RBS 2003 Annual Report Download - page 56

Operating and financial review
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Operating and financial review
Description of business
Introduction
The Royal Bank of Scotland Group plc is the holding company
of one of the world’s largest banking and financial services
groups, with a market capitalisation of £49 billion at the end of
2003. Headquartered in Edinburgh, the Group operates in the
UK and internationally through its two principal subsidiaries,
The Royal Bank of Scotland plc (“the Royal Bank”), and
National Westminster Bank Plc (“NatWest”). Both the Royal
Bank and NatWest are major UK clearing banks whose origins
go back over 275 years. The Group has a large and diversified
customer base and provides a wide range of products and
services to personal, commercial and large corporate and
institutional customers.
The Group had total assets of £455 billion and ordinary share-
holders’ equity of £25.2 billion at 31 December 2003. It is
strongly capitalised with a total capital ratio of 11.8% and tier 1
capital ratio of 7.4% as at 31 December 2003.
Organisational structure and business overview
The Group’s activities are organised in the following business
divisions: Corporate Banking and Financial Markets, Retail
Banking, Retail Direct, Manufacturing, Wealth Management,
RBS Insurance, Ulster Bank and Citizens. A description of
each of the divisions is given below.
Corporate Banking and Financial Markets (“CBFM”) is the
largest provider of banking services to medium and large
businesses in the UK and the leader in the UK in asset finance.
It provides an integrated range of products and services to
mid-sized and large corporate and institutional customers in
the UK and overseas. These services include corporate and
commercial banking, treasury and capital markets products,
structured and leveraged finance, trade finance, leasing and
factoring.
Financial Markets provides corporate and institutional customers
with treasury services, including global interest rate derivatives
trading, bond origination and trading, sovereign debt trading,
futures brokerage, foreign exchange, money market, currency
derivative and rate risk management services. RBS Greenwich
Capital, with headquarters in Connecticut, US, delivers debt
market solutions tailored to meet the needs of companies and
institutions around the world.
During 2003, CBFM acquired Nordisk Renting AB, a Swedish
leasing company.
Retail Banking comprises both the Royal Bank and NatWest
retail brands. It offers a full range of banking products and
related financial services to the personal, premium and small
business markets.
To meet its customers’ needs in the personal banking market,
Retail Banking offers a variety of products: money transmission,
savings, loans, mortgages and insurance. In the small business
market, Retail Banking provides a full range of services which
include money transmission and cash management, short,
medium and long-term financial and deposit products and
insurance. Customer choice and flexibility is at the heart of the
Retail Banking proposition and a number of options are
available to customers for carrying out their day to day banking
transactions through branches, ATMs, the internet, and the
telephone.
Retail Direct issues a comprehensive range of credit, charge
and debit cards to personal and corporate customers and
engages in merchant acquisition and processing facilities for
retail businesses. It also includes Tesco Personal Finance
(“TPF”), The One account (formerly Virgin One), Direct Line
Financial Services (“DLFS”), Lombard Direct, WorldPay
Limited, the Group’s internet banking platform, the Primeline
brand and in Europe, the Comfort Card businesses, all of
which offer products to customers through direct channels.
During 2003, Retail Direct acquired the credit card and personal
loans portfolios of Santander Direkt Bank in Germany.
Manufacturing supports the customer facing businesses,
mainly CBFM, Retail Banking, Retail Direct and Wealth
Management, and provides operational technology, customer
support in telephony, account management and money
transmission, global purchasing, property and other services.
Manufacturing drives optimum efficiencies in high volume
processing activities, leverages the Group’s purchasing power
and has become a centre of excellence for managing large
scale and complex change programmes such as integration.
Wealth Management comprises various private banking
subsidiaries and offshore banking businesses. The Coutts
Group brings together businesses that focus on private
banking through the Coutts, the Royal Bank and the NatWest
private banking brands. Adam & Company is a private bank
operating primarily in Scotland. The offshore banking
businesses – The Royal Bank of Scotland International and
NatWest Offshore – deliver retail banking services to local
expatriate customers, and corporate banking and treasury
services to corporate, intermediary and institutional clients,
principally in the Channel Islands, the Isle of Man and Gibraltar.
During 2003, the Miami-based Latin American operations of Coutts
were sold and the acquisition of Bank von Ernst & Cie AG, a
private bank based in Switzerland, was completed.
RBS Insurance was established following the acquisition of
Churchill Insurance Group on 1 September 2003. RBS
Insurance comprises all companies from the Direct Line and
Churchill Groups. Direct Line and Churchill sell and underwrite
retail and wholesale insurance on the telephone and the
internet in the UK and overseas. UKI Partnerships is a leading
wholesale provider of insurance and motoring related services.
The National Insurance and Guarantee Corporation sells
personal and commercial insurance products through a
network of independent financial advisers, while Intergroup
acts as a travel insurance intermediary and Devitt Insurance
Services operates as a specialist travel broker administrator.
The combined strength of Direct Line and Churchill makes
RBS Insurance the second largest general insurer in the UK,
by gross earned premiums.