6-K 1 a6651h.htm INTERIM RESULTS 2019 - PART 2 OF 2 Blueprint
 
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For August 02, 2019
Commission File Number: 001-10306
 
The Royal Bank of Scotland Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(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 ___
 
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):_________
 
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):_________
 
 
 
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 ___ No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
 
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)
 
 
Certain disclosures in this appendix are within the scope of EY’s review report and are marked accordingly.
 
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 England’s Term Funding Scheme reduced by £4 billion.
The liquidity coverage ratio decreased from 158% to 154% driven by reductions in NWM Plc’s 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 CCyB’s 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 Group’s 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.
 
 
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 
 
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.
 
(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.
 
 
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Capital resources (Within the scope of EY’s review report)
 
 
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 
 
 
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 RBS’s interpretation of the Bank of England’s 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.
 
 
Appendix 1 Capital and risk management
Capital, liquidity and funding risk continued
Funding sources (Within the scope of EY’s review report)
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 RBS’s participation in central bank financing operations under the European Central Bank’s 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 (Within the scope of EY’s review report)
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 RBSG’s 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 (Within the scope of EY’s review report)
A full description of the framework for incorporating economic loss drivers in to IFRS9 ECL calculations is provided in the Group’s 2018 Annual Report & Accounts. 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 (Within the scope of EY’s review report)
RBS’s 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 Moody’s 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 RBS’s 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 (Within the scope of EY’s review report)
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 customer’s 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 (Within the scope of EY’s review report)
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 
280 
Stage 2
417 
56 
187 
10 
682 
Stage 3
710 
588 
926 
19 
16 
81 
2,340 
 
1,226 
672 
1,236 
40 
22 
99 
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)
323 
Stage 1
(53)
(24)
(55)
(5)
(3)
(2)
(140)
Stage 2
103 
(38)
38 
(1)
(2)
101 
Stage 3
131 
41 
219 
(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 
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 
285 
Stage 2
430 
114 
194 
10 
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 
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 Bank’s 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 (Within the scope of EY’s review report)
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 
56 
588 
672 
Personal (3)
11,304 
1,082 
37 
1,119 
2,000 
14,423 
 
23 
26 
490 
525 
Wholesale
8,380 
501 
18 
519 
171 
9,070 
 
19 
28 
30 
98 
147 
Commercial Banking
90,287 
8,891 
346 
9,237 
2,340 
101,864 
 
123 
181 
187 
926 
1,236 
Private Banking
14,198 
356 
175 
531 
173 
14,902 
 
12 
19 
40 
Personal
11,324 
203 
51 
254 
157 
11,735 
 
15 
22 
Wholesale
2,874 
153 
124 
277 
16 
3,167 
 
18 
RBS International
15,011 
417 
426 
99 
15,536 
 
16 
22 
Personal
2,610 
36 
43 
86 
2,739 
 
12 
14 
Wholesale
12,401 
381 
383 
13 
12,797 
 
NatWest Markets
9,539 
229 
229 
715 
10,483 
 
10 
10 
81 
99 
Central items and other
5,881 
129 
129 
6,010 
 
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 
622 
155 
7,540 
 
22 
30 
30 
108 
160 
Commercial Banking
91,034 
9,087 
430 
9,518 
2,448 
103,000 
 
124 
186 
194 
942 
1,260 
Private Banking
13,750 
380 
151 
531 
225 
14,506 
 
13 
10 
20 
43 
Personal
10,803 
183 
25 
208 
203 
11,214 
 
17 
25 
Wholesale
2,947 
197 
126 
323 
22 
3,292 
 
18 
RBS International
13,383 
274 
15 
289 
101 
13,773 
 
17 
26 
NatWest Markets
8,196 
407 
407 
728 
9,331 
 
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 (Within the scope of EY’s review report)
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)
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)
Personal
0.04 
1.48 
1.18 
9.55 
0.19 
 
(3)
(5.11)
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)
Personal
0.04 
2.78 
2.33 
13.95 
0.51 
 
(1)
(7.30)
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 
 
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)
Personal
0.05 
1.64 
1.44 
8.37 
0.22 
 
(6)
(5.4)
Wholesale
0.27 
1.02 
3.97 
2.17 
13.64 
0.55 
 
RBS International
0.04 
1.09 
1.04 
16.83 
0.19 
 
(2)
(1.5)
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 (Within the scope of EY’s review report)
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 
722 
 
2,238 
  - AQ10
3,302 
140 
628 
4,070 
 
1,516 
1,712 
22 
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 
10,774 
 
25,705 
  - Stage 3
3,302 
140 
628 
4,070 
 
1,516 
1,712 
22 
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 
1,515 
 
3,302 
  - UK
236 
221 
805 
1,262 
 
361 
681 
17 
1,065 
 
2,327 
  - RoI
503 
19 
525 
 
40 
116 
158 
 
683 
  - Other Europe
 
21 
139 
12 
173 
 
173 
  - RoW
 
114 
119 
 
119 
ECL provisions by stage
739 
224 
824 
1,787 
 
424 
1,050 
32 
1,515 
 
3,302 
  - Stage 1
16 
36 
61 
113 
 
44 
103 
11 
167 
 
280 
  - Stage 2
96 
100 
251 
447 
 
41 
185 
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
26 
138 
167 
 
22 
134 
(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
 
11 
 
11 
  - AQ10
 
 
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
11 
16 
 
88 
96 
 
112 
  - AQ10 (4)
289 
298 
 
114 
258 
374 
 
672 
 
 
 
 
 
*Not within the scope of EY's review report.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (Within the scope of EY’s review report)
 
 
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 
438 
 
2,033 
  - AQ10
3,666 
122 
563 
4,351 
 
1,685 
1,643 
35 
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 
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 
1,571 
 
3,368 
  - UK
237 
227 
707 
1,171 
 
518 
615 
27 
1,161 
 
2,332 
  - RoI
602 
21 
626 
 
43 
125 
170 
 
796 
  - Other Europe
 
22