RBS 2010 Annual Report Download - page 36

RBS Group 201034
Global Banking & Markets
“Only by truly understanding our clients’ needs
can we apply our expertise to its best effect.
That is why long-term customer relationships
are so important at RBS.”
In 2010, we made good progress implementing the GBM strategy
and achieving our ambitions. Our people found ways to work more
intelligently to help clients rebuild from the financial downturn at a time
when competition was fierce, the regulatory landscape changed and
market conditions were subdued.
GBM had a reasonable set of financial results. Even as the make-up of
our business made the revenue environment challenging, we reduced
costs and impairments to post an above-target return on equity of 16.6
per cent. We invested in reinforcing our core platforms and contributed
to the restructure of the RBS Group, working with the Non-Core Division
on the sale of a GBP1.4 billion portfolio of primarily senior leveraged
loans and of GBP3.9 billion of project finance assets.
Focusing on clients
We continued to focus on improving our client offering. We refined how
we interact with clients to make it more customer focused and efficient,
including aligning operations in our core Fixed Income, Currencies &
Commodities business. We deployed our expertise to support our
customer’s ambitions, leading to notable transactions including:
•The World Bank: Joint bookrunner for the first US dollar global
benchmark bond launched by The World Bank in 2010,
a USD3.5 billion, three-year deal.
•Cheung Kong Infrastructure and Power Assets Holdings: Sole
financial advisor and lead mandated arranger in the GBP5.8 billion
purchase of EDF’s UK electricity distribution networks.
•SAS AB: Joint lead manager and joint bookrunner on a SEK5 billion
fully underwritten rights issue.
•RWE: Joint bookrunner on the largest ever euro corporate
hybrid bond sale.
•CIBC: Inaugural USD2 billion three-year and USD1.85 billion
five-year covered bonds, which re-opened the US market after
a three-year hiatus.
•Scottish and Southern Energy: Structuring advisor and joint lead
manager on the GBP750 million and EUR500 million corporate hybrid
for SSE. It was the first ever hybrid in sterling from a UK-listed
company and reopened the global market.
John Hourican
Chief Executive,
Global Banking & Markets
MFor biographies
see pages 226-229
Return on equity (%) Cost:income ratio (%)
2010 17 56
2013 >15 c.55
target
39
GBM is present
in 39 countries
16.6%
return on equity
Global Banking & Markets (GBM) provides
financing, risk management and advisory
services to major corporations, financial
institutions and public sector clients in
39 countries.
Key business highlights
• Operating profit excluding fair value of own debt fell by 42%,
reflecting sharply reduced revenue, partially offset by lower
costs and a significant improvement in impairment losses
• Expenses fell by 6%
• Impairment losses were £489 million lower than in 2009
2010 2009
Performance highlights £m £m
Net interest income 1,276 2,243
Non-interest income 6,636 8,815
Total income 7,912 11,058
Expenses (4,397) (4,660)
Operating profit before impairment losses
and fair value of own debt 3,515 6,398
Impairment losses (151) (640)
Operating profit before fair value of own debt 3,364 5,758
Fair value of own debt 139 (49)
Operating profit 3,503 5,709
Risk-weighted assets (£bn) 146.9 123.7
Return on equity 16.6% 29.8%
Net interest margin 1.05% 1.38%
Cost:income ratio 56% 42%
Loan:deposit ratio 193% 194%