Results Centre - Q1 Results 2016

Management Presentation
Highlights

Box3 Title

9.00am – Conference call with Management

Transcript

Slides

Highlights

Highlights

The Royal Bank of Scotland Group (RBS) continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders. RBS delivered against its 2015 targets.
 

RBS reported a loss attributable to ordinary shareholders of £1,979 million, compared with a loss of £3,470 million in 2014. This included elevated restructuring costs (£2,931 million), as the bank's repositioning accelerated, particularly in the Corporate & Institutional Banking (CIB) business. Litigation and conduct costs (£3,568 million) increased as further steps were taken to clear legacy obstacles from RBS's path to normalisation.
 

RBS continues to strengthen and reshape the balance sheet, building on a strong track record of delivery. Risk-weighted assets (RWAs) reduced 32%, or £113 billion, including £109 billion from the disposal of Citizens Financial Group and the accelerated run-down of Capital Resolution. RBS intends to pay a final dividend on the Dividend Access Share (DAS) during the first half of 2016 subject to final Board and PRA approval, further normalising the capital structure of the bank and removing a constraint on the resumption of capital distributions.
 

2015 results included a charge for goodwill impairment of £498 million attributed to Private Banking; a loss on redemption of own debt of £263 million; and a gain of £1,147 million on loss of control of Citizens largely arising from the reclassification of foreign exchange reserves (£962 million).
 

Adjusted operating profit(1) totalled £4,405 million compared with an adjusted operating profit of £6,056 million in 2014, lower primarily due to income attrition and disposal losses in the Capital Resolution business.
 

  • UK Personal & Business Banking (UK PBB)(2) recorded an adjusted operating profit of £2,169 million, broadly stable compared with the prior year. There was a good performance in mortgages with net new lending totalling £9.3 billion, RBS’s strongest performance since 2009, albeit at lower overall margins as customers shift from standard variable rate to fixed rate products. Adjusted operating costs(3) were 3% lower, while credit quality remained good, with modest net impairment releases.
  • Commercial Banking(2) adjusted operating profit was down 6% at £1,384 million, driven by a marginal fall in income reflecting margin pressure and included a Q4 2015 loss of £34 million on the sale of non-strategic asset portfolios. Deposit and lending volumes (net new lending of £3.6 billion excluding business transfers, run-off and disposals), contributed to a 1% rise in net interest income.
  • Ulster Bank RoI(2) adjusted operating profit declined 45% to £264 million as net impairment releases, though still substantial, were lower than in 2014. Private Banking adjusted operating profit was 41% lower at £113 million, while RBS International (RBSI) recorded an adjusted operating profit of £211 million, down 14%.
  • CIB(2) made an adjusted operating loss of £55 million, compared with an adjusted operating profit of £233 million in 2014, driven by lower income in line with the business’s reduced scale and risk appetite. Adjusted expenses were down 15% as CIB continues to move towards a more sustainable cost base.
  • Capital Resolution(2) recorded an adjusted operating loss of £412 million, compared with a profit of £1,115 million in 2014, reflecting increased disposal losses as it accelerated the run-down of its portfolios, reducing RWAs by almost half to £49.0 billion.

Adjusted bank return on equity was 11.0% in 2015, compared with (1.5%) in 2014. Franchise return on equity(4) was 11.2%.
 

Common Equity Tier 1 (CET1) ratio improved 430 basis points to 15.5% in 2015, as RWAs declined by £113 billion, partially offset by the attributable loss and the accelerated recognition of previously committed contributions in relation to the The Royal Bank of Scotland Group Pension Fund following a change in accounting policy.
 

Tangible net asset value was 352p per ordinary share at 31 December 2015, down from 374p at 31 December 2014 post restatement for the accounting policy change. This was largely driven by the attributable loss for the year less the impact of reclassified reserves on the deconsolidation of Citizens and cash flow hedging reclassifications from equity arising as the hedged transactions occurred.

Notes

(1) Operating profit/(loss) before tax, own credit adjustments, (loss)/gain on redemption of own debt, strategic disposals and excluding restructuring costs, litigation and conduct costs and write down of goodwill.
(2) For unadjusted operating profit, see segment performance on pages 25 to 29.
(3) Excluding restructuring costs, litigation and conduct costs and write down of goodwill.
(4) Return on equity for Personal & Business Banking (PBB), Commercial & Private Banking (CPB) and CIB combined.


2016
Title Announcements Excel Slides Webcast Transcript
2015 GSII Indicators
Restatements
Announcement
2015
Title Announcements Excel Slides Webcast Transcript
Annual Results 2015
Q3 Results 2015
EBA 2015 EU-Wide Transparency Exercise
H1 Results 2015
Q1 Results 2015
2014
Title Announcements Excel Slides Webcast Transcript
GSII Indicators Disclosure
Annual Results 2014
Q3 Results 2014
Interim Results 2014
Q2 Preliminary Results Announcement
Divisional reorganisation
Q1 Results 2014
2013
Title Announcements Excel Slides Webcast Transcript
G-SIB Indicators Disclosure
Annual Results 2013
Q3 Results 2013
Interim Results 2013
Q1 Interim Management Statement 2013
2012
Title Announcements Excel Slides Webcast Transcript
Annual Results 2012
Q3 Interim Management Statement
Interim Results 2012
Q1 Interim Management Statement 2012
Divisional Restatements
2011
Title Announcements Excel Slides Webcast Transcript
Annual Results 2011
Q3 Interim Management Statement
Interim Results 2011
Q1 Interim Management Statement
2010
Title Announcements Excel Slides Webcast Transcript
Annual Results 2010
Q3 Interim Management Statement
Q2 2010 Results
Q1 Interim Management Statement
2009
Title Announcements Excel Slides Webcast Transcript
2009 Annual Results
Interim Management Statement Q309
2009 Interim Results Presentation
Interim Management Statement Q109
Trading Update
2008
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2008
The Royal Bank of Scotland Group – Full Year Results 2008 – Appendix 1
The Royal Bank of Scotland Group – Full Year Results 2008 – Appendix 2
Placing and Open Offer Presentation
2008 Interim Results Presentation
Pre-Close Trading Update June 2008
Update on Credit Market Exposures, Disposals, Capital, Trading Conditions and Outlook
Rights Issue Presentation
Rights Issue US Investor Call
2007
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2007
Pre-close Trading Update
2007 Interim Results Presentation
Trading Statement Call
2006
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2006
Pre-close Trading Update
Interim Results for the half year ended June 30 2006
Pre-Close Trading Update
2005
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2005
Pre-Close trading update
Interim Results 2005 – 30 Jun 2005
Trading Update and IFRS Transition Report
2004
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2004
Pre-close trading update
Interim Results 2004 – 30 Jun 2004
Pre-close trading update
2003
Title Announcements Excel Slides Webcast Transcript
Annual Results 2003 – 31 Dec 2003
Pre-close trading update
Interim Results 2003 – 30 Jun 2003
Pre-close trading update
2002
Title Announcements Excel Slides Webcast Transcript
Annual results for the year ended 31 December 2002

RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders, and remains committed to delivering its 2016 targets. RBS reported a profit before tax of £421 million for Q1 2016. An attributable loss of £968 million included payment of the final Dividend Access Share (DAS) dividend of £1,193 million to the UK Government.

Income was broadly stable compared with Q1 2015 across our core Personal & Business Banking (PBB) and Commercial & Private Banking (CPB) franchises. In Q1 2016, core PBB and CPB net loans and advances grew by 15% on an annualised basis with strong growth in both the mortgage and commercial businesses. RBS has made good progress on customer Net Promoter Score (NPS) in the last year, although there still remains much to do. Common Equity Tier 1 ratio (CET1) of 14.6% remains in excess of target. Adjusted return on equity(1) across our core PBB, CPB and CIB franchises was 10.9% in Q1 2016.

As a result of further extensive analysis on the separation and divestment of Williams & Glyn throughout Q1 2016, we have recently concluded that there is a significant risk that this will not be achieved by 31 December 2017 and alternative means to achieve this are being explored.

  • An attributable loss(2) of £968 million in Q1 2016 compared with £459 million in Q1 2015. Excluding the final DAS dividend of £1,193 million, the Bank made an attributable profit(2) of £225 million notwithstanding IFRS volatility(3) losses of £356 million, restructuring costs of £238 million and an impairment charge of £223 million largely related to its shipping portfolio. An own credit adjustment gain of £256 million was recorded in Q1 2016.
  • Operating profit was £421 million in Q1 2016 compared with £37 million in Q1 2015. Adjusted operating profit(4) of £440 million in Q1 2016 was down from £1,355 million in Q1 2015 primarily due to Capital Resolution and the IFRS volatility charge.
  • Net interest margin (NIM) was stable compared with Q1 2015 at 2.15% as the benefit from reductions in the low yielding non-core assets has been largely offset by modest asset margin pressure and mix impacts across the core franchises.
  • Adjusted operating expenses(5) were down by £157 million compared with Q1 2015. Excluding expenses associated with Williams & Glyn and write down of intangible assets, adjusted operating expenses were down £189 million.
  • Restructuring costs were £238 million in the quarter, down £209 million, or 47%, compared with Q1 2015. Litigation and conduct costs of £31 million compared with £856 million in Q1 2015 and £2,124 million in Q4 2015, which included additional provisions for mortgage-backed securities and foreign exchange litigation in the US, additional PPI provisions and other customer redress.
  • Further to the announcement on 27 January 2016, RBS made a payment of £4.2 billion during March to The Royal Bank of Scotland Group Pension Fund, being an accelerated payment of existing committed future contributions. The impact of the £4.2 billion accelerated payment was largely reflected in the year end financial statements; the incremental impact of the accelerated payment being made during March was to reduce the CET1 ratio by around 30 basis points.
  • Tangible net asset value (TNAV) was 351p per ordinary share at 31 March 2016, broadly stable in the quarter. A 14p reduction due to the payment of the final Dividend Access Share dividend and the accelerated pension payment was offset by gains recognised in foreign exchange reserves (5p) reflecting the strengthening of the US dollar and the euro, and cash flow hedging reserves (8p) as swap rates decreased.

Notes:

(1) Excluding restructuring costs, litigation and conduct costs, write down of goodwill, own credit adjustments, loss on redemption of own debt and strategic disposals.
(2) Attributable to ordinary shareholders.
(3) IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
(4) Operating profit/(loss) before tax, own credit adjustments, loss on redemption of own debt, strategic disposals and excluding restructuring costs, litigation and conduct costs and write down of goodwill.
(5) For unadjusted operating profit and expenses see segment performance on pages 19 to 21.

Results archive

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Item Year Date Title Announcements Excel Slides Webcast Transcript
data-ip3-2016 29 Apr 2015 GSII Indicators
data-ip3-2016 04 Feb Restatements
data-ip3-2016 27 Jan Announcement
data-ip3-2015 26 Feb Annual Results 2015
data-ip3-2015 30 Oct Q3 Results 2015
data-ip3-2015 24 Nov EBA 2015 EU-Wide Transparency Exercise
data-ip3-2015 30 Jul H1 Results 2015
data-ip3-2015 30 Apr Q1 Results 2015
data-ip3-2014 31 Dec GSII Indicators Disclosure
data-ip3-2014 26 Feb Annual Results 2014
data-ip3-2014 31 Oct Q3 Results 2014
data-ip3-2014 01 Aug Interim Results 2014
data-ip3-2014 25 Jul Q2 Preliminary Results Announcement
data-ip3-2014 21 Jul Divisional reorganisation
data-ip3-2014 02 May Q1 Results 2014
data-ip3-2013 31 Jul G-SIB Indicators Disclosure
data-ip3-2013 27 Feb Annual Results 2013
data-ip3-2013 01 Nov Q3 Results 2013
data-ip3-2013 02 Aug Interim Results 2013
data-ip3-2013 03 May Q1 Interim Management Statement 2013
data-ip3-2012 28 Feb Annual Results 2012
data-ip3-2012 02 Nov Q3 Interim Management Statement
data-ip3-2012 03 Aug Interim Results 2012
data-ip3-2012 04 May Q1 Interim Management Statement 2012
data-ip3-2012 01 May Divisional Restatements
data-ip3-2011 23 Feb Annual Results 2011
data-ip3-2011 04 Nov Q3 Interim Management Statement
data-ip3-2011 05 Aug Interim Results 2011
data-ip3-2011 06 May Q1 Interim Management Statement
data-ip3-2010 24 Feb Annual Results 2010
data-ip3-2010 05 Nov Q3 Interim Management Statement
data-ip3-2010 06 Aug Q2 2010 Results
data-ip3-2010 07 May Q1 Interim Management Statement
data-ip3-2009 25 Feb 2009 Annual Results
data-ip3-2009 06 Nov Interim Management Statement Q309
data-ip3-2009 07 Aug 2009 Interim Results Presentation
data-ip3-2009 08 May Interim Management Statement Q109
data-ip3-2009 19 Jan Trading Update
data-ip3-2008 26 Feb Annual results for the year ended 31 December 2008
data-ip3-2008 26 Feb The Royal Bank of Scotland Group – Full Year Results 2008 – Appendix 1
data-ip3-2008 26 Feb The Royal Bank of Scotland Group – Full Year Results 2008 – Appendix 2
data-ip3-2008 04 Nov Placing and Open Offer Presentation
data-ip3-2008 07 Aug 2008 Interim Results Presentation
data-ip3-2008 11 Jun Pre-Close Trading Update June 2008
data-ip3-2008 22 Apr Update on Credit Market Exposures, Disposals, Capital, Trading Conditions and Outlook
data-ip3-2008 22 Apr Rights Issue Presentation
data-ip3-2008 22 Apr Rights Issue US Investor Call
data-ip3-2007 27 Feb Annual results for the year ended 31 December 2007
data-ip3-2007 06 Dec Pre-close Trading Update
data-ip3-2007 02 Aug 2007 Interim Results Presentation
data-ip3-2007 05 Jun Trading Statement Call
data-ip3-2006 28 Feb Annual results for the year ended 31 December 2006
data-ip3-2006 06 Dec Pre-close Trading Update
data-ip3-2006 03 Aug Interim Results for the half year ended June 30 2006
data-ip3-2006 13 Jun Pre-Close Trading Update
data-ip3-2005 27 Feb Annual results for the year ended 31 December 2005
data-ip3-2005 08 Dec Pre-Close trading update
data-ip3-2005 03 Aug Interim Results 2005 – 30 Jun 2005
data-ip3-2005 08 Jun Trading Update and IFRS Transition Report
data-ip3-2004 23 Feb Annual results for the year ended 31 December 2004
data-ip3-2004 05 Dec Pre-close trading update
data-ip3-2004 02 Aug Interim Results 2004 – 30 Jun 2004
data-ip3-2004 09 Jun Pre-close trading update
data-ip3-2003 18 Feb Annual Results 2003 – 31 Dec 2003
data-ip3-2003 08 Dec Pre-close trading update
data-ip3-2003 05 Aug Interim Results 2003 – 30 Jun 2003
data-ip3-2003 11 Jun Pre-close trading update
data-ip3-2002 27 Feb Annual results for the year ended 31 December 2002