Unassociated Document
 
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 October 31, 2014
 
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:

 

 
 

The Royal Bank of Scotland Group plc
Q3 2014 Results


Contents
 
Page 
   
Introduction
1
Highlights
2
Analysis of results
10
Customer franchise and segment performance
18
Statutory results
34



Forward looking statements


Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘believe’, ‘should’, ‘intend’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on such expressions.

In particular, this document includes forward-looking statements relating, but not limited to: The Royal Bank of Scotland Group’s (RBS) restructuring and strategic plans, divestments, capitalisation, portfolios, net interest margin, capital and leverage ratios, liquidity, risk-weighted assets (RWAs), RWA equivalents (RWAe), return on equity (ROE), profitability, cost:income ratios, loan:deposit ratios, funding and risk profile; litigation, government and regulatory investigations including investigations relating to the setting of interest rates and foreign exchange trading and rate setting activities; costs or exposures borne by RBS arising out of the origination or sale of mortgages or mortgage-backed securities in the US; RBS’s future financial performance; the level and extent of future impairments and write-downs; and RBS’s exposure to political risks, credit rating risk and to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: global and UK economic and financial market conditions and other geopolitical risks, and their impact on the financial industry in general and on RBS in particular; the ability to implement strategic plans on a timely basis, or at all, including the on-going simplification of RBS’s structure, rationalisation of and investment in its IT systems and the reliability and resilience of those systems, the divestment of Citizens Financial Group and the exiting of assets in RBS Capital Resolution as well as the disposal of certain other assets and businesses as announced or required as part of the State Aid restructuring plan; the achievement of capital and costs reduction targets; ineffective management of capital or changes to capital adequacy or liquidity requirements; organisational restructuring in response to legislation and regulation in the United Kingdom (UK), the European Union (EU) and the United States (US); the ability to access sufficient sources of capital, liquidity and funding when required; deteriorations in borrower and counterparty credit quality; the extent of future write-downs and impairment charges caused by depressed asset valuations; the value and effectiveness of any credit protection purchased by RBS; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices and basis, volatility and correlation risks; changes in the credit ratings of RBS; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; the ability of RBS to attract or retain senior management or other key employees; regulatory or legal changes (including those requiring any restructuring of RBS’s operations) in the UK, the US and other countries in which RBS operates or a change in UK Government policy; changes to regulatory requirements relating to capital and liquidity; changes to the monetary and interest rate policies of central banks and other governmental and regulatory bodies; changes in UK and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; impairments of goodwill; pension fund shortfalls; general operational risks; HM Treasury exercising influence over the operations of RBS; reputational risk; the conversion of the B Shares issued by RBS in accordance with their terms; limitations on, or additional requirements imposed on, RBS’s activities as a result of HM Treasury’s investment in RBS; and the success of RBS in managing the risks involved in the foregoing.

The forward-looking statements contained in this document speak only as of the date of this announcement, and RBS does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.


Introduction


Presentation of information
The financial information on pages 4 to 33, prepared using RBS’s accounting policies, shows the operating performance of The Royal Bank of Scotland Group (RBS) on a non-statutory basis which excludes own credit adjustments, gain on redemption of own debt, write down of goodwill, strategic disposals and RFS Holdings minority interest (RFS MI). Such information is provided to give a better understanding of the results of RBS’s operations.

Statutory results
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 2013 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

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

Analysts and investors conference call
RBS will hold an audio Q&A session for analysts and investors on the results for the quarter ended 30 September 2014. Details are as follows:

Date:
 
Friday 31 October 2014
Time:
 
9.00 am UK time
Webcast:
 
www.rbs.com/results
Dial in details:
 
International – +44 (0) 1452 568 172
UK Free Call – 0800 694 8082
US Toll Free – 1 866 966 8024


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

Financial supplement
A financial supplement containing income statement and balance sheet information for the nine quarters ending 30 September 2014 is available on www.rbs.com/results


Highlights


RBS reports a third successive quarterly profit, improved capital and further progress in de-risking.

Q3 2014 attributable profit was £896 million, up from £230 million in Q2 2014 and a loss of £828 million in Q3 2013. Profit before tax was £1,270 million compared with £1,010 million in Q2 2014 and a loss of £634 million in Q3 2013.

The quarter included net impairment provision releases of £801 million, principally in Ulster Bank and RBS Capital Resolution, and litigation and conduct costs of £780 million.

RBS continues to make excellent progress in building its capital ratios. The Common Equity Tier 1 ratio has strengthened 220 basis points since the year end and 70 basis points in the quarter to 10.8%.

Capital build was supported by further excellent progress in the nine months to 30 September in de-risking the balance sheet, including:
·  
Further disposals and run-off in RCR, with funded assets down £11 billion.
·  
A 16% reduction in RWAs in Corporate & Institutional Banking, including running down our US-backed product franchise.
·  
The sale of €9 billion of securities in the RBS N.V. liquidity portfolio.

Personal & Business Banking continued to perform strongly with income growth of 3% in the quarter. Operating profit in Q3 2014 was £881 million, up 66% on Q2 2014.

Commercial & Private Banking had an improved performance with income up 1% compared with Q2 2014. Operating profit in Q3 2014 was £471 million, up 23% on Q2 2014.

Corporate & Institutional Banking had a weak quarter with an operating loss of £557 million which reflected litigation and conduct costs of £562 million, including £400 million relating to potential costs following investigations into the foreign exchange market, and significantly lower income.

Further progress has been made on improving efficiency, with adjusted operating expenses down 5% over the quarter. RBS remains on track to deliver its £1 billion operating cost reduction target for 2014, at constant foreign exchange rates.

The quarter saw RBS achieve the largest ever IPO of a US bank, listing 28.75% of Citizens Financial Group. We continue to target an IPO of Williams & Glyn towards the end of 2016.

RBS confirms it will retain Ulster Bank following completion of the strategic review. Ulster Bank remains a core part of RBS, offering a good strategic fit with our focused retail and commercial banking strategy. We have a good market position and believe that Ulster Bank can deliver attractive returns, with appropriate investment.


Highlights


Ross McEwan, Chief Executive, said:
“In February I placed trust at the heart of my new strategy for our bank. We have taken the first steps towards that goal, with early progress in making RBS simpler, clearer and fairer.

We are reducing costs, and are on track to achieve our capital targets.

UK and Ireland are showing signs of growth, and impairment trends are significantly better than we had anticipated at the start of the year.

We have confirmed today that Ulster Bank remains a core part of our bank. We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future.

But we know we still have a long list of conduct and litigation issues to deal with and much, much more to do to restore our customers’ trust in us.”


Highlights


Summary consolidated income statement
for the period ended 30 September 2014
 
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013*
 
2014 
2013*
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Net interest income
2,863 
2,798 
2,783 
 
8,359 
8,225 
Non-interest income
1,496 
2,127 
2,111 
 
5,978 
7,277 
 
 
 
 
 
 
 
Total income
4,359 
4,925 
4,894 
 
14,337 
15,502 
 
 
 
 
 
 
 
Staff and non-staff expenses
(2,923)
(3,065)
(3,325)
 
(9,267)
(10,184)
Restructuring costs
(180)
(385)
(205)
 
(694)
(476)
Litigation and conduct costs
(780)
(250)
(349)
 
(1,030)
(969)
 
 
 
 
 
 
 
Operating expenses
(3,883)
(3,700)
(3,879)
 
(10,991)
(11,629)
 
 
 
 
 
 
 
Operating profit before impairment releases/(losses)
476 
1,225 
1,015 
 
3,346 
3,873 
Impairment releases/(losses)
801 
93 
(1,170)
 
532 
(3,320)
 
 
 
 
 
 
 
Operating profit/(loss)
1,277 
1,318 
(155)
 
3,878 
553 
Own credit adjustments
49 
(190)
(496)
 
(2)
(120)
Gain on redemption of own debt
13 
 
20 
204 
Write down of goodwill
(130)
 
(130)
Strategic disposals
(7)
 
191 
(7)
RFS Holdings minority interest
(56)
12 
11 
 
(35)
110 
 
 
 
 
 
 
 
Profit/(loss) before tax
1,270 
1,010 
(634)
 
3,922 
740 
Tax charge
(333)
(371)
(81)
 
(1,066)
(759)
 
 
 
 
 
 
 
Profit/(loss) from continuing operations
937 
639 
(715)
 
2,856 
(19)
Profit/(loss) from discontinued operations, net of tax
26 
(5)
 
38 
133 
 
 
 
 
 
 
 
Profit/(loss) for the period
940 
665 
(720)
 
2,894 
114 
Non-controlling interests
53 
(23)
(6)
 
11 
(123)
Other owners’ dividends
(97)
(92)
(102)
 
(264)
(284)
Dividend access share dividend
(320)
 
(320)
 
 
 
 
 
 
 
Profit/(loss) attributable to ordinary and
 
 
 
 
 
 
  B shareholders
896 
230 
(828)
 
2,321 
(293)
 
 
 
 
 
 
 
*Restated - see page 39.
 
 
 
 
 
 

 
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June
30 September 
 
30 September 
30 September 
Key metrics and ratios
2014 
2014 
2013 
 
2014 
2013 
 
 
 
 
 
 
 
Net interest margin
2.26%
2.22%
2.01%
 
2.20%
1.98%
Cost:income ratio
89%
75%
79%
 
77%
75%
Earnings/(loss) per share from continuing operations
 
 
 
 
 
 
  - basic
7.9p
1.9p
(7.4p)
 
20.4p
(3.6p)
  - adjusted (1)
7.5p
4.3p
(3.9p)
 
19.6p
(4.5p)
Return on tangible equity (2)
8.2%
2.2%
(6.9%)
 
7.3%
(0.8%)
Average tangible equity (2)
£43,536m
£42,122m
£48,282m
 
£42,231m
£49,025m
Average number of ordinary shares and equivalent B
 
 
 
 
 
 
  shares outstanding during the period (millions)
11,384 
11,335 
11,223 
 
11,333 
11,176 

Notes:
(1)
Adjusted earnings excludes own credit adjustments, gain on redemption of own debt, write down of goodwill, strategic disposals and RFS MI.
(2)
Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.

Details of other comprehensive income are provided on page 35.


Highlights


Summary consolidated balance sheet at 30 September 2014

 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
 
£m 
£m 
£m 
 
 
 
 
Cash and balances at central banks
67,900 
68,670 
82,659 
Net loans and advances to banks (1,2)
29,090 
28,904 
27,555 
Net loans and advances to customers (1,2)
392,969 
385,554 
390,825 
Reverse repurchase agreements and stock borrowing
75,491 
81,705 
76,413 
Debt securities and equity shares
115,078 
120,628 
122,410 
Intangible assets
12,454 
12,173 
12,368 
Other assets (3)
39,107 
38,568 
27,609 
 
 
 
 
Funded assets
732,089 
736,202 
739,839 
Derivatives
314,021 
274,906 
288,039 
 
 
 
 
Total assets
1,046,110 
1,011,108 
1,027,878 
 
 
 
 
Bank deposits (2,4)
38,986 
39,179 
35,329 
Customer deposits (2,4)
405,367 
401,226 
414,396 
Repurchase agreements and stock lending
75,101 
83,262 
85,134 
Debt securities in issue
53,487 
59,087 
67,819 
Subordinated liabilities
24,412 
24,809 
24,012 
Derivatives
310,361 
270,087 
285,526 
Other liabilities (3)
73,558 
72,495 
56,447 
 
 
 
 
Total liabilities
981,272 
950,145 
968,663 
Non-controlling interests
2,747 
618 
473 
Owners’ equity
62,091 
60,345 
58,742 
 
 
 
 
Total liabilities and equity
1,046,110 
1,011,108 
1,027,878 
 
 
 
 
Contingent liabilities and commitments
238,248 
239,121 
242,009 
 
 
 
 
 
30 September 
30 June 
31 December
Key metrics and ratios
2014 
2014 
2013 
 
 
 
 
Tangible net asset value per ordinary and B share (5)
388p
376p
363p
Loan:deposit ratio
97%
96%
94%
Short-term wholesale funding (6)
£31bn
£34bn
£32bn
Wholesale funding (6)
£94bn
£102bn
£108bn
Liquidity portfolio
£143bn
£138bn
£146bn
Liquidity coverage ratio (7)
102%
104%
102%
Net stable funding ratio (8)
110%
111%
118%
Common Equity Tier 1 ratio
10.8%
10.1%
8.6%
Risk-weighted assets
£381.7bn
£392.1bn
£429.1bn
Tangible equity (9)
£44,345m
£42,880m
£41,082m
Number of ordinary shares and equivalent B shares in issue (millions) (10)
11,421 
11,400 
11,303 

Notes:
(1)
Excludes reverse repurchase agreements and stock borrowing.
(2)
Excludes disposal groups.
(3)
Includes disposal groups.
(4)
Excludes repurchase agreements and stock lending.
(5)
Tangible net asset value per ordinary and B share represents total tangible equity divided by the number of ordinary shares and equivalent B shares in issue.
(6)
Excludes derivative collateral.
(7)
In January 2013, the BCBS published its final guidance for calculating LCR currently expected to come into effect from January 2015 on a phased basis. Pending the finalisation of the LCR rules within the EU, RBS monitors LCR based on its interpretation of current guidance available for EU LCR reporting. The reported LCR will change over time with regulatory developments. Due to differences in interpretation, RBS’s ratio may not be comparable with those of other financial institutions.
(8)
NSFR for all periods has been calculated using RBS’s current interpretations of the existing rules relating to various BCBS guidance to date. BCBS is expected to issue revised guidance on NSFR towards the end of 2014 or early in 2015. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS’s ratio may not be comparable with those of other financial institutions.
(9)
Tangible equity is equity attributable to ordinary and B shareholders less intangible assets.
(10)
Includes 33 million Treasury shares (30 June 2014 - 33 million; 31 December 2013 - 34 million).


Highlights


Q3 2014 performance
Operating profit(1) was £1,277 million compared with £1,318 million in Q2 2014 and a loss of £155 million in Q3 2013. Restructuring costs totalled £180 million, down from £385 million in the prior quarter, while litigation and conduct costs, including £400 million of potential conduct costs following investigations into the foreign exchange market and an additional £100 million provision for Payment Protection Insurance, were £780 million compared with £250 million in Q2 2014.
   
Operating profit(1) excluding restructuring costs and litigation and conduct costs (adjusted operating profit) improved to £2,237 million from £1,953 million in Q2 2014 and £399 million in Q3 2013.
   
Total income was 11% lower at £4,359 million, mostly driven by the scaling back of activity in CIB, the non-repeat of the £170 million gain on CFG’s sale of the Illinois franchise in Q2 2014, and £104 million(2) losses recorded on the disposal of available-for-sale debt securities in the RBS N.V. liquidity portfolio. These were partly offset by a £65 million improvement in net interest income resulting from better deposit margins and a £121 million quarter on quarter improvement in RCR non-interest income principally driven by disposal gains. Income was up 3% in PBB and 1% in CPB.
   
Operating expenses were up 5% at £3,883 million. Excluding restructuring costs and litigation and conduct costs totalling £960 million (Q2 2014 - £635 million), operating expenses were down 5% compared with Q2 2014. RBS remains on track to deliver £1 billion of cost reductions in 2014.
   
A net release of impairment provisions of £801 million in the quarter compares with a net release of £93 million in Q2 2014. These were recorded primarily in RCR and Ulster Bank, reflecting the sustained improvements in economic and asset market conditions in the UK and especially Ireland. While net impairment charges increased in UK PBB and in CPB as a result of lower latent provision releases than in Q2 2014, underlying credit conditions remain benign. Risk elements in lending declined by 11% or £3.6 billion in the quarter; the reduction from the beginning of the year was £8.9 billion, or 23%.
   
Profit before tax, which includes a gain on own credit of £49 million, was £1,270 million, up 26% from Q2 2014.
   
Profit attributable to ordinary and B shareholders was £896 million, up from £230 million in Q2 2014.
   
Tangible net asset value per ordinary and B share was 388p at 30 September 2014, compared with 376p at 30 June 2014.

Balance sheet and capital
Funded assets fell by £4.1 billion to £732.1 billion at 30 September 2014. Growth in lending in the core business was more than offset by disposals and run-off in RCR, disposals of available-for-sale securities, and continuing risk reduction in CIB. These balance sheet reductions, partially offset by the impact of the strengthening US currency on dollar-denominated balances, resulted in a 3% reduction in risk-weighted assets (RWAs) to £381.7 billion.
   
Total assets increased by £35.0 billion, driven by increases in the market value of derivatives. The increase in derivative assets and liabilities mostly related to foreign exchange contracts: primarily due to the strengthening of the US dollar but also reflecting somewhat higher trading volumes following an upsurge in currency volatility. The value of interest rate derivatives also increased, driven largely by the downward shift in yields.


Notes:
(1)
Operating profit before tax, own credit adjustments, gain on redemption of own debt, write down of goodwill, strategic disposals and RFS Holdings minority interest (“operating profit”). Statutory operating profit before tax was £1,270 million for the quarter ended 30 September 2014 and £3,922 million for the nine months ended 30 September 2014.
(2)
An additional £73 million loss attributable to other shareholders is included within RFS Holdings minority interest.




Highlights


Balance sheet and capital (continued)
Loans and advances to customers grew by £7.4 billion, or 2%, to £393.0 billion.
 
UK PBB loans and advances to customers grew by £0.6 billion, with net mortgage growth of £0.8 billion partially offset by declining card balances.
 
Commercial Banking loans and advances grew by £1.1 billion, with demand strongest in the mid- and large corporate segments.
 
CIB’s loans and advances increased by £4.1 billion driven by a combination of lending to large corporates, and collateral movements.  
 
By the end of September 2014, pro-active ‘Statements of Appetite’ had been issued to more than 300,000 SME customers, offering in excess of £12.2 billion of new or additional funding. Gross new lending to SMEs (including customers in both PBB and CPB) totalled £2.6 billion in Q3 2014, up 24% from Q3 2013.
Customer deposits grew by £4.1 billion, or 1%, to £405.4 billion, mostly reflecting CFG’s growth in money markets and term deposits, amplified by the strengthening of the US dollar.
   
CET1 ratio strengthened to 10.8%, compared with 10.1% at 30 June 2014 and 8.6% at 31 December 2013. The improvement reflects the attributable profit for the quarter together with favourable movements in cash flow and foreign currency reserves along with a 3% reduction in risk-weighted assets. The leverage ratio improved by 20 basis points to 3.9%.
   
RBS’s results in the European Banking Authority’s stress test, which was based on data from the end of 2013, were satisfactory. These results do not reflect the significant de-risking and good capital accretion that has taken place in the first three quarters of 2014 during which time the CET1 ratio has increased by 220 basis points to 10.8%.

Performance measures(1)

 
Measure
FY 2013
Q3 2014
Medium-term
Long-term
People
Great place to work
78%
72%
 
Engagement index ≥ GFS norm(2)
Efficiency
Cost:income ratio
95%
89%
~55%
~50%
 
Adjusted cost:income ratio(3)
72%
67%
   
Returns
Return on tangible equity(4)
Negative
8%
~9-11%
~12%+
Capital strength(5)
Common Equity Tier 1 ratio
8.6%
10.8%
≥12%
≥12%
 
Leverage ratio
3.4%
3.9%
3.5-4.0%
≥4.0%
 
Notes:
(1)
This table contains forecasts with significant contingencies. Please refer to ‘Forward-looking statements’.
(2)
Global Financial Services (GFS) norm currently stands at 82%.
(3)
Excluding restructuring costs and litigation and conduct costs.
(4)
Calculated with tangible equity limited to a CET1 ratio of 12%.
(5)
Based on end-point CRR basis Tier 1 capital and revised 2014 Basel leverage framework.
 
 
Highlights


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

     
NatWest
RBS
Net Promoter Score (NPS)
Personal Banking
6 month rolling
Sept 2013
Sept 2014
Sept 2013
Sept 2014
Score
4
7
                                 (17)
                                  (4)
Current gap to be clear #1(1)
 
24pts
 
                                   30pts
Business Banking
4 quarter rolling
Q3 2013
Q3 2014
Q3 2013
Q3 2014
Score
(12)
(13)
                                   (35)
                                   (27)
Current gap to be clear #1
 
37pts
 
                                  59pts
Commercial Banking
4 quarter rolling
Q3 2013
Q3 2014
Q3 2013
Q3 2014
Score
(3)
15
                                  (5)
                                    0
Current gap to be clear #1
 
4pts
 
                                  19pts

Note:
Personal: GfK FRS 6 month roll data. Latest base sizes NatWest England & Wales (3614) RBS  Scotland (541)
Question: "How likely is it that you would to recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?“
(1)
Current gap to be clear #1 is defined as the improvement in NPS required from the current score to establish a statistically significant lead over the current number one in each market or the improvement needed to establish a clear lead in a situation where our score is too close to another bank’s to claim sole position as number one in the market. The gap is based on sample numbers as at 6 months ending September 2014 (Market: Main Financial Institutions which are either, banks or building societies with a national network of branded outlets and providing all main categories of financial products).
 
Business Banking: Charterhouse Business Banking Survey. Latest Base: NatWest England & Wales  1356, RBS Scotland 441.
Commercial Banking: Charterhouse Research GB Business Banking Survey, based on interviews with businesses with annual turnover between £2 million and £25 million, 12 month roll data (524 NatWest main bank customers, 225 RBS), weighted by region and turnover to be representative of businesses in GB.

Our purpose is to serve customers well.  Our actions are beginning to have an impact. 
   
We are seeing early signs of results from becoming simpler and clearer. Our ‘Instant Saver with Savings Goals’ product is the first, and only, banking product to achieve the 5-star Fairbanking Mark and we intend to achieve Fairbanking Marks for our other products.
   
While NatWest’s NPS is flat for Personal Banking, it has made strong progress in Commercial Banking where no other bank scored more highly in Q3 2014. For the RBS brand, NPS scores recovered from minus seventeen to minus four in Personal Banking and from minus five to zero in Commercial Banking. However, we have much more to do in order to reach our goal of being number one for service, trust and advocacy by 2020.



Highlights


Outlook
These results reflect improvements in economic activity and asset values in RBS’s core UK and Irish markets so far in 2014.  Economic growth in our core markets is expected to continue, although the pace looks likely to moderate into 2015. Against this backdrop, we anticipate further credit impairment releases in Q4 2014 offset by modest new impairments. The outlook for 2015 remains relatively benign, albeit with some risks to the downside. At such low levels of impairments there may be volatility in any quarter.

The net interest margin in Q4 2014 is expected to remain at around Q3 2014 levels, with modest asset margin pressure balanced by lower funding costs.

Income from the fixed income product suite is expected to remain weak during Q4, reflecting our ongoing balance sheet reduction programme, lower risk appetite, costs associated with exiting legacy portfolios and a weaker than anticipated trading performance during October.

RBS remains on track to deliver its targeted £1 billion of cost reductions in 2014 on a constant currency basis. Restructuring costs in Q4 2014 are expected to be higher, with some potential write-downs, as we reduce our footprint and simplify our systems and product set. Previous guidance on restructuring costs in the four year period to 2017 remains unchanged at £5 billion.

RCR guidance remains unchanged from the 30 September 2014 Trading Statement and, if market conditions remain favourable, we expect continuing strong progress in balance sheet and risk reductions and an accelerated timetable to achieve its wind-down goals.

Ongoing conduct and regulatory investigations and litigation continue to present challenges and are expected to be a material drag on both earnings and capital generation over the coming quarters. The timing and amounts of any further settlements or redress however remain uncertain and could be significant.



Analysis of results


Income
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
Net interest income
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Net interest income
2,863 
2,798 
2,783 
 
8,359 
8,225 
 
 
 
 
 
 
 
Average interest-earning assets
 
 
 
 
 
 
  - RBS
501,383 
502,347 
539,396 
 
505,285 
550,599 
    - Personal & Business Banking
155,818 
155,848 
158,527 
 
155,133 
159,605 
    - Commercial & Private Banking
93,021 
93,669 
92,551 
 
93,280 
93,402 
    - Citizens Financial Group
69,520 
68,234 
65,065 
 
68,409 
65,137 
 
 
 
 
 
 
 
Gross yield on interest-earning assets of banking
 
 
 
 
 
 
  business
3.04%
3.05%
3.07%
 
3.03%
3.09%
Cost of interest-bearing liabilities of banking business
(1.10%)
(1.16%)
(1.38%)
 
(1.16%)
(1.43%)
 
 
 
 
 
 
 
Interest spread of banking business
1.94%
1.89%
1.69%
 
1.87%
1.66%
Benefit from interest free funds
0.32%
0.33%
0.32%
 
0.33%
0.32%
 
 
 
 
 
 
 
Net interest margin (1,2)
 
 
 
 
 
 
  - RBS
2.26%
2.22%
2.01%
 
2.20%
1.98%
    - Personal & Business Banking
3.47%
3.40%
3.24%
 
3.41%
3.18%
    - Commercial & Private Banking
2.96%
2.91%
2.91%
 
2.92%
2.77%
    - Citizens Financial Group
2.82%
2.93%
2.94%
 
2.89%
2.92%

Non-interest income
 
 
 
 
 
 
 
 
 
 
 
 
 
Net fees and commissions
1,094 
1,063 
1,144 
 
3,212 
3,392 
Income from trading activities
235 
626 
599 
 
1,717 
2,489 
Other operating income
167 
438 
368 
 
1,049 
1,396 
 
 
 
 
 
 
 
Total non-interest income
1,496 
2,127 
2,111 
 
5,978 
7,277 
 
 
 
 
 
 
 
Total income
4,359 
4,925 
4,894 
 
14,337 
15,502 

Notes:
For the purposes of net interest margin calculations the following adjustments have been made.
(1)
Net interest income has been reduced by £7 million in Q3 2014 (Q2 2014 - £14 million; Q3 2013 - £19 million) and by £35 million in the nine months ended 30 September 2014 (nine months ended 30 September 2013 - £57 million) in respect of interest on financial assets and liabilities designated as at fair value through profit or loss.
(2)
Net interest income has been reduced by £38 million in Q3 2013 and £7 million in the nine months ended 30 September 2013 in respect of non-recurring adjustments.

Q3 2014 compared with Q2 2014
·
Net interest income increased by 2% to £2,863 million with improvements in deposit margins in UK PBB and Commercial Banking, supported by the quarter’s higher day count.
   
·
Net interest margin (NIM) increased by four basis points to 2.26% supported by deposit re-pricing initiatives in UK PBB and Commercial Banking. CFG’s reduced NIM was driven by: lower commercial lending spreads; higher borrowing costs resulting from the growth in money market accounts, term deposits and the issue of subordinated debt; and the impact of the Illinois franchise sale in Q2 2014.
   
·
Non-interest income totalled £1,496 million, down 30% from £2,127 million in Q2 2014. Within this, income from trading activities declined by £391 million, reflecting the strategic decision to concentrate on core product areas in CIB. Other operating income reduced by £271 million compared with Q2 2014, reflecting a non-repeat of the £170 million gain in Q2 2014 on the sale of the Illinois franchise by CFG, and losses of £104 million(1) on the disposal of available-for-sale debt securities.

Note:
(1)
An additional £73 million loss attributable to other shareholders is included within RFS Holdings minority interest.



Analysis of results


Operating expenses
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Staff expenses
1,611 
1,693 
1,758 
 
4,951 
5,343 
Premises and equipment
490 
485 
540 
 
1,569 
1,619 
Other
516 
605 
683 
 
1,808 
2,162 
Restructuring costs*
180 
385 
205 
 
694 
476 
Litigation and conduct costs
780 
250 
349 
 
1,030 
969 
 
 
 
 
 
 
 
Administrative expenses
3,577 
3,418 
3,535 
 
10,052 
10,569 
Depreciation and amortisation
306 
282 
344 
 
857 
1,060 
Write down of other intangible assets
 
82 
 
 
 
 
 
 
 
Operating expenses
3,883 
3,700 
3,879 
 
10,991 
11,629 
 
 
 
 
 
 
 
Adjusted operating expenses (1)
2,923 
3,065 
3,325 
 
9,267 
10,184 
 
 
 
 
 
 
 
*Restructuring costs comprise:
 
 
 
 
 
 
  - staff expenses
79 
153 
137 
 
275 
279 
  - premises and equipment
53 
137 
 
249 
29 
  - other
48 
95 
64 
 
170 
168 
 
 
 
 
 
 
 
Restructuring costs
180 
385 
205 
 
694 
476 
 
 
 
 
 
 
 
Staff costs as a % of total income
37%
34%
36%
 
35%
34%
Cost:income ratio
89%
75%
79%
 
77%
75%
Cost:income ratio - adjusted (1)
67%
62%
68%
 
65%
66%
Employee numbers (FTEs - thousands)
110.8 
113.6 
120.3 
 
110.8 
120.3 

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

Q3 2014 compared with Q2 2014
·
Operating expenses increased by 5% to £3,883 million, principally reflecting a £530 million increase in litigation and conduct costs to £780 million, which was partly offset by lower restructuring costs, down £205 million.
   
·
Litigation and conduct costs in Q3 2014 included £400 million of potential conduct costs following investigations into the foreign exchange market and an additional £100 million charge for PPI reflecting higher than expected reactive complaint volumes.
   
·
Adjusted operating expenses declined to £2,923 million, down £142 million or 5%. The fall was primarily attributable to tight control of discretionary expenditure, lower incentive accruals in CFG and CIB in particular, and the impact of the sale of the Illinois branches in Q2 2014. Adjusted operating expenses for the first nine months of the year were 9% lower than the comparable period in 2013.
   
·
The cost:income ratio was 89% compared with 75% in Q2 2014 reflecting higher litigation and conduct costs along with lower income. The adjusted cost:income ratio was 67%, up from 62% for Q2 2014, as lower income, primarily in CIB and Centre, outweighed the decline in operating expenses.




Analysis of results

 
 
 
 
 
 
 
Impairment (releases)/losses
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Loans
(803)
(89)
1,120 
 
(532)
3,281 
Securities
(4)
50 
 
39 
 
 
 
 
 
 
 
Total impairment (releases)/losses
(801)
(93)
1,170 
 
(532)
3,320 
 
 
 
 
 
 
 
Loan impairment (releases)/losses
 
 
 
 
 
 
  - individually assessed
(410)
(42)
580 
 
(297)
2,052 
  - collectively assessed
52 
221 
287 
 
400 
1,021 
  - latent
(445)
(258)
253 
 
(625)
217 
 
 
 
 
 
 
 
Customer loans
(803)
(79)
1,120 
 
(522)
3,290 
Bank loans
(10)
 
(10)
(9)
 
 
 
 
 
 
 
Loan impairment (releases)/losses
(803)
(89)
1,120 
 
(532)
3,281 
 
 
 
 
 
 
 
RBS excluding RCR/Non-Core
(193)
36 
584 
 
97 
1,842 
RCR
(610)
(125)
n/a
 
(629)
n/a
Non-Core
n/a
n/a
536 
 
n/a
1,439 
 
 
 
 
 
 
 
RBS loan impairment (releases)/losses
(803)
(89)
1,120 
 
(532)
3,281 
 
 
 
 
 
 
 
Customer loan impairment charge as a % of
 
 
 
 
 
 
  gross loans and advances (1)
 
 
 
 
 
 
RBS
(0.8%)
(0.1%)
1.0%
 
(0.2%)
1.0%
RBS excluding RCR/Non-Core
(0.2%)
0.6%
 
0.6%
RCR
(9.5%)
(1.7%)
n/a
 
(3.3%)
n/a
Non-Core
n/a
n/a
5.2%
 
n/a
4.7%

 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
 
 
 
 
Loan impairment provisions
£20.0bn
£22.4bn
£25.2bn
Risk elements in lending
£30.5bn
£34.1bn
£39.4bn
Provisions as a % of REIL
 
 
 
  - RBS
66%
66%
64%
  - RBS excluding RCR/Non-Core
57%
59%
56%
  - RCR
72%
71%
n/a
  - Non-Core
n/a
n/a
73%
REIL as a % of gross customer loans
 
 
 
  - RBS
7.4%
8.3%
9.4%
  - RBS excluding RCR/Non-Core
3.4%
3.6%
5.3%
  - RCR
67.6%
68.1%
n/a
  - Non-Core
n/a
n/a
51.8%

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



Analysis of results


Q3 2014 compared with Q2 2014
·
A net loan impairment release of £803 million was recorded in Q3 2014, £714 million higher than in Q2 2014. This included a £610 million release in RCR driven by the improved economic environment and rising asset values in the UK and especially Ireland, together with net provision releases in Ulster Bank supported by rising Irish residential property prices and proactive debt management. While UK PBB’s net impairment charge increased as a result of lower latent releases, underlying credit conditions remain benign.
   
·
REIL decreased by £3.6 billion to £30.5 billion during Q3 2014. Of the reduction, £3.0 billion was in RCR which continued its strategy of disposing of non-performing assets. Continued favourable market conditions resulted in some disposals being achieved at prices above net book value. The £0.6 billion reduction in non-RCR was primarily in Commercial Banking portfolios due to repayments and write-offs.
   
·
REIL as a percentage of gross customer loans declined, both in RCR, to 67.6%, and in the rest of RBS to 3.4%.



Analysis of results


 
 
 
 
 
 
 
 
Risk elements in lending (REIL) and loan impairment provisions
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 September 2014
 
REIL
 
Impairment provisions (1)
 
RBS
 
 
 
RBS
 
 
 
excl. RCR
RCR
Total
 
excl. RCR
RCR
Total
 
£m
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
 
At beginning of period
13,653 
20,428 
34,081 
 
8,041 
14,405 
22,446 
Currency translation and other adjustments
(72)
(258)
(330)
 
(41)
(190)
(231)
Additions
808 
445 
1,253 
 
 
 
 
Repayments and disposals and transfers to performing book
(840)
(2,187)
(3,027)
 
(6)
(6)
Transfers between REIL and potential problem loans
(91)
(18)
(109)
 
 
 
 
Amounts written-off
(403)
(962)
(1,365)
 
(403)
(962)
(1,365)
Recoveries of amounts previously written-off
 
 
 
 
43 
46 
Net release to the income statement - continuing operations
 
 
 
 
(193)
(610)
(803)
Unwind of discount (2)
 
 
 
 
(29)
(27)
(56)
 
 
 
 
 
 
 
 
At end of period
13,055 
17,448 
30,503 
 
7,418 
12,613 
20,031 
 
 
 
 
 
 
 
 
 
Nine months ended 30 September 2014
 
REIL
 
Impairment provisions (1)
 
RBS
 
 
 
RBS
 
 
 
excl. RCR
RCR
Total
 
excl. RCR
RCR
Total
 
£m
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
 
At beginning of period
15,276 
24,116 
39,392 
 
8,716 
16,500 
25,216 
Currency translation and other adjustments
(239)
(916)
(1,155)
 
(159)
(585)
(744)
Additions
3,081 
2,332 
5,413 
 
 
 
 
Repayments and disposals and transfers to performing book
(3,580)
(5,537)
(9,117)
 
(6)
(6)
Transfers between REIL and potential problem loans
(212)
34 
(178)
 
 
 
 
Amounts written-off
(1,271)
(2,581)
(3,852)
 
(1,271)
(2,581)
(3,852)
Recoveries of amounts previously written-off
 
 
 
 
127 
17 
144 
Net charge/(release) to the income statement - continuing operations
 
 
 
 
97 
(629)
(532)
Unwind of discount (2)
 
 
 
 
(92)
(103)
(195)
 
 
 
 
 
 
 
 
At end of period
13,055 
17,448 
30,503 
 
7,418 
12,613 
20,031 

Notes:
(1)
Includes provisions relating to loans and advances to banks (refer to the following page).
(2)
Recognised in interest income.



Analysis of results


Loans and related credit metrics: Loans, REIL, provisions and impairments
The table below analyses gross loans and advances to banks and customers (excluding reverse repos) and related credit metrics by sector and geography (by location of lending office).

 
 
 
 
Credit metrics
 
Quarter ended
30 September 2014 (1)
 
 
 
REIL as a
Provisions
Provisions
 
Impairment
 
Gross
 
 
% of gross
as a %
as a % of
 
charge/
Amounts
loans
REIL
Provisions
loans
of REIL
gross loans
 
(releases)
written-off
£m
£m
£m
%
%
%
 
£m
£m
 
 
 
 
 
 
 
 
 
 
Central and local government
8,490 
100 
 
(4)
Finance
37,552 
454 
280 
1.2 
62 
0.7 
 
(15)
Personal
- mortgages
149,505 
5,722 
1,579 
3.8 
28 
1.1 
 
(61)
60 
 
- unsecured
28,592 
2,038 
1,700 
7.1 
83 
5.9 
 
101 
178 
Property
54,236 
14,582 
10,261 
26.9 
70 
18.9 
 
(295)
708 
Construction
6,178 
1,146 
722 
18.5 
63 
11.7 
 
48 
Manufacturing
22,854 
526 
378 
2.3 
72 
1.7 
 
16 
109 
Finance leases (2)
13,798 
184 
138 
1.3 
75 
1.0 
 
10 
Retail, wholesale and repairs
18,430 
1,010 
698 
5.5 
69 
3.8 
 
(23)
27 
Transport and storage
15,200 
1,179 
552 
7.8 
47 
3.6 
 
(31)
62 
Health, education and leisure
15,404 
775 
422 
5.0 
54 
2.7 
 
24 
80 
Hotels and restaurants
8,099 
1,265 
712 
15.6 
56 
8.8 
 
(33)
19 
Utilities
5,429 
123 
56 
2.3 
46 
1.0 
 
(14)
Other
30,314 
1,456 
1,138 
4.8 
78 
3.8 
 
(27)
51 
Latent
1,354 
 
(445)
n/a
 
 
 
 
 
 
 
 
 
 
 
414,081 
30,461 
19,991 
7.4 
66 
4.8 
 
(803)
1,356 
 
 
 
 
 
 
 
 
 
 
of which:
 
 
 
 
 
 
 
 
 
UK
 
 
 
 
 
 
 
 
 
  - residential mortgages
113,064 
1,590 
233 
1.4 
15 
0.2 
 
(22)
30 
  - personal lending
16,116 
1,722 
1,538 
10.7 
89 
9.5 
 
77 
131 
  - property
38,740 
6,219 
3,573 
16.1 
57 
9.2 
 
(158)
566 
  - construction
4,569 
832 
466 
18.2 
56 
10.2 
 
(10)
46 
  - other
112,986 
3,260 
2,230 
2.9 
68 
2.0 
 
(122)
166 
Europe
 
 
 
 
 
 
 
 
 
  - residential mortgages
15,759 
3,210 
1,196 
20.4 
37 
7.6 
 
(54)
(5)
  - personal lending
1,160 
112 
101 
9.7 
90 
8.7 
 
18 
  - property
9,732 
8,278 
6,642 
85.1 
80 
68.2 
 
(139)
139 
  - construction
1,107 
304 
247 
27.5 
81 
22.3 
 
12 
  - other
21,120 
3,247 
2,703 
15.4 
83 
12.8 
 
(425)
164 
US
 
 
 
 
 
 
 
 
 
  - residential mortgages
20,320 
907 
148 
4.5 
16 
0.7 
 
16 
36 
  - personal lending
10,272 
188 
42 
1.8 
22 
0.4 
 
24 
28 
  - property
4,991 
60 
21 
1.2 
35 
0.4 
 
  - construction
465 
0.4 
50 
0.2 
 
  - other
29,605 
230 
624 
0.8 
271 
2.1 
 
26 
 
 
 
 
 
 
 
 
 
 
 
RoW
14,075 
300 
226 
2.1 
75 
1.6 
 
(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
414,081 
30,461 
19,991 
7.4 
66 
4.8 
 
(803)
1,356 
 
 
 
 
 
 
 
 
 
 
 
Banks
29,146 
42 
40 
0.1 
95 
0.1 
 

Notes:
(1)
Includes disposal groups.
(2)
Includes instalment credit.



Analysis of results


Capital and leverage ratios
 
 
 
 
 
 
 
 
End-point CRR basis (1)
 
PRA transitional basis
 
30 September 
30 June 
31 December 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 (2)
 
2014 
2014 
2013 (2)
Risk asset ratios
 
 
 
 
 
 
 
 
 
CET1 (3)
10.8 
10.1 
8.6 
 
10.8 
10.1 
8.6 
Tier 1
10.8 
10.1 
8.6 
 
12.7 
12.1 
10.3 
Total
13.1 
12.4 
10.6 
 
16.3 
15.6 
13.6 
 
 
 
 
 
 
 
 
Capital
£bn 
£bn 
£bn 
 
£bn 
£bn 
£bn 
 
 
 
 
 
 
 
 
Tangible equity
44.3 
42.9 
41.1 
 
44.1 
42.9 
41.1 
Expected loss less impairment provisions
(1.6)
(1.3)
(1.7)
 
(1.6)
(1.3)
(1.7)
Prudential valuation adjustment (PVA)
(0.4)
(0.5)
(0.8)
 
(0.4)
(0.5)
(0.8)
Deferred tax assets
(1.6)
(1.7)
(2.3)
 
(1.6)
(1.7)
(2.3)
Own credit adjustments
0.6 
0.6 
0.6 
 
0.6 
0.6 
0.6 
Pension fund assets
(0.2)
(0.2)
(0.2)
 
(0.2)
(0.2)
(0.2)
Other deductions
0.1 
(0.1)
0.1 
 
0.2 
(0.1)
0.1 
 
 
 
 
 
 
 
 
Total deductions
(3.1)
(3.2)
(4.3)
 
(3.0)
(3.2)
(4.3)
 
 
 
 
 
 
 
 
CET1 capital
41.2 
39.7 
36.8 
 
41.1 
39.7 
36.8 
AT1 capital
 
7.5 
7.6 
7.5 
Tier 1 capital
41.2 
39.7 
36.8 
 
48.6 
47.3 
44.3 
Tier 2 capital
8.8 
9.0 
8.7 
 
13.6 
13.9 
13.8 
 
 
 
 
 
 
 
 
Total regulatory capital
50.0 
48.7 
45.5 
 
62.2 
61.2 
58.1 
 
 
 
 
 
 
 
 
Risk-weighted assets
£bn
£bn
£bn
 
£bn
£bn
£bn
 
 
 
 
 
 
 
 
Credit risk
 
 
 
 
 
 
 
  - non-counterparty
277.0 
283.3 
317.9 
 
277.0 
283.3 
317.9 
  - counterparty
38.2 
38.6 
39.1 
 
38.2 
38.6 
39.1 
Market risk
29.7 
33.4 
30.3 
 
29.7 
33.4 
30.3 
Operational risk
36.8 
36.8 
41.8 
 
36.8 
36.8 
41.8 
 
 
 
 
 
 
 
 
Total RWAs
381.7 
392.1 
429.1 
 
381.7 
392.1 
429.1 
 
 
 
 
 
 
 
 
Leverage
£bn
£bn
£bn
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives
314.0 
274.9 
288.0 
 
 
 
 
Loans and advances
422.1 
414.5 
418.4 
 
 
 
 
Reverse repos
75.5 
81.7 
76.4 
 
 
 
 
Other assets
234.5 
240.0 
245.1 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
1,046.1 
1,011.1 
1,027.9 
 
 
 
 
Derivatives
 
 
 
 
 
 
 
  - netting
(254.5)
(217.5)
(227.3)
 
 
 
 
  - potential future exposures
106.2 
102.5 
128.0 
 
 
 
 
Securities financing transactions gross up
72.9 
77.5 
59.8 
 
 
 
 
Undrawn commitments
98.7 
98.0 
100.2 
 
 
 
 
Regulatory deductions and other
 
 
 
 
 
 
 
  adjustments
(1.4)
(1.4)
(6.6)
 
 
 
 
 
 
 
 
 
 
 
 
Leverage exposure
1,068.0 
1,070.2 
1,082.0 
 
 
 
 
 
 
 
 
 
 
 
 
Leverage ratio % (4)
3.9 
3.7 
3.4 
 
 
 
 

Notes:
(1)
Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with effect from 1 January 2014.
(2)
Estimated end-point CRR basis.
(3)
Common Equity Tier 1 (CET1) ratio includes the benefit of the retained profit for the period.
(4)
Based on end-point CRR Tier 1 capital and revised 2014 Basel III leverage ratio framework.



Analysis of results


Q3 2014 compared with Q2 2014
·
The end-point CRR CET1 ratio improved to 10.8% from 10.1%, principally driven by retained earnings and favourable movements in cash flow and foreign currency reserves, and the continuing reduction in RWAs.
   
·
RWA reductions of £10.4 billion were achieved during the quarter, particularly in RCR (down £4.5 billion), CIB (down £4.6 billion) and Ulster Bank (down £3.8 billion). These were partially offset by an increase in CFG (up £3.7 billion) which was amplified by the strengthening of the US dollar.
   
·
The leverage ratio improved by 20 basis points reflecting increased attributable profit as leverage exposure remained broadly stable.



Customer franchise and segment performance


 
Quarter ended 30 September 2014
 
PBB
 
CPB
 
CIB
 
 
 
 
 
 
Ulster
 
 
Commercial
Private
 
 
 
Central
 
 
Total
 
UK PBB
Bank
Total
 
Banking
Banking
Total
 
 
 items (1)
CFG
RCR
RBS
 
£m
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,198 
163 
1,361 
 
521 
172 
693 
 
230 
109 
493 
(23)
2,863 
Non-interest income
345 
51 
396 
 
290 
98 
388 
 
601 
(249)
215 
145 
1,496 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income
1,543 
214 
1,757 
 
811 
270 
1,081 
 
831 
(140)
708 
122 
4,359 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
  - staff costs
(223)
(57)
(280)
 
(124)
(79)
(203)
 
(179)
(657)
(255)
(37)
(1,611)
  - other costs
(78)
(20)
(98)
 
(54)
(19)
(73)
 
(50)
(836)
(231)
(24)
(1,312)
Indirect expenses
(481)
(61)
(542)
 
(196)
(105)
(301)
 
(593)
1,460 
(24)
Restructuring costs
 
 
 
 
 
 
 
 
 
 
 
 
 
  - direct
(2)
(2)
 
 
(22)
(143)
(13)
(180)
  - indirect
(63)
(12)
(75)
 
(18)
(7)
(25)
 
98 
(4)
Litigation and conduct costs
(118)
(118)
 
 
(562)
(100)
(780)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(965)
(150)
(1,115)
 
(392)
(210)
(602)
 
(1,400)
(178)
(499)
(89)
(3,883)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before impairment losses
578 
64 
642 
 
419 
60 
479 
 
(569)
(318)
209 
33 
476 
Impairment (losses)/releases
(79)
318 
239 
 
(12)
(8)
 
12 
(1)
(46)
605 
801 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
499 
382 
881 
 
407 
64 
471 
 
(557)
(319)
163 
638 
1,277 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (£m) (2)
(782)
(138)
(920)
 
(374)
(203)
(577)
 
(822)
(33)
(486)
(85)
(2,923)
Operating profit/(loss) - adjusted (£m) (2)
682 
394 
1,076 
 
425 
71 
496 
 
21 
(174)
176 
642 
2,237 
Return on equity (3)
26.9%
42.2%
30.6%
 
16.0%
13.3%
15.5%
 
(11.0%)
nm
5.6%
nm
8.2%
Return on equity - adjusted (2,3)
36.8%
43.5%
37.4%
 
16.7%
14.8%
16.4%
 
0.4%
nm
6.1%
nm
16.0%
Cost:income ratio
63%
70%
63%
 
48%
78%
56%
 
168%
nm
71%
nm
89%
Cost:income ratio - adjusted (2)
51%
64%
52%
 
46%
75%
53%
 
99%
nm
69%
nm
67%
Funded assets (£bn)
134.2 
26.3 
160.5 
 
89.7 
21.0 
110.7 
 
274.9 
87.6 
80.5 
17.9 
732.1 
Total assets  (£bn)
134.2 
26.5 
160.7 
 
89.7 
21.1 
110.8 
 
572.9 
89.5 
80.9 
31.3 
1,046.1 
Risk-weighted assets (£bn)
44.7 
23.9 
68.6 
 
64.9 
12.2 
77.1 
 
123.2 
17.8 
64.4 
30.6 
381.7 
Employee numbers (FTEs - thousands)
25.2 
4.5 
29.7 
 
6.8 
3.5 
10.3 
 
4.0 
48.5 
17.5 
0.8 
110.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to page 20.
 
 
 
 
 
 
 
 
 
 
 
 



Customer franchise and segment performance


 
Quarter ended 30 June 2014
 
PBB
 
CPB
 
CIB
 
 
 
 
 
 
Ulster
 
 
Commercial
Private
 
 
 
Central
 
 
Total
 
UK PBB
Bank
Total
 
Banking
Banking
Total
 
 
 items (1)
CFG
RCR
RBS
 
£m
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,152 
169 
1,321 
 
511 
174 
685 
 
186 
100 
499 
2,798 
Non-interest income
347 
42 
389 
 
287 
98 
385 
 
890 
44 
391 
28 
2,127 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income
1,499 
211 
1,710 
 
798 
272 
1,070 
 
1,076 
144 
890 
35 
4,925 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
  - staff costs
(225)
(62)
(287)
 
(133)
(80)
(213)
 
(217)
(664)
(261)
(51)
(1,693)
  - other costs
(93)
(18)
(111)
 
(60)
(14)
(74)
 
(140)
(781)
(252)
(14)
(1,372)
Indirect expenses
(458)
(63)
(521)
 
(189)
(104)
(293)
 
(587)
1,433 
(32)
Restructuring costs
 
 
 
 
 
 
 
 
 
 
 
 
 
  - direct
(6)
 
(40)
(2)
(42)
 
(9)
(267)
(69)
(385)
  - indirect
(23)
(20)
(43)
 
(21)
(1)
(22)
 
(143)
208 
Litigation and conduct costs
(150)
(150)
 
(50)
(50)
 
(50)
(250)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(955)
(155)
(1,110)
 
(493)
(201)
(694)
 
(1,146)
(71)
(582)
(97)
(3,700)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before impairment losses
544 
56 
600 
 
305 
71 
376 
 
(70)
73 
308 
(62)
1,225 
Impairment (losses)/releases
(60)
(10)
(70)
 
(1)
 
45 
13 
(31)
128 
93 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
484 
46 
530 
 
314 
70 
384 
 
(25)
86 
277 
66 
1,318 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (£m) (2)
(776)
(143)
(919)
 
(382)
(198)
(580)
 
(944)
(12)
(513)
(97)
(3,065)
Operating profit/(loss) - adjusted (£m) (2)
663 
58 
721 
 
425 
73 
498 
 
177 
145 
346 
66 
1,953 
Return on equity (3)
25.3%
4.6%
17.4%
 
12.4%
14.5%
12.8%
 
(0.5%)
nm
9.8%
nm
2.2%
Return on equity - adjusted (2,3)
34.7%
5.8%
23.6%
 
16.8%
15.1%
16.5%
 
3.3%
nm
12.2%
nm
6.8%
Cost:income ratio
64%
73%
65%
 
62%
74%
65%
 
107%
nm
65%
nm
75%
Cost:income ratio - adjusted (2)
52%
68%
54%
 
48%
73%
54%
 
88%
nm
58%
nm
62%
Funded assets (£bn)
133.6 
26.6 
160.2 
 
88.6 
20.8 
109.4 
 
278.7 
91.3 
75.7 
20.9 
736.2 
Total assets (£bn)
133.6 
26.7 
160.3 
 
88.6 
20.8 
109.4 
 
537.6 
93.3 
76.1 
34.4 
1,011.1 
Risk-weighted assets (£bn)
47.0 
27.7 
74.7 
 
63.0 
11.8 
74.8 
 
127.8 
19.0 
60.7 
35.1 
392.1 
Employee numbers (FTEs - thousands)
25.7 
4.5 
30.2 
 
7.1 
3.5 
10.6 
 
4.3 
49.9 
17.7 
0.9 
113.6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RWAs - FLB3 basis at 1 January 2014 (£bn)
49.7 
28.2 
77.9 
 
61.5 
12.0 
73.5 
 
147.1 
23.3 
60.6 
46.7 
429.1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to the following page.
 
 
 
 
 
 
 
 
 
 
 
 



Customer franchise and segment performance

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended 30 September 2013*
 
PBB
 
CPB
 
CIB
 
 
 
 
 
 
Ulster
 
 
Commercial
Private
 
 
 
Central
 
 
Total
 
UK PBB
Bank
Total
 
Banking
Banking
Total
 
 
 items (1)
CFG
Non-Core
RBS
 
£m
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,141 
153 
1,294 
 
511 
168 
679 
 
162 
205 
485 
(42)
2,783 
Non-interest income
349 
60 
409 
 
281 
102 
383 
 
1,090 
43 
263 
(77)
2,111 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income
1,490 
213 
1,703 
 
792 
270 
1,062 
 
1,252 
248 
748 
(119)
4,894 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
  - staff costs
(232)
(64)
(296)
 
(129)
(81)
(210)
 
(262)
(674)
(270)
(46)
(1,758)
  - other costs
(121)
(15)
(136)
 
(57)
(22)
(79)
 
(138)
(915)
(253)
(46)
(1,567)
Indirect expenses
(485)
(63)
(548)
 
(206)
(112)
(318)
 
(614)
1,565 
(32)
(53)
Restructuring costs
 
 
 
 
 
 
 
 
 
 
 
 
 
  - direct
(21)
(3)
(24)
 
(3)
(3)
(6)
 
(17)
(159)
(2)
(205)
  - indirect
(29)
(3)
(32)
 
(8)
(2)
(10)
 
(112)
156 
(2)
Litigation and conduct costs
(250)
(250)
 
 
(99)
(349)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(1,138)
(148)
(1,286)
 
(403)
(220)
(623)
 
(1,242)
(27)
(557)
(144)
(3,879)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Profit/(loss) before impairment losses
352 
65 
417 
 
389 
50 
439 
 
10 
221 
191 
(263)
1,015 
Impairment (losses)/releases
(138)
(204)
(342)
 
(93)
(1)
(94)
 
(28)
(66)
(59)
(581)
(1,170)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
214 
(139)
75 
 
296 
49 
345 
 
(18)
155 
132 
(844)
(155)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (£m) (2)
(838)
(142)
(980)
 
(392)
(215)
(607)
 
(1,014)
(24)
(555)
(145)
(3,325)
Operating profit/(loss) - adjusted (£m) (2)
514 
(133)
381 
 
307 
54 
361 
 
210 
158 
134 
(845)
399 
Return on equity (3)
10.2%
(11.8%)
2.2%
 
11.1%
9.9%
10.9%
 
(0.3%)
nm
4.9%
nm
(6.9%)
Return on equity - adjusted (2,3)
24.6%
(11.3%)
11.1%
 
11.5%
10.9%
11.4%
 
3.8%
nm
5.0%
nm
(3.4%)
Cost:income ratio
76%
69%
76%
 
51%
81%
59%
 
99%
nm
74%
nm
79%
Cost:income ratio - adjusted (2)
56%
67%
58%
 
49%
80%
57%
 
81%
nm
74%
nm
68%
Funded assets (£bn)
131.9 
29.2 
161.1 
 
88.9 
21.0 
109.9 
 
309.6 
116.4 
71.5 
37.3 
805.8 
Total assets (£bn)
131.9 
29.4 
161.3 
 
88.9 
21.1 
110.0 
 
625.9 
118.0 
71.9 
42.3 
1,129.4 
Risk-weighted assets (£bn) (4)
52.2 
31.8 
84.0 
 
66.4 
12.1 
78.5 
 
129.0 
21.5 
56.1 
40.9 
410.0 
Employee numbers (FTEs - thousands)
26.8 
4.8 
31.6 
 
7.2 
3.6 
10.8 
 
4.8 
52.7 
18.6 
1.8 
120.3 

*Restated - refer to page 39.

Notes:
(1)
Central items include unallocated income and expenses which principally comprise profits/losses on the sale of the Treasury AFS portfolio (quarter ended 30 September 2014 - £72 million loss;
quarter ended 30 June 2014 - £13 million profit; quarter ended 30 September 2013 - £150 million profit) and profit and loss on hedges that do not qualify for hedge accounting.
(2)
Excluding restructuring costs and litigation and conduct costs.
(3)
Return on equity is based on operating profit after tax divided by average notional equity (based on 12% of the monthly average of divisional RWAs; 2013 RWAs are on a Basel 2.5 basis).
(4)
RWAs at 30 September 2013 are on a Basel 2.5 basis.



Segment performance


Q3 2014 compared with Q2 2014

UK Personal & Business Banking
Operating profit increased by 3% to £499 million primarily reflecting higher income. Adjusted operating profit increased by 3% to £682 million.
   
Total income grew by 3% to £1,543 million, supported by improvements in deposit margins. Operating expenses remained broadly stable at £965 million.
   
Net impairment losses increased by £19 million primarily reflecting lower latent releases. However, underlying default charges continued to decrease, down 5% in the quarter with continued improvements in asset quality.
   
Gross new mortgage lending totalled £5.3 billion. Net mortgage growth was £0.8 billion with strong retention in fixed rate roll-offs and higher repayments.
   
Business Banking gross new lending increased by 44% in the year to date compared with the same period in 2013. The recent launch of the Small Business Fund demonstrates the business’s continued commitment to this market sector.

Ulster Bank
Operating profit increased by £336 million to £382 million, primarily due to further net impairment releases supported by rising Irish residential property prices coupled with proactive debt management. The potential exists for further releases in the future if market conditions continue to improve. Restructuring costs were stable. Adjusted operating profit increased by £336 million to £394 million.
   
Total income grew by 1% to £214 million. Proactive re-pricing of deposits has contributed to the improvement in net interest margin since Q3 2013. In both Q2 2014 and Q3 2014 net interest margin benefited from the recognition of interest income on non-performing assets. Management continues to focus on implementing cost saving initiatives but expenses during 2014 have been adversely impacted by a number of additional regulatory charges and levies.
   
Trading conditions improved further during Q3 2014 supported by GDP growth, lower unemployment and a recovery in property values but the business environment remains challenging. Ulster Bank has seen an increase in demand for new lending, from both personal and business customers throughout 2014.

Commercial Banking
Commercial Banking continues to focus on simplifying the way customers do business with the bank. The business improved the online customer lending process, streamlined its product range, reduced the average account opening time by ten days and implemented a further 56 ‘simplifying customer life’ ideas.
   
Progress has been made on integrating the Commercial and Private businesses resulting in an increase in referrals and helping to ensure that customers’ broadest needs are met.
   
Operating profit grew by 30% to £407 million quarter on quarter, primarily reflecting the absence of litigation and conduct costs during the quarter and lower restructuring costs (down 70%). Adjusted operating profit remained stable with higher income and lower operating expenses offset by modest net impairment charges compared with net impairment release in Q2 2014.
   
Total income grew by 2% to £811 million partly as a result of margin expansion, primarily from deposit re-pricing. Cost saving initiatives resulted in an 8% reduction in direct expenses.



Segment performance


Q3 2014 compared with Q2 2014 (continued)

Commercial Banking (continued)
Net impairment losses totalled £12 million compared with a £9 million net release in Q2 2014 as a result of lower releases of latent provisions.
   
Deposit balances decreased by £1.0 billion to £87.0 billion reflecting active management of the bank’s funding surplus, while net loans and advances to customers grew by £1.1 billion across a number of sectors to £85.0 billion. RWAs increased by £1.9 billion primarily from a change in methodology.

Private Banking
Following a review of the high net worth business, RBS has decided to exit the international business. This exit will be carried out with a focus on minimising client and business disruption while maximising value and certainty of execution. Private Banking UK remains a core business with a significant opportunity to integrate and leverage the franchise within Commercial & Private Banking.
   
Operating profit decreased by 9% to £64 million principally due to higher restructuring costs. Adjusted operating profit declined by 3% to £71 million.
   
Total income decreased by 1% to £270 million while operating expenses excluding restructuring costs increased by 3% to £203 million primarily due to remediation expenses.
   
Net impairment releases totalled £4 million compared with a £1 million net impairment charge in Q2 2014.
   
Client assets and liabilities grew by £0.7 billion in Q3 2014 with increases across all categories. This includes growth of £0.2 billion in assets under management to £28.9 billion across the UK and international businesses.

Corporate & Institutional Banking
Corporate & Institutional Banking continued to make progress on reducing RWAs and controlling discretionary expenditure during Q3 2014, focusing on strengths in core product areas to serve its customers better whilst moving to a lower risk model.
   
Operating loss grew by £532 million to £557 million reflecting higher litigation and conduct charges partly offset by lower restructuring costs. Adjusted operating profit was subdued, declining by £156 million to £21 million, driven by lower income, partially offset by lower operating expenses as the business continued to manage down discretionary expenditure. Adjusted operating profit was £570 million in the year to date compared with £506 million in the same period in 2013.
   
Total income declined by 23% to £831 million in Q3 2014. Rates performance was relatively muted, falling 19% to £240 million. Credit fell by £111 million, primarily due to Asset Backed Products, where resources deployed by the business continued to reduce in line with the strategic decision to concentrate on core product areas. RWAs in Assets Backed Products have almost halved to £12 billion in 2014.
   
RWAs were £123.2 billion, down £4.6 billion compared with end Q2 2014, reflecting both risk reduction and business mitigation actions, and despite adverse currency movements of £1.3 billion.


Segment performance


Q3 2014 compared with Q2 2014 (continued)

Citizens Financial Group
The initial public offering of Citizens Financial Group (CFG) was successfully completed with shares priced at $21.50 per share, and trading began on the New York Stock Exchange on 24 September. Given the trading strength of the stock, the underwriters also exercised their overallotment option, resulting in a total of $3.5 billion of common stock being sold. As a result, RBS’s holding in CFG stood at 71.25% as of 30 September and was reduced to 70.5% of shares outstanding following a buyback by CFG on 8 October.
   
Operating profit for Q3 2014 was $271 million. Excluding the $283 million net gain on the sale of the Illinois franchise in Q2 2014 and restructuring costs, operating profit was down $5 million or 2% from Q2 2014.
   
Total income was down 21% from Q2 2014, principally driven by the impact of the Illinois franchise sale.
   
Operating expenses, excluding restructuring costs, decreased by 6% largely due to the impact of the Illinois franchise sale as well as lower incentive accruals and higher consumer regulatory compliance costs in Q2 2014.
   
Loans and advances were up 2%, driven by higher commercial loans, auto loan organic growth and purchases and a strategic initiative to purchase residential mortgages. Customer deposits have also increased by 2% from the prior quarter maintaining a 98% loan:deposit ratio.

RBS Capital Resolution
RCR funded assets were £18 billion, down £11 billion or 38% since inception on 1 January 2014; with £3 billion of the reduction in the current quarter driven by disposals and run-off.
   
RWA equivalent (RWAe)(1) decreased to £38 billion, a reduction of £27 billion or 41% since 1 January 2014. The RWAe reduction of £5.2 billion in the quarter reflects a combination of disposals and run-off partially offset by the impact of impairment releases.
   
Operating profit for the quarter was £638 million, up £572 million compared with Q2 2014, including £605 million of net provision releases reflecting improving economic conditions.
   
RCR has been capital accretive since its formation on 1 January 2014.

Central items
Operating loss in Central items in Q3 2014 was £319 million compared with an £86 million operating profit in Q2 2014. In Q3 2014, RBS took advantage of improved market prices to dispose of €9 billion of available-for-sale debt securities at a loss of £104 million(2) and recognised a loss of £110 million primarily relating to IFRS volatility arising from interest rate movements. Q2 2014 benefited from a number of small gains on asset realisations.


Notes:
(1)
RWA equivalent (RWAe) is an internal metric that measures the equity capital employed in segments. RWAe converts both performing and non-performing exposures into a consistent capital measure, being the sum of the regulatory RWAs and the regulatory capital deductions, the latter converted to RWAe by applying a multiplier of 10.
(2)
An additional £73 million loss attributable to other shareholders is included within RFS Holdings minority interest.



UK Personal & Business Banking

 
 
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
 
30 September
30 June
30 September
 
30 September
30 September
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
 
 
Net interest income
1,198 
1,152 
1,141 
 
3,474 
3,341 
 
 
 
 
 
 
 
 
 
Net fees and commissions
335 
304 
344 
 
972 
968 
 
Other non-interest income
10 
43 
 
59 
10 
 
 
 
 
 
 
 
 
 
Non-interest income
345 
347 
349 
 
1,031 
978 
 
 
 
 
 
 
 
 
 
Total income
1,543 
1,499 
1,490 
 
4,505 
4,319 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(223)
(225)
(232)
 
(672)
(698)
 
  - other costs
(78)
(93)
(121)
 
(298)
(321)
 
Indirect expenses
(481)
(458)
(485)
 
(1,463)
(1,435)
 
Restructuring costs
 
 
 
 
 
 
 
  - direct
(2)
(6)
(21)
 
(8)
(91)
 
  - indirect
(63)
(23)
(29)
 
(76)
(68)
 
Litigation and conduct costs
(118)
(150)
(250)
 
(268)
(410)
 
 
 
 
 
 
 
 
 
Operating expenses
(965)
(955)
(1,138)
 
(2,785)
(3,023)
 
 
 
 
 
 
 
 
 
Profit before impairment losses
578 
544 
352 
 
1,720 
1,296 
 
Impairment losses
(79)
(60)
(138)
 
(227)
(394)
 
 
 
 
 
 
 
 
 
Operating profit
499 
484 
214 
 
1,493 
902 
 
 
 
 
 
 
 
 
 
Operating profit - adjusted (1)
682 
663 
514 
 
1,845 
1,471 
 
 
 
 
 
 
 
 
 
Analysis of income by product
 
 
 
 
 
 
 
Personal advances
231 
232 
233 
 
698 
676 
 
Personal deposits
194 
160 
125 
 
496 
352 
 
Mortgages
657 
649 
663 
 
1,944 
1,940 
 
Cards
187 
176 
213 
 
561 
632 
 
Business banking
261 
245 
245 
 
751 
726 
 
Other
13 
37 
11 
 
55 
(7)
 
 
 
 
 
 
 
 
 
Total income
1,543 
1,499 
1,490 
 
4,505 
4,319 
 
 
 
 
 
 
 
 
 
Analysis of impairments by sector
 
 
 
 
 
 
 
Personal advances
46 
40 
34 
 
125 
118 
 
Mortgages
(8)
18 
 
(3)
44 
 
Business banking
20 
56 
 
50 
143 
 
Cards
21 
15 
30 
 
55 
89 
 
 
 
 
 
 
 
 
 
Total impairment losses
79 
60 
138 
 
227 
394 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
26.9%
25.3%
10.2%
 
26.1%
14.3%
 
Return on equity - adjusted (1,2)
36.8%
34.7%
24.6%
 
32.2%
23.4%
 
Net interest margin
3.72%
3.64%
3.60%
 
3.65%
3.54%
 
Cost:income ratio
63%
64%
76%
 
62%
70%
 
Cost:income ratio - adjusted (1)
51%
52%
56%
 
54%
57%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
£bn 
£bn 
£bn 
 
 
 
 
Funded assets
134.2 
133.6 
132.2 
Total assets
134.2 
133.6 
132.2 
Net loans and advances to customers
127.0 
126.4 
124.8 
Risk elements in lending
4.1 
4.2 
4.7 
Impairment provisions
(2.7)
(2.8)
(3.0)
Customer deposits
146.0 
146.0 
144.9 
Risk-weighted assets (3)
44.7 
47.0 
51.2 

Notes:
(1)
Excluding restructuring costs and litigation and conduct costs.
(2)
Return on equity is based on operating profit after tax divided by average notional equity (based on 12% of the monthly average of segmental RWAs; 2013 RWAs are on a Basel 2.5 basis).
(3)
RWAs reported as at 31 December 2013 are on a Basel 2.5 basis. RWAs on an FLB3 basis as at 1 January 2014 are set out on page 20.


Ulster Bank


 
Quarter ended
 
Nine months ended
 
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
 
 
Net interest income
163 
169 
153 
 
486 
455 
 
 
 
 
 
 
 
 
 
Net fees and commissions
35 
34 
35 
 
101 
104 
 
Other non-interest income
16 
25 
 
39 
98 
 
 
 
 
 
 
 
 
 
Non-interest income
51 
42 
60 
 
140 
202 
 
 
 
 
 
 
 
 
 
Total income
214 
211 
213 
 
626 
657 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(57)
(62)
(64)
 
(182)
(188)
 
  - other costs
(20)
(18)
(15)
 
(55)
(42)
 
Indirect expenses
(61)
(63)
(63)
 
(187)
(188)
 
Restructuring costs
 
 
 
 
 
 
 
  - direct
(3)
 
(18)
 
  - indirect
(12)
(20)
(3)
 
(34)
(9)
 
Litigation and conduct costs
 
(25)
 
 
 
 
 
 
 
 
 
Operating expenses
(150)
(155)
(148)
 
(450)
(470)
 
 
 
 
 
 
 
 
 
Profit before impairment losses
64 
56 
65 
 
176 
187 
 
Impairment releases/(losses)
318 
(10)
(204)
 
261 
(707)
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
382 
46 
(139)
 
437 
(520)
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (1)
394 
58 
(133)
 
463 
(468)
 
 
 
 
 
 
 
 
 
Analysis of income by product
 
 
 
 
 
 
 
Corporate
65 
65 
76 
 
199 
246 
 
Retail
111 
100 
101 
 
301 
310 
 
Other
38 
46 
36 
 
126 
101 
 
 
 
 
 
 
 
 
 
Total income
214 
211 
213 
 
626 
657 
 
 
 
 
 
 
 
 
 
Analysis of impairments by sector
 
 
 
 
 
 
 
Mortgages
(168)
16 
30 
 
(133)
211 
 
Commercial real estate
 
 
 
 
 
 
 
  - investment
(18)
104 
 
(9)
201 
 
  - development
(9)
(3)
12 
 
(15)
38 
 
Other corporate
(130)
(9)
51 
 
(122)
237 
 
Other lending
 
18 
20 
 
 
 
 
 
 
 
 
 
Total impairment (releases)/losses
(318)
10 
204 
 
(261)
707 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
42.2%
4.6%
(11.8%)
 
14.9%
(14.0%)
 
Return on equity - adjusted (1,2)
43.5%
5.8%
(11.3%)
 
15.8%
(12.6%)
 
Net interest margin
2.32%
2.35%
1.83%
 
2.32%
1.82%
 
Cost:income ratio
70%
73%
69%
 
72%
72%
 
Cost:income ratio - adjusted (1)
64%
68%
67%
 
68%
64%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
£bn 
£bn 
£bn 
 
 
 
 
Funded assets
26.3 
26.6 
28.0 
Total assets
26.5 
26.7 
28.2 
Net loans and advances to customers
22.0 
22.4 
26.0 
Risk elements in lending
4.8 
4.9 
8.5 
Impairment provisions
(2.9)
(3.3)
(5.4)
Customer deposits
19.7 
20.7 
21.7 
Risk-weighted assets (3)
23.9 
27.7 
30.7 
 
 
 
 
For the notes to this table refer to page 24.
 
 
 


Commercial Banking

 
Quarter ended
 
Nine months ended
 
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
 
 
Net interest income
521 
511 
511 
 
1,520 
1,447 
 
 
 
 
 
 
 
 
 
Net fees and commissions
220 
227 
232 
 
668 
709 
 
Other non-interest income
70 
60 
49 
 
191 
185 
 
 
 
 
 
 
 
 
 
Non-interest income
290 
287 
281 
 
859 
894 
 
 
 
 
 
 
 
 
 
Total income
811 
798 
792 
 
2,379 
2,341 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(124)
(133)
(129)
 
(390)
(381)
 
  - other costs
(54)
(60)
(57)
 
(176)
(201)
 
Indirect expenses
(196)
(189)
(206)
 
(598)
(610)
 
Restructuring costs
 
 
 
 
 
 
 
  - direct
(40)
(3)
 
(40)
(17)
 
  - indirect
(18)
(21)
(8)
 
(40)
(23)
 
Litigation and conduct costs
(50)
 
(50)
(25)
 
 
 
 
 
 
 
 
 
Operating expenses
(392)
(493)
(403)
 
(1,294)
(1,257)
 
 
 
 
 
 
 
 
 
Profit before impairment losses
419 
305 
389 
 
1,085 
1,084 
 
Impairment (losses)/releases
(12)
(93)
 
(43)
(375)
 
 
 
 
 
 
 
 
 
Operating profit
407 
314 
296 
 
1,042 
709 
 
 
 
 
 
 
 
 
 
Operating profit - adjusted (1)
425 
425 
307 
 
1,172 
774 
 
 
 
 
 
 
 
 
 
Analysis of income by business
 
 
 
 
 
 
 
Commercial lending
459 
448 
468 
 
1,353 
1,430 
 
Deposits
95 
81 
56 
 
248 
144 
 
Asset and invoice finance
188 
186 
169 
 
554 
503 
 
Other
69 
83 
99 
 
224 
264 
 
 
 
 
 
 
 
 
 
Total income
811 
798 
792 
 
2,379 
2,341 
 
 
 
 
 
 
 
 
 
Analysis of impairments by sector
 
 
 
 
 
 
 
Commercial real estate
(1)
(17)
36 
 
(7)
198 
 
Asset and invoice finance
 
11 
 
Private sector services (education, health, etc)
34 
 
(8)
97 
 
Banks & financial institutions
(1)
(1)
 
 
Wholesale and retail trade repairs
 
16 
 
Hotels and restaurants
(4)
(1)
 
18 
 
Manufacturing
 
(2)
 
Construction
 
(1)
 
Other
10 
 
20 
42 
 
 
 
 
 
 
 
 
 
Total impairment losses/(releases)
12 
(9)
93 
 
43 
375 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
16.0%
12.4%
11.1%
 
13.7%
8.7%
 
Return on equity - adjusted (1,2)
16.7%
16.8%
11.5%
 
15.4%
9.6%
 
Net interest margin
2.78%
2.73%
2.75%
 
2.72%
2.60%
 
Cost:income ratio
48%
62%
51%
 
54%
54%
 
Cost:income ratio - adjusted (1)
46%
48%
49%
 
49%
51%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
£bn 
£bn 
£bn 
 
 
 
 
Funded assets
89.7 
88.6 
87.9 
Total assets
89.7 
88.6 
87.9 
Net loans and advances to customers
85.0 
83.9 
83.5 
Risk elements in lending
2.6 
2.9 
4.3 
Impairment provisions
(1.0)
(1.2)
(1.5)
Customer deposits
87.0 
88.0 
90.7 
Risk-weighted assets (3)
64.9 
63.0 
65.8 

For the notes to this table refer to page 24.


Private Banking


 
Quarter ended
 
Nine months ended
 
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
 
 
Net interest income
172 
174 
168 
 
516 
485 
 
 
 
 
 
 
 
 
 
Net fees and commissions
85 
84 
90 
 
257 
270 
 
Other non-interest income
13 
14 
12 
 
42 
46 
 
 
 
 
 
 
 
 
 
Non-interest income
98 
98 
102 
 
299 
316 
 
 
 
 
 
 
 
 
 
Total income
270 
272 
270 
 
815 
801 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(79)
(80)
(81)
 
(239)
(254)
 
  - other costs
(19)
(14)
(22)
 
(51)
(51)
 
Indirect expenses
(105)
(104)
(112)
 
(310)
(341)
 
Restructuring costs
 
 
 
 
 
 
 
  - direct
(2)
(3)
 
(2)
(4)
 
  - indirect
(7)
(1)
(2)
 
(8)
(6)
 
 
 
 
 
 
 
 
 
Operating expenses
(210)
(201)
(220)
 
(610)
(656)
 
 
 
 
 
 
 
 
 
Profit before impairment losses
60 
71 
50 
 
205 
145 
 
Impairment releases/(losses)
(1)
(1)
 
(8)
 
 
 
 
 
 
 
 
 
Operating profit
64 
70 
49 
 
209 
137 
 
 
 
 
 
 
 
 
 
Operating profit - adjusted (1)
71 
73 
54 
 
219 
147 
 
 
 
 
 
 
 
 
 
Analysis of income by business
 
 
 
 
 
 
 
Investments
44 
45 
49 
 
134 
146 
 
Banking
226 
227 
221 
 
681 
655 
 
 
 
 
 
 
 
 
 
Total income
270 
272 
270 
 
815 
801 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
13.3%
14.5%
9.9%
 
14.5%
9.2%
 
Return on equity - adjusted (1,2)
14.8%
15.1%
10.9%
 
15.1%
9.9%
 
Net interest margin
3.65%
3.73%
3.54%
 
3.70%
3.40%
 
Cost:income ratio
78%
74%
81%
 
75%
82%
 
Cost:income ratio - adjusted (1)
75%
73%
80%
 
74%
81%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
£bn 
£bn 
£bn 
 
 
 
 
Funded assets
21.0 
20.8 
21.0 
Total assets
21.1 
20.8 
21.2 
Net loans and advances to customers
16.7 
16.5 
16.7 
Risk elements in lending
0.2 
0.2 
0.3 
Impairment provisions
(0.1)
(0.1)
(0.1)
Customer deposits
36.2 
35.9 
37.2 
Risk-weighted assets (3)
12.2 
11.8 
12.0 
 
 
 
 
For the notes to this table refer to page 24.
 
 
 


Corporate & Institutional Banking

 
 
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
 
 
Net interest income from banking activities
230 
186 
162 
 
595 
476 
 
 
 
 
 
 
 
 
 
Net fees and commissions
263 
247 
288 
 
753 
844 
 
Income from trading activities
329 
597 
772 
 
1,811 
2,525 
 
Other operating income
46 
30 
 
99 
115 
 
 
 
 
 
 
 
 
 
Non-interest income
601 
890 
1,090 
 
2,663 
3,484 
 
 
 
 
 
 
 
 
 
Total income
831 
1,076 
1,252 
 
3,258 
3,960 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(179)
(217)
(262)
 
(666)
(841)
 
  - other costs
(50)
(140)
(138)
 
(300)
(421)
 
Indirect expenses
(593)
(587)
(614)
 
(1,773)
(1,941)
 
Restructuring costs
 
 
 
 
 
 
 
  - direct
(22)
(9)
(17)
 
(44)
(51)
 
  - indirect
(143)
(112)
 
(163)
(161)
 
Litigation and conduct costs
(562)
(50)
(99)
 
(612)
(509)
 
 
 
 
 
 
 
 
 
Operating expenses
(1,400)
(1,146)
(1,242)
 
(3,558)
(3,924)
 
 
 
 
 
 
 
 
 
(Loss)/profit before impairment losses
(569)
(70)
10 
 
(300)
36 
 
Impairment releases/(losses)
12 
45 
(28)
 
51 
(251)
 
 
 
 
 
 
 
 
 
Operating loss
(557)
(25)
(18)
 
(249)
(215)
 
 
 
 
 
 
 
 
 
Operating profit - adjusted (1)
21 
177 
210 
 
570 
506 
 
 
 
 
 
 
 
 
 
Analysis of income by product
 
 
 
 
 
 
 
Rates
240 
297 
406 
 
896 
873 
 
Currencies
193 
159 
232 
 
544 
711 
 
Credit
198 
309 
304 
 
972 
1,296 
 
Global Transaction Services
207 
214 
229 
 
628 
654 
 
Portfolio
164 
156 
144 
 
482 
467 
 
 
 
 
 
 
 
 
 
Total (excluding revenue share and run-off
 
 
 
 
 
 
 
  businesses)
1,002 
1,135 
1,315 
 
3,522 
4,001 
 
Inter-segment revenue share
(58)
(59)
(63)
 
(177)
(204)
 
Run-off businesses
(113)
 
(87)
163 
 
 
 
 
 
 
 
 
 
Total income
831 
1,076 
1,252 
 
3,258 
3,960 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
(11.0%)
(0.5%)
(0.3%)
 
(1.5%)
(1.2%)
 
Return on equity - adjusted (1,2)
0.4%
3.3%
3.8%
 
3.5%
2.9%
 
Net interest margin
1.08%
0.90%
0.79%
 
0.95%
0.74%
 
Cost:income ratio
168%
107%
99%
 
109%
99%
 
Cost:income ratio - adjusted (1)
99%
88%
81%
 
84%
81%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
£bn 
£bn 
£bn 
 
 
 
 
Funded assets
274.9 
278.7 
268.6 
Total assets
572.9 
537.6 
551.2 
Reverse repos
72.9 
78.8 
76.2 
Net loans and advances to customers
73.1 
69.0 
68.2 
Net loans and advances to banks
19.5 
19.4 
20.5 
Securities
65.6 
67.9 
72.1 
Risk-weighted assets (3)
123.2 
127.8 
120.4*
  - credit risk
 
 
 
    - non-counterparty
48.5 
58.4 
61.8 
    - counterparty
37.2 
28.9 
17.5 
  - market risk
25.7 
28.7 
26.4 
  - operational risk
11.8 
11.8 
14.7 

*On a fully loaded Basel 3 basis risk-weighted assets at 1 January were £147.1 billion.

For the notes to this table refer to page 24.


Citizens Financial Group (US dollar)


 
Quarter ended
 
Nine months ended
 
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
 
2014 
2014 
2013 
 
2014 
2013 
 
Income statement
$m 
$m 
$m 
 
$m 
$m 
 
 
 
 
 
 
 
 
 
Net interest income
824 
838 
748 
 
2,471 
2,197 
 
 
 
 
 
 
 
 
 
Net fees and commissions
291 
305 
302 
 
875 
892 
 
Other non-interest income
68 
353 
101 
 
520 
392 
 
 
 
 
 
 
 
 
 
Non-interest income
359 
658 
403 
 
1,395 
1,284 
 
 
 
 
 
 
 
 
 
Total income
1,183 
1,496 
1,151 
 
3,866 
3,481 
 
 
 
 
 
 
 
 
 
Direct expenses
 
 
 
 
 
 
 
  - staff costs
(425)
(439)
(415)
 
(1,280)
(1,298)
 
  - other costs
(388)
(423)
(388)
 
(1,223)
(1,132)
 
Indirect expenses
(49)
 
(123)
 
Restructuring costs
(22)
(115)
(3)
 
(137)
(8)
 
 
 
 
 
 
 
 
 
Operating expenses
(835)
(977)
(855)
 
(2,640)
(2,561)
 
 
 
 
 
 
 
 
 
Profit before impairment losses
348 
519 
296 
 
1,226 
920 
 
Impairment losses
(77)
(53)
(91)
 
(251)
(169)
 
 
 
 
 
 
 
 
 
Operating profit
271 
466 
205 
 
975 
751 
 
 
 
 
 
 
 
 
 
Operating profit - adjusted (1)
293 
581 
208 
 
1,112 
759 
 
 
 
 
 
 
 
 
 
Average exchange rate - US$/£
1.669 
1.683 
1.551 
 
1.669 
1.543 
 
 
 
 
 
 
 
 
 
Analysis of impairments by sector
 
 
 
 
 
 
 
Residential mortgages
10 
24 
 
43 
 
Home equity
25 
43 
 
63 
99 
 
SBO home equity
(9)
(28)
 
(3)
 
Corporate and commercial
28 
(2)
(21)
 
41 
(74)
 
Other consumer
50 
45 
38 
 
144 
94 
 
Securities
 
 
 
 
 
 
 
 
 
 
Total impairment losses
77 
53 
91 
 
251 
169 
 
 
 
 
 
 
 
 
 
Performance ratios
 
 
 
 
 
 
 
Return on equity (2)
5.6%
9.8%
4.9%
 
6.9%
6.1%
 
Return on equity - adjusted (1,2)
6.1%
12.2%
5.0%
 
7.8%
6.1%
 
Net interest margin
2.82%
2.93%
2.94%
 
2.89%
2.92%
 
Cost:income ratio
71%
65%
74%
 
68%
74%
 
Cost:income ratio - adjusted (1)
69%
58%
74%
 
65%
73%
 
 
 
 
 
 
30 September 
30 June 
31 December 
 
2014 
2014 
2013 
Capital and balance sheet
$bn 
$bn 
$bn 
 
 
 
 
Funded assets
130.7 
129.5 
117.9 
Total assets
131.2 
130.1 
118.6 
Net loans and advances to customers
90.4 
88.4 
83.2 
Risk elements in lending
2.0 
2.2 
1.7 
Impairment provisions
(0.8)
(0.9)
(0.4)
Customer deposits (excluding repos)
92.4 
90.5 
91.1 
Risk-weighted assets (3)
104.5 
103.8 
92.8 
 
 
 
 
Spot exchange rate
1.622 
1.711 
1.654 

For the notes to this table refer to page 24.


RBS Capital Resolution

RCR is managed and analysed by four asset management groups - Ulster Bank (RCR Ireland), Real Estate Finance, Corporate and Markets. Real Estate Finance excludes commercial real estate lending in Ulster Bank.
 
 
 
 
Nine months 
 
Quarter ended
ended 
30 September 
30 June
31 March 
30 September 
 
2014 
2014 
2014 
2014 
 
£m 
£m 
£m 
£m 
 
 
 
 
 
Income statement
 
 
 
 
Net interest (expense)/income
(18)
16 
(5)
(7)
 
 
 
 
 
Net fees and commissions
12 
17 
14 
43 
Income from trading activities (1)
42 
(69)
16 
(11)
Other operating income (1)
86 
71 
48 
205 
 
 
 
 
 
Non-interest income
140 
19 
78 
237 
 
 
 
 
 
Total income
122 
35 
73 
230 
 
 
 
 
 
Direct expenses
 
 
 
 
  - staff costs
(37)
(51)
(38)
(126)
  - other costs
(24)
(14)
(18)
(56)
Indirect expenses
(24)
(32)
(23)
(79)
Restructuring costs
(4)
(4)
 
 
 
 
 
Operating expenses
(89)
(97)
(79)
(265)
 
 
 
 
 
Profit/(loss) before impairment losses
33 
(62)
(6)
(35)
Impairment releases/(losses) (1)
605 
128 
(108)
625 
 
 
 
 
 
Operating profit/(loss)
638 
66 
(114)
590 
 
 
 
 
 
Operating profit/(loss) - adjusted (2)
642 
66 
(114)
594 
 
 
 
 
 
Total income
 
 
 
 
Ulster Bank
(29)
14 
(13)
(28)
Real Estate Finance
67 
13 
83 
163 
Corporate
72 
(12)
(2)
58 
Markets
12 
20 
37 
 
 
 
 
 
Total income
122 
35 
73 
230 
 
 
 
 
 
Impairment (releases)/losses
 
 
 
 
Ulster Bank
(379)
(67)
52 
(394)
Real Estate Finance
(159)
(123)
89 
(193)
Corporate
(70)
73 
(34)
(31)
Markets
(11)
(7)
 
 
 
 
 
Total impairment (releases)/losses
(605)
(128)
108 
(625)
 
 
 
 
 
Loan impairment charge as % of gross loans and advances (3)
 
 
 
 
Ulster Bank
(12.0%)
(1.9%)
1.3%
(4.2%)
Real Estate Finance
(11.6%)
(6.6%)
4.1%
(4.7%)
Corporate
(4.0%)
3.7%
(1.5%)
(0.6%)
Markets
(0.6%)
(3.6%)
(1.9%)
 
 
 
 
 
Total
(9.5%)
(1.7%)
1.2%
(3.3%)

Notes:
(1)
Q3 2014 results include £332 million (Q2 2014 - £225 million; Q1 2014 - £56 million) of net gains from the disposal of assets, comprising £97 million gain (Q2 2014 - £6 million gain; Q1 2014 - £5 million loss) in income from trading activities, £3 million gain (Q2 2014 - £38 million; Q1 2014 - £3 million) in other operating income and £232 million (Q2 2014 - £257 million; Q1 2014 - £64 million) release of impairment provisions.
(2)
Excluding restructuring costs.
(3)
Includes disposal groups.



RBS Capital Resolution


 
30 September 
30 June 
31 March 
2014 
2014 
2014 
 
£bn 
£bn 
£bn 
 
 
 
 
Capital and balance sheet
 
 
 
Loans and advances to customers (gross) (1)
25.8 
30.0 
34.0 
Loan impairment provisions
(12.6)
(14.4)
(15.7)
 
 
 
 
Net loans and advances to customers
13.2 
15.6 
18.3 
 
 
 
 
Debt securities
1.7 
1.9 
2.2 
Funded assets
17.9 
20.9 
24.3 
Total assets
31.3 
34.4 
38.8 
 
 
 
 
Risk elements in lending (1)
17.4 
20.4 
23.0 
Provision coverage (2)
72%
71%
68%
Risk-weighted assets
 
 
 
  - Credit risk
 
 
 
    - non-counterparty
18.7 
22.6 
29.6 
    - counterparty
8.2 
8.2 
5.7 
  - Market risk
3.7 
4.3 
5.2 
 
 
 
 
 
30.6 
35.1 
40.5 
 
 
 
 
Gross loans and advances to customers (1)
 
 
 
Ulster Bank
12.6 
13.9 
15.5 
Real Estate Finance
5.5 
7.4 
8.6 
Corporate
7.0 
7.8 
9.1 
Markets
0.7 
0.9 
0.8 
 
 
 
 
 
25.8 
30.0 
34.0 
 
 
 
 
Funded assets - Ulster Bank
 
 
 
Commercial real estate - investment
1.5 
1.9 
2.4 
Commercial real estate - development
0.7 
0.7 
0.8 
Other corporate
0.7 
0.9 
1.2 
 
 
 
 
 
2.9 
3.5 
4.4 
 
 
 
 
Funded assets - Real Estate Finance
 
 
 
UK
3.2 
4.4 
4.7 
Germany
0.8 
1.0 
1.4 
Spain
0.5 
0.5 
0.6 
Other
0.9 
0.8 
1.0 
 
 
 
 
 
5.4 
6.7 
7.7 
 
 
 
 
Funded assets - Corporate
 
 
 
Structured finance
1.7 
2.0 
2.2 
Shipping
1.9 
1.9 
2.0 
Other
3.1 
3.5 
4.4 
 
 
 
 
 
6.7 
7.4 
8.6 
 
 
 
 
Funded assets - Markets
 
 
 
Securitised products
2.3 
2.7 
3.0 
Emerging markets
0.
0.6 
0.6 
 
 
 
 
 
2.9 
3.3 
3.6 

Notes:
(1)
Includes disposal groups.
(2)
Provision coverage represents loan impairment provisions as a percentage of risk elements in lending.



RBS Capital Resolution


Funded assets
 
 
 
 
 
 
1 July
 
 
 
 
30 September
2014 
Net run-off 
Disposals (1)
Impairments 
Other
2014 
Quarter ended 30 September 2014
£bn 
£bn 
£bn 
£bn 
£bn
£bn 
 
 
 
 
 
 
 
Ulster Bank
3.5 
(0.8)
0.4 
(0.2)
2.9 
Real Estate Finance
6.7 
(0.5)
(0.8)
0.1 
(0.1)
5.4 
Corporate
7.4 
(0.6)
(0.4)
0.1 
0.2 
6.7 
Markets
3.3 
(0.4)
(0.1)
0.1 
2.9 
 
 
 
 
 
 
 
Total
20.9 
(1.5)
(2.1)
0.6 
17.9 

Risk-weighted assets
 
 
 
 
 
 
1 July
 
 
Risk
 
Other (3)
30 September
2014 
Net run-off 
Disposals (1)
parameters (2)
Impairments
2014 
Quarter ended 30 September 2014
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
 
 
 
 
 
 
 
 
Ulster Bank
2.3 
(0.1)
(0.1)
2.1 
Real Estate Finance
6.4 
(0.3)
(0.5)
5.6 
Corporate
15.1 
(0.9)
(0.8)
(0.1)
0.7 
14.0 
Markets
11.3 
(0.7)
(0.9)
(0.8)
8.9 
 
 
 
 
 
 
 
 
Total
35.1 
(1.9)
(1.7)
(1.5)
0.6 
30.6 

Capital deductions
 
 
 
 
 
1 July
Net run-off 
 
Risk
Impairments 
Other (3)
30 September
2014 
Disposals (1)
parameters (2)
2014 
Quarter ended 30 September 2014
£m
£m
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
Ulster Bank
217 
(47)
(18)
120 
272 
Real Estate Finance
405 
(68)
(382)
299 
112 
(1)
365 
Corporate
156 
(56)
(26)
(69)
64 
12 
81 
Markets
64 
(1)
(1)
(7)
56 
 
 
 
 
 
 
 
 
Total
842 
(125)
(456)
205 
297 
11 
774 

RWA equivalent (4)
 
 
 
 
 
1 July
Net run-off 
 
Risk
Impairments 
Other (3)
30 September
2014 
Disposals (1)
parameters (2)
2014 
Quarter ended 30 September 2014
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
£bn 
 
 
 
 
 
 
 
 
Ulster Bank
4.5 
(0.5)
(0.3)
1.2 
(0.1)
4.8 
Real Estate Finance
10.5 
(1.0)
(3.8)
2.4 
1.1 
9.2 
Corporate
16.6 
(1.4)
(1.0)
(0.8)
0.6 
0.8 
14.8 
Markets
11.9 
(0.7)
(0.9)
(0.8)
9.5 
 
 
 
 
 
 
 
 
Total
43.5 
(3.1)
(6.2)
0.5 
2.9 
0.7 
38.3 

Notes:
(1)
Includes all effects relating to disposals, including associated removal of deductions from regulatory capital.
(2)
Principally reflects credit migration and other technical adjustments.
(3)
Includes fair value adjustments and foreign exchange movements.
(4)
RWA equivalent (RWAe) is an internal metric that measures the equity capital employed in segments. RWAe converts both performing and non-performing exposures into a consistent capital measure, being the sum of the regulatory RWAs and the regulatory capital deductions, the latter converted to RWAe by applying a multiplier. RBS applies a CET1 ratio of 10%; this results in an end point CRR RWAe conversion multiplier of 10.
 
 


RBS Capital Resolution

 
 
 
 
 
 
 
 
 
 
Gross loans and advances, REIL and impairments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit metrics
 
Quarter ended
 
 
 
 
REIL as a
Provisions
Provisions
 
Impairment
 
 
Gross
 
 
% of gross
as a %
as a % of
 
(releases)/
Amounts
 
loans
REIL
Provisions
loans
of REIL
gross loans
 
charge (2)
written-off
30 September 2014 (1)
£bn
£bn
£bn
%
%
%
 
£m
£m
 
 
 
 
 
 
 
 
 
 
By sector:
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
  - investment
8.4 
6.0 
3.5 
71 
58 
42 
 
(299)
572 
  - development
7.1 
6.7 
5.9 
94 
88 
83 
 
(127)
105 
Asset finance
2.4 
0.8 
0.4 
33 
50 
17 
 
21 
Other corporate
7.8 
3.9 
2.8 
50 
72 
36 
 
(165)
255 
Other
0.1 
 
(21)
 
 
 
 
 
 
 
 
 
 
 
25.8 
17.4 
12.6 
67 
72 
49 
 
(605)
953 
 
 
 
 
 
 
 
 
 
 
By donating segment
 
 
 
 
 
 
 
 
 
  and sector
 
 
 
 
 
 
 
 
 
Ulster Bank
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
 - investment
3.8 
3.5 
2.5 
92 
71 
66 
 
(168)
86 
 - development
6.4 
6.2 
5.6 
97 
90 
88 
 
(116)
77 
Other corporate
2.4 
2.2 
1.7 
92 
77 
71 
 
(95)
11 
 
 
 
 
 
 
 
 
 
 
Total Ulster Bank
12.6 
11.9 
9.8 
94 
82 
78 
 
(379)
174 
 
 
 
 
 
 
 
 
 
 
Commercial Banking
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
  - investment
1.6 
0.8 
0.3 
50 
38 
19 
 
(44)
62 
  - development
0.5 
0.4 
0.2 
80 
50 
40 
 
(16)
20 
Asset finance
 
Other corporate
1.2 
0.6 
0.4 
50 
67 
33 
 
(38)
36 
Other
 
(3)
 
 
 
 
 
 
 
 
 
 
Total Commercial Banking
3.3 
1.8 
0.9 
55 
50 
27 
 
(101)
119 
 
 
 
 
 
 
 
 
 
 
CIB
 
 
 
 
 
 
 
 
 
Commercial real estate
 
 
 
 
 
 
 
 
 
  - investment
3.0 
1.7 
0.7 
57 
41 
23 
 
(87)
424 
  - development
0.2 
0.1 
0.1 
50 
100 
50 
 
Asset finance
2.4 
0.8 
0.4 
33 
50 
17 
 
20 
Other corporate
4.2 
1.1 
0.7 
26 
64 
17 
 
(32)
208 
Other
0.1 
 
(18)
 
 
 
 
 
 
 
 
 
 
Total CIB
9.9 
3.7 
1.9 
37 
51 
19 
 
(125)
660 
 
 
 
 
 
 
 
 
 
 
Total
25.8 
17.4 
12.6 
67 
72 
49 
 
(605)
953 
 
 
 
 
 
 
 
 
 
 
Of which:
 
 
 
 
 
 
 
 
 
UK
11.3 
6.3 
4.1 
56 
65 
36 
 
(245)
630 
Europe
13.4 
10.7 
8.3 
80 
78 
62 
 
(357)
302 
US
0.3 
0.1 
33 
 
(1)
18 
RoW
0.8 
0.3 
0.2 
38 
67 
25 
 
(2)
 
 
 
 
 
 
 
 
 
 
Customers
25.8 
17.4 
12.6 
67 
72 
49 
 
(605)
953 
Banks
0.6 
 
 
 
 
 
 
 
 
 
 
 
Total
26.4 
17.4 
12.6 
66 
72 
48 
 
(605)
962 

Notes:
(1)
Includes disposal groups.
(2)
Impairment losses/(releases) include those relating to AFS securities; sector analyses above include allocation of latent impairment charges.
 
Selected condensed statutory financial statements


Condensed consolidated income statement for the period ended 30 September 2014
 
 
 
 
 
 
 
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Interest receivable
3,839 
3,821 
4,207 
 
11,460 
12,767 
Interest payable
(976)
(1,023)
(1,427)
 
(3,104)
(4,550)
 
 
 
 
 
 
 
Net interest income
2,863 
2,798 
2,780 
 
8,356 
8,217 
 
 
 
 
 
 
 
Fees and commissions receivable
1,296 
1,314 
1,382 
 
3,901 
4,090 
Fees and commissions payable
(202)
(251)
(238)
 
(689)
(698)
Income from trading activities
268 
541 
444 
 
1,761 
2,508 
Gain on redemption of own debt
13 
 
20 
204 
Other operating income
127 
345 
35 
 
1,163 
1,367 
 
 
 
 
 
 
 
Non-interest income
1,489 
1,949 
1,636 
 
6,156 
7,471 
 
 
 
 
 
 
 
Total income
4,352 
4,747 
4,416 
 
14,512 
15,688 
 
 
 
 
 
 
 
Staff costs
(1,690)
(1,845)
(1,895)
 
(5,226)
(5,622)
Premises and equipment
(543)
(622)
(544)
 
(1,818)
(1,648)
Other administrative expenses
(1,344)
(951)
(1,103)
 
(3,006)
(3,284)
Depreciation and amortisation
(306)
(282)
(338)
 
(860)
(1,074)
Write down of goodwill and other intangible assets
(130)
 
(212)
 
 
 
 
 
 
 
Operating expenses
(3,883)
(3,830)
(3,880)
 
(11,122)
(11,628)
 
 
 
 
 
 
 
Profit before impairment releases/(losses)
469 
917 
536 
 
3,390 
4,060 
Impairment releases/(losses)
801 
93 
(1,170)
 
532 
(3,320)
 
 
 
 
 
 
 
Operating profit/(loss) before tax
1,270 
1,010 
(634)
 
3,922 
740 
Tax charge
(333)
(371)
(81)
 
(1,066)
(759)
 
 
 
 
 
 
 
Profit/(loss) from continuing operations
937 
639 
(715)
 
2,856 
(19)
Profit/(loss) from discontinued operations, net of tax
26 
(5)
 
38 
133 
 
 
 
 
 
 
 
Profit/(loss) for the period
940 
665 
(720)
 
2,894 
114 
Non-controlling interests
53 
(23)
(6)
 
11 
(123)
Preference share and other dividends
(97)
(412)
(102)
 
(584)
(284)
 
 
 
 
 
 
 
Profit/(loss) attributable to ordinary and
 
 
 
 
 
 
  B shareholders
896 
230 
(828)
 
2,321 
(293)
 
 
 
 
 
 
 
Earnings/(loss) per ordinary and equivalent
 
 
 
 
 
 
 B share (EPS) (1)
 
 
 
 
 
 
Basic EPS from continuing and discontinued operations
7.9p
2.0p
(7.4p)
 
20.5p
(2.6p)
Basic EPS from continuing operations
7.9p
1.9p
(7.4p)
 
20.4p
(3.6p)

Note:
(1)
Diluted EPS for the quarter ended 30 September 2014 was 0.1p lower (quarter ended 30 June 2014 - 0.1p lower) and for the nine months ended 30 September 2014 was 0.2p lower than basic EPS. There was no dilutive impact on all other comparative periods.

Items excluded from the operating performance of reportable segments are recorded in the condensed consolidated income statement as follows:
 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Own credit adjustments
 
 
 
 
 
 
  - income from trading activities
33 
(84)
(155)
 
44 
20 
  - other operating income
16 
(106)
(341)
 
(46)
(140)
Gain on redemption of own debt
 
 
 
 
 
 
  - non-interest income
13 
 
20 
204 
Write down of goodwill
 
 
 
 
 
 
  - write down of goodwill and other intangible assets
(130)
 
(130)
Strategic disposals
 
 
 
 
 
 
  - other operating income
(7)
 
191 
(7)
RFS Holdings minority interest
(56)
12 
11 
 
(35)
110 


Selected condensed statutory financial statements


Consolidated statement of comprehensive income
for the period ended 30 September 2014
 
Quarter ended
 
Nine months ended
 
30 September 
30 June
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Profit/(loss) for the period
940 
665 
(720)
 
2,894 
114 
 
 
 
 
 
 
 
Items that do not qualify for reclassification
 
 
 
 
 
 
Tax
(163)
 
(163)
 
 
 
 
 
 
 
Items that qualify for reclassification
 
 
 
 
 
 
Available-for-sale financial assets
79 
265 
430 
 
608 
(303)
Cash flow hedges
207 
(47)
(88)
 
455 
(1,624)
Currency translation
616 
(598)
(1,211)
 
(117)
99 
Tax
(31)
(72)
85 
 
(191)
811 
 
 
 
 
 
 
 
Other comprehensive income/(loss) after tax
871 
(452)
(947)
 
755 
(1,180)
 
 
 
 
 
 
 
Total comprehensive income/(loss) for the period
1,811 
213 
(1,667)
 
3,649 
(1,066)
 
 
 
 
 
 
 
Total comprehensive income/(loss) is
 
 
 
 
 
 
  attributable to:
 
 
 
 
 
 
Non-controlling interests
12 
(13)
 
42 
121 
Preference shareholders
91 
75 
98 
 
231 
250 
Paid-in equity holders
17 
 
33 
34 
Dividend access share
320 
 
320 
Ordinary and B shareholders
1,702 
(205)
(1,756)
 
3,023 
(1,471)
 
 
 
 
 
 
 
 
1,811 
213 
(1,667)
 
3,649 
(1,066)

The movement in available-for-sale financial assets during the quarter predominantly reflects realised losses arising on the disposal of securities in the liquidity portfolio. In the nine months ended 30 September 2014, the movement primarily arises on unrealised gains on Spanish and US bonds.
   
Cash flow hedging gains in both the quarter and nine months largely result from decreases in the Sterling and Euro swap rates.
   
Currency translation gains in the quarter are principally due to the weakening of Sterling against the US dollar.  The losses in the nine months are driven by the strengthening of Sterling against the Euro, partly offset by the weakening against the US dollar.


Selected condensed statutory financial statements


Condensed consolidated balance sheet at 30 September 2014
 
30 September 
30 June 
31 December
  
2014 
2014 
2013 
 
£m 
£m 
£m 
 
 
 
 
Assets
 
 
 
Cash and balances at central banks
67,900 
68,670 
82,659 
Net loans and advances to banks
29,090 
28,904 
27,555 
Reverse repurchase agreements and stock borrowing
24,860 
28,163 
26,516 
Loans and advances to banks
53,950 
57,067 
54,071 
Net loans and advances to customers
392,969 
385,554 
390,825 
Reverse repurchase agreements and stock borrowing
50,631 
53,542 
49,897 
Loans and advances to customers
443,600 
439,096 
440,722 
Debt securities
106,769 
112,794 
113,599 
Equity shares
8,309 
7,834 
8,811 
Settlement balances
20,941 
19,682 
5,591 
Derivatives
314,021 
274,906 
288,039 
Intangible assets
12,454 
12,173 
12,368 
Property, plant and equipment
6,985 
7,115 
7,909 
Deferred tax
2,843 
3,107 
3,478 
Prepayments, accrued income and other assets
7,185 
7,418 
7,614 
Assets of disposal groups
1,153 
1,246 
3,017 
 
 
 
 
Total assets
1,046,110 
1,011,108 
1,027,878 
 
 
 
 
Liabilities
 
 
 
Bank deposits
38,986 
39,179 
35,329 
Repurchase agreements and stock lending
30,799 
31,722 
28,650 
Deposits by banks
69,785 
70,901 
63,979 
Customer deposits
405,367 
401,226 
414,396 
Repurchase agreements and stock lending
44,302 
51,540 
56,484 
Customer accounts
449,669 
452,766 
470,880 
Debt securities in issue
53,487 
59,087 
67,819 
Settlement balances
21,049 
15,128 
5,313 
Short positions
34,499 
39,019 
28,022 
Derivatives
310,361 
270,087 
285,526 
Accruals, deferred income and other liabilities
14,618 
14,876 
16,017 
Retirement benefit liabilities
2,629 
2,742 
3,210 
Deferred tax
491 
605 
507 
Subordinated liabilities
24,412 
24,809 
24,012 
Liabilities of disposal groups
272 
125 
3,378 
 
 
 
 
Total liabilities
981,272 
950,145 
968,663 
Equity
 
 
 
Non-controlling interests
2,747 
618 
473 
Owners’ equity* - called up share capital
6,832 
6,811 
6,714 
                           - reserves
55,259 
53,534 
52,028 
 
 
 
 
Total equity
64,838 
60,963 
59,215 
 
 
 
 
Total liabilities and equity
1,046,110 
1,011,108 
1,027,878 
 
 
 
 
* Owners’ equity attributable to:
 
 
 
Ordinary and B shareholders
56,799 
55,053 
53,450 
Other equity owners
5,292 
5,292 
5,292 
 
 
 
 
 
62,091 
60,345 
58,742 
 
 
 
 
Contingent liabilities and commitments
238,248 
239,121 
242,009 


Selected condensed statutory financial statements


Condensed consolidated statement of changes in equity
for the period ended 30 September 2014

 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Called-up share capital
 
 
 
 
 
 
At beginning of period
6,811 
6,752 
6,632 
 
6,714 
6,582 
Ordinary shares issued
21 
59 
65 
 
118 
115 
 
 
 
 
 
 
 
At end of period
6,832 
6,811 
6,697 
 
6,832 
6,697 
 
 
 
 
 
 
 
Paid-in equity
 
 
 
 
 
 
At beginning and end of period
979 
979 
979 
 
979 
979 
 
 
 
 
 
 
 
Share premium account
 
 
 
 
 
 
At beginning of period
24,885 
24,760 
24,483 
 
24,667 
24,361 
Ordinary shares issued
49 
125 
145 
 
267 
267 
 
 
 
 
 
 
 
At end of period
24,934 
24,885 
24,628 
 
24,934 
24,628 
 
 
 
 
 
 
 
Merger reserve
 
 
 
 
 
 
At beginning and end of period
13,222 
13,222 
13,222 
 
13,222 
13,222 
 
 
 
 
 
 
 
Available-for-sale reserve
 
 
 
 
 
 
At beginning of period
138 
(62)
(714)
 
(308)
(346)
Unrealised (losses)/gains
(37)
411 
592 
 
807 
606 
Realised losses/(gains)
52 
(148)
(164)
 
(314)
(769)
Tax
28 
(63)
34 
 
(40)
367 
Transfer to retained earnings
(9)
 
(9)
Recycled to profit or loss on disposal of businesses (1)
 
36 
(110)
 
 
 
 
 
 
 
At end of period
172 
138 
(252)
 
172 
(252)
 
 
 
 
 
 
 
Cash flow hedging reserve
 
 
 
 
 
 
At beginning of period
94 
141 
491 
 
(84)
1,666 
Amount recognised in equity
575 
315 
163 
 
1,543 
(696)
Amount transferred from equity to earnings
(368)
(362)
(251)
 
(1,088)
(928)
Tax
(44)
44 
 
(114)
405 
Transfer to retained earnings
34 
 
34 
 
 
 
 
 
 
 
At end of period
291 
94 
447 
 
291 
447 
 
 
 
 
 
 
 
Foreign exchange reserve
 
 
 
 
 
 
At beginning of period
2,963 
3,551 
5,201 
 
3,691 
3,908 
Retranslation of net assets
776 
(702)
(1,338)
 
(96)
92 
Foreign currency gains on hedges of net assets
(161)
123 
148 
 
(6)
17 
Tax
(15)
(9)
 
(26)
Transfer to retained earnings
(390)
 
(390)
Recycled to profit or loss on disposal of businesses
 
(3)
 
 
 
 
 
 
 
At end of period
3,173 
2,963 
4,018 
 
3,173 
4,018 
 
 
 
 
 
 
 
Capital redemption reserve
 
 
 
 
 
 
At beginning and end of period
9,131 
9,131 
9,131 
 
9,131 
9,131 
 
 
 
 
 
 
 
Contingent capital reserve
 
 
 
 
 
 
At beginning and end of period
(1,208)
 
(1,208)

For the notes to this table refer the following page.


Selected condensed statutory financial statements


Condensed consolidated statement of changes in equity
for the period ended 30 September 2014

 
Quarter ended
 
Nine months ended
 
30 September
30 June
30 September
 
30 September
30 September
 
2014 
2014 
2013 
 
2014 
2013 
 
£m
£m
£m
 
£m
£m
 
 
 
 
 
 
 
Retained earnings
 
 
 
 
 
 
At beginning of period
2,258 
1,986 
11,105 
 
867 
10,596 
Profit/(loss) attributable to ordinary and B
 
 
 
 
 
 
   shareholders and other equity owners
 
 
 
 
 
 
  - continuing operations
999 
627 
(723)
 
2,894 
(116)
  - discontinued operations
(6)
15 
(3)
 
11 
107 
Equity preference dividends paid
(91)
(75)
(98)
 
(231)
(250)
Dividend access share dividend
(320)
 
(320)
Paid-in equity dividends paid, net of tax
(6)
(17)
(4)
 
(33)
(34)
Transfer from available-for-sale reserve
 
Transfer from cash flow hedging reserve
(34)
 
(34)
Transfer from foreign exchange reserve
390 
 
390 
Costs relating to CFG IPO
(45)
 
(45)
Actuarial losses recognised in retirement
 
 
 
 
 
 
  benefit schemes
 
 
 
 
 
 
  - tax
(163)
 
(163)
Loss on disposal of own shares held
 
(18)
Shares released for employee benefits
(5)
 
(41)
(1)
Share-based payments
 
 
 
 
 
 
  - gross
18 
47 
26 
 
26 
22 
  - tax
 
 
 
 
 
 
 
 
At end of period
3,493 
2,258 
10,144 
 
3,493 
10,144 
 
 
 
 
 
 
 
Own shares held
 
 
 
 
 
 
At beginning of period
(136)
(136)
(139)
 
(137)
(213)
Disposal of own shares
 
74 
Shares released for employee benefits
 
 
 
 
 
 
 
 
At end of period
(136)
(136)
(138)
 
(136)
(138)
 
 
 
 
 
 
 
Owners’ equity at end of period
62,091 
60,345 
67,668 
 
62,091 
67,668 
 
 
 
 
 
 
 
Non-controlling interests
 
 
 
 
 
 
At beginning of period
618 
612 
475 
 
473 
1,770 
Currency translation adjustments and other movements
(19)
(21)
 
(15)
(7)
(Loss)/profit attributable to non-controlling interests
 
 
 
 
 
 
  - continuing operations
(62)
12 
 
(38)
97 
  - discontinued operations
11 
(2)
 
27 
26 
Movements in available-for-sale securities
 
 
 
 
 
 
  - unrealised (losses)/gains
(4)
(1)
 
(6)
11 
  - realised losses
68 
 
74 
  - tax
 
(1)
  - recycled to profit or loss on disposal of discontinued
 
 
 
 
 
 
    operations (2)
 
(5)
Equity raised (3)
2,117 
 
2,232 
Equity withdrawn and disposals
 
(1,429)
 
 
 
 
 
 
 
At end of period
2,747 
618 
462 
 
2,747 
462 
 
 
 
 
 
 
 
Total equity at end of period
64,838 
60,963 
68,130 
 
64,838 
68,130 

Notes:
(1)
Net of tax - £11 million in the nine months ended 30 September 2014 (nine months ended 30 September 2013 - £35 million).
(2)
Net of tax - £1 million in the nine months ended 30 September 2013.
(3)
Includes £2,117 million relating to the initial public offering of Citizens Financial Group.



Notes


1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with RBS’s 2013 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).

Accounting policies
There have been no significant changes to RBS’s principal accounting policies as set out on pages 377 to 386 of the 2013 Annual Report and Accounts. The adoption of a number of amendments to IFRSs effective for 2014 has not had a material effect on RBS’s results.

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 pensions, goodwill, provisions for liabilities, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgments are described on pages 386 to 389 of RBS’s 2013 Annual Report and Accounts.

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 Interim Management Statement for the period ended 30 September 2014 has been prepared on a going concern basis.

Restatements
On 27 February 2014, RBS announced the reorganisation of the previously reported operating divisions into
three franchises. In addition, in order to present a more complete picture of funding, operational and business costs of the franchises and operating segments, certain reporting changes were implemented.

For further information on these changes refer to the Q2 2014 Restatement Document dated 21 July 2014, available on www.investors.rbs.com/restatement


Notes


2. Income

 
Quarter ended
 
Nine months ended
 
30 September 
30 June 
30 September 
 
30 September 
30 September 
 
2014 
2014 
2013 
 
2014 
2013 
 
£m 
£m 
£m 
 
£m 
£m 
 
 
 
 
 
 
 
Loans and advances to customers
3,571 
3,543 
3,829 
 
10,632 
11,469 
Loans and advances to banks
94 
89 
106 
 
272 
328 
Debt securities
174 
189 
272 
 
556 
970 
 
 
 
 
 
 
 
Interest receivable
3,839 
3,821 
4,207 
 
11,460 
12,767 
 
 
 
 
 
 
 
Customer accounts
467 
471 
692 
 
1,454 
2,269 
Deposits by banks
24 
41 
95 
 
119 
318 
Debt securities in issue
237 
270 
315 
 
794 
1,013 
Subordinated liabilities
226 
220 
223 
 
658 
670 
Internal funding of trading businesses
22 
21 
102 
 
79 
280 
 
 
 
 
 
 
 
Interest payable
976 
1,023 
1,427 
 
3,104 
4,550 
 
 
 
 
 
 
 
Net interest income
2,863 
2,798 
2,780 
 
8,356 
8,217 
 
 
 
 
 
 
 
Fees and commissions receivable
 
 
 
 
 
 
  - payment services
316 
325 
375 
 
963 
1,064 
  - credit and debit card fees
237 
245 
284 
 
737 
813 
  - lending (credit facilities)
345 
371 
335 
 
1,048 
1,033 
  - brokerage
97 
102 
117 
 
304 
369 
  - investment management
100 
100 
109 
 
306 
319 
  - trade finance
87 
71 
73 
 
225 
226 
  - other
114 
100 
89 
 
318 
266 
 
 
 
 
 
 
 
Fees and commissions receivable
1,296 
1,314 
1,382 
 
3,901 
4,090 
Fees and commissions payable
(202)
(251)
(238)
 
(689)
(698)
 
 
 
 
 
 
 
Net fees and commissions
1,094 
1,063 
1,144 
 
3,212 
3,392 
 
 
 
 
 
 
 
Foreign exchange
171 
202 
198 
 
591 
648 
Interest rate
17 
424 
248 
 
689 
650 
Credit
136 
41 
116 
 
533 
996 
Own credit adjustments
33 
(84)
(155)
 
44 
20 
Other
(89)
(42)
37 
 
(96)
194 
 
 
 
 
 
 
 
Income from trading activities (1)
268 
541 
444 
 
1,761 
2,508 
 
 
 
 
 
 
 
Gain on redemption of own debt
13 
 
20 
204 
 
 
 
 
 
 
 
Operating lease and other rental income
98 
87 
125 
 
276 
381 
Own credit adjustments
16 
(106)
(341)
 
(46)
(140)
Changes in the fair value of FVTPL financial assets
 
 
 
 
 
 
  and liabilities and related derivatives
41 
36 
 
70 
65 
Changes in the fair value of investment properties
(31)
(7)
 
(37)
(23)
(Loss)/profit on sale of:
 
 
 
 
 
 
  - securities
(114)
132 
167 
 
229 
739 
  - property, plant and equipment
23 
16 
10 
 
63 
33 
  - subsidiaries, networks and associates
171 
(21)
 
364 
(3)
Dividend income
17 
 
36 
41 
Share of results of associates
31 
28 
73 
 
86 
277 
Other income
19 
22 
(13)
 
122 
(3)
 
 
 
 
 
 
 
Other operating income
127 
345 
35 
 
1,163 
1,367 
 
 
 
 
 
 
 
Total non-interest income
1,489 
1,949 
1,636 
 
6,156 
7,471 
 
 
 
 
 
 
 
Total income
4,352 
4,747 
4,416 
 
14,512 
15,688 

Note:
(1)
The analysis of income from trading activities is based on how the business is organised and the underlying risks managed. Income from trading activities comprises gains and losses on financial instruments held for trading, both realised and unrealised, interest income, dividends and the related hedging and funding costs in the trading book.



Notes


3. Earnings per ordinary and equivalent B share
Following agreement between RBS and Her Majesty's Treasury for the retirement of the Dividend Access Share (DAS), earnings per share for periods ended after 25 June 2014 only reflect DAS dividends recognised before the end of a reporting period: £320 million was recognised in the quarter ended 30 June 2014. For periods ending on or before 31 March 2014 earnings are allocated solely to the DAS and earnings per ordinary and equivalent B share for such periods are therefore nil.  The DAS does not share in losses.  For periods prior to 25 June 2014, adjusted earnings per ordinary and equivalent B share excludes the rights of the dividend access share.

4. Provisions for liabilities and charges
 
 
 
Other
 
Other
 
 
 
 
 
 
 
 customer
 
regulatory
 
 
 
 
 
PPI
IRHP
 redress
LIBOR
provisions
Litigation
Property
Other
Total
 
£m
£m
£m
£m
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
At 1 January 2014
926 
1,077 
337 
416 
150 
2,018 
379 
186 
5,489 
Currency translation and other
 
 
 
 
 
 
 
 
 
  movements
(2)
(2)
(61)
(2)
(67)
Charge to income statement
 
 
 
 
 
 
 
 
 
  - continuing operations
150 
100 
51 
68 
151 
174 
694 
Releases to income statement
 
 
 
 
 
 
 
 
 
  - continuing operations
(8)
(35)
(15)
(58)
Provisions utilised
(490)
(417)
(79)
(414)
(5)
(80)
(129)
(71)
(1,685)
 
 
 
 
 
 
 
 
 
 
At 30 June 2014
586 
760 
301 
143 
1,910 
384 
289 
4,373 
Currency translation and other
 
 
 
 
 
 
 
 
 
  movements
102 
(1)
101 
Charge to income statement
 
 
 
 
 
 
 
 
 
  - continuing operations
100 
19 
500 
135 
28 
95 
877 
Releases to income statement
 
 
 
 
 
 
 
 
 
  - continuing operations
(4)
(4)
(8)
Provisions utilised
(143)
(207)
(50)
(4)
(335)
(14)
(31)
(784)
 
 
 
 
 
 
 
 
 
 
At 30 September 2014
543 
553 
266 
639 
1,808 
397 
353 
4,559 

5. Litigation, investigations and reviews
Except for the developments noted below, there have been no material changes to litigation, investigations and reviews as disclosed in the Interim Results for the six months ended 30 June 2014. Other regulatory provisions increased by £500 million (see Note 4) during the three month period ended 30 September 2014, £400 million of which was in connection with the investigations and reviews around foreign exchange trading. Although RBS has established a provision with respect to these investigations, the effect of the outcome of these investigations, any regulatory findings and any related developments, including the timing and amount of fines or settlements, could result in the future outflow of resources in respect of these investigations ultimately proving to be substantially greater than or less than the aggregate provision RBS has recognised.

Litigation

ISDAFIX antitrust litigation
In September and October 2014, The Royal Bank of Scotland plc (RBS plc) and a number of other financial institutions were named as defendants in three purported class action complaints alleging manipulation of USD ISDAFIX rates, to the detriment of persons who entered into transactions that referenced those rates.  The complaints were filed in the United States District Court for the Southern District of New York and contain claims for unjust enrichment and violations of the U.S. antitrust laws and the Commodities Exchange Act.


Notes


5. Litigation, investigations and reviews (continued)

Complex Systems
As previously disclosed, The Royal Bank of Scotland N.V. (RBS N.V.) was a defendant in an action heard in the United States District Court for the Southern District of New York filed by Complex Systems, Inc (CSI). The plaintiff alleged that RBS N.V. had since late 2007 been using the plaintiff's back-office trade finance processing software without a valid licence, in violation of the US Copyright Act. RBS N.V. and CSI have now reached a settlement of the action, and RBS N.V. has paid the agreed settlement sum to CSI. This brings an end to the proceedings and provides RBS companies with an on-going, perpetual licence to use the software at issue.

Investigations and reviews

LIBOR and other trading rates
On 21 October 2014, the European Commission (EC) announced its findings that RBS and one other financial institution had participated in a bilateral cartel aimed at influencing the Swiss franc Libor benchmark interest rate between March 2008 and July 2009. RBS agreed to settle the case with the EC and received full immunity from fines for revealing the existence of the cartel to the EC and co-operating closely with the EC’s ongoing investigation. Also on 21 October 2014, the EC announced its findings that RBS and three other financial institutions had participated in a related cartel on bid-ask spreads of Swiss franc interest rate derivatives in the European Economic Area (EEA). Again, RBS received full immunity from fines for revealing the existence of the cartel to the EC and co-operating closely with the EC’s ongoing investigation.

Foreign exchange trading
Various governmental and regulatory authorities in different countries have been conducting investigations into foreign exchange trading and sales activities apparently involving multiple financial institutions. RBS is under investigation by, has received enquiries from and/or is in discussion with certain of these authorities including, among others, the FCA and Serious Fraud Office in the UK, and the Department of Justice and certain other financial regulatory authorities in the United States. RBS is reviewing communications and procedures relating to certain currency exchange benchmark rates as well as foreign exchange trading and sales activity.

Technology incident in June 2012
As previously disclosed, on 19 June 2012, RBS was affected by a technology incident, as a result of which the processing of certain customer accounts and payments were subject to considerable delay. RBS agreed to reimburse customers for any loss suffered as a result of the incident and RBS made a provision of £175 million in 2012.

On 9 April 2013, the UK Financial Conduct Authority (FCA) announced that it had commenced an enforcement investigation into the incident. This was a joint investigation conducted by the FCA together with the UK Prudential Regulation Authority (PRA) and enforcement proceedings have since commenced.  Separately the Central Bank of Ireland (CBI) initiated an investigation and has issued enforcement proceedings against Ulster Bank Ireland Limited, an RBS company. Ulster Bank Ireland Limited anticipates entering into settlement discussions with the CBI before the end of the year.



Notes


5. Litigation, investigations and reviews (continued)

Multilateral interchange fees
As previously disclosed, in 2007, the EC issued a decision that, while interchange is not illegal per se, MasterCard’s multilateral interchange fee (MIF) arrangements for cross border payment card transactions with MasterCard and Maestro branded consumer credit and debit cards in the EEA were in breach of competition law. MasterCard appealed against the decision to the General Court, which upheld the EC’s original decision. MasterCard appealed further to the Court of Justice and RBS intervened in those appeal proceedings. On 11 September 2014, the Court rejected MasterCard’s appeal and confirmed the EC’s original decision. MasterCard had negotiated interim cross border MIF levels to apply for the duration of the General Court and Court of Justice proceedings and further negotiation is expected in light of the Court’s decision.

Investigation into advised mortgage sales

On 27 August 2014 the FCA announced that it had fined RBS £14.47 million in relation to an investigation into advised mortgage sales made by RBS plc and NatWest in the period June 2011 to March 2013 inclusive.

6. Risk factors
A summary of the principal risks which could adversely affect RBS are included on pages 135 to 137 of the Interim Results 2014.

7. Recent developments

CFG
On 8 October 2014, in a US$334 million capital exchange transaction, CFG repurchased 14.3 million common shares from RBSG International Holdings Limited and issued US$334 million of subordinated debt to The Royal Bank of Scotland Group plc. As a result, RBS’s holding in CFG declined from 71.25% as at 30 September 2014 to 70.5% of shares outstanding.

On 24 October 2014, CFG declared a quarterly common stock dividend of US$0.10 per share. This dividend will be paid on 20 November 2014 and will amount to US$55 million in aggregate.

2014 EBA EU-wide stress test
On 26 October, 2014, the European Banking authority (EBA) announced the results of the 2014 EBA EU-wide stress test. RBSG plc and its subsidiaries Ulster Bank Ireland Limited and RBS N.V. all reported capital ratios above the respective post-stress minimum requirements.

8. Post balance sheet events
There have been no significant events between 30 September 2014 and the date of approval of this announcement which would require a change to or additional disclosure in the announcement.

 

 
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: 31 October 2014
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:
Title:
Jan Cargill
Deputy Secretary