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 23, 2018
Commission File Number: 001-10306
 
The Royal Bank of Scotland Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
   Form 20-F X Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________
 
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ___ No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
The Royal Bank of Scotland Group plc
2017 RBS performance summary
Highlights
 
RBS reported its first 'bottom-line' profit in ten years
 
2017 operating profit of £2,239 million, an increase of £6,321 million compared with 2016.
Adjusted operating profit(1)(2) increased by 31.1% to £4,818 million.
2017 attributable profit of £752 million.
Q4 2017 operating loss before tax of £583 million and an attributable loss of £579 million.
4.0% increase in adjusted income(1) and an 8.1% reduction in adjusted operating expenses(2) driving a 12.1% improvement in operating leverage.
Net interest margin (NIM) reduced by 5 basis points to 2.13% compared with 2016.
Supported the UK economy through a £6.0 billion, or 2.2%,(3) increase in net lending across PBB, CPB and RBSI. Whilst behind our 3% target, this represents strong growth in a competitive environment.
 
Continued track record of delivery against our stated objectives
 
Grow income: Adjusted income increased by £490 million, or 4.0%.(1)
Cut costs: Excluding VAT recoveries, adjusted operating expenses reduced by £810 million,(2) or 9.6%.
Reduce capital usage: Excluding volume growth, RWAs reduced by £20.8 billion across PBB (£0.6 billion), CPB (£12.9 billion), RBSI (£4.4 billion) and NatWest Markets core (£2.9 billion), already achieving our 2018 target.
Resolve legacy issues; during 2017, RBS:
●  Wound up the former Capital Resolution business. Legacy RWAs now represent around 11% of total;
●  Received formal approval from the European Commission for its alternative remedies package in respect of the business previously described as Williams & Glyn; and
●  Reached settlement with the Federal Housing Finance Agency (FHFA) and the California State Attorney General in the US and resolved the 2008 rights issue shareholder litigation.
 
Significant capital build throughout 2017
 
CET1 ratio increased by 250 basis points to 15.9%, despite absorbing significant additional legacy costs.
IFRS 9 adoption on 1 January 2018 increased CET1 by a further 30 basis points.
 
Prioritising transformation acceleration
 
Increased investment and innovation spend focused on achieving higher levels of digitisation and automation.
Faster repositioning of the bank's existing distribution network and technology platforms towards mobile, cloud based platforms and virtualisation.
 
Delivery against our 2017 targets
 
Strategy goal
2017 target
2017
Strength and sustainability
Maintain bank CET1 ratio of 13%
CET1 ratio of 15.9%; up 250 basis points from Q4 2016
Customer experience
Significantly increase NPS or maintain No.1 in chosen customer segments
We have achieved target in half our key customer segments and Commercial Banking remains ahead of its main competitors. Trust has improved for both NatWest and Royal Bank of Scotland
Simplifying the bank
Reduce adjusted operating expenses by at least £750 million
Adjusted operating expenses down £810 million, or 9.6%, excluding VAT recoveries
Supporting growth
Net 3% growth on total PBB, CPB and RBSI loans to customers
Net customer loans in PBB, CPB and RBSI up 2.2%(3)
Employee engagement
Improve employee engagement
Employee engagement improved by 7 basis points to 83, 1 point above the GFS norm
 
Notes:
(1)
Income excluding own credit adjustments £69 million loss (2016 - £180 million gain), loss on redemption of own debt £7 million (2016 - £126 million), and strategic disposals £347 million (2016 - £164 million).
(2)
Operating expenses excluding litigation and conduct costs £1,285 million (2016 - £5,868 million), restructuring costs £1,565 million (2016 - £2,106 million), and VAT recoveries of £86 million (2016 - £227 million).
(3)
Excluding transfers. See notes on page 4 for further details.
 
 
Highlights

 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
Performance key metrics and ratios
2017
2016 
 
2017
2017 
2016 
Operating profit
2,239 
(4,082)
 
(583)
871 
(4,063)
Operating profit - adjusted (1,2)
4,818 
3,674 
 
512 
1,245 
1,185 
Profit/(loss) attributable to ordinary shareholders
752 
(6,955)
 
(579)
392 
(4,441)
Net interest margin
2.13%
2.18%
 
2.04%
2.12%
2.19%
Average interest earning assets
£422,337m
£399,598m
 
£430,902m
£430,962m
£401,548m
Cost:income ratio (3)
79.0%
129.0%
 
111.5%
67.5%
230.2%
Cost:income ratio - adjusted (1,2,3)
58.2%
66.0%
 
73.6%
55.6%
66.3%
Earnings per share
 
 
 
 
 
 
  - basic
6.3p
(59.5p)
 
(4.9p)
3.3p
(37.7p)
  - basic fully diluted
6.3p
(59.5p)
 
(4.9p)
3.3p
(37.7p)
  - adjusted basic (1,2)
25.2p
5.2p
 
3.0p
5.9p
7.0p
  - adjusted fully diluted (1,2,4)
25.2p
5.2p
 
3.0p
5.9p
7.0p
Return on tangible equity
2.2%
(17.9%)
 
(6.7%)
4.5%
(48.2%)
Return on tangible equity - adjusted (1,2)
8.8%
1.6%
 
4.0%
8.2%
8.6%
Average tangible equity
£34,053m
£38,791m
 
£34,403m
£34,465m
£36,855m
Average number of ordinary shares
 
 
 
 
 
 
 outstanding during the period (millions)
 
 
 
 
 
 
   - basic
11,867 
11,692 
 
11,944 
11,886 
11,766 
  -  fully diluted (4)
11,936 
11,743 
 
12,003 
11,943 
11,846 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period ended
 
31 December
30 September
31 December
Balance sheet related key metrics and ratios
2017 
2017 
2016 
Total assets
£738.1bn
£751.8bn
£798.7bn
Funded assets
£577.2bn
£580.0bn
£551.7bn
Loans and advances to customers (excludes reverse repos)
£323.2bn
£324.7bn
£323.0bn
Customer deposits (excludes repos)
£367.0bn
£359.9bn
£353.9bn
 
 
 
 
Liquidity coverage ratio (LCR)
152%
147%
123%
Liquidity portfolio
£186bn
£177bn
£164bn
Net stable funding ratio (NSFR)
132%
126%
121%
Loan:deposit ratio
88%
90%
91%
Risk elements in lending
£8.9bn
£9.0bn
£10.3bn
Impairment provisions
£3.8bn
£3.9bn
£4.5bn
Short-term wholesale funding
£18bn
£21bn
£14bn
Wholesale funding
£70bn
£69bn
£59bn
 
 
 
 
Common Equity Tier 1 (CET1) ratio
15.9%
15.5%
13.4%
Total capital ratio
21.3%
20.6%
19.2%
Risk-weighted assets (RWAs)
£200.9bn
£210.6bn
£228.2bn
CRR leverage ratio
5.3%
5.3%
5.1%
UK leverage ratio
6.1%
6.0%
5.6%
 
 
 
 
Tangible net asset value (TNAV) per ordinary share
294p
299p
296p
Tangible net asset value (TNAV) per ordinary share - fully diluted
292p
298p
294p
Tangible equity
£35,164m
£35,621m
£34,982m
Number of ordinary shares in issue (millions)
11,965 
11,905 
11,823 
Number of ordinary shares in issue (millions) - fully diluted (4,5)
12,031 
11,950 
11,906 
 
 
 
 
 
Notes:
(1)
Excluding own credit adjustments, (loss)/gain on redemption of own debt and strategic disposals.
(2)
Excluding restructuring costs and litigation and conduct costs.
(3)
Operating lease depreciation included in income (year ended 31 December 2017 - £142 million, year ended December 2016 - £152 million, Q4 2017 - £35 million, Q3 2017 - £35 million; Q4 2016 - £37 million).
(4)
Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q4 2017 were 59 million shares and for the twelve months ended 31 December 2017 were 69 million shares (year ended 31 December 2016 51 million shares; Q3 2017 - 57 million shares; Q4 2016 - 80 million shares) and as at 31 December 2017 were 66 million shares (30 September 2017 - 45 million shares, 31 December 2016 - 83 million shares)
(5)
Includes 16 million treasury shares (30 September 2017 - 17 million shares; 31 December 2016 - 39 million shares).
 
 
Business performance summary

Personal & Business Banking
UK Personal & Business Banking (UK PBB)
UK PBB now includes the business previously described as Williams and Glyn. Adjusted operating profit of £3,084 million was 18.4% higher than in 2016, including a £185 million debt sale gain. Income increased by 5.7% to £6,477 million supported by a 5.9% increase in net loans and advances, which more than offset margin contraction. Adjusted operating expenses were 7.1% lower than 2016 reflecting reduced headcount and lower back-office operations costs. Adjusted return on equity increased to 30.7% in 2017 from 25.1% in 2016. There are a range of variables that could impact near to medium term returns, including RWA inflation as a result of a change in Bank of England mortgage risk weighting.
 
Gross new mortgage lending was £31.0 billion, with market share of new mortgages at approximately 12%, supporting growth in stock share to approximately 10%. Mortgage approval share in Q4 2017 decreased to approximately 12%, from around 14% in Q3 2017, and mortgage new business margins were 14 basis points lower in the quarter, in part reflecting intense price competition in the market. UK PBB continues to invest in its digital offering and now has 5.5 million customers regularly using its mobile app, 20% higher than December 2016, and in 2017 was the first bank to launch a paperless mortgage journey.
 
Ulster Bank RoI
Ulster Bank RoI reported an adjusted operating profit of €109 million and an adjusted return on equity of 3.6% in 2017. Adjusted income decreased by €8 million, or 1.1%, primarily reflecting a reduction in income on free funds, partially offset by one-off items, higher lending income and reduced funding costs. Gross new lending increased by 3.4% from €2.5 billion in 2016 to €2.6 billion. Further cost efficiencies have been achieved, with adjusted expenses reducing by €43 million in 2017. Ulster Bank RoI was amongst the first banks in Ireland to introduce Apple Pay and Android Pay and now over 70% of our customers are actively using our digital proposition, increased from 58% of our active customer base in 2016.  We continue to reposition capital, with REILs down by 9.8% to €3.7 billion, representing 15.9% of gross customer loans, compared with 17.5% in 2016.
 
Commercial & Private Banking
Commercial Banking
Commercial Banking includes selected assets from the former Capital Resolution business from 1 October 2017. Adjusted operating profit of £1,308 million was 2.7% higher than 2016 and adjusted return on equity remained broadly stable at 8.2%. Income increased by 2.0% due to increased volumes in targeted segments and deposit re-pricing benefits. Adjusted operating expenses reduced by 6.3% reflecting operating model simplification and productivity improvements, including a 16.4% reduction in front office headcount. Commercial Banking net impairment losses of £362 million increased by £156 million, reflecting a small number of single name impairments.
 
Adjusting for transfers(1), net lending decreased by £4.9 billion in 2017, as growth in targeted segments has been more than offset by active management of the lending book, achieving gross RWA reductions of £12.5 billion. With the successful launch of our entrepreneur accelerator hub in London we now have 12 business accelerators throughout the UK. Across these hubs, over 3,800 start ups have benefitted from our support, which has helped them raise £255 million of investment while creating over 8,000 jobs.
 
Private Banking
Private Banking now includes the Collective Investment Funds business transferred from UK PBB on 1 October 2017. Adjusted operating profit increased by £78 million, or 52.3%, to £227 million and adjusted return on equity increased to 11.3% from 7.8%. Adjusting for transfers, income increased by £12 million due to higher lending volumes and an £8 million gain on a  property sale, partially offset by margin pressure. A 12.9% reduction in adjusted operating expenses was supported by an 11.8% reduction in front office headcount. Net loans and advances increased by 10.7% to £13.5 billion and assets under management increased by 14.4%, adjusting for transfers(2). We continue to focus on delivering the best customer experience, including investing in digital by launching Coutts Invest and an enhanced mobile experience, and we were awarded Best Private Bank in the UK at the Global Private Banking Awards 2017.
 
 
For notes refer to the following page.
 
 
Business performance summary

 
RBS International
RBSI reported an adjusted operating profit of £184 million, 5.6% lower than 2016. Income increased by 4.0% driven by increased lending and deposit volumes and re-pricing actions on the deposit book. Adjusted operating expenses increased by 19.5% reflecting increased operational costs associated with becoming a non ring-fenced bank. Despite this, adjusted return on equity remained robust at 12.6%. RWAs of £5.1 billion reduced by £4.4 billion compared with 2016 reflecting the benefit of receiving regulatory approval for RBSI to adopt an advanced internal ratings based approach on the wholesale corporate book.
 
NatWest Markets
Following the closure of the former Capital Resolution business in Q4 2017, NatWest Markets now includes legacy run-off assets alongside its core businesses. An operating loss of £977 million was reported in 2017, including a profit of £41 million in the core business. Adjusted operating loss of £264 million, compared with £1,231 million in 2016. Adjusted income in the core business increased by 9.5% to £1,665 million, largely driven by Rates as the business navigated markets well. Legacy disposal losses, other adjustments and impairments of £513 million were incurred in 2017, compared with £825 million in 2016. Adjusted operating expenses reduced by 26.7% reflecting a significant reduction in the legacy business, as it moved towards closure, and cost reductions in the core business. RWAs decreased by £15.3 billion, adjusting for transfers, to £52.9 billion primarily reflecting legacy business reductions. At the end of 2017 the legacy business within NatWest Markets had RWAs of £14.0 billion, excluding RBS's stake in Alawwal Bank, a reduction of £10.9 billion, adjusting for transfers(3), over the course of the year.
Notes:
(1)
Shipping and other activities which were formerly in Capital Resolution, were transferred from NatWest Markets on 1 October 2017, including net loans and advances to customers of £2.6 billion and RWAs of £2.1 billion. Commercial Banking transferred whole business securitisations and relevant financial institution's (RFI) to NatWest Markets during December 2017, including net loans and advances to customers of £0.8 billion and RWAs of £0.6 billion. Comparatives were not re-presented for these transfers.
(2)
UK PBB Collective Investment Funds (CIFL) business was transferred from UK PBB on 1 October 2017, including total income in Q4 2017 of £11 million and assets under management of £3.3 billion. Private Banking transferred Coutts Crown Dependency (CCD) to NatWest Markets during Q4 2017, including total income of £2 million and assets under management of £1.3 billion. Comparatives were not re-presented for these transfers.
(3)
Shipping and other activities which were formerly in Capital Resolution, were transferred to Commercial Banking on 1 October 2017, including RWAs of £2.1 billion. Whole business securitisations and relevant financial institutions (RFI) were transferred from Commercial Banking during December 2017, including  RWAs of £0.6 billion. Comparatives were not re-presented for these transfers.
(4)
Transfers include £0.4 billion loans and advances transferred from Commercial Banking to UK PBB during 2017 to better align Business banking customers. Comparatives were not re-presented for these transfers
 
 
Outlook

2018 Outlook(1)
We reiterate our medium term outlook on both return on tangible equity and cost:income ratio. We also now intend to accelerate the transformation of the bank which necessitates increased investment and innovation spend together with additional restructuring costs. As a result operating costs, excluding restructuring and litigation and conduct costs, will reduce compared with 2017, but the rate of cost reduction will be materially lower than in 2017. We expect to incur restructuring charges of around £2.5 billion across 2018 to 2019 cumulatively, of which c.£0.3 billion relates to the completion of the State Aid remedy and reintegration of the former Williams & Glyn (W&G) business into UK PBB. This is compared to previous guidance of around £1 billion excluding the impact of W&G, with around two thirds of the remaining c.£1.2 billion increase being driven by costs associated with the accelerated transformation.
 
RBS continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment and manage both conduct-related investigations and litigation, including relating to RMBS. Substantial additional charges and costs may be recognised in the coming quarters.
 
With the introduction of IFRS9, impairments are expected to be more volatile and we continue to remain mindful of potential downside risks, particularly from single name and sector driven events. The consensus view of Brexit suggests a weaker UK economy in the short to medium term. With the current high level of UK household debt and real wage compression, any increases in unemployment and interest rates present a threat to retail impairment rates. In wholesale portfolios further softening of GDP growth would be expected to impact credit losses negatively. We retain our guidance that through the cycle losses would be in the range of 30-40bps.
 
By the end of 2018, we expect bank RWAs to be lower by £5-10 billion. This is despite model uplifts in Commercial Banking in 2018 which are expected to drive some RWA inflation. The majority of the gross RWA reductions will be within NatWest Markets legacy assets, including the benefit of the anticipated merger between Alawwal Bank and Saudi British Bank, and Commercial Banking.
 
RBS Group capital and funding issuance plans for 2018 focus on issuing £4-6 billion MREL-compliant securities. We do not currently anticipate the need for either AT1 or Tier 2 issuances. As in 2017, we will continue to target other funding markets to diversify our funding structure. In support of the ring-fencing requirements and to build up RBS Plc (to be renamed NatWest Markets Plc) as a standalone non ring-fenced bank, we anticipate issuing £2-4 billion of senior unsecured issuance from this entity in addition to continued reliance on short term funding.
 
In the near to medium term, we would expect the Bank to maintain a CET1 ratio in excess of our 13% target given a range of variables that are likely to impact us over the coming years. These include:
 
potential final costs of a resolution with the US Department of Justice;
future potential pension contributions and the interplay with capital buffers for the bank for investment risk being run in the pension plan;
RWA inflation as a result of IFRS 16, Bank of England mortgage floors and Basel 3 amendments;
expected increased and pro-cyclical impairment volatility as a result of IFRS 9; and
the collective impact of these items on our stress test results
 
We remain committed to restarting capital distributions when permitted, with resolution with the US Department of Justice being a key milestone to enable this.
 
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 372  to 402 of the 2017 Annual Report and Accounts. These statements constitute forward looking statements, refer to Forward Looking Statements on pages 46 and 47 of this announcement.
 
 
Outlook

Medium term outlook
We retain our target of achieving a sub 50% cost:income ratio and above 12% return on equity by 2020.
 
While we expect operating costs to reduce each year from 2018 to 2020, given the increased level of investment and innovation spend expected over the coming years we are no longer guiding to an absolute 2020 cost base.
 
The NatWest Markets segment balance sheet as at end 2017 is broadly similar to the expected target balance sheet of NatWest Markets Plc (currently RBS Plc) after the ring-fence transfer schemes to be carried out during 2018.  In preparation for the UK ring-fencing regime, the previously reported operating segments were realigned in Q4 2017 and a number of business transfers completed.  These changes included the NatWest Markets segment absorbing the former Capital Resolution segment (other than for certain shipping and portfolio assets). Notwithstanding a planned capital reduction exercise in July 2018, by 2020 this entity is targeting a capital base with a consolidated end state CET1 ratio of 14%, a leverage ratio greater than 4% and a total capital ratio of at least twice the CET1 ratio, including the benefit of downstreamed internal MREL. By 2020, NatWest Markets targets a RWA position of c.£35 billion including legacy assets, with the legacy assets generating minimal associated income, and an overall cost base of around £1 billion.
 
Trading update
Overall, RBS has had a positive start to 2018.
 
 
2017 RBS performance summary

Customer
 
In 2017 we made it our goal to significantly increase NPS or maintain number one in our chosen customer segments. This strategy was implemented to support the overall aim of being the number one bank for customer service, trust and advocacy by 2020.
 
We use independent surveys to track the progress we are making to achieve our goals in each of our markets and to also measure our customers' experience.
 
To measure advocacy, customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating 'extremely likely' and 0 indicating 'not at all likely'.  Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. The net-promoter score (NPS) is established by subtracting the proportion of detractors from the proportion of promoters.
 
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).
 
Our Commercial Banking NPS has remained stable during 2017 and remains ahead of its main competitors. In England & Wales, NPS for NatWest Personal Banking has also remained stable and we have met our target for customer trust. In Scotland, while we have not met our target for customer trust for Royal Bank of Scotland, it has increased strongly year on year. We do recognise that significant work is required to improve our customer experience and we continue our work to resolve the ongoing reputational and legacy issues.
 
 
 
Q4 2016
Q3 2017
Q4 2017
NPS: Personal Banking
NatWest (England & Wales)(1)
13
12
12
Royal Bank of Scotland (Scotland)(1)
(4)
(13)
(6)
Ulster Bank (Northern Ireland)(2)
(16)
(4)
(5)
Ulster Bank (Republic of Ireland)(2)
(7)
(6)
(7)
NPS: Business Banking
NatWest (England & Wales)(3)
(2)
(10)
(7)
Royal Bank of Scotland (Scotland)(3)
(5)
(14)
(15)
NPS: Commercial Banking(4)
20
21
21
Trust(5)
NatWest (England & Wales)
55%
59%
57%
Royal Bank of Scotland (Scotland)
13%
22%
27%
 
Notes:
(1)
Source: GfK FRS 6 month rolling data. Latest base sizes: NatWest (England & Wales) (3361) Royal Bank of Scotland (Scotland) (440). 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.
(2)
Source: Coyne Research 12 month rolling data. Latest base sizes: Ulster Bank NI (294) Ulster Bank RoI (275) Question: "Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely".   
(3)
Source: Charterhouse Research Business Banking Survey, YE Q4 2017.  Based on interviews with businesses with an annual turnover up to £2 million. Latest base sizes: NatWest England & Wales (1245), RBS Scotland (437). 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.
(4)
Source: Charterhouse Research Business Banking Survey, YE Q4 2017.  Commercial £2m+ in GB (RBSG sample size, excluding don't knows: (904). 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.
(5)
Source: Populus. Latest quarter's data. Measured as a net of those that trust RBS/NatWest to do the right thing, less those that do not. Latest base sizes: NatWest,
England & Wales (948), RBS Scotland (203).
 
 
Chief Executive's message

Putting the past behind us. Investing for the future
In 2017 we continued to make good progress in building a simpler, safer and more customer focused bank. I am pleased to report to shareholders that the bank made an operating profit before tax of £2,239 million in 2017, and for the first time in ten years we have delivered a bottom Iine profit of £752 million.
 
We have achieved profitability through delivering on the strategic plan that was set out in 2014. The first part of this plan was focused on building financial strength by reducing risk and building a more sustainable cost base. So far, we have reduced our risk-weighted assets by £228 billion and today can report a Common Equity Tier 1 ratio of 15.9% up from 8.6% in 2013. Our financial strength is now much clearer. Over the same period we have reduced operating costs by £3.9 billion. We still have more to do on cost reduction, however this reflects the progress we have made in making the bank more efficient.
 
A clear indication of the outstanding progress we have made is that from the first quarter of 2018, we will no longer report adjusted financials.
 
At the same time as building financial strength, we have also made progress with the legacy of our past and improving our core bank. We have delivered on this by resolving a number of our litigation and conduct issues. This includes reaching settlements last year with FHFA in respect of our historical at Retail Mortgage Backed Securities (RMBS) activities and with claimants in relation to our 2008 Rights Issue. In 2017 we also continued to run down our legacy assets. The wind-up of our non-core division, Capital Resolution in 2017, was an important moment. 
 
As part of the support we received in 2008 and 2009, the bank was mandated to meet certain requirements under a State Aid restructuring plan. In 2017, we received approval for an alternative remedies package, which replaced our original plan to divest of the business formally known as Williams & Glyn. This is a good solution, both for improving competition in the UK SME banking market, and for shareholders.
 
With this solution in place and currently being implemented, the number of legacy issues the bank faces has reduced. However, we have one major legacy issue that we have yet to resolve which is with the US Department of Justice. The timing of the resolution of this issue is not in our control.
 
The bank has received significant media attention for its treatment of some small business customers between 2008 and 2013. To those customers who did not receive the experience they should have done while in GRG we have apologised. We accept that we got a lot wrong in how we treated customers in GRG during the crisis. However, these were complex and subjective cases with each case having unique facts about what was the right thing to do. The bank welcomes the FCA's confirmation that the most serious allegations made against the bank have not been upheld and that the steps the bank announced in November 2016 to put things right for customers are appropriate.
 
We have made significant progress in improving our culture since then.
 
Today this bank is a simpler and safer organisation, with colleagues now fully focused on our customers.
 
I want to thank our colleagues for their commitment and resolve during what has been a difficult chapter in the bank's history. Our most recent colleague survey, Our View, reported the highest engagement levels in ten years. We also recently won the 'Employee Engagement Company of the Year' at the UK Employee Engagement Awards. This shows that our culture is improving. This bank is now more open, less hierarchical and more focused on our customers. Our colleagues serve and support millions of customers across the UK and Republic of Ireland every day, it is vital to our success that they feel engaged and motivated.
 
 
Chief Executive's message

Investing to transform our business
When I started as CEO in 2014 the bank was far too complex. We operated in 38 countries, with over 5,000 systems supporting hundreds of different products. In our credit card business alone we offered 55 different card designs, as the organisation had grown we had added complexity which distracted us from our key stakeholder, the customer. Our customers want a bank which protects their safety and security, and is also responsive to their needs.
 
Today we have exited 26 countries and now have a more focused product set, underpinned by almost half the number of systems we previously had. Simplification will continue to be a key focus for the organisation in 2018. We are going through all of our end-to-end customer processes to ensure they are fit for purpose.
 
Our mortgage application journey is experienced by thousands of customers every day. With one of our strategic aims being to grow in this market, the benefits of simplification and automation in this area are vast. Given this, in 2017 NatWest was the first UK bank to offer paperless mortgages. Customers can now apply for a completely digital mortgage which uses the latest technology to securely share and verify documents online. With this new proposition, mortgage offers can now be made within 11 days, down from 23 days before. The process also eliminates close to 4.3 million sheets of paper a year, reducing our impact on the environment.
 
The opportunities created by greater simplification and automation, in terms of improved controls, cost reduction and a better customer experience, are significant for this bank.
 
As well as transforming our processes and products, in 2017 we continued to reap the benefits of refocusing our main customer-facing brands. With each now speaking to a unique constituency of customers, we are better placed to differentiate ourselves from our competitors. With NatWest for England and Wales, Royal Bank of Scotland, for Scotland and Ulster Bank for the island of Ireland - we truly are a bank of brands in the UK and the Republic of Ireland.
 
Customer driven change
Listening and responding to our customers is helping us to get closer to meeting our goal to be No.1. In light of this we have continued with the roll out of Closed Loop Feedback in 2017. Today, within 24 hours of an interaction taking place, customers can provide specific, actionable feedback directly to the teams that serve them, empowering colleagues to listen, learn from and act on what our customers are telling us. With our complaints volumes down 9% on the previous year, and our Net Promoter scores improving in half of our chosen customer segments, we continue to see the benefits of customer driven change in this bank.  We still have a lot of work to do to meet our 2020 ambition of being the number one bank for customer service, trust and advocacy.
 
Listening to our customers is not only reducing complaints, it's also driving product and service improvements. In our commercial bank for instance, in response to customers' demand for greater speed and efficiency, we have developed self service account opening. Through this channel more than 90% of our new to bank commercial customers are able to initiate account openings themselves and, crucially, are doing it 30 minutes faster than if they used telephony. Customers told us this was a pain point for them and we have responded.
 
Listening to our customers and investing to simplifying our processes is helping us build a bank which is lower cost, and competitive in our target markets - improving outcomes for both customers and shareholders.
 
We are committed to running the bank as a more sustainable business, serving today's customers in a way that also helps future generations. As technological, social and environmental changes shape the world, it's important to stay connected with evolving customer needs, our shareholders and the wider expectations of society. One of the ways in which we are doing this is through our Board-level stakeholder engagement programme where we proactively listen, learn and engage with our stakeholders to improve the way we do business.
 
 
Chief Executive's message

Supporting the UK economy
While transforming the bank, we have continued to support the UK economy. In 2017 we extended £33.9 billion in new mortgage lending, helping grow our mortgage market share for the fifth consecutive year. We continue to target growth in our mortgage market share in 2018.
 
We are also the biggest supporter of UK business. Our commercial bank grew lending in our target markets, this commitment supported both recognised household names and fledgling start-ups. Our commitment to business goes beyond simple financing, our Entrepreneurial Spark programme continued to grow in 2017 and has supported over 3,800 new businesses since 2012 with award-winning facilities and an outstanding support network. Our work is also being recognised externally. In 2017 NatWest was awarded Best Business Bank in the UK by the National Association of Commercial and Finance Brokers.
 
Throughout 2017 NatWest Markets has continued to deepen its customer relationships by providing global market access and innovative and tailored solutions.  As well as increasing employee engagement and improving the control environment, the business has made material progress to realise cost and operating efficiencies.
 
Responding to technological change
The financial services industry is going through one of the most significant periods of change we have seen in many years, and we are responding.
 
Like other industries, the digital revolution has naturally led to lower footfall in our branches. Branch transactions are down 40% on 2013, as increasingly our customers prefer the convenience and ease of digital banking. Given this we have made some difficult, but necessary, decisions around the scale of our branch network in 2017. This does not mean we are not supporting our customers. In fact we are providing customers more ways to bank than ever before, be that through a visit to their local Post Office, a visit from one of our 39 mobile branches, which visit over 600 towns and villages on a weekly basis, meeting one of our 100 community bankers, a digital appointment with one of our video bankers, logging on to internet banking platform, or banking on the go with our market leading mobile app. Our customers have never had as many channels through which to undertake their banking.
 
For the first time we now have more active mobile users than users online, a clear indication of the direction of travel of our customers' banking preferences.
 
Our ambition is for the standard of service we provide to always be outstanding, no matter how our customers choose to interact with us. In 2018 our branches will increasingly focus providing specialised expertise and advice as well as on helping customers tap into the wealth of ease and efficiency they can experience through using our digital channels.
 
In our commercial bank, we are supporting customers shift to mobile through building our online service Bankline service into an app. Currently, 90,000 commercial customers are active on Bankline. In the future we expect this to move increasingly to mobile.  In 2018, we will also launch Bankline mobile for our larger commercial customers. This new service will act as a companion to our current Bankline on-line technology. Initially, customers will be able to view transactions and send payments with biometric approval. In the coming quarters we will further expand the scope of what Bankline Mobile offers.
 
 
Chief Executive's message

Embracing the latest in digital innovation
We know that we cannot stand still on innovation as our competitors certainly are not.  Over the last few years we have invested in building our partnerships and scouting networks across the globe to ensure we are at the cutting edge of technology. We have developed some excellent  partnerships and one area we have advanced significantly in is Artificial Intelligence (AI).
 
By harnessing the latest in computer learning and speech recognition, in partnership with IBM, we have built an AI chatbot, called Cora. Cora is helping our customers with many of their most common queries. Crucially Cora is available 24/7, has no 'wait-time' to serve a customer and can handle an unlimited number of queries at the same time. Since Q1 2017 Cora has handled over four hundred thousand conversations responding to over two hundred different questions.
 
In partnership with Soul Machines, we are investing now to build an evolution of Cora for 2018, giving her a visual avatar acting as the interface with our customers. Initial trials are proving a success with customers telling us that using Cora made them less concerned about converting to our other digital channels.  While many customers felt empowered to be more direct in their questioning of Cora, as they felt much safer and more secure with her.
 
Through digital innovation we will serve customers more efficiently, be more responsive to their needs and at the same reduce costs in the business and build a more solid control environment.
 
Looking forward
In the past our legacy has dominated our corporate story. In 2017 our financial strength improved and we continued to put the past behind us. We are entering a new phase of transforming the core bank through technology innovation and end-to-end process re-engineering. Our future will be high tech and high touch, which means lower cost, high quality digital services with human expertise available when required.
 
Conclusion
I would like to thank shareholders for their continued support. We welcome the indication in the Chancellor's budget statement about the potential to restart share sales during the fiscal year 2018/2019, again this is a further proof of the progress we have made.
 
We recognise our responsibility towards the society we serve and operate in. It is only by supporting our customers and communities to succeed that we will be become a more sustainable bank. I, together with my management team, view this as a core part of our ambition to be No.1 for customer service, trust and advocacy.
 
As the number of our legacy issues reduces, and our business performance improves, the investment case for this bank is clearer, and the prospect of us rewarding our shareholders is getting closer.
 
 
Analysis of results

Summary consolidated income statement for the period ended 31 December 2017
 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2017 
2016 
 
2017 
2017 
2016 
 
£m
£m
 
£m
£m
£m
Net interest income
8,987 
8,708 
 
2,211 
2,304 
2,208 
 
 
 
 
 
 
 
Own credit adjustments
(69)
180 
 
(5)
(114)
(Loss)/gain on redemption of own debt
(7)
(126)
 
Strategic disposals
347 
164 
 
191 
Other non-interest income
3,875 
3,664 
 
646 
858 
1,121 
 
 
 
 
 
 
 
Non-interest income
4,146 
3,882 
 
846 
853 
1,008 
 
 
 
 
 
 
 
Total income
13,133 
12,590 
 
3,057 
3,157 
3,216 
 
 
 
 
 
 
 
Litigation and conduct costs
(1,285)
(5,868)
 
(764)
(125)
(4,128)
Restructuring costs
(1,565)
(2,106)
 
(531)
(244)
(1,007)
Other expenses
(7,551)
(8,220)
 
(2,111)
(1,774)
(2,219)
 
 
 
 
 
 
 
Operating expenses
(10,401)
(16,194)
 
(3,406)
(2,143)
(7,354)
 
 
 
 
 
 
 
Profit/(loss) before impairment (losses)/releases
2,732 
(3,604)
 
(349)
1,014 
(4,138)
Impairment (losses)/releases
(493)
(478)
 
(234)
(143)
75 
 
 
 
 
 
 
 
Operating profit/(loss) before tax
2,239 
(4,082)
 
(583)
871 
(4,063)
Tax (charge)/credit
(824)
(1,166)
 
168 
(265)
(244)
 
 
 
 
 
 
 
Profit/(loss) for the period
1,415 
(5,248)
 
(415)
606 
(4,307)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Non-controlling interests
35 
10 
 
14 
(8)
(27)
Other owners
628 
504 
 
150 
222 
161 
Dividend access share
1,193 
 
Ordinary shareholders
752 
(6,955)
 
(579)
392 
(4,441)
 
 
Total income
 
 
 
 
 
 
 
 
 
 
 
 
 
Statutory total income
13,133 
12,590 
 
3,057 
3,157 
3,216 
Adjusted for
 
 
 
 
 
 
Own credit adjustments
69 
(180)
 
(9)
114 
Loss/(gain) on redemption of own debt
126 
 
 - 
 - 
(1)
Strategic disposals
(347)
(164)
 
(191)
 - 
 - 
 
 
 
 
 
 
 
Adjusted total income
12,862 
12,372 
 
2,857 
3,162 
3,329 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notable items within adjusted total income
 
 
 
 
 
 
IFRS volatility in Central items(1)
(510)
 
(173)
21 
308 
UK PBB debt sale gain
185 
19 
 
168 
15 
Commercial Banking disposal gain/(loss)
 - 
 
(46)
52 
 - 
FX (losses)/gains in Central items
(183)
446 
 
(8)
(67)
140 
NatWest Markets legacy business disposal losses
(712)
(491)
 
(163)
(446)
(325)
 
 
Analysis of results

 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2017 
2016 
 
2017 
2017 
2016
Net interest income
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
   
Net interest income
 
 
 
 
 
   
RBS
8,987 
8,708 
 
2,211 
2,304 
2,208
 
 
 
 
 
 
   
 - UK Personal & Business Banking
5,130 
4,945 
 
1,272 
1,294 
1,263
 - Ulster Bank RoI
421 
409 
 
111 
104 
105
 - Commercial Banking
2,286 
2,143 
 
575 
570 
542
 - Private Banking
464 
449 
 
122 
116 
111
 - RBS International
325 
303 
 
81 
83 
77
 - NatWest Markets
203 
343 
 
38 
99 
73
 - Central items & other
158 
116 
 
12 
38 
37
Average interest earning assets (IEA)
 
 
 
 
 
 
 
 
 
 
 
 
 
 RBS
422,337 
399,598 
 
430,902 
430,962 
401,548 
  - UK Personal & Business Banking
179,453 
166,778 
 
182,614 
181,131 
172,849 
  - Ulster Bank RoI
25,214 
25,193 
 
25,056 
26,073 
26,259 
  - Commercial Banking
131,177 
121,677 
 
130,055 
130,047 
128,174 
  - Private Banking
18,799 
16,887 
 
19,796 
19,242 
17,679 
  - RBS International
23,930 
22,254 
 
24,062 
23,667 
22,793 
  - NatWest Markets
31,231 
37,856 
 
27,442 
32,592 
33,780 
  - Central items & other
12,533 
8,953 
 
21,877 
18,210 
14 
Yields, spreads and margins of the banking business
 
 
 
 
 
 
Gross yield on interest-earning assets of the
 
 
 
 
 
 
  banking business (1,2)
2.57%
2.80%
 
2.49%
2.55%
2.72%
Cost of interest-bearing liabilities of banking business (1)
(0.69%)
(0.94%)
 
(0.76%)
(0.66%)
(0.82%)
Interest spread of the banking business (1,3)
1.88%
1.86%
 
1.73%
1.89%
1.90%
Benefit from interest-free funds
0.25%
0.32%
 
0.31%
0.23%
0.29%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
RBS
2.13%
2.18%
 
2.04%
2.12%
2.19%
  - UK Personal & Business Banking
2.86%
2.97%
 
2.76%
2.83%
2.91%
  - Ulster Bank RoI
1.67%
1.62%
 
1.76%
1.58%
1.59%
  - Commercial Banking
1.74%
1.76%
 
1.75%
1.74%
1.68%
  - Private Banking
2.47%
2.66%
 
2.44%
2.39%
2.50%
  - RBS International
1.36%
1.36%
 
1.34%
1.39%
1.34%
  - NatWest Markets
0.65%
0.91%
 
0.55%
1.24%
0.86%
 
Third party customer rates (5)
 
 
 
 
 
 
Third party asset rates
 
 
 
 
 
 
  - UK Personal & Business Banking
3.47%
3.83%
 
3.38%
3.45%
3.64%
  - Ulster Bank RoI (6)
2.38%
2.19%
 
2.47%
2.29%
2.20%
  - Commercial Banking
2.73%
2.77%
 
2.77%
2.68%
2.65%
  - Private Banking
2.71%
2.90%
 
2.76%
2.67%
2.76%
  - RBS International
2.71%
3.04%
 
2.59%
2.77%
2.93%
 
 
 
 
 
 
 
Third party customer funding rate
 
 
 
 
 
 
  - UK Personal & Business Banking
(0.16%)
(0.45%)
 
(0.21%)
(0.15%)
(0.28%)
  - Ulster Bank RoI (6)
(0.31%)
(0.50%)
 
(0.24%)
(0.28%)
(0.42%)
  - Commercial Banking
(0.15%)
(0.33%)
 
(0.20%)
(0.10%)
(0.27%)
  - Private Banking
(0.09%)
(0.18%)
 
(0.11%)
(0.10%)
(0.12%)
  - RBS International
(0.02%)
(0.14%)
 
(0.03%)
(0.01%)
(0.08%)
Notes:                                                                                                                                           
(1)
For the purpose of calculating gross yields and interest spread, both interest receivable and payable has decreased by £182 million (2016 - £76 million) and by £55 million for Q4 2017 (Q4 2016 - £20 million) in respect of 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.
 
 
Analysis of results

 
2017 compared with 2016
Net interest income of £8,987 million increased by £279 million compared with 2016. The movement was principally driven by higher mortgage volumes in UK PBB, up £185 million or 3.7%, and deposit re-pricing benefits in Commercial Banking, up £143 million or 6.7%, partially offset by planned balance sheet reductions in NatWest Markets.
The net interest margin (NIM) was 2.13% for 2017, 5 basis points lower than 2016 reflecting increased liquidity, mix impacts and competitive pressures on margin.
UK PBB NIM of 2.86% was 11 basis points lower than 2016 reflecting lower mortgage margins, asset mix and reduced current account hedge yield, partially offset by savings re-pricing benefits from actions taken in 2016 and following the Q4 2017 base rate increase.
Ulster Bank RoI NIM increased by 5 basis points to 1.67% driven by a combination of improved deposit and loan margins, one-off income adjustments and successful deleveraging measures in 2016 which have reduced the concentration of low yielding loans.
Commercial Banking NIM decreased by 2 basis points as active re-pricing of assets and deposits has been more than offset by asset margin pressure in a low rate environment.
Private Banking NIM decreased by 19 basis points to 2.47% reflecting the competitive market and low rate environment, partially offset by higher funding benefits on deposits following the Q4 2017 base rate increase.
RBSI NIM remained stable at 1.36% as active re-pricing of deposits has been offset by the low rate environment.
Structural hedges of £129 billion generated a benefit of £1.3 billion through net interest income for the year.
 
Q4 2017 compared with Q3 2017
Net interest income of £2,211 million decreased by £93 million compared with Q3 2017 principally driven by one-off income releases in Q3 2017 relating to NatWest Markets.
NIM for Q4 2017 was 2.04%, 8 basis points lower than Q3 2017 driven by one-off income releases in Q3 2017 and a Q4 2017 charge in UK PBB associated with an annual review of mortgage customer repayment behaviour. Excluding the impact of one-off adjustments, NIM was broadly stable.
 
Q4 2017 compared with Q4 2016
Net interest income of £2,211 million remained broadly stable compared with Q4 2016 as higher volumes and re-pricing benefits have been offset by planned balance sheet reductions in NatWest Markets.
NIM was 2.04% for Q4 2017, 15 basis points lower than Q4 2016 reflecting increased liquidity, mix impacts and competitive pressures on margin.
Average interest earning assets increased by £29,354 million, or 7.3%, compared with Q4 2016 reflecting increased asset volumes in UK PBB, 5.6% higher, and a £21,863 million increase in Central items associated with a build-up in liquidity.
 
 
Analysis of results

 
 
 
 
 
 
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2017 
2016 
 
2017 
2017 
2016 
Operating expenses
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Statutory operating expenses
10,401 
16,194 
 
3,406 
2,143 
7,354 
Adjusted for
 
 
 
 
 
 
Litigation and conduct costs
(1,285)
(5,868)
 
(764)
(125)
(4,128)
Restructuring costs
(1,565)
(2,106)
 
(531)
(244)
(1,007)
 
 
 
 
 
 
 
Adjusted operating expenses
7,551 
8,220 
 
2,111 
1,774 
2,219 
 
 
 
 
 
 
 
Notable items within adjusted operating expenses
 
 
 
 
 
 
VAT recovery in Central items
86 
227 
 
29 
 - 
 
 
 
 
 
 
 
Notable items within restructuring costs
 
 
 
 
 
 
Property exit costs
(303)
 - 
 
(100)
14 
 - 
 
 
 
 
 
 
 
Employee numbers (FTE-thousands)
71.2 
77.8 
 
71.2 
73.6 
77.8 
 
Year ended
 
31 December
31 December
 
2017 
2016 
UK Bank levy segmental allocations
£m
£m
UK Personal & Business Banking
33 
34 
Ulster Bank RoI
Commercial Banking
91 
90 
Private Banking
18 
19 
RBS International
14 
19 
NatWest Markets
28 
35 
Central items
30 
(10)
 
 
 
Total UK Bank levy
215 
190 
 
 
Analysis of results

 
2017 compared with 2016
Total operating expenses of £10,401 million were £5,793 million, or 35.8%, lower than 2016 reflecting a £4,583 million reduction in litigation and conduct costs, a £669 million, or 8.1%, reduction in adjusted operating expenses and a £541 million reduction in restructuring costs.
Excluding VAT recoveries, adjusted operating expenses have reduced by £810 million for the year, ahead of our £750 million targeted reduction, with approximately 45% of the cost reduction delivered across PBB, CPB, RBSI and the NatWest Markets core business, adjusting for transfers.
Staff costs of £3,923 million were £559 million, or 12.5%, lower than 2016 underpinned by a 6,600, or 8.5%, reduction in FTEs.
Restructuring costs of £1,565 million included: a £303 million charge relating to the reduction in our property portfolio; a £319 million charge in NatWest Markets principally relating to the run-down and closure of the legacy business; £221 million relating to the business previously described as Williams & Glyn; £194 million in respect of implementing ring-fencing requirements; and a £73 million net settlement relating to the RBS Netherlands pension scheme.
Litigation and conduct costs of £1,285 million included: additional charges in respect of settlement with Federal Housing Finance Agency (FHFA) and the California State Attorney General and additional RMBS related provisions in the US; a further provision in relation to settling the 2008 rights issue shareholder litigation; an additional £175 million PPI provision; and a £169 million provision in Ulster Bank RoI for customer remediation and project costs relating to tracker mortgages and other legacy business issues.  
Q4 2017 compared with Q3 2017
Total operating expenses of £3,406 million were £1,263 million higher than Q3 2017 reflecting a £639 million increase in litigation and conduct costs, a £337 million increase in adjusted operating expenses and a £287 million increase in restructuring costs.
Adjusted operating expenses of £2,111 million were £337 million higher than Q3 2017 reflecting the UK bank levy charge of £215 million, the non-repeat of £55 million of VAT and other releases in Q3 2016 and the timing of innovation and marketing spend in the quarter.
Restructuring costs of £531 million included: a £97 million charge relating to the reduction in our property portfolio; a £129 million charge in NatWest Markets including costs relating to the run-down and closure of the legacy business and back office restructuring activity in the core business; £147 million relating to the business previously described as Williams & Glyn; and £59 million in respect of implementing ring-fencing requirements.
Litigation and conduct costs of £764 million included: £442 million of additional US RMBS related provisions; an additional £175 million PPI provision and a £135 million provision in Ulster Bank RoI for customer remediation and project costs relating to tracker mortgages and other legacy business issues.
Q4 2017 compared with Q4 2016
Total operating expenses of £3,406 million were £3,948 million lower than Q4 2016 reflecting a £3,364 million reduction in litigation and conduct costs, a £476 million reduction in restructuring costs and a £108 million reduction in adjusted operating expenses.
Adjusted operating expenses of £2,111 million were £108 million, or 4.9%, lower than Q4 2016 reflecting cost efficiencies and reduced headcount.
 
 
Analysis of results
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2017 
2016 
 
2017 
2017 
2016 
Impairment (releases)/losses
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
Impairment losses
493 
478 
 
234 
143 
(75)
 
 
 
 
 
 
 
Notable items within impairment losses
 
 
 
 
 
 
Ulster Bank RoI impairment losses/(releases)
60 
(113)
 
81 
(10)
(47)
Commercial Banking impairment losses
362 
206 
 
117 
151 
83 
NatWest Markets impairment (releases)/losses
(174)
253 
 
(26)
(71)
(130)
 
 
 
 
 
 
31 December 
30 September 
31 December 
Credit metrics
2017 
2017 
2016 
 
 
 
 
Gross customer loans
£326,998m
£328,504m
£327,478m
Loan impairment provisions
£3,814m
£3,854m
£4,455m
Risk elements in lending (REIL)
£8,904m
£9,019m
£10,310m
Provisions as a % of REIL
43%
43%
43%
REIL as a % of gross customer loans
2.7%
2.7%
3.1%
Provisions as a % of gross customer loans
1.2%
1.2%
1.4%
 
2017 compared with 2016
A net impairment loss of £493 million, 15 basis points of gross customer loans, compared with £478 million in 2016.
UK PBB reported a net impairment charge of £235 million, or 14 basis points of gross customer loans, reflecting continued benign credit conditions. 
Ulster Bank RoI reported a net impairment loss of €68 million compared with a €138 million release in 2016. The charge for the year included a provision relating to a change in the non performing loan strategy to allow for further portfolio sales whilst 2016 included gains arising from the impact of asset disposals.
Commercial Banking net impairment losses of £362 million were £156 million higher than 2016, reflecting a small number of single name impairments.
NatWest Markets net impairment release of £174 million compared with a net impairment loss of £253 million in 2016 and mainly comprised releases relating to the legacy business.
REIL reduced by £1,406 million during 2017 to £8,904 million principally reflecting reductions in NatWest Markets, as legacy portfolios are run-down, and reductions across UK PBB and Ulster Bank RoI. REIL represented 2.7% of gross customer loans, compared with 3.1% in 2016.
 
Q4 2017 compared with Q3 2017
A net impairment loss of £234 million, or 29 basis points of gross customer loans, compared with £143 million in Q3 2017.
Ulster Bank RoI reported a net impairment charge of €92 million, compared with a release of €11 million in Q3 2017, which included a provision relating to a change in the non performing loan strategy to allow for further portfolio sales.
Commercial Banking net impairment losses of £117 million were £34 million lower than Q3 2017.
 
Q4 2017 compared with Q4 2016
A net impairment loss of £234 million, compared with a net impairment release of £75 million in Q4 2016.
 
 
Analysis of results

 
 
 
 
 
 
End-point CRR basis
 
31 December 
30 September 
31 December 
 
2017 
2017 
2016 
Risk asset ratios
 
 
 
 
CET1
15.9 
15.5 
13.4 
Tier 1
17.9 
17.4 
15.2 
Total
21.3 
20.6 
19.2 
 
 
 
 
Capital
 
 
 
Tangible equity
35,164 
35,621 
34,982 
 
 
 
 
Expected loss less impairment provisions
(1,286)
(1,197)
(1,371)
Prudential valuation adjustment
(496)
(459)
(532)
Deferred tax assets
(849)
(865)
(906)
Own credit adjustments
(90)
(110)
(304)
Pension fund assets
(287)
(185)
(208)
Cash flow hedging reserve
(227)
(298)
(1,030)
Other adjustments for regulatory purposes
28 
51 
(8)
 
 
 
 
Total deductions
(3,207)
(3,063)
(4,359)
CET1 capital
31,957 
32,558 
30,623 
AT1 capital
4,041 
4,041 
4,041 
Tier 1 capital
35,998 
36,599 
34,664 
Tier 2 capital
6,765 
6,841 
9,161 
 
 
 
 
Total regulatory capital
42,763 
43,440 
43,825 
 
 
 
 
Risk-weighted assets
 
 
 
 
 
 
 
Credit risk
 
 
 
  - non-counterparty
144,700 
154,400 
162,200 
  - counterparty
15,400 
16,000 
22,900 
Market risk
17,000 
16,400 
17,400 
Operational risk
23,800 
23,800 
25,700 
 
 
 
 
Total RWAs
200,900 
210,600 
228,200 
 
 
 
 
Leverage (1)
 
 
 
 
 
 
 
Cash and balances at central banks
98,300 
88,200 
74,200 
Derivatives
160,800 
171,700 
247,000 
Loans and advances
339,400 
341,500 
340,300 
Reverse repos
40,700 
36,700 
41,800 
Other assets
98,900 
113,700 
95,400 
 
 
 
 
Total assets
738,100 
751,800 
798,700 
Derivatives
 
 
 
  - netting and variation margin
(161,700)
169,500 
(241,700)
  - potential future exposures
49,400 
54,100 
65,300 
Securities financing transactions gross up
2,300 
2,300 
2,300 
Undrawn commitments
53,100 
52,600 
58,600 
Regulatory deductions and other adjustments
(2,100)
200 
100 
 
 
 
 
CRR Leverage exposure
679,100 
691,500 
683,300 
 
 
 
 
CRR leverage ratio%
5.3 
5.3 
5.1 
 
 
 
 
UK leverage exposure (2)
587,100 
609,400 
614,600 
 
 
 
 
UK leverage ratio% (2)
6.1 
6.0 
5.6 
 
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 2017
 
PBB
 
CPB
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
other
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 
Total income - adjusted (2)
6,477 
607 
 
3,484 
678 
389 
 
1,090 
137 
12,862 
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 
Operating expenses - adjusted (4)
(3,158)
(451)
 
(1,814)
(445)
(202)
 
(1,528)
47 
(7,551)
Restructuring 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 
Operating profit/(loss) - adjusted (2,4)
3,084 
96 
 
1,308 
227 
184 
 
(264)
183 
4,818 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
23.7%
(5.0%)
 
6.6%
6.4%
11.2%
 
(9.0%)
nm
2.2%
Return on equity - adjusted (2,4,5)
30.7%
3.6%
 
8.2%
11.3%
12.6%
 
(3.7%)
nm
8.8%
Cost:income ratio (3)
59.1%
111.9%
 
56.0%
78.0%
56.3%
 
nm
nm
79.0%
Cost:income ratio - adjusted (2,3,4)
48.8%
74.3%
 
50.0%
65.6%
51.9%
 
140.2%
nm
58.2%
Total assets (£bn)
190.6 
24.6 
 
149.5 
20.3 
25.9 
 
277.9 
49.3 
738.1 
Funded assets (£bn) (6)
190.6 
24.5 
 
149.5 
20.3 
25.9 
 
118.7 
47.7 
577.2 
Net loans and advances to customers (£bn)
161.7 
19.5 
 
97.0 
13.5 
8.7 
 
22.7 
0.1 
323.2 
Risk elements in lending (£bn)
2.0 
3.3 
 
3.2 
0.1 
0.1 
 
0.3 
(0.1)
8.9 
Impairment provisions (£bn)
(1.3)
(1.1)
 
(1.2)
-  
-  
 
(0.2)
-  
(3.8)
Customer deposits (£bn)
180.6 
17.5 
 
98.0 
26.9 
29.0 
 
14.8 
0.2 
367.0 
Risk-weighted assets (RWAs) (£bn)
43.0 
18.0 
 
71.8 
9.1 
5.1 
 
52.9 
1.0 
200.9 
RWA equivalent (£bn) (5)
46.7 
18.9 
 
76.8 
9.1 
5.2 
 
56.4 
1.1 
214.2 
Employee numbers (FTEs - thousands) (7)
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 23. 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
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 
 
 
 
 
 
 
 
 
 
 
 
Total income adjusted (2)
1,548 
161 
 
806 
191 
97 
 
165 
(111)
2,857 
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 
Operating expenses  - adjusted (4)
(816)
(115)
 
(519)
(127)
(63)
 
(390)
(81)
(2,111)
Restructuring 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)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (2,4)
672 
(35)
 
170 
62 
34 
 
(199)
(192)
512 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
7.8%
(26.5%)
 
1.3%
(2.9%)
9.2%
 
(14.0%)
nm
(6.7%)
Return on equity - adjusted (2,4,5)
26.2%
(5.3%)
 
3.1%
12.1%
10.4%
 
(8.7%)
nm
4.0%
Cost:income ratio (6)
81.8%
157.8%
 
70.0%
101.6%
68.0%
 
nm
nm
111.5%
Cost:income ratio - adjusted (2,3,4)
52.7%
71.4%
 
62.8%
66.5%
64.9%
 
nm
nm
73.6%
Total assets (£bn)
190.6 
24.6 
 
149.5 
20.3 
25.9 
 
277.9 
49.3 
738.1 
Funded assets (£bn) (6)
190.6 
24.5 
 
149.5 
20.3 
25.9 
 
118.7 
47.7 
577.2 
Net loans and advances to customers (£bn)
161.7 
19.5 
 
97.0 
13.5 
8.7 
 
22.7 
0.1 
323.2 
Risk elements in lending (£bn)
2.0 
3.3 
 
3.2 
0.1 
0.1 
 
0.3 
(0.1)
8.9 
Impairment provisions (£bn)
(1.3)
(1.1)
 
(1.2)
 
(0.2)
(3.8)
Customer deposits (£bn)
180.6 
17.5 
 
98.0 
26.9 
29.0 
 
14.8 
0.2 
367.0 
Risk-weighted assets (RWAs) (£bn)
43.0 
18.0 
 
71.8 
9.1 
5.1 
 
52.9 
1.0 
200.9 
RWA equivalent (£bn) (5)
46.7 
18.9 
 
76.8 
9.1 
5.2 
 
56.4 
1.1 
214.2 
Employee numbers (FTEs - thousands) (7)
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 23. nm = not meaningful.
 
 
 
 
 
 
 
 
 
 
 
Segment performance

 
Year ended 31 December 2016
 
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
4,945 
409 
 
2,143 
449 
303 
 
343 
116 
8,708 
Other non-interest income
1,182 
164 
 
1,272 
208 
71 
 
763 
3,664 
 
 
 
 
 
 
 
 
 
 
 
Total income - adjusted (2)
6,127 
573 
 
3,415 
657 
374 
 
1,106 
120 
12,372 
Own credit adjustments
 
 
187 
(10)
180 
Loss on redemption of own debt
 
 
(126)
(126)
Strategic disposals
 
 
(81)
245 
164 
 
 
 
 
 
 
 
 
 
 
 
Total income
6,127 
576 
 
3,415 
657 
374 
 
1,212 
229 
12,590 
Direct expenses - staff costs
(832)
(207)
 
(522)
(154)
(45)
 
(358)
(2,364)
(4,482)
                           - other costs
(320)
(55)
 
(235)
(44)
(17)
 
(119)
(2,948)
(3,738)
Indirect expenses
(2,246)
(195)
 
(1,179)
(313)
(107)
 
(1,607)
5,647 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (4)
(3,398)
(457)
 
(1,936)
(511)
(169)
 
(2,084)
335 
(8,220)
Restructuring costs - direct
(46)
(38)
 
(25)
(7)
(2)
 
(75)
(1,913)
(2,106)
                                - indirect
(198)
(2)
 
(83)
(30)
(3)
 
(115)
431 
Litigation and conduct costs
(634)
(172)
 
(423)
(1)
 
(550)
(4,088)
(5,868)
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(4,276)
(669)
 
(2,467)
(549)
(174)
 
(2,824)
(5,235)
(16,194)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
1,851 
(93)
 
948 
108 
200 
 
(1,612)
(5,006)
(3,604)
Impairment (losses)/releases
(125)
113 
 
(206)
(10)
 
(253)
(478)
Operating profit/(loss)
1,726 
20 
 
742 
111 
190 
 
(1,865)
(5,006)
(4,082)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (2,4)
2,604 
229 
 
1,273 
149 
195 
 
(1,231)
455 
3,674 
 
 
 
 
 
 
 
 
 
 
 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
16.2%
0.7%
 
4.1%
5.6%
13.8%
 
(12.5%)
nm
(17.9%)
Return on equity - adjusted (2,4,5)
25.1%
8.4%
 
8.4%
7.8%
14.2%
 
(8.7%)
nm
1.6%
Cost:income ratio (3)
69.8%
116.1%
 
71.0%
83.6%
46.5%
 
nm
nm
129.0%
Cost:income ratio - adjusted (2,3,4)
55.5%
79.8%
 
54.8%
77.8%
45.2%
 
188.4%
nm
66.0%
Total assets (£bn)
181.4 
24.1 
 
150.5 
18.6 
23.4 
 
372.5 
28.2 
798.7 
Funded assets (£bn) (6)
181.4 
24.0 
 
150.5 
18.5 
23.4 
 
128.5 
25.4 
551.7 
Net loans and advances to customers (£bn)
152.7 
18.9 
 
100.1 
12.2 
8.8 
 
30.2 
0.1 
323.0 
Risk elements in lending (£bn)
2.4 
3.5 
 
1.9 
0.1 
0.1 
 
2.3 
10.3 
Impairment provisions (£bn)
(1.5)
(1.2)
 
(0.8)
 
(0.8)
(0.2)
(4.5)
Customer deposits (£bn)
170.0 
16.1 
 
97.9 
26.6 
25.2 
 
17.9 
0.2 
353.9 
Risk-weighted assets (RWAs) (£bn)
42.3 
18.1 
 
78.5 
8.6 
9.5 
 
69.7 
1.5 
228.2 
RWA equivalent (£bn) (5)
45.8 
19.5 
 
82.6 
8.6 
9.5 
 
74.7 
1.7 
242.4 
Employee numbers (FTEs - thousands)
21.6 
3.1 
 
5.5 
1.7 
0.8 
 
1.6 
43.5 
77.8 
For the notes to this table please refer to page 23. nm = not meaningful.
 
 
 
 
 
 
 
Segment performance

 
Quarter ended 30 September 2017
 
PBB
 
CPB
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
other
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
 
 
 
 
 
 
 
 
 
 
 
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
1,294 
104 
 
570 
116 
83 
 
99 
38 
2,304 
Other non-interest income
463 
46 
 
358 
50 
14 
 
(74)
858 
Total income - adjusted (2)
1,757 
150 
 
928 
166 
97 
 
25 
39 
3,162 
Own credit adjustments
 
 
(5)
(5)
Total income
1,757 
150 
 
928 
166 
97 
 
20 
39 
3,157 
 
 
 
 
 
 
 
 
 
 
 
Direct expenses  - staff costs
(191)
(50)
 
(113)
(36)
(13)
 
(163)
(388)
(954)
                            - other costs
(55)
(17)
 
(55)
(6)
(3)
 
(72)
(612)
(820)
Indirect expenses
(525)
(52)
 
(252)
(58)
(33)
 
(132)
1,052 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (4)
(771)
(119)
 
(420)
(100)
(49)
 
(367)
52 
(1,774)
Restructuring costs - direct
(1)
(1)
 
(2)
(1)
(2)
 
(29)
(208)
(244)
- indirect
(47)
(8)
 
(19)
(2)
 
(28)
104 
Litigation and conduct costs
(1)
 
(2)
(8)
 
(102)
(12)
(125)
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
(819)
(129)
 
(443)
(103)
(59)
 
(526)
(64)
(2,143)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
938 
21 
 
485 
63 
38 
 
(506)
(25)
1,014 
Impairment (losses)/releases
(78)
10 
 
(151)
 
71 
(143)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss)
860 
31 
 
334 
66 
40 
 
(435)
(25)
871 
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) - adjusted (2,4)
908 
41 
 
357 
69 
50 
 
(271)
91 
1,245 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
34.2%
4.6%
 
8.6%
13.2%
10.4%
 
(15.4%)
nm
4.5%
Return on equity - adjusted (2,4,5)
36.2%
6.1%
 
9.3%
13.8%
13.6%
 
(10.3%)
nm
8.2%
Cost:income ratio (3)
46.6%
86.0%
 
45.7%
62.0%
60.8%
 
nm
nm
67.5%
Cost:income ratio - adjusted (2,3,4)
43.9%
79.3%
 
43.1%
60.2%
50.5%
 
nm
nm
55.6%
Total assets (£bn)
190.1 
25.1 
 
147.3 
19.9 
24.3 
 
305.0 
40.1 
751.8 
Funded assets (£bn) (6)
190.1 
25.1 
 
147.3 
19.9 
24.3 
 
134.9 
38.4 
580.0 
Net loans and advances to customers (£bn)
160.8 
19.5 
 
96.6 
13.3 
9.3 
 
25.1 
0.1 
324.7 
Risk elements in lending (£bn)
2.0 
3.4 
 
1.7 
0.1 
0.1 
 
1.6 
0.1 
9.0 
Impairment provisions (£bn)
(1.3)
(1.1)
 
(0.8)
 
(0.5)
(0.2)
(3.9)
Customer deposits (£bn)
178.6 
17.3 
 
98.2 
27.0 
24.9 
 
13.7 
0.2 
359.9 
Risk-weighted assets (RWAs) (£bn)
43.3 
17.9 
 
74.6 
9.2 
9.6 
 
54.9 
1.1 
210.6 
RWA equivalent (£bn) (5)
47.0 
18.9 
 
77.4 
9.2 
9.6 
 
59.1 
1.3 
222.5 
Employee numbers (FTEs - thousands) (7)
20.5 
2.8 
 
4.9 
1.6 
0.8 
 
6.0 
37.0 
73.6 
 
 
 
 
 
 
 
 
 
 
 
For the notes to this table refer to page 23. nm = not meaningful.
 
 
 
 
 
 
 
Segment performance

 
Quarter ended 31 December 2016
 
PBB
 
CPB
 
 
 
Central
 
 
 
Ulster
 
Commercial
Private
RBS
 
NatWest
items &
Total
 
UK PBB
Bank RoI
 
Banking
Banking
International
 
Markets
other
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
1,263 
105 
 
542 
111 
77 
 
73 
37 
2,208 
Other non-interest income
293 
32 
 
325 
50 
19 
 
(44)
446 
1,121 
Total income - adjusted (2)
1,556 
137 
 
867 
161 
96 
 
29 
483 
3,329 
Own credit adjustments
 
 
(37)
(77)
(114)
Gain on redemption of own debt
 
 
 
 
 
 
 
 
 
 
 
 
 
Total income
1,556 
137 
 
867 
161 
96 
 
(8)
407 
3,216 
Direct expenses  - staff costs
(196)
(57)
 
(130)
(39)
(12)
 
(87)
(504)
(1,025)
                             - other costs
(76)
(23)
 
(69)
(12)
(4)
 
(10)
(1,000)
(1,194)
Indirect expenses
(602)
(65)
 
(357)
(95)
(45)
 
(417)
1,581 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses - adjusted (4)
(874)
(145)
 
(556)
(146)
(61)
 
(514)
77 
(2,219)
Restructuring costs - direct
(1)
(6)
 
(12)
(6)
(1)
 
(24)
(957)
(1,007)
- indirect
(50)
 
(34)
(8)
(1)
 
(30)
121 
Litigation and conduct costs
(214)
(77)
 
(407)
(1)
 
(581)
(2,849)
(4,128)
Operating expenses
(1,139)
(226)
 
(1,009)
(159)
(64)
 
(1,149)
(3,608)
(7,354)
 
 
 
 
 
 
 
 
 
 
 
Operating profit/(loss) before impairment (losses)/releases
417 
(89)
 
(142)
32 
 
(1,157)
(3,201)
(4,138)
Impairment (losses)/releases
(27)
47 
 
(83)
 
130 
(1)
75 
Operating profit/(loss)
390 
(42)
 
(225)
10 
33 
 
(1,027)
(3,202)
(4,063)
Operating profit/(loss) - adjusted (2,4)
655 
39 
 
228 
23 
36 
 
(355)
559 
1,185 
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (5)
15.1%
(5.8%)
 
(9.1%)
1.6%
8.8%
 
(27.0%)
nm
(48.2%)
Return on equity - adjusted (2,4,5)
26.2%
5.4%
 
5.3%
4.5%
9.8%
 
(10.3%)
nm
8.6%
Cost:income ratio (3)
73.2%
165.0%
 
117.1%
98.8%
66.7%
 
nm
nm
230.2%
Cost:income ratio - adjusted (2,3,4)
56.2%
105.8%
 
62.6%
90.7%
63.5%
 
nm
nm
66.3%
Total assets (£bn)
181.4 
24.1 
 
150.5 
18.6 
23.4 
 
372.5 
28.2 
798.7 
Funded assets (£bn) (6)
181.4 
24.0 
 
150.5 
18.5 
23.4 
 
128.5 
25.4 
551.7 
Net loans and advances to customers (£bn)
152.7 
18.9 
 
100.1 
12.2 
8.8 
 
30.2 
0.1 
323.0 
Risk elements in lending (£bn)
2.4 
3.5 
 
1.9 
0.1 
0.1 
 
2.3 
10.3 
Impairment provisions (£bn)
(1.5)
(1.2)
 
(0.8)
 
(0.8)
(0.2)
(4.5)
Customer deposits (£bn)
170.0 
16.1 
 
97.9 
26.6 
25.2 
 
17.9 
0.2 
353.9 
Risk-weighted assets (RWAs) (£bn)
42.3 
18.1 
 
78.5 
8.6 
9.5 
 
69.7 
1.5 
228.2 
RWA equivalent (£bn) (5)
45.8 
19.5 
 
82.6 
8.6 
9.5 
 
74.7 
1.7 
242.4 
Employee numbers (FTEs - thousands)
21.6 
3.1 
 
5.5 
1.7 
0.8 
 
1.6 
43.5 
77.8 
 
Notes:
(1)
Central items include unallocated transactions which principally comprise volatile items under IFRS and balances in relation to international private banking for Q1 2016.
(2)
Excluding own credit adjustments, (loss)/gain on redemption of own debt and strategic disposals.
(3)
Operating lease depreciation included in income (year ended December 2017 - £142 million; Q4 2017 - £35 million; year ended 31 December 2016 - £152 million, Q3 2017 - £35 million and Q4 2016 - £37 million).
(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 average 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), 16% (RBS International - 12% prior to November 2017) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). RBS's Return on equity is calculated using profit/(loss) for the period attributable to ordinary shareholders.
(6)
Funded assets exclude derivative assets.
(7)
On 1 January 2017 4.5 thousand employees on a FTE basis were transferred from Central items to NatWest Markets in preparation for ring-fencing. On 1 October 2017 0.8 thousand employees on a FTE basis were transferred from Central Items to RBS International, also in preparation for ring-fencing.
 
 
 
Segment performance

 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December