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 February 15, 2019
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
2018 RBS performance summary
 
RBS reported an operating profit before tax of £3,359 million and an attributable profit of £1,622 million for 2018 and proposes a final ordinary dividend of 3.5 pence per share and a 7.5 pence special dividend.
 
Q4 2018 operating profit before tax of £572 million and an attributable profit of £286 million.
 
Continued track record of delivery
 
Income resilient in a competitive market:
 
Income increased by £269 million, or 2.0%, compared with 2017. Excluding notable items, NatWest Markets and Central items, income was stable.
 
2018 net interest margin of 1.98% decreased by 15 basis points compared with 2017. Q4 2018 net interest margin of 1.95%, or 1.97% excluding one-off items, was 2 basis points higher than Q3 2018.
 
Lower costs through continued transformation and increased digitisation:
 
Compared with 2017, other expenses decreased by £278 million, or 3.6%, excluding one-off VAT releases in 2017, and FTEs reduced by 5.8%.
 
We continue to transition from physical to digital services. 6.4 million customers now regularly use our mobile app, 16% higher than 2017. In UK PBB, total digital sales increased by 19%, representing 45% of all sales. In Commercial Banking, we successfully launched the Bankline mobile app in the Apple app store and our customers can now apply digitally for loans of up to £750,000, the largest value offered by a UK commercial bank, with approximately 50% of loans given a decision in principle in under 24 hours.
 
Stronger capital position:
 
CET1 ratio of 16.2% increased by 30 basis points in 2018 and included: the impact of a £2 billion pre-tax pension contribution; the settlement with the Department of Justice; and full year ordinary and special dividends of £1.6 billion. Excluding these items, the CET1 ratio increased by 240 basis points driven by the profit and reduced RWAs.
 
Active capital management reduced RWAs by £12.2 billion in 2018.
 
RBS achieved a clear pass in the 2018 Bank of England stress test.
 
 
 
Outlook(1)
RBS, like all companies, continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment. Our central economic forecast, which supports our corporate plan, is in line with consensus as at the end of December 2018 and shows average UK GDP growth of around 1.0-2.0% from 2019 to 2023 and continued low interest rates. Given the current uncertainties we will continue to actively monitor and react to market conditions.
 
2019 Outlook
As part of our continued cost savings plans, we expect to incur aggregate strategic costs of around £2.5 billion across 2018 and 2019, with £1.0 billion of this having been incurred during 2018. We plan to reduce operating expenses, excluding strategic costs and conduct and litigation costs, by £300 million in 2019 compared with 2018, excluding one-off items.
 
2018 saw a continuation of the period of benign economic conditions with low defaults and strong cash recoveries. However, the potential impact on the real economy of ongoing political uncertainties and geopolitical tensions could affect our credit loss outcome. As a result, impairments are expected to increase in 2019 but remain below our through-the-cycle loss rate assumption of 30-40 basis points. The threat from single name and sector driven events remains.
 
We expect to end 2019 with risk weighted assets (RWAs) of around £185 – 190 billion as the RWAs associated with Alawwal Bank are expected to reduce by around £5 billion, subject to regulatory approvals relating to the merger and our shareholding.
 
RBS Group (RBSG) capital and funding plans focus on issuing £3-5 billion of MREL-compliant instruments and around £1 billion of Tier 2 instruments. We do not plan to issue AT1 in 2019. As in prior years, we will continue to target other funding sources to diversify our funding structure, including senior secured issuance of £2-3 billion from NatWest Bank. NatWest Markets Plc, as a standalone bank, plans to issue £3-5 billion of term senior unsecured instruments.
 
Medium term outlook
While we remain comfortable with our 2020 target of a return on tangible equity of more than 12%, we recognise our 2020 target of a cost:income ratio of less than 50% is increasingly challenging for the business to achieve with the risk being to the downside. This reflects the ongoing economic and political uncertainty and the additional ongoing costs associated with ring-fencing and Brexit.
 
Our previous guidance on RWAs beyond 2020 was an estimated 10% increase in 2021 relating to Basel 3 amendments, in addition to RWA inflation as a result of IFRS 16, which requires lease obligations to be brought on balance sheet, of £1.3 billion in 2019 and Bank of England mortgage floors of £10.5 billion in 2020. We now expect the overall impact of Basel 3 amendments to be in the range of 5-10% and phased across 2021 to 2023, with the details still subject to significant regulatory uncertainty.
 
RBS Group capital distributions
We propose a 3.5 pence final ordinary dividend and a 7.5 pence special dividend for the 2018 financial year, while maintaining a CET1 ratio of 16.2% as at 31 December 2018.
 
Pro-forma for the introduction of IFRS16 - Leases, the CET1 ratio was 16.0%, with the c.20 basis points reduction reflecting a £1.3 billion increase in RWAs and £0.3 billion charge against reserves.
 
We expect to maintain ordinary dividends of around 40% of attributable profit. We have updated our medium term guidance of CET1 to be approximately 14% at the end of 2021. We have shareholder and regulatory approval to carry out directed buybacks of the UK government stake in RBS, but recognise that any exercise of this authority would be dependant upon HMT’s intentions and is limited to 4.99% of issued share capital in any 12 month period. As a reminder, we have also committed to make further pre tax contributions to the pension scheme of up to £1.5 billion in aggregate from 1 January 2020 linked to future distributions to RBS shareholders.
 
NatWest Markets (NWM)
The NWM franchise includes NWM Plc and NWM N.V., both of which are currently direct subsidiaries of RBSG. RBS has previously announced its intention for NWM N.V. to become a subsidiary of NWM Plc following the completion of the sale of the consortium holding in Alawwal. As such, NWM Plc’s financial reporting does not currently include NWM N.V.
 
NWM Plc is regulated and discloses capital ratios and RWAs on a standalone bank basis and is targeting by 2020 a CET1 ratio of circa 15%, MREL ratio of at least 30% and a leverage ratio of at least 4%.
 
We plan to transfer our Western Europe corporate business into NWM N.V. from the ring-fenced bank, in addition to the NWM business that is expected to be part of a FSMA Part VII Transfer Scheme from NWM Plc to NWM N.V., subject to court approval and as announced on 6 December 2018. NWM Plc legal entity RWAs are expected to be around £35 billion, NWM N.V. RWAs are expected to be around £8billion with the consolidated NWM franchise position, excluding RWAs related to intercompany positions, expected to be around £39 billion by 2020.
 
Note:
 (1)
The targets, expectations and trends discussed in this section represent RBSG and NWM’s management’s current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” section on pages 253 to 263 of the RBSG 2018 Annual Report and Accounts and pages 124 to 133 of the NWM 2018 Annual Report and Accounts. These statements constitute forward-looking statements; refer to Forward-looking statements in this document.
 
Business performance summary
 
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
Performance key metrics and ratios
2018 
2017 
 
2018 
2018 
2017 
Operating profit/(loss) before tax
£3,359m
£2,239m
 
£572m
£961m
(£583m)
Profit/(loss) attributable to ordinary shareholders
£1,622m
£752m
 
£286m
£448m
(£579m)
Net interest margin
1.98%
2.13%
 
1.95%
1.93%
2.04%
Average interest earning assets
£437bn
£422bn
 
£442bn
£443bn
£431bn
Cost:income ratio (1)
71.7%
79.0%
 
80.5%
66.7%
111.5%
Earnings per share
 
 
 
 
 
 
  - basic
13.5p
6.3p
 
2.4p
3.7p
(4.9p)
  - basic fully diluted
13.4p
6.3p
 
2.3p
3.7p
(4.9p)
Return on tangible equity
4.8%
2.2%
 
3.5%
5.4%
(6.7%)
Average tangible equity
£33bn
£34bn
 
£33bn
£33bn
£34bn
Average number of ordinary shares
 
 
 
 
 
 
 outstanding during the period (millions)
 
 
 
 
 
 
   - basic
12,009 
11,867 
 
12,040 
12,034 
11,944 
  - fully diluted (2)
12,061 
11,936 
 
12,081 
12,083 
12,003 
 
 
 
 
 
 
 
 
 
31 December
30 September
31 December
Balance sheet related key metrics and ratios
2018
2018
2017
Total assets
£694.2bn
£719.9bn
£738.1bn
Funded assets
£560.9bn
£587.3bn
£577.2bn
Loans to customers - amortised cost
£305.1bn
£305.8bn
£310.1bn
Impairment provisions (3)
£3.3bn
£3.9bn
£3.8bn
Customer deposits
£360.9bn
£360.6bn
£361.3bn
 
 
 
 
Liquidity coverage ratio (LCR)
158%
158%
152%
Liquidity portfolio
£198bn
£195bn
£186bn
Net stable funding ratio (NSFR) (4)
141%
139%
132%
Loan:deposit ratio (5)
85%
85%
86%
Total wholesale funding
£74bn
£78bn
£70bn
Short-term wholesale funding
£15bn
£14bn
£18bn
 
 
 
 
Common Equity Tier (CET1) ratio
16.2%
16.7%
15.9%
Total capital ratio
21.8%
22.1%
21.3%
Pro forma CET 1 ratio, pre 2018 dividend accrual (6)
16.9%
16.8%
15.9%
Risk-weighted assets (RWAs)
£188.7bn
£194.5bn
£200.9bn
CRR leverage ratio
5.4%
5.4%
5.3%
UK leverage ratio
6.2%
6.3%
6.1%
 
 
 
 
Tangible net asset value (TNAV) per ordinary share
287p
288p
294p
Tangible net asset value (TNAV) per ordinary share - fully diluted
286p
287p
292p
Tangible equity
£34,566m
£34,672m
£35,164m
Number of ordinary shares in issue (millions)
12,049 
12,048 
11,965 
Number of ordinary shares in issue (millions) - fully diluted (2,7)
12,088 
12,091 
12,031 
 
Notes:
(1)
Operating lease depreciation included in income for the year ended 31 December 2018 - £121 million; Q4 2018 - £32 million (year ended 31 December 2017 - £142 million; Q3 2018 - £32 million; Q4 2017 - £35 million).
(2)
Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q4 2018 were 41 million shares and for the year ended 31 December 2018 were 52 million shares; (year ended 31 December 2017 - 69 million shares, Q3 2018 – 49 million shares, Q4 2017 – 59 million shares), and as at 31 December 2018 were 39 million shares (30 September 2018 - 43 million shares; 31 December 2017 - 66 million shares).
(3)
31 December and 30 September 2018 prepared under IFRS 9, 31 December 2017 prepared under IAS 39.
(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 loan:deposit ratio has been updated following the adoption of IFRS 9 to be based on customer loans and deposits held at amortised cost. Comparatives have been re-presented.
(6)
The pro forma CET 1 ratio at 31 December 2018 excludes a charge of £422 million (3.5p per share) for the final dividend and £904 million (7.5p per share) for the special dividend (30 September 2018 - £120 million (1p per share)) that are reasonably foreseeable dividends.
(7)
Includes 8 million treasury shares (30 September 2018 - 9 million shares; 31 December 2017 - 16 million shares).
 
 
 
Chief Executive’s message
 
2018 was a year of strong progress on our strategy - we settled our remaining major legacy issues, paid our first dividend in ten years and delivered another full year bottom line profit. However, while our financial performance is more assured, we know that a significant gap remains to achieving our ambition to be the best bank for customers. We are fully focused on closing this gap.
Today we are reporting a pre-tax operating profit of £3.4 billion and a bottom line attributable profit of £1.6 billion for 2018. In addition, we are pleased to propose a full year ordinary dividend of 3.5 pence per share, and a special dividend of 7.5 pence per share. These are in addition to the ordinary dividend we paid at our interim results. Together, we will have returned £1.6 billion to shareholders, and around £1 billion to the UK taxpayer in dividends. We also have shareholder approval to participate in a directed buyback should the government seek to dispose of a portion of its shares.
 
The UK economy faces a heightened level of uncertainty related to the ongoing Brexit negotiations. We have continued to support our customers, providing £30.4 billion in gross new UK mortgage lending in 2018, and Commercial Banking made or renewed commitments of around £30 billion of term lending facilities to mainly UK businesses. Our Commercial and Business Banking businesses supported total lending of more than £100 billion in 2018.
 
We have also committed an additional £2 billion to our Growth Fund to support British business, taking the total fund to £3 billion. This fund is helping businesses manage their supply chains in what is a very uncertain time. These actions help maintain our position as the largest supporter of UK business.
 
A good financial performance in uncertain economic conditions
Our financial performance is good, given the uncertain economic outlook. In 2018, we continued to take costs out of the business and reduced operating expenses by £278 million. This means that we have now reduced operating costs by more than £4 billion in five years.
 
Our long-term target remains to reach a cost to income ratio of below 50%, however we note that as an industry we are required to carry additional costs to deal with Brexit and the ongoing operational obligations of ring-fencing. Given the continued low rate environment and highly competitive mortgage market, coupled with the uncertainty in the economy, income remains under pressure. We continue to focus on cost reduction to ensure we are preparing our business for the future and to meet our customers and shareholders needs.
 
In 2019, we are committing to reducing our operating costs by c.£300 million. Our consistent delivery on cost targets in recent years gives me the confidence we will achieve this.
 
Our strategic plan has served us well and we will continue to focus on our five key priorities, as set out below, as we strive to become the UK and Republic of Ireland’s best bank for customers.
 
Strength and Sustainability
The bank’s financial strength is much improved. Our Common Equity Tier 1 ratio has increased from 8.6% at the end of 2013 to 16.2% at the end of 2018. This progress helped us to obtain a clear pass in the 2018 Bank of England stress test - a very important milestone. Alongside our financial strength we have continued to build greater resilience into our systems, helping to protect our customers who are at greater risk of fraud and scams more than ever before. We are the first and only UK bank to partner with National Trading Standards on their Friends Against Scams initiative. More than 31,000 colleagues completed the training in 2018 and we have committed to training a million customers by 2020.
 
Customer Experience
While our financial performance is more assured, we know that a significant gap remains to achieving our ambition to be the best bank for customers. We are very aware that we need to deliver better service, more consistently. The Competition and Markets Authority (CMA) results, which now provide the public with a ranking of banks’ performance for customers, bring this into sharp focus. With the large major legacy issues behind us, we are putting all of our focus into improving our customer experience.
 
We are investing in innovation, with £1 billion committed to invest in 2019 aimed at improving legacy systems and delivering better solutions for customers. We continue to develop our mobile app which for NatWest now scores +41 for customer advocacy. Our Commercial Bank, the UK’s largest supporter of business, remains ahead of the rest of the market for customer advocacy and in Coutts we have a market leading private banking brand.
 
Customers want and need to do their banking quickly and safely. When we help them to do this, and combine it with expert advice, we see advocacy scores increase. That is how we are focusing the business, and we are confident the changes we are making will deliver a consistently higher quality of service.
 
Simplifying the Bank
We are a simpler bank, but we can’t yet call ourselves simple to deal with. While we are now more efficient with a lower cost base, as we have shrunk in size, many of our processes are still too difficult for our customers to deal with, and are frustrating for our colleagues as they try to serve our customers. Whether it is booking travel, watching a film or shopping online, customers now expect a fast and reliable service. Banking is no different from any other customer focused industry, and we are responding to those changes in customer behaviour.
 
Our first digital lending journey for Commercial Banking customers is now live. The new platform allows existing customers to apply digitally for secured and unsecured loans up to £750,000, subject to eligibility criteria. Customers are able to complete their loan application in a matter of minutes, and usually get a decision in principle within 24 hours. We have simplified and streamlined the customer experience, giving our customers a rapid response, all the while supported by the vast industry knowledge and insight of our Relationship Managers.
 
We are also embracing artificial intelligence (AI), which is helping us lower our cost base and deliver a 24/7 customer experience . Take Cora for instance –our AI Chat Bot which we launched in partnership with IBM Watson - she now handles an average of 83,000 queries a week. Given the success in the personal business, we have recently rolled out Cora to Commercial Banking.
 
Supporting sustainable growth
Supporting our customers’ ambitions is a key part of our role in society. We have focused on growing lending in our target markets. Gross mortgage lending in UK Personal and Business Banking increased £1.5 billion in 2018, and we helped around 45,000 customers buy their first home. Our support doesn’t only extend to lending, we now have 12 NatWest accelerators. These hubs make up the UK’s largest fully-funded business accelerator network, capable of supporting up to 1,000 entrepreneurs.
 
NatWest Markets continued to support large corporate customers with a range of financing needs in 2018. Our FX team was voted number one for customer satisfaction in the 2017 Greenwich Associates FX Survey and we helped clients raise £312 billion on the debt capital markets.
 
Employee engagement
The turnaround of the bank would not have been possible without the hard work and determination of our colleagues. Over the last four years we have seen a significant reduction in the number of roles across the bank, as a result of divestment and restructuring aligned to our strategy. Despite this activity, colleague engagement is at its highest level since we started measuring in 2002. The independent Banking Standards Board report on culture also showed improvements in every category. Of course, there is always more we can do, and we have set stretching targets as we strive to become a more diverse and inclusive organisation.
 
Innovating and investing to improve customer service
We have taken a dual approach to innovation by transforming our core banking services and delivering new products and services outside of traditional banking. In 2018, we continued to invest in our existing infrastructure, improving system resilience and migrating to latest in cloud technologies. Last year we experienced 19 Criticality 1 Incidents, compared to 318 four years ago.
 
Our customers continued to migrate to our mobile app during 2018. In UK PBB we now have 6.4 million regular mobile customers, 16% higher than 2017. Today close to three quarters of active current account customers in UK PBB are regular digital users. Sales through our digital channels in UK PBB are up 19% on last year and now represent almost half of all product sales. Four years ago this figure would have been 26%.
 
At the same time we are trying new things outside our core banking services. We are piloting Bó and Mettle as two standalone digital banks. Bó is our digital personal bank targeted at helping people to manage their money better. Mettle is our digital bank for business customers.
 
We are learning a lot from these innovations and applying our findings back into the core bank.
 
These innovations complement the wider eco-systems that we want to build around key customer experiences – be it buying a home, or running a business. Building or acquiring complementary services to the core banking services we already offer in these areas will allow us to deepen our relationships with customers, and ultimately grow revenue.
 
2019, a year of focusing forward
In 2019, we will focus forward, into a rapidly changing market. We have set annual goals for 2019 based around our five priorities in order to keep up momentum on the delivery of our strategic plan. There are two areas in particular that we need to focus on – customer experience and simplifying the bank. This year we aim to spend £1 billion on upgrading legacy infrastructure, improving systems, processes and delivering new innovations which will improve our customers’ experience. We will simplify the bank further in 2019, given this we have set a operating cost reduction target of c.£300 million for 2019, and continue to strive for a sub 50% cost to income ratio.
 
We have made good progress on making RBS a much simpler, safer and more customer focused bank. From a position of capital strength, we will aim to improve returns for you, our shareholders.
 
 
Building the best bank for customers in the UK and Republic of Ireland
 
Customer Advocacy and Trust Scores
 
Our brands are our main connection with customers. Each takes a clear and differentiated position with the aim of helping us strengthen our relationship with them. For this reason we track customer advocacy for our key brands using the net-promoter score (NPS) – a commonly-used metric in banking and other industries across the world.
 
We know that we still have much to do. Our recent programme of branch closures has had a detrimental impact on NPS. But we are determined to make a difference with the things that matter most to our customers. We are listening hard. In 2018, we called a total of over 113,000 customers; either to learn more about feedback that they had already given us, or to respond to issues that they identified. Through fixing our core processes we will get our core service right first time more consistently while at the same time innovating to deliver better solutions.
 
The tables below show NPS and Trust scores for our key brands.
 
Personal Banking
 
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
NatWest
12
12
13
12
11
Royal Bank of Scotland
-6
-14
-21
-22
-17
Ulster Bank Northern Ireland
-5
-6
-11
-9
-10
Ulster Bank Republic of Ireland
-7
-5
-7
-6
-6
 
 
Source: Ipsos MORI FRS 6 month rolling data. Latest base sizes: 3,111 for NatWest (England & Wales); 421 for Royal Bank of Scotland (Scotland). 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?” Base: Claimed main banked current account customers.
Source: Coyne Research 12 month rolling data. 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”. Latest base sizes: 274 Northern Ireland; 297 Republic of Ireland.
 
Business Banking
 
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
NatWest
-7
-10
-6
-5
-9
Royal Bank of Scotland
-15
-22
-23
-29
-36
 
 
Source: Charterhouse Research Business Banking Survey, YE Q4 2018. Based on interviews with businesses with an annual turnover up to £2 million. Latest base sizes: 1134 for NatWest (England & Wales), 455 for Royal Bank of Scotland (Scotland). Question: “How likely would you be to recommend (bank)”. Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
 
Commercial Banking
 
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
NatWest
25
23
22
21
21
Royal Bank of Scotland
21
10
17
21
20
 
 
Source: Charterhouse Research Business Banking Survey, YE Q4 2018. Based on interviews with businesses with an annual turnover over £2 million. Latest base sizes: 558 for NatWest (England & Wales), 103 for Royal Bank of Scotland (Scotland). Question: “How likely would you be to recommend (bank)”. Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
 
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).
 
 
Q4 2017
Q1 2018
Q2 1208
Q3 2018
Q4 2018
NatWest
57
59
58
64
56
Royal Bank of Scotland
27
15
27
25
27
 
 
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: 891 for NatWest (England & Wales), 215 for Royal Bank of Scotland (Scotland).
 
 
Summary consolidated income statement for the period ended 31 December 2018
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2018 
2017 
 
2018 
2018 
2017 
 
£m
£m
 
£m
£m
£m
Net interest income
8,656 
8,987 
 
2,176 
2,154 
2,211 
 
 
 
 
 
 
 
Own credit adjustments
92 
(69)
 
33 
20 
Loss on redemption of own debt
(7)
 
Strategic disposals
347 
 
191 
Other non-interest income
4,654 
3,875 
 
849 
1,468 
646 
 
 
 
 
 
 
 
Non-interest income
4,746 
4,146 
 
882 
1,488 
846 
 
 
 
 
 
 
 
Total income
13,402 
13,133 
 
3,058 
3,642 
3,057 
 
 
 
 
 
 
 
Litigation and conduct costs
(1,282)
(1,285)
 
(92)
(389)
(764)
Strategic costs
(1,004)
(1,565)
 
(355)
(299)
(531)
Other expenses
(7,359)
(7,551)
 
(2,022)
(1,753)
(2,111)
 
 
 
 
 
 
 
Operating expenses
(9,645)
(10,401)
 
(2,469)
(2,441)
(3,406)
 
 
 
 
 
 
 
Profit/(loss) before impairment losses
3,757 
2,732 
 
589 
1,201 
(349)
Impairment losses(1)
(398)
(493)
 
(17)
(240)
(234)
 
 
 
 
 
 
 
Operating profit/(loss) before tax
3,359 
2,239 
 
572 
961 
(583)
Tax (charge)/credit
(1,275)
(824)
 
(136)
(398)
168 
 
 
 
 
 
 
 
Profit/(loss) for the period
2,084 
1,415 
 
436 
563 
(415)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
1,622 
752 
 
286 
448 
(579)
Other owners
470 
628 
 
164 
93 
150 
Non-controlling interests
(8)
35 
 
(14)
22 
14 
 
 
 
 
 
 
 
Notable items within total income
 
 
 
 
 
 
IFRS volatility in Central items & other (2)
(59)
 
(25)
77 
(173)
Insurance indemnity
357 
 
85 
272 
of which:
 
 
 
 
 
 
  NatWest Markets
165 
 
165 
  Central items & other
192 
 
85 
107 
UK PBB debt sale gain
61 
185 
 
35 
FX losses in Central items & other
(46)
(183)
 
(39)
(11)
(8)
Commercial Banking fair value and disposal gain/(loss)
169 
 
(10)
(13)
(46)
NatWest Markets legacy business disposal (losses)/gains
(86)
(712)
 
(43)
14 
(163)
 
 
 
 
 
 
 
Notable items within expenses
 
 
 
 
 
 
Litigation and conduct costs
(1,282)
(1,285)
 
(92)
(389)
(764)
of which: US RMBS
(823)
(664)
 
(21)
(442)
  of which: DoJ
(1,040)
 
                  Nomura
241 
 
of which: PPI
(200)
(175)
 
(200)
(175)
of which: Ulster Bank RoI
(71)
(169)
 
(17)
(37)
(135)
VAT recovery in Central items & other
86 
 
 
Notes:
(1)
31 December 2018 and 30 September 2018 prepared under IFRS 9, 31 December 2017 prepared under IAS 39. Refer to Note 2 in this document and Note 34 in the 2018 Annual Report and Accounts for further information on the impact of IFRS 9 on 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
 
Income statement overview
 
2018 compared with 2017
 
Income
Total income increased by £269 million, or 2.0%. Excluding notable items, income decreased by £650 million, or 4.8%, primarily reflecting lower NatWest Markets income and reduced net interest income. Excluding notable items, NatWest Markets and Central items, income was stable.
Net interest income decreased by £331 million, or 3.7%, driven by margin pressure, active capital management in Commercial Banking, a reduction in the NatWest Markets legacy business and one-off Central items in 2017. Net interest margin was 15 basis points lower than 2017, or 13 basis points lower excluding one-off items reflecting an 8 basis points reduction relating to increased liquidity, 3 basis points from competitive pressures and 2 basis points from mix impacts. Structural hedges of £159 billion generated £0.9 billion of incremental net interest income for the year, compared with £1.5 billion of incremental net interest income on a balance of £149 billion in 2017.
Non-interest income increased by £600 million, or 14.5%. Excluding notable items, non-interest income decreased by £381 million principally due to lower core NatWest Markets income driven by challenging fixed income, currencies and commodities (FICC) market conditions in Q4 2018, together with turbulence in European bond markets earlier in the year.
 
Operating expenses
Operating expenses decreased by £756 million, or 7.3%, primarily reflecting £561 million lower strategic costs and a £192 million reduction in other expenses, with litigation and conduct costs remaining broadly stable despite the US Department of Justice charge in the year. Excluding £86 million of one-off VAT releases in 2017, other expenses decreased by £278 million, or 3.6%, and FTEs reduced by 5.8%.
Strategic costs of £1,004 million included: a £195 million direct charge in NatWest Markets relating to both the wind-down of the legacy business and ongoing development of the core business infrastructure; £177 million in respect of implementing ring-fencing requirements; £171 million of technology costs; a £133 million charge relating to the reduction in our property portfolio; a £76 million net settlement relating to the International Private Bank pension scheme; with the remaining charge largely relating to restructuring costs to achieve cost efficiencies across front and back office operations.
Litigation and conduct costs of £1,282 million largely comprises the £1,040 million charge relating to the settlement with the Department of Justice and a £200 million charge relating to Payment Protection Insurance, partially offset by a £241 million provision release relating to a RMBS litigation indemnity.
The cost:income ratio of 71.7% is elevated due to the inclusion of the net RMBS related conduct charge. Excluding this item the cost:income ratio, including strategic costs, would be 65.7%.
 
 
Impairments
A net impairment loss of £398 million, 13 basis points of gross customer loans, decreased by £95 million, or 19.3%, compared with 2017 primarily reflecting lower single name charges in Commercial Banking, partially offset by fewer provision releases in UK PBB and NatWest Markets. In addition, we took an additional £101 million charge in Q3 2018 reflecting the more uncertain economic outlook and a net £60 million impairment charge in Ulster Bank RoI principally in relation to ongoing sales from our loan book to further reduce the level of non performing loans. Underlying credit conditions remained benign during 2018.
 
 
 
 
Business performance summary
 
Personal & Business Banking – UK Personal & Business Banking
 
 
 
 
Year ended
 
Quarter ended and as at
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2018 
2017 
 
2018 
2018 
2017 
 
 
£m
£m
 
£m
£m
£m
Total income
 
6,282 
6,477 
 
1,557 
1,564 
1,548 
Operating expenses
 
(3,482)
(3,829)
 
(941)
(959)
(1,266)
Impairment losses
 
(342)
(235)
 
(125)
(70)
(60)
Operating profit
 
2,458 
2,413 
 
491 
535 
222 
Return on equity
 
24.3%
23.7%
 
18.6%
20.9%
7.8%
Net interest margin
 
2.78%
2.86%
 
2.73%
2.76%
2.76%
 
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
 
162.3 
163.2 
161.7 
Customer deposits
 
 
 
 
184.1 
183.4 
180.4 
RWAs
 
 
 
 
45.1 
45.4 
43.0 
 
 
2018 compared with 2017
UK PBB now has 6.4 million regular mobile app users, 16% higher than 2017, with 72% of our active current account customers being regular digital users. Total digital sales increased by 19% representing 45% of all sales. 61% of mortgage switching is now done digitally, compared with 51% in 2017. 57% of personal unsecured loans sales are via the digital channel, with digital volumes 31% higher. In business banking, 91% of current accounts and 68% of loans under £50,000 were originated digitally.
Total income was £195 million, or 3.0%, lower reflecting £124 million lower debt sale gains and a £33 million transfer of the Collective Investment Funds business to Private Banking in Q4 2017. Excluding these items, income was £38 million, or 0.6%, lower, including a £28 million reduction in overdraft fees following changes implemented in H2 2017, which included increasing the number of customer alerts. Net interest income of £5,098 million decreased by 0.6% as balance growth and deposit margin benefits were offset by lower mortgage new business margins, with net interest margin down by 8 basis points to 2.78%.
Operating expenses decreased by £347 million, or 9.1%. Excluding strategic, litigation and conduct costs, operating expenses were £167 million, or 5.3%, lower driven by reduced back-office operations costs and lower headcount reflecting continued operating efficiencies, partially offset by increased technology investment spend as we continue to build our digital capability.
Impairments were £107 million higher driven by fewer provision releases and lower recoveries following debt sales in prior years, as well as increased provision requirements under IFRS 9. The underlying default rate remained broadly stable with asset growth also accounting for an element of the uplift.
Net loans to customers increased by 0.4% to £162.3 billion. The business has maintained a prudent approach to risk and pricing in a very competitive market, with gross new mortgage lending in 2018 at £30.4 billion, 1.9% lower than 2017. Mortgage market share was maintained at 11.3% supporting a stock share of around 10%. Momentum continued in personal advances and business banking, increasing by 7.0% and 0.4% respectively.
Customer deposits increased by £3.7 billion, or 2.1%, as growth continued across current accounts and savings.
RWAs increased by £2.1 billion, or 4.9%, principally due to modelling changes on mortgages and unsecured loans.
 
Q4 2018 compared with Q3 2018
Total income decreased by £7 million primarily due to a charge of £18 million following an annual review of mortgage customer repayment behaviour and lower seasonal debit and credit card fee income, partially offset by a debt sale gain of £35 million. Net interest margin was 3 basis points lower principally due to the mortgage customer repayment behaviour charge. Excluding this charge, net interest margin increased as the benefit of the August base rate rise on deposit margins flowed through.
Operating expenses decreased by £18 million. Excluding strategic, litigation and conduct costs, operating expenses increased by £111 million, including the annual UK bank levy charge of £54 million.
Impairments were £55 million higher primarily driven by a debt sale benefit in Q3 2018 and updates in IFRS 9 predictive loss models in Q4 2018.
Gross new mortgage lending was £8.6 billion with market share of new mortgages at approximately 12% and mortgage approval share at 14%.
 
Q4 2018 compared with Q4 2017
Total income was £9 million higher driven by increased debt sale gains of £26 million, partially offset by lower overdraft fees and mortgage margin pressure.
Operating expenses decreased by £325 million, or 25.7%. Excluding strategic, litigation and conduct costs, operating expenses were £7 million, or 0.9%, higher due to a £21 million increase in the annual bank levy charge, partially offset by reduced headcount reflecting continued operating efficiencies.
 
Business performance summary
 
 
Personal & Business Banking – Ulster Bank RoI
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2018 
2017 
 
2018 
2018 
2017 
 
€m
€m
 
€m
€m
€m
Total income
689 
689 
 
165 
169 
182 
Operating expenses
(657)
(772)
 
(184)
(188)
(289)
Impairment (losses)/releases
(17)
(68)
 
21 
(68)
(92)
Operating profit/(loss)
15 
(151)
 
(87)
(199)
Return on equity
0.5%
(5.0%)
 
0.4%
(12.7%)
(26.5%)
Net interest margin
1.79%
1.67%
 
1.73%
1.72%
1.76%
 
 
 
 
€bn
€bn
€bn
Net loans to customers (amortised cost)
 
 
 
21.0 
21.6 
22.0 
Customer deposits
 
 
 
20.1 
20.1 
19.1 
RWAs
 
 
 
16.4 
18.6 
20.2 
 
2018 compared with 2017
Ulster Bank RoI continued to strengthen its digital proposition in 2018 through enhancements to digital and mobile customer offerings.  69% of our active personal current account customers are choosing to bank with us through digital channels. A faster, more convenient and secure digital application experience was introduced for customers who are applying for current accounts and personal loans and further enhancements were made to the mobile app during the year. Mobile payments and transfers increased 36% compared with 2017, reflecting the continued customer migration from physical to digital channels.
Total income was in line with 2017. Net interest income increased by €22 million, or 4.6%, supporting a 12 basis point increase in net interest margin, primarily driven by an improving asset mix, lower cost of deposits and a one-off funding benefit in 2018, partially offset by a reduction in income on free funds. Non-interest income decreased by €22 million, or 10.5%, principally due to a lower number of non-recurring benefits and a reduction in fee income.
Operating expenses decreased by €115 million, or 14.9%, principally due to a €113 million reduction in litigation and conduct costs and €39 million lower strategic costs. 2018 included a €79 million conduct and litigation provision for customer remediation and project costs associated with legacy business issues. Other expenses increased by €37 million primarily reflecting: the investment made into strengthening the risk, compliance and control environment; increased bank levies and regulatory fees; and higher spend on technology and innovation.
A net impairment charge of €17 million reflects a charge associated with a non-performing loan sale partially offset by observable improvements in the performance of the loan portfolio.
Net loans to customers reduced by €1.0 billion, or 4.5%, principally reflecting the sale of a portfolio of non-performing loans of €0.6 billion in 2018 and a continued reduction in the tracker mortgage book.
Customer deposits increased by €1.0 billion, or 5.2%, supporting a reduction in the loan:deposit ratio to 105% from 115%.
RWAs reduced by €3.8 billion, or 18.8%, principally reflecting the impact of the non-performing loan sale and an improvement in credit metrics.
 
Q4 2018 compared with Q3 2018
Total income decreased by €4 million primarily due to a reduction in income associated with the non-performing loan portfolio and reduced fee income.
A net impairment release of €21 million in Q4 2018 compared to a €68 million impairment charge in Q3 2018, principally due to a provision made in Q3 2018 for a further non-performing loan sale.
RWAs reduced by €2.2 billion primarily driven by the sale of a portfolio of non-performing loans.
 
Q4 2018 compared with Q4 2017
Total income decreased by €17 million, or 9.3%, reflecting a one off income benefit in Q4 2017 and a reduction in income from free funds in Q4 2018. Net interest margin decreased by 3 basis points, primarily driven by a decrease in income associated with non-performing loans.
Total operating expenses decreased by €105 million, or 36.3%, principally due to a €134 million reduction in litigation and conduct costs, partially offset by a €14 million increase in strategic costs primarily associated with our property strategy. Q4 2018 included a €19 million conduct and litigation provision for customer remediation and project costs associated with legacy business issues.
 
 
Business performance summary
 
Commercial & Private Banking – Commercial Banking
 
 
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2018 
2017 
 
2018 
2018 
2017 
 
 
£m
£m
 
£m
£m
£m
Total income
 
3,374 
3,484 
 
805 
789 
806 
Operating expenses
 
(1,872)
(2,014)
 
(580)
(443)
(575)
Impairment losses
(144)
(362)
 
(22)
(103)
(117)
Operating profit
 
1,358 
1,108 
 
203 
243 
114 
Return on equity
 
10.2%
6.6%
 
5.5%
6.6%
1.3%
Net interest margin
 
1.67%
1.74%
 
1.66%
1.71%
1.75%
 
 
 
 
 
£bn
£bn
£bn
Net loans to customer (amortised cost)
 
 
88.0 
88.3 
96.9 
Customer deposits
 
 
 
 
95.6 
96.4 
98.0 
RWAs
 
 
 
 
67.6 
69.0 
71.8 
 
Comparisons with prior periods are impacted by preparations for ring-fencing, including the transfer of shipping and other activities from NatWest Markets, the transfer of whole business securitisations and Relevant Financial Institutions and other activities to NatWest Markets and the transfer of the funds and trustee depositary business to RBS International. The net impact of transfers on 2017 would have been to reduce income by £246 million, operating expenses by £10 million, impairments by £72 million, net loans to customers by £5.3 billion, customer deposits by £1.2 billion and RWAs by £2.2 billion. There is an additional £1.4 billion reduction in 2017 net loans to customers as a result of 2018 asset reclassifications under IFRS9. The net impact of transfers on Q4 2017 would have been to reduce income by £39 million and operating expenses by £4 million. The net impact of transfers on Q3 2018 would have been to reduce income by £2 million, operating expenses by £1 million, net loans to customers by £0.6 billion, customer deposits by £0.7 billion and RWAs by £0.1 billion. The variances in the commentary below have been adjusted for the impact of these items excluding net interest margin.
 
2018 compared with 2017 (comparisons adjusted for transfers)
Approximately 85% of customers now interact with Commercial Banking digitally and we have developed solutions they value. We successfully launched the Bankline mobile app in the Apple app store, whilst our lending journey now enables customers to apply digitally for loans of up to £750,000 through a self-service application process. This is the largest value offered by a UK commercial bank, giving customers rapid, digital access to funding decisions, with approximately 50% of loan applications given a decision in principle in under 24 hours.
Total income increased by £136 million, or 4.2%, reflecting asset disposal and fair value gains of £169 million, compared with a £64 million loss in 2017, partially offset by lower lending. Net interest margin decreased by 7 basis points to 1.67% primarily reflecting reclassification of net interest income to non-interest income under IFRS 9, the impact of transfers and asset margin compression, partially offset by higher funding benefits from deposit balances.
Operating expenses decreased by £132 million, or 6.6%. Excluding strategic, litigation and conduct costs, operating expenses were £79 million, or 4.4%, lower reflecting continued operating model simplification.
Impairments decreased by £146 million, or 50.3%, mainly reflecting lower single name charges.
Net loans to customers decreased by £2.2 billion, or 2.4%, principally driven by significant active capital management reductions, with underlying lending growth of £3.5 billion, or 3.8%. At Q3 2018, we announced an additional £2 billion of growth funding to help British businesses prepare for the Brexit transition, bringing the total commitment to £3 billion.
Customer deposits decreased by £1.2 billion, or 1.2%, supporting a broadly stable loan:deposit ratio of 92%.
RWAs decreased by £2.0 billion, or 2.9%, driven by £10.5 billion gross RWA reductions associated with active capital management, partially offset by model updates of £2.9 billion, underlying business growth and partial reinvestment of gross RWA reductions through refinancing to existing clients under our revised pricing framework.
 
Q4 2018 compared with Q3 2018 (comparisons adjusted for transfers)
Total income increased by £18 million primarily reflecting higher fee income and lower fair value and disposal losses in the quarter. Net interest margin decreased by 5 basis points to 1.66% principally due to a higher liquidity buffer costs and coupon payments associated with active capital management.
Operating expenses increased by £138 million. Excluding strategic, litigation and conduct costs, operating expenses were £94 million higher, including the annual UK bank levy charge of £59 million.
Net loans to customers increased by £0.3 billion principally due to underlying lending growth, partially offset by reductions associated with the net impact of capital management.
 
Q4 2018 compared with Q4 2017 (comparisons adjusted for transfers)
Total income increased by £38 million, or 4.9%, reflecting lower asset disposal and fair value losses.
Operating expenses increased by £9 million, or 1.6%. Excluding strategic, litigation and conduct costs, operating expenses were £13 million, or 2.6%, lower driven by lower staff costs.
 
Business performance summary
 
Commercial & Private Banking – Private Banking
 
 
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2018 
2017 
 
2018 
2018 
2017 
 
 
£m
£m
 
£m
£m
£m
Total income
 
775 
678 
 
198 
195 
191 
Operating expenses
 
(478)
(529)
 
(143)
(110)
(194)
Impairment releases/(losses)
 
(6)
 
(1)
(2)
Operating profit/(loss)
 
303 
143 
 
63 
84 
(5)
Return on equity
 
15.4%
6.4%
 
12.3%
17.3%
(2.9%)
Net interest margin
 
2.52%
2.47%
 
2.49%
2.54%
2.44%
 
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
 
14.3 
14.2 
13.5 
Customer deposits
 
 
 
 
28.4 
27.2 
26.9 
RWAs
 
 
 
 
9.4 
9.5 
9.1 
AUM
 
 
 
 
19.8 
21.8 
21.5 
 
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 2017 would have been to increase income by £24 million and operating expenses by £15 million and reduce net loans to customers by £0.1 billion, customer deposits by £0.5 billion and assets under management by £0.7 billion. The variances in the commentary below have been adjusted for the impact of these transfers excluding net interest margin.
 
2018 compared with 2017 (comparisons adjusted for transfers)
Approximately 60% of clients bank with us digitally and 94% of clients positively rate our Coutts24 telephony service. Private Banking also recently launched Coutts Connect, a social platform which allows clients to network and build working relationships with one another.
Total income increased by £73 million, or 10.4%, largely due to increased lending, higher funding benefits from deposit balances and higher investment income. Net interest margin increased by 5 basis points as higher deposit income was partially offset by asset margin pressure.
Operating expenses decreased by £66 million, or 12.1%. Excluding strategic, litigation and conduct costs, operating expenses decreased by £4 million, or 0.8% driven by operating model efficiencies.
A net impairment release of £6 million largely reflects a £9m release in Q4 2018 due to data quality improvements.
Net loans to customers increased by £0.9 billion, or 6.7%, primarily in mortgages.
Customer deposits increased by £2.0 billion, or 7.6%, mainly due to higher personal client account balances.
Assets under management decreased by £1.0 billion, or 4.8%, reflecting market movements partially offset by new business inflows of £0.6 billion.
Private Banking manages a further £6.7 billion of assets under management on behalf of RBS Group which sit outside of Private Banking. Total assets under management overseen by Private Banking have decreased by 5.7% to £26.5 billion as a result of market movements partially offset by net new business.
RWAs increased by £0.3 billion, or 3.3%, relative to 6.7% growth in net loans to customers.
 
Q4 2018 compared with Q3 2018
Total income was broadly stable at £198 million, reflecting higher deposit income offset by asset margin pressure and lower assets under management. Net interest margin decreased by 5 basis points to 2.49% reflecting higher funding costs.
Operating expenses increased by £33 million. Excluding strategic, litigation and conduct costs, operating expenses increased by £26 million, including the annual UK bank levy charge of £18 million.
 
Q4 2018 compared with Q4 2017
Total income was £7 million higher reflecting lending growth and higher funding benefits from deposit balances, partially offset by asset margin pressure.
Operating expenses decreased by £51 million, or 26.3%. Excluding strategic, litigation and conduct costs, operating expenses increased by £6 million, or 4.7%.
 
 
Business performance summary
 
RBS International
 
 
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2018 
2017 
 
2018 
2018 
2017 
 
 
£m
£m
 
£m
£m
£m
Total income
 
594 
389 
 
155 
155 
97 
Operating expenses
 
(260)
(219)
 
(86)
(60)
(66)
Impairment releases/(losses)
 
(3)
 
(3)
--
Operating profit
 
336 
167 
 
71 
92 
31 
Return on equity
 
24.4%
11.2%
 
20.0%
26.9%
9.2%
Net interest margin
 
1.71%
1.36%
 
1.81%
1.73%
1.34%
 
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised costs)
 
 
 
 
13.3 
13.0 
8.7 
Customer deposits
 
 
 
 
27.5 
26.9 
28.9 
RWAs
 
 
 
 
6.9 
6.9 
5.1 
 
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 2017 would have been to increase income by £151 million, operating expenses by £14 million, net loans to customers by £4.5 billion, customer deposits by £1.7 billion and RWAs by £1.9 billion. The net impact of transfers on Q3 2018 would have been to increase deposits by £0.7 billion. The net impact of the transfers on Q4 2017 would have been to increase income by £37 million and operating expenses by £4 million. The variances in the commentary below have been adjusted for the impact of these transfers excluding net interest margin.
 
2018 compared with 2017 (comparisons adjusted for transfers)
The RBS International mobile app has been further developed to include new functionality, allowing customers to manage their finances more effectively and has 67 thousand users, an increase of 23% from 2017. 71% of wholesale customer payments are now processed using our newly introduced international banking platform, making the payments process simpler for customers.
Total income increased by £54 million, or 10.0%, largely driven by deposit margin benefits. Institutional Banking contributed 62% to income in 2018, with Local Banking contributing 32% and Depositary Services 6%. Net interest margin increased by 35 basis points primarily driven by the impact of transfers and a change in product mix.
Operating expenses increased by £27 million, or 11.6%, due to £39 million higher back-office costs associated with becoming a non ring-fenced bank and £5 million of remediation costs, partially offset by lower conduct and litigation costs.
Impairments decreased by £5 million reflecting a number of small releases and improvements in underlying lending quality.
Net loans to customers remained broadly stable at £13.3 billion and are split: £9.2 billion within Institutional Banking, of which £2.2 billion relates to real estate exposures; and £4.1 billion in Local Banking, of which £2.7 billion relates to mortgages.
Customer deposits decreased by £3.1 billion reflecting a large inflow of short term placements in Institutional Banking in 2017. Customer deposits represent RBS International’s primary funding source and are split: £18.1 billion Institutional Banking and £9.4 billion Local Banking.
RWAs decreased by £0.1 billion, or 1.4%, with model updates offset by business movements.
During 2018, we repositioned our balance sheet so that excess funds previously placed with RBS Group are now deployed into funding customer assets in our new London branch. We have also established a liquidity portfolio across central and correspondent banks and sovereign bond holdings. These changes provide continuity for our customers and support compliance with incoming Basel III Liquidity Coverage Ratio rules.
 
Q4 2018 compared with Q3 2018 (comparisons adjusted for transfers)
Total income was broadly stable as an increase in deposit income of £3 million was offset by a reduction in income resulting from placing excess funding with central banks. Net interest margin of 1.81% includes a one-off benefit, and in addition we would expect higher funding costs in 2019 as we reposition our balance sheet as outlined above.
Operating expenses were £26 million higher principally due to the annual UK bank levy charge of £18 million and increased remediation spend.
Net loans to customers increased by £0.2 billion and customer deposits decreased by £0.1 billion reflecting reductions in Institutional Banking.
 
Q4 2018 compared with Q4 2017 (comparisons adjusted for transfers)
Total income increased by £21 million, or 15.6%, driven by deposit margin benefits.
Operating expenses increased by £16 million, or 22.9%, due to higher back-office costs associated with becoming a non ring-fenced bank and increased remediation costs.
 
 
Business performance summary
 
NatWest Markets(1)
 
 
Year ended
 
Quarter ended and as at
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2018 
2017 
 
2018 
2018 
2017 
 
 
£m
£m
 
£m
£m
£m
Total income
 
1,442  
1,050  
 
152  
569  
200  
Operating expenses
 
(1,604)
(2,201)
 
(455)
(478)
(583)
Impairment releases/(losses)
 
92  
174  
 
100  
(4)
26  
Operating (loss)/profit
 
(70)
(977)
 
(203)
87  
(357)
Return on equity
 
(2.0%)
(9.0%)
 
(9.2%)
1.8%
(14.0%)
 
 
 
 
 
£bn
£bn
£bn
Funded assets
 
 
 
 
111.4  
120.9  
118.7  
RWAs
 
 
 
 
44.9  
46.5  
52.9  
Note:
(1)
 
The NatWest Markets operating segment should not be assumed to be the same as the NatWest Markets Plc legal entity or group. Refer to page 2 for further details on the outlook for NatWest Markets Plc.
 
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 2017 would have been to increase income by £104 million, reduce operating expenses by £2 million, reduce the net release of impairments by £72 million and increase funded assets by £1.3 billion and RWAs by £0.4 billion. The variances in the full year commentary below have been adjusted for the impact of these transfers.
 
2018 compared with 2017 (comparisons adjusted for transfers)
NatWest Markets continues to focus on customer service and is increasingly using technology to enhance the way it provides innovative financial solutions to its customers and partners. For example, FXmicropay makes it simpler for businesses operating globally to accept payments in multiple currencies, reducing costs and increasing revenues for our customers. Our success in harnessing technology has been recognised with two awards: Best in Service Globally among Corporates for Algorithmic trading in the 2018 Euromoney FX Survey and Best Order Management award in the Profit & Loss 2018 Digital FX Awards.
Total income increased by £288 million, or 25.0%, primarily reflecting lower disposal losses in the legacy business and a £165 million indemnity insurance recovery, partially offset by lower income in the core business. The reduction in the core business was driven by challenging fixed income, currencies and commodities (FICC) market conditions in Q4 2018, together with turbulence in European bond markets earlier in the year.
Operating expenses decreased by £595 million, or 27.1%. This reflects reductions in other expenses across both the core and legacy businesses, down £313 million to £1,213 million, lower strategic costs, down £198 million to £238 million, and reduced litigation and conduct costs, down £84 million to £153 million.
The net impairment release decreased by £10 million to £92 million reflecting a lower level of legacy releases.
Funded assets decreased by £8.6 billion, or 7.2%, reflecting the wind down of the legacy business.
RWAs decreased by £8.4 billion to £44.9 billion, including RWAs for Alawwal bank of £5.9 billion. The decrease was driven by the legacy business, down £7.1 billion, in addition to reductions in the core business.
 
Q4 2018 compared with Q3 2018
Total income decreased by £417 million, primarily reflecting legacy disposal losses of £43 million in the quarter compared to the prior quarter that included a £165 million indemnity insurance recovery, and the impact of challenging FICC market conditions in the core business.
Operating expenses decreased by £23 million principally due to lower litigation and conduct costs, partially offset by the annual UK bank levy charge of £27 million.
The net impairment release of £100 million was driven by a small number of one-off releases.
RWAs decreased by £1.6 billion driven by reductions in the core business.
 
Q4 2018 compared with Q4 2017
Total income decreased by £48 million, or 24.0%, primarily reflecting lower income in the core business driven by the challenging FICC market conditions in Q4 2018.
Operating expenses decreased by £128 million principally reflecting reductions in both the core and legacy businesses and lower strategic and litigation and conduct costs.
 
Central items & other
Central items not allocated represented a charge of £1,038 million in 2018, largely comprises the £1,040 million charge relating to the civil settlement with the US Department of Justice and £333m of strategic costs, partially offset by a £241 million provision release relating to an RMBS litigation indemnity and indemnity insurance recoveries of £192 million.
 
 
 
 
Business performance summary
 
 
 
 
 
 
End-point CRR basis
 
31 December 
30 September 
31 December 
 
2018 
2018 
2017 
Risk asset ratios
 
 
 
 
CET1
16.2 
16.7 
15.9 
Tier 1
18.4 
18.8 
17.9 
Total
21.8 
22.1 
21.3 
 
 
 
 
Capital
£m
£m
£m
Tangible equity
34,566 
34,672 
35,164 
 
 
 
 
Expected loss less impairment provisions
(654)
(606)
(1,286)
Prudential valuation adjustment
(494)
(574)
(496)
Deferred tax assets
(740)
(731)
(849)
Own credit adjustments
(405)
(264)
(90)
Pension fund assets
(394)
(283)
(287)
Cash flow hedging reserve
191 
370 
(227)
Foreseeable ordinary and special dividends
(1,326)
(120)
-
Other adjustments for regulatory purposes
(105)
(9)
28 
 
 
 
 
Total deductions
(3,927)
(2,217)
(3,207)
CET1 capital
30,639 
32,455 
31,957 
AT1 capital
4,051 
4,051 
4,041 
Tier 1 capital
34,690 
36,506 
35,998 
Tier 2 capital
6,483 
6,455 
6,765 
 
 
 
 
Total regulatory capital
41,173 
42,961 
42,763 
 
 
 
 
Risk-weighted assets
 
 
 
 
 
 
 
Credit risk
137,900 
142,500 
144,700 
Counterparty credit risk
13,600 
14,100 
15,400 
Market risk
14,800 
15,500 
17,000 
Operational risk
22,400 
22,400 
23,800 
 
 
 
 
Total RWAs
188,700 
194,500 
200,900 
 
 
 
 
Leverage (1)
 
 
 
Cash and balances at central banks
88,900 
106,500 
98,300 
Trading assets
75,100 
82,500 
86,000 
Derivatives
133,300 
132,600 
160,800 
Net loans to customers
318,000 
317,700 
321,600 
Other assets
78,900 
80,600 
71,400 
 
 
 
 
Total assets
694,200 
719,900 
738,100 
Derivatives
 
 
 
  - netting and variation margin
(141,300)
(136,900)
(161,700)
  - potential future exposures
42,100 
42,700 
49,400 
Securities financing transactions gross up
2,100 
1,700 
2,300 
Undrawn commitments
50,300 
49,500 
53,100 
Regulatory deductions and other adjustments
(2,900)
(700)
(2,100)
 
 
 
 
CRR Leverage exposure
644,500 
676,200 
679,100 
 
 
 
 
CRR leverage ratio%
5.4 
5.4 
5.3 
 
 
 
 
UK leverage exposure (2)
559,500 
580,300 
587,100 
 
 
 
 
UK leverage ratio% (2)
6.2 
6.3 
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
 
Year ended 31 December 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
5,098 
444 
 
2,040 
518 
466 
 
112 
(22)
8,656 
Other non-interest income
1,184 
166 
 
1,334 
257 
128 
 
1,238 
347 
4,654 
Own credit adjustments
 
 
92 
92 
Total income
6,282 
610 
 
3,374 
775 
594 
 
1,442 
325 
13,402 
Direct expenses - staff costs
(890)
(202)
 
(547)
(161)
(102)
 
(557)
(1,190)
(3,649)
                      - other costs
(300)
(103)
 
(221)
(66)
(67)
 
(241)
(2,712)
(3,710)
Indirect expenses
(1,801)
(185)
 
(957)
(229)
(91)
 
(415)
3,678 
Strategic costs - direct
(54)
(2)
 
(20)
(3)
 
(195)
(730)
(1,004)
                          - indirect
(221)
(20)
 
(86)
(21)
(6)
 
(43)
397 
Litigation and conduct costs
(216)
(71)
 
(41)
(1)
 
(153)
(809)
(1,282)
Operating expenses
(3,482)
(583)
 
(1,872)
(478)
(260)
 
(1,604)
(1,366)
(9,645)
Operating profit/(loss) before impairment (losses)/releases
2,800 
27 
 
1,502 
297 
334 
 
(162)
(1,041)
3,757 
Impairment (losses)/releases
(342)
(15)
 
(144)
 
92 
(398)
Operating profit/(loss)
2,458 
12 
 
1,358 
303 
336 
 
(70)
(1,038)
3,359 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
24.3%
0.5%
 
10.2%
15.4%
24.4%
 
(2.0%)
nm
4.8%
Cost:income ratio (3)
55.4%
95.6%
 
53.8%
61.7%
43.8%
 
111.2%
nm
71.7%
Loan impairment rate
0.21%
0.08%
 
0.16%
nm
nm
 
nm
nm
0.13%
Net interest margin
2.78%
1.79%
 
1.67%
2.52%
1.71%
 
0.40%
nm
1.98%
Third party customer asset rate (4)
3.40%
2.41%
 
2.87%
2.89%
2.15%
 
nm
nm
nm
Third party customer funding rate
(0.30%)
(0.20%)
 
(0.36%)
(0.25%)
(0.09%)
 
nm
nm
nm
Average interest earning assets (£bn)
183.6 
24.8 
 
122.4 
20.5 
27.3 
 
27.9 
30.4 
436.9 
Total assets (£bn)
194.2 
25.2 
 
143.2 
22.0 
28.4 
 
244.5 
36.7 
694.2 
Funded assets (£bn)
194.2 
25.2 
 
143.2 
22.0 
28.4 
 
111.4 
36.5 
560.9 
Net loans to customers - amortised cost (£bn)
162.3 
18.8 
 
88.0 
14.3 
13.3 
 
8.4 
305.1 
Impairment provisions (£bn)(5)
(1.4)
(0.8)
 
(1.0)
nm
nm
 
(0.1)
(3.3)
Customer deposits (£bn)
184.1 
18.0 
 
95.6 
28.4 
27.5 
 
2.6 
4.7 
360.9 
Risk-weighted assets (RWAs) (£bn)
45.1 
14.7 
 
67.6 
9.4 
6.9 
 
44.9 
0.1 
188.7 
RWA equivalent (RWAes) (£bn)
46.6 
14.7 
 
68.6 
9.5 
6.9 
 
50.0 
0.2 
196.5 
Employee numbers (FTEs - thousands) (6)
24.1 
3.1 
 
7.9 
1.9 
1.7 
 
4.8 
23.6 
67.1 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table, refer to page 21. nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
Segment performance
 
Year ended 31 December 2017
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
5,130 
421 
 
2,286 
464 
325 
 
203 
158 
8,987 
Other non-interest income
1,347 
186 
 
1,198 
214 
64 
 
887 
(21)
3,875 
Own credit adjustments
(3)
 
 
(66)
(69)
Loss on redemption of own debt
 
 
(7)
(7)
Strategic disposals
 
 
26 
321 
347 
Total income
6,477 
604 
 
3,484 
678 
389 
 
1,050 
451 
13,133 
Direct expenses - staff costs
(773)
(191)
 
(467)
(145)
(61)
 
(677)
(1,609)
(3,923)
                      - other costs
(259)
(66)
 
(232)
(32)
(25)
 
(287)
(2,727)
(3,628)
Indirect expenses
(2,126)
(194)
 
(1,115)
(268)
(116)
 
(564)
4,383 
Strategic costs - direct
(79)
(27)
 
(48)
(20)
(5)
 
(319)
(1,067)
(1,565)
                         - indirect
(382)
(29)
 
(119)
(25)
(4)
 
(117)
676 
Litigation and conduct costs
(210)
(169)
 
(33)
(39)
(8)
 
(237)
(589)
(1,285)
Operating expenses
(3,829)
(676)
 
(2,014)
(529)
(219)
 
(2,201)
(933)
(10,401)
Operating profit/(loss) before impairment (losses)/releases
2,648 
(72)
 
1,470 
149 
170 
 
(1,151)
(482)
2,732 
Impairment (losses)/releases
(235)
(60)
 
(362)
(6)
(3)
 
174 
(1)
(493)
Operating profit/(loss)
2,413 
(132)
 
1,108 
143 
167 
 
(977)
(483)
2,239 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
23.7%
(5.0%)
 
6.6%
6.4%
11.2%
 
(9.0%)
nm
2.2%
Cost:income ratio (3)
59.1%
111.9%
 
56.0%
78.0%
56.3%
 
nm
nm
79.0%
Loan impairment rate
0.14%
0.29%
 
0.37%
nm
nm
 
nm
nm
0.16%
Net interest margin
2.86%
1.67%
 
1.74%
2.47%
1.36%
 
0.65%
nm
2.13%
Third party customer asset rate (4)
3.47%
2.38%
 
2.73%
2.71%
2.71%
 
nm
nm
nm
Third party customer funding rate
(0.16%)
(0.31%)
 
(0.15%)
(0.09%)
(0.02%)
 
nm
nm
nm
Average interest earning assets (£bn)
179.5 
25.2 
 
131.2 
18.8 
23.9 
 
31.2 
12.5 
422.3 
Total assets (£bn)
190.6 
24.6 
 
149.5 
20.3 
25.9 
 
277.9 
49.3 
738.1 
Funded assets (£bn)
190.6 
24.5 
 
149.5 
20.3 
25.9 
 
118.7 
47.7 
577.2 
Net loans to customers - amortised cost (£bn)
161.7 
19.5 
 
96.9 
13.5 
8.7 
 
9.7 
0.1 
310.1 
Impairment provisions (£bn) (5)
(1.3)
(1.1)
 
(1.2)
 
(0.2)
(3.8)
Customer deposits (£bn)
180.4 
16.9 
 
98.0 
26.9 
28.9 
 
3.3 
6.9 
361.3 
Risk-weighted assets (RWAs) (£bn)
43.0 
18.0 
 
71.8 
9.1 
5.1 
 
52.9 
1.0 
200.9 
RWA equivalent (RWAes) (£bn)
46.7 
18.9 
 
76.8 
9.1 
5.2 
 
56.4 
1.1 
214.2 
Employee numbers (FTEs - thousands) (6)
19.8 
2.7 
 
4.6 
1.5 
1.6 
 
5.7 
35.3 
71.2 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table, refer to page 21. nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
Segment performance
 
Quarter ended 31 December 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
1,267 
110 
 
518 
133 
123 
 
30 
(5)
2,176 
Other non-interest income
290 
37 
 
287 
65 
32 
 
89 
49 
849 
Own credit adjustments
 
 
33 
33 
Total income
1,557 
147 
 
805 
198 
155 
 
152 
44 
3,058 
Direct expenses - staff costs
(208)
(53)
 
(143)
(39)
(25)
 
(128)
(263)
(859)
                           - other costs
(93)
(27)
 
(64)
(22)
(22)
 
(65)
(870)
(1,163)
Indirect expenses
(522)
(52)
 
(295)
(72)
(35)
 
(123)
1,099 
Strategic costs - direct
(28)
(3)
 
(4)
(1)
 
(89)
(230)
(355)
                         - indirect
(84)
(12)
 
(36)
(10)
(2)
 
(22)
166 
Litigation and conduct costs
(6)
(17)
 
(38)
(1)
 
(28)
(2)
(92)
Operating expenses
(941)
(164)
 
(580)
(143)
(86)
 
(455)
(100)
(2,469)
Operating profit/(loss) before impairment (losses)/releases
616 
(17)
 
225 
55 
69 
 
(303)
(56)
589 
Impairment (losses)/releases
(125)
19 
 
(22)
 
100 
(17)
Operating profit/(loss)
491 
 
203 
63 
71 
 
(203)
(55)
572 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
18.6%
0.4%
 
5.5%
12.3%
20.0%
 
(9.2%)
nm
3.5%
Cost:income ratio (3)
60.4%
111.6%
 
70.9%
72.2%
55.5%
 
nm
nm
80.5%
Loan impairment rate
0.31%
(0.39%)
 
0.10%
nm
nm
 
nm
nm
0.02%
Net interest margin
2.73%
1.73%
 
1.66%
2.49%
1.81%
 
0.39%
nm
1.95%
Third party customer asset rate (4)
3.39%
2.43%
 
3.06%
2.94%
1.73%
 
nm
nm
nm
Third party customer funding rate
(0.35%)
(0.18%)
 
(0.50%)
(0.38%)
(0.08%)
 
nm
nm
nm
Average interest earning assets (£bn)
184.2 
25.2 
 
124.2 
21.2 
26.9 
 
30.4 
30.0 
442.1 
Total assets (£bn)
194.2 
25.2 
 
143.2 
22.0 
28.4 
 
244.5 
36.7 
694.2 
Funded assets (£bn)
194.2 
25.2 
 
143.2 
22.0 
28.4 
 
111.4 
36.5 
560.9 
Net loans to customers - amortised cost (£bn)
162.3 
18.8 
 
88.0 
14.3 
13.3 
 
8.4 
305.1 
Impairment provisions (£bn) (5)
(1.4)
(0.8)
 
(1.0)
nm
 
(0.1)
(3.3)
Customer deposits (£bn)
184.1 
18.0 
 
95.6 
28.4 
27.5 
 
2.6 
4.7 
360.9 
Risk-weighted assets (RWAs) (£bn)
45.1 
14.7 
 
67.6 
9.4 
6.9 
 
44.9 
0.1 
188.7 
RWA equivalent (RWAes) (£bn)
46.6 
14.7 
 
68.6 
9.5 
6.9 
 
50.0 
0.2 
196.5 
Employee numbers (FTEs - thousands) (6)
24.1 
3.1 
 
7.9 
1.9 
1.7 
 
4.8 
23.6 
67.1 
For the notes to this table refer to page 21. nm = not meaningful.
 
 
 
 
 
 
 
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)
(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)
(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%
 
0.46%
nm
nm
 
nm
nm
0.31%
Net interest margin
2.76%
1.72%
 
1.71%
2.54%
1.73%
 
0.22%
nm
1.93%
Third party customer asset rate (4)
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 to customers - amortised cost (£bn)
163.2 
19.2 
 
88.3 
14.2 
13.0 
 
8.0 
(0.1)
305.8 
Impairment provisions (£bn) (5)
(1.4)
(1.2)
 
(1.0)
(0.1)
 
(0.2)
(3.9)
Customer deposits (£bn)
183.4 
17.9 
 
96.4 
27.2 
26.9 
 
2.6 
6.2 
360.6 
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) (6)
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 21. nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
Segment performance
 
Quarter ended 31 December 2017
 
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
1,272 
111 
 
575 
122 
81 
 
38 
12 
2,211 
Other non-interest income
276 
50 
 
231 
69 
16 
 
127 
(123)
646 
Own credit adjustments
 
 
Strategic disposals
 
 
26 
165 
191 
Total income
1,548 
161 
 
806 
191 
97 
 
200 
54 
3,057 
Direct expenses - staff costs
(189)
(45)
 
(109)
(35)
(25)
 
(153)
(372)
(928)
                           - other costs
(73)
(25)
 
(66)
(14)
(15)
 
(83)
(907)
(1,183)
Indirect expenses
(554)
(45)
 
(344)
(78)
(23)
 
(154)
1,198 
 
 
 
 
 
 
 
 
 
 
 
Strategic costs -  direct
(55)
(2)
 
(6)
(19)
(3)
 
(129)
(317)
(531)
                         - indirect
(198)
(2)
 
(23)
(9)
 
(13)
245 
Litigation and conduct costs
(197)
(135)
 
(27)
(39)
 
(51)
(315)
(764)
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(1,266)
(254)
 
(575)
(194)
(66)
 
(583)
(468)
(3,406)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
282 
(93)
 
231 
(3)
31 
 
(383)
(414)
(349)
Impairment (losses)/releases
(60)
(81)
 
(117)
(2)
 
26 
(234)
Operating profit/(loss)
222 
(174)
 
114 
(5)
31 
 
(357)
(414)
(583)
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
7.8%
(26.5%)
 
1.3%
(2.9%)
9.2%
 
(14.0%)
nm
(6.7%)
Cost:income ratio (3)
81.8%
157.8%
 
70.0%
101.6%
68.0%
 
nm
nm
111.5%
Loan impairment rate
0.15%
1.57%
 
0.48%
nm
nm
 
nm
nm
0.30%
Net interest margin
2.76%
1.76%
 
1.75%
2.44%
1.34%
 
0.55%
nm
2.04%
Third party customer asset rate (4)
3.38%
2.47%
 
2.77%
2.76%
2.59%
 
nm
nm
nm
Third party customer funding rate
(0.21%)
(0.24%)
 
(0.20%)
(0.11%)
(0.03%)
 
nm
nm
nm
Average interest earning assets (£bn)
182.6 
25.1 
 
130.1 
19.8 
24.1 
 
27.4 
21.8 
430.9 
Total assets (£bn)
190.6 
24.6 
 
149.5 
20.3 
25.9 
 
277.9 
49.3 
738.1 
Funded assets (£bn)
190.6 
24.5 
 
149.5 
20.3 
25.9 
 
118.7 
47.7 
577.2 
Net loans to customers - amortised cost (£bn)
161.7 
19.5 
 
96.9 
13.5 
8.7 
 
9.7 
0.1 
310.1 
Impairment provisions (£bn) (5)
(1.3)
(1.1)
 
(1.2)
 
(0.2)
(3.8)
Customer deposits (£bn)
180.4 
16.9 
 
98.0 
26.9 
28.9 
 
3.3 
6.9 
361.3 
Risk-weighted assets (RWAs) (£bn)
43.0 
18.0 
 
71.8 
9.1 
5.1 
 
52.9 
1.0 
200.9 
RWA equivalent (RWAes) (£bn)
46.7 
18.9 
 
76.8 
9.1 
5.2 
 
56.4 
1.1 
214.2 
Employee numbers (FTEs - thousands) (6)
19.8 
2.7 
 
4.6 
1.5 
1.6 
 
5.7 
35.3 
71.2 
For the notes to this table refer to the following page. nm = not meaningful.
 
 
 
 
 
 
Condensed consolidated income statement for the period ended 31 December 2018
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
2018
2017
 
2018
2018
2017
 
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Interest receivable
11,049 
11,034 
 
2,825 
2,780 
2,754 
Interest payable
(2,393)
(2,047)
 
(649)
(626)
(543)
 
 
 
 
 
 
 
Net interest income (1)
8,656 
8,987 
 
2,176 
2,154 
2,211 
 
 
 
 
 
 
 
Fees and commissions receivable
3,218 
3,338 
 
785 
787 
846 
Fees and commissions payable
(861)
(883)
 
(190)
(220)
(231)
Income from trading activities
1,507 
634 
 
161 
499 
(198)
Loss on redemption of own debt
(7)
 
Other operating income
882 
1,064 
 
126 
422 
429 
 
 
 
 
 
 
 
Non-interest income
4,746 
4,146 
 
882 
1,488 
846 
 
 
 
 
 
 
 
Total income
13,402 
13,133 
 
3,058 
3,642 
3,057 
 
 
 
 
 
 
 
Staff costs
(4,122)
(4,676)
 
(1,014)
(1,022)
(1,100)
Premises and equipment
(1,383)
(1,565)
 
(411)
(328)
(524)
Other administrative expenses
(3,372)
(3,323)
 
(851)
(885)
(1,587)
Depreciation and amortisation
(731)
(808)
 
(187)
(206)
(178)
Write down of other intangible assets
(37)
(29)
 
(6)
(17)
 
 
 
 
 
 
 
Operating expenses
(9,645)
(10,401)
 
(2,469)
(2,441)
(3,406)
 
 
 
 
 
 
 
Profit/(loss) before impairment losses
3,757 
2,732 
 
589 
1,201 
(349)
Impairment losses
(398)
(493)
 
(17)
(240)
(234)
 
 
 
 
 
 
 
Operating profit/(loss) before tax
3,359 
2,239 
 
572 
961 
(583)
Tax charge/(credit)