RBS 2004 Annual Report Download - page 85
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section
01
Operating and
financial review
83
Annual Report and Accounts 2004
Operating and financial review
2003 compared with 2002
The division achieved strong volume growth across all personal
product areas - current accounts, mortgages and loans and
savings. Despite lower interest rates and the adverse effect of
the pricing remedies agreed following the Competition
Commission inquiry into SME banking which were implemented
from 1 January 2003, income increased by 5% or £194 million
to £4,473 million, and contribution by 3% or £96 million to
£3,170 million.
Net interest income rose by 4% or £110 million to £2,959 million,
reflecting the continued strong growth in customer advances
and deposits which was partially offset by the implementation
of the Competition Commission pricing remedies and the
impact of a lower interest rate environment. Excluding the
effect of the Competition Commission the increase was 8%.
Average loans to customers, excluding mortgages, grew by
9% or £1.9 billion to £23.7 billion. Average mortgage lending
grew by 12% or £3.6 billion to £33.7 billion. Average customer
deposits increased by 6% or £3.7 billion to £60.9 billion.
Non-interest income rose by 6% or £84 million to £1,514 million.
This reflected further growth in the customer base and a 15%
growth in general insurance income to £301 million. Embedded
value profits of the life assurance business increased by 14%,
or £7 million to £57 million.
Direct expenses increased by 4% or £38 million to £1,030
million. Staff expenses increased 9% or £64 million to £793
million reflecting further investment in customer facing staff.
Other expenses decreased 10% or £26 million to £237 million,
as a result of our rigorous approach to management of non-
staff costs.
The charge for provisions for bad debts increased by £60 million
to £273 million. The overall quality of the loan portfolio
remained stable and the increased charge reflected growth
in lending over recent years particularly in NatWest since its
acquisition.