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 August 02, 2019

Commission File Number: 001-10306

 

The Royal Bank of Scotland Group plc

 

RBS, Gogarburn, PO Box 1000

Edinburgh EH12 1HQ

 

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

   Form 20-F X Form 40-F ___

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___ No X

 

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 

 

 

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

 

 

 

 

 

 

 

NatWest Markets N.V.

Interim Results 2019

 

 

 

 

 

 

NatWest Markets N.V.

Results for the half year ended 30 June 2019

 

NatWest Markets N.V. reported an attributable profit of €527 million for H1 2019 compared with €34 million in H1 2018, primarily reflecting the impact of the Alawwal bank merger completed in H1 2019, the re-purposing of the NatWest Markets N.V. (NWM N.V.) banking licence and new business transferred to NWM N.V..

 

Income, balance sheet and RWAs

 

Business developments

NWM N.V. began transacting new business on 25 March 2019 as part of preparations to ensure continuity of service to RBS Group European Economic Area (EEA) customers when the United Kingdom leaves the European Union. The activities transferred primarily relate to Markets and Corporate Lending portfolios for EEA customers previously served from NWM Plc and the ring-fenced bank.

 

As part of the commencement of new business, €6.2 billion of assets and €6.6 billion of liabilities were transferred from NWM Plc to NWM N.V. over the weekend of 23/24 March 2019. Further transfers of €1.3 billion of assets and €1.8 billion of liabilities were undertaken in Q2 2019. During H1 2019 €0.4 billion of lending and €3.3 billion of contingent liabilities and commitments have also transferred from NatWest Bank Plc to NWM N.V. in relation to the Western European Corporate Portfolio.

 

Alawwal bank

On 16 June 2019, the merger of Alawwal bank and SABB was completed, with NWM N.V. receiving an aggregate 10.3% shareholding in SABB on behalf of itself and its consortium partners. The RBS Group’s economic interest in the merged entity, amounting to 4.1%, was then sold to NWM Plc, and the balance of shares was transferred separately to RFS Holdings B.V. consortium partners, as part of the unwind of those arrangements. The completion of the Alawwal bank and SABB merger paves the way for NWM N.V. to become a subsidiary of NWM Plc in H2 2019, subject to regulatory approval.

 

NWM N.V. has recognised an income gain on disposal of the Alawwal bank stake for shares received in SABB of €523 million.

Risk-sharing agreements

During the period, NWM Plc and NWM N.V. have established limited risk-sharing arrangements that facilitate the smooth provision of services to Markets’ customers.  The arrangements include:

 

 

Presentation of Information

RBS Holdings N.V. is the parent company of one direct subsidiary, NatWest Markets N.V. (NWM N.V.), together with NWM N.V.’s other group of companies and associated companies, ‘RBSH Group’ and  NWM N.V. Group respectively.  NWM N.V. is a licenced bank regulated by the De Nederlandsche Bank. As the legal entity structure and activities of RBSH Group and NWM N.V. Group are very closely aligned, references and disclosures to each will apply equally to the other.

 

Outlook

Further changes are expected regarding the scope of the RBSH Group’s activities in 2019 resulting from structural changes as part of the RBS Group’s strategy. The volume and pace of changes will depend upon the terms and circumstances of the UK’s exit from the EU, as well as the specific contractual terms of the affected products and agreement of certain customers, amongst other variables.

 

 

 

Financial review

 

Profit attributable to controlling interests was €527 million compared with €34 million in H1 2018. This increase was due to total income of €590 million compared with €113 million in H1 2018, reflecting the gain on the merger of Alawwal bank of €523 million.

 

Net interest income was a loss of €5 million compared with a loss of €1 million in H1 2018, reflecting higher interest receivable partially offset by an increase in interest payable.

 

Non-interest income increased by €481 million to €595 million compared with €114 million in H1 2018. Income from trading activities was €8 million (H1 2018 - €70 million). H1 2019 included €17 million (H1 2018 - €46 million) received in respect of a distribution to successful plaintiffs in the Madoff related class action. Net fees and commissions of €63 million (H1 2018 - nil) primarily related to the transfer of new business. Other operating income of €524 million, compared with €44 million in H1 2018 and included the gain on the merger of Alawwal bank of €523 million.

 

Operating expenses were €42 million in H1 2019 compared with €32 million in H1 2018. Staff costs increased by €17 million to €19 million in H1 2019 (H1 2018 - €2 million) and premises and equipment costs decreased by €3 million to €1 million (H1 2018 - €4 million). Administrative expenses decreased by €5 million to €21 million, compared with €26 million in H1 2018.

 

Impairments were a release of €1 million compared with a loss of €6 million in H1 2018.

 

Tax charge for H1 2019 was €22 million compared with €41 million in H1 2018.

 

Balance sheet

The balance sheet movements in the year are materially impacted by the re-purposing of the NatWest Markets N.V. banking licence and the transfer of new business from NatWest Bank Plc in relation to the Western European Corporate Portfolio. These are described where relevant below;

 

●	Total assets were €17.7 billion at 30 June 2019, an increase of €12.4 billion compared with €5.3 billion at 31 December 2018, mainly driven by trading assets of €2.7 billion (31 December 2018 - €13 million) and derivatives of €7.4 billion (31 December 2018 - €0.7 billion) due to the transfers of assets from NWM Plc and the transfer in of new business.
●	Cash and balances at central banks increased by €1.7 billion to €2.0 billion at 30 June 2019, with the majority of the balance placed with the Dutch Central Bank.
●	Loans to banks - amortised cost increased by €0.1 billion to €0.5 billion at 30 June 2019.
●	Amounts due from holding company and fellow subsidiaries increased to €2.6 billion compared with €1.9 billion at 31 December 2018, reflecting the transfer in of new business.
●	Loans to customers - amortised cost increased to €0.5 billion, compared with €67 million, reflecting the transfer in of new business.
●	Other assets decreased by €1.4 billion, to €64 million, reflecting the impact of the Alawwal bank merger.
●	Derivative assets increased to €7.4 billion (31 December 2018 - €0.7 billion) and derivative liabilities increased to €7.0 billion (31 December 2018 - €0.4 billion), reflecting the transfer in of new business.
●	Settlement balance assets and liabilities were €1.3 billion (31 December 2018 - nil) and €0.9 billion (31 December 2018 - nil) respectively and trading liabilities increased to €0.9 billion (31 December 2018 - €6 million).
	reflecting the transfer in of new business.
●	Equity attributable to controlling interests decreased by 12%, to €2.8 billion driven by the dividend distribution to consortium partners following the Alawwal bank merger.

 

 

 

Financial review

Capital and liquidity

Capital ratios and risk-weighted assets (RWAs) on the CRR transitional basis are set out below.

	30 June	31 December
	2019	2018
Capital ratios	%	%
CET1	33.5	31.4
Tier 1	38.0	31.4
Total	39.7	32.6
Risk-weighted assets	€m	€m
Credit risk	3,642	8,164
Market risk	1,214	157
Operational risk	624	478
Total RWAs	5,480	8,799
of which Alawwal bank	-	6,156
Liquidity	%	%
Liquidity coverage ratio (LCR)	456	nm

 

 

 

Condensed consolidated income statement for the half year ended 30 June 2019 (unaudited)

 

	Half year ended
	30 June	30 June
	2019	2018
	€m	€m
Interest receivable	15	9
Interest payable	(20)	(10)
Net interest income	(5)	(1)
Fees and commissions receivable	71	2
Fees and commissions payable	(8)	(2)
Income from trading activities	8	70
Other operating income (1)	524	44
Non-interest income	595	114
Total income	590	113
Operating expenses	(42)	(32)
Profit before impairment losses	548	81
Impairment releases/(losses)	1	(6)
Operating profit before tax	549	75
Tax charge	(22)	(41)
Profit for the period attributable to controlling interests	527	34

 

Note:

 (1) Gain of €523 million on completion of the Alawwal bank merger.

 

Condensed consolidated statement of comprehensive income for the half year ended 30 June 2019 (unaudited)

 

	Half year ended
	30 June	30 June
	2019	2018
	€m	€m
Profit for the period	527	34
Items that do not qualify for reclassification
(Loss)/profit on fair value of credit in financial liabilities designated at fair value through
profit or loss due to own credit risk	(65)	41
Fair value through other comprehensive income (FVOCI) financial assets	4	-
	(61)	41
Items that qualify for reclassification
Fair value through other comprehensive income (FVOCI) financial assets	-	(2)
Currency translation	23	19
	23	17
Other comprehensive (loss)/income after tax	(38)	58
Total comprehensive income for the period attributable to controlling interests	489	92

 

 

 

 

Condensed consolidated balance sheet as at 30 June 2019 (unaudited)

	30 June	31 December
	2019	2018
	€m	€m
Assets
Cash and balances at central banks	2,047	336
Trading assets	2,681	13
Derivatives	7,355	656
Settlement balances	1,312	-
Loans to banks - amortised cost	474	392
Loans to customers - amortised cost	458	67
Amounts due from ultimate holding company and fellow subsidiaries	2,573	1,961
Other financial assets	733	389
Other assets	64	1,477
Total assets	17,697	5,291
Liabilities
Bank deposits	179	44
Customer deposits	606	61
Amounts due to ultimate holding company and fellow subsidiaries	4,295	417
Settlement balances	931	-
Trading liabilities	917	6
Derivatives	7,025	364
Subordinated liabilities	658	746
Other liabilities	252	420
Total liabilities	14,863	2,058
Equity attributable to controlling interests	2,834	3,233
Total liabilities and equity	17,697	5,291

 

 

Condensed consolidated statement of changes in equity for the half year ended 30 June 2019 (unaudited)

	Half year ended
	30 June	30 June
	2019	2018
	€m	€m
Share premium account
At beginning of period	7,024	7,024
Capital injection (1)	50	-
Distribution (2)	(1,159)	-
At end of period	5,915	7,024
Paid-in equity
At beginning of period	-	-
Securities issued during the year (3)	250	-
At end of period	250	-
Fair value through other comprehensive income (FVOCI) reserve
At beginning of period	(2)	4
Unrealised gains/(losses)	10	(2)
Realised gains	(6)	-
At end of period	2	2
Foreign exchange reserve
At beginning of period	(18)	(42)
Retranslation of net assets	24	-
Foreign currency gains on hedges of net assets	(30)	-
Recycled to profit or loss on disposal of business	29	19
At end of period	5	(23)
Retained earnings
At beginning of period	(3,771)	(4,102)
Implementation of IFRS 9 on 1 January 2018	-	(29)
Profit attributable to ordinary shareholders and other equity owners	527	34
Changes in fair value of credit in financial liabilities designated at fair value through profit or loss	(65)	41
Distribution (4)	(29)	-
At end of period	(3,338)	(4,056)
Total equity at end of period	2,834	2,947
Total equity is attributable to:
Ordinary shareholders	2,584	2,947
Paid-in equity holders	250	-
	2,834	2,947

 

Notes:

(1)	Capital injection of €50 million from RFS Holdings B.V. reflecting amounts received by RFS Holdings from Santander.
(2)	Distributions of the right to receive SABB interests via RFS Holdings B.V. to Santander and the Dutch State following the Alawwal bank merger becoming effective.
(3)	AT1 capital notes totalling €250 million issued in June 2019.
(4)	N-share capital repatriation of €29 million.

 

 

 

Condensed consolidated cash flow statement for the half year ended 30 June 2019 (unaudited)

	Half year ended
	30 June	30 June
	2019	2018
	€m	€m
Operating activities
Operating profit before tax	549	75
Adjustments for non-cash items	612	47
Net cash inflow from trading activities	1,161	122
Changes in operating assets and liabilities	1,768	123
Net cash flows from operating activities before tax	2,929	245
Income taxes paid	(79)	-
Net cash flows from operating activities	2,850	245
Net cash flows from investing activities	677	(2)
Net cash flows from financing activities	81	(179)
Effects of exchange rate changes on cash and cash equivalents	(13)	10
Net increase in cash and cash equivalents	3,595	74
Cash and cash equivalents at beginning of period	1,000	422
Cash and cash equivalents at end of period	4,595	496

 

 

 

Notes

1. Basis of preparation

The Group condensed consolidated interim financial statements have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’. They should be read in conjunction with the 2018 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as adopted by the European Union (EU) (together IFRS).

 

The condensed consolidated interim financial statements are unaudited. In the opinion of management, all relevant disclosures necessary for an understanding of the changes in the consolidated financial position and performance of the Group since the end of the last annual reporting period have been made.

 

Going concern

Having reviewed the Group’s forecasts and projections and considered the interim results of the RBS Group for the half year ended 30 June 2019, approved on 1 August 2019, which were prepared on a going concern basis, together with evidence that the RBS Group will continue to provide sufficient resources to the Group, the directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future. Accordingly, the interim financial statements for the half year ended 30 June 2019 have been prepared on a going concern basis.

 

Transfers

As part of the commencement of new business, €6.2 billion of assets and €6.6 billion of liabilities were transferred from NWM Plc to NWM N.V. over the weekend of 23/24 March 2019. Further transfers of €1.3 billion of assets and €1.8 billion of liabilities were undertaken in Q2 2019. On a cumulative basis, the H1 2019 transfers included:

 

The consideration was settled by balance due with NWM Plc.

 

During H1 2019 €0.4 billion of lending and €3.3 billion of contingent liabilities and commitment have also transferred from NatWest Bank Plc to NWM N.V. in relation to the Western European Corporate Portfolio.

 

2. Accounting policies

The RBSH Group’s principal accounting policies are as set out on pages 46 to 49 of the 2018 Annual Report and Accounts and are unchanged other than as presented below.

 

Revised Accounting policy 8 - Leases

The Group has adopted IFRS 16 ‘Leases’ with effect from 1 January 2019, replacing IAS 17 ‘Leases’. The Group has applied IFRS 16 on a modified retrospective basis without restating prior years. Accounting policy 8 presented in the 2018 Annual Report and Accounts has been updated as follows:

 

As lessor

Finance lease contracts are those which transfer substantially all the risks and rewards of ownership of an asset to a customer. All other contracts with customers to lease assets are classified as operating leases.

 

Loans to customers include finance lease receivables measured at the net investment in the lease, comprising the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Interest receivable includes finance lease income recognised at a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review; if there is a reduction in their value, income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.

 

Rental income from operating leases is recognised in other operating income on a straight-line basis over the lease term unless another systematic basis better represents the time pattern of the asset’s use. Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives.

 

 

Notes

2. Accounting policies continued

As lessee

On entering a new lease contract, the Group recognises a right of use asset and a liability to pay future rentals. The liability is measured at the present value of future lease payments discounted at the applicable incremental borrowing rate. The right of use assets is depreciated over the shorter of the term of the lease and the useful economic life, subject to review for impairment. Short term and low value leased assets are expensed on a systematic basis.

 

Adoption of IFRS 16 resulted in the right of use assets and lease liabilities of €3 million. For further details see page 49 of the 2018 Annual Report and Accounts.

 

Critical accounting policies and key sources of estimation uncertainty

The judgements and assumptions that are considered to be the most important to the portrayal of the Group’s financial condition are those relating to fair value of financial instruments. This critical accounting policies and judgements is described on page 49 of the 2018 Annual Report and Accounts.

 

3. Segmental analysis

Geographical segments

The geographical analyses in the tables below have been compiled on the basis of location of office where the transactions are recorded.

	Netherlands (1)	UK	RoW	Total
30 June 2019	€m	€m	€m	€m
Net interest income	(8)	-	3	(5)
Net fees and commissions (2)	54	-	9	63
Income from trading activities	(18)	27	(1)	8
Other operating income	532	(7)	(1)	524
Total income	560	20	10	590
Operating profit/(loss) before tax	534	20	(5)	549
Total assets	16,300	733	664	17,697
Total liabilities	14,258	342	263	14,863
Net assets attributable to equity owners	2,043	391	400	2,834
30 June 2018
Net interest income	(4)	-	3	(1)
Net fees and commissions	-	-	-	-
Income from trading activities	(15)	84	1	70
Other operating income	5	3	36	44
Total income	(14)	87	40	113
Operating (loss)/profit before tax	(29)	66	38	75
31 December 2018
Total assets	2,340	668	2,283	5,291
Total liabilities	1,128	440	490	2,058
Net assets attributable to equity owners	1,212	228	1,793	3,233

 

Notes:

 

The Managing Board, as chief operating decision maker, manages the Group as a single reportable segment.

 

 

Notes

4. Tax

Future tax rates are expected to be low due to the losses carried forward, the actual tax (charge)/credit differs from the expected tax (charge)/credit computed by applying the standard Dutch corporation tax rate of 25% as follows:

	Half year ended
	30 June	30 June
	2019	2018
	€m	€m
Profit before tax	549	75
Expected tax charge	(137)	(16)
Losses in period where no deferred tax asset recognised	-	(18)
Foreign (losses)/profits taxed at other rates	(2)	1
Non-taxable items (including the gain in relation to the Alawwal bank merger)	127	9
Losses brought forward and utilised	12	-
Reduction in carrying value of deferred tax asset in respect of associates	(22)	(17)
Actual tax charge	(22)	(41)

 

5. Trading assets and liabilities

 

Trading assets and liabilities comprise assets and liabilities held at fair value in trading portfolios.

 

	30 June	31 December
	2019	2018
Assets	€m	€m
Loans
Reverse repos	882	-
Cash collateral given	1,582	3
Other loans	-	6
Total loans	2,464	9
Securities
- Netherlands	50	-
- UK	3	3
- RoW	164	1
Total securities	217	4
Total	2,681	13
Liabilities
Deposits
Repos	157	-
Cash collateral received	654	3
Other deposits	106	3
Total deposits	917	6
Total	917	6

Notes

6. Derivatives

The table below shows third party derivatives by type of contract. The master netting agreements and collateral shown do not result in a net presentation on the balance sheet under IFRS 9.

 

	30 June 2019								31 December 2018
	Notional
	GBP	USD	Euro	Other	Total	Assets	Liabilities		Notional	Assets	Liabilities
	€m	€m	€m	€m	€m	€m	€m		€m	€m	€m
Gross exposure						2,203	3,369			220	83
IFRS offset						(12)	(12)			-	-
Carrying value	11,641	27,345	74,171	12,153	125,310	2,191	3,357		3,443	220	83
Of which:
Interest rate (1)
Interest rate swaps						1,392	2,206			182	65
Options purchased						290	-			-	-
Options written						-	327			-	-
Total	7,321	4,310	53,336	813	65,780	1,682	2,533		3,136	182	65
Exchange rate
Spot, forwards and futures						342	450			-	-
Currency swaps						141	353			38	18
Options purchased						26	-			-	-
Options written						-	19			-	-
Total	4,320	23,035	20,735	11,340	59,430	509	822		307	38	18
Credit	-	-	100	-	100	-	2		-	-	-
Carrying value					125,310	2,191	3,357		3,443	220	83
Counterparty mark-to-market netting						(1,199)	(1,199)			-	-
Cash collateral						(515)	(1,243)			(3)	(3)
Securities collateral						(69)	(450)			-	-
Net exposure						408	465			217	80
Banks (2)						-	-			-	5
Other financial institutions (3)						308	290			210	56
Corporate (4)						98	155			7	19
Government (5)						2	20			-	-
Net exposure						408	465			217	80
UK						125	293			7	-
Europe						237	144			187	79
US						13	27			-	-
RoW						33	1			23	1
Net exposure						408	465			217	80

 

Notes:

 

Notes

7. Financial instruments: classification

The following tables analyse the Group’s financial assets and liabilities in accordance with the categories of financial instruments in IFRS 9. Assets and liabilities outside the scope of IFRS 9 are shown within other assets and other liabilities.

			Amortised	Other
	MFVTPL (1,2)	FVOCI (3)	cost	assets		Total
Assets	€m	€m	€m	€m		€m
Cash and balances at central banks			2,047			2,047
Trading assets	2,681					2,681
Derivatives	7,355					7,355
Settlement balances			1,312			1,312
Loans to banks - amortised cost			474			474
Loans to customers
- amortised cost			458			458
Amounts due from ultimate holding company and fellow subsidiaries			2,571	2		2,573
Other financial assets	3	730	-			733
Other assets				64		64
30 June 2019	10,039	730	6,862	66		17,697
Cash and balances at central banks			336			336
Trading assets	13		-			13
Derivatives	656		-			656
Loans to banks - amortised cost			392			392
Loans to customers - amortised cost			67			67
Amounts due from ultimate holding company and fellow subsidiaries	-	-	1,960	1		1,961
Other financial assets	7	382		-		389
Interest in associates	-	-		2		2
Asset of disposal groups	-	-		1,317		1,317
Other assets				158		158
31 December 2018	676	382	2,755	1,478		5,291
	Held for-		Amortised	Other
	trading (1)	DFV(4)	cost	liabilities	Total
Liabilities	€m	€m	€m	€m	€m
Bank deposits			179		179
Customer deposits			606		606
Amounts due to ultimate holding company and fellow subsidiaries	3	-	4,291	1	4,295
Settlement balances			931		931
Trading Liabilities	917		-		917
Derivatives	7,025	-	-		7,025
Subordinated liabilities	-	398	260		658
Other liabilities				252	252
30 June 2019	7,945	398	6,267	253	14,863
Bank deposits			44			44
Customer deposits			61			61
Amounts due to ultimate holding company and fellow subsidiaries	3	-	414			417
Trading liabilities	6	-	-			6
Derivatives	364					364
Subordinated liabilities	-	493	253			746
Other liabilities				420		420
31 December 2018	373	493	772	420		2,058

Notes:

(1)	Includes derivative assets held for hedging purposes of €4.7 million (31 December 2018 - €2.9 million) and derivative liabilities held for hedging purposes of €15.8 million (31 December 2018 - €22.2 million).
(2)	Mandatory fair value through profit or loss.
(3)	Fair value through other comprehensive income.
(4)	Designated as at fair value through profit or loss.

 

 

Notes

7. Financial instruments: Classification continued

The above includes amounts due from/to:
	30 June 2019			31 December 2018
	Ultimate			Ultimate
	holding	Fellow		holding	Fellow
	company	subsidiaries		company	subsidiaries
	€m	€m		€m	€m
Assets
Derivatives	-	5,164		-	436
Loans to banks - amortised cost	-	2,437		-	1,827
Loans to customers - amortised cost	134	-		133	-
Liabilities
Bank deposits	-	4,283		-	414
Derivatives	-	3,668		-	281

 

The Bank's financial assets and liabilities include:		30 June	31 December
		2019	2018
		€m	€m
Reverse repos
Trading assets		882	-
Repos
Trading liabilities		157	-

 

Financial instruments: carried at fair value - valuation hierarchy

Disclosures relating to the control environment, valuation techniques and related aspects pertaining to financial instruments measured at fair value are included in the 2018 Annual Report and Accounts. Valuation and input methodologies at 30 June 2019 are consistent with those described in Note 10 of the 2018 Annual Report and Accounts.

 

The following tables show financial instruments carried at fair value on the Group’s balance sheet by valuation hierarchy - levels 1, 2 and 3.

	30 June 2019				31 December 2018
	Level 1	Level 2	Level 3		Level 1	Level 2	Level 3
	€m	€m	€m		€m	€m	€m
Assets
Trading assets
Loans	-	2,464	-		-	9	-
Securities	55	158	4		-	-	4
Derivatives	-	7,086	269		-	514	142
Other financial assets
Securities	489	244	-		155	234	-
Total financial assets held at fair value	544	9,952	273		155	757	146
Liabilities
Amounts due to fellow subsidiaries	-	3	-		-	3	-
Trading liabilities
Deposits	-	842	75		-	6	-
Derivatives	-	6,680	345		-	212	152
Subordinated liabilities	-	398	-		-	493	-
Total financial liabilities held at fair value	-	7,923	420		-	714	152

 

Notes:

(1)

Level 1 – Instruments valued using unadjusted quoted prices in active and liquid markets, for identical financial instruments. Examples include government bonds, listed equity shares and certain exchange-traded derivatives. Level 2 – Instruments valued using valuation techniques that have observable inputs. Examples include most government agency securities, investment-grade corporate bonds, certain mortgage products, including CLOs, most bank loans, repos and reverse repos, less liquid listed equities, state and municipal obligations, most notes issued, and certain money market securities and loan commitments and most OTC derivatives. Level 3 – Instruments valued using a valuation technique where at least one input which could have a significant effect on the instrument’s valuation, is not based on observable market data. Examples include cash instruments which trade infrequently, certain syndicated and commercial mortgage loans, certain emerging markets and derivatives with unobservable model inputs.

(2)

Transfers between levels are deemed to have occurred at the beginning of the quarter in which the instruments were transferred. There were no significant transfers between level 1 and level 2.

 

 

Notes

7. Financial instruments: Carried at fair value – valuation hierarchy continued

	30 June 2019				31 December 2018
	Level 3	Favourable	Unfavourable		Level 3	Favourable	Unfavourable
Assets	€m	€m	€m		€m	€m	€m
Trading assets
Securities	4	-	-		4	-	-
Derivatives
Interest rate	200	20	(20)		139	10	(10)
Foreign exchange	14	-	-		-	-	-
Other	55	-	-		3	-	-
Total financial assets held at fair value	273	20	(20)		146	10	(10)
Liabilities
Trading liabilities
Deposits - HFT	75	10	(10)		-	-	-
Derivatives
Interest rate	46	-	-		3	-	-
Foreign exchange	1	-	-		-	-	-
Other	298	20	(20)		149	20	(10)
Total financial liabilities held at fair value	420	30	(30)		152	20	(10)

 

Movement in Level 3 portfolios
	Half year ended 2019				Half year ended 2018
	Trading	Total	Total		Trading	Total	Total
	assets (1)	assets	liabilities		assets (1)	assets	liabilities
	€m	€m	€m		€m	€m	€m
At 1 January	146	146	152		30	30	140
Amount recorded in the income statement (2)	5	5	72		45	45	(46)
Level 3 transfers in	1	1	120		155	155	-
Level 3 transfers out	(1)	(1)	(20)		-	-	-
Purchases	130	130	185		-	-	-
Settlements	-	-	(63)		(74)	(74)	(16)
Sales	(8)	(8)	(26)		-	-	-
Foreign exchange and other adjustments	-	-	-		1	1	1
At 30 June	273	273	420		157	157	79
Amounts recorded in the income statement in
respect of balances held at year end
- unrealised	6	6	72		45	45	(42)

 

Notes:

(1)	Trading assets comprise assets held at fair value in trading portfolios.
(2)	Net losses on trading asset instruments of £67 million (30 June 2018 - £91 million gains) were recorded in income from trading activities in continuing operations.

 

 

 

Notes

7. Financial instruments: Fair value of financial instruments not carried at fair value

The following table shows the carrying value and fair value of financial instruments carried at amortised cost on the balance sheet.

 

Items where
fair value
	approximates			Fair value hierarchy level
	carrying value	Carrying value	Fair value	Level 2	Level 3
30 June 2019	€m	€m	€m	€m	€m
Financial assets
Cash and balances at central banks	2,047
Settlement balances	1,312
Loans to banks		474	474	6	468
Loans to customers		458	432	-	432
Amounts due from holding company
and fellow subsidiaries		2,571	2,571	6	2,565
Financial liabilities
Bank deposits	178	1	1	-	1
Customer deposits	191	415	415	-	415
Amounts due to holding company
and fellow subsidiaries	2,547	1,744	1,744	-	1,744
Settlement balances	931
Subordinated liabilities		260	301	301	-
31 December 2018
Financial assets
Cash and balances at central banks	336
Loans to banks		392	392	45	347
Loans to customers		67	64	1	63
Amounts due from holding company
and fellow subsidiaries		1,960	2,011	1,333	678
Financial liabilities
Bank deposits	44
Customer deposits		61	70	17	53
Amounts due to holding company
and fellow subsidiaries	382	32	32	-	32
Subordinated liabilities		253	314	314	-