RBS 2011 Annual Report Download - page 71

RBS Group 2011 69
2011 has been a significant year for the Coutts businesses from a
strategic perspective. In Q1 2011, a new divisional strategy was defined
with the execution of early changes already making an impact.
Key strategic changes in 2011 included:
xArefreshed Coutts brand bringing Coutts UK and RBS Coutts under
one single contemporary brand.
xArefocus on territories where the businesses have the opportunity
for greatest scale or growth such as UK, Asia, Middle East, and
Eastern Europe.
xFurther development of client propositions as well as the portfolio of
products and services for key international markets.
xStrategic investment in technology leading to the development of a
single global technology platform for the Wealth division. The
platform was successfully deployed in Adam & Company in 2011
with Coutts UK to follow in 2012.
xStrengthening the connectivity between Wealth and other Group
divisions including referrals in international jurisdictions and
improved connectivity with UK Corporate.
xContinued activity to ensure the division responds to new or
expected regulatory changes with proactive solution design and
preparation.
xInjection of new management into key roles from both internal and
external sources including key segment heads, marketing, products
&services, and international executive leadership.
Following the establishment of a single global brand in Q4 2011, focus
turned to the reorganisation of key global functions such as marketing
and product & services, as well as some local management structures.
These reorganisations have realigned the division to maximise execution
of the divisional strategy.
The execution plan for the strategy will continue into 2012 and position
Wealth strongly against its peers.
2011 compared with 2010
Operating profit increased by 6% on 2010 to £321 million, driven by an
11% growth in income partially offset by increases in expenses and
impairments.
Income increased by £121 million with a 24 basis points improvement in
lending margins, strong treasury income and increases in lending and
deposit volumes. Non-interest income rose 3%, with investment income
growing 2% despite turbulent market conditions.
Expenses increased by £97 million, largely driven by adverse foreign
exchange movements and headcount growth to service the increased
revenue base. Additional strategic investment in technology
enhancement, rebranding and programmes to support regulatory change
also contributed to the increase.
Client assets and liabilities managed by the division decreased by 1%.
Customer deposits grew 3% in a competitive environment and lending
volumes grew 5%. Assets under management declined 9%, with fund
outflows contributing 3% of the decrease and market conditions making
up the balance.
2010 compared with 2009
2010 operating profit fell by 28% driven by lower net interest income and
higher expenses, partly offset by a 45% decline in impairments in the
year.
Income declined by 5% primarily due to lower net interest income. Strong
lending and investment income was offset by the impact of a competitive
deposit market.
Expenses grew by 12% to £734 million. Direct expenses were up 5%,
£23 million reflecting additional strategic investment. Indirect expenses
increased by £55 million reflecting a change in allocation of Business
Services costs.
Assets under management grew by 4% largely through improving market
conditions. On a constant currency basis, assets fell 2% with valuation
gains being offset by client losses in the international businesses,
resulting from the private banker attrition previously experienced.