11th Jun 2008 07:21
THE ROYAL BANK OF SCOTLAND GROUP PLC
Pre-close Trading Update
11 June 2008
The Royal Bank of Scotland Group ('RBS') will be holding discussions with analysts and investors ahead of its close period for the half year ending 30 June 2008. This statement sets out the information that will be covered in those discussions.
RBS confirms that it expects Group and divisional performance trends to continue to track the guidance provided in the Interim Management Statement of 22 April 2008. The operating performance of many of RBS's businesses since the beginning of 2008 remains good, though results have been held back by the effects of the continuing deterioration in credit markets.
Write-downs on credit market exposures, as discussed in detail in the Interim Management Statement, are expected to remain within the estimates indicated. Overall, the Group's underlying results, excluding write-downs on credit market exposures, are expected to remain satisfactory.
While the global economic outlook is placing strains on a number of business sectors, the Group's loan portfolio remains robust, with a continued reduction in UK personal sector impairment losses but increased US impairments, principally in a specific retail portfolio, as previously disclosed. Although there has been little change in current corporate and commercial credit metrics, we continue to monitor forward-looking indicators closely.
The integration of ABN AMRO remains on track. Good progress continues to be made, with both income benefits and cost savings slightly ahead of target.
RBS confirms its previous guidance that at 30 June 2008 it expects its Tier 1 capital ratio to be in excess of 7.5% and its core Tier 1 capital ratio to be in excess of 5%, on a proportional consolidated basis. At 31 December 2008 the Group's Tier 1 capital ratio, on the same basis, is expected to be in excess of 8% and its core Tier 1 ratio in excess of 6%.
Further unaudited pro forma financial information under the Group's revised divisional structure is set out in Appendix 1. This information covers operating results for the Group, including the results of the ABN AMRO businesses acquired by RBS, for the full years 2006 and 2007 and for the first half of 2007. RBS will give a full update on progress with the ABN AMRO integration and on the Group's credit market exposures with its 2008 interim results on 8 August 2008.
Sir Fred Goodwin, Group Chief Executive, said:
"The trends which we have experienced so far in the second quarter are consistent with those referred to in our Interim Management Statement. Whilst we remain very much open for business, our risk appetite is tempered by a cautious stance in relation to short term economic factors and market conditions."
CONTACTS
|
Sir Fred Goodwin |
Group Chief Executive |
020 7672 0008 |
|
Guy Whittaker |
Group Finance Director |
020 7672 0003 |
|
Richard O'Connor |
Head of Investor Relations |
020 7672 1758 |
|
For media enquiries |
||
|
Andrew McLaughlin |
Group Director, Communications |
0131 626 3868 07786 111689 |
|
Carolyn McAdam |
Group Head of Media Relations |
0131 523 2055 07796 274968 |
Analysts' Conference Call
9.00 a.m., 11 June 2008
|
Dial in details: |
|
|
International Dial In: |
+44 (0) 145 256 8172 |
|
UK Free Call: |
0800 694 8082 |
|
USA Free Call: |
1 866 966 8024 |
|
Netherlands Free Call: |
0800 023 5072 |
This announcement contains forward-looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern or may affect future matters, such as RBS's future economic results, business plans and strategies, and are based upon the current expectations of the directors. They are subject to a number of risks and uncertainties that might cause actual results and events to differ materially from the expectations expressed in the forward-looking statements. Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. Factors that could cause or contribute to differences in current expectations include, but are not limited to, legislative, fiscal and regulatory developments, competitive conditions, technological developments, exchange rate fluctuations and general economic conditions. These factors, risks and uncertainties are discussed in RBS's SEC filings, including, but not limited to, RBS's Reports on Form 6-K containing this announcement and certain sections of RBS's Annual Reports on Form 20-F. Information in this announcement of the price at which investments have been bought or sold in the past or the yield on investments cannot be relied upon as a guide to future performance. RBS assumes no responsibility to update any of the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise, except to the extent legally required.
APPENDIX I
Pro forma financial information for the Group under the revised divisional structure
The unaudited pro forma financial information under the Group's revised divisional structure is shown below. These show the underlying performance of the Group including the results of the ABN AMRO businesses acquired by RBS. This information is being provided to give a better understanding of what the results of the operations might have looked like had the acquisition of ABN AMRO as well as the transfers of businesses to the other Consortium Banks occurred on 1 January 2006.
The profit before amortisation of purchased intangible assets and integration costs of each division is detailed below and is described as 'Contribution' in the divisional analyses that follow.
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Global Markets |
||||||
|
- |
Global Banking & Markets |
5,002 |
4,348 |
2,845 |
||
|
- |
Global Transaction Services |
1,649 |
1,616 |
789 |
||
|
Total Global Markets |
6,651 |
5,964 |
3,634 |
|||
|
Regional Markets |
||||||
|
- |
UK Retail & Commercial Banking |
6,207 |
5,685 |
3,010 |
||
|
- |
US Retail & Commercial Banking |
1,476 |
1,739 |
788 |
||
|
- |
Europe & Middle East Retail & Commercial Banking |
798 |
698 |
380 |
||
|
- |
Asia Retail & Commercial Banking |
205 |
117 |
97 |
||
|
Total Regional Markets |
8,686 |
8,239 |
4,275 |
|||
|
RBS Insurance |
905 |
967 |
363 |
|||
|
Group Manufacturing |
(4,287) |
(4,192) |
(2,108) |
|||
|
Central items |
(1,641) |
(1,656) |
(842) |
|||
|
Underlying Group operating profit* |
10,314 |
9,322 |
5,322 |
|||
* Underlying Group operating profit
Excludes
RBS unusual items - credit market write-downs and goodwill payments, offset by the gains on sale of Southern Water and certain other assets
ABN AMRO pre and post acquisition credit market write-downs and the impact of the LaSalle sale
RBS share of ABN AMRO's shared assets
amortisation of purchase accounting adjustments including purchased intangible assets and integration costs; and
Includes
the cost of funding the ABN AMRO acquisition within Central Items. Whilst part of the acquisition consideration was funded by the issue of preference shares, these pro forma results assume that the cash element of the consideration was debt funded.
Risk-weighted assets of each division were as follows:
|
|
31 December
|
|
31 December
|
|
30 June
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
|
|
£bn
|
|
£bn
|
|
£bn
|
|
|
Global Markets
|
|
|
|
|
|
|
|
-
|
Global Banking & Markets
|
191.4
|
|
176.6
|
|
187.7
|
|
-
|
Global Transaction Services
|
12.6
|
|
10.4
|
|
12.7
|
|
Total Global Markets
|
204.0
|
|
187.0
|
|
200.4
|
|
|
Regional Markets
|
|
|
|
|
|
|
|
-
|
UK Retail & Commercial Banking
|
179.0
|
|
165.0
|
|
170.1
|
|
-
|
US Retail & Commercial Banking
|
57.1
|
|
57.6
|
|
57.0
|
|
-
|
Europe & Middle East Retail & Commercial Banking
|
36.7
|
|
30.2
|
|
32.9
|
|
-
|
Asia Retail & Commercial Banking
|
3.3
|
|
2.8
|
|
2.9
|
|
Total Regional Markets
|
276.1
|
|
255.6
|
|
262.9
|
|
|
Other
|
9.9
|
|
5.3
|
|
9.9
|
|
|
|
|
|
|
|
|
|
|
|
490.0
|
|
447.9
|
|
473.2
|
|
|
|
|
|
|
|
|
|
GLOBAL MARKETS
GLOBAL BANKING & MARKETS
|
Full year |
Full year |
First half |
||||
|
2007 |
|
2006 |
2007 |
|||
|
£m |
£m |
£m |
||||
|
Net interest income from banking activities |
2,453 |
|
2,060 |
1,170 |
||
|
Net fees and commissions receivable |
2,221 |
2,043 |
1,124 |
|||
|
Income from trading activities |
4,334 |
3,671 |
2,726 |
|||
|
Other operating income (net of related funding costs) |
1,908 |
2,110 |
905 |
|||
|
Non-interest income |
8,463 |
7,824 |
4,755 |
|||
|
Total income |
10,916 |
9,884 |
5,925 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
4,194 |
3,539 |
2,261 |
||
|
- |
other |
1,230 |
1,541 |
618 |
||
|
- |
operating lease depreciation |
365 |
406 |
192 |
||
|
5,789 |
5,486 |
3,071 |
||||
|
Contribution before impairment losses |
5,127 |
4,398 |
2,854 |
|||
|
Impairment losses |
125 |
50 |
9 |
|||
|
Contribution |
5,002 |
4,348 |
2,845 |
|||
|
Income by product: |
||||||
|
Rates, currencies and commodities |
3,707 |
2,455 |
1,570 |
|||
|
Equities |
1,168 |
1,023 |
742 |
|||
|
Credit markets |
2,720 |
2,879 |
1,754 |
|||
|
Asset and portfolio management |
3,321 |
3,527 |
1,859 |
|||
|
Total income |
10,916 |
9,884 |
5,925 |
|||
|
£bn |
£bn |
£bn |
||||
|
Loans and advances to customers* |
||||||
|
- |
banking |
201.1 |
147.6 |
156.2 |
||
|
- |
trading |
22.1 |
16.8 |
17.4 |
||
|
Rental assets |
10.2 |
12.2 |
11.9 |
|||
|
Customer deposits* |
106.7 |
81.6 |
83.3 |
|||
|
Risk-weighted assets |
191.4 |
176.6 |
187.7 |
|||
* excluding reverse repos and repos
GLOBAL MARKETS
GLOBAL TRANSACTION SERVICES
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Net interest income |
842 |
756 |
393 |
|||
|
Non-interest income |
1,340 |
1,308 |
652 |
|||
|
Total income |
2,182 |
2,064 |
1,045 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
357 |
315 |
170 |
||
|
- |
other |
164 |
135 |
78 |
||
|
521 |
450 |
248 |
||||
|
Contribution before impairment losses |
1,661 |
1,614 |
797 |
|||
|
Impairment losses |
12 |
(2) |
8 |
|||
|
Contribution |
1,649 |
1,616 |
789 |
|||
|
£bn |
£bn |
£bn |
||||
|
Loans and advances to customers - gross |
13.7 |
11.5 |
12.8 |
|||
|
Customer deposits* |
57.0 |
51.4 |
53.6 |
|||
|
Risk-weighted assets |
12.6 |
10.4 |
12.7 |
|||
*excluding repos
REGIONAL MARKETS
UK RETAIL & COMMERCIAL BANKING
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Net interest income |
6,667 |
6,408 |
3,275 |
|||
|
Non-interest income |
4,435 |
4,167 |
2,189 |
|||
|
Total income |
11,102 |
10,575 |
5,464 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
1,928 |
1,817 |
937 |
||
|
- |
other |
1,081 |
1,088 |
526 |
||
|
3,009 |
2,905 |
1,463 |
||||
|
Insurance net claims |
518 |
488 |
285 |
|||
|
Contribution before impairment losses |
7,575 |
7,182 |
3,716 |
|||
|
Impairment losses |
1,368 |
1,497 |
706 |
|||
|
Contribution |
6,207 |
5,685 |
3,010 |
|||
|
Analysis of contribution by business unit: |
||||||
|
Retail |
3,844 |
3,594 |
1,838 |
|||
|
Corporate |
1,873 |
1,685 |
934 |
|||
|
Wealth |
490 |
406 |
238 |
|||
|
6,207 |
5,685 |
3,010 |
||||
|
£bn |
£bn |
£bn |
||||
|
Loans and advances to customers - gross |
||||||
|
- |
consumer (secured) |
67.4 |
65.6 |
66.2 |
||
|
- |
consumer (unsecured) |
43.7 |
41.7 |
42.0 |
||
|
- |
corporate |
98.9 |
86.1 |
91.7 |
||
|
- |
wealth |
8.4 |
7.2 |
7.9 |
||
|
Customer deposits* |
189.3 |
167.7 |
179.1 |
|||
|
AUMs - excluding deposits |
25.8 |
22.0 |
24.1 |
|||
|
Risk-weighted assets |
179.0 |
165.0 |
170.1 |
|||
*customer deposits exclude Bancassurance
REGIONAL MARKETS
US RETAIL & COMMERCIAL BANKING
|
|
Full year
|
|
Full year
|
|
First half
|
|
Full year
|
|
Full year
|
|
First half
|
||||
|
|
2007
|
|
2006
|
|
2007
|
|
2007
|
|
2006
|
|
2007
|
||||
|
|
£m
|
|
£m
|
|
£m
|
|
$m
|
|
$m
|
|
$m
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net interest income
|
1,936
|
|
2,042
|
|
960
|
|
3,874
|
|
3,765
|
|
1,891
|
||||
|
Non-interest income
|
850
|
|
951
|
|
401
|
|
1,700
|
|
1,753
|
|
790
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total income
|
2,786
|
|
2,993
|
|
1,361
|
|
5,574
|
|
5,518
|
|
2,681
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Direct expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
-
|
staff costs
|
601
|
|
666
|
|
309
|
|
1,203
|
|
1,228
|
|
609
|
|||
|
-
|
other
|
368
|
|
407
|
|
181
|
|
736
|
|
750
|
|
357
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
969
|
|
1,073
|
|
490
|
|
1,939
|
|
1,978
|
|
966
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Contribution before
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
impairment losses
|
1,817
|
|
1,920
|
|
871
|
|
3,635
|
|
3,540
|
|
1,715
|
||||
|
Impairment losses
|
341
|
|
181
|
|
83
|
|
682
|
|
333
|
|
163
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Contribution
|
1,476
|
|
1,739
|
|
788
|
|
2,953
|
|
3,207
|
|
1,552
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Average exchange rate - US$/£
|
2.001
|
|
1.844
|
|
1.970
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||||||||
|
|
$bn
|
|
$bn
|
|
$bn
|
||||||||||
|
Loans and advances to customers – gross
|
|
|
|
|
|
||||||||||
|
-
|
mortgages
|
19.1
|
|
18.6
|
|
18.5
|
|||||||||
|
-
|
home equity
|
35.9
|
|
34.5
|
|
36.2
|
|||||||||
|
-
|
other consumer
|
21.7
|
|
23.2
|
|
22.7
|
|||||||||
|
-
|
corporate and commercial
|
37.6
|
|
32.7
|
|
34.6
|
|||||||||
|
Customer deposits
|
105.8
|
|
100.7
|
|
99.9
|
||||||||||
|
Risk-weighted assets
|
114.4
|
|
113.1
|
|
114.4
|
||||||||||
|
|
|
|
|
|
|
||||||||||
|
Spot exchange rate - US$/£
|
2.004
|
|
1.965
|
|
2.006
|
||||||||||
REGIONAL MARKETS
EUROPE & MIDDLE EAST RETAIL & COMMERCIAL BANKING
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Net interest income |
1,066 |
936 |
506 |
|||
|
Non-interest income |
372 |
295 |
172 |
|||
|
Total income |
1,438 |
1,231 |
678 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
334 |
278 |
149 |
||
|
- |
other |
170 |
129 |
82 |
||
|
504 |
407 |
231 |
||||
|
Contribution before impairment losses |
934 |
824 |
447 |
|||
|
Impairment losses |
136 |
126 |
67 |
|||
|
Contribution |
798 |
698 |
380 |
|||
|
£bn |
£bn |
£bn |
||||
|
Loans and advances to customers - gross |
||||||
|
- |
mortgages |
18.3 |
15.0 |
16.2 |
||
|
- |
corporate |
25.3 |
19.6 |
21.7 |
||
|
- |
other |
4.2 |
4.2 |
3.9 |
||
|
Customer deposits |
22.3 |
18.6 |
20.5 |
|||
|
Risk-weighted assets |
36.7 |
30.2 |
32.9 |
|||
REGIONAL MARKETS
ASIA RETAIL & COMMERCIAL BANKING
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Net interest income |
285 |
224 |
124 |
|||
|
Non-interest income |
395 |
314 |
191 |
|||
|
Total income |
680 |
538 |
315 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
226 |
164 |
97 |
||
|
- |
other |
130 |
117 |
60 |
||
|
356 |
281 |
157 |
||||
|
Contribution before impairment losses |
324 |
257 |
158 |
|||
|
Impairment losses |
119 |
140 |
61 |
|||
|
Contribution |
205 |
117 |
97 |
|||
|
£bn |
£bn |
£bn |
||||
|
Loans and advances to customers - gross |
4.5 |
3.7 |
3.8 |
|||
|
AUMs - excluding deposits |
19.9 |
14.9 |
17.2 |
|||
|
Customer deposits |
10.8 |
8.6 |
9.5 |
|||
|
Risk-weighted assets |
3.3 |
2.8 |
2.9 |
|||
RBS INSURANCE
|
Full year |
Full year |
First half |
||||
|
2007 |
2006 |
2007 |
||||
|
£m |
£m |
£m |
||||
|
Earned premiums |
5,607 |
5,713 |
2,815 |
|||
|
Reinsurers' share |
(220) |
(212) |
(110) |
|||
|
Insurance premium income |
5,387 |
5,501 |
2,705 |
|||
|
Net fees and commissions |
(465) |
(486) |
(201) |
|||
|
Other income |
734 |
664 |
339 |
|||
|
Total income |
5,656 |
5,679 |
2,843 |
|||
|
Direct expenses |
||||||
|
- |
staff costs |
297 |
319 |
147 |
||
|
- |
other |
444 |
423 |
203 |
||
|
741 |
742 |
350 |
||||
|
Gross claims |
4,091 |
4,030 |
2,164 |
|||
|
Reinsurers' share |
(81) |
(60) |
(34) |
|||
|
Net claims |
4,010 |
3,970 |
2,130 |
|||
|
Contribution |
905 |
967 |
363 |
|||
|
In-force policies (000s) |
||||||
|
- |
Own-brand motor |
6,713 |
6,790 |
6,829 |
||
|
- |
Own-brand non-motor (home, rescue, pet, HR24) |
3,752 |
3,759 |
3,757 |
||
|
- |
Partnerships and broker (motor, home, rescue, SMEs, pet, HR24) |
9,302 |
11,242 |
9,588 |
||
|
General insurance reserves - total (£m) |
8,192 |
8,068 |
8,223 |
|||
GROUP MANUFACTURING
|
Full year |
Full year |
First half |
|||
|
2007 |
2006 |
2007 |
|||
|
£m |
£m |
£m |
|||
|
Staff costs |
1,075 |
1,063 |
524 |
||
|
Other costs |
3,212 |
3,129 |
1,584 |
||
|
Total manufacturing costs |
4,287 |
4,192 |
2,108 |
||
|
Analysis of manufacturing costs |
|||||
|
Group Technology |
1,373 |
1,369 |
665 |
||
|
Group Property |
1,519 |
1,439 |
740 |
||
|
Customer support and other operations |
1,395 |
1,384 |
703 |
||
|
Total manufacturing costs |
4,287 |
4,192 |
2,108 |
||
The expenditure incurred by Group Manufacturing relates to the Group's operations. These costs reflect activities that are shared between the various customer-facing divisions and consequently cannot be directly attributed to individual divisions. Instead, the Group monitors and controls each of its customer-facing divisions on revenue generation and direct costs whilst in Group Manufacturing such control is exercised through appropriate efficiency measures and targets.
Whilst the Group does not allocate manufacturing costs to divisions for financial reporting purposes, the following table sets out the allocation of these costs to the divisions on a basis management considers to be reasonable:
|
% of total manufacturing costs |
|
|
Global Banking & Markets |
10% |
|
Global Transaction Services |
10% |
|
UK Retail & Commercial Banking |
50% |
|
US Retail & Commercial Banking |
7.5% |
|
Europe & Middle East Retail & Commercial Banking |
7.5% |
|
Asia Retail & Commercial Banking |
5% |
|
RBS Insurance |
5% |
|
Centre |
5% |
CENTRAL ITEMS
Central Items comprises RBS group and corporate functions, the RBS share of ABN AMRO's head office costs and the pro forma funding costs associated with the ABN AMRO acquisition.
RESTATEMENTS
Divisional results for 2007 and 2006 as previously published have been restated to reflect transfers of operations and businesses between divisions following the implementation of the Group restructure. These changes do not affect the overall results of the Group.
|
2007 |
2006 |
||||||
|
Previously reported |
Transfers |
Restated |
Previously reported |
Transfers |
Restated |
||
|
£m |
£m |
£m |
£m |
£m |
£m |
||
|
Global Banking & Markets |
|||||||
|
Contribution |
4,916 |
86 |
5,002 |
4,365 |
(17) |
4,348 |
|
|
Global Transaction Services |
|||||||
|
Contribution |
1,632 |
17 |
1,649 |
1,561 |
55 |
1,616 |
|
|
UK Retail & Commercial Banking |
|||||||
|
Contribution |
6,250 |
(43) |
6,207 |
5,722 |
(37) |
5,685 |
|
|
US Retail & Commercial Banking |
|||||||
|
Contribution |
1,557 |
(81) |
1,476 |
1,821 |
(82) |
1,739 |
|
|
Europe & Middle East Retail & Commercial Banking |
|||||||
|
Contribution |
760 |
38 |
798 |
662 |
36 |
698 |
|
|
Asia Retail & Commercial Banking |
|||||||
|
Contribution |
209 |
(4) |
205 |
119 |
(2) |
117 |
|
|
RBS Insurance |
|||||||
|
Contribution |
902 |
3 |
905 |
964 |
3 |
967 |
|
|
Manufacturing |
|||||||
|
Contribution |
(4,234) |
(53) |
(4,287) |
(4,164) |
(28) |
(4,192) |
|
|
Centre |
|||||||
|
Contribution |
(1,678) |
37 |
(1,641) |
(1,728) |
72 |
(1,656) |
|
IMPORTANT INFORMATION
The unaudited pro forma financial information has been prepared solely for illustrative purposes and is not necessarily indicative of the results that might have been achieved had the acquisition and transfers occurred on the dates indicated, nor is it necessarily indicative of the results of operations that may, or may be expected to be achieved in the future.
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 and have been reported on by the auditors under section 235 of the Act. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Act.
Related Shares:
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