RBS 2011 Annual Report Download - page 218

216 RBS Group 2011
Risk management: Country risk continued
Ireland continued
Key points*
xThe Group’s exposure to Ireland is driven by Ulster Bank Group
(87% of the Group’s Irish exposure at 31 December 2011). The
portfolio is predominantly personal lending of £18.9 billion (largely
mortgages) and corporate lending of £19.0 billion (largely loans to
the property sector). In addition, the Group has lending and
derivatives exposure to the Central Bank of Ireland, financial
institutions and large international clients with funding units based in
Ireland.
xGroup exposure declined in all categories, with notable reductions in
lending of £3.4 billion and in off-balance sheet items of £1.4 billion
over the year, as a result of currency movements and de-risking in
the portfolio.
Central and local government and central bank
xExposure to the central bank fluctuates, driven by regulatory
requirements and by deposits of excess liquidity as part of the
Group’s assets and liabilities management. Exposures fell by £0.7
billion over the year, with most of the decline occurring in the fourth
quarter.
Financial institutions
xGBM and Ulster Bank account for the majority of the Group’s
exposure to financial institutions. Exposure to the financial sector fell
by £1.1 billion during the year, caused by a £0.5 billion reduction in
lending, a £0.4 billion reduction in debt securities and smaller
reductions in derivatives and repos and in off-balance sheet
exposure. The largest category is derivatives and repos where
exposure is affected predominantly by market movements and
transactions are typically collateralised.
Corporate
xCorporate lending exposure fell approximately £0.9 billion over the
year, driven by a combination of exchange rate movements and
write-offs. At the end of 2011, lending exposure was highest in the
property sector (£11.6 billion), which is also the sector that
experienced the largest year-on-year reduction (£0.4 billion). REIL
and impairment provisions rose by £2.0 billion and £1.6 billion
respectively over the year.
Personal
xThe Ulster Bank retail portfolio mainly consists of mortgages
(approximately 95% of Ulster Bank personal lending at 31
December 2011), with the remainder comprising credit card and
other personal lending. Overall personal lending exposure fell
approximately £1.4 billion over the year as a result of exchange rate
movements, amortisation, a small amount of write-offs and a lack of
demand in the market.
Non-Core (included above)
Refer to tables on pages 211 and 212 for details.
xIreland Non-Core lending exposure was £10.2 billion at 31
December 2011, down by £0.6 billion or 6% since 31 December
2010. The remaining lending portfolio largely consists of exposures
to real estate (79%), retail (7%) and leisure (4%).
*unaudited
Business review Risk and balance sheet management continued