RBS 2011 Annual Report Download - page 11

RBS Group 2011 9
When I became your Chairman in 2009, our urgent task was to stabilise RBS and then to begin
the job of rebuilding the company.
We have made good progress in three years. The balance sheet has been reduced by over £700
billion from its peak. Our reliance on short-term wholesale funding, which stood at £297 billion
at the end of 2008 has been cut to £102 billion. We repaid more than £20 billion of government-
guaranteed debt in 2011. At 10.6%, our Core Tier 1 ratio is one of the strongest among our peers.
Our actions have made RBS safer
and more stable.
Achievements like these require hard work. The
Board is committed to restoring RBS to good
health. We also made comprehensive changes
to the executive management team after 2008.
I am confident that they, ably led by Stephen
Hester, are the right people to rebuild RBS. All
of us understand our duties and responsibilities
and are determined to fulfil them diligently.
It is the Board’s view that running the business
on commercial grounds is the best way to
make the bank safer and more valuable for
everyone who depends upon it. I do not believe
there is a workable alternative if our aim is to
provide the opportunity for the UK government
to sell its shares in the public markets in a
reasonable timescale.
A sign that we have succeeded will be the
desire of private investors to acquire the UK
government’s stake. While these investors hold
only 18% of our shares today, their view of our
performance, leadership and strategy is crucial.
All being well, they will own the majority of the
equity capital of the company in future years.
In the meantime, the job of rebuilding the
Group is far from complete. The need to
address the legacy of losses in a number of
businesses means that the Group is not yet
profitable, although in 2011 our core
businesses earned a profit of £6 billion and a
return on tangible equity of 10.5%.
During 2011, we faced weak and deteriorating
economic and market conditions. We dealt with
those. For example, we accelerated our Non-
Core run-down, reduced risk concentrations
and strengthened our liquidity and funding
position. The Independent Commission on
Banking published its findings and the UK
government responded with its plans. We have
begun to deal with its far-reaching implications.
In January 2012, we announced how we will
reshape our international wholesale business.
So, we can adapt and we have adapted our
plans to changing conditions. That is simply
doing business.
Other external forces affect banks in the UK
and especially RBS. We know we are different.
I have said often that we are grateful to, and are
well aware of the interest in the Group by UK
taxpayers. We intend to repay them by
restoring RBS, allowing the bank to do its vital
job of serving our customers and being part of
a vibrant and successful economy.
At present, we are an unusual company,
operating commercially, listed on the stock
market but majority-owned by the UK
government. It is a challenge for all those
involved to manage the complexities and
occasional tensions in this structure. The ability
to run the company on a commercial basis can
be hindered by elements of the periodic
debate on how to respond to such tensions, in
the media and elsewhere. The Board believes it
is important to remain commercially focussed,
recognising where we can the political context
in which we operate.
I understand people’s anger and anxiety about
inequalities in pay at a time when the economy
is weak and many people are finding things
tough. RBS alone cannot fix these wider issues
if we are to achieve what is asked of us
commercially. But we have led the way in
changing how we pay our people. We asked
our shareholders how they expect us to set
incentives. In response, we have aligned the
longer-term rewards our people receive with
our shareholders’ interests. When we reward
good performance, the amount paid in cash is
minimal, with most of it paid in shares and
bonds. If the subsequent results so warrant, we
can claw back awards. I am confident that our
practices will stand favourable comparison with
others’.
Fulfilling our wider responsibilities
As we rebuild RBS, we are fulfilling our
responsibilities to the communities in which our
customers and people live and work.
Last year, we:
•provided more than 40p in every £1 lent to
UK small and medium-sized businesses;
•opened nearly 120,000 new start-up
accounts across the UK;
•provided an average of 4,000 business
loans each week;
•helped over 5,000 UK businesses back to
health through our Specialised Relationship
Management teams; and
•recruited more than 8,000 16-24 year olds.
These demonstrate the role we can and will
play in serving and helping society and the
economy. We are building on them. Our Board-
level Sustainability Committee is talking to our
stakeholders about the elements of our business
that matter to them and in 2012 we will publish
demanding environmental targets that will drive
a reduction in our carbon footprint.
The Board
We were pleased to welcome three new
independent non-executive directors to the
Board: Alison Davis, Tony Di Iorio and Baroness
Noakes. They bring a wealth of experience,
along with a strong global perspective. They
have already made a significant contribution to
the work of the Board since they joined.
Colin Buchan retired as a director in August
2011 and John McFarlane will step down in
March 2012. We have greatly appreciated the
experience, commitment and knowledge they
brought to the Board.
Thanks
Finally, I wish to thank our employees. They
are rebuilding RBS each day by serving our
customers. They did that very well indeed in
2011, even as many faced major uncertainties.
I am grateful to them.
Philip Hampton
Chairman
Our business and our strategy
Chairman’s statement