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Natwest Group PLC
Report Publication Announcement • Oct 24, 2019
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Q3 2019
Interim Management Statement
The Royal Bank of Scotland Group rbs.com
The Royal Bank of Scotland Group plc
Q3 2019 Interim Management Statement
RBS reported an operating loss before tax of £8 million, which included a £900 million provision in respect of Payment Protection Insurance (PPI), compared with an operating profit of £961 million in Q3 2018.
| ● | Return on tangible equity was 7.0% for Q3 2019 excluding the PPI charge. |
| ● | Income was broadly stable across the retail and commercial businesses compared with Q2 2019, excluding notable items. |
| ● | Group income was impacted by a particularly challenging quarter in NatWest Markets (NWM). |
| ● | RBS reported an attributable loss of £315 million for Q3 2019. |
Supporting our customers through continued lending growth
| ● | UK Personal Banking (UK PB) gross new mortgage lending was £8.6 billion in Q3 2019 compared with £6.7 billion in Q2 2019. |
| ● | Commercial Banking net lending was £0.1 billion higher than Q2 2019. Across Business Banking, SME & Mid-Corporate, and Specialised business, lending continues to increase, with year to date growth of £1.6 billion. |
| ● | We continue to achieve net lending growth across UK PB, Ulster Bank RoI, Commercial and Private Banking at attractive returns; net loans to customers increased by 3.2% on an annualised basis for the year to date, exceeding our 2-3% net loan growth target. |
| ● | Q3 2019 net impairment loss of £213 million equates to 26 basis points of gross customer loans, compared with 31 basis points in Q3 2018. The cost of risk remains below our view of a normalised long term loss rate of 30-40 basis points. |
Continuing competitive market
| ● | Across the retail and commercial businesses, income decreased by 3.1% compared with Q3 2018 excluding notable items. |
| ● | Bank net interest margin (NIM) of 1.97% was 5 basis points lower than Q2 2019 primarily reflecting the contraction of the yield curve and competitive pressures in the mortgage business as front book margins, whilst higher than Q2 2019, remain lower than back book margins. |
| ● | NWM had a challenging quarter with core income of £184 million, lower by £147 million, or 44.4%, than Q3 2018. Rates income in particular was impacted by a deterioration in economic sentiment for the global economy and a fall in bond yields. This, together with legacy items culminated in a loss of £193 million for the quarter. |
| ● | Costs decreased by £20 million in comparison to Q3 2018, with a £193 million cost reduction achieved for the year to date. We remain on track to achieve our £300 million target for full year 2019. |
Capital generation
| ● | CET1 ratio of 15.7% included a 50 basis point reduction in respect of the PPI charge. |
| ● | RWAs increased by £1.0 billion in Q3 2019 to £189.5 billion, principally reflecting an increase in NWM. In line with previous guidance, we expect to end the year with RWAs of around £185-190 billion. |
2019 and 2020 outlook – unchanged(1)
We retain the outlook provided in the 2019 Interim Results.
Note:
- The targets, expectations and trends discussed in this section represent management’s current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” section on pages 253 to 263 of the 2018 Annual Report and Accounts and the Summary Risk Factors on pages 46 and 47 of the 2019 Interim Results. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
Business performance summary
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| Performance key metrics and ratios | 2019 | 2018 | 2019 | 2019 | 2018 | |
| Operating profit/(loss) before tax | £2,686m | £2,787m | (£8m) | £1,681m | £961m | |
| Profit attributable to ordinary shareholders | £1,723m | £1,336m | (£315m) | £1,331m | £448m | |
| Bank net interest margin (RBS NIM excluding NWM) (1) | 2.02% | 2.10% | 1.97% | 2.02% | 2.04% | |
| Bank average interest earning assets (RBS excluding NWM) (1) | £410bn | £408bn | £416bn | £410bn | £416bn | |
| Cost:income ratio (1) | 67.5% | 69.1% | 92.9% | 52.6% | 66.7% | |
| Loan impairment rate (1) | 22bps | 16bps | 26bps | 30bps | 31bps | |
| Earnings per share | ||||||
| - basic | 14.3p | 11.1p | (2.6p) | 11.0p | 3.7p | |
| - basic fully diluted | 14.2p | 11.1p | (2.6p) | 11.0p | 3.7p | |
| Return on tangible equity (1) | 6.8% | 5.3% | (3.8%) | 15.8% | 5.4% | |
| Average tangible equity | £34bn | £34bn | £33bn | £34bn | £33bn | |
| Average number of ordinary shares | ||||||
| outstanding during the period (millions) | ||||||
| - basic | 12,064 | 11,998 | 12,075 | 12,069 | 12,034 | |
| - fully diluted (2) | 12,099 | 12,053 | 12,106 | 12,104 | 12,083 |
| 30 September | 30 June | 31 December | |
| Balance sheet key metrics and ratios | 2019 | 2019 | 2018 |
| Total assets | £776.5bn | £729.9bn | £694.2bn |
| Funded assets (1) | £600.7bn | £584.3bn | £560.9bn |
| Loans to customers - amortised cost | £319.5bn | £310.6bn | £305.1bn |
| Impairment provisions | £3.3bn | £3.2bn | £3.3bn |
| Customer deposits | £369.7bn | £361.6bn | £360.9bn |
| Liquidity coverage ratio (LCR) | 148% | 154% | 158% |
| Liquidity portfolio | £193bn | £203bn | £198bn |
| Net stable funding ratio (NSFR) (3) | 140% | 140% | 141% |
| Loan:deposit ratio (1) | 86% | 86% | 85% |
| Total wholesale funding | £78bn | £78bn | £74bn |
| Short-term wholesale funding | £19bn | £19bn | £15bn |
| Common Equity Tier (CET1) ratio | 15.7% | 16.0% | 16.2% |
| Total capital ratio | 20.5% | 20.9% | 21.8% |
| Pro forma CET 1 ratio, pre dividend accrual (4) | 15.9% | 17.1% | 16.9% |
| Risk-weighted assets (RWAs) | £189.5bn | £188.5bn | £188.7bn |
| CRR leverage ratio | 5.0% | 5.2% | 5.4% |
| UK leverage ratio | 5.7% | 5.9% | 6.2% |
| Tangible net asset value (TNAV) per ordinary share | 272p | 290p | 287p |
| Tangible net asset value (TNAV) per ordinary share - fully diluted (1,2) | 272p | 289p | 286p |
| Tangible equity | £32,930m | £35,036m | £34,566m |
| Number of ordinary shares in issue (millions) | 12,094 | 12,091 | 12,049 |
| Number of ordinary shares in issue (millions) - fully diluted (2,5) | 12,124 | 12,124 | 12,088 |
Notes:
- Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS financial and performance measures.
- Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q3 2019 were 31 million shares and for nine months ended 30 September 2019 were 35 million shares; (Q2 2019 - 35 million shares, Q3 2018 - 49 million shares; nine months ended 30 September 2018 - 55 million shares), and as at 30 September 2019 were 30 million shares (30 June 2019 - 33 million shares; 31 December 2018 - 39 million shares).
- NSFR reported in line with CRR2 regulations finalised in June 2019.
- The pro forma CET 1 ratio at 30 September 2019 excluded a charge of £362 million (3p per share) for a foreseeable dividend. 30 June 2019 excluded a charge of £241 million (2p per share) for the interim dividend, a special dividend of £1,449 million (12p per share) and a foreseeable dividend related to interim profits of £363 million (3p per share). 31 December 2018 excluded a charge of £422 million (3.5p per share) for the final dividend and £904 million (7.5p per share) for the special dividend paid following the Annual General Meeting held on 25 April 2019.
- Includes 16 million treasury shares (30 June 2019 - 17 million shares; 31 December 2018 - 8 million shares).
Re-segmentation
Refer to Note 1 for details of re-segmentation effective from 1 January 2019 and re-stated comparatives.
Non-IFRS financial measures
This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations where appropriate refer to the Appendix.
Summary consolidated income statement for the period ended 30 September 2019
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018* | 2019 | 2019 | 2018* | ||
| £m | £m | £m | £m | £m | ||
| Net interest income | 6,010 | 6,480 | 2,006 | 1,971 | 2,154 | |
| Own credit adjustments | (58) | 59 | (12) | (3) | 20 | |
| Strategic disposals | 1,035 | - | - | 1,035 | - | |
| Other non-interest income | 3,033 | 3,805 | 909 | 1,077 | 1,468 | |
| Non-interest income | 4,010 | 3,864 | 897 | 2,109 | 1,488 | |
| Total income | 10,020 | 10,344 | 2,903 | 4,080 | 3,642 | |
| Litigation and conduct costs | (810) | (1,190) | (750) | (55) | (389) | |
| Strategic costs | (844) | (649) | (215) | (434) | (299) | |
| Other expenses | (5,144) | (5,337) | (1,733) | (1,673) | (1,753) | |
| Operating expenses | (6,798) | (7,176) | (2,698) | (2,162) | (2,441) | |
| Profit before impairment losses | 3,222 | 3,168 | 205 | 1,918 | 1,201 | |
| Impairment losses | (536) | (381) | (213) | (237) | (240) | |
| Operating profit/(loss) before tax | 2,686 | 2,787 | (8) | 1,681 | 961 | |
| Tax (charge)/credit | (395) | (1,090) | (201) | 22 | (381) | |
| Profit/(loss) for the period | 2,291 | 1,697 | (209) | 1,703 | 580 | |
| Attributable to: | ||||||
| Ordinary shareholders | 1,723 | 1,336 | (315) | 1,331 | 448 | |
| Other owners | 307 | 355 | 105 | 102 | 110 | |
| Non-controlling interests | 261 | 6 | 1 | 270 | 22 |
| Notable items within total income | ||||||
| Alawwal bank merger gain in NatWest Markets | 444 | - | - | 444 | - | |
| FX recycling gain in Central items & other | 290 | - | - | 290 | - | |
| Legacy liability release in Central items & other | 256 | - | - | 256 | - | |
| Insurance indemnity | - | 272 | - | - | 272 | |
| of which: | ||||||
| NatWest Markets | - | 165 | - | - | 165 | |
| Central items & other | - | 107 | - | - | 107 | |
| IFRS volatility in Central items & other (1) | (34) | (34) | (51) | 21 | 77 | |
| UK PB debt sale gain | 18 | 26 | 16 | - | - | |
| FX gains/(losses) in Central items & other | 22 | (7) | 2 | - | (11) | |
| Commercial Banking fair value and disposal (loss)/gain | (17) | 179 | - | (15) | (13) | |
| NatWest Markets legacy business disposal (loss)/gain | (35) | (43) | (8) | (23) | 14 | |
| Notable items within operating expenses | ||||||
| Push payment fraud costs | (25) | - | (7) | (18) | - | |
| Litigation and conduct costs | (810) | (1,190) | (750) | (55) | (389) | |
| of which: | ||||||
| US RMBS | 169 | (823) | 162 | 7 | (21) | |
| PPI | (900) | (200) | (900) | - | (200) |
*Restated. Refer to Note 2 for further details.
Note:
| (1) | IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS. |
Business performance summary
Personal & Ulster
UK Personal Banking
| Quarter ended | As at | |||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| £m | £m | £m | £bn | £bn | £bn | |||
| Total income | 1,224 | 1,202 | 1,257 | Net loans to customers - | ||||
| Operating expenses | (1,601) | (594) | (819) | amortised cost | 154.6 | 151.9 | 148.9 | |
| Impairment losses | (131) | (69) | (66) | Customer deposits | 147.9 | 147.5 | 145.3 | |
| Operating profit | (508) | 539 | 372 | RWAs | 37.5 | 37.0 | 34.3 | |
| Return on equity | (26.8%) | 26.5% | 19.4% | |||||
| Net interest margin | 2.44% | 2.51% | 2.65% | |||||
| Cost:income ratio | 130.8% | 49.4% | 65.2% | |||||
| Loan impairment rate | 34bps | 18bps | 18bps |
| ● | UK PB has 6.8 million regular mobile app users and 8.8 million digitally active customers, representing 73% of active current account customers. Total digital sales volumes increased by 25% compared with Q3 2018, now representing 51% of all sales. 58% of personal unsecured loan sales, 68% of credit card accounts and 53% of current accounts opened were via the digital channel. |
| ● | Total income was £33 million, or 2.6%, lower than Q3 2018, impacted by an IFRS 9 accounting change for interest in suspense recoveries of £8 million offset in impairments, and a £16 million increase in debt sale gains. Excluding these items, income was £41 million, or 3.3%, lower than Q3 2018 reflecting lower overall mortgage margins. Net interest margin decreased by 7 basis points compared with Q2 2019 reflecting the lower yield curve, impacting deposit margins and mortgage margin pressure as front book margins, whilst higher than Q2 2019, remain lower than back book margin. |
| ● | Excluding strategic, litigation and conduct costs, operating expenses increased by £26 million, or 4.5%, compared with Q3 2018 reflecting increased fraud costs due to a revised customer refund approach for authorised push payment scams, annual pay award and increased technology and innovation costs, partially offset by a 6% reduction in headcount. |
| ● | Litigation and conduct costs include a £900 million charge in respect of PPI claims following greater than predicted complaints volumes in the lead up to the 29 August 2019 deadline. |
| ● | Impairment losses were £65 million higher than Q3 2018 reflecting lending growth, lower debt sale recoveries and IFRS 9 modelling adjustments. Underlying defaults have increased slightly since Q3 2018, however the trend is starting to flatten following risk appetite tightening. The uplift in impairment losses relative to Q2 2019 includes an additional charge in respect of increased economic uncertainty and IFRS 9 modelling adjustments. |
| ● | Compared with Q2 2019, net loans to customers increased by £2.7 billion as a result of strong gross new mortgage lending of £8.6 billion in the quarter, with market flow share of approximately 12%, supporting a stock share of approximately 10%. Personal advances increased by £0.2 billion and cards balances increased by £0.1 billion with cards growth supported by the re-entry to the 0% balance transfer market in Q2 2019. |
| ● | RWAs increased by £0.5 billion compared with Q2 2019, reflecting strong lending growth across all products. |
Business performance summary
Personal & Ulster
Ulster Bank RoI
| Quarter ended | As at | |||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| €m | €m | €m | €bn | €bn | €bn | |||
| Total income | 161 | 158 | 169 | Net loans to customers - | ||||
| Operating expenses | (146) | (166) | (188) | amortised cost | 21.4 | 21.2 | 21.0 | |
| Impairment | Customer deposits | 21.3 | 21.3 | 20.1 | ||||
| releases/(losses) | 19 | 11 | (68) | RWAs | 15.0 | 15.8 | 16.4 | |
| Operating profit/(loss) | 34 | 3 | (87) | |||||
| Return on equity | 5.8% | 0.6% | (12.7%) | |||||
| Net interest margin | 1.55% | 1.62% | 1.72% | |||||
| Cost:income ratio | 90.3% | 105.1% | 110.6% | |||||
| Loan impairment rate | (34)bps | (20)bps | 119bps |
| ● | Ulster Bank RoI continues to deliver digital enhancements, including paperless processes that simplify the everyday banking experience for customers. 70% of active personal current account customers are now choosing to bank through digital channels, with mobile payments and transfers 29% higher compared with Q3 2018. |
| ● | Total income was €8 million, or 4.7%, lower than Q3 2018 primarily reflecting the sale of a portfolio of non-performing loans (NPL) and an IFRS 9 accounting change for interest in suspense recoveries of €6 million. Net interest margin decreased by 7 basis points compared with Q2 2019 mainly due to the IFRS 9 accounting change which took effect late in Q2 2019. |
| ● | Excluding strategic, conduct and litigation costs, operating expenses decreased by €12 million, or 8.3%, compared with Q3 2018 due to the timing of project costs, reduced pension costs and the impact of other cost saving initiatives, partially offset by higher levies. |
| ● | A net impairment release of €19 million in Q3 2019 principally reflects the net impact of an improvement in the performance of the non-performing loan portfolio and NPL deleveraging, partly offset by a charge for economic uncertainty. |
| ● | Net loans to customers increased by €0.2 billion compared with Q2 2019 primarily driven by growth in the commercial loan portfolio. |
| ● | On 8 October 2019 Ulster Bank Ireland DAC confirmed the sale of a portfolio of non-performing mortgages of €0.8 billion. This sale is consistent with our strategic objective to build a strong and sustainable bank and to reduce the percentage of non-performing loans on our balance sheet. The affected loans remain on the bank’s balance sheet at 30 September 2019 and will be de-recognised during 2020. |
Business performance summary
Commercial & Private Banking
Commercial Banking
| Quarter ended | As at | |||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| £m | £m | £m | £bn | £bn | £bn | |||
| Total income | 1,077 | 1,083 | 1,096 | Net loans to customers - | ||||
| Operating expenses | (638) | (622) | (583) | amortised cost | 101.5 | 101.4 | 101.4 | |
| Impairment losses | (108) | (197) | (107) | Customer deposits | 135.7 | 133.4 | 134.4 | |
| Operating profit | 331 | 264 | 406 | RWAs | 77.0 | 77.8 | 78.4 | |
| Return on equity | 8.4% | 6.2% | 9.6% | |||||
| Net interest margin | 1.90% | 1.97% | 2.00% | |||||
| Cost:income ratio | 57.9% | 56.1% | 51.8% | |||||
| Loan impairment rate | 42bps | 77bps | 41bps |
| ● | Total income was £19 million, or 1.7%, lower than Q3 2018 as lower asset volumes and deposit income were partially offset by £13 million of fair value and disposal losses in Q3 2018. Net interest margin decreased by 7 basis points compared with Q2 2019 due to lower deposit funding benefits. |
| ● | Excluding strategic, litigation and conduct costs, operating expenses increased by £24 million, or 4.5%, compared with Q3 2018 due to additional authorised push payment fraud costs in line with new industry practice, combined with higher remediation, innovation and technology spend. |
| ● | Impairment losses of £108 million, which included charges in respect of increased economic uncertainty and IFRS 9 modelling adjustments, were in line with Q3 2018 but were £89 million lower than Q2 2019. |
| ● | Net loans to customers increased by £0.1 billion compared with Q2 2019. Lending across Business Banking, SME & Mid-Corporate and Specialised business increased by £0.1 billion in comparison to Q2 2019, with year to date growth of £1.6 billion. |
| ● | RWAs decreased by £0.8 billion compared with Q2 2019 due to active capital management and business transfers of £0.3 billion. |
Private Banking
| Quarter ended | As at | |||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| £m | £m | £m | £bn | £bn | £bn | |||
| Total income | 198 | 191 | 195 | Net loans to customers | ||||
| Operating expenses | (119) | (115) | (110) | - amortised cost | 15.2 | 14.7 | 14.3 | |
| Impairment | ||||||||
| releases/(losses) | 2 | (1) | (1) | Customer deposits | 28.2 | 28.0 | 28.4 | |
| Operating profit | 81 | 75 | 84 | RWAs | 10.0 | 9.7 | 9.4 | |
| Return on equity | 16.8% | 15.9% | 17.3% | AUMs | 22.5 | 21.9 | 19.8 | |
| Net interest margin | 2.35% | 2.44% | 2.54% | Assets Under | ||||
| Cost:income ratio | 60.1% | 60.2% | 56.4% | Administration (1) | 7.1 | 7.0 | 6.6 | |
| Total Assets Under | ||||||||
| Management and | ||||||||
| Administration (AUMA) | 29.6 | 28.9 | 26.4 |
| Note: | ||
| (1) | Private Banking manages assets under management portfolios on behalf of UK PB and RBSI. Prior to Q4 2018, the assets under management portfolios of UK PB and RBSI were not included. Private Banking receives a management fee from UK PB and clients of RBSI in respect of providing this service. | |
| ● | Total income was £3 million, or 1.5%, higher than Q3 2018, as volume growth and one-off benefits related to hedging income gains were partially offset by lower deposit income. Net interest margin decreased by 9 basis points compared with Q2 2019 primarily due to lower deposit funding benefits. | |
| ● | Excluding strategic, litigation and conduct costs, operating expenses were £1 million, or 0.9%, lower than Q3 2018 due to a reduction in back office operations costs. | |
| ● | Net loans to customers increased by £0.5 billion in comparison to Q2 2019, mainly due to mortgage lending. | |
| ● | Total assets under management in Private Banking increased by £0.6 billion, or 2.7%, in comparison with Q2 2019 reflecting investment performance of £0.4 billion and net new business inflows of £0.2 billion. | |
| ● | Total assets under management and administration overseen by Private Banking increased by £0.7 billion, or 2.4%, compared with Q2 2019 reflecting investment performance of £0.5 billion and net new business inflows of £0.2 billion. |
Business performance summary
RBS International
| Quarter ended | As at | |||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| £m | £m | £m | £bn | £bn | £bn | |||
| Total income | 150 | 159 | 155 | Net loans to customers - | ||||
| Operating expenses | (62) | (60) | (60) | amortised cost | 13.8 | 13.6 | 13.3 | |
| Impairment losses | - | 2 | (3) | Customer deposits | 29.1 | 28.1 | 27.5 | |
| Operating profit | 88 | 101 | 92 | RWAs | 6.5 | 6.9 | 6.9 | |
| Return on equity | 26.0% | 30.8% | 26.9% | |||||
| Net interest margin | 1.55% | 1.68% | 1.73% | |||||
| Cost:income ratio | 41.3% | 37.7% | 38.7% |
| ● | The Institutional Banking electronic platform, eQ, is receiving positive Net Promoter Score (NPS) ratings and within our local banking business, 321, or 68%, of approved savings account applications by customers were paperless or required no signatures in Q3 2019, an increase of 34% in comparison to Q2 2019. |
| ● | Total income was £5 million, or 3.2%, lower than Q3 2018 reflecting deposit pricing initiatives and lower funding income. Net interest margin decreased by 13 basis points compared with Q2 2019 principally due to the impact of US rate movements on our Institutional Banking business and increased central bank balances. |
| ● | Excluding strategic costs, operating expenses were flat on Q3 2018 as lower back office operations costs were offset by headcount increases associated with becoming a standalone bank. |
| ● | Net loans to customers increased by £0.2 billion compared with Q2 2019 due to activity in the Institutional Banking sector, and continues to show year on year growth. Customer deposits increased by £1.0 billion compared with Q2 2019 due to activity across all customer sectors. |
| NatWest Markets | Quarter ended | As at | ||||||
| 30 September | 30 June | 30 September | 30 September | 30 June | 31 December | |||
| 2019 | 2019 | 2018 | 2019 | 2019 | 2018 | |||
| £m | £m | £m | £bn | £bn | £bn | |||
| Total income | 150 | 686 | 569 | Funded Assets | 142.7 | 133.4 | 111.4 | |
| of which: Core income excluding | RWAs | 43.8 | 41.4 | 44.9 | ||||
| own credit adjustments | 184 | 325 | 331 | |||||
| of which: Legacy income | (23) | 366 | 218 | |||||
| of which: Own credit adjustments | (11) | (5) | 20 | |||||
| Operating expenses | (348) | (344) | (478) | |||||
| Impairment releases/(losses) | 5 | 20 | (4) | |||||
| Operating (loss)/profit | (193) | 362 | 87 | |||||
| Return on equity | (8.7%) | 4.4% | 1.8% | |||||
| Cost:income ratio | 232.0% | 50.1% | 84.0% |
Note:
- The NatWest Markets operating segment should not be assumed to be the same as the NatWest Markets Plc legal entity or group. NatWest Markets Plc entity includes the Central items & other segment but excludes NatWest Markets N.V. for statutory reporting.
| ● | Total income decreased by £419 million to £150 million compared with Q3 2018, primarily reflecting insurance indemnity recoveries in the prior year and lower core income in Q3 2019. Core income of £184 million decreased by £147 million, or 44.4%, compared with Q3 2018. The reduction was due to challenging market conditions, principally affecting Rates income, most significantly during August. Rates income was impacted due to elevated hedging costs caused by reduced liquidity and wider bid-offer spreads, as the market experienced sustained curve flattening across global fixed income markets. |
| ● | Excluding strategic, litigation and conduct costs, operating expenses increased by £10 million, or 3.7%, compared with Q3 2018 reflecting an elevated level of provision release in the prior year, costs associated with becoming a standalone bank and investment in NatWest Markets N.V.. |
| ● | RWAs increased by £2.4 billion in the quarter largely due to the requirement to hold higher capital on derivative assets driven by market moves in August and September. |
Central items & other
| Quarter ended | ||||||
| 30 September | 30 June | 30 September | ||||
| 2019 | 2019 | 2018 | ||||
| £m | £m | £m | ||||
| Central items not allocated | 162 | 337 | (4) |
| ● | Central items not allocated represent a gain of £162 million in the quarter, principally reflecting reimbursement of £162 million under indemnification agreements relating to residential mortgage-backed securities. Excluding strategic, litigation and conduct costs, operating expenses decreased by £70 million reflecting one-off releases and innovation and other costs that were held centrally in Q3 2018 but are now allocated to the franchises. Across RBS, costs reduced by £20 million compared with Q3 2018. |
Segment performance
| Nine months ended 30 September 2019 | ||||||||||||||
| Personal & Ulster | Commercial & Private | Central | ||||||||||||
| UK Personal | Ulster | Commercial | Private | RBS | NatWest | items & | Total | |||||||
| Banking | Bank RoI | Banking | Banking | International | Markets | other (1) | RBS | |||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||
| Income statement | ||||||||||||||
| Net interest income | 3,118 | 302 | 2,127 | 391 | 361 | (184) | (105) | 6,010 | ||||||
| Non-interest income | 553 | 125 | 1,115 | 191 | 99 | 890 | 60 | 3,033 | ||||||
| Own credit adjustments | - | 1 | - | - | - | (58) | (1) | (58) | ||||||
| Strategic disposals | - | - | - | - | - | 444 | 591 | 1,035 | ||||||
| Total income | 3,671 | 428 | 3,242 | 582 | 460 | 1,092 | 545 | 10,020 | ||||||
| Direct expenses | ||||||||||||||
| - staff costs | (470) | (159) | (568) | (122) | (89) | (508) | (816) | (2,732) | ||||||
| - other costs | (259) | (70) | (229) | (52) | (37) | (128) | (1,637) | (2,412) | ||||||
| Indirect expenses | (1,032) | (131) | (863) | (145) | (40) | (246) | 2,457 | - | ||||||
| Strategic costs | ||||||||||||||
| - direct | (8) | (12) | (37) | - | (9) | (104) | (674) | (844) | ||||||
| - indirect | (143) | (19) | (153) | (30) | (6) | (37) | 388 | - | ||||||
| Litigation and conduct costs | (918) | (21) | (50) | (2) | - | (3) | 184 | (810) | ||||||
| Operating expenses | (2,830) | (412) | (1,900) | (351) | (181) | (1,026) | (98) | (6,798) | ||||||
| Operating profit before impairment (losses)/releases | 841 | 16 | 1,342 | 231 | 279 | 66 | 447 | 3,222 | ||||||
| Impairment (losses)/releases | (312) | 38 | (310) | 5 | 3 | 41 | (1) | (536) | ||||||
| Operating profit | 529 | 54 | 1,032 | 236 | 282 | 107 | 446 | 2,686 | ||||||
| Additional information | ||||||||||||||
| Return on equity (2) | 7.8% | 3.4% | 8.7% | 16.7% | 28.5% | (2.2%) | nm | 6.8% | ||||||
| Cost:income ratio (2) | 77.1% | 96.3% | 57.2% | 60.3% | 39.3% | 94.0% | nm | 67.5% | ||||||
| Total assets (£bn) | 176.7 | 26.1 | 166.6 | 22.6 | 31.2 | 318.3 | 35.0 | 776.5 | ||||||
| Funded assets (£bn) | 176.7 | 26.0 | 166.6 | 22.6 | 31.2 | 142.7 | 34.9 | 600.7 | ||||||
| Net loans to customers - amortised cost (£bn) | 154.6 | 19.0 | 101.5 | 15.2 | 13.8 | 9.1 | 6.3 | 319.5 | ||||||
| Loan impairment rate (2) | 27bps | (26)bps | 40bps | nm | nm | nm | nm | 22bps | ||||||
| Impairment provisions (£bn) | (1.3) | (0.6) | (1.2) | - | - | (0.1) | (0.1) | (3.3) | ||||||
| Impairment provisions - stage 3 (£bn) | (0.7) | (0.6) | (0.9) | - | - | (0.1) | - | (2.3) | ||||||
| Customer deposits (£bn) | 147.9 | 18.8 | 135.7 | 28.2 | 29.1 | 3.3 | 6.7 | 369.7 | ||||||
| Risk-weighted assets (RWAs) (£bn) | 37.5 | 13.3 | 77.0 | 10.0 | 6.5 | 43.8 | 1.4 | 189.5 | ||||||
| RWA equivalent (RWAes) (£bn) | 38.4 | 13.6 | 78.1 | 10.0 | 6.6 | 48.9 | 1.7 | 197.3 | ||||||
| Employee numbers (FTEs - thousands) | 21.0 | 3.0 | 10.4 | 1.9 | 1.8 | 5.1 | 22.5 | 65.7 | ||||||
| Average interest earning assets (£bn) | 165.3 | 25.2 | 145.8 | 21.5 | 29.3 | 35.1 | nm | 445.1 | ||||||
| Net interest margin | 2.52% | 1.60% | 1.95% | 2.44% | 1.65% | (0.70%) | nm | 1.81% | ||||||
| Third party customer asset rate | 3.26% | 2.28% | 3.17% | 2.92% | 1.73% | nm | nm | nm | ||||||
| Third party customer funding rate | (0.38%) | (0.16%) | (0.43%) | (0.44%) | (0.14%) | nm | nm | nm |
For the notes to this table, refer to page 12. nm = not meaningful.
Segment performance
| Nine months ended 30 September 2018 | ||||||||||||||
| Personal & Ulster | Commercial & Private | Central | ||||||||||||
| UK Personal | Ulster | Commercial | Private | RBS | NatWest | items & | Total | |||||||
| Banking | Bank RoI | Banking | Banking | International | Markets | other (1) | RBS | |||||||
| £m | £m | £m | £m | £m | £m | £m | £m | |||||||
| Income statement | ||||||||||||||
| Net interest income | 3,222 | 334 | 2,131 | 385 | 343 | 82 | (17) | 6,480 | ||||||
| Non-interest income | 586 | 129 | 1,355 | 192 | 96 | 1,149 | 298 | 3,805 | ||||||
| Own credit adjustments | - | - | - | - | - | 59 | - | 59 | ||||||
| Total income | 3,808 | 463 | 3,486 | 577 | 439 | 1,290 | 281 | 10,344 | ||||||
| Direct expenses | ||||||||||||||
| - staff costs | (532) | (149) | (554) | (122) | (77) | (429) | (927) | (2,790) | ||||||
| - other costs | (186) | (76) | (178) | (44) | (45) | (176) | (1,842) | (2,547) | ||||||
| Indirect expenses | (1,050) | (133) | (891) | (157) | (56) | (292) | 2,579 | - | ||||||
| Strategic costs | ||||||||||||||
| - direct | (14) | 1 | (28) | - | (2) | (106) | (500) | (649) | ||||||
| - indirect | (122) | (8) | (65) | (11) | (4) | (21) | 231 | - | ||||||
| Litigation and conduct costs | (206) | (54) | (7) | (1) | 10 | (125) | (807) | (1,190) | ||||||
| Operating expenses | (2,110) | (419) | (1,723) | (335) | (174) | (1,149) | (1,266) | (7,176) | ||||||
| Operating profit/(loss) before impairment (losses)/releases | 1,698 | 44 | 1,763 | 242 | 265 | 141 | (985) | 3,168 | ||||||
| Impairment (losses)/releases | (197) | (34) | (142) | (2) | - | (8) | 2 | (381) | ||||||
| Operating profit/(loss) | 1,501 | 10 | 1,621 | 240 | 265 | 133 | (983) | 2,787 | ||||||
| Additional information | ||||||||||||||
| Return on equity (2) | 27.3% | 0.5% | 13.2% | 16.3% | 26.0% | 0.2% | nm | 5.3% | ||||||
| Cost:income ratio (2) | 55.4% | 90.5% | 48.1% | 58.1% | 39.6% | 89.1% | nm | 69.1% | ||||||
| Total assets (£bn) | 171.7 | 25.3 | 167.9 | 21.4 | 29.0 | 253.3 | 51.3 | 719.9 | ||||||
| Funded assets (£bn) | 171.7 | 25.3 | 167.9 | 21.4 | 29.0 | 120.9 | 51.1 | 587.3 | ||||||
| Net loans to customers - amortised cost (£bn) | 149.2 | 19.2 | 102.3 | 14.2 | 13.0 | 8.0 | (0.1) | 305.8 | ||||||
| Loan impairment rate (2) | 17bps | 22bps | 18bps | nm | nm | nm | nm | 16bps | ||||||
| Impairment provisions (£bn) | (1.1) | (1.2) | (1.3) | (0.1) | - | (0.2) | - | (3.9) | ||||||
| Impairment provisions - stage 3 (£bn) | (0.7) | (1.0) | (1.1) | - | - | (0.1) | - | (2.9) | ||||||
| Customer deposits (£bn) | 144.8 | 17.9 | 135.0 | 27.2 | 26.9 | 2.6 | 6.2 | 360.6 | ||||||
| Risk-weighted assets (RWAs) (£bn) | 34.1 | 16.5 | 80.3 | 9.5 | 6.9 | 46.5 | 0.7 | 194.5 | ||||||
| RWA equivalent (RWAes) (£bn) | 35.5 | 16.6 | 83.8 | 9.5 | 6.9 | 49.9 | 1.0 | 203.2 | ||||||
| Employee numbers (FTEs - thousands) | 22.3 | 3.1 | 10.6 | 1.9 | 1.7 | 4.9 | 24.1 | 68.6 | ||||||
| Average interest earning assets (£bn) | 160.3 | 24.7 | 144.9 | 20.3 | 27.4 | 27.0 | nm | 435.2 | ||||||
| Net interest margin | 2.69% | 1.81% | 1.96% | 2.53% | 1.67% | 0.41% | nm | 1.99% | ||||||
| Third party customer asset rate | 3.37% | 2.40% | 2.97% | 2.87% | 2.38% | nm | nm | nm | ||||||
| Third party customer funding rate | (0.30%) | (0.21%) | (0.26%) | (0.21%) | (0.10%) | nm | nm | nm |
For the notes to this table, refer to page 12. nm = not meaningful.
Segment performance
| Quarter ended 30 September 2019 | ||||||||||
| Personal & Ulster | Commercial & Private | Central | ||||||||
| UK Personal | Ulster | Commercial | Private | RBS | NatWest | items & | Total | |||
| Banking | Bank RoI | Banking | Banking | International | Markets | other (1) | RBS | |||
| £m | £m | £m | £m | £m | £m | £m | £m | |||
| Income statement | ||||||||||
| Net interest income | 1,034 | 102 | 703 | 130 | 119 | (62) | (20) | 2,006 | ||
| Non-interest income | 190 | 43 | 374 | 68 | 31 | 223 | (20) | 909 | ||
| Own credit adjustments | - | - | - | - | - | (11) | (1) | (12) | ||
| Total income | 1,224 | 145 | 1,077 | 198 | 150 | 150 | (41) | 2,903 | ||
| Direct expenses | ||||||||||
| - staff costs | (157) | (53) | (194) | (40) | (30) | (159) | (258) | (891) | ||
| - other costs | (95) | (22) | (74) | (17) | (14) | (42) | (578) | (842) | ||
| Indirect expenses | (357) | (43) | (294) | (49) | (13) | (81) | 837 | - | ||
| Strategic costs | ||||||||||
| - direct | (12) | (3) | (5) | - | (4) | (55) | (136) | (215) | ||
| - indirect | (68) | (9) | (67) | (13) | (1) | (7) | 165 | - | ||
| Litigation and conduct costs | (912) | (1) | (4) | - | - | (4) | 171 | (750) | ||
| Operating expenses | (1,601) | (131) | (638) | (119) | (62) | (348) | 201 | (2,698) | ||
| Operating (loss)/profit before impairment (losses)/releases | (377) | 14 | 439 | 79 | 88 | (198) | 160 | 205 | ||
| Impairment (losses)/releases | (131) | 17 | (108) | 2 | - | 5 | 2 | (213) | ||
| Operating (loss)/profit | (508) | 31 | 331 | 81 | 88 | (193) | 162 | (8) | ||
| Additional information | ||||||||||
| Return on equity (2) | (26.8%) | 5.8% | 8.4% | 16.8% | 26.0% | (8.7%) | nm | (3.8%) | ||
| Cost:income ratio (2) | 130.8% | 90.3% | 57.9% | 60.1% | 41.3% | 232.0% | nm | 92.9% | ||
| Total assets (£bn) | 176.7 | 26.1 | 166.6 | 22.6 | 31.2 | 318.3 | 35.0 | 776.5 | ||
| Funded assets (£bn) | 176.7 | 26.0 | 166.6 | 22.6 | 31.2 | 142.7 | 34.9 | 600.7 | ||
| Net loans to customers - amortised cost (£bn) | 154.6 | 19.0 | 101.5 | 15.2 | 13.8 | 9.1 | 6.3 | 319.5 | ||
| Loan impairment rate (2) | 34bps | (35)bps | 42bps | nm | nm | nm | nm | 26bps | ||
| Impairment provisions (£bn) | (1.3) | (0.6) | (1.2) | - | - | (0.1) | (0.1) | (3.3) | ||
| Impairment provisions - stage 3 (£bn) | (0.7) | (0.6) | (0.9) | - | - | (0.1) | - | (2.3) | ||
| Customer deposits (£bn) | 147.9 | 18.8 | 135.7 | 28.2 | 29.1 | 3.3 | 6.7 | 369.7 | ||
| Risk-weighted assets (RWAs) (£bn) | 37.5 | 13.3 | 77.0 | 10.0 | 6.5 | 43.8 | 1.4 | 189.5 | ||
| RWA equivalent (RWAes) (£bn) | 38.4 | 13.6 | 78.1 | 10.0 | 6.6 | 48.9 | 1.7 | 197.3 | ||
| Employee numbers (FTEs - thousands) | 21.0 | 3.0 | 10.4 | 1.9 | 1.8 | 5.1 | 22.5 | 65.7 | ||
| Average interest earning assets (£bn) | 168.1 | 26.2 | 146.7 | 22.0 | 30.4 | 38.6 | nm | 454.4 | ||
| Net interest margin | 2.44% | 1.55% | 1.90% | 2.35% | 1.55% | (0.64%) | nm | 1.75% | ||
| Third party customer asset rate | 3.22% | 2.23% | 3.11% | 2.87% | 1.69% | nm | nm | nm | ||
| Third party customer funding rate | (0.38%) | (0.15%) | (0.43%) | (0.43%) | (0.15%) | nm | nm | nm |
For the notes to this table, refer to page 12. nm = not meaningful.
Segment performance
| Quarter ended 30 June 2019 | |||||||||||
| Personal & Ulster | Commercial & Private | Central | |||||||||
| UK Personal | Ulster | Commercial | Private | RBS | NatWest | items & | Total | ||||
| Banking | Bank RoI | Banking | Banking | International | Markets | other (1) | RBS | ||||
| £m | £m | £m | £m | £m | £m | £m | £m | ||||
| Income statement | |||||||||||
| Net interest income | 1,032 | 102 | 716 | 129 | 125 | (91) | (42) | 1,971 | |||
| Non-interest income | 170 | 35 | 367 | 62 | 34 | 338 | 71 | 1,077 | |||
| Own credit adjustments | - | 1 | - | - | - | (5) | 1 | (3) | |||
| Strategic disposals | - | - | - | - | - | 444 | 591 | 1,035 | |||
| Total income | 1,202 | 138 | 1,083 | 191 | 159 | 686 | 621 | 4,080 | |||
| Direct expenses | |||||||||||
| - staff costs | (155) | (54) | (184) | (41) | (31) | (176) | (264) | (905) | |||
| - other costs | (90) | (22) | (80) | (17) | (10) | (38) | (511) | (768) | |||
| Indirect expenses | (297) | (41) | (260) | (45) | (13) | (76) | 732 | - | |||
| Strategic costs | |||||||||||
| - direct | 4 | (4) | (12) | - | (3) | (31) | (388) | (434) | |||
| - indirect | (49) | (5) | (50) | (10) | (3) | (17) | 134 | - | |||
| Litigation and conduct costs | (7) | (19) | (36) | (2) | - | (6) | 15 | (55) | |||
| Operating expenses | (594) | (145) | (622) | (115) | (60) | (344) | (282) | (2,162) | |||
| Operating profit/(loss) before impairment (losses)/releases | 608 | (7) | 461 | 76 | 99 | 342 | 339 | 1,918 | |||
| Impairment (losses)/releases | (69) | 10 | (197) | (1) | 2 | 20 | (2) | (237) | |||
| Operating profit | 539 | 3 | 264 | 75 | 101 | 362 | 337 | 1,681 | |||
| Additional information | |||||||||||
| Return on equity (2) | 26.5% | 0.6% | 6.2% | 15.9% | 30.8% | 4.4% | nm | 15.8% | |||
| Cost:income ratio (2) | 49.4% | 105.1% | 56.1% | 60.2% | 37.7% | 50.1% | nm | 52.6% | |||
| Total assets (£bn) | 173.9 | 26.4 | 165.6 | 21.9 | 30.4 | 278.9 | 32.8 | 729.9 | |||
| Funded assets (£bn) | 173.9 | 26.4 | 165.6 | 21.9 | 30.4 | 133.4 | 32.7 | 584.3 | |||
| Net loans to customers - amortised cost (£bn) | 151.9 | 19.0 | 101.4 | 14.7 | 13.6 | 9.3 | 0.7 | 310.6 | |||
| Loan impairment rate (2) | 18bps | (20)bps | 77bps | nm | nm | nm | nm | 30bps | |||
| Impairment provisions (£bn) | (1.2) | (0.7) | (1.2) | - | - | (0.1) | - | (3.2) | |||
| Impairment provisions - stage 3 (£bn) | (0.7) | (0.6) | (0.9) | - | - | (0.1) | - | (2.3) | |||
| Customer deposits (£bn) | 147.5 | 19.0 | 133.4 | 28.0 | 28.1 | 2.8 | 2.8 | 361.6 | |||
| Risk-weighted assets (RWAs) (£bn) | 37.0 | 14.2 | 77.8 | 9.7 | 6.9 | 41.4 | 1.5 | 188.5 | |||
| RWA equivalent (RWAes) (£bn) | 38.1 | 14.5 | 79.3 | 9.7 | 7.0 | 46.1 | 1.8 | 196.5 | |||
| Employee numbers (FTEs - thousands) | 21.3 | 3.1 | 10.5 | 1.9 | 1.8 | 5.0 | 23.0 | 66.6 | |||
| Average interest earning assets (£bn) | 164.8 | 25.3 | 146.1 | 21.2 | 29.8 | 34.4 | nm | 444.8 | |||
| Net interest margin | 2.51% | 1.62% | 1.97% | 2.44% | 1.68% | (1.05%) | nm | 1.78% | |||
| Third party customer asset rate | 3.25% | 2.29% | 3.18% | 2.89% | 1.79% | nm | nm | nm | |||
| Third party customer funding rate | (0.38%) | (0.15%) | (0.42%) | (0.45%) | (0.13%) | nm | nm | nm |
For the notes to this table, refer to page 12. nm = not meaningful.
Segment performance
| Quarter ended 30 September 2018 | |||||||||||
| Personal & Ulster | Commercial & Private | Central | |||||||||
| UK Personal | Ulster | Commercial | Private | RBS | NatWest | items & | Total | ||||
| Banking | Bank RoI | Banking | Banking | International | Markets | other (1) | RBS | ||||
| £m | £m | £m | £m | £m | £m | £m | £m | ||||
| Income statement | |||||||||||
| Net interest income | 1,083 | 110 | 731 | 133 | 124 | 15 | (42) | 2,154 | |||
| Non-interest income | 174 | 41 | 365 | 62 | 31 | 534 | 261 | 1,468 | |||
| Own credit adjustments | - | - | - | - | - | 20 | - | 20 | |||
| Total income | 1,257 | 151 | 1,096 | 195 | 155 | 569 | 219 | 3,642 | |||
| Direct expenses | |||||||||||
| - staff costs | (172) | (51) | (180) | (39) | (26) | (120) | (299) | (887) | |||
| - other costs | (69) | (31) | (64) | (16) | (12) | (61) | (613) | (866) | |||
| Indirect expenses | (342) | (45) | (294) | (52) | (19) | (91) | 843 | - | |||
| Strategic costs | |||||||||||
| - direct | - | (1) | (8) | 1 | (2) | (78) | (211) | (299) | |||
| - indirect | (37) | (2) | (21) | (4) | (1) | (15) | 80 | - | |||
| Litigation and conduct costs | (199) | (37) | (16) | - | - | (113) | (24) | (389) | |||
| Operating expenses | (819) | (167) | (583) | (110) | (60) | (478) | (224) | (2,441) | |||
| Operating profit/(loss) before impairment (losses)/releases | 438 | (16) | 513 | 85 | 95 | 91 | (5) | 1,201 | |||
| Impairment (losses)/releases | (66) | (60) | (107) | (1) | (3) | (4) | 1 | (240) | |||
| Operating profit/(loss) | 372 | (76) | 406 | 84 | 92 | 87 | (4) | 961 | |||
| Additional information | |||||||||||
| Return on equity (2) | 19.4% | (12.7%) | 9.6% | 17.3% | 26.9% | 1.8% | nm | 5.4% | |||
| Cost:income ratio (2) | 65.2% | 110.6% | 51.8% | 56.4% | 38.7% | 84.0% | nm | 66.7% | |||
| Total assets (£bn) | 171.7 | 25.3 | 167.9 | 21.4 | 29.0 | 253.3 | 51.3 | 719.9 | |||
| Funded assets (£bn) | 171.7 | 25.3 | 167.9 | 21.4 | 29.0 | 120.9 | 51.1 | 587.3 | |||
| Net loans to customers - amortised cost (£bn) | 149.2 | 19.2 | 102.3 | 14.2 | 13.0 | 8.0 | (0.1) | 305.8 | |||
| Loan impairment rate (2) | 18bps | 118bps | 41bps | nm | nm | nm | nm | 31bps | |||
| Impairment provisions (£bn) | (1.1) | (1.2) | (1.3) | (0.1) | - | (0.2) | - | (3.9) | |||
| Impairment provisions - stage 3 (£bn) | (0.7) | (1.0) | (1.1) | - | - | (0.1) | - | (2.9) | |||
| Customer deposits (£bn) | 144.8 | 17.9 | 135.0 | 27.2 | 26.9 | 2.6 | 6.2 | 360.6 | |||
| Risk-weighted assets (RWAs) (£bn) | 34.1 | 16.5 | 80.3 | 9.5 | 6.9 | 46.5 | 0.7 | 194.5 | |||
| RWA equivalent (RWAes) (£bn) | 35.5 | 16.6 | 83.8 | 9.5 | 6.9 | 49.9 | 1.0 | 203.2 | |||
| Employee numbers (FTEs - thousands) | 22.3 | 3.1 | 10.6 | 1.9 | 1.7 | 4.9 | 24.1 | 68.6 | |||
| Average interest earning assets (£bn) | 162.3 | 25.4 | 144.9 | 20.8 | 28.4 | 26.7 | nm | 443.1 | |||
| Net interest margin | 2.65% | 1.72% | 2.00% | 2.54% | 1.73% | 0.22% | nm | 1.93% | |||
| Third party customer asset rate | 3.35% | 2.42% | 3.04% | 2.91% | 2.29% | nm | nm | nm | |||
| Third party customer funding rate | (0.31%) | (0.20%) | (0.28%) | (0.26%) | (0.11%) | nm | nm | nm |
Notes:
- Central items include unallocated transactions, including volatile items under IFRS, items related to Alawwal bank merger and RMBS related charges.
- Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS performance measures where relevant.
Business performance summary
Capital and leverage ratios
| End-point CRR basis | |||
| 30 September | 30 June | 31 December | |
| Capital adequacy ratios | 2019 | 2019 | 2018 |
| CET1 (%) | 15.7 | 16.0 | 16.2 |
| Tier 1 (%) | 17.9 | 18.2 | 18.4 |
| Total (%) | 20.5 | 20.9 | 21.8 |
| Capital | £m | £m | £m |
| Tangible equity | 32,930 | 35,036 | 34,566 |
| Expected loss less impairment provisions | (620) | (726) | (654) |
| Prudential valuation adjustment | (466) | (419) | (494) |
| Deferred tax assets | (732) | (869) | (740) |
| Own credit adjustments | (234) | (261) | (405) |
| Pension fund assets | (401) | (400) | (394) |
| Cash flow hedging reserve | (336) | (117) | 191 |
| Foreseeable ordinary dividends | (362) | (2,053) | (1,326) |
| Other deductions | (6) | - | (105) |
| Total deductions | (3,157) | (4,845) | (3,927) |
| CET1 capital | 29,773 | 30,191 | 30,639 |
| AT1 capital | 4,051 | 4,051 | 4,051 |
| Tier 1 capital | 33,824 | 34,242 | 34,690 |
| Tier 2 capital | 4,980 | 5,119 | 6,483 |
| Total regulatory capital | 38,804 | 39,361 | 41,173 |
| Risk-weighted assets | |||
| Credit risk | 136,200 | 137,100 | 137,900 |
| Counterparty credit risk | 15,000 | 14,200 | 13,600 |
| Market risk | 15,700 | 14,600 | 14,800 |
| Operational risk | 22,600 | 22,600 | 22,400 |
| Total RWAs | 189,500 | 188,500 | 188,700 |
| Leverage | |||
| Cash and balances at central banks | 84,300 | 85,400 | 88,900 |
| Trading assets | 91,600 | 85,400 | 75,100 |
| Derivatives | 175,800 | 145,600 | 133,300 |
| Financial assets | 396,400 | 389,200 | 377,500 |
| Other assets | 28,400 | 24,300 | 19,400 |
| Total assets | 776,500 | 729,900 | 694,200 |
| Derivatives | |||
| - netting and variation margin | (189,800) | (156,600) | (141,300) |
| - potential future exposures | 47,200 | 44,100 | 42,100 |
| Securities financing transactions gross up | 1,700 | 1,900 | 2,100 |
| Undrawn commitments | 43,900 | 49,300 | 50,300 |
| Regulatory deductions and other adjustments | (9,400) | (9,500) | (2,900) |
| CRR leverage exposure | 670,100 | 659,100 | 644,500 |
| CRR leverage ratio % (1) | 5.0 | 5.2 | 5.4 |
| UK leverage exposure | 589,500 | 576,600 | 559,500 |
| UK leverage ratio % (2) | 5.7 | 5.9 | 6.2 |
Notes:
| (1) | Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act. |
| (2) | Based on end-point CRR Tier 1 capital and UK leverage exposures reflecting the post EU referendum measures announced by the Bank of England in the third quarter of 2016. |
Condensed consolidated income statement for the period ended 30 September 2019 (unaudited)
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018* | 2019 | 2019 | 2018* | ||
| £m | £m | £m | £m | £m | ||
| Interest receivable | 8,474 | 8,224 | 2,921 | 2,806 | 2,780 | |
| Interest payable | (2,464) | (1,744) | (915) | (835) | (626) | |
| Net interest income (1) | 6,010 | 6,480 | 2,006 | 1,971 | 2,154 | |
| Fees and commissions receivable | 2,570 | 2,433 | 808 | 857 | 787 | |
| Fees and commissions payable | (673) | (671) | (186) | (243) | (220) | |
| Income from trading activities | 794 | 1,346 | 195 | 375 | 499 | |
| Other operating income | 1,319 | 756 | 80 | 1,120 | 422 | |
| Non-interest income | 4,010 | 3,864 | 897 | 2,109 | 1,488 | |
| Total income | 10,020 | 10,344 | 2,903 | 4,080 | 3,642 | |
| Staff costs | (3,028) | (3,108) | (1,000) | (1,017) | (1,022) | |
| Premises and equipment | (823) | (972) | (265) | (293) | (328) | |
| Other administrative expenses | (2,085) | (2,521) | (1,222) | (445) | (885) | |
| Depreciation and amortisation | (853) | (544) | (232) | (377) | (206) | |
| Write down of other intangible assets | (9) | (31) | 21 | (30) | - | |
| Operating expenses | (6,798) | (7,176) | (2,698) | (2,162) | (2,441) | |
| Profit before impairment losses | 3,222 | 3,168 | 205 | 1,918 | 1,201 | |
| Impairment losses | (536) | (381) | (213) | (237) | (240) | |
| Operating profit/(loss) before tax | 2,686 | 2,787 | (8) | 1,681 | 961 | |
| Tax (charge)/credit | (395) | (1,090) | (201) | 22 | (381) | |
| Profit/(loss) for the period | 2,291 | 1,697 | (209) | 1,703 | 580 | |
| Attributable to: | ||||||
| Ordinary shareholders | 1,723 | 1,336 | (315) | 1,331 | 448 | |
| Preference shareholders | 30 | 94 | 10 | 10 | 20 | |
| Paid-in equity holders | 277 | 261 | 95 | 92 | 90 | |
| Non-controlling interests | 261 | 6 | 1 | 270 | 22 | |
| Earnings per ordinary share (2) | 14.3p | 11.1p | (2.6p) | 11.0p | 3.7p |
*Restated. Refer to Note 2 for further details.
Notes:
- Negative interest on loans is reported as interest payable. Negative interest on customer deposits is reported as interest receivable.
- Basic, fully diluted, earnings per share for the nine months ended 30 September 2019 was 14.2p. There was no dilutive impact in any other period.
Condensed consolidated statement of comprehensive income for the period ended 30 September 2019 (unaudited)
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018* | 2019 | 2019 | 2018* | ||
| £m | £m | £m | £m | £m | ||
| Profit/(loss) for the period | 2,291 | 1,697 | (209) | 1,703 | 580 | |
| Items that do not qualify for reclassification | ||||||
| Remeasurement of retirement benefit schemes | ||||||
| - contributions in preparation for ring-fencing (1) | - | (2,000) | - | - | - | |
| - other movements | (96) | 72 | (28) | (26) | 72 | |
| (Loss)/profit on fair value of credit in financial liabilities | ||||||
| designated as at FVTPL due to own credit risk | (115) | 109 | (19) | (50) | 14 | |
| FVOCI financial assets | (92) | 61 | (130) | (4) | 58 | |
| Tax | 24 | 487 | (2) | (6) | (13) | |
| (279) | (1,271) | (179) | (86) | 131 | ||
| Items that do qualify for reclassification | ||||||
| FVOCI financial assets | (3) | 31 | 9 | (53) | (168) | |
| Cash flow hedges | 688 | (822) | 286 | 214 | (301) | |
| Currency translation | (298) | 120 | (57) | 109 | 102 | |
| Tax | (193) | 224 | (71) | (82) | 127 | |
| 194 | (447) | 167 | 188 | (240) | ||
| Other comprehensive (loss)/income after tax | (85) | (1,718) | (12) | 102 | (109) | |
| Total comprehensive income/(loss) for the period | 2,206 | (21) | (221) | 1,805 | 471 | |
| Attributable to: | ||||||
| Ordinary shareholders | 1,624 | (404) | (326) | 1,392 | 304 | |
| Preference shareholders | 30 | 94 | 10 | 10 | 20 | |
| Paid-in equity holders | 277 | 261 | 95 | 92 | 90 | |
| Non-controlling interests | 275 | 28 | - | 311 | 57 | |
| 2,206 | (21) | (221) | 1,805 | 471 |
*Restated. Refer to Note 2 for further details.
Note:
| (1) | On 17 April 2018, RBS agreed a Memorandum of Understanding (MoU) with the Trustees of the RBS Group Pension Fund in connection with the requirements of ring-fencing. NatWest Markets Plc could not continue to be a participant in the Main section and separate arrangements were required for its employees. Under the MoU, NatWest Plc made a contribution of £2 billion on 9 October 2018 to strengthen funding of the Main section in recognition of the changes in covenant. |
Condensed consolidated balance sheet as at 30 September 2019 (unaudited)
| 30 September | 31 December | |
| 2019 | 2018 | |
| £m | £m | |
| Assets | ||
| Cash and balances at central banks | 84,252 | 88,897 |
| Trading assets | 91,605 | 75,119 |
| Derivatives | 175,760 | 133,349 |
| Settlement balances | 12,962 | 2,928 |
| Loans to banks - amortised cost | 12,440 | 12,947 |
| Loans to customers - amortised cost | 319,493 | 305,089 |
| Other financial assets | 64,488 | 59,485 |
| Intangible assets | 6,646 | 6,616 |
| Other assets | 8,861 | 9,805 |
| Total assets | 776,507 | 694,235 |
| Liabilities | ||
| Bank deposits | 22,095 | 23,297 |
| Customer deposits | 369,708 | 360,914 |
| Settlement balances | 11,862 | 3,066 |
| Trading liabilities | 87,374 | 72,350 |
| Derivatives | 173,750 | 128,897 |
| Other financial liabilities | 47,508 | 39,732 |
| Subordinated liabilities | 10,200 | 10,535 |
| Other liabilities | 9,864 | 8,954 |
| Total liabilities | 732,361 | 647,745 |
| Equity | ||
| Ordinary shareholders' interests | 39,576 | 41,182 |
| Other owners' interests | 4,554 | 4,554 |
| Owners’ equity | 44,130 | 45,736 |
| Non-controlling interests | 16 | 754 |
| Total equity | 44,146 | 46,490 |
| Total liabilities and equity | 776,507 | 694,235 |
Condensed consolidated statement of changes in equity for the period ended 30 September 2019 (unaudited)
| Share | |||||||
| capital and | Total | Non | |||||
| statutory | Paid-in | Retained | Other | owners' | controlling | Total | |
| reserves | equity | earnings | reserves* | equity | interests | equity | |
| £m | £m | £m | £m | £m | £m | £m | |
| At 1 January 2019 | 13,055 | 4,058 | 14,312 | 14,311 | 45,736 | 754 | 46,490 |
| Implementation of IFRS 16 on 1 January 2019 (1) | - | - | (187) | - | (187) | - | (187) |
| Profit attributable to ordinary shareholders | |||||||
| and other equity owners | - | - | 2,030 | - | 2,030 | 261 | 2,291 |
| Other comprehensive income | |||||||
| - Realised gains/(losses) in period | |||||||
| on FVOCI equity shares | - | - | 118 | (118) | - | - | - |
| - Remeasurement of retirement | |||||||
| benefit schemes | - | - | (96) | - | (96) | - | (96) |
| - Changes in fair value of credit in financial | |||||||
| liabilities at FVTPL | - | - | (115) | - | (115) | - | (115) |
| - Other amounts recognised in equity | - | - | - | 737 | 737 | 14 | 751 |
| - Amount transferred from equity to earnings | - | - | - | (169) | (169) | - | (169) |
| - Recycled to profit or loss on disposal | - | ||||||
| of businesses (2) | - | - | - | (335) | (335) | - | (335) |
| - Tax | - | - | 39 | (160) | (121) | - | (121) |
| Ordinary share dividends paid | - | - | (3,018) | - | (3,018) | - | (3,018) |
| Preference share and paid-in equity dividends paid | - | - | (307) | - | (307) | - | (307) |
| Shares and securities issued during the period | 112 | - | (4) | - | 108 | - | 108 |
| Share-based payments - gross | - | - | (109) | - | (109) | - | (109) |
| Movement in own shares held | (24) | - | - | - | (24) | - | (24) |
| Equity raised (3) | - | - | - | - | - | 45 | 45 |
| Equity withdrawn and disposals (4) | - | - | - | - | - | (1,058) | (1,058) |
| At 30 September 2019 | 13,143 | 4,058 | 12,663 | 14,266 | 44,130 | 16 | 44,146 |
| 30 September | |||||||
| 2019 | |||||||
| Total equity is attributable to: | £m | ||||||
| Ordinary shareholders | 39,576 | ||||||
| Preference shareholders | 496 | ||||||
| Paid-in equity holders | 4,058 | ||||||
| Non-controlling interests | 16 | ||||||
| 44,146 | |||||||
| *Other reserves consist of: | |||||||
| Merger reserve | 10,881 | ||||||
| FVOCI reserve | 125 | ||||||
| Cash flow hedging reserve | 336 | ||||||
| Foreign exchange reserve | 2,924 | ||||||
| 14,266 |
Notes:
- Refer to Note 2 for further information on the impact of IFRS 16 implementation.
- Includes £338 million arising on the completion of the Alawwal bank merger in June 2019, of which £48 million relates to tax. The merger resulted in the derecognition of the associate investment in Alawwal bank and recognition of a new investment in SABB held at fair value through other comprehensive income (FVOCI).
- Capital injection from RFS Holdings B.V. Consortium Members.
- Distribution to RFS Holdings B.V. Consortium Members on completion of Alawwal bank merger.
Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with RBS’s 2018 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).
Going concern
Having reviewed RBS’s forecasts, projections and other relevant evidence, the directors have a reasonable expectation that RBS will continue in operational existence for the foreseeable future. Accordingly, the results for the periods ended 30 September 2019 have been prepared on a going concern basis.
Re-segmentation
Effective from 1 January 2019, Business Banking has been transferred from UK Personal and Business Banking (UK PBB) to Commercial Banking as the nature of the business, including distribution channels, products and customers, are more closely aligned to the Commercial Banking business. Concurrent with the transfer, UK PBB has been renamed UK Personal Banking (UK PB) and the previous franchise combining UK PBB (now UK PB) and Ulster Bank RoI has been renamed Personal & Ulster. Comparatives have been re-stated.
2. Accounting policies
RBS’s principal accounting policies are as set out on pages 182 to 186 of the 2018 Annual Report and Accounts and are unchanged other than as presented below.
Changes in reporting standards
IAS 12 ‘Income taxes’ was revised with effect from 1 January 2019. The income statement is now required to include any tax relief on the servicing cost of instruments classified as equity. Relief of £67 million was recognised in the statement of changes in equity for the year ended 31 December 2018; this and prior periods have been restated.
Presentation of interest in suspense recoveries
Until 1 January 2019, interest in suspense recoveries were presented as a component of interest receivable within Net interest income. It amounted to £46 million for the period ended 30 September 2019. From 1 January 2019 interest in suspense recoveries is presented within impairment charges; prior periods were presented as income. Comparatives have not been restated.
Revised Accounting policy 10 - Leases
RBS has adopted IFRS 16 ‘Leases’ with effect from 1 January 2019, replacing IAS 17 ‘Leases’. RBS has applied IFRS 16 on a modified retrospective basis without restating prior years. Accounting policy 10 presented in the 2018 Annual Report and Accounts has been updated as follows:
As lessor
Finance lease contracts are those which transfer substantially all the risks and rewards of ownership of an asset to a customer. All other contracts with customers to lease assets are classified as operating leases.
Loans to customers include finance lease receivables measured at the net investment in the lease, comprising the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Interest receivable includes finance lease income recognised at a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review; if there is a reduction in their value, income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.
Rental income from operating leases is recognised in other operating income on a straight-line basis over the lease term unless another systematic basis better represents the time pattern of the asset’s use. Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives.
As lessee
On entering a new lease contract, RBS recognises a right of use asset and a liability to pay future rentals. The liability is measured at the present value of future lease payments discounted at the applicable incremental borrowing rate. The right of use asset is depreciated over the shorter of the term of the lease and the useful economic life, subject to review for impairment. Short term and low value leased assets are expensed on a systematic basis.
Notes
2. Accounting policies continued
For further details see page 186 of RBS’s 2018 Annual Report and Accounts. The impact on RBS’s balance sheet at 1 January 2019 is as follows:
| £bn | |
| Retained earnings at 31 December 2018 | 14.3 |
| Loans to customers - finance leases | 0.2 |
| Other assets - net right of use assets | 1.3 |
| - Recognition of lease liabilities | (1.9) |
| - Provision for onerous leases | 0.2 |
| Other liabilities | (1.7) |
| Net impact on retained earnings | (0.2) |
| Retained earnings at 1 January 2019 | 14.1 |
Operating lease commitments reported under IAS 17 were £2.7 billion which resulted in lease liabilities recognised under IFRS 16 of £1.9 billion. The difference is primarily because of the different treatment of termination and extension options, and discounting the contractual lease payments under IFRS 16.
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of RBS’s financial condition are those relating to goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on page 186 of the 2018 Annual Report and Accounts.
Notes
3. Provisions for liabilities and charges
| Payment | Other | ||||
| protection | customer | Litigation and | |||
| insurance (1) | redress | other regulatory | Other (2) | Total | |
| £m | £m | £m | £m | £m | |
| At 1 January 2019 | 695 | 536 | 783 | 990 | 3,004 |
| Implementation of IFRS 16 on 1 January 2019 (3) | - | - | - | (170) | (170) |
| ECL impairment release | - | - | - | (3) | (3) |
| Transfer to accruals and other liabilities | - | (4) | - | 1 | (3) |
| Currency translation and other movements | - | (7) | (6) | (16) | (29) |
| Charge to income statement | - | 17 | 5 | 33 | 55 |
| Releases to income statement | - | (12) | (9) | (16) | (37) |
| Provisions utilised | (136) | (81) | (6) | (114) | (337) |
| At 31 March 2019 | 559 | 449 | 767 | 705 | 2,480 |
| ECL impairment charge | - | - | - | 21 | 21 |
| Transfer from accruals and other liabilities | - | 4 | - | - | 4 |
| Currency translation and other movements | - | 3 | 3 | 4 | 10 |
| Charge to income statement | - | 64 | 18 | 100 | 182 |
| Releases to income statement | - | (11) | (33) | (70) | (114) |
| Provisions utilised | (116) | (90) | (28) | (79) | (313) |
| At 30 June 2019 | 443 | 419 | 727 | 681 | 2,270 |
| ECL impairment charge | - | - | - | 13 | 13 |
| Transfer from accruals and other liabilities | - | (1) | - | 15 | 14 |
| Currency translation and other movements | - | (5) | 19 | 2 | 16 |
| Charge to income statement | 900 | 29 | 14 | 69 | 1,012 |
| Releases to income statement | - | (14) | (32) | (25) | (71) |
| Provisions utilised | (99) | (70) | (227) | (66) | (462) |
| At 30 September 2019 | 1,244 | 358 | 501 | 689 | 2,792 |
Notes:
- 30 September 2019 includes provisions held in relation to offers made in 2018 and earlier years of £97 million.
- Materially comprises provisions relating to property closures and restructuring costs.
- Refer to Note 2 for further information on the impact of IFRS 16 implementation.
There are uncertainties as to the eventual cost of redress in relation to certain of the provisions contained in the table above. Assumptions relating to these are inherently uncertain and the ultimate financial impact may be different from the amount provided.
Payment protection insurance
An additional provision of £0.9 billion was taken at Q3 2019, reflecting greater than predicted complaints volumes in the lead up to the 29 August 2019 deadline for making new PPI complaints. RBS has made provisions totalling £6.2 billion to date for PPI claims, of which £5.0 billion had been utilised by 30 September 2019.
The table below shows the sensitivity of the provision to changes in the principal assumptions in relation to claims received since June 2019 which are still being processed, all other assumptions remaining the same.
| Sensitivity | ||||
| Consequential | ||||
| Claims | Claims | change in | ||
| to | since | Change in | provision | |
| Assumption | June 2019 | June 2019 (5) | assumption | £m |
| Customer Initiated Total Complaints (1) | 4,064k | 783k | +/-50k | +/-50 |
| No PPI % (2) | 27% | 32% | +/-1% | +/-11 |
| Uphold rate (3) | 88% | 94% | +/-1% | +/-8 |
| Average redress (4) | £1,658 | £1,556 | +/-£50 | +/-25 |
Notes:
- Claims and auto-converted queries (PPI mis-sale and ‘Plevin’ (commission)) received directly by RBS to date, including those received by CMCs.
- No PPI % relates to those cases where no PPI policy exists.
- Average uphold rate per customer initiated claims received directly by RBS, including those received via CMCs, to end of timebar for both PPI (mis-sale) and Plevin (commission), excluding those for which no PPI policy exists.
- Average redress for PPI (mis-sale) and Plevin (commission) pay-outs.
- Claims since June 2019 represents complaints received via telephone, on-line and post as at 30 September 2019. These complaints are currently undergoing processing.
Notes
4. Litigation, investigations and reviews
RBS's 2019 Interim Results, issued on 2 August 2019, included comprehensive disclosures about RBS's litigation, investigations and reviews in Note 13. Set out below are the material developments in those matters since the 2019 Interim Results were published.
Litigation
London Interbank Offered Rate (LIBOR) and other rates litigation
As previously disclosed, NWM plc and certain other members of the RBS Group, including RBSG, are defendants in a number of cases, including several class actions, pending in the United States District Court for the Southern District of New York which concern alleged manipulation of USD LIBOR. In September 2019, RBS Group companies reached a settlement in principle to resolve the class action on behalf of those who held bonds issued by non-defendants on which interest was paid from 2007 to 2010 at a rate expressly tied to USD LIBOR. The settlement is subject to documentation and court approval. The amount of the settlement is covered by a provision existing as of 30 September 2019.
On 16 August 2019, the United States District Court for the Southern District of New York dismissed all remaining claims in the class action concerning alleged manipulation of Pound Sterling LIBOR on the ground that the only named plaintiff with potentially valid claims lacks capacity to maintain the suit. Plaintiffs have commenced an appeal to the United States Court of Appeals for the Second Circuit.
On 16 September 2019, the United States District Court for the Southern District of New York dismissed the amended class action complaint concerning alleged manipulation of Swiss Franc LIBOR on the ground that, because the named plaintiffs who originally purported to file the case had ceased to exist at the time of filing, there is no triable issue over which court has jurisdiction. The court’s decision is subject to potential appeal.
US Anti-Terrorism Act litigation
On 16 September 2019, the United States District Court for the Eastern District of New York dismissed the US Anti-Terrorism Act case that has been pending against NWM N.V. and certain other financial institutions since it was filed in November 2014, concerning an alleged conspiracy to assist Iran in transferring money to Hezbollah and Iraqi terror cells. The court held that the claims were deficient for several reasons, including lack of sufficient allegations as to the alleged conspiracy and causation. The decision is subject to potential appeal.
US investigations relating to fixed-income securities
In October 2017, NatWest Markets Securities Inc. entered into a non-prosecution agreement (NPA) with the United States Attorney for the District of Connecticut (USAO) in connection with alleged misrepresentations to counterparties relating to secondary trading in various forms of asset-backed securities. In the NPA, the USAO agreed not to file criminal charges relating to certain conduct and information described in the NPA if NatWest Markets Securities Inc. complies with the NPA’s requirements during its term, including by not engaging in conduct during the NPA that the US Department of Justice determines was a felony under federal or state law or a violation of the anti-fraud provisions of the United States securities law. As previously disclosed, the NatWest Markets business is currently responding to a criminal investigation concerning unrelated securities trading by certain traders in 2018, which was reported to the USAO during the course of the NPA. In October 2019, NatWest Markets Securities Inc. agreed to a third extension of the NPA (for three additional months) so that the USAO could review the circumstances of that unrelated matter. The NatWest Markets business is in discussions to resolve these matters.
Investigations and reviews
Systematic Anti-Money Laundering Programme
In December 2018, the Financial Conduct Authority (FCA) commenced a Systematic Anti-Money Laundering Programme assessment of RBS. The FCA provided its written findings to RBS on 28 June 2019, and RBS responded on 8 August 2019. On 28 August 2019, the FCA instructed RBS to appoint a Skilled Person to provide assurance on financial crime governance arrangements in relation to two change programmes. It is not yet possible to assess the likely impact of these matters.
Payment Protection Insurance (PPI)
An additional provision of £900 million was taken at Q3 2019, reflecting greater than predicted complaints volumes in the lead up to the 29 August 2019 deadline for making new PPI complaints. RBS has made provisions totalling £6.2 billion to date for PPI claims, of which £5.0 billion had been utilised by 30 September 2019.
Notes
5. Tax
The actual tax charge differs from the expected tax charge computed by applying the standard UK corporation tax rate of 19% (2018 - 19%), as analysed below.
| Nine months ended | |||
| 30 September | 30 September | ||
| 2019 | 2018 | ||
| £m | £m | ||
| Profit before tax | 2,686 | 2,787 | |
| Expected tax charge | (510) | (530) | |
| Regulatory and legal actions | (158) | (222) | |
| Alawwal bank merger gain disposal | 212 | - | |
| Increase/(reduction) in carrying value of deferred tax in respect of:- | |||
| - UK tax losses | 215 | - | |
| - Ireland tax losses | (70) | - | |
| Banking surcharge | (210) | (308) | |
| Tax credit paid-in equity | 57 | 49 | |
| Other | (37) | (113) | |
| Adjustments in respect of prior years | 106 | 34 | |
| Actual tax charge | (395) | (1,090) |
The tax charge includes a £215 million deferred tax credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS plc under ring-fencing regulations and a £70 million deferred tax charge in respect of reducing the carrying value of the deferred tax asset for losses in Ulster Bank Ireland DAC. RBS has implemented amendments to IAS 12 Income Taxes with effect from 1 January 2019 and as a result tax relief on distributions on other equity instruments, previously recognised under retained earnings, is now reported as a tax expense in the income statement.
- Post balance sheet events
Other than as disclosed there have been no other significant events between 30 September 2019 and the date of approval of these accounts which would require a change to or additional disclosure in the accounts.
Additional information
Presentation of information
In this document, ‘RBSG plc’ or the ‘parent company’ refers to The Royal Bank of Scotland Group plc, and ‘RBS’ or the ‘RBS Group’ refers to RBSG plc and its subsidiaries.
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 2018 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.
Contacts
| Analyst enquiries: | Alexander Holcroft, Investor Relations | +44 (0) 20 7672 1982 |
| Media enquiries: | RBS Press Office | +44 (0) 131 523 4205 |
| Analyst and investor call | Webcast and dial in details | |
| Date: | 24 October 2019 | www.rbs.com/results |
| Time: | 9am UK time | International: +44 (0) 203 057 6566 |
| Conference ID: | 5889802 | UK Free Call: 0800 279 5995 US Local Dial-In, New York: +1 646 741 2115 |
Available on www.rbs.com/results
- Q3 2019 Interim Management Statement and background slides.
- A financial supplement containing income statement, balance sheet and segment performance for the nine quarters ended 30 September 2019.
- Pillar 3 supplement at 30 September 2019.
Forward looking statements
This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as RBSG's future economic results, business plans and current strategies. In particular, this document may include forward-looking statements relating to RBSG in respect of, but not limited to: its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital and operational targets), its access to adequate sources of liquidity and funding, increasing competition from new incumbents and disruptive technologies, its exposure to third party risks, its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, LIBOR, EURIBOR and other benchmark reform and RBSG’s exposure to economic and political risks (including with respect to Brexit and climate change), operational risk, conduct risk, cyber and IT risk, key person risk and credit rating risk. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, the final number of PPI claims and their amounts, legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations and general economic conditions. These and other factors, risks and uncertainties that may impact any forward-looking statement or RBSG's actual results are discussed in RBSG's UK 2018 Annual Report and Accounts (ARA), RBSG’s Interim Results for H1 2019 and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, RBSG's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and RBSG does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.
Appendix
Non-IFRS financial measures
Appendix Non-IFRS financial measures
As described in Note 1 on page 18, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). The Q3 2019 Results contain a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:
Non-IFRS financial measures
| Measure | Basis of preparation | Additional analysis or reconciliation |
| RBS return on tangible equity | Annualised profit for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is total equity less intangible assets and other owners’ equity. | Table I |
| RBS return on tangible equity excluding PPI | Annualised profit for the period attributable to ordinary shareholders adjusted for the PPI charge for the period divided by average tangible equity. Average tangible equity is total equity less intangible assets and other owners’ equity. | Table I |
| Segmental return on tangible equity | Annualised segmental operating profit adjusted for tax and for preference share dividends divided by average notional equity, allocated at an operating segment specific rate, of the period average segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). | Table I |
| Operating expenses analysis – management view | The management analysis of strategic disposals in other income and operating expenses shows strategic costs and litigation and conduct costs in separate lines. These amounts are included in staff, premises and equipment and other administrative expenses in the statutory analysis. | Table II |
| Cost:income ratio | Total operating expenses less operating lease depreciation divided by total income less operating lease depreciation. | Table III |
| Commentary – adjusted periodically for specific items | RBS and segmental business performance commentary have been adjusted for the impact of specific items such as the Alawwal bank merger, additional authorised push payments fraud costs, notable items (detailed on page 3), strategic, litigation and conduct costs (detailed on pages 8 to 12). | Notable items - page 3 Strategic, litigation and conduct costs - pages 8 to 12. |
| Aggregation of business segments into franchises | Personal & Ulster franchise results, combining the reportable segments of UK Personal Banking (UK PB) and Ulster Bank RoI, and Commercial & Private Banking (CPB) franchise results, combining the reportable segments of Commercial Banking and Private Banking. | Pages 8 to 12. |
| Bank net interest margin (NIM) | Net interest income of the banking business less the NatWest Markets (NWM) element as a percentage of interest-earning assets of the banking business less the NWM element. | Table IV |
Performance metrics not defined under IFRS(1)
| Measure | Basis of preparation | Additional analysis or reconciliation |
| Loan:deposit ratio | Net customer loans held at amortised cost divided by total customer deposits. | Table V |
| Tangible net asset value (TNAV) | Tangible equity divided by the number of ordinary shares in issue. Tangible equity is ordinary shareholders’ interest less intangible assets. | Page 2. |
| NIM | Net interest income of the banking business as a percentage of interest-earning assets of the banking business. | Pages 8 to 12. |
| Funded assets | Total assets less derivatives. | Pages 8 to 12. |
| ECL loss rate | The annualised loan impairment charge divided by gross customer loans. | Pages 8 to 12. |
Note:
(1) Metric based on GAAP measures, included as not defined under IFRS and reported for compliance with ESMA adjusted performance measure rules.
Appendix Non-IFRS financial measures
I. Return on tangible equity
| Nine months ended or as at | Quarter ended or as at | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| RBS return on tangible equity | 2019 | 2018 | 2019 | 2019 | 2018 | |
| Profit/(loss) attributable to ordinary shareholders (£m) | 1,723 | 1,336 | (315) | 1,331 | 448 | |
| Annualised profit/(loss) attributable to ordinary shareholders (£m) | 2,297 | 1,781 | (1,260) | 5,324 | 1,792 | |
| Adjustment for PPI provision for Q3 2019 (£m) | 900 | |||||
| Adjusted profit attributable to ordinary shareholders (£m) | 585 | |||||
| Annualised adjusted profit attributable to ordinary | ||||||
| shareholders (£m) | 2,340 | |||||
| Average total equity (£m) | 46,025 | 48,825 | 45,579 | 46,179 | 48,833 | |
| Adjustment for other owners equity and intangibles (£m) | (12,432) | (15,126) | (12,226) | (12,410) | (15,341) | |
| Adjusted total tangible equity (£m) | 33,593 | 33,699 | 33,353 | 33,769 | 33,492 | |
| Return on tangible equity (%) | 6.8% | 5.3% | (3.8%) | 15.8% | 5.4% | |
| Return on tangible equity adjusting for impact of PPI | ||||||
| provision (%) | 7.0% |
| Personal & Ulster | Commercial & Private | ||||||
| UK | Ulster | ||||||
| Personal | Bank | Commercial | Private | RBS | NatWest | ||
| Nine months ended 30 September 2019 | Banking | RoI | Banking | Banking | International | Markets | |
| Operating profit (£m) | 529 | 54 | 1,032 | 236 | 282 | 107 | |
| Adjustment for tax (£m) | (148) | - | (289) | (66) | (39) | (30) | |
| Preference share cost allocation (£m) | (54) | - | (123) | (12) | (5) | (50) | |
| Adjusted attributable profit (£m) | 327 | 54 | 620 | 158 | 238 | 27 | |
| Annualised adjusted attributable profit (£m) | 436 | 72 | 827 | 211 | 317 | 36 | |
| Adjustment for Alawwal merger gain (£m) | - | - | - | - | - | (200) | |
| Annualised adjusted attributable profit/(loss) (£m) | 436 | 72 | 827 | 211 | 317 | (164) | |
| Average RWAe (£bn) | 37.4 | 14.2 | 79.3 | 9.7 | 6.9 | 49.0 | |
| Equity factor | 15.0% | 15.0% | 12.0% | 13.0% | 16.0% | 15.0% | |
| RWAe applying equity factor (£bn) | 5.6 | 2.1 | 9.5 | 1.3 | 1.1 | 7.4 | |
| Return on equity | 7.8% | 3.4% | 8.7% | 16.7% | 28.5% | (2.2%) | |
| Nine months ended 30 September 2018* | |||||||
| Operating profit (£m) | 1,501 | 10 | 1,621 | 240 | 265 | 133 | |
| Adjustment for tax (£m) | (420) | - | (454) | (67) | (38) | (37) | |
| Preference share cost allocation (£m) | (60) | - | (141) | (18) | (12) | (81) | |
| Adjusted attributable profit (£m) | 1,021 | 10 | 1,026 | 155 | 215 | 15 | |
| Annualised adjusted attributable profit (£m) | 1,361 | 13 | 1,368 | 206 | 287 | 20 | |
| Average RWAe (£bn) | 33.2 | 17.5 | 86.1 | 9.4 | 6.9 | 55.1 | |
| Equity factor | 15.0% | 14.0% | 12.0% | 13.5% | 16.0% | 15.0% | |
| RWAe applying equity factor (£bn) | 5.0 | 2.4 | 10.3 | 1.3 | 1.1 | 8.3 | |
| Return on equity | 27.3% | 0.5% | 13.2% | 16.3% | 26.0% | 0.2% | |
| * Restated. Refer to Note 1 for further details. |
Appendix Non-IFRS financial measures
I. Return on tangible equity continued
| Personal & Ulster | Commercial & Private | ||||||
| UK | Ulster | ||||||
| Personal | Bank | Commercial | Private | RBS | NatWest | ||
| Quarter ended 30 September 2019 | Banking | RoI | Banking | Banking | International | Markets | |
| Operating (loss)/profit (£m) | (508) | 31 | 331 | 81 | 88 | (193) | |
| Adjustment for tax (£m) | 142 | - | (92) | (23) | (12) | 54 | |
| Preference share cost allocation (£m) | (18) | - | (41) | (4) | (5) | (20) | |
| Adjusted attributable (loss)/profit (£m) | (384) | 31 | 198 | 54 | 71 | (159) | |
| Annualised adjusted attributable (loss)/profit (£m) | (1,536) | 124 | 792 | 216 | 283 | (634) | |
| Average RWAe (£bn) | 38.2 | 14.2 | 78.8 | 9.9 | 6.8 | 48.7 | |
| Equity factor | 15.0% | 15.0% | 12.0% | 13.0% | 16.0% | 15.0% | |
| RWAe applying equity factor (£bn) | 5.7 | 2.1 | 9.5 | 1.3 | 1.1 | 7.3 | |
| Return on equity | (26.8%) | 5.8% | 8.4% | 16.8% | 26.0% | (8.7%) | |
| Quarter ended 30 June 2019 | |||||||
| Operating profit (£m) | 539 | 3 | 264 | 75 | 101 | 362 | |
| Adjustment for tax (£m) | (151) | - | (74) | (21) | (14) | (101) | |
| Preference share cost allocation (£m) | (18) | - | (41) | (4) | - | (30) | |
| Adjusted attributable profit (£m) | 370 | 3 | 149 | 50 | 87 | 231 | |
| Annualised adjusted attributable profit (£m) | 1,480 | 12 | 596 | 199 | 345 | 924 | |
| Adjustment for Alawwal bank merger gain (£m) | - | - | - | - | - | (598) | |
| Annualised adjusted attributable profit (£m) | 1,480 | 12 | 596 | 199 | 345 | 326 | |
| Average RWAe (£bn) | 37.2 | 14.3 | 80.1 | 9.6 | 7.0 | 49.1 | |
| Equity factor | 15.0% | 15.0% | 12.0% | 13.0% | 16.0% | 15.0% | |
| RWAe applying equity factor (£bn) | 5.6 | 2.1 | 9.6 | 1.2 | 1.1 | 7.4 | |
| Return on equity | 26.5% | 0.6% | 6.2% | 15.9% | 30.8% | 4.4% | |
| Quarter ended 30 September 2018* | |||||||
| Operating profit/(loss) (£m) | 372 | (76) | 406 | 84 | 92 | 87 | |
| Adjustment for tax (£m) | (104) | - | (114) | (24) | (13) | (24) | |
| Preference share cost allocation (£m) | (20) | - | (47) | (6) | (4) | (27) | |
| Adjusted attributable profit/(loss) (£m) | 248 | (76) | 245 | 55 | 75 | 36 | |
| Annualised adjusted attributable profit/(loss) (£m) | 991 | (304) | 981 | 219 | 299 | 142 | |
| Average RWAe (£bn) | 34.0 | 17.1 | 85.5 | 9.4 | 6.9 | 52.5 | |
| Equity factor | 15.0% | 14.0% | 12.0% | 13.5% | 16.0% | 15.0% | |
| RWAe applying equity factor (£bn) | 5.1 | 2.4 | 10.3 | 1.3 | 1.1 | 7.9 | |
| Return on equity | 19.4% | (12.7%) | 9.6% | 17.3% | 26.9% | 1.8% | |
| * Restated. Refer to Note 1 for further details. |
Appendix Non-IFRS financial measures
II. Operating expenses analysis
| Statutory analysis (1,2) | ||||||
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018 | 2019 | 2019 | 2018 | ||
| Operating expenses | £m | £m | £m | £m | £m | |
| Staff expenses | 3,028 | 3,108 | 1,000 | 1,017 | 1,022 | |
| Premises and equipment | 823 | 972 | 265 | 293 | 328 | |
| Other administrative expenses | 2,085 | 2,521 | 1,222 | 445 | 885 | |
| Administrative expenses | 5,936 | 6,601 | 2,487 | 1,755 | 2,235 | |
| Depreciation and amortisation | 853 | 544 | 232 | 377 | 206 | |
| Write-down of other intangible assets | 9 | 31 | (21) | 30 | - | |
| Total operating expenses | 6,798 | 7,176 | 2,698 | 2,162 | 2,441 |
| Non-statutory analysis | ||||||
| Nine months ended | Quarter ended | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018 | 2019 | 2019 | 2018 | ||
| Operating expenses | £m | £m | £m | £m | £m | |
| Staff expenses | 2,732 | 2,790 | 891 | 905 | 887 | |
| Premises and equipment | 730 | 872 | 237 | 245 | 298 | |
| Other administrative expenses | 1,078 | 1,164 | 405 | 318 | 404 | |
| Strategic costs (1) | 844 | 649 | 215 | 434 | 299 | |
| Litigation and conduct costs (2) | 810 | 1,190 | 750 | 55 | 389 | |
| Administrative expenses | 6,194 | 6,665 | 2,498 | 1,957 | 2,277 | |
| Depreciation and amortisation | 620 | 480 | 221 | 200 | 164 | |
| Write-down of other intangible assets | (16) | 31 | (21) | 5 | - | |
| Total | 6,798 | 7,176 | 2,698 | 2,162 | 2,441 |
Notes:
- On a statutory, or GAAP, basis, strategic costs are included within staff, premises and equipment, depreciation and amortisation, write-down of other intangible assets and other administrative expenses.
- On a statutory, or GAAP, basis, litigation and conduct costs are included within other administrative expenses.
III. Cost:income ratio
| Personal & Ulster | Commercial & Private | ||||||||
| UK | Ulster | ||||||||
| Personal | Bank | Commercial | Private | RBS | NatWest | Central items | RBS | ||
| Nine months ended | Banking | RoI | Banking | Banking | International | Markets | & other | Group | |
| 30 September 2019 | £m | £m | £m | £m | £m | £m | £m | £m | |
| Operating expenses | (2,830) | (412) | (1,900) | (351) | (181) | (1,026) | (98) | (6,798) | |
| Operating lease depreciation | - | - | 103 | - | - | - | - | 103 | |
| Adjusted operating expenses | (2,830) | (412) | (1,797) | (351) | (181) | (1,026) | (98) | (6,695) | |
| Total income | 3,671 | 428 | 3,242 | 582 | 460 | 1,092 | 545 | 10,020 | |
| Operating lease depreciation | - | - | (103) | - | - | - | - | (103) | |
| Adjusted total income | 3,671 | 428 | 3,139 | 582 | 460 | 1,092 | 545 | 9,917 | |
| Cost:income ratio | 77.1% | 96.3% | 57.2% | 60.3% | 39.3% | 94.0% | nm | 67.5% | |
| Nine months ended | |||||||||
| 30 September 2018 | |||||||||
| Operating expenses | (2,110) | (419) | (1,723) | (335) | (174) | (1,149) | (1,266) | (7,176) | |
| Operating lease depreciation | - | - | 89 | - | - | - | - | 89 | |
| Adjusted operating expenses | (2,110) | (419) | (1,634) | (335) | (174) | (1,149) | (1,266) | (7,087) | |
| Total income | 3,808 | 463 | 3,486 | 577 | 439 | 1,290 | 281 | 10,344 | |
| Operating lease depreciation | - | - | (89) | - | - | - | - | (89) | |
| Adjusted total income | 3,808 | 463 | 3,397 | 577 | 439 | 1,290 | 281 | 10,255 | |
| Cost:income ratio | 55.4% | 90.5% | 48.1% | 58.1% | 39.6% | 89.1% | nm | 69.1% | |
| * Restated. Refer to Note 1 for further details. |
Appendix Non-IFRS performance measures
III. Cost:income ratio continued
| Personal & Ulster | Commercial & Private | ||||||||
| UK | Ulster | ||||||||
| Personal | Bank | Commercial | Private | RBS | NatWest | Central items | RBS | ||
| Banking | RoI | Banking | Banking | International | Markets | & other | Group | ||
| Quarter ended | £m | £m | £m | £m | £m | £m | £m | £m | |
| 30 September 2019 | |||||||||
| Operating expenses | (1,601) | (131) | (638) | (119) | (62) | (348) | 201 | (2,698) | |
| Operating lease depreciation | - | - | 35 | - | - | - | - | 35 | |
| Adjusted operating expenses | (1,601) | (131) | (603) | (119) | (62) | (348) | 201 | (2,663) | |
| Total income | 1,224 | 145 | 1,077 | 198 | 150 | 150 | (41) | 2,903 | |
| Operating lease depreciation | - | - | (35) | - | - | - | - | (35) | |
| Adjusted total income | 1,224 | 145 | 1,042 | 198 | 150 | 150 | (41) | 2,868 | |
| Cost:income ratio | 130.8% | 90.3% | 57.9% | 60.1% | 41.3% | 232.0% | nm | 92.9% | |
| 30 June 2019 | |||||||||
| Operating expenses | (594) | (145) | (622) | (115) | (60) | (344) | (282) | (2,162) | |
| Operating lease depreciation | - | - | 34 | - | - | - | - | 34 | |
| Adjusted operating expenses | (594) | (145) | (588) | (115) | (60) | (344) | (282) | (2,128) | |
| Total income | 1,202 | 138 | 1,083 | 191 | 159 | 686 | 621 | 4,080 | |
| Operating lease depreciation | - | - | (34) | - | - | - | - | (34) | |
| Adjusted total income | 1,202 | 138 | 1,049 | 191 | 159 | 686 | 621 | 4,046 | |
| Cost:income ratio | 49.4% | 105.1% | 56.1% | 60.2% | 37.7% | 50.1% | nm | 52.6% | |
| 30 September 2018 | |||||||||
| Operating expenses | (819) | (167) | (583) | (110) | (60) | (478) | (224) | (2,441) | |
| Operating lease depreciation | - | - | 32 | - | - | - | - | 32 | |
| Adjusted operating expenses | (819) | (167) | (551) | (110) | (60) | (478) | (224) | (2,409) | |
| Total income | 1,257 | 151 | 1,096 | 195 | 155 | 569 | 219 | 3,642 | |
| Operating lease depreciation | - | - | (32) | - | - | - | - | (32) | |
| Adjusted total income | 1,257 | 151 | 1,064 | 195 | 155 | 569 | 219 | 3,610 | |
| Cost:income ratio | 65.2% | 110.6% | 51.8% | 56.4% | 38.7% | 84.0% | nm | 66.7% |
* Restated. Refer to Note 1 for further details.
IV. Net interest margin
| Nine months ended or as at | Quarter ended or as at | |||||
| 30 September | 30 September | 30 September | 30 June | 30 September | ||
| 2019 | 2018 | 2019 | 2019 | 2018 | ||
| £m | £m | £m | £m | £m | ||
| RBS net interest income | 6,010 | 6,480 | 2,006 | 1,971 | 2,154 | |
| NWM net interest income | 184 | (82) | 62 | 91 | (15) | |
| Net interest income excluding NWM | 6,194 | 6,398 | 2,068 | 2,062 | 2,139 | |
| Annualised net interest income | 8,035 | 8,664 | 7,959 | 7,906 | 8,546 | |
| Annualised net interest income excluding NWM | 8,281 | 8,554 | 8,205 | 8,271 | 8,486 | |
| Average interest earning assets (IEA) | 445,068 | 435,218 | 454,429 | 444,800 | 443,092 | |
| NWM average IEA | 35,065 | 26,989 | 38,616 | 34,436 | 26,705 | |
| Bank average IEA excluding NWM | 410,003 | 408,229 | 415,813 | 410,364 | 416,387 | |
| Net interest margin | 1.81% | 1.99% | 1.75% | 1.78% | 1.93% | |
| Bank net interest margin (RBS NIM excluding NWM) | 2.02% | 2.10% | 1.97% | 2.02% | 2.04% |
V. Loan:deposit ratio
| As at | |||
| 30 September | 30 June | 31 December | |
| 2019 | 2019 | 2018 | |
| £bn | £bn | £bn | |
| Loans to customers - amortised cost | 319.5 | 310.6 | 305.1 |
| Customer deposits | 369.7 | 361.6 | 360.9 |
| Loan:deposit ratio (%) | 86% | 86% | 85% |
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