RBS 2012 Annual Report Download - page 17

Key performance indicator Why? How are we doing? Medium-term target
Return on equity (1) We need to earn solid returns
that consistently cover our cost of
capital in the long run in order to
justify our shareholders’ support Core >12%
Cost:income ratio (2) What it costs us to generate each
unit of income is a key measure
of efficiency affecting how we
price our services and meet
shareholders’ need for profits
Core <55%
Core Tier 1 ratio This is the most important measure
of capital strength. We need to
meet society’s expectation of a
safe and sound banking system by
maintaining a strong capital ratio
>10%
Loan:deposit ratio We want to fund our customer
lending with stable deposits from
customers in order to maintain
a sustainable balance sheet c.100%
Short-term
wholesale funding (3)
We want to have proportionately
low reliance on more volatile
short-term money market funding <10% TPAs (7)
Liquidity portfolio (4) We want to hold a strong liquidity
buffer to guard against unexpected
funding emergencies >1.5x STWF (8)
Leverage ratio (5) A useful cross check to ensure
that we are protected against risks
that might turn out to be greater
than we calculate <18x
10.4% 9.8%
2011 2012
60% 59%
2011 2012
9.7% (6) 10.3%
2011 2012
108% 100%
2011 2012
£102bn
2011 2012
2011 2012
16.9x 15.0x
2011 2012
(1) Based on indicative Core attributable profit taxed
at standard rates and Core average tangible equity
per the average balance sheet (83% of Group tangible
equity based on risk-weighted assets at
31 December 2012).
(2) Cost:income ratio net of insurance claims.
(3) Excluding derivatives collateral.
(4) Eligible assets for contingent liquidity purposes including
cash, Government issued securities and other eligible
securities with central banks.
(5) Funded tangible assets divided by total Tier 1 capital.
(6) Core Tier 1 ratio excluding benefit from the Asset
Protection Scheme of 90 basis points in 2011.
(7) Third Party Assets.
(8) Short-term wholesale funding.
Our key
targets
15
RBS GROUP 2012
£42bn
£155bn £147bn