RBS 2003 Annual Report Download - page 66

Operating and financial review continued
64
Operating and financial review
Balance sheet
Total assets were £455 billion at 31 December 2003, 11%
higher than total assets of £412 billion at 31 December 2002.
Lending to customers, excluding repurchase agreements and
stock borrowing (“reverse repos”), increased by 13% or £27
billion to £228 billion. Customer deposits, excluding
repurchase agreements and stock lending (“repos”), grew by
8% or £16 billion to £210 billion.
Capital ratios at 31 December 2003 were 7.4% (tier 1) and
11.8% (total), against 7.3% (tier 1) and 11.7% (total) at 31
December 2002.
Profitability
The adjusted after-tax return on ordinary equity was 18.7%
compared with 17.6% for 2002. This is based on profit
attributable to ordinary shareholders before goodwill
amortisation, integration costs and the AVS dividend, and
average equity shareholders’ funds.
Acquisitions
In January 2003, Citizens completed the acquisition of
Pennsylvania-based commercial bank, Commonwealth
Bancorp, Inc. for a cash consideration of US$450 million.
In April 2003, Citizens announced the acquisition of Port
Financial Corp., the holding company of the Massachusetts
savings bank, CambridgePort Bank for a cash consideration of
US$285 million. This transaction was completed on 31 July 2003.
In May 2003, RBS announced the acquisition of Nordisk
Renting AB, a Swedish leasing company, for a cash
consideration of 104 million. This transaction was completed
on 2 June 2003.
In May 2003, RBS announced the acquisition of the credit card
and personal loans portfolios of Frankfurt-based Santander
Direkt Bank for a cash consideration of 486 million. This
transaction was completed on 31 July 2003.
In June 2003, RBS announced the acquisition of Churchill
Insurance Group PLC for a cash consideration of £1.1 billion.
This transaction was completed on 1 September 2003.
In July 2003, Citizens announced the acquisition of Community
Bancorp, Inc., the holding company for Community National
Bank, for a cash consideration of US$116 million. This transaction
was completed on 31 October 2003.
In September 2003, Citizens announced the acquisition of Thistle
Group Holdings, Co., the holding company for Roxborough
Manayunk Bank, for a cash consideration of US$136 million.
This transaction was completed on 5 January 2004.
In October 2003, Coutts Bank (Switzerland) Limited announced
the acquisition of a Swiss private bank, Bank von Ernst & Cie
AG, for a cash consideration of Swiss Francs 500 million. This
transaction was completed on 28 November 2003.
In October 2003, RBS announced that it had agreed terms for
a recommended acquisition of First Active plc, for a cash
consideration of 887 million. This transaction was completed
on 5 January 2004.
On 3 February 2004, RBS announced that it had agreed terms
with People’s Bank of Connecticut to purchase their credit
card portfolio. This transaction is subject to regulatory approval
and is expected to complete by the end of March 2004.
Disposals
In May 2003, RBS announced the sale of the Miami-based
Latin American private banking operations of Coutts Group to
Santander Central Hispano. The cash consideration was
US$81 million. This transaction was completed on 31 July 2003.
2002 compared with 2001
Profit
RBS increased its profit before tax, goodwill amortisation and
integration costs by 12%, or £673 million, from £5,778 million to
£6,451 million.
After goodwill amortisation and integration costs, profit before
tax was up 12%, from £4,252 million to £4,763 million.
Integration costs relating to NatWest, the Mellon Regional
Franchise and Medford Bancorp Inc. (“Medford”) were £957
million against £875 million in 2001.
Total income
RBS continued to achieve strong growth in income. Total
income at £16,815 million was up by 16%, or £2,257 million.
Excluding acquisitions, total income rose by 12%.
Citizens increased its income by 53% (15% underlying growth,
excluding the effect of acquisitions and exchange rate
fluctuations), Direct Line Group by 39% (34% excluding
acquisitions) and Retail Direct by 16%.
Corporate Banking and Financial Markets income was up by 11%,
notwithstanding Financial Markets’ strong performance in 2001
when it benefited from market volatility and falling interest rates.
Retail Banking grew its income by 8% and Ulster Bank by 8%.
Income in Wealth Management declined 3% as the effect of
lower stock market values on activity levels and fees more than
offset the benefit from increased customer numbers and volumes.
Net interest income
Net interest income increased by 15%, or £1,003 million, to
£7,849 million. Net interest income accounted for 47% of total
income. Average interest-earning assets of the banking
business increased by 14%.