RBS 2009 Annual Report Download - page 55

53RBS Group Annual Report and Accounts 2009
Business review
Business review
Description of business
Introduction
The Royal Bank of Scotland Group plc is the holding company of a large
global banking and financial services group. Headquartered in
Edinburgh, the Group operates in the United Kingdom, the United States
and internationally through its two principal subsidiaries, the Royal Bank
and NatWest. Both the Royal Bank and NatWest are major UK clearing
banks whose origins go back over 275 years. In the United States, the
Group’s subsidiary Citizens is a large commercial banking organisation.
The Group has a large and diversified customer base and provides a
wide range of products and services to personal, commercial and large
corporate and institutional customers in over 50 countries.
Following placing and open offers in December 2008 and in April 2009,
HM Treasury currently own approximately 70.3% of the enlarged
ordinary share capital of the company.
In December 2009, the company issued £25.5 billion of new capital to
HM Treasury. This new capital took the form of B shares, which do not
generally carry voting rights at general meetings of ordinary
shareholders but are convertible into ordinary shares and qualify as
core tier one capital.
Following the issuance of B shares, HM Treasury’s holding of ordinary
shares of the company remained at 70.3% although its economic
interest rose to 84.4%.
HM Treasury has agreed not to convert its B shares into ordinary shares
to the extent that its holding of ordinary shares following the conversion
would represent more than 75% of the company’s issued ordinary share
capital.
The Group had total assets of £1,696.5 billion and owners’ equity of
£77.7 billion at 31 December 2009. The Group’s capital ratios, which
included the equity minority interest of the State of the Netherlands and
Santander in ABN AMRO, were a total capital ratio of 16.1 per cent., a
core Tier 1 capital ratio of 11.0 per cent. and a Tier 1 capital ratio of
14.1 per cent., as at 31 December 2009.
Organisational structure and business overview
Following a comprehensive strategic review, changes have been
made to the Group’s operating segments in 2009. A Non-Core
division has been created comprising those lines of business,
portfolios and individual assets that the Group intends to run off or
sell. Furthermore, Business Services (formerly Group Manufacturing)
is no longer reported as a separate division and its costs are now
allocated to the customer-facing divisions along with certain central
costs. UK Retail & Commercial Banking has been split into three
segments (UK Retail, UK Corporate and Wealth). Ulster Bank has
become a specific segment. The remaining elements of Europe &
Middle East Retail & Commercial Banking, Asia Retail & Commercial
Banking and Share of shared assets form part of Non-Core. The
segment measure is now Operating profit/(loss) before tax which
differs from Contribution used previously; it excludes certain
infrequent items and RFS Holdings minority interest, which is not an
operating segment of the Group. Comparative data have been restated
accordingly.
UK Retail offers a comprehensive range of banking products and
related financial services to the personal market. It serves customers
through the RBS and NatWest networks of branches and ATMs in the
United Kingdom, and also through telephone and internet channels.
UK Corporate is a leading provider of banking, finance, and risk
management services to the corporate and SME sector in the United
Kingdom. It offers a full range of banking products and related financial
services through a nationwide network of relationship managers, and
also through telephone and internet channels. The product range
includes asset finance through the Lombard brand.
Wealth provides private banking and investment services in the UK
through Coutts & Co and Adam & Company, offshore banking through
RBS International, NatWest Offshore and Isle of Man Bank, and
international private banking through RBS Coutts.
Global Banking & Markets (GBM) is a leading banking partner to major
corporations and financial institutions around the world, providing an
extensive range of debt and equity financing, risk management and
investment services to its customers. The division is organised along six
principal business lines: money markets; rates flow trading; currencies
and commodities; equities; credit markets and portfolio management &
origination.
Global Transaction Services ranks among the top five global transaction
services providers, offering global payments, cash and liquidity
management, and trade finance and commercial card products and
services. It includes the Group’s corporate money transmission activities
in the United Kingdom and the United States as well as Global
Merchant Services, the Group’s United Kingdom and international
merchant acquiring business.
Ulster Bank is the leading retail and commercial bank in Northern
Ireland and the third largest banking group on the island of Ireland. It
provides a comprehensive range of financial services through both its
Retail Markets division which has a network of branches and operates
in the personal and bancassurance sectors, and its Corporate Markets
division which provides services to SME business customers,
corporates and institutional markets.
US Retail & Commercial provides financial services primarily through
the Citizens and Charter One brands. US Retail & Commercial is
engaged in retail and corporate banking activities through its branch
network in 12 states in the United States and through non-branch offices
in other states. It ranks among the top five banks in New England.
RBS Insurance sells and underwrites retail and SME insurance over the
telephone and internet, as well as through brokers and partnerships. Its
brands include Direct Line, Churchill and Privilege, which sell general
insurance products direct to the customer, as well as Green Flag and
NIG. Through its international division, RBS Insurance sells general
insurance, mainly motor, in Germany and Italy. The Intermediary and
Broker division sells general insurance products through independent
brokers.