RBS 2003 Annual Report Download - page 99

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Annual Report and Accounts 2003
Operating and financial review
Risk elements in lending and potential problem loans
The table below sets out the Group’s loans that are classified as non-accrual, accruing past due and restructured loans (together
risk elements in lending (REIL)) or potential problem loans (PPL) as defined by the SEC in the US. The figures incorporate estimates
and are stated before the value of security held or related provisions.
2003 2002 2001
REIL and PPL £m £m £m
Non-accrual loans (2) 4,432 4,175 3,566
Accrual loans past due 90 days (3) 642 492 785
Troubled debt restructurings 83 204 142
Total REIL 5,157 4,871 4,493
PPL (4) 591 1,183 1,080
Total REIL and PPL 5,748 6,054 5,573
Notes:
(1) The classification of a loan as non-accrual, past due 90 days or troubled debt restructuring does not necessarily indicate that the principal of the loan is uncollectable in whole
or in part. Collection depends in each case on the individual circumstances of the loan, including the adequacy of any collateral securing the loan and therefore classification of
a loan as non-accrual, past due 90 days or troubled debt restructuring does not always require that a provision be made against such a loan. In accordance with the Group’s
provisioning policy for bad and doubtful debts, it is considered that adequate provisions for the above risk elements in lending have been made.
(2) The Group’s UK banking subsidiary undertakings account for loans on a non-accrual basis from the point in time at which the collectability of interest is in significant doubt.
Certain subsidiary undertakings of the Group, principally Citizens, generally account for loans on a non-accrual basis when interest or principal is past due 90 days.
(3) Overdrafts generally have no fixed repayment schedule and consequently are not included in this category.
(4) Loans which are current as to the payment of principal and interest but in respect of which management have serious doubts about the ability of the borrowers to comply with
contractual repayment terms. Substantial security is held in respect of these loans and appropriate provisions have already been made in accordance with the Group’s
provisioning policy for bad and doubtful debts.
REIL increased to £5,157 million (a rise of 6% compared with
2002). REIL as a proportion of total loans and advances to
customers was 2.01% in 2003 (2002 – 2.14%; 2001 – 2.31%),
reflecting active risk management and improvements in the
economic environment in the Group’s key markets.
These factors also contributed to a reduction of 5% in the
aggregate amount of PPL and REIL which together account for
2.24% of loans and advances to customers (2002 – 2.66%;
2001 – 2.87%).
REIL and PPL as a percentage of loans and advances