RBS 2011 Annual Report Download - page 66

64 RBS Group 2011
UK Retail continued
In 2010, UK Retail set out an aspiration to become the UK’s most helpful
bank and launched the Customer Charter. In 2011, we made good
progress on our Customer Charter commitments and the roll-out of
innovation that actually helps customers. In December 2011, UK Retail
refined its staff incentive scheme to further strengthen the role of
customer service and to help build long lasting customer relationships.
Progress against the Customer Charter commitments is independently
assessed and has shown encouraging results. By the end of 2011, we
achieved the goal of serving 80% of our customers in less than 5 minutes
in our busiest branches. Branch opening hours have also been extended
and standardised, which means that our branches are now open for an
additional 5,000 hours per week at times our customers have told us suit
them.
Innovation has supported the delivery of Helpful Banking by focusing on
solutions that make it easier for customers to bank with RBS and
NatWest. An important example has been giving customers access to 24
hour emergency cash from NatWest and RBS ATMs when their cards are
lost or stolen. We also updated our market-leading iPhone application
and by the end of the year 1 million customers had downloaded the
application. With successful apps also launched for iPad, Android and
Blackberry, RBS is now the leading mobile bank in the UK.
2011 compared with 2010
UK Retail delivered strong full year results, as operating profit increased
by £619 million to £1,991 million, despite continued uncertainty in the
economic climate and the low interest rate environment. Profit before
impairments was up £247 million or 10%, while impairments fell by £372
million, with further improvements in the unsecured book and continued
careful mortgage underwriting. Return on equity improved to 26.4%.
The division continued to focus on growing secured lending while at the
same time building customer deposits, thereby reducing the Group’s
reliance on wholesale funding. Loans and advances to customers grew
2%, with a change in mix from unsecured to secured as the Group
actively sought to improve its risk profile. Mortgage balances grew by 5%,
while unsecured lending contracted by 11%.
-Mortgage growth reflected continued strong new business levels.
Gross mortgage lending market share of 10% continues above our
stock position of 8%.
-Customer deposits grew 6%, outperforming the market total deposit
growth of 3%. Savings balances grew by £6 billion, or 9%, with 1.5
million accounts opened, demonstrating the strength of our customer
franchise and our strategy to further develop primary banking
relationships.
Net interest income increased by 5% to £4,272 million, driven by strong
balance sheet growth. Net interest margin remained broadly flat with
recovering asset margins largely offset by more competitive savings rates
and lower long term swap rate returns adversely impacting liability
margins.
Non-interest income declined 10% to £1,206 million, primarily driven by
lower investment and protection income as a result of the dissolution of
the bancassurance joint venture. In addition, a number of changes have
been made to support delivery of Helpful Banking, such as ‘Act Now’ text
alerts, which have decreased fee income.
Overall expenses decreased by 6%, with the adjusted cost:income ratio
improving from 53% to 49%. Cost reductions were driven by a clear
management focus on process re-engineering and operational efficiency
together with benefits from the dissolution of the bancassurance joint
venture, partly offset by higher inflation rates in utility and mail costs.
Impairment losses decreased 32% to £788 million reflecting the impact of
astrengthened risk appetite, and a more stable economic environment.
Risk-weighted assets were broadly stable, with volume growth in lower
risk secured mortgages partly offset by a decrease in the unsecured
portfolio.
Business review continued