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 April 28, 2017
 
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
Q1 2017 results
Contents
Page
 
 
Introduction
1
Highlights
2
Summary consolidated results
7
Analysis of results
9
Segment performance
15
Selected statutory financial statements
25
Notes
29
Forward-looking statements
32
Appendix - Segmental income statement reconciliations
 
 
Contacts
Analyst enquiries:
Matt Waymark
Investor Relations
+44 (0) 207 672 1758
 
 
 
 
Media enquiries:
RBS Press Office
 
+44 (0) 131 523 4205
 
Analysts and investors conference call
 
 
Analyst and investor call
Web cast and dial in details
Date:
Friday 28 April 2017
www.rbs.com/results
Time:
12 pm UK time
International - +44 1452 568 172
Conference ID:
58172437
UK Free Call - 0800 694 8082
US Toll Free - 1 866 966 8024
 
Available on www.rbs.com/results
Q1 2017 results and background slides.
A financial supplement containing income statement, balance sheet and segment performance information for the nine quarters ended 31 March 2017.
Pillar 3 supplement at 31 March 2017.
Globally Systemically Important Banks template as of and for the year ended 31 December 2016.
 
 
 
 
 
Introduction
 
In this document, 'RBSG plc' or the 'parent company' refers to The Royal Bank of Scotland Group plc, and 'RBS' or the 'Group' refers to RBSG plc and its subsidiaries.
 
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2016 will be filed with the Registrar of Companies following the company's Annual General Meeting. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
 
In this document Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity, which continues to be reported as a separate operating segment. 
 
Key operating indicators
As described in Note 1 on page 29, RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP financial measures. These measures exclude certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These
measures include:
'Adjusted' measures of financial performance, principally operating performance before: own credit adjustments; gain or loss on redemption of own debt; strategic disposals; restructuring costs; litigation and conduct costs and write down of goodwill (refer to the Appendix for reconciliations of the statutory to adjusted basis);
Performance, funding and credit metrics such as 'return on tangible equity', 'adjusted return on tangible equity' and related RWA equivalents incorporating the effect of capital deductions (RWAes), total assets excluding derivatives (funded assets), net interest margin (NIM) adjusted for items designated at fair value through profit or loss (non-statutory NIM), cost:income ratio, loan:deposit ratio and REIL/impairment provision ratios. These are internal metrics used to measure business performance;
Personal & Business Banking (PBB) franchise, combining the reportable segments of UK Personal & Business Banking (UK PBB) and Ulster Bank RoI; and Commercial & Private Banking (CPB) franchise, combining the reportable segments of Commercial Banking, Private Banking and RBS International (RBSI); and
Cost savings progress and 2017 target calculated using operating expenses excluding litigation and conduct costs, restructuring costs, write down of goodwill and the VAT recoveries.
 
 
 
 
 
 
 
Highlights

RBS reported an operating profit before tax of £713 million for Q1 2017 and an attributable profit(1) of £259 million.
 
Across our Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and NatWest Markets (NWM) businesses, RBS reported an adjusted operating profit(2) of £1,326 million, an increase of £303 million, or 30%, compared with Q1 2016. Adjusted return on equity across PBB, CPB and NatWest Markets was 13.8% compared with 10.9% in Q1 2016.  
 
Common Equity Tier 1 ratio increased by 70 basis points in the quarter to 14.1%, and remains ahead of our 13.0% target.
 
 
 
 
 
Quarter ended
 
31 March
31 December
31 March
Key metrics and ratios
2017
2016
2016
 
 
 
 
Attributable profit/(loss)
£259m
(£4,441m)
(£968m)
Operating profit/(loss)
£713m
(£4,063m)
£421m
Operating profit - adjusted (2)
£1,371m
£1,185m
£440m
Net interest margin
2.24%
2.19%
2.15%
Cost:income ratio (3)
76.1%
230.2%
78.7%
Cost:income ratio - adjusted (3,4,5)
55.8%
66.3%
76.1%
Earnings/(loss) per share from continuing operations
 
 
 
  - basic
2.2p
(37.7p)
(8.3p)
  - adjusted (4,5)
7.1p
7.0p
(8.1p)
Return on tangible equity (6,7)
3.1%
(48.2%)
(9.6%)
Return on tangible equity - adjusted (4,5,7)
9.7%
8.6%
(9.4%)
Average tangible equity (6)
£33,357m
£36,855m
£40,383m
Average number of ordinary shares
 
 
 
  outstanding during the period (millions)
11,793 
11,766 
11,606 
 
 
 
 
PBB, CPB & NWM
 
 
 
Total income - adjusted (4)
£3,154m
£2,914m
£2,815m
Operating profit - adjusted (2)
£1,326m
£848m
£1,023m
Return on tangible equity - adjusted (4,5,6)
13.8%
8.5%
10.9%
 
 
 
 
31 March
31 December
Balance sheet related key metrics and ratios
2017 
2016 
 
 
 
 
 
 
Tangible net asset value (TNAV) per ordinary share (7)
297p
296p
Liquidity coverage ratio (LCR) (8)
129%
123%
Liquidity portfolio
£160bn
£164bn
Net stable funding ratio (NSFR) (9)
120%
121%
Loan:deposit ratio (10,11)
93%
91%
Short-term wholesale funding (10,12)
£16bn
£14bn
Wholesale funding (10,12)
£67bn
£59bn
Common Equity Tier 1 (CET1) ratio
14.1%
13.4%
Risk-weighted assets (RWAs)
£221.7bn
£228.2bn
CRR leverage ratio (13)
5.0%
5.1%
UK leverage ratio (14)
5.7%
5.6%
Tangible equity (7)
£35,186m
£34,982m
Number of ordinary shares in issue (millions) (15)
11,842 
11,823 
 
Notes:
(1)
Attributable to ordinary shareholders.
(2)
Operating profit before tax excluding own credit adjustments, gain on redemption of own debt, strategic disposals, restructuring costs and litigation and conduct costs.
(3)
Operating lease depreciation included in income (Q1 2017 - £36 million; Q4 2016 - £37 million and Q1 2016 - £38 million).
(4)
Excluding own credit adjustments, gain on redemption of own debt and strategic disposals.
(5)
Excluding restructuring costs and litigation and conduct costs.
(6)
Calculated using profit/(loss) for the period attributable to ordinary shareholders.
(7)
Tangible equity is equity attributable to ordinary shareholders less intangible assets. The dilutive impact was 2p (31 December 2016 - 2p).
(8)
On 1 October 2015 the LCR became the Prudential Regulation Authority's (PRA) primary regulatory liquidity standard; UK banks are required to meet a minimum standard of 90% from 1 January 2017, rising to 100% by 1 January 2018. The published LCR excludes Pillar 2 add-ons. RBS calculates the LCR using its own interpretation of the EU LCR Delegated Act, which may change over time and may not be fully comparable with those of other institutions.
(9)
NSFR for all periods have been calculated using RBS's current interpretations of the revised BCBS guidance on NSFR issued in late 2014. Therefore, reported NSFR will change over time with regulatory developments. Due to differences in interpretation, RBS's ratio may not be comparable with those of other financial institutions.
(10)
Excludes repurchase agreements and stock lending.
(11)
Includes disposal groups.
(12)
Excludes derivative collateral.
(13)
Based on end-point Capital Requirements Regulation (CRR) Tier 1 capital and leverage exposure under the CRR Delegated Act.
(14)
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.
(15)
Includes 28 million treasury shares (31 December 2016 - 39 million).
 
 
 
 
 
 
Highlights

 
Q1 2017 RBS Performance Summary
RBS reported an attributable profit of £259 million for Q1 2017 compared with a loss of £968 million in Q1 2016 which included payment of the final Dividend Access Share (DAS) dividend of £1,193 million. 
Q1 2017 operating profit of £713 million compared with £421 million in Q1 2016. An adjusted operating profit of £1,371 million was £931 million higher than Q1 2016. 
Adjusted income of £3,239 million was £425 million, or 15.1%, higher than Q1 2016. NatWest Markets adjusted income of £508 million was £231 million, or 83.4%, higher than Q1 2016 reflecting consistent customer activity and an improved trading environment compared to a particularly difficult Q1 2016. Across PBB and CPB, income was £108 million, or 4.3%, higher supported by asset growth.
Net interest margin (NIM) of 2.24% for Q1 2017 was 9 basis points higher than Q1 2016, as the benefit associated with the reduction in low yielding assets more than offset asset margin pressure and mix impacts across the core businesses. NIM increased by 5 basis points compared with Q4 2016 principally driven by deposit re-pricing in UK PBB and Commercial Banking.
Excluding a £51 million VAT recovery, adjusted operating expenses have reduced by £278 million, or 12.9%, compared with Q1 2016. The adjusted cost:income ratio for Q1 2017 was 55.8% compared with 76.1% in Q1 2016. Across the core PBB, CPB and NatWest Markets businesses, adjusted cost:income ratio of 54.9% compared with 62.4% in Q1 2016.
Restructuring costs were £577 million in the quarter, an increase of £339 million compared with Q1 2016, and included a charge of £235 million relating to the reduction of our property portfolio.
Litigation and conduct costs of £54 million comprised a number of small charges.
A net impairment loss of £46 million, 6 basis points of gross customer loans, compared with a loss of £223 million in Q1 2016, with the reduction principally reflecting a £226 million shipping impairment in Q1 2016. REIL represented 2.9% of gross customer loans compared with 3.6% at 31 March 2016 and 3.1% at 31 December 2016.
PBB and CPB net loans and advances have increased by 5.6% on an annualised basis in Q1 2017 principally driven by mortgage growth within UK PBB.
Tangible net asset value (TNAV) (1) per share increased by 1p from Q4 2016 to 297p.
 
PBB, CPB and NatWest Markets operating performance
Across our three customer facing businesses, PBB, CPB and NatWest Markets, adjusted operating profit of £1,326 million was £303 million, or 29.6%, higher than Q1 2016.
 
UK PBB adjusted operating profit of £629 million was £98 million, or 18.5%, higher than Q1 2016. Total income of £1,377 million was £102 million, or 8.0%, higher than Q1 2016 driven by increased lending, with net loans and advances 11.5% higher at £135.8 billion.  
 
Ulster Bank RoI adjusted operating profit of £62 million was £2 million, or 3.1%, lower than Q1 2016 reflecting an asset disposal gain in Q1 2016 and reduced income on free funds, partially offset by an increased net impairment release. 
 
Commercial Banking adjusted operating profit of £356 million was £47 million, or 11.7%, lower than Q1 2016 primarily driven by an increased impairment charge. Income was £12 million, or 1.4%, higher at £865 million with the benefit of increased net loans and advances, up 3.4% to £99.7 billion, offset by margin pressure, down 12 basis points to 1.76%.
 
Private Banking(2) adjusted operating profit of £44 million was £18 million, or 69.2%, higher than Q1 2016 driven by a £24 million, or 17.5%, reduction in adjusted operating expenses, principally reflecting various management actions to improve operational efficiency.
 
RBS International adjusted operating profit of £48 million reduced by £5 million, or 9.4%, compared with Q1 2016 driven by an £8 million, or 22.9%, increase in adjusted operating expenses principally reflecting increased regulatory and remediation costs.
 
NatWest Markets adjusted income of £508 million was £231 million, or 83.4%, higher than Q1 2016 reflecting the benefit of consistent customer activity and an improved trading environment compared to a particularly difficult Q1 2016, notably in the Rates business. An adjusted operating profit of £187 million compared with a loss of £54 million for Q1 2016.
 
Notes:
(1)
Tangible equity is equity attributable to ordinary shareholders less intangible assets. The dilutive impact was 2p ( 31 December 2016 - 2p)
(2)
Private Banking serves high net worth individuals through Coutts and Adam & Co.
 
 
Highlights

 
Capital Resolution & Central items operating performance
Capital Resolution adjusted operating loss of £76 million compared with a loss of £377 million in Q1 2016 reflecting modest disposal losses and impairments of £5 million and a 70.3% reduction in adjusted operating expenses to £69 million. RWAs reduced by a further £4.0 billion in the quarter to £30.5 billion.
Central items adjusted operating profit of £10 million compared with a loss of £307 million in Q1 2016 and included a £18 million loss in respect of IFRS volatility (Q1 2016 - £356 million loss). In addition, a VAT recovery of £51 million was recognised in the quarter.
 
Building a stronger RBS
RBS is progressing with its plan to build a strong, simple, fair bank for customers and shareholders.
CET1 remains ahead of our 13% target at 14.1%, a 70 basis point increase on Q4 2016 driven by a £6.5 billion reduction in RWAs and the £259 million attributable profit.
RWAs decreased by £6.5 billion compared with Q4 2016 principally reflecting £4.0 billion of disposals and run-off in Capital Resolution and planned RWA reductions in the core businesses. Excluding volume growth, RWAs across PBB, CPB and NatWest Markets reduced by £3.2 billion (PBB £0.7 billion, CPB £1.4 billion and NatWest Markets £1.1 billion) during Q1 2017, and we remain committed to achieving at least a £20 billion gross reduction by the end of 2018.
On 1 March 2017, RBS issued €1.5 billion Senior holding company (RBSG) debt which it expects to be eligible to meet its 'Minimum Requirement for Own Funds and Eligible Liabilities' (MREL). Total MREL eligible securities are now £55.3 billion, or 24.9% of RWAs.     
Leverage ratio reduced by 10 basis points to 5.0% driven by increased lending exposure.
Risk elements in lending (REIL) of £9.7 billion were £0.6 billion lower than 31 December 2016 and represented 2.9% of gross customer loans, compared with 3.1% at 31 December 2016 and 3.6% as at 31 March 2016. Excluding REIL in Capital Resolution and Ulster Bank RoI, REIL were £4.1 billion or 1.4% of the respective gross customer loans.    
As at 31 March 2017, there has been no material change to the surplus ratio of assets to liabilities in the Main Scheme of The Royal Bank of Scotland Group Pension Fund which at 31 December was c.115% under IAS valuation principles.
RBS has continued to utilise the Bank of England's Term Funding Scheme. A further £9 billion has been drawn since 31 December 2016, taking total RBS participation to £14 billion as at 31 March 2017.
 
Building the number one bank for customer service, trust and advocacy in the UK
RBS continued to deliver strong support for both household and business customers. Within UK PBB, gross new mortgage lending of £7.8 billion was 10% higher than Q1 2016 with market share of new mortgages at approximately 13% supporting growth in stock share to approximately 9.0%, up from 8.8% at 31 December 2016 and 8.3% at 31 March 2016. Positive momentum continued across business banking lending with balances up 4.7%, excluding transfers of £0.9 billion as at 31 March 2017,  compared with Q1 2016.
RBS continues to enhance the functionality of its mobile app. Customers can now view remaining ISA allowances, register their travel plans, and apply for loans and credit cards. There are also improved transaction descriptions to help customers manage their finances and spot transactions they do not recognise. We now have 4.3 million customers regularly using our mobile app in the UK, over 4% higher than Q4 2016. Nearly 80% of our commercial customers' interaction with us is via digital channels.
In February 2017, RBS launched a fully automated lending platform, ESME, to originate unsecured SME lending of up to £150,000. Where our credit risk appetite permits, these loans can be processed and funded within an hour, responding to our customers' desire for speed and simplicity.
RBS launched 'Royal Bank Assist', our artificial intelligence-based, 'always-on' online support on the Royal Bank of Scotland website, supported by IBM Watson and LivePerson, answering our top 80 customer questions and getting customers to the right place to meet their needs more quickly.
RBS has launched a dedicated team of 1,200 TechXperts, who are in our branches helping customers make the most of online and mobile banking, providing advice on how to stay safe and secure.
 
 
 
Highlights

 
Capital reorganisation
It is our intention to implement a capital reorganisation in 2017 in order to increase the distributable reserves of the parent company, RBSG plc, providing greater flexibility for future distributions and preference share redemptions. We intend to seek shareholder approval to reduce the share premium account by around £25 billion and to cancel the capital redemption reserve of around £5 billion. This will, subject to approval by shareholders and regulators, and confirmation by the Court of Session in Edinburgh, increase RBSG plc distributable reserves by around £30 billion. As at 31 March 2017, distributable reserves were £7.9 billion.
 
IFRS 9
Ahead of adopting IFRS 9 Financial Instruments from 1 January 2018, RBS has adopted the provisions in respect of the presentation of gains and losses on financial liabilities at fair value that are not held for trading from 1 January 2017. Accordingly, a loss of £20 million has been reported in the Consolidated Statement of Other Comprehensive Income instead of in the Consolidated Income Statement. Comparatives have not been restated, however, in Q1 2016 a gain of £108 million was included in the Consolidated Income Statement. Own credit adjustments on financial liabilities held for trading will continue to be recognised in the Consolidated Income Statement, a loss of £29 million was reported in Q1 2017 (Q1 2016 - gain of £148 million).
 
Williams & Glyn
On 17 February 2017, RBS announced that it had been informed by HM Treasury (HMT) that the Commissioner responsible for EU competition policy planned to propose to the College of Commissioners to open proceedings to gather evidence on an alternative plan for RBS to meet its remaining state aid obligations. On 4 April 2017, the European Commission announced that it had opened an in-depth investigation into whether this alternative plan was an appropriate replacement for the existing requirement to achieve separation and divestment of Williams & Glyn by 31 December 2017.      
 
Progress on 2017 targets
RBS remains committed to achieving its priority targets for 2017.
 
Strategy goal
2017 target
Q1 2017 Progress
Strength and sustainability
Maintain bank CET1 ratio of 13%
CET1 ratio of 14.1%; up 70 basis points from Q4 2016
Customer experience
Significantly increase NPS or maintain No.1 in chosen customer segments
The March 2017 NatWest Personal NPS score was the highest seen since we started to track it in 2009
Commercial Banking is a market leader for customer advocacy, seeing a significant improvement in NPS since Q1 2013 and as of Q1 2017 we have more promoters of our brand than ever before
Simplifying the bank
Reduce operating expenses by at least £750 million (1)
Operating expenses down £278 million, or 12.9%, excluding the VAT recovery
Supporting growth
Net 3% growth on total PBB and CPB loans to customers
Net customer loans in PBB and CPB are up 5.6% on an annualised basis for the year to date; 47% of the total full year target
Employee engagement
Improve employee engagement
Reviewed bi-annually
 
Note:
(1)
Cost saving target and progress 2017 calculated using operating expenses excluding restructuring costs, litigation and conduct costs, write down of goodwill and VAT recoveries.
 
 
Highlights

 
Outlook (1)
We retain the 2017 full year guidance and medium term outlook we provided in the 2016 Annual Results document. In addition, and subject to providing fully for remaining significant legacy issues in 2017, our expectation remains that we will be profitable in 2018.
We anticipate that adjusted operating profit will be lower in Q2 2017 compared with Q1 2017 reflecting expected reduced income in NatWest Markets, coupled with increased adjusted operating expenses, in part due to the absence of the Q1 2017 VAT recovery in Q2 2017. Separately, we expect to recognise a gain on the sale of RBS's stake in Vocalink of approximately £160 million during the quarter.
 
Recent developments
RBS N.V.'s associate Alawwal Bank announced on 25 April 2017 that it was starting merger discussions with Saudi British Bank (SABB).  The 40% stake in Alawwal Bank is the remaining significant shared asset of the RFS Consortium. 
 
 
 
 
 
 
 
Note:
(1)       The targets, expectations and trends discussed in this section represent management's current expectations and are subject to change, including as a result of the factors described in this document and in the "Risk Factors" on pages 432 to 463 of the Annual Report and Accounts 2016. These statements constitute forward-looking statements; refer to Forward-looking statements in this announcement.
 
 
 
 
 
 
Summary consolidated income statement for the period ended 31 March 2017

 
 
Quarter ended
 
31 March
31 December
31 March
 
2017
2016
2016
 
£m
£m
£m
Net interest income
2,234 
2,208 
2,156 
 
 
 
 
Own credit adjustments
(29)
(114)
256 
Gain on redemption of own debt
Strategic disposals
(6)
Other operating income
1,005 
1,121 
658 
 
 
 
 
Non-interest income
978 
1,008 
908 
 
 
 
 
Total income
3,212 
3,216 
3,064 
 
 
 
 
Restructuring costs
(577)
(1,007)
(238)
Litigation and conduct costs
(54)
(4,128)
(31)
Other costs
(1,822)
(2,219)
(2,151)
 
 
 
 
Operating expenses
(2,453)
(7,354)
(2,420)
 
 
 
 
Profit/(loss) before impairment (losses)/releases
759 
(4,138)
644 
Impairment (losses)/releases
(46)
75 
(223)
 
 
 
 
Operating profit/(loss) before tax
713 
(4,063)
421 
Tax charge
(327)
(244)
(80)
 
 
 
 
Profit/(loss) for the period
386 
(4,307)
341 
 
 
 
 
Attributable to:
 
 
 
Non-controlling interests
11 
(27)
22 
Other owners
116 
161 
94 
Dividend access share
1,193 
Ordinary shareholders
259 
(4,441)
(968)
 
 
 
 
Notable items memo
 
 
 
 
 
 
 
Adjusted basis
 
 
 
Total income - adjusted (1)
3,239 
3,329 
2,814 
Operating expenses - adjusted (2)
(1,822)
(2,219)
(2,151)
Operating profit - adjusted (1,2)
1,371 
1,185 
440 
 
 
 
 
Within adjusted total income
 
 
 
IFRS volatility in Central items (3)
(18)
308 
(356)
FX (losses)/gains in Central items
(52)
140 
52 
Capital Resolution disposal losses
(50)
(325)
Unwind of securitisations in the property portfolio
(105)
 
 
 
 
Within adjusted operating expenses
 
 
 
VAT recovery in Central items
51 
Bank levy
(190)
 
 
 
 
Within restructuring costs
 
 
 
Property exit costs
(235)
Williams & Glyn restructuring costs
(12)
(810)
(158)
 
 
 
 
Within impairment (losses)/releases
 
 
 
Capital Resolution impairment releases/(losses)
45 
130 
(196)
Capital Resolution shipping portfolio impairment releases/(losses)
30 
(226)
Ulster Bank RoI impairment releases
24 
47 
13 
Commercial Banking impairment losses
(61)
(83)
(14)
 
Notes:
(1)
Excluding own credit adjustments, gain on redemption of own debt and strategic disposals.
(2)
Excluding restructuring costs and litigation and conduct costs.
(3)
IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
 
Details of other comprehensive income are provided on page 26.
 
 
 
 
 
 
Summary consolidated balance sheet as at 31 March 2017

 
 
31 March
31 December
 
2017
2016
 
£m
£m
 
 
 
Cash and balances at central banks
83,160 
74,250 
Net loans and advances to banks (1)
20,513 
17,278 
Net loans and advances to customers (1)
326,733 
323,023 
Reverse repurchase agreements and stock borrowing
45,451 
41,787 
Debt securities and equity shares
77,347 
73,225 
Assets of disposal groups
92 
13 
Other assets
25,927 
22,099 
 
 
 
Funded assets
579,223 
551,675 
Derivatives
204,052 
246,981 
 
 
 
Total assets
783,275 
798,656 
 
 
 
Bank deposits (2)
40,276 
33,317 
Customer deposits (2)
351,498 
353,872 
Repurchase agreements and stock lending
44,966 
32,335 
Debt securities in issue
28,163 
27,245 
Subordinated liabilities
15,514 
19,419 
Derivatives
196,224 
236,475 
Provisions for liabilities and charges
11,619 
12,836 
Liabilities of disposal groups
14 
15 
Other liabilities
45,490 
33,738 
 
 
 
Total liabilities
733,764 
749,252 
Non-controlling interests
805 
795 
Owners' equity
48,706 
48,609 
 
 
 
Total liabilities and equity
783,275 
798,656 
 
 
 
Contingent liabilities and commitments
148,324 
150,691 
 
Notes:
(1)
Excludes reverse repurchase agreements and stock borrowing.
(2)
Excludes repurchase agreements and stock lending.
 
 
 
 
 
 
 
Analysis of results

 
 
Quarter ended
 
31 March
31 December
31 March
2017
2016
2016
Net interest income
£m
£m
£m
 
 
 
 
Net interest income
 
 
 
RBS
2,234 
2,208 
2,156 
 
 
 
 
  - UK Personal & Business Banking
1,111 
1,093 
1,019 
  - Ulster Bank RoI
105 
105 
105 
  - Commercial Banking
567 
542 
536 
  - Private Banking
112 
111 
113 
  - RBS International
80 
77 
75 
  - NatWest Markets
29 
29 
19 
  - Capital Resolution
33 
44 
86 
  - Williams & Glyn
165 
170 
162 
  - Central items & other
32 
37 
41 
 
 
 
 
Average interest-earning assets (IEA)
 
 
 
RBS
405,122 
401,548 
403,384 
 
 
 
 
  - UK Personal & Business Banking
149,581 
147,703 
135,793 
  - Ulster Bank RoI
24,424 
26,259 
24,178 
  - Commercial Banking
130,885 
128,174 
114,855 
  - Private Banking
17,597 
17,679 
16,259 
  - RBS International
22,949 
22,793 
21,075 
  - NatWest Markets
17,192 
14,085 
11,568 
  - Capital Resolution
16,771 
19,696 
30,767 
  - Williams & Glyn
25,170 
25,145 
23,356 
  - Central items & other
553 
14 
25,533 
 
 
 
 
Yields, spreads and margins of the banking business
 
 
 
 
 
 
 
Gross yield on interest-earning assets
 
 
 
  of the banking business (1,2)
2.70%
2.72%
2.82%
Cost of interest-bearing liabilities of banking business (1)
(0.69%)
(0.82%)
(1.01%)
 
 
 
 
Interest spread of the banking business (1,3)
2.01%
1.90%
1.81%
Benefit from interest-free funds
0.23%
0.29%
0.34%
 
 
 
 
Net interest margin (4)
 
 
 
RBS
2.24%
2.19%
2.15%
 
 
 
 
  - UK Personal & Business Banking
3.01%
2.94%
3.02%
  - Ulster Bank RoI
1.74%
1.59%
1.75%
  - Commercial Banking
1.76%
1.68%
1.88%
  - Private Banking
2.58%
2.50%
2.80%
  - RBS International
1.41%
1.34%
1.43%
  - NatWest Markets
0.68%
0.82%
0.66%
  - Capital Resolution
0.80%
0.89%
1.12%
  - Williams & Glyn
2.66%
2.69%
2.79%
 
Third party customer rates (5)
 
 
 
Third party customer asset rate
 
 
 
  - UK Personal & Business Banking
3.57%
3.64%
3.95%
  - Ulster Bank RoI (6)
2.47%
2.20%
2.33%
  - Commercial Banking
2.67%
2.65%
2.87%
  - Private Banking
2.71%
2.76%
3.01%
  - RBS International
2.75%
2.93%
3.29%
Third party customer funding rate
 
 
 
  - UK Personal & Business Banking
(0.17%)
(0.28%)
(0.62%)
  - Ulster Bank RoI (6)
(0.40%)
(0.42%)
(0.59%)
  - Commercial Banking
(0.14%)
(0.27%)
(0.35%)
  - Private Banking
(0.07%)
(0.12%)
(0.23%)
  - RBS International
(0.03%)
(0.08%)
(0.24%)
 
 
 
 
For the notes to this table refer to the following page.
 
 
 
 
 
 
 
Analysis of results

 
 
 
Notes:                                                                                                                                           
(1)
For the purpose of calculating gross yields and interest spread, interest receivable has been decreased by £18 million and interest payable has been decreased by £18 million in respect of negative interest relating to both financial assets and financial liabilities that attracted negative interest.
(2)
Gross yield is the interest earned on average interest-earning assets as a percentage of average interest-earning assets.
(3)
Interest spread is the difference between the gross yield and interest paid on average interest-bearing liabilities as a percentage of average interest-bearing liabilities.
(4)
Net interest margin is net interest income as a percentage of average interest-earning assets.
(5)
Net interest margin includes Treasury allocations and interest on intercompany borrowings, which are excluded from third party customer rates.
(6)
Ulster Bank Ireland DAC manages its funding and liquidity requirements locally. Its liquid asset portfolios and non-customer related funding sources are included within its net interest margin, but excluded from its third party asset and liability rates.
 
Net interest income
Key points
● 
Net interest income of £2,234 million was £78 million, or 3.6%, higher than Q1 2016 principally reflecting higher volumes in UK PBB, up £92 million or 9.0%, and Commercial Banking, up £31 million or 5.8%. Partially offsetting, Capital Resolution reduced by £53 million in line with the planned shrinkage of the balance sheet. 
NIM of 2.24% for Q1 2017 was 9 basis points higher than Q1 2016, as the benefit associated with the reduction in low yielding assets more than offset asset margin pressure and mix impacts across the core businesses. NIM increased by 5 basis points compared with Q4 2016 largely driven by increases in UK PBB and Commercial Banking associated with deposit book re-pricing.
Across PBB and CPB, NIM reduced by 6 basis points to 2.32% compared with Q1 2016, but increased by 8 basis points compared with Q4 2016.
UK PBB NIM decreased by 1 basis point compared with Q1 2016 to 3.01% principally reflecting a decline in current account hedge returns and reduced mortgage margins, partially offset by savings re-pricing benefits. Compared with Q4 2016, NIM increased by 7 basis points driven by the full effect of savings re-pricing in November 2016.
Ulster Bank RoI NIM of 1.74% increased by 15 basis points compared with Q4 2016 principally reflecting income recognised on a cohort of non performing loans in Q1 2017.
Commercial Banking NIM fell by 12 basis points from Q1 2016 to 1.76% driven by asset margin pressure in a competitive market and lower rate environment. Compared with Q4 2016, NIM increased by 8 basis points due to the active re-pricing of the deposit book and asset pricing actions on new lending.
Private Banking NIM of 2.58% reduced by 22 basis points compared with Q1 2016 reflecting the competitive market and low rate environment.
● 
Structural hedges of £126 billion generated a benefit of £0.3 billion through net interest income for Q1 2017.
 
 
 
 
Analysis of results

 
 
Quarter ended
 
31 March
31 December
31 March
2017
2016 
2016
Non-interest income
£m
£m
£m
 
 
 
 
Net fees and commissions
605 
608 
654 
Income/(loss) from trading activities
428 
622 
(110)
Own credit adjustments (OCA)
(29)
(114)
256 
Gain on redemption of own debt
Strategic disposals
(6)
Other operating income
(28)
(109)
114 
 
 
 
 
Total non-interest income
978 
1,008 
908 
 
 
 
 
 
 
Key points
● 
Non-interest income was £978 million, an increase of £70 million, or 7.7%, compared with Q1 2016. NatWest Markets non-interest income increased by £137 million, or 42.5%, to £459 million reflecting consistent customer activity and an improved trading environment compared to a particularly difficult Q1 2016, partially offset by an £84 million adverse movement in OCA. Central items non-interest income improved by £117 million principally reflecting a reduction in IFRS volatility losses, £18 million compared with £356 million in Q1 2016, partially offset by a £52 million FX loss (compared with a £52 million gain in Q1 2016) and a £105 million charge in respect of the unwind of securitisations relating to our property portfolio. Partially offsetting, Capital Resolution non-interest income was a loss of £92 million compared with a gain of £67 million in Q1 2016 reflecting a £115 million adverse movement in OCA and increased disposal losses, £50 million compared with £2 million in Q1 2016.   
 
 
● 
Income from trading activities increased by £538 million compared with Q1 2016 largely reflecting reduced IFRS volatility losses and increased NatWest Markets income.
 
 
● 
Other operating income decreased by £142 million compared with Q1 2016 largely reflecting a £105 million charge in respect of the unwind of securitisations relating to our property portfolio.
 
 
 
Analysis of results

 
 
 
 
 
 
Quarter ended
 
31 March
31 December
31 March
2017
2016
2016
Operating expenses
£m
£m
£m
 
 
 
 
Staff costs
1,024 
1,025 
1,202 
Premises and equipment
310 
346 
315 
Other administrative expenses
320 
601 
446 
Restructuring costs (see below)
577 
1,007 
238 
Litigation and conduct costs
54 
4,128 
31 
 
 
 
 
Administrative expenses
2,285 
7,107 
2,232 
Depreciation and amortisation
168 
178 
178 
Write down of intangible assets
69 
10 
 
 
 
 
Operating expenses
2,453 
7,354 
2,420 
 
 
 
 
Adjusted operating expenses (1)
1,822 
2,219 
2,151 
 
 
 
 
Restructuring costs comprise:
 
 
 
  - staff expenses
291 
117 
121 
  - premises, equipment, depreciation and amortisation
241 
107 
  - other
45 
783 
108 
 
 
 
 
 
577 
1,007 
238 
 
 
 
 
Staff costs as a % of total income
31.9%
31.9%
39.2%
Cost:income ratio (2)
76.1%
230.2%
78.7%
Cost:income ratio - adjusted (2,3)
55.8%
66.3%
76.1%
Employee numbers (FTE - thousands)
76.2 
77.8 
92.4 
 
Notes:
(1)
Excluding restructuring costs and litigation and conduct costs.
(2)
Operating lease depreciation included in income (Q1 2017 - £36 million; Q4 2016 - £37 million and Q1 2016 - £38 million).
(3)
Excluding restructuring costs, litigation and conduct costs, own credit adjustments, gain on redemption of own debt and strategic disposals.
 
 
 
Key points
● 
Total operating expenses of £2,453 million were £33 million, or 1.4%, higher than Q1 2016 reflecting a £339 million increase in restructuring costs and a £23 million increase in litigation and conduct costs, partially offset by a £329 million, or 15.3%, reduction in adjusted operating expenses.
● 
Excluding a £51 million VAT recovery, adjusted operating expenses reduced by £278 million, or 12.9%, compared with Q1 2016 and we remain on target to achieve a £750 million reduction for the full year. The cost reduction was principally driven by Capital Resolution, down £163 million or 70.3%, and Central items, down £79 million, excluding the VAT recovery. Across PBB, CPB and NatWest Markets, adjusted operating expenses reduced by £22 million, or 1.2%.  
● 
Staff costs of £1,024 million, were £178 million, or 14.8%, lower than Q1 2016 underpinned by a 16,200, or 17.5%, reduction in FTEs.
● 
Restructuring costs of £577 million included a £235 million charge associated with the planned reduction of our property portfolio, a £73 million net settlement relating to the RBS Netherlands pension scheme and a £70 million charge in Capital Resolution, primarily in respect of Asia-Pacific restructuring.
Litigation and conduct costs of £54 million were £23 million higher than Q1 2016 and reflected a number of small items.
● 
Compared with Q4 2016, adjusted operating expenses reduced by £397 million principally reflecting the £190 million UK bank levy charge and a £69 million write down of intangible assets in Q4 2016 and a £51 million VAT recovery in Q1 2017. 
 
 
 
Analysis of results

 
 
Quarter ended
 
31 March
31 December
31 March
2017
2016
2016
Impairment losses/(releases)
£m
£m
£m
 
 
 
 
Loan impairment losses/(releases)
 
 
 
  - individually assessed
42 
(40)
186 
  - collectively assessed
38 
(1)
16 
  - latent
(25)
21 
 
 
 
 
Total loan impairment losses/(releases)
84 
(66)
223 
Securities
(38)
(9)
 
 
 
 
Total impairment losses/(releases)
46 
(75)
223 
 
 
 
 
 
 
31 March 
31 December 
31 March 
Credit metrics (1)
2017 
2016 
2016 
 
 
 
 
Gross customer loans
£330,843m
£327,478m
£325,339m
Loan impairment provisions
£4,110m
£4,455m
£6,701m
Risk elements in lending (REIL)
£9,726m
£10,310m
£11,867m
Provisions as a % of REIL
42%
43%
57%
REIL as a % of gross customer loans
2.9%
3.1%
3.6%
Provisions as a % of gross customer loans
1.2%
1.4%
2.1%
 
Note:
(1)
Includes disposal groups and excludes reverse repos.
 
Key points 
● 
A net impairment loss of £46 million, 6 basis points of gross customer loans, compared with a loss of £223 million in Q1 2016. 
● 
Capital Resolution reported a net impairment release of £45 million in Q1 2017 compared with a loss of £196 million in Q1 2016 which included a £226 million charge in respect of the shipping portfolio. 
Commercial Banking reported a net impairment loss of £61 million in Q1 2017, £47 million higher than Q1 2016 with four specific impairment charges totalling £47 million in the quarter.
REIL reduced by £2,141 million, compared with Q1 2016, to £9,726 million reflecting Capital Resolution run-down and a portfolio sale in Ulster Bank RoI partially offset by an increase in the shipping portfolio, foreign exchange movements and the implementation of a revised mortgage methodology in Ulster Bank RoI. REIL represented 2.9% of gross customer loans compared with 3.6% at 31 March 2016 and 3.1% at 31 December 2016. Provision coverage was 42% compared with 57% at 31 March 2016 and 43% at 31 December 2016.   
Excluding REIL in Capital Resolution and Ulster Bank RoI, REIL were £4.1 billion or 1.4% of the respective gross customer loans.   
 
 
Capital and leverage
Key points 
● 
CET1 has increased by 70 basis points to 14.1% as a result of the attributable profit and the reduction in RWAs in the period.
● 
RWAs have decreased by £6.5 billion to £221.7 billion primarily driven by a £4.0 billion reduction in Capital Resolution reflecting disposal and run offs in line with exit strategy and a £1.1 billion reduction in NatWest Markets principally due to business movements. Excluding volume growth, RWAs across PBB, CPB and NatWest Markets reduced by £3.2 billion during Q1 2017.
Operational risk RWAs have decreased by £1.9 billion as a result of the annual recalculation.
Leverage ratio decreased marginally to 5.0% as increased lending exposure was offset by movements in capital.
 
 
 
Capital and leverage ratios

 
 
End-point CRR basis (1)
 
31 March 
31 December 
 
2017 
2016 
Risk asset ratios
 
 
 
CET1
14.1 
13.4 
Tier 1
15.9 
15.2 
Total
19.2 
19.2 
 
 
 
Capital
£m
£m
 
 
 
Tangible equity
35,186 
34,982 
 
 
 
Expected loss less impairment provisions
(1,396)
(1,371)
Prudential valuation adjustment
(377)
(532)
Deferred tax assets
(887)
(906)
Own credit adjustments
(245)
(304)
Pension fund assets
(186)
(208)
Cash flow hedging reserve
(888)
(1,030)
Other deductions
45 
(8)
 
 
 
Total deductions
(3,934)
(4,359)
 
 
 
CET1 capital
31,252 
30,623 
AT1 capital
4,041 
4,041 
 
 
 
Tier 1 capital
35,293 
34,664 
Tier 2 capital
7,370 
9,161 
 
 
 
Total regulatory capital
42,663 
43,825 
 
 
 
Risk-weighted assets
 
 
 
 
 
Credit risk
 
 
  - non-counterparty
160,100 
162,200 
  - counterparty
20,800 
22,900 
Market risk
17,000 
17,400 
Operational risk
23,800 
25,700 
 
 
 
Total RWAs
221,700 
228,200 
 
 
 
Leverage (2)
 
 
 
 
 
Derivatives
204,100 
247,000 
Loans and advances
347,200 
340,300 
Reverse repos
45,500 
41,800 
Other assets
186,500 
169,600 
 
 
 
Total assets
783,300 
798,700 
Derivatives
 
 
  - netting and variation margin
(204,200)
(241,700)
  - potential future exposures
63,400 
65,300 
Securities financing transactions gross up
2,800 
2,300 
Undrawn commitments
55,100 
58,600 
Regulatory deductions and other adjustments
300 
100 
 
 
 
CRR leverage exposure
700,700 
683,300 
 
 
 
Tier 1 capital
35,293 
34,664 
 
 
 
CRR leverage ratio %
5.0 
5.1 
 
 
 
UK leverage exposure (3)
622,200 
614,600 
 
 
 
UK leverage ratio % (3)
5.7 
5.6 
 
Notes:
(1)
CRR as implemented by the PRA in the UK, with effect from 1 January 2014. All regulatory adjustments and deductions to CET1 have been applied in full for both bases with the exception of unrealised gains on available-for-sale securities which have been included from 2015 under the PRA transitional basis.
(2)
Based on end-point CRR Tier 1 capital and leverage exposure under the CRR Delegated Act.
(3)
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

 
Quarter ended 31 March 2017
 
PBB
 
CPB
 
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
Capital
Williams
 items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
Resolution
& Glyn (1)
other (2)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,111 
105 
 
567 
112 
80 
 
29 
33 
165 
32 
2,234 
Other non-interest income
266 
41 
 
298 
48 
18 
 
479 
(85)
41 
(101)
1,005 
Total income - adjusted (3)
1,377 
146 
 
865 
160 
98 
 
508 
(52)
206 
(69)
3,239 
Own credit adjustments
(1)
 
 
(20)
(7)
(1)
(29)
Gain on redemption of own debt
 
 
Total income
1,377 
145 
 
865 
160 
98 
 
488 
(59)
206 
(68)
3,212 
Direct expenses - staff costs
(163)
(49)
 
(125)
(38)
(12)
 
(71)
(16)
(53)
(497)
(1,024)
                           - other costs
(64)
(12)
 
(55)
(7)
(3)
 
(17)
(9)
(11)
(620)
(798)
Indirect expenses
(489)
(47)
 
(268)
(68)
(28)
 
(233)
(44)
(20)
1,197 
Operating expenses - adjusted (4)
(716)
(108)
 
(448)
(113)
(43)
 
(321)
(69)
(84)
80 
(1,822)
Restructuring costs  - direct
(20)
(19)
 
(39)
 
(70)
(429)
(577)
                                  - indirect
(111)
(15)
 
(60)
(11)
(3)
 
(68)
(16)
284 
Litigation and conduct costs
(4)
 
(3)
 
(31)
(6)
(10)
(54)
Operating expenses
(851)
(142)
 
(550)
(124)
(46)
 
(420)
(161)
(84)
(75)
(2,453)
Operating profit/(loss) before impairment (losses)/releases
526 
 
315 
36 
52 
 
68 
(220)
122 
(143)
759 
Impairment (losses)/releases
(32)
24 
 
(61)
(3)
(7)
 
45 
(11)
(1)
(46)
Operating profit/(loss)
494 
27 
 
254 
33 
45 
 
68 
(175)
111 
(144)
713 
Operating profit/(loss) - adjusted (3,4)
629 
62 
 
356 
44 
48 
 
187 
(76)
111 
10 
1,371 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
24.8%
4.0%
 
5.7%
6.0%
12.0%
 
1.7%
nm
nm
nm
3.1%
Return on equity - adjusted (3,4,5)
32.0%
9.3%
 
8.9%
8.6%
13.0%
 
7.9%
nm
nm
nm
9.7%
Cost:income ratio (6)
61.8%
97.9%
 
62.0%
77.5%
46.9%
 
86.1%
nm
40.8%
nm
76.1%
Cost:income ratio - adjusted (3,4,6)
52.0%
74.0%
 
49.7%
70.6%
43.9%
 
63.2%
nm
40.8%
nm
55.8%
Total assets (£bn)
159.1 
24.7 
 
153.3 
18.1 
25.1 
 
225.3 
119.2 
25.8 
32.7 
783.3 
Funded assets (£bn) (7)
159.1 
24.6 
 
153.3 
18.1 
25.1 
 
113.9 
29.2 
25.8 
30.1 
579.2 
Net loans and advances to customers (£bn)
135.8 
19.0 
 
99.7 
12.5 
8.9 
 
17.9 
12.3 
20.6 
-  
326.7 
Risk elements in lending (£bn)
1.9 
3.5 
 
1.7 
0.1 
0.1 
 
-  
2.1 
0.3 
-  
9.7 
Impairment provisions (£bn)
(1.2)
(1.1)
 
(0.8)
-  
-  
 
-  
(0.7)
(0.2)
(0.1)
(4.1)
Customer deposits (£bn)
146.3 
16.6 
 
97.2 
25.7 
25.3 
 
8.0 
7.6 
24.0 
0.8 
351.5 
Risk-weighted assets (RWAs) (£bn)
32.7 
17.7 
 
77.8 
8.7 
9.5 
 
34.1 
30.5 
9.7 
1.0 
221.7 
RWA equivalent (£bn) (5)
35.7 
18.9 
 
81.8 
8.7 
9.5 
 
36.0 
32.7 
10.2 
1.2 
234.7 
Employee numbers (FTEs - thousands)
18.2 
3.1 
 
5.4 
1.7 
0.8 
 
1.2 
0.3 
4.3 
41.2 
76.2 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to page 17. nm = not meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment performance

 
Quarter ended 31 December 2016
 
PBB
 
CPB
 
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
Capital
Williams
 items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
Resolution
& Glyn (1)
other (2)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,093 
105 
 
542 
111 
77 
 
29 
44 
170 
37 
2,208 
Other non-interest income
246 
32 
 
325 
50 
19 
 
285 
(329)
47 
446 
1,121 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income adjusted (3)
1,339 
137 
 
867 
161 
96 
 
314 
(285)
217 
483 
3,329 
Own credit adjustments
 
 
(29)
(8)
(77)
(114)
Gain on redemption of own debt
 
 
Total income
1,339 
137 
 
867 
161 
96 
 
285 
(293)
217 
407 
3,216 
Direct expenses - staff costs
(161)
(57)
 
(130)
(39)
(12)
 
(64)
(23)
(60)
(479)
(1,025)
                           - other costs
(72)
(23)
 
(69)
(12)
(4)
 
(7)
(3)
(13)
(991)
(1,194)
Indirect expenses
(544)
(65)
 
(357)
(95)
(45)
 
(267)
(150)
(24)
1,547 
Operating expenses - adjusted (4)
(777)
(145)
 
(556)
(146)
(61)
 
(338)
(176)
(97)
77 
(2,219)
Restructuring costs  - direct
(1)
(6)
 
(12)
(6)
(1)
 
(3)
(21)
(957)
(1,007)
                                  - indirect
(50)
 
(34)
(8)
(1)
 
(43)
13 
121 
Litigation and conduct costs
(214)
(77)
 
(407)
(1)
 
(466)
(3,156)
192 
(4,128)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(1,042)
(226)
 
(1,009)
(159)
(64)
 
(850)
(3,340)
(97)
(567)
(7,354)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
297 
(89)
 
(142)
32 
 
(565)
(3,633)
120 
(160)
(4,138)
Impairment (losses)/releases
(16)
47 
 
(83)
 
130 
(11)
(1)
75 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
281 
(42)
 
(225)
10 
33 
 
(565)
(3,503)
109 
(161)
(4,063)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (3,4)
546 
39 
 
228 
23 
36 
 
(24)
(331)
109 
559 
1,185 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
13.5%
(5.8%)
 
(9.1%)
1.6%
8.8%
 
(30.2%)
nm
nm
nm
(48.2%)
Return on equity - adjusted (3,4,5)
27.8%
5.4%
 
5.3%
4.5%
9.8%
 
(2.7%)
nm
nm
nm
8.6%
Cost:income ratio (6)
77.8%
165.0%
 
117.1%
98.8%
66.7%
 
nm
nm
44.7%
nm
230.2%
Cost:income ratio - adjusted (3,4,6)
58.0%
105.8%
 
62.6%
90.7%
63.5%
 
107.6%
nm
44.7%
nm
66.3%
Total assets (£bn)
155.6 
24.1 
 
150.5 
18.6 
23.4 
 
240.0 
132.5 
25.8 
28.2 
798.7 
Funded assets (£bn) (7)
155.6 
24.0 
 
150.5 
18.5 
23.4 
 
100.9 
27.6 
25.8 
25.4 
551.7 
Net loans and advances to customers (£bn)
132.1 
18.9 
 
100.1 
12.2 
8.8 
 
17.4 
12.8 
20.6 
0.1 
323.0 
Risk elements in lending (£bn)
2.0 
3.5 
 
1.9 
0.1 
0.1 
 
2.3 
0.4 
10.3 
Impairment provisions (£bn)
(1.3)
(1.2)
 
(0.8)
 
(0.8)
(0.2)
(0.2)
(4.5)
Customer deposits (£bn)
145.8 
16.1 
 
97.9 
26.6 
25.2 
 
8.4 
9.5 
24.2 
0.2 
353.9 
Risk-weighted assets (RWAs) (£bn)
32.7 
18.1 
 
78.5 
8.6 
9.5 
 
35.2 
34.5 
9.6 
1.5 
228.2 
RWA equivalent (£bn) (5)
35.7 
19.5 
 
82.6 
8.6 
9.5 
 
37.2 
37.5 
10.1 
1.7 
242.4 
Employee numbers (FTEs - thousands)
18.3 
3.1 
 
5.5 
1.7 
0.8 
 
1.2 
0.4 
4.5 
42.3 
77.8 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to page 17. nm = not meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment performance

 
Quarter ended 31 March 2016
 
PBB
 
CPB
 
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
Capital
Williams
items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
Resolution
& Glyn (1)
other (2)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
1,019 
105 
 
536 
113 
75 
 
19 
86 
162 
41 
2,156 
Other non-interest income
256 
50 
 
317 
52 
15 
 
258 
(35)
43 
(298)
658 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income - adjusted (3)
1,275 
155 
 
853 
165 
90 
 
277 
51 
205 
(257)
2,814 
Own credit adjustments
 
 
64 
108 
81 
256 
Strategic disposals
 
 
(6)
(6)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income
1,275 
158 
 
853 
165 
90 
 
341 
153 
205 
(176)
3,064 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct expenses - staff costs
(181)
(51)
 
(131)
(40)
(10)
 
(67)
(45)
(62)
(615)
(1,202)
                           - other costs
(63)
(11)
 
(49)
(14)
(5)
 
(14)
(33)
(15)
(745)
(949)
Indirect expenses
(484)
(42)
 
(256)
(83)
(20)
 
(250)
(154)
(21)
1,310 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (4)
(728)
(104)
 
(436)
(137)
(35)
 
(331)
(232)
(98)
(50)
(2,151)
Restructuring costs - direct
(13)
(6)
 
(1)
(1)
 
(7)
(20)
(190)
(238)
                                - indirect
(9)
 
(15)
(1)
 
(12)
(9)
45 
Litigation and conduct costs
 
(2)
 
(18)
(10)
(1)
(31)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(750)
(110)
 
(438)
(153)
(36)
 
(361)
(258)
(118)
(196)
(2,420)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
525 
48 
 
415 
12 
54 
 
(20)
(105)
87 
(372)
644 
Impairment (losses)/releases
(16)
13 
 
(14)
(2)
(2)
 
(196)
(6)
(223)
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
509 
61 
 
401 
10 
52 
 
(20)
(301)
81 
(372)
421 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (3,4)
531 
64 
 
403 
26 
53 
 
(54)
(377)
101 
(307)
440 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
26.1%
8.8%
 
11.1%
1.5%
16.0%
 
(2.6%)
nm
nm
nm
(9.6%)
Return on equity - adjusted (3,4,5)
27.3%
9.2%
 
11.2%
5.1%
16.3%
 
(4.4%)
nm
nm
nm
(9.4%)
Cost:income ratio (6)
58.8%
69.6%
 
49.3%
92.7%
40.0%
 
105.9%
nm
57.6%
nm
78.7%
Cost:income ratio - adjusted (3,4,6)
57.1%
67.1%
 
49.0%
83.0%
38.9%
 
119.5%
nm
47.8%
nm
76.1%
Total assets (£bn)
146.3 
22.7 
 
139.4 
17.4 
23.7 
 
255.9 
218.8 
24.2 
34.5 
882.9 
Funded assets (£bn) (7)
146.3 
22.6 
 
139.4 
17.3 
23.7 
 
116.0 
50.2 
24.2 
31.0 
570.7 
Net loans and advances to customers (£bn)
121.8 
17.9 
 
96.4 
11.6 
8.0 
 
18.6 
22.4 
20.1 
1.8 
318.6 
Risk elements in lending (£bn)
2.4 
4.5 
 
2.2 
0.1 
0.1 
 
2.2 
0.4 
11.9 
Impairment provisions (£bn)
(1.6)
(2.7)
 
(1.1)
 
(1.0)
(0.3)
(6.7)
Customer deposits (£bn)
136.9 
13.7 
 
97.1 
23.2 
21.6 
 
6.7 
24.9 
24.3 
6.6 
355.0 
Risk-weighted assets (RWAs) (£bn)
34.7 
20.4 
 
75.7 
8.6 
9.1 
 
36.1 
47.6 
9.7 
7.6 
249.5 
RWA equivalent (£bn) (5)
37.5 
21.7 
 
79.7 
8.6 
9.1 
 
36.7 
48.4 
10.1 
7.8 
259.6 
Employee numbers (FTEs - thousands)
21.4 
3.2 
 
6.0 
1.8 
0.7 
 
1.3 
1.0 
5.5 
51.5 
92.4 
nm = not meaningful.
 
 
 
 
 
 
 
 
Notes:
(1)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented W&G has not operated as a separate legal entity.
(2)
Central items include unallocated transactions which principally comprise volatile items under IFRS and balances in relation to international private banking for Q1 2016.
(3)
Excluding own credit adjustments, gain on redemption of own debt and strategic disposals.
(4)
Excluding restructuring costs and litigation and conduct costs.
(5)
RBS's CET 1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by notional equity allocated at different rates of 14% (Ulster Bank RoI - 11% prior to Q1 2017), 11% (Commercial Banking), 14% (Private Banking - 15% prior to Q1 2017), 12% (RBS International) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). RBS Return on equity is calculated using profit for the period attributable to ordinary shareholders.
(6)
Operating lease depreciation included in income (Q1 2017 - £36 million; Q4 2016 - £37 million and Q1 2016 - £38 million).
(7)
Funded assets exclude derivative assets.
 
 
 
 
 
 
Segment performance

 
 
Quarter ended
 
31 March
31 December
31 March
 
2017
2016 
2016
Total income by segment
£m
£m
£m
 
 
 
 
UK PBB
 
 
 
Personal advances
225 
215 
204 
Personal deposits
204 
184 
168 
Mortgages
590 
598 
564 
Cards
137 
150 
142 
Business banking
194 
188 
182 
Other
27 
15 
Total
1,377 
1,339 
1,275 
 
 
 
 
Ulster Bank RoI
 
 
 
Corporate
45 
34 
56 
Retail
100 
101 
100 
Other
 
 
 
 
Total
145 
137 
158 
 
 
 
 
Commercial Banking
 
 
 
Commercial lending
468 
503 
436 
Deposits
123 
109 
125 
Asset and invoice finance
171 
175 
177 
Other
103 
80 
115 
Total
865 
867 
853 
 
 
 
 
Private Banking
 
 
 
Investments
25 
23 
28 
Banking
135 
138 
137 
Total
160 
161 
165 
 
 
 
 
RBS International
98 
96 
90 
 
 
 
 
NatWest Markets
 
 
 
Rates
325 
129 
121 
Currencies
128 
157 
144 
Financing
88 
78 
42 
Other
(33)
(50)
(30)
Total excluding own credit adjustments
508 
314 
277 
Own credit adjustments
(20)
(29)
64 
Total
488 
285 
341 
 
 
 
 
Capital Resolution
 
 
 
Portfolio and GTS
16 
34 
52 
Shipping
16 
Markets
16 
(29)
Other
(39)
(6)
Total excluding disposals and own credit adjustments
(2)
40 
47 
Disposal losses
(50)
(325)
(2)
Own credit adjustments
(7)
(8)
108 
Total
(59)
(293)
153 
 
 
 
 
Williams & Glyn (1)
 
 
 
Retail
119 
129 
115 
Commercial
87 
88 
90 
Total
206 
217 
205 
 
 
 
 
Central items
(68)
407 
(176)
Total RBS
3,212 
3,216 
3,064 
 
Note:
(1)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented Williams & Glyn has not operated as a separate legal entity.
 
 
Segment performance

 
 
Quarter ended
 
31 March
31 December
31 March
 
2017
2016
2016
Impairment losses/(releases) by segment
£m
£m
£m
UK PBB
 
 
 
Personal advances
28 
38 
Mortgages
(18)
(39)
Business banking
(3)
Cards
20 
20 
Total
32 
16 
16 
 
 
 
 
Ulster Bank RoI
 
 
 
Mortgages
(14)
(30)
Commercial real estate
 
 
 
 - investment
(1)
(5)
 - development
(3)
(1)
(2)
Other lending
(9)
(15)
(7)
Total
(24)
(47)
(13)
 
 
 
 
Commercial Banking
 
 
 
Commercial real estate
(2)
Asset and invoice finance
16 
21 
Private sector services (education, health etc)
(2)
Banks & financial institutions
Wholesale and retail trade repairs
Hotels and restaurants
Manufacturing
Construction
13 
Other
32 
20 
Total
61 
83 
14 
 
 
 
 
Private Banking
(8)
 
 
 
 
RBS International
(1)
 
 
 
 
Capital Resolution
(45)
(130)
196 
 
 
 
 
Williams & Glyn (1)
 
 
 
Retail
Commercial
Total
11 
11 
 
 
 
 
Central items
Total RBS
46 
(75)
223 
 
 
 
 
 
31 March
31 December
31 March
 
2017
2016
2016
Analysis of Capital Resolution RWAs by portfolio
£bn
£bn
£bn
Portfolio and GTS
2.8 
3.2 
8.5 
Shipping
2.4 
2.8 
4.2 
Markets
14.0 
15.8 
22.4 
Alawwal Bank
7.8 
7.9 
7.3 
Other
1.7 
2.0 
2.4 
Total credit and market risk RWAs
28.7 
31.7 
44.8 
Operational risk
1.8 
2.8 
2.8 
Total RWAs
30.5 
34.5 
47.6 
 
Note:
(1)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented Williams & Glyn has not operated as a separate legal entity.
 
 
 
 
Segment performance

 
 
31 March
31 December
31 March
 
2017
2016
2016
Loans and advances to customers (gross) by segment (1)
£bn
£bn
£bn
UK PBB
 
 
 
Personal advances
6.1 
6.0 
6.0 
Mortgages
120.6 
117.1 
108.0 
Business banking
6.6 
6.4 
5.5 
Cards
3.7 
3.9 
3.9 
Total
137.0 
133.4 
123.4 
 
 
 
 
Ulster Bank RoI
 
 
 
Mortgages
15.0 
15.3 
14.8 
Commercial real estate
 
 
 
 - investment
0.8 
0.7 
1.0 
 - development
0.2 
0.2 
0.6 
 - other lending
4.1 
3.9 
4.2 
Total
20.1 
20.1 
20.6 
 
 
 
 
Commercial Banking
 
 
 
Commercial real estate
17.1 
16.9 
17.5 
Asset and invoice finance
14.2 
14.1 
14.4 
Private sector services (education, health etc)
6.8 
6.9 
7.0 
Banks & financial institutions
8.9 
8.9 
7.4 
Wholesale and retail trade repairs
8.3 
8.4 
8.3 
Hotels and restaurants
3.9 
3.7 
3.5 
Manufacturing
6.3 
6.6 
6.4 
Construction
2.2 
2.1 
2.2 
Other
32.8 
33.3 
30.8 
Total
100.5 
100.9 
97.5 
 
 
 
 
Private Banking
 
 
 
Personal advances
2.2 
2.3 
2.6 
Mortgages
7.4 
7.0 
6.8 
Other
2.9 
2.9 
2.2 
Total
12.5 
12.2 
11.6 
 
 
 
 
RBS International
 
 
 
Corporate
6.3 
6.2 
5.4 
Mortgages
2.6 
2.6 
2.6 
Total
8.9 
8.8 
8.0 
 
 
 
 
Capital Resolution
13.0 
13.6 
23.4 
 
 
 
 
Williams & Glyn (2)
 
 
 
Retail
12.3 
12.3 
11.7 
Commercial
8.5 
8.5 
8.7 
Total
20.8 
20.8 
20.4 
 
 
 
 
Central items
0.1 
0.3 
1.8 
 
 
 
 
Balance sheet
 
 
 
NatWest Markets
 
 
 
Loans and advances to customer (excluding reverse repos)
17.9 
17.4 
18.6 
Loans and advances to banks (excluding reverse repos) (3)
4.9 
3.3 
5.2 
Reverse repos
40.8 
38.6 
40.4 
Securities
25.4 
22.0 
29.5 
Cash and eligible bills
15.0 
13.4 
12.2 
Other
9.9 
6.2 
10.1 
Total funded assets
113.9 
100.9 
116.0 
 
Notes:
(1)
Excludes reverse repurchase agreements and includes disposal groups.
(2)
Williams & Glyn refers to the business formerly intended to be divested as a separate legal entity and comprises RBS England and Wales branch-based businesses, along with certain small and medium enterprises and corporate activities across the UK. During the period presented Williams & Glyn has not operated as a separate legal entity.
(3)
Excludes disposal groups.
 
 
 
 
 
 
 
Segment performance

 
UK Personal & Business Banking
Operating profit was £494 million compared with £509 million in Q1 2016 with income growth of £102 million, or 8.0%, more than offset by a £16 million increase in impairments and a £109 million higher restructuring charge. Return on equity of 24.8% compared with 26.1% in Q1 2016. Adjusted operating profit of £629 million was £98 million, or 18.5%, higher than Q1 2016.
UK PBB continued to deliver support for both personal and business customers with net loans and advances of £135.8 billion up £14.0 billion, or 11.5%, compared with Q1 2016 driven by continued strong growth across key product areas. Gross new mortgage lending in the quarter of £7.8 billion was 10% higher than Q1 2016 with market share of new mortgages at approximately 13% supporting growth in stock share to approximately 9.0% at 31 March 2017, up from 8.8% at 31 December 2016 and 8.3% at 31 March 2016. Positive momentum continued across business banking lending with balances up 4.7%, excluding transfers of £0.9 billion as at 31 March 2017, compared with Q1 2016. Margins across asset products were stable with Q4 2016, although we have seen more aggressive new business pricing in the quarter from competitors.
Customer deposits increased by £9.4 billion, or 6.9%, to £146.3 billion compared with Q1 2016 largely driven by personal current account balance growth of 12.1%. Continued strong balance growth in Q1 2017 has offset lower hedge income in personal current accounts.
We continue to see higher customer retention and deepening relationships from our Reward Account proposition with overall current account attrition 14% lower than Q1 2016. The Reward Account is being re-positioned from 26 June 2017 with a reduced monthly fee and cashback reduced to 2% from the current 3% level.
The number of active mobile users has increased by over 4% to 4.3 million since Q4 2016. Our mobile app won Best Banking App at the British Bank Awards, helping maintain strong customer advocacy for our growing number of mobile customers. Total branch service transactions have reduced by 10% since Q1 2016. In recognition of this customer behaviour shift we have announced the closure of approximately 250 branches over 2017, from 1,315 at the end of 2016. However, we continue to invest in our network and enhance our digital capabilities for our customers.
Total income of £1,377 million was £102 million, or 8.0%, higher than Q1 2016. Net interest income increased by £92 million, or 9.0%, principally reflecting strong volume growth and savings re-pricing benefits partially offset by a decline in current account hedge returns and lower mortgage margins. Non-interest income increased by £10 million, or 3.9%, compared with Q1 2016 primarily due to a £7 million debt sale profit. Compared with Q4 2016, non-interest income increased by £20 million due to an annual home insurance profit share of £20 million.
Net interest margin increased by 7 basis points to 3.01% compared with Q4 2016 driven by the full effect of savings re-pricing in November 2016. Mortgage book margins were broadly stable as were the level of average SVR balances from Q4 2016 to Q1 2017 at around 11% of total mortgage balances.
Adjusted expenses of £716 million were £12 million, or 1.6%, lower than Q1 2016, with direct costs £17 million, or 7.0%, down due to a 15.0% reduction in FTEs driving reduced staff costs, partially offset by increased technology infrastructure investment costs. Adjusted cost:income ratio decreased from 57.1% to 52.0%. Compared with Q4 2016, adjusted expenses reduced by £61 million reflecting a £35 million intangible asset write down and a £34 million bank levy charge in Q4 2016, partially offset by higher technology infrastructure investment in ATM and cash deposit machines and branch refurbishment costs.
Restructuring costs of £131 million were £109 million higher than Q1 2016 largely due to a £92 million charge for property exits as we rationalise our back office property location strategy and branch distribution network.
The net impairment charge of £32 million, 9 basis points of gross customer loans, continued to reflect benign credit conditions. Defaults in Q1 2017 continue to remain at very low levels across all portfolios.
RWAs were £2.0 billion, or 5.8%, lower than Q1 2016 with lending growth more than offset by asset mix benefits from lower card balances and improved credit quality, reflecting the continued benign credit conditions.
 
 
 
Segment performance

 
 
Ulster Bank RoI
An operating profit of €32 million for the quarter compared with €78 million in Q1 2016. The decrease in operating profit primarily reflects the non recurrence of asset disposal benefits in Q1 2016 (€28 million), reduced income on free funds (€14 million) and an increase in restructuring costs in Q1 2017(€31 million) associated with recent announcements to invest in and transform key segments of the business. Adjusted operating profit of €72 million was €10 million, or 12.2%, lower than Q1 2016. Adjusted return on equity of 9.3% compared with 9.2% in Q1 2016.
Ulster Bank RoI added a further €0.2 billion of gross new mortgage lending in the quarter, up 25% compared with Q1 2016. The low yielding tracker mortgage portfolio declined by €0.9 billion to €10.8 billion.
Customer deposits increased €2.1 billion, or 12.1%, compared with Q1 2016 largely driven by an increase in commercial customer funding. The loan:deposit ratio reduced by 17 percentage points to 114%.
A non-recurring profit of €28 million relating to asset disposals was recognised in Q1 2016, of which €14 million was reported in income.
Total income of €168 million was €37 million, or 18.0%, lower than Q1 2016. Excluding the €14 million asset disposal gain, income decreased by €23 million primarily due to reduced income on free funds and a €3 million interim adjustment to the pricing of FX transactions between Ulster Bank RoI and NatWest Markets, pending completion of a detailed pricing review.
Compared with Q4 2016 total income increased €12 million, or 7.7%, primarily due to income recognised on a cohort of non performing loans in Q1 2017 which contributed to a 15 basis point increase in net interest margin to 1.74%.
Adjusted operating expenses of €125 million were €11 million, or 8.1%, lower than Q1 2016, largely reflecting progress in the delivery of cost saving initiatives and one off accrual releases of €8 million in Q1 2017, partially offset by a €4 million reduction in costs recharged to other business segments. Adjusted cost:income ratio increased from 67.1% to 74.0%. Restructuring costs of €39 million were €31 million higher than Q1 2016 reflecting recent announcements to invest in and restructure the bank, including the closure of 22 branches.
Adjusted operating expenses were €44 million lower than Q4 2016 largely driven by intangible asset write-offs and a reduction in costs recharged to other business segments in Q4 2016, in addition to business driven savings and a one off accrual release in Q1 2017.
Risk elements in lending reduced by €1.7 billion or 29.8% to €4.0 billion compared with Q1 2016, and benefited from the sale of a portfolio of loans in 2016. As at end Q1 2017, REIL were 17.0% of gross customer loans.
RWAs of €20.8 billion reduced by €4.9 billion, or 19.1%, compared with Q1 2016 driven by the sale of a portfolio of non-performing loans, combined with adjustments to the mortgage modelling approach and an improvement in the macro economic environment. RWAs on the tracker mortgage portfolio reduced by €2.5 billion, or 25.3%, compared with Q1 2016 to €7.5 billion.
 
 
 
Segment performance

 
Commercial Banking
Operating profit of £254 million compared with £401 million in Q1 2016. Adjusted operating profit of £356 million was £47 million, or 11.7%, lower than Q1 2016, principally reflecting an increased number of specific impairment losses taken in the quarter. An adjusted return on equity of 8.9% compared with 11.2% in Q1 2016.
Net loans and advances increased by £3.3 billion, or 3.4%, compared with Q1 2016 reflecting increased borrowing across sectors. Compared with Q4 2016, net loans and advances decreased by £0.4 billion as reductions in exposures with weak returns have been partially offset by growth in some segments.
Total income of £865 million was £12 million, or 1.4%, higher than Q1 2016 principally reflecting higher asset volumes. Net interest margin fell by 12 basis points from Q1 2016 to 1.76% driven by asset margin pressure in a competitive market and lower rate environment. Compared with Q4 2016, net interest margin increased by 8 basis points due to the active re-pricing of the deposit book and asset pricing actions on new lending.  
Adjusted operating expenses increased by £12 million, or 2.8%, compared with Q1 2016, reflecting the non recurrence of one off releases in Q1 2016, with underlying cost reductions of £11 million driven by a 10.0% reduction in front office headcount. Adjusted cost:income ratio was 49.7% compared with 49.0% in Q1 2016.
Net impairment losses of £61 million, 24 basis points of gross customer loans, were £47 million higher than Q1 2016 with four specific impairment charges totalling £47 million in the quarter.
RWAs were £77.8 billion, an increase of £2.1 billion compared to Q1 2016, reflecting asset growth partially offset by reduced RWA intensity. Compared with Q4 2016, RWAs reduced by £0.7 billion reflecting planned reductions in exposures with weak returns, partially offset by moderate growth in some segments.
 
Private Banking
Operating profit of £33 million was £23 million higher than Q1 2016 principally reflecting lower operating expenses. An adjusted return on equity of 8.6% compared with 5.1% in Q1 2016.
Total income of £160 million decreased by £5 million, or 3.0%, compared with Q1 2016 as the benefit of increased asset volumes has been more than offset by reduced net interest margin, down 22 basis points to 2.58% primarily reflecting the competitive market and low rate environment.
Adjusted operating expenses were £24 million, or 17.5%, lower than Q1 2016 at £113 million principally reflecting management actions to reduce operational costs. Adjusted cost:income ratio of 70.6% compared with 83.0% in Q1 2016.
Net loans and advances increased by £0.9 billion, or 7.8%, to £12.5 billion compared with Q1 2016 driven by mortgages. Assets under management of £17.8 billion were £3.8 billion higher compared with Q1 2016 reflecting underlying growth in net new assets and positive market returns. In addition, investment cash balances were included in assets under management for the first time in Q3 2016. Excluding this, growth was £2.6 billion.
 
RBS International
Operating profit of £45 million was £7 million, or 13.5%, lower than Q1 2016 driven by higher operating expenses, partially offset by increased income. An adjusted return on equity of 13.0% compared with 16.3% in Q1 2016.
Total income increased by £8 million, or 8.9%, to £98 million compared with Q1 2016 reflecting higher asset volumes. Net interest margin was broadly stable on Q1 2016 at 1.41% as asset and liability margin pressures have been offset by mitigating pricing actions.
Adjusted operating expenses were £8 million, or 22.9%, higher than Q1 2016 at £43 million principally reflecting increased regulatory and remediation costs (a combined £5 million). Adjusted cost:income ratio of 43.9% compared with 38.9% in Q1 2016.
Net loans and advances to customers increased by £0.9 billion, or 11.3%, to £8.9 billion compared with Q1 2016 principally reflecting balance draw-downs in the funds sector lending portfolio and foreign exchange movements.
Customer deposits increased by £3.7 billion, or 17.1%, to £25.3 billion principally reflecting the transfer in of the Luxembourg branch from Capital Resolution in Q2 2016 and foreign exchange movements.
 
 
 
Segment performance

 
NatWest Markets
An operating profit of £68 million compared with an operating loss of £20 million in Q1 2016. Adjusted operating profit of £187 million compared with an adjusted operating loss of £54 million in Q1 2016, with the improvement principally reflecting an increase in adjusted income. This generated an adjusted return on equity of 7.9% for the quarter.
Adjusted income increased by £231 million, or 83.4%, to £508 million. The increase reflected a consistent level of customer activity and an improved trading environment compared to a particularly difficult Q1 2016, notably in Rates. Total income, which includes own credit adjustments, increased by £147 million, or 43.1%, to £488 million compared with £341 million in Q1 2016.
Total expenses increased by £59 million, or 16.3%, principally reflecting an increase in restructuring costs. Adjusted operating expenses of £321 million were £10 million, or 3.0%, lower than Q1 2016, and £17 million lower than Q4 2016 driven by non-repeat of the annual bank levy charge of £13 million.
Funded assets decreased by £2.1 billion to £113.9 billion compared with Q1 2016. Compared with Q4 2016, funded assets increased by £13.0 billion in the quarter following the seasonally low levels of activity at the end of 2016. 
RWAs decreased by £2.0 billion compared with Q1 2016 to £34.1 billion principally due to business movements, partially offset by an increase due to the weakening of sterling.
 
Capital Resolution
RWAs reduced by £4.0 billion in the quarter to £30.5 billion primarily reflecting disposal activity and updates to operational risk.
An operating loss of £175 million compared with a £301 million loss in Q1 2016. Total income losses of £59 million compared with income of £153 million in Q1 2016, reflecting a £115 million decrease in own credit adjustments and increased disposal losses, up £48 million to £50 million.
Adjusted expenses of £69 million reduced by £163 million, or 70.3%, compared with Q1 2016, principally reflecting the impact of a 791 reduction in headcount to 254 FTEs by the end Q1 2017.
A net impairment release of £45 million was recorded in the quarter, compared with a net impairment loss of £196 million in Q1 2016 which was driven by a shipping portfolio charge of £226 million. 
RWAs have fallen by £17.1 billion to £30.5 billion from Q1 2016, primarily due to run-off and loan portfolio disposals. Funded assets have reduced by £21.0 billion to £29.2 billion for the same period.
 
Williams & Glyn
Operating profit of £111 million was £30 million, or 37.0%, higher than Q1 2016 due to a £13 million, or 16.9%, reduction in direct expenses and a £20 million restructuring charge incurred in Q1 2016.
Total income was broadly stable at £206 million compared with Q1 2016. Net interest income was £3 million, or 1.9%, higher driven by retail deposits, largely offset by a £2 million, or 4.7%, reduction in non-interest income.
Operating expenses of £84 million were £34 million, or 28.8%, lower than Q1 2016 driven by reduced staff and restructuring costs. Direct expenses were £13 million, or 16.9%, lower driven by a substantial reduction in FTEs, down over 1,000 compared with Q1 2016.
A net impairment loss of £11 million compared with £6 million in Q1 2016, and reflects the continued benign credit conditions.
Net loans and advances increased by £0.5 billion, or 2.5%, to £20.6 billion compared with Q1 2016 driven by a £0.3 billion increase in mortgage balances.
Customer deposits were broadly stable at £24.0 billion compared with Q1 2016.
 
Central items & other
Central items not allocated represent a charge of £144 million in the quarter compared with a charge of £372 million in Q1 2016. Treasury funding costs were a charge of £52 million, compared with a charge of £286 million in Q1 2016, and included a £52 million foreign exchange loss (Q1 2016 - £52 million gain) and a £18 million charge for volatile items under IFRS (Q1 2016 - £356 million charge). Restructuring costs of £145 million included a £73 million net settlement charge related to the RBS Netherlands pension scheme. These were partially offset by a £51 million VAT recovery recognised in the quarter.
 
 
 
 
 
 
 
Selected statutory financial statements

 
Condensed consolidated income statement for the period ended 31 March 2017
 
 
Quarter ended
 
31 March
31 December
31 March
2017 
2016 
2016 
 
£m 
£m 
£m 
 
 
 
 
Interest receivable
2,732 
2,770 
2,845 
Interest payable
(498)
(562)
(689)
Net interest income (1)
2,234 
2,208 
2,156 
 
 
 
 
Fees and commissions receivable
822 
821 
866 
Fees and commissions payable
(217)
(213)
(212)
Income from trading activities
399 
590 
38 
Gain on redemption of own debt