4.70 |
|
|
|
4.57 | |
AQ10 |
|
|
|
|
|
3,367 |
|
3,367 |
|
|
|
|
|
1,162 |
|
1,162 |
|
|
|
|
|
34.51 |
|
34.51 | |
|
|
126,432 |
|
11,126 |
|
3,367 |
|
140,925 |
|
163 |
|
246 |
|
1,162 |
|
1,571 |
|
0.13 |
|
2.21 |
|
34.51 |
|
1.11 | |
Key points
· |
Across the Wholesale portfolio, the asset quality band distribution differed reflecting the diverse nature of differing sectors, but remained broadly unchanged during the first half of 2019. |
· |
The reduction in Stage 3 provision coverage in property was driven by the write-off of defaulted debt that carried a higher than average level of impairment compared to the rest of the portfolio. The lower coverage level in this sector reflected the secured nature of the exposure. |
Appendix 1 Capital and risk management
Credit risk Trading activities
This section covers the credit risk profile of RBSs trading activities.
Securities funding transactions and collateral
The table below shows securities funding transactions in NWM and Treasury. Balance sheet captions include balances held at all classifications under IFRS 9.
|
|
Reverse repos |
|
Repos | ||||||||
|
|
|
|
|
|
Outside |
|
|
|
|
|
Outside |
|
|
|
|
Of which |
|
netting |
|
|
|
Of which |
|
netting |
|
|
Total |
|
can be offset |
|
arrangements |
|
Total |
|
can be offset |
|
arrangements |
30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
Gross |
|
80,146 |
|
75,389 |
|
4,757 |
|
85,931 |
|
83,534 |
|
2,397 |
IFRS offset |
|
(49,125) |
|
(49,125) |
|
- |
|
(49,125) |
|
(49,125) |
|
- |
Carrying value |
|
31,021 |
|
26,264 |
|
4,757 |
|
36,806 |
|
34,409 |
|
2,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Master netting arrangements |
|
(1,191) |
|
(1,191) |
|
- |
|
(1,191) |
|
(1,191) |
|
- |
Securities collateral |
|
(24,808) |
|
(24,808) |
|
- |
|
(33,078) |
|
(33,078) |
|
- |
Potential for offset not recognised under IFRS |
|
(25,999) |
|
(25,999) |
|
- |
|
(34,269) |
|
(34,269) |
|
- |
Net |
|
5,022 |
|
265 |
|
4,757 |
|
2,537 |
|
140 |
|
2,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
68,044 |
|
65,057 |
|
2,987 |
|
70,097 |
|
68,940 |
|
1,157 |
IFRS offset |
|
(39,737) |
|
(39,737) |
|
- |
|
(39,737) |
|
(39,737) |
|
- |
Carrying value |
|
28,307 |
|
25,320 |
|
2,987 |
|
30,360 |
|
29,203 |
|
1,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Master netting arrangements |
|
(762) |
|
(762) |
|
- |
|
(762) |
|
(762) |
|
- |
Securities collateral |
|
(24,548) |
|
(24,548) |
|
- |
|
(28,441) |
|
(28,441) |
|
- |
Potential for offset not recognised under IFRS |
|
(25,310) |
|
(25,310) |
|
- |
|
(29,203) |
|
(29,203) |
|
- |
Net |
|
2,997 |
|
10 |
|
2,987 |
|
1,157 |
|
- |
|
1,157 |
Appendix 1 Capital and risk management
Credit risk Trading activities continued
Derivatives
The table below shows derivatives by type of contract. The master netting agreements and collateral shown below do not result in a net presentation on the balance sheet under IFRS 9. A significant proportion (more than 90%) of the derivatives relate to trading activities in NatWest Markets. The table below also includes hedging derivatives in Treasury.
|
|
30 June 2019 |
|
31 December 2018 | ||||||||||||||||
|
|
Notional |
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
GBP |
|
USD |
|
Euro |
|
Other |
|
Total |
|
Assets |
|
Liabilities |
|
Notional |
|
Assets |
|
Liabilities |
|
|
£bn |
|
£bn |
|
£bn |
|
£bn |
|
£bn |
|
£m |
|
£m |
|
£bn |
|
£m |
|
£m |
Gross exposure |
|
|
|
|
|
|
|
|
|
|
|
153,424 |
|
151,725 |
|
|
|
138,390 |
|
135,673 |
IFRS offset |
|
|
|
|
|
|
|
|
|
|
|
(7,830) |
|
(10,028) |
|
|
|
(5,041) |
|
(6,776) |
Carrying value |
|
3,014 |
|
6,317 |
|
5,214 |
|
1,942 |
|
16,487 |
|
145,594 |
|
141,697 |
|
13,979 |
|
133,349 |
|
128,897 |
Of which: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
91,365 |
|
88,255 |
|
|
|
81,855 |
|
74,004 |
Options purchased |
|
|
|
|
|
|
|
|
|
|
|
18,124 |
|
- |
|
|
|
14,481 |
|
- |
Options written |
|
|
|
|
|
|
|
|
|
|
|
- |
|
15,847 |
|
|
|
- |
|
16,371 |
Futures and forwards |
|
|
|
|
|
|
|
|
|
|
|
68 |
|
73 |
|
|
|
74 |
|
69 |
Total |
|
2,627 |
|
4,550 |
|
4,603 |
|
872 |
|
12,652 |
|
109,557 |
|
104,175 |
|
10,536 |
|
96,410 |
|
90,444 |
Exchange rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spot, forwards and futures |
|
|
|
|
|
|
|
|
|
|
|
19,350 |
|
20,177 |
|
|
|
17,904 |
|
18,610 |
Currency swaps |
|
|
|
|
|
|
|
|
|
|
|
10,079 |
|
10,453 |
|
|
|
11,322 |
|
12,062 |
Options purchased |
|
|
|
|
|
|
|
|
|
|
|
6,329 |
|
- |
|
|
|
7,319 |
|
- |
Options written |
|
|
|
|
|
|
|
|
|
|
|
- |
|
6,617 |
|
|
|
- |
|
7,558 |
Total |
|
386 |
|
1,760 |
|
600 |
|
1,070 |
|
3,816 |
|
35,758 |
|
37,247 |
|
3,426 |
|
36,545 |
|
38,230 |
Credit |
|
1 |
|
6 |
|
11 |
|
- |
|
18 |
|
266 |
|
254 |
|
16 |
|
346 |
|
208 |
Equity and commodity |
|
- |
|
1 |
|
- |
|
- |
|
1 |
|
13 |
|
21 |
|
1 |
|
48 |
|
15 |
Carrying value |
|
|
|
|
|
|
|
|
|
16,487 |
|
145,594 |
|
141,697 |
|
13,979 |
|
133,349 |
|
128,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counterparty mark-to-market netting |
|
|
|
|
|
|
|
|
|
|
|
(116,595) |
|
(116,595) |
|
|
|
(106,762) |
|
(106,762) |
Cash collateral |
|
|
|
|
|
|
|
|
|
|
|
(19,927) |
|
(17,592) |
|
|
|
(17,937) |
|
(15,227) |
Securities collateral |
|
|
|
|
|
|
|
|
|
|
|
(3,997) |
|
(3,364) |
|
|
|
(4,469) |
|
(3,466) |
Net exposure |
|
|
|
|
|
|
|
|
|
|
|
5,075 |
|
4,146 |
|
|
|
4,181 |
|
3,442 |
Of which outside netting arrangements |
|
|
|
|
|
|
|
|
|
|
|
1,891 |
|
3,874 |
|
|
|
2,061 |
|
1,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banks (2) |
|
|
|
|
|
|
|
|
|
|
|
258 |
|
903 |
|
|
|
362 |
|
443 |
Other financial institutions (3) |
|
|
|
|
|
|
|
|
|
|
|
1,472 |
|
1,311 |
|
|
|
1,054 |
|
1,144 |
Corporate (4) |
|
|
|
|
|
|
|
|
|
|
|
2,994 |
|
1,832 |
|
|
|
2,510 |
|
1,817 |
Government (5) |
|
|
|
|
|
|
|
|
|
|
|
351 |
|
100 |
|
|
|
255 |
|
38 |
Net exposure |
|
|
|
|
|
|
|
|
|
|
|
5,075 |
|
4,146 |
|
|
|
4,181 |
|
3,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
|
|
|
|
|
2,635 |
|
1,332 |
|
|
|
1,935 |
|
1,304 |
Europe |
|
|
|
|
|
|
|
|
|
|
|
1,280 |
|
2,460 |
|
|
|
1,308 |
|
1,465 |
US |
|
|
|
|
|
|
|
|
|
|
|
844 |
|
80 |
|
|
|
588 |
|
298 |
RoW |
|
|
|
|
|
|
|
|
|
|
|
316 |
|
274 |
|
|
|
350 |
|
375 |
Net exposure |
|
|
|
|
|
|
|
|
|
|
|
5,075 |
|
4,146 |
|
|
|
4,181 |
|
3,442 |
Notes:
(1) The notional amount of interest rate derivatives includes £7,843 billion (31 December 2018 £5,952 billion) in respect of contracts cleared through central clearing counterparties.
(2) Transactions with certain counterparties with whom RBS has netting arrangements but collateral is not posted on a daily basis; certain transactions with specific terms that may not fall within netting and collateral arrangements; derivative positions in certain jurisdictions for example China where the collateral agreements are not deemed to be legally enforceable.
(3) Transactions with securitisation vehicles and funds where collateral posting is contingent on RBSs external rating.
(4) Mainly large corporates with whom RBS may have netting arrangements in place, but operational capability does not support collateral posting.
(5) Sovereigns and supranational entities with one-way collateral agreements in their favour.
Appendix 1 Capital and risk management
Credit risk Trading Activities continued
Debt securities
The table below shows debt securities held at mandatory fair value through profit or loss by issuer as well as ratings based on the lowest of Standard & Poors, Moodys and Fitch. A significant proportion (more than 95%) of these positions are trading securities in NatWest Markets.
|
Central and local government |
|
Financial |
|
|
|
| |||||
|
|
UK |
|
US |
|
Other |
|
institutions |
|
Corporate |
|
Total |
30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
AAA |
|
- |
|
- |
|
3,198 |
|
1,928 |
|
4 |
|
5,130 |
AA to AA+ |
|
5,365 |
|
6,093 |
|
3,686 |
|
811 |
|
95 |
|
16,050 |
A to AA- |
|
- |
|
- |
|
4,508 |
|
628 |
|
46 |
|
5,182 |
BBB- to A- |
|
- |
|
- |
|
4,861 |
|
818 |
|
467 |
|
6,146 |
Non-investment grade |
|
- |
|
- |
|
88 |
|
517 |
|
294 |
|
899 |
Unrated |
|
- |
|
- |
|
- |
|
505 |
|
121 |
|
626 |
Total |
|
5,365 |
|
6,093 |
|
16,341 |
|
5,207 |
|
1,027 |
|
34,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short positions |
|
(5,589) |
|
(1,773) |
|
(15,811) |
|
(1,652) |
|
(189) |
|
(25,014) |
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA |
|
- |
|
- |
|
2,093 |
|
1,459 |
|
7 |
|
3,559 |
AA to AA+ |
|
6,834 |
|
4,689 |
|
3,161 |
|
773 |
|
120 |
|
15,577 |
A to AA- |
|
- |
|
- |
|
4,571 |
|
482 |
|
51 |
|
5,104 |
BBB- to A- |
|
- |
|
- |
|
3,592 |
|
802 |
|
285 |
|
4,679 |
Non-investment grade |
|
- |
|
- |
|
81 |
|
832 |
|
237 |
|
1,150 |
Unrated |
|
- |
|
- |
|
- |
|
572 |
|
8 |
|
580 |
Total |
|
6,834 |
|
4,689 |
|
13,498 |
|
4,920 |
|
708 |
|
30,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short positions |
|
(6,394) |
|
(2,008) |
|
(13,500) |
|
(1,724) |
|
(201) |
|
(23,827) |
Credit risk Cross border exposure
Cross border exposures comprise both banking and trading activities, including reverse repurchase agreements. Exposures comprise loans, including finance leases and instalment credit receivables, and other monetary assets, such as debt securities. The geographical breakdown is based on the country of domicile of the borrower or guarantor of ultimate risk. Cross border exposures include non-local currency claims of overseas offices on local residents but exclude exposures to local residents in local currencies. The table below shows cross border exposures greater than 0.05% of RBSs total assets.
|
|
Government |
|
Banks |
|
Other |
|
Total |
|
Short positions |
|
Net of short positions |
30 June 2019 |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
Western Europe |
|
22,879 |
|
10,801 |
|
21,062 |
|
54,742 |
|
16,480 |
|
38,262 |
Of which: France |
|
3,892 |
|
2,363 |
|
2,471 |
|
8,726 |
|
3,982 |
|
4,744 |
Of which: Germany |
|
7,535 |
|
3,790 |
|
1,401 |
|
12,726 |
|
3,892 |
|
8,834 |
Of which: Netherlands |
|
1,858 |
|
663 |
|
5,157 |
|
7,678 |
|
1,454 |
|
6,224 |
Of which: Italy |
|
2,965 |
|
720 |
|
1,759 |
|
5,444 |
|
2,405 |
|
3,039 |
Of which: Spain |
|
1,587 |
|
522 |
|
1,917 |
|
4,026 |
|
1,947 |
|
2,079 |
United States |
|
14,093 |
|
5,657 |
|
8,582 |
|
28,332 |
|
1,868 |
|
26,464 |
Japan |
|
4,611 |
|
3,512 |
|
431 |
|
8,554 |
|
13 |
|
8,541 |
Jersey |
|
- |
|
- |
|
3,858 |
|
3,858 |
|
1 |
|
3,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Western Europe |
|
21,121 |
|
19,003 |
|
16,741 |
|
56,865 |
|
14,103 |
|
42,762 |
Of which: France |
|
3,396 |
|
10,209 |
|
1,579 |
|
15,184 |
|
1,626 |
|
13,558 |
Of which: Germany |
|
8,023 |
|
3,086 |
|
1,145 |
|
12,254 |
|
5,397 |
|
6,857 |
Of which: Netherlands |
|
1,142 |
|
675 |
|
3,739 |
|
5,556 |
|
985 |
|
4,571 |
Of which: Italy |
|
2,179 |
|
248 |
|
584 |
|
3,011 |
|
1,796 |
|
1,215 |
Of which: Spain |
|
891 |
|
450 |
|
1,848 |
|
3,189 |
|
1,164 |
|
2,025 |
United States |
|
13,558 |
|
5,458 |
|
8,379 |
|
27,395 |
|
2,103 |
|
25,292 |
Japan |
|
4,857 |
|
2,327 |
|
405 |
|
7,589 |
|
11 |
|
7,578 |
Jersey |
|
- |
|
5 |
|
3,064 |
|
3,069 |
|
2 |
|
3,067 |
Appendix 1 Capital and risk management
Non-traded market risk
Non-traded market risk is the risk to the value of assets or liabilities outside the trading book, or the risk to income, that arises from changes in market prices such as interest rates, foreign exchange rates and equity prices, or from changes in managed rates.
Key developments
· Non-traded market risk is now managed separately on both sides of the ring-fence. However, it continues to be aggregated and monitored against risk appetite at RBS level.
· Five- and ten-year sterling interest-rate swap rates fell by 0.35%-0.40% in H1 2019. The structural hedge provides some protection against volatility in interest rates and the yield remained stable, falling by only 0.02% in H1 2019 from 1.23% to 1.21%.
· Following the Alawwal bank merger, RBS holds a minority equity holding in SABB. This investment in the newly-merged entity is held in NWM Plc. The investment is held at fair value. Changes in value are recognised in reserves. This exposure is now captured in the VaR table below.
· By 30 June 2019, the disposal of the lender-option/borrower-option loan portfolio was materially complete, reducing RBSs exposure to changes in the credit spread compared to the 2018 year-end.
Value-at-risk
The following table shows one-day internal banking book VaR at a 99% confidence level, split by risk type.
|
|
Half year ended | ||||||||||||||||||||||
|
|
30 June 2019 |
|
30 June 2018 |
|
31 December 2018 | ||||||||||||||||||
|
|
|
|
|
|
|
|
Period |
|
|
|
|
|
|
|
Period |
|
|
|
|
|
|
|
Period |
|
|
Average |
|
Maximum |
|
Minimum |
|
end |
|
Average |
|
Maximum |
|
Minimum |
|
end |
|
Average |
|
Maximum |
|
Minimum |
|
end |
|
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
|
£m |
Interest rate |
|
11.9 |
|
14.0 |
|
9.3 |
|
9.9 |
|
19.4 |
|
28.2 |
|
8.9 |
|
19.2 |
|
9.3 |
|
11.6 |
|
7.3 |
|
11.6 |
Euro |
|
1.2 |
|
1.8 |
|
0.7 |
|
1.8 |
|
2.7 |
|
3.9 |
|
1.3 |
|
2.9 |
|
1.4 |
|
2.4 |
|
1.0 |
|
1.0 |
Sterling |
|
11.5 |
|
14.1 |
|
9.5 |
|
9.9 |
|
18.7 |
|
26.0 |
|
11.2 |
|
19.9 |
|
10.3 |
|
13.7 |
|
7.9 |
|
13.3 |
US dollar |
|
4.7 |
|
6.0 |
|
3.8 |
|
3.8 |
|
5.6 |
|
6.8 |
|
1.5 |
|
1.5 |
|
3.7 |
|
8.7 |
|
1.4 |
|
8.7 |
Other |
|
0.3 |
|
0.4 |
|
0.2 |
|
0.4 |
|
0.4 |
|
0.7 |
|
0.3 |
|
0.3 |
|
0.5 |
|
0.7 |
|
0.3 |
|
0.7 |
Credit spread |
|
54.9 |
|
58.0 |
|
49.2 |
|
56.6 |
|
56.9 |
|
60.8 |
|
49.4 |
|
49.4 |
|
62.4 |
|
77.8 |
|
53.9 |
|
77.8 |
Foreign exchange |
|
20.0 |
|
23.8 |
|
7.2 |
|
7.2 |
|
12.8 |
|
32.7 |
|
5.9 |
|
16.6 |
|
14.0 |
|
16.4 |
|
12.2 |
|
13.0 |
Equity |
|
38.6 |
|
38.6 |
|
38.6 |
|
38.6 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Pipeline risk |
|
0.3 |
|
0.5 |
|
0.2 |
|
0.3 |
|
0.6 |
|
1.3 |
|
0.3 |
|
0.4 |
|
0.6 |
|
0.8 |
|
0.4 |
|
0.4 |
Diversification (1) |
|
(70.5) |
|
|
|
|
|
(50.7) |
|
(29.3) |
|
|
|
|
|
(22.6) |
|
(20.6) |
|
|
|
|
|
(20.5) |
Total |
|
55.2 |
|
61.9 |
|
48.1 |
|
61.9 |
|
60.4 |
|
69.8 |
|
54.9 |
|
63.0 |
|
65.7 |
|
82.3 |
|
61.4 |
|
82.3 |
Note:
(1) |
RBS benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR. |
Key point
· |
The increase in total VaR at the end of June 2019 compared to the average, reflected the equity exposure to SABB following the Alawwal bank merger in June 2019. The inclusion of this exposure outweighed the decrease in the foreign exchange VaR at 30 June 2019 resulting from lower sensitivity to the Saudi Riyal exchange rate following the merger. |
Appendix 1 Capital and risk management
Non-traded market risk continued
Structural hedging
RBS has the benefit of a significant pool of stable, non and low interest-bearing liabilities, principally comprising equity and money transmission accounts. These balances are usually hedged, either by investing directly in longer-term fixed-rate assets (such as fixed-rate mortgages or UK government gilts) or by using interest rate swaps, which are generally booked as cash flow hedges or floating rate assets, in order to provide a consistent and predictable revenue stream.
After hedging the net interest rate exposure of the bank externally, RBS allocates income to equity or products in structural hedges by reference to the relevant interest rate swap curve. Over time, this approach has provided a basis for stable income attribution to products and interest rate returns. The programme aims to track a time series of medium-term swap rates, but the yield will be affected by changes in product volumes and RBSs capital composition.
The table below shows the incremental income allocation (above three-month LIBOR), total income allocation (including three-month LIBOR), the period end and average notional balances and the total yield (including three-month LIBOR) associated with the structural hedges managed by RBS.
|
Half year ended
| ||||||||||||||||
|
30 June 2019 |
|
30 June 2018 |
|
31 December 2018 | ||||||||||||
|
Incremental |
Total |
Spot |
Average |
Overall |
|
Incremental |
Total |
Spot |
Average |
Overall |
|
Incremental |
Total |
Spot |
Average |
Overall |
|
income |
income |
notional |
notional |
yield |
|
income |
income |
notional |
notional |
yield |
|
income |
income |
notional |
notional |
yield |
|
£m |
£m |
£bn |
£bn |
% |
|
£m |
£m |
£bn |
£bn |
% |
|
£m |
£m |
£bn |
£bn |
% |
Equity |
197 |
332 |
29 |
29 |
2.31 |
|
257 |
335 |
29 |
28 |
2.40 |
|
212 |
338 |
29 |
30 |
2.28 |
Product (1) |
82 |
558 |
111 |
111 |
1.01 |
|
225 |
545 |
108 |
108 |
1.01 |
|
143 |
558 |
110 |
109 |
1.03 |
Other |
27 |
84 |
21 |
21 |
0.79 |
|
50 |
80 |
21 |
21 |
0.75 |
|
39 |
86 |
22 |
22 |
0.78 |
Total |
306 |
974 |
161 |
161 |
1.21 |
|
532 |
960 |
158 |
157 |
1.22 |
|
394 |
982 |
161 |
161 |
1.23 |
Note:
(1) Refer to the next table for a segmental split.
Key points
· The five year sterling swap rate fell to 0.83% at the end of June 2019 from 1.22% at December 2018. The ten-year sterling swap rate also fell to 0.97% from 1.35%. However, the yield of the structural hedge was relatively stable. At 1.21% the overall yield was also higher than market swap rates at 30 June 2019.
· Incremental income in excess of three-month LIBOR fell in H1 2019 compared to H2 2018. This was primarily due to higher three-month LIBOR fixings, resulting in less income benefit from the hedge.
Equity structural hedges refer to income attributed to the hedging of equity and reserves, primarily in NatWest Markets Plc and NatWest Holdings. Product structural hedges refer to income allocated to customer products, for example current accounts, in NatWest Holdings. Other structural hedges refer to hedges managed by the subsidiaries. Approximately 37% of other structural hedges are euro-denominated.
The following table presents the incremental income associated with product structural hedges at segment level.
|
Half year ended | ||
|
30 June 2019 |
30 June 2018* |
31 December 2018* |
|
£m |
£m |
£m |
UK Personal Banking |
38 |
101 |
65 |
Commercial and Business Banking |
44 |
122 |
78 |
Other |
- |
2 |
- |
Total |
82 |
225 |
143 |
Note:
(1) For further detail on incremental income related to product structural hedges refer to the table below.
*Restated. Refer to Note 1 of the main announcement for further details.
Appendix 1 Capital and risk management
Non-traded market risk continued
Sensitivity of net interest earnings
Net interest earnings are sensitive to changes in the level of interest rates because changes to coupons on some customer products do not always match changes in market rates of interest or central bank policy rates.
The sensitivity of the net interest income table shows the expected impact, over 12 months, to an immediate upward or downward change of 25 and 100 basis points to all interest rates. Yield curves are expected to move in parallel, though interest rates are assumed to floor at zero per cent or, for euro rates, at the current negative rate.
The methodology, assumptions and limitations relating to the following two earnings sensitivity tables did not change materially in H1 2019. For further details, refer to pages 154-155 of the 2018 Annual Report on Form 20-F.
|
Parallel shifts in yield curve | |||
|
+25 basis points |
-25 basis points |
+100 basis points |
-100 basis points |
30 June 2019 |
£m |
£m |
£m |
£m |
Euro |
23 |
5 |
88 |
9 |
Sterling |
201 |
(142) |
707 |
(706) |
US dollar |
15 |
(9) |
51 |
(52) |
Other |
(2) |
2 |
(9) |
15 |
Total |
237 |
(144) |
837 |
(734) |
|
|
|
|
|
30 June 2018 |
|
|
|
|
Euro |
6 |
4 |
26 |
4 |
Sterling |
156 |
(173) |
673 |
(674) |
US dollar |
9 |
(6) |
43 |
(29) |
Other |
4 |
(3) |
16 |
(7) |
Total |
175 |
(178) |
758 |
(706) |
|
|
|
|
|
31 December 2018 |
|
|
|
|
Euro |
29 |
(3) |
114 |
(1) |
Sterling |
152 |
(201) |
651 |
(717) |
US dollar |
15 |
(8) |
63 |
(42) |
Other |
1 |
2 |
2 |
3 |
Total |
197 |
(210) |
830 |
(757) |
|
|
|
|
|
Refer to the key points under the next table for analysis. |
|
|
|
|
Appendix 1 Capital and risk management
Non-traded market risk continued
The table below shows the net interest earnings sensitivity on a one-year, two-year and three-year forward-looking basis to a parallel upward or downward shift in interest rates of 25 basis points. The projection is a simplified sensitivity in which the balance sheet is assumed to be constant, with no change in customer behaviour or margin management strategy as a result of rate changes. The impact of the rate shock on structural hedges increases as maturing hedges are replaced at higher or lower rates through the three-year period.
|
+25 basis points parallel upward shift |
|
-25 basis points parallel downward shift | ||||
|
Year 1 |
Year 2 (1) |
Year 3 (1) |
|
Year 1 |
Year 2 (1) |
Year 3 (1) |
30 June 2019 |
£m |
£m |
£m |
|
£m |
£m |
£m |
Structural hedges |
32 |
99 |
171 |
|
(30) |
(97) |
(168) |
Managed margin (2) |
213 |
241 |
243 |
|
(129) |
(104) |
(108) |
Other |
(8) |
- |
- |
|
15 |
- |
- |
Total |
237 |
340 |
414 |
|
(144) |
(201) |
(276) |
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
Structural hedges |
32 |
98 |
170 |
|
(32) |
(98) |
(167) |
Managed margin (2) |
150 |
171 |
170 |
|
(177) |
(189) |
(163) |
Other |
15 |
- |
- |
|
(2) |
- |
- |
Total |
197 |
269 |
340 |
|
(210) |
(287) |
(330) |
Notes:
(1) The projections for Year 2 and Year 3 consider only the main drivers of earnings sensitivity, namely structural hedging and margin management.
(2) Primarily current accounts and savings accounts.
Key points
· Changes to earnings sensitivity to rate shocks between December 2018 and June 2019 were mainly driven by changes to estimates of how product pricing will respond to interest rate shocks. These estimates are regularly reviewed and are influenced by the overall level of interest rates, the Groups competitive position and other strategic considerations.
· Sensitivity to a 100 basis point downward shift in yield curves was also affected by the changes in the level of interest rates. In the shock scenario, rates fell less at 30 June 2019 before hitting an assumed zero per cent floor compared to 31 December 2018. This resulted in a slightly lower adverse impact at 30 June 2019.
Appendix 1 Capital and risk management
Non-traded market risk continued
Foreign exchange risk
The table below shows structural foreign currency exposures.
|
|
|
Net |
|
Structural |
|
|
|
Net |
|
investments |
|
foreign currency |
|
Residual |
|
investments |
|
in foreign |
Net |
exposures |
|
structural |
|
in foreign |
|
operations |
investment |
pre-economic |
Economic |
foreign currency |
|
operations |
NCI (1) |
excluding NCI |
hedges |
hedges |
hedges (2) |
exposures |
30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
US dollar |
1,412 |
- |
1,412 |
(33) |
1,379 |
(1,379) |
- |
Euro |
6,935 |
3 |
6,932 |
(1,711) |
5,221 |
- |
5,221 |
Other non-sterling |
1,492 |
- |
1,492 |
(145) |
1,347 |
- |
1,347 |
Total |
9,839 |
3 |
9,836 |
(1,889) |
7,947 |
(1,379) |
6,568 |
|
|
|
|
|
|
|
|
31 December 2018 |
|
|
|
|
|
|
|
US dollar |
553 |
- |
553 |
(4) |
549 |
(549) |
- |
Euro |
6,428 |
33 |
6,395 |
(853) |
5,542 |
- |
5,542 |
Other non-sterling |
2,600 |
710 |
1,890 |
(1,249) |
641 |
(81) |
560 |
Total |
9,581 |
743 |
8,838 |
(2,106) |
6,732 |
(630) |
6,102 |
Notes:
(1) Non-controlling interests (NCI) represents the structural foreign exchange exposure not attributable to owners equity.
(2) Economic hedges of US dollar net investments in foreign operations represent US dollar equity securities that do not qualify as net investment hedges for accounting purposes. They provide an offset to structural foreign exchange exposures to the extent that there are net assets in overseas operations available. Economic hedges of other currency net investments in foreign operations represent monetary liabilities that are not booked as net investment hedges.
Key points
· Other non-sterling net investments in foreign operations fell. This reflected the Alawwal bank merger. The minority equity stake in Saudi British Bank is too small to be consolidated as a net investment in a foreign operation. The increase in euro net investments in foreign operations also partly resulted from the gain on the sale of NWM N.V.s equity stake in SABB to NWM Plc. NWM Plc has increased the capitalisation of its US branch. This has reduced the branchs debt funding and NWM Plcs regulatory exposure to fluctuations in the US dollar exchange rate against sterling.
· Changes in exchange rates affect equity in proportion to structural foreign currency exposures. At 30 June 2019, a 5% strengthening in all foreign currencies against sterling would result in a £0.4 billion increase in equity reserves, while a 5% weakening in all foreign currencies against sterling would result in a £0.4 billion reduction in equity reserves.
Traded market risk
Traded market risk is the risk arising from changes in fair value on positions, assets, liabilities or commitments in trading portfolios as a result of fluctuations in market prices.
Traded internal VaR
The table below shows one-day internal value-at-risk (VaR) for RBSs trading portfolios, split by exposure type.
|
Half year ended | |||||||||||||
|
30 June 2019 |
|
30 June 2018 |
|
31 December 2018 | |||||||||
|
|
|
|
Period |
|
|
|
|
Period |
|
|
|
|
Period |
|
Average |
Maximum |
Minimum |
end |
|
Average |
Maximum |
Minimum |
end |
|
Average |
Maximum |
Minimum |
end |
Traded VaR (1-day 99%) |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
Interest rate |
10.3 |
16.9 |
6.9 |
9.8 |
|
15.0 |
27.3 |
10.4 |
16.5 |
|
13.6 |
19.9 |
9.2 |
13.0 |
Credit spread |
9.4 |
12.7 |
7.0 |
9.9 |
|
13.2 |
24.2 |
9.1 |
10.4 |
|
8.9 |
14.6 |
6.9 |
8.2 |
Currency |
3.6 |
5.8 |
2.0 |
3.8 |
|
3.2 |
7.6 |
1.4 |
3.5 |
|
3.0 |
6.3 |
1.7 |
5.3 |
Equity |
0.7 |
2.2 |
0.3 |
0.5 |
|
0.6 |
0.9 |
0.3 |
0.8 |
|
1.0 |
1.6 |
0.5 |
0.8 |
Commodity |
0.2 |
0.5 |
- |
0.2 |
|
0.4 |
1.0 |
0.1 |
0.5 |
|
0.2 |
0.6 |
- |
0.1 |
Diversification (1) |
(9.3) |
|
|
(10.6) |
|
(11.2) |
|
|
(11.9) |
|
(9.9) |
|
|
(8.8) |
Total |
14.9 |
21.5 |
12.1 |
13.6 |
|
21.2 |
35.6 |
15.4 |
19.8 |
|
16.8 |
26.8 |
11.7 |
18.6 |
Note:
(1) RBS benefits from diversification across various financial instrument types, currencies and markets. The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
Key points
· Traded VaR remained broadly unchanged on an average basis during H1 2019 compared to H2 2018.
· The decrease, on an average basis compared to H1 2018, is attributed to peaks in H1 2018 due to long euro rates positioning and bond syndication activity.
Appendix 1 Capital and risk management
Other risks
Operational risk
· RBS continues to develop its cyber risk management and defence strategies, including tracking prominent threat groups and working with the National Cyber Security Centre through its Industry 100 initiative.
· There was also continued oversight of the Groups preparations for the UKs exit from the EU to ensure that processes and systems are in place to ensure continuity of service for customers. Additionally, continuing improvements to the Groups control environment, including further embedding of the operational risk management framework and refresh of the risk appetite framework, were also a focus.
Compliance and Conduct risk
· Embedding the compliance and conduct risk framework across RBS was a key focus in H1 2019. The complementary compliance and conduct risk manual was also launched to support this work. Training was completed across all three lines of defence, supported by business-specific case studies.
· Work continued on concluding most of RBSs material remediation projects in 2019. Some material projects remain under active management, with plans in place to conclude the majority by the end of the year. Meeting the PPI closure deadline of 29 August 2019, and ensuring the effective and timely management of residual work thereafter, remains a key focus with the current timeline being end of Q2 2020.
Climate risk
· RBS reclassified climate change as a top risk and work continued on integrating climate-related financial risks into the core risk framework. This included work on scenario-based analysis for both physical and transition risks. In March 2019, RBS also joined the Climate Financial Risk Forum, established by the FCA and PRA to develop practical tools to address climate-related financial risks.
Appendix 2
Non-IFRS financial measures
RBS Interim Results 2019
Appendix 2 Non-IFRS financial measures
As described in Note 1 on page 25, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). The Interim Results contain a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:
Non-IFRS financial measures
Measure |
Basis of preparation |
Additional analysis or |
RBS return on tangible equity |
Annualised profit for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is total equity less intangible assets and other owners equity. |
Note 1 |
Segmental return on tangible equity |
Segmental operating profit adjusted for tax and for preference share dividends divided by average notional equity, allocated at an operating segment specific rate, of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). |
Note 1 |
Operating expenses analysis management view |
The management analysis of strategic disposals in other income and operating expenses shows strategic costs and litigation and conduct costs in separate lines, these amounts are included in staff, premises and equipment and other administrative expenses in the statutory analysis. |
Note 2 |
Cost:income ratio |
Total operating expenses less operating lease depreciation divided by total income less operating lease depreciation. |
Note 3 |
Commentary adjusted periodically for specific items |
Group and segmental business performance commentary have been adjusted for the impact of specific items such as the Alawwal bank merger, additional authorised push payments fraud costs, notable items(detailed on Page 5), strategic, litigation and conduct costs(detailed on Page 16 to 20). |
Notable items - Page 5 |
Aggregation of business segments into franchises |
Personal & Ulster franchise results, combining the reportable segments of UK Personal Banking (UK PB) and Ulster Bank RoI, Commercial & Private Banking (CPB) franchise results, combining the reportable segments of Commercial Banking and Private Banking. |
Page 28 Note 4 |
Bank net interest margin (NIM) |
Net interest income of the banking business less the NatWest Markets element as a percentage of interest-earning assets of the banking business less the NatWest Markets element. |
Note 4 |
Performance metrics not defined under IFRS(1)
Measure |
Basis of preparation |
Additional analysis or |
Loan:deposit ratio |
Net customer loans held at amortised cost divided by total customer deposits. |
Note 5 |
Tangible net asset value |
Tangible equity divided by the number of ordinary shares in issue. Tangible equity is ordinary shareholders interest less intangible assets. |
Page 4 |
NIM |
Net interest income of the banking business as a percentage of interest-earning assets of the banking business. |
Pages 16 - 20. |
Funded assets |
Total assets less derivatives. |
Page 16 - 20 |
ECL loss rate |
The annualised loan impairment charge divided by gross customer loans. |
Page 37. |
Note:
(1) Metric based on GAAP measures, included as not defined under IFRS and reported for compliance with ESMA adjusted performance measure rules.
RBS Interim Results 2019
Appendix 2 Non-IFRS financial measures
1. Return on tangible equity
|
|
Half year ended |
|
Quarter ended |
| ||||||
|
|
30 June |
|
30 June |
|
30 June |
|
31 March |
|
30 June |
|
RBS return on tangible equity |
|
2019 |
|
2018 |
|
2019 |
|
2019 |
|
2018 |
|
Profit attributable to ordinary shareholders (£m) |
|
2,038 |
|
888 |
|
1,331 |
|
707 |
|
96 |
|
Adjustment for Alawwal bank merger gain (£m) |
|
764 |
|
- |
|
- |
|
- |
|
- |
|
Adjusted profit attributable to ordinary shareholders (£m) |
|
1,274 |
|
- |
|
- |
|
- |
|
- |
|
Annualised profit attributable to ordinary shareholders (£m) |
|
4,076 |
|
1,776 |
|
5,324 |
|
2,828 |
|
384 |
|
Annualised adjusted profit attributable to ordinary shareholders (£m) |
|
2,548 |
|
- |
|
- |
|
- |
|
- |
|
Average total equity (£m) |
|
46,310 |
|
48,773 |
|
46,179 |
|
46,516 |
|
48,578 |
|
Adjustment for other owners equity and intangibles (£m) |
|
(12,528) |
|
(15,019) |
|
(12,410) |
|
(12,581) |
|
(15,056) |
|
Adjusted total tangible equity (£m) |
|
33,782 |
|
33,754 |
|
33,769 |
|
33,935 |
|
33,522 |
|
Return on tangible equity (%) |
|
12.1% |
|
5.3% |
|
15.8% |
|
8.3% |
|
1.1% |
|
Return on tangible equity adjusting for impact of Alawwal bank merger |
|
7.5% |
|
|
|
|
|
|
|
|
|
|
|
UK |
|
Ulster |
|
Commercial & Private |
|
|
|
|
| ||
|
|
Personal |
|
Bank |
|
Commercial |
|
Private |
|
RBS |
|
NatWest |
|
Half year ended 30 June 2019 |
|
Banking |
|
RoI |
|
Banking |
|
Banking |
|
International |
|
Markets |
|
Operating profit (£m) |
|
1,037 |
|
23 |
|
701 |
|
155 |
|
194 |
|
300 |
|
Adjustment for tax (£m) |
|
(290) |
|
- |
|
(196) |
|
(43) |
|
(27) |
|
(84) |
|
Preference share cost allocation (£m) |
|
(36) |
|
- |
|
(82) |
|
(8) |
|
- |
|
(30) |
|
Adjusted attributable profit (£m) |
|
711 |
|
23 |
|
423 |
|
104 |
|
167 |
|
186 |
|
Annualised adjusted attributable profit (£m) |
|
1,422 |
|
46 |
|
846 |
|
207 |
|
334 |
|
372 |
|
Adjustment for Alawwal merger gain (£m) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(299) |
|
Annualised adjusted profit attributable to ordinary shareholders (£m) |
|
1,422 |
|
46 |
|
846 |
|
207 |
|
334 |
|
73 |
|
Monthly average RWAe (£bn) |
|
37.0 |
|
14.3 |
|
79.6 |
|
9.6 |
|
7.0 |
|
49.2 |
|
Equity factor |
|
15.0% |
|
15.0% |
|
12.0% |
|
13.0% |
|
16.0% |
|
15.0% |
|
RWAe applying equity factor (£bn) |
|
5.5 |
|
2.1 |
|
9.6 |
|
1.2 |
|
1.1 |
|
7.4 |
|
Return on equity (%) |
|
25.6% |
|
2.1% |
|
8.8% |
|
16.6% |
|
29.7% |
|
1.0% |
|
Half year ended 30 June 2018* |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (£m) |
|
1,129 |
|
86 |
|
1,215 |
|
156 |
|
173 |
|
46 |
|
Adjustment for tax (£m) |
|
(316) |
|
- |
|
(340) |
|
(44) |
|
(24) |
|
(13) |
|
Preference share cost allocation (£m) |
|
(40) |
|
- |
|
(94) |
|
(12) |
|
(8) |
|
(54) |
|
Adjusted attributable profit (£m) |
|
773 |
|
86 |
|
781 |
|
100 |
|
141 |
|
(21) |
|
Annualised adjusted attributable profit (£m) |
|
1,546 |
|
172 |
|
1,562 |
|
200 |
|
282 |
|
(42) |
|
Monthly average RWAe (£bn) |
|
32.8 |
|
17.7 |
|
86.5 |
|
9.4 |
|
6.9 |
|
56.4 |
|
Equity factor |
|
15.0% |
|
14.0% |
|
12.0% |
|
13.5% |
|
16.0% |
|
15.0% |
|
RWAe applying equity factor (£bn) |
|
4.9 |
|
2.5 |
|
10.4 |
|
1.3 |
|
1.1 |
|
8.5 |
|
Return on equity |
|
31.4% |
|
7.0% |
|
15.1% |
|
15.8% |
|
25.7% |
|
-0.5% |
|
* Restated. Refer to Note 1 for further details.
RBS Interim Results 2019
Appendix 2 Non-IFRS financial measures
1. Return on tangible equity continued
|
|
UK |
|
Ulster |
|
Commercial & Private |
|
|
|
|
| ||
|
|
Personal |
|
Bank |
|
Commercial |
|
Private |
|
RBS |
|
NatWest |
|
Quarter ended 30 June 2019 |
|
Banking |
|
RoI |
|
Banking |
|
Banking |
|
International |
|
Markets |
|
Operating profit (£m) |
|
539 |
|
3 |
|
264 |
|
75 |
|
101 |
|
362 |
|
Adjustment for tax (£m) |
|
(151) |
|
- |
|
(74) |
|
(21) |
|
(14) |
|
(101) |
|
Preference share cost allocation (£m) |
|
(18) |
|
- |
|
(41) |
|
(4) |
|
- |
|
(30) |
|
Adjusted attributable profit (£m) |
|
370 |
|
3 |
|
149 |
|
50 |
|
87 |
|
231 |
|
Annualised adjusted attributable profit (£m) |
|
1,480 |
|
12 |
|
596 |
|
199 |
|
345 |
|
924 |
|
Adjustment for Alawwal merger gain (£m) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(598) |
|
Annualised adjusted profit attributable to ordinary shareholders (£m) |
|
1,480 |
|
12 |
|
596 |
|
199 |
|
345 |
|
326 |
|
Monthly average RWAe (£bn) |
|
37.2 |
|
14.3 |
|
80.1 |
|
9.6 |
|
7.0 |
|
49.1 |
|
Equity factor |
|
15.0% |
|
15.0% |
|
12.0% |
|
13.0% |
|
16.0% |
|
15.0% |
|
RWAe applying equity factor (£bn) |
|
5.6 |
|
2.1 |
|
9.6 |
|
1.2 |
|
1.1 |
|
7.4 |
|
Return on equity |
|
26.5% |
|
0.6% |
|
6.2% |
|
15.9% |
|
30.8% |
|
4.4% |
|
Quarter ended 31 March 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (£m) |
|
498 |
|
20 |
|
437 |
|
80 |
|
93 |
|
(62) |
|
Adjustment for tax (£m) |
|
(139) |
|
- |
|
(122) |
|
(23) |
|
(13) |
|
17 |
|
Preference share cost allocation (£m) |
|
(18) |
|
- |
|
(41) |
|
(4) |
|
- |
|
- |
|
Adjusted attributable profit (£m) |
|
341 |
|
20 |
|
274 |
|
53 |
|
80 |
|
(45) |
|
Annualised adjusted attributable profit (£m) |
|
1,364 |
|
80 |
|
1,096 |
|
212 |
|
320 |
|
(180) |
|
Monthly average RWAe (£bn) |
|
36.8 |
|
14.2 |
|
79.1 |
|
9.6 |
|
7.0 |
|
49.4 |
|
Equity factor |
|
15.0% |
|
15.0% |
|
12.0% |
|
13.0% |
|
16.0% |
|
15.0% |
|
RWAe applying equity factor (£bn) |
|
5.5 |
|
2.1 |
|
9.5 |
|
1.2 |
|
1.1 |
|
7.4 |
|
Return on equity |
|
24.7% |
|
3.8% |
|
11.5% |
|
17.1% |
|
28.6% |
|
-2.4% |
|
Quarter ended 30 June 2018* |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (£m) |
|
585 |
|
76 |
|
664 |
|
94 |
|
95 |
|
(51) |
|
Adjustment for tax (£m) |
|
(164) |
|
- |
|
(186) |
|
(26) |
|
(13) |
|
14 |
|
Preference share cost allocation (£m) |
|
(20) |
|
- |
|
(47) |
|
(6) |
|
(4) |
|
(27) |
|
Adjusted attributable profit (£m) |
|
401 |
|
76 |
|
431 |
|
62 |
|
78 |
|
(64) |
|
Annualised adjusted attributable profit (£m) |
|
1,604 |
|
304 |
|
1,724 |
|
248 |
|
310 |
|
(256) |
|
Monthly average RWAe (£bn) |
|
32.4 |
|
17.4 |
|
87.4 |
|
9.5 |
|
6.9 |
|
56.4 |
|
Equity factor |
|
15.0% |
|
14.0% |
|
12.0% |
|
13.5% |
|
16.0% |
|
15.0% |
|
RWAe applying equity factor (£bn) |
|
4.9 |
|
2.4 |
|
10.5 |
|
1.3 |
|
1.1 |
|
8.5 |
|
Return on equity |
|
33.0% |
|
12.5% |
|
16.4% |
|
19.3% |
|
27.9% |
|
-3.0% |
|
*Restated. Refer to Note 1 for further details.
RBS Interim Results 2019
Appendix 2 Non-IFRS performance measures
2. Operating expenses analysis
Statutory analysis (1,2) |
|
|
|
|
|
|
|
Half year ended |
|
Quarter ended | |||
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
Operating expenses |
£m |
£m |
|
£m |
£m |
£m |
Staff expenses |
2,028 |
2,086 |
|
1,017 |
1,011 |
1,031 |
Premises and equipment |
558 |
644 |
|
293 |
265 |
274 |
Other administrative expenses |
863 |
1,636 |
|
445 |
418 |
1,237 |
Administrative expenses |
3,449 |
4,366 |
|
1,755 |
1,694 |
2,542 |
Depreciation and amortisation |
621 |
338 |
|
377 |
244 |
175 |
Write down of other intangible assets |
30 |
31 |
|
30 |
- |
7 |
Total operating expenses |
4,100 |
4,735 |
|
2,162 |
1,938 |
2,724 |
|
|
|
|
|
|
|
Non-statutory analysis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Half year ended |
|
Quarter ended | |||
|
30 June |
30 June |
|
30 June |
31 March |
30 June |
|
2019 |
2018 |
|
2019 |
2019 |
2018 |
Operating expenses |
£m |
£m |
|
£m |
£m |
£m |
Staff expenses |
1,841 |
1,903 |
|
905 |
936 |
939 |
Premises and equipment |
493 |
574 |
|
245 |
248 |
288 |
Other administrative expenses |
673 |
760 |
|
318 |
355 |
413 |
Strategic costs (1) |
629 |
350 |
|
434 |
195 |
141 |
Litigation and conduct costs (2) |
60 |
801 |
|
55 |
5 |
782 |
Administrative expenses |
3,696 |
4,388 |
|
1,957 |
1,739 |
2,563 |
Depreciation and amortisation |
399 |
316 |
|
200 |
199 |
154 |
Write down of other intangible assets |
5 |
31 |
|
5 |
- |
7 |
Total |
4,100 |
4,735 |
|
2,162 |
1,938 |
2,724 |
Notes:
(1) On a statutory, or GAAP, basis, strategic costs are included within staff, premises and equipment, depreciation and amortisation, write-down of other intangible assets and other administrative expenses.
(2) On a statutory, or GAAP, basis, litigation and conduct costs are included within other administrative expenses.
3. Cost:income ratio
|
UK |
|
Commercial & Private |
|
|
|
| |
|
Personal |
Ulster Bank |
Commercial |
Private |
RBS |
NatWest |
Central items |
RBS |
|
Banking |
RoI |
Banking |
Banking |
International |
Markets |
& other |
Group |
Half year ended 30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Operating expenses |
(1,229) |
(281) |
(1,262) |
(232) |
(119) |
(678) |
(299) |
(4,100) |
Operating lease depreciation |
- |
- |
68 |
- |
- |
- |
- |
68 |
Adjusted operating expenses |
(1,229) |
(281) |
(1,194) |
(232) |
(119) |
(678) |
(299) |
(4,032) |
|
|
|
|
|
|
|
|
|
Total income |
2,447 |
283 |
2,165 |
384 |
310 |
942 |
586 |
7,117 |
Operating lease depreciation |
- |
- |
(68) |
- |
- |
- |
- |
(68) |
Adjusted total income |
2,447 |
283 |
2,097 |
384 |
310 |
942 |
586 |
7,049 |
|
|
|
|
|
|
|
|
|
Cost:income ratio (%) |
50.2% |
99.3% |
56.9% |
60.4% |
38.4% |
72.0% |
nm |
57.2% |
Half year ended 30 June 2018 * |
|
|
|
|
|
|
|
|
Operating expenses |
(1,291) |
(252) |
(1,140) |
(225) |
(114) |
(671) |
(1,042) |
(4,735) |
Operating lease depreciation |
- |
- |
57 |
- |
- |
- |
- |
57 |
Adjusted operating expenses |
(1,291) |
(252) |
(1,083) |
(225) |
(114) |
(671) |
(1,042) |
(4,678) |
|
|
|
|
|
|
|
|
|
Total income |
2,551 |
312 |
2,390 |
382 |
284 |
721 |
62 |
6,702 |
Operating lease depreciation |
- |
- |
(57) |
- |
- |
- |
- |
(57) |
Adjusted total income |
2,551 |
312 |
2,333 |
382 |
284 |
721 |
62 |
6,645 |
|
|
|
|
|
|
|
|
|
Cost:income ratio (%) |
50.6% |
80.8% |
46.4% |
58.9% |
40.1% |
93.1% |
nm |
70.4% |
* Restated. Refer to Note 1 for further details.
RBS Interim Results 2019
Appendix 2 Non-IFRS performance measures
3. Cost:income ratio continued
|
UK |
|
Commercial & Private |
|
|
|
| |
|
Personal |
Ulster Bank |
Commercial |
Private |
RBS |
NatWest |
Central items |
RBS |
|
Banking |
RoI |
Banking |
Banking |
International |
Markets |
& others |
Group |
Quarter ended 30 June 2019 |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Operating expenses |
(594) |
(145) |
(622) |
(115) |
(60) |
(344) |
(282) |
(2,162) |
Operating lease depreciation |
- |
- |
34 |
- |
- |
- |
- |
34 |
Adjusted operating expenses |
(594) |
(145) |
(588) |
(115) |
(60) |
(344) |
(282) |
(2,128) |
|
|
|
|
|
|
|
|
|
Total income |
1,202 |
138 |
1,083 |
191 |
159 |
686 |
621 |
4,080 |
Operating lease depreciation |
- |
- |
(34) |
- |
- |
- |
- |
(34) |
Adjusted total income |
1,202 |
138 |
1,049 |
191 |
159 |
686 |
621 |
4,046 |
|
|
|
|
|
|
|
|
|
Cost:income ratio |
49.4% |
105.1% |
56.1% |
60.2% |
37.7% |
50.1% |
nm |
52.6% |
Quarter ended 31 March 2019 |
|
|
|
|
|
|
|
|
Operating expenses |
(635) |
(136) |
(640) |
(117) |
(59) |
(334) |
(17) |
(1,938) |
Operating lease depreciation |
- |
- |
34 |
- |
- |
- |
- |
34 |
Adjusted operating expenses |
(635) |
(136) |
(606) |
(117) |
(59) |
(334) |
(17) |
(1,904) |
|
|
|
|
|
|
|
|
|
Total income |
1,245 |
145 |
1,082 |
193 |
151 |
256 |
(35) |
3,037 |
Operating lease depreciation |
- |
- |
(34) |
- |
- |
- |
- |
(34) |
Adjusted total income |
1,245 |
145 |
1,048 |
193 |
151 |
256 |
(35) |
3,003 |
|
|
|
|
|
|
|
|
|
Cost:income ratio |
51.0% |
93.8% |
57.8% |
60.6% |
39.1% |
130.5% |
nm |
63.4% |
Quarter ended 30 June 2018 * |
|
|
|
|
|
|
|
|
Operating expenses |
(605) |
(124) |
(545) |
(104) |
(55) |
(322) |
(969) |
(2,724) |
Operating lease depreciation |
- |
- |
26 |
- |
- |
- |
- |
26 |
Adjusted operating expenses |
(605) |
(124) |
(519) |
(104) |
(55) |
(322) |
(969) |
(2,698) |
|
|
|
|
|
|
|
|
|
Total income |
1,253 |
166 |
1,232 |
198 |
147 |
284 |
120 |
3,400 |
Operating lease depreciation |
- |
- |
(26) |
- |
- |
- |
- |
(26) |
Adjusted total income |
1,253 |
166 |
1,206 |
198 |
147 |
284 |
120 |
3,374 |
|
|
|
|
|
|
|
|
|
Cost:income ratio |
48.3% |
74.7% |
43.0% |
52.5% |
37.4% |
113.4% |
nm |
80.0% |
* Restated. Refer to Note 1 for further details.
4. Net interest margin
|
Half year ended |
|
Quarter ended | |||||
|
30 June |
30 June |
|
30 June |
31 March |
30 June | ||
|
2019 |
2018 |
|
2019 |
2019 |
2018 | ||
|
£m |
£m |
|
£m |
£m |
£m | ||
RBS net interest income |
4,004 |
4,326 |
|
1,971 |
2,033 |
2,180 | ||
NWM net interest income |
122 |
(67) |
|
91 |
31 |
(31) | ||
Net interest income excluding NWM |
4,126 |
4,259 |
|
2,062 |
2,064 |
2,149 | ||
Annualised net interest income |
8,074 |
8,724 |
|
7,906 |
8,245 |
8,744 | ||
Annualised net interest income excluding NWM |
8,320 |
8,589 |
|
8,271 |
8,371 |
8,620 | ||
Average interest earning assets (IEA) |
440,309 |
431,211 |
|
444,800 |
435,768 |
434,928 | ||
NWM average IEA |
33,261 |
27,134 |
|
34,436 |
32,072 |
26,981 | ||
Average IEA excluding NWM |
407,048 |
404,077 |
|
410,364 |
403,696 |
407,947 | ||
|
|
|
|
|
|
| ||
Net interest margin |
1.83% |
2.02% |
|
1.78% |
1.89% |
2.01% | ||
Bank net interest margin (excluding NWM) |
2.04% |
2.13% |
|
2.02% |
2.07% |
2.11% | ||
|
|
|
|
|
| |||
5. Loan:deposit ratio |
|
|
|
|
| |||
|
|
|
|
|
| |||
|
|
|
As at | |||||
|
|
|
30 June |
31 March |
31 December | |||
|
|
|
2019 |
2019 |
2018 | |||
|
|
|
£bn |
£bn |
£bn | |||
Loans to customers - amortised cost |
|
|
310.6 |
306.4 |
305.1 | |||
Customer deposits |
|
|
361.6 |
355.2 |
360.9 | |||
Loan:deposit ratio (%) |
|
|
86% |
86% |
85% | |||
|
|
|
|
|
| |||
Legal Entity Identifier: 2138005O9XJIJN4JPN90
RBS Interim Results 2019
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
The Royal Bank of Scotland Group plc
Registrant
/s/ Katie Murray
Chief Financial Officer
7 August 2019
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Document and Entity Information |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | ROYAL BANK OF SCOTLAND GROUP PLC |
Entity Central Index Key | 0000844150 |
Document Type | 6-K |
Document Period End Date | Jun. 30, 2019 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | Q2 |
Condensed consolidated income statement - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
[1] | |||
Condensed consolidated income statement | |||||
Interest receivable | £ 5,553 | £ 5,444 | |||
Interest payable | (1,549) | (1,118) | |||
Net interest income | 4,004 | 4,326 | |||
Fees and commissions receivable | 1,762 | 1,646 | |||
Fees and commissions payable | (487) | (451) | |||
Income from trading activities | 599 | 847 | |||
Other operating income | 1,239 | 334 | |||
Non-interest income | 3,113 | 2,376 | |||
Total income | 7,117 | 6,702 | |||
Operating expenses | (4,100) | (4,735) | |||
Profit before impairment losses | 3,017 | 1,967 | |||
Impairment losses | (323) | (141) | |||
Operating profit before tax | 2,694 | 1,826 | |||
Tax charge | (194) | (709) | |||
Profit for the period | 2,500 | 1,117 | |||
Attributable to: | |||||
Ordinary shareholders | 2,038 | 888 | |||
Other owners | 202 | 245 | |||
Non-controlling interests | £ 260 | £ (16) | |||
Earnings per ordinary share | £ 0.169 | £ 0.074 | |||
Earnings per ordinary share - fully diluted | £ 0.168 | £ 0.074 | |||
|
Condensed consolidated statement of comprehensive income - GBP (£) £ in Millions |
6 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||||
Condensed consolidated statement of comprehensive income | |||||||
Profit for the period | £ 2,500 | £ 1,117 | [1] | ||||
Items that do not qualify for reclassification | |||||||
- contributions in preparation for ring-fencing (1) | [1],[2] | (2,000) | |||||
- other movements | (68) | ||||||
(Loss)/profit on fair value of credit in financial liabilities designated at FVTPL due to own credit risk | (96) | 95 | [1] | ||||
Fair value through other comprehensive income (FVOCI) financial assets | 38 | 3 | [1] | ||||
Tax | 26 | 500 | [1] | ||||
Total - Items that do not qualify for reclassification | (100) | (1,402) | [1] | ||||
Items that do qualify for reclassification | |||||||
Fair value through other comprehensive income (FVOCI) financial assets | (12) | 199 | [1] | ||||
Cash flow hedges | 402 | (521) | [1] | ||||
Currency translation | (241) | 18 | [1] | ||||
Tax | (122) | 97 | [1] | ||||
Total - Items that do qualify for reclassification | 27 | (207) | [1] | ||||
Other comprehensive loss after tax | (73) | (1,609) | [1] | ||||
Total comprehensive income/(loss) for the period | 2,427 | (492) | [1] | ||||
Attributable to: | |||||||
Ordinary shareholders | 1,950 | (708) | [1] | ||||
Preference shareholders | 20 | 74 | [1] | ||||
Paid-in equity holders | 182 | 171 | [1] | ||||
Non-controlling interests | 275 | (29) | [1] | ||||
Total comprehensive income/(loss) for the period | £ 2,427 | £ (492) | [1] | ||||
|
Condensed consolidated statement of comprehensive income (Parenthetical) - GBP (£) £ in Millions |
3 Months Ended | |
---|---|---|
Oct. 09, 2018 |
Mar. 31, 2019 |
|
Nat West Bank | ||
Disclosure of transactions between related parties [line items] | ||
Contribution under the MoU to strengthen funding of the Main section | £ 2,000 | |
NatWest Markets Plc | ||
Disclosure of transactions between related parties [line items] | ||
Contribution under the MoU to strengthen funding of the Main section | £ 53 |
Condensed consolidated balance sheet - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Assets | ||
Cash and balances at central banks | £ 85,380 | £ 88,897 |
Trading assets | 85,364 | 75,119 |
Derivatives | 145,594 | 133,349 |
Settlement balances | 8,438 | 2,928 |
Loans to banks - amortised cost | 12,935 | 12,947 |
Loans to customers - amortised cost | 310,631 | 305,089 |
Other financial assets | 65,634 | 59,485 |
Intangible assets | 6,631 | 6,616 |
Other assets | 9,262 | 9,805 |
Total assets | 729,869 | 694,235 |
Liabilities | ||
Bank deposits | 23,093 | 23,297 |
Customer deposits | 361,626 | 360,914 |
Settlement balances | 7,619 | 3,066 |
Trading liabilities | 84,135 | 72,350 |
Derivatives | 141,697 | 128,897 |
Other financial liabilities | 46,485 | 39,732 |
Subordinated liabilities | 9,808 | 10,535 |
Other liabilities | 9,169 | 8,954 |
Total liabilities | 683,632 | 647,745 |
Ordinary shareholders' interests | 41,667 | 41,182 |
Other owners' interests | 4,554 | 4,554 |
Owners' equity | 46,221 | 45,736 |
Non-controlling interests | 16 | 754 |
Total equity | 46,237 | 46,490 |
Total liabilities and equity | £ 729,869 | £ 694,235 |
Condensed consolidated statement of changes in equity - GBP (£) £ in Millions |
Called-up share capital |
Paid-in equity |
Share premium account |
Merger reserve |
FVOCI reserve |
Cash flow hedging reserve |
Foreign exchange reserve |
Retained earnings |
Own shares held |
Shareholders' equity |
Non-controlling interests |
Ordinary shareholders |
Preference shareholders |
Total |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
At 1 January at Dec. 31, 2017 | £ 11,965 | £ 4,058 | £ 887 | £ 10,881 | £ 255 | £ 227 | £ 2,970 | £ 17,130 | £ (43) | £ 763 | ||||||||||||||||
Ordinary shares issued | 63 | 108 | ||||||||||||||||||||||||
Implementation of IFRS 9 on 1 January 2018 | 34 | (105) | ||||||||||||||||||||||||
Movements in fair value through other comprehensive income - unrealised (losses)/gains | 203 | (1) | ||||||||||||||||||||||||
Realised gains | (3) | |||||||||||||||||||||||||
Tax | (47) | |||||||||||||||||||||||||
Amount recognized in equity | (156) | |||||||||||||||||||||||||
Amount transferred from equity to earnings | (365) | |||||||||||||||||||||||||
Tax | 143 | |||||||||||||||||||||||||
Retranslation of net assets | (58) | |||||||||||||||||||||||||
Foreign currency gains on hedges of net assets | 14 | |||||||||||||||||||||||||
Tax | 1 | |||||||||||||||||||||||||
Recycled to profit or loss on disposal of businesses | [1] | 74 | ||||||||||||||||||||||||
Profit attributable to ordinary shareholders and other equity owners | 1,133 | |||||||||||||||||||||||||
Equity preference dividends paid | (74) | |||||||||||||||||||||||||
Paid-in equity dividends paid | (171) | |||||||||||||||||||||||||
Realised gains in period on FVOCI equity shares | 3 | |||||||||||||||||||||||||
contributions in preparation for ring-fencing | [2] | (2,000) | ||||||||||||||||||||||||
Remeasurement of the retirement benefit schemes, tax | 516 | |||||||||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at fair value through profit, gross | 95 | |||||||||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at fair value through profit, tax | (16) | |||||||||||||||||||||||||
Purchase of own shares | (63) | |||||||||||||||||||||||||
Shares issued under employee share schemes | (2) | 82 | ||||||||||||||||||||||||
Share based payments | 18 | |||||||||||||||||||||||||
Currency translation adjustments and other movements | (12) | |||||||||||||||||||||||||
Profit/(loss) attributable to non-controlling interests | (16) | |||||||||||||||||||||||||
At 30 June at Jun. 30, 2018 | 12,028 | 4,058 | 995 | 442 | (151) | 3,001 | 16,527 | (24) | £ 47,757 | 734 | £ 41,134 | £ 2,565 | £ 48,491 | |||||||||||||
At 1 January at Dec. 31, 2018 | 12,049 | 4,058 | 1,027 | £ 10,881 | 343 | (191) | 3,278 | 14,312 | (21) | 754 | 46,490 | |||||||||||||||
Ordinary shares issued | 42 | 62 | 45 | [3] | ||||||||||||||||||||||
Implementation of IFRS 16 on 1 January 2019 | [4] | (187) | ||||||||||||||||||||||||
Movements in fair value through other comprehensive income - unrealised (losses)/gains | 45 | |||||||||||||||||||||||||
Realised gains | (133) | |||||||||||||||||||||||||
Tax | 10 | |||||||||||||||||||||||||
Amount recognized in equity | 524 | |||||||||||||||||||||||||
Amount transferred from equity to earnings | (122) | |||||||||||||||||||||||||
Tax | (94) | |||||||||||||||||||||||||
Retranslation of net assets | 30 | |||||||||||||||||||||||||
Foreign currency gains on hedges of net assets | 1 | |||||||||||||||||||||||||
Tax | 8 | |||||||||||||||||||||||||
Recycled to profit or loss on disposal of businesses | [1] | (335) | ||||||||||||||||||||||||
Profit attributable to ordinary shareholders and other equity owners | 2,240 | |||||||||||||||||||||||||
Equity preference dividends paid | (20) | |||||||||||||||||||||||||
Paid-in equity dividends paid | (182) | |||||||||||||||||||||||||
Ordinary dividends paid | (1,327) | |||||||||||||||||||||||||
Realised gains in period on FVOCI equity shares | 114 | |||||||||||||||||||||||||
Other movements | (68) | |||||||||||||||||||||||||
Remeasurement of the retirement benefit schemes, tax | 18 | |||||||||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at fair value through profit, gross | (96) | |||||||||||||||||||||||||
Changes in fair value of credit in financial liabilities designated at fair value through profit, tax | 10 | |||||||||||||||||||||||||
Purchase of own shares | (58) | |||||||||||||||||||||||||
Shares issued under employee share schemes | (4) | 33 | ||||||||||||||||||||||||
Share based payments | (26) | |||||||||||||||||||||||||
Currency translation adjustments and other movements | 15 | |||||||||||||||||||||||||
Profit/(loss) attributable to non-controlling interests | 260 | |||||||||||||||||||||||||
Equity withdrawn and disposals | [5] | (1,058) | ||||||||||||||||||||||||
At 30 June at Jun. 30, 2019 | £ 12,091 | £ 4,058 | £ 1,089 | £ 265 | £ 117 | £ 2,982 | £ 14,784 | £ (46) | £ 46,221 | £ 16 | £ 41,667 | £ 496 | £ 46,237 | |||||||||||||
|
Condensed consolidated statement of changes in equity (Parenthetical) - GBP (£) £ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Oct. 09, 2018 |
Mar. 31, 2019 |
Jun. 30, 2019 |
|
Nat West Bank | |||
Funding contribution to retirement benefit schemes | £ 2,000 | ||
NatWest Markets Plc | |||
Funding contribution to retirement benefit schemes | £ 53 | ||
Alawwal bank merger | |||
Gains on disposals of investments | £ 338 | ||
Income tax relating to completion of Alawwal bank merger | £ 48 |
Condensed consolidated cash flow statement - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Operating activities | |||||
Operating profit before tax | £ 2,694 | £ 1,826 | [1] | ||
Adjustments for non-cash items | (2,428) | (1,280) | |||
Net cash inflow from trading activities | 266 | 546 | |||
Changes in operating assets and liabilities | 9,939 | 9,408 | |||
Net cash flows from operating activities before tax | 10,205 | 9,954 | |||
Income taxes paid | (192) | (156) | |||
Net cash flows from operating activities | 10,013 | 9,798 | |||
Cash flows from investing activities | |||||
Net cash flows from investing activities | (5,776) | (3,769) | |||
Cash flows from financing activities | |||||
Net cash flows from financing activities | (2,689) | (2,307) | |||
Effects of exchange rate changes on cash and cash equivalents | 211 | 38 | |||
Net increase in cash and cash equivalents | 1,759 | 3,760 | |||
Cash and cash equivalents at beginning of year | 108,811 | 122,605 | |||
Cash and cash equivalents at end of year | £ 110,570 | £ 126,365 | |||
|
Basis of preparation |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Basis of preparation | |
Basis of preparation | 1. Basis of preparation The Group condensed consolidated financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 ‘Interim Financial Reporting’. They should be read in conjunction with RBS’s 2018 Annual Report on Form 20-F 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).
Going concern The Group’s business activities and financial position, and the factors likely to affect its future development and performance are discussed on pages 1 to 53. The risk factors which could materially affect the Group’s future results are described on pages 54 and 55.
Having reviewed the Group’s forecasts, projections and other relevant evidence, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future. Accordingly, the results for the half year ended 30 June 2019 have been prepared on a going concern basis.
Re-segmentation 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 business. Concurrent with the transfer, UK PBB has been renamed UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed Personal & Ulster. Comparatives have been re-stated or represented. Refer to Note 4, Segmental analysis and the disclosures in the Capital and risk management section, as marked, where the impact is reflected. Refer to the Form 6-K filed on 30 April 2019 which provides details of the re-stated comparatives.
|
Accounting policies |
6 Months Ended | |||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||
Accounting policies | ||||||||||||||||||||||||||||||||||
Accounting policies | 2. Accounting policies The Group’s principal accounting policies are as set out on pages 186 to 190 of the 2018 Annual Report on Form 20-F and are unchanged other than as presented below.
Changes in reporting standards IAS 12 ‘Income taxes’ was revised with effect from 1 January 2019. The income statement is now required to include any tax relief on the servicing cost of instruments classified as equity. Relief of £67 million was recognised in the statement of changes in equity for the year ended 31 December 2018; this and prior periods have been restated. Refer to the Form 6-K filed on 30 April 2019 for further details.
Presentation of interest in suspense recoveries Until 1 January 2019, interest in suspense recoveries were presented as a component of interest receivable within Net interest income. It amounted to £31 million for the period ended 30 June 2019. From 1 January 2019 interest in suspense recoveries is presented within impairment charges; prior periods were presented as income. Comparatives have not been restated.
Revised Accounting policy 10 - Leases The Group has adopted IFRS 16 ‘Leases’ with effect from 1 January 2019, replacing IAS 17 ‘Leases’. The Group has applied IFRS 16 on a modified retrospective basis without restating prior years. Accounting policy 10 presented in the 2018 Annual Report on Form 20-F has been updated as follows:
As lessor Finance lease contracts are those which transfer substantially all the risks and rewards of ownership of an asset to a customer. All other contracts with customers to lease assets are classified as operating leases.
Loans to customers include finance lease receivables measured at the net investment in the lease, comprising the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Interest receivable includes finance lease income recognised at a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review; if there is a reduction in their value, income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.
Rental income from operating leases is recognised in other operating income on a straight-line basis over the lease term unless another systematic basis better represents the time pattern of the asset’s use. Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives.
As lessee On entering a new lease contract, the Group recognises a right of use asset and a liability to pay future rentals. The liability is measured at the present value of future lease payments discounted at the applicable incremental borrowing rate. The right of use asset is depreciated over the shorter of the term of the lease and the useful economic life, subject to review for impairment. Short term and low value leased assets are expensed on a systematic basis.
For further details see page 190 of RBS’s 2018 Annual Report on Form 20-F. The impact on RBS’s balance sheet at 1 January 2019 is as follows:
Operating lease commitments reported under IAS 17 were £2.7 billion which resulted in lease liabilities recognised under IFRS 16 of £1.9 billion. The difference is primarily because of the different treatment of termination and extension options; and discounting the contractual lease payments under IFRS 16.
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 page 190 of the 2018 Annual Report on Form 20-F. |
Analysis of income, expenses and impairment losses |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis of income, expenses and impairment losses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis of income, expenses and impairment losses | 3. Analysis of income, expenses and impairment losses
Notes:
|
Segmental analysis |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segmental analysis | 4. Segmental analysis The business is organised into the following franchises and reportable segments:
Analysis of operating profit /(loss) The following tables provide a segmental analysis of operating profit/(loss) by main income statement captions.
*Restated. Refer to Note 1 for further details.
*Restated. Refer to Note 1 for further details.
Analysis of net fees and commissions
*Restated. Refer to Note 1 for further details.
Total assets and liabilities
*Restated. Refer to Note 1 for further details. |
Tax |
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Tax | 5. Tax
The actual tax charge differs from the expected tax charge computed by applying the standard UK corporation tax rate of 19% (2018 - 19%), as analysed below.
The tax charge includes a £215 million deferred tax asset credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS Plc under ring-fencing regulations.
At 30 June 2019, the Group has recognised a deferred tax asset of £1,499 million (31 December 2018 - £1,412 million) and a deferred tax liability of £463 million (31 December 2018 - £454 million). These include amounts recognised in respect of UK trading losses of £848 million (31 December 2018 - £675 million). Under UK tax legislation, these UK losses can be carried forward indefinitely . The Finance Act 2016 limited the offset of the UK banking losses carried forward to 25% of taxable profits. The Group has considered the carrying value of this asset as at 30 June 2019 and concluded that it is recoverable based on future profit projections. |
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Profit attributable to non-controlling interests | 6. Profit attributable to non-controlling interests
Note:
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Trading assets and liabilities |
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Trading assets and liabilities | 7. Trading assets and liabilities Trading assets and liabilities comprise assets and liabilities held at fair value in trading portfolios.
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Financial instruments - classification |
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Financial instruments - classification | 8. Financial instruments: classification The following tables analyse financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9. Assets and liabilities outside the scope of IFRS 9 are shown within other assets and other liabilities.
Notes:
The Group's financial assets and liabilities include:
Carried at fair value - valuation hierarchy Disclosures relating to the control environment, valuation techniques and related aspects pertaining to financial instruments measured at fair value are included in the 2018 Annual Report on Form 20-F. Valuation, sensitivity methodologies and inputs at 30 June 2019 are consistent with those described in Note 12 to the 2018 Annual Report on Form 20-F. The tables below show financial instruments carried at fair value on the balance sheet by valuation hierarchy - level 1, level 2 and level 3 and valuation sensitivities for level 3 balances.
Notes:
Level 2 - Instruments valued using valuation techniques that have observable inputs. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products, including CLOs, most bank loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most notes issued, and certain money market securities and loan commitments and most OTC derivatives. Level 3 - Instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on observable market data. Examples include cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, certain emerging markets and derivatives with unobservable model inputs.
Movement in level 3 portfolios
Notes:
8. Financial instruments: fair value of financial instruments not carried at fair value The following table shows the carrying value and fair value of financial instruments carried at amortised cost on the balance sheet.
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Quoted market values are used where available; otherwise, fair values have been estimated based on discounted expected future cash flows and other valuation techniques. These techniques involve uncertainties and require assumptions and judgments covering prepayments, credit risk and discount rates. Furthermore, there is a wide range of potential valuation techniques. Changes in these assumptions would affect estimated fair values. The fair values reported would not necessarily be realised in an immediate sale or settlement. |
Provisions for liabilities and charges |
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Provisions for liabilities and charges | 9. Provisions for liabilities and charges
Notes:
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.
Payment protection insurance The Group’s provision reflects the increased volume of complaints following the FCA’s introduction of an August 2019 PPI timebar as outlined in FCA announcement CP17/3 and the introduction of new Plevin (unfair commission) complaint handling rules.
The principal assumptions underlying the Group’s provision in respect of PPI sales are: assessment of the total number of complaints that the Group will receive; the proportion of these that will result in redress; and the average cost of such redress. The number of complaints has been estimated from an analysis of the Group’s portfolio of PPI policies sold by vintage and by product. Estimates of the percentage of policyholders that will lodge complaints (the take up rate) and of the number of these that will be upheld (the uphold rate) have been established based on recent experience, guidance in FCA policy statements and the expected rate of responses from proactive customer contact. The average redress assumption is based on recent experience and FCA calculation rules. The table below shows the sensitivity of the provision to changes in the principal assumptions (all other assumptions remaining the same).
Notes:
On 5 February 2019 the Official Receiver appointed Deloitte to assist in the identification of potential claimants in respect of PPI. We are evaluating data suggesting 250,000 to 300,000 such claimants. The extent of the Group’s share of any obligation in respect of ensuing claims cannot be ascertained with sufficient reliability for inclusion in the provision at 30 June 2019.
Background information for all material provisions is given in Note 13. |
Dividends |
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Dividends | 10. Dividends The 2018 final and special dividends recommended were approved by shareholders at the Annual General Meeting on 25 April 2019 and the payment made on 30 April 2019 to shareholders on the register at the close of business on 22 March 2019.
RBS announces an interim dividend for 2019 of £241 million, or 2p per ordinary share. In addition, the company announces a further special dividend of £1,449 million, or 12p per ordinary share.
The interim and special dividends will be paid on 20 September 2019 to shareholders on the register at close of business on 16 August 2019. The ex-dividend date will be 15 August 2019.
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Loan impairment provisions | 11. Loan impairment provisions Loan exposure and impairment metrics The table below summarises loans and related credit impairment measures on an IFRS 9 basis.
Notes:
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Contingent liabilities and commitments | 12. Contingent liabilities and commitments
Contingent liabilities arise in the normal course of RBS’s business; credit exposure is subject to the bank’s normal controls. The amounts shown do not, and are not intended to, provide any indication of RBS’s expectation of future losses. |
Litigation, investigations and reviews |
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Litigation, investigations and reviews | 13. Litigation, investigations and reviews The Royal Bank of Scotland Group plc (the ‘company’ or RBSG) and certain members of the Group are party to legal proceedings and the subject of investigation and other regulatory and governmental action (‘Matters’) in the United Kingdom (UK), the United States (US), the European Union (EU) and other jurisdictions.
RBS recognises a provision for a liability in relation to these Matters when it is probable that an outflow of economic benefits will be required to settle an obligation resulting from past events, and a reliable estimate can be made of the amount of the obligation.
In many proceedings and investigations, it is not possible to determine whether any loss is probable or to estimate reliably the amount of any loss, either as a direct consequence of the relevant proceedings and investigations or as a result of adverse impacts or restrictions on RBS’s reputation, businesses and operations. Numerous legal and factual issues may need to be resolved, including through potentially lengthy discovery and document production exercises and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a liability can reasonably be estimated for any claim. RBS cannot predict if, how, or when such claims will be resolved or what the eventual settlement, damages, fine, penalty or other relief, if any, may be, particularly for claims that are at an early stage in their development or where claimants seek substantial or indeterminate damages.
There are situations where RBS may pursue an approach that in some instances leads to a settlement agreement. This may occur in order to avoid the expense, management distraction or reputational implications of continuing to contest liability, or in order to take account of the risks inherent in defending claims or investigations, even for those Matters for which RBS believes it has credible defences and should prevail on the merits. The uncertainties inherent in all such Matters affect the amount and timing of any potential outflows for both Matters with respect to which provisions have been established and other contingent liabilities.
The future outflow of resources in respect of any Matter may ultimately prove to be substantially greater than or less than the aggregate provision that RBS has recognised. Where (and as far as) liability cannot be reasonably estimated, no provision has been recognised.
RBS expects that in future periods, additional provisions, settlement amounts and customer redress payments will be necessary, in amounts that are expected to be substantial in some instances.
For a discussion of certain risks associated with the Group’s litigation, investigations and reviews, see the Risk Factor relating to legal, regulatory and governmental actions and investigations set out in RBS’s 2018 Annual Report and Accounts on page 261 and in RBS's 2018 Annual Report on Form 20-F on page 274.
Litigation Residential mortgage-backed securities (RMBS) litigation in the US RBS companies continue to defend RMBS-related claims in the US in which plaintiffs allege that certain disclosures made in connection with the relevant offerings of RMBS contained materially false or misleading statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans underlying the RMBS were issued.
The remaining RMBS lawsuits against RBS companies consist of cases filed by the Federal Home Loan Banks of Boston and Seattle and the Federal Deposit Insurance Corporation that together involve the issuance of less than US$1 billion of RMBS issued primarily from 2005 to 2007. In addition, NatWest Markets Securities Inc. previously agreed to settle a purported RMBS class action entitled New Jersey Carpenters Health Fund v. Novastar Mortgage Inc. et al. for US$55.3 million, which was paid into escrow pending court approval of the settlement, which was granted on 11 March 2019, but which is now the subject of an appeal by a class member who does not want to participate in the settlement.
London Interbank Offered Rate (LIBOR) and other rates litigation NatWest Markets Plc and certain other members of the Group, including RBSG, are defendants in a number of class actions and individual claims pending in the US (primarily in the United States District Court for the Southern District of New York (SDNY)) with respect to the setting of LIBOR and certain other benchmark interest rates. The complaints allege that certain members of the Group and other panel banks violated various federal laws, including the US commodities and antitrust laws, and state statutory and common law, as well as contracts, by manipulating LIBOR and prices of LIBOR-based derivatives in various markets through various means.
Several class actions relating to USD LIBOR, as well as more than two dozen non-class actions concerning USD LIBOR, are part of a co-ordinated proceeding in the SDNY. In December 2016, the SDNY held that it lacks personal jurisdiction over NatWest Markets Plc with respect to certain claims. As a result of that decision, all Group companies have been dismissed from each of the USD LIBOR-related class actions (including class actions on behalf of over-the-counter plaintiffs, exchange-based purchaser plaintiffs, bondholder plaintiffs, and lender plaintiffs), but seven non-class cases in the co-ordinated proceeding remain pending against Group defendants. The dismissal of Group companies for lack of personal jurisdiction is the subject of a pending appeal to the United States Court of Appeals for the Second Circuit.
Among the non-class claims dismissed by the SDNY in December 2016 were claims that the Federal Deposit Insurance Corporation (FDIC) had asserted on behalf of certain failed US banks. In July 2017, the FDIC, on behalf of 39 failed US banks, commenced substantially similar claims against RBS companies and others in the High Court of Justice of England and Wales. The action alleges that the defendants breached English and European competition law as well as asserting common law claims of fraud under US law.
In addition, there are two class actions relating to JPY LIBOR and Euroyen TIBOR, both pending before the same judge in the SDNY. In the first class action, which relates to Euroyen TIBOR futures contracts, the court dismissed the plaintiffs' antitrust claims in March 2014, but declined to dismiss their claims under the Commodity Exchange Act for price manipulation, and the case is proceeding in the discovery phase. The second class action relates to other derivatives allegedly tied to JPY LIBOR and Euroyen TIBOR. The court dismissed that case in March 2017 on the ground that the plaintiffs lack standing. The plaintiffs have commenced an appeal of that decision.
There is also a class action relating to the Singapore Interbank Offered Rate and Singapore Swap Offer Rate pending in the SDNY. In that case, the court denied defendants’ motion to dismiss on 5 October 2018 in a ruling that would have permitted certain antitrust claims to proceed against NatWest Markets Plc and other non-RBS defendants. However, on 26 July 2019, the court determined that the named plaintiffs asserting such claims do not have standing and therefore dismissed the case. The dismissal is subject to appeal.
Four other class action complaints were filed against RBS companies in the SDNY, each relating to a different reference rate. In the case relating to Pound Sterling LIBOR, the court dismissed all claims against RBS companies, for various reasons, on 21 December 2018, and plaintiffs are seeking reconsideration of that decision. In the case relating to the Australian Bank Bill Swap Reference Rate, the court dismissed all claims against RBS companies for lack of personal jurisdiction on 26 November 2018, but plaintiffs have filed an amended complaint, which is the subject of a further motion to dismiss. In the case relating to Euribor, the court dismissed all claims against RBS companies for lack of personal jurisdiction in February 2017, but in June 2019, the plaintiffs commenced an appeal of that decision. In the case relating to Swiss Franc LIBOR, the court dismissed all claims against all defendants on various grounds in September 2017, but held that it has personal jurisdiction over NatWest Markets Plc and allowed the plaintiffs to replead their complaint. Defendants’ renewed motion to dismiss the amended complaint relating to Swiss Franc LIBOR remains pending.
NatWest Markets Plc has also been named as a defendant in a motion to certify a class action relating to LIBOR in the Tel Aviv District Court in Israel. NatWest Markets Plc has filed a motion for cancellation of service. If the motion is successful then the current action will be brought to an end, although the claimants may seek to re-raise the claim in the future.
NatWest Markets Plc is defending a claim in the High Court in London brought by London Bridge Holdings Ltd and others, in which the claimants allege LIBOR manipulation in connection with the sale of interest rate hedging products. The quantified sum claimed in that case is £446.7 million.
Details of UK litigation claims in relation to the alleged mis-sale of interest rate hedging products (IRHPs) involving LIBOR-related allegations are set out under ‘Interest rate hedging products and similar litigation’ on page 39.
In January 2019, a class action antitrust complaint was filed in the SDNY alleging that the defendants (USD ICE LIBOR panel banks and affiliates) have conspired to suppress USD ICE LIBOR from 2014 to the present by submitting incorrect information to ICE about their borrowing costs. The RBS defendants are RBSG, NatWest Markets Plc, NatWest Markets Securities Inc., and NatWest Plc.
FX antitrust litigation NatWest Markets Plc, NatWest Markets Securities Inc. and / or RBSG, are defendants in several cases relating to NatWest Markets Plc’s foreign exchange (FX) business, each of which is pending before the same federal judge in the SDNY.
In 2015, NatWest Markets Plc paid US$255 million to settle the consolidated antitrust class action on behalf of persons who entered into over-the-counter FX transactions with defendants or who traded FX instruments on exchanges. That settlement received final court approval in August 2018. On 7 November 2018, some members of the settlement class who opted out of the settlement filed their own non-class complaint in the SDNY asserting antitrust claims against NatWest Markets Plc, NatWest Markets Securities Inc. and other banks. On 31 December 2018, some of the same claimants, as well as others, filed proceedings in the High Court in London, asserting competition claims against NatWest Markets Plc and several other banks. The claim was served on 25 April 2019.
Two other FX-related class actions remain pending in the SDNY. First, there is a class action on behalf of ‘consumers and end-user businesses,’ which is proceeding against NatWest Markets Plc in the discovery phase following the SDNY’s denial of the defendants’ motions to dismiss in March 2018. Second, there is a class action on behalf of ‘indirect purchasers’ of FX instruments (which plaintiffs define as persons who transacted FX instruments with retail foreign exchange dealers that transacted directly with defendant banks). That case is proceeding in discovery against NatWest Markets Securities Inc. and other defendants following the SDNY’s denial of defendants’ motion to dismiss on 25 October 2018. On 20 May 2019, NatWest Markets Plc was dismissed from the case for lack of personal jurisdiction, but plaintiffs are seeking permission to replead their complaint to establish jurisdiction.
On 27 May 2019, a class action was filed in the Federal Court of Australia against NatWest Markets Plc and other banks on behalf of persons who bought or sold currency through FX spots or forwards between 1 January 2008 and 15 October 2013 with a total transaction value exceeding AUS $0.5m. RBSG has been named in the action as a ‘cartel party’, but is not a defendant. The claim was served on 28 June 2019.
On 29 July 2019, an application for a collective proceedings order was filed in the UK Competition Appeal Tribunal against RBSG, NatWest Markets Plc and other banks on behalf of persons who, between 18 December 2007 and 31 January 2013, entered into a relevant FX spot or outright forward transaction in the EEA with a relevant financial institution or on an electronic communications network.
Two motions to certify FX-related class actions have been filed in the Tel Aviv District Court in Israel. RBSG and NatWest Markets Securities Inc. have been named as defendants in the first motion. The Royal Bank of Scotland plc has been named in the second. These motions have not been served.
Certain other foreign exchange transaction related claims have been or may be threatened. RBS cannot predict whether any of these claims will be pursued, but expects that some may.
Government securities antitrust litigation NatWest Markets Securities Inc. and certain other US broker-dealers are defendants in a consolidated antitrust class action pending in the SDNY on behalf of persons who transacted in US Treasury securities or derivatives based on such instruments, including futures and options. The plaintiffs allege that defendants rigged the US Treasury securities auction bidding process to deflate prices at which they bought such securities and colluded to increase the prices at which they sold such securities to plaintiffs. The defendants’ motion to dismiss this matter remains pending.
Class action antitrust claims commenced in March 2019 are pending in the SDNY against NatWest Markets Plc, NatWest Markets Securities Inc. and other banks. The complaints allege a conspiracy among dealers of Euro-denominated bonds issued by European central banks (EGBs), to widen the bid-ask spreads they quoted to customers, thereby increasing the prices customers paid for the EGBs or decreasing the prices at which customers sold the bonds. The class consists of those who purchased or sold EGBs in the US between 2007 and 2012.
Swaps antitrust litigation NatWest Markets Plc and other members of the Group , including RBSG, as well as a number of other interest rate swap dealers, are defendants in several cases pending in the SDNY alleging violations of the US antitrust laws in the market for interest rate swaps. There is a consolidated class action complaint on behalf of persons who entered into interest rate swaps with the defendants, as well as non-class action claims by three swap execution facilities (TeraExchange, Javelin, and trueEx). The plaintiffs allege that the swap execution facilities would have successfully established exchange-like trading of interest rate swaps if the defendants had not unlawfully conspired to prevent that from happening through boycotts and other means. Discovery in these cases is ongoing.
In addition, in June 2017, TeraExchange filed a complaint against RBS companies, including RBSG, as well as a number of other credit default swap dealers, in the SDNY. TeraExchange alleges it would have established exchange-like trading of credit default swaps if the defendant dealers had not engaged in an unlawful antitrust conspiracy. On 1 October 2018, the court dismissed all claims against RBS companies.
Madoff NatWest Markets N.V. (NWM N.V.) is a defendant in two actions filed by Irving Picard, as trustee for the bankruptcy estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in bankruptcy court in New York. In both cases, the trustee alleges that certain transfers received by NWM N.V. amounted to fraudulent conveyances that should be clawed back for the benefit of the Madoff estate.
In the primary action, filed in December 2010, the trustee originally sought to recover US$75.8 million in redemptions that NWM N.V. allegedly received from certain Madoff feeder funds and US$162.1 million that NWM N.V. allegedly received from certain swap counterparties. In August 2018, due to a court ruling in a related matter, the trustee voluntarily dismissed a portion of this claim (relating to US$74.6 million received from certain swap counterparties) without prejudice to refiling at a later date. In June 2019, the trustee filed a motion for leave to file an amended complaint, seeking to clawback a total of US$276.3 million, including the previously voluntarily dismissed US$74.6 million, that NWM N.V. allegedly received in redemptions from certain Madoff feeder funds and swap counterparties. NWM N.V.intends to oppose the motion for leave to amend and otherwise seek dismissal of the amended complaint.
In the second action, filed in October 2011, the trustee seeks to recover an additional US$21.8 million. In November 2016, the bankruptcy court dismissed this case on international comity grounds, and that decision was appealed. On 25 February 2019, the United States Court of Appeals for the Second Circuit reversed the bankruptcy court’s decision. If the U.S. Supreme Court declines to review the matter, the case will return to the bankruptcy court for further proceedings.
Interest rate hedging products and similar litigation RBS is dealing with a number of active litigation claims in the UK in relation to the alleged mis-selling of interest rate hedging products (IRHPs). In general claimants allege that the relevant IRHPs were mis-sold to them, with some also alleging that misrepresentations were made in relation to LIBOR. Claims have been brought by customers who were considered under the UK Financial Conduct Authority (FCA) redress programme for IRHPs, as well as customers who were outside of the scope of that programme, which was closed to new entrants in March 2015. RBS remains exposed to potential claims from customers who were either ineligible to be considered for redress or who are dissatisfied with their redress offers.
Property Alliance Group (PAG) v NatWest Markets Plc was the leading case before the English High Court involving both IRHP mis-selling and LIBOR misconduct allegations. The amount claimed was £34.8 million. Following dismissal by the Court of all PAG’s claims in December 2016, PAG appealed to the Court of Appeal, which dismissed the appeal in March 2018. In July 2018 the Supreme Court declined the request from PAG for permission to appeal an aspect of the judgment relating to implied representations of Sterling LIBOR rates. The Court of Appeal’s decision may impact other IRHP and LIBOR-related cases currently pending in the English courts, some of which involve substantial amounts.
Separately, NatWest Markets Plc is defending claims filed in France by five French local authorities relating to structured interest rate swaps. The plaintiffs allege, among other things, that the swaps are void for being illegal transactions, that they were mis-sold, and that information / advisory duties were breached. Of the remaining claims, two are being appealed to the Supreme Court and one remains to be heard before the lower court.
Tax dispute HMRC issued a tax assessment in 2012 against RBSG for approximately £86 million regarding a value-added-tax ('VAT') matter in relation to the trading of European Union Allowances ('EUAs') by a joint venture subsidiary in 2009. RBSG has lodged an appeal, which is still to be heard, before the First-tier Tribunal (Tax), a specialist tax tribunal, challenging the assessment (the 'Tax Dispute'). In the event that the assessment is upheld, interest and costs would be payable, and a penalty of up to 100 per cent of the VAT held to have been legitimately denied by HMRC could also be levied. Separately, NatWest Markets Plc is a named defendant in civil proceedings before the High Court brought in 2015 by ten companies (all in liquidation) (the 'Liquidated Companies') and their respective liquidators (together, 'the Claimants'). The Liquidated Companies previously traded in EUAs in 2009 and are alleged to be defaulting traders within (or otherwise connected to) the EUA supply chains forming the subject of the Tax Dispute. The Claimants claim approximately £71.4 million plus interest and costs and allege that NatWest Markets Plc dishonestly assisted the directors of the Liquidated Companies in the breach of their statutory duties and/or knowingly participated in the carrying on of the business of the Liquidated Companies with intent to defraud creditors. The trial in that matter concluded on 20 July 2018 and judgment is awaited.
US Anti-Terrorism Act litigation NatWest Plc is defending lawsuits filed in the United States District Court for the Eastern District of New York by a number of US nationals (or their estates, survivors, or heirs) who were victims of terrorist attacks in Israel. The plaintiffs allege that NatWest Plc is liable for damages arising from those attacks pursuant to the US Anti-Terrorism Act because NatWest Plc previously maintained bank accounts and transferred funds for the Palestine Relief & Development Fund, an organisation which plaintiffs allege solicited funds for Hamas, the alleged perpetrator of the attacks.
In October 2017, the trial court dismissed claims against NatWest Plc with respect to two of the 18 terrorist attacks at issue. In March 2018, the trial court granted a request by NatWest Plc for leave to file a renewed summary judgment motion in respect of the remaining claims, and in March 2019, the court granted summary judgment in favour of NatWest Plc. The plaintiffs have commenced an appeal of the judgment to the United States Court of Appeals for the Second Circuit.
NWM N.V. and certain other financial institutions, are defendants in several actions pending in the United States District Courts for the Eastern and Southern Districts of New York, filed by a number of US nationals (or their estates, survivors, or heirs), most of whom are or were US military personnel, who were killed or injured in attacks in Iraq between 2003 and 2011. NatWest Markets Plc is also a defendant in some of these cases.
The attacks at issue in the cases were allegedly perpetrated by Hezbollah and certain Iraqi terror cells allegedly funded by the Islamic Republic of Iran. According to the plaintiffs’ allegations, the defendants are liable for damages arising from the attacks because they allegedly conspired with Iran and certain Iranian banks to assist Iran in transferring money to Hezbollah and the Iraqi terror cells, in violation of the US Anti-Terrorism Act, by agreeing to engage in ‘stripping’ of transactions initiated by the Iranian banks so that the Iranian nexus to the transactions would not be detected. The first of these actions was filed in the United States District Court for the Eastern District of New York in November 2014. On 27 July 2018, the magistrate judge in that case issued a report to the district court recommending that the district court deny the defendants’ pending motion to dismiss. NWM N.V. has requested that the district court grant the motion to dismiss notwithstanding the magistrate’s recommendation. Another action, filed in 2017, was dismissed on 28 March 2019. The dismissal is subject to re-pleading by the plaintiffs or appeal. The other actions are either subject to a pending motion to dismiss, or will be the subject of such a motion in due course.
Securities underwriting litigation NatWest Markets Securities Inc. is an underwriter defendant in several securities class actions in the US in which plaintiffs generally allege that an issuer of public debt or equity securities, as well as the underwriters of the securities (including NatWest Markets Securities Inc.), are liable to purchasers for misrepresentations and omissions made in connection with the offering of such securities.
Investigations and reviews RBS’s businesses and financial condition can be affected by the actions of various governmental and regulatory authorities in the UK, the US, the EU and elsewhere. RBS has engaged, and will continue to engage, in discussions with relevant governmental and regulatory authorities, including in the UK, the US, the EU and elsewhere, on an ongoing and regular basis, and in response to informal and formal inquiries or investigations, regarding operational, systems and control evaluations and issues including those related to compliance with applicable laws and regulations, including consumer protection, business conduct, competition/anti-trust, anti-bribery, anti-money laundering and sanctions regimes.
The NatWest Markets business in particular has been providing, and continues to provide, information regarding a variety of matters, including, for example, the setting of benchmark rates and related derivatives trading, conduct in the foreign exchange market, and various issues relating to the issuance, underwriting, and sales and trading of fixed-income securities, including structured products and government securities, some of which have resulted, and others of which may result, in investigations or proceedings.
Any matters discussed or identified during such discussions and inquiries may result in, among other things, further inquiry or investigation, other action being taken by governmental and regulatory authorities, increased costs being incurred by RBS, remediation of systems and controls, public or private censure, restriction of RBS’s business activities and/or fines. Any of the events or circumstances mentioned in this paragraph or below could have a material adverse effect on RBS, its business, authorisations and licences, reputation, results of operations or the price of securities issued by it.
RBS is co-operating fully with the investigations and reviews described below.
US investigations relating to fixed-income securities
In the US, RBS companies have in recent years been involved in investigations relating to, among other things, issuance, underwriting and trading in RMBS and other mortgage-backed securities and collateralised debt obligations (CDOs).
Investigations by the US Department of Justice (DoJ) and several state attorneys general relating to the issuance and underwriting of RMBS were previously resolved. Certain other state attorneys general have sought information regarding similar issues, and RBS is aware that at least one such investigation is ongoing.
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 forms 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's reporting and conduct requirements during its term. The NatWest Markets business is currently responding to a criminal investigation concerning unrelated securities trading by certain traders in 2018, which was reported to the USAO during the course of the NPA. In April 2019, NatWest Markets Securities Inc. agreed to a second six-month extension of the NPA so that the USAO could review the circumstances of that unrelated matter.
Foreign exchange related investigations In May and June 2019, RBSG and NatWest Markets Plc reached settlements totalling approximately EUR 275 million in connection with the EC and certain other related competition law investigations into FX trading. The aggregate amount is fully covered by existing provisions in NatWest Markets Plc. NatWest Markets Plc continues to co-operate with ongoing investigations from competition authorities on similar issues relating to past FX trading. The exact timing and amount of future financial penalties, related risks and collateral consequences remain uncertain and may be material.
In 2014 and 2015, NatWest Markets Plc paid significant penalties to resolve investigations into its FX business by the FCA, the CFTC, the DoJ, and the Board of Governors of the Federal Reserve System (Federal Reserve). As part of its plea agreement with the DoJ, NatWest Markets Plc pled guilty to a one-count information charging an antitrust conspiracy occurring between as early as December 2007 to at least April 2010. NatWest Markets Plc admitted that it knowingly, through one of its Euro/US dollar currency traders, joined and participated in a conspiracy to eliminate competition in the purchase and sale of the Euro/US dollar currency pair exchanged in the FX spot market. On 5 January 2017, the United States District Court for the District of Connecticut imposed a sentence on NatWest Markets Plc consisting of a US$395 million fine and a three-year probation, which among other things, prohibits NatWest Markets Plc from committing another crime in violation of US law or engaging in the FX trading practices that form the basis for the charged crime and requires NatWest Markets Plc to implement a compliance program designed to prevent and detect the unlawful conduct at issue and to strengthen its compliance and internal controls as required by other regulators (including the FCA and the CFTC). A violation of the terms of probation could lead to the imposition of additional penalties.
As part of the settlement with the Federal Reserve, NatWest Markets Plc and NatWest Markets Securities Inc. entered into a cease and desist order (the FX Order). In the FX Order, which is publicly available and will remain in effect until terminated by the Federal Reserve, NatWest Markets Plc and NatWest Markets Securities Inc. agreed to take certain remedial actions with respect to FX activities and certain other designated market activities, including the creation of an enhanced written internal controls and compliance program, an improved compliance risk management program, and an enhanced internal audit program. NatWest Markets Plc and NatWest Markets Securities Inc. are obligated to implement and comply with these programs as approved by the Federal Reserve, and are also required to conduct, on an annual basis, a review of applicable compliance policies and procedures and a risk-focused sampling of key controls.
FCA review of RBS’s treatment of SMEs In 2014, the FCA appointed an independent Skilled Person under section 166 of the Financial Services and Markets Act 2000 to review RBS’s treatment of SME customers whose relationship was managed by RBS’s Global Restructuring Group (GRG) in the period 1 January 2008 to 31 December 2013.
The Skilled Person delivered its final report to the FCA during September 2016, and the FCA published an update in November 2016. In response, RBS announced redress steps for SME customers in the UK and the Republic of Ireland that were in GRG between 2008 and 2013. These steps were (i) an automatic refund of certain complex fees; and (ii) a new complaints process, overseen by an independent third party. The complaints process closed on 22 October 2018 for new complaints in the UK and 31 December 2018 in the Republic of Ireland, with the exception of a small cohort of potential complainants in the Republic of Ireland for whom there is an extended deadline until 31 August 2019.
RBS provisions to date totalled £481 million in respect of the above redress steps, of which £328 million had been utilised by 30 June 2019.
The FCA published a summary of the Skilled Person’s report in November 2017. The UK House of Commons Treasury Select Committee, seeking to rely on Parliamentary powers, published the full version of the Skilled Person’s report in February 2018. In July 2018, the FCA confirmed that it had concluded its investigation and that it did not intend to take disciplinary or prohibitory action against any person in relation to these matters. On 13 June 2019, the FCA published a full report explaining how it had reached that conclusion.
Investment advice review As a result of an FSA review in 2013, the FCA required RBS to carry out a past business review and customer contact exercise on a sample of historic customers who received investment advice on certain lump sum products, during the period from March 2012 until December 2012. The review was conducted by an independent Skilled Person under section 166 of the Financial Services and Markets Act 2000. Redress was paid to certain customers in that sample group.
RBS later agreed with the FCA that it would carry out a wider review/remediation exercise relating to certain investment, insurance and pension sales from 1 January 2011 to 1 April 2015. That exercise is now complete. Phase 2 (covering sales in 2010) started in April 2018 and , with the exception of a small cohort of former customers for whom there is an extended completion date, is targeted for material completion by the end of September 2019.
In addition, RBS agreed with the FCA that it would carry out a remediation exercise, for a specific customer segment who were sold a particular structured product. Redress was paid to certain customers who took out the structured product.
RBS provisions in relation to these matters at 30 June 2019 were less than £10 million.
Packaged accounts RBS has had dedicated resources in place since 2013 to investigate and resolve packaged account complaints on an individual basis. RBS provisions for this matter to date totalled £444 million, of which £411 million had been utilised by 30 June 2019. The FCA conducted a thematic review of packaged bank accounts across the UK from October 2014 to April 2016, the results of which were published in October 2016. RBS made amendments to its sales process and complaints procedures to address the findings from that review.
FCA investigation into RBS’s compliance with the Money Laundering Regulations 2007 In July 2017, the FCA notified RBS that it was undertaking an investigation into RBS’s compliance with the Money Laundering Regulations 2007 in relation to certain customers. There are currently two areas under review: (1) compliance with Money Laundering Regulations in respect of Money Service Business customers; and (2) the Suspicious Transactions regime in relation to the events surrounding particular customers. The investigations in both areas are assessing both criminal and civil culpability. RBS is cooperating with the investigations, including responding to several information requests from the FCA.
Systematic Anti-Money Laundering Programme assessment In December 2018, the FCA commenced a Systematic Anti-Money Laundering Programme assessment of RBS. The FCA provided its written findings to RBS on 28 June 2019, and RBS is considering these. It is not yet possible to assess the likely impact of this matter.
Payment Protection Insurance (PPI) Since 2011, RBS has been implementing the FCA’s policy statement for the handling of complaints about the mis-selling of PPI (Policy Statement 10/12). In August 2017, the FCA’s new rules and guidance on PPI complaints handling (Policy Statement 17/3) came into force. The Policy Statement introduced new so called ‘Plevin’ rules, under which customers may be eligible for redress if the bank earned a high level of commission from the sale of PPI, but did not disclose this detail at the point of sale. The Policy Statement also introduced a two year PPI deadline, due to expire on 29 August 2019, before which new PPI complaints must be made. RBS is implementing the Policy Statement.
RBS has made provisions totalling £5.3 billion to date for PPI claims of which £4.9 billion had been utilised by 30 June 2019.
FCA mortgages market study In December 2016, the FCA launched a market study into the provision of mortgages. On 26 March 2019 the final report was published. This found that competition was working well for many customers but also proposed remedies to help customers shop around more easily for mortgages. A period of consultation is underway and the FCA has indicated that it intends to provide updates on the remedies in due course.
FCA strategic review of retail banking models In May 2017 the FCA announced a strategic review of retail banking models. The FCA used the review to understand how these models operate, including how ‘free if in credit’ banking is paid for and the impact of changes such as increased use of digital channels and reduced branch usage.
On 18 December 2018, the FCA published its final report containing a number of findings, including that personal current accounts are an important source of competitive advantage for major banks. Following the review, the FCA is to continue to monitor retail banking models, analyse new payments business models and undertake exploratory work to understand certain aspects of SME banking.
US/Swiss tax programme In December 2015, Coutts & Co Ltd., a member of the Group incorporated in Switzerland, entered into a non-prosecution agreement (the NPA) with the DoJ. This was entered into as part of the DoJ’s programme for Swiss banks, related to its investigations of the role that Swiss banks played in concealing the assets of US tax payers in offshore accounts (US related accounts). Coutts & Co Ltd. paid a US$78.5 million penalty and acknowledged responsibility for certain conduct set forth in a statement of facts accompanying the agreement. Under the NPA, which has a term of four years, Coutts & Co Ltd. is required, among other things, to provide certain information, cooperate with the DoJ’s investigations, and commit no US federal offences. If Coutts & Co Ltd. abides by the NPA, the DoJ will not prosecute it for certain tax-related and monetary transaction offences in connection with US related accounts.
Since the signing of the NPA in 2015, Coutts & Co Ltd identified and disclosed to the DoJ a number of US related accounts that were not included in its original submission supporting the NPA. As a result of this, Coutts & Co Ltd agreed with the DoJ to undertake additional review work, which began in October 2018 and is now largely complete. This additional review work identified further US related accounts, which are being discussed with the DoJ.
Enforcement proceedings and investigations in relation to Coutts & Co Ltd In February 2017, the Swiss Financial Market Supervisory Authority (FINMA) took enforcement action against Coutts & Co Ltd with regard to failures of money laundering checks and controls on certain client accounts that were connected with the Malaysian sovereign wealth fund, 1MDB, and were held with Coutts & Co Ltd. FINMA accordingly required Coutts & Co Ltd to disgorge profits of CHF 6.5 million. There are two administrative criminal proceedings pending before the Swiss Finance Department against two former employees of Coutts & Co Ltd. In addition, the Monetary Authority of Singapore (MAS)’s supervisory examination of Coutts & Co Ltd’s Singapore branch revealed breaches of anti-money laundering requirements. MAS imposed on Coutts & Co Ltd financial penalties amounting to SGD 2.4 million in December 2016.
In addition, Coutts & Co Ltd continues to assist with investigations and enquiries from authorities where requested to do so.
Response to reports concerning certain historic Russian and Lithuanian transactions Media coverage in March 2019 highlighted an alleged money laundering scheme involving Russian and Lithuanian entities between 2006 and 2013. The media reports alleged that certain European banks, including ABN AMRO and Coutts, and at least one US bank, were involved in processing certain transactions associated with this scheme. RBS has responded to regulatory requests for information.
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC In December 2015, the Central Bank of Ireland (CBI) announced that it had written to a number of lenders requiring them to put in place a robust plan and framework to review the treatment of customers who had been sold mortgages with a tracker interest rate or with a tracker interest rate entitlement. The CBI stated that the intended purpose of the review was to identify any cases where customers’ contractual rights under the terms of their mortgage agreements were not fully honoured, or where lenders did not fully comply with various regulatory requirements and standards regarding disclosure and transparency for customers. The CBI required Ulster Bank Ireland DAC (UBI DAC), a member of the Group incorporated in the Republic of Ireland, to participate in this review. UBI DAC submitted its phase 2 report to the CBI in March 2017, identifying impacted customers. The redress and compensation phase (phase 3) has now concluded although an appeals process is currently anticipated to run until approximately Q3 2020.
RBS has made provisions totalling €312 million (£279 million) to date for this matter, of which €252million (£226 million) had been utilised by 30 June 2019.
Separately, in April 2016, the CBI notified UBI DAC that it was also commencing an investigation under its Administrative Sanctions Procedure into suspected breaches of the Consumer Protection Code 2006 during the period 4 August 2006 to 30 June 2008 in relation to certain customers who switched from tracker mortgages to fixed rate mortgages. This investigation remains ongoing and UBI DAC continues to co-operate with the CBI.
As part of an internal review of the wider retail and commercial loan portfolios extending from the tracker mortgage examination programme, UBI DAC identified further legacy business issues. A programme remains ongoing to identify and remediate impacted customers. RBS has made provisions totalling €167 million (£150 million), of which €66 million (£59 million) had been utilised by 30 June 2019. |
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Related party transactions | 14. Related party transactions UK Government The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arm’s length basis.
Bank of England facilities In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of England.
The Group’s other transactions with the UK Government include the payment of taxes, principally UK corporation tax and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the bank levy and FSCS levies).
Other related parties
Full details of the Group’s related party transactions for the year ended 31 December 2018 are included in the 2018 Annual Report on Form 20-F. |
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Post balance sheet events | 15. Post balance sheet events Other than as disclosed in this document there have been no significant events between 30 June 2019 and the date of approval of this announcement which would require a change to, or additional disclosure, in the announcement. |
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Date of approval | 16. Date of approval This announcement was approved by the Board of Directors on 1 August 2019. |
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Consolidating financial information | 17. Consolidating financial information NatWest Markets Plc ('NWM Plc') is a wholly owned subsidiary of The Royal Bank of Scotland Group plc ('RBSG plc') and was able to offer and sell certain securities in the US from time to time pursuant to a registration statement on Form F-3 filed with the SEC with a full and unconditional guarantee from RBSG plc.
NWM Plc utilises an exception provided in Rule 3-10 of Regulation S-X, and therefore does not file its financial statements with the SEC. In accordance with the requirements to qualify for the exception, presented below is condensed consolidating financial information for:
Under IAS 27, RBSG plc and NWM Plc account for investments in their subsidiary undertakings at cost less impairment. Rule 3-10 of Regulation S-X requires a company to account for its investments in subsidiary undertakings using the equity method, which would decrease the results for the period of RBSG plc and increase NWM Plc in the information below by £224 million and £52 million respectively for the half year ended 30 June 2019 (decrease £32,713 million and increase £1,316 million, respectively, for the half year ended 30 June 2018).
The net assets of RBSG plc and NWM Plc in the information below would also be decreased by £9,210 million and increased by £282 million respectively at 30 June 2019 (decreased by £8,651 million and increased by £165 million respectively at 31 December 2018).
NWM Plc Disposal groups and discontinued operations NatWest Holdings Limited (NatWest Holdings) In preparation for ring-fencing, the transfer of the NWM Plc Personal Banking (PB), Commercial & Private Banking (CPB) and certain parts of Central items and NatWest Markets to subsidiaries of NatWest Holdings was completed on 30 April 2018. Accordingly, all of the NWM Plc activities to be undertaken by NatWest Holdings and its subsidiaries are classified as disposal groups in the NWM Plc accounts at 30 June 2018 and presented as discontinued operations. On 29 June 2018, the distribution of NatWest Holdings by NWM plc to RBSG plc was approved and accounted for as income by RBSG plc.
Income statement
Statement of comprehensive income
Income statement
Statement of comprehensive income
Balance sheet
Balance sheet
Note:
Cash flow statement
Trust preferred securities
The Group has issued trust preferred securities through trusts 100% owned by the Group (through partnership interests held by RBSG Capital Corporation and RBS) which meet the definition of a finance subsidiary in Regulation S-X, Rule 3-10. The securities represent undivided beneficial interests in the assets of the trusts, which consist of partnership preferred securities representing non-cumulative perpetual preferred limited partnership interests issued by Delaware limited partnerships. The Royal Bank of Scotland Group plc has provided subordinated guarantees for the benefit of the holders of the trust preferred securities and the partnership preferred securities. Under the terms of the guarantees, the Group has fully and unconditionally guaranteed on a subordinated basis, payments on such trust preferred securities and partnership preferred securities, to the extent they are due to be paid and have not been paid by, or on behalf of the trusts and the partnerships, as the case may be. Following implementation of IFRS 10 the trusts are no longer consolidated by the Group, for those securities that were classified as subordinated liabilities, the Group’s outstanding instruments with the trusts are classified as subordinated liabilities. |
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Changes in reporting standards | Changes in reporting standards IAS 12 ‘Income taxes’ was revised with effect from 1 January 2019. The income statement is now required to include any tax relief on the servicing cost of instruments classified as equity. Relief of £67 million was recognised in the statement of changes in equity for the year ended 31 December 2018; this and prior periods have been restated. Refer to the Form 6-K filed on 30 April 2019 for further details. |
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Presentation of interest in suspense recoveries |
Presentation of interest in suspense recoveries Until 1 January 2019, interest in suspense recoveries were presented as a component of interest receivable within Net interest income. It amounted to £31 million for the period ended 30 June 2019. From 1 January 2019 interest in suspense recoveries is presented within impairment charges; prior periods were presented as income. Comparatives have not been restated. |
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Leases | Revised Accounting policy 10 - Leases The Group has adopted IFRS 16 ‘Leases’ with effect from 1 January 2019, replacing IAS 17 ‘Leases’. The Group has applied IFRS 16 on a modified retrospective basis without restating prior years. Accounting policy 10 presented in the 2018 Annual Report on Form 20-F has been updated as follows:
As lessor Finance lease contracts are those which transfer substantially all the risks and rewards of ownership of an asset to a customer. All other contracts with customers to lease assets are classified as operating leases.
Loans to customers include finance lease receivables measured at the net investment in the lease, comprising the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Interest receivable includes finance lease income recognised at a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review; if there is a reduction in their value, income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.
Rental income from operating leases is recognised in other operating income on a straight-line basis over the lease term unless another systematic basis better represents the time pattern of the asset’s use. Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives.
As lessee On entering a new lease contract, the Group recognises a right of use asset and a liability to pay future rentals. The liability is measured at the present value of future lease payments discounted at the applicable incremental borrowing rate. The right of use asset is depreciated over the shorter of the term of the lease and the useful economic life, subject to review for impairment. Short term and low value leased assets are expensed on a systematic basis.
For further details see page 190 of RBS’s 2018 Annual Report on Form 20-F. The impact on RBS’s balance sheet at 1 January 2019 is as follows:
Operating lease commitments reported under IAS 17 were £2.7 billion which resulted in lease liabilities recognised under IFRS 16 of £1.9 billion. The difference is primarily because of the different treatment of termination and extension options; and discounting the contractual lease payments under IFRS 16. |
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Schedule of impact on the RBS's balance sheet |
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Segmental analysis (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segmental analysis | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of operating segments |
*Restated. Refer to Note 1 for further details.
*Restated. Refer to Note 1 for further details.
Analysis of net fees and commissions
*Restated. Refer to Note 1 for further details.
Total assets and liabilities
*Restated. Refer to Note 1 for further details. |
Tax (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of actual tax charge from the expected tax charge |
The tax charge includes a £215 million deferred tax asset credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS Plc under ring-fencing regulations.
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Profit attributable to non-controlling interests (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Profit attributable to non-controlling interests | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Profit attributable to non-controlling interests |
Note:
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Trading assets and liabilities (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading assets and liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trading assets and liabilities |
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Financial instruments - classification (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial instruments - classification | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of classification for financial assets |
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Schedule of classification for financial liabilities |
Notes:
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Schedule of financial assets and liabilities |
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Schedule of financial assets and liabilities at fair value by valuation hierarchy |
Notes:
Level 2 - Instruments valued using valuation techniques that have observable inputs. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products, including CLOs, most bank loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most notes issued, and certain money market securities and loan commitments and most OTC derivatives. Level 3 - Instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on observable market data. Examples include cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, certain emerging markets and derivatives with unobservable model inputs.
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Schedule financial instruments carried at fair value on the balance sheet by valuation sensitivities for level 3 balances |
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Schedule of movement in level 3 assets and liabilities |
Notes:
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Schedule of carrying value and fair value of financial instruments carried at amortised cost on the balance sheet |
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Provisions for liabilities and charges (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for liabilities and charges | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule for provisions for liabilities and charges |
Notes:
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Schedule of the sensitivity of the provision |
Notes:
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Loan impairment provisions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loan impairment provisions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of loan exposure and impairment metrics |
Notes:
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Contingent liabilities and commitments (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Contingent liabilities and commitments | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of contingent liabilities and commitments |
|
Consolidating financial information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Consolidating financial information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Consolidating financial information |
Income statement
Statement of comprehensive income
Income statement
Statement of comprehensive income
Balance sheet
Balance sheet
Note:
Cash flow statement
|
Accounting policies (Details) - GBP (£) £ in Millions |
6 Months Ended | ||
---|---|---|---|
Jan. 01, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Impact on the balance sheet due to application IFRS 9 | |||
Tax relief on servicing cost of instruments | £ 67.0 | ||
Interest in suspense recoveries | £ 31.0 | ||
Retained earnings. | 14.1 | ||
Other liabilities | £ 9,169.0 | £ 8,954.0 | |
Operating lease commitments | 2,700.0 | ||
Previously reported | IFRS 16 | |||
Impact on the balance sheet due to application IFRS 9 | |||
Retained earnings. | 14.3 | ||
Adjustments | IFRS 16 | |||
Impact on the balance sheet due to application IFRS 9 | |||
Retained earnings. | (0.2) | ||
Loans to customers - Finance leases | 0.2 | ||
Other assets - Net right of use assets | 1.3 | ||
Recognition of lease liabilities | (1.9) | ||
Provision for onerous leases | 0.2 | ||
Other liabilities | (1.7) | ||
Operating lease commitments | £ 1,900.0 |
Segmental analysis (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
segment
| |
Personal & Ulster | |
Segmental analysis | |
Number of reportable segments | 2 |
Commercial and Private Banking (CPB) | |
Segmental analysis | |
Number of reportable segments | 2 |
Segmental analysis - Operating profit/(loss) (Details) - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Segmental analysis | |||||
Net interest income | £ 4,004 | £ 4,326 | [1] | ||
Net fees and commissions | 1,275 | 1,195 | |||
Other non-interest income | 1,838 | 1,181 | |||
Total income | 7,117 | 6,702 | [1] | ||
Operating expenses | (4,100) | (4,735) | [1] | ||
Impairment (losses)/releases | (323) | (141) | [1] | ||
Operating profit/(loss) | 2,694 | 1,826 | [1] | ||
Personal & Ulster | |||||
Segmental analysis | |||||
Net interest income | 2,284 | 2,363 | |||
Net fees and commissions | 417 | 402 | |||
Other non-interest income | 29 | 98 | |||
Total income | 2,730 | 2,863 | |||
Operating expenses | (1,510) | (1,543) | |||
Impairment (losses)/releases | (160) | (105) | |||
Operating profit/(loss) | 1,060 | 1,215 | |||
UK Personal Banking | |||||
Segmental analysis | |||||
Net interest income | 2,084 | 2,139 | |||
Net fees and commissions | 366 | 359 | |||
Other non-interest income | (3) | 53 | |||
Total income | 2,447 | 2,551 | |||
Operating expenses | (1,229) | (1,291) | |||
Impairment (losses)/releases | (181) | (131) | |||
Operating profit/(loss) | 1,037 | 1,129 | |||
Ulster Bank RoI | |||||
Segmental analysis | |||||
Net interest income | 200 | 224 | |||
Net fees and commissions | 51 | 43 | |||
Other non-interest income | 32 | 45 | |||
Total income | 283 | 312 | |||
Operating expenses | (281) | (252) | |||
Impairment (losses)/releases | 21 | 26 | |||
Operating profit/(loss) | 23 | 86 | |||
Commercial and Private Banking (CPB) | |||||
Segmental analysis | |||||
Net interest income | 1,685 | 1,652 | |||
Net fees and commissions | 772 | 747 | |||
Other non-interest income | 92 | 373 | |||
Total income | 2,549 | 2,772 | |||
Operating expenses | (1,494) | (1,365) | |||
Impairment (losses)/releases | (199) | (36) | |||
Operating profit/(loss) | 856 | 1,371 | |||
Commercial Banking | |||||
Segmental analysis | |||||
Net interest income | 1,424 | 1,400 | |||
Net fees and commissions | 661 | 631 | |||
Other non-interest income | 80 | 359 | |||
Total income | 2,165 | 2,390 | |||
Operating expenses | (1,262) | (1,140) | |||
Impairment (losses)/releases | (202) | (35) | |||
Operating profit/(loss) | 701 | 1,215 | |||
Private Banking | |||||
Segmental analysis | |||||
Net interest income | 261 | 252 | |||
Net fees and commissions | 111 | 116 | |||
Other non-interest income | 12 | 14 | |||
Total income | 384 | 382 | |||
Operating expenses | (232) | (225) | |||
Impairment (losses)/releases | 3 | (1) | |||
Operating profit/(loss) | 155 | 156 | |||
RBS International | |||||
Segmental analysis | |||||
Net interest income | 242 | 219 | |||
Net fees and commissions | 53 | 52 | |||
Other non-interest income | 15 | 13 | |||
Total income | 310 | 284 | |||
Operating expenses | (119) | (114) | |||
Impairment (losses)/releases | 3 | 3 | |||
Operating profit/(loss) | 194 | 173 | |||
NatWest Markets | |||||
Segmental analysis | |||||
Net interest income | (122) | 67 | |||
Net fees and commissions | 48 | (7) | |||
Other non-interest income | 1,016 | 661 | |||
Total income | 942 | 721 | |||
Operating expenses | (678) | (671) | |||
Impairment (losses)/releases | 36 | (4) | |||
Operating profit/(loss) | 300 | 46 | |||
Central Items & other | |||||
Segmental analysis | |||||
Net interest income | (85) | 25 | |||
Net fees and commissions | (15) | 1 | |||
Other non-interest income | 686 | 36 | |||
Total income | 586 | 62 | |||
Operating expenses | (299) | (1,042) | |||
Impairment (losses)/releases | (3) | 1 | |||
Operating profit/(loss) | £ 284 | £ (979) | |||
|
Segmental analysis - Total revenue (Details) - GBP (£) £ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Segmental analysis | ||
Revenue | £ 9,153 | £ 8,271 |
Personal & Ulster | ||
Segmental analysis | ||
Revenue | 3,461 | 3,465 |
UK Personal Banking | ||
Segmental analysis | ||
Revenue | 3,150 | 3,126 |
Ulster Bank RoI | ||
Segmental analysis | ||
Revenue | 311 | 339 |
Commercial and Private Banking (CPB) | ||
Segmental analysis | ||
Revenue | 2,699 | 2,817 |
Commercial Banking | ||
Segmental analysis | ||
Revenue | 2,236 | 2,396 |
Private Banking | ||
Segmental analysis | ||
Revenue | 463 | 421 |
RBS International | ||
Segmental analysis | ||
Revenue | 334 | 314 |
NatWest Markets | ||
Segmental analysis | ||
Revenue | 2,004 | 1,212 |
Central Items & other | ||
Segmental analysis | ||
Revenue | 655 | 463 |
Operating segment | ||
Segmental analysis | ||
Revenue | 9,153 | 8,271 |
Operating segment | Personal & Ulster | ||
Segmental analysis | ||
Revenue | 3,427 | 3,435 |
Operating segment | UK Personal Banking | ||
Segmental analysis | ||
Revenue | 3,118 | 3,096 |
Operating segment | Ulster Bank RoI | ||
Segmental analysis | ||
Revenue | 309 | 339 |
Operating segment | Commercial and Private Banking (CPB) | ||
Segmental analysis | ||
Revenue | 2,516 | 2,687 |
Operating segment | Commercial Banking | ||
Segmental analysis | ||
Revenue | 2,173 | 2,354 |
Operating segment | Private Banking | ||
Segmental analysis | ||
Revenue | 343 | 333 |
Operating segment | RBS International | ||
Segmental analysis | ||
Revenue | 319 | 235 |
Operating segment | NatWest Markets | ||
Segmental analysis | ||
Revenue | 1,494 | 953 |
Operating segment | Central Items & other | ||
Segmental analysis | ||
Revenue | 1,397 | 961 |
Inter segment/consolidation adjustments | Personal & Ulster | ||
Segmental analysis | ||
Revenue | 34 | 30 |
Inter segment/consolidation adjustments | UK Personal Banking | ||
Segmental analysis | ||
Revenue | 32 | 30 |
Inter segment/consolidation adjustments | Ulster Bank RoI | ||
Segmental analysis | ||
Revenue | 2 | |
Inter segment/consolidation adjustments | Commercial and Private Banking (CPB) | ||
Segmental analysis | ||
Revenue | 183 | 130 |
Inter segment/consolidation adjustments | Commercial Banking | ||
Segmental analysis | ||
Revenue | 63 | 42 |
Inter segment/consolidation adjustments | Private Banking | ||
Segmental analysis | ||
Revenue | 120 | 88 |
Inter segment/consolidation adjustments | RBS International | ||
Segmental analysis | ||
Revenue | 15 | 79 |
Inter segment/consolidation adjustments | NatWest Markets | ||
Segmental analysis | ||
Revenue | 510 | 259 |
Inter segment/consolidation adjustments | Central Items & other | ||
Segmental analysis | ||
Revenue | £ (742) | £ (498) |
Segmental analysis - Net fees and commissions (Details) - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Fees and commissions receivable | |||||
Lending (credit facilities) | £ 542 | £ 463 | |||
Payment services | 542 | 409 | |||
Credit and debit card fees | 290 | 326 | |||
Underwriting fees | 100 | 115 | |||
Investment management, trustee and fiduciary services | 138 | 143 | |||
Other | 150 | 190 | |||
Fees and commissions receivable | 1,762 | 1,646 | [1] | ||
Fees and commissions payable | (487) | (451) | [1] | ||
Net fees and commissions | 1,275 | 1,195 | |||
Personal & Ulster | |||||
Fees and commissions receivable | |||||
Net fees and commissions | 417 | 402 | |||
UK Personal Banking | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 266 | 208 | |||
Payment services | 154 | 101 | |||
Credit and debit card fees | 189 | 222 | |||
Investment management, trustee and fiduciary services | 22 | 25 | |||
Other | 36 | 37 | |||
Fees and commissions receivable | 667 | 593 | |||
Fees and commissions payable | (301) | (234) | |||
Net fees and commissions | 366 | 359 | |||
Ulster Bank RoI | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 18 | 15 | |||
Payment services | 21 | 12 | |||
Credit and debit card fees | 10 | 12 | |||
Investment management, trustee and fiduciary services | 2 | 2 | |||
Other | 6 | 5 | |||
Fees and commissions receivable | 57 | 46 | |||
Fees and commissions payable | (6) | (3) | |||
Net fees and commissions | 51 | 43 | |||
Commercial and Private Banking (CPB) | |||||
Fees and commissions receivable | |||||
Net fees and commissions | 772 | 747 | |||
Commercial Banking | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 204 | 183 | |||
Payment services | 323 | 267 | |||
Credit and debit card fees | 84 | 86 | |||
Underwriting fees | 22 | ||||
Investment management, trustee and fiduciary services | 3 | ||||
Other | 82 | 99 | |||
Fees and commissions receivable | 696 | 657 | |||
Fees and commissions payable | (35) | (26) | |||
Net fees and commissions | 661 | 631 | |||
Private Banking | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 1 | 1 | |||
Payment services | 17 | 17 | |||
Credit and debit card fees | 6 | 6 | |||
Investment management, trustee and fiduciary services | 91 | 95 | |||
Other | 12 | 12 | |||
Fees and commissions receivable | 127 | 131 | |||
Fees and commissions payable | (16) | (15) | |||
Net fees and commissions | 111 | 116 | |||
RBS International | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 18 | 17 | |||
Payment services | 12 | 11 | |||
Credit and debit card fees | 1 | ||||
Investment management, trustee and fiduciary services | 20 | 21 | |||
Other | 3 | 3 | |||
Fees and commissions receivable | 54 | 52 | |||
Fees and commissions payable | (1) | ||||
Net fees and commissions | 53 | 52 | |||
NatWest Markets | |||||
Fees and commissions receivable | |||||
Lending (credit facilities) | 35 | 39 | |||
Payment services | 15 | 1 | |||
Underwriting fees | 100 | 93 | |||
Other | 88 | 90 | |||
Fees and commissions receivable | 238 | 223 | |||
Fees and commissions payable | (190) | (230) | |||
Net fees and commissions | 48 | (7) | |||
Central Items & other | |||||
Fees and commissions receivable | |||||
Other | (77) | (56) | |||
Fees and commissions receivable | (77) | (56) | |||
Fees and commissions payable | 62 | 57 | |||
Net fees and commissions | £ (15) | £ 1 | |||
|
Segmental analysis - Assets and Liabilities (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Segmental analysis | ||
Assets | £ 729,869 | £ 694,235 |
Liabilities | 683,632 | 647,745 |
Personal & Ulster | ||
Segmental analysis | ||
Assets | 200,290 | 196,204 |
Liabilities | 172,506 | 169,982 |
UK Personal Banking | ||
Segmental analysis | ||
Assets | 173,860 | 171,011 |
Liabilities | 150,573 | 148,793 |
Ulster Bank RoI | ||
Segmental analysis | ||
Assets | 26,430 | 25,193 |
Liabilities | 21,933 | 21,189 |
Commercial and Private Banking (CPB) | ||
Segmental analysis | ||
Assets | 187,503 | 188,461 |
Liabilities | 167,286 | 168,357 |
Commercial Banking | ||
Segmental analysis | ||
Assets | 165,594 | 166,478 |
Liabilities | 139,098 | 139,803 |
Private Banking | ||
Segmental analysis | ||
Assets | 21,909 | 21,983 |
Liabilities | 28,188 | 28,554 |
RBS International | ||
Segmental analysis | ||
Assets | 30,413 | 28,398 |
Liabilities | 28,325 | 27,663 |
NatWest Markets | ||
Segmental analysis | ||
Assets | 278,949 | 244,531 |
Liabilities | 261,084 | 227,399 |
Central Items & other | ||
Segmental analysis | ||
Assets | 32,714 | 36,641 |
Liabilities | £ 54,431 | £ 54,344 |
Tax - Reconciliation (Details) - GBP (£) £ in Millions |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
||||
Tax reconciliation | ||||||
UK corporation tax | 19.00% | 19.00% | ||||
Operating profit before tax | £ 2,694 | £ 1,826 | [1] | |||
Expected tax charge | (512) | (347) | ||||
Losses and temporary differences in period where no deferred tax asset recognised | (2) | (8) | ||||
Foreign profits taxed at other rates | 5 | 1 | ||||
Losses on disposals and write-downs | (46) | (26) | ||||
UK bank levy | (15) | (16) | ||||
Regulatory and legal actions | (5) | (154) | ||||
Other disallowable items | (40) | (34) | ||||
Alawwal bank merger gain disposal | 212 | |||||
other | 26 | 8 | ||||
Taxable foreign exchange movements | (5) | |||||
Losses brought forward and utilised | 21 | 18 | ||||
Banking surcharge | (155) | (188) | ||||
Tax credit paid-in equity | 32 | |||||
Adjustments in respect of prior periods | 102 | 25 | ||||
Actual tax charge | (194) | (709) | [1] | |||
Deferred tax asset | 1,499 | £ 1,412 | ||||
Deferred tax liability | 463 | 454 | ||||
NatWest Markets Plc | ||||||
Tax reconciliation | ||||||
Increase/(reduction) in carrying value of deferred tax asset | 215 | |||||
UK | ||||||
Tax reconciliation | ||||||
Increase/(reduction) in carrying value of deferred tax asset | 215 | £ (15) | ||||
Trading losses carried forward | £ 848 | £ 675 | ||||
Limit of offset of losses carried forward (as a percent) | 25.00% | |||||
|
Profit attributable to non-controlling interests (Details) - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Profit/(loss) attributable to non-controlling interests | £ 260 | £ (16) | [1] | ||
Gain on Alawwal Bank merger | 274 | ||||
RFS Holdings B.V. Consortium Members | |||||
Profit/(loss) attributable to non-controlling interests | 258 | (17) | |||
Other | |||||
Profit/(loss) attributable to non-controlling interests | £ 2 | £ 1 | |||
|
Trading assets and liabilities (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Loans | ||
Reverse repos | £ 28,176 | £ 24,759 |
Collateral given | 22,063 | 19,036 |
Other loans | 1,651 | 1,308 |
Total loans | 51,890 | 45,103 |
Securities | ||
Other securities | 5,675 | 4,995 |
Total securities | 33,474 | 30,016 |
Total | 85,364 | 75,119 |
Deposits | ||
Repos | 32,087 | 25,645 |
Collateral received | 23,204 | 20,187 |
Other deposits | 2,335 | 1,788 |
Total deposits | 57,626 | 47,620 |
Debt securities in issue | 1,495 | 903 |
Short positions | 25,014 | 23,827 |
Total | 84,135 | 72,350 |
UK | ||
Securities | ||
Central and local government securities | 5,365 | 6,834 |
US | ||
Securities | ||
Central and local government securities | 6,093 | 4,689 |
Other | ||
Securities | ||
Central and local government securities | £ 16,341 | £ 13,498 |
Financial Instruments - classification - Assets (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Financial instruments | ||
Assets | £ 729,869 | £ 694,235 |
Financial Assets | 729,869 | 694,235 |
Cash and balances at central banks | ||
Financial instruments | ||
Financial Assets | 85,380 | 88,897 |
Trading assets | ||
Financial instruments | ||
Financial Assets | 85,364 | 75,119 |
Derivatives | ||
Financial instruments | ||
Financial Assets | 145,594 | 133,349 |
Settlement balances | ||
Financial instruments | ||
Financial Assets | 8,438 | 2,928 |
Loans to banks - amortised cost | ||
Financial instruments | ||
Financial Assets | 12,935 | 12,947 |
Loans to customers - amortised cost | ||
Financial instruments | ||
Financial Assets | 310,631 | 305,089 |
Other financial assets | ||
Financial instruments | ||
Financial Assets | 65,634 | 59,485 |
Intangible assets | ||
Financial instruments | ||
Financial Assets | 6,631 | 6,616 |
Other assets | ||
Financial instruments | ||
Financial Assets | 9,262 | 9,805 |
Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Assets | 15,893 | 16,421 |
Other financial assets | Intangible assets | ||
Financial instruments | ||
Assets | 6,631 | 6,616 |
Other financial assets | Other assets | ||
Financial instruments | ||
Assets | 9,262 | 9,805 |
MFVTPL | Trading assets | ||
Financial instruments | ||
Financial Assets | 85,364 | 75,119 |
MFVTPL | Derivatives | ||
Financial instruments | ||
Financial Assets | 145,594 | 133,349 |
MFVTPL | Other financial assets | ||
Financial instruments | ||
Financial Assets | 1,130 | 1,638 |
MFVTPL | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Assets | 232,088 | 210,106 |
FVOCI | Other financial assets | ||
Financial instruments | ||
Financial Assets | 51,250 | 46,077 |
FVOCI | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Assets | 51,250 | 46,077 |
Amortised cost | Cash and balances at central banks | ||
Financial instruments | ||
Financial Assets | 85,380 | 88,897 |
Amortised cost | Settlement balances | ||
Financial instruments | ||
Financial Assets | 8,438 | 2,928 |
Amortised cost | Loans to banks - amortised cost | ||
Financial instruments | ||
Financial Assets | 12,935 | 12,947 |
Amortised cost | Loans to customers - amortised cost | ||
Financial instruments | ||
Financial Assets | 310,631 | 305,089 |
Amortised cost | Other financial assets | ||
Financial instruments | ||
Financial Assets | 13,254 | 11,770 |
Amortised cost | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Assets | £ 430,638 | £ 421,631 |
Financial Instruments - classification - Liabilities (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Financial instruments | ||
Liabilities | £ 683,632 | £ 647,745 |
Financial Liabilities | 683,632 | 647,745 |
Bank deposits | ||
Financial instruments | ||
Financial Liabilities | 23,093 | 23,297 |
Customer deposits | ||
Financial instruments | ||
Financial Liabilities | 361,626 | 360,914 |
Settlement balances | ||
Financial instruments | ||
Financial Liabilities | 7,619 | 3,066 |
Trading liabilities | ||
Financial instruments | ||
Financial Liabilities | 84,135 | 72,350 |
Derivatives | ||
Financial instruments | ||
Financial Liabilities | 141,697 | 128,897 |
Other financial liabilities | ||
Financial instruments | ||
Financial Liabilities | 46,485 | 39,732 |
Subordinated liabilities | ||
Financial instruments | ||
Financial Liabilities | 9,808 | 10,535 |
Other liabilities | ||
Financial instruments | ||
Liabilities | 9,169 | 8,954 |
Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Liabilities | 7,023 | 6,736 |
Other liabilities | Other liabilities | ||
Financial instruments | ||
Liabilities | 7,023 | 6,736 |
Held-for-trading | Trading liabilities | ||
Financial instruments | ||
Financial Liabilities | 84,135 | 72,350 |
Held-for-trading | Derivatives | ||
Financial instruments | ||
Financial Liabilities | 141,697 | 128,897 |
Held-for-trading | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Liabilities | 225,832 | 201,247 |
DFV | Other financial liabilities | ||
Financial instruments | ||
Financial Liabilities | 2,494 | 2,840 |
DFV | Subordinated liabilities | ||
Financial instruments | ||
Financial Liabilities | 763 | 867 |
DFV | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Liabilities | 3,257 | 3,707 |
Amortised cost | Bank deposits | ||
Financial instruments | ||
Financial Liabilities | 23,093 | 23,297 |
Amortised cost | Customer deposits | ||
Financial instruments | ||
Financial Liabilities | 361,626 | 360,914 |
Amortised cost | Settlement balances | ||
Financial instruments | ||
Financial Liabilities | 7,619 | 3,066 |
Amortised cost | Other financial liabilities | ||
Financial instruments | ||
Financial Liabilities | 43,991 | 36,892 |
Amortised cost | Subordinated liabilities | ||
Financial instruments | ||
Financial Liabilities | 9,045 | 9,668 |
Amortised cost | Other liabilities | ||
Financial instruments | ||
Liabilities | 2,146 | 2,218 |
Amortised cost | Financial Assets and Liabilities, Category | ||
Financial instruments | ||
Financial Liabilities | £ 447,520 | £ 436,055 |
Financial Instruments - classification - Gains and losses (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Financial instruments | ||
Financial Assets | £ 729,869 | £ 694,235 |
Financial Liabilities | 683,632 | 647,745 |
Bank deposits | ||
Financial instruments | ||
Financial Liabilities | 3,715 | 941 |
Customer deposits | ||
Financial instruments | ||
Financial Liabilities | 1,004 | 3,774 |
Trading liabilities | ||
Financial instruments | ||
Financial Liabilities | 32,087 | 25,645 |
Loans to banks - amortised cost | ||
Financial instruments | ||
Financial Assets | 2,162 | 3,539 |
Loans to customers - amortised cost | ||
Financial instruments | ||
Financial Assets | 683 | 9 |
Trading assets | ||
Financial instruments | ||
Financial Assets | £ 28,176 | £ 24,759 |
Financial instruments - valuation - hierarchy of assets (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Level 1 | ||||
Fair value of assets | ||||
Assets | £ 67,686 | £ 62,135 | ||
Level 1 | Securities | ||||
Fair value of assets | ||||
Assets | 24,247 | 22,003 | ||
Level 1 | Derivatives | ||||
Fair value of assets | ||||
Assets | 5 | |||
Level 1 | Securities | ||||
Fair value of assets | ||||
Assets | 43,434 | 40,132 | ||
Level 2 | ||||
Fair value of assets | ||||
Assets | 212,934 | 190,748 | ||
Level 2 | Loans | ||||
Fair value of assets | ||||
Assets | 51,616 | 44,983 | ||
Level 2 | Securities | ||||
Fair value of assets | ||||
Assets | 8,885 | 7,312 | ||
Level 2 | Derivatives | ||||
Fair value of assets | ||||
Assets | 143,994 | 131,513 | ||
Level 2 | Loans | ||||
Fair value of assets | ||||
Assets | 425 | 768 | ||
Level 2 | Securities | ||||
Fair value of assets | ||||
Assets | 8,014 | 6,172 | ||
Level 3 | ||||
Fair value of assets | ||||
Assets | 2,718 | 3,300 | ||
Level 3 | Loans | ||||
Fair value of assets | ||||
Assets | 274 | 120 | ||
Level 3 | Securities | ||||
Fair value of assets | ||||
Assets | 342 | 701 | ||
Level 3 | Derivatives | ||||
Fair value of assets | ||||
Assets | 1,595 | 1,836 | ||
Level 3 | Loans | ||||
Fair value of assets | ||||
Assets | 63 | 136 | ||
Level 3 | Securities | ||||
Fair value of assets | ||||
Assets | 444 | 507 | ||
Recurring | Level 3 | ||||
Fair value of assets | ||||
Assets | 2,718 | 3,300 | £ 3,129 | £ 3,222 |
Recurring | Level 3 | Loans | ||||
Fair value of assets | ||||
Assets | 274 | 120 | ||
Recurring | Level 3 | Securities | ||||
Fair value of assets | ||||
Assets | 342 | 701 | ||
Recurring | Level 3 | Loans | ||||
Fair value of assets | ||||
Assets | 63 | 136 | ||
Recurring | Level 3 | Securities | ||||
Fair value of assets | ||||
Assets | £ 444 | £ 507 |
Financial instruments - valuation - hierarchy of liabilities (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Level 1 | ||||
Fair value of liabilities | ||||
Liabilities | £ 19,660 | £ 18,941 | ||
Level 1 | Short positions | ||||
Fair value of liabilities | ||||
Liabilities | 19,656 | 18,941 | ||
Level 1 | Derivatives | ||||
Fair value of liabilities | ||||
Liabilities | 4 | |||
Level 2 | ||||
Fair value of liabilities | ||||
Liabilities | 207,639 | 184,056 | ||
Level 2 | Deposits | ||||
Fair value of liabilities | ||||
Liabilities | 57,258 | 47,243 | ||
Level 2 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 1,415 | 791 | ||
Level 2 | Short positions | ||||
Fair value of liabilities | ||||
Liabilities | 5,358 | 4,886 | ||
Level 2 | Derivatives | ||||
Fair value of liabilities | ||||
Liabilities | 140,507 | 127,709 | ||
Level 2 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 2,234 | 2,348 | ||
Level 2 | Other deposits | ||||
Fair value of liabilities | ||||
Liabilities | 104 | 212 | ||
Level 2 | Subordinated liabilities | ||||
Fair value of liabilities | ||||
Liabilities | 763 | 867 | ||
Level 3 | ||||
Fair value of liabilities | ||||
Liabilities | 1,790 | 1,957 | ||
Level 3 | Deposits | ||||
Fair value of liabilities | ||||
Liabilities | 368 | 377 | ||
Level 3 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 80 | 112 | ||
Level 3 | Derivatives | ||||
Fair value of liabilities | ||||
Liabilities | 1,186 | 1,188 | ||
Level 3 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 156 | 280 | ||
Recurring | Level 3 | ||||
Fair value of liabilities | ||||
Liabilities | 1,790 | 1,957 | £ 2,030 | £ 2,187 |
Recurring | Level 3 | Deposits | ||||
Fair value of liabilities | ||||
Liabilities | 368 | 377 | ||
Recurring | Level 3 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 80 | 112 | ||
Recurring | Level 3 | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | £ 156 | £ 280 |
Financial instruments - valuation - Level 3 Sensitivities of Assets (Details) - Level 3 - GBP (£) £ in Millions |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Fair value of assets | ||||
Assets | £ 2,718 | £ 3,300 | ||
Loans | ||||
Fair value of assets | ||||
Assets | 274 | 120 | ||
Securities | ||||
Fair value of assets | ||||
Assets | 342 | 701 | ||
Loans | ||||
Fair value of assets | ||||
Assets | 63 | 136 | ||
Securities | ||||
Fair value of assets | ||||
Assets | 444 | 507 | ||
Recurring | ||||
Fair value of assets | ||||
Assets | 2,718 | 3,300 | £ 3,129 | £ 3,222 |
Sensitivity favourable | 280 | 230 | ||
Sensitivity unfavourable | (260) | (220) | ||
Recurring | Loans | ||||
Fair value of assets | ||||
Assets | 274 | 120 | ||
Sensitivity favourable | 10 | 10 | ||
Sensitivity unfavourable | (10) | (10) | ||
Recurring | Securities | ||||
Fair value of assets | ||||
Assets | 342 | 701 | ||
Sensitivity favourable | 10 | 20 | ||
Sensitivity unfavourable | (10) | |||
Recurring | Interest rate | ||||
Fair value of assets | ||||
Assets | 1,326 | 1,487 | ||
Sensitivity favourable | 200 | 120 | ||
Sensitivity unfavourable | (200) | (120) | ||
Recurring | Foreign exchange | ||||
Fair value of assets | ||||
Assets | 123 | 130 | ||
Sensitivity favourable | 10 | 10 | ||
Sensitivity unfavourable | (10) | (10) | ||
Recurring | Other | ||||
Fair value of assets | ||||
Assets | 146 | 219 | ||
Sensitivity favourable | 10 | 10 | ||
Sensitivity unfavourable | (10) | (20) | ||
Recurring | Loans | ||||
Fair value of assets | ||||
Assets | 63 | 136 | ||
Sensitivity favourable | 10 | |||
Sensitivity unfavourable | (20) | |||
Recurring | Securities | ||||
Fair value of assets | ||||
Assets | 444 | 507 | ||
Sensitivity favourable | 40 | 50 | ||
Sensitivity unfavourable | £ (30) | £ (30) |
Financial instruments - valuation - Level 3 Sensitivities of Liabilities (Details) - Level 3 - GBP (£) £ in Millions |
6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Fair value of liabilities | ||||
Liabilities | £ 1,790 | £ 1,957 | ||
Deposits | ||||
Fair value of liabilities | ||||
Liabilities | 368 | 377 | ||
Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 80 | 112 | ||
Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 156 | 280 | ||
Recurring | ||||
Fair value of liabilities | ||||
Liabilities | 1,790 | 1,957 | £ 2,030 | £ 2,187 |
Sensitivity favourable | 150 | 140 | ||
Sensitivity unfavourable | (150) | (150) | ||
Recurring | Deposits | ||||
Fair value of liabilities | ||||
Liabilities | 368 | 377 | ||
Sensitivity favourable | 40 | 40 | ||
Sensitivity unfavourable | (40) | (40) | ||
Recurring | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | 80 | 112 | ||
Sensitivity favourable | 10 | |||
Sensitivity unfavourable | (10) | |||
Recurring | Interest rate | ||||
Fair value of liabilities | ||||
Liabilities | 802 | 808 | ||
Sensitivity favourable | 100 | 70 | ||
Sensitivity unfavourable | (100) | (70) | ||
Recurring | Foreign exchange | ||||
Fair value of liabilities | ||||
Liabilities | 304 | 279 | ||
Sensitivity favourable | 10 | 10 | ||
Sensitivity unfavourable | (10) | (10) | ||
Recurring | Other | ||||
Fair value of liabilities | ||||
Liabilities | 80 | 101 | ||
Sensitivity unfavourable | (10) | |||
Recurring | Debt securities in issue | ||||
Fair value of liabilities | ||||
Liabilities | £ 156 | 280 | ||
Sensitivity favourable | 10 | |||
Sensitivity unfavourable | £ (10) |
Financial instruments - valuation - Movement in Level 3 portfolios - Assets (Details) - GBP (£) £ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Held-for-trading | Continuing operations | ||
Movement in level 3 assets | ||
Amounts recorded in the income statement | £ 195 | |
Level 3 | ||
Movement in level 3 assets | ||
Assets at beginning of period | £ 3,300 | |
Assets at end of period | 2,718 | |
Level 3 | Held-for-trading | Continuing operations | ||
Movement in level 3 assets | ||
Amounts recorded in the income statement | 383 | |
Level 3 | Other instruments | Continuing operations | ||
Movement in level 3 assets | ||
Amounts recorded in the income statement | 14 | 81 |
Recurring | Level 3 | ||
Movement in level 3 assets | ||
Assets at beginning of period | 3,300 | 3,222 |
Amounts recorded in the income statement | (109) | 43 |
Amounts recorded in the statement of comprehensive income | 75 | 17 |
Level 3 transfers in | 160 | 597 |
Level 3 transfers out | (515) | (182) |
Purchases | 292 | 613 |
Settlements | (79) | (473) |
Sales | (406) | (711) |
Foreign exchange and other adjustments | 3 | |
Assets at end of period | 2,718 | 3,129 |
Amounts recorded in the income statement in respect of balances held at year end - unrealised | (110) | 8 |
Amounts recorded in the income statement in respect of balances held at year end - realised | 9 | |
Recurring | Level 3 | Trading assets | ||
Movement in level 3 assets | ||
Assets at beginning of period | 2,657 | 2,692 |
Amounts recorded in the income statement | (113) | (21) |
Level 3 transfers in | 158 | 513 |
Level 3 transfers out | (462) | (181) |
Purchases | 290 | 596 |
Settlements | (73) | (473) |
Sales | (249) | (632) |
Foreign exchange and other adjustments | 3 | 1 |
Assets at end of period | 2,211 | 2,495 |
Amounts recorded in the income statement in respect of balances held at year end - unrealised | (112) | (16) |
Amounts recorded in the income statement in respect of balances held at year end - realised | 5 | |
Recurring | Level 3 | Other financial assets | ||
Movement in level 3 assets | ||
Assets at beginning of period | 643 | 530 |
Amounts recorded in the income statement | 4 | 64 |
Amounts recorded in the statement of comprehensive income | 75 | 17 |
Level 3 transfers in | 2 | 84 |
Level 3 transfers out | (53) | (1) |
Purchases | 2 | 17 |
Settlements | (6) | |
Sales | (157) | (79) |
Foreign exchange and other adjustments | (3) | 2 |
Assets at end of period | 507 | 634 |
Amounts recorded in the income statement in respect of balances held at year end - unrealised | £ 2 | 24 |
Amounts recorded in the income statement in respect of balances held at year end - realised | £ 4 |
Financial instruments - valuation - Movement in Level 3 portfolios - Liabilities (Details) - Level 3 - GBP (£) £ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Movement in level 3 liabilities | ||
Liabilities at beginning of period | £ 1,957 | |
Liabilities at end of period | 1,790 | |
Recurring | ||
Movement in level 3 liabilities | ||
Liabilities at beginning of period | 1,957 | £ 2,187 |
Amounts recorded in the income statement | 260 | (233) |
Level 3 transfers in | 161 | 198 |
Level 3 transfers out | (239) | (107) |
Issuances | 23 | 24 |
Purchases | 216 | 191 |
Settlements | (171) | (108) |
Sales | (419) | (122) |
Foreign exchange and other adjustments | 2 | |
Liabilities at end of period | 1,790 | 2,030 |
Amounts recorded in the income statement in respect of balances held at year end - unrealised | £ 260 | (222) |
Amounts recorded in the income statement in respect of balances held at year end - realised | £ 7 |
Financial instruments - valuation - Assets at Amortised Cost (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair value of assets | ||
Carrying value, Financial assets | £ 729,869.0 | £ 694,235.0 |
Level 1 | ||
Fair value of assets | ||
Fair value, Financial assets | 67,686.0 | 62,135.0 |
Level 2 | ||
Fair value of assets | ||
Fair value, Financial assets | 212,934.0 | 190,748.0 |
Level 3 | ||
Fair value of assets | ||
Fair value, Financial assets | 2,718.0 | 3,300.0 |
Cash and balances at central banks | ||
Fair value of assets | ||
Carrying value, Financial assets | 85,380.0 | 88,897.0 |
Securities | Level 1 | ||
Fair value of assets | ||
Fair value, Financial assets | 43,434.0 | 40,132.0 |
Securities | Level 2 | ||
Fair value of assets | ||
Fair value, Financial assets | 8,014.0 | 6,172.0 |
Securities | Level 3 | ||
Fair value of assets | ||
Fair value, Financial assets | 444.0 | 507.0 |
Items where fair values approximates carrying value | Cash and balances at central banks | ||
Fair value of assets | ||
Carrying value, Financial assets | 85.4 | 88.9 |
Items where fair values approximates carrying value | Settlement balances | ||
Fair value of assets | ||
Carrying value, Financial assets | 8.4 | 2.9 |
Items where fair values approximates carrying value | Loans to banks | ||
Fair value of assets | ||
Carrying value, Financial assets | 0.2 | 0.5 |
Carrying value | Loans to banks | ||
Fair value of assets | ||
Carrying value, Financial assets | 12.7 | 12.4 |
Carrying value | Loans to customers | ||
Fair value of assets | ||
Carrying value, Financial assets | 310.6 | 305.1 |
Carrying value | Securities | ||
Fair value of assets | ||
Carrying value, Financial assets | 13.3 | 11.8 |
Fair value | Loans to banks | ||
Fair value of assets | ||
Fair value, Financial assets | 12.7 | 12.4 |
Fair value | Loans to banks | Level 2 | ||
Fair value of assets | ||
Fair value, Financial assets | 4.9 | 9.2 |
Fair value | Loans to banks | Level 3 | ||
Fair value of assets | ||
Fair value, Financial assets | 7.8 | 3.2 |
Fair value | Loans to customers | ||
Fair value of assets | ||
Fair value, Financial assets | 307.4 | 301.7 |
Fair value | Loans to customers | Level 2 | ||
Fair value of assets | ||
Fair value, Financial assets | 1.0 | 0.5 |
Fair value | Loans to customers | Level 3 | ||
Fair value of assets | ||
Fair value, Financial assets | 306.4 | 301.2 |
Fair value | Securities | ||
Fair value of assets | ||
Fair value, Financial assets | 13.5 | 11.8 |
Fair value | Securities | Level 1 | ||
Fair value of assets | ||
Fair value, Financial assets | 7.2 | 7.3 |
Fair value | Securities | Level 2 | ||
Fair value of assets | ||
Fair value, Financial assets | 4.1 | 3.0 |
Fair value | Securities | Level 3 | ||
Fair value of assets | ||
Fair value, Financial assets | £ 2.2 | £ 1.5 |
Financial instruments - valuation - Liabilities at Amortised Cost (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair value of liabilities | ||
Carrying value, Financial liabilities | £ 683,632.0 | £ 647,745.0 |
Level 1 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 19,660.0 | 18,941.0 |
Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 207,639.0 | 184,056.0 |
Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 1,790.0 | 1,957.0 |
Bank deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 23,093.0 | 23,297.0 |
Customer deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 361,626.0 | 360,914.0 |
Settlement balances | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 7,619.0 | 3,066.0 |
Debt securities in issue | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 1,415.0 | 791.0 |
Debt securities in issue | Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 80.0 | 112.0 |
Subordinated liabilities | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 9,808.0 | 10,535.0 |
Subordinated liabilities | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 763.0 | 867.0 |
Items where fair values approximates carrying value | Bank deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 4.2 | 4.2 |
Items where fair values approximates carrying value | Customer deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 307.2 | 307.1 |
Items where fair values approximates carrying value | Settlement balances | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 7.6 | 3.1 |
Items where fair values approximates carrying value | Other liabilities - notes in circulation | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 2.1 | 2.2 |
Carrying value | Bank deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 18.9 | 19.1 |
Carrying value | Customer deposits | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 54.4 | 53.8 |
Carrying value | Debt securities in issue | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 44.0 | 36.9 |
Carrying value | Subordinated liabilities | ||
Fair value of liabilities | ||
Carrying value, Financial liabilities | 9.0 | 9.7 |
Fair value | Bank deposits | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 18.7 | 18.5 |
Fair value | Bank deposits | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 12.7 | 13.9 |
Fair value | Bank deposits | Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 6.0 | 4.6 |
Fair value | Customer deposits | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 54.5 | 54.6 |
Fair value | Customer deposits | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 7.4 | 10.4 |
Fair value | Customer deposits | Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 47.1 | 44.2 |
Fair value | Debt securities in issue | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 45.9 | 38.6 |
Fair value | Debt securities in issue | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 43.7 | 36.9 |
Fair value | Debt securities in issue | Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 2.2 | 1.7 |
Fair value | Subordinated liabilities | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 10.1 | 10.0 |
Fair value | Subordinated liabilities | Level 2 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | 10.0 | 9.9 |
Fair value | Subordinated liabilities | Level 3 | ||
Fair value of liabilities | ||
Fair value, Financial liabilities | £ 0.1 | £ 0.1 |
Provision for liabilities and charges (Details) - GBP (£) £ in Millions |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2019 |
|
Provisions for liabilities and charges | |||
Balance at beginning of the period | £ 2,480 | £ 3,004 | £ 3,004 |
Implementation of IFRS 16 on 1 January 2019 | 170 | ||
ECL impairment charge/(release) | 21 | (3) | |
Transfer of accruals and other liabilities | 4 | (3) | |
Currency translation and other movements | 10 | (29) | |
Charge to income statement | 182 | 55 | |
Releases to income statement | (114) | (37) | |
Provisions utilised | (313) | (337) | |
Balance at end of the period | 2,270 | 2,480 | 2,270 |
Payment protection insurance | |||
Provisions for liabilities and charges | |||
Balance at beginning of the period | 559 | 695 | 695 |
Provisions utilised | (116) | (136) | (4,900) |
Balance at end of the period | 443 | 559 | 443 |
Prior year provisions | 99 | 99 | |
Other customer redress | |||
Provisions for liabilities and charges | |||
Balance at beginning of the period | 449 | 536 | 536 |
Transfer of accruals and other liabilities | 4 | (4) | |
Currency translation and other movements | 3 | (7) | |
Charge to income statement | 64 | 17 | |
Releases to income statement | (11) | (12) | |
Provisions utilised | (90) | (81) | |
Balance at end of the period | 419 | 449 | 419 |
Litigation and other regulatory (incl. RMBS) | |||
Provisions for liabilities and charges | |||
Balance at beginning of the period | 767 | 783 | 783 |
Currency translation and other movements | 3 | (6) | |
Charge to income statement | 18 | 5 | |
Releases to income statement | (33) | (9) | |
Provisions utilised | (28) | (6) | |
Balance at end of the period | 727 | 767 | 727 |
Other | |||
Provisions for liabilities and charges | |||
Balance at beginning of the period | 705 | 990 | 990 |
Implementation of IFRS 16 on 1 January 2019 | 170 | ||
ECL impairment charge/(release) | 21 | (3) | |
Transfer of accruals and other liabilities | 1 | ||
Currency translation and other movements | 4 | (16) | |
Charge to income statement | 100 | 33 | |
Releases to income statement | (70) | (16) | |
Provisions utilised | (79) | (114) | |
Balance at end of the period | £ 681 | £ 705 | £ 681 |
Provisions for liabilities and charges - Sensitivity (Details) - Payment protection insurance complaint in Thousands |
6 Months Ended | |
---|---|---|
Feb. 05, 2019
item
|
Jun. 30, 2019
GBP (£)
complaint
|
|
Minimum | ||
Disclosure of financial liabilities | ||
Number of claimants | item | 250,000 | |
Maximum | ||
Disclosure of financial liabilities | ||
Number of claimants | item | 300,000 | |
Customer Initiated Complaints | ||
Disclosure of financial liabilities | ||
Number of customer initiated complaints | complaint | 2,968 | |
Customer Initiated Complaints | Estimated change in provision | ||
Disclosure of financial liabilities | ||
Number of customer initiated complaints | complaint | 95 | |
Customer Initiated Complaints | Estimated change in provision | Maximum | ||
Disclosure of financial liabilities | ||
Change in assumption (as a percent) | 5.00% | |
Change in provisions | £ 7,000,000 | |
Uphold rate | ||
Disclosure of financial liabilities | ||
Actual to date (as a percent) | 88.00% | |
Uphold rate | Estimated change in provision | ||
Disclosure of financial liabilities | ||
Actual to date (as a percent) | 90.00% | |
Uphold rate | Estimated change in provision | Maximum | ||
Disclosure of financial liabilities | ||
Change in assumption (as a percent) | 1.00% | |
Change in provisions | £ 1,000,000 | |
Average redress | ||
Disclosure of financial liabilities | ||
Average redress | 1,657 | |
Average redress | Estimated change in provision | ||
Disclosure of financial liabilities | ||
Average redress | £ 1,559 | |
Average redress | Estimated change in provision | Maximum | ||
Disclosure of financial liabilities | ||
Change in assumption (as a percent) | 5.00% | |
Change in provisions | £ 7,000,000 | |
Processing costs per claim | ||
Disclosure of financial liabilities | ||
Processing costs per claim | 148 | |
Processing costs per claim | Estimated change in provision | ||
Disclosure of financial liabilities | ||
Processing costs per claim | 317 | |
Processing costs per claim | Estimated change in provision | Maximum | ||
Disclosure of financial liabilities | ||
Change in assumption | 20,000 | |
Change in provisions | £ 6,000,000 |
Dividends (Details) £ / shares in Units, £ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
GBP (£)
£ / shares
| |
Dividends | |
Interim dividend announced | £ | £ 241 |
Interim dividend per share | £ / shares | £ 2 |
Special dividend announced | £ | £ 1,449 |
Special dividend per share | £ / shares | £ 12 |
Loan impairment provisions (Details) - GBP (£) £ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Loan impairment provisions | ||
Financial Assets | £ 729,869 | £ 694,235 |
ECL provisions | £ 3,302 | £ 3,368 |
ECL provision coverage (in percentage) | 1.02% | 1.05% |
ECL charge | £ 323 | £ 398 |
ECL loss rate - annualised (basis points) | 19.88% | 12.45% |
Amounts written off | £ 452 | £ 1,494 |
Contingent liabilities | ||
Loan impairment provisions | ||
ECL charge | 28 | 31 |
Other financial assets | ||
Loan impairment provisions | ||
Financial Assets | 65,634 | 59,485 |
ECL charge | 30 | 3 |
FVOCI | ||
Loan impairment provisions | ||
ECL provisions | 4 | 5 |
FVOCI | Other financial assets | ||
Loan impairment provisions | ||
Financial Assets | 51,250 | 46,077 |
ECL charge | 0 | 1 |
Loans and advances | ||
Loan impairment provisions | ||
Financial Assets | 325,014 | 319,800 |
Stage 1 | ||
Loan impairment provisions | ||
ECL provisions | £ 280 | £ 285 |
ECL provision coverage (in percentage) | 0.10% | 0.10% |
ECL charge | £ (140) | £ (143) |
Stage 1 | Loans and advances | ||
Loan impairment provisions | ||
Financial Assets | 291,984 | 285,985 |
Stage 2 | ||
Loan impairment provisions | ||
ECL provisions | £ 682 | £ 763 |
ECL provision coverage (in percentage) | 2.65% | 2.92% |
ECL charge | £ 101 | £ 292 |
Stage 2 | Loans and advances | ||
Loan impairment provisions | ||
Financial Assets | 25,705 | 26,097 |
Stage 3 | ||
Loan impairment provisions | ||
ECL provisions | £ 2,340 | £ 2,320 |
ECL provision coverage (in percentage) | 31.95% | 30.06% |
ECL charge | £ 362 | £ 249 |
Stage 3 | Loans and advances | ||
Loan impairment provisions | ||
Financial Assets | £ 7,325 | £ 7,718 |
Contingent liabilities and commitments (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Contingent liabilities and commitments | ||
Standby facilities, credit lines and other commitments | £ 120,862 | £ 119,879 |
Contingent liabilities and commitments | 126,065 | 126,883 |
Guarantees | ||
Contingent liabilities and commitments | ||
Estimated net exposure | 2,793 | 3,952 |
Other contingent liabilities | ||
Contingent liabilities and commitments | ||
Estimated net exposure | £ 2,410 | £ 3,052 |
Litigation, investigations and reviews (Details) € in Millions, £ in Millions, SFr in Millions, $ in Millions, $ in Millions, $ in Millions |
1 Months Ended | 2 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May 27, 2019
AUD ($)
|
Aug. 31, 2018
USD ($)
|
Jan. 05, 2017
USD ($)
|
Jun. 30, 2019
USD ($)
|
Oct. 31, 2017
item
|
Feb. 28, 2017
CHF (SFr)
|
Dec. 31, 2016
SGD ($)
action
|
Dec. 31, 2016
GBP (£)
action
|
Dec. 31, 2015
USD ($)
|
Oct. 31, 2011
USD ($)
|
Dec. 31, 2010
USD ($)
|
Jun. 30, 2019
EUR (€)
lawsuit
|
Jun. 30, 2019
GBP (£)
|
Mar. 31, 2019
GBP (£)
|
Jun. 30, 2019
USD ($)
item
action
complaint
lawsuit
|
Jun. 30, 2019
EUR (€)
item
action
complaint
lawsuit
|
Jun. 30, 2019
GBP (£)
item
action
complaint
lawsuit
|
Dec. 31, 2015
USD ($)
company
|
Dec. 31, 2015
GBP (£)
company
|
Dec. 31, 2012
GBP (£)
|
Jun. 30, 2019
GBP (£)
lawsuit
|
Jul. 10, 2017
item
|
|
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Provisions utilised | £ 313.0 | £ 337.0 | ||||||||||||||||||||
Payment protection insurance | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | £ 5,300.0 | |||||||||||||||||||||
Provisions utilised | £ 116.0 | £ 136.0 | £ 4,900.0 | |||||||||||||||||||
Investment advice review | Maximum | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | 10.0 | |||||||||||||||||||||
Packaged accounts | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | 444.0 | |||||||||||||||||||||
Provisions utilised | 411.0 | |||||||||||||||||||||
Treatment of tracker mortgage customers | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | € 312 | € 312 | 279.0 | |||||||||||||||||||
Provisions utilised | 252 | 226.0 | ||||||||||||||||||||
Internal review from treatment of tracker mortgage customers | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | 167 | 167 | 150.0 | |||||||||||||||||||
Provisions utilised | € 66 | £ 59.0 | ||||||||||||||||||||
Foreign exchange related investigations | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Settlement amount paid | € | € 275 | |||||||||||||||||||||
Residential mortgage-backed securities (RMBS) litigation in the US, issued by Nomura Holding America Inc and subsidiaries | ||||||||||||||||||||||
Litigation, investigations and reviews | ||||||||||||||||||||||
Final settlement amount | $ | $ 1,000.0 | |||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Settlement amount paid | $ | $ 55.3 | |||||||||||||||||||||
London Interbank Offered Rate (LIBOR) | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of non-class action | action | 24 | 24 | ||||||||||||||||||||
Number of non-class actions pending | action | 7 | 7 | ||||||||||||||||||||
Number of failed US banks | item | 39 | |||||||||||||||||||||
JPY LIBOR and Euroyen TIBOR | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of class actions | action | 2 | 2 | 2 | |||||||||||||||||||
Different Reference Rates [Member] | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of class actions | complaint | 4 | 4 | 4 | |||||||||||||||||||
FX antitrust litigation | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Settlement amount paid | $ | $ 255.0 | |||||||||||||||||||||
Maximum Total Transaction Value | $ | $ 0.5 | |||||||||||||||||||||
Swaps antitrust litigation | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of swap execution facilities | item | 3 | 3 | 3 | |||||||||||||||||||
Madoff | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of class actions | action | 2 | 2 | 2 | |||||||||||||||||||
Damages claimed | $ | $ 276.3 | $ 21.8 | $ 75.8 | |||||||||||||||||||
Maximum contingent liability | $ | $ 162.1 | |||||||||||||||||||||
Consumer relief credits | $ | $ 74.6 | |||||||||||||||||||||
Property Alliance Group claim | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Damages claimed | £ 34.8 | £ 446.7 | ||||||||||||||||||||
SMEs | FCA | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Total aggregate provisions | £ 481.0 | |||||||||||||||||||||
Provisions utilised | £ 328.0 | |||||||||||||||||||||
Coutts & Co Ltd | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Penalty paid | $ 2.4 | $ 78.5 | ||||||||||||||||||||
NPA term | 4 years | |||||||||||||||||||||
Disgorge Profits | SFr | SFr 6.5 | |||||||||||||||||||||
Tax dispute | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Damages claimed | £ 71.4 | |||||||||||||||||||||
Value-added-tax | £ 86.0 | |||||||||||||||||||||
Penalty as a percentage of VAT | 100.00% | |||||||||||||||||||||
Number of claimants | company | 10 | 10 | ||||||||||||||||||||
NatWest | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of terrorist attacks claims dismissed | item | 2 | |||||||||||||||||||||
Number of terrorist attacks claimed | item | 18 | |||||||||||||||||||||
NatWest | DoJ | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Penalty paid | $ | $ 395.0 | |||||||||||||||||||||
Number of years probation | 3 years | |||||||||||||||||||||
NatWest | France local authorities | ||||||||||||||||||||||
UK 2008 rights issue shareholder litigation | ||||||||||||||||||||||
Number of complaints filed | lawsuit | 5 | 5 | 5 | |||||||||||||||||||
Number of claims appealed | lawsuit | 2 | 2 | 2 | |||||||||||||||||||
Number of claims pending | lawsuit | 1 | 1 | 1 |
Consolidating financial information - Income statement (Details) - GBP (£) £ in Millions |
6 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||
Consolidating financial information | |||||
Net interest income | £ 4,004 | £ 4,326 | [1] | ||
Non-interest income | 3,113 | 2,376 | [1] | ||
Total income | 7,117 | 6,702 | [1] | ||
Operating expenses | (4,100) | (4,735) | [1] | ||
Impairment releases/(losses) | (323) | (141) | [1] | ||
Operating profit before tax | 2,694 | 1,826 | [1] | ||
Tax credit/(charge) | (194) | (709) | [1] | ||
Profit/(loss) from continuing operations | 1,117 | ||||
Profit/(loss) for the period | 2,500 | 1,117 | [1] | ||
Attributable to: | |||||
Ordinary shareholders | 2,038 | 888 | [1] | ||
Preference shareholders | 20 | 74 | |||
Paid-in equity holders | 182 | 171 | |||
Non-controlling interests | 260 | (16) | [1] | ||
Profit/(loss) for the period | 2,500 | 1,117 | [1] | ||
Inter segment/consolidation adjustments | |||||
Consolidating financial information | |||||
Net interest income | 225 | 1,066 | |||
Non-interest income | (2,519) | (33,125) | |||
Total income | (2,294) | (32,059) | |||
Operating expenses | (85) | (1,292) | |||
Impairment releases/(losses) | 36 | (55) | |||
Operating profit before tax | (2,343) | (33,406) | |||
Tax credit/(charge) | 304 | (191) | |||
Profit/(loss) from continuing operations | (33,597) | ||||
Profit/(loss) from discontinued operations, net of tax | (262) | ||||
Profit/(loss) for the period | (2,039) | (33,859) | |||
Attributable to: | |||||
Ordinary shareholders | (2,113) | (33,842) | |||
Paid-in equity holders | (184) | ||||
Non-controlling interests | 258 | (17) | |||
Profit/(loss) for the period | (2,039) | (33,859) | |||
RBSG plc | |||||
Consolidating financial information | |||||
Net interest income | (331) | (136) | |||
Non-interest income | 2,903 | 33,980 | |||
Total income | 2,572 | 33,844 | |||
Operating expenses | (37) | (60) | |||
Impairment releases/(losses) | 2 | (4) | |||
Operating profit before tax | 2,537 | 33,780 | |||
Tax credit/(charge) | (73) | 66 | |||
Profit/(loss) from continuing operations | 33,846 | ||||
Profit/(loss) for the period | 2,464 | 33,846 | |||
Attributable to: | |||||
Ordinary shareholders | 2,262 | 33,601 | |||
Preference shareholders | 20 | 74 | |||
Paid-in equity holders | 182 | 171 | |||
Profit/(loss) for the period | 2,464 | 33,846 | |||
RBSG plc | IAS 27 | |||||
Consolidating financial information | |||||
Increase (decrease) in results of investments using the equity method | (224) | (32,713) | |||
Increase (decrease) in net assets | (9,210) | (8,651) | |||
NWM Plc | |||||
Consolidating financial information | |||||
Net interest income | (102) | (72) | |||
Non-interest income | 622 | 62 | |||
Total income | 520 | ||||
Total income | (10) | ||||
Operating expenses | (456) | (627) | |||
Impairment releases/(losses) | 34 | (13) | |||
Operating profit before tax | 98 | (650) | |||
Tax credit/(charge) | 55 | 37 | |||
Profit/(loss) from continuing operations | (613) | ||||
Profit/(loss) from discontinued operations, net of tax | 262 | ||||
Profit/(loss) for the period | 153 | (351) | |||
Attributable to: | |||||
Ordinary shareholders | 123 | (351) | |||
Paid-in equity holders | 30 | ||||
Profit/(loss) for the period | 153 | (351) | |||
NWM Plc | IAS 27 | |||||
Consolidating financial information | |||||
Increase (decrease) in results of investments using the equity method | 52 | 1,316 | |||
Increase (decrease) in net assets | 282 | 165 | |||
Subsidiaries | |||||
Consolidating financial information | |||||
Net interest income | 4,212 | 3,468 | |||
Non-interest income | 2,107 | 1,459 | |||
Total income | 6,319 | 4,927 | |||
Operating expenses | (3,522) | (2,756) | |||
Impairment releases/(losses) | (395) | (69) | |||
Operating profit before tax | 2,402 | 2,102 | |||
Tax credit/(charge) | (480) | (621) | |||
Profit/(loss) from continuing operations | 1,481 | ||||
Profit/(loss) for the period | 1,922 | 1,481 | |||
Attributable to: | |||||
Ordinary shareholders | 1,766 | 1,480 | |||
Paid-in equity holders | 154 | ||||
Non-controlling interests | 2 | 1 | |||
Profit/(loss) for the period | £ 1,922 | £ 1,481 | |||
|
Consolidating financial information - Statement of comprehensive income (Details) - GBP (£) £ in Millions |
6 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
||||||
Consolidating financial information | |||||||
Profit/(loss) for the period | £ 2,500 | £ 1,117 | [1] | ||||
Items that do not qualify for reclassification | |||||||
- contributions in preparation for ring-fencing (1) | [1],[2] | (2,000) | |||||
- other movements | (68) | ||||||
(Loss)/profit on fair value of credit in financial liabilities designated at FVTPL due to own credit risk | (96) | 95 | [1] | ||||
Fair value through other comprehensive income (FVOCI) financial assets | 38 | 3 | [1] | ||||
Tax | 26 | 500 | [1] | ||||
Total - Items that do not qualify for reclassification | (100) | (1,402) | [1] | ||||
Items that do qualify for reclassification | |||||||
Fair value through other comprehensive income | (12) | 199 | [1] | ||||
Cash flow hedges | 402 | (521) | [1] | ||||
Currency translation | (241) | 18 | [1] | ||||
Tax | (122) | 97 | [1] | ||||
Total - Items that do qualify for reclassification | 27 | (207) | [1] | ||||
Other comprehensive loss after tax | (73) | (1,609) | [1] | ||||
Total comprehensive income/(loss) for the period | 2,427 | (492) | [1] | ||||
Total comprehensive income/(loss) attributable to: | |||||||
Ordinary shareholders | 1,950 | (708) | [1] | ||||
Preference shareholders | 20 | 74 | [1] | ||||
Paid-in equity holders | 182 | 171 | [1] | ||||
Non-controlling interests | 275 | (29) | [1] | ||||
Inter segment/consolidation adjustments | |||||||
Consolidating financial information | |||||||
Profit/(loss) for the period | (2,039) | (33,859) | |||||
Items that do not qualify for reclassification | |||||||
Fair value through other comprehensive income (FVOCI) financial assets | 51 | 6 | |||||
Total - Items that do not qualify for reclassification | 51 | 6 | |||||
Items that do qualify for reclassification | |||||||
Fair value through other comprehensive income | (10) | ||||||
Cash flow hedges | (16) | (350) | |||||
Currency translation | (290) | 355 | |||||
Tax | (11) | 95 | |||||
Total - Items that do qualify for reclassification | (317) | 90 | |||||
Other comprehensive loss after tax | (266) | 96 | |||||
Total comprehensive income/(loss) for the period | (2,305) | (33,763) | |||||
Total comprehensive income/(loss) attributable to: | |||||||
Ordinary shareholders | (2,395) | (33,732) | |||||
Paid-in equity holders | (184) | ||||||
Non-controlling interests | 274 | (31) | |||||
RBSG plc | |||||||
Consolidating financial information | |||||||
Profit/(loss) for the period | 2,464 | 33,846 | |||||
Items that do qualify for reclassification | |||||||
Cash flow hedges | 7 | 28 | |||||
Tax | (1) | (5) | |||||
Total - Items that do qualify for reclassification | 6 | 23 | |||||
Other comprehensive loss after tax | 6 | 23 | |||||
Total comprehensive income/(loss) for the period | 2,470 | 33,869 | |||||
Total comprehensive income/(loss) attributable to: | |||||||
Ordinary shareholders | 2,268 | 33,624 | |||||
Preference shareholders | 20 | 74 | |||||
Paid-in equity holders | 182 | 171 | |||||
NWM Plc | |||||||
Consolidating financial information | |||||||
Profit/(loss) for the period | 153 | (351) | |||||
Items that do not qualify for reclassification | |||||||
(Loss)/profit on fair value of credit in financial liabilities designated at FVTPL due to own credit risk | (39) | 59 | |||||
Fair value through other comprehensive income (FVOCI) financial assets | (52) | ||||||
Tax | 31 | (16) | |||||
Total - Items that do not qualify for reclassification | (60) | 43 | |||||
Items that do qualify for reclassification | |||||||
Fair value through other comprehensive income | 26 | (323) | |||||
Cash flow hedges | 53 | 234 | |||||
Currency translation | 44 | 56 | |||||
Tax | (12) | 27 | |||||
Total - Items that do qualify for reclassification | 111 | (6) | |||||
Other comprehensive loss after tax | 51 | 37 | |||||
Total comprehensive income/(loss) for the period | 204 | (314) | |||||
Total comprehensive income/(loss) attributable to: | |||||||
Ordinary shareholders | 174 | (314) | |||||
Paid-in equity holders | 30 | ||||||
Subsidiaries | |||||||
Consolidating financial information | |||||||
Profit/(loss) for the period | 1,922 | 1,481 | |||||
Items that do not qualify for reclassification | |||||||
- contributions in preparation for ring-fencing (1) | (2,000) | ||||||
- other movements | (68) | ||||||
(Loss)/profit on fair value of credit in financial liabilities designated at FVTPL due to own credit risk | (57) | 36 | |||||
Fair value through other comprehensive income (FVOCI) financial assets | 39 | (3) | |||||
Tax | (5) | 516 | |||||
Total - Items that do not qualify for reclassification | (91) | (1,451) | |||||
Items that do qualify for reclassification | |||||||
Fair value through other comprehensive income | (38) | 532 | |||||
Cash flow hedges | 358 | (433) | |||||
Currency translation | 5 | (393) | |||||
Tax | (98) | (20) | |||||
Total - Items that do qualify for reclassification | 227 | (314) | |||||
Other comprehensive loss after tax | 136 | (1,765) | |||||
Total comprehensive income/(loss) for the period | 2,058 | (284) | |||||
Total comprehensive income/(loss) attributable to: | |||||||
Ordinary shareholders | 1,903 | (286) | |||||
Paid-in equity holders | 154 | ||||||
Non-controlling interests | £ 1 | £ 2 | |||||
|
Consolidating financial information - Balance sheet (Details) - GBP (£) £ in Millions |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
---|---|---|---|
Assets | |||
Cash and balances at central banks | £ 85,380 | £ 88,897 | |
Trading assets | 85,364 | 75,119 | |
Derivatives | 145,594 | 133,349 | |
Settlement balances | 8,438 | 2,928 | |
Loans to banks - amortised cost | 12,935 | 12,947 | |
Loans to customers - amortised cost | 310,631 | 305,089 | |
Other financial assets. | 65,634 | 59,485 | |
Intangible assets | 6,631 | 6,616 | |
Other assets | 9,262 | 9,805 | |
Total assets | 729,869 | 694,235 | |
Liabilities | |||
Bank deposits | 23,093 | 23,297 | |
Customer deposits | 361,626 | 360,914 | |
Settlement balances | 7,619 | 3,066 | |
Trading liabilities | 84,135 | 72,350 | |
Derivatives | 141,697 | 128,897 | |
Other financial liabilities. | 46,485 | 39,732 | |
Subordinated liabilities | 9,808 | 10,535 | |
Other liabilities | 9,169 | 8,954 | |
Total liabilities | 683,632 | 647,745 | |
Owners' equity | 46,221 | 45,736 | |
Non-controlling interests | 16 | 754 | |
Total equity | 46,237 | 46,490 | £ 48,491 |
Total liabilities and equity | 729,869 | 694,235 | |
Inter segment/consolidation adjustments | |||
Assets | |||
Cash and balances at central banks | 1 | ||
Trading assets | (124) | (99) | |
Derivatives | (10,932) | (2,717) | |
Loans to banks - amortised cost | 14 | (34) | |
Loans to customers - amortised cost | (18) | (19) | |
Amounts due from holding company and fellow | (52,351) | (51,468) | |
Other financial assets. | (258) | (232) | |
Intangible assets | 302 | 302 | |
Other assets | (59,925) | (60,023) | |
Total assets | (123,291) | (114,290) | |
Liabilities | |||
Bank deposits | (1) | (76) | |
Customer deposits | 27 | (7) | |
Amounts due to holding company and fellow subsidiaries | (52,351) | (51,468) | |
Trading liabilities | (124) | (99) | |
Derivatives | (10,932) | (2,717) | |
Other financial liabilities. | 19 | 7 | |
Subordinated liabilities | (145) | (123) | |
Other liabilities | (592) | (561) | |
Total liabilities | (64,099) | (55,044) | |
Owners' equity | (59,195) | (59,989) | |
Non-controlling interests | 3 | 743 | |
Total equity | (59,192) | (59,246) | |
Total liabilities and equity | (123,291) | (114,290) | |
RBSG plc | |||
Assets | |||
Derivatives | 1,083 | 543 | |
Amounts due from holding company and fellow | 26,536 | 22,791 | |
Other financial assets. | 260 | 241 | |
Other assets | 56,823 | 56,773 | |
Total assets | 84,702 | 80,348 | |
Liabilities | |||
Amounts due to holding company and fellow subsidiaries | 916 | 635 | |
Derivatives | 722 | 445 | |
Other financial liabilities. | 20,016 | 16,821 | |
Subordinated liabilities | 7,337 | 7,941 | |
Other liabilities | 280 | 119 | |
Total liabilities | 29,271 | 25,961 | |
Owners' equity | 55,431 | 54,387 | |
Total equity | 55,431 | 54,387 | |
Total liabilities and equity | 84,702 | 80,348 | |
NWM Plc | |||
Assets | |||
Cash and balances at central banks | 12,874 | 11,095 | |
Trading assets | 64,784 | 61,990 | |
Derivatives | 147,840 | 134,291 | |
Settlement balances | 6,305 | 1,421 | |
Loans to banks - amortised cost | 628 | 454 | |
Loans to customers - amortised cost | 8,541 | 7,908 | |
Amounts due from holding company and fellow | 11,539 | 11,800 | |
Other financial assets. | 12,833 | 10,995 | |
Other assets | 2,034 | 2,087 | |
Total assets | 267,378 | 242,041 | |
Liabilities | |||
Bank deposits | 3,593 | 2,777 | |
Customer deposits | 2,046 | 2,390 | |
Amounts due to holding company and fellow subsidiaries | 21,071 | 23,505 | |
Settlement balances | 6,067 | 1,977 | |
Trading liabilities | 61,617 | 54,540 | |
Derivatives | 144,533 | 129,974 | |
Other financial liabilities. | 17,962 | 16,279 | |
Subordinated liabilities | 626 | 659 | |
Other liabilities | 1,490 | 1,018 | |
Total liabilities | 259,005 | 233,119 | |
Owners' equity | 8,373 | 8,922 | |
Total equity | 8,373 | 8,922 | |
Total liabilities and equity | 267,378 | 242,041 | |
Subsidiaries | |||
Assets | |||
Cash and balances at central banks | 72,505 | 77,802 | |
Trading assets | 20,704 | 13,228 | |
Derivatives | 7,603 | 1,232 | |
Settlement balances | 2,133 | 1,507 | |
Loans to banks - amortised cost | 12,293 | 12,527 | |
Loans to customers - amortised cost | 302,108 | 297,200 | |
Amounts due from holding company and fellow | 14,276 | 16,877 | |
Other financial assets. | 52,799 | 48,481 | |
Intangible assets | 6,329 | 6,314 | |
Other assets | 10,330 | 10,968 | |
Total assets | 501,080 | 486,136 | |
Liabilities | |||
Bank deposits | 19,501 | 20,596 | |
Customer deposits | 359,553 | 358,531 | |
Amounts due to holding company and fellow subsidiaries | 30,364 | 27,328 | |
Settlement balances | 1,552 | 1,089 | |
Trading liabilities | 22,642 | 17,909 | |
Derivatives | 7,374 | 1,195 | |
Other financial liabilities. | 8,488 | 6,625 | |
Subordinated liabilities | 1,990 | 2,058 | |
Other liabilities | 7,991 | 8,378 | |
Total liabilities | 459,455 | 443,709 | |
Owners' equity | 41,612 | 42,416 | |
Non-controlling interests | 13 | 11 | |
Total equity | 41,625 | 42,427 | |
Total liabilities and equity | £ 501,080 | £ 486,136 |
Consolidating financial information - Cash flow statement (Details) - GBP (£) £ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Consolidating financial information | ||
Net cash flows from operating activities | £ 10,013 | £ 9,798 |
Net cash flows from investing activities | (5,776) | (3,769) |
Net cash flows from financing activities | (2,689) | (2,307) |
Effects of exchange rate changes on cash and cash equivalents | 211 | 38 |
Net increase/(decrease) in cash and cash equivalents | 1,759 | 3,760 |
Cash and cash equivalents at beginning of year | 108,811 | 122,605 |
Cash and cash equivalents at end of year | £ 110,570 | 126,365 |
Ownership percentage of trust (as a percent) | 100.00% | |
Inter segment/consolidation adjustments | ||
Consolidating financial information | ||
Net cash flows from operating activities | £ (4,565) | 1,540 |
Net cash flows from investing activities | 753 | 48,529 |
Net cash flows from financing activities | 6,681 | 1,045 |
Effects of exchange rate changes on cash and cash equivalents | (31) | (477) |
Net increase/(decrease) in cash and cash equivalents | 2,838 | 50,637 |
Cash and cash equivalents at beginning of year | (7,283) | (86,912) |
Cash and cash equivalents at end of year | (4,445) | (36,275) |
RBSG plc | ||
Consolidating financial information | ||
Net cash flows from operating activities | 4,125 | 273 |
Net cash flows from investing activities | (521) | |
Net cash flows from financing activities | (2,632) | (345) |
Effects of exchange rate changes on cash and cash equivalents | 7 | (1) |
Net increase/(decrease) in cash and cash equivalents | 979 | (73) |
Cash and cash equivalents at beginning of year | 307 | 245 |
Cash and cash equivalents at end of year | 1,286 | 172 |
NWM Plc | ||
Consolidating financial information | ||
Net cash flows from operating activities | 7,886 | 25,094 |
Net cash flows from investing activities | (3,478) | (617) |
Net cash flows from financing activities | (450) | (1,082) |
Effects of exchange rate changes on cash and cash equivalents | 55 | 708 |
Net increase/(decrease) in cash and cash equivalents | 4,013 | 24,103 |
Cash and cash equivalents at beginning of year | 24,575 | 13,058 |
Cash and cash equivalents at end of year | 28,588 | 37,161 |
Subsidiaries | ||
Consolidating financial information | ||
Net cash flows from operating activities | 2,567 | (17,109) |
Net cash flows from investing activities | (2,530) | (51,681) |
Net cash flows from financing activities | (6,288) | (1,925) |
Effects of exchange rate changes on cash and cash equivalents | 180 | (192) |
Net increase/(decrease) in cash and cash equivalents | (6,071) | (70,907) |
Cash and cash equivalents at beginning of year | 91,212 | 196,214 |
Cash and cash equivalents at end of year | £ 85,141 | £ 125,307 |
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