28th Mar 2008 17:29
National Westminster Bank PLC28 March 2008 NATIONAL WESTMINSTER BANK Plc RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 National Westminster Bank Plc ('NatWest' or the 'Group') is a wholly-ownedsubsidiary of The Royal Bank of Scotland plc and its ultimate parent company isThe Royal Bank of Scotland Group plc. These results of NatWest are published to meet the requirements of the ListingRules of the Financial Services Authority in respect of NatWest's preferenceshares, which continue to be listed on the London Stock Exchange. CONTENTS PAGE Financial review 2 Condensed consolidated income statement 3 Condensed consolidated balance sheet 4 Overview of condensed consolidated balance sheet 5 Condensed consolidated statement of recognised income and expense 6 Condensed consolidated cash flow statement 7 Notes 8 Contacts 13 FINANCIAL REVIEW Profit Profit before tax was down 11%, from £3,456 million to £3,085 million,principally as a result of reduced profits in Global Banking & Markets,partially offset by strong growth in Retail Markets and Ulster Bank. Total income Total income was down by £972 million, 10%, to £8,354 million, mainly reflectingthe adverse impact of the developments in global credit markets in the secondhalf of 2007. Net interest income increased by 14% to £5,091 million and represents 61% oftotal income (2006 - 48%). Non-interest income fell by 33% to £3,263 million and represents 39% of totalincome (2006 - 52%). The decrease in non-interest income was due primarily to afall in income from trading activities in Global Banking & Markets which morethan offset growth in fees and commissions. Operating expenses Operating expenses fell by 12% to £4,420 million primarily reflecting the effectof lower income in Global Banking & Markets. Cost: income ratio The Group's cost:income ratio was 52.9% compared with 53.8% in 2006. Impairment losses Impairment losses were £849 million compared with £852 million in 2006. Integration Integration costs, which primarily relate to the integration of First Active,were £43 million compared with £67 million in 2006. Dividends Ordinary dividends totalling £1,850 million (2006 - £1,500 million) were paid tothe parent company during the year. Balance sheet Total assets were £312.3 billion at 31 December 2007, 7% higher than totalassets of £290.7 billion at 31 December 2006. Lending to customers, excludingrepurchase agreements and stock borrowing, increased by 6% or £10.5 billion to£173.4 billion. Customer deposits, excluding repurchase agreements and stocklending, grew by 13% or £19.9 billion to £175.3 billion. The directors are satisfied with the progress of the Group in 2007 and of itsability to meet the challenges and opportunities in the year ahead. RESTATEMENTS Divisional results for 2006 have been restated to reflect transfers ofbusinesses between divisions in 2007. These changes do not affect the Group'sresults. CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £m £m Interest receivable 12,178 9,825Interest payable 7,087 5,376 _______ _______Net interest income 5,091 4,449 _______ _______Fees and commissions receivable 4,226 3,928Fees and commissions payable (1,036) (960)(Loss)/income from trading activities (360) 1,458Other operating income 433 451 _______ _______Non-interest income 3,263 4,877 _______ _______Total income 8,354 9,326 _______ _______Staff costs 1,567 1,754Premises and equipment 267 266Other administrative expenses 2,322 2,741Depreciation and amortisation 264 257 _______ _______Operating expenses 4,420 5,018 _______ _______Profit before impairment losses 3,934 4,308Impairment losses 849 852 _______ _______Operating profit before tax 3,085 3,456Tax 768 831 _______ _______Profit for the year 2,317 2,625Minority interests 89 39 _______ _______Profit attributable to ordinary shareholders 2,228 2,586 _______ _______ CONDENSED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 2007 2006 £m £mAssetsCash and balances at central banks 1,363 1,525Treasury and other eligible bills 2,021 275Loans and advances to banks 71,449 61,563Loans and advances to customers 188,976 182,411Debt securities 35,916 32,268Equity shares 1,110 1,158Settlement balances 2,700 3,574Derivatives 3,575 2,746Intangible assets 1,244 1,209Property, plant and equipment 1,514 1,719Prepayments, accrued income and other assets 2,414 2,213 _______ _______Total assets 312,282 290,661 _______ _______ LiabilitiesDeposits by banks 44,861 46,258Customer accounts 205,519 181,219Debt securities in issue 20,923 14,335Settlement balances and short positions 14,955 24,274Derivatives 3,251 2,343Accruals, deferred income and other liabilities 3,417 4,108Retirement benefit liabilities 1,322 1,298Subordinated liabilities 5,932 5,641 _______ _______Total liabilities 300,180 279,476Equity:Minority interests 1,314 1,012Shareholders' equityCalled up share capital 1,678 1,678Reserves 9,110 8,495Total equity 12,102 11,185 _______ _______Total liabilities and equity 312,282 290,661 _______ _______ OVERVIEW OF CONDENSED CONSOLIDATED BALANCE SHEET Total assets of £312.3 billion at 31 December 2007 were up £21.6 billion, 7%,compared with 31 December 2006. Treasury and other eligible bills increased by £1.7 billion to £2.0 billion, dueto trading activity. Loans and advances to banks increased by £9.9 billion, 16%, to £71.4 billion.Excluding reverse repurchase agreements and stock borrowing ("reverse repos"),down £2.3 billion, 21% to £8.5 billion, bank placings were up by £12.2 billion,24%, to £62.9 billion. Loans and advances to customers increased by £6.6 billion, 4%, to £189.0billion. Within this, reverse repos decreased by 20%, £3.9 billion to £15.6billion. Excluding reverse repos, lending rose by £10.5 billion, 6% to £173.4billion. Debt securities increased by £3.6 billion, 11%, to £35.9 billion, principallydue to increased holdings in Global Banking & Markets. Settlement balances fell by £0.9 billion, 24% to £2.7 billion. Movements in the value of derivatives, assets and liabilities, primarily reflectchanges in interest rates and growth in trading volumes. Prepayments, accrued income and other assets increased by £0.2 billion, 9% to£2.4 billion. Deposits by banks fell by £1.4 billion, 3% to £44.9 billion. Higher inter-bankdeposits, up £5.8 billion, 22% at £31.8 billion were more than offset by adecrease in repurchase agreements and stock lending ("repos"), down £7.2billion, 36% to £13.1 billion. Customer accounts were up £24.3 billion, 13% to £205.5 billion. Within this,repos increased £4.4 billion, 17% to £30.2 billion. Excluding repos, depositsrose by £19.9 billion, 13%, to £175.3 billion reflecting organic growth. Debt securities in issue increased by £6.6 billion, 46%, to £20.9 billion. Settlement balances and short positions were down £9.3 billion, 38%, to £15.0billion. Accruals, deferred income and other liabilities decreased £0.7 billion, 17% to£3.4 billion. Subordinated liabilities increased by £0.3 billion, 5%, to £5.9 billion. Theissue of £0.6 billion dated loan capital and £0.1 billion movement in exchangerates was offset by the redemption of £0.3 billion undated loan capital and £0.1billion non-cumulative preference shares. Shareholders' equity increased by £0.6 billion, 6% to £10.8 billion. The profitfor the year of £2.2 billion and movements in currency translation, £0.3 billionwere partially offset by the payment of an ordinary dividend to the parentcompany of £1.9 billion. CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £m £m Net movements in reserves:Available-for-sale 2 26Cash flow hedges (20) (41)Currency translation 247 (491) Tax on items recognised direct in equity 7 (43) _______ _______Net income/(expense) recognised direct in equity 236 (549)Profit for the year 2,317 2,625 _______ _______Total recognised income and expense for the year 2,553 2,076 _______ _______ Attributable to:Equity shareholders 2,465 2,045Minority interests 88 31 _______ _______ 2,553 2,076 _______ _______ CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 2007 2006 £m £m Operating activitiesOperating profit before tax 3,085 3,456 Adjustments for:Depreciation and amortisation 264 257Interest on subordinated liabilities 271 310 Charge for defined benefit pension schemes 132 229 Cash contribution to defined benefit pension schemes (117) (135)Elimination of foreign exchange differences andother non-cash items (539) 1,214 _______ _______Net cash inflow from trading activities 3,096 5,331 Changes in operating assets and liabilities 15,004 2,706 _______ _______ Net cash flows from operating activities before tax 18,100 8,037Income taxes paid (592) (1,157) _______ _______ Net cash flows from operating activities 17,508 6,880 _______ _______ Investing activities Sale and maturity of securities 560 1,489Purchase of securities (2,215) (874)Sale of property, plant and equipment 678 268Purchase of property, plant and equipment (328) (382)Net investment in business interests and intangible assets (159) (92) _______ _______Net cash flows from investing activities (1,464) 409 _______ _______Financing activities Issue of subordinated liabilities 634 91Proceeds of minority interests issued 288 271 Redemption of minority interests (2) -Capital contribution - 188Repayment of subordinated liabilities (403) (719)Dividends paid (1,922) (1,534) Interest paid on subordinated liabilities (274) (313) _______ _______Net cash flows from financing activities (1,679) (2,016) _______ _______ Effects of exchange rate changes on cash and cash 364 (2,237)equivalents _______ _______ Net increase in cash and cash equivalents 14,729 3,036 Cash and cash equivalents at beginning of year 51,460 48,424 _______ _______ Cash and cash equivalents at end of year 66,189 51,460 _______ _______ NOTES 1. Accounting policies There have been no significant changes to the Group's accounting policies. 2. Loan impairment provisions Operating profit is stated after charging loan impairment losses of £848 million (2006 - £852 million). The balance sheet loan impairment provisions increased in the year ended 31 December 2007 from £2,061 million to £2,340 million, and the movements thereon were: 2007 2006 £m £m At beginning of period 2,061 2,031 Currency translation and other adjustments 41 (25) Amounts written-off (617) (801) Recoveries of amounts previously written-off 94 71 Charge to the income statement 848 852 Unwind of discount (87) (67) _______ _______ At end of period 2,340 2,061 _______ _______ The provision at 31 December 2007 includes £2 million (2006 - £2 million) in respect of loans and advances to banks. 3. Taxation The actual tax charge differs from the tax charge computed by applying the standard UK corporation tax rate of 30% as follows: 2007 2006 £m £m Profit before tax 3,085 3,456 _______ _______ Expected tax charge at 30% 926 1,037 Non-deductible items 52 157 Non-taxable items (178) (35) Taxable foreign exchange movements (3) (106) Group relief at non-standard rates 94 13 Foreign profits taxed at other rates (57) (23) Increase in deferred tax asset following change in the rate of UK Corporation Tax 18 - Unutilised losses brought forward and carried forward 1 10 Adjustments in respect of prior periods (85) (222) _______ _______ Actual tax charge 768 831 _______ _______ Overseas tax included above (11) 326 _______ _______ 4. Segmental analysis The revenues for each division in the table below are gross of intra-group transactions. 2007 2006 Total revenue £m £m Corporate Markets - Global Banking & Markets 4,062 4,514 - UK Corporate Banking 2,734 2,222 Retail Markets - Retail 6,470 5,942 - Wealth Management 1,655 1,262 Ulster Bank 3,043 2,577 Manufacturing (84) 31 Central items 1,061 1,049 Elimination of intra-group transactions (2,464) (1,935) _______ _______ 16,477 15,662 _______ _______ 2007 2006 Operating profit before tax £m £m Corporate Markets - Global Banking & Markets (563) 730 - UK Corporate Banking 990 922 Total Corporate Markets 427 1,652 Retail Markets - Retail 1,782 1,539 - Wealth Management 281 207 Total Retail Markets 2,063 1,746 Ulster Bank 520 431 Manufacturing - - Central items 124 (300) _______ _______ 3,134 3,529 Amortisation of purchased intangible assets (6) (6) Integration costs (43) (67) _______ _______ 3,085 3,456 _______ _______ 5. Dividend 2007 2006 £m £m Ordinary dividend paid to parent company 1,850 1,500 _______ _______ 6. Analysis of consolidated equity 2007 2006 £m £m Called-up share capital At beginning and end of year 1,678 1,678 _______ _______ Share premium account At beginning and end of year 1,291 1,291 _______ _______ Available-for-sale reserves At beginning of year 18 - Unrealised gains in the year 87 81 Realised gains in the year (85) (55) Taxation 3 (8) _______ _______ At end of year 23 18 _______ _______ Cash flow hedging reserve At beginning of year 72 148 Amount recognised in equity during the year - (2) Amount transferred from equity to earnings in the year (20) (39) Taxation 4 (35) _______ _______ At end of year 56 72 _______ _______ Foreign exchange reserve At beginning of year (314) 169 Retranslation of net assets 248 (483) _______ _______ At end of year (66) (314) _______ _______ Other reserves At beginning of year 486 298 Redemption of preference shares classified as debt 128 - Capital contribution - 188 _______ _______ At end of year 614 486 _______ _______ Retained earnings At beginning of year 6,942 5,856 Profit attributable to ordinary shareholders 2,228 2,586 Ordinary dividends paid (1,850) (1,500) Redemption of preference shares classified as debt (128) - _______ _______ At end of year 7,192 6,942 _______ _______ Shareholders' equity at end of year 10,788 10,173 _______ _______ Minority interests At beginning of year 1,012 744 Currency translation adjustments and other movements (1) (8) Profit attributable to minority interests 89 39 Dividends paid (72) (34) Equity raised 288 271 Equity withdrawn (2) - _______ _______ At end of year 1,314 1,012 _______ _______ Total equity at end of year 12,102 11,185 _______ _______ 7. Contingent liabilities and commitments 2007 2006 £m £m Contingent liabilities Guarantees and assets pledged as collateral security 2,438 2,272 Other contingent liabilities 2,907 2,889 ______ ______ 5,345 5,161 ______ ______ Commitments Undrawn formal standby facilities, credit lines and 76,116 74,918 other commitments to lend Other commitments 220 181 ______ ______ 76,336 75,099 ______ ______ 8. Litigation Proceedings, including consolidated class actions on behalf of former Enron securities holders, have been brought in the United States against a large number of defendants, including the Group, following the collapse of Enron. The claims against the Group could be significant; the class plaintiff's position is that each defendant is responsible for an entire aggregate damage amount less settlements - they have not quantified claimed damages against the Group in particular. The Group considers that it has substantial and credible legal and factual defences to these claims and will continue to defend them vigorously. Recent United States Supreme Court and United States Court of Appeals for the Fifth Circuit decisions provide further support for the Group's position. The Group is unable reliably to estimate the liability, if any, that might arise or its effect on the Group's consolidated net assets, its operating results or cashflows in any particular period. On 27 July 2007, following discussions between the Office of Fair Trading ('OFT'), the Financial Ombudsman Service, the Financial Services Authority and all the major UK banks (including the Group) in the first half of 2007, the OFT issued proceedings in a test case against the banks including the Group to determine the legal status and enforceability of certain charges relating to unauthorised overdrafts. The hearing of the test case commenced on 17 January 2008. The Group maintains that its charges are fair and enforceable and is defending its position vigorously. It cannot, however, at this stage predict with any certainty the outcome of the test case and is unable reliably to estimate the liability, if any, that may arise or its effect on the Group's consolidated net assets, operating results or cash flows in any particular period. Members of the Group are engaged in other litigation in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against them arising in the ordinary course of business. The Group has reviewed these other actual, threatened and known potential claims and proceedings and, after consulting with its legal advisers, does not expect that the outcome of these other claims and proceedings will have a material adverse effect on its consolidated net assets, operating results or cash flows in any particular period. 9. Regulatory enquiries and investigations In the normal course of business the Group and its subsidiaries co-operate with regulatory authorities in various jurisdictions in their enquiries or investigations into alleged or possible breaches of regulations. Certain of the Group's subsidiaries have received requests for information from various US governmental agencies and self regulatory organisations including in connection with sub-prime mortgages and securitisations, collateralised debt obligations and synthetic products related to sub-prime mortgages. The Group and its subsidiaries are cooperating with these various requests for information and investigations. 10. Statutory accounts Financial information contained in this document does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 ("the Act"). The statutory accounts for the year ended 31 December 2007 will be filed with the Registrar of Companies following the company's Annual General Meeting. The auditors have reported on these accounts: their report was unqualified and did not contain a statement under section 237(2) or (3) of the Act. 11. Form 20-F A report on Form 20-F will be filed with the Securities and Exchange Commission in the United States. 12. Date of approval The results for the year ended 31 December 2007 were approved by the Board of directors on 28 March 2008. CONTACTS Guy Whittaker Group Finance Director 020 7672 0003 0131 523 2028 Richard O'Connor Head of Investor Relations 020 7672 1758 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RBS.L