RBS 2010 Annual Report Download - page 83

The development of the RBS and NatWest Customer Charters aims to
deliver those elements that customers have said are most important to
them, and has been well received by both customers and staff. The
division is reaping continuing benefits from investment in process
improvements and automation, resulting in gains in both service quality
and cost efficiency.
Serving our customers better is a key priority for RBS. While our
customer satisfaction compares well with our competitors we know we
can do more. In June 2010 we launched a Customer Charter setting out
14 commitments to delivering helpful banking.
The Customer Charter reflects the views and expectations of more than
30,000 customers. We are working hard to deliver on the commitments
we have made. This won't happen overnight but the Customer Charter is
our pledge that we will be regularly held to account against the progress
we make. As part of this we will publish an independently-assured report
on our performance every six months.
2010 compared with 2009
Operating profit recovered strongly from the low levels recorded in 2008
and 2009 to £1,372 million. Profit before impairments was up £624 million
or 33% and impairments fell by £519 million as the economic
environment continued to recover.
The division has continued to focus in 2010 on growing secured lending
while at the same time building customer deposits, thereby reducing the
Group’s reliance on wholesale funding. Loans and advances to
customers grew 5%, with a change in mix from unsecured to secured as
the Group actively sought to improve its risk profile. Mortgage balances
grew by 9% while unsecured lending contracted by 10%.
xMortgage growth was due to good retention of existing customers
and new business, the majority of which comes from the existing
customer base. Gross mortgage lending market share remained
broadly in line with 2009 at 12%, with the Group on track to meet its
Government target on net mortgage lending.
xCustomer deposits grew 10% on 2009, reflecting the strength of the
UK Retail customer franchise, which outperformed the market in an
increasingly competitive environment. Savings balances grew by £8
billion or 13% with 1.8 million accounts opened, outperforming the
market total deposit growth of 3%. Personal current account
balances increased by 3% on 2009.
Net interest income increased significantly by 18% to £4,078 million,
driven by strong balance sheet growth and repricing. Net interest margin
improved by 32 basis points to 3.91%, with widening asset margins
partially offset by contracting liability margins in the face of a competitive
deposit market.
Non-interest income declined 11% to £1,327 million, principally reflecting
the restructuring of current account overdraft fees in the final quarter of
2009.
Expenses decreased by 5%, with the cost:income ratio (net of insurance
claims) improving from 61% to 53%.
xDirect staff costs declined by 8%, largely driven by a clear
management focus on process re-engineering enabling a 7%
reduction in headcount.
xRBS continues to progress towards a more convenient, lower cost
operating model, with over 4.8 million active users of online banking
and a record share of new sales achieved through direct channels.
More than 7.8 million accounts have switched to paperless
statements and 276 branches now utilise automated cash deposit
machines.
Impairment losses decreased 31% to £1,160 million primarily reflecting
the recovery in the economic environment.
xThe mortgage impairment charge was £177 million (2009 - £124
million) on a total book of £91 billion. Mortgage arrears rates
marginally increased in 2010 but remain below the industry average,
as reported by the Council of Mortgage Lenders. Repossessions
showed only a small increase on 2009, as the Group continues to
support customers facing financial difficulties.
xThe unsecured lending impairment charge was £983 million (2009 -
£1,555 million) on a total book of £18 billion.
Risk-weighted assets decreased by 5% to £48.8 billion, with lower
unsecured lending, improving portfolio credit metrics and small
procyclicality benefits more than offsetting growth in mortgages.
81RBS Group 2010
Business review