TIDMRBS
RNS Number : 0954C
Royal Bank of Scotland Group PLC
06 November 2009
?
Third quarter 2009 results
Contents
+------------------------------------------------------------------+----------+
| | Page |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Forward-looking statements | 3 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Presentation of information | 4 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Results summary - pro forma | 5 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Results summary - statutory | 7 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Business and strategic update | 8 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Pro forma results | 13 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Summary consolidated income statement | 13 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Condensed consolidated statement of comprehensive income | 15 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Summary consolidated balance sheet | 15 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Key metrics | 16 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Results summary | 18 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Divisional performance | 26 |
+------------------------------------------------------------------+----------+
| UK Retail | 28 |
+------------------------------------------------------------------+----------+
| UK Corporate | 31 |
+------------------------------------------------------------------+----------+
| Wealth | 34 |
+------------------------------------------------------------------+----------+
| Global Banking & Markets | 36 |
+------------------------------------------------------------------+----------+
| Global Transaction Services | 39 |
+------------------------------------------------------------------+----------+
| Ulster Bank | 41 |
+------------------------------------------------------------------+----------+
| US Retail & Commercial | 44 |
+------------------------------------------------------------------+----------+
| RBS Insurance | 51 |
+------------------------------------------------------------------+----------+
| Central items | 53 |
+------------------------------------------------------------------+----------+
| Non-Core | 54 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Allocation methodology for indirect costs | 59 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Condensed consolidated balance sheet | 61 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Commentary on condensed consolidated balance sheet | 62 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Notes | 63 |
+------------------------------------------------------------------+----------+
Contents (continued)
+------------------------------------------------------------------+----------+
| | Page |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Risk and capital management | 76 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Capital resources and ratios | 76 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Credit risk | 78 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Liquidity risk | 83 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Market risk | 87 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Market turmoil exposures | 89 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Statutory results | 101 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Condensed consolidated income statement | 102 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Condensed consolidated statement of comprehensive income | 103 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Financial review | 104 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Condensed consolidated balance sheet | 105 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Commentary on condensed consolidated balance sheet | 106 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Notes | 107 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Capital resources and ratios | 114 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Additional information | 116 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Statutory results | 116 |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Appendix 1 Reconciliations of pro forma to statutory income | |
| statements and balance sheets | |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Appendix 2 Analysis by quarter | |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Appendix 3 Asset Protection Scheme | |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Appendix 4Businesses outlined for disposal | |
+------------------------------------------------------------------+----------+
| | |
+------------------------------------------------------------------+----------+
| Appendix 5Revisions | |
+------------------------------------------------------------------+----------+
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', 'should', 'intend', 'plan', 'probability', 'risk', 'Value-at-Risk
(VaR)', 'target', 'goal', 'objective', 'will', 'endeavour', 'outlook',
'optimistic', 'prospects' and similar expressions or variations on such
expressions.
In particular, this document includes forward-looking statements relating,
but not limited, to the Group's potential exposures to various types of market
risks, such as interest rate risk, foreign exchange rate risk and commodity and
equity price risk. Such statements are subject to risks and uncertainties. For
example, certain of the 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: RBS obtaining the requisite approvals and agreeing the
requisite documents to finalise its accession into the APS; the effect of the
APS and State Aid remedies on RBS's financial and capital position; the
continuation or further deepening of recessionary conditions; the ability of the
Group to access sufficient funding to meet its liquidity needs; the developments
in the current crisis in the global financial markets, and their impact on the
financial industry in general and the Group in particular; the effect on the
Group's capital of write downs in respect of credit market exposures and
impairments; general economic conditions in the UK and in other countries in
which the Group has significant business activities or investments, including
the United States; the monetary and interest rate policies of the Bank of
England, the Board of Governors of the Federal Reserve System and other G-7
central banks; inflation; deflation; unanticipated turbulence in interest rates,
foreign currency exchange rates, commodity prices and equity prices; changes in
UK and foreign laws, regulations and taxes; changes in competition and pricing
environments; natural and other disasters; the inability to hedge certain risks
economically; the adequacy of loss reserves; acquisitions or restructurings;
technological changes; changes in consumer spending and saving habits; the value
and effectiveness of any credit protection purchased by RBS; and the success of
the Group in managing the risks involved in the foregoing.
The forward-looking statements contained in this document speak only as of
the date of this announcement, and the Group does not undertake to update any
forward-looking statement to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this document do not
constitute a public offer under any applicable legislation or an offer to sell
or solicitation of any offer to buy any securities or financial instruments or
any advice or recommendation with respect to such securities or other financial
instruments.
Presentation of information
Acquisition of ABN AMRO
On 17 October 2007, RFS Holdings B.V. ('RFS Holdings'), a company jointly owned
by The Royal Bank of Scotland Group plc ('RBS'), Fortis Bank Nederland (Holding)
N.V. ('Fortis') and Banco Santander S.A. ('Santander') (together, the
'Consortium Members'), completed the acquisition of ABN AMRO Holding N.V. ('ABN
AMRO').
RFS Holdings is implementing an orderly separation of the business units of ABN
AMRO with RBS retaining the following ABN AMRO business units:
- Continuing businesses of Business Unit North America;
- Business Unit Global Clients and wholesale clients in the Netherlands
(including former Dutch wholesale clients) and Latin America (excluding
Brazil);
- Business Unit Asia (excluding Saudi Hollandi); and
- Business Unit Europe (excluding Antonveneta).
Certain other assets will continue to be shared by the Consortium Members.
On 3 October 2008, the State of the Netherlands acquired Fortis Bank Nederland
(Holding) N.V. including Fortis' participation in RFS Holdings that represents
the acquired activities of ABN AMRO.
The separation of the main platform shared between RBS and its Dutch state-owned
partner has been completed and the Group expects that, subject to legal process
and regulatory approvals, the legal separation of the constituent parts of ABN
AMRO will be complete in early 2010. From that point RBS will cease to
consolidate the Dutch state's interest in RBS Group statutory accounts.
Pro forma results
Pro forma results have been prepared to include only those business units of ABN
AMRO that will be retained by RBS. The financial review and divisional
performance and discussion of risk and capital management in this Interim
Management Statement focus on the pro forma results. The basis of preparation of
the pro forma results is detailed on page 63.
Statutory results
RFS Holdings is jointly owned by the Consortium Members. It is controlled by RBS
and is therefore fully consolidated in its statutory financial statements. The
interests of the State of the Netherlands and Santander in RFS Holdings are
included in minority interests.
Restatements
Divisional results for 2008 have been restated to reflect the Group's new
organisational structure that includes a Non-Core division comprising individual
assets, portfolios and lines of business that the Group intends to run off or
dispose of. The Non-Core division is reported separately from the divisions
which form the Core Group. In addition, separate reporting of Business Services
(formerly Group Manufacturing) and Centre results has changed and, with the
exception of certain items of a one off nature, costs incurred are now allocated
to the customer-facing divisions and included in the measurement of the returns
which they generate. The changes do not affect the Group's results. Comparatives
have been restated accordingly.
The pro forma and statutory results for 2008 have been restated for the
amendment to IFRS 2 'Share-based Payment'. This has resulted in an increase in
staff costs amounting to GBP37 million for the third quarter of 2008 and GBP72
million for the first nine months of 2008.
The pro forma and statutory results for 2008 have been restated for the
finalisation of the ABN AMRO acquisition accounting.
Results summary - pro forma
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income (1) | 7,154 | 7,015 | 7,529 | | 24,862 | 21,699 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses (2) | (3,729) | (3,638) | (3,531) | | (11,474) | (10,742) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (1,019) | (788) | (764) | | (2,596) | (2,353) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 2,406 | 2,589 | 3,234 | | 10,792 | 8,604 |
| impairment losses (3) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (1,213) | (1,147) | (512) | | (3,390) | (1,184) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit (3) | 1,193 | 1,442 | 2,722 | | 7,402 | 7,420 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income (1) | (60) | (894) | 1,056 | | (2,977) | (1,463) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses (2) | (466) | (428) | (529) | | (1,454) | (1,711) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (126) | (137) | (170) | | (440) | (508) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (652) | (1,459) | 357 | | (4,871) | (3,682) |
| before impairment | | | | | | |
| losses (3) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (2,066) | (3,516) | (768) | | (7,410) | (1,575) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating loss (3) | (2,718) | (4,975) | (411) | | (12,281) | (5,257) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total* | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income (1) | 7,094 | 6,121 | 8,585 | | 21,885 | 20,236 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses (2) | (4,195) | (4,066) | (4,060) | | (12,928) | (12,453) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (1,145) | (925) | (934) | | (3,036) | (2,861) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 1,754 | 1,130 | 3,591 | | 5,921 | 4,922 |
| impairment losses (3) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (3,279) | (4,663) | (1,280) | | (10,800) | (2,759) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (1,525) | (3,533) | 2,311 | | (4,879) | 2,163 |
| (3) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| (Loss)/profit before tax | (2,077) | 59 | 1,903 | | (2,062) | 1,177 |
| (4) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| (Loss)/profit | (1,800) | (140) | 871 | | (2,842) | 44 |
| attributable to ordinary | | | | | | |
| shareholders | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| * Includes fair value of | (483) | (960) | 1,281 | | (412) | 2,093 |
| own debt impact | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity - | (11.2%) | (26.6%) | 9.8% | | (15.6%) | 2.4% |
| annualised (5) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin** | 1.75% | 1.70% | 2.05% | | 1.74% | 2.06% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio (6) | 59.1% | 66.4% | 47.3% | | 59.1% | 61.5% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Adjusted cost:income | 70.5% | 78.3% | 53.1% | | 68.6% | 71.7% |
| ratio (7) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Continuing | | | | | | |
| operations: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Pre-impairment | 2.5p | 2.6p | 11.5p | | 15.1p | 38.9p |
| Core adjusted | | | | | | |
| earnings per | | | | | | |
| ordinary share (8) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core adjusted earnings | 1.0p | 1.0p | 9.5p | | 9.7p | 33.0p |
| per ordinary share (9) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Basic earnings per | (3.2p) | (0.2p) | 5.6p | | (5.6p) | 0.9p |
| ordinary share (10) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
For definitions of the notes see pages 16 and 17.
** Net interest margin for the quarter ended 30 June 2009 has been revised. See
Appendix 5.
Results summary - pro forma
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Capital and balance sheet | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Total assets | GBP1,680.3bn | GBP1,644.4bn | 2% | | GBP2,218.7bn | (24%) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Funded balance sheet (11) | GBP1,127.8bn | GBP1,088.6bn | 4% | | GBP1,227.2bn | (8%) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Loan:deposit ratio (gross | 142.3% | 144.5% | (220bp) | | 152.4% | (1,010bp) |
| of provisions) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Loan:deposit ratio (net | 138.8% | 142.9% | (410bp) | | 150.3% | (1,150bp) |
| of provisions) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| RWAs | GBP594.7bn | GBP547.3bn | 9% | | GBP577.8bn | 3% |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Total equity | GBP58.9bn | GBP57.8bn | 2% | | GBP64.3bn | (8%) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Core Tier 1 ratio | 5.5% | 6.4% | (90bp) | | 5.9% | (40bp) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tier 1 ratio | 8.0% | 9.0% | (100bp) | | 9.9% | (190bp) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tier 1 leverage ratio | 23.4x | 21.7x | 8% | | 21.2x | 10% |
| (12) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tangible equity leverage | 3.0% | 3.0% | - | | 2.4% | 60bp |
| ratio (13) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Net tangible equity per | 59.4p | 58.0p | 2% | | 73.8p | (20%) |
| share | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
For definitions of the notes see pages 16 and 17.
Results summary - statutory
Highlights
* Income of GBP8,080 million.
* Pre-tax loss of GBP2,169 million for Q309.
* Core Tier 1 ratio 6.5%.
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 8,080 | 11,453 | 9,962 | | 29,921 | 23,804 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses | (5,552) | (5,732) | (5,321) | | (17,443) | (16,040) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating | 1,319 | 4,674 | 3,595 | | 9,135 | 4,529 |
| profit before | | | | | | |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment | (3,488) | (4,970) | (1,397) | | (11,548) | (3,058) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (2,169) | (296) | 2,198 | | (2,413) | 1,471 |
| before tax | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| (Loss)/profit | (1,800) | (140) | 871 | | (2,842) | 44 |
| attributable to ordinary | | | | | | |
| shareholders | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Business and strategic update
Strategic plan
In August, RBS detailed its plans, first announced in February, for a radical
restructuring of its businesses to set the Group on a path to sustainability,
stability and customer focus. Businesses and portfolios that did not meet the
Group's strategic criteria, including both stressed and non-stressed assets,
were transferred to the Non-Core division. Within the Core Bank, comprehensive
changes have been set in motion to improve the business and adapt to the future
banking climate. The balance sheet and capital framework were also clearly set
out, anticipating substantially increased regulatory pressures and much greater
emphasis on liquidity. While updates to the Plan and related targets will be
published in February, reflecting the new APS agreement and EU remedies, we
currently expect the Plan's integrity and key aspirations to remain valid.
The Group's strategy has been embedded in five-year plans across divisions, and
the more recent 2010 budgets provide encouraging support for these plans. There
remain many uncertainties in the economic environment and the Group has made it
clear that it expects the path to rebuilding standalone strength and shareholder
value to be multi-year in duration.
Some encouraging progress has, nevertheless, been made in the third quarter
towards some of the Group's intermediate goals:
* Despite intense competition for retail savings, customer deposits, excluding
repos, grew in the quarter, up 2% or GBP8.5 billion compared with 2Q09, with
encouraging deposit-gathering performances from all our retail divisions as well
as from Global Transaction Services.
* Loans and advances to customers, excluding reverse repos, reduced by 1% compared
with 2Q09 and by 15% compared with December 2008, with the bulk of the reduction
coming in Global Banking & Markets and Non-Core.
* The Group's loan to deposit ratio improved to 142% at the end of September, an
improvement of 220 basis points from the end of June and of 1,010 basis points
from the end of December 2008. The Group's 2013 target is to achieve a ratio of
approximately 100%.
* Risk-weighted assets, however, increased by 9% in the quarter, mainly due to the
fall in credit ratings for monolines, the effect of procyclicality in Basel II
models and foreign exchange movements.
* Efforts to improve efficiency have continued to make headway, and the Group is
on track for its three year cost saving targets. The Group cost:income ratio
year to date improved by 2 percentage points, compared with the same period of
2008.
* We issued GBP4.8 billion of unguaranteed term debt during the third quarter,
taking the total issued to end September to GBP9.2 billion. In general, the
picture on liquidity is rapidly improving, albeit from a poor starting point.
Return on equity remains negative. The Group's 2013 target is to achieve a
sustainable return on equity in excess of 15%, powered by market-leading
franchises in large, customer-driven markets.
Business and strategic update (continued)
Non-Core division and disposal programme
The Non-Core Division is now fully operational and continues actively to reduce
risk and manage the run-down and sale options for the GBP190.3 billion of RWAs
for which it is now responsible. Finalising APS has been the greatest priority
to date, in the knowledge that market conditions overall will take time to offer
acceptable value and liquidity. Significant and encouraging market improvements
are, nevertheless, visible.
The disposal of the majority of our Retail & Commercial businesses in Asia,
along with some of our Global Banking & Markets (GBM) businesses, continues to
progress well and we remain in advanced stages of negotiations with bidders for
the remaining markets. Elsewhere, in addition to normal amortisations, improved
market conditions have enabled us to unwind legacy trades. The current market
rally has also significantly reduced monoline and CDPC exposures.
Our plan will continue to be affected by external factors such as economic
conditions, risk appetite and liquidity in the market, as well as foreign
exchange rates.
Risk
As part of its strategic review RBS has a clearly stated ambition to achieve a
standalone AA category risk rating and risk management within the Group is now
implementing revised risk appetite and controls in order to achieve this
objective.
While economic conditions and outlook have improved since the first half
results, they remain fragile, with corporate failures and consequent
unemployment not expected to peak until 2010. The outlook for impairments has
improved somewhat and these may now be plateauing at 1H09 levels although we are
still seeing a modest increase in default rates. Economic conditions in the UK
and more so Ireland, two key markets for RBS, remain relatively weak. Our
impairments and write-downs remain concentrated in the Non-Core division with
better quality credit metrics in most of our Core divisions.
The Group continues to reduce its exposure to country risk and a new country
risk framework is now well embedded across the Group. Total cross border
exposure to countries in the emerging economies has declined since June 2008 by
over 20% adjusted for currency movements.
Single Name Concentrations continue to receive a high level of attention and
further refinements to the risk management framework will be implemented during
the fourth quarter. A programme to improve reporting is now well underway
increasing transparency of risk exposures and improving the ability of
management to take mitigating action as part of the process of reducing the risk
in RBS's balance sheet.
Market risk as measured by Value at Risk (VaR) has increased materially,
primarily reflecting the rise in Non-Core credit spread VaR resulting from the
increased volatility in the most recent two years' of market data, as well as
additional hedges against the risk of counterparty failure, which is not itself
recorded in VaR.
Business and strategic update (continued)
Risk (continued)
The potential for increased Operational Risk emanating from the implementation
of the Strategic Plan is an issue which is being actively managed by each
division and monitored by the independent risk function. We also have an active
programme of engagement with the very significant regulatory change agenda
across prudential requirements, banking capital, bank licensing and supervision.
The regulatory agenda is all-consuming of itself, with multiple initiatives to
prepare for and react to significant uncertainties still to wash through for all
banks.
UK Lending Commitments
In February, as a pre-requisite to its proposed participation in the APS, the
Group agreed to make available an additional GBP25 billion of lending (GBP9
billion of mortgage lending and GBP16 billion of business lending) to
creditworthy customers on commercial terms, and subject to market demand, over
the ensuing 12 months, and a similar amount over the following year.
RBS is unambiguous in its view that these commitments are being met. However, as
is normal in recessions, our customers are generally seeking to repair their
balance sheets, not to increase borrowing. As a result, the demand for our
lending is muted, especially from business customers. By comparison in the
United States, where economic growth has already resumed, the fall in loan
demand has been even greater. Increased borrowing is not the route to
sustainable recovery.
Since entering into this commitment RBS has achieved strong results in the
mortgage market:
* Gross lending year to date totals GBP13.9 billion, including over GBP2.3 billion
of lending to first time buyers. Gross lending during the quarter was 23% higher
than in 2Q09 and at 30 September 2009, UK mortgage balances totalled GBP88.7
billion, 11% higher than at the end of 2008.
* The acceptance rate for mortgage lending, at 90%, remains high. With net
mortgage lending year to date totalling GBP8.6 billion, the Group is on target
to surpass the GBP9 billion mortgage lending commitment.
In business markets, RBS has achieved gross lending of GBP45.5 billion year to
date. Gross lending during 3Q09 was GBP15.2 billion, 2% lower than 2Q09. After
taking account of loan repayments and overdraft movements, RBS's business
lending, including Ulster Bank, at 30 September 2009 totalled GBP154.3 billion,
a decline of 6% since the end of 2008.
* In the SME segment, gross lending in the first nine months of 2009 was GBP28.5
billion. Demand remains subdued, with credit applications down 26% by value
3Q09 compared with 3Q08. The acceptance rate across all categories of SME credit
remains stable at 85%.
* The average interest rate on new lending to SMEs has fallen to 3.4% in the third
quarter, compared with 7.0% for 3Q08. In November 2008, we gave a promise not to
increase small business customers' overdraft pricing until the end of 2009
unless the risks associated with lending to them have increased. As a result, in
the third quarter 94% of SME customers had overdrafts renewed at the same margin
or lower.
Business and strategic update (continued)
UK Lending Commitments (continued)
* SME repayments have accelerated as many business and commercial customers seek
to deleverage (term loan repayments are up 37% in 2009 year to date).
* Overdraft utilisation rates across the SME and mid-corporate segments have
remained low at 44%. SME and mid-corporate customers still have access to
undrawn committed facilities of more than GBP27 billion. Our SME Committed
Overdraft promise ensures that customers' committed facilities remain in place
for at least 12 months.
* Significant marketing activity to reiterate an 'Open for Business' message and
the success of the Regional Funds programme has enabled balances to be held
stable year to date. We have also recently launched a new Business Hotline which
offers businesses, whether they are customers or not, a second opinion in cases
where their lending proposition has been declined.
* Gross new lending to mid- and large corporates totalled GBP5.4 billion in the
quarter, 13% lower than the 2Q09 total, and GBP17.0 billion year to date.
* Many larger corporates are actively deleveraging to repair their balance sheets.
RBS has been a significant player in facilitating access to the debt and equity
markets for its larger clients. RBS has been bookrunner for circa GBP5 billion
of the GBP55 billion of bond issuance by UK corporates and has been actively
involved in circa GBP25 billion of equity issuance in the year to date. Much of
this finance raised has been used to repay bank borrowing.
Notwithstanding the Group's willingness to lend to creditworthy customers and
our clarity that the requisite funds are available, thereby fulfilling our
commitments, indications remain that it is unlikely that RBS's net business
lending will increase by the GBP16 billion that we are making available, in the
light of the subdued demand we currently experience.
+----------------+------------+------------+------------+------------+------------+
| | 30 | 31 | Gross | Net | 30 |
| | September | December | lending | lending | September |
| | 2008 | 2008 | during | during | 2009 |
| | | | 2009 | 2009 | |
+----------------+------------+------------+------------+------------+------------+
| | GBPbn | GBPbn | GBPbn | GBPbn | GBPbn |
+----------------+------------+------------+------------+------------+------------+
| | | | | | |
+----------------+------------+------------+------------+------------+------------+
| Mortgages | 79.2 | 80.1 | 13.9 | 8.6 | 88.7 |
+----------------+------------+------------+------------+------------+------------+
| | | | | | |
+----------------+------------+------------+------------+------------+------------+
| Total Business | 161.1 | 163.4 | 45.5 | (9.1) | 154.3 |
| | | | | | |
+----------------+------------+------------+------------+------------+------------+
| SME | 67.4 | 68.0 | 28.5 | (0.1) | 67.9 |
+----------------+------------+------------+------------+------------+------------+
| Mid-corporate | 48.5 | 49.3 | 11.2 | (3.7) | 45.6 |
+----------------+------------+------------+------------+------------+------------+
| Large | 45.2 | 46.1 | 5.8 | (5.3) | 40.8 |
| corporate | | | | | |
+----------------+------------+------------+------------+------------+------------+
| | | | | | |
+----------------+------------+------------+------------+------------+------------+
| Total Lending | 240.3 | 243.5 | 59.4 | (0.5) | 243.0 |
+----------------+------------+------------+------------+------------+------------+
Note:
The above figures include Ulster Bank and Wealth lending and represent drawn
balances, with the exception of Large Corporate numbers which are committed
lending (as per RBS's Lending Commitments agreement). Unsecured personal
lending and non-UK lending are not included in the above data.
Business and strategic update (continued)
Customer Accounts
Crucial to the Group's prospects for future success and return to standalone
health is the resilience of its customer franchises. Except for the activities
earmarked for restructuring, run-off or exit, RBS has sustained its customer
market positions during the third quarter, with customer numbers steady or
growing in all the Group's major businesses.
* UK Retail added 139,000 current account customers during the third quarter, with
current account numbers rising by 3% over the last year to 12.7 million at 30
September. Over 1 million savings accounts have been added over the last 12
months.
* UK Retail added 25,000 mortgage customers during the third quarter, taking
mortgage customer numbers to 826,000, 8% up on 3Q08.
* Ulster Bank has held SME and corporate customer numbers stable over the last
year and increased consumer accounts by 4%, compared with 3Q08.
* US Retail's consumer customer base held steady during the quarter at 4.0
million.
* RBS Insurance achieved strong growth in own brand policy numbers, both through
direct brands and through the bank branch channel. Direct own brand policies
were up 11% in motor and 13% in home, compared with 3Q08. Bank channel home
policies have risen 13% from 3Q08.
Summary consolidated income statement
for the quarter ended 30 September 2009 - pro forma (unaudited)
In the income statements set out below, amortisation of purchased intangible
assets, gain on redemption of own debt, strategic disposals, write-down of
goodwill and other intangible assets and integration and restructuring costs are
shown separately. In the statutory condensed consolidated income statement on
page 102, these items are included in income and operating expenses as
appropriate. Data for 2008 have been restated for the amendment to IFRS 2
'Share-based Payment'.
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | *30 June | 30 | | 30 | 30 |
| | September | | September | | September | September |
| | 2009 | 2009 | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income* | 3,030 | 3,111 | 3,432 | | 9,357 | 10,242 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest | 2,996 | 2,799 | 2,940 | | 12,160 | 7,924 |
| income (excluding | | | | | | |
| insurance net | | | | | | |
| premium income)* | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net premium | 1,128 | 1,105 | 1,157 | | 3,345 | 3,533 |
| income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 4,124 | 3,904 | 4,097 | | 15,505 | 11,457 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income (1) | 7,154 | 7,015 | 7,529 | | 24,862 | 21,699 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses (2) | (3,729) | (3,638) | (3,531) | | (11,474) | (10,742) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Profit before other | 3,425 | 3,377 | 3,998 | | 13,388 | 10,957 |
| operating charges | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (1,019) | (788) | (764) | | (2,596) | (2,353) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 2,406 | 2,589 | 3,234 | | 10,792 | 8,604 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (1,213) | (1,147) | (512) | | (3,390) | (1,184) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit (3) | 1,193 | 1,442 | 2,722 | | 7,402 | 7,420 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 231 | 211 | 404 | | 764 | 1,095 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest | (464) | (1,301) | 400 | | (4,354) | (3,295) |
| income (excluding | | | | | | |
| insurance net | | | | | | |
| premium income) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net premium | 173 | 196 | 252 | | 613 | 737 |
| income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | (291) | (1,105) | 652 | | (3,741) | (2,558) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income (1) | (60) | (894) | 1,056 | | (2,977) | (1,463) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses (2) | (466) | (428) | (529) | | (1,454) | (1,711) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| (Loss)/profit before | (526) | (1,322) | 527 | | (4,431) | (3,174) |
| other operating | | | | | | |
| charges | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (126) | (137) | (170) | | (440) | (508) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (652) | (1,459) | 357 | | (4,871) | (3,682) |
| before impairment | | | | | | |
| losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (2,066) | (3,516) | (768) | | (7,410) | (1,575) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating loss (3) | (2,718) | (4,975) | (411) | | (12,281) | (5,257) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
For definitions of the notes see pages 16 and 17.
* Certain income reported in other operating income in the interim results for
the half year ended 30 June 2009 has been reclassified to net interest income.
The reclassification amounted to GBP205 million and does not affect total income
or operating profit. Further details are included in Appendix 5.
Summary consolidated income statement
for the quarter ended 30 September 2009 - pro forma (unaudited) (continued)
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+------------------------------+---------------------------------+-+-----------------------+
| | 30 | 30 | 30 | | 30 | 30 |
| | September | June | September | | September | September |
| | 2009 | 2009 | 2008 | | 2009 | 2008 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Total | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Net interest income | 3,261 | 3,322 | 3,836 | | 10,121 | 11,337 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Non-interest income | 2,532 | 1,498 | 3,340 | | 7,806 | 4,629 |
| (excluding insurance net | | | | | | |
| premium income) | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Insurance net premium income | 1,301 | 1,301 | 1,409 | | 3,958 | 4,270 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Non-interest income | 3,833 | 2,799 | 4,749 | | 11,764 | 8,899 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Total income (1) | 7,094 | 6,121 | 8,585 | | 21,885 | 20,236 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Operating expenses (2) | (4,195) | (4,066) | (4,060) | | (12,928) | (12,453) |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Profit before other | 2,899 | 2,055 | 4,525 | | 8,957 | 7,783 |
| operating charges | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Insurance net claims | (1,145) | (925) | (934) | | (3,036) | (2,861) |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Operating profit before | 1,754 | 1,130 | 3,591 | | 5,921 | 4,922 |
| impairment losses (3) | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Impairment losses | (3,279) | (4,663) | (1,280) | | (10,800) | (2,759) |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Operating (loss)/profit (3) | (1,525) | (3,533) | 2,311 | | (4,879) | 2,163 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Amortisation of purchased | (73) | (55) | (119) | | (213) | (381) |
| intangible assets | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Integration and | (324) | (355) | (289) | | (1,058) | (605) |
| restructuring costs | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Gain on redemption of own | - | 3,790 | - | | 3,790 | - |
| debt | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Strategic disposals | (155) | 212 | - | | 298 | - |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (2,077) | 59 | 1,903 | | (2,062) | 1,177 |
| before tax (4) | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Tax | 576 | 640 | (724) | | 988 | (421) |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| (Loss)/profit from | (1,501) | 699 | 1,179 | | (1,074) | 756 |
| continuing operations | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Loss from discontinued | (7) | (13) | (46) | | (65) | (87) |
| operations, net of tax | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| (Loss)/profit for the period | (1,508) | 686 | 1,133 | | (1,139) | 669 |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Minority interests | (47) | (83) | (43) | | (601) | (191) |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Preference share and other | (245) | (432) | (219) | | (791) | (434) |
| dividends | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| (Loss)/profit | (1,800) | 171 | 871 | | (2,531) | 44 |
| attributable to | | | | | | |
| ordinary | | | | | | |
| shareholders before | | | | | | |
| write-down of | | | | | | |
| goodwill and | | | | | | |
| other intangible | | | | | | |
| assets | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| Write-down of | - | (311) | - | | (311) | - |
| goodwill and other | | | | | | |
| intangible assets | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
| (Loss)/profit attributable | (1,800) | (140) | 871 | | (2,842) | 44 |
| to ordinary shareholders | | | | | | |
+------------------------------+-----------+---------+-----------+-+-----------+-----------+
For definitions of the notes see pages 16 and 17.
Condensed consolidated statement of comprehensive income
for the quarter ended 30 September 2009 (unaudited) - pro forma
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| (Loss)/profit for the | (1,508) | 375 | 1,133 | | (1,450) | 669 |
| period | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other comprehensive | | | | | | |
| income: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Available-for-sale | 2,861 | 1,319 | (2,056) | | 1,228 | (3,671) |
| financial assets | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cash flow hedges | 155 | 277 | (97) | | 676 | (220) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Currency translation | 659 | (2,262) | 1,691 | | (1,788) | 2,424 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Tax on other | (846) | (154) | 498 | | (438) | 989 |
| comprehensive income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 2,829 | (820) | 36 | | (322) | (478) |
| comprehensive | | | | | | |
| income for the | | | | | | |
| period, net of tax | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total | 1,321 | (445) | 1,169 | | (1,772) | 191 |
| comprehensive | | | | | | |
| income for the | | | | | | |
| period | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Attributable to: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Equity shareholders | 1,243 | (364) | 1,135 | | (1,903) | 199 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Minority interests | 78 | (81) | 34 | | 131 | (8) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1,321 | (445) | 1,169 | | (1,772) | 191 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Summary consolidated balance sheet
at 30 September 2009 (unaudited) - pro forma
+-----------------------------------------------+------------+------------+------------+
| | 30 | 30 June | 31 |
| | September | 2009 | December |
| | 2009 | | 2008 |
+-----------------------------------------------+------------+------------+------------+
| | GBPm | GBPm | GBPm |
+-----------------------------------------------+------------+------------+------------+
| | | | |
+-----------------------------------------------+------------+------------+------------+
| Loans and advances to banks | 97,464 | 83,700 | 129,499 |
+-----------------------------------------------+------------+------------+------------+
| Loans and advances to customers | 631,459 | 640,762 | 731,265 |
+-----------------------------------------------+------------+------------+------------+
| Debt securities and equity shares | 268,111 | 243,279 | 275,357 |
+-----------------------------------------------+------------+------------+------------+
| Derivatives and settlement balances | 581,100 | 579,134 | 1,009,307 |
+-----------------------------------------------+------------+------------+------------+
| Other assets | 102,182 | 97,570 | 73,265 |
+-----------------------------------------------+------------+------------+------------+
| | | | |
+-----------------------------------------------+------------+------------+------------+
| Total assets | 1,680,316 | 1,644,445 | 2,218,693 |
+-----------------------------------------------+------------+------------+------------+
| | | | |
+-----------------------------------------------+------------+------------+------------+
| Owners' equity | 56,666 | 55,666 | 58,879 |
+-----------------------------------------------+------------+------------+------------+
| Minority interests | 2,185 | 2,123 | 5,436 |
+-----------------------------------------------+------------+------------+------------+
| Subordinated liabilities | 33,085 | 32,106 | 43,678 |
+-----------------------------------------------+------------+------------+------------+
| Deposits by banks | 178,400 | 179,743 | 262,609 |
+-----------------------------------------------+------------+------------+------------+
| Customer accounts | 493,234 | 490,282 | 518,461 |
+-----------------------------------------------+------------+------------+------------+
| Derivatives, settlement balances and short | 609,413 | 594,914 | 1,023,673 |
| positions | | | |
+-----------------------------------------------+------------+------------+------------+
| Other liabilities | 307,333 | 289,611 | 305,957 |
+-----------------------------------------------+------------+------------+------------+
| | | | |
+-----------------------------------------------+------------+------------+------------+
| Total liabilities and equity | 1,680,316 | 1,644,445 | 2,218,693 |
+-----------------------------------------------+------------+------------+------------+
Key metrics
+---------------------------+-----------+----------+-----------+-+---------+---+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-------------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-------------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Return on equity - | (11.2%) | (26.6%) | 9.8% | | (15.6%) | 2.4% |
| annualised (5) | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Net interest margin* | 1.75% | 1.70% | 2.05% | | 1.74% | 2.06% |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Cost:income ratio (6) | 59.1% | 66.4% | 47.3% | | 59.1% | 61.5% |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Adjusted cost:income | 70.5% | 78.3% | 53.1% | | 68.6% | 71.7% |
| ratio (7) | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Continuing | | | | | | |
| operations: | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Pre-impairment | 2.5p | 2.6p | 11.5p | | 15.1p | 38.9p |
| Core adjusted | | | | | | |
| earnings per | | | | | | |
| ordinary share (8) | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Core adjusted earnings | 1.0p | 1.0p | 9.5p | | 9.7p | 33.0p |
| per ordinary share (9) | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Basic earnings per | (3.2p) | (0.2p) | 5.6p | | (5.6p) | 0.9p |
| ordinary share (10) | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---+-----------+
* Net interest margin for the quarter ended 30 June 2009 has been revised. See
Appendix 5.
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Capital and balance sheet | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Funded balance sheet (11) | GBP1,127.8bn | GBP1,088.6bn | 4% | | GBP1,227.2bn | (8%) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Risk-weighted assets | GBP594.7bn | GBP547.3bn | 9% | | GBP577.8bn | 3% |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Core tier 1 ratio | 5.5% | 6.4% | (90bp) | | 5.9% | (40bp) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tier 1 ratio | 8.0% | 9.0% | (100bp) | | 9.9% | (190bp) |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Risk elements in lending | GBP35.0bn | GBP30.7bn | 14% | | GBP18.8bn | 86% |
| (REIL) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Risk elements in | 5.74% | 5.01% | 73bp | | 2.66% | 308bp |
| lending as a % of | | | | | | |
| loans and advances | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Provision balance as % of | 43% | 44% | (100bp) | | 50% | (700bp) |
| REIL/PPLs | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Loan:deposit ratio (gross | 142.3% | 144.5% | (220bp) | | 152.4% | (1,010bp) |
| of provisions) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Loan:deposit ratio (net | 138.8% | 142.9% | (410bp) | | 150.3% | (1,150bp) |
| of provisions) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tier 1 leverage ratio | 23.4x | 21.7x | 8% | | 21.2x | 10% |
| (12) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Tangible equity leverage | 3.0% | 3.0% | - | | 2.4% | 60bp |
| ratio (13) | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
| Net tangible equity per | 59.4p | 58.0p | 2% | | 73.8p | (20%) |
| share | | | | | | |
+---------------------------+--------------+--------------+----------+-+--------------+-----------+
+-----+------------------------------------------------------------------------+
| Notes: |
+------------------------------------------------------------------------------+
| (1) | Excluding gain on redemption of own debt and strategic disposals. |
+-----+------------------------------------------------------------------------+
| (2) | Excluding purchased intangibles amortisation, write-down of goodwill |
| | and other intangible assets, integration and restructuring costs. |
+-----+------------------------------------------------------------------------+
| (3) | (Loss)/profit before tax, purchased intangibles amortisation, |
| | integration and restructuring costs, gain on redemption of own debt, |
| | strategic disposals and write-down of goodwill and other intangible |
| | assets. |
+-----+------------------------------------------------------------------------+
| (4) | Excluding write-down of goodwill and other intangible assets. |
+-----+------------------------------------------------------------------------+
| (5) | (Loss)/profit from continuing operations attributable to ordinary |
| | shareholders adjusted for purchased intangibles amortisation, |
| | integration and restructuring costs, gain on redemption of own debt, |
| | strategic disposals and write-down of goodwill and other intangible |
| | assets divided by average ordinary shareholders equity. |
+-----+------------------------------------------------------------------------+
| (6) | The cost:income ratio is based on total income and operating expenses |
| | as defined in (1) and (2) above. |
+-----+------------------------------------------------------------------------+
| (7) | The adjusted cost:income ratio is based on total income and operating |
| | expenses as defined in (1) and (2) above and after netting insurance |
| | claims against income. |
+-----+------------------------------------------------------------------------+
| (8) | (Loss)/profit from continuing operations attributable to ordinary |
| | shareholders adjusted for Non-Core operations, impairment losses, |
| | purchased intangibles amortisation, integration and restructuring |
| | costs, gain on redemption of own debt, strategic disposals and |
| | write-down of goodwill and other intangible assets divided by weighted |
| | average number of shares in issue. |
+-----+------------------------------------------------------------------------+
Key metrics (continued)
+------+-------------------------------------------------------------------------+
| Notes (continued): |
+--------------------------------------------------------------------------------+
| (9) | (Loss)/profit from continuing operations attributable to ordinary |
| | shareholders adjusted for Non-Core operations, purchased intangibles |
| | amortisation, integration and restructuring costs, gain on redemption |
| | of own debt, strategic disposals and write-down of goodwill and other |
| | intangible assets divided by weighted average number of shares in |
| | issue. |
+------+-------------------------------------------------------------------------+
| (10) | (Loss)/profit from continuing operations attributable to ordinary |
| | shareholders divided by weighted average number of shares in issue. |
+------+-------------------------------------------------------------------------+
| (11) | Funded balance sheet is defined as total assets less derivatives. |
+------+-------------------------------------------------------------------------+
| (12) | The Tier 1 leverage ratio is based on total tangible assets (after |
| | netting derivatives) divided by Tier 1 capital. |
+------+-------------------------------------------------------------------------+
| (13) | The tangible equity leverage ratio is based on total tangible equity |
| | divided by total tangible assets (after netting derivatives). |
+------+-------------------------------------------------------------------------+
Results summary
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 3,197 | 3,276 | 3,729 | | 9,943 | 11,043 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin - | 1.75% | 1.70% | 2.05% | | 1.74% | 2.06% |
| Group | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Global Banking & | 1.08% | 1.48% | 1.24% | | 1.52% | 1.07% |
| Markets | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Rest of Group | 1.92% | 1.77% | 2.31% | | 1.80% | 2.38% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Selected average | | | | | | |
| balances: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loans and advances to | 56,984 | 55,062 | 29,386 | | 51,984 | 44,132 |
| banks | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loans and advances to | 554,047 | 585,925 | 594,762 | | 586,173 | 586,764 |
| customers | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Debt securities | 118,791 | 129,190 | 102,449 | | 122,303 | 82,623 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Interest earning assets | 729,822 | 770,177 | 726,597 | | 760,460 | 713,519 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Deposits by banks | 119,317 | 128,733 | 141,728 | | 134,291 | 135,688 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Customer accounts | 350,298 | 359,539 | 373,805 | | 360,224 | 386,955 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Subordinated liabilities | 35,922 | 33,813 | 37,311 | | 36,130 | 33,827 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Interest bearing | 665,290 | 688,432 | 696,762 | | 680,612 | 663,598 |
| liabilities | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest bearing | 35,464 | 36,790 | 32,020 | | 36,264 | 31,658 |
| deposits | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Selected average yields | | | | | | |
| (%): | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loans and advances to | 1.38 | 1.85 | 5.69 | | 1.74 | 4.66 |
| banks | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loans and advances to | 3.35 | 4.07 | 6.03 | | 3.77 | 6.00 |
| customers | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Debt securities | 2.98 | 2.96 | 6.04 | | 3.45 | 5.53 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Interest earning assets | 3.13 | 3.72 | 4.51 | | 3.58 | 5.86 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Deposits by banks | 1.92 | 2.23 | 4.19 | | 2.33 | 4.41 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Customer accounts | 1.10 | 1.49 | 3.19 | | 1.37 | 3.50 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Subordinated liabilities | 3.11 | 3.60 | 5.23 | | 3.73 | 5.36 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Interest bearing deposits | 1.52 | 2.26 | 4.13 | | 2.05 | 4.08 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest | 4.86 | 4.78 | 4.41 | | 4.77 | 4.44 |
| bearing deposits | | | | | | |
| as a percentage of | | | | | | |
| interest earning | | | | | | |
| assets | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
* Net interest margin increased by 5 basis points in 3Q09 and declined by 30 basis
points compared with 3Q08.
* GBM net interest margin declined due to lower money market income, partially
offset by higher margins on GBM banking assets.
* UK Retail margin declined in the quarter as increased mortgage margins only
partially offset reduced deposit margins and adverse asset mix impacts. UK
Corporate margins benefited from improved pricing on new loans, while the US
Retail & Commercial margin increased slightly due to improved asset margins.
* For the near-term, margins are expected to be broadly stable as increased
funding and liquidity costs offset further asset margin improvements.
Results summary (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 1,374 | 1,530 | 1,781 | | 4,489 | 4,959 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income from trading | 1,051 | 384 | 1,274 | | 3,095 | (2,067) |
| activities | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other operating income | 107 | (416) | 285 | | 222 | 1,737 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest | 2,532 | 1,498 | 3,340 | | 7,806 | 4,629 |
| income (excluding | | | | | | |
| insurance | | | | | | |
| premiums)* | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net premium | 1,301 | 1,301 | 1,409 | | 3,958 | 4,270 |
| income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total non-interest income | 3,833 | 2,799 | 4,749 | | 11,764 | 8,899 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| * Includes fair value of | (483) | (960) | 1,281 | | (412) | 2,093 |
| own debt impact | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
3Q09 versus 2Q09
* Net fees and commissions fell GBP156 million primarily due to declines in GBM
(GBP71 million) due to lower credit and equity market activity, UK Retail (GBP18
million) driven by payment protection insurance and US Retail & Commercial
(GBP50 million) due to lower mortgage activity.
* Income from trading activities rose in 3Q09 principally due to lower credit
market losses reflecting improved valuations of super senior CDOs coupled with
lower losses on CDS hedges.
* Insurance net premium income was stable principally reflecting the continuation
of the good performance in the Group's own brand sales.
* Other operating income improved by GBP523 million primarily due to the movement
in fair value of own debt.
Results summary (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Staff costs | 2,175 | 2,150 | 2,146 | | 6,835 | 6,704 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Premises and equipment | 619 | 587 | 652 | | 1,850 | 1,533 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 943 | 915 | 787 | | 2,904 | 2,907 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Administrative expenses | 3,737 | 3,652 | 3,585 | | 11,589 | 11,144 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Depreciation and | 458 | 414 | 475 | | 1,339 | 1,309 |
| amortisation | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating expenses | 4,195 | 4,066 | 4,060 | | 12,928 | 12,453 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| General insurance | 1,054 | 895 | 930 | | 2,919 | 2,793 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Bancassurance | 91 | 30 | 4 | | 117 | 68 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net claims | 1,145 | 925 | 934 | | 3,036 | 2,861 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total staff | 30.7% | 35.1% | 25.0% | | 31.2% | 33.1% |
| expense as a | | | | | | |
| percentage of | | | | | | |
| total income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
3Q09 versus 2Q09
* Staff costs were up GBP25 million, largely reflecting an increase in resourcing
of the Non-Core division balanced by small reductions elsewhere as restructuring
programmes start to take effect.
* Premises and equipment costs rose by GBP32 million due to the cost of new
completed buildings coming on stream.
* Other expenses rose GBP28 million principally as a result of a one-off recovery
of legal fees in 2Q09.
* General insurance claims rose by GBP159 million primarily because of higher
estimated costs of bodily injury claims within our motor lines of business.
* Bancassurance claims rose by GBP61 million due to increased returns on
investments being passed on to customers.
Results summary (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses by | | | | | | |
| division | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | 404 | 470 | 287 | | 1,228 | 727 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | 187 | 450 | 55 | | 737 | 150 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | 1 | 16 | 3 | | 23 | 8 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 272 | (31) | 2 | | 510 | 20 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | 22 | 4 | 7 | | 35 | 14 |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | 144 | 90 | 17 | | 301 | 35 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | 180 | 146 | 134 | | 549 | 260 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | 2 | 1 | - | | 8 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items | 1 | 1 | 7 | | (1) | (30) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | 1,213 | 1,147 | 512 | | 3,390 | 1,184 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | 2,066 | 3,516 | 768 | | 7,410 | 1,575 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 3,279 | 4,663 | 1,280 | | 10,800 | 2,759 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of | | | | | | |
| impairment losses | | | | | | |
| by asset category | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loans and advances | 3,262 | 4,520 | 1,023 | | 10,058 | 2,429 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Available-for-sale | 17 | 143 | 257 | | 742 | 330 |
| securities | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 3,279 | 4,663 | 1,280 | | 10,800 | 2,759 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+----------+----------+----------+-+----------+----------+
| Loan impairment | 2.14% | 2.98% | 0.64% | | 2.21% | 0.51% |
| charge as % of | | | | | | |
| gross loans and | | | | | | |
| advances excluding | | | | | | |
| reverse repurchase | | | | | | |
| agreements | | | | | | |
+---------------------------+----------+----------+----------+-+----------+----------+
Key points
3Q09 versus 2Q09
* Impairment losses were GBP3,279 million compared to GBP4,663 million. Impairment
losses in the Core divisions increased by GBP66 million sequentially, while
Non-Core losses declined by GBP1,450 million.
* In the Core businesses, the biggest increase relates to a sizeable individual
loss in GBM. Increases were also seen in Ulster Bank and US Retail & Commercial
reflecting the difficult economic environment. Partially offsetting these
increases were declines in UK Retail and UK Corporate as credit trends currently
appear to be stabilising around 1H09 levels.
* Non-Core losses were lower in the quarter with reduced charges in UK corporate
and GBM portfolios, which included a number of large, single name impairments in
the second quarter. Ulster Bank's Non-Core impairments have increased materially
as its market has continued to deteriorate.
* Impairment losses overall appear to be stabilising compared with the first half
of 2009, although they are expected to remain at elevated levels for the next
few quarters as non-performing loans have continued to rise, and economic
recovery looks to be gradual.
Results summary (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Credit and other market | GBPm | GBPm | GBPm | | GBPm | GBPm |
| losses* | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Monoline exposures | 106 | 7 | 109 | | 1,653 | 2,229 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CDPCs | 276 | 371 | 162 | | 846 | 241 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Super senior CDOs | (148) | 151 | - | | 389 | 1,892 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US mortgages | - | - | 172 | | - | 1,310 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Leveraged finance | - | - | 36 | | - | 899 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CLO's | 1 | - | 69 | | 1 | 182 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other credit exotics | 46 | (15) | (130) | | 588 | 231 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Equities | 12 | 13 | 132 | | 34 | 168 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 55 | 51 | (78) | | 97 | (142) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 348 | 578 | 472 | | 3,608 | 7,010 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CDS Hedging | 426 | 816 | (367) | | 1,465 | (568) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 774 | 1,394 | 105 | | 5,073 | 6,442 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
* Included in 'Income from trading activities' on page 19.
Key points
3Q09 versus 2Q09
* Credit and other market write-downs were substantially lower in the third
quarter, down from GBP1,394 million to GBP774 million with the widening in
monoline spreads more than offset by reduced losses on CDS hedging and CDPCs.
Further analysis of these credit market losses and exposures is contained in the
Risk and Capital Management section, pages 76 to 100.
Results summary (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-operating items | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Amortisation of purchased | (73) | (55) | (119) | | (213) | (381) |
| intangible assets | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Integration and | (324) | (355) | (289) | | (1,058) | (605) |
| restructuring costs | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Gain on redemption of own | - | 3,790 | - | | 3,790 | - |
| debt | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Strategic disposals | (155) | 212 | - | | 298 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (552) | 3,592 | (408) | | 2,817 | (986) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
3Q09 versus 2Q09
* Integration and restructuring costs totalled GBP324 million in 3Q09 (2Q09 -
GBP355 million) with reduced ABN AMRO integration activity offset by increased
restructuring activity as strategic plans are implemented. We expect an increase
in 4Q09 as our restructuring plans move to a higher degree of implementation.
* In 2Q09 the Group posted a gain of GBP3,790 million on a liability management
exercise to redeem a number of Tier 1 and upper Tier 2 securities. In 3Q09 the
Group recorded a loss of GBP155 million from Non-Core disposals, primarily
relating to our Retail and Commercial Asian businesses.
Results summary (continued)
+-----------------------------------------------+------------+------------+-------------+
| Capital resources and ratios | 30 | 30 June | 31 December |
| | September | 2009 | 2008 |
| | 2009 | | |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Core Tier 1 | GBP33.0bn | GBP35.2bn | GBP34.0bn |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Tier 1 | GBP47.6bn | GBP49.4bn | GBP57.1bn |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Total capital | GBP62.1bn | GBP64.0bn | GBP82.2bn |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| RWAs | GBP594.7bn | GBP547.3bn | GBP577.8bn |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Core Tier 1 ratio | 5.5% | 6.4% | 5.9% |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Tier 1 ratio | 8.0% | 9.0% | 9.9% |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Total capital ratio | 10.4% | 11.7% | 14.2% |
+-----------------------------------------------+------------+------------+-------------+
| | | | |
+-----------------------------------------------+------------+------------+-------------+
| Pro forma Core Tier 1 ratio | 11.1% | 12.5% | |
+-----------------------------------------------+------------+------------+-------------+
Key points
* The RWA increase relative to 2Q09 of GBP47.4 billion is principally due to the
effect of procyclicality of GBP33 billion (of which GBP22.2 billion is due to
lower credit ratings for Monolines), increase in market risk, GBP6 billion, and
the effect of exchange rate movements, GBP9.3 billion.
* The RWA increase relative to 4Q08 of GBP16.9 billion stems primarily from the
effect of procyclicality of GBP69 billion (of which GBP22 billion is due to
lower credit ratings for Monolines), increase in market risk GBP16 billion
offset by reductions due to de-leveraging of GBP47 billion and the effect of
exchange rate movements, GBP19 billion.
* Core Tier 1 capital fell by GBP2.2 billion principally reflecting the
attributable loss of GBP1.8 billion and increased deductions due to higher
expected losses and other regulatory adjustments of GBP0.4 billion.
* As a consequence of the above factors, Core Tier 1 capital ratio fell by 0.9% to
5.5%, and Tier 1 capital ratio by 1% to 8%. Pro-forma for B share issuance and
APS cover, these ratios would be 11.1% and 14.5%, respectively.
* In 2010, ABN AMRO will move from an adjusted Basel I methodology to Basel II,
which is expected to result in an increase in RWAs.
Results summary (continued)
+-----------------------------------------------+--------------+--------------+--------------+
| Balance sheet | 30 | 30 June | 31 |
| | September | 2009 | December |
| | 2009 | | 2008 |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Total assets | GBP1,680.3bn | GBP1,644.4bn | GBP2,218.7bn |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Loans and advances to customers | GBP631.5bn | GBP640.8bn | GBP731.3bn |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Customer accounts | GBP493.2bn | GBP490.3bn | GBP518.5bn |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Loan:deposit ratio (gross of provisions) | 142.3% | 144.5% | 152.4% |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Loan:deposit ratio (net of provisions) | 138.8% | 142.9% | 150.3% |
+-----------------------------------------------+--------------+--------------+--------------+
| | | | |
+-----------------------------------------------+--------------+--------------+--------------+
| Total wholesale funding | GBP437.9bn | GBP416.4bn | GBP492.1bn |
+-----------------------------------------------+--------------+--------------+--------------+
Key points
* Total assets and funded assets are up 2% and 4% respectively, primarily due to
currency movements. On a constant currency basis, total assets were broadly
flat. Continuing Non-Core asset reductions of GBP12 billion, at constant
currency, were offset by small growth elsewhere.
* The loan:deposit ratio (gross of provisions) has improved by 220 basis points to
142.3%, due to deposits, excluding repos, increasing by GBP9 billion and loans,
excluding reverse repos, falling by GBP5 billion.
A further analysis of our funding and liquidity positions is contained on pages
83 to 86 of the document.
Divisional performance
The operating profit/(loss) of each division before amortisation of purchased
intangible assets, write-down of goodwill and other intangible assets,
integration and restructuring costs, gain on redemption of own debt and
strategic disposals is shown below.
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | | | | | | |
| before impairment | | | | | | |
| losses by | | | | | | |
| division | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | 468 | 490 | 420 | | 1,329 | 1,361 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | 566 | 535 | 523 | | 1,522 | 1,613 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | 120 | 134 | 103 | | 354 | 287 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 647 | 1,116 | 616 | | 5,608 | 1,699 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | 275 | 269 | 275 | | 784 | 771 |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | 59 | 78 | 98 | | 208 | 288 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | 137 | 136 | 236 | | 455 | 653 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | 13 | 142 | 150 | | 236 | 450 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items | 121 | (311) | 813 | | 296 | 1,482 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | 2,406 | 2,589 | 3,234 | | 10,792 | 8,604 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | (652) | (1,459) | 357 | | (4,871) | (3,682) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Group operating | 1,754 | 1,130 | 3,591 | | 5,921 | 4,922 |
| profit before | | | | | | |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Included in the | | | | | | |
| above are | | | | | | |
| movements in fair | | | | | | |
| value of own debt | | | | | | |
| of: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | (320) | (482) | 648 | | (155) | 1,232 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items | (163) | (478) | 633 | | (257) | 861 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (483) | (960) | 1,281 | | (412) | 2,093 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses by | | | | | | |
| division | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | 404 | 470 | 287 | | 1,228 | 727 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | 187 | 450 | 55 | | 737 | 150 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | 1 | 16 | 3 | | 23 | 8 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 272 | (31) | 2 | | 510 | 20 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | 22 | 4 | 7 | | 35 | 14 |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | 144 | 90 | 17 | | 301 | 35 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | 180 | 146 | 134 | | 549 | 260 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | 2 | 1 | - | | 8 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items | 1 | 1 | 7 | | (1) | (30) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | 1,213 | 1,147 | 512 | | 3,390 | 1,184 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | 2,066 | 3,516 | 768 | | 7,410 | 1,575 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Group impairment losses | 3,279 | 4,663 | 1,280 | | 10,800 | 2,759 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key point
Operating profit in the divisions before impairment losses, adjusted for
movement in fair value of own debt was GBP2,237 million in 3Q09. This compares
with GBP2,090 million in 2Q09 (increase of 7% sequentially) and GBP2,310 million
in 3Q08 (down 3% year on year).
Divisional performance (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit/(loss) | | | | | | |
| by division | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | 64 | 20 | 133 | | 101 | 634 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | 379 | 85 | 468 | | 785 | 1,463 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | 119 | 118 | 100 | | 331 | 279 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 375 | 1,147 | 614 | | 5,098 | 1,679 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | 253 | 265 | 268 | | 749 | 757 |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | (85) | (12) | 81 | | (93) | 253 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | (43) | (10) | 102 | | (94) | 393 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | 11 | 141 | 150 | | 228 | 450 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items | 120 | (312) | 806 | | 297 | 1,512 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Core | 1,193 | 1,442 | 2,722 | | 7,402 | 7,420 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | (2,718) | (4,975) | (411) | | (12,281) | (5,257) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Group operating | (1,525) | (3,533) | 2,311 | | (4,879) | 2,163 |
| (loss)/profit | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk-weighted assets by | | | | | | |
| division | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| UK Retail | 51.6 | 54.0 | (4) | | 45.7 | 13 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| UK Corporate | 91.0 | 89.5 | 2 | | 85.7 | 6 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Wealth | 10.7 | 10.3 | 4 | | 10.8 | (1) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Global Banking & Markets | 131.9 | 122.4 | 8 | | 162.4 | (19) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Global Transaction | 18.9 | 16.7 | 13 | | 17.4 | 9 |
| Services | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Ulster Bank | 28.5 | 26.2 | 9 | | 24.5 | 16 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| US Retail & Commercial | 62.8 | 55.6 | 13 | | 63.9 | (2) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Other | 9.0 | 8.5 | 6 | | 7.1 | 27 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Core | 404.4 | 383.2 | 6 | | 417.5 | (3) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Non-Core | 190.3 | 164.1 | 16 | | 160.3 | 19 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Total | 594.7 | 547.3 | 9 | | 577.8 | 3 |
+---------------------------+-----------+----------+----------+-+----------+----------+
UK Retail
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 848 | 868 | 821 | | 2,513 | 2,331 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 303 | 321 | 365 | | 961 | 1,179 |
| - banking | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest | 69 | 69 | 34 | | 191 | 173 |
| income (net of | | | | | | |
| insurance claims) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 372 | 390 | 399 | | 1,152 | 1,352 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,220 | 1,258 | 1,220 | | 3,665 | 3,683 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (206) | (214) | (243) | | (634) | (688) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (99) | (102) | (109) | | (316) | (320) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (447) | (452) | (448) | | (1,386) | (1,314) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (752) | (768) | (800) | | (2,336) | (2,322) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 468 | 490 | 420 | | 1,329 | 1,361 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (404) | (470) | (287) | | (1,228) | (727) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 64 | 20 | 133 | | 101 | 634 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal advances | 303 | 311 | 310 | | 919 | 948 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal deposits | 319 | 354 | 557 | | 1,070 | 1,567 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 319 | 273 | 93 | | 799 | 314 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Bancassurance | 69 | 69 | 34 | | 190 | 166 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cards | 225 | 212 | 205 | | 641 | 623 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | (15) | 39 | 21 | | 46 | 65 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,220 | 1,258 | 1,220 | | 3,665 | 3,683 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 26 | 41 | 9 | | 89 | 22 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal | 247 | 299 | 144 | | 741 | 399 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cards | 131 | 130 | 134 | | 398 | 306 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 404 | 470 | 287 | | 1,228 | 727 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment | | | | | | |
| charge as % of | | | | | | |
| gross customer | | | | | | |
| loans and advances | | | | | | |
| by sector | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 0.13% | 0.21% | 0.05% | | 0.15% | 0.04% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal | 6.81% | 8.31% | 3.76% | | 6.81% | 3.48% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cards | 8.59% | 8.52% | 8.25% | | 8.70% | 6.28% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1.60% | 1.94% | 1.23% | | 1.62% | 1.04% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
UK Retail (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+---------+---+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-------------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-------------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Return on equity (1) | 4.6% | 1.4% | 9.4% | | 2.4% | 15.0% |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Net interest margin | 3.47% | 3.69% | 3.62% | | 3.54% | 3.52% |
+---------------------------+-----------+----------+-----------+-+---------+---------------+
| Cost:income ratio | 57.4% | 59.6% | 65.4% | | 61.8% | 61.9% |
+---------------------------+-----------+----------+-----------+-+---------+---+-----------+
+---------------------------+-----------+----------+----------+-+---------+---+----------+
| | 30 | 30 June | Change | | 31 December | Change |
| | September | 2009 | | | | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+-------------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+-------------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Loans and advances to | | | | | | |
| customers - gross | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| - mortgages | 80.3 | 76.6 | 5 | | 72.2 | 11 |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| - personal | 14.5 | 14.4 | 1 | | 15.3 | (5) |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| - cards | 6.1 | 6.1 | - | | 6.3 | (3) |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Customer deposits | 85.6 | 83.4 | 3 | | 78.9 | 8 |
| (excluding | | | | | | |
| bancassurance) | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Assets under | 5.0 | 4.7 | 6 | | 5.7 | (12) |
| management - | | | | | | |
| excluding deposits | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Risk elements in lending | 4.7 | 4.5 | 4 | | 3.8 | 24 |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Loan:deposit ratio | 117.8% | 116.4% | 139bp | | 119.0% | (120bp) |
| (excluding repos) | | | | | | |
+---------------------------+-----------+----------+----------+-+---------+--------------+
| Risk-weighted assets | 51.6 | 54.0 | (4) | | 45.7 | 13 |
+---------------------------+-----------+----------+----------+-+---------+---+----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 7% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Operating profit of GBP64 million in 3Q09 was up from the previous quarter, with
lower income more than offset by reduced costs and impairment charges.
* Our focus in 2009 has been to grow secured lending to meet our Government
commitments and at the same time to build customer deposits, reducing the
Group's reliance on wholesale funding.
* Mortgage balances were up 5% sequentially or 11% compared with end December
2008, with good retention of existing customers and new business sourced
predominantly from the existing customer base. Gross mortgage market share
increased to 12.0% from 10.5% in 2Q09, and the Group is on track to deliver its
commitments to the Government on net lending. Unsecured lending is flat compared
with 2Q09 as the Group continued to focus on lower risk secured lending.
* Deposit growth remained strong, with balances up 3% on 2Q09 or 8% compared with
end 2008. Savings balances were up 8% on end 2008, outperforming the market
despite an increasingly competitive environment, while personal current account
balances were up 10% over the same period, with a 2% growth in accounts.
UK Retail (continued)
Key points (continued)
* Net interest margin declined by 22 basis points in 3Q09 but remains stable year
to date.
* At the product level lending margins widened further in the quarter, although
the growth in mortgages and the reduction in unsecured balances led to a drop in
the blended total asset margin.
* Liability margins decreased, as competition on savings accounts increased and as
the interest rate hedges established in a higher rate environment began to roll
off.
* Fee income fell by 5% from the previous quarter, reflecting a provision taken on
payment protection insurance and weak activity levels in cards. Year to date,
fees are down 15%. As a result of the change in the structure of overdraft
administration charges, an annual reduction in fee income of approximately
GBP270 million is anticipated, which will impact results from October 2009.
* Expenses decreased a further 2% over 2Q09, and are now showing a 6% reduction
against 3Q08. As the benefits of process re-engineering and technology
investment start to flow through, headcount has been reduced by over 3%, with a
cumulative reduction of 9% on prior year. Year to date costs are up less than
1%, despite higher deposit insurance levies.
* RBS continues to progress towards a more convenient, lower cost operating model,
with over 4 million active users of online banking and a record share of new
sales achieved through direct channels. More than 2.4 million accounts have
switched to paperless statements and over 218 branches now utilise automated
cash deposit machines.
* Impairment losses were 14% lower than in 2Q09, which had recorded a sharp rise
in provisions to reflect the reduction in expected cash recoveries. We
anticipate that the level of impairment charge will resume its upward
trajectory, peaking in the middle of 2010.
* Mortgage impairments were GBP26 million on a total book of GBP80.3 billion.
Arrears rates show little increase and remain well below the industry average,
as reported by the Council of Mortgage Lenders. Repossessions have shown only a
small increase in 3Q09 as we continue to support customers facing financial
difficulty.
* Unsecured impairment charges amounted to GBP378 million in the quarter, on a
book of GBP20.6 billion. Industry benchmarks for cards arrears indicate a
flattening trend, with RBS continuing to perform better than the market.
* Risk-weighted assets declined by GBP2.4 billion in the quarter as the impacts of
volume growth were offset by a reduction in through-the-cycle loss given default
for mortgages. RWAs grew by 13% compared with 31 December 2008.
UK Corporate
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 607 | 560 | 618 | | 1,666 | 1,860 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 223 | 219 | 222 | | 636 | 614 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest income | 106 | 109 | 114 | | 332 | 353 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 329 | 328 | 336 | | 968 | 967 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 936 | 888 | 954 | | 2,634 | 2,827 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (174) | (182) | (206) | | (541) | (591) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (71) | (46) | (96) | | (191) | (245) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (125) | (125) | (129) | | (380) | (378) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (370) | (353) | (431) | | (1,112) | (1,214) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 566 | 535 | 523 | | 1,522 | 1,613 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (187) | (450) | (55) | | (737) | (150) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 379 | 85 | 468 | | 785 | 1,463 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| business: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate and commercial | 616 | 586 | 542 | | 1,740 | 1,637 |
| lending | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Asset and invoice finance | 59 | 57 | 60 | | 164 | 188 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate deposits | 241 | 263 | 342 | | 794 | 928 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 20 | (18) | 10 | | (64) | 74 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 936 | 888 | 954 | | 2,634 | 2,827 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Manufacturing | 7 | 17 | 5 | | 28 | 15 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Housebuilding and | 58 | 55 | 6 | | 119 | 11 |
| construction | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property | 69 | 149 | 11 | | 229 | 18 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Asset and invoice finance | 4 | 47 | 24 | | 72 | 61 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 49 | 182 | 9 | | 289 | 45 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 187 | 450 | 55 | | 737 | 150 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment charge as | | | | | | |
| % of gross customer loans | | | | | | |
| and advances (excluding | | | | | | |
| reverse repurchase | | | | | | |
| agreements) by sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Manufacturing | 0.56% | 1.36% | 0.41% | | 0.75% | 0.41% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Housebuilding and | 4.64% | 4.40% | 0.41% | | 3.17% | 0.25% |
| construction | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property | 0.92% | 1.81% | 0.15% | | 1.02% | 0.08% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Asset and invoice finance | 0.18% | 2.09% | 1.13% | | 1.07% | 0.96% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 0.30% | 1.20% | 0.06% | | 0.59% | 0.09% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 0.66% | 1.60% | 0.19% | | 0.86% | 0.18% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
UK Corporate (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | 13.7% | 3.2% | 18.6% | | 9.5% | 19.4% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 2.38% | 2.17% | 2.40% | | 2.14% | 2.47% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 39.5% | 39.8% | 45.2% | | 42.2% | 42.9% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Total assets | 117.3 | 116.2 | 1 | | 121.0 | (3) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loans and advances to | | | | | | |
| customers - gross | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Manufacturing | 5.0 | 5.0 | - | | 5.4 | (7) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Housebuilding and | 5.0 | 5.0 | - | | 5.9 | (15) |
| construction | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Property | 30.0 | 33.0 | (9) | | 30.5 | (2) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Asset and invoice | 9.0 | 9.0 | - | | 8.5 | 6 |
| finance | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Other | 64.9 | 60.6 | 7 | | 66.6 | (3) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Customer deposits | 86.7 | 85.6 | 1 | | 82.0 | 6 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk elements in lending | 2.5 | 2.4 | 4 | | 1.3 | 92 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loan:deposit ratio | 131.4% | 131.6% | (16bp) | | 142.7% | (1,130bp) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk-weighted assets | 91.0 | 89.5 | 2 | | 85.7 | 6 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 8% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Net interest margin increased by 21 basis points from the second quarter of
2009, as lending rates have been repriced upwards to reflect the Group's
increased cost of funding. NIM year to date remains 33 basis points lower than
in the prior year, reflecting this increase in funding costs and the highly
competitive market for deposits.
* Loans and advances to customers have increased by GBP1.3 billion from 2Q09, but
demand for credit remains subdued and repayments have accelerated, leaving
balances down 3% from year-end 2008.
* Deposits have grown steadily over the course of 2009 and increased by GBP1.1
billion during 3Q09 reflecting a range of initiatives undertaken to defend and
grow the deposit base.
* Non-interest income has remained resilient despite a slightly lower level of
cross-sales of GBM products in the quarter, benefiting from early repayment fees
as customers seek to deleverage.
UK Corporate (continued)
Key points (continued)
* Costs reduced slightly in 3Q09, excluding the benefit of a GBP19 million legal
fee recovery in the prior quarter. Year to date costs are down 8%, as
initiatives within the Group-wide cost reduction programme continue to deliver
savings on headcount and non-staff costs.
* Impairments were reduced from 2Q09, which included a substantial increase in
provisions to reflect deteriorating economic conditions. Year to date
impairments remain substantially higher than in the same period of 2008, with
the charge biased towards the house building, property and construction sectors.
* Risk-weighted assets increased by 2% compared with 2Q09, partly reflecting
additional lending volumes, but also resulting from the effect of deteriorating
economic conditions on risk weightings.
Wealth
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 168 | 176 | 153 | | 502 | 418 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 92 | 90 | 98 | | 272 | 309 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest income | 19 | 21 | 19 | | 61 | 57 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 111 | 111 | 117 | | 333 | 366 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 279 | 287 | 270 | | 835 | 784 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (82) | (78) | (94) | | (250) | (280) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (35) | (34) | (34) | | (102) | (105) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (42) | (41) | (39) | | (129) | (112) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (159) | (153) | (167) | | (481) | (497) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 120 | 134 | 103 | | 354 | 287 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (1) | (16) | (3) | | (23) | (8) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 119 | 118 | 100 | | 331 | 279 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Private Banking | 232 | 242 | 211 | | 693 | 598 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Investments | 47 | 45 | 59 | | 142 | 186 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 279 | 287 | 270 | | 835 | 784 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Wealth (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 4.34% | 4.82% | 4.68% | | 4.54% | 4.50% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 57.0% | 53.3% | 61.9% | | 57.6% | 63.4% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loans and advances to | | | | | | |
| customers - gross | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| - mortgages | 6.1 | 5.6 | 9 | | 5.3 | 15 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| - personal | 4.8 | 4.7 | 2 | | 5.0 | (4) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| - other | 2.5 | 2.1 | 19 | | 2.1 | 19 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Customer deposits | 36.3 | 35.3 | 3 | | 34.1 | 6 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Assets under | 31.7 | 29.8 | 6 | | 34.7 | (9) |
| management - | | | | | | |
| excluding deposits | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk elements in lending | 0.2 | 0.2 | - | | 0.1 | 100 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loan:deposit ratio | 36.9% | 35.2% | 172bp | | 36.3% | 60bp |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk-weighted assets | 10.7 | 10.3 | 4 | | 10.8 | (1) |
+---------------------------+-----------+----------+----------+-+----------+----------+
Key points
* Deposits showed modest growth from 2Q09, mainly in the UK, and balances have now
returned to the same level as at the end of 3Q08. Continued pressure on deposit
margins, including a reduction in internal pricing applied to the Wealth deposit
base, resulted in a decline in net interest income.
* Assets under management rose 6% compared with 2Q09 reflecting improved market
conditions, but continuing lack of investor appetite to commit to longer term
investments and a preference for lower return and more liquid assets has left
AUM 9% lower than at the end of 2008, with a resulting impact on fee income.
* Loans and advances increased by 8% compared with the prior quarter, and by 8%
against 31 December 2008, with lending margins continuing to improve. Loan
growth has come primarily in the UK, where Wealth remains on track to achieve
its share of the Group's UK lending commitments.
* Expenses in 3Q09 were marginally higher than in 2Q09, which had benefited from
changes to remuneration policy, including bonus deferral. 3Q09 expenses were
slightly below the prior year quarter, benefiting from a 9% reduction in
headcount versus a year ago.
Global Banking & Markets
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income from | 447 | 660 | 535 | | 1,919 | 1,386 |
| banking activities | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 338 | 409 | 405 | | 1,038 | 1,030 |
| receivable | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income from trading | 1,184 | 1,338 | 760 | | 6,851 | 2,942 |
| activities | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other operating | (110) | (97) | (22) | | (300) | (83) |
| income (net of | | | | | | |
| related funding | | | | | | |
| costs) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 1,412 | 1,650 | 1,143 | | 7,589 | 3,889 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,859 | 2,310 | 1,678 | | 9,508 | 5,275 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (760) | (762) | (618) | | (2,523) | (2,204) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (261) | (231) | (284) | | (792) | (911) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (191) | (201) | (160) | | (585) | (461) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (1,212) | (1,194) | (1,062) | | (3,900) | (3,576) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 647 | 1,116 | 616 | | 5,608 | 1,699 |
| before impairment | | | | | | |
| losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (272) | 31 | (2) | | (510) | (20) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 375 | 1,147 | 614 | | 5,098 | 1,679 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Rates - money markets | 287 | 466 | 384 | | 1,606 | 893 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Rates - flow | 694 | 536 | - | | 2,527 | 1,370 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Currencies | 141 | 384 | 417 | | 1,083 | 1,091 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commodities | 120 | 239 | 47 | | 587 | 396 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Equities | 282 | 364 | 21 | | 1,017 | 582 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Credit markets | 475 | 690 | (105) | | 2,023 | (1,094) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Portfolio management and | 180 | 113 | 266 | | 820 | 805 |
| origination | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Fair value of own debt | (320) | (482) | 648 | | (155) | 1,232 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,859 | 2,310 | 1,678 | | 9,508 | 5,275 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Manufacturing and | 33 | 23 | - | | 72 | - |
| infrastructure | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property and construction | - | 4 | - | | 50 | 12 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Transport | 2 | 1 | - | | 3 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banks and financial | 237 | 39 | - | | 280 | (8) |
| institutions | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | - | (98) | 2 | | 105 | 16 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 272 | (31) | 2 | | 510 | 20 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment charge as | 0.60% | (0.11%) | - | | 0.48% | 0.02% |
| % of gross customer loans | | | | | | |
| and advances (excluding | | | | | | |
| reverse repurchase | | | | | | |
| agreements) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Global Banking & Markets (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | 7.7% | 25.1% | 10.5% | | 35.0% | 9.6% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 1.08% | 1.48% | 1.24% | | 1.52% | 1.07% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 65.2% | 51.7% | 63.3% | | 41.0% | 67.8% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loans and advances | 157.0 | 156.0 | 1 | | 225.5 | (30) |
| (including banks) | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Reverse repos | 75.4 | 75.2 | - | | 88.8 | (15) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Securities | 117.6 | 115.5 | 2 | | 127.5 | (8) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Cash and eligible bills | 63.8 | 51.5 | 24 | | 20.2 | 216 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Other | 50.8 | 46.2 | 10 | | 42.9 | 18 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Total third party | 464.6 | 444.4 | 5 | | 504.9 | (8) |
| assets (excluding | | | | | | |
| derivatives mark | | | | | | |
| to market) | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Net derivative assets | 81.5 | 70.7 | 15 | | 113.0 | (28) |
| (after netting) | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Customer deposits | 58.1 | 65.0 | (11) | | 88.6 | (34) |
| (excluding repos) | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk elements in lending | 1.6 | 1.1 | 49 | | 0.7 | 112 |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loan:deposit ratio | 192.4% | 182.7% | 962bp | | 192.0% | 40bp |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk-weighted assets | 131.9 | 122.4 | 8 | | 162.4 | (19) |
+---------------------------+-----------+----------+----------+-+----------+----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 10% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Income fell 20% from the strong second quarter, but year to date income is up
80% relative to the same period of 2008. Rates flow business remained very
strong, benefiting from good client activity, with income up 29% versus 2Q09 and
84% year to date. Currencies income declined, with no repeat of the favourable
market conditions of the first half. Commodities and equities were down on 2Q09
but remain well ahead of the previous year, with core equities growth driven by
a strong equity capital markets performance.
* Credit markets income was down 31% versus the second quarter but remains
strongly improved from the comparable period of 2008, with performance
benefiting from greater liquidity and a more positive trading environment
driving increased activity, particularly in the US liquid mortgage trading
business.
* Expenses remain tightly controlled, with total expenses for the quarter up 2% on
2Q09 and staff costs flat. Year to date expenses are up 9% on prior year,
reflecting the inclusion of Sempra for the full nine months in 2009 and the
impact of adverse exchange rate movements, partly offset by restructuring and
efficiency benefits.
Global Banking & Markets (continued)
Key points (continued)
* Impairments of GBP272 million for the quarter included a large individual
failure. Year to date impairments were GBP510 million, representing 0.48% of
loans and advances to customers compared with 0.02% in the prior year.
* Losses of GBP320 million were incurred in the third quarter on the fair value of
own debt, as the Group's credit spreads tightened further. In 3Q08 widening
spreads led to a gain being booked.
* Total third party assets excluding derivatives (TPAs) were up 1% at constant
exchange rates from 2Q09, with most of the growth in cash and liquid bills.
Compared with 31 December 2008 TPAs have been reduced by 8%, as asset
inventories have been run down. Risk-weighted assets increased by 8% during the
quarter, or 5% at constant exchange rates, reflecting the roll-off of relief
trades. RWAs at 30 September 2009 are 19% down from 31 December 2008, or 16% at
constant exchange rates, reflecting the Group's focus on reducing its risk
profile and balance sheet usage.
Global Transaction Services
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 234 | 225 | 244 | | 679 | 688 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 388 | 398 | 375 | | 1,171 | 1,087 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 622 | 623 | 619 | | 1,850 | 1,775 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (87) | (87) | (91) | | (269) | (269) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (37) | (38) | (38) | | (110) | (107) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (223) | (229) | (215) | | (687) | (628) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (347) | (354) | (344) | | (1,066) | (1,004) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 275 | 269 | 275 | | 784 | 771 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (22) | (4) | (7) | | (35) | (14) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 253 | 265 | 268 | | 749 | 757 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Domestic cash management | 202 | 204 | 203 | | 608 | 585 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| International cash | 183 | 179 | 179 | | 531 | 522 |
| management | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Trade finance | 71 | 77 | 60 | | 223 | 171 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Merchant acquiring | 134 | 131 | 147 | | 394 | 409 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial cards | 32 | 32 | 30 | | 94 | 88 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 622 | 623 | 619 | | 1,850 | 1,775 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Global Transaction Services (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 9.63% | 9.23% | 8.54% | | 9.03% | 8.35% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 55.8% | 56.8% | 55.6% | | 57.6% | 56.6% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Total third party assets | 21.4 | 19.4 | 10 | | 22.2 | (4) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loans and advances | 14.5 | 13.5 | 7 | | 14.8 | (2) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Customer deposits | 58.6 | 54.0 | 9 | | 61.8 | (5) |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk elements in lending | 0.2 | 0.1 | - | | 0.1 | - |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Loan:deposit ratio | 25.6% | 25.9% | (29bp) | | 25.1% | 50bp |
+---------------------------+-----------+----------+----------+-+----------+----------+
| Risk-weighted assets | 18.9 | 16.7 | 13 | | 17.4 | 9 |
+---------------------------+-----------+----------+----------+-+----------+----------+
Key points
* Operating profit was resilient overall, declining by 5% or 2% at constant
foreign exchange rates compared with 2Q09, as a result of modest impairments,
offset by slightly improved income and costs.
* Income increased 2% in the quarter at constant foreign exchange rates. Liability
margins remained compressed in the low interest rate environment and there was a
reduction in trade finance volumes and pricing.
* Cash Management performance for the nine months to 30 September 2009 was robust,
with deposits up 9% during the quarter supported by additional mandates from new
and existing clients, offset by liability margin compression, although balances
remained below year-end 2008 levels.
* Global Merchant Services saw improving transaction volumes and turnover, offset
by reduced margins resulting in part from the continued customer migration from
credit to debit cards.
* There was a reduction in Trade Finance volumes in 3Q09 and some softening of
previous repricing to account for risk; however, income was up 11% year to date
at constant foreign exchange rates.
* Expenses were tightly controlled and down 1% on 2Q09 at constant foreign
exchange rates, with modest movements in transaction-related and indirect costs,
and were flat year to date.
* Modest impairment losses arose as a result of a small number of defaults in
Trade Finance and Cash Management. Overall impairments year to date remain
small, at 0.3% of loans and advances.
Ulster Bank
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 176 | 208 | 207 | | 586 | 599 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 45 | 39 | 69 | | 130 | 178 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest income | 10 | 12 | - | | 33 | 34 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 55 | 51 | 69 | | 163 | 212 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 231 | 259 | 276 | | 749 | 811 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (79) | (81) | (84) | | (249) | (243) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (20) | (25) | (23) | | (67) | (69) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (73) | (75) | (71) | | (225) | (211) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (172) | (181) | (178) | | (541) | (523) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 59 | 78 | 98 | | 208 | 288 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (144) | (90) | (17) | | (301) | (35) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (85) | (12) | 81 | | (93) | 253 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| business: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate | 134 | 138 | 160 | | 434 | 479 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail | 104 | 101 | 107 | | 298 | 304 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | (7) | 20 | 9 | | 17 | 28 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 231 | 259 | 276 | | 749 | 811 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 30 | 10 | 5 | | 54 | 13 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate | 87 | 66 | 3 | | 193 | 1 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 27 | 14 | 9 | | 54 | 21 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 144 | 90 | 17 | | 301 | 35 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment | | | | | | |
| charge as % of | | | | | | |
| gross customer | | | | | | |
| loans and advances | | | | | | |
| (excluding reverse | | | | | | |
| repurchase | | | | | | |
| agreements) by | | | | | | |
| sector: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 0.72% | 0.25% | 0.13% | | 0.43% | 0.11% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate | 1.59% | 1.23% | 0.06% | | 1.18% | 0.01% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 5.40% | 3.50% | 1.61% | | 3.60% | 1.27% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1.42% | 0.92% | 0.18% | | 0.99% | 0.13% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Ulster Bank (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | (12.7%) | (2.0%) | 17.3% | | (4.6%) | 18.0% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 1.74% | 2.03% | 2.04% | | 1.88% | 1.96% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 74.5% | 69.9% | 64.5% | | 72.2% | 64.5% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+-----------+-+----------+----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Loans and advances to | | | | | | |
| customers - gross | | | | | | |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - mortgages | 16.7 | 16.0 | 4 | | 18.1 | (8) |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - corporate | 21.9 | 21.2 | 3 | | 23.8 | (8) |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - other | 2.0 | 1.8 | 11 | | 2.1 | (5) |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Customer deposits | 20.9 | 18.9 | 11 | | 24.3 | (14) |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Risk elements in lending | | | | | | |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - mortgages | 0.5 | 0.4 | 25 | | 0.3 | 67 |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - corporate | 1.3 | 1.1 | 18 | | 0.8 | 63 |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| - other | 0.2 | 0.1 | 100 | | 0.1 | 100 |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Loan:deposit ratio | 194.0% | 206.3% | (1,237bp) | | 181.1% | 1,291bp |
+---------------------------+-----------+----------+-----------+-+----------+----------+
| Risk-weighted assets | 28.5 | 26.2 | 9 | | 24.5 | 16 |
+---------------------------+-----------+----------+-----------+-+----------+----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 7% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Deteriorating operating results largely reflect increased impairment losses and
funding costs, against the backdrop of difficult economic conditions across the
island of Ireland.
* Net interest margin was 29 basis points lower in the quarter and 8 basis points
lower year to date. The benefits of asset repricing initiatives have been offset
by the increased cost of acquiring and retaining customer deposits. Year to
date, net interest income declined by 12% in constant currency terms.
* At constant exchange rates, loans to customers declined by 2% compared with 2Q09
and by 4% compared with December 2008, reflecting a reduction in new business
demand, partially offset by lower redemption levels. Customer deposits rose by
5% in the quarter on a constant currency basis, reflecting the continued focus
on improving the Bank's funding profile, with balances 11% lower than December
2008, on the same basis, due to strong competition from institutions covered by
the Irish Government guarantee scheme.
* Year to date, non-interest income has fallen by 28% from the prior year at
constant currency rates, driven by reduced activity levels across all business
lines, most notably in Bancassurance and Capital Markets.
Ulster Bank (continued)
Key points (continued)
* Ulster Bank continues to implement its restructuring programme, resulting in a
4% decrease in costs in constant currency terms compared with 2Q09, and this
trend is expected to continue into 2010. The programme will encompass the merger
of the First Active and Ulster Bank businesses and other cost management
initiatives across the group. Total costs year to date are down 2% versus prior
year on a constant currency basis.
* Impairment charges increased to GBP144 million for the quarter, driven by the
continued deterioration in the Irish economic environment and resultant impact
on credit risk metrics, particularly in property-related lending. Year to date
impairment charges of GBP301 million are significantly higher than the prior
year.
* Customer account numbers increased by 3% compared with 3Q08, with growth fuelled
by strong current account activity and new-to-bank savings customers.
US Retail & Commercial (GBP Sterling)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 410 | 448 | 440 | | 1,352 | 1,214 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 159 | 209 | 171 | | 566 | 481 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest income | 65 | 45 | 29 | | 162 | 113 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 224 | 254 | 200 | | 728 | 594 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 634 | 702 | 640 | | 2,080 | 1,808 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (174) | (184) | (159) | | (576) | (470) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (132) | (188) | (92) | | (463) | (234) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (191) | (194) | (153) | | (586) | (451) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (497) | (566) | (404) | | (1,625) | (1,155) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 137 | 136 | 236 | | 455 | 653 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (180) | (146) | (134) | | (549) | (260) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (43) | (10) | 102 | | (94) | 393 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages and home equity | 112 | 130 | 88 | | 384 | 263 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal lending and | 116 | 113 | 86 | | 336 | 243 |
| cards | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail deposits | 200 | 202 | 256 | | 633 | 721 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial lending | 127 | 140 | 98 | | 408 | 277 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial deposits | 97 | 89 | 97 | | 290 | 266 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | (18) | 28 | 15 | | 29 | 38 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 634 | 702 | 640 | | 2,080 | 1,808 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Average exchange rate - | 1.640 | 1.551 | 1.892 | | 1.543 | 1.948 |
| US$/GBP | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
US Retail & Commercial (GBP Sterling) (continued)
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+----------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 29 | 12 | 16 | | 64 | 28 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Home equity | 82 | 43 | 20 | | 154 | 45 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate & Commercial | 65 | 61 | 54 | | 234 | 94 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other consumer | 4 | 30 | 44 | | 97 | 93 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 180 | 146 | 134 | | 549 | 260 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment | | | | | | |
| charge as % of | | | | | | |
| gross customer | | | | | | |
| loans and | | | | | | |
| advances (excluding | | | | | | |
| reverse repurchase | | | | | | |
| agreements) by | | | | | | |
| sector: | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 1.68% | 0.66% | 0.74% | | 1.24% | 0.43% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Home equity | 2.05% | 1.08% | 0.53% | | 1.28% | 0.40% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate & Commercial | 1.27% | 1.19% | 1.11% | | 1.53% | 0.65% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other consumer | 0.20% | 1.45% | 2.17% | | 1.64% | 1.53% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1.41% | 1.12% | 1.04% | | 1.43% | 0.68% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
US Retail & Commercial (GBP Sterling) (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | (2.5%) | (0.7%) | 7.4% | | (1.9%) | 9.5% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 2.34% | 2.30% | 2.79% | | 2.32% | 2.67% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 78.4% | 80.6% | 63.1% | | 78.1% | 63.8% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Total assets | 76.9 | 75.6 | 2 | | 87.5 | (12) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loans and advances to | | | | | | |
| customers (gross): | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Residential mortgages | 6.9 | 7.3 | (5) | | 9.5 | (27) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - home equity | 16.0 | 15.9 | 1 | | 18.7 | (14) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - corporate and | 20.5 | 20.5 | - | | 23.7 | (14) |
| commercial | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - other consumer | 7.8 | 8.3 | (6) | | 9.8 | (20) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Customer deposits | 62.1 | 60.2 | 3 | | 64.4 | (4) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk elements in lending | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - retail | 0.3 | 0.3 | - | | 0.2 | 50 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - commercial | 0.2 | 0.1 | - | | 0.2 | - |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loan:deposit ratio | 82.6% | 86.7% | (410bp) | | 96.6% | (1,400bp) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk-weighted assets | 62.8 | 55.6 | 13 | | 63.9 | (2) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Spot exchange rate - | 1.599 | 1.644 | | | 1.460 | |
| US$/GBP | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 7% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Sterling has weakened over the course of the quarter, and the average exchange
rate in 3Q09 reflects a 6% appreciation of the dollar. As a result, weak income
and profit trends have been exacerbated in sterling terms.
* Variances are fully described in the US dollar based financials that follow.
US Retail & Commercial (US Dollar)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | $m | $m | $m | | $m | $m |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest income | 680 | 696 | 834 | | 2,087 | 2,363 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 266 | 324 | 325 | | 874 | 937 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other non-interest income | 104 | 69 | 52 | | 248 | 220 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-interest income | 370 | 393 | 377 | | 1,122 | 1,157 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,050 | 1,089 | 1,211 | | 3,209 | 3,520 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (289) | (287) | (302) | | (889) | (916) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (219) | (289) | (172) | | (714) | (453) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (313) | (301) | (292) | | (902) | (880) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (821) | (877) | (766) | | (2,505) | (2,249) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 229 | 212 | 445 | | 704 | 1,271 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (296) | (231) | (258) | | (847) | (507) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating (loss)/profit | (67) | (19) | 187 | | (143) | 764 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages and home equity | 186 | 203 | 166 | | 593 | 512 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal lending and | 190 | 174 | 164 | | 518 | 474 |
| cards | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail deposits | 329 | 315 | 483 | | 976 | 1,402 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial lending | 210 | 217 | 186 | | 629 | 540 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial deposits | 160 | 138 | 185 | | 448 | 519 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | (25) | 42 | 27 | | 45 | 73 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,050 | 1,089 | 1,211 | | 3,209 | 3,520 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
US Retail & Commercial (US Dollar) (continued)
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+----------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | $m | $m | $m | | $m | $m |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of impairment by | | | | | | |
| sector: | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 47 | 19 | 30 | | 99 | 54 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Home equity | 131 | 65 | 37 | | 238 | 87 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate & Commercial | 107 | 99 | 106 | | 360 | 184 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other consumer | 11 | 48 | 85 | | 150 | 182 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment | 296 | 231 | 258 | | 847 | 507 |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment | | | | | | |
| charge as % of | | | | | | |
| gross customer | | | | | | |
| loans and | | | | | | |
| advances (excluding | | | | | | |
| reverse repurchase | | | | | | |
| agreements) by | | | | | | |
| sector: | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 1.69% | 0.63% | 0.77% | | 1.19% | 0.46% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Home equity | 2.05% | 1.00% | 0.55% | | 1.24% | 0.43% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Corporate & Commercial | 1.31% | 1.18% | 1.23% | | 1.47% | 0.71% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other consumer | 0.34% | 1.41% | 2.36% | | 1.60% | 1.69% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1.45% | 1.08% | 1.13% | | 1.38% | 0.74% |
+----------------------------+-----------+----------+-----------+-+-----------+-----------+
US Retail & Commercial (US Dollar) (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | (2.5%) | (0.8%) | 7.6% | | (1.8%) | 10.3% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net interest margin | 2.37% | 2.32% | 2.80% | | 2.34% | 2.68% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 78.2% | 80.5% | 63.2% | | 78.1% | 63.9% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | $bn | $bn | % | | $bn | % |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Capital and balance sheet | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Total assets | 122.9 | 124.4 | (1) | | 127.8 | (4) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loans and advances to | | | | | | |
| customers (gross): | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - Residential mortgages | 11.0 | 12.0 | (8) | | 13.9 | (21) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - home equity | 25.6 | 26.1 | (2) | | 27.2 | (6) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - corporate and | 32.7 | 33.6 | (3) | | 34.7 | (6) |
| commercial | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - other consumer | 12.5 | 13.7 | (9) | | 14.3 | (13) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Customer deposits | 99.3 | 99.0 | - | | 94.0 | 6 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk elements in lending | | | | | | |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - retail | 0.5 | 0.4 | 25 | | 0.3 | 67 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| - commercial | 0.3 | 0.3 | - | | 0.2 | 50 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Loan:deposit ratio | 82.6% | 86.7% | (410bp) | | 96.6% | (1,400bp) |
+---------------------------+-----------+----------+----------+-+----------+-----------+
| Risk-weighted assets | 100.4 | 91.3 | 10 | | 93.2 | 8 |
+---------------------------+-----------+----------+----------+-+----------+-----------+
+----------------------------------------------------------------------------+
| Note: |
+----------------------------------------------------------------------------+
| * Return on equity is based on divisional operating profit after tax, |
| divided by divisional notional equity (based on 7% of divisional |
| risk-weighted assets, adjusted for capital deductions). |
+----------------------------------------------------------------------------+
Key points
* Deteriorating operating loss in the quarter reflects continuing pressure on
income lines and further rises in impairments, partially offset by reduced
expenses.
* Net interest margin improved by 5 basis points compared with 2Q09, with wider
lending margins as a result of strategic repricing, particularly on auto and
home equity loans, as well as changes to deposit pricing and mix. However, net
interest margin for the year to date is 34 basis points lower than in the same
period of 2008, reflecting the decline in deposit margins in the low interest
rate environment.
* Fee income has fallen as mortgage banking fee income dropped 30%, compared with
2Q09, reflecting a decline in refinancing applications from the record levels
seen in the prior period.
* Consumer loans and advances were 4% lower compared with 2Q09, primarily driven
by a decision to reduce activity in the student loan market. Compared with 3Q08,
consumer lending is down 14%, with increased prepayments and sales of
residential mortgages and reduced demand for auto loans. Commercial lending is
down 3% compared with 2Q09 and 6% against 3Q08, reflecting a lack of credit
demand.
US Retail & Commercial (US Dollar) (continued)
Key points (continued)
* Customer deposits have been maintained in the third quarter. Compared with 3Q08
overall deposit balances are flat, but the mix has altered, with non-interest
bearing deposits up 14% and wholesale deposits reduced by $7 billion, or 90%.
The loan to deposit ratio has improved further to 82.6%.
* Increased impairments reflect challenging conditions in the home equity,
residential mortgage and commercial real estate portfolios. Charge-offs remain
in line with 2Q09, representing 0.75% of loans and advances, but were 22 basis
points higher than in 3Q08. The provision balance increased by $134 million in
3Q09.
RBS Insurance
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Earned premiums | 1,145 | 1,119 | 1,128 | | 3,370 | 3,391 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Reinsurers' share | (43) | (40) | (51) | | (128) | (158) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Insurance net premium | 1,102 | 1,079 | 1,077 | | 3,242 | 3,233 |
| income | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | (95) | (95) | (102) | | (282) | (303) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other income | 112 | 104 | 107 | | 324 | 374 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,119 | 1,088 | 1,082 | | 3,284 | 3,304 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - staff | (67) | (69) | (64) | | (206) | (209) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - other | (47) | (54) | (44) | | (168) | (171) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (64) | (65) | (65) | | (195) | (189) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | (178) | (188) | (173) | | (569) | (569) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Gross claims | (941) | (776) | (777) | | (2,515) | (2,348) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Reinsurers' share | 13 | 18 | 18 | | 36 | 63 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Net claims | (928) | (758) | (759) | | (2,479) | (2,285) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit before | 13 | 142 | 150 | | 236 | 450 |
| impairment losses | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses | (2) | (1) | - | | (8) | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operating profit | 11 | 141 | 150 | | 228 | 450 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Analysis of income by | | | | | | |
| product: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Motor own-brand | 517 | 495 | 492 | | 1,489 | 1,451 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Household and Life | 214 | 210 | 200 | | 628 | 600 |
| own-brands | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Motor partnerships and | 141 | 145 | 167 | | 431 | 520 |
| broker | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Household and Life, | 78 | 81 | 88 | | 242 | 269 |
| partnerships and broker | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other (international, | 169 | 157 | 135 | | 494 | 464 |
| commercial and central) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total income | 1,119 | 1,088 | 1,082 | | 3,284 | 3,304 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
RBS Insurance (continued)
Key metrics
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| In-force policies | | | | | | |
| (thousands) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Motor own-brand | 4,894 | 4,789 | 4,434 | | 4,894 | 4,434 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Own-brand | 6,150 | 5,890 | 5,468 | | 6,150 | 5,468 |
| non-motor (home, | | | | | | |
| rescue, pet, HR24) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Partnerships & | 5,371 | 5,609 | 6,052 | | 5,371 | 6,052 |
| broker (motor, | | | | | | |
| home, rescue, pet, | | | | | | |
| HR24) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| - Other | 1,212 | 1,210 | 1,122 | | 1,212 | 1,122 |
| (International, | | | | | | |
| commercial and | | | | | | |
| central) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Gross written premium | 1,186 | 1,147 | 1,159 | | 3,456 | 3,382 |
| (GBPm) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Return on equity (1) | 1.2% | 17.7% | 18.8% | | 8.6% | 18.8% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | 15.9% | 17.3% | 16.0% | | 17.3% | 17.2% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Adjusted cost:income | 93.2% | 57.0% | 53.6% | | 70.7% | 55.8% |
| ratio (2) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Balance sheet | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| General insurance | 6,839 | 6,601 | 6,661 | | 6,839 | 6,661 |
| reserves - total (GBPm) | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Notes:* |
| Based on divisional operating profit after tax, divided by divisional notional |
| equity (based on regulatory capital).* |
| Based on total income and operating expenses above and after netting insurance |
| claims against income. |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
* Income grew by 3% compared with 2Q09, driven by the success of the Group's own
brands, with the partnerships and broker segment remaining flat. Churchill and
Privilege have benefited from deployment on selected price comparison websites,
with motor policy numbers up 25% and 13% respectively, and home policies up 33%
and 186% respectively, compared with 3Q08. Year to date own brand premium income
is up 10% against the prior year.
* Investment income declined 10% in the quarter and is 41% lower year to date,
reflecting lower interest rates earned on the division's conservatively invested
portfolio.
* Expenses fell by 5% in the quarter, mainly reflecting the phasing of marketing
activity and a reduction in industry levies. Year to date, costs were held flat
at GBP569 million, with wage inflation offset by efficiency reductions in
headcount and reduced marketing spend.
* Net claims were significantly higher than expected in the quarter, with an
increase of 22% compared with 2Q09. This was largely due to greater claims being
made against our drivers for bodily injury accidents, resulting in the need to
strengthen both current and prior years' claims reserves by a total of GBP118
million above that projected for the quarter. Significant action has now been
taken to mitigate this impact including motor price increases and refining our
claims handling processes. Year to date net claims were up 8%, with the
additional impact of increases in creditor claims and home claims from cold
weather in 1Q09.
* The UK combined operating ratio, including statutory business services costs was
104.2%, compared with 91.3% in the second quarter, with the impact of the
increase in reserves for bodily injury claims only partially mitigated by
commission and expense ratio improvement. The year to date combined ratio rose
to 98.3%.
Central items
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Fair value of own debt | (163) | (478) | 633 | | (257) | 861 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 283 | 166 | 173 | | 554 | 651 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Central items not | 120 | (312) | 806 | | 297 | 1,512 |
| allocated | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Key points
* Funding and operating costs have been allocated to operating divisions, based on
direct service usage, requirement for market funding and other appropriate
drivers where services span more than one division.
* Residual unallocated items relate to volatile corporate items that do not
naturally reside within a division.
* Items not allocated in the quarter amounted to a net credit of GBP120 million
and comprised an increase in the carrying value of own debt partially offset by
a net credit on a number of other volatile items, including the impact of
economic hedges that do not qualify for IFRS hedge accounting.
Non-Core
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+-------------------------------------+-----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Income statement | GBPm | GBPm | GBPm | | GBPm | GBPm |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Net interest income from | 287 | 274 | 479 | | 956 | 1,391 |
| banking activities | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Net fees and commissions | 132 | 82 | 260 | | 392 | 752 |
| receivable | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| (Loss)/income from | (735) | (1,390) | 68 | | (4,990) | (5,186) |
| trading activities | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Insurance net premium | 173 | 196 | 252 | | 613 | 737 |
| income | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Other operating income | 83 | (56) | (3) | | 52 | 843 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Non-interest income | (347) | (1,168) | 577 | | (3,933) | (2,854) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Total income | (60) | (894) | 1,056 | | (2,977) | (1,463) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Direct expenses | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| - staff | (111) | (71) | (141) | | (370) | (552) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| - other | (223) | (220) | (257) | | (673) | (772) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Indirect expenses | (132) | (137) | (131) | | (411) | (387) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | (466) | (428) | (529) | | (1,454) | (1,711) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Operating | (526) | (1,322) | 527 | | (4,431) | (3,174) |
| (loss)/profit | | | | | | |
| before other | | | | | | |
| operating charges | | | | | | |
| and impairment | | | | | | |
| losses | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Insurance net claims | (126) | (137) | (170) | | (440) | (508) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Impairment losses | (2,066) | (3,516) | (768) | | (7,410) | (1,575) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Operating loss | (2,718) | (4,975) | (411) | | (12,281) | (5,257) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Analysis of income: | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Banking & Portfolio | (92) | (772) | 739 | | (774) | 2,015 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Retail, Commercial & | 537 | 570 | 773 | | 1,769 | 2,291 |
| Countries | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Trading | (505) | (692) | (456) | | (3,972) | (5,769) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | (60) | (894) | 1,056 | | (2,977) | (1,463) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Key metrics | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Performance ratios | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Net interest margin | 0.55% | 0.45% | 0.38% | | 0.54% | 0.67% |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Cost:income ratio | (776.7%) | (47.9%) | 50.1% | | (48.8%) | (117.0%) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | 30 | 30 June | Change | | 31 | Change |
| | September | 2009 | | | December | |
| | 2009 | | | | 2008 | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | GBPbn | GBPbn | % | | GBPbn | % |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Capital and balance | | | | | | |
| sheet* | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Total | 220.2 | 231.9 | (5) | | 325.1 | (32) |
| third | | | | | | |
| party | | | | | | |
| assets | | | | | | |
| (including | | | | | | |
| derivatives**) | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Loans and advances to | 158.7 | 163.6 | (3) | | 190.6 | (17) |
| customers - gross | | | | | | |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Customer deposits | 14.7 | 13.4 | 10 | | 26.6 | (45) |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Risk elements in lending | 23.3 | 20.5 | 14 | | 11.2 | 108 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Loan:deposit ratio | 1,078.5% | 1,282.2% | (16) | | 718.1% | 50 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
| Risk-weighted assets | 190.3 | 164.1 | 16 | | 160.3 | 19 |
+-------------------------------------+------------+----------+-----------+-+-----------+-----------+
* includes disposal groups.
** Derivatives were GBP23.6 billion at 30 September 2009 (30 June 2009 - GBP30.5
billion; 31 December 2008 - GBP73.4 billion)
Non-Core (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Credit and other market | | | | | | |
| write-downs:* | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Monoline exposures | 106 | 7 | 109 | | 1,653 | 2,229 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CDPCs | 277 | 371 | 162 | | 846 | 242 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Super senior CDOs | (148) | 151 | - | | 389 | 1,892 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Leveraged finance | - | - | 36 | | - | 899 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CLO's | 1 | - | 69 | | 1 | 182 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other credit exotics | 46 | (15) | (130) | | 588 | 231 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Equities | 12 | 13 | 132 | | 34 | 168 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 55 | 51 | (78) | | 97 | (142) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 349 | 578 | 300 | | 3,608 | 5,701 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| CDS Hedging | 386 | 813 | (368) | | 1,382 | (516) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 735 | 1,391 | (68) | | 4,990 | 5,185 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Impairment losses: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banking & Portfolio | 878 | 1,619 | 252 | | 3,320 | 498 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail, Commercial & | 1,234 | 1,638 | 360 | | 3,592 | 887 |
| Countries | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Trading | (46) | 259 | 156 | | 498 | 190 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 2,066 | 3,516 | 768 | | 7,410 | 1,575 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment | | | | | | |
| charge as % of | | | | | | |
| gross customer | | | | | | |
| loans and | | | | | | |
| advances: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banking & Portfolio | 4.04% | 7.16% | (0.33%) | | 5.01% | 0.24% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail, Commercial & | 7.22% | 9.44% | 1.95% | | 7.00% | 1.61% |
| Countries | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Trading | (31.73%) | 42.09% | 7.52% | | (9.19%) | 3.24% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total | 5.37% | 8.39% | 1.03% | | 5.66% | 0.98% |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPbn | GBPbn | GBPbn | | GBPbn | GBPbn |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Gross customer loans and | | | | | | |
| advances: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banking & Portfolio | 88.4 | 93.1 | 91.1 | | 88.4 | 91.1 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail, Commercial & | 68.4 | 69.4 | 73.5 | | 68.4 | 73.5 |
| Countries | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Trading | 1.9 | 1.1 | 7.5 | | 1.9 | 7.5 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 158.7 | 163.6 | 172.1 | | 158.7 | 172.1 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Risk-weighted assets: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banking & Portfolio | 73.1 | 61.8 | 42.9 | | 73.1 | 42.9 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Retail, Commercial & | 45.9 | 48.3 | 53.8 | | 45.9 | 53.8 |
| Countries | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Trading | 71.3 | 54.0 | 34.0 | | 71.3 | 34.0 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 190.3 | 164.1 | 130.7 | | 190.3 | 130.7 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
* Included in income from trading activities.
Non-Core (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Loan impairment losses by | | | | | | |
| donating division and | | | | | | |
| sector | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 1 | 2 | - | | 4 | 1 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal | 11 | 17 | 12 | | 42 | 31 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | - | - | 16 | | - | 43 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total UK Retail | 12 | 19 | 28 | | 46 | 75 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Manufacturing & | 14 | 13 | 4 | | 48 | 13 |
| Infrastructure | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property and construction | 163 | 229 | 45 | | 517 | 72 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Transport | 5 | 2 | 7 | | 8 | 8 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Telecoms, media and | - | - | - | | - | - |
| technology | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Banks and financials | 1 | 99 | 2 | | 102 | 3 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Lombard | 27 | - | - | | 109 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Invoice finance | 2 | - | - | | 2 | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 32 | 544 | 29 | | 551 | 96 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total UK Corporate | 244 | 887 | 87 | | 1,337 | 192 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 7 | 11 | 2 | | 26 | 3 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial inv. & dev. | 20 | 19 | 2 | | 47 | 3 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential inv. & dev. | 406 | 240 | 6 | | 749 | 34 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 148 | 25 | 5 | | 184 | 11 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other EMEA | 27 | 34 | 20 | | 86 | 61 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total Ulster Bank | 608 | 329 | 35 | | 1,092 | 112 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail and Commercial | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Auto & consumer | 49 | 32 | 52 | | 110 | 82 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cards | 33 | 45 | 18 | | 104 | 42 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| SBO/home equity | 70 | 142 | 51 | | 360 | 218 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 20 | 18 | 2 | | 42 | 3 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial real estate | 85 | 65 | 32 | | 177 | 39 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial and other | 38 | 19 | 6 | | 76 | 11 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total US Retail and | 295 | 321 | 161 | | 869 | 395 |
| Commercial | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 832 | 1,878 | 408 | | 3,818 | 688 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 75 | 82 | 49 | | 248 | 113 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total impairment losses | 2,066 | 3,516 | 768 | | 7,410 | 1,575 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Non-Core (continued)
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+----------------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPbn | GBPbn | GBPbn | | GBPbn | GBPbn |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Gross | | | | | | |
| loans | | | | | | |
| and | | | | | | |
| advances | | | | | | |
| to | | | | | | |
| customers | | | | | | |
| by | | | | | | |
| donating | | | | | | |
| division | | | | | | |
| and | | | | | | |
| sector | | | | | | |
| (excluding | | | | | | |
| reverse | | | | | | |
| repurchase | | | | | | |
| agreements) | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 2.0 | 2.0 | 2.3 | | 2.0 | 2.3 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Personal | 0.7 | 0.9 | 1.2 | | 0.7 | 1.2 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | - | - | 1.9 | | - | 1.9 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total UK Retail | 2.7 | 2.9 | 5.4 | | 2.7 | 5.4 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Manufacturing & | 0.3 | 0.6 | 0.3 | | 0.3 | 0.3 |
| Infrastructure | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property and construction | 13.0 | 13.5 | 13.1 | | 13.0 | 13.1 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 22.2 | 23.0 | 22.3 | | 22.2 | 22.3 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total UK Corporate | 35.5 | 37.1 | 35.7 | | 35.5 | 35.7 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Mortgages | 6.3 | 5.8 | 5.2 | | 6.3 | 5.2 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial inv. & dev. | 2.8 | 0.6 | 1.4 | | 2.8 | 1.4 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential inv. & dev. | 5.9 | 7.9 | 3.9 | | 5.9 | 3.9 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 1.1 | 1.1 | 3.5 | | 1.1 | 3.5 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other EMEA | 1.1 | 0.8 | 1.1 | | 1.1 | 1.1 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total Ulster Bank | 17.2 | 16.2 | 15.1 | | 17.2 | 15.1 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail and Commercial | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Auto & consumer | 3.4 | 3.5 | 3.7 | | 3.4 | 3.7 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Cards | 0.6 | 0.6 | 0.6 | | 0.6 | 0.6 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| SBO/home equity | 3.9 | 4.0 | 4.3 | | 3.9 | 4.3 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Residential mortgages | 0.9 | 0.9 | 1.0 | | 0.9 | 1.0 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial real estate | 2.1 | 2.1 | 2.4 | | 2.1 | 2.4 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Commercial and other | 1.0 | 1.2 | 1.0 | | 1.0 | 1.0 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total US Retail and | 11.9 | 12.3 | 13.0 | | 11.9 | 13.0 |
| Commercial | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 87.4 | 91.6 | 92.0 | | 87.4 | 92.0 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Other | 1.1 | 0.8 | 4.3 | | 1.1 | 4.3 |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
| Total loans and advances | 155.8 | 160.9 | 165.5 | | 155.8 | 165.5 |
| to customers | | | | | | |
+----------------------------------+-----------+----------+-----------+-+-----------+-----------+
Non-Core (continued)
Key points
* Credit and other market write-downs were substantially lower in the third
quarter, down from GBP1,390 million to GBP735 million with the widening in
monoline spreads more than offset by reduced losses on hedges and credit
derivative product companies and a rally in asset-backed securities.
* Impairment losses were GBP1,450 million lower than in 2Q09, with reduced charges
in UK Corporate and GBM portfolios, which included a number of large, single
name impairments in the second quarter. Ulster Bank's impairments have increased
materially as the market has continued to deteriorate.
* Third party assets (including MTM derivatives) were down 5% compared with 2Q09,
and have declined by 32% compared with December 2008, as assets have been
run-off and written down. Risk-weighted assets, however, increased by 16% during
the third quarter to GBP190.3 billion and are 19% higher than at end 2008, as
continued deterioration in the corporate economic environment has pushed the
impact of procyclicality higher, particularly in real estate and leverage
finance portfolios and due to downgrades on monolines.
Allocation methodology for indirect costs
Business Services directly attributable costs have been allocated to the
operating divisions, based on their service usage. Where services span more than
one division an appropriate measure is used to allocate the costs on a basis
which management considers reasonable. Business Services costs are fully
allocated and there are no residual unallocated costs.
Group Centre directly attributable costs have been allocated to the operating
divisions, based on their service usage. Where services span more than one
division, the costs are allocated on a basis management considers reasonable.
The residual unallocated costs remaining in the Group centre relate to volatile
corporate items that do not naturally reside within a division.
Treasury costs are allocated to operating divisions as follows: term funding
costs are allocated or rewarded based on long term funding gap or surplus;
liquidity buffer funding costs are allocated based on share of overall liquidity
buffer derived from divisional stresses; and capital cost or benefit is
allocated based on share of divisional risk-adjusted RWAs.
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Business Services costs | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Property | 497 | 492 | 427 | | 1,457 | 1,241 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Operations | 370 | 357 | 358 | | 1,105 | 1,075 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Technology services and | 389 | 474 | 456 | | 1,318 | 1,331 |
| support functions | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | 1,256 | 1,323 | 1,241 | | 3,880 | 3,647 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Allocated to divisions: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | (381) | (397) | (409) | | (1,178) | (1,201) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | (106) | (109) | (112) | | (325) | (330) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | (29) | (31) | (31) | | (90) | (90) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | (134) | (152) | (118) | | (411) | (346) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | (207) | (215) | (203) | | (638) | (595) |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | (63) | (66) | (63) | | (195) | (187) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | (173) | (179) | (139) | | (533) | (410) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | (54) | (57) | (57) | | (167) | (167) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | (109) | (117) | (109) | | (343) | (321) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | - | - | - | | - | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Group centre costs | 232 | 196 | 170 | | 704 | 484 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Allocated to divisions: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | (66) | (55) | (39) | | (208) | (113) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | (19) | (16) | (17) | | (55) | (48) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | (13) | (10) | (8) | | (39) | (22) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | (57) | (49) | (42) | | (174) | (115) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | (16) | (14) | (12) | | (49) | (33) |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | (10) | (9) | (8) | | (30) | (24) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | (18) | (15) | (14) | | (53) | (41) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | (10) | (8) | (8) | | (28) | (22) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | (23) | (20) | (22) | | (68) | (66) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | - | - | - | | - | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
Allocation methodology for indirect costs (continued)
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | Quarter ended | | Nine months ended |
+---------------------------+----------------------------------+-+-----------------------+
| | 30 | 30 June | 30 | | 30 | 30 |
| | September | 2009 | September | | September | September |
| | 2009 | | 2008 | | 2009 | 2008 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | GBPm | GBPm | GBPm | | GBPm | GBPm |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Treasury funding costs | 334 | 334 | 270 | | 1,088 | 977 |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Allocated to divisions: | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Retail | (66) | (29) | (37) | | (144) | (142) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| UK Corporate | (47) | (63) | (41) | | (211) | (149) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Wealth | 28 | 30 | (17) | | 67 | (67) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Banking & Markets | 24 | 44 | (32) | | 218 | (79) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Global Transaction | 48 | 38 | 32 | | 107 | 69 |
| Services | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Ulster Bank | (23) | 5 | (16) | | (26) | (55) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| US Retail & Commercial | (48) | (14) | (15) | | (85) | (73) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| RBS Insurance | (12) | (7) | (4) | | (30) | (21) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| Non-Core | (238) | (338) | (140) | | (984) | (460) |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | | | | | | |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
| | - | - | - | | - | - |
+---------------------------+-----------+----------+-----------+-+-----------+-----------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
IMSBFBITMMJMMIL
|