FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549


 

 

Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

 

For October 26, 2018

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

Q3 2018 Interim Management Statement

 

RBS reported an operating profit before tax of £961 million for Q3 2018, compared with £871 million in Q3 2017, and £2,787 million for the year to date.

 

●	Q3 2018 attributable profit of £448 million and £1,336 million for the year to date.

 

Income stable in a competitive market:

●	Income increased by £268 million, or 2.7%, for the year to date compared with 2017. Excluding NatWest Markets and Central items and notable items in UK PBB and Commercial Banking, income was broadly stable.
●	Q3 2018 income increased by £485 million, or 15.4%, compared with Q3 2017 principally reflecting indemnity insurance recoveries of £272 million and lower disposal losses.
●	Q3 2018 net interest margin of 1.93% decreased by 8 basis points compared with Q2 2018. Excluding one-off items, net interest margin was down 5 basis points, of which 3 basis points related to competitive pressure and 2 basis points due to higher average liquidity balances.

 

Lower costs through continued transformation and increased digitisation:

●	Compared with 2017, other expenses for the year to date decreased by £183 million, or 3.3%, excluding VAT releases in 2017, and FTEs reduced by 6.8%.
●	We continue to transition from physical to digital services. 6.2 million customers now regularly use our mobile app, 14% higher than Q4 2017. In UK PBB, total digital sales increased by 22% for the year to date, representing 43% of all sales.

 

Strong capital position:

●	CET1 ratio of 16.7% increased by 60 basis points in the quarter reflecting further RWA reductions and the attributable profit for Q3 2018.
●	RWAs decreased by £4.3 billion in the quarter primarily reflecting reductions in NatWest Markets and the impact of capital initiatives in Commercial Banking.
●	We have taken an additional £100 million impairment charge reflecting the more uncertain economic outlook and a further net £60 million impairment charge in our Irish business in relation to ongoing sales from our loan book to further reduce the level of non performing loans. Underlying credit conditions remained benign during the quarter.
●	Following final settlement with the US Department of Justice, RBS declared a 2p interim dividend on 14 August 2018.

 

Outlook and recent developments (1)

We retain the outlook guidance we provided in the 2017 Annual Results document.

 

Further to previously announced plans to be operationally ready to serve our European Economic Area (EEA) customers when the UK leaves the European Union on 29 March 2019, we have received approval from the Dutch regulator (DNB) for the repurposing of the existing NatWest Markets N.V. (formerly RBS N.V.) banking licence.

 

Note:

(1)

The targets, expectations and trends (including but not limited to impairment provisions) in this document represent management’s current expectations and are subject to change, including as a result of the “Risk Factors” on pages 372 to 402 of the 2017 Annual Report and Accounts and the Summary Risk Factors on pages 48 and 49 of the 2018 Interim Results. These statements constitute forward-looking statements; refer to Forward-looking statements in this document.

 

 

Business performance summary

 

	Nine months ended			Quarter ended
	30 September	30 September		30 September	30 June	30 September
Performance key metrics and ratios	2018	2017		2018	2018	2017
Operating profit before tax	£2,787m	£2,822m		£961m	£613m	£871m
Profit attributable to ordinary shareholders	£1,336m	£1,331m		£448m	£96m	£392m
Net interest margin	1.99%	2.16%		1.93%	2.01%	2.12%
Average interest earning assets	£435,218m	£419,450m		£443,092m	£434,928m	£430,962m
Cost:income ratio (1)	69.1%	69.1%		66.7%	80.0%	67.5%
Earnings per share
- basic	11.1p	11.2p		3.7p	0.8p	3.3p
- basic fully diluted	11.1p	11.2p		3.7p	0.8p	3.3p
Return on tangible equity	5.3%	5.2%		5.4%	1.1%	4.5%
Average tangible equity	£33,699m	£33,964m		£33,492m	£33,522m	£34,465m
Average number of ordinary shares
outstanding during the period (millions)
- basic	11,998	11,840		12,034	12,003	11,886
- fully diluted (2)	12,053	11,913		12,083	12,062	11,943
				30 September	30 June	31 December
Balance sheet related key metrics and ratios				2018	2018	2017
Total assets				£719.9bn	£748.3bn	£738.1bn
Funded assets				£587.3bn	£597.2bn	£577.2bn
Loans and advances to customers (excludes reverse repos)				£319.6bn	£320.0bn	£323.2bn
Impairment provisions (3)				£3.9bn	£3.9bn	£3.8bn
Customer deposits (excludes repos)				£366.0bn	£366.3bn	£367.0bn
Liquidity coverage ratio (LCR)				158%	167%	152%
Liquidity portfolio				£195bn	£198bn	£186bn
Net stable funding ratio (NSFR) (4)				139%	140%	132%
Loan:deposit ratio				87%	87%	88%
Total wholesale funding				£78bn	£75bn	£70bn
Short-term wholesale funding				£14bn	£13bn	£18bn
Common Equity Tier (CET1) ratio				16.7%	16.1%	15.9%
Total capital ratio				22.1%	21.5%	21.3%
Pro forma CET 1 ratio, pre 2018 dividend accrual (5)				16.8%	16.2%	15.9%
Risk-weighted assets (RWAs)				£194.5bn	£198.8bn	£200.9bn
CRR leverage ratio				5.4%	5.2%	5.3%
UK leverage ratio				6.3%	6.0%	6.1%
Tangible net asset value (TNAV) per ordinary share				288p	287p	294p
Tangible net asset value (TNAV) per ordinary share - fully diluted				287p	286p	292p
Tangible equity				£34,672m	£34,564m	£35,164m
Number of ordinary shares in issue (millions)				12,048	12,028	11,965
Number of ordinary shares in issue (millions) - fully diluted (2,6)				12,091	12,095	12,031

 

Notes:

(1)	Operating lease depreciation included in income for the nine months ended 30 September 2018 - £89 million; Q3 2018 - £32 million (nine months ended 30 September 2017 - £107 million; Q2 2018 - £26 million; Q3 2017 - £35 million).
(2)	Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q3 2018 were 49 million shares and for the nine months ended 30 September 2018 were 55 million shares; (Q2 2018 - £59 million, Q3 2017 - £57 million; nine months ended 30 September 2017 - £73 million and as at 30 September 2018 were 43 million shares (30 June 2018 - 67 million shares; 31 December 2017 - 66 million shares).
(3)	30 September 2018 and 30 June 2018 prepared under IFRS 9, 31 December 2017 prepared under IAS 39. Refer to Note 2 for further details.
(4)	In November 2016, the European Commission published its proposal for NSFR rules within the EU as part of its CRR2 package of regulatory reforms. CRR2 NSFR is expected to become the regulatory requirement in future within the EU and the UK. RBS has changed its policy on the NSFR to align with its interpretation of the CRR2 proposals with effect from 1 January 2018. The pro forma CRR2 NSFR at 31 December 2017 under CRR2 proposals is estimated to be 139%.
(5)	The pro forma CET 1 ratio at 30 September 2018 excludes a charge of £120 million (1p per share) that is a reasonably foreseeable final dividend, related to Q3 2018 profits. The 30 June 2018 ratio excluded a charge of £240 million (2p per share) that was a reasonably foreseeable interim dividend related to H1 2018 profits.
(6)	Includes 9 million treasury shares (30 June 2018 - 9 million shares; 31 December 2017 - 16 million shares).

 

Business performance summary

 

Summary consolidated income statement for the period ended 30 September 2018
	Nine months ended			Quarter ended
	30 September	30 September		30 September	30 June	30 September
	2018	2017		2018	2018	2017
	£m	£m		£m	£m	£m
Net interest income	6,480	6,776		2,154	2,180	2,304
Own credit adjustments	59	(78)		20	18	(5)
Loss on redemption of own debt	-	(7)		-	-	-
Strategic disposals	-	156		-	-	-
Other non-interest income	3,805	3,229		1,468	1,202	858
Non-interest income	3,864	3,300		1,488	1,220	853
Total income	10,344	10,076		3,642	3,400	3,157
Litigation and conduct costs	(1,190)	(521)		(389)	(782)	(125)
Strategic costs	(649)	(1,034)		(299)	(141)	(244)
Other expenses	(5,337)	(5,440)		(1,753)	(1,801)	(1,774)
Operating expenses	(7,176)	(6,995)		(2,441)	(2,724)	(2,143)
Profit before impairment losses	3,168	3,081		1,201	676	1,014
Impairment losses(1)	(381)	(259)		(240)	(63)	(143)
Operating profit before tax	2,787	2,822		961	613	871
Tax charge	(1,139)	(992)		(398)	(412)	(265)
Profit for the period	1,648	1,830		563	201	606
Attributable to:
Non-controlling interests	6	21		22	(23)	(8)
Other owners	306	478		93	128	222
Ordinary shareholders	1,336	1,331		448	96	392

 

Notable items within total income
IFRS volatility in Central items (2)	(34)	175		77	17	21
Insurance indemnity	272	-		272	-	-
of which:
NatWest Markets	165	-		165	-	-
Central items & other	107	-		107	-	-
UK PBB debt sale gain	26	176		-	-	168
FX gains/losses in Central items & other	(7)	(175)		(11)	19	(67)
Commercial Banking fair value and disposal gain/(loss)	179	52		(13)	115	52
NatWest Markets legacy business disposal (losses)/gains	(43)	(549)		14	(41)	(446)
Notable items within expenses
Litigation and conduct costs	(1,190)	(521)		(389)	(782)	(125)
of which: US RMBS	(823)	(222)		(21)	(803)	-
of which: DoJ	(1,040)	-		-	(1,040)	-
Nomura	241	-		-	241	-
of which: PPI	(200)	-		(200)	-	-
of which: Ulster Bank RoI	(54)	(34)		(37)	(8)	(1)
VAT recovery in Central items & other	-	80		-	-	29

 

Notes:

(1)	30 September 2018 and 30 June 2018 prepared under IFRS 9, 31 December 2017 and 30 September 2017 prepared under IAS 39. Refer to Note 2 for further information on the impact of IFRS 9 on classification and basis of preparation.
(2)	IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.

 

Business performance summary

 

Personal & Business Banking – UK Personal & Business Banking

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	£m	£m	£m			£bn	£bn	£bn
Total income	1,564	1,570	1,757		Net loans & advances
Operating expenses	(959)	(746)	(819)		to customers	163.2	161.9	161.7
Impairment losses	(70)	(90)	(78)		Customer deposits	183.4	182.2	180.6
Operating profit	535	734	860		RWAs	45.4	43.4	43.0
Return on equity	20.9%	30.0%	34.2%
Net interest margin	2.76%	2.81%	2.83%

 

Q3 2018 performance
●	UK PBB now has 6.2 million regular mobile app users, 19% higher than Q3 2017 and 14% higher than Q4 2017, supporting 71% digital penetration of active current account customers. Total digital sales increased by 22% in the year to date compared with the prior period, representing 43% of all sales, compared with 36% in the prior period. In personal banking, 56% of personal loans and 60% of mortgage switching was done digitally in the year to date. In business banking, 89% of current accounts and 66% of loans less than £50,000 were originated digitally in the year to date.
●	Total income was £193 million, or 11.0%, lower than Q3 2017 reflecting a £168 million debt sale gain in Q3 2017 and £11 million transfer of the Collective Investment business to Private Banking. Excluding these items, income was £14 million, or 0.9%, lower than Q3 2017, including an £8 million reduction in overdraft fees. Net interest margin decreased by 5 basis points to 2.76% compared with Q2 2018 driven by ongoing mortgage margin compression partly offset by improving deposit margins as interest rates rise.
●	Operating expenses were £140 million, or 17.1%, higher than Q3 2017 driven by increased litigation and conduct costs of £206 million, of which £200 million related to Payment Protection Insurance. Excluding litigation and conduct costs, operating expenses were £66 million, or 8.1%, lower driven by reduced headcount reflecting continued operating efficiencies.
●	Net loans and advances increased by 0.8% compared with Q2 2018. Gross new mortgage lending in Q3 2018 was £8.2 billion. Mortgage new business market share was approximately 12% in Q3 2018, supporting stock share of 10%, with mortgage approval share of approximately 13%.
●	RWAs increased by £2.0 billion compared with Q2 2018 primarily reflecting model updates, particularly mortgages.

 

Personal & Business Banking – Ulster Bank RoI

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	€m	€m	€m			€bn	€bn	€bn
Total income	169	190	166		Net loans & advances
Operating expenses	(188)	(140)	(141)		to customers	21.6	21.6	22.0
Impairment					Customer deposits	20.4	19.9	19.8
(losses)/releases	(68)	39	11		RWAs	18.6	19.0	20.2
Operating (loss)/profit	(87)	89	36
Return on equity	(12.7%)	12.5%	4.6%
Net interest margin	1.72%	1.91%	1.58%

 

Q3 2018 performance
●	Total income increased by €3 million, or 1.8%, compared with Q3 2017 reflecting an increase in lending income and lower cost of deposits, with a 14 basis point increase in net interest margin, largely offset by a reduction in income from free funds. Compared with Q2 2018, net interest margin decreased by 19 basis points primarily reflecting a €13 million one-off funding benefit in the prior quarter.
●	Operating expenses increased by €47 million, or 33.3%, compared with Q3 2017 principally due to higher litigation and conduct costs, largely relating to customer remediation and project costs associated with legacy business issues.
●	A net impairment loss of €68 million includes a provision for a further non performing loan sale that we expect would result in a material reduction in our non performing exposure ratio.
●	RWAs reduced by €0.4 billion compared with Q2 2018 principally reflecting an improvement in credit metrics.

 

Business performance summary

 

Commercial & Private Banking – Commercial Banking

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	£m	£m	£m			£bn	£bn	£bn
Total income	789	915	928		Net loans & advances
Operating expenses	(443)	(404)	(443)		to customers	90.1	90.7	97.0
Impairment					Customer deposits	96.4	96.4	98.0
(losses)/releases	(103)	4	(151)		RWAs	69.0	71.7	71.8
Operating profit	243	515	334
Return on equity	6.6%	15.9%	8.6%
Net interest margin	1.71%	1.66%	1.74%

 

Comparisons with prior periods are impacted by the transfer of shipping and other activities from NatWest Markets, the transfer of whole business securitisations and Relevant Financial Institutions to NatWest Markets in preparation for ring-fencing and the transfer of the funds and trustee depository business to RBS International. The net impact of the transfers on Q3 2017 operating profit would have been to reduce income by £81 million, operating expenses by £2 million and impairments by £34 million. The net impact on the Q2 2018 balance sheet would have been to reduce net loans and advances by £0.2 billion and RWAs by £0.4 billion. The variances in the commentary below have been adjusted for the impact of these transfers unless otherwise stated.

 

Q3 2018 performance (comparisons adjusted for transfers)
●	After successfully testing Bankline mobile with 750 customers, we will be launching in the Apple app store in Q4 2018. We are now onboarding 90% of new customers digitally, up from 75% as at the end of 2017 with a greater than 50% reduction in time taken to complete the application.
●	Total income of £789 million was £58 million, or 6.8%, lower than Q3 2017, reflecting £13 million of fair value and disposal losses compared with £28 million of gains in Q3 2017 and lower asset volumes. On an unadjusted basis, net interest margin of 1.71% increased by 5 basis points compared with Q2 2018 due to continued progress on pricing.
●	Operating expenses were £2 million lower than Q3 2017 reflecting lower staff costs through headcount reductions, partially offset by increased strategic, litigation and conduct costs.
●	Net impairment losses were £14 million lower than Q3 2017 reflecting lower single name charges.
●	Net loans and advances decreased by £0.4 billion compared with Q2 2018 principally reflecting the impact of active capital management, although we continue to grow in target sectors.
●	RWAs decreased by £2.3 billion compared with Q2 2018 primarily reflecting the net impact of capital initiatives.

 

Commercial & Private Banking – Private Banking

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	£m	£m	£m			£bn	£bn	£bn
Total income	195	198	166		Net loans & advances
Operating expenses	(110)	(104)	(103)		to customers	14.2	13.8	13.5
Impairment					Customer deposits	27.2	26.4	26.9
(losses)/releases	(1)	--	3		RWAs	9.5	9.4	9.1
Operating profit	84	94	66		AUM	21.8	21.3	21.5
Return on equity	17.3%	19.3%	13.2%
Net interest margin	2.54%	2.54%	2.39%

 

Comparisons with prior periods are impacted by the transfer of the Collective Investment Fund business from UK PBB and by the transfers of Coutts Crown Dependency and the International Client Group Jersey to RBS International. The net impact of the transfers on Q3 2017 operating profit would have been to increase income by £9 million and increase operating expenses by £3 million. The variances in the commentary below have been adjusted for the impact of these transfers, unless otherwise stated.

 

Q3 2018 performance (comparisons adjusted for transfers)
●	Total Income of £195 million was £20 million, or 11.4%, higher than Q3 2017, principally reflecting increased assets under management, higher lending volumes and increased deposit income. Compared with Q2 2018, net interest margin remained stable at 2.54%.
●	Operating expenses increased by £4 million compared with Q3 2017, as increased back-office operations costs have been partially offset by lower staff expenses, reflecting an 9.5% reduction in headcount.
●	Net loans and advances increased by £0.4 billion compared with Q2 2018 principally reflecting continued targeted growth in mortgage lending, whilst capital efficient lending has kept RWAs broadly stable.
●	Assets under management increased by £0.5 billion compared with Q2 2018, reflecting new business inflows and investment performance. In addition, Private Banking manages a further £7.1 billion of assets under management which sit in other parts of the Group. Total assets under management increased by 1.2%.

 

Business performance summary

 

RBS International

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	£m	£m	£m			£bn	£bn	£bn
Total income	155	147	97		Net loans & advances
Operating expenses	(60)	(55)	(59)		to customers	13.0	13.0	8.7
Impairment					Customer deposits	27.0	28.5	29.0
(losses)/releases	(3)	3	2		RWAs	6.9	6.8	5.1
Operating profit	92	95	40
Return on equity	26.9%	27.9%	10.4%
Net interest margin	1.73%	1.72%	1.39%

 

Comparisons with prior periods are impacted by the transfer of the funds and trustee depositary business from Commercial Banking and by the transfers of Coutts Crown Dependency and the International Client Group from Private Banking. The net impact of the transfers on Q3 2017 would have increased income by £44 million and increased operating expenses by £3 million. The variances in the commentary below have been adjusted for the impact of these transfers, unless otherwise stated.

 

Q3 2018 performance (comparisons adjusted for transfers)
●	Total Income of £155 million was £14 million, or 9.9%, higher than Q3 2017 principally reflecting deposit margin benefits. Net interest margin increased by 1 basis point compared with Q2 2018 reflecting funding benefits partially offset by an increase in deposits placed with central banks.
●	Operating expenses were £2 million lower than Q3 2017 as a reduction in conduct costs has been partially offset by increased back-office costs, associated with becoming a non ring-fenced bank.
●	Net loans and advances were stable compared with Q2 2018. Customer deposits decreased by £1.5 billion, or 5.3%, reflecting higher outflows of short term placements in the Funds sector since June.

 

NatWest Markets(1)

	Quarter ended					As at
	30 September	30 June	30 September			30 September	30 June	31 December
	2018	2018	2017			2018	2018	2017
	£m	£m	£m			£bn	£bn	£bn
Total income	569	284	20		Funded assets	120.9	134.5	118.7
Operating expenses	(478)	(322)	(526)		RWAs	46.5	50.1	52.9
Impairment
(losses)/releases	(4)	(13)	71
Operating profit/(loss)	87	(51)	(435)
Return on equity	1.8%	(3.0%)	(15.4%)

 

Note:

(1) The NatWest Markets operating segment should not be assumed to be the same as the NatWest Markets Plc legal entity or group following completion of the capital reduction on 2 July 2018.

 

Comparisons with prior periods are impacted by the transfer of shipping and other activities to Commercial Banking and the transfer of whole business securitisations and Relevant Financial Institutions from Commercial Banking in preparation for ring-fencing. The net impact of the transfers on Q3 2017 operating profit would have been to increase total income by £40 million, reduce the impairment release by £34 million and reduce operating expenses by £1 million.

Q3 2018 performance (comparisons adjusted for transfers)
●	Total income increased by £509 million to £569 million compared with Q3 2017 primarily reflecting indemnity insurance recoveries in the quarter of £165 million and non recurring disposal losses in the legacy business in Q3 2017. Income of £331 million in the core business decreased by £70 million compared with Q3 2017 reflecting more muted market conditions, although customer activity remained stable.
●	Operating expenses decreased by £47 million, or 9.0%, compared with Q3 2017 reflecting reductions in both the core and legacy businesses, partially offset by higher strategic costs, up £36 million to £93 million, and litigation and conduct costs, up £11 million to £113 million.
●	Funded assets decreased by £13.6 billion compared with Q2 2018 as the business continues to manage leverage exposure in line with becoming a non ring-fenced bank.
●	RWAs decreased by £3.6 billion in the quarter as core RWAs reduced by £2.3 billion, primarily reflecting lower market risk, and legacy RWAs reduced by £1.3 billion. RWAs of £46.5 billion include £5.8 billion relating to Alawwal.

 

Central items & other

●	Central items not allocated represented a charge of £4 million in Q3 2018, principally reflecting strategic costs of £131 million, partially offset by indemnity insurance recoveries of £107 million.

 

Business performance summary

 

	End-point CRR basis
	30 September	30 June	31 December
	2018	2018	2017
Risk asset ratios	%	%	%
CET1	16.7	16.1	15.9
Tier 1	18.8	18.1	17.9
Total	22.1	21.5	21.3
Capital	£m	£m	£m
Tangible equity	34,672	34,564	35,164
Expected loss less impairment provisions	(606)	(636)	(1,286)
Prudential valuation adjustment	(574)	(608)	(496)
Deferred tax assets	(731)	(746)	(849)
Own credit adjustments	(264)	(224)	(90)
Pension fund assets	(283)	(316)	(287)
Cash flow hedging reserve	370	151	(227)
Other adjustments for regulatory purposes	(129)	(235)	28
Total deductions	(2,217)	(2,614)	(3,207)
CET1 capital	32,455	31,950	31,957
AT1 capital	4,051	4,051	4,041
Tier 1 capital	36,506	36,001	35,998
Tier 2 capital	6,455	6,659	6,765
Total regulatory capital	42,961	42,660	42,763
Risk-weighted assets
Credit risk
- non-counterparty	142,500	144,000	144,700
- counterparty	14,100	15,100	15,400
Market risk	15,500	17,300	17,000
Operational risk	22,400	22,400	23,800
Total RWAs	194,500	198,800	200,900
Leverage (1)
Cash and balances at central banks	106,500	102,600	98,300
Derivatives	132,600	151,100	160,800
Loans and advances	337,200	338,100	339,400
Reverse repos	29,800	38,900	40,700
Other assets	113,800	117,600	98,900
Total assets	719,900	748,300	738,100
Derivatives
- netting and variation margin	(136,900)	(153,400)	(161,700)
- potential future exposures	42,700	46,200	49,400
Securities financing transactions gross up	1,700	2,700	2,300
Undrawn commitments	49,500	50,700	53,100
Regulatory deductions and other adjustments	(700)	(1,200)	(2,100)
CRR Leverage exposure	676,200	693,300	679,100
CRR leverage ratio%	5.4	5.2	5.3
UK leverage exposure (2)	580,300	597,700	587,100
UK leverage ratio% (2)	6.3	6.0	6.1

 

Notes:

(1)	Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.
(2)	Based on end-point CRR Tier 1 capital and UK leverage exposures reflecting the post EU referendum measures announced by the Bank of England in the third quarter of 2016.

 

Segment performance

Segment performance	Quarter ended 30 September 2018
	PBB			CPB					Central
		Ulster		Commercial	Private	RBS		NatWest	items &	Total
	UK PBB	Bank RoI		Banking	Banking	International		Markets	other (1)	RBS
	£m	£m		£m	£m	£m		£m	£m	£m
Income statement
Net interest income	1,289	110		525	133	124		15	(42)	2,154
Other non-interest income	275	41		264	62	31		534	261	1,468
Own credit adjustments	-	-		-	-	-		20	-	20
Total income	1,564	151		789	195	155		569	219	3,642
Direct expenses - staff costs	(221)	(51)		(131)	(39)	(26)		(120)	(299)	(887)
- other costs	(76)	(31)		(57)	(16)	(12)		(61)	(613)	(866)
Indirect expenses	(415)	(45)		(221)	(52)	(19)		(91)	843	-
Strategic costs - direct	-	(1)		(8)	1	(2)		(78)	(211)	(299)
- indirect	(41)	(2)		(17)	(4)	(1)		(15)	80	-
Litigation and conduct costs	(206)	(37)		(9)	-	-		(113)	(24)	(389)
Operating expenses	(959)	(167)		(443)	(110)	(60)		(478)	(224)	(2,441)
Operating profit/(loss) before impairment (losses)/releases	605	(16)		346	85	95		91	(5)	1,201
Impairment (losses)/releases	(70)	(60)		(103)	(1)	(3)		(4)	1	(240)
Operating profit/(loss)	535	(76)		243	84	92		87	(4)	961
Additional information
Return on equity (2)	20.9%	(12.7%)		6.6%	17.3%	26.9%		1.8%	nm	5.4%
Cost:income ratio (3)	61.3%	110.6%		54.3%	56.4%	38.7%		84.0%	nm	66.7%
Loan impairment rate	0.17%	1.18%		0.45%	nm	nm		nm	nm	0.30%
Net interest margin (%)	2.76%	1.72%		1.71%	2.54%	1.73%		0.22%	nm	1.93%
Third party customer asset rate	3.39%	2.42%		2.89%	2.91%	2.29%		nm	nm	nm
Third party customer funding rate	(0.29%)	(0.20%)		(0.33%)	(0.26%)	(0.11%)		nm	nm	nm
Average interest earning assets (£bn)	185.2	25.4		122.0	20.8	28.4		26.7	34.6	443.1
Total assets (£bn)	195.6	25.3		144.0	21.4	29.0		253.3	51.3	719.9
Funded assets (£bn)	195.6	25.3		144.0	21.4	29.0		120.9	51.1	587.3
Net loans and advances to customers (£bn)	163.2	19.2		90.1	14.2	13.0		19.7	0.2	319.6
Impairment provisions (£bn)(4)	(1.4)	(1.2)		(1.0)	(0.1)	-		(0.2)	-	(3.9)
Customer deposits (£bn)	183.4	18.1		96.4	27.2	27.0		12.8	1.1	366.0
Risk-weighted assets (RWAs) (£bn)	45.4	16.5		69.0	9.5	6.9		46.5	0.7	194.5
RWA equivalent	47.1	16.6		72.5	9.5	6.9		49.9	0.7	203.2
Employee numbers (FTEs - thousands)	24.8	3.1		8.1	1.9	1.7		4.9	24.1	68.6
For the notes to this table, refer to page 10. nm = not meaningful

 

Segment performance

	Nine months ended 30 September 2018
	PBB			CPB					Central
		Ulster		Commercial	Private	RBS		NatWest	items &	Total
	UK PBB	Bank RoI		Banking	Banking	International		Markets	other (1)	RBS
	£m	£m		£m	£m	£m		£m	£m	£m
Income statement
Net interest income	3,831	334		1,522	385	343		82	(17)	6,480
Other non-interest income	894	129		1,047	192	96		1,149	298	3,805
Own credit adjustments	-	-		-	-	-		59	-	59
Total income	4,725	463		2,569	577	439		1,290	281	10,344
Direct expenses - staff costs	(682)	(149)		(404)	(122)	(77)		(429)	(927)	(2,790)
- other costs	(207)	(76)		(157)	(44)	(45)		(176)	(1,842)	(2,547)
Indirect expenses	(1,279)	(133)		(662)	(157)	(56)		(292)	2,579	-
Strategic costs - direct	(26)	1		(16)	-	(2)		(106)	(500)	(649)
- indirect	(137)	(8)		(50)	(11)	(4)		(21)	231	-
Litigation and conduct costs	(210)	(54)		(3)	(1)	10		(125)	(807)	(1,190)
Operating expenses	(2,541)	(419)		(1,292)	(335)	(174)		(1,149)	(1,266)	(7,176)
Operating profit/(loss) before impairment (losses)/releases	2,184	44		1,277	242	265		141	(985)	3,168
Impairment (losses)/releases	(217)	(34)		(122)	(2)	-		(8)	2	(381)
Operating profit/(loss)	1,967	10		1,155	240	265		133	(983)	2,787
Additional information
Return on equity (2)	26.2%	0.5%		11.6%	16.3%	26.0%		0.2%	nm	5.3%
Cost:income ratio (3)	53.8%	90.5%		48.5%	58.1%	39.6%		89.1%	nm	69.1%
Loan impairment rate	0.18%	0.22%		0.18%	nm	nm		nm	nm	0.16%
Net interest margin %	2.79%	1.81%		1.67%	2.53%	1.67%		0.41%	nm	1.99%
Third party customer asset rate %	3.41%	2.40%		2.81%	2.87%	2.38%		nm	nm	nm
Third party customer funding rate %	(0.28%)	(0.21%)		(0.32%)	(0.21%)	(0.10%)		nm	nm	nm
Average interest earning assets (£bn)	183.4	24.7		121.8	20.3	27.4		27.0	30.6	435.2
Total assets (£bn)	195.6	25.3		144.0	21.4	29.0		253.3	51.3	719.9
Funded assets (£bn)	195.6	25.3		144.0	21.4	29.0		120.9	51.1	587.3
Net loans and advances to customers (£bn)	163.2	19.2		90.1	14.2	13.0		19.7	0.2	319.6
Impairment provisions (£bn) (4)	(1.4)	(1.2)		(1.0)	(0.1)	-		(0.2)	-	(3.9)
Customer deposits (£bn)	183.4	18.1		96.4	27.2	27.0		12.8	1.1	366.0
Risk-weighted assets (RWAs) (£bn)	45.4	16.5		69.0	9.5	6.9		46.5	0.7	194.5
RWA equivalent (RWAes) (£bn)	47.1	16.6		72.5	9.5	6.9		49.9	0.7	203.2
Employee numbers (FTEs - thousands)	24.8	3.1		8.1	1.9	1.7		4.9	24.1	68.6
For the notes to this table refer to the following page. nm = not meaningful.

Condensed consolidated income statement for the period ended 30 September 2018 (unaudited)

 

	Nine months ended			Quarter ended
	30 September	30 September		30 September	30 June	30 September
	2018	2017		2018	2018	2017
	£m	£m		£m	£m	£m
Interest receivable	8,224	8,280		2,780	2,742	2,818
Interest payable	(1,744)	(1,504)		(626)	(562)	(514)
Net interest income (1)	6,480	6,776		2,154	2,180	2,304
Fees and commissions receivable	2,433	2,492		787	833	826
Fees and commissions payable	(671)	(652)		(220)	(244)	(204)
Income from trading activities	1,346	832		499	382	(52)
Loss on redemption of own debt	-	(7)		-	-	-
Other operating income	756	635		422	249	283
Non-interest income	3,864	3,300		1,488	1,220	853
Total income	10,344	10,076		3,642	3,400	3,157
Staff costs	(3,108)	(3,576)		(1,022)	(1,031)	(1,129)
Premises and equipment	(972)	(1,041)		(328)	(274)	(363)
Other administrative expenses	(2,521)	(1,736)		(885)	(1,237)	(528)
Depreciation and amortisation	(544)	(630)		(206)	(175)	(119)
Write down of other intangible assets	(31)	(12)		-	(7)	(4)
Operating expenses	(7,176)	(6,995)		(2,441)	(2,724)	(2,143)
Profit before impairment losses	3,168	3,081		1,201	676	1,014
Impairment losses	(381)	(259)		(240)	(63)	(143)
Operating profit before tax	2,787	2,822		961	613	871
Tax charge	(1,139)	(992)		(398)	(412)	(265)
Profit for the period	1,648	1,830		563	201	606
Attributable to:
Non-controlling interests	6	21		22	(23)	(8)
Preference share and other dividends	306	478		93	128	222
Ordinary shareholders	1,336	1,331		448	96	392
Earnings per ordinary share (EPS)
Earnings per ordinary share (2)	11.1p	11.2p		3.7p	0.8p	3.3p