RBS 2011 Annual Report Download - page 153

RBS Group 2011 151
By sub-sector
UK
(excl NI)
£m
Ireland
(ROI & NI)
£m
Western
Europe
£m
US
£m
RoW
£m
Total
£m
2011
Residential 12,871 7,449 1,096 1,325 319 23,060
Office 7,155 1,354 2,248 404 352 11,513
Retail 8,709 1,641 1,893 285 275 12,803
Industrial 4,317 507 520 24 105 5,473
Mixed/other 9,669 4,235 3,001 4,898 194 21,997
42,721 15,186 8,758 6,936 1,245 74,846
2010
Residential 15,543 7,726 685 1,471 523 25,948
Office 8,539 1,178 2,878 663 891 14,149
Retail 10,607 1,668 1,888 1,025 479 15,667
Industrial 4,912 515 711 80 106 6,324
Mixed/other 9,796 4,480 5,116 5,646 284 25,322
49,397 15,567 11,278 8,885 2,283 87,410
2009
Residential 17,197 7,352 1,065 2,134 505 28,253
Office 9,381 1,536 5,034 1,614 975 18,540
Retail 5,760 686 998 492 700 8,636
Industrial 11,378 2,599 3,592 2,053 402 20,024
Mixed/other 12,501 3,633 3,125 3,243 231 22,733
56,217 15,806 13,814 9,536 2,813 98,186
Note:
(1) Excludes commercial real estate lending in Wealth as these loans are generally supported by personal guarantees in addition to collateral. This portfolio, which totalled £1.3 billion at 31 December
2011 continues to perform in line with expectations and requires minimal provision.
Key points
xIn line with the Group’s strategy, exposure to commercial real estate
was reduced during 2011, affecting mainly the UK and Western
Europe given that these regions account for the majority of the
portfolio. Overall this portfolio decreased circa 25% from the end of
2009 to the end of 2011.
xMost of the decrease is in Non-Core due to run-off and asset sales.
The Non-Core portfolio totalled £34.3 billion (46% of the portfolio) at
31 December 2011 (2010 - £45.1 billion, or 52% of the portfolio) and
includes exposures in Ulster Bank as discussed on page 160.
xWith the exception of exposure in Spain and in Ireland, the Group
has minimal commercial real estate exposure to other eurozone
periphery countries. Exposure in Spain is predominantly in the Non-
Core portfolio and totals £2.3 billion, of which 36% is in AQ1-AQ9.
The remainder of the Spanish portfolio has already been subject to
material write-off and provision levels have been assessed based on
re-appraised values. There are significant differences in values
based on geographic location and asset type.
xThe UK portfolio is focused on London and the South East (44%),
with the remainder well spread across the UK regions.
xShort-term lending to property developers without sufficient pre-let
revenue at origination to support investment financing after practical
completion is classified as speculative. Speculative lending at
origination represents approximately 1% of the portfolio. The
Group’s appetite for originating speculative commercial real estate
lending is very limited and any such business requires senior
management approval.
xThe commercial real estate market is expected to remain
challenging in key markets and new business will be accommodated
from run-off of existing Core exposure. As liquidity in the market
remains tight, the Group is focusing on re-financings and supporting
its existing client base.