RBS 2010 Annual Report Download - page 4

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Chairman’s statement
Philip Hampton, Chairman
dWatch or listen to
Philip Hampton at www.rbs.com/AnnualReport
MFor biographies
see pages 226-229
Business achievements
There are two dimensions to the internal rebuilding process at RBS:
reducing our exposure to certain assets and risks, and strengthening
our core businesses. On asset and risk reduction, we are ahead of
schedule. Our programme of business disposals has attracted the most
attention, with 20 agreements signed or completed in 2010. But our
asset restructuring deals and run-off programme are also contributing
to making RBS a stronger and safer bank, with a greatly improved
capital position and lower funding needs.
This progress means we can increasingly focus on the core businesses
that will drive our future. It has been pleasing to see the early results of
our efforts to strengthen them. For example, we have increased our
share of the mortgage and savings markets in the UK, with account
numbers rising by 44,000 and 579,000, respectively. We are investing
heavily in our core businesses, with a strong emphasis on serving
customers better and improving our efficiency.
Economic backdrop – getting better
The global economy rebounded strongly in 2010, but the strength of
the recovery was unevenly spread across countries, and over time.
Among our core markets, the UK and the US both returned to fairly
modest growth. Conditions in Ireland remained very challenging.
This general improvement must be viewed against a backdrop of
financial market turbulence at various points in the year, especially in
Europe. So while our expectation is that the return of economic growth
in 2010 will be sustained in 2011, and that interest rates will gradually
start to rise during the year, we are vigilant about the downside risks
and the possibility of spill-over effects from political uncertainties in
some countries and regions.
Public policy – lending and remuneration
In the public policy debate, two issues attracted controversy for UK
banks in 2010: lending to companies, especially small and medium
enterprises; and remuneration. In February 2011, the leading UK banks
reached an agreement with the UK Government with the intention of
reducing public controversy and improving constructive relationships.
The agreement involves a series of commitments by the larger banks,
including on lending, remuneration and capital support, which are a
positive reaction to issues of concern in our communities. We welcome
the UK Government’s recognition of the contribution of financial
services to the economy, and its commitment to support the creation
of a level international playing field to promote effective competition.
On lending, it is important that banks give customers confidence that
requests for funds for viable businesses will be met. RBS has been
active in support of our customers over the last two years of significant
downturn. For example, we are on track to meet our current targets for
UK lending availability, agreed in March 2010. In the UK, we lent £52
billion to businesses over the first eleven months of the March 2010 –
February 2011 period, well ahead of our full year target of £50 billion.
Over the same eleven month period we lent over £15 billion to mortgage
customers, resulting in net balance growth of more than £8 billion, in
excess of our full year mortgage net lending target of £8 billion.
RBS Group 2010
Rebuilding and Recovery
There was a step-change in our overall financial
performance last year. The return to operating
profit(1) reflects both the internal rebuilding
process at RBS and the external recovery in
market and economic conditions. We are still
a good way from where we want to be in terms
of our performance but 2010 represents
another big stride towards that goal.
(1) As defined on page 1.