RBS 2012 Annual Report Download - page 190

188
Business review Risk and balance sheet management continued
Key credit portfolios*: Residential mortgages: Key points continued
Ulster Bank
x Ulster Bank’s residential mortgage portfolio totalled £19.2 billion at
31 December 2012, with 88% in the Republic of Ireland and 12% in
Northern Ireland. At constant exchange rates, the portfolio
decreased 2% from 31 December 2011 as a result of natural
amortisation and limited growth due to low market demand.
x The assets include £2.3 billion of exposure (12%) of residential buy-
to-let loans. The interest rate product mix is approximately 91% on a
variable rate product (including tracker products) and 9% on a fixed
rate.
x 16% of the total portfolio is on interest only which reflects legacy
policy and is no longer available to residential mortgage customers
on a permanent basis. Interest only is permitted on a temporary
basis under the suite of forbearance treatments available within
Ulster Bank (refer to page 178 for further information). Interest only
repayment remains an option for private customers within Northern
Ireland on an exception basis.
x Average LTVs increased from 31 December 2011 to 31 December
2012, on a value basis, as a result of decreases in the Central
Statistics Office house price index (4%) impacting the Ulster Bank
portfolio. The average of individual LTV on new originations was
stable in 2012 at 74% (weighted by value of lending) and 69.4% by
volume (2011 - 67.3%). The volume of business remains very low.
The maximum LTV available to Ulster Bank customers is 90% with
the exception of a specific Northern Ireland scheme which permits
LTVs of up to 95%, in which Ulster Bank’s exposure is capped at
85% LTV.
x Refer to the Ulster Bank Group (Core and Non-Core) section on
page 192 for commentary on mortgage REIL and repossessions.
RBS Citizens
x RBS Citizens’ mortgage portfolio totalled £21.5 billion at 31
December 2012, a reduction of 11% from 2011 (£24.2 billion). The
Core business comprises 89% of the portfolio.
x The portfolio comprises £6.2 billion (Core - £5.8 billion; Non-Core -
£0.4 billion) of residential mortgages, of which 1% are in second lien
position. There is also £15.3 billion (Core - £13.3 billion; Non-Core -
£2.0 billion) of home equity loans and lines. Home equity Core
consists of 47% in first lien position while Non-Core consists of 95%
in second lien position.
x RBS Citizens’ lending originates predominantly in the ‘footprint
states’ of New England, Mid Atlantic and Mid West regions. At 31
December 2012, £17.9 billion (83% of the total portfolio) was within
footprint.
x The Non-Core portfolio comprises 11% of the mortgage portfolio
with the serviced by others (SBO) portfolio being the largest
component (75%). The SBO portfolio consists of purchased pools of
home equity loans and lines. The full year charge-off rate was 7.4%
for 2012 (excluding one-time events, the charge-off rate was 6.8%),
which represents a year-on-year improvement (2011 - 8.6%). It is
characterised by out-of-footprint geographies, high (95%) second
lien concentration, and high LTV exposure (111% weighted average
LTV at 31 December 2012). The SBO book has been closed to new
purchases since the third quarter of 2007 and is in run-off, with
exposure down from £2.3 billion at 31 December 2011 to £1.8 billion
at 31 December 2012. The arrears rate of the SBO portfolio has
decreased from 2.3% at 31 December 2011 to 1.9% at 31
December 2012 due primarily to portfolio liquidation (highest risk
borrowers have been charged-off), as well as more effective account
servicing and collections.
x The current weighted average LTV of the mortgage portfolio
decreased from 77% at 31 December 2011 to 75% at 31 December
2012, driven by increases in the Case-Shiller home price index from
the third quarter of 2011 to the third quarter of 2012. The current
weighted average LTV of the mortgage portfolio, excluding SBO, is
71%.
*unaudited