RBS 2010 Annual Report Download - page 5

3RBS Group 2010
Essential reading
Chairman’s statement
Our lending goals to businesses will now continue in 2011, with
additional capacity available to support further growth if demand is
higher than expected. This time, we will be joined by the other large
UK banks. We hope this initiative will help give confidence to stimulate
economic growth. In addition, the banks have agreed to support a new
major equity fund targeted at small businesses, and provide capital to
the UK Government’s “big society” bank.
Our support for business extends beyond lending. This is particularly
true in tough economic times when it is even more important to
preserve economic activity and jobs. A 500-strong team of our most
experienced relationship managers provides intensive support to new
and fast-growing companies, who may be experiencing a recession
and its aftermath for the first time. We have also grown our team of
restructuring specialists who help struggling businesses back to health.
We helped around 950 UK businesses to restructure successfully in
2010. We work with companies of all shapes and sizes across the
country – from a small road haulage business to higher-profile
examples, such as Liverpool Football Club, and large multinationals.
On remuneration, we have been a leading advocate of international,
industry-wide reform in the banking sector over the last two years, having
focused early on the need for deferrals, clawback and strong alignment
of rewards to shareholders’ interests by using equity instead of cash.
Following an extensive consultation with both our institutional
shareholders and UK Financial Investments, the Board has decided
our approach on the key aspects of 2010 remuneration, including
performance-related awards, and has balanced the need to attract
and retain talented people to serve customers effectively with other
key drivers, including regulatory compliance and the control of costs.
It will again include a £2,000 cap on immediate cash bonuses.
On tax, the Government will introduce a levy on banks’ balance sheets
from 1 January 2011. This policy was announced by the Chancellor of
the Exchequer in the June Budget, with the details finalised as part of
the February 2011 agreement outlined above. If the levy had been
applied to the balance sheet at 31 December 2010, the cost of the
levy to RBS would be in the region of £350 to £400 million in 2011.
We made a gross contribution of £3.9 billion to the UK Government in
2010. The bulk of this was taxes, including £1.5 billion paid on behalf
of employees, directly or indirectly. We also paid around £1.5 billion
fees, including £700 million for the Asset Protection Scheme.
Governance – building on the changes we made last year
We made comprehensive changes to the Board and the Executive
Management team in 2009, so last year was one of relative stability.
I remain confident that the Board has the right blend of skills and
experience to succeed. Our management team, under the experienced
leadership of Stephen Hester, is doing an excellent job in moving
RBS forward.
Penny Hughes joined the Board on 1 January, as a Non-executive
Director, and took over as Chair of our Remuneration Committee from
1 June 2010. Brendan Nelson was appointed as a Non-executive
Director with effect from 1 April, and took over as Chair of the Group
Audit Committee following the 2010 AGM.
Archie Hunter left the Board at the 2010 AGM after six years and
I would like to thank him for his work as a director and Chair of the
Audit Committee. The commitment he provided during a time of major
changes on the Board was very professional and valuable.
Finally, Colin Buchan will stand down from the Board in the summer,
after nine years. Again, his commitment as a director and, last year,
as chairman of the Remuneration Committee, has been greatly
appreciated by the Board.
Sustainable Banking – serving local communities
Financial services provide important benefits to society when they are
delivered responsibly and efficiently. Having learned the lessons from
the past, the challenge for RBS is to deliver these services in a way
that our communities value and that our people can be proud of. I am
confident that the changes we are making at RBS in the way we do
business, as well as the business we do, will help to achieve this. Much
of this work is overseen by the Group’s Sustainability Committee, which
is chaired by our Senior Independent Director, Sir Sandy Crombie, and
reports to our Board.
For example, NatWest and RBS introduced Customer Charters in 2010.
These are based on the issues that customers have told us are important
to them, such as making banking easy (we will extend our opening
hours in our busiest branches). Similarly, Ulster Bank in Ireland and
Citizens in the US launched their own commitments, which are already
delivering tangible benefits to our customers.
We are also committed to investing in and developing our community
programmes. Our long-running MoneySense programme continues to
provide education on basic financial matters to thousands of
schoolchildren in the UK, and is actively supported by employee
volunteers. The Citizens ‘Gear for Grades’ programme in the US
provides school supplies for children whose families are unable to
afford them. Since the programme’s inception in 2003, Citizens has
served over 150,000 school children in the US. Our community activities
also include business start-up support and microfinance programmes.
Our annual Sustainability Report contains extensive information on our
activities in this key area for us in the UK, USA, India and many other
countries where we operate.
Value for our shareholders
It is vital that we make a proper financial return on the large amounts
of new capital that RBS has raised in recent years, mainly from the
UK Government. To make that return, we know that we have to run the
businesses efficiently and support our customers effectively. An intrinsic
part of our effectiveness comes from being a healthy and safe bank, with
sufficient capital and liquidity to meet the demands of customers, markets
and regulation. Many banks in the UK and elsewhere, including RBS,
operated for a number of years with levels of capital and liquidity which,
certainly in hindsight, left them weak and vulnerable. Our job is to make
sure RBS remains strong and safe, but also to reward shareholders
appropriately through improving financial results. I hope you will agree
that the progress we have made is evident in our 2010 Results. Much
remains to be done, but we are another important step closer to realising
the potential in the businesses that make up the RBS Group.
Philip Hampton
Chairman