Annual Report • Aug 3, 2012
Annual Report
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RBS reports an H1 2012 Group operating profit(1) of £1,834 million Core RBS H1 2012 operating profit of £3,185 million Core return on tangible equity 10.2% Net attributable H1 loss of £1,990 million after £2,974 million accounting charge for own credit, reflecting improvement in market trading levels of Group credit; £287 million attributable profit ex own credit adjustments Non-Core proceeding well, assets down £22 billion in H1 to £72 billion Group Core Tier 1 ratio strengthens further to 11.1%
"The first half of 2012 saw RBS make good progress on both of the jobs that make up our recovery plan. We have continued to make the bank safer and stronger as we clean up problems of the past. And despite the tougher economy, these results show our ongoing businesses to be more resilient than before with many further improvements underway.
Our recovery plan for RBS is about both physical and cultural change. We know that in a difficult moment for banks it is more essential than ever to drive through these changes. 30 million customers worldwide rely on our services. We have the obligation to show that their interests consistently come first. I am determined that RBS should be a leader as we remodel this bank to better serve society and all those who rely on us."
(1) Operating profit before tax, own credit adjustments, Asset Protection Scheme, Payment Protection Insurance costs, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals and RFS Holdings minority interest ('operating profit'). Statutory operating loss before tax was £1,505 million for the half year ended 30 June 2012.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Core | |||||
| Total income (1) | 13,299 | 14,494 | 6,437 | 6,862 | 6,816 |
| Operating expenses (2) | (7,336) | (7,355) | (3,615) | (3,721) | (3,557) |
| Insurance net claims | (1,225) | (1,487) | (576) | (649) | (703) |
| Operating profit before impairment losses (3) | 4,738 | 5,652 | 2,246 | 2,492 | 2,556 |
| Impairment losses (4) | (1,553) | (1,725) | (728) | (825) | (853) |
| Core operating profit (3) | 3,185 | 3,927 | 1,518 | 1,667 | 1,703 |
| Non-Core operating loss (3) | (1,351) | (1,961) | (868) | (483) | (870) |
| Group operating profit (3) | 1,834 | 1,966 | 650 | 1,184 | 833 |
| Own credit adjustments | (2,974) | (236) | (518) | (2,456) | 324 |
| Asset Protection Scheme | (45) | (637) | (2) | (43) | (168) |
| Payment Protection Insurance costs | (260) | (850) | (135) | (125) | (850) |
| Sovereign debt impairment | - | (733) | - | - | (733) |
| Other items (5) | (60) | (304) | (96) | 36 | (84) |
| Loss before tax | (1,505) | (794) | (101) | (1,404) | (678) |
| Loss attributable to ordinary and | |||||
| B shareholders | (1,990) | (1,425) | (466) | (1,524) | (897) |
| Memo: APS after tax cost (6) | (34) | (468) | (2) | (32) | (123) |
| 30 June 2012 |
31 March 2012 |
31 December 2011 |
|
|---|---|---|---|
| Capital and balance sheet | |||
| Funded balance sheet (7) | £929bn | £950bn | £977bn |
| Loan:deposit ratio (Group) (8) | 104% | 106% | 108% |
| Loan:deposit ratio (Core) (8) | 92% | 93% | 94% |
| Core Tier 1 ratio | 11.1% | 10.8% | 10.6% |
| Tangible equity per ordinary and B share (9) | 489p | 488p | 501p |
Notes:
We launched our plan to change RBS in 2009 and it continues to deliver good progress along the path we set out. For the first half of this year, the Group made an operating profit of £1.8 billion, close to the same period in 2011 despite a worsening economic backdrop and the further restructuring of our Markets businesses. Excluding 'clean-up' losses from Non-Core and Ulster Bank, operating profit was £3.7 billion and operating ROE on this basis was 13.2%.
We also achieved an important milestone in completing full repayment of the huge liquidity support given to RBS by public authorities during the crisis. We navigated Eurozone problems and a credit rating downgrade from Moody's with no slippage in the balance sheet resilience painstakingly rebuilt in the first three years of our plan. The bottom-line loss we report for H1 2012 includes a £3 billion 'own credit' accounting charge, itself an indicator of RBS's recovery as our debt now trades at tighter margins.
We continue to prioritise support for customers and have increased overall net lending in Core UK Retail and Corporate businesses. In the first six months, despite economic shrinkage; gross new lending to UK non-financial institutions and homeowners was £49.2 billion. Since 2008, total drawn lending balances in our UK Core businesses are up 4%.
However, steady progress in rebuilding financial strength, and resilience in the Group's underlying financial performance, contrasts with a grim period for the reputation of our industry and for RBS within it.
We are in a chastening period for the banking industry. The consequences of the sector's past overexpansion are still being accounted for, probably with some way still to go. The mistakes and vulnerabilities carried over from that period are both financial and cultural. The consequences of these mistakes have seen the reputation of the sector fall to new lows. This is dangerous because customer trust is a pre-requisite for a successful banking sector and an effective banking sector is so important to economic stability and growth. It especially saddens me because since rejoining the sector three and a half years ago to lead the change and recovery at RBS, I have been struck by the sterling efforts of the vast majority of people in our bank to provide honest, reliable and helpful services to customers.
When we first set out the plan for recovery and change at RBS, we were under no illusions as to the scale of the task. Most things that had gone wrong in the industry as a whole had also been present within RBS. It was clear the changes we needed to bring about could not be accomplished overnight. We foresaw five tough years - identifying the problems, paying for their consequences and putting them right for the future. The sheer scale of what was needed to recover RBS from the chaos of 2008- 2009 meant the problems would take much work to fix and we would not get everything right first time.
Three years on we have made a lot of progress in our task. We have largely corrected the unstable balance sheet. The clean-up costs from past mistakes are steadily being put behind us, though still significant. The Bank's leadership has been almost entirely changed. Our recovery has been elongated by tough economic conditions in our main markets, but we have taken care to build resiliency into our balance sheet and sustainability into our customer revenues. This means the business is increasingly well positioned for the more conservative approach that customers and shareholders want from their banks.
At the centre of RBS's recovery and change plan was always both physical and cultural change. Our industry's weaknesses, and those of RBS specifically, were often rooted in the interplay of these two aspects. While there are many different strands to cultural change, at its heart is one central truth: we must build RBS around good and enduring customer service. The Bank's own fortunes - shareholders and employees - must be a reflection of how well we do this, not an end in itself.
All companies make mistakes and have individual cases of wrongdoing. The nature of financial services tends to magnify the impact of these. But we must not rest until our physical defences are robust and the culture of RBS and the wider industry, properly and permanently reinforces the good and isolates the bad. Culture is defined over years, not months. The wrenching changes at RBS and elsewhere are a hugely powerful catalyst to hasten that process. However, the process of combing through and rectifying the past can seem like going backwards for a while - just as realisation of bad lending takes time to identify, provide for and deal with.
A significant blot on RBS's reputation came at the end of this quarter via a systems failure. We are working through a detailed root cause investigation to assess what improvements need to be made to ensure these types of issues do not re-occur. While we have significantly increased technology spend over the past three years, there is clearly more we need to do to ensure reliability for our customers. I know our customers expect and deserve better and we are determined to learn the lessons of this incident and make the necessary improvements.
RBS legal disclosures, which accompany each of our quarterly reports, highlight a list of items arising from past actions that we are still dealing with in the conduct arena. It is no comfort that many are shared across the industry. The LIBOR situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact. This is the subject of ongoing regulatory investigation but our customers and shareholders should be in no doubt that we are taking it seriously. These issues together are hard to deal with but just as necessary a part of change from the past as the restructuring of our balance sheet.
We debate carefully what these industry problems say about different forms of banking. Certainly, wholesale businesses saw the greatest financial and cultural distortion in the boom years. In response to this, RBS wholesale businesses are now just one third of their pre-crisis size in balance sheet terms - a restructuring on a greater scale than any peer so far. Yet our industry, and RBS, has had cultural, customer and risk management failures across all its business lines arising out of pre-crisis times. The change we are making must be as comprehensive. This is because customers and our economies need strong and effective financial services of all kinds - from the man in the street to the international needs of large exporters, pension funds and governments themselves.
RBS plays an important and enduring role for our customers. We are needed, and where we do our jobs well we also have a valuable, well performing and enduring business. We have undergone huge change for the better in the last three years. The fruits of change are visible in many areas, but still to be secured in others. There will remain tough moments ahead. We want RBS to be a model for the way a bank relates to society. This means we aspire to serve our customers well with a dedicated staff who can feel proud of their work at RBS. And as we do that, we must also deliver enduring value to our shareholders and meet all of our responsibilities in the wider economy and society. I believe we can do what we need to do.
The Royal Bank of Scotland Group (RBS) reported a Group operating profit of £1,834 million for the first half of 2012. The results included a provision of £125 million for costs arising from the technology incident that affected the Group's systems in June, principally to cover customer redress. In addition, we have reserved £50 million for redress of a particular category of complex interest rate swaps based on agreement reached with the FSA. Excluding these provisions, operating profit was stable compared with H1 2011.
Core operating profit totalled £3,185 million in H1, down 19%, while return on equity was 10.2%.
Q2 2012 Group operating profit totalled £650 million, down 22% from Q2 2011 but only 1% excluding the provisions described earlier. Core operating profit for the quarter was £1,518 million, down 9% from Q1 2012 and down 11% versus Q2 2011 (down 1% year-on-year and up 2% quarter-on-quarter excluding the provisions).
H1 integration and restructuring costs totalled £673 million, of which £213 million was recorded in the second quarter. This was largely offset by the gain of £577 million recorded in March following a restructuring of the Group's Lower Tier 2 debt. A disposal gain of £197 million was recorded on the sale of RBS Aviation Capital, completed in June 2012.
A further provision of £135 million in Q2 (H1 2012 - £260 million) was recorded for Payment Protection Insurance claims, bringing the cumulative charge taken to £1.3 billion, of which £0.7 billion in redress had been paid by 30 June 2012.
The significant narrowing of RBS's credit spreads in debt markets, reflecting strengthened investor perceptions, that occurred in the first quarter of 2012 continued in Q2, resulting in an own credit charge of £2,974 million in H1 2012, of which £518 million was booked in Q2. Excluding own credit adjustments, H1 pre-tax profit was £1,469 million and attributable profit £287 million*. H1 2012 statutory pre-tax loss was £1,505 million and statutory attributable loss was £1,990 million. Tangible net asset value per share rose to 489 pence.
*Attributable loss adjusted for post-tax effect of own credit adjustments.
Core expenses in H1 2012 were flat, with benefits from the Group's cost reduction programme and the restructuring of Markets and International Banking offsetting the £88 million litigation settlement booked by US R&C in Q1 and the £125 million provision for costs arising from the technology incident accrued in Group Centre in Q2.
Staff expenses were reduced by 4% from H1 2011, with employee numbers down by 5,700, principally in Markets and International Banking. The compensation:revenue ratio in Markets declined to 33%, compared with 35% in H1 2011.
Despite strong expense control, the Core cost:income ratio, net of claims, worsened to 61%, compared with 57% in H1 2011, reflecting the weaker income trends. R&C cost:income ratio was 59% in H1, improving slightly from 60% in Q1 to 57% in Q2.
Group impairment losses totalled £2,649 million in H1 2012, with Q2 2012 in line with Q1 2012 at £1,335 million. R&C impairments were £241 million lower than H1 2011, with improvements particularly in UK Retail and US R&C. Core Ulster Bank impairments were in line with H1 2011 at £717 million, with Q2 2012 down 18% on Q1 2012. Non-Core impairments were down £1,390 million in H1 2012 at £1,096 million, principally reflecting the substantial provisioning of development land values in the Ulster Bank portfolio during the first half of 2011. Non-Core's Q2 2012 impairments were £118 million higher than Q1 2012, largely reflecting one significant provision within the project finance portfolio.
Core annualised impairments represented 0.7% of loans and advances to customers in Q2 2012 compared with 0.8% in Q1. Group risk elements in lending totalled £41.1 billion at 30 June 2012, down from £42.4 billion at 31 December 2011, with provision coverage increasing from 49% to 51%. Ulster Bank provision coverage was 53% in Core and 57% in Non-Core.
RBS made strong progress on the task of strengthening and derisking its balance sheet during the first half. Non-Core third party assets, which had been reduced by £11 billion in Q1, fell by a further £11 billion in Q2 to £72 billion at 30 June 2012, principally driven by the disposal of RBS Aviation Capital and run-off. In light of this strong progress the Group has lowered its year-end target for Non-Core assets to £60-65 billion.
Markets funded assets have been reduced by £60 billion over the 12 months to 30 June 2012, with a further £18 billion reduction in International Banking assets.
From its highest reported point in 2008 the Group has reduced its funded balance sheet by £298 billion (24%).
The Group maintained its trajectory towards a more stable, deposit-led balance sheet with the Group loan:deposit ratio improving further to 104% at 30 June 2012, compared with 114% a year earlier. Customer deposits grew by £3 billion during Q2 2012 and at 30 June 2012 were up £7 billion from a year earlier. No material impact was experienced from the credit rating downgrade during Q2 2012, on either the Group's credit spreads or its ability to attract customer deposits.
Reflecting the Group's strategy of sharply reducing its dependence on short-term wholesale funding, this funding fell to £62 billion at 30 June 2012, down £40 billion since the end of 2011. Short-term wholesale funding was covered 2.5 times by the Group's liquidity buffer, which was maintained at £156 billion.
The Group's Core Tier 1 ratio remained strong at 11.1%, and the leverage ratio was 15.6x. Although regulatory changes continued to increase risk-weightings on a number of portfolios, the Group reduced risk-weighted assets in Markets and successfully restructured a large derivative position in Non-Core, resulting in a substantial decrease in exposure to a highly leveraged counterparty. The capital relief afforded by the Asset Protection Scheme fell from 85 basis points in Q1 2012 to 77 basis points in Q2 2012 and continues to diminish. It remains the Group's intention to exit the Scheme in H2 2012, subject to the approval of the Financial Services Authority. The Group has already expensed £2.5 billion for the APS, which equals the minimum fee payable.
| Worst | Medium | ||
|---|---|---|---|
| point | Q1 2012 | Q2 2012 | term target |
| Core | Core | Core | |
| (31%)(2) | 11.0% | 9.3% | >12% |
| 97%(4) | 60% | 62% | <55% |
| Group | Group | Group | |
| 4%(5) | 10.8% | 11.1% | >10% |
| 154%(6) | 106% | 104% | c.100% |
| £297bn(7) | £80bn | £62bn | <10% TPAs(8) |
| £90bn(7) | £153bn | £156bn | >1.5x STWF |
| 28.7x(11) | 16.3x | 15.6x | <18x |
Notes:
(1) Based on indicative Core attributable profit taxed at standard rates and Core average tangible equity per the average balance sheet (c.75% of Group tangible equity based on RWAs at 30 June 2012); (2) Group return on tangible equity for 2008; (3) Cost:income ratio net of insurance claims; (4) Year ended 31 December 2008; (5) As at 1 January 2008; (6) As at October 2008; (7) As at December 2008; (8) Third party assets (TPAs); (9) Eligible assets held for contingent liquidity purposes including cash, Government issued securities and other eligible securities with central banks; (10) Funded tangible assets divided by total Tier 1 capital; (11) As at June 2008.
Preparations for the planned IPO of Direct Line Group in the latter part of 2012 remain on track. The company is prepared for separation and, from 1 July, is operating on a substantially standalone basis with its own corporate functions and HR platform. Residual IT services will be provided by the Group under a Transitional Services Agreement. Direct Line Group returned £800 million to the Group during H1 2012 as part of optimising its capital structure.
We continue to work with Santander on the sale of the RBS England & Wales and NatWest Scotland branch-based businesses along with certain SME and corporate activities. The complexity of the transaction and the focus on causing minimum disruption to our customers is likely to lead to an extension of the process well into 2013.
The sale of RBS Aviation Capital to Sumitomo Mitsui Banking Corporation, acting on behalf of a consortium comprising its parent, Sumitomo Mitsui Financial Group, and Sumitomo Corporation, was completed on 1 June 2012. The disposal realised a net gain of £197 million and removed £5 billion of funded assets from the Non-Core balance sheet.
In late June, a number of our customers were impacted by a technology incident affecting our transaction batch processing.
The immediate software issue was promptly identified and rectified. Despite this, significant manual intervention in a highly automated and complex batch processing environment was required. This resulted in a significant backlog of daily data and information processing. The consequential technology problems and backlog took time to resolve. However, at no point was any customer data lost or destroyed. Regrettably, in Ulster Bank, our customers experienced extended problems with their accounts, which have now been largely rectified.
Throughout the incident, we took action to help customers experiencing difficulty. We opened our branches for longer, doubled the number of staff in our UK-based call centres and gave staff greater authority to provide on-the-spot help. Thereafter, we focused on honouring our commitment that we would put impacted Group and non-Group customers back to the position they would have been in had the incident not occurred.
A full and detailed investigation is under way into the causes of the problem, overseen by independent experts and reporting to the Group Board Risk Committee. It will consider both the Group's own operations and the role of third parties in the context of the incident. It will establish a full account of what happened, an assessment of how the Group responded and a thorough review of the root cause.
A charge of £125 million has been accrued in Q2 2012 in relation to the costs of this incident, principally covering redress to the Group's customers. Additional costs may arise once all redress and business disruption items are clear and a further update will be given in Q3.
The health of RBS's core UK retail and commercial banking franchises is directly dependent on the health and success of its customers. Over the first half of 2012 the Group has maintained its support for these customers, with UK Retail increasing net lending to homeowners by £2.0 billion, or 2%, while UK Corporate increased loans to the manufacturing industry by 4%.
Gross mortgage lending in H1 2012 totalled £7.7 billion, with net new lending of over £3 billion in the same period. Gross new lending to first time buyers was up 26% from H1 2011.
Gross new lending to UK non-financial businesses totalled £41.5 billion, of which £19.2 billion was to SME customers. This included £28.3 billion of new loans and facilities (of which £15.2 billion was to SMEs) as well as £13.2 billion of overdraft renewals (including £4.0 billion to SMEs). Customer confidence has weakened in the face of economic newsflow, with many companies scaling back their investment plans, given concerns about the prospects for demand, and this is reflected in weak SME application volumes, down 18% on H1 2011. As a result, Q2 gross lending volumes were lower, with some impact from the technology incident as relationship managers prioritised the provision of operational support for affected customers. Overall, utilisation of overdraft facilities remained below 50% as it has for over two years.
It is into this challenging environment that the Bank of England recently launched the new Funding for Lending Scheme (FLS), aimed at increasing lending to the real economy. The Group welcomes this new initiative and has taken immediate steps to ensure that the FLS delivers real benefits for customers. UK Retail has introduced a new set of mortgage rates and products, offering low fixed rates to first time buyers and buyers of newly built homes as well as a strong offering for buy-to-let purchasers. In UK Corporate, the scheme will be used to cut interest rates on £2.5 billion of SME loans by an average of 1 percentage point, with larger reductions for the smallest businesses. The division will also remove arrangement fees on £2.5 billion of new SME loans. For larger businesses, the FLS benefits will be targeted at specific client segments where there are good opportunities to increase support to customers.
The Group also played an active role in the UK Government's National Loan Guarantee Scheme (NLGS), launched in March, and by 30 June had provided over 8,000 loans and asset finance facilities, totalling £470 million. RBS was the only bank to make NLGS loans available for the full range of loans down to as little as £1,000, and approximately two-thirds of the facilities provided have been for amounts under £25,000, demonstrating the Group's commitment to supporting as wide a range of customers as possible.
We continue to conduct extensive research with our customers to ensure that we are well equipped to meet their needs. Customers' principal expectations are that we will make their banking straightforward and simple, enabling them to interact with us in a way and at a time that suits them. When their needs are more complex, our customers want fast access to business expertise. They want to be confident that the person they talk to understands their business well. Key initiatives to ensure that we can meet these expectations include:
The economic and regulatory challenges we face are unlikely to abate over the remainder of the year. We will continue to focus on maintaining a strong balance sheet and capital position.
We expect our Retail and Commercial businesses to continue to perform satisfactorily albeit Ulster Bank impairments are expected to remain elevated. Net interest margin is expected to be slightly up compared with the first half of 2012.
Markets' revenues remain sensitive to client activity levels and broader market volatility.
Non-Core continues to make good progress operating within our loss expectations, with third party assets projected to fall to between £60 billion and £65 billion by the year end.
We will make an announcement regarding exit from the Asset Protection Scheme once formal regulatory clearance has been secured.
The divestment of Direct Line Group is on track and, subject to market conditions, the IPO is planned for October 2012.
Contacts
| For analyst enquiries: | ||
|---|---|---|
| Richard O'Connor | Head of Investor Relations | +44 (0) 20 7672 1758 |
| For media enquiries: | ||
| Group Media Centre | +44 (0) 131 523 4205 |
A pre-recorded presentation of the results for the half year ended 30 June 2012 will be available on www.rbs.com/results from 7.00 am on Friday 3 August 2012.
An audio Q&A session will also be held, details as follows:
| Date: | Friday 3 August 2012 |
|---|---|
| Time: | 9.30 am UK time |
| Webcast: | www.rbs.com/results |
| Dial in details: | International – +44 (0) 1452 568 172 UK Free Call – 0800 694 8082 US Toll Free – 1 866 966 8024 |
Slides accompanying this document will be available on www.rbs.com/results
A financial supplement will be available on www.rbs.com/results This supplement shows published income and balance sheet financial information by quarter for the last nine quarters to assist analysts for modelling purposes.
| Page | |
|---|---|
| Forward-looking statements | 3 |
| Presentation of information | 4 |
| Results summary | 6 |
| Results summary - statutory | 9 |
| Summary consolidated income statement | 10 |
| Summary consolidated balance sheet | 12 |
| Analysis of results | 13 |
| Net interest income | 13 |
| Non-interest income | 14 |
| Operating expenses | 15 |
| Impairment losses | 16 |
| One-off and other items | 18 |
| Capital resources and ratios | 19 |
| Balance sheet | 20 |
| Divisional performance | 21 |
| UK Retail | 24 |
| UK Corporate | 28 |
| Wealth | 32 |
| International Banking | 35 |
| Ulster Bank | 39 |
| US Retail & Commercial | 42 |
| Markets | 48 |
| Direct Line Group | 52 |
| Central items | 58 |
| Non-Core | 60 |
| Statutory results | 68 |
| Condensed consolidated income statement | 68 |
| Condensed consolidated statement of comprehensive income | 69 |
| Condensed consolidated balance sheet | 70 |
| Commentary on condensed consolidated balance sheet | 71 |
| Average balance sheet | 73 |
| Condensed consolidated statement of changes in equity | 76 |
| Condensed consolidated cash flow statement | 79 |
| Notes | 80 |
| 1. Basis of preparation | 80 |
| 2. Accounting policies | 80 |
| 3. Analysis of income, expenses and impairment losses | 81 |
| 4. Loan impairment provisions | 83 |
| 5. Pensions | 84 |
| 6. Tax | 84 |
| 7. (Loss)/profit attributable to non-controlling interests | 85 |
| 8. Dividends | 86 |
| 9. Share consolidation | 86 |
| 10. Earnings per ordinary and B share | 87 |
| 11. Segmental analysis | 88 |
| Notes (continued) | Page |
|---|---|
| 12. Discontinued operations and assets and liabilities of disposal groups | 95 |
| 13. Financial instruments | 97 |
| 14. Available-for-sale reserve | 110 |
| 15. Contingent liabilities and commitments | 110 |
| 16. Litigation, investigations and reviews | 111 |
| 17. Other developments | 124 |
| 18. Related party transactions | 127 |
| 19. Date of approval | 128 |
| 20. Post balance sheet events | 128 |
| Risk and balance sheet management | 129 |
| General overview | 129 |
| Balance sheet management | 132 |
| Capital | 132 |
| Regulatory capital developments | 135 |
| Liquidity and funding risk | 137 |
| Funding sources | 138 |
| Securitisations and asset transfers | 142 |
| Conduits | 145 |
| Liquidity portfolio | 146 |
| Net stable funding ratio | 147 |
| Non-traded interest rate risk | 148 |
| Interest rate risk | 149 |
| Structural hedges | 150 |
| Structural foreign currency exposures | 151 |
| Risk management | 152 |
| Credit risk | 152 |
| Financial assets | 152 |
| Problem debt management | 165 |
| Key credit portfolios | 180 |
| - Commercial real estate | 180 |
| - Residential mortgages | 186 |
| - Ulster Bank Group (Core and Non-Core) | 190 |
| Market risk | 194 |
| Country risk | 201 |
| Independent review report to The Royal Bank of Scotland Group plc | 237 |
| Risk factors | 239 |
| Statement of directors' responsibilities | 241 |
| Additional information | 242 |
| Appendix 1 Income statement reconciliations Appendix 2 Businesses outlined for disposal Appendix 3 Credit risk assets |
Certain sections in this document contain 'forward-looking statements' as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words 'expect', 'estimate', 'project', 'anticipate', 'believes', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'will', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on such expressions.
In particular, this document includes forward-looking statements relating, but not limited to: the Group's restructuring plans, divestments, capitalisation, portfolios, net interest margin, capital ratios, liquidity, risk weighted assets (RWAs), return on equity (ROE), profitability, cost:income ratios, leverage and loan:deposit ratios, funding and risk profile; discretionary coupon and dividend payments; certain ring-fencing proposals; sustainability targets; the Group's future financial performance; the level and extent of future impairments and write-downs, including sovereign debt impairments; the protection provided by the Asset Protection Scheme (APS); and the Group's potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.
Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: global economic and financial market conditions and other geopolitical risks, and their impact on the financial industry in general and on the Group in particular; the ability to implement strategic plans on a timely basis, or at all, including the disposal of certain Non-Core assets and of certain assets and businesses required as part of the State Aid restructuring plan; organisational restructuring, including any adverse consequences of a failure to transfer, or a further delay in transferring, certain business assets and liabilities from RBS N.V. to RBS; the ability to access sufficient sources of liquidity and funding when required; deteriorations in borrower and counterparty credit quality; litigation, government and regulatory investigations including investigations relating to the setting of LIBOR and other interest rates; costs or exposures borne by the Group arising out of the origination or sale of mortgages or mortgage-backed securities in the United States; the extent of future write-downs and impairment charges caused by depressed asset valuations; the value and effectiveness of any credit protection purchased by the Group; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices and basis, volatility and correlation risks; changes in the credit ratings of the Group; ineffective management of capital or changes to capital adequacy or liquidity requirements; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; the ability of the Group to attract or retain senior management or other key employees; regulatory or legal changes (including those requiring any restructuring of the Group's operations) in the United Kingdom, the United States and other countries in which the Group operates or a change in United Kingdom Government policy; changes to regulatory requirements relating to capital and liquidity; changes to the monetary and interest rate policies of central banks and other governmental and regulatory bodies; changes in UK and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; the implementation of recommendations made by the Independent Commission on Banking (ICB) and their potential implications; impairments of goodwill; pension fund shortfalls; general operational risks; HM Treasury exercising influence over the operations of the Group; insurance claims; reputational risk; the ability to access the contingent capital arrangements with HM Treasury; the participation of the Group in the APS and the effect of the APS on the Group's financial and capital position; the conversion of the B Shares in accordance with their terms; limitations on, or additional requirements imposed on, the Group's activities as a result of HM Treasury's investment in the Group; and the success of the Group in managing the risks involved in the foregoing.
The forward-looking statements contained in this document speak only as of the date of this announcement, and the Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.
The financial information on pages 6 to 67, prepared using the Group's accounting policies, shows the underlying performance of the Group on a managed basis which excludes certain one-off and other items. Information is provided in this form to give a better understanding of the results of the Group's operations. Group operating profit on this basis excludes:
The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and related notes presented on pages 68 to 128 inclusive are on a statutory basis. Reconciliations between the managed basis and statutory basis are included in Appendix 1.
In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', in Q4 2011 the Group transferred the assets and liabilities relating to the planned disposal of its RBS England and Wales, and NatWest Scotland branch-based businesses, along with certain SME and corporate activities across the UK ('UK branch-based businesses'), to assets and liabilities of disposal groups.
In January 2012, the Group announced changes to its wholesale banking operations in light of a changed market and regulatory environment. The changes have seen the reorganisation of the Group's wholesale businesses into 'Markets' and 'International Banking' and the proposed exit and/or downsizing of selected activities. The changes will ensure the wholesale businesses continue to deliver against the Group's strategy.
The changes include an exit from cash equities, corporate broking, equity capital markets and mergers and acquisitions advisory businesses. Significant reductions in balance sheet, funding requirements and cost base in the remaining wholesale businesses will be implemented.
In the first quarter of 2012, the Group revised its allocation of funding and liquidity costs and capital for the new divisional structure as well as for a new methodology. The new methodology is designed to ensure that the allocated funding and liquidity costs more fully reflect each division's funding requirement.
For the purposes of divisional return on equity ratios, notional equity has been calculated as a percentage of the monthly average of divisional risk-weighted assets (RWAs), adjusted for capital deductions. Historically, notional equity was allocated at 9% of RWAs for the Retail & Commercial divisions and 10% of RWAs for Global Banking & Markets. This was revised in Q1 2012 and 10% of RWAs is now applied to both the Retail & Commercial and Markets divisions.
The Group had previously excluded changes in the fair value of own debt (FVOD) in presenting the underlying performance of the Group on a managed basis given it is a volatile non-cash item. To better align our managed view of performance, movements in the fair value of own derivative liabilities (FVDL), previously incorporated within Markets operating performance, are now combined with movements in FVOD in a single measure, 'Own Credit Adjustments' (OCA). This took effect in Q1 2012 and Group and Markets operating results have been adjusted to reflect this change which does not affect profit/(loss) before and after tax.
Comparatives for all of the items discussed above were restated in Q1 2012. For further information on the restatements refer to the announcement dated 1 May 2012, available on www.rbs.com/ir.
Following approval at the Group's Annual General Meeting on 30 May 2012, the sub-division and consolidation of the Group's ordinary shares on a one-for-ten basis took effect on 6 June 2012. Consequently, disclosures relating to or affected by numbers of ordinary shares or share price have been restated.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Core | |||||
| Total income (1) | 13,299 | 14,494 | 6,437 | 6,862 | 6,816 |
| Operating expenses (2) | (7,336) | (7,355) | (3,615) | (3,721) | (3,557) |
| Insurance net claims | (1,225) | (1,487) | (576) | (649) | (703) |
| Operating profit before impairment losses (3) | 4,738 | 5,652 | 2,246 | 2,492 | 2,556 |
| Impairment losses (4) | (1,553) | (1,725) | (728) | (825) | (853) |
| Operating profit (3) | 3,185 | 3,927 | 1,518 | 1,667 | 1,703 |
| Non-Core | |||||
| Total income (1) | 270 | 1,401 | 1 | 269 | 966 |
| Operating expenses (2) | (525) | (658) | (262) | (263) | (335) |
| Insurance net claims | - | (218) | - | - | (90) |
| Operating (loss)/profit before impairment | |||||
| losses (3) | (255) | 525 | (261) | 6 | 541 |
| Impairment losses (4) | (1,096) | (2,486) | (607) | (489) | (1,411) |
| Operating loss (3) | (1,351) | (1,961) | (868) | (483) | (870) |
| Total | |||||
| Total income (1) | 13,569 | 15,895 | 6,438 | 7,131 | 7,782 |
| Operating expenses (2) | (7,861) | (8,013) | (3,877) | (3,984) | (3,892) |
| Insurance net claims | (1,225) | (1,705) | (576) | (649) | (793) |
| Operating profit before impairment losses (3) | 4,483 | 6,177 | 1,985 | 2,498 | 3,097 |
| Impairment losses (4) | (2,649) | (4,211) | (1,335) | (1,314) | (2,264) |
| Operating profit (3) | 1,834 | 1,966 | 650 | 1,184 | 833 |
| Own credit adjustments | (2,974) | (236) | (518) | (2,456) | 324 |
| Asset Protection Scheme | (45) | (637) | (2) | (43) | (168) |
| Payment Protection Insurance costs | (260) | (850) | (135) | (125) | (850) |
| Sovereign debt impairment | - | (733) | - | - | (733) |
| Other items | (60) | (304) | (96) | 36 | (84) |
| Loss before tax | (1,505) | (794) | (101) | (1,404) | (678) |
For definitions of the notes refer to page 8.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| Key metrics | 2012 | 2011 | 2012 | 2012 | 2011 |
| Performance ratios | |||||
| Core | |||||
| - Net interest margin | 2.16% | 2.24% | 2.20% | 2.12% | 2.19% |
| - Cost:income ratio (5) | 61% | 57% | 62% | 60% | 58% |
| - Return on equity | 10.2% | 13.9% | 9.3% | 11.0% | 11.9% |
| - Adjusted earnings per ordinary and B share | |||||
| from continuing operations (6) | 10.4p | 14.0p | 4.4p | 6.0p | 6.9p |
| - Adjusted earnings per ordinary and B share | |||||
| from continuing operations assuming a | |||||
| normalised tax rate of 24.5% (2011 - 26.5%) (6) | 21.3p | 26.8p | 9.7p | 11.6p | 11.6p |
| Non-Core | |||||
| - Net interest margin | 0.28% | 0.77% | 0.24% | 0.31% | 0.83% |
| - Cost:income ratio (5) | 194% | 56% | nm | 98% | 38% |
| Group | |||||
| - Net interest margin | 1.92% | 2.00% | 1.95% | 1.89% | 1.97% |
| - Cost:income ratio (5) | 64% | 56% | 66% | 61% | 56% |
| Continuing operations | |||||
| - Basic loss per ordinary and B share (6,7) | (18.2p) | (13.2p) | (4.2p) | (14.0p) | (8.3p) |
For definitions of the notes refer to page 8.
| 30 June 31 March |
31 December | ||||
|---|---|---|---|---|---|
| 2012 | 2012 | Change | 2011 | Change | |
| Capital and balance sheet | |||||
| Funded balance sheet (8) | £929bn | £950bn | (2%) | £977bn | (5%) |
| Total assets | £1,415bn | £1,403bn | 1% | £1,507bn | (6%) |
| Loan:deposit ratio - Core (9) | 92% | 93% | (100bp) | 94% | (200bp) |
| Loan:deposit ratio - Group (9) | 104% | 106% | (200bp) | 108% | (400bp) |
| Risk-weighted assets - gross | £488bn | £496bn | (2%) | £508bn | (4%) |
| Benefit of Asset Protection Scheme (APS) | (£53bn) | (£62bn) | (15%) | (£69bn) | (23%) |
| Risk-weighted assets - net of APS | £435bn | £434bn | - | £439bn | (1%) |
| Total equity | £75bn | £75bn | - | £76bn | (1%) |
| Core Tier 1 ratio* | 11.1% | 10.8% | 30bp | 10.6% | 50bp |
| Tier 1 ratio | 13.4% | 13.2% | 20bp | 13.0% | 40bp |
| Risk elements in lending (REIL) | £40bn | £40bn | - | £41bn | (2%) |
| REIL as a % of gross loans and advances (10) | 8.6% | 8.6% | - | 8.6% | - |
| Tier 1 leverage ratio (11) | 15.6x | 16.3x | (70bp) | 16.9x | (130bp) |
| Tangible equity leverage ratio (12) | 6.0% | 5.8% | 20bp | 5.7% | 30bp |
| Tangible equity per ordinary and B share (6,13) | 489p | 488p | - | 501p | (2%) |
* The benefit of APS in the Core Tier 1 ratio is 77 basis points at 30 June 2012 (31 March 2012 - 85 basis points; 31 December 2011 - 90 basis points).
Notes:
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Summary income statement | |||||
| Total income | 11,263 | 15,296 | 6,087 | 5,176 | 8,238 |
| Operating expenses | (8,894) | (9,332) | (4,277) | (4,617) | (5,017) |
| Operating profit/(loss) before impairment losses | 1,144 | 4,259 | 1,234 | (90) | 2,428 |
| Impairment losses | (2,649) | (5,053) | (1,335) | (1,314) | (3,106) |
| Operating loss before tax | (1,505) | (794) | (101) | (1,404) | (678) |
| Loss attributable to ordinary and B shareholders | (1,990) | (1,425) | (466) | (1,524) | (897) |
A reconciliation between statutory and managed view income statements is shown in Appendix 1 to this announcement.
In the income statement set out below, own credit adjustments, Asset Protection Scheme, Payment Protection Insurance costs, sovereign debt impairment, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax, interest rate hedge adjustments on impaired available-for-sale sovereign debt and RFS Holdings minority interest are shown separately. In the statutory condensed consolidated income statement on page 68, these items are included in income, operating expenses and impairments as appropriate.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Core | £m | £m | £m | £m | £m |
| Net interest income | 5,868 | 6,115 | 2,925 | 2,943 | 3,012 |
| Non-interest income (excluding insurance net | |||||
| premium income) | 5,564 | 6,373 | 2,583 | 2,981 | 2,809 |
| Insurance net premium income | 1,867 | 2,006 | 929 | 938 | 995 |
| Non-interest income | 7,431 | 8,379 | 3,512 | 3,919 | 3,804 |
| Total income (1) | 13,299 | 14,494 | 6,437 | 6,862 | 6,816 |
| Operating expenses (2) | (7,336) | (7,355) | (3,615) | (3,721) | (3,557) |
| Profit before insurance net claims and | |||||
| impairment losses | 5,963 | 7,139 | 2,822 | 3,141 | 3,259 |
| Insurance net claims | (1,225) | (1,487) | (576) | (649) | (703) |
| Operating profit before impairment losses (3) | 4,738 | 5,652 | 2,246 | 2,492 | 2,556 |
| Impairment losses (4) | (1,553) | (1,725) | (728) | (825) | (853) |
| Operating profit (3) | 3,185 | 3,927 | 1,518 | 1,667 | 1,703 |
| Non-Core | |||||
| Net interest income | 112 | 420 | 48 | 64 | 221 |
| Non-interest income (excluding insurance net | |||||
| premium income) | 158 | 748 | (47) | 205 | 650 |
| Insurance net premium income | - | 233 | - | - | 95 |
| Non-interest income | 158 | 981 | (47) | 205 | 745 |
| Total income (1) | 270 | 1,401 | 1 | 269 | 966 |
| Operating expenses (2) | (525) | (658) | (262) | (263) | (335) |
| (Loss)/profit before insurance net claims and | |||||
| impairment losses | (255) | 743 | (261) | 6 | 631 |
| Insurance net claims | - | (218) | - | - | (90) |
| Operating (loss)/profit before impairment | |||||
| losses (3) | (255) | 525 | (261) | 6 | 541 |
| Impairment losses (4) | (1,096) | (2,486) | (607) | (489) | (1,411) |
| Operating loss (3) | (1,351) | (1,961) | (868) | (483) | (870) |
For definitions of the notes refer to page 8.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| Total | 2012 £m |
2011 £m |
2012 £m |
2012 £m |
2011 £m |
| Net interest income | 5,980 | 6,535 | 2,973 | 3,007 | 3,233 |
| Non-interest income (excluding insurance net | |||||
| premium income) | 5,722 | 7,121 | 2,536 | 3,186 | 3,459 |
| Insurance net premium income | 1,867 | 2,239 | 929 | 938 | 1,090 |
| Non-interest income | 7,589 | 9,360 | 3,465 | 4,124 | 4,549 |
| Total income (1) | 13,569 | 15,895 | 6,438 | 7,131 | 7,782 |
| Operating expenses (2) | (7,861) | (8,013) | (3,877) | (3,984) | (3,892) |
| Profit before insurance net claims and | |||||
| impairment losses | 5,708 | 7,882 | 2,561 | 3,147 | 3,890 |
| Insurance net claims | (1,225) | (1,705) | (576) | (649) | (793) |
| Operating profit before impairment | |||||
| losses (3) | 4,483 | 6,177 | 1,985 | 2,498 | 3,097 |
| Impairment losses (4) | (2,649) | (4,211) | (1,335) | (1,314) | (2,264) |
| Operating profit (3) | 1,834 | 1,966 | 650 | 1,184 | 833 |
| Own credit adjustments | (2,974) | (236) | (518) | (2,456) | 324 |
| Asset Protection Scheme | (45) | (637) | (2) | (43) | (168) |
| Payment Protection Insurance costs | (260) | (850) | (135) | (125) | (850) |
| Sovereign debt impairment | - | (733) | - | - | (733) |
| Amortisation of purchased intangible assets | (99) | (100) | (51) | (48) | (56) |
| Integration and restructuring costs | (673) | (353) | (213) | (460) | (208) |
| Gain on redemption of own debt | 577 | 255 | - | 577 | 255 |
| Strategic disposals | 152 | 27 | 160 | (8) | 50 |
| Other items | (17) | (133) | 8 | (25) | (125) |
| Loss before tax | (1,505) | (794) | (101) | (1,404) | (678) |
| Tax charge | (429) | (645) | (290) | (139) | (222) |
| Loss from continuing operations | (1,934) | (1,439) | (391) | (1,543) | (900) |
| Profit/(loss) from discontinued operations, net of tax |
1 | 31 | (4) | 5 | 21 |
| Loss for the period | (1,933) | (1,408) | (395) | (1,538) | (879) |
| Non-controlling interests | 19 | (17) | 5 | 14 | (18) |
| Preference share and other dividends | (76) | - | (76) | - | - |
| Loss attributable to ordinary and B | |||||
| shareholders | (1,990) | (1,425) | (466) | (1,524) | (897) |
For definitions of the notes refer to page 8.
| 30 June 2012 £m |
31 March 2012 £m |
31 December 2011 £m |
|
|---|---|---|---|
| Loans and advances to banks (1,2) | 39,436 | 36,064 | 43,870 |
| Loans and advances to customers (1,2) | 434,965 | 440,406 | 454,112 |
| Reverse repurchase agreements and stock borrowing | 97,901 | 91,129 | 100,934 |
| Debt securities and equity shares | 200,717 | 213,534 | 224,263 |
| Other assets (3) | 155,738 | 168,534 | 154,070 |
| Funded assets | 928,757 | 949,667 | 977,249 |
| Derivatives | 486,432 | 453,354 | 529,618 |
| Total assets | 1,415,189 | 1,403,021 | 1,506,867 |
| Bank deposits (2,4) | 67,619 | 65,735 | 69,113 |
| Customer deposits (2,4) | 412,769 | 410,207 | 414,143 |
| Repurchase agreements and stock lending | 128,075 | 128,718 | 128,503 |
| Debt securities in issue | 119,855 | 142,943 | 162,621 |
| Settlement balances and short positions | 53,502 | 54,919 | 48,516 |
| Subordinated liabilities | 25,596 | 25,513 | 26,319 |
| Other liabilities (3) | 51,812 | 53,821 | 57,616 |
| Liabilities excluding derivatives | 859,228 | 881,856 | 906,831 |
| Derivatives | 480,745 | 446,534 | 523,983 |
| Total liabilities | 1,339,973 | 1,328,390 | 1,430,814 |
| Owners' equity | 74,016 | 73,416 | 74,819 |
| Non-controlling interests | 1,200 | 1,215 | 1,234 |
| Total liabilities and equity | 1,415,189 | 1,403,021 | 1,506,867 |
| Memo: Tangible equity (5) | 54,386 | 53,901 | 55,217 |
Notes:
(1) Excluding reverse repurchase agreements and stock borrowing.
(2) Excludes disposal groups (see page 96).
(3) Includes disposal groups (see page 96).
(4) Excluding repurchase agreements and stock lending.
(5) Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Net interest income | £m | £m | £m | £m | £m |
| Net interest income (1) | 5,987 | 6,534 | 2,979 | 3,008 | 3,245 |
| Average interest-earning assets | 627,182 | 660,125 | 612,995 | 641,369 | 661,672 |
| Net interest margin | |||||
| - Group | 1.92% | 2.00% | 1.95% | 1.89% | 1.97% |
| - Retail & Commercial (2) | 2.93% | 3.02% | 2.94% | 2.91% | 2.99% |
| - Non-Core | 0.28% | 0.77% | 0.24% | 0.31% | 0.83% |
Notes:
(1) For further analysis and details of adjustments refer to pages 74 and 75.
(2) Retail & Commercial (R&C) comprises the UK Retail, UK Corporate, Wealth, International Banking, Ulster Bank and US Retail & Commercial divisions.
• Group NIM fell 2 basis points, reflecting increased funding and liquidity costs and pressure on liability margins.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| Non-interest income | 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
| Net fees and commissions Income from trading activities Other operating income |
2,333 2,195 1,194 |
2,759 2,789 1,573 |
1,136 931 469 |
1,197 1,264 725 |
1,377 1,219 863 |
| Non-interest income (excluding insurance net premium income) Insurance net premium income |
5,722 1,867 |
7,121 2,239 |
2,536 929 |
3,186 938 |
3,459 1,090 |
| Total non-interest income | 7,589 | 9,360 | 3,465 | 4,124 | 4,549 |
• Non-interest income decreased by £1,084 million, or 24%, principally driven by Non-Core as significant gains on restructured assets in Q2 2011 were not repeated.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Operating expenses | £m | £m | £m | £m | £m |
| Staff expenses | 4,257 | 4,419 | 2,036 | 2,221 | 2,099 |
| Premises and equipment | 1,073 | 1,119 | 523 | 550 | 563 |
| Other | 1,755 | 1,699 | 936 | 819 | 834 |
| Administrative expenses | 7,085 | 7,237 | 3,495 | 3,590 | 3,496 |
| Depreciation and amortisation | 776 | 776 | 382 | 394 | 396 |
| Operating expenses | 7,861 | 8,013 | 3,877 | 3,984 | 3,892 |
| Insurance net claims | 1,225 | 1,705 | 576 | 649 | 793 |
| Staff costs as a % of total income | 31% | 28% | 32% | 31% | 27% |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Impairment losses | £m | £m | £m | £m | £m |
| Loan impairment losses | 2,730 | 4,135 | 1,435 | 1,295 | 2,237 |
| Securities impairment losses | (81) | 76 | (100) | 19 | 27 |
| Group impairment losses | 2,649 | 4,211 | 1,335 | 1,314 | 2,264 |
| Loan impairment losses | |||||
| - individually assessed | 1,690 | 3,119 | 945 | 745 | 1,834 |
| - collectively assessed | 1,129 | 1,311 | 534 | 595 | 591 |
| - latent | (113) | (295) | (56) | (57) | (188) |
| Customer loans | 2,706 | 4,135 | 1,423 | 1,283 | 2,237 |
| Bank loans | 24 | - | 12 | 12 | - |
| Loan impairment losses | 2,730 | 4,135 | 1,435 | 1,295 | 2,237 |
| Core | 1,515 | 1,662 | 719 | 796 | 810 |
| Non-Core | 1,215 | 2,473 | 716 | 499 | 1,427 |
| Group | 2,730 | 4,135 | 1,435 | 1,295 | 2,237 |
| Customer loan impairment charge as a % of | |||||
| gross loans and advances (1) | |||||
| Group | 1.1% | 1.6% | 1.2% | 1.1% | 1.8% |
| Core | 0.7% | 0.8% | 0.7% | 0.8% | 0.8% |
| Non-Core | 3.6% | 5.2% | 4.2% | 2.7% | 6.0% |
Note:
(1) Customer loan impairment charge as a percentage of gross customer loans and advances excluding reverse repurchase agreements and including disposal groups.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | ||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| One-off and other items | £m | £m | £m | £m | £m | |
| Own credit adjustments* | (2,974) | (236) | (518) | (2,456) | 324 | |
| Asset Protection Scheme | (45) | (637) | (2) | (43) | (168) | |
| Payment Protection Insurance costs | (260) | (850) | (135) | (125) | (850) | |
| Sovereign debt impairment (1) | - | (733) | - | - | (733) | |
| Amortisation of purchased intangible assets | (99) | (100) | (51) | (48) | (56) | |
| Integration and restructuring costs | (673) | (353) | (213) | (460) | (208) | |
| Gain on redemption of own debt | 577 | 255 | - | 577 | 255 | |
| Strategic disposals** | 152 | 27 | 160 | (8) | 50 | |
| Other | ||||||
| - Bonus tax | - | (22) | - | - | (11) | |
| - RFS Holdings minority interest | (17) | (2) | 8 | (25) | (5) | |
| - Interest rate hedge adjustments on impaired | ||||||
| available-for-sale sovereign debt | - | (109) | - | - | (109) | |
| (3,339) | (2,760) | (751) | (2,588) | (1,511) | ||
| * Own credit adjustments impact: | ||||||
| Income from trading activities | (1,280) | (170) | (271) | (1,009) | 96 | |
| Other operating income | (1,694) | (66) | (247) | (1,447) | 228 | |
| Own credit adjustments | (2,974) | (236) | (518) | (2,456) | 324 | |
| **Strategic disposals | ||||||
| Gain/(loss) on sale and provision for loss on disposal | ||||||
| of investments in: | ||||||
| - RBS Aviation Capital | 197 | - | 197 | - | - | |
| - Global Merchant Services | - | 47 | - | - | - | |
| - Other | (45) | (20) | (37) | (8) | 50 | |
| 152 | 27 | 160 | (8) | 50 |
Note:
(1) In the second quarter of 2011, the Group recorded an impairment loss of £733 million in respect of its AFS portfolio of Greek government debt as a result of Greece's continuing fiscal difficulties. In Q1 2012, as part of Private Sector Involvement in the Greek government bail-out, the vast majority of this portfolio was exchanged for Greek sovereign debt and European Financial Stability Facility notes; the Greek sovereign debt received in the exchange was sold.
| Capital resources and ratios | 30 June 2012 |
31 March 2012 |
31 December 2011 |
|---|---|---|---|
| Core Tier 1 capital | £48bn | £47bn | £46bn |
| Tier 1 capital | £58bn | £57bn | £57bn |
| Total capital | £63bn | £61bn | £61bn |
| Risk-weighted assets | |||
| - gross | £488bn | £496bn | £508bn |
| - benefit of Asset Protection Scheme | (£53bn) | (£62bn) | (£69bn) |
| Risk-weighted assets | £435bn | £434bn | £439bn |
| Core Tier 1 ratio (1) | 11.1% | 10.8% | 10.6% |
| Tier 1 ratio | 13.4% | 13.2% | 13.0% |
| Total capital ratio | 14.6% | 14.0% | 13.8% |
Note:
(1) The benefit of APS in the Core Tier 1 ratio was 77 basis points at 30 June 2012 (31 March 2012 - 85 basis points; 31 December 2011 - 90 basis points).
| Balance sheet | 30 June 2012 |
31 March 2012 |
31 December 2011 |
|---|---|---|---|
| Funded balance sheet (1) | £929bn | £950bn | £977bn |
| Total assets | £1,415bn | £1,403bn | £1,507bn |
| Loans and advances to customers (2) | £455bn | £460bn | £474bn |
| Customer deposits (3) | £435bn | £432bn | £437bn |
| Loan:deposit ratio - Core (4) | 92% | 93% | 94% |
| Loan:deposit ratio - Group (4) | 104% | 106% | 108% |
| Short-term wholesale funding | £62bn | £80bn | £102bn |
| Wholesale funding | £213bn | £234bn | £258bn |
| Liquidity portfolio | £156bn | £153bn | £155bn |
Notes:
Further analysis of the Group's liquidity and funding position is included on pages 137 to 148.
The operating profit/(loss)(1) of each division is shown below.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Operating profit/(loss) before impairment losses by division |
|||||
| UK Retail | 1,209 | 1,455 | 577 | 632 | 743 |
| UK Corporate | 1,361 | 1,416 | 693 | 668 | 692 |
| Wealth | 131 | 138 | 76 | 55 | 63 |
| International Banking | 326 | 473 | 194 | 132 | 253 |
| Ulster Bank | 162 | 187 | 78 | 84 | 91 |
| US Retail & Commercial | 378 | 413 | 257 | 121 | 208 |
| Retail & Commercial | 3,567 | 4,082 | 1,875 | 1,692 | 2,050 |
| Markets | 1,096 | 1,342 | 270 | 826 | 313 |
| Direct Line Group | 219 | 206 | 135 | 84 | 139 |
| Central items | (144) | 22 | (34) | (110) | 54 |
| Core | 4,738 | 5,652 | 2,246 | 2,492 | 2,556 |
| Non-Core | (255) | 525 | (261) | 6 | 541 |
| Group operating profit before impairment | |||||
| losses | 4,483 | 6,177 | 1,985 | 2,498 | 3,097 |
| Impairment losses/(recoveries) by division | |||||
| UK Retail | 295 | 402 | 140 | 155 | 208 |
| UK Corporate | 357 | 327 | 181 | 176 | 220 |
| Wealth | 22 | 8 | 12 | 10 | 3 |
| International Banking | 62 | 98 | 27 | 35 | 104 |
| Ulster Bank | 717 | 730 | 323 | 394 | 269 |
| US Retail & Commercial | 47 | 176 | 28 | 19 | 65 |
| Retail & Commercial | 1,500 | 1,741 | 711 | 789 | 869 |
| Markets | 21 | (14) | 19 | 2 | (14) |
| Central items | 32 | (2) | (2) | 34 | (2) |
| Core | 1,553 | 1,725 | 728 | 825 | 853 |
| Non-Core | 1,096 | 2,486 | 607 | 489 | 1,411 |
| Group impairment losses | 2,649 | 4,211 | 1,335 | 1,314 | 2,264 |
Note:
(1) Operating profit/(loss) before own credit adjustments, Asset Protection Scheme, Payment Protection Insurance costs, sovereign debt impairment, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax, interest rate hedge adjustments on impaired available-for-sale sovereign debt and RFS Holdings minority interest.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| £m | £m | £m | £m | £m | |
| Operating profit/(loss) by division | |||||
| UK Retail | 914 | 1,053 | 437 | 477 | 535 |
| UK Corporate | 1,004 | 1,089 | 512 | 492 | 472 |
| Wealth | 109 | 130 | 64 | 45 | 60 |
| International Banking | 264 | 375 | 167 | 97 | 149 |
| Ulster Bank | (555) | (543) | (245) | (310) | (178) |
| US Retail & Commercial | 331 | 237 | 229 | 102 | 143 |
| Retail & Commercial | 2,067 | 2,341 | 1,164 | 903 | 1,181 |
| Markets | 1,075 | 1,356 | 251 | 824 | 327 |
| Direct Line Group | 219 | 206 | 135 | 84 | 139 |
| Central items | (176) | 24 | (32) | (144) | 56 |
| Core | 3,185 | 3,927 | 1,518 | 1,667 | 1,703 |
| Non-Core | (1,351) | (1,961) | (868) | (483) | (870) |
| Group operating profit | 1,834 | 1,966 | 650 | 1,184 | 833 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| % | % | % | % | % | |
| Net interest margin by division | |||||
| UK Retail | 3.59 | 4.06 | 3.57 | 3.61 | 4.04 |
| UK Corporate | 3.13 | 3.11 | 3.17 | 3.09 | 3.03 |
| Wealth | 3.68 | 3.29 | 3.69 | 3.67 | 3.33 |
| International Banking | 1.62 | 1.78 | 1.65 | 1.60 | 1.73 |
| Ulster Bank | 1.85 | 1.82 | 1.82 | 1.87 | 1.80 |
| US Retail & Commercial | 3.04 | 3.06 | 3.02 | 3.06 | 3.12 |
| Retail & Commercial | 2.93 | 3.02 | 2.94 | 2.91 | 2.99 |
| Non-Core | 0.28 | 0.77 | 0.24 | 0.31 | 0.83 |
| Group net interest margin | 1.92 | 2.00 | 1.95 | 1.89 | 1.97 |
| 30 June 2012 £bn |
31 March 2012 £bn |
31 December 2011 £bn |
|
|---|---|---|---|
| Total funded assets by division | |||
| UK Retail | 116.9 | 116.3 | 114.5 |
| UK Corporate | 113.7 | 113.1 | 114.1 |
| Wealth | 21.2 | 21.3 | 21.6 |
| International Banking | 61.4 | 63.7 | 69.9 |
| Ulster Bank | 33.1 | 33.4 | 34.6 |
| US Retail & Commercial | 74.3 | 72.9 | 74.9 |
| Markets | 302.4 | 300.6 | 313.9 |
| Other | 132.9 | 144.2 | 139.2 |
| Core | 855.9 | 865.5 | 882.7 |
| Non-Core | 72.1 | 83.3 | 93.7 |
| 928.0 | 948.8 | 976.4 | |
| RFS Holdings minority interest | 0.8 | 0.9 | 0.8 |
| Total | 928.8 | 949.7 | 977.2 |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Risk-weighted assets by division | |||||
| UK Retail | 47.4 | 48.2 | (2%) | 48.4 | (2%) |
| UK Corporate | 79.4 | 76.9 | 3% | 79.3 | - |
| Wealth | 12.3 | 12.9 | (5%) | 12.9 | (5%) |
| International Banking | 46.0 | 41.8 | 10% | 43.2 | 6% |
| Ulster Bank | 37.4 | 38.4 | (3%) | 36.3 | 3% |
| US Retail & Commercial | 58.5 | 58.6 | - | 59.3 | (1%) |
| Retail & Commercial | 281.0 | 276.8 | 2% | 279.4 | 1% |
| Markets | 107.9 | 115.6 | (7%) | 120.3 | (10%) |
| Other | 12.7 | 11.0 | 15% | 12.0 | 6% |
| Core | 401.6 | 403.4 | - | 411.7 | (2%) |
| Non-Core | 82.7 | 89.9 | (8%) | 93.3 | (11%) |
| Group before benefit of Asset Protection Scheme | 484.3 | 493.3 | (2%) | 505.0 | (4%) |
| Benefit of Asset Protection Scheme | (52.9) | (62.2) | (15%) | (69.1) | (23%) |
| Group before RFS Holdings minority interest | 431.4 | 431.1 | - | 435.9 | (1%) |
| RFS Holdings minority interest | 3.3 | 3.2 | 3% | 3.1 | 6% |
| Group | 434.7 | 434.3 | - | 439.0 | (1%) |
| Employee numbers by division (full time equivalents in continuing operations rounded to the nearest hundred) |
30 June 2012 |
31 March 2012 |
31 December 2011 |
|---|---|---|---|
| UK Retail | 27,500 | 27,600 | 27,700 |
| UK Corporate | 13,100 | 13,400 | 13,600 |
| Wealth | 5,600 | 5,700 | 5,700 |
| International Banking | 4,800 | 5,400 | 5,400 |
| Ulster Bank | 4,500 | 4,500 | 4,200 |
| US Retail & Commercial | 14,500 | 14,700 | 15,400 |
| Retail & Commercial | 70,000 | 71,300 | 72,000 |
| Markets | 12,500 | 13,200 | 13,900 |
| Direct Line Group | 15,100 | 15,100 | 14,900 |
| Group Centre | 6,900 | 6,600 | 6,200 |
| Core | 104,500 | 106,200 | 107,000 |
| Non-Core | 3,800 | 4,300 | 4,700 |
| 108,300 | 110,500 | 111,700 | |
| Business Services | 33,500 | 33,600 | 34,000 |
| Integration and restructuring | 1,000 | 1,000 | 1,100 |
| Group | 142,800 | 145,100 | 146,800 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 1,989 | 2,184 | 988 | 1,001 | 1,098 |
| Net fees and commissions | 451 | 565 | 214 | 237 | 295 |
| Other non-interest income | 57 | 72 | 28 | 29 | 38 |
| Non-interest income | 508 | 637 | 242 | 266 | 333 |
| Total income | 2,497 | 2,821 | 1,230 | 1,267 | 1,431 |
| Direct expenses | |||||
| - staff | (417) | (433) | (210) | (207) | (218) |
| - other | (189) | (219) | (110) | (79) | (106) |
| Indirect expenses | (682) | (714) | (333) | (349) | (364) |
| (1,288) | (1,366) | (653) | (635) | (688) | |
| Operating profit before impairment losses | 1,209 | 1,455 | 577 | 632 | 743 |
| Impairment losses | (295) | (402) | (140) | (155) | (208) |
| Operating profit | 914 | 1,053 | 437 | 477 | 535 |
| Analysis of income by product | |||||
| Personal advances | 458 | 553 | 222 | 236 | 278 |
| Personal deposits | 353 | 511 | 168 | 185 | 257 |
| Mortgages | 1,159 | 1,124 | 596 | 563 | 581 |
| Cards Other |
431 96 |
481 152 |
212 32 |
219 64 |
243 72 |
| Total income | 2,497 | 2,821 | 1,230 | 1,267 | 1,431 |
| Analysis of impairments by sector | |||||
| Mortgages | 58 | 116 | 24 | 34 | 55 |
| Personal | 166 | 201 | 84 | 82 | 106 |
| Cards | 71 | 85 | 32 | 39 | 47 |
| Total impairment losses | 295 | 402 | 140 | 155 | 208 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances (excluding | |||||
| reverse repurchase agreements) by sector | |||||
| Mortgages | 0.1% | 0.2% | 0.1% | 0.1% | 0.2% |
| Personal | 3.6% | 3.7% | 3.7% | 3.5% | 3.9% |
| Cards | 2.5% | 3.0% | 2.3% | 2.8% | 3.4% |
| Total | 0.5% | 0.7% | 0.5% | 0.6% | 0.8% |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| Performance ratios | |||||
| Return on equity (1) | 23.3% | 25.1% | 22.5% | 24.0% | 25.8% |
| Net interest margin | 3.59% | 4.06% | 3.57% | 3.61% | 4.04% |
| Cost:income ratio | 52% | 48% | 53% | 50% | 48% |
| 30 June 2012 |
31 March 2012 |
31 December 2011 |
|||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) (2) | |||||
| - mortgages | 98.1 | 97.5 | 1% | 95.0 | 3% |
| - personal | 9.2 | 9.4 | (2%) | 10.1 | (9%) |
| - cards | 5.7 | 5.6 | 2% | 5.7 | - |
| 113.0 | 112.5 | - | 110.8 | 2% | |
| Customer deposits (2) | 106.5 | 104.2 | 2% | 101.9 | 5% |
| Assets under management (excluding deposits) | 5.8 | 5.8 | - | 5.5 | 5% |
| Risk elements in lending (2) | 4.6 | 4.6 | - | 4.6 | - |
| Loan:deposit ratio (excluding repos) | 104% | 105% | (100bp) | 106% | (200bp) |
| Risk-weighted assets | 47.4 | 48.2 | (2%) | 48.4 | (2%) |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2) Includes disposal groups: loans and advances to customers £7.5 billion (31 March 2012 and 31 December 2011 - £7.3 billion), risk elements in lending £0.5 billion (31 March 2012 and 31 December 2011 - £0.5 billion) and customer deposits £8.6 billion (31 March 2012 - £8.7 billion; 31 December 2011 - £8.8 billion).
UK Retail had a subdued H1 2012, with operating profit falling 13%, although the division continued to lend more despite the tough economic conditions reducing demand for unsecured lending. The division had a successful ISA season and has achieved balance growth well in excess of the market, although deposit margins remained under pressure.
UK Retail's aspiration to become the UK's most helpful bank suffered a setback in June, following the technology problems that affected a number of the Group's payment systems. The division's priority has been to take all steps possible to help customers experiencing difficulty by opening branches for longer, doubling staff numbers in UK-based call centres and giving greater authority to local staff to provide on-the-spot help.
In early July, the Bank of England announced the Funding for Lending Scheme (FLS) designed to boost lending to the real economy. UK Retail will use this scheme to cut costs for first time buyers, introducing a new set of mortgages with lower rates.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 1,528 | 1,581 | 772 | 756 | 770 |
| Net fees and commissions | 682 | 681 | 346 | 336 | 336 |
| Other non-interest income | 202 | 218 | 93 | 109 | 112 |
| Non-interest income | 884 | 899 | 439 | 445 | 448 |
| Total income | 2,412 | 2,480 | 1,211 | 1,201 | 1,218 |
| Direct expenses | |||||
| - staff | (477) | (470) | (232) | (245) | (235) |
| - other | (174) | (189) | (89) | (85) | (85) |
| Indirect expenses | (400) | (405) | (197) | (203) | (206) |
| (1,051) | (1,064) | (518) | (533) | (526) | |
| Operating profit before impairment losses | 1,361 | 1,416 | 693 | 668 | 692 |
| Impairment losses | (357) | (327) | (181) | (176) | (220) |
| Operating profit | 1,004 | 1,089 | 512 | 492 | 472 |
| Analysis of income by business | |||||
| Corporate and commercial lending | 1,351 | 1,379 | 664 | 687 | 657 |
| Asset and invoice finance | 333 | 315 | 171 | 162 | 164 |
| Corporate deposits | 340 | 348 | 174 | 166 | 174 |
| Other | 388 | 438 | 202 | 186 | 223 |
| Total income | 2,412 | 2,480 | 1,211 | 1,201 | 1,218 |
| Analysis of impairments by sector | |||||
| Financial institutions | 4 | 16 | 2 | 2 | 13 |
| Hotels and restaurants | 23 | 21 | 8 | 15 | 13 |
| Housebuilding and construction | 104 | 47 | 79 | 25 | 15 |
| Manufacturing | 19 | 12 | 19 | - | 6 |
| Other | 31 | 94 | (9) | 40 | 91 |
| Private sector education, health, social work, | |||||
| recreational and community services | 43 | 12 | 21 | 22 | 1 |
| Property | 64 | 69 | 34 | 30 | 51 |
| Wholesale and retail trade, repairs | 49 | 32 | 16 | 33 | 16 |
| Asset and invoice finance | 20 | 24 | 11 | 9 | 14 |
| Total impairment losses | 357 | 327 | 181 | 176 | 220 |
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) by sector |
||||||
| Financial institutions | 0.1% | 0.5% | 0.1% | 0.1% | 0.9% | |
| Hotels and restaurants | 0.8% | 0.6% | 0.5% | 1.0% | 0.8% | |
| Housebuilding and construction | 5.9% | 2.2% | 9.0% | 2.7% | 1.4% | |
| Manufacturing | 0.8% | 0.5% | 1.6% | - | 0.5% | |
| Other | 0.2% | 0.6% | (0.1%) | 0.5% | 1.1% | |
| Private sector education, health, social work, | ||||||
| recreational and community services | 1.0% | 0.3% | 0.9% | 1.0% | - | |
| Property | 0.5% | 0.5% | 0.5% | 0.4% | 0.7% | |
| Wholesale and retail trade, repairs | 1.1% | 0.7% | 0.7% | 1.5% | 0.7% | |
| Asset and invoice finance | 0.4% | 0.5% | 0.4% | 0.3% | 0.6% | |
| Total | 0.6% | 0.6% | 0.7% | 0.6% | 0.8% |
| Key metrics | Half year ended | Quarter ended | |||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Performance ratios | |||||
| Return on equity (1) | 16.5% | 16.9% | 16.8% | 16.2% | 14.6% |
| Net interest margin | 3.13% | 3.11% | 3.17% | 3.09% | 3.03% |
| Cost:income ratio | 44% | 43% | 43% | 44% | 43% |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 113.7 | 113.2 | - | 114.2 | - |
| Loans and advances to customers (gross) (2) | |||||
| - financial institutions | 6.1 | 6.2 | (2%) | 5.8 | 5% |
| - hotels and restaurants | 6.1 | 6.0 | 2% | 6.1 | - |
| - housebuilding and construction | 3.5 | 3.7 | (5%) | 3.9 | (10%) |
| - manufacturing | 4.9 | 4.7 | 4% | 4.7 | 4% |
| - other | 34.1 | 34.4 | (1%) | 34.2 | - |
| - private sector education, health, social | |||||
| work, recreational and community services | 8.9 | 8.6 | 3% | 8.7 | 2% |
| - property | 26.9 | 26.7 | 1% | 28.2 | (5%) |
| - wholesale and retail trade, repairs | 8.9 | 9.1 | (2%) | 8.7 | 2% |
| - asset and invoice finance | 10.7 | 10.3 | 4% | 10.4 | 3% |
| 110.1 | 109.7 | - | 110.7 | (1%) | |
| Customer deposits (2) | 127.5 | 124.3 | 3% | 126.3 | 1% |
| Risk elements in lending (2) | 4.9 | 4.9 | - | 5.0 | (2%) |
| Loan:deposit ratio (excluding repos) | 85% | 87% | (200bp) | 86% | (100bp) |
| Risk-weighted assets | 79.4 | 76.9 | 3% | 79.3 | - |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2) Includes disposal groups: loans and advances to customers £11.9 billion (31 March 2012 - £12.0 billion; 31 December 2011 - £12.2 billion), risk elements in lending £0.9 billion (31 March 2012 and 31 December 2011 - £1.0 billion) and customer deposits £13.1 billion (31 March 2012 - £12.7 billion; 31 December 2011- £13.0 billion).
In a challenging environment, UK Corporate delivered a resilient performance in the first half, with a stronger operating profit in Q2 than Q1. Customer confidence has weakened in the face of economic newsflow, with many companies scaling back their investment plans, given concerns about the prospects for demand. This was reflected in weak SME application volumes.
UK Corporate has, nevertheless, continued to support its customers, playing an active role in supporting government initiatives, including over 8,000 new loans and asset finance facilities under the Government's National Loan Guarantee Scheme. The Group has also welcomed the new FLS, and will use the scheme to cut interest rates on £2.5 billion of SME loans by an average of 1% and to remove arrangement fees on the same amount of new SME loans.
H1 2012 saw the launch of an enhanced telephony offering aimed at Business Banking customers: Business Connect. This service now supports 210,000 customers and has already processed over 28,000 calls with 75% of customers very satisfied with the service received. UK Corporate also rolled out an FX campaign, which uses expertise from Corporate & Institutional Banking, Transaction Services UK and Corporate Banking Risk Services to help customers trade internationally.
UK Corporate responded swiftly and decisively to minimise the impact on its customers from the recent Group technology incident. Corporate service centre hours were immediately extended, and business banking customers had access to additional support during extended branch opening hours, while relationship managers were empowered to take critical decisions to action customer payments and drawdowns.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| Income statement Net interest income |
357 | 325 | 178 | 179 | 168 |
| Net fees and commissions Other non-interest income |
183 53 |
191 38 |
90 35 |
93 18 |
94 21 |
| Non-interest income | 236 | 229 | 125 | 111 | 115 |
| Total income | 593 | 554 | 303 | 290 | 283 |
| Direct expenses - staff - other Indirect expenses |
(233) (116) (113) |
(211) (95) (110) |
(116) (56) (55) |
(117) (60) (58) |
(111) (51) (58) |
| (462) | (416) | (227) | (235) | (220) | |
| Operating profit before impairment losses Impairment losses |
131 (22) |
138 (8) |
76 (12) |
55 (10) |
63 (3) |
| Operating profit | 109 | 130 | 64 | 45 | 60 |
| Analysis of income Private banking Investments |
489 104 |
452 102 |
252 51 |
237 53 |
231 52 |
| Total income | 593 | 554 | 303 | 290 | 283 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Performance ratios | |||||
| Return on equity (1) | 11.6% | 13.9% | 13.8% | 9.5% | 12.8% |
| Net interest margin | 3.68% | 3.29% | 3.69% | 3.67% | 3.33% |
| Cost:income ratio | 78% | 75% | 75% | 81% | 78% |
| 30 June | 31 March | 31 December | |||
| 2012 | 2012 | 2011 | |||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 8.6 | 8.4 | 2% | 8.3 | 4% |
| - personal | 5.6 | 6.8 | (18%) | 6.9 | (19%) |
| - other | 2.8 | 1.7 | 65% | 1.7 | 65% |
| 17.0 | 16.9 | 1% | 16.9 | 1% | |
| Customer deposits | 38.5 | 38.3 | 1% | 38.2 | 1% |
| Assets under management (excluding deposits) | 30.6 | 31.4 | (3%) | 30.9 | (1%) |
| Risk elements in lending | 0.2 | 0.2 | - | 0.2 | - |
| Loan:deposit ratio (excluding repos) | 44% | 44% | - | 44% | - |
| Risk-weighted assets | 12.3 | 12.9 | (5%) | 12.9 | (5%) |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
H1 2012 delivered a strong income performance, driven by improved interest margins, more than offset by higher expenses and increased impairments. Continued volatile markets led to subdued client transactions, resulting in reduced brokerage and foreign exchange income.
The period saw further progress in the implementation of the refreshed Coutts divisional strategy across all jurisdictions. Coutts completed the sale of the Latin American, Caribbean and African business to RBC Wealth Management. The business, with client assets of around £1.5 billion, represented approximately 2% of Coutts' total client assets. The decision to sell the business was consistent with the new Coutts strategy of simplifying the business and sharpening the focus on key regions and countries, specifically the UK, Switzerland, the Middle East, Russia, the Commonwealth of Independent States and selected countries in Asia.
The UK rollout of the Coutts global technology platform was completed in Q1 2012. The platform, and related strategic investment, will transform the division's ability to serve clients globally, enabling the business to operate as an international organisation on a unified and common information technology platform.
The division continued to prepare for the implementation of the Retail Distribution Review (RDR) regulations in the UK. Revised Private Banker and Wealth Manager roles were announced aimed at ensuring clients continue to receive the best service and advice based on their specific needs.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 494 | 604 | 234 | 260 | 301 |
| Non-interest income | 609 | 708 | 327 | 282 | 364 |
| Total income | 1,103 | 1,312 | 561 | 542 | 665 |
| Direct expenses | |||||
| - staff | (340) | (376) | (153) | (187) | (181) |
| - other | (95) | (118) | (47) | (48) | (57) |
| Indirect expenses | (342) | (345) | (167) | (175) | (174) |
| (777) | (839) | (367) | (410) | (412) | |
| Operating profit before impairment losses | 326 | 473 | 194 | 132 | 253 |
| Impairment losses | (62) | (98) | (27) | (35) | (104) |
| Operating profit | 264 | 375 | 167 | 97 | 149 |
| Of which: | |||||
| Ongoing businesses | 281 | 395 | 168 | 113 | 160 |
| Run-off businesses | (17) | (20) | (1) | (16) | (11) |
| Analysis of income by product | |||||
| Cash management | 514 | 458 | 246 | 268 | 242 |
| Trade finance | 145 | 131 | 73 | 72 | 69 |
| Loan portfolio | 430 | 693 | 233 | 197 | 340 |
| Ongoing businesses | 1,089 | 1,282 | 552 | 537 | 651 |
| Run-off businesses | 14 | 30 | 9 | 5 | 14 |
| Total income | 1,103 | 1,312 | 561 | 542 | 665 |
| Analysis of impairments by sector | |||||
| Manufacturing and infrastructure | 19 | 132 | 2 | 17 | 100 |
| Property and construction | 7 | 6 | 7 | - | - |
| Transport and storage | (4) | 9 | - | (4) | - |
| Telecommunications, media and technology | 9 | - | - | 9 | - |
| Banks and financial institutions | 31 | 1 | 19 | 12 | 2 |
| Other | - | (50) | (1) | 1 | 2 |
| Total impairment losses | 62 | 98 | 27 | 35 | 104 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances (excluding | |||||
| reverse repurchase agreements) | 0.2% | 0.3% | 0.2% | 0.3% | 0.6% |
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| Performance ratios (ongoing businesses) | ||||||
| Return on equity (1) | 9.0% | 11.5% | 10.5% | 7.5% | 9.6% | |
| Net interest margin | 1.62% | 1.78% | 1.65% | 1.60% | 1.73% | |
| Cost:income ratio | 69% | 62% | 65% | 72% | 59% |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Loans and advances to customers | 49.5 | 52.3 | (5%) | 56.9 | (13%) |
| Loans and advances to banks | 5.1 | 3.9 | 31% | 3.4 | 50% |
| Securities | 2.4 | 4.0 | (40%) | 6.0 | (60%) |
| Cash and eligible bills | 0.7 | 0.3 | 133% | 0.3 | 133% |
| Other | 3.7 | 3.2 | 16% | 3.3 | (12%) |
| Total third party assets (excluding derivatives | |||||
| mark-to-market) | 61.4 | 63.7 | (4%) | 69.9 | (12%) |
| Customer deposits (excluding repos) | 42.2 | 45.0 | (6%) | 45.1 | (6%) |
| Bank deposits | 7.7 | 10.5 | (27%) | 11.4 | (32%) |
| Risk elements in lending | 0.7 | 0.9 | (22%) | 1.6 | (56%) |
| Loan:deposit ratio (excluding repos and conduits) | 102% | 95% | 700bp | 103% | (100bp) |
| Risk-weighted assets | 46.0 | 41.8 | 10% | 43.2 | 6% |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions), for the ongoing businesses.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| Run-off businesses (1) | |||||
| Total income | 14 | 30 | 9 | 5 | 14 |
| Direct expenses | (31) | (50) | (10) | (21) | (25) |
| Operating loss | (17) | (20) | (1) | (16) | (11) |
Note:
(1) Run-off businesses consist of the exited corporate finance business.
H1 results for International Banking were affected by the division's restructuring, with a substantial reduction in exposures improving capital efficiency but with a consequential impact on income. Debt capital markets were sluggish during the period affecting loan portfolio revenues, but trade finance activity has shown significant growth, particularly in Asia. In Europe, the European Central Bank (ECB) lending and deposit rate cuts in Q2 underlined growing fragility across the region. Clients remain cautious following continued economic uncertainty.
The International Banking structure and governance were fully bedded down by the end of Q2 2012. Management is focused on leveraging the International network and the Transaction Services offering to ensure relevance and intimacy with the division's client base.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 325 | 363 | 160 | 165 | 182 |
| Net fees and commissions | 73 | 73 | 35 | 38 | 37 |
| Other non-interest income | 22 | 29 | 11 | 11 | 14 |
| Non-interest income | 95 | 102 | 46 | 49 | 51 |
| Total income | 420 | 465 | 206 | 214 | 233 |
| Direct expenses | |||||
| - staff | (104) | (113) | (52) | (52) | (57) |
| - other | (23) | (35) | (11) | (12) | (17) |
| Indirect expenses | (131) | (130) | (65) | (66) | (68) |
| (258) | (278) | (128) | (130) | (142) | |
| Operating profit before impairment losses | 162 | 187 | 78 | 84 | 91 |
| Impairment losses | (717) | (730) | (323) | (394) | (269) |
| Operating loss | (555) | (543) | (245) | (310) | (178) |
| Analysis of income by business | |||||
| Corporate | 190 | 230 | 88 | 102 | 117 |
| Retail | 174 | 211 | 86 | 88 | 98 |
| Other | 56 | 24 | 32 | 24 | 18 |
| Total income | 420 | 465 | 206 | 214 | 233 |
| Analysis of impairments by sector | |||||
| Mortgages | 356 | 311 | 141 | 215 | 78 |
| Corporate | |||||
| - property | 115 | 163 | 61 | 54 | 66 |
| - other corporate | 217 | 223 | 103 | 114 | 103 |
| Other lending | 29 | 33 | 18 | 11 | 22 |
| Total impairment losses | 717 | 730 | 323 | 394 | 269 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances (excluding | |||||
| reverse repurchase agreements) by sector | |||||
| Mortgages | 3.7% | 2.9% | 2.9% | 4.3% | 1.4% |
| Corporate | |||||
| - property | 4.8% | 6.2% | 5.1% | 4.4% | 5.0% |
| - other corporate | 5.7% | 5.1% | 5.4% | 5.8% | 4.7% |
| Other lending | 4.1% | 4.1% | 5.1% | 3.4% | 5.5% |
| Total | 4.3% | 3.9% | 3.9% | 4.6% | 2.9% |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Performance ratios | |||||
| Return on equity (1) | (22.8%) | (26.5%) | (19.8%) | (25.8%) | (16.9%) |
| Net interest margin | 1.85% | 1.82% | 1.82% | 1.87% | 1.80% |
| Cost:income ratio | 61% | 60% | 62% | 61% | 61% |
| 30 June | 31 March | ||||
| 2012 | 2012 | 31 December 2011 |
|||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 19.2 | 19.8 | (3%) | 20.0 | (4%) |
| - corporate | |||||
| - property | 4.8 | 4.9 | (2%) | 4.8 | - |
| - other corporate | 7.6 | 7.9 | (4%) | 7.7 | (1%) |
| - other lending | 1.4 | 1.3 | 8% | 1.6 | (13%) |
| 33.0 | 33.9 | (3%) | 34.1 | (3%) | |
| Customer deposits | 20.6 | 21.0 | (2%) | 21.8 | (6%) |
| Risk elements in lending | |||||
| - mortgages | 2.6 | 2.5 | 4% | 2.2 | 18% |
| - corporate |
Spot exchange rate - €/£ 1.238 1.200 1.196
Note:
Trading conditions remained difficult, as Irish economic indicators continue to be weak. The high cost of funding has an adverse impact on income, while impairment levels are still elevated, asset prices weakening over the period and residential mortgage arrears continue to rise, albeit with less deterioration in credit metrics in Q2 than in Q1 2012. Cost management remained a central priority.
(1) Divisional return on equity is based on divisional operating loss after tax divided by average notional equity (based on
The recent RBS Group technology incident, affecting a number of the Group's payments systems, has had an extended impact on Ulster Bank customers. During the period of disruption Ulster Bank's main priority was to help customers experiencing difficulty. Branches remained open for longer and the number of staff in call centres was trebled. Provision for costs arising from this incident are included in central items (see page 59).
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 988 | 922 | 492 | 496 | 470 |
| Net fees and commissions | 390 | 419 | 195 | 195 | 217 |
| Other non-interest income | 193 | 135 | 128 | 65 | 62 |
| Non-interest income | 583 | 554 | 323 | 260 | 279 |
| Total income | 1,571 | 1,476 | 815 | 756 | 749 |
| Direct expenses | |||||
| - staff | (440) | (412) | (217) | (223) | (211) |
| - other | (260) | (264) | (144) | (116) | (138) |
| - litigation settlement | (88) | - | - | (88) | - |
| Indirect expenses | (405) | (387) | (197) | (208) | (192) |
| (1,193) | (1,063) | (558) | (635) | (541) | |
| Operating profit before impairment losses Impairment losses |
378 (47) |
413 (176) |
257 (28) |
121 (19) |
208 (65) |
| Operating profit | 331 | 237 | 229 | 102 | 143 |
| Average exchange rate - US\$/£ | 1.577 | 1.616 | 1.582 | 1.571 | 1.631 |
| Analysis of income by product | |||||
| Mortgages and home equity | 268 | 216 | 134 | 134 | 107 |
| Personal lending and cards | 201 | 225 | 102 | 99 | 113 |
| Retail deposits | 444 | 452 | 224 | 220 | 234 |
| Commercial lending | 311 | 286 | 151 | 160 | 148 |
| Commercial deposits | 227 | 201 | 113 | 114 | 102 |
| Other | 120 | 96 | 91 | 29 | 45 |
| Total income | 1,571 | 1,476 | 815 | 756 | 749 |
| Analysis of impairments by sector | |||||
| Residential mortgages | 2 | 18 | (4) | 6 | 12 |
| Home equity | 42 | 51 | 20 | 22 | 12 |
| Corporate and commercial | (22) | 42 | (6) | (16) | 23 |
| Other consumer | 20 | 28 | 17 | 3 | 8 |
| Securities | 5 | 37 | 1 | 4 | 10 |
| Total impairment losses | 47 | 176 | 28 | 19 | 65 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances (excluding | |||||
| reverse repurchase agreements) by sector | |||||
| Residential mortgages | 0.1% | 0.6% | (0.3%) | 0.4% | 0.8% |
| Home equity | 0.6% | 0.7% | 0.6% | 0.6% | 0.3% |
| Corporate and commercial Other consumer |
(0.2%) 0.5% |
0.4% 0.9% |
(0.1%) 0.8% |
(0.3%) 0.2% |
0.4% 0.5% |
| Total | 0.2% | 0.6% | 0.2% | 0.1% | 0.5% |
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| Performance ratios | ||||||
| Return on equity (1) | 7.3% | 5.7% | 10.0% | 4.5% | 6.9% | |
| Return on equity - excluding litigation settlement | ||||||
| and net gain on the sale of Visa B shares (1) | 8.4% | 5.7% | 8.3% | 8.4% | 6.9% | |
| Net interest margin | 3.04% | 3.06% | 3.02% | 3.06% | 3.12% | |
| Cost:income ratio | 76% | 72% | 69% | 84% | 72% | |
| Cost:income ratio - excluding litigation settlement | ||||||
| and net gain on the sale of Visa B shares | 72% | 72% | 72% | 72% | 72% |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 75.1 | 73.7 | 2% | 75.8 | (1%) |
| Loans and advances to customers (gross) | |||||
| - residential mortgages | 6.1 | 6.0 | 2% | 6.1 | - |
| - home equity | 14.2 | 14.2 | - | 14.9 | (5%) |
| - corporate and commercial | 23.6 | 22.6 | 4% | 22.9 | 3% |
| - other consumer | 8.3 | 8.1 | 2% | 7.7 | 8% |
| 52.2 | 50.9 | 3% | 51.6 | 1% | |
| Customer deposits (excluding repos) | 59.2 | 58.7 | 1% | 60.0 | (1%) |
| Bank deposits (excluding repos) | 5.0 | 4.3 | 16% | 5.2 | (4%) |
| Risk elements in lending | |||||
| - retail | 0.6 | 0.6 | - | 0.6 | - |
| - commercial | 0.4 | 0.3 | 33% | 0.4 | - |
| Total risk elements in lending | 1.0 | 0.9 | 11% | 1.0 | - |
| Loan:deposit ratio (excluding repos) | 87% | 86% | 100bp | 85% | 200bp |
| Risk-weighted assets | 58.5 | 58.6 | - | 59.3 | (1%) |
| Spot exchange rate - US\$/£ | 1.569 | 1.599 | 1.548 |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| \$m | \$m | \$m | \$m | \$m | |
| Income statement | |||||
| Net interest income | 1,557 | 1,491 | 778 | 779 | 767 |
| Net fees and commissions | 616 | 678 | 309 | 307 | 354 |
| Other non-interest income | 304 | 216 | 202 | 102 | 100 |
| Non-interest income | 920 | 894 | 511 | 409 | 454 |
| Total income | 2,477 | 2,385 | 1,289 | 1,188 | 1,221 |
| Direct expenses | |||||
| - staff | (694) | (665) | (344) | (350) | (343) |
| - other | (410) | (427) | (228) | (182) | (224) |
| - litigation settlement | (138) | - | - | (138) | - |
| Indirect expenses | (638) | (625) | (311) | (327) | (313) |
| (1,880) | (1,717) | (883) | (997) | (880) | |
| Operating profit before impairment losses | 597 | 668 | 406 | 191 | 341 |
| Impairment losses | (74) | (285) | (43) | (31) | (108) |
| Operating profit | 523 | 383 | 363 | 160 | 233 |
| Analysis of income by product | |||||
| Mortgages and home equity | 422 | 350 | 211 | 211 | 175 |
| Personal lending and cards | 317 | 364 | 161 | 156 | 185 |
| Retail deposits | 701 | 730 | 355 | 346 | 381 |
| Commercial lending | 490 | 462 | 239 | 251 | 241 |
| Commercial deposits | 358 | 325 | 179 | 179 | 167 |
| Other | 189 | 154 | 144 | 45 | 72 |
| Total income | 2,477 | 2,385 | 1,289 | 1,188 | 1,221 |
| Analysis of impairments by sector | |||||
| Residential mortgages | 3 | 28 | (6) | 9 | 19 |
| Home equity | 65 | 82 | 30 | 35 | 19 |
| Corporate and commercial | (34) | 67 | (9) | (25) | 37 |
| Other consumer Securities |
33 7 |
49 59 |
27 1 |
6 6 |
17 16 |
| Total impairment losses | 74 | 285 | 43 | 31 | 108 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances (excluding | |||||
| reverse repurchase agreements) by sector | |||||
| Residential mortgages | 0.1% | 0.6% | (0.3%) | 0.4% | 0.8% |
| Home equity | 0.6% | 0.7% | 0.5% | 0.6% | 0.3% |
| Corporate and commercial | (0.2%) | 0.4% | (0.1%) | (0.3%) | 0.4% |
| Other consumer | 0.5% | 0.9% | 0.8% | 0.2% | 0.7% |
| Total | 0.2% | 0.6% | 0.2% | 0.1% | 0.5% |
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 31 March | 30 June | |||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| Performance ratios | ||||||
| Return on equity (1) | 7.3% | 5.7% | 10.0% | 4.5% | 6.9% | |
| Return on equity - excluding litigation settlement and | ||||||
| net gain on the sale of Visa B shares (1) | 8.4% | 5.7% | 8.3% | 8.4% | 6.9% | |
| Net interest margin | 3.04% | 3.06% | 3.02% | 3.06% | 3.12% | |
| Cost:income ratio | 76% | 72% | 69% | 84% | 72% | |
| Cost:income ratio - excluding litigation settlement | ||||||
| and net gain on the sale of Visa B shares | 72% | 72% | 72% | 72% | 72% |
| 30 June 2012 \$bn |
31 March 2012 \$bn |
Change | 31 December 2011 \$bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 117.8 | 117.9 | - | 117.3 | - |
| Loans and advances to customers (gross) | |||||
| - residential mortgages | 9.6 | 9.5 | 1% | 9.4 | 2% |
| - home equity | 22.3 | 22.6 | (1%) | 23.1 | (3%) |
| - corporate and commercial | 37.0 | 36.2 | 2% | 35.3 | 5% |
| - other consumer | 13.1 | 13.2 | (1%) | 12.0 | 9% |
| 82.0 | 81.5 | 1% | 79.8 | 3% | |
| Customer deposits (excluding repos) | 92.9 | 93.9 | (1%) | 92.8 | - |
| Bank deposits (excluding repos) | 7.8 | 6.9 | 13% | 8.0 | (3%) |
| Risk elements in lending | |||||
| - retail | 1.0 | 0.9 | 11% | 1.0 | - |
| - commercial | 0.6 | 0.6 | - | 0.6 | - |
| Total risk elements in lending | 1.6 | 1.5 | 7% | 1.6 | - |
| Loan:deposit ratio (excluding repos) | 87% | 86% | 100bp | 85% | 200bp |
| Risk-weighted assets | 91.7 | 93.7 | (2%) | 91.8 | - |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of monthly average of divisional RWAs, adjusted for capital deductions).
US Retail & Commercial performed strongly in H1 2012, with a significant improvement in operating profit, largely reflecting lower impairment losses. The macroeconomic operating environment remained challenging, with low rates, high unemployment, a soft housing market, sluggish consumer activity and the continuing impact of legislative changes. However, the credit environment showed signs of improvement.
US Retail & Commercial has focused on its back-to-basics strategy; concentrating on core banking products and competing on service and product capabilities rather than price. This was supported by the four core Customer Commitments launched across the entire branch footprint last year. The division enhanced its mobile capabilities, launching an Android app along with an improved iPhone user experience, including a new person-to-person (P2P) payment application. Consumers also recognised Citizens Bank as within the top 10 US banks for corporate reputation in the 2012 American Banker survey, an increase of eight places from 2011.
In Q2 2012, Commercial Banking introduced its own four core Client Commitments, which were built around client feedback. Standard & Poor's recently recognised US Retail & Commercial's continued focus on strengthening and growing valued Commercial Banking client relationships as delivering results and providing differentiation from competitors based on the quality of ideas and solutions.
The reintegration of both Corporate Risk Solutions and Treasury Solutions into Commercial Banking has significantly strengthened the cross-sell of Treasury Solutions products as well as foreign exchange and derivatives hedging to the Commercial client base. Referrals increased by 25% for derivatives, 6% for foreign exchange services and 36% for cash management compared with the same period last year.
In Q2 2012, Citizens executed a referral partnership with Oppenheimer & Company to address the corporate finance needs of its Commercial Enterprise Banking and Middle Market clients. As a result, Commercial bankers are now able to offer their clients timely and relevant corporate finance solutions, including mergers & acquisitions, joint ventures, divestitures and common equity underwriting.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | ||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| £m | £m | £m | £m | £m | ||
| Income statement | ||||||
| Net interest income from banking activities | 56 | 62 | 32 | 24 | 6 | |
| Net fees and commissions receivable | 200 | 388 | 73 | 127 | 181 | |
| Income from trading activities | 2,465 | 2,741 | 917 | 1,548 | 924 | |
| Other operating income (net of related | ||||||
| funding costs) | 79 | 85 | 44 | 35 | 57 | |
| Non-interest income | 2,744 | 3,214 | 1,034 | 1,710 | 1,162 | |
| Total income | 2,800 | 3,276 | 1,066 | 1,734 | 1,168 | |
| Direct expenses | ||||||
| - staff | (967) | (1,203) | (423) | (544) | (476) | |
| - other | (351) | (354) | (185) | (166) | (188) | |
| Indirect expenses | (386) | (377) | (188) | (198) | (191) | |
| (1,704) | (1,934) | (796) | (908) | (855) | ||
| Operating profit before impairment losses | 1,096 | 1,342 | 270 | 826 | 313 | |
| Impairment (losses)/recoveries | (21) | 14 | (19) | (2) | 14 | |
| Operating profit | 1,075 | 1,356 | 251 | 824 | 327 | |
| Of which: | ||||||
| Ongoing businesses | 1,129 | 1,364 | 268 | 861 | 325 | |
| Run-off businesses | (54) | (8) | (17) | (37) | 2 | |
| Analysis of income by product | ||||||
| Rates | 1,217 | 1,036 | 416 | 801 | 287 | |
| Currencies | 421 | 508 | 175 | 246 | 267 | |
| Asset backed products (ABP) | 805 | 984 | 378 | 427 | 367 | |
| Credit markets | 497 | 638 | 184 | 313 | 208 | |
| Investor products and equity derivatives | 214 | 399 | 91 | 123 | 183 | |
| Total income ongoing businesses | 3,154 | 3,565 | 1,244 | 1,910 | 1,312 | |
| Inter-divisional revenue share | (360) | (412) | (174) | (186) | (204) | |
| Run-off businesses | 6 | 123 | (4) | 10 | 60 | |
| Total income | 2,800 | 3,276 | 1,066 | 1,734 | 1,168 | |
| Memo - Fixed income and currencies | ||||||
| Rates/currencies/ABP/credit markets | 2,940 | 3,166 | 1,153 | 1,787 | 1,129 | |
| Less: primary credit markets | (303) | (417) | (132) | (171) | (188) | |
| Total fixed income and currencies | 2,637 | 2,749 | 1,021 | 1,616 | 941 |
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| Performance ratios (ongoing businesses) | ||||||
| Return on equity (1) | 14.0% | 17.1% | 6.8% | 21.1% | 8.2% | |
| Cost:income ratio | 59% | 57% | 73% | 50% | 72% | |
| Compensation ratio (2) | 33% | 35% | 38% | 29% | 39% |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet (ongoing businesses) |
|||||
| Loans and advances | 53.7 | 50.5 | 6% | 61.2 | (12%) |
| Reverse repos | 97.6 | 90.8 | 7% | 100.4 | (3%) |
| Securities | 101.7 | 106.6 | (5%) | 108.1 | (6%) |
| Cash and eligible bills | 26.8 | 24.2 | 11% | 28.1 | (5%) |
| Other | 22.2 | 27.7 | (20%) | 14.8 | 50% |
| Total third party assets (excluding derivatives | |||||
| mark-to-market) | 302.0 | 299.8 | 1% | 312.6 | (3%) |
| Customer deposits (excluding repos) | 34.3 | 34.6 | (1%) | 36.8 | (7%) |
| Bank deposits (excluding repos) | 50.7 | 46.2 | 10% | 48.2 | 5% |
| Net derivative assets (after netting) | 27.5 | 29.3 | (6%) | 37.0 | (26%) |
| Risk-weighted assets | 107.9 | 115.6 | (7%) | 120.3 | (10%) |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions), for the ongoing businesses.
(2) Compensation ratio is based on staff costs as a percentage of total income.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| Run-off businesses (1) | £m | £m | £m | £m | £m | |
| Total income | 6 | 123 | (4) | 10 | 60 | |
| Direct expenses | (60) | (131) | (13) | (47) | (58) | |
| Operating loss | (54) | (8) | (17) | (37) | 2 |
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| 2012 | 2012 | 2011 | |
| Run-off businesses (1) | £bn | £bn | £bn |
| Total third party assets (excluding derivatives mark-to-market) | 0.4 | 0.8 | 1.3 |
Note:
(1) Run-off businesses consist of the exited cash equities, corporate broking and equity capital markets operations.
In both H1 2011 and H1 2012, Markets benefited from an initial surge in investor confidence, with H1 2012 helped by the increased liquidity provided in Q1 2012 by the ECB's Long Term Refinancing Operation (LTRO). In both periods, however, confidence fell away quickly, with the decline in H1 2012 being precipitated by heightened instability in peripheral European financial markets.
Trading conditions during Q2 2012 have been challenging, driven by renewed uncertainty in the Eurozone and slowing Chinese growth. Investor confidence and appetite for risk have declined, causing client volumes to weaken. This mirrors the conditions seen at the end of 2011 but contrasts with Q1 2012.
The difficult environment reinforces Markets' decision to restructure, announced in January of this year. The sale of the cash equities business in the Asia Pacific region has been announced and the remainder of cash equities is being efficiently wound down. Within the ongoing businesses the new structure has been largely cascaded through the front office - the division's focus remains the provision of a seamless service to clients within the context of the strategy to reduce the balance sheet.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Earned premiums | 2,032 | 2,121 | 1,012 | 1,020 | 1,056 |
| Reinsurers' share | (165) | (114) | (83) | (82) | (60) |
| Net premium income | 1,867 | 2,007 | 929 | 938 | 996 |
| Fees and commissions | (222) | (156) | (113) | (109) | (81) |
| Instalment income | 62 | 70 | 31 | 31 | 35 |
| Other income | 30 | 62 | 14 | 16 | 27 |
| Total income | 1,737 | 1,983 | 861 | 876 | 977 |
| Net claims | (1,225) | (1,488) | (576) | (649) | (704) |
| Underwriting profit | 512 | 495 | 285 | 227 | 273 |
| Staff expenses | (160) | (146) | (81) | (79) | (70) |
| Other expenses | (172) | (166) | (81) | (91) | (79) |
| Total direct expenses | (332) | (312) | (162) | (170) | (149) |
| Indirect expenses | (124) | (110) | (61) | (63) | (54) |
| (456) | (422) | (223) | (233) | (203) | |
| Technical result | 56 | 73 | 62 | (6) | 70 |
| Investment income | 163 | 133 | 73 | 90 | 69 |
| Operating profit | 219 | 206 | 135 | 84 | 139 |
| Analysis of income by product | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 820 | 878 | 409 | 411 | 438 |
| - partnerships | 62 | 130 | 31 | 31 | 57 |
| Personal lines home excluding broker | |||||
| - own brands | 231 | 235 | 115 | 116 | 118 |
| - partnerships | 182 | 188 | 94 | 88 | 90 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 91 | 92 | 46 | 45 | 46 |
| - partnerships | 89 | 94 | 47 | 42 | 48 |
| Commercial | 158 | 154 | 79 | 79 | 80 |
| International | 161 | 160 | 77 | 84 | 80 |
| Other (1) | (57) | 52 | (37) | (20) | 20 |
| Total income | 1,737 | 1,983 | 861 | 876 | 977 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| In-force policies (000s) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 3,816 | 3,931 | 3,816 | 3,827 | 3,931 |
| - partnerships | 319 | 474 | 319 | 322 | 474 |
| Personal lines home excluding broker | |||||
| - own brands | 1,795 | 1,844 | 1,795 | 1,812 | 1,844 |
| - partnerships | 2,509 | 2,524 | 2,509 | 2,520 | 2,524 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 1,798 | 1,932 | 1,798 | 1,803 | 1,932 |
| - partnerships | 7,895 | 7,577 | 7,895 | 7,493 | 7,577 |
| Commercial | 496 | 393 | 496 | 417 | 393 |
| International | 1,441 | 1,302 | 1,441 | 1,412 | 1,302 |
| Other (1) | 54 | 211 | 54 | 123 | 211 |
| Total in-force policies (2) | 20,123 | 20,188 | 20,123 | 19,729 | 20,188 |
| Gross written premium (£m) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 776 | 798 | 378 | 398 | 408 |
| - partnerships | 69 | 73 | 32 | 37 | 36 |
| Personal lines home excluding broker | |||||
| - own brands | 222 | 229 | 112 | 110 | 117 |
| - partnerships | 263 | 273 | 127 | 136 | 135 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 88 | 86 | 45 | 43 | 44 |
| - partnerships | 86 | 82 | 45 | 41 | 42 |
| Commercial | 230 | 232 | 123 | 107 | 120 |
| International | 306 | 303 | 133 | 173 | 134 |
| Other (1) | 2 | (5) | 1 | 1 | (2) |
| Total gross written premium | 2,042 | 2,071 | 996 | 1,046 | 1,034 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| Performance ratios | |||||
| Return on tangible equity (3) | 10.1% | 9.5% | 13.4% | 7.4% | 12.9% |
| Loss ratio (4) | 66% | 74% | 62% | 69% | 71% |
| Commission ratio (5) | 12% | 8% | 12% | 12% | 8% |
| Expense ratio (6) | 24% | 21% | 24% | 25% | 20% |
| Combined operating ratio (7) | 102% | 103% | 98% | 106% | 99% |
| Balance sheet | |||||
| Total insurance reserves - (£m) (8) | 8,184 | 8,132 | 7,557 |
Notes:
Direct Line Group continues to make good progress with improved loss ratios and stabilisation of inforce policies demonstrating that the transformation plan is effective.
Operating profit for H1 2012 of £219 million was 6% higher than H1 2011. Operating profit of £135 million for Q2 2012 was 61% higher than Q1 2012 but in line with Q2 2011. Q2 2012 included Home weather claims of approximately £40 million worse than expected for a summer quarter following the wettest April to June period since UK meteorological records began. This was more than offset by significant releases from reserves held against prior year claims across the portfolio. Reserve releases were in part attributable to benefits arising from Direct Line Group's claims transformation programme reflecting significant investment since 2010.
In 2012, Direct Line Group has made significant progress in developing its distribution capabilities. It has renewed or expanded partnership agreements that represent a substantial portion of its portfolio, especially in its home segment. The agreement with Sainsbury's to provide motor insurance to its customers is now in its second year and was recently extended to provide home insurance. Furthermore, Direct Line Group is in the process of agreeing terms with the UK Retail division for an arm's length, five year distribution agreement for the continued provision of general insurance products after the divestment.
Following launch on comparethemarket.com, Churchill and Privilege motor insurance products are now available on all four major price comparison websites in the UK. This move reinforces Direct Line Group's multi-channel distribution strategy.
Execution of Direct Line Group's clear strategic plan continues with further developments in its pricing capability, embedding peril level technical pricing models for Home and developing price optimisation for Motor. Within claims management, and following rigorous pilot testing, a number of claims initiatives were implemented and the benefits are beginning to emerge. Claims inflation in small bodily injury claims has reduced and together with lower litigation rates has contributed to higher reserve releases from estimates for prior year claims.
In-force policies of 20.1 million were up 2% in the quarter and 4% since the start of the year. The main growth was in Rescue and other personal lines due to an increase in travel policies from packaged bank accounts. Within Motor, in-force policies were stable marking a stabilisation in the portfolio following a period of de-risking and business exits during the period 2009 to 2011. The Motor market remained competitive with prices broadly stable in H1 2012.
Commercial income was slightly higher than the equivalent period for 2011. In-force policies continued to increase due to growth in Direct Line for Business.
International consolidated its position during the first half of 2012, although reported gross written premium was adversely affected by foreign exchange rates. This followed a period of strong growth in 2010 and 2011. Operating profit in the quarter improved, partially as a result of releases in prior year claims reserves. International continues to benefit from its multi-channel distribution model including partnerships.
In line with its strategic business transformation plan, Direct Line Group has identified further initiatives to realise £100 million of gross annual cost and claims savings by the end of 2014(1), with one-off restructuring costs, for all cost saving initiatives, expected to be c.£100 million. The initiatives include reducing administration costs in central functions and improving marketing efficiency.
Direct Line Group supports the current regulatory reviews and initiatives announced by the UK Government, the Ministry of Justice, the Office of Fair Trading and others in relation to the motor insurance industry. It is actively engaged with the major stakeholders, and supports the introduction of a coherent set of reforms.
Direct Line Group also made further progress in optimising its capital structure during the first six months of 2012. On 27 April 2012, £500 million of Tier 2 subordinated debt was raised following publication of inaugural credit ratings from both Standard and Poor's and Moody's Investor Services. In addition, a £500 million dividend was paid to RBS Group on 6 June 2012, a total of £800 million for H1 2012. At 30 June 2012, shareholders' equity was £2.9 billion, with tangible shareholders' equity of £2.6 billion.
Direct Line Group continues to be well capitalised, with an estimated Insurance Group's Directive (IGD) coverage ratio of 299%.
Investment markets remained challenging with continued low yields. Direct Line Group continues to manage its investment portfolios carefully, with portfolios composed primarily of cash, investment grade corporate bonds and gilts. At 30 June 2012, exposure to peripheral Eurozone debt was £51 million, less than 1% of the portfolio, comprising non-sovereign debt issued in Ireland, Italy and Spain. During the quarter Direct Line Group invested c.£400 million in US dollar corporate credit, hedged back to Sterling, through leading global third party asset managers.
(1) Cost savings expected to be recognised in operating expenses and claims handling expenses.
From 1 July 2012, Direct Line Group is operating on a substantially standalone basis with independent corporate functions and governance following successful execution of a comprehensive programme of initiatives. During H1 2012, these included: launching a new corporate identity, confirming further senior management appointments, appointing a chairman, agreeing and issuing new terms and conditions for staff, implementing independent HR systems and making progress on an arm's length transitional services agreement with RBS Group for residual services.
Overall, Direct Line Group continues to deliver on the transformation required to fulfil its aim to be Britain's best retail general insurer.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Central items not allocated | (176) | 24 | (32) | (144) | 56 |
Note:
(1) Costs/charges are denoted by brackets.
Funding and operating costs have been allocated to operating divisions based on direct service usage, the requirement for market funding and other appropriate drivers where services span more than one division.
Residual unallocated items relate to volatile corporate items that do not naturally reside within a division.
The following table provides an analysis by division of the estimated costs of redress following the technology incident in June 2012. These costs are included in Central items above and include waiver of interest and other charges together with other compensation payments all of which are reported in expenses. Additional costs may arise once all redress and business disruption items are clear and a further update will be given in Q3.
| Total £m |
|
|---|---|
| UK Retail | 35 |
| UK Corporate | 36 |
| International Banking | 21 |
| Ulster Bank | 28 |
| Group Centre | 5 |
| 125 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| Income statement Net interest income |
201 | 525 | 86 | 115 | 273 |
| Net fees and commissions | 60 | 94 | 29 | 31 | 47 |
| (Loss)/income from trading activities | (401) | (68) | (131) | (270) | 230 |
| Insurance net premium income | - | 233 | - | - | 95 |
| Other operating income - rental income |
301 | 398 | 133 | 168 | 206 |
| - other (1) | 109 | 219 | (116) | 225 | 115 |
| Non-interest income/(loss) | 69 | 876 | (85) | 154 | 693 |
| Total income | 270 | 1,401 | 1 | 269 | 966 |
| Direct expenses | |||||
| - staff | (151) | (200) | (80) | (71) | (109) |
| - operating lease depreciation | (152) | (174) | (69) | (83) | (87) |
| - other | (87) | (137) | (46) | (41) | (68) |
| Indirect expenses | (135) | (147) | (67) | (68) | (71) |
| (525) | (658) | (262) | (263) | (335) | |
| Operating (loss)/profit before other operating | |||||
| charges and impairment losses | (255) | 743 | (261) | 6 | 631 |
| Insurance net claims | - | (218) | - | - | (90) |
| Impairment losses | (1,096) | (2,486) | (607) | (489) | (1,411) |
| Operating loss | (1,351) | (1,961) | (868) | (483) | (870) |
Note:
(1) Includes gains/(losses) on disposals (H1 2012 - £143 million gain; H1 2011 - £54 million loss; Q2 2012 - £39 million loss; Q1 2012 - £182 million gain; Q2 2011 - £20 million loss).
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Analysis of income/(loss) by business | |||||
| Banking and portfolios | 60 | 1,374 | (117) | 177 | 818 |
| International businesses | 161 | 218 | 76 | 85 | 137 |
| Markets | 49 | (191) | 42 | 7 | 11 |
| Total income | 270 | 1,401 | 1 | 269 | 966 |
| (Loss)/income from trading activities | |||||
| Monoline exposures | (191) | (197) | (63) | (128) | (67) |
| Credit derivative product companies | (7) | (61) | 31 | (38) | (21) |
| Asset-backed products (1) | 68 | 102 | 37 | 31 | 36 |
| Other credit exotics | (49) | (160) | (69) | 20 | 8 |
| Equities | 2 | (1) | 3 | (1) | (2) |
| Banking book hedges | (22) | (38) | (22) | - | (9) |
| Other | (202) | 287 | (48) | (154) | 285 |
| (401) | (68) | (131) | (270) | 230 | |
| Impairment losses | |||||
| Banking and portfolios | 1,190 | 2,463 | 706 | 484 | 1,405 |
| International businesses | 25 | 35 | 14 | 11 | 15 |
| Markets | (119) | (12) | (113) | (6) | (9) |
| Total impairment losses | 1,096 | 2,486 | 607 | 489 | 1,411 |
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) (2) |
|||||
| Banking and portfolios | 3.6% | 5.3% | 4.2% | 2.8% | 6.1% |
| International businesses | 3.0% | 2.3% | 3.4% | 2.1% | 1.9% |
| Markets | (2.6%) | (0.7%) | (4.4%) | (0.8%) | (1.2%) |
| Total | 3.6% | 5.2% | 4.2% | 2.7% | 6.0% |
Notes:
(1) Asset-backed products include super senior asset-backed structures and other asset-backed products.
(2) Includes disposal groups.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| Performance ratios | |||||
| Net interest margin | 0.28% | 0.77% | 0.24% | 0.31% | 0.83% |
| Cost:income ratio | 194% | 47% | nm | 98% | 35% |
| Adjusted cost:income ratio | 194% | 56% | nm | 98% | 38% |
| 30 June 2012 £bn |
31 March 2012 £bn |
Change | 31 December 2011 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets (excluding derivatives) (1) | 72.1 | 83.3 | (13%) | 93.7 | (23%) |
| Total third party assets (including derivatives) | 80.6 | 91.8 | (12%) | 104.7 | (23%) |
| Loans and advances to customers (gross) (2) | 67.7 | 72.7 | (7%) | 79.4 | (15%) |
| Customer deposits (2) | 2.9 | 3.1 | (6%) | 3.5 | (17%) |
| Risk elements in lending (2) | 23.1 | 23.5 | (2%) | 24.0 | (4%) |
| Risk-weighted assets (1) | 82.7 | 89.9 | (8%) | 93.3 | (11%) |
nm = not meaningful
Notes:
(1) Includes RBS Sempra Commodities JV (30 June 2012 third party assets, excluding derivatives (TPAs) nil, RWAs £1.0 billion, 31 March 2012 TPAs nil, RWAs £1.0 billion, 31 December 2011 TPAs £0.1 billion, RWAs £2.4 billion).
(2) Excludes disposal groups.
| 30 June 2012 |
31 March 2012 |
31 December 2011 |
|
|---|---|---|---|
| £bn | £bn | £bn | |
| Gross customer loans and advances | |||
| Banking and portfolios | 66.3 | 70.8 | 77.3 |
| International businesses | 1.4 | 1.9 | 2.0 |
| Markets | - | - | 0.1 |
| 67.7 | 72.7 | 79.4 | |
| Risk-weighted assets | |||
| Banking and portfolios | 64.4 | 66.1 | 64.8 |
| International businesses | 2.9 | 3.8 | 4.1 |
| Markets | 15.4 | 20.0 | 24.4 |
| 82.7 | 89.9 | 93.3 | |
| Third party assets (excluding derivatives) | |||
| Banking and portfolios | 63.5 | 73.2 | 81.3 |
| International businesses | 2.2 | 2.7 | 2.9 |
| Markets | 6.4 | 7.4 | 9.5 |
| 72.1 | 83.3 | 93.7 |
| Quarter ended 30 June 2012 | 31 March 2012 £bn |
Run-off £bn |
Disposals/ restructuring £bn |
Drawings/ roll overs £bn |
Impairments £bn |
FX £bn |
30 June 2012 £bn |
|---|---|---|---|---|---|---|---|
| Commercial real estate | 29.1 | (1.2) | (0.2) | - | (0.4) | (0.4) | 26.9 |
| Corporate | 40.1 | (1.7) | (5.9) | 0.5 | (0.2) | - | 32.8 |
| SME | 1.9 | (0.3) | (0.1) | 0.1 | - | - | 1.6 |
| Retail | 4.2 | (0.3) | - | 0.1 | (0.1) | 0.1 | 4.0 |
| Other | 0.6 | (0.2) | - | - | - | - | 0.4 |
| Markets | 7.4 | (0.7) | (0.5) | - | 0.1 | 0.1 | 6.4 |
| Total (excluding derivatives) | 83.3 | (4.4) | (6.7) | 0.7 | (0.6) | (0.2) | 72.1 |
| Quarter ended 31 March 2012 | 31 December 2011 £bn |
Run-off £bn |
Disposals/ restructuring £bn |
Drawings/ roll overs £bn |
Impairments £bn |
FX £bn |
31 March 2012 £bn |
|---|---|---|---|---|---|---|---|
| Commercial real estate | 31.5 | (1.5) | (0.4) | 0.1 | (0.4) | (0.2) | 29.1 |
| Corporate | 42.2 | (0.8) | (1.1) | 0.4 | (0.1) | (0.5) | 40.1 |
| SME | 2.1 | (0.3) | - | 0.1 | - | - | 1.9 |
| Retail | 6.1 | (0.2) | (1.6) | - | - | (0.1) | 4.2 |
| Other | 1.9 | (1.2) | - | - | - | (0.1) | 0.6 |
| Markets | 9.8 | (0.2) | (2.1) | 0.1 | - | (0.2) | 7.4 |
| Total (excluding derivatives) Markets - RBS Sempra |
93.6 | (4.2) | (5.2) | 0.7 | (0.5) | (1.1) | 83.3 |
| Commodities JV | 0.1 | (0.1) | - | - | - | - | - |
| Total (1) | 93.7 | (4.3) | (5.2) | 0.7 | (0.5) | (1.1) | 83.3 |
| Quarter ended 30 June 2011 | 31 March 2011 £bn |
Run-off £bn |
Disposals/ restructuring £bn |
Drawings/ roll overs £bn |
Impairments £bn |
FX £bn |
30 June 2011 £bn |
|---|---|---|---|---|---|---|---|
| Commercial real estate | 38.7 | (1.1) | (0.3) | 0.2 | (1.3) | 0.4 | 36.6 |
| Corporate | 56.0 | (2.6) | (4.0) | 0.6 | - | 0.4 | 50.4 |
| SME | 3.1 | (0.4) | - | - | - | - | 2.7 |
| Retail | 8.3 | (0.2) | - | - | (0.1) | - | 8.0 |
| Other | 2.5 | (0.2) | - | - | - | - | 2.3 |
| Markets | 12.3 | (0.7) | (0.4) | 0.3 | - | - | 11.5 |
| Total (excluding derivatives) Markets - RBS Sempra |
120.9 | (5.2) | (4.7) | 1.1 | (1.4) | 0.8 | 111.5 |
| Commodities JV | 3.9 | (0.5) | (2.2) | - | - | (0.1) | 1.1 |
| Total (1) | 124.8 | (5.7) | (6.9) | 1.1 | (1.4) | 0.7 | 112.6 |
Note:
(1) No disposals have been signed as at 30 June 2012 (31 March 2012 - £5 billion; 30 June 2011 - £2 billion).
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| Impairment losses by donating division and sector |
|||||
| UK Retail | |||||
| Mortgages | - | 4 | - | - | 1 |
| Personal | 3 | - | 1 | 2 | 3 |
| Total UK Retail | 3 | 4 | 1 | 2 | 4 |
| UK Corporate | |||||
| Manufacturing and infrastructure | 14 | 47 | 7 | 7 | 47 |
| Property and construction | 78 | 49 | 23 | 55 | 36 |
| Transport | 14 | 46 | 16 | (2) | 26 |
| Financial institutions | (2) | 4 | (3) | 1 | 1 |
| Lombard | 22 | 43 | 12 | 10 | 25 |
| Other | 17 | 57 | 11 | 6 | 46 |
| Total UK Corporate | 143 | 246 | 66 | 77 | 181 |
| Ulster Bank | |||||
| Commercial real estate | |||||
| - investment | 136 | 384 | 52 | 84 | 161 |
| - development | 262 | 1,313 | 120 | 142 | 810 |
| Other corporate Other EMEA |
51 6 |
113 11 |
17 2 |
34 4 |
6 5 |
| Total Ulster Bank | 455 | 1,821 | 191 | 264 | 982 |
| US Retail & Commercial Auto and consumer |
20 | 37 | 11 | 9 | 12 |
| Cards | 4 | (10) | (1) | 5 | (3) |
| SBO/home equity | 62 | 111 | 44 | 18 | 58 |
| Residential mortgages | 7 | 10 | 4 | 3 | 6 |
| Commercial real estate | (1) | 30 | 2 | (3) | 11 |
| Commercial and other | (7) | (9) | (3) | (4) | (6) |
| Total US Retail & Commercial | 85 | 169 | 57 | 28 | 78 |
| International Banking | |||||
| Manufacturing and infrastructure | 5 | (8) | (1) | 6 | (6) |
| Property and construction | 322 | 322 | 236 | 86 | 217 |
| Transport | 147 | (7) | 134 | 13 | (1) |
| Telecoms, media and technology | 27 | 23 | 11 | 16 | 34 |
| Banks and financial institutions | (114) | (38) | (102) | (12) | (39) |
| Other | 23 | (47) | 14 | 9 | (39) |
| Total International Banking | 410 | 245 | 292 | 118 | 166 |
| Other | |||||
| Wealth | - | - | 1 | (1) | (1) |
| Central items | - | 1 | (1) | 1 | 1 |
| Total Other | - | 1 | - | - | - |
| Total impairment losses | 1,096 | 2,486 | 607 | 489 | 1,411 |
| 30 June 2012 £bn |
31 March 2012 £bn |
31 December 2011 £bn |
|
|---|---|---|---|
| Gross loans and advances to customers (excluding reverse repurchase agreements) by donating division and sector |
|||
| UK Retail | |||
| Mortgages | - | - | 1.4 |
| Personal | 0.1 | 0.1 | 0.1 |
| Total UK Retail | 0.1 | 0.1 | 1.5 |
| UK Corporate | |||
| Manufacturing and infrastructure | 0.1 | 0.1 | 0.1 |
| Property and construction | 4.3 | 4.8 | 5.9 |
| Transport | 4.1 | 4.3 | 4.5 |
| Financial institutions | 0.6 | 0.6 | 0.6 |
| Lombard | 0.7 | 0.9 | 1.0 |
| Other | 6.9 | 7.0 | 7.5 |
| Total UK Corporate | 16.7 | 17.7 | 19.6 |
| Ulster Bank | |||
| Commercial real estate | |||
| - investment | 3.7 | 3.7 | 3.9 |
| - development | 7.7 | 8.0 | 8.5 |
| Other corporate | 1.6 | 1.7 | 1.6 |
| Other EMEA | 0.4 | 0.4 | 0.4 |
| Total Ulster Bank | 13.4 | 13.8 | 14.4 |
| US Retail & Commercial | |||
| Auto and consumer | 0.6 | 0.8 | 0.8 |
| Cards | 0.1 | 0.1 | 0.1 |
| SBO/home equity | 2.3 | 2.4 | 2.5 |
| Residential mortgages | 0.5 | 0.5 | 0.6 |
| Commercial real estate Commercial and other |
0.7 0.2 |
0.9 - |
1.0 0.4 |
| Total US Retail & Commercial | 4.4 | 4.7 | 5.4 |
| International Banking | |||
| Manufacturing and infrastructure | 5.4 | 5.8 | 6.6 |
| Property and construction | 14.3 | 15.4 | 15.3 |
| Transport Telecoms, media and technology |
2.0 0.7 |
2.4 0.7 |
3.2 0.7 |
| Banks and financial institutions | 5.3 | 5.7 | 5.6 |
| Other | 5.4 | 6.4 | 7.0 |
| Total International Banking | 33.1 | 36.4 | 38.4 |
| Other Wealth |
0.2 | 0.2 | 0.2 |
| Central items | (0.2) | (0.3) | (0.2) |
| Total Other | - | (0.1) | - |
| Gross loans and advances to customers (excluding reverse | |||
| repurchase agreements) | 67.7 | 72.6 | 79.3 |
Non-Core continues to make significant progress towards exiting approximately 85% of the portfolio by the end of 2013. In Q2 2012 third party assets fell to £72 billion, a reduction of £11 billion during the quarter and an overall reduction to date of 72%. The successful completion of the disposal of the RBS Aviation Capital business contributed c£5 billion of the Q2 2012 reduction and c£2 billion of the riskweighted asset reduction.
Risk-weighted assets were reduced by £7 billion during Q2 2012 as the division continued to focus on run-off, disposals and reducing exposure to capital intensive positions.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | ||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| £m | £m | £m | £m | £m | ||
| Interest receivable | 9,791 | 10,805 | 4,774 | 5,017 | 5,404 | |
| Interest payable | (3,821) | (4,277) | (1,803) | (2,018) | (2,177) | |
| Net interest income | 5,970 | 6,528 | 2,971 | 2,999 | 3,227 | |
| Fees and commissions receivable | 2,937 | 3,342 | 1,450 | 1,487 | 1,700 | |
| Fees and commissions payable | (604) | (583) | (314) | (290) | (323) | |
| Income from trading activities | 869 | 1,982 | 657 | 212 | 1,147 | |
| Gain on redemption of own debt | 577 | 255 | - | 577 | 255 | |
| Other operating income (excluding insurance net | ||||||
| premium income) | (353) | 1,533 | 394 | (747) | 1,142 | |
| Insurance net premium income | 1,867 | 2,239 | 929 | 938 | 1,090 | |
| Non-interest income | 5,293 | 8,768 | 3,116 | 2,177 | 5,011 | |
| Total income | 11,263 | 15,296 | 6,087 | 5,176 | 8,238 | |
| Staff costs | (4,713) | (4,609) | (2,143) | (2,570) | (2,210) | |
| Premises and equipment | (1,107) | (1,173) | (544) | (563) | (602) | |
| Other administrative expenses | (2,172) | (2,673) | (1,156) | (1,016) | (1,752) | |
| Depreciation and amortisation | (902) | (877) | (434) | (468) | (453) | |
| Operating expenses | (8,894) | (9,332) | (4,277) | (4,617) | (5,017) | |
| Profit before insurance net claims and | ||||||
| impairment losses | 2,369 | 5,964 | 1,810 | 559 | 3,221 | |
| Insurance net claims | (1,225) | (1,705) | (576) | (649) | (793) | |
| Impairment losses | (2,649) | (5,053) | (1,335) | (1,314) | (3,106) | |
| Operating loss before tax | (1,505) | (794) | (101) | (1,404) | (678) | |
| Tax charge | (429) | (645) | (290) | (139) | (222) | |
| Loss from continuing operations | (1,934) | (1,439) | (391) | (1,543) | (900) | |
| Profit/(loss) from discontinued operations, net of tax | 1 | 31 | (4) | 5 | 21 | |
| Loss for the period | (1,933) | (1,408) | (395) | (1,538) | (879) | |
| Non-controlling interests | 19 | (17) | 5 | 14 | (18) | |
| Preference share and other dividends | (76) | - | (76) | - | - | |
| Loss attributable to ordinary and B shareholders | (1,990) | (1,425) | (466) | (1,524) | (897) | |
| Basic and diluted loss per ordinary and B share from | ||||||
| continuing operations (1) | (18.2p) | (13.2p) | (4.2p) | (14.0p) | (8.3p) | |
| Basic and diluted loss per ordinary and B share from | ||||||
| discontinued operations (1) | - | - | - | - | - |
Note:
(1) Prior periods have been adjusted for the sub-division and one-for-ten ordinary share consolidation of ordinary shares.
In the income statement above, one-off and other items as shown on page 18 are included in the appropriate captions. A reconciliation between the income statement above and the managed view income statement on page 11 is given in Appendix 1 to this announcement.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
||
| Loss for the period | (1,933) | (1,408) | (395) | (1,538) | (879) | |
| Other comprehensive income | ||||||
| Available-for-sale financial assets | 591 | 1,369 | 66 | 525 | 1,406 | |
| Cash flow hedges | 695 | 361 | 662 | 33 | 588 | |
| Currency translation | (496) | (301) | 58 | (554) | 59 | |
| Other comprehensive income before tax | 790 | 1,429 | 786 | 4 | 2,053 | |
| Tax charge | (256) | (492) | (237) | (19) | (524) | |
| Other comprehensive income/(loss) | ||||||
| after tax | 534 | 937 | 549 | (15) | 1,529 | |
| Total comprehensive (loss)/income for | ||||||
| the period | (1,399) | (471) | 154 | (1,553) | 650 | |
| Total comprehensive (loss)/income is attributable to: |
||||||
| Non-controlling interests | (13) | (6) | (10) | (3) | 3 | |
| Ordinary and B shareholders | (1,386) | (465) | 164 | (1,550) | 647 | |
| (1,399) | (471) | 154 | (1,553) | 650 |
| 30 June 2012 £m |
31 March 2012 £m |
31 December 2011 £m |
|
|---|---|---|---|
| Assets | |||
| Cash and balances at central banks | 78,647 | 82,363 | 79,269 |
| Net loans and advances to banks | 39,436 | 36,064 | 43,870 |
| Reverse repurchase agreements and stock borrowing | 37,705 | 34,626 | 39,440 |
| Loans and advances to banks | 77,141 | 70,690 | 83,310 |
| Net loans and advances to customers | 434,965 | 440,406 | 454,112 |
| Reverse repurchase agreements and stock borrowing | 60,196 | 56,503 | 61,494 |
| Loans and advances to customers | 495,161 | 496,909 | 515,606 |
| Debt securities | 187,626 | 195,931 | 209,080 |
| Equity shares | 13,091 | 17,603 | 15,183 |
| Settlement balances Derivatives |
15,312 486,432 |
20,970 453,354 |
7,771 529,618 |
| Intangible assets | 14,888 | 14,771 | 14,858 |
| Property, plant and equipment | 11,337 | 11,442 | 11,868 |
| Deferred tax | 3,502 | 3,849 | 3,878 |
| Prepayments, accrued income and other assets | 10,983 | 10,079 | 10,976 |
| Assets of disposal groups | 21,069 | 25,060 | 25,450 |
| Total assets | 1,415,189 | 1,403,021 | 1,506,867 |
| Liabilities | |||
| Bank deposits | 67,619 | 65,735 | 69,113 |
| Repurchase agreements and stock lending | 39,125 | 41,415 | 39,691 |
| Deposits by banks | 106,744 | 107,150 | 108,804 |
| Customer deposits | 412,769 | 410,207 | 414,143 |
| Repurchase agreements and stock lending | 88,950 | 87,303 | 88,812 |
| Customer accounts | 501,719 | 497,510 | 502,955 |
| Debt securities in issue | 119,855 | 142,943 | 162,621 |
| Settlement balances | 15,126 | 17,597 | 7,477 |
| Short positions | 38,376 | 37,322 | 41,039 |
| Derivatives | 480,745 | 446,534 | 523,983 |
| Accruals, deferred income and other liabilities | 18,820 | 20,278 | 23,125 |
| Retirement benefit liabilities | 1,791 | 1,840 | 2,239 |
| Deferred tax | 1,815 | 1,788 | 1,945 |
| Insurance liabilities | 6,322 | 6,251 | 6,312 |
| Subordinated liabilities | 25,596 | 25,513 | 26,319 |
| Liabilities of disposal groups | 23,064 | 23,664 | 23,995 |
| Total liabilities | 1,339,973 | 1,328,390 | 1,430,814 |
| Equity | |||
| Non-controlling interests | 1,200 | 1,215 | 1,234 |
| Owners' equity* | |||
| Called up share capital | 6,528 | 15,397 | 15,318 |
| Reserves | 67,488 | 58,019 | 59,501 |
| Total equity | 75,216 | 74,631 | 76,053 |
| Total liabilities and equity | 1,415,189 | 1,403,021 | 1,506,867 |
| * Owners' equity attributable to: | |||
| Ordinary and B shareholders | 69,272 | 68,672 | 70,075 |
| Other equity owners | 4,744 | 4,744 | 4,744 |
| 74,016 | 73,416 | 74,819 | |
| Half year ended | Quarter ended | |||
|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
|
| % | % | % | % | |
| Average yields, spreads and margins of the banking business |
||||
| Gross yield on interest-earning assets of banking business | 3.14 | 3.30 | 3.13 | 3.15 |
| Cost of interest-bearing liabilities of banking business | (1.52) | (1.59) | (1.47) | (1.57) |
| Interest spread of banking business | 1.62 | 1.71 | 1.66 | 1.58 |
| Benefit from interest-free funds | 0.30 | 0.29 | 0.29 | 0.31 |
| Net interest margin of banking business | 1.92 | 2.00 | 1.95 | 1.89 |
| Average interest rates | ||||
| The Group's base rate | 0.50 | 0.50 | 0.50 | 0.50 |
| London inter-bank three month offered rates | ||||
| - Sterling | 1.02 | 0.81 | 0.99 | 1.06 |
| - Eurodollar | 0.49 | 0.29 | 0.47 | 0.51 |
| - Euro | 0.79 | 1.20 | 0.61 | 0.97 |
| Half year ended 30 June 2012 |
Half year ended 30 June 2011 |
||||||
|---|---|---|---|---|---|---|---|
| Average balance £m |
Interest £m |
Rate % |
Average balance £m |
Interest £m |
Rate % |
||
| Assets | |||||||
| Loans and advances to banks Loans and advances to |
82,588 | 282 | 0.69 | 65,606 | 336 | 1.03 | |
| customers | 439,395 | 8,369 | 3.83 | 472,385 | 9,138 | 3.90 | |
| Debt securities | 105,199 | 1,149 | 2.20 | 122,134 | 1,343 | 2.22 | |
| Interest-earning assets - | |||||||
| banking business (1,2,3) | 627,182 | 9,800 | 3.14 | 660,125 | 10,817 | 3.30 | |
| Trading business (4) | 246,256 | 281,771 | |||||
| Non-interest earning assets | 618,586 | 532,429 | |||||
| Total assets | 1,492,024 | 1,474,325 | |||||
| Memo: Funded assets | 984,037 | 1,078,045 | |||||
| Liabilities | |||||||
| Deposits by banks | 42,965 | 334 | 1.56 | 65,895 | 504 | 1.54 | |
| Customer accounts | 335,552 | 1,787 | 1.07 | 333,071 | 1,688 | 1.02 | |
| Debt securities in issue | 109,934 | 1,290 | 2.36 | 173,647 | 1,743 | 2.02 | |
| Subordinated liabilities | 22,297 | 336 | 3.03 | 23,300 | 318 | 2.75 | |
| Internal funding of trading | |||||||
| business | (6,884) | 66 | (1.93) | (51,811) | 30 | (0.12) | |
| Interest-bearing liabilities - | |||||||
| banking business (1,2,3) | 503,864 | 3,813 | 1.52 | 544,102 | 4,283 | 1.59 | |
| Trading business (4) Non-interest-bearing liabilities |
257,343 | 307,926 | |||||
| - demand deposits | 74,088 | 64,256 | |||||
| - other liabilities | 582,768 | 483,682 | |||||
| Owners' equity | 73,961 | 74,359 | |||||
| Total liabilities and | |||||||
| owners' equity | 1,492,024 | 1,474,325 |
Notes:
(1) Interest receivable has been increased by nil (H1 2011 - £5 million) and interest payable has been decreased by £10 million (H1 2011 - nil) to exclude RFS Holdings minority interest. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
(2) Interest receivable has been increased by £9 million (H1 2011 - £5 million) and interest payable has been increased by £82 million (H1 2011 - £63 million) to record interest on financial assets and liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
(3) Interest receivable has been increased by nil (H1 2011 - £2 million) and interest payable has been decreased by £80 million (H1 2011 - £57 million) in respect of non-recurring adjustments.
(4) Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
| Quarter ended 30 June 2012 |
Quarter ended 31 March 2012 |
|||||
|---|---|---|---|---|---|---|
| Average balance £m |
Interest £m |
Rate % |
Average balance £m |
Interest £m |
Rate % |
|
| Assets | ||||||
| Loans and advances to banks Loans and advances to |
78,151 | 134 | 0.69 | 87,025 | 148 | 0.68 |
| customers | 435,372 | 4,117 | 3.80 | 443,418 | 4,252 | 3.86 |
| Debt securities | 99,472 | 524 | 2.12 | 110,926 | 625 | 2.27 |
| Interest-earning assets - | ||||||
| banking business (1) | 612,995 | 4,775 | 3.13 | 641,369 | 5,025 | 3.15 |
| Trading business (4) | 241,431 | 251,081 | ||||
| Non-interest earning assets | 603,888 | 633,284 | ||||
| Total assets | 1,458,314 | 1,525,734 | ||||
| Memo: Funded assets | 955,789 | 1,012,285 | ||||
| Liabilities | ||||||
| Deposits by banks | 41,543 | 154 | 1.49 | 44,387 | 180 | 1.63 |
| Customer accounts | 337,189 | 870 | 1.04 | 333,915 | 917 | 1.10 |
| Debt securities in issue | 96,977 | 541 | 2.24 | 122,891 | 749 | 2.45 |
| Subordinated liabilities | 22,064 | 190 | 3.46 | 22,530 | 146 | 2.61 |
| Internal funding of trading | ||||||
| business | (7,336) | 41 | (2.25) | (6,432) | 25 | (1.56) |
| Interest-bearing liabilities - | ||||||
| banking business (1,2,3) | 490,437 | 1,796 | 1.47 | 517,291 | 2,017 | 1.57 |
| Trading business (4) Non-interest-bearing liabilities |
252,639 | 262,047 | ||||
| - demand deposits | 75,806 | 72,370 | ||||
| - other liabilities | 565,310 | 600,226 | ||||
| Owners' equity | 74,122 | 73,800 | ||||
| Total liabilities and | ||||||
| owners' equity | 1,458,314 | 1,525,734 |
Notes:
(1) Interest receivable has been increased by £1 million (Q1 2012 - £8 million) and interest payable has been increased by £30 million (Q1 2012 - £52 million) to record interest on financial assets and liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
(2) Interest payable has been decreased by £2 million (Q1 2012 - £8 million) to exclude RFS Holdings minority interest. Related interest-bearing liabilities have also been adjusted.
(3) Interest payable has been decreased by £35 million (Q1 2012 - £45 million) in respect of non-recurring adjustments.
(4) Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | ||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| £m | £m | £m | £m | £m | ||
| Called-up share capital | ||||||
| At beginning of period | 15,318 | 15,125 | 15,397 | 15,318 | 15,156 | |
| Ordinary shares issued | 143 | 192 | 64 | 79 | 161 | |
| Share capital sub-division and consolidation | (8,933) | - | (8,933) | - | - | |
| At end of period | 6,528 | 15,317 | 6,528 | 15,397 | 15,317 | |
| Paid-in equity | ||||||
| At beginning and end of period | 431 | 431 | 431 | 431 | 431 | |
| Share premium account | ||||||
| At beginning of period | 24,001 | 23,922 | 24,027 | 24,001 | 23,922 | |
| Ordinary shares issued | 197 | 1 | 171 | 26 | 1 | |
| At end of period | 24,198 | 23,923 | 24,198 | 24,027 | 23,923 | |
| Merger reserve | ||||||
| At beginning of period | 13,222 | 13,272 | 13,222 | 13,222 | 13,272 | |
| Transfer to retained earnings | - | (50) | - | - | (50) | |
| At end of period | 13,222 | 13,222 | 13,222 | 13,222 | 13,222 | |
| Available-for-sale reserve (1) At beginning of period |
(957) | (2,037) | (439) | (957) | (2,063) | |
| Net unrealised gains | 1,152 | 943 | 428 | 724 | 781 | |
| Realised (gains)/losses | (582) | 429 | (370) | (212) | 626 | |
| Tax | (63) | (361) | (69) | 6 | (370) | |
| At end of period | (450) | (1,026) | (450) | (439) | (1,026) | |
| Cash flow hedging reserve | ||||||
| At beginning of period | 879 | (140) | 921 | 879 | (314) | |
| Amount recognised in equity | 1,218 | 825 | 928 | 290 | 811 | |
| Amount transferred from equity to earnings | (523) | (464) | (266) | (257) | (223) | |
| Tax | (175) | (108) | (184) | 9 | (161) | |
| At end of period | 1,399 | 113 | 1,399 | 921 | 113 |
Note:
(1) Analysis provided on page 110.
for the period ended 30 June 2012 (continued)
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | ||
| 2012 | 2011 | 2012 | 2012 | 2011 | ||
| £m | £m | £m | £m | £m | ||
| Foreign exchange reserve | ||||||
| At beginning of period | 4,775 | 5,138 | 4,227 | 4,775 | 4,754 | |
| Retranslation of net assets | (566) | (240) | 82 | (648) | 189 | |
| Foreign currency gains/(losses) on hedges | ||||||
| of net assets | 88 | (40) | (8) | 96 | (116) | |
| Tax | 20 | (24) | 16 | 4 | 7 | |
| Recycled to profit or loss on disposal of | ||||||
| business (nil tax) | (3) | - | (3) | - | - | |
| At end of period | 4,314 | 4,834 | 4,314 | 4,227 | 4,834 | |
| Capital redemption reserve | ||||||
| At beginning of period | 198 | 198 | 198 | 198 | 198 | |
| Share capital sub-division and consolidation | 8,933 | - | 8,933 | - | - | |
| At end of period | 9,131 | 198 | 9,131 | 198 | 198 | |
| Contingent capital reserve | ||||||
| At beginning and end of period | (1,208) | (1,208) | (1,208) | (1,208) | (1,208) | |
| Retained earnings | ||||||
| At beginning of period | 18,929 | 21,239 | 17,405 | 18,929 | 20,713 | |
| (Loss)/profit attributable to ordinary and B | ||||||
| shareholders and other equity owners | ||||||
| - continuing operations | (1,911) | (1,429) | (387) | (1,524) | (899) | |
| - discontinued operations | (3) | 4 | (3) | - | 2 | |
| Transfer from merger reserve | - | 50 | - | - | 50 | |
| Equity preference dividends paid | (76) | - | (76) | - | - | |
| Actuarial losses recognised in retirement benefit schemes |
||||||
| - tax | (38) | - | - | (38) | - | |
| Loss on disposal of own shares held | (196) | - | (196) | - | - | |
| Shares released for employee benefits | (129) | (207) | (116) | (13) | (166) | |
| Share-based payments | ||||||
| - gross | 92 | 67 | 47 | 45 | 29 | |
| - tax | (11) | 2 | (17) | 6 | (3) | |
| At end of period | 16,657 | 19,726 | 16,657 | 17,405 | 19,726 |
for the period ended 30 June 2012 (continued)
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 £m |
2011 £m |
2012 £m |
2012 £m |
2011 £m |
|
| Own shares held | |||||
| At beginning of period Disposal/(purchase) of own shares |
(769) 449 |
(808) 6 |
(765) 451 |
(769) (2) |
(785) (6) |
| Shares released for employee benefits | 114 | 16 | 108 | 6 | 5 |
| At end of period | (206) | (786) | (206) | (765) | (786) |
| Owners' equity at end of period | 74,016 | 74,744 | 74,016 | 73,416 | 74,744 |
| Non-controlling interests | |||||
| At beginning of period | 1,234 | 1,719 | 1,215 | 1,234 | 1,710 |
| Currency translation adjustments and other | |||||
| movements | (15) | (21) | (13) | (2) | (14) |
| (Loss)/profit attributable to non-controlling | |||||
| interests | |||||
| - continuing operations | (23) | (10) | (4) | (19) | (1) |
| - discontinued operations | 4 | 27 | (1) | 5 | 19 |
| Dividends paid | (6) | (39) | (6) | - | (39) |
| Movements in available-for-sale securities | |||||
| - unrealised gains/(losses) | 1 | - | 5 | (4) | (1) |
| - realised losses/(gains) | 20 | (3) | 3 | 17 | - |
| - tax | - | 1 | - | - | - |
| Equity raised | 1 | - | 1 | - | - |
| Equity withdrawn and disposals | (16) | (176) | - | (16) | (176) |
| At end of period | 1,200 | 1,498 | 1,200 | 1,215 | 1,498 |
| Total equity at end of period | 75,216 | 76,242 | 75,216 | 74,631 | 76,242 |
| Total comprehensive (loss)/income | |||||
| recognised in the statement of | |||||
| changes in equity is attributable to: | |||||
| Non-controlling interests | (13) | (6) | (10) | (3) | 3 |
| Ordinary and B shareholders | (1,386) | (465) | 164 | (1,550) | 647 |
| (1,399) | (471) | 154 | (1,553) | 650 |
for the period ended 30 June 2012
| Half year ended | ||
|---|---|---|
| 30 June | 30 June | |
| 2012 | 2011 | |
| £m | £m | |
| Operating activities | ||
| Operating loss before tax | (1,505) | (794) |
| Operating profit before tax on discontinued operations | 6 | 38 |
| Adjustments for non-cash items | 4,969 | 1,503 |
| Net cash inflow from trading activities | 3,470 | 747 |
| Changes in operating assets and liabilities | (20,487) | 7,595 |
| Net cash flows from operating activities before tax | (17,017) | 8,342 |
| Income taxes paid | (90) | (90) |
| Net cash flows from operating activities | (17,107) | 8,252 |
| Net cash flows from investing activities | 18,697 | (4,362) |
| Net cash flows from financing activities | (40) | (1,212) |
| Effects of exchange rate changes on cash and cash equivalents | (3,108) | 482 |
| Net (decrease)/increase in cash and cash equivalents | (1,558) | 3,160 |
| Cash and cash equivalents at beginning of period | 152,655 | 152,530 |
| Cash and cash equivalents at end of period | 151,097 | 155,690 |
The Group's condensed financial statements have been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Services Authority and IAS 34 'Interim Financial Reporting'. They should be read in conjunction with the Group's 2011 annual accounts which were prepared in accordance with International Financial Reporting Standards issued by the IASB and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the EU (together IFRS).
In line with the Group's policy of providing users of its financial reports with relevant and transparent disclosures, it has adopted the British Bankers' Association Code for Financial Reporting Disclosure published in September 2010. The code sets out five disclosure principles together with supporting guidance: the overarching principle being a commitment to provide high quality, meaningful and decision-useful disclosures. The Group's 2012 interim financial statements have been prepared in compliance with the code.
The Group's business activities and financial position, and the factors likely to affect its future development and performance are discussed on pages 6 to 128. Its objectives and policies in managing the financial risks to which it is exposed and its capital are discussed in the risk and balance sheet management sections on pages 129 to 236. A summary of the risk factors which could materially affect the Group's future results are described on pages 239 and 240. The Group's regulatory capital resources are set on page 133 and 134. The Group's liquidity and funding management is described on pages 137 to 148. Having reviewed the Group's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future. Accordingly, the interim financial statements for the six months ended 30 June 2012 have been prepared on a going concern basis.
There have been no significant changes to the Group's principal accounting policies as set out on pages 314 to 323 of the 2011 Annual Report and Accounts.
The reported results of the Group are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. The judgements and assumptions that are considered to be the most important to the portrayal of Group's financial condition are those relating to loan impairment provisions; pensions; financial instrument fair values; general insurance claims and deferred tax. These critical accounting policies and judgments are described on pages 323 to 325 of the Group's 2011 Annual Report and Accounts.
In May 2012, the IASB issued Annual Improvements 2009-2011 Cycle which clarified:
None of the amendments are effective before 1 January 2013. Earlier application is permitted. The Group is reviewing the amendments to determine their effect, if any, on the Group's financial reporting.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Loans and advances to customers | 8,369 | 9,128 | 4,117 | 4,252 | 4,535 |
| Loans and advances to banks | 282 | 336 | 134 | 148 | 164 |
| Debt securities | 1,140 | 1,341 | 523 | 617 | 705 |
| Interest receivable | 9,791 | 10,805 | 4,774 | 5,017 | 5,404 |
| Customer accounts | 1,784 | 1,684 | 870 | 914 | 853 |
| Deposits by banks | 347 | 508 | 156 | 191 | 249 |
| Debt securities in issue | 1,209 | 1,680 | 511 | 698 | 863 |
| Subordinated liabilities | 415 | 375 | 225 | 190 | 190 |
| Internal funding of trading businesses | 66 | 30 | 41 | 25 | 22 |
| Interest payable | 3,821 | 4,277 | 1,803 | 2,018 | 2,177 |
| Net interest income | 5,970 | 6,528 | 2,971 | 2,999 | 3,227 |
| Fees and commissions receivable Fees and commissions payable |
2,937 | 3,342 | 1,450 | 1,487 | 1,700 |
| - banking | (380) | (419) | (201) | (179) | (238) |
| - insurance related | (224) | (164) | (113) | (111) | (85) |
| Net fees and commissions | 2,333 | 2,759 | 1,136 | 1,197 | 1,377 |
| Foreign exchange | 435 | 578 | 210 | 225 | 375 |
| Interest rate | 1,100 | 651 | 428 | 672 | 2 |
| Credit | (893) | 314 | (94) | (799) | 562 |
| Other | 227 | 439 | 113 | 114 | 208 |
| Income from trading activities | 869 | 1,982 | 657 | 212 | 1,147 |
| Gain on redemption of own debt | 577 | 255 | - | 577 | 255 |
| Operating lease and other rental income | 562 | 672 | 261 | 301 | 350 |
| Own credit adjustments | (1,694) | (66) | (247) | (1,447) | 228 |
| Changes in the fair value of securities and | |||||
| other financial assets and liabilities | 55 | 292 | (26) | 81 | 224 |
| Changes in the fair value of investment | |||||
| properties | (56) | (52) | (88) | 32 | (27) |
| Profit on sale of securities | 482 | 429 | 259 | 223 | 193 |
| Profit on sale of property, plant and equipment | 23 | 22 | 18 | 5 | 11 |
| Profit/(loss) on sale of subsidiaries and | |||||
| associates | 143 | 26 | 155 | (12) | 55 |
| Life business losses | (6) | (5) | (4) | (2) | (3) |
| Dividend income | 33 | 33 | 17 | 16 | 18 |
| Share of profits less losses of associated entities | 1 | 15 | 5 | (4) | 8 |
| Other income | 104 | 167 | 44 | 60 | 85 |
| Other operating (loss)/income | (353) | 1,533 | 394 | (747) | 1,142 |
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
| Half year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
||
| £m | £m | £m | £m | £m | ||
| Non-interest income (excluding | ||||||
| insurance net premium income) | 3,426 | 6,529 | 2,187 | 1,239 | 3,921 | |
| Insurance net premium income | 1,867 | 2,239 | 929 | 938 | 1,090 | |
| Total non-interest income | 5,293 | 8,768 | 3,116 | 2,177 | 5,011 | |
| Total income | 11,263 | 15,296 | 6,087 | 5,176 | 8,238 | |
| Staff costs | 4,713 | 4,609 | 2,143 | 2,570 | 2,210 | |
| Premises and equipment | 1,107 | 1,173 | 544 | 563 | 602 | |
| Other | 2,172 | 2,673 | 1,156 | 1,016 | 1,752 | |
| Administrative expenses | 7,992 | 8,455 | 3,843 | 4,149 | 4,564 | |
| Depreciation and amortisation | 902 | 877 | 434 | 468 | 453 | |
| Operating expenses | 8,894 | 9,332 | 4,277 | 4,617 | 5,017 | |
| Loan impairment losses | 2,730 | 4,135 | 1,435 | 1,295 | 2,237 | |
| Securities impairment (recoveries)/losses | ||||||
| - sovereign debt impairment and related | ||||||
| interest rate hedge adjustments | - | 842 | - | - | 842 | |
| - other | (81) | 76 | (100) | 19 | 27 | |
| Impairment losses | 2,649 | 5,053 | 1,335 | 1,314 | 3,106 |
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
To reflect current experience of PPI complaints received, the Group strengthened its provision for PPI by £125 million in Q1 2012 and a further £135 million in Q2 2012, bringing the cumulative charge taken to £1.3 billion, of which £0.7 billion in redress had been paid by 30 June 2012. The eventual cost is dependent upon complaint volumes, uphold rates and average redress costs. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different than the amount provided. The Group will continue to monitor the position closely and refresh its assumptions as more information becomes available.
| Half year ended |
Quarter ended | Year ended |
||
|---|---|---|---|---|
| 30 June | 30 June | 31 March | 31 December | |
| 2012 | 2012 | 2012 | 2011 | |
| £m | £m | £m | £m | |
| At beginning of period | 745 | 689 | 745 | - |
| Transfers from accruals and other liabilities | - | - | - | 215 |
| Charge to income statement | 260 | 135 | 125 | 850 |
| Utilisations | (417) | (236) | (181) | (320) |
| At end of period | 588 | 588 | 689 | 745 |
Operating loss is stated after charging loan impairment losses of £2,730 million (H1 2011 - £4,135 million). The balance sheet loan impairment provisions increased in the half year ended 30 June 2012 from £19,883 million to £20,297 million and the movements thereon were:
| Half year ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 30 June 2011 | |||||||
| Non | Non | RFS | ||||||
| Core | Core | Total | Core | Core | MI | Total | ||
| £m | £m | £m | £m | £m | £m | £m | ||
| At beginning of period | 8,414 | 11,469 | 19,883 | 7,866 | 10,316 | - | 18,182 | |
| Intra-group transfers | - | - | - | 177 | (177) | - | - | |
| Currency translation and other adjustments | 1 | (316) | (315) | 89 | 240 | - | 329 | |
| Disposals | - | - | - | - | - | 11 | 11 | |
| Amounts written-off | (991) | (934) | (1,925) | (1,018) | (912) | - | (1,930) | |
| Recoveries of amounts previously written-off | 127 | 53 | 180 | 80 | 206 | - | 286 | |
| Charge to income statement | ||||||||
| - continuing | 1,515 | 1,215 | 2,730 | 1,662 | 2,473 | - | 4,135 | |
| - discontinued | - | - | - | - | - | (11) | (11) | |
| Unwind of discount (recognised in interest | ||||||||
| income) | (122) | (134) | (256) | (104) | (139) | - | (243) | |
| At end of period | 8,944 | 11,353 | 20,297 | 8,752 | 12,007 | - | 20,759 |
| Quarter ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 31 March 2012 | 30 June 2011 | ||||||||
| Non | Non | Non | RFS | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | MI | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| At beginning of period | 8,797 | 11,414 | 20,211 | 8,414 | 11,469 19,883 | 8,416 | 10,842 | - | 19,258 | |
| Transfers to disposal | ||||||||||
| groups | - | - | - | - | - | - | - | 9 | - | 9 |
| Currency translation and | ||||||||||
| other adjustments | 9 | (236) | (227) | (8) | (80) | (88) | 33 | 145 | - | 178 |
| Disposals | - | - | - | - | - | - | - | - | 11 | 11 |
| Amounts written-off | (586) | (494) (1,080) | (405) | (440) | (845) | (504) | (474) | - | (978) | |
| Recoveries of amounts | ||||||||||
| previously written-off | 65 | 20 | 85 | 62 | 33 | 95 | 41 | 126 | - | 167 |
| Charge to income | ||||||||||
| statement | ||||||||||
| - continuing | 719 | 716 | 1,435 | 796 | 499 | 1,295 | 810 | 1,427 | - | 2,237 |
| - discontinued | - | - | - | - | - | - | - | - | (11) | (11) |
| Unwind of discount | ||||||||||
| (recognised in interest | ||||||||||
| income) | (60) | (67) | (127) | (62) | (67) | (129) | (44) | (68) | - | (112) |
| At end of period | 8,944 | 11,353 | 20,297 | 8,797 | 11,414 20,211 | 8,752 | 12,007 | - | 20,759 |
Provisions at 30 June 2012 include £119 million in respect of loans and advances to banks (31 March 2012 - £135 million; 30 June 2011 - £132 million).
Pension costs for the half year ended 30 June 2012 amounted to £267 million (half year ended 30 June 2011 - £245 million; quarter ended 30 June 2012 - £132 million; quarter ended 31 March 2012 - £135 million; quarter ended 30 June 2011 - £108 million). Defined benefit schemes charges are based on the actuarially determined pension cost rates at 31 December 2011.
The most recent funding valuation of the main UK scheme, as at 31 March 2010, showed the value of liabilities exceeded the value of assets by £3.5 billion, a ratio of assets to liabilities of 84%. In order to eliminate this deficit, the Group has agreed to pay additional contributions each year over the period 2011 to 2018. These contributions started at £375 million in September 2011 and in March 2012, increasing to £400 million per annum in 2013 and from 2016 onwards will be further increased in line with price inflation. These contributions are in addition to the regular annual contributions of around £300 million for future accrual benefits.
The actual tax charge differs from the expected tax credit computed by applying the standard UK corporation tax rate of 24.5% (2011 - 26.5%).
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 |
30 June 2011 |
30 June 2012 |
31 March 2012 |
30 June 2011 |
|
| £m | £m | £m | £m | £m | |
| Loss before tax | (1,505) | (794) | (101) | (1,404) | (678) |
| Expected tax credit | 369 | 210 | 25 | 344 | 179 |
| Sovereign debt impairment where no | |||||
| deferred tax asset recognised | - | (183) | - | - | (183) |
| Derecognition of deferred tax asset in respect | |||||
| of losses in Australia | (182) | - | (21) | (161) | - |
| Other losses in period where no deferred | |||||
| tax asset recognised | (253) | (268) | (80) | (173) | (102) |
| Foreign profits taxed at other rates | (211) | (300) | (109) | (102) | (100) |
| UK tax rate change - deferred tax impact | (46) | (87) | (16) | (30) | - |
| Unrecognised timing differences | 14 | (10) | 14 | - | (15) |
| Items not allowed for tax | |||||
| - losses on strategic disposals and | |||||
| write-downs | (4) | (10) | - | (4) | (7) |
| - UK bank levy | (37) | - | (19) | (18) | - |
| - employee share schemes | (29) | (8) | (14) | (15) | (4) |
| - other disallowable items | (80) | (102) | (29) | (51) | (66) |
| Non-taxable items | |||||
| - gain on sale of RBS Aviation Capital | 27 | - | 27 | - | - |
| - gain on sale of Global Merchant Services | - | 12 | - | - | - |
| - other non-taxable items | 26 | 21 | 2 | 24 | 9 |
| Taxable foreign exchange movements | (2) | - | (3) | 1 | (2) |
| Losses brought forward and utilised | 11 | 29 | (4) | 15 | 13 |
| Adjustments in respect of prior periods | (32) | 51 | (63) | 31 | 56 |
| Actual tax charge | (429) | (645) | (290) | (139) | (222) |
The high tax charge for the half year ended 30 June 2012 reflects profits in high tax regimes (principally US) and losses in low tax regimes (principally Ireland), losses in overseas subsidiaries for which a deferred tax asset has not been recognised (principally Ireland and the Netherlands) and the derecognition of deferred tax assets in respect of losses in Australia, following the strategic changes to the Markets and International Banking businesses announced in January 2012.
The combined effect of tax losses in Ireland and the Netherlands in the half year ended 30 June 2012 for which no deferred tax asset has been recognised and the derecognition of the deferred tax asset in respect of losses in Australia account for £502 million (63%) of the difference between the actual tax charge and the tax credit derived from applying the standard UK Corporation Tax rate to the results for the period.
The Group has recognised a deferred tax asset at 30 June 2012 of £3,502 million (31 March 2012 - £3,849 million; 31 December 2011 - £3,878 million) of which £3,029 million (31 March 2012 - £3,134 million; 31 December 2011 - £2,933 million) relates to carried forward trading losses in the UK. Under UK tax legislation, these UK losses can be carried forward indefinitely to be utilised against profits arising in the future. The Group has considered the carrying value of this asset as at 30 June 2012 and concluded that it is recoverable based on future profit projections.
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| RBS Sempra Commodities JV | 4 | (5) | 4 | - | 4 |
| RFS Holdings BV Consortium Members | (35) | 24 | (16) | (19) | 14 |
| Other | 12 | (2) | 7 | 5 | - |
| (Loss)/profit attributable to non-controlling | |||||
| interests | (19) | 17 | (5) | (14) | 18 |
On 26 November 2009, RBS entered into a State Aid Commitment Deed with HM Treasury containing commitments and undertakings that were designed to ensure that HM Treasury was able to comply with the commitments to be given by it to the European Commission for the purposes of obtaining approval for the State aid provided to RBS. As part of these commitments and undertakings, RBS agreed not to pay discretionary coupons and dividends on its existing hybrid capital instruments for a period of two years. This period commenced on 30 April 2010 for RBS Group instruments (the two year deferral period for RBS Holdings N.V. instruments commenced on 1 April 2011). On 30 April 2012 this period ended for RBS Group instruments.
On 4 May 2012, RBS determined that it was in a position to recommence payments on RBS Group instruments. The Core Tier 1 capital impact of discretionary amounts that will be payable over the remainder of 2012 on RBSG instruments on which payments have previously been stopped is c.£340 million. In the context of recent macro-prudential policy discussions, the Board of RBS decided to neutralise any impact on Core Tier 1 capital through equity issuance. Approximately 65% of this is ascribed to equity funding of employee incentive awards through the sale of surplus shares held by the Group's Employee Benefit Trust, which is now complete. The remaining 35% will be raised through the issue of new ordinary shares, which is expected to take place during the remainder of 2012.
In May 2012, the Directors declared the discretionary dividends on certain non-cumulative dollar preference shares which were payable on 30 June 2012, and announced that the discretionary distributions on certain RBSG innovative securities which were payable in June 2012 would also be paid. Future coupons and dividends on RBSG hybrid capital instruments will only be paid subject to, and in accordance with, the terms of the relevant instruments.
Following approval at the Group's Annual General Meeting on 30 May 2012, the sub-division and consolidation of the Group's ordinary shares on a one-for-ten basis took effect on 6 June 2012. There was a corresponding change in the Group's share price to reflect this.
The Board believes that the consolidation will result in a more appropriate share price for a company of the Group's size in the UK market. It may also help reduce volatility, thereby enabling a more consistent valuation of the Group.
Earnings per ordinary and B share have been calculated based on the following:
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June | 30 June | 30 June | 31 March | 30 June | |
| 2012 | 2011 | 2012 | 2012 | 2011 | |
| Earnings | |||||
| Loss from continuing operations attributable to | |||||
| ordinary and B shareholders (£m) | (1,987) | (1,429) | (463) | (1,524) | (899) |
| (Loss)/profit from discontinued operations | |||||
| attributable to ordinary and B shareholders (£m) | (3) | 4 | (3) | - | 2 |
| Ordinary shares in issue during the period | |||||
| (millions) | 5,812 | 5,689 | 5,854 | 5,770 | 5,697 |
| Effect of convertible B shares in issue during | |||||
| the period (millions) | 5,100 | 5,100 | 5,100 | 5,100 | 5,100 |
| Weighted average number of ordinary shares | |||||
| and effect of convertible B shares in issue | |||||
| during the period (millions) | 10,912 | 10,789 | 10,954 | 10,870 | 10,797 |
| Basic loss per ordinary and B share from | |||||
| continuing operations Own credit adjustments |
(18.2p) 21.5p |
(13.2p) 1.6p |
(4.2p) 4.1p |
(14.0p) 17.4p |
(8.3p) (2.3p) |
| Asset Protection Scheme | 0.3p | 4.3p | - | 0.3p | 1.1p |
| Payment Protection Insurance costs | 1.8p | 5.8p | 0.9p | 0.9p | 5.8p |
| Sovereign debt impairment | - | 7.8p | - | - | 7.8p |
| Amortisation of purchased intangible assets | 0.7p | 0.7p | 0.3p | 0.3p | 0.4p |
| Integration and restructuring costs | 4.8p | 2.5p | 1.7p | 3.2p | 1.5p |
| Gain on redemption of own debt | (4.0p) | (2.3p) | - | (4.0p) | (2.3p) |
| Strategic disposals | (1.3p) | (0.3p) | (1.4p) | 0.1p | (0.5p) |
| Bonus tax | - | 0.2p | - | - | 0.1p |
| Adjusted earnings per ordinary and B share | |||||
| from continuing operations | 5.6p | 7.1p | 1.4p | 4.2p | 3.3p |
| Loss from Non-Core divisions attributable to | |||||
| ordinary shareholders | 4.8p | 6.9p | 3.0p | 1.8p | 3.6p |
| Core adjusted earnings per ordinary | |||||
| and B share from continuing operations | 10.4p | 14.0p | 4.4p | 6.0p | 6.9p |
| Core impairment losses | 5.4p | 6.2p | 2.5p | 2.9p | 3.3p |
| Pre-impairment Core adjusted earnings per ordinary and B share |
15.8p | 20.2p | 6.9p | 8.9p | 10.2p |
| Memo: Core adjusted earnings per | |||||
| ordinary and B share from continuing | |||||
| operations assuming normalised tax | |||||
| rate of 24.5% (2011 - 26.5%) | 21.3p | 26.8p | 9.7p | 11.6p | 11.6p |
| Diluted loss per ordinary and B share from continuing operations |
(18.2p) | (13.2p) | (4.2p) | (14.0p) | (8.3p) |
Prior period data have been adjusted for the sub-division and one-for-ten consolidation of ordinary shares, which took effect in June 2012.
In January 2012, the Group announced the reorganisation of its wholesale businesses into 'Markets' and 'International Banking'. Divisional results have been presented based on the new organisational structure. The Group has also revised its allocation of funding and liquidity costs and capital for the new divisional structure as well as for a new methodology. In addition, the Group had previously included movements in the fair value of own derivative liabilities within the Markets operating segment. These movements have now been combined with movements in the fair value of own debt in a single measure, 'own credit adjustments' and presented as a reconciling item. Refer to 'presentation of information' on page 5 for further details. Comparatives have been restated accordingly.
The following tables provide an analysis of divisional operating profit/(loss) by main income statement captions. The divisional income statements on pages 21 to 67 reflect certain presentational reallocations as described in the notes below. These do not affect the overall operating profit/(loss).
| Net | Non | ||||||
|---|---|---|---|---|---|---|---|
| interest | interest | Total | Operating | Insurance | Impairment | Operating | |
| income | income | income | expenses | net claims | losses | profit/(loss) | |
| Half year ended 30 June 2012 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 1,989 | 508 | 2,497 | (1,288) | - | (295) | 914 |
| UK Corporate | 1,528 | 884 | 2,412 | (1,051) | - | (357) | 1,004 |
| Wealth | 357 | 236 | 593 | (462) | - | (22) | 109 |
| International Banking (1) | 485 | 618 | 1,103 | (777) | - | (62) | 264 |
| Ulster Bank | 325 | 95 | 420 | (258) | - | (717) | (555) |
| US Retail & Commercial | 988 | 583 | 1,571 | (1,193) | - | (47) | 331 |
| Markets (2) | 48 | 2,752 | 2,800 | (1,704) | - | (21) | 1,075 |
| Direct Line Group (3) | 152 | 1,748 | 1,900 | (456) | (1,225) | - | 219 |
| Central items | (4) | 7 | 3 | (147) | - | (32) | (176) |
| Core | 5,868 | 7,431 | 13,299 | (7,336) | (1,225) | (1,553) | 3,185 |
| Non-Core (4) | 112 | 158 | 270 | (525) | - | (1,096) | (1,351) |
| Managed basis | 5,980 | 7,589 | 13,569 | (7,861) | (1,225) | (2,649) | 1,834 |
| Reconciling items | |||||||
| Own credit adjustments (5) | - | (2,974) | (2,974) | - | - | - | (2,974) |
| Asset Protection Scheme (6) | - | (45) | (45) | - | - | - | (45) |
| Payment Protection Insurance costs | - | - | - | (260) | - | - | (260) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (99) | - | - | (99) |
| Integration and restructuring costs | - | - | - | (673) | - | - | (673) |
| Gain on redemption of own debt | - | 577 | 577 | - | - | - | 577 |
| Strategic disposals | - | 152 | 152 | - | - | - | 152 |
| RFS Holdings minority interest | (10) | (6) | (16) | (1) | - | - | (17) |
| Statutory basis | 5,970 | 5,293 | 11,263 | (8,894) | (1,225) | (2,649) | (1,505) |
Notes:
(1) Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2) Reallocation of £8 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3) Total income includes £163 million investment income, of which £90 million is included in net interest income and £73 million in non-interest income. Reallocation of £62 million between non-interest income and net interest income in respect of instalment income.
(4) Reallocation of £89 million between net interest income and non-interest income in respect of funding costs of rental assets, £91 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £2 million.
(5) Comprises £1,280 million loss included in 'Income from trading activities' and £1,694 million loss included in 'Other operating income' on a statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.
| Half year ended 30 June 2011 | Net interest income £m |
Non interest income £m |
Total income £m |
Operating expenses £m |
Insurance net claims £m |
Impairment losses £m |
Operating profit/(loss) £m |
|---|---|---|---|---|---|---|---|
| UK Retail | 2,184 | 637 | 2,821 | (1,366) | - | (402) | 1,053 |
| UK Corporate | 1,581 | 899 | 2,480 | (1,064) | - | (327) | 1,089 |
| Wealth | 325 | 229 | 554 | (416) | - | (8) | 130 |
| International Banking (1) | 583 | 729 | 1,312 | (839) | - | (98) | 375 |
| Ulster Bank | 363 | 102 | 465 | (278) | - | (730) | (543) |
| US Retail & Commercial | 922 | 554 | 1,476 | (1,063) | - | (176) | 237 |
| Markets (2) | 56 | 3,220 | 3,276 | (1,934) | - | 14 | 1,356 |
| Direct Line Group (3) | 177 | 1,939 | 2,116 | (422) | (1,488) | - | 206 |
| Central items | (76) | 70 | (6) | 27 | 1 | 2 | 24 |
| Core | 6,115 | 8,379 | 14,494 | (7,355) | (1,487) | (1,725) | 3,927 |
| Non-Core (4) | 420 | 981 | 1,401 | (658) | (218) | (2,486) | (1,961) |
| Managed basis | 6,535 | 9,360 | 15,895 | (8,013) | (1,705) | (4,211) | 1,966 |
| Reconciling items | |||||||
| Own credit adjustments (5) | - | (236) | (236) | - | - | - | (236) |
| Asset Protection Scheme (6) | - | (637) | (637) | - | - | - | (637) |
| Payment Protection Insurance costs | - | - | - | (850) | - | - | (850) |
| Sovereign debt impairment | - | - | - | - | - | (733) | (733) |
| Interest rate hedge adjustments on impaired available-for-sale sovereign |
|||||||
| debt | - | - | - | - | - | (109) | (109) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (100) | - | - | (100) |
| Integration and restructuring costs | (2) | (3) | (5) | (348) | - | - | (353) |
| Gain on redemption of own debt | - | 255 | 255 | - | - | - | 255 |
| Strategic disposals | - | 27 | 27 | - | - | - | 27 |
| Bonus tax | - | - | - | (22) | - | - | (22) |
| RFS Holdings minority interest | (5) | 2 | (3) | 1 | - | - | (2) |
| Statutory basis | 6,528 | 8,768 | 15,296 | (9,332) | (1,705) | (5,053) | (794) |
Notes:
(1) Reallocation of £21 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2) Reallocation of £6 million between net interest income and non-interest income to record interest in financial assets and liabilities designated as at fair value through profit or loss.
(3) Total income includes £133 million investment income, of which £107 million is included in net interest income and £26 million in non-interest income. Reallocation of £70 million between non-interest income and net interest income in respect of instalment income.
(4) Reallocation of £105 million between net interest income and non-interest income in respect of funding costs of rental assets, £102 million and to record interest in financial assets and liabilities designated as at fair value through profit or loss, £3 million.
(5) Comprises £170 million loss included in 'Income from trading activities' and £66 million loss included in 'Other operating income' on a statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.
| Net | Non | ||||||
|---|---|---|---|---|---|---|---|
| interest | interest | Total | Operating | Insurance | Impairment | Operating | |
| income | income | income | expenses | net claims | losses | profit/(loss) | |
| Quarter ended 30 June 2012 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 988 | 242 | 1,230 | (653) | - | (140) | 437 |
| UK Corporate | 772 | 439 | 1,211 | (518) | - | (181) | 512 |
| Wealth | 178 | 125 | 303 | (227) | - | (12) | 64 |
| International Banking | 234 | 327 | 561 | (367) | - | (27) | 167 |
| Ulster Bank | 160 | 46 | 206 | (128) | - | (323) | (245) |
| US Retail & Commercial | 492 | 323 | 815 | (558) | - | (28) | 229 |
| Markets | 32 | 1,034 | 1,066 | (796) | - | (19) | 251 |
| Direct Line Group (1) | 68 | 866 | 934 | (223) | (576) | - | 135 |
| Central items | 1 | 110 | 111 | (145) | - | 2 | (32) |
| Core | 2,925 | 3,512 | 6,437 | (3,615) | (576) | (728) | 1,518 |
| Non-Core (2) | 48 | (47) | 1 | (262) | - | (607) | (868) |
| Managed basis | 2,973 | 3,465 | 6,438 | (3,877) | (576) | (1,335) | 650 |
| Reconciling items | |||||||
| Own credit adjustments (3) | - | (518) | (518) | - | - | - | (518) |
| Asset Protection Scheme (4) | - | (2) | (2) | - | - | - | (2) |
| Payment Protection Insurance costs | - | - | - | (135) | - | - | (135) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (51) | - | - | (51) |
| Integration and restructuring costs | - | - | - | (213) | - | - | (213) |
| Strategic disposals | - | 160 | 160 | - | - | - | 160 |
| RFS Holdings minority interest | (2) | 11 | 9 | (1) | - | - | 8 |
| Statutory basis | 2,971 | 3,116 | 6,087 | (4,277) | (576) | (1,335) | (101) |
Notes:
(1) Total income includes £73 million investment income, of which £37 million is included in net interest income and £36 million in non-interest income. Reallocation of £31 million between non-interest income and net interest income in respect of instalment income.
(2) Reallocation of £38 million between net interest income and non-interest income in respect of funding costs of rental assets, £40 million and to record interest in financial assets and liabilities designated as fair value through profit or loss, £2 million.
(3) Comprises £271 million loss included in 'Income from trading activities' and £247 million loss included in 'Other operating income' on a statutory basis.
(4) Included in 'Income from trading activities' on a statutory basis.
| Net | Non | ||||||
|---|---|---|---|---|---|---|---|
| interest | interest | Total | Operating | Insurance | Impairment | Operating | |
| income | income | income | expenses | net claims | losses | profit/(loss) | |
| Quarter ended 31 March 2012 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 1,001 | 266 | 1,267 | (635) | - | (155) | 477 |
| UK Corporate | 756 | 445 | 1,201 | (533) | - | (176) | 492 |
| Wealth | 179 | 111 | 290 | (235) | - | (10) | 45 |
| International Banking (1) | 251 | 291 | 542 | (410) | - | (35) | 97 |
| Ulster Bank | 165 | 49 | 214 | (130) | - | (394) | (310) |
| US Retail & Commercial | 496 | 260 | 756 | (635) | - | (19) | 102 |
| Markets (2) | 16 | 1,718 | 1,734 | (908) | - | (2) | 824 |
| Direct Line Group (3) | 84 | 882 | 966 | (233) | (649) | - | 84 |
| Central items | (5) | (103) | (108) | (2) | - | (34) | (144) |
| Core | 2,943 | 3,919 | 6,862 | (3,721) | (649) | (825) | 1,667 |
| Non-Core (4) | 64 | 205 | 269 | (263) | - | (489) | (483) |
| Managed basis | 3,007 | 4,124 | 7,131 | (3,984) | (649) | (1,314) | 1,184 |
| Reconciling items | |||||||
| Own credit adjustments (5) | - | (2,456) | (2,456) | - | - | - | (2,456) |
| Asset Protection Scheme (6) | - | (43) | (43) | - | - | - | (43) |
| Payment Protection Insurance costs | - | - | - | (125) | - | - | (125) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (48) | - | - | (48) |
| Integration and restructuring costs | - | - | - | (460) | - | - | (460) |
| Gain on redemption of own debt | - | 577 | 577 | - | - | - | 577 |
| Strategic disposals | - | (8) | (8) | - | - | - | (8) |
| RFS Holdings minority interest | (8) | (17) | (25) | - | - | - | (25) |
| Statutory basis | 2,999 | 2,177 | 5,176 | (4,617) | (649) | (1,314) | (1,404) |
Notes:
(1) Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2) Reallocation of £8 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3) Total income includes £90 million of investment income, of which £53 million is included in net interest income and £37 million in non-interest income. Reallocation of £31 million between non-interest income and net interest income in respect of instalment income.
(4) Reallocation of £51 million between net interest income and non-interest income in respect of funding costs of rental assets.
(5) Comprises £1,009 million loss included in 'Income from trading activities' and £1,447 million loss included in 'Other operating income' on a statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.
| Statutory basis | 3,227 | 5,011 | 8,238 | (5,017) | (793) | (3,106) | (678) |
|---|---|---|---|---|---|---|---|
| RFS Holdings minority interest | (6) | - | (6) | 1 | - | - | (5) |
| Bonus tax | - | - | - | (11) | - | - | (11) |
| Strategic disposals | - | 50 | 50 | - | - | - | 50 |
| Gain on redemption of own debt | - | 255 | 255 | - | - | - | 255 |
| Integration and restructuring costs | - | 1 | 1 | (209) | - | - | (208) |
| Amortisation of purchased intangible assets |
- | - | - | (56) | - | - | (56) |
| Interest rate hedge adjustments on impaired available-for-sale sovereign debt |
- | - | - | - | - | (109) | (109) |
| Sovereign debt impairment | - | - | - | - | - | (733) | (733) |
| Payment Protection Insurance costs | - | - | - | (850) | - | - | (850) |
| Asset Protection Scheme (6) | - | (168) | (168) | - | - | - | (168) |
| Own credit adjustments (5) | - | 324 | 324 | - | - | - | 324 |
| Reconciling items | |||||||
| Managed basis | 3,233 | 4,549 | 7,782 | (3,892) | (793) | (2,264) | 833 |
| Non-Core (4) | 221 | 745 | 966 | (335) | (90) | (1,411) | (870) |
| Core | 3,012 | 3,804 | 6,816 | (3,557) | (703) | (853) | 1,703 |
| Central items | (58) | 81 | 23 | 30 | 1 | 2 | 56 |
| Direct Line Group (3) | 89 | 957 | 1,046 | (203) | (704) | - | 139 |
| Markets (2) | 3 | 1,165 | 1,168 | (855) | - | 14 | 327 |
| US Retail & Commercial | 470 | 279 | 749 | (541) | - | (65) | 143 |
| Ulster Bank | 182 | 51 | 233 | (142) | - | (269) | (178) |
| International Banking (1) | 290 | 375 | 665 | (412) | - | (104) | 149 |
| Wealth | 168 | 115 | 283 | (220) | - | (3) | 60 |
| UK Corporate | 770 | 448 | 1,218 | (526) | - | (220) | 472 |
| UK Retail | 1,098 | 333 | 1,431 | (688) | - | (208) | 535 |
| Quarter ended 30 June 2011 | income £m |
income £m |
income £m |
expenses £m |
net claims £m |
losses £m |
profit/(loss) £m |
| interest | interest | Total | Operating | Insurance | Impairment | Operating | |
| Net | Non |
Notes:
(1) Reallocation of £11 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2) Reallocation of £3 million between net interest income and non-interest income to record interest in financial assets and liabilities designated as at fair value through profit or loss.
(3) Total income includes £69 million investment income, of which £54 million is included in net interest income and £15 million in non-interest income. Reallocation of £35 million between non-interest income and net interest income in respect of instalment income.
(4) Reallocation of £52 million between net interest income and non-interest income in respect of funding costs of rental assets, £51 million and to record interest in financial assets and liabilities designated as at fair value through profit or loss, £1 million.
(5) Comprises £96 million gain included in 'Income from trading activities' and £228 million gain included in 'Other operating income' on a statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.
| Half year ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 30 June 2011 | |||||||||
| Inter | Inter | |||||||||
| External | segment | Total | External | segment | Total | |||||
| Total revenue | £m | £m | £m | £m | £m | £m | ||||
| UK Retail | 3,277 | 320 | 3,597 | 3,440 | 204 | 3,644 | ||||
| UK Corporate | 2,541 | 40 | 2,581 | 2,532 | 39 | 2,571 | ||||
| Wealth | 526 | 401 | 927 | 501 | 353 | 854 | ||||
| International Banking | 1,409 | 189 | 1,598 | 1,609 | 204 | 1,813 | ||||
| Ulster Bank | 557 | (8) | 549 | 636 | 2 | 638 | ||||
| US Retail & Commercial | 1,755 | 68 | 1,823 | 1,715 | 108 | 1,823 | ||||
| Markets | 3,199 | 2,805 | 6,004 | 3,850 | 3,589 | 7,439 | ||||
| Direct Line Group | 2,296 | 5 | 2,301 | 2,386 | 4 | 2,390 | ||||
| Central items | 1,270 | 8,379 | 9,649 | 1,459 | 6,032 | 7,491 | ||||
| Core | 16,830 | 12,199 | 29,029 | 18,128 | 10,535 | 28,663 | ||||
| Non-Core | 1,322 | 498 | 1,820 | 2,754 | 171 | 2,925 | ||||
| Managed basis | 18,152 | 12,697 | 30,849 | 20,882 | 10,706 | 31,588 | ||||
| Reconciling items | ||||||||||
| Own credit adjustments | (2,974) | - | (2,974) | (236) | (236) | |||||
| Asset Protection Scheme | (45) | - | (45) | (637) | - | (637) | ||||
| Integration and restructuring costs | - | - | - | (5) | - | (5) | ||||
| Gain on redemption of own debt | 577 | - | 577 | 255 | - | 255 | ||||
| Strategic disposals | 152 | - | 152 | 27 | - | 27 | ||||
| RFS Holdings minority interest | (4) | - | (4) | (3) | - | (3) | ||||
| Elimination of intra-group transactions | - | (12,697) | (12,697) | - | (10,706) | (10,706) | ||||
| Statutory basis | 15,858 | - | 15,858 | 20,283 | - | 20,283 |
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 31 March 2012 | 30 June 2011 | |||||||
| Inter | Inter | Inter | |||||||
| External | segment | Total | External | segment | Total | External | segment | Total | |
| Total revenue | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 1,627 | 178 | 1,805 | 1,650 | 142 | 1,792 | 1,744 | 88 | 1,832 |
| UK Corporate | 1,262 | 22 | 1,284 | 1,279 | 18 | 1,297 | 1,249 | 18 | 1,267 |
| Wealth | 266 | 190 | 456 | 260 | 211 | 471 | 253 | 185 | 438 |
| International Banking | 709 | 89 | 798 | 700 | 100 | 800 | 833 | 113 | 946 |
| Ulster Bank | 267 | (2) | 265 | 290 | (6) | 284 | 309 | 2 | 311 |
| US Retail & Commercial | 900 | 32 | 932 | 855 | 36 | 891 | 861 | 52 | 913 |
| Markets | 1,265 | 1,294 | 2,559 | 1,934 | 1,511 | 3,445 | 1,517 | 1,879 | 3,396 |
| Direct Line Group | 1,138 | 2 | 1,140 | 1,158 | 3 | 1,161 | 1,187 | 2 | 1,189 |
| Central items | 701 | 4,478 | 5,179 | 569 | 3,901 | 4,470 | 762 | 3,063 | 3,825 |
| Core | 8,135 | 6,283 | 14,418 | 8,695 | 5,916 | 14,611 | 8,715 | 5,402 | 14,117 |
| Non-Core | 502 | 350 | 852 | 820 | 148 | 968 | 1,632 | 116 | 1,748 |
| Managed basis | 8,637 | 6,633 | 15,270 | 9,515 | 6,064 | 15,579 | 10,347 | 5,518 | 15,865 |
| Reconciling items | |||||||||
| Own credit adjustments | (518) | - | (518) | (2,456) | (2,456) | 324 | - | 324 | |
| Asset Protection Scheme | (2) | - | (2) | (43) | (43) | (168) | - | (168) | |
| Integration and restructuring | |||||||||
| costs | - | - | - | - | - | - | 1 | - | 1 |
| Gain on redemption of | |||||||||
| own debt | - | - | - | 577 | - | 577 | 255 | - | 255 |
| Strategic disposals | 160 | - | 160 | (8) | - | (8) | 50 | - | 50 |
| RFS Holdings minority | |||||||||
| interest | 13 | - | 13 | (17) | - | (17) | (6) | - | (6) |
| Elimination of intra-group | |||||||||
| transactions | - | (6,633) | (6,633) | - | (6,064) | (6,064) | - | (5,518) | (5,518) |
| Statutory basis | 8,290 | - | 8,290 | 7,568 | - | 7,568 | 10,803 | - | 10,803 |
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| Total assets | 2012 £m |
2012 £m |
2011 £m |
| UK Retail | 116,849 | 116,255 | 114,469 |
| UK Corporate | 113,655 | 113,140 | 114,237 |
| Wealth | 21,285 | 21,325 | 21,718 |
| International Banking | 61,480 | 63,719 | 69,987 |
| Ulster Bank | 33,293 | 33,614 | 34,810 |
| US Retail & Commercial | 75,084 | 73,693 | 75,791 |
| Markets | 774,443 | 740,332 | 826,947 |
| Direct Line Group | 13,559 | 13,430 | 12,912 |
| Central items | 124,120 | 134,780 | 130,466 |
| Core | 1,333,768 | 1,310,288 | 1,401,337 |
| Non-Core | 80,590 | 91,823 | 104,726 |
| 1,414,358 | 1,402,111 | 1,506,063 | |
| RFS Holdings minority interest | 831 | 910 | 804 |
| 1,415,189 | 1,403,021 | 1,506,867 |
| Half year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
|
| Discontinued operations | |||||
| Total income | 16 | 17 | 8 | 8 | 9 |
| Operating expenses | (2) | (1) | (1) | (1) | - |
| Impairment losses | - | 11 | - | - | 11 |
| Profit before tax | 14 | 27 | 7 | 7 | 20 |
| Tax | (5) | (7) | (2) | (3) | (4) |
| Profit after tax | 9 | 20 | 5 | 4 | 16 |
| Businesses acquired exclusively with a view to disposal |
|||||
| (Loss)/profit after tax | (8) | 11 | (9) | 1 | 5 |
| Profit/(loss) from discontinued operations, | |||||
| net of tax | 1 | 31 | (4) | 5 | 21 |
Discontinued operations reflect the results of RFS Holdings attributable to the State of the Netherlands and Santander following the legal separation of ABN AMRO Bank N.V. on 1 April 2010.
| 30 June 2012 | |||||
|---|---|---|---|---|---|
| UK branch | |||||
| based | 31 March | 31 December | |||
| businesses | Other | Total | 2012 | 2011 | |
| £m | £m | £m | £m | £m | |
| Assets of disposal groups | |||||
| Cash and balances at central banks | 90 | 50 | 140 | 87 | 127 |
| Loans and advances to banks | - | 88 | 88 | 112 | 87 |
| Loans and advances to customers | 18,608 | 1,092 | 19,700 | 19,264 | 19,405 |
| Debt securities and equity shares | - | 36 | 36 | 5 | 5 |
| Derivatives | 372 | 4 | 376 | 368 | 439 |
| Intangible assets | - | - | - | 15 | 15 |
| Settlement balances | - | 2 | 2 | 4 | 14 |
| Property, plant and equipment | 114 | 1 | 115 | 4,609 | 4,749 |
| Other assets | 4 | 441 | 445 | 438 | 456 |
| Discontinued operations and other disposal groups | 19,188 | 1,714 | 20,902 | 24,902 | 25,297 |
| Assets acquired exclusively with a view to disposal | - | 167 | 167 | 158 | 153 |
| 19,188 | 1,881 | 21,069 | 25,060 | 25,450 | |
| Liabilities of disposal groups | |||||
| Deposits by banks | 1 | - | 1 | 83 | 1 |
| Customer accounts | 21,729 | 802 | 22,531 | 22,281 | 22,610 |
| Derivatives | 56 | 5 | 61 | 49 | 126 |
| Settlement balances | - | - | - | - | 8 |
| Other liabilities | 15 | 446 | 461 | 1,239 | 1,233 |
| Discontinued operations and other disposal groups | 21,801 | 1,253 | 23,054 | 23,652 | 23,978 |
| Liabilities acquired exclusively with a view to disposal | - | 10 | 10 | 12 | 17 |
| 21,801 | 1,263 | 23,064 | 23,664 | 23,995 |
The assets and liabilities of disposal groups at 30 June 2012 primarily comprise the RBS England and Wales and NatWest Scotland branch-based businesses ("UK branch-based businesses").
Gross loans, Risk elements in lending (REIL) and impairment provisions at 30 June 2012 relating to the Group's UK branch-based businesses are set out below.
| Gross | Impairment | ||
|---|---|---|---|
| loans | REIL | provisions | |
| £m | £m | £m | |
| Residential mortgages | 5,849 | 197 | 34 |
| Personal lending | 1,782 | 325 | 267 |
| Property | 5,519 | 422 | 136 |
| Construction | 562 | 160 | 60 |
| Service industries and business activities | 4,824 | 286 | 153 |
| Other | 839 | 43 | 42 |
| Latent | - | - | 75 |
| Total | 19,375 | 1,433 | 767 |
The following tables analyse the Group's financial assets and liabilities in accordance with the categories of financial instruments in IAS 39 with assets and liabilities outside the scope of IAS 39 shown separately. There have been no reclassifications during H1 2012.
| Other financial |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| instruments | financial | |||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | (amortised cost) |
Finance leases |
assets/ liabilities |
Total | |
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at central | ||||||||
| banks | - | - | - | 78,647 | 78,647 | |||
| Loans and advances to banks | ||||||||
| - reverse repos | 37,165 | - | - | 540 | 37,705 | |||
| - other | 18,857 | - | - | 20,579 | 39,436 | |||
| Loans and advances to | ||||||||
| customers | ||||||||
| - reverse repos | 59,680 | - | - | 516 | 60,196 | |||
| - other | 24,542 | 206 | - | 402,355 | 7,862 | 434,965 | ||
| Debt securities | 92,194 | 873 | 89,336 | 5,223 | 187,626 | |||
| Equity shares | 11,019 | 640 | 1,432 | - | 13,091 | |||
| Settlement balances | - | - | - | 15,312 | 15,312 | |||
| Derivatives (5) | 486,432 | 486,432 | ||||||
| Intangible assets | 14,888 | 14,888 | ||||||
| Property, plant and equipment | 11,337 | 11,337 | ||||||
| Deferred tax | 3,502 | 3,502 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,490 | 9,493 | 10,983 | ||
| Assets of disposal groups | 21,069 | 21,069 | ||||||
| 729,889 | 1,719 | 90,768 | 524,662 | 7,862 | 60,289 | 1,415,189 | ||
| Liabilities Deposits by banks |
||||||||
| - repos | 33,077 | - | 6,048 | 39,125 | ||||
| - other | 33,615 | - | 34,004 | 67,619 | ||||
| Customer accounts | ||||||||
| - repos | 83,463 | - | 5,487 | 88,950 | ||||
| - other | 14,356 | 5,752 | 392,661 | 412,769 | ||||
| Debt securities in issue | 10,780 | 30,355 | 78,720 | 119,855 | ||||
| Settlement balances | - | - | 15,126 | 15,126 | ||||
| Short positions | 38,376 | - | 38,376 | |||||
| Derivatives (5) | 480,745 | 480,745 | ||||||
| Accruals, deferred income | ||||||||
| and other liabilities | - | - | 1,748 | 16 | 17,056 | 18,820 | ||
| Retirement benefit liabilities | 1,791 | 1,791 | ||||||
| Deferred tax | 1,815 | 1,815 | ||||||
| Insurance liabilities | 6,322 | 6,322 | ||||||
| Subordinated liabilities | - | 923 | 24,673 | 25,596 | ||||
| Liabilities of disposal groups | 23,064 | 23,064 | ||||||
| 694,412 | 37,030 | 558,467 | 16 | 50,048 | 1,339,973 | |||
| Equity | 75,216 | |||||||
| 1,415,189 |
| Other financial |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| instruments (amortised |
Finance | financial assets/ |
||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | cost) | leases | liabilities | Total | |
| 31 March 2012 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at central | ||||||||
| banks | - | - | - | 82,363 | 82,363 | |||
| Loans and advances to banks | ||||||||
| - reverse repos | 32,232 | - | - | 2,394 | 34,626 | |||
| - other | 17,055 | - | - | 19,009 | 36,064 | |||
| Loans and advances to | ||||||||
| customers | ||||||||
| - reverse repos | 50,039 | - | - | 6,464 | 56,503 | |||
| - other | 24,142 | 254 | - | 408,031 | 7,979 | 440,406 | ||
| Debt securities | 92,250 | 818 | 97,381 | 5,482 | 195,931 | |||
| Equity shares | 14,903 | 784 | 1,916 | - | 17,603 | |||
| Settlement balances | - | - | - | 20,970 | 20,970 | |||
| Derivatives (5) | 453,354 | 453,354 | ||||||
| Intangible assets | 14,771 | 14,771 | ||||||
| Property, plant and equipment | 11,442 | 11,442 | ||||||
| Deferred tax | 3,849 | 3,849 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,341 | 8,738 | 10,079 | ||
| Assets of disposal groups | 25,060 | 25,060 | ||||||
| 683,975 | 1,856 | 99,297 | 546,054 | 7,979 | 63,860 | 1,403,021 | ||
| Liabilities | ||||||||
| Deposits by banks | ||||||||
| - repos | 26,926 | - | 14,489 | 41,415 | ||||
| - other | 30,967 | - | 34,768 | 65,735 | ||||
| Customer accounts | ||||||||
| - repos | 68,308 | - | 18,995 | 87,303 | ||||
| - other | 13,957 | 5,755 | 390,495 | 410,207 | ||||
| Debt securities in issue | 10,692 | 33,317 | 98,934 | 142,943 | ||||
| Settlement balances | - | - | 17,597 | 17,597 | ||||
| Short positions | 37,322 | - | 37,322 | |||||
| Derivatives (5) | 446,534 | 446,534 | ||||||
| Accruals, deferred income | ||||||||
| and other liabilities | - | - | 1,672 | 17 | 18,589 | 20,278 | ||
| Retirement benefit liabilities | 1,840 | 1,840 | ||||||
| Deferred tax | 1,788 | 1,788 | ||||||
| Insurance liabilities | 6,251 | 6,251 | ||||||
| Subordinated liabilities | - | 1,006 | 24,507 | 25,513 | ||||
| Liabilities of disposal groups | 23,664 | 23,664 | ||||||
| 634,706 | 40,078 | 601,457 | 17 | 52,132 | 1,328,390 | |||
| Equity | 74,631 | |||||||
| 1,403,021 |
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | Other financial instruments (amortised cost) |
Finance leases |
Non financial assets/ liabilities |
Total | |
|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at central | ||||||||
| banks | - | - | - | 79,269 | 79,269 | |||
| Loans and advances to banks | ||||||||
| - reverse repos | 34,659 | - | - | 4,781 | 39,440 | |||
| - other | 20,317 | - | - | 23,553 | 43,870 | |||
| Loans and advances to customers |
||||||||
| - reverse repos | 53,584 | - | - | 7,910 | 61,494 | |||
| - other | 25,322 | 476 | - | 419,895 | 8,419 | 454,112 | ||
| Debt securities | 95,076 | 647 | 107,298 | 6,059 | 209,080 | |||
| Equity shares | 12,433 | 774 | 1,976 | - | 15,183 | |||
| Settlement balances | - | - | - | 7,771 | 7,771 | |||
| Derivatives (5) | 529,618 | 529,618 | ||||||
| Intangible assets | 14,858 | 14,858 | ||||||
| Property, plant and equipment | 11,868 | 11,868 | ||||||
| Deferred tax | 3,878 | 3,878 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,309 | 9,667 | 10,976 | ||
| Assets of disposal groups | 25,450 | 25,450 | ||||||
| 771,009 | 1,897 | 109,274 | 550,547 | 8,419 | 65,721 | 1,506,867 | ||
| Liabilities | ||||||||
| Deposits by banks | ||||||||
| - repos | 23,342 | - | 16,349 | 39,691 | ||||
| - other | 34,172 | - | 34,941 | 69,113 | ||||
| Customer accounts | ||||||||
| - repos | 65,526 | - | 23,286 | 88,812 | ||||
| - other | 14,286 | 5,627 | 394,230 | 414,143 | ||||
| Debt securities in issue | 11,492 | 35,747 | 115,382 | 162,621 | ||||
| Settlement balances | - | - | 7,477 | 7,477 | ||||
| Short positions | 41,039 | - | 41,039 | |||||
| Derivatives (5) | 523,983 | 523,983 | ||||||
| Accruals, deferred income | ||||||||
| and other liabilities | - | - | 1,683 | 19 | 21,423 | 23,125 | ||
| Retirement benefit liabilities | 2,239 | 2,239 | ||||||
| Deferred tax | 1,945 | 1,945 | ||||||
| Insurance liabilities | 6,312 | 6,312 | ||||||
| Subordinated liabilities | - | 903 | 25,416 | 26,319 | ||||
| Liabilities of disposal groups | 23,995 | 23,995 | ||||||
| 713,840 | 42,277 | 618,764 | 19 | 55,914 | 1,430,814 | |||
| Equity | 76,053 | |||||||
| 1,506,867 |
Notes:
(1) Held-for-trading.
(2) Designated as at fair value.
(3) Available-for-sale.
(4) Loans and receivables.
(5) Held-for-trading derivatives include hedging derivatives.
Credit valuation adjustments (CVA) represent an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk inherent in counterparty derivative exposures. Certain credit derivative product companies (CDPC) exposures were restructured during the first half of the year and the CVA methodology applied to these exposures was updated to reflect the revised risk mitigation strategy that is now in place. There were no changes to other valuation methodologies.
When valuing financial instruments in the trading book, adjustments are made to mid-market valuations to cover bid-offer spread, liquidity and credit risk.
The following table shows credit valuation adjustments and other reserves.
| 30 June 2012 £m |
31 March 2012 £m |
31 December 2011 £m |
|
|---|---|---|---|
| CVA | |||
| - Monoline insurers | 481 | 991 | 1,198 |
| - Credit derivative product companies | 479 | 624 | 1,034 |
| - Other counterparties | 2,334 | 2,014 | 2,254 |
| 3,294 | 3,629 | 4,486 | |
| Bid-offer, liquidity and other reserves | 2,207 | 2,228 | 2,704 |
| Valuation reserves | 5,501 | 5,857 | 7,190 |
The following table shows the cumulative own credit adjustment recorded on securities classified as fair value through profit or loss and derivative liabilities. There have been some refinements to methodologies during the first half of the year, but they did not have a material overall impact on cumulative own credit adjustment.
| Subordinated | |||||||
|---|---|---|---|---|---|---|---|
| Debt securities in issue (2) | liabilities | ||||||
| HFT | DFV | Total | DFV | Total | Derivatives | Total (3) | |
| Cumulative own credit adjustment (1) | £m | £m | £m | £m | £m | £m | £m |
| 30 June 2012 | (323) | 1,040 | 717 | 572 | 1,289 | 452 | 1,741 |
| 31 March 2012 | 91 | 1,207 | 1,298 | 520 | 1,818 | 466 | 2,284 |
| 31 December 2011 | 882 | 2,647 | 3,529 | 679 | 4,208 | 602 | 4,810 |
| Carrying values of underlying liabilities | £bn | £bn | £bn | £bn | £bn | ||
| 30 June 2012 | 10.8 | 30.3 | 41.1 | 0.9 | 42.0 | ||
| 31 March 2012 | 10.7 | 33.3 | 44.0 | 1.0 | 45.0 | ||
| 31 December 2011 | 11.5 | 35.7 | 47.2 | 0.9 | 48.1 |
Notes:
(2) Consists of wholesale and retail note issuances.
(3) The reserve movement between periods will not equate to the reported profit or loss for own credit. The balance sheet reserves are stated by conversion of underlying currency balances at spot rates for each period, whereas the income statement includes intra-period foreign exchange sell-offs.
(1) The own credit fair value adjustment does not alter cash flows and is not used for performance management. It is disregarded for regulatory capital reporting purposes and will reverse over time as the liabilities mature.
The following tables show financial instruments carried at fair value on the Group's balance sheet by valuation hierarchy - level 1, level 2 and level 3.
A detailed explanation of the valuation techniques and sensitivity analysis methodology are set out in the Group's 2011 Annual Report and Accounts on pages 345 to 358.
| 30 June 2012 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable Unfavourable | ||||||
| Assets | £bn | £bn | £bn | £bn | £m | £m | ||||
| Loans and advances to banks | ||||||||||
| - reverse repos | - | 37.2 | - | 37.2 | - | - | ||||
| - collateral | - | 18.3 | - | 18.3 | - | - | ||||
| - other | - | 0.2 | 0.4 | 0.6 | 30 | (50) | ||||
| - | 55.7 | 0.4 | 56.1 | 30 | (50) | |||||
| Loans and advances to customers | ||||||||||
| - reverse repos | - | 59.7 | - | 59.7 | - | - | ||||
| - collateral | - | 22.2 | - | 22.2 | - | - | ||||
| - other | - | 2.2 | 0.3 | 2.5 | 80 | (20) | ||||
| - | 84.1 | 0.3 | 84.4 | 80 | (20) | |||||
| Debt securities | ||||||||||
| - UK government | 18.3 | - | - | 18.3 | - | - | ||||
| - US government | 33.6 | 6.1 | - | 39.7 | - | - | ||||
| - other government | 43.0 | 11.2 | - | 54.2 | - | - | ||||
| - corporate | - | 4.8 | 0.2 | 5.0 | 20 | (20) | ||||
| - other financial institutions | 1.8 | 57.8 | 5.6 | 65.2 | 370 | (220) | ||||
| 96.7 | 79.9 | 5.8 | 182.4 | 390 | (240) | |||||
| Equity shares | 10.6 | 1.5 | 1.0 | 13.1 | 140 | (150) | ||||
| Derivatives | ||||||||||
| - foreign exchange | - | 60.4 | 1.4 | 61.8 | 170 | (70) | ||||
| - interest rate | 0.1 | 399.7 | 0.7 | 400.5 | 50 | (50) | ||||
| - equities and commodities | - | 5.5 | 0.2 | 5.7 | - | - | ||||
| - credit | - | 15.6 | 2.8 | 18.4 | 490 | (330) | ||||
| 0.1 | 481.2 | 5.1 | 486.4 | 710 | (450) | |||||
| 107.4 | 702.4 | 12.6 | 822.4 | 1,350 | (910) | |||||
| Proportion | 13.1% | 85.4% | 1.5% | 100% | ||||||
| Of which | ||||||||||
| Core | 107.0 | 693.0 | 5.7 | 805.7 | ||||||
| Non-Core | 0.4 | 9.4 | 6.9 | 16.7 | ||||||
| 107.4 | 702.4 | 12.6 | 822.4 |
| 31 March 2012 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | |||||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable Unfavourable | |||||||
| Assets | £bn | £bn | £bn | £bn | £m | £m | |||||
| Loans and advances to banks | |||||||||||
| - reverse repos | - | 32.2 | - | 32.2 | - | - | |||||
| - collateral | - | 16.4 | - | 16.4 | - | - | |||||
| - other | - | 0.3 | 0.4 | 0.7 | 30 | (50) | |||||
| - | 48.9 | 0.4 | 49.3 | 30 | (50) | ||||||
| Loans and advances to customers | |||||||||||
| - reverse repos | - | 50.0 | - | 50.0 | - | - | |||||
| - collateral | - | 21.2 | - | 21.2 | - | - | |||||
| - other | - | 2.9 | 0.3 | 3.2 | 80 | (20) | |||||
| - | 74.1 | 0.3 | 74.4 | 80 | (20) | ||||||
| Debt securities | |||||||||||
| - UK government | 18.7 | - | - | 18.7 | - | - | |||||
| - US government | 32.8 | 4.8 | - | 37.6 | - | - | |||||
| - other government | 49.4 | 8.3 | - | 57.7 | - | - | |||||
| - corporate | - | 5.0 | 0.3 | 5.3 | 20 | (20) | |||||
| - other financial institutions | 2.0 | 63.6 | 5.5 | 71.1 | 450 | (130) | |||||
| 102.9 | 81.7 | 5.8 | 190.4 | 470 | (150) | ||||||
| Equity shares | 14.7 | 2.0 | 0.9 | 17.6 | 130 | (140) | |||||
| Derivatives | |||||||||||
| - foreign exchange | - | 61.5 | 1.8 | 63.3 | 120 | (120) | |||||
| - interest rate | 0.2 | 364.5 | 0.9 | 365.6 | 70 | (90) | |||||
| - equities and commodities | 0.1 | 5.8 | 0.2 | 6.1 | - | - | |||||
| - credit | - | 15.5 | 2.9 | 18.4 | 540 | (280) | |||||
| 0.3 | 447.3 | 5.8 | 453.4 | 730 | (490) | ||||||
| 117.9 | 654.0 | 13.2 | 785.1 | 1,440 | (850) | ||||||
| Proportion | 15.0% | 83.3% | 1.7% | 100% | |||||||
| Of which | |||||||||||
| Core | 117.4 | 643.2 | 6.2 | 766.8 | |||||||
| Non-Core | 0.5 | 10.8 | 7.0 | 18.3 | |||||||
| 117.9 | 654.0 | 13.2 | 785.1 | ||||||||
| 31 December 2011 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable Unfavourable | ||||||
| Assets | £bn | £bn | £bn | £bn | £m | £m | ||||
| Loans and advances to banks | ||||||||||
| - reverse repos | - | 34.7 | - | 34.7 | - | - | ||||
| - collateral | - | 19.7 | - | 19.7 | - | - | ||||
| - other | - | 0.2 | 0.4 | 0.6 | 40 | (50) | ||||
| - | 54.6 | 0.4 | 55.0 | 40 | (50) | |||||
| Loans and advances to customers | ||||||||||
| - reverse repos | - | 53.6 | - | 53.6 | - | - | ||||
| - collateral | - | 22.0 | - | 22.0 | - | - | ||||
| - other | - | 3.4 | 0.4 | 3.8 | 80 | (20) | ||||
| - | 79.0 | 0.4 | 79.4 | 80 | (20) | |||||
| Debt securities | ||||||||||
| - UK government | 22.4 | - | - | 22.4 | - | - | ||||
| - US government | 35.5 | 5.0 | - | 40.5 | - | - | ||||
| - other government | 53.9 | 8.7 | - | 62.6 | - | - | ||||
| - corporate | - | 5.0 | 0.5 | 5.5 | 30 | (30) | ||||
| - other financial institutions | 3.0 | 61.6 | 7.4 | 72.0 | 560 | (180) | ||||
| 114.8 | 80.3 | 7.9 | 203.0 | 590 | (210) | |||||
| Equity shares | 12.4 | 1.8 | 1.0 | 15.2 | 140 | (130) | ||||
| Derivatives | ||||||||||
| - foreign exchange | - | 72.9 | 1.6 | 74.5 | 100 | (100) | ||||
| - interest rate | 0.2 | 420.8 | 1.1 | 422.1 | 80 | (80) | ||||
| - equities and commodities | - | 5.9 | 0.2 | 6.1 | - | - | ||||
| - credit | - | 23.1 | 3.8 | 26.9 | 680 | (400) | ||||
| 0.2 | 522.7 | 6.7 | 529.6 | 860 | (580) | |||||
| 127.4 | 738.4 | 16.4 | 882.2 | 1,710 | (990) | |||||
| Proportion | 14.4% | 83.7% | 1.9% | 100% | ||||||
| Of which | ||||||||||
| Core | 126.9 | 724.5 | 7.2 | 858.6 | ||||||
| Non-Core | 0.5 | 13.9 | 9.2 | 23.6 | ||||||
| 127.4 | 738.4 | 16.4 | 882.2 | |||||||
The following tables detail AFS assets included within debt securities and equity shares on pages 102 to 104.
| Level 3 sensitivity (1) | |||||||
|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | ||
| Assets | £bn | £bn | £bn | £bn | £m | £m | |
| 30 June 2012 | |||||||
| Debt securities | |||||||
| - UK government | 11.9 | - | - | 11.9 | - | - | |
| - US government | 17.3 | 2.8 | - | 20.1 | - | - | |
| - other government | 12.3 | 5.2 | - | 17.5 | - | - | |
| - corporate - other financial institutions |
- 0.2 |
2.5 33.3 |
0.1 3.7 |
2.6 37.2 |
10 210 |
(10) (100) |
|
| 41.7 | 43.8 | 3.8 | 89.3 | 220 | (110) | ||
| Equity shares | 0.2 | 0.7 | 0.5 | 1.4 | 90 | (90) | |
| 41.9 | 44.5 | 4.3 | 90.7 | 310 | (200) | ||
| Of which | |||||||
| Core | 41.9 | 43.0 | 0.7 | 85.6 | |||
| Non-Core | - | 1.5 | 3.6 | 5.1 | |||
| 41.9 | 44.5 | 4.3 | 90.7 | ||||
| 31 March 2012 | |||||||
| Debt securities | |||||||
| - UK government | 11.9 | - | - | 11.9 | - | - | |
| - US government | 18.0 | 2.6 | - | 20.6 | - | - | |
| - other government | 16.4 | 3.6 | - | 20.0 | - | - | |
| - corporate | - | 2.1 | 0.1 | 2.2 | 10 | (10) | |
| - other financial institutions | 0.1 | 38.4 | 4.2 | 42.7 | 260 | (30) | |
| 46.4 | 46.7 | 4.3 | 97.4 | 270 | (40) | ||
| Equity shares | 0.3 | 1.2 | 0.4 | 1.9 | 70 | (80) | |
| 46.7 | 47.9 | 4.7 | 99.3 | 340 | (120) | ||
| Of which | |||||||
| Core | 46.6 | 45.8 | 0.6 | 93.0 | |||
| Non-Core | 0.1 | 2.1 | 4.1 | 6.3 | |||
| 46.7 | 47.9 | 4.7 | 99.3 | ||||
| 31 December 2011 | |||||||
| Debt securities | |||||||
| - UK government | 13.4 | - | - | 13.4 | - | - | |
| - US government | 18.1 | 2.7 | - | 20.8 | - | - | |
| - other government | 21.6 | 4.0 | - | 25.6 | - | - | |
| - corporate | - | 2.3 | 0.2 | 2.5 | 10 | (10) | |
| - other financial institutions | 0.2 | 39.3 | 5.5 | 45.0 | 310 | (50) | |
| 53.3 | 48.3 | 5.7 | 107.3 | 320 | (60) | ||
| Equity shares | 0.3 | 1.3 | 0.4 | 2.0 | 70 | (70) | |
| 53.6 | 49.6 | 6.1 | 109.3 | 390 | (130) | ||
| Of which | |||||||
| Core | 53.6 | 46.9 | 0.6 | 101.1 | |||
| Non-Core | - | 2.7 | 5.5 | 8.2 | |||
| 53.6 | 49.6 | 6.1 | 109.3 |
| 30 June 2012 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | |||||
| Liabilities | £bn | £bn | £bn | £bn | £m | £m | ||||
| Deposits by banks | ||||||||||
| - repos | - | 33.1 | - | 33.1 | - | - | ||||
| - collateral | - | 31.9 | - | 31.9 | - | - | ||||
| - other | - | 1.6 | 0.1 | 1.7 | - | (90) | ||||
| - | 66.6 | 0.1 | 66.7 | - | (90) | |||||
| Customer accounts | ||||||||||
| - repos | - | 83.5 | - | 83.5 | - | - | ||||
| - collateral | - | 9.8 | - | 9.8 | - | - | ||||
| - other | - | 10.3 | - | 10.3 | 20 | (20) | ||||
| - | 103.6 | - | 103.6 | 20 | (20) | |||||
| Debt securities in issue | - | 38.3 | 2.8 | 41.1 | 70 | (70) | ||||
| Short positions | 32.4 | 5.9 | 0.1 | 38.4 | 20 | (20) | ||||
| Derivatives | ||||||||||
| - foreign exchange | - | 70.1 | 0.7 | 70.8 | 110 | (30) | ||||
| - interest rate | 0.2 | 382.4 | 0.5 | 383.1 | 40 | (40) | ||||
| - equities and commodities | - | 8.5 | 0.8 | 9.3 | 10 | (10) | ||||
| - credit | - | 16.4 | 1.1 | 17.5 | 50 | (80) | ||||
| 0.2 | 477.4 | 3.1 | 480.7 | 210 | (160) | |||||
| Subordinated liabilities | - | 0.9 | - | 0.9 | - | - | ||||
| 32.6 | 692.7 | 6.1 | 731.4 | 320 | (360) | |||||
| Proportion | 4.5% | 94.7% | 0.8% | 100% | ||||||
| Of which | ||||||||||
| Core | 32.6 | 688.4 | 5.8 | 726.8 | ||||||
| Non-Core | - | 4.3 | 0.3 | 4.6 | ||||||
| 32.6 | 692.7 | 6.1 | 731.4 |
| 31 March 2012 | ||||||
|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | |
| Liabilities | £bn | £bn | £bn | £bn | £m | £m |
| Deposits by banks | ||||||
| - repos | - | 26.9 | - | 26.9 | - | - |
| - collateral | - | 29.4 | - | 29.4 | - | - |
| - other | - | 1.6 | - | 1.6 | - | (70) |
| - | 57.9 | - | 57.9 | - | (70) | |
| Customer accounts | ||||||
| - repos | - | 68.3 | - | 68.3 | - | - |
| - collateral | - | 8.8 | - | 8.8 | - | - |
| - other | - | 10.9 | - | 10.9 | 30 | (30) |
| - | 88.0 | - | 88.0 | 30 | (30) | |
| Debt securities in issue | - | 41.8 | 2.2 | 44.0 | 60 | (60) |
| Short positions | 31.4 | 5.7 | 0.2 | 37.3 | - | (30) |
| Derivatives | ||||||
| - foreign exchange | - | 68.6 | 1.0 | 69.6 | 50 | (50) |
| - interest rate | 0.2 | 348.7 | 0.7 | 349.6 | 70 | (60) |
| - equities and commodities | - | 8.9 | 0.8 | 9.7 | 10 | (10) |
| - credit - APS (2) | - | - | 0.1 | 0.1 | 50 | - |
| - credit - other | - | 16.4 | 1.2 | 17.6 | 60 | (90) |
| 0.2 | 442.6 | 3.8 | 446.6 | 240 | (210) | |
| Subordinated liabilities | - | 1.0 | - | 1.0 | - | - |
| 31.6 | 637.0 | 6.2 | 674.8 | 330 | (400) | |
| Proportion | 4.7% | 94.4% | 0.9% | 100% | ||
| Of which | ||||||
| Core | 31.6 | 632.7 | 5.8 | 670.1 | ||
| Non-Core | - | 4.3 | 0.4 | 4.7 | ||
| 31.6 | 637.0 | 6.2 | 674.8 |
| 31 December 2011 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | |||||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | ||||||
| Liabilities | £bn | £bn | £bn | £bn | £m | £m | |||||
| Deposits by banks | |||||||||||
| - repos | - | 23.3 | - | 23.3 | - | - | |||||
| - collateral | - | 31.8 | - | 31.8 | - | - | |||||
| - other | - | 2.4 | - | 2.4 | - | - | |||||
| - | 57.5 | - | 57.5 | - | - | ||||||
| Customer accounts | |||||||||||
| - repos | - | 65.5 | - | 65.5 | - | - | |||||
| - collateral | - | 9.2 | - | 9.2 | - | - | |||||
| - other | - | 10.8 | - | 10.8 | 20 | (20) | |||||
| - | 85.5 | - | 85.5 | 20 | (20) | ||||||
| Debt securities in issue | - | 45.0 | 2.2 | 47.2 | 80 | (60) | |||||
| Short positions | 34.4 | 6.3 | 0.3 | 41.0 | 10 | (100) | |||||
| Derivatives | |||||||||||
| - foreign exchange | - | 80.5 | 0.4 | 80.9 | 30 | (20) | |||||
| - interest rate | 0.4 | 405.5 | 1.1 | 407.0 | 80 | (90) | |||||
| - equities and commodities | - | 8.9 | 0.5 | 9.4 | 10 | (10) | |||||
| - credit - APS (2) | - | - | 0.2 | 0.2 | 300 | (40) | |||||
| - credit - other | - | 24.9 | 1.6 | 26.5 | 80 | (130) | |||||
| 0.4 | 519.8 | 3.8 | 524.0 | 500 | (290) | ||||||
| Subordinated liabilities | - | 0.9 | - | 0.9 | - | - | |||||
| 34.8 | 715.0 | 6.3 | 756.1 | 610 | (470) | ||||||
| Proportion | 4.6% | 94.6% | 0.8% | 100% | |||||||
| Of which | |||||||||||
| Core | 34.8 | 708.9 | 5.7 | 749.4 | |||||||
| Non-Core | - | 6.1 | 0.6 | 6.7 | |||||||
| 34.8 | 715.0 | 6.3 | 756.1 |
Notes:
(2) Asset Protection Scheme.
(1) Sensitivity represents the favourable and unfavourable effect respectively on the income statement or the statement of comprehensive income due to reasonably possible changes to valuations using reasonably possible alternative inputs to the Group's valuation techniques or models. Level 3 sensitivities are calculated at a sub-portfolio level and hence these aggregated figures do not reflect the correlation between some of the sensitivities. In particular, for some of the portfolios, the sensitivities may be negatively correlated where a downward movement in one asset would produce an upward movement in another, but due to the additive presentation above, this correlation cannot be observed.
| 1 January 2012 £m |
(Losses)/ gains £m |
Level 3 transfers In £m |
Out £m |
Purchases and issues £m |
Sales and settlements £m |
FX (2) £m |
30 June 2012 £m |
Gains/(losses) recorded in the income statement relating to instruments held at 30 June 2012 £m |
|
|---|---|---|---|---|---|---|---|---|---|
| Assets Fair value through |
|||||||||
| profit or loss: Loans and |
|||||||||
| advances | 760 | (1) | 5 | (16) | 69 | (82) | (3) | 732 | (5) |
| Debt securities | 2,243 | 181 | 546 | (86) | 367 | (1,301) | (4) | 1,946 | 43 |
| Equity shares | 573 | 8 | 33 | (27) | 134 | (193) | (6) | 522 | 4 |
| Derivatives | 6,732 | (933) | 26 | (259) | 372 | (772) | (26) | 5,140 | (1,002) |
| 10,308 | (745) | 610 | (388) | 942 | (2,348) | (39) | 8,340 | (960) | |
| AFS: | |||||||||
| Debt securities | 5,697 | 106 | 86 | (410) | - | (1,637) | 1 | 3,843 | (67) |
| Equity shares | 395 | 63 | 20 | - | 9 | (12) | (8) | 467 | 7 |
| 6,092 | 169 | 106 | (410) | 9 | (1,649) | (7) | 4,310 | (60) | |
| 16,400 | (576) | 716 | (798) | 951 | (3,997) | (46) | 12,650 | (1,020) | |
| Liabilities Deposits Debt securities |
22 | 49 | - | - | - | - | (1) | 70 | (7) |
| in issue | 2,199 | 34 | 107 | (79) | 827 | (328) | (9) | 2,751 | 34 |
| Short positions | 291 | (155) | - | - | 33 | (21) | 1 | 149 | 90 |
| Derivatives | 3,811 | (437) | 92 | (206) | 390 | (542) | (18) | 3,090 | (668) |
| Other | - | - | - | - | - | - | - | - | - |
| 6,323 | (509) | 199 | (285) | 1,250 | (891) | (27) | 6,060 | (551) | |
| Net losses (1) | (67) | (469) |
Notes:
(1) Losses of £176 million and gains of £109 million were recognised in the income statement and statement of comprehensive income during the first half of 2012.
(2) Foreign exchange movements.
| Half year ended | Quarter ended | ||||||
|---|---|---|---|---|---|---|---|
| Available-for-sale reserve | 30 June 2012 £m |
30 June 2011 £m |
30 June 2012 £m |
31 March 2012 £m |
30 June 2011 £m |
||
| At beginning of period | (957) | (2,037) | (439) | (957) | (2,063) | ||
| Unrealised losses on Greek sovereign debt | - | (842) | - | - | (842) | ||
| Impairment of Greek sovereign debt | - | 842 | - | - | 842 | ||
| Other unrealised net gains | 1,152 | 1,785 | 428 | 724 | 1,623 | ||
| Realised net gains | (582) | (413) | (370) | (212) | (216) | ||
| Tax | (63) | (361) | (69) | 6 | (370) | ||
| At end of period | (450) | (1,026) | (450) | (439) | (1,026) |
The H1 2012 movement in available-for-sale reserve primarily reflects unrealised net gains on securities of £1,158 million, largely as yields tightened on German, US and UK sovereign bonds.
In Q2 2011, as a result of the deterioration in Greece's fiscal position and the announcement of proposals to restructure Greek government debt, the Group concluded that the Greek sovereign debt was impaired. Accordingly, £733 million of unrealised losses recognised in available-for-sale reserves together with £109 million related interest rate hedge adjustments were recycled to the income statement. Further losses of £224 million were recorded in Q4 2011.
Ireland, Italy, Portugal and Spain are facing less acute fiscal difficulties and the Group's sovereign exposures to these countries were not considered impaired at 30 June 2012.
| 30 June 2012 | 31 March 2012 | 31 December 2011 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Contingent liabilities | |||||||||
| Guarantees and assets pledged | |||||||||
| as collateral security | 21,706 | 802 | 22,508 | 22,660 | 921 | 23,581 | 23,702 | 1,330 | 25,032 |
| Other contingent liabilities | 11,234 | 232 | 11,466 | 11,582 | 223 | 11,805 | 10,667 | 245 | 10,912 |
| 32,940 | 1,034 | 33,974 | 34,242 | 1,144 | 35,386 | 34,369 | 1,575 | 35,944 | |
| Commitments | |||||||||
| Undrawn formal standby facilities, credit lines and |
|||||||||
| other commitments to lend | 221,091 | 6,941 228,032 | 225,237 | 11,575 236,812 | 227,419 | 12,544 239,963 | |||
| Other commitments | 1,303 | 70 | 1,373 | 666 | 1,919 | 2,585 | 301 | 2,611 | 2,912 |
| 222,394 | 7,011 229,405 | 225,903 | 13,494 239,397 | 227,720 | 15,155 242,875 | ||||
| Total contingent liabilities | |||||||||
| and commitments | 255,334 | 8,045 263,379 | 260,145 | 14,638 274,783 | 262,089 | 16,730 278,819 |
Additional contingent liabilities arise in the normal course of the Group's business. It is not anticipated that any material loss will arise from these transactions.
The Group and certain Group members are party to legal proceedings, investigations and regulatory matters in the United Kingdom, the United States and other jurisdictions, arising out of their normal business operations. All such matters are periodically reassessed with the assistance of external professional advisers, where appropriate, to determine the likelihood of the Group incurring a liability. The Group recognises a provision for a liability in relation to these matters when it is probable that an outflow of economic benefits will be required to settle an obligation which has arisen as a result of past events, and for which a reliable estimate can be made of the amount of the obligation.
In many proceedings, it is not possible to determine whether any loss is probable or to estimate the amount of any loss. Numerous legal and factual issues may need to be resolved, including through potentially lengthy discovery and determination of important factual matters, and by addressing novel or unsettled legal questions relevant to the proceedings in question, before a liability can be reasonably estimated for any claim. The Group cannot predict if, how, or when such claims will be resolved or what the eventual settlement, fine, penalty or other relief, if any, may be, particularly for claims that are at an early stage in their development or where claimants seek substantial or indeterminate damages.
While the outcome of the legal proceedings, investigations and regulatory matters in which the Group is involved is inherently uncertain, management believes that, based on the information available to it, appropriate provisions have been made in respect of legal proceedings, investigations and regulatory matters as at 30 June 2012.
Other than as set out in the following sub-sections of this Note entitled 'Litigation' and 'Investigations and reviews', no member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Group is aware) during the 12 months prior to the date of this document which may have, or have had in the recent past, significant effects on the financial position or profitability of the Group.
In each of the material legal proceedings, investigations and reviews described below, unless specifically noted otherwise, it is not possible to reliably estimate with any certainty the liability, if any, or the effect these proceedings, investigations and reviews, and any related developments, may have on the Group. However, in the event that any such matters were resolved against the Group, these matters could, individually or in the aggregate, have a material adverse effect on the Group's consolidated net assets, operating results or cash flows in any particular period.
Set out below are descriptions of the material legal proceedings involving the Group.
RBS and certain of its subsidiaries, together with certain current and former individual officers and directors have been named as defendants in purported class actions filed in the United States District Court for the Southern District of New York involving holders of RBS preferred shares (the Preferred Shares litigation) and holders of American Depositary Receipts (the ADR claims).
In the Preferred Shares litigation, the consolidated amended complaint alleges certain false and misleading statements and omissions in public filings and other communications during the period 1 March 2007 to 19 January 2009, and variously asserts claims under Sections 11, 12 and 15 of the US Securities Act of 1933, as amended (Securities Act). The putative class is composed of all persons who purchased or otherwise acquired Group Series Q, R, S, T and/or U non-cumulative dollar preference shares issued pursuant or traceable to the 8 April 2005 US Securities and Exchange Commission (SEC) registration statement. Plaintiffs seek unquantified damages on behalf of the putative class. The defendants have moved to dismiss the complaint and briefing on the motions was completed in September 2011.
With respect to the ADR claims, a complaint was filed in January 2011 and a further complaint was filed in February 2011 asserting claims under Sections 10 and 20 of the US Securities Exchange Act of 1934, as amended (Exchange Act) on behalf of all persons who purchased or otherwise acquired the Group's American Depositary Receipts (ADRs) between 1 March 2007 and 19 January 2009. On 18 August 2011, these two ADR cases were consolidated and lead plaintiff and lead counsel were appointed. On 1 November 2011, the lead plaintiff filed a consolidated amended complaint asserting ADR-related claims under Sections 10 and 20 of the Exchange Act and Sections 11, 12 and 15 of the Securities Act. The defendants moved to dismiss the complaint in January 2012 and briefing on the motions was completed in April 2012. The Court heard oral argument on the motions on 19 July 2012.
The Group has also received notification of similar prospective claims in the United Kingdom and elsewhere but no court proceedings have been commenced in relation to these claims. The Group recently submitted a detailed response to a letter before action from one purported plaintiff group in the United Kingdom.
The Group considers that it has substantial and credible legal and factual defences to the remaining and prospective claims and will defend itself vigorously.
Recently, the level of litigation activity in the financial services industry focused on residential mortgage and credit crisis related matters has increased. As a result, the Group has become and expects that it may further be the subject of additional claims for damages and other relief regarding residential mortgages and related securities in the future.
Group companies have been named as defendants in their various roles as issuer, depositor and/or underwriter in a number of claims in the United States that relate to the securitisation and securities underwriting businesses. These cases include actions by individual purchasers of securities and purported class action suits. Together, the individual and class action cases involve the issuance of more than US\$85 billion of mortgage-backed securities (MBS) issued primarily from 2005 to 2007. Although the allegations vary by claim, in general, plaintiffs in these actions claim that certain disclosures made in connection with the relevant offerings contained materially false or misleading statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans underlying the securities were issued. Group companies have been named as defendants in more than 30 lawsuits brought by purchasers of MBS, including five purported class actions. Among the lawsuits are six cases filed on 2 September 2011 by the US Federal Housing Finance Agency (FHFA) as conservator for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
The primary FHFA lawsuit pending in the federal court in Connecticut relates to approximately US\$32 billion of MBS for which Group entities acted as sponsor/depositor and/or lead underwriter or co-lead underwriter.
FHFA has also filed five separate lawsuits (against Ally Financial Group, Countrywide Financial Corporation, JP Morgan, Morgan Stanley and Nomura respectively) in which RBS Securities Inc. is named as a defendant by virtue of the fact that it was an underwriter of some of the securities at issue.
Other lawsuits against Group companies include two cases filed by the National Credit Union Administration Board (on behalf of US Central Federal Credit Union and Western Corporate Federal Credit Union) and eight cases filed by the Federal Home Loan Banks of Boston, Chicago, Indianapolis, Seattle and San Francisco.
The purported MBS class actions in which Group companies are defendants include New Jersey Carpenters Vacation Fund et al. v. The Royal Bank of Scotland plc et al.; New Jersey Carpenters Health Fund v. Novastar Mortgage Inc. et al.; In re IndyMac Mortgage-Backed Securities Litigation; Genesee County Employees' Retirement System et al. v. Thornburg Mortgage Securities Trust 2006-3, et al.; and Luther v. Countrywide Financial Corp. et al. and related cases.
Certain other institutional investors have threatened to bring claims against the Group in connection with various mortgage-related offerings. The Group cannot predict with any certainty whether any of these individual investors will pursue these threatened claims (or their outcome), but expects that several may. If such claims are asserted and were successful, the amounts involved may be material. In many of these actions, the Group has or will have contractual claims to indemnification from the issuers of the securities (where a Group company is underwriter) and/or the underlying mortgage originator (where a Group company is issuer). The amount and extent of any recovery on an indemnification claim, however, is uncertain and subject to a number of factors, including the ongoing creditworthiness of the indemnifying party.
With respect to the current claims described above, the Group considers that it has substantial and credible legal and factual defences to these claims and will continue to defend them vigorously.
Certain members of the Group have been named as defendants in a number of class actions and individual claims filed in the US with respect to the setting of LIBOR. The complaints are substantially similar and allege that certain members of the Group and other panel banks individually and collectively violated US commodities and antitrust laws and state common law by manipulating LIBOR and prices of LIBOR-based derivatives in various markets through various means. The Group considers that it has substantial and credible legal and factual defences to these and prospective claims. It is possible that further claims may be threatened or brought in the US or elsewhere relating to the setting of interest rates or interest rate-related trading.
Details of LIBOR investigations affecting the Group are set out under 'Investigations and reviews' on page 115.
In December 2010, Irving Picard, as trustee for the bankruptcy estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC filed a claim against RBS N.V. for approximately US\$271 million. This is a clawback action similar to claims filed against six other institutions in December 2010. RBS N.V. (or its subsidiaries) invested in Madoff funds through feeder funds. The Trustee alleges that RBS N.V. received US\$71 million in redemptions from the feeder funds and US\$200 million from its swap counterparties while RBS N.V. 'knew or should have known of Madoff's possible fraud'. The Trustee alleges that those transfers were preferences or fraudulent conveyances under the US bankruptcy code and New York law and he asserts the purported right to claw them back for the benefit of Madoff's estate. A further claim, for US\$21.8 million, was filed in October 2011. The Group considers that it has substantial and credible legal and factual defences to these claims and intends to defend itself vigorously.
RBS Citizens Financial Group, Inc (RBS Citizens) and its affiliates were among more than thirty banks named as defendants in US class action lawsuits alleging that the manner in which defendant banks posted transactions to consumer accounts caused customers to incur excessive overdraft fees. The complaints against RBS Citizens, which concern the period between 2002 and 2010 and were consolidated into one case, alleged that this conduct violated its duty of good faith and fair dealing, was unconscionable and constituted an unfair trade practice and a conversion of customers' funds. RBS Citizens has agreed to settle this matter for US\$137.5 million and, as a result, the matter has been stayed. The Group has made a provision for the settlement although payment has not yet been made, pending court approval. If the settlement is given final approval by the United States District Court for the Southern District of Florida, consumers who do not opt out of the settlement will be deemed to have released any claims related to the allegations in the lawsuits.
In addition to the matters described above, members of the Group are engaged in other legal proceedings in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against them arising in the ordinary course of business. The Group has reviewed these other actual, threatened and known potential claims and proceedings and, after consulting with its legal advisers, does not expect that the outcome of any of these other claims and proceedings will have a significant effect on the Group's consolidated net assets, operating results or cash flows in any particular period.
The Group's businesses and financial condition can be affected by the fiscal or other policies and actions of various governmental and regulatory authorities in the United Kingdom, the European Union, the United States and elsewhere. The Group has engaged, and will continue to engage, in discussions with relevant government and regulatory authorities, including in the United Kingdom and the United States, on an ongoing and regular basis regarding operational, systems and control evaluations and issues including those related to compliance with applicable anti-bribery, anti-money laundering and sanctions regimes. It is possible that any matters discussed or identified may result in investigatory or other action being taken by governmental and regulatory authorities, increased costs being incurred by the Group, remediation of systems and controls, public or private censure, restriction of the Group's business activities or fines. Any of these events or circumstances could have a significant effect on the Group, its business, authorisations and licences, reputation, results of operations or the price of securities issued by it.
Political and regulatory scrutiny of the operation of retail banking and consumer credit industries in the United Kingdom, United States and elsewhere continues. The nature and impact of future changes in policies and regulatory action are not predictable and are beyond the Group's control but could have a significant effect on the Group's consolidated net assets, operating results or cash flows in any particular period.
The Group is co-operating fully with the investigations, reviews and proceedings described below.
The Group continues to co-operate fully with investigations by various governmental and regulatory authorities into its submissions, communications and procedures relating to the setting of LIBOR and other interest rates. The relevant authorities include, amongst others, the US Commodity Futures Trading Commission, the US Department of Justice (Fraud Division), the FSA and the Japanese Financial Services Agency. The Group has dismissed a number of employees for misconduct as a result of its investigations into these matters.
The Group is also under investigation by competition authorities in a number of jurisdictions, including the European Commission, Department of Justice (Antitrust Division) and Canadian Competition Bureau, stemming from the actions of certain individuals in the setting of LIBOR and other interest rates, as well as interest rate-related trading. The Group is also co-operating fully with these investigations.
It is not possible to reliably measure what effect these investigations, any regulatory findings and any related developments may have on the Group, including the timing and amount of fines or settlements.
On 19 June 2012, the Group was affected by a technology incident as a result of which the processing of certain customer accounts and payments were subject to considerable delay. The cause of the incident is being investigated by independent external counsel with the assistance of third party advisors, who have been instructed to carry out an independent review. The Group has agreed to reimburse customers for any loss suffered as a result of the incident and has made a provision of £125 million in its Q2 2012 results for this matter. Additional costs may arise once all redress and business disruption items are clear and a further update will be given in Q3.
The incident, the Group's handling of the incident and the systems and controls surrounding the processes affected, are the subject of regulatory enquiries (both from the UK and Ireland) and the Group could become a party to litigation. In particular, the Group could face legal claims from those whose accounts were affected and could itself have claims against third parties.
In June 2012, following an industry wide review, the FSA announced that the Group and other UK banks had agreed to a redress exercise and past business review in relation to the sale of interest rate hedging products to some small and medium sized businesses who were classified as retail clients under FSA rules.
The Group will provide fair and reasonable redress to non-sophisticated customers classified as retail clients, who were sold structured collars. The Group has made a provision of £50 million in its Q2 2012 results for the redress it expects to offer to these customers. As the actual amount that the Group will be required to pay will depend on the facts and circumstances of each case, there is no certainty as to the eventual costs of redress.
The Group will also write to non-sophisticated customers classified as retail clients sold other interest rate products (other than interest rate caps) on or after 1 December 2001 offering a review of their sale and, if it is appropriate in the individual circumstances, the Group will propose fair and reasonable redress on a case by case basis. Furthermore, non-sophisticated customers classified as retail clients who have purchased interest rate caps will be entitled to approach the Group and request a review. At this stage, the Group is not able to estimate reliably the cost of redress for these customers.
The redress exercise and the past business review will be scrutinised by an independent reviewer, who will review and agree any redress, and will be overseen by the FSA.
In the European Union, regulatory actions included an inquiry into retail banking initiated on 13 June 2005 in all of the then 25 member states by the European Commission's Directorate General for Competition. The inquiry examined retail banking in Europe generally. On 31 January 2007, the European Commission (EC) announced that barriers to competition in certain areas of retail banking, payment cards and payment systems in the European Union had been identified. The EC indicated that it will consider using its powers to address these barriers and will encourage national competition authorities to enforce European and national competition laws where appropriate. In addition, in late 2010, the EC launched an initiative pressing for increased transparency in respect of bank fees. The EC is currently proposing to legislate for the increased harmonisation of terminology across Member States, with proposals expected in the second half of 2012. The Group cannot predict the outcome of these actions at this stage and is unable reliably to estimate the effect, if any, that these may have on the Group's consolidated net assets, operating results or cash flows in any particular period.
In 2007, the EC issued a decision that, while interchange is not illegal per se, MasterCard's current multilateral interchange fee (MIF) arrangements for cross border payment card transactions with MasterCard and Maestro branded consumer credit and debit cards in the European Union are in breach of competition law. MasterCard was required by the decision to withdraw the relevant crossborder MIF (i.e. set these fees to zero) by 21 June 2008.
MasterCard appealed against the decision to the European Court of First Instance (subsequently renamed the General Court) in March 2008, and the Group intervened in the appeal proceedings. In addition, in summer 2008, MasterCard announced various changes to its scheme arrangements. The EC was concerned that these changes might be used as a means of circumventing the requirements of the infringement decision. In April 2009, MasterCard agreed an interim settlement on the level of cross-border MIF with the EC pending the outcome of the appeal process and, as a result, the EC advised it would no longer investigate the non-compliance issue. The General Court heard MasterCard's appeal in July 2011 and issued its judgment on 24 May 2012, upholding the EC's original decision. The Group understands that MasterCard will appeal further and is awaiting confirmation of the basis of such appeal.
Visa's cross-border MIFs were exempted in 2002 by the EC for a period of five years up to 31 December 2007 subject to certain conditions. In March 2008, the EC opened a formal inquiry into Visa's current MIF arrangements for cross border payment card transactions with Visa branded debit and consumer credit cards in the European Union and in April 2009 the EC announced that it had issued Visa with a formal Statement of Objections. At the same time Visa announced changes to its interchange levels and introduced some changes to enhance transparency. There is no deadline for the closure of the inquiry. However, in April 2010 Visa announced it had reached an agreement with the EC as regards immediate cross border debit card MIF rates only and in December 2010 the commitments were finalised for a four year period commencing December 2010 under Article 9 of Regulation 1/2003. The EC is continuing its investigations into Visa's cross border MIF arrangements for deferred debit and credit transactions.
In the UK, the Office of Fair Trading (OFT) has carried out investigations into Visa and MasterCard domestic credit card interchange rates. The decision by the OFT in the MasterCard interchange case was set aside by the Competition Appeal Tribunal (CAT) in June 2006. The OFT's investigations in the Visa interchange case and a second MasterCard interchange case are ongoing. In February 2007, the OFT announced that it was expanding its investigation into domestic interchange rates to include debit cards. In January 2010 the OFT advised that it did not anticipate issuing a Statement of Objections prior to the General Court's judgment. The OFT has advised that it is currently reviewing the implications of the European General Court judgment for its own investigations and that it will issue a project update in due course.
The outcome of these investigations is not known, but they may have a significant effect on the consumer credit industry in general and, therefore, on the Group's business in this sector.
In January 2009, the Competition Commission (CC) announced its intention to order a range of remedies in relation to Payment Protection Insurance (PPI), including a prohibition on actively selling PPI at point of sale of the credit product (and for 7 days thereafter), a ban on single premium policies and other measures to increase transparency (in order to improve customers' ability to search and improve price competition). In October 2010, the CC published its final decision on remedies which confirmed the point of sale prohibition. In March 2011, the CC issued a final order setting out its remedies with a commencement date of 6 April 2011. The key remedies came into force in two parts, in October 2011 and April 2012.
The FSA conducted a broad industry thematic review of PPI sales practices and in September 2008, the FSA announced that it intended to escalate its level of regulatory intervention. Substantial numbers of customer complaints alleging the mis-selling of PPI policies have been made to banks and to the Financial Ombudsman Service (FOS) and many of these are being upheld by the FOS against the banks.
The FSA published a final policy statement in August 2010 imposing significant changes with respect to the handling of complaints about the mis-selling of PPI. In October 2010, the British Bankers' Association (BBA) filed an application for judicial review of the FSA's policy statement and of related guidance issued by the FOS. In April 2011 the High Court issued judgment in favour of the FSA and the FOS and in May 2011 the BBA announced that it would not appeal that judgment. The Group then recorded an additional provision of £850 million in respect of PPI. In the first half of 2012 an additional provision of £260 million was recorded, with an overall total of £1.3 billion accrued as at 30 June 2012. During 2011, the Group reached agreement with the FSA on a process for implementation of its policy statement and for the future handling of PPI complaints. Implementation of the agreed processes is currently under way.
On 16 July 2008, the OFT published the results of its market study into Personal Current Accounts (PCA) in the United Kingdom. The OFT found evidence of competition and several positive features in the PCA market but believed that the market as a whole was not working well for consumers and that the ability of the market to function well had become distorted.
On 7 October 2009, the OFT published a follow-up report summarising the initiatives agreed between the OFT and PCA providers to address the OFT's concerns about transparency and switching, following its market study. PCA providers will take a number of steps to improve transparency, including providing customers with an annual summary of the cost of their account and making charges prominent on monthly statements. To improve the switching process, a number of steps are being introduced following work with Bacs, the payment processor, including measures to reduce the impact on consumers of any problems with transferring direct debits.
On 22 December 2009, the OFT published a further report in which it stated that it continued to have significant concerns about the operation of the PCA market in the United Kingdom, in particular in relation to unarranged overdrafts, and that it believed that fundamental changes are required for the market to work in the best interests of bank customers. The OFT stated that it would discuss these issues intensively with banks, consumer groups and other organisations, with the aim of reporting on progress by the end of March 2010. On 16 March 2010, the OFT announced that it had secured agreement from the banks on four industry-wide initiatives, namely minimum standards on the operation of opt-outs from unarranged overdrafts, new working groups on information sharing with customers, best practice for PCA customers in financial difficulties and incurring charges, and PCA providers to publish their policies on dealing with PCA customers in financial difficulties. The OFT also announced its plan to conduct six-monthly ongoing reviews, to review the market again fully in 2012 and to undertake a brief analysis on barriers to entry.
The first six-monthly ongoing review was completed in September 2010. The OFT noted progress in the areas of switching, transparency and unarranged overdrafts for the period March to September 2010, as well as highlighting further changes the OFT expected to see in the market. In March 2011, the OFT published its update report in relation to PCAs. This noted further progress in improving consumer control over the use of unarranged overdrafts. In particular, the Lending Standards Board had led on producing standards and guidance to be included in a revised Lending Code. The OFT stated it would continue to monitor the market and would consider the need for, and appropriate timing of, further update reports in light of other developments, in particular the work of the UK Government's Independent Commission on Banking (ICB).
In May 2010, the OFT announced its review of barriers to entry. The review concerned retail banking for individuals and small and medium size enterprises (up to £25 million turnover) and looked at products which require a banking licence to sell mortgages, loan products and, where appropriate, other products such as insurance or credit cards where cross-selling may facilitate entry or expansion. The OFT published its report in November 2010. It advised that it expected its review to be relevant to the ICB, the FSA, HM Treasury and the Department for Business, Innovation and Skills and to the devolved governments in the United Kingdom. The OFT did not indicate whether it would undertake any further work. The report maintained that barriers to entry remain, in particular regarding switching, branch networks and brands. At this stage, it is not possible to estimate the effect of the OFT's report and recommendations regarding barriers to entry upon the Group.
On 13 July 2012, the OFT launched its planned review of the PCA market. The review will look at whether the initiatives agreed by the OFT with banks have been successful. The OFT has also announced a wider programme of work on retail banking and will consider the operation of the payment systems and the banking market for SMEs. The PCA review and wider programme of work are aimed at informing the OFT's response to the Independent Commission on Banking's recommendation that the OFT consider making a reference to the Competition Commission by 2015 if it had not already done so and if sufficient improvements in the market have not been made by that time.
In December 2011, the OFT launched a market study into private motor insurance, with a focus on the provision of third party vehicle repairs and credit hire replacement vehicles to claimants. The OFT issued its report on 31 May 2012 and has advised that it believes there are features of the market that potentially restrict, distort or prevent competition in the market and that would merit a referral to the Competition Commission (CC). The OFT's particular focus is on credit hire replacement vehicles and third party vehicle repairs. Following publication of the consultation, which closed on 6 July 2012, the Group is awaiting the OFT's decision on whether to refer the market to the CC. If a referral is made, this is likely to take place in the second half of 2012. At this stage, it is not possible to estimate with any certainty the effect the market study and any related developments may have on the Group.
Following an interim report published on 11 April 2011, the ICB published its final report to the Cabinet Committee on Banking Reform on 12 September 2011 (Final Report). The Final Report makes a number of recommendations, including in relation to (i) the implementation of a ring-fence of retail banking operations, (ii) loss-absorbency (including bail-in) and (iii) competition.
On 19 December 2011, the UK Government published a response to the Final Report (the 'Response'), reaffirming its intention to accept the majority of the ICB's recommendations. The Government agreed that "vital banking services - in particular the taking of retail deposits - should only be provided by 'ring-fenced banks', and that these banks should be prohibited from undertaking certain investment banking activities." It also broadly accepted the ICB's recommendations on loss absorbency and on competition.
Following an extensive first consultation, the UK Government published a White Paper on 14 June 2012 (White Paper), setting out its more detailed proposals for implementing the ICB's recommendations. Its intention remains to complete primary and secondary legislation before the end of the current Parliamentary term in May 2015 and for banks to comply with all the measures proposed in the paper by 2019, as the ICB recommended. The Government also reaffirmed its determination that changes to the account switching process should be completed by September 2013, as already scheduled. A further period of consultation has now been established, which runs until 6 September 2012.
The content of the White Paper was broadly in line with expectations following the Response, with ring-fencing to be implemented as set out in the ICB recommendations and loss-absorbency requirements also largely consistent.
With regard to the competition aspects, the White Paper supports the Payment Council proposals to increase competition by making account switching easier and confirms that the Bank of England and the FSA will publish reviews on how prudential standards and conduct requirements can be a barrier to market entry. The White Paper also urges the OFT to consider what further transparency measures would be appropriate during its review of the PCA market in the second half of this year and a consultation regarding the structure of UK Payments Council is recommended.
While the UK Government's White Paper provides some additional detail, until the further consultation is concluded and significantly more is known on the precise detail of the legislative and regulatory framework it is not possible to estimate the potential impact of these measures with any level of precision.
The Group will continue to participate in the debate and to consult with the UK Government on the implementation of the proposals set out in the White Paper, the effects of which could have a negative impact on the Group's consolidated net assets, operating results or cash flows in any particular period.
In the United States, the Group is involved in reviews, investigations and proceedings (both formal and informal) by federal and state governmental law enforcement and other agencies and self-regulatory organisations relating to, among other things, mortgage-backed securities, collateralised debt obligations (CDOs), and synthetic products. In connection with these inquiries, Group companies have received requests for information and subpoenas seeking information about, among other things, the structuring of CDOs, financing to loan originators, purchase of whole loans, sponsorship and underwriting of securitisations, due diligence, representations and warranties, communications with ratings agencies, disclosure to investors, document deficiencies, and repurchase requests.
In September and October 2010, the SEC requested voluntary production of information concerning residential mortgage-backed securities underwritten by subsidiaries of RBS during the period from September 2006 to July 2007 inclusive. In November 2010, the SEC commenced a formal investigation. The investigation is in its preliminary stages and it is not possible to predict any potential exposure that may result.
Also in October 2010, the SEC commenced an inquiry into document deficiencies and repurchase requests with respect to certain securitisations, and in January 2011, this was converted to a formal investigation. Among other matters, the investigation seeks information related to document deficiencies and remedial measures taken with respect to such deficiencies. The investigation also seeks information related to early payment defaults and loan repurchase requests.
In 2007, the New York State Attorney General issued subpoenas to a wide array of participants in the securitisation and securities industry, focusing on the information underwriters obtained from the independent firms hired to perform due diligence on mortgages. The Group completed its production of documents requested by the New York State Attorney General in 2008, principally producing documents related to loans that were pooled into one securitisation transaction. In May 2011, at the New York State Attorney General's request, representatives of the Group attended an informal meeting to provide additional information about the Group's mortgage securitisation business. The investigation is ongoing and the Group continues to provide requested information.
In September 2010, RBS subsidiaries received a request from the Nevada State Attorney General requesting information related to securitisations of mortgages issued by three specific originators. The investigation by the Nevada State Attorney General continues. Whilst it is difficult to predict the final outcome of this investigation, it is not expected to have a material adverse effect on the Group's net assets, operating results or cash flows in any particular period.
The Group's Markets & International Banking N.A. or M&IB N.A. business (formerly Global Banking & Markets N.A.) has been a purchaser of non-agency US residential mortgages in the secondary market, and an issuer and underwriter of non-agency residential mortgage-backed securities (RMBS). M&IB N.A. did not originate or service any US residential mortgages and it was not a significant seller of mortgage loans to government sponsored enterprises (GSEs) (e.g., the Federal National Mortgage Association and the Federal Home Loan Mortgage Association).
In issuing RMBS, M&IB N.A. generally assigned certain representations and warranties regarding the characteristics of the underlying loans made by the originator of the residential mortgages; however, in some circumstances, M&IB N.A. made such representations and warranties itself. Where M&IB N.A. has given those or other representations and warranties (whether relating to underlying loans or otherwise), M&IB N.A. may be contractually required to repurchase such loans or indemnify certain parties against losses for certain breaches of such representations and warranties. In certain instances where it is required to repurchase loans or related securities, M&IB N.A. may be able to assert claims against third parties who provided representations or warranties to M&IB N.A. when selling loans to it; although the ability to recover against such parties is uncertain. Between the start of 2009 and the end of June 2012, M&IB N.A. received approximately US\$512 million in repurchase demands in respect of loans made primarily from 2005 to 2008 and related securities sold where obligations in respect of contractual representations or warranties were undertaken by M&IB N.A..
However, repurchase demands presented to M&IB N.A. are subject to challenge and, to date, M&IB N.A. has rebutted a significant percentage of these claims.
RBS Citizens has not been an issuer or underwriter of non-agency RMBS. However, RBS Citizens is an originator and servicer of residential mortgages, and it routinely sells such mortgage loans in the secondary market and to GSEs. In the context of such sales, RBS Citizens makes certain representations and warranties regarding the characteristics of the underlying loans and, as a result, may be contractually required to repurchase such loans or indemnify certain parties against losses for certain breaches of the representations and warranties concerning the underlying loans. Between the start of 2009 and the end of June 2012, RBS Citizens received US\$69.1 million in repurchase demands in respect of loans originated primarily since 2003. However, repurchase demands presented to RBS Citizens are subject to challenge and, to date, RBS Citizens has rebutted a significant percentage of these claims.
Although there has been disruption in the ability of certain financial institutions operating in the United States to complete foreclosure proceedings in respect of US mortgage loans in a timely manner (or at all) over the last year (including as a result of interventions by certain states and local governments), to date, RBS Citizens has not been materially impacted by such disruptions and the Group has not ceased making foreclosures.
The volume of repurchase demands is increasing and is expected to continue to increase, and the Group cannot currently estimate what the ultimate exposure of M&IB N.A. or RBS Citizens may be. Furthermore, the Group is unable to estimate the extent to which the matters described above will impact it, and future developments may have an adverse impact on the Group's net assets, operating results or cash flows in any particular period.
The Federal Reserve and state banking supervisors have been reviewing the Group's US operations and RBS and its subsidiaries have been required to make improvements with respect to various matters, including enterprise-wide governance, US Bank Secrecy Act and anti-money laundering compliance, risk management and asset quality. The Group is in the process of implementing measures for matters identified to date.
On 27 July 2011, the Group consented to the issuance of a Cease and Desist Order (the Order) setting forth measures required to address deficiencies related to governance, risk management and compliance systems and controls identified by the Federal Reserve and state banking supervisors during examinations of the RBS plc and RBS N.V. branches in 2010. The Order requires the Group to strengthen its US corporate governance structure, to develop an enterprise-wide risk management programme, and to develop and enhance its programmes to ensure compliance with US law, particularly the US Bank Secrecy Act and anti-money laundering laws, rules and regulations. The Group has established a strategic and remedial programme of change to address the identified concerns and is committed to working closely with the US bank regulators to implement the remedial measures required by the Order.
The Group's operations include businesses outside the United States that are responsible for processing US dollar payments. The Group is conducting a review of its policies, procedures and practices in respect of such payments and has initiated discussions with UK and US authorities to discuss its historical compliance with applicable laws and regulations, including US economic sanctions regulations. Although the Group cannot currently determine when the review of its operations will be completed or what the outcome of its discussions with UK and US authorities will be, the investigation costs, remediation required or liability incurred could have a material adverse effect on the Group's net assets, operating results or cash flows in any particular period.
The Group may become subject to formal and informal supervisory actions and may be required by its US banking supervisors to take further actions and implement additional remedial measures with respect to these and additional matters. Any limitations or conditions placed on the Group's activities in the United States, as well as the terms of any supervisory action applicable to RBS and its subsidiaries, could have a material adverse effect on the Group's net assets, operating results or cash flows in any particular period.
In July 2010, the FSA notified the Group that it was commencing an investigation into the sale by Coutts & Co of the ALICO (American Life Insurance Company) Premier Access Bond Enhanced Variable Rate Fund (EVRF) to customers between 2001 and 2008 as well as its subsequent review of those sales. Subsequently, on 11 January 2011 the FSA revised the investigation start date to December 2003.
On 8 November 2011, the FSA published its Final Notice having reached a settlement with Coutts & Co, under which Coutts & Co agreed to pay a fine of £6.3 million. The FSA did not make any findings on the suitability of advice given in individual cases. Nonetheless, Coutts & Co has agreed to undertake a past business review of its sales of the product. This review is being overseen by an independent third party and considers the advice given to customers invested in the EVRF as at the date of its suspension, 15 September 2008. For any sales which are found to be unsuitable, redress will be paid to the customers to ensure that they have not suffered financially.
On 26 March 2012, the FSA published a Final Notice that it had reached a settlement with Coutts & Co under which Coutts agreed to pay a fine of £8.75 million. This follows an investigation by the FSA into Coutts & Co's anti-money laundering (AML) systems and controls in relation to high risk clients. The fine relates to historic activity undertaken between December 2007 and November 2010.
Coutts & Co has cooperated fully and openly with the FSA throughout the investigation. Coutts & Co has accepted the findings contained in the FSA's Final Notice regarding certain failures to meet the relevant regulatory standards between December 2007 and November 2010. Coutts & Co has found no evidence that money laundering took place during that time.
Since concerns were first identified by the FSA, Coutts & Co has enhanced its client relationship management process which included a review of its AML procedures, and is confident in its current processes and procedures.
On 18 January 2012, the FSA published its Final Notice having reached a settlement with U K Insurance Limited for breaches of Principle 2 by Direct Line and Churchill (the Firms), under which U K Insurance Limited agreed to pay a fine of £2.17 million. The Firms were found to have acted without due skill, care and diligence in the way that they responded to the FSA's request to provide it with a sample of their closed complaint files. The Firms' breaches of Principle 2 did not result in any customer detriment.
In March 2008, the Group was advised by the SEC that it had commenced a non-public, formal investigation relating to the Group's United States sub-prime securities exposures and United States residential mortgage exposures. In December 2010, the SEC contacted the Group and indicated that it would also examine valuations of various RBS N.V. structured products, including CDOs. With respect to the latter inquiry, in March 2012, the SEC communicated to the Group that it had completed its investigation and that it did not, as of the date of that communication and based upon the information then in its possession, intend to recommend any enforcement action against RBS.
On 19 April 2011, the Group announced its intention to transfer a substantial part of the business activities of The Royal Bank of Scotland N.V. (RBS N.V.) to RBS plc (the "Proposed Transfers"), subject, amongst other matters, to regulatory and other approvals, further tax and other analysis in respect of the assets and liabilities to be transferred and employee consultation procedures.
It is expected that the Proposed Transfers will be implemented on a phased basis over a period ending 31 December 2013. The transfer of substantially all of the UK business was completed during Q4 2011. A large part of the remainder of the Proposed Transfers is expected to have taken place by the end of 2012.
On 26 March 2012, the Boards of The Royal Bank of Scotland Group plc (RBSG), RBS plc, RBS Holdings N.V., RBS N.V. and RBS II B.V. announced that (1) RBS N.V. (as the demerging company) and RBS II B.V. (as the acquiring company) filed a proposal with the Dutch Trade Register for a legal demerger and (2) following a preliminary hearing at the Court of Session in Scotland, RBS plc and RBS II B.V. made filings with Companies House in the UK and the Dutch Trade Register respectively for a proposed cross-border merger of RBS II B.V. into RBS plc ("the Dutch Scheme").
Upon implementation of these proposals, a substantial part of the business conducted by RBS N.V. in the Netherlands as well as in certain EMEA branches of RBS N.V. will be transferred to RBS plc. Implementation will be by the demerger of the transferring businesses into RBS II B.V. by way of a Dutch statutory demerger followed by the merger of RBS II B.V. into RBS plc through a cross-border merger. RBS plc and RBS N.V. have discussed the transfer in detail with De Nederlandsche Bank and the Financial Services Authority.
On 18 June 2012, the Court of Session in Scotland made an order approving the completion of the Merger. This order fixed the effective date of the Merger and its effects as 9 July 2012.
On 4 July 2012, it was announced that RBSG, RBS plc, RBS Holdings N.V., RBS N.V. and RBS II B.V. had decided that, as a result of technology issues which affected the RBS Group in the UK and Ireland, it would be prudent to defer the implementation of the Dutch Scheme. On 20 July 2012, it was announced that the Dutch Scheme is now expected to be implemented on 10 September 2012, subject to (among other matters) regulatory approvals and the approval of the Court of Session in Scotland.
On 15 February 2012, the rating agency Moody's Investor Service ("Moody's") placed on review for possible downgrade, or extended reviews on, the ratings of 114 European banks and 17 firms with global capital markets activities. Included in the rating reviews were the ratings of RBS and certain subsidiaries. Moody's cited three reasons for their reviews across all of the affected firms; (i) the adverse and prolonged impact of the euro area crisis; (ii) the deteriorating creditworthiness of euro area sovereigns; and (iii) the substantial challenges faced by banks and securities firms with significant capital market activities.
On 22 February 2012, Moody's also placed on review for possible downgrade selected ratings of North American bank subsidiaries of European banks. Included in these rating actions were the ratings of RBS Citizens, N.A. and Citizens Bank of Pennsylvania.
Moody's completed its ratings review on the Group on 21 June 2012. As a result the agency downgraded RBS Group plc's long-term ratings by one-notch to 'Baa1' from 'A3' (short-term ratings were affirmed unchanged at 'P-2') whilst downgrading ratings of RBS plc, NatWest Plc, RBS N.V., RBS Citizens, N.A. and Citizens Bank of Pennsylvania by one-notch: long term ratings to 'A3' from 'A2' and short term ratings to 'P-2' from 'P-1'. The long term ratings of Ulster Bank Ltd and Ulster Bank Ireland Ltd were downgraded by one-notch to 'Baa2' from 'Baa1' whilst the short-term ratings of these entities were affirmed as unchanged at 'P-2'.
The outlook on RBS plc's standalone rating ('D'+/'baa3') is now stable reflecting Moody's view that capital markets-related risk factors have now been fully incorporated into the bank's standalone rating. The outlook on RBS plc's long-term rating is negative (in line with other large UK banks) reflecting Moody's' view that government support for large UK banks may be lowered in the medium term.
There was very limited impact from these downgrades given the underlying robust improvement in the Group's liquidity, funding and capital position.
On 17 July 2012, Fitch affirmed its ratings on the Group and its subsidiaries. Fitch's ratings outlooks were also affirmed as unchanged at this time except for the outlook on Ulster Bank Ireland Ltd which was changed to Negative from Stable. This Negative outlook is in line with the outlook on the sovereign (Republic of Ireland).
No material rating actions have been undertaken on the Group or its subsidiaries by Standard & Poor's since the start of the year.
| Moody's | S&P | Fitch | ||||
|---|---|---|---|---|---|---|
| Long-term | Short-term | Long-term | Short-term | Long-term | Short-term | |
| RBS Group plc | Baa1 | P-2 | A- | A-2 | A | F1 |
| RBS plc | A3 | P-2 | A | A-1 | A | F1 |
| NatWest Plc | A3 | P-2 | A | A-1 | A | F1 |
| RBS N.V. | A3 | P-2 | A | A-1 | A | F1 |
| RBS Citizens, N.A/Citizens Bank of Pennsylvania |
A3 | P-2 | A | A-1 | A- | F1 |
| Ulster Bank Ltd/Ulster Bank Ireland Ltd |
Baa2 | P-2 | BBB+ | A-2 | A- | F1 |
Current Group and subsidiary ratings are shown in the table below.
Additionally, U K Insurance Limited has an insurance financial strength rating of 'A2' from Moody's and an insurer financial strength rating of 'A' from S&P. Both agencies have assigned a stable outlook to the company.
The UK Government and bodies controlled or jointly controlled by the UK Government and bodies over which it has significant influence are related parties of the Group. The Group enters into transactions with many of these bodies on an arm's length basis.
The Group is party to the UK Government's Asset Protection Scheme (APS). Under the APS the Group purchased credit protection over a portfolio of specified assets and exposures (covered assets) from Her Majesty's Treasury. The contract is accounted for as a derivative financial instrument and recognised as a liability at a fair value of £25 million (31 December 2011 - £231 million). Changes in fair value of £45 million (2011 - £906 million) were charged to profit or loss (Income from trading activities).
Under these schemes the UK Government guarantees eligible debt issued by qualifying institutions for a fee. During the first half of 2012 the Group repaid all its borrowings under these schemes. At 31 December 2011, the amount outstanding was £21.3 billion.
In the ordinary course of business, the Group may from time to time access market-wide facilities provided by the Bank of England.
Under the UK Government's National Loan Guarantee Scheme, launched on 20 March 2012, eligible customers receive a 1 per cent discount on their funding rate. Up to 30 June 2012, the Group had provided loans and asset finance facilities of £470 million under this scheme.
The Group's other transactions with the UK Government include the payment of taxes, principally UK corporation tax and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies (including the bank levy and FSCS levies).
(a) In their roles as providers of finance, Group companies provide development and other types of capital support to businesses. These investments are made in the normal course of business and on arm's length terms. In some instances, the investment may extend to ownership or control over 20% or more of the voting rights of the investee company. However, these investments are not considered to give rise to transactions of a materiality requiring disclosure under IAS 24.
(b) The Group recharges The Royal Bank of Scotland Group Pension Fund with the cost of administration services incurred by it. The amounts involved are not material to the Group.
Full details of the Group's related party transactions for the year ended 31 December 2011 are included in the Group's 2011 Annual Report and Accounts.
This announcement was approved by the Board of directors on 2 August 2012.
There have been no significant events between 30 June 2012 and the date of approval of this announcement which would require a change to or additional disclosure in the announcement.
Except as otherwise indicated by an asterisk (*), the information in the Risk and balance sheet management section on pages 129 to 236 is within the scope of the Deloitte LLP's review report.
The following table defines the main types of risk managed by the Group and presents a summary of the key developments for each risk in the first half of 2012.
| Risk type | Definition | H1 2012 summary |
|---|---|---|
| Capital risk | The risk that the Group has insufficient capital. |
The Core tier 1 ratio was 11.1%, despite regulatory changes increasing risk-weightings on various asset categories, particularly commercial real estate. The Group reduced RWAs in Markets and successfully restructured a large derivative position in Non-Core. Refer to the Capital section. |
| Liquidity and funding risk |
The risk that the Group is unable to meet its financial liabilities as they fall due. |
The Group maintained its trajectory towards a more stable deposit-led balance sheet with the loan:deposit ratio improving from 108% at 31 December 2011 to 104% at 30 June 2012. Short-term wholesale funding declined significantly from £102 billion at 31 December 2011 to £62 billion, covered 2.5 times by the liquidity buffer which was maintained at £156 billion. Refer to the Liquidity and funding risk section. |
| Credit risk (including counterparty risk) |
The risk that the Group will incur losses owing to the failure of a customer to meet its obligation to settle outstanding amounts. |
The Group's credit performance improved; the H1 2012 impairment charge of £2.7 billion was 34% lower than the H1 2011 charge. This was despite continued economic stress within the eurozone, including Ireland, and depressed markets elsewhere. Progress continued in reducing key credit concentration risks, with exposure to commercial real estate 7% lower than at 31 December 2011. Refer to the Credit risk section. |
| Country risk | The risk of material losses arising from significant country-specific events. |
Sovereign risk continues to increase, resulting in further rating downgrades for a number of countries, including several eurozone members. Total eurozone exposures decreased by 8% to £218 billion in H1 2012 and within that exposures to the periphery, fell by 10% to £69 billion. The Group participated in the Greek sovereign bond restructuring in March 2012 and sold all resulting new Greek sovereign bonds as well as parts of its Spanish and Portuguese bond holdings. A number of further advanced countries were brought under limit control and exposure to a range of countries was further reduced. Refer to the Country risk section. |
| Risk type | Definition | H1 2012 summary |
|---|---|---|
| Market risk | The risk arising from changes in interest rates, foreign currency, credit spreads, equity prices and risk related factors such as market volatilities. |
During H1 2012, the Group continued to manage down its market risk exposure in Non-Core through the disposal of assets and unwinding of trades. Refer to the Market risk section. |
| Insurance risk | The risk of financial loss through fluctuations in the timing, frequency and/or severity of insured events, relative to the expectations at the time of underwriting. |
Direct Line Group introduced enhanced claims management systems and processes, improving its ability to handle and understand insured events. In addition, improvements in the Group's insurance risk policy, associated minimum standards and key risk indicators were implemented. |
| Operational risk The risk of loss resulting from inadequate or failed processes, people, systems or from external events. |
The Group continued to focus on tight management of operational risks, particularly with regard to risk and control assessment (including change risk assessment), scenario analysis and statistical modelling for capital requirements. The level of operational risk remains high due to the continued scale of structural change occurring across the Group, the pace of regulatory change, the economic downturn and other external threats, such as e-crime. During June 2012, the Group's technology incident led to significant payment system disruption. A detailed investigation is underway into the root cause of the problem. |
|
| Compliance risk |
The risk arising from non compliance with national and international laws, rules and regulations. |
The Group agreed its conduct risk appetite and made significant progress towards finalising and embedding the associated policy framework and governance. In addition, Group-wide implementation of its Anti Money Laundering Change Programme continued. |
| Risk type | Definition | H1 2012 summary |
|---|---|---|
| Reputational risk |
The risk of brand damage arising from financial and non-financial events arising from the failure to meet stakeholders' expectations of the Group's performance and behaviour. |
The Group Sustainability Committee oversaw further development of the Group's policies for environmental, social and ethical risks focusing on the power generation and gambling sectors. As part of the Group's commitment to stakeholder engagement, the Group Sustainability Committee also met with key non-governmental organisations to discuss concerns over high profile issues including tax, oil and gas investment, corporate transparency and agricultural commodity trading. The disruption experienced by customers due to the Group's recent technology incident has presented reputational risks. The Group has informed customers that they will not suffer financially as a result and is undertaking an independent review of the incident. |
| Business risk | The risk of lower-than expected revenues and/or higher-than-expected operating costs. |
Business risk is fully incorporated within the Group's stress testing process through an analysis of the potential movement in revenues and operating costs under stress scenarios. |
| Pension risk | The risk that the Group will have to make additional contributions to its defined benefit pension schemes. |
The Group continued to focus on improving pension risk management systems and modelling. This included the development of a policy setting out the governance framework for managing the Group's risk as sponsor of its defined pension schemes. |
The Group aims to maintain an appropriate level of capital to meet its business needs and regulatory requirements. Capital adequacy and risk management are closely aligned. The Group's risk-weighted assets and risk asset ratios, calculated in accordance with Financial Services Authority (FSA) definitions, are set out below.
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| Risk-weighted assets (RWAs) by risk* | 2012 £bn |
2012 £bn |
2011 £bn |
| Credit risk | 334.8 | 332.9 | 344.3 |
| Counterparty risk | 53.0 | 56.8 | 61.9 |
| Market risk | 54.0 | 61.0 | 64.0 |
| Operational risk | 45.8 | 45.8 | 37.9 |
| 487.6 | 496.5 | 508.1 | |
| Asset Protection Scheme relief | (52.9) | (62.2) | (69.1) |
| 434.7 | 434.3 | 439.0 | |
| Risk asset ratios* | % | % | % |
| Core Tier 1 | 11.1 | 10.8 | 10.6 |
| Tier 1 | 13.4 | 13.2 | 13.0 |
| Total | 14.6 | 14.0 | 13.8 |
* not within the scope of Deloitte LLP's review report
The Group's regulatory capital resources in accordance with FSA definitions were as follows:
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| 2012 | 2012 | 2011 | |
| £m | £m | £m | |
| Shareholders' equity (excluding non-controlling interests) | |||
| Shareholders' equity per balance sheet | 74,016 | 73,416 | 74,819 |
| Preference shares - equity | (4,313) | (4,313) | (4,313) |
| Other equity instruments | (431) | (431) | (431) |
| 69,272 | 68,672 | 70,075 | |
| Non-controlling interests | |||
| Non-controlling interests per balance sheet | 1,200 | 1,215 | 1,234 |
| Non-controlling preference shares | (548) | (548) | (548) |
| Other adjustments to non-controlling interests for regulatory purposes | (259) | (259) | (259) |
| 393 | 408 | 427 | |
| Regulatory adjustments and deductions | |||
| Own credit | (402) | (845) | (2,634) |
| Unrealised losses on AFS debt securities | 520 | 547 | 1,065 |
| Unrealised gains on AFS equity shares | (70) | (108) | (108) |
| Cash flow hedging reserve | (1,399) | (921) | (879) |
| Other adjustments for regulatory purposes | 637 | 630 | 571 |
| Goodwill and other intangible assets | (14,888) | (14,771) | (14,858) |
| 50% excess of expected losses over impairment provisions (net of tax) | (2,329) | (2,791) | (2,536) |
| 50% of securitisation positions | (1,461) | (1,530) | (2,019) |
| 50% of APS first loss | (2,118) | (2,489) | (2,763) |
| (21,510) | (22,278) | (24,161) | |
| Core Tier 1 capital | 48,155 | 46,802 | 46,341 |
| Other Tier 1 capital | |||
| Preference shares - equity | 4,313 | 4,313 | 4,313 |
| Preference shares - debt | 1,082 | 1,064 | 1,094 |
| Innovative/hybrid Tier 1 securities | 4,466 | 4,557 | 4,667 |
| 9,861 | 9,934 | 10,074 | |
| Tier 1 deductions | |||
| 50% of material holdings | (313) | (300) | (340) |
| Tax on excess of expected losses over impairment provisions | 756 | 906 | 915 |
| 443 | 606 | 575 | |
| Total Tier 1 capital | 58,459 | 57,342 | 56,990 |
| Qualifying Tier 2 capital | |||
| Undated subordinated debt | 1,958 | 1,817 | 1,838 |
| Dated subordinated debt - net of amortisation | 13,346 | 13,561 | 14,527 |
| Unrealised gains on AFS equity shares | 70 | 108 | 108 |
| Collectively assessed impairment provisions | 552 | 571 | 635 |
| Non-controlling Tier 2 capital | 11 | 11 | 11 |
| 15,937 | 16,068 | 17,119 | |
| Tier 2 deductions | |||
| 50% of securitisation positions | (1,461) | (1,530) | (2,019) |
| 50% excess of expected losses over impairment provisions | (3,085) | (3,697) | (3,451) |
| 50% of material holdings | (313) | (300) | (340) |
| 50% of APS first loss | (2,118) | (2,489) | (2,763) |
| (6,977) | (8,016) | (8,573) | |
| Total Tier 2 capital | 8,960 | 8,052 | 8,546 |
| 30 June 2012 £m |
31 March 2012 £m |
31 December 2011 £m |
|
|---|---|---|---|
| Supervisory deductions | |||
| Unconsolidated Investments | |||
| - Direct Line Group | (3,642) | (4,130) | (4,354) |
| - Other investments | (141) | (248) | (239) |
| Other deductions | (197) | (212) | (235) |
| (3,980) | (4,590) | (4,828) | |
| Total regulatory capital | 63,439 | 60,804 | 60,708 |
| Movement in Core Tier 1 capital | £m |
|---|---|
| At 1 January 2012 | 46,341 |
| Attributable profit net of movements in fair value of own debt | 242 |
| Share capital and reserve movements in respect of employee benefits | 659 |
| Foreign currency reserves | (461) |
| Decrease in non-controlling interests | (34) |
| Decrease in capital deductions including APS first loss | 1,410 |
| Decrease in goodwill and intangibles | (30) |
| Other movements | 28 |
| At 30 June 2012 | 48,155 |
Risk-weighted assets by risk category and division are set out below.
| 30 June 2012 | Credit risk £bn |
Counterparty risk £bn |
Market risk £bn |
Operational risk £bn |
Gross RWAs £bn |
|---|---|---|---|---|---|
| UK Retail | 39.6 | - | - | 7.8 | 47.4 |
| UK Corporate | 70.8 | - | - | 8.6 | 79.4 |
| Wealth | 10.3 | - | 0.1 | 1.9 | 12.3 |
| International Banking | 41.2 | - | - | 4.8 | 46.0 |
| Ulster Bank | 34.7 | 0.9 | 0.1 | 1.7 | 37.4 |
| US Retail & Commercial | 52.5 | 1.1 | - | 4.9 | 58.5 |
| Retail & Commercial | 249.1 | 2.0 | 0.2 | 29.7 | 281.0 |
| Markets | 15.7 | 33.4 | 43.1 | 15.7 | 107.9 |
| Other | 10.5 | 0.2 | 0.2 | 1.8 | 12.7 |
| Core | 275.3 | 35.6 | 43.5 | 47.2 | 401.6 |
| Non-Core | 56.4 | 17.4 | 10.5 | (1.6) | 82.7 |
| Group before RFS Holdings MI | 331.7 | 53.0 | 54.0 | 45.6 | 484.3 |
| RFS Holdings MI | 3.1 | - | - | 0.2 | 3.3 |
| Group | 334.8 | 53.0 | 54.0 | 45.8 | 487.6 |
| APS relief | (46.2) | (6.7) | - | - | (52.9) |
| Net RWAs | 288.6 | 46.3 | 54.0 | 45.8 | 434.7 |
| Credit | Counterparty | Market | Operational | Gross | |
|---|---|---|---|---|---|
| 31 March 2012 | risk £bn |
risk £bn |
risk £bn |
risk £bn |
RWAs £bn |
| UK Retail | 40.4 | - | - | 7.8 | 48.2 |
| UK Corporate | 68.3 | - | - | 8.6 | 76.9 |
| Wealth | 10.9 | - | 0.1 | 1.9 | 12.9 |
| International Banking | 37.0 | - | - | 4.8 | 41.8 |
| Ulster Bank | 35.9 | 0.7 | 0.1 | 1.7 | 38.4 |
| US Retail & Commercial | 52.8 | 0.9 | - | 4.9 | 58.6 |
| Retail & Commercial | 245.3 | 1.6 | 0.2 | 29.7 | 276.8 |
| Markets | 15.0 | 36.5 | 48.4 | 15.7 | 115.6 |
| Other | 9.0 | 0.2 | - | 1.8 | 11.0 |
| Core | 269.3 | 38.3 | 48.6 | 47.2 | 403.4 |
| Non-Core | 60.6 | 18.5 | 12.4 | (1.6) | 89.9 |
| Group before RFS Holdings MI | 329.9 | 56.8 | 61.0 | 45.6 | 493.3 |
| RFS Holdings MI | 3.0 | - | - | 0.2 | 3.2 |
| Group | 332.9 | 56.8 | 61.0 | 45.8 | 496.5 |
| APS relief | (53.9) | (8.3) | - | - | (62.2) |
| Net RWAs | 279.0 | 48.5 | 61.0 | 45.8 | 434.3 |
| 31 December 2011 | |||||
| UK Retail | 41.1 | - | - | 7.3 | 48.4 |
| UK Corporate | 71.2 | - | - | 8.1 | 79.3 |
| Wealth | 10.9 | - | 0.1 | 1.9 | 12.9 |
| International Banking | 38.9 | - | - | 4.3 | 43.2 |
| Ulster Bank | 33.6 | 0.6 | 0.3 | 1.8 | 36.3 |
| US Retail & Commercial | 53.6 | 1.0 | - | 4.7 | 59.3 |
| Retail & Commercial | 249.3 | 1.6 | 0.4 | 28.1 | 279.4 |
| Markets | 16.7 | 39.9 | 50.6 | 13.1 | 120.3 |
| Other | 9.8 | 0.2 | - | 2.0 | 12.0 |
| Core | 275.8 | 41.7 | 51.0 | 43.2 | 411.7 |
| Non-Core | 65.6 | 20.2 | 13.0 | (5.5) | 93.3 |
| Group before RFS Holdings MI | 341.4 | 61.9 | 64.0 | 37.7 | 505.0 |
| RFS Holdings MI | 2.9 | - | - | 0.2 | 3.1 |
| Group | 344.3 | 61.9 | 64.0 | 37.9 | 508.1 |
| APS relief | (59.6) | (9.5) | - | - | (69.1) |
| Net RWAs | 284.7 | 52.4 | 64.0 | 37.9 | 439.0 |
The regulatory change agenda remains intense, although we are now seeing a change of emphasis. At a global level, the G20 financial sector reform action plan, first developed in 2008, has mostly been addressed, with focus at that forum now shifting to growth and other issues. The G20 is expected to endorse policy proposals on 'shadow banking' by the end of 2012 but its regulation agenda is increasingly geared towards the implementation of agreed standards. Although policy initiation at the G20 level is drawing to an end, there remains a substantial pipeline of policy development, particularly in the EU and US, and RBS does not anticipate any easing of this for some time.
In the H1 2012, there were new regulatory proposals in Europe for data protection and crisis management as well as initial discussions on a banking union and the launch of the Liikanen Group to look at a structural reform of the industry. Negotiations, which are still incomplete, continued throughout the period on the adoption of the Basel III enhanced capital and liquidity standards in Europe. The European Banking Authority published several draft technical standards in anticipation of final agreement.
Basel III capital proposals were also issued in the US, as well as final rules for Basel 2.5. These were drawn up to be consistent with the Dodd-Frank Act and several other proposed and final rules were issued under the auspices of that legislation during the period. Significant activity took place in both Europe and the US to finalise rules requiring central clearing, where possible, and other reforms of over-the-counter (OTC) derivatives, as the end of 2012 deadline set by the G20 approaches. Additionally, work continued on the finalisation of recovery and resolution planning frameworks for Europe and the UK.
In the UK, the Financial Services Bill to introduce the 'twin peaks' model of financial regulation was published as the FSA continued to alter its structure in anticipation of its formal split into the Prudential Regulation Authority and the Financial Conduct Authority in 2013. The government also published its White Paper on the implementation of the Vickers Report. The Group is evaluating the impact of these developments.
The Group, in conjunction with the FSA, continues to evaluate its models for the assessment of RWAs ascribed to credit risk across various classes. This together with the changes introduced by CRD IV relating primarily to counterparty risk, is expected to increase RWA requirements by the end of 2013 by £50 billion to £65 billion. These estimates are still subject to change; a degree of uncertainty remains around implementation details as the guidelines are not finalised and must still be enacted into EU law. There could be other future changes and associated impacts from these model reviews. See page 115 of the Group's 2011 Annual Report and Accounts on background on Basel III and related proposals. The Group is also in the process of implementing changes to the RWA requirements for commercial real estate portfolios consistent with revised industry guidance from the FSA. This is projected to increase RWA requirements by circa £20 billion by the end of 2013, of which circa £10 billion will apply in 2012. Certain of the changes referred to above have been implemented, adding circa £15 billion to RWAs as of 30 June 2012.
The reported Core Tier 1 ratio following the implementation of the above changes is currently projected(1) to be 10.3% at 31 December 2013, while the fully loaded Basel III Core Tier 1 ratio at that date is estimated at 9.0% - 9.5%.
CRD IV legislation implementing Basel III proposals was due to be finalised in early July for implementation by 1 January 2013. However there are a number of areas still under consideration. On 1 August 2012, the FSA issued a statement indicating that it was unlikely that the legislation will be adopted earlier than autumn 2012 and enter into force on the envisaged implementation date of 1 January 2013. No alternative implementation date has yet been communicated by the EU institutions.
(1) Projected using consensus earnings and company balance sheet forecasts.
Liquidity risk is the risk that the Group is unable to meet its obligations, including financing maturities as they fall due. Liquidity risk is heavily influenced by the maturity profile and mix of the Group's funding base, as well as the quality and liquidity value of its liquidity portfolio.
The Group continues to improve the structure and composition of its balance sheet through persistently difficult market conditions.
The table below shows the Group's primary funding sources including deposits in disposal groups and excluding repurchase agreements.
| 30 June 2012 £m |
31 March 2012 £m |
31 December 2011 £m |
|
|---|---|---|---|
| Deposits by banks | |||
| derivative cash collateral | 32,001 | 29,390 | 31,807 |
| other deposits | 35,619 | 36,428 | 37,307 |
| 67,620 | 65,818 | 69,114 | |
| Debt securities in issue | |||
| conduit asset-backed commercial paper (ABCP) | 4,246 | 9,354 | 11,164 |
| other commercial paper (CP) | 1,985 | 3,253 | 5,310 |
| certificates of deposits (CDs) | 10,397 | 14,575 | 16,367 |
| medium-term notes (MTNs) | 81,229 | 90,674 | 105,709 |
| covered bonds | 9,987 | 10,107 | 9,107 |
| securitisations | 12,011 | 14,980 | 14,964 |
| 119,855 | 142,943 | 162,621 | |
| Subordinated liabilities | 25,596 | 25,513 | 26,319 |
| Notes issued | 145,451 | 168,456 | 188,940 |
| Wholesale funding | 213,071 | 234,274 | 258,054 |
| Customer deposits | |||
| cash collateral | 10,269 | 8,829 | 9,242 |
| other deposits | 425,031 | 423,659 | 427,511 |
| Total customer deposits | 435,300 | 432,488 | 436,753 |
| Total funding | 648,371 | 666,762 | 694,807 |
| Disposal group deposits included above | |||
| banks | 1 | 83 | 1 |
| customers | 22,531 | 22,281 | 22,610 |
| 22,532 | 22,364 | 22,611 |
The table below shows the Group's wholesale funding source metrics.
| Short-term wholesale funding (1) |
Total wholesale funding |
Net inter-bank funding (2) |
||||||
|---|---|---|---|---|---|---|---|---|
| Excluding derivative collateral £bn |
Including derivative collateral £bn |
Excluding derivative collateral £bn |
Including derivative collateral £bn |
Deposits £bn |
Loans £bn |
Net interbank funding £bn |
||
| 30 June 2012 | 62.3 | 94.3 | 181.1 | 213.1 | 35.6 | (22.3) | 13.3 | |
| 31 March 2012 | 79.7 | 109.1 | 204.9 | 234.3 | 36.4 | (19.7) | 16.7 | |
| 31 December 2011 | 102.4 | 134.2 | 226.2 | 258.1 | 37.3 | (24.3) | 13.0 | |
| 30 September 2011 | 141.6 | 174.1 | 267.0 | 299.4 | 46.2 | (33.0) | 13.2 | |
| 30 June 2011 | 148.1 | 173.6 | 286.2 | 311.7 | 46.1 | (33.6) | 12.5 |
Notes:
(1) Short-term balances denote those with a residual maturity of less than one year and includes longer-term issuances.
(2) Excludes derivative collateral.
The table below shows the Group's debt securities in issue and subordinated liabilities by remaining maturity.
| Debt securities in issue | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other | Total | Total | |||||||
| Conduit | CP and | Covered | Securit | Subordinated | notes | notes | |||
| ABCP | CDs | MTNs | bonds | isations | Total | liabilities | issued | issued | |
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m | % |
| Less than 1 year | 4,246 | 12,083 | 16,845 | 1,020 | 69 | 34,263 | 1,631 | 35,894 | 25 |
| 1-3 years | - | 293 | 24,452 | 1,681 | 1,263 | 27,689 | 5,401 | 33,090 | 23 |
| 3-5 years | - | 1 | 16,620 | 3,619 | - | 20,240 | 2,667 | 22,907 | 15 |
| More than 5 years | - | 5 | 23,312 | 3,667 | 10,679 | 37,663 | 15,897 | 53,560 | 37 |
| 4,246 | 12,382 | 81,229 | 9,987 | 12,011 | 119,855 | 25,596 145,451 | 100 | ||
| 31 March 2012 | |||||||||
| Less than 1 year | 9,354 | 17,532 | 19,686 | - | 22 | 46,594 | 454 | 47,048 | 28 |
| 1-3 years | - | 290 | 30,795 | 2,787 | 1,231 | 35,103 | 4,693 | 39,796 | 24 |
| 3-5 years | - | 1 | 16,416 | 3,666 | - | 20,083 | 4,998 | 25,081 | 15 |
| More than 5 years | - | 5 | 23,777 | 3,654 | 13,727 | 41,163 | 15,368 | 56,531 | 33 |
| 9,354 | 17,828 | 90,674 | 10,107 | 14,980 | 142,943 | 25,513 168,456 | 100 | ||
| 31 December 2011 | |||||||||
| Less than 1 year | 11,164 | 21,396 | 36,302 | - | 27 | 68,889 | 624 | 69,513 | 37 |
| 1-3 years | - | 278 | 26,595 | 2,760 | 479 | 30,112 | 3,338 | 33,450 | 18 |
| 3-5 years | - | 2 | 16,627 | 3,673 | - | 20,302 | 7,232 | 27,534 | 14 |
| More than 5 years | - | 1 | 26,185 | 2,674 | 14,458 | 43,318 | 15,125 | 58,443 | 31 |
| 11,164 | 21,677 | 105,709 | 9,107 | 14,964 | 162,621 | 26,319 188,940 | 100 |
• Short-term debt securities in issue declined by £34.6 billion (Q2 2012 - £12.3 billion) primarily due to the final tranches of notes issued under the Credit Guarantee Scheme maturing (£21.3 billion in H1 2012 and £5.7 billion in Q2 2012) and the reduction of commercial paper in issue of £10.2 billion (Q2 2012 - £6.4 billion) in line with the Group's strategy.
The table below shows the composition of the Group's deposits excluding repos and repo funding including disposal groups.
| 30 June 2012 | 31 March 2012 | 31 December 2011 | |||||
|---|---|---|---|---|---|---|---|
| Deposits £m |
Repos £m |
Deposits £m |
Repos £m |
Deposits £m |
Repos £m |
||
| Financial institutions | |||||||
| - central and other banks | 67,620 | 39,125 | 65,818 | 41,415 | 69,114 | 39,691 | |
| - other financial institutions | 65,563 | 87,789 | 61,552 | 84,743 | 66,009 | 86,032 | |
| Personal and corporate deposits | 369,737 | 1,161 | 370,936 | 2,560 | 370,744 | 2,780 | |
| 502,920 | 128,075 | 498,306 | 128,718 | 505,867 | 128,503 |
• The central and other bank balances include €10 billion in relation to funding accessed through the European Central Banks long-term refinancing operation facility.
• Of the deposits above, about a third are insured through the UK Financial Services Compensation Scheme, US Federal Deposit Insurance Corporation and similar schemes.
The table below shows the Group's divisional customer loan:deposit ratio (LDR) and customer funding gap.
| 30 June 2012 | Loans (1) £m |
Deposits (2) £m |
LDR (3) % |
Funding surplus/ (gap) (3) £m |
|---|---|---|---|---|
| UK Retail | 110,318 | 106,571 | 104 | (3,747) |
| UK Corporate | 107,775 | 127,446 | 85 | 19,671 |
| Wealth | 16,888 | 38,462 | 44 | 21,574 |
| International Banking (4) | 43,190 | 42,238 | 102 | (952) |
| Ulster Bank | 29,701 | 20,593 | 144 | (9,108) |
| US Retail & Commercial | 51,634 | 59,229 | 87 | 7,595 |
| Conduits (4) | 6,295 | - | - | (6,295) |
| Retail & Commercial | 365,801 | 394,539 | 93 | 28,738 |
| Markets | 30,191 | 34,257 | 88 | 4,066 |
| Direct Line Group and other | 1,320 | 2,999 | 44 | 1,679 |
| Core | 397,312 | 431,795 | 92 | 34,483 |
| Non-Core | 57,398 | 3,505 | 1,638 | (53,893) |
| Group | 454,710 | 435,300 | 104 | (19,410) |
| 31 March 2012 | ||||
| UK Retail | 109,852 | 104,247 | 105 | (5,605) |
| UK Corporate | 107,583 | 124,256 | 87 | 16,673 |
| Wealth | 16,881 | 38,278 | 44 | 21,397 |
| International Banking (4) | 42,713 | 45,041 | 95 | 2,328 |
| Ulster Bank | 30,831 | 20,981 | 147 | (9,850) |
| US Retail & Commercial | 50,298 | 58,735 | 86 | 8,437 |
| Conduits (4) | 9,544 | - | - | (9,544) |
| Retail & Commercial | 367,702 | 391,538 | 94 | 23,836 |
| Markets | 28,628 | 34,638 | 83 | 6,010 |
| Direct Line Group and other | 1,468 | 2,573 | 57 | 1,105 |
| Core | 397,798 | 428,749 | 93 | 30,951 |
| Non-Core | 61,872 | 3,739 | 1,655 | (58,133) |
| Group | 459,670 | 432,488 | 106 | (27,182) |
For the notes to this table refer to the following page.
| 31 December 2011 | Loans (1) £m |
Deposits (2) £m |
LDR (3) % |
Funding surplus/ (gap) (3) £m |
|---|---|---|---|---|
| UK Retail | 107,983 | 101,878 | 106 | (6,105) |
| UK Corporate | 108,668 | 126,309 | 86 | 17,641 |
| Wealth | 16,834 | 38,164 | 44 | 21,330 |
| International Banking (4) | 46,417 | 45,051 | 103 | (1,366) |
| Ulster Bank | 31,303 | 21,814 | 143 | (9,489) |
| US Retail & Commercial | 50,842 | 59,984 | 85 | 9,142 |
| Conduits (4) | 10,504 | - | - | (10,504) |
| Retail & Commercial | 372,551 | 393,200 | 95 | 20,649 |
| Markets | 31,254 | 36,776 | 85 | 5,522 |
| Direct Line Group and other | 1,196 | 2,496 | 48 | 1,300 |
| Core | 405,001 | 432,472 | 94 | 27,471 |
| Non-Core | 68,516 | 4,281 | 1,600 | (64,235) |
| Group | 473,517 | 436,753 | 108 | (36,764) |
Notes:
(1) Loans and advances to customers excluding reverse repurchase agreements and stock borrowing but including disposal groups.
(2) Excluding repurchase agreements and stock lending but including disposal groups.
(3) Based on loans and advances to customers net of provisions and customer deposits as shown.
(4) All conduits relate to International Banking and have been extracted and shown separately.
• The Group's customer loan:deposit ratio improved by 400 basis points in the first half 2012 (Q2 2012 - 200 basis points) despite a credit rating downgrade in June 2012, reflecting the growth of Core Retail & Commercial deposits and the ongoing contraction of Non-Core loans.
The table below shows debt securities issued by the Group in the period with an original maturity of one year or more. The Group also executes other long-term funding arrangements (predominantly term repurchase agreements) which are not reflected in the following tables.
| Half year ended | |||||
|---|---|---|---|---|---|
| 30 June | 31 December | 30 June | |||
| 2012 | 2011 | 2011 | |||
| £m | £m | £m | |||
| Public | |||||
| - unsecured | - | - | 5,085 | ||
| - secured | 1,784 | 4,944 | 4,863 | ||
| Private | |||||
| - unsecured | 2,585 | 4,166 | 8,248 | ||
| - secured | - | 500 | - | ||
| Gross issuance | 4,369 | 9,610 | 18,196 | ||
| Buy backs | (2,859) | (3,656) | (3,236) | ||
| Net issuance | 1,510 | 5,954 | 14,960 |
• Issuance in 2012 has been modest, demonstrating reduced reliance on capital markets for funding.
The Group has access to secured funding markets through own-asset securitisation and covered bond funding programme. This complements existing wholesale funding programmes and access to the repo markets. The Group monitors and manages encumbrance levels related to these secured funding programmes including the potential encumbrance of Group assets that could be used in ownasset securitisations and/or covered bonds that could be used as contingent liquidity.
The Group has a programme of own-asset securitisations where assets are transferred to bankruptcy remote special purpose entities (SPEs) funded by the issue of debt securities. The majority of the risks and rewards of the portfolio are retained by the Group and these SPEs are consolidated with all of the transferred assets retained on the Group's balance sheet. In some own-asset securitisations, the Group may purchase all the issued securities which are available to be pledged as collateral for repurchase agreements with major central banks
Certain loans and advances to customers have been assigned to bankruptcy remote limited liability partnerships to provide security for issues of covered bonds by the Group. The Group retains all of the risks and rewards of these loans, the partnerships are consolidated, the loans retained on the Group's balance sheet and the related covered bonds included within debt securities in issue.
The following table shows:
| Debt securities in issue | |||||||
|---|---|---|---|---|---|---|---|
| Held by third | Held by the | ||||||
| Assets (1) | parties (2) | Group (3) | Total | ||||
| Asset type (1) | £m | £m | £m | £m | |||
| 30 June 2012 | |||||||
| Mortgages | |||||||
| - UK (RMBS) | 21,492 | 7,461 | 16,797 | 24,258 | |||
| - UK (covered bonds) | 17,303 | 9,987 | - | 9,987 | |||
| - Irish | 11,953 | 3,278 | 8,204 | 11,482 | |||
| UK credit cards | 3,827 | 1,265 | 282 | 1,547 | |||
| UK personal loans | 4,823 | - | 4,406 | 4,406 | |||
| Other | 18,730 | 7 | 20,398 | 20,405 | |||
| 78,128 | 21,998 | 50,087 | 72,085 | ||||
| Cash deposits (4) | 5,210 | ||||||
| 83,338 |
For the notes relating to this table refer to the following page.
| Debt securities in issue | ||||
|---|---|---|---|---|
| Held by third | Held by the | |||
| Assets (1) | parties (2) | Group (3) | Total | |
| 31 March 2012 | £m | £m | £m | £m |
| Mortgages | ||||
| - UK (RMBS) | 48,674 | 10,303 | 45,320 | 55,623 |
| - UK (covered bonds) | 17,773 | 10,107 | - | 10,107 |
| - Irish | 12,496 | 3,419 | 8,532 | 11,951 |
| UK credit cards | 3,869 | 1,251 | 282 | 1,533 |
| UK personal loans | 4,948 | - | 4,543 | 4,543 |
| Other | 18,505 | 7 | 18,462 | 18,469 |
| 106,265 | 25,087 | 77,139 | 102,226 | |
| Cash deposits (4) | 11,198 | |||
| 117,463 | ||||
| 31 December 2011 | ||||
| Mortgages | ||||
| - UK (RMBS) | 49,549 | 10,988 | 47,324 | 58,312 |
| - UK (covered bonds) | 15,441 | 9,107 | - | 9,107 |
| - Irish | 12,660 | 3,472 | 8,670 | 12,142 |
| UK credit cards | 4,037 | 500 | 110 | 610 |
| UK personal loans | 5,168 | - | 4,706 | 4,706 |
| Other | 19,778 | 4 | 20,577 | 20,581 |
| 106,633 | 24,071 | 81,387 | 105,458 | |
| Cash deposits (4) | 11,998 | |||
| 118,631 |
Notes:
(1) Assets that have been pledged to the SPEs which itself is a subset of the total portfolio of eligible assets within a collateral pool.
(4) Cash deposits comprise £4.4 billion (31 March 2012 - £10.4 billion; 31 December 2011 - £11.2 billion) from mortgage repayments and £0.8 billion (31 March 2012 and 31 December 2011 - £0.8 billion) from other loan repayments held in the SPEs, to repay debt securities issued by the own-asset securitisation vehicles.
• The Group unwound a number of own-asset securitisations as part of its strategy on assets used for the Bank of England discount window facility. At 30 June 2012 the Group had £37.1 billion of pre-positioned whole loans in relation to this facility in addition to the balances above.
The Group enters into securities repurchase agreements and securities lending transactions (repos) under which it transfers securities in accordance with normal market practice. Generally, the agreements require additional collateral to be provided if the value of the securities falls below a predetermined level. Under standard terms for repurchase transactions in the UK and US markets, the recipient of collateral has an unrestricted right to sell or repledge it, subject to returning equivalent securities on settlement of the transaction.
Securities sold under repurchase transactions are not derecognised if the Group retains substantially all the risks and rewards of ownership. The fair value (which is equivalent to the carrying value) of securities transferred under such repurchase transactions included within securities on the balance sheet is set out below. All of these securities could be sold or repledged by the holder.
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| 2012 | 2012 | 2011 | |
| Assets pledged against repos | £m | £m | £m |
| Debt securities | 81,871 | 80,010 | 79,480 |
| Equity shares | 5,069 | 3,390 | 6,534 |
The Group sponsors and administers a number of asset-backed commercial paper conduits. The liquidity commitments from the Group to each conduit exceeds the nominal amount of assets funded by a conduit as liquidity commitments are sized to cover the cost of the related assets. Refer to pages 125 to 127 of the Group's 2011 Annual Report and Accounts for more information.
The total assets and other aspects relating to the Group's consolidated conduits are set out below.
| 30 June 2012 | 31 December 2011 | |||||
|---|---|---|---|---|---|---|
| Core | Non-Core | Total | Core | Non-Core | Total | |
| £m | £m | £m | £m | £m | £m | |
| Total assets held by the conduits | 6,672 | 1,575 | 8,247 | 11,208 | 1,893 | 13,101 |
| Commercial paper issued (1) | 5,361 | 96 | 5,457 | 10,590 | 859 | 11,449 |
| Liquidity and credit enhancements | ||||||
| Deal specific liquidity | ||||||
| - drawn | 752 | 1,493 | 2,245 | 321 | 1,051 | 1,372 |
| - undrawn | 9,104 | 366 | 9,470 | 15,324 | 1,144 | 16,468 |
| PWCE (2) | 417 | 155 | 572 | 795 | 193 | 988 |
| 10,273 | 2,014 | 12,287 | 16,440 | 2,388 | 18,828 | |
| Maximum exposure to loss (3) | 9,856 | 1,859 | 11,715 | 15,646 | 2,194 | 17,840 |
Notes:
(1) Includes £1.3 billion of asset backed commercial paper issued to RBS plc (31 December 2011 - £0.3 billion).
The table below shows the composition of the Group's liquidity portfolio (at estimated liquidity value). All assets within the liquidity portfolio are unencumbered.
| 30 June 2012 | 31 March 2012 | 31 December 2011 | ||||||
|---|---|---|---|---|---|---|---|---|
| Quarterly average £m |
Period end £m |
Quarterly average £m |
Period end £m |
Quarterly average £m |
Period end £m |
|||
| Cash and balances at central banks Central and local government bonds (1) |
87,114 | 71,890 | 91,287 | 69,489 | 89,377 | 69,932 | ||
| AAA rated governments and US agencies | 20,163 | 26,315 | 19,085 | 29,639 | 30,421 | 29,632 | ||
| AA- to AA+ rated governments (2) | 10,739 | 14,449 | 8,924 | 14,903 | 5,056 | 14,102 | ||
| governments rated below AA | 609 | 519 | 797 | 544 | 1,011 | 955 | ||
| local government | 2,546 | 1,872 | 3,980 | 2,933 | 4,517 | 4,302 | ||
| 34,057 | 43,155 | 32,786 | 48,019 | 41,005 | 48,991 | |||
| Treasury bills | - | - | - | - | 444 | - | ||
| 121,171 | 115,045 | 124,073 | 117,508 | 130,826 | 118,923 | |||
| Other assets (3) | ||||||||
| AAA rated | 22,505 | 10,712 | 26,435 | 24,243 | 25,083 | 25,202 | ||
| below AAA rated and other high quality assets | 13,789 | 30,244 | 9,194 | 10,972 | 11,400 | 11,205 | ||
| 36,294 | 40,956 | 35,629 | 35,215 | 36,483 | 36,407 | |||
| Total liquidity portfolio | 157,465 | 156,001 | 159,702 | 152,723 | 167,309 | 155,330 |
Notes:
(1) Includes FSA eligible government bonds of £29.7 billion (31 March 2012 - £30.5 billion; 31 December 2011 - £36.7 billion).
(2) Includes US government guaranteed and US government sponsored agencies.
(3) Other assets are a diversified pool of unencumbered assets that would be accepted as collateral by central banks as part of open market operations.
The table below shows the composition of the Group's net stable funding ratio (NSFR), estimated by applying the Basel III guidance issued in December 2010. The Group's NSFR will also continue to be refined over time in line with regulatory developments and related interpretations. It may also be calculated on a basis that may differ from other financial institutions.
| 30 June 2012 | 31 March 2012 | 31 December 2011 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASF (1) | ASF (1) | ASF (1) | Weighting | |||||
| £bn | £bn | £bn | £bn | £bn | £bn | % | ||
| Equity | 75 | 75 | 75 | 75 | 76 | 76 | 100 | |
| Wholesale funding > 1 year | 119 | 119 | 125 | 125 | 124 | 124 | 100 | |
| Wholesale funding < 1 year | 94 | - | 109 | - | 134 | - | - | |
| Derivatives | 481 | - | 447 | - | 524 | - | - | |
| Repurchase agreements | 128 | - | 129 | - | 129 | - | - | |
| Deposits | ||||||||
| - Retail and SME - more stable | 235 | 212 | 230 | 207 | 227 | 204 | 90 | |
| - Retail and SME - less stable | 29 | 23 | 30 | 24 | 31 | 25 | 80 | |
| - Other | 171 | 86 | 173 | 87 | 179 | 89 | 50 | |
| Other (2) | 83 | - | 85 | - | 83 | - | - | |
| Total liabilities and equity | 1,415 | 515 | 1,403 | 518 | 1,507 | 518 | ||
| Cash | 79 | - | 82 | - | 79 | - | - | |
| Inter-bank lending | 39 | - | 36 | - | 44 | - | - | |
| Debt securities > 1 year | ||||||||
| - governments AAA to AA- | 70 | 4 | 70 | 3 | 77 | 4 | 5 | |
| - other eligible bonds | 60 | 12 | 64 | 13 | 73 | 15 | 20 | |
| - other bonds | 20 | 20 | 20 | 20 | 14 | 14 | 100 | |
| Debt securities < 1 year | 38 | - | 42 | - | 45 | - | - | |
| Derivatives | 486 | - | 453 | - | 530 | - | - | |
| Reverse repurchase agreements | 98 | - | 91 | - | 101 | - | - | |
| Customer loans and advances > 1 year | ||||||||
| - residential mortgages | 146 | 95 | 145 | 94 | 145 | 94 | 65 | |
| - other | 151 | 151 | 167 | 167 | 173 | 173 | 100 | |
| Customer loans and advances < 1 year | ||||||||
| - retail loans | 18 | 15 | 19 | 16 | 19 | 16 | 85 | |
| - other | 140 | 70 | 129 | 65 | 137 | 69 | 50 | |
| Other (3) | 70 | 70 | 85 | 85 | 70 | 70 | 100 | |
| Total assets | 1,415 | 437 | 1,403 | 463 | 1,507 | 455 | ||
| Undrawn commitments | 228 | 11 | 237 | 12 | 240 | 12 | 5 | |
| Total assets and undrawn commitments | 1,643 | 448 | 1,640 | 475 | 1,747 | 467 | ||
| Net stable funding ratio | 115% | 109% | 111% |
Notes:
(1) Available stable funding.
(2) Deferred tax, insurance liabilities and other liabilities.
(3) Prepayments, accrued income, deferred tax, settlement balances and other assets.
Non-traded interest rate risk impacts earnings arising from the Group's banking activities. This excludes positions in financial instruments or commodities which are deemed to be held-for-trading or hedging items that are held-for-trading.
The Group provides a range of financial products to meet a variety of customer requirements. These products differ with regard to repricing frequency, tenor, indexation, prepayments, optionality and other features. When aggregated, they form portfolios of assets and liabilities with varying degrees of sensitivity to changes in market rates.
Mismatches in these sensitivities give rise to net interest income volatility as interest rates rise and fall. For example, a bank with a floating rate loan portfolio and largely fixed rate deposits will see its net interest income rise as interest rates rise and fall as rates decline.
The Group policy is to manage interest rate sensitivity in banking book portfolios within defined risk limits. Interest rate risk is transferred from the banking divisions to Group Treasury. Aggregate positions are then hedged externally using cash and derivative instruments, primarily interest rate swaps, to manage exposures within Group Asset and Liability Management Committee (GALCO) approved limits.
The Group assesses interest rate risk in the banking book (IRRBB) using a set of standards to define, measure and report the risk. These standards incorporate the expected divergence between contractual terms and the actual behaviour of fixed rate loan portfolios due to refinancing incentives and the risks associated with structural hedges of interest rate insensitive balances.
Key measures used to evaluate IRRBB are subject to approval by divisional Asset and Liability Management Committees (ALCOs) and GALCO. Limits on IRRBB are proposed by the Group Treasurer for approval by the Executive Risk Forum annually. Residual risk positions are reported on a regular basis to divisional ALCOs and monthly to the Group Balance Sheet Management Committee, GALCO, the Group Board and the Executive Risk Forum.
* not within the scope of Deloitte LLP's review report
The Group uses a variety of approaches to quantify its interest rate risk encompassing both earnings and value metrics. IRRBB is measured using a version of the same VaR methodology that is used for the Group's trading portfolios. Net interest income exposures are measured in terms of earnings sensitivity over time against movements in interest rates.
VaR metrics are based on interest rate repricing gap reports as at the reporting date. These incorporate customer products and associated funding and hedging transactions as well as nonfinancial assets and liabilities such as property, equipment, capital and reserves. Behavioural assumptions are applied as appropriate.
The VaR does not provide a dynamic measurement of interest rate risk since static underlying repricing gap positions are assumed. Changes in customer behaviour under varying interest rate scenarios are captured by way of earnings risk measures.
IRRBB VaR for the Group's retail and commercial banking activities at 99% confidence level and currency analysis of period end VaR were as follows:
| Average £m |
Period end £m |
Maximum £m |
Minimum £m |
|
|---|---|---|---|---|
| 30 June 2012 | 56 | 55 | 65 | 51 |
| 31 December 2011 | 63 | 51 | 80 | 44 |
| 30 June 2012 £m |
31 December 2011 £m |
|
|---|---|---|
| Euro | 21 | 26 |
| Sterling | 43 | 57 |
| US dollar | 62 | 61 |
| Other | 4 | 5 |
Earnings sensitivity to rate movements is derived from a central forecast over a twelve month period. Market implied forward rates and new business volume, mix and pricing consistent with business assumptions are used to generate a base case earnings forecast. The rates used to calculate this forecast are then shifted up and down by 100 basis points and the earnings recalculated. New business assumptions and the behavioural maturity profile of existing business may vary under the different rate scenarios.
The following table shows the sensitivity of net interest income, over the next twelve months, to an immediate upward or downward change of 100 basis points to all interest rates. In addition, the table includes the impact of a gradual 400 basis point steepening and a gradual 300 basis point flattening of the yield curve at tenors greater than a year.
| 30 June 2012 | Euro £m |
Sterling £m |
US dollar £m |
Other £m |
Total £m |
|---|---|---|---|---|---|
| + 100 basis points shift in yield curves | 14 | 214 | 90 | 26 | 344 |
| - 100 basis points shift in yield curves | 20 | (273) | (25) | (36) | (314) |
| Bear steepener | 237 | ||||
| Bull flattener | (161) | ||||
| 31 December 2011 | |||||
| + 100 basis points shift in yield curves | (19) | 190 | 59 | 14 | 244 |
| - 100 basis points shift in yield curves | 25 | (188) | (4) | (16) | (183) |
| Bear steepener | 443 | ||||
| Bull flattener | (146) |
Banks generally have the benefit of a significant pool of stable, non and low interest bearing liabilities, principally comprising equity and money transmission accounts. These balances are usually invested in longer-term fixed rate assets, either directly or by the use of interest rate swaps, in order to minimise earnings volatility and to provide a consistent and predictable revenue stream.
The Group targets a weighted average life for these economic hedges. This is accomplished using a continuous rolling maturity programme to achieve the desired profile and is primarily managed by Group Treasury.
It is estimated that this programme, encompassing both equity and product structural hedges, contributed an additional £750 million to the Group's net interest income over the half year 2012 relative to base rate. The maturity profile of the hedge aims to reduce the potential sensitivity of income to rate movements and residual sensitivity is estimated at £50 to £75 million for a 100 basis point adverse movement in rates over a twelve month horizon.
Fixed rate returns on liability structural hedges are expected to decline over the next twelve months as projected market rates continue to trend below historic averages. However, the portfolio maturity profile continues to moderate this impact and the Group expects the net contribution from these hedges to remain broadly stable.
* not within the scope of Deloitte LLP's review report
The Group does not maintain material non-trading open currency positions, other than the structural foreign currency translation exposures arising from its investments in foreign subsidiaries and associated undertakings and their related currency funding.
The table below shows the Group's structural foreign currency exposures.
| Structural | |||||||
|---|---|---|---|---|---|---|---|
| foreign | Residual | ||||||
| Net | Net | currency | structural | ||||
| assets of | investments | Net | exposures | foreign | |||
| overseas | RFS | in foreign | investment | pre-economic | Economic | currency | |
| operations | MI | operations | hedges | hedges | hedges (1) | exposures | |
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m |
| US dollar | 17,518 | 1 | 17,517 | (2,394) | 15,123 | (4,014) | 11,109 |
| Euro | 8,975 | (1) | 8,976 | (831) | 8,145 | (2,159) | 5,986 |
| Other non-sterling | 4,751 | 268 | 4,483 | (3,631) | 852 | - | 852 |
| 31,244 | 268 | 30,976 | (6,856) | 24,120 | (6,173) | 17,947 | |
| 31 December 2011 | |||||||
| US dollar | 17,570 | 1 | 17,569 | (2,049) | 15,520 | (4,071) | 11,449 |
| Euro | 8,428 | (3) | 8,431 | (621) | 7,810 | (2,236) | 5,574 |
| Other non-sterling | 5,224 | 272 | 4,952 | (4,100) | 852 | - | 852 |
| 31,222 | 270 | 30,952 | (6,770) | 24,182 | (6,307) | 17,875 |
Note:
(1) The economic hedges represents US and EU preference shares in issue that are treated as equity under IFRS and do not qualify as hedges for accounting purposes.
Credit risk is the risk of financial loss due to the failure of a customer to meet its obligation to settle outstanding amounts. The quantum and nature of credit risk assumed across the Group's different businesses vary considerably, while the overall credit risk outcome usually exhibits a high degree of correlation with the macroeconomic environment.
The table below sets out the Group's financial asset exposures by caption, both gross and net of offset and netting arrangements.
| Gross exposure |
IFRS offset (1) |
Balance sheet value |
Other offset (2) |
Net exposure |
|
|---|---|---|---|---|---|
| 30 June 2012 | £m | £m | £m | £m | £m |
| Cash balances at central banks | 78,647 | - | 78,647 | - | 78,647 |
| Reverse repos | 144,465 | (46,564) | 97,901 | (13,212) | 84,689 |
| Lending | 474,401 | - | 474,401 | (41,151) | 433,250 |
| Debt securities | 187,626 | - | 187,626 | - | 187,626 |
| Equity shares | 13,091 | - | 13,091 | - | 13,091 |
| Derivatives | 910,996 | (424,564) | 486,432 | (445,980) | 40,452 |
| Settlement balances | 21,644 | (6,332) | 15,312 | (3,090) | 12,222 |
| Other financial assets | 1,490 | - | 1,490 | - | 1,490 |
| Total excluding disposal groups | 1,832,360 | (477,460) | 1,354,900 | (503,433) | 851,467 |
| Total including disposal groups | 1,852,702 | (477,460) | 1,375,242 | (503,433) | 871,809 |
| Short positions | (38,376) | - | (38,376) | - | (38,376) |
| Net of short positions | 1,814,326 | (477,460) | 1,336,866 | (503,433) | 833,433 |
| 31 December 2011 | |||||
| Cash balances at central banks | 79,269 | - | 79,269 | - | 79,269 |
| Reverse repos | 138,539 | (37,605) | 100,934 | (15,246) | 85,688 |
| Lending | 497,982 | - | 497,982 | (41,129) | 456,853 |
| Debt securities | 209,080 | - | 209,080 | - | 209,080 |
| Equity shares | 15,183 | - | 15,183 | - | 15,183 |
|---|---|---|---|---|---|
| Derivatives | 1,074,109 | (544,491) | 529,618 | (478,848) | 50,770 |
| Settlement balances | 9,130 | (1,359) | 7,771 | (2,221) | 5,550 |
| Other financial assets | 1,309 | - | 1,309 | - | 1,309 |
| Total excluding disposal groups | 2,024,601 | (583,455) | 1,441,146 | (537,444) | 903,702 |
| Total including disposal groups | 2,044,678 | (583,455) | 1,461,223 | (537,444) | 923,779 |
| Short positions | (41,039) | - | (41,039) | - | (41,039) |
| Net of short positions | 2,003,639 | (583,455) | 1,420,184 | (537,444) | 882,740 |
Notes:
(1) Relates to offset arrangements that comply with IFRS criteria.
(2) This reflects the amounts by which the Group's credit risk is reduced through arrangements such as master netting agreements and current account pooling. In addition the Group holds collateral in respect of individual loans and advances. This collateral includes mortgages over property (both personal and commercial); charges over business assets such as plant, inventories and trade debtors; and guarantees of lending from parties other than the borrower. The Group obtains collateral in the form of securities in reverse repo and derivative transactions.
The table below analyses balance sheet financial assets on the balance sheet by sector.
| Re ve rse |
Le nd ing |
Se riti cu |
es | Ba lan ce |
To tal t ne |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| rep os |
Co re |
No n-C ore |
To tal |
De bt |
Eq uit ies |
De riv ati ve s |
Ot he r |
sh alu t v ee e |
Of fse t |
ex p os ure |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ( 1) ve rnm en |
1, 02 5 |
9, 27 8 |
1, 38 4 |
10 66 2 , |
11 2, 17 6 |
32 6 |
6, 02 4 |
1, 46 2 |
13 1, 67 5 |
2, 98 3 |
12 8, 69 2 |
| Fin - b ks an ce an |
37 70 5 , |
39 15 2 , |
40 3 |
39 55 5 , |
12 09 1 , |
- | 36 0, 32 3 |
78 64 7 , |
52 8, 32 1 |
37 4, 49 7 |
15 3, 82 4 |
| the - o r |
58 79 8 , |
43 12 3 , |
2, 99 4 |
46 11 7 , |
57 15 6 , |
5, 36 2 |
97 21 8 , |
14 98 0 , |
27 9, 63 1 |
11 5, 59 0 |
16 4, 04 1 |
| Pe l - rtg rso na mo ag es |
- | 14 0, 81 4 |
3, 53 7 |
14 4, 35 1 |
- | - | 3 | - | 14 4, 35 4 |
1 | 14 4, 35 3 |
| red - u nse cu |
- | 30 41 6 , |
1, 22 3 |
31 63 9 , |
- | - | 7 | 56 | 31 70 2 , |
16 | 31 68 6 , |
| Pro rty d c str uct ion pe an on |
- | 43 31 5 , |
36 39 0 , |
79 70 5 , |
1, 07 7 |
54 1 |
4, 69 2 |
1 | 86 01 6 , |
2, 80 3 |
83 21 3 , |
| Ma fac ing tur nu |
32 2 |
21 92 8 , |
3, 83 9 |
25 76 7 , |
74 4 |
78 9 |
3, 23 0 |
56 | 30 90 8 , |
5 2, 41 |
28 49 3 , |
| Fin lea s ( 2) an ce se |
- | 8, 83 4 |
5, 26 2 |
14 09 6 , |
13 | 2 | 43 | - | 14 15 4 , |
- | 14 15 4 , |
| Re tai l, w ho les ale d r air an ep s |
- | 20 08 0 , |
1, 86 9 |
21 94 9 , |
43 6 |
1, 20 3 |
98 3 |
12 | 24 58 3 , |
1, 51 5 |
23 06 8 , |
| Tra rt a nd sto ns po rag e |
- | 15 38 4 , |
4, 06 5 |
19 44 9 , |
59 2 |
18 6 |
3, 73 2 |
- | 23 95 9 , |
48 2 |
23 47 7 , |
| He alt h, ed tio nd leis uca n a ure |
6 | 12 93 6 , |
96 9 |
13 90 5 , |
29 1 |
29 9 |
89 2 |
- | 15 39 3 , |
93 0 |
14 46 3 , |
| Ho tel nd tau ts s a res ran |
- | 6, 90 0 |
1, 01 7 |
91 7, 7 |
19 1 |
29 | 48 3 |
- | 8, 62 0 |
38 1 |
8, 23 9 |
| Uti litie s |
- | 6, 38 2 |
1, 67 6 |
8, 05 8 |
1, 41 1 |
47 9 |
3, 40 3 |
8 | 13 35 9 , |
93 5 |
12 42 4 , |
| Ot he r |
45 | 28 10 0 , |
3, 42 8 |
31 52 8 , |
2, 56 4 |
4, 00 5 |
5, 39 9 |
22 7 |
43 76 8 , |
88 5 |
42 88 3 , |
| of To tal vis ion gro ss pro s |
97 90 1 , |
42 6, 64 2 |
68 05 6 , |
49 4, 69 8 |
18 8, 74 2 |
13 22 1 , |
48 6, 43 2 |
95 44 9 , |
1, 37 6, 44 3 |
50 3, 43 3 |
87 3, 01 0 |
| Pro vis ion s |
- | ( 8, 94 4) |
( 11 35 3 ) , |
( 20 29 7) , |
( 1, 11 6 ) |
( 13 0 ) |
- | - | ( 21 54 3 ) , |
n/a | ( 21 54 3 ) , |
| To tal clu din dis l g ex g po sa rou ps |
97 90 1 , |
41 7, 69 8 |
56 70 3 , |
47 4, 40 1 |
18 7, 62 6 |
13 09 1 , |
48 6, 43 2 |
95 44 9 , |
35 1, 4, 90 0 |
50 3, 43 3 |
85 1, 46 7 |
| Dis l g po sa rou ps |
- | 18 60 9 , |
1, 17 9 |
19 78 8 , |
- | 36 | 37 6 |
14 2 |
20 34 2 , |
- | 20 34 2 , |
| To tal inc lud ing di al g sp os rou ps |
97 90 1 , |
43 6, 30 7 |
57 88 2 , |
49 4, 18 9 |
18 62 6 7, |
13 12 7 , |
48 6, 80 8 |
95 59 1 , |
1, 37 5, 24 2 |
50 3, 43 3 |
87 1, 80 9 |
For the notes to this table refer to the following page.
| Re ve rse |
Le nd ing |
Se ritie cu |
s | Ba lan ce |
To tal t ne |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| rep os |
Co re |
No n-C ore |
To tal |
De bt |
Eq uit ies |
De riva tive s |
Ot he r |
sh t v alu ee e |
Off set |
ex po su re |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ( 1) ve rnm en |
2, 24 7 |
8, 35 9 |
1, 38 3 |
9, 74 2 |
126 60 4 , |
32 8 |
5, 54 1 |
64 1 |
145 103 , |
1, 09 8 |
144 00 5 , |
| Fin - b ks an ce an |
39 34 5 , |
43 37 4 , |
61 9 |
43 99 3 , |
16 94 0 , |
- | 40 0, 26 1 |
79 26 9 , |
9, 80 8 57 |
40 45 7, 7 |
172 35 1 , |
| the - o r |
58 47 8 , |
46 45 2 , |
3, 22 9 |
49 68 1 , |
60 45 3 , |
5, 61 8 |
97 73 2 , |
7, 43 7 |
27 9, 39 9 |
119 71 7 , |
159 68 2 , |
| Pe l - m ort rso na ga ge s |
- | 138 50 9 , |
5, 102 |
143 61 1 , |
- | - | 48 | - | 143 65 9 , |
- | 143 65 9 , |
| red - u nse cu |
- | 31 06 7 , |
1, 55 6 |
32 62 3 , |
- | - | 52 | 52 | 32 72 7 , |
7 | 32 72 0 , |
| Pro rty d c str uct ion pe an on |
- | 45 48 5 , |
40 73 6 , |
86 22 1 , |
62 3 |
22 8 |
5, 54 5 |
1 | 92 61 8 , |
2, 41 3 |
90 20 5 , |
| Ma fac tur ing nu |
25 4 |
23 20 1 , |
4, 93 1 |
28 132 , |
66 4 |
1, 93 8 |
3, 78 6 |
30 6 |
35 08 0 , |
2, 21 4 |
32 86 6 , |
| Fin lea s ( 2) an ce se |
- | 8, 44 0 |
6, 05 9 |
14 49 9 , |
145 | 2 | 75 | - | 14 72 1 , |
16 | 14 70 5 , |
| Re tai l, w ho les ale d r air an ep s |
- | 21 31 4 , |
2, 33 9 |
23 65 3 , |
64 5 |
2, 65 2 |
1, 134 |
18 | 28 102 , |
1, 67 1 |
26 43 1 , |
| Tra rt a nd sto ns po rag e |
43 6 |
16 45 4 , |
5, 47 7 |
21 93 1 , |
53 9 |
74 | 3, 75 9 |
- | 26 73 9 , |
24 1 |
26 49 8 , |
| He alt h, ed tio nd leis uca n a ure |
- | 13 27 3 , |
1, 41 9 |
14 69 2 , |
31 0 |
21 | 88 5 |
- | 15 90 8 , |
97 3 |
14 93 5 , |
| Ho tel nd tau ts s a res ran |
- | 7, 143 |
1, 16 1 |
8, 30 4 |
116 | 5 | 67 1 |
- | 9, 09 6 |
184 | 8, 91 2 |
| Uti litie s |
- | 6, 54 3 |
1, 84 9 |
8, 39 2 |
1, 53 0 |
4 55 |
3, 70 8 |
30 | 14 21 4 , |
45 0 |
13 76 4 , |
| Ot he r |
174 | 28 37 4 , |
4, 01 7 |
32 39 1 , |
2, 89 9 |
3, 90 4 |
6, 42 1 |
59 5 |
46 38 4 , |
1, 00 3 |
45 38 1 , |
| To tal of vis ion gro ss pro s |
100 93 4 , |
43 98 8 7, |
79 87 7 , |
51 86 7, 5 |
21 1, 46 8 |
15 32 4 , |
52 9, 61 8 |
88 34 9 , |
1, 46 3, 8 55 |
53 44 4 7, |
92 6, 114 |
| Pro vis ion s |
- | ( 8, 41 4) |
( 11 46 9) , |
( 19 88 3) , |
( 2, 38 8) |
( 14 1) |
- | - | ( 22 41 2) , |
n/a | ( 22 41 2) , |
| To tal clu din dis l g ex g po sa rou ps |
100 93 4 , |
42 9, 57 4 |
68 40 8 , |
49 7, 98 2 |
20 9, 08 0 |
15 183 , |
52 9, 61 8 |
88 34 9 , |
1, 44 1, 146 |
53 7, 44 4 |
90 3, 70 2 |
| Dis l g po sa rou ps |
- | 18 67 7 , |
81 5 |
19 49 2 , |
- | 5 | 43 9 |
59 7 |
20 53 3 , |
- | 20 53 3 , |
| To tal inc lud ing di al g sp os rou ps |
100 93 4 , |
44 8, 25 1 |
69 22 3 , |
51 7, 47 4 |
20 9, 08 0 |
15 188 , |
53 0, 05 7 |
88 94 6 , |
1, 46 1, 67 9 |
53 7, 44 4 |
92 4, 23 5 |
(1) Government comprises central and local government.
(2) Includes instalment credit.
The following table analyses the Group's financial assets excluding debt securities and off-balance sheet exposures by internal asset quality ratings. For further details on internal asset quality ratings refer to page 172 of the Group's 2011 Annual Report and Accounts. Debt securities are analysed by external ratings and are therefore excluded from the table below and are set out on page 161.
| Cash and | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| balances | Other | ||||||||
| at central | Loans and advances | Settlement | financial | Commit | Contingent | ||||
| banks Banks (1) Customers | balances Derivatives | instruments | ments | liabilities | Total | ||||
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Total | |||||||||
| AQ1 | 78,237 | 66,190 | 117,859 | 9,484 | 441,743 | 789 | 69,359 | 12,228 | 795,889 |
| AQ2 | 155 | 2,282 | 13,375 | 457 | 8,174 | - | 22,739 | 3,459 | 50,641 |
| AQ3 | 153 | 2,630 | 27,806 | 858 | 8,725 | 17 | 22,571 | 4,210 | 66,970 |
| AQ4 | 31 | 1,778 | 99,384 | 2,650 | 15,846 | - | 39,065 | 6,089 | 164,843 |
| AQ5 | 64 | 1,538 | 98,231 | 540 | 5,712 | 26 | 34,170 | 3,534 | 143,815 |
| AQ6 | 3 | 168 | 40,548 | 97 | 1,776 | - | 16,136 | 1,685 | 60,413 |
| AQ7 | 2 | 151 | 37,035 | 4 | 2,037 | - | 16,605 | 1,214 | 57,048 |
| AQ8 | 1 | 140 | 14,811 | 76 | 834 | - | 4,474 | 248 | 20,584 |
| AQ9 | 1 | 379 | 17,672 | 164 | 984 | 274 | 2,938 | 1,116 | 23,528 |
| AQ10 | - | - | 1,006 | 3 | 601 | - | 1,348 | 191 | 3,149 |
| Past due | - | - | 9,848 | 979 | - | - | - | - | 10,827 |
| Impaired | - | 138 | 37,764 | - | - | 414 | - | - | 38,316 |
| Impairment | |||||||||
| provision | - | (119) | (20,178) | - | - | (30) | - | - | (20,327) |
| 78,647 | 75,275 | 495,161 | 15,312 | 486,432 | 1,490 | 229,405 | 33,974 1,415,696 | ||
| 31 December 2011 | |||||||||
| AQ1 | 78,592 | 74,192 | 113,437 | 4,582 | 481,622 | 556 | 75,356 | 14,076 | 842,413 |
| AQ2 | 342 | 1,881 | 15,622 | 93 | 8,177 | - | 24,269 | 3,154 | 53,538 |
| 79,269 | 81,840 | 515,606 | 7,771 | 529,618 | 1,309 | 242,875 | 35,944 1,494,232 | ||
|---|---|---|---|---|---|---|---|---|---|
| provision | - | (123) | (19,760) | - | - | (26) | - | - | (19,909) |
| Impairment | |||||||||
| Impaired | - | 137 | 38,610 | - | - | 414 | - | - | 39,161 |
| Past due | - | 2 | 10,995 | 1,623 | - | - | - | - | 12,620 |
| AQ10 | 1 | 164 | 570 | 6 | 1,047 | - | 2,354 | 221 | 4,363 |
| AQ9 | 5 | 83 | 16,006 | 4 | 1,150 | 320 | 2,286 | 943 | 20,797 |
| AQ8 | 7 | 30 | 11,871 | 19 | 1,252 | - | 4,159 | 276 | 17,614 |
| AQ7 | 8 | 432 | 31,379 | 13 | 2,393 | - | 19,163 | 1,037 | 54,425 |
| AQ6 | 9 | 188 | 47,892 | 46 | 2,221 | - | 17,153 | 1,662 | 69,171 |
| AQ5 | 90 | 1,261 | 112,537 | 79 | 6,516 | 45 | 34,593 | 4,301 | 159,422 |
| AQ4 | 19 | 1,612 | 103,617 | 760 | 14,421 | - | 40,071 | 5,847 | 166,347 |
| AQ3 | 196 | 1,981 | 32,830 | 546 | 10,819 | - | 23,471 | 4,427 | 74,270 |
| AQ2 | 342 | 1,881 | 15,622 | 93 | 8,177 | - | 24,269 | 3,154 | 53,538 |
| AQ1 | 78,592 | 74,192 | 113,437 | 4,582 | 481,622 | 556 | 75,356 | 14,076 | 842,413 |
| Cash and | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| balances | Other | ||||||||
| at central | Loans and advances | Settlement | financial | Commit | Contingent | ||||
| 30 June 2012 | £m | £m | banks Banks (1) Customers £m |
£m | balances Derivatives £m |
instruments £m |
ments £m |
liabilities £m |
Total £m |
| Core | |||||||||
| AQ1 | 78,173 | 65,926 | 107,587 | 9,465 | 438,643 | 789 | 67,957 | 11,887 | 780,427 |
| AQ2 | 154 | 2,259 | 12,041 | 457 | 7,526 | - | 22,458 | 3,434 | 48,329 |
| AQ3 | 8 | 2,630 | 23,042 | 858 | 8,445 | 17 | 22,112 | 4,113 | 61,225 |
| AQ4 | 29 | 1,778 | 93,999 | 2,645 | 14,656 | - | 38,479 | 5,992 | 157,578 |
| AQ5 | 63 | 1,538 | 92,594 | 521 | 4,911 | 26 | 33,409 | 3,335 | 136,397 |
| AQ6 | 3 | 167 | 37,404 | 97 | 1,165 | - | 15,158 | 1,635 | 55,629 |
| AQ7 | 2 | 105 | 31,642 | 4 | 1,078 | - | 15,417 | 1,151 | 49,399 |
| AQ8 | 1 | 140 | 11,082 | 76 | 694 | - | 4,397 | 172 | 16,562 |
| AQ9 | 1 | 310 | 13,830 | 164 | 438 | 274 | 2,219 | 1,067 | 18,303 |
| AQ10 | - | - | 598 | 3 | 415 | - | 788 | 154 | 1,958 |
| Past due | - | - | 8,773 | 979 | - | - | - | - | 9,752 |
| Impaired | - | 137 | 15,005 | - | - | 414 | - | - | 15,556 |
| Impairment | |||||||||
| provision | - | (118) | (8,826) | - | - | (30) | - | - | (8,974) |
| 78,434 | 74,872 | 438,771 | 15,269 | 477,971 | 1,490 | 222,394 | 32,940 1,342,141 | ||
| 31 December 2011 | |||||||||
| AQ1 | 78,534 | 73,689 | 94,704 | 4,566 | 477,746 | 468 | 69,220 | 13,247 | 812,174 |
| AQ2 | 342 | 1,877 | 13,970 | 91 | 7,500 | - | 23,404 | 3,122 | 50,306 |
| AQ3 | 56 | 1,967 | 30,082 | 546 | 10,360 | - | 22,319 | 4,354 | 69,684 |
| AQ4 | 18 | 1,557 | 97,001 | 759 | 13,475 | - | 38,808 | 5,655 | 157,273 |
| AQ5 | 90 | 1,256 | 105,392 | 79 | 5,087 | 45 | 33,226 | 4,092 | 149,267 |
AQ7 8 432 27,114 13 796 - 17,514 949 46,826 AQ8 7 20 9,857 19 666 - 4,068 236 14,873 AQ9 5 83 11,515 4 592 272 1,769 898 15,138 AQ10 1 164 264 6 339 - 1,274 180 2,228 Past due - 2 9,451 1,623 - - - - 11,076 Impaired - 136 15,170 - - 413 - - 15,719 Impairment provision - (122) (8,292) - - (25) - - (8,439) 79,070 81,201 447,704 7,752 518,548 1,173 227,720 34,367 1,397,535
AQ6 9 140 41,476 46 1,987 - 16,118 1,634 61,410
| Cash and balances |
Other | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| at central | Loans and advances | Settlement | financial | Commit | Contingent | ||||
| banks Banks (1) Customers | balances Derivatives | instruments | ments | liabilities | Total | ||||
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Non-Core | |||||||||
| AQ1 | 64 | 264 | 10,272 | 19 | 3,100 | - | 1,402 | 341 | 15,462 |
| AQ2 | 1 | 23 | 1,334 | - | 648 | - | 281 | 25 | 2,312 |
| AQ3 | 145 | - | 4,764 | - | 280 | - | 459 | 97 | 5,745 |
| AQ4 | 2 | - | 5,385 | 5 | 1,190 | - | 586 | 97 | 7,265 |
| AQ5 | 1 | - | 5,637 | 19 | 801 | - | 761 | 199 | 7,418 |
| AQ6 | - | 1 | 3,144 | - | 611 | - | 978 | 50 | 4,784 |
| AQ7 | - | 46 | 5,393 | - | 959 | - | 1,188 | 63 | 7,649 |
| AQ8 | - | - | 3,729 | - | 140 | - | 77 | 76 | 4,022 |
| AQ9 | - | 69 | 3,842 | - | 546 | - | 719 | 49 | 5,225 |
| AQ10 | - | - | 408 | - | 186 | - | 560 | 37 | 1,191 |
| Past due | - | - | 1,075 | - | - | - | - | - | 1,075 |
| Impaired | - | 1 | 22,759 | - | - | - | - | - | 22,760 |
| Impairment | |||||||||
| provision | - | (1) | (11,352) | - | - | - | - | - | (11,353) |
| 213 | 403 | 56,390 | 43 | 8,461 | - | 7,011 | 1,034 | 73,555 | |
| 31 December 2011 |
| 58 | ||||||||
|---|---|---|---|---|---|---|---|---|
| 503 | 18,733 | 16 | 3,876 | 88 | 6,136 | 829 | 30,239 | |
| - | 4 | 1,652 | 2 | 677 | - | 865 | 32 | 3,232 |
| 140 | 14 | 2,748 | - | 459 | - | 1,152 | 73 | 4,586 |
| 1 | 55 | 6,616 | 1 | 946 | - | 1,263 | 192 | 9,074 |
| - | 5 | 7,145 | - | 1,429 | - | 1,367 | 209 | 10,155 |
| - | 48 | 6,416 | - | 234 | - | 1,035 | 28 | 7,761 |
| - | - | 4,265 | - | 1,597 | - | 1,649 | 88 | 7,599 |
| - | 10 | 2,014 | - | 586 | - | 91 | 40 | 2,741 |
| - | - | 4,491 | - | 558 | 48 | 517 | 45 | 5,659 |
| - | - | 306 | - | 708 | - | 1,080 | 41 | 2,135 |
| - | - | 1,544 | - | - | - | - | - | 1,544 |
| - | 1 | 23,440 | - | - | 1 | - | - | 23,442 |
| - | (1) | (11,468) | - | - | (1) | - | - | (11,470) |
| 199 | 639 | 67,902 | 19 | 11,070 | 136 | 15,155 | 1,577 | 96,697 |
Note:
(1) Excludes items in the course of collection from other banks of £1,866 million (31 December 2011 - £1,470 million).
The table analyses debt securities by issuer and IFRS measurement classifications.
| Central and local government | Other | |||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | UK £m |
US £m |
Other £m |
Banks £m |
financial institutions £m |
Corporate £m |
Total £m |
Of which ABS £m |
| Held-for-trading | 6,378 | 19,583 | 36,622 | 2,478 | 24,701 | 2,432 | 92,194 | 23,298 |
| Designated as at fair value | 1 | - | 125 | 77 | 661 | 9 | 873 | 558 |
| Available-for-sale | 11,888 | 20,077 | 17,489 | 9,290 | 27,989 | 2,603 | 89,336 | 34,344 |
| Loans and receivables | 9 | - | 4 | 246 | 4,505 | 459 | 5,223 | 4,501 |
| Long positions | 18,276 | 39,660 | 54,240 | 12,091 | 57,856 | 5,503 | 187,626 | 62,701 |
| Of which US agencies | - | 5,982 | - | - | 27,421 | - | 33,403 | 31,748 |
| Short positions (HFT) | (2,265) | (10,706) | (17,644) | (2,452) | (2,100) | (1,165) | (36,332) | (3,620) |
| Available-for-sale | ||||||||
| Gross unrealised gains | 1,353 | 1,306 | 1,110 | 76 | 682 | 121 | 4,648 | 694 |
| Gross unrealised losses | - | (1) | (77) | (694) | (1,589) | (15) | (2,376) | (2,257) |
| 31 December 2011 | ||||||||
| Held-for-trading | 9,004 | 19,636 | 36,928 | 3,400 | 23,160 | 2,948 | 95,076 | 20,816 |
| Designated as at fair value | 1 | - | 127 | 53 | 457 | 9 | 647 | 558 |
| Available-for-sale | 13,436 | 20,848 | 25,552 | 13,175 | 31,752 | 2,535 | 107,298 | 40,735 |
| Loans and receivables | 10 | - | 1 | 312 | 5,259 | 477 | 6,059 | 5,200 |
| Long positions | 22,451 | 40,484 | 62,608 | 16,940 | 60,628 | 5,969 | 209,080 | 67,309 |
| Of which US agencies | - | 4,896 | - | - | 25,924 | - | 30,820 | 28,558 |
| Short positions (HFT) | (3,098) | (10,661) | (19,136) | (2,556) | (2,854) | (754) | (39,059) | (352) |
| Available-for-sale | ||||||||
| Gross unrealised gains | 1,428 | 1,311 | 1,180 | 52 | 913 | 94 | 4,978 | 1,001 |
| Gross unrealised losses | - | - | (171) | (838) | (2,386) | (13) | (3,408) | (3,158) |
The table below analyses available-for-sale debt securities and related reserves, gross of tax.
| 30 June 2012 | 31 December 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| UK | US | Other (1) | Total | UK | US | Other (1) | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Central and local government | 11,888 | 20,077 | 17,489 | 49,454 | 13,436 | 20,848 | 25,552 | 59,836 |
| Banks | 1,072 | 338 | 7,880 | 9,290 | 1,391 | 376 | 11,408 | 13,175 |
| Other financial institutions | 2,975 | 14,338 | 10,676 | 27,989 | 3,100 | 17,453 | 11,199 | 31,752 |
| Corporate | 1,151 | 443 | 1,009 | 2,603 | 1,105 | 131 | 1,299 | 2,535 |
| Total | 17,086 | 35,196 | 37,054 | 89,336 | 19,032 | 38,808 | 49,458 | 107,298 |
| Of which ABS | 3,676 | 17,245 | 13,423 | 34,344 | 3,659 | 20,256 | 16,820 | 40,735 |
| AFS reserves (gross) | 916 | 756 | (1,516) | 156 | 845 | 486 | (1,815) | (484) |
Note:
(1) Includes eurozone countries as detailed in the Country risk section of this report.
The table below analyses debt securities by issuer and external ratings. Ratings are based on the lowest of Standard and Poor's, Moody's and Fitch.
| Central and local government | Other | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| UK | US | Other | Banks | financial institutions Corporate |
Total | % of | Of which ABS |
||
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | total | £m |
| AAA | 18,276 | 43 | 20,423 | 2,389 | 12,136 | 170 | 53,437 | 29 | 11,183 |
| AA to AA+ | - | 39,597 | 8,833 | 1,461 | 32,061 | 653 | 82,605 | 44 | 36,498 |
| A to AA- | - | 18 | 17,168 | 3,292 | 3,795 | 1,722 | 25,995 | 14 | 3,521 |
| BBB- to A- | - | - | 7,070 | 4,209 | 4,390 | 1,423 | 17,092 | 9 | 7,457 |
| Non-investment grade | - | - | 732 | 395 | 3,978 | 908 | 6,013 | 3 | 3,231 |
| Unrated | - | 2 | 14 | 345 | 1,496 | 627 | 2,484 | 1 | 811 |
| 18,276 | 39,660 | 54,240 | 12,091 | 57,856 | 5,503 187,626 | 100 | 62,701 | ||
| 31 December 2011 | |||||||||
| AAA | 22,451 | 45 | 32,522 | 5,155 | 15,908 | 452 | 76,533 | 37 | 17,156 |
| AA to AA+ | - | 40,435 | 2,000 | 2,497 | 30,403 | 639 | 75,974 | 36 | 33,615 |
| A to AA- | - | 1 | 24,966 | 6,387 | 4,979 | 1,746 | 38,079 | 18 | 6,331 |
| BBB- to A- | - | - | 2,194 | 2,287 | 2,916 | 1,446 | 8,843 | 4 | 4,480 |
| Non-investment grade | - | - | 924 | 575 | 5,042 | 1,275 | 7,816 | 4 | 4,492 |
| Unrated | - | 3 | 2 | 39 | 1,380 | 411 | 1,835 | 1 | 1,235 |
| 22,451 | 40,484 | 62,608 | 16,940 | 60,628 | 5,969 209,080 | 100 | 67,309 |
The table below summarises the rating levels of ABS carrying values.
| RM BS |
( 1) |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Go t ve rnm en red sp on so |
No n |
MB S red co ve |
AB S red co ve |
S AB |
|||||||
| sim ila r ( 2) or |
Pri me |
nfo ing co rm |
Su b-p rim e |
bo nd |
CM BS ( 3 ) |
CD Os ( 4) |
CL Os ( 5 ) |
bo nd s |
oth er |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| AA A |
2, 53 0 |
3, 03 0 |
1, 47 2 |
41 | 87 5 |
37 2 |
11 9 |
1, 45 7 |
15 3 |
1, 13 4 |
11 18 3 , |
| AA to AA + |
31 97 8 , |
74 6 |
88 | 42 | 20 1 |
1, 19 1 |
6 | 1, 36 2 |
32 9 |
55 5 |
36 49 8 , |
| A t o A A- |
19 1 |
44 3 |
31 7 |
46 | 16 2 |
1, 02 0 |
86 | 25 9 |
- | 99 7 |
3, 52 1 |
| BB B- to A- |
1, 15 7 |
46 | 94 | 11 5 |
4, 36 0 |
30 5 |
51 | 26 8 |
8 | 1, 05 3 |
7, 45 7 |
| No n-i rad stm t g nve en e |
20 | 61 0 |
49 5 |
35 6 |
63 | 51 0 |
46 9 |
16 8 |
- | 54 0 |
3, 23 1 |
| Un rat ed |
- | 14 2 |
7 | 57 | - | 34 | 96 | 22 5 |
- | 25 0 |
81 1 |
| 35 87 6 , |
5, 01 7 |
2, 47 3 |
65 7 |
5, 66 1 |
3, 43 2 |
82 7 |
3, 73 9 |
49 0 |
4, 52 9 |
62 70 1 , |
|
| Of wh ich in No n-C ore |
- | 72 2 |
40 7 |
16 6 |
- | 84 3 |
60 2 |
3, 10 4 |
- | 1, 54 1 |
38 5 7, |
| 31 De mb 20 11 ce er |
|||||||||||
| AA A |
4, 169 |
3, 59 9 |
1, 48 8 |
10 5 |
2, 59 5 |
64 7 |
135 | 2, 17 1 |
62 5 |
1, 62 2 |
17 156 , |
| AA AA to + |
29 25 2 , |
66 9 |
106 | 60 | 37 9 |
71 0 |
35 | 1, 53 3 |
32 1 |
0 55 |
33 61 5 , |
| A t o A A- |
13 1 |
50 6 |
110 | 10 4 |
2, 56 7 |
1, 23 0 |
16 1 |
69 7 |
100 | 72 5 |
6, 33 1 |
| BB B- to A- |
- | 39 | 28 8 |
93 | 1, 97 9 |
33 3 |
86 | 34 1 |
- | 1, 32 1 |
48 0 4, |
| No n-i stm t g rad nve en e |
21 | 78 4 |
65 8 |
39 6 |
- | 41 5 |
1, 37 0 |
176 | - | 67 2 |
4, 49 2 |
| Un rat ed |
- | 148 | 29 | 14 6 |
- | 56 | 170 | 42 3 |
- | 26 3 |
1, 23 5 |
| 33 57 3 , |
5, 74 5 |
2, 67 9 |
90 4 |
7, 52 0 |
3, 39 1 |
1, 95 7 |
5, 34 1 |
1, 04 6 |
5, 153 |
67 30 9 , |
|
| Of wh ich in No n-C ore |
- | 83 7 |
47 7 |
30 8 |
- | 83 0 |
1, 65 6 |
4, 22 7 |
- | 1, 86 1 |
10 196 , |
Notes:
(1) Residential mortgage-backed securities.
(2) Includes US agency and Dutch government guaranteed securities.
(3) Commercial mortgage-backed securities.
(4) Collateralised debt obligations.
(5) Collateralised loan obligations.
The table below analyses the fair value of the Group's derivatives by type of contract. Master netting arrangements in respect of mark-to-market (mtm) positions and collateral shown below do not result in a net presentation in the Group's balance sheet under IFRS.
| 30 June 2012 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notional | 31 December 2011 | ||||||||||||
| GBP | USD | Euro | Other | Total | Assets Liabilities | Notional | Assets | Liabilities | |||||
| Contract type | £bn | £bn | £bn | £bn | £bn | £m | £m | £bn | £m | £m | |||
| Interest rate (1) | 5,196 | 12,619 | 10,343 | 6,938 | 35,096 | 400,528 | 383,108 | 38,722 | 422,156 | 406,709 | |||
| Exchange rate | 388 | 1,947 | 813 | 1,887 | 5,035 | 61,768 | 70,794 | 4,479 | 74,492 | 80,980 | |||
| Credit | 118 | 432 | 261 | 18 | 829 | 18,475 | 17,477 | 1,054 | 26,836 | 26,743 | |||
| Other (2) | 15 | 47 | 40 | 34 | 136 | 5,661 | 9,366 | 123 | 6,134 | 9,551 | |||
| 486,432 | 480,745 | 529,618 | 523,983 | ||||||||||
| Counterparty mtm netting | (408,500) | (408,500) | (441,626) | (441,626) | |||||||||
| Cash collateral | (37,480) | (29,935) | (37,222) | (31,368) | |||||||||
| Securities collateral | (4,277) | (7,243) | (5,312) | (8,585) | |||||||||
| 36,175 | 35,067 | 45,458 | 42,404 |
Notes:
(1) Interest rate notional includes £15,436 billion (31 December 2011 - £16,377 billion) relating to contracts with central clearing houses.
(2) Other comprises equity and commodity derivatives.
The Group trades credit derivatives as part of its client led business and to mitigate credit risk. The Group's credit derivative exposures relating to proprietary trading are minimal. The table below analyses the Group's bought and sold protection.
| 30 June 2012 | 31 December 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Notional | Fair value | Notional | Fair value | |||||
| Bought | Sold | Bought | Sold | Bought | Sold | Bought | Sold | |
| Group | £bn | £bn | £bn | £bn | £bn | £bn | £bn | £bn |
| Client-led trading & residual risk | 298.4 | 285.5 | 9.0 | 8.5 | 401.0 | 390.5 | 17.0 | 16.5 |
| Credit hedging - banking | ||||||||
| book (1) | 9.5 | 1.0 | 0.1 | - | 15.6 | 4.7 | 0.1 | 0.1 |
| Credit hedging - trading book | ||||||||
| - rates | 18.8 | 16.1 | 1.0 | 1.1 | 21.2 | 17.1 | 0.9 | 1.7 |
| - credit and mortgage markets | 47.3 | 37.5 | 2.0 | 1.6 | 42.9 | 28.4 | 2.3 | 1.7 |
| - other | 1.2 | 0.2 | 0.1 | - | 0.9 | 0.1 | - | - |
| Total excluding APS | 375.2 | 340.3 | 12.2 | 11.2 | 481.6 | 440.8 | 20.3 | 20.0 |
| APS | 113.1 | - | - | - | 131.8 | - | (0.2) | - |
| 488.3 | 340.3 | 12.2 | 11.2 | 613.4 | 440.8 | 20.1 | 20.0 | |
| Core | ||||||||
| Client-led trading | 275.4 | 271.2 | 7.9 | 7.6 | 371.0 | 369.4 | 14.6 | 14.0 |
| Credit hedging - banking book | 2.3 | 0.2 | - | - | 2.2 | 1.0 | - | 0.1 |
| Credit hedging - trading book | ||||||||
| - rates | 17.5 | 15.3 | 0.9 | 1.1 | 19.9 | 16.2 | 0.9 | 1.7 |
| - credit and mortgage markets | 14.4 | 13.8 | 0.4 | 0.4 | 4.6 | 4.0 | 0.3 | 0.2 |
| - other | 1.0 | 0.1 | 0.1 | - | 0.7 | 0.1 | - | - |
| 310.6 | 300.6 | 9.3 | 9.1 | 398.4 | 390.7 | 15.8 | 16.0 | |
| Non-Core | ||||||||
| Residual risk | 23.0 | 14.3 | 1.1 | 0.9 | 30.0 | 21.1 | 2.4 | 2.5 |
| Credit hedging - banking | ||||||||
| book (1) | 7.2 | 0.8 | 0.1 | - | 13.4 | 3.7 | 0.1 | - |
| Credit hedging - trading book | ||||||||
| - rates | 1.3 | 0.8 | 0.1 | - | 1.3 | 0.9 | - | - |
| - credit and mortgage markets | 32.9 | 23.7 | 1.6 | 1.2 | 38.3 | 24.4 | 2.0 | 1.5 |
| - other | 0.2 | 0.1 | - | - | 0.2 | - | - | - |
| 64.6 | 39.7 | 2.9 | 2.1 | 83.2 | 50.1 | 4.5 | 4.0 | |
| By counterparty | ||||||||
| Central government (APS) | 113.1 | - | - | - | 131.8 | - | (0.2) | - |
| Monoline insurers | 5.9 | - | 0.4 | - | 8.6 | - | 0.6 | - |
| CDPCs | 22.4 | - | 0.7 | - | 24.5 | - | 0.9 | - |
| Banks | 164.9 | 160.3 | 6.1 | 6.2 | 204.1 | 202.1 | 8.5 | 10.2 |
| Other financial institutions | 181.0 | 180.0 | 5.0 | 5.0 | 234.8 | 231.6 | 10.5 | 9.5 |
| Corporates | 1.0 | - | - | - | 9.6 | 7.1 | (0.2) | 0.3 |
| 488.3 | 340.3 | 12.2 | 11.2 | 613.4 | 440.8 | 20.1 | 20.0 |
Note:
(1) Credit hedging in the banking book principally relates to portfolio management in Non-Core.
The following tables analyse loans and advances to banks and customers (excluding reverse repos) and the related debt management measures and ratios by division.
Refer to pages 136 to 141 of the Group's 2011 Annual Report and Accounts for policies, methodologies and approaches to problem debt management.
| Credit metrics | ||||||||
|---|---|---|---|---|---|---|---|---|
| Gross loans to banks customers |
REIL | Impairment provisions |
REIL as a % of gross loans to customers |
Provisions as a % of REIL |
YTD Impairment charge |
YTD Amounts written-off |
||
| 30 June 2012 | £m | £m | £m | £m | % | % | £m | £m |
| UK Retail | 854 | 105,559 | 4,115 | 2,376 | 3.9 | 58 | 295 | 299 |
| UK Corporate | 884 | 98,108 | 3,938 | 1,845 | 4.0 | 47 | 357 | 218 |
| Wealth | 1,747 | 16,985 | 229 | 99 | 1.3 | 43 | 22 | 3 |
| International Banking | 5,219 | 50,138 | 682 | 694 | 1.4 | 102 | 62 | 210 |
| Ulster Bank | 2,286 | 33,008 | 6,234 | 3,307 | 18.9 | 53 | 717 | 28 |
| US Retail & Commercial | 232 | 52,239 | 1,022 | 340 | 2.0 | 33 | 43 | 192 |
| Retail & Commercial | 11,222 | 356,037 16,220 | 8,661 | 4.6 | 53 | 1,496 | 950 | |
| Markets | 23,614 | 30,398 | 345 | 283 | 1.1 | 82 | 19 | 41 |
| Direct Line Group and other | 4,316 | 1,055 | - | - | - | - | - | - |
| Core | 39,152 | 387,490 16,565 | 8,944 | 4.3 | 54 | 1,515 | 991 | |
| Non-Core | 403 | 67,653 23,088 | 11,353 | 34.1 | 49 | 1,215 | 934 | |
| Group | 39,555 | 455,143 39,653 | 20,297 | 8.7 | 51 | 2,730 | 1,925 | |
| Total including disposal groups | 39,643 | 475,624 41,106 | 21,078 | 8.6 | 51 | 2,730 | 1,925 | |
| Full year | Full year |
| 31 December 2011 | Impairment charge |
Amounts written-off |
||||||
|---|---|---|---|---|---|---|---|---|
| UK Retail | 628 | 103,377 | 4,087 | 2,344 | 4.0 | 57 | 788 | 823 |
| UK Corporate | 806 | 98,563 | 3,988 | 1,623 | 4.0 | 41 | 790 | 658 |
| Wealth | 2,422 | 16,913 | 211 | 81 | 1.2 | 38 | 25 | 11 |
| International Banking | 3,411 | 57,728 | 1,632 | 851 | 2.8 | 52 | 168 | 125 |
| Ulster Bank | 2,079 | 34,052 | 5,523 | 2,749 | 16.2 | 50 | 1,384 | 124 |
| US Retail & Commercial | 208 | 51,562 | 1,007 | 455 | 2.0 | 45 | 248 | 373 |
| Retail & Commercial | 9,554 | 362,195 16,448 | 8,103 | 4.5 | 49 | 3,403 | 2,114 | |
| Markets | 29,991 | 31,490 | 414 | 311 | 1.3 | 75 | - | 23 |
| Direct Line Group and other | 3,829 | 929 | - | - | - | - | - | - |
| Core | 43,374 | 394,614 16,862 | 8,414 | 4.3 | 50 | 3,403 | 2,137 | |
| Non-Core | 619 | 79,258 23,983 | 11,469 | 30.3 | 48 | 3,838 | 2,390 | |
| Group | 43,993 | 473,872 40,845 | 19,883 | 8.6 | 49 | 7,241 | 4,527 | |
| Total including disposal groups | 44,080 | 494,068 42,394 | 20,674 | 8.6 | 49 | 7,241 | 4,527 |
| Total | Non-Core | ||||
|---|---|---|---|---|---|
| 30 June | 31 December | 30 June | 31 December | ||
| 2012 | 2011 | 2012 | 2011 | ||
| Lending | £69.3bn | £74.8bn | £30.4bn | £34.3bn | |
| REIL | £21.7bn | £22.9bn | £18.1bn | £18.8bn | |
| Provisions | £9.4bn | £9.5bn | £8.0bn | £8.2bn | |
| REIL as a % of gross loans to customers | 31.3% | 30.6% | 59.5% | 54.8% | |
| Provisions as a % of REIL | 43% | 42% | 44% | 44% |
Ulster Bank is a significant contributor to the Non-Core commercial real estate lending. Refer to the Key credit portfolios section on Ulster Bank Group (Core and Non-Core).
The following tables analyse loans and advances to banks and customers (excluding reverse repos and assets of disposal groups) and the related debt management by sector and geography (by location of office) for the Group, Core and Non-Core. Loans, REIL and provisions exclude amounts relating to businesses held for disposal, consistent with the balance sheet presentation required by IFRS.
| REIL | Provisions | |||||||
|---|---|---|---|---|---|---|---|---|
| as a % | Provisions | as a % | YTD | YTD | ||||
| Gross | of gross | as a % | of gross | Impairment | Amounts | |||
| loans | REIL | Provisions | loans | of REIL | loans | charge | written-off | |
| 30 June 2012 | £m | £m | £m | % | % | % | £m | £m |
| Group | ||||||||
| Government (1) | 10,662 | - | - | - | - | - | - | - |
| Other finance | 46,117 | 876 | 532 | 1.9 | 61 | 1.2 | 74 | 195 |
| Personal - mortgages | 144,351 | 5,475 | 1,548 | 3.8 | 28 | 1.1 | 492 | 238 |
| - unsecured | 31,639 | 2,667 | 2,212 | 8.4 | 83 | 7.0 | 324 | 369 |
| Property and construction | 79,705 | 22,133 | 9,667 | 27.8 | 44 | 12.1 | 1,104 | 696 |
| Manufacturing | 25,767 | 842 | 492 | 3.3 | 58 | 1.9 | 57 | 92 |
| Finance leases (2) | 14,096 | 725 | 471 | 5.1 | 65 | 3.3 | 35 | 77 |
| Retail, wholesale and repairs | 21,949 | 1,067 | 578 | 4.9 | 54 | 2.6 | 126 | 55 |
| Transport and storage | 19,449 | 727 | 326 | 3.7 | 45 | 1.7 | 191 | 8 |
| Health, education and leisure | 13,905 | 1,048 | 469 | 7.5 | 45 | 3.4 | 102 | 52 |
| Hotels and restaurants | 7,917 | 1,494 | 702 | 18.9 | 47 | 8.9 | 116 | 34 |
| Utilities | 8,058 | 72 | 29 | 0.9 | 40 | 0.4 | 1 | - |
| Other | 31,528 | 2,389 | 1,303 | 7.6 | 55 | 4.1 | 197 | 84 |
| Latent | - | - | 1,849 | - | - | - | (113) | - |
| 455,143 | 39,515 | 20,178 | 8.7 | 51 | 4.4 | 2,706 | 1,900 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 102,506 | 2,118 | 379 | 2.1 | 18 | 0.4 | 58 | 27 |
| - personal lending | 18,941 | 2,324 | 1,975 | 12.3 | 85 | 10.4 | 274 | 298 |
| - property and construction | 57,939 | 10,899 | 3,939 | 18.8 | 36 | 6.8 | 564 | 312 |
| - other | 121,738 | 3,569 | 2,520 | 2.9 | 71 | 2.1 | 241 | 231 |
| Europe | ||||||||
| - residential mortgages | 17,990 | 2,564 | 947 | 14.3 | 37 | 5.3 | 284 | 10 |
| - personal lending | 2,221 | 221 | 190 | 10.0 | 86 | 8.6 | 27 | 12 |
| - property and construction | 16,369 | 10,595 | 5,509 | 64.7 | 52 | 33.7 | 519 | 299 |
| - other | 31,421 | 4,770 | 3,123 | 15.2 | 65 | 9.9 | 546 | 255 |
| US | ||||||||
| - residential mortgages | 23,312 | 760 | 210 | 3.3 | 28 | 0.9 | 150 | 201 |
| - personal lending | 8,919 | 121 | 46 | 1.4 | 38 | 0.5 | 23 | 59 |
| - property and construction | 4,681 | 356 | 84 | 7.6 | 24 | 1.8 | 8 | 48 |
| - other | 32,760 | 465 | 789 | 1.4 | 170 | 2.4 | (18) | 96 |
| RoW | ||||||||
| - residential mortgages | 543 | 33 | 12 | 6.1 | 36 | 2.2 | - | - |
| - personal lending | 1,558 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property and construction | 716 | 283 | 135 | 39.5 | 48 | 18.9 | 13 | 37 |
| - other | 13,529 | 436 | 319 | 3.2 | 73 | 2.4 | 17 | 15 |
| 455,143 | 39,515 | 20,178 | 8.7 | 51 | 4.4 | 2,706 | 1,900 | |
| Banks | 39,555 | 138 | 119 | 0.3 | 86 | 0.3 | 24 | 25 |
| Gross loans |
REIL | Provisions | REIL as a % of gross loans |
Provisions as a % of REIL |
Provisions as a % of gross loans |
Full year Impairment charge |
Full year Amounts written-off |
|
|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | £m | £m | £m | % | % | % | £m | £m |
| Group | ||||||||
| Government (1) | 9,742 | - | - | - | - | - | - | - |
| Other finance | 49,681 | 1,049 | 719 | 2.1 | 69 | 1.4 | 89 | 87 |
| Personal - mortgages | 143,611 | 5,084 | 1,362 | 3.5 | 27 | 0.9 | 1,076 | 516 |
| - unsecured | 32,623 | 2,737 | 2,172 | 8.4 | 79 | 6.7 | 782 | 1,286 |
| Property and construction | 86,221 | 23,417 | 9,565 | 27.2 | 41 | 11.1 | 3,809 | 1,415 |
| Manufacturing | 28,132 | 881 | 504 | 3.1 | 57 | 1.8 | 227 | 215 |
| Finance leases (2) | 14,499 | 794 | 508 | 5.5 | 64 | 3.5 | 112 | 170 |
| Retail, wholesale and repairs | 23,653 | 1,007 | 516 | 4.3 | 51 | 2.2 | 180 | 172 |
| Transport and storage | 21,931 | 589 | 146 | 2.7 | 25 | 0.7 | 78 | 43 |
| Health, education and leisure | 14,692 | 1,077 | 458 | 7.3 | 43 | 3.1 | 304 | 98 |
| Hotels and restaurants | 8,304 | 1,437 | 643 | 17.3 | 45 | 7.7 | 334 | 131 |
| Utilities | 8,392 | 88 | 23 | 1.0 | 26 | 0.3 | 3 | 3 |
| Other Latent |
32,391 - |
2,548 - |
1,158 1,986 |
7.9 - |
45 - |
3.6 - |
792 (545) |
391 - |
| 473,872 | 40,708 | 19,760 | 8.6 | 49 | 4.2 | 7,241 | 4,527 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 100,726 | 2,076 | 397 | 2.1 | 19 | 0.4 | 180 | 25 |
| - personal lending | 20,207 | 2,384 | 1,925 | 11.8 | 81 | 9.5 | 645 | 1,007 |
| - property and construction | 62,924 | 11,947 | 4,207 | 19.0 | 35 | 6.7 | 1,598 | 721 |
| - other | 125,265 | 4,256 | 2,678 | 3.4 | 63 | 2.1 | 514 | 655 |
| Europe | ||||||||
| - residential mortgages | 18,946 | 2,205 | 713 | 11.6 | 32 | 3.8 | 467 | 10 |
| - personal lending | 2,464 | 209 | 180 | 8.5 | 86 | 7.3 | 25 | 126 |
| - property and construction | 18,138 | 10,676 | 5,132 | 58.9 | 48 | 28.3 | 2,234 | 504 |
| - other | 34,497 | 4,261 | 2,873 | 12.4 | 67 | 8.3 | 1,267 | 293 |
| US | ||||||||
| - residential mortgages | 23,237 | 770 | 240 | 3.3 | 31 | 1.0 | 426 | 481 |
| - personal lending | 8,441 | 143 | 66 | 1.7 | 46 | 0.8 | 112 | 153 |
| - property and construction | 4,240 | 450 | 102 | 10.6 | 23 | 2.4 | 7 | 155 |
| - other | 37,015 | 517 | 895 | 1.4 | 173 | 2.4 | (175) | 180 |
| RoW - residential mortgages |
702 | 33 | 12 | 4.7 | 36 | 1.7 | 3 | - |
| - personal lending | 1,511 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property and construction | 919 | 344 | 124 | 37.4 | 36 | 13.5 | (30) | 35 |
| - other | 14,640 | 436 | 215 | 3.0 | 49 | 1.5 | (32) | 182 |
| 473,872 | 40,708 | 19,760 | 8.6 | 49 | 4.2 | 7,241 | 4,527 | |
| Banks | 43,993 | 137 | 123 | 0.3 | 90 | 0.3 | - | - |
| REIL | Provisions | |||||||
|---|---|---|---|---|---|---|---|---|
| Gross | as a % of gross |
Provisions as a % |
as a % of gross |
YTD Impairment |
YTD Amounts |
|||
| loans | REIL | Provisions | loans | of REIL | loans | charge | written-off | |
| 30 June 2012 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Government (1) | 9,278 | - | - | - | - | - | - | - |
| Other finance | 43,123 | 424 | 327 | 1.0 | 77 | 0.8 | 15 | 194 |
| Personal - mortgages | 140,814 | 5,175 | 1,402 | 3.7 | 27 | 1.0 | 412 | 129 |
| - unsecured | 30,416 | 2,564 | 2,127 | 8.4 | 83 | 7.0 | 296 | 330 |
| Property and construction | 43,315 | 3,870 | 1,481 | 8.9 | 38 | 3.4 | 409 | 139 |
| Manufacturing | 21,928 | 445 | 240 | 2.0 | 54 | 1.1 | 42 | 11 |
| Finance leases (2) | 8,834 | 158 | 102 | 1.8 | 65 | 1.2 | 14 | 26 |
| Retail, wholesale and repairs | 20,080 | 656 | 363 | 3.3 | 55 | 1.8 | 81 | 39 |
| Transport and storage | 15,384 | 276 | 67 | 1.8 | 24 | 0.4 | 19 | 7 |
| Health, education and leisure | 12,936 | 633 | 261 | 4.9 | 41 | 2.0 | 88 | 38 |
| Hotels and restaurants | 6,900 | 957 | 424 | 13.9 | 44 | 6.1 | 74 | 16 |
| Utilities | 6,382 | 8 | 6 | 0.1 | 75 | 0.1 | 1 | - |
| Other | 28,100 | 1,262 | 782 | 4.5 | 62 | 2.8 | 118 | 37 |
| Latent | - | - | 1,244 | - | - | - | (78) | - |
| 387,490 | 16,428 | 8,826 | 4.2 | 54 | 2.3 | 1,491 | 966 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 102,449 | 2,118 | 379 | 2.1 | 18 | 0.4 | 58 | 27 |
| - personal lending | 18,857 | 2,298 | 1,954 | 12.2 | 85 | 10.4 | 270 | 285 |
| - property and construction | 33,716 | 2,354 | 891 | 7.0 | 38 | 2.6 | 260 | 105 |
| - other | 106,562 | 2,101 | 1,405 | 2.0 | 67 | 1.3 | 158 | 136 |
| Europe | ||||||||
| - residential mortgages | 17,489 | 2,487 | 896 | 14.2 | 36 | 5.1 | 280 | 9 |
| - personal lending | 1,794 | 149 | 131 | 8.3 | 88 | 7.3 | 20 | 8 |
| - property and construction | 5,406 | 1,276 | 517 | 23.6 | 41 | 9.6 | 134 | 13 |
| - other | 23,267 | 2,343 | 1,818 | 10.1 | 78 | 7.8 | 259 | 166 |
| US | ||||||||
| - residential mortgages | 20,528 | 537 | 115 | 2.6 | 21 | 0.6 | 74 | 93 |
| - personal lending | 8,208 | 116 | 41 | 1.4 | 35 | 0.5 | 6 | 37 |
| - property and construction | 3,847 | 162 | 27 | 4.2 | 17 | 0.7 | 15 | 21 |
| - other | 31,390 | 254 | 464 | 0.8 | 183 | 1.5 | (51) | 63 |
| RoW | ||||||||
| - residential mortgages | 348 | 33 | 12 | 9.5 | 36 | 3.4 | - | - |
| - personal lending | 1,557 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property and construction | 346 | 78 | 46 | 22.5 | 59 | 13.3 | - | - |
| - other | 11,726 | 121 | 129 | 1.0 | 107 | 1.1 | 8 | 3 |
| 387,490 | 16,428 | 8,826 | 4.2 | 54 | 2.3 | 1,491 | 966 | |
| Banks | 39,152 | 137 | 118 | 0.3 | 86 | 0.3 | 24 | 25 |
| REIL as a % |
Provisions | Provisions as a % |
Full year | Full year | ||||
|---|---|---|---|---|---|---|---|---|
| Gross loans |
REIL | Provisions | of gross loans |
as a % of REIL |
of gross loans |
Impairment charge |
Amounts written-off |
|
| 31 December 2011 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Government (1) | 8,359 | - | - | - | - | - | - | - |
| Other finance | 46,452 | 732 | 572 | 1.6 | 78 | 1.2 | 207 | 44 |
| Personal - mortgages | 138,509 | 4,704 | 1,182 | 3.4 | 25 | 0.9 | 776 | 198 |
| - unsecured | 31,067 | 2,627 | 2,080 | 8.5 | 79 | 6.7 | 715 | 935 |
| Property and construction | 45,485 | 4,346 | 1,229 | 9.6 | 28 | 2.7 | 648 | 310 |
| Manufacturing | 23,201 | 458 | 221 | 2.0 | 48 | 1.0 | 106 | 125 |
| Finance leases (2) | 8,440 | 172 | 110 | 2.0 | 64 | 1.3 | 31 | 68 |
| Retail, wholesale and repairs | 21,314 | 619 | 312 | 2.9 | 50 | 1.5 | 208 | 119 |
| Transport and storage | 16,454 | 325 | 52 | 2.0 | 16 | 0.3 | 47 | 29 |
| Health, education and leisure | 13,273 | 576 | 213 | 4.3 | 37 | 1.6 | 170 | 55 |
| Hotels and restaurants | 7,143 | 952 | 354 | 13.3 | 37 | 5.0 | 209 | 60 |
| Utilities | 6,543 | 22 | 1 | 0.3 | 5 | - | - | - |
| Other | 28,374 | 1,193 | 627 | 4.2 | 53 | 2.2 | 538 | 194 |
| Latent | - | - | 1,339 | - | - | - | (252) | - |
| 394,614 | 16,726 | 8,292 | 4.2 | 50 | 2.1 | 3,403 | 2,137 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 99,303 | 2,024 | 386 | 2.0 | 19 | 0.4 | 174 | 24 |
| - personal lending | 20,080 | 2,347 | 1,895 | 11.7 | 81 | 9.4 | 657 | 828 |
| - property and construction | 36,432 | 3,012 | 790 | 8.3 | 26 | 2.2 | 538 | 252 |
| - other | 107,598 | 2,192 | 1,383 | 2.0 | 63 | 1.3 | 366 | 398 |
| Europe | ||||||||
| - residential mortgages | 18,393 | 2,121 | 664 | 11.5 | 31 | 3.6 | 437 | 10 |
| - personal lending | 1,972 | 143 | 125 | 7.3 | 87 | 6.3 | (8) | 22 |
| - property and construction | 5,865 | 1,109 | 408 | 18.9 | 37 | 7.0 | 175 | 10 |
| - other | 24,414 | 2,430 | 1,806 | 10.0 | 74 | 7.4 | 915 | 183 |
| US | ||||||||
| - residential mortgages | 20,311 | 526 | 120 | 2.6 | 23 | 0.6 | 162 | 164 |
| - personal lending | 7,505 | 136 | 59 | 1.8 | 43 | 0.8 | 66 | 85 |
| - property and construction | 2,825 | 209 | 25 | 7.4 | 12 | 0.9 | 16 | 48 |
| - other | 34,971 | 345 | 583 | 1.0 | 169 | 1.7 | 26 | 96 |
| RoW | ||||||||
| - residential mortgages | 502 | 33 | 12 | 6.6 | 36 | 2.4 | 3 | - |
| - personal lending | 1,510 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property and construction | 363 | 16 | 6 | 4.4 | 38 | 1.7 | (81) | - |
| - other | 12,570 | 82 | 29 | 0.7 | 35 | 0.2 | (43) | 17 |
| 394,614 | 16,726 | 8,292 | 4.2 | 50 | 2.1 | 3,403 | 2,137 | |
| Banks | 43,374 | 136 | 122 | 0.3 | 90 | 0.3 | - | - |
| Gross | REIL as a % of gross |
Provisions as a % |
Provisions as a % of gross |
YTD Impairment |
YTD Amounts |
|||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | loans £m |
REIL £m |
Provisions £m |
loans % |
of REIL % |
loans % |
charge £m |
written-off £m |
| Non-Core | ||||||||
| Government (1) | 1,384 | - | - | - | - | - | - | - |
| Other finance | 2,994 | 452 | 205 | 15.1 | 45 | 6.8 | 59 | 1 |
| Personal - mortgages | 3,537 | 300 | 146 | 8.5 | 49 | 4.1 | 80 | 109 |
| - unsecured | 1,223 | 103 | 85 | 8.4 | 83 | 7.0 | 28 | 39 |
| Property and construction | 36,390 | 18,263 | 8,186 | 50.2 | 45 | 22.5 | 695 | 557 |
| Manufacturing | 3,839 | 397 | 252 | 10.3 | 63 | 6.6 | 15 | 81 |
| Finance leases (2) | 5,262 | 567 | 369 | 10.8 | 65 | 7.0 | 21 | 51 |
| Retail, wholesale and repairs | 1,869 | 411 | 215 | 22.0 | 52 | 11.5 | 45 | 16 |
| Transport and storage | 4,065 | 451 | 259 | 11.1 | 57 | 6.4 | 172 | 1 |
| Health, education and leisure | 969 | 415 | 208 | 42.8 | 50 | 21.5 | 14 | 14 |
| Hotels and restaurants | 1,017 | 537 | 278 | 52.8 | 52 | 27.3 | 42 | 18 |
| Utilities | 1,676 | 64 | 23 | 3.8 | 36 | 1.4 | - | - |
| Other | 3,428 | 1,127 | 521 | 32.9 | 46 | 15.2 | 79 | 47 |
| Latent | - | - | 605 | - | - | - | (35) | - |
| 67,653 | 23,087 | 11,352 | 34.1 | 49 | 16.8 | 1,215 | 934 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 57 | - | - | - | - | - | - | - |
| - personal lending | 84 | 26 | 21 | 31.0 | 81 | 25.0 | 4 | 13 |
| - property and construction | 24,223 | 8,545 | 3,048 | 35.3 | 36 | 12.6 | 304 | 207 |
| - other | 15,176 | 1,468 | 1,115 | 9.7 | 76 | 7.3 | 83 | 95 |
| Europe | ||||||||
| - residential mortgages | 501 | 77 | 51 | 15.4 | 66 | 10.2 | 4 | 1 |
| - personal lending | 427 | 72 | 59 | 16.9 | 82 | 13.8 | 7 | 4 |
| - property and construction | 10,963 | 9,319 | 4,992 | 85.0 | 54 | 45.5 | 385 | 286 |
| - other | 8,154 | 2,427 | 1,305 | 29.8 | 54 | 16.0 | 287 | 89 |
| US | ||||||||
| - residential mortgages | 2,784 | 223 | 95 | 8.0 | 43 | 3.4 | 76 | 108 |
| - personal lending | 711 | 5 | 5 | 0.7 | 100 | 0.7 | 17 | 22 |
| - property and construction | 834 | 194 | 57 | 23.3 | 29 | 6.8 | (7) | 27 |
| - other | 1,370 | 211 | 325 | 15.4 | 154 | 23.7 | 33 | 33 |
| RoW | ||||||||
| - residential mortgages | 195 | - | - | - | - | - | - | - |
| - personal lending | 1 | - | - | - | - | - | - | - |
| - property and construction | 370 | 205 | 89 | 55.4 | 43 | 24.1 | 13 | 37 |
| - other | 1,803 | 315 | 190 | 17.5 | 60 | 10.5 | 9 | 12 |
| 67,653 | 23,087 | 11,352 | 34.1 | 49 | 16.8 | 1,215 | 934 | |
| Banks | 403 | 1 | 1 | 0.2 | 100 | 0.2 | - | - |
| Banks | 619 | 1 | 1 | 0.2 | 100 | 0.2 | - | - |
|---|---|---|---|---|---|---|---|---|
| 79,258 | 23,982 | 11,468 | 30.3 | 48 | 14.5 | 3,838 | 2,390 | |
| - other | 2,070 | 354 | 186 | 17.1 | 53 | 9.0 | 11 | 165 |
| - property and construction | 556 | 328 | 118 | 59.0 | 36 | 21.2 | 51 | 35 |
| - personal lending | 1 | - | - | - | - | - | - | - |
| - residential mortgages | 200 | - | - | - | - | - | - | - |
| RoW | ||||||||
| - other | 2,044 | 172 | 312 | 8.4 | 181 | 15.3 | (201) | 84 |
| - property and construction | 1,415 | 241 | 77 | 17.0 | 32 | 5.4 | (9) | 107 |
| - personal lending | 936 | 7 | 7 | 0.7 | 100 | 0.7 | 46 | 68 |
| - residential mortgages | 2,926 | 244 | 120 | 8.3 | 49 | 4.1 | 264 | 317 |
| US | ||||||||
| - other | 10,083 | 1,831 | 1,067 | 18.2 | 58 | 10.6 | 352 | 110 |
| - property and construction | 12,273 | 9,567 | 4,724 | 78.0 | 49 | 38.5 | 2,059 | 494 |
| - personal lending | 492 | 66 | 55 | 13.4 | 83 | 11.2 | 33 | 104 |
| - residential mortgages | 553 | 84 | 49 | 15.2 | 58 | 8.9 | 30 | - |
| Europe | ||||||||
| - other | 17,667 | 2,064 | 1,295 | 11.7 | 63 | 7.3 | 148 | 257 |
| - property and construction | 26,492 | 8,935 | 3,417 | 33.7 | 38 | 12.9 | 1,060 | 469 |
| - personal lending | 127 | 37 | 30 | 29.1 | 81 | 23.6 | (12) | 179 |
| - residential mortgages | 1,423 | 52 | 11 | 3.7 | 21 | 0.8 | 6 | 1 |
| of which: UK |
||||||||
| 79,258 | 23,982 | 11,468 | 30.3 | 48 | 14.5 | 3,838 | 2,390 | |
| Latent | - | - | 647 | - | - | - | (293) | - |
| Other | 4,017 | 1,355 | 531 | 33.7 | 39 | 13.2 | 254 | 197 |
| Utilities | 1,849 | 66 | 22 | 3.6 | 33 | 1.2 | 3 | 3 |
| Hotels and restaurants | 1,161 | 485 | 289 | 41.8 | 60 | 24.9 | 125 | 71 |
| Health, education and leisure | 1,419 | 501 | 245 | 35.3 | 49 | 17.3 | 134 | 43 |
| Transport and storage | 5,477 | 264 | 94 | 4.8 | 36 | 1.7 | 31 | 14 |
| Retail, wholesale and repairs | 2,339 | 388 | 204 | 16.6 | 53 | 8.7 | (28) | 53 |
| Finance leases (2) | 6,059 | 622 | 398 | 10.3 | 64 | 6.6 | 81 | 102 |
| Manufacturing | 4,931 | 423 | 283 | 8.6 | 67 | 5.7 | 121 | 90 |
| Property and construction | 40,736 | 19,071 | 8,336 | 46.8 | 44 | 20.5 | 3,161 | 1,105 |
| - unsecured | 1,556 | 110 | 92 | 7.1 | 84 | 5.9 | 67 | 351 |
| Personal - mortgages | 5,102 | 380 | 180 | 7.4 | 47 | 3.5 | 300 | 318 |
| Other finance | 3,229 | 317 | 147 | 9.8 | 46 | 4.6 | (118) | 43 |
| Government (1) | 1,383 | - | - | - | - | - | - | - |
| Non-Core | ||||||||
| 31 December 2011 | £m | £m | £m | % | % | % | £m | £m |
| loans | REIL | Provisions | loans | of REIL | loans | charge | written-off | |
| Gross | of gross | as a % | of gross | Impairment | Amounts | |||
| as a % | Provisions | as a % | Full year | Full year | ||||
| REIL | Provisions |
(1) Government includes central and local government.
(2) Includes instalment credit.
REIL are stated without giving effect to any security held that could reduce the eventual loss should it occur or to any provisions marked. The table below details the movement in REIL for the first half of 2012.
| Impaired loans | Other loans (1) | REIL | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| At 1 January 2012 | 15,306 | 23,441 | 38,747 | 1,556 | 542 | 2,098 | 16,862 | 23,983 | 40,845 |
| Currency translation and | (150) | (541) | (691) | 51 | (7) | 44 | (99) | (548) | (647) |
| other adjustments | |||||||||
| Additions | 3,127 | 2,529 | 5,656 | 1,167 | 224 | 1,391 | 4,294 | 2,753 | 7,047 |
| Transfers | 33 | 124 | 157 | (126) | (130) | (256) | (93) | (6) | (99) |
| Disposals and restructurings | (647) | (346) | (993) | (109) | (6) | (115) | (756) | (352) | (1,108) |
| Repayments | (1,536) | (1,513) | (3,049) | (1,116) | (295) | (1,411) | (2,652) | (1,808) | (4,460) |
| Amounts written-off | (991) | (934) | (1,925) | - | - | - | (991) | (934) | (1,925) |
| At 30 June 2012 | 15,142 | 22,760 | 37,902 | 1,423 | 328 | 1,751 | 16,565 | 23,088 | 39,653 |
Note:
(1) Accruing loans past due 90 days or more where an impairment event has taken place but no impairment provision has been recognised. This category is used for fully collateralised non-revolving credit facilities.
The table below analyses the Group's REIL between UK and overseas, based on the location of the lending office.
| 30 June 2012 | 31 December 2011 | |||||
|---|---|---|---|---|---|---|
| Core | Non-Core | Total | Core | Non-Core | Total | |
| £m | £m | £m | £m | £m | £m | |
| Impaired loans (1) | ||||||
| - UK | 7,672 | 9,788 | 17,460 | 8,467 | 10,580 | 19,047 |
| - overseas | 7,470 | 12,972 | 20,442 | 6,839 | 12,861 | 19,700 |
| 15,142 | 22,760 | 37,902 | 15,306 | 23,441 | 38,747 | |
| Accruing loans past due | ||||||
| 90 days or more (2) | ||||||
| - UK | 1,286 | 251 | 1,537 | 1,192 | 508 | 1,700 |
| - overseas | 137 | 77 | 214 | 364 | 34 | 398 |
| 1,423 | 328 | 1,751 | 1,556 | 542 | 2,098 | |
| Total REIL | 16,565 | 23,088 | 39,653 | 16,862 | 23,983 | 40,845 |
| REIL including disposal groups | 41,106 | 42,394 | ||||
| REIL as a % of gross loans | ||||||
| and advances (3) | 4.4% | 34.0% | 8.6% | 4.4% | 30.1% | 8.6% |
| Provisions as a % of REIL | 54% | 49% | 51% | 50% | 48% | 49% |
Notes:
(1) All loans against which an impairment provision is held.
(2) Loans where an impairment event has taken place but no impairment provision recognised. This category is used for fully collateralised non-revolving credit facilities.
(3) Includes disposal groups but excludes reverse repos.
• Group REIL including disposal groups decreased by £1.3 billion in H1 2012 despite the difficult economic climate, due to several material write-offs and recoveries within Non-Core portfolios.
The table below analyses impairment provisions in respect of loans and advances to banks and customers.
| 30 June 2012 | 31 December 2011 | ||||||
|---|---|---|---|---|---|---|---|
| Non | Non | ||||||
| Core | Core | Total | Core | Core | Total | ||
| £m | £m | £m | £m | £m | £m | ||
| Individually assessed | 2,797 | 10,071 | 12,868 | 2,674 | 9,960 | 12,634 | |
| Collectively assessed | 4,785 | 676 | 5,461 | 4,279 | 861 | 5,140 | |
| Latent loss | 1,244 | 605 | 1,849 | 1,339 | 647 | 1,986 | |
| Loans and advances to customers | 8,826 | 11,352 | 20,178 | 8,292 | 11,468 | 19,760 | |
| Loans and advances to banks | 118 | 1 | 119 | 122 | 1 | 123 | |
| Total provisions | 8,944 | 11,353 | 20,297 | 8,414 | 11,469 | 19,883 | |
| Provisions as a % of REIL | 54% | 49% | 51% | 50% | 48% | 49% | |
| Customer provisions as a % of customer loans (1) | 2.4% | 16.7% | 4.4% | 2.2% | 14.4% | 4.2% |
Note:
(1) Includes disposal groups but excludes reverse repos.
• Impairment provisions increased by £0.4 billion, primarily in collectively assessed portfolios, mainly driven by deteriorating credit metrics within the Ulster Bank mortgage portfolio where elevated levels of impairment continue to outpace write-offs.
The table below analyses the impairment charge for loans and securities.
| Half year ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 30 June 2011 | |||||||
| Core | Non-Core | Total | Core | Non-Core | Total | |||
| £m | £m | £m | £m | £m | £m | |||
| Individually assessed | 596 | 1,094 | 1,690 | 745 | 2,374 | 3,119 | ||
| Collectively assessed | 973 | 156 | 1,129 | 1,049 | 262 | 1,311 | ||
| Latent loss | (78) | (35) | (113) | (132) | (163) | (295) | ||
| Loans to customers | 1,491 | 1,215 | 2,706 | 1,662 | 2,473 | 4,135 | ||
| Loans to banks | 24 | - | 24 | - | - | - | ||
| Securities | ||||||||
| - sovereign debt (1) | - | - | - | 842 | - | 842 | ||
| - other | 38 | (119) | (81) | 63 | 13 | 76 | ||
| Charge to income statement | 1,553 | 1,096 | 2,649 | 2,567 | 2,486 | 5,053 | ||
| Charge as a % of gross loans (2) | 0.7% | 3.6% | 1.1% | 0.8% | 5.2% | 1.6% |
Notes:
(2) Customer loan impairment charge as a percentage of gross loans and advances to customers including assets of disposal groups and excluding reverse purchase agreements.
(1) Includes related interest rate hedge instruments.
As part of the Group's problem debt management process, a number of restructuring options are available when corrective action is deemed necessary. The vast majority of wholesale loan restructurings take place within the Global Restructuring Group (GRG). However, within its early problem management framework, the Group may agree various remedial measures with customers whose loans are performing but who are experiencing temporary financial difficulties. Refer to pages 137 and 138 of the Group's 2011 Annual Report and Accounts for more details on wholesale loan restructuring.
The total amount of wholesale loan restructurings that achieved legal completion in the first half of 2012 and that individually exceed respective thresholds set at divisional level (which range from nil to £10 million) was £4.3 billion. In addition, a further £12.5 billion was in the process of being completed at 30 June 2012. Restructured loans, related internal asset quality bands, sector breakdown and types of restructuring are set out below.
| Sector | AQ1-AQ9 (1) £m |
AQ10 (2) £m |
AQ10 (2) provision coverage % |
|---|---|---|---|
| Half year ended 30 June 2012 | |||
| Property | 1,343 | 1,108 | 25 |
| Transport | 666 | 48 | 62 |
| Telecoms, media and technology | 291 | 16 | 15 |
| Retail and leisure | 473 | 14 | 52 |
| Other | 165 | 131 | 12 |
| 2,938 | 1,317 | 25 | |
| Year ended 31 December 2011 | |||
| Property | 1,980 | 2,600 | 18 |
| Transport | 686 | 694 | 11 |
| Telecoms, media and technology | 167 | 12 | 25 |
| Retail and leisure | 503 | 148 | 24 |
| Other | 1,139 | 659 | 52 |
| 4,475 | 4,113 | 22 |
Notes:
(1) Probability of default is less than 100%.
(2) Probability of default is 100%.
The table below analyses the incidence of the main types of restructuring by loan value.
| Arrangement type | 30 June 2012 % |
31 December 2011 % |
|---|---|---|
| Variation in margin | 9 | 12 |
| Payment holidays and loan rescheduling | 89 | 87 |
| Forgiveness of all or part of the outstanding debt | 11 | 31 |
| Other | 11 | 8 |
Note:
(1) The total above exceeds 100% as an individual case can involve more than one type of arrangement.
Retail mortgage accounts in forbearance arrangements at 30 June 2012 totalled £7.1 billion. The mortgage arrears information for retail accounts in forbearance, related provision and type of arrangements are shown in the tables below. Refer to pages 139 to 141 of the Group's 2011 Annual Report and Accounts for details on methodologies.
| No missed payments |
1-3 months in arrears |
>3 months in arrears |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Balance Provision | Balance | Provision | Balance Provision | Balance Provision | as a % of total |
||||
| £m | £m | £m | £m | £m | £m | £m | £m | % | |
| 30 June 2012 | |||||||||
| UK Retail (1,2) | 3,847 | 19 | 360 | 15 | 413 | 61 | 4,620 | 95 | 4.7 |
| Ulster Bank (1,2) | 927 | 104 | 608 | 69 | 396 | 145 | 1,931 | 318 | 10.1 |
| RBS Citizens (3) | - | - | 223 | 24 | 127 | 13 | 350 | 37 | 1.5 |
| Wealth | 61 | - | - | - | 91 | 6 | 152 | 6 | 1.7 |
| 4,835 | 123 | 1,191 | 108 | 1,027 | 225 | 7,053 | 456 | 4.7 | |
| 31 December 2011 | |||||||||
| UK Retail (1,2) | 3,677 | 16 | 351 | 13 | 407 | 59 | 4,435 | 88 | 4.7 |
| Ulster Bank (1,2) | 893 | 78 | 516 | 45 | 421 | 124 | 1,830 | 247 | 9.1 |
| RBS Citizens (3) | - | - | 91 | 10 | 89 | 10 | 180 | 20 | 0.8 |
| Wealth | 121 | - | - | - | 2 | - | 123 | - | 1.3 |
| 4,691 | 94 | 958 | 68 | 919 | 193 | 6,568 | 355 | 4.4 |
Notes:
(1) Includes all forbearance arrangements whether relating to the customer's lifestyle changes or financial difficulty.
(2) Comprises the current stock position of forbearance deals agreed since early 2008 for UK Retail and early 2009 for Ulster Bank.
(3) Forbearance stock reported at 30 June 2012 now includes home equity loans and lines as well as the residential mortgage portfolio.
Retail forbearance (continued)
| RBS | |||||
|---|---|---|---|---|---|
| UK Retail Ulster Bank | Citizens | Wealth | Total (1) | ||
| Forbearance arrangements | £m | £m | £m | £m | £m |
| 30 June 2012 | |||||
| Interest only conversions (temporary and permanent) | 1,261 | 846 | - | 8 | 2,115 |
| Term extensions - capital repayment and interest only | 2,007 | 147 | - | 85 | 2,239 |
| Payment concessions/holidays | 172 | 832 | 350 | 22 | 1,376 |
| Capitalisation of arrears | 917 | 106 | - | - | 1,023 |
| Other | 488 | - | - | 37 | 525 |
| 4,845 | 1,931 | 350 | 152 | 7,278 | |
| 31 December 2011 | |||||
| Interest only conversions (temporary and permanent) | 1,269 | 795 | - | 3 | 2,067 |
| Term extensions - capital repayment and interest only | 1,805 | 58 | - | 97 | 1,960 |
| Payment concessions/holidays | 198 | 876 | 180 | - | 1,254 |
| Capitalisation of arrears | 864 | 101 | - | - | 965 |
| Other | 517 | - | - | 23 | 540 |
| 4,653 | 1,830 | 180 | 123 | 6,786 |
Note:
(1) As an individual case can include more than one type of arrangement, the analysis in the table on forbearance arrangements exceeds the total value of cases subject to forbearance.
The commercial real estate lending portfolio totalled £69.3 billion at 30 June 2012, a £5.6 billion or 7% decrease from £74.8 billion at 31 December 2011. The commercial real estate sector comprises exposures to entities involved in the development of, or investment in, commercial and residential properties (including housebuilders). The analysis of lending utilisations below excludes rate risk management and contingent obligations.
| 30 June 2012 | 31 December 2011 | ||||||
|---|---|---|---|---|---|---|---|
| Investment Development | Total | Investment | Development | Total | |||
| By division (1) | £m | £m | £m | £m | £m | £m | |
| Core | |||||||
| UK Corporate | 23,917 | 4,450 | 28,367 | 25,101 | 5,023 | 30,124 | |
| Ulster Bank | 3,715 | 762 | 4,477 | 3,882 | 881 | 4,763 | |
| US Retail & Commercial | 4,129 | 68 | 4,197 | 4,235 | 70 | 4,305 | |
| International Banking | 1,014 | 295 | 1,309 | 872 | 299 | 1,171 | |
| Markets | 441 | 80 | 521 | 141 | 61 | 202 | |
| 33,216 | 5,655 | 38,871 | 34,231 | 6,334 | 40,565 | ||
| Non-Core | |||||||
| UK Corporate | 3,190 | 1,274 | 4,464 | 3,957 | 2,020 | 5,977 | |
| Ulster Bank | 3,698 | 7,683 | 11,381 | 3,860 | 8,490 | 12,350 | |
| US Retail & Commercial | 652 | 16 | 668 | 901 | 28 | 929 | |
| International Banking | 13,633 | 238 | 13,871 | 14,689 | 336 | 15,025 | |
| 21,173 | 9,211 | 30,384 | 23,407 | 10,874 | 34,281 | ||
| Core and Non-Core | 54,389 | 14,866 | 69,255 | 57,638 | 17,208 | 74,846 |
| Investment | Development | |||||
|---|---|---|---|---|---|---|
| By geography (1) | Commercial £m |
Residential £m |
Commercial £m |
Residential £m |
Total £m |
|
| 30 June 2012 | ||||||
| UK (excluding NI) (2) | 27,566 | 5,957 | 959 | 5,329 | 39,811 | |
| Ireland (ROI and NI) (2) | 4,964 | 1,077 | 2,315 | 5,719 | 14,075 | |
| Western Europe | 7,569 | 402 | 19 | 56 | 8,046 | |
| US | 5,207 | 986 | 55 | 29 | 6,277 | |
| RoW | 648 | 13 | 129 | 256 | 1,046 | |
| 45,954 | 8,435 | 3,477 | 11,389 | 69,255 | ||
| 31 December 2011 | ||||||
| UK (excluding NI) (2) | 28,653 | 6,359 | 1,198 | 6,511 | 42,721 | |
| Ireland (ROI and NI) (2) | 5,146 | 1,132 | 2,591 | 6,317 | 15,186 | |
| Western Europe | 7,649 | 1,048 | 9 | 52 | 8,758 | |
| US | 5,552 | 1,279 | 59 | 46 | 6,936 | |
| RoW | 785 | 35 | 141 | 284 | 1,245 | |
| 47,785 | 9,853 | 3,998 | 13,210 | 74,846 |
For the notes to these tables refer to the following page.
| Investment | Development | ||||
|---|---|---|---|---|---|
| By geography (1) | Core £m |
Non-Core £m |
Core £m |
Non-Core £m |
Total £m |
| 30 June 2012 | |||||
| UK (excluding NI) (2) | 24,664 | 8,859 | 4,531 | 1,757 | 39,811 |
| Ireland (ROI and NI) (2) | 3,031 | 3,010 | 688 | 7,346 | 14,075 |
| Western Europe | 546 | 7,425 | 45 | 30 | 8,046 |
| US | 4,724 | 1,469 | 68 | 16 | 6,277 |
| RoW | 251 | 410 | 323 | 62 | 1,046 |
| 33,216 | 21,173 | 5,655 | 9,211 | 69,255 | |
| 31 December 2011 | |||||
| UK (excluding NI) (2) | 25,904 | 9,108 | 5,118 | 2,591 | 42,721 |
| Ireland (ROI and NI) (2) | 3,157 | 3,121 | 793 | 8,115 | 15,186 |
| Western Europe | 422 | 8,275 | 20 | 41 | 8,758 |
| US | 4,521 | 2,310 | 71 | 34 | 6,936 |
| RoW | 227 | 593 | 332 | 93 | 1,245 |
| 34,231 | 23,407 | 6,334 | 10,874 | 74,846 |
| By sub-sector (1) | UK (excl NI) (2) £m |
Ireland (ROI and NI) (2) £m |
Western Europe £m |
US £m |
RoW £m |
Total £m |
|---|---|---|---|---|---|---|
| 30 June 2012 | ||||||
| Residential | 11,286 | 6,796 | 458 | 1,015 | 269 | 19,824 |
| Office | 6,747 | 1,279 | 1,997 | 248 | 283 | 10,554 |
| Retail | 8,197 | 1,567 | 1,761 | 150 | 202 | 11,877 |
| Industrial | 3,927 | 478 | 374 | 36 | 101 | 4,916 |
| Mixed/other | 9,654 | 3,955 | 3,456 | 4,828 | 191 | 22,084 |
| 39,811 | 14,075 | 8,046 | 6,277 | 1,046 | 69,255 | |
| 31 December 2011 | ||||||
| Residential | 12,870 | 7,449 | 1,100 | 1,325 | 319 | 23,063 |
| Office | 7,155 | 1,354 | 2,246 | 404 | 352 | 11,511 |
| Retail | 8,709 | 1,641 | 1,891 | 285 | 275 | 12,801 |
| Industrial | 4,317 | 507 | 520 | 24 | 105 | 5,473 |
| Mixed/other | 9,670 | 4,235 | 3,001 | 4,898 | 194 | 21,998 |
| 42,721 | 15,186 | 8,758 | 6,936 | 1,245 | 74,846 |
Notes:
(1) Excludes commercial real estate lending in Wealth as these loans are generally supported by personal guarantees in addition to collateral. This portfolio, which totalled £1.4 billion at 30 June 2012 (31 December 2011 - £1.3 billion), continues to perform in line with expectations and requires minimal provisions.
(2) ROI: Republic of Ireland; NI: Northern Ireland.
* not within the scope of Deloitte LLP's review report
| US Retail & | International | |||||
|---|---|---|---|---|---|---|
| Maturity profile of portfolio | UK Corporate £m |
Ulster Bank £m |
Commercial £m |
Banking £m |
Markets £m |
Total £m |
| 30 June 2012 | ||||||
| Core | ||||||
| < 1 year (1) | 9,598 | 2,465 | 978 | 199 | 76 | 13,316 |
| 1-2 years | 3,911 | 795 | 575 | 116 | 7 | 5,404 |
| 2-3 years | 3,926 | 165 | 837 | 551 | 152 | 5,631 |
| > 3 years | 10,347 | 1,052 | 1,807 | 443 | 286 | 13,935 |
| Not classified (2) | 585 | - | - | - | - | 585 |
| Total | 28,367 | 4,477 | 4,197 | 1,309 | 521 | 38,871 |
| Non-Core | ||||||
| < 1 year (1) | 2,308 | 9,796 | 217 | 5,208 | - | 17,529 |
| 1-2 years | 377 | 1,165 | 133 | 3,828 | - | 5,503 |
| 2-3 years | 207 | 115 | 80 | 2,113 | - | 2,515 |
| > 3 years | 1,315 | 305 | 238 | 2,722 | - | 4,580 |
| Not classified (2) | 257 | - | - | - | - | 257 |
| Total | 4,464 | 11,381 | 668 | 13,871 | - | 30,384 |
| 31 December 2011 | ||||||
| Core | ||||||
| < 1 year (1) | 8,268 | 3,030 | 1,056 | 142 | - | 12,496 |
| 1-2 years | 5,187 | 391 | 638 | 218 | 60 | 6,494 |
| 2-3 years | 3,587 | 117 | 765 | 230 | 133 | 4,832 |
| > 3 years | 10,871 | 1,225 | 1,846 | 581 | 9 | 14,532 |
| Not classified (2) | 2,211 | - | - | - | - | 2,211 |
| Total | 30,124 | 4,763 | 4,305 | 1,171 | 202 | 40,565 |
| Non-Core | ||||||
| < 1 year (1) | 3,224 | 11,089 | 293 | 7,093 | - | 21,699 |
| 1-2 years | 508 | 692 | 163 | 3,064 | - | 4,427 |
| 2-3 years | 312 | 177 | 152 | 1,738 | - | 2,379 |
| > 3 years | 1,636 | 392 | 321 | 3,126 | - | 5,475 |
| Not classified (2) | 297 | - | - | 4 | - | 301 |
| Total | 5,977 | 12,350 | 929 | 15,025 | - | 34,281 |
Notes:
(1) Includes on demand and past due assets.
(2) Predominantly comprises overdrafts and multi-option facilities for which there is no single maturity date.
• The majority of Ulster Bank Group's commercial real estate portfolio was categorised as < 1 year, owing to the high level of non-performing assets in the portfolio. Ulster Bank places most restructured facilities on demand rather than extend the maturity date.
| Portfolio by AQ band | AQ1-AQ2 £m |
AQ3-AQ4 £m |
AQ5-AQ6 £m |
AQ7-AQ8 £m |
AQ9 £m |
AQ10 £m |
Total £m |
|---|---|---|---|---|---|---|---|
| 30 June 2012 | |||||||
| Core | 924 | 6,585 | 17,716 | 6,828 | 2,399 | 4,419 | 38,871 |
| Non-Core | 168 | 1,248 | 4,514 | 3,377 | 1,806 | 19,271 | 30,384 |
| 1,092 | 7,833 | 22,230 | 10,205 | 4,205 | 23,690 | 69,255 | |
| 31 December 2011 | |||||||
| Core | 1,094 | 6,714 | 19,054 | 6,254 | 3,111 | 4,338 | 40,565 |
| Non-Core | 680 | 1,287 | 5,951 | 3,893 | 2,385 | 20,085 | 34,281 |
| 1,774 | 8,001 | 25,005 | 10,147 | 5,496 | 24,423 | 74,846 |
The table below analyses commercial real estate lending by loan-to-value (LTV). Due to market conditions in Ireland and to a lesser extent in the UK, there is a shortage of market-based data. In the absence of external valuations, the Group deploys a range of alternative approaches to assess property values, including internal expert judgement and indexation.
| Ulster Bank | Rest of the Group | Group | ||||
|---|---|---|---|---|---|---|
| AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | |
| Loan-to-value | £m | £m | £m | £m | £m | £m |
| 30 June 2012 | ||||||
| <= 50% | 89 | 37 | 7,103 | 321 | 7,192 | 358 |
| > 50% and <= 70% | 535 | 122 | 13,490 | 1,077 | 14,025 | 1,199 |
| > 70% and <= 90% | 624 | 208 | 8,780 | 1,179 | 9,404 | 1,387 |
| > 90% and <= 100% | 509 | 176 | 2,320 | 1,695 | 2,829 | 1,871 |
| > 100% and <= 110% | 704 | 523 | 1,106 | 1,946 | 1,810 | 2,469 |
| > 110% and <= 130% | 767 | 928 | 670 | 1,081 | 1,437 | 2,009 |
| > 130% | 846 | 9,601 | 482 | 3,271 | 1,328 | 12,872 |
| Total with LTVs | 4,074 | 11,595 | 33,951 | 10,570 | 38,025 | 22,165 |
| Other (1) | 1 | 188 | 7,539 | 1,337 | 7,540 | 1,525 |
| Total | 4,075 | 11,783 | 41,490 | 11,907 | 45,565 | 23,690 |
| Total portfolio average LTV (2) | 138% | 262% | 67% | 189% | 75% | 227% |
| 31 December 2011 | ||||||
| <= 50% | 81 | 28 | 7,091 | 332 | 7,172 | 360 |
| > 50% and <= 70% | 642 | 121 | 14,105 | 984 | 14,747 | 1,105 |
| > 70% and <= 90% | 788 | 293 | 10,042 | 1,191 | 10,830 | 1,484 |
| > 90% and <= 100% | 541 | 483 | 2,616 | 1,679 | 3,157 | 2,162 |
| > 100% and <= 110% | 261 | 322 | 1,524 | 1,928 | 1,785 | 2,250 |
| > 110% and <= 130% | 893 | 1,143 | 698 | 1,039 | 1,591 | 2,182 |
| > 130% | 1,468 | 10,004 | 672 | 2,994 | 2,140 | 12,998 |
| Total with LTVs | 4,674 | 12,394 | 36,748 | 10,147 | 41,422 | 22,541 |
| Other (1) | 7 | 38 | 8,994 | 1,844 | 9,001 | 1,882 |
| Total | 4,681 | 12,432 | 45,742 | 11,991 | 50,423 | 24,423 |
Notes:
(1) Other performing loans of £7.5 billion (31 December 2011 - £9.0 billion) include unsecured lending to commercial real estate clients, such as major UK housebuilders. The credit quality of these exposures was consistent with that of the performing portfolio overall. Other non-performing loans of £1.5 billion (31 December 2011 - £1.9 billion) are subject to the Group's standard provisioning policies.
Total portfolio average LTV (2) 140% 259% 69% 129% 77% 201%
(2) Weighted average by exposure.
The majority of the Group's residential mortgage portfolio exposures are in the UK, Ireland and the US. The analysis below includes both Core and Non-Core balances.
| 30 June | 31 December | |
|---|---|---|
| 2012 | 2011 | |
| £m | £m | |
| UK Retail | 98,044 | 96,388 |
| Ulster Bank | 19,172 | 20,020 |
| RBS Citizens (1) | 22,994 | 24,153 |
| 140,210 | 140,561 |
Note:
(1) Restated.
The table below details the distribution of residential mortgages by indexed LTV. LTV averages are calculated by transaction value.
| UK Retail | Ulster Bank | RBS Citizens (3) | ||||
|---|---|---|---|---|---|---|
| AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | |
| Loan-to-value (LTV) | £m | £m | £m | £m | £m | £m |
| 30 June 2012 | ||||||
| <= 50% | 21,571 | 297 | 2,210 | 218 | 4,212 | 37 |
| > 50% and <= 70% | 25,924 | 406 | 1,628 | 151 | 4,424 | 53 |
| > 70% and <= 90% | 34,087 | 721 | 1,968 | 222 | 6,656 | 93 |
| > 90% and <= 100% | 7,574 | 354 | 1,169 | 119 | 2,345 | 53 |
| > 100% and <= 110% | 3,869 | 292 | 1,291 | 130 | 1,593 | 51 |
| > 110% and <= 130% | 2,105 | 244 | 2,396 | 308 | 1,679 | 52 |
| > 130% | 105 | 29 | 5,939 | 1,423 | 1,249 | 50 |
| Total with LTVs | 95,235 | 2,343 | 16,601 | 2,571 | 22,158 | 389 |
| Other (1) | 455 | 11 | - | - | 378 | 69 |
| Total | 95,690 | 2,354 | 16,601 | 2,571 | 22,536 | 458 |
| Total portfolio average LTV (2) | 67% | 81% | 110% | 135% | 78% | 94% |
| 31 December 2011 | ||||||
| <= 50% | 21,537 | 285 | 2,568 | 222 | 4,745 | 49 |
| > 50% and <= 70% | 25,598 | 390 | 1,877 | 157 | 4,713 | 78 |
| > 70% and <= 90% | 33,738 | 671 | 2,280 | 223 | 6,893 | 125 |
| > 90% and <= 100% | 7,365 | 343 | 1,377 | 128 | 2,352 | 66 |
| > 100% and <= 110% | 3,817 | 276 | 1,462 | 130 | 1,517 | 53 |
| > 110% and <= 130% | 1,514 | 199 | 2,752 | 322 | 1,536 | 53 |
| > 130% | 60 | 15 | 5,405 | 1,117 | 1,214 | 55 |
| Total with LTVs | 93,629 | 2,179 | 17,721 | 2,299 | 22,970 | 479 |
| Other (1) | 567 | 13 | - | - | 681 | 23 |
| Total | 94,196 | 2,192 | 17,721 | 2,299 | 23,651 | 502 |
| Total portfolio average LTV (2) | 67% | 80% | 104% | 125% | 76% | 91% |
Notes:
(1) Where no indexed LTV is held.
(2) Calculated by value of debt outstanding.
(3) Includes residential mortgages and home equity loans and lines (refer to page 189 for breakdown of balances).
* not within the scope of Deloitte LLP's review report
* not within the scope of Deloitte LLP's review report
* not within the scope of Deloitte LLP's review report
At 30 June 2012, Ulster Bank Group accounted for 10% of the Group's total gross customer loans and 9% of the Group's Core gross customer loans. The impairment charge for H1 2012 was £1,166 million, mainly driven by the residential mortgage and commercial real estate portfolios as high unemployment, austerity measures and economic uncertainty have reduced incomes and, together with limited liquidity, depressed the property market. For 2011, the H1 impairment charge was £2,540 million and the full year charge was £3,717 million.
The impairment charge for H1 2012 was £717 million, with the mortgage sector accounting for £356 million (50%). For H1 2011, the charge was £730 million, with the mortgage sector accounting for £311 million (43%). For the whole of 2011, the charge was £1,384 million, with the mortgage sector accounting for £570 million (41%).
The impairment charge for H1 2012 was £449 million. The commercial real estate sector accounted for £398 million (89%); of this, development land accounted for £262 million (58%).
For H1 2011, the corresponding charge was £1,810 million, with the commercial real sector accounting for £1,697 million (94%), of which development land accounted for £1,313 million (73% of the total Non-Core charge). For the whole of 2011, the charge was £2,333 million, with the commercial real estate sector accounting for £2,160 million (93%), of which development land accounted for £1,551 million (66% of the total Non-Core charge).
* not within the scope of Deloitte LLP's review report
| Gross loans |
REIL Provisions | REIL as a % of gross loans |
Provisions as a % of REIL |
Provisions as a % of gross loans |
YTD Impairment charge |
YTD Amounts written-off |
||
|---|---|---|---|---|---|---|---|---|
| Sector analysis | £m | £m | £m | % | % | % | £m | £m |
| 30 June 2012 | ||||||||
| Core | ||||||||
| Mortgages | 19,172 | 2,561 | 1,242 | 13.4 | 48 | 6.5 | 356 | 11 |
| Commercial real estate | ||||||||
| - investment | 3,715 | 1,117 | 481 | 30.1 | 43 | 12.9 | 91 | - |
| - development | 762 | 335 | 164 | 44.0 | 49 | 21.5 | 24 | - |
| Other corporate | 7,908 | 2,010 | 1,226 | 25.4 | 61 | 15.5 | 217 | 2 |
| Other lending | 1,451 | 211 | 194 | 14.5 | 92 | 13.4 | 29 | 15 |
| 33,008 | 6,234 | 3,307 | 18.9 | 53 | 10.0 | 717 | 28 | |
| Non-Core | ||||||||
| Commercial real estate | ||||||||
| - investment | 3,698 | 2,929 | 1,430 | 79.2 | 49 | 38.7 | 136 | 3 |
| - development | 7,683 | 7,212 | 4,374 | 93.9 | 61 | 56.9 | 262 | 37 |
| Other corporate | 1,619 | 1,136 | 656 | 70.2 | 58 | 40.5 | 51 | 7 |
| 13,000 | 11,277 | 6,460 | 86.7 | 57 | 49.7 | 449 | 47 | |
| Ulster Bank Group | ||||||||
| Mortgages | 19,172 | 2,561 | 1,242 | 13.4 | 48 | 6.5 | 356 | 11 |
| Commercial real estate | ||||||||
| - investment | 7,413 | 4,046 | 1,911 | 54.6 | 47 | 25.8 | 227 | 3 |
| - development | 8,445 | 7,547 | 4,538 | 89.4 | 60 | 53.7 | 286 | 37 |
| Other corporate | 9,527 | 3,146 | 1,882 | 33.0 | 60 | 19.8 | 268 | 9 |
| Other lending | 1,451 | 211 | 194 | 14.5 | 92 | 13.4 | 29 | 15 |
| 46,008 | 17,511 | 9,767 | 38.1 | 56 | 21.2 | 1,166 | 75 |
| Sector analysis | Gross loans £m |
REIL £m |
Provisions £m |
REIL as a % of gross loans % |
Provisions as a % of REIL % |
Provisions as a % of gross loans % |
YTD Impairment charge £m |
YTD Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | ||||||||
| Core | ||||||||
| Mortgages | 20,020 | 2,184 | 945 | 10.9 | 43 | 4.7 | 570 | 11 |
| Commercial real estate | ||||||||
| - investment | 3,882 | 1,014 | 413 | 26.1 | 41 | 10.6 | 225 | - |
| - development | 881 | 290 | 145 | 32.9 | 50 | 16.5 | 99 | 16 |
| Other corporate | 7,736 | 1,834 | 1,062 | 23.7 | 58 | 13.7 | 434 | 72 |
| Other lending | 1,533 | 201 | 184 | 13.1 | 92 | 12.0 | 56 | 25 |
| 34,052 | 5,523 | 2,749 | 16.2 | 50 | 8.1 | 1,384 | 124 | |
| Non-Core | ||||||||
| Commercial real estate | ||||||||
| - investment | 3,860 | 2,916 | 1,364 | 75.5 | 47 | 35.3 | 609 | 1 |
| - development | 8,490 | 7,536 | 4,295 | 88.8 | 57 | 50.6 | 1,551 | 32 |
| Other corporate | 1,630 | 1,159 | 642 | 71.1 | 55 | 39.4 | 173 | 16 |
| 13,980 | 11,611 | 6,301 | 83.1 | 54 | 45.1 | 2,333 | 49 | |
| Ulster Bank Group | ||||||||
| Mortgages | 20,020 | 2,184 | 945 | 10.9 | 43 | 4.7 | 570 | 11 |
| Commercial real estate | ||||||||
| - investment | 7,742 | 3,930 | 1,777 | 50.8 | 45 | 23.0 | 834 | 1 |
| - development | 9,371 | 7,826 | 4,440 | 83.5 | 57 | 47.4 | 1,650 | 48 |
| Other corporate | 9,366 | 2,993 | 1,704 | 32.0 | 57 | 18.2 | 607 | 88 |
| Other lending | 1,533 | 201 | 184 | 13.1 | 92 | 12.0 | 56 | 25 |
| 48,032 | 17,134 | 9,050 | 35.7 | 53 | 18.8 | 3,717 | 173 |
* not within the scope of Deloitte LLP's review report
The commercial real estate lending portfolio for Ulster Bank (Core and Non-Core) totalled £15.9 billion at 30 June 2012, of which £11.4 billion or 72% was in Non-Core. The geographic split of the total Ulster Bank Group commercial real estate portfolio remained similar to 31 December 2011, with 27% in Northern Ireland, 62% in the Republic of Ireland and 11% in the UK (excluding Northern Ireland).
| Investment | Development | |||||
|---|---|---|---|---|---|---|
| Commercial | Residential | Commercial | Residential | Total | ||
| Exposure by geography | £m | £m | £m | £m | £m | |
| 30 June 2012 | ||||||
| Ireland (ROI and NI) | 4,939 | 1,077 | 2,315 | 5,719 | 14,050 | |
| UK (excluding NI) | 1,287 | 96 | 91 | 304 | 1,778 | |
| RoW | 14 | - | 5 | 11 | 30 | |
| 6,240 | 1,173 | 2,411 | 6,034 | 15,858 | ||
| 31 December 2011 | ||||||
| Ireland (ROI and NI) | 5,097 | 1,132 | 2,591 | 6,317 | 15,137 | |
| UK (excluding NI) | 1,371 | 111 | 95 | 336 | 1,913 | |
| RoW | 27 | 4 | - | 32 | 63 | |
| 6,495 | 1,247 | 2,686 | 6,685 | 17,113 |
* not within the scope of Deloitte LLP's review report
Market risk arises from changes in interest rates, foreign currency, credit spreads, equity prices and risk related factors such as market volatilities. The Group manages market risk centrally within its trading and non-trading portfolios through a comprehensive market risk management framework. This control framework includes qualitative and quantitative guidance in the form of comprehensive policy statements, dealing authorities, limits based on, but not limited to, value-at-risk (VaR), stress testing, positions and sensitivity analyses.
For a description of the Group's basis of measurement and methodology enhancements, refer to pages 229 to 231 of the Group's 2011 Annual Report and Accounts.
Following the implementation of CRD III in 2011, the Group is required to calculate: (i) Stressed VaR (SVaR) - an additional capital charge based on a stressed calibration of the VaR model; (ii) an Incremental Risk Charge (IRC) to capture the default and migration risk for credit risk positions in the trading book; and (iii) an All Price Risk (APR) measure for correlation trading positions, subject to a capital floor that is based on standardised securitisation charges. The capital charges at 30 June 2012 associated with these models are shown in the table below:
| 30 June | 31 March | 31 December | |
|---|---|---|---|
| 2012 | 2012 | 2011 | |
| £m | £m | £m | |
| Stressed VaR | 1,670 | 1,793 | 1,682 |
| Incremental Risk Charge | 528 | 659 | 469 |
| All Price Risk | 199 | 262 | 297 |
Note:
(1) The effect of any month end adjustments, not attributable to a specific daily market move, is spread evenly over the trading days in the month in question.
* not within the scope of Deloitte LLP's review report
The tables below detail VaR for the Group's trading portfolios.
| Half year ended | 31 December | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 30 June 2011 | 2011 | |||||||
| Period | Period | Period | |||||||
| Average | end Maximum Minimum | Average | end Maximum Minimum | end | |||||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Interest rate | 66.3 | 58.7 | 95.7 | 43.6 | 49.8 | 36.8 | 79.2 | 27.5 | 68.1 |
| Credit spread | 75.7 | 50.2 | 94.9 | 44.9 | 103.4 | 64.6 | 151.1 | 60.0 | 74.3 |
| Currency | 12.6 | 10.9 | 21.3 | 8.2 | 10.8 | 9.3 | 18.0 | 5.2 | 16.2 |
| Equity | 6.3 | 6.2 | 12.5 | 3.3 | 10.8 | 12.0 | 17.3 | 5.2 | 8.0 |
| Commodity | 1.9 | 1.3 | 6.0 | 0.9 | 0.2 | 0.3 | 1.6 | - | 2.3 |
| Diversification (1) | (45.3) | (61.0) | (52.3) | ||||||
| Total | 103.4 | 82.0 | 137.0 | 66.5 | 117.3 | 62.0 | 181.3 | 60.8 | 116.6 |
| Core | 75.3 | 67.2 | 118.0 | 47.4 | 84.0 | 42.5 | 133.9 | 42.5 | 89.1 |
| Non-Core | 35.8 | 24.3 | 41.9 | 22.1 | 91.4 | 51.4 | 128.6 | 47.5 | 34.6 |
| CEM | 78.2 | 75.8 | 84.2 | 73.3 | 43.6 | 33.5 | 57.4 | 30.3 | 75.8 |
| Total (excluding | |||||||||
| CEM) | 50.4 | 43.0 | 76.4 | 37.5 | 97.4 | 47.6 | 150.0 | 45.8 | 49.7 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. Diversification has an inverse relationship with correlation. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
| Quarter ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 31 March 2012 | |||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | ||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m |
| Interest rate | 58.8 | 58.7 | 84.5 | 43.6 | 73.8 | 68.3 | 95.7 | 51.2 |
| Credit spread | 67.3 | 50.2 | 90.1 | 44.9 | 84.2 | 88.5 | 94.9 | 72.6 |
| Currency | 12.6 | 10.9 | 18.0 | 8.8 | 12.5 | 11.1 | 21.3 | 8.2 |
| Equity | 5.1 | 6.2 | 7.8 | 3.3 | 7.5 | 6.3 | 12.5 | 4.7 |
| Commodity | 1.2 | 1.3 | 2.4 | 0.9 | 2.5 | 1.3 | 6.0 | 1.0 |
| Diversification (1) | (45.3) | (69.0) | ||||||
| Total | 90.3 | 82.0 | 111.0 | 66.5 | 116.6 | 106.5 | 137.0 | 97.2 |
| Core | 67.9 | 67.2 | 84.1 | 47.4 | 82.8 | 74.5 | 118.0 | 63.6 |
| Non-Core | 32.9 | 24.3 | 40.4 | 22.1 | 38.7 | 39.3 | 41.9 | 34.2 |
| CEM | 77.3 | 75.8 | 83.7 | 73.8 | 79.1 | 78.5 | 84.2 | 73.3 |
| Total (excluding CEM) | 47.4 | 43.0 | 63.2 | 37.5 | 53.5 | 56.6 | 76.4 | 41.0 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. Diversification has an inverse relationship with correlation. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
The tables below detail VaR for the Group's non-trading portfolio, excluding the structured credit portfolio and loans and receivables.
| Half year ended | 31 December | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 30 June 2011 | 2011 | |||||||
| Period | Period | Period | |||||||
| Average | end Maximum Minimum | Average | end Maximum Minimum | end | |||||
| Non-trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Interest rate | 8.4 | 6.0 | 10.7 | 6.0 | 8.0 | 8.3 | 10.8 | 5.7 | 9.9 |
| Credit spread | 12.6 | 9.1 | 15.4 | 9.1 | 21.4 | 18.0 | 39.3 | 14.2 | 13.6 |
| Currency | 3.5 | 3.5 | 4.5 | 3.2 | 1.1 | 3.3 | 3.3 | 0.1 | 4.0 |
| Equity | 1.8 | 1.6 | 1.9 | 1.6 | 2.3 | 2.0 | 3.1 | 2.0 | 1.9 |
| Diversification (1) | (11.2) | (13.1) | (13.6) | ||||||
| Total | 14.3 | 9.0 | 18.3 | 9.0 | 22.6 | 18.5 | 41.6 | 13.4 | 15.8 |
| Core | 14.0 | 9.0 | 19.0 | 8.9 | 22.0 | 19.4 | 38.9 | 13.5 | 15.1 |
| Non-Core | 2.2 | 1.7 | 2.6 | 1.6 | 3.2 | 4.3 | 4.3 | 2.2 | 2.5 |
| CEM | 1.0 | 1.0 | 1.0 | 0.9 | 0.3 | 0.3 | 0.4 | 0.3 | 0.9 |
| Total (excluding CEM) | 14.1 | 9.0 | 17.8 | 9.0 | 22.5 | 18.4 | 41.4 | 13.7 | 15.5 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. Diversification has an inverse relationship with correlation. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
• The average Core and credit spread VaR were considerably lower in H1 2012 than in H1 2011, due to reduced volatility in the market data time series, position reductions and a decrease in the size of the collateral portfolio. The reduction in collateral was driven by the restructuring of certain Dutch RMBS. This restructuring facilitated their eligibility as ECB collateral and allowed the disposal in H1 2012 of additional collateral purchased during H2 2011.
| Quarter ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | 31 March 2012 | |||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | ||
| Non-trading VaR | £m | £m | £m | £m | £m | £m | £m | £m |
| Interest rate | 7.2 | 6.0 | 8.3 | 6.0 | 9.6 | 8.7 | 10.7 | 8.7 |
| Credit spread | 11.4 | 9.1 | 13.4 | 9.1 | 13.9 | 15.2 | 15.4 | 12.9 |
| Currency | 3.3 | 3.5 | 3.6 | 3.2 | 3.7 | 3.3 | 4.5 | 3.2 |
| Equity | 1.6 | 1.6 | 1.8 | 1.6 | 1.9 | 1.8 | 1.9 | 1.8 |
| Diversification (1) | (11.2) | (10.8) | ||||||
| Total | 12.8 | 9.0 | 15.5 | 9.0 | 15.7 | 18.2 | 18.3 | 13.6 |
| Core | 12.3 | 9.0 | 14.8 | 8.9 | 15.7 | 18.8 | 19.0 | 13.5 |
| Non-Core | 1.8 | 1.7 | 2.5 | 1.6 | 2.5 | 2.4 | 2.6 | 2.4 |
| CEM | 1.0 | 1.0 | 1.0 | 0.9 | 1.0 | 0.9 | 1.0 | 0.9 |
| Total (excluding CEM) | 12.4 | 9.0 | 15.4 | 9.0 | 15.7 | 17.4 | 17.8 | 13.5 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, currencies and markets. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time. Diversification has an inverse relationship with correlation. The diversification factor is the sum of the VaR on individual risk types less the total portfolio VaR.
• The Group's total non-trading VaR was lower in Q2 2012 than in the previous quarter, largely due to decreases in the credit spread and interest rate VaR, which were driven by reduced volatility in the time series and the decrease in the collateral portfolio referred to on the previous page.
The Structured Credit Portfolio is within Non-Core. The risk in this portfolio is not measured or disclosed using VaR, as the Group believes this is not an appropriate tool for the banking book portfolio, which comprises illiquid debt securities. These assets are reported on a drawn notional and fair value basis, and managed on a third party asset and RWA basis. The table below shows the open market risk in the structured credit portfolio.
| Drawn notional | Fair value | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other | Other | |||||||||
| CDOs | CLOs MBS (1) | ABS | Total | CDOs | CLOs MBS (1) | ABS | Total | |||
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| 1-2 years | - | - | - | 122 | 122 | - | - | - | 114 | 114 |
| 2-3 years | - | - | 7 | 69 | 76 | - | - | 6 | 65 | 71 |
| 3-4 years | - | 9 | - | 49 | 58 | - | 9 | - | 46 | 55 |
| 4-5 years | - | - | 103 | 40 | 143 | - | - | 83 | 37 | 120 |
| 5-10 years | - | 379 | 174 | 277 | 830 | - | 352 | 109 | 242 | 703 |
| >10 years | 346 | 359 | 485 | 573 | 1,763 | 139 | 315 | 308 | 329 | 1,091 |
| 346 | 747 | 769 | 1,130 | 2,992 | 139 | 676 | 506 | 833 | 2,154 | |
| 31 March 2012 | ||||||||||
| 1-2 years | - | - | - | 54 | 54 | - | - | - | 48 | 48 |
| 2-3 years | - | - | 9 | 153 | 162 | - | - | 9 | 143 | 152 |
| 4-5 years | - | 18 | 30 | 93 | 141 | - | 17 | 23 | 86 | 126 |
| 5-10 years | - | 368 | 254 | 248 | 870 | - | 334 | 167 | 210 | 711 |
| >10 years | 1,115 | 432 | 833 | 557 | 2,937 | 202 | 368 | 569 | 319 | 1,458 |
| 1,115 | 818 | 1,126 | 1,105 | 4,164 | 202 | 719 | 768 | 806 | 2,495 | |
| 31 December 2011 | ||||||||||
| 1-2 years | - | - | - | 27 | 27 | - | - | - | 22 | 22 |
| 2-3 years | - | - | 10 | 196 | 206 | - | - | 9 | 182 | 191 |
| 4-5 years | - | 37 | 37 | 95 | 169 | - | 34 | 30 | 88 | 152 |
| 5-10 years | 32 | 503 | 270 | 268 | 1,073 | 30 | 455 | 184 | 229 | 898 |
| >10 years | 2,180 | 442 | 464 | 593 | 3,679 | 766 | 371 | 291 | 347 | 1,775 |
| 2,212 | 982 | 781 | 1,179 | 5,154 | 796 | 860 | 514 | 868 | 3,038 | |
Note:
(1) MBS include sub-prime RMBS with a notional amount of £369 million (31 March 2012 - £396 million; 31 December 2011 - £401 million) and a fair value of £235 million (31 March 2012 - £258 million; 31 December 2011 - £252 million), all with residual maturities of >10 years.
• The CDO drawn notional was significantly lower at 30 June 2012 than at 31 December 2011, due to the liquidation of legacy trust preferred securities and commercial real estate CDOs and the subsequent sale of the underlying assets. Some retained assets were added to the MBS portfolio during Q1 2012, increasing the MBS drawn notional at 31 March 2012, but were sold outright during Q2 2012, reducing the drawn notional back to the level seen at 31 December 2011.
Country risk is the risk of material losses arising from significant country-specific events such as sovereign events (default or restructuring); economic events (contagion of sovereign default to other parts of the economy, cyclical economic shock); political events (transfer or convertibility restrictions and expropriation or nationalisation); and natural disaster or conflict. Such events have the potential to affect elements of the Group's credit portfolio that are directly or indirectly linked to the country in question and can also give rise to market, liquidity, operational and franchise risk related losses.
The risk that one or more of the weaker eurozone member states will default on its external debts and/or exit the eurozone is a particular concern. It carries with it the potential for broader economic contagion and even a complete break-up or restructuring of the eurozone. The potential for such events gives rise to redenomination risk - the risk that losses may occur when a country converts its currency and then suffers a sharp devaluation - in addition to other risks.
The Group's overall exposure to redenomination risk is difficult to predict with certainty, but the key driving factors are the currency of exposures; the form and nature of the documentation, collateral and guarantees related to the exposures; and whether there are offsetting liabilities that would be redenominated at the same time. For the purposes of estimating funding mismatches at risk of redenomination (see below), the Group assumes that non-euro exposures, and certain facilities documented under international law, are unlikely to be affected by a redenomination event.
The Group believes that the balances reported in this section represent a realistic, if conservative, view of its asset exposure to redenomination risk and related risks. Assets that are not denominated in euros, and facilities that are guaranteed or documented under international law, are expected to have protection from redenomination, and analysis shows the Group's actual exposure purely to redenomination risk is lower. However, a redenomination event would be accompanied by increased credit risk, for two reasons. First, capital controls would likely be introduced in the affected country resulting in any non-redenominated assets, including non-euro assets, potentially becoming harder to service (transfer and convertibility event). Second, a sharp devaluation could imply payment difficulties for counterparties with large debts denominated in foreign currency (counterparty defaults).
The Group's focus has been on reducing its asset exposures and funding mismatches in the eurozone periphery countries. Total asset exposures to these countries fell by 10% in H1 2012. Estimated funding mismatches at 30 June 2012 are approximately £12 billion in Ireland and £7 billion in Spain. The mismatch positions in Portugal and Greece are modest. In Italy there are surplus liabilities of approximately £1 billion. The Group is taking steps to significantly reduce its Spanish funding mismatch and expects to make further progress in the second half of this year.
* not within the scope of Deloitte LLP's review report
For further details of the Group's approach to country risk management, refer to pages 208 to 210 of the Group's 2011 Annual Report and Accounts.
The following tables show the Group's exposures by country of incorporation of the counterparty at 30 June 2012. Countries shown are those where the Group's balance sheet exposure to counterparties incorporated in the country exceeded £1 billion and the country had an external rating of A+ or below from S&P, Moody's or Fitch at 30 June 2012, as well as certain eurozone countries. The numbers are stated before taking into account mitigants, such as collateral (with the exception of reverse repos), insurance or guarantees, which may have been taken to reduce or eliminate exposure to country risk events. Exposures relating to ocean-going vessels are not included due to their multinational nature.
Definitions of headings in the following tables:
Lending - comprises gross loans and advances to: central and local government; central banks, including cash balances; other banks and financial institutions, incorporating overdraft and other shortterm facilities; corporates, in large part loans and leases; and individuals, comprising mortgages, personal loans and credit card balances. Lending includes impaired loans and loans where an impairment event has taken place but no impairment provision is recognised - risk elements in lending (REIL).
Debt securities - comprise securities classified as available-for-sale (AFS), loans and receivables (LAR), held-for-trading (HFT) and designated as at fair value through profit or loss (DFV). All debt securities other than LAR securities are carried at fair value. LAR debt securities are carried at amortised cost less impairment. HFT debt securities are presented as gross long positions (including DFV securities) and short positions per country. Impairment losses and exchange differences relating to AFS debt securities, together with interest are recognised in the income statement; other changes in the fair value of AFS securities are reported within AFS reserves, which are presented gross of tax.
* not within the scope of Deloitte LLP's review report
Derivatives (net) - comprises the mark-to-market (mtm) value of such contracts after the effect of legally enforceable netting agreements but before the effect of collateral. In the event of counterparty default, this is the net amount due to the Group from the counterparty. Counterparty netting is applied within the regulatory capital model used.
Reverse repos (net) - comprises the mtm value of such contracts after the effect of legally enforceable netting agreements and collateral. Counterparty netting is applied within the regulatory capital model used.
Balance sheet - comprises lending exposures, debt securities and derivatives and reverse repo exposures, as defined above.
In addition, for eurozone periphery countries, derivative and reverse repo netting referred to above is disclosed.
Off-balance sheet - comprises contingent liabilities, including guarantees, and committed undrawn facilities.
Credit default swaps (CDSs) - under a CDS contract, the credit risk on the reference entity is transferred from the buyer to the seller. The fair value, or mtm, represents the balance sheet carrying value. The mtm value of CDSs is included within derivatives against the counterparty of the trade, as opposed to the reference entity. The notional is the par amount of the credit protection bought or sold and is included against the reference entity of the CDS contract.
The column CDS notional less fair value represents the notional less fair value amounts arising from sold positions netted against those arising from bought positions, which equals the net change in exposure for a given reference entity should the CDS contract be triggered by a credit event, assuming there is zero recovery rate. However, in most cases, the Group expects the recovery rate to be greater than zero and the change in exposure to be less than this amount.
Government - comprises central and local government.
Asset quality (AQ) - for the probability of default range relating to each internal asset quality band, refer to page 172 of the Group's 2011 Annual Report and Accounts.
Eurozone periphery - comprises Ireland, Spain, Italy, Portugal, Greece and Cyprus.
Other eurozone - comprises Austria, Estonia, Finland, Malta, Slovakia and Slovenia.
* not within the scope of Deloitte LLP's review report
| 30 Ju ne |
20 12 |
||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Le nd |
ing | CD S |
|||||||||||||
| Go t ve rnm en £m |
Ce al ntr ba nk s £m |
Ot he r ba nk s £m |
Ot he r fin cia l an ins titu tio ns £m |
C te orp ora £m |
Pe l rso na £m |
To tal len din g £m |
Of hic h w No n Co re £m |
bt se De riti cu es £m |
riv ati De ve s £m |
Re ve rse rep os £m |
Ba lan ce sh t ee £m |
Of f ba lan ce sh t ee £m |
To tal £m |
tio l no na les s f air lue va £m |
|
| Eu roz on e |
|||||||||||||||
| Ire lan d |
45 | 1, 80 0 |
40 | 37 4 |
18 34 0 |
17 97 8 |
57 38 7 |
9, 72 3 |
74 7 |
1, 82 2 |
55 1 |
41 69 7 |
2, 97 9 |
44 67 6 |
( ) 67 |
| Sp ain |
9 | 11 7 |
10 7 |
, 4, 93 7 |
, 33 7 |
, 5, 50 7 |
3, 20 7 |
4, 61 9 |
2, 26 1 |
, 12 38 7 |
1, 96 2 |
, 14 34 9 |
( 54 2) |
||
| Ita ly |
- | - 32 |
17 6 |
25 7 |
58 1, 7 |
25 | 2, 07 7 |
1, 00 7 |
66 0 |
2, 31 7 |
- - |
, 5, 05 4 |
2, 67 7 |
, 7, 73 1 |
( 75 ) |
| Po rtu l ga |
- | - | - | - | 41 1 |
6 | 41 7 |
25 2 |
14 3 |
56 2 |
- | 1, 12 2 |
17 4 |
1, 29 6 |
24 |
| Gr ee ce |
4 | - | - | 30 | 14 9 |
12 | 19 5 |
69 | 16 | 35 1 |
- | 56 2 |
46 | 60 8 |
( ) 9 |
| Cy pru s |
- | - | - | 39 | 24 1 |
14 | 29 4 |
12 7 |
- | 52 | - | 34 6 |
17 | 36 3 |
- |
| Eu roz on e |
|||||||||||||||
| eri he p p ry |
58 | 1, 83 2 |
33 3 |
80 7 |
25 66 5 , |
18 37 2 , |
47 06 7 , |
14 38 5 , |
6, 18 5 |
7, 36 5 |
55 1 |
61 16 8 , |
7, 85 5 |
69 02 3 , |
( 66 9 ) |
| Ge rm an y |
- | 17 35 1 , |
61 0 |
29 9 |
5, 52 5 |
15 6 |
23 94 1 , |
4, 52 7 |
13 41 7 , |
10 28 3 , |
39 0 |
48 03 1 , |
8, 32 9 |
56 36 0 , |
( 1, 76 9 ) |
| Ne the rla nd s |
1 | 9, 18 5 |
61 7 |
1, 55 6 |
4, 75 5 |
29 | 16 14 3 , |
2, 56 3 |
8, 54 8 |
10 26 1 , |
63 4 |
35 58 6 , |
11 95 4 , |
47 54 0 , |
( 2) 1, 10 |
| Fra nce |
49 8 |
2 | 82 9 |
17 6 |
2, 91 3 |
73 | 4, 49 1 |
2, 02 8 |
4, 34 4 |
87 7, 7 |
40 1 |
17 11 3 , |
9, 45 5 |
26 56 8 , |
( 1, 68 8 ) |
| Be lg ium |
- | - | 30 0 |
24 6 |
49 3 |
21 | 1, 06 0 |
34 3 |
1, 28 2 |
3, 05 2 |
21 | 5, 41 5 |
1, 40 2 |
6, 81 7 |
( 12 7) |
| Lux bo em urg |
- | - | 1 | 47 1 |
2, 10 0 |
3 | 57 5 2, |
1, 07 2 |
31 1 |
57 1, 8 |
39 3 |
85 4, 7 |
1, 93 4 |
6, 79 1 |
( 4) 30 |
| Ot he r e uro zo ne |
60 | - | 16 | 73 | 97 4 |
13 | 1, 13 6 |
17 2 |
92 2 |
1, 74 3 |
31 | 3, 83 2 |
1, 31 2 |
5, 14 4 |
( 15 0 ) |
| To tal eu roz on e |
61 7 |
28 37 0 , |
2, 70 6 |
3, 62 8 |
42 42 5 , |
18 66 7 , |
96 41 3 , |
25 09 0 , |
35 00 9 , |
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2, 42 1 |
17 6, 00 2 |
42 24 1 , |
21 8, 24 3 |
( 5, 80 9 ) |
| Ot he ies ntr r c ou |
|||||||||||||||
| Ja pa n |
- | 62 9 |
47 7 |
24 0 |
32 6 |
19 | 1, 69 1 |
19 5 |
10 33 1 , |
1, 81 5 |
17 8 |
14 01 5 , |
72 1 |
14 73 6 , |
( ) 29 5 |
| Ind ia |
- | 85 | 1, 07 7 |
37 | 2, 91 2 |
96 | 4, 20 7 |
21 3 |
1, 25 9 |
13 7 |
- | 5, 60 3 |
1, 49 2 |
09 5 7, |
( 59 ) |
| Ch ina |
6 | 19 5 |
1, 28 1 |
60 | 66 7 |
28 | 2, 23 7 |
56 | 62 2 |
36 5 |
24 0 |
3, 46 4 |
1, 82 7 |
5, 29 1 |
57 |
| So uth Ko rea |
- | 7 | 57 0 |
- | 62 0 |
2 | 1, 19 9 |
2 | 76 9 |
20 3 |
15 0 |
2, 32 1 |
80 6 |
3, 12 7 |
( 15 ) 0 |
| Bra zil |
- | - | 85 9 |
- | 20 3 |
3 | 1, 06 5 |
62 | 74 2 |
44 | - | 1, 85 1 |
27 3 |
2, 12 4 |
49 6 |
| Tu rke y |
5 13 |
54 | 12 0 |
69 | 99 8 |
20 | 1, 39 6 |
31 2 |
31 3 |
90 | - | 1, 79 9 |
65 9 |
45 2, 8 |
2 |
| Ru ssi a |
- | 32 | 81 0 |
2 | 51 4 |
50 | 1, 40 8 |
66 | 21 1 |
45 | - | 1, 66 4 |
53 8 |
2, 20 2 |
( 26 4) |
| Ro nia ma |
23 | 11 4 |
4 | 4 | 37 8 |
35 6 |
87 9 |
87 8 |
31 3 |
5 | - | 1, 19 7 |
12 6 |
1, 32 3 |
( ) 24 |
| 31 | De mb ce |
( 1) 20 11 er |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Le nd |
ing | CD S |
|||||||||||||
| Go t ve rnm en |
Ce ntr al ba nks |
Ot he r ba nks |
Ot he r fin cia l an ins titu tio ns |
Co rat rpo e |
Pe l rso na |
To tal len din g |
Of wh ich No n Co re |
bt se De ritie cu s |
De riva tive s |
Re ve rse rep os |
Ba lan ce sh t ee |
Off -ba lan ce sh t ee |
To tal |
tio l no na s f les air lue va |
|
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Eu roz on e |
|||||||||||||||
| Ire lan d |
45 | 1, 46 7 |
136 | 33 3 |
18 99 4 , |
18 85 8 , |
39 83 3 , |
10 156 , |
88 6 |
2, 27 3 |
55 1 |
43 54 3 , |
2, 92 8 |
46 47 1 , |
53 |
| Sp ain |
9 | 3 | 130 | 154 | 5, 77 5 |
36 2 |
6, 43 3 |
3, 73 5 |
6, 155 |
2, 39 1 |
2 | 14 98 1 , |
2, 63 0 |
17 61 1 , |
( 1, 01 3) |
| Ita ly |
- | 73 | 23 3 |
29 9 |
2, 44 4 |
23 | 3, 07 2 |
1, 155 |
1, 25 8 |
2, 31 4 |
- | 6, 64 4 |
3, 150 |
9, 79 4 |
( 45 2) |
| Po rtu l ga |
- | - | 10 | - | 49 5 |
5 | 51 0 |
34 1 |
113 | 51 9 |
- | 1, 142 |
26 8 |
1, 41 0 |
55 |
| Gr ee ce |
7 | 6 | - | 31 | 42 7 |
14 | 48 5 |
94 | 40 9 |
35 5 |
- | 1, 24 9 |
52 | 1, 30 1 |
1 |
| Cy pru s |
- | - | - | 38 | 25 0 |
14 | 30 2 |
133 | 2 | 56 | - | 36 0 |
68 | 42 8 |
- |
| Eu roz on e |
|||||||||||||||
| eri he p p ry |
61 | 1, 54 9 |
50 9 |
85 5 |
28 38 5 , |
19 27 6 , |
50 63 5 , |
15 61 4 , |
8, 82 3 |
7, 90 8 |
55 3 |
67 91 9 , |
9, 09 6 |
77 01 5 , |
( 6) 1, 35 |
| Ge rm an y |
- | 18 06 8 , |
65 3 |
30 5 |
6, 60 8 |
155 | 25 78 9 , |
5, 40 2 |
15 76 7 , |
10 169 , |
166 | 51 89 1 , |
7, 52 7 |
59 41 8 , |
( 2, 40 1) |
| Ne the rla nd s |
8 | 65 4 7, |
62 3 |
1, 55 7 |
4, 82 7 |
20 | 14 68 9 , |
2, 49 8 |
9, 89 3 |
10 01 0 , |
27 5 |
34 86 7 , |
13 56 1 , |
48 42 8 , |
( 1, 29 5) |
| Fra nce |
48 1 |
3 | 1, 27 3 |
28 2 |
3, 76 1 |
79 | 5, 87 9 |
2, 31 7 |
7, 79 4 |
8, 70 1 |
34 5 |
22 71 9 , |
10 21 7 , |
32 93 6 , |
( 2, 84 6) |
| Be lg ium |
- | 8 | 28 7 |
35 4 |
58 8 |
20 | 1, 25 7 |
48 0 |
65 2 |
2, 95 9 |
51 | 4, 91 9 |
1, 35 9 |
6, 27 8 |
( 99 ) |
| Lux bo em urg |
- | - | 10 1 |
92 5 |
2, 22 8 |
2 | 3, 25 6 |
1, 49 7 |
130 | 2, 88 4 |
80 5 |
7, 07 5 |
2, 00 7 |
9, 08 2 |
( 40 4) |
| Ot he r e uro zo ne |
12 1 |
- | 28 | 77 | 1, 125 |
12 | 1, 36 3 |
19 1 |
70 8 |
1, 89 4 |
- | 3, 96 5 |
1, 29 7 |
5, 26 2 |
( ) 25 |
| To tal eu roz on e |
67 1 |
27 28 2 , |
3, 47 4 |
4, 35 5 |
47 52 2 , |
19 56 4 , |
102 86 8 , |
27 99 9 , |
43 76 7 , |
44 52 5 , |
2, 195 |
193 35 5 , |
45 06 4 , |
23 8, 41 9 |
( 8, 42 6) |
| Ot he ntr ies r c ou |
|||||||||||||||
| Ja pa n |
- | 2, 08 5 |
68 8 |
96 | 43 3 |
26 | 3, 32 8 |
33 8 |
12 45 6 , |
2, 44 3 |
19 1 |
18 41 8 , |
45 2 |
18 87 0 , |
( 36 5) |
| Ind ia |
- | 27 5 |
61 0 |
35 | 2, 94 9 |
127 | 3, 99 6 |
35 0 |
1, 53 0 |
21 8 |
- | 74 4 5, |
1, 28 0 |
7, 02 4 |
( 105 ) |
| Ch ina |
9 | 178 | 1, 23 7 |
16 | 65 4 |
30 | 2, 124 |
50 | 59 7 |
41 0 |
3 | 3, 134 |
1, 55 9 |
4, 69 3 |
( 62 ) |
| So uth Ko rea |
- | 5 | 81 2 |
2 | 6 57 |
1 | 1, 39 6 |
3 | 84 5 |
25 1 |
153 | 2, 64 5 |
62 7 |
3, 27 2 |
( 22 ) |
| Bra zil |
- | - | 93 6 |
- | 22 7 |
4 | 1, 167 |
70 | 79 0 |
24 | - | 1, 98 1 |
31 9 |
2, 30 0 |
164 |
| Tu rke y |
21 5 |
193 | 25 2 |
66 | 1, 07 2 |
16 | 1, 81 4 |
42 3 |
36 1 |
94 | - | 2, 26 9 |
43 7 |
2, 70 6 |
10 |
| Ru ssi a |
- | 36 | 97 0 |
8 | 65 9 |
62 | 1, 73 5 |
76 | 186 | 47 | - | 1, 96 8 |
35 6 |
2, 32 4 |
( 34 3) |
| Ro nia ma |
66 | 145 | 30 | 8 | 41 3 |
39 2 |
1, 05 4 |
1, 05 4 |
22 0 |
6 | - | 1, 28 0 |
160 | 1, 44 0 |
8 |
Note:
(1) Lending and reverse repos have been revised to exclude cash-equivalent of collateral pledged against derivative liabilities and central bank facilities respectively.
Reported exposures are affected by currency movements. Over the first half of 2012, sterling appreciated 1.4% against the US dollar and 3.5% against the euro.
* not within the scope of Deloitte LLP's review report
For more specific commentary on the Group's exposure to Ireland, Spain, Italy, Portugal and Greece, refer to pages 212 to 222. For commentary on the Group's exposure to other eurozone non-periphery countries, see page 236.
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
riv ati De ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
61 7 |
- | - | 12 62 1 , |
19 4 |
19 23 8 , |
13 58 0 , |
18 27 9 , |
1, 66 7 |
- | 20 56 3 , |
1, 68 3 |
22 24 6 , |
| Ce ntr al ba nks |
28 37 0 , |
- | - | - | - | - | - | - | 28 | - | 28 39 8 , |
- | 28 39 8 , |
| Ot he r b ks an |
2, 70 6 |
- | - | 5, 48 8 |
( 4) 68 |
1, 06 3 |
35 1, 8 |
5, 19 3 |
28 82 4 , |
1, 60 9 |
38 33 2 , |
51 4, 8 |
85 42 0 , |
| Ot he r F I |
3, 62 8 |
- | - | 9, 59 0 |
( 1, 07 2) |
1, 27 4 |
33 1 |
10 53 3 , |
7, 66 6 |
81 1 |
22 63 8 , |
6, 52 2 |
29 16 0 , |
| Co rat rpo e |
42 42 5 , |
13 99 3 , |
6, 97 5 |
82 5 |
31 | 40 0 |
22 1 |
1, 00 4 |
3, 97 3 |
1 | 47 40 3 , |
28 75 3 , |
76 15 6 , |
| Pe l rso na |
18 66 7 , |
2, 66 4 |
1, 37 1 |
- | - | - | - | - | 1 | - | 18 66 8 , |
76 5 |
19 43 3 , |
| 96 41 3 , |
16 65 7 , |
8, 34 6 |
28 52 4 , |
( 1, 53 1) |
21 97 5 , |
15 49 0 , |
35 00 9 , |
42 15 9 , |
2, 42 1 |
17 6, 00 2 |
42 24 1 , |
21 8, 24 3 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
67 1 |
- | - | 18 40 6 , |
81 | 19 59 7 , |
15 04 9 , |
22 95 4 , |
1, 92 4 |
- | 25 54 9 , |
1, 05 6 |
26 60 5 , |
| Ce al ba nks ntr |
27 28 2 , |
- | - | 20 | - | 6 | - | 26 | 35 | - | 27 34 3 , |
- | 27 34 3 , |
| Ot he r b ks an |
3, 47 4 |
- | - | 8, 42 3 |
( 75 2) |
1, 27 2 |
1, 50 2 |
8, 193 |
28 59 5 , |
1, 09 0 |
41 35 2 , |
4, 49 3 |
45 84 5 , |
| Ot he r F I |
4, 35 5 |
- | - | 10 49 4 , |
( 1, 129 ) |
1, 138 |
47 1 |
11 16 1 , |
9, 85 4 |
1, 102 |
26 47 2 , |
8, 199 |
34 67 1 , |
| Co rat rpo e |
47 52 2 , |
14 152 , |
7, 26 7 |
96 4 |
24 | 52 8 |
59 | 1, 43 3 |
4, 116 |
3 | 53 07 4 , |
30 55 1 , |
83 62 5 , |
| Pe l rso na |
19 56 4 , |
2, 28 0 |
1, 06 9 |
- | - | - | - | - | 1 | - | 19 56 5 , |
76 5 |
20 33 0 , |
| 102 86 8 , |
16 43 2 , |
8, 33 6 |
38 30 7 , |
( 1, 77 6) |
22 54 1 , |
17 08 1 , |
43 76 7 , |
44 52 5 , |
2, 195 |
19 3, 35 5 |
45 06 4 , |
23 8, 41 9 |
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio na |
l | Fa ir v alu |
e | No tio na |
l | Fa ir v alu |
e | |
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty ere nc e e y |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
33 37 8 , |
32 36 3 , |
3, 67 4 |
( 1) 3, 53 |
37 08 0 , |
36 75 9 , |
6, 48 8 |
( 6) 6, 37 |
| Ot he r b ks an |
14 59 0 , |
14 56 4 , |
1, 13 1 |
( 1, 07 3 ) |
19 73 6 , |
19 23 2 , |
2, 30 3 |
( 2, 22 5) |
| Ot he r F I |
11 51 7 , |
10 55 4 , |
49 9 |
( ) 44 8 |
17 94 9 , |
16 60 8 , |
69 3 |
( 0) 62 |
| Co rat rpo e |
50 15 1 , |
45 80 0 , |
1, 14 9 |
( 85 5 ) |
76 96 6 , |
70 119 , |
2, 24 1 |
( 1, 91 7) |
| 10 9, 63 6 |
10 3, 28 1 |
45 6, 3 |
( 5, 7) 90 |
15 1, 73 1 |
142 71 8 , |
11 72 5 , |
( 11 138 ) , |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | AQ10 | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 53,212 | 3,234 | 1,295 | 150 | 186 | 22 | - | - | 54,693 | 3,406 |
| Other FI | 51,975 | 2,787 | 546 | 37 | 2,280 | 214 | 142 | 9 | 54,943 | 3,047 |
| 105,187 | 6,021 | 1,841 | 187 | 2,466 | 236 | 142 | 9 | 109,636 | 6,453 | |
| 31 December 2011 | ||||||||||
| Banks | 67,624 | 5,585 | 1,085 | 131 | 198 | 23 | - | - | 68,907 | 5,739 |
| Other FI | 79,824 | 5,605 | 759 | 89 | 2,094 | 278 | 147 | 14 | 82,824 | 5,986 |
| 147,448 | 11,190 | 1,844 | 220 | 2,292 | 301 | 147 | 14 | 151,731 | 11,725 |
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
S AF |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
58 | - | - | 51 9 |
( 19 8 ) |
4, 52 4 |
5, 05 3 |
( 10 ) |
10 3 |
- | 15 1 |
72 | 22 3 |
| Ce al ba nks ntr |
1, 83 2 |
- | - | - | - | - | - | - | - | - | 1, 83 2 |
- | 1, 83 2 |
| Ot he r b ks an |
33 3 |
- | - | 3, 44 0 |
( 81 3 ) |
28 7 |
24 7 |
3, 48 0 |
4, 74 7 |
47 3 |
9, 03 3 |
10 5 |
9, 13 8 |
| Ot he r F I |
80 7 |
- | - | 2, 04 1 |
( 4) 67 |
40 5 |
48 | 2, 39 8 |
89 6 |
78 | 4, 17 9 |
1, 66 7 |
5, 84 6 |
| Co rat rpo e |
25 66 5 , |
11 89 2 , |
6, 24 6 |
18 9 |
1 | 14 8 |
20 | 31 7 |
1, 61 8 |
- | 27 60 0 , |
5, 39 1 |
32 99 1 , |
| Pe l rso na |
18 37 2 , |
2, 63 4 |
1, 34 6 |
- | - | - | - | - | 1 | - | 18 37 3 , |
62 0 |
18 99 3 , |
| 47 06 7 , |
14 52 6 , |
7, 59 2 |
6, 18 9 |
( 1, 68 4) |
5, 36 4 |
5, 36 8 |
6, 18 5 |
7, 36 5 |
55 1 |
61 16 8 , |
7, 85 5 |
69 02 3 , |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
61 | - | - | 1, 20 7 |
( 33 9) |
4, 85 4 |
5, 65 2 |
40 9 |
23 6 |
- | 70 6 |
118 | 82 4 |
| Ce al ba nks ntr |
1, 54 9 |
- | - | - | - | - | - | - | - | - | 1, 54 9 |
- | 1, 54 9 |
| Ot he r b ks an |
50 9 |
- | - | 5, 27 9 |
( 95 6) |
43 6 |
31 8 |
5, 39 7 |
4, 35 0 |
48 0 |
10 73 6 , |
67 | 10 80 3 , |
| Ot he r F I |
85 5 |
- | - | 2, 33 1 |
( 65 4) |
22 8 |
56 | 2, 50 3 |
1, 78 3 |
73 | 21 5, 4 |
1, 86 2 |
07 6 7, |
| Co rat rpo e |
28 38 5 , |
12 27 2 , |
6, 56 7 |
27 4 |
4 | 24 0 |
- | 51 4 |
1, 53 8 |
- | 30 43 7 , |
6, 41 2 |
36 84 9 , |
| Pe l rso na |
19 27 6 , |
2, 25 8 |
1, 04 8 |
- | - | - | - | - | 1 | - | 19 27 7 , |
63 7 |
19 91 4 , |
| 50 63 5 , |
14 53 0 , |
7, 61 5 |
9, 09 1 |
( 1, 94 5) |
5, 75 8 |
6, 02 6 |
8, 82 3 |
7, 90 8 |
55 3 |
67 91 9 , |
9, 09 6 |
77 01 5 , |
Derivative and reverse repo netting were £29,590 million (31 December 2011 - £32,506 million) and £3,195 million (31 December 2011 - £3,320 million) respectively.
| 30 Ju ne |
12 | 31 De mb ce |
20 11 |
||||
|---|---|---|---|---|---|---|---|
| No tio na |
Fa ir v alu |
No tio na |
Fa ir v alu |
e | |||
| Bo ht |
So ld |
Bo ht |
So ld |
Bo ht |
So ld |
Bo ht |
So ld |
| £m | £m | £m | £m | £m | £m | £m | £m |
| 22 09 2 , |
22 29 2 , |
3, 34 9 |
( 3, 23 2) |
25 88 3 , |
26 174 , |
5, 97 9 |
( 5, 92 6) |
| 6, 63 9 |
6, 61 8 |
77 8 |
( 75 1) |
9, 37 2 |
9, 159 |
1, 65 7 |
( 1, 62 3) |
| 2, 76 7 |
2, 49 8 |
22 2 |
( 19 9 ) |
3, 85 4 |
3, 63 5 |
29 0 |
( 26 2) |
| 7, 56 7 |
6, 70 1 |
69 1 |
( 1) 57 |
10 79 8 , |
9, 32 9 |
99 9 |
( 0) 86 |
| 39 06 5 , |
38 10 9 , |
5, 04 0 |
( 4, 75 3 ) |
49 90 7 , |
48 29 7 , |
8, 92 5 |
( 8, 67 1) |
| ug | l | 20 ug |
e | ug | l | er ug |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 21,383 | 2,718 | 874 | 136 | 90 | 14 | 22,347 | 2,868 |
| Other FI | 15,731 | 2,053 | 189 | 5 | 798 | 114 | 16,718 | 2,172 |
| 37,114 | 4,771 | 1,063 | 141 | 888 | 128 | 39,065 | 5,040 | |
| 31 December 2011 | ||||||||
| Banks | 26,008 | 4,606 | 604 | 112 | 93 | 14 | 26,705 | 4,732 |
| Other FI | 22,082 | 3,980 | 394 | 51 | 726 | 162 | 23,202 | 4,193 |
| 48,090 | 8,586 | 998 | 163 | 819 | 176 | 49,907 | 8,925 |
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
45 | - | - | 10 9 |
( ) 36 |
9 | 9 | 10 9 |
2 | - | 15 6 |
2 | 15 8 |
| Ce al ba nk ntr |
1, 80 0 |
- | - | - | - | - | - | - | - | - | 1, 80 0 |
- | 1, 80 0 |
| Ot he r b ks an |
40 | - | - | 17 4 |
( 25 ) |
66 | 25 | 21 5 |
74 2 |
47 3 |
1, 47 0 |
40 | 1, 51 0 |
| Ot he r F I |
37 4 |
- | - | 51 | - | 30 1 |
4 | 34 8 |
67 1 |
78 | 1, 47 1 |
63 2 |
2, 10 3 |
| Co rat rpo e |
18 34 0 , |
10 31 1 , |
5, 68 3 |
75 | 1 | 1 | 1 | 75 | 40 6 |
- | 18 82 1 , |
1, 78 5 |
20 60 6 , |
| Pe l rso na |
17 97 8 , |
2, 63 4 |
1, 34 6 |
- | - | - | - | - | 1 | - | 17 97 9 , |
52 0 |
18 49 9 , |
| 38 57 7 , |
12 94 5 , |
7, 02 9 |
40 9 |
( ) 60 |
37 7 |
39 | 74 7 |
1, 82 2 |
55 1 |
41 69 7 , |
2, 97 9 |
44 67 6 , |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
45 | - | - | 102 | ( ) 46 |
20 | 19 | 103 | 92 | - | 24 0 |
2 | 24 2 |
| Ce ntr al ba nk |
1, 46 7 |
- | - | - | - | - | - | - | - | - | 1, 46 7 |
- | 1, 46 7 |
| Ot he r b ks an |
136 | - | - | 177 | ( 39 ) |
19 5 |
14 | 35 8 |
98 1 |
47 8 |
1, 95 3 |
- | 1, 95 3 |
| Ot he r F I |
33 3 |
- | - | 61 | - | 116 | 35 | 142 | 78 2 |
73 | 1, 33 0 |
54 6 |
1, 87 6 |
| Co rat rpo e |
18 99 4 , |
10 26 9 , |
5, 68 9 |
148 | 3 | 135 | - | 28 3 |
41 7 |
- | 19 69 4 , |
1, 84 1 |
21 53 5 , |
| Pe l rso na |
18 85 8 , |
2, 25 8 |
1, 04 8 |
- | - | - | - | - | 1 | - | 18 85 9 , |
53 9 |
19 39 8 , |
| 39 83 3 , |
12 52 7 , |
6, 73 7 |
48 8 |
( ) 82 |
46 6 |
68 | 88 6 |
2, 27 3 |
55 1 |
43 54 3 , |
2, 92 8 |
46 47 1 , |
Derivative and reverse repo netting were £16,122 million (31 December 2011 - £19,189 million) and £2,645 million (31 December 2011 - £2,324 million) respectively.
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
||||
|---|---|---|---|---|---|---|---|
| No tio na |
Fa ir v alu |
No tio l na |
Fa ir v alu e |
||||
| Bo ht |
So ld |
Bo ht |
So ld |
Bo ht |
So ld |
Bo ht |
So ld |
| £m | £m | £m | £m | £m | £m | £m | £m |
| 2, 29 4 |
2, 38 5 |
36 0 |
( ) 37 6 |
2, 145 |
2, 22 3 |
46 6 |
( 48 1) |
| 11 4 |
11 1 |
8 | ( 8 ) |
110 | 10 7 |
21 | ( 21 ) |
| 70 4 |
64 4 |
68 | ( ) 69 |
52 3 |
63 0 |
64 | ( ) 74 |
| 31 6 |
23 8 |
( 16 ) |
16 | 42 5 |
32 2 |
( 11 ) |
10 |
| 3, 42 8 |
3, 37 8 |
42 0 |
( 7) 43 |
3, 20 3 |
3, 28 2 |
54 0 |
( 56 6) |
| ug | l | ug | e | ug | ug |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 1,621 | 230 | 5 | 1 | - | - | 1,626 | 231 |
| Other FI | 1,343 | 179 | 161 | - | 298 | 10 | 1,802 | 189 |
| 2,964 | 409 | 166 | 1 | 298 | 10 | 3,428 | 420 | |
| 31 December 2011 | ||||||||
| Banks | 1,586 | 300 | 2 | - | - | - | 1,588 | 300 |
| Other FI | 1,325 | 232 | 161 | 1 | 129 | 7 | 1,615 | 240 |
| 2,911 | 532 | 163 | 1 | 129 | 7 | 3,203 | 540 |
Exposure to the CBI fluctuates, driven by regulatory requirements and by deposits of excess liquidity as part of UBG's asset and liability management.
Markets, International Banking and UBG account for the majority of the Group's exposure to financial institutions. The largest category is derivatives and reverse repos, where exposure is affected predominantly by market movements and much of the exposure is collateralised.
• Corporate
Lending exposure fell by approximately £0.7 billion over the first half of 2012, driven by exchange rate movements and write-offs. Commercial real estate lending, nearly all in UBG, amounted to £10.5 billion at 30 June 2012, down £0.4 billion from 31 December 2011 amid continuing adverse market conditions. The commercial real estate lending exposure is largely in UBG Non-Core and includes REIL of £7.6 billion and loan provisions of £4.1 billion.
• Personal
Overall lending exposure fell a further £0.9 billion as a result of exchange rate movements, amortisation, maturities, a small amount of write-offs, low new business volumes and active risk management. Residential mortgage loans amounted to £17.0 billion, including REIL of £2.5 billion and loan provisions of £1.1 billion. The housing market continues to suffer from weak domestic demand, with house prices now approximately 50% below their 2007 peak.
Ireland Non-Core lending exposure was £9.7 billion at 30 June 2012, down by £0.4 billion since 31 December 2011. The remaining lending portfolio largely consisted of exposures to real estate (80%), retail (6%) and leisure (4%).
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
9 | - | - | 29 | ( ) 19 |
38 3 |
49 3 |
( ) 81 |
3 | - | ( ) 69 |
70 | 1 |
| Ce al ba nk ntr |
- | - | - | - | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
11 7 |
- | - | 3, 09 2 |
( 75 8 ) |
16 3 |
11 3 |
3, 14 2 |
1, 77 6 |
- | 5, 03 5 |
40 | 5, 07 5 |
| Ot he r F I |
10 7 |
- | - | 1, 47 2 |
( 2) 66 |
67 | 32 | 50 1, 7 |
38 | - | 65 1, 2 |
25 1 |
1, 90 3 |
| Co rat rpo e |
4, 93 7 |
1, 00 8 |
22 6 |
- | - | 61 | 10 | 51 | 44 4 |
- | 5, 43 2 |
1, 54 4 |
6, 97 6 |
| Pe l rso na |
33 7 |
- | - | - | - | - | - | - | - | - | 33 7 |
57 | 39 4 |
| 5, 50 7 |
1, 00 8 |
22 6 |
4, 59 3 |
( ) 1, 43 9 |
67 4 |
64 8 |
4, 61 9 |
2, 26 1 |
- | 12 38 7 , |
1, 96 2 |
14 34 9 , |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
9 | - | - | 33 | ( 15 ) |
36 0 |
75 1 |
( 35 8) |
35 | - | ( 31 4) |
116 | ( 198 ) |
| Ce ntr al ba nk |
3 | - | - | - | - | - | - | - | - | - | 3 | - | 3 |
| Ot he r b ks an |
130 | - | - | 4, 89 2 |
( 86 7) |
16 2 |
21 4 |
4, 84 0 |
1, 62 0 |
2 | 6, 59 2 |
41 | 6, 63 3 |
| Ot he r F I |
154 | - | - | 1, 58 0 |
( 63 9) |
65 | 8 | 1, 63 7 |
28 2 |
- | 2, 07 3 |
169 | 2, 24 2 |
| Co rat rpo e |
5, 77 5 |
1, 190 |
44 2 |
9 | - | 27 | - | 36 | 45 4 |
- | 6, 26 5 |
2, 24 7 |
8, 51 2 |
| Pe l rso na |
36 2 |
- | - | - | - | - | - | - | - | - | 36 2 |
57 | 41 9 |
| 6, 43 3 |
1, 190 |
44 2 |
6, 51 4 |
( 1, 52 1) |
61 4 |
97 3 |
6, 155 |
2, 39 1 |
2 | 14 98 1 , |
2, 63 0 |
17 61 1 , |
Derivative and reverse repo netting were £4,440 million (31 December 2011 - £4,384 million) and £487 million (31 December 2011 - £567 million) respectively.
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio na |
l | Fa ir v alu |
e | No tio l na |
Fa ir v alu |
e | ||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
4, 96 0 |
4, 96 8 |
69 3 |
( ) 66 5 |
5, 15 1 |
5, 155 |
53 8 |
( 52 2) |
| Ot he r b ks an |
1, 9 77 |
1, 73 9 |
14 5 |
( 13 6 ) |
1, 96 5 |
1, 93 7 |
154 | ( 152 ) |
| Ot he r F I |
1, 26 9 |
1, 08 7 |
98 | ( 78 ) |
2, 41 7 |
2, 20 4 |
157 | ( 128 ) |
| Co rat rpo e |
3, 16 8 |
2, 73 3 |
28 2 |
( 2) 23 |
4, 83 1 |
3, 95 9 |
44 8 |
( 39 9) |
| 11 17 6 , |
10 52 7 , |
1, 21 8 |
( 1) 1, 11 |
14 36 4 , |
13 25 5 , |
1, 29 7 |
( 1) 1, 20 |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 5,602 | 559 | 51 | 7 | 31 | 4 | 5,684 | 570 |
| Other FI | 5,198 | 595 | 21 | 4 | 273 | 49 | 5,492 | 648 |
| 10,800 | 1,154 | 72 | 11 | 304 | 53 | 11,176 | 1,218 | |
| 31 December 2011 | ||||||||
| Banks | 6,595 | 499 | 68 | 5 | 32 | 4 | 6,695 | 508 |
| Other FI | 7,238 | 736 | 162 | 3 | 269 | 50 | 7,669 | 789 |
| 13,833 | 1,235 | 230 | 8 | 301 | 54 | 14,364 | 1,297 |
The Group's exposure was very small at 30 June 2012.
The Group's largest exposure was a covered bond portfolio of £4.6 billion at 30 June 2012, a decrease by £1.9 billion in H1 2012, largely as a result of sales. The portfolio continued to perform satisfactorily. However, the Group is monitoring the situation closely, including undertaking stress analyses.
A further £1.8 billion of the Group's exposure consisted of derivatives to Spanish international banks and a few of the large regional banks, the majority of which was collateralised.
Lending to banks consists mainly of short-term uncommitted credit lines with the top two international Spanish banks.
• Corporate
Lending decreased by £0.8 billion and off-balance exposure by another £0.7 billion, due to reductions mostly in the natural resources and property sectors. Commercial real estate lending amounted to £2.1 billion at 30 June 2012, nearly all in Non-Core. The majority of REIL and loan provisions relates to commercial real estate lending and further decreased over the first half of 2012, reflecting disposals and restructurings.
At 30 June 2012, Non-Core had lending exposure of £3.2 billion to Spain, a reduction of £0.5 billion or 14% since 31 December 2011. The real estate (67%), construction (12%) and electricity (8%) sectors account for the majority of the remaining lending exposure.
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| Ju 30 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
- | - | - | 32 6 |
( ) 10 8 |
4, 09 6 |
4, 52 0 |
( ) 98 |
81 | - | ( ) 17 |
- | ( ) 17 |
| Ce ntr al ba nk |
32 | - | - | - | - | - | - | - | - | - | 32 | - | 32 |
| Ot he r b ks an |
17 6 |
- | - | 11 8 |
( ) 11 |
41 | 84 | 75 | 1, 51 5 |
- | 1, 76 6 |
25 | 1, 79 1 |
| Ot he r F I |
25 7 |
- | - | 51 6 |
( 12 ) |
34 | 11 | 53 9 |
14 1 |
- | 93 7 |
78 1 |
1, 71 8 |
| Co rat rpo e |
1, 58 7 |
11 9 |
38 | 73 | - | 80 | 9 | 14 4 |
58 0 |
- | 2, 31 1 |
1, 85 9 |
4, 17 0 |
| Pe l rso na |
25 | - | - | - | - | - | - | - | - | - | 25 | 12 | 37 |
| 2, 07 7 |
11 9 |
38 | 1, 03 3 |
( 1) 13 |
4, 25 1 |
4, 62 4 |
66 0 |
2, 31 7 |
- | 5, 05 4 |
2, 67 7 |
7, 73 1 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
- | - | - | 70 4 |
( 22 0) |
4, 33 6 |
4, 72 5 |
31 5 |
90 | - | 40 5 |
- | 40 5 |
| Ce ntr al ba nk |
73 | - | - | - | - | - | - | - | - | - | 73 | - | 73 |
| Ot he r b ks an |
23 3 |
- | - | 119 | ( 14 ) |
67 | 88 | 98 | 1, 06 4 |
- | 1, 39 5 |
23 | 1, 41 8 |
| Ot he r F I |
29 9 |
- | - | 68 5 |
( 15 ) |
40 | 13 | 71 2 |
68 6 |
- | 1, 69 7 |
1, 146 |
2, 84 3 |
| Co rat rpo e |
2, 44 4 |
36 1 |
113 | 75 | - | 58 | - | 133 | 47 4 |
- | 3, 05 1 |
1, 96 8 |
5, 01 9 |
| Pe l rso na |
23 | - | - | - | - | - | - | - | - | - | 23 | 13 | 36 |
| 3, 07 2 |
36 1 |
113 | 1, 58 3 |
( 24 9) |
4, 50 1 |
4, 82 6 |
1, 25 8 |
2, 31 4 |
- | 6, 64 4 |
3, 150 |
9, 79 4 |
Derivative and reverse repo netting were £8,709 million (31 December 2011 - £8,633 million) and £20 million (31 December 2011 - £187 million) respectively.
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio na |
l | Fa ir v alu |
e | No tio l na |
Fa ir v alu |
e | ||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
65 11 4 , |
75 11 3 , |
1, 60 7 |
( 52 ) 1, 8 |
12 125 , |
12 21 8 , |
1, 0 75 |
( 1, 70 8) |
| Ot he r b ks an |
3, 75 8 |
3, 77 1 |
48 1 |
( 46 5 ) |
6, 07 8 |
5, 93 8 |
1, 21 5 |
( 1, 187 ) |
| Ot he r F I |
75 3 |
72 9 |
50 | ( 45 ) |
87 2 |
76 2 |
60 | ( 51 ) |
| Co rat rpo e |
3, 36 7 |
3, 05 1 |
24 6 |
( 19 3 ) |
4, 74 2 |
4, 29 9 |
35 0 |
( 28 1) |
| 19 53 2 , |
19 30 4 , |
2, 38 4 |
( 2, 23 1) |
23 81 7 , |
23 21 7 , |
3, 37 5 |
( 3, 22 7) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 11,382 | 1,375 | 781 | 121 | 59 | 10 | 12,222 | 1,506 |
| Other FI | 7,141 | 840 | 7 | 1 | 162 | 37 | 7,310 | 878 |
| 18,523 | 2,215 | 788 | 122 | 221 | 47 | 19,532 | 2,384 | |
| 31 December 2011 | ||||||||
| Banks | 12,904 | 1,676 | 487 | 94 | 61 | 10 | 13,452 | 1,780 |
| Other FI | 10,138 | 1,550 | 8 | 2 | 219 | 43 | 10,365 | 1,595 |
| 23,042 | 3,226 | 495 | 96 | 280 | 53 | 23,817 | 3,375 |
• The Group maintains strong relationships with Italian government entities, banks, other financial institutions and large corporate clients. Since the start of 2011, the Group has taken steps to reduce its risk through strategic exits where appropriate, or to mitigate its risk through increased collateral requirements, in line with its evolving appetite for Italian risk. Lending exposure to Italian counterparties was reduced by a further £1.0 billion in the first half of 2012, to £2.1 billion.
The Group is an active market-maker in Italian government bonds, resulting in large gross long and short positions in held-for-trading securities.
The majority of the Group's exposure relates to the top five banks. The Group's product offering consists largely of collateralised trading products and, to a lesser extent, short-term uncommitted lending lines for liquidity purposes. During the first half of 2012, derivative exposure decreased by £0.5 billion due to market movements; risk is mitigated since most facilities are fully collateralised.
The AFS bond exposure was reduced by £0.2 billion.
• Corporate
Lending declined by £0.9 billion, largely in lending to manufacturing companies.
Non-Core lending exposure was £1.0 billion at 30 June 2012, a £0.1 billion (13%) reduction since 31 December 2011, largely within unleveraged funds. The remaining lending exposure mainly comprised commercial real estate (28%), leisure (22%), electricity (15%) and industrials (11%).
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
S AF |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
- | - | - | 55 | ( 35 ) |
12 | 23 | 44 | 17 | - | 61 | - | 61 |
| Ot he r b ks an |
- | - | - | 56 | ( ) 19 |
17 | 25 | 48 | 41 3 |
- | 46 1 |
- | 46 1 |
| Ot he r F I |
- | - | - | 2 | - | 3 | 1 | 4 | 44 | - | 48 | 3 | 51 |
| Co rat rpo e |
41 1 |
20 1 |
16 1 |
41 | - | 6 | - | 47 | 88 | - | 54 6 |
16 3 |
70 9 |
| Pe l rso na |
6 | - | - | - | - | - | - | - | - | - | 6 | 8 | 14 |
| 41 7 |
20 1 |
16 1 |
15 4 |
( 54 ) |
38 | 49 | 14 3 |
56 2 |
- | 1, 12 2 |
17 4 |
1, 29 6 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
- | - | - | 56 | ( 58 ) |
36 | 152 | ( 60 ) |
19 | - | ( 41 ) |
- | ( 41 ) |
| Ot he r b ks an |
10 | - | - | 91 | ( 36 ) |
12 | 2 | 10 1 |
38 9 |
- | 50 0 |
2 | 50 2 |
| Ot he r F I |
- | - | - | 5 | - | 7 | - | 12 | 30 | - | 42 | - | 42 |
| Co rat rpo e |
49 5 |
27 | 27 | 42 | 1 | 18 | - | 60 | 81 | - | 63 6 |
25 8 |
89 4 |
| Pe l rso na |
5 | - | - | - | - | - | - | - | - | - | 5 | 8 | 13 |
| 51 0 |
27 | 27 | 194 | ( 93 ) |
73 | 154 | 113 | 51 9 |
- | 1, 142 |
26 8 |
1, 41 0 |
Derivative and reverse repo netting were £93 million (31 December 2011 - £114 million) and £41 million (31 December 2011 - £220 million) respectively.
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio na |
l | Fa ir v alu e |
No tio l na |
Fa ir v alu |
e | |||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
3, 18 4 |
3, 18 6 |
68 9 |
( ) 66 3 |
3, 30 4 |
3, 41 3 |
99 7 |
( 98 5) |
| Ot he r b ks an |
98 4 |
99 3 |
14 3 |
( 14 0 ) |
1, 197 |
1, 155 |
26 4 |
( 26 0) |
| Ot he r F I |
8 | 5 | 1 | ( 1) |
8 | 5 | 1 | ( 1) |
| Co rat rpo e |
34 0 |
30 9 |
60 | ( ) 42 |
36 6 |
32 1 |
68 | ( 48 ) |
| 4, 51 6 |
4, 49 3 |
89 3 |
( ) 84 6 |
4, 87 5 |
4, 89 4 |
1, 33 0 |
( 4) 1, 29 |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 2,677 | 520 | 37 | 7 | - | - | 2,714 | 527 |
| Other FI | 1,770 | 353 | - | - | 32 | 13 | 1,802 | 366 |
| 4,447 | 873 | 37 | 7 | 32 | 13 | 4,516 | 893 | |
| 31 December 2011 | ||||||||
| Banks | 2,922 | 786 | 46 | 12 | - | - | 2,968 | 798 |
| Other FI | 1,874 | 517 | - | - | 33 | 15 | 1,907 | 532 |
| 4,796 | 1,303 | 46 | 12 | 33 | 15 | 4,875 | 1,330 |
The Group's exposure to the Portuguese government at 30 June 2012 was £61 million, comprising very small derivative exposure and a small debt securities position - up from a net negative position at 31 December 2011 caused by a net short HFT debt securities position.
A major proportion of the remaining exposure is focused on the top four systemically important financial groups. Exposures generally consist of collateralised trading products.
The largest exposure is to the natural resources and transport sectors, concentrated on a few large, highly creditworthy clients.
The Non-Core division's lending exposure to Portugal was reduced by £0.1 billion in the first half of 2012, to less than £0.3 billion. The portfolio largely comprised lending exposure to the land transport and logistics (39%), electricity (38%) and commercial real estate (18%) sectors.
* not within the scope of Deloitte LLP's review report
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
4 | - | - | - | - | 24 | 8 | 16 | - | - | 20 | - | 20 |
| Ot he r b ks an |
- | - | - | - | - | - | - | - | 28 7 |
- | 28 7 |
- | 28 7 |
| Ot he r F I |
30 | - | - | - | - | - | - | - | 2 | - | 32 | - | 32 |
| Co rat rpo e |
14 9 |
87 | 98 | - | - | - | - | - | 62 | - | 21 1 |
36 | 24 7 |
| Pe l rso na |
12 | - | - | - | - | - | - | - | - | - | 12 | 10 | 22 |
| 19 5 |
87 | 98 | - | - | 24 | 8 | 16 | 35 1 |
- | 56 2 |
46 | 60 8 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
7 | - | - | 31 2 |
- | 102 | 5 | 40 9 |
- | - | 41 6 |
- | 41 6 |
| Ce ntr al ba nk |
6 | - | - | - | - | - | - | - | - | - | 6 | - | 6 |
| Ot he r b ks an |
- | - | - | - | - | - | - | - | 29 0 |
- | 29 0 |
- | 29 0 |
| Ot he r F I |
31 | - | - | - | - | - | - | - | 2 | - | 33 | - | 33 |
| Co rat rpo e |
42 7 |
25 6 |
25 6 |
- | - | - | - | - | 63 | - | 49 0 |
42 | 53 2 |
| Pe l rso na |
14 | - | - | - | - | - | - | - | - | - | 14 | 10 | 24 |
| 48 5 |
25 6 |
25 6 |
31 2 |
- | 102 | 5 | 40 9 |
35 5 |
- | 1, 24 9 |
52 | 1, 30 1 |
Derivative netting was £223 million (31 December 2011 - £186 million).
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu |
e | ||||
| CD S b ref nti ty ere nc e e y |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Go t ve rnm en |
- | - | - | - | 3, 158 |
3, 165 |
2, 22 8 |
( 0) 2, 23 |
| Ot he r b ks an |
4 | 4 | 1 | ( 2) |
22 | 22 | 3 | ( 3) |
| Ot he r F I |
33 | 33 | 5 | ( ) 6 |
34 | 34 | 8 | ( 8) |
| Co rat rpo e |
37 6 |
37 0 |
11 9 |
( 12 0 ) |
43 4 |
42 8 |
144 | ( 142 ) |
| 41 3 |
40 7 |
5 12 |
( ) 12 8 |
3, 64 8 |
3, 64 9 |
2, 38 3 |
( 2, 38 3) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 101 | 34 | - | - | - | - | 101 | 34 |
| Other FI | 279 | 86 | - | - | 33 | 5 | 312 | 91 |
| 380 | 120 | - | - | 33 | 5 | 413 | 125 | |
| 31 December 2011 | ||||||||
| Banks | 2,001 | 1,345 | 1 | 1 | - | - | 2,002 | 1,346 |
| Other FI | 1,507 | 945 | 63 | 45 | 76 | 47 | 1,646 | 1,037 |
| 3,508 | 2,290 | 64 | 46 | 76 | 47 | 3,648 | 2,383 |
• The Group has substantially reduced its exposure to Greece which it continues to actively manage, in line with the de-risking strategy that has been in place since early 2010. Much of the remaining exposure is collateralised or guaranteed. The remaining Greek exposure at 30 June 2012 was £0.6 billion, more than half of this being derivative exposure to banks (itself in part collateralised), the remainder is mostly corporate lending (part of this being exposure to local subsidiaries of international companies).
The Group participated in the restructuring of the Greek government debt in March 2012, which resulted in new bonds that were sold in March and April, and in £0.3 billion of AFS bonds issued by the European Financial Stability Facility incorporated in Luxembourg. The Group no longer holds any AFS bonds issued by the Greek government. A small HFT position, resulting from the sovereign debt restructuring in March has been retained to enable the Group to quote prices and stay relevant to key clients.
Activity with Greek financial institutions is largely collateralised derivative and repo exposure and remains under close scrutiny.
Lending exposure fell by £0.3 billion, largely due to a single name write-off.
The Group's focus is on short-term trade facilities to the domestic subsidiaries of international clients, increasingly supported by parental guarantees.
The Non-Core division's lending exposure to Greece was less than £0.1 billion at 30 June 2012, a slight reduction from 31 December 2011. The remaining lending portfolio primarily consisted of the following sectors: financial intermediaries (43%), construction (27%) and other services (13%).
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| Ju 30 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ot he r b k an |
- | - | - | - | - | - | - | - | 14 | - | 14 | - | 14 |
| Ot he r F I |
39 | - | - | - | - | - | - | - | - | - | 39 | - | 39 |
| Co rat rpo e |
24 1 |
16 6 |
40 | - | - | - | - | - | 38 | - | 27 9 |
4 | 28 3 |
| Pe l rso na |
14 | - | - | - | - | - | - | - | - | - | 14 | 13 | 27 |
| 29 4 |
16 6 |
40 | - | - | - | - | - | 52 | - | 34 6 |
17 | 36 3 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Ot he r b k an |
- | - | - | - | - | - | - | - | 6 | - | 6 | 1 | 7 |
| Ot he r F I |
38 | - | - | - | - | - | - | - | 1 | - | 39 | 1 | 40 |
| Co rat rpo e |
25 0 |
169 | 40 | - | - | 2 | - | 2 | 49 | - | 30 1 |
56 | 35 7 |
| Pe l rso na |
14 | - | - | - | - | - | - | - | - | - | 14 | 10 | 24 |
| 30 2 |
169 | 40 | - | - | 2 | - | 2 | 56 | - | 36 0 |
68 | 42 8 |
Derivative and reverse repo netting were £3 million (31 December 2011 - nil) and £2 million (31 December 2011 - £22 million) respectively.
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
- | - | - | 8, 61 2 |
50 0 |
5, 48 3 |
1, 69 5 |
12 40 0 , |
49 1 |
- | 12 89 1 , |
76 3 |
13 65 4 , |
| Ce al ba nk ntr |
17 35 1 , |
- | - | - | - | - | - | - | - | - | 17 35 1 , |
- | 17 35 1 , |
| Ot he r b ks an |
61 0 |
- | - | 63 0 |
9 | 34 3 |
57 8 |
39 5 |
6, 12 0 |
19 1 |
7, 31 6 |
26 6 |
7, 58 2 |
| Ot he r F I |
29 9 |
- | - | 35 3 |
( 33 ) |
14 1 |
45 | 44 9 |
3, 15 2 |
19 9 |
4, 09 9 |
1, 27 0 |
5, 36 9 |
| Co rat rpo e |
5, 52 5 |
25 4 |
90 | 16 3 |
12 | 17 | 7 | 17 3 |
52 0 |
- | 6, 21 8 |
6, 00 7 |
12 22 5 , |
| Pe l rso na |
15 6 |
4 | 4 | - | - | - | - | - | - | - | 15 6 |
23 | 17 9 |
| 23 94 1 , |
25 8 |
94 | 9, 75 8 |
48 8 |
5, 98 4 |
2, 32 5 |
13 41 7 , |
10 28 3 , |
39 0 |
48 03 1 , |
8, 32 9 |
56 36 0 , |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
- | - | - | 12 03 5 , |
52 3 |
4, 136 |
2, 08 4 |
14 08 7 , |
42 3 |
- | 14 51 0 , |
2 | 14 51 2 , |
| Ce ntr al ba nk |
18 06 8 , |
- | - | - | - | - | - | - | 2 | - | 18 07 0 , |
- | 18 07 0 , |
| Ot he r b ks an |
65 3 |
- | - | 1, 37 6 |
5 | 29 4 |
76 1 |
90 9 |
5, 88 6 |
11 7 |
7, 56 5 |
28 4 |
7, 84 9 |
| Ot he r F I |
30 5 |
- | - | 56 3 |
( 33 ) |
18 7 |
95 | 65 5 |
3, 27 2 |
49 | 4, 28 1 |
1, 116 |
5, 39 7 |
| Co rat rpo e |
6, 60 8 |
19 1 |
80 | 109 | 9 | 14 | 7 | 11 6 |
58 6 |
- | 7, 31 0 |
6, 103 |
13 41 3 , |
| Pe l rso na |
155 | 19 | 19 | - | - | - | - | - | - | - | 155 | 22 | 177 |
| 25 78 9 , |
21 0 |
99 | 14 08 3 , |
50 4 |
4, 63 1 |
2, 94 7 |
15 76 7 , |
10 169 , |
16 6 |
51 89 1 , |
7, 52 7 |
59 41 8 , |
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| tio No na |
l | ir v Fa alu e |
No tio l na |
Fa ir v alu e |
||||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
2, 89 5 |
2, 61 0 |
64 | ( 64 ) |
2, 63 1 |
2, 64 0 |
76 | ( 67 ) |
| Ot he r b ks an |
3, 33 6 |
3, 33 1 |
12 6 |
( ) 12 5 |
4, 76 5 |
4, 69 4 |
30 7 |
( 31 0) |
| Ot he r F I |
2, 59 5 |
2, 37 7 |
13 | ( 10 ) |
3, 65 3 |
3, 40 3 |
7 | ( 2) |
| Co rat rpo e |
14 38 7 , |
13 08 7 , |
( 64 ) |
99 | 20 43 3 , |
18 31 1 , |
148 | ( 126 ) |
| 23 21 3 , |
21 40 5 , |
13 9 |
( 10 0 ) |
31 48 2 , |
29 04 8 , |
53 8 |
( 50 5) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 11,166 | 43 | 142 | 3 | 4 | - | 11,312 | 46 |
| Other FI | 11,527 | 91 | 17 | (1) | 357 | 3 | 11,901 | 93 |
| 22,693 | 134 | 159 | 2 | 361 | 3 | 23,213 | 139 | |
| 31 December 2011 | ||||||||
| Banks | 14,644 | 171 | 163 | 4 | 8 | - | 14,815 | 175 |
| Other FI | 16,315 | 357 | 18 | - | 334 | 6 | 16,667 | 363 |
| 30,959 | 528 | 181 | 4 | 342 | 6 | 31,482 | 538 |
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| ing Le nd |
RE IL |
vis ion Pro s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
riv ati De ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
1 | - | - | 1, 30 6 |
59 | 1, 27 0 |
1, 20 2 |
1, 37 4 |
35 | - | 1, 41 0 |
27 | 1, 43 7 |
| Ce ntr al ba nk |
9, 18 5 |
- | - | - | - | - | - | - | - | - | 9, 18 5 |
- | 9, 18 5 |
| Ot he r b ks an |
61 7 |
- | - | 62 9 |
11 9 |
5 19 |
37 7 |
44 7 |
7, 67 6 |
55 2 |
9, 29 2 |
3, 46 4 |
75 12 6 , |
| Ot he r F I |
1, 55 6 |
- | - | 6, 35 3 |
( 32 9 ) |
31 0 |
50 | 6, 61 3 |
1, 90 5 |
81 | 10 15 5 , |
2, 20 7 |
12 36 2 , |
| Co rat rpo e |
4, 75 5 |
58 8 |
23 0 |
83 | 5 | 49 | 18 | 11 4 |
64 5 |
1 | 5, 51 5 |
6, 24 4 |
11 75 9 , |
| Pe l rso na |
29 | 26 | 21 | - | - | - | - | - | - | - | 29 | 12 | 41 |
| 16 14 3 , |
61 4 |
25 1 |
8, 37 1 |
( 14 6 ) |
1, 82 4 |
1, 64 7 |
8, 54 8 |
10 26 1 , |
63 4 |
35 58 6 , |
11 95 4 , |
47 54 0 , |
|
| 31 20 11 De mb ce er |
|||||||||||||
| Go t ve rnm en |
8 | - | - | 1, 44 7 |
74 | 84 9 |
59 1 |
1, 70 5 |
40 | - | 1, 75 3 |
- | 1, 75 3 |
| Ce al ba nk ntr |
7, 65 4 |
- | - | - | - | 6 | - | 6 | 7 | - | 7, 66 7 |
- | 7, 66 7 |
| Ot he r b ks an |
62 3 |
- | - | 80 2 |
21 7 |
36 5 |
27 8 |
88 9 |
7, 41 0 |
16 4 |
9, 08 6 |
3, 56 6 |
12 65 2 , |
| Ot he r F I |
1, 55 7 |
- | - | 6, 80 4 |
( 38 6) |
29 0 |
108 | 6, 98 6 |
1, 80 6 |
10 8 |
10 45 7 , |
3, 38 8 |
13 84 5 , |
| Co rat rpo e |
4, 82 7 |
62 1 |
20 9 |
199 | 6 | 113 | 5 | 30 7 |
74 7 |
3 | 5, 88 4 |
6, 59 6 |
12 48 0 , |
| Pe l rso na |
20 | 3 | 2 | - | - | - | - | - | - | - | 20 | 11 | 31 |
| 14 68 9 , |
62 4 |
21 1 |
9, 25 2 |
( 89 ) |
1, 62 3 |
98 2 |
9, 89 3 |
10 01 0 , |
27 5 |
34 86 7 , |
13 56 1 , |
48 42 8 , |
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| tio No na |
l | ir v Fa alu e |
No tio l na |
Fa ir v alu e |
||||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
1, 15 6 |
1, 10 8 |
20 | ( 20 ) |
1, 20 6 |
1, 189 |
31 | ( 31 ) |
| Ot he r b ks an |
70 8 |
74 7 |
19 | ( ) 18 |
96 5 |
99 5 |
41 | ( 42 ) |
| Ot he r F I |
3, 27 5 |
3, 15 7 |
10 0 |
( 94 ) |
5, 77 2 |
5, 54 1 |
142 | ( 13 1) |
| Co rat rpo e |
9, 43 2 |
8, 36 4 |
15 9 |
( 73 ) |
15 41 6 , |
14 23 8 , |
25 7 |
( 166 ) |
| 14 57 1 , |
13 37 6 , |
29 8 |
( 20 5 ) |
23 35 9 , |
21 96 3 , |
47 1 |
( 37 0) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | AQ10 | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 5,411 | 42 | 66 | 1 | 4 | - | - | - | 5,481 | 43 |
| Other FI | 7,940 | 145 | 307 | 32 | 701 | 69 | 142 | 9 | 9,090 | 255 |
| 13,351 | 187 | 373 | 33 | 705 | 69 | 142 | 9 | 14,571 | 298 | |
| 31 December 2011 | ||||||||||
| Banks | 7,605 | 107 | 88 | 1 | 6 | - | - | - | 7,699 | 108 |
| Other FI | 14,529 | 231 | 308 | 37 | 676 | 81 | 147 | 14 | 15,660 | 363 |
| 22,134 | 338 | 396 | 38 | 682 | 81 | 147 | 14 | 23,359 | 471 |
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
49 8 |
- | - | 1, 11 0 |
( ) 27 |
05 6, 6 |
59 4, 6 |
57 2, 0 |
19 7 |
- | 5 3, 26 |
82 1 |
4, 08 6 |
| Ce ntr al ba nk |
2 | - | - | - | - | - | - | - | - | - | 2 | - | 2 |
| Ot he r b ks an |
82 9 |
- | - | 72 6 |
1 | 14 3 |
10 2 |
76 7 |
6, 30 9 |
34 7 |
8, 25 2 |
50 3 |
8, 75 5 |
| Ot he r F I |
17 6 |
- | - | 70 5 |
( 22 ) |
18 0 |
13 8 |
74 7 |
65 5 |
54 | 1, 63 2 |
88 2 |
2, 51 4 |
| Co rat rpo e |
2, 91 3 |
33 | 13 | 24 2 |
14 | 14 8 |
13 0 |
26 0 |
71 6 |
- | 3, 88 9 |
7, 17 4 |
11 06 3 , |
| Pe l rso na |
73 | - | - | - | - | - | - | - | - | - | 73 | 75 | 14 8 |
| 4, 49 1 |
33 | 13 | 2, 78 3 |
( ) 34 |
52 6, 7 |
4, 96 6 |
4, 34 4 |
7, 87 7 |
40 1 |
17 11 3 , |
45 5 9, |
56 26 8 , |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
48 1 |
- | - | 2, 64 8 |
( 14 ) |
8, 70 5 |
5, 66 9 |
5, 68 4 |
35 7 |
- | 6, 52 2 |
91 1 |
7, 43 3 |
| Ce al ba nk ntr |
3 | - | - | 20 | - | - | - | 20 | - | - | 23 | - | 23 |
| Ot he r b ks an |
1, 27 3 |
- | - | 88 9 |
( 17 ) |
15 7 |
75 | 97 1 |
7, 00 9 |
26 2 |
9, 51 5 |
47 4 |
9, 98 9 |
| Ot he r F I |
28 2 |
- | - | 64 2 |
( ) 40 |
32 5 |
126 | 84 1 |
59 2 |
83 | 1, 79 8 |
92 8 |
2, 72 6 |
| Co rat rpo e |
3, 76 1 |
128 | 74 | 24 0 |
9 | 72 | 34 | 27 8 |
74 3 |
- | 4, 78 2 |
7, 82 9 |
12 61 1 , |
| Pe l rso na |
79 | - | - | - | - | - | - | - | - | - | 79 | 75 | 154 |
| 5, 87 9 |
128 | 74 | 4, 43 9 |
( 62 ) |
9, 25 9 |
5, 90 4 |
7, 79 4 |
8, 70 1 |
34 5 |
22 71 9 , |
10 21 7 , |
32 93 6 , |
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| tio No na |
l | ir v Fa alu e |
No tio l na |
Fa ir v alu |
e | |||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
3, 39 7 |
2, 71 4 |
15 4 |
( 13 9 ) |
3, 46 7 |
2, 90 1 |
22 8 |
( 195 ) |
| Ot he r b ks an |
3, 51 8 |
3, 48 6 |
20 1 |
( 2) 17 |
4, 23 2 |
3, 99 5 |
28 2 |
( 23 6) |
| Ot he r F I |
1, 81 7 |
1, 50 9 |
81 | ( 69 ) |
2, 59 0 |
2, 05 3 |
136 | ( 117 ) |
| Co rat rpo e |
14 13 4 , |
13 38 3 , |
22 6 |
( 19 6 ) |
23 22 4 , |
21 58 9 , |
60 9 |
( 57 8) |
| 22 86 6 , |
21 09 2 , |
66 2 |
( 57 6 ) |
33 51 3 , |
30 53 8 , |
1, 25 5 |
( 1, 126 ) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 10,391 | 279 | 148 | 10 | 76 | 8 | 10,615 | 297 |
| Other FI | 11,933 | 343 | 21 | 1 | 297 | 21 | 12,251 | 365 |
| 22,324 | 622 | 169 | 11 | 373 | 29 | 22,866 | 662 | |
| 31 December 2011 | ||||||||
| Banks | 13,353 | 453 | 162 | 13 | 79 | 8 | 13,594 | 474 |
| Other FI | 19,641 | 758 | 24 | 1 | 254 | 22 | 19,919 | 781 |
| 32,994 | 1,211 | 186 | 14 | 333 | 30 | 33,513 | 1,255 |
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
- | - | - | 5 74 |
( ) 94 |
25 1, 3 |
71 8 |
1, 28 0 |
95 | - | 5 1, 37 |
- | 5 1, 37 |
| Ce ntr al ba nk |
- | - | - | - | - | - | - | - | 3 | - | 3 | - | 3 |
| Ot he r b ks an |
30 0 |
- | - | - | - | - | - | - | 2, 51 4 |
21 | 2, 83 5 |
7 | 2, 84 2 |
| Ot he r F I |
24 6 |
- | - | - | - | - | - | - | 22 0 |
- | 46 6 |
81 | 54 7 |
| Co rat rpo e |
49 3 |
49 | 18 | 8 | - | 4 | 10 | 2 | 22 0 |
- | 71 5 |
1, 30 6 |
2, 02 1 |
| Pe l rso na |
21 | - | - | - | - | - | - | - | - | - | 21 | 8 | 29 |
| 1, 06 0 |
49 | 18 | 75 3 |
( ) 94 |
25 1, 7 |
72 8 |
1, 28 2 |
05 3, 2 |
21 | 5, 5 41 |
1, 40 2 |
6, 81 7 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
- | - | - | 74 2 |
( 116 ) |
60 8 |
72 2 |
62 8 |
89 | - | 71 7 |
- | 71 7 |
| Ce al ba nk ntr |
8 | - | - | - | - | - | - | - | 3 | - | 11 | - | 11 |
| Ot he r b ks an |
28 7 |
- | - | 4 | - | - | - | 4 | 2, 39 9 |
51 | 2, 74 1 |
8 | 2, 74 9 |
| Ot he r F I |
35 4 |
- | - | - | - | 1 | 4 | ( 3) |
19 1 |
- | 54 2 |
64 | 60 6 |
| Co rat rpo e |
58 8 |
31 | 21 | 3 | - | 20 | - | 23 | 27 7 |
- | 88 8 |
1, 27 9 |
2, 167 |
| Pe l rso na |
20 | - | - | - | - | - | - | - | - | - | 20 | 8 | 28 |
| 1, 25 7 |
31 | 21 | 74 9 |
( 116 ) |
62 9 |
72 6 |
65 2 |
2, 95 9 |
51 | 4, 91 9 |
1, 35 9 |
6, 27 8 |
| 30 Ju 20 ne |
12 | 31 De mb ce er |
20 11 |
|||||
|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|||||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
|
| CD S b ref nti ty ere nc e e y |
£m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
1, 56 9 |
1, 45 1 |
60 | ( ) 55 |
1, 61 2 |
1, 50 5 |
120 | ( ) 110 |
| Ot he r b ks an |
31 3 |
31 1 |
6 | ( 6 ) |
31 2 |
30 2 |
14 | ( 13 ) |
| Co rat rpo e |
36 7 |
35 5 |
3 | ( ) 3 |
56 3 |
57 0 |
12 | ( ) 12 |
| 2, 24 9 |
2, 11 7 |
69 | ( 64 ) |
2, 48 7 |
2, 37 7 |
146 | ( 135 ) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 1,519 | 46 | 2 | - | 12 | - | 1,533 | 46 |
| Other FI | 710 | 23 | 1 | - | 5 | - | 716 | 23 |
| 2,229 | 69 | 3 | - | 17 | - | 2,249 | 69 | |
| 31 December 2011 | ||||||||
| Banks | 1,602 | 97 | 2 | - | 12 | 1 | 1,616 | 98 |
| Other FI | 866 | 48 | 1 | - | 4 | - | 871 | 48 |
| 2,468 | 145 | 3 | - | 16 | 1 | 2,487 | 146 |
| AF S a nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
S AF |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| 30 Ju 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ot he r b ks an |
1 | - | - | 10 | - | 44 | 2 | 52 | 54 7 |
12 | 61 2 |
- | 61 2 |
| Ot he r F I |
47 1 |
- | - | 41 | ( ) 6 |
22 1 |
4 | 25 8 |
82 4 |
38 1 |
1, 93 4 |
35 0 |
2, 28 4 |
| Co rat rpo e |
2, 10 0 |
97 8 |
31 0 |
5 | 1 | 25 | 29 | 1 | 20 7 |
- | 2, 30 8 |
1, 58 2 |
3, 89 0 |
| Pe l rso na |
3 | - | - | - | - | - | - | - | - | - | 3 | 2 | 5 |
| 2, 57 5 |
97 8 |
31 0 |
56 | ( 5 ) |
29 0 |
35 | 31 1 |
1, 57 8 |
39 3 |
4, 85 7 |
1, 93 4 |
6, 79 1 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Ot he r b ks an |
10 1 |
- | - | 10 | - | 7 | - | 17 | 53 0 |
16 | 66 4 |
- | 66 4 |
| Ot he r F I |
92 5 |
- | - | 54 | ( 7) |
82 | 80 | 56 | 2, 174 |
78 9 |
3, 94 4 |
71 1 |
4, 65 5 |
| Co rat rpo e |
2, 22 8 |
89 7 |
30 1 |
5 | - | 58 | 6 | 57 | 180 | - | 2, 46 5 |
1, 29 4 |
3, 75 9 |
| Pe l rso na |
2 | - | - | - | - | - | - | - | - | - | 2 | 2 | 4 |
| 3, 25 6 |
89 7 |
30 1 |
69 | ( 7) |
147 | 86 | 13 0 |
2, 88 4 |
80 5 |
7, 07 5 |
2, 00 7 |
9, 08 2 |
|
| 30 Ju 20 ne |
12 | 31 De mb 20 11 ce er |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| tio No na |
l | e | No tio l na |
Fa ir v alu e |
|||||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
||
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m | |
| Ot he r F I |
1, 06 3 |
1, 01 3 |
83 | ( 76 ) |
2, 08 0 |
1, 97 6 |
118 | ( 108 ) |
|
| Co rat rpo e |
1, 57 7 |
1, 30 2 |
97 | ( ) 83 |
2, 47 8 |
2, 138 |
146 | ( 116 ) |
|
| 2, 64 0 |
2, 31 5 |
18 0 |
( 15 9 ) |
4, 55 8 |
4, 114 |
26 4 |
( 22 4) |
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 969 | 71 | 14 | - | - | - | 983 | 71 |
| Other FI | 1,571 | 103 | 8 | - | 78 | 6 | 1,657 | 109 |
| 2,540 | 174 | 22 | - | 78 | 6 | 2,640 | 180 | |
| 31 December 2011 | ||||||||
| Banks | 1,535 | 93 | 16 | - | - | - | 1,551 | 93 |
| Other FI | 2,927 | 164 | 10 | - | 70 | 7 | 3,007 | 171 |
| 4,462 | 257 | 26 | - | 70 | 7 | 4,558 | 264 |
| S a AF nd |
HF | T | To tal |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| LA R d eb t |
AF S |
de bt se |
riti cu es |
de bt |
Re ve rse |
Ba lan ce |
Of f-b ala nc e |
||||||
| Le nd ing |
RE IL |
Pro vis ion s |
riti se cu es |
res erv es |
Lo ng |
Sh ort |
riti se cu es |
De riv ati ve s |
rep os |
sh t ee |
sh t ee |
To tal |
|
| Ju 30 20 12 ne |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Go t ve rnm en |
60 | - | - | 32 9 |
( ) 46 |
65 2 |
31 6 |
66 5 |
74 6 |
- | 1, 47 1 |
- | 1, 47 1 |
| Ce ntr al ba nk |
- | - | - | - | - | - | - | - | 25 | - | 25 | - | 25 |
| Ot he r b ks an |
16 | - | - | 53 | - | 51 | 52 | 52 | 91 1 |
13 | 99 2 |
17 3 |
1, 16 5 |
| Ot he r F I |
73 | - | - | 97 | ( 8 ) |
17 | 46 | 68 | 14 | 18 | 17 3 |
65 | 23 8 |
| Co rat rpo e |
97 4 |
19 9 |
68 | 13 5 |
( 2) |
9 | 7 | 13 7 |
47 | - | 1, 15 8 |
1, 04 9 |
2, 20 7 |
| Pe l rso na |
13 | - | - | - | - | - | - | - | - | - | 13 | 25 | 38 |
| 1, 13 6 |
19 9 |
68 | 61 4 |
( ) 56 |
72 9 |
42 1 |
92 2 |
1, 74 3 |
31 | 3, 83 2 |
1, 31 2 |
5, 14 4 |
|
| 31 De mb 20 11 ce er |
|||||||||||||
| Go t ve rnm en |
12 1 |
- | - | 32 7 |
( 47 ) |
44 5 |
33 1 |
44 1 |
77 9 |
- | 1, 34 1 |
25 | 1, 36 6 |
| Ce ntr al ba nk |
- | - | - | - | - | - | - | - | 23 | - | 23 | - | 23 |
| Ot he r b ks an |
28 | - | - | 63 | ( 1) |
13 | 70 | 6 | 1, 01 1 |
- | 1, 04 5 |
94 | 1, 139 |
| Ot he r F I |
77 | - | - | 100 | ( 9) |
25 | 2 | 123 | 36 | - | 23 6 |
130 | 36 6 |
| Co rat rpo e |
1, 125 |
12 | 15 | 134 | ( 4) |
11 | 7 | 138 | 45 | - | 1, 30 8 |
1, 03 8 |
2, 34 6 |
| Pe l rso na |
12 | - | - | - | - | - | - | - | - | - | 12 | 10 | 22 |
| 1, 36 3 |
12 | 15 | 62 4 |
( 61 ) |
49 4 |
41 0 |
70 8 |
1, 89 4 |
- | 3, 96 5 |
1, 29 7 |
5, 26 2 |
| 30 Ju 20 ne |
12 | 31 De mb 20 11 ce er |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| No tio na |
l | e | No tio l na |
Fa ir v alu e |
|||||
| Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
Bo ht ug |
So ld |
||
| CD S b ref nti ty y ere nc e e |
£m | £m | £m | £m | £m | £m | £m | £m | |
| Go t ve rnm en |
2, 26 9 |
2, 18 8 |
27 | ( ) 21 |
2, 28 1 |
2, 35 0 |
54 | ( 47 ) |
|
| Ot he r b ks an |
76 | 71 | 1 | ( 1) |
90 | 87 | 2 | ( 1) |
|
| Co rat rpo e |
2, 68 7 |
2, 60 8 |
37 | ( 28 ) |
4, 05 4 |
3, 94 4 |
70 | ( 59 ) |
|
| 5, 03 2 |
4, 86 7 |
65 | ( 50 ) |
6, 42 5 |
6, 38 1 |
126 | ( 107 ) |
For the note to this table refer to the following page.
| AQ1 | AQ2-AQ3 | AQ4-AQ9 | Total | |||||
|---|---|---|---|---|---|---|---|---|
| 30 June 2012 | Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
Notional £m |
Fair value £m |
| Banks | 2,373 | 35 | 49 | - | - | - | 2,422 | 35 |
| Other FI | 2,563 | 29 | 3 | - | 44 | 1 | 2,610 | 30 |
| 4,936 | 64 | 52 | - | 44 | 1 | 5,032 | 65 | |
| 31 December 2011 | ||||||||
| Banks | 2,877 | 58 | 50 | 1 | - | - | 2,927 | 59 |
| Other FI | 3,464 | 67 | 4 | - | 30 | - | 3,498 | 67 |
| 6,341 | 125 | 54 | 1 | 30 | - | 6,425 | 126 |
Note:
(1) Comprises Austria, Estonia, Finland, Malta, Slovakia and Slovenia.
Belgium - Net HFT government bonds exposure increased by £0.6 billion reflecting fluctuations in market making positions.
Germany and Netherlands - Derivative and repo exposure to financial institutions increased during the first half of 2012 by £0.7 billion in Netherlands, driven by a few large banks, and by £0.3 billion in Germany, spread over a larger number of names.
France - Approximately two thirds of the lending to banks is to the top three banks under uncommitted facilities.
Luxembourg - Lending to banks and non-bank financial institutions decreased by £0.6 billion during the first half of 2012, spread over a number of financial intermediaries, funds and banks.
Germany - Lending to corporate clients fell by £1.1 billion, driven by reductions in the transport, media, commercial real estate, electricity and media sectors.
France - Corporate lending decreased by £0.8 billion, due to reductions in the telecommunications, commercial real estate and construction sectors.
Non-Core lending exposure has been generally reduced in line with the Group's strategic plan.
Non-Core lending exposure in France was £2.0 billion at 30 June 2012, a decline of £0.3 billion since 31 December 2011. The lending portfolio mainly comprised property (41%) and sovereign and quasi-sovereign (24%) exposures.
Non-Core lending exposure in Germany was £4.5 billion at 30 June 2012, down £0.9 billion since 31 December 2011. Most of the lending was in the property (50%) and transport (27%) sectors.
* not within the scope of Deloitte LLP's review report
We have been engaged by The Royal Bank of Scotland Group plc ("the Company") to review the condensed financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprise the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement, related notes 1 to 20, the divisional results on pages 21 to 67 and the Risk and balance sheet management section set out on pages 129 to 236 except for those indicated as not reviewed (together "the condensed financial statements"). We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed financial statements included in this halfyearly financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility is to express to the Company a conclusion on the condensed financial statements in the half-yearly financial report based on our review.
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed financial statements in the half-yearly financial report for the six months ended 30 June 2012 are not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Chartered Accountants and Statutory Auditor London, United Kingdom 2 August 2012
The principal risks and uncertainties facing the Group are unchanged from those disclosed on pages 451 to 464 of the Group's 2011 Annual Report and Accounts ("2011 R&A").
Set out below is a summary of certain risks which could adversely affect the Group. These should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. The summary should be read in conjunction with the Risk and balance sheet management section on pages 100 to 249 of the 2011 R&A, which also includes a fuller description of these and other risk factors (pages 451 to 464).
We, the directors listed below, confirm that to the best of our knowledge:
By order of the Board
Philip Hampton Stephen Hester Bruce Van Saun
Chairman Group Chief Executive Group Finance Director
2 August 2012
Board of directors
Philip Hampton Stephen Hester Bruce Van Saun
Sandy Crombie Alison Davis Tony Di Iorio Penny Hughes Joe MacHale Brendan Nelson Baroness Noakes Arthur 'Art' Ryan Philip Scott
| 30 June 2012 |
31 March 2012 |
31 December 2011 |
|
|---|---|---|---|
| Ordinary share price* | 215.3p | 276.4p | 201.8p |
| Number of ordinary shares in issue* | 6,017m | 5,955m | 5,923m |
*prior period data have been adjusted for the sub-division and one-for-ten share consolidation of ordinary shares, which took effect in June 2012.
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 2011 have been filed with the Registrar of Companies. 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.
| Financial calendar | |
|---|---|
| 2012 Q3 interim management statement | Friday 2 November 2012 |
| 2012 annual results | Thursday 28 February 2013 |
| Ha lf y nd ed ea r e |
||||||||
|---|---|---|---|---|---|---|---|---|
| Ju 30 20 12 ne |
30 | Ju 20 11 ne |
||||||
| Re allo cat ion |
Re allo cat ion |
|||||||
| of ff on e-o |
of ff on e-o |
|||||||
| Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
|||
| Int eiv ab le st ere rec |
9, 79 1 |
- | 9, 79 1 |
10 81 2 , |
( 7) |
10 80 5 , |
||
| Int st ble ere pa ya |
( 1) 3, 81 |
( 10 ) |
( 1) 3, 82 |
( 7) 4, 27 |
- | ( 7) 4, 27 |
||
| Ne t in t in ter es co me |
5, 98 0 |
( 10 ) |
5, 97 0 |
6, 53 5 |
( 7) |
6, 52 8 |
||
| Fe d c mis sio eiv ab le es an om ns rec |
2, 93 7 |
- | 2, 93 7 |
3, 34 2 |
- | 3, 34 2 |
||
| Fe d c mis sio ble es an om ns pa ya |
( 60 4) |
- | ( 60 4) |
( 58 3 ) |
- | ( 58 3 ) |
||
| Inc e f din ctiv itie tra om rom g a s |
5 2, 19 |
( 1, 32 6) |
86 9 |
2, 78 9 |
( 80 7) |
1, 98 2 |
||
| Ga in o ed tio f o de bt n r em p n o wn |
- | 57 7 |
57 7 |
- | 25 5 |
25 5 |
||
| Ot (e ) he rat ing in lud ing in mi in r o pe co me xc su ran ce pre um co me |
1, 19 4 |
( 7) 1, 54 |
( ) 35 3 |
1, 57 3 |
( ) 40 |
1, 53 3 |
||
| Ins t p ium in ura nce ne rem co me |
1, 86 7 |
- | 1, 86 7 |
2, 23 9 |
- | 2, 23 9 |
||
| No n-i t in nte res co me |
58 7, 9 |
( 2, 29 6) |
5, 29 3 |
9, 36 0 |
( 59 2) |
8, 76 8 |
||
| To tal in co me |
13 56 9 , |
( 2, 30 6) |
11 26 3 , |
15 89 5 , |
( 59 9) |
15 29 6 , |
||
| Sta ff c ost s |
( 4, 25 7) |
( 45 6) |
( 4, 71 3 ) |
( 4, 41 9 ) |
( 190 ) |
( 4, 60 9 ) |
||
| Pre mis d e ipm t es an qu en |
( ) 1, 07 3 |
( ) 34 |
( 7) 1, 10 |
( ) 1, 11 9 |
( ) 54 |
( ) 1, 17 3 |
||
| Ot he dm inis tra tive r a ex pe nse s |
( 1, 75 5 ) |
( 41 7) |
( 2, 17 2) |
( 1, 69 9 ) |
( 97 4) |
( 2, 67 3 ) |
||
| De cia tio nd ort isa tio pre n a am n |
( ) 77 6 |
( 126 ) |
( 2) 90 |
( ) 77 6 |
( 10 1) |
( 7) 87 |
||
| Op tin era g ex p en se s |
( 7, 86 1) |
( 1, 03 3) |
( 8, 89 4) |
( 8, 01 3 ) |
( 1, 31 9) |
( 9, 33 2) |
||
| Pro fit be for the tin ch e o r o p era g arg es |
5, 70 8 |
( 3, 33 9) |
2, 36 9 |
7, 88 2 |
( 1, 91 8) |
5, 96 4 |
||
| Ins t c laim ura nce ne s |
( 1, 22 5 ) |
- | ( 1, 22 5 ) |
( 1, 70 5 ) |
- | ( 1, 70 5 ) |
||
| Op tin rof it b efo im air los nt era g p re p me se s |
4, 48 3 |
( 3, 33 9) |
1, 14 4 |
6, 17 7 |
( 1, 91 8) |
25 4, 9 |
||
| Im irm t lo pa en sse s |
( 2, 64 9 ) |
- | ( 2, 64 9 ) |
( 4, 21 1) |
( 84 2) |
( 5, 05 3 ) |
||
| it/ ( ) Op tin rof los era g p s |
1, 83 4 |
( 3, 33 9) |
( ) 1, 50 5 |
1, 96 6 |
( 2, 76 0) |
( 4) 79 |
| Ha lf y ea |
nd ed r e |
||||||
|---|---|---|---|---|---|---|---|
| 30 Ju 20 12 ne |
30 | Ju 20 11 ne |
|||||
| Re allo ion cat of ff on e-o |
Re allo ion cat of ff on e-o |
||||||
| Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
||
| Op tin rof it/ ( los ) era g p s |
1, 83 4 |
( 3, 33 9) |
( 1, 50 5 ) |
1, 96 6 |
( 2, 76 0) |
( 79 4) |
|
| Ow red it a dju stm ts ( 1) n c en |
( 2, 97 4) |
2, 97 4 |
- | ( 23 6 ) |
23 6 |
- | |
| As Pr ctio n S ch e ( 2) set ote em |
( 45 ) |
45 | - | ( 7) 63 |
63 7 |
- | |
| Pa t P rot ect ion In ts ym en su ran ce cos |
( 26 0 ) |
26 0 |
- | ( 85 0 ) |
85 0 |
- | |
| So rei de bt im irm t ve gn pa en |
- | - | - | ( ) 73 3 |
73 3 |
- | |
| Int st rat e h ed ad jus tm ts im ire d a ilab le- for le s ign de bt ere ge en on pa va -sa ov ere |
- | - | - | ( 10 9 ) |
109 | - | |
| f p Am ort isa tio ha d i nta ible set n o urc se ng as s |
( ) 99 |
99 | - | ( ) 10 0 |
100 | - | |
| Int rat ion d r est tur ing sts eg an ruc co |
( 67 3 ) |
67 3 |
- | ( 35 3 ) |
35 3 |
- | |
| Ga in o ed tio f o de bt n r em p n o wn |
57 7 |
( 57 7) |
- | 25 5 |
( 25 5) |
- | |
| Str ic d isp als ate g os |
15 2 |
( 152 ) |
- | 27 | ( 27 ) |
- | |
| Bo s t nu ax |
- | - | - | ( 22 ) |
22 | - | |
| RF S H old ing ino rity in ter est s m |
( ) 17 |
17 | - | ( 2) |
2 | - | |
| Lo be for e t ss ax |
( 1, 50 5 ) |
- | ( 1, 50 5 ) |
( 79 4) |
- | ( 79 4) |
|
| Ta ha x c rge |
( 42 9 ) |
- | ( 42 9 ) |
( 64 5 ) |
- | ( 64 5 ) |
|
| Lo fro nti ing tio ss m co nu op era ns |
( 4) 1, 93 |
- | ( 4) 1, 93 |
( ) 1, 43 9 |
- | ( ) 1, 43 9 |
|
| Pro fit fro dis nti ed tio of et tax m co nu op era ns , n |
1 | - | 1 | 31 | - | 31 | |
| fo eri Lo r th od ss e p |
( ) 1, 93 3 |
- | ( ) 1, 93 3 |
( ) 1, 40 8 |
- | ( ) 1, 40 8 |
|
| No tro llin inte ts n-c on g res |
19 | - | 19 | ( 17 ) |
- | ( 17 ) |
|
| Pre fer sh d o the r d ivid ds en ce are an en |
( ) 76 |
- | ( ) 76 |
- | - | - | |
| Lo tri bu tab le ord ina d B sh ho lde at to ss ry an are rs |
( 1, 99 0 ) |
- | ( 1, 99 0 ) |
( 1, 42 5 ) |
- | ( 1, 42 5 ) |
Notes:
(1) Reallocation of £1,280 million loss (H1 2011 - £170 million loss) to income from trading activities and £1,694 million loss (H1 2011 - £66 million loss) to other operating income.
(2) Reallocation to income from trading activities.
| Qu | art de d er en |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 | Ju 20 12 ne |
31 | M h 2 01 2 arc |
30 | Ju 20 11 ne |
||||
| Re | allo ion cat of ff on e-o |
Re | allo ion cat of ff on e-o |
Re | allo ion cat of ff on e-o |
||||
| Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
|
| Int eiv ab le st ere rec |
4, 4 77 |
- | 4, 4 77 |
5, 01 7 |
- | 5, 01 7 |
5, 41 0 |
( 6) |
5, 40 4 |
| Int st ble ere pa ya |
( 1, 80 1) |
( 2) |
( 1, 80 3 ) |
( 2, 01 0 ) |
( 8) |
( 2, 01 8 ) |
( 2, 17 7) |
- | ( 2, 17 7) |
| Ne t in t in ter es co me |
2, 97 3 |
( 2) |
2, 97 1 |
3, 00 7 |
( 8) |
2, 99 9 |
3, 23 3 |
( 6) |
3, 22 7 |
| Fe d c mis sio eiv ab le es an om ns rec |
1, 45 0 |
- | 1, 45 0 |
1, 48 7 |
- | 1, 48 7 |
1, 70 0 |
- | 1, 70 0 |
| Fe d c mis sio ble es an om ns pa ya |
( 31 4) |
- | ( 31 4) |
( 29 0 ) |
- | ( 29 0 ) |
( 32 3 ) |
- | ( 32 3 ) |
| Inc e f tra din ctiv itie om rom g a s |
93 1 |
( 27 4) |
65 7 |
1, 26 4 |
( 1, 05 2) |
21 2 |
1, 21 9 |
( 72 ) |
1, 14 7 |
| Ga in o ed tio f o de bt n r em p n o wn |
- | - | - | - | 57 7 |
57 7 |
- | 25 5 |
25 5 |
| Ot he rat ing in (e lud ing in t p ium in ) r o pe co me xc su ran ce ne rem co me |
46 9 |
( 75 ) |
39 4 |
72 5 |
( 1, 47 2) |
( 74 7) |
86 3 |
27 9 |
1, 14 2 |
| Ins ium in t p ura nce ne rem co me |
92 9 |
- | 92 9 |
93 8 |
- | 93 8 |
1, 09 0 |
- | 1, 09 0 |
| No n-i nte t in res co me |
3, 46 5 |
( 34 9) |
3, 11 6 |
4, 12 4 |
( 1, 94 7) |
2, 17 7 |
4, 54 9 |
46 2 |
5, 01 1 |
| To tal in co me |
6, 43 8 |
( 35 1) |
6, 08 7 |
7, 13 1 |
( 1, 95 5) |
5, 17 6 |
7, 78 2 |
45 6 |
8, 23 8 |
| Sta ff c ost s |
( ) 2, 03 6 |
( 107 ) |
( ) 2, 14 3 |
( 1) 2, 22 |
( 34 9) |
( 57 ) 2, 0 |
( ) 2, 09 9 |
( 11 1) |
( ) 2, 21 0 |
| Pre mis d e ipm t es an qu en |
( 52 3 ) |
( 21 ) |
( 54 4) |
( 55 0 ) |
( 13 ) |
( 56 3 ) |
( 56 3 ) |
( 39 ) |
( 60 2) |
| Ot he dm inis tra tive r a ex pe nse s |
( ) 93 6 |
( 0) 22 |
( ) 1, 15 6 |
( ) 81 9 |
( ) 197 |
( ) 1, 01 6 |
( 4) 83 |
( 8) 91 |
( 2) 1, 75 |
| De cia tio nd ort isa tio pre n a am n |
( 38 2) |
( 52 ) |
( 43 4) |
( 39 4) |
( 74 ) |
( 46 8 ) |
( 39 6 ) |
( 57 ) |
( 45 3 ) |
| tin Op era g ex p en se s |
( 7) 3, 87 |
( 40 0) |
( 7) 4, 27 |
( 4) 3, 98 |
( 63 3) |
( 7) 4, 61 |
( 2) 3, 89 |
( 1, 125 ) |
( 5, 7) 01 |
| Pro fit be for the tin ch e o r o p era g arg es |
2, 56 1 |
( 75 1) |
1, 81 0 |
3, 14 7 |
( 2, 58 8) |
55 9 |
3, 89 0 |
( 66 9) |
3, 22 1 |
| Ins laim t c ura nce ne s |
( 57 ) 6 |
- | ( 57 ) 6 |
( ) 64 9 |
- | ( ) 64 9 |
( ) 79 3 |
- | ( ) 79 3 |
| it/ Op tin rof ( los ) be for e i air nt los era g p s mp me se s |
1, 98 5 |
( 75 1) |
1, 23 4 |
2, 49 8 |
( 2, 58 8) |
( 90 ) |
3, 09 7 |
( 66 9) |
2, 42 8 |
| Im irm t lo pa en sse s |
( 1, 33 5 ) |
- | ( 1, 33 5 ) |
( 1, 31 4) |
- | ( 1, 31 4) |
( 2, 26 4) |
( 84 2) |
( 3, 10 6 ) |
| it/ ( ) Op tin rof los era g p s |
65 0 |
( 75 1) |
( 1) 10 |
1, 18 4 |
( 2, 58 8) |
( 4) 1, 40 |
83 3 |
( 1, 51 1) |
( ) 67 8 |
| Qu | art de d er en |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 Ju 20 12 ne |
31 | M h 2 01 2 arc |
30 | Ju 20 11 ne |
|||||
| Re allo cat ion of ff on e-o |
Re allo cat ion of ff on e-o |
Re allo cat ion of ff on e-o |
|||||||
| Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
|
| Op tin rof it/ ( los ) era g p s |
65 0 |
( 75 1) |
( 10 1) |
1, 18 4 |
( 2, 58 8) |
( 1, 40 4) |
83 3 |
( 1, 51 1) |
( 67 8 ) |
| Ow ( 1) red it a dju stm ts n c en |
( ) 51 8 |
51 8 |
- | ( ) 2, 45 6 |
2, 45 6 |
- | 32 4 |
( 4) 32 |
- |
| As set Pr ote ctio n S ch e ( 2) em |
( 2) |
2 | - | ( 43 ) |
43 | - | ( 16 8 ) |
168 | - |
| Pa t P rot ect ion In ts ym en su ran ce cos |
( ) 13 5 |
135 | - | ( ) 12 5 |
125 | - | ( ) 85 0 |
85 0 |
- |
| So rei de bt im irm t ve gn pa en |
- | - | - | - | - | - | ( 73 3 ) |
73 3 |
- |
| Int st rat e h ed ad jus tm ts im ire d a ilab le- for le ere ge en on pa va -sa ign de bt s ov ere |
- | - | - | - | - | - | ( 10 9 ) |
109 | - |
| Am ort isa tio f p ha d i nta ible set n o urc se ng as s |
( 51 ) |
51 | - | ( 48 ) |
48 | - | ( 56 ) |
56 | - |
| Int ion d r ing rat est tur sts eg an ruc co |
( ) 21 3 |
21 3 |
- | ( ) 46 0 |
46 0 |
- | ( ) 20 8 |
20 8 |
- |
| Ga in o ed tio f o de bt n r em p n o wn |
- | - | - | 57 7 |
( 57 7) |
- | 25 5 |
( 25 5) |
- |
| Str ate ic d isp als g os |
16 0 |
( ) 160 |
- | ( ) 8 |
8 | - | 50 | ( ) 50 |
- |
| Bo s t nu ax |
- | - | - | - | - | - | ( 11 ) |
11 | - |
| S H RF old ing ino rity in ter est s m |
8 | ( 8) |
- | ( ) 25 |
25 | - | ( ) 5 |
5 | - |
| Lo be for e t ss ax |
( 10 1) |
- | ( 10 1) |
( 1, 40 4) |
- | ( 1, 40 4) |
( 67 8 ) |
- | ( 67 8 ) |
| Ta ha x c rge |
( ) 29 0 |
- | ( ) 29 0 |
( ) 13 9 |
- | ( ) 13 9 |
( 2) 22 |
- | ( 2) 22 |
| Lo fro nti ing tio ss m co nu op era ns |
( 39 1) |
- | ( 39 1) |
( 1, 54 3 ) |
- | ( 1, 54 3 ) |
( 90 0 ) |
- | ( 90 0 ) |
| ( ss) /pr ofit fro of Lo dis nti ed tio et tax m co nu op era ns , n |
( 4) |
- | ( 4) |
5 | - | 5 | 21 | - | 21 |
| Lo fo r th eri od ss e p |
( 39 5 ) |
- | ( 39 5 ) |
( 1, 53 8 ) |
- | ( 1, 53 8 ) |
( 87 9 ) |
- | ( 87 9 ) |
| No llin inte tro ts n-c on g res |
5 | - | 5 | 14 | - | 14 | ( ) 18 |
- | ( ) 18 |
| Pre fer sh d o the r d ivid ds en ce are an en |
( 76 ) |
- | ( 76 ) |
- | - | - | - | - | - |
| Lo tri bu tab le ord ina d B sh ho lde at to ss ry an are rs |
( 46 6 ) |
- | ( 46 6 ) |
( 1, 52 4) |
- | ( 1, 52 4) |
( 89 7) |
- | ( 89 7) |
Notes:
(1) Reallocation of £271 million loss (Q1 2012 - £1,009 million loss; Q2 2011 - £96 million gain) to income from trading activities and £247 million loss (Q1 2012 - £1,447 million loss; Q2 2011 - £228 million gain) to other operating income.
(2) Reallocation to income from trading activities.
To comply with EC State Aid requirements the Group agreed to make a series of divestments by the end of 2013: the disposal of Direct Line Group, Global Merchant Services and its interest in RBS Sempra Commodities JV. The Group also agreed to dispose of its RBS England and Wales and NatWest Scotland branch-based businesses, along with certain SME and corporate activities across the UK ('UK branch-based businesses'). The disposals of Global Merchant Services and RBS Sempra Commodities JV businesses have now effectively been completed.
The Group continues to work with Santander on the sale of the UK branch-based businesses. The complexity of the transaction and the focus on causing minimum disruption to customers is likely to lead to an extension of the process well into 2013.
Preparations for the planned IPO of Direct Line Group in the latter part of 2012 remain on track. The company is prepared for separation and, from 1 July, is operating on a substantially standalone basis with its own corporate functions and HR platform. Residual IT services will be provided by the Group under a Transitional Services Agreement. Direct Line Group returned £800 million to the Group during H1 2012 as part of the optimisation of its capital structure.
The table below shows total income and operating profit of Direct Line Group and the UK branchbased businesses.
| Operating profit | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total income | before impairments | Operating profit | |||||||||
| H1 2012 | FY 2011 | FY 2011 | H1 2012 | FY 2011 | |||||||
| £m | £m | £m | £m | £m | £m | ||||||
| Direct Line Group (1) | 1,900 | 4,286 | 219 | 407 | 219 | 407 | |||||
| UK branch-based businesses (2) | 458 | 959 | 253 | 518 | 186 | 319 | |||||
| Total | 2,358 | 5,245 | 472 | 925 | 405 | 726 |
The table below shows the estimated risk-weighted assets, total assets and capital of the businesses identified for disposal.
| RWAs | Total assets | Capital | |||||
|---|---|---|---|---|---|---|---|
| 30 June 31 December |
30 June | 31 December | 30 June | 31 December | |||
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | ||
| Direct Line Group (1) | n/m | n/m | 13.4 | 13.9 | 3.6 | 4.4 | |
| UK branch-based businesses (2) | 10.3 | 11.1 | 19.2 | 19.3 | 1.0 | 1.1 | |
| Total | 10.3 | 11.1 | 32.6 | 33.2 | 4.6 | 5.5 |
Notes:
(1) Total income includes investment income of £163 million (FY 2011 - £302 million). Total assets and estimated capital include approximately £0.9 billion of goodwill, of which £0.7 billion is attributed to Direct Line Group by RBS Group.
(2) Estimated notional equity based on 10% of RWAs.
Further information on the UK branch-based businesses by division is shown in the tables below:
| Division | Total | ||||
|---|---|---|---|---|---|
| UK | UK | ||||
| Retail | Corporate | H1 2012 | FY 2011 | ||
| £m | £m | £m | £m | ||
| Income statement | |||||
| Net interest income | 157 | 179 | 336 | 689 | |
| Non-interest income | 45 | 77 | 122 | 270 | |
| Total income | 202 | 256 | 458 | 959 | |
| Direct expenses | |||||
| - staff | (35) | (40) | (75) | (158) | |
| - other | (47) | (28) | (75) | (166) | |
| Indirect expenses | (30) | (25) | (55) | (117) | |
| (112) | (93) | (205) | (441) | ||
| Operating profit before impairment losses | 90 | 163 | 253 | 518 | |
| Impairment losses | (30) | (37) | (67) | (199) | |
| Operating profit | 60 | 126 | 186 | 319 | |
| Analysis of income by product | |||||
| Loans and advances | 57 | 147 | 204 | 436 | |
| Deposits | 41 | 73 | 114 | 245 | |
| Mortgages | 67 | - | 67 | 134 | |
| Other | 37 | 36 | 73 | 144 | |
| Total income | 202 | 256 | 458 | 959 | |
| Net interest margin | 4.60% | 3.19% | 3.72% | 3.57% | |
| Employee numbers (full time equivalents rounded to the | |||||
| nearest hundred) | 2,700 | 1,600 | 4,300 | 4,400 |
| Division | Total | ||||||
|---|---|---|---|---|---|---|---|
| UK | UK | 30 June | 31 December | ||||
| Retail | Corporate | Markets | 2012 | 2011 | |||
| £bn | £bn | £bn | £bn | £bn | |||
| Capital and balance sheet | |||||||
| Total third party assets (excluding mark-to- | |||||||
| market derivatives) | 7.3 | 11.5 | - | 18.8 | 18.9 | ||
| Loans and advances to customers (gross) | 7.5 | 11.9 | - | 19.4 | 19.5 | ||
| Customer deposits | 8.6 | 13.1 | - | 21.7 | 21.8 | ||
| Derivative assets | - | - | 0.4 | 0.4 | 0.4 | ||
| Derivative liabilities | - | - | 0.1 | 0.1 | 0.1 | ||
| Risk elements in lending | 0.5 | 0.9 | - | 1.4 | 1.5 | ||
| Loan:deposit ratio | 82% | 88% | - | 86% | 86% | ||
| Risk-weighted assets | 3.6 | 6.7 | - | 10.3 | 11.1 |
The following table analyses the results of Direct Line Group between 'ongoing' and 'run-off' businesses. The income statement for each period includes the results of Direct Line Versicherung AG (DLVAG) which was acquired by Direct Line Group on 2 April 2012.
| Half year ended 30 June 2012 |
Half year ended 30 June 2011 |
|||||
|---|---|---|---|---|---|---|
| Ongoing £m |
Run-off £m |
Total £m |
Ongoing £m |
Run-off £m |
Total £m |
|
| Income statement | ||||||
| Earned premiums | 2,019 | 13 | 2,032 | 2,057 | 64 | 2,121 |
| Reinsurers' share | (161) | (4) | (165) | (114) | - | (114) |
| Net premium income | 1,858 | 9 | 1,867 | 1,943 | 64 | 2,007 |
| Fees and commissions | (156) | (66) | (222) | (140) | (16) | (156) |
| Instalment income | 62 | - | 62 | 70 | - | 70 |
| Other income | 30 | - | 30 | 61 | 1 | 62 |
| Total income | 1,794 | (57) | 1,737 | 1,934 | 49 | 1,983 |
| Net claims | (1,254) | 29 | (1,225) | (1,449) | (39) | (1,488) |
| Underwriting profit/(loss) | 540 | (28) | 512 | 485 | 10 | 495 |
| Staff expenses | (159) | (1) | (160) | (142) | (4) | (146) |
| Other expenses | (171) | (1) | (172) | (164) | (2) | (166) |
| Total direct expenses | (330) | (2) | (332) | (306) | (6) | (312) |
| Indirect expenses | (124) | - | (124) | (108) | (2) | (110) |
| Total expenses | (454) | (2) | (456) | (414) | (8) | (422) |
| Technical result | 86 | (30) | 56 | 71 | 2 | 73 |
| Investment income | 134 | 29 | 163 | 124 | 9 | 133 |
| Operating profit/(loss) | 220 | (1) | 219 | 195 | 11 | 206 |
| Performance ratios | ||||||
| Loss ratio | 68% | 66% | 75% | 74% | ||
| Commission ratio | 8% | 12% | 7% | 8% | ||
| Expense ratio | 24% | 24% | 21% | 21% | ||
| Combined operating ratio | 100% | 102% | 103% | 103% |
Operating profit is reported before exceptional items of £109 million (H1 2011 - £8 million) primarily comprising separation and restructuring costs.
RBS Group – 2012 Interim Results
Credit risk assets analysed in this appendix are presented to supplement the balance sheet related credit risk analyses on pages 152 to 175. Credit risk assets consist of:
Credit risk assets exclude issuer risk (primarily debt securities) and reverse repurchase arrangements. They take account of legal netting arrangements that provide a right of legal set-off but do not meet the offset criteria under IFRS.
| 30 June | 31 December | |
|---|---|---|
| 2012 | 2011 | |
| Divisional analysis of credit risk assets | £m | £m |
| UK Retail | 113,408 | 111,070 |
| UK Corporate | 103,528 | 105,078 |
| Wealth | 19,677 | 20,079 |
| International Banking | 72,644 | 72,737 |
| Ulster Bank | 36,605 | 37,781 |
| US Retail & Commercial | 56,176 | 56,546 |
| Retail & Commercial | 402,038 | 403,291 |
| Markets | 97,206 | 114,327 |
| Other | 67,065 | 64,517 |
| Core | 566,309 | 582,135 |
| Non-Core | 79,732 | 92,709 |
| 646,041 | 674,844 |
Internal reporting and oversight of risk assets is principally differentiated by credit grades. Customers are assigned credit grades based on various credit grading models that reflect the key drivers of default for each customer type. All credit grades across the Group map to both a Group level asset quality scale, used for external financial reporting, and a master grading scale for wholesale exposures, used for internal management reporting across portfolios. Accordingly, measures of risk exposure may be readily aggregated and reported at increasing levels of granularity depending on stakeholder or business need.
The table below shows credit risk assets by asset quality (AQ) band:
| 30 June 2012 | 31 December 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Core | Non-Core | Total | Total | Core | Non-Core | Total | Total | ||
| Asset quality band | £m | £m | £m | % | £m | £m | £m | % | |
| AQ1 | 0% - 0.034% | 182,074 | 10,331 | 192,405 | 29.8 | 195,826 | 13,732 | 209,558 | 31.1 |
| AQ2 | 0.034% - 0.048% | 19,331 | 2,456 | 21,787 | 3.4 | 18,366 | 2,915 | 21,281 | 3.2 |
| AQ3 | 0.048% - 0.095% | 26,794 | 3,519 | 30,313 | 4.7 | 27,082 | 2,883 | 29,965 | 4.4 |
| AQ4 | 0.095% - 0.381% | 66,630 | 8,703 | 75,333 | 11.7 | 65,491 | 9,636 | 75,127 | 11.1 |
| AQ5 | 0.381% - 1.076% | 93,450 | 8,721 | 102,171 | 15.8 | 92,503 | 10,873 | 103,376 | 15.3 |
| AQ6 | 1.076% - 2.153% | 66,151 | 6,247 | 72,398 | 11.2 | 67,260 | 6,636 | 73,896 | 11.0 |
| AQ7 | 2.153% - 6.089% | 35,504 | 6,638 | 42,142 | 6.5 | 36,567 | 8,133 | 44,700 | 6.6 |
| AQ8 | 6.089% - 17.222% | 13,404 | 2,151 | 15,555 | 2.4 | 11,921 | 3,320 | 15,241 | 2.3 |
| AQ9 | 17.222% - 100% | 10,909 | 3,434 | 14,343 | 2.2 | 12,710 | 5,024 | 17,734 | 2.6 |
| AQ10 | 100% | 19,630 | 24,332 | 43,962 | 6.8 | 20,029 | 25,020 | 45,049 | 6.7 |
| Other (1) | 32,432 | 3,200 | 35,632 | 5.5 | 34,380 | 4,537 | 38,917 | 5.7 | |
| 566,309 | 79,732 | 646,041 | 100 | 582,135 | 92,709 | 674,844 | 100 |
Note:
(1) 'Other' largely comprises assets covered by the standardised approach, for which a probability of default equivalent to those assigned to assets covered by the internal ratings based approach is not available.
| 30 June 2012 | 31 December 2011 | |||||
|---|---|---|---|---|---|---|
| AQ10 | % of divisional credit risk assets |
AQ10 | % of divisional credit risk assets |
|||
| AQ10 credit risk assets by division | £m | % | £m | % | ||
| UK Retail | 5,074 | 4.5 | 5,097 | 4.6 | ||
| UK Corporate | 5,607 | 5.4 | 5,484 | 5.2 | ||
| Wealth | - | - | 12 | 0.1 | ||
| International Banking | 926 | 1.3 | 1,736 | 2.4 | ||
| Ulster Bank | 6,834 | 18.7 | 6,305 | 16.7 | ||
| US Retail & Commercial | 647 | 1.2 | 646 | 1.1 | ||
| Retail & Commercial | 19,088 | 4.7 | 19,280 | 4.8 | ||
| Markets | 542 | 0.6 | 749 | 0.7 | ||
| Core | 19,630 | 3.5 | 20,029 | 3.4 | ||
| Non-Core | 24,332 | 30.5 | 25,020 | 27.0 | ||
| 43,962 | 6.8 | 45,049 | 6.7 |
| Western Europe |
North | Asia | Latin | Non | |||||
|---|---|---|---|---|---|---|---|---|---|
| UK | (excl. UK) | America | Pacific | America | Other (1) | Total | Core | Core | |
| 30 June 2012 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Personal | 128,980 | 19,367 | 32,412 | 1,589 | 44 | 1,133 | 183,525 | 178,762 | 4,763 |
| Banks | 3,984 | 37,644 | 5,511 | 9,913 | 1,560 | 2,761 | 61,373 | 60,902 | 471 |
| Other financial institutions | 17,511 | 12,736 | 10,477 | 3,827 | 5,874 | 814 | 51,239 | 42,743 | 8,496 |
| Sovereign (2) | 30,168 | 32,343 | 18,351 | 670 | 68 | 1,292 | 82,892 | 81,830 | 1,062 |
| Property | 57,556 | 25,226 | 8,724 | 1,185 | 3,253 | 1,451 | 97,395 | 57,846 | 39,549 |
| Natural resources | 6,720 | 6,581 | 7,544 | 4,703 | 913 | 1,882 | 28,343 | 24,392 | 3,951 |
| Manufacturing | 9,855 | 6,264 | 6,911 | 2,067 | 826 | 1,430 | 27,353 | 25,575 | 1,778 |
| Transport (3) | 13,066 | 7,131 | 4,751 | 5,369 | 2,477 | 5,079 | 37,873 | 27,720 | 10,153 |
| Retail and leisure | 19,065 | 5,612 | 4,971 | 1,186 | 750 | 602 | 32,186 | 28,132 | 4,054 |
| Telecommunications, media | |||||||||
| and technology | 5,122 | 3,832 | 3,377 | 1,940 | 73 | 713 | 15,057 | 11,653 | 3,404 |
| Business services | 17,503 | 3,396 | 6,245 | 881 | 600 | 180 | 28,805 | 26,754 | 2,051 |
| 309,530 | 160,132 | 109,274 | 33,330 | 16,438 | 17,337 | 646,041 | 566,309 | 79,732 | |
| 31 December 2011 | |||||||||
| Personal | 126,945 | 20,254 | 33,087 | 1,604 | 158 | 1,114 | 183,162 | 176,201 | 6,961 |
| Banks | 4,720 | 39,213 | 3,952 | 11,132 | 1,738 | 3,276 | 64,031 | 63,470 | 561 |
| Other financial institutions | 16,549 | 15,960 | 13,319 | 3,103 | 5,837 | 1,159 | 55,927 | 45,548 | 10,379 |
| Sovereign (2) | 21,053 | 31,374 | 31,391 | 3,399 | 78 | 1,581 | 88,876 | 87,617 | 1,259 |
| Property | 60,099 | 27,281 | 8,052 | 1,370 | 3,471 | 1,480 | 101,753 | 58,323 | 43,430 |
| Natural resources | 6,552 | 7,215 | 8,116 | 3,805 | 1,078 | 2,508 | 29,274 | 25,146 | 4,128 |
| Manufacturing | 9,583 | 7,391 | 7,098 | 2,126 | 1,011 | 1,381 | 28,590 | 26,525 | 2,065 |
| Transport (3) | 13,789 | 7,703 | 4,951 | 5,433 | 2,500 | 5,363 | 39,739 | 27,529 | 12,210 |
| Retail and leisure | 22,775 | 6,101 | 5,762 | 1,488 | 1,041 | 675 | 37,842 | 32,766 | 5,076 |
| Telecommunications, media | |||||||||
| and technology | 5,295 | 4,941 | 3,202 | 1,944 | 139 | 609 | 16,130 | 12,180 | 3,950 |
| Business services | 17,851 | 3,719 | 6,205 | 910 | 629 | 206 | 29,520 | 26,830 | 2,690 |
| 305,211 | 171,152 | 125,135 | 36,314 | 17,680 | 19,352 | 674,844 | 582,135 | 92,709 |
Notes:
(1) Comprises Central and Eastern Europe, the Middle East, Central Asia and Africa, and supranationals such as the World Bank.
(2) Includes central bank exposures.
(3) Excludes net investment in operating leases in shipping and aviation portfolios as they are accounted for as property, plant and equipment. However, operating leases are included in the monitoring and management of these portfolios.
(4) Enhancements to Wealth credit systems in Q2 2012 resulted in refinements to sector classifications at 30 June 2012. The most significant impact has been a re-allocation of £2.6 billion from the retail and leisure sector across a number of other sectors. Prior period data have not been revised.
● Exposure to the transport sector includes asset-backed exposure to ocean-going vessels. The downturn observed in the shipping sector since 2008 continued into H1 2012, with oversupply of vessels, lower asset prices and lower charter rates. Credit quality in this portfolio continued to deteriorate and, despite no material defaults in this portfolio, the number of clients moved onto the Watchlist increased. The other component of this sector, land transport and logistics, performed satisfactorily in H1 2012.
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