Annual Report • Feb 23, 2012
Annual Report
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RBS reports a 2011 Group operating profit(1) of £1,892 million, up 11%(2) Core RBS 2011 operating profit £6,095 million, return on tangible equity 10.5% Retail and Commercial (ex Ulster Bank) operating profit up 9%, return on equity of 16.6% Group pre-tax loss of £766 million after charges for PPI and Greece
Significant further strengthening and de-risking of balance sheet
"We have three jobs at RBS - to support our customers, to defuse our legacy risks and to rebuild a successful profitable bank. In 2011 we showed results across all three goals, though with much still to do."
"RBS Core profits - the ongoing bank - were £6 billion, comparing well with others and representing a return on equity of 10.5%. The reduction in our balance sheet since 2008 now exceeds £700 billion with all other 'safety' measures improving strongly. And we provided service to more than 30 million customers worldwide. In UK lending support specifically, we provided £94 billion gross lending to corporates (£41 billion to SMEs) exceeding our targets and far exceeding any competitor bank."
The Royal Bank of Scotland Group (RBS) made further progress in rebuilding its financial resilience during 2011. The Group's key priority has been to strengthen its balance sheet and reduce risks in the face of difficult economic and financial market conditions as we work through the restructuring plan embarked on in 2009.
The Group's funded balance sheet decreased by £49 billion to £977 billion while risk-weighted assets pre-APS were reduced by £63 billion, or 11%. In Non-Core we exceeded run-off targets, accelerating the derisking programme and thereby bringing forward losses on some positions. The Core Tier 1 ratio of 10.6% and tangible net asset value per share (TNAV) of 50.1p were broadly stable over the year, in spite of derisking costs and regulatory impacts. Liquidity metrics improved further, as short-term wholesale funding declined by 21% to £102 billion and the loan:deposit ratio improved to 108%.
Despite this risk reduction, support for customers remained a central goal. RBS showed a 22% increase in new loans and facilities to UK corporates, exceeding its Merlin 'stretch' lending targets. RBS new lending accounted for 48% of all SME lending reported by the Merlin banks, substantially above its customer market share.
Over the last three years RBS has sustained its Core customer franchises and rebuilt its financial resilience. Core pre-impairment operating profits have totalled £34 billion, including £11.5 billion from Global Banking & Markets (GBM). This has helped to mitigate the costs of working through legacy issues and derisking the Group's operations.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Core | |||||
| Total income (1) | 26,571 | 29,698 | 5,923 | 6,312 | 7,138 |
| Operating expenses (2) | (14,183) | (14,454) | (3,330) | (3,498) | (3,600) |
| Insurance net claims | (2,773) | (4,046) | (590) | (696) | (937) |
| Operating profit before impairment losses (3) | 9,615 | 11,198 | 2,003 | 2,118 | 2,601 |
| Impairment losses (4) | (3,520) | (3,780) | (941) | (854) | (930) |
| Core operating profit (3) | 6,095 | 7,418 | 1,062 | 1,264 | 1,671 |
| Non-Core operating loss (3) | (4,203) | (5,505) | (1,308) | (997) | (1,616) |
| Group operating profit/(loss) (3) | 1,892 | 1,913 | (246) | 267 | 55 |
| Fair value of own debt | 1,846 | 174 | (370) | 2,357 | 582 |
| Asset Protection Scheme | (906) | (1,550) | (209) | (60) | (725) |
| Payment Protection Insurance costs | (850) | - | - | - | - |
| Sovereign debt impairment | (1,099) | - | (224) | (142) | - |
| Bank levy | (300) | - | (300) | - | - |
| Other items (5) | (1,349) | (936) | (627) | (418) | 80 |
| (Loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| (Loss)/profit attributable to ordinary and | |||||
| B shareholders | (1,997) | (1,125) | (1,798) | 1,226 | 12 |
| Memo: APS after tax cost (6) | (666) | (1,116) | (154) | (44) | (522) |
| 31 December 2011 |
30 September 2011 |
31 December 2010 |
|
|---|---|---|---|
| Capital and balance sheet | |||
| Funded balance sheet (7) | £977bn | £1,035bn | £1,026bn |
| Loan:deposit ratio (Group) (8) | 108% | 112% | 118% |
| Loan:deposit ratio (Core) (8) | 94% | 95% | 96% |
| Core Tier 1 ratio | 10.6% | 11.3% | 10.7% |
| Tangible equity per ordinary and B share (9) | 50.1p | 52.6p | 51.1p |
Notes:
When I became your Chairman in 2009, our urgent task was to stabilise RBS and then to begin the job of rebuilding the company.
We have made good progress in three years. The balance sheet has been reduced by over £700 billion from its peak. Our reliance on short-term wholesale funding, which stood at £297 billion at the end of 2008 has been cut to £102 billion. We repaid more than £20 billion of government-guaranteed debt in 2011. At 10.6%, our Core Tier 1 ratio is one of the strongest among our peers.
Our actions have made RBS safer and more stable.
Achievements like these require hard work. The Board is committed to restoring RBS to good health. We also made comprehensive changes to the executive management team after 2008. I am confident that they, ably led by Stephen Hester, are the right people to rebuild RBS. All of us understand our duties and responsibilities and are determined to fulfil them diligently.
It is the Board's view that running the business on commercial grounds is the best way to make the bank safer and more valuable for everyone who depends upon it. I do not believe there is a workable alternative if our aim is to provide the opportunity for the UK government to sell its shares in the public markets in a reasonable timescale.
A sign that we have succeeded will be the desire of private investors to acquire the UK government's stake. While these investors hold only 18% of our shares today, their view of our performance, leadership and strategy is crucial. All being well, they will own the majority of the equity capital of the company in future years.
In the meantime, the job of rebuilding the Group is far from complete. The need to address the legacy of losses in a number of businesses means that the Group is not yet profitable, although in 2011 our core businesses earned a profit of £6 billion and a return on tangible equity of 10.5%.
During 2011, we faced weak and deteriorating economic and market conditions. We dealt with those. For example, we accelerated our Non-Core run-down, reduced risk concentrations and strengthened our liquidity and funding position. The Independent Commission on Banking published its findings and the UK government responded with its plans. We have begun to deal with its far-reaching implications. In January 2012, we announced how we will reshape our international wholesale business.
So, we can adapt and we have adapted our plans to changing conditions. That is simply doing business.
Other external forces affect banks in the UK and especially RBS. We know we are different. I have said often that we are grateful to, and are well aware of the interest in the Group by UK taxpayers. We intend to repay them by restoring RBS, allowing the bank to do its vital job of serving our customers and being part of a vibrant and successful economy.
At present, we are an unusual company, operating commercially, listed on the stock market but majority-owned by the UK government. It is a challenge for all those involved to manage the complexities and occasional tensions in this structure. The ability to run the company on a commercial basis can be hindered by elements of the periodic debate on how to respond to such tensions, in the media and elsewhere. The Board believes it is important to remain commercially focussed, recognising where we can the political context in which we operate.
I understand people's anger and anxiety about inequalities in pay at a time when the economy is weak and many people are finding things tough. RBS alone cannot fix these wider issues if we are to achieve what is asked of us commercially. But we have led the way in changing how we pay our people. We asked our shareholders how they expect us to set incentives. In response, we have aligned the longer-term rewards our people receive with our shareholders' interests. When we reward good performance, the amount paid in cash is minimal, with most of it paid in shares and bonds. If the subsequent results so warrant, we can claw back awards. I am confident that our practices will stand favourable comparison with others'.
As we rebuild RBS, we are fulfilling our responsibilities to the communities in which our customers and people live and work. Last year, we:
These demonstrate the role we can and will play in serving and helping society and the economy. We are building on them. Our Board-level Sustainability Committee is talking to our stakeholders about the elements of our business that matter to them and in 2012 we will publish demanding environmental targets that will drive a reduction in our carbon footprint.
We were pleased to welcome three new independent non-executive directors to the Board: Alison Davis, Tony Di Iorio and Baroness Noakes. They bring a wealth of experience, along with a strong global perspective. They have already made a significant contribution to the work of the Board since they joined.
Colin Buchan retired as a director in August 2011 and John McFarlane will step down in March 2012. We have greatly appreciated the experience, commitment and knowledge they brought to the Board.
Finally, I wish to thank our employees. They are rebuilding RBS each day by serving our customers. They did that very well indeed in 2011, even as many faced major uncertainties. I am grateful to them.
RBS has completed the first three years of its recovery plan. Over that period the Bank's results across our key goals - Customers, Risk and Value - have exceeded the Plan targets we put together in 2009. This is pleasing and puts the Bank in a vastly better position than before to serve our different constituencies. We are dealing with the new economic and regulatory challenges within the strategic plan and have retained our focus on building an RBS for all to be proud of. Great credit is due to our people for the accomplishments to date and to those who have supported us with their capital or their custom.
We are clear on RBS's priorities:
These priorities are interconnected and mutually supporting.
During the last three years RBS has:
2011 saw good progress across all measures of risk reduction and increased financial soundness; important given the much tougher market conditions. Customer service and support was sustained well.
However, RBS has reported a pre-tax loss of £766 million overall and, in common with others, has seen a share price fall, albeit still at levels much higher than the 10p starting point in January 2009. These outcomes reflect the stage of our recovery and the external environment. They mask real and important accomplishments, however.
Core bank operating profits were £6.1 billion. Within this total, operating profits in 2011 across RBS's Retail and Commercial business (excluding Ulster Bank) were up 9% to £4.9 billion. RBS Insurance turned loss into profit, a £749 million improvement on 2010. GBM suffered a 54% fall in profit to £1.6 billion, reflecting tough market conditions, but still a substantial result and one generally in line with other investment banking businesses. Non-Core losses declined 24% to £4.2 billion as the risk run-off continued ahead of schedule. Exceptional charges for past business associated with PPI and Greek write-downs were also taken. £3.8 billion was handed over to HMT/HMRC/Bank of England in fees for APS/Credit Guarantee Scheme, taxes (both on our behalf and on that of our employees) and capital support schemes.
We all understand that a company that is making losses at the bottom line tests the patience of those who depend on it. However, the restructuring task we have undertaken at RBS is unique in its scale and complexity, and needs to be phased in line with our ability to fund and execute it. In dealing with these legacy losses we expect to put the company on a sustainable footing for generations to come. 2011 proved what we already knew: that there are no shortcuts to this endpoint.
The new RBS is built upon customer-driven businesses with substantial competitive strengths in their respective markets; together our 'Core' business. Each unit is being reshaped to provide improved and enduring performance and to meet new external challenges. The businesses are managed to add value in their own right but to provide a stronger, more balanced and valuable whole through vital cross-business linkages.
The weaknesses uncovered by the financial crisis - of leverage, risk concentration and business stretch – are being fixed. The primary vehicle for this is the run-off and sale of assets in our Non-Core division though there are many other parallel tasks. RBS's total assets have already been reduced by £712 billion from their peak in 2008 - more than any other entity worldwide has achieved.
The principles of RBS strategy are working well. The tougher external environment will slow progress and reduce profitability but requires largely tactical change from the original plan for the majority of our business.
However, all banks, and especially in the UK, must adjust to much higher capital and liquidity requirements, and substantially changed wholesale funding markets. There are particular pressures on the funding, profitability and capital intensity of cross-border, wholesale and investment banking business lines.
RBS has therefore adjusted its business plan to target a still more conservative capital and funding structure overall in order to meet current and prospective market and regulatory challenges. This also includes further reduction in balance sheet, capital usage and expense base in the investment banking area, including exit of the cash equities business, reduction of the Group's fixed income markets balance sheet and combination of its international corporate banking businesses. We expect these moves to make the client proposition in our wholesale businesses more focused, and so stronger and more sustainable. It will improve the stability of their funding and their prospects for an improved return on equity.
These enduring principles - around Customer, Risk and Shareholder - continue to drive our strategy. The actions they give rise to should enable RBS to prosper over the long term as a leading international bank, anchored firmly in the UK and serving customers, shareholders and society well.
RBS people are doing a great job in serving customers whilst driving the change we need. Their engagement and efforts are essential to our task. I thank them sincerely. While the climate is tough for people in many walks of life, that does not take away from the exceptional demands we make on our staff and the continuing need we have for their talents, engagement and motivation.
In this letter a year ago I re-affirmed the path ahead for RBS and how we planned to travel down it. I am pleased to say we remain on that track.
However, I also warned of the risks from economic and regulatory/policy change. These have indeed impacted strongly and remain uppermost in our minds when looking at 2012. We will continue to prioritise customer service and risk reduction. We will strive to complement this with determined measures to improve business performance to pay for the remaining 'clean-up' and then to produce results for shareholders. We are building the capacity of our business to earn its cost of capital and produce solid returns as external conditions allow.
RBS is an enduring financial institution playing a key part in our markets and communities. We support others. We depend on the support of customers and our communities in turn. We are working our way out of a tough legacy whilst sustaining "business as usual" for the vast majority of what we do.
I thank our staff and all our stakeholders for their continued support.
RBS made further progress in 2011 on its strategic plan to rebuild financial resilience, cutting its funded balance sheet to less than £1,000 billion for the first time since the restructuring plan's inception in 2009. The Group's priority in 2011 has been to strengthen its balance sheet and reduce risk as it works through the restructuring plan. Key achievements include:
Customer franchises have been sustained across the Core Group, with resilient market shares and improving service metrics. While operating results in the Group's principal retail and commercial businesses have remained strong, measures to reduce risk in GBM as financial market conditions deteriorated in the second half of the year and to accelerate the disposal of Non-Core exposures held back overall operating profits.
These results mean that over the last three years RBS has lowered short-term wholesale funding by 66% to £102 billion and improved its loan:deposit ratio to 108%. Core pre-impairment operating profits over this period have totalled £34 billion, including £11.5 billion from GBM. This has helped to fund £43 billion of loan losses and the costs of working through other legacy issues and derisking the Group's operations, including sovereign debt impairments, APS charges, disposal costs and restructuring charges.
Group operating profit was £1,892 million in 2011, compared with £1,913 million in 2010. Adjusting for the impact of the disposal of Global Merchant Services (GMS) in Q4 2010, operating profit was up 11%.
Core Group operating profit of £6,095 million, down 15% excluding GMS, reflects a strong performance from R&C, offset by weaker operating results in GBM in the second half, and the difficult credit environment for Ulster Bank.
Non-Core's operating loss fell to £4,203 million in 2011, an improvement of £1,302 million from 2010, with impairments falling by £1,557 million, despite ongoing challenges in the Ulster Bank and real estate portfolios. Operating expenses were £961 million lower. Non-Core RWAs fell by £60 billion in 2011 to £93 billion. The division focused on reducing capital intensive trading assets, with activity including the restructuring of monoline exposures, which, at a cost of c.£600 million in 2011, achieved a reduction of £32 billion in RWAs.
The process of funding legacy losses through the generation of operating profit continues. In 2011 the Group absorbed further significant legacy costs, including integration and restructuring costs of £1,064 million; PPI costs of £850 million; sovereign debt impairments of £1,099 million; and a charge of £906 million for the Asset Protection Scheme. A total of £2,456 million has now been expensed in relation to the APS. Other significant non-operating items included the bank levy of £300 million and a credit of £1,846 million for movements in the fair value of own debt, resulting in pre-tax losses of £766 million, up from £249 million in 2010. Following a particularly high tax charge of £1,250 million (£634 million in 2010), primarily as a result of continuing Ulster Bank losses, the Group recorded an attributable loss of £1,997 million compared with £1,125 million in 2010.
R&C ROE improved to 11.3% from 10.2% in 2010, or 16.6% excluding Ulster Bank. GBM ROE was 7.7%, notwithstanding the challenging market conditions, leaving overall Core ROE at 10.5%. TNAV per share at end 2011 was 50.1p.
Core expenses were stable, with reduced costs in UK Retail and GBM offset by investment in the Wealth and GTS franchises. Non-Core expenses fell by 43%, leaving Group 2011 expenses 7% lower than in 2010 at £15,478 million. The Group's cost reduction programme delivered cost savings with an underlying run rate of over £3 billion to the end of 2011, ahead of the original target of £2.5 billion annualised savings by 2013 and with lower programme spend than originally projected. This has enabled the Group to reinvest savings into enhancing its systems infrastructure to support improvements in customer service, enhance product offerings and respond to regulatory changes.
Staff costs declined 9% to £8,163 million. The compensation ratio in GBM, excluding discontinued businesses, was 39%. Variable compensation accrued in the first half of the year were reduced in the second half of the year, leaving the 2011 variable compensation awards 58% lower than 2010, compared with the 54% fall in operating profit.
The cost:income ratio for the Core Group was 60% and for R&C was 55%, compared with 56% in 2010. RBS believes that further efficiency gains will be needed to ensure that its businesses are capable of delivering sustainable returns in excess of the cost of equity to its shareholders.
Group impairments totalled £7,439 million, down 20% from 2010. Non-Core continued to improve, despite persistent challenges in Ulster Bank and commercial real estate portfolios.
UK Retail and US R&C impairment trends remained favourable, with 2011 impairment losses down 32% and 37% respectively compared with the prior year. UK Corporate impairments were broadly in line with 2010 at 0.7% of loans and advances but Core Ulster Bank's impairment charge rose 19%, reflecting deteriorating bad debt trends and lower asset prices in the mortgage portfolio. Total Ulster Bank impairments in Core and Non-Core were £3,733 million in 2011 compared with £3,895 million in 2010, down 4%.
The 2011 impairment charge represented 1.5% of Group customer loans and advances, with the Core ratio at 0.8%. Provision coverage of risk elements in lending improved to 49% compared with 47% at the end of 2010.
The Group actively managed down its market risk exposures in anticipation of the deterioration in financial market conditions in the second half of 2011. Average trading value at risk (VaR) was £105.5 million, down 37% from 2010. Average credit spread VaR in particular was significantly lower, reflecting continuing progress in managing down Non-Core exposures and reducing concentration risk. Increased volatility arising from the difficulties of eurozone sovereigns resulted in average VaR increasing slightly in Q4 2011.
The Group funded balance sheet fell by £49 billion during 2011 to £977 billion. Non-Core again exceeded targets, reducing funded assets by £44 billion during 2011 to £94 billion at the year-end. Further reductions will include the disposal of the Group's aviation finance business for £4.7 billion, signed in January 2012. During 2011, Non-Core focused on reducing capital intensive trading assets, reducing RWAs by £60 billion and also mitigated significant future regulatory uplifts.
GBM lowered funded assets by £35 billion, to £362 billion compared with £397 billion at 31 December 2010, making good progress towards the new target of circa £300 billion set as RBS restructures its wholesale businesses. R&C loan growth remained muted.
The Group further strengthened its liquidity and funding metrics as financial market conditions became more challenging in the second half of 2011. The Group loan:deposit ratio improved to 108%, 10 percentage points lower than at the end of 2010. Over the last three years Core R&C customer deposits have grown by £49 billion, partially offset by a reduction in more volatile GBM deposits and Non-Core rundown.
Net term issuance in 2011 totalled £21 billion, exceeding the Group's targets for the year. £20 billion of maturing government-guaranteed debt was repaid in 2011. In view of continuing uncertain market conditions the liquidity portfolio was maintained above target levels at £155 billion, well in excess of short-term wholesale funding, which, excluding derivatives collateral, fell to £102 billion at year end compared with £130 billion at 31 December 2010.
The Core Tier 1 ratio was 10.6%, compared with 10.7% at the end of 2010. Excluding the effect of the APS, RWAs decreased by £63 billion, despite a £21 billion impact in Q4 2011 from the implementation of CRD III. The reduction reflected activity in Non-Core to reduce capital-intensive trading assets, including the restructuring of monoline exposures. As assets covered by the APS have run-off or been disposed of, the Core Tier 1 ratio benefit arising from the APS has diminished to 0.9%, compared with 1.2% at end 2010.
Tangible net asset value per share was 50.1p at 31 December 2011, compared with 51.1p at 31 December 2010.
RBS has made good progress over the last three years towards its key objectives of serving customers well, reducing risk and rebuilding value for all shareholders.
In the course of 2011 the Group's priority has been to strengthen its balance sheet and reduce risk as it works through the restructuring plan, and this is reflected in good progress made on the key risk measures set out in 2009. Targets for capital, short-term wholesale funding, liquidity reserves and leverage have all been met ahead of schedule, while the Group loan:deposit ratio improved further in 2011 to stand at 108%, compared with 154% shortly before the strategic plan was launched.
RBS has seen significant improvement in earnings and returns from the worst point reached in 2008. In 2011, however, the deterioration in external economic and financial conditions led the Group to prioritise derisking over driving returns. Core ROE was 10.5%, with R&C return on equity at 11.3%, or 16.6% excluding Ulster Bank. GBM ROE was 7.7%, notwithstanding the challenging market conditions.
The Group's objective remains for each of its banking businesses to be based on enduring customer franchises; to be capable of generating sustainable returns in excess of its cost of equity; to be able to fund itself from its own deposit base; to contribute to the overall Group through its connectivity with other businesses; and to achieve the levels of efficiency necessary to compete effectively in its market. In light of the changed market and regulatory environment, the RBS Group Board has agreed new medium-term strategic targets, which are set out below.
| Worst | Original 2013 |
Revised medium |
||
|---|---|---|---|---|
| Key Measures | point | 2011 | target | term target |
| Value drivers | Core | Core | Core | |
| • Return on equity (1) |
(31%)(2) | 10.5% | >15% | >12% |
| • Cost:income ratio (3) |
97%(4) | 60% | <50% | <55% |
| Risk measures | Group | Group | ||
| • Core Tier 1 ratio |
4%(5) | 10.6% | >8% | >10% |
| • Loan:deposit ratio |
154%(6) | 108% | c.100% | c.100% |
| • Short-term wholesale funding (7) |
£297bn(8) | £102bn | <£125bn | <10% TPAs |
| • Liquidity portfolio (9) |
£90bn(8) | £155bn | c.£150bn | <15% TPAs |
| • Leverage ratio (10) |
28.7x(11) | 16.9x | <20x | <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 31 December 2011); (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) Excluding derivatives collateral; (8) As at December 2008; (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.
RBS's first priority is to serve its customers well. Since the adoption of our strategic plan in 2009 we have been focused on identifying what our customers value and on targeting our product propositions and service improvements accordingly.
2011 highlights for our businesses included:
During 2011, UK Retail and Ulster Bank both achieved encouraging progress against their Customer Charter commitments. UK Retail, for example, achieved the goal of serving 80% of its customers in less than 5 minutes in its busiest branches and answering 90% of all incoming calls in less than a minute. 89% of Ulster Bank's customer queries were answered in a single call in the period July - September 2011, compared with 81% in the period January - June 2011. In both divisions, however, there is clearly more to do, with handling of customer complaints a particular focus.
US Retail & Commercial began a phased roll-out of its Customer Commitments in Q4 2011: focusing on getting to know each customer as an individual, earning customer trust, putting customers in control of their own finances and valuing their time and business.
Technological innovation has an important role to play in improving customer service, and 2011 saw further improvements to RBS's leading mobile banking services. UK Retail, Ulster Bank and US Retail & Commercial customers can access their accounts and manage their money via their mobiles and GBM customers can access trading analysis and expert commentary through their iPad. The iPhone app for RBS and NatWest customers was updated and has now been downloaded by one million customers.
In August, RBS Insurance responded quickly and decisively to the UK riots, helping customers and other small business owners cope with the aftermath of the rioting, providing general insurance advice and information on the claims process. UK Corporate also reacted swiftly, providing £10 million of interest-free, fee-free loans to business customers affected by the rioting.
In June, UK Corporate launched a relationship manager accreditation programme to improve the knowledge and professionalism of front-line staff, while US Retail & Commercial invested in an enhanced sales training programme for managers and sales colleagues. By the end of 2011, the majority of UK Corporate's relationship managers had gained full accreditation under the initial phase of the programme and in the US the training has begun to deliver externally recognised increases in customer satisfaction.
2011 demonstrated clear examples of our commitment to serving our customers well but we recognise there is much we still need to achieve, and providing our customers consistently high quality service remains a key priority in our strategic plan.
RBS extended £93.5 billion of new lending to UK businesses in 2011: £36.3 billion of new loans and facilities to mid and large corporates, £16.3 billion of mid corporate overdraft renewals, £31.5 billion of new loans and facilities to SMEs and £9.4 billion of SME overdraft renewals.
New loans and facilities to businesses increased by 22% in 2011 compared with 2010, with new loans and facilities to SME customers up by 4%, exceeding its Merlin "stretch" lending targets. RBS new lending accounted for 48% of all SME lending reported by the Merlin banks, well above its customer market share.
This strong lending performance represented a significant success for RBS's efforts to foster loan demand from creditworthy companies, in the face of weakening confidence and subdued appetite for investment in 2011. If creditworthy demand grows, the Group would aim to lend even more in 2012. Economic uncertainty caused companies - particularly smaller businesses - to delay or scale back investments and to focus on deleveraging and cash flow preservation. Total SME credit applications in 2011 were 17% lower than for 2010, and 31% lower than 2007. RBS remains committed to doing everything it can to stimulate demand.
Many of RBS's SME customers have been paying down debt and building up their cash balances, with SME customers increasingly opting to build up longer term savings in light of perceived decreased investment opportunities. Term deposits of over 12 months rose 53% in 2011 from the Group's smallest business customers, those with turnover of up to £2 million, and 33% for SME customers overall. SME overdraft utilisation also continued to fall, from 47% for December 2010 to 45% for December 2011.
Lending to mid and large corporates was driven by re-financing activity, as economic newsflows remained weak and uncertainty surrounding the eurozone drove confidence in economic recovery and market stability lower. Drawn lending balances in the mid and large corporate sector decreased by 5% compared with 2010.
Gross new mortgage lending in 2011 was £16.2 billion, with balances outstanding up 5% compared with 2010. A fifth of new mortgages provided by the Group were to first time buyers, and gross new lending to this market segment increased quarter on quarter throughout 2011.
Economic and regulatory challenges have continued into 2012. Growth prospects in the UK, the Group's most important market, remain modest, while the eurozone sovereign crisis remains a risk.
Against this backdrop, Retail and Commercial performance is expected to remain broadly stable, benefitting modestly from improvement in impairments.
GBM Markets will transition to its revised, more targeted strategy. The year is off to a good start, but revenue performance will remain market-dependent.
The continuing run-off of Non-Core is expected to crystallise further disposal losses, though overall Non-Core losses are expected to fall again.
The Group NIM outlook is stable with the second half of 2011. However, accounting swings relating to fair value of own debt will continue to feature.
The Group expects to continue to prioritise the strengthening of its balance sheet and the further removal of risk.
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 |
The Royal Bank of Scotland Group will be hosting an analyst presentation following the release of the results for the year ended 31 December 2011. The presentation will also be available via a live webcast and audio call. The details are as follows:
| Date: | Thursday 23 February 2012 |
|---|---|
| Time: | 9.30 am UK time |
| Webcast: | www.rbs.com/ir |
| 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/ir
A financial supplement will be available on www.rbs.com/ir. This supplement shows published income and balance sheet financial information by quarter for the last eight quarters to assist analysts for modelling purposes.
RBS Group – Annual Results 2011
| Page | |
|---|---|
| Forward-looking statements | 3 |
| Presentation of information | 4 |
| Results summary | 5 |
| Results summary - statutory | 8 |
| Summary consolidated income statement | 9 |
| Summary consolidated balance sheet | 11 |
| Analysis of results | 12 |
| Divisional performance UK Retail UK Corporate Wealth Global Transaction Services Ulster Bank US Retail & Commercial Global Banking & Markets RBS Insurance Central items Non-Core |
22 25 29 33 36 39 43 49 53 59 60 |
| 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 |
| Page | |
|---|---|
| Risk and balance sheet management | 128 |
| Capital | 130 |
| Liquidity and funding risk | 136 |
| Credit risk | 148 |
| Market risk | 205 |
| Risk factors | 210 |
| Statement of directors' responsibilities | 212 |
| Additional information | 213 |
| Appendix 1 Income statement reconciliations | |
| Appendix 2 Businesses outlined for disposal | |
| Appendix 3 Additional risk management disclosures | |
| Appendix 4 Asset Protection Scheme | |
| Appendix 5 Divisional reorganisation |
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; 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: the 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 access sufficient sources of liquidity and funding; the recommendations made by the Independent Commission on Banking (ICB) and their potential implications; the ability to implement strategic plans on a timely basis, or at all, including the disposal of certain Non-Core assets and assets and businesses required as part of the State Aid restructuring plan; organisational restructuring, including any adverse consequences of a failure to transfer, or delay in transferring, certain business assets and liabilities from RBS N.V. to RBS; the full nationalisation of the Group or other resolution procedures under the Banking Act 2009; deteriorations in borrower and counterparty credit quality; 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 writedowns 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; litigation and regulatory investigations; 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; 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 5 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. This information is provided 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 127 inclusive are on a statutory basis. Reconciliations between the managed basis and statutory basis are included in Appendix 1.
The basis of calculating the net interest margin (NIM) was refined in Q1 2011 and reflects the actual number of days in each quarter. Group and divisional NIMs for 2010 have been re-computed on the new basis.
In accordance with IFRS 5 'Non-current assets held for sale and discontinued operations', the Group has transferred the assets and liabilities relating to the planned disposal of its RBS England and Wales, and NatWest Scotland branch-based business, along with certain SME and corporate activities across the UK ('UK branch-based businesses'), to assets and liabilities of disposal groups.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Core | |||||
| Total income (1) | 26,571 | 29,698 | 5,923 | 6,312 | 7,138 |
| Operating expenses (2) | (14,183) | (14,454) | (3,330) | (3,498) | (3,600) |
| Insurance net claims | (2,773) | (4,046) | (590) | (696) | (937) |
| Operating profit before impairment | |||||
| losses (3) | 9,615 | 11,198 | 2,003 | 2,118 | 2,601 |
| Impairment losses (4) | (3,520) | (3,780) | (941) | (854) | (930) |
| Operating profit (3) | 6,095 | 7,418 | 1,062 | 1,264 | 1,671 |
| Non-Core | |||||
| Total income/(loss) (1) | 1,206 | 2,964 | (304) | 46 | 321 |
| Operating expenses (2) | (1,295) | (2,256) | (314) | (323) | (481) |
| Insurance net claims | (195) | (737) | 61 | (38) | (245) |
| Operating loss before impairment | |||||
| losses (3) | (284) | (29) | (557) | (315) | (405) |
| Impairment losses (4) | (3,919) | (5,476) | (751) | (682) | (1,211) |
| Operating loss (3) | (4,203) | (5,505) | (1,308) | (997) | (1,616) |
| Total | |||||
| Total income (1) | 27,777 | 32,662 | 5,619 | 6,358 | 7,459 |
| Operating expenses (2) | (15,478) | (16,710) | (3,644) | (3,821) | (4,081) |
| Insurance net claims | (2,968) | (4,783) | (529) | (734) | (1,182) |
| Operating profit before impairment | |||||
| losses (3) | 9,331 | 11,169 | 1,446 | 1,803 | 2,196 |
| Impairment losses (4) | (7,439) | (9,256) | (1,692) | (1,536) | (2,141) |
| Operating profit/(loss) (3) | 1,892 | 1,913 | (246) | 267 | 55 |
| Fair value of own debt | 1,846 | 174 | (370) | 2,357 | 582 |
| Asset Protection Scheme | (906) | (1,550) | (209) | (60) | (725) |
| Payment Protection Insurance costs | (850) | - | - | - | - |
| Sovereign debt impairment | (1,099) | - | (224) | (142) | - |
| Bank levy | (300) | - | (300) | - | - |
| Other items | (1,349) | (936) | (627) | (418) | 80 |
| (Loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| Memo: Operating profit/(loss) after | |||||
| adjusting for GMS disposal | 1,892 | 1,704 | (246) | 267 | 25 |
For definitions of the notes refer to page 7.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| Key metrics | 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
| Performance ratios | |||||
| Core | |||||
| - Net interest margin | 2.16% | 2.23% | 2.09% | 2.10% | 2.25% |
| - Cost:income ratio (5) | 60% | 56% | 62% | 62% | 58% |
| - Return on equity | 10.5% | 13.3% | 7.1% | 8.5% | 12.1% |
| - Adjusted earnings/(loss) per ordinary and | |||||
| B share from continuing operations | 0.7p | 2.4p | (0.6p) | - | 0.4p |
| - Adjusted earnings per ordinary and | |||||
| B share from continuing operations | |||||
| assuming a normalised tax rate of 26.5% | |||||
| (2010 - 28.0%) | 4.1p | 4.8p | 0.7p | 0.9p | 1.1p |
| Non-Core | |||||
| - Net interest margin | 0.64% | 1.16% | 0.31% | 0.43% | 1.09% |
| - Cost:income ratio (5) | 128% | 101% | nm | nm | nm |
| Group | |||||
| - Net interest margin | 1.92% | 2.01% | 1.84% | 1.84% | 2.02% |
| - Cost:income ratio (5) | 62% | 60% | 72% | 68% | 65% |
| Continuing operations | |||||
| - Basic (loss)/earnings per ordinary and | |||||
| B share (6) | (1.8p) | (0.5p) | (1.7p) | 1.1p | - |
nm = not meaningful
For definitions of the notes refer to page 7.
| 31 December | 30 September | 31 December | |||
|---|---|---|---|---|---|
| 2011 | 2011 | Change | 2010 | Change | |
| Capital and balance sheet | |||||
| Funded balance sheet (7) | £977bn | £1,035bn | (6%) | £1,026bn | (5%) |
| Total assets | £1,507bn | £1,608bn | (6%) | £1,454bn | 4% |
| Loan:deposit ratio - Core (8) | 94% | 95% | (100bp) | 96% | (200bp) |
| Loan:deposit ratio - Group (8) | 108% | 112% | (400bp) | 118% | (1,000bp) |
| Risk-weighted assets - gross | £508bn | £512bn | (1%) | £571bn | (11%) |
| Benefit of Asset Protection Scheme (APS) | (£69bn) | (£89bn) | (22%) | (£106bn) | (35%) |
| Risk-weighted assets - net of APS | £439bn | £423bn | 4% | £465bn | (6%) |
| Total equity | £76bn | £79bn | (4%) | £77bn | (1%) |
| Core Tier 1 ratio* | 10.6% | 11.3% | (70bp) | 10.7% | (10bp) |
| Tier 1 ratio | 13.0% | 13.8% | (80bp) | 12.9% | 10bp |
| Risk elements in lending (REIL) | £41bn | £43bn | (5%) | £39bn | 5% |
| REIL as a % of gross loans and advances (9) | 8.6% | 8.4% | 20bp | 7.3% | 130bp |
| Tier 1 leverage ratio (10) | 16.9x | 17.5x | (3%) | 16.8x | 1% |
| Tangible equity leverage ratio (11) | 5.7% | 5.7% | - | 5.5% | 20bp |
| Tangible equity per ordinary and B share (12) | 50.1p | 52.6p | (5%) | 51.1p | (2%) |
* Benefit of APS in Core Tier 1 ratio is 0.9% at 31 December 2011 (30 September 2011 - 1.3%; 31 December 2010 - 1.2%).
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Continuing operations | |||||
| Total income | 28,937 | 31,868 | 5,038 | 8,603 | 7,822 |
| Operating expenses | (18,026) | (18,228) | (4,567) | (4,127) | (4,507) |
| Operating profit/(loss) before impairment | |||||
| losses | 7,943 | 8,857 | (58) | 3,742 | 2,133 |
| Impairment losses | (8,709) | (9,256) | (1,918) | (1,738) | (2,141) |
| Operating (loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| (Loss)/profit attributable to ordinary and B | |||||
| shareholders | (1,997) | (1,125) | (1,798) | 1,226 | 12 |
A reconciliation between statutory and managed view income statements is shown in Appendix 1 to this announcement.
In the income statement set out below, movements in the fair value of own debt, 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, bank levy, interest rate hedge adjustments on impaired available-for-sale Greek government bonds, write-down of goodwill and other intangible assets and RFS Holdings minority interest are shown separately. In the statutory condensed consolidated income statement on page 68, these items are included in income and operating expenses as appropriate.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Core | £m | £m | £m | £m | £m |
| Net interest income | 12,023 | 12,517 | 3,003 | 2,968 | 3,220 |
| Non-interest income (excluding insurance | |||||
| net premium income) | 10,578 | 12,755 | 1,948 | 2,352 | 2,827 |
| Insurance net premium income | 3,970 | 4,426 | 972 | 992 | 1,091 |
| Non-interest income | 14,548 | 17,181 | 2,920 | 3,344 | 3,918 |
| Total income (1) | 26,571 | 29,698 | 5,923 | 6,312 | 7,138 |
| Operating expenses (2) | (14,183) | (14,454) | (3,330) | (3,498) | (3,600) |
| Profit before insurance net claims and | |||||
| impairment losses | 12,388 | 15,244 | 2,593 | 2,814 | 3,538 |
| Insurance net claims | (2,773) | (4,046) | (590) | (696) | (937) |
| Operating profit before impairment | |||||
| losses (3) | 9,615 | 11,198 | 2,003 | 2,118 | 2,601 |
| Impairment losses (4) | (3,520) | (3,780) | (941) | (854) | (930) |
| Operating profit (3) | 6,095 | 7,418 | 1,062 | 1,264 | 1,671 |
| Non-Core | |||||
| Net interest income | 666 | 1,683 | 73 | 110 | 358 |
| Non-interest income (excluding insurance | |||||
| net premium income) | 254 | 579 | (386) | (108) | (218) |
| Insurance net premium income | 286 | 702 | 9 | 44 | 181 |
| Non-interest income | 540 | 1,281 | (377) | (64) | (37) |
| Total income/(loss) (1) | 1,206 | 2,964 | (304) | 46 | 321 |
| Operating expenses (2) | (1,295) | (2,256) | (314) | (323) | (481) |
| (Loss)/profit before insurance net claims | |||||
| and impairment losses | (89) | 708 | (618) | (277) | (160) |
| Insurance net claims | (195) | (737) | 61 | (38) | (245) |
| Operating loss before impairment | |||||
| losses (3) | (284) | (29) | (557) | (315) | (405) |
| Impairment losses (4) | (3,919) | (5,476) | (751) | (682) | (1,211) |
| Operating loss (3) | (4,203) | (5,505) | (1,308) | (997) | (1,616) |
For definitions of the notes refer to page 7.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Total | £m | £m | £m | £m | £m |
| Net interest income | 12,689 | 14,200 | 3,076 | 3,078 | 3,578 |
| Non-interest income (excluding insurance | |||||
| net premium income) | 10,832 | 13,334 | 1,562 | 2,244 | 2,609 |
| Insurance net premium income | 4,256 | 5,128 | 981 | 1,036 | 1,272 |
| Non-interest income | 15,088 | 18,462 | 2,543 | 3,280 | 3,881 |
| Total income (1) | 27,777 | 32,662 | 5,619 | 6,358 | 7,459 |
| Operating expenses (2) | (15,478) | (16,710) | (3,644) | (3,821) | (4,081) |
| Profit before insurance net claims and | |||||
| impairment losses | 12,299 | 15,952 | 1,975 | 2,537 | 3,378 |
| Insurance net claims | (2,968) | (4,783) | (529) | (734) | (1,182) |
| Operating profit before impairment | |||||
| losses (3) | 9,331 | 11,169 | 1,446 | 1,803 | 2,196 |
| Impairment losses (4) | (7,439) | (9,256) | (1,692) | (1,536) | (2,141) |
| Operating profit/(loss) (3) | 1,892 | 1,913 | (246) | 267 | 55 |
| Fair value of own debt | 1,846 | 174 | (370) | 2,357 | 582 |
| Asset Protection Scheme | (906) | (1,550) | (209) | (60) | (725) |
| Payment Protection Insurance costs | (850) | - | - | - | - |
| Sovereign debt impairment | (1,099) | - | (224) | (142) | - |
| Amortisation of purchased intangible | |||||
| assets | (222) | (369) | (53) | (69) | (96) |
| Integration and restructuring costs | (1,064) | (1,032) | (478) | (233) | (299) |
| Gain/(loss) on redemption of own debt | 255 | 553 | (1) | 1 | - |
| Strategic disposals | (104) | 171 | (82) | (49) | 502 |
| Bank levy | (300) | - | (300) | - | - |
| Write-down of goodwill and other | |||||
| intangible assets | (11) | (10) | (11) | - | (10) |
| Other items | (203) | (249) | (2) | (68) | (17) |
| (Loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| Tax (charge)/credit | (1,250) | (634) | 186 | (791) | 3 |
| (Loss)/profit from continuing operations | (2,016) | (1,033) | (1,790) | 1,213 | (5) |
| Profit/(loss) from discontinued operations, | |||||
| net of tax | 47 | (633) | 10 | 6 | 55 |
| (Loss)/profit for the period | (1,969) | (1,666) | (1,780) | 1,219 | 50 |
| Non-controlling interests | (28) | 665 | (18) | 7 | (38) |
| Preference share and other dividends | - | (124) | - | - | - |
| (Loss)/profit attributable to ordinary | |||||
| and B shareholders | (1,997) | (1,125) | (1,798) | 1,226 | 12 |
For definitions of the notes refer to page 7.
| 31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Loans and advances to banks (1) | 43,870 | 52,602 | 57,911 |
| Loans and advances to customers (1) | 454,112 | 485,573 | 502,748 |
| Reverse repurchase agreements and stock borrowing | 100,934 | 102,259 | 95,119 |
| Debt securities and equity shares | 224,263 | 244,545 | 239,678 |
| Other assets | 154,070 | 150,405 | 131,043 |
| Funded assets | 977,249 | 1,035,384 | 1,026,499 |
| Derivatives | 529,618 | 572,344 | 427,077 |
| Total assets | 1,506,867 | 1,607,728 | 1,453,576 |
| Bank deposits (2) | 69,113 | 78,370 | 66,051 |
| Customer deposits (2) | 414,143 | 433,660 | 428,599 |
| Repurchase agreements and stock lending | 128,503 | 131,918 | 114,833 |
| Settlement balances and short positions | 48,516 | 66,478 | 54,109 |
| Subordinated liabilities | 26,319 | 26,275 | 27,053 |
| Other liabilities | 220,237 | 230,361 | 262,113 |
| Funded liabilities | 906,831 | 967,062 | 952,758 |
| Derivatives | 523,983 | 561,790 | 423,967 |
| Total liabilities | 1,430,814 | 1,528,852 | 1,376,725 |
| Owners' equity | 74,819 | 77,443 | 75,132 |
| Non-controlling interests | 1,234 | 1,433 | 1,719 |
| Total liabilities and equity | 1,506,867 | 1,607,728 | 1,453,576 |
| Memo: Tangible equity (3) | 55,217 | 57,955 | 55,940 |
Notes:
(1) Excluding reverse repurchase agreements and stock borrowing.
(2) Excluding repurchase agreements and stock lending.
(3) Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
| Year ended Quarter ended |
||||||
|---|---|---|---|---|---|---|
| Net interest income | 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
| Net interest income (1) | 12,690 | 13,838 | 3,082 | 3,074 | 3,365 | |
| Average interest-earning assets | 662,222 | 689,958 | 664,613 | 663,956 | 661,380 | |
| Net interest margin - Group - Core |
1.92% | 2.01% | 1.84% | 1.84% | 2.02% | |
| - Retail & Commercial (2) - Global Banking & Markets |
3.21% 0.73% |
3.14% 1.05% |
3.17% 0.76% |
3.19% 0.71% |
3.21% 0.93% |
|
| - Non-Core | 0.64% | 1.16% | 0.31% | 0.43% | 1.09% |
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, Global Transaction Services, Ulster Bank and US Retail & Commercial divisions.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| Non-interest income | 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
| Net fees and commissions Income from trading activities Other operating income |
4,924 3,381 2,527 |
5,983 6,138 1,213 |
1,017 140 405 |
1,148 547 549 |
1,604 979 26 |
| Non-interest income (excluding insurance net premium income) Insurance net premium income |
10,832 4,256 |
13,334 5,128 |
1,562 981 |
2,244 1,036 |
2,609 1,272 |
| Total non-interest income | 15,088 | 18,462 | 2,543 | 3,280 | 3,881 |
• More challenging market conditions reduced trading and fee income in GBM.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| Operating expenses | £m | £m | £m | £m | £m | |
| Staff expenses | 8,163 | 8,956 | 1,781 | 1,963 | 2,059 | |
| Premises and equipment | 2,278 | 2,276 | 575 | 584 | 636 | |
| Other | 3,395 | 3,716 | 838 | 858 | 938 | |
| Administrative expenses | 13,836 | 14,948 | 3,194 | 3,405 | 3,633 | |
| Depreciation and amortisation | 1,642 | 1,762 | 450 | 416 | 448 | |
| Operating expenses | 15,478 | 16,710 | 3,644 | 3,821 | 4,081 | |
| General insurance | 2,968 | 4,698 | 529 | 734 | 1,151 | |
| Bancassurance | - | 85 | - | - | 31 | |
| Insurance net claims | 2,968 | 4,783 | 529 | 734 | 1,182 | |
| Staff costs as a % of total income | 29% | 27% | 32% | 31% | 28% |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Impairment losses | £m | £m | £m | £m | £m |
| Loan impairment losses | 7,241 | 9,144 | 1,654 | 1,452 | 2,155 |
| Securities impairment losses | 198 | 112 | 38 | 84 | (14) |
| Group impairment losses | 7,439 | 9,256 | 1,692 | 1,536 | 2,141 |
| Loan impairment losses | |||||
| - latent | (545) | (121) | (190) | (60) | (116) |
| - collectively assessed | 2,591 | 3,070 | 591 | 689 | 729 |
| - individually assessed | 5,195 | 6,208 | 1,253 | 823 | 1,555 |
| Customer loans | 7,241 | 9,157 | 1,654 | 1,452 | 2,168 |
| Bank loans | - | (13) | - | - | (13) |
| Loan impairment losses | 7,241 | 9,144 | 1,654 | 1,452 | 2,155 |
| Core | 3,403 | 3,737 | 924 | 817 | 912 |
| Non-Core | 3,838 | 5,407 | 730 | 635 | 1,243 |
| Group | 7,241 | 9,144 | 1,654 | 1,452 | 2,155 |
| Customer loan impairment charge as | |||||
| a % of gross loans and advances (1) | |||||
| Group | 1.5% | 1.7% | 1.3% | 1.1% | 1.6% |
| Core | 0.8% | 0.9% | 0.9% | 0.8% | 0.9% |
| Non-Core | 4.8% | 4.9% | 3.7% | 2.8% | 4.4% |
Note:
(1) Customer loan impairment charge as a percentage of gross customer loans and advances excluding reverse repurchase agreements and including disposal groups.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| One-off and other items | £m | £m | £m | £m | £m |
| Fair value of own debt* | 1,846 | 174 | (370) | 2,357 | 582 |
| Asset Protection Scheme | (906) | (1,550) | (209) | (60) | (725) |
| Payment Protection Insurance costs | (850) | - | - | - | - |
| Sovereign debt impairment (1) | (1,099) | - | (224) | (142) | - |
| Amortisation of purchased intangible assets | (222) | (369) | (53) | (69) | (96) |
| Integration and restructuring costs | (1,064) | (1,032) | (478) | (233) | (299) |
| Gain/(loss) on redemption of own debt | 255 | 553 | (1) | 1 | - |
| Strategic disposals** | (104) | 171 | (82) | (49) | 502 |
| Bank levy | (300) | - | (300) | - | - |
| Write-down of goodwill and other | |||||
| intangible assets | (11) | (10) | (11) | - | (10) |
| Other | |||||
| - Bonus tax | (27) | (99) | - | (5) | (15) |
| - Interest rate hedge adjustments on | |||||
| impaired available-for-sale Greek | |||||
| government bonds | (169) | - | - | (60) | - |
| - RFS Holdings minority interest | (7) | (150) | (2) | (3) | (2) |
| (2,658) | (2,312) | (1,730) | 1,737 | (63) | |
| * Fair value of own debt impact: | |||||
| Income from trading activities | 225 | (75) | (170) | 470 | 110 |
| Other operating income | 1,621 | 249 | (200) | 1,887 | 472 |
| Fair value of own debt (FVOD) | 1,846 | 174 | (370) | 2,357 | 582 |
| **Strategic disposals | |||||
| (Loss)/gain on sale and provision for loss | |||||
| on disposal of investments in: | |||||
| - RBS Asset Management's investment | |||||
| strategies business | - | 80 | - | - | - |
| - Global Merchant Services | 47 | 837 | - | - | 837 |
| - Life assurance business | - | (231) | - | - | - |
| - Non-Core project finance assets | - | (221) | - | - | (221) |
| - Goodwill relating to UK branch-based | |||||
| businesses | (80) | - | (80) | - | - |
| - Other | (71) | (294) | (2) | (49) | (114) |
| (104) | 171 | (82) | (49) | 502 |
Note:
(1) The Group holds Greek government bonds with a notional amount of £1.45 billion. In the second quarter of 2011, the Group recorded an impairment loss of £733 million in respect of these bonds as a result of Greece's continuing fiscal difficulties. This charge (c.50% of notional) wrote the bonds down to their market price as at 30 June 2011. In the third quarter of 2011, an additional impairment loss of £142 million was recorded to write the bonds down to their market price as at 30 September 2011 (c.37% of notional). In the fourth quarter of 2011, an additional impairment loss of £224 million was recorded to write the bonds down to their market price as at 31 December 2011 (c.21% of notional).
The Finance Act 2011 introduced an annual bank levy in the UK. The levy is collected through the existing quarterly Corporation Tax collection mechanism starting with payment dates on or after 19 July 2011.
The levy is based on the total chargeable equity and liabilities as reported in the balance sheet at the end of a chargeable period. The first chargeable period for the Group was the year ended 31 December 2011. In determining the chargeable equity and liabilities the following amounts are excluded: adjusted Tier 1 capital; certain "protected deposits" (for example those protected under the Financial Services Compensation Scheme); liabilities that arise from certain insurance business within banking groups; liabilities in respect of currency notes in circulation; Financial Services Compensation Scheme liabilities; liabilities representing segregated client money; and deferred tax liabilities, current tax liabilities, liabilities in respect of the levy, revaluation of property liabilities, liabilities representing the revaluation of business premises and defined benefit retirement liabilities. It is also permitted in specified circumstances to reduce certain liabilities: by netting them against certain assets; offsetting assets on the relevant balance sheets that would qualify as high quality liquid assets (in accordance with the FSA definition); and repo liabilities secured against sovereign and supranational debt.
The levy will be set at a rate of 0.088 per cent from 2012. Three different rates applied during 2011, these average to 0.075 per cent. Certain liabilities are subject to only a half rate, namely any deposits not otherwise excluded, (except for those from financial institutions and financial traders) and liabilities with a maturity greater than one year at the balance sheet date. The levy is not charged on the first £20 billion of chargeable liabilities. The cost of the levy to the Group for 2011 is £300 million. As the Group continues to target a reduction in wholesale funding, the cost should decline over time absent further rate increases.
| Capital resources and ratios | 31 December 2011 |
30 September 2011 |
31 December 2010 |
|---|---|---|---|
| Core Tier 1 capital | £46bn | £48bn | £50bn |
| Tier 1 capital | £57bn | £58bn | £60bn |
| Total capital | £61bn | £62bn | £65bn |
| Risk-weighted assets | |||
| - gross | £508bn | £512bn | £571bn |
| - benefit of the Asset Protection Scheme | (£69bn) | (£89bn) | (£106bn) |
| Risk-weighted assets | £439bn | £423bn | £465bn |
| Core Tier 1 ratio (1) | 10.6% | 11.3% | 10.7% |
| Tier 1 ratio | 13.0% | 13.8% | 12.9% |
| Total capital ratio | 13.8% | 14.7% | 14.0% |
Note:
(1) The benefit of APS in Core Tier 1 ratio is 0.9% at 31 December 2011 (30 September 2011 - 1.3%; 31 December 2010 - 1.2%).
| Balance sheet | 31 December 2011 |
30 September 2011 |
31 December 2010 |
|---|---|---|---|
| Funded balance sheet (1) | £977bn | £1,035bn | £1,026bn |
| Total assets | £1,507bn | £1,608bn | £1,454bn |
| Loans and advances to customers (2) | £474bn | £487bn | £508bn |
| Customer deposits (3) | £437bn | £435bn | £431bn |
| Loan:deposit ratio - Core (4) | 94% | 95% | 96% |
| Loan:deposit ratio - Group (4) | 108% | 112% | 118% |
Notes:
Further discussion of the Group's liquidity and funding position is included on pages 136 to 145.
The operating profit/(loss)(1) of each division is shown below.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Operating profit/(loss) before | ||||||
| impairment losses by division | ||||||
| UK Retail | 2,779 | 2,532 | 652 | 694 | 780 | |
| UK Corporate | 2,199 | 2,224 | 509 | 529 | 552 | |
| Wealth | 346 | 322 | 109 | 75 | 93 | |
| Global Transaction Services | 909 | 1,097 | 244 | 240 | 270 | |
| Ulster Bank | 360 | 400 | 88 | 108 | 105 | |
| US Retail & Commercial | 804 | 823 | 222 | 199 | 169 | |
| Retail & Commercial | 7,397 | 7,398 | 1,824 | 1,845 | 1,969 | |
| Global Banking & Markets | 1,610 | 3,515 | (27) | 80 | 522 | |
| RBS Insurance | 454 | (295) | 125 | 123 | (9) | |
| Central items | 154 | 580 | 81 | 70 | 119 | |
| Core | 9,615 | 11,198 | 2,003 | 2,118 | 2,601 | |
| Non-Core | (284) | (29) | (557) | (315) | (405) | |
| Group operating profit before | ||||||
| impairment losses | 9,331 | 11,169 | 1,446 | 1,803 | 2,196 | |
| Impairment losses/(recoveries) | ||||||
| by division | ||||||
| UK Retail | 788 | 1,160 | 191 | 195 | 222 | |
| UK Corporate | 785 | 761 | 234 | 228 | 219 | |
| Wealth | 25 | 18 | 13 | 4 | 6 | |
| Global Transaction Services | 166 | 9 | 47 | 45 | 3 | |
| Ulster Bank | 1,384 | 1,161 | 327 | 327 | 376 | |
| US Retail & Commercial | 325 | 517 | 65 | 84 | 105 | |
| Retail & Commercial | 3,473 | 3,626 | 877 | 883 | 931 | |
| Global Banking & Markets | 49 | 151 | 68 | (32) | (5) | |
| Central items | (2) | 3 | (4) | 3 | 4 | |
| Core | 3,520 | 3,780 | 941 | 854 | 930 | |
| Non-Core | 3,919 | 5,476 | 751 | 682 | 1,211 | |
| Group impairment losses | 7,439 | 9,256 | 1,692 | 1,536 | 2,141 |
Note:
(1) Operating profit/(loss) before movements in the fair value of own debt, 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, bank levy, write-down of goodwill and other intangible assets, interest rate hedge adjustments on impaired available-for-sale Greek government bonds and RFS Holdings minority interest.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Operating profit/(loss) by division | ||||||
| UK Retail | 1,991 | 1,372 | 461 | 499 | 558 | |
| UK Corporate | 1,414 | 1,463 | 275 | 301 | 333 | |
| Wealth | 321 | 304 | 96 | 71 | 87 | |
| Global Transaction Services | 743 | 1,088 | 197 | 195 | 267 | |
| Ulster Bank | (1,024) | (761) | (239) | (219) | (271) | |
| US Retail & Commercial | 479 | 306 | 157 | 115 | 64 | |
| Retail & Commercial | 3,924 | 3,772 | 947 | 962 | 1,038 | |
| Global Banking & Markets | 1,561 | 3,364 | (95) | 112 | 527 | |
| RBS Insurance | 454 | (295) | 125 | 123 | (9) | |
| Central items | 156 | 577 | 85 | 67 | 115 | |
| Core | 6,095 | 7,418 | 1,062 | 1,264 | 1,671 | |
| Non-Core | (4,203) | (5,505) | (1,308) | (997) | (1,616) | |
| Group operating profit/(loss) | 1,892 | 1,913 | (246) | 267 | 55 |
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| % | % | % | % | % | ||
| Net interest margin by division | ||||||
| UK Retail | 3.92 | 3.91 | 3.75 | 3.90 | 4.05 | |
| UK Corporate | 2.58 | 2.51 | 2.55 | 2.48 | 2.55 | |
| Wealth | 3.59 | 3.37 | 3.86 | 3.46 | 3.29 | |
| Global Transaction Services | 5.52 | 6.73 | 5.29 | 5.33 | 6.14 | |
| Ulster Bank | 1.77 | 1.84 | 1.81 | 1.85 | 1.77 | |
| US Retail & Commercial | 3.06 | 2.85 | 3.03 | 3.09 | 3.00 | |
| Retail & Commercial | 3.21 | 3.14 | 3.17 | 3.19 | 3.21 | |
| Global Banking & Markets | 0.73 | 1.05 | 0.76 | 0.71 | 0.93 | |
| Non-Core | 0.64 | 1.16 | 0.31 | 0.43 | 1.09 | |
| Group net interest margin | 1.92 | 2.01 | 1.84 | 1.84 | 2.02 |
| 31 December 2011 £bn |
30 September 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Risk-weighted assets by division | |||||
| UK Retail | 48.4 | 48.7 | (1%) | 48.8 | (1%) |
| UK Corporate | 76.1 | 75.7 | 1% | 81.4 | (7%) |
| Wealth | 12.9 | 13.0 | (1%) | 12.5 | 3% |
| Global Transaction Services | 17.3 | 18.6 | (7%) | 18.3 | (5%) |
| Ulster Bank | 36.3 | 34.4 | 6% | 31.6 | 15% |
| US Retail & Commercial | 58.8 | 56.5 | 4% | 57.0 | 3% |
| Retail & Commercial | 249.8 | 246.9 | 1% | 249.6 | - |
| Global Banking & Markets | 151.1 | 134.3 | 13% | 146.9 | 3% |
| Other | 10.8 | 9.8 | 10% | 18.0 | (40%) |
| Core | 411.7 | 391.0 | 5% | 414.5 | (1%) |
| Non-Core | 93.3 | 117.9 | (21%) | 153.7 | (39%) |
| Group before benefit of Asset Protection Scheme | 505.0 | 508.9 | (1%) | 568.2 | (11%) |
| Benefit of Asset Protection Scheme | (69.1) | (88.6) | (22%) | (105.6) | (35%) |
| Group before RFS Holdings | |||||
| minority interest | 435.9 | 420.3 | 4% | 462.6 | (6%) |
| RFS Holdings minority interest | 3.1 | 3.0 | 3% | 2.9 | 7% |
| Group | 439.0 | 423.3 | 4% | 465.5 | (6%) |
For the purposes of the divisional return on equity ratios, notional equity has been calculated as a percentage of the monthly average of divisional risk-weighted assets, adjusted for capital deductions. Currently, 9% has been applied to the Retail & Commercial divisions and 10% to Global Banking & Markets. However, these will be subject to modification as the final Basel III rules and ICB recommendations are considered.
| Employee numbers by division (full time equivalents in continuing operations rounded to the nearest hundred) |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|---|---|---|---|
| UK Retail | 27,700 | 27,900 | 28,200 |
| UK Corporate | 13,500 | 13,600 | 13,100 |
| Wealth | 5,700 | 5,600 | 5,200 |
| Global Transaction Services | 2,600 | 2,700 | 2,600 |
| Ulster Bank | 4,200 | 4,400 | 4,200 |
| US Retail & Commercial | 15,200 | 15,300 | 15,700 |
| Retail & Commercial | 68,900 | 69,500 | 69,000 |
| Global Banking & Markets | 17,000 | 18,900 | 18,700 |
| RBS Insurance | 14,900 | 15,200 | 14,500 |
| Group Centre | 6,200 | 6,100 | 4,700 |
| Core | 107,000 | 109,700 | 106,900 |
| Non-Core | 4,700 | 5,300 | 6,900 |
| 111,700 | 115,000 | 113,800 | |
| Business Services | 34,000 | 34,200 | 34,400 |
| Integration and restructuring | 1,100 | 1,100 | 300 |
| Group | 146,800 | 150,300 | 148,500 |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 4,272 | 4,078 | 1,036 | 1,074 | 1,088 |
| Net fees and commissions | 1,066 | 1,100 | 242 | 259 | 316 |
| Other non-interest income (net of insurance | |||||
| claims) | 140 | 237 | 35 | 33 | 55 |
| Non-interest income | 1,206 | 1,337 | 277 | 292 | 371 |
| Total income | 5,478 | 5,415 | 1,313 | 1,366 | 1,459 |
| Direct expenses | |||||
| - staff | (839) | (889) | (200) | (206) | (208) |
| - other | (437) | (480) | (116) | (102) | (71) |
| Indirect expenses | (1,423) | (1,514) | (345) | (364) | (400) |
| (2,699) | (2,883) | (661) | (672) | (679) | |
| Operating profit before impairment losses | 2,779 | 2,532 | 652 | 694 | 780 |
| Impairment losses | (788) | (1,160) | (191) | (195) | (222) |
| Operating profit | 1,991 | 1,372 | 461 | 499 | 558 |
| Analysis of income by product | |||||
| Personal advances | 1,089 | 993 | 276 | 260 | 275 |
| Personal deposits | 961 | 1,102 | 214 | 236 | 271 |
| Mortgages | 2,277 | 1,984 | 577 | 576 | 557 |
| Cards Other, including bancassurance |
950 201 |
962 374 |
238 8 |
231 63 |
251 105 |
| Total income | 5,478 | 5,415 | 1,313 | 1,366 | 1,459 |
| Analysis of impairments by sector | |||||
| Mortgages | 182 | 177 | 32 | 34 | 30 |
| Personal | 437 | 682 | 116 | 120 | 131 |
| Cards | 169 | 301 | 43 | 41 | 61 |
| Total impairment losses | 788 | 1,160 | 191 | 195 | 222 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances | |||||
| (excluding reverse repurchase | |||||
| agreements) by sector | |||||
| Mortgages | 0.2% | 0.2% | 0.1% | 0.1% | 0.1% |
| Personal | 4.3% | 5.8% | 4.6% | 4.7% | 4.5% |
| Cards | 3.0% | 4.9% | 3.0% | 2.9% | 4.0% |
| Total | 0.7% | 1.1% | 0.7% | 0.7% | 0.8% |
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
||
| Performance ratios | ||||||
| Return on equity (1) | 26.4% | 18.0% | 25.1% | 26.7% | 25.2% | |
| Net interest margin | 3.92% | 3.91% | 3.75% | 3.90% | 4.05% | |
| Cost:income ratio | 49% | 52% | 50% | 49% | 46% | |
| Adjusted cost:income ratio (2) | 49% | 53% | 50% | 49% | 47% | |
| 31 December 2011 |
30 September 2011 |
31 December 2010 |
||||
| £bn | £bn | Change | £bn | Change | ||
| Capital and balance sheet | ||||||
| Loans and advances to customers (gross) (3) | ||||||
| - mortgages | 95.0 | 94.2 | 1% | 90.6 | 5% | |
| - personal | 10.1 | 10.3 | (2%) | 11.7 | (14%) | |
| - cards | 5.7 | 5.6 | 2% | 6.1 | (7%) | |
| 110.8 | 110.1 | 1% | 108.4 | 2% | ||
| Customer deposits (excluding | ||||||
| bancassurance) (3) | 101.9 | 98.6 | 3% | 96.1 | 6% | |
| Assets under management (excluding | ||||||
| deposits) | 5.5 | 5.6 | (2%) | 5.7 | (4%) | |
| Risk elements in lending (3) | 4.6 | 4.7 | (2%) | 4.6 | - | |
| Loan:deposit ratio (excluding repos) | 106% | 109% | (300bp) | 110% | (400bp) | |
| Risk-weighted assets | 48.4 | 48.7 | (1%) | 48.8 | (1%) |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2) Adjusted cost:income ratio is based on total income after netting insurance claims and operating expenses.
(3) Includes disposal groups: loans and advances to customers £7.3 billion; risk elements in lending £0.5 billion; customer deposits £8.8 billion.
In 2010, UK Retail set out an aspiration to become the UK's most helpful bank and launched the Customer Charter. In 2011, we made good progress on our Customer Charter commitments and the roll-out of innovation that actually helps customers. In December 2011, UK Retail refined its staff incentive scheme to further strengthen the role of customer service and to help build long lasting customer relationships.
Progress against the Customer Charter commitments is independently assessed and has shown encouraging results. By the end of 2011, we achieved the goal of serving 80% of our customers in less than 5 minutes in our busiest branches. Branch opening hours have also been extended and standardised, which means that our branches are now open for an additional 5,000 hours per week at times our customers have told us suit them.
Innovation has supported the delivery of Helpful Banking by focusing on solutions that make it easier for customers to bank with RBS and NatWest. An important example has been giving customers access to 24 hour emergency cash from NatWest and RBS ATMs when their cards are lost or stolen. We also updated our market-leading iPhone application and by the end of the year 1 million customers had downloaded the application. With successful apps also launched for iPad, Android and Blackberry, RBS is now the leading mobile bank in the UK.
• UK Retail achieved strong deposit growth of £3.3 billion or 3% in the quarter, with competitive fixed rate bond and ISA offerings helping to deliver strong growth in savings balances. With interest rates falling and declining consumer activity, this strong deposit-gathering performance was balanced by narrowing liability margins and lower fee income, resulting in a 4% drop in income and operating profit of £461 million, £38 million lower than in the previous quarter.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Income statement | ||||||
| Net interest income | 2,585 | 2,572 | 634 | 621 | 653 | |
| Net fees and commissions | 948 | 952 | 229 | 244 | 251 | |
| Other non-interest income | 327 | 371 | 62 | 83 | 79 | |
| Non-interest income | 1,275 | 1,323 | 291 | 327 | 330 | |
| Total income | 3,860 | 3,895 | 925 | 948 | 983 | |
| Direct expenses | ||||||
| - staff | (780) | (778) | (195) | (184) | (198) | |
| - other | (335) | (359) | (86) | (88) | (93) | |
| Indirect expenses | (546) | (534) | (135) | (147) | (140) | |
| (1,661) | (1,671) | (416) | (419) | (431) | ||
| Operating profit before impairment losses | 2,199 | 2,224 | 509 | 529 | 552 | |
| Impairment losses | (785) | (761) | (234) | (228) | (219) | |
| Operating profit | 1,414 | 1,463 | 275 | 301 | 333 | |
| Analysis of income by business | ||||||
| Corporate and commercial lending | 2,676 | 2,598 | 634 | 647 | 657 | |
| Asset and invoice finance | 660 | 617 | 169 | 176 | 166 | |
| Corporate deposits | 683 | 728 | 170 | 172 | 184 | |
| Other | (159) | (48) | (48) | (47) | (24) | |
| Total income | 3,860 | 3,895 | 925 | 948 | 983 | |
| Analysis of impairments by sector | ||||||
| Banks and financial institutions | 20 | 20 | (2) | 6 | 12 | |
| Hotels and restaurants | 59 | 52 | 16 | 22 | 18 | |
| Housebuilding and construction | 103 | 131 | 27 | 29 | 47 | |
| Manufacturing | 34 | 1 | 13 | 9 | (9) | |
| Other | 163 | 127 | 37 | 36 | (12) | |
| Private sector education, health, social work, | ||||||
| recreational and community services | 113 | 30 | 81 | 20 | 21 | |
| Property | 170 | 245 | 19 | 82 | 84 | |
| Wholesale and retail trade, repairs | 85 | 91 | 29 | 24 | 31 | |
| Asset and invoice finance | 38 | 64 | 14 | - | 27 | |
| Total impairment losses | 785 | 761 | 234 | 228 | 219 |
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
||
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) by sector |
||||||
| Banks and financial institutions | 0.4% | 0.3% | (0.1%) | 0.4% | 0.8% | |
| Hotels and restaurants | 1.0% | 0.8% | 1.0% | 1.4% | 1.1% | |
| Housebuilding and construction | 2.6% | 2.9% | 2.8% | 2.9% | 4.2% | |
| Manufacturing | 0.7% | - | 1.1% | 0.8% | (0.7%) | |
| Other | 0.5% | 0.4% | 0.5% | 0.4% | (0.2%) | |
| Private sector education, health, social work, | ||||||
| recreational and community services | 1.3% | 0.3% | 3.7% | 0.9% | 0.9% | |
| Property | 0.6% | 0.8% | 0.3% | 1.1% | 1.1% | |
| Wholesale and retail trade, repairs | 1.0% | 0.9% | 1.4% | 1.1% | 1.3% | |
| Asset and invoice finance | 0.4% | 0.6% | 0.5% | - | 1.1% | |
| Total | 0.7% | 0.7% | 0.9% | 0.8% | 0.8% |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Performance ratios | |||||
| Return on equity (1) | 12.4% | 12.1% | 10.2% | 11.1% | 11.8% |
| Net interest margin | 2.58% | 2.51% | 2.55% | 2.48% | 2.55% |
| Cost:income ratio | 43% | 43% | 45% | 44% | 44% |
| 31 December | 30 September | 31 December | ||||
|---|---|---|---|---|---|---|
| 2011 £bn |
2011 £bn |
Change | 2010 £bn |
Change | ||
| Capital and balance sheet | ||||||
| Total third party assets | 111.8 | 112.7 | (1%) | 114.6 | (2%) | |
| Loans and advances to customers (gross) (2) | ||||||
| - banks and financial institutions | 5.7 | 5.7 | - | 6.1 | (7%) | |
| - hotels and restaurants | 6.1 | 6.3 | (3%) | 6.8 | (10%) | |
| - housebuilding and construction | 3.9 | 4.0 | (3%) | 4.5 | (13%) | |
| - manufacturing | 4.6 | 4.7 | (2%) | 5.3 | (13%) | |
| - other | 32.6 | 32.6 | - | 31.0 | 5% | |
| - private sector education, health, social | ||||||
| work, recreational and community services | 8.7 | 8.7 | - | 9.0 | (3%) | |
| - property | 28.2 | 29.0 | (3%) | 29.5 | (4%) | |
| - wholesale and retail trade, repairs | 8.5 | 8.9 | (4%) | 9.6 | (11%) | |
| - asset and invoice finance | 10.4 | 10.1 | 3% | 9.9 | 5% | |
| 108.7 | 110.0 | (1%) | 111.7 | (3%) | ||
| Customer deposits (2) | 100.9 | 98.9 | 2% | 100.0 | 1% | |
| Risk elements in lending (2) | 5.0 | 4.9 | 2% | 4.0 | 25% | |
| Loan:deposit ratio (excluding repos) | 106% | 109% | (300bp) | 110% | (400bp) | |
| Risk-weighted assets | 76.1 | 75.7 | 1% | 81.4 | (7%) |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2) Includes disposal groups: loans and advances to customers £12.2 billion; risk elements in lending £1.0 billion; customer deposits £21.8 billion.
In 2011, UK Corporate focused on supporting its customers through challenging economic times.
As a result of over 5,000 hours of customer research, UK Corporate launched the 'Ahead for Business' promise to its small and medium-sized enterprise (SME) customers.
To deliver on this, the division launched a number of initiatives to improve the service it offers to customers. For example, the 'Working with You' initiative, has seen over 4,600 visits to customer businesses since its launch in Q2 2011. Additionally, following the launch of the relationship manager accreditation programme, also in Q2 2011, almost all relationship managers have gained full accreditation in the initial phase.
UK Corporate continued to support new and existing businesses during 2011:
The division also took measures to reduce the risk retained in the business allowing for quicker and more consistent decisions by simplifying the credit underwriting process and improving automated decision making.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
| Income statement Net interest income |
718 | 609 | 191 | 178 | 160 |
| Net fees and commissions Other non-interest income |
375 84 |
376 71 |
89 23 |
95 23 |
94 17 |
| Non-interest income | 459 | 447 | 112 | 118 | 111 |
| Total income | 1,177 | 1,056 | 303 | 296 | 271 |
| Direct expenses - staff - other Indirect expenses |
(413) (195) (223) |
(382) (142) (210) |
(96) (43) (55) |
(106) (57) (58) |
(96) (29) (53) |
| Operating profit before impairment losses Impairment losses |
(831) 346 (25) |
(734) 322 (18) |
(194) 109 (13) |
(221) 75 (4) |
(178) 93 (6) |
| Operating profit | 321 | 304 | 96 | 71 | 87 |
| Analysis of income Private banking Investments |
975 202 |
857 199 |
255 48 |
244 52 |
220 51 |
| Total income | 1,177 | 1,056 | 303 | 296 | 271 |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 18.7% | 18.9% | 22.1% | 16.3% | 21.0% |
| Net interest margin | 3.59% | 3.37% | 3.86% | 3.46% | 3.29% |
| Cost:income ratio | 71% | 70% | 64% | 75% | 66% |
| 31 December 2011 £bn |
30 September 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 8.3 | 8.3 | - | 7.8 | 6% |
| - personal | 6.9 | 7.2 | (4%) | 6.7 | 3% |
| - other | 1.7 | 1.5 | 13% | 1.6 | 6% |
| 16.9 | 17.0 | (1%) | 16.1 | 5% | |
| Customer deposits (2) | 38.2 | 37.4 | 2% | 37.1 | 3% |
| Assets under management (excluding | |||||
| deposits) (2) | 30.9 | 29.9 | 3% | 33.9 | (9%) |
| Risk elements in lending | 0.2 | 0.2 | - | 0.2 | - |
| Loan:deposit ratio (excluding repos) (2) | 44% | 45% | (100bp) | 43% | 100bp |
| Risk-weighted assets | 12.9 | 13.0 | (1%) | 12.5 | 3% |
Notes:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2) 31 December 2010 comparatives were revised in Q3 2011 to reflect the current reporting methodology.
2011 has been a significant year for the Coutts businesses from a strategic perspective. In Q1 2011, a new divisional strategy was defined with the execution of early changes already making an impact.
Key strategic changes in 2011 included:
Following the establishment of a single global brand in Q4 2011, focus turned to the reorganisation of key global functions such as marketing and product & services, as well as some local management structures. These reorganisations have realigned the division to maximise execution of the divisional strategy.
The execution plan for the strategy will continue into 2012 and position Wealth strongly against its peers.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 1,076 | 974 | 277 | 276 | 263 |
| Non-interest income | 1,175 | 1,587 | 296 | 300 | 375 |
| Total income | 2,251 | 2,561 | 573 | 576 | 638 |
| Direct expenses | |||||
| - staff | (375) | (411) | (95) | (89) | (105) |
| - other | (113) | (159) | (26) | (26) | (51) |
| Indirect expenses | (854) | (894) | (208) | (221) | (212) |
| (1,342) | (1,464) | (329) | (336) | (368) | |
| Operating profit before impairment losses | 909 | 1,097 | 244 | 240 | 270 |
| Impairment losses | (166) | (9) | (47) | (45) | (3) |
| Operating profit | 743 | 1,088 | 197 | 195 | 267 |
| Analysis of income by product | |||||
| Domestic cash management International cash management |
866 868 |
818 801 |
221 222 |
216 220 |
207 223 |
| Trade finance | 318 | 309 | 77 | 90 | 81 |
| Merchant acquiring | 16 | 451 | 5 | 4 | 80 |
| Commercial cards | 183 | 182 | 48 | 46 | 47 |
| Total income | 2,251 | 2,561 | 573 | 576 | 638 |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 30.4% | 42.8% | 33.0% | 31.0% | 42.7% |
| Net interest margin | 5.52% | 6.73% | 5.29% | 5.33% | 6.14% |
| Cost:income ratio | 60% | 57% | 57% | 58% | 58% |
| 31 December 2011 £bn |
30 September 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 25.9 | 29.9 | (13%) | 25.2 | 3% |
| Loans and advances | 15.8 | 19.5 | (19%) | 14.4 | 10% |
| Customer deposits | 71.7 | 71.4 | - | 69.9 | 3% |
| Risk elements in lending | 0.2 | 0.2 | - | 0.1 | 100% |
| Loan:deposit ratio (excluding repos) | 22% | 28% | (600bp) | 21% | 100bp |
| Risk-weighted assets | 17.3 | 18.6 | (7%) | 18.3 | (5%) |
Note:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
In Q4 2011, Global Transaction Services (GTS) maintained operating profit levels with continued focus on cost management and an improved funding contribution.
GTS recognises the important role international trade plays in a strong global economy and throughout 2011 the division supported UK companies, both in the UK and overseas, to do more business internationally. This support included delivering a series of UK Government-backed 'Doing Business in Asia' events.
During the year, GTS invested in improving existing products and services and also in developing new ones. To help corporate treasurers manage their global positions, the division launched a global Liquidity Solutions Portal, giving its customers a view of their operational and investment balances and rates all in one place, improving transparency, and enabling them to execute and redeem investments effectively.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Income statement | ||||||
| Net interest income | 696 | 761 | 171 | 185 | 187 | |
| Net fees and commissions | 142 | 156 | 28 | 41 | 40 | |
| Other non-interest income | 69 | 58 | 21 | 19 | 16 | |
| Non-interest income | 211 | 214 | 49 | 60 | 56 | |
| Total income | 907 | 975 | 220 | 245 | 243 | |
| Direct expenses | ||||||
| - staff | (221) | (237) | (53) | (55) | (57) | |
| - other | (67) | (74) | (15) | (17) | (17) | |
| Indirect expenses | (259) | (264) | (64) | (65) | (64) | |
| (547) | (575) | (132) | (137) | (138) | ||
| Operating profit before impairment losses | 360 | 400 | 88 | 108 | 105 | |
| Impairment losses | (1,384) | (1,161) | (327) | (327) | (376) | |
| Operating loss | (1,024) | (761) | (239) | (219) | (271) | |
| Analysis of income by business | ||||||
| Corporate | 435 | 521 | 98 | 107 | 122 | |
| Retail | 428 | 465 | 101 | 116 | 124 | |
| Other | 44 | (11) | 21 | 22 | (3) | |
| Total income | 907 | 975 | 220 | 245 | 243 | |
| Analysis of impairments by sector | ||||||
| Mortgages | 570 | 294 | 133 | 126 | 159 | |
| Corporate | ||||||
| - property | 324 | 375 | 83 | 78 | 69 | |
| - other corporate | 434 | 444 | 100 | 111 | 135 | |
| Other lending | 56 | 48 | 11 | 12 | 13 | |
| Total impairment losses | 1,384 | 1,161 | 327 | 327 | 376 | |
| Loan impairment charge as % of gross | ||||||
| customer loans and advances | ||||||
| (excluding reverse repurchase | ||||||
| agreements) by sector | ||||||
| Mortgages | 2.8% | 1.4% | 2.7% | 2.4% | 3.0% | |
| Corporate | ||||||
| - property | 6.8% | 6.9% | 6.9% | 6.1% | 5.1% | |
| - other corporate | 5.6% | 4.9% | 5.2% | 5.4% | 6.0% | |
| Other lending | 3.5% | 3.7% | 2.8% | 3.2% | 4.0% | |
| Total | 4.1% | 3.1% | 3.8% | 3.7% | 4.1% | |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | (26.1%) | (21.0%) | (23.3%) | (21.2%) | (29.8%) |
| Net interest margin | 1.77% | 1.84% | 1.81% | 1.85% | 1.77% |
| Cost:income ratio | 60% | 59% | 60% | 56% | 57% |
| 31 December | 30 September | 31 December | |||
| 2011 | 2011 | 2010 | |||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 20.0 | 20.7 | (3%) | 21.2 | (6%) |
| - corporate | |||||
| - property | 4.8 | 5.1 | (6%) | 5.4 | (11%) |
| - other corporate | 7.7 | 8.2 | (6%) | 9.0 | (14%) |
| - other lending | 1.6 | 1.5 | 7% | 1.3 | 23% |
| 34.1 | 35.5 | (4%) | 36.9 | (8%) | |
| Customer deposits | 21.8 | 23.4 | (7%) | 23.1 | (6%) |
| Risk elements in lending | |||||
| - mortgages | 2.2 | 2.1 | 5% | 1.5 | 47% |
| - corporate | |||||
| - property | 1.3 | 1.5 | (13%) | 0.7 | 86% |
| - other corporate | 1.8 | 1.8 | - | 1.2 | 50% |
| - other lending | 0.2 | 0.2 | - | 0.2 | - |
| Total risk elements in lending | 5.5 | 5.6 | (2%) | 3.6 | 53% |
| Loan:deposit ratio (excluding repos) | 143% | 141% | 200bp | 152% | (900bp) |
| Risk-weighted assets | 36.3 | 34.4 | 6% | 31.6 | 15% |
| Spot exchange rate - €/£ | 1.196 | 1.162 | 1.160 |
Note:
(1) Divisional return on equity is based on divisional operating loss after tax divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
2011 was another difficult year for the business due to the continued challenging economic environment. This was reflected in the financial performance, with ongoing pressure on income and a further increase in impairment losses.
Ulster Bank continues to make progress on its customer commitments and deposit gathering strategy, while cost management and targeting growth in areas that leverage competitive advantage, remain priorities. In 2011, customer numbers increased by 2%, representing a strong performance in current and savings accounts, driven by the enhanced customer service highlighted by our 'Help for what matters' programme.
Following a review of the cost base and operating model, 950 proposed job losses were announced in January 2012, the majority of which are expected by the end of 2012. This decision is a necessary part of the changes required to build a stronger sustainable business for the future.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 1,896 | 1,917 | 493 | 483 | 467 |
| Net fees and commissions | 709 | 729 | 164 | 190 | 169 |
| Other non-interest income | 295 | 300 | 94 | 67 | 62 |
| Non-interest income | 1,004 | 1,029 | 258 | 257 | 231 |
| Total income | 2,900 | 2,946 | 751 | 740 | 698 |
| Direct expenses | |||||
| - staff | (819) | (784) | (211) | (206) | (204) |
| - other | (544) | (569) | (133) | (152) | (124) |
| Indirect expenses | (733) | (770) | (185) | (183) | (201) |
| (2,096) | (2,123) | (529) | (541) | (529) | |
| Operating profit before impairment losses | 804 | 823 | 222 | 199 | 169 |
| Impairment losses | (325) | (517) | (65) | (84) | (105) |
| Operating profit | 479 | 306 | 157 | 115 | 64 |
| Average exchange rate - US\$/£ | 1.604 | 1.546 | 1.573 | 1.611 | 1.581 |
| Analysis of income by product | |||||
| Mortgages and home equity | 464 | 509 | 128 | 119 | 128 |
| Personal lending and cards | 420 | 476 | 94 | 111 | 113 |
| Retail deposits | 918 | 903 | 235 | 236 | 206 |
| Commercial lending | 580 | 580 | 147 | 149 | 141 |
| Commercial deposits | 292 | 320 | 76 | 75 | 75 |
| Other | 226 | 158 | 71 | 50 | 35 |
| Total income | 2,900 | 2,946 | 751 | 740 | 698 |
| Analysis of impairments by sector | |||||
| Residential mortgages | 35 | 58 | 9 | 7 | 3 |
| Home equity | 99 | 126 | 19 | 29 | 26 |
| Corporate and commercial | 54 | 202 | 8 | 7 | 54 |
| Other consumer | 57 | 97 | 17 | 11 | 6 |
| Securities | 80 | 34 | 12 | 30 | 16 |
| Total impairment losses | 325 | 517 | 65 | 84 | 105 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances | |||||
| (excluding reverse repurchase | |||||
| agreements) by sector | |||||
| Residential mortgages | 0.6% | 1.0% | 0.6% | 0.5% | 0.2% |
| Home equity | 0.7% | 0.8% | 0.5% | 0.8% | 0.7% |
| Corporate and commercial | 0.2% | 1.0% | 0.1% | 0.1% | 1.1% |
| Other consumer | 0.8% | 1.4% | 0.9% | 0.7% | 0.3% |
| Total | 0.5% | 1.0% | 0.4% | 0.4% | 0.7% |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Performance ratios | |||||
| Return on equity (1) | 6.3% | 3.6% | 8.0% | 6.0% | 3.3% |
| Net interest margin | 3.06% | 2.85% | 3.03% | 3.09% | 3.00% |
| Cost:income ratio | 72% | 72% | 70% | 73% | 76% |
| 31 December 2011 £bn |
30 September 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 74.5 | 72.9 | 2% | 71.2 | 5% |
| Loans and advances to customers (gross) | |||||
| - residential mortgages | 6.1 | 5.9 | 3% | 6.1 | - |
| - home equity | 14.9 | 14.9 | - | 15.2 | (2%) |
| - corporate and commercial | 22.8 | 22.1 | 3% | 20.4 | 12% |
| - other consumer | 7.6 | 6.6 | 15% | 6.9 | 10% |
| 51.4 | 49.5 | 4% | 48.6 | 6% | |
| Customer deposits (excluding repos) | 59.5 | 58.5 | 2% | 58.7 | 1% |
| Risk elements in lending | |||||
| - retail | 0.6 | 0.6 | - | 0.4 | 50% |
| - commercial | 0.4 | 0.4 | - | 0.5 | (20%) |
| Total risk elements in lending | 1.0 | 1.0 | - | 0.9 | 11% |
| Loan:deposit ratio (excluding repos) | 85% | 83% | 200bp | 81% | 400bp |
| Risk-weighted assets | 58.8 | 56.5 | 4% | 57.0 | 3% |
| Spot exchange rate - US\$/£ | 1.548 | 1.562 | 1.552 |
Note:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 9% of the monthly average of divisional RWAs, adjusted for capital deductions).
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| \$m | \$m | \$m | \$m | \$m | ||
| Income statement | ||||||
| Net interest income | 3,042 | 2,962 | 777 | 778 | 739 | |
| Net fees and commissions | 1,138 | 1,126 | 258 | 306 | 267 | |
| Other non-interest income | 473 | 465 | 148 | 109 | 100 | |
| Non-interest income | 1,611 | 1,591 | 406 | 415 | 367 | |
| Total income | 4,653 | 4,553 | 1,183 | 1,193 | 1,106 | |
| Direct expenses | ||||||
| - staff | (1,313) | (1,212) | (331) | (332) | (322) | |
| - other | (874) | (880) | (211) | (245) | (197) | |
| Indirect expenses | (1,176) | (1,189) | (291) | (295) | (317) | |
| (3,363) | (3,281) | (833) | (872) | (836) | ||
| Operating profit before impairment losses Impairment losses |
1,290 (521) |
1,272 (799) |
350 (101) |
321 (136) |
270 (168) |
|
| Operating profit | 769 | 473 | 249 | 185 | 102 | |
| Analysis of income by product | ||||||
| Mortgages and home equity | 744 | 786 | 202 | 192 | 201 | |
| Personal lending and cards | 673 | 735 | 147 | 179 | 179 | |
| Retail deposits | 1,474 | 1,397 | 370 | 381 | 329 | |
| Commercial lending | 931 | 896 | 232 | 240 | 223 | |
| Commercial deposits | 469 | 495 | 120 | 121 | 119 | |
| Other | 362 | 244 | 112 | 80 | 55 | |
| Total income | 4,653 | 4,553 | 1,183 | 1,193 | 1,106 | |
| Analysis of impairments by sector | ||||||
| Residential mortgages | 56 | 90 | 14 | 12 | 5 | |
| Home equity | 160 | 194 | 29 | 48 | 40 | |
| Corporate and commercial | 87 | 312 | 13 | 11 | 87 | |
| Other consumer | 92 | 150 | 26 | 17 | 11 | |
| Securities | 126 | 53 | 19 | 48 | 25 | |
| Total impairment losses | 521 | 799 | 101 | 136 | 168 | |
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) by sector |
||||||
| Residential mortgages | 0.6% | 1.0% | 0.6% | 0.5% | 0.2% | |
| Home equity | 0.7% | 0.8% | 0.5% | 0.8% | 0.7% | |
| Corporate and commercial | 0.2% | 1.0% | 0.1% | 0.1% | 1.1% | |
| Other consumer | 0.8% | 1.4% | 0.9% | 0.7% | 0.4% | |
| Total | 0.5% | 1.0% | 0.4% | 0.5% | 0.8% |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 6.3% | 3.6% | 8.0% | 6.0% | 3.3% |
| Net interest margin | 3.06% | 2.85% | 3.03% | 3.09% | 3.00% |
| Cost:income ratio | 72% | 72% | 70% | 73% | 76% |
| 31 December 2011 \$bn |
30 September 2011 |
31 December 2010 |
||||
|---|---|---|---|---|---|---|
| \$bn | Change | \$bn | Change | |||
| Capital and balance sheet | ||||||
| Total third party assets | 115.3 | 113.8 | 1% | 110.5 | 4% | |
| Loans and advances to customers (gross) | ||||||
| - residential mortgages | 9.4 | 9.1 | 3% | 9.4 | - | |
| - home equity | 23.1 | 23.3 | (1%) | 23.6 | (2%) | |
| - corporate and commercial | 35.3 | 34.5 | 2% | 31.7 | 11% | |
| - other consumer | 11.8 | 10.4 | 13% | 10.6 | 11% | |
| 79.6 | 77.3 | 3% | 75.3 | 6% | ||
| Customer deposits (excluding repos) | 92.1 | 91.3 | 1% | 91.2 | 1% | |
| Risk elements in lending | ||||||
| - retail | 1.0 | 0.9 | 11% | 0.7 | 43% | |
| - commercial | 0.6 | 0.6 | - | 0.7 | (14%) | |
| Total risk elements in lending | 1.6 | 1.5 | 7% | 1.4 | 14% | |
| Loan:deposit ratio (excluding repos) | 85% | 83% | 200bp | 81% | 400bp | |
| Risk-weighted assets | 91.1 | 88.2 | 3% | 88.4 | 3% |
Note:
(1) Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 9% of monthly average of divisional RWAs, adjusted for capital deductions).
US R&C continued to focus on its back-to-basics strategy, with good progress made in developing the division's customer franchise during 2011. The bank continued to re-energise the franchise through new branding, product development and competitive pricing.
To strengthen retail alignment and improve efficiencies, US R&C formed a consolidated Consumer Banking division by combining management of the retail banking franchise with the consumer lending division during H2 2011. This continued focus on alignment is expected to further contribute to the improved penetration of loan products to deposit households, which has already increased in ten consecutive quarters. The penetration of on-line banking customers, a key indicator of customer retention, also continued to improve during 2011.
To enhance the customer experience, in Q4 2011, Consumer Banking introduced four core Customer Commitments, built around feedback received from customers in Massachusetts. In Q1 2012, the Commitments will be rolled out to Citizens Financial Group's (CFG's) entire branch footprint.
Significant organisational changes and investment in Commercial Banking, including unification under the RBS Citizens brand, has been important in positioning the business for growth. The enhanced sales training programme for managers and sales colleagues in this business has begun to deliver results with both higher credit balances and increased client satisfaction. External researchers TNS awarded Citizens the second highest score in relationship manager satisfaction among its competitors for 2011.
Risk management was also an important focus for 2011 and in Q4 2011, CFG's Board of directors approved a new formal risk appetite statement aimed at ensuring sustained predictable earnings and further strengthening the control environment.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income from banking activities | 719 | 1,276 | 174 | 174 | 245 |
| Net fees and commissions receivable | 1,281 | 1,495 | 239 | 289 | 425 |
| Income from trading activities | 3,736 | 4,982 | 460 | 602 | 893 |
| Other operating income (net of related | |||||
| funding costs) | 205 | 159 | 39 | 34 | 24 |
| Non-interest income | 5,222 | 6,636 | 738 | 925 | 1,342 |
| Total income | 5,941 | 7,912 | 912 | 1,099 | 1,587 |
| Direct expenses | |||||
| - staff | (2,454) | (2,693) | (459) | (527) | (554) |
| - other | (928) | (842) | (240) | (243) | (292) |
| Indirect expenses | (949) | (862) | (240) | (249) | (219) |
| (4,331) | (4,397) | (939) | (1,019) | (1,065) | |
| Operating profit/(loss) before impairment losses | 1,610 | 3,515 | (27) | 80 | 522 |
| Impairment (losses)/recoveries | (49) | (151) | (68) | 32 | 5 |
| Operating profit/(loss) | 1,561 | 3,364 | (95) | 112 | 527 |
| Analysis of income by product | |||||
| Rates - money markets | (212) | 65 | (78) | (19) | (65) |
| Rates - flow | 1,668 | 1,985 | 465 | 113 | 413 |
| Currencies | 868 | 870 | 183 | 227 | 178 |
| Credit and asset backed markets | 1,424 | 2,215 | 9 | 93 | 433 |
| Fixed income & currencies | 3,748 | 5,135 | 579 | 414 | 959 |
| Portfolio management and origination | 1,343 | 1,777 | 277 | 305 | 396 |
| Equities | 781 | 933 | 158 | 114 | 183 |
| Total excluding fair value derivative liabilities | 5,872 | 7,845 | 1,014 | 833 | 1,538 |
| Fair value derivative liabilities | 69 | 67 | (102) | 266 | 49 |
| Total income | 5,941 | 7,912 | 912 | 1,099 | 1,587 |
| Analysis of impairments by sector | |||||
| Manufacturing and infrastructure | (139) | 51 | (62) | - | (2) |
| Property and construction | (42) | (74) | (25) | (11) | (10) |
| Banks and financial institutions | 54 | (177) | (11) | 44 | (54) |
| Other | 78 | 49 | 30 | (1) | 71 |
| Total impairment (losses)/recoveries | (49) | (151) | (68) | 32 | 5 |
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) |
0.1% | 0.2% | 0.4% | (0.2%) | - |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| Performance ratios | |||||
| Return on equity (1) | 7.7% | 16.6% | (1.8%) | 2.3% | 10.2% |
| Net interest margin | 0.73% | 1.05% | 0.76% | 0.71% | 0.93% |
| Cost:income ratio | 73% | 56% | 103% | 93% | 67% |
| Compensation ratio (2) | 41% | 34% | 50% | 48% | 35% |
| Compensation ratio - continuing business | 39% | 32% |
| 31 December 2011 £bn |
30 September 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Loans and advances to customers | 74.7 | 73.1 | 2% | 75.1 | (1%) |
| Loans and advances to banks | 29.9 | 34.1 | (12%) | 44.5 | (33%) |
| Reverse repos | 100.5 | 100.6 | - | 94.8 | 6% |
| Securities | 111.0 | 124.5 | (11%) | 119.2 | (7%) |
| Cash and eligible bills | 28.1 | 33.3 | (16%) | 38.8 | (28%) |
| Other | 17.5 | 33.0 | (47%) | 24.3 | (28%) |
| Total third party assets (excluding derivatives | |||||
| mark-to-market) | 361.7 | 398.6 | (9%) | 396.7 | (9%) |
| Net derivative assets (after netting) | 37.0 | 45.6 | (19%) | 37.4 | (1%) |
| Customer deposits (excluding repos) | 37.4 | 39.5 | (5%) | 38.9 | (4%) |
| Risk elements in lending | 1.8 | 1.6 | 13% | 1.7 | 6% |
| Risk-weighted assets | 151.1 | 134.3 | 13% | 146.9 | 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) Compensation ratio is based on staff costs as a percentage of total income.
During Q4 2011, the market environment continued to weaken. Market volatility remained elevated and liquidity depressed as markets reacted to developments in the European sovereign debt crisis. Deal flow was weak reflecting investor pessimism about the outlook for the world economy. Throughout the year, GBM continued to deliver core products and innovative solutions to clients, while also focusing on management of its cost base and on tight control of its risk positions.
On 12 January 2012 the Group announced changes to its wholesale banking operations in light of a changed market and regulatory environment. The changes will see the reorganisation of RBS's wholesale businesses into 'Markets' and 'International Banking' and the exit and downsizing of selected activities. The changes will ensure the wholesale businesses continue to deliver against the Group's strategy.
• Operating profit fell by 54%, from £3,364 million for 2010 to £1,561 million for 2011, driven by a 25% decrease in revenue. The year was characterised by volatile and deteriorating credit markets, especially during the second half of the year when the European sovereign debt crisis drove a sharp widening in credit spreads.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Earned premiums | 4,221 | 4,459 | 1,043 | 1,057 | 1,100 |
| Reinsurers' share | (252) | (148) | (71) | (67) | (40) |
| Net premium income | 3,969 | 4,311 | 972 | 990 | 1,060 |
| Fees and commissions | (400) | (410) | (161) | (83) | (133) |
| Instalment income | 138 | 159 | 33 | 35 | 38 |
| Other income | 100 | 179 | 19 | 19 | 70 |
| Total income | 3,807 | 4,239 | 863 | 961 | 1,035 |
| Net claims | (2,772) | (3,932) | (589) | (695) | (898) |
| Underwriting profit | 1,035 | 307 | 274 | 266 | 137 |
| Staff expenses | (288) | (287) | (75) | (67) | (72) |
| Other expenses | (333) | (325) | (79) | (88) | (77) |
| Total direct expenses | (621) | (612) | (154) | (155) | (149) |
| Indirect expenses | (225) | (267) | (55) | (60) | (74) |
| (846) | (879) | (209) | (215) | (223) | |
| Technical result | 189 | (572) | 65 | 51 | (86) |
| Investment income | 265 | 277 | 60 | 72 | 77 |
| Operating profit/(loss) | 454 | (295) | 125 | 123 | (9) |
| Analysis of income by product | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 1,742 | 1,825 | 425 | 439 | 468 |
| - partnerships | 209 | 343 | 34 | 45 | 91 |
| Personal lines home excluding broker | |||||
| - own brands | 471 | 474 | 119 | 117 | 120 |
| - partnerships | 363 | 388 | 81 | 94 | 100 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 181 | 192 | 46 | 43 | 49 |
| - partnerships | 125 | 155 | (16) | 47 | 2 |
| Commercial | 315 | 314 | 81 | 80 | 76 |
| International | 340 | 316 | 89 | 91 | 82 |
| Other (1) | 61 | 232 | 4 | 5 | 47 |
| Total income | 3,807 | 4,239 | 863 | 961 | 1,035 |
| Year ended | |||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| In-force policies (000s) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 3,787 | 4,162 | 3,787 | 3,832 | 4,162 |
| - partnerships | 320 | 645 | 320 | 388 | 645 |
| Personal lines home excluding broker | |||||
| - own brands | 1,811 | 1,797 | 1,811 | 1,832 | 1,797 |
| - partnerships | 2,497 | 2,530 | 2,497 | 2,504 | 2,530 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 1,844 | 1,966 | 1,844 | 1,886 | 1,966 |
| - partnerships | 7,307 | 7,497 | 7,307 | 7,714 | 7,497 |
| Commercial | 422 | 352 | 422 | 410 | 352 |
| International | 1,387 | 1,082 | 1,387 | 1,357 | 1,082 |
| Other (1) | 1 | 644 | 1 | 44 | 644 |
| Total in-force policies (2) | 19,376 | 20,675 | 19,376 | 19,967 | 20,675 |
| Gross written premium (£m) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 1,584 | 1,647 | 348 | 438 | 370 |
| - partnerships | 137 | 257 | 28 | 36 | 59 |
| Personal lines home excluding broker | |||||
| - own brands | 474 | 478 | 112 | 133 | 116 |
| - partnerships | 549 | 556 | 132 | 144 | 137 |
| Personal lines rescue and other excluding | |||||
| broker | |||||
| - own brands | 174 | 178 | 40 | 48 | 41 |
| - partnerships | 174 | 159 | 44 | 48 | 39 |
| Commercial | 435 | 397 | 102 | 101 | 96 |
| International | 570 | 425 | 142 | 125 | 123 |
| Other (1) | 1 | 201 | 2 | 4 | 7 |
| Total gross written premium | 4,098 | 4,298 | 950 | 1,077 | 988 |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Return on regulatory capital (3) | 11.3% | (7.9%) | 12.5% | 12.3% | (0.9%) |
| Return on tangible equity (4) | 10.3% | (6.8%) | 11.0% | 11.0% | (0.8%) |
| Loss ratio (5) | 70% | 91% | 61% | 70% | 85% |
| Commission ratio (6) | 10% | 10% | 17% | 8% | 13% |
| Expense ratio (7) | 20% | 20% | 22% | 20% | 23% |
| Combined operating ratio (8) | 100% | 121% | 100% | 98% | 121% |
| Balance sheet | |||||
| Total insurance reserves - (£m) (9) | 7,284 | 7,545 | 7,643 |
Notes:
(1) 'Other' predominantly consists of the personal lines broker business.
(2) Total in-force policies include travel and creditor policies sold through RBS Group. These comprise travel policies included in bank accounts e.g. Royalties Gold Account, and creditor policies sold with bank products including mortgage, loan and card payment protection.
(3) Return on regulatory capital required is based on annualised operating profit/(loss) after tax divided by average notional regulatory equity.
(4) Return on tangible equity is based on annualised operating profit/(loss) after tax divided by average tangible equity.
(5) Loss ratio is based on net claims divided by net premium income.
(6) Commission ratio is based on fees and commissions divided by gross written premium.
(7) Expense ratio is based on expenses divided by gross written premium.
(8) Combined operating ratio is the sum of the loss, commission and expense ratios.
(9) Consists of general and life insurance liabilities, unearned premium reserve and liability adequacy reserve.
RBS Insurance continues to make good progress ahead of its divestment from the Group. Q4 2011 operating profit of £125 million was the fifth successive quarter of year-on-year improvement. Operating profit of £454 million for 2011 shows a return to full year profitability and represents close to a £750 million turnaround from 2010. These results demonstrate the success of the first phase of management's transformation plan - to return to profit in 2011. The full year combined operating ratio improved to 100% (2010 - 121%) with a full year return on equity of 10.3% compared with a negative return of 6.8% in 2010.
The second phase of the RBS Insurance transformation plan, to build competitive advantage, is underway and tangible benefits are already being delivered. All new Churchill, Direct Line and Privilege motor claims, as well as all new Churchill home claims, are now being processed through a new claims management system. Within motor, the rollout of a new rating engine and new pricing tools ensured more accurate and tailored pricing with the aim of generating greater value from RBS Insurance's multi-brand, multi-distribution strategy.
As part of the plan to build competitive advantage, the rationalisation of occupied sites continues, with 15 site exits by the end of 2011. The consolidation of the four UK general insurance underwriting entities within the RBS Insurance Group was successfully completed in December 2011. All UK general insurance business is now written through one underwriter with the aim of improving operational and capital efficiency.
Marking a significant new partnership, RBS Insurance signed a five-year contract with Sainsbury's Finance in 2011 to provide underwriting, sales, service and claims management for its car insurance customers. Following the successful launch and development of the car insurance partnership, a further contract was signed early in 2012 to provide home insurance for Sainsbury's customers. Building on RBS Insurance's established successful relationship with Nationwide Building Society, a deal was concluded to extend its provision of home insurance until the end of 2015. RBS Insurance is also concluding terms with RBS Group's UK Retail bank on the details of a five-year agreement for the continued provision of general insurance products post separation. The term would commence from the point of initial divestment.
While overall gross written premium fell by 5% in 2011, it increased by 10% in Commercial, which includes NIG, the commercial broker business, and Direct Line for Business, the direct SME insurer. A new brand identity was unveiled for NIG and work continued to improve its product offering and service to brokers. Direct Line for Business continued to develop well.
RBS Insurance's international division showed strong growth in gross written premiums primarily in Italy, assisted by the first full year of its sales agreements with FGA Capital, a joint venture between Fiat and Credit Agricole. The German business also showed good growth following improvements in the second half of 2011 to its direct and partnership business, including strengthening its relationship with Renault.
Ahead of the planned divestment in the second half of 2012, RBS Insurance has begun separating its activities and operations from RBS Group. Its corporate functions have been strengthened, arm's length agreements are under discussion with the Group where appropriate, a new corporate brand, Direct Line Group was announced on 15 February 2012 and a new risk and control framework has been implemented, in readiness for standalone status.
Overall, RBS Insurance has powerful brands, improved earnings, a robust balance sheet and is executing the second phase of its transformation plan to rebuild competitive advantage.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Central items not allocated | 156 | 577 | 85 | 67 | 115 |
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.
• Central items not allocated represented a credit of £85 million in the quarter, an increase of £18 million compared with Q3 2011.
• Central items not allocated represented a credit of £85 million, £30 million lower than Q4 2010.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
||
| Income statement Net interest income |
881 | 1,959 | 129 | 164 | 419 | |
| Net fees and commissions | (38) | 471 | (47) | (85) | 166 | |
| Loss from trading activities Insurance net premium income Other operating income |
(721) 286 |
(31) 702 |
(407) 9 |
(246) 44 |
(152) 181 |
|
| - rental income - other (1) |
743 55 |
752 (889) |
163 (151) |
182 (13) |
218 (511) |
|
| Non-interest income | 325 | 1,005 | (433) | (118) | (98) | |
| Total income/(loss) | 1,206 | 2,964 | (304) | 46 | 321 | |
| Direct expenses - staff - operating lease depreciation - other Indirect expenses |
(375) (347) (256) (317) |
(731) (452) (573) (500) |
(82) (91) (57) (84) |
(93) (82) (62) (86) |
(105) (108) (141) (127) |
|
| (1,295) | (2,256) | (314) | (323) | (481) | ||
| Operating (loss)/profit before other operating charges and impairment losses Insurance net claims Impairment losses |
(89) (195) (3,919) |
708 (737) (5,476) |
(618) 61 (751) |
(277) (38) (682) |
(160) (245) (1,211) |
|
| Operating loss | (4,203) | (5,505) | (1,308) | (997) | (1,616) |
Note:
(1) Includes losses on disposals (year ended 31 December 2011 - £127 million; year ended 31 December 2010 - £504 million; quarter ended 31 December 2011 - £36 million; quarter ended 30 September 2011 - £37 million; quarter ended 31 December 2010 - £247 million).
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
||
| £m | £m | £m | £m | £m | ||
| Analysis of income/(loss)by business | ||||||
| Banking & portfolios | 1,474 | 1,673 | (168) | 214 | 157 | |
| International businesses | 419 | 778 | 92 | 101 | 84 | |
| Markets | (687) | 513 | (228) | (269) | 80 | |
| Total income/(loss) | 1,206 | 2,964 | (304) | 46 | 321 | |
| Loss from trading activities | ||||||
| Monoline exposures | (670) | (5) | (243) | (230) | (57) | |
| Credit derivative product companies | (85) | (139) | (19) | (5) | (38) | |
| Asset-backed products (1) | 29 | 235 | (22) | (51) | 33 | |
| Other credit exotics | (175) | 77 | (8) | (7) | 21 | |
| Equities | (11) | (17) | 1 | (11) | 11 | |
| Banking book hedges | (1) | (82) | (36) | 73 | (70) | |
| Other (2) | 192 | (100) | (80) | (15) | (52) | |
| (721) | (31) | (407) | (246) | (152) | ||
| Impairment losses | ||||||
| Banking & portfolios | 3,833 | 5,328 | 714 | 656 | 1,258 | |
| International businesses | 82 | 200 | 30 | 17 | 59 | |
| Markets | 4 | (52) | 7 | 9 | (106) | |
| Total impairment losses | 3,919 | 5,476 | 751 | 682 | 1,211 | |
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase |
||||||
| agreements) (3) | ||||||
| Banking & portfolios | 4.9% | 5.0% | 3.6% | 2.8% | 4.6% | |
| International businesses | 3.7% | 4.4% | 5.3% | 2.7% | 5.2% | |
| Markets | (3.0%) | 0.2% | (8.8%) | (0.4%) | (38.4%) | |
| Total | 4.8% | 4.9% | 3.7% | 2.8% | 4.4% |
Notes:
(1) Asset-backed products include super senior asset-backed structures and other asset-backed products.
(2) Includes profits in RBS Sempra Commodities JV (year ended 31 December 2011 - £4 million; year ended 31 December 2010 - £372 million; quarter ended 31 December 2011 - £1 million; quarter ended 30 September 2011 - £1 million; quarter ended 31 December 2010 - £19 million).
(3) Includes disposal groups.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December 2011 |
31 December 2010 |
31 December 2011 |
30 September 2011 |
31 December 2010 |
|
| Performance ratios | |||||
| Net interest margin | 0.64% | 1.16% | 0.31% | 0.43% | 1.09% |
| Cost:income ratio | 107% | 76% | nm | nm | 150% |
| Adjusted cost:income ratio | 128% | 101% | nm | nm | nm |
| 31 December 2011 |
30 September 2011 |
31 December 2010 |
|||
|---|---|---|---|---|---|
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Total third party assets (excluding | |||||
| derivatives) (1) | 93.7 | 105.1 | (11%) | 137.9 | (32%) |
| Total third party assets (including | |||||
| derivatives) (1) | 104.7 | 117.7 | (11%) | 153.9 | (32%) |
| Loans and advances to customers (gross) (2) | 79.4 | 88.9 | (11%) | 108.4 | (27%) |
| Customer deposits (2) | 3.5 | 4.3 | (19%) | 6.7 | (48%) |
| Risk elements in lending (2) | 24.0 | 24.6 | (2%) | 23.4 | 3% |
| Risk-weighted assets (1) | 93.3 | 117.9 | (21%) | 153.7 | (39%) |
nm = not meaningful
Notes:
(1) Includes RBS Sempra Commodities JV (31 December 2011 third party assets, excluding derivatives (TPAs) £0.1 billion, RWAs £1.6 billion; 30 September 2011 TPAs £0.3 billion, RWAs £1.7 billion; 31 December 2010 TPAs £6.7 billion, RWAs £4.3 billion).
(2) Excludes disposal groups.
| 31 December 2011 £bn |
30 September 2011 £bn |
31 December 2010 £bn |
|
|---|---|---|---|
| Gross customer loans and advances | |||
| Banking & portfolios | 77.3 | 86.6 | 104.9 |
| International businesses | 2.0 | 2.2 | 3.5 |
| Markets | 0.1 | 0.1 | - |
| 79.4 | 88.9 | 108.4 | |
| Risk-weighted assets | |||
| Banking & portfolios | 64.8 | 66.6 | 83.5 |
| International businesses | 4.1 | 4.5 | 5.6 |
| Markets | 24.4 | 46.8 | 64.6 |
| 93.3 | 117.9 | 153.7 | |
| Third party assets (excluding derivatives) | |||
| Banking & portfolios | 81.3 | 91.0 | 113.9 |
| International businesses | 2.9 | 3.3 | 4.4 |
| Markets | 9.5 | 10.8 | 19.6 |
| 93.7 | 105.1 | 137.9 |
| 31 December 2010 £bn |
Run-off £bn |
Disposals/ restructuring £bn |
Drawings/ £bn |
roll overs Impairments £bn |
FX £bn |
31 December 2011 £bn |
|
|---|---|---|---|---|---|---|---|
| Commercial real estate | 42.6 | (5.6) | (2.4) | 0.7 | (3.4) | (0.4) | 31.5 |
| Corporate | 59.8 | (8.5) | (11.3) | 2.5 | (0.1) | (0.2) | 42.2 |
| SME | 3.7 | (1.6) | - | 0.1 | (0.1) | - | 2.1 |
| Retail | 9.0 | (1.1) | (1.4) | - | (0.3) | (0.1) | 6.1 |
| Other | 2.5 | (0.6) | - | - | - | - | 1.9 |
| Markets | 13.6 | (2.9) | (1.8) | 1.0 | - | (0.1) | 9.8 |
| Total (excluding derivatives) Markets - RBS Sempra |
131.2 | (20.3) | (16.9) | 4.3 | (3.9) | (0.8) | 93.6 |
| Commodities JV | 6.7 | (1.3) | (5.0) | - | - | (0.3) | 0.1 |
| Total (1) | 137.9 | (21.6) | (21.9) | 4.3 | (3.9) | (1.1) | 93.7 |
| 30 September | Disposals/ | Drawings/ | 31 December | ||||
|---|---|---|---|---|---|---|---|
| 2011 | Run-off | restructuring | roll overs Impairments | FX | 2011 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | £bn | |
| Commercial real estate | 35.3 | (1.8) | (1.1) | 0.1 | (0.6) | (0.4) | 31.5 |
| Corporate | 46.9 | (1.6) | (3.6) | 0.6 | (0.1) | - | 42.2 |
| SME | 2.4 | (0.3) | - | 0.1 | (0.1) | - | 2.1 |
| Retail | 7.4 | (0.2) | (1.1) | - | - | - | 6.1 |
| Other | 1.9 | - | - | - | - | - | 1.9 |
| Markets | 10.9 | (0.2) | (1.0) | - | - | 0.1 | 9.8 |
| Total (excluding derivatives) | 104.8 | (4.1) | (6.8) | 0.8 | (0.8) | (0.3) | 93.6 |
| Markets - RBS Sempra | |||||||
| Commodities JV | 0.3 | - | (0.2) | - | - | - | 0.1 |
| Total (1) | 105.1 | (4.1) | (7.0) | 0.8 | (0.8) | (0.3) | 93.7 |
| 30 June | Disposals/ | Drawings/ | 30 September | ||||
|---|---|---|---|---|---|---|---|
| 2011 | Run-off | restructuring | roll overs Impairments | FX | 2011 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | £bn | |
| Commercial real estate (2) | 36.6 | 0.3 | (0.6) | 0.2 | (0.5) | (0.7) | 35.3 |
| Corporate (2) | 50.4 | (2.4) | (1.3) | 0.5 | - | (0.3) | 46.9 |
| SME | 2.7 | (0.3) | - | - | - | - | 2.4 |
| Retail | 8.0 | (0.3) | (0.3) | - | (0.1) | 0.1 | 7.4 |
| Other | 2.3 | (0.4) | - | - | - | - | 1.9 |
| Markets | 11.5 | (0.9) | (0.4) | 0.6 | - | 0.1 | 10.9 |
| Total (excluding derivatives) | 111.5 | (4.0) | (2.6) | 1.3 | (0.6) | (0.8) | 104.8 |
| Markets - RBS Sempra | |||||||
| Commodities JV | 1.1 | (0.5) | (0.3) | - | - | - | 0.3 |
| Total (1) | 112.6 | (4.5) | (2.9) | 1.3 | (0.6) | (0.8) | 105.1 |
Notes:
(1) Disposals of £0.2 billion have been signed as at 31 December 2011 but are pending completion (30 September 2011 - £1 billion; 31 December 2010 - £12 billion).
(2) Business restructuring in Q3 2011 resulted in third party assets of £1 billion transferring from Corporate to Commercial Real Estate resulting in run-off totalling £0.3 billion in Q3 2011.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Impairment losses by donating division and sector |
||||||
| UK Retail | ||||||
| Mortgages | 5 | 5 | - | 1 | 1 | |
| Personal | (27) | 8 | (28) | 1 | 2 | |
| Total UK Retail | (22) | 13 | (28) | 2 | 3 | |
| UK Corporate | ||||||
| Manufacturing and infrastructure | 76 | 26 | 26 | 3 | 5 | |
| Property and construction | 224 | 437 | 83 | 92 | 103 | |
| Transport | 52 | 3 | 6 | - | (20) | |
| Banking and financial institutions | 5 | 69 | 1 | - | 51 | |
| Lombard | 75 | 129 | 20 | 12 | 50 | |
| Other | 96 | 166 | 21 | 18 | 50 | |
| Total UK Corporate | 528 | 830 | 157 | 125 | 239 | |
| Ulster Bank | ||||||
| Mortgages | - | 42 | - | - | - | |
| Commercial real estate | ||||||
| - investment | 609 | 630 | 151 | 74 | 206 | |
| - development | 1,552 | 1,759 | 77 | 162 | 596 | |
| Other corporate | 173 | 251 | 15 | 45 | (19) | |
| Other EMEA | 15 | 52 | 2 | 2 | 6 | |
| Total Ulster Bank | 2,349 | 2,734 | 245 | 283 | 789 | |
| US Retail & Commercial | ||||||
| Auto and consumer | 58 | 82 | 7 | 14 | 37 | |
| Cards | (9) | 23 | 1 | - | 3 | |
| SBO/home equity | 201 | 277 | 33 | 57 | 51 | |
| Residential mortgages | 16 | 4 | 2 | 4 | (1) | |
| Commercial real estate | 40 | 185 | 14 | (4) | 31 | |
| Commercial and other | (3) | 17 | 7 | (1) | 2 | |
| Total US Retail & Commercial | 303 | 588 | 64 | 70 | 123 | |
| Global Banking & Markets | ||||||
| Manufacturing and infrastructure | 57 | (290) | 42 | 23 | 15 | |
| Property and construction | 752 | 1,296 | 241 | 189 | 176 | |
| Transport | (3) | 33 | 10 | (6) | 24 | |
| Telecoms, media and technology | 68 | 9 | 18 | 27 | (23) | |
| Banking and financial institutions | (98) | 196 | (31) | (29) | 19 | |
| Other | (20) | 14 | 25 | (1) | (163) | |
| Total Global Banking & Markets | 756 | 1,258 | 305 | 203 | 48 | |
| Other | ||||||
| Wealth | 1 | 51 | - | 1 | - | |
| Global Transaction Services | 1 | - | 4 | - | 7 | |
| Central items | 3 | 2 | 4 | (2) | 2 | |
| Total Other | 5 | 53 | 8 | (1) | 9 | |
| Total impairment losses | 3,919 | 5,476 | 751 | 682 | 1,211 |
| 31 December 2011 £bn |
30 September 2011 £bn |
31 December 2010 £bn |
|
|---|---|---|---|
| Gross loans and advances to customers (excluding reverse repurchase agreements) by donating division and sector |
|||
| UK Retail | |||
| Mortgages | 1.4 | 1.4 | 1.6 |
| Personal | 0.1 | 0.3 | 0.4 |
| Total UK Retail | 1.5 | 1.7 | 2.0 |
| UK Corporate | |||
| Manufacturing and infrastructure | 0.1 | 0.1 | 0.3 |
| Property and construction | 5.9 | 6.5 | 11.4 |
| Transport | 4.5 | 4.8 | 5.4 |
| Banking and financial institutions | 0.6 | 0.5 | 0.8 |
| Lombard | 1.0 | 1.2 | 1.7 |
| Other | 7.5 | 7.5 | 7.4 |
| Total UK Corporate | 19.6 | 20.6 | 27.0 |
| Ulster Bank | |||
| Commercial real estate | |||
| - investment | 3.9 | 3.9 | 4.0 |
| - development | 8.5 | 8.7 | 8.4 |
| Other corporate Other EMEA |
1.6 0.4 |
1.7 0.4 |
2.2 0.4 |
| Total Ulster Bank | 14.4 | 14.7 | 15.0 |
| US Retail & Commercial | |||
| Auto and consumer | 0.8 | 1.9 | 2.6 |
| Cards | 0.1 | 0.1 | 0.1 |
| SBO/home equity | 2.5 | 2.6 | 3.2 |
| Residential mortgages | 0.6 | 0.6 | 0.7 |
| Commercial real estate | 1.0 | 1.1 | 1.5 |
| Commercial and other | 0.4 | 0.5 | 0.5 |
| Total US Retail & Commercial | 5.4 | 6.8 | 8.6 |
| Global Banking & Markets | |||
| Manufacturing and infrastructure | 6.6 | 7.0 | 8.7 |
| Property and construction | 15.3 | 17.8 | 19.6 |
| Transport | 3.2 | 3.9 | 5.5 |
| Telecoms, media and technology | 0.7 | 0.9 | 0.9 |
| Banking and financial institutions | 5.6 | 8.3 | 12.0 |
| Other | 6.8 | 6.7 | 9.0 |
| Total Global Banking & Markets | 38.2 | 44.6 | 55.7 |
| Other | |||
| Wealth | 0.2 | 0.3 | 0.4 |
| Global Transaction Services | 0.2 | 0.3 | 0.3 |
| RBS Insurance | - | - | 0.2 |
| Central items | (0.2) | (0.3) | (1.0) |
| Total Other | 0.2 | 0.3 | (0.1) |
| Gross loans and advances to customers (excluding reverse | |||
| repurchase agreements) | 79.3 | 88.7 | 108.2 |
Non-Core third party assets fell to £94 billion, below the revised year end target of £96 billion and significantly ahead of the original guidance of £118 billion. Further reductions will include the sale of RBS Aviation Capital for £4.7 billion, which was signed in January 2012. Since the division was formed in 2009, the reduction totals £164 billion, or 64%. By the end of 2011, the Non-Core funded balance sheet equated to less than 10% of the Group funded balance sheet compared with 21% when the division was created.
The division focused on reducing capital intensive trading assets, with activity including the restructuring of monoline exposures, which, at a cost of c.£600 million in 2011, achieved a reduction of £32 billion in risk-weighted assets.
An operating loss of £4,203 million for 2011 was £1,302 million lower than 2010. Income declined by £1,758 million reflecting continued divestment, including business and country exits. The decrease was partially offset by a reduction in expenses of £961 million, largely driven by the fall in headcount. Impairment losses fell by £1,557 million despite ongoing challenges in the real estate and Ulster Bank portfolios.
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Interest receivable | 21,410 | 22,776 | 5,234 | 5,371 | 5,612 |
| Interest payable | (8,731) | (8,567) | (2,160) | (2,294) | (2,032) |
| Net interest income | 12,679 | 14,209 | 3,074 | 3,077 | 3,580 |
| Fees and commissions receivable | 6,384 | 8,193 | 1,590 | 1,452 | 2,052 |
| Fees and commissions payable | (1,460) | (2,211) | (573) | (304) | (449) |
| Income from trading activities | 2,701 | 4,517 | (238) | 957 | 364 |
| Gain on redemption of own debt | 255 | 553 | (1) | 1 | - |
| Other operating income (excluding insurance | |||||
| premium income) | 4,122 | 1,479 | 205 | 2,384 | 1,003 |
| Insurance net premium income | 4,256 | 5,128 | 981 | 1,036 | 1,272 |
| Non-interest income | 16,258 | 17,659 | 1,964 | 5,526 | 4,242 |
| Total income | 28,937 | 31,868 | 5,038 | 8,603 | 7,822 |
| Staff costs | (8,678) | (9,671) | (1,993) | (2,076) | (2,194) |
| Premises and equipment | (2,451) | (2,402) | (674) | (604) | (709) |
| Other administrative expenses | (4,931) | (3,995) | (1,296) | (962) | (1,048) |
| Depreciation and amortisation | (1,875) | (2,150) | (513) | (485) | (546) |
| Write-down of goodwill and other intangible | |||||
| assets | (91) | (10) | (91) | - | (10) |
| Operating expenses | (18,026) | (18,228) | (4,567) | (4,127) | (4,507) |
| Profit before insurance net claims and | |||||
| impairment losses | 10,911 | 13,640 | 471 | 4,476 | 3,315 |
| Insurance net claims | (2,968) | (4,783) | (529) | (734) | (1,182) |
| Impairment losses | (8,709) | (9,256) | (1,918) | (1,738) | (2,141) |
| Operating (loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| Tax (charge)/credit | (1,250) | (634) | 186 | (791) | 3 |
| (Loss)/profit from continuing operations | (2,016) | (1,033) | (1,790) | 1,213 | (5) |
| Profit/(loss) from discontinued operations, | |||||
| net of tax | 47 | (633) | 10 | 6 | 55 |
| (Loss)/profit for the period | (1,969) | (1,666) | (1,780) | 1,219 | 50 |
| Non-controlling interests | (28) | 665 | (18) | 7 | (38) |
| Preference share and other dividends | - | (124) | - | - | - |
| (Loss)/profit attributable to ordinary and | |||||
| B shareholders | (1,997) | (1,125) | (1,798) | 1,226 | 12 |
| Basic (loss)/earnings per ordinary and | |||||
| B share from continuing operations | (1.8p) | (0.5p) | (1.7p) | 1.1p | - |
| Diluted (loss)/earnings per ordinary and | |||||
| B share from continuing operations | (1.8p) | (0.5p) | (1.7p) | 1.1p | - |
| Basic (loss)/earnings per ordinary | |||||
| and B share from discontinued operations | - | - | - | - | - |
| Diluted (loss)/earnings per ordinary | |||||
| and B shares from discontinued operations | - | - | - | - | - |
In the income statement above, one-off and other items as shown on page 17 are included in the appropriate captions. A reconciliation between the income statement above and the managed view income statement on page 10 is given in Appendix 1 to this announcement.
| Year ended | |||||
|---|---|---|---|---|---|
| 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
Quarter ended 30 September 2011 £m |
31 December 2010 £m |
|
| (Loss)/profit for the period | (1,969) | (1,666) | (1,780) | 1,219 | 50 |
| Other comprehensive income/(loss) | |||||
| Available-for-sale financial assets (1) | 2,258 | (389) | (107) | 996 | (1,132) |
| Cash flow hedges | 1,424 | 1,454 | 124 | 939 | (353) |
| Currency translation Actuarial (losses)/gains on defined benefit |
(440) | 81 | (117) | (22) | 34 |
| plans | (581) | 158 | (581) | - | 158 |
| Other comprehensive income/(loss) | |||||
| before tax | 2,661 | 1,304 | (681) | 1,913 | (1,293) |
| Tax (charge)/credit | (1,472) | (309) | (500) | (480) | 393 |
| Other comprehensive income/(loss) after tax |
1,189 | 995 | (1,181) | 1,433 | (900) |
| Total comprehensive (loss)/income for the period |
(780) | (671) | (2,961) | 2,652 | (850) |
| Total comprehensive (loss)/income is attributable to: |
|||||
| Non-controlling interests | (24) | (197) | (12) | (6) | 52 |
| Preference shareholders | - | 105 | - | - | - |
| Paid-in equity holders | - | 19 | - | - | - |
| Ordinary and B shareholders | (756) | (598) | (2,949) | 2,658 | (902) |
| (780) | (671) | (2,961) | 2,652 | (850) |
Note:
(1) Analysis provided on page 112.
| 31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Assets | |||
| Cash and balances at central banks | 79,269 | 78,445 | 57,014 |
| Net loans and advances to banks | 43,870 | 52,602 | 57,911 |
| Reverse repurchase agreements and stock borrowing | 39,440 | 48,127 | 42,607 |
| Loans and advances to banks | 83,310 | 100,729 | 100,518 |
| Net loans and advances to customers | 454,112 | 485,573 | 502,748 |
| Reverse repurchase agreements and stock borrowing | 61,494 | 54,132 | 52,512 |
| Loans and advances to customers Debt securities |
515,606 209,080 |
539,705 229,657 |
555,260 217,480 |
| Equity shares | 15,183 | 14,888 | 22,198 |
| Settlement balances | 7,771 | 21,526 | 11,605 |
| Derivatives | 529,618 | 572,344 | 427,077 |
| Intangible assets | 14,858 | 14,744 | 14,448 |
| Property, plant and equipment | 11,868 | 17,060 | 16,543 |
| Deferred tax | 3,878 | 4,988 | 6,373 |
| Prepayments, accrued income and other assets | 10,976 | 10,598 | 12,576 |
| Assets of disposal groups | 25,450 | 3,044 | 12,484 |
| Total assets | 1,506,867 | 1,607,728 | 1,453,576 |
| Liabilities | |||
| Bank deposits | 69,113 | 78,370 | 66,051 |
| Repurchase agreements and stock lending | 39,691 | 36,227 | 32,739 |
| Deposits by banks | 108,804 | 114,597 | 98,790 |
| Customer deposits | 414,143 | 433,660 | 428,599 |
| Repurchase agreements and stock lending | 88,812 | 95,691 | 82,094 |
| Customer accounts | 502,955 | 529,351 | 510,693 |
| Debt securities in issue | 162,621 | 194,511 | 218,372 |
| Settlement balances | 7,477 | 17,983 | 10,991 |
| Short positions | 41,039 | 48,495 | 43,118 |
| Derivatives | 523,983 | 561,790 | 423,967 |
| Accruals, deferred income and other liabilities | 23,125 | 22,938 | 23,089 |
| Retirement benefit liabilities | 2,239 | 1,855 | 2,288 |
| Deferred tax | 1,945 | 1,913 | 2,142 |
| Insurance liabilities | 6,312 | 6,628 | 6,794 |
| Subordinated liabilities | 26,319 | 26,275 | 27,053 |
| Liabilities of disposal groups | 23,995 | 2,516 | 9,428 |
| Total liabilities | 1,430,814 | 1,528,852 | 1,376,725 |
| Equity | |||
| Non-controlling interests | 1,234 | 1,433 | 1,719 |
| Owners' equity* | |||
| Called up share capital | 15,318 | 15,318 | 15,125 |
| Reserves | 59,501 | 62,125 | 60,007 |
| Total equity | 76,053 | 78,876 | 76,851 |
| Total liabilities and equity | 1,506,867 | 1,607,728 | 1,453,576 |
| * Owners' equity attributable to: | |||
| Ordinary and B shareholders | 70,075 | 72,699 | 70,388 |
| Other equity owners | 4,744 | 4,744 | 4,744 |
| 74,819 | 77,443 | 75,132 |
Total assets of £1,506.9 billion at 31 December 2011 were up £53.3 billion, 4%, compared with 31 December 2010. This principally reflects an increase in cash and balances at central banks and the mark-to-market value of derivatives in Global Banking & Markets, partly offset by decreases in debt securities and equity shares and the continuing disposal and run-off of Non-Core assets.
Cash and balances at central banks were up £22.3 billion, 39%, to £79.3 billion due to improvements in the Group's structured liquidity position during 2011.
Loans and advances to banks decreased by £17.2 billion, 17%, to £83.3 billion. Reverse repurchase agreements and stock borrowing ('reverse repos') were down £3.2 billion, 7%, to £39.4 billion and bank placings declined £14.0 billion, 24%, to £43.9 billion, primarily as a result of the reduction in exposure to eurozone banks and lower cash collateral requirements.
Loans and advances to customers were down £39.7 billion, 7%, to £515.6 billion. Within this, reverse repurchase agreements were up £9.0 billion, 17%, to £61.5 billion. Customer lending decreased by £48.7 billion, 10%, to £454.1 billion or £46.9 billion, 9%, to £473.9 billion before impairment provisions. This reflected the transfer to disposal groups of £19.5 billion of customer balances relating to the UK branch-based businesses. There were also planned reductions in Non-Core of £28.1 billion, together with declines in UK Corporate, £2.9 billion and Ulster Bank, £2.0 billion, together with the effect of exchange rate and other movements, £1.9 billion. These were partially offset by growth in Global Banking & Markets, £0.2 billion, Global Transaction Services, £1.5 billion, Wealth, £0.7 billion, UK Retail, £2.3 billion and US Retail & Commercial, £2.8 billion.
Debt securities were down £8.4 billion, 4%, to £209.1 billion driven mainly by a reduction in holdings of government and financial institution bonds in Global Banking & Markets and Group Treasury.
Equity shares decreased £7.0 billion, 32%, to £15.2 billion which largely reflects the closure of positions to reduce the Group's level of unsecured funding requirements to mitigate the potential impact of unfavourable market conditions.
Settlement balances declined £3.8 billion, 33% to £7.8 billion as a result of decreased customer activity.
Movements in the value of derivative assets up £102.5 billion, 24%, to £529.6 billion, and liabilities, up £100.0 billion, 24%, to £524.0 billion, primarily reflect increases in interest rate contracts as a result of a significant downward shift in interest rates across all major currencies, together with increases in the mark-to-market value of credit derivatives as a result of widening credit spreads and rising credit default swap prices.
Property, plant and equipment declined £4.7 billion, 28%, to £11.9 billion, primarily as a result of the transfer of RBS Aviation Capital's operating lease assets to disposal groups.
Deferred taxation was down £2.5 billion, 39%, to £3.9 billion, largely as a result of the utilisation of brought forward tax losses in the UK.
The increase in assets and liabilities of disposal groups reflects the reclassification of the UK branchbased businesses and RBS Aviation Capital pending their disposal, partly offset by the completion of disposals, primarily RBS Sempra Commodities JV and certain Non-Core project finance assets.
Deposits by banks increased £10.0 billion, 10%, to £108.8 billion, with higher repurchase agreements and stock lending ('repos'), up £6.9 billion, 21%, to £39.7 billion and higher inter-bank deposits, up £3.1 billion, 5%, to £69.1 billion.
Customer accounts fell £7.7 billion, 2%, to £503.0 billion. Within this, repos increased £6.7 billion, 8%, to £88.8 billion. Excluding repos, customer deposits were down £14.4 billion, 3%, to £414.1 billion, reflecting the transfer to disposal groups of £21.8 billion of customer accounts relating to the UK branch-based businesses. This was partly offset by the net effect of growth in Global Transaction Services, £2.7 billion, UK Corporate, £0.9 billion, UK Retail, £5.8 billion, US Retail & Commercial, £0.6 billion and Wealth, £1.8 billion, together with exchange rate and other movements of £0.3 billion and declines in Global Banking & Markets, £0.8 billion, Ulster Bank, £0.8 billion and Non-Core, £3.1 billion.
Debt securities in issue were down £55.8 billion, 26% to £162.6 billion driven by reductions in the level of certificates of deposit and commercial paper in Global Banking & Markets and Group Treasury.
Settlement balances declined £3.5 billion, 32%, to £7.5 billion and short positions were down £2.1 billion, 5%, to £41.0 billion due to decreased customer activity.
Subordinated liabilities were down £0.7 billion, 3%, to £26.3 billion, primarily reflecting the redemption of £0.2 billion US dollar and £0.4 billion Euro denominated dated loan capital.
The Group's non-controlling interests decreased by £0.5 billion, 28%, to £1.2 billion, primarily due to the disposal of the majority of the RBS Sempra Commodities JV business, £0.4 billion.
Owners' equity decreased by £0.3 billion to £74.8 billion. This was driven by the attributable loss for the year, £2.0 billion, together with the recognition of actuarial losses in respect of the Group's defined benefit pension schemes, net of tax, £0.5 billion and exchange rate and other movements of £0.3 billion. Offsetting these reductions were gains in available-for-sale reserves, £1.1 billion and cash flow hedging reserves, £1.0 billion and the issue of shares under employee share schemes, £0.4 billion.
| Year ended | Quarter ended | |||
|---|---|---|---|---|
| 31 December 2011 % |
31 December 2010 % |
31 December 2011 % |
30 September 2011 % |
|
| Average yields, spreads and margins of the banking business |
||||
| Gross yield on interest-earning assets of banking business | 3.24 | 3.29 | 3.13 | 3.21 |
| Cost of interest-bearing liabilities of banking business | (1.63) | (1.48) | (1.64) | (1.69) |
| Interest spread of banking business | 1.61 | 1.81 | 1.49 | 1.52 |
| Benefit from interest-free funds | 0.31 | 0.20 | 0.35 | 0.32 |
| Net interest margin of banking business | 1.92 | 2.01 | 1.84 | 1.84 |
| Average interest rates | ||||
| The Group's base rate | 0.50 | 0.50 | 0.50 | 0.50 |
| London inter-bank three month offered rates | ||||
| - Sterling | 0.87 | 0.70 | 0.99 | 0.87 |
| - Eurodollar | 0.33 | 0.34 | 0.43 | 0.30 |
| - Euro | 1.36 | 0.75 | 1.50 | 1.51 |
| Year ended 31 December 2011 |
Year ended 31 December 2010 |
|||||
|---|---|---|---|---|---|---|
| Average balance £m |
Interest £m |
Rate % |
Average balance £m |
Interest £m |
Rate % |
|
| Assets | ||||||
| Loans and advances to banks Loans and advances to |
73,825 | 697 | 0.94 | 52,721 | 592 | 1.12 |
| customers | 466,888 | 17,979 | 3.85 | 508,400 | 18,843 | 3.71 |
| Debt securities | 121,509 | 2,749 | 2.26 | 128,837 | 3,258 | 2.53 |
| Interest-earning assets - | ||||||
| banking business | 662,222 | 21,425 | 3.24 | 689,958 | 22,693 | 3.29 |
| Trading business | 278,975 | 276,330 | ||||
| Non-interest earning assets | 593,958 | 705,916 | ||||
| Total assets | 1,535,155 | 1,672,204 | ||||
| Memo: Funded assets | 1,075,717 | 1,166,311 | ||||
| Liabilities | ||||||
| Deposits by banks | 64,114 | 977 | 1.52 | 81,358 | 1,330 | 1.63 |
| Customer accounts | 336,365 | 3,531 | 1.05 | 341,641 | 3,723 | 1.09 |
| Debt securities in issue | 162,208 | 3,520 | 2.17 | 195,976 | 3,251 | 1.66 |
| Subordinated liabilities | 23,571 | 598 | 2.54 | 29,334 | 732 | 2.50 |
| Internal funding of trading | ||||||
| business | (49,025) | 109 | (0.22) | (48,315) | (181) | 0.37 |
| Interest-bearing liabilities - | ||||||
| banking business | 537,233 | 8,735 | 1.63 | 599,994 | 8,855 | 1.48 |
| Trading business Non-interest-bearing liabilities |
307,564 | 293,993 | ||||
| - demand deposits | 66,404 | 53,016 | ||||
| - other liabilities | 548,915 | 648,295 | ||||
| Owners' equity | 75,039 | 76,906 | ||||
| Total liabilities and | ||||||
| owners' equity | 1,535,155 | 1,672,204 |
Notes:
(1) Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
(2) Interest-earning assets and interest-bearing liabilities for 2010 exclude the Retail bancassurance long-term assets and liabilities, attributable to policyholders, in view of their distinct nature. As a result, net interest income has been increased by £6 million for the year ended 31 December 2010.
(3) Interest receivable has been increased by £8 million (2010 - £11 million) and interest payable has been increased by £150 million (2010 - £30 million decrease) 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.
(4) Interest receivable has been increased by nil (2010 - £90 million decrease) and interest payable has been decreased by £143 million (2010 - £319 million increase) in respect of non-recurring adjustments.
(5) Interest receivable has been increased by £5 million (2010 - £10 million decrease) and interest payable has been decreased by £3 million (2010 - £1 million) to exclude the RFS Holdings minority interest and increased by £2 million in respect of exceptional interest receivable. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
| Quarter ended | Quarter ended 30 September 2011 |
||||||
|---|---|---|---|---|---|---|---|
| Average | 31 December 2011 | Average | |||||
| balance £m |
Interest £m |
Rate % |
balance £m |
Interest £m |
Rate % |
||
| Assets | |||||||
| Loans and advances to banks | 91,359 | 207 | 0.90 | 72,461 | 154 | 0.84 | |
| Loans and advances to | |||||||
| customers | 453,051 | 4,335 | 3.80 | 469,910 | 4,506 | 3.80 | |
| Debt securities | 120,203 | 693 | 2.29 | 121,585 | 713 | 2.33 | |
| Interest-earning assets - | |||||||
| banking business | 664,613 | 5,235 | 3.13 | 663,956 | 5,373 | 3.21 | |
| Trading business | 271,183 | 281,267 | |||||
| Non-interest earning assets | 655,374 | 653,592 | |||||
| Total assets | 1,591,170 | 1,598,815 | |||||
| Memo: Funded assets | 1,058,372 | 1,087,227 | |||||
| Liabilities | |||||||
| Deposits by banks | 60,526 | 228 | 1.49 | 64,198 | 245 | 1.51 | |
| Customer accounts | 340,742 | 922 | 1.07 | 338,469 | 921 | 1.08 | |
| Debt securities in issue | 140,208 | 833 | 2.36 | 161,703 | 944 | 2.32 | |
| Subordinated liabilities | 22,906 | 146 | 2.53 | 23,000 | 134 | 2.31 | |
| Internal funding of trading | |||||||
| business | (44,408) | 24 | (0.21) | (48,161) | 55 | (0.45) | |
| Interest-bearing liabilities - | |||||||
| banking business | 519,974 | 2,153 | 1.64 | 539,209 | 2,299 | 1.69 | |
| Trading business | 299,789 | 314,626 | |||||
| Non-interest-bearing liabilities | |||||||
| - demand deposits | 70,538 | 66,496 | |||||
| - other liabilities | 625,702 | 602,235 | |||||
| Owners' equity | 75,167 | 76,249 | |||||
| Total liabilities and | |||||||
| owners' equity | 1,591,170 | 1,598,815 |
Notes:
(1) Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
(2) Interest payable has been decreased by £2 million (Q3 2011 - £1 million) to exclude the RFS Holdings minority interest. Related interest-bearing liabilities have also been adjusted.
(3) Interest receivable has been increased by £1 million (Q3 2011 - £2 million) and interest payable has been increased by £40 million (Q3 2011 - £47 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.
(4) Interest payable has been decreased by £45 million (Q3 2011 - £41 million) in respect of non-recurring adjustments.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Called-up share capital | ||||||
| At beginning of period | 15,125 | 14,630 | 15,318 | 15,317 | 15,030 | |
| Ordinary shares issued | 523 | 1 | 121 | |||
| Preference shares redeemed | 193 - |
(1) | - | - | 1 | |
| Cancellation of non-voting deferred shares | - | (27) | - | - | (27) | |
| - | ||||||
| At end of period | 15,318 | 15,125 | 15,318 | 15,318 | 15,125 | |
| Paid-in equity | ||||||
| At beginning of period | 431 | 565 | 431 | 431 | 431 | |
| Securities redeemed | - | (132) | - | - | - | |
| Transfer to retained earnings | - | (2) | - | - | - | |
| At end of period | 431 | 431 | 431 | 431 | 431 | |
| Share premium account | ||||||
| At beginning of period | 23,922 | 23,523 | 23,923 | 23,923 | 23,858 | |
| Ordinary shares issued | 79 | 281 | 78 | - | 64 | |
| Redemption of preference shares classified | ||||||
| as debt | - | 118 | - | - | - | |
| At end of period | 24,001 | 23,922 | 24,001 | 23,923 | 23,922 | |
| Merger reserve | ||||||
| At beginning of period | 13,272 | 25,522 | 13,222 | 13,222 | 13,272 | |
| Transfer to retained earnings | (50) | (12,250) | - | - | - | |
| At end of period | 13,222 | 13,272 | 13,222 | 13,222 | 13,272 | |
| Available-for-sale reserve | ||||||
| At beginning of period | (2,037) | (1,755) | (292) | (1,026) | (1,242) | |
| Unrealised gains/(losses) | 1,769 | 179 | (179) | 1,005 | (1,148) | |
| Realised losses/(gains) (1) | 486 | (519) | 69 | (12) | 16 | |
| Tax | (1,175) | 74 | (555) | (259) | 337 | |
| Recycled to profit or loss on disposal of | ||||||
| businesses (2) | - | (16) | - | - | - | |
| At end of period | (957) | (2,037) | (957) | (292) | (2,037) | |
| Cash flow hedging reserve | ||||||
| At beginning of period | (140) | (252) | 798 | 113 | 119 | |
| Amount recognised in equity | 2,417 | 180 | 389 | 1,203 | (149) | |
| Amount transferred from equity to earnings | (993) | (59) | (265) | (264) | (197) | |
| Tax | (405) | (67) | (43) | (254) | 87 | |
| Recycled to profit or loss on disposal of | ||||||
| businesses (3) | - | 58 | - | - | - | |
| At end of period | 879 | (140) | 879 | 798 | (140) |
for the period ended 31 December 2011 (continued)
| Year ended | |||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | Quarter ended 30 September |
31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Foreign exchange reserve | |||||
| At beginning of period | 5,138 | 4,528 | 4,847 | 4,834 | 5,085 |
| Retranslation of net assets | (382) | 997 | (111) | (31) | - |
| Foreign currency (losses)/gains on hedges | |||||
| of net assets | (10) | (458) | 20 | 10 | (6) |
| Tax | 23 | 63 | 13 | 34 | 34 |
| Recycled to profit or loss on disposal of | |||||
| businesses | 6 | 8 | 6 | - | 25 |
| At end of period | 4,775 | 5,138 | 4,775 | 4,847 | 5,138 |
| Capital redemption reserve | |||||
| At beginning of period | 198 | 170 | 198 | 198 | 172 |
| Preference shares redeemed | - | 1 | - | - | (1) |
| Cancellation of non-voting deferred shares | - | 27 | - | - | 27 |
| At end of period | 198 | 198 | 198 | 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 | 21,239 | 12,134 | 20,977 | 19,726 | 20,904 |
| (Loss)/profit attributable to ordinary and B | |||||
| shareholders and other equity owners | |||||
| - continuing operations | (2,002) | (973) | (1,798) | 1,225 | 12 |
| - discontinued operations | 5 | (28) | - | 1 | - |
| Equity preference dividends paid | - | (105) | - | - | - |
| Paid-in equity dividends paid, net of tax | - | (19) | - | - | - |
| Transfer from paid-in equity | |||||
| - gross | - | 2 | - | - | - |
| - tax | - | (1) | - | - | - |
| Equity owners gain on withdrawal of non-controlling interest |
|||||
| - gross | - | 40 | - | - | - |
| - tax | - | (11) | - | - | - |
| Redemption of equity preference shares | - | (2,968) | - | - | - |
| Gain on redemption of equity preference | |||||
| shares | - | 609 | - | - | - |
| Redemption of preference shares classified | |||||
| as debt | - | (118) | - | - | - |
| Transfer from merger reserve | 50 | 12,250 | - | - | - |
| Actuarial (losses)/gains recognised in | |||||
| retirement benefit schemes | |||||
| - gross | (581) | 158 | (581) | - | 158 |
| - tax | 86 | (71) | 86 | - | (71) |
| Purchase of non-controlling interest | - | (38) | - | - | (38) |
| Shares issued under employee share | |||||
| schemes | (58) | (13) | 151 | (2) | (2) |
| Share-based payments | |||||
| - gross | 200 | 385 | 98 | 35 | 282 |
| - tax | (10) | 6 | (4) | (8) | (6) |
| At end of period | 18,929 | 21,239 | 18,929 | 20,977 | 21,239 |
| Year ended | Quarter ended | ||||||
|---|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |||
| 2011 | 2010 | 2011 | 2011 | 2010 | |||
| £m | £m | £m | £m | £m | |||
| Own shares held | |||||||
| At beginning of period | (808) | (121) | (771) | (786) | (821) | ||
| Disposal/(purchase) of own shares | 20 | (700) | 1 | 13 | 11 | ||
| Shares issued under employee share | |||||||
| schemes | 19 | 13 | 1 | 2 | 2 | ||
| At end of period | (769) | (808) | (769) | (771) | (808) | ||
| Owners' equity at end of period | 74,819 | 75,132 | 74,819 | 77,443 | 75,132 | ||
| Non-controlling interests | |||||||
| At beginning of period | 1,719 | 16,895 | 1,433 | 1,498 | 1,780 | ||
| Currency translation adjustments and other | |||||||
| movements | (54) | (466) | (32) | (1) | 15 | ||
| Profit/(loss) attributable to non-controlling | |||||||
| interests | |||||||
| - continuing operations | (14) | (60) | 8 | (12) | (17) | ||
| - discontinued operations | 42 | (605) | 10 | 5 | 55 | ||
| Dividends paid | (40) | (4,200) | (1) | - | 17 | ||
| Movements in available-for-sale securities | |||||||
| - unrealised gains/(losses) | 1 | (56) | 1 | - | (2) | ||
| - realised losses | 2 | 37 | 2 | 3 | 1 | ||
| - tax | (1) | 5 | (1) | (1) | - | ||
| - recycled to profit or loss on disposal of | |||||||
| discontinued operations (4) | - | (7) | - | - | - | ||
| Movements in cash flow hedging reserves | |||||||
| - amounts recognised in equity | - | (120) | - | - | (21) | ||
| - tax | - | 39 | - | - | 6 | ||
| - recycled to profit or loss on disposal of | |||||||
| discontinued operations (5) | - | 1,036 | - | - | 15 | ||
| Equity raised | - | 559 | - | - | 58 | ||
| Equity withdrawn and disposals | (421) | (11,298) | (186) | (59) | (188) | ||
| Transfer to retained earnings | - | (40) | - | - | - | ||
| At end of period | 1,234 | 1,719 | 1,234 | 1,433 | 1,719 | ||
| Total equity at end of period | 76,053 | 76,851 | 76,053 | 78,876 | 76,851 | ||
| Total comprehensive (loss)/income | |||||||
| recognised in the statement of | |||||||
| changes in equity is attributable to: | |||||||
| Non-controlling interests | (24) | (197) | (12) | (6) | 52 | ||
| Preference shareholders | - | 105 | - | - | - | ||
| Paid-in equity holders | - | 19 | - | - | - | ||
| Ordinary and B shareholders | (756) | (598) | (2,949) | 2,658 | (902) | ||
| (780) | (671) | (2,961) | 2,652 | (850) |
Notes:
(1) Includes an impairment loss of £1,099 million in respect of the Group's holding of Greek government bonds, together with £169 million of related interest rate hedge adjustments, for the year ended 31 December 2011.
(2) Net of tax (year ended 31 December 2010 - £5 million credit).
(3) Net of tax (year ended 31 December 2010 - £19 million credit).
(4) Net of tax (year ended 31 December 2010 - £2 million credit).
(5) Net of tax (year ended 31 December 2010 - £340 million credit).
for the year ended 31 December 2011
| 2011 £m |
2010 £m |
|
|---|---|---|
| Operating activities | ||
| Operating loss before tax | (766) | (399) |
| Operating loss before tax on discontinued operations | 58 | (541) |
| Adjustments for non-cash items | 7,661 | 2,571 |
| Net cash inflow from trading activities | 6,953 | 1,631 |
| Changes in operating assets and liabilities | (3,444) | 17,095 |
| Net cash flows from operating activities before tax | 3,509 | 18,726 |
| Income taxes received/(paid) | (184) | 565 |
| Net cash flows from operating activities | 3,325 | 19,291 |
| Net cash flows from investing activities | 14 | 3,351 |
| Net cash flows from financing activities | (1,741) | (14,380) |
| Effects of exchange rate changes on cash and cash equivalents | (1,473) | 82 |
| Net increase in cash and cash equivalents | 125 | 8,344 |
| Cash and cash equivalents at beginning of year | 152,530 | 144,186 |
| Cash and cash equivalents at end of year | 152,655 | 152,530 |
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 accounts for the year ended 31 December 2011 have been prepared on a going concern basis.
The annual accounts are prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).
In May 2011, the IASB issued six new or revised standards:
IFRS 10 Consolidated Financial Statements which replaces SIC-12 Consolidation - Special Purpose Entities and the consolidation elements of the existing IAS 27 Consolidated and Separate Financial Statements. The new standard adopts a single definition of control: a reporting entity controls another entity when the reporting entity has the power to direct the activities of that other entity to generate returns for the reporting entity.
IAS 27 Separate Financial Statements which comprises those parts of the existing IAS 27 that dealt with separate financial statements.
IFRS 11 Joint Arrangements which supersedes IAS 31 Interests in Joint Ventures. IFRS 11 distinguishes between joint operations and joint ventures. Joint operations are accounted for by the investor recognising its assets and liabilities including its share of any assets held and liabilities incurred jointly and its share of revenues and costs. Joint ventures are accounted for in the investor's consolidated accounts using the equity method.
IAS 28 Investments in Associates and Joint Ventures covers joint ventures as well as associates; both must be accounted for using the equity method. The mechanics of the equity method are unchanged.
IFRS 12 Disclosure of Interests in Other Entities covers disclosures for entities reporting under IFRS 10 and IFRS 11 replacing those in IAS 28 and IAS 27. Entities are required to disclose information that helps financial statement readers evaluate the nature, risks and financial effects associated with an entity's interests in subsidiaries, in associates and joint arrangements and in unconsolidated structured entities.
IFRS 13 Fair Value Measurement which sets out a single IFRS framework for defining and measuring fair value and requiring disclosures about fair value measurements.
These standards are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted. The Group is reviewing the standards to determine their effect on the Group's financial reporting.
In June 2011, the IASB issued amendments to two standards:
Amendments to IAS 1 Presentation of Items of Other Comprehensive Income that require items that will never be recognised in profit or loss to be presented separately in other comprehensive income from those that are subject to subsequent reclassification. The amendments are effective for annual periods beginning on or after 1 July 2012. Earlier application is permitted.
Amendments IAS 19 Employee Benefits - these require the immediate recognition of all actuarial gains and losses eliminating the 'corridor approach'; interest cost to be calculated on the net pension liability or asset at the appropriate corporate bond rate; and all past service costs to be recognised immediately when a scheme is curtailed or amended. These amendments are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted. The Group is reviewing the amendments to determine their effect on the Group's financial reporting.
In December 2011, the IASB issued Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) and Disclosures-Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7). The amendment to IAS 32 adds application guidance on the meaning of 'a legally enforceable right to set off' and on simultaneous settlement. IFRS 7 is amended to require disclosures facilitating comparisons between those entities reporting under IFRS and those reporting under US GAAP. The amendments are effective for annual periods beginning on or after 1 January 2014 and are required to be applied retrospectively.
| Year ended Quarter ended |
|||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Loans and advances to customers | 17,969 | 18,889 | 4,336 | 4,505 | 4,755 |
| Loans and advances to banks | 697 | 591 | 207 | 154 | 167 |
| Debt securities | 2,744 | 3,296 | 691 | 712 | 690 |
| Interest receivable | 21,410 | 22,776 | 5,234 | 5,371 | 5,612 |
| Customer accounts | 3,529 | 3,721 | 926 | 919 | 926 |
| Deposits by banks | 982 | 1,333 | 226 | 248 | 288 |
| Debt securities in issue | 3,371 | 3,277 | 794 | 897 | 866 |
| Subordinated liabilities | 740 | 417 | 190 | 175 | (18) |
| Internal funding of trading businesses | 109 | (181) | 24 | 55 | (30) |
| Interest payable | 8,731 | 8,567 | 2,160 | 2,294 | 2,032 |
| Net interest income | 12,679 | 14,209 | 3,074 | 3,077 | 3,580 |
| Fees and commissions receivable Fees and commissions payable |
6,384 | 8,193 | 1,590 | 1,452 | 2,052 |
| - banking | (962) | (1,892) | (339) | (204) | (392) |
| - insurance related | (498) | (319) | (234) | (100) | (57) |
| Net fees and commissions | 4,924 | 5,982 | 1,017 | 1,148 | 1,603 |
| Foreign exchange | 1,327 | 1,491 | 308 | 441 | 217 |
| Interest rate | 760 | 1,862 | 76 | 33 | (165) |
| Credit | (15) | 41 | (695) | 366 | 83 |
| Other | 629 | 1,123 | 73 | 117 | 229 |
| Income/(loss) from trading activities | 2,701 | 4,517 | (238) | 957 | 364 |
| Gain on redemption of own debt | 255 | 553 | (1) | 1 | - |
| Operating lease and other rental income | 1,307 | 1,394 | 308 | 327 | 369 |
| Changes in fair value of own debt | 1,621 | 249 | (200) | 1,887 | 472 |
| Changes in the fair value of securities and other financial assets and liabilities |
150 | (180) | 6 | (148) | (83) |
| Changes in the fair value of investment | |||||
| properties | (139) | (405) | (65) | (22) | (293) |
| Profit on sale of securities | 882 | 496 | 179 | 274 | (10) |
| Profit on sale of property, plant and | |||||
| equipment | 22 | 50 | (5) | 5 | 29 |
| (Loss)/profit on sale of subsidiaries and | |||||
| associates | (28) | (107) | (15) | (39) | 511 |
| Life business (losses)/profits | (13) | 90 | - | (8) | 29 |
| Dividend income | 62 | 69 | 15 | 14 | 11 |
| Share of profits less losses of associated | |||||
| entities Other income |
26 232 |
70 (247) |
6 (24) |
5 89 |
14 (46) |
| Other operating income | 4,122 | 1,479 | 205 | 2,384 | 1,003 |
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
||
| Non-interest income (excluding | ||||||
| insurance net premium income) | 12,002 | 12,531 | 983 | 4,490 | 2,970 | |
| Insurance net premium income | 4,256 | 5,128 | 981 | 1,036 | 1,272 | |
| Total non-interest income | 16,258 | 17,659 | 1,964 | 5,526 | 4,242 | |
| Total income | 28,937 | 31,868 | 5,038 | 8,603 | 7,822 | |
| Staff costs | 8,678 | 9,671 | 1,993 | 2,076 | 2,194 | |
| Premises and equipment | 2,451 | 2,402 | 674 | 604 | 709 | |
| Other (1) | 4,931 | 3,995 | 1,296 | 962 | 1,048 | |
| Administrative expenses | 16,060 | 16,068 | 3,963 | 3,642 | 3,951 | |
| Depreciation and amortisation | 1,875 | 2,150 | 513 | 485 | 546 | |
| Write-down of goodwill and other | ||||||
| intangible assets | 91 | 10 | 91 | - | 10 | |
| Operating expenses | 18,026 | 18,228 | 4,567 | 4,127 | 4,507 | |
| General insurance | 2,968 | 4,698 | 529 | 734 | 1,151 | |
| Bancassurance | - | 85 | - | - | 31 | |
| Insurance net claims | 2,968 | 4,783 | 529 | 734 | 1,182 | |
| Loan impairment losses | 7,241 | 9,144 | 1,654 | 1,452 | 2,155 | |
| Securities impairment losses | ||||||
| - sovereign debt impairment and related | ||||||
| interest rate hedge adjustments | 1,268 | - | 224 | 202 | - | |
| - other | 200 | 112 | 40 | 84 | (14) | |
| Impairment losses | 8,709 | 9,256 | 1,918 | 1,738 | 2,141 |
Note:
(1) Includes Payment Protection Insurance costs of £850 million reflected in the quarter ended 30 June 2011.
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
| Staff expenses comprise | 2011 £m |
2010 £m |
Change % |
|---|---|---|---|
| Salaries | 5,423 | 5,473 | (1) |
| Variable compensation | 985 | 1,246 | (21) |
| Temporary and contract costs | 846 | 700 | 21 |
| Share based compensation | 197 | 397 | (50) |
| Bonus tax | 27 | 99 | (73) |
| Social security costs | 640 | 661 | (3) |
| Post retirement benefits | 447 | 569 | (21) |
| Other * | 113 | 526 | (79) |
| Staff expenses | 8,678 | 9,671 | (10) |
* Other includes severance costs and variable compensation for disposal groups.
The following table analyses Group and GBM variable compensation awards for 2011, which are 43% and 58% respectively lower than in 2010.
| Group | GBM | |||||||
|---|---|---|---|---|---|---|---|---|
| 2011 | 2010 | Change | 2011 | 2010 | Change | |||
| £m | £m | % | £m | £m | % | |||
| Non-deferred cash awards (1) | 72 | 89 | (19) | 10 | 18 | (44) | ||
| Non-deferred share awards | 35 | 54 | (35) | 23 | 43 | (47) | ||
| Total non-deferred variable compensation | 107 | 143 | (25) | 33 | 61 | (46) | ||
| Deferred bond awards | 582 | 1,029 | (43) | 286 | 701 | (59) | ||
| Deferred share awards | 96 | 203 | (53) | 71 | 175 | (59) | ||
| Total deferred variable compensation | 678 | 1,232 | (45) | 357 | 876 | (59) | ||
| Total variable compensation | 785 | 1,375 | (43) | 390 | 937 | (58) | ||
| Variable compensation as a % of core operating profit (2) Proportion of variable compensation that is |
11% | 16% | 18% | 22% | ||||
| deferred | 86% | 90% | 92% | 93% | ||||
| Total employees | 146,800 | 148,500 | (1) | 17,000 | 18,700 | (9) | ||
| Variable compensation per employee | £5,347 | £9,260 | (42) | £22,941 | £50,114 | (54) | ||
| Reconciliation of variable compensation awards to income statement charge | 2011 £m |
2010 £m |
||||||
| Variable compensation awarded for 2011 Less: deferral of charge for amounts awarded for current year Add: current year charge for amounts deferred from prior years |
785 (302) 502 |
1,375 (512) 383 |
||||||
| Income statement charge for variable compensation | 985 | 1,246 | ||||||
| Actual | Expected | |||||||
| Year in which income statement charge is expected to be taken for deferred variable compensation |
2010 | £m | 2011 £m |
2012 £m |
2013 and beyond £m |
|||
| Variable compensation deferred from 2009 and earlier | 383 | 160 | 78 | - | ||||
| Variable compensation deferred from 2010 | - | 342 | 105 | 65 | ||||
| Variable compensation for 2011 deferred | - | - | 225 | 77 | ||||
| 383 | 502 | 408 | 142 |
Notes:
(1) Cash payments to all employees are limited to £2,000.
(2) Core operating profit pre variable compensation expense and before one-off and other items.
Operating (loss)/profit is stated after charging loan impairment losses of £7,241 million (2010 - £9,144 million). The balance sheet loan impairment provisions increased in the year ended 31 December 2011 from £18,182 million to £19,883 million and the movements thereon were:
| Year ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 31 December 2010 | |||||||||
| Non | Non | |||||||||
| Core | Core | RFS MI | Total | Core | Core | RFS MI | Total | |||
| £m | £m | £m | £m | £m | £m | £m | £m | |||
| At beginning of period | 7,866 | 10,316 | - | 18,182 | 6,921 | 8,252 | 2,110 | 17,283 | ||
| Transfers to disposal groups | (773) | - | - | (773) | - | (72) | - | (72) | ||
| Intra-group transfers | 177 | (177) | - | - | (568) | 568 | - | - | ||
| Currency translation and other | ||||||||||
| adjustments | (76) | (207) | - | (283) | (16) | 59 | - | 43 | ||
| Disposals | - | - | 8 | 8 | - | (20) | (2,152) | (2,172) | ||
| Amounts written-off | (2,137) | (2,390) | - | (4,527) | (2,224) | (3,818) | - | (6,042) | ||
| Recoveries of amounts previously | ||||||||||
| written-off | 167 | 360 | - | 527 | 213 | 198 | - | 411 | ||
| Charge to income statement | ||||||||||
| - continued | 3,403 | 3,838 | - | 7,241 | 3,737 | 5,407 | - | 9,144 | ||
| - discontinued | - | - | (8) | (8) | - | - | 42 | 42 | ||
| Unwind of discount (recognised in interest | ||||||||||
| income) | (213) | (271) | - | (484) | (197) | (258) | - | (455) | ||
| At end of period | 8,414 | 11,469 | - | 19,883 | 7,866 | 10,316 | - | 18,182 |
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||||||
| Core £m |
Non Core £m |
RFS MI £m |
Total £m |
Core £m |
Non Core £m |
Total £m |
Core £m |
Non Core £m |
RFS MI £m |
Total £m |
|
| At beginning of period | 8,873 | 11,850 | - 20,723 | 8,752 | 12,007 20,759 | 7,791 | 9,879 | - | 17,670 | ||
| Transfers to disposal groups |
(773) | - | - | (773) | - | - | - | - | (5) | - | (5) |
| Intra-group transfers | - | - | - | - | - | - | - | (217) | 217 | - | - |
| Currency translation and other adjustments |
(75) | (162) | - | (237) | (90) | (285) | (375) | 147 | (235) | - | (88) |
| Disposals | - | - | (3) | (3) | - | - | - | - | (3) | (3) | (6) |
| Amounts written-off | (526) | (981) | - (1,507) | (593) | (497) (1,090) | (745) | (771) | - | (1,516) | ||
| Recoveries of amounts previously written-off |
48 | 99 | - | 147 | 39 | 55 | 94 | 29 | 67 | - | 96 |
| Charge to income statement |
|||||||||||
| - continued | 924 | 730 | - | 1,654 | 817 | 635 | 1,452 | 912 | 1,243 | - | 2,155 |
| - discontinued | - | - | 3 | 3 | - | - | - | - | - | 3 | 3 |
| Unwind of discount (recognised in interest |
|||||||||||
| income) | (57) | (67) | - | (124) | (52) | (65) | (117) | (51) | (76) | - | (127) |
| At end of period | 8,414 | 11,469 | - 19,883 | 8,873 | 11,850 20,723 | 7,866 | 10,316 | - | 18,182 |
Provisions at 31 December 2011 include £123 million (30 September 2011 - £126 million; 31 December 2010 - £127 million) in respect of loans and advances to banks.
The table above excludes impairments relating to securities (see page 153).
| Pension costs | 2011 £m |
2010 £m |
|---|---|---|
| Defined benefit schemes | 349 | 462 |
| Defined contribution schemes | 98 | 107 |
| 447 | 569 | |
| Net pension deficit/(surplus) | 2011 £m |
2010 £m |
| At 1 January Currency translation and other adjustments |
2,183 (3) |
2,905 - |
| Income statement | ||
| - pension costs | ||
| - continuing operations | 349 | 519 |
| - discontinued operations | - | 21 |
| - curtailment gains: continuing operations | - | (78) |
| Net actuarial losses/(gains) | 581 | (158) |
| Contributions by employer | (1,059) | (832) |
| Disposal of RFS minority interest | - | (194) |
| At 31 December | 2,051 | 2,183 |
| Net assets of schemes in surplus | (188) | (105) |
| Net liabilities of schemes in deficit | 2,239 | 2,288 |
The Group and the Trustees of The Royal Bank of Scotland Group Pension Fund agreed the funding valuation as at 31 March 2010 during the year. It showed that the value of liabilities exceed the value of assets by £3.5 billion as at 31 March 2010, a ratio of assets to liabilities of 84%. In order to eliminate this deficit, the Group will pay additional contributions each year over the period 2011 to 2018. These contributions started at £375 million per annum in 2011, 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)/credit differs from the expected tax (charge)/credit computed by applying the standard UK corporation tax rate of 26.5% (2010 - 28%) as follows:
| Year ended | |||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| (Loss)/profit before tax | (766) | (399) | (1,976) | 2,004 | (8) |
| Tax credit/(charge) based on the standard UK | |||||
| corporation tax rate of 26.5% (2010 - 28%) | 203 | 112 | 524 | (531) | 2 |
| Sovereign debt impairment where no | |||||
| deferred tax asset recognised | (275) | - | (56) | (36) | - |
| Other losses in period where no deferred | |||||
| tax asset recognised | (530) | (450) | (195) | (67) | (96) |
| Foreign profits taxed at other rates | (417) | (517) | (46) | (71) | (131) |
| UK tax rate change - deferred tax impact | (110) | (82) | 27 | (50) | 8 |
| Unrecognised timing differences | (20) | 11 | - | (10) | 18 |
| Non-deductible goodwill impairment | (24) | (3) | (24) | - | (3) |
| Items not allowed for tax | |||||
| - losses on strategic disposals and | |||||
| write-downs | (72) | (311) | (58) | (4) | (129) |
| - UK bank levy | (80) | - | (80) | - | - |
| - employee share schemes | (113) | (32) | (101) | (4) | (32) |
| - other disallowable items | (271) | (296) | (123) | (46) | (162) |
| Non-taxable items | |||||
| - gain on sale of Global Merchant Services | 12 | 221 | - | - | 221 |
| - gain on redemption of own debt | - | 11 | - | - | (1) |
| - other non-taxable items | 245 | 341 | 208 | 16 | 240 |
| Taxable foreign exchange movements | 4 | 4 | 2 | 2 | 2 |
| Losses brought forward and utilised | 2 | 2 | (29) | 2 | (8) |
| Adjustments in respect of prior periods | 196 | 355 | 137 | 8 | 74 |
| Actual tax (charge)/credit | (1,250) | (634) | 186 | (791) | 3 |
The high tax charge in the year ended 31 December 2011 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 effect of the two reductions of 1% in the rate of UK corporation tax enacted in March 2011 and July 2011 on the net deferred tax balance.
The combined effect of the tax losses in Ireland and the Netherlands (including the sovereign debt impairment and related interest rate hedge adjustments) in the year ended 31 December 2011 for which no deferred tax asset has been recognised and the two 1% changes in the standard rate of UK corporation tax, account for £1,020 million (70%) 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 impact of these items for the quarter ended 31 December 2011 is £165 million (49%).
The Group has recognised a deferred tax asset at 31 December 2011 of £3,878 million (30 September 2011 - £4,988 million; 31 December 2010 - £6,373 million), of which £2,933 million (30 September 2011 - £3,014 million; 31 December 2010 - £3,849 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 deferred tax asset balance has reduced over the period primarily as a result of the utilisation of tax losses brought forward and the impact of the reductions in the rate of UK corporation tax. The Group has considered the carrying value of this asset as at 31 December 2011 and concluded that it is recoverable based on future profit projections.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | ||
| 2011 | 2010 | 2011 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Trust preferred securities | - | 10 | - | - | - | |
| RBS Sempra Commodities JV | (18) | 35 | (5) | (8) | (11) | |
| RFS Holdings BV Consortium Members | 35 | (726) | 8 | 3 | 49 | |
| RBS Life Holdings | - | 26 | - | - | 9 | |
| Other | 11 | (10) | 15 | (2) | (9) | |
| Profit/(loss) attributable to non-controlling | ||||||
| interests | 28 | (665) | 18 | (7) | 38 |
The Group has undertaken that, unless otherwise agreed with the European Commission, neither the company nor any of its direct or indirect subsidiaries (other than companies in the RBS Holdings N.V. group, which are subject to different restrictions) will pay external investors any dividends or coupons on existing hybrid capital instruments (including preference shares, B shares and upper and lower tier 2 instruments) from 30 April 2010 and for a period of two years thereafter ("the Deferral period"), or exercise any call rights in relation to these capital instruments between 24 November 2009 and the end of the deferral period, unless there is a legal obligation to do so. Hybrid capital instruments issued after 24 November 2009 will generally not be subject to the restriction on dividend or coupon payments or call options.
Earnings per ordinary and B share have been calculated based on the following:
| Year ended | Quarter ended | ||||||
|---|---|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |||
| 2011 | 2010 | 2011 | 2011 | 2010 | |||
| Earnings | £m | £m | £m | £m | £m | ||
| (Loss)/profit from continuing operations | |||||||
| attributable to ordinary and B shareholders | (2,002) | (1,097) | (1,798) | 1,225 | 12 | ||
| Gain on redemption of preference shares and | |||||||
| paid-in equity | - | 610 | - | - | - | ||
| (Loss)/adjusted profit from continuing | |||||||
| operations attributable to ordinary and | |||||||
| B shareholders | (2,002) | (487) | (1,798) | 1,225 | 12 | ||
| Profit/(loss) from discontinued operations | |||||||
| attributable to ordinary and B shareholders | 5 | (28) | - | 1 | - | ||
| Ordinary shares in issue during the period | |||||||
| (millions) | 57,219 | 56,245 | 57,552 | 57,541 | 56,166 | ||
| B shares in issue during the period (millions) | 51,000 | 51,000 | 51,000 | 51,000 | 51,000 | ||
| Weighted average number of ordinary | |||||||
| and B shares in issue during the | |||||||
| period (millions) | 108,219 | 107,245 | 108,552 | 108,541 | 107,166 | ||
| Effect of dilutive share options and | |||||||
| convertible securities | - | - | - | 891 | - | ||
| Diluted weighted average number of ordinary | |||||||
| and B shares in issue during the period | 108,219 | 107,245 | 108,552 | 109,432 | 107,166 | ||
| Basic (loss)/earnings per ordinary and B | |||||||
| share from continuing operations | (1.8p) | (0.5p) | (1.7p) | 1.1p | - | ||
| Fair value of own debt | (1.3p) | (0.1p) | 0.2p | (1.7p) | (0.4p) | ||
| Asset Protection Scheme | 0.6p | 1.1p | 0.1p | - | 0.5p | ||
| Payment Protection Insurance costs | 0.6p | - | - | - | |||
| Sovereign debt impairment | 1.0p | - | 0.2p | - | - | ||
| Amortisation of purchased intangible assets | 0.1p | - 0.2p |
- | - | 0.1p | ||
| Integration and restructuring costs | 0.6p | 0.8p | 0.5p | 0.3p | 0.3p | ||
| Gain on redemption of own debt | (0.2p) | (1.0p) | - | - | - | ||
| Strategic disposals | 0.1p | (0.1p) | 0.1p | - | (0.5p) | ||
| Bank levy | 0.3p | - | 0.3p | - | - | ||
| Bonus tax | - | - | - | - | |||
| 0.1p | |||||||
| Interest rate hedge adjustments on impaired | |||||||
| available-for-sale Greek government bonds | 0.2p | - | - | 0.2p | - | ||
| Adjusted earnings/(loss) per ordinary | |||||||
| and B share from continuing operations | 0.2p | 0.5p | (0.3p) | (0.1p) | - | ||
| Earnings/(loss) from Non-Core attributable to | |||||||
| ordinary and B shareholders | 0.5p | 1.9p | (0.3p) | 0.1p | 0.4p | ||
| Core adjusted earnings per ordinary | |||||||
| and B share from continuing operations | 0.7p | 2.4p | (0.6p) | - | 0.4p | ||
| Core impairment losses | 0.5p | 1.3p | (0.2p) | 0.1p | 0.3p | ||
| Pre-impairment Core adjusted | |||||||
| earnings per ordinary and B share | 1.2p | 3.7p | (0.8p) | 0.1p | 0.7p | ||
| Memo: Core adjusted earnings per | |||||||
| ordinary and B share from continuing | |||||||
| operations assuming normalised tax | |||||||
| rate of 26.5% (2010 - 28.0%) | 4.1p | 4.8p | 0.7p | 0.9p | 1.1p | ||
| Diluted (loss)/earnings per ordinary and | |||||||
| B share from continuing operations | (1.8p) | (0.5p) | (1.7p) | 1.1p | - |
There have been no significant changes in the Group's divisions during the year.
The following tables provide an analysis of divisional operating profit/(loss) for the years ended 31 December 2011 and 31 December 2010 and the quarters ended 31 December 2011, 30 September 2011 and 31 December 2010 by main income statement captions. The divisional income statements on pages 22 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) | |
| Year ended 31 December 2011 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 4,272 | 1,206 | 5,478 | (2,699) | - | (788) | 1,991 |
| UK Corporate | 2,585 | 1,275 | 3,860 | (1,661) | - | (785) | 1,414 |
| Wealth | 718 | 459 | 1,177 | (831) | - | (25) | 321 |
| Global Transaction Services | 1,076 | 1,175 | 2,251 | (1,342) | - | (166) | 743 |
| Ulster Bank | 696 | 211 | 907 | (547) | - | (1,384) | (1,024) |
| US Retail & Commercial | 1,896 | 1,004 | 2,900 | (2,096) | - | (325) | 479 |
| Global Banking & Markets (1) | 665 | 5,276 | 5,941 | (4,331) | - | (49) | 1,561 |
| RBS Insurance (2) | 343 | 3,729 | 4,072 | (846) | (2,772) | - | 454 |
| Central items | (228) | 213 | (15) | 170 | (1) | 2 | 156 |
| Core | 12,023 | 14,548 | 26,571 | (14,183) | (2,773) | (3,520) | 6,095 |
| Non-Core (3) | 666 | 540 | 1,206 | (1,295) | (195) | (3,919) | (4,203) |
| Managed basis | 12,689 | 15,088 | 27,777 | (15,478) | (2,968) | (7,439) | 1,892 |
| Reconciling items | |||||||
| Fair value of own debt (4) | - | 1,846 | 1,846 | - | - | - | 1,846 |
| Asset Protection Scheme (5) | - | (906) | (906) | - | - | - | (906) |
| Payment Protection Insurance costs | - | - | - | (850) | - | - | (850) |
| Sovereign debt impairment | - | - | - | - | - | (1,099) | (1,099) |
| Amortisation of purchased | |||||||
| intangible assets | - | - | - | (222) | - | - | (222) |
| Integration and restructuring costs | (2) | (3) | (5) | (1,059) | - | - | (1,064) |
| Gain on redemption of own debt | - | 255 | 255 | - | - | - | 255 |
| Strategic disposals | - | (24) | (24) | (80) | - | - | (104) |
| Bank levy | - | - | - | (300) | - | - | (300) |
| Bonus tax | - | - | - | (27) | - | - | (27) |
| Write-down of goodwill and other | |||||||
| intangible assets | - | - | - | (11) | - | - | (11) |
| Interest rate hedge adjustments on | |||||||
| impaired available-for-sale Greek | |||||||
| government bonds | - | - | - | - | - | (169) | (169) |
| RFS Holdings minority interest | (8) | 2 | (6) | 1 | - | (2) | (7) |
| Statutory basis | 12,679 | 16,258 | 28,937 | (18,026) | (2,968) | (8,709) | (766) |
Notes:
(1) Reallocation of £54 million between net interest income and non-interest income in respect of funding costs of rental assets, £42 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £12 million.
(2) Total income includes £265 million investment income, of which £205 million is included in net interest income and £60 million in non-interest income. Reallocation of £138 million between non-interest income and net interest income in respect of instalment income.
(3) Reallocation of £215 million between net interest income and non-interest income in respect of funding costs of rental assets, £210 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £5 million.
(4) Comprises £225 million gain included in 'Income and trading activities' and £1,621 million gain included in 'Other operating income' on a statutory basis.
(5) 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) | |
| Year ended 31 December 2010 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail (1) | 4,078 | 1,422 | 5,500 | (2,883) | (85) | (1,160) | 1,372 |
| UK Corporate | 2,572 | 1,323 | 3,895 | (1,671) | - | (761) | 1,463 |
| Wealth | 609 | 447 | 1,056 | (734) | - | (18) | 304 |
| Global Transaction Services | 974 | 1,587 | 2,561 | (1,464) | - | (9) | 1,088 |
| Ulster Bank | 761 | 214 | 975 | (575) | - | (1,161) | (761) |
| US Retail & Commercial | 1,917 | 1,029 | 2,946 | (2,123) | - | (517) | 306 |
| Global Banking & Markets (2) | 1,215 | 6,697 | 7,912 | (4,397) | - | (151) | 3,364 |
| RBS Insurance (3) | 381 | 4,135 | 4,516 | (879) | (3,932) | - | (295) |
| Central items | 10 | 327 | 337 | 272 | (29) | (3) | 577 |
| Core | 12,517 | 17,181 | 29,698 | (14,454) | (4,046) | (3,780) | 7,418 |
| Non-Core (4) | 1,683 | 1,281 | 2,964 | (2,256) | (737) | (5,476) | (5,505) |
| Managed basis | 14,200 | 18,462 | 32,662 | (16,710) | (4,783) | (9,256) | 1,913 |
| Reconciling items | |||||||
| Fair value of own debt (5) | - | 174 | 174 | - | - | - | 174 |
| Asset Protection Scheme (6) | - | (1,550) | (1,550) | - | - | - | (1,550) |
| Amortisation of purchased | |||||||
| intangible assets | - | - | - | (369) | - | - | (369) |
| Integration and restructuring costs | - | - | - | (1,032) | - | - | (1,032) |
| Gain on redemption of own debt | - | 553 | 553 | - | - | - | 553 |
| Strategic disposals | - | 171 | 171 | - | - | - | 171 |
| Bonus tax | - | - | - | (99) | - | - | (99) |
| Write-down of goodwill and other | |||||||
| intangible assets | - | - | - | (10) | - | - | (10) |
| RFS Holdings minority interest | 9 | (151) | (142) | (8) | - | - | (150) |
| Statutory basis | 14,209 | 17,659 | 31,868 | (18,228) | (4,783) | (9,256) | (399) |
Notes:
(1) Reallocation of bancassurance claims of £85 million from non-interest income.
| Quarter ended 31 December 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 | 1,036 | 277 | 1,313 | (661) | - | (191) | 461 |
| UK Corporate | 634 | 291 | 925 | (416) | - | (234) | 275 |
| Wealth | 191 | 112 | 303 | (194) | - | (13) | 96 |
| Global Transaction Services | 277 | 296 | 573 | (329) | - | (47) | 197 |
| Ulster Bank | 171 | 49 | 220 | (132) | - | (327) | (239) |
| US Retail & Commercial | 493 | 258 | 751 | (529) | - | (65) | 157 |
| Global Banking & Markets (1) | 159 | 753 | 912 | (939) | - | (68) | (95) |
| RBS Insurance (2) | 82 | 841 | 923 | (209) | (589) | - | 125 |
| Central items | (40) | 43 | 3 | 79 | (1) | 4 | 85 |
| Core | 3,003 | 2,920 | 5,923 | (3,330) | (590) | (941) | 1,062 |
| Non-Core (3) | 73 | (377) | (304) | (314) | 61 | (751) | (1,308) |
| Managed basis | 3,076 | 2,543 | 5,619 | (3,644) | (529) | (1,692) | (246) |
| Reconciling items | |||||||
| Fair value of own debt (4) | - | (370) | (370) | - | - | - | (370) |
| Asset Protection Scheme (5) | - | (209) | (209) | - | - | - | (209) |
| Sovereign debt impairment | - | - | - | - | - | (224) | (224) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (53) | - | - | (53) |
| Integration and restructuring costs | - | - | - | (478) | - | - | (478) |
| Gain on redemption of own debt | - | (1) | (1) | - | - | - | (1) |
| Strategic disposals | - | (2) | (2) | (80) | - | - | (82) |
| Bank levy | - | - | - | (300) | - | - | (300) |
| Write-down of goodwill and other | |||||||
| intangible assets | - | - | - | (11) | - | - | (11) |
| RFS Holdings minority interest | (2) | 3 | 1 | (1) | - | (2) | (2) |
| Statutory basis | 3,074 | 1,964 | 5,038 | (4,567) | (529) | (1,918) | (1,976) |
Notes:
(1) Reallocation of £15 million between net interest income and non-interest income in respect of funding costs of rental assets, £12 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £3 million.
(2) Total income includes £60 million investment income of which £49 million is included in net interest income and £11 million in non-interest income. Reallocation of £33 million between non-interest income and net interest income in respect of instalment income.
(3) Reallocation of £56 million between net interest income and non-interest income in respect of funding costs of rental assets, £55 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £1 million.
(4) Comprises £170 million loss included in 'Income from trading activities' and £200 million loss included in 'Other operating income' on a statutory basis.
(5) 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 September 2011 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 1,074 | 292 | 1,366 | (672) | - | (195) | 499 |
| UK Corporate | 621 | 327 | 948 | (419) | - | (228) | 301 |
| Wealth | 178 | 118 | 296 | (221) | - | (4) | 71 |
| Global Transaction Services | 276 | 300 | 576 | (336) | - | (45) | 195 |
| Ulster Bank | 185 | 60 | 245 | (137) | - | (327) | (219) |
| US Retail & Commercial | 483 | 257 | 740 | (541) | - | (84) | 115 |
| Global Banking & Markets (1) | 161 | 938 | 1,099 | (1,019) | - | 32 | 112 |
| RBS Insurance (2) | 84 | 949 | 1,033 | (215) | (695) | - | 123 |
| Central items | (94) | 103 | 9 | 62 | (1) | (3) | 67 |
| Core | 2,968 | 3,344 | 6,312 | (3,498) | (696) | (854) | 1,264 |
| Non-Core (3) | 110 | (64) | 46 | (323) | (38) | (682) | (997) |
| Managed basis | 3,078 | 3,280 | 6,358 | (3,821) | (734) | (1,536) | 267 |
| Reconciling items | |||||||
| Fair value of own debt (4) | - | 2,357 | 2,357 | - | - | - | 2,357 |
| Asset Protection Scheme (5) | - | (60) | (60) | - | - | - | (60) |
| Sovereign debt impairment and related | |||||||
| interest rate hedge adjustments | - | - | - | - | - | (202) | (202) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (69) | - | - | (69) |
| Integration and restructuring costs | - | - | - | (233) | - | - | (233) |
| Gain on redemption of own debt | - | 1 | 1 | - | - | - | 1 |
| Strategic disposals | - | (49) | (49) | - | - | - | (49) |
| Bonus tax | - | - | - | (5) | - | - | (5) |
| RFS Holdings minority interest | (1) | (3) | (4) | 1 | - | - | (3) |
| Statutory basis | 3,077 | 5,526 | 8,603 | (4,127) | (734) | (1,738) | 2,004 |
Notes:
(1) Reallocation of £13 million between net interest income and non-interest income in respect of funding costs of rental assets, £10 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £3 million.
(2) Total income includes £72 million investment income of which £49 million is included in net interest income and £23 million in non-interest income. Reallocation of £35 million between non-interest income and net interest income in respect of instalment income.
(3) Reallocation of £54 million between net interest income and non-interest income in respect of funding costs of rental assets, £53 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £1 million.
(4) Comprises £470 million gain included in 'Income from trading activities' and £1,887 million gain included in 'Other operating income' on a statutory basis.
(5) 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 December 2010 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail (1) | 1,088 | 402 | 1,490 | (679) | (31) | (222) | 558 |
| UK Corporate | 653 | 330 | 983 | (431) | - | (219) | 333 |
| Wealth | 160 | 111 | 271 | (178) | - | (6) | 87 |
| Global Transaction Services | 263 | 375 | 638 | (368) | - | (3) | 267 |
| Ulster Bank | 187 | 56 | 243 | (138) | - | (376) | (271) |
| US Retail & Commercial | 467 | 231 | 698 | (529) | - | (105) | 64 |
| Global Banking & Markets (2) | 214 | 1,373 | 1,587 | (1,065) | - | 5 | 527 |
| RBS Insurance (3) | 96 | 1,016 | 1,112 | (223) | (898) | - | (9) |
| Central items | 92 | 24 | 116 | 11 | (8) | (4) | 115 |
| Core | 3,220 | 3,918 | 7,138 | (3,600) | (937) | (930) | 1,671 |
| Non-Core (4) | 358 | (37) | 321 | (481) | (245) | (1,211) | (1,616) |
| Managed basis | 3,578 | 3,881 | 7,459 | (4,081) | (1,182) | (2,141) | 55 |
| Reconciling items | |||||||
| Fair value of own debt (5) | - | 582 | 582 | - | - | - | 582 |
| Asset Protection Scheme (6) | - | (725) | (725) | - | - | - | (725) |
| Amortisation of purchased | |||||||
| intangible assets | - | - | - | (96) | - | - | (96) |
| Integration and restructuring costs | - | - | - | (299) | - | - | (299) |
| Strategic disposals | - | 502 | 502 | - | - | - | 502 |
| Bonus tax | - | - | - | (15) | - | - | (15) |
| RFS Holdings minority interest | 2 | 2 | 4 | (6) | - | - | (2) |
| Write-down of goodwill and other | |||||||
| intangible assets | - | - | - | (10) | - | - | (10) |
| Statutory basis | 3,580 | 4,242 | 7,822 | (4,507) | (1,182) | (2,141) | (8) |
Notes:
(1) Reallocation of bancassurance claims of £31 million from non-interest income.
| 31 December | 30 September | 31 December | |
|---|---|---|---|
| 2011 | 2011 | 2010 | |
| Total assets | £m | £m | £m |
| UK Retail | 114,469 | 113,308 | 111,793 |
| UK Corporate | 111,835 | 112,737 | 114,550 |
| Wealth | 21,718 | 21,946 | 21,073 |
| Global Transaction Services | 25,937 | 29,889 | 25,221 |
| Ulster Bank | 34,810 | 37,356 | 40,081 |
| US Retail & Commercial | 74,502 | 72,879 | 71,173 |
| Global Banking & Markets | 874,848 | 952,374 | 802,578 |
| RBS Insurance | 12,912 | 13,031 | 12,555 |
| Central items | 130,306 | 135,545 | 99,728 |
| Core | 1,401,337 | 1,489,065 | 1,298,752 |
| Non-Core | 104,726 | 117,671 | 153,882 |
| 1,506,063 | 1,606,736 | 1,452,634 | |
| RFS Holdings minority interest | 804 | 992 | 942 |
| 1,506,867 | 1,607,728 | 1,453,576 |
| Year ended | Quarter ended | ||||
|---|---|---|---|---|---|
| 31 December | 31 December | 31 December | 30 September | 31 December | |
| 2011 | 2010 | 2011 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Discontinued operations | |||||
| Total income | 42 | 1,433 | 15 | 10 | 6 |
| Operating expenses | (5) | (803) | (1) | (3) | (2) |
| Insurance net claims | - | (161) | - | - | - |
| Impairment recoveries/(losses) | 8 | (42) | (3) | - | (3) |
| Profit before tax | 45 | 427 | 11 | 7 | 1 |
| Gain on disposal before recycling | |||||
| of reserves | - | 113 | - | - | 56 |
| Recycled reserves | - | (1,076) | - | - | - |
| Operating profit/(loss) before tax | 45 | (536) | 11 | 7 | 57 |
| Tax | (11) | (92) | (1) | (3) | (3) |
| Profit/(loss) after tax | 34 | (628) | 10 | 4 | 54 |
| Businesses acquired exclusively with a view to disposal |
|||||
| Profit/(loss) after tax | 13 | (5) | - | 2 | 1 |
| Profit/(loss) from discontinued operations, | |||||
| net of tax | 47 | (633) | 10 | 6 | 55 |
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.
| 31 December 2011 | |||||
|---|---|---|---|---|---|
| UK branch based businesses £m |
Other £m |
Total £m |
30 September 2011 £m |
31 December 2010 £m |
|
| Assets of disposal groups | |||||
| Cash and balances at central banks | 100 | 27 | 127 | 119 | 184 |
| Loans and advances to banks Loans and advances to customers |
- 18,676 |
87 729 |
87 19,405 |
95 1,711 |
651 5,013 |
| Debt securities and equity shares | - | 5 | 5 | 10 | 20 |
| Derivatives | 431 | 8 | 439 | 24 | 5,148 |
| Intangible assets | - | 15 | 15 | - | - |
| Settlement balances | - | 14 | 14 | 206 | 555 |
| 112 | 4,637 | 4,749 | 220 | 18 | |
| Other assets | - | 456 | 456 | 448 | 704 |
| Discontinued operations and other disposal groups | 19,319 | 5,978 | 25,297 | 2,833 | 12,293 |
| Property, plant and equipment Assets acquired exclusively with a view to disposal |
- | 153 | 153 | 211 | 191 |
| 19,319 | 6,131 | 25,450 | 3,044 | 12,484 | |
| Liabilities of disposal groups | |||||
| Deposits by banks | - | 1 | 1 | 288 | 266 |
| Customer accounts | 21,784 | 826 | 22,610 | 1,743 | 2,267 |
| Derivatives | 117 | 9 | 126 | 24 | 5,042 |
| Settlement balances | - | 8 | 8 | 264 | 907 |
| Other liabilities | - | 1,233 | 1,233 | 178 | 925 |
| Discontinued operations and other disposal groups | 21,901 | 2,077 | 23,978 | 2,497 | 9,407 |
| Liabilities acquired exclusively with a view to disposal | - | 17 | 17 | 19 | 21 |
| 21,901 | 2,094 | 23,995 | 2,516 | 9,428 |
The assets and liabilities of disposal groups at 31 December 2011 primarily comprise the RBS England and Wales and NatWest Scotland branch-based businesses ("UK branch-based businesses") and the RBS Aviation Capital business.
The disposal of the RBS Sempra Commodities JV was substantially completed in 2010. Certain contracts of the RBS Sempra Commodities JV were sold in risk transfer transactions prior to being novated to the purchaser, the majority of which completed during 2011.
Loans, REIL and impairment provisions at 31 December 2011 relating to the Group's UK branchbased businesses are set out below.
| Gross loans £m |
REIL £m |
Impairment provisions £m |
|
|---|---|---|---|
| Residential mortgages | 5,662 | 186 | 34 |
| Personal lending | 1,801 | 333 | 284 |
| Property | 4,290 | 446 | 132 |
| Construction | 416 | 181 | 58 |
| Service industries and business activities | 4,497 | 329 | 156 |
| Other | 2,783 | 50 | 30 |
| Latent | - | - | 79 |
| Total | 19,449 | 1,525 | 773 |
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.
| At fair value | Other financial |
Non | ||||||
|---|---|---|---|---|---|---|---|---|
| through profit or loss | instruments | financial | ||||||
| (amortised | Finance | assets/ | ||||||
| HFT (1) | DFV (2) AFS (3) | LAR (4) | cost) | leases | 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 | 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 |
| Other | ||||||||
|---|---|---|---|---|---|---|---|---|
| At fair value | financial | Non | ||||||
| through profit or loss | instruments | financial | ||||||
| (amortised | Finance | assets/ | ||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | cost) | leases | liabilities | Total | |
| 31 December 2011 | £m | £m | £m | £m | £m | £m | £m | £m |
| 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 | 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 |
| At fair value through profit or loss |
Other financial instruments |
Non financial |
||||||
|---|---|---|---|---|---|---|---|---|
| (amortised | Finance | assets/ | ||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | cost) | leases | liabilities | Total | |
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at | ||||||||
| central banks | - | - | - | 78,445 | 78,445 | |||
| Loans and advances to | ||||||||
| banks | ||||||||
| - reverse repos | 40,181 | - | - | 7,946 | 48,127 | |||
| - other | 20,423 | - | - | 32,179 | 52,602 | |||
| Loans and advances to | ||||||||
| customers | ||||||||
| - reverse repos | 41,692 | - | - | 12,440 | 54,132 | |||
| - other | 24,608 | 1,040 | - | 450,193 | 9,732 | 485,573 | ||
| Debt securities | 112,568 | 162 | 110,401 | 6,526 | 229,657 | |||
| Equity shares | 12,044 | 834 | 2,010 | - | 14,888 | |||
| Settlement balances | - | - | - | 21,526 | 21,526 | |||
| Derivatives | 572,344 | 572,344 | ||||||
| Intangible assets | 14,744 | 14,744 | ||||||
| Property, plant and | ||||||||
| equipment | 17,060 | 17,060 | ||||||
| Deferred tax | 4,988 | 4,988 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,394 | 9,204 | 10,598 | ||
| Assets of disposal groups | 3,044 | 3,044 | ||||||
| 823,860 | 2,036 | 112,411 | 610,649 | 9,732 | 49,040 | 1,607,728 |
| At fair value through profit or loss |
Other financial instruments |
Non financial |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | (amortised cost) |
Finance leases |
assets/ liabilities |
Total | ||
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | £m | |
| Liabilities | |||||||||
| Deposits by banks | |||||||||
| - repos | 24,583 | - | 11,644 | 36,227 | |||||
| - other | 34,754 | - | 43,616 | 78,370 | |||||
| Customer accounts | |||||||||
| - repos | 67,447 | - | 28,244 | 95,691 | |||||
| - other | 14,459 | 5,836 | 413,365 | 433,660 | |||||
| Debt securities in issue | 10,754 | 37,910 | 145,847 | 194,511 | |||||
| Settlement balances | - | - | 17,983 | 17,983 | |||||
| Short positions | 48,495 | - | 48,495 | ||||||
| Derivatives | 561,790 | 561,790 | |||||||
| Accruals, deferred income | |||||||||
| and other liabilities | - | - | 1,629 | 471 | 20,838 | 22,938 | |||
| Retirement benefit | |||||||||
| liabilities | - | 1,855 | 1,855 | ||||||
| Deferred tax | - | 1,913 | 1,913 | ||||||
| Insurance liabilities | - | 6,628 | 6,628 | ||||||
| Subordinated liabilities | - | 934 | 25,341 | 26,275 | |||||
| Liabilities of disposal | |||||||||
| groups | 2,516 | 2,516 | |||||||
| 762,282 | 44,680 | 687,669 | 471 | 33,750 | 1,528,852 | ||||
| Equity | 78,876 | ||||||||
| 1,607,728 |
| At fair value through profit or loss |
Other financial instruments (amortised |
Finance | Non financial assets/ |
|||||
|---|---|---|---|---|---|---|---|---|
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | cost) | leases | liabilities | Total | |
| 31 December 2010 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at | ||||||||
| central banks | - | - | - | 57,014 | 57,014 | |||
| Loans and advances to | ||||||||
| banks | ||||||||
| - reverse repos | 38,215 | - | - | 4,392 | 42,607 | |||
| - other | 26,082 | - | - | 31,829 | 57,911 | |||
| Loans and advances to | ||||||||
| customers | ||||||||
| - reverse repos | 41,110 | - | - | 11,402 | 52,512 | |||
| - other | 19,903 | 1,100 | - | 471,308 | 10,437 | 502,748 | ||
| Debt securities | 98,869 | 402 | 111,130 | 7,079 | 217,480 | |||
| Equity shares | 19,186 | 1,013 | 1,999 | - | 22,198 | |||
| Settlement balances | - | - | - | 11,605 | 11,605 | |||
| Derivatives | 427,077 | 427,077 | ||||||
| Intangible assets | 14,448 | 14,448 | ||||||
| Property, plant and | ||||||||
| equipment | 16,543 | 16,543 | ||||||
| Deferred tax | 6,373 | 6,373 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,306 | 11,270 | 12,576 | ||
| Assets of disposal groups | 12,484 | 12,484 | ||||||
| 670,442 | 2,515 | 113,129 | 595,935 | 10,437 | 61,118 | 1,453,576 |
| Other | ||||||||
|---|---|---|---|---|---|---|---|---|
| At fair value | financial | Non | ||||||
| through profit or loss | instruments | financial | ||||||
| (amortised | Finance | assets/ | ||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | cost) | leases | liabilities | Total | |
| 31 December 2010 | £m | £m | £m | £m | £m | £m | £m | £m |
| Liabilities | ||||||||
| Deposits by banks | ||||||||
| - repos | 20,585 | - | 12,154 | 32,739 | ||||
| - other | 28,216 | - | 37,835 | 66,051 | ||||
| Customer accounts | ||||||||
| - repos | 53,031 | - | 29,063 | 82,094 | ||||
| - other | 14,357 | 4,824 | 409,418 | 428,599 | ||||
| Debt securities in issue | 7,730 | 43,488 | 167,154 | 218,372 | ||||
| Settlement balances | - | - | 10,991 | 10,991 | ||||
| Short positions | 43,118 | - | 43,118 | |||||
| Derivatives | 423,967 | 423,967 | ||||||
| Accruals, deferred income | ||||||||
| and other liabilities | - | - | 1,793 | 458 | 20,838 | 23,089 | ||
| Retirement benefit | ||||||||
| liabilities | - | 2,288 | 2,288 | |||||
| Deferred tax | - | 2,142 | 2,142 | |||||
| Insurance liabilities | - | 6,794 | 6,794 | |||||
| Subordinated liabilities | - | 1,129 | 25,924 | 27,053 | ||||
| Liabilities of disposal | ||||||||
| groups | 9,428 | 9,428 | ||||||
| 591,004 | 49,441 | 694,332 | 458 | 41,490 | 1,376,725 | |||
| Equity | 76,851 | |||||||
1,453,576
Notes:
(1) Held-for-trading.
(2) Designated as at fair value through profit or loss.
(3) Available-for-sale.
(4) Loans and receivables.
There were no reclassifications in 2011 or 2010.
Detailed explanations of the valuation techniques are set out in the Group's 2011 Annual Report and Accounts. Certain aspects relating to the valuation of financial instruments carried at fair value are discussed below.
When valuing financial instruments in the trading book, adjustments are made to mid-market valuations to cover bid-offer spread, liquidity and credit risk. 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.
The table below shows the valuation reserves and adjustments.
| 31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Credit valuation adjustments (CVA) | |||
| Monoline insurers | 1,198 | 2,827 | 2,443 |
| Credit derivative product companies (CDPCs) | 1,034 | 1,233 | 490 |
| Other counterparties | 2,254 | 2,222 | 1,714 |
| 4,486 | 6,282 | 4,647 | |
| Bid-offer, liquidity and other reserves | 2,704 | 2,712 | 2,797 |
| 7,190 | 8,994 | 7,444 |
Until the first half of 2011, primary issuance spreads were used to calculate the own credit adjustment for senior debt issuances. As issuances by the Group declined significantly during 2011, the credit spread used for this adjustment was refined to reference more liquid secondary market senior debt issuance spreads, as they are considered to provide a fairer representation of fair value.
| Debt securities in issue (2) | Subordinated liabilities |
||||||
|---|---|---|---|---|---|---|---|
| Cumulative own credit adjustment (1) | HFT DFV Total £m £m £m |
DFV £m |
Total (3) Derivatives £m £m |
Total £m |
|||
| 31 December 2011 | 882 | 2,647 | 3,529 | 679 | 4,208 | 602 | 4,810 |
| 30 September 2011 | 939 | 3,054 | 3,993 | 657 | 4,650 | 700 | 5,350 |
| 31 December 2010 | 517 | 1,574 | 2,091 | 325 | 2,416 | 534 | 2,950 |
| Carrying values of underlying liabilities | £bn | £bn | £bn | £bn | £bn | ||
| 31 December 2011 | 11.5 | 35.7 | 47.2 | 0.9 | 48.1 | ||
| 30 September 2011 | 10.8 | 37.9 | 48.7 | 0.9 | 49.6 | ||
| 31 December 2010 | 7.7 | 43.5 | 51.2 | 1.1 | 52.3 |
Notes:
(1) The own credit adjustment for fair value does not alter cash flows, is not used for performance management and is disregarded for regulatory capital reporting and will reverse over time as the liabilities mature.
(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.
| 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% | 100.0% | ||||
| 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 |
| 31 December 2010 | ||||||
|---|---|---|---|---|---|---|
| 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 | - | 38.2 | - | 38.2 | - | - |
| - collateral | - | 25.1 | - | 25.1 | - | - |
| - other | - | 0.6 | 0.4 | 1.0 | 40 | (20) |
| - | 63.9 | 0.4 | 64.3 | 40 | (20) | |
| Loans and advances to customers | ||||||
| - reverse repos | - | 41.1 | - | 41.1 | - | - |
| - collateral | - | 14.4 | - | 14.4 | - | - |
| - other | - | 6.2 | 0.4 | 6.6 | 30 | (40) |
| - | 61.7 | 0.4 | 62.1 | 30 | (40) | |
| Debt securities | ||||||
| - UK government | 13.5 | - | - | 13.5 | - | - |
| - US government | 31.0 | 7.0 | - | 38.0 | - | - |
| - other government | 62.3 | 13.6 | - | 75.9 | - | - |
| - corporate | - | 6.5 | 1.2 | 7.7 | 210 | (170) |
| - other financial institutions | 3.5 | 64.8 | 7.0 | 75.3 | 540 | (180) |
| 110.3 | 91.9 | 8.2 | 210.4 | 750 | (350) | |
| Equity shares | 18.4 | 2.8 | 1.0 | 22.2 | 160 | (160) |
| Derivatives | ||||||
| - foreign exchange | - | 83.2 | 0.1 | 83.3 | - | - |
| - interest rate | 1.7 | 308.3 | 1.7 | 311.7 | 150 | (140) |
| - equities and commodities | 0.1 | 4.9 | 0.2 | 5.2 | - | - |
| - credit - APS (2) | - | - | 0.6 | 0.6 | 860 | (940) |
| - credit - other | - | 23.2 | 3.1 | 26.3 | 320 | (170) |
| 1.8 | 419.6 | 5.7 | 427.1 | 1,330 | (1,250) | |
| 130.5 | 639.9 | 15.7 | 786.1 | 2,310 | (1,820) | |
| Proportion | 16.6% | 81.4% | 2.0% | 100% | ||
| Of which | ||||||
| Core | 129.4 | 617.6 | 7.2 | 754.2 | ||
| Non-Core | 1.1 | 22.3 | 8.5 | 31.9 | ||
| 130.5 | 639.9 | 15.7 | 786.1 | |||
The following tables detail AFS assets included within total assets on pages 97 and 103.
| 31 December 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | |||
| Assets | £bn | £bn | £bn | £bn | £m | £m | ||
| 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 |
| 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | |||
| Assets | £bn | £bn | £bn | £bn | £m | £m | ||
| Debt securities | ||||||||
| - UK government | 8.4 | - | - | 8.4 | - | - | ||
| - US government | 17.8 | 4.4 | - | 22.2 | - | - | ||
| - other government | 26.5 | 6.4 | - | 32.9 | - | - | ||
| - corporate | - | 1.4 | 0.1 | 1.5 | 20 | (20) | ||
| - other financial institutions | 0.4 | 41.4 | 4.3 | 46.1 | 280 | (40) | ||
| 53.1 | 53.6 | 4.4 | 111.1 | 300 | (60) | |||
| Equity shares | 0.3 | 1.4 | 0.3 | 2.0 | 60 | (60) | ||
| 53.4 | 55.0 | 4.7 | 113.1 | 360 | (120) | |||
| Of which | ||||||||
| Core | 52.8 | 49.2 | 1.0 | 103.0 | ||||
| Non-Core | 0.6 | 5.8 | 3.7 | 10.1 | ||||
| 53.4 | 55.0 | 4.7 | 113.1 | |||||
| 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 | - | - | |||
| Total | 34.8 | 715.0 | 6.3 | 756.1 | 610 | (470) | |||
| Proportion | 4.6% | 94.6% | 0.8% | 100.0% | |||||
| Of which | |||||||||
| Core | 34.8 | 708.9 | 5.7 | 749.4 | |||||
| Non-Core | - | 6.1 | 0.6 | 6.7 | |||||
| Total | 34.8 | 715.0 | 6.3 | 756.1 |
| 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | ||||||||
| Level 1 | Level 2 | Level 3 | Total | Favourable | Unfavourable | |||
| Liabilities | £bn | £bn | £bn | £bn | £m | £m | ||
| Deposits by banks | ||||||||
| - repos | - | 20.6 | - | 20.6 | - | - | ||
| - collateral | - | 26.6 | - | 26.6 | - | - | ||
| - other | - | 1.6 | - | 1.6 | - | - | ||
| - | 48.8 | - | 48.8 | - | - | |||
| Customer accounts | ||||||||
| - repos | - | 53.0 | - | 53.0 | - | - | ||
| - collateral | - | 10.4 | - | 10.4 | - | - | ||
| - other | - | 8.7 | 0.1 | 8.8 | 60 | (60) | ||
| - | 72.1 | 0.1 | 72.2 | 60 | (60) | |||
| Debt securities in issue | - | 49.0 | 2.2 | 51.2 | 90 | (110) | ||
| Short positions | 35.0 | 7.3 | 0.8 | 43.1 | 20 | (50) | ||
| Derivatives | ||||||||
| - foreign exchange | 0.1 | 89.3 | - | 89.4 | - | (10) | ||
| - interest rate | 0.2 | 298.0 | 1.0 | 299.2 | 70 | (90) | ||
| - equities and commodities | 0.1 | 9.6 | 0.4 | 10.1 | 10 | - | ||
| - credit - other | - | 25.0 | 0.3 | 25.3 | 40 | (40) | ||
| 0.4 | 421.9 | 1.7 | 424.0 | 120 | (140) | |||
| Subordinated liabilities | - | 1.1 | - | 1.1 | - | - | ||
| Total | 35.4 | 600.2 | 4.8 | 640.4 | 290 | (360) | ||
| Proportion | 5.5% | 93.7% | 0.8% | 100% | ||||
| Of which | ||||||||
| Core | 35.4 | 586.9 | 3.8 | 626.1 | ||||
| Non-Core | - | 13.3 | 1.0 | 14.3 | ||||
| Total | 35.4 | 600.2 | 4.8 | 640.4 |
Notes:
(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. The 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.
(2) Asset Protection Scheme.
| recorded in the income statement Level 3 transfers Sales and instruments held at 1 January Gains or Purchases settle 31 December 2011 losses (1) In Out and issues ments FX (2) 2011 £m £m £m £m £m £m £m £m Assets Fair value through profit or loss: Loans and advances 843 (15) 145 - 701 (920) 6 760 Debt securities 3,784 (177) 164 (380) 1,014 (2,175) 13 2,243 Equity shares 716 (46) 143 (33) 56 (258) (5) 573 Derivatives 5,737 (511) 3,042 (1,441) 684 (834) 55 6,732 11,080 (749) 3,494 (1,854) 2,455 (4,187) 69 10,308 AFS: Debt securities 4,379 5 2,097 (21) 98 (864) 3 5,697 Equity shares 279 61 82 - 7 (30) (4) 395 4,658 66 2,179 (21) 105 (894) (1) 6,092 Total 15,738 (683) 5,673 (1,875) 2,560 (5,081) 68 16,400 |
relating to 31 December 2011 £m |
|---|---|
| (11) | |
| (61) | |
| (43) | |
| (522) | |
| (637) | |
| 2 | |
| (4) | |
| (2) | |
| (639) | |
| Liabilities | |
| Deposits 84 (35) - (24) - (4) 1 22 |
(25) |
| Debt securities | |
| in issue 2,203 (201) 948 (520) 688 (886) (33) 2,199 |
(50) |
| Short positions 776 (71) 58 (3) 34 (506) 3 291 |
(207) |
| Derivatives 1,740 279 1,822 (240) 538 (366) 38 3,811 |
325 |
| Other 1 - - (1) - - - - |
- |
| Total 4,804 (28) 2,828 (788) 1,260 (1,762) 9 6,323 |
43 |
| Net losses (655) |
(682) |
Notes:
(1) Net (losses)/gains recognised in the income statement and statement of comprehensive income during the year were £(717) million and £62 million respectively.
(2) Foreign exchange movements.
The 2011 full year movement in available-for-sale financial assets reflects net unrealised gains on securities of £2,339 million, primarily as yields tightened on high quality sovereign bonds. This was partially offset by the transfer to profit or loss of realised gains primarily from routine portfolio management in Group Treasury of £545 million, along with disposals across several divisions. Impairment of Greek government debt led to the recycling of unrealised losses to the income statement.
The Q4 2011 movement mainly reflects net realised gains of £155 million. Unrealised gains in Q3 2011 principally related to gains in UK government bonds, reflecting flight to quality.
The 2011 full year and Q4 2011 tax charge include a £664 million write-off of deferred tax assets in The Netherlands.
| Year ended | |||||
|---|---|---|---|---|---|
| Available-for-sale reserve | 31 December 2011 £m |
31 December 2010 £m |
31 December 2011 £m |
Quarter ended 30 September 2011 £m |
31 December 2010 £m |
| At beginning of period | (2,037) | (1,755) | (292) | (1,026) | (1,242) |
| Unrealised losses on Greek sovereign debt | (570) | (437) | (224) | (202) | (7) |
| Impairment of Greek sovereign debt | 1,268 | - | 224 | 202 | - |
| Other unrealised net gains/(losses) | 2,339 | 616 | 45 | 1,207 | (1,141) |
| Realised net (gains)/losses | (782) | (519) | (155) | (214) | 16 |
| Tax | (1,175) | 74 | (555) | (259) | 337 |
| Recycled to profit or loss on disposal of | |||||
| businesses (1) | - | (16) | - | - | - |
| At end of period | (957) | (2,037) | (957) | (292) | (2,037) |
Note:
(1) Net of tax - £5 million credit.
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 £142 million and £224 million were recorded in Q3 2011 and Q4 2011 respectively, along with £60 of million related interest rate hedge adjustments in Q3 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 31 December 2011.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 23,702 | 1,330 | 25,032 | 24,518 | 1,417 | 25,935 | 28,859 | 2,242 | 31,101 | |
| Other contingent liabilities | 10,667 | 245 | 10,912 | 10,916 | 215 | 11,131 | 11,833 | 421 | 12,254 | |
| 34,369 | 1,575 | 35,944 | 35,434 | 1,632 | 37,066 | 40,692 | 2,663 | 43,355 | ||
| Commitments | ||||||||||
| Undrawn formal standby facilities, credit lines and other |
||||||||||
| commitments to lend | 227,419 | 12,544 | 239,963 | 230,369 | 14,258 244,627 | 245,425 | 21,397 266,822 | |||
| Other commitments | 301 | 2,611 | 2,912 | 1,163 | 2,228 | 3,391 | 1,560 | 2,594 | 4,154 | |
| 227,720 | 15,155 | 242,875 | 231,532 | 16,486 248,018 | 246,985 | 23,991 270,976 | ||||
| Total contingent liabilities | ||||||||||
| and commitments | 262,089 | 16,730 | 278,819 | 266,966 | 18,118 285,084 | 287,677 | 26,654 314,331 |
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 31 December 2011.
Other than as set out in these sections entitled "Litigation" and "Investigations, reviews and proceedings", 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 RBS 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 RBS and/or the Group taken as a whole.
In each of the material legal proceedings and investigations, reviews and proceedings 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 (the "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 (the 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 (the "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 is ongoing.
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 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.
To date, 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\$83 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 AAA rated 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.
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.
In the US, Citizens Financial Group, Inc ("Citizens") in common with other US banks, has been named as a defendant in a class action asserting that Citizens charges excessive overdraft fees. The plaintiffs claim that overdraft fees resulting from point of sale and automated teller machine (ATM) transactions violate the duty of good faith implied in Citizens' customer account agreement and constitute an unfair trade practice. The Group considers that it has substantial and credible legal and factual defences to these claims and will 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.
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 regulators, 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 the regulators, 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 cooperating fully with the investigations and proceedings described below.
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 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) on 1 March 2008, and the Group has 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 has advised it will no longer investigate the non-compliance issue (although MasterCard is continuing with its appeal). The appeal was heard on 8 July 2011 by the General Court and judgment is awaited. This could be delivered in spring or summer 2012, although it may take longer.
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. On 26 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 on 6 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, on 26 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. On 9 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, although it has reserved the right to do so if it considers it appropriate.
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.
Having conducted a market study relating to Payment Protection Insurance (PPI), in February 2007 the OFT referred the PPI market to the Competition Commission (CC) for an in-depth inquiry. The CC published its final report in January 2009 and announced its intention to order a range of remedies, 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). Barclays Bank PLC subsequently appealed certain CC findings to the CAT. In October 2009, the CAT handed down a judgment remitting the matter back to the CC for review. Following further review, in October 2010, the CC published its final decision on remedies following the remittal which confirmed the point of sale prohibition. In March 2011, the CC made a final order setting out its remedies with a commencement date of 6 April 2011. The key remedies come into force in two parts. A number came into force in October 2011, and the remainder come into force in 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.
Following unsuccessful negotiations with the industry, the FSA issued consultation papers on PPI complaint handling and redress in September 2009 and in March 2010. The FSA published its final policy statement in August 2010. The new rules imposed significant changes with respect to the handling of mis-selling PPI complaints. 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. 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.
On 16 July 2008, the OFT published the results of its market study into Personal Current Accounts (PCAs) in the United Kingdom. The OFT found evidence of competition and several positive features in the personal current account 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 personal current account providers to address the OFT's concerns about transparency and switching, following its market study. Personal current account 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 personal current account 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, fully to review the market again 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. On 29 March 2011, the OFT published its update report in relation to personal current accounts. 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). The OFT has indicated its intention to conduct a more comprehensive review of the market in 2012.
On 26 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 14 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 aims to complete its market study by spring 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 (the "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 'ringfenced 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.
The UK Government has now embarked on an extensive consultation on how exactly the general principles outlined by the ICB should be implemented, and intends to bring forward a White Paper in the spring of 2012. Its intention is to complete primary and secondary legislation before the end of the current Parliamentary term in May 2015 and to implement the ring-fencing measures as soon as practicable thereafter and the loss absorbency measures by 2019. The Government also stated its determination that changes to the account switching process should be completed by September 2013, as already scheduled.
With regard to the competition aspects, the Government recommended a number of initiatives aimed at improving transparency and switching in the market and ensuring a level playing field for new entrants. In addition, the Government has recommended that HM Treasury should consult on regulating the UK Payments Council and has confirmed that the Financial Conduct Authority's remit will include competition.
Until the UK Government consultation is concluded and significantly more detail is known on how the precise legislative and regulatory framework is to be implemented it is impossible 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 recommendations set out in the Final Report and the Response, 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 May 2010, following a criminal investigation by the United States Department of Justice (DoJ) into its dollar clearing activities, Office of Foreign Assets Control compliance procedures and other Bank Secrecy Act compliance matters, RBS N.V. formally entered into a Deferred Prosecution Agreement (DPA) with the DoJ resolving the investigation. Pursuant to the DPA, RBS N.V. paid a penalty of US\$500 million in 2010 and agreed to comply with the terms of the DPA and to co-operate fully with any further investigations. Payment of the penalty was made from a provision established in April 2007 when an agreement in principle to settle was first announced. On 20 December 2011, the DoJ filed a motion with the US District Court to dismiss the criminal information underlying the DPA, stating that RBS N.V. had met the terms and obligations of the DPA. The US District Court granted the DoJ's motion on the same day, and this matter is now fully resolved.
In the United States, the Group is also involved in other reviews, investigations and proceedings (both formal and informal) by federal and state governmental law enforcement and other agencies and selfregulatory 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.
By way of example, 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 and requested testimony from a former Group employee. The investigation is in its preliminary stages and it is difficult 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 June 2009, in connection with an investigation into the role of investment banks in the origination and securitisation of sub-prime loans in Massachusetts, the Massachusetts Attorney General issued subpoenas to various banks, including an RBS subsidiary, seeking information related to residential mortgage lending practices and sales and securitisation of residential mortgage loans. On 28 November 2011, an Assurance of Discontinuance between RBS Financial Products Inc. and the Massachusetts Attorney General was filed in Massachusetts State Court which resolves the Massachusetts Attorney General's investigation as to RBS. The Assurance of Discontinuance required RBS Financial Products Inc. to make payments totalling approximately US\$52 million.
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 is in the early stages and therefore it is difficult to predict the potential exposure from any such investigation.
The Group's Global Banking & Markets N.A. (GBM 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). GBM 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, GBM 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, GBM N.A. made such representations and warranties itself. Where GBM N.A. has given those or other representations and warranties (whether relating to underlying loans or otherwise), GBM 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, GBM N.A. may be able to assert claims against third parties who provided representations or warranties to GBM N.A. when selling loans to it; although the ability to recover against such parties is uncertain. Since January 2009, GBM N.A. has received approximately US\$75 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 GBM N.A.. However, repurchase demands presented to GBM N.A. are subject to challenge and, to date, GBM N.A. has rebutted a significant percentage of these claims.
Citizens has not been an issuer or underwriter of non-agency RMBS. However, 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, 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. Since January 2009, Citizens has received approximately US\$41.2 million in repurchase demands in respect of loans originated primarily since 2003. However, repurchase demands presented to Citizens are subject to challenge and, to date, 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, Citizens has not been materially impacted by such disruptions and the Group has not ceased making foreclosures.
The Group cannot estimate what the future level of repurchase demands or ultimate exposure of GBM N.A. or Citizens may be, and cannot give any assurance that the historical experience will continue in the future. It is possible that the volume of repurchase demands will increase in the future. 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 consolidated net assets, operating results or cash flows in any particular period.
The Group continues to receive requests from various regulators investigating the setting of LIBOR and other interest rates, including the US Commodity Futures Trading Commission, the US Department of Justice, the European Commission, the FSA and the Japanese Financial Services Agency. The authorities are seeking documents and communications related to the process and procedures for setting LIBOR and other interest rates, together with related trading information. In addition to co-operating with the investigations as described above, the Group is also keeping relevant regulators informed. It is not possible to estimate with any certainty what effect these investigations and any related developments may have on the Group.
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 consolidated 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 consolidated net assets, operating results or cash flows in any particular period.
In April 2009, the FSA notified the Group that it was commencing a supervisory review of the acquisition of ABN AMRO Holding N.V. in 2007 and the 2008 capital raisings and an investigation into conduct, systems and controls within the Global Banking & Markets division of the Group. RBS and its subsidiaries co-operated fully with this review and investigation. On 2 December 2010, the FSA confirmed that it had completed its investigation and had concluded that no enforcement action, either against the Group or against individuals, was warranted. On 12 December 2011, the FSA published its report 'The Failure of the Royal Bank of Scotland', on which the Group engaged constructively with the FSA.
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 will be overseen by an independent third party and will consider 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 18 January 2012, the FSA published its Final Notice having reached a settlement with UK Insurance Limited for breaches of Principle 2 by Direct Line and Churchill (the "Firms"), under which UK 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.
During 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.
On 19 April 2011, the Group announced its intention to transfer a substantial part of the business activities of 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.
The Proposed Transfers will streamline the manner in which the GBM and GTS businesses of the Group interact with clients with simplified access to the GBM and GTS product suites.
It is expected that the Proposed Transfers will be implemented on a phased basis over a period ending 31 December 2013. The transfer of eligible business carried out in the UK, including certain securities issued by RBS N.V. was completed on 17 October 2011. A large part of the remainder of Proposed Transfers (including the transfers of certain securities issued by RBS N.V.) is expected to have taken place by the end of 2012.
RBS and RBS plc's long-term and short-term ratings remained unchanged in the quarter, however in several of the Group's credit ratings have been updated during the quarter. During October 2011, both Moody's and Fitch have taken rating action on RBS and certain subsidiaries. On 7 October 2011, Moody's Investor Services downgraded the long term ratings of RBS, RBS plc and National Westminster Bank Plc (NatWest), following the conclusion of its review into the systemic support assumptions from the UK government for 14 UK financial institutions. As a result of this review, 12 UK entities, including RBS, were downgraded. RBS was downgraded to A3 from A1 (long-term) and to P-2 from P-1 (short term), RBS plc and NatWest were downgraded to A2 from Aa3 (long-term); their P-1 short-term ratings were affirmed. These ratings will all have a negative outlook assigned due to Moody's opinion that the likelihood of government support will likely weaken further in the future, however, Moody's affirmed RBS's underlying Baa2 rating, noting that these downgrades did not reflect a worsening in the credit quality of UK financial institutions.
On 11 October 2011, following the reduction of support factored into the ratings of RBS, Moody's downgraded the ratings of Ulster Bank Ltd and Ulster Bank Ireland Ltd to Baa1 from A2 (long term) and to P-2 from P-1 (short term); Moody's also placed these ratings on negative outlook to be in line with the outlook of RBS plc. In addition, Moody's has placed the ratings of RBS N.V. on negative outlook, to match those of RBS plc.
On 13 October 2011, Fitch Ratings downgraded RBS and certain subsidiaries, having lowered its 'Support Rating Floors' for large UK banks. The ratings of RBS, RBS plc, NatWest, RBS International and RBS N.V. were reduced to A from AA- (long-term) and to F1 from F1+ (short term). The ratings of Citizens Financial Group, Ulster Bank Ltd and Ulster Bank Ireland Ltd were downgraded to A- from A+ (long term). The short term rating of Citizens Financial Group was affirmed at F1 following the downgrade of RBS plc, while the rating of Ulster Bank Ltd and Ulster Bank Ireland Limited was downgraded to F1 from F1+. Fitch assigned all of these ratings a stable outlook. The standalone ratings of RBS Group and RBS plc were unchanged by this action and were upgraded from C/D to C on 29 June 2011, corresponding to a bbb viability rating.
On 29 November 2011, S&P announced the results of the reviews into a group of 37 of the largest global financial institutions, including all major UK banks. This review has resulted in a one notch downgrade of the long-term ratings of RBS plc and NatWest plc to A from A+, the short term rating of A-1 was affirmed. RBS was also downgraded one notch bringing the long-term rating to A- from A and the short term to A-2 from A-1. Standard & Poor's assigned all these ratings a stable outlook.
As a result of the 29 November rating action, S&P also lowered the ratings of RBS Securities Inc and RBS N.V. to A from A+ (long-term) and affirmed the A-1 short-term rating. Finally, S&P upgraded the long and short term ratings of RBS Citizens NA and Citizens Bank of Pennsylvania to A from A- (longterm) and to A-1 from A-2 (short-term). Standard & Poor's assign all these ratings a stable outlook.
Further to its announcements on 11 and 7 of October 2011, on 15 February 2012 Moody's placed the ratings of RBS and certain subsidiaries on review for possible downgrade, along with 114 other European banks and 17 firms with capital markets activities. Moody's have placed Bank Standalone Financial Strength Rating (BFSR) of RBS plc on review for possible downgrade and this has driven a review for downgrade of the long-term ratings of RBS, RBS plc, NatWest plc, RBS N.V., Ulster Bank Ireland Ltd and Ulster Bank Ltd; along with the short-term ratings of RBS plc, NatWest plc and RBS N.V. The short-term ratings of RBS, Ulster Bank Ireland Ltd and Ulster Bank Ltd were affirmed. Moody's cite three reasons for this review across all of the affected firms; the adverse and prolonged impact of the euro area crisis; the deteriorating creditworthiness of euro-area sovereigns; and the substantial challenges faced by banks and securities firms with significant capital market activities.
This announcement was approved by the Board of directors on 22 February 2012.
There have been no significant events between 31 December 2011 and the date of approval of this announcement which would require a change to or additional disclosure in the announcement.
The following table defines the main types of risk managed by the Group and presents the key areas of focus for each risk in 2011.
| Risk type | Definition | 2011 key areas of focus |
|---|---|---|
| Capital, liquidity and funding risk |
The risk that the Group has insufficient capital or is unable to meet its financial liabilities as they fall due. |
Active run-down of capital intensive assets in Non-Core and other risk mitigation left the Core Tier 1 ratio strong at 10.6%, despite a £21 billion uplift in RWAs from the implementation of CRD III in December 2011. Refer to pages 130 to 135. |
| Maintaining the structural integrity of the Group's balance sheet requires active management of both asset and liability portfolios as necessary. Strong term debt issuance and planned reductions in the funded balance sheet enabled the Group to strengthen its liquidity and funding position as market conditions worsened. Refer to pages 136 to 145. |
||
| 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. |
During 2011, asset quality continued to improve, resulting in loan impairment charges 21% lower than in 2010 despite continuing challenges in Ulster Bank Group (Core and Non-Core) and corporate real estate portfolios. The Group continued to make progress in reducing key credit concentration risks, with credit exposures in excess of single name concentration limits declining 15% during the year and exposure to commercial real estate declining 14%. Refer to pages 148 to 180. |
| Country risk | The risk of material losses arising from significant country-specific events. |
Sovereign risk increased in 2011, resulting in rating downgrades for a number of countries, including several eurozone members. This resulted in an impairment charge recognised by the Group in 2011 in respect of available-for-sale Greek government bonds. In response the Group further strengthened its country risk appetite setting and risk management systems during the year and brought a number of advanced countries under limit control. This contributed to a reduction in exposure to a range of countries. Refer to pages 181 to 204. |
| Risk type | Definition | 2011 key areas of focus |
|---|---|---|
| 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 2011, the Group continued to manage down its market risk exposure in Non-Core and reduce the ABS trading inventory such that the trading portfolio became less exposed to credit risk. Refer to pages 205 to 209. |
| 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. |
During 2011, focus on insurance risk appetite resulted in the de-risking and significant re pricing of certain classes of business and exiting some altogether. |
|
| Operational risk |
The risk of loss resulting from inadequate or failed processes, people, systems or from external events. |
During 2011, the Group took steps to enhance its management of operational risks. This was particularly evident in respect of risk appetite, the Group Policy Framework, risk assessment, scenario analysis and statistical modelling for capital requirements. |
| The level of operational risk remains high due to the scale of structural change occurring across the Group, the pace of regulatory change, the economic downturn and other external threats, such as e-crime. |
||
| Compliance risk |
The risk arising from non compliance with national and international laws, rules and regulations. |
During 2011, the Group managed the increased levels of scrutiny and legislation by enlarging the capacity of its compliance, anti-money laundering and regulatory affairs teams and taking steps to improve its operating model, tools, systems and processes. |
| 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. |
In 2011, an Environmental, Social and Ethical (ESE) Risk Policy was developed with sector ESE risk appetite positions drawn up to assess the Group's appetite to support customers in sensitive sectors including defence, oil and gas. This also included the establishment of divisional reputational risk committees. |
| Stakeholder engagement was broadened with the implementation of formal sessions between the Group Sustainability Commitee and relevant advocacy groups and non-governmental organisations. |
| Risk type | Definition | 2011 key areas of focus |
|---|---|---|
| Business risk | The risk of lower-than-expected revenues and/or higher-than expected operating costs. |
Business risk is incorporated within the Group's risk appetite target for earnings volatility that was set in 2011. |
| Pension risk | The risk that the Group will have to make additional contributions to its defined benefit pension schemes. |
In 2011, the Group focused on improved stress testing and risk governance mechanisms. This included the establishment of the Pension Risk Committee and the articulation of its view of risk appetite for the various Group pension schemes. |
The Group aims to maintain an appropriate level of capital to meet its business needs and regulatory requirements as capital adequacy and risk management are closely aligned. The Group's risk asset ratios calculated in accordance with Financial Services Authority (FSA) definitions are set out below.
| Risk-weighted assets (RWAs) by risk | 31 December 2011 £bn |
30 September 2011 £bn |
31 December 2010 £bn |
|---|---|---|---|
| Credit risk | 344.3 | 346.8 | 385.9 |
| Counterparty risk | 61.9 | 72.2 | 68.1 |
| Market risk | 64.0 | 55.0 | 80.0 |
| Operational risk | 37.9 | 37.9 | 37.1 |
| 508.1 | 511.9 | 571.1 | |
| Asset Protection Scheme relief | (69.1) | (88.6) | (105.6) |
| 439.0 | 423.3 | 465.5 | |
| Risk asset ratios | % | % | % |
| Core Tier 1 | 10.6 | 11.3 | 10.7 |
| Tier 1 | 13.0 | 13.8 | 12.9 |
| Total | 13.8 | 14.7 | 14.0 |
The Group's capital resources in accordance with FSA definitions were as follows:
| 31 December | 30 September | 31 December | |
|---|---|---|---|
| 2011 | 2011 | 2010 | |
| £m | £m | £m | |
| Shareholders' equity (excluding non-controlling interests) | |||
| Shareholders' equity per balance sheet | 74,819 | 77,443 | 75,132 |
| Preference shares - equity | (4,313) | (4,313) | (4,313) |
| Other equity instruments | (431) | (431) | (431) |
| 70,075 | 72,699 | 70,388 | |
| Non-controlling interests | |||
| Non-controlling interests per balance sheet | 1,234 | 1,433 | 1,719 |
| Non-controlling preference shares | (548) | (548) | (548) |
| Other adjustments to non-controlling interests for regulatory purposes | (259) | (259) | (259) |
| 427 | 626 | 912 | |
| Regulatory adjustments and deductions | |||
| Own credit | (2,634) | (2,931) | (1,182) |
| Unrealised losses on AFS debt securities | 1,065 | 379 | 2,061 |
| Unrealised gains on AFS equity shares | (108) | (88) | (25) |
| Cash flow hedging reserve | (879) | (798) | 140 |
| Other adjustments for regulatory purposes | 571 | 523 | 204 |
| Goodwill and other intangible assets | (14,858) | (14,744) | (14,448) |
| 50% excess of expected losses over impairment provisions (net of tax) | (2,536) | (2,127) | (1,900) |
| 50% of securitisation positions | (2,019) | (2,164) | (2,321) |
| 50% of APS first loss | (2,763) | (3,545) | (4,225) |
| (24,161) | (25,495) | (21,696) | |
| Core Tier 1 capital | 46,341 | 47,830 | 49,604 |
| Other Tier 1 capital | |||
| Preference shares - equity | 4,313 | 4,313 | 4,313 |
| Preference shares - debt | 1,094 | 1,085 | 1,097 |
| Innovative/hybrid Tier 1 securities | 4,667 | 4,644 | 4,662 |
| 10,074 | 10,042 | 10,072 | |
| Deductions | |||
| 50% of material holdings | (340) | (303) | (310) |
| Tax on excess of expected losses over impairment provisions | 915 | 767 | 758 |
| 575 | 464 | 448 | |
| Total Tier 1 capital | 56,990 | 58,336 | 60,124 |
| 31 December 2011 |
30 September 2011 |
31 December 2010 |
|
|---|---|---|---|
| £m | £m | £m | |
| Qualifying Tier 2 capital | |||
| Undated subordinated debt | 1,838 | 1,837 | 1,852 |
| Dated subordinated debt - net of amortisation | 14,527 | 14,999 | 16,745 |
| Unrealised gains on AFS equity shares | 108 | 88 | 25 |
| Collectively assessed impairment provisions | 635 | 728 | 778 |
| Non-controlling Tier 2 capital | 11 | 11 | 11 |
| 17,119 | 17,663 | 19,411 | |
| Tier 2 deductions | |||
| 50% of securitisation positions | (2,019) | (2,164) | (2,321) |
| 50% excess of expected losses over impairment provisions | (3,451) | (2,894) | (2,658) |
| 50% of material holdings | (340) | (303) | (310) |
| 50% of APS first loss | (2,763) | (3,545) | (4,225) |
| (8,573) | (8,906) | (9,514) | |
| Total Tier 2 capital | 8,546 | 8,757 | 9,897 |
| Supervisory deductions | |||
| Unconsolidated Investments | |||
| - RBS Insurance | (4,354) | (4,292) | (3,962) |
| - Other investments | (239) | (262) | (318) |
| Other deductions | (235) | (311) | (452) |
| (4,828) | (4,865) | (4,732) | |
| Total regulatory capital (1) | 60,708 | 62,228 | 65,289 |
| 2011 | |||
| Movement in Core Tier 1 capital | £m | ||
| At beginning of the year | 49,604 | ||
| Attributable loss net of movements in fair value of own debt | (3,449) | ||
| Foreign currency reserves | (363) | ||
| Decrease in non-controlling interests | (485) | ||
| Decrease in capital deductions including APS first loss | 1,128 | ||
| Other movements | (94) |
At end of the year 46,341
Note:
(1) Total capital includes certain instruments issued by RBS N.V. Group that are treated consistent with the local implementation of the Capital Requirements Directive (including the transitional provisions of that Directive). The FSA formally confirmed this treatment in 2012.
Risk-weighted assets by risk category and division are set out below.
| Credit | Counterparty | Market | Operational | Gross | APS | Net | |
|---|---|---|---|---|---|---|---|
| risk | risk | risk | risk | RWAs | relief | RWAs | |
| 31 December 2011 | £bn | £bn | £bn | £bn | £bn | £bn | £bn |
| UK Retail | 41.1 | - | - | 7.3 | 48.4 | (9.4) | 39.0 |
| UK Corporate | 69.4 | - | - | 6.7 | 76.1 | (15.5) | 60.6 |
| Wealth | 10.9 | - | 0.1 | 1.9 | 12.9 | - | 12.9 |
| Global Transaction Services | 12.4 | - | - | 4.9 | 17.3 | - | 17.3 |
| Ulster Bank | 33.6 | 0.6 | 0.3 | 1.8 | 36.3 | (6.8) | 29.5 |
| US Retail & Commercial | 53.4 | 1.0 | - | 4.4 | 58.8 | - | 58.8 |
| Retail & Commercial | 220.8 | 1.6 | 0.4 | 27.0 | 249.8 | (31.7) | 218.1 |
| Global Banking & Markets | 45.1 | 39.9 | 50.6 | 15.5 | 151.1 | (8.5) | 142.6 |
| Other | 9.9 | 0.2 | - | 0.7 | 10.8 | - | 10.8 |
| Core | 275.8 | 41.7 | 51.0 | 43.2 | 411.7 | (40.2) | 371.5 |
| Non-Core | 65.6 | 20.2 | 13.0 | (5.5) | 93.3 | (28.9) | 64.4 |
| Group before RFS MI | 341.4 | 61.9 | 64.0 | 37.7 | 505.0 | (69.1) | 435.9 |
| RFS MI | 2.9 | - | - | 0.2 | 3.1 | - | 3.1 |
| Group | 344.3 | 61.9 | 64.0 | 37.9 | 508.1 | (69.1) | 439.0 |
| 30 September 2011 | |||||||
| UK Retail | 41.4 | - | - | 7.3 | 48.7 | (9.9) | 38.8 |
| UK Corporate | 69.0 | - | - | 6.7 | 75.7 | (16.9) | 58.8 |
| Wealth | 11.0 | - | 0.1 | 1.9 | 13.0 | - | 13.0 |
| Global Transaction Services | 13.7 | - | - | 4.9 | 18.6 | - | 18.6 |
| Ulster Bank | 32.0 | 0.5 | 0.1 | 1.8 | 34.4 | (6.7) | 27.7 |
| US Retail & Commercial | 51.0 | 1.1 | - | 4.4 | 56.5 | - | 56.5 |
| Retail & Commercial | 218.1 | 1.6 | 0.2 | 27.0 | 246.9 | (33.5) | 213.4 |
| Global Banking & Markets | 46.1 | 35.1 | 37.6 | 15.5 | 134.3 | (10.4) | 123.9 |
| Other | 8.8 | 0.3 | - | 0.7 | 9.8 | - | 9.8 |
| Core | 273.0 | 37.0 | 37.8 | 43.2 | 391.0 | (43.9) | 347.1 |
| Non-Core | 71.0 | 35.2 | 17.2 | (5.5) | 117.9 | (44.7) | 73.2 |
| Group before RFS MI | 344.0 | 72.2 | 55.0 | 37.7 | 508.9 | (88.6) | 420.3 |
| RFS MI | 2.8 | - | - | 0.2 | 3.0 | - | 3.0 |
| Group | 346.8 | 72.2 | 55.0 | 37.9 | 511.9 | (88.6) | 423.3 |
| 31 December 2010 | |||||||
| UK Retail | 41.7 | - | - | 7.1 | 48.8 | (12.4) | 36.4 |
| UK Corporate | 74.8 | - | - | 6.6 | 81.4 | (22.9) | 58.5 |
| Wealth | 10.4 | - | 0.1 | 2.0 | 12.5 | - | 12.5 |
| Global Transaction Services | 13.7 | - | - | 4.6 | 18.3 | - | 18.3 |
| Ulster Bank | 29.2 | 0.5 | 0.1 | 1.8 | 31.6 | (7.9) | 23.7 |
| US Retail & Commercial | 52.0 | 0.9 | - | 4.1 | 57.0 | - | 57.0 |
| Retail & Commercial | 221.8 | 1.4 | 0.2 | 26.2 | 249.6 | (43.2) | 206.4 |
| Global Banking & Markets | 53.5 | 34.5 | 44.7 | 14.2 | 146.9 | (11.5) | 135.4 |
| Other | 16.4 | 0.4 | 0.2 | 1.0 | 18.0 | - | 18.0 |
| Core | 291.7 | 36.3 | 45.1 | 41.4 | 414.5 | (54.7) | 359.8 |
| Non-Core | 91.3 | 31.8 | 34.9 | (4.3) | 153.7 | (50.9) | 102.8 |
| Group before RFS MI | 383.0 | 68.1 | 80.0 | 37.1 | 568.2 | (105.6) | 462.6 |
| RFS MI | 2.9 | - | - | - | 2.9 | - | 2.9 |
| Group | 385.9 | 68.1 | 80.0 | 37.1 | 571.1 | (105.6) | 465.5 |
The rules issued by the Basel Committee on Banking Supervision (BCBS), commonly referred to as Basel III, are a comprehensive set of reforms designed to strengthen the regulation, supervision, risk and liquidity management of the banking sector. In the EU they will be enacted through a revised Capital Requirements Directive referred to as CRD IV.
In December 2010, the BCBS issued the final text of the Basel III rules, providing details of the global standards agreed by the Group of Governors and Heads of Supervision, the oversight body of the BCBS and endorsed by the G20 leaders at their November 2010 Seoul summit. There are transition arrangements proposed for implementing these new standards as follows:
The Group, in conjunction with the FSA, regularly evaluates 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.
The Group is 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.
The Group is managing the changes to capital requirements from new regulation and model changes and the resulting impact on the common equity Tier 1 ratio, focusing on risk reduction and deleveraging. This is principally being achieved through the continued run-down and disposal of Non-Core assets and deleveraging in GBM as the business focuses on the most productive returns on capital.
The major categories of new deductions and regulatory adjustments which are being phased in over a 5 year period from 1 January 2014 include:
The net impact of these changes is expected to be manageable as the aggregation of these drivers is projected to be lower by 2014 and declining during the phase-in period.
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.
Liquidity risk is dynamic, being influenced by movements in markets and perceptions that are driven by firm specific or external factors. Managing liquidity risk effectively is a key component of the Group's risk reduction strategy. The Group's 2011 performance demonstrates continued improvements in managing liquidity risk and reflects actions taken in light of an uncertain economic outlook, which resulted in improvements in key measures.
The Group has access to a variety of funding sources across the globe, including short-term money markets, repurchase agreement markets and term debt investors through its secured and unsecured funding programmes. Diversity in funding is provided by its active role in the money markets, along with access to global capital flows through GBM's international client base. The Group's wholesale funding franchise is well diversified by currency, geography, maturity and type.
The Group has been a regular issuer in the debt capital markets in both secured and unsecured arrangements. 2011 net new term debt issuance was £21 billion, with 49% secured and 51% unsecured, of which 71% were public transactions and 29% were private.
The table below shows the Group's primary funding sources including deposits in disposal groups and excluding repurchase agreements.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||
|---|---|---|---|---|---|---|
| £m | % | £m | % | £m | % | |
| Deposits by banks | ||||||
| - central banks | 3,680 | 0.5 | 3,568 | 0.5 | 6,655 | 0.9 |
| - derivative cash collateral | 31,807 | 4.6 | 32,466 | 4.4 | 28,074 | 3.8 |
| - other | 33,627 | 4.8 | 42,624 | 5.8 | 31,588 | 4.3 |
| 69,114 | 9.9 | 78,658 | 10.7 | 66,317 | 9.0 | |
| Debt securities in issue | ||||||
| - conduit asset backed commercial | ||||||
| paper (ABCP) | 11,164 | 1.6 | 11,783 | 1.6 | 17,320 | 2.3 |
| - other commercial paper (CP) | 5,310 | 0.8 | 8,680 | 1.2 | 8,915 | 1.2 |
| - certificates of deposits (CDs) | 16,367 | 2.4 | 25,036 | 3.4 | 37,855 | 5.1 |
| - medium-term notes (MTNs) | 105,709 | 15.2 | 127,719 | 17.4 | 131,026 | 17.6 |
| - covered bonds | 9,107 | 1.3 | 8,541 | 1.1 | 4,100 | 0.6 |
| - securitisations | 14,964 | 2.1 | 12,752 | 1.7 | 19,156 | 2.6 |
| 162,621 | 23.4 | 194,511 | 26.4 | 218,372 | 29.4 | |
| Subordinated liabilities | 26,319 | 3.8 | 26,275 | 3.6 | 27,053 | 3.6 |
| Notes issued | 188,940 | 27.2 | 220,786 | 30.0 | 245,425 | 33.0 |
| Wholesale funding | 258,054 | 37.1 | 299,444 | 40.7 | 311,742 | 42.0 |
| Customer deposits | ||||||
| - cash collateral | 9,242 | 1.4 | 10,278 | 1.4 | 10,433 | 1.4 |
| - other | 427,511 | 61.5 | 425,125 | 57.9 | 420,433 | 56.6 |
| Total customer deposits | 436,753 | 62.9 | 435,403 | 59.3 | 430,866 | 58.0 |
| Total funding | 694,807 | 100.0 | 734,847 | 100.0 | 742,608 | 100.0 |
| Disposal group deposits included above | ||||||
| - banks | 1 | 288 | 266 | |||
| - customers | 22,610 | 1,743 | 2,267 | |||
| 22,611 | 2,031 | 2,533 |
| Short-term wholesale funding | 31 December | 31 September | 31 December |
|---|---|---|---|
| 2011 | 2011 | 2010 | |
| £bn | £bn | £bn | |
| Deposits | 32.9 | 41.8 | 34.7 |
| Notes issued | 69.5 | 99.8 | 95.0 |
| STWF excluding derivative collateral | 102.4 | 141.6 | 129.7 |
| Derivative collateral | 31.8 | 32.5 | 28.1 |
| STWF including derivative collateral | 134.2 | 174.1 | 157.8 |
| Interbank funding excluding derivative collateral - bank deposits - bank loans |
37.3 (24.3) |
46.2 (33.0) |
38.2 (31.3) |
| Net interbank funding | 13.0 | 13.2 | 6.9 |
The table below shows the Group's debt securities in issue and subordinated liabilities by remaining maturity.
| Debt securities in issue | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other | Total | ||||||||
| Conduit | CP and | Covered | Subordinated | notes | |||||
| ABCP | CDs | MTNs | bonds Securitisations | Total | liabilities | issued | |||
| £m | £m | £m | £m | £m | £m | £m | £m | % | |
| 31 December 2011 | |||||||||
| Less than 1 year | 11,164 | 21,396 36,302 | - | 27 | 68,889 | 624 | 69,513 | 36.8 | |
| 1-3 years | - | 278 26,595 | 2,760 | 479 | 30,112 | 3,338 | 33,450 | 17.7 | |
| 3-5 years | - | 2 16,627 | 3,673 | - | 20,302 | 7,232 | 27,534 | 14.6 | |
| More than 5 years | - | 1 26,185 | 2,674 | 14,458 | 43,318 | 15,125 | 58,443 | 30.9 | |
| 11,164 | 21,677 105,709 | 9,107 | 14,964 162,621 | 26,319 188,940 100.0 | |||||
| 30 September 2011 | |||||||||
| Less than 1 year | 11,783 | 32,914 54,622 | - | 43 | 99,362 | 400 | 99,762 | 45.2 | |
| 1-3 years | - | 795 28,456 | 2,800 | 26 | 32,077 | 2,045 | 34,122 | 15.5 | |
| 3-5 years | - | 2 18,049 | 3,037 | 33 | 21,121 | 8,265 | 29,386 | 13.3 | |
| More than 5 years | - | 5 26,592 | 2,704 | 12,650 | 41,951 | 15,565 | 57,516 | 26.0 | |
| 11,783 | 33,716 127,719 | 8,541 | 12,752 194,511 | 26,275 220,786 100.0 | |||||
| 31 December 2010 | |||||||||
| Less than 1 year | 17,320 | 46,051 30,589 | - | 88 | 94,048 | 964 | 95,012 | 38.7 | |
| 1-3 years | - | 702 47,357 | 1,078 | 12 | 49,149 | 754 | 49,903 | 20.3 | |
| 3-5 years | - | 12 21,466 | 1,294 | 34 | 22,806 | 8,476 | 31,282 | 12.8 | |
| More than 5 years | - | 5 31,614 | 1,728 | 19,022 | 52,369 | 16,859 | 69,228 | 28.2 | |
| 17,320 | 46,770 131,026 | 4,100 | 19,156 218,372 | 27,053 245,425 100.0 |
• Debt securities in issue with a maturity of less than one year declined £25.1 billion from £94.0 billion at 31 December 2010 to £68.9 billion at 31 December 2011, largely due to the maturity of £20.1 billion of notes issued under the UK Government's Credit Guarantee Scheme (CGS). The remaining notes issued under the CGS are due to mature in 2012, £15.6 billion in the first quarter of the year and £5.7 billion in the second quarter.
The table below shows debt securities issued by the Group 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.
| Year ended | Quarter ended | |||||
|---|---|---|---|---|---|---|
| 31 December 2011 |
31 December 31 December 2010 2011 |
30 September 2011 |
31 December 2010 |
|||
| £m | £m | £m | £m | £m | ||
| Public | ||||||
| - unsecured | 5,085 | 12,887 | - | - | 775 | |
| - secured | 9,807 | 8,041 | 3,223 | 1,721 | 1,725 | |
| Private | ||||||
| - unsecured | 12,414 | 17,450 | 911 | 3,255 | 4,623 | |
| - secured | 500 | - | 500 | - | - | |
| Gross issuance | 27,806 | 38,378 | 4,634 | 4,976 | 7,123 | |
| Buy backs | (6,892) | (6,298) | (1,270) | (2,386) | (1,702) | |
| Net issuance | 20,914 | 32,080 | 3,364 | 2,590 | 5,421 |
The table below shows the original maturity of public long-term debt securities issued in the years ended 31 December 2011 and 2010.
| Year ended 31 December 2011 | 1-3 years £m |
3-5 years £m |
5-10 years £m |
>10 years £m |
Total £m |
|---|---|---|---|---|---|
| MTNs | 904 | 1,407 | 1,839 | 935 | 5,085 |
| Covered bonds | - | 1,721 | 3,280 | - | 5,001 |
| Securitisations | - | - | - | 4,806 | 4,806 |
| 904 | 3,128 | 5,119 | 5,741 | 14,892 | |
| % of total | 6 | 21 | 34 | 39 | 100 |
| Year ended 31 December 2010 | |||||
| MTNs | 1,445 | 2,150 | 6,559 | 2,733 | 12,887 |
| Covered bonds | - | 1,030 | 1,244 | 1,725 | 3,999 |
| Securitisations | - | - | - | 4,042 | 4,042 |
| 1,445 | 3,180 | 7,803 | 8,500 | 20,928 | |
| % of total | 7 | 15 | 37 | 41 | 100 |
The table below shows the currency breakdown of public and private long-term debt securities issued in the years ended 31 December 2011 and 2010.
| Year ended 31 December 2011 | GBP £m |
EUR £m |
USD £m |
AUD £m |
Other £m |
Total £m |
|---|---|---|---|---|---|---|
| Public | ||||||
| - MTNs | - | 1,808 | 2,181 | 1,096 | - | 5,085 |
| - covered bonds | - | 5,001 | - | - | - | 5,001 |
| - securitisations | 478 | 1,478 | 2,850 | - | - | 4,806 |
| Private | 2,872 | 3,856 | 3,183 | 302 | 2,701 | 12,914 |
| 3,350 | 12,143 | 8,214 | 1,398 | 2,701 | 27,806 | |
| % of total | 12 | 44 | 29 | 5 | 10 | 100 |
| Year ended 31 December 2010 | ||||||
| Public | ||||||
| - MTNs | 1,260 | 3,969 | 5,131 | 1,236 | 1,291 | 12,887 |
| - covered bonds | - | 3,999 | - | - | - | 3,999 |
| - securitisations | 663 | 1,629 | 1,750 | - | - | 4,042 |
| Private | 2,184 | 10,041 | 2,879 | 174 | 2,172 | 17,450 |
| 4,107 | 19,638 | 9,760 | 1,410 | 3,463 | 38,378 | |
| % of total | 11 | 51 | 25 | 4 | 9 | 100 |
The Group has access to secured funding markets through own-asset securitisation and covered bond funding programmes to complement existing wholesale funding programmes and access to the repo markets. The Group monitors and manages encumbrance levels related to these secured funding programmes. This includes the potential encumbrance of Group assets that could be used in own asset 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 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 and 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:
| 31 December 2011 | 31 December 2010 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Debt securities in issue | Debt securities in issue | |||||||||
| Held by | Held by | Held by | Held by | |||||||
| third | the | third | the | |||||||
| Assets | parties (2) | Group (3) | Total | Assets | parties (2) | Group (3) | Total | |||
| Asset type (1) | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Mortgages | ||||||||||
| - UK (RMBS) | 49,549 | 10,988 | 47,324 | 58,312 | 53,132 | 13,047 | 50,028 | 63,075 | ||
| - UK (covered bonds) | 15,441 | 9,107 | - | 9,107 | 8,046 | 4,100 | - | 4,100 | ||
| - Irish | 12,660 | 3,472 | 8,670 | 12,142 | 15,034 | 5,101 | 11,152 | 16,253 | ||
| UK credit cards | 4,037 | 500 | 110 | 610 | 3,993 | 34 | 1,500 | 1,534 | ||
| UK personal loans | 5,168 | - | 4,706 | 4,706 | 5,795 | - | 5,383 | 5,383 | ||
| Other | 19,778 | 4 | 20,577 | 20,581 | 25,193 | 974 | 23,186 | 24,160 | ||
| 106,633 | 24,071 | 81,387 | 105,458 | 111,193 | 23,256 | 91,249 114,505 | ||||
| Cash deposits (4) | 11,998 | 13,068 | ||||||||
| 118,631 | 124,261 |
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.
(2) Debt securities that have been sold to third party investors and represents a source of external wholesale funding.
(3) Debt securities issued pursuant to own-asset securitisations where the debt securities are retained by the Group as a source of contingent liquidity where those securities can be used in repurchase agreements with central banks.
(4) Cash deposits, £11.2 billion from mortgage repayments and £0.8 billion from other loan repayments held in the SPEs, to repay debt securities issued by the own-asset securitisation vehicles.
The Group enters into securities repurchase agreements and securities lending transactions 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 debt securities on the balance sheet is set out below. All of these securities could be sold or repledged by the holder.
| 31 December | 31 December | |
|---|---|---|
| 2011 | 2010 | |
| Assets pledged against liabilities | £m | £m |
| Debt securities | 79,480 | 80,100 |
| Equity shares | 6,534 | 5,148 |
Liquidity risk management requires ongoing assessment and calibration of: how the various sources of the Group's liquidity risk interact with each other; market dynamics; and regulatory developments to determine the overall size of the Group's liquid asset buffer. In addition to the size determination, the composition of the buffer is also important. The composition is reviewed on a continuous basis in order to ensure that the Group holds an appropriate portfolio of high quality assets that can provide a cushion against market disruption and dislocation, even in the most extreme stress circumstances.
The table below shows the composition of the Group's liquidity portfolio (at estimated liquidity value). All assets within the liquidity portfolio are unencumbered.
| 31 December 2011 | 30 September 2011 |
31 December 2010 |
||
|---|---|---|---|---|
| £m | Average Period end £m |
Period end £m |
Period end £m |
|
| Cash and balances at central banks | 74,711 | 69,932 | 76,833 | 53,661 |
| Treasury bills | 5,937 | - | 4,037 | 14,529 |
| Central and local government bonds (1) | ||||
| - AAA rated governments and US agencies | 37,947 | 29,632 | 29,850 | 41,435 |
| - AA- to AA+ rated governments (2) | 3,074 | 14,102 | 18,077 | 3,744 |
| - governments rated below AA | 925 | 955 | 700 | 1,029 |
| - local government | 4,779 | 4,302 | 4,700 | 5,672 |
| 46,725 | 48,991 | 53,327 | 51,880 | |
| Other assets (3) | ||||
| - AAA rated | 21,973 | 25,202 | 24,186 | 17,836 |
| - below AAA rated and other high quality assets | 12,102 | 11,205 | 11,444 | 16,693 |
| 34,075 | 36,407 | 35,630 | 34,529 | |
| Total liquidity portfolio | 161,448 | 155,330 | 169,827 | 154,599 |
Notes:
• In view of the continuing uncertain market conditions, the liquidity portfolio was maintained above the Group's target level of £150 billion at £155.3 billion, with an average balance in 2011 of £161.4 billion. In anticipation of challenging market conditions, the composition was altered to become more liquid and conservative, as cash and balances at central banks rose to 45% of the total portfolio at 31 December 2011, from 35% at 31 December 2010.
The Group continues to improve and augment liquidity and funding risk management practices, in light of market experience and emerging regulatory and industry standards. The Group monitors a range of liquidity and funding indicators. These metrics encompass short and long-term liquidity requirements under stress and normal operating conditions. Two key structural ratios are described below.
The table below shows quarterly trends in the Group's loan to deposit ratio and customer funding gap, including disposal groups.
| Loan to deposit ratio |
|||
|---|---|---|---|
| Group % |
Core | Group £bn |
|
| % | |||
| 31 December 2011 | 108 | 94 | 37 |
| 30 September 2011 | 112 | 95 | 52 |
| 30 June 2011 | 114 | 96 | 60 |
| 31 March 2011 | 116 | 96 | 67 |
| 31 December 2010 | 118 | 96 | 77 |
Note:
(1) Loans are net of provisions.
The table below shows the Group's net stable funding ratio (NSFR), estimated by applying the Basel III guidance issued in December 2010. The Group is aiming to meet the minimum required NSFR of 100% over the longer term. This measure seeks to show the proportion of structural term assets which are funded by stable funding, including customer deposits, long-term wholesale funding and equity. One of the main components of the ratio entails categorising retail and SME deposits as either 'more stable' or 'less stable'. The Group's NSFR will also continue to be refined over time in line with regulatory developments. It may be calculated on a basis that is not consistent with that used by other financial institutions.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|---|
| ASF (1) | ASF (1) | ASF (1) | Weighting | ||||
| £bn | £bn | £bn | £bn | £bn | £bn | % | |
| Equity | 76 | 76 | 79 | 79 | 77 | 77 | 100 |
| Wholesale funding > 1 year | 124 | 124 | 125 | 125 | 154 | 154 | 100 |
| Wholesale funding < 1 year | 134 | - | 174 | - | 157 | - | - |
| Derivatives | 524 | - | 562 | - | 424 | - | - |
| Repurchase agreements | 129 | - | 132 | - | 115 | - | - |
| Deposits | |||||||
| - Retail and SME - more stable | 227 | 204 | 170 | 153 | 172 | 155 | 90 |
| - Retail and SME - less stable | 31 | 25 | 25 | 20 | 51 | 41 | 80 |
| - Other | 179 | 89 | 239 | 120 | 206 | 103 | 50 |
| Other (2) | 83 | - | 102 | - | 98 | - | - |
| Total liabilities and equity | 1,507 | 518 | 1,608 | 497 | 1,454 | 530 | |
| Cash | 79 | - | 78 | - | 57 | - | - |
| Inter-bank lending | 44 | - | 53 | - | 58 | - | - |
| Debt securities > 1 year | |||||||
| - central and local governments | |||||||
| AAA to AA- | 77 | 4 | 84 | 4 | 89 | 4 | 5 |
| - other eligible bonds | 73 | 15 | 75 | 15 | 75 | 15 | 20 |
| - other bonds | 14 | 14 | 17 | 17 | 10 | 10 | 100 |
| Debt securities < 1 year | 45 | - | 54 | - | 43 | - | - |
| Derivatives | 530 | - | 572 | - | 427 | - | - |
| Reverse repurchase agreements | 101 | - | 102 | - | 95 | - | - |
| Customer loans and advances > 1 year | |||||||
| - residential mortgages | 145 | 94 | 144 | 94 | 145 | 94 | 65 |
| - other | 173 | 173 | 176 | 176 | 211 | 211 | 100 |
| Customer loans and advances < 1 year | |||||||
| - retail loans | 19 | 16 | 20 | 17 | 22 | 19 | 85 |
| - other | 137 | 69 | 146 | 73 | 125 | 63 | 50 |
| Other (3) | 70 | 70 | 87 | 87 | 97 | 97 | 100 |
| Total assets | 1,507 | 455 | 1,608 | 483 | 1,454 | 513 | |
| Undrawn commitments | 240 | 12 | 245 | 12 | 267 | 13 | 5 |
| Total assets and undrawn commitments | 1,747 | 467 | 1,853 | 495 | 1,721 | 526 | |
| Net stable funding ratio | 111% | 100% | 101% |
Notes:
(1) Available stable funding.
(2) Deferred tax, insurance liabilities and other liabilities.
(3) Prepayments, accrued income, deferred tax and other assets.
Interest rate risk in the banking book (IRRBB) value-at-risk (VaR) for the Group's retail and commercial banking activities at a 99% confidence level was as follows:
| Average £m |
Period end £m |
Maximum £m |
Minimum £m |
|
|---|---|---|---|---|
| 31 December 2011 | 63 | 51 | 80 | 44 |
| 31 December 2010 | 58 | 96 | 96 | 30 |
A breakdown of the Group's IRRBB VaR by currency is shown below.
| 31 December 2011 |
31 December 2010 |
|
|---|---|---|
| Currency | £m | £m |
| Euro | 26 | 33 |
| Sterling | 57 | 79 |
| US dollar | 61 | 121 |
| Other | 5 | 10 |
The Group seeks to mitigate the effect of prospective interest rate movements, which could reduce future net interest income (NII) in the Group's businesses, whilst balancing the cost of such activities on the current net revenue stream. Hedging activities also consider the impact on market value sensitivity under stress.
The following table shows the sensitivity of NII, 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. This scenario differs from that applied in the previous year in both the severity of the rate shift and the tenors to which this is applied.
| 31 December 2011 |
30 September 2011 |
31 December 2010 |
|
|---|---|---|---|
| Potential favourable/(adverse) impact on NII | £m | £m | £m |
| + 100 basis points shift in yield curves | 244 | 188 | 232 |
| – 100 basis points shift in yield curves | (183) | (74) | (352) |
| Bear steepener | 443 | 487 | |
| Bull flattener | (146) | (248) |
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 Group's structural foreign currency exposure was £24.2 billion and £17.9 billion before and after economic hedges respectively, broadly unchanged from the 2010 position.
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.
In the table below loans and advances exclude disposal groups and repurchase agreements. Totals for disposal groups are also presented.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | ||||||||
| Core | Core (1) | Total | Core | Core (1) | Total | Core | Core (1) | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Central and local government | 8,359 | 1,383 | 9,742 | 8,097 | 1,507 | 9,604 | 6,781 | 1,671 | 8,452 | |
| Finance | 46,452 | 3,229 | 49,681 | 48,094 | 4,884 | 52,978 | 46,910 | 7,651 | 54,561 | |
| Residential mortgages | 138,509 | 5,102 143,611 | 143,941 | 5,319 149,260 | 140,359 | 6,142 146,501 | ||||
| Personal lending | 31,067 | 1,556 | 32,623 | 32,152 | 2,810 | 34,962 | 33,581 | 3,891 | 37,472 | |
| Property | 38,704 | 38,064 | 76,768 | 44,072 | 40,628 | 84,700 | 42,455 | 47,651 | 90,106 | |
| Construction | 6,781 | 2,672 | 9,453 | 7,992 | 3,062 | 11,054 | 8,680 | 3,352 | 12,032 | |
| Manufacturing | 23,201 | 4,931 | 28,132 | 24,816 | 5,233 | 30,049 | 25,797 | 6,520 | 32,317 | |
| Service industries and | ||||||||||
| business activities | ||||||||||
| - retail, wholesale and repairs | 21,314 | 2,339 | 23,653 | 22,207 | 2,427 | 24,634 | 21,974 | 3,191 | 25,165 | |
| - transport and storage | 16,454 | 5,477 | 21,931 | 16,236 | 6,009 | 22,245 | 15,946 | 8,195 | 24,141 | |
| - health, education and | ||||||||||
| Recreation | 13,273 | 1,419 | 14,692 | 16,224 | 1,515 | 17,739 | 17,456 | 1,865 | 19,321 | |
| - hotels and restaurants | 7,143 | 1,161 | 8,304 | 7,841 | 1,358 | 9,199 | 8,189 | 1,492 | 9,681 | |
| - utilities | 6,543 | 1,849 | 8,392 | 8,212 | 1,725 | 9,937 | 7,098 | 2,110 | 9,208 | |
| - other | 24,228 | 3,772 | 28,000 | 24,744 | 4,479 | 29,223 | 24,464 | 5,530 | 29,994 | |
| Agriculture, forestry and fishing | 3,471 | 129 | 3,600 | 3,767 | 135 | 3,902 | 3,758 | 135 | 3,893 | |
| Finance leases and | ||||||||||
| instalment credit | 8,440 | 6,059 | 14,499 | 8,404 | 7,467 | 15,871 | 8,321 | 8,529 | 16,850 | |
| Gross loans including disposal | ||||||||||
| groups | 414,063 | 80,005 494,068 | 417,510 | 90,389 507,899 | 412,851 113,001 525,852 | |||||
| Loan impairment provisions | (8,292) (11,468) | (19,760) | (8,748) | (11,849) | (20,597) | (7,740) (10,315) (18,055) | ||||
| Loan impairment provisions | ||||||||||
| including disposal groups | (9,065) (11,486) | (20,551) | (8,748) | (11,867) | (20,615) | (7,740) (10,351) (18,091) | ||||
| Net loans | 386,322 | 67,790 454,112 | 408,712 | 76,861 | 485,573 | 404,860 | 97,888 502,748 | |||
| groups | 404,998 | 68,519 473,517 | 408,762 | 78,522 487,284 | 405,111 102,650 507,761 | |||||
| Interest accruals Gross loans Net loans including disposal |
675 394,614 |
116 | 791 79,258 473,872 |
661 417,460 |
152 | 813 88,710 506,170 |
831 | 278 412,600 108,203 520,803 |
1,109 |
Note:
(1) Non-Core includes amounts relating to RFS MI of £0.4 billion at 31 December 2011 (30 September 2011 - £0.6 billion; 31 December 2010 - £0.6 billion)
The table below analyses the Group's risk elements in lending (REIL) without taking account of any security held which could reduce the eventual loss should it occur, nor of any provisions. REIL is split into UK and overseas, based on the location of the lending office.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | ||||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Impaired loans (1) | ||||||||||
| - UK | 8,291 | 7,284 | 15,575 | 9,222 | 7,471 | 16,693 | 8,575 | 7,835 | 16,410 | |
| - Overseas | 7,015 | 16,157 | 23,172 | 6,695 | 16,274 | 22,969 | 4,936 | 14,355 | 19,291 | |
| 15,306 | 23,441 | 38,747 | 15,917 | 23,745 | 39,662 | 13,511 | 22,190 | 35,701 | ||
| Accruing loans past due 90 days or more (2) |
||||||||||
| - UK | 1,192 | 508 | 1,700 | 1,648 | 580 | 2,228 | 1,434 | 939 | 2,373 | |
| - Overseas | 364 | 34 | 398 | 580 | 256 | 836 | 262 | 262 | 524 | |
| 1,556 | 542 | 2,098 | 2,228 | 836 | 3,064 | 1,696 | 1,201 | 2,897 | ||
| Total REIL | 16,862 | 23,983 | 40,845 | 18,145 | 24,581 | 42,726 | 15,207 | 23,391 | 38,598 | |
| REIL including disposal groups | 42,394 | 42,752 | 38,651 | |||||||
| REIL as a % of gross loans and advances (3) |
4.4% | 30.1% | 8.6% | 4.3% | 27.4% | 8.4% | 3.7% | 20.8% | 7.3% | |
| Provisions as a % of REIL | 50% | 48% | 49% | 49% | 48% | 49% | 52% | 44% | 47% |
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 and excludes reverse repos.
For sector, geography and divisional analysis of loans, REIL and impairments, refer to Appendix 3.
The following tables analyse loans and advances to banks and customers (excluding reverse repos) and related REIL, provisions, impairments, write-offs and coverage ratios by division.
| REIL as a % | ||||||||
|---|---|---|---|---|---|---|---|---|
| Gross | Gross | of gross | Provisions | YTD | YTD | |||
| loans | loans | customer | as a % | Impairment | Amounts | |||
| banks | customers | REIL Provisions | loans | of REIL | charge | written-off | ||
| 31 December 2011 UK Retail |
£m 628 |
£m 103,377 |
£m 4,087 |
£m 2,344 |
% 4.0 |
% 57 |
£m 788 |
£m 823 |
| UK Corporate | 672 | 96,647 | 3,972 | 1,608 | 4.1 | 40 | 782 | 653 |
| Wealth | 2,422 | 16,913 | 211 | 81 | 1.2 | 38 | 25 | 11 |
| Global Transaction Services | 3,464 | 15,767 | 218 | 234 | 1.4 | 107 | 166 | 79 |
| Ulster Bank | 2,079 | 34,052 | 5,523 | 2,749 | 16.2 | 50 | 1,384 | 124 |
| US Retail & Commercial | 208 | 51,436 | 1,006 | 451 | 2.0 | 45 | 247 | 371 |
| Retail & Commercial | 9,473 | 318,192 15,017 | 7,467 | 4.7 | 50 | 3,392 | 2,061 | |
| Global Banking & Markets | 30,072 | 75,493 | 1,845 | 947 | 2.4 | 51 | 11 | 76 |
| RBS Insurance 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 | |
| 30 September 2011 | ||||||||
| UK Retail | 434 | 110,086 | 4,651 | 2,661 | 4.2 | 57 | 597 | 658 |
| UK Corporate | 70 | 109,977 | 4,904 | 1,961 | 4.5 | 40 | 549 | 498 |
| Wealth | 2,326 | 17,037 | 198 | 71 | 1.2 | 36 | 13 | 8 |
| Global Transaction Services | 3,707 | 19,545 | 240 | 201 | 1.2 | 84 | 119 | 66 |
| Ulster Bank | 2,791 | 35,546 | 5,556 | 2,567 | 15.6 | 46 | 1,057 | 63 |
| US Retail & Commercial | 186 | 49,477 | 955 | 469 | 1.9 | 49 | 193 | 267 |
| Retail & Commercial | 9,514 | 341,668 16,504 | 7,930 | 4.8 | 48 | 2,528 | 1,560 | |
| Global Banking & Markets | 35,900 | 73,921 | 1,641 | 943 | 2.2 | 57 | (49) | 51 |
| RBS Insurance and other | 6,604 | 1,871 | - | - | - | - | - | - |
| Core | 52,018 | 417,460 18,145 | 8,873 | 4.3 | 49 | 2,479 | 1,611 | |
| Non-Core | 709 | 88,710 24,581 | 11,850 | 27.7 | 48 | 3,108 | 1,409 | |
| Group | 52,727 | 506,170 42,726 | 20,723 | 8.4 | 49 | 5,587 | 3,020 | |
| Total including disposal groups | 52,822 | 507,899 42,752 | 20,741 | 8.4 | 49 | 5,587 | 3,020 | |
| 31 December 2010 | ||||||||
| UK Retail | 408 | 108,405 | 4,620 | 2,741 | 4.3 | 59 | 1,160 | 1,135 |
| UK Corporate | 72 | 111,672 | 3,967 | 1,732 | 3.6 | 44 | 761 | 349 |
| Wealth | 2,220 | 16,130 | 223 | 66 | 1.4 | 30 | 18 | 9 |
| Global Transaction Services | 3,047 | 14,437 | 146 | 147 | 1.0 | 101 | 8 | 49 |
| Ulster Bank | 2,928 | 36,858 | 3,619 | 1,633 | 9.8 | 45 | 1,161 | 48 |
| US Retail & Commercial | 145 | 48,516 | 913 | 505 | 1.9 | 55 | 483 | 547 |
| Retail & Commercial | 8,820 | 336,018 13,488 | 6,824 | 4.0 | 51 | 3,591 | 2,137 | |
| Global Banking & Markets | 46,073 | 75,981 | 1,719 | 1,042 | 2.3 | 61 | 146 | 87 |
| RBS Insurance and other | 2,140 | 601 | - | - | - | - | - | - |
| Core | 57,033 | 412,600 15,207 | 7,866 | 3.7 | 52 | 3,737 | 2,224 | |
| Non-Core | 1,003 | 108,203 23,391 | 10,316 | 21.6 | 44 | 5,407 | 3,818 | |
| Group | 58,036 | 520,803 38,598 | 18,182 | 7.4 | 47 | 9,144 | 6,042 | |
| Total including disposal groups | 58,687 | 525,852 38,651 | 18,218 | 7.3 | 47 | 9,144 | 6,042 |
The tables below details the movement in REIL for the year ended 31 December 2011.
| 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 2011 | 13,511 | 22,190 | 35,701 | 1,696 | 1,201 | 2,897 | 15,207 | 23,391 | 38,598 | |
| Transfers to disposal groups | (1,287) | - | (1,287) | (238) | - | (238) | (1,525) | - | (1,525) | |
| Intra-group transfers | 300 | (300) | - | 149 | (149) | - | 449 | (449) | - | |
| Currency translation and | ||||||||||
| other adjustments | (158) | (496) | (654) | (14) | - | (14) | (172) | (496) | (668) | |
| Additions | 8,379 | 8,698 | 17,077 | 2,585 | 1,059 | 3,644 | 10,964 | 9,757 | 20,721 | |
| Transfers | 645 | 381 | 1,026 | (362) | (352) | (714) | 283 | 29 | 312 | |
| Disposals and restructurings | (407) | (1,470) | (1,877) | (9) | (97) | (106) | (416) | (1,567) | (1,983) | |
| Repayments | (3,540) | (3,172) | (6,712) | (2,251) | (1,120) | (3,371) | (5,791) | (4,292) (10,083) | ||
| Amounts written-off | (2,137) | (2,390) | (4,527) | - | - | - | (2,137) | (2,390) | (4,527) | |
| At 31 December 2011 | 15,306 | 23,441 | 38,747 | 1,556 | 542 | 2,098 | 16,862 | 23,983 | 40,845 |
| 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 2011 | 13,511 | 22,190 | 35,701 | 1,696 | 1,201 | 2,897 | 15,207 | 23,391 | 38,598 | |
| Intra-group transfers | 300 | (300) | - | 81 | (81) | - | 381 | (381) | - | |
| Currency translation and | ||||||||||
| other adjustments | - | (167) | (167) | (5) | (3) | (8) | (5) | (170) | (175) | |
| Additions | 6,261 | 6,910 | 13,171 | 2,143 | 827 | 2,970 | 8,404 | 7,737 | 16,141 | |
| Transfers | 400 | 312 | 712 | (217) | (235) | (452) | 183 | 77 | 260 | |
| Disposals and restructurings | (373) | (1,206) | (1,579) | (9) | (97) | (106) | (382) | (1,303) | (1,685) | |
| Repayments | (2,571) | (2,585) | (5,156) | (1,461) | (776) | (2,237) | (4,032) | (3,361) | (7,393) | |
| Amounts written-off | (1,611) | (1,409) | (3,020) | - | - | - | (1,611) | (1,409) | (3,020) | |
| At 30 September 2011 | 15,917 | 23,745 | 39,662 | 2,228 | 836 | 3,064 | 18,145 | 24,581 | 42,726 | |
| Transfers to disposal groups | (1,287) | - | (1,287) | (238) | - | (238) | (1,525) | - | (1,525) | |
| Intra-group transfers | - | - | - | 68 | (68) | - | 68 | (68) | - | |
| Currency translation and | ||||||||||
| other adjustments | (158) | (329) | (487) | (9) | 3 | (6) | (167) | (326) | (493) | |
| Additions | 2,118 | 1,788 | 3,906 | 442 | 232 | 674 | 2,560 | 2,020 | 4,580 | |
| Transfers | 245 | 69 | 314 | (145) | (117) | (262) | 100 | (48) | 52 | |
| Disposals and restructurings | (34) | (264) | (298) | (34) | (264) | (298) | ||||
| Repayments | (969) | (587) | (1,556) | (790) | (344) | (1,134) | (1,759) | (931) | (2,690) | |
| Amounts written-off | (526) | (981) | (1,507) | - | - | - | (526) | (981) | (1,507) | |
| At 31 December 2011 | 15,306 | 23,441 | 38,747 | 1,556 | 542 | 2,098 | 16,862 | 23,983 | 40,845 |
Note:
(1) Accruing loans past due 90 days or more.
The following tables show the movement in impairment provisions for loans and advances to banks and customers.
| Year ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 31 December 2010 | |||||||||
| Non | Non | |||||||||
| Core | Core | RFS MI | Total | Core | Core | RFS MI | Total | |||
| £m | £m | £m | £m | £m | £m | £m | £m | |||
| At beginning of period | 7,866 | 10,316 | - | 18,182 | 6,921 | 8,252 | 2,110 | 17,283 | ||
| Transfers to disposal groups | (773) | - | - | (773) | - | (72) | - | (72) | ||
| Intra-group transfers | 177 | (177) | - | - | (568) | 568 | - | - | ||
| Currency translation and | ||||||||||
| other adjustments | (76) | (207) | - | (283) | (16) | 59 | - | 43 | ||
| Disposals | - | - | 8 | 8 | - | (20) | (2,152) | (2,172) | ||
| Amounts written-off | (2,137) | (2,390) | - | (4,527) | (2,224) | (3,818) | - | (6,042) | ||
| Recoveries of amounts | ||||||||||
| previously written-off | 167 | 360 | - | 527 | 213 | 198 | - | 411 | ||
| Charge to income statement | ||||||||||
| - continued | 3,403 | 3,838 | - | 7,241 | 3,737 | 5,407 | - | 9,144 | ||
| - discontinued | - | - | (8) | (8) | - | - | 42 | 42 | ||
| Unwind of discount | (213) | (271) | - | (484) | (197) | (258) | - | (455) | ||
| At end of period | 8,414 | 11,469 | - | 19,883 | 7,866 | 10,316 | - | 18,182 |
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||||||
| Non | RFS | Non | Non | RFS | |||||||
| Core | Core | MI | Total | Core | Core | Total | Core | Core | MI | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| At beginning of period | 8,873 | 11,850 | - 20,723 | 8,752 | 12,007 20,759 | 7,791 | 9,879 | - | 17,670 | ||
| Transfers to disposal | |||||||||||
| groups | (773) | - | - | (773) | - | - | - | - | (5) | - | (5) |
| Intra-group transfers | - | - | - | - | - | - | - | (217) | 217 | - | - |
| Currency translation and | |||||||||||
| other adjustments | (75) | (162) | - | (237) | (90) | (285) | (375) | 147 | (235) | - | (88) |
| Disposals | - | - | (3) | (3) | - | - | - | - | (3) | (3) | (6) |
| Amounts written-off | (526) | (981) | - (1,507) | (593) | (497) (1,090) | (745) | (771) | - | (1,516) | ||
| Recoveries of amounts | |||||||||||
| previously written-off | 48 | 99 | - | 147 | 39 | 55 | 94 | 29 | 67 | - | 96 |
| Charge to income | |||||||||||
| statement | |||||||||||
| - continued | 924 | 730 | - | 1,654 | 817 | 635 | 1,452 | 912 | 1,243 | - | 2,155 |
| - discontinued | - | - | 3 | 3 | - | - | - | - | - | 3 | 3 |
| Unwind of discount | (57) | (67) | - | (124) | (52) | (65) | (117) | (51) | (76) | - | (127) |
| At end of period | 8,414 | 11,469 | - 19,883 | 8,873 | 11,850 20,723 | 7,866 | 10,316 | - | 18,182 |
The following table analyses impairment provisions in respect of loans and advances to banks and customers.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | ||||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Latent loss | 1,339 | 647 | 1,986 | 1,516 | 751 | 2,267 | 1,653 | 997 | 2,650 | |
| Collectively assessed | 4,279 | 861 | 5,140 | 4,675 | 1,114 | 5,789 | 4,139 | 1,157 | 5,296 | |
| Individually assessed | 2,674 | 9,960 | 12,634 | 2,557 | 9,984 | 12,541 | 1,948 | 8,161 | 10,109 | |
| Customer loans | 8,292 | 11,468 | 19,760 | 8,748 | 11,849 | 20,597 | 7,740 | 10,315 | 18,055 | |
| Bank loans | 122 | 1 | 123 | 125 | 1 | 126 | 126 | 1 | 127 | |
| Total provisions | 8,414 | 11,469 | 19,883 | 8,873 | 11,850 | 20,723 | 7,866 | 10,316 | 18,182 | |
| % of loans (1) | 2.2% | 14.4% | 4.2% | 2.1% | 13.2% | 4.1% | 1.9% | 9.1% | 3.4% |
Note:
(1) Customer provisions as a percentage of gross loans and advances to customers including assets of disposal groups and excluding reverse repos.
The following table analyses the impairment charge for loans and securities.
| Year ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 31 December 2010 | ||||||||
| Core Non-Core | RFS MI | Total | Core Non-Core | Total | |||||
| £m | £m | £m | £m | £m | £m | £m | |||
| Latent loss | (252) | (293) | - | (545) | (5) | (116) | (121) | ||
| Collectively assessed | 2,075 | 516 | - | 2,591 | 2,258 | 812 | 3,070 | ||
| Individually assessed | 1,580 | 3,615 | - | 5,195 | 1,489 | 4,719 | 6,208 | ||
| Customer loans | 3,403 | 3,838 | - | 7,241 | 3,742 | 5,415 | 9,157 | ||
| Bank loans | - | - | - | - | (5) | (8) | (13) | ||
| Securities - sovereign debt impairment and | |||||||||
| related interest rate hedge adjustments | 1,268 | - | - | 1,268 | - | - | - | ||
| Securities - other | 117 | 81 | 2 | 200 | 44 | 68 | 112 | ||
| Charge to income statement | 4,788 | 3,919 | 2 | 8,709 | 3,781 | 5,475 | 9,256 | ||
| Charge relating to customer loans as a % | |||||||||
| of gross customer loans (1) | 0.8% | 4.8% | - | 1.5% | 0.9% | 4.9% | 1.7% |
| Quarter ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 30 September 2011 | 31 December 2010 | ||||||||
| Non | Non | Non | ||||||||
| Core £m |
£m | Core RFS MI £m |
Total £m |
Core £m |
Core £m |
Total £m |
Core £m |
Core £m |
Total £m |
|
| Latent loss | (87) | (103) | - | (190) | (33) | (27) | (60) | (68) | (48) | (116) |
| Collectively assessed | 478 | 113 | - | 591 | 548 | 141 | 689 | 559 | 170 | 729 |
| Individually assessed | 533 | 720 | - | 1,253 | 302 | 521 | 823 | 426 | 1,129 | 1,555 |
| Customer loans | 924 | 730 | - | 1,654 | 817 | 635 | 1,452 | 917 | 1,251 | 2,168 |
| Bank loans | - | - | - | - | - | - | - | (5) | (8) | (13) |
| Securities - sovereign debt impairment and related interest rate hedge |
||||||||||
| adjustments | 224 | - | - | 224 | 202 | - | 202 | - | - | - |
| Securities - other | 17 | 21 | 2 | 40 | 37 | 47 | 84 | 19 | (33) | (14) |
| Charge to income | ||||||||||
| statement | 1,165 | 751 | 2 | 1,918 | 1,056 | 682 | 1,738 | 931 | 1,210 | 2,141 |
| Charge relating to customer loans as a % of |
||||||||||
| gross customer loans (1) | 0.9% | 3.7% | - | 1.3% | 0.8% | 2.8% | 1.1% | 0.9% | 4.4% | 1.6% |
Note:
(1) Customer loan impairment charge as a percentage of gross loans and advances to customers including assets of disposal groups and excluding reverse purchase agreements.
The total amount of wholesale restructurings that achieved legal completion in 2011 was £8.6 billion. In addition, a further £14.7 billion was in the process of being completed at 31 December 2011. Restructured loans, related internal asset quality bands, sector breakdown and types of restructuring are set out below.
| 31 December 2011 | AQ1-AQ9 (1) £m |
AQ10 (2) £m |
AQ10 (2) Provision coverage % |
|---|---|---|---|
| Wholesale restructurings by sector | |||
| Property | 1,980 | 2,600 | 18 |
| Transport | 686 | 694 | 11 |
| Non-bank financial institutions | 228 | 420 | 65 |
| Retail and leisure | 503 | 148 | 24 |
| Other | 1,078 | 251 | 28 |
| Total | 4,475 | 4,113 | 22 |
Notes:
(1) Probability of default less than 100%.
(2) Probability of default is 100%.
| 31 December 2011 | Loans by value % |
|---|---|
| Wholesale restructurings by type of arrangement | |
| Variation in margin | 12 |
| Payment holidays and loan rescheduling | 87 |
| Forgiveness of all or part of the outstanding debt | 31 |
| Other | 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 31 December 2011 totalled £6.6 billion. The mortgage arrears information for retail accounts in forbearance and related provision arrangements are shown in the table below.
| No missed payments |
1-3 months in arrears |
>3 months in arrears |
Total | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | £m | Balance Provision £m |
Balance £m |
Provision £m |
£m | Balance Provision £m |
£m | Balance Provision £m |
Accounts forborne % |
| Arrears status and provisions |
|||||||||
| 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 |
| Citizens | - | - | 91 | 10 | 89 | 10 | 180 | 20 | 0.8 |
| Wealth | 121 | - | - | - | 2 | - | 123 | - | 1.3 |
| Total | 4,691 | 94 | 958 | 68 | 919 | 193 | 6,568 | 355 | 4.4 |
Notes:
(1) Includes all forbearance arrangements regardless of whether or not the customer is experiencing financial difficulty.
(2) Comprises the current stock position of forbearance deals agreed since January 2008 for UK Retail and since July 2008 for Ulster Bank.
(3) Refer to page 173 for details of the proportion of UK Retail and Citizens mortgage loans that have missed three or more payments, compared to the forbearance population above.
| UK Retail (1) Ulster Bank | Citizens | Wealth | Total (2) | ||
|---|---|---|---|---|---|
| 31 December 2011 | £m | £m | £m | £m | £m |
| Forbearance arrangements | |||||
| Interest only conversions | 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 |
| Total | 4,653 | 1,830 | 180 | 123 | 6,786 |
Notes:
(1) For unsecured portfolios in UK Retail, 1.1% of the total unsecured population was subject to forbearance at 31 December 2011.
(2) As an individual case can include more than one type of arrangement, the analysis in the table on forbearance arrangements exceeds the total forbearance.
The table below analyses debt securities by issuer and measurement classification. The categorisation of debt securities has been revised to include asset-backed securities (ABS) by class of issuer. The main changes are to US central and local government which includes US federal agencies, and financial institutions which now includes US government sponsored agencies and securitisation entities. 2010 data are presented on the revised basis.
| Central and local government | Other | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| financial | Of which | ||||||||
| UK | US | Other | Banks | institutions | Corporate | Total | ABS | ||
| £m | £m | £m | £m | £m | £m | £m | £m | ||
| 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) | |
| 30 September 2011 | |||||||||
| Held-for-trading | 8,434 | 20,120 | 47,621 | 4,216 | 27,511 | 4,666 | 112,568 | 24,123 | |
| Designated as at fair value | 1 | - | 140 | 4 | 7 | 10 | 162 | 1 | |
| Available-for-sale | 13,328 | 20,032 | 28,976 | 17,268 | 28,463 | 2,334 | 110,401 | 41,091 | |
| Loans and receivables | 10 | - | - | 274 | 5,764 | 478 | 6,526 | 5,447 | |
| Long positions | 21,773 | 40,152 | 76,737 | 21,762 | 61,745 | 7,488 | 229,657 | 70,662 | |
| Of which US agencies | - | 5,311 | - | - | 27,931 | - | 33,242 | 30,272 | |
| Short positions (HFT) | (2,896) | (12,763) | (21,484) | (2,043) | (4,437) | (1,680) | (45,303) | (895) | |
| Available-for-sale Gross unrealised gains Gross unrealised losses |
1,090 - |
1,240 - |
1,331 (124) |
310 (1,039) |
1,117 (2,371) |
81 (24) |
5,169 (3,558) |
1,242 (3,114) |
| Central and local government | Other financial |
Of which | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 December 2010 | UK £m |
US £m |
Other £m |
Banks £m |
institutions £m |
Corporate £m |
Total £m |
ABS £m |
|
| Held-for-trading | 5,097 | 15,648 | 42,828 | 5,486 | 23,711 | 6,099 | 98,869 | 21,988 | |
| Designated as at fair value | 1 | 117 | 262 | 4 | 8 | 10 | 402 | 119 | |
| Available-for-sale | 8,377 | 22,244 | 32,865 | 16,982 | 29,148 | 1,514 | 111,130 | 42,515 | |
| Loans and receivables | 11 | - | - | 1 | 6,686 | 381 | 7,079 | 6,203 | |
| Long positions | 13,486 | 38,009 | 75,955 | 22,473 | 59,553 | 8,004 | 217,480 | 70,825 | |
| Of which US agencies | - | 6,811 | - | - | 21,686 | - | 28,497 | 25,375 | |
| Short positions (HFT) | (4,200) | (10,943) | (18,913) | (1,844) | (3,356) | (1,761) | (41,017) | (1,335) | |
| Available-for-sale | |||||||||
| Gross unrealised gains | 349 | 525 | 700 | 143 | 827 | 51 | 2,595 | 1,057 | |
| Gross unrealised losses | (10) | (2) | (618) | (786) | (2,626) | (55) | (4,097) | (3,396) |
The table below analyses available-for-sale debt securities and related reserves, gross of tax.
| 31 December 2011 | 31 December 2010 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| US | UK | Other (1) | Total | US | UK | Other (1) | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | ||
| Central and local | |||||||||
| Government | 20,848 | 13,436 | 25,552 | 59,836 | 22,244 | 8,377 | 32,865 | 63,486 | |
| Banks | 376 | 1,391 | 11,408 | 13,175 | 704 | 4,297 | 11,981 | 16,982 | |
| Other financial institutions | 17,453 | 3,100 | 11,199 | 31,752 | 15,973 | 1,662 | 11,513 | 29,148 | |
| Corporate | 131 | 1,105 | 1,299 | 2,535 | 65 | 438 | 1,011 | 1,514 | |
| Total | 38,808 | 19,032 | 49,458 | 107,298 | 38,986 | 14,774 | 57,370 | 111,130 | |
| Of which ABS | 20,256 | 3,659 | 16,820 | 40,735 | 20,872 | 4,002 | 17,641 | 42,515 | |
| AFS reserves (gross) | 486 | 845 | (1,815) | (484) | (304) | 158 | (2,559) | (2,705) |
Note:
(1) Includes eurozone countries that are detailed on pages 186 to 203.
The table below analyses debt securities by issuer and external ratings. Ratings are based on the lowest of S&P, Moody's and Fitch.
| Central and local government | Other financial |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| UK | US | Other | Banks | institutions Corporate | Total | % of | Of which ABS |
||
| 31 December 2011 | £m | £m | £m | £m | £m | £m | £m | total | £m |
| 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 | ||
| 30 September 2011 | |||||||||
| AAA | 21,773 | 27 | 43,712 | 9,363 | 14,120 | 553 | 89,548 | 39 | 18,771 |
| AA to AA+ | - | 40,094 | 4,247 | 4,279 | 31,785 | 661 | 81,066 | 35 | 35,954 |
| A to AA- | - | 9 | 25,043 | 5,087 | 4,783 | 1,894 | 36,816 | 16 | 5,670 |
| BBB- to A- | - | - | 2,460 | 2,032 | 3,873 | 2,104 | 10,469 | 5 | 4,431 |
| Non-investment grade | - | - | 1,242 | 709 | 5,242 | 1,778 | 8,971 | 4 | 4,619 |
| Unrated | - | 22 | 33 | 292 | 1,942 | 498 | 2,787 | 1 | 1,217 |
| 21,773 | 40,152 | 76,737 | 21,762 | 61,745 | 7,488 229,657 | 100 | 70,662 | ||
| 31 December 2010 | |||||||||
| AAA | 13,486 | 38,009 | 44,123 | 10,704 | 39,388 | 878 146,588 | 67 | 51,235 | |
| AA to AA+ | - | - | 18,025 | 3,511 | 6,023 | 616 | 28,175 | 13 | 6,335 |
| A to AA- | - | - | 9,138 | 4,926 | 2,656 | 1,155 | 17,875 | 8 | 3,244 |
| BBB- to A- | - | - | 2,845 | 1,324 | 3,412 | 2,005 | 9,586 | 5 | 3,385 |
| Non-investment grade | - | - | 1,770 | 1,528 | 5,522 | 2,425 | 11,245 | 5 | 4,923 |
| Unrated | - | - | 54 | 480 | 2,552 | 925 | 4,011 | 2 | 1,703 |
| 13,486 | 38,009 | 75,955 | 22,473 | 59,553 | 8,004 217,480 | 100 | 70,825 |
| BS ( 1) RM |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 De mb 20 11 ce er |
Go t ve rnm en red sp on so sim ila r ( 2) or £m |
im Pr e £m |
No n nfo ing co rm £m |
Su rim b-p e £m |
MB S red co ve bo nd £m |
CM BS ( ) 3 £m |
CD ( 4) Os £m |
CL ( ) Os 5 £m |
AB S red co ve bo nd s £m |
AB S oth er £m |
To tal £m |
| AA A |
4, 16 9 |
3, 59 9 |
1, 48 8 |
10 5 |
2, 59 5 |
64 7 |
13 5 |
2, 17 1 |
62 5 |
1, 62 2 |
17 15 6 , |
| AA to AA + |
29 25 2 , |
66 9 |
10 6 |
60 | 37 9 |
71 0 |
35 | 1, 53 3 |
32 1 |
55 0 |
33 61 5 , |
| A t o A A- |
13 1 |
50 6 |
11 0 |
10 4 |
56 2, 7 |
1, 23 0 |
16 1 |
69 7 |
10 0 |
5 72 |
6, 33 1 |
| BB B- to A- |
- | 39 | 28 8 |
93 | 1, 97 9 |
33 3 |
86 | 34 1 |
- | 1, 32 1 |
4, 48 0 |
| No n-i stm t g rad nve en e |
21 | 78 4 |
65 8 |
39 6 |
- | 41 5 |
1, 37 0 |
17 6 |
- | 67 2 |
4, 49 2 |
| Un rat ed |
- | 14 8 |
29 | 14 6 |
- | 56 | 17 0 |
42 3 |
- | 26 3 |
1, 23 5 |
| 57 33 3 , |
5, 5 74 |
2, 67 9 |
90 4 |
52 7, 0 |
3, 39 1 |
95 1, 7 |
5, 34 1 |
1, 04 6 |
5, 15 3 |
67 30 9 , |
|
| Of n-C wh ich in No ore |
- | 83 7 |
47 7 |
30 8 |
- | 83 0 |
1, 65 6 |
4, 22 7 |
- | 1, 86 1 |
10 19 6 , |
| 30 Se tem be r 2 01 1 p |
|||||||||||
| AA A |
4, 39 1 |
4, 152 |
1, 50 9 |
144 | 3, 46 2 |
89 3 |
194 | 2, 198 |
65 1 |
1, 177 |
18 77 1 , |
| AA to AA + |
31 03 7 , |
117 | 11 1 |
97 | 1, 162 |
83 9 |
125 | 1, 49 6 |
40 7 |
56 3 |
35 95 4 , |
| A t o A A- |
137 | 60 3 |
124 | 175 | 1, 68 0 |
1, 32 6 |
166 | 56 9 |
36 7 |
52 3 |
5, 67 0 |
| BB B- to A- |
- | 147 | 29 5 |
59 | 1, 55 3 |
38 3 |
92 | 60 1 |
- | 1, 30 1 |
4, 43 1 |
| No n-i rad stm t g nve en e |
- | 76 8 |
67 6 |
48 6 |
- | 32 7 |
1, 51 6 |
170 | - | 67 6 |
4, 61 9 |
| Un rat ed |
- | 146 | 47 | 21 3 |
- | 67 | 134 | 33 1 |
- | 27 9 |
1, 21 7 |
| 35 56 5 , |
5, 93 3 |
2, 76 2 |
1, 174 |
7, 85 7 |
3, 83 5 |
2, 22 7 |
5, 36 5 |
1, 42 5 |
4, 51 9 |
70 66 2 , |
|
| Of wh ich in No n-C ore |
- | 26 9 |
46 3 |
27 6 |
- | 1, 158 |
1, 95 3 |
4, 69 8 |
- | 1, 97 6 |
10 79 3 , |
| 31 De mb 20 10 ce er |
Go t ve rnm en red sp on so sim ilar ( 2) or £m |
Pri me £m |
No n nfo ing co rm £m |
Su b-p rim e £m |
MB S d cov ere bo nd £m |
CM BS ( 3) £m |
CD Os ( 4) £m |
CL Os ( 5) £m |
AB S d cov ere bo nd s £m |
S AB oth er £m |
To tal £m |
|---|---|---|---|---|---|---|---|---|---|---|---|
| AA A |
28 83 5 , |
4, 35 5 |
1, 75 4 |
31 7 |
7, 107 |
2, 78 9 |
44 4 |
2, 49 0 |
98 9 |
2, 155 |
51 23 5 , |
| AA to AA + |
1, 52 9 |
147 | 144 | 116 | 35 7 |
39 2 |
56 7 |
1, 78 6 |
68 1 |
61 6 |
6, 33 5 |
| A t o A A- |
- | 67 | 60 | 21 2 |
40 8 |
97 3 |
29 6 |
34 3 |
190 | 69 5 |
3, 24 4 |
| BB B- to A- |
- | 82 | 31 6 |
39 | - | 50 0 |
20 3 |
52 7 |
- | 1, 71 8 |
3, 38 5 |
| No n-i stm t g rad nve en e |
- | 90 0 |
80 9 |
45 8 |
- | 29 6 |
1, 86 3 |
33 2 |
- | 26 5 |
4, 92 3 |
| Un rat ed |
- | 196 | 52 | 76 | - | - | 85 | 59 6 |
- | 69 8 |
1, 70 3 |
| 30 36 4 , |
5, 74 7 |
3, 135 |
1, 21 8 |
7, 87 2 |
4, 95 0 |
3, 45 8 |
6, 07 4 |
1, 86 0 |
6, 14 1 |
70 82 5 , |
|
| Of wh ich in No n-C ore |
- | 81 | 33 6 |
37 9 |
- | 1, 27 8 |
3, 159 |
5, 09 4 |
- | 2, 38 6 |
12 71 3 , |
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.
For analyses of ABS by geography and measurement classification, refer to Appendix 3.
The Group's derivative assets by internal grading scale and residual maturity are analysed below. 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.
| 31 December 2011 | 30 September | 31 December | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 0-3 | 3-6 | 6-12 | 1-5 | Over 5 | 2011 | 2010 | |||
| Asset | Probability | months | months | months | years | years | Total | Total | Total |
| quality | of default range | £m | £m | £m | £m | £m | £m | £m | £m |
| AQ1 | 0% - 0.034% | 24,580 | 10,957 | 17,178 | 126,107 | 302,800 481,622 | 517,097 | 408,489 | |
| AQ2 | 0.034% - 0.048% | 326 | 236 | 431 | 2,046 | 5,138 | 8,177 | 7,265 | 2,659 |
| AQ3 | 0.048% - 0.095% | 975 | 390 | 459 | 2,811 | 6,184 | 10,819 | 14,523 | 3,317 |
| AQ4 | 0.095% - 0.381% | 1,465 | 782 | 713 | 4,093 | 7,368 | 14,421 | 10,405 | 3,391 |
| AQ5 | 0.381% - 1.076% | 890 | 93 | 219 | 1,787 | 3,527 | 6,516 | 13,709 | 4,860 |
| AQ6 | 1.076% - 2.153% | 121 | 30 | 81 | 803 | 1,186 | 2,221 | 2,471 | 1,070 |
| AQ7 | 2.153% - 6.089% | 101 | 29 | 56 | 1,674 | 533 | 2,393 | 3,368 | 857 |
| AQ8 | 6.089% - 17.222% | 16 | 21 | 11 | 143 | 1,061 | 1,252 | 1,174 | 403 |
| AQ9 | 17.222% - 100% | 5 | 8 | 7 | 254 | 876 | 1,150 | 1,140 | 450 |
| AQ10 | 100% | 13 | 20 | 35 | 658 | 321 | 1,047 | 1,192 | 1,581 |
| 28,492 | 12,566 | 19,190 | 140,376 | 328,994 529,618 | 572,344 | 427,077 | |||
| Counterparty mtm netting | (441,626) | (473,256) | (330,397) | ||||||
| Cash collateral held against derivative exposures | (37,222) | (38,202) | (31,096) | ||||||
| Net exposure | 50,770 | 60,886 | 65,584 |
At 31 December 2011, the Group also held collateral in the form of securities of £5.3 billion (30 September 2011 - £5.5 billion; 31 December 2010 - £2.9 billion) against derivative positions.
The table below analyses the fair value of the Group's derivatives by type of contract.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Contract type | Notional £bn |
£m | Assets Liabilities £m |
Notional £bn |
Assets £m |
Liabilities £m |
Notional £bn |
Assets £m |
Liabilities £m |
| Interest rate | 38,722 | 422,156 | 406,709 | 42,732 | 424,130 | 407,814 | 39,760 | 311,731 | 299,209 |
| Exchange rate | 4,479 | 74,492 | 80,980 | 5,329 | 107,024 | 112,184 | 4,854 | 83,253 | 89,375 |
| Credit | |||||||||
| derivatives | 1,054 | 26,836 | 26,743 | 1,343 | 33,884 | 31,574 | 1,357 | 26,872 | 25,344 |
| Equity and | |||||||||
| commodity | 123 | 6,134 | 9,551 | 120 | 7,306 | 10,218 | 179 | 5,221 | 10,039 |
| 529,618 | 523,983 | 572,344 | 561,790 | 427,077 | 423,967 |
The Group's exposures to monolines and credit derivative product companies (CDPCs) by credit rating are summarised below: ratings are based on the lower of S&P and Moody's. All of these exposures are held within Non-Core.
| Fair value: | Credit | |||||
|---|---|---|---|---|---|---|
| Notional: | reference | valuation | ||||
| protected | protected | Gross | adjustment | Net | ||
| assets | assets | exposure | (CVA) | Hedges | exposure | |
| £m | £m | £m | £m | £m | £m | |
| 31 December 2011 | ||||||
| A to AA- | 4,939 | 4,243 | 696 | 252 | - | 444 |
| Non-investment grade | 3,623 | 2,431 | 1,192 | 946 | 71 | 175 |
| 8,562 | 6,674 | 1,888 | 1,198 | 71 | 619 | |
| Of which: | ||||||
| CMBS | 946 | 674 | 272 | 247 | ||
| CDOs | 500 | 57 | 443 | 351 | ||
| CLOs | 4,616 | 4,166 | 450 | 177 | ||
| Other ABS | 1,998 | 1,455 | 543 | 334 | ||
| Other | 502 | 322 | 180 | 89 | ||
| 8,562 | 6,674 | 1,888 | 1,198 | |||
| 30 September 2011 | ||||||
| A to AA- | 5,411 | 4,735 | 676 | 259 | - | 417 |
| Non-investment grade | 7,098 | 3,684 | 3,414 | 2,568 | 70 | 776 |
| 12,509 | 8,419 | 4,090 | 2,827 | 70 | 1,193 | |
| Of which: | ||||||
| CMBS | 3,954 | 1,879 | 2,075 | 1,599 | ||
| CDOs | 988 | 156 | 832 | 619 | ||
| CLOs | 4,806 | 4,348 | 458 | 183 | ||
| Other ABS | 2,275 | 1,758 | 517 | 309 | ||
| Other | 486 | 278 | 208 | 117 | ||
| 12,509 | 8,419 | 4,090 | 2,827 | |||
| 31 December 2010 | ||||||
| A to AA- | 6,336 | 5,503 | 833 | 272 | - | 561 |
| Non-investment grade | 8,555 | 5,365 | 3,190 | 2,171 | 71 | 948 |
| 14,891 | 10,868 | 4,023 | 2,443 | 71 | 1,509 | |
| Of which: | ||||||
| CMBS | 4,149 | 2,424 | 1,725 | 1,253 | ||
| CDOs | 1,133 | 256 | 877 | 593 | ||
| CLOs | 6,724 | 6,121 | 603 | 210 | ||
| Other ABS | 2,393 | 1,779 | 614 | 294 | ||
| Other | 492 | 288 | 204 | 93 | ||
| 14,891 | 10,868 | 4,023 | 2,443 |
• The exposure to monolines declined, primarily due to the restructuring of some exposures. The CVA decreased in line with the reduction in exposure.
| Fair value: | |||||
|---|---|---|---|---|---|
| Notional: | reference | Credit | |||
| protected | protected | Gross | valuation | Net | |
| assets | assets | exposure | adjustment | exposure | |
| £m | £m | £m | £m | £m | |
| 31 December 2011 | |||||
| AAA | 213 | 212 | 1 | - | 1 |
| A to AA- | 646 | 632 | 14 | 3 | 11 |
| Non-investment grade | 19,671 | 18,151 | 1,520 | 788 | 732 |
| Unrated | 3,974 | 3,613 | 361 | 243 | 118 |
| 24,504 | 22,608 | 1,896 | 1,034 | 862 | |
| 30 September 2011 | |||||
| AAA | 211 | 209 | 2 | - | 2 |
| A to AA- | 640 | 614 | 26 | 15 | 11 |
| Non-investment grade | 19,294 | 17,507 | 1,787 | 902 | 885 |
| Unrated | 3,985 | 3,552 | 433 | 316 | 117 |
| 24,130 | 21,882 | 2,248 | 1,233 | 1,015 | |
| 31 December 2010 | |||||
| AAA | 213 | 212 | 1 | - | 1 |
| A to AA- | 644 | 629 | 15 | 4 | 11 |
| Non-investment grade | 20,066 | 19,050 | 1,016 | 401 | 615 |
| Unrated | 4,165 | 3,953 | 212 | 85 | 127 |
| 25,088 | 23,844 | 1,244 | 490 | 754 |
The commercial real estate lending portfolio totalled £74.8 billion at 31 December 2011, a 14% yearon-year decrease (31 December 2010 - £87.4 billion). The commercial real estate sector comprises exposure to entities involved in the development of or investment in commercial and residential properties (including homebuilders). The analysis below excludes rate risk management and contingent obligations.
| 31 December 2011 | 31 December 2010 | ||||||
|---|---|---|---|---|---|---|---|
| Investment | Development | Total | Investment | Development | Total | ||
| By division | £m | £m | £m | £m | £m | £m | |
| Core | |||||||
| UK Corporate | 25,101 | 5,023 | 30,124 | 24,879 | 5,819 | 30,698 | |
| Ulster Bank | 3,882 | 881 | 4,763 | 4,284 | 1,090 | 5,374 | |
| US Retail & | |||||||
| Commercial | 4,235 | 70 | 4,305 | 4,322 | 93 | 4,415 | |
| Global Banking & | |||||||
| Markets | 1,013 | 360 | 1,373 | 1,131 | 644 | 1,775 | |
| 34,231 | 6,334 | 40,565 | 34,616 | 7,646 | 42,262 | ||
| Non-Core | |||||||
| UK Corporate | 3,957 | 2,020 | 5,977 | 7,591 | 3,263 | 10,854 | |
| Ulster Bank | 3,860 | 8,490 | 12,350 | 3,854 | 8,760 | 12,614 | |
| US Retail & | |||||||
| Commercial | 901 | 28 | 929 | 1,325 | 70 | 1,395 | |
| Global Banking & | |||||||
| Markets | 14,689 | 336 | 15,025 | 19,906 | 379 | 20,285 | |
| 23,407 | 10,874 | 34,281 | 32,676 | 12,472 | 45,148 | ||
| Total | 57,638 | 17,208 | 74,846 | 67,292 | 20,118 | 87,410 |
| Investment | Development | |||||
|---|---|---|---|---|---|---|
| By geography | Commercial £m |
Residential £m |
Commercial £m |
Residential £m |
Total £m |
|
| 31 December 2011 | ||||||
| UK (excluding NI) (1) | 28,653 | 6,359 | 1,198 | 6,511 | 42,721 | |
| Ireland (ROI & NI) (1) | 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 | ||
| 31 December 2010 | ||||||
| UK (excluding NI) (1) | 32,334 | 7,255 | 1,520 | 8,288 | 49,397 | |
| Ireland (ROI & NI) (1) | 5,056 | 1,148 | 2,785 | 6,578 | 15,567 | |
| Western Europe | 10,568 | 643 | 25 | 42 | 11,278 | |
| US | 7,345 | 1,296 | 69 | 175 | 8,885 | |
| RoW | 1,622 | 25 | 138 | 498 | 2,283 | |
| 56,925 | 10,367 | 4,537 | 15,581 | 87,410 |
Note:
(1) ROI: Republic of Ireland; NI: Northern Ireland.
| Investment | Development | |||||
|---|---|---|---|---|---|---|
| By geography | Core £m |
Non-Core £m |
Core £m |
Non-Core £m |
Total £m |
|
| 31 December 2011 | ||||||
| UK (excluding NI) | 25,904 | 9,108 | 5,118 | 2,591 | 42,721 | |
| Ireland (ROI & NI) | 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 | ||
| 31 December 2010 | ||||||
| UK (excluding NI) | 26,168 | 13,421 | 5,997 | 3,811 | 49,397 | |
| Ireland (ROI & NI) | 3,159 | 3,044 | 963 | 8,401 | 15,567 | |
| Western Europe | 409 | 10,802 | 25 | 42 | 11,278 | |
| US | 4,636 | 4,005 | 173 | 71 | 8,885 | |
| RoW | 244 | 1,404 | 488 | 147 | 2,283 | |
| 34,616 | 32,676 | 7,646 | 12,472 | 87,410 |
| By sub-sector | UK (excl NI) £m |
Ireland (ROI & NI) £m |
Western Europe £m |
US £m |
RoW £m |
Total £m |
|---|---|---|---|---|---|---|
| 31 December 2011 | ||||||
| Residential | 12,871 | 7,449 | 1,096 | 1,325 | 319 | 23,060 |
| Office | 7,155 | 1,354 | 2,248 | 404 | 352 | 11,513 |
| Retail | 8,709 | 1,641 | 1,893 | 285 | 275 | 12,803 |
| Industrial | 4,317 | 507 | 520 | 24 | 105 | 5,473 |
| Mixed/other | 9,669 | 4,235 | 3,001 | 4,898 | 194 | 21,997 |
| 42,721 | 15,186 | 8,758 | 6,936 | 1,245 | 74,846 | |
| 31 December 2010 | ||||||
| Residential | 15,543 | 7,726 | 685 | 1,471 | 523 | 25,948 |
| Office | 8,539 | 1,178 | 2,878 | 663 | 891 | 14,149 |
| Retail | 10,607 | 1,668 | 1,888 | 1,025 | 479 | 15,667 |
| Industrial | 4,912 | 515 | 711 | 80 | 106 | 6,324 |
| Mixed/other | 9,796 | 4,480 | 5,116 | 5,646 | 284 | 25,322 |
| 49,397 | 15,567 | 11,278 | 8,885 | 2,283 | 87,410 |
Note:
(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 £1.3 billion at 31 December 2011 continues to perform in line with expectations and requires minimal provision.
| Maturity profile of portfolio | UK Corporate £m |
Ulster Bank £m |
US Retail & Commercial £m |
Global Banking & Markets £m |
Total £m |
|---|---|---|---|---|---|
| 31 December 2011 | |||||
| Core | |||||
| < 1 year (1) | 8,268 | 3,030 | 1,056 | 142 | 12,496 |
| 1-2 years | 5,187 | 391 | 638 | 278 | 6,494 |
| 2-3 years | 3,587 | 117 | 765 | 363 | 4,832 |
| > 3 years | 10,871 | 1,225 | 1,846 | 590 | 14,532 |
| Not classified (2) | 2,211 | - | - | - | 2,211 |
| Total | 30,124 | 4,763 | 4,305 | 1,373 | 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 |
| 31 December 2010 | |||||
| Core | |||||
| < 1 year (1) | 7,563 | 2,719 | 1,303 | 890 | 12,475 |
| 1-2 years | 5,154 | 829 | 766 | 247 | 6,996 |
| 2-3 years | 4,698 | 541 | 751 | 221 | 6,211 |
| > 3 years | 10,361 | 1,285 | 1,595 | 417 | 13,658 |
| Not classified (2) | 2,922 | - | - - |
2,922 | |
| Total | 30,698 | 5,374 | 4,415 | 1,775 | 42,262 |
| Non-Core | |||||
| < 1 year (1) | 4,829 | 10,809 | 501 | 3,887 | 20,026 |
| 1-2 years | 1,727 | 983 | 109 | 6,178 | 8,997 |
| 2-3 years | 831 | 128 | 218 | 3,967 | 5,144 |
| > 3 years | 2,904 | 694 | 567 | 6,253 | 10,418 |
| Not classified (2) | 563 | - | - - |
563 | |
| Total | 10,854 | 12,614 | 1,395 | 20,285 | 45,148 |
Notes:
(1) Includes on demand and past due assets.
(2) Predominantly comprises multi-option facilities for which there is no single maturity date.
• The majority of Ulster Bank's commercial real estate portfolio is categorised as < 1 year including on demand assets, owing to the high level of non-performing assets in the portfolio. Ulster Bank places most restructured facilities on demand rather than extending the maturity date.
| 31 December 2011 | AQ1-AQ2 £m |
AQ3-AQ4 £m |
AQ5-AQ6 £m |
AQ7-AQ8 £m |
AQ9 £m |
AQ10 £m |
Total £m |
|---|---|---|---|---|---|---|---|
| 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 |
| Total | 1,774 | 8,001 | 25,005 | 10,147 | 5,496 | 24,423 | 74,846 |
| 31 December 2010 | |||||||
| Core | 1,055 | 7,087 | 20,588 | 7,829 | 2,171 | 3,532 | 42,262 |
| Non-Core | 1,003 | 2,694 | 11,249 | 7,608 | 4,105 | 18,489 | 45,148 |
| Total | 2,058 | 9,781 | 31,837 | 15,437 | 6,276 | 22,021 | 87,410 |
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 including internal expert judgement and indexation.
| Ulster Bank | Rest of the Group | Group | ||||
|---|---|---|---|---|---|---|
| AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | AQ1-AQ9 | AQ10 | |
| LTVs at 31 December 2011 | £m | £m | £m | £m | £m | £m |
| <= 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 |
| Total portfolio average LTV (2) | 140% | 259% | 69% | 129% | 77% | 201% |
Notes:
(1) Other performing loans of £9.0 billion include unsecured lending to commercial real estate clients, such as major UK homebuilders. The credit quality of these exposures is consistent with that of the performing portfolio overall. Other nonperforming loans of £1.9 billion are subject to the Group's standard provisioning policies.
(2) Weighted average by exposure.
The Group's retail lending portfolio includes mortgages, credit cards, unsecured loans, auto finance and overdrafts. The majority of personal lending exposures are in the UK, Ireland and the US. The analysis below includes both Core and Non-Core balances.
| 31 December | 31 December | |
|---|---|---|
| 2011 | 2010 | |
| Personal credit loans and receivables | £m | £m |
| UK Retail | ||
| - mortgages | 96,388 | 92,592 |
| - cards, loans and overdrafts | 16,004 | 18,072 |
| Ulster Bank | ||
| - mortgages | 20,020 | 21,162 |
| - other personal | 1,533 | 1,017 |
| Citizens | ||
| - mortgages | 23,829 | 24,575 |
| - auto and cards | 5,731 | 6,062 |
| - other (1) | 2,111 | 3,455 |
| Other (2) | 17,545 | 18,123 |
| 183,161 | 185,058 |
Notes:
(1) Mainly student loans and loans secured by recreational vehicles or marine vessels.
(2) Personal exposures in other divisions.
The tables below detail the distribution of residential mortgages by indexed LTV. LTV averages are calculated by transaction volume and transaction value. Refer to the section on Ulster Bank Group on page 179 for analysis of Ulster Bank residential mortgages.
| UK Retail | Citizens | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| LTV distribution calculated on a volume basis | % | % | % | % |
| <= 70% | 62.1 | 61.6 | 43.5 | 43.4 |
| > 70% and <= 90% | 27.1 | 26.2 | 26.9 | 27.6 |
| > 90% and <= 110% | 9.4 | 10.4 | 16.7 | 17.2 |
| > 110% and <= 130% | 1.4 | 1.7 | 6.9 | 6.0 |
| > 130% | - | 0.1 | 6.0 | 5.8 |
| Total portfolio average LTV at 31 December | 57.8 | 58.2 | 73.8 | 75.3 |
| Average LTV on new originations during the year | 58.4 | 64.2 | 63.8 | 64.8 |
| LTV distribution calculated on a value basis | £m | £m | £m | £m |
| <= 70% | 47,811 | 44,522 | 9,669 | 10,375 |
| > 70% and <= 90% | 34,410 | 32,299 | 7,011 | 7,196 |
| > 90% and <= 110% | 11,800 | 12,660 | 3,947 | 4,080 |
| > 110% and <= 130% | 1,713 | 1,924 | 1,580 | 1,488 |
| > 130% | 74 | 73 | 1,263 | 1,252 |
| Total portfolio average LTV at 31 December | 67.2% | 68.1% | 75.9% | 75.4% |
| Average LTV on new originations during the year | 63.0% | 68.0% | 65.8% | 65.3% |
The table below details residential mortgages which are three months or more in arrears (by volume).
| 31 December | 31 December | |
|---|---|---|
| 2011 | 2010 | |
| Residential mortgages which are three months or more in arrears (by volume) | % | % |
| UK Retail (1) | 1.6 | 1.7 |
| Citizens | 2.0 | 1.4 |
Note:
(1) The 'One Account' current account mortgage is excluded (£5.4 billion - 5.6% of assets) at 31 December 2011, 0.9% of these accounts were 90 days continually in excess of the limit (31 December 2010 - 0.8%). Consistent with the way the Council of Mortgage Lenders publishes member arrears information, the 3+ months arrears rate now excludes accounts in repossession and cases with shortfalls post property sale.
The Group's personal lending portfolio includes credit cards, unsecured loans, auto finance and overdrafts. The majority of personal lending exposures exist in the UK and the US. Impairments as a proportion of average loans and receivables are shown in the following table.
| 31 December 2011 | 31 December 2010 | |||
|---|---|---|---|---|
| Impairment charge as a % |
Impairment charge as a % |
|||
| Average | of average | Average | of average | |
| loans and receivables |
loans and receivables |
loans and receivables |
loans and receivables |
|
| Personal lending | £m | % | £m | % |
| UK Retail cards (1) | 5,675 | 3.0 | 6,025 | 5.0 |
| UK Retail loans (1) | 7,755 | 2.8 | 9,863 | 4.8 |
| Citizens cards (2) | 936 | 5.1 | 1,005 | 9.9 |
| Citizens auto loans (2) | 4,856 | 0.2 | 5,256 | 0.6 |
Notes:
At 31 December 2011, Ulster Bank Group accounted for 10% of the Group's total gross customer loans (31 December 2010 - 10%) and 9% of the Group's Core gross customer loans (31 December 2010 - 9%). Ulster Bank's financial performance continues to be overshadowed by the challenging economic climate in Ireland, with impairments remaining elevated as high unemployment, coupled with higher taxation and limited liquidity in the economy, continues to depress the property market and domestic spending.
The impairment charge of £3,717 million for the year (31 December 2010 - £3,843 million) was driven by a combination of new defaulting customers and deteriorating security values. Provisions as a percentage of risk elements in lending increased from 44% at 31 December 2010 to 53% at 31 December 2011, predominantly as a result of the deterioration in the value of the Non-Core commercial real estate development portfolio.
The impairment charge for the year of £1,384 million (31 December 2010 - £1,161 million) reflects the difficult economic climate in Ireland, with elevated default levels across both mortgage and other corporate portfolios. The mortgage sector accounted for £570 million (41%) of the total 2011 impairment charge.
The impairment charge for the year was £2,333 million (31 December 2010 - £2,682 million), with the commercial real estate sector accounting for £2,160 million (93%) of the total 2011 charge.
| REIL | ||||||||
|---|---|---|---|---|---|---|---|---|
| as a % of | Provisions | Provisions | ||||||
| Gross | gross | as a % of | as a % of | Impairment | Amounts | |||
| 31 December 2011 | loans £m |
£m | REIL Provisions £m |
loans % |
REIL % |
gross loans % |
charge £m |
written-off £m |
| Core | ||||||||
| Mortgages | 20,020 | 2,184 | 945 | 10.9 | 43 | 4.7 | 570 | 11 |
| Personal unsecured | 1,533 | 201 | 184 | 13.1 | 92 | 12.0 | 56 | 25 |
| 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 |
| 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 |
| Personal unsecured | 1,533 | 201 | 184 | 13.1 | 92 | 12.0 | 56 | 25 |
| 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 |
| 48,032 | 17,134 | 9,050 | 35.7 | 53 | 18.8 | 3,717 | 173 |
| REIL | ||||||||
|---|---|---|---|---|---|---|---|---|
| as a % of | Provisions | Provisions | ||||||
| Gross | gross | as a % of | as a % of | Impairment | Amounts | |||
| loans | REIL | Provisions | loans | REIL | gross loans | charge | written-off | |
| 31 December 2010 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Mortgages | 21,162 | 1,566 | 439 | 7.4 | 28 | 2.1 | 294 | 7 |
| Personal unsecured | 1,282 | 185 | 158 | 14.4 | 85 | 12.3 | 48 | 30 |
| Commercial real estate | ||||||||
| - investment | 4,284 | 598 | 332 | 14.0 | 56 | 7.7 | 259 | - |
| - development | 1,090 | 65 | 37 | 6.0 | 57 | 3.4 | 116 | - |
| Other corporate | 9,039 | 1,205 | 667 | 13.3 | 55 | 7.4 | 444 | 11 |
| 36,857 | 3,619 | 1,633 | 9.8 | 45 | 4.4 | 1,161 | 48 | |
| Non-Core | ||||||||
| Mortgages | - | - | - | - | - | - | 42 | - |
| Commercial real estate | ||||||||
| - investment | 3,854 | 2,391 | 1,000 | 62.0 | 42 | 25.9 | 630 | - |
| - development | 8,760 | 6,341 | 2,783 | 72.4 | 44 | 31.8 | 1,759 | - |
| Other corporate | 1,970 | 1,310 | 561 | 66.5 | 43 | 28.5 | 251 | - |
| 14,584 | 10,042 | 4,344 | 68.9 | 43 | 29.8 | 2,682 | - | |
| Ulster Bank Group | ||||||||
| Mortgages | 21,162 | 1,566 | 439 | 7.4 | 28 | 2.1 | 336 | 7 |
| Personal unsecured | 1,282 | 185 | 158 | 14.4 | 85 | 12.3 | 48 | 30 |
| Commercial real estate | ||||||||
| - investment | 8,138 | 2,989 | 1,332 | 36.7 | 45 | 16.4 | 889 | - |
| - development | 9,850 | 6,406 | 2,820 | 65.0 | 44 | 28.6 | 1,875 | - |
| Other corporate | 11,009 | 2,515 | 1,228 | 22.8 | 49 | 11.2 | 695 | 11 |
| 51,441 | 13,661 | 5,977 | 26.6 | 44 | 11.6 | 3,843 | 48 |
The tables below show how the continued decrease in property values has affected the distribution of residential mortgages by indexed LTV. LTV is based upon gross loan amounts and whilst including defaulted loans, does not take account of provisions made.
| LTV distribution calculated on a volume basis | 2011 % |
2010 % |
|---|---|---|
| <= 70% | 45.0 | 50.3 |
| > 70% and <= 90% | 11.4 | 13.0 |
| > 90% and <= 110% | 12.0 | 14.5 |
| > 110% and <= 130% | 10.9 | 13.5 |
| > 130% | 20.7 | 8.7 |
| Total portfolio average LTV at 31 December | 81.0 | 71.2 |
| Average LTV on new originations during the year | 67.0 | 75.9 |
| LTV distribution calculated on a value basis | £m | £m |
|---|---|---|
| <= 70% | 4,526 | 5,928 |
| > 70% and <= 90% | 2,501 | 3,291 |
| > 90% and <= 110% | 3,086 | 4,256 |
| > 110% and <= 130% | 3,072 | 4,391 |
| > 130% | 6,517 | 2,958 |
| Total portfolio average LTV at 31 December | 106.1 | 91.7 |
| Average LTV on new originations during the year | 73.9 | 78.9 |
The commercial real estate lending portfolio for Ulster Bank Group totalled £17.1 billion at 31 December, of which £12.3 billion or 72% is Non-Core. The geographic split of the total Ulster Bank Group commercial real estate portfolio remained similar to 2010, with 26% in Northern Ireland, 63% in the Republic of Ireland and 11% in the UK.
| Development | Investment | ||||
|---|---|---|---|---|---|
| Commercial | Residential | Commercial | Residential | Total | |
| Exposure by geography | £m | £m | £m | £m | £m |
| 31 December 2011 | |||||
| Ireland (ROI & NI) | 2,591 | 6,317 | 5,097 | 1,132 | 15,137 |
| UK (excluding NI) | 95 | 336 | 1,371 | 111 | 1,913 |
| RoW | - | 32 | 27 | 4 | 63 |
| 2,686 | 6,685 | 6,495 | 1,247 | 17,113 | |
| 31 December 2010 | |||||
| Ireland (ROI & NI) | 2,785 | 6,578 | 5,032 | 1,098 | 15,493 |
| UK (excluding NI) | 110 | 359 | 1,869 | 115 | 2,453 |
| RoW | - | 18 | 23 | 1 | 42 |
| 2,895 | 6,955 | 6,924 | 1,214 | 17,988 |
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.
For a discussion of the Group's approach to country risk management and the external risk environment, refer to the 2011 Annual Report and Accounts: Business review: Risk and balance sheet management: Country risk.
The following tables show the Group's exposure by country of incorporation of the counterparty at 31 December 2011. 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 31 December 2011, as well as selected eurozone countries. The numbers are stated before taking into account the impact of mitigating actions, such as collateral, insurance or guarantees, that 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.
For definitions of headings in the following tables, refer to page 204.
'Other eurozone' comprises Austria, Cyprus, Estonia, Finland, Malta, Slovakia and Slovenia.
References to Non-Core in the following pages relate to Non-Core lending disclosures in the summary tables on pages 182-183.
| 31 | De mb ce er |
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||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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||||||||||||||
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85 5, 7 |
( 82 ) |
| To tal eu roz on e |
1, 87 6 |
19 65 9 , |
4, 32 0 |
4, 93 2 |
53 128 , |
21 38 3 , |
105 29 8 , |
32 45 6 , |
56 50 9 , |
46 72 4 , |
20 8, 53 1 |
56 73 8 , |
26 5, 26 9 |
( 7, 174 ) |
| Oth trie er co un s |
||||||||||||||
| Ind ia |
- | - | 1, 30 7 |
30 7 |
2, 66 5 |
27 3 |
4, 55 2 |
65 3 |
1, 68 6 |
178 | 6, 41 6 |
1, 28 1 |
7, 69 7 |
( ) 195 |
| Ch ina |
17 | 29 8 |
1, 22 3 |
16 | 75 3 |
64 | 2, 37 1 |
23 6 |
57 3 |
25 2 |
3, 196 |
1, 58 9 |
4, 78 5 |
( 117 ) |
| So uth Ko rea |
- | 27 6 |
1, 03 3 |
5 | 55 8 |
2 | 1, 87 4 |
53 | 1, 35 3 |
49 3 |
3, 72 0 |
1, 143 |
4, 86 3 |
( 159 ) |
| Tu rke y |
28 2 |
68 | 44 8 |
37 | 1, 38 6 |
12 | 2, 23 3 |
69 2 |
55 0 |
11 1 |
2, 89 4 |
68 6 |
3, 58 0 |
( 91 ) |
| Ru ssi a |
- | 110 | 24 4 |
7 | 1, 18 1 |
58 | 1, 60 0 |
125 | 124 | 51 | 1, 77 5 |
59 6 |
2, 37 1 |
( 134 ) |
| Bra zil |
- | - | 82 5 |
- | 31 5 |
5 | 1, 145 |
120 | 68 7 |
15 | 1, 84 7 |
190 | 2, 03 7 |
( 36 9) |
| Ro nia ma |
36 | 178 | 21 | 21 | 42 6 |
44 6 |
1, 128 |
1, 123 |
31 0 |
8 | 1, 44 6 |
31 9 |
1, 76 5 |
23 |
| Me xic o |
- | 8 | 149 | - | 99 9 |
1 | 1, 157 |
30 3 |
144 | 122 | 1, 42 3 |
84 0 |
2, 26 3 |
84 |
| Po lan d |
- | 168 | 7 | 7 | 65 5 |
6 | 84 3 |
108 | 27 1 |
69 | 1, 183 |
1, 02 0 |
2, 20 3 |
( 94 ) |
Reported exposures are affected by currency movements. Over the year, sterling fell 0.3% against the US dollar and rose 3.1% against the euro. In the fourth quarter, sterling fell 0.9% against the US dollar and rose 2.9% against the euro.
The Group primarily transacts CDS contracts with investment-grade global financial institutions that are active participants in the CDS market. These transactions are subject to regular margining. For European peripheral sovereigns, credit protection has been purchased from a number of major European banks, predominantly outside the country of the reference entity. In a few cases where protection was bought from banks in the country of the reference entity, giving rise to wrong-way risk, this risk is mitigated through specific collateralisation. Due to their bespoke nature, exposures relating to CDPCs and related hedges have not been included, as they cannot be meaningfully attributed to a particular country or a reference entity. Exposures to CDPCs are disclosed on page 164.
The Group used CDS contracts throughout 2011 to manage both eurozone country and counterparty exposures. As shown in the individual country tables, this resulted in increases in both gross notional bought and sold eurozone CDS contracts, mainly on Italy, France and the Netherlands. The magnitude of the fair value of bought and sold CDS contracts increased over 2011 in line with the widening of eurozone CDS spreads.
For more specific commentary on the Group's exposure to each of the eurozone periphery countries, refer to pages 188 to 196. For commentary on the Group's exposure to other eurozone countries, see page 203.
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| De mb 31 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
3, 44 3 |
- | - | 18 40 6 , |
81 | 19 59 7 , |
15 04 9 , |
22 95 4 , |
1, 92 5 |
28 32 2 , |
37 08 0 , |
36 75 9 , |
6, 48 8 |
( 6, 37 6 ) |
| Ce ntr al ba nks |
27 28 2 , |
- | - | 20 | - | 6 | - | 26 | 5, 77 0 |
33 07 8 , |
- | - | - | - |
| Ot he r b ks an |
55 3, 0 |
- | - | 8, 42 3 |
( 75 2) |
1, 27 2 |
50 1, 2 |
8, 19 3 |
5 29 68 , |
41 42 8 , |
19 73 6 , |
19 23 2 , |
2, 30 3 |
( 5 ) 2, 22 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
5, 5 38 |
- | - | 10 49 4 , |
( ) 1, 12 9 |
1, 13 8 |
47 1 |
11 16 1 , |
95 10 6 , |
50 27 2 , |
17 94 9 , |
16 60 8 , |
69 3 |
( ) 62 0 |
| Co rat rpo e |
47 52 2 , |
14 15 2 , |
7, 26 7 |
96 4 |
23 | 52 8 |
59 | 1, 43 3 |
4, 11 8 |
53 07 3 , |
76 96 6 , |
70 11 9 , |
2, 24 1 |
( 1, 91 7) |
| Pe l rso na |
56 19 4 , |
2, 28 0 |
1, 06 9 |
- | - | - | - | - | 1 | 56 5 19 , |
- | - | - | - |
| 10 6, 74 6 |
16 43 2 , |
8, 33 6 |
38 30 7 , |
( 1, 77 7) |
22 54 1 , |
17 08 1 , |
43 76 7 , |
52 45 5 , |
20 2, 96 8 |
15 1, 73 1 |
14 2, 71 8 |
11 72 5 , |
( 11 13 8 ) , |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
1, 87 6 |
- | - | 23 20 1 , |
( 89 3) |
25 04 1 , |
14 25 6 , |
33 98 6 , |
1, 53 7 |
37 39 9 , |
28 82 5 , |
29 07 5 , |
2, 89 9 |
( 2, 84 3) |
| Ce ntr al ba nks |
19 65 9 , |
- | - | - | - | 7 | - | 7 | 6, 38 2 |
26 04 8 , |
- | - | - | - |
| Ot he r b ks an |
4, 32 0 |
- | - | 9, 192 |
( 91 6) |
1, 71 9 |
1, 187 |
9, 72 4 |
25 63 9 , |
39 68 3 , |
16 61 6 , |
16 25 6 , |
1, 04 2 |
( 1, 03 2) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
4, 93 2 |
- | - | 10 58 3 , |
( 73 7) |
90 8 |
83 | 11 40 8 , |
9, 02 5 |
25 36 5 , |
12 92 1 , |
12 170 , |
173 | ( 182 ) |
| Co rat rpo e |
53 128 , |
12 40 4 , |
5, 39 3 |
81 3 |
45 | 83 1 |
26 0 |
1, 38 4 |
4, 14 1 |
58 65 3 , |
70 35 4 , |
63 79 0 , |
( 26 7) |
46 1 |
| Pe l rso na |
21 38 3 , |
1, 64 2 |
53 7 |
- | - | - | - | - | - | 21 38 3 , |
- | - | - | - |
| 105 29 8 , |
14 04 6 , |
5, 93 0 |
43 78 9 , |
( 2, 50 1) |
28 50 6 , |
15 78 6 , |
56 50 9 , |
46 72 4 , |
20 8, 53 1 |
128 71 6 , |
12 1, 29 1 |
3, 84 7 |
( 3, 59 6) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
67 62 4 , |
5, 58 5 |
1, 08 5 |
13 1 |
19 8 |
23 | - | - | 68 90 7 , |
5, 73 9 |
| Ot he r fi ial Ins titu tio na nc ns |
79 82 4 , |
5, 60 5 |
75 9 |
89 | 2, 09 4 |
27 8 |
14 7 |
14 | 82 82 4 , |
5, 98 6 |
| To tal |
14 7, 44 8 |
11 19 0 , |
1, 84 4 |
22 0 |
2, 29 2 |
30 1 |
14 7 |
14 | 15 1, 73 1 |
11 72 5 , |
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v alu |
e | ||||||
| Le nd ing |
RE IL |
Pro vis ion s |
LA R d eb t riti se cu es |
AF S re se rve s |
Lo | Sh ort |
To tal de bt riti se cu es |
llat l) co era d r an os |
sh t ee ex os ure s |
Bo ht |
So ld |
Bo ht |
So ld |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | ng £m |
£m | £m | ep £m |
p £m |
ug £m |
£m | ug £m |
£m |
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
45 | - | - | 10 2 |
( 46 ) |
20 | 19 | 10 3 |
92 | 24 0 |
2, 14 5 |
2, 22 3 |
46 6 |
( 48 1) |
| Ce ntr al ba nks |
1, 46 7 |
- | - | - | - | - | - | - | - | 1, 46 7 |
- | - | - | - |
| Ot he r b ks an |
13 6 |
- | - | 17 7 |
( ) 39 |
5 19 |
14 | 35 8 |
45 1, 9 |
95 1, 3 |
11 0 |
10 7 |
21 | ( ) 21 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
33 6 |
- | - | 61 | - | 11 6 |
35 | 14 2 |
85 5 |
1, 33 3 |
52 3 |
63 0 |
64 | ( ) 74 |
| Co rat rpo e |
18 99 4 , |
10 26 9 , |
5, 68 9 |
14 8 |
3 | 13 5 |
- | 28 3 |
41 7 |
19 69 4 , |
42 5 |
32 2 |
( 11 ) |
10 |
| Pe l rso na |
18 85 8 , |
2, 25 8 |
1, 04 8 |
- | - | - | - | - | 1 | 18 85 9 , |
- | - | - | - |
| 39 83 6 , |
12 52 7 , |
6, 73 7 |
48 8 |
( 82 ) |
46 6 |
68 | 88 6 |
2, 82 4 |
43 54 6 , |
3, 20 3 |
3, 28 2 |
54 0 |
( 56 6 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
61 | - | - | 104 | ( 45 ) |
93 | 88 | 109 | 20 | 190 | 1, 87 2 |
2, 01 4 |
36 0 |
( 38 7) |
| Ce ntr al ba nks |
2, 119 |
- | - | - | - | 7 | - | 7 | 126 | 2, 25 2 |
- | - | - | - |
| Ot he r b ks an |
87 | - | - | 43 5 |
( 51 ) |
96 | 45 | 48 6 |
1, 52 3 |
2, 09 6 |
31 7 |
31 2 |
103 | ( 95 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
81 3 |
- | - | 29 1 |
( 1) |
20 5 |
- | 49 6 |
83 7 |
2, 146 |
56 6 |
59 7 |
45 | ( 84 ) |
| Co rat rpo e |
19 88 6 , |
8, 29 1 |
4, 07 2 |
91 | ( 2) |
14 0 |
6 | 22 5 |
43 4 |
20 54 5 , |
48 3 |
34 4 |
( 20 ) |
17 |
| Pe l rso na |
20 22 8 , |
1, 63 8 |
53 4 |
- | - | - | - | - | - | 20 22 8 , |
- | - | - | - |
| 43 194 , |
9, 92 9 |
4, 60 6 |
92 1 |
( 99 ) |
54 1 |
139 | 1, 32 3 |
2, 94 0 |
47 45 7 , |
3, 23 8 |
3, 26 7 |
48 8 |
( 54 9) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To tal |
||
|---|---|---|---|---|---|---|---|---|---|---|
| tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
58 1, 6 |
30 0 |
2 | - | - | - | - | - | 58 1, 8 |
30 0 |
| Ot he r fi ial Ins titu tio na nc ns |
1, 32 5 |
23 2 |
16 1 |
1 | 12 9 |
7 | - | - | 1, 61 5 |
24 0 |
| To tal |
2, 91 1 |
53 2 |
16 3 |
1 | 12 9 |
7 | - | - | 3, 20 3 |
54 0 |
● Exposure to the central bank fluctuates, driven by regulatory requirements and by deposits of excess liquidity as part of the Group's assets and liabilities management. Exposures fell by £0.7 billion over the year, with most of the decline occurring in the fourth quarter.
● GBM and Ulster Bank account for the majority of the Group's exposure to financial institutions. Exposure to the financial sector fell by £1.1 billion during the year, caused by a £0.4 billion reduction in lending, a £0.5 billion reduction in debt securities and smaller reductions in derivatives and repos and in off-balance sheet exposure. The largest category is derivatives and repos where exposure is affected predominantly by market movements and transactions are typically collateralised.
● Corporate lending exposure fell approximately £0.9 billion over the year, driven by a combination of exchange rate movements and write-offs. At the end of 2011, lending exposure was highest in the property sector (£11.6 billion), which is also the sector that experienced the largest year-onyear reduction (£0.4 billion). REIL and impairment provisions rose by £2.0 billion and £1.6 billion respectively over the year.
● The Ulster Bank retail portfolio mainly consists of mortgages (approximately 95% of Ulster Bank personal lending at 31 December 2011), with the remainder comprising credit card and other personal lending. Overall personal lending exposure fell approximately £1.4 billion over the year as a result of exchange rate fluctuations, amortisation, a small amount of write-offs and a lack of demand in the market.
Refer to table on pages 182 and 183 for details.
● Ireland Non-Core lending exposure was £10.2 billion at 31 December 2011, down by £0.6 billion or 6% since December 2010. The remaining lending portfolio largely consists of exposures to real estate (79%), retail (7%) and leisure (4%).
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
9 | - | - | 33 | ( 15 ) |
36 0 |
75 1 |
( 35 8 ) |
35 | ( 31 4) |
5, 15 1 |
5, 15 5 |
53 8 |
( 52 2) |
| Ce ntr al ba nks |
3 | - | - | - | - | - | - | - | - | 3 | - | - | - | - |
| Ot he r b ks an |
20 6 |
- | - | 4, 89 2 |
( 7) 86 |
16 2 |
21 4 |
4, 84 0 |
1, 62 2 |
6, 66 8 |
5 1, 96 |
1, 93 7 |
15 4 |
( 15 2) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
15 4 |
- | - | 58 1, 0 |
( ) 63 9 |
65 | 8 | 1, 63 7 |
28 2 |
2, 07 3 |
2, 41 7 |
2, 20 4 |
15 7 |
( ) 12 8 |
| Co rat rpo e |
5, 77 5 |
1, 19 0 |
44 2 |
9 | - | 27 | - | 36 | 45 4 |
6, 26 5 |
4, 83 1 |
3, 95 9 |
44 8 |
( 39 9 ) |
| Pe l rso na |
36 2 |
- | - | - | - | - | - | - | - | 36 2 |
- | - | - | - |
| 6, 50 9 |
1, 19 0 |
44 2 |
6, 51 4 |
( 1, 52 1) |
61 4 |
97 3 |
6, 15 5 |
2, 39 3 |
15 05 7 , |
14 36 4 , |
13 22 5 , |
1, 29 7 |
( 1, 20 1) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
19 | - | - | 88 | ( 7) |
1, 172 |
1, 24 8 |
12 | 53 | 84 | 3, 82 0 |
3, 92 3 |
43 6 |
( 43 5) |
| Ce ntr al ba nks |
5 | - | - | - | - | - | - | - | - | 5 | - | - | - | - |
| Ot he r b ks an |
166 | - | - | 5, 26 4 |
( 83 4) |
14 7 |
118 | 5, 29 3 |
1, 48 2 |
6, 94 1 |
2, 08 7 |
2, 159 |
133 | ( 135 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
92 | - | - | 1, 72 4 |
( 47 4) |
34 | 7 | 1, 1 75 |
22 | 1, 86 5 |
1, 64 8 |
1, 38 8 |
72 | ( 45 ) |
| Co rat rpo e |
6, 99 1 |
1, 87 1 |
57 2 |
9 | 38 | 50 | 8 | 51 | 49 0 |
7, 53 2 |
5, 192 |
4, 22 4 |
23 1 |
( 168 ) |
| Pe l rso na |
40 7 |
1 | - | - | - | - | - | - | - | 40 7 |
- | - | - | - |
| 7, 68 0 |
1, 87 2 |
57 2 |
7, 08 5 |
( 1, 27 7) |
1, 40 3 |
1, 38 1 |
7, 107 |
2, 04 7 |
16 83 4 , |
12 74 7 , |
11 69 4 , |
87 2 |
( 78 3) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| De mb 31 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
6, 59 5 |
49 9 |
68 | 5 | 32 | 4 | - | - | 6.6 95 |
50 8 |
| Ot he r fi ial Ins titu tio na nc ns |
23 8 7, |
73 6 |
16 2 |
3 | 26 9 |
50 | - | - | 66 9 7, |
78 9 |
| To tal |
13 83 3 , |
5 1, 23 |
23 0 |
8 | 30 1 |
54 | - | - | 14 36 4 , |
1, 29 7 |
● The Group's exposure to the government was negative at 31 December 2011, reflecting net short held-for-trading debt securities.
● Exposure to corporate clients declined during 2011, with reductions in lending of £1.2 billion and in off-balance sheet items of £0.4 billion, driven by reductions in exposure to property, transport and technology, media and telecommunications sectors. The majority of REIL relates to commercial real estate lending and decreased over the year, reflecting disposals and restructurings.
Refer to table on pages 182 and 183 for details.
● At 31 December 2011, Non-Core had lending exposure of £3.7 billion to Spain, a reduction of £0.8 billion or 18% since December 2010. The real estate (66%), construction (11%), electricity (7%) and land transport (3%) sectors account for the majority of this lending exposure.
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
- | - | - | 70 4 |
( 22 0 ) |
4, 33 6 |
4, 72 5 |
31 5 |
90 | 40 5 |
12 12 5 , |
12 21 8 , |
1, 75 0 |
( 1, 70 8 ) |
| Ce ntr al ba nks |
73 | - | - | - | - | - | - | - | - | 73 | - | - | - | - |
| Ot he r b ks an |
23 3 |
- | - | 11 9 |
( ) 14 |
67 | 88 | 98 | 1, 06 4 |
5 1, 39 |
6, 07 8 |
5, 93 8 |
5 1, 21 |
( 7) 1, 18 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
29 9 |
- | - | 5 68 |
( 15 ) |
40 | 13 | 71 2 |
68 6 |
1, 69 7 |
87 2 |
76 2 |
60 | ( 51 ) |
| Co rat rpo e |
2, 44 4 |
36 1 |
11 3 |
75 | - | 58 | - | 13 3 |
47 4 |
3, 05 1 |
4, 74 2 |
4, 29 9 |
35 0 |
( 28 1) |
| Pe l rso na |
23 | - | - | - | - | - | - | - | - | 23 | - | - | - | - |
| 3, 07 2 |
36 1 |
11 3 |
1, 58 3 |
( 24 9 ) |
4, 50 1 |
4, 82 6 |
1, 25 8 |
2, 31 4 |
6, 64 4 |
23 81 7 , |
23 21 7 , |
3, 37 5 |
( 3, 22 7) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
45 | - | - | 90 6 |
( 99 ) |
5, 113 |
3, 175 |
2, 84 4 |
71 | 2, 96 0 |
8, 99 8 |
8, 51 9 |
64 1 |
( 55 2) |
| Ce ntr al ba nks |
78 | - | - | - | - | - | - | - | - | 78 | - | - | - | - |
| Ot he r b ks an |
66 8 |
- | - | 198 | ( 11 ) |
67 | 16 | 24 9 |
78 2 |
1, 69 9 |
4, 41 7 |
4, 45 8 |
42 1 |
( 41 4) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
41 8 |
- | - | 64 6 |
( 5) |
49 | - | 69 5 |
9 75 |
1, 87 2 |
72 3 |
69 7 |
21 | ( 13 ) |
| Co rat rpo e |
2, 48 3 |
31 4 |
14 1 |
20 | - | 36 | 8 | 48 | 42 0 |
2, 95 1 |
4, 50 6 |
3, 96 6 |
150 | ( 88 ) |
| Pe l rso na |
27 | - | - | - | - | - | - | - | - | 27 | - | - | - | - |
| 3, 71 9 |
31 4 |
14 1 |
1, 77 0 |
( 115 ) |
5, 26 5 |
3, 199 |
3, 83 6 |
2, 03 2 |
9, 58 7 |
18 64 4 , |
17 64 0 , |
1, 23 3 |
( 1, 06 7) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
12 90 4 , |
1, 67 6 |
48 7 |
94 | 61 | 10 | - | - | 13 45 2 , |
1, 78 0 |
| Ot he r fi ial Ins titu tio na nc ns |
10 13 8 , |
1, 55 0 |
8 | 2 | 21 9 |
43 | - | - | 10 36 5 , |
1, 59 5 |
| To tal |
23 04 2 , |
3, 22 6 |
49 5 |
96 | 28 0 |
53 | - | - | 23 81 7 , |
3, 37 5 |
● 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 risks through strategic exits where appropriate, or to mitigate these risks through increased collateral requirements, in line with its evolving appetite for Italian risk. As a result, the Group reduced lending exposure to Italian counterparties by £0.6 billion over 2011 to £3.1 billion.
● The majority of the Group's exposure to Italian financial institutions 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 fourth quarter of the year, gross mtm derivatives exposure increased due to market movements but the risk was mitigated since most facilities are fully collateralised.
● Lending exposure fell slightly during 2011, with reductions in lending to the property industry offset by increased lending to manufacturing companies, particularly in the fourth quarter.
Refer to table on pages 182 and 183 for details.
● Non-Core lending exposure was £1.2 billion at 31 December 2011, a £0.7 billion (39%) reduction since December 2010. The remaining lending exposure comprises mainly commercial real estate finance (22%), leisure (20%), unleveraged funds (16%), electricity (15%) and industrials (10%).
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
7 | - | - | 31 2 |
- | 10 2 |
5 | 40 9 |
- | 41 6 |
3, 15 8 |
3, 16 5 |
2, 22 8 |
( 2, 23 0 ) |
| Ce ntr al ba nks |
6 | - | - | - | - | - | - | - | - | 6 | - | - | - | - |
| Ot he r b ks an |
- | - | - | - | - | - | - | - | 29 0 |
29 0 |
22 | 22 | 3 | ( ) 3 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
31 | - | - | - | - | - | - | - | 2 | 33 | 34 | 34 | 8 | ( ) 8 |
| Co rat rpo e |
42 7 |
25 6 |
25 6 |
- | - | - | - | - | 63 | 49 0 |
43 4 |
42 8 |
14 4 |
( 14 2) |
| Pe l rso na |
14 | - | - | - | - | - | - | - | - | 14 | - | - | - | - |
| 48 5 |
25 6 |
25 6 |
31 2 |
- | 10 2 |
5 | 40 9 |
35 5 |
1, 24 9 |
3, 64 8 |
3, 64 9 |
2, 38 3 |
( 2, 38 3 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
14 | - | - | 89 5 |
( 69 4) |
11 8 |
39 | 97 4 |
7 | 99 5 |
2, 96 0 |
3, 06 1 |
85 4 |
( 87 1) |
| Ce ntr al ba nks |
36 | - | - | - | - | - | - | - | - | 36 | - | - | - | - |
| Ot he r b ks an |
18 | - | - | - | - | - | - | - | 167 | 185 | 21 | 19 | 3 | ( 3) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
31 | - | - | - | - | - | - | - | 3 | 34 | 35 | 35 | 11 | ( 11 ) |
| Co rat rpo e |
19 1 |
48 | 48 | - | - | - | - | - | 50 | 24 1 |
51 1 |
61 6 |
44 | ( 49 ) |
| Pe l rso na |
16 | - | - | - | - | - | - | - | - | 16 | - | - | - | - |
| 30 6 |
48 | 48 | 89 5 |
( 69 4) |
118 | 39 | 97 4 |
22 7 |
1, 50 7 |
3, 52 7 |
3, 73 1 |
91 2 |
( 93 4) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
2, 00 1 |
1, 34 5 |
1 | 1 | - | - | - | - | 2, 00 2 |
1, 34 6 |
| Ot he r fi ial Ins titu tio na nc ns |
1, 50 7 |
94 5 |
63 | 45 | 76 | 47 | - | - | 1, 64 6 |
1, 03 7 |
| To tal |
3, 50 8 |
2, 29 0 |
64 | 46 | 76 | 47 | - | - | 3, 64 8 |
2, 38 3 |
● The Group has reduced its effective exposure to Greece and continues to actively manage its exposure to the country, in line with the de-risking strategy that has been in place since early 2010. Much of the remaining exposure is collateralised or guaranteed.
● As a result of the continued deterioration in Greece's fiscal position, coupled with the potential for the restructuring of Greek sovereign debt, the Group recognised an impairment charge in respect of available-for-sale Greek government bonds.
Refer to table on pages 182 and 183 for details.
● The Non-Core division's lending exposure to Greece was £0.1 billion at 31 December 2011, a reduction of 28% since December 2010. The remaining lending portfolio primarily consists of the following sectors: financial intermediaries (33%), construction (20%), other services (16%) and electricity (14%).
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| HF | T | riv ati De ve s |
||||||||||||
| AF S a nd |
de bt se |
riti cu es |
( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| ing Le nd |
RE IL |
vis ion Pro s |
LA R d eb t riti se cu es |
S AF re se rve s |
Lo | Sh ort |
To tal de bt riti se cu es |
l) llat co era d r an os |
sh t ee ex os ure s |
Bo ht |
So ld |
Bo ht |
So ld |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | ng £m |
£m | £m | ep £m |
p £m |
ug £m |
£m | ug £m |
£m |
| Ce al d l al ntr an oc |
||||||||||||||
| nt g ov ern me |
- | - | - | 56 | ( 58 ) |
36 | 15 2 |
( 60 ) |
19 | ( 41 ) |
3, 30 4 |
3, 41 3 |
99 7 |
( 98 5 ) |
| Ot he r b ks an |
10 | - | - | 91 | ( 36 ) |
12 | 2 | 10 1 |
38 9 |
50 0 |
1, 19 7 |
1, 15 5 |
26 4 |
( 26 0 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
- | - | - | 5 | - | 7 | - | 12 | 30 | 42 | 8 | 5 | 1 | ( 1) |
| Co rat rpo e |
49 5 |
27 | 27 | 42 | - | 18 | - | 60 | 81 | 63 6 |
36 6 |
32 1 |
68 | ( 48 ) |
| Pe l rso na |
5 | - | - | - | - | - | - | - | - | 5 | - | - | - | - |
| 51 0 |
27 | 27 | 19 4 |
( 94 ) |
73 | 15 4 |
11 3 |
51 9 |
1, 14 2 |
4, 87 5 |
4, 89 4 |
1, 33 0 |
( 1, 29 4) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
86 | - | - | 92 | ( 26 ) |
68 | 122 | 38 | 29 | 153 | 2, 84 4 |
2, 92 3 |
47 1 |
( 46 0) |
| Ot he r b ks an |
63 | - | - | 106 | ( 24 ) |
46 | 2 | 150 | 30 7 |
52 0 |
1, 08 5 |
1, 107 |
23 1 |
( 24 3) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
- | - | - | 47 | - | 7 | - | 54 | 7 | 61 | 9 | 6 | ( 1) |
- |
| Co rat rpo e |
61 1 |
27 | 21 | - | 1 | - | - | - | 51 | 66 2 |
58 1 |
50 7 |
48 | ( 29 ) |
| Pe l rso na |
6 | - | - | - | - | - | - | - | - | 6 | - | - | - | - |
| 76 6 |
27 | 21 | 24 5 |
( 49 ) |
12 1 |
124 | 24 2 |
39 4 |
1, 40 2 |
4, 51 9 |
4, 54 3 |
74 9 |
( 73 2) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| De mb 31 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
2, 92 2 |
78 6 |
46 | 12 | - | - | - | - | 2, 96 8 |
79 8 |
| Ot r fi he ial Ins titu tio na nc ns |
1, 87 4 |
51 7 |
- | - | 33 | 15 | - | - | 1, 90 7 |
53 2 |
| To tal |
4, 79 6 |
1, 30 3 |
46 | 12 | 33 | 15 | - | - | 4, 87 5 |
1, 33 0 |
● In early 2011, RBS closed its local operations in Portugal, leaving the Group with modest overall exposure of £1.4 billion by year-end. The portfolio, now managed out of Spain, is focused on corporate lending and derivatives trading with the largest local banks. Medium-term activity has ceased with the exception of that carried out under a Credit Support Annex.
● During 2011, the Group's exposure to the Portuguese government was reduced to a very small derivatives position, the result of decreases in contingent and lending exposures to public sector entities by way of facility maturities. The Group's exposure to the government was negative at 31 December 2011, reflecting net short held-for-trading debt securities.
● A major proportion of the remaining exposures is focused on the top four systemically important financial groups. Exposures generally consist of collateralised trading products.
● The largest non-financial corporate exposure is to the energy and transport sectors. The Group's exposure is concentrated on a few large, highly creditworthy clients.
Refer to table on pages 182 and 183 for details.
● The Non-Core division's lending exposure to Portugal was £0.3 billion at 31 December 2011, an increase of 8% in the portfolio since December 2010, due to an infrastructure project drawing committed facilities. The portfolio comprises lending exposure to the land transport and logistics (52%), electricity (30%) and commercial real estate (14%) sectors. There is no exposure to central or local government.
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
- | - | - | 12 03 5 , |
52 3 |
4, 13 6 |
2, 08 4 |
14 08 7 , |
42 3 |
14 51 0 , |
2, 63 1 |
2, 64 0 |
76 | ( 67 ) |
| Ce ntr al ba nks |
18 06 8 , |
- | - | - | - | - | - | - | 5, 70 4 |
23 77 2 , |
- | - | - | - |
| Ot he r b ks an |
65 3 |
- | - | 1, 37 6 |
5 | 29 4 |
76 1 |
90 9 |
6, 00 3 |
56 5 7, |
5 4, 76 |
4, 69 4 |
30 7 |
( ) 31 0 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
5 30 |
- | - | 56 3 |
( ) 33 |
18 7 |
95 | 65 5 |
3, 32 1 |
4, 28 1 |
65 3, 3 |
3, 40 3 |
7 | ( 2) |
| Co rat rpo e |
6, 60 8 |
19 1 |
80 | 10 9 |
9 | 14 | 7 | 11 6 |
58 6 |
7, 31 0 |
20 43 3 , |
18 31 1 , |
14 8 |
( 12 6 ) |
| Pe l rso na |
15 5 |
19 | 19 | - | - | - | - | - | - | 15 5 |
- | - | - | - |
| 25 78 9 , |
21 0 |
99 | 14 08 3 , |
50 4 |
4, 63 1 |
2, 94 7 |
15 76 7 , |
16 03 7 , |
57 59 3 , |
31 48 2 , |
29 04 8 , |
53 8 |
( 50 5 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
- | - | - | 10 64 8 , |
1 | 5, 96 4 |
4, 124 |
12 48 8 , |
160 | 12 64 8 , |
2, 05 6 |
2, 173 |
25 | ( 19 ) |
| Ce ntr al ba nks |
10 89 4 , |
- | - | - | - | - | - | - | 6, 23 3 |
17 127 , |
- | - | - | - |
| Ot he r b ks an |
1, 06 0 |
- | - | 1, 29 1 |
3 | 56 7 |
48 1 |
1, 37 7 |
6, 28 9 |
8, 72 6 |
3, 84 8 |
3, 93 3 |
73 | ( 88 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
42 2 |
- | - | 49 4 |
( 47 ) |
19 5 |
17 | 67 2 |
1, 95 1 |
3, 04 5 |
2, 71 2 |
2, 63 3 |
( 18 ) |
18 |
| Co rat rpo e |
7, 51 9 |
163 | 44 | 21 9 |
4 | 44 | 53 | 21 0 |
63 3 |
8, 36 2 |
20 73 1 , |
19 07 6 , |
( 38 2) |
37 2 |
| Pe l rso na |
162 | - | - | - | - | - | - | - | - | 162 | - | - | - | - |
| 20 05 7 , |
163 | 44 | 12 65 2 , |
( 39 ) |
6, 77 0 |
4, 67 5 |
14 74 7 , |
15 26 6 , |
50 07 0 , |
29 34 7 , |
27 81 5 , |
( 30 2) |
28 3 |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
14 64 4 , |
17 1 |
16 3 |
4 | 8 | - | - | - | 14 81 5 , |
17 5 |
| Ot he r fi ial Ins titu tio na nc ns |
5 16 31 , |
35 7 |
18 | - | 33 4 |
6 | - | - | 16 66 7 , |
36 3 |
| To tal |
30 95 9 , |
52 8 |
18 1 |
4 | 34 2 |
6 | - | - | 31 48 2 , |
53 8 |
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
2, 56 7 |
- | - | 1, 44 7 |
74 | 84 9 |
59 1 |
1, 70 5 |
41 | 4, 31 3 |
1, 20 6 |
1, 18 9 |
31 | ( 31 ) |
| Ce ntr al ba nks |
7, 65 4 |
- | - | - | - | 6 | - | 6 | 7 | 7, 66 7 |
- | - | - | - |
| Ot he r b ks an |
62 3 |
- | - | 80 2 |
21 7 |
5 36 |
27 8 |
88 9 |
57 7, 4 |
9, 08 6 |
5 96 |
5 99 |
41 | ( ) 42 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
57 5 1, |
- | - | 6, 80 4 |
( ) 38 6 |
29 0 |
10 8 |
6, 98 6 |
1, 91 4 |
5 10 47 , |
5, 77 2 |
5, 54 1 |
14 2 |
( 1) 13 |
| Co rat rpo e |
4, 82 7 |
62 1 |
20 9 |
19 9 |
6 | 11 3 |
5 | 30 7 |
74 9 |
5, 88 3 |
15 41 6 , |
14 23 8 , |
25 7 |
( 16 6 ) |
| Pe l rso na |
20 | 3 | 2 | - | - | - | - | - | - | 20 | - | - | - | - |
| 17 26 6 , |
62 4 |
21 1 |
9, 25 2 |
( 89 ) |
1, 62 3 |
98 2 |
9, 89 3 |
10 28 5 , |
37 44 4 , |
23 35 9 , |
21 96 3 , |
47 1 |
( 37 0 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
91 4 |
- | - | 3, 46 9 |
16 | 1, 42 6 |
60 7 |
4, 28 8 |
46 | 5, 24 8 |
1, 195 |
99 9 |
( 2) |
( 4) |
| Ce ntr al ba nks |
6, 48 4 |
- | - | - | - | - | - | - | - | 6, 48 4 |
- | - | - | - |
| Ot he r b ks an |
55 4 |
- | - | 98 4 |
2 | 22 3 |
27 5 |
93 2 |
5, 02 1 |
6, 50 7 |
78 4 |
78 9 |
12 | ( 10 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
1, 80 1 |
- | - | 6, 61 2 |
( 185 ) |
34 4 |
12 | 6, 94 4 |
3, 116 |
11 86 1 , |
4, 21 0 |
3, 98 5 |
48 | ( 46 ) |
| Co rat rpo e |
6, 170 |
38 8 |
149 | 26 4 |
3 | 152 | 57 | 35 9 |
87 5 |
7, 40 4 |
12 33 0 , |
11 113 , |
( 72 ) |
17 7 |
| Pe l rso na |
81 | 3 | 3 | - | - | - | - | - | - | 81 | - | - | - | - |
| 16 00 4 , |
39 1 |
152 | 11 32 9 , |
( 164 ) |
2, 145 |
95 1 |
12 52 3 , |
9, 05 8 |
37 58 5 , |
18 51 9 , |
16 88 6 , |
( 14 ) |
11 7 |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
tio No l na |
ir v Fa alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
7, 60 5 |
10 7 |
88 | 1 | 6 | - | - | - | 7, 69 9 |
10 8 |
| Ot he r fi ial Ins titu tio na nc ns |
14 52 9 , |
23 1 |
30 8 |
37 | 67 6 |
81 | 14 7 |
14 | 15 66 0 , |
36 3 |
| To tal |
22 13 4 , |
33 8 |
39 6 |
38 | 68 2 |
81 | 14 7 |
14 | 23 35 9 , |
47 1 |
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| HF | T | De riv ati ve s |
||||||||||||
| S a AF nd LA R d eb |
AF S |
de bt se |
riti cu es |
To tal de bt |
( f g ros s o llat |
Ba lan ce sh |
No tio |
l na |
Fa ir v |
alu e |
||||
| Le nd ing |
RE IL |
Pro vis ion s |
t riti se cu es |
re se rve s |
Lo | Sh ort |
riti se cu es |
l) co era d r an ep os |
t ee ex p os ure s |
Bo ht |
So ld |
Bo ht |
So ld |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | ng £m |
£m | £m | £m | £m | ug £m |
£m | ug £m |
£m |
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
48 1 |
- | - | 2, 64 8 |
( 14 ) |
8, 70 5 |
5, 66 9 |
5, 68 4 |
35 7 |
6, 52 2 |
3, 46 7 |
2, 90 1 |
22 8 |
( 19 5 ) |
| Ce ntr al ba nks |
3 | - | - | 20 | - | - | - | 20 | 12 | 35 | - | - | - | - |
| Ot he r b ks an |
1, 27 3 |
- | - | 88 9 |
( ) 17 |
15 7 |
75 | 97 1 |
7, 27 1 |
51 5 9, |
4, 23 2 |
5 3, 99 |
28 2 |
( ) 23 6 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
43 7 |
- | - | 64 2 |
( ) 40 |
5 32 |
12 6 |
84 1 |
5 67 |
95 1, 3 |
59 2, 0 |
05 2, 3 |
13 6 |
( 7) 11 |
| Co rat rpo e |
3, 76 1 |
12 8 |
74 | 24 0 |
9 | 72 | 34 | 27 8 |
74 3 |
4, 78 2 |
23 22 4 , |
21 58 9 , |
60 9 |
( 57 8 ) |
| Pe l rso na |
79 | - | - | - | - | - | - | - | - | 79 | - | - | - | - |
| 6, 03 4 |
12 8 |
74 | 4, 43 9 |
( 62 ) |
9, 25 9 |
5, 90 4 |
7, 79 4 |
9, 05 8 |
22 88 6 , |
33 51 3 , |
30 53 8 , |
1, 25 5 |
( 1, 12 6 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
51 1 |
- | - | 5, 91 2 |
40 | 10 26 6 , |
3, 96 8 |
12 21 0 , |
36 2 |
13 08 3 , |
2, 22 5 |
2, 28 7 |
87 | ( 92 ) |
| Ce ntr al ba nks |
3 | - | - | - | - | - | - | - | 15 | 18 | - | - | - | - |
| Ot he r b ks an |
1, 09 5 |
- | - | 77 4 |
- | 41 0 |
20 4 |
98 0 |
7, 183 |
9, 25 8 |
3, 63 1 |
3, 07 1 |
63 | ( 43 ) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
47 0 |
- | - | 66 6 |
( 22 ) |
42 | 23 | 68 5 |
37 5 |
1, 53 0 |
1, 72 2 |
1, 60 9 |
- | ( 2) |
| Co rat rpo e |
4, 37 6 |
23 0 |
46 | 71 | 1 | 185 | 90 | 166 | 67 2 |
5, 21 4 |
19 77 1 , |
18 46 6 , |
( 18 1) |
15 9 |
| Pe l rso na |
102 | - | - | - | - | - | - | - | - | 102 | - | - | - | - |
| 6, 55 7 |
23 0 |
46 | 7, 42 3 |
19 | 10 90 3 , |
4, 28 5 |
14 04 1 , |
8, 60 7 |
29 20 5 , |
27 34 9 , |
25 43 3 , |
( 31 ) |
22 |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
13 35 3 , |
45 3 |
16 2 |
13 | 79 | 8 | - | - | 13 59 4 , |
47 4 |
| Ot he r fi ial Ins titu tio na nc ns |
19 64 1 , |
75 8 |
24 | 1 | 25 4 |
22 | - | - | 19 91 9 , |
78 1 |
| To tal |
32 99 4 , |
1, 21 1 |
18 6 |
14 | 33 3 |
30 | - | - | 33 51 3 , |
1, 25 5 |
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v alu |
e | ||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ot he r b ks an Ot he r fi ial na nc |
10 1 |
- | - | 10 | - | 7 | - | 17 | 54 6 |
66 4 |
- | - | - | - |
| in stit utio ns |
1, 77 9 |
- | - | 54 | ( 7) |
82 | 80 | 56 | 2, 96 3 |
4, 79 8 |
2, 08 0 |
1, 97 6 |
11 8 |
( 10 8 ) |
| Co rat rpo e |
2, 22 8 |
89 7 |
30 1 |
5 | - | 58 | 6 | 57 | 18 0 |
5 2, 46 |
2, 47 8 |
2, 13 8 |
14 6 |
( ) 11 6 |
| Pe l rso na |
2 | - | - | - | - | - | - | - | - | 2 | - | - | - | - |
| 4, 11 0 |
89 7 |
30 1 |
69 | ( 7) |
14 7 |
86 | 13 0 |
3, 68 9 |
92 9 7, |
4, 55 8 |
4, 11 4 |
26 4 |
( 22 4) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
- | - | - | - | - | 24 | - | 24 | - | 24 | - | - | - | - |
| Ce ntr al ba nks |
25 | - | - | - | - | - | - | - | - | 25 | - | - | - | - |
| Ot he r b ks an |
26 | - | - | 30 | ( 1) |
45 | - | 75 | 49 9 |
60 0 |
- | - | - | - |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
73 4 |
- | - | 99 | ( 3) |
32 | 19 | 112 | 1, 80 0 |
2, 64 6 |
1, 29 6 |
1, 22 0 |
( 5) |
1 |
| Co rat rpo e |
2, 50 3 |
80 7 |
20 6 |
5 | 1 | 183 | 21 | 167 | 24 6 |
2, 91 6 |
2, 36 7 |
1, 91 8 |
( 16 ) |
13 |
| Pe l rso na |
3 | - | - | - | - | - | - | - | - | 3 | - | - | - | - |
| 3, 29 1 |
80 7 |
20 6 |
134 | ( 3) |
28 4 |
40 | 37 8 |
2, 54 5 |
6, 21 4 |
3, 66 3 |
3, 138 |
( 21 ) |
14 |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
1, 53 5 |
93 | 16 | - | - | - | - | - | 1, 55 1 |
93 |
| Ot he r fi ial Ins titu tio na nc ns |
2, 92 7 |
16 4 |
10 | - | 70 | 7 | - | - | 3, 00 7 |
17 1 |
| To tal |
4, 46 2 |
25 7 |
26 | - | 70 | 7 | - | - | 55 4, 8 |
26 4 |
| CD | S b ref y ere |
nti ty nc e e |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| S a AF nd |
HF de bt se |
T riti cu es |
De riv ati ve s ( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
LA R d eb t riti se cu es £m |
AF S re se rve s £m |
Lo ng £m |
Sh ort £m |
To tal de bt riti se cu es £m |
llat l) co era d r an ep os £m |
sh t ee ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc nt g ov ern me |
21 3 |
- | - | 74 2 |
( 11 6 ) |
60 8 |
72 2 |
62 8 |
89 | 93 0 |
1, 61 2 |
1, 50 5 |
12 0 |
( 11 0 ) |
| Ce ntr al ba nks |
8 | - | - | - | - | - | - | - | 3 | 11 | - | - | - | - |
| Ot he r b ks an |
28 7 |
- | - | 4 | - | - | - | 4 | 45 2, 0 |
2, 74 1 |
31 2 |
30 2 |
14 | ( ) 13 |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
35 4 |
- | - | - | - | 1 | 4 | ( ) 3 |
19 1 |
54 2 |
- | - | - | - |
| Co rat rpo e |
58 8 |
31 | 21 | 3 | - | 20 | - | 23 | 27 7 |
88 8 |
56 3 |
57 0 |
12 | ( 12 ) |
| Pe l rso na |
20 | - | - | - | - | - | - | - | - | 20 | - | - | - | - |
| 1, 47 0 |
31 | 21 | 74 9 |
( 11 6 ) |
62 9 |
72 6 |
65 2 |
3, 01 0 |
5, 13 2 |
2, 48 7 |
2, 37 7 |
14 6 |
( 13 5 ) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
102 | - | - | 76 3 |
( 54 ) |
52 9 |
60 2 |
69 0 |
92 | 88 4 |
88 0 |
98 6 |
53 | ( 57 ) |
| Ce ntr al ba nks |
14 | - | - | - | - | - | - | - | 7 | 21 | - | - | - | - |
| Ot he r b ks an |
44 1 |
- | - | 39 | 1 | 66 | 2 | 103 | 1, 82 2 |
2, 36 6 |
27 8 |
26 6 |
2 | ( 1) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
32 | - | - | - | - | - | - | - | 126 | 158 | - | - | - | - |
| Co rat rpo e |
89 3 |
27 | 27 | 1 | - | 11 | 2 | 10 | 19 1 |
1, 09 4 |
62 8 |
59 4 |
( 6) |
6 |
| Pe l rso na |
32 7 |
- | - | - | - | - | - | - | - | 32 7 |
- | - | - | - |
| 1, 80 9 |
27 | 27 | 80 3 |
( 53 ) |
60 6 |
60 6 |
80 3 |
2, 23 8 |
4, 85 0 |
1, 78 6 |
1, 84 6 |
49 | ( 52 ) |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To | tal | |
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
1, 60 2 |
97 | 2 | - | 12 | 1 | - | - | 1, 61 6 |
98 |
| Ot he r fi ial Ins titu tio na nc ns |
86 6 |
48 | 1 | - | 4 | - | - | - | 87 1 |
48 |
| To tal |
2, 46 8 |
14 5 |
3 | - | 16 | 1 | - | - | 2, 48 7 |
14 6 |
| HF | T | De riv ati ve s |
CD | S b ref y ere |
nti ty nc e e |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AF S a nd |
de bt se |
riti cu es |
( f g ros s o |
Ba lan ce |
No tio |
l na |
Fa ir v |
alu e |
||||||
| LA R d eb t |
S AF |
To tal de bt |
l) llat co era |
sh t ee |
||||||||||
| 31 De mb 20 11 ce er |
Le nd ing £m |
RE IL £m |
Pro vis ion s £m |
riti se cu es £m |
re se rve s £m |
Lo ng £m |
Sh ort £m |
riti se cu es £m |
d r an ep os £m |
ex p os ure s £m |
Bo ht ug £m |
So ld £m |
Bo ht ug £m |
So ld £m |
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
12 1 |
- | - | 32 7 |
( ) 47 |
44 5 |
33 1 |
44 1 |
77 9 |
1, 34 1 |
2, 28 1 |
2, 35 0 |
54 | ( ) 47 |
| Ce al ba nks ntr |
- | - | - | - | - | - | - | - | 44 | 44 | - | - | - | - |
| Ot he r b ks an |
28 | - | - | 63 | ( 1) |
13 | 70 | 6 | 1, 01 7 |
1, 05 1 |
90 | 87 | 2 | ( 1) |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
11 5 |
- | - | 10 0 |
( 9 ) |
25 | 2 | 12 3 |
37 | 27 5 |
- | - | - | - |
| Co rat rpo e |
5 1, 37 |
18 1 |
55 | 13 4 |
( 4) |
13 | 7 | 14 0 |
94 | 1, 60 9 |
05 4, 4 |
3, 94 4 |
70 | ( 59 ) |
| Pe l rso na |
26 | - | - | - | - | - | - | - | - | 26 | - | - | - | - |
| 1, 66 5 |
18 1 |
55 | 62 4 |
( 61 ) |
49 6 |
41 0 |
71 0 |
1, 97 1 |
4, 34 6 |
6, 42 5 |
6, 38 1 |
12 6 |
( 10 7) |
|
| 31 De mb 20 10 ce er |
||||||||||||||
| Ce ntr al d l al an oc |
||||||||||||||
| nt g ov ern me |
124 | - | - | 32 4 |
( ) 25 |
26 8 |
28 3 |
30 9 |
69 7 |
1, 130 |
1, 97 5 |
2, 190 |
( ) 26 |
34 |
| Ce ntr al ba nks |
1 | - | - | - | - | - | - | - | 1 | 2 | - | - | - | - |
| Ot he r b ks an |
142 | - | - | 71 | ( 1) |
52 | 44 | 79 | 56 4 |
78 5 |
148 | 142 | 1 | - |
| Ot he r fi ial na nc |
||||||||||||||
| in stit utio ns |
119 | - | - | 4 | - | - | 5 | ( 1) |
29 | 147 | - | - | - | - |
| Co rat rpo e |
1, 50 5 |
23 8 |
67 | 133 | ( 1) |
30 | 15 | 148 | 79 | 1, 73 2 |
3, 25 4 |
2, 96 6 |
( 63 ) |
51 |
| Pe l rso na |
24 | - | - | - | - | - | - | - | - | 24 | - | - | - | - |
| 1, 91 5 |
23 8 |
67 | 53 2 |
( 27 ) |
35 0 |
34 7 |
53 5 |
1, 37 0 |
3, 82 0 |
5, 37 7 |
5, 29 8 |
( 88 ) |
85 |
| AQ | 1 | AQ 2-A |
Q 3 |
AQ 4-A |
Q 9 |
AQ | 10 | To tal |
||
|---|---|---|---|---|---|---|---|---|---|---|
| No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
No tio l na |
Fa ir v alu e |
|
| 31 De mb 20 11 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Ba nks |
2, 87 7 |
58 | 50 | 1 | - | - | - | - | 2, 92 7 |
59 |
| Ot r fi he ial Ins titu tio na nc ns |
3, 46 4 |
67 | 4 | - | 30 | - | - | - | 3, 49 8 |
67 |
| To tal |
6, 34 1 |
12 5 |
54 | 1 | 30 | - | - | - | 6, 42 5 |
12 6 |
Note: (1) Comprises Austria, Cyprus, Estonia, Finland, Malta, Slovakia and Slovenia.
● Netherlands - corporate lending fell £1.3 billion over 2011, driven by the manufacturing, natural resources and services sectors. The relatively large contingent liabilities and commitments declined £7.9 billion.
Refer to table on pages 182 and 183 for details.
Notes to tables on page 182 to 202.
Lending comprises gross loans and advances to: central and local governments; central banks, including cash balances; other banks and financial institutions, incorporating overdraft and other shortterm facilities; corporations, 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.
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.
Derivatives comprise the mark-to-market (mtm) value of such contracts after the effect of enforceable netting agreements, but gross of collateral. Reverse repurchase agreements (repos) comprise the mtm value of counterparty exposure arising from repo transactions net of collateral.
Balance sheet exposures comprise lending exposures, debt securities and derivatives and repo exposures.
Contingent liabilities and commitments comprise contingent liabilities, including guarantees, and committed undrawn facilities.
Asset Quality (AQ) - for the probability of default range relating to each internal asset quality band, refer to page 163.
Credit default swap (CDS) under 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, and represents 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.
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 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.
Following the implementation of CRD III, the Group is required to calculate: (i) an additional capital charge based on a stressed calibration of the VaR model - Stressed VaR; (ii) an Incremental Risk Charge to capture the default and migration risk for credit risk positions in the trading book; and (iii) an All Price Risk measure for correlation trading positions, subject to a capital floor that is based on standardised securitisation charges. The capital charges at 31 December 2011 associated with the new models are shown in the table below:
| Total £m |
|
|---|---|
| Stressed VaR | 1,682 |
| Incremental Risk Charge | 469 |
| All Price Risk | 297 |
For a description of the Group's basis of measurement and methodology enhancements, refer to the 2011 Annual Report and Accounts: Market risk.
Note:
(1) The effect of any month end adjustments, not attributable to a specific daily market move, is spread evenly over the days in the month in question.
The tables below detail VaR for the Group's trading portfolios, segregated by type of market risk exposure, and between Core and Non-Core, Counterparty Exposure Management (CEM) and Core excluding CEM.
| Year ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 31 December 2010 | ||||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | |||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | |
| Interest rate | 53.4 | 68.1 | 79.2 | 27.5 | 51.6 | 57.0 | 83.0 | 32.5 | |
| Credit spread | 82.7 | 74.3 | 151.1 | 47.4 | 166.3 | 133.4 | 243.2 | 110.2 | |
| Currency | 10.3 | 16.2 | 19.2 | 5.2 | 17.9 | 14.8 | 28.0 | 8.4 | |
| Equity | 9.4 | 8.0 | 17.3 | 4.6 | 9.5 | 10.9 | 17.9 | 2.7 | |
| Commodity | 1.4 | 2.3 | 7.0 | - | 9.5 | 0.5 | 18.1 | 0.5 | |
| Diversification (1) | (52.3) | (75.6) | |||||||
| Total | 105.5 | 116.6 | 181.3 | 59.7 | 168.5 | 141.0 | 252.1 | 103.0 | |
| Core (Total) | 75.8 | 89.1 | 133.9 | 41.7 | 103.6 | 101.2 | 153.4 | 58.3 | |
| Core CEM | 36.8 | 52.4 | 54.1 | 21.9 | 53.3 | 54.6 | 82.4 | 30.3 | |
| Core excluding CEM | 59.2 | 42.1 | 106.2 | 35.3 | 82.8 | 78.7 | 108.7 | 53.6 | |
| Non-Core | 64.4 | 34.6 | 128.6 | 30.0 | 105.7 | 101.4 | 169.4 | 63.2 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, industry counterparties, currencies and regions. 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 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 30 September 2011 | ||||||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | |||||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | |||
| Interest rate | 62.5 | 68.1 | 72.3 | 50.8 | 51.3 | 73.0 | 73.1 | 33.1 | |||
| Credit spread | 68.4 | 74.3 | 78.5 | 57.4 | 56.2 | 69.8 | 69.8 | 47.4 | |||
| Currency | 10.9 | 16.2 | 19.2 | 5.7 | 8.7 | 6.5 | 12.5 | 6.1 | |||
| Equity | 8.3 | 8.0 | 12.5 | 5.0 | 7.9 | 7.7 | 13.1 | 4.6 | |||
| Commodity | 4.3 | 2.3 | 7.0 | 2.0 | 0.9 | 3.6 | 3.6 | 0.1 | |||
| Diversification (1) | (52.3) | (54.3) | |||||||||
| Total | 109.7 | 116.6 | 132.2 | 83.5 | 78.3 | 106.3 | 114.2 | 59.7 | |||
| Core (Total) | 77.3 | 89.1 | 95.6 | 57.7 | 58.3 | 83.1 | 91.0 | 41.7 | |||
| Core CEM | 46.1 | 52.4 | 54.1 | 39.0 | 34.4 | 38.0 | 45.2 | 23.5 | |||
| Core excluding CEM | 47.9 | 42.1 | 69.5 | 38.7 | 44.3 | 62.2 | 71.4 | 35.3 | |||
| Non-Core | 35.2 | 34.6 | 40.7 | 30.0 | 40.4 | 38.7 | 53.0 | 33.2 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, industry counterparties, currencies and regions. 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 (SCP) and loans and receivables (LAR), segregated by type of market risk exposure and between Core and Non-Core.
| Year ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 31 December 2010 | ||||||||||
| Non-trading VaR | Average £m |
Period end £m |
Maximum £m |
Minimum £m |
£m | Average Period end £m |
Maximum £m |
Minimum £m |
|||
| Interest rate | 8.8 | 9.9 | 11.1 | 5.7 | 8.7 | 10.4 | 20.5 | 4.4 | |||
| Credit spread | 18.2 | 13.6 | 39.3 | 12.1 | 32.0 | 16.1 | 101.2 | 15.4 | |||
| Currency | 2.1 | 4.0 | 5.9 | 0.1 | 2.1 | 3.0 | 7.6 | 0.3 | |||
| Equity | 2.1 | 1.9 | 3.1 | 1.6 | 1.2 | 3.1 | 4.6 | 0.2 | |||
| Diversification | (13.6) | (15.9) | |||||||||
| Total | 19.7 | 15.8 | 41.6 | 13.4 | 30.9 | 16.7 | 98.0 | 13.7 | |||
| Core | 19.3 | 15.1 | 38.9 | 13.5 | 30.5 | 15.6 | 98.1 | 12.8 | |||
| Non-Core | 3.4 | 2.5 | 4.3 | 2.2 | 1.3 | 2.8 | 4.1 | 0.2 |
| Quarter ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 December 2011 | 30 September 2011 | |||||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | ||||
| Non-trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | ||
| Interest rate | 9.7 | 9.9 | 10.9 | 8.8 | 9.6 | 10.3 | 11.1 | 8.2 | ||
| Credit spread | 13.9 | 13.6 | 15.7 | 12.1 | 16.0 | 14.8 | 18.0 | 14.1 | ||
| Currency | 3.5 | 4.0 | 5.1 | 2.4 | 3.0 | 4.1 | 5.9 | 1.1 | ||
| Equity | 1.9 | 1.9 | 2.0 | 1.8 | 1.9 | 1.8 | 2.0 | 1.6 | ||
| Diversification | (13.6) | (13.5) | ||||||||
| Total | 16.3 | 15.8 | 20.0 | 14.2 | 17.6 | 17.5 | 18.9 | 15.7 | ||
| Core | 16.0 | 15.1 | 18.9 | 14.1 | 17.4 | 18.6 | 20.1 | 15.2 | ||
| Non-Core | 3.4 | 2.5 | 3.9 | 2.5 | 3.9 | 3.7 | 4.3 | 3.2 |
Note:
(1) The Group benefits from diversification, which reflects the risk reduction achieved by allocating investments across various financial instrument types, industry counterparties, currencies and regions. 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.
| Fair value | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Drawn notional | Other | Other | ||||||||
| CDOs | CLOs MBS (1) | ABS | Total | CDOs | CLOs MBS (1) | ABS | Total | |||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| 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 | |
| 30 September 2011 | ||||||||||
| 1-2 years | - | - | 29 | 36 | 65 | - | - | 28 | 31 | 59 |
| 2-3 years | - | - | 5 | 172 | 177 | - | - | 4 | 160 | 164 |
| 3-4 years | 6 | - | 6 | 43 | 55 | 5 | - | 5 | 40 | 50 |
| 4-5 years | - | 39 | - | 95 | 134 | - | 36 | - | 88 | 124 |
| 5-10 years | 32 | 517 | 317 | 277 | 1,143 | 30 | 469 | 230 | 242 | 971 |
| >10 years | 1,296 | 454 | 470 | 593 | 2,813 | 228 | 394 | 314 | 349 | 1,285 |
| 1,334 | 1,010 | 827 | 1,216 | 4,387 | 263 | 899 | 581 | 910 | 2,653 | |
| 31 December 2010 | ||||||||||
| 1-2 years | - | - | - | 47 | 47 | - | - | - | 42 | 42 |
| 2-3 years | 85 | 19 | 44 | 98 | 246 | 81 | 18 | 37 | 91 | 227 |
| 3-4 years | - | 41 | 20 | 205 | 266 | - | 37 | 19 | 191 | 247 |
| 4-5 years | 16 | - | - | - | 16 | 15 | - | - | - | 15 |
| 5-10 years | 98 | 466 | 311 | 437 | 1,312 | 87 | 422 | 220 | 384 | 1,113 |
| >10 years | 412 | 663 | 584 | 550 | 2,209 | 161 | 515 | 397 | 367 | 1,440 |
| 611 | 1,189 | 959 | 1,337 | 4,096 | 344 | 992 | 673 | 1,075 | 3,084 |
Notes:
(1) MBS include sub-prime RMBS with a notional amount of £401 million (30 September 2011 - £406 million; 31 December 2010 - £471 million) and a fair value of £252 million (30 September 2011 - £274 million; 31 December 2010 - £329 million), all with residual maturities of greater than ten years.
(2) This table relates to open market risk in SCP.
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.
Set out below is a summary of certain risks which could adversely affect the Group; it should be read in conjunction with the Balance Sheet Management and Risk Management sections of the Business Review (pages 128 to 209). This summary should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties. A fuller description of these and other risk factors is included in the Group's 2011 Annual Report and Accounts.
The responsibility statement below has been prepared in connection with the Group's full Annual Report and Accounts for the year ended 31 December 2011.
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 |
22 February 2012
Board of directors
Sandy Crombie Alison Davis Tony Di lorio Penny Hughes Joe MacHale John McFarlane Brendan Nelson Baroness Noakes Arthur 'Art' Ryan Philip Scott
| 2011 | 2010 | |
|---|---|---|
| Ordinary share price | £0.202 | £0.391 |
| Number of ordinary shares in issue | 59,228m | 58,458m |
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 2010 have been filed with the Registrar of Companies and those for the year ended 31 December 2011 will be filed with the Registrar of Companies following the company's Annual General Meeting. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
A report on Form 20-F will be filed with the Securities and Exchange Commission in the United States.
| Financial calendar | |
|---|---|
| 2012 first quarter interim management statement | Friday 4 May 2012 |
2012 interim results announcement Friday 3 August 2012
2012 third quarter interim management statement Friday 2 November 2012
| Ye ar en |
de d |
|||||
|---|---|---|---|---|---|---|
| 31 | De mb 20 11 ce er |
31 De |
mb 20 10 ce er |
|||
| Ma ed na g £m |
Re allo ion cat of ff on e-o ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
Re allo ion cat of ff on e-o ite ms £m |
Sta tut ory £m |
|
| Int st eiv ab le ere rec Int ab le st ere pa y |
21 41 7 , ( 8, 72 8 ) |
( 7) ( 3 ) |
21 41 0 , ( 8, 73 1) |
22 76 6 , ( 8, 56 6 ) |
10 ( 1) |
22 77 6 , ( 8, 56 7) |
| Ne t in t in ter es co me |
12 68 9 , |
( ) 10 |
12 67 9 , |
14 20 0 , |
9 | 14 20 9 , |
| Fe d c mis sio eiv ab le es an om ns rec Fe d c mis sio ab le es an om ns pa y Inc e f din ivit ies tra act om rom g Ga in o ed tio f o de bt n r em p n o wn Ot he ing in (e lud ing in mi in ) rat r o pe co me xc su ran ce pre um co me Ins ium in t p ura nce ne rem co me |
6, 38 4 ( 1, 46 0 ) 3, 38 1 - 2, 52 7 25 4, 6 |
- - ( 68 0 ) 25 5 1, 59 5 - |
6, 38 4 ( 1, 46 0 ) 2, 70 1 25 5 4, 12 2 25 4, 6 |
8, 19 4 ( 2, 21 1) 6, 13 8 - 1, 21 3 5, 12 8 |
( 1) - ( 1, 62 1) 55 3 26 6 - |
8, 19 3 ( 2, 21 1) 4, 51 7 55 3 1, 47 9 5, 12 8 |
| No n-i t in nte res co me |
15 08 8 , |
1, 170 |
16 25 8 , |
18 46 2 , |
( 80 3 ) |
17 65 9 , |
| To tal in co me |
27 77 7 , |
1, 160 |
28 93 7 , |
32 66 2 , |
( 79 4) |
31 86 8 , |
| Sta ff c ost s Pre mis d e ipm t es an qu en Ot he dm inis tra tive r a ex pe nse s De cia tio nd isa tio ort pre n a am n of Wr ite- do dw ill a nd oth inta ible set wn g oo er ng as s |
( ) 8, 16 3 ( 2, 27 8 ) ( ) 3, 39 5 ( 1, 64 2) - |
( ) 51 5 ( 173 ) ( ) 1, 53 6 ( 23 3 ) ( ) 91 |
( ) 8, 67 8 ( 2, 45 1) ( 1) 4, 93 ( 1, 87 5 ) ( ) 91 |
( 95 ) 8, 6 ( 2, 27 6 ) ( ) 3, 71 6 ( 1, 76 2) - |
( ) 71 5 ( 126 ) ( ) 27 9 ( 38 8 ) ( ) 10 |
( 1) 9, 67 ( 2, 40 2) ( ) 3, 99 5 ( 2, 15 0 ) ( ) 10 |
| Op tin era g ex p en se s |
( 15 47 8 ) , |
( 2, 54 8 ) |
( 18 02 6 ) , |
( 16 71 0 ) , |
( 1, 51 8 ) |
( 18 22 8 ) , |
| Pro fit be for the tin ch e o r o p era g arg es Ins laim t c ura nce ne s |
12 29 9 , ( 2, 96 8 ) |
( ) 1, 38 8 - |
10 91 1 , ( 2, 96 8 ) |
15 95 2 , ( 4, 78 3 ) |
( 2) 2, 31 - |
13 64 0 , ( 4, 78 3 ) |
| Op tin rof it b efo im air los nt era g p re p me se s Im irm t lo pa en sse s |
9, 33 1 ( 7, 43 9 ) |
( ) 1, 38 8 ( 1, 27 0 ) |
94 3 7, ( 8, 70 9 ) |
11 16 9 , ( 9, 25 6 ) |
( 2) 2, 31 - |
8, 85 7 ( 9, 25 6 ) |
| rof it/ ( ) Op tin los era g p s |
1, 89 2 |
( ) 2, 65 8 |
( ) 76 6 |
1, 91 3 |
( 2) 2, 31 |
( ) 39 9 |
| Ye ar en |
de d |
|||||
|---|---|---|---|---|---|---|
| 31 | De mb 20 11 ce er |
De 31 |
mb 20 10 ce er |
|||
| 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, 89 2 |
( 2, 65 8 ) |
( 76 6 ) |
1, 91 3 |
( 2, 31 2) |
( 39 9 ) |
| ( 1) Fa ir v alu f o de bt e o wn |
1, 84 6 |
( ) 1, 84 6 |
- | 17 4 |
( ) 174 |
- |
| As Pr ctio n S ch ( 2) set ote em e |
( 90 6 ) |
90 6 |
- | ( 1, 55 0 ) |
1, 55 0 |
- |
| Pa Pro tio n I nt tec sts y me ns ura nce co |
( 85 0 ) |
85 0 |
- | - | - | - |
| So rei n d eb t im irm t ve g pa en |
( 1, 09 9 ) |
1, 09 9 |
- | - | - | - |
| Am isa tio f p ha d i ible ort nta set n o urc se ng as s |
( 22 2) |
22 2 |
- | ( 36 9 ) |
36 9 |
- |
| Int ion d r ing rat est tur sts eg an ruc co |
( 4) 1, 06 |
1, 06 4 |
- | ( 2) 1, 03 |
1, 03 2 |
- |
| Ga in o ed tio f o de bt n r em p n o wn |
25 5 |
( 25 ) 5 |
- | 55 3 |
( 3 ) 55 |
- |
| Str ate ic d isp als g os |
( 4) 10 |
104 | - | 17 1 |
( 1) 17 |
- |
| Ba nk lev y |
( 30 0 ) |
30 0 |
- | - | - | - |
| Bo s t nu ax |
( ) 27 |
27 | - | ( ) 99 |
99 | - |
| Wr ite- do of dw ill a nd oth inta ible set wn g oo er ng as s |
( 11 ) |
11 | - | ( 10 ) |
10 | - |
| Gr Int e h ed dju im ire d a ilab le- for le k g bo nd st rat stm ts nt ere g e a en on pa va -sa ee ov ern me s |
( 16 9 ) |
169 | - | - | - | - |
| RF S H old ing ino rity in ter est s m |
( 7) |
7 | - | ( 15 ) 0 |
( ) 150 |
- |
| Lo be for e t ss ax |
( ) 76 6 |
- | ( ) 76 6 |
( ) 39 9 |
- | ( ) 39 9 |
| Ta ha x c rg e |
( 1, 25 0 ) |
- | ( 1, 25 0 ) |
( 63 4) |
- | ( 63 4) |
| fro Lo nti ing tio ss m co nu op era ns |
( ) 2, 01 6 |
- | ( ) 2, 01 6 |
( ) 1, 03 3 |
- | ( ) 1, 03 3 |
| Pro fit/ ( los ) fro dis nti ed tio of et tax s m co nu op era ns , n |
47 | - | 47 | ( 63 3 ) |
- | ( 63 3 ) |
| fo Lo r th ss e y ea r |
( ) 1, 96 9 |
- | ( ) 1, 96 9 |
( ) 1, 66 6 |
- | ( ) 1, 66 6 |
| No llin inte tro ts n-c on g res |
( 28 ) |
- | ( 28 ) |
66 5 |
- | 66 5 |
| Pre fer sh d o the r d ivid ds en ce are an en |
- | - | - | ( 4) 12 |
- | ( 4) 12 |
| Lo tri bu tab le ord ina d B sh ho lde at to ss ry an are rs |
( 1, 99 7) |
- | ( 1, 99 7) |
( 1, 12 5 ) |
- | ( 1, 12 5 ) |
Notes:
(1) Reallocation of £225 million (2010 - £75 million loss) to income from trading activities and £1,621 million (2010 - £249 million gain) to other operating income.
(2) Reallocation to income from trading activities.
| Qu art |
de d er en |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 31 De |
mb 20 ce er |
11 | 30 Se |
be r 2 01 tem p |
1 | 31 De |
mb 20 ce er |
10 | |
| 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 |
5, 23 4 |
- | 5, 23 4 |
5, 37 1 |
- | 5, 37 1 |
5, 61 1 |
1 | 5, 61 2 |
| Int st ab le ere pa y |
( ) 2, 15 8 |
( 2) |
( ) 2, 16 0 |
( ) 2, 29 3 |
( 1) |
( 4) 2, 29 |
( ) 2, 03 3 |
1 | ( 2) 2, 03 |
| Ne t in t in ter es co me |
3, 07 6 |
( 2) |
3, 07 4 |
3, 07 8 |
( 1) |
3, 07 7 |
3, 57 8 |
2 | 3, 58 0 |
| Fe d c mis sio eiv ab le es an om ns rec |
1, 59 0 |
- | 1, 59 0 |
1, 45 2 |
- | 1, 45 2 |
2, 05 3 |
( 1) |
20 52 |
| Fe d c mis sio ab le es an om ns pa y |
( 57 3 ) |
- | ( 57 3 ) |
( 30 4) |
- | ( 30 4) |
( 44 9 ) |
- | ( 44 9 ) |
| Inc e f din ivit ies tra act om rom g |
14 0 |
( ) 37 8 |
( 23 8 ) |
54 7 |
41 0 |
95 7 |
97 9 |
( ) 61 5 |
36 4 |
| Ga in o ed tio f o de bt n r em p n o wn |
- | ( 1) |
( 1) |
- | 1 | 1 | - | - | - |
| Ot he ing in (e lud ing in mi in ) rat r o pe co me xc su ran ce pre um co me |
5 40 |
( ) 20 0 |
5 20 |
54 9 |
1, 83 5 |
2, 38 4 |
26 | 97 7 |
1, 00 3 |
| Ins ium in t p ura nce ne rem co me |
98 1 |
- | 98 1 |
1, 03 6 |
- | 1, 03 6 |
1, 27 2 |
- | 1, 27 2 |
| No n-i t in nte res co me |
54 2, 3 |
( ) 57 9 |
1, 96 4 |
3, 28 0 |
2, 24 6 |
5, 52 6 |
3, 88 1 |
36 1 |
4, 24 2 |
| To tal in co me |
5, 61 9 |
( 1) 58 |
5, 03 8 |
6, 35 8 |
2, 24 5 |
8, 60 3 |
7, 45 9 |
36 3 |
7, 82 2 |
| Sta ff c ost s |
( 1, 78 1) |
( 21 2) |
( 1, 99 3 ) |
( 1, 96 3 ) |
( 113 ) |
( 2, 07 6 ) |
( 2, 05 9 ) |
( 135 ) |
( 2, 19 4) |
| Pre mis d e ipm t es an qu en |
( ) 57 5 |
( ) 99 |
( 4) 67 |
( 4) 58 |
( ) 20 |
( 4) 60 |
( ) 63 6 |
( ) 73 |
( ) 70 9 |
| Ot he dm inis tive tra r a ex pe nse s |
( 83 8 ) |
( 45 8 ) |
( 1, 29 6 ) |
( 85 8 ) |
( 104 ) |
( 96 2) |
( 93 8 ) |
( 110 ) |
( 1, 04 8 ) |
| De cia tio nd isa tio ort pre n a am n |
( ) 45 0 |
( ) 63 |
( ) 51 3 |
( ) 41 6 |
( ) 69 |
( ) 48 5 |
( ) 44 8 |
( ) 98 |
( ) 54 6 |
| Wr ite do of dw ill a nd oth inta ible set wn g oo er ng as s |
- | ( ) 91 |
( 91 ) |
- | - | - | - | ( ) 10 |
( 10 ) |
| Op tin era g ex p en se s |
( 4) 3, 64 |
( ) 92 3 |
( 7) 4, 56 |
( 1) 3, 82 |
( ) 30 6 |
( 7) 4, 12 |
( 1) 4, 08 |
( ) 42 6 |
( 7) 4, 50 |
| Pro fit be for the tin ch e o r o p era g arg es |
1, 97 5 |
( 1, 50 4) |
47 1 |
2, 53 7 |
1, 93 9 |
4, 47 6 |
3, 37 8 |
( 63 ) |
3, 31 5 |
| Ins t c laim ura nce ne s |
( ) 52 9 |
- | ( ) 52 9 |
( 4) 73 |
- | ( 4) 73 |
( 2) 1, 18 |
- | ( 2) 1, 18 |
| Op tin rof it/ ( los ) be for e i air los nt era g p s mp me se s |
1, 44 6 |
( 1, 50 4) |
( 58 ) |
1, 80 3 |
1, 93 9 |
3, 74 2 |
2, 19 6 |
( 63 ) |
2, 13 3 |
| Im irm t lo pa en sse s |
( 2) 1, 69 |
( ) 22 6 |
( ) 1, 91 8 |
( ) 1, 53 6 |
( 2) 20 |
( ) 1, 73 8 |
( 1) 2, 14 |
- | ( 1) 2, 14 |
| Op tin ( los ) /p rof it era g s |
( 24 6 ) |
( 1, 73 0 ) |
( 1, 97 6 ) |
26 7 |
1, 73 7 |
2, 00 4 |
55 | ( 63 ) |
( 8 ) |
| Qu de d art er en |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 De |
Se 30 tem be r 2 01 1 p |
31 De |
mb 20 ce er |
10 | ||||||
| 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 |
||
| Op tin ( los ) /p rof it era g s |
( ) 24 6 |
( ) 1, 73 0 |
( ) 1, 97 6 |
26 7 |
1, 73 7 |
2, 00 4 |
55 | ( ) 63 |
( ) 8 |
|
| Fa ir v alu f o de bt ( 1) e o wn |
( 37 0 ) |
37 0 |
- | 2, 35 7 |
( 2, 35 7) |
- | 58 2 |
( 58 2) |
- | |
| n S ( 2) As set Pr ote ctio ch em e |
( ) 20 9 |
20 9 |
- | ( ) 60 |
60 | - | ( ) 72 5 |
72 5 |
- | |
| So rei n d eb t im irm t ve g pa en |
( 22 4) |
22 4 |
- | ( 14 2) |
142 | - | - | - | - | |
| f p Am ort isa tio ha d i nta ible set n o urc se ng as s |
( ) 53 |
53 | - | ( ) 69 |
69 | - | ( ) 96 |
96 | - | |
| Int ion d r ing rat est tur sts eg an ruc co |
( 47 8 ) |
47 8 |
- | ( 23 3 ) |
23 3 |
- | ( 29 9 ) |
29 9 |
- | |
| Ga in o ed tio f o de bt n r em p n o wn |
( 1) |
1 | - | 1 | ( 1) |
- | - | - | - | |
| Str ic d isp als ate g os |
( 82 ) |
82 | - | ( 49 ) |
49 | - | 50 2 |
( 2) 50 |
- | |
| Ba nk lev y |
( 30 0 ) |
30 0 |
- | - | - | - | - | - | - | |
| Bo s t nu ax |
- | - | - | ( 5 ) |
5 | - | ( 15 ) |
15 | - | |
| Wr ite- do of dw ill a nd oth inta ible set wn g oo er ng as s |
( 11 ) |
11 | - | - | - | - | ( 10 ) |
10 | - | |
| Int e h ed dju im ire d a ilab le- for le st rat stm ts ere g e a en on pa va -sa |
||||||||||
| G k g bo nd nt ree ov ern me s |
- | - | - | ( 60 ) |
60 | - | - | - | - | |
| S H RF old ing ino rity in ter est s m |
( 2) |
2 | - | ( ) 3 |
3 | - | ( 2) |
2 | - | |
| ( Lo ) /p rof it b efo tax ss re |
( 1, 97 6 ) |
- | ( 1, 97 6 ) |
2, 00 4 |
- | 2, 00 4 |
( 8 ) |
- | ( 8 ) |
|
| it/ (c ) Ta red ha x c rg e |
18 6 |
- | 18 6 |
( 1) 79 |
- | ( 1) 79 |
3 | - | 3 | |
| ( Lo ) /p rof it f nti ing tio ss rom co nu op era ns |
( 1, 79 0 ) |
- | ( 1, 79 0 ) |
1, 21 3 |
- | 1, 21 3 |
( 5 ) |
- | ( 5 ) |
|
| fit/ ( ) fro of Pro los dis nti ed tio et tax s m co nu op era ns , n |
10 | - | 10 | 6 | - | 6 | 55 | - | 55 | |
| ( Lo ) /p rof it f the eri od ss or p |
( 1, 78 0 ) |
- | ( 1, 78 0 ) |
1, 21 9 |
- | 1, 21 9 |
50 | - | 50 | |
| No llin inte tro ts n-c on g res |
( ) 18 |
- | ( ) 18 |
7 | - | 7 | ( ) 38 |
- | ( ) 38 |
|
| /p ( Lo ) rof it a ibu tab le t rdi d B sh ho lde ttr ss o o na ry an are rs |
( 1, 79 8 ) |
- | ( 1, 79 8 ) |
1, 22 6 |
- | 1, 22 6 |
12 | - | 12 |
Notes:
(1) Reallocation of £170 million loss (Q3 2011 - £470 million; Q4 2010 - £110 million) to income from trading activities and £200 million loss (Q3 2011 - £1,887 million; Q4 2010 - £472 million) to other operating income.
(2) Reallocation to income from trading activities.
RBS Group – Annual Results 2011
To comply with EC State Aid requirements the Group agreed to make a series of divestments by the end of 2013: the disposal of RBS Insurance, 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 sale of the Group's UK branch-based businesses to Santander UK plc continues to make good progress and is expected to substantially complete in the fourth quarter of 2012, subject to regulatory approvals and other conditions.
The disposal of RBS Insurance, the base case plan for which is by way of a public flotation, is targeted to commence in the second half of 2012, subject to market conditions. External advisors have been appointed to assist the Group with the disposal and the process of separation is proceeding on plan. In the meantime, the business continues to be managed and reported as a separate core division.
The table below shows total income and operating profit of RBS Insurance and the UK branch-based businesses.
| Total income | Operating profit/(loss) before impairments |
Operating profit/(loss) | |||||
|---|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | £m | ||
| RBS Insurance (1) | 4,286 | 5,302 | 407 | (341) | 407 | (341) | |
| UK branch-based businesses (2) | 959 | 902 | 518 | 439 | 319 | 160 | |
| Total | 5,245 | 6,204 | 925 | 98 | 726 | (181) |
The table below shows the estimated risk-weighted assets, total assets and capital of the businesses identified for disposal.
| RWAs | Total assets | Capital | |||||
|---|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | ||
| RBS Insurance (1) | n/m | n/m | 13.9 | 14.0 | 4.4 | 4.0 | |
| UK branch-based businesses (2) | 11.1 | 13.2 | 19.3 | 19.9 | 1.0 | 1.2 | |
| Total | 11.1 | 13.2 | 33.2 | 33.9 | 5.4 | 5.2 |
Notes:
(1) Total income includes investment income of £302 million (2010 - £309 million). Total assets and estimated capital include approximately £0.9 billion of goodwill, of which £0.7 billion is attributed to RBS Insurance by RBS Group.
(2) Estimated notional equity based on 9% of RWAs.
Further information on the UK branch-based businesses by division is shown in the tables below:
| Division | Total | |||
|---|---|---|---|---|
| UK | UK | |||
| Retail | Corporate | 2011 | 2010 | |
| £m | £m | £m | £m | |
| Income statement | ||||
| Net interest income | 329 | 360 | 689 | 656 |
| Non-interest income | 108 | 162 | 270 | 246 |
| Total income | 437 | 522 | 959 | 902 |
| Direct expenses | ||||
| - staff | (74) | (84) | (158) | (176) |
| - other | (106) | (60) | (166) | (144) |
| Indirect expenses | (67) | (50) | (117) | (143) |
| (247) | (194) | (441) | (463) | |
| Operating profit before impairment losses | 190 | 328 | 518 | 439 |
| Impairment losses (1) | (92) | (107) | (199) | (279) |
| Operating profit | 98 | 221 | 319 | 160 |
| Analysis of income by product | ||||
| Loans and advances | 125 | 311 | 436 | 445 |
| Deposits | 101 | 144 | 245 | 261 |
| Mortgages | 134 | - | 134 | 120 |
| Other | 77 | 67 | 144 | 76 |
| Total income | 437 | 522 | 959 | 902 |
| Net interest margin | 4.92% | 2.85% | 3.57% | 3.24% |
| Employee numbers (full time equivalents rounded to the | ||||
| nearest hundred) | 2,800 | 1,600 | 4,400 | 4,400 |
(1) For the year ended 31 December 2011, impairment losses benefited from £75 million of latent and other provision releases.
| Division | Total | ||||
|---|---|---|---|---|---|
| UK Retail £bn |
UK Corporate £bn |
Global Banking & Markets £bn |
2011 £bn |
2010 £bn |
|
| Capital and balance sheet | |||||
| Total third party assets (excluding mark-to- | |||||
| market derivatives) | 7.2 | 11.7 | - | 18.9 | 19.9 |
| Loans and advances to customers (gross) | 7.3 | 12.2 | - | 19.5 | 20.7 |
| Customer deposits | 8.8 | 13.0 | - | 21.8 | 24.0 |
| Derivative assets | - | - | 0.4 | 0.4 | n/a |
| Derivative liabilities | - | - | 0.1 | 0.1 | n/a |
| Risk elements in lending | 0.5 | 1.0 | - | 1.5 | 1.7 |
| Loan:deposit ratio | 79% | 90% | - | 86% | 83% |
| Risk-weighted assets | 3.6 | 7.5 | - | 11.1 | 13.2 |
The following information has been prepared to present RBS Insurance Group on a stand alone basis. The income statement includes the results of Direct Line Versicherung AG (DLVAG) (which is owned by National Westminster Bank plc), however the balance sheet excludes the balance sheet of DLVAG. The total assets and net assets of DLVAG are included in note 1 below.
| R B S In su ra nc e |
Ye de d ar en |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 De |
mb 20 11 ce er |
31 | De mb 20 10 ce er |
31 De mb ce er |
20 09 |
|||||
| Co re |
No n-C ore |
To tal |
Co re |
No n-C ore |
To tal |
Co re |
No n-C ore |
To tal |
||
| Inc Sta tem t om e en |
£m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Ea d p ium rne rem s |
4, 22 1 |
30 4 |
52 5 4, |
4, 45 9 |
73 3 |
5, 192 |
4, 51 9 |
81 0 |
5, 32 9 |
|
| Re ins rs' sh ure are |
( 25 2) |
( 18 ) |
( 27 0 ) |
( 148 ) |
( 31 ) |
( 179 ) |
( 165 ) |
( 26 ) |
( 19 1) |
|
| Ne ium in t p rem co me |
3, 96 9 |
28 6 |
4, 25 5 |
4, 31 1 |
70 2 |
5, 01 3 |
4, 35 4 |
78 4 |
5, 138 |
|
| Fe d c mis sio es an om ns |
( 40 0 ) |
( 93 ) |
( 49 3 ) |
( 41 0 ) |
89 | ( 32 1) |
( 36 7) |
( 119 ) |
( 48 6 ) |
|
| Ins tal inc nt me om e |
13 8 |
7 | 5 14 |
159 | 35 | 194 | 17 1 |
35 | 20 6 |
|
| Ot he r in co me |
10 0 |
( 23 ) |
77 | 179 | ( 72 ) |
10 7 |
15 1 |
( 67 ) |
84 | |
| To tal inc om e |
3, 80 7 |
17 7 |
3, 98 4 |
4, 23 9 |
75 4 |
4, 99 3 |
4, 30 9 |
63 3 |
4, 94 2 |
|
| Ne laim t c s |
( 2, 77 2) |
( 19 5 ) |
( 2, 96 7) |
( 3, 93 2) |
( 73 7) |
( 4, 66 9 ) |
( 3, 60 6 ) |
( 58 8 ) |
( 4, 194 ) |
|
| Un de ritin fit/ ( los ) rw g pro s |
1, 03 5 |
( 18 ) |
1, 01 7 |
30 7 |
17 | 32 4 |
70 3 |
45 | 74 8 |
|
| Sta ff e xp en se s |
( 28 8 ) |
( 2) |
( 29 0 ) |
( 7) 28 |
( 2) |
( ) 28 9 |
( 4) 30 |
( ) 9 |
( ) 31 3 |
|
| Ot he r e xp en se s |
( 33 3 ) |
( 16 ) |
( 34 9 ) |
( 32 5 ) |
( 47 ) |
( 37 2) |
( 36 8 ) |
( 60 ) |
( 42 8 ) |
|
| To tal dir ect ex pe nse s |
( 62 1) |
( 18 ) |
( 63 9 ) |
( 61 2) |
( 49 ) |
( 66 1) |
( 67 2) |
( 69 ) |
( 74 1) |
|
| Ind ire ct ex pe nse s |
( ) 22 5 |
( ) 46 |
( 1) 27 |
( 26 7) |
( 46 ) |
( 31 3 ) |
( 27 0 ) |
( 58 ) |
( 32 8 ) |
|
| To tal ex pe nse s |
( ) 84 6 |
( ) 64 |
( ) 91 0 |
( ) 87 9 |
( ) 95 |
( 4) 97 |
( 2) 94 |
( ) 127 |
( ) 1, 06 9 |
|
| Te ch nic al ult res |
18 9 |
( 82 ) |
10 7 |
( 57 2) |
( 78 ) |
( 65 0 ) |
( 23 9 ) |
( 82 ) |
( 32 1) |
|
| Inv imp air est nt nts me me |
- | ( 2) |
( 2) |
- | - | - | ( ) 8 |
- | ( ) 8 |
|
| Inv inc est nt me om e |
26 5 |
37 | 30 2 |
27 7 |
32 | 30 9 |
30 5 |
40 | 34 5 |
|
| Op tin fit/ ( los ) era g pro s |
45 4 |
( ) 47 |
40 7 |
( ) 29 5 |
( ) 46 |
( 1) 34 |
58 | ( ) 42 |
16 |
| R B S in ( inu d ) t su ra nc e co n e |
31 | De mb 20 11 ce er |
31 | De mb 20 10 ce er |
31 De mb 20 09 ce er |
||||
|---|---|---|---|---|---|---|---|---|---|
| Co re |
No n-C ore |
To tal |
Co re |
No n-C ore |
To tal |
Co re |
No n-C ore |
To tal |
|
| Sh t ( 1) Ba lan ce ee |
£m | £m | £m | £m | £m | £m | £m | £m | £m |
| As ts se |
|||||||||
| Pro lan nd uip rty t a nt pe , p eq me |
60 | - | 60 | 53 | - | 53 | 67 | - | 67 |
| Inv rtie est nt me pro pe s |
70 | - | 70 | 84 | - | 84 | 78 | - | 78 |
| Int ible set an g as s |
36 2 |
- | 36 2 |
28 0 |
- | 28 0 |
28 2 |
- | 28 2 |
| Fin cia l in stm ts an ve en |
6, 91 2 |
86 1 |
3 7, 77 |
6, 70 6 |
93 9 |
7, 64 5 |
6, 26 3 |
86 9 |
7, 132 |
| Lo nd eiv ab les in clu din rei an s a rec g ns ura nce |
|||||||||
| iva ble ( 2) re ce s |
2, 20 6 |
15 9 |
5 2, 36 |
1, 79 2 |
26 7 |
2, 05 9 |
2, 32 4 |
38 8 |
2, 71 2 |
| Ot he d a d i ts, nts r a sse pre pa y me an ccr ue nco me |
73 1 |
20 | 75 1 |
80 8 |
170 | 97 8 |
82 0 |
60 | 88 0 |
| of Re ins sh in liab iliti ure rs are su ran ce es |
29 8 |
10 1 |
39 9 |
24 1 |
117 | 35 8 |
25 8 |
77 | 33 5 |
| Ca sh d c h e iva len ts an as qu |
1, 30 4 |
57 | 1, 36 1 |
1, 62 6 |
196 | 1, 82 2 |
1, 123 |
14 4 |
1, 26 7 |
| To tal ts as se |
11 94 3 , |
1, 19 8 |
13 14 1 , |
11 59 0 , |
1, 68 9 |
13 27 9 , |
11 21 5 , |
1, 53 8 |
12 75 3 , |
| Lia bil itie s |
|||||||||
| Ins lia bili tie ( 3 ) ura nce s |
7, 10 1 |
88 1 |
7, 98 2 |
7, 46 0 |
1, 36 2 |
8, 82 2 |
6, 95 6 |
1, 177 |
8, 133 |
| Bo win rro g s |
5 30 |
11 | 31 6 |
30 9 |
2 | 31 1 |
29 0 |
- | 29 0 |
| Ot he r lia bili tie als d d efe d i s, ac cru an rre nco me |
91 6 |
15 | 93 1 |
56 0 |
67 | 62 7 |
59 2 |
11 2 |
70 4 |
| lia bil itie To tal s |
8, 32 2 |
90 7 |
9, 22 9 |
8, 32 9 |
1, 43 1 |
9, 76 0 |
7, 83 8 |
1, 28 9 |
9, 127 |
| Eq uit ( 4) y |
3, 62 1 |
29 1 |
3, 91 2 |
3, 26 1 |
25 8 |
3, 51 9 |
3, 37 7 |
24 9 |
3, 62 6 |
| To tal lia bil itie nd uit s a eq y |
11 94 3 , |
1, 19 8 |
13 14 1 , |
11 59 0 , |
1, 68 9 |
13 27 9 , |
11 21 5 , |
1, 53 8 |
12 75 3 , |
Notes:
(1) Total assets of DLVAG at 31 December 2011 were £320 million (2010 - £322 million; 2009 - £337 million) and total equity was £103 million (2010 - £103 million; 2009 - £108 million).
(2) Total reinsurance receivables at 31 December 2011 were £41 million (2010 - £41 million; 2009 - £42 million).
(3) Insurance liabilities include unearned premium reserves.
(4) Non-Core equity includes £259 million at 31 December 2011 which was a non-controlling interest (2010 - £259 million; 2009 - £259 million). Equity excludes goodwill of £0.7 billion which is attributed to RBS Insurance division by RBS Group.
The following tables analyse loans and advances to customers (excluding reverse repos and assets of disposal groups) by sector and geography (by location of office). Refer to Risk management: Credit risk for the Group summary. All assets, including loans, of businesses held for disposal are included as one line on the balance sheet, as required by IFRS.
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| UK | |||||||||
| Central and local government | 8,012 | 25 | 8,037 | 7,680 | 83 | 7,763 | 5,728 | 173 | 5,901 |
| Finance | 30,874 | 2,361 | 33,235 | 29,754 | 3,795 | 33,549 | 27,995 | 6,023 | 34,018 |
| Residential mortgages | 99,303 | 1,423 100,726 | 104,040 | 1,497 105,537 | 99,928 | 1,665 | 101,593 | ||
| Personal lending | 20,080 | 127 | 20,207 | 21,930 | 295 | 22,225 | 23,035 | 585 | 23,620 |
| Property | 31,141 | 24,610 | 55,751 | 36,106 | 25,953 | 62,059 | 34,970 | 30,492 | 65,462 |
| Construction | 5,291 | 1,882 | 7,173 | 6,203 | 2,245 | 8,448 | 7,041 | 2,310 | 9,351 |
| Manufacturing | 9,641 | 835 | 10,476 | 11,123 | 867 | 11,990 | 12,300 | 1,510 | 13,810 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 11,071 | 1,441 | 12,512 | 12,325 | 1,553 | 13,878 | 12,554 | 1,853 | 14,407 |
| - transport and storage | 8,589 | 3,439 | 12,028 | 8,835 | 3,664 | 12,499 | 8,105 | 5,015 | 13,120 |
| - health, education and | |||||||||
| recreation | 8,734 | 757 | 9,491 | 11,894 | 742 | 12,636 | 13,502 | 1,039 | 14,541 |
| - hotels and restaurants | 5,599 | 569 | 6,168 | 6,264 | 684 | 6,948 | 6,558 | 808 | 7,366 |
| - utilities | 2,462 | 922 | 3,384 | 3,788 | 715 | 4,503 | 3,101 | 1,035 | 4,136 |
| - other | 13,963 | 1,644 | 15,607 | 13,952 | 2,154 | 16,106 | 14,445 | 1,991 | 16,436 |
| Agriculture, forestry and | |||||||||
| fishing | 2,660 | 76 | 2,736 | 2,963 | 73 | 3,036 | 2,872 | 67 | 2,939 |
| Finance leases and | |||||||||
| instalment credit | 5,618 | 5,598 | 11,216 | 5,524 | 6,925 | 12,449 | 5,589 | 7,785 | 13,374 |
| Interest accruals | 375 | - | 375 | 352 | 1 | 353 | 415 | 98 | 513 |
| 263,413 | 45,709 309,122 | 282,733 | 51,246 333,979 | 278,138 | 62,449 340,587 | ||||
| Europe | |||||||||
| Central and local government | 116 | 715 | 831 | 209 | 805 | 1,014 | 365 | 1,017 | 1,382 |
| Finance | 2,534 | 474 | 3,008 | 2,654 | 644 | 3,298 | 2,642 | 1,019 | 3,661 |
| Residential mortgages | 18,393 | 553 | 18,946 | 19,109 | 590 | 19,699 | 19,473 | 621 | 20,094 |
| Personal lending | 1,972 | 492 | 2,464 | 2,126 | 526 | 2,652 | 2,270 | 600 | 2,870 |
| Property | 4,846 | 11,538 | 16,384 | 5,359 | 12,255 | 17,614 | 5,139 | 12,636 | 17,775 |
| Construction | 1,019 | 735 | 1,754 | 1,279 | 754 | 2,033 | 1,014 | 873 | 1,887 |
| Manufacturing | 4,383 | 3,732 | 8,115 | 4,807 | 3,872 | 8,679 | 5,853 | 4,181 | 10,034 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 3,992 | 772 | 4,764 | 3,559 | 721 | 4,280 | 4,126 | 999 | 5,125 |
| - transport and storage | 5,667 | 862 | 6,529 | 5,281 | 1,093 | 6,374 | 5,625 | 1,369 | 6,994 |
| - health, education and | |||||||||
| recreation | 1,235 | 349 | 1,584 | 1,334 | 339 | 1,673 | 1,442 | 496 | 1,938 |
| - hotels and restaurants | 892 | 535 | 1,427 | 1,029 | 560 | 1,589 | 1,055 | 535 | 1,590 |
| - utilities | 1,569 | 530 | 2,099 | 1,852 | 598 | 2,450 | 1,412 | 623 | 2,035 |
| - other | 2,966 | 1,555 | 4,521 | 3,554 | 1,634 | 5,188 | 3,877 | 2,050 | 5,927 |
| Agriculture, forestry and | |||||||||
| fishing | 699 | 53 | 752 | 760 | 62 | 822 | 849 | 68 | 917 |
| Finance leases and | |||||||||
| instalment credit | 260 | 435 | 695 | 259 | 515 | 774 | 370 | 744 | 1,114 |
| Interest accruals | 101 | 71 | 172 | 105 | 98 | 203 | 143 | 101 | 244 |
| 50,644 | 23,401 | 74,045 | 53,276 | 25,066 | 78,342 | 55,655 | 27,932 | 83,587 |
| 31 December 2011 | 30 September 2011 | 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| US | |||||||||
| Central and local government | 177 | 14 | 191 | 164 | 15 | 179 | 263 | 53 | 316 |
| Finance | 8,993 | 341 | 9,334 | 10,035 | 368 | 10,403 | 9,522 | 587 | 10,109 |
| Residential mortgages | 20,311 | 2,926 | 23,237 | 20,285 | 3,040 | 23,325 | 20,548 | 3,653 | 24,201 |
| Personal lending | 7,505 | 936 | 8,441 | 6,543 | 1,986 | 8,529 | 6,816 | 2,704 | 9,520 |
| Property | 2,413 | 1,370 | 3,783 | 2,338 | 1,549 | 3,887 | 1,611 | 3,318 | 4,929 |
| Construction | 412 | 45 | 457 | 443 | 54 | 497 | 442 | 78 | 520 |
| Manufacturing | 6,782 | 42 | 6,824 | 6,545 | 54 | 6,599 | 5,459 | 143 | 5,602 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 4,975 | 98 | 5,073 | 4,851 | 109 | 4,960 | 4,264 | 237 | 4,501 |
| - transport and storage | 1,832 | 937 | 2,769 | 1,699 | 985 | 2,684 | 1,786 | 1,408 | 3,194 |
| - health, education and | |||||||||
| recreation | 2,946 | 88 | 3,034 | 2,572 | 94 | 2,666 | 2,380 | 313 | 2,693 |
| - hotels and restaurants | 627 | 57 | 684 | 532 | 62 | 594 | 486 | 136 | 622 |
| - utilities | 1,033 | 28 | 1,061 | 952 | 27 | 979 | 1,117 | 53 | 1,170 |
| - other | 4,927 | 394 | 5,321 | 4,447 | 423 | 4,870 | 4,042 | 577 | 4,619 |
| Agriculture, forestry and | |||||||||
| fishing | 27 | - | 27 | 24 | - | 24 | 31 | - | 31 |
| Finance leases and | |||||||||
| instalment credit | 2,471 | - | 2,471 | 2,531 | - | 2,531 | 2,315 | - | 2,315 |
| Interest accruals | 181 | 45 | 226 | 172 | 53 | 225 | 183 | 73 | 256 |
| 65,612 | 7,321 | 72,933 | 64,133 | 8,819 | 72,952 | 61,265 | 13,333 | 74,598 | |
| RoW | |||||||||
| Central and local government | 54 | 629 | 683 | 44 | 604 | 648 | 425 | 428 | 853 |
| Finance | 4,051 | 53 | 4,104 | 5,651 | 77 | 5,728 | 6,751 | 22 | 6,773 |
| Residential mortgages | 502 | 200 | 702 | 507 | 192 | 699 | 410 | 203 | 613 |
| Personal lending | 1,510 | 1 | 1,511 | 1,553 | 3 | 1,556 | 1,460 | 2 | 1,462 |
| Property | 304 | 546 | 850 | 269 | 871 | 1,140 | 735 | 1,205 | 1,940 |
| Construction | 59 | 10 | 69 | 67 | 9 | 76 | 183 | 91 | 274 |
| Manufacturing | 2,395 | 322 | 2,717 | 2,341 | 440 | 2,781 | 2,185 | 686 | 2,871 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 1,276 | 28 | 1,304 | 1,472 | 44 | 1,516 | 1,030 | 102 | 1,132 |
| - transport and storage | 366 | 239 | 605 | 421 | 267 | 688 | 430 | 403 | 833 |
| - health, education and | |||||||||
| recreation | 358 | 225 | 583 | 424 | 340 | 764 | 132 | 17 | 149 |
| - hotels and restaurants | 25 | - | 25 | 16 | 52 | 68 | 90 | 13 | 103 |
| - utilities | 1,479 | 369 | 1,848 | 1,620 | 385 | 2,005 | 1,468 | 399 | 1,867 |
| - other | 2,372 | 179 | 2,551 | 2,791 | 268 | 3,059 | 2,100 | 912 | 3,012 |
| Agriculture, forestry and | |||||||||
| fishing | 85 | - | 85 | 20 | - | 20 | 6 | - | 6 |
| Finance leases and | |||||||||
| instalment credit | 91 | 26 | 117 | 90 | 27 | 117 | 47 | - | 47 |
| Interest accruals | 18 | - | 18 | 32 | - | 32 | 90 | 6 | 96 |
| 14,945 | 2,827 | 17,772 | 17,318 | 3,579 | 20,897 | 17,542 | 4,489 | 22,031 |
The following tables analyse loans and advances to banks and customers (excluding reverse repos and assets of disposal groups) and related REIL, provisions, impairments and write-offs 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 % | FY | FY | ||||
| Gross | of gross | as a % | of gross | Impairment | Amounts | |||
| 31 December 2011 | loans £m |
REIL £m |
Provisions £m |
loans % |
of REIL % |
loans % |
charge £m |
written-off £m |
| Group | ||||||||
| Central and local government | 9,742 | - | - | - | - | - | - | - |
| Finance - banks | 43,993 | 137 | 123 | 0.3 | 90 | 0.3 | - | - |
| - other | 49,681 | 1,049 | 719 | 2.1 | 69 | 1.4 | 89 | 87 |
| Residential mortgages | 143,611 | 5,084 | 1,362 | 3.5 | 27 | 0.9 | 1,076 | 516 |
| Personal lending | 32,623 | 2,737 | 2,172 | 8.4 | 79 | 6.7 | 782 | 1,286 |
| Property | 76,768 | 21,655 | 8,862 | 28.2 | 41 | 11.5 | 3,670 | 1,171 |
| Construction | 9,453 | 1,762 | 703 | 18.6 | 40 | 7.4 | 139 | 244 |
| Manufacturing | 28,132 | 881 | 504 | 3.1 | 57 | 1.8 | 227 | 215 |
| Service industries and | ||||||||
| business activities | ||||||||
| - 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 | ||||||||
| recreation | 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 | 28,000 | 2,403 | 1,095 | 8.6 | 46 | 3.9 | 799 | 373 |
| Agriculture, forestry and fishing | 3,600 | 145 | 63 | 4.0 | 43 | 1.8 | (7) | 18 |
| Finance leases and instalment | ||||||||
| credit | 14,499 | 794 | 508 | 5.5 | 64 | 3.5 | 112 | 170 |
| Interest accruals | 791 | - | - | - | - | - | - | - |
| Latent | - | - | 1,986 | - | - | - | (545) | - |
| 517,865 | 40,845 | 19,883 | 7.9 | 49 | 3.8 | 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 | 55,751 | 7,880 | 2,859 | 14.1 | 36 | 5.1 | 1,413 | 490 |
| - other | 162,220 | 4,934 | 3,040 | 3.0 | 62 | 1.9 | 699 | 886 |
| 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 | 16,384 | 13,073 | 5,751 | 79.8 | 44 | 35.1 | 2,296 | 508 |
| - other | 44,862 | 5,193 | 3,206 | 11.6 | 62 | 7.1 | 1,205 | 289 |
| 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 | 3,783 | 329 | 92 | 8.7 | 28 | 2.4 | (2) | 138 |
| - other | 38,158 | 656 | 913 | 1.7 | 139 | 2.4 | (166) | 197 |
| RoW | ||||||||
| - residential mortgages | 702 | 33 | 12 | 4.7 | 36 | 1.7 | 3 | - |
| - personal lending | 1,511 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property | 850 | 373 | 160 | 43.9 | 43 | 18.8 | (37) | 35 |
| - other | 19,623 | 586 | 328 | 3.0 | 56 | 1.7 | (25) | 182 |
| 517,865 | 40,845 | 19,883 | 7.9 | 49 | 3.8 | 7,241 | 4,527 |
| 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 September 2011 | £m | £m | £m | % | % | % | £m | £m |
| Group | ||||||||
| Central and local government | 9,604 | 76 | - | 0.8 | - | - | - | - |
| Finance - banks | 52,727 | 149 | 126 | 0.3 | 85 | 0.2 | - | - |
| - other | 52,978 | 979 | 670 | 1.8 | 68 | 1.3 | 4 | 62 |
| Residential mortgages | 149,260 | 5,313 | 1,420 | 3.6 | 27 | 1.0 | 949 | 392 |
| Personal lending | 34,962 | 3,256 | 2,622 | 9.3 | 81 | 7.5 | 535 | 806 |
| Property | 84,700 | 22,354 | 8,831 | 26.4 | 40 | 10.4 | 2,936 | 731 |
| Construction | 11,054 | 1,753 | 740 | 15.9 | 42 | 6.7 | 32 | 168 |
| Manufacturing | 30,049 | 1,106 | 489 | 3.7 | 44 | 1.6 | 105 | 158 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 24,634 | 1,094 | 555 | 4.4 | 51 | 2.3 | 135 | 93 |
| - transport and storage | 22,245 | 544 | 141 | 2.4 | 26 | 0.6 | 53 | 35 |
| - health, education and | ||||||||
| recreation | 17,739 | 1,197 | 401 | 6.7 | 34 | 2.3 | 176 | 72 |
| - hotels and restaurants | 9,199 | 1,574 | 701 | 17.1 | 45 | 7.6 | 266 | 54 |
| - utilities | 9,937 | 80 | 22 | 0.8 | 28 | 0.2 | 1 | 2 |
| - other | 29,223 | 2,239 | 1,162 | 7.7 | 52 | 4.0 | 690 | 311 |
| Agriculture, forestry and fishing | 3,902 | 151 | 59 | 3.9 | 39 | 1.5 | (21) | 11 |
| Finance leases and instalment | ||||||||
| credit | 15,871 | 861 | 517 | 5.4 | 60 | 3.3 | 81 | 125 |
| Interest accruals | 813 | - | - | - | - | - | - | - |
| Latent | - | - | 2,267 | - | - | - | (355) | - |
| 558,897 | 42,726 | 20,723 | 7.6 | 49 | 3.7 | 5,587 | 3,020 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 105,537 | 2,292 | 424 | 2.2 | 18 | 0.4 | 152 | 14 |
| - personal lending | 22,225 | 2,913 | 2,368 | 13.1 | 81 | 10.7 | 510 | 666 |
| - property | 62,059 | 8,373 | 2,799 | 13.5 | 33 | 4.5 | 1,063 | 421 |
| - other | 177,452 | 5,343 | 3,387 | 3.0 | 63 | 1.9 | 436 | 650 |
| Europe | ||||||||
| - residential mortgages | 19,699 | 2,248 | 722 | 11.4 | 32 | 3.7 | 445 | 7 |
| - personal lending | 2,652 | 210 | 178 | 7.9 | 85 | 6.7 | (68) | 20 |
| - property | 17,614 | 13,165 | 5,753 | 74.7 | 44 | 32.7 | 1,809 | 189 |
| - other | 51,977 | 5,188 | 3,146 | 10.0 | 61 | 6.1 | 938 | 195 |
| US | ||||||||
| - residential mortgages | 23,325 | 749 | 265 | 3.2 | 35 | 1.1 | 352 | 371 |
| - personal lending | 8,529 | 131 | 75 | 1.5 | 57 | 0.9 | 93 | 116 |
| - property | 3,887 | 377 | 119 | 9.7 | 32 | 3.1 | (10) | 87 |
| - other | 38,275 | 633 | 946 | 1.7 | 149 | 2.5 | (175) | 111 |
| RoW | ||||||||
| - residential mortgages | 699 | 24 | 9 | 3.4 | 38 | 1.3 | - | - |
| - personal lending | 1,556 | 2 | 1 | 0.1 | 50 | 0.1 | - | 4 |
| - property | 1,140 | 439 | 160 | 38.5 | 36 | 14.0 | 74 | 34 |
| - other | 22,271 | 639 | 371 | 2.9 | 58 | 1.7 | (32) | 135 |
| 558,897 | 42,726 | 20,723 | 7.6 | 49 | 3.7 | 5,587 | 3,020 |
| 31 December 2010 | Gross loans £m |
REIL £m |
Provisions £m |
REIL as a % of gross loans % |
Provisions as a % of REIL % |
Provisions as a % of gross loans % |
FY Impairment charge £m |
FY Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Group | ||||||||
| Central and local government | 8,452 | - | - | - | - | - | - | - |
| Finance - banks | 58,036 | 145 | 127 | 0.2 | 88 | 0.2 | (13) | 12 |
| - other | 54,561 | 1,129 | 595 | 2.1 | 53 | 1.1 | 198 | 141 |
| Residential mortgages | 146,501 | 4,276 | 877 | 2.9 | 21 | 0.6 | 1,014 | 669 |
| Personal lending | 37,472 | 3,544 | 2,894 | 9.5 | 82 | 7.7 | 1,370 | 1,577 |
| Property | 90,106 | 19,584 | 6,736 | 21.7 | 34 | 7.5 | 4,682 | 1,009 |
| Construction | 12,032 | 2,464 | 875 | 20.5 | 36 | 7.3 | 530 | 146 |
| Manufacturing | 32,317 | 1,199 | 503 | 3.7 | 42 | 1.6 | (92) | 1,547 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 25,165 | 1,157 | 572 | 4.6 | 49 | 2.3 | 334 | 161 |
| - transport and storage | 24,141 | 248 | 118 | 1.0 | 48 | 0.5 | 87 | 39 |
| - health, education and | ||||||||
| recreation | 19,321 | 1,055 | 319 | 5.5 | 30 | 1.7 | 159 | 199 |
| - hotels and restaurants | 9,681 | 1,269 | 504 | 13.1 | 40 | 5.2 | 321 | 106 |
| - utilities | 9,208 | 91 | 23 | 1.0 | 25 | 0.2 | 14 | 7 |
| - other | 29,994 | 1,438 | 749 | 4.8 | 52 | 2.5 | 378 | 310 |
| Agriculture, forestry and fishing | 3,893 | 152 | 86 | 3.9 | 57 | 2.2 | 31 | 6 |
| Finance leases and instalment | ||||||||
| credit | 16,850 | 847 | 554 | 5.0 | 65 | 3.3 | 252 | 113 |
| Interest accruals | 1,109 | - | - | - | - | - | - | - |
| Latent | - | - | 2,650 | - | - | - | (121) | - |
| 578,839 | 38,598 | 18,182 | 6.7 | 47 | 3.1 | 9,144 | 6,042 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 101,593 | 2,062 | 314 | 2.0 | 15 | 0.3 | 169 | 17 |
| - personal lending | 23,620 | 3,083 | 2,518 | 13.1 | 82 | 10.7 | 1,046 | 1,153 |
| - property | 65,462 | 7,986 | 2,219 | 12.2 | 28 | 3.4 | 1,546 | 397 |
| - other | 191,934 | 5,652 | 3,580 | 2.9 | 63 | 1.9 | 1,197 | 704 |
| Europe | ||||||||
| - residential mortgages - personal lending |
20,094 2,870 |
1,551 401 |
301 316 |
7.7 14.0 |
19 79 |
1.5 11.0 |
221 66 |
6 24 |
| - property | 17,775 | 10,534 | 4,199 | 59.3 | 40 | 23.6 | 2,828 | 210 |
| - other | 53,380 | 3,950 | 2,454 | 7.4 | 62 | 4.6 | 763 | 1,423 |
| US | ||||||||
| - residential mortgages | 24,201 | 640 | 253 | 2.6 | 40 | 1.0 | 615 | 645 |
| - personal lending | 9,520 | 55 | 55 | 0.6 | 100 | 0.6 | 160 | 271 |
| - property | 4,929 | 765 | 202 | 15.5 | 26 | 4.1 | 321 | 220 |
| - other | 36,780 | 870 | 1,133 | 2.4 | 130 | 3.1 | (76) | 524 |
| RoW | ||||||||
| - residential mortgages | 613 | 23 | 9 | 3.8 | 39 | 1.5 | 9 | 1 |
| - personal lending | 1,462 | 5 | 5 | 0.3 | 100 | 0.3 | 98 | 129 |
| - property | 1,940 | 299 | 116 | 15.4 | 39 | 6.0 | (13) | 182 |
| - other | 22,666 | 722 | 508 | 3.2 | 70 | 2.2 | 194 | 136 |
| 578,839 | 38,598 | 18,182 | 6.7 | 47 | 3.1 | 9,144 | 6,042 |
| REIL | Provisions | |||||||
|---|---|---|---|---|---|---|---|---|
| as a % | Provisions | as a % | FY | FY | ||||
| Gross | of gross | as a % | of gross | Impairment | Amounts | |||
| loans | REIL | Provisions | loans | of REIL | loans | charge | written-off | |
| 31 December 2011 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Central and local government | 8,359 | - | - | - | - | - | - | - |
| Finance - banks | 43,374 | 136 | 122 | 0.3 | 90 | 0.3 | - | - |
| - other | 46,452 | 732 | 572 | 1.6 | 78 | 1.2 | 207 | 44 |
| Residential mortgages | 138,509 | 4,704 | 1,182 | 3.4 | 25 | 0.9 | 776 | 198 |
| Personal lending | 31,067 | 2,627 | 2,080 | 8.5 | 79 | 6.7 | 715 | 935 |
| Property | 38,704 | 3,686 | 1,001 | 9.5 | 27 | 2.6 | 470 | 167 |
| Construction | 6,781 | 660 | 228 | 9.7 | 35 | 3.4 | 178 | 143 |
| Manufacturing | 23,201 | 458 | 221 | 2.0 | 48 | 1.0 | 106 | 125 |
| Service industries and | ||||||||
| business activities | ||||||||
| - 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 | ||||||||
| recreation | 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 | 24,228 | 1,095 | 591 | 4.5 | 54 | 2.4 | 553 | 189 |
| Agriculture, forestry and fishing | 3,471 | 98 | 36 | 2.8 | 37 | 1.0 | (15) | 5 |
| Finance leases and instalment | ||||||||
| credit | 8,440 | 172 | 110 | 2.0 | 64 | 1.3 | 31 | 68 |
| Interest accruals | 675 | - | - | - | - | - | - | - |
| Latent | - | - | 1,339 | - | - | - | (252) | - |
| 437,988 | 16,862 | 8,414 | 3.8 | 50 | 1.9 | 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 | 31,141 | 2,475 | 568 | 7.9 | 23 | 1.8 | 379 | 113 |
| - other | 142,464 | 2,636 | 1,536 | 1.9 | 58 | 1.1 | 525 | 537 |
| 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 | 4,846 | 1,038 | 367 | 21.4 | 35 | 7.6 | 162 | 11 |
| - other | 33,794 | 2,552 | 1,891 | 7.6 | 74 | 5.6 | 928 | 182 |
| 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 | 2,413 | 111 | 24 | 4.6 | 22 | 1.0 | 16 | 43 |
| - other | 36,054 | 443 | 584 | 1.2 | 132 | 1.6 | 26 | 101 |
| RoW | ||||||||
| - residential mortgages | 502 | 33 | 12 | 6.6 | 36 | 2.4 | 3 | - |
| - personal lending | 1,510 | 1 | 1 | 0.1 | 100 | 0.1 | - | - |
| - property | 304 | 62 | 42 | 20.4 | 68 | 13.8 | (87) | - |
| - other | 17,396 | 214 | 140 | 1.2 | 65 | 0.8 | (37) | 17 |
| 437,988 | 16,862 | 8,414 | 3.8 | 50 | 1.9 | 3,403 | 2,137 |
| 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 September 2011 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Central and local government | 8,097 | - | - | - | - | - | - | - |
| Finance - banks | 52,018 | 138 | 125 | 0.3 | 91 | 0.2 | - | - |
| - other | 48,094 | 715 | 518 | 1.5 | 72 | 1.1 | 130 | 22 |
| Residential mortgages | 143,941 | 4,835 | 1,139 | 3.4 | 24 | 0.8 | 641 | 169 |
| Personal lending | 32,152 | 2,957 | 2,359 | 9.2 | 80 | 7.3 | 514 | 718 |
| Property | 44,072 | 4,314 | 1,035 | 9.8 | 24 | 2.3 | 293 | 122 |
| Construction | 7,992 | 741 | 259 | 9.3 | 35 | 3.2 | 136 | 122 |
| Manufacturing | 24,816 | 447 | 238 | 1.8 | 53 | 1.0 | 48 | 89 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 22,207 | 685 | 328 | 3.1 | 48 | 1.5 | 126 | 68 |
| - transport and storage | 16,236 | 277 | 49 | 1.7 | 18 | 0.3 | 29 | 23 |
| - health, education and | ||||||||
| recreation | 16,224 | 633 | 188 | 3.9 | 30 | 1.2 | 89 | 39 |
| - hotels and restaurants | 7,841 | 982 | 359 | 12.5 | 37 | 4.6 | 150 | 29 |
| - utilities | 8,212 | 18 | 1 | 0.2 | 6 | - | (1) | - |
| - other | 24,744 | 1,126 | 614 | 4.6 | 55 | 2.5 | 490 | 154 |
| Agriculture, forestry and fishing | 3,767 | 93 | 31 | 2.5 | 33 | 0.8 | (22) | 4 |
| Finance leases and instalment | ||||||||
| credit | 8,404 | 184 | 114 | 2.2 | 62 | 1.4 | 21 | 52 |
| Interest accruals | 661 | - | - | - | - | - | - | - |
| Latent | - | - | 1,516 | - | - | - | (165) | - |
| 469,478 | 18,145 | 8,873 | 3.9 | 49 | 1.9 | 2,479 | 1,611 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 104,040 | 2,236 | 413 | 2.1 | 18 | 0.4 | 146 | 13 |
| - personal lending | 21,930 | 2,716 | 2,185 | 12.4 | 80 | 10.0 | 498 | 658 |
| - property | 36,106 | 2,950 | 636 | 8.2 | 22 | 1.8 | 167 | 81 |
| - other | 153,683 | 2,968 | 1,811 | 1.9 | 61 | 1.2 | 379 | 421 |
| Europe | ||||||||
| - residential mortgages | 19,109 | 2,074 | 588 | 10.9 | 28 | 3.1 | 331 | 3 |
| - personal lending | 2,126 | 143 | 124 | 6.7 | 87 | 5.8 | (15) | 14 |
| - property | 5,359 | 1,193 | 320 | 22.3 | 27 | 6.0 | 89 | 1 |
| - other | 40,020 | 2,566 | 1,783 | 6.4 | 69 | 4.5 | 714 | 126 |
| US | ||||||||
| - residential mortgages | 20,285 | 502 | 129 | 2.5 | 26 | 0.6 | 164 | 153 |
| - personal lending | 6,543 | 96 | 49 | 1.5 | 51 | 0.7 | 31 | 42 |
| - property | 2,338 | 108 | 30 | 4.6 | 28 | 1.3 | 13 | 30 |
| - other | 36,016 | 329 | 583 | 0.9 | 177 | 1.6 | (20) | 52 |
| RoW | ||||||||
| - residential mortgages | 507 | 23 | 9 | 4.5 | 39 | 1.8 | - | - |
| - personal lending | 1,553 | 2 | 1 | 0.1 | 50 | 0.1 | - | 4 |
| - property | 269 | 63 | 49 | 23.4 | 78 | 18.2 | 24 | 10 |
| - other | 19,594 | 176 | 163 | 0.9 | 93 | 0.8 | (42) | 3 |
| 469,478 | 18,145 | 8,873 | 3.9 | 49 | 1.9 | 2,479 | 1,611 |
| 31 December 2010 | Gross loans £m |
REIL £m |
Provisions £m |
REIL as a % of gross loans % |
Provisions as a % of REIL % |
Provisions as a % of gross loans % |
FY Impairment charge £m |
FY Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Core | ||||||||
| Central and local government | 6,781 | - | - | - | - | - | - | - |
| Finance - banks | 57,033 | 144 | 126 | 0.3 | 88 | 0.2 | (5) | 1 |
| - other | 46,910 | 567 | 402 | 1.2 | 71 | 0.9 | 191 | 53 |
| Residential mortgages | 140,359 | 3,999 | 693 | 2.8 | 17 | 0.5 | 578 | 243 |
| Personal lending | 33,581 | 3,131 | 2,545 | 9.3 | 81 | 7.6 | 1,157 | 1,271 |
| Property | 42,455 | 3,287 | 818 | 7.7 | 25 | 1.9 | 739 | 98 |
| Construction | 8,680 | 610 | 222 | 7.0 | 36 | 2.6 | 189 | 38 |
| Manufacturing | 25,797 | 555 | 266 | 2.2 | 48 | 1.0 | 119 | 124 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 21,974 | 611 | 259 | 2.8 | 42 | 1.2 | 199 | 103 |
| - transport and storage | 15,946 | 112 | 40 | 0.7 | 36 | 0.3 | 40 | 35 |
| - health, education and | ||||||||
| recreation | 17,456 | 507 | 134 | 2.9 | 26 | 0.8 | 145 | 64 |
| - hotels and restaurants | 8,189 | 741 | 236 | 9.0 | 32 | 2.9 | 165 | 49 |
| - utilities | 7,098 | 22 | 3 | 0.3 | 14 | - | 1 | - |
| - other | 24,464 | 583 | 276 | 2.4 | 47 | 1.1 | 137 | 98 |
| Agriculture, forestry and fishing Finance leases and instalment |
3,758 | 94 | 57 | 2.5 | 61 | 1.5 | 24 | 5 |
| credit | 8,321 | 244 | 140 | 2.9 | 57 | 1.7 | 63 | 42 |
| Interest accruals | 831 | - | - | - | - | - | - | - |
| Latent | - | - | 1,649 | - | - | - | (5) | - |
| 469,633 | 15,207 | 7,866 | 3.2 | 52 | 1.7 | 3,737 | 2,224 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 99,928 | 2,010 | 307 | 2.0 | 15 | 0.3 | 164 | 16 |
| - personal lending | 23,035 | 2,888 | 2,341 | 12.5 | 81 | 10.2 | 1,033 | 1,142 |
| - property | 34,970 | 2,454 | 500 | 7.0 | 20 | 1.4 | 394 | 43 |
| - other | 161,746 | 2,657 | 1,743 | 1.6 | 66 | 1.1 | 689 | 318 |
| Europe | ||||||||
| - residential mortgages | 19,473 | 1,506 | 280 | 7.7 | 19 | 1.4 | 184 | 6 |
| - personal lending | 2,270 | 203 | 164 | 8.9 | 81 | 7.2 | 43 | 19 |
| - property | 5,139 | 631 | 240 | 12.3 | 38 | 4.7 | 241 | 1 |
| - other | 38,992 | 1,565 | 1,343 | 4.0 | 86 | 3.4 | 468 | 85 |
| US | ||||||||
| - residential mortgages | 20,548 | 460 | 97 | 2.2 | 21 | 0.5 | 225 | 221 |
| - personal lending | 6,816 | 35 | 35 | 0.5 | 100 | 0.5 | 81 | 110 |
| - property | 1,611 | 144 | 43 | 8.9 | 30 | 2.7 | 84 | 54 |
| - other | 33,110 | 388 | 649 | 1.2 | 167 | 2.0 | 35 | 171 |
| RoW | ||||||||
| - residential mortgages | 410 | 23 | 9 | 5.6 | 39 | 2.2 | 5 | - |
| - personal lending | 1,460 | 5 | 5 | 0.3 | 100 | 0.3 | - | - |
| - property | 735 | 58 | 35 | 7.9 | 60 | 4.8 | 20 | - |
| - other | 19,390 | 180 | 75 | 0.9 | 42 | 0.4 | 71 | 38 |
| 469,633 | 15,207 | 7,866 | 3.2 | 52 | 1.7 | 3,737 | 2,224 |
| REIL | Provisions | |||||||
|---|---|---|---|---|---|---|---|---|
| as a % | Provisions | as a % | FY | FY | ||||
| Gross | of gross | as a % | of gross | Impairment | Amounts | |||
| loans | REIL | Provisions | loans | of REIL | loans | charge | written-off | |
| 31 December 2011 | £m | £m | £m | % | % | % | £m | £m |
| Non-Core | ||||||||
| Central and local government | 1,383 | - | - | - | - | - | - | - |
| Finance - banks | 619 | 1 | 1 | 0.2 | 100 | 0.2 | - | - |
| - other | 3,229 | 317 | 147 | 9.8 | 46 | 4.6 | (118) | 43 |
| Residential mortgages | 5,102 | 380 | 180 | 7.4 | 47 | 3.5 | 300 | 318 |
| Personal lending | 1,556 | 110 | 92 | 7.1 | 84 | 5.9 | 67 | 351 |
| Property | 38,064 | 17,969 | 7,861 | 47.2 | 44 | 20.7 | 3,200 | 1,004 |
| Construction | 2,672 | 1,102 | 475 | 41.2 | 43 | 17.8 | (39) | 101 |
| Manufacturing | 4,931 | 423 | 283 | 8.6 | 67 | 5.7 | 121 | 90 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 2,339 | 388 | 204 | 16.6 | 53 | 8.7 | (28) | 53 |
| - transport and storage | 5,477 | 264 | 94 | 4.8 | 36 | 1.7 | 31 | 14 |
| - health, education and | ||||||||
| recreation | 1,419 | 501 | 245 | 35.3 | 49 | 17.3 | 134 | 43 |
| - hotels and restaurants | 1,161 | 485 | 289 | 41.8 | 60 | 24.9 | 125 | 71 |
| - utilities | 1,849 | 66 | 22 | 3.6 | 33 | 1.2 | 3 | 3 |
| - other | 3,772 | 1,308 | 504 | 34.7 | 39 | 13.4 | 246 | 184 |
| Agriculture, forestry and fishing | 129 | 47 | 27 | 36.4 | 57 | 20.9 | 8 | 13 |
| Finance leases and instalment | ||||||||
| credit | 6,059 | 622 | 398 | 10.3 | 64 | 6.6 | 81 | 102 |
| Interest accruals | 116 | - | - | - | - | - | - | - |
| Latent | - | - | 647 | - | - | - | (293) | - |
| 79,877 | 23,983 | 11,469 | 30.0 | 48 | 14.4 | 3,838 | 2,390 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 1,423 | 52 | 11 | 3.7 | 21 | 0.8 | 6 | 1 |
| - personal lending | 127 | 37 | 30 | 29.1 | 81 | 23.6 | (12) | 179 |
| - property | 24,610 | 5,405 | 2,291 | 22.0 | 42 | 9.3 | 1,034 | 377 |
| - other | 19,756 | 2,298 | 1,504 | 11.6 | 65 | 7.6 | 174 | 349 |
| Europe | ||||||||
| - residential mortgages | 553 | 84 | 49 | 15.2 | 58 | 8.9 | 30 | - |
| - personal lending | 492 | 66 | 55 | 13.4 | 83 | 11.2 | 33 | 104 |
| - property | 11,538 | 12,035 | 5,384 | 104.3 | 45 | 46.7 | 2,134 | 497 |
| - other | 11,068 | 2,641 | 1,315 | 23.9 | 50 | 11.9 | 277 | 107 |
| US | ||||||||
| - residential mortgages | 2,926 | 244 | 120 | 8.3 | 49 | 4.1 | 264 | 317 |
| - personal lending | 936 | 7 | 7 | 0.7 | 100 | 0.7 | 46 | 68 |
| - property | 1,370 | 218 | 68 | 15.9 | 31 | 5.0 | (18) | 95 |
| - other | 2,104 | 213 | 329 | 10.1 | 154 | 15.6 | (192) | 96 |
| RoW | ||||||||
| - residential mortgages | 200 | - | - | - | - | - | - | - |
| - personal lending | 1 | - | - | - | - | - | - | - |
| - property | 546 | 311 | 118 | 57.0 | 38 | 21.6 | 50 | 35 |
| - other | 2,227 | 372 | 188 | 16.7 | 51 | 8.4 | 12 | 165 |
| 79,877 | 23,983 | 11,469 | 30.0 | 48 | 14.4 | 3,838 | 2,390 |
| 30 September 2011 | 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 |
|---|---|---|---|---|---|---|---|---|
| Non-Core | ||||||||
| Central and local government | 1,507 | 76 | - | 5.0 | - | - | - | - |
| Finance - banks | 709 | 11 | 1 | 1.6 | 9 | 0.1 | - | - |
| - other | 4,884 | 264 | 152 | 5.4 | 58 | 3.1 | (126) | 40 |
| Residential mortgages | 5,319 | 478 | 281 | 9.0 | 59 | 5.3 | 308 | 223 |
| Personal lending | 2,810 | 299 | 263 | 10.6 | 88 | 9.4 | 21 | 88 |
| Property | 40,628 | 18,040 | 7,796 | 44.4 | 43 | 19.2 | 2,643 | 609 |
| Construction | 3,062 | 1,012 | 481 | 33.1 | 48 | 15.7 | (104) | 46 |
| Manufacturing | 5,233 | 659 | 251 | 12.6 | 38 | 4.8 | 57 | 69 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 2,427 | 409 | 227 | 16.9 | 56 | 9.4 | 9 | 25 |
| - transport and storage | 6,009 | 267 | 92 | 4.4 | 34 | 1.5 | 24 | 12 |
| - health, education and | ||||||||
| recreation | 1,515 | 564 | 213 | 37.2 | 38 | 14.1 | 87 | 33 |
| - hotels and restaurants | 1,358 | 592 | 342 | 43.6 | 58 | 25.2 | 116 | 25 |
| - utilities | 1,725 | 62 | 21 | 3.6 | 34 | 1.2 | 2 | 2 |
| - other | 4,479 | 1,113 | 548 | 24.8 | 49 | 12.2 | 200 | 157 |
| Agriculture, forestry and fishing | 135 | 58 | 28 | 43.0 | 48 | 20.7 | 1 | 7 |
| Finance leases and instalment | ||||||||
| credit | 7,467 | 677 | 403 | 9.1 | 60 | 5.4 | 60 | 73 |
| Interest accruals | 152 | - | - | - | - | - | - | - |
| Latent | - | - | 751 | - | - | - | (190) | - |
| 89,419 | 24,581 | 11,850 | 27.5 | 48 | 13.3 | 3,108 | 1,409 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 1,497 | 56 | 11 | 3.7 | 20 | 0.7 | 6 | 1 |
| - personal lending | 295 | 197 | 183 | 66.8 | 93 | 62.0 | 12 | 8 |
| - property | 25,953 | 5,423 | 2,163 | 20.9 | 40 | 8.3 | 896 | 340 |
| - other | 23,769 | 2,375 | 1,576 | 10.0 | 66 | 6.6 | 57 | 229 |
| Europe | ||||||||
| - residential mortgages | 590 | 174 | 134 | 29.5 | 77 | 22.7 | 114 | 4 |
| - personal lending | 526 | 67 | 54 | 12.7 | 81 | 10.3 | (53) | 6 |
| - property | 12,255 | 11,972 | 5,433 | 97.7 | 45 | 44.3 | 1,720 | 188 |
| - other | 11,957 | 2,622 | 1,363 | 21.9 | 52 | 11.4 | 224 | 69 |
| US | ||||||||
| - residential mortgages | 3,040 | 247 | 136 | 8.1 | 55 | 4.5 | 188 | 218 |
| - personal lending | 1,986 | 35 | 26 | 1.8 | 74 | 1.3 | 62 | 74 |
| - property | 1,549 | 269 | 89 | 17.4 | 33 | 5.7 | (23) | 57 |
| - other | 2,259 | 304 | 363 | 13.5 | 119 | 16.1 | (155) | 59 |
| RoW | ||||||||
| - residential mortgages | 192 | 1 | - | 0.5 | - | - | - | - |
| - personal lending | 3 | - | - | - | - | - | - | - |
| - property | 871 | 376 | 111 | 43.2 | 30 | 12.7 | 50 | 24 |
| - other | 2,677 | 463 | 208 | 17.3 | 45 | 7.8 | 10 | 132 |
| 89,419 | 24,581 | 11,850 | 27.5 | 48 | 13.3 | 3,108 | 1,409 |
| 31 December 2010 | Gross loans £m |
REIL £m |
Provisions £m |
REIL as a % of gross loans % |
Provisions as a % of REIL % |
Provisions as a % of gross loans % |
FY Impairment charge £m |
FY Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Non-Core | ||||||||
| Central and local government | 1,671 | - | - | - | - | - | - | - |
| Finance - banks | 1,003 | 1 | 1 | 0.1 | 100 | 0.1 | (8) | 11 |
| - other | 7,651 | 562 | 193 | 7.3 | 34 | 2.5 | 7 | 88 |
| Residential mortgages | 6,142 | 277 | 184 | 4.5 | 66 | 3.0 | 436 | 426 |
| Personal lending | 3,891 | 413 | 349 | 10.6 | 85 | 9.0 | 213 | 306 |
| Property | 47,651 | 16,297 | 5,918 | 34.2 | 36 | 12.4 | 3,943 | 911 |
| Construction | 3,352 | 1,854 | 653 | 55.3 | 35 | 19.5 | 341 | 108 |
| Manufacturing | 6,520 | 644 | 237 | 9.9 | 37 | 3.6 | (211) | 1,423 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 3,191 | 546 | 313 | 17.1 | 57 | 9.8 | 135 | 58 |
| - transport and storage | 8,195 | 136 | 78 | 1.7 | 57 | 1.0 | 47 | 4 |
| - health, education and | ||||||||
| recreation | 1,865 | 548 | 185 | 29.4 | 34 | 9.9 | 14 | 135 |
| - hotels and restaurants | 1,492 | 528 | 268 | 35.4 | 51 | 18.0 | 156 | 57 |
| - utilities | 2,110 | 69 | 20 | 3.3 | 29 | 0.9 | 13 | 7 |
| - other | 5,530 | 855 | 473 | 15.5 | 55 | 8.6 | 241 | 212 |
| Agriculture, forestry and fishing | 135 | 58 | 29 | 43.0 | 50 | 21.5 | 7 | 1 |
| Finance leases and instalment | ||||||||
| credit | 8,529 | 603 | 414 | 7.1 | 69 | 4.9 | 189 | 71 |
| Interest accruals | 278 | - | - | - | - | - | - | - |
| Latent | - | - | 1,001 | - | - | - | (116) | - |
| 109,206 | 23,391 | 10,316 | 21.4 | 44 | 9.4 | 5,407 | 3,818 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 1,665 | 52 | 7 | 3.1 | 13 | 0.4 | 5 | 1 |
| - personal lending | 585 | 195 | 177 | 33.3 | 91 | 30.3 | 13 | 11 |
| - property | 30,492 | 5,532 | 1,719 | 18.1 | 31 | 5.6 | 1,152 | 354 |
| - other | 30,188 | 2,995 | 1,837 | 9.9 | 61 | 6.1 | 508 | 386 |
| Europe | ||||||||
| - residential mortgages | 621 | 45 | 21 | 7.2 | 47 | 3.4 | 37 | - |
| - personal lending | 600 | 198 | 152 | 33.0 | 77 | 25.3 | 23 | 5 |
| - property | 12,636 | 9,903 | 3,959 | 78.4 | 40 | 31.3 | 2,587 | 209 |
| - other | 14,388 | 2,385 | 1,111 | 16.6 | 47 | 7.7 | 295 | 1,338 |
| US | ||||||||
| - residential mortgages | 3,653 | 180 | 156 | 4.9 | 87 | 4.3 | 390 | 424 |
| - personal lending | 2,704 | 20 | 20 | 0.7 | 100 | 0.7 | 79 | 161 |
| - property | 3,318 | 621 | 159 | 18.7 | 26 | 4.8 | 237 | 166 |
| - other | 3,670 | 482 | 484 | 13.1 | 100 | 13.2 | (111) | 353 |
| RoW | ||||||||
| - residential mortgages | 203 | - | - | - | - | - | 4 | 1 |
| - personal lending | 2 | - | - | - | - | - | 98 | 129 |
| - property | 1,205 | 241 | 81 | 20.0 | 34 | 6.7 | (33) | 182 |
| - other | 3,276 | 542 | 433 | 16.5 | 80 | 13.2 | 123 | 98 |
| 109,206 | 23,391 | 10,316 | 21.4 | 44 | 9.4 | 5,407 | 3,818 |
| FVTPL (1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other | |||||||||
| US | UK | Europe | RoW | Total | HFT (2) | DFV (3) | AFS (4) | LAR (5) | |
| 31 December 2011 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Gross exposure | |||||||||
| MBS: covered bond | 133 | 203 | 8,256 | - | 8,592 | - | - | 8,592 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 27,549 | - | 5,884 | 2 | 33,435 | 15,031 | - | 18,404 | - |
| RMBS: prime | 1,201 | 3,487 | 1,541 | 484 | 6,713 | 1,090 | 567 | 4,977 | 79 |
| RMBS: non-conforming | 1,220 | 2,197 | 74 | - | 3,491 | 717 | - | 1,402 | 1,372 |
| RMBS: sub-prime | 1,847 | 427 | 94 | 2 | 2,370 | 2,183 | - | 22 | 165 |
| CMBS | 1,623 | 1,562 | 883 | 1 | 4,069 | 2,001 | - | 862 | 1,206 |
| CDOs | 7,889 | 72 | 469 | - | 8,430 | 4,455 | - | 3,885 | 90 |
| CLOs | 5,019 | 156 | 1,055 | - | 6,230 | 1,294 | - | 4,734 | 202 |
| ABS covered bond | 21 | 71 | 948 | 4 | 1,044 | - | - | 1,044 | - |
| Other ABS | 2,085 | 1,844 | 1,746 | 992 | 6,667 | 1,965 | 17 | 2,389 | 2,296 |
| 48,587 | 10,019 | 20,950 | 1,485 | 81,041 | 28,736 | 584 | 46,311 | 5,410 | |
| Carrying value | |||||||||
| MBS: covered bond | 136 | 209 | 7,175 | - | 7,520 | - | - | 7,520 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 28,022 | - | 5,549 | 2 | 33,573 | 15,132 | - | 18,441 | - |
| RMBS: prime | 1,035 | 3,038 | 1,206 | 466 | 5,745 | 872 | 558 | 4,243 | 72 |
| RMBS: non-conforming | 708 | 1,897 | 74 | - | 2,679 | 327 | - | 980 | 1,372 |
| RMBS: sub-prime | 686 | 144 | 72 | 2 | 904 | 737 | - | 9 | 158 |
| CMBS | 1,502 | 1,253 | 635 | 1 | 3,391 | 1,513 | - | 716 | 1,162 |
| CDOs | 1,632 | 31 | 294 | - | 1,957 | 315 | - | 1,555 | 87 |
| CLOs | 4,524 | 98 | 719 | - | 5,341 | 882 | - | 4,280 | 179 |
| ABS covered bond | 19 | 70 | 953 | 4 | 1,046 | - | - | 1,046 | - |
| Other ABS | 1,715 | 947 | 1,525 | 966 | 5,153 | 1,038 | - | 1,945 | 2,170 |
| 39,979 | 7,687 | 18,202 | 1,441 | 67,309 | 20,816 | 558 | 40,735 | 5,200 | |
| Net exposure | |||||||||
| MBS: covered bond | 136 | 209 | 7,175 | - | 7,520 | - | - | 7,520 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 28,022 | - | 5,549 | 2 | 33,573 | 15,132 | - | 18,441 | - |
| RMBS: prime | 825 | 3,456 | 1,005 | 458 | 5,744 | 447 | 557 | 4,668 | 72 |
| RMBS: non-conforming | 677 | 2,225 | 74 | - | 2,976 | 284 | - | 1,320 | 1,372 |
| RMBS: sub-prime | 385 | 138 | 67 | 2 | 592 | 434 | - | - | 158 |
| CMBS | 860 | 1,253 | 543 | 1 | 2,657 | 777 | - | 718 | 1,162 |
| CDOs | 1,030 | 31 | 294 | - | 1,355 | 304 | - | 964 | 87 |
| CLOs | 1,367 | 98 | 712 | - | 2,177 | 827 | - | 1,171 | 179 |
| ABS covered bond | 19 | 70 | 952 | 4 | 1,045 | - | - | 1,045 | - |
| Other ABS | 1,456 | 843 | 1,527 | 804 | 4,630 | 617 | - | 1,941 | 2,071 |
| 34,777 | 8,323 | 17,898 | 1,271 | 62,269 | 18,822 | 557 | 37,788 | 5,101 |
For notes relating to this table refer to page 14.
| FVTPL (1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other | |||||||||
| US | UK | Europe | RoW | Total | HFT (2) | DFV (3) | AFS (4) | LAR (5) | |
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Gross exposure | |||||||||
| MBS: covered bond | 136 | 206 | 8,468 | - | 8,810 | - | - | 8,810 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 29,011 | 15 | 6,141 | 1 | 35,168 | 17,622 | - | 17,546 | - |
| RMBS: prime | 1,464 | 3,267 | 1,848 | 493 | 7,072 | 1,152 | 74 | 5,743 | 103 |
| RMBS: non-conforming | 1,197 | 2,198 | 75 | - | 3,470 | 678 | - | 1,416 | 1,376 |
| RMBS: sub-prime | 2,015 | 437 | 106 | 4 | 2,562 | 2,355 | - | 24 | 183 |
| CMBS | 1,937 | 1,748 | 881 | 30 | 4,596 | 2,295 | - | 949 | 1,352 |
| CDOs | 9,427 | 49 | 487 | - | 9,963 | 5,882 | - | 3,989 | 92 |
| CLOs | 5,314 | 119 | 772 | - | 6,205 | 1,050 | - | 4,893 | 262 |
| ABS covered bond | - | - | 1,466 | - | 1,466 | - | - | 1,466 | - |
| Other ABS | 2,074 | 1,688 | 948 | 1,150 | 5,860 | 1,907 | - | 1,612 | 2,341 |
| 52,575 | 9,727 | 21,192 | 1,678 | 85,172 | 32,941 | 74 | 46,448 | 5,709 | |
| Carrying value | |||||||||
| MBS: covered bond | 139 | 214 | 7,504 | - | 7,857 | - | - | 7,857 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 29,759 | 15 | 5,790 | 1 | 35,565 | 17,948 | - | 17,617 | - |
| RMBS: prime | 1,207 | 2,755 | 1,493 | 478 | 5,933 | 947 | 1 | 4,891 | 94 |
| RMBS: non-conforming | 773 | 1,914 | 75 | - | 2,762 | 366 | - | 1,020 | 1,376 |
| RMBS: sub-prime | 928 | 159 | 83 | 4 | 1,174 | 988 | - | 11 | 175 |
| CMBS | 1,811 | 1,373 | 621 | 30 | 3,835 | 1,759 | - | 838 | 1,238 |
| CDOs | 1,913 | 16 | 298 | - | 2,227 | 476 | - | 1,662 | 89 |
| CLOs | 4,787 | 78 | 500 | - | 5,365 | 647 | - | 4,479 | 239 |
| ABS covered bond | - | - | 1,425 | - | 1,425 | - | - | 1,425 | - |
| Other ABS | 1,743 | 824 | 838 | 1,114 | 4,519 | 992 | - | 1,291 | 2,236 |
| 43,060 | 7,348 | 18,627 | 1,627 | 70,662 | 24,123 | 1 | 41,091 | 5,447 | |
| Net exposure | |||||||||
| MBS: covered bond | 139 | 214 | 7,504 | - | 7,857 | - | - | 7,857 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 29,759 | 15 | 5,790 | 1 | 35,565 | 17,948 | - | 17,617 | - |
| RMBS: prime | 1,102 | 2,740 | 1,292 | 454 | 5,588 | 610 | 1 | 4,883 | 94 |
| RMBS: non-conforming | 739 | 1,903 | 75 | - | 2,717 | 322 | - | 1,019 | 1,376 |
| RMBS: sub-prime | 506 | 159 | 78 | 4 | 747 | 569 | - | 3 | 175 |
| CMBS | 950 | 1,373 | 510 | 30 | 2,863 | 802 | - | 837 | 1,224 |
| CDOs | 369 | 16 | 298 | - | 683 | 225 | - | 369 | 89 |
| CLOs | 1,159 | 78 | 493 | - | 1,730 | 580 | - | 911 | 239 |
| ABS covered bond | - | - | 1,425 | - | 1,425 | - | - | 1,425 | - |
| Other ABS | 1,449 | 717 | 840 | 959 | 3,965 | 548 | - | 1,292 | 2,125 |
| 36,172 | 7,215 | 18,305 | 1,448 | 63,140 | 21,604 | 1 | 36,213 | 5,322 |
For notes relating to this table refer to page 14.
| FVTPL (1) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Other | |||||||||
| US | UK | Europe | RoW | Total | HFT (2) | DFV (3) | AFS (4) | LAR (5) | |
| 31 December 2010 Gross exposure |
£m | £m | £m | £m | £m | £m | £m | £m | £m |
| MBS: covered bond | 138 | 208 | 8,525 | - | 8,871 | - | - | 8,871 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 24,207 | 16 | 6,422 | - | 30,645 | 13,840 | - | 16,805 | - |
| RMBS: prime | 1,784 | 3,385 | 1,118 | 192 | 6,479 | 1,605 | 1 | 4,749 | 124 |
| RMBS: non-conforming | 1,249 | 2,107 | 92 | - | 3,448 | 708 | - | 1,313 | 1,427 |
| RMBS: sub-prime | 792 | 365 | 139 | 221 | 1,517 | 819 | - | 496 | 202 |
| CMBS | 3,086 | 1,451 | 912 | 45 | 5,494 | 2,646 | 120 | 1,409 | 1,319 |
| CDOs | 12,156 | 128 | 453 | - | 12,737 | 7,951 | - | 4,687 | 99 |
| CLOs | 6,038 | 134 | 879 | 9 | 7,060 | 1,062 | - | 5,572 | 426 |
| ABS covered bond | - | - | 1,908 | - | 1,908 | - | - | 1,908 | - |
| Other ABS | 3,104 | 1,144 | 963 | 1,705 | 6,916 | 1,533 | - | 2,615 | 2,768 |
| 52,554 | 8,938 | 21,411 | 2,172 | 85,075 | 30,164 | 121 | 48,425 | 6,365 | |
| Carrying value | |||||||||
| MBS: covered bond | 142 | 208 | 7,522 | - | 7,872 | - | - | 7,872 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 24,390 | 16 | 5,958 | - | 30,364 | 13,765 | - | 16,599 | - |
| RMBS: prime | 1,624 | 3,000 | 931 | 192 | 5,747 | 1,384 | 1 | 4,249 | 113 |
| RMBS: non-conforming | 1,084 | 1,959 | 92 | - | 3,135 | 605 | - | 1,102 | 1,428 |
| RMBS: sub-prime | 638 | 255 | 120 | 205 | 1,218 | 681 | - | 344 | 193 |
| CMBS | 2,936 | 1,338 | 638 | 38 | 4,950 | 2,262 | 118 | 1,281 | 1,289 |
| CDOs | 3,135 | 69 | 254 | - | 3,458 | 1,341 | - | 2,021 | 96 |
| CLOs | 5,334 | 102 | 635 | 3 | 6,074 | 691 | - | 4,958 | 425 |
| ABS covered bond | - | - | 1,861 | - | 1,861 | - | - | 1,861 | - |
| Other ABS | 2,780 | 945 | 754 | 1,667 | 6,146 | 1,259 | - | 2,228 | 2,659 |
| 42,063 | 7,892 | 18,765 | 2,105 | 70,825 | 21,988 | 119 | 42,515 | 6,203 | |
| Net exposure | |||||||||
| MBS: covered bond | 142 | 208 | 7,522 | - | 7,872 | - | - | 7,872 | - |
| RMBS: Government sponsored | |||||||||
| or similar | 24,390 | 16 | 5,958 | - | 30,364 | 13,765 | - | 16,599 | - |
| RMBS: prime | 1,523 | 2,948 | 596 | 192 | 5,259 | 897 | 1 | 4,248 | 113 |
| RMBS: non-conforming | 1,081 | 1,959 | 92 | - | 3,132 | 602 | - | 1,102 | 1,428 |
| RMBS: sub-prime | 289 | 253 | 112 | 176 | 830 | 305 | - | 332 | 193 |
| CMBS | 1,823 | 1,336 | 458 | 38 | 3,655 | 1,188 | 10 | 1,230 | 1,227 |
| CDOs | 1,085 | 39 | 245 | - | 1,369 | 743 | - | 530 | 96 |
| CLOs | 1,387 | 102 | 629 | 1 | 2,119 | 673 | - | 1,021 | 425 |
| ABS covered bond | - | - | 1,861 | - | 1,861 | - | - | 1,861 | - |
| Other ABS | 2,293 | 748 | 748 | 1,659 | 5,448 | 690 | - | 2,220 | 2,538 |
| 34,013 | 7,609 | 18,221 | 2,066 | 61,909 | 18,863 | 11 | 37,015 | 6,020 |
Notes:
(1) Fair value through profit or loss.
(2) Held-for-trading.
(3) Designated as at fair value through profit or loss.
(4) Available-for-sale.
(5) Loans and receivables.
The Group has paid Asset Protection Scheme (APS) premiums totalling £2,225 million (£125 million in 2011, £700 million in 2010 and £1,400 million in 2009). From 31 December 2011, premiums of £125 million are payable quarterly until the earlier of 2099 and the date the Group leaves the Scheme.
The table below shows the movement in covered assets.
| Covered amount |
|
|---|---|
| £bn | |
| Covered assets at 31 December 2010 | 194.7 |
| Disposals | (4.1) |
| Maturities, amortisation and early repayments | (33.2) |
| Effect of foreign currency movements and other adjustments | (1.6) |
| Covered assets at 30 September 2011 | 155.8 |
| Disposals | (1.2) |
| Maturities, amortisation and early repayments | (9.2) |
| Withdrawals | (12.4) |
| Effect of foreign currency movements and other adjustments | (1.2) |
| Covered assets at 31 December 2011 | 131.8 |
The table below analyses the credit impairment provision (adjusted for write-downs) and adjustments to par value (including available-for-sale reserves) relating to covered assets.
| 31 December 2011 £m |
30 September 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Loans and advances | 20,586 | 20,407 | 18,033 |
| Debt securities | 10,703 | 11,079 | 11,747 |
| Derivatives | 3,056 | 3,023 | 2,043 |
| 34,345 | 34,509 | 31,823 | |
| Core | 7,626 | 8,061 | 6,646 |
| Non-Core | 26,719 | 26,448 | 25,177 |
| 34,345 | 34,509 | 31,823 |
The table below shows the first loss utilisation under the original and modified rules.
| Modified | ||||
|---|---|---|---|---|
| Original Scheme rules | Scheme rules | |||
| Cash | ||||
| Gross loss amount |
recoveries to date |
Net triggered loss |
Net triggered total |
|
| 31 December 2011 | £m | £m | £m | £m |
| Core | 8,451 | (2,240) | 1,567 | 7,778 |
| Non-Core | 17,486 | (2,992) | 8,158 | 22,652 |
| 25,937 | (5,232) | 9,725 | 30,430 | |
| Loss credits | 1,802 | |||
| 32,232 | ||||
| 30 September 2011 | ||||
| Core | 8,152 | (1,625) | 2,004 | 8,531 |
| 7,949 | 20,446 | |||
| Non-Core | 14,974 | (2,477) | ||
| 23,126 | (4,102) | 9,953 | 28,977 | |
| Loss credits | 1,792 | |||
| 30,769 | ||||
| 31 December 2010 | ||||
| Core | 6,865 | (1,042) | 1,559 | 7,382 |
| Non-Core | 13,946 | (1,876) | 6,923 | 18,993 |
| 20,811 | (2,918) | 8,482 | 26,375 | |
| Loss credits | 1,241 | |||
| 27,616 | ||||
The table below analyses risk-weighted assets (RWAs) covered by the APS.
| 31 December | 30 September | 31 December | ||
|---|---|---|---|---|
| 2011 £bn |
2011 £bn |
2010 £bn |
||
| Core | 40.2 | 43.9 | 54.7 | |
| Non-Core | 28.9 | 44.7 | 50.9 | |
| APS RWAs | 69.1 | 88.6 | 105.6 |
• The decrease of £36.5 billion in RWAs covered by the APS, reflects pool movements, assets moving into default and changes in risk parameters.
• RWA decreases in the quarter were as a result of pool movements, asset withdrawals, assets moving into default and changes in risk parameters.
In January 2012, the Group announced changes to its wholesale banking operations in light of a changed market and regulatory environment. The changes will see the reorganisation of the Group's wholesale businesses into 'Markets' and 'International Banking' and the exit and downsizing of selected activities. The changes will ensure the wholesale businesses continue to deliver against the Group's strategy.
The changes will include an exit from cash equities, corporate brokering, equity capital markets and mergers and acquisitions businesses. Significant reductions in balance sheet, funding requirements and cost base in the remaining wholesale businesses will be implemented.
Existing GBM and GTS divisions will be reorganised as follows:
Our wholesale business will be retaining its international footprint to ensure that it can serve our customers' needs globally. We believe, that despite current challenges to the sector, wholesale banking services can play a central role in supporting cross border trade and capital flows, financing requirements and risk management and we remain committed to this business.
Going forward the Group will comprise the following segments:
The Group is also refining the way that Group Treasury costs are allocated. It is in the process of revising prior period information to reflect these changes and further details will be published ahead of the Group's Q1 2012 Interim Management Statement.
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