RBS 2011 Annual Report Download - page 75

RBS Group 2011 73
2011 2010 2009
£bn £bn £bn
Capital and balance sheet
Loans and advances to customers (gross)
- mortgages 20.0 21.2 16.2
- corporate
- property 4.8 5.4 10.1
- other corporate 7.7 9.0 11.0
- other lending 1.6 1.3 2.4
34.1 36.9 39.7
Customer deposits 21.8 23.1 21.9
Risk elements in lending
- mortgages 2.2 1.5 0.6
- corporate
- property 1.3 0.7 0.7
- other corporate 1.8 1.2 0.8
- other lending 0.2 0.2 0.2
Total risk elements in lending 5.5 3.6 2.3
Loan:deposit ratio (excluding repos) 143% 152% 177%
Risk-weighted assets 36.3 31.6 29.9
Spot exchange rate - €/£ 1.196 1.160 1.126
2011 was another difficult year for the business due to the continued
challenging economic environment. This was reflected in the financial
performance, with ongoing pressure on income and a further increase in
impairment losses.
Ulster Bank continues to make progress on its customer commitments
and deposit gathering strategy, while cost management and targeting
growth in areas that leverage competitive advantage, remain priorities. In
2011, customer numbers increased by 2%, representing a strong
performance in current and savings accounts, driven by the enhanced
customer service highlighted by our 'Help for what matters' programme.
Following a review of the cost base and operating model, 950 proposed
job losses were announced in January 2012, the majority of which are
expected by the end of 2012. This decision is a necessary part of the
changes required to build a stronger sustainable business for the future.
2011 compared with 2010
Operating profit before impairment losses decreased by £40 million in
2011 with lower income partially mitigated by cost savings. Impairment
losses of £1,384 million increased by 19% from 2010 resulting in an
operating loss of £1,024 million, 35% higher than 2010.
Income fell by 7% driven by a contracting performing loan book coupled
with higher funding costs. Loans and advances to customers decreased
by 5% in constant currency terms during 2011.
Expenses fell by 5% reflecting tight management of the cost base across
the business.
Impairment losses increased by 19% largely reflecting the deterioration in
credit metrics on the mortgage portfolio driven by a combination of higher
debt flow and further fall in asset prices.
Despite intense competition, retail and small business deposit balances
have grown strongly throughout 2011, driven by the benefits of a focused
deposit gathering strategy. However, total customer deposit balances fell
by 4% in constant currency terms largely driven by the outflow of
wholesale customer balances due to rating downgrades.
Risk-weighted assets increased by 15% in 2011 reflecting the
deterioration in credit risk metrics.