30th Mar 2006 07:00
National Westminster Bank PLC29 March 2006 RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 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 International Financial Reporting Standards 2 Financial highlights 2 Condensed consolidated income statement 3 Condensed consolidated balance sheet 4 Condensed statement of recognised income and expense 5 Condensed consolidated cash flow statement 5 Analysis of IFRS adjustments excluding IAS 32, IAS 39 and IFRS 4 6 7Notes 9Contacts INTERNATIONAL FINANCIAL REPORTING STANDARDS The annual accounts have, for the first time, been prepared in accordance withInternational Financial Reporting Standards ('IFRS') adopted by theInternational Accounting Standards Board ('IASB'), and interpretations issued bythe International Financial Reporting Interpretations Committee of the IASB andendorsed by the European Union. The date of transition to IFRS for NatWest andthe date of its opening IFRS balance sheet was 1 January 2004. In preparing its results, NatWest has applied IFRS extant at 31 December 2005. As a result of continued amendments to IAS 39 'Financial Instruments:Recognition and Measurement' during 2004 and into 2005 the Group was not in aposition fully to implement this standard for statutory reporting from 1 January2004. NatWest has therefore taken advantage of the option in IFRS 1 'First-timeAdoption of International Financial Reporting Standards' to implement IAS 39,together with IAS 32 'Financial Instruments: Disclosure and Presentation' andIFRS 4 'Insurance Contracts', from 1 January 2005 without restating its 2004profit and loss account and balance sheet. The results for 2005 and 2004 aretherefore not directly comparable. FINANCIAL HIGHLIGHTS NatWest Home Loans Limited was transferred to The Royal Bank of Scotland plc on31 December 2005 at neither a profit nor a loss to NatWest Group and its resultsare shown as discontinued. Operating profit before tax from continuing operations increased by 9% from£3,000 million to £3,264 million. Total income from continuing operations was £8,429 million compared with £7,745million in the prior year, an increase of £684 million, 9%. Operating expensesfrom continuing operations increased by £298 million, 7% to £4,413 million. Provisions for impairment in continuing operations at £752 million were £122million higher. Total assets were up £63.4 billion from £197.2 billion to £260.6 billion. Loansand advances to customers (excluding £26.9 billion relating to NatWest HomeLoans which was sold on 31 December 2005) were up 53%, £55.2 billion at £159.9billion and loans and advances to banks increased by £26.0 billion to £56.0billion, reflecting the implementation of IAS 32 and IAS 39 on 1 January 2005and business growth. The directors are satisfied with the progress of the Group in 2005 and do notexpect any significant change in the future. CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 In the Income Statement below, the comparative figures for 2004 have beenrestated for the implementation of all applicable IFRS, except for IAS 32, IAS39 and IFRS 4, which have been applied from 1 January 2005. 2005 2004 Discontinued Continuing Discontinued Continuing £m £m £m £m Interest receivable 203 8,289 251 6,929Interest payable 9 (4,040) 14 (2,811) _______ _______ _______ _______Net interest income 212 4,249 265 4,118 _______ _______ _______ _______Fees and commissions receivable 43 3,663 51 3,384Fees and commissions payable (34) (926) (38) (845)Other non-interest income - 1,443 - 1,088 _______ _______ _______ _______Non-interest income 9 4,180 13 3,627 _______ _______ _______ _______Total income 221 8,429 278 7,745Operating expenses 70 4,413 53 4,115 _______ _______ _______ _______Operating profit before impairment losses 225 3,630 151 4,016Impairment losses 4 752 (5) 630 _______ _______ _______ _______Operating profit before tax 147 3,264 230 3,000Tax* 44 904 69 797 _______ _______ _______ _______Operating profit after tax 103 2,360 161 2,203 _______ _______Discontinued operations 103 161 _______ _______Profit for the year 2,463 2,364 _______ _______ Profit attributable to:Minority interests 17 12Preference dividends - non-equity - 36Ordinary shareholders 2,446 2,316 _______ _______ 2,463 2,364 _______ _______ *includes overseas tax of £273 million for 2005 (2004 - £228 million). CONDENSED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2005 In the Consolidated Balance Sheet below, the comparative figures for 2004 havebeen restated for the implementation of all applicable IFRS, except for IAS 32,IAS 39 and IFRS 4, which have been applied from 1 January 2005. 2005 2004 £m £mAssetsCash and balances at central banks 1,568 1,589Treasury bills and other eligible bills 770 172Loans and advances to banks 55,995 29,982Loans and advances to customers 159,943 131,679Debt securities 28,745 22,426Equity shares 823 1,338Intangible assets 1,198 1,244Property, plant and equipment 1,531 1,542Settlement balances 3,931 3,538Derivatives at fair value 2,976 1,366Prepayments, accrued income and other assets 3,123 2,345 _______ _______Total assets 260,603 197,221 _______ _______ Liabilities and equityDeposits by banks 46,001 23,873Customer accounts 157,924 126,119Debt securities in issue 10,801 3,597Settlement balances and short positions 21,574 21,670Derivatives at fair value 2,657 1,105Accruals, deferred income and other liabilities 4,814 6,632Subordinated liabilities 6,648 5,808 _______ _______Total liabilities 250,419 188,804Equity*Minority interests 744 408Shareholders' equity 9,440 8,009Total equity 10,184 8,417 _______ _______Total liabilities and equity 260,603 197,221 _______ _______ *includes non-equity minority interests and preference shares in 2004. CONDENSED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004 £m £m Net movement in available-for-sale reserve (286) -Net movement in cash flow hedging reserve (28) -Exchange differences on translation of foreign operations 180 8 _______ _______Expense before tax on items recognised direct in equity (134) 8Tax on items recognised direct in equity 106 - _______ _______Net expense recognised direct in equity (28) 8Profit for the year 2,463 2,364 _______ _______Total recognised income and expense for the year 2,435 2,372 _______ _______ Attributable to:Equity holders of the parent 2,420 2,360Minority interests 15 12 _______ _______ 2,435 2,372 _______ _______Effect of changes in accounting policies on the implementation of IFRSEquity holders of the parent (1,768) (1,029)Minority interests (6) - _______ _______ (1,774) (1,029) _______ _______ CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 2005 2004 £m £m Cash flows from operating activities 30,469 (4,864)Cash flows from investing activities 162 (1,558)Cash flows from financing activities (261) (2,035)Effects of exchange rate changes on cash and cash equivalents (4,791) 2,484 _______ _______Net increase/(decrease) in cash and cash equivalents 25,579 (5,973)Cash and cash equivalents at 1 January 22,845 28,818 _______ _______Cash and cash equivalents at 31 December 48,424 22,845 _______ _______ Cash and cash equivalents comprises cash on hand and demand deposits with bankstogether with short-term highly liquid investments that are readily convertibleto known amounts of cash and subject to insignificant risk of changes in value. ANALYSIS OF IFRS ADJUSTMENTS EXCLUDING IAS 32, IAS 39 AND IFRS 4 SUMMARY CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 UK GAAP Effect IFRS of IFRS £m £m £m Net interest income 4,360 (242) 4,118Non-interest income 3,641 (14) 3,627 _______ _______ _______Total income 8,001 (256) 7,745Operating expenses 3,893 222 4,115 _______ _______ _______Operating profit before impairment losses 4,108 (478) 3,630Impairment losses 625 5 630 _______ _______ _______Operating profit before tax 3,483 (483) 3,000Tax 955 (158) 797 _______ _______ _______Operating profit after tax 2,528 (325) 2,203Discontinued operations - 161 161 _______ _______ _______Profit for the year 2,528 (164) 2,364Minority interests 12 - 12Preference dividends 36 - 36 _______ _______ _______Profit attributable to ordinary shareholders 2,480 (164) 2,316 _______ _______ _______ ANALYSIS BY TYPE OF ADJUSTMENT Software development Employee Discontinued Leases costs benefits Goodwill operations Total £m £m £m £m £m £m Net interest income 13 10 - - (265) (242)Non-interest income - - (1) - (13) (14)Total income 13 10 (1) - (278) (256)Operating expenses - 253 65 (43) (53) 222Operating profit beforeimpairment losses 13 (243) (66) 43 (225) (478)Impairment losses - - - - 5 5Operating profit before tax 13 (243) (66) 43 (230) (483)Tax 4 (73) (20) - (69) (158)Operating profit after tax 9 (170) (46) 43 (161) (325)Discontinued operations - - - - 161 161Profit for the year 9 (170) (46) 43 - (164) NOTES 1. Adoption of International Financial Reporting Standards ("IFRS") NatWest prepared its 2004 consolidated financial statements in accordance with accounting standards issued by the UK Accounting Standards Board, the pronouncements of the Urgent Issues Task Force, relevant Statements of Recommended Accounting Practice and in compliance with the Companies Act 1985. NatWest will henceforth prepare its consolidated financial statements in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ("IASB"), and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together "IFRS"). The standards, adopted for the first time for the purpose of preparing consolidated financial statements for the year ending 31 December 2005, are those issued by the IASB and endorsed by the EU as at 31 December 2005. The EU has not endorsed IAS 39 as issued by the IASB. It has relaxed some of the hedging requirements. NatWest has not taken advantage of this relaxation. A reconciliation of equity as at 31 December 2004 and of profit for 2004 under previous GAAP to IFRS is included in this announcement. 2. Basis of preparation The statutory accounts have been prepared in accordance with IFRS. 3. Accounting policies NatWest's provisional IFRS accounting policies and a description of the key differences between UK GAAP and IFRS accounting policies were included in NatWest's interim results announcement issued on 28 September 2005. Subsequently, NatWest has adopted the Amendment to IAS 39 'The Fair Value Option' issued by the IASB in June 2005 with effect from 1 January 2005. This amendment allows financial assets and financial liabilities to be designated as at fair value through profit or loss but only if it (a) eliminates or significantly reduces a measurement or recognition inconsistency, or (b) is applied to a group of financial assets, financial liabilities or both that is managed and its performance evaluated on a fair value basis, or (c) relates to a financial asset or financial liability with an embedded derivative; unless it is clear that accounting for the embedded derivative separately from the host is prohibited by IAS 39. Implementation of the amended fair value option did not have a material effect on shareholders' funds as at 1 January 2005. 4. Ordinary dividends 2005 2004 £m £m Dividends paid 350 2,300 _______ _______ NOTES (continued) 5. Reconciliation of shareholders' funds 31 December 2004 £m UK GAAP shareholders' equity 9,138 Adoption of IFRS other than IAS 32, IAS 39 and IFRS 4: Employee benefits (1,767) Software development costs 344 Other (31) Tax effect on adjustments 445 Deferred tax (120) _______ Shareholders' equity under IFRS 8,009 _______ 6. Date of approval The results for the year ended 31 December 2005 were approved by the Board of directors on 29 March 2006. 7. 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 2005 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. CONTACTS Guy Whittaker Group Finance Director 020 7672 0008 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:
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