RBS 2003 Annual Report Download - page 57

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Operating and financial review
Annual Report and Accounts 2003
Ulster Bank provides a comprehensive range of retail and
wholesale financial services in Northern Ireland and the
Republic of Ireland. Retail Banking has a network of branches
throughout Ireland and operates in the personal, commercial
and wealth management sectors. Corporate Banking and
Financial Markets provides a wide range of services in the
corporate and institutional markets.
On 6 October 2003, the Group announced that it had agreed
the terms of a recommended acquisition for cash of First
Active plc. The acquisition was completed in January 2004.
First Active and Ulster Bank have retained their own distinctive
brands, branch networks and customer propositions. The
acquisition enables the Group to sell First Active’s competitive
range of mortgage and savings products to Ulster Bank
customers, and Ulster Bank’s wide range of banking products,
to First Active customers.
Citizens is engaged in retail and corporate banking activities
through its branch network in the states of Rhode Island,
Connecticut, Massachusetts, New Hampshire, Pennsylvania,
Delaware and New Jersey. Citizens is the second largest
commercial banking organisation in New England and the 13th
largest commercial banking organisation in the US measured
by deposits. Citizens provides a full range of retail and
corporate banking services, including personal banking,
residential mortgages and home equity loans. In addition,
Citizens engages in a wide variety of commercial loans
(including real estate), consumer lending, credit card services,
trust services and retail investment services. Citizens also
operates subsidiaries primarily engaged in equipment lease
financing.
During 2003, Citizens completed the acquisitions of
Commonwealth Bancorp, Inc., Port Financial Corp. (the holding
company of CambridgePort Bank) and Community Bancorp,
Inc. (the holding company of Community National Bank). It
also announced the acquisition of Thistle Group Holdings, Co.,
the holding company of Roxborough Manayunk Bank, which
was completed in January 2004.
Santander Central Hispano, S.A.
In October 1988, the Group and Banco Santander entered into
an agreement whereby the Group and Banco Santander and
its subsidiaries agreed to co-operate in certain banking and
financial services activities in Europe, including representation
in each other’s bank branches to service their respective
customers, offshore and investment banking, technology
development, operational co-operation and the development of
representation in Europe and the Far East. In April 1999, Banco
Santander merged with Banco Central Hispanoamericano,
another Spanish banking group and the merged entity is now
called Santander Central Hispano, S.A. (“SCH”).
The Group holds 2.83% of SCH’s capital stock and SCH holds
5.15% of the company’s ordinary shares.
Competition
The Group faces intense competition in the markets it serves.
In the UK, the Group’s principal competitors are the other UK
retail and commercial banks, building societies (which are
similar to savings and loans associations in the US) and the
other major international banks represented in London.
Competition for corporate and institutional customers in the UK
remains strong. In addition to the UK banks, large foreign
financial institutions are also active and offer combined investment
and commercial banking capabilities. In asset finance,
Lombard competes with banks and specialised asset finance
providers, both captive and non-captive.
In the small business banking market, where competition
remains strong, the Group competes with other UK clearing
banks, with specialist finance providers and building societies.
In the personal banking segment, competition remains intense.
In addition to UK banks and building societies, major retailers,
life assurance companies and internet-only players are active
participants. The mortgage market has remained highly
competitive, with re-mortgaging activity by customers at a high
level. NatWest Life and Royal Scottish Assurance compete with
Independent Financial Advisors and life assurance companies.
The competitive situation in the long term savings market is
dynamic due to regulatory change and the impact of volatile
securities markets on consumer confidence.
The UK credit card market is highly competitive. Large retailers
and specialist card issuers, including major US operators, are
active in the market in addition to the UK banks and building
societies. There has been some consolidation in the market as
larger players have acquired smaller portfolios, but non-bank
new entrants are continuing to grow in importance in the
marketplace. Competition is across a range of dimensions,
including aggressive pricing, loyalty and reward schemes, and
packaged benefits. In addition to physical distribution
channels, providers compete through direct marketing activity
and, increasingly, the internet.
In Wealth Management, The Royal Bank of Scotland
International and NatWest Offshore compete with other UK and
international banks to offer offshore banking services. Coutts
Group and Adam & Co. compete as private banks with UK
clearing and private banks, and with international private
banks. Difficult market conditions have seen some
retrenchment of competitive activity, particularly in the mass-
affluent segment.
RBS Insurance competes in personal lines insurance. The
market is highly competitive. There is competition from a range
of insurance companies which now operate telephone and
internet direct sales businesses. RBS Insurance also competes
in the direct motor insurance markets in Spain, Italy and
Germany with the local insurance companies.
In Northern Ireland and the Republic of Ireland, Ulster Bank
competes in retail and commercial banking with the major Irish
banks and building societies, and with other UK and