RBS 2007 Annual Report Download - page 56

RBS Group • Annual Report and Accounts 2007
54
Business review continued
Business review
2007 compared with 2006
Retail achieved strong results in 2007, increasing operating
profit by 10% to £2,470 million as a result of good income
growth in both consumer and business banking combined with
tight cost control and a reduction in impairment losses. Total
income grew by 3% to £7,762 million, while income net of
claims grew by 2% to £7,244 million and contribution by 6% to
£4,073 million.
We have accelerated the expansion of our consumer banking
franchise, opening more than 975,000 new personal current
accounts in 2007 and maintaining the Group’s joint number
one position in the current account market. RBS and NatWest
continue to lead the other major high street banks in Great
Britain for customer satisfaction. We continue to focus on sales
through the branch channel, and by adding more customer
advisers in our branches have achieved a significant uplift in
volumes.
Bancassurance continued its excellent progress with sales
growth of 28% to £342 million annual premium equivalent,
representing a doubling of 2005 sales. We invested further in
our sales force, ending the year with more than 1,000 financial
planning managers.
In business banking we strengthened our management team
and improved operational processes, producing good results.
During 2007 we placed an additional 500 business managers
back in branches, launched additional products to support the
start-up market, and added new roles supporting ethnic
minorities, women in business and community banking.
In our cards and direct finance business, we have maintained
our focus on credit card sales through the branch channel,
where new business sales were up 47% on 2006, while
continuing to take a cautious view on direct sales. Our cards
acquiring business continued to grow market share,
strengthening its market leading position with an 11% increase
in transactions in 2007.
Average customer deposit balances were 9% higher, driven by
accelerating growth in both personal savings, up 12%, and
business deposits, up 11%, alongside modest growth in
current account balances. Savings balance growth was helped
by good sales of new accounts to branch customers, with
NatWest opening more than 1 million new savings accounts.
Average loans and advances to customers increased by 3%,
with average mortgage lending up 5% and average business
lending up 9%. Mortgage activity focused on branch channels,
where net lending was 14% higher than in the previous year.
We also took advantage of improved margins in the
intermediary segment in the latter part of the year to improve
volumes. Direct loan balances declined over the year as we
maintained our strategy of focussing unsecured personal
lending on profitability rather than volume, although we
continued to grow lending through the branch channel. After a
decline in credit card balances in the first half of the year we
improved recruitment and retention in the second half.
Net interest income increased by 2% to £4,191 million, with
strong growth in deposits helping to mitigate the impact of
lower unsecured lending volumes and lower average card
Retail
2007 2006 2005
£m £m £m
Net interest income 4,191 4,108 3,965
Non-interest income 3,571 3,458 3,333
Total income 7,762 7,566 7,298
Direct expenses
– staff costs 1,361 1,317 1,281
– other 614 621 663
1,975 1,938 1,944
Insurance net claims 518 488 486
Contribution before impairment losses 5,269 5,140 4,868
Impairment losses 1,196 1,310 1,135
Contribution 4,073 3,830 3,733
Allocation of Manufacturing costs 1,603 1,580 1,526
Operating profit 2,470 2,250 2,207
£bn £bn £bn
Total banking assets 111.1 107.4 102.9
Loans and advances to customers – gross
– mortgages 67.3 65.6 61.1
– personal 17.3 17.2 17.2
– cards 8.3 8.1 8.6
– business 18.7 16.9 16.3
Customer deposits* 96.5 87.1 79.8
Risk-weighted assets 73.3 70.6 73.2
* customer deposits exclude bancassurance