FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For 05 August 2016
Commission File Number: 001-10306
 
The Royal Bank of Scotland Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X
 
Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
  ___
No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 

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

 
 
 
The Royal Bank of Scotland Group plc
Interim Results 2016
 
 
Contents
Page
 
 
Introduction
1
Highlights
3
Summary consolidated results
13
Analysis of results
15
Segment performance
26
 
 
Statutory results
60
 
 
Condensed consolidated income statement (unaudited)
60
Condensed consolidated statement of comprehensive income (unaudited)
61
Condensed consolidated balance sheet (unaudited)
62
Condensed consolidated statement of changes in equity (unaudited)
63
Condensed consolidated cash flow statement (unaudited)
65
Notes
66
 
 
Independent review report to The Royal Bank of Scotland Group plc
109
Risk factors
111
Statement of directors’ responsibilities
117
 
 
Additional information
118
 
 
Share information
118
Financial calendar
118
 
 
Forward-looking statements
119
 
 
Appendix 1 – Capital and risk management
 
Appendix 2 – Williams & Glyn
 
 
 
 
 
 
RBS\MIB\00000057\Secret
 
RBS – Interim Results 2016
 
 
Introduction
 
Presentation of information
In this document, ‘RBSG plc’ or the ‘company’ refers to The Royal Bank of Scotland Group plc, and ‘RBS’ or the ‘Group’ refers to RBSG plc and its subsidiaries.
 
Statutory results
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 (‘the Act’). The statutory accounts for the year ended 31 December 2015 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
 
RBS prepares its financial statements in accordance with IFRS as adopted by the European Union (EU). The EU has not adopted the complete text of IAS 39; it has relaxed some of the standard's hedging requirements. RBS has not taken advantage of this relaxation, therefore its financial statements are also prepared in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP).
 
Condensed consolidated financial statements
The unaudited condensed consolidated financial statements for the half year ended 30 June 2016 comprise the following sections of this document:
 
Financial information in the segmental performance section on pages 26 to 59 except for Risk-Weighted Assets (RWAs), RWAs after capital deductions (RWAes), the related metrics, Return on Equity (ROE), Adjusted Return on Equity and Employee numbers.
Statutory results on pages 60 to 108 comprising the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related notes 1 to 19.
Appendix 1 Capital and risk management except for those items indicated as not within the scope of the independent review.
 
The above sections are within the scope of the independent review performed by Ernst & Young LLP (EY). Please see the Independent review report to The Royal Bank of Scotland Group plc on page 109 for further information.
 
Non-GAAP financial measures
The results commentary in this document refers to adjusted measures of financial performance, principally operating performance before own credit adjustments, loss on redemption of own debt, strategic disposals, restructuring costs, litigation and conduct costs, to exclude items which distort period-on-period comparison. These items are excluded on the basis that management believes these are not representative of the underlying performance of the business. In addition, certain ratios including the liquidity coverage ratio, stressed outflow coverage and net stable funding ratio are presented as they are used by management for risk management purposes although they are metrics not yet required to be disclosed by a government, governmental authority or self-regulatory organisation. These measures and performance ratios derived from the reported results, are non-GAAP financial measures.
 
Further, the Group’s reportable segments are organised on a franchise basis (combinations of reportable segments). As a result, the presentation of Personal & Business Banking (PBB) combines the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI and is a non-GAAP financial measure. The presentation of Commercial & Private Banking (CPB) combines the reportable segments of Commercial Banking, Private Banking and RBS International (RBSI) and is also a non-GAAP financial measure.
 
Lastly, the presentation of cost savings against 2016 target shown within the Highlights section which excludes litigation and conduct costs, restructuring costs and the impairment of other intangible assets and operating costs of Williams & Glyn, is a non-GAAP financial measure.
 
 
RBS – Interim Results 2016
 
 
Introduction
 
Contacts
 
For analyst enquiries:
 
 
 
 
 
Richard O’Connor
Head of Investor Relations
+44 (0) 20 7672 1758
 
 
 
For media enquiries:
 
 
 
 
 
Group Media Centre
 
+44 (0) 131 523 4205
 
Analysts and investors presentation
RBS will be hosting a presentation for analysts and investors which will also be available via live webcast and audio call. The details are as follows:
 
Date:
 
Friday 5 August 2016
Time:
 
9.30 am UK time
Conference ID
 
46989713
Webcast:
 
www.rbs.com/results
Dial in details:
 
International – +44 (0) 1452 568 172
UK Free Call – 0800 694 8082
US Toll Free – 1 866 966 8024
 
There will also be a call for fixed income analysts and investors. The details are as follows:
 
Date:
 
Friday 5 August 2016
Time:
 
2.30 pm UK time
Conference ID
 
46974381
Webcast:
 
www.rbs.com/results
Dial in details:
 
International – +44 (0) 1452 568 172
UK Free Call – 0800 694 8082
US Toll Free – 1 866 966 8024
 
Available on www.rbs.com/results
 
Interim results 2016 and background slides.
Financial supplement containing income statement and balance sheet information for the nine quarters ending 30 June 2016.
Pillar 3 supplement at 30 June 2016.
 
The European Union Market Abuse Regulation EU 596/2014 requires RBS to disclose that this announcement contains Inside Information, as defined in that Regulation.
 
RBS – Interim Results 2016
 
 
Highlights
RBS reported an operating loss before tax of £274 million in H1 2016 and an attributable loss(1) of £2,045 million.
 
Across our Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and Corporate & Institutional Banking (CIB) franchises, RBS reported an adjusted operating profit(2) of £2,070 million in H1 2016 and £1,047 million in Q2 2016.
 
Adjusted return on equity across PBB, CPB and CIB was 11% for both H1 2016 and Q2 2016. Across PBB and CPB, net lending grew by 15% on an annualised basis in H1 2016.
 
Common Equity Tier 1 ratio of 14.5% remains ahead of our 13.0% target. Leverage ratio was 5.2%.
 
 
 
 
 
 
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
Key metrics and ratios
2016 
2015 
 
2016 
2016 
2015 
 
 
 
 
 
 
 
Attributable (loss)/profit (£m)
(2,045)
(179)
 
(1,077)
(968)
280 
Operating (loss)/profit (£m)
(274)
261 
 
(695)
421 
224 
Operating profit - adjusted (£m) (2)
1,156 
2,893 
 
716 
440 
1,538 
Net interest margin
2.18%
2.14%
 
2.21%
2.15%
2.13%
Cost:income ratio
98%
101%
 
117%
79%
99%
Cost:income ratio - adjusted (3,4)
72%
64%
 
67%
76%
62%
(Loss)/earnings per share from continuing operations (5)
 
 
 
 
 
 
  - basic
(17.6p)
(2.2p)
 
(9.3p)
(8.3p)
  - adjusted (3,4)
(5.5p)
18.5p
 
2.6p
(8.1p)
9.9p
Return on tangible equity (6)
(10.3%)
(0.9%)
 
(11.0%)
(9.6%)
2.7%
Return on tangible equity - adjusted (3,4.6)
(3.2%)
10.4%
 
3.2%
(9.4%)
13.5%
Average tangible equity (6)
£39,870m
£42,037m
 
£39,283m
£40,383m
£41,572m
Average number of ordinary shares
 
 
 
 
 
 
  outstanding during the period (millions)
11,639 
11,481 
 
11,673 
11,606 
11,511 
 
 
 
 
 
 
 
PBB, CPB & CIB
 
 
 
 
 
 
Total income - adjusted (£m) (3)
5,801 
5,898 
 
2,986 
2,815 
2,915 
Operating profit - adjusted (£m) (2)
2,070 
2,439 
 
1,047 
1,023 
1,221 
Return on tangible equity - adjusted (3,4,6)
10.9%
13.3%
 
11.0%
10.9%
13.5%
 
30 June
31 March
31 December
Balance sheet related key metrics and ratios
2016 
2016 
2015 
 
 
 
 
Tangible net asset value per ordinary share (6)
345p
351p
352p
Loan:deposit ratio (7,8)
92%
90%
89%
Short-term wholesale funding (7,9)
£14.7bn
£16.6bn
£17.2bn
Wholesale funding (7,9)
£55.1bn
£58.9bn
£58.7bn
Liquidity portfolio
£153bn
£157bn
£156bn
Liquidity coverage ratio (10)
116%
121%
136%
Net stable funding ratio (11)
119%
119%
121%
Common Equity Tier 1 ratio
14.5%
14.6%
15.5%
Risk-weighted assets
£245.2bn
£249.5bn
£242.6bn
Leverage ratio (12)
5.2%
5.3%
5.6%
Tangible equity (6)
£40,541m
£40,892m
£40,943m
Number of ordinary shares in issue (millions) (13)
11,755 
11,661 
11,625 
 
Notes:
(1)
Attributable to ordinary shareholders, after payment of the £1,193 million final Dividend Access Share dividend.
(2)
Operating profit before tax excluding own credit adjustments, loss on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
(3)
Excluding own credit adjustments, loss on redemption of own debt and strategic disposals.
(4)
Excluding restructuring costs and litigation and conduct costs.
(5)
Refer to Note 10 on page 73 for further details.
(6)
Tangible equity is equity attributable to ordinary shareholders less intangible assets.
(7)
Excludes repurchase agreements and stock lending.
(8)
Includes disposal groups.
(9)
Excludes derivative collateral.
(10)
On 1 October 2015 the LCR became the PRA’s primary regulatory liquidity standard; UK banks are required to meet a minimum standard of 80% initially, rising to 100% by 1 January 2018. The published LCR excludes Pillar 2 add-ons. RBS calculates the LCR using its own interpretation of the EU LCR Delegated Act, which may change over time and may not be fully comparable with that of other institutions.
(11)
NSFR for all periods have been calculated using RBS’s current interpretations of the revised BCBS guidance on NSFR issued in late 2014. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS’s ratio may not be comparable with those of other financial institutions.
(12)
Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.
(13)
Includes 41 million treasury shares (31 March 2016 - 36 million; 31 December 2015 - 26 million).
 
 
 
RBS – Interim Results 2016
 
 
 
 
H1 2016 Highlights
RBS reported an attributable loss of £2,045 million for H1 2016, which included the final Dividend Access Share (DAS) dividend of £1,193 million in Q1 2016 and £1,315 million of litigation and conduct costs. These included provisions in respect of PPI, following the publication of the FCA Consultation Paper on 2 August 2016, the UK 2008 rights issue shareholder litigation, an industry-wide examination of tracker mortgages in Ulster Bank RoI and other matters in Q2 2016.
H1 2016 operating loss was £274 million compared with an operating profit of £261 million in H1 2015.
Adjusted operating profit of £1,156 million was £1,737 million lower than H1 2015, principally due to increased losses in Capital Resolution, £1,087 million, and increased IFRS volatility losses(1), £668 million compared with a gain of £80 million in H1 2015. Across our PBB, CPB and CIB franchises, adjusted operating profit of £2,070 million was £369 million, or 15%, lower than H1 2015.
H1 2016 income across PBB and CPB was broadly stable compared with H1 2015 whilst CIB adjusted income of £681 million was £68 million, or 9%, lower than H1 2015, adjusting for transfers(2).
Adjusted operating expenses reduced by £547 million compared with H1 2015, and included a £227 million VAT recovery following agreement with HMRC on recovery rates in previous years. Excluding expenses associated with Williams & Glyn, write-down of intangible assets and the VAT recovery, adjusted operating expenses reduced by £404 million.
Adjusted cost:income ratio was 72% compared with 64% in H1 2015 as the reduction in adjusted operating expenses has been more than offset by lower adjusted income, principally relating to Capital Resolution and IFRS volatility losses.
Risk elements in lending (REIL) as a percentage of gross customer loans was 3.5%, 130 basis points lower than 30 June 2015 and 10 basis points lower than 31 March 2016.
In H1 2016, PBB and CPB net loans and advances grew by 15% on an annualised basis with strong growth across both residential mortgage and commercial lending.
 
 
Q2 2016 Highlights
Q2 2016 operating loss of £695 million compared with an operating profit of £421 million in Q1 2016 and £224 million in Q2 2015.
Adjusted operating profit of £716 million was £276 million, or 63%, higher than Q1 2016. A £318 million reduction in adjusted operating expenses, including the benefit of a £227 million VAT recovery, and a £37 million reduction in impairments have been partially offset by a £79 million, or 3%, fall in adjusted income. Across PBB, CPB and CIB, adjusted income increased by £171 million, or 6%, to £2,986 million compared with Q1 2016.
Across our PBB, CPB and CIB franchises, RBS made an adjusted operating profit of £1,047 million in Q2 2016, £24 million, or 2%, higher than Q1 2016. Adjusted return on equity was 11%, in line with Q1 2016.
RBS has made progress on customer Net Promoter Score (NPS) with improvements across NatWest Personal, Royal Bank Business and Commercial customers in the last year.
Highlights
 
RBS – Interim Results 2016
 
 
Highlights
 
H1 2016 Performance Summary
RBS Performance
RBS reported an attributable loss of £2,045 million, compared with a loss of £179 million in H1 2015, which included the final DAS dividend of £1,193 million in Q1 2016 and £1,315 million of litigation and conduct costs. These included provisions in respect of PPI, the UK 2008 rights issue shareholder litigation, an industry-wide examination of tracker mortgages in Ulster Bank RoI and other matters in Q2 2016.
Operating loss was £274 million in H1 2016 compared with an operating profit of £261 million in H1 2015. Adjusted operating profit of £1,156 million was £1,737 million, or 60%, lower than H1 2015.
Net interest margin (NIM) of 2.18% for H1 2016 was 4 basis points higher than H1 2015 as the benefit associated with a reduction in low yielding assets more than offset modest asset margin pressure and mix impacts across PBB and CPB.
PBB, CPB and CIB Performance
Across our PBB, CPB and CIB franchises, an adjusted operating profit of £2,070 million, was £369 million, or 15%, lower than H1 2015.
 
      ○
UK Personal & Business Banking (UK PBB) adjusted operating profit(3) of £1,065 million was £123 million, or 10%, lower than H1 2015 principally driven by an £83 million, or 6%, increase in adjusted operating expenses reflecting a higher FSCS levy and increased technology investment. Net loans and advances grew by £13.1 billion, or 12%, principally driven by continued strong mortgage growth and we continue to see positive momentum across business and personal unsecured lending.
 
      ○
Ulster Bank RoI adjusted operating profit(3) of £122 million was £25 million, or 17%, lower than H1 2015 principally reflecting a reduced level of impairment releases.
 
      ○
Commercial Banking adjusted operating profit(3) of £663 million was £160 million, or 19%, lower than H1 2015. Adjusted operating expenses, excluding transfers(4), increased by £75 million, or 9%, reflecting intangible asset write downs and increased investment spend, and a single name charge in respect of the Oil & Gas portfolio drove a £77 million increase in impairments. Commercial Banking net loans and advances increased by £6.7 billion, or 8%, adjusting for transfers (4).
 
      ○
Private Banking adjusted operating profit(3) of £73 million was £16 million, or 18%, lower as the business continues to invest in its infrastructure, whilst RBS International (RBSI) adjusted operating profit(3) was stable at £106 million.
 
      ○
CIB adjusted income of £681 million was £68 million, or 9%, lower than H1 2015, excluding transfers(2) with adjusted operating profit(3) of £41 million, £46 million lower than H1 2015. Adjusted expenses reduced by 11%, excluding transfers, as CIB moves towards a lower cost base.
 
 
Capital Resolution & Central items
Capital Resolution reported an adjusted operating loss(3) of £983 million, compared with an adjusted operating profit of £104 million in H1 2015; H1 2016 included a net impairment charge of £263 million, primarily related to the Shipping portfolio, compared with a release of £319 million in H1 2015. An additional £220 million valuation reserve was recorded in Q2 2016 following the EU Referendum. RWAs reduced by £26.3 billion from H1 2015 to £42.3 billion.
Central items adjusted operating loss(3) of £128 million compared with a profit of £87 million in H1 2015. H1 2016 included a £668 million charge in respect of IFRS volatility (H1 2015 - £80 million gain), a £227 million VAT recovery and an FX gain of £253 million principally reflecting the significant weakening of sterling against the US dollar following the EU Referendum.
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Q2 2016 Performance Summary
 
RBS Performance
An attributable loss of £1,077 million was reported in Q2 2016 compared with a profit of £280 million in Q2 2015 and a loss of £968 million in Q1 2016, which included the final DAS dividend payment of £1,193 million.
An operating loss of £695 million in Q2 2016 compared with an operating profit of £224 million in Q2 2015 and £421 million in Q1 2016. Adjusted operating profit of £716 million was £822 million lower than Q2 2015 but was £276 million higher than Q1 2016.
Restructuring costs were £392 million in the quarter, an increase of £154 million compared with Q1 2016, and included £187 million in respect of Williams & Glyn. Litigation and conduct costs of £1,284 million in Q2 2016 compared with £31 million in Q1 2016, and included an additional PPI provision, a provision in respect of the UK 2008 rights issue shareholder litigation, a provision in Ulster Bank RoI principally in respect of an industry-wide examination of tracker mortgages and various other matters.
The Q2 2016 results included a net strategic disposal gain of £201 million comprising: a £246 million gain on disposal of RBS’s stake in Visa Europe and a £45 million loss associated with the sale of our Russian subsidiary.
A loss of £67 million was recognised in Q2 2016 in respect of a cash tender of certain US dollar, sterling and euro senior debt securities. The tender offers were part of the on-going transition to a holding company capital and term funding model in line with regulatory requirements and included securities that RBS considers non-compliant for ‘Minimum Requirement for Own Funds and Eligible Liabilities’ (MREL) purposes. In addition, RBS recognised a loss of £63 million as a result of the redemption of three RBS NV trust preferred securities as part of simplification of the RBS NV balance sheet and management of our legacy capital securities.
Q2 2016 NIM of 2.21% was 6 basis points higher than Q1 2016. NIM across our PBB and CPB franchises was 2.37% for Q2 2016 compared with 2.38% in Q1 2016.
Tangible net asset value (TNAV) was 345p per ordinary share at 30 June 2016, a 6p reduction compared with 31 March 2016. The reduction was driven by the attributable loss for the quarter, 8p, a reduction associated with the elimination of the surplus on The Royal Bank of Scotland Group Pension Fund recognised at 31 December 2015 as a result of the revised schedule of contributions, 4p, and the impact of share issuance and other movements, 3p. Partially offsetting, gains were recognised in foreign exchange reserves, 4p, reflecting the weakening of sterling, and cash flow hedging reserves, 5p, as swap rates decreased.
 
 
PBB, CPB and CIB Performance
Across our PBB, CPB and CIB franchises, an adjusted operating profit of £1,047 million, was £174 million lower than Q2 2015 but was £24 million higher than Q1 2016.
 
UK PBB adjusted operating profit(3) of £534 million was £69 million lower than Q2 2015, as a higher FSCS levy charge and increased technology investment drove a £64 million increase in adjusted operating expenses, and was broadly in line with Q1 2016.
 
Ulster Bank RoI adjusted operating profit(3) reduced by £27 million, compared with Q2 2015, to £58 million, principally reflecting reduced impairment releases, and was £6 million lower than Q1 2016.
 
Commercial Banking adjusted operating profit(3) of £260 million was £188 million lower than Q2 2015 and £143 million lower than Q1 2016. Adjusted operating expenses increased by £61 million to £497 million compared with Q1 2016, reflecting a write down of intangible assets and increased investment spend, and a single name charge in the Oil & Gas portfolio drove a £75 million increase in impairments.
 
Private Banking adjusted operating profit(3) of £47 million was in line with Q2 2015 but was £21 million higher than Q1 2016. RBSI adjusted operating profit(3) of £53 million was in line with both Q2 2015 and Q1 2016.
 
 
RBS – Interim Results 2016
 
 
Highlights
 
 
CIB made an adjusted operating profit(3) of £95 million in Q2 2016 compared with losses of £13 million in Q2 2015 and £54 million in Q1 2016. CIB adjusted income of £404 million was £97 million higher than Q2 2015, excluding transfers(2), and was £127 million higher than Q1 2016.
 
 
Capital Resolution & Central items
Capital Resolution adjusted operating loss(3) of £606 million was £567 million higher than Q2 2015 and was £229 million up on Q1 2016, principally reflecting an additional £220 million valuation reserve following the EU Referendum. RWAs reduced by £5.3 billion in the quarter to £42.3 billion.
Central items adjusted operating profit(3) of £179 million compared with a profit of £242 million in Q2 2015 and a loss of £307 million in Q1 2016. The quarter included a £227 million VAT recovery, a £201 million FX gain as the US dollar strengthened against sterling and a £312 million charge in respect of IFRS volatility (Q2 2015 - £204 million; Q1 2016 - £356 million).
 
Progress on 2016 targets
Whilst RBS remains committed to achieving its priority targets for 2016, we recognise that market conditions have become more uncertain following the EU Referendum result and we have updated our guidance as follows:
 
Strategy goal
2016 target
H1 2016 Progress
Strength and sustainability
Maintain Bank CET1 ratio of 13%
CET1 ratio of 14.5%
£2 billion AT1 issuance
Continue to plan to issue in 2016, subject to market conditions
Capital Resolution RWAs around £30 billion
RWAs down £6.7 billion to £42.3 billion in H1 2016. Following the EU Referendum, and the resultant significant weakening of sterling, we now anticipate that RWAs will be around £30 - £35 billion at the end of 2016
Customer experience
Narrow the gap to No.1 in NPS in every primary UK brand
Year on year Royal Bank of Scotland Business (Scotland) has narrowed the gap. NatWest Personal and RBSG Commercial have seen improvements in NPS
Simplifying the bank
Reduce operating expenses by £800 million
Operating expenses down £404 million(5) and we remain on track to achieve our target
Supporting growth
Net 4% growth in PBB and CPB customer loans
Net lending in PBB and CPB up 15% on an annualised basis in the half year
Employee engagement
Raise employee engagement to within two points of the GFS norm
Reviewed annually during Q3
 
Notes:
(1)
IFRS volatility arises from the changes to fair value of hedges of loans which do not qualify for hedge accounting under IFRS.
(2)
CIB's results include the following financials for businesses subsequently transferred to Commercial Banking: total income of £78 million for H1 2015 (Q2 2015 - £36 million) and expenses of £23 million for H1 2015 (Q2 2015 - £11 million).
(3)
For unadjusted operating profit and expenses see segment performance on pages 26 to 30.
(4)
The portfolio transfers included operating expenses of £50 million for H1 2016 (Q2 2016 - £26 million) and net loans and advances to customers of £4.1 billion at 30 June 2016.
(5)
Excluding litigation and conduct costs, restructuring costs, write down of other intangible assets, the operating costs of Williams & Glyn and the VAT recovery.
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Building a stronger RBS
RBS is progressing with its plan to build a strong, simple, fair bank for customers and shareholders.
CET1 remains ahead of our 13% target at 14.5%. The 10 basis point reduction in the quarter was driven by the attributable loss partially offset by the reduction in RWAs. RWAs decreased by £4.3 billion primarily reflecting disposals and run-off in Capital Resolution and a £3.9 billion reduction associated with the removal of Citizens operational risk RWAs following regulatory approval. Partially offsetting, the weakening of sterling, principally following the EU Referendum, increased RWAs by £4.4 billion. Leverage ratio decreased by 10 basis points to 5.2%.
Risk elements in lending (REIL) of £11.8 billion were 3.5% of gross customer loans, down from 3.6% at 31 March 2016 and 4.8% at 30 June 2015.
RBS continues to reposition and strengthen its balance sheet. In H1 2016, we completed two senior debt issuances (€1.5 billion seven year 2.5% notes and $1.5 billion ten year 4.8% notes) which are eligible to meet RBS’s MREL. In addition, we redeemed £2.3 billion of legacy US dollar, sterling and euro senior debt securities, including some that RBS considers non-compliant for MREL purposes.
In March 2016 RBS made a £4.2 billion payment into The Royal Bank of Scotland Group Pension Fund, being an accelerated payment of existing committed future contributions, and paid the final Dividend Access Share dividend of £1,193 million, actions that have been taken to help the long term resilience and normalise the ownership structure of the Bank.
During H1 2016 we completed the transfer of the Coutts International businesses in Asia and the Middle East to Union Bancaire Privée, the final milestone in the sale of our International Private Bank. In addition, we completed the sale of our Russian subsidiary.
We continue to work on our ring fencing plans, which were submitted to the PRA in January 2016, and target operational compliance by 1 January 2019. Legal entity restructuring, including the establishment of a Ring-Fenced Bank Holding company, will begin in H2 2016 details of which will be provided in H2. We are actively liaising with key stakeholders including the regulators and employee representatives, and will engage with the credit rating agencies.
 
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Building the number one bank for customer service, trust and advocacy in the UK
RBS continued to deliver strong support for both household and business customers. Within UK PBB, gross new mortgage lending was £14.7 billion, representing a market share of approximately 12% compared with a quarter end stock share of 8.6%. We now have 1,001 mortgage advisors supporting our customers, an increase of 15% since H1 2015. We continue to see positive momentum across business banking and personal unsecured lending. Net lending in Commercial Banking increased by £7.9 billion in H1 2016, 17% growth on an annualised basis.
The Reward account continues to show positive momentum and now has 815,000 customer accounts compared with 202,000 as at 31 December 2015.
We continue to make better use of our digital channels to make it simpler to serve our customers and for them to do business with us. NatWest customers can now apply for personal loans or credit cards via the mobile app. We now have 4.1 million active users of our personal mobile app, up 25% in the last year, with 69,000 unsecured products applied for via the mobile app in H1 2016. We became the first UK based bank to launch Android fingerprint authentication, with 37% of app logins now biometric.
RBS became the first UK Bank to be accredited by the Royal National Institute for Blind People for making the voiceover mode simpler and easier to use for our visually impaired customers. In addition, we launched a new service for British Sign Language (BSL) customers, making it possible to instantly chat with an advisor through a BSL interpreter.
RBS continues to support UK business growth through the launch of three new business accelerator hubs in H1 2016, bringing the total to nine, with a further three more opening in H2 2016. This included the opening of an Entrepreneurial Centre in our Edinburgh headquarters. In addition, NatWest launched a £1 billion lending fund to support small businesses.
RBS is one of only two banks to achieve formal recognition from the Chartered Banker Professional Standards Board for excellence in monitoring the Foundation Standard for Professional Bankers. More than 94% of the in-scope employee population achieved this standard in 2015.
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Customer
RBS remains committed to achieving its target of being number one bank for customer service, trust and advocacy by 2020.
 
We use independent surveys to measure our customers’ experience and track our progress against our goal in each of our markets.
 
Net Promoter Score (NPS)
Customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating ‘extremely likely’ and 0 indicating ‘not at all likely’. Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. NPS is established by subtracting the proportion of detractors from the proportion of promoters.
 
The table below lists all of the businesses for which we have an NPS for 2016. Year-on-year, NatWest Personal Banking, Royal Bank of Scotland Business Banking and Commercial Banking have improved. In Scotland, we have narrowed the gap to number one in Business Banking.
 
In recent years, the bank has launched a number of initiatives to make it simpler, fairer and easier to do business, and it continues to deliver on the commitments that it made to its customers in 2014.
 
 
 
Q2 2015
Q1 2016
Q2 2016
Year end 2016 target
Personal Banking
NatWest (England & Wales)(1)
8
13
12
15
Royal Bank of Scotland (Scotland)(1)
-10
-6
-7
-5
Ulster Bank (Northern Ireland)(2)
-11
-14
-16
-3
Ulster Bank (Republic of Ireland)(2)
-14
-12
-11
-10
Business Banking
NatWest (England & Wales)(3)
4
9
4
13
Royal Bank of Scotland (Scotland)(3)
-17
-7
-4
2
Ulster Bank Business & Commercial
Ulster Bank (Northern Ireland) (4)
n/a
-10
3
-4
Commercial Banking(5)
10
15
18
17
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Customer Trust
We also use independent experts to measure our customers’ trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).
 
Customer trust in RBS has continued to improve and is at its highest in two years. NatWest has not changed since last quarter. Both are currently on track to meet the 2016 year end target.
 
 
 
Q2 2015
Q1 2016
Q2 2016
Year end 2016 target
Customer trust(6)
NatWest (England & Wales)
48%
48%
48%
51%
Royal Bank of Scotland (Scotland)
-2%
21%
23%
26%
 
Notes:
(1)
Source: GfK FRS 6 month rolling data. Latest base sizes: NatWest (England & Wales) (3387) Royal Bank of Scotland (Scotland) (527). Based on the question: "How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?“
(2)
Source: Coyne Research 12 month rolling data. Latest base sizes: Ulster Bank NI (372) Ulster Bank RoI (332) Question: “Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely”.
(3)
Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with an annual turnover up to £2 million. Quarterly rolling data. Latest base sizes: NatWest England & Wales (1361), RBS Scotland (438). Weighted by region and turnover to be representative of businesses in England & Wales/Scotland, 4 quarter rolling data.
(4)
Source: Charterhouse Research Business Banking Survey (NI). Latest base size: Ulster (362) Weighted by turnover and industry sector to be representative of businesses in Northern Ireland, 4 quarter rolling data.
In 2016 we switched the source of advocacy measurement for Ulster Bank Corporate NI to the Charterhouse Business Banking Study. Charterhouse is a recognised, independent syndicate study that provides more frequent reporting of NPS as well as additional diagnostic customer feedback to help us improve the customer experience.
Ulster Bank Business & Commercial RoI reports annually.
(5)
Source: Charterhouse Research Business Banking Survey (GB), based on interviews with businesses with annual turnover between £2 million and £1 billion. Latest base size: RBSG Great Britain (972). Weighted by region and turnover to be representative of businesses in Great Britain, 4 quarter rolling data.
(6)
Source: Populus. Latest quarter’s data. Measured as a net of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: NatWest, England & Wales (852), RBS Scotland (185).
 
 
 
RBS – Interim Results 2016
 
 
Highlights
 
Williams & Glyn
 
On 28 April 2016 we announced that there was a significant risk that the separation and divestment of Williams & Glyn will not be achieved by 31 December 2017. RBS remains committed to meeting its State Aid obligations. Work has continued to explore alternative means to achieve separation and divestment and RBS has had positive discussions with a number of interested parties concerning an alternative transaction related to substantially all of the business previously described as Williams & Glyn. These discussions are at a preliminary stage and may or may not lead to a viable transaction.
 
Due to the complexities of Williams & Glyn's separation, whilst good progress has been made on the programme to create a cloned banking platform, the Board concluded that the risks and costs inherent in the programme are such that it would not be prudent to continue with this programme.  RBS will instead prioritise exploring alternative means to achieve divestment.
 
Outlook
The outcome of the UK’s EU Referendum has created considerable uncertainty in our core market and we continue to assess all its implications. In the current low rate and low growth environment, achieving our longer term cost:income ratio and return targets by 2019 is likely to be more challenging.
We expect PBB and CPB income to be broadly stable in 2016 compared with 2015 as strong planned balance sheet growth, particularly in mortgages but also in core commercial lending, is balanced by headwinds from the reduction in interchange fees, low interest rates and the uncertain macroeconomic environment. In H1 2016 income across PBB and CPB was broadly stable. CIB income recovered in Q2 2016, following a difficult Q1 2016, and we now expect income to be stable in 2016 compared with 2015.
RBS remains on track to achieve an £800 million cost reduction in 2016. We retain our expectation that cost reduction will exceed any income erosion across our combined PBB, CPB and CIB businesses.
The impairment charge taken during H1 largely related to sector specific issues particularly in the Oil & Gas and Capital Resolution Shipping portfolios. There is a continuing risk of large single name/sector driven events across our portfolios given the uncertain macroeconomic environment. The outcome of the UK’s EU Referendum has increased the level of uncertainty however it is too early at this point to quantify the impact of any potential credit losses that may result.
Restructuring costs are expected to remain high in 2016, totalling over £1 billion. The H1 2016 restructuring charge was £630 million, of which £345 million related to Williams & Glyn.
We expect Capital Resolution disposal losses of approximately £1.5 billion, and we anticipate that we will incur most of the remaining losses in 2016 (2015 - £367 million). Losses of £368 million in H1 2016 include an impairment charge of £264 million in relation to the Shipping portfolio. Following the EU Referendum and the resultant significant weakening of sterling, we now anticipate that Capital Resolution RWAs will be around £30 - £35 billion by the end of 2016.
We continue to deal with a range of uncertainties in the external environment and we will also have to manage conduct-related investigations and litigation, including US RMBS, throughout 2016, and substantial related incremental provisions may be recognised during the remainder of the year.
 
 
RBS – Interim Results 2016
 
 
Summary consolidated income statement for the period ended 30 June 2016
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
 
2016
2015*
 
2016
2016
2015*
 
£m
£m
 
£m
£m
£m
Net interest income
4,333 
4,418 
 
2,177 
2,156 
2,215 
 
 
 
 
 
 
 
Own credit adjustments
450 
288 
 
194 
256 
168 
Loss on redemption of own debt
(130)
 
(130)
Strategic disposals
195 
(135)
 
201 
(6)
Other operating income
1,216 
2,685 
 
558 
658 
1,354 
 
 
 
 
 
 
 
Non-interest income
1,731 
2,838 
 
823 
908 
1,522 
 
 
 
 
 
 
 
Total income
6,064 
7,256 
 
3,000 
3,064 
3,737 
 
 
 
 
 
 
 
Restructuring costs
(630)
(1,470)
 
(392)
(238)
(1,023)
Litigation and conduct costs
(1,315)
(1,315)
 
(1,284)
(31)
(459)
Other costs
(3,984)
(4,531)
 
(1,833)
(2,151)
(2,223)
 
 
 
 
 
 
 
Operating expenses
(5,929)
(7,316)
 
(3,509)
(2,420)
(3,705)
 
 
 
 
 
 
 
Profit/(loss) before impairment (losses)/releases
135 
(60)
 
(509)
644 
32 
Impairment (losses)/releases
(409)
321 
 
(186)
(223)
192 
 
 
 
 
 
 
 
Operating (loss)/profit before tax
(274)
261 
 
(695)
421 
224 
Tax charge
(340)
(287)
 
(260)
(80)
(97)
 
 
 
 
 
 
 
(Loss)/profit from continuing operations
(614)
(26)
 
(955)
341 
127 
 
 
 
 
 
 
 
Profit from discontinued operations, net of tax
358 
 
674 
 
 
 
 
 
 
 
(Loss)/profit for the period
(614)
332 
 
(955)
341 
801 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Non-controlling interests
30 
344 
 
22 
428 
Other owners
208 
167 
 
114 
94 
93 
Dividend access share
1,193 
 
1,193 
Ordinary shareholders
(2,045)
(179)
 
(1,077)
(968)
280 
 
 
 
 
 
 
 
Memo:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income - adjusted (1)
5,549 
7,103 
 
2,735 
2,814 
3,569 
Operating expenses - adjusted (2)
(3,984)
(4,531)
 
(1,833)
(2,151)
(2,223)
Operating profit - adjusted (1,2)
1,156 
2,893 
 
716 
440 
1,538 
 
*Restated – refer to page 66 for further details
 
Notes:
(1)
Excluding own credit adjustments, loss on redemption of own debt and strategic disposals.
(2)
Excluding restructuring costs and litigation and conduct costs.
 
Details of other comprehensive income are provided on page 61.
 
RBS – Interim Results 2016
 
 
Summary consolidated balance sheet as at 30 June 2016
 
 
30 June 
31 March 
31 December 
 
2016 
2016 
2015 
 
£m 
£m 
£m 
 
 
 
 
Cash and balances at central banks
65,307 
72,083 
79,404 
Net loans and advances to banks (1)
21,763 
19,295 
18,361 
Net loans and advances to customers (1)
326,503 
317,088 
306,334 
Reverse repurchase agreements and stock borrowing
45,778 
42,356 
39,843 
Debt securities and equity shares
84,807 
88,877 
83,458 
Assets of disposal groups (2)
396 
3,405 
3,486 
Other assets
31,047 
27,609 
22,008 
 
 
 
 
Funded assets
575,601 
570,713 
552,894 
Derivatives
326,023 
312,217 
262,514 
 
 
 
 
Total assets
901,624 
882,930 
815,408 
 
 
 
 
Bank deposits (3)
31,377 
31,774 
28,030 
Customer deposits (3)
355,719 
352,344 
343,186 
Repurchase agreements and stock lending
40,881 
39,030 
37,378 
Debt securities in issue
27,148 
29,576 
31,150 
Subordinated liabilities
20,113 
20,870 
19,847 
Derivatives
322,390 
304,789 
254,705 
Liabilities of disposal groups (2)
252 
2,816 
2,980 
Other liabilities
50,017 
47,566 
43,985 
 
 
 
 
Total liabilities
847,897 
828,765 
761,261 
Non-controlling interests
820 
788 
716 
Owners’ equity
52,907 
53,377 
53,431 
 
 
 
 
Total liabilities and equity
901,624 
882,930 
815,408 
 
Notes:
(1)
Excludes reverse repurchase agreements and stock borrowing.
(2)
Primarily international private banking business at 31 March 2016 and 31 December 2015.
(3)
Excludes repurchase agreements and stock lending.
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
2016
2015
 
2016
2016
2015
Net interest income
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Net interest income (1)
4,333 
4,418 
 
2,177 
2,156 
2,215 
RBS
 
 
 
 
 
 
 
 
 
 
 
 
 
  - UK Personal & Business Banking
2,109 
2,067 
 
1,090 
1,019 
1,035 
  - Ulster Bank RoI
198 
190 
 
93 
105 
95 
  - Commercial Banking
1,067 
981 
 
531 
536 
499 
  - Private Banking
226 
219 
 
113 
113 
109 
  - RBS International
151 
152 
 
76 
75 
76 
  - Corporate & Institutional Banking
43 
30 
 
24 
19 
16 
  - Capital Resolution
168 
281 
 
82 
86 
124 
  - Williams & Glyn
324 
326 
 
162 
162 
163 
  - Central items & other
47 
172 
 
41 
98 
 
 
 
 
 
 
 
Average interest-earning assets (IEA)
 
 
 
 
 
 
RBS
399,751 
416,319 
 
396,118 
403,384 
417,248 
 
 
 
 
 
 
 
  - UK Personal & Business Banking
138,192 
128,485 
 
140,591 
135,793 
128,957 
  - Ulster Bank RoI
24,233 
23,136 
 
24,288 
24,178 
23,029 
  - Commercial Banking
117,312 
104,067 
 
119,768 
114,855 
104,648 
  - Private Banking
16,441 
15,716 
 
16,622 
16,259 
15,855 
  - RBS International
21,436 
20,527 
 
21,798 
21,075 
20,416 
  - Corporate & Institutional Banking
11,745 
18,702 
 
11,923 
11,568 
23,128 
  - Capital Resolution
29,962 
75,727 
 
29,157 
30,767 
68,544 
  - Williams & Glyn
23,764 
22,703 
 
24,172 
23,356 
22,769 
  - Central items & other
16,666 
7,256 
 
7,799 
25,533 
9,902 
 
 
 
 
 
 
 
Yields, spreads and margins of the banking business
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross yield on interest-earning assets of the banking business (2)
2.85%
2.96%
 
2.87%
2.82%
2.91%
Cost of interest-bearing liabilities of banking business
(1.00%)
(1.18%)
 
(1.00%)
(1.01%)
(1.14%)
 
 
 
 
 
 
 
Interest spread of banking business (3)
1.85%
1.78%
 
1.87%
1.81%
1.77%
Benefit from interest-free funds
0.33%
0.36%
 
0.34%
0.34%
0.36%
 
 
 
 
 
 
 
Net interest margin (1,4)
 
 
 
 
 
 
RBS
2.18%
2.14%
 
2.21%
2.15%
2.13%
 
 
 
 
 
 
 
  - UK Personal & Business Banking (5)
3.07%
3.24%
 
3.12%
3.02%
3.22%
  - Ulster Bank RoI (5)
1.64%
1.66%
 
1.54%
1.75%
1.65%
  - Commercial Banking (5)
1.83%
1.90%
 
1.78%
1.88%
1.91%
  - Private Banking (5)
2.76%
2.81%
 
2.73%
2.80%
2.76%
  - RBS International (5)
1.42%
1.49%
 
1.40%
1.43%
1.49%
  - Corporate & Institutional Banking
0.74%
0.32%
 
0.81%
0.66%
0.28%
  - Capital Resolution
1.13%
0.75%
 
1.13%
1.12%
0.73%
  - Williams & Glyn
2.74%
2.90%
 
2.70%
2.79%
2.87%
 
 
 
 
 
 
 
Average interest rates
 
 
 
 
 
 
 
 
 
 
 
 
 
Base rate
0.50 
0.50 
 
0.50 
0.50 
0.50 
London inter-bank three month offered rates
 
 
 
 
 
 
  - Sterling
0.59 
0.57 
 
0.58 
0.59 
0.57 
  - Eurodollar
0.63 
0.27 
 
0.64 
0.62 
0.28 
  - Euro
(0.22)
0.02 
 
(0.26)
(0.19)
(0.01)
 
 
 
 
 
 
 
For notes to this table refer to next page.
 
 
 
 
 
 
 
 
RBS – Interim Results 2016
 
 
 
Analysis of results
 
 
 
 
 
 
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
 
2016
2015
 
2016
2016
2015
 
%
%
 
%
%
%
 
 
 
 
 
 
 
Third party customer rates (6)
 
 
 
 
 
 
Third party customer asset rate
 
 
 
 
 
 
  - UK Personal & Business Banking
3.96 
4.19 
 
3.96 
3.95 
4.18 
  - Ulster Bank RoI (7)
2.20 
2.31 
 
2.07 
2.33 
2.34 
  - Commercial Banking
2.85 
2.97 
 
2.82 
2.87 
2.96 
  - Private Banking
3.00 
3.19 
 
2.97 
3.01 
3.19 
  - RBS International
3.14 
3.08 
 
3.02 
3.29 
3.01 
Third party customer funding rate
 
 
 
 
 
 
  - UK Personal & Business Banking
(0.54)
(0.69)
 
(0.46)
(0.62)
(0.67)
  - Ulster Bank RoI (7)
(0.56)
(0.97)
 
(0.53)
(0.59)
(0.90)
  - Commercial Banking
(0.36)
(0.39)
 
(0.36)
(0.35)
(0.31)
  - Private Banking
(0.22)
(0.27)
 
(0.20)
(0.23)
(0.25)
  - RBS International
(0.18)
(0.38)
 
(0.13)
(0.24)
(0.38)
 
Notes:
(1)
For the purpose of net interest margin (NIM) calculations, no increase (H1 2015 - £8 million; Q2 2016 - nil; Q1 2016 - nil; Q2 2015 - £3 million) was made in respect of interest payable on financial liabilities designated as at fair value through profit or loss. Related average interest-earning assets and average interest-bearing liabilities have also been adjusted.
(2)
Gross yield is the interest earned on average interest-earning assets as a percentage of average interest-earning assets.
(3)
Interest spread is the difference between the gross yield and interest paid on average interest-bearing liabilities as a percentage of average interest-bearing liabilities.
(4)
Net interest margin is net interest income as a percentage of average interest-earning assets.
(5)
PBB NIM was 2.86% (H1 2015 - 3.00%; Q2 2016 - 2.89%; Q1 2016 - 2.83%; Q2 2015 - 2.98%); CPB NIM was 1.87% (H1 2015 - 1.94%; Q2 2016 - 1.83%;
Q1 2016 - 1.91%; Q2 2015 - 1.95%).
(6)
Net interest margin includes Treasury allocations and interest on intercompany borrowings, which are excluded from third party customer rates.
(7)
Ulster Bank Ireland DAC manages its funding and liquidity requirements locally. Its liquid asset portfolios and non-customer related funding sources are included within its net interest margin, but excluded from its third party asset and liability rates.
 
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
 
Half year ended
 
Half year ended
 
30 June 2016
 
30 June 2015*
 
Average
 
 
 
Average
 
 
 
balance
Interest
Rate
 
balance
Interest
Rate
Average balance sheet
£m
£m
%
 
£m
£m
%
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Loans and advances to banks
66,179 
115 
0.35 
 
75,199 
197 
0.53 
Loans and advances to customers
287,575 
5,364 
3.75 
 
304,857 
5,771 
3.82 
Debt securities
45,997 
177 
0.77 
 
36,263 
139 
0.77 
 
 
 
 
 
 
 
 
Interest-earning assets
 
 
 
 
 
 
 
  - banking business (1,2)
399,751 
5,656 
2.85 
 
416,319 
6,107 
2.96 
  - trading business (3)
132,839 
 
 
 
151,588 
 
 
 
 
 
 
 
 
 
 
Non-interest earning assets
338,903 
 
 
 
493,066 
 
 
 
 
 
 
 
 
 
 
Total assets
871,493 
 
 
 
1,060,973 
 
 
 
 
 
 
 
 
 
 
Memo: Funded assets
535,848 
 
 
 
701,616 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Deposits by banks
4,437 
12 
0.54 
 
6,806 
25 
0.74 
Customer accounts
237,126 
575 
0.49 
 
243,601 
758 
0.63 
Debt securities in issue
21,742 
298 
2.76 
 
34,014 
420 
2.49 
Subordinated liabilities
19,837 
442 
4.48 
 
20,730 
442 
4.30 
Internal funding of trading business
(17,508)
(4)
0.05 
 
(15,505)
52 
(0.68)
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
  - banking business (1,2)
265,634 
1,323 
1.00 
 
289,646 
1,697 
1.18 
  - trading business (3)
141,714 
 
 
 
159,632 
 
 
 
 
 
 
 
 
 
 
Non-interest-bearing liabilities
 
 
 
 
 
 
 
  - deposits(4)
84,660 
 
 
 
80,207 
 
 
  - other liabilities
325,071 
 
 
 
471,405 
 
 
Total equity
54,414 
 
 
 
60,083 
 
 
 
 
 
 
 
 
 
 
Total liabilities and equity
871,493 
 
 
 
1,060,973 
 
 
 
*Restated – refer to page 66 for further details
 
Notes:
(1)
Interest payable has been increased by nil (H1 2015 - £8 million) to record interest on financial liabilities designated as at fair value through profit or loss. Related interest-earning assets and interest-bearing liabilities have also been adjusted.
(2)
Interest income includes amounts (unwind of discount) recognised on impaired loans and receivables. The average balances of such loans are included in average loans and advances to banks and loans and advances to customers.
(3)
Interest receivable and interest payable on trading assets and liabilities are included in income from trading activities.
(4)
Of which, PBB - £49 billion, CPB - £28 billion and other - £8 billion (H1 2015; PBB - £44 billion, CPB - £25 billion and other - £11 billion).
 
 
 
RBS – Interim Results 2016
 
 
 
Analysis of results
 
Key points
 
H1 2016 compared with H1 2015
● 
Net interest income of £4,333 million decreased £85 million, or 2%, compared with H1 2015 principally driven by a £113 million reduction in Capital Resolution in line with the planned shrinkage of the balance sheet.
 
 
● 
NIM was 2.18% for H1 2016, 4 basis points higher than H1 2015 as the benefit associated with reductions in the low yielding ‘non-core’ assets has been partially offset by modest asset margin pressure and mix impacts across PBB and CPB.
In UK PBB, NIM decreased by 17 basis points to 3.07% compared with H1 2015 reflecting the impact of the overall portfolio mix being increasingly weighted towards secured lending and mortgage customers switching from standard variable rate (SVR) to lower rate products. SVR mortgages represented 12% of the mortgage book as at 30 June 2016 compared with 18% a year earlier.
Commercial Banking NIM declined by 7 basis points reflecting asset margin pressure and an increased allocation of the low yielding liquidity portfolio.
 
Q2 2016 compared with Q1 2016
● 
Net interest income of £2,177 million was £21 million higher than Q1 2016 principally driven by a £71 million increase in UK PBB reflecting deposit re-pricing, strong volume growth and a release of previously suspended credit card interest of £32 million.
 
 
NIM was 2.21% for Q2 2016, 6 basis points higher than Q1 2016 as low yielding non-core and liquid assets become a smaller proportion of the overall book.
NIM for our combined PBB and CPB franchises was 2.37% in Q2 2016 compared with 2.38% in Q1 2016.
● 
UK PBB NIM increased by 10 basis points to 3.12% reflecting a one-off release of suspended interest, 9 basis points, and deposit re-pricing whilst Commercial Banking NIM decreased by 10 basis points to 1.78% principally driven by an increased allocation of the low yielding liquidity portfolio.
 
Q2 2016 compared with Q2 2015
● 
Net interest income of £2,177 million was £38 million lower than Q2 2015 and included a £42 million reduction in Capital Resolution in line with planned shrinkage of the balance sheet.
● 
NIM was 8 basis points higher than Q2 2015 principally reflecting the benefit associated with reductions in the low yielding ‘non-core’ assets.
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
2016
2015
 
2016
2016
2015
Non-interest income
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Net fees and commissions
1,284 
1,595 
 
630 
654 
783 
(Loss)/income from trading activities
(267)
665 
 
(157)
(110)
430 
Own credit adjustments
450 
288 
 
194 
256 
168 
Loss on redemption of own debt
(130)
 
(130)
-
Strategic disposals
195 
(135)
 
201 
(6)
Other operating income
199 
425 
 
85 
114 
141 
 
 
 
 
 
 
 
Total non-interest income
1,731 
2,838 
 
823 
908 
1,522 
 
 
 
 
 
 
 
Memo:
 
 
 
 
 
 
IFRS volatility in Treasury (1)
(668)
80 
 
(312)
(356)
204 
 
Note:
(1)
IFRS volatility arises from the changes to fair value of hedges of loans which do not qualify for hedge accounting under IFRS.
 
Key points
 
H1 2016 compared with H1 2015
● 
Non-interest income was £1,731 million, a reduction of £1,107 million, or 39%, compared with H1 2015. Capital Resolution non-interest income fell by £771 million reflecting planned asset disposals and an additional £220 million funding valuation adjustment in Q2 2016 (H1 2016 - £330 million) following the EU Referendum. CIB income reduced by £130 million reflecting the reduced scale of the business. In addition, we recognised a £668 million charge for volatile items under IFRS compared with an £80 million gain in H1 2015. Partially offsetting this, we reported a strategic disposal gain of £195 million, versus a loss of £135 million in H1 2015, and recognised an FX gain of £253 million principally reflecting the significant weakening of sterling against the dollar following the EU Referendum.
Net fees and commissions decreased by £311 million, or 19%, compared with H1 2015 reflecting the planned Capital Resolution asset run-down, £131 million, lower CIB income, down £133 million, and lower credit card interchange fees in UK PBB, down £41 million.
● 
Losses from trading activities totalled £267 million compared with income of £665 million in H1 2015, reflecting an increased charge for volatile items under IFRS as well as increased losses in Capital Resolution (including an incremental £220 million funding valuation adjustment in Q2 2016).
● 
Other operating income of £199 million was £226 million lower than H1 2015 principally reflecting the planned Capital Resolution asset run-down as well as equity disposal and fair value gains of £75 million reported in Commercial Banking in H1 2015.
 
Q2 2016 compared with Q1 2016
● 
Non-interest income reduced by £85 million to £823 million. Capital Resolution non-interest income fell by £474 million reflecting planned asset disposals, including disposal losses of £102 million, and an additional £220 million funding valuation adjustment following the EU Referendum. Partially offsetting, CIB non-interest income increased by £131 million principally reflecting robust levels of customer activity within the Rates business. In addition, we recognised a £246 million gain on the disposal of our stake in Visa Europe.
 
Q2 2016 compared with Q2 2015
Non-interest income reduced by £699 million largely reflecting a £537 million fall in Capital Resolution. In addition, a £312 million IFRS volatility charge was reported compared with a gain of £204 million in Q2 2015.
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
2016
2015*
 
2016
2016
2015*
Operating expenses
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Staff costs
2,329 
2,543 
 
1,127 
1,202 
1,258 
Premises and equipment
630 
709 
 
315 
315 
298 
Other administrative expenses
625 
861 
 
179 
446 
481 
Restructuring costs (see below)
630 
1,470 
 
392 
238 
1,023 
Litigation and conduct costs
1,315 
1,315 
 
1,284 
31 
459 
 
 
 
 
 
 
 
Administrative expenses
5,529 
6,898 
 
3,297 
2,232 
3,519 
Depreciation and amortisation
352 
418 
 
174 
178 
186 
Write down of intangible assets
48 
 
38 
10 
 
 
 
 
 
 
 
Operating expenses
5,929 
7,316 
 
3,509 
2,420 
3,705 
 
 
 
 
 
 
 
Adjusted operating expenses (1)
3,984 
4,531 
 
1,833 
2,151 
2,223 
 
 
 
 
 
 
 
Restructuring costs comprise:
 
 
 
 
 
 
  - staff expenses
366 
344 
 
245 
121 
288 
  - premises, equipment, depreciation and amortisation
24 
330 
 
15 
42 
  - other
240 
796 
 
132 
108 
693 
 
 
 
 
 
 
 
 
630 
1,470 
 
392 
238 
1,023 
 Of which Williams & Glyn
345 
259 
 
187 
158 
126 
 
 
 
 
 
 
 
Staff costs as a % of total income
38%
35%
 
38%
39%
34%
Cost:income ratio
98%
101%
 
117%
79%
99%
Cost:income ratio - adjusted (2)
72%
64%
 
67%
76%
62%
Employee numbers (FTE - thousands)
89.2 
91.6 
 
89.2 
92.4 
91.6 
 
*Restated – refer to page 66 for further details
 
Notes:
(1)
Excluding restructuring costs and litigation and conduct costs.
(2)
Excluding own credit adjustments, loss on redemption of own debt ,strategic disposals, restructuring costs and litigation and conduct costs.
 
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
Key points
 
H1 2016 compared with H1 2015
● 
Operating expenses of £5,929 million were £1,387 million, or 19%, lower than H1 2015 reflecting lower restructuring costs of £630 million (H1 2015 - £1,470 million) and a £547 million, or 12%, reduction in adjusted operating expenses.
● 
Adjusted operating expenses fell by £547 million, or 12%, from H1 2015 to £3,984 million. Excluding expenses associated with Williams & Glyn, write down of intangible assets (£48 million) and a £227 million VAT recovery, adjusted operating expenses reduced by £404 million and remain on target to achieve an £800 million reduction for the year.
● 
Staff costs of £2,329 million were down £214 million, or 8%, principally reflecting reduced headcount in Capital Resolution and CIB.
● 
Restructuring costs of £630 million in H1 2016 included £345 million in respect of Williams & Glyn separation costs.
● 
Litigation and conduct costs of £1,315 million included an additional PPI provision following publication of the FCA Consultation Paper on 2 August, a provision in respect of the UK 2008 rights issue shareholder litigation, a provision in Ulster Bank RoI principally in respect of an industry-wide examination of tracker mortgages and various other matters.
 
Q2 2016 compared with Q1 2016
● 
Operating expenses of £3,509 million were £1,089 million higher than Q1 2016. A £1,253 million increase in litigation and conduct costs and a £154 million increase in restructuring costs were partially offset by a £318 million reduction in adjusted operating expenses.
● 
Adjusted operating costs of £1,833 million were £318 million lower than Q1 2016 and included a £227 million VAT recovery.
 
Q2 2016 compared with Q2 2015
● 
Operating expenses were £196 million lower than Q2 2015 reflecting a £631 million reduction in restructuring costs and a £390 million reduction in adjusted operating expenses, benefiting from a £227 million VAT recovery, partially offset by a £825 million increase in litigation and conduct costs.
 
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
Half year ended
 
Quarter ended
 
30 June
30 June
 
30 June
31 March
30 June
2016
2015
 
2016
2016
2015
Impairment losses/(releases)
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Loan impairment losses/(releases)
 
 
 
 
 
 
  - individually assessed
358 
(120)
 
172 
186 
(105)
  - collectively assessed
43 
 
27 
16 
(7)
  - latent
11 
(316)
 
(10)
21 
(91)
 
 
 
 
 
 
 
Total loan impairment losses/(releases)
412 
(431)
 
189 
223 
(203)
Securities
(3)
110 
 
(3)
11 
 
 
 
 
 
 
 
Total impairment losses/(releases)
409 
(321)
 
186 
223 
(192)
 
 
 
 
 
 
 
 
 
 
 
30 June
31 March
31 December
Credit metrics (1)
 
 
 
2016
2016
2015
 
 
 
 
 
 
 
Gross customer loans
 
 
 
£333,017m
£325,339m
£315,111m
Loan impairment provisions
 
 
 
£6,456m
£6,701m
£7,139m
Risk elements in lending (REIL)
 
 
 
£11,789m
£11,867m
£12,157m
Provisions as a % of REIL
 
 
 
55%
57%
59%
REIL as a % of gross customer loans
 
 
 
3.5%
3.6%
3.9%
 
Note:
(1)
Includes disposal groups and excludes reverse repos.
 
Key points
 
H1 2016 compared with H1 2015
● 
A net impairment loss of £409 million was reported in H1 2016 compared with a release of £321 million in H1 2015.
● 
Capital Resolution reported an impairment loss of £263 million compared with a release of £319 million in H1 2015. The charge for the half year included £264 million in relation to exposures in the Shipping portfolio reflecting difficult conditions in some parts of the sector.
● 
Commercial Banking reported an impairment loss of £103 million compared with a charge of £26 million in H1 2015, with the uplift primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.
● 
Ulster Bank RoI reported a net impairment release of £27 million compared with a £77 million release in H1 2015.
● 
REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.9% at 31 December 2015. Provision coverage was 55% compared with 59% at 31 December 2015. Exchange rate movements added £0.8 billion to REIL during H1 2016.
 
Q2 2016 compared with Q1 2016
● 
A net impairment loss of £186 million was reported in Q2 2016 compared with a loss of £223 million in Q1 2016.
● 
Capital Resolution reported a net impairment loss of £67 million compared with a loss of £196 million in Q1 2016 principally reflecting a reduced charge on the Shipping portfolio. Commercial Banking reported a charge of £89 million compared with a charge of £14 million in Q1 2016 with the increase primarily reflecting a single name charge taken in respect of the Oil & Gas portfolio.
● 
REIL of £11.8 billion were 3.5% of gross customer loans compared with 3.6% in Q1 2016.
 
Q2 2016 compared with Q2 2015
● 
A net impairment loss of £186 million in Q2 2016 compared with a release of £192 million in Q2 2015. Capital Resolution reported a charge of £67 million compared with a release of £174 million in Q2 2015. Commercial Banking reported a charge of £89 million compared with a charge of £27 million in Q2 2015, with the uplift primarily reflecting a single name charge on the Oil & Gas portfolio.
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
 
 
 
 
 
 
Selected credit risk portfolios
 
 
 
 
30 June 2016
 
31 December 2015*
 
Current
Potential
 
Current
Potential
 
exposure
exposure
 
exposure
exposure
Natural Resources (1)
£m
£m
 
£m
£m
 
 
 
 
 
 
Oil & Gas
3,298 
6,356 
 
3,544 
6,798 
Mining & Metals
816 
1,941 
 
729 
1,823 
Electricity
3,374 
8,583 
 
2,851 
7,683 
Water & Waste
5,347 
8,665 
 
4,657 
8,261 
 
 
 
 
 
 
 
12,835 
25,545 
 
11,781 
24,565 
 
 
 
 
 
 
Commodity Traders (2)
564 
1,080 
 
900 
1,320 
Of which: Natural Resources
427 
759 
 
521 
752 
 
 
 
 
 
 
Shipping
6,765 
7,246 
 
6,776 
7,301 
 
 
30 June 2016
 
31 December 2015*
 
Current
Potential
 
Current
Potential
 
exposure
exposure
 
exposure
exposure
Emerging markets (1)
£m
£m
 
£m
£m
 
 
 
 
 
 
India
1,330 
1,393 
 
1,634 
1,733 
China
661 
860 
 
960 
1,150 
 
 
*Restated - refer to page 17 in Appendix 1 for further details.
 
Notes:
(1)
Refer to Appendix 1 for further details and definitions.
(2)
Represent customers in a number of industry sectors, predominantly Natural Resources above.
 
Key points
 
● 
Oil & Gas: Potential exposure decreased by 6.5% due to active credit management and the continued run-off of the North American and Asia-Pacific portfolios. The portfolio in Commercial Banking saw an impairment charge of £97 million in Q2 2016 primarily from a single name.
● 
Mining & Metals: Potential exposure was relatively unchanged with the increase mainly driven by foreign exchange movements (64% of the portfolio is denominated in US dollars). Excluding the impact of foreign exchange movements, exposure decreased by 2.5%. 
● 
Shipping: Most of the portfolio related to exposure secured by ocean-going vessels managed by Capital Resolution. Excluding foreign exchange impacts, exposure fell by 10%. Impairment provisions were £445 million at 30 June 2016 up from £181 million at 31 December 2015.
● 
 
Exposure to most emerging markets decreased in H1 2016 as RBS continued to implement its strategy to withdraw from non-strategic countries.
 
 
RBS – Interim Results 2016
 
 
Analysis of results
 
Capital and leverage ratios
 
 
 
 
 
 
End-point CRR basis (1)
 
PRA transitional basis
 
30 June 
31 December 
 
30 June 
31 December 
 
2016 
2015 
 
2016 
2015 
Risk asset ratios
 
 
 
 
 
 
 
CET1
14.5 
15.5 
 
14.5 
15.5 
Tier 1
15.4 
16.3 
 
17.7 
19.1 
Total
19.0 
19.6 
 
23.0 
24.7 
 
 
 
 
 
 
Capital
£m
£m
 
£m
£m
 
 
 
 
 
 
Tangible equity
40,541 
40,943 
 
40,541 
40,943 
 
 
 
 
 
 
Expected loss less impairment provisions
(831)
(1,035)
 
(831)
(1,035)
Prudential valuation adjustment
(603)
(381)
 
(603)
(381)
Deferred tax assets
(1,040)
(1,110)
 
(1,040)
(1,110)
Own credit adjustments
(587)
(104)
 
(587)
(104)
Pension fund assets
(209)
(161)
 
(209)
(161)
Cash flow hedging reserve
(1,603)
(458)
 
(1,603)
(458)
Other deductions
(14)
(86)
 
(14)
(64)
 
 
 
 
 
 
Total deductions
(4,887)
(3,335)
 
(4,887)
(3,313)
 
 
 
 
 
 
CET1 capital
35,654 
37,608 
 
35,654 
37,630 
AT1 capital
1,997 
1,997 
 
7,756 
8,716 
 
 
 
 
 
 
Tier 1 capital
37,651 
39,605 
 
43,410 
46,346 
Tier 2 capital
9,028 
8,002 
 
13,043 
13,619 
 
 
 
 
 
 
Total regulatory capital
46,679 
47,607 
 
56,453 
59,965 
 
 
 
 
 
 
Risk-weighted assets
 
 
 
 
 
 
 
 
 
 
 
Credit risk
 
 
 
 
 
  - non-counterparty
172,500 
166,400 
 
 
 
  - counterparty
26,100 
23,400 
 
 
 
Market risk
20,900 
21,200 
 
 
 
Operational risk
25,700 
31,600 
 
 
 
 
 
 
 
 
 
Total RWAs
245,200 
242,600 
 
 
 
 
 
 
 
 
 
Leverage (2)
 
 
 
 
 
 
 
 
 
 
 
Derivatives
326,000 
262,500 
 
 
 
Loans and advances
348,500 
327,000 
 
 
 
Reverse repos
45,800 
39,900 
 
 
 
Other assets
181,300 
186,000 
 
 
 
 
 
 
 
 
 
Total assets
901,600 
815,400 
 
 
 
Derivatives
 
 
 
 
 
  - netting and variation margin
(328,400)
(258,600)
 
 
 
  - potential future exposures
75,500 
75,600 
 
 
 
Securities financing transactions gross up
3,200 
5,100 
 
 
 
Undrawn commitments
63,200 
63,500 
 
 
 
Regulatory deductions and other adjustments
5,600 
1,500 
 
 
 
 
 
 
 
 
 
Leverage exposure
720,700 
702,500 
 
 
 
 
 
 
 
 
 
Tier 1 capital
37,651 
39,605 
 
 
 
 
 
 
 
 
 
Leverage ratio %
5.2 
5.6 
 
 
 
 
 
 
 
 
 
Average leverage exposure (3)
717,167 
 
 
 
 
 
 
 
 
 
 
Average Tier 1 capital (3)
38,561 
 
 
 
 
 
 
 
 
 
 
Average leverage ratio % (3)
5.4 
 
 
 
 
 
Notes:
(1)
Capital Requirements Regulation (CRR) as implemented by the Prudential Regulation Authority in the UK, with the effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on AFS securities which have been included from 2015 under the PRA transitional basis.
(2)
Based on end-point CRR 1 Tier capital and leverage exposure under the CRR Delegated Act.
(3)
Based on averages of last three quarter end positions.
 
 
 
RBS – Interim Results 2016
 
 
 
Analysis of results
 
Key points
The CET1 ratio decreased by 100 basis points in H1 2016 to 14.5% primarily reflecting management actions to normalise the ownership structure and improve the long-term resilience of RBS. These actions included the final Dividend Access Share payment of £1.2 billion and the accelerated payment of £4.2 billion relating to the outstanding deficit on the pension Main Scheme. Additional litigation and conduct charges contributed to a £2.0 billion reduction in CET1 capital.
 
 
RWAs increased by £2.6 billion to £245.2 billion during H1 2016 reflecting lending growth in UK PBB and Commercial Banking and the adverse impact of exchange rate movements of £7.5 billion mainly due to weakening of sterling following the EU Referendum. These are partially offset by the reductions in RWAs due to disposals and run-off in Capital Resolution and the removal of the element of operational risk RWAs relating to Citizens, following regulatory approval.
 
 
There was a 10 basis points decrease in the CET1 ratio in Q2 2016 driven by a £0.7 billion decrease in CET 1 capital in Q2 2016, offset by £4.3 billion reduction in RWAs. The reduction in RWAs related to disposals and run-off in Capital Resolution, and removal of that element of operational risk RWAs relating to Citizens, following regulatory approval (£3.9 billion); these were partly offset by the weakening of sterling mainly due to the EU Referendum (£4.4 billion).
 
 
Leverage ratio decreased by 40 basis points in H1 2016 to 5.2% driven by growth in mortgages and commercial lending as well as the reduction in Tier 1 capital. 
 
 
RBS – Interim Results 2016
 
 
Segment performance
 
 
Half year ended 30 June 2016
 
PBB
 
CPB
 
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
 
Capital
Williams
 items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
CIB
Resolution
& Glyn
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
2,109 
198 
 
1,067 
226 
151 
 
43 
168 
324 
47 
4,333 
Other non-interest income
506 
92 
 
632 
105 
34 
 
638 
(473)
87 
(405)
1,216 
Total income - adjusted (2)
2,615 
290 
 
1,699 
331 
185 
 
681 
(305)
411 
(358)
5,549 
Own credit adjustments
 
 
137 
184 
126 
450 
Loss on redemption of own debt
 
 
(130)
(130)
Strategic disposals
 
 
(51)
246 
195 
Total income
2,615 
293 
 
1,699 
331 
185 
 
818 
(172)
411 
(116)
6,064 
Direct expenses - staff costs
(361)
(97)
 
(265)
(77)
(22)
 
(131)
(62)
(125)
(1,189)
(2,329)
                           - other costs
(162)
(13)
 
(111)
(23)
(8)
 
(21)
(64)
(33)
(1,220)
(1,655)
Indirect expenses
(987)
(85)
 
(557)
(156)
(38)
 
(488)
(289)
(39)
2,639 
Operating expenses - adjusted (3)
(1,510)
(195)
 
(933)
(256)
(68)
 
(640)
(415)
(197)
230 
(3,984)
Restructuring costs - direct
(51)
(24)
 
(1)
(1)
(1)
 
(10)
(12)
(45)
(485)
(630)
                                - indirect
(60)
(1)
 
(40)
(19)
(2)
 
(23)
(25)
170 
Litigation and conduct costs
(421)
(92)
 
(10)
(2)
 
(56)
(26)
(708)
(1,315)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(2,042)
(312)
 
(984)
(278)
(71)
 
(729)
(478)
(242)
(793)
(5,929)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment losses
573 
(19)
 
715 
53 
114 
 
89 
(650)
169 
(909)
135 
Impairment (losses)/releases
(40)
27 
 
(103)
(2)
(11)
 
--
(263)
(17)
--
(409)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
533 
 
612 
51 
103 
 
89 
(913)
152 
(909)
(274)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (2,3)
1,065 
122 
 
663 
73 
106 
 
41 
(983)
197 
(128)
1,156 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity (4)
11.9%
0.6%
 
8.1%
5.1%
15.4%
 
0.8%
nm
nm
nm
(10.3%)
Return on equity - adjusted (2,3,4)
25.5%
9.3%
 
8.9%
7.6%
15.9%
 
(0.5%)
nm
nm
nm
(3.2%)
Cost:income ratio
78%
106%
 
58%
84%
38%
 
89%
nm
59%
nm
98%
Cost:income ratio - adjusted (2,3)
58%
67%
 
55%
77%
37%
 
94%
nm
48%
nm
72%
Total assets (£bn)
151.2  
24.3  
 
146.3  
17.8  
24.6  
 
284.0  
208.0  
24.9  
20.5  
901.6  
Funded assets (£bn)
151.2  
24.1  
 
146.3  
17.7  
24.6  
 
125.6  
44.7  
24.9  
16.5  
575.6  
Net loans and advances to customers (£bn)
126.0  
18.9  
 
99.2  
11.8 
8.5  
 
21.6  
19.9  
20.3  
0.4  
326.6  
Risk elements in lending (£bn)
2.3  
4.3  
 
2.2  
0.1 
0.1  
 
--
2.4  
0.4  
--
11.8  
Impairment provisions (£bn)
(1.5)
(2.5)
 
(1.0)
--
 
--
(1.1)
(0.3)
(0.1)
(6.5)
Customer deposits (£bn)
140.4  
14.7  
 
96.7  
25.4 
24.1  
 
8.3  
18.8  
23.9  
3.5  
355.8  
Risk-weighted assets (RWAs) (£bn)
37.0  
20.9  
 
77.5  
8.1 
9.6  
 
36.7  
42.3  
9.9  
3.2  
245.2  
RWA equivalent (£bn)
41.3  
20.8  
 
81.5  
8.1 
9.6  
 
37.2  
43.2  
10.4  
3.3  
255.4  
Employee numbers (FTEs - thousands)
20.0  
3.2  
 
5.9  
1.8 
0.7  
 
1.3  
0.9  
5.2  
50.2  
89.2  
 
 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to page 30. nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RBS – Interim Results 2016
 
 
 
Segment performance
 
 
Quarter ended 30 June 2016
 
PBB
 
CPB
 
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
 
Capital
Williams
 items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
CIB
Resolution
& Glyn
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,090  
93 
 
531  
113  
76  
 
24 
82 
162 
2,177 
Other non-interest income
250  
42 
 
315  
53  
19  
 
380 
(438)
44 
(107)
558 
Total income - adjusted (2)
1,340  
135 
 
846  
166  
95  
 
404 
(356)
206 
(101)
2,735 
 
 
 
 
 
 
 
 
 
 
 
 
 
Own credit adjustments
 
 
73 
76 
45 
194 
Loss on redemption of own debt
 
 
(130)
(130)
Strategic disposals
 
 
(45)
246 
201 
Total income
1,340  
135 
 
846  
166  
95  
 
477 
(325)
206 
60 
3,000 
Direct expenses - staff costs
(180)
(46)
 
(134)
(37)
(12)
 
(64)
(17)
(63)
(574)
(1,127)
                           - other costs
(99)
(2)
 
(62)
(9)
(3)
 
(7)
(31)
(18)
(475)
(706)
Indirect expenses
(503)
(43)
 
(301)
(73)
(18)
 
(238)
(135)
(18)
1,329 
Operating expenses - adjusted (3)
(782)
(91)
 
(497)
(119)
(33)
 
(309)
(183)
(99)
280 
(1,833)
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring costs - direct
(38)
(18)
 
(1)
 
(10)
(5)
(25)
(295)
(392)
                                - indirect
(51)
(1)
 
(41)
(4)
(1)
 
(11)
(16)
125 
Litigation and conduct costs
(421)
(92)
 
(8)
(2)
 
(38)
(16)
(707)
(1,284)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(1,292)
(202)
 
(546)
(125)
(35)
 
(368)
(220)
(124)
(597)
(3,509)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment losses
48  
(67)
 
300  
41  
60  
 
109 
(545)
82 
(537)
(509)
Impairment (losses)/releases
(24)
14 
 
(89)
(9)
 
(67)
(11)
(186)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
24  
(53)
 
211  
41  
51  
 
109 
(612)
71 
(537)
(695)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (2,3)
534  
58 
 
260  
47  
53  
 
95 
(606)
96 
179 
716 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity (4)
(0.4%)
(8.2%)
 
4.9%
8.6%
15.0%
 
4.3%
nm
nm
nm
(11.0%)
Return on equity - adjusted (2,3,4)
24.2%
9.0%
 
6.6%
9.9%
15.7%
 
3.5%
nm
nm
nm
3.2%
Cost:income ratio
96%
150%
 
65%
75%
37%
 
77%
nm
60%
nm
117%
Cost:income ratio - adjusted (2,3)
58%
67%
 
59%
72%
35%
 
76%
nm
48%
nm
67%
Total assets (£bn)
151.2  
24.3  
 
146.3  
17.8  
24.6  
 
284.0  
208.0  
24.9  
20.5  
901.6  
Funded assets (£bn)
151.2  
24.1  
 
146.3  
17.7  
24.6  
 
125.6  
44.7  
24.9  
16.5  
575.6