TIDMRBS TIDM61ZU
RNS Number : 3946C
Royal Bank of Scotland Group PLC
17 June 2019
The Royal Bank of Scotland Group plc
17 June 2019
RBS announces the impact of the merger of Alawwal bank and Saudi
British Bank
The Royal Bank of Scotland Group plc ("RBS") notes the
completion of the merger of Alawwal bank and Saudi British Bank
("SABB") announced on 16 June 2019 (the "Merger"). The completion
of the merger impacts RBS and its subsidiaries NatWest Markets N.V.
("NWM NV") and NatWest Markets Plc ("NWM Plc").
RBS, through its Dutch subsidiary NWM NV, held an aggregate 40%
shareholding in Alawwal bank on behalf of itself, Stichting
Administratiekantoor Beheer Financiële Instellingen ("NLFI") and
Banco Santander S.A. (together the "Consortium") which dated back
to RBS's acquisition of ABN AMRO in 2007. The economic interest of
RBS was equivalent to a 15.3% shareholding in Alawwal bank.
As a result of the Merger NWM NV received an aggregate
shareholding of 10.8% in SABB, representing the total interests of
the Consortium. NWM NV then immediately transferred the RBS
economic interest of 4.1% in SABB to NWM Plc, and the balance of
the shares separately to NLFI and Banco Santander S.A., as part of
an unwind of the Consortium arrangements.
NWM NV is reported as part of RBS's NatWest Markets franchise.
NWM NV is now expected to transfer to NWM Plc ownership during the
second half of 2019, subject to regulatory approvals, and will
continue to be reported as part of the franchise.
Commenting on the transaction, Ross McEwan, CEO of RBS said,
"We are pleased that this merger has now concluded; it will help
facilitate the future exit of our shareholding as we continue to
focus on our key target markets. The release of capital will also
have a positive and material financial impact for RBS."
Impact of the Merger on RBS
-- Within the NatWest Markets franchise, RBS will recognise an
income gain on disposal of the Alawwal bank stake for shares
received in SABB of GBP0.4 billion and a reduction in risk weighted
assets ("RWAs") of GBP4.7 billion.
-- Within Central Items, RBS will recycle foreign exchange of
GBP0.3 billion which is capital neutral and will in addition
extinguish legacy liabilities of GBP0.3 billion.
-- The gains above the line will be partially offset by GBP0.3
billion of non-controlling interests.
-- These impacts would have increased the 31 March 2019 CET1 by
60bps, being 20bps attributable profit and 40bps RWA relief.
The profit and loss impacts on franchises are summarised in
Table 1 below, with affected entities noted.
Table 1
NWM Central RBS Group Entity
GBPbn franchise Items
Gain on disposal 0.4 - 0.4 NWM NV
Legacy liability release - 0.3 0.3 RBS
FX reserves recycling - 0.3 0.3 RBS
----------- -------- ----------
Non interest income 0.4 0.6 1.0
Profit after Tax 1.0
Non-controlling interests (0.3) RBS
----------
Profit attributable to ordinary
shareholders 0.7
----------
We estimate a further GBP1.2 billion of FX reserves recycling to
be crystallised through RBS at the point at which NWM NV transfers
ownership to NWM Plc during the second half of 2019, subject to
regulatory approval, which is also capital and TNAV neutral.
Table 2 illustrates the risk weighted asset movements related to
the transactions. These are indicative of the expected impact and
act only as a guide.
Table 2
NWM NV NWM Plc Group Adjustment RBS Group
As at 31 March 2019 EUR6.5bn - - GBP5.6bn
Transaction impact (EUR6.5bn) GBP0.4bn GBP0.5bn (GBP4.7bn)
Adjusted 31 March - GBP0.4bn GBP0.5bn GBP0.9bn
2019
----------- --------- ----------------- -----------
Notes
- The above does not include operational risk RWAs related to the stake in Alawwal bank
- Table shown using exchange rates as at 31 March 2019 with
GBP1:EUR1.162 and a SABB share price of SAR37.80. RWA impact may
vary as a result of fluctuations in FX rates, SABB share price or
the underlying CET1 capital base of NWM Plc. At 13 June 2019, the
SABB share closing price was SAR 41.70. As at 14 June 2019, the
relevant FX rate was GBP1:EUR1.1232.
Impact of the Merger on NWM Plc
NWM Plc acquired the SABB shares attributable to RBS from NWM NV
for GBP0.7bn, which will be carried at fair value through equity
until sold. The SABB shares are subject to a 6 month lock up period
for sale outside RBS. The investment will give rise to RWA of
GBP0.4bn, as well as a capital deduction for non-significant
investments.
Ownership of NWM NV is expected to transfer under NWM Plc in H2
2019, subject to regulatory approval.
Impact of the Merger on NWM NV
In addition to the impacts noted in Tables 1 and 2, above, NWM
NV will make capital distributions to NLFI and Santander and will
replace this with internal capital issuance to RBS entities in June
2019. The impact of the RWA reduction is expected to improve NWM
NV's capital ratios in H1 2019.
Each of RBS, NWM Plc and NWM NV will publish their H1 2019
accounts on 2 August 2019.
For further information, please contact:
Investor Relations
Alexander Holcroft
Head of Investor Relations
+44 (0) 207 672 1758
RBS Media Relations
+44 (0) 131 523 4205
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 RBS, NWM
Plc or NWM NV's future economic results, business plans and current
strategies. In particular, this document may include
forward-looking statements relating to RBS, NWM Plc or NWM NV in
respect of, but not limited to their respective: regulatory capital
positions and related requirements, financial positions,
profitability and financial performance (including financial,
capital and operational targets), access to adequate sources of
liquidity and funding, increasing competition from new incumbents
and disruptive technologies, 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
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 RBS,
NWM Plc and NWM NV's actual results are discussed in NWM Plc's 2018
Annual Report and Accounts and other regulatory filings, NWM NV's
2018 Annual Report and Accounts and other regulatory filings, and
RBS's UK 2018 Annual Report and Accounts and materials filed by RBS
with, or furnished to, the US Securities and Exchange Commission,
including, but not limited to, RBS'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 RBS, NWM Plc and NWM NV do 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 Identifiers
The Royal Bank of Scotland Group plc 2138005O9XJIJN4JPN90
NatWest Markets Plc RR3QWICWWIPCS8A4S074
NatWest Markets N.V. X3CZP3CK64YBHON1LE12
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END
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