RBS 2009 Annual Report Download - page 56

RBS Group Annual Report and Accounts 200954
Business review continued
Business Services (formerly Group Manufacturing) supports the
customer-facing businesses and provides operational technology,
customer support in telephony, account management, lending and
money transmission, global purchasing, property and other services.
Business Services drives efficiencies and supports income growth
across multiple brands and channels by using a single, scalable
platform and common processes wherever possible. It also leverages
the Group’s purchasing power and is the Group’s centre of excellence
for managing large-scale and complex change.
Central Functions comprises group and corporate functions, such as
treasury, funding and finance, risk management, legal, communications
and human resources. The Centre manages the Group’s capital
resources and Group-wide regulatory projects and provides services to
the operating divisions.
Non-Core Division manages separately assets that the Group intends to
run off or dispose. The division contains a range of businesses and
asset portfolios primarily from the GBM division including RBS Sempra
Commodities, linked to proprietary trading, higher risk profile asset
portfolios including excess risk concentrations, and other illiquid
portfolios. It also includes a number of other portfolios and businesses
including regional markets businesses that the Group has concluded
are no longer strategic.
Business divestments
To comply with EC state aid requirements the Group has agreed a
series of restructuring measures to be implemented over a four year
period. This will supplement the measures in the strategic plan
previously announced by the Group. These include divesting fully RBS
Insurance, Global Merchant Services and RBS Sempra Commodities, as
well as divesting the RBS branch-based business in England & Wales
and the NatWest branches in Scotland, along with the Direct SME
customers across the UK.
Competition
The Group faces strong competition in all the markets it serves.
However, the global banking crisis has reduced either the capacity or
appetite of many institutions to lend and has resulted in the withdrawal
or disappearance of a number of market participants and significant
consolidation of competitors, particularly in the US and UK. Competition
for retail deposits has intensified significantly as institutions have re-
orientated their funding strategies following the difficulties experienced
in the wholesale markets since late 2007.
Competition for corporate and institutional customers in the UK is from
UK banks and from large foreign financial institutions who are also
active and offer combined investment and commercial banking
capabilities. In asset finance, the Group competes with banks and
specialised asset finance providers, both captive and non-captive. In
European and Asian corporate and institutional banking markets the
Group competes with the large domestic banks active in these markets
and with the major international banks.
In the small business banking market, the Group competes with other
UK clearing banks, specialist finance providers and building societies.
In the personal banking segment the Group competes with UK banks
and building societies, major retailers and life assurance companies. In
the mortgage market the Group competes with UK banks and building
societies. A number of competitors have either left or scaled back their
lending in the mortgage and unsecured markets. The Group’s life
assurance businesses compete with Independent Financial Advisers
and life assurance companies.
In the UK credit card market large retailers and specialist card issuers,
including major US operators, are active in addition to the UK banks. In
addition to physical distribution channels, providers compete through
direct marketing activity and the internet.
In Wealth Management, The Royal Bank of Scotland International
competes with other UK and international banks to offer offshore banking
services. Coutts and Adam & Company compete as private banks with
UK clearing and private banks, and with international private banks.
Competition in wealth management remains strong as banks maintain
their focus on competing for affluent and high net worth customers.
RBS Insurance competes in personal lines insurance and, to a more
limited extent, in commercial insurance. There is strong competition from a
range of insurance companies which now operate telephone and internet
direct sales businesses. Competition in the UK motor market remains
particularly intense, and price comparison internet sites now play a major
role in the marketplace. RBS Insurance also competes with local insurance
companies in the direct motor insurance markets in Italy and Germany.
In Ireland, Ulster Bank competes in retail and commercial banking with
the major Irish banks and building societies, and with other UK and
international banks and building societies active in the market.
In the United States, Citizens competes in the New England, Mid-
Atlantic and Mid West retail and mid-corporate banking markets with
local and regional banks and other financial institutions. The Group also
competes in the US in large corporate lending and specialised finance
markets, and in fixed-income trading and sales. Competition is
principally with the large US commercial and investment banks and
international banks active in the US.