Royal Bk Scot.Grp. RBS Interim Management Statement - Part 7 of 7

  Royal Bk Scot.Grp. (RBS) - Interim Management Statement - Part 7 of 7

RNS Number : 1672Q
Royal Bank of Scotland Group PLC
02 November 2012
















                                      

                                      

                                  Appendix 1

                                      

                       Income statement reconciliations

                            and Segmental analysis





Appendix 1 Income statement reconciliations and Segmental analysis



Income statement reconciliations

                                                            Quarter ended
                      30 September 2012                    30 June 2012                     30 September 2011
                        Reallocation                       Reallocation                       Reallocation

                          of one-off                         of one-off                         of one-off

              Managed        items Statutory  Managed        items Statutory  Managed        items Statutory
                   £m           £m        £m       £m           £m        £m       £m           £m        £m
                                                                                                            
Interest
receivable       4,529            -     4,529    4,774            -     4,774    5,371            -     5,371
Interest
payable         (1,656)           (2)    (1,658)   (1,801)           (2)    (1,803)   (2,293)           (1)    (2,294)
                                                                                                            
Net interest
income           2,873           (2)     2,871    2,973           (2)     2,971    3,078           (1)     3,077
                                                                                                            
Fees and
commissions
receivable       1,403            -     1,403    1,450            -     1,450    1,452            -     1,452
Fees and
commissions
payable           (341)            -      (341)     (314)            -      (314)     (304)            -      (304)
Income from
trading
activities         769         (435)       334      931         (274)       657      282          675       957
(Loss)/gain on
redemption of
own debt             -         (123)      (123)        -            -         -        -            1         1
Other
operating
income
(excluding
insurance net
premium
income)            822       (1,039)      (217)      469          (75)       394      549        1,835     2,384
Insurance net
premium income     932            -       932      929            -       929    1,036            -     1,036
                                                                                                            
Non-interest
income           3,585       (1,597)     1,988    3,465         (349)     3,116    3,015        2,511     5,526
                                                                                                            
Total income     6,458       (1,599)     4,859    6,438         (351)     6,087    6,093        2,510     8,603
                                                                                                            
Staff costs     (1,943)         (116)    (2,059)   (2,036)         (107)    (2,143)   (1,963)         (113)    (2,076)
Premises and
equipment         (552)          (45)      (597)     (523)          (21)      (544)     (584)          (20)      (604)
Other
administrative
expenses          (770)         (489)    (1,259)     (936)         (220)    (1,156)     (858)         (104)      (962)
Depreciation
and
amortisation      (374)          (56)      (430)     (382)          (52)      (434)     (416)          (69)      (485)
                                                                                                            
Operating
expenses        (3,639)         (706)    (4,345)   (3,877)         (400)    (4,277)   (3,821)         (306)    (4,127)
                                                                                                            
Profit before
other
operating
charges          2,819       (2,305)       514    2,561         (751)     1,810    2,272        2,204     4,476
Insurance net
claims            (596)            -      (596)     (576)            -      (576)     (734)            -      (734)
                                                                                                            
Operating
profit/(loss)
before
impairment
losses           2,223       (2,305)       (82)    1,985         (751)     1,234    1,538        2,204     3,742
Impairment
losses          (1,176)            -    (1,176)   (1,335)            -    (1,335)   (1,536)         (202)    (1,738)
                                                                                                            
Operating
profit/(loss)    1,047       (2,305)    (1,258)      650         (751)      (101)        2        2,002     2,004



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Income statement reconciliations (continued)



                                                                Quarter ended
                          30 September 2012                    30 June 2012                     30 September 2011
                            Reallocation                       Reallocation                       Reallocation

                              of one-off                         of one-off                         of one-off

                  Managed        items Statutory  Managed        items Statutory  Managed        items Statutory
                       £m           £m        £m       £m           £m        £m       £m           £m        £m
                                                                                                                
Operating
profit/(loss)        1,047       (2,305)    (1,258)      650         (751)      (101)        2        2,002     2,004
Own credit
adjustments (1)     (1,455)        1,455         -     (518)          518         -    2,622       (2,622)         -
Asset Protection
Scheme (2)               1           (1)         -       (2)            2         -      (60)           60         -
Payment Protection
Insurance costs       (400)          400         -     (135)          135         -        -            -         -
Sovereign debt
impairment               -            -         -        -            -         -     (142)          142         -
Interest rate
hedge adjustments
on impaired
available-for-sale

sovereign debt         -            -         -        -            -         -      (60)           60         -
Amortisation of
purchased
intangible assets      (47)           47         -      (51)           51         -      (69)           69         -
Integration and
restructuring
costs                 (257)          257         -     (213)          213         -     (233)          233         -
(Loss)/gain on
redemption of own
debt                  (123)          123         -        -            -         -        1           (1)         -
Strategic
disposals              (23)           23         -      160         (160)         -      (49)           49         -
Bonus tax                -            -         -        -            -         -       (5)            5         -
RFS Holdings
minority interest       (1)            1         -        8           (8)         -       (3)            3         -
                                                                                                                
(Loss)/profit
before tax          (1,258)            -    (1,258)     (101)            -      (101)    2,004            -     2,004
Tax charge             (30)            -       (30)     (290)            -      (290)     (791)            -      (791)
                                                                                                                
(Loss)/profit from
continuing
operations          (1,288)            -    (1,288)     (391)            -      (391)    1,213            -     1,213
Profit/(loss) from
discontinued
operations, net of
tax                      5            -         5       (4)            -        (4)        6            -         6
                                                                                                                
(Loss)/profit for
the period          (1,283)            -    (1,283)     (395)            -      (395)    1,219            -     1,219
Non-controlling
interests               (3)            -        (3)        5            -         5        7            -         7
Preference share
dividends              (98)            -       (98)      (76)            -       (76)        -            -         -
                                                                                                                
(Loss)/profit
attributable to
ordinary and B
shareholders        (1,384)            -    (1,384)     (466)            -      (466)    1,226            -     1,226



Notes:

(1) Reallocation of £435 million loss (Q2 2012 - £271 million loss; Q3 2011  - 
    £735 million gain) to  income from trading  activities and £1,020  million 
    loss (Q2 2012 - £247 million loss; Q3 2011 - £1,887 million gain) to other
    operating income.
(2) Reallocation to income from trading activities.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Income statement reconciliations (continued)



                                        Nine months ended
                      30 September 2012                  30 September 2011
                        Reallocation                       Reallocation

                          of one-off                         of one-off

               Managed       items Statutory  Managed       items Statutory
                   £m           £m        £m       £m           £m        £m
                                                                            
Interest
receivable      14,320            -    14,320   16,183           (7)    16,176
Interest
payable         (5,467)          (12)    (5,479)   (6,570)           (1)    (6,571)
                                                                            
Net interest
income           8,853          (12)     8,841    9,613           (8)     9,605
                                                                            
Fees and
commissions
receivable       4,340            -     4,340    4,794            -     4,794
Fees and
commissions
payable           (945)            -      (945)     (887)            -      (887)
Income from
trading
activities       2,964       (1,761)     1,203    3,071         (132)     2,939
Gain on
redemption of
own debt             -          454       454        -          256       256
Other
operating
income
(excluding
insurance
premium
income)          2,016       (2,586)      (570)    2,122        1,795     3,917
Insurance net
premium income   2,799            -     2,799    3,275            -     3,275
                                                                            
Non-interest
income          11,174       (3,893)     7,281   12,375        1,919    14,294
                                                                            
Total income    20,027       (3,905)    16,122   21,988        1,911    23,899
                                                                            
Staff costs     (6,200)         (572)    (6,772)   (6,382)         (303)    (6,685)
Premises and
equipment       (1,625)          (79)    (1,704)   (1,703)          (74)    (1,777)
Other
administrative
expenses        (2,525)         (906)    (3,431)   (2,557)       (1,078)    (3,635)
Depreciation
and
amortisation    (1,150)         (182)    (1,332)   (1,192)         (170)    (1,362)
                                                                            
Operating
expenses       (11,500)       (1,739)   (13,239)  (11,834)       (1,625)   (13,459)
                                                                            
Profit before
other
operating
charges          8,527       (5,644)     2,883   10,154          286    10,440
Insurance net
claims          (1,821)            -    (1,821)   (2,439)            -    (2,439)
                                                                            
Operating
profit before
impairment
losses           6,706       (5,644)     1,062    7,715          286     8,001
Impairment
losses          (3,825)            -    (3,825)   (5,747)       (1,044)    (6,791)
                                                                            
Operating
profit/(loss)    2,881       (5,644)    (2,763)    1,968         (758)     1,210



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Income statement reconciliations (continued)



                                            Nine months ended
                          30 September 2012                  30 September 2011
                            Reallocation                       Reallocation

                              of one-off                         of one-off

                  Managed       items Statutory  Managed       items Statutory
                       £m           £m        £m       £m           £m        £m
                                                                                
Operating
profit/(loss)        2,881       (5,644)    (2,763)    1,968         (758)     1,210
Own credit
adjustments (1)     (4,429)        4,429         -    2,386       (2,386)         -
Asset Protection
Scheme (2)             (44)           44         -     (697)          697         -
Payment Protection
Insurance costs       (660)          660         -     (850)          850         -
Sovereign debt
impairment               -            -         -     (875)          875         -
Interest rate
hedge adjustments
on impaired
available-for-sale
sovereign debt           -            -         -     (169)          169         -
Amortisation of
purchased
intangible assets     (146)          146         -     (169)          169         -
Integration and
restructuring
costs                 (930)          930         -     (586)          586         -
Gain on redemption
of own debt            454         (454)         -      256         (256)         -
Strategic
disposals              129         (129)         -      (22)           22         -
Bonus tax                -            -         -      (27)           27         -
RFS Holdings
minority interest      (18)           18         -       (5)            5         -
                                                                                
(Loss)/profit
before tax          (2,763)            -    (2,763)    1,210            -     1,210
Tax charge            (459)            -      (459)   (1,436)            -    (1,436)
                                                                                
Loss from
continuing
operations          (3,222)            -    (3,222)     (226)            -      (226)
Profit from
discontinued
operations, net of
tax                      6            -         6       37            -        37
                                                                                
Loss for the
period              (3,216)            -    (3,216)     (189)            -      (189)
Non-controlling
interests               16            -        16      (10)            -       (10)
Preference share
dividends             (174)            -      (174)        -            -         -
                                                                                
Loss attributable
to ordinary and B
shareholders        (3,374)            -    (3,374)     (199)            -      (199)



Notes:

(1) Reallocation of £1,715 million loss (nine months ended 30 September 2011 -
    £565 million gain) to  income from trading  activities and £2,714  million 
    loss (nine months ended 30 September 2011 - £1,821 million gain) to  other 
    operating income.
(2) Reallocation to income from trading activities.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Segmental analysis

In January  2012, the  Group  announced the  reorganisation of  its  wholesale 
businesses into 'Markets' and 'International Banking'. Divisional results  are 
presented based on the  new organisational structure.  The Group also  revised 
its allocation  of  funding  and  liquidity costs  and  capital  for  the  new 
divisional structure as well as for a new methodology. In addition, the  Group 
had previously  included  movements  in  the  fair  value  of  own  derivative 
liabilities within  the Markets  operating segment.  These movements  are  now 
combined with movements in  the fair value  of own debt  in a single  measure, 
'own credit  adjustments'  and  presented  as a  reconciling  item.  Refer  to 
'presentation of information' on page 4  of the main announcement for  further 
details. Comparatives have been restated accordingly.



Analysis of divisional operating profit/(loss)

The following tables provide an analysis of divisional operating profit/(loss)
by main income statement captions.  The divisional income statements on  pages 
20 to 62 of the main announcement reflect certain presentational reallocations
as described in  the notes below.  These do not  affect the overall  operating 
profit/(loss).

                   Net     Non-                               Impairment
                                                     Insurance
              interest interest  Total Operating             (losses)/    Operating
                                                            net
               income   income income  expenses    claims recoveries profit/(loss)
Quarter ended
30 September
2012                £m       £m     £m        £m        £m         £m           £m
                                                                                 
UK Retail          990      252  1,242      (637)         -       (141)          464
UK Corporate      729      409  1,138      (523)         -       (247)          368
Wealth             185      107    292      (219)         -         (8)           65
International
Banking            227      308    535      (348)         -        (12)          175
Ulster Bank        163       50    213      (126)         -       (329)         (242)
US Retail &
Commercial         492      288    780      (536)         -        (21)          223
Markets (1)         14    1,028  1,042      (753)         -          6          295
Direct Line
Group (2)           61      838    899      (194)      (596)          -          109
Central items      (67)      334    267       (91)         -          -          176
                                                                                 
Core             2,794    3,614  6,408    (3,427)      (596)       (752)        1,633
Non-Core (3)        79      (29)     50      (212)         -       (424)         (586)
                                                                                 
Managed basis    2,873    3,585  6,458    (3,639)      (596)     (1,176)        1,047
Reconciling
items                                                                             
Own credit
adjustments
(4)                  -   (1,455) (1,455)         -         -          -       (1,455)
Asset
Protection
Scheme (5)           -        1      1         -         -          -            1
Payment
Protection
Insurance
costs                -        -      -      (400)         -          -         (400)
Amortisation
of purchased
intangible

 assets             -        -      -       (47)         -          -          (47)
Integration
and
restructuring
costs                -        -      -      (257)         -          -         (257)
Loss on
redemption of
own debt             -     (123)   (123)         -         -          -         (123)
Strategic
disposals            -      (23)    (23)         -         -          -          (23)
RFS Holdings
minority
interest            (2)        3      1        (2)         -          -           (1)
                                                                                 
Statutory
basis            2,871    1,988  4,859    (4,345)      (596)     (1,176)       (1,258)



Notes:

(1) Reallocation of £3  million between net  interest income and  non-interest 
    income to record interest on  financial assets and liabilities  designated 
    as at fair value through profit or loss.
(2) Total income includes £48 million investment income, of which £29  million 
    is included in net interest income and £19million in non-interest income.
    Reallocation of £32 million between  non-interest income and net  interest 
    income in respect of instalment income.
(3) Reallocation of £7  million between net  interest income and  non-interest 
    income in respect of  funding costs of rental  assets, £12 million and  to 
    record interest on financial assets and liabilities designated as at  fair 
    value through profit or loss, £5 million.
(4) Comprises £435 million loss included  in 'Income from trading  activities' 
    and £1,020  million  loss  included  in  'Other  operating  income'  on  a 
    statutory basis.
(5) Included in 'Income from trading activities' on a statutory basis.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Segmental analysis (continued)



Analysis of divisional operating profit/(loss) (continued)



                   Net     Non-                             Impairment             
                                                     Insurance
              interest interest  Total Operating             (losses)/    Operating
                                                            net
               income   income income  expenses    claims recoveries profit/(loss)
Quarter ended
30 June 2012        £m       £m     £m        £m        £m         £m           £m
                                                                                 
UK Retail          988      242  1,230      (653)         -       (140)          437
UK Corporate       772      439  1,211      (518)         -       (181)          512
Wealth             178      125    303      (227)         -        (12)           64
International
Banking            234      327    561      (367)         -        (27)          167
Ulster Bank        160       46    206      (128)         -       (323)         (245)
US Retail &
Commercial         492      323    815      (558)         -        (28)          229
Markets             32    1,034  1,066      (796)         -        (19)          251
Direct Line
Group (1)           68      866    934      (223)      (576)          -          135
Central items        1      110    111      (145)         -          2          (32)
                                                                                 
Core             2,925    3,512  6,437    (3,615)      (576)       (728)        1,518
Non-Core (2)        48      (47)      1      (262)         -       (607)         (868)
                                                                                 
Managed basis    2,973    3,465  6,438    (3,877)      (576)     (1,335)          650
Reconciling
items                                                                             
Own credit
adjustments
(3)                  -     (518)   (518)         -         -          -         (518)
Asset
Protection
Scheme (4)           -       (2)     (2)         -         -          -           (2)
Payment
Protection
Insurance
costs                -        -      -      (135)         -          -         (135)
Amortisation
of purchased
intangible

 assets             -        -      -       (51)         -          -          (51)
Integration
and
restructuring
costs                -        -      -      (213)         -          -         (213)
Strategic
disposals            -      160    160         -         -          -          160
RFS Holdings
minority
interest            (2)       11      9        (1)         -          -            8
                                                                                 
Statutory
basis            2,971    3,116  6,087    (4,277)      (576)     (1,335)         (101)



Notes:

(1) Total income includes £73 million investment income, of which £37  million 
    is included in net interest income and £36million in non-interest income.
    Reallocation of £31 million between  non-interest income and net  interest 
    income in respect of instalment income.
(2) Reallocation of £38 million between  net interest income and  non-interest 
    income in respect of  funding costs of rental  assets, £40 million and  to 
    record interest on financial assets and liabilities designated as at  fair 
    value through profit or loss, £2 million.
(3) Comprises £271 million loss included  in 'Income from trading  activities' 
    and £247 million loss included in 'Other operating income' on a  statutory 
    basis.
(4) Included in 'Income from trading activities' on a statutory basis.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Segmental analysis (continued)



Analysis of divisional operating profit/(loss) (continued)



                        Net     Non-                             Impairment             
                                                          Insurance
                   interest interest  Total Operating             (losses)/    Operating
                                                                 net
                    income   income income  expenses    claims recoveries profit/(loss)
Quarter ended 30
September 2011           £m       £m     £m        £m        £m         £m           £m
                                                                                      
UK Retail             1,086      292  1,378      (673)         -       (195)          510
UK Corporate            753      453  1,206      (547)         -       (230)          429
Wealth                  152      118    270      (221)         -         (4)           45
International
Banking (1)             293      357    650      (408)         -        (14)          228
Ulster Bank             196       60    256      (137)         -       (327)         (208)
US Retail &
Commercial              482      289    771      (563)         -        (85)          123
Markets (2)              (9)      456    447      (800)         -          5         (348)
Direct Line Group
(3)                      84      949  1,033      (215)      (695)          -          123
Central items           (88)      105     17        66        (1)         (4)           78
                                                                                      
Core                  2,949    3,079  6,028    (3,498)      (696)       (854)          980
Non-Core (4)            129      (64)     65      (323)       (38)       (682)         (978)
                                                                                      
Managed basis         3,078    3,015  6,093    (3,821)      (734)     (1,536)            2
Reconciling items                                                                      
Own credit
adjustments (5)           -    2,622  2,622         -         -          -        2,622
Asset Protection
Scheme (6)                -      (60)    (60)         -         -          -          (60)
Sovereign debt
impairment                -        -      -         -         -       (142)         (142)
Interest rate
hedge adjustments
on

 impaired
available-for-sale
sovereign

 debt                    -        -      -         -         -        (60)          (60)
Amortisation of
purchased

 intangible
assets                    -        -      -       (69)         -          -          (69)
Integration and
restructuring
costs                     -        -      -      (233)         -          -         (233)
Gain on redemption
of own debt               -        1      1         -         -          -            1
Strategic
disposals                 -      (49)    (49)         -         -          -          (49)
Bonus tax                 -        -      -        (5)         -          -           (5)
RFS Holdings
minority interest        (1)       (3)     (4)         1         -          -           (3)
                                                                                      
Statutory basis       3,077    5,526  8,603    (4,127)      (734)     (1,738)        2,004



Notes:

(1) Reallocation of £9  million between net  interest income and  non-interest 
    income in respect of funding costs of rental assets.
(2) Reallocation of £3  million between net  interest income and  non-interest 
    income to record interest on  financial assets and liabilities  designated 
    as at fair value through profit or loss.
(3) Total income includes £72 million investment income, of which £49  million 
    is included in net interest income and £23 million in non-interest income.
    Reallocation of £35 million between  non-interest income and net  interest 
    income in respect of instalment income.
(4) Reallocation of £54 million between  net interest income and  non-interest 
    income in respect of  funding costs of rental  assets, £53 million and  to 
    record interest on financial assets and liabilities designated as at  fair 
    value through profit or loss, £1 million.
(5) Comprises £735 million gain included  in 'Income from trading  activities' 
    and £1,887  million  gain  included  in  'Other  operating  income'  on  a 
    statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Segmental analysis (continued)



Analysis of divisional operating profit/(loss) (continued)



                   Net     Non-                              Impairment             

              interest interest  Total Operating Insurance  (losses)/    Operating

               income   income income  expenses net claims recoveries profit/(loss)
Nine months
ended 30
September
2012                £m       £m     £m        £m         £m         £m           £m
                                                                                  
UK Retail        2,979      760  3,739    (1,925)          -       (436)        1,378
UK Corporate     2,257    1,293  3,550    (1,574)          -       (604)        1,372
Wealth             542      343    885      (681)          -        (30)          174
International
Banking (1)        712      926  1,638    (1,125)          -        (74)          439
Ulster Bank        488      145    633      (384)          -     (1,046)         (797)
US Retail &
Commercial       1,480      871  2,351    (1,729)          -        (68)          554
Markets (2)         62    3,780  3,842    (2,457)          -        (15)        1,370
Direct Line
Group (3)          213    2,586  2,799      (650)     (1,821)          -          328
Central items      (71)      341    270      (238)          -        (32)            -
                                                                                  
Core             8,662   11,045 19,707   (10,763)     (1,821)     (2,305)        4,818
Non-Core (4)       191      129    320      (737)          -     (1,520)       (1,937)
                                                                                  
Managed basis    8,853   11,174 20,027   (11,500)     (1,821)     (3,825)        2,881
Reconciling
items                                                                              
Own credit
adjustments
(5)                  -   (4,429) (4,429)         -          -          -       (4,429)
Asset
Protection
Scheme (6)           -      (44)    (44)         -          -          -          (44)
Payment
Protection
Insurance
costs                -        -      -      (660)          -          -         (660)
Amortisation
of purchased
intangible

 assets             -        -      -      (146)          -          -         (146)
Integration
and
restructuring
costs                -        -      -      (930)          -          -         (930)
Gain on
redemption of
own debt             -      454    454         -          -          -          454
Strategic
disposals            -      129    129         -          -          -          129
RFS Holdings
minority
interest           (12)       (3)    (15)        (3)          -          -          (18)
                                                                                  
Statutory
basis            8,841    7,281 16,122   (13,239)     (1,821)     (3,825)       (2,763)



Notes:

(1) Reallocation of £9  million between net  interest income and  non-interest 
    income in respect of funding costs of rental assets.
(2) Reallocation of £5  million between net  interest income and  non-interest 
    income to record interest on  financial assets and liabilities  designated 
    as at fair value through profit or loss.
(3) Total income  includes  £211  million investment  income,  of  which  £119 
    million is included in net interest income and £92million in non-interest
    income. Reallocation of  £94 million between  non-interest income and  net 
    interest income in respect of instalment income.
(4) Reallocation of £96 million between  net interest income and  non-interest 
    income in respect of funding costs  of rental assets, £103 million and  to 
    record interest on financial assets and liabilities designated as at  fair 
    value through profit or loss, £7 million.
(5) Comprises £1,715 million loss included in 'Income from trading activities'
    and £2,714  million  loss  included  in  'Other  operating  income'  on  a 
    statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.



Appendix 1 Income statement reconciliations and Segmental analysis (continued)



Segmental analysis (continued)



Analysis of divisional operating profit/(loss) (continued)



                        Net     Non-                              Impairment             

                   interest interest  Total Operating Insurance  (losses)/    Operating

                    income   income income  expenses net claims recoveries profit/(loss)
Nine months ended
30 September 2011        £m       £m     £m        £m         £m         £m           £m
                                                                                       
UK Retail             3,270      929  4,199    (2,039)          -       (597)        1,563
UK Corporate          2,334    1,352  3,686    (1,611)          -       (557)        1,518
Wealth                  477      347    824      (637)          -        (12)          175
International
Banking (1)             876    1,086  1,962    (1,247)          -       (112)          603
Ulster Bank             559      162    721      (415)          -     (1,057)         (751)
US Retail &
Commercial            1,404      843  2,247    (1,626)          -       (261)          360
Markets (2)              47    3,676  3,723    (2,734)          -         19        1,008
Direct Line Group
(3)                     261    2,888  3,149      (637)     (2,183)          -          329
Central items          (164)      175     11        93          -         (2)          102
                                                                                       
Core                  9,064   11,458 20,522   (10,853)     (2,183)     (2,579)        4,907
Non-Core (4)            549      917  1,466      (981)       (256)     (3,168)       (2,939)
                                                                                       
Managed basis         9,613   12,375 21,988   (11,834)     (2,439)     (5,747)        1,968
Reconciling items                                                                       
Own credit
adjustments (5)           -    2,386  2,386         -          -          -        2,386
Asset Protection
Scheme (6)                -     (697)   (697)         -          -          -         (697)
Payment Protection
Insurance costs           -        -      -      (850)          -          -         (850)
Sovereign debt
impairment                -        -      -         -          -       (875)         (875)
Interest rate
hedge adjustments
on

impaired
available-for-sale

sovereign debt            -        -      -         -          -       (169)         (169)
Amortisation of
purchased
intangible

 assets                  -        -      -      (169)          -          -         (169)
Integration and
restructuring
costs                    (2)       (3)     (5)      (581)           -          -         (586)
Gain on redemption
of own debt               -      256    256         -          -          -          256
Strategic
disposals                 -      (22)    (22)         -          -          -          (22)
Bonus tax                 -        -      -       (27)          -          -          (27)
RFS Holdings
minority interest        (6)       (1)     (7)         2          -          -           (5)
                                                                                       
Statutory basis       9,605   14,294 23,899   (13,459)     (2,439)     (6,791)        1,210



Notes:

(1) Reallocation of £30 million between  net interest income and  non-interest 
    income in respect of funding costs of rental assets.
(2) Reallocation of £9  million between net  interest income and  non-interest 
    income to record interest on  financial assets and liabilities  designated 
    as at fair value through profit or loss.
(3) Total income  includes  £205  million investment  income,  of  which  £156 
    million is included in net interest income and £49 million in non-interest
    income. Reallocation of £105 million  between non-interest income and  net 
    interest income in respect of instalment income.
(4) Reallocation of £159 million between net interest income and  non-interest 
    income in respect of funding costs  of rental assets, £155 million and  to 
    record interest on financial assets and liabilities designated as at  fair 
    value through profit or loss, £4 million.
(5) Comprises £565 million gain included  in 'Income from trading  activities' 
    and £1,821  million  gain  included  in  'Other  operating  income'  on  a 
    statutory basis.
(6) Included in 'Income from trading activities' on a statutory basis.













                                      

                                      

                                  Appendix 2

                                      

                           Businesses outlined for

                                   disposal





Appendix 2 Businesses outlined for disposal



To comply with EC State Aid requirements the Group agreed to make a series  of 
divestments by the end of 2013: the disposal of a majority interest in  Direct 
Line  Group,  Global  Merchant  Services  and  its  interest  in  RBS   Sempra 
Commodities JV. The Group also agreed to dispose of its RBS England and  Wales 
and NatWest  Scotland  branch-based businesses,  along  with certain  SME  and 
corporate  activities  across  the  UK  ('UK  branch-based  businesses').  The 
disposals of Global Merchant Services and RBS Sempra Commodities JV businesses
have now effectively been completed.



On 12 October 2012, the Group  announced that it had received notification  of 
Santander's decision to  pull out  of its agreed  purchase of  certain of  the 
Group's UK branched-based businesses.  Santander's decision follows  extensive 
work by both parties to separate the businesses into a largely standalone form
and to prepare the business, customers and staff for transfer. RBS intends  to 
initiate a new process of disposal  following discussion with HM Treasury  and 
the European Commission.



The Direct Line Group  IPO prospectus was published  on 28 September 2012  and 
the shares were admitted to listing on  16 October 2012. RBS Group sold  520.8 
million ordinary shares in Direct Line Group, representing 34.7% of the  total 
share capital, generating gross proceeds of £911 million. This was  consistent 
with the already communicated plan to  divest control of Direct Line Group  in 
stages, with control ceded by the end of 2013 and complete disposal by the end
of 2014.



Direct Line Group reached  agreement with RBS Group  in September 2012 for  an 
arm's-length, five year distribution agreement for the continued provision  of 
general insurance products post-divestment. Residual IT services will also  be 
provided under a Transitional Services Agreement.



The table below shows total income  and operating profit of Direct Line  Group 
and the UK branch-based businesses.

                                         Operating profit

                     Total income     before impairments  Operating profit
                        YTD                 YTD                YTD

                   Q3 2012 FY 2011   Q3 2012 FY 2011  Q3 2012 FY 2011
                        £m      £m        £m      £m       £m      £m
                                                                     
Direct Line Group
(1)                   2,799   4,286       328     407      328     407
UK branch-based
businesses              672     959       360     518      262     319
                                                                     
Total                 3,471   5,245       688     925      590     726



The table below  shows the  estimated risk-weighted assets,  total assets  and 
capital of the businesses identified for disposal.

                     RWAs               Total assets             Capital
                     30        31           30        31           30        31
             September December   September December   September December

                  2012     2011        2012     2011        2012     2011
                   £bn      £bn         £bn      £bn         £bn      £bn
Direct Line
Group (1)          n/m      n/m       13.1     13.9        3.5      4.4
UK
branch-based
businesses
(2)               10.2     11.1       19.0     19.3        1.0      1.1
                                                                        
Total             10.2     11.1       32.1     33.2        4.5      5.5



Notes:

(1) Total income includes investment  income of £211 million  (FY 2011 -  £302 
    million). Total assets  and estimated capital  include approximately  £0.9 
    billion of goodwill, of  which £0.7 billion is  attributed to Direct  Line 
    Group by RBS Group.
(2) Estimated notional equity based on 10% of RWAs.



Appendix 2 Businesses outlined for disposal (continued)



Further information on the UK branch-based businesses by division is shown  in 
the tables below:



                                            Division             Total
                                            UK        UK       YTD

                                       Retail Corporate  Q3 2012 FY 2011
                                           £m        £m       £m      £m
                                                                 
Income statement                                                         
Net interest income                        241       256      497     689
Non-interest income                         64       111      175     270
                                                                        
Total income                               305       367      672     959
                                                                        
Direct expenses                                                          
 - staff                                  (53)       (64)     (117)    (158)
 - other                                  (70)       (42)     (112)    (166)
Indirect expenses                          (46)       (37)      (83)    (117)
                                                                        
                                         (169)      (143)     (312)    (441)
                                                                        
Operating profit before impairment
losses                                     136       224      360     518
Impairment losses                          (42)       (56)      (98)    (199)
                                                                        
Operating profit                            94       168      262     319
                                                                        
Analysis of income by product                                            
Loans and advances                          86       224      310     436
Deposits                                    58       108      166     245
Mortgages                                  106         -      106     134
Other                                       55        35       90     144
                                                                        
Total income                               305       367      672     959
                                                                        
Net interest margin                      4.64%     3.03%    3.64%   3.57%
Employee numbers

 (full time equivalents rounded to the
nearest hundred)                         2,700     1,600    4,300   4,400



                              Division                      Total
                          UK        UK            30 September 31 December

                     Retail Corporate Markets          2012        2011
                        £bn       £bn     £bn           £bn         £bn
                                                                       
Capital and balance
sheet                                                                   
Total third party
assets (excluding
mark-to-

 market derivatives)    7.4      11.2       -          18.6        18.9
Loans and advances to
customers (gross)        7.6      11.7       -          19.3        19.5
Customer deposits        8.5      12.9       -          21.4        21.8
Derivative assets          -         -     0.4           0.4         0.4
Derivative
liabilities                -         -       -             -         0.1
Risk elements in
lending                  0.5       0.9       -           1.4         1.5
Loan:deposit ratio       86%       88%       -           87%         86%
Risk-weighted assets     3.5       6.7       -          10.2        11.1





Index



 Page



Accounting policies 74



Analysis of results            13
Balance sheet                19
Capital resources and ratios 18
Impairment losses            16
Net-interest income          13
Non-interest income          14
One-off and other items      17
Operating expenses           15



Available-for-sale reserve 86



Average balance sheet 68



Balance sheet
Consolidated 65
Summary      19



Basis of preparation 74



Business divestments
Businesses outlined for disposal Appendix 2
Notes                                    82



Capital               92
Analysis of results 18
Capital resources   93
Risk asset ratios   92



Central items 54



Consolidated financial statements                63
Consolidated balance sheet                     65
Consolidated income statement                  63
Consolidated statement of changes in equity    71
Consolidated statement of comprehensive income 64
Notes                                          74



Contacts xii



Contingent liabilities and commitments 86



Index (continued)



 Page



Debt securities 109



Direct Line Group 48



Dividends 80



Divisional performance   20
Central Items          54
Direct Line Group      48
International Banking  31
Markets                44
Non-Core               56
UK Corporate           26
UK Retail              23
Ulster Bank            35
US Retail & Commercial 38
Wealth                 29



Earnings per share 81



Employees
Costs            76
Employee numbers 22



Financial instruments 84



Forward-looking statements 3



Funded assets by division 21



Group Chief Executive's comment iv



Highlights i



Impairment
Analysis of results      16
Problem debt management 112



Income statement
Consolidated   63
Summary        10



International Banking 31



Index (continued)



 Page



Litigation, investigations and reviews 87



Markets 44



Net interest income 13



Non-Core 56



Non-interest income 14



One-off and other items 17



Operating expenses
Analysis of results 15
Notes               76



Other developments 89



Outlook xi



Payment Protection Insurance 76



Post balance sheet events 91



Presentation of information 4



Results presentation xii



Results summary - statutory 9



Risk and balance sheet management  92
Capital                          92
Country risk                    127
Credit risk                     105
Liquidity and funding risk       97
Market risk                     122



Risk-weighted assets
 By division        22
 Capital            92



Segmental analysis Appendix 1



Share consolidation 80





Index (continued)



 Page



Statement of changes in equity 71



Statement of comprehensive income 64



Strategic Plan xi



Tax 78



UK Corporate 26



UK Retail 23



Ulster Bank 35



US Retail & Commercial 38



Value-at-risk (VaR) 124



Wealth 29



                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IMSBBBJTMBTMTAT -0- Nov/02/2012 07:01 GMT
 
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