TIDMRBS
RNS Number : 1686X
Royal Bank of Scotland Group PLC
26 April 2019
The Royal Bank of Scotland Group plc
Q1 Interim Management Statement
RBS reported an operating profit before tax of GBP1,013 million,
compared with GBP1,213 million in Q1 2018 primarily reflecting
GBP265 million lower income, partially offset by GBP73 million
lower operating expenses.
-- Q1 2019 attributable profit of GBP707 million compared with GBP808
million in Q1 2018.
Supporting our customers:
-- We continue to support our customers through ongoing UK economic
uncertainty. UK Personal Banking (UK PB) gross new mortgage lending
was GBP7.6 billion in the quarter, with net loans to customers of
GBP150.6 billion at Q1 2019. Commercial Banking originated or refinanced
GBP4.6 billion of utilised term lending in the quarter and net loans
to customers were GBP100.8 billion.
-- Across UK PB, Ulster, Commercial and Private Banking net loans to
customers increased by 0.8% on an annualised basis.
Income stable in a competitive market:
-- Excluding notable items, NatWest Markets (NWM) and Central items,
income remained stable compared with Q1 2018.
-- Across the retail and commercial businesses, net interest margin
(NIM) of 2.07% was stable on Q4 2018. Group NIM decreased by 6 basis
points to 1.89% reflecting a reclassification of funding costs in
NWM and an IFRS 9 accounting change for interest in suspense recoveries.
Building a sustainable bank through continued transformation and
increased digitisation:
-- We remain on track to meet our GBP300 million cost reduction target
this year, achieving a GBP45 million reduction in the quarter.
-- We now have 6.6 million regular personal and business users of our
mobile app. In UK PB, 73% of our active current account customers
are regular digital users and total digital sales increased by 17%,
representing 47% of all sales in Q1 2019. In Commercial Banking,
we now have over 2,500 users of the Bankline Mobile app, up 19% compared
with Q4 2018.
Capital generation:
-- CET1 ratio of 16.2%, which excluding the impact of IFRS 16 'Leases'
and a 2p dividend accrual, represents an underlying increase of 30
basis points in the quarter.
-- RWAs increased by GBP2.1 billion compared with Q4 2018 principally
reflecting a GBP1.3 billion increase associated with IFRS 16 'Leases'.
Outlook(1)
While we retain the outlook guidance we provided in the 2018
Annual Results document, we recognise that the ongoing impact of
Brexit uncertainty on the economy, and associated delay in business
borrowing decisions, is likely to make income growth more
challenging in the near term.
Note:
(1) The targets, expectations and trends discussed in this
section represent management's current expectations and are subject
to change, including as a result of the factors described in the
"Risk Factors" section on pages 253 to 263 of the 2018 Annual
Report and Accounts. These statements constitute forward-looking
statements. Refer to Forward-looking statements in this
announcement.
Business performance summary
Quarter ended
=================================
31 March 31 December 31 March
Performance key metrics and ratios 2019 2018 2018
============================================= ========= =========== =========
Operating profit before tax GBP1,013m GBP572m GBP1,213m
Profit attributable to ordinary shareholders GBP707m GBP304m GBP808m
Net interest margin 1.89% 1.95% 2.04%
Net interest margin (excluding NWM) 2.07% 2.07% 2.14%
Average interest earning assets GBP436bn GBP442bn GBP427bn
Cost:income ratio (1) 63.4% 80.5% 60.5%
Earnings per share
- basic 5.9p 2.5p 6.8p
- basic fully diluted 5.8p 2.5p 6.7p
Return on tangible equity 8.3% 3.7% 9.4%
Average tangible equity GBP34bn GBP33bn GBP34bn
Average number of ordinary shares
outstanding during the period (millions)
- basic 12,047 12,040 11,956
- fully diluted (2) 12,087 12,081 12,015
============================================= ========= =========== =========
31 March 31 December 31 March
Balance sheet related key metrics and ratios 2019 2018 2018
================================================ ========== =========== ==========
Total assets GBP719.1bn GBP694.2bn GBP738.5bn
Funded assets GBP585.1bn GBP560.9bn GBP588.7bn
Loans to customers - amortised cost GBP306.4bn GBP305.1bn GBP303.8bn
Impairment provisions GBP3.1bn GBP3.3bn GBP4.2bn
Loan impairment rate (3) 11bps 2bps 10bps
Customer deposits GBP355.2bn GBP360.9bn GBP354.5bn
Liquidity coverage ratio (LCR) 153% 158% 151%
Liquidity portfolio GBP190bn GBP198bn GBP180bn
Net stable funding ratio (NSFR) (4) 137% 141% 137%
Loan:deposit ratio 86% 85% 86%
Total wholesale funding GBP77bn GBP74bn GBP73bn
Short-term wholesale funding GBP19bn GBP15bn GBP17bn
Common Equity Tier (CET1) ratio 16.2% 16.2% 16.4%
Total capital ratio 21.1% 21.8% 21.6%
Pro forma CET 1 ratio, pre dividend accrual (5) 16.3% 16.9%
Risk-weighted assets (RWAs) GBP190.8bn GBP188.7bn GBP202.7bn
CRR leverage ratio 5.2% 5.4% 5.4%
UK leverage ratio 6.0% 6.2% 6.2%
Tangible net asset value (TNAV) per ordinary
share 289p 287p 297p
Tangible net asset value (TNAV) per ordinary
share - fully diluted 288p 286p 295p
Tangible equity GBP34,962m GBP34,566m GBP35,644m
Number of ordinary shares in issue (millions) 12,090 12,049 11,993
Number of ordinary shares in issue (millions)
- fully diluted (2,6) 12,129 12,088 12,075
================================================ ========== =========== ==========
Notes:
(1) Operating lease depreciation included in income for Q1 2019
- GBP34 million; (Q4 2018 - GBP32 million; Q1 2018 - GBP31
million).
(2) Includes the effect of dilutive share options and
convertible securities. Dilutive shares on an average basis for Q1
2019 were 40 million shares; (Q4 2018 - 41 million shares, Q1 2018
- 59 million shares), and as at 31 March 2019 were 39 million
shares (31 December 2018 - 39 million shares; 31 March 2018 - 82
million shares).
(3) Loan impairment rate is calculated as the annualised
impairment charge for the period as a proportion of gross customer
loans.
(4) In November 2016, the European Commission published its
proposal for NSFR rules within the EU as part of its CRR2 package
of regulatory reforms. CRR2 NSFR is expected to become the
regulatory requirement in future within the EU and the UK. RBS has
changed its policy on the NSFR to align with its interpretation of
the CRR2 proposals with effect from 1 January 2018.
(5) The pro forma CET 1 ratio at 31 March 2019 excluded a charge
of GBP242 million (2p per share) for the Q1 2019 foreseeable
dividend. 31 December 2018 excluded a charge of GBP422 million
(3.5p per share) for the final dividend and GBP904 million (7.5p
per share) for the special dividend due to be paid following the
Annual General Meeting held on 25 April 2019.
(6) Includes 24 million treasury shares (31 December 2018 - 8
million shares; 31 March 2018 - 18 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
restated.
Summary consolidated income statement for the period ended 31 March
2019
Quarter ended
===============================
31 March 31 December 31 March
2019 2018 2018
GBPm GBPm GBPm
======================================================= ======== =========== ========
Net interest income 2,033 2,176 2,146
======================================================= ======== =========== ========
Own credit adjustments (43) 33 21
Other non-interest income 1,047 849 1,135
======================================================= ======== =========== ========
Non-interest income 1,004 882 1,156
======================================================= ======== =========== ========
Total income 3,037 3,058 3,302
======================================================= ======== =========== ========
Litigation and conduct costs (5) (92) (19)
Strategic costs (195) (355) (209)
Other expenses (1,738) (2,022) (1,783)
Operating expenses (1,938) (2,469) (2,011)
======================================================= ======== =========== ========
Profit before impairment losses 1,099 589 1,291
Impairment losses (86) (17) (78)
======================================================= ======== =========== ========
Operating profit before tax 1,013 572 1,213
Tax charge (216) (118) (313)
======================================================= ======== =========== ========
Profit for the period 797 454 900
======================================================= ======== =========== ========
Attributable to:
Ordinary shareholders 707 304 808
Other owners 100 164 85
Non-controlling interests (10) (14) 7
======================================================= ======== =========== ========
Notable items within total income
IFRS volatility in Central items & other (1) (4) (25) (128)
Insurance indemnity in Central items & other - 85 -
UK PB debt sale gain 2 35 26
FX gain/(losses) in Central items & other 20 (39) (15)
Commercial Banking fair value and disposal (loss)/gain (2) (10) 77
NatWest Markets legacy business disposal losses (4) (43) (16)
Note:
(1) IFRS volatility relates to loans which are economically
hedged but for which hedge accounting is not permitted under
IFRS.
Business performance summary
Personal & Ulster
UK Personal Banking
Quarter ended As at
=================================== ======================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
GBPm GBPm GBPm GBPbn GBPbn
===================== ========= ============= ========= ========================= ======== ============
Total income 1,245 1,246 1,298 Net loans to customers 150.6 148.9
Operating expenses (635) (757) (686) Customer deposits 145.7 145.3
Impairment losses (112) (142) (68) RWAs 35.8 34.3
Loan impairment
Operating profit 498 347 544 rate 30bps 38bps
Return on equity 24.7% 17.2% 29.9%
Net interest margin 2.62% 2.60% 2.73%
Cost:income ratio 51.0% 60.8% 52.9%
===================== ========= ============= ========= ========================= ======== ============
-- UK PB now has 6.1 million regular mobile app users, with 73% of our
active current account customers being regular digital users. Total
digital sales volumes increased by 17% representing 47% of all sales
in Q1 2019. 59% of personal unsecured loan sales were via the digital
channel, 4% higher than Q1 2018. 54% of current accounts opened in
Q1 2019 were via the digital channel, with digital volumes 44% higher.
-- Total income was GBP53 million, or 4.1%, lower than Q1 2018 impacted
by a GBP24 million reduction in debt sale gains, GBP8 million lower
annual insurance profit share and an IFRS 9 accounting change for
interest in suspense recoveries of GBP6 million. Excluding these
items, income was GBP15 million or 1.2% lower than Q1 2018 reflecting
a continued competitive mortgage market. Compared with Q4 2018, net
interest margin was 2 basis points higher due to the impact of an
annual review of mortgage customer behaviour in Q4 2018.
-- Excluding strategic, litigation and conduct costs, operating expenses
were GBP8 million, or 1.3%, lower compared with Q1 2018 as lower
operational costs associated with a 12% reduction in headcount were
largely offset by increased fraud, investment and technology transformation
costs.
-- Impairments were GBP44 million higher than Q1 2018 reflecting lower
provision releases and recoveries and an increase in the stage 1
and 2 charge, reflecting IFRS 9 predictive loss model adjustments
in Q1 2019, following a slight deterioration in default rates.
-- Compared with Q4 2018, net loans to customers increased by GBP1.7
billion as a result of strong gross new mortgage lending and lower
redemptions. Gross new mortgage lending in the quarter was GBP7.6
billion, with market flow share of approximately 13% and mortgage
approval share of around 12%.
-- RWAs increased by GBP1.5 billion compared with Q4 2018, primarily
reflecting an increase in central allocations linked to IFRS 16 changes
and predictive loss model adjustments in Q1 2019.
Ulster Bank RoI
Quarter ended As at
=================================== ======================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
EURm EURm EURm EURbn EURbn
========================= ========= ============= ========= ======================== ======== ============
Total income 166 165 165 Net loans to customers 21.1 21.0
Operating expenses (156) (184) (145) Customer deposits 20.3 20.1
Impairment
releases/(losses) 13 21 (9) RWAs 16.4 16.4
Loan impairment
Operating profit 23 2 11 rate (24)bps (38)bps
Return on equity 3.8% 0.4% 1.6%
Net interest margin 1.65% 1.73% 1.80%
Cost:income ratio 93.8% 111.6% 87.7%
========================= ========= ============= ========= ======================== ======== ============
-- 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 active personal current account customers are choosing to
bank through digital channels. Mobile payments and transfers increased
31% compared with Q1 2018.
-- Total income remained stable compared with Q1 2018 as a decrease
in income associated with the non-performing loan portfolio was offset
by an EUR11 million one-off benefit following a restructure of interest
rate swaps on free funds. Compared with Q4 2018, net interest margin
was 8 basis points lower as a continued reduction in funding costs
was more than offset by a decrease in income associated with the
non-performing portfolio.
-- Excluding strategic, litigation and conduct costs, operating expenses
were EUR13 million, or 10.0%, higher than Q1 2018 reflecting the
continued focus on strengthening the risk, compliance and control
environment, investment in technology capabilities and expenditure
on recent mortgage marketing activity.
-- A net impairment release of EUR13 million in the quarter reflects
an improvement in the performance of the non-performing loan portfolio
and an IFRS 9 change in accounting treatment for the recovery of
interest in suspense.
-- Net loans to customers increased by EUR0.1 billion compared with
Q4 2018 primarily driven by growth in the commercial loan portfolio
in the quarter.
Business performance summary
Commercial & Private Banking
Commercial Banking
Quarter ended As at
=============================== =====================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
GBPm GBPm GBPm GBPbn GBPbn
==================== ======== =========== ======== ====================== ======== ===========
Total income 1,082 1,116 1,158 Net loans to customers 100.8 101.4
Operating expenses (640) (764) (595) Customer deposits 131.8 134.4
Impairment losses (5) (5) (12) RWAs 78.1 78.4
Loan impairment
Operating profit 437 347 551 rate 2bps 2bps
Return on equity 11.5% 8.3% 13.6%
Net interest margin 1.99% 1.96% 1.91%
Cost:income ratio 57.8% 67.5% 50.0%
==================== ======== =========== ======== ====================== ======== ===========
-- The Bankline mobile app was successfully launched in the Apple
app store in Q4 2018 and now has over 2,500 users, up 19% compared
with Q4 2018. The improved lending journey now provides a decision
in principle in under 24 hours for approximately 74% of loans,
compared with 50% in 2018.
-- Total income was GBP76 million, or 6.6%, lower than Q1 2018 reflecting
a GBP79 million reduction in fair value and disposal gains and
lower fee income, partially offset by higher deposit income.
Compared with Q4 2018, net interest margin increased by 3 basis
points to 1.99% due to lower liquidity portfolio costs and deposit
funding benefits, partially offset by lower volumes.
-- Excluding strategic, litigation and conduct costs, operating
expenses were GBP28 million, or 5.1% higher, primarily reflecting
an GBP11 million one-off item in Q1 2018, increased remediation
spend and higher innovation and technology costs.
-- Impairments were GBP7 million lower than Q1 2018 reflecting lower
single name charges.
-- Compared with Q4 2018, net loans to customers decreased by GBP0.6
billion, or 0.6%, to GBP100.8 billion. Commercial Banking originated
or refinanced GBP4.6 billion of utilised term lending in the
quarter.
-- Compared with Q4 2018, RWAs were GBP0.3 billion lower as a result
of the transfer of GBP1.0 billion to Central Items in relation
to the 2011 investment in the Business Growth Fund and GBP0.2
billion to NatWest Markets related to the transition of Western
European Corporate clients, partially offset by model changes
and the impact of IFRS 16 'Leases'.
Private Banking
Quarter ended As at
=============================== =====================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
GBPm GBPm GBPm GBPbn GBPbn
============================= ======== =========== ======== ====================== ======== ===========
Total income 193 198 184 Net loans to customers 14.4 14.3
Operating expenses (117) (143) (121) Customer deposits 26.9 28.4
Impairment releases/(losses) 4 8 (1) RWAs 9.6 9.4
Operating profit 80 63 62 AUM 27.8 26.4
Return on equity 17.1% 12.3% 12.5%
Net interest margin 2.52% 2.49% 2.51%
Cost:income ratio 60.6% 72.2% 65.8%
============================= ======== =========== ======== ====================== ======== ===========
Note:
(1) Private Banking manages assets under management portfolios
on behalf of UK Personal Banking and RBS International (Q4 2018 -
GBP6.6 billion and Q1 2019 - GBP6.8 billion). Prior to Q4 2018, the
assets under management portfolios from Personal and RBSI were not
included. Private Banking receives a management fee from UK
Personal Banking and clients of RBS International in respect of
providing this service.
-- Private Banking offers a service-led, digitally enabled experience
for its clients, with 73% banking digitally, and 94% of clients positively
rate the Coutts24 telephony service. Coutts Connect, the social platform
which allows clients to network and build working relationships with
one another, now has over 1,500 users with more than half of conversations
client to client.
-- Total income was GBP9 million, or 4.9%, higher than Q1 2018 reflecting
increased deposit income and higher lending balances. Compared with
Q4 2018, net interest margin increased by 3 basis points due to deposit
funding benefits and lower liquidity portfolio costs, partially offset
by ongoing asset margin pressure.
-- Excluding strategic, litigation and conduct costs, operating expenses
were GBP2 million, or 1.8%, lower primarily reflecting lower back
office operations costs.
-- Net loans to customers increased by GBP0.1 billion compared with Q4
2018, driven by mortgage lending.
-- Assets under management (AUM) increased by GBP1.4 billion compared
with Q4 2018 to GBP27.8 billion driven by new business inflows of
GBP0.1 billion and investment performance.
Business performance summary
RBS International
Quarter ended As at
================================== ======================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
GBPm GBPm GBPm GBPbn GBPbn
===================== ========= ============ ========= ======================== ========= ===========
Total income 151 155 137 Net loans to customers 13.3 13.3
Operating expenses (59) (86) (59) Customer deposits 27.6 27.5
Impairment releases 1 2 - RWAs 7.0 6.9
Operating profit 93 71 78
Return on equity 28.6% 20.0% 23.2%
Net interest margin 1.70% 1.81% 1.57%
Cost:income ratio 39.1% 55.5% 43.1%
===================== ========= ============ ========= ======================== ========= ===========
-- The RBS International mobile app now has 69,000 users, an increase
of 24% year on year. 90% of wholesale customer payments are now processed
using the newly introduced international banking platform, making
the payments process simpler for customers.
-- Total income was GBP14 million, or 10.2%, higher than Q1 2018 driven
by deposit margin benefits. Compared with Q4 2018, net interest margin
decreased by 11 basis points due to a one-off benefit in Q4 2018 and
ongoing higher funding costs associated with becoming a non ring-fenced
bank.
-- Excluding strategic, litigation and conduct costs, operating expenses
were GBP4 million, or 6.8%, lower reflecting decreased remediation
spend and lower back office operations costs.
-- Net loans to customers remained stable compared with Q4 2018. Customer
deposits increased by GBP0.1 billion compared with Q4 2018 primarily
due to customer activity in Institutional Banking.
-- In the quarter, RBS International continued to diversify its liquidity
portfolio, increasing the position in sovereign bonds with this portfolio
expected to modestly increase in scale over future quarters.
NatWest Markets(1)
Quarter ended As at
=============================== =====================
31 March 31 December 31 March 31 March 31 December
2019 2018 2018 2019 2018
GBPm GBPm GBPm GBPbn GBPbn
======================== ======== =========== ======== ============= ======== ===========
Total income 256 152 437 Funded assets 138.8 111.4
Operating expenses (334) (455) (349) RWAs 44.6 44.9
Impairment releases 16 100 9
Operating (loss)/profit (62) (203) 97
Return on equity (2.4%) (9.2%) 2.0%
Net interest margin
(2) (0.39%) 0.39% 0.54%
Cost:income ratio 130.5% 299.3% 79.9%
======================== ======== =========== ======== ============= ======== ===========
Notes:
(1) The NatWest Markets operating segment should not be assumed
to be 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.
For the quarter ended 31 March 2019, NatWest Markets Plc's
(consolidated legal entity) results are estimated as: total income
of GBP276 million, operating expenses of GBP231 million, impairment
releases of GBP20 million, operating profit before tax of GBP65
million, funded assets(excluding intra-group assets) of GBP130.8
billion and total assets of GBP273.6 billion. The key difference
between the NWM segment and NWM legal entity operating profit for
the quarter ended 31 March 2019 largely relates to expense items,
including one-off recoveries, that form part of Central items and
other. The remaining difference relates primarily to NatWest
Markets N.V.
(2) From 1 January 2019, funding costs of the trading book have
been reclassified from trading income to net interest income.
-- NatWest Markets is increasingly using technology to enhance the
way it provides innovative financial solutions to customers.
For example, through our automated pricing tool FXmicropay we
make it simpler for businesses operating globally to accept payments
in multiple currencies. We have now made FXmicropay available
on an e-commerce web platform, SAP Commerce Cloud, helping online
businesses easily integrate the tool and capture foreign exchange
margins via their platform.
-- Total income was GBP181 million, or 41.4%, lower than Q1 2018
reflecting a GBP35 million reduction in the core business, an
GBP83 million decrease in legacy income and a GBP63 million deterioration
in own credit adjustments. Income in the core business fell by
8.5% to GBP377 million as customer activity fell in uncertain
market conditions. Legacy income reduced as funding costs associated
with former RBS plc debt are now reported wholly in NatWest Markets
rather than being partially allocated to other segments. The
larger part of this former RBS plc debt is due to mature by early
2020. Income from own credit adjustments deteriorated due to
a substantial reduction in funding spreads.
-- Excluding strategic, litigation and conduct costs, operating
expenses reduced by GBP10 million, or 3.1%, compared with Q1
2018 reflecting lower support costs.
-- RWAs decreased by GBP0.3 billion compared with Q4 2018 driven
by legacy reductions partially offset by a GBP0.2 billion transfer
of Western European Corporate clients from Commercial Banking.
Legacy RWAs are now GBP12.9 billion including Alawwal Bank RWAs
of GBP5.6 billion.
Central items & other
-- Central items not allocated represented a charge of GBP53 million
in the quarter, principally reflecting GBP61 million of strategic
costs.
Business performance summary
Capital and leverage ratios
End-point CRR basis
(1)
======================
31 March 31 December
2019 2018
Risk asset ratios % %
============================================ ========= ===========
CET1 16.2 16.2
Tier 1 18.3 18.4
Total 21.1 21.8
============================================ ========= ===========
Capital GBPm GBPm
============================================ ========= ===========
Tangible equity 34,962 34,566
============================================ ========= ===========
Expected loss less impairment provisions (682) (654)
Prudential valuation adjustment (448) (494)
Deferred tax assets (720) (740)
Own credit adjustments (311) (405)
Pension fund assets (389) (394)
Cash flow hedging reserve 49 191
Foreseeable ordinary dividends (1,568) (1,326)
Other deductions (4) (105)
============================================ ========= ===========
Total deductions (4,073) (3,927)
CET1 capital 30,889 30,639
AT1 capital 4,051 4,051
============================================ ========= ===========
Tier 1 capital 34,940 34,690
Tier 2 capital 5,242 6,483
============================================ ========= ===========
Total regulatory capital 40,182 41,173
============================================ ========= ===========
Risk-weighted assets
============================================ ========= ===========
Credit risk
- non-counterparty 139,300 137,900
- counterparty 14,700 13,600
Market risk 14,200 14,800
Operational risk 22,600 22,400
============================================ ========= ===========
Total RWAs 190,800 188,700
============================================ ========= ===========
Leverage
============================================ ========= ===========
Cash and balances at central banks 83,800 88,900
Trading assets 89,100 75,100
Derivatives 134,100 133,300
Loans 319,400 318,000
Other assets 92,700 78,900
============================================ ========= ===========
Total assets 719,100 694,200
Derivatives
- netting and variation margin (143,000) (141,300)
- potential future exposures 43,100 42,100
Securities financing transactions gross up 1,900 2,100
Undrawn commitments 48,900 50,300
Regulatory deductions and other adjustments (3,200) (2,900)
============================================ ========= ===========
CRR leverage exposure 666,800 644,500
============================================ ========= ===========
CRR leverage ratio % 5.2 5.4
============================================ ========= ===========
UK leverage exposure (2) 586,700 559,500
============================================ ========= ===========
UK leverage ratio % (2) 6.0 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
Quarter ended 31 March 2019
==================================================================================
Personal & Ulster Commercial & Private Central
================== ====================
UK
Personal Ulster Commercial Private RBS NatWest items & Total
other
Banking Bank RoI Banking Banking International Markets (1) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================== ======== ======== ========== ======== ============= ======= ======= =======
Income statement
Net interest income 1,052 98 708 132 117 (31) (43) 2,033
Other 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 (3) 51.0% 93.8% 57.8% 60.6% 39.1% 130.5% nm 63.4%
Loan impairment rate (4) 30bps (23)bps 2bps nm nm nm nm 11bps
Impairment provisions (GBPbn) (1.2) (0.7) (1.0) - - (0.1) (0.1) (3.1)
Impairment provisions - stage 3
(GBPbn) (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
(GBPbn) 162.9 24.1 144.6 21.2 27.8 32.1 23.1 435.8
Total assets (GBPbn) 172.2 24.8 165.4 21.7 28.9 272.8 33.3 719.1
Funded assets (GBPbn) 172.2 24.8 165.4 21.7 28.9 138.8 33.3 585.1
Net loans to customers - amortised
cost (GBPbn) 150.6 18.2 100.8 14.4 13.3 9.1 - 306.4
Customer deposits (GBPbn) 145.7 17.5 131.8 26.9 27.6 2.7 3.0 355.2
Risk-weighted assets (RWAs)
(GBPbn) 35.8 14.2 78.1 9.6 7.0 44.6 1.5 190.8
RWA equivalent (RWAes) (GBPbn) 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
10. nm
= not meaningful
Segment performance
Quarter ended 31 December 2018
==================================================================================
Personal & Ulster Commercial & Private Central
================== ====================
UK
Personal Ulster Commercial Private RBS NatWest items & Total
other
Banking Bank RoI Banking Banking International Markets (1) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================= ======== ======== ========== ======== ============= ======= ======= =======
Income statement
Net interest income 1,061 110 724 133 123 30 (5) 2,176
Other non-interest income 185 37 392 65 32 89 49 849
Own credit adjustments - - - - - 33 - 33
================================= ======== ======== ========== ======== ============= ======= ======= =======
Total income 1,246 147 1,116 198 155 152 44 3,058
================================= ======== ======== ========== ======== ============= ======= ======= =======
Direct expenses - staff costs (166) (53) (185) (39) (25) (128) (263) (859)
- other costs (80) (27) (77) (22) (22) (65) (870) (1,163)
Indirect expenses (414) (52) (403) (72) (35) (123) 1,099 -
Strategic costs - direct (27) (3) (5) - (1) (89) (230) (355)
-
indirect (63) (12) (57) (10) (2) (22) 166 -
Litigation and conduct costs (7) (17) (37) - (1) (28) (2) (92)
Operating expenses (757) (164) (764) (143) (86) (455) (100) (2,469)
================================= ======== ======== ========== ======== ============= ======= ======= =======
Operating profit/(loss) before
impairment
(losses)/releases 489 (17) 352 55 69 (303) (56) 589
Impairment (losses)/releases (142) 19 (5) 8 2 100 1 (17)
================================= ======== ======== ========== ======== ============= ======= ======= =======
Operating profit/(loss) 347 2 347 63 71 (203) (55) 572
================================= ======== ======== ========== ======== ============= ======= ======= =======
Additional information
Return on equity (2) 17.2% 0.4% 8.3% 12.3% 20.0% (9.2%) nm 3.7%
Cost:income ratio (3) 60.8% 111.6% 67.5% 72.2% 55.5% 299.3% nm 80.5%
Loan impairment rate (4) 38bps (39)bps 2bps nm nm nm nm 2bps
Impairment provisions (GBPbn) (1.1) (0.8) (1.3) - - (0.1) - (3.3)
Impairment provisions - stage 3
(GBPbn) (0.6) (0.6) (1.0) - - (0.1) - (2.3)
Net interest margin 2.60% 1.73% 1.96% 2.49% 1.81% 0.39% nm 1.95%
Third party customer asset rate 3.33% 2.43% 3.19% 2.94% 1.73% nm nm nm
Third party customer funding rate (0.36%) (0.18%) (0.44%) (0.38%) (0.08%) nm nm nm
Average interest earning assets
(GBPbn) 161.7 25.2 146.7 21.2 26.9 30.4 30.0 442.1
Total assets (GBPbn) 171.0 25.2 166.4 22.0 28.4 244.5 36.7 694.2
Funded assets (GBPbn) 171.0 25.2 166.4 22.0 28.4 111.4 36.5 560.9
Net loans to customers -
amortised cost (GBPbn) 148.9 18.8 101.4 14.3 13.3 8.4 - 305.1
Customer deposits (GBPbn) 145.3 18.0 134.4 28.4 27.5 2.6 4.7 360.9
Risk-weighted assets (RWAs)
(GBPbn) 34.3 14.7 78.4 9.4 6.9 44.9 0.1 188.7
RWA equivalent (RWAes) (GBPbn) 35.5 14.7 79.7 9.5 6.9 50.0 0.2 196.5
Employee numbers (FTEs -
thousands) 21.7 3.1 10.3 1.9 1.7 4.8 23.6 67.1
================================= ======== ======== ========== ======== ============= ======= ======= =======
For the notes to this table, refer to page
10. nm
= not meaningful
Segment performance
Quarter ended 31 March 2018
==================================================================================
Personal & Ulster Commercial & Private Central
================== ====================
UK
Personal Ulster Commercial Private RBS NatWest items & Total
other
Banking Bank RoI Banking Banking International Markets (1) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
================================= ======== ======== ========== ======== ============= ======= ======= =======
Income statement
Net interest income 1,068 106 683 123 104 36 26 2,146
Other non-interest income 230 40 475 61 33 380 (84) 1,135
Own credit adjustments - - - - - 21 - 21
================================= ======== ======== ========== ======== ============= ======= ======= =======
Total income 1,298 146 1,158 184 137 437 (58) 3,302
================================= ======== ======== ========== ======== ============= ======= ======= =======
Direct expenses - staff costs (178) (49) (188) (43) (24) (165) (317) (964)
-
other
costs (65) (19) (47) (14) (15) (53) (606) (819)
Indirect expenses (374) (47) (311) (55) (20) (102) 909 -
Strategic costs - direct (7) (1) (6) (1) - (17) (177) (209)
-
indirect (61) (3) (42) (8) (1) (6) 121 -
Litigation and conduct costs (1) (9) (1) - 1 (6) (3) (19)
================================= ======== ======== ========== ======== ============= ======= ======= =======
Operating expenses (686) (128) (595) (121) (59) (349) (73) (2,011)
================================= ======== ======== ========== ======== ============= ======= ======= =======
Operating profit/(loss) before
impairment (losses)/releases 612 18 563 63 78 88 (131) 1,291
Impairment (losses)/releases (68) (8) (12) (1) - 9 2 (78)
Operating profit/(loss) 544 10 551 62 78 97 (129) 1,213
================================= ======== ======== ========== ======== ============= ======= ======= =======
Additional information
Return on equity (2) 29.9% 1.6% 13.6% 12.5% 23.2% 2.0% nm 9.4%
Cost:income ratio (3) 52.9% 87.7% 50.0% 65.8% 43.1% 79.9% nm 60.5%
Loan impairment rate (4) 18bps 16bps 5bps nm nm nm nm 10bps
Impairment provisions (GBPbn) (1.3) (1.2) (1.5) (0.1) - (0.2) 0.1 (4.2)
Impairment provisions - stage 3
(GBPbn) (0.8) (1.0) (1.4) - - (0.1) - (3.3)
Net interest margin 2.73% 1.80% 1.91% 2.51% 1.57% 0.54% nm 2.04%
Third party customer asset rate 3.41% 2.39% 2.90% 2.89% 2.57% nm nm nm
Third party customer funding rate (0.29%) (0.21%) (0.26%) (0.19%) (0.07%) nm nm nm
Average interest earning assets
(GBPbn) 158.4 23.9 144.8 19.8 26.9 27.3 26.3 427.4
Total assets (GBPbn) 166.3 23.4 165.6 20.4 28.0 283.8 51.0 738.5
Funded assets (GBPbn) 166.3 23.3 165.5 20.4 28.0 135.2 50.0 588.7
Net loans to customers -
amortised cost (GBPbn) 145.9 19.0 102.9 13.7 13.1 9.4 (0.2) 303.8
Customer deposits (GBPbn) 142.9 16.4 131.1 25.3 26.9 3.8 8.1 354.5
Risk-weighted assets (RWAs)
(GBPbn) 31.5 16.9 84.3 9.4 7.0 53.1 0.5 202.7
RWA equivalent (RWAes) (GBPbn) 32.2 17.4 88.9 9.4 7.0 56.5 0.9 212.3
Employee numbers (FTEs -
thousands) 24.5 3.0 10.7 1.9 1.7 5.7 23.4 70.9
================================= ======== ======== ========== ======== ============= ======= ======= =======
nm = not meaningful
Notes:
(1) Central items include unallocated transactions which
principally comprise volatile items under IFRS and RMBS related
charges.
(2) RBS's CET 1 target is around 14% but for the purposes of
computing segmental return on equity (ROE), to better reflect the
differential drivers of capital usage, segmental operating profit
after tax and adjusted for preference dividends is divided by
notional equity allocated at different rates of 15% (Ulster Bank
RoI, 14% prior to Q1 2019), 12% (Commercial Banking), 13% (Private
Banking, 13.5% prior to Q1 2019), 16% (RBS International - 12%
prior to Q4 2017)) and 15% for all other segments, of the monthly
average of segmental risk-weighted assets incorporating the effect
of capital deductions (RWAes). RBS return on equity is calculated
using profit for the period attributable to ordinary
shareholders.
(3) Operating lease depreciation included in income (Q1 2019 -
GBP34 million; Q4 2018 - GBP32 million; Q1 2018 - GBP31
million).
(4) Loan impairment rate is calculated as the annualised charge
for the period as a proportion of gross customer loans.
Condensed consolidated income statement for the period ended 31
March 2019 (unaudited)
Quarter ended
===============================
31 March 31 December 31 March
2019 2018 2018
GBPm GBPm GBPm
-------------------------------------------- -------- ----------- --------
Interest receivable 2,747 2,825 2,702
Interest payable (714) (649) (556)
============================================ ======== =========== ========
Net interest income (1) 2,033 2,176 2,146
============================================ ======== =========== ========
Fees and commissions receivable 905 785 813
Fees and commissions payable (244) (190) (207)
Income from trading activities 224 161 465
Other operating income 119 126 85
============================================ ======== =========== ========
Non-interest income 1,004 882 1,156
============================================ ======== =========== ========
Total income 3,037 3,058 3,302
============================================ ======== =========== ========
Staff costs (1,011) (1,014) (1,055)
Premises and equipment (265) (411) (370)
Other administrative expenses (418) (851) (399)
Depreciation and amortisation (244) (187) (163)
Write down of other intangible assets - (6) (24)
============================================ ======== =========== ========
Operating expenses (1,938) (2,469) (2,011)
============================================ ======== =========== ========
Profit before impairment losses 1,099 589 1,291
Impairment losses (86) (17) (78)
============================================ ======== =========== ========
Operating profit before tax 1,013 572 1,213
Tax charge (216) (118) (313)
============================================ ======== =========== ========
Profit for the period 797 454 900
============================================ ======== =========== ========
Attributable to:
Ordinary shareholders 707 304 808
Other owners 100 164 85
Non-controlling interests (10) (14) 7
============================================ ======== =========== ========
Earnings per ordinary share 5.9p 2.5p 6.8p
Earnings per ordinary share - fully diluted 5.8p 2.5p 6.7p
============================================ ======== =========== ========
Note:
(1) Negative interest on loans is reported as interest payable.
Negative interest on customer deposits is reported as interest
receivable.
Condensed consolidated statement of comprehensive income for the
period ended 31 March 2019 (unaudited)
Quarter ended
===============================
31 March 31 December 31 March
2019 2018 2018
GBPm GBPm GBPm
=================================================== ======== =========== ========
Profit for the period 797 454 900
=================================================== ======== =========== ========
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes
- contributions in preparation for ring-fencing
(1) - (53) -
- other movements (42) 14 -
(Loss)/profit on fair value of credit in financial
liabilities designated at FVTPL due to
own credit risk (46) 91 61
Fair value through other comprehensive income
(FVOCI) financial assets 42 (13) -
Tax 32 15 (13)
=================================================== ======== =========== ========
(14) 54 48
=================================================== ======== =========== ========
Items that do qualify for reclassification
Fair value through other comprehensive income
(FVOCI) financial assets 41 (24) 131
Cash flow hedges 188 241 (584)
Currency translation (350) 190 (73)
Tax (40) (35) 126
=================================================== ======== =========== ========
(161) 372 (400)
=================================================== ======== =========== ========
Other comprehensive (loss)/income after tax (175) 426 (352)
=================================================== ======== =========== ========
Total comprehensive income for the period 622 880 548
=================================================== ======== =========== ========
Total comprehensive income/(loss) is attributable
to:
Ordinary shareholders 558 727 474
Preference shareholders 10 88 18
Paid-in equity holders 90 76 67
Non-controlling interests (36) (11) (11)
=================================================== ======== =========== ========
622 880 548
=================================================== ======== =========== ========
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 have been made for its employees. Under the MoU,
on 9 October 2018, NatWest Bank Plc made a contribution of GBP2
billion to strengthen funding of the Main section relating to
the ring-fenced bank. In Q1 2019 NatWest Markets Plc paid a contribution
of GBP53 million to the new NatWest Markets section relating
to the non-ring fenced bank.
Condensed consolidated balance sheet as at 31 March 2019
(unaudited)
31 March 31 December
2019 2018
GBPm GBPm
==================================== ======== ===========
Assets
Cash and balances at central banks 83,800 88,897
Trading assets 89,101 75,119
Derivatives 134,079 133,349
Settlement balances 13,556 2,928
Loans to banks - amortised costs 13,042 12,947
Loans to customers - amortised cost 306,400 305,089
Other financial assets 62,058 59,485
Intangible assets 6,616 6,616
Other assets 10,484 9,805
==================================== ======== ===========
Total assets 719,136 694,235
==================================== ======== ===========
Liabilities
Bank deposits 25,188 23,297
Customer deposits 355,186 360,914
Settlement balances 12,981 3,066
Trading liabilities 86,554 72,350
Derivatives 130,606 128,897
Other financial liabilities 42,404 39,732
Subordinated liabilities 9,651 10,535
Other liabilities 9,716 8,954
==================================== ======== ===========
Total liabilities 672,286 647,745
Equity
Ordinary shareholders' interests 41,578 41,182
Other owners' interests 4,554 4,554
==================================== ======== ===========
Owners' equity 46,132 45,736
Non-controlling interests 718 754
==================================== ======== ===========
Total equity 46,850 46,490
==================================== ======== ===========
Total liabilities and equity 719,136 694,235
==================================== ======== ===========
Condensed consolidated statement of changes in equity for the
period ended 31 March 2019 (unaudited)
Share
capital
and Total Non
statutory Paid-in Retained Other owners' controlling Total
reserves equity earnings reserves* equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================================= ========= ======= ======== ========= ======= =========== ========
At 1 January 2019 13,055 4,058 14,312 14,311 45,736 754 46,490
Implementation of IFRS 16 on
1 January 2019 (1) - - (187) - (187) - (187)
Profit attributable to ordinary
shareholders
and other equity owners - - 807 - 807 (10) 797
Other comprehensive income
- Remeasurement of retirement
benefit schemes
- other movements - - (42) - (42) - (42)
- Changes in fair value of
credit in financial liabilities
at
fair value through profit
or loss - - (46) - (46) - (46)
- Other amounts recognised
in equity - - - 28 28 (26) 2
- Amount transferred from
equity to earnings - - - (81) (81) - (81)
- Tax - - 18 (26) (8) - (8)
Preference share dividends
paid - - (100) - (100) - (100)
Shares and securities issued
during the period 100 - - - 100 - 100
Share-based payments - gross - - (35) - (35) - (35)
Movement in own shares held (40) - - - (40) - (40)
======================================= ========= ======= ======== ========= ======= =========== ========
At 31 March 2019 13,115 4,058 14,727 14,232 46,132 718 46,850
======================================= ========= ======= ======== ========= ======= =========== ========
31 March
2019
Total equity is attributable to: GBPm
======== ========= ======= =========== ========
Ordinary shareholders 41,578
Preference shareholders 496
Paid-in equity holders 4,058
Non-controlling interests 718
======================================= ========= ======= ======== ========= ======= =========== ========
46,850
========
*Other reserves consist of:
======= ======== ========= ======= =========== ========
Merger reserve 10,881
Fair value through other comprehensive
income reserve 436
Cash flow hedging reserve (49)
Foreign exchange reserve 2,964
======================================= ========= ======= ======== ========= ======= =========== ========
14,232
========
Note:
(1) Refer to Note 1 for further information.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read
in conjunction with RBS's 2018 Annual Report and Accounts which
were prepared in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board
(IASB) and interpretations issued by the IFRS Interpretations
Committee of the IASB as adopted by the European Union (EU)
(together IFRS).
Accounting policies
The Group's principal accounting policies are as set out on
pages 182 to 186 of the 2018 Annual Report and Accounts 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 GBP67 million was recognised in the statement of changes
in equity for the year ended 31 December 2018; this and prior
periods have been restated.
Presentation of interest on suspense recoveries
Until 1 January 2019, interest on suspense recoveries was
presented as a component of interest receivable within Net interest
income. It amounted to GBP11 million for the period ended 31 March
2019. From 1 January 2019 interest on suspense recoveries is
presented within impairment charges; prior periods were presented
as income. It is unpredictable by nature but is not expected to be
material. 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 note 10 presented in the 2018 Annual Report and
Accounts 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.
Notes
1. Basis of preparation continued
For further details see page 186 of RBS's 2018 Annual Report and
Accounts. The impact on RBS's balance sheet at 1 January 2019 is as
follows:
GBPbn
======================================= =====
Retained earnings at 31 December 2018 14.3
Loans to customers - Finance leases 0.2
Other assets - Net right use of 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 GBP2.7
billion which resulted in lease liabilities recognised under IFRS
16 of GBP1.9 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 186 of RBS's 2018 Annual Report
and Accounts.
Going concern
Having reviewed RBS's forecasts, projections and other relevant
evidence, the directors have a reasonable expectation that RBS will
continue in operational existence for the foreseeable future.
Accordingly, the results for the period ended 31 March 2019 have
been prepared on a going concern basis.
2. Provisions for liabilities and charges
Litigation
Payment Other and
protection customer other regulatory
insurance redress (incl. RMBS) Other (1) Total
GBPm GBPm GBPm GBPm GBPm
=============================== ========== ========= ================ ========= =====
At 1 January 2019 695 536 783 990 3,004
Implementation of IFRS 16 on 1
January 2019 - - - (170) (170)
IFRS 9 - Impairment charges -
Movements on ECL - - - (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
=============================== ========== ========= ================ ========= =====
Note:
(1) Materially comprises provisions relating to property closures and restructuring costs.
On 5 February 2019 the Official Receiver appointed Deloitte to
assist in the identification of potential claimants in respect of
PPI. 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 31 March 2019.
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.
Notes
3. Litigation, investigations and reviews
RBS's 2018 Annual Report and Accounts, issued on 15 February
2019, included comprehensive disclosures about RBS's litigation,
investigations and reviews in Note 27 on the accounts. Set out
below are the material developments in these matters since the 2018
Annual Report and Accounts were published. RBS generally does not
disclose information about the establishment or existence of a
provision for a particular matter where disclosure of the
information can be expected to prejudice seriously RBS's position
in the matter.
Litigation
Government securities antitrust litigation
In March 2019, class action antitrust claims were filed in the
United States District Courts for the District of Connecticut and
the Southern District of New York against Bank of America and
NatWest Markets Plc, as well as NatWest Markets Securities Inc. and
(in the Connecticut case) NatWest Plc. 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.
US Anti-Terrorism Act litigation
On 31 March 2019, the United States District Court for the
Eastern District of New York granted summary judgment in favour of
NatWest Plc in the Anti-Terrorism Act case relating to accounts
previously maintained for the Palestine Relief & Development
Fund, an organisation which plaintiffs allege solicited funds for
Hamas, the alleged perpetrator of the terrorist attacks in Israel
which harmed the plaintiffs. The plaintiffs have commenced an
appeal of the judgment to the United States Court of Appeals for
the Second Circuit.
On 28 March 2019, the United States District Court for the
Southern District of New York granted defendants' motion to dismiss
one of the Anti-Terrorism Act cases pending against NatWest Markets
N.V., NatWest Markets Plc, and other financial institutions,
relating to terrorist attacks in Iraq allegedly perpetrated by
Hezbollah and certain Iraqi terror cells. The dismissal is subject
to re-pleading by the plaintiffs or appeal. Similar Anti-Terrorism
Act claims against NatWest Markets N.V. remain subject to a pending
motion to dismiss in the United States District Court for the
Eastern District of New York.
Investigations and reviews
RMBS and other securitised products investigations
In October 2017, NatWest Markets Securities Inc. entered into a
non-prosecution agreement (NPA) with the United States Attorney for
the District of Connecticut (USAO) in connection with alleged
misrepresentations to counterparties relating to secondary trading
in various form of asset-backed securities. In the NPA, the USAO
agreed not to file criminal charges relating to certain conduct and
information described in the NPA if NatWest Markets Securities Inc.
complies with the NPA during its term. In April 2019, NatWest
Markets Securities Inc. agreed to a second six-month extension of
the NPA while the USAO reviews the circumstances of an unrelated
matter reported during the course of the NPA.
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. Allegedly certain European banks and at least one US
bank, were involved in processing certain transactions associated
with this scheme. The reports allege that ABN AMRO and Coutts were
amongst those institutions. RBS is investigating these reports, and
in particular whether the relevant business unit of ABN AMRO was
part of the business acquired by RBS in 2007. RBS is responding to
regulatory requests for information.
4. Post balance sheet events
Other than as disclosed there have been no other significant
events between 31 March 2019 and the date of approval of these
accounts which would require a change to or additional disclosure
in the accounts.
Additional information
Presentation of information
In this document, 'RBSG plc' or the 'parent company' refers to
The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group'
refers to RBSG plc and its subsidiaries.
Financial information contained in this document does not
constitute statutory accounts within the meaning of section 434 of
the Companies Act 2006 ('the Act'). The statutory accounts for the
year ended 31 December 2017 have been filed with the Registrar of
Companies and those for the year ended 31 December 2018 will be
filed with the register of companies following the Annual General
Meeting. The report of the auditor on those statutory accounts was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Act.
Key operating indicators
As described in Note 1 on page 15, RBS prepares its financial
statements in accordance with IFRS as issued by the IASB which
constitutes a body of generally accepted accounting principles
(GAAP). This document contains a number of adjusted or alternative
performance measures, also known as non-GAAP financial measures.
These measures exclude certain items which management believe are
not representative of the underlying performance of the business
and which distort period-on-period comparison. These measures
include:
-- Performance, funding and credit metrics such as 'return on
tangible equity', and related RWA equivalents incorporating the
effect of capital deductions (RWAes), total assets excluding
derivatives (funded assets), net interest margin (NIM) adjusted for
items designated at fair value through profit or loss
(non-statutory NIM), NIM excluding NatWest Markets, cost:income
ratio and loan:deposit ratio. These are internal metrics used to
measure business performance;
-- Personal & Ulster franchise results combining the
reportable segments of UK Personal Banking and Ulster Bank RoI and
the Commercial & Private Banking franchise results, combining
the reportable segments of Commercial Banking and Private
Banking.
-- The Group also presents a pro forma CET1 ratio which is on an
adjusted basis, this has not been prepared in accordance with
Regulation S-X and should be read in conjunction with the notes
provided as well as the section "Forward-looking statements"
below.
Q1 2019 segmental re-organisation
Effective from 1 January 2019, Business Banking has been
transferred from UK Personal and Business Bank (UK PBB) to
Commercial Banking as the nature of the business, including
distribution channels, products and customers, are more closely
aligned to the Commercial Business. Following 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 represented
in this document. Refer to the re-segmentation document published
on 16 April 2019 for further details.
Contacts
Analyst enquiries: Alexander Holcroft Investor Relations +44 (0) 2076721982
Media enquiries: RBS Press Office +44 (0) 131 523 4205
Analyst and investor call Webcast and dial in details
Date: Friday 26 April 2019 www.rbs.com/results
Time: 9am UK time International: +44 (0) 203 057 6566
Conference ID: 6858277 UK Free Call: 0800 279 5995
US Local Dial-In, New York: +1 646 741 2115
========================= ============================================
Available on www.rbs.com/results
-- Q1 2019 Interim Management Statement and background slides.
-- A financial supplement containing income statement, balance
sheet and segment performance for the nine quarters ended 31 March
2019.
-- Pillar 3 supplement at 31 March 2019.
-- Q1 2019 re-segmentation document.
-- GSIB template as of and for the year ended 31 December 2018.
Forward looking statements
This document contains forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, such as statements that include, without limitation,
the words 'expect', 'estimate', 'project', 'anticipate', 'commit',
'believe', 'should', 'intend', 'plan', 'could', 'probability',
'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective',
'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and
similar expressions or variations on these expressions. These
statements concern or may affect future matters, such as RBSG's
future economic results, business plans and current strategies. In
particular, this document includes forward-looking statements
relating to RBSG in respect of, but not limited to: its regulatory
capital position and related requirements, its financial position,
profitability and financial performance (including financial,
capital and operational targets), its access to adequate sources of
liquidity and funding, increasing competition from new incumbents
and disruptive technologies, its impairment losses and credit
exposures under certain specified scenarios, substantial regulation
and oversight, ongoing legal, regulatory and governmental actions
and investigations, LIBOR, EURIBOR and other benchmark reform and
RBSG's exposure to economic and political risks (including with
respect to Brexit and climate change), operational risk, conduct
risk, cyber and IT risk and credit rating risk. Forward-looking
statements are subject to a number of risks and uncertainties that
might cause actual results and performance to differ materially
from any expected future results or performance expressed or
implied by the forward-looking statements. Factors that could cause
or contribute to differences in current expectations include, but
are not limited to, legislative, political, fiscal and regulatory
developments, accounting standards, competitive conditions,
technological developments, interest and exchange rate
fluctuations and general economic conditions. These and other
factors, risks and uncertainties that may impact any
forward-looking statement or RBSG's actual results are discussed in
RBSG's UK 2018 Annual Report and Accounts (ARA) and materials filed
with, or furnished to, the US Securities and Exchange Commission,
including, but not limited to, RBSG's most recent Annual Report on
Form 20-F and Reports on Form 6-K. The forward-looking statements
contained in this document speak only as of the date of this
document and RBSG does not assume or undertake any obligation or
responsibility to update any of the forward-looking statements
contained in this document, whether as a result of new information,
future events or otherwise, except to the extent legally
required.
Legal Entity Identifier: 2138005O9XJIJN4JPN90
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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