RBS 2004 Annual Report Download - page 60

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Operating and financial review
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 £55.6 billion at the end of
2004. Headquartered in Edinburgh, the Group operates in the
UK, US and internationally through its two principal subsidiaries,
the Royal Bank and NatWest. Both the Royal Bank and NatWest
are major UK clearing banks whose origins go back over 275
years. In the US, the Group’s subsidiary, Citizens is ranked the
eighth largest commercial banking organisation by deposits.
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 £583 billion and ordinary share-
holders’ equity of £27.3 billion at 31 December 2004. It is
strongly capitalised with a total capital ratio of 11.7% and tier 1
capital ratio of 7.0% as at 31 December 2004.
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 with growing presence in the US, Europe
and Asia. It provides an integrated range of products and
services including corporate and commercial banking,
treasury and capital markets products, structured and
leveraged finance, trade finance, leasing and factoring.
Within CBFM, 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.
Retail Banking is one of the leading retail banks in the UK. The
division 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.
In the personal banking market, Retail Banking offers a
comprehensive product range: 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 financing, deposit products and insurance.
Customer choice and product flexibility are central to the Retail
Banking proposition and customers are able to access
services through a full range of channels: branches, ATMs, the
internet and the telephone.
Retail Direct consists of the Group’s non-branch based retail
businesses. Retail Direct issues a comprehensive range of
credit, charge and debit cards to personal and corporate
customers and provides merchant acquisition and processing
facilities for retail businesses. It also includes Tesco Personal
Finance (“TPF”), The One account, 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 2004 Retail Direct expanded its international operations.
In the US, it acquired the credit card business of People’s
Bank, Lynk systems Inc., a leading merchant acquirer and
entered into an agreement to issue credit cards to the
customers of Kroger, a leading supermarket chain. In
continental Europe, Retail Direct acquired Bibit NV, a leading
internet payment specialist and agreed to provide consumer
finance services through the outlets of Tchibo, a leading
German retailer.
Manufacturing supports the customer facing businesses in the
UK and Ireland and manages the Group’s telephony, account
management and money transmission operations. It is also
responsible for information technology operations and
development, 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 provides private banking and investment
services to its clients through a number of leading UK and
overseas private banking subsidiaries and offshore banking
businesses. Coutts is one of the world’s leading international
wealth managers with over 50 offices worldwide, including
Switzerland, Dubai, Monaco, Hong Kong and Singapore, as
well as its premier position in the UK. Adam & Company is the
major private bank in Scotland. The offshore banking
businesses – The Royal Bank of Scotland International and
NatWest Offshore – deliver retail banking services to local and
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.
RBS Insurance is the second largest general insurer in the UK,
by gross earned premiums. Through the Direct Line, Churchill
and Privilege brands it sells and underwrites personal
insurance over the telephone and the internet in the UK.
Through the red phone brand, RBS Insurance also sells and