Natwest Group PLC

Earnings Release • Aug 3, 2015

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The Royal Bank of Scotland Group plc

Interim Results 2015

Contents	Page
Introduction	1
Highlights	3
Letter from the Chairman	10
Summary consolidated results	11
Analysis of results	17
Segment performance	26
Statutory results	67
Condensed consolidated income statement	67
Condensed consolidated statement of comprehensive income	68
Condensed consolidated balance sheet	69
Average balance sheet	70
Condensed consolidated statement of changes in equity	72
Condensed consolidated cash flow statement	74
Notes	75
Independent review report to The Royal Bank of Scotland Group plc	123
Summary risk factors	125
Statement of directors’ responsibilities	129
Additional information	130
Share information	130
Financial calendar	130
Exchange rates	130
Forward-looking statements	131
Appendix 1 – Capital and risk management
Appendix 2 – Income statement reconciliations and balance sheet pre and post disposal groups
Appendix 3 – Go-forward Bank profile
Appendix 4 – Williams & Glyn
Appendix 5 – Parent company financial statements

Introduction

Presentation of information

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 2014 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.

In this document, ‘RBSG plc’ or the ‘company’ refers to The Royal Bank of Scotland Group plc, and ‘RBS’ or the ‘Group’ refers to RBSG plc and its subsidiaries. Some of the financial information contained in this document, prepared using Group accounting policies, shows the operating performance of RBS on a non-statutory basis which excludes own credit adjustments, gain on redemption of own debt, write down of goodwill and strategic disposals and includes the results of Citizens which is classified as a discontinued operation in the statutory results. RFS Holdings minority interest (RFS MI) was also excluded in the periods ended 30 June 2014. Such information is provided to give a better understanding of the results of RBS’s operations.

RBS is committed to a leaner, less volatile business based around its core franchises of Personal & Business Banking (PBB) and Commercial & Private Banking (CPB). To achieve this goal a number of initiatives have been announced which include, but are not limited to, the restructuring of Corporate & Institutional Banking (CIB) into CIB Go-forward and CIB Capital Resolution, the divestment of the remaining stake in Citizens, the sale of the International Private Banking business (the remaining Private Banking UK business is within the Go-forward Bank (Private Banking Go-forward)), the exit of Williams & Glyn (mainly within UK Personal & Business Banking (UK PBB)) and the continued run down of RBS Capital Resolution (RCR). Significant progress towards these exits is expected in 2015. This document contains some information to illustrate the impact on certain key performance measures of these initiatives by showing the future profile of the bank (the ‘Go-forward Bank’) and the segments, businesses and portfolios which it intends to exit (the ‘Exit Bank’). This information is presented to illustrate the strategy and its impact on the business and is on a non-statutory basis and should be read in conjunction with the notes attached as well as the section titled Forward-looking Statements. There has been no change to the reportable segments in the period.

Statutory results

The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and related Notes presented on pages 67 to 122 inclusive are on a statutory basis. Reconciliations between the non-statutory basis and statutory basis are included in Appendix 2.

Contacts

For analyst enquiries:
Richard O’Connor	Head of Investor Relations	+44 (0) 20 7672 1758
For media enquiries:
Group Media Centre		+44 (0) 131 523 4205

Introduction

Analysts and investors presentation

RBS will be hosting a presentation for analysts and investors which will also be available via live webcast and audio call. The details are as follows:

Date:		Thursday 30 July 2015
Time:		9.30 am UK time
Webcast:		www.rbs.com/results
Dial in details:		International – +44 (0) 1452 568 172 UK Free Call – 0800 694 8082 US Toll Free – 1 866 966 8024

Slides

This announcement and background slides are available on www.rbs.com/results

Financial supplement

A financial supplement containing income statement and balance sheet information for the nine quarters ending 30 June 2015 is available on www.rbs.com/results

Highlights

The Royal Bank of Scotland Group (RBS) continues to deliver on its plan to build a stronger, simpler and fairer bank for both customers and shareholders.

A strong operating performance from Personal & Business Banking (PBB) and Commercial & Private Banking (CPB) contributed to an attributable profit of £293 million for Q2 2015 (loss of £153 million for H1 2015):

●	Q2 operating profit(1) was £304 million, in line with Q1 2015. Litigation and conduct costs were lower at £459 million compared with £856 million in Q1 2015, while restructuring costs rose to £1,050 million from £453 million in Q1 2015 as the pace of restructuring accelerated.
●	Adjusted operating profit(2) was £1,813 million, up 11% from Q1 2015 but down 7% from Q2 2014, principally driven by reduced income in Corporate & Institutional Banking (CIB) following the planned scaling back of the business. Q2 2015 income benefited from a £205 million credit for IFRS volatility(3), compared with a £123 million charge in Q1 2015. H1 2015 adjusted operating profit was £3,447 million, up 2% from H1 2014.
●	Discontinued operations included a fair value gain of £517 million, of which £211 million was attributable to RBS, reflecting the rise in market value of Citizens shares and broadly reversing the loss recorded in Q1 2015.
●	Tangible net asset value per ordinary and equivalent B share was 380p at 30 June 2015 compared with 384p at 31 March 2015.

RBS is making good progress against its 2015 targets, moving faster in delivering its plan:

●	Positive lending momentum across UK Personal & Business Banking (UK PBB) and Commercial Banking.
●	Statistically significant improvement in Net Promoter Scores (NPS) year-on-year in four of the seven businesses where it is measured.
●	Adjusted return on equity(4) in the Go-forward Bank is estimated at 14% for H1 2015.
●	Capital position strengthened further with Common Equity Tier 1 ratio up 80 basis points in Q2 2015 to 12.3%.
●	Exit Bank ahead of plan with continuing progress on sales and run-off.
●	On track to achieve £800 million cost reduction target(5).

Creating a strong Go-forward Bank

RBS continues to target lending growth in strategic segments, UK PBB and Commercial Banking, in line with or above nominal UK GDP growth. Annualised growth across these segments was 2% in H1 2015. Investment in these businesses is paying dividends through improving returns.

Following a slow start to 2015, the updated mortgage platform enabled RBS to meet increased demand for mortgage products through Q2 2015, with applications up 43% year-on-year and gross new lending up 43% to £5.4 billion relative to the previous quarter. Market share of new mortgages reached 9.7% for Q2 2015, well in excess of RBS’s current stock share of 8.3%. Commercial Banking increased loans and advances by £1.4 billion year-on-year, excluding transfers, while continuing to run down non-strategic books.

Notes:

(1)	Operating profit/(loss) before tax, own credit adjustments, gain on redemption of own debt and strategic disposals and includes the results of Citizens (excluding any fair value adjustment) which are classified as discontinued operations in the statutory results. The half year and quarter ended 30 June 2014 are stated before RFS minority interest.
(2)	Excluding restructuring, litigation and conduct costs.
(3)	IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
(4)	Calculated using operating profit after tax on a non-statutory basis excluding restructuring and litigation and conduct costs adjusted for preference share dividends divided by average notional equity (based on 13% of average RWA equivalent (RWAe)).
(5)	Excluding restructuring, litigation and conduct costs, write-off of intangible assets, and operating expenses of Citizens and Williams & Glyn.

Highlights

RBS’s ambition is to be the number one bank for customer service, trust and advocacy. Customer NPS across our businesses have seen statistically significant improvement year-on-year, specifically NatWest Personal Banking, NatWest Business Banking, RBS Business Banking and Ulster Bank (Northern Ireland) Personal Banking reflecting recent initiatives to make the bank fairer and simpler to do business with.

RBS is focused on improving performance and returns in the remaining Go-forward Bank (Ulster Bank, Private Banking and CIB) by improving service and reducing operating costs and risk where appropriate.

The Go-forward Bank is estimated to have generated an adjusted operating profit of £1.4 billion in the quarter, up 17% from Q1 2015, with adjusted return on equity estimated at 16%, up from 12% in Q1 2015 (see appendix 3).

Accelerated run-down of the Exit Bank

RBS remains ahead of plans to exit a number of businesses through sale or run-off, with good execution to date. Good momentum has been maintained with risk-weighted assets (RWAs) down by an estimated £24 billion since the start of 2015 to £148 billion.

●	CIB is on course to reduce RWAs by £25 billion by the end of 2015, with substantial progress across exit portfolios.
●
●	Plans to complete the exit from Citizens remain on track.
●
●	RBS Capital Resolution (RCR) continued on its path to complete its targeted rundown before the end of 2015, one year ahead of schedule, as it continues to benefit from attractive exit values. Funded assets fell by 44% in the first half of 2015 taking the balance down to £8.4 billion. RWAs also decreased 35% to £14.4 billion in the same period.
●
●	By 30 June 2015 considerable progress had been made toward the disposal of the North American corporate loan portfolio identified for exit, with a substantial proportion sold to Mizuho Bank through two separate transactions. Upon final settlement expected in Q3 2015, RWAs will have been reduced by approximately US$9 billion.
●
●	RBS has partnered with BNP Paribas to offer existing international customers an alternative to Global Transaction Services (GTS) as part of the decision to refocus the business. Businesses in the UK and Ireland, including those outwith the UK but with significant links to the UK, will continue to receive GTS capabilities from RBS.
●
●	The majority of the Australian and United Arab Emirates corporate loan books have been sold.
●
●	The sale of most of the RBS International Private Banking business to Union Bancaire Privée remains on track for Q4 2015.
●
●	RBS is continuing to work towards the separation of Williams & Glyn in the summer of 2016 and IPO by the end of 2016. In May 2015 the Competition & Markets Authority announced that it had been asked by the Chancellor to advise on the competition implications of the Williams & Glyn divestment. The review is expected to be completed later this year and at this stage its outcome cannot be predicted.

Highlights

Making RBS safer and dealing with ongoing issues

Balance sheet and capital strength and resilience continue to build. RWAs decreased to £326 billion, down from £356 billion at the start of the year and £392 billion from 30 June 2014, driven by RCR and CIB. A Common Equity Tier 1 (CET1) ratio of 12.3% at 30 June 2015 was up 80 basis points from 31 March 2015 and 110 basis points from 31 December 2014. Citizens Financial Group’s RWAs (£70 billion) remain for the time being fully consolidated for regulatory purposes, although RBS’s holding has been reduced to 40.8% as at 30 June 2015.

Risk elements in lending (REIL) fell to £18.7 billion, representing 4.8% of gross customers loans, down from 5.4% at 31 March 2015. REIL for RBS excluding RCR were £11.3 billion, down from £12.1 billion at 31 March 2015.

RBS plans to return excess capital to shareholders through dividends or buybacks, subject to regulatory approval. This is dependent on the achievement of certain strategic objectives, including sustained profitability, improved stress test results and resolving our major conduct and litigation issues. As a result we do not expect to be in a position to return capital before Q1 2017 at the earliest.

RBS continues to be party to legal proceedings and regulatory and governmental investigations, including with respect to US mortgage-backed securities, foreign exchange trading and its treatment of UK SME customers and continues to incur conduct related costs, including in relation to payment protection insurance and interest rate hedging products. While addressing these ongoing issues, RBS is continuing its endeavours to embed a strong and comprehensive risk and compliance culture throughout the organisation.

In June 2015 RBS experienced an issue with its secure connection used to process BACS payments resulting in a one or two day delay to payments being applied to some customer accounts. RBS has agreed to reimburse customers for any loss suffered as a result. A comprehensive root cause analysis is ongoing and correspondence with our regulators continues.

Making good progress on 2015 targets

Strategy Goal	2015 Target	H1 2015 Progress
Strength and sustainability	Reduce RWAs to <£300 billion	£326 billion
RCR exit substantially completed	Funded assets down 78% since initial pool of assets identified(1)
Citizens deconsolidation	40.8% holding
£2 billion AT1 issuance	Inaugural AT1 to be launched shortly(2)
Customer experience	Improve NPS in every UK franchise(3)	Year-on-year, statistically significant improvement in NPS in 4 of the 7 businesses where it is measured
Simplifying the bank	Reduce costs by £800 million(4)	Annualised cost savings of over £700 million achieved in H1
Supporting growth	Lending growth in strategic segments ≥ nominal UK GDP growth	2% annualised growthin UK PBB and Commercial Banking
Employee engagement	Raise employee engagement index to within 8% of Global Financial Services (GFS) norm	Annual metric

Notes:

(1)	Funded assets are down 71% since 1 January 2014.
(2)	Issuance subject to market conditions.
(3)	Further details are available on page 7.
(4)	Excluding restructuring, litigation and conduct costs, write-off of intangible assets, and operating expenses of Citizens and Williams & Glyn.

Highlights

Building the number one bank for customer service, trust and advocacy in the UK

●	Investment in new products - Reward, the new current account proposition, was launched in July to a small number of customers. Through the Reward account customers can receive 3% cashback on certain household bills paid by direct debit. Full launch is scheduled for later in the year.
●	Continued commitment to be fairer for customers - RBS is making overdrafts more accessible with 600,000 customers now newly eligible for a £100 overdraft. This is in addition to allowing a £250 limit to customers who have had positive behaviour with RBS but historical issues with other lenders.
●	Investment in service - The mortgage platform was upgraded and the number of mortgage advisors increased to 869 in UK PBB (up 8% compared with the start of 2015 or 28% compared with Q2 2014) which provides increased lending capacity. The NatWest mobile banking app customer NPS became joint number one in the market(1) during Q2 2015, with real time registration allowing customers to begin using the app as their account is opened. Around 2,800 staff registered for a bespoke lending skills training programme and RBS rolled out a customer relationship management (CRM) tool to around 3,000 staff, allowing them to have a single view of all customer needs and thus improve service.
●	Making RBS simpler to do business with - The time to open a personal current account has been halved to 30 minutes as the bank transforms its systems, becoming simpler and quicker. The Commercial Bank has delivered a 75% reduction in customer paperwork and a 25% reduction in the time to open an account.
●	Leading on innovation and collaboration - RBS is the first bank to launch TouchID login and adopt Apple Pay whilst launching the first Royal National Institute of Blind People (RNIB) approved cards.
●	Backing UK business -RBS launched a mid-market initiative to attract and support more businesses with a turnover of between £10 million and £50 million or borrowing in excess of £1 million. The aim is to achieve 300 new customer relationships, providing the means to grow and support UK business. In partnership with Entrepreneurial Spark, the first of eight business accelerator hubs was opened in Birmingham providing free space, mentoring and financial support to small businesses. A new £2.5 million Skills & Opportunities Fund to help people from disadvantaged communities learn new skills, get into the world of work or set up their own business was also launched.
●	Building a more capable and diverse workforce -RBS is raising professional standards by supporting staff to undertake the Chartered Banker foundation qualification. RBS is the first bank to achieve Investors in Young People Accreditation. In 2015 we will increase the number of apprentices from 50 to over 300. RBS has set a target of having 30% female leaders in every business by 2020.

RBS remains committed to achieving its target of being number one bank for customer service, trust and advocacy by 2020.

We use independent surveys to measure our customers’ experience and track our progress against our goal in each of our markets.

Net Promoter Score (NPS)

Customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating ‘extremely likely’ and 0 indicating ‘not at all likely’. Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. NPS is established by subtracting the proportion of detractors from the proportion of promoters.

Note:

(1)	Source: internal NPD Drivers study, June 15 based on 3 month roll with latest base size 2234.

Highlights

The table below lists all of the businesses for which we have an NPS for Q2 2015. Year-on-year, NatWest Personal Banking, NatWest Business Banking, RBS Business Banking and Ulster Bank (Northern Ireland) Personal Banking have all seen statistically significant improvements in NPS.

In recent years, the bank has launched a number of initiatives to make it simpler, fairer and easier to do business, and it continues to deliver on the commitments that it made to its customers in 2014.

		Q2 2014	Q1 2015	Q2 2015	Year end 2015 target
Personal Banking	NatWest (England & Wales)(1)	4	5	8	9
RBS (Scotland)(1)	-10	-18	-10	-10
Ulster Bank (Northern Ireland)(2)	-34	-18	-11	-21
Ulster Bank (Republic of Ireland)(2)	-22	-16	-14	-15
Business Banking	NatWest (England & Wales)(3)	-15	-6	4	-7
RBS (Scotland)(3)	-30	-17	-17	-21
Commercial Banking(4)		9	12	10	15

Customer Trust

We also use independent experts to measure our customers’ trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).

Trust in the RBS brand was impacted by the IT incident on 17 June 2015.

		Q2 2014	Q1 2015	Q2 2015	Year end 2015 target
Customer Trust(5)	NatWest (England & Wales)(1)	49%	44%	48%	46%
RBS (Scotland)	0%	10%	-2%	11%

Notes:

Suitable measures for Private Banking and for Corporate & Institutional Banking are in development. NPS for Ulster Bank Business Banking is measured at Q4.

(1)	Source: GfK FRS 6 month rolling data. Latest base sizes: NatWest England & Wales (3,444) RBS Scotland (520). Based on the question: "How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?”.
(2)	Source: Coyne Research 12 month rolling data. Question: “Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely”.
(3)	Source: Charterhouse Research Business Banking Survey, based on interviews with businesses with an annual turnover up to £2 million. 12 month rolling data. Latest base sizes: NatWest England & Wales (1,240), RBS Scotland (419). Weighted by region and turnover to be representative of businesses in England & Wales/Scotland.
(4)	Source: Charterhouse Research Business Banking Survey, based on interviews with businesses with annual turnover between £2 million and £1 billion. Latest base size: RBSG Great Britain (965). Weighted by region and turnover to be representative of businesses in Great Britain.
(5)	Source: Populus. Latest quarter’s data. Measured as a net of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: NatWest, England & Wales (916), RBS Scotland (209).

Highlights

Recent developments

Citizens

On 29 July 2015, RBS announced the final pricing for a further offering of 86 million shares in Citizens and the grant of a 15% over-allotment option to underwriters giving them a 30-day option to purchase an additional 12.9 million shares. Gross proceeds will be US$2.2 billion (£1.4 billion), ($2.6 billion (£1.6 billion) assuming exercise in full of the over-allotment option). Concurrently, Citizens intends to repurchase 9.6 million shares (US$250 million) from RBS. Once these transactions have completed and assuming the over-allotment option is exercised in full, RBS will own 110.5 million shares - 20.9% of Citizens’ common stock and will record an estimated £1.1 billion profit (including £0.9 billion reclassified from equity).

Following this significant reduction in its voting interest, RBS will no longer control Citizens for accounting purposes and will cease to consolidate it; reducing total assets by approximately £78 billion. RBS’s remaining investment in Citizens will be an associate classified as held for sale.

Citizens will however continue to be consolidated for the purposes of regulatory capital as RBS will retain certain veto rights notwithstanding the reduction in its interest in CFG.

Capital

AT1 securities

As part of our commitment to continue building our capital ratios, we plan to launch our inaugural Additional Tier 1 securities offering over the next few days, subject to market conditions.

Preference shares

RBS intends to redeem US$1.9 billion of its outstanding Series M, N, P and Q non-cumulative dollar preference shares, represented by American depositary shares, on 1 September 2015.

July Budget

On 8 July 2015 a number of proposed changes to the UK corporate tax system were announced. In accordance with IFRS these changes will be accounted for when they are substantively enacted which is expected to be in October 2015.

The most relevant proposed measures include:

●	Cuts in the rate of corporation tax from 20% to 19% from 1 April 2017 and to 18% from 1 April 2020. Existing temporary differences on which deferred tax has been provided may reverse at these reduced rates;
●	A corporation tax surcharge of 8% on UK banking entities from 1 January 2016. This is expected to increase RBS’s corporation tax liabilities and vary the carrying value of its deferred tax balances;
●	A reduction in the bank levy rate from 0.21% to 0.18% from 1 January 2016 and subsequent annual reductions to 0.1% from 1 January 2021; and
●	Making compensation in relation to misconduct non-deductible for corporation tax.

It is expected that these measures will increase the normalised tax rate to around 27% in the medium term and trending lower thereafter. The bank levy for 2015 is expected to be £280 million and is projected to fall progressively to £150 million by 2019.

Highlights

Outlook

Following the sale of a further tranche of shares, RBS now plans to complete the exit from Citizens by the end of 2015, subject to market conditions.

The divestment, together with the strong progress being made in CIB and RCR, will enable RBS to meet its target of reducing RWAs to below £300 billion in 2015.

The restructuring of CIB is planned to accelerate during the second half of 2015. This is expected to result in lower revenues, partially due to higher disposal losses, and elevated restructuring costs.

Targeted cost savings of £800 million in 2015 are expected to be delivered, notwithstanding the adverse impact of the increased UK bank levy.

RBS expects to meet its objective of lending growth in strategic segments, UK PBB and Commercial Banking, in line with or above nominal UK GDP growth.

Investments to make the bank simpler and fairer for customers are having a positive impact on NPS. The target to improve NPS in all customer franchises is stretching but achievable.

Whilst legacy issues continue to be addressed, material further and incremental costs and provisions related to historical conduct are expected. The timing and quantum of any future costs, provisions and settlements, however, remain uncertain.

Letter from the Chairman

These results demonstrate the strength of our underlying customer businesses with operating profit - excluding restructuring and conduct charges - of £1.8 billion for the quarter, up 11% on Q1. We have reported an attributable profit for the quarter, albeit a loss for the half year, which reflects the restructuring and conduct costs we are continuing to work through.

We are seeing progress in our UK retail and commercial businesses. More customers are choosing us to help them buy their homes than ever before, while the commercial business grew its loan book by £1.4 billion since 30 June 2014.

RBS is closely involved in the UK’s improving economic performance. In partnership with Entrepreneurial Spark, RBS is opening business accelerator hubs in Birmingham, Brighton, Bristol and Leeds, with plans to open further hubs in major cities across the UK as we continue to support UK entrepreneurs and businesses providing free space, mentoring and financial support. The latest data from UK Export Finance shows that we are currently the biggest backer (by volume and value) of export contracts for 2015/16 and we are well on track to exceed our business for the previous financial year.

In the first six months of the year we have increased our UK focus by further reducing our stake in Citizens in the US and by agreeing to sell our International Private Bank. We have made excellent progress running down the parts of the business that no longer fit with our strategy.

We have also once again improved our core capital position, and have had six consecutive quarters of capital growth. RBS is now a much better capitalised bank.

The RBS of today is of course very different from the bank of 2009. It has a greater focus on the quality of earnings and the control of risks.

There have naturally been ups and downs along the way, which have required the strategy to change, but the focus on making this a stronger, simpler and fairer organisation has been the right one. The decisions to sell or run-off significant parts of the business while investing in our core customer franchises has meant we are better positioned to deal with the constraints of structural regulatory reform, notably ring-fencing.

Of course there are still some obstacles to overcome especially the resolution of outstanding conduct issues, including the investigations into our sale of residential mortgage-backed securities in the US between 2005-07, and the investigation by UK authorities into the bank’s approach to distressed businesses.

Past experience at RBS and many other banks has demonstrated the readiness of regulators to impose substantial fines and costly redress schemes. These conduct and litigation costs have greatly exceeded the expectations of banks and their investors. Judging the ultimate scale of conduct costs remains extremely challenging.

Looking forward, however, making customer service, trust and advocacy the focus of our strategy is starting to deliver results and by the end of this year I am confident that shareholders will see a clearer picture of the bank that RBS will become.

This is an appropriate backdrop to the sale of shares by the UK government, which will be a significant moment for this bank.

Philip Hampton

Chairman

Summary consolidated income statement for the period ended 30 June 2015

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
	2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Net interest income	5,522	5,496		2,766	2,756	2,798
Non-interest income	3,178	4,482		1,603	1,575	2,127
Total income	8,700	9,978		4,369	4,331	4,925
Litigation and conduct costs	(1,315)	(250)		(459)	(856)	(250)
Restructuring costs	(1,503)	(514)		(1,050)	(453)	(385)
Other costs	(5,485)	(6,344)		(2,697)	(2,788)	(3,065)
Operating expenses	(8,303)	(7,108)		(4,206)	(4,097)	(3,700)
Profit before impairment releases/(losses)	397	2,870		163	234	1,225
Impairment releases/(losses)	232	(269)		141	91	93
Operating profit (1)	629	2,601		304	325	1,318
Own credit adjustments	288	(51)		168	120	(190)
Gain on redemption of own debt	-	20		-	-	-
Write down of goodwill	-	(130)		-	-	(130)
Strategic disposals	(135)	191		-	(135)	-
Citizens discontinued operations	(489)	(426)		(232)	(257)	(274)
RFS Holdings minority interest	-	21		-	-	12
Operating profit before tax	293	2,226		240	53	736
Tax charge	(293)	(592)		(100)	(193)	(278)
Profit/(loss) from continuing operations	-	1,634		140	(140)	458
Profit/(loss) from discontinued operations, net of tax
- Citizens (2)	354	285		674	(320)	181
- Other	4	35		-	4	26
Profit/(loss) from discontinued operations net of tax	358	320		674	(316)	207
Profit/(loss) for the period	358	1,954		814	(456)	665
Non-controlling interests	(344)	(42)		(428)	84	(23)
Other owners’ dividends	(167)	(167)		(93)	(74)	(92)
Dividend access share	-	(320)		-	-	(320)
(Loss)/profit attributable to ordinary and B shareholders	(153)	1,425		293	(446)	230
Memo:
Operating expenses - adjusted (3)	(5,485)	(6,344)		(2,697)	(2,788)	(3,065)
Operating profit - adjusted (3)	3,447	3,365		1,813	1,634	1,953

For the notes to this table refer to the following page.

Summary consolidated income statement for the period ended 30 June 2015

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
Key metrics and ratios	2015	2014		2015	2015	2014
Net interest margin	2.24%	2.17%		2.23%	2.26%	2.22%
Cost:income ratio	95%	71%		96%	95%	75%
(Loss)/earnings per share from continuing operations (4)
- basic	(1.9p)	9.9p		0.2p	(2.1p)	0.3p
- adjusted (5)	(2.7p)	9.5p		(0.9p)	(1.7p)	2.7p
Return on tangible equity (6)	(0.7%)	6.9%		2.7%	(4.1%)	2.2%
Average tangible equity (6)	£43,524m	£41,579m		£43,062m	£43,879m	£42,122m
Average number of ordinary shares and equivalent B
shares outstanding during the period (millions)	11,481	11,308		11,511	11,451	11,335

Key metrics and ratios - excluding Citizens (7)
Net interest margin	2.14%	2.06%		2.13%	2.15%	2.11%
Cost:income ratio	103%	72%		103%	102%	77%

Notes:

(1)	Operating profit before tax, own credit adjustments, gain on redemption of own debt, write down of goodwill and strategic disposals and includes the results of Citizens (prior to any fair value adjustment) which are classified as discontinued operations in the statutory results. The half year and quarter ended 30 June 2014 are stated before RFS minority interest.
(2)	Included within Citizens discontinued operations are the results of the reportable operating segment Citizens Financial Group (CFG), the fair value remeasurement of the loss on transfer to disposal groups, and certain Citizens related activities in Central items and related one-off and other items.
(3)	Excluding restructuring costs and litigation and conduct costs.
(4)	Refer to Note 11 on page 84 for further details.
(5)	Adjusted earnings excludes own credit adjustments, gain on redemption of own debt, write down of goodwill, strategic disposals and RFS MI.
(6)	Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
(7)	Assuming Citizens was fully divested of at its carrying value on 30 June 2015.

Details of other comprehensive income are provided on page 68.

Summary consolidated balance sheet as at 30 June 2015

	30 June	31 March	31 December
	2015	2015	2014
	£m	£m	£m
Cash and balances at central banks	81,900	75,521	74,872
Net loans and advances to banks (1,2)	20,714	25,002	23,027
Net loans and advances to customers (1,2)	314,993	333,173	334,251
Reverse repurchase agreements and stock borrowing	67,606	69,400	64,695
Debt securities and equity shares	80,550	85,557	92,284
Assets of disposal groups (3)	89,071	93,673	82,011
Other assets	28,010	31,721	26,033
Funded assets	682,844	714,047	697,173
Derivatives	281,857	390,565	353,590
Total assets	964,701	1,104,612	1,050,763
Bank deposits (2,4)	30,978	37,235	35,806
Customer deposits (2,4)	342,023	349,289	354,288
Repurchase agreements and stock lending	66,362	69,383	62,210
Debt securities in issue	41,819	45,855	50,280
Subordinated liabilities	19,683	22,004	22,905
Derivatives	273,589	386,056	349,805
Liabilities of disposal groups (3)	80,388	85,244	71,320
Other liabilities	48,090	47,265	43,957
Total liabilities	902,932	1,042,331	990,571
Non-controlling interests	5,705	5,473	2,946
Owners’ equity	56,064	56,808	57,246
Total liabilities and equity	964,701	1,104,612	1,050,763

Notes:

(1)	Excludes reverse repurchase agreements and stock borrowing.
(2)	Excludes disposal groups.
(3)	Primarily Citizens and International Private Banking in 2015 and Citizens at 31 December 2014 - refer to Note 13 on page 91.
(4)	Excludes repurchase agreements and stock lending.

Summary consolidated balance sheet as at 30 June 2015

	30 June	31 March	31 December
Balance sheet related key metrics and ratios	2015	2015	2014
Tangible net asset value per ordinary and equivalent B share (1)	380p	384p	387p
Loan:deposit ratio (2,3)	92%	95%	95%
Short-term wholesale funding (2,4)	£25bn	£27bn	£28bn
Wholesale funding (2,4)	£76bn	£84bn	£90bn
Liquidity portfolio	£161bn	£157bn	£151bn
Liquidity coverage ratio (5)	117%	112%	112%
Net stable funding ratio (6)	115%	110%	112%
Common Equity Tier 1 ratio	12.3%	11.5%	11.2%
Risk-weighted assets	£326.4bn	£348.6bn	£355.9bn
Leverage ratio (7)	4.6%	4.3%	4.2%
Tangible equity (8)	£43,919m	£44,242m	£44,368m
Number of ordinary shares and equivalent B shares in issue (millions) (9)	11,570	11,514	11,466

	30 June
Key metrics and ratios - excluding Citizens (10)	2015
Tangible net asset value per ordinary and equivalent B share (1)	380p
Loan:deposit ratio (2,3)	91%
Short-term wholesale funding (2,4)	£21bn
Wholesale funding (2,4)	£71bn
Liquidity portfolio	£148bn
Liquidity coverage ratio (5)	118%
Net stable funding ratio (6)	112%
Common Equity Tier 1 ratio	15.3%
Risk-weighted assets	£261.5bn
Leverage ratio (7)	5.1%
Tangible equity (8)	£43,919m
Return on tangible equity (8)	(1.0%)
Average tangible equity (8)	£43,524m

Notes:

(1)	Tangible net asset value per ordinary and equivalent B share represents total tangible equity divided by the number of ordinary and equivalent B shares in issue.
(2)	Includes disposal groups.
(3)	Excludes repurchase agreements and stock lending.
(4)	Excludes derivative collateral.
(5)	In January 2013, the BCBS published its final guidance for calculating LCR currently expected to come into effect from October 2015 on a phased basis. Pending the finalisation of the LCR rules within the EU, RBS monitors LCR based on its interpretation of current guidance available for EU LCR reporting. The reported LCR will change over time with regulatory developments. Due to differences in interpretation, RBS’s ratio may not be comparable with those of other financial institutions.
(6)	NSFR for both periods has been calculated using RBS’s current interpretations of the revised BCBS guidance on NSFR issued in late 2014. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS’s ratio may not be comparable with those of other financial institutions.
(7)	Based on end-point CRR Tier 1 capital and revised 2014 Basel III leverage ratio framework.
(8)	Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
(9)	Includes 26 million Treasury shares (31 March 2015 - 27 million; 31 December 2014 - 28 million).
(10)	Assuming Citizens was fully divested of at carrying value on 30 June 2015 and excluding only credit risk and counterparty risk RWA.

Highlights

Q2 2015 performance

Attributable profit of £293 million was reported in Q2 2015 including £1,050 million of restructuring costs as the pace of restructuring accelerated and £459 million of litigation and conduct costs. The attributable profit for Q2 2015 was up from a loss of £446 million in Q1 2015 and a profit of £230 million in Q2 2014.

Total income was £4,369 million, with net interest income broadly stable, but non-interest income down 25% from Q2 2014, reflecting the reduction in the scale of CIB.

Operating expenses totalled £4,206 million, with other costs at £2,697 million, down 3% from Q1 2015 and 12% from Q2 2014. Restructuring costs were significantly higher at £1,050 million, principally relating to CIB (£734 million) and to Williams & Glyn separation (£126 million). Litigation and conduct costs in Q2 2015 amounted to £459 million, principally related to mortgage-backed securities litigation in the United States.

Credit conditions remained generally benign, with net impairment releases of £141 million, up from £91 million in Q1 2015 and from £93 million in Q2 2014, principally reflecting releases on disposals within RCR.

Operating profit was £304 million, down slightly from £325 million in Q1 2015 and more markedly from £1,318 million in Q2 2014. Excluding restructuring, litigation and conduct costs, operating profit was £1,813 million, up 11% from Q1 2015 but down 7% from Q2 2014.

Statutory operating profit before tax, including £168 million of own credit adjustments, was £240 million. After a tax charge of £100 million, the profit from continuing operations was £140 million, compared with a loss of £140 million in Q1 2015 and a profit of £458 million in Q2 2014.

Profit from discontinued operations of £674 million reflected the rise in the market value of Citizens shares during the quarter.

Tangible net asset value per ordinary and equivalent B share was 380p at 30 June 2015 compared with 384p at 31 March 2015, reflecting cash flow hedging and currency translation losses recognised in other comprehensive income, partly offset by the second quarter attributable profit.

Highlights

H1 2015 performance

An attributable loss of £153 million was reported for the first half of 2015, including £1,503 million of restructuring costs and £1,315 million of litigation and conduct costs. The attributable loss for H1 2015 was down from a profit of £1,425 million in H1 2014 as income attrition in the Exit Bank businesses preceded the delivery of cost reductions and higher restructuring, litigation, and conduct costs were incurred.

Total income was £8,700 million, 13% lower than in H1 2014, with net interest income up slightly but non-interest income down 29%, reflecting the reduction in scale of CIB.

Cost reductions of £859 million were achieved relative to H1 2014, leaving operating expenses excluding restructuring, litigation and conducts costs down 14% at £5,485 million and putting RBS on track to deliver its targeted £800 million of cost savings in 2015.

Net impairment releases of £232 million were reported in H1 2015, compared with net impairment losses of £269 million in H1 2014. Net releases were recorded in all segments except Commercial Banking and CFG, where impairments nevertheless remained low at 0.1% and 0.3% respectively of loans and advances.

Operating profit in H1 2015 was £629 million down from £2,601 million in H1 2014. Excluding restructuring, litigation and conduct costs, operating profit was £3,447 million, up 2% from H1 2014. After a tax charge of £293 million, net profit from continuing operations was nil, while results from discontinued operations included a net profit of £354 million reflecting the rise in the market value of Citizens shares.

Balance sheet and capital

Net loans and advances to customers at 30 June 2015 were £315 billion, down 5% from 31 March 2015 and 6% from 31 December 2014. This was driven by run-off in CIB and RCR, partially offset by strong UK mortgage growth.

Funded assets at 30 June 2015 were £683 billion, down 4% from 31 March 2015 and 2% from 31 December 2014, principally reflecting run-off in CIB and RCR.

Customer deposits of £342 billion at 30 June 2015 were down 2% from 31 March 2015 and 3% from 31 December 2014, with good growth in UK personal current and savings accounts more than offset by the reduction in scale of CIB and by the impact of the weakening euro on balances in Ulster Bank.

CET1 and leverage ratios improved from 11.5% and 4.3% at 31 March 2015 to 12.3% and 4.6% respectively at 30 June 2015, principally driven by asset reduction in CIB and RCR.

Analysis of results

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Net interest income	£m	£m		£m	£m	£m
Net interest income
RBS	5,522	5,496		2,766	2,756	2,798
- UK Personal & Business Banking	2,290	2,276		1,147	1,143	1,152
- Ulster Bank	265	323		132	133	169
- Commercial Banking	1,108	999		562	546	511
- Private Banking	254	344		126	128	174
- Corporate & Institutional Banking	376	365		174	202	186
- Central items	150	203		88	62	100
- RCR	(25)	(1)		(14)	(11)	7
RBS excluding Citizens Financial Group	4,418	4,509		2,215	2,203	2,299
- Citizens Financial Group	1,104	987		551	553	499
Average interest-earning assets
RBS	495,726	507,268		496,835	494,605	502,347
- UK Personal & Business Banking	128,468	126,696		128,569	128,366	126,964
- Ulster Bank	27,518	28,089		27,404	27,633	28,884
- Commercial Banking	77,985	74,749		78,880	77,079	74,971
- Private Banking	15,850	18,663		15,729	15,973	18,698
- Corporate & Institutional Banking	71,269	83,778		69,437	73,114	83,477
- Central items	77,793	71,071		82,471	73,071	66,586
- RCR	17,436	36,383		14,758	20,144	34,533
RBS excluding Citizens Financial Group	416,319	439,429		417,248	415,380	434,113
- Citizens Financial Group	79,407	67,839		79,587	79,225	68,234
Gross yield on interest-earning assets of banking business	2.98%	3.03%		2.94%	3.02%	3.05%
Cost of interest-bearing liabilities of banking business	(1.06%)	(1.18%)		(1.03%)	(1.09%)	(1.16%)
Interest spread of banking business	1.92%	1.85%		1.91%	1.93%	1.89%
Benefit from interest free funds	0.32%	0.32%		0.32%	0.33%	0.33%
Net interest margin (1)
RBS	2.24%	2.17%		2.23%	2.26%	2.22%
- UK Personal & Business Banking	3.59%	3.62%		3.58%	3.61%	3.64%
- Ulster Bank	1.94%	2.32%		1.93%	1.95%	2.35%
- Commercial Banking	2.87%	2.70%		2.86%	2.87%	2.73%
- Private Banking	3.23%	3.72%		3.21%	3.25%	3.73%
- Corporate & Institutional Banking	1.06%	0.88%		1.00%	1.12%	0.90%
- Central items	0.37%	0.50%		0.41%	0.32%	0.52%
- RCR	(0.29%)	(0.01%)		(0.38%)	(0.22%)	0.08%
RBS excluding Citizens Financial Group	2.14%	2.06%		2.13%	2.15%	2.11%
- Citizens Financial Group	2.80%	2.94%		2.78%	2.83%	2.93%

Note:

(1)

For the purposes of net interest margin calculations, a decrease of £8 million arising in Central Items (H1 2014 - £28 million; Q2 2015 - £3 million; Q1 2015 - £5 million; Q2 2014 - £14 million) was made in respect of 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.

Analysis of results

Key points

H1 2015 compared with H1 2014

	Net interest income was stable, with asset growth in UK PBB and Commercial Banking. Segmental splits are affected by the transfer of a number of portfolios between businesses, including the transfer to Commercial Banking of the UK corporate coverage business from CIB and of the RBS International business from Private Banking.
	Net interest margin (NIM) rose 7 basis points, with progressive repricing of deposits helping to offset continuing competitive pressures on asset margins.

Q2 2015 compared with Q1 2015

	Asset growth was driven by rising mortgage volumes, supported by increased mortgage adviser capacity and increasingly competitive pricing.
	Modest downward pressure on NIM reflected competitive conditions in domestic markets and a further slight decline in the standard variable rate mortgage book, partially offset by some further small adjustments to deposit pricing.

Q2 2015 compared with Q2 2014

	Net interest income was down 1%, with good asset growth in UK mortgages and Commercial Banking partially offsetting declines in other portfolios.
	NIM was 1 basis point higher, with deposit repricing offsetting continuing pressure on asset margins.

Analysis of results

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Non-interest income	£m	£m		£m	£m	£m
Net fees and commissions	1,966	2,118		974	992	1,063
Income from trading activities	734	1,482		464	270	626
Other operating income	478	882		165	313	438
Total non-interest income	3,178	4,482		1,603	1,575	2,127

Key points

H1 2015 compared with H1 2014

	Non-interest income was down 29%, principally reflecting reduced trading income, in line with CIB’s risk and resource reduction.
	Losses of £69 million were recorded on the disposal of available-for-sale securities, compared with gains of £215 million in H1 2014.

Q2 2015 compared with Q1 2015

	Non-interest income was up 2%, reflecting seasonal movements offset by volatile items under IFRS.

Q2 2015 compared with Q2 2014

	Non-interest income was 25% lower, principally reflecting the reduction in CIB’s scale.
	A loss of £42 million on the disposal of available-for-sale securities compared with a gain of £13 million in Q2 2014.

Analysis of results

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Operating expenses	£m	£m		£m	£m	£m
Staff expenses	3,075	3,340		1,517	1,558	1,693
Premises and equipment	859	1,079		372	487	485
Other	1,133	1,292		622	511	605
Restructuring costs*	1,503	514		1,050	453	385
Litigation and conduct costs	1,315	250		459	856	250
Administrative expenses	7,885	6,475		4,020	3,865	3,418
Depreciation and amortisation	418	551		186	232	282
Write down of intangible assets	-	82		-	-	-
Operating expenses	8,303	7,108		4,206	4,097	3,700
Adjusted operating expenses (1)	5,485	6,344		2,697	2,788	3,065
*Restructuring costs comprise:
- staff expenses	348	196		293	55	153
- premises, equipment, depreciation and amortisation	341	199		51	290	138
- other	814	119		706	108	94
Restructuring costs	1,503	514		1,050	453	385
Staff costs as a % of total income	35%	33%		35%	36%	34%
Cost:income ratio	95%	71%		96%	95%	75%
Cost:income ratio - adjusted (1)	63%	64%		62%	64%	62%
Employee numbers (FTE - thousands)	109.2	113.6		109.2	109.2	113.6

Note:

(1)	Excluding restructuring costs and litigation and conduct costs.

Key points

H1 2015 compared with H1 2014

	Operating expenses rose as a result of higher restructuring and litigation and conduct costs.
	Adjusted operating expenses were 14% lower, reflecting the benefits of the bank’s cost reduction programme. This included an 8% reduction in staff expenses, driven by a 4,400 reduction in headcount, principally in higher cost businesses.

Q2 2015 compared with Q1 2015

	Operating expenses were 3% higher, with an increase in restructuring costs (up £597 million) partially offset by lower litigation and conduct charges (down £397 million).
	Adjusted operating expenses fell by 3%, including an 8% reduction within CIB.

Q2 2015 compared with Q2 2014

	Operating expenses were 14% higher reflecting increased restructuring and litigation and conduct costs.
	Adjusted operating expenses fell by 12%, driven by a reduction in staff expenses.

Analysis of results

Restructuring costs

	Restructuring costs totalled £1,050 million for Q2 2015 and £1,503 million for H1 2015, principally relating to CIB (Q2 2015 - £734 million) and to Williams & Glyn separation (Q2 2015 - £126 million). Restructuring costs included intangible software write-offs in CIB and Private Banking totalling £606 million, which have no impact on CET1 capital or tangible net asset value.
	Total restructuring charges are still expected to total c.£5 billion over the five year period 2015-2019 including:
	○	Williams & Glyn separation c.£1.1 billion of which £259 million was taken in H1 2015. The remainder is expected to be incurred over the period to Q4 2016;
	○	Independent Commission on Banking (ICB) preparation c.£800 million. The bulk is expected to be incurred in 2016-2018; and
	○	Restructuring of CIB and Go-forward Bank transformation just over c.£3 billion, of which £1,244 million was taken in H1 2015, with the majority relating to CIB. Most of the CIB restructuring is expected to be incurred in 2015.

Litigation and conduct costs

	£459 million of additional litigation and conduct costs taken in Q2 2015 related principally to mortgage-backed securities litigation in the United States. An additional £69 million provision was taken in relation to interest rate hedging products redress.

Analysis of results

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Impairment (releases)/losses	£m	£m		£m	£m	£m
Loans	(342)	271		(152)	(190)	(89)
Securities	110	(2)		11	99	(4)
Total impairment (releases)/losses	(232)	269		(141)	(91)	(93)
Loan impairment (releases)/losses
- individually assessed	(102)	113		(96)	(6)	(42)
- collectively assessed	90	348		21	69	221
- latent	(330)	(180)		(77)	(253)	(258)
Customer loans	(342)	281		(152)	(190)	(79)
Bank loans	-	(10)		-	-	(10)
Loan impairment (releases)/losses	(342)	271		(152)	(190)	(89)
RBS excluding RCR	13	290		43	(30)	36
RCR	(355)	(19)		(195)	(160)	(125)
Loan impairment (releases)/losses	(342)	271		(152)	(190)	(89)
Customer loan impairment (releases)/losses
as a % of gross loans and advances (1)
RBS	(0.2%)	0.1%		(0.2%)	(0.2%)	(0.1%)
RBS excluding RCR	-	0.2%		-	-	-
RCR	(6.5%)	(0.1%)		(7.1%)	(4.2%)	(1.7%)

	30 June	31 March	31 December
	2015	2015	2014
Loan impairment provisions
- RBS	£11.3bn	£13.8bn	£18.0bn
- RBS excluding RCR	£6.2bn	£6.6bn	£7.1bn
- RCR	£5.1bn	£7.2bn	£10.9bn
Risk elements in lending (REIL)
- RBS	£18.7bn	£22.3bn	£28.2bn
- RBS excluding RCR	£11.3bn	£12.1bn	£12.8bn
- RCR	£7.4bn	£10.2bn	£15.4bn
Provisions as a % of REIL
- RBS	60%	62%	64%
- RBS excluding RCR	54%	55%	55%
- RCR	69%	70%	71%
REIL as a % of gross customer loans
- RBS	4.8%	5.4%	6.8%
- RBS excluding RCR	3.0%	3.0%	3.3%
- RCR	67%	68%	70%

Note:

(1)	Excludes reverse repurchase agreements and includes disposals groups.

Analysis of results

Key points

H1 2015 compared with H1 2014

	Net impairment releases of £232 million were recorded in H1 2015, compared with net impairment losses of £269 million in H1 2014. Net loan impairment releases were recorded in all operating segments except Commercial Banking and CFG, where impairments nevertheless remained low at 0.1% and 0.3% respectively of gross loans and advances.

	REIL totalled £18.7 billion at 30 June 2015, and represented 4.8% of gross customer loans, down £9.5 billion from 31 December 2014, when they represented 6.8% of gross customer loans.
	The £112 million increase in securities impairments related to a small number of single name exposures, predominantly an exposure in the RBS N.V. liquidity portfolio.

Q2 2015 compared with Q1 2015

	Net impairment releases of £141 million were up from net releases of £91 million in Q1 2015. Loan impairment releases were lower, reflecting reduced latent releases, but securities impairments recorded in Q1 2015 were not repeated on the same scale.
	REIL were £3.6 billion lower, representing 4.8% of gross customer loans, with the bulk of the reduction in RCR.
	Provision coverage of REIL was 60%, compared with 62% at 31 March 2015, reflecting the continuing reduction in the more heavily provisioned portfolios of RCR.

Q2 2015 compared with Q2 2014

	Net impairment releases of £141 million were up from Q2 2014, during which higher latent releases were partially offset by greater collectively assessed impairment charges.

Analysis of results

Capital and leverage ratios
	End-point CRR basis (1)				PRA transitional basis
	30 June	31 March	31 December		30 June	31 March	31 December
	2015	2015	2014		2015	2015	2014
Risk asset ratios	%	%	%		%	%	%
CET1	12.3	11.5	11.2		12.3	11.5	11.1
Tier 1	12.3	11.5	11.2		14.3	13.3	13.2
Total	14.8	14.0	13.7		18.5	17.0	17.1
Capital	£m	£m	£m		£m	£m	£m
Tangible equity	43,919	44,242	44,368		43,919	44,242	44,368
Expected loss less impairment provisions	(1,319)	(1,512)	(1,491)		(1,319)	(1,512)	(1,491)
Prudential valuation adjustment	(366)	(393)	(384)		(366)	(393)	(384)
Deferred tax assets	(1,206)	(1,140)	(1,222)		(1,206)	(1,140)	(1,222)
Own credit adjustments	345	609	500		345	609	500
Pension fund assets	(250)	(245)	(238)		(250)	(245)	(238)
Other deductions	(1,070)	(1,436)	(1,614)		(1,047)	(1,414)	(1,884)
Total deductions	(3,866)	(4,117)	(4,449)		(3,843)	(4,095)	(4,719)
CET1 capital	40,053	40,125	39,919		40,076	40,147	39,649
AT1 capital	-	-	-		6,709	6,206	7,468
Tier 1 capital	40,053	40,125	39,919		46,785	46,353	47,117
Tier 2 capital	8,181	8,689	8,717		13,573	12,970	13,626
Total regulatory capital	48,234	48,814	48,636		60,358	59,323	60,743
Risk-weighted assets
Credit risk
- non-counterparty	245,000	263,000	264,700		245,000	263,000	264,700
- counterparty	27,500	31,200	30,400		27,500	31,200	30,400
Market risk	22,300	22,800	24,000		22,300	22,800	24,000
Operational risk	31,600	31,600	36,800		31,600	31,600	36,800
Total RWAs	326,400	348,600	355,900		326,400	348,600	355,900
Leverage (2)
Derivatives	282,300	391,100	354,000
Loans and advances	402,800	429,400	419,600
Reverse repos	67,800	69,900	64,700
Other assets	211,800	214,200	212,500
Total assets	964,700	1,104,600	1,050,800
Derivatives
- netting	(266,600)	(379,200)	(330,900)
- potential future exposures	83,500	96,000	98,800
Securities financing transactions gross up	6,200	20,200	25,000
Undrawn commitments	84,700	94,900	96,400
Regulatory deductions and other
adjustments (3)	2,000	900	(600)
Leverage exposure	874,500	937,400	939,500
CET1 capital	40,053	40,125	39,919
Leverage ratio %	4.6	4.3	4.2

Notes:

(1)	Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for the end-point CRR basis with the exception of unrealised gains on AFS securities which has been included from 2015 for the PRA transitional basis.
(2)	Based on end-point CRR Tier 1 capital and leverage exposure under the revised 2014 Basel III leverage ratio framework and the CRR Delegated Act.
(3)	The increase in regulatory adjustments in Q2 2015 was driven by higher disallowable settlement balances.

Analysis of results

Key points

30 June 2015 compared with 31 March 2015

	RBS’s CET1 ratio improved by 80 basis points to 12.3%, driven by good progress in RWA reduction in RCR and CIB.
	Citizens, in which RBS had a 40.8% stake at 30 June 2015, remains fully consolidated for regulatory capital purposes. On a pro forma basis, assuming the full deconsolidation of all Citizens credit and counterparty risk RWAs at 30 June 2015, the CET1 ratio would have been 300 basis points higher.
	RBS’s leverage ratio improved by 30 basis points to 4.6% at 30 June 2015, with leverage exposures down 7% to £875 billion.
	On 29 July 2015, RBS approved plans for an issue of AT1 instruments.

30 June 2015 compared with 31 December 2014

	The CET1 ratio was 110 basis points higher at 12.3%, while the leverage ratio improved by 40 basis points to 4.6%. The improvement was principally driven by continued good progress on run-off and disposals in RCR and CIB.

Segment performance

	Half year ended 30 June 2015
	PBB				CPB				CIB
		Ulster			Commercial	Private				Central			Total
	UK PBB	Bank	Total		Banking	Banking	Total			items (1)	CFG	RCR	RBS
	£m	£m	£m		£m	£m	£m		£m	£m	£m	£m	£m
Income statement
Net interest income	2,290	265	2,555		1,108	254	1,362		376	150	1,104	(25)	5,522
Non-interest income	631	103	734		606	167	773		948	43	490	190	3,178
Total income	2,921	368	3,289		1,714	421	2,135		1,324	193	1,594	165	8,700
Direct expenses
- staff costs	(456)	(120)	(576)		(255)	(143)	(398)		(322)	(1,159)	(564)	(56)	(3,075)
- other costs	(140)	(33)	(173)		(110)	(26)	(136)		(149)	(1,517)	(422)	(13)	(2,410)
Indirect expenses	(913)	(126)	(1,039)		(433)	(194)	(627)		(1,061)	2,759	-	(32)	-
Restructuring costs
- direct	-	(18)	(18)		(10)	(3)	(13)		(211)	(1,228)	(33)	-	(1,503)
- indirect	(50)	-	(50)		(8)	(80)	(88)		(814)	952	-	-	-
Litigation and conduct costs	(364)	8	(356)		(59)	(28)	(87)		(873)	1	-	-	(1,315)
Operating expenses	(1,923)	(289)	(2,212)		(875)	(474)	(1,349)		(3,430)	(192)	(1,019)	(101)	(8,303)
Profit/(loss) before impairment losses	998	79	1,077		839	(53)	786		(2,106)	1	575	64	397
Impairment releases/(losses)	17	52	69		(27)	3	(24)		31	(48)	(89)	293	232
Operating profit/(loss)	1,015	131	1,146		812	(50)	762		(2,075)	(47)	486	357	629
Additional information
Operating expenses - adjusted (£m) (2)	(1,509)	(279)	(1,788)		(798)	(363)	(1,161)		(1,532)	83	(986)	(101)	(5,485)
Operating profit/(loss) - adjusted (£m) (2)	1,429	141	1,570		889	61	950		(177)	228	519	357	3,447
Return on equity (3)	23.6%	8.0%	18.4%		11.6%	(7.5%)	9.2%		(24.6%)	nm	6.8%	nm	(0.7%)
Return on equity - adjusted (2,3)	34.0%	8.7%	25.7%		12.8%	5.1%	11.9%		(3.5%)	nm	7.3%	nm	9.8%
Cost:income ratio	66%	79%	67%		51%	113%	63%		259%	nm	64%	nm	95%
Cost:income ratio - adjusted (2)	52%	76%	54%		47%	86%	54%		116%	nm	62%	nm	63%
Total assets (£bn)	135.4	26.5	161.9		94.5	17.0	111.5		482.4	105.2	87.2	16.5	964.7
Funded assets (£bn)	135.4	26.4	161.8		94.5	16.9	111.4		211.1	102.9	86.8	8.4	682.4
Risk-weighted assets (RWAs) (£bn)	41.0	21.2	62.2		66.9	9.8	76.7		88.0	15.3	69.8	14.4	326.4
RWA equivalent (£bn) (4)	44.6	20.7	65.3		72.0	9.8	81.8		89.7	15.4	70.0	17.9	340.1
Employee numbers (FTEs - thousands)	25.4	4.2	29.6		6.2	2.7	8.9		3.1	49.5	17.6	0.5	109.2
nm = not meaningful
For the notes to this table refer to page 30.

Segment performance

	Quarter ended 30 June 2015
	PBB				CPB				CIB
		Ulster			Commercial	Private				Central			Total
	UK PBB	Bank	Total		Banking	Banking	Total			items (1)	CFG	RCR	RBS
	£m	£m	£m		£m	£m	£m		£m	£m	£m	£m	£m
Income statement
Net interest income	1,147	132	1,279		562	126	688		174	88	551	(14)	2,766
Non-interest income	322	46	368		330	81	411		346	173	246	59	1,603
Total income	1,469	178	1,647		892	207	1,099		520	261	797	45	4,369
Direct expenses
- staff costs	(231)	(60)	(291)		(126)	(67)	(193)		(142)	(585)	(275)	(31)	(1,517)
- other costs	(69)	(16)	(85)		(56)	(14)	(70)		(71)	(732)	(215)	(7)	(1,180)
Indirect expenses	(463)	(63)	(526)		(208)	(96)	(304)		(521)	1,366	-	(15)	-
Restructuring costs
- direct	-	(18)	(18)		(10)	(3)	(13)		(195)	(797)	(27)	-	(1,050)
- indirect	(20)	(1)	(21)		(7)	(81)	(88)		(539)	648	-	-	-
Litigation and conduct costs	(10)	8	(2)		(59)	(26)	(85)		(373)	1	-	-	(459)
Operating expenses	(793)	(150)	(943)		(466)	(287)	(753)		(1,841)	(99)	(517)	(53)	(4,206)
Profit/(loss) before impairment losses	676	28	704		426	(80)	346		(1,321)	162	280	(8)	163
Impairment (losses)/releases	(9)	52	43		(26)	2	(24)		(13)	2	(51)	184	141
Operating profit/(loss)	667	80	747		400	(78)	322		(1,334)	164	229	176	304
Additional information
Operating expenses - adjusted (£m) (2)	(763)	(139)	(902)		(390)	(177)	(567)		(734)	49	(490)	(53)	(2,697)
Operating profit/(loss) - adjusted (£m) (2)	697	91	788		476	32	508		(227)	312	256	176	1,813
Return on equity (3)	32.1%	9.9%	24.7%		11.3%	(20.1%)	7.5%		(33.0%)	nm	6.5%	nm	2.7%
Return on equity - adjusted (2,3)	33.6%	11.3%	26.1%		13.7%	5.6%	12.7%		(6.9%)	nm	7.2%	nm	14.1%
Cost:income ratio	54%	84%	57%		52%	139%	69%		354%	nm	65%	nm	96%
Cost:income ratio - adjusted (2)	52%	78%	55%		44%	86%	52%		141%	nm	62%	nm	62%
Total assets (£bn)	135.4	26.5	161.9		94.5	17.0	111.5		482.4	105.2	87.2	16.5	964.7
Funded assets (£bn)	135.4	26.4	161.8		94.5	16.9	111.4		211.1	102.9	86.8	8.4	682.4
Risk-weighted assets (RWAs) (£bn)	41.0	21.2	62.2		66.9	9.8	76.7		88.0	15.3	69.8	14.4	326.4
RWA equivalent (£bn) (4)	44.6	20.7	65.3		72.0	9.8	81.8		89.7	15.4	70.0	17.9	340.1
Employee numbers (FTEs - thousands)	25.4	4.2	29.6		6.2	2.7	8.9		3.1	49.5	17.6	0.5	109.2
nm = not meaningful
For the notes to this table refer to page 30.

Segment performance

	Half year ended 30 June 2014
	PBB				CPB				CIB
		Ulster			Commercial	Private				Central			Total
	UK PBB	Bank	Total		Banking	Banking	Total			items (1)	CFG	RCR	RBS
	£m	£m	£m		£m	£m	£m		£m	£m	£m	£m	£m
Income statement
Net interest income	2,276	323	2,599		999	344	1,343		365	203	987	(1)	5,496
Non-interest income	686	89	775		569	201	770		2,062	146	620	109	4,482
Total income	2,962	412	3,374		1,568	545	2,113		2,427	349	1,607	108	9,978
Direct expenses
- staff costs	(469)	(125)	(594)		(266)	(151)	(417)		(487)	(1,241)	(512)	(89)	(3,340)
- other costs	(224)	(35)	(259)		(122)	(29)	(151)		(250)	(1,811)	(501)	(32)	(3,004)
Indirect expenses	(958)	(126)	(1,084)		(402)	(217)	(619)		(1,180)	2,938	-	(55)	-
Restructuring costs
- direct	(6)	8	2		(40)	(2)	(42)		(22)	(383)	(69)	-	(514)
- indirect	(13)	(22)	(35)		(22)	(1)	(23)		(169)	227	-	-	-
Litigation and conduct costs	(150)	-	(150)		(50)	-	(50)		(50)	-	-	-	(250)
Operating expenses	(1,820)	(300)	(2,120)		(902)	(400)	(1,302)		(2,158)	(270)	(1,082)	(176)	(7,108)
Profit/(loss) before impairment losses	1,142	112	1,254		666	145	811		269	79	525	(68)	2,870
Impairment (losses)/releases	(148)	(57)	(205)		(31)	-	(31)		39	12	(104)	20	(269)
Operating profit/(loss)	994	55	1,049		635	145	780		308	91	421	(48)	2,601
Additional information
Operating expenses - adjusted (£m) (2)	(1,651)	(286)	(1,937)		(790)	(397)	(1,187)		(1,917)	(114)	(1,013)	(176)	(6,344)
Operating profit/(loss) - adjusted (£m) (2)	1,163	69	1,232		747	148	895		549	247	490	(48)	3,365
Return on equity (3)	21.8%	2.9%	15.5%		9.5%	12.9%	10.0%		1.6%	nm	6.9%	nm	6.9%
Return on equity - adjusted (2,3)	25.7%	3.7%	18.3%		11.3%	13.2%	11.6%		3.5%	nm	8.0%	nm	9.7%
Cost:income ratio	61%	73%	63%		58%	73%	62%		89%	nm	67%	nm	71%
Cost:income ratio - adjusted (2)	56%	69%	57%		50%	73%	56%		79%	nm	63%	nm	64%
Total assets (£bn)	133.6	26.7	160.3		88.6	20.8	109.4		537.6	93.3	76.1	34.4	1,011.1
Funded assets (£bn)	133.6	26.6	160.2		88.6	20.8	109.4		278.7	91.3	75.7	20.9	736.2
Risk-weighted assets (£bn)	47.0	27.7	74.7		63.0	11.8	74.8		127.8	19.0	60.7	35.1	392.1
RWA equivalent (RWAs) (£bn) (4)	48.8	23.0	71.8		69.2	11.8	81.0		129.8	19.3	60.7	43.5	406.1
Employee numbers (FTEs - thousands)	25.1	4.5	29.6		7.1	3.4	10.5		4.3	50.6	17.7	0.9	113.6
nm = not meaningful
For the notes to this table refer to page 30.

Segment performance

	Quarter ended 31 March 2015
	PBB				CPB				CIB
		Ulster			Commercial	Private				Central			Total
	UK PBB	Bank	Total		Banking	Banking	Total			items (1)	CFG	RCR	RBS
	£m	£m	£m		£m	£m	£m		£m	£m	£m	£m	£m
Income statement
Net interest income	1,143	133	1,276		546	128	674		202	62	553	(11)	2,756
Non-interest income	309	57	366		276	86	362		602	(130)	244	131	1,575
Total income	1,452	190	1,642		822	214	1,036		804	(68)	797	120	4,331
Direct expenses
- staff costs	(225)	(60)	(285)		(129)	(76)	(205)		(180)	(574)	(289)	(25)	(1,558)
- other costs	(71)	(17)	(88)		(54)	(12)	(66)		(78)	(785)	(207)	(6)	(1,230)
Indirect expenses	(450)	(63)	(513)		(225)	(98)	(323)		(540)	1,393	-	(17)	-
Restructuring costs
- direct	-	-	-		-	-	-		(16)	(431)	(6)	-	(453)
- indirect	(30)	1	(29)		(1)	1	-		(275)	304	-	-	-
Litigation and conduct costs	(354)	-	(354)		-	(2)	(2)		(500)	-	-	-	(856)
Operating expenses	(1,130)	(139)	(1,269)		(409)	(187)	(596)		(1,589)	(93)	(502)	(48)	(4,097)
Profit/(loss) before impairment losses	322	51	373		413	27	440		(785)	(161)	295	72	234
Impairment releases/(losses)	26	-	26		(1)	1	-		44	(50)	(38)	109	91
Operating profit/(loss)	348	51	399		412	28	440		(741)	(211)	257	181	325
Additional information
Operating expenses - adjusted (£m) (2)	(746)	(140)	(886)		(408)	(186)	(594)		(798)	34	(496)	(48)	(2,788)
Operating profit/(loss) - adjusted (£m) (2)	732	50	782		413	29	442		50	(84)	263	181	1,634
Return on equity (3)	15.4%	6.2%	12.3%		11.9%	4.4%	10.9%		(17.1%)	nm	7.2%	nm	(4.1%)
Return on equity - adjusted (2,3)	34.3%	6.1%	25.2%		11.9%	4.6%	11.0%		(0.4%)	nm	7.4%	nm	5.6%
Cost:income ratio	78%	73%	77%		50%	87%	58%		198%	nm	63%	nm	95%
Cost:income ratio - adjusted (2)	51%	74%	54%		50%	87%	57%		99%	nm	62%	nm	64%
Total assets (£bn)	134.6	26.6	161.2		93.3	17.9	111.2		623.8	93.8	91.8	22.8	1,104.6
Funded assets (£bn)	134.6	26.5	161.1		93.3	17.8	111.1		248.4	90.6	91.3	11.1	713.6
Risk-weighted assets (£bn)	42.6	22.4	65.0		65.5	10.2	75.7		102.8	15.9	72.0	17.2	348.6
RWA equivalent (£bn) (4)	46.4	21.5	67.9		71.0	10.2	81.2		105.1	16.2	72.2	21.7	364.3
Employee numbers (FTEs - thousands)	25.1	4.3	29.4		6.2	2.8	9.0		3.5	49.2	17.5	0.6	109.2
nm= not meaningful
For the notes to this table refer to page 30.

Segment performance

	Quarter ended 30 June 2014
	PBB				CPB				CIB
		Ulster			Commercial	Private				Central			Total
	UK PBB	Bank	Total		Banking	Banking	Total			items (1)	CFG	RCR	RBS
	£m	£m	£m		£m	£m	£m		£m	£m	£m	£m	£m
Income statement
Net interest income	1,152	169	1,321		511	174	685		186	100	499	7	2,798
Non-interest income	347	42	389		287	98	385		890	44	391	28	2,127
Total income	1,499	211	1,710		798	272	1,070		1,076	144	890	35	4,925
Direct expenses
- staff costs	(235)	(62)	(297)		(133)	(75)	(208)		(217)	(659)	(261)	(51)	(1,693)
- other costs	(95)	(18)	(113)		(60)	(14)	(74)		(140)	(779)	(252)	(14)	(1,372)
Indirect expenses	(446)	(63)	(509)		(189)	(109)	(298)		(587)	1,426	-	(32)	-
Restructuring costs
- direct	(6)	8	2		(40)	(2)	(42)		(9)	(267)	(69)	-	(385)
- indirect	(23)	(20)	(43)		(21)	(1)	(22)		(143)	208	-	-	-
Litigation and conduct costs	(150)	-	(150)		(50)	-	(50)		(50)	-	-	-	(250)
Operating expenses	(955)	(155)	(1,110)		(493)	(201)	(694)		(1,146)	(71)	(582)	(97)	(3,700)
Profit/(loss) before impairment losses	544	56	600		305	71	376		(70)	73	308	(62)	1,225
Impairment (losses)/releases	(60)	(10)	(70)		9	(1)	8		45	13	(31)	128	93
Operating profit/(loss)	484	46	530		314	70	384		(25)	86	277	66	1,318
Additional information
Operating expenses - adjusted (£m) (2)	(776)	(143)	(919)		(382)	(198)	(580)		(944)	(12)	(513)	(97)	(3,065)
Operating profit - adjusted (£m) (2)	663	58	721		425	73	498		177	145	346	66	1,953
Return on equity (3)	21.6%	4.9%	15.8%		9.3%	12.3%	9.7%		(1.5%)	nm	9.0%	nm	2.2%
Return on equity - adjusted (2,3)	29.9%	6.2%	21.8%		12.9%	12.8%	12.9%		1.9%	nm	11.2%	nm	6.8%
Cost:income ratio	64%	73%	65%		62%	74%	65%		107%	nm	65%	nm	75%
Cost:income ratio - adjusted (2)	52%	68%	54%		48%	73%	54%		88%	nm	58%	nm	62%
Total assets (£bn)	133.6	26.7	160.3		88.6	20.8	109.4		537.6	93.3	76.1	34.4	1,011.1
Funded assets (£bn)	133.6	26.6	160.2		88.6	20.8	109.4		278.7	91.3	75.7	20.9	736.2
Risk-weighted assets (£bn)	47.0	27.7	74.7		63.0	11.8	74.8		127.8	19.0	60.7	35.1	392.1
RWA equivalent (£bn) (4)	48.8	23.0	71.8		69.2	11.8	81.0		129.8	19.3	60.7	43.5	406.1
Employee numbers (FTEs - thousands)	25.1	4.5	29.6		7.1	3.4	10.5		4.3	50.6	17.7	0.9	113.6
nm = not meaningful

Notes:

(1)	Central items include unallocated transactions, principally Treasury AFS portfolio sales of £69 million loss in H1 2015 (H1 2014 - £215 million gain; Q2 2015 - £42 million loss; Q1 2015 - £27 million loss; Q2 2014 - £13 million gain) and profit and loss on hedges that do not qualify for hedge accounting.
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	Segmental return on equity based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average RWA equivalents (RWAe)).
(4)	RWAe is an internal metric based on target CET 1 ratio of 13%, for all segments except RCR, set at 10% at creation. RWAe converts performing and non-performing exposures into a consistent capital measure comprising RWAs and capital deductions.

UK Personal & Business Banking

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
	2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Income statement
Net interest income	2,290	2,276		1,147	1,143	1,152
Net fees and commissions	603	637		309	294	304
Other non-interest income	28	49		13	15	43
Non-interest income	631	686		322	309	347
Total income	2,921	2,962		1,469	1,452	1,499
Direct expenses
- staff costs	(456)	(469)		(231)	(225)	(235)
- other costs	(140)	(224)		(69)	(71)	(95)
Indirect expenses	(913)	(958)		(463)	(450)	(446)
Restructuring costs
- direct	-	(6)		-	-	(6)
- indirect	(50)	(13)		(20)	(30)	(23)
Litigation and conduct costs	(364)	(150)		(10)	(354)	(150)
Operating expenses	(1,923)	(1,820)		(793)	(1,130)	(955)
Profit before impairment losses	998	1,142		676	322	544
Impairment releases/(losses)	17	(148)		(9)	26	(60)
Operating profit	1,015	994		667	348	484
Operating profit - adjusted (1)	1,429	1,163		697	732	663
Of which: Williams & Glyn (2)
Total income	414	423		211	203	213
Operating expenses	(168)	(169)		(90)	(78)	(83)
Impairment releases/(losses)	10	(31)		(11)	21	(9)
Operating profit	256	223		110	146	121

Notes:

(1)	Excluding restructuring costs and litigation and conduct costs.
(2)	Williams & Glyn has not operated as a separate legal entity therefore these figures are not necessarily indicative of results that would have occurred if Williams & Glyn had been standalone – see appendix 4.

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
	2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Analysis of income by product
Personal advances	433	467		217	216	232
Personal deposits	400	302		210	190	160
Mortgages	1,234	1,287		617	617	649
Cards	337	374		162	175	176
Business banking	547	490		278	269	245
Other	(30)	42		(15)	(15)	37
Total income	2,921	2,962		1,469	1,452	1,499
Analysis of impairments by sector
Personal advances	53	79		18	35	40
Mortgages	(2)	5		-	(2)	4
Business banking	(79)	30		(13)	(66)	1
Cards	11	34		4	7	15
Total impairment (releases)/losses	(17)	148		9	(26)	60
Loan impairment charge as % of gross
customer loans and advances (excluding
reverse repurchase agreements) by sector
Personal advances	1.5%	2.1%		1.0%	1.9%	2.1%
Business banking	(1.2%)	0.4%		(0.4%)	(1.8%)	-
Cards	0.5%	1.3%		0.4%	0.6%	1.1%
Total	-	0.2%		-	(0.1%)	0.2%

UK Personal & Business Banking

Key metrics
	Half year ended			Quarter ended
	30 June	30 June		30 June		31 March	30 June
2015	2014		2015		2015	2014
Performance ratios
Return on equity (1)	23.6%	21.8%		32.1%		15.4%	21.6%
Return on equity - adjusted (1,2)	34.0%	25.7%		33.6%		34.3%	29.9%
Net interest margin	3.59%	3.62%		3.58%		3.61%	3.64%
Cost:income ratio	66%	61%		54%		78%	64%
Cost:income ratio - adjusted (2)	52%	56%		52%		51%	52%
	30 June	31 March				31 December
2015	2015		2014
	£bn	£bn	Change			£bn	Change
Capital and balance sheet
Loans and advances to customers (gross)
- personal advances	7.2	7.2	-			7.4	(3%)
- mortgages	105.4	103.6	2%			103.2	2%
- business	13.7	14.5	(6%)			14.3	(4%)
- cards	4.4	4.5	(2%)			4.9	(10%)
Total loans and advances to customers (gross)	130.7	129.8	1%			129.8	1%
Loan impairment provisions	(2.1)	(2.4)	(13%)			(2.6)	(19%)
Net loans and advances to customers	128.6	127.4	1%			127.2	1%
Total assets	135.4	134.6	1%			134.3	1%
Funded assets	135.4	134.6	1%			134.3	1%
Risk elements in lending	3.2	3.6	(11%)			3.8	(16%)
Provision coverage (3)	66%	67%	(100bp)			69%	(300bp)
Customer deposits
- personal current accounts	36.5	36.3	1%			35.9	2%
- personal savings	82.5	81.1	2%			81.0	2%
- business/commercial	32.0	30.6	5%			31.8	1%
Total customer deposits	151.0	148.0	2%			148.7	2%
Assets under management (excluding deposits)	4.6	4.9	(6%)			4.9	(6%)
Loan:deposit ratio (excluding repos)	85%	86%	(100bp)			86%	(100bp)
Risk-weighted assets (4)
- Credit risk (non-counterparty)	32.0	33.6	(5%)			33.4	(4%)
- Operational risk	9.0	9.0	-			9.4	(4%)
Total risk-weighted assets	41.0	42.6	(4%)			42.8	(4%)
Of which: Williams & Glyn (5)
Total assets	19.5	19.6	(1%)			19.6	(1%)
Net loans and advances to customers	19.5	19.5	-			19.5	-
Customer deposits	23.4	22.1	6%			22.0	6%
Risk-weighted assets (4)	10.3	10.5	(2%)			10.1	2%

Notes:

(1)	Return on equity is based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average of segmental RWAe).
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(4)	RWAs on an end-point CRR basis.
(5)	Williams & Glyn has not operated as a separate legal entity therefore these figures do not necessarily reflect the cost base, funding and capital profile of a standalone bank see Appendix 4.

UK Personal & Business Banking

Key points

The strategic goal of UK PBB is to become the number one personal and business bank for customer service, trust and advocacy in the UK. Throughout 2015, the business has continued to progress a number of fair banking initiatives and technology investments.

	Continued to recruit further mortgage advisers, supporting an increase in applications, up 43% on Q2 2014 to £9.4 billion and up 42% compared with the prior quarter, providing a strong pipeline for third quarter completions and subsequent balance growth.
	Successfully trialled the opening of key branches on the two May bank holidays with mortgage advisers and business managers available to meet UK PBB customers’ banking needs.
	Enhancements to our current account opening process have halved the time to open an account to 30 minutes.
	The Reward current account which will provide 3% cashback on certain household bills paid by direct debit launched in July to a small number of customers with a full launch scheduled for later in the year.
	Completed our Personal savings product simplification programme which included increasing the interest rate received by 4.5 million personal customers.
	Provided more than 22,000 fixed rate business loans since launch, to a value of £1.8 billion helping customers concentrate on growing their businesses without having to worry about interest rates or hidden charges.
	In partnership with Entrepreneurial Spark, RBS opened business accelerator hubs in Birmingham, Bristol and Leeds, with plans to open further hubs in major cities across the UK in the future as the bank continues to support UK entrepreneurs and small businesses.
	Customers using the mobile application increased 12% to 3.3 million in the year to 30 June 2015, supported by developments including the launch of instant mobile application activation. Such developments have helped the NatWest mobile banking customer NPS to become joint number one in the market.
	Became the first UK-based bank to offer TouchID technology within its mobile app, allowing customers to use only their fingerprint for access, with over 1 million unique customer logins since launch.

UK Personal & Business Banking

Key points (continued)

H1 2015 compared with H1 2014

	Operating profit increased £21 million to £1,015 million for H1 2015 with a net impairment release largely offset by higher conduct costs. Adjusted operating profit of £1,429 million was £266 million higher as adjusted operating expenses decreased by 9%. Return on equity rose 1.8 percentage points to 23.6%.
	Total income decreased £41 million to £2,921 million. Net interest income increased by 1% to £2,290 million driven by improved deposit income from increased balances and stronger margins partly offset by lower asset income as a result of asset margin compression outweighing strong balance sheet growth.
	Net interest margin decreased from 3.62% to 3.59% reflecting strong new business mortgage growth at lower margin, together with an increase in the level of standard variable rate customers switching to new lower margin fixed rate products. This has been partly offset by a continued improvement in deposit margins.
	Non-interest income decreased by 8% to £631 million reflecting the impacts of changes that were introduced to support customers, in particular current account charges and investment fund charges. In addition, card interchange income fell as a result of the implementation of EU regulations on interchange rates.
	Operating expenses increased by £103 million or 6%, largely reflecting higher restructuring costs and litigation and conduct costs from increased levels of customer redress provision. Adjusted expenses were £142 million or 9% lower, supported by a headcount decrease of 4%, lower FSCS levy charges and lower complaints and compensation costs. Indirect expenses were £45 million lower largely due to the non-repeat of a £60 million technology write-off in the first half of 2014.
	A £17 million net impairment release compared with a net loss of £148 million, resulting from lower levels of defaults across all portfolios and increased portfolio provision releases, particularly in business banking.
	Mortgage balances increased to £105.4 billion, up £3.6 billion year-on-year, or 4% above the overall mortgage market for the same period. Gross new mortgage lending in the first half of 2015 was £9.1 billion representing a market share of approximately 9%, above our stock share of 8%. Deposit balances increased £5.0 billion driven by instant access growth in personal savings, current accounts and business.
	RWAs declined 13% to £41.0 billion primarily due to improved credit quality and lower unsecured balances.

UK Personal & Business Banking

Key points (continued)

Q2 2015 compared with Q1 2015

	Operating profit was £667 million, up £319 million or 92%. This reflected higher income, up 1% to £1,469 million and lower expenses, down 30% to £793 million. Impairments remained low at £9 million, compared to a £26 million net release in the prior quarter.
	Net interest income was broadly stable, with a small reduction in net interest margin of 3bps due to contraction in mortgage margins partially offset by balance growth.
	Non-interest income increased by 4% to £322 million, due to a largely seasonal increase in card transaction levels, partly offset by reduced interchange income following implementation of new EU regulations on interchange rates.
	Operating expenses decreased 30% to £793 million, largely reflecting lower restructuring, litigation and conduct costs. Adjusted expenses increased by £17 million due to increased technology spend and the increase in Williams & Glyn functional staff costs as the business prepares for divestment.
	The impairment losses increased by £35 million to £9 million as provision releases in Q2 were lower than Q1. Underlying default levels continue to be low.
	Mortgage balances increased £1.8 billion in the quarter, achieving approximately 10% of the gross new lending market share, driven by increased adviser capacity and competitive pricing.
	Business loan balances decreased £0.8 billion, largely reflecting the transfer of £0.4 billion to Commercial Banking in Q2, a decrease in Williams & Glyn (Commercial/Corporate) and asset write offs; underlying balances were broadly stable in the quarter. Business deposit balances decreased £0.1 billion, driven by the transfer of £0.6 billion of balances to Commercial & Private Banking in Q2. Underlying deposit balances increased 2% in the quarter.
	RWAs declined 4% to £41.0 billion with improved credit quality, lower unsecured balances and Business Banking data and model improvements.

Q2 2015 compared with Q2 2014

	Operating profit of £667 million, increased £183 million or 38%, while adjusted operating profit totalled £697 million compared with £663 million in the second quarter of 2014.
	Net interest income is broadly stable at £1,147 million with lower asset income primarily from lower asset margins partly offset by increased deposit income.
	Non-interest income decreased by 7% to £322 million largely due to lower insurance profit share and lower cards interchange income.
	Operating expenses decreased £162 million or 17%, largely reflecting lower restructuring costs and litigation and conduct costs. Adjusted expenses decreased by £13 million supported by an underlying 4% decrease in headcount, lower FSCS levy charges and lower complaints and compensation costs partly offset by increased investment in technology.
	Net impairment losses of £9 million were significantly lower, driven by lower defaults across all portfolios and higher levels of portfolio provision releases, particularly in business banking.
	RWAs declined 13% to £41.0 billion with improved credit quality and lower unsecured balances.

Ulster Bank

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
	2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Income statement
Net interest income	265	323		132	133	169
Net fees and commissions	64	66		31	33	34
Other non-interest income	39	23		15	24	8
Non-interest income	103	89		46	57	42
Total income	368	412		178	190	211
Direct expenses
- staff costs	(120)	(125)		(60)	(60)	(62)
- other costs	(33)	(35)		(16)	(17)	(18)
Indirect expenses	(126)	(126)		(63)	(63)	(63)
Restructuring costs
- direct	(18)	8		(18)	-	8
- indirect	-	(22)		(1)	1	(20)
Litigation and conduct costs	8	-		8	-	-
Operating expenses	(289)	(300)		(150)	(139)	(155)
Profit before impairment losses	79	112		28	51	56
Impairment releases/(losses)	52	(57)		52	-	(10)
Operating profit	131	55		80	51	46
Operating profit - adjusted (1)	141	69		91	50	58
Average exchange rate	1.365	1.218		1.385	1.345	1.228

Note:

(1)	Excluding restructuring costs and litigation and conduct costs.

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
	2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Analysis of income by business
Corporate	95	134		45	50	65
Retail	221	190		112	109	100
Other	52	88		21	31	46
Total income	368	412		178	190	211
Analysis of impairments by sector
Mortgages	(51)	35		(38)	(13)	16
Commercial real estate
- investment	12	9		11	1	1
- development	18	(6)		18	-	(3)
Other corporate	(25)	8		(37)	12	(9)
Other lending	(6)	11		(6)	-	5
Total impairment (releases)/losses	(52)	57		(52)	-	10
Loan impairment charge as % of gross
customer loans and advances (excluding
reverse repurchase agreements) by sector
Mortgages	(0.6%)	0.4%		(1.0%)	(0.3%)	0.4%
Commercial real estate
- investment	3.0%	1.8%		5.5%	0.4%	0.4%
- development	12.0%	(3.0%)		24.0%	-	(3.0%)
Other corporate	(1.1%)	0.3%		(3.1%)	1.0%	(0.7%)
Other lending	(1.3%)	2.2%		(2.7%)	-	2.0%
Total	(0.5%)	0.4%		(0.9%)	-	0.2%

Ulster Bank

Key metrics
	Half year ended				Quarter ended
	30 June	30 June			30 June		31 March			30 June
2015	2014			2015		2015			2014
Performance ratios
Return on equity (1)	8.0%	2.9%			9.9%		6.2%			4.9%
Return on equity - adjusted (1,2)	8.7%	3.7%			11.3%		6.1%			6.2%
Net interest margin	1.94%	2.32%			1.93%		1.95%			2.35%
Cost:income ratio	79%	73%			84%		73%			73%
Cost:income ratio - adjusted (2)	76%	69%			78%		74%			68%
	30 June		31 March						31 December
2015		2015				2014
	£bn		£bn			Change			£bn		Change
Capital and balance sheet
Loans and advances to customers (gross)
Mortgages	15.9		16.3			(2%)			17.5		(9%)
Commercial real estate
- investment	0.8		0.9			(11%)			1.0		(20%)
- development	0.3		0.3			-			0.3		-
Other corporate	4.7		4.6			2%			4.9		(4%)
Other lending	0.9		0.9			-			1.0		(10%)
Total loans and advances to customers (gross)	22.6		23.0			(2%)			24.7		(9%)
Loan impairment provisions
Mortgages	(1.2)		(1.3)			(8%)			(1.4)		(14%)
Commercial real estate
- investment	(0.2)		(0.2)			-			(0.2)		-
- development	(0.2)		(0.1)			100%			(0.2)		-
Other corporate	(0.7)		(0.8)			(13%)			(0.8)		(13%)
Other lending	(0.1)		(0.1)			-			(0.1)		-
Total loan impairment provisions	(2.4)		(2.5)			(4%)			(2.7)		(11%)
Net loans and advances to customers (3)	20.2		20.5			(1%)			22.0		(8%)
Total assets	26.5		26.6			-			27.6		(4%)
Funded assets	26.4		26.5			-			27.5		(4%)
Risk elements in lending
Mortgages	2.9		3.0			(3%)			3.4		(15%)
Commercial real estate
- investment	0.2		0.2			-			0.3		(33%)
- development	0.2		0.2			-			0.2		-
Other corporate	0.8		0.9			(11%)			0.8		-
Other lending	0.1		0.1			-			0.1		-
Total risk elements in lending	4.2		4.4			(5%)			4.8		(13%)
Provision coverage (4)	58%		58%			-			57%		100bp
Customer deposits	18.7		19.2			(3%)			20.6		(9%)
Loan:deposit ratio (excluding repos)	108%		107%			100bp			107%		100bp
Risk-weighted assets (5,6)
- Credit risk
- non-counterparty	19.6		20.8			(6%)			22.2		(12%)
- counterparty	0.1		0.1			-			0.1		-
- Operational risk	1.5		1.5			-			1.5		-
Total risk-weighted assets	21.2		22.4			(5%)			23.8		(11%)
Spot exchange rate - €/£	1.411		1.382						1.285

Notes:

(1)	Return on equity is based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average of segmental RWAe).
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	Includes £9.4 billion relating to tracker mortgages (31 March 2015 - £9.7 billion; 31 December 2014 - £10.5 billion).
(4)	Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(5)	RWAs on an end-point CRR basis.
(6)	Includes £8.1 billion in relating to tracker mortgages (31 March 2015 - £8.5 billion; 31 December 2014 - £9.6 billion).

Ulster Bank

Ulster Bank retains a strong capital and funding position as it continues to support the economic recovery across the island of Ireland. New lending activity increased further during H1 2015 with mortgage drawdowns up 45% versus H1 2014 and £0.8 billion of new lending made available to business customers, an increase of 57% from H1 2014. Impairment releases have continued driven by proactive debt management and the improving economic conditions.

During H1 2015 Ulster Bank continued to make it simpler and easier for customers to do business:

	The launch of the “Mortgage you can live with” campaign offers a range of new product options to both new and existing mortgage customers including a suite of fixed rate options. The bank has also introduced a dedicated team of mobile mortgage managers and returned to the mortgage broker market.
	Ulster Bank continues to support Commercial customers and launched new propositions for businesses operating in the food and drink, agriculture and international business sectors during H1 2015.
	A fully digitalised account opening option was introduced for personal customers in Northern Ireland as the digital proposition continued to be enhanced. Customers continue to move towards direct channels with over 88% of all transactional activity now outside the traditional branch.
	Significant progress has been made to improve the customer service proposition. The announcement of a new partnership with ‘An Post’ in the Republic of Ireland will provide customers with 1,140 new points of presence. The bank’s award winning customer contact centre announced 350 new jobs which will handle customer calls across a number of RBS brands.
	The launch of a set of customer commitments specifically designed to support customers in arrears on their home loan has been positively received by the market.

A significant weakening in the euro relative to sterling during H1 2015 had a material impact on Ulster Bank’s financial performance as reported and in comparison to prior periods.

H1 2015 compared with H1 2014

	Operating profit increased by £76 million to £131 million for H1 2015 with the benefit of net impairment releases. Adjusted operating profit was £141 million for H1 2015, compared with a profit of £69 million for H1 2014. The reduction in profit before impairment losses to £79 million is partly attributable to a weakening of the euro, (an impact of £17 million), a decrease in income on free funds and an increase in pension servicing costs. Return on equity increased 5.1 percentage points to 8%.
	Total income decreased by £44 million primarily driven by the weakening of the euro (an impact of £33 million) and a lower return on free funds. While deposit pricing improved steadily and loan margins remained stable in a competitive market, the net interest margin of 1.94% reflected the lower return on free funds and the impact of liquidity management requirements. The offsetting income movements between the Corporate and Retail businesses primarily reflect a transfer of management responsibility for a specific business channel to align with the bank’s distribution strategy.
	Operating expenses decreased by £11 million to £289 million principally from a reduction in headcount and the property footprint coupled with a benefit from the weakening of the euro (an impact of £16 million), offset partly by higher pensions charges and investment in technology and infrastructure.
	A net impairment release of £52 million for H1 2015 reflected the benefits of proactive debt management and improving macroeconomic conditions.

Ulster Bank

Key points (continued)

H1 2015 compared with H1 2014 (continued)

	The significant growth in new lending volumes has been offset by continued customer deleveraging. The loan:deposit ratio was steady over the period with the weakening euro driving reductions in the reported net loans and advances to customers and customer deposit balances. The low yielding tracker mortgage portfolio declined by a further £1.1 billion, or 10% during H1 2015 to £9.4 billion reflecting customer repayments and the weakening of the euro.
	RWAs reduced by £2.6 billion during H1 2015 to £21.2 billion reflecting an improvement in credit metrics and the impact of exchange rate movements, contributing to the improvement in return on equity. £1.5 billion of the RWA reduction related to the tracker mortgage portfolio which now totals £8.1 billion.

Q2 2015 compared with Q1 2015

	Operating profit increased by £29 million to £80 million due primarily to impairment releases, partly offset by lower income and higher restructuring costs. Adjusted operating profit was £91 million for Q2 2015 compared with an operating profit of £50 million for Q1 2015.
	Total income decreased by £12 million to £178 million primarily driven by the weakening of the euro (an impact of £4 million) and a lower return on free funds. Operating expenses increased by £11 million with the impact of higher restructuring costs partly offset by a release of provision reflecting the outcome of reviews on Interest Rate Hedging Products.

Q2 2015 compared with Q2 2014

	Operating profit increased by £34 million to £80 million driven by impairment releases and lower expenses, partly offset by lower income. Adjusted operating profit increased by £33 million to £91 million.
	Total income decreased by £33 million primarily driven by exchange rate movements (an impact of £17 million) and a lower return on free funds. Operating expenses decreased by £5 million reflecting the continued focus on cost management.

Commercial Banking

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Income statement
Net interest income	1,108	999		562	546	511
Net fees and commissions	433	448		226	207	227
Other non-interest income	173	121		104	69	60
Non-interest income	606	569		330	276	287
Total income	1,714	1,568		892	822	798
Direct expenses
- staff costs	(255)	(266)		(126)	(129)	(133)
- other costs	(110)	(122)		(56)	(54)	(60)
Indirect expenses	(433)	(402)		(208)	(225)	(189)
Restructuring costs
- direct	(10)	(40)		(10)	-	(40)
- indirect	(8)	(22)		(7)	(1)	(21)
Litigation and conduct costs	(59)	(50)		(59)	-	(50)
Operating expenses	(875)	(902)		(466)	(409)	(493)
Profit before impairment losses	839	666		426	413	305
Impairment (losses)/releases	(27)	(31)		(26)	(1)	9
Operating profit	812	635		400	412	314
Operating profit - adjusted (1)	889	747		476	413	425

Note:

(1)	Excluding restructuring costs and litigation and conduct costs.

Commercial Banking

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Analysis of income by business
Commercial lending	948	894		499	449	448
Deposits	240	153		124	116	81
Asset and invoice finance	358	366		180	178	186
Other	168	155		89	79	83
Total income	1,714	1,568		892	822	798
Analysis of impairments by sector
Commercial real estate	8	(6)		10	(2)	(17)
Asset and invoice finance	3	2		2	1	-
Private sector services (education, health, etc)	3	(10)		-	3	-
Banks & financial institutions	1	1		1	-	(1)
Wholesale and retail trade repairs	-	14		2	(2)	2
Hotels and restaurants	(1)	(1)		2	(3)	(4)
Manufacturing	-	7		(1)	1	4
Construction	2	4		2	-	2
Other	11	20		8	3	5
Total impairment losses/(releases)	27	31		26	1	(9)
Loan impairment charge as % of gross
customer loans and advances by sector
Commercial real estate	0.1%	(0.1%)		0.2%	-	(0.4%)
Asset and invoice finance	-	-		0.1%	-	-
Private sector services (education, health, etc)	0.1%	(0.3%)		-	0.2%	-
Banks & financial institutions	-	-		0.1%	-	(0.1%)
Wholesale and retail trade repairs	-	0.5%		0.1%	(0.1%)	0.1%
Hotels and restaurants	(0.1%)	(0.1%)		0.3%	(0.4%)	(0.5%)
Manufacturing	-	0.4%		(0.1%)	0.1%	0.4%
Construction	0.2%	0.4%		0.4%	-	0.4%
Other	0.1%	0.2%		0.1%	-	0.1%
Total	0.1%	0.1%		0.1%	-	-

Commercial Banking

Key metrics
	Half year ended			Quarter ended
30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Performance ratios
Return on equity (1)	11.6%	9.5%		11.3%	11.9%	9.3%
Return on equity - adjusted (1,2)	12.8%	11.3%		13.7%	11.9%	12.9%
Net interest margin	2.87%	2.70%		2.86%	2.87%	2.73%
Cost:income ratio	51%	58%		52%	50%	62%
Cost:income ratio - adjusted (2)	47%	50%		44%	50%	48%

	30 June	31 March			31 December
2015	2015		2014
	£bn	£bn		Change	£bn	Change
Capital and balance sheet
Loans and advances to customers (gross)
- Commercial real estate	17.9	18.4		(3%)	18.3	(2%)
- Asset and invoice finance	14.1	13.9		1%	14.2	(1%)
- Private sector services (education, health etc)	7.0	7.1		(1%)	6.9	1%
- Banks & financial institutions	7.2	7.0		3%	7.0	3%
- Wholesale and retail trade repairs	6.6	6.3		5%	6.0	10%
- Hotels and restaurants	3.2	3.4		(6%)	3.4	(6%)
- Manufacturing	4.6	3.9		18%	3.7	24%
- Construction	1.8	1.7		6%	1.9	(5%)
- Other	28.6	28.0		2%	24.7	16%
Total loans and advances to customers (gross)	91.0	89.7		1%	86.1	6%
Loan impairment provisions	(0.9)	(0.9)		-	(1.0)	(10%)
Net loans and advances to customers (3)	90.1	88.8		1%	85.1	6%
Total assets	94.5	93.3		1%	89.4	6%
Funded assets	94.5	93.3		1%	89.4	6%
Risk elements in lending	2.3	2.4		(4%)	2.5	(8%)
Provision coverage (4)	39%	38%		100bp	38%	100bp
Customer deposits	97.0	99.0		(2%)	86.8	12%
Loan:deposit ratio (excluding repos)	93%	90%		300bp	98%	(500bp)
Risk-weighted assets (3,5)
- Credit risk (non-counterparty)	60.7	59.4		2%	57.6	5%
- Operational risk	6.2	6.1		2%	6.4	(3%)
Total risk-weighted assets	66.9	65.5		2%	64.0	5%

Notes:

(1)	Return on equity is based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average of segmental RWAe).
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	30 June 2015 includes £13.3 billion third party assets and £10.2 billion risk-weighted asset equivalents relating to the run-down legacy book.
(4)	Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(5)	RWAs on an end-point CRR basis.

Commercial Banking

Key points

Commercial Banking made a strong start to the year with the business continuing to make a significant contribution to overall bank profitability, whilst focussing on customer service, trust and advocacy. Continued simplification of processes, as well as investment in technology and relationship managers has contributed to organic H1 2015 net lending growth of £0.5 billion.

	As the business continues to focus on supporting the UK economy, special emphasis is being placed on supporting businesses with a turnover of between £10 million and £50 million or borrowing in excess of £1 million.
	Commercial Banking continued to simplify its customer proposition; improvements in account opening have delivered a 75% reduction in customer paperwork and a 25% reduction in the time to open an account.
	Further investment in relationship managers included the introduction of a new Customer Relationship Management tool for 3,000 staff, enabling a more coherent view of all customer needs. In addition, 2,800 staff registered for a bespoke lending skills training programme.
	During H1 complaints reduced by 21%, highlighting the success of the franchise’s focus on customer service, delivered through empowering staff, enhancing capability and process simplification.

On 1 January 2015, the Private Banking RBSI business was transferred to Commercial Banking, accounting for £31 million of operating profit in the half year, followed on 1 May 2015 by the Corporate & Institutional Banking UK coverage business, accounting for £13 million of operating profit from the date of transfer. On 1 August 2014, Commercial Cards for UK Personal & Business Banking related customers, with revenue of £22 million, was transferred to UK Personal & Business Banking. The transferred businesses affect comparisons with prior periods. (1)

H1 2015 compared with H1 2014

	Commercial Banking recorded an operating profit of £812 million compared with £635 million in the comparative period. Adjusted operating profit was £889 million, compared with £747 million in H1 2014, with income up 9%. Return on equity improved 2.1 percentage points to 11.6%.
	Total income was £1,714 million, compared with £1,568 million in the prior year. Net interest income increased by £109 million to £1,108 million, driven by increased deposits and asset volumes and higher deposit margins, partially offset by lower asset margins. Non-interest income increased £37 million to £606 million mostly reflecting higher gains on equity disposals.
	Operating expenses decreased £27 million to £875 million, principally from lower restructuring costs, and lower headcount. This was partially offset by higher litigation and conduct costs of £59 million, up £9 million, primarily a top-up for interest rate hedging product provisions.
	Net impairment losses decreased £4 million to £27 million driven by reduced individual and collective charges, down £51 million, offsetting lower net latent releases.
	Headline net loans and advances to customers increased by £5.0 billion from December 2014 to £90.1 billion, including £4.5 billion from the transferred businesses. Underlying gross lending compared with H1 2014 was up £1.4 billion.
	Deposits were £97.0 billion at 30 June 2015, including £6.4 billion from the transferred businesses, with organic deposit growth of £3.8 billion from 31 December 2014.
	RWAs increased by £3.9 billion year-on-year to £66.9 billion, including £3.8 billion from the transferred businesses.

Note:

(1)

The business transfer included: total income of £108 million (H1 2014 - £78 million; Q2 2015 - £56 million; Q1 2015 - £53 million; Q2 2014 - £42 million); operating expenses of £46 million (H1 2014 - £57 million; Q2 2015 - £24 million; Q1 2015 - £21 million; Q2 2014 - £30 million); net loans and advances to customers of £4.5 billion (31 March 2015 - £4.4 billion; 31 December 2014 - £4.4 billion); customer deposits of £6.4 billion (31 March 2015 - £6.2 billion; 31 December 2014 - £6.5 billion); and RWAs of £3.8 billion (31 March 2015 - £3.6 billion; 31 December 2014 - £3.5 billion). Comparatives have not been restated.

Commercial Banking

Key points (continued)

Q2 2015 compared with Q1 2015

	Operating profit was £400 million compared with £412 million in the previous quarter. Adjusted operating profit was £476 million, compared with £413 million.
	Total income increased £70 million in the quarter to £892 million. Net interest income increased 3% to £562 million reflecting an increase in asset and deposit volumes and higher deposit margins, which more than offset lower asset margins. Non-interest income increased by £54 million or 20%, reflecting higher gains on equity disposals in the quarter.
	Operating expenses increased £57 million to £466 million driven by a £59 million provision for litigation and conduct costs and increased restructuring costs.
	Impairment losses increased to £26 million, reflecting increased individual charges and the non-repeat of a net latent release of £13 million in Q1 2015.
	Net loans and advances to customers increased £1.3 billion, reflecting £2.1 billion from the transferred business offset by seasonal reductions and a high level of contractual maturities in June. Lower deposits, down £2.0 billion, reflected the outflow of short term funds placed by customers at the end of Q1 2015.
	RWAs increased £1.4 billion to £66.9 billion, including £2.1 billion from the transferred businesses.

Q2 2015 compared with Q2 2014

	Operating profit improved £86 million to £400 million. Adjusted operating profit rose by £51 million with increased income and cost management initiatives partially offset by increased impairment losses.
	Total income rose to £892 million, up from £798 million in Q2 2014. Net interest income increased by £51 million or 10%, reflecting increased asset and deposit volumes and higher deposit margins, which more than offset reduced asset margins. Non-interest income increased by £43 million or 15%, reflecting higher gains on equity disposals.
	Operating expenses were £27 million lower reflecting reduced restructuring costs, discretionary cost initiatives and lower headcount.
	Net impairment losses increased by £35 million reflecting the non-repeat of a Q2 2014 latent provision release of £59 million, partially offset by lower individual and collective charges.

Private Banking

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Income statement
Net interest income	254	344		126	128	174
Net fees and commissions	145	172		70	75	84
Other non-interest income	22	29		11	11	14
Non-interest income	167	201		81	86	98
Total income	421	545		207	214	272
Direct expenses
- staff costs	(143)	(151)		(67)	(76)	(75)
- other costs	(26)	(29)		(14)	(12)	(14)
Indirect expenses	(194)	(217)		(96)	(98)	(109)
Restructuring costs
- direct	(3)	(2)		(3)	-	(2)
- indirect	(80)	(1)		(81)	1	(1)
Litigation and conduct costs	(28)	-		(26)	(2)	-
Operating expenses	(474)	(400)		(287)	(187)	(201)
(Loss)/profit before impairment losses	(53)	145		(80)	27	71
Impairment releases/(losses)	3	-		2	1	(1)
Operating (loss)/profit	(50)	145		(78)	28	70
Operating profit - adjusted (1)	61	148		32	29	73
Of which: international private banking activities (2)
Total income	100	115		48	52	57
Operating expenses	(113)	(87)		(68)	(45)	(42)
Operating (loss)/profit	(13)	28		(20)	7	15

Notes:

(1)	Excluding restructuring costs and litigation and conduct costs.
(2)	International private banking business reclassified to disposal groups.

	Half year ended			Quarter ended
	30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
	£m	£m		£m	£m	£m
Analysis of income by business
Investments	74	90		35	39	45
Banking	347	455		172	175	227
Total income	421	545		207	214	272

Private Banking
Key metrics
	Half year ended			Quarter ended
30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Performance ratios
Return on equity (1)	(7.5%)	12.9%		(20.1%)	4.4%	12.3%
Return on equity - adjusted (1,2)	5.1%	13.2%		5.6%	4.6%	12.8%
Net interest margin	3.23%	3.72%		3.21%	3.25%	3.73%
Cost:income ratio	113%	73%		139%	87%	74%
Cost:income ratio - adjusted (2)	86%	73%		86%	87%	73%
	30 June	31 March			31 December
2015	2015		2014
	£bn	£bn		Change	£bn	Change
Capital and balance sheet
Loans and advances to customers (gross)
- Personal	4.8	5.3		(9%)	5.4	(11%)
- Mortgages	6.6	6.6		-	8.9	(26%)
- Other	2.1	2.2		(5%)	2.3	(9%)
Total loans and advances to customers (gross)	13.5	14.1		(4%)	16.6	(19%)
Loan impairment provisions	-	(0.1)		(100%)	(0.1)	(100%)
Net loans and advances to customers	13.5	14.0		(4%)	16.5	(18%)
Total assets	17.0	17.9		(5%)	20.5	(17%)
Funded assets	16.9	17.8		(5%)	20.4	(17%)
Assets under management	27.1	29.2		(7%)	28.3	(4%)
Risk elements in lending	0.2	0.1		100%	0.2	-
Provision coverage (3)	31%	34%		(300bp)	34%	(300bp)
Customer deposits	29.8	29.6		1%	36.1	(17%)
Loan:deposit ratio (excluding repos)	45%	47%		(200bp)	46%	(100bp)
Risk-weighted assets (4)
- Credit risk
- non-counterparty	8.2	8.6		(5%)	9.5	(14%)
- counterparty	0.1	0.1		-	0.1	-
- Operational risk	1.5	1.5		-	1.9	(21%)
Total risk-weighted assets	9.8	10.2		(4%)	11.5	(15%)
Of which: international private banking activities (5)
Total assets	5.3	6.2		(15%)	5.6	(5%)
Net loans and advances to customers	2.7	3.1		(13%)	3.1	(13%)
Assets under management	13.6	15.0		(9%)	14.6	(7%)
Customer deposits (excluding repos)	6.7	7.7		(13%)	7.5	(11%)
Risk-weighted assets (4)	1.7	2.0		(15%)	1.8	(6%)

Notes:

(1)	Return on equity is based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average of segmental RWAe).
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(4)	RWAs on an end-point CRR basis.
(5)	International private banking business reclassified to disposal groups.

Private Banking

Key points

Private Banking continued to focus on its UK strengths as the business is repositioned to enable sustainable returns over the long run, and to meet its ambition to be the leading UK-based private bank and wealth manager for wealthy individuals. A new Executive Committee was created with end-to-end accountabilities around banking, credit and investments, to ensure the business delivers solutions to clients in a responsive, rapid and efficient manner.

	Growth initiatives included working more closely with colleagues in RBS and NatWest, resulting in hundreds of referrals of individuals potentially suitable for a private banking relationship with Coutts & Co or Adam & Company.
	A series of client campaigns are underway to ensure client needs are proactively addressed which have resulted in over a thousand clients starting to use online banking and the refinancing of over £1 billion of expiring credit facilities.
	The sale of most of the International Private Banking business to Union Bancaire Privée remains on track for Q4 2015.

On 1 January 2015, the Private Banking RBSI business, accounting for £31 million of operating profit in the half year was transferred to Commercial Banking. This transfer affects comparisons with prior periods(1).

H1 2015 compared with H1 2014

	Operating loss was £50 million compared with a profit of £145 million a year prior. Results were affected by the transfer of the RBSI business, lower income, higher restructuring costs and increased litigation and conduct costs. Private Banking Go-forward business reported an operating loss of £37 million, including £82 million write-down of an intangible asset, compared with a £117 million profit for H1 2014.
	Total income was £421 million, down from £545 million in H1 2014 with net interest income decreasing 26%. Underlying performance was adversely affected by lower income from hedging activities and reduced investment and transactional income.
	Operating expenses increased £74 million to £474 million, reflecting an £80 million increase in restructuring costs, arising from the write-down of an intangible asset of £82 million and litigation and conduct costs of £28 million, principally incurred in Q2 2015, offsetting a reduction in direct and indirect costs.
	Assets under management were £27.1 billion, down £1.6 billion year-on-year and £1.2 billion from 31 December 2014, with the Greek financial crisis adversely impacting European stock market indices and reducing portfolio values. Private Banking Go-forward business assets under management were £13.5 billion, down £0.3 billion year-on-year and down £0.2 billion from 31 December 2014.

Note:

(1)

The business transfer included: total income of £76 million (H1 2014 - £69 million; Q2 2015 - £37 million; Q1 2015 - £38 million; Q2 2014 - £37 million); operating expenses of £44 million (H1 2014 - £53 million; Q2 2015 - £23 million; Q1 2015 - £20 million; Q2 2014 - £28 million); net loans and advances to customers of £2.4 billion (31 March 2015 - £2.4 billion; 31 December 2014 - £2.6 billion); customer deposits of £6.4 billion (31 March 2015 - £6.2 billion; 31 December 2014 - £6.5 billion); and RWAs of £1.5 billion (31 March 2015 - £1.5 billion; 31 December 2014 - £1.4 billion). Comparatives have not been restated.

Private Banking

Key points (continued)

Q2 2015 compared with Q1 2015

	Operating loss was £78 million compared with a profit of £28 million in Q1, with higher restructuring and litigation and conduct costs.
	Total income decreased by 3% to £207 million, with net interest income flat and lower non-interest income reflecting lower investment and transactional income.
	Operating expenses increased by 53%, driven by higher restructuring costs as a result of an £82 million write-down of an intangible asset together with higher litigation and conduct costs by £24 million.
	Assets under management reduced to £27.1 billion from £29.2 billion in the previous quarter with the Greek financial crisis adversely impacting European stock market indices reducing portfolio values.

Q2 2015 compared with Q2 2014

	Operating loss was £78 million compared with a £70 million profit in Q2 2014, partly due to the transfer of Private Banking RBSI business to Commercial Banking on 1 January 2015; performance was also impacted by higher restructuring costs, increased litigation and conduct costs and lower income.
	Total income decreased 24%, partly due to the transfer of RBSI business; the underlying performance adversely impacted by lower income from hedging activities and reduced investment and transactional income.
	Operating expenses increased £86 million, or 43%, with the underlying performance impacted by higher restructuring costs, as a result of the write-down of an intangible asset of £82 million, increased litigation and conduct costs of £26 million, offset in part by a fall in direct and indirect costs.

Corporate & Institutional Banking

	Half year ended						Quarter ended
	30 June		30 June				30 June		31 March		30 June
2015		2014				2015		2015		2014
	£m		£m				£m		£m		£m
Income statement
Net interest income from banking activities	376		365				174		202		186
Net fees and commissions	395		490				160		235		247
Income from trading activities	559		1,482				250		309		597
Other operating income	(6)		90				(64)		58		46
Non-interest income	948		2,062				346		602		890
Total income	1,324		2,427				520		804		1,076
Direct expenses
- staff costs	(322)		(487)				(142)		(180)		(217)
- other costs	(149)		(250)				(71)		(78)		(140)
Indirect expenses	(1,061)		(1,180)				(521)		(540)		(587)
Restructuring costs
- direct	(211)		(22)				(195)		(16)		(9)
- indirect	(814)		(169)				(539)		(275)		(143)
Litigation and conduct costs	(873)		(50)				(373)		(500)		(50)
Operating expenses	(3,430)		(2,158)				(1,841)		(1,589)		(1,146)
(Loss)/profit before impairment losses	(2,106)		269				(1,321)		(785)		(70)
Impairment releases/(losses)	31		39				(13)		44		45
Operating (loss)/profit	(2,075)		308				(1,334)		(741)		(25)
Operating (loss)/profit - adjusted (1)	(177)		549				(227)		50		177
		Half year ended						Quarter ended
		30 June		30 June				30 June		31 March		30 June
		2015		2014				2015		2015		2014
		£m		£m				£m		£m		£m
Analysis of income by product
Rates		372		523				164		208		221
Currencies		195		247				107		88		111
Credit		242		384				86		156		170
Banking/Other		(69)		(73)				(47)		(22)		(46)
Total CIB (Go-forward)		740		1,081				310		430		456
Transfers to other areas (2)		223		269				102		121		136
CIB Capital Resolution excluding disposal losses		502		1,077				221		281		484
Disposal losses		(141)		-				(113)		(28)		-
CIB Capital Resolution (3)		361		1,077				108		253		484
Total income		1,324		2,427				520		804		1,076

Notes:

(1)	Excluding restructuring costs and litigation and conduct costs.
(2)	Transfer to other areas comprises the UK Portfolio which was transferred to Commercial Banking on 1 May 2015, the Western European Portfolio is expected to be transferred to Commercial Banking during H2 2015 and UK Transaction services which is expected to transfer to Commercial Banking in 2016.
(3)	The CIB segment is being restructured into Go-forward and CIB Capital Resolution elements. The split is subject to further refinement.

Corporate & Institutional Banking

Key metrics	Half year ended			Quarter ended
30 June	30 June		30 June	31 March	30 June
2015	2014		2015	2015	2014
Performance ratios
Return on equity (1)	(24.6%)	1.6%		(33.0%)	(17.1%)	(1.5%)
Return on equity - adjusted (1,2)	(3.5%)	3.5%		(6.9%)	(0.4%)	1.9%
Net interest margin	1.06%	0.88%		1.00%	1.12%	0.90%
Cost:income ratio	259%	89%		354%	198%	107%
Cost:income ratio - adjusted (2)	116%	79%		141%	99%	88%

	30 June	31 March			31 December
2015	2015		2014
	£bn	£bn		Change	£bn	Change
Capital and balance sheet
Loans and advances to customers (gross, excluding
reverse repos)	57.9	76.8		(25%)	73.0	(21%)
Loan impairment provisions	(0.1)	(0.1)		-	(0.2)	(50%)
Total loans and advances to customers (excluding
reverse repos)	57.8	76.7		(25%)	72.8	(21%)
Loans and advances to banks (excluding reverse
repos) (3)	13.6	18.5		(26%)	16.9	(20%)
Reverse repos	63.0	68.4		(8%)	61.6	2%
Securities	40.8	48.2		(15%)	57.0	(28%)
Cash and eligible bills	22.4	20.8		8%	23.2	(3%)
Other	13.5	15.8		(15%)	9.6	41%
Total assets	482.4	623.8		(23%)	577.2	(16%)
Funded assets	211.1	248.4		(15%)	241.1	(12%)
Provision coverage (4)	65%	82%		(1,700bp)	105%	(4,000bp)
Customer deposits (excluding repos)	49.2	58.4		(16%)	59.4	(17%)
Bank deposits (excluding repos)	28.7	34.7		(17%)	33.3	(14%)
Repos	61.0	68.3		(11%)	61.1	-
Debt securities in issue	10.5	12.4		(15%)	14.1	(26%)
Loan:deposit ratio (excluding repos)	117%	131%		(1,400bp)	122%	(500bp)
Risk-weighted assets (5)
- Credit risk
- non-counterparty	38.6	49.8		(22%)	51.3	(25%)
- counterparty	22.9	26.1		(12%)	25.1	(9%)
- Market risk	18.1	18.4		(2%)	18.9	(4%)
- Operational risk	8.4	8.5		(1%)	11.8	(29%)
Total risk-weighted assets	88.0	102.8		(14%)	107.1	(18%)
Of which: CIB Capital Resolution (6)
Funded assets	62.3	85.8		(27%)	95.0	(34%)
Risk-weighted assets	45.2	57.8		(22%)	63.8	(29%)

Notes:

(1)	Return on equity is based on operating profit after tax adjusted for preference share dividends divided by average notional equity (based on 13% of the monthly average of segmental RWAe).
(2)	Excluding restructuring costs and litigation and conduct costs.
(3)	Excludes disposal groups.
(4)	Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(5)	RWAs on an end-point CRR basis. £88 billion includes £9 billion of RWAs related to businesses that will transfer out of CIB, comprising the Western European Large Corporate portfolio (expected to move to Commercial Banking in H2 2015) and UK Transaction Services (to Commercial Banking in 2016).
(6)	The CIB segment is being restructured into CIB Go-forward and CIB Capital Resolution elements. The split is subject to further refinement.

Corporate & Institutional Banking

Key points

Corporate & Institutional Banking (CIB) announced its new business strategy in February 2015 and plans to restructure into CIB Go-forward and CIB Capital Resolution are well advanced. Reviews of the business are complete and the new management teams are in place, however, the business continues to be managed as a single reportable segment.

The CIB Go-forward business is currently undergoing a multi-year transformation, implementing a simpler operating model to support two main lines of business: debt financing and risk management. The business has completed its client communication programme outlining a commitment to maintaining strong market positions in the UK and Western Europe. Assuming normal seasonal trends, we expect the CIB Go-forward business will generate full year income in the region of £1.3 billion excluding revenues of approximately £400 million relating to the UK and European large corporate business which have been or will be transferred during the second half of 2015 to Commercial Banking, and the UK GTS business which will transfer in 2016. We now expect the steady state RWAs of the CIB Go-forward business to be around £30 billion.

Following February’s announcement, CIB Capital Resolution will run down certain parts of the CIB business, removing risk from the balance sheet. CIB Capital Resolution is currently ahead of both its cost reduction and RWA rundown targets. The first half of the year saw substantial progress in the sale of corporate loan portfolios including a substantial proportion of the North American portfolio to Mizuho Bank and the majority of the Australian and United Arab Emirates portfolios. A partnership with BNP Paribas was also announced to offer existing international customers an alternative Global Transaction Services (GTS) provider as the business is refocused.

As part of the restructuring, effective from 1 May 2015, the UK Corporate loan portfolio transferred to Commercial Banking(1) accounting for £2 billion of funded assets and £2.1 billion of RWAs at the date of transfer. Work is also underway to transfer the Go-forward Western European loan portfolio to Commercial Banking accounting for £4 billion of assets and £5 billion of RWAs at 30 June 2015. The UK Transaction Services business will transfer to Commercial Banking in 2016.

H1 2015 compared with H1 2014

●	An operating loss of £2,075 million was reported in H1 2015, compared with a profit of £308 million in H1 2014, impacted by litigation and conducts costs of £873 million and a heightened level of restructuring costs totalling £1,025 million following the strategic announcement in February. Adjusted operating loss in the first half of the year was £177 million, a fall from a profit of £549 million in H1 2014. This reflected lower income partly offset by lower adjusted expenses.
●	Total income decreased by £1,103 million to £1,324 million compared with H1 2014.  This is broadly in line with expectations given CIB’s reduction in scale and scope.  The bulk of the income reduction was in CIB Capital Resolution where: Markets income fell from £683 million in H1 2014 to £116 million in H1 2015 (primarily due to the wind down of US asset-backed products); Portfolio income fell from £184 million in H1 2014 to £165 million in H1 2015; Transaction Services income fell from £292 million in H1 2014 to £230 million in H1 2015; disposal losses of £141 million were incurred in H1 2015 (nil in H1 2014). Within the Go-forward business Rates and Credit were impacted by uncertainty in the Eurozone while Currencies incurred a loss when the Swiss central bank removed unexpectedly the Swiss Franc’s peg to the Euro.

Note:

(1)

The business transfer from CIB to CPB was effective from 1 May 2015. Comparatives were not restated and for the whole period the financials of the UK large corporate business were: total income of £32 million in H1 2015 (H1 2014 - £31 million; Q2 2015 - £19 million; Q1 2015 - £15 million; Q2 2014 - £16 million); operating expenses of £2 million in H1 2015 (H1 2014 - £4 million; Q2 2015 - £1 million; Q1 2015 - £1 million; Q2 2014 - £2 million); net loans and advances to customers of £2.1 billion (31 March 2015 - £2.0 billion; 31 December 2014 - £1.8 billion); and RWAs of £2.3 billion (31 March 2015 - £2.1 billion; 31 December 2014 - £2.1 billion).

Corporate & Institutional Banking

Key points (continued)

H1 2015 compared with H1 2014 (continued)

●	Operating expenses increased from £2,158 million to £3,430 million in H1 2015 due to a higher level of litigation and conduct costs and restructuring costs The increased restructuring costs of £1,025 million reflect February’s strategic announcement and were driven by the write-down of intangible assets totalling £521 million and provision for staff redundancies, as the business strives to become a smaller, simpler bank. Adjusted expenses fell by 20% to £1,532 million as headcount continued to be reduced and discretionary expenditure tightly controlled.
●	RWAs fell substantially, from £128 billion at 30 June 2014 to £88 billion at 30 June 2015 reflecting the ongoing drive to reduce both the scale and risk of the business. This was reinforced by the creation of CIB Capital Resolution where an acceleration of disposals means RWAs have fallen by £19 billion since 31 December 2014 and are ahead of plan. CIB is on track to deliver the previously announced target of a £25 billion reduction in 2015.

Q2 2015 compared with Q1 2015

●	Operating loss increased by £593 million to £1,334 million, reflecting lower income and higher restructuring costs, partially offset by lower litigation and conduct costs. Adjusted operating loss was £227 million compared with a profit of £50 million in Q1 2015 as the reduction in adjusted expenses was more than offset by lower income.
●	Total income fell by £284 million to £520 million. This was driven by the wind down of CIB Capital Resolution where: Markets income fell from £94 million in Q1 2015 to £21 million in Q2 2015; Portfolio income increased from £80 million in Q1 2015 to £85 million in Q2 2015; Transaction Services income fell from £126 million in Q1 2015 to £104 million in Q2 2015; disposal losses increased from £28 million in Q1 2015 to £113 million in Q2 2015. CIB Go-forward income declined by 28% from £430 million to £310 million, driven by uncertainty in European markets, impacting both rates trading and debt capital market issuance.
●	Operating expenses increased by £252 million to £1,841 million as a lower level of litigation and conduct expenses was more than offset by higher restructuring costs. Adjusted expenses fell by £64 million to £734 million due to ongoing reductions in both headcount and discretionary expenditure.
●	RWAs fell by £15 billion to £88 billion, £13 billion of which was in CIB Capital Resolution driven by reductions in both the loan portfolio and the trading book.

Q2 2015 compared with Q2 2014

●

Operating loss totalled £1,334 million, compared with £25 million in Q2 2014. This reflected lower income, an increase in restructuring costs to £734 million following the recent strategic announcement and higher litigation and conduct costs of £373 million, partially offset by lower adjusted expenses falling by 22% to £734 million. Adjusted operating loss was £227 million, compared with a profit of £177 million in Q2 2014.

Note:

(1)

The business transfer from CIB to CPB was effective from 1 May 2015. Comparatives were not restated and for the whole period the financials of the UK large corporate business were: total income of £32 million in H1 2015 (H1 2014 - £31 million; Q2 2015 - £19 million; Q1 2015 - £15 million; Q2 2014 - £16 million); operating expenses of £2 million in H1 2015 (H1 2014 - £4 million; Q2 2015 - £1 million; Q1 2015 - £1 million; Q2 2014 - £2 million); net loans and advances to customers of £2.1 billion (31 March 2015 - £2.0 billion; 31 December 2014 - £1.8 billion); and RWAs of £2.3 billion (31 March 2015 - £2.1 billion; 31 December 2014 - £2.1 billion).

Corporate & Institutional Banking

Key points (continued)

Q2 2015 compared with Q2 2014 (continued)

●	The reduction in total income of £556 million was driven by CIB Capital Resolution, where: Markets income fell from £282 million in Q2 2014 to £21 million in Q2 2015 (primarily due to the wind down of US asset-backed products); Portfolio income was at £85 million in both periods; Transaction Services income fell from £145 million in Q2 2014 to £104 million in Q2 2015; disposal losses of £113 million were incurred in Q2 2015 (nil in Q2 2014). In CIB Go-forward lower Credit income was driven by the market-wide reduction in EMEA debt capital market issuance compared to the same period last year.
●	Operating expenses increased by £695 million to £1,841 million and included a £582 million increase in restructuring costs and a £323 million increase in litigation and conduct costs. Adjusted expenses fell by 22% reflecting the ongoing drive to reduce costs and simplify the business.

Note:

(1)

The business transfer from CIB to CPB was effective from 1 May 2015. Comparatives were not restated and for the whole period the financials of the UK large corporate business were: total income of £32 million in H1 2015 (H1 2014 - £31 million; Q2 2015 - £19 million; Q1 2015 - £15 million; Q2 2014 - £16 million); operating expenses of £2 million in H1 2015 (H1 2014 - £4 million; Q2 2015 - £1 million; Q1 2015 - £1 million; Q2 2014 - £2 million); net loans and advances to customers of £2.1 billion (31 March 2015 - £2.0 billion; 31 December 2014 - £1.8 billion); and RWAs of £2.3 billion (31 March 2015 - £2.1 billion; 31 December 2014 - £2.1 billion).