Earnings Release • Nov 4, 2011
Earnings Release
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The Royal Bank of Scotland Group plc (RBS) reports a third quarter operating profit(1) of £267 million and a year to date operating profit of £2,138 million, up 15% RBS core operating profit of £1,264 million in the third quarter and £5,033 million year-to-date Q3 attributable profit of £1,226 million after fair value of own debt credit of £2,357 million Strong Core Tier 1 ratio increases to 11.3%; TNAV increases to 52.6p Funding and liquidity metrics continue to strengthen; loan:deposit ratio 112%, liquidity pool of £170 billion
RBS successfully focused on maintaining a strong balance sheet during the volatile and uncertain macroeconomic environment experienced in the third quarter. Capital, funding and liquidity metrics improved and remain robust. The decline in Core operating performance reflects a challenging quarter in Global Banking & Markets (GBM), which maintained a cautious risk appetite in a very subdued operating environment. Retail & Commercial maintained income in the quarter, and year-to-date profits for these businesses were up 9%. RBS Insurance maintained and built on its recovery, and Non-Core made further progress. Non-Core is on course to meet its year-end target of £96 billion of funded assets, a reduction of over £40 billion during 2011. Core return on equity year-to-date is 12% despite continuing market, economic and regulatory headwinds.
Note:
(1) Operating profit/(loss) before tax, movements in the fair value of own debt (FVOD), Asset Protection Scheme credit default swap - fair value changes, Payment Protection Insurance costs, sovereign debt impairment and related interest rate hedge adjustments, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax and RFS Holdings minority interest. Statutory operating profit before tax of £1,210 million for the nine months ended 30 September 2011.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Core | ||||||
| Total income (1) | 6,312 | 6,789 | 7,047 | 20,648 | 22,560 | |
| Operating expenses (2) | (3,498) | (3,557) | (3,535) | (10,853) | (10,854) | |
| Insurance net claims | (696) | (703) | (998) | (2,183) | (3,109) | |
| Operating profit before impairment losses (3) | 2,118 | 2,529 | 2,514 | 7,612 | 8,597 | |
| Impairment losses (4) | (854) | (853) | (782) | (2,579) | (2,850) | |
| Core operating profit (3) | 1,264 | 1,676 | 1,732 | 5,033 | 5,747 | |
| Non-Core operating loss (3) | (997) | (858) | (1,006) | (2,895) | (3,889) | |
| Group operating profit (3) | 267 | 818 | 726 | 2,138 | 1,858 | |
| Fair value of own debt | 2,357 | 339 | (858) | 2,216 | (408) | |
| Asset Protection Scheme credit default swap | ||||||
| - fair value changes | (60) | (168) | (825) | (697) | (825) | |
| Payment Protection Insurance costs | - | (850) | - | (850) | - | |
| Sovereign debt impairment | (142) | (733) | - | (875) | - | |
| Other items (5) | (418) | (84) | (603) | (722) | (1,016) | |
| Profit/(loss) before tax | 2,004 | (678) | (1,560) | 1,210 | (391) | |
| Profit/(loss) attributable to ordinary and | ||||||
| B shareholders | 1,226 | (897) | (1,146) | (199) | (1,137) | |
| Memo: APS after tax cost (6) | (44) | (123) | (594) | (512) | (594) |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|
|---|---|---|---|
| Capital and balance sheet | |||
| Total assets | £1,608bn | £1,446bn | £1,454bn |
| Funded balance sheet (7) | £1,035bn | £1,051bn | £1,026bn |
| Loan:deposit ratio (Group) (8) | 112% | 114% | 117% |
| Loan:deposit ratio (Core) (8) | 95% | 96% | 96% |
| Core Tier 1 ratio | 11.3% | 11.1% | 10.7% |
| Tangible equity per ordinary and B share (9) | 52.6p | 50.3p | 51.1p |
Notes:
"RBS's third quarter results show the improved strength and resilience we have built up since 2008. They also highlight the external pressures facing banks, and economies more broadly, which are making the road to recovery longer and bumpier than hoped for.
Service to customers remains at the top of RBS's agenda. We care about our customers and the communities we serve and are part of. Across our businesses we have both the means and the will to meet creditworthy demand with lending and other support. We provided £28.5 billion of new lending in Q3 across both UK businesses and personal mortgages, again exceeding our natural customer market shares in each segment.
In the face of eurozone turmoil and economic slowdown RBS has sustained its restructuring momentum. Our Core Tier 1 capital ratio is strong. Our loan:deposit ratio improved again, as did our liquidity position. Non-Core run-down is on-track for year end targets. Impairment charges fell, especially in Ireland.
In common with other banks, the picture on profitability is mixed. Our Retail & Commercial businesses are holding up well with 16% return on equity for the quarter, excluding Ulster Bank. Forward momentum will be challenging, however, until the economies we serve see stronger growth. Our investment bank was only modestly profitable in the third quarter, performing in line with competitors. While we have been pleased with GBM's risk management in volatile markets, we expect difficult conditions to continue in Q4. Losses in Non-Core are coming down year by year but will remain significant and volatile for a while longer.
RBS will take clear action to adjust strategy where needed in the light of new economic and regulatory realities. The foundation established since 2009 helps us immeasurably. The path ahead is navigable, and we are committed to delivering the best of RBS for customers and shareholders."
The Royal Bank of Scotland Group (RBS or the Group) reported an operating profit(1) of £267 million in the third quarter of 2011. Operating profit for the first nine months of 2011 was £2,138 million, compared with £1,858 million in the same period of 2010.
The result reflects a challenging and uncertain economic environment, with the Group adopting a cautious approach by reducing its risk appetite and ensuring a strong and liquid balance sheet. The Group liquidity buffer was expanded from £155 billion to £170 billion and deposit growth remained a key strategic target, with the Group loan:deposit ratio improving to 112%, compared with 126% at 30 September 2010. Total funded assets were down £16 billion from Q2 and £44 billion from Q3 2010. Average value-at-risk in the Group's Core businesses was £58.3 million in Q3 2011 compared with £123.8 million in Q3 2010.
Retail & Commercial profitability was impacted by increased funding costs and impairments remaining high, particularly in Ulster Bank. Year-to-date return on equity was 17% excluding Ulster Bank, compared with 13% in the same period of 2010. In GBM, however, the subdued operating environment and lower risk appetite led to a year-to-date return on equity of 11%, compared with 19% in the prior year. Total Core return on equity in the first nine months was 12%, compared with 14% for the comparable period of 2010.
Non-Core kept up good progress, reducing its funded balance sheet by £8 billion during Q3 2011 to £105 billion. The division remains on course to meet its year-end asset target of £96 billion.
Significant non-operating items during Q3 2011 included a gain of £2,357 million on movements in the fair value of own debt, as the volatile market conditions led to a significant widening in the Group's credit spreads during the quarter. This compared with a gain of £339 million in Q2 2011 and a charge of £858 million in Q3 2010. An additional impairment of £142 million was booked against the Group's holdings of Greek sovereign bonds, which were marked at 37% of par value as at 30 September 2011. A further charge of £60 million (compared with £168 million in Q2 2011) was recorded in respect of the Asset Protection Scheme (APS), which is accounted for as a derivative, with changes in fair value booked each quarter. The cumulative APS charge now stands at £2.2 billion.
After these and other charges RBS recorded a pre-tax profit of £2,004 million, compared with a loss of £678 million in Q2 2011. Profit before tax for the first nine months of 2011 was £1,210 million, compared with a loss of £391 million in the prior year.
Net of tax and minority interests, Q3 2011 attributable profit was £1,226 million, compared with an attributable loss of £897 million in the second quarter.
Group income totalled £6,358 million in Q3 2011, down 18% from the second quarter, driven primarily by a decline in Non-Core income as valuation gains booked in Q2 2011 were not repeated. Retail & Commercial income was flat at £4,171 million, with growth in US Retail & Commercial, Global Transaction Services and Ulster Bank offset by declines in UK Retail and UK Corporate. GBM income was 29% lower at £1,099 million, reflecting a cautious risk appetite in view of the difficult market conditions.
(1) As defined on page i.
Net interest income was 5% lower at £3,078 million with lower loan balances (reflecting in particular Non-Core run-off) and Group net interest margin (NIM) narrowing to 1.84% from 1.97% in the second quarter. Group margin was negatively affected by the cost of carrying higher liquidity reserves and central bank balances, along with lower yield on Non-Core assets due to run-off of high earning assets and lack of interest recoveries in the quarter. Retail & Commercial NIM was resilient, falling just 3 basis points to 3.19%, principally reflecting the impact of lower rates on current account balances, as well as competitive deposit pricing.
Non-interest income declined by 28% to £3,280 million, principally reflecting lower trading income in Non-Core, where valuation gains booked in the second quarter were not repeated, and where fair value losses were incurred on some portfolios as a result of the volatile market conditions. In addition, GBM non-interest income was 33% lower at £925 million, reflecting depressed primary market volumes and limited opportunities in the secondary market.
Group expenses totalled £3,821 million in Q3 2011, down 2% from Q2 and 7% from Q3 2010. The reduction in expenses was largely driven by reduced compensation accruals in GBM. Retail & Commercial costs were flat in the third quarter and down 2% compared with Q3 2010.
The Group cost:income ratio was 68% and the Core cost:income ratio 62%, reflecting the subdued operating environment. Retail & Commercial held its cost:income ratio stable.
Given the economic outlook and difficult trading environment, we are actively working on further cost initiatives across the Group.
Impairments fell by 32% from the prior quarter, principally due to reduced charges in Non-Core, which had recorded substantial additional provisions relating to development land values in its Irish portfolios during Q2 2011. Core impairments of 0.8% of loans and advances to customers were flat with Q2 2011. Across the Group, Irish impairments fell sequentially from £1,251 million in Q2 2011 to £610 million in Q3 2011, paced by lower Non-Core impairments. Core Ulster Bank impairments remained high reflecting the difficult economic environment in Ireland with elevated default levels across both mortgage and other corporate portfolios.
The Group funded balance sheet fell by £16 billion during the quarter to £1,035 billion, with Non-Core down £8 billion to £105 billion and GBM down £20 billion to £399 billion. This was partially offset by an increase of £15 billion in cash balances at central banks held by Group Treasury for liquidity purposes. Loan growth in Core Retail & Commercial businesses was limited, with customer credit demand remaining subdued in the face of an uncertain economic outlook.
The reduction in Non-Core assets was driven by £4 billion of run-off and £3 billion of disposals, with another £1 billion of deals signed but not yet completed at the end of the quarter. The division remains on target to reduce third party assets to about £96 billion by the end of 2011.
The Group continues to be vigilant, and carefully monitors and controls country risk and exposures. Eurozone peripheral sovereign exposures have been substantially reduced and are at modest levels. Total exposures to central and local governments in Portugal, Greece, Italy, Spain and the Republic of Ireland have been reduced in 2011 from £4.6 billion to £1.1 billion (see pages 132 to 140). Our exposure to the Republic of Ireland is substantially funded domestically and is domiciled primarily in Ulster Bank, an in-market bank which has been established 175 years.
The Group's prudent approach during the third quarter's uncertain market conditions was reflected in its strong funding and liquidity metrics. The Group loan:deposit ratio (LDR) improved again from 114% to 112%. The Core LDR also improved on the second quarter to 95%, principally reflecting a £5 billion increase in deposits.
Short-term wholesale funding levels remained stable and the Group continues to access the markets as required, although consistent with the overall market, tenors are shorter. RBS has completed its £23 billion term funding issuance target for 2011, successfully issuing in the secured and private markets during the third quarter and October despite difficult market conditions. We will look to access the term markets opportunistically over the remainder of the year.
The Group decided to increase its liquidity portfolio from £155 billion to £170 billion in view of the uncertain market environment. This portfolio substantially exceeds short-term wholesale funding, excluding derivatives collateral, of £141 billion.
The Core Tier 1 ratio remained strong at 11.3%. While gross risk-weighted assets (which excludes the benefit provided by APS) fell by £17 billion to £512 billion, this impact was partially offset by the attributable loss of £593 million, excluding FVOD.
The Group's TNAV increased from 50.3p to 52.6p during the quarter reflecting the reported attributable profit as well as positive movements in the available-for-sale (AFS) and cash flow hedging reserves, reflecting the decline in long-term interest rates.
2011 marks the halfway point of the Group's five year recovery plan, adopted in 2009. Our plan's three primary goals are to restore RBS to financial strength and stability; to support customers well (and better) across the Group's core businesses; and to rebuild value for shareholders from the nadir reached in January 2009.
RBS's structural approach to these tasks has worked well. The identification of Core businesses to drive the Group's recovery has been validated; the customer franchises have shown their strength. The Non-Core bank as the primary vehicle of risk reduction and reduction in strategic scope has also paid off.
The RBS Strategic Plan has met or exceeded all material targets to date. Over £600 billion of assets have come off the balance sheet. Capital and funding ratios have been transformed. £32 billion of preimpairment profits have been generated by the Core businesses since the Plan's inception. These have been necessary to absorb the loan losses and restructuring costs incurred in dealing with the Bank's legacy risk positions, a task that is well advanced but by no means finished.
At the same time, customer support has been uninterrupted and is improving in key areas. UK customer satisfaction has risen and is at the top end of competitor ratings, though further improvement remains important. Lending has been made available to meet demand, with RBS increasing market share in UK mortgages. In SME lending, the latest figures show RBS exceeding 40% of UK lending despite a much lower "natural" share of customer relationships (in the 20-30% range). We remain the only UK bank to guarantee the price and availability of SME overdraft facilities.
Our Strategic Plan has anticipated many of the challenges in our operating environment and has proved resilient. However, two important developments require additional strategic response.
Now that the Independent Commission on Banking (ICB) has published its final report, the future shape of UK banking regulation has become clearer. The Government's formal response to the ICB is expected in December, but it has already indicated that it intends to implement the ICB's recommendations, including the creation of a ring fence between different banking activities, and RBS is preparing for that outcome.
Clearly, extensive engagement will be needed between Government, regulators and industry to sort out the myriad of operational details that are inherent in proposals on this scale and then to implement them. We anticipate that it will take most of the scheduled adjustment period to complete this.
At the same time, the outlook for economic growth has been downgraded. Interest rates are likely to remain low for longer than originally forecast and markets appear likely to remain volatile for some time. We expect that unsecured wholesale funding availability for banks generally will remain scarcer and more expensive than in the past even when current uncertainties subside. The impact of these challenges will be felt by all banks.
Taken together, the impact of the ICB's ring-fencing proposals and changes in market and economic outlook will result in a further shift in the balance of RBS towards its retail and commercial businesses. It will drive a further shift in the Bank's funding model to even greater deposit focus. We will pursue additional cost cutting to reduce the impact on customers and shareholders of the regulatory and market developments. We do expect that the higher equity capital requirements and other changes to funding structure that the ICB measures entail will be met organically during the adjustment period.
RBS anticipates that it may take some years for the full implications of the ICB to be clear. It will also take time for the path of economic recovery to be more positive. This will mean RBS's own restructuring is likely to take longer to produce the targeted results and those results will be impacted by these external events.
RBS remains on course to meet or exceed its extant targets for capital, risk and balance sheet, and committed to the goal of all its businesses being capable of generating returns in excess of their cost of equity. Achievement of return on equity consistent with this goal and the related cost:income ratio is likely to take longer than the 2013 date originally envisaged.
| Key Measures | Worst point |
YTD 2010 | YTD 2011 | 2013 Target |
|---|---|---|---|---|
| Value drivers | Core | Core | Core | |
| • Return on equity (1) |
(31%)(2) | 14% | 12% | >15% |
| • Cost:income ratio (3) |
97%(4) | 56% | 59% | <50% |
| Risk measures | Group | Group | Group | |
| • Core Tier 1 ratio |
4%(5) | 10.2% | 11.3% | >8% |
| • Loan:deposit ratio |
154%(6) | 126% | 112% | c.100% |
| • Short-term wholesale funding (7) |
£297bn(8) | £139bn | £141bn | <£125bn |
| • Liquidity portfolio (9) |
£90bn(8) | £151bn | £170bn | c.£150bn |
| • Leverage ratio (10) |
28.7x(11) | 18.0x | 17.5x | <20x |
Notes:
(1) Based on indicative Core attributable profit taxed at 28% and Core average tangible equity per the average balance sheet (c.75% of Group tangible equity based on RWAs at 30 September 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 Group is committed to supporting customers well. Improving the services the Group provides its customers and improving the way in which those services are provided are key to achieving this.
During the quarter UK Retail was awarded the "Best Financial Services Contact Centre in the UK" and "Best Large Contact Centre Organisation" accolades at the annual Customer Service Awards. To be recognised in this way is an important milestone in the division's transformation programme, begun in 2010, and acts as further motivation in achieving its goal of becoming the UK's most Helpful Bank.
Global Transaction Services (GTS) and Citizens both launched new products aimed at helping their customers manage their money better and more efficiently. GTS customers can now benefit from a product improving their ability to effectively manage cash positions and make successful liquidity and investment decisions while, in the US, Citizens focused on the specific needs of its small business customers. The launch of its expense management product follows on from a mobile cash management product launched during Q2 and allows business owners to track spend on cards issued by the business in real time and set limits for employee spending.
UK Corporate continued to promote its customer promise under the banner of Ahead for Business. By the end of Q3 for example, in addition to their regular customer visits, our relationship managers had spent over 600 additional days working in our customers' businesses, to better understand how these businesses work and support them through the pressures and challenges they face, under our Working With You programme.
In the current difficult markets it is especially important that customers are able to monitor their money and for GBM customers with money invested in turbulent markets this can be especially important. In September, GBM launched RBS Agile, an automated trading tool which uses client specified criteria to enact hedging trades as required, helping customers to automatically manage their foreign exchange risk and strategy.
The Group recognises that there will always be more to achieve in customer satisfaction and product innovation but by focusing on the things that really matter to customers, it is moving in the right direction.
Q3 2011 was a difficult quarter for UK businesses, with weak macroeconomic news flows and the continuing sovereign debt crisis in the eurozone affecting confidence in future prospects and growth opportunities. In these conditions, RBS remains committed to serving its customers and the UK economy as a whole.
In Q3 2011 RBS provided a total of £24.5 billion of new lending to UK business customers - more than £375 million every working day. That brings total new lending in the first nine months of 2011 to £68.7 billion. These totals lead the industry, substantially exceed RBS's 'natural' share of customer relationships and underpin the Bank's demonstrable commitment to supporting customers.
Third quarter new business lending comprised £10.0 billion of new loans and facilities to mid and large corporates, £4.1 billion of mid-corporate overdraft renewals, £8.1 billion of new loans and facilities to SMEs and £2.3 billion of SME overdraft renewals. New SME lending in the first nine months of the year totalled £30.7 billion (£23.6 billion of new loans and facilities and £7.1 billion of overdraft renewals).
The overall pattern of credit demand remained similar to the previous quarter. Mid and large corporate demand was robust and largely driven by refinancing, with businesses taking advantage of longer tenors available and opportunistically refinancing 2010 facilities at lower margins. Demand from SMEs remained more muted, with loan applications during the quarter down 12% from the prior year at 68,000. Approval rates remained above 85%.
Most businesses remained focused on deleveraging. Repayments in the mid and large segments remained significant in the quarter, although mid corporate drawn balances remained stable in the quarter.
SMEs also continued to pay down existing debt and focus on building up their cash balances, with Core drawn balances overall falling by 2% in the quarter and overall credit balances increasing £2 billion since the beginning of 2011. Overdraft utilisation remained below 50%, as it has consistently been since February 2010. In Q3 2011, average price of new SME lending was generally stable, averaging 3.77%.
RBS continues with a range of measures to reinforce SMEs' confidence that it is open for business including:
On 3 November the Group launched a new loan product to support its SME customers with low fixed interest rates, no early repayment charges and, for a limited three month period, no initial fees. This offer responds to small businesses' increasing concerns about investing in the face of significant uncertainty. This is part of our efforts to instil confidence in our small business customers and encourage them to speak to us about their investment plans.
Additionally, in the immediate aftermath of the August riots in London and other parts of England, the Group was quick to recognise the extra support its customers might need as a result, providing £10 million of interest free and fee-free loans to business customers affected by the rioting. RBS also contributed to the "High Street Fund", in conjunction with other UK banks, to provide free cash support to small, independent traders to help them make repairs and get back to business.
RBS also recognises the importance of providing mortgage lending to UK consumers. Gross new lending in Q3 2011 increased by 5% compared with Q2 to £4.0 billion. In the first nine months of 2011 net mortgage lending to UK households increased by over £3.8 billion to £103.1 billion. One in five of the new mortgages provided by the Group during Q3 2011 was to first time buyers. RBS continues to provide more new mortgage lending than its historic market share.
External market and economic conditions in Q4 are expected to remain challenging. RBS will continue to prioritise a strong balance sheet with an appropriate capital, funding and liquidity position.
We anticipate trends in our Core businesses broadly consistent with the third quarter. We expect to accelerate some Non-Core disposal losses to reduce RWAs in partial mitigation of Basel III implementation. Headline results will also be affected by volatility of own debt valuations and other non-operating items.
| 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 a conference call and live audio webcast following the release of the results for the quarter ended 30 September 2011. The details are as follows:
| Date: | Friday 4 November 2011 |
|---|---|
| Time: | 9.00am 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, which will not be formally presented at the analysts' conference call, 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 nine quarters to assist analysts for modelling purposes.
| 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 |
20 23 27 30 33 35 38 43 46 50 51 |
| Condensed consolidated income statement | 58 |
| Condensed consolidated statement of comprehensive income | 59 |
| Condensed consolidated balance sheet | 60 |
| Commentary on condensed consolidated balance sheet | 61 |
| Average balance sheet | 63 |
| Condensed consolidated statement of changes in equity | 66 |
| Notes | 69 |
| Page | |
|---|---|
| Risk and balance sheet management | 98 |
| Capital | 98 |
| Funding and liquidity risk | 102 |
| Credit risk | 111 |
| Market risk | 148 |
| Additional information | 153 |
| Appendix 1 Income statement reconciliations | |
| Appendix 2 Businesses outlined for disposal | |
| Appendix 3 Additional risk management disclosures | |
| Appendix 4 Asset Protection Scheme | |
| Glossary of terms |
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, capitalisation, portfolios, net interest margin, capital ratios, liquidity, risk weighted assets, return on equity (ROE), profitability, cost:income ratios, leverage and loan:deposit ratios, funding and risk profile; certain ring-fencing proposals; 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 full nationalisation of the Group or other resolution procedures under the Banking Act 2009; 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 financial stability of other financial institutions, and the Group's counterparties and borrowers; the ability to complete restructurings on a timely basis, or at all, including the disposal of certain Non-Core assets and assets and businesses required as part of the EC State Aid restructuring plan; organisational restructuring, including any adverse consequences of a failure to transfer, or delay in transferring, certain businesses, assets and liabilities from RBS Bank N.V. to RBS plc; the ability to access sufficient funding to meet liquidity needs; the extent of future write-downs and impairment charges caused by depressed asset valuations; the inability to hedge certain risks economically; 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 value and effectiveness of any credit protection purchased by the Group; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices and basis, volatility and correlation risks; changes in the credit ratings of the Group; ineffective management of capital or changes to capital adequacy or liquidity requirements; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; HM Treasury exercising influence over the operations of the Group; 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 government and regulatory bodies; impairments of goodwill; pension fund shortfalls; litigation and regulatory investigations; general operational risks; insurance claims; reputational risk; changes in UK and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; the recommendations made by the UK Independent Commission on Banking and their potential implications; the participation of the Group in the APS and the effect of the APS on the Group's financial and capital position; the ability to access the contingent capital arrangements with HM Treasury; 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 57, 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 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.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Core | ||||||
| Total income (1) | 6,312 | 6,789 | 7,047 | 20,648 | 22,560 | |
| Operating expenses (2) | (3,498) | (3,557) | (3,535) | (10,853) | (10,854) | |
| Insurance net claims | (696) | (703) | (998) | (2,183) | (3,109) | |
| Operating profit before impairment | ||||||
| losses (3) | 2,118 | 2,529 | 2,514 | 7,612 | 8,597 | |
| Impairment losses (4) | (854) | (853) | (782) | (2,579) | (2,850) | |
| Operating profit (3) | 1,264 | 1,676 | 1,732 | 5,033 | 5,747 | |
| Non-Core | ||||||
| Total income (1) | 46 | 978 | 870 | 1,510 | 2,643 | |
| Operating expenses (2) | (323) | (335) | (561) | (981) | (1,775) | |
| Insurance net claims | (38) | (90) | (144) | (256) | (492) | |
| Operating (loss)/profit before impairment | ||||||
| losses (3) | (315) | 553 | 165 | 273 | 376 | |
| Impairment losses (4) | (682) | (1,411) | (1,171) | (3,168) | (4,265) | |
| Operating loss (3) | (997) | (858) | (1,006) | (2,895) | (3,889) | |
| Total | ||||||
| Total income (1) | 6,358 | 7,767 | 7,917 | 22,158 | 25,203 | |
| Operating expenses (2) | (3,821) | (3,892) | (4,096) | (11,834) | (12,629) | |
| Insurance net claims | (734) | (793) | (1,142) | (2,439) | (3,601) | |
| Operating profit before impairment | ||||||
| losses (3) | 1,803 | 3,082 | 2,679 | 7,885 | 8,973 | |
| Impairment losses (4) | (1,536) | (2,264) | (1,953) | (5,747) | (7,115) | |
| Operating profit (3) | 267 | 818 | 726 | 2,138 | 1,858 | |
| Fair value of own debt | 2,357 | 339 | (858) | 2,216 | (408) | |
| Asset Protection Scheme credit default | ||||||
| swap - fair value changes | (60) | (168) | (825) | (697) | (825) | |
| Payment Protection Insurance costs | - | (850) | - | (850) | - | |
| Sovereign debt impairment | (142) | (733) | - | (875) | - | |
| Other items | (418) | (84) | (603) | (722) | (1,016) | |
| Profit/(loss) before tax | 2,004 | (678) | (1,560) | 1,210 | (391) | |
| Memo: Profit/(loss) before tax, pre APS | 2,064 | (510) | (735) | 1,907 | 434 |
For definitions of the notes refer to page 7.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| Key metrics | 2011 | 2011 | 2010 | 2011 | 2010 | |
| Performance ratios | ||||||
| Core | ||||||
| - Net interest margin | 2.10% | 2.18% | 2.28% | 2.18% | 2.23% | |
| - Cost:income ratio (5) | 62% | 58% | 58% | 59% | 56% | |
| - Return on equity | 8.5% | 11.7% | 12.6% | 11.7% | 13.7% | |
| - Adjusted earnings per ordinary and | ||||||
| B share from continuing operations | - | 0.7p | 1.1p | 1.3p | 2.0p | |
| - Adjusted earnings per ordinary and B share | ||||||
| from continuing operations assuming a | ||||||
| normalised tax rate of 26.5% (2010 - 28.0%) | 0.9p | 1.1p | 1.2p | 3.4p | 3.7p | |
| Non-Core | ||||||
| - Net interest margin | 0.43% | 0.87% | 1.04% | 0.74% | 1.18% | |
| - Cost:income ratio (5) | nm | 38% | 77% | 78% | 83% | |
| Group | ||||||
| - Net interest margin | 1.84% | 1.97% | 2.03% | 1.94% | 2.00% | |
| - Cost:income ratio (5) | 68% | 56% | 60% | 60% | 58% | |
| Continuing operations | ||||||
| - Basic earnings/(loss) per ordinary and | ||||||
| B share (6) | 1.1p | (0.8p) | (1.1p) | (0.2p) | (0.5p) |
nm = not meaningful
For definitions of the notes refer to page 7.
| 30 September | 30 June | Change | 31 December | Change | |
|---|---|---|---|---|---|
| 2011 | 2011 | 2010 | |||
| Capital and balance sheet | |||||
| Funded balance sheet (7) | £1,035bn | £1,051bn | (2%) | £1,026bn | 1% |
| Total assets | £1,608bn | £1,446bn | 11% | £1,454bn | 11% |
| Loan:deposit ratio - Core (8) | 95% | 96% | (100bp) | 96% | (100bp) |
| Loan:deposit ratio - Group (8) | 112% | 114% | (200bp) | 117% | (500bp) |
| Risk-weighted assets - gross | £512bn | £529bn | (3%) | £571bn | (10%) |
| Benefit of Asset Protection Scheme (APS) | (£89bn) | (£95bn) | (6%) | (£106bn) | (16%) |
| Risk-weighted assets - net of APS | £423bn | £434bn | (3%) | £465bn | (9%) |
| Total equity | £79bn | £76bn | 4% | £77bn | 3% |
| Core Tier 1 ratio* | 11.3% | 11.1% | 20bp | 10.7% | 60bp |
| Tier 1 ratio | 13.8% | 13.5% | 30bp | 12.9% | 90bp |
| Risk elements in lending (REIL) | £43bn | £42bn | 2% | £39bn | 10% |
| REIL as a % of gross loans and advances (9) | 8.4% | 8.3% | 10bp | 7.3% | 110bp |
| Tier 1 leverage ratio (10) | 17.5x | 17.8x | (2%) | 16.8x | 4% |
| Tangible equity leverage ratio (11) | 5.7% | 5.3% | 40bp | 5.5% | 20bp |
| Tangible equity per ordinary and B share (12) | 52.6p | 50.3p | 5% | 51.1p | 3% |
* Benefit of APS in Core Tier 1 ratio is 1.3% at 30 September 2011 (30 June 2011 - 1.3%; 31 December 2010 - 1.2%).
Notes:
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Continuing operations | |||||
| Total income | 8,603 | 8,238 | 6,086 | 23,899 | 24,046 |
| Operating expenses | (4,127) | (5,017) | (4,551) | (13,459) | (13,721) |
| Operating profit before impairment losses | 3,742 | 2,428 | 393 | 8,001 | 6,724 |
| Impairment losses | (1,738) | (3,106) | (1,953) | (6,791) | (7,115) |
| Operating profit/(loss) before tax | 2,004 | (678) | (1,560) | 1,210 | (391) |
| Profit/(loss) attributable to ordinary and B | |||||
| shareholders | 1,226 | (897) | (1,146) | (199) | (1,137) |
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 credit default swap - fair value changes, Payment Protection Insurance costs, sovereign debt impairment and related interest rate hedge adjustments, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax and RFS Holdings minority interest are shown separately. In the statutory condensed consolidated income statement on page 58, these items are included in income and operating expenses as appropriate.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| Core | £m | £m | £m | £m | £m |
| Net interest income | 2,968 | 3,000 | 3,050 | 9,020 | 9,297 |
| Non-interest income (excluding insurance | |||||
| net premium income) | 2,352 | 2,794 | 2,888 | 8,630 | 9,928 |
| Insurance net premium income | 992 | 995 | 1,109 | 2,998 | 3,335 |
| Non-interest income | 3,344 | 3,789 | 3,997 | 11,628 | 13,263 |
| Total income (1) | 6,312 | 6,789 | 7,047 | 20,648 | 22,560 |
| Operating expenses (2) | (3,498) | (3,557) | (3,535) | (10,853) | (10,854) |
| Profit before other operating charges | 2,814 | 3,232 | 3,512 | 9,795 | 11,706 |
| Insurance net claims | (696) | (703) | (998) | (2,183) | (3,109) |
| Operating profit before impairment | |||||
| losses (3) | 2,118 | 2,529 | 2,514 | 7,612 | 8,597 |
| Impairment losses (4) | (854) | (853) | (782) | (2,579) | (2,850) |
| Operating profit (3) | 1,264 | 1,676 | 1,732 | 5,033 | 5,747 |
| Non-Core | |||||
| Net interest income | 110 | 233 | 354 | 593 | 1,325 |
| Non-interest income (excluding insurance | |||||
| net premium income) | (108) | 650 | 336 | 640 | 797 |
| Insurance net premium income | 44 | 95 | 180 | 277 | 521 |
| Non-interest income | (64) | 745 | 516 | 917 | 1,318 |
| Total income (1) | 46 | 978 | 870 | 1,510 | 2,643 |
| Operating expenses (2) | (323) | (335) | (561) | (981) | (1,775) |
| (Loss)/profit before other operating | |||||
| charges | (277) | 643 | 309 | 529 | 868 |
| Insurance net claims | (38) | (90) | (144) | (256) | (492) |
| Operating (loss)/profit before impairment | |||||
| losses (3) | (315) | 553 | 165 | 273 | 376 |
| Impairment losses (4) | (682) | (1,411) | (1,171) | (3,168) | (4,265) |
| Operating loss (3) | (997) | (858) | (1,006) | (2,895) | (3,889) |
For definitions of the notes refer to page 7.
| 30 September 30 June 30 September 30 September 2011 2011 2010 2011 Total £m £m £m £m Net interest income 3,078 3,233 3,404 9,613 Non-interest income (excluding insurance net premium income) 2,244 3,444 3,224 9,270 Insurance net premium income 1,036 1,090 1,289 3,275 3,280 4,534 4,513 12,545 Non-interest income Total income (1) 6,358 7,767 7,917 22,158 Operating expenses (2) (3,821) (3,892) (4,096) (11,834) Profit before other operating charges 2,537 3,875 3,821 10,324 Insurance net claims (734) (793) (1,142) (2,439) Operating profit before impairment losses (3) 1,803 3,082 2,679 7,885 Impairment losses (4) (1,536) (2,264) (1,953) (5,747) Operating profit (3) 267 818 726 2,138 Fair value of own debt 2,357 339 (858) 2,216 Asset Protection Scheme credit default swap - fair value changes (60) (168) (825) (697) |
30 September 2010 |
|---|---|
| £m | |
| 10,622 | |
| 10,725 | |
| 3,856 | |
| 14,581 | |
| 25,203 | |
| (12,629) | |
| 12,574 | |
| (3,601) | |
| 8,973 | |
| (7,115) | |
| 1,858 | |
| (408) | |
| (825) | |
| Payment Protection Insurance costs - (850) - (850) |
- |
| Sovereign debt impairment (142) (733) - (875) |
- |
| Amortisation of purchased intangible | |
| assets (69) (56) (123) (169) |
(273) |
| Integration and restructuring costs (233) (208) (311) (586) |
(733) |
| Gain on redemption of own debt 1 255 - 256 |
553 |
| Strategic disposals (49) 50 27 (22) |
(331) |
| Other (68) (125) (196) (201) |
(232) |
| Profit/(loss) before tax 2,004 (678) (1,560) 1,210 |
(391) |
| Tax (charge)/credit (791) (222) 295 (1,436) |
(637) |
| 1,213 (900) (1,265) (226) Profit/(loss) from continuing operations Profit/(loss) from discontinued operations, |
(1,028) |
| net of tax 6 21 18 37 |
(688) |
| Profit/(loss) for the period 1,219 (879) (1,247) (189) |
(1,716) |
| Non-controlling interests 7 (18) 101 (10) |
703 |
| Preference share and other dividends - - - - |
(124) |
| Profit/(loss) attributable to ordinary | |
| and B shareholders 1,226 (897) (1,146) (199) |
(1,137) |
For definitions of the notes refer to page 7.
| 30 September 2011 £m |
30 June 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Loans and advances to banks (1) | 52,602 | 53,133 | 57,911 |
| Loans and advances to customers (1) | 485,573 | 489,572 | 502,748 |
| Reverse repurchase agreements and stock borrowing | 102,259 | 98,135 | 95,119 |
| Debt securities and equity shares | 244,545 | 268,596 | 239,678 |
| Other assets | 150,405 | 141,661 | 131,043 |
| Funded assets | 1,035,384 | 1,051,097 | 1,026,499 |
| Derivatives | 572,344 | 394,872 | 427,077 |
| Total assets | 1,607,728 | 1,445,969 | 1,453,576 |
| Bank deposits (2) | 78,370 | 71,573 | 66,051 |
| Customer deposits (2) | 433,660 | 428,703 | 428,599 |
| Repurchase agreements and stock lending | 131,918 | 124,203 | 114,833 |
| Settlement balances and short positions | 66,478 | 79,011 | 54,109 |
| Subordinated liabilities | 26,275 | 26,311 | 27,053 |
| Other liabilities | 230,361 | 252,117 | 262,113 |
| Funded liabilities | 967,062 | 981,918 | 952,758 |
| Derivatives | 561,790 | 387,809 | 423,967 |
| Total liabilities | 1,528,852 | 1,369,727 | 1,376,725 |
| Owners' equity | 77,443 | 74,744 | 75,132 |
| Non-controlling interests | 1,433 | 1,498 | 1,719 |
| Total liabilities and equity | 1,607,728 | 1,445,969 | 1,453,576 |
| Memo: Tangible equity (3) | 57,955 | 55,408 | 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.
| Quarter ended | Nine months ended | ||||||
|---|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |||
| Net interest income | 2011 £m |
2011 £m |
2010 £m |
2011 £m |
2010 £m |
||
| Net interest income (1) | 3,074 | 3,245 | 3,459 | 9,608 | 10,473 | ||
| Average interest-earning assets | 663,956 | 661,672 | 676,290 | 661,416 | 699,484 | ||
| Net interest margin | |||||||
| - Group | 1.84% | 1.97% | 2.03% | 1.94% | 2.00% | ||
| - Core | |||||||
| - Retail & Commercial (2) | 3.19% | 3.22% | 3.20% | 3.23% | 3.11% | ||
| - Global Banking & Markets | 0.71% | 0.70% | 1.13% | 0.72% | 1.09% | ||
| - Non-Core | 0.43% | 0.87% | 1.04% | 0.74% | 1.18% |
Notes:
(1) For further analysis and details of adjustments refer to pages 64 and 65.
(2) Retail & Commercial comprises the UK Retail, UK Corporate, Wealth, Global Transaction Services, Ulster Bank and US Retail & Commercial divisions.
• R&C NIM remained essentially flat, with asset repricing offsetting the tightening of liability margins to support the Group's deposit-gathering targets.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| Non-interest income | £m | £m | £m | £m | £m | |
| Net fees and commissions | 1,148 | 1,377 | 1,433 | 3,907 | 4,379 | |
| Income from trading activities | 547 | 1,204 | 1,432 | 3,241 | 5,159 | |
| Other operating income | 549 | 863 | 359 | 2,122 | 1,187 | |
| Non-interest income (excluding | ||||||
| insurance net premium income) | 2,244 | 3,444 | 3,224 | 9,270 | 10,725 | |
| Insurance net premium income | 1,036 | 1,090 | 1,289 | 3,275 | 3,856 | |
| Total non-interest income | 3,280 | 4,534 | 4,513 | 12,545 | 14,581 |
Insurance net premium income fell 5%, driven by continued run-off of legacy insurance policies in Non-Core. Net premium income in RBS Insurance, at £990 million, remained largely flat quarter on quarter.
The 27% decline in non-interest income was largely driven by uncertain market conditions during the quarter.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| Operating expenses | £m | £m | £m | £m | £m | |
| Staff costs | 1,963 | 2,099 | 2,166 | 6,382 | 6,897 | |
| Premises and equipment | 584 | 563 | 596 | 1,703 | 1,640 | |
| Other | 858 | 834 | 869 | 2,557 | 2,778 | |
| Administrative expenses | 3,405 | 3,496 | 3,631 | 10,642 | 11,315 | |
| Depreciation and amortisation | 416 | 396 | 465 | 1,192 | 1,314 | |
| Operating expenses | 3,821 | 3,892 | 4,096 | 11,834 | 12,629 | |
| General insurance | 734 | 793 | 1,092 | 2,439 | 3,547 | |
| Bancassurance | - | - | 50 | - | 54 | |
| Insurance net claims | 734 | 793 | 1,142 | 2,439 | 3,601 | |
| Staff costs as a % of total income | 31% | 27% | 27% | 29% | 27% |
The Group cost:income ratio was 68% in Q3 2011 compared with 56%, reflecting the subdued operating environment, with income trends the dominant factor. The Core cost:income ratio also worsened, to 62% in the quarter.
Group costs were 7% lower than in the prior year, with expenses in Non-Core declining 42% with run-off the principal driver.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| Impairment losses | 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
| Loan impairment losses | 1,452 | 2,237 | 1,908 | 5,587 | 6,989 |
| Securities impairment losses | 84 | 27 | 45 | 160 | 126 |
| Group impairment losses | 1,536 | 2,264 | 1,953 | 5,747 | 7,115 |
| Loan impairment losses - customers | |||||
| - latent | (60) | (188) | 40 | (355) | (5) |
| - collectively assessed | 689 | 591 | 748 | 2,000 | 2,341 |
| - individually assessed | 823 | 1,834 | 1,120 | 3,942 | 4,653 |
| Loan impairment losses | 1,452 | 2,237 | 1,908 | 5,587 | 6,989 |
| Core | 817 | 810 | 779 | 2,479 | 2,825 |
| Non-Core | 635 | 1,427 | 1,129 | 3,108 | 4,164 |
| Group | 1,452 | 2,237 | 1,908 | 5,587 | 6,989 |
| Customer loan impairment charge as | |||||
| a % of gross loans and advances (1) | |||||
| Group | 1.1% | 1.8% | 1.4% | 1.5% | 1.7% |
| Core | 0.8% | 0.8% | 0.7% | 0.8% | 0.9% |
| Non-Core | 2.8% | 6.0% | 3.9% | 4.6% | 4.7% |
Note:
(1) Gross loans and advances to customers include disposal groups and exclude reverse repurchase agreements.
The Retail & Commercial impairment uplift mainly reflected a £58 million increase in Core Ulster Bank driven primarily by deteriorating mortgage metrics. Combined Ulster Bank (Core and Non-Core) impairments were £610 million, down 51% or £641 million from Q2 2011.
Core loan impairments were up 5% on Q3 2010, primarily driven by the increase in Ulster Bank's mortgage portfolio. GTS increased its provision on an existing single name impairment, while UK Corporate saw an increase in collective charges.
| Quarter ended | Nine months ended | ||||||
|---|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |||
| 2011 | 2011 | 2010 | 2011 | 2010 | |||
| One-off and other items | £m | £m | £m | £m | £m | ||
| Fair value of own debt* | 2,357 | 339 | (858) | 2,216 | (408) | ||
| Asset Protection Scheme credit default | |||||||
| swap - fair value changes | (60) | (168) | (825) | (697) | (825) | ||
| Payment Protection Insurance costs | - | (850) | - | (850) | - | ||
| Sovereign debt impairment (1) | (142) | (733) | - | (875) | - | ||
| Other | |||||||
| - Amortisation of purchased intangible | |||||||
| assets | (69) | (56) | (123) | (169) | (273) | ||
| - Integration and restructuring costs | (233) | (208) | (311) | (586) | (733) | ||
| - Gain on redemption of own debt | 1 | 255 | - | 256 | 553 | ||
| - Strategic disposals** | (49) | 50 | 27 | (22) | (331) | ||
| - Bonus tax | (5) | (11) | (15) | (27) | (84) | ||
| - RFS Holdings minority interest | (3) | (5) | (181) | (5) | (148) | ||
| - Interest rate hedge adjustments on | |||||||
| impaired available-for-sale Greek | |||||||
| government bonds | (60) | (109) | - | (169) | - | ||
| 1,737 | (1,496) | (2,286) | (928) | (2,249) | |||
| * Fair value of own debt impact: | |||||||
| Income from trading activities | 470 | 111 | (330) | 395 | (185) | ||
| Other operating income | 1,887 | 228 | (528) | 1,821 | (223) | ||
| Fair value of own debt (FVOD) | 2,357 | 339 | (858) | 2,216 | (408) | ||
| **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 | - | ||
| - Life assurance business | - | - | - | - | (235) | ||
| - Other | (49) | 50 | 27 | (69) | (176) | ||
| (49) | 50 | 27 | (22) | (331) |
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).
Under IFRS, no liability for the bank levy arises until the measurement date, 31 December 2011. Accordingly, no accrual was made for the estimated cost of the levy at 30 September 2011. If the levy had been applied to the balance sheet at 30 September 2011, the cost of the levy to RBS would be a full year charge of approximately £330 million.
| Capital resources and ratios | 30 September 2011 |
30 June 2011 |
31 December 2010 |
|---|---|---|---|
| Core Tier 1 capital | £48bn | £48bn | £50bn |
| Tier 1 capital | £58bn | £58bn | £60bn |
| Total capital | £62bn | £62bn | £65bn |
| Risk-weighted assets | |||
| - gross | £512bn | £529bn | £571bn |
| - benefit of the Asset Protection Scheme | (£89bn) | (£95bn) | (£106bn) |
| Risk-weighted assets | £423bn | £434bn | £465bn |
| Core Tier 1 ratio (1) | 11.3% | 11.1% | 10.7% |
| Tier 1 ratio | 13.8% | 13.5% | 12.9% |
| Total capital ratio | 14.7% | 14.4% | 14.0% |
Note:
(1) The benefit of APS in Core Tier 1 ratio is 1.3% at 30 September 2011 (30 June 2011 - 1.3%; 31 December 2010 - 1.2%).
| Balance sheet | 30 September 2011 |
30 June 2011 |
31 December 2010 |
|---|---|---|---|
| Funded balance sheet | £1,035bn | £1,051bn | £1,026bn |
| Total assets | £1,608bn | £1,446bn | £1,454bn |
| Loans and advances to customers (1) | £486bn | £490bn | £503bn |
| Customer deposits (2) | £434bn | £429bn | £429bn |
| Loan:deposit ratio - Core (3) | 95% | 96% | 96% |
| Loan:deposit ratio - Group (3) | 112% | 114% | 117% |
Notes:
Further discussion of the Group's funding and liquidity position is included on pages 102 to 110.
The operating profit/(loss)(1) of each division is shown below.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 £m |
2011 £m |
2010 £m |
2011 £m |
2010 £m |
||
| Operating profit/(loss) before | ||||||
| impairment losses by division | ||||||
| UK Retail | 694 | 731 | 649 | 2,127 | 1,752 | |
| UK Corporate | 529 | 563 | 580 | 1,690 | 1,672 | |
| Wealth | 75 | 77 | 75 | 237 | 229 | |
| Global Transaction Services | 240 | 218 | 312 | 665 | 827 | |
| Ulster Bank | 108 | 80 | 110 | 272 | 295 | |
| US Retail & Commercial | 199 | 193 | 198 | 582 | 654 | |
| Retail & Commercial | 1,845 | 1,862 | 1,924 | 5,573 | 5,429 | |
| Global Banking & Markets | 80 | 483 | 549 | 1,637 | 2,993 | |
| RBS Insurance | 123 | 139 | (33) | 329 | (286) | |
| Central items | 70 | 45 | 74 | 73 | 461 | |
| Core | 2,118 | 2,529 | 2,514 | 7,612 | 8,597 | |
| Non-Core | (315) | 553 | 165 | 273 | 376 | |
| Group operating profit before | ||||||
| impairment losses | 1,803 | 3,082 | 2,679 | 7,885 | 8,973 | |
| Impairment losses/(recoveries) | ||||||
| by division | ||||||
| UK Retail | 195 | 208 | 251 | 597 | 938 | |
| UK Corporate | 228 | 218 | 158 | 551 | 542 | |
| Wealth | 4 | 3 | 1 | 12 | 12 | |
| Global Transaction Services | 45 | 54 | 3 | 119 | 6 | |
| Ulster Bank | 327 | 269 | 286 | 1,057 | 785 | |
| US Retail & Commercial | 84 | 66 | 125 | 260 | 412 | |
| Retail & Commercial | 883 | 818 | 824 | 2,596 | 2,695 | |
| Global Banking & Markets | (32) | 37 | (40) | (19) | 156 | |
| Central items | 3 | (2) | (2) | 2 | (1) | |
| Core | 854 | 853 | 782 | 2,579 | 2,850 | |
| Non-Core | 682 | 1,411 | 1,171 | 3,168 | 4,265 | |
| Group impairment losses | 1,536 | 2,264 | 1,953 | 5,747 | 7,115 |
Note:
(1) Operating profit/(loss) before movements in the fair value of own debt, Asset Protection Scheme credit default swap fair value changes, Payment Protection Insurance costs, sovereign debt impairment and related interest rate hedge adjustments, amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax and RFS Holdings minority interest.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Operating profit/(loss) by division | |||||
| UK Retail | 499 | 523 | 398 | 1,530 | 814 |
| UK Corporate | 301 | 345 | 422 | 1,139 | 1,130 |
| Wealth | 71 | 74 | 74 | 225 | 217 |
| Global Transaction Services | 195 | 164 | 309 | 546 | 821 |
| Ulster Bank | (219) | (189) | (176) | (785) | (490) |
| US Retail & Commercial | 115 | 127 | 73 | 322 | 242 |
| Retail & Commercial | 962 | 1,044 | 1,100 | 2,977 | 2,734 |
| Global Banking & Markets | 112 | 446 | 589 | 1,656 | 2,837 |
| RBS Insurance | 123 | 139 | (33) | 329 | (286) |
| Central items | 67 | 47 | 76 | 71 | 462 |
| Core | 1,264 | 1,676 | 1,732 | 5,033 | 5,747 |
| Non-Core | (997) | (858) | (1,006) | (2,895) | (3,889) |
| Group operating profit | 267 | 818 | 726 | 2,138 | 1,858 |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| % | % | % | % | % | ||
| Net interest margin by division | ||||||
| UK Retail | 3.90 | 4.00 | 3.99 | 3.98 | 3.87 | |
| UK Corporate | 2.48 | 2.55 | 2.56 | 2.59 | 2.49 | |
| Wealth | 3.46 | 3.61 | 3.41 | 3.51 | 3.40 | |
| Global Transaction Services | 5.33 | 5.63 | 6.67 | 5.61 | 6.98 | |
| Ulster Bank | 1.85 | 1.69 | 1.88 | 1.76 | 1.86 | |
| US Retail & Commercial | 3.09 | 3.11 | 2.89 | 3.07 | 2.80 | |
| Retail & Commercial | 3.19 | 3.22 | 3.20 | 3.23 | 3.11 | |
| Global Banking & Markets | 0.71 | 0.70 | 1.13 | 0.72 | 1.09 | |
| Non-Core | 0.43 | 0.87 | 1.04 | 0.74 | 1.18 | |
| Group net interest margin | 1.84 | 1.97 | 2.03 | 1.94 | 2.00 |
| 30 September 2011 £bn |
30 June 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Risk-weighted assets by division | |||||
| UK Retail | 48.7 | 49.5 | (2%) | 48.8 | - |
| UK Corporate | 75.7 | 77.9 | (3%) | 81.4 | (7%) |
| Wealth | 13.0 | 12.9 | 1% | 12.5 | 4% |
| Global Transaction Services | 18.6 | 18.8 | (1%) | 18.3 | 2% |
| Ulster Bank | 34.4 | 36.3 | (5%) | 31.6 | 9% |
| US Retail & Commercial | 56.5 | 54.8 | 3% | 57.0 | (1%) |
| Retail & Commercial | 246.9 | 250.2 | (1%) | 249.6 | (1%) |
| Global Banking & Markets | 134.3 | 139.0 | (3%) | 146.9 | (9%) |
| Other | 9.8 | 11.8 | (17%) | 18.0 | (46%) |
| Core | 391.0 | 401.0 | (2%) | 414.5 | (6%) |
| Non-Core | 117.9 | 124.7 | (5%) | 153.7 | (23%) |
| Group before benefit of Asset Protection Scheme | 508.9 | 525.7 | (3%) | 568.2 | (10%) |
| Benefit of Asset Protection Scheme | (88.6) | (95.2) | (7%) | (105.6) | (16%) |
| Group before RFS Holdings | |||||
| minority interest | 420.3 | 430.5 | (2%) | 462.6 | (9%) |
| RFS Holdings minority interest | 3.0 | 3.0 | - | 2.9 | 3% |
| Group | 423.3 | 433.5 | (2%) | 465.5 | (9%) |
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) |
30 September 2011 |
30 June 2011 |
31 December 2010 |
|---|---|---|---|
| UK Retail | 27,900 | 27,900 | 28,200 |
| UK Corporate | 13,600 | 13,400 | 13,100 |
| Wealth | 5,600 | 5,500 | 5,200 |
| Global Transaction Services | 2,700 | 2,700 | 2,600 |
| Ulster Bank | 4,400 | 4,300 | 4,200 |
| US Retail & Commercial | 15,300 | 15,200 | 15,700 |
| Retail & Commercial | 69,500 | 69,000 | 69,000 |
| Global Banking & Markets | 18,900 | 19,000 | 18,700 |
| RBS Insurance | 15,200 | 14,600 | 14,500 |
| Group Centre | 6,100 | 5,100 | 4,700 |
| Core | 109,700 | 107,700 | 106,900 |
| Non-Core | 5,300 | 6,300 | 6,900 |
| 115,000 | 114,000 | 113,800 | |
| Business Services | 34,200 | 33,500 | 34,400 |
| Integration | 1,100 | 800 | 300 |
| Group | 150,300 | 148,300 | 148,500 |
The increase in Group employee numbers primarily reflects project staff employed to meet the shortterm demands of the Group's change and customer service related programmes. The increase is temporary, and we expect a decline in Q4 2011, and further into 2012, due to the Group's on-going cost reduction programmes.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 £m |
2011 £m |
2010 £m |
2011 £m |
2010 £m |
|
| Income statement | |||||
| Net interest income | 1,074 | 1,086 | 1,056 | 3,236 | 2,990 |
| Net fees and commissions | 259 | 295 | 262 | 824 | 784 |
| Other non-interest income (net of insurance | |||||
| claims) | 33 | 38 | 65 | 105 | 182 |
| Non-interest income | 292 | 333 | 327 | 929 | 966 |
| Total income | 1,366 | 1,419 | 1,383 | 4,165 | 3,956 |
| Direct expenses | |||||
| - staff | (206) | (218) | (226) | (639) | (681) |
| - other | (102) | (106) | (134) | (321) | (409) |
| Indirect expenses | (364) | (364) | (374) | (1,078) | (1,114) |
| (672) | (688) | (734) | (2,038) | (2,204) | |
| Operating profit before impairment losses | 694 | 731 | 649 | 2,127 | 1,752 |
| Impairment losses | (195) | (208) | (251) | (597) | (938) |
| Operating profit | 499 | 523 | 398 | 1,530 | 814 |
| Analysis of income by product | |||||
| Personal advances | 260 | 278 | 248 | 813 | 718 |
| Personal deposits | 236 | 257 | 277 | 747 | 831 |
| Mortgages | 576 | 581 | 527 | 1,700 | 1,427 |
| Cards | 231 | 243 | 243 | 712 | 711 |
| Other, including bancassurance | 63 | 60 | 88 | 193 | 269 |
| Total income | 1,366 | 1,419 | 1,383 | 4,165 | 3,956 |
| Analysis of impairments by sector | |||||
| Mortgages | 34 | 55 | 55 | 150 | 147 |
| Personal | 120 | 106 | 150 | 321 | 551 |
| Cards | 41 | 47 | 46 | 126 | 240 |
| Total impairment losses | 195 | 208 | 251 | 597 | 938 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances | |||||
| (excluding reverse repurchase | |||||
| agreements) by sector | |||||
| Mortgages | 0.1% | 0.2% | 0.2% | 0.2% | 0.2% |
| Personal | 4.7% | 3.9% | 4.8% | 4.2% | 5.9% |
| Cards | 2.9% | 3.4% | 3.0% | 3.0% | 5.2% |
| Total | 0.7% | 0.8% | 0.9% | 0.7% | 1.2% |
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 26.7% | 27.6% | 21.2% | 26.8% | 14.1% |
| Net interest margin | 3.90% | 4.00% | 3.99% | 3.98% | 3.87% |
| Cost:income ratio | 49% | 48% | 51% | 49% | 55% |
| Adjusted cost:income ratio (2) | 49% | 48% | 53% | 49% | 56% |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 94.2 | 94.0 | - | 90.6 | 4% |
| - personal | 10.3 | 10.8 | (5%) | 11.7 | (12%) |
| - cards | 5.6 | 5.6 | - | 6.1 | (8%) |
| 110.1 | 110.4 | - | 108.4 | 2% | |
| Customer deposits (excluding bancassurance) | 98.6 | 95.9 | 3% | 96.1 | 3% |
| Assets under management (excluding | |||||
| deposits) | 5.6 | 5.8 | (3%) | 5.7 | (2%) |
| Risk elements in lending | 4.7 | 4.6 | 2% | 4.6 | 2% |
| Loan:deposit ratio (excluding repos) | 109% | 112% | (300bp) | 110% | (100bp) |
| Risk-weighted assets | 48.7 | 49.5 | (2%) | 48.8 | - |
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.
UK Retail's transformation into the UK's most helpful and sustainable bank picked up speed during Q3 2011, with good progress on reducing branch queuing, improving telephone services and reducing complaints.
With an uncertain economic environment and difficult financial market conditions across Europe, the third quarter was characterised by an additional focus on deposit gathering. UK Retail achieved good balance growth during the period, including successful fixed rate bond sales, though in a competitive pricing environment this growth came at the cost of margin.
There has been positive feedback from RBS customers following the introduction of the facility to obtain emergency cash and on the new packaged accounts. UK Retail continued to develop mobile banking applications and online functionality by developing iPad, Blackberry and Android applications for customers.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 621 | 641 | 662 | 1,951 | 1,919 |
| Net fees and commissions | 244 | 231 | 244 | 719 | 701 |
| Other non-interest income | 83 | 94 | 80 | 265 | 292 |
| Non-interest income | 327 | 325 | 324 | 984 | 993 |
| Total income | 948 | 966 | 986 | 2,935 | 2,912 |
| Direct expenses | |||||
| - staff | (184) | (199) | (186) | (585) | (580) |
| - other | (88) | (71) | (81) | (249) | (266) |
| Indirect expenses | (147) | (133) | (139) | (411) | (394) |
| (419) | (403) | (406) | (1,245) | (1,240) | |
| Operating profit before impairment losses | 529 | 563 | 580 | 1,690 | 1,672 |
| Impairment losses | (228) | (218) | (158) | (551) | (542) |
| Operating profit | 301 | 345 | 422 | 1,139 | 1,130 |
| Analysis of income by business | |||||
| Corporate and commercial lending | 647 | 666 | 651 | 2,042 | 1,941 |
| Asset and invoice finance | 176 | 163 | 163 | 491 | 451 |
| Corporate deposits | 172 | 171 | 183 | 513 | 544 |
| Other | (47) | (34) | (11) | (111) | (24) |
| Total income | 948 | 966 | 986 | 2,935 | 2,912 |
| Analysis of impairments by sector | |||||
| Banks and financial institutions | 6 | 13 | 15 | 22 | 8 |
| Hotels and restaurants | 22 | 13 | 6 | 43 | 34 |
| Housebuilding and construction | 29 | 15 | 62 | 76 | 84 |
| Manufacturing | 9 | 6 | 2 | 21 | 10 |
| Other | 36 | 89 | 19 | 126 | 139 |
| Private sector education, health, social work, | |||||
| recreational and community services | 20 | 1 | 1 | 32 | 9 |
| Property | 82 | 51 | 34 | 151 | 161 |
| Wholesale and retail trade, repairs | 24 | 16 | 14 | 56 | 60 |
| Asset and invoice finance | - | 14 | 5 | 24 | 37 |
| Total impairment losses | 228 | 218 | 158 | 551 | 542 |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase |
||||||
| agreements) by sector | ||||||
| Banks and financial institutions | 0.4% | 0.9% | 1.0% | 0.5% | 0.2% | |
| Hotels and restaurants | 1.4% | 0.8% | 0.3% | 0.9% | 0.7% | |
| Housebuilding and construction | 2.9% | 1.4% | 5.5% | 2.5% | 2.5% | |
| Manufacturing | 0.8% | 0.5% | 0.2% | 0.6% | 0.3% | |
| Other | 0.4% | 1.1% | 0.2% | 0.5% | 0.6% | |
| Private sector education, health, social work, | ||||||
| recreational and community services | 0.9% | - | - | 0.5% | 0.1% | |
| Property | 1.1% | 0.7% | 0.5% | 0.7% | 0.7% | |
| Wholesale and retail trade, repairs | 1.1% | 0.7% | 0.5% | 0.8% | 0.8% | |
| Asset and invoice finance | - | 0.6% | 0.2% | 0.3% | 0.5% | |
| Total | 0.8% | 0.8% | 0.6% | 0.7% | 0.6% |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| Performance ratios | ||||||
| Return on equity (1) | 11.1% | 12.3% | 14.1% | 13.1% | 12.2% | |
| Net interest margin | 2.48% | 2.55% | 2.56% | 2.59% | 2.49% | |
| Cost:income ratio | 44% | 42% | 41% | 42% | 43% | |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
||||
| £bn | £bn | Change | £bn | Change | ||
| Capital and balance sheet | ||||||
| Total third party assets | 112.7 | 113.6 | (1%) | 114.6 | (2%) | |
| Loans and advances to customers (gross) | ||||||
| - banks and financial institutions | 5.7 | 5.9 | (3%) | 6.1 | (7%) | |
| - hotels and restaurants | 6.3 | 6.5 | (3%) | 6.8 | (7%) | |
| - housebuilding and construction | 4.0 | 4.2 | (5%) | 4.5 | (11%) | |
| - manufacturing | 4.7 | 4.9 | (4%) | 5.3 | (11%) | |
| - other | 32.6 | 32.2 | 1% | 31.0 | 5% | |
| - private sector education, health, social | ||||||
| work, recreational and community services | 8.7 | 8.8 | (1%) | 9.0 | (3%) | |
| - property | 29.0 | 29.2 | (1%) | 29.5 | (2%) | |
| - wholesale and retail trade, repairs | 8.9 | 9.2 | (3%) | 9.6 | (7%) | |
| - asset and invoice finance | 10.1 | 9.9 | 2% | 9.9 | 2% | |
| 110.0 | 110.8 | (1%) | 111.7 | (2%) | ||
| Customer deposits | 98.9 | 99.5 | (1%) | 100.0 | (1%) | |
| Risk elements in lending | 4.9 | 4.8 | 2% | 4.0 | 23% | |
| Loan:deposit ratio (excluding repos) | 109% | 109% | - | 110% | (100bp) | |
| Risk-weighted assets | 75.7 | 77.9 | (3%) | 81.4 | (7%) |
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).
UK Corporate continues to support UK businesses through a challenging economic climate.
In Q3 2011, following the August riots, UK Corporate responded with a number of emergency measures to support SME customers. On 3 November we launched a new loan product to support our SME customers with low fixed interest rates, no early repayment charges and, for a limited three month period, no initial fees.
The division has worked closely with over 2,000 customers so far this year (600 in the quarter) to help reduce banking operations complexity and improve efficiency. The benefits include converting 30,000 cheques to BACS payments, migrating 22,000 credits from branch counters and reducing manual payments by 2,000 per annum.
Q3 2011 also saw UK Corporate's strategic investment programme deliver two new deposit products. The Managed Rate account enables customers to manage their liquidity requirements on a day by day basis. Since launch, £3 billion of base rate balances have migrated to the Managed Rate product. Additionally, an education sector specific product suite, offering attractively priced products and a deposit structure better suited to the sector's unique needs was also launched during the quarter.
Impairments increased £10 million due to lower latent provision releases and higher collective provisions on the SME book, partially offset by a fall in specific provisions in the quarter.
Operating profit decreased by £121 million, 29%, primarily driven by increased impairments and higher costs of funding.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 178 | 182 | 156 | 527 | 449 |
| Net fees and commissions | 95 | 94 | 90 | 286 | 282 |
| Other non-interest income | 23 | 21 | 18 | 61 | 54 |
| Non-interest income | 118 | 115 | 108 | 347 | 336 |
| Total income | 296 | 297 | 264 | 874 | 785 |
| Direct expenses | |||||
| - staff | (106) | (111) | (95) | (317) | (286) |
| - other | (57) | (51) | (39) | (152) | (113) |
| Indirect expenses | (58) | (58) | (55) | (168) | (157) |
| (221) | (220) | (189) | (637) | (556) | |
| Operating profit before impairment losses | 75 | 77 | 75 | 237 | 229 |
| Impairment losses | (4) | (3) | (1) | (12) | (12) |
| Operating profit | 71 | 74 | 74 | 225 | 217 |
| Analysis of income | |||||
| Private banking | 244 | 245 | 217 | 720 | 637 |
| Investments | 52 | 52 | 47 | 154 | 148 |
| Total income | 296 | 297 | 264 | 874 | 785 |
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 16.3% | 17.4% | 18.2% | 17.5% | 18.1% |
| Net interest margin | 3.46% | 3.61% | 3.41% | 3.51% | 3.40% |
| Cost:income ratio | 75% | 74% | 72% | 73% | 71% |
| 30 September 2011 £bn |
30 June 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Loans and advances to customers (gross) | |||||
| - mortgages | 8.3 | 8.2 | 1% | 7.8 | 6% |
| - personal | 7.2 | 7.0 | 3% | 6.7 | 7% |
| - other | 1.5 | 1.6 | (6%) | 1.6 | (6%) |
| 17.0 | 16.8 | 1% | 16.1 | 6% | |
| Customer deposits (2) | 37.4 | 37.3 | - | 37.1 | 1% |
| Assets under management (excluding | |||||
| deposits) (2) | 29.9 | 34.3 | (13%) | 33.9 | (12%) |
| Risk elements in lending | 0.2 | 0.2 | - | 0.2 | - |
| Loan:deposit ratio (excluding repos) (2) | 45% | 45% | - | 43% | 200bp |
| Risk-weighted assets | 13.0 | 12.9 | 1% | 12.5 | 4% |
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 have been revised to reflect the current reporting methodology.
Q3 2011 has seen continued execution of the Wealth strategy as announced in Q1 2011.
Plans to refresh the Coutts brand were finalised in the quarter with the initial launch in the UK market scheduled for Q4 2011. The new brand will bring Coutts UK and RBS Coutts under one single contemporary Coutts brand.
The Wealth divisional strategy focuses on territories where the businesses have the opportunity for greatest scale or growth and during Q3 2011 the refocus on target markets was completed. The division also furthered plans to enhance its propositions in strategic international markets such as Asia, the Middle East, and Eastern Europe.
In products and services further work was undertaken on the development of propositions for the diverse segments in the UK and International markets and the division continues to look to optimise how new products and services are delivered across multiple markets. The RBS Group provides significant opportunity to leverage synergies across divisions and Wealth continues to look at the connectivity potential with relevant businesses.
Strategic investment in technology continued in Q3 2011, in particular with the finalisation of plans to deploy a new class-leading global banking platform in the UK, Further technology solutions continue to be assessed to enhance client experience, client to advisor interaction, and advisor to advisor collaboration.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
||
| £m | £m | £m | £m | £m | ||
| Income statement | ||||||
| Net interest income | 276 | 263 | 257 | 799 | 711 | |
| Non-interest income | 300 | 297 | 411 | 879 | 1,212 | |
| Total income | 576 | 560 | 668 | 1,678 | 1,923 | |
| Direct expenses | ||||||
| - staff | (89) | (95) | (100) | (280) | (306) | |
| - other | (26) | (32) | (38) | (87) | (108) | |
| Indirect expenses | (221) | (215) | (218) | (646) | (682) | |
| (336) | (342) | (356) | (1,013) | (1,096) | ||
| Operating profit before impairment losses | 240 | 218 | 312 | 665 | 827 | |
| Impairment losses | (45) | (54) | (3) | (119) | (6) | |
| Operating profit | 195 | 164 | 309 | 546 | 821 | |
| Analysis of income by product | ||||||
| Domestic cash management | 216 | 217 | 216 | 645 | 611 | |
| International cash management | 220 | 215 | 200 | 646 | 578 | |
| Trade finance | 90 | 78 | 81 | 241 | 228 | |
| Merchant acquiring | 4 | 4 | 123 | 11 | 371 | |
| Commercial cards | 46 | 46 | 48 | 135 | 135 | |
| Total income | 576 | 560 | 668 | 1,678 | 1,923 |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
||
| Performance ratios | ||||||
| Return on equity (1) | 31.0% | 27.0% | 47.8% | 29.6% | 42.8% | |
| Net interest margin | 5.33% | 5.63% | 6.67% | 5.61% | 6.98% | |
| Cost:income ratio | 58% | 61% | 53% | 60% | 57% | |
| 30 September 2011 £bn |
30 June 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 29.9 | 30.2 | (1%) | 25.2 | 19% |
| Loans and advances | 19.5 | 19.2 | 2% | 14.4 | 35% |
| Customer deposits | 71.4 | 73.3 | (3%) | 69.9 | 2% |
| Risk elements in lending | 0.2 | 0.3 | (33%) | 0.1 | 100% |
| Loan:deposit ratio (excluding repos) | 28% | 26% | 200bp | 21% | 700bp |
| Risk-weighted assets | 18.6 | 18.8 | (1%) | 18.3 | 2% |
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 Q3 2011 Global Transaction Services (GTS) delivered revenue growth, careful cost management and resilient deposit performance.
GTS continued to deliver solutions to clients, for example, launching the new Liquidity Solutions Portal which gives clients the ability to view and control balances, forecast their cash positions and make effective liquidity and investment decisions in real time. The business also launched the new enhanced e-Invoicing solution, which received a 'Green Apple' award for environmental best practice from The Green Organisation.
Customer deposit levels held up well in a competitive environment, but were adversely affected by exchange rate movements.
Operating profit fell 37%, in part reflecting the sale of Global Merchant Services (GMS), which completed on 30 November 2010. Adjusting for the disposal, operating profit decreased 24%, reflecting provision on a single name impairment.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June 30 September |
30 September 30 September |
||||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Income statement | ||||||
| Net interest income | 185 | 171 | 192 | 525 | 574 | |
| Net fees and commissions | 41 | 37 | 38 | 114 | 116 | |
| Other non-interest income | 19 | 14 | 14 | 48 | 42 | |
| Non-interest income | 60 | 51 | 52 | 162 | 158 | |
| Total income | 245 | 222 | 244 | 687 | 732 | |
| Direct expenses | ||||||
| - staff | (55) | (57) | (54) | (168) | (180) | |
| - other | (17) | (17) | (18) | (52) | (57) | |
| Indirect expenses | (65) | (68) | (62) | (195) | (200) | |
| (137) | (142) | (134) | (415) | (437) | ||
| Operating profit before impairment losses | 108 | 80 | 110 | 272 | 295 | |
| Impairment losses | (327) | (269) | (286) | (1,057) | (785) | |
| Operating loss | (219) | (189) | (176) | (785) | (490) | |
| Analysis of income by business | ||||||
| Corporate | 107 | 117 | 120 | 337 | 399 | |
| Retail | 116 | 98 | 124 | 327 | 341 | |
| Other | 22 | 7 | - | 23 | (8) | |
| Total income | 245 | 222 | 244 | 687 | 732 | |
| Analysis of impairments by sector | ||||||
| Mortgages | 126 | 78 | 69 | 437 | 135 | |
| Corporate | ||||||
| - property | 78 | 66 | 107 | 241 | 306 | |
| - other corporate | 111 | 103 | 100 | 334 | 309 | |
| Other lending | 12 | 22 | 10 | 45 | 35 | |
| Total impairment losses | 327 | 269 | 286 | 1,057 | 785 | |
| Loan impairment charge as % of gross | ||||||
| customer loans and advances | ||||||
| (excluding reverse repurchase | ||||||
| agreements) by sector | ||||||
| Mortgages | 2.4% | 1.4% | 1.3% | 2.8% | 0.8% | |
| Corporate | ||||||
| - property | 6.1% | 5.0% | 8.1% | 6.3% | 7.7% | |
| - other corporate | 5.4% | 4.7% | 4.3% | 5.4% | 4.4% | |
| Other lending | 3.2% | 5.5% | 2.4% | 4.0% | 2.7% | |
| Total | 3.7% | 2.9% | 3.0% | 4.0% | 2.8% |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
||
| Performance ratios | ||||||
| Return on equity (1) | (21.2%) | (19.7%) | (20.2%) | (27.1%) | (18.1%) | |
| Net interest margin | 1.85% | 1.69% | 1.88% | 1.76% | 1.86% | |
| Cost:income ratio | 56% | 64% | 55% | 60% | 60% | |
| 30 September 2011 £bn |
30 June 2011 £bn |
Change | 31 December 2010 £bn |
Change | ||
| Capital and balance sheet | ||||||
| Loans and advances to customers (gross) | ||||||
| - mortgages | 20.7 | 21.8 | (5%) | 21.2 | (2%) | |
| - corporate | ||||||
| - property | 5.1 | 5.3 | (4%) | 5.4 | (6%) | |
| - other corporate | 8.2 | 8.7 | (6%) | 9.0 | (9%) | |
| - other lending | 1.5 | 1.6 | (6%) | 1.3 | 15% | |
| 35.5 | 37.4 | (5%) | 36.9 | (4%) | ||
| Customer deposits | 23.4 | 24.3 | (4%) | 23.1 | 1% | |
| Risk elements in lending | ||||||
| - mortgages | 2.1 | 2.0 | 5% | 1.5 | 40% | |
| - corporate | ||||||
| - property | 1.5 | 1.1 | 36% | 0.7 | 114% | |
| - other corporate | 1.8 | 1.8 | - | 1.2 | 50% | |
| - other lending | 0.2 | 0.2 | - | 0.2 | - | |
| Total risk elements in lending | 5.6 | 5.1 | 10% | 3.6 | 56% | |
| Loan:deposit ratio (excluding repos) | 141% | 144% | (300bp) | 152% | (1,100bp) | |
| Risk-weighted assets | 34.4 | 36.3 | (5%) | 31.6 | 9% | |
| Spot exchange rate - €/£ | 1.162 | 1.106 | 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).
Ulster Bank's financial performance continues to be overshadowed by the challenging economic climate in Ireland, with impairments remaining elevated.
Progress has been made to identify growth opportunities in the Irish market over the medium term. To capitalise on these opportunities the business remains focused on deposit-gathering, targeting growth in sectors which leverage competitive advantage and cost efficiency.
Customer deposit balances remained largely stable in the quarter on a constant currency basis despite rating downgrades and market uncertainty. This has resulted in an erosion of corporate balances, offset by growth in retail and SME deposits.
Operating loss increased by £43 million driven by the impact of deteriorating credit quality on impairment losses. Operating profit before impairment losses was broadly flat.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Net interest income | 483 | 469 | 480 | 1,403 | 1,450 |
| Net fees and commissions | 190 | 185 | 180 | 545 | 560 |
| Other non-interest income | 67 | 61 | 91 | 201 | 238 |
| Non-interest income | 257 | 246 | 271 | 746 | 798 |
| Total income | 740 | 715 | 751 | 2,149 | 2,248 |
| Direct expenses | |||||
| - staff | (206) | (205) | (214) | (608) | (580) |
| - other | (152) | (135) | (148) | (411) | (445) |
| Indirect expenses | (183) | (182) | (191) | (548) | (569) |
| (541) | (522) | (553) | (1,567) | (1,594) | |
| Operating profit before impairment losses | 199 | 193 | 198 | 582 | 654 |
| Impairment losses | (84) | (66) | (125) | (260) | (412) |
| Operating profit | 115 | 127 | 73 | 322 | 242 |
| Average exchange rate - US\$/£ | 1.611 | 1.631 | 1.551 | 1.614 | 1.534 |
| Analysis of income by product | |||||
| Mortgages and home equity | 119 | 108 | 142 | 336 | 381 |
| Personal lending and cards | 111 | 108 | 127 | 326 | 363 |
| Retail deposits | 236 | 231 | 223 | 683 | 697 |
| Commercial lending | 149 | 147 | 145 | 433 | 439 |
| Commercial deposits | 75 | 72 | 78 | 216 | 245 |
| Other | 50 | 49 | 36 | 155 | 123 |
| Total income | 740 | 715 | 751 | 2,149 | 2,248 |
| Analysis of impairments by sector | |||||
| Residential mortgages | 7 | 13 | 14 | 26 | 55 |
| Home equity | 29 | 11 | 56 | 80 | 100 |
| Corporate and commercial | 7 | 22 | 23 | 46 | 148 |
| Other consumer | 11 | 9 | 28 | 40 | 91 |
| Securities | 30 | 11 | 4 | 68 | 18 |
| Total impairment losses | 84 | 66 | 125 | 260 | 412 |
| Loan impairment charge as % of gross | |||||
| customer loans and advances | |||||
| (excluding reverse repurchase | |||||
| agreements) by sector | |||||
| Residential mortgages | 0.5% | 0.9% | 0.9% | 0.6% | 1.2% |
| Home equity | 0.8% | 0.3% | 1.5% | 0.7% | 0.9% |
| Corporate and commercial | 0.1% | 0.4% | 0.5% | 0.3% | 1.0% |
| Other consumer | 0.7% | 0.6% | 1.6% | 0.8% | 1.8% |
| Total | 0.4% | 0.5% | 1.0% | 0.5% | 1.1% |
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
|
| Performance ratios | |||||
| Return on equity (1) | 6.0% | 6.8% | 3.3% | 5.7% | 3.6% |
| Net interest margin | 3.09% | 3.11% | 2.89% | 3.07% | 2.80% |
| Cost:income ratio | 73% | 73% | 74% | 73% | 71% |
| 30 September 2011 £bn |
30 June 2011 £bn |
Change | 31 December 2010 £bn |
Change | |
|---|---|---|---|---|---|
| Capital and balance sheet | |||||
| Total third party assets | 72.9 | 70.9 | 3% | 71.2 | 2% |
| Loans and advances to customers (gross) | |||||
| - residential mortgages | 5.9 | 5.7 | 4% | 6.1 | (3%) |
| - home equity | 14.9 | 14.6 | 2% | 15.2 | (2%) |
| - corporate and commercial | 22.1 | 21.3 | 4% | 20.4 | 8% |
| - other consumer | 6.6 | 6.3 | 5% | 6.9 | (4%) |
| 49.5 | 47.9 | 3% | 48.6 | 2% | |
| Customer deposits (excluding repos) | 58.5 | 56.5 | 4% | 58.7 | - |
| Risk elements in lending | |||||
| - retail | 0.6 | 0.5 | 20% | 0.4 | 50% |
| - commercial | 0.4 | 0.4 | - | 0.5 | (20%) |
| Total risk elements in lending | 1.0 | 0.9 | 11% | 0.9 | 11% |
| Loan:deposit ratio (excluding repos) | 83% | 83% | - | 81% | 200bp |
| Risk-weighted assets | 56.5 | 54.8 | 3% | 57.0 | (1%) |
| Spot exchange rate - US\$/£ | 1.562 | 1.607 | 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).
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 \$m |
2011 \$m |
2010 \$m |
2011 \$m |
2010 \$m |
||
| Income statement | ||||||
| Net interest income | 778 | 764 | 745 | 2,265 | 2,223 | |
| Net fees and commissions | 306 | 301 | 280 | 880 | 859 | |
| Other non-interest income | 109 | 100 | 139 | 325 | 365 | |
| Non-interest income | 415 | 401 | 419 | 1,205 | 1,224 | |
| Total income | 1,193 | 1,165 | 1,164 | 3,470 | 3,447 | |
| Direct expenses | ||||||
| - staff | (332) | (335) | (332) | (982) | (890) | |
| - other | (245) | (220) | (230) | (663) | (683) | |
| Indirect expenses | (295) | (297) | (296) | (885) | (872) | |
| (872) | (852) | (858) | (2,530) | (2,445) | ||
| Operating profit before impairment losses Impairment losses |
321 (136) |
313 (107) |
306 (193) |
940 (420) |
1,002 (631) |
|
| Operating profit | 185 | 206 | 113 | 520 | 371 | |
| Analysis of income by product | ||||||
| Mortgages and home equity | 192 | 175 | 220 | 542 | 585 | |
| Personal lending and cards | 179 | 176 | 196 | 526 | 556 | |
| Retail deposits | 381 | 377 | 345 | 1,104 | 1,068 | |
| Commercial lending | 240 | 240 | 225 | 699 | 673 | |
| Commercial deposits | 121 | 118 | 122 | 349 | 376 | |
| Other | 80 | 79 | 56 | 250 | 189 | |
| Total income | 1,193 | 1,165 | 1,164 | 3,470 | 3,447 | |
| Analysis of impairments by sector | ||||||
| Residential mortgages | 12 | 21 | 22 | 42 | 85 | |
| Home equity | 48 | 19 | 88 | 131 | 154 | |
| Corporate and commercial | 11 | 35 | 35 | 74 | 225 | |
| Other consumer | 17 | 16 | 42 | 66 | 139 | |
| Securities | 48 | 16 | 6 | 107 | 28 | |
| Total impairment losses | 136 | 107 | 193 | 420 | 631 | |
| Loan impairment charge as % of gross | ||||||
| customer loans and advances | ||||||
| (excluding reverse repurchase | ||||||
| agreements) by sector | ||||||
| Residential mortgages | 0.5% | 0.9% | 0.9% | 0.6% | 1.2% | |
| Home equity | 0.8% | 0.3% | 1.5% | 0.7% | 0.9% | |
| Corporate and commercial | 0.1% | 0.4% | 0.5% | 0.3% | 1.0% | |
| Other consumer | 0.7% | 0.6% | 1.6% | 0.8% | 1.7% | |
| Total | 0.5% | 0.5% | 1.0% | 0.5% | 1.1% |
| Quarter ended | |||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| Performance ratios | |||||
| Return on equity (1) | 6.0% | 6.8% | 3.3% | 5.7% | 3.6% |
| Net interest margin | 3.09% | 3.11% | 2.89% | 3.07% | 2.80% |
| Cost:income ratio | 73% | 73% | 74% | 73% | 71% |
| 30 September | 30 June | 31 December |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|||
|---|---|---|---|---|---|
| \$bn | \$bn | Change | \$bn | Change | |
| Capital and balance sheet | |||||
| Total third party assets | 113.8 | 113.9 | - | 110.5 | 3% |
| Loans and advances to customers (gross) | |||||
| - residential mortgages | 9.1 | 9.2 | (1%) | 9.4 | (3%) |
| - home equity | 23.3 | 23.5 | (1%) | 23.6 | (1%) |
| - corporate and commercial | 34.5 | 34.0 | 1% | 31.7 | 9% |
| - other consumer | 10.4 | 10.2 | 2% | 10.6 | (2%) |
| 77.3 | 76.9 | 1% | 75.3 | 3% | |
| Customer deposits (excluding repos) | 91.3 | 90.7 | 1% | 91.2 | - |
| Risk elements in lending | |||||
| - retail | 0.9 | 0.9 | - | 0.7 | 29% |
| - commercial | 0.6 | 0.6 | - | 0.7 | (14%) |
| Total risk elements in lending | 1.5 | 1.5 | - | 1.4 | 7% |
| Loan:deposit ratio (excluding repos) | 83% | 83% | - | 81% | 200bp |
| Risk-weighted assets | 88.2 | 88.1 | - | 88.4 | - |
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 Retail & Commercial continued to focus on its "back-to-basics" strategy, with good progress made in developing the division's customer franchise during 2011. The bank has continued to re-energise the franchise through new branding, product development and competitive pricing.
Consumer Finance continues to strengthen its alignment with branch banking, further improving the penetration of products to deposit households, which has increased over nine consecutive quarters. In addition, Consumer continues to improve its penetration of the on-line banking market, while also focusing on growing its auto, business banking, education finance and wealth management businesses.
The Commercial Banking business continues to achieve good momentum through a refreshed sales training programme, benefiting over 900 employees so far, an improved product offering and further improvements in the cross-sell of Global Transaction Services (GTS) products to its customer base.
Furthermore, Commercial Banking took an important step forward in branding, by unifying under the RBS Citizens brand, helping to ensure that customers and prospects understand both the depth of local expertise and the breadth of global capabilities.
Impairment losses were up \$29 million, or 27%, reflecting higher impairments (\$32 million) related to securities. Loan impairments as a percent of loans and advances were essentially unchanged and stable at 0.5%.
Operating profit increased by 64% to \$185 million substantially driven by lower impairments and improved net interest income.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 £m |
2011 £m |
2010 £m |
2011 £m |
2010 £m |
||
| Income statement | ||||||
| Net interest income from banking activities | 174 | 178 | 317 | 545 | 1,031 | |
| Net fees and commissions receivable | 289 | 363 | 411 | 1,042 | 1,070 | |
| Income from trading activities | 602 | 922 | 830 | 3,276 | 4,089 | |
| Other operating income (net of related | ||||||
| funding costs) | 34 | 87 | (4) | 166 | 135 | |
| Non-interest income | 925 | 1,372 | 1,237 | 4,484 | 5,294 | |
| Total income | 1,099 | 1,550 | 1,554 | 5,029 | 6,325 | |
| Direct expenses | ||||||
| - staff | (527) | (605) | (621) | (1,995) | (2,139) | |
| - other | (243) | (229) | (166) | (688) | (550) | |
| Indirect expenses | (249) | (233) | (218) | (709) | (643) | |
| (1,019) | (1,067) | (1,005) | (3,392) | (3,332) | ||
| Operating profit before impairment losses | 80 | 483 | 549 | 1,637 | 2,993 | |
| Impairment recoveries/(losses) | 32 | (37) | 40 | 19 | (156) | |
| Operating profit | 112 | 446 | 589 | 1,656 | 2,837 | |
| Analysis of income by product | ||||||
| Rates - money markets | (19) | (41) | 38 | (134) | 130 | |
| Rates - flow Currencies |
113 227 |
357 234 |
402 218 |
1,203 685 |
1,572 692 |
|
| Credit and mortgage markets | 93 | 437 | 349 | 1,415 | 1,782 | |
| Fixed income & currencies | 414 | 987 | 1,007 | 3,169 | 4,176 | |
| Portfolio management and origination | 571 | 329 | 349 | 1,237 | 1,399 | |
| Equities | 114 | 234 | 198 | 623 | 750 | |
| Total income | 1,099 | 1,550 | 1,554 | 5,029 | 6,325 | |
| Analysis of impairments by sector | ||||||
| Manufacturing and infrastructure | - | (45) | 34 | (77) | 53 | |
| Property and construction | (11) | - | - | (17) | (64) | |
| Banks and financial institutions | 44 | (2) | 3 | 65 | (123) | |
| Other | (1) | 10 | 3 | 48 | (22) | |
| Total impairment recoveries/(losses) | 32 | (37) | 40 | 19 | (156) | |
| Loan impairment charge as % of gross customer loans and advances (excluding reverse repurchase agreements) |
(0.2%) | 0.2% | (0.2%) | - | 0.2% |
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| Performance ratios | |||||
| Return on equity (1) | 2.3% | 8.7% | 11.6% | 10.7% | 18.8% |
| Net interest margin | 0.71% | 0.70% | 1.13% | 0.72% | 1.09% |
| Cost:income ratio | 93% | 69% | 65% | 67% | 53% |
| Compensation ratio (2) | 48% | 39% | 40% | 40% | 34% |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
||||
|---|---|---|---|---|---|---|
| £bn | £bn | Change | £bn | Change | ||
| Capital and balance sheet | ||||||
| Loans and advances to customers | 73.1 | 71.2 | 3% | 75.1 | (3%) | |
| Loans and advances to banks | 34.1 | 38.6 | (12%) | 44.5 | (23%) | |
| Reverse repos | 100.6 | 97.5 | 3% | 94.8 | 6% | |
| Securities | 124.5 | 141.5 | (12%) | 119.2 | 4% | |
| Cash and eligible bills | 33.3 | 32.8 | 2% | 38.8 | (14%) | |
| Other | 33.0 | 37.5 | (12%) | 24.3 | 36% | |
| Total third party assets (excluding derivatives | ||||||
| mark-to-market) | 398.6 | 419.1 | (5%) | 396.7 | - | |
| Net derivative assets (after netting) | 45.6 | 32.2 | 42% | 37.4 | 22% | |
| Customer deposits (excluding repos) | 39.5 | 35.7 | 11% | 38.9 | 2% | |
| Risk elements in lending | 1.6 | 1.5 | 7% | 1.7 | (6%) | |
| Loan:deposit ratio (excluding repos) | 185% | 200% | (1,500bp) | 193% | (800bp) | |
| Risk-weighted assets | 134.3 | 139.0 | (3%) | 146.9 | (9%) |
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.
The ongoing European sovereign debt crisis and heightened concerns about growth expectations for the world economy caused market sentiment to deteriorate significantly during Q3 2011. Markets were volatile and generally pessimistic. Against this backdrop primary volumes were heavily depressed and opportunities in the secondary market were limited.
During this challenging period, it is all the more important that customers are provided with the best possible service and that the division capitalises on its strengths. Therefore, GBM continues to focus on improving relationships with its clients, while managing its activities very tightly and ensuring that sound risk policies are in place.
Return on equity was 2.3% driven by the fall in revenue.
A sharp fall in operating profit reflected a 29% fall in revenue.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Income statement | |||||
| Earned premiums | 1,057 | 1,056 | 1,111 | 3,178 | 3,359 |
| Reinsurers' share | (67) | (60) | (36) | (181) | (108) |
| Net premium income | 990 | 996 | 1,075 | 2,997 | 3,251 |
| Fees and commissions | (83) | (81) | (96) | (239) | (277) |
| Instalment income | 35 | 35 | 39 | 105 | 121 |
| Other income | 19 | 27 | 31 | 81 | 109 |
| Total income | 961 | 977 | 1,049 | 2,944 | 3,204 |
| Net claims | (695) | (704) | (942) | (2,183) | (3,034) |
| Underwriting profit/(loss) | 266 | 273 | 107 | 761 | 170 |
| Staff expenses | (67) | (70) | (72) | (213) | (215) |
| Other expenses | (88) | (79) | (77) | (254) | (248) |
| Total direct expenses | (155) | (149) | (149) | (467) | (463) |
| Indirect expenses | (60) | (54) | (66) | (170) | (193) |
| (215) | (203) | (215) | (637) | (656) | |
| Technical result | 51 | 70 | (108) | 124 | (486) |
| Investment income | 72 | 69 | 75 | 205 | 200 |
| Operating profit/(loss) | 123 | 139 | (33) | 329 | (286) |
| Analysis of income by product | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 439 | 438 | 450 | 1,317 | 1,357 |
| - partnerships | 45 | 57 | 82 | 175 | 252 |
| Personal lines home excluding broker | |||||
| - own brands | 117 | 118 | 120 | 352 | 354 |
| - partnerships | 94 | 90 | 93 | 282 | 288 |
| Personal lines other excluding broker | |||||
| - own brands | 43 | 46 | 47 | 135 | 143 |
| - partnerships | 47 | 48 | 44 | 141 | 153 |
| Other | |||||
| - commercial | 80 | 80 | 78 | 234 | 238 |
| - international | 91 | 80 | 79 | 251 | 234 |
| - other (1) | 5 | 20 | 56 | 57 | 185 |
| Total income | 961 | 977 | 1,049 | 2,944 | 3,204 |
Note:
(1) Other predominantly consists of the discontinued personal lines broker business.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| In-force policies (000s) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 3,832 | 3,931 | 4,276 | 3,832 | 4,276 |
| - partnerships | 388 | 474 | 698 | 388 | 698 |
| Personal lines home excluding broker | |||||
| - own brands | 1,832 | 1,844 | 1,807 | 1,832 | 1,807 |
| - partnerships | 2,504 | 2,524 | 2,533 | 2,504 | 2,533 |
| Personal lines other excluding broker | |||||
| - own brands | 1,886 | 1,932 | 2,027 | 1,886 | 2,027 |
| - partnerships | 7,714 | 7,577 | 6,527 | 7,714 | 6,527 |
| Other | |||||
| - commercial | 410 | 393 | 363 | 410 | 363 |
| - international | 1,357 | 1,302 | 1,060 | 1,357 | 1,060 |
| - other (1) | 44 | 211 | 861 | 44 | 861 |
| Total in-force policies (2) | 19,967 | 20,188 | 20,152 | 19,967 | 20,152 |
| Gross written premium (£m) | |||||
| Personal lines motor excluding broker | |||||
| - own brands | 438 | 408 | 458 | 1,236 | 1,277 |
| - partnerships | 36 | 36 | 70 | 109 | 198 |
| Personal lines home excluding broker | |||||
| - own brands | 133 | 117 | 135 | 362 | 362 |
| - partnerships | 144 | 135 | 145 | 417 | 419 |
| Personal lines other excluding broker | |||||
| - own brands | 48 | 44 | 49 | 134 | 137 |
| - partnerships | 48 | 42 | 43 | 130 | 120 |
| Other | |||||
| - commercial | 101 | 120 | 90 | 333 | 301 |
| - international | 125 | 134 | 79 | 428 | 302 |
| - other (1) | 4 | (2) | 59 | (1) | 194 |
| Total gross written premium | 1,077 | 1,034 | 1,128 | 3,148 | 3,310 |
| Performance ratios | |||||
| Return on regulatory capital (3) | 12.3% | 15.4% | (3.5%) | 11.0% | (10.3%) |
| Return on equity (4) | 11.0% | 12.9% | (3.0%) | 10.0% | (8.6%) |
| Loss ratio (5) | 70% | 71% | 88% | 72% | 93% |
| Commission ratio (6) | 8% | 8% | 9% | 8% | 8% |
| Expense ratio (7) | 20% | 20% | 19% | 21% | 20% |
| Combined operating ratio (8) | 98% | 99% | 116% | 101% | 121% |
| Balance sheet | |||||
| Total insurance reserves - total (£m) (9) | 7,545 | 7,557 | 7,668 |
Notes:
RBS Insurance continues to undertake a significant programme of investment, designed to achieve a substantial improvement in financial and operational performance ahead of its planned divestment from the Group. The results of the first phase of this transformation - to recover profitability - are now apparent after four successive quarters of year-on-year improvement. The clearest evidence of the recovery is in September YTD 2011 underwriting profit of £761 million, an increase of £591 million versus September YTD 2010, primarily driven by a substantial improvement in net claims. The loss ratio for the first 9 months of 2011 was 72% compared with 93% for the equivalent period in 2010.
RBS Insurance is also making good progress in building its competitive advantage through its investment programme and business transformation, the largest element of which is the transformation of claims operations. Launched this year, the first phase of a new Claims Centre system now processes 100% of new Churchill home claims and 70% of all new Churchill, Direct Line, and Privilege motor claims. This system is set to achieve a substantial uplift in operational and financial performance. The rollout of a rating engine, which is largely complete on motor, and new pricing tools will complement customer propositions in order to generate greater value from RBS Insurance's multi-brand, multi-distribution strategy.
Implementation of the plan to rationalise the number of sites occupied, announced in 2010, continues, with 10 site exits to date. Progress is also being made to simplify the legal entity structure, to improve the efficient use of capital and to facilitate compliance with the Solvency II regulations.
Investment markets remain challenging as yields on quality fixed income instruments remain low. RBS Insurance's investment portfolio is composed of high quality gilts and bonds and cash. Of the total portfolio of £9.7 billion, 1.5% is directly exposed to issuers in Spain, Italy and Ireland. There is no direct exposure to either Greece or Portugal.
In September 2011 it was announced by The Ministry of Justice that referral fees will be banned. From a customer perspective, RBS Insurance is supportive of this proposal provided that there is a contemporaneous reduction in legal fees.
Overall, RBS Insurance is making good progress, has a positive momentum and is well positioned with powerful brands, coupled with a transformed claims function. In personal lines the business will continue to look for partners that fit with its strategy of providing a full end-to-end service, while complementing its own business and distribution channels. Elsewhere, RBS Insurance continues to develop its commercial and international divisions.
The loss ratio reduced by 1% to 70%, the expense ratio remained at 20%, and the combined ratio improved by 1% to 98%.
Operating profit was £123 million compared with a loss of £33 million for Q3 2010. The loss in Q3 2010 included reserve strengthening for bodily injury claims. The improved results were also attributable to the reduction in the risk of the book, selected business line exits, and pricing action taken. These factors led to a £247 million improvement in claims year-on-year.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Central items not allocated | 67 | 47 | 76 | 71 | 462 |
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 £67 million, an increase of £20 million on the previous quarter. This movement was driven by increased profits on bond disposals in Q3 2011 partially offset by non-repeat of the Q2 2011 gain on the sale of the investment in VISA.
• Central items not allocated represented a credit of £67 million, a decline of £9 million on Q3 2010 due to slightly lower bond disposal gains in Q3 2011.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
||
| Income statement Net interest income |
164 | 285 | 438 | 752 | 1,540 | |
| Net fees and commissions (Loss)/income from trading activities |
(85) (246) |
47 230 |
43 219 |
9 (314) |
305 121 |
|
| Insurance net premium income | 44 | 95 | 180 | 277 | 521 | |
| Other operating income - rental income - other (1) |
182 (13) |
206 115 |
166 (176) |
580 206 |
534 (378) |
|
| Non-interest income | (118) | 693 | 432 | 758 | 1,103 | |
| Total income | 46 | 978 | 870 | 1,510 | 2,643 | |
| Direct expenses - staff - operating lease depreciation - other Indirect expenses |
(93) (82) (62) (86) (323) |
(109) (87) (68) (71) (335) |
(172) (126) (133) (130) (561) |
(293) (256) (199) (233) (981) |
(626) (344) (432) (373) (1,775) |
|
| Operating (loss)/profit before other operating charges and impairment losses Insurance net claims Impairment losses |
(277) (38) (682) |
643 (90) (1,411) |
309 (144) (1,171) |
529 (256) (3,168) |
868 (492) (4,265) |
|
| Operating loss | (997) | (858) | (1,006) | (2,895) | (3,889) |
Note:
(1) Includes losses on disposals (quarter ended 30 September 2011 - £37 million; quarter ended 30 June 2011 - £20 million; quarter ended 30 September 2010 - £253 million; nine months ended 30 September 2011 - £91 million; nine months ended 30 September 2010 - £257 million).
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Analysis of income/(loss)by business | |||||
| Portfolios & banking | 214 | 830 | 280 | 1,642 | 1,516 |
| International businesses | 101 | 137 | 182 | 327 | 694 |
| Markets | (269) | 11 | 408 | (459) | 433 |
| Total income | 46 | 978 | 870 | 1,510 | 2,643 |
| (Loss)/income from trading activities | |||||
| Monoline exposures | (230) | (67) | 191 | (427) | 52 |
| Credit derivative product companies | (5) | (21) | (15) | (66) | (101) |
| Asset-backed products (1) | (51) | 36 | 160 | 51 | 202 |
| Other credit exotics | (7) | 8 | (2) | (167) | 56 |
| Equities | (11) | (2) | (15) | (12) | (28) |
| Banking book hedges | 73 | (9) | (123) | 35 | (12) |
| Other (2) | (15) | 285 | 23 | 272 | (48) |
| (246) | 230 | 219 | (314) | 121 | |
| Impairment losses | |||||
| Portfolios & banking | 656 | 1,405 | 1,159 | 3,119 | 4,070 |
| International businesses | 17 | 15 | 25 | 52 | 141 |
| Markets | 9 | (9) | (13) | (3) | 54 |
| Total impairment losses | 682 | 1,411 | 1,171 | 3,168 | 4,265 |
| Loan impairment charge as % of gross customer loans and advances |
|||||
| (excluding reverse repurchase agreements) (3) |
|||||
| Portfolios & banking | 2.8% | 6.1% | 4.0% | 4.7% | 4.7% |
| International businesses | 2.7% | 1.9% | 1.5% | 2.8% | 2.9% |
| Markets | (0.4%) | (1.2%) | 0.2% | (1.1%) | 13.0% |
| Total | 2.8% | 6.0% | 3.9% | 4.6% | 4.7% |
Notes:
(1) Asset-backed products include super senior asset-backed structures and other asset-backed products.
(2) Q3 2011 includes profits in RBS Sempra Commodities JV of £1 million (quarter ended 30 September 2010 - £78 million). Q2 2011 includes securities gains of £362 million not repeated in Q3 2011.
(3) Includes disposal groups.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
|
| Performance ratios | |||||
| Net interest margin | 0.43% | 0.87% | 1.04% | 0.74% | 1.18% |
| Cost:income ratio | nm | 34% | 64% | 65% | 67% |
| Adjusted cost:income ratio | nm | 38% | 77% | 78% | 83% |
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|||
| £bn | £bn | Change | £bn | Change | |
| Capital and balance sheet (1) | |||||
| Total third party assets (excluding | |||||
| derivatives) (2) | 105.1 | 112.6 | (7%) | 137.9 | (24%) |
| Total third party assets (including | |||||
| derivatives) (2) | 117.7 | 134.7 | (13%) | 153.9 | (24%) |
| Loans and advances to customers (gross) | 88.9 | 94.9 | (6%) | 108.4 | (18%) |
| Customer deposits | 4.3 | 5.0 | (14%) | 6.7 | (36%) |
| Risk elements in lending | 24.6 | 24.9 | (1%) | 23.4 | 5% |
| Risk-weighted assets (2) | 117.9 | 124.7 | (5%) | 153.7 | (23%) |
nm = not meaningful
(1) Includes disposal groups.
(2) Includes RBS Sempra Commodities JV (30 September 2011 Third party assets, excluding derivatives (TPAs) £0.3 billion, RWAs £1.7 billion; 30 June 2011 TPAs £1.1 billion, RWAs £1.9 billion; 31 December 2010 TPAs £6.7 billion, RWAs £4.3 billion).
| 30 September 2011 £bn |
30 June 2011 £bn |
31 December 2010 £bn |
|
|---|---|---|---|
| Gross customer loans and advances | |||
| Portfolios & banking | 86.6 | 92.1 | 104.9 |
| International businesses | 2.2 | 2.7 | 3.5 |
| Markets | 0.1 | 0.1 | - |
| 88.9 | 94.9 | 108.4 | |
| Risk-weighted assets | |||
| Portfolios & banking | 66.6 | 72.6 | 83.5 |
| International businesses | 4.5 | 5.2 | 5.6 |
| Markets | 46.8 | 46.9 | 64.6 |
| 117.9 | 124.7 | 153.7 |
| 30 June 2011 £bn |
Run-off £bn |
Disposals/ restructuring £bn |
Drawings/ £bn |
roll overs Impairments £bn |
FX £bn |
30 September 2011 £bn |
|
|---|---|---|---|---|---|---|---|
| Commercial real estate | 36.6 | 0.3 | (0.6) | 0.2 | (0.5) | (0.7) | 35.3 |
| Corporate | 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) Markets - RBS Sempra |
111.5 | (4.0) | (2.6) | 1.3 | (0.6) | (0.8) | 104.8 |
| Commodities JV | 1.1 | - | (0.8) | - | - | - | 0.3 |
| Total (1) | 112.6 | (4.0) | (3.4) | 1.3 | (0.6) | (0.8) | 105.1 |
| 31 March | Disposals/ | Drawings/ | 30 June | ||||
|---|---|---|---|---|---|---|---|
| 2011 | Run-off | restructuring | roll overs Impairments | FX | 2011 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | £bn | |
| Commercial real estate | 38.7 | (1.1) | (0.3) | 0.2 | (1.3) | 0.4 | 36.6 |
| Corporate | 56.0 | (2.6) | (4.0) | 0.6 | - | 0.4 | 50.4 |
| SME | 3.1 | (0.4) | - | - | - | - | 2.7 |
| Retail | 8.3 | (0.2) | - | - | (0.1) | - | 8.0 |
| Other | 2.5 | (0.2) | - | - | - | - | 2.3 |
| Markets | 12.3 | (0.7) | (0.4) | 0.3 | - | - | 11.5 |
| Total (excluding derivatives) | 120.9 | (5.2) | (4.7) | 1.1 | (1.4) | 0.8 | 111.5 |
| Markets - RBS Sempra | |||||||
| Commodities JV | 3.9 | (0.5) | (2.2) | - | - | (0.1) | 1.1 |
| Total (1) | 124.8 | (5.7) | (6.9) | 1.1 | (1.4) | 0.7 | 112.6 |
| 30 June | Disposals/ | Drawings/ | 30 September | ||||
|---|---|---|---|---|---|---|---|
| 2010 | Run-off | restructuring | roll overs Impairments | FX | 2010 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | £bn | |
| Commercial real estate | 44.1 | 2.9 | (0.3) | (0.2) | (1.2) | 1.2 | 46.5 |
| Corporate | 70.4 | (2.8) | (2.4) | 0.6 | 0.1 | 0.2 | 66.1 |
| SME | 4.7 | (0.8) | - | - | - | - | 3.9 |
| Retail | 16.8 | (6.2) | - | - | (0.1) | (0.2) | 10.3 |
| Other | 3.0 | (0.2) | (0.3) | 0.1 | - | - | 2.6 |
| Markets | 22.3 | (1.4) | (4.4) | 0.4 | - | (0.4) | 16.5 |
| Total (excluding derivatives) | 161.3 | (8.5) | (7.4) | 0.9 | (1.2) | 0.8 | 145.9 |
| Markets - RBS Sempra | |||||||
| Commodities JV | 12.7 | (0.5) | (3.3) | - | - | (0.6) | 8.3 |
| Total (1) | 174.0 | (9.0) | (10.7) | 0.9 | (1.2) | 0.2 | 154.2 |
Notes:
(1) £1 billion of disposals have been signed as at 30 September 2011 but are pending completion (30 June 2011 - £2 billion; 30 September 2010 - £9 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 the quarter.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
||
| Impairment losses by donating division and sector |
||||||
| UK Retail | ||||||
| Mortgages Personal |
1 1 |
1 3 |
1 4 |
(1) 7 |
4 6 |
|
| Total UK Retail | 2 | 4 | 5 | 6 | 10 | |
| UK Corporate | ||||||
| Manufacturing and infrastructure | 3 | 47 | 5 | 50 | 21 | |
| Property and construction | 92 | 36 | 130 | 141 | 334 | |
| Transport | - | 26 | 26 | 46 | 23 | |
| Banking and financial institutions | - | 1 | (8) | 4 | 18 | |
| Lombard Invoice finance |
12 - |
25 - |
25 (3) |
55 - |
79 (3) |
|
| Other | 18 | 46 | (2) | 75 | 119 | |
| Total UK Corporate | 125 | 181 | 173 | 371 | 591 | |
| Ulster Bank | ||||||
| Mortgages | - | - | (1) | - | 42 | |
| Commercial real estate | ||||||
| - investment | 74 | 161 | 180 | 458 | 424 | |
| - development | 162 | 810 | 415 | 1,475 | 1,163 | |
| Other corporate | 45 | 6 | 82 | 158 | 270 | |
| Other EMEA | 2 | 5 | 13 | 13 | 46 | |
| Total Ulster Bank | 283 | 982 | 689 | 2,104 | 1,945 | |
| US Retail & Commercial | ||||||
| Auto and consumer | 14 | 12 | (2) | 51 | 45 | |
| Cards | - | (3) | 2 | (10) | 20 | |
| SBO/home equity | 57 | 58 | 57 | 168 | 226 | |
| Residential mortgages | 4 | 6 | 3 | 14 | 5 | |
| Commercial real estate | (4) | 11 | 49 | 26 | 154 | |
| Commercial and other | (1) | (6) | 7 | (10) | 15 | |
| Total US Retail & Commercial | 70 | 78 | 116 | 239 | 465 | |
| Global Banking & Markets | ||||||
| Manufacturing and infrastructure | 23 | (6) | (53) | 15 | (305) | |
| Property and construction | 189 | 217 | 147 | 511 | 1,120 | |
| Transport | (6) | (1) | 8 | (13) | 9 | |
| Telecoms, media and technology | 27 | 34 | 32 | 50 | 32 | |
| Banking and financial institutions Other |
(29) (1) |
(39) (36) |
5 52 |
(67) (45) |
177 177 |
|
| Total Global Banking & Markets | 203 | 169 | 191 | 451 | 1,210 | |
| Other | ||||||
| Wealth | 1 | (1) | 7 | 1 | 51 | |
| Global Transaction Services Central items |
- (2) |
(3) 1 |
(10) - |
(3) (1) |
(7) - |
|
| Total Other | (1) | (3) | (3) | (3) | 44 | |
| Total impairment losses | 682 | 1,411 | 1,171 | 3,168 | 4,265 |
| 30 September 2011 £bn |
30 June 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 | 1.5 | 1.6 |
| Personal | 0.3 | 0.3 | 0.4 |
| Total UK Retail | 1.7 | 1.8 | 2.0 |
| UK Corporate | |||
| Manufacturing and infrastructure | 0.1 | 0.3 | 0.3 |
| Property and construction | 6.5 | 7.2 | 11.4 |
| Transport | 4.8 | 5.0 | 5.4 |
| Banking and financial institutions | 0.5 | 0.9 | 0.8 |
| Lombard | 1.2 | 1.4 | 1.7 |
| Invoice finance Other |
- 7.5 |
- 6.8 |
- 7.4 |
| Total UK Corporate | 20.6 | 21.6 | 27.0 |
| Ulster Bank | |||
| Commercial real estate | |||
| - investment | 3.9 | 4.1 | 4.0 |
| - development | 8.7 | 9.0 | 8.4 |
| Other corporate | 1.7 | 1.8 | 2.2 |
| Other EMEA | 0.4 | 0.4 | 0.4 |
| Total Ulster Bank | 14.7 | 15.3 | 15.0 |
| US Retail & Commercial | |||
| Auto and consumer | 1.9 | 2.2 | 2.6 |
| Cards | 0.1 | 0.1 | 0.1 |
| SBO/home equity | 2.6 | 2.7 | 3.2 |
| Residential mortgages | 0.6 | 0.7 | 0.7 |
| Commercial real estate | 1.1 | 1.2 | 1.5 |
| Commercial and other | 0.5 | 0.4 | 0.5 |
| Total US Retail & Commercial | 6.8 | 7.3 | 8.6 |
| Global Banking & Markets | |||
| Manufacturing and infrastructure | 7.0 | 8.5 | 8.7 |
| Property and construction | 17.8 | 18.6 | 19.6 |
| Transport | 3.9 | 4.2 | 5.5 |
| Telecoms, media and technology | 0.9 | 0.8 | 0.9 |
| Banking and financial institutions Other |
8.3 6.7 |
8.8 7.5 |
12.0 9.0 |
| Total Global Banking & Markets | 44.6 | 48.4 | 55.7 |
| Other | |||
| Wealth | 0.3 | 0.3 | 0.4 |
| Global Transaction Services RBS Insurance |
0.3 - |
0.3 - |
0.3 0.2 |
| Central items | (0.3) | (0.3) | (1.0) |
| Total Other | 0.3 | 0.3 | (0.1) |
| Gross loans and advances to customers (excluding reverse | |||
| repurchase agreements) | 88.7 | 94.7 | 108.2 |
Non-Core continues to deliver in a challenging and uncertain environment with further reductions in Q3 2011 in third party assets, risk weighted assets, impairment charges and headcount.
The division remains on track to reduce third party assets to £96 billion by the end of 2011 and continues to focus upon reducing required levels of capital and funding.
Income in Q3 2011 was significantly lower than Q2 2011 reflecting equity-related gains in Q2 not repeated in Q3, lower underlying revenue in line with balance sheet reduction, a one-off charge in relation to de-risking the portfolio and fair value write-downs reflecting market conditions.
Despite ongoing difficulties in the commercial real estate sector and Ireland in particular, Q3 2011 impairment losses decreased by £729 million compared with Q2 2011.
Non-Core headcount continues to decline in line with disposal activity. Headcount reductions in Q3 2011 predominantly relate to Asia, Non-Core Insurance and RBS Sempra Commodities JV.
Third party assets declined by £49 billion (32%) principally reflecting disposals (£29 billion) and run-off (£21 billion).
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Interest receivable | 5,371 | 5,404 | 5,584 | 16,176 | 17,164 | |
| Interest payable | (2,294) | (2,177) | (2,173) | (6,571) | (6,535) | |
| Net interest income | 3,077 | 3,227 | 3,411 | 9,605 | 10,629 | |
| Fees and commissions receivable | 1,452 | 1,700 | 2,037 | 4,794 | 6,141 | |
| Fees and commissions payable | (304) | (323) | (611) | (887) | (1,762) | |
| Income from trading activities | 957 | 1,147 | 277 | 2,939 | 4,153 | |
| Gain on redemption of own debt | 1 | 255 | - | 256 | 553 | |
| Other operating income (excluding insurance | ||||||
| premium income) | 2,384 | 1,142 | (317) | 3,917 | 476 | |
| Insurance net premium income | 1,036 | 1,090 | 1,289 | 3,275 | 3,856 | |
| Non-interest income | 5,526 | 5,011 | 2,675 | 14,294 | 13,417 | |
| Total income | 8,603 | 8,238 | 6,086 | 23,899 | 24,046 | |
| Staff costs | (2,076) | (2,210) | (2,423) | (6,685) | (7,477) | |
| Premises and equipment | (604) | (602) | (611) | (1,777) | (1,693) | |
| Other administrative expenses | (962) | (1,752) | (914) | (3,635) | (2,947) | |
| Depreciation and amortisation | (485) | (453) | (603) | (1,362) | (1,604) | |
| Operating expenses | (4,127) | (5,017) | (4,551) | (13,459) | (13,721) | |
| Profit before other operating charges | ||||||
| and impairment losses | 4,476 | 3,221 | 1,535 | 10,440 | 10,325 | |
| Insurance net claims | (734) | (793) | (1,142) | (2,439) | (3,601) | |
| Impairment losses | (1,738) | (3,106) | (1,953) | (6,791) | (7,115) | |
| Operating profit/(loss) before tax | 2,004 | (678) | (1,560) | 1,210 | (391) | |
| Tax (charge)/credit | (791) | (222) | 295 | (1,436) | (637) | |
| Profit/(loss) from continuing operations | 1,213 | (900) | (1,265) | (226) | (1,028) | |
| Profit/(loss) from discontinued operations, | ||||||
| net of tax | 6 | 21 | 18 | 37 | (688) | |
| Profit/(loss) for the period | 1,219 | (879) | (1,247) | (189) | (1,716) | |
| Non-controlling interests | 7 | (18) | 101 | (10) | 703 | |
| Preference share and other dividends | - | - | - | - | (124) | |
| Profit/(loss) attributable to ordinary and | ||||||
| B shareholders | 1,226 | (897) | (1,146) | (199) | (1,137) | |
| Basic earnings/(loss) per ordinary and | ||||||
| B share from continuing operations | 1.1p | (0.8p) | (1.1p) | (0.2p) | (0.5p) | |
| Diluted earnings/(loss) per ordinary and | ||||||
| B share from continuing operations | 1.1p | (0.8p) | (1.1p) | (0.2p) | (0.5p) | |
| Basic (loss)/earnings per ordinary and | ||||||
| B share from discontinued operations | - | - | - | - | - | |
| Diluted (loss)/earnings per ordinary and | ||||||
| B share from discontinued operations | - | - | - | - | - |
In the income statement above, one-off and other items as shown on page 16 are included in the appropriate caption. A reconciliation between the income statement above and the managed view income statement on page 10 is given in Appendix 1 to this announcement.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
||
| Profit/(loss) for the period | 1,219 | (879) | (1,247) | (189) | (1,716) | |
| Other comprehensive income/(loss) | ||||||
| Available-for-sale financial assets (1) | 996 | 1,406 | 235 | 2,365 | 743 | |
| Cash flow hedges | 939 | 588 | 553 | 1,300 | 1,807 | |
| Currency translation | (22) | 59 | (647) | (323) | 47 | |
| Other comprehensive income before tax | 1,913 | 2,053 | 141 | 3,342 | 2,597 | |
| Tax charge | (480) | (524) | (256) | (972) | (702) | |
| Other comprehensive income/(loss) after tax |
1,433 | 1,529 | (115) | 2,370 | 1,895 | |
| Total comprehensive income/(loss) for the period |
2,652 | 650 | (1,362) | 2,181 | 179 | |
| Total comprehensive income/(loss) recognised in the statement of changes in equity is attributable as follows: |
||||||
| Non-controlling interests | (6) | 3 | (117) | (12) | (249) | |
| Preference shareholders | - | - | - | - | 105 | |
| Paid-in equity holders | - | - | - | - | 19 | |
| Ordinary and B shareholders | 2,658 | 647 | (1,245) | 2,193 | 304 | |
| 2,652 | 650 | (1,362) | 2,181 | 179 |
Note:
(1) Analysis provided on page 94.
• The Q3 2011 movement in available-for-sale financial assets reflects £1,207 million unrealised gains on securities, primarily in relation to high quality sovereign bonds, partially offset by realised gains of £214 million from routine portfolio management, mainly in Group Treasury.
| 30 September 2011 £m |
30 June 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Assets Cash and balances at central banks |
78,445 | 64,351 | 57,014 |
| Net loans and advances to banks | 52,602 | 53,133 | 57,911 |
| Reverse repurchase agreements and stock borrowing | 48,127 | 41,973 | 42,607 |
| Loans and advances to banks | 100,729 | 95,106 | 100,518 |
| Net loans and advances to customers | 485,573 | 489,572 | 502,748 |
| Reverse repurchase agreements and stock borrowing | 54,132 | 56,162 | 52,512 |
| Loans and advances to customers | 539,705 | 545,734 | 555,260 |
| Debt securities | 229,657 | 243,645 | 217,480 |
| Equity shares | 14,888 | 24,951 | 22,198 |
| Settlement balances | 21,526 | 24,566 | 11,605 |
| Derivatives | 572,344 | 394,872 | 427,077 |
| Intangible assets | 14,744 | 14,592 | 14,448 |
| Property, plant and equipment | 17,060 | 17,357 | 16,543 |
| Deferred tax | 4,988 | 6,245 | 6,373 |
| Prepayments, accrued income and other assets | 10,598 | 11,143 | 12,576 |
| Assets of disposal groups | 3,044 | 3,407 | 12,484 |
| Total assets | 1,607,728 | 1,445,969 | 1,453,576 |
| Liabilities | |||
| Bank deposits | 78,370 | 71,573 | 66,051 |
| Repurchase agreements and stock lending | 36,227 | 35,381 | 32,739 |
| Deposits by banks | 114,597 | 106,954 | 98,790 |
| Customer deposits | 433,660 | 428,703 | 428,599 |
| Repurchase agreements and stock lending | 95,691 | 88,822 | 82,094 |
| Customer accounts | 529,351 | 517,525 | 510,693 |
| Debt securities in issue | 194,511 | 213,797 | 218,372 |
| Settlement balances | 17,983 | 22,905 | 10,991 |
| Short positions Derivatives |
48,495 561,790 |
56,106 387,809 |
43,118 423,967 |
| Accruals, deferred income and other liabilities | 22,938 | 24,065 | 23,089 |
| Retirement benefit liabilities | 1,855 | 2,239 | 2,288 |
| Deferred tax | 1,913 | 2,092 | 2,142 |
| Insurance liabilities | 6,628 | 6,687 | 6,794 |
| Subordinated liabilities | 26,275 | 26,311 | 27,053 |
| Liabilities of disposal groups | 2,516 | 3,237 | 9,428 |
| Total liabilities | 1,528,852 | 1,369,727 | 1,376,725 |
| Equity | |||
| Non-controlling interests | 1,433 | 1,498 | 1,719 |
| Owners' equity* | |||
| Called up share capital | 15,318 | 15,317 | 15,125 |
| Reserves | 62,125 | 59,427 | 60,007 |
| Total equity | 78,876 | 76,242 | 76,851 |
| Total liabilities and equity | 1,607,728 | 1,445,969 | 1,453,576 |
| * Owners' equity attributable to: | |||
| Ordinary and B shareholders | 72,699 | 70,000 | 70,388 |
| Other equity owners | 4,744 | 4,744 | 4,744 |
| 77,443 | 74,744 | 75,132 |
Total assets of £1,607.7 billion at 30 September 2011 were up £161.8 billion, 11%, compared with 30 June 2011. This was principally driven by an increase in the mark-to-market value of derivatives within Global Banking & Markets, together with higher cash and balances at central banks in stressed global financial markets. This increase was partly offset by the continuing planned disposal of Non-Core assets.
Cash and balances at central banks increased £14.1 billion, 22%, to £78.4 billion principally due to the placing of short-term cash surpluses.
Loans and advances to banks increased £5.6 billion, 6%, to £100.7 billion. Within this, reverse repurchase agreements and stock borrowing ('reverse repos') were up £6.2 billion, 15%, to £48.1 billion with bank placings declining £0.6 billion, 1%, to £52.6 billion.
Loans and advances to customers declined £6.0 billion, 1%, to £539.7 billion. Within this, reverse repurchase agreements were down £2.0 billion, 4%, to £54.1 billion. Customer lending decreased by £4.0 billion, 1%, to £485.6 billion, or £4.0 billion to £506.2 billion before impairments. This reflected planned reductions in Non-Core of £5.4 billion, along with declines in UK Corporate, £0.8 billion, UK Retail, £0.3 billion and Ulster Bank, £0.3 billion, together with the effect of exchange rate and other movements, £0.4 billion. These were partially offset by growth in Global Banking & Markets, £2.2 billion, Global Transaction Services, £0.5 billion, Wealth, £0.3 billion and US Retail & Commercial, £0.2 billion.
Debt securities were down £14.0 billion, 6%, to £229.7 billion, driven mainly by a reduction in holdings of government and financial institution bonds within Global Banking & Markets and Group Treasury.
Equity shares decreased £10.1 billion, 40%, to £14.9 billion reflecting primarily the closure of positions to reduce the Groups' level of unsecured funding requirements to mitigate the potential impact of unfavourable market conditions.
Settlement balances declined £3.0 billion, 12%, to £21.5 billion as a result of decreased customer activity.
Movements in the value of derivative assets up, £177.5 billion, 45%, to £572.3 billion, and liabilities, up £174.0 billion, 45% to £561.8 billion, primarily reflect increases in interest rate contracts as a result of a significant downwards 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. Further contributing to the increase was the net effect of currency movements, with sterling weakening against the US dollar but strengthening against the euro.
Deposits by banks increased £7.6 billion, 7%, to £114.6 billion, with higher repurchase agreements and stock lending ('repos'), up £0.8 billion, 2%, to £36.2 billion and inter-bank deposits up £6.8 billion, 9%, to £78.4 billion.
Customer accounts were up £11.8 billion, 2%, to £529.4 billion. Within this, repos increased £6.9 billion, 8%, to £95.7 billion. Excluding repos, customer deposits were up £4.9 billion, 1%, at £433.7 billion, reflecting growth in Global Banking & Markets, £4.1 billion, UK Retail, £2.7 billion, US Retail & Commercial, £0.4 billion and Wealth, £0.1 billion, together with exchange and other movements, £0.6 billion. This was partly offset by decreases in Global Transaction Services, £1.5 billion, UK Corporate, £0.7 billion, Non-Core, £0.7 billion and Ulster Bank, £0.1 billion.
Debt securities in issue declined £19.3 billion, 9%, to £194.5 billion as a result of reduced issuance by Global Banking & Markets and Group Treasury.
Settlement balances declined £4.9 billion, 21%, to £18.0 billion and short positions were down £7.6 billion, 14%, to £48.5 billion due to decreased customer activity.
Owner's equity increased by £2.7 billion, 4%, to £77.4 billion, driven by the attributable profit for the period of £1.2 billion and increases in available-for-sale reserves, £0.7 billion and cash flow hedging reserves, £0.7 billion.
| Quarter ended | Nine months ended | |||
|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2011 |
30 September 2010 |
|
| % | % | % | % | |
| Average yields, spreads and margins of the banking business |
||||
| Gross yield on interest-earning assets of banking business | 3.21 | 3.28 | 3.27 | 3.27 |
| Cost of interest-bearing liabilities of banking business | (1.69) | (1.60) | (1.62) | (1.45) |
| Interest spread of banking business | 1.52 | 1.68 | 1.65 | 1.82 |
| Benefit from interest-free funds | 0.32 | 0.29 | 0.29 | 0.18 |
| Net interest margin of banking business | 1.84 | 1.97 | 1.94 | 2.00 |
| 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 | 0.82 | 0.83 | 0.69 |
| - Eurodollar | 0.30 | 0.26 | 0.29 | 0.36 |
| - Euro | 1.51 | 1.36 | 1.30 | 0.68 |
| Quarter ended 30 September 2011 |
Quarter ended 30 June 2011 |
|||||||
|---|---|---|---|---|---|---|---|---|
| Average balance £m |
Interest £m |
Rate % |
Average balance £m |
Interest £m |
Rate % |
|||
| Assets | ||||||||
| Loans and advances to banks Loans and advances to |
72,461 | 154 | 0.84 | 67,191 | 164 | 0.98 | ||
| customers | 469,910 | 4,506 | 3.80 | 470,593 | 4,545 | 3.87 | ||
| Debt securities | 121,585 | 713 | 2.33 | 123,888 | 705 | 2.28 | ||
| Interest-earning assets - | ||||||||
| banking business | 663,956 | 5,373 | 3.21 | 661,672 | 5,414 | 3.28 | ||
| Trading business | 281,267 | 284,378 | ||||||
| Non-interest earning assets | 653,592 | 557,649 | ||||||
| Total assets | 1,598,815 | 1,503,699 | ||||||
| Memo: Funded assets | 1,087,227 | 1,089,400 | ||||||
| Liabilities | ||||||||
| Deposits by banks | 64,198 | 245 | 1.51 | 65,119 | 245 | 1.51 | ||
| Customer accounts | 338,469 | 921 | 1.08 | 336,317 | 857 | 1.02 | ||
| Debt securities in issue | 161,703 | 944 | 2.32 | 171,709 | 897 | 2.10 | ||
| Subordinated liabilities | 23,000 | 134 | 2.31 | 23,320 | 148 | 2.55 | ||
| Internal funding of trading | ||||||||
| business | (48,161) | 55 | (0.45) | (51,609) | 22 | (0.17) | ||
| Interest-bearing liabilities - | ||||||||
| banking business | 539,209 | 2,299 | 1.69 | 544,856 | 2,169 | 1.60 | ||
| Trading business Non-interest-bearing liabilities |
314,626 | 314,099 | ||||||
| - demand deposits | 66,496 | 64,811 | ||||||
| - other liabilities | 602,235 | 505,585 | ||||||
| Owners' equity | 76,249 | 74,348 | ||||||
| Total liabilities and | ||||||||
| owners' equity | 1,598,815 | 1,503,699 |
Notes:
(1) Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
(2) Interest receivable has been increased by nil (Q2 2011 - £6 million) and interest payable has been decreased by £1 million (Q2 2011 - nil) to exclude the RFS Holdings minority interest. Related interest-earning assets and interestbearing liabilities have also been adjusted.
(3) Interest receivable has been increased by £2 million (Q2 2011 - £2 million) and interest payable has been increased by £47 million (Q2 2011 - £34 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 receivable has been increased by nil (Q2 2011 - £2 million) and interest payable has been decreased by £41 million (Q2 2011 - £42 million) in respect of non-recurring adjustments.
| Nine months ended 30 September 2011 |
Nine months ended 30 September 2010 |
||||||
|---|---|---|---|---|---|---|---|
| Average balance £m |
Interest £m |
Rate % |
Average balance £m |
Interest £m |
Rate % |
||
| Assets | |||||||
| Loans and advances to banks Loans and advances to |
67,916 | 490 | 0.96 | 49,686 | 425 | 1.14 | |
| customers | 471,551 | 13,644 | 3.87 | 517,209 | 14,086 | 3.64 | |
| Debt securities | 121,949 | 2,056 | 2.25 | 132,589 | 2,604 | 2.63 | |
| Interest-earning assets - | |||||||
| banking business | 661,416 | 16,190 | 3.27 | 699,484 | 17,115 | 3.27 | |
| Trading business | 281,601 | 276,338 | |||||
| Non-interest earning assets | 573,261 | 725,760 | |||||
| Total assets | 1,516,278 | 1,701,582 | |||||
| Memo: Funded assets | 1,081,562 | 1,197,599 | |||||
| Liabilities | |||||||
| Deposits by banks | 65,323 | 749 | 1.53 | 84,955 | 1,043 | 1.64 | |
| Customer accounts | 334,890 | 2,609 | 1.04 | 344,223 | 2,795 | 1.09 | |
| Debt securities in issue | 169,622 | 2,687 | 2.12 | 198,051 | 2,426 | 1.64 | |
| Subordinated liabilities | 23,795 | 452 | 2.54 | 29,860 | 529 | 2.37 | |
| Internal funding of trading | |||||||
| business | (50,581) | 85 | (0.22) | (43,349) | (151) | 0.47 | |
| Interest-bearing liabilities - | |||||||
| banking business | 543,049 | 6,582 | 1.62 | 613,740 | 6,642 | 1.45 | |
| Trading business Non-interest-bearing liabilities |
310,184 | 295,847 | |||||
| - demand deposits | 65,011 | 48,119 | |||||
| - other liabilities | 523,038 | 666,459 | |||||
| Owners' equity | 74,996 | 77,417 | |||||
| Total liabilities and | |||||||
| owners' equity | 1,516,278 | 1,701,582 |
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 £4 million for the nine months ended 30 September 2010.
(3) Interest receivable has been increased by £5 million (nine months ended 30 September 2010 - £9 million decrease) and interest payable has been decreased by £1 million (nine months ended 30 September 2010 - £2 million) to exclude the RFS Holdings minority interest. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
(4) Interest receivable has been increased by £7 million for nine months ended 30 September 2011 (nine months ended 30 September 2010 - £46 million) and interest payable has been increased by £110 million (nine months ended 30 September 2010 - £15 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.
(5) Interest receivable has been increased by £2 million (nine months ended 30 September 2010 - £90 million decrease) and interest payable has been decreased by £98 million (nine months ended 30 September 2010 - £94 million increase) in respect of non-recurring adjustments.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Called-up share capital | ||||||
| At beginning of period | 15,317 | 15,156 | 15,029 | 15,125 | 14,630 | |
| Ordinary shares issued | 1 | 161 | 1 | 193 | 402 | |
| Preference shares redeemed | - | - | - | - | (2) | |
| At end of period | 15,318 | 15,317 | 15,030 | 15,318 | 15,030 | |
| Paid-in equity | ||||||
| At beginning of period | 431 | 431 | 431 | 431 | 565 | |
| Securities redeemed | - | - | - | - | (132) | |
| Transfer to retained earnings | - | - | - | - | (2) | |
| At end of period | 431 | 431 | 431 | 431 | 431 | |
| Share premium account | ||||||
| At beginning of period | 23,923 | 23,922 | 23,858 | 23,922 | 23,523 | |
| Ordinary shares issued | - | 1 | - | 1 | 217 | |
| Redemption of preference shares classified | ||||||
| as debt | - | - | - | - | 118 | |
| At end of period | 23,923 | 23,923 | 23,858 | 23,923 | 23,858 | |
| Merger reserve | ||||||
| At beginning of period | 13,222 | 13,272 | 13,272 | 13,272 | 25,522 | |
| Transfer to retained earnings | - | (50) | - | (50) | (12,250) | |
| At end of period | 13,222 | 13,222 | 13,272 | 13,222 | 13,272 | |
| Available-for-sale reserve | ||||||
| At beginning of period | (1,026) | (2,063) | (1,459) | (2,037) | (1,755) | |
| Unrealised gains | 1,207 | 781 | 680 | 2,150 | 1,327 | |
| Realised (gains)/losses (1) | (214) | 626 | (408) | 215 | (535) | |
| Tax | (259) | (370) | (55) | (620) | (263) | |
| Recycled to profit or loss on disposal of businesses (2) |
- | - | - | - | (16) | |
| At end of period | (292) | (1,026) | (1,242) | (292) | (1,242) | |
| Cash flow hedging reserve | ||||||
| At beginning of period | 113 | (314) | (235) | (140) | (252) | |
| Amount recognised in equity | 1,203 | 811 | 387 | 2,028 | 329 | |
| Amount transferred from equity to earnings | (264) | (223) | 121 | (728) | 138 | |
| Tax | (254) | (161) | (154) | (362) | (154) | |
| Recycled to profit or loss on disposal of | ||||||
| businesses (3) | - | - | - | - | 58 | |
| At end of period | 798 | 113 | 119 | 798 | 119 |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Foreign exchange reserve | ||||||
| At beginning of period | 4,834 | 4,754 | 5,755 | 5,138 | 4,528 | |
| Retranslation of net assets | (31) | 189 | (778) | (271) | 997 | |
| Foreign currency gains/(losses) on hedges | ||||||
| of net assets | 10 | (116) | 157 | (30) | (452) | |
| Tax | 34 | 7 | (43) | 10 | 29 | |
| Recycled to profit or loss on disposal of | ||||||
| businesses | - | - | (6) | - | (17) | |
| At end of period | 4,847 | 4,834 | 5,085 | 4,847 | 5,085 | |
| Capital redemption reserve | ||||||
| At beginning of period | 198 | 198 | 172 | 198 | 170 | |
| Preference shares redeemed | - | - | - | - | 2 | |
| At end of period | 198 | 198 | 172 | 198 | 172 | |
| 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 | 19,726 | 20,713 | 22,003 | 21,239 | 12,134 | |
| Profit/(loss) attributable to ordinary and B | ||||||
| shareholders and other equity owners | ||||||
| - continuing operations | 1,225 | (899) | (1,148) | (204) | (985) | |
| - discontinued operations | 1 | 2 | 2 | 5 | (28) | |
| 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 Gain on redemption of equity preference |
- | - | - | - | (2,968) | |
| shares | - | - | - | - | 609 | |
| Redemption of preference shares classified | ||||||
| as debt Transfer from merger reserve |
- - |
- 50 |
- - |
- 50 |
(118) 12,250 |
|
| Shares issued under employee share schemes Share-based payments |
(2) | (166) | (2) | (209) | (11) | |
| - gross | 35 | 29 | 42 | 102 | 103 | |
| - tax | (8) | (3) | 7 | (6) | 12 | |
| At end of period | 20,977 | 19,726 | 20,904 | 20,977 | 20,904 |
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Own shares held | ||||||
| At beginning of period | (786) | (785) | (816) | (808) | (121) | |
| Shares disposed/(purchased) | 13 | (6) | (7) | 19 | (711) | |
| Shares issued under employee share | ||||||
| schemes | 2 | 5 | 2 | 18 | 11 | |
| At end of period | (771) | (786) | (821) | (771) | (821) | |
| Owners' equity at end of period | 77,443 | 74,744 | 75,600 | 77,443 | 75,600 | |
| Non-controlling interests | ||||||
| At beginning of period | 1,498 | 1,710 | 2,492 | 1,719 | 16,895 | |
| Currency translation adjustments and other | ||||||
| movements | (1) | (14) | (20) | (22) | (481) | |
| (Loss)/profit attributable to non-controlling interests |
||||||
| - continuing operations | (12) | (1) | (117) | (22) | (43) | |
| - discontinued operations | 5 | 19 | 16 | 32 | (660) | |
| Dividends paid | - | (39) | (46) | (39) | (4,217) | |
| Movements in available-for-sale securities | ||||||
| - unrealised (losses)/gains | - | (1) | (76) | - | (54) | |
| - realised losses | 3 | - | 39 | 36 | ||
| - tax | (1) | - | 4 | - | 5 | |
| - recycled to profit or loss on disposal of | ||||||
| discontinued operations (4) | - | - | - | - | (7) | |
| Movements in cash flow hedging reserves | ||||||
| - amounts recognised in equity | - | - | 66 | - | (99) | |
| - tax | - | - | (14) | - | 33 | |
| - recycled to profit or loss on disposal of | ||||||
| discontinued operations (5) | - | - | (15) | - | 1,021 | |
| Equity raised | - | - | - | - | 501 | |
| Equity withdrawn and disposals | (59) | (176) | (549) | (235) | (11,110) | |
| Transfer to retained earnings | - | - | - | - | (40) | |
| At end of period | 1,433 | 1,498 | 1,780 | 1,433 | 1,780 | |
| Total equity at end of period | 78,876 | 76,242 | 77,380 | 78,876 | 77,380 | |
| Total comprehensive income/(loss) | ||||||
| recognised in the statement of | ||||||
| changes in equity is attributable | ||||||
| as follows: | ||||||
| Non-controlling interests | (6) | 3 | (117) | (12) | (249) | |
| Preference shareholders | - | - | - | - | 105 | |
| Paid-in equity holders | - | - | - | - | 19 | |
| Ordinary and B shareholders | 2,658 | 647 | (1,245) | 2,193 | 304 | |
| 2,652 | 650 | (1,362) | 2,181 | 179 |
Notes:
(1) Includes an impairment loss of £733 million in respect of the Group's holding of Greek government bonds, together with £109 million of related interest rate hedge adjustments, in the quarter ended 30 June 2011.
(2) Net of tax (quarter ended 30 September 2010 - nil; nine months ended 30 September 2010 - £6 million credit).
(3) Net of tax (quarter ended 30 September 2010 - nil; nine months ended 30 September 2010 - £20 million charge).
(4) Net of tax (quarter ended 30 September 2010 - nil; nine months ended 30 September 2010 - £2 million credit).
(5) Net of tax (quarter ended 30 September 2010 - £6 million credit; nine months ended 30 September 2010 - £340 million charge).
Having reviewed the Group's forecasts, projections and other relevant evidence, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future. Accordingly, the Interim Management Statement for the period ended 30 September 2011 has 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 International Financial Reporting Interpretations Committee (IFRIC) of the IASB as adopted by the European Union (EU) (together IFRS). There have been no significant changes to the Group's principal accounting policies as set out on pages 275 to 283 of the 2010 Annual Report and Accounts.
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.
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.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Loans and advances to customers | 4,505 | 4,535 | 4,683 | 13,633 | 14,134 | |
| Loans and advances to banks | 154 | 164 | 153 | 490 | 424 | |
| Debt securities | 712 | 705 | 748 | 2,053 | 2,606 | |
| Interest receivable | 5,371 | 5,404 | 5,584 | 16,176 | 17,164 | |
| Customer accounts | 919 | 853 | 961 | 2,603 | 2,795 | |
| Deposits by banks | 248 | 249 | 330 | 756 | 1,045 | |
| Debt securities in issue | 897 | 863 | 733 | 2,577 | 2,411 | |
| Subordinated liabilities | 175 | 190 | 175 | 550 | 435 | |
| Internal funding of trading businesses | 55 | 22 | (26) | 85 | (151) | |
| Interest payable | 2,294 | 2,177 | 2,173 | 6,571 | 6,535 | |
| Net interest income | 3,077 | 3,227 | 3,411 | 9,605 | 10,629 | |
| Fees and commissions receivable Fees and commissions payable |
1,452 | 1,700 | 2,037 | 4,794 | 6,141 | |
| - banking | (204) | (238) | (493) | (623) | (1,500) | |
| - insurance related | (100) | (85) | (118) | (264) | (262) | |
| Net fees and commissions | 1,148 | 1,377 | 1,426 | 3,907 | 4,379 | |
| Foreign exchange | 441 | 375 | 442 | 1,019 | 1,274 | |
| Interest rate | 33 | 2 | 866 | 684 | 2,027 | |
| Credit | 366 | 562 | (1,250) | 680 | (42) | |
| Other | 117 | 208 | 219 | 556 | 894 | |
| Income from trading activities | 957 | 1,147 | 277 | 2,939 | 4,153 | |
| Gain on redemption of own debt | 1 | 255 | - | 256 | 553 | |
| Operating lease and other rental income | 327 | 350 | 338 | 999 | 1,025 | |
| Changes in fair value of own debt Changes in the fair value of securities and |
1,887 | 228 | (528) | 1,821 | (223) | |
| other financial assets and liabilities Changes in the fair value of investment |
(148) | 224 | 54 | 144 | (97) | |
| properties | (22) | (27) | (4) | (74) | (112) | |
| Profit on sale of securities | 274 | 193 | 352 | 703 | 506 | |
| Profit on sale of property, plant and equipment |
5 | 11 | 9 | 27 | 21 | |
| (Loss)/profit on sale of subsidiaries and | ||||||
| associates | (39) | 55 | (260) | (13) | (618) | |
| Life business (losses)/profits | (8) | (3) | 49 | (13) | 61 | |
| Dividend income | 14 | 18 | 17 | 47 | 58 | |
| Share of profits less losses of associated | ||||||
| entities | 5 | 8 | 8 | 20 | 56 | |
| Other income | 89 | 85 | (352) | 256 | (201) | |
| Other operating income | 2,384 | 1,142 | (317) | 3,917 | 476 |
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
||
| Non-interest income (excluding insurance net premium income) Insurance net premium income |
4,490 1,036 |
3,921 1,090 |
1,386 1,289 |
11,019 3,275 |
9,561 3,856 |
|
| Total non-interest income | 5,526 | 5,011 | 2,675 | 14,294 | 13,417 | |
| Total income | 8,603 | 8,238 | 6,086 | 23,899 | 24,046 | |
| Staff costs - wages, salaries and other staff costs - bonus tax - social security costs - pension costs |
1,798 5 145 128 |
1,923 11 168 108 |
2,100 15 153 155 |
5,780 27 505 373 |
6,473 84 505 415 |
|
| Total staff costs Premises and equipment Other (including Payment Protection Insurance costs) |
2,076 604 962 |
2,210 602 1,752 |
2,423 611 914 |
6,685 1,777 3,635 |
7,477 1,693 2,947 |
|
| Administrative expenses Depreciation and amortisation |
3,642 485 |
4,564 453 |
3,948 603 |
12,097 1,362 |
12,117 1,604 |
|
| Operating expenses | 4,127 | 5,017 | 4,551 | 13,459 | 13,721 | |
| General insurance Bancassurance |
734 - |
793 - |
1,092 50 |
2,439 - |
3,547 54 |
|
| Insurance net claims | 734 | 793 | 1,142 | 2,439 | 3,601 | |
| Loan impairment losses Securities impairment losses - sovereign debt impairment and related |
1,452 | 2,237 | 1,908 | 5,587 | 6,989 | |
| interest rate hedge adjustments - other |
202 84 |
842 27 |
- 45 |
1,044 160 |
- 126 |
|
| Impairment losses | 1,738 | 3,106 | 1,953 | 6,791 | 7,115 |
Refer to Appendix 1 for a reconciliation between the managed and statutory bases for key line items.
Operating profit/(loss) is stated after charging loan impairment losses of £1,452 million (Q2 2011 - £2,237 million; Q3 2010 - £1,908 million). The balance sheet loan impairment provisions decreased in the quarter ended 30 September 2011 from £20,759 million to £20,723 million and the movements thereon were:
| Quarter ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 June 2011 | 30 September 2010 | ||||||||
| Non | Non | Non | ||||||||
| Core | Core | Total | Core | Core RFS MI | Total | Core | Core | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| At beginning of period | 8,752 | 12,007 | 20,759 | 8,416 | 10,842 | - 19,258 | 7,633 | 8,533 16,166 | ||
| Transfers to disposal groups | - | - | - | - | 9 | - | 9 | - | - | - |
| Intra-group transfers | - | - | - | - | - | - | - | (351) | 351 | - |
| Currency translation and | ||||||||||
| other adjustments | (90) | (285) | (375) | 33 | 145 | - | 178 | 116 | 175 | 291 |
| Disposals | - | - | - | - | - | 11 | 11 | - | - | - |
| Amounts written-off | (593) | (497) | (1,090) | (504) | (474) | - | (978) | (416) | (329) | (745) |
| Recoveries of amounts | ||||||||||
| previously written-off | 39 | 55 | 94 | 41 | 126 | - | 167 | 80 | 85 | 165 |
| Charge to income statement | ||||||||||
| - continued | 817 | 635 | 1,452 | 810 | 1,427 | - | 2,237 | 779 | 1,129 | 1,908 |
| - discontinued | - | - | - | - | - | (11) | (11) | |||
| Unwind of discount | (52) | (65) | (117) | (44) | (68) | - | (112) | (50) | (65) | (115) |
| At end of period | 8,873 | 11,850 | 20,723 | 8,752 | 12,007 | - 20,759 | 7,791 | 9,879 17,670 |
| Nine months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 September 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 | - | - | - | - | - | (67) | - | (67) |
| Intra-group transfers | 177 | (177) | - | - | (351) | 351 | - | - |
| Currency translation and | ||||||||
| other adjustments | (1) | (45) | - | (46) | (163) | 294 | - | 131 |
| Disposals | - | - | 11 | 11 | - | (17) | (2,149) | (2,166) |
| Amounts written-off | (1,611) | (1,409) | - | (3,020) | (1,479) | (3,047) | - | (4,526) |
| Recoveries of amounts | ||||||||
| previously written-off | 119 | 261 | - | 380 | 184 | 131 | - | 315 |
| Charge to income statement | ||||||||
| - continued | 2,479 | 3,108 | - | 5,587 | 2,825 | 4,164 | - | 6,989 |
| - discontinued | - | - | (11) | (11) | - | - | 39 | 39 |
| Unwind of discount | (156) | (204) | - | (360) | (146) | (182) | - | (328) |
| At end of period | 8,873 | 11,850 | - | 20,723 | 7,791 | 9,879 | - | 17,670 |
Provisions at 30 September 2011 include £126 million (30 June 2011 - £132 million; 30 September 2010 - £127 million) in respect of loans and advances to banks.
The table above excludes impairments relating to securities.
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:
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
|
| Profit/(loss) before tax | 2,004 | (678) | (1,560) | 1,210 | (391) |
| Tax (charge)/credit based on the standard UK corporation tax rate of 26.5% (2010 - 28%) Sovereign debt impairment and related interest |
(531) | 179 | 437 | (321) | 109 |
| rate hedge adjustments where no deferred tax asset recognised |
(42) | (219) | - | (261) | - |
| Other losses in period where no deferred tax asset recognised |
(61) | (66) | 1 | (293) | (354) |
| Foreign profits taxed at other rates | (71) | (100) | (48) | (371) | (386) |
| UK tax rate change - deferred tax impact | (50) | - | (90) | (137) | (90) |
| Unrecognised timing differences | (10) | (15) | (7) | (20) | (7) |
| Items not allowed for tax | |||||
| - losses on strategic disposals and write- | |||||
| downs | (4) | (7) | (37) | (14) | (182) |
| - other disallowable items | (50) | (70) | (50) | (160) | (133) |
| Non-taxable items | |||||
| - gain on sale of Global Merchant Services | - | - | - | 12 | - |
| - gain on redemption of own debt | - | - | - | - | 12 |
| - other non-taxable items | 16 | 9 | 37 | 37 | 101 |
| Taxable foreign exchange movements | 2 | (2) | (5) | 2 | 2 |
| Losses brought forward and utilised | 2 | 13 | (1) | 31 | 10 |
| Adjustments in respect of prior periods | 8 | 56 | 58 | 59 | 281 |
| Actual tax (charge)/credit | (791) | (222) | 295 | (1,436) | (637) |
The high tax charge in the first nine months of 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 nine months ended 30 September 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 £855 million (77%) of the difference between the actual tax charge and the tax credit derived from applying the standard UK Corporation Tax rate to the results for the period.
The Group has recognised a deferred tax asset at 30 September 2011 of £4,988 million (30 June 2011 - £6,245 million; 31 December - £6,373 million), of which £3,014 million (30 June 2011 - £3,880 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 30 September 2011 and concluded that it is recoverable based on future profit projections.
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September 2011 |
30 June 2011 |
30 September 2010 |
30 September 2011 |
30 September 2010 |
|
| £m | £m | £m | £m | £m | |
| Trust preferred securities | - | - | - | - | 10 |
| RBS Sempra Commodities JV | (8) | 4 | 26 | (13) | 46 |
| ABN AMRO | |||||
| - RFS Holdings minority interest | 3 | 14 | (131) | 27 | (775) |
| - other | - | - | (2) | - | (1) |
| RBS Life Holdings | - | - | 6 | - | 17 |
| Other | (2) | - | - | (4) | - |
| (Loss)/profit attributable to non-controlling | |||||
| interests | (7) | 18 | (101) | 10 | (703) |
Earnings per ordinary and B share have been calculated based on the following:
| Quarter ended | Nine months ended | ||||
|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Earnings | |||||
| Profit/(loss) from continuing operations | |||||
| attributable to ordinary and B shareholders | 1,225 | (899) | (1,148) | (204) | (1,109) |
| Gain on redemption of preference shares and | |||||
| paid-in equity | - | - | - | - | 610 |
| Adjusted profit/(loss) from continuing | |||||
| operations attributable to ordinary and | |||||
| B shareholders | 1,225 | (899) | (1,148) | (204) | (499) |
| Profit/(loss) from discontinued operations | |||||
| attributable to ordinary and B shareholders | 1 | 2 | 2 | 5 | (28) |
| Ordinary shares in issue during the period | |||||
| (millions) | 57,541 | 56,973 | 56,164 | 57,107 | 56,271 |
| 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) | 108,541 | 107,973 | 107,164 | 108,107 | 107,271 |
| Effect of dilutive share options and convertible | |||||
| securities | 891 | - | - | 893 | - |
| Diluted weighted average number of ordinary | |||||
| and B shares in issue during the period | 109,432 | 107,973 | 107,164 | 109,000 | 107,271 |
| Basic earnings/(loss) per ordinary and B | |||||
| share from continuing operations | 1.1p | (0.8p) | (1.1p) | (0.2p) | (0.5p) |
| Fair value of own debt | (1.7p) | (0.2p) | 0.6p | (1.6p) | 0.3p |
| Asset Protection Scheme credit default swap | |||||
| - fair value changes | - | 0.1p | 0.6p | 0.5p | 0.6p |
| Payment Protection Insurance costs | - | 0.6p | - | 0.6p | - |
| Sovereign debt impairment and related interest | |||||
| rate hedge adjustments | 0.2p | 0.8p | - | 1.0p | - |
| Amortisation of purchased intangible assets | - | - | 0.1p | 0.1p | 0.2p |
| Integration and restructuring costs | 0.3p | - | 0.2p | 0.4p | 0.5p |
| Gain on redemption of own debt | - | (0.2p) | - | (0.2p) | (1.0p) |
| Strategic disposals | - | - | - | - | 0.3p |
| Bonus tax | - | - | - | - | 0.1p |
| Adjusted earnings per ordinary and | |||||
| B share from continuing operations | (0.1p) | 0.3p | 0.4p | 0.6p | 0.5p |
| Loss from Non-Core attributable to | |||||
| ordinary and B shareholders | 0.1p | 0.4p | 0.7p | 0.7p | 1.5p |
| Core adjusted earnings per ordinary | |||||
| and B share from continuing operations | - | 0.7p | 1.1p | 1.3p | 2.0p |
| Core impairment losses | 0.1p | 0.3p | 0.5p | 0.7p | 1.0p |
| Pre-impairment Core adjusted | |||||
| earnings per ordinary and B share | 0.1p | 1.0p | 1.6p | 2.0p | 3.0p |
| Memo: Core adjusted earnings per | |||||
| ordinary and B share from continuing | |||||
| operations assuming normalised tax | |||||
| rate of 26.5% (2010 - 28.0%) | 0.9p | 1.1p | 1.2p | 3.4p | 3.7p |
| Diluted earnings/(loss) per ordinary and B | |||||
| share from continuing operations | 1.1p | (0.8p) | (1.1p) | (0.2p) | (0.5p) |
There have been no significant changes in the Group's divisions as set out on page 377 of the 2010 Report and Accounts.
The following tables provide an analysis of the divisional profit/(loss) for the quarters ended 30 September 2011, 30 June 2011 and 30 September 2010 and the nine months ended 30 September 2011 and 30 September 2010 by main income statement captions. The divisional income statements on pages 23 to 57 reflect certain presentational reallocations as described in the notes below. These do not affect the overall operating profit/(loss).
| Quarter ended 30 September 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 | 1,074 | 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) |
| 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 credit | |||||||
| default swap - fair value changes (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) |
| Total statutory | 3,077 | 5,526 | 8,603 | (4,127) | (734) | (1,738) | 2,004 |
(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.
| Quarter ended 30 June 2011 | Net interest income £m |
Non interest income £m |
Total income £m |
Operating expenses £m |
Insurance net claims £m |
Impairment losses £m |
Operating profit/(loss) £m |
|---|---|---|---|---|---|---|---|
| UK Retail | 1,086 | 333 | 1,419 | (688) | - | (208) | 523 |
| UK Corporate | 641 | 325 | 966 | (403) | - | (218) | 345 |
| Wealth | 182 | 115 | 297 | (220) | - | (3) | 74 |
| Global Transaction Services | 263 | 297 | 560 | (342) | - | (54) | 164 |
| Ulster Bank | 171 | 51 | 222 | (142) | - | (269) | (189) |
| US Retail & Commercial | 469 | 246 | 715 | (522) | - | (66) | 127 |
| Global Banking & Markets (1) | 164 | 1,386 | 1,550 | (1,067) | - | (37) | 446 |
| RBS Insurance (2) | 89 | 957 | 1,046 | (203) | (704) | - | 139 |
| Central items | (65) | 79 | 14 | 30 | 1 | 2 | 47 |
| Core | 3,000 | 3,789 | 6,789 | (3,557) | (703) | (853) | 1,676 |
| Non-Core (3) | 233 | 745 | 978 | (335) | (90) | (1,411) | (858) |
| 3,233 | 4,534 | 7,767 | (3,892) | (793) | (2,264) | 818 | |
| Reconciling items | |||||||
| Fair value of own debt (4) | - | 339 | 339 | - | - | - | 339 |
| Asset Protection Scheme credit | |||||||
| default swap - fair value changes (5) | - | (168) | (168) | - | - | - | (168) |
| Payment Protection Insurance costs | - | - | - | (850) | - | - | (850) |
| Sovereign debt impairment and related | |||||||
| interest rate hedge adjustments | - | - | - | - | - | (842) | (842) |
| Amortisation of purchased intangible | |||||||
| assets | - | - | - | (56) | - | - | (56) |
| Integration and restructuring costs | - | 1 | 1 | (209) | - | - | (208) |
| Gain on redemption of own debt | - | 255 | 255 | - | - | - | 255 |
| Strategic disposals | - | 50 | 50 | - | - | - | 50 |
| Bonus tax | - | - | - | (11) | - | - | (11) |
| RFS Holdings minority interest | (6) | - | (6) | 1 | - | - | (5) |
| Total statutory | 3,227 | 5,011 | 8,238 | (5,017) | (793) | (3,106) | (678) |
Notes:
(1) Reallocation of £14 million between net interest income and non-interest income in respect of funding costs of rental assets, £11 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 £69 million investment income of which £54 million is included in net interest income and £15 million in non-interest income. Reallocation of £35 million between non-interest income and net interest income in respect of instalment income.
(3) Reallocation of £52 million between net interest income and non-interest income in respect of funding costs of rental assets, £51 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £1 million.
(4) Comprises £111 million gain included in 'Income from trading activities' and £228 million gain included in 'Other operating income' on a statutory basis.
(5) Included in 'Income from trading activities' on a statutory basis.
| Total statutory | 3,411 | 2,675 | 6,086 | (4,551) | (1,142) | (1,953) | (1,560) |
|---|---|---|---|---|---|---|---|
| RFS Holdings minority interest | 7 | (182) | (175) | (6) | - | - | (181) |
| Bonus tax | - | - | - | (15) | - | - | (15) |
| Strategic disposals | - | 27 | 27 | - | - | - | 27 |
| Integration and restructuring costs | - | - | - | (311) | - | - | (311) |
| Amortisation of purchased intangible assets |
- | - | - | (123) | - | - | (123) |
| Asset Protection Scheme credit default swap - fair value changes (6) |
- | (825) | (825) | - | - | - | (825) |
| Reconciling items Fair value of own debt (5) |
- | (858) | (858) | - | - | - | (858) |
| 3,404 | 4,513 | 7,917 | (4,096) | (1,142) | (1,953) | 726 | |
| Non-Core (4) | 355 | 515 | 870 | (561) | (144) | (1,171) | (1,006) |
| Core | 3,049 | 3,998 | 7,047 | (3,535) | (998) | (782) | 1,732 |
| Central items | (158) | 181 | 23 | 57 | (6) | 2 | 76 |
| RBS Insurance (3) | 94 | 1,030 | 1,124 | (215) | (942) | - | (33) |
| Global Banking & Markets (2) | 310 | 1,244 | 1,554 | (1,005) | - | 40 | 589 |
| US Retail & Commercial | 480 | 271 | 751 | (553) | - | (125) | 73 |
| Global Transaction Services Ulster Bank |
257 192 |
411 52 |
668 244 |
(356) (134) |
- - |
(3) (286) |
309 (176) |
| Wealth | 156 | 108 | 264 | (189) | - | (1) | 74 |
| UK Corporate | 662 | 324 | 986 | (406) | - | (158) | 422 |
| UK Retail (1) | 1,056 | 377 | 1,433 | (734) | (50) | (251) | 398 |
| Quarter ended 30 September 2010 | £m | £m | £m | £m | £m | £m | £m |
| interest income |
interest income |
Total income |
Operating expenses |
Insurance net claims |
Impairment losses |
Operating profit/(loss) |
|
| Net | Non |
Notes:
(1) Reallocation of netting of bancassurance claims of £50 million from non-interest income.
(2) Reallocation of £7 million between net interest income and non-interest income in respect of funding costs of rental assets, £9 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £2 million.
(3) Total income includes £75 million of investment income of which £55 million is included in net interest income and £20 million in non-interest income. Reallocation of £39 million between non-interest income and net interest income in respect of instalment income.
(4) Reallocation of £83 million between net interest income and non-interest income in respect of funding costs of rental assets, £78 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £5 million.
(5) Comprises £330 million loss included in 'Income and trading activities' and £528 million loss included on 'Other operating income' on a statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.
| Net | Non | ||||||
|---|---|---|---|---|---|---|---|
| interest | interest | Total | Operating | Insurance | Impairment | Operating | |
| income | income | income | expenses | net claims | losses | profit/(loss) | |
| Nine months ended 30 September 2011 | £m | £m | £m | £m | £m | £m | £m |
| UK Retail | 3,236 | 929 | 4,165 | (2,038) | - | (597) | 1,530 |
| UK Corporate | 1,951 | 984 | 2,935 | (1,245) | - | (551) | 1,139 |
| Wealth | 527 | 347 | 874 | (637) | - | (12) | 225 |
| Global Transaction Services | 799 | 879 | 1,678 | (1,013) | - | (119) | 546 |
| Ulster Bank | 525 | 162 | 687 | (415) | - | (1,057) | (785) |
| US Retail & Commercial | 1,403 | 746 | 2,149 | (1,567) | - | (260) | 322 |
| Global Banking & Markets (1) | 506 | 4,523 | 5,029 | (3,392) | - | 19 | 1,656 |
| RBS Insurance (2) | 261 | 2,888 | 3,149 | (637) | (2,183) | - | 329 |
| Central items | (188) | 170 | (18) | 91 | - | (2) | 71 |
| Core | 9,020 | 11,628 | 20,648 | (10,853) | (2,183) | (2,579) | 5,033 |
| Non-Core (3) | 593 | 917 | 1,510 | (981) | (256) | (3,168) | (2,895) |
| 9,613 | 12,545 | 22,158 | (11,834) | (2,439) | (5,747) | 2,138 | |
| Reconciling items | |||||||
| Fair value of own debt (4) | - | 2,216 | 2,216 | - | - | - | 2,216 |
| Asset Protection Scheme credit | |||||||
| default swap - fair value changes (5) | - | (697) | (697) | - | - | - | (697) |
| Payment Protection Insurance costs | - | - | - | (850) | - | - | (850) |
| Sovereign debt impairment and related | |||||||
| interest rate hedge adjustments | - | - | - | - | - | (1,044) | (1,044) |
| Amortisation of purchased | |||||||
| intangible assets | - | - | - | (169) | - | - | (169) |
| Integration and restructuring costs | (2) | (3) | (5) | (581) | - | - | (586) |
| Gain on redemption of own debt | - | 256 | 256 | - | - | - | 256 |
| Strategic disposals | - | (22) | (22) | - | - | - | (22) |
| Bonus tax | - | - | - | (27) | - | - | (27) |
| RFS Holdings minority interest | (6) | (1) | (7) | 2 | - | - | (5) |
| Total statutory | 9,605 | 14,294 | 23,899 | (13,459) | (2,439) | (6,791) | 1,210 |
Notes:
(1) Reallocation of £39 million between net interest income and non-interest income in respect of funding costs of rental assets, £30 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £9 million.
(2) Total income includes £205 million investment income of which £156 million is included in net interest income and £49 million in non-interest income. Reallocation of £105 million between non-interest income and net interest income in respect of instalment income.
(3) Reallocation of £159 million between net interest income and non-interest income in respect of funding costs of rental assets, £155 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £4 million.
(4) Comprises £395 million gain included in 'Income from trading activities' and £1,821 million gain included in 'Other operating income' on a statutory basis.
(5) Included in 'Income from trading activities' on a statutory basis.
| Total statutory | 10,629 | 13,417 | 24,046 | (13,721) | (3,601) | (7,115) | (391) |
|---|---|---|---|---|---|---|---|
| RFS Holdings minority interest | 7 | (153) | (146) | (2) | - | - | (148) |
| Bonus tax | - | - | - | (84) | - | - | (84) |
| Strategic disposals | - | (331) | (331) | - | - | - | (331) |
| Gain on redemption of own debt | - | 553 | 553 | - | - | - | 553 |
| Integration and restructuring costs | - | - | - | (733) | - | - | (733) |
| Amortisation of purchased intangible assets |
- | - | - | (273) | - | - | (273) |
| Asset Protection Scheme credit default swap - fair value changes (6) |
- | (825) | (825) | - | - | - | (825) |
| Reconciling items Fair value of own debt (5) |
- | (408) | (408) | - | - | - | (408) |
| 10,622 | 14,581 | 25,203 | (12,629) | (3,601) | (7,115) | 1,858 | |
| Core Non-Core (4) |
9,297 1,325 |
13,263 1,318 |
22,560 2,643 |
(10,854) (1,775) |
(3,109) (492) |
(2,850) (4,265) |
5,747 (3,889) |
| Central items | (82) | 303 | 221 | 261 | (21) | 1 | 462 |
| RBS Insurance (3) | 285 | 3,119 | 3,404 | (656) | (3,034) | - | (286) |
| Global Banking & Markets (2) | 1,001 | 5,324 | 6,325 | (3,332) | - | (156) | 2,837 |
| Ulster Bank US Retail & Commercial |
574 1,450 |
158 798 |
732 2,248 |
(437) (1,594) |
- - |
(785) (412) |
(490) 242 |
| Global Transaction Services | 711 | 1,212 | 1,923 | (1,096) | - | (6) | 821 |
| Wealth | 449 | 336 | 785 | (556) | - | (12) | 217 |
| UK Corporate | 1,919 | 993 | 2,912 | (1,240) | - | (542) | 1,130 |
| UK Retail (1) | 2,990 | 1,020 | 4,010 | (2,204) | (54) | (938) | 814 |
| Nine months ended 30 September 2010 | £m | £m | £m | £m | £m | £m | £m |
| interest income |
interest income |
Total income |
Operating expenses |
Insurance net claims |
Impairment losses |
Operating profit/(loss) |
|
| Net | Non |
Notes:
(1) Reallocation of netting of bancassurance claims of £54 million from non-interest income.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| 30 September | 30 June | 30 September | 30 September | 30 September | ||
| 2011 | 2011 | 2010 | 2011 | 2010 | ||
| £m | £m | £m | £m | £m | ||
| Discontinued operations | ||||||
| Total income | 10 | 9 | (8) | 27 | 1,427 | |
| Operating expenses | (3) | - | 19 | (4) | (801) | |
| Insurance net claims | - | - | 2 | - | (161) | |
| Impairment recoveries/(losses) | - | 11 | - | 11 | (39) | |
| Profit before tax | 7 | 20 | 13 | 34 | 426 | |
| Gain on disposal before recycling | ||||||
| of reserves | - | - | - | - | 57 | |
| Recycled reserves | - | - | - | - | (1,076) | |
| Operating profit/(loss) before tax | 7 | 20 | 13 | 34 | (593) | |
| Tax on profit/(loss) | (3) | (4) | (1) | (10) | (89) | |
| Profit/(loss) after tax | 4 | 16 | 12 | 24 | (682) | |
| Businesses acquired exclusively with a view to disposal |
||||||
| Profit/(loss) after tax | 2 | 5 | 6 | 13 | (6) | |
| Profit/(loss) from discontinued operations, | ||||||
| net of tax | 6 | 21 | 18 | 37 | (688) |
Discontinued operations reflect the results of RFS Holdings attributable to the State of the Netherlands and Santander following the legal separation of ABN AMRO Bank N.V. on 1 April 2010.
| 30 September 2011 | 30 June | 31 December | |||
|---|---|---|---|---|---|
| Sempra | Other | Total | 2011 | 2010 | |
| £m | £m | £m | £m | £m | |
| Assets of disposal groups | |||||
| Cash and balances at central banks | - | 119 | 119 | 155 | 184 |
| Loans and advances to banks | 83 | 12 | 95 | 344 | 651 |
| Loans and advances to customers | 13 | 1,698 | 1,711 | 1,487 | 5,013 |
| Debt securities and equity shares | 8 | 2 | 10 | 16 | 20 |
| Derivatives | 24 | - | 24 | 525 | 5,148 |
| Settlement balances | 206 | - | 206 | 157 | 555 |
| Property, plant and equipment | 2 | 218 | 220 | 17 | 18 |
| Other assets | 10 | 438 | 448 | 473 | 704 |
| Discontinued operations and other disposal groups | 346 | 2,487 | 2,833 | 3,174 | 12,293 |
| Assets acquired exclusively with a view to disposal | - | 211 | 211 | 233 | 191 |
| 346 | 2,698 | 3,044 | 3,407 | 12,484 | |
| Liabilities of disposal groups | |||||
| Deposits by banks | - | 288 | 288 | 86 | 266 |
| Customer accounts | - | 1,743 | 1,743 | 1,888 | 2,267 |
| Derivatives | 24 | - | 24 | 498 | 5,042 |
| Settlement balances | 264 | - | 264 | 505 | 907 |
| Other liabilities | 94 | 84 | 178 | 239 | 925 |
| Discontinued operations and other disposal groups | 382 | 2,115 | 2,497 | 3,216 | 9,407 |
| Liabilities acquired exclusively with a view to disposal | - | 19 | 19 | 21 | 21 |
| 382 | 2,134 | 2,516 | 3,237 | 9,428 |
The assets and liabilities of disposal groups at 30 September 2011 primarily include Non-Core loan portfolios and the residual assets and liabilities of RBS Sempra Commodities JV.
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 the reduction in assets and liabilities of disposal groups since 31 December 2010 relates to the novation of these contracts.
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.
| Other financial |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| instruments | 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 |
| 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 (5) | 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 | ||
| 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 (5) | 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 |
| Other financial |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| instruments | financial | |||||||
| HFT (1) | DFV (2) | AFS (3) | LAR (4) | (amortised cost) |
Finance leases |
assets/ liabilities |
Total | |
| 30 June 2011 | £m | £m | £m | £m | £m | £m | £m | £m |
| Assets | ||||||||
| Cash and balances at | ||||||||
| central banks | - | - | - | 64,351 | 64,351 | |||
| Loans and advances to banks | ||||||||
| - reverse repos | 36,120 | - | - | 5,853 | 41,973 | |||
| - other | 21,733 | - | - | 31,400 | 53,133 | |||
| Loans and advances to customers |
||||||||
| - reverse repos | 43,641 | - | - | 12,521 | 56,162 | |||
| - other | 19,971 | 1,038 | - | 458,553 | 10,010 | 489,572 | ||
| Debt securities | 118,169 | 213 | 118,668 | 6,595 | 243,645 | |||
| Equity shares | 21,873 | 1,049 | 2,029 | - | 24,951 | |||
| Settlement balances | - | - | - | 24,566 | 24,566 | |||
| Derivatives (5) | 394,872 | 394,872 | ||||||
| Intangible assets | 14,592 | 14,592 | ||||||
| Property, plant and equipment | 17,357 | 17,357 | ||||||
| Deferred tax | 6,245 | 6,245 | ||||||
| Prepayments, accrued | ||||||||
| income and other assets | - | - | - | 1,160 | 9,983 | 11,143 | ||
| Assets of disposal groups | 3,407 | 3,407 | ||||||
| 656,379 | 2,300 | 120,697 | 604,999 | 10,010 | 51,584 1,445,969 | |||
| Liabilities | ||||||||
| Deposits by banks | ||||||||
| - repos | 19,898 | - | 15,483 | 35,381 | ||||
| - other | 28,177 | - | 43,396 | 71,573 | ||||
| Customer accounts | ||||||||
| - repos | 57,716 | - | 31,106 | 88,822 | ||||
| - other | 16,043 | 5,566 | 407,094 | 428,703 | ||||
| Debt securities in issue | 10,474 | 42,395 | 160,928 | 213,797 | ||||
| Settlement balances | - | - | 22,905 | 22,905 | ||||
| Short positions | 56,106 | - | 56,106 | |||||
| Derivatives (5) | 387,809 | 387,809 | ||||||
| Accruals, deferred income | ||||||||
| and other liabilities | - | - | 1,541 | 467 | 22,057 | 24,065 | ||
| Retirement benefit liabilities | - | 2,239 | 2,239 | |||||
| Deferred tax | - | 2,092 | 2,092 | |||||
| Insurance liabilities | - | 6,687 | 6,687 | |||||
| Subordinated liabilities | - | 1,092 | 25,219 | 26,311 | ||||
| Liabilities of disposal groups | 3,237 | 3,237 | ||||||
| 576,223 | 49,053 | 707,672 | 467 | 36,312 1,369,727 | ||||
| Equity | 76,242 | |||||||
1,445,969
| Other financial |
Non | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 |
| 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 (5) | 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 | ||
| 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 (5) | 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.
(3) Available-for-sale.
(4) Loans and receivables.
(5) Held-for-trading derivatives include hedging derivatives.
Refer to Note 12 Financial instruments - valuation of the Group's 2010 Annual Report and Accounts for valuation techniques. 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.
The table below shows the valuation reserves and adjustments.
| 30 September 2011 £m |
30 June 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Credit valuation adjustments (CVA) | |||
| Monoline insurers | 2,827 | 2,321 | 2,443 |
| Credit derivative product companies (CDPCs) | 1,233 | 532 | 490 |
| Other counterparties | 2,222 | 1,719 | 1,714 |
| 6,282 | 4,572 | 4,647 | |
| Bid-offer, liquidity and other reserves | 2,712 | 2,572 | 2,797 |
| 8,994 | 7,144 | 7,444 |
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.
Valuation reserves (continued)
| Cumulative pre-tax own credit adjustment (1) | Debt securities in issue £m |
Subordinated liabilities £m |
Total (2) £m |
Derivatives £m |
Total £m |
|---|---|---|---|---|---|
| 30 September 2011 | 3,993 | 657 | 4,650 | 700 | 5,350 |
| 30 June 2011 | 1,933 | 377 | 2,310 | 434 | 2,744 |
| 31 December 2010 | 2,091 | 325 | 2,416 | 534 | 2,950 |
| Carrying values of underlying liabilities | £bn | £bn | £bn | ||
| 30 September 2011 | 48.7 | 0.9 | 49.6 | ||
| 30 June 2011 | 52.9 | 1.1 | 54.0 | ||
| 31 December 2010 | 51.2 | 1.1 | 52.3 |
Notes:
| 30 September 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | |||||||
| Total | Level 1 | Level 2 | Level 3 | Favourable | Unfavourable | ||
| Assets | £bn | £bn | £bn | £bn | £m | £m | |
| Loans and advances to banks | |||||||
| - reverse repos | 40.2 | - | 40.2 | - | - | - | |
| - collateral | 19.6 | - | 19.6 | - | - | - | |
| - other | 0.8 | - | 0.3 | 0.5 | 60 | (50) | |
| 60.6 | - | 60.1 | 0.5 | 60 | (50) | ||
| Loans and advances to customers | |||||||
| - reverse repos | 41.7 | - | 41.7 | - | - | - | |
| - collateral | 20.5 | - | 20.5 | - | - | - | |
| - other | 5.1 | - | 4.8 | 0.3 | 30 | (30) | |
| 67.3 | - | 67.0 | 0.3 | 30 | (30) | ||
| Debt securities | |||||||
| - UK government | 21.8 | 21.8 | - | - | - | - | |
| - US government | 40.2 | 34.8 | 5.4 | - | - | - | |
| - other government | 76.7 | 65.0 | 11.7 | - | - | - | |
| - corporate | 7.0 | - | 6.5 | 0.5 | 20 | (20) | |
| - other financial institutions | 77.4 | 3.1 | 69.2 | 5.1 | 520 | (180) | |
| 223.1 | 124.7 | 92.8 | 5.6 | 540 | (200) | ||
| Equity shares | 14.9 | 11.7 | 2.1 | 1.1 | 120 | (210) | |
| Derivatives | |||||||
| - foreign exchange | 107.0 | - | 106.3 | 0.7 | 50 | (20) | |
| - interest rate | 424.2 | 0.2 | 422.2 | 1.8 | 90 | (110) | |
| - equities and commodities | 7.3 | 0.1 | 7.0 | 0.2 | - | - | |
| - credit | 33.9 | - | 30.9 | 3.0 | 640 | (410) | |
| 572.4 | 0.3 | 566.4 | 5.7 | 780 | (540) | ||
| Total | 938.3 | 136.7 | 788.4 | 13.2 | 1,530 | (1,030) | |
| Proportion | 100% | 14.6% | 84.0% | 1.4% | |||
| Of which | |||||||
| Core | 912.0 | 135.6 | 770.3 | 6.1 | |||
| Non-Core | 26.3 | 1.1 | 18.1 | 7.1 | |||
| Total | 938.3 | 136.7 | 788.4 | 13.2 |
| 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|
| Total | Level 1 | Level 2 | Level 3 £bn |
||||
| Assets | £bn | £bn | £bn | ||||
| Loans and advances to banks | |||||||
| - reverse repos | 38.2 | - | 38.2 | - | |||
| - collateral | 25.1 | - | 25.1 | - | |||
| - other | 1.0 | - | 0.6 | 0.4 | |||
| 64.3 | - | 63.9 | 0.4 | ||||
| Loans and advances to customers | |||||||
| - reverse repos | 41.1 | - | 41.1 | - | |||
| - collateral | 14.4 | - | 14.4 | - | |||
| - other | 6.6 | - | 6.2 | 0.4 | |||
| 62.1 | - | 61.7 | 0.4 | ||||
| Debt securities | |||||||
| - UK government | 13.5 | 13.5 | - | - | |||
| - US government | 38.0 | 31.0 | 7.0 | - | |||
| - other government | 75.9 | 62.3 | 13.6 | - | |||
| - corporate | 7.7 | - | 6.5 | 1.2 | |||
| - other financial institutions | 75.3 | 3.5 | 64.8 | 7.0 | |||
| 210.4 | 110.3 | 91.9 | 8.2 | ||||
| Equity shares | 22.2 | 18.4 | 2.8 | 1.0 | |||
| Derivatives | |||||||
| - foreign exchange | 83.3 | - | 83.2 | 0.1 | |||
| - interest rate | 311.7 | 1.7 | 308.3 | 1.7 | |||
| - equities and commodities | 5.2 | 0.1 | 4.9 | 0.2 | |||
| - credit - APS (2) | 0.6 | - | - | 0.6 | |||
| - credit - other | 26.3 | - | 23.2 | 3.1 | |||
| 427.1 | 1.8 | 419.6 | 5.7 | ||||
| Total | 786.1 | 130.5 | 639.9 | 15.7 | |||
| Proportion | 100% | 16.6% | 81.4% | 2.0% | |||
| Of which | |||||||
| Core Non-Core |
754.2 31.9 |
129.4 1.1 |
617.6 22.3 |
7.2 8.5 |
|||
| Total | 786.1 | 130.5 | 639.9 | 15.7 |
The following tables detail AFS assets included within total assets on pages 89 and 90.
| 30 September 2011 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | |||||||||
| Total | Level 1 | Level 2 | Level 3 | Favourable | Unfavourable | ||||
| Assets | £bn | £bn | £bn | £bn | £m | £m | |||
| Debt securities | |||||||||
| - UK government | 13.3 | 13.3 | - | - | - | - | |||
| - US government | 20.0 | 16.9 | 3.1 | - | - | - | |||
| - other government | 29.0 | 24.2 | 4.8 | - | - | - | |||
| - corporate | 2.3 | - | 2.1 | 0.2 | 10 | (10) | |||
| - other financial institutions | 45.8 | 0.7 | 42.0 | 3.1 | 270 | (40) | |||
| 110.4 | 55.1 | 52.0 | 3.3 | 280 | (50) | ||||
| Equity shares | 2.0 | 0.3 | 1.3 | 0.4 | 70 | (80) | |||
| Total | 112.4 | 55.4 | 53.3 | 3.7 | 350 | (130) | |||
| Of which | |||||||||
| Core | 103.5 | 55.0 | 47.7 | 0.8 | |||||
| Non-Core | 8.9 | 0.4 | 5.6 | 2.9 | |||||
| Total | 112.4 | 55.4 | 53.3 | 3.7 |
| 31 December 2010 | ||||||
|---|---|---|---|---|---|---|
| Assets | Total £bn |
Level 1 £bn |
Level 2 £bn |
Level 3 £bn |
||
| Debt securities | ||||||
| - UK government | 8.4 | 8.4 | - | - | ||
| - US government | 22.2 | 17.8 | 4.4 | - | ||
| - other government | 32.9 | 26.5 | 6.4 | - | ||
| - corporate | 1.5 | - | 1.4 | 0.1 | ||
| - other financial institutions | 46.1 | 0.4 | 41.4 | 4.3 | ||
| 111.1 | 53.1 | 53.6 | 4.4 | |||
| Equity shares | 2.0 | 0.3 | 1.4 | 0.3 | ||
| Total | 113.1 | 53.4 | 55.0 | 4.7 | ||
| Of which | ||||||
| Core | 103.0 | 52.8 | 49.2 | 1.0 | ||
| Non-Core | 10.1 | 0.6 | 5.8 | 3.7 | ||
| Total | 113.1 | 53.4 | 55.0 | 4.7 |
| 30 September 2011 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Level 3 sensitivity (1) | |||||||||
| Total | Level 1 | Level 2 | Level 3 | Favourable | Unfavourable | ||||
| Liabilities | £bn | £bn | £bn | £bn | £m | £m | |||
| Deposits by banks | |||||||||
| - repos | 24.6 | - | 24.6 | - | - | - | |||
| - collateral | 32.4 | - | 32.4 | - | - | - | |||
| - other | 2.3 | - | 2.3 | - | - | - | |||
| 59.3 | - | 59.3 | - | - | - | ||||
| Customer accounts | |||||||||
| - repos | 67.4 | - | 67.4 | - | - | - | |||
| - collateral | 10.2 | - | 10.2 | - | - | - | |||
| - other | 10.1 | - | 10.1 | - | 20 | (20) | |||
| 87.7 | - | 87.7 | - | 20 | (20) | ||||
| Debt securities in issue | 48.7 | - | 46.1 | 2.6 | 100 | (110) | |||
| Short positions | 48.5 | 37.7 | 10.0 | 0.8 | 130 | (20) | |||
| Derivatives | |||||||||
| - foreign exchange | 112.2 | - | 111.9 | 0.3 | 20 | (20) | |||
| - interest rate | 407.8 | 0.3 | 406.7 | 0.8 | 40 | (40) | |||
| - equities and commodities | 10.2 | 0.1 | 9.7 | 0.4 | 10 | (10) | |||
| - credit - APS (2) | 0.1 | - | - | 0.1 | 480 | (390) | |||
| - credit - other | 31.5 | - | 30.9 | 0.6 | 50 | (40) | |||
| 561.8 | 0.4 | 559.2 | 2.2 | 600 | (500) | ||||
| Subordinated liabilities | 0.9 | - | 0.9 | - | - | - | |||
| Total | 806.9 | 38.1 | 763.2 | 5.6 | 850 | (650) | |||
| Proportion | 100% | 4.7% | 94.6% | 0.7% | |||||
| Of which | |||||||||
| Core | 798.7 | 38.1 | 756.0 | 4.6 | |||||
| Non-Core | 8.2 | - | 7.2 | 1.0 | |||||
| Total | 806.9 | 38.1 | 763.2 | 5.6 |
| 31 December 2010 | ||||||
|---|---|---|---|---|---|---|
| Total | Level 1 | Level 2 | Level 3 | |||
| Liabilities | £bn | £bn | £bn | £bn | ||
| 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 | 8.8 | - | 8.7 | 0.1 | ||
| 72.2 | - | 72.1 | 0.1 | |||
| Debt securities in issue | 51.2 | - | 49.0 | 2.2 | ||
| Short positions | 43.1 | 35.0 | 7.3 | 0.8 | ||
| Derivatives | ||||||
| - foreign exchange | 89.4 | 0.1 | 89.3 | - | ||
| - interest rate | 299.2 | 0.2 | 298.0 | 1.0 | ||
| - equities and commodities | 10.1 | 0.1 | 9.6 | 0.4 | ||
| - credit - other | 25.3 | - | 25.0 | 0.3 | ||
| 424.0 | 0.4 | 421.9 | 1.7 | |||
| Subordinated liabilities | 1.1 | - | 1.1 | - | ||
| Total | 640.4 | 35.4 | 600.2 | 4.8 | ||
| Proportion | 100% | 5.5% | 93.7% | 0.8% | ||
| Of which Core |
626.1 | 35.4 | 586.9 | 3.8 | ||
| Non-Core | 14.3 | - | 13.3 | 1.0 | ||
| Total | 640.4 | 35.4 | 600.2 | 4.8 | ||
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.
The Q3 2011 movement in available-for-sale financial assets reflects £1,207 million unrealised gains on securities, primarily high quality sovereign bonds, partially offset by realised gains of £214 million from routine portfolio management, mainly in Group Treasury.
| Quarter ended | Nine months ended | |||||
|---|---|---|---|---|---|---|
| Available-for-sale reserve | 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
|
| At beginning of period Unrealised gains Realised (gains)/losses Tax Recycled to profit or loss on disposal of businesses (1) |
(1,026) 1,207 (214) (259) - |
(2,063) 781 626 (370) - |
(1,459) 680 (408) (55) - |
(2,037) 2,150 215 (620) - |
(1,755) 1,327 (535) (263) (16) |
|
| At end of period | (292) | (1,026) | (1,242) | (292) | (1,242) |
Note:
(1) Net of tax - £6 million credit.
In Q2 2011, an impairment loss of £733 million was recorded in respect of Greek government bonds, together with £109 million related interest rate hedge adjustments, as a result of the deterioration in Greece's fiscal position and the announcement of the proposals to restructure Greek government debt. Further losses of £142 million were recorded in Q3 2011, along with £60 million related interest rate hedge adjustments.
Ireland, Italy, Portugal and Spain are facing less acute fiscal difficulties and the Group's sovereign exposures to these countries were not considered impaired at 30 September 2011.
| 30 September 2011 | 30 June 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 | 24,518 | 1,417 | 25,935 | 27,090 | 1,703 | 28,793 | 28,859 | 2,242 | 31,101 | |
| Other contingent liabilities | 10,916 | 215 | 11,131 | 11,883 | 296 | 12,179 | 11,833 | 421 | 12,254 | |
| 35,434 | 1,632 | 37,066 | 38,973 | 1,999 | 40,972 | 40,692 | 2,663 | 43,355 | ||
| Commitments | ||||||||||
| Undrawn formal standby | ||||||||||
| facilities, credit lines and other | ||||||||||
| commitments to lend | 230,369 | 14,258 | 244,627 | 233,795 | 16,493 250,288 | 245,425 | 21,397 266,822 | |||
| Other commitments | 1,163 | 2,228 | 3,391 | 1,141 | 2,315 | 3,456 | 1,560 | 2,594 | 4,154 | |
| 231,532 | 16,486 | 248,018 | 234,936 | 18,808 253,744 | 246,985 | 23,991 270,976 | ||||
| Total contingent liabilities | ||||||||||
| and commitments | 266,966 | 18,118 | 285,084 | 273,909 | 20,807 294,716 | 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.
Except for the developments noted below, there have been no material changes to the litigation or investigations as disclosed in the Interim Results for the six months ended 30 June 2011.
On 2 September 2011, the US Federal Housing Finance Agency ("FHFA") as conservator for the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Company ("Freddie Mac") filed 17 lawsuits in the United States against a number of international banks and individual defendants, including RBS, certain other Group companies and five individual officers and directors of the Group's subsidiaries.
The lawsuits involve allegations that certain disclosures made in connection with the relevant offering or underwriting of securities 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 entities are named as defendants in their capacities as issuers and underwriters of securities, not as originators of any underlying mortgage loans. The plaintiffs' claims against the Group are currently unquantified.
The FHFA primary lawsuit against Group entities relates to approximately US\$32 billion of AAA rated RMBS issuance during the period 2005-2008 pursuant to which Group entities acted as sponsor/depositor and/or lead underwriter. The aggregate principal amount has been reduced to approximately US\$14 billion outstanding by repayments and recoveries of approximately US\$18 billion and losses to date of approximately US\$0.2 billion.
FHFA has also filed five lawsuits against each of Ally Financial Group, Countrywide Financial Corporation, JP Morgan, Morgan Stanley and Nomura in relation to some of the offerings where a Group entity acted as underwriter and is named amongst the defendants.
Group entities believe they have a variety of substantial and credible legal and factual defences available to all of the FHFA lawsuits and the Group will defend each of the matters vigorously. Additionally, Group entities potentially have recourse to indemnities from the relevant mortgage originators or sponsors/depositors although the amount and extent of any recovery is uncertain and subject to a number of factors, including the ongoing creditworthiness of the indemnifying party. Given the early stages of these matters the Group cannot predict the outcome of these claims and is unable reliably to estimate the liability, if any, that may arise or its effect on the Group's consolidated net assets, operating results or cash flows in any particular period.
Following an interim report published on 11 April 2011, the Independent Commission on Banking ("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 bailin) and (iii) competition. The ICB has recommended 2019 as the final deadline for the implementation of its recommendations. 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, 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.
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 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 all have a negative outlook assigned due to Moody's opinion that the likelihood of government support will weaken further in the future, however Moody's affirmed RBS's underlying Baa2 rating, noting that these downgrades do 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 following the earlier downgrade 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 was downgraded from F+ to F1. Fitch has assigned all of these ratings a stable outlook. The standalone ratings of RBS Group and RBS plc were unchanged by this action and have recently been upgraded from C/D to C, corresponding to a bbb viability rating.
The capital package proposed by the European Banking Authority (EBA) and agreed by the European Council on 26 October 2011 requires banks to build up additional capital buffers to reach a level of 9% Core Tier 1 ratio by the end of June 2012, after the removal of the prudential filters on sovereign assets in the available-for-sale portfolio and prudent valuation of sovereign debt in the held-to-maturity and loans and receivables portfolio, reflecting current market prices.
The EBA estimated the preliminary impact of this approach based on data as of 30 June 2011. As part of this exercise, the Group was advised that it did not need additional capital. The final total target buffer will be based on 30 September 2011 data, and the results are expected to be published by the EBA in the course of November.
This announcement was approved by the Board of directors on 3 November 2011.
There have been no significant events between 30 September 2011 and the date of approval of this announcement which would require a change to or additional disclosure in the announcement.
Key terms and acronyms used in this section are defined in the glossary of terms.
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.
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|
|---|---|---|---|
| Risk-weighted assets (RWAs) | £bn | £bn | £bn |
| Credit risk | 346.8 | 366.1 | 385.9 |
| Counterparty risk | 72.2 | 66.1 | 68.1 |
| Market risk | 55.0 | 58.6 | 80.0 |
| Operational risk | 37.9 | 37.9 | 37.1 |
| 511.9 | 528.7 | 571.1 | |
| Benefit of Asset Protection Scheme | (88.6) | (95.2) | (105.6) |
| 423.3 | 433.5 | 465.5 | |
| Risk asset ratio | % | % | % |
| Core Tier 1 | 11.3 | 11.1 | 10.7 |
| Tier 1 | 13.8 | 13.5 | 12.9 |
| Total | 14.7 | 14.4 | 14.0 |
The Group's capital resources in accordance with FSA definitions were as follows:
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|
|---|---|---|---|
| Composition of regulatory capital | £m | £m | £m |
| Tier 1 | |||
| Ordinary and B shareholders' equity | 72,699 | 70,000 | 70,388 |
| Non-controlling interests | 1,433 | 1,498 | 1,719 |
| Adjustments for: | |||
| - goodwill and other intangible assets - continuing businesses | (14,744) | (14,592) | (14,448) |
| - unrealised losses on available-for-sale (AFS) debt securities | 379 | 1,103 | 2,061 |
| - reserves arising on revaluation of property and unrealised gains on | |||
| AFS equities | (88) | (76) | (25) |
| - reallocation of preference shares and innovative securities | (548) | (548) | (548) |
| - other regulatory adjustments* | (3,465) | (1,014) | (1,097) |
| Less excess of expected losses over provisions net of tax | (2,127) | (2,156) | (1,900) |
| Less securitisation positions | (2,164) | (2,404) | (2,321) |
| Less APS first loss | (3,545) | (3,810) | (4,225) |
| Core Tier 1 capital | 47,830 | 48,001 | 49,604 |
| Preference shares | 5,398 | 5,372 | 5,410 |
| Innovative Tier 1 securities | 4,644 | 4,564 | 4,662 |
| Tax on the excess of expected losses over provisions | 767 | 777 | 758 |
| Less material holdings | (303) | (327) | (310) |
| Total Tier 1 capital | 58,336 | 58,387 | 60,124 |
| Tier 2 | |||
| Reserves arising on revaluation of property and unrealised gains on AFS | |||
| equities | 88 | 76 | 25 |
| Collective impairment provisions | 728 | 715 | 778 |
| Perpetual subordinated debt | 1,837 | 1,858 | 1,852 |
| Term subordinated debt | 14,999 | 15,697 | 16,745 |
| Non-controlling and other interests in Tier 2 capital | 11 | 11 | 11 |
| Less excess of expected losses over provisions | (2,894) | (2,933) | (2,658) |
| Less securitisation positions | (2,164) | (2,404) | (2,321) |
| Less material holdings | (303) | (327) | (310) |
| Less APS first loss | (3,545) | (3,810) | (4,225) |
| Total Tier 2 capital | 8,757 | 8,883 | 9,897 |
| Supervisory deductions | |||
| Unconsolidated investments | |||
| - RBS Insurance | (4,292) | (4,176) | (3,962) |
| - other investments | (262) | (354) | (318) |
| Other deductions | (311) | (419) | (452) |
| Deductions from total capital | (4,865) | (4,949) | (4,732) |
| Total regulatory capital | 62,228 | 62,321 | 65,289 |
| * Includes reduction for own liabilities carried at fair value | (2,931) | (1,112) | (1,182) |
| Movement in Core Tier 1 capital | £m |
|---|---|
| At 1 January 2011 | 49,604 |
| Attributable loss net of movement in fair value of own debt | (1,355) |
| Foreign currency reserves | (304) |
| Decrease in capital deductions including APS first loss | 76 |
| Decrease in non-controlling interests | (221) |
| Other movements | 201 |
| At 30 June 2011 | 48,001 |
| Attributable loss net of movement in fair value of own debt | (593) |
| Foreign currency reserves | 13 |
| Decrease in capital deductions including APS first loss | 534 |
| Decrease in non-controlling interests | (65) |
| Other movements | (60) |
| At 30 September 2011 | 47,830 |
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 | |
| 30 September 2011 | £bn | £bn | £bn | £bn | £bn | £bn | £bn |
| 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 |
| 30 June 2011 | |||||||
| UK Retail | 42.2 | - | - | 7.3 | 49.5 | (10.7) | 38.8 |
| UK Corporate | 71.2 | - | - | 6.7 | 77.9 | (19.3) | 58.6 |
| Wealth | 10.9 | - | 0.1 | 1.9 | 12.9 | - | 12.9 |
| Global Transaction Services | 13.9 | - | - | 4.9 | 18.8 | - | 18.8 |
| Ulster Bank | 33.9 | 0.5 | 0.1 | 1.8 | 36.3 | (7.6) | 28.7 |
| US Retail & Commercial | 49.6 | 0.8 | - | 4.4 | 54.8 | - | 54.8 |
| Retail & Commercial | 221.7 | 1.3 | 0.2 | 27.0 | 250.2 | (37.6) | 212.6 |
| Global Banking & Markets | 51.2 | 31.4 | 40.9 | 15.5 | 139.0 | (10.3) | 128.7 |
| Other | 10.7 | 0.4 | - | 0.7 | 11.8 | - | 11.8 |
| Core | 283.6 | 33.1 | 41.1 | 43.2 | 401.0 | (47.9) | 353.1 |
| Non-Core | 79.7 | 33.0 | 17.5 | (5.5) | 124.7 | (47.3) | 77.4 |
| Group before RFS MI | 363.3 | 66.1 | 58.6 | 37.7 | 525.7 | (95.2) | 430.5 |
| RFS MI | 2.8 | - | - | 0.2 | 3.0 | - | 3.0 |
| Group | 366.1 | 66.1 | 58.6 | 37.9 | 528.7 | (95.2) | 433.5 |
| 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 estimated impact of CRD 3 rules on the Group's RWAs post mitigation is an increase of c.£20 billion. This is lower than the initial estimates of £25 billion to £30 billion and reflects mitigation, restructuring and continuing risk reduction.
The implementation of the Basel III proposals in 2013 is now estimated to result in an increase in RWAs of £60 billion to £75 billion. This is lower than the previous estimate of £75 billion to £85 billion, due to risk reduction and mitigation in both GBM and Non-Core.
The combined impact of CRD 3 and Basel III on the Group's RWAs is now estimated to be some £20 billion or 20% lower than the previous estimates.
The Group's balance sheet composition is a function of the broad array of product offerings and diverse markets served by its Core divisions. The structural composition of the balance sheet is augmented as needed through active management of both asset and liability portfolios. The objective of these activities is to optimise liquidity transformation in normal business environments while ensuring adequate coverage of all cash requirements under extreme stress conditions.
Diversification of the Group's funding base is central to its liquidity management strategy. The Group's businesses have developed large customer franchises based on strong relationship management and high quality service. These customer franchises are strongest in the UK, US and Ireland but extend into Europe and Asia. Customer deposits provide large pools of stable funding to support the majority of the Group's lending. It is a strategic objective to improve the Group's loan to deposit ratio to 100%, or better, by 2013.
The Group also accesses professional markets funding by way of public and private debt issuances on an unsecured and secured basis. These debt issuance programmes are spread across multiple currencies and maturities to appeal to a broad range of investor types and preferences around the world. This market based funding supplements the Group's structural liquidity needs and in some cases achieves certain capital objectives.
The table below shows the Group's primary funding sources, excluding repurchase agreements.
| 30 September 2011 | 30 June 2011 | 31 December 2010 | ||||
|---|---|---|---|---|---|---|
| £m | % | £m | % | £m | % | |
| Deposits by banks | ||||||
| - central banks | 3,568 | 0.5 | 4,469 | 0.6 | 6,655 | 0.9 |
| - derivative cash collateral | 32,466 | 4.4 | 25,524 | 3.5 | 28,074 | 3.8 |
| - other | 42,336 | 5.8 | 41,580 | 5.6 | 31,322 | 4.3 |
| 78,370 | 10.7 | 71,573 | 9.7 | 66,051 | 9.0 | |
| Debt securities in issue | ||||||
| - conduit asset backed commercial paper | 11,783 | 1.6 | 12,894 | 1.7 | 17,320 | 2.3 |
| - other commercial paper | 8,680 | 1.2 | 9,475 | 1.3 | 8,915 | 1.2 |
| - certificates of deposits | 25,036 | 3.4 | 35,305 | 4.8 | 37,855 | 5.1 |
| - medium-term notes (MTNs) | 127,719 | 17.4 | 132,371 | 17.9 | 131,026 | 17.7 |
| - covered bonds | 8,541 | 1.2 | 6,972 | 0.9 | 4,100 | 0.6 |
| - securitisations | 12,752 | 1.7 | 16,780 | 2.3 | 19,156 | 2.6 |
| 194,511 | 26.5 | 213,797 | 28.9 | 218,372 | 29.5 | |
| Subordinated liabilities | 26,275 | 3.6 | 26,311 | 3.5 | 27,053 | 3.6 |
| Debt securities in issue and subordinated | ||||||
| liabilities | 220,786 | 30.1 | 240,108 | 32.4 | 245,425 | 33.1 |
| Wholesale funding | 299,156 | 40.8 | 311,681 | 42.1 | 311,476 | 42.1 |
| Customer deposits | ||||||
| - cash collateral | 10,278 | 1.4 | 11,166 | 1.5 | 10,433 | 1.4 |
| - other | 423,382 | 57.8 | 417,537 | 56.4 | 418,166 | 56.5 |
| Total customer deposits | 433,660 | 59.2 | 428,703 | 57.9 | 428,599 | 57.9 |
| Total funding | 732,816 | 100.0 | 740,384 | 100.0 | 740,075 | 100.0 |
| 30 September 2011 £bn |
30 June 2011 £bn |
31 December 2010 £bn |
|
|---|---|---|---|
| Short-term wholesale funding | 173.8 | 173.5 | 157.5 |
| Of which - bank deposits | 74.0 | 67.0 | 62.5 |
| - other | 99.8 | 106.5 | 95.0 |
| Short-term wholesale funding excluding derivative collateral | 141.3 | 148.0 | 129.4 |
| Of which - bank deposits | 41.5 | 41.5 | 34.4 |
| - other | 99.8 | 106.5 | 95.0 |
The table below shows the Group's debt securities in issue and subordinated liabilities by remaining maturity.
| Conduit asset |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| backed | Other | ||||||||
| commercial | CP and | Covered | Subordinated | ||||||
| paper | CDs | MTNs | bonds Securitisations | Total | liabilities | Total | |||
| £m | £m | £m | £m | £m | £m | £m | £m | % | |
| 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 | ||||
| 30 June 2011 | |||||||||
| Less than 1 year | 12,894 | 43,974 | 49,174 | - | 43 106,085 | 399 106,484 | 44.3 | ||
| 1-3 years | - | 788 | 33,366 | 1,114 | 18 | 35,286 | 1,962 | 37,248 | 15.6 |
| 3-5 years | - | 13 | 19,028 | 3,154 | 33 | 22,228 | 8,316 | 30,544 | 12.7 |
| More than 5 years | - | 5 | 30,803 | 2,704 | 16,686 | 50,198 | 15,634 | 65,832 | 27.4 |
| 12,894 | 44,780 132,371 | 6,972 | 16,780 213,797 | 26,311 240,108 | 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 |
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 (predominately term repos) which are not reflected in the following tables.
| Quarter ended | Nine months ended | ||||||
|---|---|---|---|---|---|---|---|
| 30 September 2011 £m |
30 June 2011 £m |
30 September 2010 £m |
30 September 2011 £m |
30 September 2010 £m |
|||
| Public - unsecured - secured |
- 1,721 |
1,808 2,211 |
6,254 5,286 |
5,085 6,584 |
12,112 6,316 |
||
| Private - unsecured |
3,255 | 3,997 | 6,299 | 11,503 | 12,827 | ||
| Gross issuance | 4,976 | 8,016 | 17,839 | 23,172 | 31,255 |
The table below shows the original maturity of public long-term debt securities issued in the nine months ended 30 September 2011 and 2010.
| 2-3 years | 3-5years | 5-10 years | > 10 years | Total | |
|---|---|---|---|---|---|
| Nine months ended 30 September 2011 | £m | £m | £m | £m | £m |
| MTNs | 904 | 1,407 | 1,839 | 935 | 5,085 |
| Covered bonds | - | 1,721 | 2,652 | - | 4,373 |
| Securitisations | - | - | - | 2,211 | 2,211 |
| 904 | 3,128 | 4,491 | 3,146 | 11,669 | |
| % of total | 8% | 27% | 38% | 27% | 100% |
| Nine months ended 30 September 2010 | |||||
| MTNs | 1,445 | 1,541 | 6,393 | 2,733 | 12,112 |
| Covered bonds | - | 1,030 | 1,244 | - | 2,274 |
| Securitisations | - | - | - | 4,042 | 4,042 |
| 1,445 | 2,571 | 7,637 | 6,775 | 18,428 | |
| % of total | 8% | 14% | 41% | 37% | 100% |
The table below shows the currency breakdown of public and private long-term debt securities issued in the nine months ended 30 September 2011 and 2010.
| Nine months ended 30 September 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 | - | 4,373 | - | - | - | 4,373 |
| - securitisations | 258 | 1,293 | 660 | - | - | 2,211 |
| Private | 2,193 | 3,513 | 2,996 | 280 | 2,521 | 11,503 |
| 2,451 | 10,987 | 5,837 | 1,376 | 2,521 | 23,172 | |
| % of total | 11% | 47% | 25% | 6% | 11% | 100% |
| Nine months ended 30 September 2010 | ||||||
| Public | ||||||
| - MTNs | 1,260 | 3,969 | 5,131 | 1,040 | 712 | 12,112 |
| - covered bonds | - | 2,274 | - | - | - | 2,274 |
| - securitisations | 663 | 1,629 | 1,750 | - | - | 4,042 |
| Private | 1,926 | 7,671 | 1,683 | 106 | 1,441 | 12,827 |
| 3,849 | 15,543 | 8,564 | 1,146 | 2,153 | 31,255 | |
| % of total | 12% | 50% | 27% | 4% | 7% | 100% |
The table below shows the composition of the Group's liquidity portfolio.
| Liquidity portfolio | 30 September 2011 £m |
30 June 2011 £m |
31 December 2010 £m |
|---|---|---|---|
| Cash and balances at central banks | 76,833 | 59,010 | 53,661 |
| Treasury bills | 4,037 | 8,600 | 14,529 |
| Central and local government bonds (1) | |||
| - AAA rated governments and US agencies | 29,850 | 47,999 | 41,435 |
| - AA- to AA+ rated governments (2) | 18,077 | 1,399 | 3,744 |
| - governments rated below AA | 700 | 836 | 1,029 |
| - local government | 4,700 | 4,881 | 5,672 |
| 53,327 | 55,115 | 51,880 | |
| Unencumbered collateral (3) | |||
| - AAA rated | 24,186 | 18,335 | 17,836 |
| - below AAA rated and other high quality assets | 11,444 | 13,493 | 16,693 |
| 35,630 | 31,828 | 34,529 | |
| Total liquidity portfolio | 169,827 | 154,553 | 154,599 |
Notes:
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. The Group's NSFR will continue to be refined over time in line with regulatory developments.
| 30 September 2011 | 30 June 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|---|
| ASF (1) | ASF (1) | ASF (1) | Weighting | ||||
| £bn | £bn | £bn | £bn | £bn | £bn | % | |
| Equity | 79 | 79 | 76 | 76 | 77 | 77 | 100 |
| Wholesale funding > 1 year | 125 | 125 | 138 | 138 | 154 | 154 | 100 |
| Wholesale funding < 1 year | 174 | - | 174 | - | 157 | - | - |
| Derivatives | 562 | - | 388 | - | 424 | - | - |
| Repurchase agreements | 132 | - | 124 | - | 115 | - | - |
| Deposits | |||||||
| - Retail and SME - more stable | 170 | 153 | 168 | 151 | 172 | 155 | 90 |
| - Retail and SME - less stable | 25 | 20 | 25 | 20 | 51 | 41 | 80 |
| - Other | 239 | 120 | 236 | 118 | 206 | 103 | 50 |
| Other (2) | 102 | - | 117 | - | 98 | - | - |
| Total liabilities and equity | 1,608 | 497 | 1,446 | 503 | 1,454 | 530 | |
| Cash | 78 | - | 64 | - | 57 | - | - |
| Inter-bank lending | 53 | - | 53 | - | 58 | - | - |
| Debt securities > 1 year | |||||||
| - central and local governments AAA | |||||||
| to AA- | 84 | 4 | 87 | 4 | 89 | 4 | 5 |
| - other eligible bonds | 75 | 15 | 85 | 17 | 75 | 15 | 20 |
| - other bonds | 17 | 17 | 19 | 19 | 10 | 10 | 100 |
| Debt securities < 1 year | 54 | - | 53 | - | 43 | - | - |
| Derivatives | 572 | - | 395 | - | 427 | - | - |
| Reverse repurchase agreements | 102 | - | 98 | - | 95 | - | - |
| Customer loans and advances > 1 year | |||||||
| - residential mortgages | 144 | 94 | 145 | 94 | 145 | 94 | 65 |
| - other | 176 | 176 | 182 | 182 | 211 | 211 | 100 |
| Customer loans and advances < 1 year | |||||||
| - retail loans | 20 | 17 | 20 | 17 | 22 | 19 | 85 |
| - other | 146 | 73 | 143 | 72 | 125 | 63 | 50 |
| Other (3) | 87 | 87 | 102 | 102 | 97 | 97 | 100 |
| Total assets | 1,608 | 483 | 1,446 | 507 | 1,454 | 513 | |
| Undrawn commitments | 245 | 12 | 250 | 13 | 267 | 13 | 5 |
| Total assets and undrawn commitments | 1,853 | 495 | 1,696 | 520 | 1,721 | 526 | |
| Net stable funding ratio | 100% | 97% | 101% |
Notes:
• The Group's net stable funding ratio improved to 100% during Q3 2011 from 97% mainly as a result of increased deposits and the reduction in GBM and Non-Core assets.
The table below shows quarterly trends in the loan to deposit ratio and customer funding gap.
| Loan to deposit ratio (1) |
|||
|---|---|---|---|
| Group % |
Core % |
Group £bn |
|
| 30 September 2011 | 112 | 95 | 52 |
| 30 June 2011 | 114 | 96 | 61 |
| 31 March 2011 | 115 | 96 | 66 |
| 31 December 2010 | 117 | 96 | 74 |
| 30 September 2010 | 126 | 101 | 107 |
Note:
(1) Loans are net of provisions.
The Group seeks to mitigate the effect of prospective interest rate movements which could reduce future net interest income through its management of interest rate risk 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 net interest income over the next twelve months to an immediate up and down 100 basis points change to all interest rates. In addition, the table includes the impact of a gradual 400 basis point steepening and a gradual 300 basis point flattening of the yield curve at tenors greater than a year.
| 30 September | 30 June | |
|---|---|---|
| 2011 | 2011 | |
| £m | £m | |
| + 100bp shift in yield curves | 188 | 319 |
| – 100bp shift in yield curves | (74) | (141) |
| Bear steepener | 487 | 417 |
| Bull flattener | (248) | (309) |
Credit risk is the risk of financial loss due to the failure of customers or counterparties to meet payment obligations. The quantum and nature of credit risk assumed across the Group's different businesses varies considerably, while the overall credit risk outcome usually exhibits a high degree of correlation with the macroeconomic environment.
The table below shows loans and advances to customers excluding reverse repos and assets of disposal groups. All assets, including loans, of businesses held for disposal are included as one line on the balance sheet, as required by IFRS.
| 30 September 2011 | 30 June 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 | ||
| Central and local government | 8,097 | 1,507 | 9,604 | 6,574 | 1,507 | 8,081 | 6,781 | 1,671 | 8,452 | |
| Finance | 48,094 | 4,884 | 52,978 | 47,545 | 5,038 | 52,583 | 46,910 | 7,651 | 54,561 | |
| Residential mortgages | 143,941 | 5,319 | 149,260 | 144,400 | 5,509 149,909 | 140,359 | 6,142 146,501 | |||
| Personal lending | 32,152 | 2,810 | 34,962 | 32,224 | 3,229 | 35,453 | 33,581 | 3,891 | 37,472 | |
| Property | 44,072 40,628 | 84,700 | 44,539 | 42,862 | 87,401 | 42,455 | 47,651 | 90,106 | ||
| Construction | 7,992 | 3,062 | 11,054 | 8,525 | 3,070 | 11,595 | 8,680 | 3,352 | 12,032 | |
| Manufacturing | 24,816 | 5,233 | 30,049 | 24,068 | 6,293 | 30,361 | 25,797 | 6,520 | 32,317 | |
| Service industries and | ||||||||||
| business activities | ||||||||||
| - retail, wholesale and repairs | 22,207 | 2,427 | 24,634 | 22,123 | 2,598 | 24,721 | 21,974 | 3,191 | 25,165 | |
| - transport and storage | 16,236 | 6,009 | 22,245 | 15,243 | 6,449 | 21,692 | 15,946 | 8,195 | 24,141 | |
| - health, education and | ||||||||||
| recreation | 16,224 | 1,515 | 17,739 | 16,707 | 1,547 | 18,254 | 17,456 | 1,865 | 19,321 | |
| - hotels and restaurants | 7,841 | 1,358 | 9,199 | 8,028 | 1,452 | 9,480 | 8,189 | 1,492 | 9,681 | |
| - utilities | 8,212 | 1,725 | 9,937 | 7,487 | 2,010 | 9,497 | 7,098 | 2,110 | 9,208 | |
| - other | 24,744 | 4,479 | 29,223 | 25,128 | 4,966 | 30,094 | 24,464 | 5,530 | 29,994 | |
| Agriculture, forestry and | ||||||||||
| fishing | 3,767 | 135 | 3,902 | 3,791 | 123 | 3,914 | 3,758 | 135 | 3,893 | |
| Finance leases and | ||||||||||
| instalment credit | 8,404 | 7,467 | 15,871 | 8,353 | 7,920 | 16,273 | 8,321 | 8,529 | 16,850 | |
| Interest accruals | 661 | 152 | 813 | 715 | 176 | 891 | 831 | 278 | 1,109 | |
| Gross loans | 417,460 88,710 | 506,170 | 415,450 | 94,749 510,199 | 412,600 108,203 520,803 | |||||
| Loan impairment provisions | (8,748) (11,849) | (20,597) | (8,621) | (12,006) | (20,627) | (7,740) | (10,315) | (18,055) | ||
| Net loans | 408,712 76,861 | 485,573 | 406,829 | 82,743 489,572 | 404,860 | 97,888 502,748 |
• Gross loans decreased by £4.0 billion in Q3 2011, across most sectors, including £2.7 billion in property, £0.5 billion in construction, £0.3 billion in manufacturing, £0.3 billion in hotels and restaurants reflecting run-offs, continued de-risking as well as subdued credit demand.
The table below analyses the Group's risk elements in lending (REIL) which do not take account of the value of any security held that 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.
| 30 September 2011 | 30 June 2011 | 31 December 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Non | Non | Non | |||||||
| Core £m |
Core £m |
Total £m |
Core £m |
Core £m |
Total £m |
Core £m |
Core £m |
Total £m |
|
| Impaired loans (1) | |||||||||
| - UK | 9,222 | 7,471 | 16,693 | 9,229 | 7,812 | 17,041 | 8,575 | 7,835 | 16,410 |
| - Overseas | 6,695 | 16,274 | 22,969 | 6,326 | 16,268 | 22,594 | 4,936 | 14,355 | 19,291 |
| 15,917 | 23,745 | 39,662 | 15,555 | 24,080 | 39,635 | 13,511 | 22,190 | 35,701 | |
| Accruing loans past due 90 days or more (2) |
|||||||||
| - UK | 1,648 | 580 | 2,228 | 1,487 | 583 | 2,070 | 1,434 | 939 | 2,373 |
| - Overseas | 580 | 256 | 836 | 415 | 230 | 645 | 262 | 262 | 524 |
| 2,228 | 836 | 3,064 | 1,902 | 813 | 2,715 | 1,696 | 1,201 | 2,897 | |
| Total REIL | 18,145 | 24,581 | 42,726 | 17,457 | 24,893 | 42,350 | 15,207 | 23,391 | 38,598 |
| REIL as a % of gross loans and advances (3) |
4.3% | 27.4% | 8.4% | 4.2% | 26.1% | 8.3% | 3.7% | 20.7% | 7.3% |
| Provisions as a % of REIL | 49% | 48% | 49% | 50% | 48% | 49% | 52% | 44% | 47% |
(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) Gross loans and advances to customers include assets of disposal groups and exclude repos.
For sector, geography and divisional analysis of loans, REIL and impairments, refer to Appendix 3.
The table below details the movement in REIL for the nine months ended 30 September 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 |
| Intra-group transfers | 300 | (300) | - | 81 | (81) | - | 381 | (381) | - |
| Currency translation and | |||||||||
| other adjustments | 165 | 462 | 627 | 14 | 12 | 26 | 179 | 474 | 653 |
| Additions | 4,249 | 5,383 | 9,632 | 1,362 | 577 | 1,939 | 5,611 | 5,960 | 11,571 |
| Transfers | 403 | 284 | 687 | (245) | (225) | (470) | 158 | 59 | 217 |
| Disposals, repayments and | |||||||||
| restructurings | (2,055) | (3,027) | (5,082) | (1,006) | (671) | (1,677) | (3,061) | (3,698) | (6,759) |
| Amounts written-off | (1,018) | (912) | (1,930) | - | - | - | (1,018) | (912) | (1,930) |
| At 30 June 2011 | 15,555 | 24,080 | 39,635 | 1,902 | 813 | 2,715 | 17,457 | 24,893 | 42,350 |
| Currency translation and | |||||||||
| other adjustments | (165) | (629) | (794) | (19) | (15) | (34) | (184) | (644) | (828) |
| Additions | 2,012 | 1,527 | 3,539 | 781 | 250 | 1,031 | 2,793 | 1,777 | 4,570 |
| Transfers | (3) | 28 | 25 | 28 | (10) | 18 | 25 | 18 | 43 |
| Disposals, repayments and | |||||||||
| restructurings | (889) | (764) | (1,653) | (464) | (202) | (666) | (1,353) | (966) | (2,319) |
| Amounts written-off | (593) | (497) | (1,090) | - | - | - | (593) | (497) | (1,090) |
| At 30 September 2011 | 15,917 | 23,745 | 39,662 | 2,228 | 836 | 3,064 | 18,145 | 24,581 | 42,726 |
| 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, repayments and | |||||||||
| restructurings | (2,944) | (3,791) | (6,735) | (1,470) | (873) | (2,343) | (4,414) | (4,664) | (9,078) |
| 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 |
Note:
(1) Accruing loans past due 90 days or more (also see page 112).
• Disposals and restructurings include £1,685 million of transfers to the performing book in the nine months ended September 2011 including £120 million in Q3 2011.
The following tables show the movement in impairment provisions for loans and advances to banks and customers.
| Quarter ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 June 2011 | 30 September 2010 | ||||||||
| Non | Non | Non | ||||||||
| Core | Core | Total | Core | Core RFS MI | Total | Core | Core | Total | ||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| At beginning of period | 8,752 | 12,007 | 20,759 | 8,416 | 10,842 | - | 19,258 | 7,633 | 8,533 | 16,166 |
| Transfers to disposal groups | - | - | - | - | 9 | - | 9 | - | - | - |
| Intra-group transfers | - | - | - | - | - | - | - | (351) | 351 | - |
| Currency translation and | ||||||||||
| other adjustments | (90) | (285) | (375) | 33 | 145 | - | 178 | 116 | 175 | 291 |
| Disposals | - | - | - | - | - | 11 | 11 | - | - | - |
| Amounts written-off | (593) | (497) | (1,090) | (504) | (474) | - | (978) | (416) | (329) | (745) |
| Recoveries of amounts | ||||||||||
| previously written-off | 39 | 55 | 94 | 41 | 126 | - | 167 | 80 | 85 | 165 |
| Charge to income statement | ||||||||||
| - continued | 817 | 635 | 1,452 | 810 | 1,427 | - | 2,237 | 779 | 1,129 | 1,908 |
| - discontinued | - | - | - | - | - | (11) | (11) | - | - | - |
| Unwind of discount | (52) | (65) | (117) | (44) | (68) | - | (112) | (50) | (65) | (115) |
| At end of period | 8,873 | 11,850 | 20,723 | 8,752 | 12,007 | - | 20,759 | 7,791 | 9,879 | 17,670 |
| Nine months ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 September 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 | - | - | - | - | - | (67) | - | (67) |
| Intra-group transfers | 177 | (177) | - | - | (351) | 351 | - | - |
| Currency translation and | ||||||||
| other adjustments | (1) | (45) | - | (46) | (163) | 294 | - | 131 |
| Disposals | - | - | 11 | 11 | - | (17) | (2,149) | (2,166) |
| Amounts written-off | (1,611) | (1,409) | - | (3,020) | (1,479) | (3,047) | - | (4,526) |
| Recoveries of amounts | ||||||||
| previously written-off | 119 | 261 | - | 380 | 184 | 131 | - | 315 |
| Charge to income statement | ||||||||
| - continued | 2,479 | 3,108 | - | 5,587 | 2,825 | 4,164 | - | 6,989 |
| - discontinued | - | - | (11) | (11) | - | - | 39 | 39 |
| Unwind of discount | (156) | (204) | - | (360) | (146) | (182) | - | (328) |
| At end of period | 8,873 | 11,850 | - | 20,723 | 7,791 | 9,879 | - | 17,670 |
The following table analyses impairment provisions in respect of loans and advances to banks and customers.
| 30 September 2011 | 30 June 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 | 1,516 | 751 | 2,267 | 1,568 | 786 | 2,354 | 1,653 | 997 | 2,650 |
| Collectively assessed | 4,675 | 1,114 | 5,789 | 4,510 | 1,100 | 5,610 | 4,139 | 1,157 | 5,296 |
| Individually assessed | 2,557 | 9,984 | 12,541 | 2,543 | 10,120 | 12,663 | 1,948 | 8,161 | 10,109 |
| Customer loans | 8,748 | 11,849 | 20,597 | 8,621 | 12,006 | 20,627 | 7,740 | 10,315 | 18,055 |
| Bank loans | 125 | 1 | 126 | 131 | 1 | 132 | 126 | 1 | 127 |
| Total provisions | 8,873 | 11,850 | 20,723 | 8,752 | 12,007 | 20,759 | 7,866 | 10,316 | 18,182 |
| % of loans (1) | 2.1% | 13.2% | 4.1% | 2.1% | 12.6% | 4.0% | 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.
| Quarter ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 June 2011 | 30 September 2010 | |||||||
| Non | Non | Non | |||||||
| Core | Core | Total | Core | Core | Total | Core | Core | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Latent loss | (33) | (27) | (60) | (16) | (172) | (188) | 132 | (92) | 40 |
| Collectively assessed | 548 | 141 | 689 | 465 | 126 | 591 | 450 | 298 | 748 |
| Individually assessed | 302 | 521 | 823 | 361 | 1,473 | 1,834 | 197 | 923 | 1,120 |
| Customer loans Securities - sovereign debt impairment and related interest rate hedge |
817 | 635 | 1,452 | 810 | 1,427 | 2,237 | 779 | 1,129 | 1,908 |
| adjustments | 202 | - | 202 | 842 | - | 842 | - | - | - |
| Securities - other | 37 | 47 | 84 | 43 | (16) | 27 | 3 | 42 | 45 |
| Charge to income statement |
1,056 | 682 | 1,738 | 1,695 | 1,411 | 3,106 | 782 | 1,171 | 1,953 |
| Charge relating to customer loans as a % of gross customer loans (1) |
0.8% | 2.8% | 1.1% | 0.8% | 6.0% | 1.8% | 0.7% | 3.9% | 1.4% |
| Nine months ended | ||||||
|---|---|---|---|---|---|---|
| 30 September 2011 | 30 September 2010 | |||||
| Core | Non-Core | Total | Core | Non-Core | Total | |
| £m | £m | £m | £m | £m | £m | |
| Latent loss | (165) | (190) | (355) | 63 | (68) | (5) |
| Collectively assessed | 1,597 | 403 | 2,000 | 1,699 | 642 | 2,341 |
| Individually assessed | 1,047 | 2,895 | 3,942 | 1,063 | 3,590 | 4,653 |
| Customer loans | 2,479 | 3,108 | 5,587 | 2,825 | 4,164 | 6,989 |
| Securities - sovereign debt impairment and | ||||||
| related interest rate hedge adjustments | 1,044 | - | 1,044 | - | - | - |
| Securities - other | 100 | 60 | 160 | 25 | 101 | 126 |
| Charge to income statement | 3,623 | 3,168 | 6,791 | 2,850 | 4,265 | 7,115 |
| Charge relating to customer loans as a % of gross customer loans (1) |
0.8% | 4.6% | 1.5% | 0.9% | 4.7% | 1.7% |
Note:
(1) Customer loan impairment charge as a percentage of gross loans and advances to customers including assets of disposal groups and excluding reverse repos.
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 now 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 £m |
US £m |
Other £m |
Banks £m |
institutions £m |
Corporate £m |
Total £m |
ABS £m |
|
| 30 September 2011 | ||||||||
| Held-for-trading (HFT) | 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 |
| 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 | 1,090 | 1,240 | 1,331 | 310 | 1,117 | 81 | 5,169 | 1,242 |
| Gross unrealised losses | - | - | (989) | (1,039) | (2,371) | (24) | (4,423) | (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 |
| 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 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 | Of which | ||||||||
| UK | US | Other | Banks | institutions Corporate | Total | % of | ABS | ||
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | total | £m |
| 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 |
| RMBS (1) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Government | MBS | |||||||||
| sponsored | Non | Sub | covered | Other | ||||||
| or similar (2) | Prime | conforming | prime | bond CMBS (3) CDOs (4) CLOs (5) | ABS (6) | Total | ||||
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| AAA | 4,391 | 4,152 | 1,509 | 144 | 3,462 | 893 | 194 | 2,198 | 1,828 18,771 | |
| AA to AA+ | 31,037 | 117 | 111 | 97 | 1,162 | 839 | 125 | 1,496 | 970 35,954 | |
| A to AA- | 137 | 603 | 124 | 175 | 1,680 | 1,326 | 166 | 569 | 890 | 5,670 |
| BBB- to A- | - | 147 | 295 | 59 | 1,553 | 383 | 92 | 601 | 1,301 | 4,431 |
| Non-investment grade | - | 768 | 676 | 486 | - | 327 | 1,516 | 170 | 676 | 4,619 |
| Unrated | - | 146 | 47 | 213 | - | 67 | 134 | 331 | 279 | 1,217 |
| 35,565 | 5,933 | 2,762 | 1,174 | 7,857 | 3,835 | 2,227 | 5,365 | 5,944 70,662 | ||
| Of which in Non-Core | - | 269 | 463 | 276 | - | 1,158 | 1,953 | 4,698 | 1,976 10,793 | |
| 31 December 2010 | ||||||||||
| AAA | 28,835 | 4,355 | 1,754 | 317 | 7,107 | 2,789 | 444 | 2,490 | 3,144 51,235 | |
| AA to AA+ | 1,529 | 147 | 144 | 116 | 357 | 392 | 567 | 1,786 | 1,297 | 6,335 |
| A to AA- | - | 67 | 60 | 212 | 408 | 973 | 296 | 343 | 885 | 3,244 |
| BBB- to A- | - | 82 | 316 | 39 | - | 500 | 203 | 527 | 1,718 | 3,385 |
| Non-investment grade | - | 900 | 809 | 458 | - | 296 | 1,863 | 332 | 265 | 4,923 |
| Unrated | - | 196 | 52 | 76 | - | - | 85 | 596 | 698 | 1,703 |
| 30,364 | 5,747 | 3,135 | 1,218 | 7,872 | 4,950 | 3,458 | 6,074 | 8,007 70,825 |
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.
(6) Other ABS includes £1.4 billion (31 December 2010 - £1.9 billion) of covered bonds.
For analyses of ABS by geography and measurement classification, refer to Appendix 3.
The table below analyses available-for-sale (AFS) debt securities by issuer and related AFS reserves, gross and net of tax, for countries exceeding £0.5 billion, together with the total in aggregate of those individually less than £0.5 billion.
| Se 30 |
be tem r 2 01 p |
1 | 31 | De mb 20 ce er |
10 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ce al ntr |
Ot he r |
AF S |
Ce ntr al |
Ot he r |
AF S |
|||||||||
| d l al an oc |
fin cia l an |
Of hic h w |
re se rve s |
d l al an oc |
fin cia l an |
Of wh ich |
re se rve s |
|||||||
| nt g ov ern me |
Ba nk s |
ins titu tio ns |
Co te rp ora |
To tal |
AB S |
( ) g ros s |
t go ve rnm en |
Ba nks |
ins titu tio ns |
Co rat rpo e |
To tal |
AB S |
(gr s) os |
|
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| US | 20 03 2 , |
39 4 |
16 71 0 , |
16 9 |
37 30 5 , |
19 90 7 , |
52 3 |
22 24 4 , |
70 4 |
15 97 3 , |
65 | 38 98 6 , |
20 87 2 , |
( 4) 30 |
| UK | 13 32 8 , |
4, 05 3 |
99 6 |
89 1 |
19 26 8 , |
3, 83 0 |
58 9 |
8, 37 7 |
4, 29 7 |
1, 66 2 |
43 8 |
14 77 4 , |
4, 00 2 |
158 |
| Ge rm an y |
11 08 4 , |
1, 51 8 |
10 9 |
99 | 12 81 0 , |
1, 08 3 |
41 6 |
10 64 8 , |
1, 29 1 |
38 6 |
21 9 |
12 54 4 , |
1, 36 0 |
( ) 39 |
| Ne the rla nd s |
2, 74 9 |
1, 35 7 |
6, 16 3 |
20 1 |
10 47 0 , |
6, 89 2 |
( 8 ) |
3, 46 9 |
98 4 |
6, 23 8 |
26 4 |
10 95 5 , |
6, 77 3 |
( 164 ) |
| Sp ain |
81 | 5, 13 1 |
1, 63 2 |
8 | 6, 85 2 |
6, 72 4 |
( ) 1, 40 8 |
88 | 5, 26 4 |
1, 65 7 |
9 | 7, 01 8 |
6, 77 3 |
( 1, 27 7) |
| Fra nce |
4, 60 5 |
98 8 |
56 1 |
24 7 |
6, 40 1 |
63 9 |
52 | 91 2 5, |
77 4 |
63 0 |
71 | 7, 38 7 |
57 5 |
19 |
| Ja pa n |
3, 57 5 |
- | - | 6 | 3, 58 1 |
- | 1 | 4, 35 4 |
- | 80 | 2 | 4, 43 6 |
- | - |
| Au alia str |
- | 1, 83 4 |
26 2 |
28 9 |
5 2, 38 |
5 49 |
( ) 17 |
- | 1, 65 9 |
32 0 |
93 | 2, 07 2 |
48 6 |
( 33 ) |
| MD Bs ( 1) |
- | - | 1, 11 2 |
- | 1, 11 2 |
- | 37 | - | - | 91 2 |
- | 91 2 |
- | 30 |
| Ita ly |
85 2 |
16 8 |
55 | 6 | 1, 08 1 |
22 1 |
( ) 21 5 |
90 6 |
198 | 54 | 15 | 1, 173 |
24 3 |
( ) 115 |
| Sin ga po re |
73 2 |
18 0 |
20 | - | 93 2 |
- | - | 64 9 |
189 | 20 | - | 85 8 |
- | - |
| Be lg ium |
77 1 |
39 | - | 3 | 81 3 |
34 | ( ) 91 |
76 3 |
39 | - | 1 | 80 3 |
34 | ( ) 53 |
| Ind ia |
62 7 |
17 6 |
- | - | 80 3 |
- | ( 6 ) |
54 8 |
139 | - | - | 68 7 |
- | 2 |
| Ho Ko ng ng |
64 1 |
- | - | - | 64 1 |
- | - | 90 5 |
8 | - | - | 91 3 |
- | - |
| De ark nm |
43 3 |
18 3 |
- | - | 61 6 |
- | - | 62 9 |
172 | - | - | 80 1 |
- | 2 |
| Au str ia |
29 6 |
61 | 10 5 |
14 0 |
60 2 |
15 6 |
( 40 ) |
27 4 |
67 | 4 | 13 1 |
47 6 |
51 | ( 26 ) |
| Sw ed en |
39 | 37 9 |
14 1 |
26 | 58 5 |
25 0 |
1 | 30 | 28 8 |
13 1 |
15 | 46 4 |
26 9 |
1 |
| Sw itze rla nd |
32 3 |
22 8 |
- | 7 | 55 8 |
- | 1 | 65 7 |
148 | - | 8 | 81 3 |
- | 11 |
| Gr ee ce |
53 2 |
- | - | - | 53 2 |
- | - | 89 5 |
- | - | - | 89 5 |
- | ( 4) 69 |
| Re blic of pu |
||||||||||||||
| Ir ela nd |
11 5 |
17 6 |
1 | 91 | 38 3 |
15 1 |
( ) 83 |
104 | 43 5 |
62 | 88 | 68 9 |
177 | ( ) 99 |
| So uth Ko rea |
13 8 |
- | 86 | - | 22 4 |
86 | - | 26 1 |
- | 42 9 |
- | 69 0 |
42 9 |
( 1) |
| < £ 0.5 bn |
1, 38 3 |
40 3 |
51 0 |
15 1 |
2, 44 7 |
62 3 |
( 2) 14 |
1, 77 3 |
32 6 |
59 0 |
95 | 2, 78 4 |
47 1 |
( 123 ) |
| 62 33 6 , |
17 26 8 , |
28 46 3 , |
2, 33 4 |
11 0, 40 1 |
41 09 1 , |
( 39 0 ) |
63 48 6 , |
16 98 2 , |
29 148 , |
1, 51 4 |
11 1, 130 |
42 51 5 , |
( 2, 70 5) |
|
| Ta n A FS x o re |
se rve s |
11 | 64 4 |
|||||||||||
| S r AF |
f ta t o |
37 9 |
06 | |||||||||||
| es erv es |
ne x |
( ) |
( 1) 2, |
(1) Represents multilateral development banks and other supranational organisations.
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.
| 30 September 2011 | 30 June | 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% | 41,121 | 13,820 | 19,858 | 137,585 | 304,713 | 517,097 | 357,031 | 408,489 |
| AQ2 | 0.034% - 0.048% | 591 | 116 | 347 | 2,016 | 4,195 | 7,265 | 5,600 | 2,659 |
| AQ3 | 0.048% - 0.095% | 2,618 | 525 | 939 | 3,609 | 6,832 | 14,523 | 10,908 | 3,317 |
| AQ4 | 0.095% - 0.381% | 1,135 | 399 | 828 | 3,373 | 4,670 | 10,405 | 6,624 | 3,391 |
| AQ5 | 0.381% - 1.076% | 4,469 | 173 | 341 | 2,707 | 6,019 | 13,709 | 6,933 | 4,860 |
| AQ6 | 1.076% - 2.153% | 282 | 65 | 78 | 929 | 1,117 | 2,471 | 3,595 | 1,070 |
| AQ7 | 2.153% - 6.089% | 327 | 134 | 93 | 670 | 2,144 | 3,368 | 2,072 | 857 |
| AQ8 | 6.089% - 17.222% | 3 | 11 | 30 | 160 | 970 | 1,174 | 654 | 403 |
| AQ9 | 17.222% - 100% | 10 | 12 | 19 | 402 | 697 | 1,140 | 486 | 450 |
| AQ10 | 100% | 26 | 11 | 48 | 713 | 394 | 1,192 | 969 | 1,581 |
| 50,582 | 15,266 | 22,581 | 152,164 | 331,751 | 572,344 | 394,872 | 427,077 | ||
| Counterparty mtm netting | (473,256) | (323,455) | (330,397) | ||||||
| Cash collateral held against derivative exposures | (38,202) | (27,500) | (31,096) | ||||||
| Net exposure | 60,886 | 43,917 | 65,584 |
At 30 September 2011, the Group also held collateral in the form of securities of £5.5 billion (30 June 2011 - £4.2 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.
| 30 September 2011 | 30 June 2011 | 31 December 2010 | |||||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||
| Contract type | £m | £m | £m | £m | £m | £m | |
| Interest rate contracts | 424,130 | 407,814 | 283,966 | 269,638 | 311,731 | 299,209 | |
| Exchange rate contracts | 107,024 | 112,184 | 72,682 | 78,095 | 83,253 | 89,375 | |
| Credit derivatives | 33,884 | 31,574 | 32,507 | 30,877 | 26,872 | 25,344 | |
| Equity and commodity contracts | 7,306 | 10,218 | 5,717 | 9,199 | 5,221 | 10,039 | |
| 572,344 | 561,790 | 394,872 | 387,809 | 427,077 | 423,967 |
The Group's exposures to monolines and 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 | |
| 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 | |||
| 30 June 2011 | ||||||
| A to AA- | 5,547 | 4,936 | 611 | 166 | - | 445 |
| Non-investment grade | 7,079 | 4,047 | 3,032 | 2,155 | 68 | 809 |
| 12,626 | 8,983 | 3,643 | 2,321 | 68 | 1,254 | |
| Of which: | ||||||
| CMBS | 3,853 | 2,131 | 1,722 | 1,285 | ||
| CDOs | 1,086 | 230 | 856 | 596 | ||
| CLOs | 4,946 | 4,561 | 385 | 107 | ||
| Other ABS | 2,241 | 1,739 | 502 | 250 | ||
| Other | 500 | 322 | 178 | 83 | ||
| 12,626 | 8,983 | 3,643 | 2,321 | |||
| 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 |
Exposure to monoline insurers (continued)
• The increase in monoline CVA on a year-to-date basis was primarily attributable to wider monoline credit spreads.
| Fair value: | |||||
|---|---|---|---|---|---|
| Notional: | reference | Credit | |||
| protected | protected | Gross | valuation | Net | |
| assets | assets | exposure | adjustment | exposure | |
| £m | £m | £m | £m | £m | |
| 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 | |
| 30 June 2011 | |||||
| AAA | 205 | 205 | - | - | - |
| A to AA- | 622 | 607 | 15 | 4 | 11 |
| Non-investment grade | 19,724 | 18,759 | 965 | 427 | 538 |
| Unrated | 3,927 | 3,712 | 215 | 101 | 114 |
| 24,478 | 23,283 | 1,195 | 532 | 663 | |
| 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 |
Exposure to CPDCs (continued)
All country exposures are covered by the Group's country risk framework. This framework includes active management of portfolios either when these have been identified as exhibiting signs of stress, using the Group's country risk watch list process, or when it is otherwise considered appropriate. Granular portfolio reviews are undertaken to align country risk profiles to the Group's country risk appetite in light of evolving economic and political developments. Accordingly, limit controls are tailored to the level of risk associated with each country.
Ongoing concern surrounding the most vulnerable eurozone economies has intensified the Group's vigilance and controls. This involves frequent, comprehensive and detailed reviews of exposures to each of these countries, including increased prudence in counterparty monitoring which has led to several divestments and exposure reductions. In addition to Greece, Portugal and Ireland, the Group has recently brought Italy and Spain under tighter controls, and country limits are being set in response to these countries' uncertain outlook.
Country events in North Africa and the Middle East, a tsunami plus nuclear disaster in Japan, and developments in the eurozone have placed crisis management on the daily agenda for country risk this year. Following on from sovereign related stress tests and a series of broad thematic reviews, a Group wide response plan has been prepared to position the Group against potential increased stress in the eurozone. The plan covers themes such as sovereign debt restructuring, various eurozone breakup scenarios and a re-examination of prospective financial sector support given ongoing public finance and political pressures.
The following tables show the Group's exposure to countries at 30 September 2011, where the onbalance sheet exposure to counterparties incorporated in the country exceeded £1 billion and where the country had an external rating of A+ or below from S&P, Moody's or Fitch, as well as selected other eurozone countries. The numbers are stated before taking into account the impact of mitigating action, such as collateral, insurance or guarantees that may have been taken to reduce or eliminate exposure to country risk events. Shipping related exposures are not included due to their multinational nature.
The following apply to the tables on pages 128 to 140:
Lending comprises loans and advances, gross of impairment provisions, to: central banks, including cash balances; other banks and financial institutions, incorporating overdraft and other short-term facilities; corporations, in large part loans and leases; and individuals, comprising mortgages, personal loans and credit card balances. Risk elements in lending (REIL) are included within lending and comprise impaired loans and loans where an impairment event has taken place.
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 net of 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.
Derivatives comprise the marked-to-market (mtm) value of such contracts after the effect of enforceable netting agreements, but gross of collateral. Repos comprise the marked-to-market value of counterparty exposure arising from repo transactions net of collateral.
Off balance sheet amounts comprise the sum of contingent liabilities, including guarantees, and committed undrawn facilities.
Credit default swaps (CDS): Under a CDS contract the buyer is protected in the event of the default of the reference entity by the seller. Fair value or mtm value of CDS represents the carrying value on the balance sheet. The mtm value of CDSs is included within derivatives against the counterparty of the credit derivative, as opposed to the reference entity.
| Le nd ing |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 Se be r 2 01 1 tem |
Ce al d ntr an lo l ca nt g ov ern me £m |
Ce al ntr ba nk s £m |
Ot he r ba nk s £m |
Ot he r fin cia l an ins titu tio ns £m |
Co te rp ora £m |
Pe l rso na £m |
To tal len din g £m |
Of w Co re £m |
hic h n-C No ore £m |
De bt riti se cu es £m |
De riv ati ve s ( f g ros s o llat l) co era d r an ep os £m |
Co nti t ng en lia bil itie nd s a itm ts co mm en £m |
| p | ||||||||||||
| Eu roz on e: |
||||||||||||
| Ire lan d |
54 | 2, 23 5 |
49 | 54 2 |
19 57 4 , |
19 60 6 , |
42 06 0 , |
31 54 9 , |
10 51 1 , |
90 0 |
2, 35 4 |
3, 34 0 |
| Sp ain |
10 | 3 | 55 4 |
90 | 59 6, 9 |
38 0 |
7, 63 6 |
50 5 3, |
4, 13 1 |
6, 49 7 |
52 2, 1 |
1, 99 0 |
| Ita ly |
- | 76 | 42 0 |
47 2 |
2, 05 7 |
25 | 3, 05 0 |
1, 43 7 |
1, 61 3 |
1, 18 0 |
2, 33 1 |
3, 16 8 |
| Gr ee ce |
7 | 10 | 1 | 32 | 38 1 |
14 | 44 5 |
32 5 |
12 0 |
70 7 |
33 5 |
71 |
| Po rtu l ga |
43 | - | 57 | - | 57 9 |
5 | 68 4 |
33 3 |
35 1 |
13 9 |
44 3 |
35 6 |
| Ot he r |
||||||||||||
| Ge rm an y - |
- | 15 48 3 , |
1, 47 3 |
33 4 |
09 9 7, |
16 6 |
24 55 5 , |
18 83 2 , |
5, 72 3 |
17 43 4 , |
15 76 9 , |
75 2 7, |
| Ne the rla nd s - |
2, 25 7 |
7, 39 3 |
64 2 |
1, 89 6 |
5, 54 0 |
21 | 17 74 9 , |
15 00 3 , |
2, 74 6 |
11 72 9 , |
11 29 0 , |
14 53 6 , |
| Fra nce - |
50 3 |
56 | 1, 99 8 |
5 69 |
35 4, 4 |
79 | 5 7, 68 |
5, 21 8 |
2, 46 7 |
5 11 12 , |
9, 77 7 |
11 30 3 , |
| Lux bo em urg - |
- | 27 | 92 | 1, 08 7 |
2, 44 8 |
3 | 3, 65 7 |
2, 06 0 |
1, 59 7 |
16 2 |
3, 66 3 |
2, 17 2 |
| Be lg ium - |
22 6 |
13 | 38 4 |
39 9 |
80 0 |
20 | 1, 84 2 |
1, 27 3 |
56 9 |
92 0 |
2, 81 8 |
5 1, 43 |
| Re st of eu roz on e |
12 0 |
- | 61 | 11 5 |
1, 51 1 |
26 | 1, 83 3 |
1, 49 4 |
33 9 |
1, 15 2 |
1, 91 9 |
1, 36 2 |
| Ot he ele d c cte ntr r s ou |
ies | |||||||||||
| Ind ia |
- | 16 4 |
1, 38 2 |
94 | 5 3, 29 |
15 0 |
5, 5 08 |
4, 67 0 |
5 41 |
1, 86 7 |
19 4 |
1, 49 2 |
| Ch ina |
23 | 17 0 |
2, 22 6 |
6 | 74 6 |
55 | 3, 22 6 |
3, 03 3 |
19 3 |
44 4 |
76 2 |
1, 36 5 |
| So uth Ko rea |
- | 39 | 1, 02 4 |
3 | 63 6 |
1 | 1, 70 3 |
1, 69 3 |
10 | 1, 10 6 |
58 9 |
5 36 |
| Tu rke y |
23 1 |
27 | 29 4 |
55 | 1, 18 7 |
15 | 1, 80 9 |
1, 33 0 |
47 9 |
38 6 |
83 | 49 8 |
| Ru ssi a |
- | 20 | 98 6 |
44 | 85 2 |
69 | 1, 97 1 |
1, 85 1 |
12 0 |
10 7 |
93 | 62 0 |
| Bra zil |
- | - | 1, 03 5 |
- | 27 3 |
4 | 1, 31 2 |
1, 20 1 |
11 1 |
65 9 |
25 | 17 2 |
| Ro nia ma |
30 | 17 4 |
22 | 15 | 47 3 |
41 0 |
1, 12 4 |
13 | 1, 11 1 |
30 2 |
10 | 16 1 |
| Me xic o |
- | - | 20 7 |
- | 99 3 |
1 | 1, 20 1 |
81 9 |
38 2 |
27 | 12 7 |
35 9 |
| Ind ia on es |
77 | 31 | 28 8 |
23 | 31 1 |
11 0 |
84 0 |
72 0 |
12 0 |
13 9 |
36 5 |
13 3 |
| Po lan d |
37 | - | - | 10 | 5 63 |
5 | 68 7 |
63 9 |
48 | 29 4 |
60 | 70 9 |
For definitions refer to pages 126 and 127.
| Le nd ing |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Ce ntr al d an lo l ca t go ve rnm en |
Ce ntr al ba nks |
Ot he r ba nks |
Ot he r fin cia l an ins titu tio ns |
Co rat rpo e |
Pe l rso na |
To tal len din g |
Of wh Co re |
ich n-C No ore |
De bt ritie se cu s |
De riva tive s (gr f os s o llat l) co era d r an ep os |
Co nti t ng en liab iliti d es an itm ts co mm en |
|
| 31 De mb 20 10 ce er |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Eu roz on e: |
||||||||||||
| Ire lan d |
61 | 2, 119 |
87 | 81 3 |
19 88 1 , |
20 22 8 , |
43 189 , |
32 43 2 , |
10 75 7 , |
1, 32 3 |
2, 94 0 |
4, 31 1 |
| Sp ain |
19 | 5 | 166 | 92 | 6, 96 2 |
40 7 |
65 1 7, |
3, 130 |
4, 52 1 |
107 7, |
2, 04 7 |
2, 88 3 |
| Ita ly |
45 | 78 | 66 8 |
41 8 |
2, 48 3 |
27 | 3, 71 9 |
1, 81 8 |
1, 90 1 |
3, 83 6 |
2, 03 0 |
3, 85 3 |
| Gr ee ce |
14 | 36 | 18 | 31 | 188 | 16 | 30 3 |
173 | 130 | 97 4 |
20 3 |
162 |
| Po rtu l ga |
86 | - | 63 | - | 61 1 |
6 | 76 6 |
45 0 |
31 6 |
24 2 |
39 3 |
73 4 |
| Ot he r |
||||||||||||
| Ge rm an y - |
- | 10 89 4 , |
1, 06 0 |
42 2 |
7, 42 3 |
162 | 19 96 1 , |
13 58 6 , |
6, 37 5 |
14 74 7 , |
15 26 3 , |
8, 90 4 |
| Ne the rla nd s - |
91 4 |
6, 48 4 |
55 4 |
1, 80 1 |
6, 16 1 |
81 | 15 99 5 , |
12 79 2 , |
3, 20 3 |
12 52 3 , |
9, 03 5 |
17 91 4 , |
| Fra nce - |
51 1 |
3 | 1, 09 5 |
47 0 |
4, 37 6 |
102 | 6, 55 7 |
3, 76 9 |
2, 78 8 |
14 04 1 , |
8, 60 6 |
11 64 0 , |
| Lux bo em urg - |
- | 25 | 26 | 73 4 |
2, 50 3 |
3 | 3, 29 1 |
1, 77 3 |
1, 51 8 |
37 8 |
2, 54 5 |
2, 38 3 |
| Be lg ium - |
102 | 14 | 44 1 |
32 | 89 3 |
32 7 |
1, 80 9 |
1, 30 7 |
50 2 |
80 3 |
2, 20 7 |
1, 49 2 |
| Re st of eu roz on e |
124 | 1 | 142 | 119 | 1, 50 3 |
24 | 1, 91 3 |
1, 58 1 |
33 2 |
53 5 |
1, 35 1 |
2, 01 8 |
| Ot he ele cte d c ntr r s ou |
ies | |||||||||||
| Ind ia |
- | - | 1, 30 7 |
30 7 |
2, 59 0 |
27 3 |
4, 47 7 |
3, 82 4 |
65 3 |
1, 68 6 |
177 | 1, 23 9 |
| Ch ina |
17 | 29 8 |
1, 22 3 |
16 | 75 3 |
64 | 2, 37 1 |
2, 135 |
23 6 |
57 3 |
25 1 |
1, 58 9 |
| So uth Ko rea |
- | 27 6 |
1, 03 3 |
5 | 55 5 |
2 | 1, 87 1 |
1, 82 1 |
50 | 1, 35 3 |
45 7 |
68 8 |
| Tu rke y |
28 2 |
68 | 44 8 |
37 | 1, 36 5 |
12 | 2, 21 2 |
1, 52 0 |
69 2 |
55 0 |
103 | 68 6 |
| Ru ssi a |
- | 110 | 24 4 |
7 | 1, 18 1 |
58 | 1, 60 0 |
1, 47 5 |
125 | 124 | 51 | 59 6 |
| Bra zil |
- | - | 82 5 |
- | 31 5 |
5 | 1, 145 |
1, 02 5 |
120 | 68 7 |
15 | 190 |
| Ro nia ma |
36 | 178 | 21 | 21 | 42 6 |
44 6 |
1, 128 |
7 | 1, 12 1 |
31 0 |
8 | 31 9 |
| Me xic o |
- | 8 | 149 | - | 99 9 |
1 | 1, 157 |
85 4 |
30 3 |
144 | 122 | 84 0 |
| Ind ia on es |
84 | 42 | 24 2 |
19 | 29 4 |
13 1 |
81 2 |
65 8 |
154 | 35 6 |
24 9 |
24 9 |
| Po lan d |
- | 168 | 7 | 7 | 65 5 |
6 | 84 3 |
73 5 |
108 | 27 1 |
69 | 1, 02 0 |
For definitions refer to pages 126 and 127.
So far 2011 has seen heightened country risks, which have intensified in the past quarter. However, trends have been divergent. Conditions have deteriorated among vulnerable eurozone countries facing growth impediments and higher public debt burdens, with market risks rising sharply in the past quarter. Many emerging markets have continued to enjoy relative stability, seeing net inflows of capital and lower spreads despite the impact of higher risk aversion in Q3 2011. In the US, notwithstanding a sovereign downgrade from a rating agency, a deal was secured to increase the sovereign debt ceiling, and yields on government debt remain low.
Europe has been at the centre of rising global risks, owing to a combination of slower growth among some of its major economies and a further deepening of the ongoing sovereign crisis which has in turn, increasingly harmed financial sector health. Risks in Greece have risen as a deeper than expected contraction in GDP has adversely affected the fiscal adjustment programme and hit debt sustainability. Some private sector creditors have proposed a burden sharing agreement to reduce debt repayments somewhat, but market prices of sovereign debt have implied investor expectations of a broader debt restructuring and concerns over contagion have risen sharply.
Despite the announcement of significant new support proposals by eurozone leaders in July, investor worries over risks to their implementation rose and market conditions worsened markedly through Q3 2011 as a result. Risk aversion towards Spanish and Italian assets picked up and despite a policy response by both countries, yields remained elevated, prompting the European Central Bank (ECB) to intervene to support their bonds in secondary markets for the first time. Contagion affected bank stocks and asset prices. At the International Monetary Fund (IMF) annual meetings in September, eurozone leaders agreed to enhance anti-crisis measures. Some steps, including boosting the resources of the European Financial Stability Facility and a proposed 50% voluntary haircut by private sector investors holding Greek debt, were taken at two key summits in October, but implementation risks remain high. Within a week of the summit, Greece proposed a referendum on its commitments under the deal, resulting in renewed concerns over the possibility of a more comprehensive restructuring.
Meanwhile, Portugal's new government has continued to remain on track with implementation of the European Union - International Monetary Fund (EU-IMF) deal agreed in May after a sharp deterioration in sovereign liquidity. Ireland's performance under its EU-IMF programme has been good and the announcement of a bank restructuring deal without defaults on senior debt obligations has helped improve market confidence. This was reflected in a compression in bond spreads in Q3 2011.
Emerging markets have meanwhile continued to perform relatively well. In Asia, despite growth slowing, China and India have continued to post strong overall expansion, while generally large external savings levels have reinforced balance of payments stability. In China specifically, measures to curb house price growth have proven effective, though concerns over bank asset quality linked to rapid lending growth in 2009 have risen.
In Emerging Europe, Russia has seen some contagion into asset markets from weaker commodity prospects and a challenging investment climate, but the sovereign balance sheet remains quite robust. Foreign exchange exposures remain a risk factor in a number of Eastern European economies. Elsewhere, Turkey's economy cooled in Q3 2011, helping to narrow the current account deficit sharply, though external vulnerabilities remain.
The Middle East and North Africa has been characterised by political instability in a number of the relatively lower income countries. Excluding Bahrain, pressures for change have been more contained in the Gulf Cooperation Council countries.
Latin America continues to be characterised by relative stability owing to balance sheet repair by a number of countries following crises in previous decades. Capital inflows have contributed to currency appreciation, but overheating pressures have so far proven contained, including in Brazil where credit growth has slowed from high levels.
Overall, the outlook for the rest of the year remains challenging, with risks likely to remain elevated but divergent. Much will depend on the success of EU efforts to contain contagion from the sovereign crisis and whether growth headwinds in larger advanced economies persist. Emerging market balance sheet risks remain lower, despite ongoing structural and political constraints, but these economies will continue to be affected by events elsewhere through financial markets and trade channels.
| Iss ue r |
Le nd ing £m |
RE IL £m |
Im air nt p me isi p rov on s £m |
S a AF nd LA R d eb t riti se cu es £m |
AF S re se rve s £m |
HF T d eb t s Lo ng £m |
uri tie ec s Sh ort £m |
To tal de bt riti se cu es £m |
De riv ati ve s ( f g ros s o llat l) co era d r an ep os £m |
Co nti t ng en lia bil itie nd s a itm ts co mm en £m |
|---|---|---|---|---|---|---|---|---|---|---|
| 30 Se be r 2 01 1 tem p |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
54 | - | - | 5 11 |
( ) 40 |
30 | 30 | 5 11 |
20 | 1 |
| Ce ntr al ba nks |
2, 23 5 |
- | - | - | - | - | - | - | 1 | - |
| Ot he r b ks an |
49 | - | - | 17 6 |
( ) 44 |
67 | - | 24 3 |
90 1 |
52 |
| Ot he r fi ial ins titu tio na nc ns |
54 2 |
- | - | 57 | - | 25 0 |
52 | 25 5 |
1, 02 4 |
69 1 |
| Co rat rpo e |
19 57 4 , |
10 19 5 , |
5, 66 7 |
14 8 |
1 | 13 9 |
- | 28 7 |
40 7 |
2, 06 1 |
| Pe l rso na |
19 60 6 , |
2, 21 0 |
95 4 |
- | - | - | - | - | 1 | 53 5 |
| 42 06 0 , |
12 40 5 , |
6, 62 1 |
49 6 |
( ) 83 |
48 6 |
82 | 90 0 |
2, 35 4 |
3, 34 0 |
|
| 31 De mb 20 10 ce er |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
61 | - | - | 104 | ( 45 ) |
93 | 88 | 109 | 20 | 1 |
| Ce al ba nks ntr |
2, 119 |
- | - | - | - | 7 | - | 7 | 126 | - |
| Ot he r b ks an |
87 | - | - | 43 5 |
( 51 ) |
96 | 45 | 48 6 |
1, 52 3 |
83 |
| Ot r fi he ial ins titu tio na nc ns |
81 3 |
- | - | 29 1 |
( 1) |
20 5 |
- | 49 6 |
83 7 |
1, 05 0 |
| Co rat rpo e |
19 88 1 , |
8, 29 1 |
4, 07 2 |
91 | ( 2) |
140 | 6 | 22 5 |
43 4 |
2, 63 3 |
| Pe l rso na |
20 22 8 , |
1, 63 8 |
53 4 |
- | - | - | - | - | - | 54 4 |
| 43 189 , |
9, 92 9 |
4, 60 6 |
92 1 |
( 99 ) |
54 1 |
139 | 1, 32 3 |
2, 94 0 |
4, 31 1 |
Fair values of CDS referencing sovereign exposures were:
| 30 Se be tem p r |
31 De mb ce er |
|
|---|---|---|
| 20 11 |
20 10 |
|
| Fa ir v alu e |
£m | £m |
| Bo ht tec tio ug pro n |
51 1 |
36 0 |
| So ld tio tec pro n |
52 3 |
38 7 |
For definitions refer to pages 126 and 127.
● Corporate lending exposure decreased by approximately £0.3 billion in the nine months ended 30 September 2011. Exposure in this area is highest in the property sector £12.5 billion, which also experienced the biggest reduction, £160 million, in the same period. Risk elements in lending of £10.2 billion and impairment provisions of £5.7 billion, up since December 2010 by £1.9 billion and £1.6 billion respectively, are further discussed in the Ulster Bank section.
● The Ulster Bank retail portfolio mainly consists of mortgages (approximately 92%), with the remainder comprising other personal lending and credit card exposure (see also page 142).
● Of the total Irish exposure, £11.5 billion is designated Non-Core, £10.0 billion of which is related to commercial real estate.
| S a AF nd |
HF T d eb t s |
uri tie ec s |
De riv ati ve s ( f ros s o |
Co nti t en |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Iss ue r |
Le nd ing £m |
RE IL £m |
Im air nt p me isi p rov on 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 |
g llat l) co era d r an ep os £m |
ng lia bil itie nd s a itm ts co mm en £m |
| Se 30 tem be r 2 01 1 p |
||||||||||
| Ce al d l al ntr t an oc go ve rnm en |
10 | - | - | 81 | ( 9 ) |
86 4 |
1, 27 1 |
( 32 6 ) |
40 | 30 |
| Ce ntr al ba nks |
3 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
55 4 |
- | - | 5, 13 1 |
( ) 82 0 |
13 7 |
17 8 |
5, 09 0 |
1, 90 4 |
40 |
| Ot he r fi ial ins titu tio na nc ns |
90 | - | - | 1, 69 4 |
( 57 9 ) |
71 | 55 | 1, 71 0 |
32 | 22 8 |
| Co rat rpo e |
6, 59 9 |
1, 43 8 |
69 0 |
8 | - | 18 | 3 | 23 | 54 5 |
1, 63 5 |
| Pe l rso na |
38 0 |
1 | - | - | - | - | - | - | - | 57 |
| 63 6 7, |
1, 43 9 |
69 0 |
6, 91 4 |
( 1, 40 8 ) |
1, 09 0 |
1, 50 7 |
6, 49 7 |
2, 52 1 |
1, 99 0 |
|
| 31 20 10 De mb ce er |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
19 | - | - | 88 | ( 7) |
1, 172 |
1, 24 8 |
12 | 53 | 1 |
| Ce al ba nks ntr |
5 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
166 | - | - | 5, 26 4 |
( 83 4) |
147 | 118 | 5, 29 3 |
1, 48 2 |
41 |
| Ot he r fi ial ins titu tio na nc ns |
92 | - | - | 1, 72 4 |
( 47 4) |
34 | 7 | 1, 1 75 |
22 | 28 5 |
| Co rat rpo e |
6, 96 2 |
1, 87 1 |
57 2 |
9 | 38 | 50 | 8 | 51 | 49 0 |
2, 49 4 |
| Pe l rso na |
40 7 |
1 | - | - | - | - | - | - | - | 62 |
Fair values of CDS referencing sovereign exposures were:
| 30 Se be tem p r |
31 De mb ce er |
|
|---|---|---|
| 20 11 |
20 10 |
|
| Fa ir v alu e |
£m | £m |
| Bo ht tio tec ug pro n |
56 2 |
43 6 |
| So ld tec tio pro n |
54 7 |
43 5 |
For definitions refer to pages 126 and 127.
● The Group's exposure to the government is negative owing to a net short position in held-fortrading debt securities.
● Total exposure to corporate clients declined by £1.2 billion in the nine months ended 30 September 2011, driven by reductions in exposure to corporations in the property and telecom, media and technology sectors. REIL relates to commercial real estate lending and decreased reflecting disposals and restructurings; however provision increased due to declining collateral values.
● Of the total Spanish exposure, £4.9 billion is in Non-Core, the majority of which is related to either real estate or project finance. Current Spanish property market conditions present significant disposal challenges. Despite this, Non-Core continues to seek divestment opportunities across the portfolio.
| De riv ati ve s |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| AF S a nd |
HF T d eb t s ec |
uri tie s |
( f g ros s o |
Co nti t ng en |
||||||
| Im air nt p me |
LA R d eb t |
S AF |
To tal de bt |
llat l) co era |
lia bil itie nd s a |
|||||
| Le nd ing |
RE IL |
isi p rov on s |
riti se cu es |
re se rve s |
Lo ng |
Sh ort |
riti se cu es |
d r an ep os |
itm ts co mm en |
|
| Iss ue r |
£m | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| 30 Se be r 2 01 1 tem p |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
- | - | - | 85 2 |
( 19 1) |
5, 07 6 |
5, 63 4 |
29 4 |
10 3 |
- |
| Ce al ba nks ntr |
76 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
42 0 |
- | - | 16 8 |
( 16 ) |
88 | 5 | 25 1 |
1, 14 3 |
26 |
| Ot he r fi ial ins titu tio na nc ns |
47 2 |
- | - | 53 8 |
( 8 ) |
49 | 81 | 50 6 |
67 2 |
95 7 |
| Co rat rpo e |
2, 05 7 |
45 1 |
13 9 |
68 | - | 61 | - | 12 9 |
41 3 |
2, 17 2 |
| Pe l rso na |
25 | - | - | - | - | - | - | - | - | 13 |
| 3, 05 0 |
45 1 |
13 9 |
1, 62 6 |
( 21 5 ) |
5, 27 4 |
5, 72 0 |
1, 18 0 |
2, 33 1 |
3, 16 8 |
|
| 31 De mb 20 10 ce er |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
45 | - | - | 90 6 |
( 99 ) |
5, 113 |
3, 175 |
2, 84 4 |
71 | 6 |
| Ce ntr al ba nks |
78 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
66 8 |
- | - | 198 | ( 11 ) |
67 | 16 | 24 9 |
78 2 |
16 1 |
| Ot he r fi ial ins titu tio na nc ns |
41 8 |
- | - | 64 6 |
( 5) |
49 | - | 69 5 |
75 9 |
1, 21 7 |
| Co rat rpo e |
2, 48 3 |
31 4 |
14 1 |
20 | - | 36 | 8 | 48 | 41 8 |
2, 45 6 |
| Pe l rso na |
27 | - | - | - | - | - | - | - | - | 13 |
| 3, 71 9 |
31 4 |
14 1 |
1, 77 0 |
( 115 ) |
5, 26 5 |
3, 199 |
3, 83 6 |
2, 03 0 |
3, 85 3 |
Fair values of CDS referencing sovereign exposures were:
| 30 Se be tem p r |
31 De mb ce er |
|
|---|---|---|
| 20 11 |
20 10 |
|
| Fa ir v alu e |
£m | £m |
| Bo ht tec tio ug pro n |
1, 81 5 |
64 1 |
| So ld tec tio pro n |
1, 69 1 |
55 1 |
For definitions refer to pages 126 and 127.
● Total exposure to the government including net debt securities positions was significantly reduced by £2.6 billion to £0.4 billion.
● The majority of the Group's exposure to Italian financial institutions is concentrated on the two largest, systemically important groups and consists of collateralised derivatives and, to a lesser extent, short-term interbank lending.
● Since 31 December 2010, total exposure has declined by approximately £0.6 billion, driven in part by reductions in lending to the property industry. However, the Group has maintained lending facilities to the manufacturing and natural resource sectors.
● Of the total Italian exposure, £1.8 billion is in Non-Core, the majority of which is related to real estate or project finance. The key risk in the portfolio is the availability of refinancing options for current clients.
| De riv ati ve s |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Iss ue r |
Le nd ing £m |
RE IL £m |
Im air nt p me isi p rov on s £m |
AF S a nd LA R d eb t riti se cu es £m |
AF S re se rve s £m |
HF T d eb t s ec Lo ng £m |
uri tie s Sh ort £m |
To tal de bt riti se cu es £m |
( f g ros s o llat l) co era d r an ep os £m |
Co nti t ng en lia bil itie nd s a itm ts co mm en £m |
| Se 30 tem be r 2 01 1 p |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
7 | - | - | 53 2 |
- | 18 0 |
7 | 70 5 |
- | - |
| Ce ntr al ba nks |
10 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
1 | - | - | - | - | - | - | - | 29 9 |
1 |
| Ot r fi he ial ins titu tio na nc ns |
32 | - | - | - | - | - | - | - | 2 | - |
| Co rat rpo e |
38 1 |
33 5 |
24 9 |
- | - | 2 | - | 2 | 34 | 60 |
| Pe l rso na |
14 | - | - | - | - | - | - | - | - | 10 |
| 44 5 |
33 5 |
24 9 |
53 2 |
- | 18 2 |
7 | 70 7 |
33 5 |
71 | |
| 31 De mb 20 10 ce er |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
14 | - | - | 89 5 |
( 69 4) |
118 | 39 | 97 4 |
7 | 7 |
| Ce ntr al ba nks |
36 | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
18 | - | - | - | - | - | - | - | 167 | 1 |
| Ot he r fi ial ins titu tio na nc ns |
31 | - | - | - | - | - | - | - | 3 | 3 |
| Co rat rpo e |
188 | 48 | 48 | - | - | - | - | - | 26 | 14 1 |
| Pe l rso na |
16 | - | - | - | - | - | - | - | - | 10 |
| 30 3 |
48 | 48 | 89 5 |
( 69 4) |
118 | 39 | 97 4 |
20 3 |
162 |
Fair values of CDS referencing sovereign exposures were:
| 30 Se be tem p r |
31 De mb ce er |
|
|---|---|---|
| 20 11 |
20 10 |
|
| Fa ir v alu e |
£m | £m |
| Bo ht tio tec ug pro n |
1, 83 2 |
85 4 |
| So ld tec tio pro n |
1, 72 0 |
87 1 |
For definitions refer to pages 126 and 127.
● 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 in H1 2011. These bonds continue to represent a significant proportion of the total Greek portfolio.
● Of the total Greek exposure, £0.2 billion is in Non-Core.
| Iss ue r Se 30 tem be r 2 01 1 p |
Le nd ing £m |
RE IL £m |
Im air nt p me isi p rov on s £m |
S a AF nd LA R d eb t riti se cu es £m |
AF S re se rve s £m |
HF T d eb t s Lo ng £m |
uri tie ec s Sh ort £m |
To tal de bt riti se cu es £m |
De riv ati ve s ( f g ros s o llat l) co era d r an ep os £m |
Co nti t ng en lia bil itie nd s a itm ts co mm en £m |
|---|---|---|---|---|---|---|---|---|---|---|
| Ce al d l al ntr t an oc go ve rnm en |
43 | - | - | 66 | ( 53 ) |
70 | 15 2 |
( 16 ) |
19 | - |
| Ce ntr al ba nks |
- | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
57 | - | - | 91 | ( ) 37 |
14 | 11 | 94 | 33 8 |
- |
| Ot he r fi ial ins titu tio na nc ns |
- | - | - | 5 | - | 13 | - | 18 | 12 | - |
| Co rat rpo e |
57 9 |
27 | 27 | 43 | - | - | - | 43 | 74 | 34 8 |
| Pe l rso na |
5 | - | - | - | - | - | - | - | - | 8 |
| 68 4 |
27 | 27 | 20 5 |
( 90 ) |
97 | 16 3 |
13 9 |
44 3 |
35 6 |
|
| 31 20 10 De mb ce er |
||||||||||
| Ce ntr al d l al t an oc go ve rnm en |
86 | - | - | 92 | ( 26 ) |
68 | 122 | 38 | 29 | 21 1 |
| Ce al ba nks ntr |
- | - | - | - | - | - | - | - | - | - |
| Ot he r b ks an |
63 | - | - | 106 | ( 24 ) |
46 | 2 | 150 | 30 7 |
2 |
| Ot he r fi ial ins titu tio na nc ns |
- | - | - | 47 | - | 7 | - | 54 | 7 | 1 |
| Co rat rpo e |
61 1 |
27 | 21 | - | 1 | - | - | - | 50 | 51 2 |
| Pe l rso na |
6 | - | - | - | - | - | - | - | - | 8 |
| 76 6 |
27 | 21 | 24 5 |
( 49 ) |
12 1 |
124 | 24 2 |
39 3 |
73 4 |
|
Fair values of CDS referencing sovereign exposures were:
| Se 30 be tem p r |
31 De mb ce er |
|
|---|---|---|
| 20 11 |
20 10 |
|
| Fa ir v alu e |
£m | £m |
| Bo ht tio tec ug pro n |
05 1, 3 |
47 1 |
| So ld tec tio pro n |
1, 04 1 |
46 0 |
For definitions refer to pages 126 and 127.
● Following the closure of its local branch in early 2011, the Group has modest exposure overall. The portfolio is focused on corporate lending and derivatives trading with the largest local banks.
● In the first nine months of 2011, the sovereign risk position was reduced, largely the result of decreases in contingent exposures to three public sector entities in addition to bond sales and maturities. Overall, the exposure shrank to less than £50 million in the nine months.
● Of the total Portuguese exposure, £0.6 billion is in Non-Core, 87% of which is related to project finance.
Ulster Bank Group accounts for 9.8% of the Group's total gross customer loans (30 June 2011 - 10.2%; 31 December 2010 - 9.9%) and 8.5% of the Group's Core gross customer loans (30 June 2011 - 8.8%; 31 December 2010 - 8.9%). The Q3 2011 impairment charge was £608 million (Q3 2010 - £962 million) with commercial real estate and mortgage sectors accounting for £314 million (52%) and £126 million (21%) of the total Q3 2011 impairment charge respectively. The impairment charge in Q3 2011 was driven by a combination of new defaulting customers and deteriorating security values. Provisions as a percentage of REIL has increased from 51.4% at 30 June 2011 to 51.6% at 30 September 2011 (30 September 2010 - 39%).
The impairment charge of £608 million for Q3 2011 was £638 million lower than the £1,246 million impairment charge for Q2 2011. Non-Core was the main driver for this reduction with its impairment charge £696 million lower in Q3 2011 compared with Q2 2011 due to a slower rate of deterioration in security values and a decrease in the value of loans defaulting in the quarter. The Core portfolio quarterly impairment charge increased by £58 million to £327 million (Q2 2011- £269 million), with the mortgage portfolio accounting for £48 million of the increase. Impairments remain elevated as high unemployment coupled with higher taxation and less liquidity in the economy continues to depress the property market and domestic spending.
The Q3 2011 impairment charge was £327 million (Q3 2010 - £286 million) with the mortgage sector accounting for £126 million (39%) of the total Q3 2011 impairment charge. These impairment losses reflect the difficult economic climate in Ireland with elevated default levels across both mortgage and other corporate portfolios.
Ulster Bank Group is assisting customers in this difficult environment. Mortgage forbearance policies which are deployed through the 'Flex' initiative are aimed at assisting customers in financial difficulty.
The Q3 2011 impairment charge was £281 million (Q3 2010 - £676 million) with the commercial real estate sector accounting for £236 million (84%) of the total Q3 2011 charge. The impairment charge decreased from £977 million in Q2 2011 to £281 million in Q3 2011, primarily reflecting a slower rate of deterioration in security values and a reduction in the value of loans defaulting.
| REIL | ||||||||
|---|---|---|---|---|---|---|---|---|
| as a % of | Provisions | Provisions | Q3 | Q3 | ||||
| Gross | gross | as a % of | as a % of | Impairment | Amounts | |||
| loans (1) | REIL Provisions | loans | REIL | gross loans | charge | written-off | ||
| 30 September 2011 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Mortgages | 20,692 | 2,138 | 852 | 10.3 | 40 | 4.1 | 126 | - |
| Personal unsecured | 1,557 | 201 | 182 | 12.9 | 91 | 11.7 | 12 | 4 |
| Commercial real estate | ||||||||
| - investment | 4,241 | 1,163 | 373 | 27.4 | 32 | 8.8 | 58 | - |
| - development | 923 | 261 | 135 | 28.3 | 52 | 14.6 | 20 | - |
| Other corporate | 8,133 | 1,793 | 1,025 | 22.0 | 57 | 12.6 | 111 | 37 |
| 35,546 | 5,556 | 2,567 | 15.6 | 46 | 7.2 | 327 | 41 | |
| Non-Core | ||||||||
| Commercial real estate | ||||||||
| - investment | 3,937 | 2,684 | 1,247 | 68.2 | 47 | 31.7 | 74 | 1 |
| - development | 8,703 | 7,687 | 4,342 | 88.3 | 57 | 49.9 | 162 | 1 |
| Other corporate | 1,670 | 1,176 | 674 | 70.4 | 57 | 40.4 | 45 | 9 |
| 14,310 | 11,547 | 6,263 | 80.7 | 54 | 43.8 | 281 | 11 | |
| Ulster Bank Group | ||||||||
| Mortgages | 20,692 | 2,138 | 852 | 10.3 | 40 | 4.1 | 126 | - |
| Personal unsecured | 1,557 | 201 | 182 | 12.9 | 91 | 11.7 | 12 | 4 |
| Commercial real estate | ||||||||
| - investment | 8,178 | 3,847 | 1,620 | 47.0 | 42 | 19.8 | 132 | 1 |
| - development | 9,626 | 7,948 | 4,477 | 82.6 | 56 | 46.5 | 182 | 1 |
| Other corporate | 9,803 | 2,969 | 1,699 | 30.3 | 57 | 17.3 | 156 | 46 |
| 49,856 | 17,103 | 8,830 | 34.3 | 52 | 17.7 | 608 | 52 |
Note:
(1) Funded customer loans.
| REIL | ||||||||
|---|---|---|---|---|---|---|---|---|
| as a % of | Provisions | Provisions | H1 | H1 | ||||
| Gross | gross | as a % of | as a % of | Impairment | Amounts | |||
| loans | REIL | Provisions | loans | REIL | gross loans | charge | written-off | |
| 30 June 2011 | £m | £m | £m | % | % | % | £m | £m |
| Core | ||||||||
| Mortgages | 21,778 | 2,014 | 769 | 9.2 | 38 | 3.5 | 311 | 4 |
| Personal unsecured | 1,605 | 201 | 181 | 12.5 | 90 | 11.3 | 33 | 15 |
| Commercial real estate | ||||||||
| - investment | 4,338 | 838 | 331 | 19.3 | 40 | 7.6 | 115 | - |
| - development | 955 | 241 | 120 | 25.2 | 50 | 12.6 | 48 | - |
| Other corporate | 8,699 | 1,822 | 1,000 | 20.9 | 55 | 11.5 | 223 | 2 |
| 37,375 | 5,116 | 2,401 | 13.7 | 47 | 6.4 | 730 | 21 | |
| Non-Core | ||||||||
| Commercial real estate | ||||||||
| - investment | 4,076 | 2,662 | 1,231 | 65.3 | 46 | 30.2 | 384 | - |
| - development | 9,002 | 7,847 | 4,367 | 87.2 | 56 | 48.5 | 1,313 | - |
| Other corporate | 1,811 | 1,226 | 661 | 67.7 | 54 | 36.5 | 113 | 2 |
| 14,889 | 11,735 | 6,259 | 78.8 | 53 | 42.0 | 1,810 | 2 | |
| Ulster Bank Group | ||||||||
| Mortgages | 21,778 | 2,014 | 769 | 9.2 | 38 | 3.5 | 311 | 4 |
| Personal unsecured | 1,605 | 201 | 181 | 12.5 | 90 | 11.3 | 33 | 15 |
| Commercial real estate | ||||||||
| - investment | 8,414 | 3,500 | 1,562 | 41.6 | 45 | 18.6 | 499 | - |
| - development | 9,957 | 8,088 | 4,487 | 81.2 | 56 | 45.1 | 1,361 | - |
| Other corporate | 10,510 | 3,048 | 1,661 | 29.0 | 55 | 15.8 | 336 | 4 |
| 52,264 | 16,851 | 8,660 | 32.2 | 51 | 16.6 | 2,540 | 23 |
| REIL | ||||||||
|---|---|---|---|---|---|---|---|---|
| as a % of | Provisions | Provisions | Q4 | Q4 | ||||
| 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 | 159 | 3 |
| Personal unsecured | 1,282 | 185 | 158 | 14.4 | 85 | 12.3 | 13 | 6 |
| Commercial real estate | ||||||||
| - investment | 4,284 | 598 | 332 | 14.0 | 56 | 7.7 | 79 | - |
| - development | 1,090 | 65 | 37 | 6.0 | 57 | 3.4 | (10) | - |
| Other corporate | 9,039 | 1,205 | 667 | 13.3 | 55 | 7.4 | 135 | 1 |
| 36,857 | 3,619 | 1,633 | 9.8 | 45 | 4.4 | 376 | 10 | |
| Non-Core | ||||||||
| Commercial real estate | ||||||||
| - investment | 3,854 | 2,391 | 1,000 | 62.0 | 42 | 25.9 | 206 | - |
| - development | 8,760 | 6,341 | 2,783 | 72.4 | 44 | 31.8 | 596 | - |
| Other corporate | 1,970 | 1,310 | 561 | 66.5 | 43 | 28.5 | (19) | - |
| 14,584 | 10,042 | 4,344 | 68.9 | 43 | 29.8 | 783 | - | |
| Ulster Bank Group | ||||||||
| Mortgages | 21,162 | 1,566 | 439 | 7.4 | 28 | 2.1 | 159 | 3 |
| Personal unsecured | 1,282 | 185 | 158 | 14.4 | 85 | 12.3 | 13 | 6 |
| Commercial real estate | ||||||||
| - investment | 8,138 | 2,989 | 1,332 | 36.7 | 45 | 16.4 | 285 | - |
| - development | 9,850 | 6,406 | 2,820 | 65.0 | 44 | 28.6 | 586 | - |
| Other corporate | 11,009 | 2,515 | 1,228 | 22.8 | 49 | 11.2 | 116 | 1 |
| 51,441 | 13,661 | 5,977 | 26.6 | 44 | 11.6 | 1,159 | 10 |
The table below shows how the continued decrease in property values has affected the distribution of residential mortgages by loan-to-value (LTV) (indexed). LTV is based upon gross loan amounts and, whilst including defaulted loans, does not take account of provisions made.
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|
|---|---|---|---|
| By average LTV (1) | % | % | % |
| <= 50% | 33.7 | 35.1 | 35.9 |
| > 50% and <= 70% | 12.5 | 13.0 | 13.5 |
| > 70% and <= 90% | 12.4 | 13.0 | 13.5 |
| > 90% | 41.4 | 38.9 | 37.1 |
| Total portfolio average LTV | 77.6 | 74.5 | 71.2 |
| Average LTV on new originations during the period | 66.7 | 65.0 | 75.9 |
Note:
(1) LTV averages calculated by transaction volume.
The commercial real estate lending portfolio in Ulster Bank Group reduced during the quarter to £17.8 billion, primarily due to exchange rate movements. The Non-Core portion of the portfolio totalled £12.6 billion (71% of the portfolio). Of the total Ulster Bank Group commercial real estate portfolio, the geographic split remains similar to last quarter with, 62% relating to the Republic of Ireland, 26% to Northern Ireland and 12% to the rest of the UK.
| Development | Investment | ||||
|---|---|---|---|---|---|
| Exposure by geography | Commercial £m |
Residential £m |
Commercial £m |
Residential £m |
Total £m |
| 30 September 2011 | |||||
| Ireland (ROI & NI) | 2,674 | 6,479 | 5,225 | 1,174 | 15,552 |
| UK (excluding Northern Ireland) | 97 | 357 | 1,659 | 108 | 2,221 |
| RoW | - | 19 | 8 | 4 | 31 |
| 2,771 | 6,855 | 6,892 | 1,286 | 17,804 | |
| 30 June 2011 | |||||
| Ireland (ROI & NI) | 2,762 | 6,701 | 5,378 | 1,210 | 16,051 |
| UK (excluding Northern Ireland) | 104 | 358 | 1,702 | 112 | 2,276 |
| RoW | 4 | 28 | 8 | 4 | 44 |
| 2,870 | 7,087 | 7,088 | 1,326 | 18,371 | |
| 31 December 2010 | |||||
| Ireland (ROI & NI) | 2,785 | 6,578 | 5,072 | 1,098 | 15,533 |
| UK (excluding Northern Ireland) | 110 | 359 | 1,831 | 115 | 2,415 |
| RoW | - | 18 | 22 | - | 40 |
| 2,895 | 6,955 | 6,925 | 1,213 | 17,988 |
Note:
(1) The above table does not include rate risk management or contingent obligations.
• Commercial real estate remains the primary driver of the increase in the defaulted loan book for Ulster Bank. The outlook for the sector remains uncertain with the possibility of further declines in values. Proactive management of the portfolio has resulted in further transfers of stressed customers to the specialised management of Global Restructuring Group.
Market risk arises from changes in interest rates, foreign currency, credit spread, 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 framework includes limits based on, but not limited to, value-at-risk (VaR), stress testing, position and sensitivity analyses.
For a description of the Group's basis of measurement and methodology limitations, refer to the 2010 Annual Report and Accounts, Market risk, page 193.
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.
Market risk (continued)
The table below details VaR for the Group's trading portfolio, segregated by type of market risk exposure, and between Core and Non-Core, Counterparty Exposure Management (CEM) and Core excluding CEM.
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 June 2011 | ||||||||||
| Average Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | ||||||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | |||
| Interest rate | 51.3 | 73.0 | 73.1 | 33.1 | 39.4 | 36.8 | 75.7 | 27.5 | |||
| Credit spread | 56.2 | 69.8 | 69.8 | 47.4 | 73.2 | 64.6 | 95.0 | 60.0 | |||
| Currency | 8.7 | 6.5 | 12.5 | 6.1 | 9.4 | 9.3 | 14.2 | 5.2 | |||
| Equity | 7.9 | 7.7 | 13.1 | 4.6 | 10.4 | 12.0 | 17.3 | 5.2 | |||
| Commodity | 0.9 | 3.6 | 3.6 | 0.1 | 0.2 | 0.3 | 1.6 | - | |||
| Diversification | (54.3) | (61.0) | |||||||||
| Total | 78.3 | 106.3 | 114.2 | 59.7 | 78.7 | 62.0 | 117.9 | 60.8 | |||
| Core | 58.3 | 83.1 | 91.0 | 41.7 | 60.2 | 42.5 | 86.0 | 42.5 | |||
| Core CEM | 34.4 | 38.0 | 45.2 | 23.5 | 26.5 | 23.2 | 33.2 | 21.9 | |||
| Core excluding CEM | 44.3 | 62.2 | 71.4 | 35.3 | 57.1 | 39.4 | 78.4 | 39.2 | |||
| Non-Core | 40.4 | 38.7 | 53.0 | 33.2 | 69.3 | 51.4 | 110.1 | 47.5 |
| Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 September 2010 | ||||||||||
| Average | Period end | Maximum | Minimum | Average Period end | Maximum | Minimum | |||||
| Trading VaR | £m | £m | £m | £m | £m | £m | £m | £m | |||
| Interest rate | 50.3 | 73.0 | 79.2 | 27.5 | 47.7 | 74.3 | 74.3 | 32.5 | |||
| Credit spread | 87.4 | 69.8 | 151.1 | 47.4 | 177.1 | 190.8 | 243.2 | 113.0 | |||
| Currency | 10.1 | 6.5 | 18.0 | 5.2 | 18.9 | 16.7 | 28.0 | 9.3 | |||
| Equity | 9.8 | 7.7 | 17.3 | 4.6 | 9.3 | 5.4 | 17.9 | 2.7 | |||
| Commodity | 0.4 | 3.6 | 3.6 | - | 10.1 | 13.8 | 15.8 | 3.2 | |||
| Diversification | (54.3) | (119.2) | |||||||||
| Total | 104.1 | 106.3 | 181.3 | 59.7 | 173.3 | 181.8 | 252.1 | 103.0 | |||
| Core | 75.3 | 83.1 | 133.9 | 41.7 | 105.1 | 115.0 | 153.4 | 58.9 | |||
| Core CEM | 33.6 | 38.0 | 47.6 | 21.9 | 55.1 | 73.0 | 82.4 | 30.3 | |||
| Core excluding CEM | 62.9 | 62.2 | 106.2 | 35.3 | 83.2 | 78.4 | 108.7 | 53.6 | |||
| Non-Core | 74.2 | 38.7 | 128.6 | 33.2 | 105.7 | 101.8 | 169.4 | 63.2 |
• The Group's market risk profile in 2010 was equally split across Non-Core and Core divisions with a concentrated exposure to the credit spread risk factor. In line with the business strategy to wind down the Group's interest in Sempra and other Non-Core activities, the trading portfolio has now been re-balanced such that the Non-Core exposure has been significantly reduced and the trading portfolio is less concentrated in the credit risk factor.
The table below details VaR for the Group's non-trading portfolio, excluding the structured portfolio (SCP) and loans and receivables (LAR), segregated by type of market risk exposure and between Core and Non-Core.
| Quarter ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 June 2011 | ||||||||||
| Non-trading VaR | Average £m |
Period end £m |
Maximum £m |
Minimum £m |
£m | Average Period end £m |
Maximum £m |
Minimum £m |
|||
| Interest rate | 9.6 | 10.3 | 11.1 | 8.2 | 8.3 | 8.3 | 9.2 | 5.7 | |||
| Credit spread | 16.0 | 14.8 | 18.0 | 14.1 | 19.1 | 18.0 | 24.2 | 16.1 | |||
| Currency | 3.0 | 4.1 | 5.9 | 1.1 | 1.7 | 3.3 | 3.3 | 0.2 | |||
| Equity | 1.9 | 1.8 | 2.0 | 1.6 | 2.2 | 2.0 | 2.4 | 2.0 | |||
| Diversification | (13.5) | (13.1) | |||||||||
| Total | 17.6 | 17.5 | 18.9 | 15.7 | 18.7 | 18.5 | 22.5 | 16.7 | |||
| Core | 17.4 | 18.6 | 20.1 | 15.2 | 18.5 | 19.4 | 24.6 | 15.7 | |||
| Non-Core | 3.9 | 3.7 | 4.3 | 3.2 | 3.7 | 4.3 | 4.3 | 2.8 |
• The maximum credit spread VaR was lower in Q3 2011 than in Q2 2011. This was primarily due to the increased market volatility experienced during the 2008/2009 credit crisis, dropping out of the two year time series used by the VaR model. This volatility was particularly pronounced in respect of credit spreads and had a marked impact on historic credit spread VaR.
| Nine months ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 30 September 2011 | 30 September 2010 (1) | ||||||||||
| Non-trading VaR | Average £m |
Period end £m |
Maximum £m |
Minimum £m |
£m | Average Period end £m |
Maximum £m |
Minimum £m |
|||
| Interest rate | 8.6 | 10.3 | 11.1 | 5.7 | 8.9 | 4.4 | 20.5 | 4.4 | |||
| Credit spread | 19.6 | 14.8 | 39.3 | 14.1 | 37.1 | 19.4 | 101.2 | 19.4 | |||
| Currency | 1.8 | 4.1 | 5.9 | 0.1 | 2.1 | 2.0 | 7.6 | 0.3 | |||
| Equity | 2.2 | 1.8 | 3.1 | 1.6 | 0.6 | 0.4 | 3.5 | 0.2 | |||
| Diversification | (13.5) | (6.8) | |||||||||
| Total | 20.9 | 17.5 | 41.6 | 13.4 | 35.8 | 19.4 | 98.0 | 19.4 | |||
| Core | 20.4 | 18.6 | 38.9 | 13.5 | 35.5 | 19.3 | 98.1 | 19.3 | |||
| Non-Core | 3.4 | 3.7 | 4.3 | 2.2 | 0.8 | 0.3 | 3.6 | 0.2 |
Note:
(1) Revised to exclude LAR portfolios.
• The maximum credit spread VaR was considerably lower in 2011 than in the same period in 2010. This was due to a change in the time series used for the Dutch RMBS portfolio in RBS N.V. where more relevant and granular market data had become available and provided a better reflection of the risk in the portfolio. The VaR decreased through the period as the volatile market data continued to drop out of the 500 day time series used in the VaR calculation.
| Drawn notional | Fair value | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other | Other | |||||||||
| CDOs | CLOs MBS (1) | ABS | Total | CDOs | CLOs MBS (1) | ABS | Total | |||
| £m | £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| 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 | |
| 30 June 2011 | ||||||||||
| 1-2 years | - | - | 45 | 46 | 91 | - | - | 44 | 41 | 85 |
| 2-3 years | 11 | - | - | 183 | 194 | 10 | - | - | 170 | 180 |
| 3-4 years | 5 | - | 11 | 48 | 64 | 5 | - | 10 | 46 | 61 |
| 4-5 years | - | 15 | - | 56 | 71 | - | 14 | - | 53 | 67 |
| 5-10 years | 95 | 396 | 315 | 365 | 1,171 | 84 | 370 | 245 | 322 | 1,021 |
| >10 years | 390 | 498 | 551 | 526 | 1,965 | 167 | 420 | 391 | 388 | 1,366 |
| 501 | 909 | 922 | 1,224 | 3,556 | 266 | 804 | 690 | 1,020 | 2,780 | |
| 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 |
Note:
(1) MBS include sub-prime RMBS with a notional amount of £406 million (30 June 2011 - £451 million; 31 December 2010 - £471 million) and a fair value of £274 million (30 June 2011 - £325 million; 31 December 2010 - £329 million), all with residual maturities of greater than 10 years.
The SCP non-trading risk in Non-Core is not measured using VaR as the Group believes this is not an appropriate tool for this portfolio of illiquid debt securities. The fair value and drawn notional are represented on a net basis.
The increase in drawn notional for CDOs and CLOs at the quarter ended 30 September 2011 was due to the exposure to legacy positions in the banking book portfolio. These positions were previously hedged, with both positions and hedges marked at fair value, well below their notional values. The hedges that were considered to be ineffective were removed in Q3 2011, resulting in a large increase in net notional values but only a small increase in net fair values.
| 30 September 2011 |
30 June 2011 |
31 December 2010 |
|
|---|---|---|---|
| Ordinary share price | £0.235 | £0.385 | £0.391 |
| Number of ordinary shares in issue | 59,228m | 59,226m | 58,458m |
| Market capitalisation (including B shares) | £25.9bn | £42.4bn | £42.8bn |
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. 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.
These third quarter 2011 results have not been audited or reviewed by the auditors.
| 2012 first quarter interim management statement | Friday 4 May 2012 |
|---|---|
| 2011 annual results announcement | Thursday 23 February 2012 |
| Qu | de d art er en |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 Se |
be r 2 01 tem p |
1 | 30 | Ju 20 11 ne |
30 Se |
be r 2 01 tem p |
0 | ||
| Re allo ion cat of ff |
Re | allo ion cat of ff |
Re | allo ion cat of ff |
|||||
| Ma ed na g |
on e-o ite ms |
Sta tut ory |
Ma ed na g |
on e-o ite ms |
Sta tut ory |
Ma ed na g |
on e-o ite ms |
Sta tut ory |
|
| £m | £m | £m | £m | £m | £m | £m | £m | £m | |
| Int eiv ab le st ere rec |
5, 37 1 |
- | 5, 37 1 |
5, 41 0 |
( ) 6 |
5, 40 4 |
5, 57 5 |
9 | 5, 58 4 |
| Int ab le st ere pa y |
( 2, 29 3 ) |
( 1) |
( 2, 29 4) |
( 2, 17 7) |
- | ( 2, 17 7) |
( 2, 17 1) |
( 2) |
( 2, 17 3 ) |
| Ne t in ter t in es co me |
3, 07 8 |
( 1) |
3, 07 7 |
3, 23 3 |
( ) 6 |
3, 22 7 |
3, 40 4 |
7 | 3, 41 1 |
| Fe d c mis sio eiv ab le es an om ns rec |
1, 45 2 |
- | 1, 45 2 |
1, 70 0 |
- | 1, 70 0 |
2, 04 4 |
( 7) |
2, 03 7 |
| Fe d c mis sio ab le es an om ns pa y |
( 4) 30 |
- | ( 4) 30 |
( ) 32 3 |
- | ( ) 32 3 |
( 1) 61 |
- | ( 1) 61 |
| Inc e f din ivit ies tra act om rom g |
54 7 |
41 0 |
95 7 |
1, 20 4 |
( ) 57 |
1, 14 7 |
1, 43 2 |
( 1, 155 ) |
27 7 |
| Ga in o ed tio f o de bt n r em p n o wn |
- | 1 | 1 | - | 25 5 |
25 5 |
- | - | - |
| Ot he ing in (e lud ing in mi in ) rat r o pe co me xc su ran ce pre um co me |
54 9 |
1, 83 5 |
2, 38 4 |
86 3 |
27 9 |
1, 14 2 |
35 9 |
( ) 67 6 |
( 31 7) |
| Ins ium in t p ura nce ne rem co me |
1, 03 6 |
- | 1, 03 6 |
1, 09 0 |
- | 1, 09 0 |
1, 28 9 |
- | 1, 28 9 |
| No n-i t in nte res co me |
3, 28 0 |
2, 24 6 |
5, 52 6 |
4, 53 4 |
47 7 |
5, 01 1 |
4, 51 3 |
( 1, 83 8 ) |
2, 67 5 |
| in To tal co me |
6, 35 8 |
2, 24 5 |
8, 60 3 |
7, 76 7 |
47 1 |
8, 23 8 |
7, 91 7 |
( 1) 1, 83 |
6, 08 6 |
| Sta ff c ost s |
( 1, 96 3 ) |
( 113 ) |
( 2, 07 6 ) |
( 2, 09 9 ) |
( 11 1) |
( 2, 21 0 ) |
( 2, 16 6 ) |
( 25 7) |
( 2, 42 3 ) |
| Pre mis d e ipm t es an qu en |
( 58 4) |
( ) 20 |
( 4) 60 |
( 56 ) 3 |
( ) 39 |
( 2) 60 |
( 59 ) 6 |
( ) 15 |
( 1) 61 |
| Ot he dm inis tive tra r a ex pe nse s |
( 85 8 ) |
( 104 ) |
( 96 2) |
( 83 4) |
( 91 8 ) |
( 1, 75 2) |
( 86 9 ) |
( 45 ) |
( 91 4) |
| De cia tio nd ort isa tio pre n a am n |
( ) 41 6 |
( ) 69 |
( ) 48 5 |
( ) 39 6 |
( ) 57 |
( ) 45 3 |
( ) 46 5 |
( ) 138 |
( ) 60 3 |
| Op tin era g ex p en se s |
( 3, 82 1) |
( 30 6 ) |
( 4, 12 7) |
( 3, 89 2) |
( 1, 125 ) |
( 5, 01 7) |
( 4, 09 6 ) |
( 45 5 ) |
( 4, 55 1) |
| Pro fit be for the tin ch e o r o p era g arg es |
2, 53 7 |
1, 93 9 |
4, 47 6 |
3, 87 5 |
( 4) 65 |
3, 22 1 |
3, 82 1 |
( ) 2, 28 6 |
1, 53 5 |
| Ins laim t c ura nce ne s |
( 73 4) |
- | ( 73 4) |
( 79 3 ) |
- | ( 79 3 ) |
( 1, 14 2) |
- | ( 1, 14 2) |
| Op tin rof it b efo im air los nt era g p re p me se s |
1, 80 3 |
1, 93 9 |
3, 74 2 |
3, 08 2 |
( 65 4) |
2, 42 8 |
2, 67 9 |
( 2, 28 6 ) |
39 3 |
| Im irm t lo pa en sse s |
( ) 1, 53 6 |
( 2) 20 |
( ) 1, 73 8 |
( 4) 2, 26 |
( 2) 84 |
( ) 3, 10 6 |
( ) 1, 95 3 |
- | ( ) 1, 95 3 |
| Op tin rof it/ ( los ) era g p s |
26 7 |
1, 73 7 |
2, 00 4 |
81 8 |
( 1, 49 6 ) |
( 67 8 ) |
72 6 |
( 2, 28 6 ) |
( 1, 56 0 ) |
| Qu | art de d er en |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| 30 Se |
be r 2 01 tem p |
1 | Ju 30 20 11 ne |
Se 30 |
be tem r 2 01 p |
0 | |||
| Re allo ion cat |
Re allo ion cat |
Re allo ion cat |
|||||||
| of ff on e-o |
of ff on e-o |
of ff on e-o |
|||||||
| Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
Ma ed na g £m |
ite ms £m |
Sta tut ory £m |
|
| Op tin rof it/ ( los ) era g p s |
26 7 |
1, 73 7 |
2, 00 4 |
81 8 |
( 1, 49 6 ) |
( 67 8 ) |
72 6 |
( 2, 28 6 ) |
( 1, 56 0 ) |
| f o ( 1) Fa ir v alu de bt e o wn |
2, 35 7 |
( 7) 2, 35 |
- | 33 9 |
( ) 33 9 |
- | ( ) 85 8 |
85 8 |
- |
| As Pr ctio n S ch red it d efa ult - f air lue ch ( 2) set ote em e c sw ap va an g es |
( 60 ) |
60 | - | ( 16 8 ) |
168 | - | ( 82 5 ) |
82 5 |
- |
| 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 |
( 14 2) |
142 | - | ( 73 3 ) |
73 3 |
- | - | - | - |
| Am isa tio f p ha d i ible ort nta set n o urc se ng as s |
( 69 ) |
69 | - | ( 56 ) |
56 | - | ( 12 3 ) |
123 | - |
| Int ion d r ing rat est tur sts eg an ruc co |
( ) 23 3 |
23 3 |
- | ( ) 20 8 |
20 8 |
- | ( 1) 31 |
31 1 |
- |
| Ga in o ed tio f o de bt n r em p n o wn |
1 | ( 1) |
- | 25 5 |
( 25 5 ) |
- | - | - | - |
| Str ate ic d isp als g os |
( ) 49 |
49 | - | 50 | ( ) 50 |
- | 27 | ( ) 27 |
- |
| Bo s t nu ax |
( 5 ) |
5 | - | ( 11 ) |
11 | - | ( 15 ) |
15 | - |
| S H RF old ing ino rity in ter est s m |
( ) 3 |
3 | - | ( ) 5 |
5 | - | ( 1) 18 |
18 1 |
- |
| 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 | - | ( ) 10 9 |
109 | - | - | - | - |
| Pro fit/ ( los ) be for e t s ax |
2, 00 4 |
- | 2, 00 4 |
( 67 8 ) |
- | ( 67 8 ) |
( 1, 56 0 ) |
- | ( 1, 56 0 ) |
| x ( ) /cr Ta cha ed it rg e |
( 1) 79 |
- | ( 1) 79 |
( 2) 22 |
- | ( 2) 22 |
29 5 |
- | 29 5 |
| Pro fit/ ( los ) fro nti ing tio s m co nu op era ns |
1, 21 3 |
- | 1, 21 3 |
( 90 0 ) |
- | ( 90 0 ) |
( 1, 26 5 ) |
- | ( 1, 26 5 ) |
| fit fro of Pro dis nti ed tio et tax m co nu op era ns , n |
6 | - | 6 | 21 | - | 21 | 18 | - | 18 |
| Pro fit/ ( los ) for th eri od s e p |
1, 21 9 |
- | 1, 21 9 |
( 87 9 ) |
- | ( 87 9 ) |
( 1, 24 7) |
- | ( 1, 24 7) |
| No tro llin inte ts n-c on g res |
7 | - | 7 | ( ) 18 |
- | ( ) 18 |
10 1 |
- | 10 1 |
| Pro fit/ ( los ) rib ble din d B sh ho lde att uta to s or ary an are rs |
1, 22 6 |
- | 1, 22 6 |
( 89 7) |
- | ( 89 7) |
( 1, 14 6 ) |
- | ( 1, 14 6 ) |
Notes:
(1) Reallocation of £470 million (Q2 2011 - £111 million; Q3 2010 - (£330) million) to income from trading activities and £1,887 million (Q2 2011 - £228 million; Q3 2010 - (£528) million) to other operating income.
(2) Reallocation to income from trading activities.
| Nin ths e m on |
de d en |
|||||
|---|---|---|---|---|---|---|
| 30 | Se be tem r 2 01 1 p |
Se 30 |
be tem r 2 01 0 p |
|||
| 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 |
|
| Int eiv ab le st ere rec |
16 18 3 , |
( 7) |
16 17 6 , |
17 15 5 , |
9 | 17 16 4 , |
| Int ab le st ere pa y |
( 6, 57 0 ) |
( 1) |
( 6, 57 1) |
( 6, 53 3 ) |
( 2) |
( 6, 53 5 ) |
| Ne t in t in ter es co me |
9, 61 3 |
( 8 ) |
9, 60 5 |
10 62 2 , |
7 | 10 62 9 , |
| Fe d c mis sio eiv ab le es an om ns rec |
4, 79 4 |
- | 4, 79 4 |
6, 14 1 |
- | 6, 14 1 |
| Fe d c mis sio ab le es an om ns pa y |
( 88 7) |
- | ( 88 7) |
( 1, 76 2) |
- | ( 1, 76 2) |
| Inc e f din ivit ies tra act om rom g |
3, 24 1 |
( 2) 30 |
2, 93 9 |
5, 15 9 |
( ) 1, 00 6 |
15 4, 3 |
| Ga in o ed tio f o de bt n r em p n o wn |
- | 25 6 |
25 6 |
- | 3 55 |
55 3 |
| Ot (e ) he rat ing in lud ing in mi in r o pe co me xc su ran ce pre um co me |
2, 12 2 |
1, 79 5 |
3, 91 7 |
1, 18 7 |
( 1) 71 |
47 6 |
| Ins ium in t p ura nce ne rem co me |
3, 27 5 |
- | 3, 27 5 |
3, 85 6 |
- | 3, 85 6 |
| n-i t in No nte res co me |
12 54 5 , |
1, 74 9 |
14 29 4 , |
14 58 1 , |
( ) 1, 164 |
13 41 7 , |
| To tal in co me |
22 15 8 , |
1, 74 1 |
23 89 9 , |
25 20 3 , |
( 1, 157 ) |
24 04 6 , |
| Sta ff c ost s |
( 6, 38 2) |
( 30 3 ) |
( 6, 68 5 ) |
( 6, 89 7) |
( 58 0 ) |
( 47 7) 7, |
| Pre mis d e ipm t es an qu en |
( 1, 70 3 ) |
( 74 ) |
( 1, 77 7) |
( 1, 64 0 ) |
( 53 ) |
( 1, 69 3 ) |
| Ot he dm inis tive tra r a ex pe nse s |
( 2, 55 7) |
( 1, 07 8 ) |
( 3, 63 5 ) |
( 2, 8 ) 77 |
( 169 ) |
( 2, 94 7) |
| De cia tio nd isa tio ort pre n a am n |
( 1, 19 2) |
( 170 ) |
( 1, 36 2) |
( 1, 31 4) |
( 29 0 ) |
( 1, 60 4) |
| Op tin era g ex p en se s |
( 11 83 4) , |
( 1, 62 ) 5 |
( 13 45 9 ) , |
( 12 62 9 ) , |
( 1, 09 2) |
( 13 72 1) , |
| fit for tin Pro be the ch e o r o p era g arg es |
10 32 4 , |
116 | 10 44 0 , |
12 57 4 , |
( ) 2, 24 9 |
10 32 5 , |
| Ins laim t c ura nce ne s |
( 2, 43 9 ) |
- | ( 2, 43 9 ) |
( 3, 60 1) |
- | ( 3, 60 1) |
| Op tin rof it b efo im air los nt era g p re p me se s |
5 7, 88 |
116 | 8, 00 1 |
8, 97 3 |
( ) 2, 24 9 |
6, 72 4 |
| Im irm t lo pa en sse s |
( 5, 74 7) |
( 1, 04 4) |
( 6, 79 1) |
( 7, 11 5 ) |
- | ( 7, 11 5 ) |
| it/ Op tin rof ( los ) era g p s |
2, 13 8 |
( 92 8 ) |
1, 21 0 |
1, 85 8 |
( 2, 24 9 ) |
( 39 1) |
| Nin ths de d e m on en |
||||||||
|---|---|---|---|---|---|---|---|---|
| Se 30 |
tem be r 2 01 p |
1 | Se 30 |
be r 2 01 0 tem p |
||||
| 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 |
2, 13 8 |
( ) 92 8 |
1, 21 0 |
85 1, 8 |
( ) 2, 24 9 |
( 1) 39 |
||
| Fa ir v alu f o de bt ( 1) e o wn |
2, 21 6 |
( 2, 21 6 ) |
- | ( 40 8 ) |
40 8 |
- | ||
| n S efa - f ( 2) As set Pr ote ctio ch red it d ult air lue ch em e c sw ap va an g es |
( 7) 69 |
69 7 |
- | ( ) 82 5 |
82 5 |
- | ||
| 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 |
( ) 87 5 |
87 5 |
- | - | - | - | ||
| Am isa tio f p ha d i ible ort nta set n o urc se ng as s |
( 16 9 ) |
169 | - | ( 27 3 ) |
27 3 |
- | ||
| Int ion d r ing rat est tur sts eg an ruc co |
( 58 6 ) |
58 6 |
- | ( 73 3 ) |
73 3 |
- | ||
| Ga in o ed tio f o de bt n r em p n o wn |
25 6 |
( ) 25 6 |
- | 55 3 |
( ) 55 3 |
- | ||
| Str ic d isp als ate g os |
( 22 ) |
22 | - | ( 33 1) |
33 1 |
- | ||
| Bo s t nu ax |
( ) 27 |
27 | - | ( ) 84 |
84 | - | ||
| RF S H old ing ino rity in ter est s m |
( 5 ) |
5 | - | ( 14 8 ) |
148 | - | ||
| for Gr Int st rat e h ed dju stm ts im ire d a ilab le- le k g nt bo nd ere g e a en on pa va -sa ee ov ern me s |
( ) 16 9 |
169 | - | - | - | - | ||
| Pro fit/ ( los ) be for e t s ax |
1, 21 0 |
- | 1, 21 0 |
( 39 1) |
- | ( 39 1) |
||
| Ta ha x c rg e |
( ) 1, 43 6 |
- | ( ) 1, 43 6 |
( 7) 63 |
- | ( 7) 63 |
||
| Lo fro nti ing tio ss m co nu op era ns |
( 22 6 ) |
- | ( 22 6 ) |
( 1, 02 8 ) |
- | ( 1, 02 8 ) |
||
| Pro fit/ ( los ) fro dis nti ed tio of et tax s m co nu op era ns , n |
37 | - | 37 | ( ) 68 8 |
- | ( ) 68 8 |
||
| Lo fo r th eri od ss e p |
( 18 9 ) |
- | ( 18 9 ) |
( 1, 71 6 ) |
- | ( 1, 71 6 ) |
||
| No llin inte tro ts n-c on g res |
( 10 ) |
- | ( 10 ) |
70 3 |
- | 70 3 |
||
| Pre fer sh d o the r d ivid ds en ce are an en |
- | - | - | ( 12 4) |
- | ( 12 4) |
||
| Lo tri bu tab le ord ina d B sh ho lde at to ss ry an are rs |
( 19 9 ) |
- | ( 19 9 ) |
( 1, 13 7) |
- | ( 1, 13 7) |
Notes:
(1) Reallocation of £395 million (Q3 2010 - (£185) million) to income from trading activities and £1,821 million (Q3 2010 - (£223) million) to other operating income.
(2) Reallocation to income from trading activities.
To comply with EC State Aid requirements the Group agreed to make a series of divestments by the end of 2013: the disposal of 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. Due to the complex nature of the process required to separate the divesting branches and associated assets, and the desire to minimise customer disruption, the transaction is now expected to substantially complete in the fourth quarter of 2012, subject to regulatory approvals and other conditions.
The disposal of RBS Insurance, by way of public flotation or a trade sale, is targeted for the second half of 2012, subject to market conditions. External advisors were appointed during Q4 2010 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) | |||||
|---|---|---|---|---|---|---|
| YTD Q3 2011 £m |
FY 2010 £m |
before impairments YTD Q3 2011 £m |
FY 2010 £m |
YTD Q3 2011 £m |
FY 2010 £m |
|
| RBS Insurance (1) UK branch-based businesses (2) |
3,149 695 |
4,369 902 |
329 365 |
(295) 439 |
329 226 |
(295) 160 |
| Total | 3,844 | 5,271 | 694 | 144 | 555 | (135) |
The table below shows the estimated risk-weighted assets, total assets and capital of the businesses identified for disposal.
| RWAs | Total assets | Capital | |||||
|---|---|---|---|---|---|---|---|
| 30 September 31 December |
30 September | 31 December | 30 September 31 December |
||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | ||
| £bn | £bn | £bn | £bn | £bn | £bn | ||
| RBS Insurance (1) | n/m | n/m | 12.8 | 12.4 | 4.3 | 4.0 | |
| UK branch-based businesses (2) | 10.6 | 13.2 | 19.1 | 19.9 | 0.9 | 1.2 | |
| Total | 10.6 | 13.2 | 31.9 | 32.3 | 5.2 | 5.2 |
Notes:
(2) Estimated notional equity based on 8.5% of RWAs.
(1) As reported in the results for the period ended 30 September 2011 and Annual Results for the year ended 31 December 2010 and excluding non-core business. Estimated capital includes approximately £0.9 billion of goodwill.
Further information on the UK branch-based businesses by division is shown in the tables below:
| Division | Total | |||
|---|---|---|---|---|
| UK | UK | YTD | ||
| Retail | Corporate | Q3 2011 | FY 2010 | |
| £m | £m | £m | £m | |
| Income statement | ||||
| Net interest income | 222 | 290 | 512 | 656 |
| Non-interest income | 69 | 114 | 183 | 246 |
| Total income | 291 | 404 | 695 | 902 |
| Direct expenses | ||||
| - staff | (57) | (63) | (120) | (176) |
| - other | (70) | (50) | (120) | (144) |
| Indirect expenses | (55) | (35) | (90) | (143) |
| (182) | (148) | (330) | (463) | |
| Operating profit before impairment losses | 109 | 256 | 365 | 439 |
| Impairment losses | (63) | (76) | (139) | (279) |
| Operating profit | 46 | 180 | 226 | 160 |
| Analysis of income by product | ||||
| Loans and advances | 98 | 250 | 348 | 445 |
| Deposits | 79 | 117 | 196 | 261 |
| Mortgages | 102 | - | 102 | 120 |
| Other | 12 | 37 | 49 | 76 |
| Total income | 291 | 404 | 695 | 902 |
| Net interest margin | 4.62% | 2.67% | 3.26% | 3.24% |
| Employee numbers (full time equivalents rounded to the nearest hundred) |
2,900 | 1,500 | 4,400 | 4,400 |
| Division | Total | |||||
|---|---|---|---|---|---|---|
| UK Retail £bn |
UK Corporate £bn |
Global Banking & Markets £bn |
30 September 2011 £bn |
31 December 2010 £bn |
||
| Capital and balance sheet | ||||||
| Total third party assets | 6.6 | 12.4 | - | 19.0 | 19.9 | |
| Loans and advances to customers (gross) | 6.9 | 12.9 | - | 19.8 | 20.7 | |
| Customer deposits | 8.9 | 14.7 | - | 23.6 | 24.0 | |
| Derivative assets | - | - | 0.6 | 0.6 | n/a | |
| Derivative liabilities | - | - | 0.1 | 0.1 | n/a | |
| Risk elements in lending | 0.5 | 1.1 | - | 1.6 | 1.7 | |
| Loan:deposit ratio | 78% | 88% | - | 84% | 86% | |
| Risk-weighted assets | 3.3 | 7.3 | - | 10.6 | 13.2 |
The following tables analyse loans and advances to customers (excluding reverse repos and assets of disposal groups), by industry and geography (by location of office). Refer to Risk management: Credit risk for the Group summary.
| 30 September 2011 | 30 June 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 | 7,680 | 83 | 7,763 | 5,945 | 91 | 6,036 | 5,728 | 173 | 5,901 |
| Finance | 29,754 | 3,795 | 33,549 | 28,657 | 3,734 | 32,391 | 27,995 | 6,023 | 34,018 |
| Residential mortgages | 104,040 | 1,497 105,537 | 103,689 | 1,570 105,259 | 99,928 | 1,665 | 101,593 | ||
| Personal lending | 21,930 | 295 | 22,225 | 22,205 | 358 | 22,563 | 23,035 | 585 | 23,620 |
| Property | 36,106 | 25,953 | 62,059 | 36,584 | 27,182 | 63,766 | 34,970 | 30,492 | 65,462 |
| Construction | 6,203 | 2,245 | 8,448 | 6,839 | 2,104 | 8,943 | 7,041 | 2,310 | 9,351 |
| Manufacturing | 11,123 | 867 | 11,990 | 10,155 | 1,447 | 11,602 | 12,300 | 1,510 | 13,810 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 12,325 | 1,553 | 13,878 | 12,255 | 1,615 | 13,870 | 12,554 | 1,853 | 14,407 |
| - transport and storage | 8,835 | 3,664 | 12,499 | 7,905 | 3,844 | 11,749 | 8,105 | 5,015 | 13,120 |
| - health, education and | |||||||||
| recreation | 11,894 | 742 | 12,636 | 12,678 | 835 | 13,513 | 13,502 | 1,039 | 14,541 |
| - hotels and restaurants | 6,264 | 684 | 6,948 | 6,399 | 775 | 7,174 | 6,558 | 808 | 7,366 |
| - utilities | 3,788 | 715 | 4,503 | 3,418 | 908 | 4,326 | 3,101 | 1,035 | 4,136 |
| - other | 13,952 | 2,154 | 16,106 | 13,555 | 2,199 | 15,754 | 14,445 | 1,991 | 16,436 |
| Agriculture, forestry and | |||||||||
| fishing | 2,963 | 73 | 3,036 | 2,955 | 55 | 3,010 | 2,872 | 67 | 2,939 |
| Finance leases and | |||||||||
| instalment credit | 5,524 | 6,925 | 12,449 | 5,578 | 7,161 | 12,739 | 5,589 | 7,785 | 13,374 |
| Interest accruals | 352 | 1 | 353 | 365 | 21 | 386 | 415 | 98 | 513 |
| 282,733 | 51,246 333,979 | 279,182 | 53,899 333,081 | 278,138 | 62,449 340,587 | ||||
| Europe | |||||||||
| Central and local government | 209 | 805 | 1,014 | 397 | 862 | 1,259 | 365 | 1,017 | 1,382 |
| Finance | 2,654 | 644 | 3,298 | 2,642 | 719 | 3,361 | 2,642 | 1,019 | 3,661 |
| Residential mortgages | 19,109 | 590 | 19,699 | 20,224 | 640 | 20,864 | 19,473 | 621 | 20,094 |
| Personal lending | 2,126 | 526 | 2,652 | 2,234 | 572 | 2,806 | 2,270 | 600 | 2,870 |
| Property | 5,359 | 12,255 | 17,614 | 5,483 | 12,790 | 18,273 | 5,139 | 12,636 | 17,775 |
| Construction | 1,279 | 754 | 2,033 | 1,163 | 864 | 2,027 | 1,014 | 873 | 1,887 |
| Manufacturing | 4,807 | 3,872 | 8,679 | 5,669 | 4,253 | 9,922 | 5,853 | 4,181 | 10,034 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 3,559 | 721 | 4,280 | 4,058 | 767 | 4,825 | 4,126 | 999 | 5,125 |
| - transport and storage | 5,281 | 1,093 | 6,374 | 5,330 | 970 | 6,300 | 5,625 | 1,369 | 6,994 |
| - health, education and | |||||||||
| recreation | 1,334 | 339 | 1,673 | 1,373 | 445 | 1,818 | 1,442 | 496 | 1,938 |
| - hotels and restaurants | 1,029 | 560 | 1,589 | 1,065 | 597 | 1,662 | 1,055 | 535 | 1,590 |
| - utilities | 1,852 | 598 | 2,450 | 1,536 | 654 | 2,190 | 1,412 | 623 | 2,035 |
| - other | 3,554 | 1,634 | 5,188 | 4,807 | 1,850 | 6,657 | 3,877 | 2,050 | 5,927 |
| Agriculture, forestry and | |||||||||
| fishing | 760 | 62 | 822 | 789 | 68 | 857 | 849 | 68 | 917 |
| Finance leases and | |||||||||
| instalment credit | 259 | 515 | 774 | 264 | 620 | 884 | 370 | 744 | 1,114 |
| Interest accruals | 105 | 98 | 203 | 135 | 98 | 233 | 143 | 101 | 244 |
| 53,276 | 25,066 | 78,342 | 57,169 | 26,769 | 83,938 | 55,655 | 27,932 | 83,587 |
| 30 September 2011 | 30 June 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 | 164 | 15 | 179 | 164 | 15 | 179 | 263 | 53 | 316 |
| Finance | 10,035 | 368 | 10,403 | 9,820 | 444 | 10,264 | 9,522 | 587 | 10,109 |
| Residential mortgages | 20,285 | 3,040 | 23,325 | 20,020 | 3,093 | 23,113 | 20,548 | 3,653 | 24,201 |
| Personal lending | 6,543 | 1,986 | 8,529 | 6,315 | 2,299 | 8,614 | 6,816 | 2,704 | 9,520 |
| Property | 2,338 | 1,549 | 3,887 | 2,228 | 1,626 | 3,854 | 1,611 | 3,318 | 4,929 |
| Construction | 443 | 54 | 497 | 445 | 68 | 513 | 442 | 78 | 520 |
| Manufacturing | 6,545 | 54 | 6,599 | 6,113 | 64 | 6,177 | 5,459 | 143 | 5,602 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 4,851 | 109 | 4,960 | 4,644 | 144 | 4,788 | 4,264 | 237 | 4,501 |
| - transport and storage | 1,699 | 985 | 2,684 | 1,725 | 1,297 | 3,022 | 1,786 | 1,408 | 3,194 |
| - health, education and | |||||||||
| recreation | 2,572 | 94 | 2,666 | 2,396 | 107 | 2,503 | 2,380 | 313 | 2,693 |
| - hotels and restaurants | 532 | 62 | 594 | 455 | 71 | 526 | 486 | 136 | 622 |
| - utilities | 952 | 27 | 979 | 960 | 27 | 987 | 1,117 | 53 | 1,170 |
| - other | 4,447 | 423 | 4,870 | 4,195 | 425 | 4,620 | 4,042 | 577 | 4,619 |
| Agriculture, forestry and | |||||||||
| fishing | 24 | - | 24 | 25 | - | 25 | 31 | - | 31 |
| Finance leases and | |||||||||
| instalment credit | 2,531 | - | 2,531 | 2,456 | - | 2,456 | 2,315 | - | 2,315 |
| Interest accruals | 172 | 53 | 225 | 179 | 57 | 236 | 183 | 73 | 256 |
| 64,133 | 8,819 | 72,952 | 62,140 | 9,737 | 71,877 | 61,265 | 13,333 | 74,598 | |
| RoW | |||||||||
| Central and local government | 44 | 604 | 648 | 68 | 539 | 607 | 425 | 428 | 853 |
| Finance | 5,651 | 77 | 5,728 | 6,426 | 141 | 6,567 | 6,751 | 22 | 6,773 |
| Residential mortgages | 507 | 192 | 699 | 467 | 206 | 673 | 410 | 203 | 613 |
| Personal lending | 1,553 | 3 | 1,556 | 1,470 | - | 1,470 | 1,460 | 2 | 1,462 |
| Property | 269 | 871 | 1,140 | 244 | 1,264 | 1,508 | 735 | 1,205 | 1,940 |
| Construction | 67 | 9 | 76 | 78 | 34 | 112 | 183 | 91 | 274 |
| Manufacturing | 2,341 | 440 | 2,781 | 2,131 | 529 | 2,660 | 2,185 | 686 | 2,871 |
| Service industries and | |||||||||
| business activities | |||||||||
| - retail, wholesale and repairs | 1,472 | 44 | 1,516 | 1,166 | 72 | 1,238 | 1,030 | 102 | 1,132 |
| - transport and storage | 421 | 267 | 688 | 283 | 338 | 621 | 430 | 403 | 833 |
| - health, education and | |||||||||
| recreation | 424 | 340 | 764 | 260 | 160 | 420 | 132 | 17 | 149 |
| - hotels and restaurants | 16 | 52 | 68 | 109 | 9 | 118 | 90 | 13 | 103 |
| - utilities | 1,620 | 385 | 2,005 | 1,573 | 421 | 1,994 | 1,468 | 399 | 1,867 |
| - other | 2,791 | 268 | 3,059 | 2,571 | 492 | 3,063 | 2,100 | 912 | 3,012 |
| Agriculture, forestry and | |||||||||
| fishing | 20 | - | 20 | 22 | - | 22 | 6 | - | 6 |
| Finance leases and | |||||||||
| instalment credit | 90 | 27 | 117 | 55 | 139 | 194 | 47 | - | 47 |
| Interest accruals | 32 | - | 32 | 36 | - | 36 | 90 | 6 | 96 |
| 17,318 | 3,579 | 20,897 | 16,959 | 4,344 | 21,303 | 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 industry and geography (by location of office), for the Group, Core and Non-Core.
| 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 |
| 30 June 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 % |
H1 Impairment charge £m |
H1 Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Group | ||||||||
| Central and local government | 8,081 | - | - | - | - | - | - | - |
| Finance - banks | 53,264 | 155 | 133 | 0.3 | 86 | 0.2 | - | - |
| - other | 52,583 | 1,088 | 677 | 2.1 | 62 | 1.3 | 15 | 52 |
| Residential mortgages | 149,909 | 5,127 | 1,284 | 3.4 | 25 | 0.9 | 670 | 274 |
| Personal lending | 35,453 | 3,279 | 2,628 | 9.2 | 80 | 7.4 | 303 | 573 |
| Property | 87,401 | 21,953 | 8,911 | 25.1 | 41 | 10.2 | 2,395 | 415 |
| Construction | 11,595 | 1,757 | 694 | 15.2 | 39 | 6.0 | (73) | 118 |
| Manufacturing | 30,361 | 1,274 | 562 | 4.2 | 44 | 1.9 | 85 | 30 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 24,721 | 1,074 | 536 | 4.3 | 50 | 2.2 | 80 | 66 |
| - transport and storage | 21,692 | 527 | 148 | 2.4 | 28 | 0.7 | 49 | 22 |
| - health, education and | ||||||||
| recreation | 18,254 | 1,202 | 413 | 6.6 | 34 | 2.3 | 146 | 37 |
| - hotels and restaurants | 9,480 | 1,611 | 663 | 17.0 | 41 | 7.0 | 195 | 43 |
| - utilities | 9,497 | 89 | 25 | 0.9 | 28 | 0.3 | 1 | - |
| - other | 30,094 | 2,173 | 1,138 | 7.2 | 52 | 3.8 | 523 | 205 |
| Agriculture, forestry and fishing | 3,914 | 152 | 62 | 3.9 | 41 | 1.6 | (27) | 3 |
| Finance leases and instalment | ||||||||
| credit | 16,273 | 889 | 531 | 5.5 | 60 | 3.3 | 68 | 92 |
| Interest accruals | 891 | - | - | - | - | - | - | - |
| Latent | - | - | 2,354 | - | - | - | (295) | - |
| 563,463 | 42,350 | 20,759 | 7.5 | 49 | 3.7 | 4,135 | 1,930 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 105,259 | 2,222 | 407 | 2.1 | 18 | 0.4 | 124 | 12 |
| - personal lending | 22,563 | 2,927 | 2,395 | 13.0 | 82 | 10.6 | 336 | 461 |
| - property | 63,766 | 8,227 | 2,847 | 12.9 | 35 | 4.5 | 830 | 162 |
| - other | 178,726 | 5,735 | 3,424 | 3.2 | 60 | 1.9 | 239 | 439 |
| Europe | ||||||||
| - residential mortgages | 20,864 | 2,140 | 654 | 10.3 | 31 | 3.1 | 337 | 2 |
| - personal lending | 2,806 | 216 | 178 | 7.7 | 82 | 6.3 | (80) | 27 |
| - property | 18,273 | 13,018 | 5,826 | 71.2 | 45 | 31.9 | 1,570 | 170 |
| - other | 50,711 | 5,004 | 3,106 | 9.9 | 62 | 6.1 | 637 | 48 |
| US | ||||||||
| - residential mortgages | 23,113 | 740 | 214 | 3.2 | 29 | 0.9 | 209 | 260 |
| - personal lending | 8,614 | 134 | 53 | 1.6 | 40 | 0.6 | 47 | 82 |
| - property | 3,854 | 360 | 97 | 9.3 | 27 | 2.5 | (46) | 63 |
| - other | 36,908 | 610 | 1,053 | 1.7 | 173 | 2.9 | (82) | 40 |
| RoW | ||||||||
| - residential mortgages | 673 | 25 | 9 | 3.7 | 36 | 1.3 | - | - |
| - personal lending | 1,470 | 2 | 2 | 0.1 | 100 | 0.1 | - | 3 |
| - property | 1,508 | 348 | 141 | 23.1 | 41 | 9.4 | 41 | 20 |
| - other | 24,355 | 642 | 353 | 2.6 | 55 | 1.4 | (27) | 141 |
| 563,463 | 42,350 | 20,759 | 7.5 | 49 | 3.7 | 4,135 | 1,930 |
| 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 | 20,094 | 1,551 | 301 | 7.7 | 19 | 1.5 | 221 | 6 |
| - personal lending | 2,870 | 401 | 316 | 14.0 | 79 | 11.0 | 66 | 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 % | 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 |
| 30 June 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 % |
H1 Impairment charge £m |
H1 Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Core | ||||||||
| Central and local government | 6,574 | - | - | - | - | - | - | - |
| Finance - banks | 52,619 | 145 | 132 | 0.3 | 91 | 0.3 | - | - |
| - other | 47,545 | 777 | 531 | 1.6 | 68 | 1.1 | 130 | 18 |
| Residential mortgages | 144,400 | 4,629 | 1,000 | 3.2 | 22 | 0.7 | 422 | 118 |
| Personal lending | 32,224 | 2,968 | 2,380 | 9.2 | 80 | 7.4 | 320 | 502 |
| Property | 44,539 | 3,749 | 943 | 8.4 | 25 | 2.1 | 124 | 59 |
| Construction | 8,525 | 812 | 271 | 9.5 | 33 | 3.2 | 100 | 84 |
| Manufacturing | 24,068 | 546 | 259 | 2.3 | 47 | 1.1 | 21 | 22 |
| Service industries and | ||||||||
| business activities | ||||||||
| - retail, wholesale and repairs | 22,123 | 667 | 315 | 3.0 | 47 | 1.4 | 92 | 48 |
| - transport and storage | 15,243 | 247 | 45 | 1.6 | 18 | 0.3 | 23 | 19 |
| - health, education and | ||||||||
| recreation | 16,707 | 576 | 177 | 3.4 | 31 | 1.1 | 53 | 14 |
| - hotels and restaurants | 8,028 | 976 | 345 | 12.2 | 35 | 4.3 | 112 | 19 |
| - utilities | 7,487 | 20 | - | 0.3 | - | - | (1) | - |
| - other | 25,128 | 1,070 | 638 | 4.3 | 60 | 2.5 | 407 | 72 |
| Agriculture, forestry and fishing | 3,791 | 81 | 24 | 2.1 | 30 | 0.6 | (29) | 3 |
| Finance leases and instalment | ||||||||
| credit | 8,353 | 194 | 124 | 2.3 | 64 | 1.5 | 20 | 40 |
| Interest accruals | 715 | - | - | - | - | - | - | - |
| Latent | - | - | 1,568 | - | - | - | (132) | - |
| 468,069 | 17,457 | 8,752 | 3.7 | 50 | 1.9 | 1,662 | 1,018 | |
| of which: | ||||||||
| UK | ||||||||
| - residential mortgages | 103,689 | 2,168 | 397 | 2.1 | 18 | 0.4 | 119 | 11 |
| - personal lending | 22,205 | 2,723 | 2,210 | 12.3 | 81 | 10.0 | 326 | 458 |
| - property | 36,584 | 2,747 | 586 | 7.5 | 21 | 1.6 | 77 | 42 |
| - other | 153,718 | 3,078 | 1,814 | 2.0 | 59 | 1.2 | 231 | 293 |
| Europe | ||||||||
| - residential mortgages | 20,224 | 1,956 | 514 | 9.7 | 26 | 2.5 | 224 | 2 |
| - personal lending | 2,234 | 146 | 125 | 6.5 | 86 | 5.6 | (23) | 12 |
| - property | 5,483 | 826 | 281 | 15.1 | 34 | 5.1 | 37 | - |
| - other | 37,702 | 2,576 | 1,829 | 6.8 | 71 | 4.9 | 568 | 15 |
| US | ||||||||
| - residential mortgages | 20,020 | 481 | 80 | 2.4 | 17 | 0.4 | 79 | 105 |
| - personal lending | 6,315 | 97 | 43 | 1.5 | 44 | 0.7 | 17 | 29 |
| - property | 2,228 | 127 | 38 | 5.7 | 30 | 1.7 | 10 | 17 |
| - other | 34,157 | 304 | 638 | 0.9 | 210 | 1.9 | 29 | 28 |
| RoW | ||||||||
| - residential mortgages | 467 | 24 | 9 | 5.1 | 38 | 1.9 | - | - |
| - personal lending | 1,470 | 2 | 2 | 0.1 | 100 | 0.1 | - | 3 |
| - property | 244 | 49 | 38 | 20.1 | 78 | 15.6 | - | - |
| - other | 21,329 | 153 | 148 | 0.7 | 97 | 0.7 | (32) | 3 |
| 468,069 | 17,457 | 8,752 | 3.7 | 50 | 1.9 | 1,662 | 1,018 |
| 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 - other |
735 19,390 |
58 180 |
35 75 |
7.9 0.9 |
60 42 |
4.8 0.4 |
20 71 |
- 38 |
| 469,633 | 15,207 | 7,866 | 3.2 | 52 | 1.7 | 3,737 | 2,224 |
| 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 |
| 30 June 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 % |
H1 Impairment charge £m |
H1 Amounts written-off £m |
|---|---|---|---|---|---|---|---|---|
| Non-Core | ||||||||
| Central and local government | 1,507 | - | - | - | - | - | - | - |
| Finance - banks | 645 | 10 | 1 | 1.6 | 10 | 0.2 | - | - |
| - other | 5,038 | 311 | 146 | 6.2 | 47 | 2.9 | (115) | 34 |
| Residential mortgages | 5,509 | 498 | 284 | 9.0 | 57 | 5.2 | 248 | 156 |
| Personal lending | 3,229 | 311 | 248 | 9.6 | 80 | 7.7 | (17) | 71 |
| Property | 42,862 | 18,204 | 7,968 | 42.5 | 44 | 18.6 | 2,271 | 356 |
| Construction | 3,070 | 945 | 423 | 30.8 | 45 | 13.8 | (173) | 34 |
| Manufacturing | 6,293 | 728 | 303 | 11.6 | 42 | 4.8 | 64 | 8 |
| Service industries and business activities |
||||||||
| - retail, wholesale and repairs | 2,598 | 407 | 221 | 15.7 | 54 | 8.5 | (12) | 18 |
| - transport and storage | 6,449 | 280 | 103 | 4.3 | 37 | 1.6 | 26 | 3 |
| - health, education and | ||||||||
| recreation | 1,547 | 626 | 236 | 40.5 | 38 | 15.3 | 93 | 23 |
| - hotels and restaurants | 1,452 | 635 | 318 | 43.7 | 50 | 21.9 | 83 | 24 |
| - utilities | 2,010 | 69 | 25 | 3.4 | 36 | 1.2 | 2 | - |
| - other | 4,966 | 1,103 | 500 | 22.2 | 45 | 10.1 | 116 | 133 |
| Agriculture, forestry and fishing Finance leases and instalment |
123 | 71 | 38 | 57.7 | 54 | 30.9 | 2 | - |
| credit | 7,920 | 695 | 407 | 8.8 | 59 | 5.1 | 48 | 52 |
| Interest accruals | 176 | - | - | - | - | - | - | - |
| Latent | - | - | 786 | - | - | - | (163) | - |
| 95,394 | 24,893 | 12,007 | 26.1 | 48 | 12.6 | 2,473 | 912 | |
| of which: UK |
||||||||
| - residential mortgages | 1,570 | 54 | 10 | 3.4 | 19 | 0.6 | 5 | 1 |
| - personal lending | 358 | 204 | 185 | 57.0 | 91 | 51.7 | 10 | 3 |
| - property | 27,182 | 5,480 | 2,261 | 20.2 | 41 | 8.3 | 753 | 120 |
| - other | 25,008 | 2,657 | 1,610 | 10.6 | 61 | 6.4 | 8 | 146 |
| Europe | ||||||||
| - residential mortgages | 640 | 184 | 140 | 28.8 | 76 | 21.9 | 113 | - |
| - personal lending | 572 | 70 | 53 | 12.2 | 76 | 9.3 | (57) | 15 |
| - property | 12,790 | 12,192 | 5,545 | 95.3 | 45 | 43.4 | 1,533 | 170 |
| - other US |
13,009 | 2,428 | 1,277 | 18.7 | 53 | 9.8 | 69 | 33 |
| - residential mortgages | 3,093 | 259 | 134 | 8.4 | 52 | 4.3 | 130 | 155 |
| - personal lending | 2,299 | 37 | 10 | 1.6 | 27 | 0.4 | 30 | 53 |
| - property | 1,626 | 233 | 59 | 14.3 | 25 | 3.6 | (56) | 46 |
| - other | 2,751 | 306 | 415 | 11.1 | 136 | 15.1 | (111) | 12 |
| RoW | ||||||||
| - residential mortgages | 206 | 1 | - | 0.5 | - | - | - | - |
| - personal lending | - | - | - | - | - | - | - | - |
| - property | 1,264 | 299 | 103 | 23.7 | 34 | 8.1 | 41 | 20 |
| - other | 3,026 | 489 | 205 | 16.2 | 42 | 6.8 | 5 | 138 |
| 95,394 | 24,893 | 12,007 | 26.1 | 48 | 12.6 | 2,473 | 912 |
| 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 |
The following tables analyse loans and advances to banks and customers (excluding reverse repos and assets of disposal groups) and related REIL, provisions, impairments, write-offs and coverage ratios by division.
| REIL | |||||||
|---|---|---|---|---|---|---|---|
| as a % | Provisions | YTD | YTD | ||||
| Gross | of gross | as a % | Impairment | Amounts | |||
| 30 September 2011 | loans £m |
£m | REIL Provisions £m |
loans % |
of REIL % |
charge £m |
written-off £m |
| UK Retail | 110,520 | 4,651 | 2,661 | 4.2 | 57 | 597 | 658 |
| UK Corporate | 110,047 | 4,904 | 1,961 | 4.5 | 40 | 549 | 498 |
| Wealth | 19,363 | 198 | 71 | 1.0 | 36 | 13 | 8 |
| Global Transaction Services | 23,252 | 240 | 201 | 1.0 | 84 | 119 | 66 |
| Ulster Bank | 38,337 | 5,556 | 2,567 | 14.5 | 46 | 1,057 | 63 |
| US Retail & Commercial | 49,663 | 955 | 469 | 1.9 | 49 | 193 | 267 |
| Retail & Commercial | 351,182 | 16,504 | 7,930 | 4.7 | 48 | 2,528 | 1,560 |
| Global Banking & Markets | 109,821 | 1,641 | 943 | 1.5 | 57 | (49) | 51 |
| RBS Insurance and other | 8,475 | - | - | - | - | - | - |
| Core | 469,478 | 18,145 | 8,873 | 3.9 | 49 | 2,479 | 1,611 |
| Non-Core | 89,419 | 24,581 | 11,850 | 27.5 | 48 | 3,108 | 1,409 |
| 558,897 | 42,726 | 20,723 | 7.6 | 49 | 5,587 | 3,020 | |
| 30 June 2011 | |||||||
| UK Retail | 110,770 | 4,622 | 2,672 | 4.2 | 58 | 402 | 457 |
| UK Corporate | 110,893 | 4,761 | 1,902 | 4.3 | 40 | 322 | 332 |
| Wealth | 19,626 | 185 | 69 | 0.9 | 37 | 8 | 6 |
| Global Transaction Services | 23,074 | 309 | 216 | 1.3 | 70 | 74 | 11 |
| Ulster Bank | 39,450 | 5,116 | 2,401 | 13.0 | 47 | 730 | 21 |
| US Retail & Commercial | 48,020 | 929 | 484 | 1.9 | 52 | 139 | 170 |
| Retail & Commercial | 351,833 | 15,922 | 7,744 | 4.5 | 49 | 1,675 | 997 |
| Global Banking & Markets | 112,310 | 1,535 | 1,008 | 1.4 | 66 | (13) | 21 |
| RBS Insurance and other | 3,926 | - | - | - | - | - | - |
| Core | 468,069 | 17,457 | 8,752 | 3.7 | 50 | 1,662 | 1,018 |
| Non-Core | 95,394 | 24,893 | 12,007 | 26.1 | 48 | 2,473 | 912 |
| 563,463 | 42,350 | 20,759 | 7.5 | 49 | 4,135 | 1,930 | |
| 31 December 2010 | |||||||
| UK Retail | 108,813 | 4,620 | 2,741 | 4.2 | 59 | 1,160 | 1,135 |
| UK Corporate | 111,744 | 3,967 | 1,732 | 3.6 | 44 | 761 | 349 |
| Wealth | 18,350 | 223 | 66 | 1.2 | 30 | 18 | 9 |
| Global Transaction Services | 17,484 | 146 | 147 | 0.8 | 101 | 8 | 49 |
| Ulster Bank | 39,786 | 3,619 | 1,633 | 9.1 | 45 | 1,161 | 48 |
| US Retail & Commercial | 48,661 | 913 | 505 | 1.9 | 55 | 483 | 547 |
| Retail & Commercial | 344,838 | 13,488 | 6,824 | 3.9 | 51 | 3,591 | 2,137 |
| Global Banking & Markets | 122,054 | 1,719 | 1,042 | 1.4 | 61 | 146 | 87 |
| RBS Insurance and other | 2,741 | - | - | - | - | - | - |
| Core | 469,633 | 15,207 | 7,866 | 3.2 | 52 | 3,737 | 2,224 |
| Non-Core | 109,206 | 23,391 | 10,316 | 21.4 | 44 | 5,407 | 3,818 |
| 578,839 | 38,598 | 18,182 | 6.7 | 47 | 9,144 | 6,042 |
| Other | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| US | UK | Europe | RoW | Total | HFT | DFV | AFS | LAR | |
| 30 September 2011 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Gross exposure | |||||||||
| RMBS: G10 government | 29,011 | 15 | 6,141 | 1 | 35,168 | 17,622 | - | 17,546 | - |
| RMBS: covered bond | 136 | 206 | 8,468 | - | 8,810 | - | - | 8,810 | - |
| 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 |
| Other ABS | 2,074 | 1,688 | 2,414 | 1,150 | 7,326 | 1,907 | - | 3,078 | 2,341 |
| 52,575 | 9,727 | 21,192 | 1,678 | 85,172 | 32,941 | 74 | 46,448 | 5,709 | |
| Carrying value | |||||||||
| RMBS: G10 government | 29,759 | 15 | 5,790 | 1 | 35,565 | 17,948 | - | 17,617 | - |
| RMBS: covered bond | 139 | 214 | 7,504 | - | 7,857 | - | - | 7,857 | - |
| 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 |
| Other ABS | 1,743 | 824 | 2,263 | 1,114 | 5,944 | 992 | - | 2,716 | 2,236 |
| 43,060 | 7,348 | 18,627 | 1,627 | 70,662 | 24,123 | 1 | 41,091 | 5,447 | |
| Net exposure | |||||||||
| RMBS: G10 government | 29,759 | 15 | 5,790 | 1 | 35,565 | 17,948 | - | 17,617 | - |
| RMBS: covered bond | 139 | 214 | 7,504 | - | 7,857 | - | - | 7,857 | - |
| 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 |
| Other ABS | 1,449 | 717 | 2,265 | 959 | 5,390 | 548 | - | 2,717 | 2,125 |
| 36,172 | 7,215 | 18,305 | 1,448 | 63,140 | 21,604 | 1 | 36,213 | 5,322 |
| Other | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| US | UK | Europe | RoW | Total | HFT | DFV | AFS | LAR | |
| 31 December 2010 | £m | £m | £m | £m | £m | £m | £m | £m | £m |
| Gross exposure | |||||||||
| RMBS: G10 government | 24,207 | 16 | 6,422 | - | 30,645 | 13,840 | - | 16,805 | - |
| RMBS: covered bond | 138 | 208 | 8,525 | - | 8,871 | - | - | 8,871 | - |
| 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 |
| Other ABS | 3,104 | 1,144 | 2,871 | 1,705 | 8,824 | 1,533 | - | 4,523 | 2,768 |
| 52,554 | 8,938 | 21,411 | 2,172 | 85,075 | 30,164 | 121 | 48,425 | 6,365 | |
| Carrying value | |||||||||
| RMBS: G10 government | 24,390 | 16 | 5,958 | - | 30,364 | 13,765 | - | 16,599 | - |
| RMBS: covered bond | 142 | 208 | 7,522 | - | 7,872 | - | - | 7,872 | - |
| 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 |
| Other ABS | 2,780 | 945 | 2,615 | 1,667 | 8,007 | 1,259 | - | 4,089 | 2,659 |
| 42,063 | 7,892 | 18,765 | 2,105 | 70,825 | 21,988 | 119 | 42,515 | 6,203 | |
| Net exposure | |||||||||
| RMBS: G10 government | 24,390 | 16 | 5,958 | - | 30,364 | 13,765 | - | 16,599 | - |
| RMBS: covered bond | 142 | 208 | 7,522 | - | 7,872 | - | - | 7,872 | - |
| 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 |
| Other ABS | 2,293 | 748 | 2,609 | 1,659 | 7,309 | 690 | - | 4,081 | 2,538 |
| 34,013 | 7,609 | 18,221 | 2,066 | 61,909 | 18,863 | 11 | 37,015 | 6,020 |
The table below shows the movement in covered assets.
| Covered amount |
|
|---|---|
| £bn | |
| At 31 December 2010 | 194.7 |
| Disposals | (2.9) |
| Maturities, amortisation and early repayments | (24.3) |
| Effect of foreign currency movements and other adjustments | 0.2 |
| At 30 June 2011 | 167.7 |
| Disposals | (1.2) |
| Maturities, amortisation and early repayments | (8.9) |
| Effect of foreign currency movements and other adjustments | (1.8) |
| At 30 September 2011 | 155.8 |
The table below analyses the credit impairment provision (adjusted for write-offs) and adjustments to par value (including available-for-sale reserves) relating to the covered assets.
| 30 September 2011 £m |
30 June 2011 £m |
31 December 2010 £m |
|
|---|---|---|---|
| Loans and advances | 20,407 | 19,777 | 18,033 |
| Debt securities | 11,079 | 10,785 | 11,747 |
| Derivatives | 3,023 | 2,125 | 2,043 |
| 34,509 | 32,687 | 31,823 | |
| By division: | |||
| UK Retail | 3,202 | 3,124 | 2,964 |
| UK Corporate | 2,102 | 1,838 | 1,382 |
| Ulster Bank | 1,231 | 1,190 | 804 |
| Retail & Commercial | 6,535 | 6,152 | 5,150 |
| Global Banking & Markets | 1,526 | 1,420 | 1,496 |
| Core | 8,061 | 7,572 | 6,646 |
| Non-Core | 26,448 | 25,115 | 25,177 |
| 34,509 | 32,687 | 31,823 |
• Cumulative credit impairments and write-downs increased by £1.8 billion in the quarter to £34.5 billion.
Definitions of triggered amounts and other related aspects are set out in the Group's 2010 Annual Report and Accounts and the Group's Interim Results 2011. The table below shows the first loss utilisation under the original and modified rules (as described in the Group's Interim Results 2011).
| Original Scheme rules | Modified Scheme rules |
|||
|---|---|---|---|---|
| Gross loss | Cash recoveries |
Net triggered | Total net triggered |
|
| amount | to date | loss | amount | |
| 30 September 2011 | £m | £m | £m | £m |
| UK Retail | 3,980 | (693) | - | 3,287 |
| UK Corporate | 1,963 | (672) | 1,022 | 2,313 |
| Ulster Bank | 2,209 | (260) | - | 1,949 |
| Retail & Commercial | 8,152 | (1,625) | 1,022 | 7,549 |
| Global Banking & Markets | - | - | 982 | 982 |
| Core | 8,152 | (1,625) | 2,004 | 8,531 |
| Non-Core | 14,974 | (2,477) | 7,949 | 20,446 |
| 23,126 | (4,102) | 9,953 | 28,977 | |
| Loss credits | 1,792 | |||
| 30,769 | ||||
| 30 June 2011 | ||||
| UK Retail | 3,895 | (608) | - | 3,287 |
| UK Corporate | 1,914 | (622) | 806 | 2,098 |
| Ulster Bank | 1,918 | (202) | - | 1,716 |
| Retail & Commercial | 7,727 | (1,432) | 806 | 7,101 |
| Global Banking & Markets | - | - | 962 | 962 |
| Core | 7,727 | (1,432) | 1,768 | 8,063 |
| Non-Core | 14,676 | (2,190) | 7,753 | 20,239 |
| 22,403 | (3,622) | 9,521 | 28,302 | |
| Loss credits | 1,632 | |||
| 29,934 | ||||
| 31 December 2010 | ||||
| UK Retail | 3,675 | (455) | - | 3,220 |
| UK Corporate | 1,690 | (427) | 597 | 1,860 |
| Ulster Bank | 1,500 | (160) | - | 1,340 |
| Retail & Commercial | 6,865 | (1,042) | 597 | 6,420 |
| Global Banking & Markets | - | - | 962 | 962 |
| 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 by division, risk-weighted assets (RWAs) covered by APS.
| 30 September 2011 £bn |
30 June 2011 £bn |
31 December 2010 £bn |
|
|---|---|---|---|
| UK Retail | 9.9 | 10.7 | 12.4 |
| UK Corporate | 16.9 | 19.3 | 22.9 |
| Ulster Bank | 6.7 | 7.6 | 7.9 |
| Retail & Commercial | 33.5 | 37.6 | 43.2 |
| Global Banking & Markets | 10.4 | 10.3 | 11.5 |
| Core | 43.9 | 47.9 | 54.7 |
| Non-Core | 44.7 | 47.3 | 50.9 |
| APS RWAs | 88.6 | 95.2 | 105.6 |
• The decrease of £6.6 billion in RWAs covered by the Scheme reflects pool movements, assets moving into default and changes in risk parameters.
Alt-A (Alternative A-paper) are mortgage loans with a higher credit quality than sub-prime loans but with features that disqualify the borrower from a traditional prime loan. Alt-A lending characteristics include limited documentation; high loan-to-value ratio; secured on non-owner occupied properties; and debt-to-income ratio above normal limits.
Arrears are the aggregate of contractual payments due on a debt that have not been met by the borrower. A loan or other financial asset is said to be 'in arrears' when payments have not been made.
Asset-backed commercial paper (ABCP) - a form of asset-backed security generally issued by a commercial paper conduit.
Asset-backed securities (ABS) are securities that represent interests in specific portfolios of assets. They are issued by a special purpose entity following a securitisation. The underlying portfolios commonly comprise residential or commercial mortgages but can include any class of asset that yields predictable cash flows. Payments on the securities depend primarily on the cash flows generated by the assets in the underlying pool and other rights designed to assure timely payment, such as guarantees or other credit enhancements. Collateralised bond obligations, collateralised debt obligations, collateralised loan obligations, commercial mortgage backed securities and residential mortgage backed securities are all types of ABS.
Asset Protection Scheme credit default swap - in 2009, the Group became party to the Asset Protection Scheme under which it purchased credit protection over a portfolio of specified assets and exposures (covered assets) from Her Majesty's Treasury acting on behalf of the UK Government. The contract is accounted for as a derivative financial instrument. It is recognised at fair value and included in Derivatives on the balance sheet. Changes in its fair value are recognised in profit or loss within Income from trading activities.
Assets under management are assets managed by the Group on behalf of clients.
Certificate of deposit (CD) - CDs are bearer negotiable instruments acknowledging the receipt of a fixed term deposit at a specified interest rate.
Collateralised bond obligations (CBOs) are asset-backed securities for which the underlying asset portfolios are bonds, some of which may be sub-investment grade.
Collateralised debt obligations (CDOs) are asset-backed securities for which the underlying asset portfolios are debt obligations: either bonds (collateralised bond obligations) or loans (collateralised loan obligations) or both. The credit exposure underlying synthetic CDOs derives from credit default swaps. The CDOs issued by an individual vehicle are usually divided in different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated). Losses are borne first by the equity securities, next by the junior securities, and finally by the senior securities; junior tranches offer higher coupons (interest payments) to compensate for their increased risk.
Collateralised loan obligations (CLOs) are asset-backed securities for which the underlying asset portfolios are loans, often leveraged loans.
Collectively assessed loan impairment provisions - impairment loss provisions in respect of impaired loans, such as credit cards or personal loans, that are below individual assessment thresholds. Such provisions are established on a portfolio basis, taking account of the level of arrears, security, past loss experience, credit scores and defaults based on portfolio trends.
Commercial mortgage backed securities (CMBS) are asset-backed securities for which the underlying asset portfolios are loans secured on commercial real estate.
Commercial paper (CP) comprises unsecured obligations issued by a corporate or a bank directly or secured obligations (asset-backed CP), often issued through a commercial paper conduit, to fund working capital. Maturities typically range from 2 to 270 days. However, the depth and reliability of some CP markets means that issuers can repeatedly roll over CP issuance and effectively achieve longer term funding. Commercial paper is issued in a wide range of denominations and can be either discounted or interest-bearing.
Commercial real estate - freehold and leasehold properties used for business activities. Commercial real estate includes office buildings, industrial property, medical centres, hotels, retail stores, shopping centres, agricultural land and buildings, warehouses, garages etc.
Contractual maturity is the date in the terms of a financial instrument on which the last payment or receipt under the contract is due for settlement.
Core Tier 1 capital - called-up share capital and eligible reserves plus equity non-controlling interests, less intangible assets and other regulatory deductions.
Core Tier 1 capital ratio - core Tier 1 capital as a percentage of risk-weighted assets.
Cost:income ratio - operating expenses as a percentage of total income.
Covered mortgage bonds are debt securities backed by a portfolio of mortgages that is segregated from the issuer's other assets solely for the benefit of the holders of the covered bonds
Credit default swap (CDS) is a contract where the protection seller receives premium or interestrelated payments in return for contracting to make payments to the protection buyer upon a defined credit event in relation to a reference financial asset or portfolio of financial assets. Credit events usually include bankruptcy, payment default and rating downgrades.
Credit derivative product company (CDPC) is a special purpose entity that sells credit protection under credit default swaps or certain approved forms of insurance policies. Sometimes they can also buy credit protection. CDPCs are similar to monoline insurers. However, unlike monoline insurers, they are not regulated as insurers.
Credit derivatives are contractual agreements that provide protection against a credit event on one or more reference entities or financial assets. The nature of a credit event is established by the protection buyer and protection seller at the inception of a transaction, and such events include bankruptcy, insolvency or failure to meet payment obligations when due. The buyer of the credit derivative pays a periodic fee in return for a payment by the protection seller upon the occurrence, if any, of a credit event. Credit derivatives include credit default swaps, total return swaps and credit swap options.
Credit risk assets - loans and advances (including overdraft facilities), instalment credit, finance lease receivables and other traded instruments across all customer types.
Credit risk spread - is the difference between the coupon on a debt instrument and the benchmark or the risk-free interest rate for the instrument's maturity structure. It is the premium over the risk-free rate required by the market for the credit quality of an individual debt instrument.
Credit valuation adjustments - are adjustments to the fair values of derivative assets to reflect the creditworthiness of the counterparty.
Currency swap - an arrangement in which two parties exchange specific principal amounts of different currencies at inception and subsequently interest payments on the principal amounts. Often, one party will pay a fixed interest rate, while the other will pay a floating rate (though there are also fixed-fixed and floating-floating arrangements). At the maturity of the swap, the principal amounts are usually reexchanged.
Customer accounts - comprise money deposited with the Group by counterparties other than banks and classified as liabilities. They include demand, savings and time deposits; securities sold under repurchase agreements; and other short-term deposits. Deposits received from banks are classified as deposits by banks.
Debt restructuring - see Renegotiated loans.
Debt securities are transferable instruments creating or acknowledging indebtedness. They include debentures, bonds, certificates of deposit, notes and commercial paper. The holder of a debt security is typically entitled to the payment of principal and interest, together with other contractual rights under the terms of the issue, such as the right to receive certain information. Debt securities are generally issued for a fixed term and redeemable by the issuer at the end of that term. Debt securities can be secured or unsecured.
Debt securities in issue comprise unsubordinated debt securities issued by the Group. They include commercial paper, certificates of deposit, bonds and medium-term notes.
Deferred tax asset - income taxes recoverable in future periods as a result of deductible temporary differences - temporary differences between the accounting and tax base of an asset or liability that will result in tax deductible amounts in future periods - and the carry-forward of tax losses and unused tax credits.
Deferred tax liability - income taxes payable in future periods as a result of taxable temporary differences (temporary differences between the accounting and tax base of an asset or liability that will result in taxable amounts in future periods).
Defined benefit obligation - the present value of expected future payments required to settle the obligations of a defined benefit plan resulting from employee service.
Defined benefit plan - pension or other post-retirement benefit plan other than a defined contribution plan.
Delinquency - a debt or other financial obligation is considered delinquent when one or more contractual payments are overdue. Delinquency is usually defined in terms of days past due. Delinquent and in arrears are synonymous.
Deposits by banks - comprise money deposited with the Group by banks and recorded as liabilities. They include money-market deposits, securities sold under repurchase agreements, federal funds purchased and other short term deposits. Deposits received from customers are recorded as customer accounts.
Derivative - a contract or agreement whose value changes with movements in an underlying index such as interest rates, foreign exchange rates, share prices or indices and which requires no initial investment or an initial investment that is smaller than would be required for other types of contracts with a similar response to market factors. The principal types of derivatives are: swaps, forwards, futures and options.
Discontinued operation - is a component of the Group that either has been disposed of or is classified as held for sale. A discontinued operation is either: a separate major line of business or geographical area of operations or part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or a subsidiary acquired exclusively with a view to resale.
Exposure at default (EAD) - an estimate of the expected level of utilisation of a credit facility at the time of a borrower's default. The EAD may be higher than the current utilisation (e.g. in the case where further drawings may be made under a revolving credit facility prior to default) but will not typically exceed the total facility limit.
Fannie Mae (Federal National Mortgage Association) - is a US Government Sponsored Enterprise. It buys mortgages, principally issued by banks, on the secondary market, pools them, and sells them as residential mortgage-backed securities to investors on the open market. Its obligations are not explicitly guaranteed by the full faith and credit of the US Government.
Federal Agencies - US federal agencies are independent bodies established by the US Government for specific purposes such as the management of natural resources, financial oversight or national security. A number of agencies, including Ginnie Mae, issue or guarantee publicly traded debt securities.
Federal Home Loan Mortgage Corporation - see Freddie Mac.
Federal National Mortgage Association - see Fannie Mae.
First/second lien - a lien is a charge such as a mortgage held by one party, over property owned by a second party, as security for payment of some debt, obligation, or duty owed by that second party. The holder of a first lien takes precedence over all other encumbrances on that property i.e. second and subsequent liens.
Forbearance - is the term generally applied to an agreement, principally in relation to secured loans with retail customers experiencing temporary financial difficulty, to a payment moratorium, to reduced repayments or to roll up arrears. Forbearance loans are a subset of Renegotiated loans.
Freddie Mac (Federal Home Loan Mortgage Corporation) - is a US Government Sponsored Enterprise. It buys mortgages, principally issued by thrifts, on the secondary market, pools them, and sells them as residential mortgage-backed securities to investors on the open market. Its obligations are not explicitly guaranteed by the full faith and credit of the US Government.
G10 - the Group of Ten comprises the eleven industrial countries (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States) that have agreed to participate in the IMF's General Arrangements to Borrow.
Government Sponsored Enterprises (GSEs) - are a group of financial services corporations created by the US Congress. Their function is to improve the efficiency of capital markets and to overcome statutory and other market imperfections which otherwise prevent funds from moving easily from suppliers of funds to areas of high loan demand. They include Fannie Mae and Freddie Mac.
Gross yield - is the interest rate earned on average interest-earning assets i.e. interest income divided by average interest-earning assets.
Guaranteed mortgages - are mortgages that are guaranteed by a government or government agency. In the US, government loan guarantee programmes are offered by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture's Rural Housing Service. In the Netherlands, the Gemeentegarantie programme is run partly by the central government and partly by the municipalities.
Home equity loan - is a type of loan in which the borrower uses the equity in their home as collateral. A home equity loan creates a charge against the borrower's house.
Impaired loans - comprise all loans for which an impairment provision has been established; for collectively assessed loans, impairment loss provisions are not allocated to individual loans and the entire portfolio is included in impaired loans.
Impairment allowance - see Loan impairment provisions.
Impairment losses - for impaired financial assets measured at amortised cost, impairment losses - the difference between carrying value and the present value of estimated future cash flows discounted at the asset's original effective interest rate - are recognised in profit or loss and the carrying amount of the financial asset reduced by establishing a provision (allowance). For impaired available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in profit or loss as an impairment loss.
Individually assessed loan impairment provisions - impairment loss provisions for individually significant impaired loans assessed on a case-by-case basis, taking into account the financial condition of the counterparty and any guarantor and the realisable value of any collateral held.
International Accounting Standards Board (IASB) - is the independent standard-setting body of the IFRS Foundation. Its members are responsible for the development and publication of International Financial Reporting Standards (IFRSs) and for approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (IFRIC).
Interest spread - is the difference between the gross yield and the interest rate paid on average interest-bearing liabilities.
Investment grade - generally represents a risk profile similar to a rating of BBB-/Baa3 or better, as defined by independent rating agencies.
Latent loss provisions - loan impairment provisions held against impairments in the performing loan portfolio that have been incurred as a result of events occurring before the balance sheet date but which have not been identified as impaired at the balance sheet date. The Group has developed methodologies to estimate latent loss provisions that reflect historical loss experience (adjusted for current economic and credit conditions) and the period between an impairment occurring and a loan being identified and reported as impaired.
Loan impairment provisions - are established to recognise incurred impairment losses on a portfolio of loans classified as loans and receivables and carried at amortised cost. It has three components: individually assessed loan impairment provisions, collectively assessed loan impairment provisions and latent loss provisions.
Loan-to-value ratio - the amount of a secured loan as a percentage of the appraised value of the security e.g. the outstanding amount of a mortgage loan as a percentage of the property's value.
Loss given default (LGD) - the economic loss that may occur in the event of default i.e. the actual loss - that part of the exposure that is not expected to be recovered - plus any costs of recovery.
Master netting agreement - is an agreement between two counterparties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in a single currency, in the event of default on, or termination of, any one contract.
Medium term notes (MTNs) - are debt securities usually with a maturity of five to ten years, but the term may be less than one year or as long as 50 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon; with a fixed maturity date (non-callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as senior, unsecured debt.
Monoline insurers - are entities that specialise in providing credit protection against the notional and interest cash flows due to the holders of debt instruments in the event of default. This protection is typically in the form of derivatives such as credit default swaps.
Mortgage-backed securities (MBS) - are asset-backed securities for which the underlying asset portfolios are loans secured on property. See Residential mortgage backed securities and Commercial mortgage backed securities.
Net interest income - is the difference between interest receivable on financial assets classified as loans and receivables or available-for-sale and interest payable on financial liabilities carried at amortised cost.
Net interest margin - is net interest income as a percentage of average interest-earning assets.
Net principal exposure - is the carrying value of a financial asset after taking account of credit protection purchased but excluding the effect of any counterparty credit valuation adjustment to that protection.
Non-conforming mortgages - mortgage loans that do not meet the requirements for sale to US Government agencies or US Government sponsored enterprises. These requirements include limits on loan-to-value ratios, loan terms, loan amounts, borrower creditworthiness and other requirements.
Option - an option is a contract that gives the holder the right but not the obligation to buy (or sell) a specified amount of the underlying physical or financial commodity, at a specific price, at an agreed date or over an agreed period. Options can be exchange-traded or traded over-the-counter.
Past due - a financial asset such as a loan is past due when the counterparty has failed to make a payment when contractually due.
Potential problem loans - are loans other than impaired loans, accruing loans which are contractually overdue 90 days or more as to principal or interest and troubled debt restructurings where known information about possible credit problems of the borrower causes management to have serious doubts about the borrower's ability to meet the loan's repayment terms.
Prime - prime mortgage loans generally have low default risk and are made to borrowers with good credit records and a monthly income that is at least three to four times greater than their monthly housing expense (mortgage payments plus taxes and other debt payments). These borrowers provide full documentation and generally have reliable payment histories.
Probability of default (PD) - the likelihood that a customer will fail to make full and timely repayment of credit obligations over a one year time horizon.
Renegotiated loans - loans are generally renegotiated either as part of the ongoing banking relationship with a creditworthy customer or in response to a borrower's financial difficulties. In the latter case, renegotiation encompasses not only revisions to the terms of a loan such as a maturity extension, a payment moratorium, a concessionary rate of interest but also the restructuring of all or part of the exposure including debt forgiveness or a debt for equity swap. Loans renegotiated as part of the ongoing banking relationship with a creditworthy customer, are treated as new loans.
Repurchase agreement (Repo) - see Sale and repurchase agreements.
Residential mortgage backed securities (RMBS) - are asset-backed securities for which the underlying asset portfolios are residential mortgages.
Retail loans - are loans made to individuals rather than institutions. The loans may be for car purchases, home purchases, medical care, home repair, holidays and other consumer uses.
Reverse repurchase agreement (Reverse repo) - see Sale and repurchase agreements.
Risk asset ratio (RAR) - total regulatory capital as a percentage of risk-weighted assets.
Risk elements in lending (REIL) - comprise impaired loans, accruing loans which are contractually overdue 90 days or more as to principal or interest and troubled debt restructurings.
Risk-weighted assets - assets adjusted for their associated risks using weightings established in accordance with the Basel Capital Accord as implemented by the FSA. Certain assets are not weighted but deducted from capital.
Sale and repurchase agreements - in a sale and repurchase agreement one party, the seller, sells a financial asset to another party, the buyer, at the same time the seller agrees to reacquire, and the buyer to resell, the asset at a later date. From the seller's perspective such agreements are repurchase agreements (repos) and from the buyer's reverse repurchase agreements (reverse repos).
Securitisation - is a process by which assets or cash flows are transformed into transferable securities. The underlying assets or cash flows are transferred by the originator or an intermediary, typically an investment bank, to a special purpose entity which issues securities to investors. Asset securitisations involve issuing debt securities (asset-backed securities) that are backed by the cash flows of incomegenerating assets (ranging from credit card receivables to residential mortgage loans). Liability securitisations typically involve issuing bonds that assume the risk of a potential insurance liability (ranging from a catastrophic natural event to an unexpected claims level on a certain product type).
Special purpose entity (SPE) - is an entity created by a sponsor, typically a major bank, finance company, investment bank or insurance company. An SPE can take the form of a corporation, trust, partnership, corporation or a limited liability company. Its operations are typically limited for example in a securitisation to the acquisition and financing of specific assets or liabilities.
Structured credit portfolio (SCP) - the SCP is a portfolio of certain of the Group's illiquid assets principally CDO super senior positions, negative basis trades and monoline exposures - held within Non-Core division.
Structured notes - are securities that pay a return linked to the value or level of a specified asset or index. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.
Subordinated liabilities - are liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
Sub-prime - sub-prime mortgage loans are designed for customers with one or more high risk characteristics, such as: unreliable or poor payment histories; loan-to-value ratio of greater than 80%; high debt-to-income ratio; the loan is not secured on the borrower's primary residence; or a history of delinquencies or late payments on the loan.
Super senior CDO - is the most senior class of instrument issued by a CDO vehicle. They benefit from the subordination of all other instruments, including AAA rated securities, issued by the CDO vehicle.
Tangible Net Asset Value (TNAV) - Owners' equity attributable to ordinary and B shareholders less intangible assets, divided by number of ordinary and B shares in issue.
Tier 1 capital - core Tier 1 capital plus other Tier 1 securities in issue, less material holdings in financial companies.
Tier 1 capital ratio - Tier 1 capital as a percentage of risk-weighted assets.
Tier 2 capital - qualifying subordinated debt and other Tier 2 securities in issue, eligible collective impairment allowances, unrealised available-for-sale equity gains and revaluation reserves less certain regulatory deductions.
Value-at-risk (VaR) - is a technique that produces estimates of the potential change in the market value of a portfolio over a specified time horizon at given confidence levels.
Write down - a reduction in the carrying value of an asset to record a decline in its fair value or value in use.
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