TIDMRBS
RNS Number : 5059W
Royal Bank of Scotland Group PLC
17 April 2019
Segmental Reporting Restatement
Document
April 2019
The Royal Bank of Scotland Group plc
Overview of business re-segmentation
This announcement sets out changes to RBS's operating segments
and consequent changes in results presentation. The announcement
contains re-presented financial results for the year ended 31
December 2018 and, is presented to aid comparison of RBS's quarter
ended 31 March 2019 results with prior periods. Re-presented
financial information for the quarters ended 31 December 2018 and
31 March 2018 are included.
Segmental reorganisation
RBS continues to deliver on its plan to build a strong, simple
and fair bank for both customers and shareholders. To support this,
the following previously reported operating segments are now
realigned, with comparatives re-presented:
-- Effective from 1 January 2019, Business Banking has been
transferred from UK Personal and Business Banking (UK PBB) to
Commercial Banking as the nature of the business, including
distribution channels, products and customers, are more closely
aligned to the Commercial Banking (CB) business. Concurrent with
the transfer, UK PBB has been renamed to UK Personal Banking (UK
PB) and the previous franchise combining UK PBB (now UK PB) and
Ulster Bank RoI has been renamed Personal & Ulster. The
Commercial & Private Banking franchise has also been renamed to
Commercial & Private.
Quarter ended 31 March 2019 results
RBS's results for the quarter ended 31 March 2019 will be
announced on Friday 26 April 2019. These results will be reported
on the new structure and reporting basis as described above.
In conjunction with this Segmental Reporting Restatement
Document, a financial supplement showing re-presented financial
information for the last nine quarters is available at
www.rbs.com/results.
Forward-looking statements
This document contains forward-looking statements within the
meaning of the United States Private Securities Litigation Reform
Act of 1995, such as statements that include, without limitation,
the words 'expect', 'estimate', 'project', 'anticipate', 'commit',
'believe', 'should', 'intend', 'plan', 'could', 'probability',
'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective',
'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and
similar expressions or variations on these expressions. These
statements concern or may affect future matters, such as RBSG's
future economic results, business plans and current strategies. In
particular, this document includes forward-looking statements
relating to RBSG in respect of, but not limited to: its regulatory
capital position and related requirements, its financial position,
profitability and financial performance (including financial,
capital and operational targets), its access to adequate sources of
liquidity and funding, increasing competition from new incumbents
and disruptive technologies, its impairment losses and credit
exposures under certain specified scenarios, substantial regulation
and oversight, ongoing legal, regulatory and governmental actions
and investigations, LIBOR, EURIBOR and other benchmark reform and
RBSG's exposure to economic and political risks (including with
respect to Brexit and climate change), operational risk, conduct
risk, cyber and IT risk and credit rating risk. Forward-looking
statements are subject to a number of risks and uncertainties that
might cause actual results and performance to differ materially
from any expected future results or performance expressed or
implied by the forward-looking statements. Factors that could cause
or contribute to differences in current expectations include, but
are not limited to, legislative, political, fiscal and regulatory
developments, accounting standards, competitive conditions,
technological developments, interest and exchange rate fluctuations
and general economic conditions. These and other factors, risks and
uncertainties that may impact any forward-looking statement or
RBSG's actual results are discussed in RBSG's UK 2018 Annual Report
and Accounts (ARA) and materials filed with, or furnished to, the
US Securities and Exchange Commission, including, but not limited
to, RBSG's most recent Annual Report on Form 20-F and Reports on
Form 6-K. The forward-looking statements contained in this document
speak only as of the date of this document and RBSG does not assume
or undertake any obligation or responsibility to update any of the
forward-looking statements contained in this document, whether as a
result of new information, future events or otherwise, except to
the extent legally required.
Document roadmap
Pages 2 to 5 of this document show the income statement,
selected balance sheet line items and key metrics for the new
reportable segments for the year and quarter ended 31 December 2018
and for the quarter ended 31 March 2018. The Re-segmentation
reconciliation Appendix - summarises how Business Banking area is
allocated to the reportable operating segment Commercial
Banking.
For further information contact:
Alexander Holcroft
Investor Relations
+44 (0) 207 672 1982
Group Media Centre
+44 (0)131 523 4205
Re-presented customer segments
Year ended 31 December 2018
===============================================================================
Personal & Commercial &
Ulster Private
================ ===================
UK Ulster Central
Personal Bank Commercial Private RBS NatWest items Total
Banking & other
(1) RoI Banking Banking International Markets (2) RBS
Income statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ======== ====== ========== ======= ============= ======= ======= =======
Net interest income 4,283 444 2,855 518 466 112 (22) 8,656
Non-interest income 771 166 1,747 257 128 1,238 347 4,654
Own credit adjustments - - - - - 92 - 92
============================ ======== ====== ========== ======= ============= ======= ======= =======
Total income 5,054 610 4,602 775 594 1,442 325 13,402
============================ ======== ====== ========== ======= ============= ======= ======= =======
Direct expenses
- staff (698) (202) (739) (161) (102) (557) (1,190) (3,649)
- other (266) (103) (255) (66) (67) (241) (2,712) (3,710)
Indirect expenses (1,464) (185) (1,294) (229) (91) (415) 3,678 -
Strategic costs
- direct (41) (2) (33) - (3) (195) (730) (1,004)
- indirect (185) (20) (122) (21) (6) (43) 397 -
Litigation and conduct costs (213) (71) (44) (1) 9 (153) (809) (1,282)
============================ ======== ====== ========== ======= ============= ======= ======= =======
Operating expenses (2,867) (583) (2,487) (478) (260) (1,604) (1,366) (9,645)
============================ ======== ====== ========== ======= ============= ======= ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 2,187 27 2,115 297 334 (162) (1,041) 3,757
Impairment (losses)/releases (339) (15) (147) 6 2 92 3 (398)
============================ ======== ====== ========== ======= ============= ======= ======= =======
Operating profit/(loss) 1,848 12 1,968 303 336 (70) (1,038) 3,359
============================ ======== ====== ========== ======= ============= ======= ======= =======
Key metrics
============================ ======== ====== ========== ======= ============= ======= ======= =========
Return on equity (3) 24.7% 0.5% 12.1% 15.4% 24.4% (2.0%) nm 4.8%
Net interest margin 2.67% 1.79% 1.96% 2.52% 1.71% 0.40% nm 1.98%
Cost:income ratio (4) 56.7% 95.6% 52.8% 61.7% 43.8% 111.2% nm 71.7%
Loan impairment rate 0.23% 0.08% 0.14% nm nm nm nm 0.13%
============================ ======== ====== ========== ======= ============= ======= ======= =========
As at 31 December 2018
=================================================================================
Capital and balance sheet GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
============================ ======== ====== ========== ======= ============= ======= ======= =========
Total assets 171.0 25.2 166.4 22.0 28.4 244.5 36.7 694.2
Funded assets (5) 171.0 25.2 166.4 22.0 28.4 111.4 36.5 560.9
Net loans to customers -
amortised cost 148.9 18.8 101.4 14.3 13.3 8.4 - 305.1
Impairment provisions (1.1) (0.8) (1.3) - - (0.1) - (3.3)
Customer deposits 145.3 18.0 134.4 28.4 27.5 2.6 4.7 360.9
Risk-weighted assets (RWAs) 34.3 14.7 78.4 9.4 6.9 44.9 0.1 188.7
RWA equivalent (RWAes) 35.5 14.7 79.7 9.5 6.9 50.0 0.2 196.5
Employee numbers (FTEs -
thousands) (6) 21.7 3.1 10.3 1.9 1.7 4.8 23.6 67.1
============================ ======== ====== ========== ======= ============= ======= ======= =========
For notes to this table
refer to page 5.
Re-presented customer segments
Quarter ended 31 December 2018
=======================================================================================
Personal & Ulster Commercial & Private
===================== ======================
Ulster Central
UK Personal Bank Commercial Private RBS NatWest items Total
Banking & other
(1) RoI Banking Banking International Markets (2) RBS
Income statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
========================= ============ ======= ============ ======== ============= ======= ======= =======
Net interest income 1,061 110 724 133 123 30 (5) 2,176
Non-interest income 185 37 392 65 32 89 49 849
Own credit adjustments - - - - - 33 - 33
========================= ============ ======= ============ ======== ============= ======= ======= =======
Total income 1,246 147 1,116 198 155 152 44 3,058
========================= ============ ======= ============ ======== ============= ======= ======= =======
Direct expenses
- staff (166) (53) (185) (39) (25) (128) (263) (859)
- other (80) (27) (77) (22) (22) (65) (870) (1,163)
Indirect expenses (414) (52) (403) (72) (35) (123) 1,099 -
Strategic costs
- direct (27) (3) (5) - (1) (89) (230) (355)
- indirect (63) (12) (57) (10) (2) (22) 166 -
Litigation and conduct
costs (7) (17) (37) - (1) (28) (2) (92)
========================= ============ ======= ============ ======== ============= ======= ======= =======
Operating expenses (757) (164) (764) (143) (86) (455) (100) (2,469)
========================= ============ ======= ============ ======== ============= ======= ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 489 (17) 352 55 69 (303) (56) 589
Impairment
(losses)/releases (142) 19 (5) 8 2 100 1 (17)
========================= ============ ======= ============ ======== ============= ======= ======= =======
Operating profit/(loss) 347 2 347 63 71 (203) (55) 572
========================= ============ ======= ============ ======== ============= ======= ======= =======
Key metrics
========================= ============ ======= ============ ======== ============= ======= ======= =======
Return on equity (3) 17.2% 0.4% 8.3% 12.3% 20.0% (9.2%) nm 3.5%
Net interest margin 2.60% 1.73% 1.96% 2.49% 1.81% 0.39% nm 1.95%
Cost:income ratio (4) 60.8% 111.6% 67.5% 72.2% 55.5% 299.3% nm 80.5%
Loan impairment rate 0.38% (0.39%) 0.02% nm nm nm nm 0.02%
------------------------- ------------ ------- ------------ -------- ------------- ------- ------- -------
For the notes to this
table refer to page 5.
Re-presented customer segments
Quarter ended 31 March 2018
=====================================================================================
Personal & Ulster Commercial & Private
=================== ======================
Ulster Central
UK Personal Bank Commercial Private RBS NatWest items Total
Banking & other
(1) RoI Banking Banking International Markets (2) RBS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Net interest income 1,068 106 683 123 104 36 26 2,146
Non-interest income 230 40 475 61 33 380 (84) 1,135
Own credit adjustments - - - - - 21 - 21
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Total income 1,298 146 1,158 184 137 437 (58) 3,302
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Direct expenses
- staff (178) (49) (188) (43) (24) (165) (317) (964)
- other (65) (19) (47) (14) (15) (53) (606) (819)
Indirect expenses (374) (47) (311) (55) (20) (102) 909 -
Strategic costs
- direct (7) (1) (6) (1) - (17) (177) (209)
- indirect (61) (3) (42) (8) (1) (6) 121 -
Litigation and conduct
costs (1) (9) (1) - 1 (6) (3) (19)
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Operating expenses (686) (128) (595) (121) (59) (349) (73) (2,011)
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Operating profit/(loss)
before impairment
(losses)/releases 612 18 563 63 78 88 (131) 1,291
Impairment
(losses)/releases (68) (8) (12) (1) - 9 2 (78)
=========================== =========== ====== ============ ======== ============= ======= ======= =======
Operating profit/(loss) 544 10 551 62 78 97 (129) 1,213
=========================== =========== ====== ============ ======== ============= ======= ======= =======
For the notes to this table refer to page 5.
Re-presented customer segments
Quarter ended 31 March 2018
====================================================================================
Personal & Ulster Commercial & Private
=================== ======================
Ulster Central
UK Personal Bank Commercial Private RBS NatWest items Total
Banking & other
Key metrics (1) RoI Banking Banking International Markets (2) RBS
============================ =========== ====== ============= ======= ============= ======= ======= ======
Return on equity (3) 29.9% 1.6% 13.6% 12.5% 23.2% 2.0% nm 9.3%
Net interest margin 2.73% 1.80% 1.91% 2.51% 1.57% 0.54% nm 2.04%
Cost:income ratio (4) 52.9% 87.7% 50.0% 65.8% 43.1% 79.9% nm 60.5%
Loan impairment rate 0.18% 0.16% 0.05% nm nm nm nm nm
============================ =========== ====== ============= ======= ============= ======= ======= ======
As at 31 March 2018
Capital and balance sheet GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
============================ =========== ====== ============= ======= ============= ======= ======= ======
Total assets 166.3 23.4 165.6 20.4 28.0 283.8 51.0 738.5
Funded assets (5) 166.3 23.3 165.5 20.4 28.0 135.2 50.0 588.7
Net loans to customers -
amortised cost (GBPbn) 145.9 19.0 102.9 13.7 13.1 9.4 (0.2) 303.8
Impairment provisions (1.3) (1.2) (1.5) (0.1) - (0.2) 0.1 (4.2)
Customer deposits 142.9 16.4 131.1 25.3 26.9 3.8 8.1 354.5
Risk-weighted assets (RWAs) 31.5 16.9 84.3 9.4 7.0 53.1 0.5 202.7
RWA equivalent (RWAes) 32.2 17.4 88.9 9.4 7.0 56.5 0.9 212.3
Employee numbers (FTEs -
thousands) (6) 24.5 3.0 10.7 1.9 1.7 5.7 23.4 70.9
============================ =========== ====== ============= ======= ============= ======= ======= ======
nm = not meaningful
Notes:
(1) Reportable operating segment UK Personal and Business Banking renamed to UK Personal Banking
to reflect re-segmentation.
(2) Central items include unallocated transactions which principally comprise volatile items under
IFRS and RMBS related charges.
(3) RBS's CET 1 target is approximately 14% but for the purposes of computing segmental return
on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating
profit after tax and adjusted for preference share dividends is divided by average notional
equity allocated at different rates of 14% (Ulster Bank RoI), 12% (Commercial Banking), 13.5%
(Private Banking), 16% (RBS International) and 15% for all other segments, of the monthly
average of segmental risk-weighted assets equivalents (RWAes) incorporating the effect of
capital deductions. RBS return on equity is calculated using profit for the period attributable
to ordinary shareholders over tangible net asset value.
(4) Operating lease depreciation included in income for the year ended 31 December 2018 - GBP121
million; Q4 2018 - GBP32 million; Q1 2018 - GBP31 million.
(5) Funded assets exclude derivative assets.
(6) On 1 January 2018, 7,600 employees on a FTE basis were transferred from Central items to UK
Personal Banking, 200 to Ulster Bank RoI, 3,700 to Commercial Banking and 400 to Private Banking.
Appendix
Re-segmentation reconciliations
UK Personal Banking (operating segment within the Personal &
Ulster franchise)
Year ended Quarter ended Quarter ended
31 December 2018 31 December 2018 31 March 2018
============================= ============================= =============================
Previously Previously Previously
reported To Total reported To Total reported To Total
UK PBB CB UK PB(1) UK PBB CB UK PB(1) UK PBB CB UK PB(1)
Income statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Net interest income 5,098 (815) 4,283 1,267 (206) 1,061 1,259 (191) 1,068
Non-interest income 1,184 (413) 771 290 (105) 185 332 (102) 230
Total income 6,282 (1,228) 5,054 1,557 (311) 1,246 1,591 (293) 1,298
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Direct expenses
- staff (890) 192 (698) (208) 42 (166) (229) 51 (178)
- other (300) 34 (266) (93) 13 (80) (70) 5 (65)
Indirect expenses (1,801) 337 (1,464) (522) 108 (414) (456) 82 (374)
Strategic costs
- direct (54) 13 (41) (28) 1 (27) (12) 5 (7)
- indirect (221) 36 (185) (84) 21 (63) (68) 7 (61)
Litigation and
conduct
costs (216) 3 (213) (6) (1) (7) (1) - (1)
Operating expenses (3,482) 615 (2,867) (941) 184 (757) (836) 150 (686)
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Operating profit
before
impairment
losses 2,800 (613) 2,187 616 (127) 489 755 (143) 612
Impairment losses (342) 3 (339) (125) (17) (142) (57) (11) (68)
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Operating profit 2,458 (610) 1,848 491 (144) 347 698 (154) 544
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Key metrics
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
Return on equity (2) 24.3% 0.4% 24.7% 18.6% (1.4%) 17.2% 27.9% 2.0% 29.9%
Net interest margin 2.78% (0.11%) 2.67% 2.73% (0.13%) 2.60% 2.81% (0.08%) 2.73%
Cost:income ratio 55.4% 1.3% 56.7% 60.4% 0.4% 60.8% 52.5% 0.4% 52.9%
Loan impairment rate 0.21% 0.02% 0.23% 0.31% 0.07% 0.38% 0.14% 0.04% 0.18%
===================== ========== ======= ======== ========== ======= ======== ========== ======= ========
31 December 2018 31 March 2018
============================ ============================
Previously Previously
reported To Total reported To Total
UK PBB CB UK PB(1) UK PBB CB UK PB(1)
Capital and balance sheet GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
======================================== ========== ====== ======== ========== ====== ========
Loans to customers - amortised cost 163.7 (13.7) 150.0 162.1 (14.9) 147.2
Impairment provisions (1.4) 0.3 (1.1) (1.6) 0.3 (1.3)
======================================== ========== ====== ======== ========== ====== ========
Net loans to customers - amortised cost 162.3 (13.4) 148.9 160.5 (14.6) 145.9
Funded assets 194.2 (23.2) 171.0 190.3 (24.0) 166.3
Customer deposits 184.1 (38.8) 145.3 180.3 (37.4) 142.9
Loan:deposit ratio 88% 14% 102% 89% 13% 102%
Risk-weighted assets 45.1 (10.8) 34.3 43.4 (11.9) 31.5
======================================== ========== ====== ======== ========== ====== ========
Notes:
(1) Reportable operating segment UK Personal and Business Banking renamed
to UK Personal Banking to reflect re-segmentation.
(2) Return on equity is based on segmental operating profit after tax
adjusted for preference dividends divided by average notional equity
based on 15% of the monthly average of segmental Risk-weighted
assets equivalents (RWAes), incorporating the effect of capital
deductions, assuming 28% tax rate. Return on equity is calculated
using profit for the period attributable to ordinary shareholders.
Commercial Banking (operating segment within the Commercial
& Private franchise)
Year ended Quarter ended Quarter ended
31 December 2018 31 December 2018 31 March 2018
=========================== ========================= ========================
Previously From Total Previously From Total Previously From Total
reported reported reported
CB UK PB CB CB UK PB CB CB UK PB CB
Income statement GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Net interest income 2,040 815 2,855 518 206 724 492 191 683
Non-interest income 1,334 413 1,747 287 105 392 373 102 475
Total income 3,374 1,228 4,602 805 311 1,116 865 293 1,158
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Direct expenses
- staff (547) (192) (739) (143) (42) (185) (137) (51) (188)
- other (221) (34) (255) (64) (13) (77) (42) (5) (47)
Indirect expenses (957) (337) (1,294) (295) (108) (403) (229) (82) (311)
Strategic costs
- direct (20) (13) (33) (4) (1) (5) (1) (5) (6)
- indirect (86) (36) (122) (36) (21) (57) (35) (7) (42)
Litigation and conduct
costs (41) (3) (44) (38) 1 (37) (1) - (1)
Operating expenses (1,872) (615) (2,487) (580) (184) (764) (445) (150) (595)
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Operating profit before
impairment
(losses)/releases 1,502 613 2,115 225 127 352 420 143 563
Impairment (losses)/releases (144) (3) (147) (22) 17 (5) (23) 11 (12)
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Operating profit 1,358 610 1,968 203 144 347 397 154 551
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Key metrics
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
Return on equity (1) 10.2% 1.9% 12.1% 5.5% 2.8% 8.3% 12.2% 1.4% 13.6%
Net interest margin 1.67% 0.29% 1.96% 1.66% 0.30% 1.96% 1.64% 0.27% 1.91%
Cost:income ratio 53.8% (1.0%) 52.8% 70.9% (3.4%) 67.5% 49.6% 0.4% 50.0%
Loan impairment rate 0.16% 0.02% 0.14% 0.10% 0.08% 0.02% 0.10% 0.05% 0.05%
============================= ========== ====== ======= ========== ====== ===== ========== ===== =====
31 December 2018 31 March 2018
======================== ========================
Previously From Total Previously From Total
reported reported
CB UK PB CB CB UK PB CB
Capital and balance sheet GBPbn GBPbn GBPbn GBPbn GBPbn GBPbn
======================================== ========== ===== ===== ========== ===== =====
Loans to customers - amortised cost 89.0 13.7 102.7 89.5 14.9 104.4
Impairment provisions (1.0) (0.3) (1.3) (1.2) (0.3) (1.5)
======================================== ========== ===== ===== ========== ===== =====
Net loans to customers - amortised cost 88.0 13.4 101.4 88.3 14.6 102.9
Funded assets 143.2 23.2 166.4 141.5 24.0 165.5
Customer deposits 95.6 38.8 134.4 93.7 37.4 131.1
Loan:deposit ratio 92% (16%) 76% 94% (14%) 80%
Risk-weighted assets 67.6 10.8 78.4 72.4 11.9 84.3
======================================== ========== ===== ===== ========== ===== =====
Note:
(1) Return on equity is based on segmental operating profit after
tax adjusted for preference dividends divided by average notional
equity based on 11% of the monthly average of segmental Risk-weighted
assets equivalents (RWAes), incorporating the effect of capital
deductions, assuming 28% tax rate. Return on equity is calculated
using profit for the period attributable to ordinary shareholders.
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END
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