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 14, 2020
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: 
 
 
 
 
 
 
 
Annual Results
 
 
For the year ended 31 December 2019
 
 
 
 
 
The Royal Bank of Scotland Group plc
2019 RBS performance summary
 
RBS reported an operating profit before tax of £4,232 million and an attributable profit of £3,133 million and proposes a final ordinary dividend of 3 pence and a 5 pence special dividend.
 
In a challenging market RBS has exceeded all of its 2019 financial targets: cost reduction above target; net lending growth ahead of target; RWAs below guidance; and 22 pence of total distributions to shareholders in 2019, while maintaining a CET1 ratio of 16.2%.
 
Return on tangible equity of 9.4% for 2019 and 4.7% excluding FX recycling gains.
Q4 2019 operating profit before tax of £1,546 million and an attributable profit of £1,410 million, or £176 million excluding FX recycling gains.
FY 2019 attributable profit of £3,133 million, or £1,561 million excluding FX recycling gains.
 
Supporting our customers through continued lending growth
We continue to achieve net lending growth at attractive returns in a challenging market. Across UK Personal Banking, Ulster Bank RoI, Commercial Banking and Private Banking, net loans to customers increased by 3.7% in 2019, exceeding our 2-3% growth target.
UK Personal Banking gross new mortgage lending was £33.3 billion in 2019 compared with £30.4 billion in 2018. Commercial Banking gross new lending was £19.5 billion in 2019.
2019 net impairment losses of £696 million equate to 21 basis points of gross customer loans, compared with 13 basis points in 2018. The cost of risk remains below our view of a normalised blended long term loss rate of 30-40 basis points.
 
 
Continuing competitive market
Reflecting challenging market conditions and ongoing margin pressure, across the retail and commercial businesses income, excluding notable items, decreased by 2.6% compared with 2018.
2019 Bank net interest margin (NIM) of 1.99% decreased by 10 basis points compared with 2018. Q4 2019 Bank NIM of 1.93% was 4 basis points lower than Q3 2019 primarily reflecting competitive pressures in the mortgage business as front book margins remain lower than back book.
Natwest Markets core income of £1,082 million was £177 million, or 14.1%, lower than 2018 largely reflecting a challenging third quarter in the Rates business.
A cost reduction of £310 million was achieved during 2019, ahead of our £300 million target for the year.
 
 
Capital generation
The Bank maintained a CET1 ratio of 16.2% despite accruing £2.7 billion of distributions to shareholders and a £0.4 billion post tax charge in respect of foreseeable pension contributions. Excluding the impact of the Alawwal bank merger and PPI, the Bank generated c.110 basis points of capital from attributable profits and c.60 basis points from a reduction in RWAs and other capital movements.
RWAs reduced by £9.5 billion during 2019 to £179.2 billion, below our £185 -190 billion guidance, in part reflecting a £4.7 billion reduction associated with the Alawwal bank merger.
 
Parent Company name change
Today, we have announced that we plan to rename our parent company. The Royal Bank of Scotland Group plc is intended to be renamed NatWest Group plc later this year.
 
 
 
Outlook(1)
RBS, like all companies, continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment. Our central economic forecast, which supports our corporate plan, is in line with consensus as at the end of December 2019 and shows average UK GDP growth of around 1.6% from 2019 to 2023 and continued low interest rates; we expect a base rate cut in the short term and then flat thereafter. Given the current uncertainties we will continue to actively monitor and react to market conditions.
 
2020 Outlook
In the current environment, and recognising ongoing market uncertainty, we continue to expect challenges on income. In addition, we anticipate that regulatory changes will adversely impact income in our personal business by around £200 million.
 
We plan ongoing operating cost take out by reducing operating expenses excluding strategic costs, litigation and conduct costs and operating lease depreciation costs by £250 million in 2020 compared with 2019. We expect to incur £0.8-1.0 billion of strategic costs during 2020 resulting from a refocussing of NatWest Markets and the continued resizing of the Group's cost base. We anticipate that NatWest Markets exit, restructuring and disposal costs will be around £0.6 billion in 2020, with around £0.4 billion as disposal losses through income and £0.2 billion through strategic costs.
 
We expect to remain below our through-the-cycle impairment loss rate assumption of 30-40 basis points, although the potential impact on the real economy of ongoing political uncertainties and geopolitical tensions could affect our credit loss outcome. The threat from single name and sector driven events remains.
 
We are targeting lending growth of greater than 3% across our retail and commercial franchises.
 
We expect to end 2020 with risk weighted assets (RWAs) of around £185-190 billion including an estimated £10.5 billion increase associated with the implementation of Bank of England mortgage floors, with NatWest Markets RWAs reducing by around £6-8 billion in the year.
 
RBS Group (RBSG) capital and funding plans focus on issuing £2-4 billion of MREL-compliant instruments, of which we would expect around £1 billion to be issued under our Green, Social and Sustainable Bond Framework, up to £1.5 billion of AT1 and up to £2.5 billion of Tier 2 instruments. As in prior years, we will continue to target other funding sources to diversify our funding structure, including senior secured from NatWest Bank subject to funding and liquidity considerations.
 
Medium term outlook
We expect to achieve a return on tangible equity of 9-11% in the medium to long term. In addition, we expect ongoing operating cost take-out.
 
Within NatWest Markets franchise, we anticipate that RWAs will reduce to around £20 billion in the medium term, which, after accounting for strategic costs and disposal losses, is expected to be capital ratio accretive in year one and over the course of the transition plan period.
 
We anticipate that the overall RWA impact of Basel 3 amendments to be around 5-10% and phased across 2021 to 2023, with the details still subject to regulatory uncertainty on both quantum and timing.
 
RBS Group capital distributions
We expect to maintain ordinary dividends of around 40% of attributable profit. We retain our guidance of CET1 ratio to be approximately 14% at the end of 2021, and we will target a reduction to 13-14% in the medium to long term. We have shareholder and regulatory approval to carry out directed buybacks of the UK government stake in RBS but recognise that any exercise of this authority would be dependent upon HMT's intentions and is limited to 4.99% of issued share capital in any 12 month period. As a reminder, we have also committed to make further pre-tax contributions to the pension scheme of up to £1.5 billion in aggregate from 1 January 2020 linked to future distributions to RBS shareholders.
 
NatWest Markets Plc
Whilst we have announced a refocusing of the business, NatWest Markets Plc remains a regulated entity and is targeting to maintain a CET1 ratio above 15%, MREL ratio of at least 30%, leverage ratio of at least 4%, and to reduce RWAs by around £14-18 billion in the medium term.
 
NatWest Markets Plc, as a standalone bank, plans to issue £3-5 billion of term senior unsecured instruments in 2020.
 
Note:
 (1)
The targets, expectations and trends discussed in this section represent RBS Group's and NatWest Markets Plc's management current expectations and are subject to change, including as a result of the factors described in the "Risk Factors" section on pages 281 to 295 of RBS Group's 2019 Annual Report and Accounts and pages 143 to 156 of NatWest Markets Plc's 2019 Annual Report and Accounts. These statements constitute forward-looking statements; refer to Forward-looking statements in this document.
 
 
 
 
 
Business performance summary
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
Performance key metrics and ratios
2019
2018
 
2019
2019
2018
Operating profit/(loss) before tax
£4,232m
£3,359m
 
£1,546m
(£8m)
£572m
Profit/(loss) attributable to ordinary shareholders
£3,133m
£1,622m
 
£1,410m
(£315m)
£286m
Bank net interest margin (RBS NIM excluding NWM) (1)
1.99%
2.09%
 
1.93%
1.97%
2.07%
Bank average interest earning assets (RBS excluding NWM) (1)
£413bn
£409bn
 
£420bn
£416bn
£412bn
Cost:income ratio (1)
65.1%
71.7%
 
59.4%
92.9%
80.5%
Loan impairment rate (2)
21bps
13bps
 
19bps
26bps
2bps
Earnings per share
 
 
 
 
 
 
  - basic
 26.0p
13.5p
 
 11.7p
(2.6p)
2.4p
  - basic fully diluted
 25.9p
13.4p
 
 11.6p
(2.6p)
2.3p
Return on tangible equity (1)
9.4%
4.8%
 
17.7%
(3.8%)
3.5%
Average tangible equity
£33bn
£33bn
 
£32bn
£33bn
£33bn
Average number of ordinary shares
 
 
 
 
 
 
 outstanding during the period (millions)
 
 
 
 
 
 
   - basic
12,067
12,009 
 
12,078
12,075
12,040 
  -  fully diluted (3)
12,102
12,061 
 
12,114
12,106
12,081 
 
 
31 December
30 September
31 December
Balance sheet related key metrics and ratios
2019
2019
2018
Total assets
£723.0bn
£776.5bn
£694.2bn
Funded assets (1)
£573.0bn
£600.7bn
£560.9bn
Loans to customers - amortised cost
£326.9bn
£319.5bn
£305.1bn
Impairment provisions
£3.7bn
£3.8bn
£3.8bn
Customer deposits
£369.2bn
£369.7bn
£360.9bn
 
 
 
 
Liquidity coverage ratio (LCR)
152%
148%
158%
Liquidity portfolio
£199bn
£193bn
£198bn
Net stable funding ratio (NSFR) (4)
141%
140%
141%
Loan:deposit ratio (1)
89%
86%
85%
Total wholesale funding
£75bn
£78bn
£74bn
Short-term wholesale funding
£19bn
£19bn
£15bn
 
 
 
 
Common Equity Tier (CET1) ratio
16.2%
15.7%
16.2%
Total capital ratio
21.2%
20.5%
21.8%
Pro forma CET 1 ratio, pre dividend and charges (5)
17.0%
15.9%
16.9%
Risk-weighted assets (RWAs)
£179.2bn
£189.5bn
£188.7bn
CRR leverage ratio
5.1%
5.0%
5.4%
UK leverage ratio
5.8%
5.7%
6.2%
 
 
 
 
Tangible net asset value (TNAV) per ordinary share
268p
272p
287p
Tangible net asset value (TNAV) per ordinary share - fully diluted (1,3)
267p
272p
286p
Tangible equity
£32,371m
£32,930m
£34,566m
Number of ordinary shares in issue (millions)
12,094
12,094
12,049 
Number of ordinary shares in issue (millions) - fully diluted (3,6)
12,138
12,124
12,088 
 
 
Notes:
(1)
Refer to the Appendix for details of the basis of preparation and reconciliation of non-financial and performance measures.
(2)
Refer to Note 2 for details of the representation of interest in suspense provisions. The loan impairment rates for 2018 were recalculated and there was no impact on the rates.
(3)
Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for Q4 2019 were 36 million shares and for the year ended 31 December 2019 were 35 million shares; (year ended 31 December 2018 - 52 million shares, Q3 2019 - 31 million shares, Q4 2018 - 41 million shares), and as at 31 December 2019 were 44 million shares (30 September 2019 - 30 million shares; 31 December 2018 - 39 million shares).
(4)
NSFR reported in line with CRR2 regulations finalised in June 2019.
(5)
The pro forma CET 1 ratio at 31 December 2019 excludes a foreseeable charge of £365 million, £362 million (3p per share) for a final dividend and £606 million (5p per share) for a special dividend (30 September 2019 - £362 million (3p per share)). 31 December 2018 excluded a charge of £422 million (3.5p per share) for the final dividend and £904 million (7.5p per share) for the special dividend.
(6)
Includes 15 million shares by the Employee Benefit Trust (30 September 2019 - 16 million shares; 31 December 2018 - 8 million shares).
 
 
 
 
 
 
Chief Executive's Statement
 
We champion potential, helping people, families and businesses to thrive.  
 
Dear shareholders,
It is a privilege to be writing to you as CEO of the company that I joined as a graduate more than 25 years ago. I am truly excited by the opportunity to lead the Bank as we set out a new commitment to become a Purpose-led organisation, which will champion the potential of people, families and businesses across the communities we serve.
 
A period of unprecedented disruption
We, like our customers, are living in a period of unprecedented disruption - whether it is the struggle to get on the housing ladder or starting a business, the rapid growth of disruptive technology, an ageing population, the emergence of the gig economy or the existential impact of climate change. The way people live is changing, and their expectations of companies are changing too. I firmly believe in response, we have to adopt a new approach that moves away from a view that is defined by products and transactions, and uses the strength of the relationships we have with all of our stakeholders as the real test of our progress.
 
This disruption is happening against the backdrop of a highly uncertain economic environment. UK economic growth remains subdued, compared to its historic trend, and interest rates are likely to be lower for longer. This has an impact on our ability to generate net interest income. Business confidence continues to be affected by the UK's departure from the EU as our customers await certainty over the future terms of trade. Consumer confidence on the other hand continues to be supported by a relatively strong UK employment market and we are seeing good volumes in our mortgage business as a result. We still see opportunities to grow in our key target markets despite some of these challenging trends.
 
Purpose-led organisation - Building more sustainable returns
Today marks a new era, as we provide an update to our plans and a new Purpose for the Bank that will help us become a more sustainable business, delivering better outcomes for our customers and our shareholders.
 
We are privileged to play a central role in the UK economy. That brings with it, a deep responsibility to the communities we serve and to wider society. That is why we have a refreshed Purpose:
 
We champion potential, helping people, families and businesses to thrive.
 
We won't get everything right every time, but this simple expression will be the standard to which we will hold ourselves.
 
Sustainable returns, however, can only come from a sustainable business model and building a Purpose-led bank must underpin the services we provide. It also means we must play our role in tackling the issues which hold people, families and businesses back.
 
The Board and management team have worked together to define an approach to becoming a Purpose-led organisation based on balancing the interests of all our stakeholders. As part of this, we have worked with the not-for-profit organisation a Blueprint for Better Business.
 
We have informed our approach using their framework that identifies the need to be: Honest and Fair with Customers and Suppliers; A Good Citizen; A Guardian for Future Generations; and A Responsible and Responsive Employer as key drivers to becoming a more sustainable business. In addition, we have analysed what is driving the changes in our own customer behaviours and the subsequent trends borne from their experiences. This forms the building blocks for the plans we are setting out today.  
 
It is essential that our Purpose underpins our strategy and the decisions we make on the future direction of the business. At a practical level, we have been reviewing how to embed Purpose within Board forums and processes to ensure it is a central part of how we work. We are very clear that our Purpose must apply across the whole organisation and to everything we do. We are also clear that getting this right will take time.
 
Three initial areas of focus where we can make a substantial impact
We have identified three areas of focus where we can make a substantial impact in addressing challenges that threaten to hold people, families and businesses back:
 
Enterprise, and the barriers that too many face to starting a business;
Learning, and what we can do to improve financial capability and confidence for our customers, as well as establishing a dynamic learning culture for our employees; and
Climate, and the role we can play in accelerating the transition to a low carbon economy.
 
We have set out some significant ambitions across these three areas that will deliver important benefits for our customers and the wider economy.  
 
 
 
Chief Executive's Statement continued
 
An ambition to take the lead in combating the causes of climate change
Today, we are setting a bold new ambition - to be a leading bank in the UK & Republic of Ireland helping to address the climate challenge; by making our own operations net carbon zero in 2020 and climate positive by 2025, and by driving material reductions in the climate impact of our financing activity. We are setting ourselves the challenge to at least halve the climate impact of our financing activity by 2030, and intend to do what is necessary to achieve alignment with the 2015 Paris Agreement.
 
This will be a significant challenge as we, like others, do not yet fully understand what this will require and how it will be achieved, not least as there is currently no standard industry methodology or approach. Solving this will require UK and international industry, regulators and experts to come together and find solutions. We are determined to not just play our part, but to lead on the collaboration and co-operation that is so critical to influencing the transition to a low carbon economy.
 
As a systemic UK bank, we must play an active role and these market leading ambitions underline our position. This is not only the right thing to do, it will give us the opportunity to do more business with our customers, as they transition to a low carbon economy.
 
We are already taking positive steps in the right direction. This year we became one of the Founding Signatories of the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking, committing to begin strategically aligning our business with the UN Sustainable Development Goals (SDGs) and the 2015 Paris Agreement. We have been reviewing specific SDGs with relevance to our Purpose focus areas of Climate Change, Enterprise and Learning.
 
The Bank continues to support the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) - a voluntary set of guidelines encouraging consistent climate-related disclosures in annual reporting. In 2019, we were one of the first companies worldwide to commit to all the Climate Group initiatives on electric vehicles (EV100), energy productivity (EP100), and renewable power (RE100).
 
In November 2019 we issued the first exclusively social bond under ICMA's Social Bond Principles in the UK by any financial institution. The impact of the lending funded by this bond will be reported 12 months after issuance, measuring the number of jobs created and retained in some of the UK's most deprived areas.
 
This is good progress, but we can, and will, do more.
 
Improving financial confidence and becoming a learning organisation
We also know that we have a responsibility to help our customers improve their financial confidence. Our UK-wide financial education programme, MoneySense has now been running for 25 years. We can help children in schools and at home understand the value and importance of finance from an early age. We will target reaching 2.5 million people through financial capability interactions each year. The more confidence our customers have, the more opportunity we will have to provide services to them.
 
I also want to build the confidence and capability of our employees. We already have one of the most qualified workforces in the UK. Today I am setting a target to have all front-line staff professionally accredited within the first twelve months of being in role.
 
Removing barriers to enterprise
As the largest supporter of UK business, we already offer a wide range of support to those who want to start a new business. But we also know that for many, it remains harder than it should be. We are committed to helping create an additional 50,000 new businesses across the UK by 2023, through inspiring and supporting over 500,000 people to consider enterprise as a career option.
 
Our focus will be on under-represented populations, with women making up at least 60% of those we support and more than 20% being Black, Asian, Minority Ethnic-led businesses. We will also make sure that at least 75% of the people we support are in regions outside of London and the South East. By helping to tackle the barriers to starting a business, there will be more opportunities to help companies grow.
 
Starting with strong foundations, but with much more to do
We have built strong foundations, but our performance doesn't yet match its full potential and we need to support our customers better at the key moments in their lives. This means running a bank that is safe, simple and smart - supporting our customers with what they need and also making some tough choices in order to deliver for shareholders and colleagues.
 
Safe
Safety and soundness must underpin everything we do. Intelligent risk-taking is why banks exist - to find valuable and sustainable uses for the resources in the economy, and to help customers achieve their ambitions. We have strong capital and liquidity positions and are well placed to help our customers succeed. In today's digital world, our operational resilience and keeping our customers' data safe are top priorities. We can never lose sight of this, even as we look to grow. We have announced today that we will reduce our Common Equity Tier 1 ratio (CET 1) over the medium to long-term to around 13-14%. This will ensure that the Bank remains safe, and also allow room for further capital distributions. 
 
 
 
Chief Executive's Statement continued
 
Simple
We are still too complicated for our customers. Much of the potential value in this Bank is locked in business lines and business models that are too complex and generating too little return. This complexity also creates 'bad costs' - costs that provide no benefit to customers.
 
This applies to parts of our NatWest Markets business, where we have shrunk over time but we could do more to increase its focus on our corporate and institutional customers and their needs.
 
Today we are announcing that we will reduce the size of this business by around half, as measured by Risk Weighted Assets, managing down and optimising low-returning capital and inefficient activities. We will build a much smaller and simpler part of the business which will bring customers closer to the services they need, reduce costs and release capital for shareholders.
 
This action will refocus our NatWest Markets products and services on our corporate and institutional customers. We estimate that for 2019, our corporate and institutional customers represented around £75 billion of Risk Weighted Asset equivalents but only generated returns of around 2% on an underlying basis and excluding strategic costs and litigation and conduct costs. We believe that as we refocus NatWest Markets, corporate and institutional customers in the medium to long term will represent around £60 billion of Risk Weighted Asset equivalents and returns will improve to around 8%.
 
Driving out bad costs also means simplifying our core customer journeys, like our account opening and lending application processes. Aligning and accelerating the transformation of these with more automation and less manual processing will save money, deliver better controls and improve service. 
 
We are targeting an overall cost reduction this year of £250 million.
 
Smart
Taking a disciplined approach to cost means we can make smart investment choices, investing to improve our services across our retail and commercial customer bases. We will continue to explore the potential for partnerships across industries, and within banking, that can help us innovate faster and ensure our investment is wisely spent.
 
We already have strong relationships with millions of customers in this country, but we can deepen them even further by building propositions that provide support throughout their financial lives. This may mean looking to increase our presence in certain areas including through partnerships, where relevant, to ensure we are helping our customers meet their needs and ambitions.
 
In recent years we have dramatically increased the focus on innovation across the Bank. This has positioned us well with partners, opened up new income lines and helped improve our time-to-market in a number of critical areas. There is an amazing opportunity for NatWest to use its brand and market presence to connect new technology solutions with the problems that hold back potential in the personal, professional and business lives of our customers. 
 
This must, however, also be matched by the financial discipline to call time on ventures that don't deliver and that can't deliver a big enough impact for our customers and investors.
 
By simplifying our innovation focus, and being disciplined on the internal allocation of capital, we will strengthen the core of the Bank. By making smarter investments in services for our customers we will deepen our leading positions in personal, business, commercial and corporate banking. 
 
Delivering sustainable returns
Championing the potential of people, families and businesses is not an add-on to our strategy, it is our strategy. I firmly believe this new Purpose-led approach is what will deliver reliable returns for our shareholders, year in, year out. 
 
We will target a return on tangible equity of 9%-11% from a CET 1 ratio of 13%-14% in the medium to long-term. Subject to shareholder approval of our 2019 final and special dividends, we will have returned £4.2 billion to shareholders, with £2.6 billion returned to UK taxpayers since 2018. We have a clear plan to continue to return capital to our shareholders over time.
 
I know from experience, that we only succeed when our customers and wider communities succeed. I am confident that the strategy I have outlined will deliver sustainable long-term shareholder returns and will also build a Bank that the UK and Republic of Ireland can be proud of. We will create lasting value when we champion the potential of those we serve. That is our Purpose and our Strategy.
 
 
 
Business performance summary
Our ambition is to build the best bank for customers in the UK and Republic of Ireland
 
Customer Advocacy and Trust Scores
 
Our brands are our main connection with customers. Each takes a clear and differentiated position with the aim of helping us strengthen our relationship with them. For this reason we track customer advocacy for our key brands using the net promoter score (NPS) - a commonly used metric in banking and other industries across the world.
 
We are seeing early signs of improvement, but we still have much to do.  We are determined to make a difference with the things that matter most to our customers.  We listen to customer feedback and, via our closed-loop feedback programme, respond to any issues that they identify. Through fixing our core processes we will get our core service right first time more consistently while at the same time innovating to deliver better solutions.
 
The tables below show NPS and Trust scores for our key brands.
 
Personal Banking
 
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
NatWest
15
13
11
11
11
Royal Bank of Scotland
(14)
(9)
(10)
(14)
(17)
Ulster Bank Northern Ireland
(10)
(5)
1
(3)
(10)
Ulster Bank Republic of Ireland
(18)
(15)
(11)
(7)
(6)
 
Source: Ipsos MORI FRS 6 month rolling data. Latest base sizes: 2,829 for NatWest (England & Wales); 451 for Royal Bank of Scotland (Scotland). Based on the question: "How likely is it that you would recommend (brand) to a relative, friend or colleague in the next 12 months for current account banking?" Base: Claimed main banked current account customers.
 
Source: Coyne Research 12 month rolling data. Question: "Please indicate to what extent you would be likely to recommend (brand) to your friends or family using a scale of 0 to 10 where 0 is not at all likely and 10 is extremely likely".  Latest base sizes: 352 Northern Ireland; 1,424 Republic of Ireland.   
 
 
 
 
 
 
 
 
 
Business Banking
 
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
NatWest
(7)
(9)
(9)
(8)
(9)
Royal Bank of Scotland
(25)
(31)
(36)
(36)
(36)
 
Source: Savanta MarketVue Business Banking, YE Q4 2019.  Based on interviews with businesses with an annual turnover up to £2 million. Latest base sizes: 1104 for NatWest (England & Wales), 416 for Royal Bank of Scotland (Scotland). Question: "How likely would you be to recommend (bank)". Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
 
Commercial Banking
 
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
NatWest
23
23
20
20
21
Royal Bank of Scotland
9
16
21
18
20
 
Source: Savanta MarketVue Business Banking, YE Q4 2019.  Based on interviews with businesses with an annual turnover over £2 million. Latest base sizes: 586 for NatWest (England & Wales), 100 for Royal Bank of Scotland (Scotland). Question: "How likely would you be to recommend (bank)". Base: Claimed main bank. Data weighted by region and turnover to be representative of businesses in Great Britain.
 
 
 
 
 
 
 
 
 
Trust
We also use independent experts to measure our customers' trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).
 
 
Q4 2019
Q3 2019
Q2 2019
Q1 2019
Q4 2018
NatWest
62
62
61
60
56
Royal Bank of Scotland
39
47
38
28
27
 
Source: Populus. Latest quarter's data. Measured as a net % of those that trust Royal Bank of Scotland/NatWest to do the right thing, less those that do not. Latest base sizes: 531 for NatWest (England & Wales), 214 for Royal Bank of Scotland (Scotland).
 
 
 
 
 
 
 
 
 
 
 
 
Summary consolidated income statement for the period ended 31 December 2019
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018*
 
2019
2019
2018*
 
£m
£m
 
£m
£m
£m
Net interest income
8,047
8,656 
 
2,037
2,006
2,176 
 
 
 
 
 
 
 
Own credit adjustments
(80)
92 
 
(22)
(12)
33 
Strategic disposals
1,035
 
-
-
Other non-interest income
5,251
4,654 
 
2,218
909
849 
 
 
 
 
 
 
 
Non-interest income
6,206
4,746 
 
2,196
897
882 
 
 
 
 
 
 
 
Total income
14,253
13,402 
 
4,233
2,903
3,058 
 
 
 
 
 
 
 
Litigation and conduct costs
(895)
(1,282)
 
(85)
(750)
(92)
Strategic costs
(1,381)
(1,004)
 
(537)
(215)
(355)
Other expenses
(7,049)
(7,359)
 
(1,905)
(1,733)
(2,022)
Operating expenses
(9,325)
(9,645)
 
(2,527)
(2,698)
(2,469)
 
 
 
 
 
 
 
Profit before impairment losses
4,928
3,757 
 
1,706
205
589 
Impairment losses
(696)
(398)
 
(160)
(213)
(17)
 
 
 
 
 
 
 
Operating profit/(loss) before tax
4,232
3,359 
 
1,546
(8)
572 
Tax charge
(432)
(1,208)
 
(37)
(201)
(118)
 
 
 
 
 
 
 
Profit/(loss) for the period
3,800
2,151
 
1,509
(209)
454
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
3,133
1,622 
 
1,410
(315)
286 
Other owners
406
537
 
99
105
182
Non-controlling interests
261
(8)
 
-
1
(14)
 
Notable items within total income
 
 
 
 
 
 
Alawwal bank merger gain in NatWest Markets
444
-
 
-
-
-
FX recycling gain in Central items & other (1)
1,459
-
 
1,169
-
-
Legacy liability release in Central items & other
256
-
 
-
-
-
Insurance indemnity
-
357
 
-
-
85
of which:
 
 
 
 
 
 
    NatWest Markets
-
165
 
-
-
-
    Central items & other
-
192
 
-
-
85
IFRS volatility in Central items & other (2)
9
(59)
 
43
(51)
(25)
UK Personal Banking debt sale gain
49
61
 
31
16
35
FX gains/(losses) in Central items & other
21
(46)
 
(1)
2
(39)
Commercial Banking fair value and disposal (loss)/gain
(16)
169
 
1
-
(10)
NatWest Markets legacy business disposal (loss)/gain
(35)
(86)
 
-
(8)
(43)
 
 
 
 
 
 
 
Notable items within operating expenses
 
 
 
 
 
 
Push payment fraud costs
(38)
-
 
(13)
(7)
-
Litigation and conduct costs
(895)
(1,282)
 
(85)
(750)
(92)
of which:
 
 
 
 
 
 
    US RMBS
169
(823)
 
-
162
-
    PPI
(900)
(200)
 
-
(900)
-
 
*Restated for IAS 12 'Income taxes', refer to Note 2 for further details.
 
Notes:
(1)
Includes £290 million arising on the completion of the Alawwal bank merger in June 2019, £1,102 million arising on the liquidation of RFS Holdings and £67 million in relation to dividends in UBI DAC.
(2)
IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
 
 
 
 
Business performance summary
Income statement overview
 
2019 compared with 2018
Total income increased by £851 million, or 6.3%. Excluding notable items, income decreased by £813 million, or 6.3%, due to a reduction in retail and commercial income, lower NatWest Markets income and increased Treasury funding costs, reflecting increased MREL costs and lower structural hedge income. Across the retail and commercial businesses, income decreased by £301 million, or 2.6%, excluding notable items, principally reflecting margin pressure in a challenging market.
Bank NIM of 1.99% was 10 basis points lower than 2018, principally reflecting competitive pressures within the personal business and a flattening yield curve.
Excluding strategic, litigation and conduct costs, operating expenses reduced by £310 million, ahead of target, despite incurring an additional £38 million of authorised push payment fraud costs in line with new industry practice. In line with the reduction in costs, headcount was c.3,100, or 4.6%, lower than 2018. 
Strategic costs of £1,381 million included: a £470 million charge relating to the reduction in our property portfolio; £299 million of technology costs; a £178 million charge in NatWest Markets relating to both the wind-down of the legacy business and ongoing development of the core business infrastructure; with the remaining charge largely relating to restructuring costs to achieve cost efficiencies across front and back book operations.
Litigation and conduct costs included a £900 million PPI charge and a £169 million reimbursement under indemnification agreements relating to US residential mortgage-backed securities (RMBS).
The net impairment loss of £696 million, 21 basis points of gross customer loans, increased by £298 million compared with 2018, transitioning from a very benign period towards a more normalised external credit environment, as well as the impact of a small number of large individual commercial charges. The cost of risk remained below the view of our normalised blended long term loss rate of 30 to 40 basis points.
The tax charge for 2019 is lower than the UK statutory rate reflecting the impact of the Alawwal bank merger gain on disposal, the FX recycling gain on the liquidation of RFS Holdings, a £206 million deferred tax credit on the recognition of tax losses following the transfer of business under the ring-fencing regulations and adjustments in respect of prior periods. These factors have been partially offset by the impact of conduct charges, the banking surcharge and a £144 million reduction in the carrying value of deferred tax assets in respect of losses in the UK and Ireland.
Non-controlling interests includes a charge of £274 million in relation to the minority share of the gain recognised on completion of the Alawwal bank merger.
 
Q4 2019 compared with Q3 2019
Q4 2019 income includes £1,169 million of FX recycling gains largely associated with the transfer of NatWest Markets N.V. ownership to NatWest Markets Plc. Excluding notable items, retail and commercial income was £55 million lower whilst NatWest Markets core income increased by £12 million to £196 million.  
Bank NIM of 1.93% was 4 basis points lower than Q3 2019 primarily reflecting competitive pressures in the mortgage business as front book margins remain lower than back book.
Excluding strategic, litigation and conduct costs, operating expenses increased by £172 million primarily reflecting the annual UK bank levy charge. Headcount reduced by c.1,700, or 2.6%.
The Q4 2019 tax charge includes an £86 million charge relating to reducing the carrying value of the deferred tax asset in respect of losses in the UK and a £65 million credit associated with FX recycling gains.
.
Q4 2019 compared with Q4 2018
Across the retail and commercial businesses, income decreased by £114 million, or 4.0%, excluding notable items, principally reflecting margin pressure in a challenging market. NatWest Markets core income was 2.0% lower at £196 million.
Excluding strategic, litigation and conduct costs, operating expenses reduced by £117 million, or 5.8%.
 
 
 
 
Business performance summary
UK Personal Banking
 
Year ended and as at
 
Quarter ended and as at
 
 
31 December
31 December
 
31 December
30 September
31 December
 
 
2019
2018
 
2019
2019
2018
 
 
£m
£m
 
£m
£m
£m
 
Total income
4,866
5,054
 
1,195
1,224
1,246
 
Operating expenses
(3,618)
(2,867)
 
(788)
(1,601)
(757)
 
Impairment losses
(393)
(339)
 
(81)
(131)
(142)
 
Operating profit/(loss)
855
1,848
 
326
(508)
347
 
Return on equity
9.6%
24.7%
 
14.9%
(26.8%)
17.2%
 
Net interest margin
2.47%
2.67%
 
2.32%
2.44%
2.60%
 
Cost:income ratio
74.4%
56.7%
 
65.9%
130.8%
60.8%
 
Loan impairment rate
25bps
23bps
 
20bps
34bps
38bps
 
 
 
 
 
£bn
£bn
£bn
 
Net loans to customers (amortised cost)
 
 
 
158.9
154.6
148.9
 
Customer deposits
 
 
 
150.3
147.9
145.3
 
RWAs
 
 
 
37.8
37.5
34.3
 
 
Almost three quarters of our current account customers are now digitally active, with growing engagement and continued improvements to their digital experience making it easier for our customers everyday. Total digital sales volumes increased by 30% compared with 2018, representing 53% of all sales. 63% of personal unsecured loan sales, 66% of credit card accounts and 56% of current accounts opened were via the digital channel.
 
 
2019 compared with 2018
Total income was £188 million, or 3.7%, lower than 2018, impacted by lower overall mortgage margins, an IFRS 9 accounting change for interest in suspense recoveries of £29 million and a £12 million decrease in debt sale gains, partially offset by strong lending growth.
Net interest margin decreased by 20 basis points reflecting mortgage margin pressure, as front book margins remain lower than back book margin and the book re-prices to the current rate.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £25 million, or 1.0%, reflecting a 6.5% reduction in headcount from digital process simplification and back office rationalisation and lower property costs, partially offset by increased fraud costs due to a revised customer refund approach for authorised push payment scams, annual pay award, and increased investment and technology costs.
Litigation and conduct costs include a £900 million charge in respect of PPI claims following greater than predicted complaints volumes in the lead up to the 29 August 2019 deadline.
Impairment losses were £54 million higher than 2018 reflecting lending growth and lower debt sale recoveries, partially offset by interest in suspense recoveries following an IFRS 9 accounting change and a £25 million lower charge for economic uncertainty than in 2018. Default rates increased slightly since 2018, but, the overall trend flattened in the second half of the year as a result of unsecured risk appetite tightening.
Net loans to customers increased by £10.0 billion, or 6.7%, to £158.9 billion. The business has maintained a prudent approach to risk and pricing in a very competitive market, with gross new mortgage lending in 2019 of £33.3 billion, 9.6% higher than 2018. Mortgage new business market share increased to approximately 12.5%, supporting a stock share of around 10.2% up from 9.8% in 2018. Momentum also continued in personal advances and credit cards, increasing by 11.8% and 7.5% respectively.
Customer deposits increased by £5.0 billion, or 3.4%, as growth continued across current accounts and savings.
RWAs increased by £3.5 billion, or 10.2%, principally due to strong lending, £2.2 billion, mortgage predictive loss adjustments, £0.6 billion, and an increase linked to IFRS 16 changes, £0.7 billion.
 
Q4 2019 compared with Q3 2019
Total income was £29 million lower than Q3 2019 reflecting a £19 million charge following an annual review of mortgage customer repayment behaviour, lower seasonal debit and credit card fee income and the implementation of certain overdraft fee changes, partly offset by £15 million higher debt sale gains. Strong volume growth in Q4 2019 largely offset product margin dilution. Net interest margin decreased by 12 basis points reflecting mortgage margin pressure and the mortgage customer repayment behaviour charge.
Excluding strategic, litigation and conduct costs, operating expenses were £33 million higher than Q3 2019, largely reflecting the inclusion of the annual bank levy charge.
Gross new mortgage lending was £10.4 billion, the highest quarter of new mortgage lending in 2019, representing approximately 15% new business market share.
 
Q4 2019 compared with Q4 2018
Total income was £51 million lower than Q4 2018, primarily driven by mortgage margin pressure, interest in suspense recoveries and lower debt sale gains.
Excluding strategic, litigation and conduct costs, operating expenses were £18 million lower than Q4 2018 due to headcount reductions, partially offset by increased fraud costs.
 
 
Business performance summary
Ulster Bank RoI
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
€m
€m
 
€m
€m
€m
Total income
647
689
 
162
161
165
Operating expenses
(630)
(657)
 
(162)
(146)
(184)
Impairment releases/(losses)
38
(17)
 
(5)
19
21
Operating profit/(loss)
55
15
 
(5)
34
2
Return on equity
2.3%
0.5%
 
(1.0%)
5.8%
0.4%
Net interest margin
1.59%
1.79%
 
1.57%
1.55%
1.73%
Cost:income ratio
97.4%
95.6%
 
100.7%
90.3%
111.6%
Loan impairment rate
(17)bps
8bps
 
9bps
(34)bps
(38)bps
 
 
 
 
€bn
€bn
€bn
Net loans to customers (amortised cost)
 
 
 
21.4
21.4
21.0
Customer deposits
 
 
 
21.7
21.3
20.1
RWAs
 
 
 
15.3
15.0
16.4
 
Ulster Bank RoI continued to strengthen its digital proposition in 2019 through enhancements to digital and mobile customer offerings. 70% of active current account customers are now on digital channels, with 48% using the mobile app which now includes new app services to enable customers to lock and unlock their debit cards, create savings goals and explore how they are spending their money.
 
2019 compared with 2018
Total income was €42 million, or 6.1% lower than 2018 primarily reflecting reduced income from non-performing loans (NPLs) following the sale of a portfolio of assets, largely completed in 2018, and an income reduction from an IFRS 9 accounting change in 2019 for interest in suspense recoveries of €23 million, with an offsetting impact in impairments. These movements contributed to a 20 basis points decrease in net interest margin compared with 2018.
Excluding strategic, conduct and litigation costs, operating expenses decreased by €16 million, or 2.9%, due to reduced project and pension costs and other efficiencies which resulted in a headcount reduction of 6.5%, partially offset by higher levies and increased risk and compliance costs.
A net impairment release of €38 million reflects improvements in the performance of the loan portfolio and the accounting change for interest in suspense recoveries, partially offset by a charge for economic uncertainty.
Net loans to customers increased by €0.4 billion, or 1.9%, reflecting strong lending in both the personal and commercial sectors, partially offset by concluding the sale of a portfolio of NPLs, €0.1 billion, and a continued reduction in the tracker mortgage book. Tracker mortgage balances reduced by €0.7 billion, or 8.4% compared with 2018, with Tracker balances accounting for 38.2% of total net loans at the end of 2019. The business maintained a prudent approach to risk and pricing in a competitive market, with gross new lending of €3.0 billion in 2019, 13.0% higher than 2018.
Customer deposits increased by €1.6 billion, or 8.0%, supporting a reduction in the loan:deposit ratio to 98% from 105%.
RWAs reduced by €1.1 billion, or 6.7%, principally reflecting an improvement in credit metrics and the impact of the NPL sale.
 
Q4 2019 compared with Q3 2019
Total income remained broadly stable at €162 million and net interest margin increased two basis points to 1.57% compared with Q3 2019.
Total operating expenses increased by €16 million, or 11.0%, primarily reflecting an increase in strategic costs relating to a restructuring programme, partly offset by one-off credits to the pension charge.
Impairment losses of €5 million reflect the impact of mortgage model recalibration, partially offset by the net impact of an improvement in the performance of the NPL portfolio.
RWAs increased by €0.3 billion largely due to model recalibrations.
 
Q4 2019 compared with Q4 2018
Total income decreased by €3 million, or 1.8%, reflecting lower income on NPLs and the IFRS 9 accounting change, partially offset by higher other income.
Total operating expenses decreased by €22 million, or 12.0%, primarily reflecting lower conduct and pension costs and the benefits from cost saving initiatives.
 
 
Business performance summary
Commercial Banking
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
£m
£m
 
£m
£m
£m
Total income
4,318
4,602
 
1,076
1,077
1,116
Operating expenses
(2,600)
(2,487)
 
(700)
(638)
(764)
Impairment losses
(391)
(147)
 
(81)
(108)
(5)
Operating profit
1,327
1,968
 
295
331
347
Return on equity
8.4%
12.1%
 
7.6%
8.4%
8.3%
Net interest margin
1.95%
1.96%
 
1.94%
1.90%
1.96%
Cost:income ratio
58.9%
52.8%
 
63.9%
57.9%
67.5%
Loan impairment rate
38bps
14bps
 
32bps
42bps
2bps
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
101.2
101.5
101.4
Customer deposits
 
 
 
135.0
135.7
134.4
RWAs
 
 
 
72.5
77.0
78.4
 
Notes:(1)   New drawn lending and any re-financing resulting in a new facility or the opening of a new account, excluding Overdrafts and Supplier Finance.(2)   RWA intensity is defined as total risk weighted assets divided by total loans to customers (amortised cost). 
Commercial Banking continues to focus on increasing customer interactions through digital channels. In 2019, NatWest became the first UK bank to launch biometric secure authentication for all business payments via Bankline mobile. Conversation volumes with our chat bot Cora have increased to c.16,500 per month since inception in December 2018.
 
2019 compared with 2018
Total income decreased by £284 million, or 6.2%, reflecting asset disposal and fair value gains of £169 million in 2018, compared with a £16 million loss in 2019, combined with lower deposit income and lower non-interest income. Net interest margin decreased by 1 basis point in comparison to 2018 as a result of lower deposit income, with lending margins broadly stable.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £51 million, or 2.2%, reflecting lower back office operations costs and VAT recoveries, partially offset by £17 million higher operating lease depreciation, £9 million authorised push payment fraud costs in line with new industry practice, and higher remediation, innovation and technology spend.
Impairment losses of £391 million include a small number of single name charges, IFRS 9 modelling adjustments and charges in respect of increased economic uncertainty.
Commercial Banking gross new lending(1) was £19.5 billion in 2019. Net loans to customers decreased by £0.2 billion as planned reductions in EU divestment and Large Corporates & Institutions Western European transfers to NatWest Markets of £0.6 billion were partially offset by growth across the business. Lending across Business Banking, SME & Mid-Corporate and Specialised business increased by £1.1 billion, or 2.1%.
RWAs decreased by £5.9 billion due to model improvements, active capital management and business transfers of £2.4 billion, resulting in a RWA intensity(2) of 70.7% in comparison to 76.3% in 2018.
 
Q4 2019 compared with Q3 2019 
Total income remained stable, whilst net interest margin increased by 4 basis points in comparison to Q3 2019, mainly due to an annual review related to customer repayment behaviour changes, partially offset by lower deposit income.
Excluding strategic, litigation and conduct costs, operating expenses increased by £15 million, or 2.7%, as the annual UK bank levy charge was partially offset by VAT recoveries.
Impairment losses decreased by £27 million reflecting charges in respect of increased economic uncertainty in Q3 2019.
Net loans to customers decreased by £0.3 billion mainly due to reductions in EU Divestment.
RWAs decreased by £4.5 billion due to model improvements, active capital management and business transfers of £0.3 billion.
 
 
Q4 2019 compared with Q4 2018
Total income decreased by £40 million, or 3.6%, mainly due to lower deposit income and lower non-interest income.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £88 million, or 13.2%, due to VAT recoveries and lower back office operations costs.
Impairment losses increased by £76 million, principally due to higher single name charges and IFRS 9 modelling adjustments.
 
Business performance summary
Private Banking
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
£m
£m
 
£m
£m
£m
Total income
777
775
 
195
198
198
Operating expenses
(486)
(478)
 
(135)
(119)
(143)
Impairment releases
6
6
 
1
2
8
Operating profit
297
303
 
61
81
63
Return on equity
15.4%
15.4%
 
12.0%
16.8%
12.3%
Net interest margin
2.40%
2.52%
 
2.30%
2.35%
2.49%
Cost:income ratio
62.5%
61.7%
 
69.2%
60.1%
72.2%
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
15.5
15.2
14.3
Customer deposits
 
 
 
28.4
28.2
28.4
RWAs
 
 
 
10.1
10.0
9.4
Assets Under Management (AUMs)
 
 
 
23.2
22.5
19.8
Assets Under Administration (AUAs) (1)
 
 
 
7.2
7.1
6.6
Assets Under Management and Administration (AUMA)
 
 
 
30.4
29.6
26.4
 
Note:
(1)   Private Banking manages assets under management portfolios on behalf of UK Personal Banking and RBSI. Prior to Q4 2018, the assets under management portfolios of UK Personal Banking and RBSI were not included. Private Banking receives a management fee from UK Personal Banking and clients of RBSI in respect of providing this service.
 
Private banking offers a service-led, digitally enabled experience for its clients, with approximately 75% of eligible clients banking with us digitally. Our client servicing model utilises both digital and telephony through Coutts24 and Adam24, which have client satisfaction ratings of 96% and 92% respectively. Coutts Connect, our social platform which allows clients to network and build working relationships with one another, now has over 1,700 active users since launching in 2018.
 
2019 compared with 2018

Total income increased by £2 million, or 0.3%, as volume growth and one-off benefits were partially offset by lower deposit income. Net interest margin decreased by 12 basis points compared with 2018 primarily due to deposit margin pressure.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £17 million, or 3.7%, primarily reflecting lower back office operations costs.
A net impairment release of £6 million reflected a number of one-off releases.
Net loans to customers increased by £1.2 billion, or 8.4%, mainly due to mortgage lending, relative to an increase in RWAs of £0.7 billion, or 7.4%.
Total assets under management in Private Banking increased by £3.4 billion, or 17.2%, reflecting positive investment performance of £2.7 billion and net new business inflows of £0.7 billion.
Total assets under management and administration overseen by Private Banking increased by £4.0 billion, or 15.2%, reflecting positive investment performance of £3.2 billion and net new business inflows of £0.8 billion.
 
Q4 2019 compared with Q3 2019
Total income decreased by £3 million, or 1.5%, as one-off benefits related to hedging income gains recognised in Q3 2019 were partially offset by volume growth in Q4 2019. Net interest margin decreased by 5 basis points compared to Q3 2019 primarily due to lower deposit funding benefits.
Excluding strategic, litigation and conduct costs, operating expenses increased by £14 million, or 13.2%, primarily due to the annual UK bank levy charge.
Net loans to customers increased by £0.3 billion, or 2%, reflecting mortgage lending.
Total assets under management in Private Banking increased by £0.7 billion, or 3.1%, reflecting positive investment performance of £0.4 billion and net new business inflows of £0.3 billion.
Total assets under management and administration overseen by Private Banking increased by £0.8 billion, or 2.7%, reflecting positive investment performance of £0.4 billion and net new business inflows of £0.4 billion.
 
Q4 2019 compared with Q4 2018
Total income decreased by £3 million, or 1.5%, as lower deposit income was partially offset by volume growth.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £13 million, or 9.8%, reflecting lower back office operations costs and a number of one-off items.
 
 
Business performance summary
RBS International
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
£m
£m
 
£m
£m
£m
Total income
610
594
 
150
150
155
Operating expenses
(264)
(260)
 
(83)
(62)
(86)
Impairment (losses)/releases
(2)
2
 
(5)
-
2
Operating profit
344
336
 
62
88
71
Return on equity
25.7%
24.4%
 
17.3%
26.0%
20.0%
Net interest margin
1.60%
1.71%
 
1.47%
1.55%
1.81%
Cost:income ratio
43.3%
43.8%
 
55.3%
41.3%
55.5%
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
14.1
13.8
13.3
Customer deposits
 
 
 
30.1
29.1
27.5
RWAs
 
 
 
6.5
6.5
6.9
 
RBS International's existing personal customers can now open individual savings accounts in an average time of 8 minutes rather than 14 days, with over 3,000 new accounts opened this year using the automated process. Digital adoption in personal banking has increased by more than 17%. Over 90% of non-personal customers who provided feedback find our electronic banking platform, eQ easy or extremely easy to use, with 18 new features introduced into eQ through 2019 as part of our ongoing investment in the platform.
 
2019 compared with 2018
Total income increased by £16 million, or 2.7%, due to increased customer lending and deposits in Institutional and Local Banking. Institutional Banking contributed 63% to income in 2019, with Local Banking 31% and Depositary Services 6%. Net interest margin decreased by 11 basis points compared with 2018 as deposit margins reduced due to falling interest rates in the second half of the year along with mortgage margin pressure.
Excluding strategic, litigation and conduct costs, operating expenses decreased £16 million, or 6.2%, reflecting a £24 million reduction in back office operations costs, partially offset by higher investment spend relating to the digital proposition.
Net loans to customers increased by £0.8 billion, or 6.0%, reflecting a Funds business transfer of £0.5 billion from NatWest Markets and higher volumes in Institutional and Local Banking.
Customer deposits increased by £2.6 billion primarily reflecting activity in the Funds sector and £1.1 billion growth in term and notice deposits.
RWAs decreased by £0.4 billion as the impact of model updates was partially offset by increased lending and business transfers.
 
Q4 2019 compared with Q3 2019
Total income was stable at £150 million as higher non utilisation fees were offset by lower deposit funding margins. Net interest margin decreased by 8 basis points compared with Q3 2019 primarily due to lower interest rates in the US and Europe reducing deposit margins.
Excluding strategic, litigation and conduct costs, operating expenses increased by £21 million, or 36.8%, primarily due to the bank levy charge and increased project costs relating to building the business' digital proposition.
Net loans to customers increased by £0.3 billion reflecting a Funds business transfer of £0.5 billion from NatWest Markets, partially offset by short term customer activity in the Funds Sector.
Customer deposits increased by £1.0 billion primarily due to activity in the Funds Sector.
 
Q4 2019 compared with Q4 2018
Total income decreased by £5 million, or 3.2%, reflecting margin compression as a result of US and European Central Bank rate reductions.
Excluding strategic, litigation and conduct costs, operating expenses decreased £4 million, or 4.9%, primarily due to lower back office operations costs.
 
 
Business performance summary
NatWest Markets(1)
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
£m
£m
 
£m
£m
£m
Total income
1,342
1,442
 
250
150
152
Of which: Core income excluding own credit adjustments
1,082
1,259
 
196
184
200
Of which: Legacy income
340
91
 
76
(23)
(81)
Of which: Own credit adjustments (OCA)
(80)
92
 
(22)
(11)
33
Operating expenses
(1,418)
(1,604)
 
(392)
(348)
(455)
Impairment releases
51
92
 
10
5
100
Operating loss
(25)
(70)
 
(132)
(193)
(203)
Return on equity
(3.2%)
(2.0%)
 
(6.5%)
(8.7%)
(9.2%)
Cost:income ratio
105.7%
111.2%
 
156.8%
232.0%
299.3%
 
 
 
 
£bn
£bn
£bn
Funded assets
 
 
 
116.2
142.7
111.4
RWAs
 
 
 
37.9
43.8
44.9
 
Note:
(1)
 
The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity or group. For 2019, NatWest Markets Plc entity includes NatWest Markets N.V. from the 29 November 2019 only, whereas the NatWest Markets franchise excludes the Central items & other segment. For periods prior to Q4 2019, NatWest Markets N.V. was also excluded from the NatWest Markets Plc entity.
 
NatWest Markets continued to play a leading role in market structural reform. We were first-to-market with our Realised Rate calculator and we acted as the sole solicitation agent for the first ever LIBOR to SONIA bond amendment issued in the market.
 
2019 compared with 2018
Total income decreased by £100 million, or 6.9%, reflecting lower core income and own credit adjustments (OCA), partially offset by increased legacy income following the £444 million gain on the merger of Alawwal bank with SABB.
A core income reduction of £177 million, or 14.1%, was due to challenging market conditions, most significantly in Q3 2019 when the business was impacted by weak performance in the Rates business.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £35 million, or 2.9%.
A net impairment release of £51 million compared with a release of £92 million in 2018, both reflecting a small number of legacy cases.
RWAs decreased by £7.0 billion driven by the £4.7 billion reduction following the merger of Alawwal bank with SABB and other legacy reductions.
 
Q4 2019 compared with Q3 2019
Total income increased by £100 million, or 66.7%, primarily reflecting higher legacy income from a release following the closure of a specific exposure.
Excluding strategic, litigation and conduct costs, operating expenses increased by £14 million, or 5.0%, reflecting the annual UK bank levy charge and the timing of one-off expense items.
RWAs decreased by £5.9 billion due to a £2.5 billion reduction in market risk and a £2.4 billion decrease in counterparty risk, primarily in the core business.
 
Q4 2019 compared with Q4 2018
Total income increased by £98 million, or 64.5%, primarily reflecting higher legacy income due to a release following the closure of a specific exposure.
Excluding strategic, litigation and conduct costs, operating expenses decreased by £20 million, or 6.3%, driven by the timing of one-off expense items.
An impairment release of £10 million compared with a release of £100 million in Q4 2018. The Q4 2018 release was driven by a small number of legacy cases.
 
Central items & other
 
Year ended and as at
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2019
2018
 
2019
2019
2018
 
£m
£m
 
£m
£m
£m
Central items not allocated
1,385
(1,038)
 
939
162
(55)
Of which: Litigation and conduct costs
141
(809)
 
(43)
(171)
(2)
Of which: FX recycling gain (1)
1,459
-
 
1,169
-
-
 
Note:
(1)   Includes £290 million arising on the completion of the Alawwal bank merger in June 2019, £1,102 million arising on the liquidation of RFS Holdings and £67 million in relation to dividends in UBI DAC.
 
Central items not allocated include £1,459 million of FX recycling gains, a £169 million reimbursement under indemnification agreements relating to US residential mortgage-backed securities (RMBS) and strategic costs of £450 million. FY 2018 included a litigation and conduct charge of £809 million, principally in respect of the settlement with the US Department of Justice.
 
 
 
Business performance summary
 
 
End-point CRR basis
 
31 December 
30 September 
31 December 
 
2019
2019
2018
Risk asset ratios
 
 
 
 
CET1
16.2
15.7
16.2 
Tier 1
18.5
17.9
18.4 
Total
21.2
20.5
21.8 
 
 
 
 
Capital
£m
£m
£m
Tangible equity
32,371
32,930
34,566 
 
 
 
 
Expected loss less impairment provisions
(167)
(620)
(654)
Prudential valuation adjustment
(431)
(466)
(494)
Deferred tax assets
(757)
(732)
(740)
Own credit adjustments
(118)
(234)
(405)
Pension fund assets
(474)
(401)
(394)
Cash flow hedging reserve
(35)
(336)
191 
Foreseeable ordinary and special dividends
(968)
(362)
(1,326)
Foreseeable charges
(365)
-
-
Other adjustments for regulatory purposes
(2)
(6)
(105)
 
 
 
 
Total deductions
(3,317)
(3,157)
(3,927)
CET1 capital
29,054
29,773
30,639 
AT1 capital
4,051
4,051
4,051 
Tier 1 capital
33,105
33,824
34,690 
Tier 2 capital
4,900
4,980
6,483 
 
 
 
 
Total regulatory capital
38,005
38,804
41,173 
 
 
 
 
Risk-weighted assets
 
 
 
 
 
 
 
Credit risk
131,000
136,200
137,900 
Counterparty credit risk
12,600
15,000
13,600 
Market risk
13,000
15,700
14,800 
Operational risk
22,600
22,600
22,400 
 
 
 
 
Total RWAs
179,200
189,500
188,700 
 
 
 
 
Leverage (1)
 
 
 
Cash and balances at central banks
77,900
84,300
88,900 
Trading assets
76,700
91,600
75,100 
Derivatives
150,000
175,800
133,300 
Financial assets
399,100
396,400
377,500
Other assets
19,300
28,400
19,400
 
 
 
 
Total assets
723,000
776,500
694,200 
Derivatives
 
 
 
  - netting and variation margin
(157,800)
(189,800)
(141,300)
  - potential future exposures
43,000
47,200
42,100 
Securities financing transactions gross up
2,200
1,700
2,100 
Undrawn commitments
42,500
43,900
50,300 
Regulatory deductions and other adjustments
(9,000)
(9,400)
(2,900)
 
 
 
 
CRR Leverage exposure
643,900
670,100
644,500 
 
 
 
 
CRR leverage ratio%
5.1
5.0
5.4 
 
 
 
 
UK leverage exposure (2)
570,300
589,500
559,500 
 
 
 
 
UK leverage ratio% (2)
5.8
5.7
6.2 
 
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 2019
 
 
 
 
 
 
 
 
Central
 
 
UK Personal
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
Banking
Bank RoI
 
Banking
Banking
International
 
Markets
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
4,130
400
 
2,842
521
478
 
(188)
(136)
8,047
Non-interest income
736
167
 
1,476
256
132
 
1,166
1,318
5,251
Own credit adjustments
-
-
 
-
-
-
 
(80)
-
(80)
Strategic disposals
-
-
 
-
-
-
 
444
591
1,035
Total income
4,866
567
 
4,318
777
610
 
1,342
1,773
14,253
Direct expenses - staff costs
(612)
(197)
 
(748)
(162)
(120)
 
(626)
(1,102)
(3,567)
                           - other costs
(360)
(96)
 
(296)
(66)
(57)
 
(202)
(2,405)
(3,482)
Indirect expenses
(1,431)
(177)
 
(1,193)
(211)
(67)
 
(350)
3,429
-
Strategic costs  - direct
(17)
(33)
 
(63)
(2)
(12)
 
(178)
(1,076)
(1,381)
                          - indirect
(273)
(27)
 
(238)
(36)
(8)
 
(44)
626
-
Litigation and conduct costs
(925)
(22)
 
(62)
(9)
-
 
(18)
141
(895)
Operating expenses
(3,618)
(552)
 
(2,600)
(486)
(264)
 
(1,418)
(387)
(9,325)
Operating profit/(loss) before impairment (losses)/releases
1,248
15
 
1,718
291
346
 
(76)
1,386
4,928
Impairment (losses)/releases
(393)
34
 
(391)
6
(2)
 
51
(1)
(696)
Operating profit/(loss)
855
49
 
1,327
297
344
 
(25)
1,385
4,232
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
9.6%
2.3%
 
8.4%
15.4%
25.7%
 
(3.2%)
nm
9.4%
Cost:income ratio (2)
74.4%
97.4%
 
58.9%
62.5%
43.3%
 
105.7%
nm
65.1%
Total assets (£bn)
182.3
25.4
 
165.4
23.3
31.7
 
263.9
31.0
723.0
Funded assets (£bn)
182.3
25.4
 
165.4
23.3
31.7
 
116.2
28.7
573.0
Net loans to customers - amortised cost (£bn)
158.9
18.2
 
101.2
15.5
14.1
 
8.4
10.6
326.9
Loan impairment rate (2)
25bps
(18)bps
 
38bps
nm
nm
 
nm
nm
21bps
Impairment provisions (£bn)
(1.4)
(0.8)
 
(1.3)
-
-
 
(0.1)
(0.1)
(3.7)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.7)
 
(1.0)
-
-
 
(0.1)
(0.1)
(2.7)
Customer deposits (£bn)
150.3
18.5
 
135.0
28.4
30.1
 
3.7
3.2
369.2
Risk-weighted assets (RWAs) (£bn)
37.8
13.0
 
72.5
10.1
6.5
 
37.9
1.4
179.2
RWA equivalent (RWAe) (£bn)
38.2
13.2
 
72.8
10.1
6.7
 
40.5
1.7
183.2
Employee numbers (FTEs - thousands)
20.3
2.9
 
10.2
1.9
1.8
 
5.0
21.9
64.0
Average interest earning assets (£bn)
167.2
25.1
 
145.9
21.7
29.9
 
35.4
nm
448.6
Net interest margin
2.47%
1.59%
 
1.95%
2.40%
1.60%
 
(0.53%)
nm
1.79%
Third party customer asset rate (3)
3.22%
2.27%
 
3.16%
2.91%
2.89%
 
nm
nm
nm
Third party customer funding rate (3)
(0.38%)
(0.16%)
 
(0.43%)
(0.43%)
(0.13%)
 
nm
nm
nm
 
For the notes to this table, refer to page 22. nm = not meaningful.
 
 
 
 
Segment performance
 
Year ended 31 December 2018
 
 
 
 
 
 
 
 
Central
 
 
UK Personal
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
Banking
Bank RoI
 
Banking
Banking
International
 
Markets
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
4,283
444
 
2,855
518
466
 
112
(22)
8,656
Non-interest income
771
166
 
1,747
257
128
 
1,238
347
4,654
Own credit adjustments
-
-
 
-
-
-
 
92
-
92
Total income
5,054
610
 
4,602
775
594
 
1,442
325
13,402
Direct expenses - staff costs
(698)
(202)
 
(739)
(161)
(102)
 
(557)
(1,190)
(3,649)
                         - other costs
(266)
(103)
 
(255)
(66)
(67)
 
(241)
(2,712)
(3,710)
Indirect expenses
(1,464)
(185)
 
(1,294)
(229)
(91)
 
(415)
3,678
-
Strategic costs  - direct
(41)
(2)
 
(33)
-
(3)
 
(195)
(730)
(1,004)
                         - indirect
(185)
(20)
 
(122)
(21)
(6)
 
(43)
397
-
Litigation and conduct costs
(213)
(71)
 
(44)
(1)
9
 
(153)
(809)
(1,282)
Operating expenses
(2,867)
(583)
 
(2,487)
(478)
(260)
 
(1,604)
(1,366)
(9,645)
Operating profit/(loss) before impairment (losses)/releases
2,187
27
 
2,115
297
334
 
(162)
(1,041)
3,757
Impairment (losses)/releases
(339)
(15)
 
(147)
6
2
 
92
3
(398)
Operating profit/(loss)
1,848
12
 
1,968
303
336
 
(70)
(1,038)
3,359
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
24.7%
0.5%
 
12.1%
15.4%
24.4%
 
(2.0%)
nm
4.8%
Cost:income ratio (2)
56.7%
95.6%
 
52.8%
61.7%
43.8%
 
111.2%
nm
71.7%
Total assets (£bn)
171.0
25.2
 
166.4
22.0
28.4
 
244.5
36.7
694.2
Funded assets (£bn)
171.0
25.2
 
166.4
22.0
28.4
 
111.4
36.5
560.9
Net loans to customers - amortised cost (£bn)
148.9
18.8
 
101.4
14.3
13.3
 
8.4
-
305.1
Loan impairment rate (2)
23bps
8bps
 
14bps
nm
nm
 
nm
nm
13bps
Impairment provisions (£bn)
(1.2)
(1.0)
 
(1.4)
-
-
 
(0.2)
-
(3.8)
Impairment provisions - stage 3 (£bn)
(0.7)
(0.8)
 
(1.1)
-
-
 
(0.2)
-
(2.8)
Customer deposits (£bn)
145.3
18.0
 
134.4
28.4
27.5
 
2.6
4.7
360.9
Risk-weighted assets (RWAs) (£bn)
34.3
14.7
 
78.4
9.4
6.9
 
44.9
0.1
188.7
RWA equivalent (RWAe) (£bn)
35.5
14.7
 
79.7
9.5
6.9
 
50.0
0.2
196.5
Employee numbers (FTEs - thousands)
21.7
3.1
 
10.3
1.9
1.7
 
4.8
23.6
67.1
Average interest earning assets (£bn)
160.6
24.8
 
145.3
20.5
27.3
 
27.9
nm
437.0
Net interest margin
2.67%
1.79%
 
1.96%
2.52%
1.71%
 
0.40%
nm
1.98%
Third party customer asset rate (3)
3.36%
2.41%
 
3.02%
2.89%
2.88%
 
nm
nm
nm
Third party customer funding rate (3)
(0.31%)
(0.20%)
 
(0.30%)
(0.25%)
(0.09%)
 
nm
nm
nm
 
For the notes to this table, refer to page 22. nm = not meaningful.
 
 
Segment performance
 
Quarter ended 31 December 2019
 
 
 
 
 
 
 
 
Central
 
UK Personal
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
Banking
Bank RoI
 
Banking
Banking
International
 
Markets
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
1,012
98
 
715
130
117
 
(4)
(31)
2,037
Non-interest income
183
42
 
361
65
33
 
276
1,258
2,218
Own credit adjustments
-
(1)
 
-
-
-
 
(22)
1
(22)
Total income
1,195
139
 
1,076
195
150
 
250
1,228
4,233
Direct expenses - staff costs
(142)
(38)
 
(180)
(40)
(31)
 
(118)
(286)
(835)
                                    - other costs
(101)
(26)
 
(67)
(14)
(20)
 
(74)
(768)
(1,070)
Indirect expenses
(399)
(46)
 
(330)
(66)
(27)
 
(104)
972
-
Strategic costs  - direct
(9)
(21)
 
(26)
(2)
(3)
 
(74)
(402)
(537)
                                    - indirect
(130)
(8)
 
(85)
(6)
(2)
 
(7)
238
-
Litigation and conduct costs
(7)
(1)
 
(12)
(7)
-
 
(15)
(43)
(85)
Operating expenses
(788)
(140)
 
(700)
(135)
(83)
 
(392)
(289)
(2,527)
Operating profit before impairment (losses)/releases
407
(1)
 
376
60
67
 
(142)
939
1,706
Impairment (losses)/releases
(81)
(4)
 
(81)
1
(5)
 
10
-
(160)
Operating profit/(loss)
326
(5)
 
295
61
62
 
(132)
939
1,546
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
14.9%
(1.0%)
 
7.6%
12.0%
17.3%
 
(6.5%)
nm
17.7%
Cost:income ratio (2)
65.9%
100.7%
 
63.9%
69.2%
55.3%
 
156.8%
nm
59.4%
Total assets (£bn)
182.3
25.4
 
165.4
23.3
31.7
 
263.9
31.0
723.0
Funded assets (£bn)
182.3
25.4
 
165.4
23.3
31.7
 
116.2
28.7
573.0
Net loans to customers - amortised cost (£bn)
158.9
18.2
 
101.2
15.5
14.1
 
8.4
10.6
326.9
Loan impairment rate (2)
20bps
8bps
 
32bps
nm
nm
 
nm
nm
19bps
Impairment provisions (£bn)
(1.4)
(0.8)
 
(1.3)
-
-
 
(0.1)
(0.1)
(3.7)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.7)
 
(1.0)
-
-
 
(0.1)
(0.1)
(2.7)
Customer deposits (£bn)
150.3
18.5
 
135.0
28.4
30.1
 
3.7
3.2
369.2
Risk-weighted assets (RWAs) (£bn)
37.8
13.0
 
72.5
10.1
6.5
 
37.9
1.4
179.2
RWA equivalent (RWAe) (£bn)
38.2
13.2
 
72.8
10.1
6.7
 
40.5
1.7
183.2
Employee numbers (FTEs - thousands)
20.3
2.9
 
10.2
1.9
1.8
 
5.0
21.9
64.0
Average interest earning assets (£bn)
172.9
24.8
 
146.4
22.4
31.6
 
36.6
nm
456.2
Net interest margin
2.32%
1.57%
 
1.94%
2.30%
1.47%
 
(0.04%)
nm
1.77%
Third party customer asset rate (3)
3.09%
2.23%
 
3.15%
2.86%
2.79%
 
nm
nm
nm
Third party customer funding rate (3)
(0.38%)
(0.15%)
 
(0.43%)
(0.40%)
(0.09%)
 
nm
nm
nm
 
For the notes to this table, refer to page 22. nm = not meaningful.
 
 
 
Segment performance
 
Quarter ended 30 September 2019
 
 
 
 
 
 
 
 
Central
 
 
UK Personal
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
Banking
Bank RoI
 
Banking
Banking
International
 
Markets
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
1,034
102
 
703
130
119
 
(62)
(20)
2,006
Non-interest income
190
43
 
374
68
31
 
223
(20)
909
Own credit adjustments
-
-
 
-
-
-
 
(11)
(1)
(12)
Total income
1,224
145
 
1,077
198
150
 
150
(41)
2,903
Direct expenses - staff costs
(157)
(53)
 
(194)
(40)
(30)
 
(159)
(258)
(891)
                           - other costs
(95)
(22)
 
(74)
(17)
(14)
 
(42)
(578)
(842)
Indirect expenses
(357)
(43)
 
(294)
(49)
(13)
 
(81)
837
-
Strategic costs  - direct
(12)
(3)
 
(5)
-
(4)
 
(55)
(136)
(215)
                          - indirect
(68)
(9)
 
(67)
(13)
(1)
 
(7)
165
-
Litigation and conduct costs
(912)
(1)
 
(4)
-
-
 
(4)
171
(750)
Operating expenses
(1,601)
(131)
 
(638)
(119)
(62)
 
(348)
201
(2,698)
Operating (loss)/profit before impairment (losses)/releases
(377)
14
 
439
79
88
 
(198)
160
205
Impairment (losses)/releases
(131)
17
 
(108)
2
-
 
5
2
(213)
Operating (loss)/profit
(508)
31
 
331
81
88
 
(193)
162
(8)
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
(26.8%)
5.8%
 
8.4%
16.8%
26.0%
 
(8.7%)
nm
(3.8%)
Cost:income ratio (2)
130.8%
90.3%
 
57.9%
60.1%
41.3%
 
232.0%
nm
92.9%
Total assets (£bn)
176.7
26.1
 
166.6
22.6
31.2
 
318.3
35.0
776.5
Funded assets (£bn)
176.7
26.0
 
166.6
22.6
31.2
 
142.7
34.9
600.7
Net loans to customers - amortised cost (£bn)
154.6
19.0
 
101.5
15.2
13.8
 
9.1
6.3
319.5
Loan impairment rate (2)
34bps
(34)bps
 
42bps
nm
nm
 
nm
nm
26bps
Impairment provisions (£bn)
(1.4)
(0.8)
 
(1.3)
-
-
 
(0.2)
(0.1)
(3.8)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.8)
 
(1.0)
-
-
 
(0.2)
-
(2.8)
Customer deposits (£bn)
147.9
18.8
 
135.7
28.2
29.1
 
3.3
6.7
369.7
Risk-weighted assets (RWAs) (£bn)
37.5
13.3
 
77.0
10.0
6.5
 
43.8
1.4
189.5
RWA equivalent (RWAe) (£bn)
38.4
13.6
 
78.1
10.0
6.6
 
48.9
1.7
197.3
Employee numbers (FTEs - thousands)
21.0
3.0
 
10.4
1.9
1.8
 
5.1
22.5
65.7
Average interest earning assets (£bn)
168.1
26.2
 
146.7
22.0
30.4
 
38.6
nm
454.4
Net interest margin
2.44%
1.55%
 
1.90%
2.35%
1.55%
 
(0.64%)
nm
1.75%
Third party customer asset rate (3)
3.22%
2.23%
 
3.11%
2.87%
2.91%
 
nm
nm
nm
Third party customer funding rate (3)
(0.38%)
(0.15%)
 
(0.43%)
(0.43%)
(0.14%)
 
nm
nm
nm
 
For the notes to this table, refer to the following page. nm = not meaningful.
 
 
Segment performance
 
Quarter ended 31 December 2018
 
 
 
 
 
 
 
 
Central
 
 
UK Personal
Ulster
 
Commercial
Private
RBS
 
NatWest
 items &
Total
 
Banking
Bank RoI
 
Banking
Banking
International
 
Markets
other (1)
RBS
 
£m
£m
 
£m
£m
£m
 
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
 
 
Net interest income
1,061
110
 
724
133
123
 
30
(5)
2,176
Non-interest income
185
37
 
392
65
32
 
89
49
849
Own credit adjustments
-
-
 
-
-
-
 
33
-
33
Total income
1,246
147
 
1,116
198
155
 
152
44
3,058
Direct expenses - staff costs
(166)
(53)
 
(185)
(39)
(25)
 
(128)
(263)
(859)
                         - other costs
(80)
(27)
 
(77)
(22)
(22)
 
(65)
(870)
(1,163)
Indirect expenses
(414)
(52)
 
(403)
(72)
(35)
 
(123)
1,099
-
Strategic costs  - direct
(27)
(3)
 
(5)
-
(1)
 
(89)
(230)
(355)
                         - indirect
(63)
(12)
 
(57)
(10)
(2)
 
(22)
166
-
Litigation and conduct costs
(7)
(17)
 
(37)
-
(1)
 
(28)
(2)
(92)
Operating expenses
(757)
(164)
 
(764)
(143)
(86)
 
(455)
(100)
(2,469)
Operating profit/(loss) before impairment (losses)/releases
489
(17)
 
352
55
69
 
(303)
(56)
589
Impairment (losses)/releases
(142)
19
 
(5)
8
2
 
100
1
(17)
Operating profit/(loss)
347
2
 
347
63
71
 
(203)
(55)
572
Additional information
 
 
 
 
 
 
 
 
 
 
Return on equity (2)
17.2%
0.4%
 
8.3%
12.3%
20.0%
 
(9.2%)
nm
3.5%
Cost:income ratio (2)
60.8%
111.6%
 
67.5%
72.2%
55.5%
 
299.3%
nm
80.5%
Total assets (£bn)
171.0
25.2
 
166.4
22.0
28.4
 
244.5
36.7
694.2
Funded assets (£bn)
171.0
25.2
 
166.4
22.0
28.4
 
111.4
36.5
560.9
Net loans to customers - amortised cost (£bn)
148.9
18.8
 
101.4
14.3
13.3
 
8.4
-
305.1
Loan impairment rate (2)
38bps
(38)bps
 
2bps
nm
nm
 
nm
nm
2bps
Impairment provisions (£bn)
(1.2)
(1.0)
 
(1.4)
-
-
 
(0.2)
-
(3.8)
Impairment provisions - stage 3 (£bn)
(0.7)
(0.8)
 
(1.1)
-
-
 
(0.2)
-
(2.8)
Customer deposits (£bn)
145.3
18.0
 
134.4
28.4
27.5
 
2.6
4.7
360.9
Risk-weighted assets (RWAs) (£bn)
34.3
14.7
 
78.4
9.4
6.9
 
44.9
0.1
188.7
RWA equivalent (RWAe) (£bn)
35.5
14.7
 
79.7
9.5
6.9
 
50.0
0.2
196.5
Employee numbers (FTEs - thousands)
21.7
3.1
 
10.3
1.9
1.7
 
4.8
23.6
67.1
Average interest earning assets (£bn)
161.7
25.2
 
146.7
21.2
26.9
 
30.4
nm
442.1
Net interest margin
2.60%
1.73%
 
1.96%
2.49%
1.81%
 
0.39%
nm
1.95%
Third party customer asset rate (3)
3.33%
2.43%
 
3.19%
2.94%
2.98%
 
nm
nm
nm
Third party customer funding rate (3)
(0.36%)
(0.18%)
 
(0.42%)
(0.38%)
(0.09%)
 
nm
nm
nm
nm = not meaningful
 
Notes:
(1)   Central items and other include unallocated transactions, including volatile items under IFRS, items related to Alawwal bank merger and a US RMBS related reimbursement.
(2)   Refer to the Appendix for further details of preparation and reconciliation of non-IFRS performance measures where relevant.
(3)   UBI DAC and RBS International manage their funding and liquidity requirements locally. Their liquidity asset portfolios and non-customer related funding sources are included within their net interest margin, but excluded from their third party asset and liability rates.
 
 
 
Condensed consolidated income statement for the period ended 31 December 2019 
 
 
Year ended
 
Quarter ended
 
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