RBS 2006 Annual Report Download - page 8

7
The Group maintained strength and momentum
in 2006 with higher earnings growth and an
improved return on equity. All our growth was
organic and all our divisions contributed to it.
We increased our total income by 10% and held
our cost growth to 8%. Group operating profit
increased by 14% to £9,414 million.
We are building a group whose diversity, scale, distribution
capacity and operational excellence can deliver superior,
sustainable income growth, controlled risk and strong returns.
Our 2006 results demonstrate once again the success
of this model with particularly strong performances from
Global Banking & Markets (“GBM”), UK Corporate Banking,
Wealth Management and Ulster Bank. UK Retail banking,
Citizens and RBS Insurance made good progress in the
face of headwinds in their markets.
In 2006, we continued to build our market share in UK
retail, commercial and corporate banking, increased our
customer base in Europe and made good progress in
building a platform for sustained growth in North America.
We have also laid the foundations for a growing share in
the vibrant financial services markets of the Asia Pacific
region. The breadth of the Group’s businesses is reflected
in our results: 42% of our operating profit came from our
international operations.
Sound control of risk is fundamental to the Group’s business.
While we grew average customer lending by 14%, impairment
losses have increased by just 10%. Central to this is our
longstanding aversion to sub-prime lending, wherever we
do business. We have also maintained the customer-driven
nature of our trading activities, as reflected in trading
income growth of 14%, compared with an increase
of only 9% in our average daily value at risk.
Our customers
The Group continues to hold the highest market share in
UK corporate banking and we are now the joint leader in
the personal current account market. RBS has once again
secured top position and NatWest is joint second among
major High Street banks for extremely satisfied customers,
and we continued to invest in the expansion of our branch
network in the UK. Through Ulster Bank we expanded across
the island of Ireland, and in the US, Citizens continued to
broaden its customer base through the expansion of its
credit card, merchant acquiring, small business and mid-
corporate activities. Our GBM and Wealth Management
businesses are growing rapidly in Asia.
Our shareholders
The capital generated by our businesses during 2006
has enabled us to invest in profitable organic growth
across the Group, carry out a £1 billion share buyback
and we propose to raise our payout ratio to 45% through
a final dividend of 66.4p, making a total of 90.6p for the
year, an increase of 25%.
Our people
Our performance is the result of the hard work, energy
and dedication of our 135,000 employees. We have made
significant progress in recent years in the development
of our people, by seeking and then acting upon feedback
from them. A record 87% of our employees participated
in the 2006 Employee Opinion Survey and we outperformed
the Global Financial Services norm in every category.
Our people told us, and our results demonstrate, that
the Group provides a rewarding and stimulating working
environment for personal and professional development.
We continue to listen to them and invest to maintain our
market-leading position.
Bank of China
We have made good progress in developing our partnership
with Bank of China. Our joint credit card business has
already issued 1.2 million cards, we are establishing a
joint private banking business and have together completed
a number of significant transactions in shipping, aviation
and trade finance.
Outlook
Our proven business model delivered strong results in
2006. We are expanding our reach and making progress
in all the major economies we operate in. We believe that the
strategic choices we have made, together with the prospects
for continued growth in the world economy, position us well
for 2007. We remain confident in the Group’s ability to take
advantage of the many opportunities to invest profitably in
sustainable growth.
Sir Fred Goodwin
Group Chief Executive
RBS Group • Annual Report and Accounts 2006