RBS 2009 Annual Report Download - page 112

RBS Group Annual Report and Accounts 2009110
Commentary on consolidated balance sheet – statutory
Total assets of £1,696.5 billion at 31 December 2009 were down £705.2
billion, 29%, compared with 31 December 2008, principally reflecting
substantial repayments of customer loans and advances as corporate
customer demand fell and corporates looked to deleverage their
balance sheets. Lending to banks also fell in line with significantly
reduced wholesale funding activity. There were also significant falls in
the value of derivative assets, with a corresponding fall in derivative
liabilities.
Cash and balances at central banks were up £39.9 billion to £52.3
billion due to the placing of short-term cash surpluses, including the
proceeds from the issue of B shares in December, with central banks.
Loans and advances to banks decreased by £46.4 billion, 34%, to
£91.8 billion with reverse repurchase agreements and stock borrowing
(‘reverse repos’) down by £23.7 billion, 40% to £35.1 billion and lower
bank placings, down £22.7 billion, 29%, to £56.7 billion largely as a
result of reduced wholesale funding activity in Global Banking &
Markets.
Loans and advances to customers were down £146.3 billion, 17%, at
£728.4 billion. Within this, reverse repos increased by 4%, £1.7 billion to
£41.0 billion. Excluding reverse repos, lending decreased by £148.0
billion, 18%, to £687.4 billion or by £141.8 billion, 17%, before
impairment provisions. This reflected reductions in Global Banking &
Markets of £71.4 billion, and planned reductions in Non-Core of £30.1
billion, including a £3.2 billion transfer to disposal groups in respect of
RBS Sempra Commodities and the Asian and Latin American
businesses. Reductions were also experienced in US Retail &
Commercial, £7.4 billion; UK Corporate & Commercial, £5.4 billion;
Ulster Bank, £1.8 billion; and the effect of exchange rate movements,
£33.1 billion, following the strengthening of sterling during the year,
partially offset by growth in UK Retail of £9.2 billion, and in Wealth of
£1.4 billion.
Debt securities were flat at £267.3 billion and equity shares decreased
by £6.8 billion, 26%, to £19.5 billion, principally due to the sale of the
Bank of China investment and lower holdings in Global Banking &
Markets and Non-Core, largely offset by growth in Group Treasury, in
part reflecting an £18.0 billion increase in the gilt liquidity portfolio, and
in the RFS Holdings minority interest.
Settlement balances were down £5.8 billion, 33%, at £12.0 billion as a
result of lower customer activity.
Movements in the value of derivative assets, down £551.1 billion, 56%,
to £441.5 billion, and liabilities, down £547.2 billion, 56%, to £424.1
billion, reflect the easing of market volatility, the strengthening of sterling
and significant tightening in credit spreads in the continuing low interest
rate environment.
Increases in assets and liabilities of disposal groups reflect the
inclusion of the RBS Sempra Commodities business and the planned
sale of a number of the Group’s retail and commercial activities in Asia
and Latin America.
Deposits by banks declined by £115.9 billion, 45%, to £142.1 billion due
to a decrease in repurchase agreements and stock lending (‘repos’),
down £45.7 billion, 55%, to £38.0 billion and reduced inter-bank
deposits, down £70.2 billion, 40% to £104.1 billion principally in Global
Banking & Markets, reflecting reduced reliance on wholesale funding,
and in the RFS Holdings minority interest.
Customer accounts were down £25.3 billion, 4%, to £614.2 billion.
Within this, repos increased £10.2 billion, 18%, to £68.4 billion.
Excluding repos, deposits were down £35.5 billion, 6%, to £545.8 billion,
primarily due to; reductions in Global Banking & Markets, down £43.6
billion; Non-Core, £13.0 billion; including the transfer of £8.9 billion to
disposal groups; and Ulster Bank, £1.2 billion; together with exchange
rate movements, £21.3 billion, offset in part by growth across all other
divisions, up £23.0 billion, and in the RFS Holdings minority interest, up
£20.6 billion.
Debt securities in issue were down £32.7 billion, 11% to £267.6 billion
mainly as a result of movements in exchange rates, together with
reductions in Global Banking & Markets, Non-Core and the RFS
Holdings minority interest.
Retirement benefit liabilities increased by £0.9 billion, 46%, to £3.0
billion, with net actuarial losses of £3.7 billion, arising from lower
discount rates and higher assumed inflation, partially offset by
curtailment gains of £2.1 billion due to changes in prospective pension
benefits.
Subordinated liabilities were down £11.5 billion, 23% to £37.7 billion,
reflecting the redemption of £5.0 billion undated loan capital, £1.5
billion trust preferred securities and £2.7 billion dated loan capital,
together with the effect of exchange rate movements and other
adjustments, £2.9 billion, partly offset by the issue of £2.3 billion
undated loan capital within the RFS Holdings minority interest.
Equity minority interests decreased by £4.7 billion, 22%, to £16.9 billion.
Equity withdrawals of £3.1 billion, due to the disposal of the investment
in the Bank of China attributable to minority shareholders and the
redemption, in part, of certain trust preferred securities, exchange rate
movements of £1.4 billion, the recycling of related available-for-sale
reserves to income, £0.5 billion, and dividends paid of £0.3 billion, were
partially offset by attributable profits of £0.3 billion.
Owners' equity increased by £18.9 billion, 32% to £77.7 billion. The
issue of B shares to HM Treasury in December 2009 raised £25.1
billion, net of expenses, and was offset in part by the creation of a £1.2
billion reserve in respect of contingent capital B shares. The placing
and open offer in April 2009 raised £5.3 billion to fund the redemption
of the £5.0 billion preference shares issued to HM Treasury in
December 2008. Actuarial losses, net of tax, of £2.7 billion; the
attributable loss for the period, £2.7 billion; exchange rate movements of
£1.9 billion; the payment of other owners dividends of £0.9 billion
including £0.3 billion to HM Treasury on the redemption of preference
shares, and partial redemption of paid-in equity £0.3 billion were partly
offset by increases in available-for-sale reserves, £1.8 billion; cash flow
hedging reserves, £0.6 billion; and the equity owners gain on withdrawal
of minority interests, net of tax, of £0.5 billion arising from the
redemption of trust preferred securities.
Business review continued