RBS 2012 Annual Report Download - page 176

Early problem identification and problem debt management: Wholesale renegotiations continued
The data presented in the tables below include loans renegotiated during 2011 and 2012 which individually exceed thresholds set at divisional level,
ranging from nil to £10 million. This population captures approximately 68% of that proportion of the wholesale portfolio which is either on Watchlist or
under GRG stewardship. We continue to refine our reporting processes relating to renegotiated loans and as part of the 2012 review, the amounts in-
progress and completed renegotiations relating to 2011 have been revised.
The table below shows the value of loans (excluding loans where the Group has initiated recovery procedures) where renegotiations were completed
during the year by sector and renegotiation types.
2012 2011 - Revised
Wholesale renegotiations during the year by sector Performing
£m
Non-performing
£m
Non-performing
provision
coverage
%
Performing
£m
Non-performing
£m
Non-performing
provision
coverage
%
Property 1,954 3,288 18 2,166 3,215 25
Transport 832 99 23 771 670 10
Telecommunications, media and technology 237 341 46 57 33 30
Retail and leisure 487 111 34 331 433 10
Other (1) 792 245 28
893 792 42
Total 4,302 4,084 22 4,218 5,143 25
Note:
(1) SME business within Wealth is now reported within Wholesale forbearance.
Renegotiation agreements
The table below analyses the incidence of the main types of renegotiation by loan value:
Loans by value
Arrangement type 2012
%
Revised
2011
%
Variation in margin 9 12
Payment concessions and loan rescheduling 69 92
Forgiveness of all or part of the outstanding debt 29 33
Other (2) 20 9
Notes:
(1) The total above exceeds 100% as an individual case can involve more than one type of arrangement.
(2) Main types of “other” concessions include formal “standstill” agreements, release of security and amendments to negative pledge. 2012 saw the completion of a small number of material standstill
agreements, accounting for the higher proportion of the “Other” modification type.
Key points
x Renegotiations completed during 2012, subject to thresholds as
explained above, were £8.4 billion (2011 - £9.4 billion). The volume
of renegotiations continues at a high level as difficult economic
conditions persist in the UK and Ireland, particularly in real estate
markets and the Group continues its active problem debt
management. Renegotiations are likely to remain significant: at 31
December 2012 loans totalling £13.7 billion (2011 - £11.7 billion)
were in the process of being renegotiated but had not yet reached
legal completion (these loans are not included in the tables above).
Of these 69% were non-performing loans, with an associated
provision coverage of 32%, and 31% were performing loans. The
principal types of arrangements being offered include variation in
margin, payment concessions and loan rescheduling and
forgiveness of all or part of the outstanding debt
x Loans renegotiated during 2011 and 2012 outstanding at 31
December 2012 were £17.7 billion, of which £9.3 billion relates to
arrangements completed during 2011.
x Additional provisions charged in 2012 relating to loans renegotiated
during 2011 totalled £0.2 billion and provision coverage of those
loans at 31 December 2012 was 25%.
x Of the loans renegotiated by GRG during 2011 and 2012
(£14.5 billion), 6% had been returned to performing portfolios
managed by the business by 31 December 2012.
x Renegotiated loans disclosed in the table above may have been the
subject of one or more covenant waivers or modifications. In
addition loans totalling £3.5 billion granted financial covenant
concessions only during the year are not included in the table above
as these concessions do not affect a loan’s contractual cash flows.
x Year-on-year analysis of renegotiated loans may be skewed by
individual material cases reaching legal completion during a given
year. This is particularly relevant when comparing the value of
renegotiations completed in the property and transport sectors in
2012 with previous years.
174
Business review Risk and balance sheet management continued