rbs201305036k2.htm
 
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For May 3, 2013
 
Commission File Number: 001-10306

 
The Royal Bank of Scotland Group plc

 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ

 
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X
  
Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________


Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes
   ___
No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 
 
The following information was issued as a Company announcement in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:

 
 
 
 
 
 
Divisional performance
 
The operating profit/(loss)(1) of each division is shown below.
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Operating profit/(loss) before impairment losses by division
      
UK Retail
557 
606 
632 
UK Corporate
543 
658 
668 
Wealth
61 
92 
53 
International Banking
149 
192 
132 
Ulster Bank
76 
75 
84 
US Retail & Commercial
208 
223 
121 
       
Retail & Commercial
1,594 
1,846 
1,690 
Markets
294 
161 
826 
Direct Line Group
89 
113 
84 
Central items
(43)
126 
(136)
       
Core
1,934 
2,246 
2,464 
Non-Core
(72)
(239)
6 
       
Group operating profit before impairment losses
1,862 
2,007 
2,470 
       
Impairment losses by division
      
UK Retail
80 
93 
155 
UK Corporate
185 
234 
176 
Wealth
5 
16 
10 
International Banking
55 
37 
35 
Ulster Bank
240 
318 
394 
US Retail & Commercial
19 
23 
19 
       
Retail & Commercial
584 
721 
789 
Markets
16 
22 
2 
Central items
- 
8 
34 
       
Core
600 
751 
825 
Non-Core
433 
703 
489 
       
Group impairment losses
1,033 
1,454 
1,314 
 
Note:
 
(1)
Operating profit/(loss) before own credit adjustments, Payment Protection Insurance costs, Interest Rate Hedging Products redress and related costs, regulatory fines, integration and restructuring costs, (loss)/gain on redemption of own debt, write-down of goodwill and other intangible assets, Asset Protection Scheme, amortisation of purchased intangible assets, strategic disposals, bank levy, RFS Holdings minority interest and includes the results of Direct Line Group on a managed basis, which are included in discontinued operations in the statutory results until 12 March 2013 and as an associated undertaking thereafter.
 
 
 
 
 
Divisional performance (continued)
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Operating profit/(loss) by division
      
UK Retail
477 
513 
477 
UK Corporate
358 
424 
492 
Wealth
56 
76 
43 
International Banking
94 
155 
97 
Ulster Bank
(164)
(243)
(310)
US Retail & Commercial
189 
200 
102 
       
Retail & Commercial
1,010 
1,125 
901 
Markets
278 
139 
824 
Direct Line Group
89 
113 
84 
Central items
(43)
118 
(170)
       
Core
1,334 
1,495 
1,639 
Non-Core
(505)
(942)
(483)
       
Group operating profit
829 
553 
1,156 
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
% 
% 
% 
       
Net interest margin by division
      
UK Retail
3.49 
3.60 
3.61 
UK Corporate
3.01 
2.97 
3.09 
Wealth
3.55 
3.69 
3.67 
International Banking
1.74 
1.62 
1.60 
Ulster Bank
1.85 
1.93 
1.87 
US Retail & Commercial
2.93 
2.90 
3.03 
       
Retail & Commercial
2.90 
2.91 
2.91 
Non-Core
(0.25)
0.29 
0.31 
       
Group net interest margin
1.95 
1.95 
1.89 
 
 
 
31 March 
2013 
31 December 
2012 
 
£bn 
£bn 
     
Total funded assets by division
    
UK Retail
117.1 
117.4 
UK Corporate
109.9 
110.2 
Wealth
21.7 
21.4 
International Banking
54.4 
53.0 
Ulster Bank
30.6 
30.6 
US Retail & Commercial
76.3 
72.1 
     
Retail & Commercial
410.0 
404.7 
Markets
288.0 
284.5 
Other (primarily Group Treasury)
123.8 
123.0 
     
Core
821.8 
812.2 
Non-Core
52.9 
57.4 
     
 
874.7 
869.6 
RFS Holdings minority interest
1.0 
0.8 
     
Group
875.7 
870.4 
 
 
 
 
 
 
Divisional performance (continued)
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Risk-weighted assets by division
            
UK Retail
44.5 
45.7 
(3%)
  
48.2 
(8%)
UK Corporate
87.0 
86.3 
1% 
  
76.9 
13% 
Wealth
12.5 
12.3 
2% 
  
12.9 
(3%)
International Banking
48.9 
51.9 
(6%)
  
41.8 
17% 
Ulster Bank
36.8 
36.1 
2% 
  
38.4 
(4%)
US Retail & Commercial
58.9 
56.5 
4% 
  
58.6 
1% 
             
Retail & Commercial
288.6 
288.8 
- 
  
276.8 
4% 
Markets
88.5 
101.3 
(13%)
  
115.6 
(23%)
Other (primarily Group Treasury)
10.2 
5.8 
76% 
  
11.0 
(7%)
             
Core
387.3 
395.9 
(2%)
  
403.4 
(4%)
Non-Core
54.6 
60.4 
(10%)
  
89.9 
(39%)
             
Group before benefit of Asset Protection
  Scheme
441.9 
456.3 
(3%)
  
493.3 
(10%)
Benefit of Asset Protection Scheme
- 
- 
- 
  
(62.2)
(100%)
             
Group before RFS Holdings minority
  interest
441.9 
456.3 
(3%)
  
431.1 
3% 
RFS Holdings minority interest
3.9 
3.3 
18% 
  
3.2 
22% 
             
Group
445.8 
459.6 
(3%)
  
434.3 
3% 
 
 
 
Employee numbers by division (full time equivalents rounded to the nearest hundred)
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
UK Retail
25,800 
26,000 
27,600 
UK Corporate
13,600 
13,300 
13,400 
Wealth
5,100 
5,100 
5,500 
International Banking
4,800 
4,600 
5,600 
Ulster Bank
5,000 
4,500 
4,500 
US Retail & Commercial
18,600 
18,700 
18,700 
       
Retail & Commercial
72,900 
72,200 
75,300 
Markets
11,300 
11,300 
13,300 
Direct Line Group
- 
14,200 
15,100 
Group Centre
6,800 
6,800 
6,600 
       
Core
91,000 
104,500 
110,300 
Non-Core
2,600 
3,100 
4,300 
       
 
93,600 
107,600 
114,600 
Business Services
29,100 
29,100 
29,500 
Integration and restructuring
300 
500 
1,000 
       
Group
123,000 
137,200 
145,100 
 
 
 
 
 
UK Retail
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
965 
1,011 
1,001 
       
Net fees and commissions
212 
202 
237 
Other non-interest income
14 
17 
29 
       
Non-interest income
226 
219 
266 
       
Total income
1,191 
1,230 
1,267 
       
Direct expenses
      
  - staff
(178)
(186)
(211)
  - other
(112)
(90)
(78)
Indirect expenses
(344)
(348)
(346)
       
 
(634)
(624)
(635)
       
Operating profit before impairment losses
557 
606 
632 
Impairment losses
(80)
(93)
(155)
       
Operating profit
477 
513 
477 
       
       
Analysis of income by product
      
Personal advances
223 
228 
236 
Personal deposits
103 
150 
185 
Mortgages
628 
610 
563 
Cards
209 
214 
219 
Other
28 
28 
64 
       
Total income
1,191 
1,230 
1,267 
       
       
Analysis of impairments by sector
      
Mortgages
10 
5 
34 
Personal
35 
64 
82 
Cards
35 
24 
39 
       
Total impairment losses
80 
93 
155 
       
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements) by sector
      
Mortgages
- 
- 
0.1% 
Personal
1.6% 
2.9% 
3.5% 
Cards
2.5% 
1.7% 
2.8% 
       
Total
0.3% 
0.3% 
0.6% 
 
 
 
 
 
UK Retail (continued)
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
25.5% 
27.2% 
24.0% 
Net interest margin
3.49% 
3.60% 
3.61% 
Cost:income ratio
53% 
51% 
50% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
  - mortgages
99.1 
99.1 
- 
  
97.5 
2% 
  - personal
8.6 
8.8 
(2%)
  
9.4 
(9%)
  - cards
5.5 
5.7 
(4%)
  
5.6 
(2%)
             
 
113.2 
113.6 
- 
  
112.5 
1% 
Loan impairment provisions
(2.6)
(2.6)
- 
  
(2.7)
(4%)
             
Net loans and advances to customers
110.6 
111.0 
- 
  
109.8 
1% 
             
Risk elements in lending
4.4 
4.6 
(4%)
  
4.6 
(4%)
Provision coverage (2)
58% 
58% 
- 
  
58% 
- 
             
Customer deposits
110.1 
107.6 
2% 
  
104.1 
6% 
Assets under management (excluding deposits)
6.2 
6.0 
3% 
  
5.8 
7% 
Loan:deposit ratio (excluding repos)
100% 
103% 
(300bp)
  
105% 
(500bp)
             
Risk-weighted assets (3)
            
  - Credit risk (non-counterparty)
36.7 
37.9 
(3%)
  
40.4 
(9%)
  - Operational risk
7.8 
7.8 
- 
  
7.8 
- 
             
 
44.5 
45.7 
(3%)
  
48.2 
(8%)
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
(3)
Divisional RWAs are based on a long-term conservative average secured mortgage probability of default methodology rather than the current lower point in time basis required for regulatory reporting.
 
Key points
During Q1 2013, UK Retail continued to make progress towards becoming a simpler, more customer focused business. On 18 March 2013, UK Retail announced its new strategy and the investment of £700 million in the business over the next 3-5 years, as part of its plans to build the best retail bank in the UK.
 
The strategy focuses on understanding and responding to customers' needs, making banking easier and being fair and honest. At the heart of those plans is improving systems and processes to make it simpler for customers to do business with us and to free up more time to coach and develop customer facing teams.
 
 
 
 
 
UK Retail (continued)
 
Key points (continued)
In Q1 2013, UK Retail implemented a new Telephony Desktop System across all of its Customer Contact Centres, giving staff all the information they need to help customers on one screen, saving customer time and improving the experience. In addition, mortgage advisors attended extensive training courses and were re-accredited during Q1 2013 to help ensure customers receive the best possible outcome to meet their financial needs. The division also launched a new Specialist Financial Advice business for customers who require advice about their investment and protection needs. Through quality advice from fully accredited advisers, customers can make informed financial decisions.
 
Further enhancements were made to UK Retail's mobile banking app, used by over two million customers. Customers can now open a savings account using the iPhone or iPad apps (a first in the UK), and the app also now includes the ability to pay any mobile phone contact who holds a VISA debit card. In February 2013, as a direct response to requests from customers, UK Retail launched a version of the app for customers with Windows phones which attracted top reviews on WindowsPhone.com, with more than 10,000 downloads in the first few days following launch.
 
Q1 2013 compared with Q4 2012
 
·
Operating profit of £477 million held up well, excluding the impact on income of fewer days in the quarter (£22 million) and the effect on expenses of higher FSCS levy charges (£22 million). Return on equity remained robust.
   
·
Mortgage balances remained flat as the direct sales force took part in a re-accreditation training exercise to help ensure optimal customer outcomes. Credit card balances reflected seasonal customer behaviour, although the interest-bearing balances remained stable.
   
·
Customer deposit balances increased by 2%, mainly due to strong current account and instant access savings performance, which helped drive a 3% reduction in the loan:deposit ratio to 100%.
   
·
Net interest income, down £46 million, reflected the result of fewer days in the quarter as well as continued lower rates on current account hedges. This, along with the non-recurrence of an internal funding benefit in Q4 2012, drove net interest margin 11 basis points lower to 3.49%.
   
·
Non-interest income increased by £7 million although investment advice income has been adversely impacted by the Retail Distribution Review (RDR).
   
·
Staff costs declined by a further 4% as a consequence of increased branch efficiency and automation which drove headcount reductions. Other direct costs were successfully controlled, with the increase due to a rise in the FSCS levy charge of £22 million.
   
·
Impairment losses declined by 14% reflecting slightly lower default levels and the recognition of improved recoveries on previously defaulted unsecured debt.
   
·
Risk-weighted assets fell by 3%, reflecting quality improvements and small balance reductions across the unsecured portfolio.
 
 
 
 
 
 
UK Retail (continued)
 
Key points (continued)
 
Q1 2013 compared with Q1 2012
 
·
Operating profit was resilient as impairments improved by £75 million, offsetting weaker income trends.
   
·
The loan:deposit ratio improved by 5%.
   
 
○
Mortgage balances increased by 2% reflecting strong growth in 2012. Personal lending balances declined by 9% largely as a result of continued customer deleveraging.
 
○
Customer deposits increased by 6% with strong instant access balance growth and a healthy 2012/13 ISA season.
   
·
Net interest income reflected the continuing roll-over of current account hedges at lower prevailing market rates and lower unsecured balances.
   
·
Non-interest income was affected by restructuring and retraining to meet industry-wide RDR regulatory changes. In addition, packaged account fees and credit card insurance income were lower.
   
·
Total costs remained stable as staff costs declined, reflecting headcount reductions of 1,800 offset by a higher FSCS levy and other regulatory charges.
   
·
Impairment losses declined, reflecting lower default rates.
 
 
 
 
 
UK Corporate
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
706 
717 
756 
       
Net fees and commissions
321 
349 
336 
Other non-interest income
57 
107 
109 
       
Non-interest income
378 
456 
445 
       
Total income
1,084 
1,173 
1,201 
       
Direct expenses
      
  - staff
(228)
(226)
(249)
  - other
(105)
(99)
(85)
Indirect expenses
(208)
(190)
(199)
       
 
(541)
(515)
(533)
       
Operating profit before impairment losses
543 
658 
668 
Impairment losses
(185)
(234)
(176)
       
Operating profit
358 
424 
492 
       
       
Analysis of income by business
      
Corporate and commercial lending
622 
672 
687 
Asset and invoice finance
164 
176 
162 
Corporate deposits
73 
87 
166 
Other
225 
238 
186 
       
Total income
1,084 
1,173 
1,201 
       
       
Analysis of impairments by sector
      
Financial institutions
2 
3 
2 
Hotels and restaurants
18 
23 
15 
Housebuilding and construction
12 
25 
25 
Manufacturing
8 
10 
- 
Private sector education, health, social work, recreational and community
  services
25 
2 
22 
Property
69 
71 
30 
Wholesale and retail trade, repairs
32 
47 
33 
Asset and invoice finance
1 
10 
9 
Shipping
8 
42 
2 
Other
10 
1 
38 
       
Total impairment losses
185 
234 
176 
 
 
 
 
 
UK Corporate (continued)
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Loan impairment charge as % of gross customer loans and  
  advances (excluding reverse repurchase agreements) by sector
      
Financial institutions
0.2% 
0.2% 
0.1% 
Hotels and restaurants
1.3% 
1.6% 
1.0% 
Housebuilding and construction
1.5% 
2.9% 
2.7% 
Manufacturing
0.7% 
0.9% 
- 
Private sector education, health, social work, recreational and community
  services
1.1% 
0.1% 
1.0% 
Property
1.1% 
1.1% 
0.4% 
Wholesale and retail trade, repairs
1.5% 
2.2% 
1.5% 
Asset and invoice finance
- 
0.4% 
0.3% 
Shipping
0.4% 
2.2% 
0.1% 
Other
0.1% 
- 
0.6% 
       
Total
0.7% 
0.9% 
0.6% 
 
 
Key metrics
 
 
Quarter ended
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
10.7% 
13.2% 
16.2% 
Net interest margin
3.01% 
2.97% 
3.09% 
Cost:income ratio
50% 
44% 
44% 
 
 
 
 
 
 
UK Corporate (continued)
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
  - financial institutions
5.1 
5.8 
(12%)
  
6.2 
(18%)
  - hotels and restaurants
5.6 
5.6 
- 
  
6.0 
(7%)
  - housebuilding and construction
3.1 
3.4 
(9%)
  
3.7 
(16%)
  - manufacturing
4.7 
4.7 
- 
  
4.7 
- 
  - private sector education, health, social
      work, recreational and community services
8.8 
8.7 
1% 
  
8.6 
2% 
  - property
24.4 
24.8 
(2%)
  
26.7 
(9%)
  - wholesale and retail trade, repairs
8.6 
8.5 
1% 
  
9.1 
(5%)
  - asset and invoice finance
11.4 
11.2 
2% 
  
10.3 
11% 
  - shipping
7.7 
7.6 
1% 
  
7.7 
- 
  - other
27.4 
26.7 
3% 
  
26.7 
3% 
             
 
106.8 
107.0 
- 
  
109.7 
(3%)
Loan impairment provisions
(2.4)
(2.4)
- 
  
(2.1)
14% 
             
Net loans and advances to customers
104.4 
104.6 
- 
  
107.6 
(3%)
             
Total third party assets
109.9 
110.2 
- 
  
113.2 
(3%)
Risk elements in lending
5.3 
5.5 
(4%)
  
4.9 
8% 
Provision coverage (2)
45% 
45% 
- 
  
43% 
200bp 
             
Customer deposits
123.9 
127.1 
(3%)
  
124.3 
- 
Loan:deposit ratio (excluding repos)
84% 
82% 
200bp 
  
87% 
(300bp)
             
Risk-weighted assets
            
  - Credit risk (non-counterparty)
78.6 
77.7 
1% 
  
68.3 
15% 
  - Operational risk
8.4 
8.6 
(2%) 
  
8.6 
(2%)
             
 
87.0 
86.3 
1% 
  
76.9 
13% 
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
Key points
In a challenging economic landscape, UK Corporate continued to support the UK economy and contribute to the communities it operates in.
 
UK Corporate successfully completed the first of its Funding for Lending Scheme (FLS) phases in Q1 2013, surpassing the £2.5 billion of lending it had originally committed to. Since the scheme's inception, the division has supported over 19,000 Small and Medium Enterprises (SMEs) with over £3.2 billion of new FLS-related lending, £1.6 billion of which has already been drawn. These SME customers benefited from both lower interest rates and the removal of arrangement fees. Supporting UK economic growth, UK Corporate also used the FLS to provide targeted support to mid-sized manufacturers, reducing interest rates by more than 1% in some cases.
 
 
 
 
 
UK Corporate (continued)
 
Key points (continued)
In Q1 2013, UK Corporate underlined its commitment to the communities it operates in by continuing the implementation of its Business Banking Enterprise Programme. Through its Start-Up Surgeries, Mobile Business School and Business Academy the Programme offers support and advice to aspiring entrepreneurs, new start-up businesses and established SMEs looking to grow. In Q1 2013, UK Corporate began the national rollout of the Start-Up Surgeries and Business Academy which, since their launch, have already supported over 1,300 customers.
 
In Q1 2013, UK Corporate also expanded its Two Percent Club into the Midlands. A high-level networking group, the Two Percent Club aims to develop more women into senior business leaders in the UK and further underscores UK Corporate's longstanding commitment to helping women achieve their business goals.
 
Q1 2013 compared with Q4 2012
 
·
Operating profit fell by 16%, with revenues 8% lower than the more buoyant Q4 2012. This was partially offset by lower impairments (down 21%), with improving trends in the SME portfolio.
   
·
Net interest income was down 2% mainly as a result of fewer days in the quarter. Deposit margin compression, due to a continuation of low yields, was largely offset by an improvement in asset margins from selected sector re-pricing and back book refinancing.
   
·
Non-interest income declined by 17%, mainly from lower revenue share from Markets hedging activities, the non-repeat of equity investment gains of £19 million in Q4 2012, higher derivative close-out charges associated with impaired assets, up £11 million, and subdued transaction services.
   
·
Expenses were 5% higher, reflecting costs of £17 million provided for customer remediation. Excluding these, expenses were broadly in line with lower revenue-related costs offset by the implementation of revised internal charging arrangements, which resulted in UK Corporate taking an increased share of branch network costs.
   
·
Impairments fell by 21% in the quarter, with fewer significant individual cases and improving trends in the SME market.
   
·
Lending balances remained broadly flat over the course of Q1 2013, whilst absorbing targeted reductions in the commercial property sector.
   
·
Risk-weighted assets increased by 1% to £87 billion following further regulatory changes to models relating to the market-wide slotting approach on real estate.
 
 
 
 
 
UK Corporate (continued)
 
Key points (continued)
 
Q1 2013 compared with Q1 2012
 
·
Operating profit fell 27%, with continuing pressure on liability margins and with small increases in costs and impairments. Return on equity fell to 10.7%, reflecting the fall in operating profit and higher risk-weighted assets.
   
·
Net interest income decreased by 7%, primarily driven by continuing pressure on liability margins and the non-repeat of income deferral benefits of £28 million in Q1 2012. This was partially offset by improvements in asset margins.
   
·
Non-interest income was 15% lower, reflecting a decline in Markets revenue share, and derivative close-out charges up £14 million.
   
·
Total expenses increased by 2% as a result of customer remediation costs of £17 million and increased branch network charges, partially offset by lower revenue-related and staff incentive costs.
   
·
Impairments were slightly higher than in Q1 2012, which had benefited from a higher latent provision release.
   
·
Risk-weighted assets were 13%, or £10 billion, higher as a result of significant increases in market-wide regulatory capital model requirements and increases to default risk weights in other models.
 
 
 
 
 
Wealth
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
169 
178 
179 
       
Net fees and commissions
89 
89 
93 
Other non-interest income
15 
18 
18 
       
Non-interest income
104 
107 
111 
       
Total income
273 
285 
290 
       
Direct expenses
      
  - staff
(108)
(85)
(116)
  - other
(24)
(34)
(43)
Indirect expenses
(80)
(74)
(78)
       
 
(212)
(193)
(237)
       
Operating profit before impairment losses
61 
92 
53 
Impairment losses
(5)
(16)
(10)
       
Operating profit
56 
76 
43 
       
Analysis of income
      
Private banking
224 
230 
237 
Investments
49 
55 
53 
       
Total income
273 
285 
290 
 
 
Key metrics
 
Quarter ended
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
12.1% 
16.7% 
9.0% 
Net interest margin
3.55% 
3.69% 
3.67% 
Cost:income ratio
78% 
68% 
82% 
 
Note:
 
(1)
Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
 
 
 
 
 
Wealth (continued)
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
  - mortgages
8.8 
8.8 
- 
  
8.4 
5% 
  - personal
5.7 
5.5 
4% 
  
6.8 
(16%)
  - other
2.7 
2.8 
(4%)
  
1.7 
59% 
             
 
17.2 
17.1 
1% 
  
16.9 
2% 
Loan impairment provisions
(0.1)
(0.1)
- 
  
(0.1)
- 
             
Net loans and advances to customers
17.1 
17.0 
1% 
  
16.8 
2% 
             
Risk elements in lending
0.3 
0.2 
50% 
  
0.2 
50% 
Provision coverage (1)
43% 
44% 
(100bp)
  
38% 
500bp 
Assets under management (excluding
  deposits)
30.8 
28.9 
7% 
  
31.4 
(2%)
Customer deposits
39.6 
38.9 
2% 
  
38.3 
3% 
             
Loan:deposit ratio (excluding repos)
43% 
44% 
(100bp)
  
44% 
(100bp)
             
Risk-weighted assets
            
  - Credit risk (non-counterparty)
10.4 
10.3 
1% 
  
10.9 
(5%)
  - Market risk
0.2 
0.1 
100% 
  
0.1 
100% 
  - Operational risk
1.9 
1.9 
- 
  
1.9 
- 
             
 
12.5 
12.3 
2% 
  
12.9 
(3%)
 
Note:
 
(1)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
Key points
Q1 2013 delivered an improved performance compared with the prior year, driven by lower expenses and a significant fall in impairments.
 
The period saw further execution of the division's strategy for generating new prospects through improved banker coverage, with senior hires in Asia and Middle East. Revenue growth in Asian and Indian markets was buoyant as a result of growth in collateralised lending, following enhancements made to the programme in 2012.
 
In the UK, clients have welcomed Coutts' new advice-led model. They have also been receptive to Coutts' differentiated approach, which delivers on the division's commitment to provide clients with the best service, advice and products based on their individual needs. Also in the UK, Coutts responded to client feedback and research with the launch of a new Coutts card suite, incorporating charge, credit and debit cards for both private and commercial banking clients and offering enhanced travel and international benefits plus multi-card functionality.
 
During 2013, the Coutts business continues to focus on implementing and delivering the new divisional strategy outlined in 2011. Priorities include optimising newly introduced service models, driving out further benefits of the division's global technology platform and streamlining key client facing processes.
 
 
 
 
 
Wealth (continued)
 
Key points (continued)
 
Q1 2013 compared with Q4 2012
 
·
Operating profit was lower than in the prior quarter, in large part reflecting the reversion of staff expenses following a significant reduction in incentive costs in Q4 2012, partially offset by an improvement in impairments.
   
·
Net interest income reflected the continued impact of lower rates on UK deposit hedges. Small improvements in deposit and lending margins were more than offset by lower income on hedges, driving the net interest margin 14 basis points lower.
   
·
Investment in technology and the global platform infrastructure was reflected in lower non-staff expenses, as a result of efficiency gains, and higher staff expenses, as headcount was increased to support this investment as well as to support regulatory projects. The phasing of Financial Services Compensation Scheme levies and the timing of incentive accruals also pushed expenses higher.
   
·
Impairments fell by £11 million, reflecting the non-recurrence of one-off items in Q4 2012.
   
·
Client assets and liabilities increased by 3%. Assets under management increased by 7%, benefiting from a recovery in markets in Q1 2013. Deposit volumes increased by 2%, while lending remained stable.
 
Q1 2013 compared with Q1 2012
 
·
Operating profit increased, driven by a decrease in expenses and impairments, despite the continuation of a challenging income environment.
   
·
Income trends reflect the wider economic environment, with muted investment activity and lower rates available on UK deposit hedges. Non-interest income was also impacted by client transfers resulting from the disposal of the Latin American, Caribbean and African businesses.
   
·
Expenses decreased by £25 million, partially due to the non-repeat of an £8.75 million fine from the Financial Services Authority incurred in Q1 2012 and a fall in headcount.
   
·
Client assets and liabilities increased marginally. Assets under management were largely maintained as positive market movements offset net outflows of low margin custody assets and client transfers resulting from the disposal of the Latin American, Caribbean and African businesses.
 
 
 
 
 
International Banking
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
197 
201 
260 
Non-interest income
285 
283 
282 
       
Total income
482 
484 
542 
       
Direct expenses
      
  - staff
(134)
(103)
(189)
  - other
(38)
(20)
(48)
Indirect expenses
(161)
(169)
(173)
       
 
(333)
(292)
(410)
       
Operating profit before impairment losses
149 
192 
132 
Impairment losses
(55)
(37)
(35)
       
Operating profit
94 
155 
97 
       
Of which:
      
Ongoing businesses
94 
150 
113 
Run-off businesses
- 
5 
(16)
       
Analysis of income by product
      
Cash management
187 
205 
268 
Trade finance
70 
70 
72 
Loan portfolio
224 
207 
197 
       
Ongoing businesses
481 
482 
537 
Run-off businesses
1 
2 
5 
       
Total income
482 
484 
542 
       
Analysis of impairments by sector
      
Manufacturing and infrastructure
40 
21 
17 
Property and construction
(14)
- 
- 
Transport and storage
24 
1 
(4)
Telecommunications, media and technology
- 
3 
9 
Banks and financial institutions
- 
- 
12 
Other
5 
12 
1 
       
Total impairment losses
55 
37 
35 
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements)
0.5% 
0.4% 
0.3% 
 
 
 
 
 
International Banking (continued)
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios (ongoing businesses)
      
Return on equity (1)
5.2% 
8.3% 
7.5% 
Net interest margin
1.74% 
1.62% 
1.60% 
Cost:income ratio
69% 
61% 
72% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross) (2)
42.5 
42.2 
1% 
  
53.1 
(20%)
Loan impairment provisions
(0.4)
(0.4)
- 
  
(0.8)
(50%)
             
Net loans and advances to customers
42.1 
41.8 
1% 
  
52.3 
20% 
Loans and advances to banks
5.8 
4.8 
21% 
  
4.0 
45% 
Securities
2.5 
2.6 
(4%)
  
4.0 
(38%)
Cash and eligible bills
0.4 
0.5 
(20%)
  
0.3 
33% 
Other
3.6 
3.3 
9% 
  
3.1 
16% 
             
Total third party assets (excluding derivatives mark-to-market)
54.4 
53.0 
3% 
  
63.7 
(15%)
Risk elements in lending
0.6 
0.4 
50% 
  
0.9 
(33%)
Provision coverage (3)
60% 
93% 
(3,300bp)
  
97% 
(3,700bp)
             
Customer deposits (excluding repos)
47.0 
46.2 
2% 
  
45.0 
4% 
Bank deposits (excluding repos)
4.7 
5.6 
(16%)
  
10.5 
(55%)
Loan:deposit ratio (excluding repos)
90% 
91% 
(100bp)
  
116% 
(2,600bp)
             
Risk-weighted assets
            
  - Credit risk (non-counterparty)
44.2 
46.7 
(5%)
  
37.0 
19% 
  - Operational risk
4.7 
5.2 
(10%)
  
4.8 
(2%)
             
 
48.9 
51.9 
(6%)
  
41.8 
17% 
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions), for the ongoing businesses.
(2)
Excludes disposal groups.
(3)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Run-off businesses (1)
      
Total income
1 
2 
5 
Direct expenses
(1)
3 
(21)
       
Operating profit/(loss)
- 
5 
(16)
 
Note:
 
(1)
Run-off businesses consist of the exited corporate finance business.
 
 
 
 
 
International Banking (continued)
 
Key points
In Q1 2013, International Banking continued its progress in strengthening its balance sheet, in particular its liability composition. Performance, however, continued to be restricted by ongoing macroeconomic pressures.
 
Despite these headwinds, the division has earned external recognition for its efforts in serving its customers' needs, helping RBS Group gain awards such as:
 
 
·
Best Trade Finance Bank in the UK (Global Finance Awards 2013).
   
·
Number Two in Sterling denominated Debt Capital Markets in Q1 2013 (Dealogic).
 
International Banking continues its unwavering focus on its customers. It strives to build deeper long-term relationships, to understand its customers' business well and to develop solutions that help them succeed. As part of its commitment to treating customers fairly, the division has developed a framework to pro-actively redress any clients who might be adversely effected.
 
Q1 2013 compared with Q4 2012
 
·
Operating profit was down £61 million, or 39%, largely reflecting the normalisation of expenses following the downward adjustment to variable compensation in Q4 2012, together with higher impairments.
   
·
Income remained stable:
 
○
Loan portfolio income was up 8% following completion of one large hedging transaction.
     
 
○
Cash management decreased by 9%, driven by tighter spreads following the decline in both three month LIBOR and five year fixed rates across Europe.
     
 
○
Trade finance remained stable despite significant pressure on margins following increased competition in Asia.
   
·
Total expenses increased by £41 million, or 14%, mainly due to the normalisation of revenue-linked expenses following the downward revision to variable compensation in Q4 2012.
   
·
Impairments in Q1 2013 included a £38 million single-name provision.
   
·
Return on equity was 5.2%, compared with 8.3% in Q4 2012. Excluding the single-name impairment, return on equity was 7.2% in Q1 2013.
   
·
Customer deposits increased by £1 billion, with an improvement in the deposit profile as the business strategically reduced short-term deposits and increased operational balances, reducing future liquidity outflow risk.
   
·
Third party assets were up 3% as the impact of sterling weakening against the US dollar and euro more than offset reductions in the lending portfolio and increased levels of repayments.
   
·
Risk-weighted assets decreased by 6% reflecting an active reduction in higher risk exposures. This was partially offset by exchange rate movements.
 
 
 
 
 
 
International Banking (continued)
 
Q1 2013 compared with Q1 2012
 
·
Operating profit was little changed as expense reductions offset the impact on income of the strategic reduction in the loan portfolio undertaken in 2012.
   
·
Income was 11% lower:
 
○
Loan portfolio income increased by 14%, mainly due to market movements associated with credit hedging activities.
     
 
○
Cash management income was affected by tighter deposit margins following reductions in both three month LIBOR and five year fixed rates across Europe. Payment fees were also lower, reflecting growth in electronic, lower-margin payments.
   
·
Expenses declined by £77 million, reflecting planned restructuring initiatives following the formation of the International Banking division in January 2012. Savings were achieved through headcount reduction and the run-off of discontinued businesses, with a resulting decrease in infrastructure support costs. Revenue-linked expenses also fell in line with the decrease in income.
   
·
Third party assets declined by 15%, reflecting targeted reductions in the lending portfolio carried out in 2012.
   
·
Customer deposits increased by 4% with a focus on growing operational balances. The net funding position improved with the loan:deposit ratio moving from 116% to 90%.
   
·
Bank deposits were down 55%, mainly as a result of lower short tenor balances, reflecting a strategic initiative to reduce liquidity outflow risk.
   
·
Risk-weighted assets increased by 17%, reflecting the impact of regulatory uplifts partially offset by successful mitigation through balance sheet reduction. Risk-weighted asset intensity in the loan book has increased significantly given the uplifts, which will result in strategic adjustments going forward.
 
 
 
 
 
 
Ulster Bank
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
154 
161 
165 
       
Net fees and commissions
34 
36 
38 
Other non-interest income
20 
15 
11 
       
Non-interest income
54 
51 
49 
       
Total income
208 
212 
214 
       
Direct expenses
      
  - staff
(57)
(53)
(53)
  - other
(15)
(14)
(12)
Indirect expenses
(60)
(70)
(65)
       
 
(132)
(137)
(130)
       
Operating profit before impairment losses
76 
75 
84 
Impairment losses
(240)
(318)
(394)
       
Operating loss
(164)
(243)
(310)
       
       
Analysis of income by business
      
Corporate
82 
85 
102 
Retail
89 
93 
88 
Other
37 
34 
24 
       
Total income
208 
212 
214 
       
       
Analysis of impairments by sector
      
Mortgages
90 
135 
215 
Commercial real estate
      
  - investment
46 
52 
40 
  - development
14 
17 
14 
Other corporate
75 
97 
114 
Other lending
15 
17 
11 
       
Total impairment losses
240 
318 
394 
       
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements) by sector
      
Mortgages
1.8% 
2.8% 
4.3% 
Commercial real estate
      
  - investment
5.1% 
5.8% 
4.2% 
  - development
8.0% 
9.7% 
7.0% 
Other corporate
3.8% 
5.0% 
5.6% 
Other lending
4.6% 
5.2% 
3.4% 
       
Total
2.9% 
3.9% 
4.6% 
 
 
 
 
 
Ulster Bank (continued)
 
 
Key metrics
 
Quarter ended
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
(13.5%)
(20.9%)
(25.8%)
Net interest margin
1.85% 
1.93% 
1.87% 
Cost:income ratio
63% 
65% 
61% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
Mortgages
19.7 
19.2 
3% 
  
19.8 
(1%)
Commercial real estate
            
  - investment
3.6 
3.6 
- 
  
3.8 
(5%)
  - development
0.7 
0.7 
- 
  
0.8 
(13%)
Other corporate
7.8 
7.8 
- 
  
8.2 
(5%)
Other lending
1.3 
1.3 
- 
  
1.3 
- 
             
 
33.1 
32.6 
2% 
  
33.9 
(2%)
Loan impairment provisions
(4.2)
(3.9)
8% 
  
(3.1)
35% 
             
Net loans and advances to customers
28.9 
28.7 
1% 
  
30.8 
(6%)
             
Risk elements in lending
            
Mortgages
3.4 
3.1 
10% 
  
2.5 
36% 
Commercial real estate
            
  - investment
1.6 
1.6 
- 
  
1.0 
60% 
  - development
0.4 
0.4 
- 
  
0.3 
33% 
Other corporate
2.4 
2.2 
9% 
  
1.9 
26% 
Other lending
0.2 
0.2 
- 
  
0.2 
- 
             
Total risk elements in lending
8.0 
7.5 
7% 
  
5.9 
36% 
Provision coverage (2)
53% 
52% 
100bp 
  
53% 
- 
             
Customer deposits
22.7 
22.1 
3% 
  
21.0 
8% 
Loan:deposit ratio (excluding repos)
127% 
130% 
(300bp)
  
147% 
(2,000bp)
             
Risk-weighted assets
            
  - Credit risk
            
    - non-counterparty
34.3 
33.6 
2% 
  
35.9 
(4%)
    - counterparty
0.6 
0.6 
- 
  
0.7 
(14%)
  - Market risk
0.2 
0.2 
- 
  
0.1 
100% 
  - Operational risk
1.7 
1.7 
- 
  
1.7 
- 
             
 
36.8 
36.1 
2% 
  
38.4 
(4%)
             
Spot exchange rate - €/£
1.183 
1.227 
    
1.200 
  
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating loss after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
 
 
 
Ulster Bank (continued)
 
Key points
Ulster Bank delivered a significant improvement in operating results with reduced impairment charges, in line with the recent stabilisation of the macroeconomic environment in the Republic of Ireland, driving a 33% reduction in operating losses. The bank continued to work with customers in arrears to find sustainable solutions, and significant investment was made in specialist resourcing to support customers in financial difficulty.
 
The progress made during 2012 to strengthen the balance sheet continued in Q1 2013 with deposit balances 7% higher than Q1 2012 on a constant currency basis. As a result the loan:deposit ratio further improved to 127% from 147% at Q1 2012.
 
Ulster Bank continued to improve its support for customers. New services aimed at improving customer convenience included the launch of 'Anytime banking' for business customers, which represents further progress to simplify customers' day to day banking needs through digital channels.
 
Q1 2013 compared with Q4 2012
 
·
Operating loss decreased by £79 million to £164 million primarily reflecting a significant reduction in impairment losses.
   
·
Income fell by £4 million in the quarter largely driven by lower interest-earning assets, the cost of deposit growth at the end of 2012 and the impact of fewer days in the quarter. Net interest margin decreased by 8 basis points to 1.85%.
   
·
Expenses were £5 million lower with the impact of an impairment charge on own property assets in Q4 2012 partly offset by higher underlying pension charges and further investment in programmes to support customers in financial difficulty in Q1 2013.
   
·
Impairment losses declined by £78 million, 25%, while remaining elevated. Although risk elements in lending increased in both the mortgage and corporate portfolios, the pace of arrears formation has slowed, particularly in the mortgage book. Residential asset values have been stabilising over the past two to three quarters.
   
·
Customer deposits won during Q4 2012 were retained in Q1 2013 (flat on a constant currency basis) and the loan:deposit ratio fell further to 127%. Customer loan balances decreased by £0.6 billion, or by 2% in constant currency terms.
 
Q1 2013 compared with Q1 2012
 
·
Operating loss decreased by £146 million or 47%, driven by a significant improvement in impairment losses.
   
·
Net interest income fell by £11 million reflecting lower customer loan balances, the impact of an increased volume of impaired loans and the relatively high cost of deposit raising. Net interest margin declined by 2 basis points, despite the impact of initiatives to widen loan margins and re-price deposits.
   
·
Non-interest income increased by £5 million, holding up well despite the low levels of new business and muted market activity.
 
 
 
 
 
Ulster Bank (continued)
 
Key points (continued)
 
Q1 2013 compared with Q1 2012 (continued)
 
·
Expenses showed a modest increase, reflecting investment in resources to support customers in arrears coupled with an increase in mandatory change requirements. Expenses continued to be managed efficiently with further progress made on initiatives to simplify the bank's operations.
   
·
Impairment losses decreased by £154 million, 39%, with a significant reduction in losses on the mortgage portfolio as underlying credit metrics improved and asset values began to stabilise.
   
·
The loan:deposit ratio further improved to 127% from 147% in Q1 2012. Loan balances declined by 4% in constant currency terms reflecting subdued demand for new lending coupled with customer action to reduce debt levels. Customer deposits increased by 7% at constant currency, largely driven by retail and SME balances, a key focus area in the bank's deposit gathering strategy.
 
 
 
 
 
 
US Retail & Commercial (£ Sterling)
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
471 
465 
491 
       
Net fees and commissions
190 
197 
199 
Other non-interest income
102 
78 
66 
       
Non-interest income
292 
275 
265 
       
Total income
763 
740 
756 
       
Direct expenses
      
  - staff
(279)
(227)
(270)
  - other
(246)
(263)
(243)
  - litigation settlement
- 
- 
(88)
Indirect expenses
(30)
(27)
(34)
       
 
(555)
(517)
(635)
       
Operating profit before impairment losses
208 
223 
121 
Impairment losses
(19)
(23)
(19)
       
Operating profit
189 
200 
102 
       
       
Average exchange rate - US$/£
1.552 
1.606 
1.571 
       
Analysis of income by product
      
Mortgages and home equity
126 
134 
134 
Personal lending and cards
100 
102 
98 
Retail deposits
190 
199 
217 
Commercial lending
168 
154 
160 
Commercial deposits
102 
101 
112 
Other
77 
50 
35 
       
Total income
763 
740 
756 
       
Analysis of impairments by sector
      
Residential mortgages
2 
2 
6 
Home equity
19 
13 
22 
Corporate and commercial
(24)
(20)
(16)
Other consumer
22 
24 
3 
Securities
- 
4 
4 
       
Total impairment losses
19 
23 
19 
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements) by sector
      
Residential mortgages
0.1% 
0.1% 
0.4% 
Home equity
0.6% 
0.4% 
0.6% 
Corporate and commercial
(0.4%)
(0.3%)
(0.3%)
Other consumer
1.0% 
1.2% 
0.2% 
       
Total
0.1% 
0.2% 
0.1% 
 
 
 
 
 
US Retail & Commercial (£ Sterling) (continued)
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
8.2% 
9.0% 
4.5% 
Adjusted return on equity (2)
8.2% 
9.0% 
8.4% 
Net interest margin
2.93% 
2.90% 
3.03% 
Cost:income ratio
73% 
70% 
84% 
Adjusted cost:income ratio (2)
73% 
70% 
72% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
  - residential mortgages
6.0 
5.8 
3% 
  
6.0 
- 
  - home equity
13.8 
13.3 
4% 
  
14.2 
(3%)
  - corporate and commercial
25.1 
23.8 
5% 
  
22.6 
11% 
  - other consumer
8.9 
8.4 
6% 
  
8.1 
10% 
             
 
53.8 
51.3 
5% 
  
50.9 
6% 
Loan impairment provisions
(0.3)
(0.3)
- 
  
(0.4)
(25%)
             
Net loans and advances to customers
53.5 
51.0 
5% 
  
50.5 
6% 
             
Total third party assets
77.0 
72.8 
6% 
  
74.0 
4% 
Investment securities
11.9 
12.0 
(1%)
  
14.3 
(17%)
Risk elements in lending
            
  - retail
0.9 
0.8 
13% 
  
0.6 
50% 
  - commercial
0.4 
0.3 
33% 
  
0.3 
33% 
             
Total risk elements in lending
1.3 
1.1 
18% 
  
0.9 
44% 
Provision coverage (3)
22% 
25% 
(300bp)
  
43% 
(2,100bp)
             
Customer deposits (excluding repos)
62.4 
59.2 
5% 
  
58.7 
6% 
Bank deposits (excluding repos)
1.7 
1.8 
(6%)
  
4.3 
(60%)
Loan:deposit ratio (excluding repos)
86% 
86% 
- 
  
86% 
- 
             
Risk-weighted assets
            
  - Credit risk
            
    - non-counterparty
53.1 
50.8 
5% 
  
52.8 
1% 
    - counterparty
0.8 
0.8 
- 
  
0.9 
(11%)
  - Operational risk
5.0 
4.9 
2% 
  
4.9 
2% 
             
 
58.9 
56.5 
4% 
  
58.6 
1% 
             
Spot exchange rate - US$/£
1.517 
1.616 
    
1.599 
  
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions).
(2)
Excludes the litigation settlement in Q1 2012.
(3)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
Key points
 
●
Sterling weakened against the US Dollar, with the spot exchange rate at 31 March 2013 decreasing by 6% compared with 31 December 2012.
   
●
Performance is described in full in the US dollar-based financial statements set out on pages 47 to 50.
 
 
 
 
 
US Retail & Commercial (US Dollar)
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
$m 
$m 
$m 
       
Income statement
      
Net interest income
731 
747 
772 
       
Net fees and commissions
295 
315 
312 
Other non-interest income
158 
127 
103 
       
Non-interest income
453 
442 
415 
       
Total income
1,184 
1,189 
1,187 
       
Direct expenses
      
  - staff
(433)
(365)
(425)
  - other
(381)
(422)
(379)
  - litigation settlement
- 
- 
(138)
Indirect expenses
(48)
(42)
(54)
       
 
(862)
(829)
(996)
       
Operating profit before impairment losses
322 
360 
191 
Impairment losses
(30)
(38)
(31)
       
Operating profit
292 
322 
160 
       
       
Analysis of income by product
      
Mortgages and home equity
195 
215 
211 
Personal lending and cards
155 
164 
154 
Retail deposits
295 
319 
341 
Commercial lending
261 
247 
251 
Commercial deposits
158 
163 
176 
Other
120 
81 
54 
       
Total income
1,184 
1,189 
1,187 
       
Analysis of impairments by sector
      
Residential mortgages
3 
3 
9 
Home equity
29 
21 
35 
Corporate and commercial
(36)
(31)
(25)
Other consumer
34 
39 
6 
Securities
- 
6 
6 
       
Total impairment losses
30 
38 
31 
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements) by sector
      
Residential mortgages
0.1% 
0.1% 
0.4% 
Home equity
0.6% 
0.4% 
0.6% 
Corporate and commercial
(0.4%)
(0.3%)
(0.3%)
Other consumer
1.0% 
1.2% 
0.2% 
       
Total
0.1% 
0.2% 
0.1% 
 
 
 
 
 
US Retail & Commercial (US Dollar) (continued)
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Return on equity (1)
8.2% 
9.0% 
4.5% 
Adjusted return on equity (2)
8.2% 
9.0% 
8.4% 
Net interest margin
2.93% 
2.90% 
3.03% 
Cost:income ratio
73% 
70% 
84% 
Adjusted cost:income ratio (2)
73% 
70% 
72% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
$bn 
$bn 
Change 
  
$bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross)
            
  - residential mortgages
9.1 
9.4 
(3%)
  
9.5 
(4%)
  - home equity
20.9 
21.5 
(3%)
  
22.6 
(8%)
  - corporate and commercial
38.1 
38.5 
(1%)
  
36.2 
5% 
  - other consumer
13.5 
13.5 
- 
  
13.2 
2% 
             
 
81.6 
82.9 
(2%)
  
81.5 
- 
Loan impairment provisions
(0.4)
(0.5)
(20%)
  
(0.6)
(33%)
             
Net loans and advances to customers
81.2 
82.4 
(1%)
  
80.9 
- 
             
Total third party assets
116.8 
117.7 
(1%)
  
118.3 
(1%)
Investment securities
18.1 
19.5 
(7%)
  
22.9 
(21%)
Risk elements in lending
            
  - retail
1.4 
1.3 
8% 
  
0.9 
56% 
  - commercial
0.5 
0.6 
(17%)
  
0.6 
(17%)
             
Total risk elements in lending
1.9 
1.9 
- 
  
1.5 
27% 
Provision coverage (3)
22% 
25% 
(300bp)
  
43% 
(2,100bp)
             
Customer deposits (excluding repos)
94.6 
95.6 
(1%)
  
93.9 
1% 
Bank deposits (excluding repos)
2.6 
2.9 
(10%)
  
6.9 
(62%)
Loan:deposit ratio (excluding repos)
86% 
86% 
- 
  
86% 
- 
             
Risk-weighted assets
            
  - Credit risk
            
    - non-counterparty
80.6 
82.0 
(2%)
  
84.4 
(5%)
    - counterparty
1.2 
1.4 
(14%)
  
1.5 
(20%)
  - Operational risk
7.5 
7.9 
(5%)
  
7.8 
(4%)
             
 
89.3 
91.3 
(2%)
  
93.7 
(5%)
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax divided by average notional equity (based on 10% of monthly average of divisional RWAs, adjusted for capital deductions).
(2)
Excludes the litigation settlement in Q1 2012.
(3)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
 
 
 
US Retail & Commercial (US Dollar) (continued)
 
Key points
In Q1 2013, US R&C continued to focus on its back-to-basics strategy, concentrating on core banking products and competing on service and product capabilities rather than price.
 
Consumer Banking continued to create greater convenience for its customers by addressing the shift in customer preferences and expanding its distribution presence. In Q1 2013, another 227 intelligent deposit machines were installed and additional web account opening enhancements were made. Expansion of the wealth and auto businesses continued, with the launch of Premier banking services to the Pittsburgh market and the ongoing increase of the auto dealer base (up 19% year on year).
 
Consumer Banking also continued to grow and deepen customer relationships, evidenced by the upward trends in online banking usage, online bill pay and direct deposit penetration. Moreover, the number of deposit customers with a consumer loan product continued to increase (up 3% year on year) indicating more effective cross-sell efforts.
 
To promote its thought leadership capabilities and to also help grow and deepen client relationships, Commercial Banking leveraged the 2013 M&A Outlook Research Study to develop an integrated marketing programme that includes industry webinars and targeted advertising campaigns. The division's strategic alliance with Oppenheimer further enhanced RBS Citizens commercial bankers' ability to drive forward relationships, ideas, and capabilities in the markets they serve.
 
Corporate Finance & Capital Markets, which was launched in 2009, continued to take market share, not only from its regional competitors but also from the large money centre banks, moving up in the traditional Middle Market league tables from unranked in 2009 to sixth position as at Q4 2012.
 
The Treasury Solutions division launched accessPAYMODE-X™, a business-to-business electronic settlement network. The product features improved efficiencies and security and provides web access and electronic delivery of remittance information. In partnership with NetSpend, a prepaid debit card provider, Treasury Solutions also launched a Commercial payroll card, which provides its clients' employees with an alternative to a payroll check. The card drives higher direct deposit participation, reduces overall payroll costs and minimizes exposure to check fraud.
 
Q1 2013 compared with Q4 2012
 
·
Operating profit of $292 million was resilient excluding the impact of a one-off $33 million pension gain in Q4 2012.
   
·
Net interest income was down 2% as favourable funding costs and commercial loan growth were more than offset by a smaller investment portfolio and consumer loan run-off.
   
·
Non-interest income was up $11 million, or 2%, reflecting higher securities gains offset by lower mortgage banking fees and deposit fees.
   
·
Excluding the one-off $33 million pension gain in Q4 2012, total expenses were flat, reflecting lower operational losses offset by phasing of the annual incentive plan accruals and a seasonal increase in payroll taxes.
   
·
Impairment losses were down $8 million, or 21%, reflecting lower impairments related to securities as well as a stable credit environment.
 
 
 
 
 
US Retail & Commercial (US Dollar) (continued)
 
Key points (continued)
 
Q1 2013 compared with Q1 2012
 
·
Operating profit of $292 million increased by $132 million, or 83%, and was broadly stable if adjusted for the $138 million litigation settlement in Q1 2012.
   
·
Net interest income was down 5% as the positive impact of commercial loan growth and lower funding costs was offset by the effect of prevailing economic conditions on asset yields and customer investment behaviour.
   
·
Loans and advances were up slightly with strong commercial loan growth mostly offset by planned run-off of long-term fixed-rate consumer products.
   
·
Customer deposits were up 1% with strong growth achieved in checking balances. Consumer checking balances grew by 2% while small business checking balances grew by 6% over the year.
   
·
Non-interest income was up $38 million, or 9%, reflecting higher securities gains partially offset by lower deposit and mortgage banking fees.
   
·
Excluding the $138 million litigation settlement in Q1 2012 relating to a class action lawsuit regarding the way overdraft fees were assessed on customer accounts prior to 2010, total expenses were broadly in line with Q1 2012.
   
·
Impairment losses were in line with Q1 2012. The credit environment remained broadly stable over the year.
 
 
 
 
 
Markets
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income from banking activities
30 
46 
24 
       
Net fees and commissions receivable
77 
41 
127 
Income from trading activities
916 
513 
1,548 
Other operating income (net of related funding costs)
17 
41 
35 
       
Non-interest income
1,010 
595 
1,710 
       
Total income
1,040 
641 
1,734 
       
Direct expenses
      
  - staff
(385)
(87)
(545)
  - other
(182)
(207)
(167)
Indirect expenses
(179)
(186)
(196)
       
 
(746)
(480)
(908)
       
Operating profit before impairment losses
294 
161 
826 
Impairment losses
(16)
(22)
(2)
       
Operating profit
278 
139 
824 
       
Of which:
      
Ongoing businesses
279 
135 
861 
Run-off businesses
(1)
4 
(37)
       
Analysis of income by product
      
Rates and investor products (IP) (1)
340 
333 
924 
Currencies
192 
163 
246 
Asset backed products (ABP)
437 
139 
427 
Credit markets
238 
179 
313 
       
Total income ongoing businesses
1,207 
814 
1,910 
Inter-divisional revenue share
(167)
(172)
(186)
Run-off businesses
- 
(1)
10 
       
Total income
1,040 
641 
1,734 
       
Memo - Fixed income and currencies
      
Rates & IP/currencies/ABP/credit markets
1,207 
880 
1,787 
Less: primary credit markets
(139)
(151)
(171)
       
Total fixed income and currencies
1,068 
729 
1,616 
 
Note:
 
(1)
Following further review in Q4 2012, Investor Products and Equity Derivatives (IPED) operation was moved into Rates to form part of the Derivative Product Solutions (DPS) business. Includes IPED (31 December 2012 - £(66) million; 31 March 2012 - £123 million) which are not included in fixed income and currencies.
 
 
 
 
 
 
Markets (continued)
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios (ongoing businesses)
      
Return on equity (1)
8.0% 
3.6% 
21.1% 
Cost:income ratio
72% 
76% 
50% 
Compensation ratio (2)
37% 
16% 
29% 
 
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet (ongoing
  businesses)
            
Loans and advances to customers (gross)
32.0 
29.8 
7% 
  
28.8 
11% 
Loan impairment provisions
(0.2)
(0.2)
- 
  
(0.2)
- 
             
Net loans and advances to customers
31.8 
29.6 
7% 
  
28.6 
11% 
Net loans and advances to banks (3)
20.1 
16.6 
21% 
  
21.8 
(8%)
Reverse repos
100.8 
103.8 
(3%)
  
90.8 
11% 
Securities
90.7 
92.4 
(2%)
  
106.6 
(15%)
Cash and eligible bills
24.3 
30.2 
(20%)
  
24.2 
- 
Other
20.2 
11.8 
71% 
  
27.8 
(27%)
             
Total third party assets (excluding derivatives mark-to-market)
287.9 
284.4 
1% 
  
299.8 
(4%)
Net derivative assets (after netting)
21.7 
21.9 
(1%)
  
29.3 
(26%)
             
Provision coverage (4)
76% 
77% 
(100bp)
  
75% 
100bp 
             
Customer deposits (excluding repos)
25.7 
26.3 
(2%)
  
34.6 
(26%)
Bank deposits (excluding repos)
43.7 
45.4 
(4%)
  
46.2 
(5%)
             
Risk-weighted assets
            
  - Credit risk
            
    - non-counterparty
12.4 
14.0 
(11%)
  
15.0 
(17%)
    - counterparty
32.7 
34.7 
(6%)
  
36.5 
(10%)
  - Market risk
33.6 
36.9 
(9%)
  
48.4 
(31%)
  - Operational risk
9.8 
15.7 
(38%)
  
15.7 
(38%)
             
 
88.5 
101.3 
(13%)
  
115.6 
(23%)
 
Notes:
 
(1)
Divisional return on equity is based on divisional operating profit after tax, divided by average notional equity (based on 10% of the monthly average of divisional RWAs, adjusted for capital deductions), for the ongoing businesses.
(2)
Compensation ratio is based on staff costs as a percentage of total income.
(3)
Excludes disposal groups.
(4)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
 
 
 
Markets (continued)
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
Run-off businesses (1)
£m 
£m 
£m 
       
Total income
- 
(1)
10 
Direct expenses
(1)
5 
(47)
       
Operating (loss)/profit
(1)
4 
(37)
 
 
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
Run-off businesses (1)
£bn 
£bn 
£bn 
       
Total third party assets (excluding derivatives mark-to-market)
0.1 
0.1 
0.8 
 
Note:
 
(1)
Run-off businesses consist of the exited cash equities, corporate broking and equity capital markets operations.
 
 
Key points
Q1 2013 featured uncertainty in the Eurozone, generated by both the situation in Cyprus and weak European growth figures, in contrast with Q1 2012 when the European Central Bank's (ECB's) Long Term Refinancing Operation (LTRO) boosted markets. This uncertainty contributed to difficult trading conditions with reduced client activity and margin contraction, particularly for the Rates and investor products franchise, although this was partially offset by a positive market in Asset Backed Products. RBS specific issues contributed to relative underperformance versus peers in the quarter. The continued focus on capital resulted in the division's risk-weighted assets falling below £100 billion in Q1 2013, moving towards the 2014 objective of £80 billion, on a Basel III basis, announced in February 2013. We continue to develop the details of this plan and will communicate those no later than at the half year results.
 
Q1 2013 compared with Q4 2012
 
·
Operating profit doubled to £278 million, driven by 62% growth in income and a continued focus on cost management. Staff expenses normalised following the significant reduction in variable compensation in Q4 2012 relating to the Group's LIBOR settlements.
   
·
Rates and investor products income was broadly flat. Client activity was subdued and risk appetite was lowered. Trading performance was weak in vanilla products although this was offset by an improved performance in Derivative Product Solutions.
   
·
The increase in Currencies was partly driven by an increase in volumes as clients responded to greater volatility.
   
·
Asset Backed Products rallied early in the quarter as investors renewed their search for yield, compared with a seasonally quiet Q4 2012, generating both client flow and mark to market gains on trading inventory.
   
·
The 33% increase in Credit Markets was driven by Flow Credit which benefited from a rally in credit assets at the beginning of Q1 2013. Income from Origination was slightly down on a positive Q4 2012.
   
·
Staff expenses normalised following the reduction in variable compensation recognised in Q4 2012 relating to the Group's LIBOR settlement. Other expenses continued to benefit from effective cost management and control of discretionary expenditure.
 
 
 
 
 
Markets (continued)
 
Q1 2013 compared with Q4 2012 (continued)
 
·
Impairments remained low, with asset quality stable.
   
·
The normal increase in third party assets compared with the seasonally low fourth quarter was limited by management's ongoing determination to reduce and de-risk the balance sheet.
   
·
Risk-weighted assets continued to fall, reflecting management's continued focus on risk reduction and a fall in operational risk.
 
Q1 2013 compared with Q1 2012
 
·
Market conditions were more challenging than a year earlier as heightened Eurozone uncertainty during Q1 2013 contrasted with the confidence boost from the ECB's LTRO in Q1 2012. A 29% reduction in staff costs helped to mitigate the income impact of the division's balance sheet realignment.
   
·
Rates and investor products declined, reflecting lower client volumes, de-risking and a weak trading performance. This contrasted with Q1 2012 which benefited from the impact of the LTRO and a heightened level of client activity.
   
·
Currencies continued to suffer from margin compression and subdued volumes in a competitive and diversified market.
   
·
Asset Backed Products benefited from investors' search for yield and a credit market rally in both Q1 2012 and Q1 2013.
   
·
Credit Markets declined following lower income in both Flow Credit, which benefited from the LTRO in Q1 2012, and Origination, where both corporate and financial client activity was lower.
   
·
Significant headcount reductions implemented during 2012, combined with a reduced level of performance-related pay, drove staff costs lower. Discretionary expenditure continued to be managed down, although other expenses increased as a result of higher legal costs.
   
·
Risk-weighted assets fell by £27 billion, demonstrating the division's commitment to reduce risk and manage down the balance sheet despite ongoing regulatory pressure. This was also reflected in the £12 billion fall in third party assets over the period.
 
 
 
 
 
 
Direct Line Group
 
 
 
Quarter ended
 
Memo (1)
31 March 
2013 
  
31 March 
2013 
(to 12 March)
31 December 
2012 
31 March 
2012 
 
£m 
  
£m 
£m 
£m 
           
Income statement
          
Earned premiums
981 
  
774 
999 
1,020 
Reinsurers' share
(95)
  
(75)
(80)
(82)
           
Net premium income
886 
  
699 
919 
938 
Fees and commissions
(92)
  
(73)
(79)
(109)
Instalment income
30 
  
24 
32 
31 
Other income
15 
  
12 
14 
16 
Share of profit as an associated undertaking
  (13 March 2013 - 31 March 2013)
- 
  
7 
- 
- 
           
Total income
839 
  
669 
886 
876 
Net claims
(564)
  
(445)
(606)
(649)
           
Underwriting profit
275 
  
224 
280 
227 
           
Staff expenses
(91)
  
(72)
(90)
(79)
Other expenses
(115)
  
(90)
(109)
(91)
           
Total direct expenses
(206)
  
(162)
(199)
(170)
Indirect expenses
- 
  
- 
- 
(63)
           
 
(206)
  
(162)
(199)
(233)
           
Technical result
69 
  
62 
81 
(6)
Investment income
34 
  
27 
32 
90 
           
Operating profit
103 
  
89 
113 
84 
 
Note:
 
(1)
To assist with review of DLG performance against prior periods the full three month income statement is also presented, including the period after 13 March 2013 the date from which the Group ceased to consolidate DLG.
 
Key metrics
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratios
      
Loss ratio (1)
64% 
66% 
69% 
Commission ratio (2)
10% 
9% 
12% 
Expense ratio (3)
23% 
22% 
25% 
Combined operating ratio (4)
97% 
97% 
106% 
 
Notes:
 
(1)
Loss ratio is based on net claims divided by net premium income.
(2)
Commission ratio is based on fees and commissions divided by net premium income.
(3)
Expense ratio is based on expenses divided by net premium income.
(4)
Combined operating ratio is the sum of the loss, commission and expense ratios.
 
 
 
 
 
 
Direct Line Group (continued)
 
Key points
From 1 July 2012, Direct Line Group (DLG) has operated on a substantially standalone basis with distinct corporate functions and governance. During 2012, the DLG board became fully compliant with the UK Corporate Governance Code and an arm's length transitional services agreement was reached with RBS Group for residual services.
 
The Group sold 34.7% of the share capital of DLG in October 2012 via an Initial Public Offering. On 13 March 2013, the Group sold a further 16.8% of the share capital of DLG and now holds 48.5% of the issued ordinary share capital in DLG and has ceded control in advance of the European Commission requirement to do so by the end of 2013. The Group is required to completely dispose of DLG by the end of 2014.
 
Consequently, in the Q1 2013 RBS Group results, DLG's results are recognised as a discontinued operation until 12 March 2013. From 13 March 2013, the interest in DLG still held by the Group is recognised as an associated undertaking and no longer as a discontinued operation. The period for which DLG's results are fully consolidated by RBSG is 21% shorter than previous quarters, resulting in a commensurate expected fall in most line items. The share of profit of associates mitigates this at the operating profit level as RBSG's share of profit after tax for the period 13 March 2013 to 31 March 2013 is included.
 
An Interim Management Statement of the Q1 2013 results of DLG is available on DLG's company website.
 
Q1 2013 compared with Q1 2012
 
·
Operating profit for the full quarter of £103 million was £19 million, 23%, higher than 2012 as a fall in investment income of £56 million was more than offset by an improved technical result.
   
·
Investment income of £34 million was £56 million, 62%, lower than Q1 2012 due to non-repeat of gains, reduced reinvestment yields and a lower average investment asset base.
   
·
The improvement in the loss ratio was partially due to the absence of claims from major weather events in the first quarter of 2013, despite unseasonably cold weather across most of the UK.
   
·
The commission ratio improved by 200 basis points compared with Q1 2012 due to the non-repeat of payments to Tesco Personal Finance.
   
·
The expense ratio improved by 200 basis points reflecting lower expenses, due to the non-repeat of parallel running costs and the move to a fully stand-alone expense base, partially offset by lower net premium income.
   
·
The combined operating ratio of 97% improved by 900 basis points compared with 2012, driven by improvements in all ratios.
 
 
 
 
 
 
Central items
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Central items not allocated
(43)
118 
(170)
 
Note:
 
(1)
Costs/charges are denoted by brackets.
 
Funding and operating costs have been allocated to operating divisions based on direct service usage, the requirement for market funding and other appropriate drivers where services span more than one division.
 
Residual unallocated items relate to volatile corporate items that do not naturally reside within a division.
 
Key points
 
Q1 2013 compared with Q4 2012
 
·
Central items not allocated represented a debit of £43 million compared with a credit of £118 million in Q4 2012.
   
·
Significant items included a gain of £105 million on available-for-sale bond disposals versus the £187 million gain recorded in Q4 2012 and a £65 million credit relating to the Group's share of profit from its stake in Saudi Hollandi, which was previously held as a disposal group.
   
·
Other unallocated Group Treasury costs, including volatile items under IFRS, were £103 million, up from £26 million in Q4 2012.
 
Q1 2013 compared with Q1 2012
 
·
Central items not allocated represented a debit of £43 million compared with £170 million in Q1 2012.
   
·
The movement is primarily due to lower unallocated costs in Group Treasury, down £97 million, higher gains on available-for-sale bond disposals, up £15 million and the £65 million credit relating to Saudi Hollandi.
 
 
 
 
 
Non-Core
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Income statement
      
Net interest income
(28)
59 
115 
       
Net fees and commissions
20 
28 
31 
Income/(loss) from trading activities
45 
(50)
(270)
Other operating income
      
  - rental income
48 
47 
168 
  - other (1)
8 
(116)
225 
       
Non-interest income
121 
(91)
154 
       
Total income
93 
(32)
269 
       
Direct expenses
      
  - staff
(61)
(50)
(73)
  - operating lease depreciation
(27)
(51)
(83)
  - other
(28)
(47)
(41)
Indirect expenses
(49)
(59)
(66)
       
 
(165)
(207)
(263)
       
Operating (loss)/profit before impairment losses
(72)
(239)
6 
Impairment losses
(433)
(703)
(489)
       
Operating loss
(505)
(942)
(483)
 
Note:
 
(1)
Includes losses on disposals of £57 million (Q4 2012 - £115 million loss; Q1 2012 - £182 million gain).
 
 
 
 
 
Non-Core (continued)
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Analysis of income/(loss) by business
      
Banking and portfolios
(8)
(111)
177 
International businesses
45 
29 
85 
Markets
56 
50 
7 
       
Total income
93 
(32)
269 
       
Income/(loss) from trading activities
      
Monoline exposures
(7)
(35)
(128)
Credit derivative product companies
3 
1 
(38)
Asset-backed products (1)
20 
16 
31 
Other credit exotics
15 
5 
20 
Equities
- 
(5)
(1)
Banking book hedges
3 
(2)
- 
Other
11 
(30)
(154)
       
 
45 
(50)
(270)
       
Impairment losses
      
Banking and portfolios (2)
441 
723 
484 
International businesses
2 
15 
11 
Markets
(10)
(35)
(6)
       
Total impairment losses
433 
703 
489 
       
Loan impairment charge as % of gross customer loans and
  advances (excluding reverse repurchase agreements) (3)
      
Banking and portfolios (4)
3.4% 
5.0% 
2.8% 
International businesses
0.8% 
5.5% 
2.1% 
Markets
- 
- 
(0.8%)
       
Total
3.3% 
4.8% 
2.7% 
 
Notes:
 
(1)
Asset-backed products include super senior asset-backed structures and other asset-backed products.
(2)
Includes Ulster Bank impairment losses of £242 million (Q4 2012 - £364 million; Q1 2012 - £264 million).
(3)
Includes disposal groups.
(4)
Ulster Bank - 7.4% (Q4 2012 - 11.3%; Q1 2012 - 7.7%). Banking and portfolios excluding Ulster Bank - 2.0% (Q4 2012 - 3.0%; Q1 2012 - 1.6%).
 
Key metrics
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
       
Performance ratio
      
Net interest margin
(0.25%)
0.29% 
0.31% 
 
 
 
 
 
Non-Core (continued)
 
Key metrics (continued)
 
 
31 March 
2013 
31 December 
2012 
    
31 March 
2012 
  
 
£bn 
£bn 
Change 
  
£bn 
Change 
             
Capital and balance sheet
            
Loans and advances to customers (gross) (1)
52.0 
55.4 
(6%)
  
72.7 
(28%)
Loan impairment provisions
(11.2)
(11.2)
- 
  
(11.4)
(2%)
             
Net loans and advances to customers
40.8 
44.2 
(8%)
  
61.3 
(33%)
             
Total third party assets (excluding
  derivatives)
52.9 
57.4 
(8%)
  
83.3 
(36%)
Total third party assets (including derivatives)
58.3 
63.4 
(8%)
  
91.8 
(36%)
             
Risk elements in lending (1)
20.7 
21.4 
(3%)
  
23.5 
(12%)
Provision coverage (2)
54% 
52% 
200bp 
  
49% 
500bp 
Customer deposits (1)
2.8 
2.7 
4% 
  
3.1 
(10%)
             
Risk-weighted assets
            
  - Credit risk
            
    - non-counterparty
38.7 
45.1 
(14%)
  
60.6 
(36%)
    - counterparty
9.9 
11.5 
(14%)
  
18.5 
(46%)
  - Market risk
4.8 
5.4 
(11%)
  
12.4 
(61%)
  - Operational risk
1.2 
(1.6)
175% 
  
(1.6)
175% 
             
 
54.6 
60.4 
(10%)
  
89.9 
(39%)
 
Notes:
 
(1)
Excludes disposal groups.
(2)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.
 
 
 
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£bn 
£bn 
£bn 
       
Gross customer loans and advances
      
Banking and portfolios
51.2 
54.5 
70.8 
International businesses
0.8 
0.9 
1.9 
       
 
52.0 
55.4 
72.7 
       
Risk-weighted assets
      
Banking and portfolios
48.9 
53.3 
66.1 
International businesses
1.8 
2.4 
3.8 
Markets
3.9 
4.7 
20.0 
       
 
54.6 
60.4 
89.9 
       
Third party assets (excluding derivatives)
      
Banking and portfolios
47.2 
51.1 
73.2 
International businesses
1.1 
1.2 
2.7 
Markets
4.6 
5.1 
7.4 
       
 
52.9 
57.4 
83.3 
 
 
 
 
 
Non-Core (continued)
 
Third party assets (excluding derivatives)
 
 
 
31 December 
2012 
Run-off 
Disposals/ 
restructuring 
Drawings/ 
roll overs 
Impairments 
FX 
31 March 
2013 
Quarter ended 31 March 2013
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
               
Commercial real estate
22.1 
(1.9)
(0.2)
- 
(0.4)
0.5 
20.1 
Corporate
25.5 
(1.7)
(1.0)
0.3 
- 
0.8 
23.9 
SME
1.0 
(0.2)
- 
- 
- 
 - 
0.8 
Retail
3.2 
(0.2)
- 
- 
- 
0.2 
3.2 
Other
0.5 
(0.2)
- 
- 
- 
- 
0.3 
Markets
5.1 
(0.3)
(0.4)
- 
- 
0.2 
4.6 
               
Total (excluding derivatives)
57.4 
(4.5)
(1.6)
0.3 
(0.4)
1.7 
52.9 
 
 
 
30 September 
2012 
Run-off 
Disposals/ 
restructuring 
Drawings/ 
roll overs 
Impairments 
FX 
31 December 
2012 
Quarter ended 31 December 2012
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
               
Commercial real estate
25.0 
(1.4)
(1.2)
- 
(0.5)
0.2 
22.1 
Corporate
29.0 
(2.1)
(1.7)
0.3 
(0.1)
0.1 
25.5 
SME
1.3 
(0.2)
(0.1)
- 
- 
- 
1.0 
Retail
3.8 
(0.2)
(0.3)
- 
(0.1)
- 
3.2 
Other
0.4 
0.1 
- 
- 
- 
- 
0.5 
Markets
5.6 
0.1 
(0.7)
0.1 
- 
- 
5.1 
               
Total (excluding derivatives)
65.1 
(3.7)
(4.0)
0.4 
(0.7)
0.3 
57.4 
 
Note:
 
(1)
Disposals of £0.3 billion have been signed as at 31 March 2013 but are pending completion (31 December 2012 - £0.2 billion; 30 September 2012 - £0.2 billion).
 
 
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
Commercial real estate third party assets
£bn 
£bn 
£bn 
       
UK (excluding NI)
7.6 
8.9 
10.3 
Ireland (ROI and NI)
5.5 
5.8 
7.0 
Spain
1.4 
1.4 
1.8 
Rest of Europe
4.7 
4.9 
7.7 
USA
0.8 
0.9 
1.9 
RoW
0.1 
0.2 
0.4 
       
Total (excluding derivatives)
20.1 
22.1 
29.1 
 
 
 
 
 
Non-Core (continued)
 
 
 
Quarter ended
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£m 
£m 
£m 
       
Impairment losses by donating division and sector (1)
      
       
UK Retail
      
Personal
(1)
- 
2 
       
Total UK Retail
(1)
- 
2 
       
UK Corporate
      
Manufacturing and infrastructure
2 
1 
7 
Property and construction
60 
8 
55 
Transport
9 
2 
(2)
Financial institutions
(1)
(23)
1 
Lombard
- 
15 
10 
Other
2 
53 
6 
       
Total UK Corporate
72 
56 
77 
       
Ulster Bank
      
Commercial real estate
      
  - investment
47 
91 
84 
  - development
155 
256 
142 
Other corporate
38 
16 
34 
Other EMEA
2 
1 
4 
       
Total Ulster Bank
242 
364 
264 
       
US Retail & Commercial
      
Auto and consumer
13 
19 
9 
Cards
- 
(2)
5 
SBO/home equity
27 
22 
18 
Residential mortgages
2 
4 
3 
Commercial real estate
(1)
(2)
(3)
Commercial and other
(2)
3 
(4)
       
Total US Retail & Commercial
39 
44 
28 
       
International Banking
      
Manufacturing and infrastructure
(3)
3 
6 
Property and construction
85 
96 
86 
Transport
7 
51 
13 
Telecoms, media and technology
3 
5 
16 
Financial institutions
(10)
75 
(12)
Other
(2)
8 
9 
       
Total International Banking
80 
238 
118 
       
Other
      
Wealth
1 
- 
(1)
Central items
- 
1 
1 
       
Total Other
1 
1 
- 
       
Total impairment losses
433 
703 
489 
 
Note:
 
(1)
Impairment losses include those relating to AFS securities; sector analyses above include allocation of latent impairment charges.
 
 
 
 
 
Non-Core (continued)
 
 
 
31 March 
2013 
31 December 
2012 
31 March 
2012 
 
£bn 
£bn 
£bn 
       
Gross loans and advances to customers (excluding reverse
  repurchase agreements) by donating division and sector
      
       
UK Retail
      
Personal
- 
- 
0.1 
       
Total UK Retail
- 
- 
0.1 
       
UK Corporate
      
Manufacturing and infrastructure
0.1 
0.1 
0.1 
Property and construction
3.3 
3.6 
4.8 
Transport
3.9 
3.8 
4.3 
Financial institutions
0.1 
0.2 
0.6 
Lombard
0.3 
0.4 
0.9 
Other
3.5 
4.2 
7.0 
       
Total UK Corporate
11.2 
12.3 
17.7 
       
Ulster Bank
      
Commercial real estate
      
  - investment
3.4 
3.4 
3.7 
  - development
7.6 
7.6 
8.0 
Other corporate
1.6 
1.6 
1.7 
Other EMEA
0.4 
0.3 
0.4 
       
Total Ulster Bank
13.0 
12.9 
13.8 
       
US Retail & Commercial
      
Auto and consumer
0.6 
0.6 
0.8 
Cards
- 
- 
0.1 
SBO/home equity
2.0 
2.0 
2.4 
Residential mortgages
0.4 
0.4 
0.5 
Commercial real estate
0.4 
0.4 
0.9 
Commercial and other
0.1 
0.1 
- 
       
Total US Retail & Commercial
3.5 
3.5 
4.7 
       
International Banking
      
Manufacturing and infrastructure
2.7 
3.9 
5.8 
Property and construction
11.1 
12.3 
15.4 
Transport
1.6 
1.7 
2.4 
Telecoms, media and technology
1.0 
0.4 
0.7 
Financial institutions
4.6 
4.7 
5.7 
Other
3.3 
3.7 
6.4 
       
Total International Banking
24.3 
26.7 
36.4 
       
Other
      
Wealth
- 
- 
0.2 
Central items
- 
- 
(0.3)
       
Total Other
- 
- 
(0.1)
       
Gross loans and advances to customers (excluding reverse
  repurchase agreements)
52.0 
55.4 
72.6 
 
 
 
 
 
Non-Core (continued)
 
Key points
Non-Core third party assets fell to £53 billion, a reduction of £5 billion (£6 billion at constant currency), or 8% during the quarter and an overall reduction of £205 billion, or 79%, since the division was set up. This was achieved through a mixture of disposals, run-off and impairments. As of 31 March 2013, the Non-Core funded balance sheet was under 7% of the Group's funded balance sheet compared with 21% when the division was created. Non-Core remains on target to reach its third party asset target of c.£40 billion, a reduction of approximately 85% of its original portfolio, by the end of 2013.
 
Q1 2013 compared with Q4 2012
 
·
Third party assets were further reduced by £5 billion, or 8%, largely reflecting run-off of £5 billion and disposals of £2 billion, partially offset by an increase due to exchange rate and other movements of £2 billion.
   
·
Risk-weighted assets were £6 billion lower, principally driven by disposals and run-off.
   
·
An operating loss of £505 million was almost half of that in Q4 2012, principally due to significantly lower impairments, lower disposal losses and improved trading activity.
   
·
Impairment losses fell by £270 million to £433 million, with £122 million of this reduction from the Ulster Bank portfolio. Ulster Bank impairments increased from 52% to 56% of the Non-Core total impairment losses.
   
·
Income increased by £125 million principally as a result of improved income from trading activities (up £95 million with asset price improvements and tighter spreads on indices and corporate credit) and disposal losses (down £58 million to £57 million), partially offset by falling net interest income as a result of continued divestment and run-off.
   
·
Headcount declined by 16% to 2,600 reflecting run-off across the business.
 
Q1 2013 compared with Q1 2012
 
·
Third party assets fell by £30 billion, or 36%, largely reflecting disposals of £15 billion and run-off of £17 billion. The disposal of RBS Aviation Capital in Q2 2012 contributed c.£5 billion to this reduction.
   
·
Risk-weighted assets were £35 billion lower, principally driven by disposals, run-off and restructuring of existing positions.
   
·
Operating loss reflected higher disposal losses and lower rental income, largely offset by gains in trading income and improved impairments.
   
·
Impairment losses fell by £56 million to £433 million, principally reflecting provisions falling in line with the reducing size of the portfolio. Ulster Bank impairments increased from 54% to 56% of the Non-Core total.
   
·
Trading income improved by £315 million. Overall income reflected £57 million of disposal losses in Q1 2013 compared with gains on disposal of £182 million in Q1 2012 and £120 million lower rental income (largely due to the disposal of RBS Aviation Capital in Q2 2012).
   
·
Costs decreased by £98 million, largely as a result of a £56 million reduction in operating lease depreciation predominantly due to the disposal of RBS Aviation Capital in Q2 2012.
   
·
Since Q1 2012 headcount decreased by 1,700, or 40%, reflecting divestment activity and run-off across the business.
 
 
 
 

 
 
Signatures


 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







 
 
Date: 3 May 2013
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:
Title:
Jan Cargill
Deputy Secretary