RBS 2011 Annual Report Download - page 28

26 RBS Group 2011
Serving customers well
Market conditions were difficult in 2011.
We focused on giving our clients the solutions
they needed. Sometimes we did that by
changing how we work to best serve our
clients and we also harnessed new
technologies. We maintained leading
positions in our chosen markets.
We worked closely with our clients to help
them build their businesses and create value
for their own customers.
The Housing Finance Corporation (HFC) makes
loans to housing associations that provide
affordable houses to tenants. We helped the
HFC to take advantage of low borrowing costs
through the sale of a 32-year bond. The HFC
lent the money to seven housing associations
so that they could fund affordable housing.
Heathrow is one of the world’s busiest airports.
With our help, BAA, its operator, raised US$1
billion to invest in improvements. This was the
first bond the company had sold in US dollars
and the first secured UK corporate transaction
in US dollars.
RBS closed a transaction of more than £2 billion
for Bank of Ireland that assisted it in meeting
its requirements under the Prudential Liquidity
Assessment Review (PLAR) and was an
important step in the normalisation of funding
markets for the group. Subsequently, the bank
successfully secured a significant external
equity investment from a consortium of North
American investors.
In China, we raised capital for our clients in
the Hong Kong renminbi bond market and
enhanced the products we offer in this
offshore currency so that we can take
advantage of its increasing use. The Chinese
weekly newspaper, The Economic Observer
named us Best Offshore RMB House.
We used technology to provide new services
to our clients. RBS AgileTM uses criteria that
clients specify to undertake foreign exchange
trades automatically on their behalf. That
allows them to manage currency risks and
strategy during difficult market conditions.
The trading app we created for the Apple iPad
gives people on the move access to our
analysis, commentary and trading ideas.
Our customers valued the work we did for
them and rewarded us accordingly. We were
named Global Securitisation House of the
Year and EMEA Loan House of the Year by
the International Financing Review. We also
achieved number one rankings in sterling
denominated bonds (Dealogic), in global
e-trading of high-frequency accounts
(Euromoney FX Survey) and in US dollar/sterling
foreign exchange options (Risk Interdealer).
Our European Structured Retail businesses were
named the Quality Leader in Europe by a study
of 164 third-party distributors carried out by
Greenwich Associates. Our expertise in asset-
backed securities (ABS) debt markets earned
us the best bank for ABS and best bank for ABS
research accolades from Credit Magazine.
Building a sustainable risk profile
We reduced our reliance on unsecured funding.
Third party assets fell from £396.7 billion in
2010 to £361.7 billion. The 3% increase in
risk-weighted assets reflected the impact of
regulatory changes, largely offset by risk
management and efficient capital deployment.
Building sustainable value
Operating profit fell by 54% to £1,561 million,
driven by a 25% decline in revenue, much
of this reflecting the deterioration in credit
markets in the second half of the year as the
European sovereign debt crisis intensified.
Our return on equity was 7.7%, down from
16.6% in 2010.
In light of the changed market and regulatory
environment, we have re-focused our strategic
priorities for the longer term. We are combining
our wholesale Banking business with the
international arm of Global Transaction
Services to create a Markets business and an
International Banking unit. We will continue to
offer world-class debt financing, transaction
services and risk management, while seeking
to reduce our use of wholesale funding and
making our capital work harder to improve our
return on equity.
John Hourican
Chief Executive,
Global Banking & Markets
Performance highlights 2011 2010
Operating profit before impairment losses (£m) 1,610 3,515
Impairment losses (£m) (49) (151)
Operating profit (£m) 1,561 3,364
Return on equity (%) 7.7 16.6
Divisional review
Global Banking & Markets