RBS 2010 Annual Report Download - page 93

Non-interest income declined by 12% in constant currency terms due to
lower fee income driven by reduced activity levels across all business
lines.
Total costs for the year were flat on a constant currency basis. Direct
expenses were down 12% in constant currency terms during 2009, driven
by the bank's restructuring programme, which incorporates the merger of
the First Active and Ulster Bank businesses. The rollout of the
programme has resulted in a downward trend in direct expenses
throughout 2009. The reduction in direct expenses has been offset by a
17% increase in indirect expenses primarily reflecting provisions relating
to the bank's own property recognised in the fourth quarter.
Impairment losses increased to £649 million from £106 million driven by
the continued deterioration in the Irish economic environment and
resultant impact on loan performance across the retail and wholesale
portfolios.
Necessary fiscal budgetary action allied to the well-entrenched downturn
in property markets in Ireland has fed through to higher loan losses.
Mortgage impairments have been driven by rising unemployment and
lower incomes. Loans to the property sector experienced a substantial
rise in defaults as the Irish property market declined, reflecting the difficult
economic backdrop and the uncertainty surrounding the possible effect of
the Irish Government's National Asset Management Agency on asset
values. Sectors driven by consumer spending have been affected by the
double digit decline in 2009 with rising default rates evident.
Customer account numbers increased by 3% during 2009, with growth
fuelled by strong current account activity and new-to-bank savings
customers.
91RBS Group 2010
Business review