RBS 2008 Annual Report Download - page 106

105RBS Group Annual Report and Accounts 2008
Customer accounts – the principal source of funds for the Group is its
core customer deposits gathered by its retail banking, private client,
corporate and SME franchises. The underlying strength of the franchise
is demonstrated by the performance of the Group in these markets as
customer deposits increased from £437 billion in December 2007 to
£460 billion at the end of December 2008. There was a fluctuation in
balances at the height of the market disruption in October 2008 but this
was recovered by the year end. The Group’s multi-brand offering and
strong client focus is a key part of the funding strategy and continues to
benefit the Group’s funding position.
Repo agreements are borrowings collateralised by a range of debt
securities and other assets undertaken with a range of corporate and
institutional customers and banks. These reduced significantly in the
course of 2008 as the Group took strategic actions and wholesale
markets retrenched.
Short positions in various securities are held primarily by GBM including
RBS Greenwich Capital in the US.
Debt securities in issue over one year, subordinated liabilities and
equity – during 2008, the debt markets saw reduced activity, in both the
term and the securitisation markets; as a result the maturity profile of
the Group’s wholesale funding has become shorter in duration over the
course of the year. This was partly offset by issues of government
guaranteed debt in the latter part of 2008. The maturity profile of debt
securities is predominantly concentrated under one year and this is a
source of refinancing risk in the coming twelve months.
The Group raised £27 billion of equity capital during the course of 2008
from a rights issue of £12 billion in June 2008 and a placing and open
offer in December 2008 which provided a further £15 billion of equity
capital. In December 2008 a further £5 billion was raised from a
preference share issue.
Short term debt and bank deposits – the Group saw considerable
pressure and risk aversion in the short term debt and bank deposit
markets. In order to relieve funding shortages in the market, central
banks across the world allowed banks to pledge assets to access
funding. The Group has used central bank schemes to support its
funding and pledged assets into several of these schemes in a number
of countries in which it operates. The Group has set up a series of
initiatives to improve the liquidity value of its assets to assist in relieving
funding pressures.
Undrawn commitments – the Group provides undrawn commitments to
both its corporate and personal customers in the form of products such
as overdrafts and credit card facilities. The commitments portfolio is well
diversified in terms of customers, geography and business type. The
total amount of the Group’s undrawn commitments at the end of 2008
was £352 billion.
An analysis of the Group’s funding is set out below.
2008 2007
Group Group
before RFS before RFS
Holdings Holdings
ˆ minority minority
Group interest Group interest
Sources of funding £m % £m % £m % £m %
Customer accounts (excluding repos)
Repayable on demand 327,547 24 279,315 23 346,074 24 273,644 22
Time deposits 253,822 19 181,003 15 201,373 14 163,416 13
Total customer accounts (excluding repos) 581,369 43 460,318 38 547,447 38 437,060 35
Debt securities in issue over one year
remaining maturity 125,782 9 99,218 8 118,152 8 92,310 8
Subordinated liabilities 49,154 4 43,678 4 38,043 3 28,052 2
Owners’ equity 58,879 4 58,879 5 53,038 4 53,038 4
Total customer accounts and long term funds 815,184 60 662,093 55 756,680 53 610,460 49
Repo agreements with customers 58,143 5 58,143 5 134,916 10 120,062 10
Repo agreements with banks 83,666 6 83,666 7 163,038 11 161,862 13
Total customer accounts, long term funds
and collateralised borrowing 956,993 71 803,902 67 1,054,634 74 892,384 72
Debt securities in issue up to one year
remaining maturity 174,507 13 169,970 14 156,020 11 128,267 10
Deposits by banks (excluding repos) 174,378 13 178,268 15 149,256 10 141,637 12
Short positions 42,536 3 42,536 4 73,501 5 72,323 6
Total 1,348,414 100 1,194,676 100 1,433,411 100 1,234,611 100