RBS 2007 Annual Report Download - page 33

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RBS Group • Annual Report and Accounts 2007
Business review
brokers and partnerships. Direct Line, Churchill and Privilege sell
general insurance products direct to the customer. Through its
International Division, RBS Insurance sells general insurance,
mainly motor, in Spain, Germany and Italy. The Intermediary and
Broker Division sells general insurance products through
independent brokers.
Manufacturing supports the customer-facing businesses and
provides operational, technology and customer support in
telephony, account management, lending and money
transmission, global purchasing, property and other services.
Manufacturing drives optimum efficiencies and supports
income growth across multiple brands and channels by using
a single, scalable platform and common processes wherever
possible. It also leverages the Group’s purchasing power and
has become the centre of excellence for managing large-scale
and complex change.
The expenditure incurred by Manufacturing relates to costs
principally in respect of the Group’s banking and insurance
operations in the UK and Ireland. These costs reflect activities
that are shared between the various customer-facing divisions
and consequently cannot be directly attributed to individual
divisions. Instead, the Group monitors and controls each of its
customer-facing divisions on revenue generation and direct
costs whilst in Manufacturing such control is exercised through
appropriate efficiency measures and targets. For financial
reporting purposes the Manufacturing costs have been
allocated to the relevant customer-facing divisions on a basis
management considers to be reasonable.
ABN AMRO is a major international banking group with a
leading position in international payments and a strong
investment banking franchise with particular strengths in
emerging markets, as well as offering a range of retail and
commercial financial services around the world via regional
business units in Europe, the Netherlands, North America,
Latin America and Asia.
As discussed on page 28, ABN AMRO was acquired by the
Consortium Banks in October 2007 through the Group's
subsidiary, RFS Holdings. The ABN AMRO business units that
will be retained by RBS are principally the global wholesale
businesses and international retail businesses in Asia and the
Middle East. In due course, these will be integrated with the
Group's existing business and will further diversify the Group's
global reach.
The Centre comprises group and corporate functions, such as
capital raising, finance, risk management, legal, communications
and human resources. The Centre manages the Group’s capital
requirements and Group-wide regulatory projects and provides
services to the operating divisions.
Competition
The Group faces intense competition in all the markets it
serves. In the UK, the Group’s principal competitors are the
other UK retail and commercial banks, building societies and
the other major international banks represented in London.
Competition for corporate and institutional customers in the UK
is from UK banks and from large foreign financial institutions
who are also active and offer combined investment and
commercial banking capabilities. In asset finance, the Group
competes with banks and specialised asset finance providers,
both captive and non-captive. In European and Asian
corporate and institutional banking markets the Group
competes with the large domestic banks active in these
markets and with the major international banks.
In the small business banking market, the Group competes
with other UK clearing banks, specialist finance providers and
building societies.
In the personal banking segment the Group competes with UK
banks and building societies, major retailers, life assurance
companies and internet-only players. In the mortgage market
the Group competes with UK banks and building societies. The
Group’s life assurance businesses compete with Independent
Financial Advisers and life assurance companies.
In the UK credit card market large retailers and specialist card
issuers, including major US operators, are active in addition to
the UK banks. Competitive activity is across a number of
dimensions including introductory and longer term pricing,
loyalty and reward schemes, and packaged benefits. In
addition to physical distribution channels, providers compete
through direct marketing activity and the internet. The market
remains competitive, both between issuers and with other
payment methods.
In Europe, Asia and the Middle East, the enlarged Group now
competes in retail banking with local and international banks.
In a number of these markets there are regulatory barriers to
entry or expansion, and the state ownership of banks.
Competition is generally intensifying as more players enter
markets that are perceived to be de-regulating and offer
significant growth potential.
In Wealth Management, The Royal Bank of Scotland International
competes with other UK and international banks to offer offshore
banking services. Coutts and Adam & Company compete as
private banks with UK clearing and private banks, and with
international private banks. Competition in wealth management
activities has intensified as banks have increased their focus on
competing for affluent and high net worth customers.
RBS Insurance competes in personal lines insurance and, to a
limited extent, in commercial insurance. There is strong
competition from a range of insurance companies which now
operate telephone and internet direct sales businesses.
Competition in the UK motor market remains particularly
intense, and price comparison internet sites now play a major
role in the marketplace. RBS Insurance also competes with
local insurance companies in the direct motor insurance
markets in Spain, Italy and Germany.