RBS 2012 Annual Report Download - page 19

Strategy and business objectives
17
RBS GROUP 2012
Strategy and business objectives
The chosen business mix to produce an attractive blend of
profitability, stability and sustainable growth
How are we going to do this?
Focused on retail and commercial banking
Our leading UK retail and corporate customer franchises
form the anchor of our strategy, strengthened by selected
international businesses that provide deep local franchises
with material synergies with the rest of the Group.
Concentrate on the core strengths of our wholesale
businesses
Re-balance and shrink our markets activities, focusing on
the businesses that form key aspects of our customer
proposition and where we have strength.
Exit Non-Core business lines
Expeditious run-off or sale of businesses and asset portfolios
while maximising the value obtained for the Group.
Our progress so far
Our business mix has made strong progress towards being
dominated by high quality, stable customer franchises. We have
moved from 64% retail and commercial operating profit in 2007
to 83% (operating profit before impairment losses) operating
profit this year, in line with our target.
In this time we have also ramped up our investment in these
businesses, spending on enhancing customer experience,
developing IT infrastructure and transforming our front and back
office functions.
We believe that having a focused international presence adds
value, allowing us to access additional growth opportunities
and benefit from long-term globalisations trends, although we
want to be anchored in the UK. In 2012 we have met our target
geographical business mix with the UK contributing 66% to
income.
We undertook a major restructuring of our wholesale
businesses this year, focusing on our strongest businesses and
exiting loss-makers. We shed £29 billion of funded assets from
Markets balance sheet. This will help improve the efficiency of
our capital usage and strengthen our overall balance sheet and
funding profile whilst ensuring we continue to provide our larger
corporate customers with the access to global markets that they
require.
We have decreased Non-Core’s funded balance sheet by £201
billion since the creation of the division in 2008 through run-off
and disposals.
Medium-term target
Approximately 80% of operating profit to come from our retail
and commercial banking activities and approximately 60% of
income to come from UK businesses
Approximately 20% of operating profit to come from our
Markets activities
Strategy and business objectives
RBS management hallmarks to include an open, investor-friendly
approach, discipline and proven execution effectiveness, strong
risk management and central focus on serving our customers well,
and better
How are we going to do this?
Publish targets for risk/return balance
Demonstrate execution effectiveness by setting clear performance targets for
risk and returns, and give regular updates on progress against them.
Improve levels of disclosure
Rebuild confidence and trust with investors by combining clear performance
targets with improved disclosure.
Set customer franchise targets for every business
Put serving our customers well, and better, at the heart of our agenda.
Measure our progress on this with reference to a series of targets.
Management change
At the centre of its effort to rebuild the Group, RBS is dedicated to maintaining
the strength of its Board and senior management teams.
Strong risk management
Embed the new set of management disciplines to ensure that the RBS of the
future is adequately protected, notably by its risk management processes and
frameworks.
Our progress so far
In 2011, we revisited our targets in light of the economic and regulatory
landscape being significantly different to what was forecast back in 2009 when
the original targets were communicated. We strengthened many of our balance
sheet and risk targets, and the revised income targets indicate that we remain
committed to earning sustainable returns from all our ongoing businesses.
We are transparent in explaining our progress towards targets, reporting this
in our quarterly results. Further details can be found on page 13.
We provide detailed financial information, including disclosures on risk and
balance sheet management, to the market each quarter.
Improving support for our customers was the top goal of our 2009 strategic plan.
We track, and target improvements in, customer satisfaction and market position
for all of our core franchises. In addition, we have implemented customer
charters and have piloted training programmes for our front line staff. We plan to
widen further the scope of these going forward.
We believe that the majority of our people want to, and do, serve our customers
well already. However, we need to do more to ensure that customers receive the
best possible service consistently.
A number of legacy conduct issues have had to be addressed, particularly in
the last year. These highlight the importance of the cultural change we are
undergoing in order for us to do better for our customers in the future.
Since the start of the financial crisis we have overhauled RBS’s management.
We believe that we now have a strong and qualified team in place to finish
restoring RBS to a normal bank, then to build on our core franchises from there.
We are committed to restoring the Group to a sustainable and conservative risk
profile. The RBS risk management framework, and our risk management teams,
are clearly aligned with the Group priority. For an overview of how this is working
in practice, see pages 19 and 20.
Medium-term target
Implemented in 2009, some reviewed in 2012