RBS 2007 Annual Report Download - page 51

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RBS Group • Annual Report and Accounts 2007
Business review
2007 compared with 2006
Corporate Markets grew operating profit in 2007 by 2% to
£5,648 million, notwithstanding difficult conditions in global
credit markets. Total income was flat at £10,322 million, as the
credit market deterioration in the second half of the year
resulted in substantial write-downs in Global Banking &
Markets income, but good progress in UK Corporate Banking
combined with tight expense control and declining
impairments lifted profits.
Average loans and advances to customers, excluding reverse
repos, grew by 17% and average customer deposits
(excluding repos) by 19%. The portfolio remains well
diversified by counterparty, sector and geography, and the
average credit grade continues to improve. Assets grew
strongly outside the UK, particularly in Western Europe and
Asia. Overall corporate credit conditions remained benign, and
impairment losses represented 0.1% of loans and advances to
customers. Risk-weighted assets rose by 11%.
2006 compared with 2005
Corporate Markets achieved a strong performance in 2006,
with excellent results across many of our businesses. Total
income, after deducting operating lease depreciation, rose by
19% to £9,557 million with contribution growing by 18% to
£6,116 million. Operating profit rose by 20% to £5,541 million.
Average loans and advances grew by 19% and average
customer deposits by 17%. Our portfolio remains well
diversified by counterparty, sector and geography and
balanced in credit distribution. Assets grew strongly outside
the UK, particularly in Western Europe. Overall credit
conditions remained benign, and impairment losses
represented 0.14% of loans and advances to customers.
Average risk-weighted assets rose by 12%, with disciplined
capital allocation and increasing returns. The ratio of operating
profit to average risk-weighted assets improved from 2.3% to
2.5%.
Corporate Markets
2007 2006 2005
£m £m £m
Net interest income from banking activities 4,111 3,805 3,442
Non-interest income 6,211 6,488 5,348
Total income 10,322 10,293 8,790
Direct expenses
– staff costs 2,457 2,539 2,007
– other 732 628 536
– operating lease depreciation 684 736 733
3,873 3,903 3,276
Contribution before impairment losses 6,449 6,390 5,514
Impairment losses 219 274 335
Contribution 6,230 6,116 5,179
Allocation of Manufacturing costs 582 575 555
Operating profit 5,648 5,541 4,624
£bn £bn £bn
Total assets* 682.1 472.4 409.2
Loans and advances to customers – gross*
– banking book 221.7 181.1 158.7
– trading book 20.0 15.4 11.8
Rental assets 12.0 13.9 13.2
Customer deposits* 159.5 132.6 111.1
Risk-weighted assets 257.2 231.2 202.6
* excluding repos and reverse repos