RBS 2007 Annual Report Download - page 79

Business review
77
RBS Group • Annual Report and Accounts 2007
The table below sets out the Group’s loans that are classified as REIL and PPL:
Including
ABN AMRO
net of
Including minority Excluding
ABN AMRO interest ABN AMRO
2007 2007 2007 2006 2005
REIL and PPL £m £m £m £m £m
Non-accrual loans (1) 10,362 7,949 6,668 6,232 5,926
Accrual loans past due 90 days (2) 369 302 256 105 9
Troubled debt restructurings (3) ————2
Total REIL 10,731 8,251 6,924 6,337 5,937
PPL (4) 671 131 64 52 19
Total REIL and PPL 11,402 8,382 6,988 6,389 5,956
REIL and PPL as % of customer loans and advances – gross (5) 1.64% 1.49% 1.49% 1.57% 1.60%
The sub-categories of REIL and PPL are calculated as described in notes 1 to 4 below.
Notes:
(1) All loans against which an impairment provision is held are reported in the non-accrual category.
(2) Loans where an impairment event has taken place but no impairment recognised. This category is used for fully collateralised non-revolving credit facilities.
(3) Troubled debt restructurings represent loans that have been restructured following the granting of a concession by the Group to the borrower.
(4) Loans for which an impairment event has occurred but no impairment provision is necessary. This category is used for fully collateralised advances and revolving credit facilities
where identification as 90 days overdue is not feasible.
(5) Gross of provisions and excluding reverse repurchase agreements.
REIL as at 31 December 2007 was £10,731 million (2006 – £6,337 million). Excluding ABN AMRO minority interest, REIL was £8,251
million, an increase of £1,914 million (30%) during the year. As a percentage of customer lending, REIL and PPL in aggregate, excluding
ABN AMRO minority interest, show an improving trend, amounting to 1.49% of customer loans and advances at 31 December 2007
(2006 – 1.57%).
REIL by division
The table below shows REIL by division.
2007 2006 2005
REIL £m £m £m
Corporate Markets
– Global Banking & Markets 373 492 496
– UK Corporate Banking 1,236 1,034 969
Retail Markets
– Retail 4,286 4,078 3,783
– Wealth Management 45 43 58
Ulster Bank 667 498 436
Citizens 317 175 195
Other — 17 —
6,924 6,337 5,937
ABN AMRO excluding minority interest 1,327 ——
8,251 6,337 5,937
ABN AMRO minority interest 2,480 ——
Total REIL 10,731 6,337 5,937
During 2007, REIL in Retail Markets increased by £210 million, Ulster Bank by £169 million and Citizens by £142 million.
Loan impairment
The Group classifies impaired assets as either Risk Elements
in Lending (REIL) or Potential Problem Loans (PPL). REIL
represents non-accrual loans, loans that are accruing but
are past due 90 days and restructured loans. PPL represents
impaired assets which are not included in REIL but where
information about possible credit problems cause management
to have serious doubts about the future ability of the borrower
to comply with loan repayment terms.
Both REIL and PPL are reported gross of the value of any
security held, which could reduce the eventual loss should it
occur, and gross of any provision marked. Therefore impaired
assets which are highly collateralised, such as mortgages, will
have a low coverage ratio of provisions held against reported
impaired balance.