RBS 2012 Annual Report Download - page 199

RBS GROUP 2012
197
Lending Securities
Reverse
repos Core Non-Core Total Debt Equity Derivatives Other
Balance
sheet value
Non-IFRS
offset (1)
Exposure
post offset
2010 £m £m £m £m £m £m £m £m £m £m £m
Government (2) 645 6,781 1,671 8,452 130,123 — 7,560 291 147,071 (3,916) 143,155
Financial institutions - banks (3) 42,571 57,033 1,654 58,687 22,474 3,259 315,297 57,198 499,486 (312,327) 187,159
- other (4) 51,297 47,161 7,791 54,952 54,726 4,366 84,042 12,740 262,123 (91,059) 171,064
Personal - mortgages — 140,359 6,142 146,501 — — — — 146,501 (19) 146,482
- unsecured — 33,581 3,891 37,472 — — — 48 37,520 (11) 37,509
Property — 42,455 47,948 90,403 2,700 237 3,830 28 97,198 (1,046) 96,152
Construction — 8,680 3,425 12,105 56 31780 — 12,972 (1,406) 11,566
Manufacturing 389 25,797 7,688 33,485 784 113 3,229 — 38,000 (2,156) 35,844
Finance leases (5) — 8,321 8,529 16,850 13 2 14 — 16,879 (134) 16,745
Retail, wholesale and repairs — 21,974 3,191 25,165 520 411,124 — 26,850 (2,468) 24,382
Transport and storage — 15,946 8,195 24,141 879 54 2,703 — 27,777 (224) 27,553
Health, education and leisure — 17,456 1,975 19,431 1,495 42 1,198 — 22,166 (1,047) 21,119
Hotels and restaurants — 8,189 1,492 9,681 276 123 525 — 10,605 (253) 10,352
Utilities — 7,098 2,948 10,046 1,714 229 2,491 2 14,482 (985) 13,497
Other 217 29,053 8,115 37,168 3,021 13,897 9,432 386 64,121 (1,494) 62,627
Total gross of provisions 95,119 469,884 114,655 584,539 218,781 22,394 432,225 70,693 1,423,751 (418,545)1,005,206
Provisions — (7,866) (10,352) (18,218) (1,301)(176) — (29) (19,724) n/a (19,724)
Total including disposal groups
before RFS MI 95,119 462,018 104,303 566,321 217,480 22,218 432,225 70,664 1,404,027 (418,545) 985,482
RFS minority interests — — 2 2 — — — — 2 — 2
Total 95,119 462,018 104,305 566,323 217,480 22,218 432,225 70,664 1,404,029 (418,545) 985,484
For the notes to this table refer to page 204.
Key points
x Financial asset exposures after offset including disposal groups
decreased by £110 billion or 12% to £814 billion, reflecting the
Group’s focus on reducing its funded balance sheet, primarily in
Non-Core, Markets and International Banking.
x Reductions were across all major balance sheet categories: lending
(£54 billion), debt securities (£44 billion) and derivatives (£88 billion).
Conditions in the financial markets and the Group’s focus on risk
appetite and sector concentration had a direct impact on the
composition of its portfolio during the year.
x Exposures to central and local governments decreased by
£34 billion principally in debt securities. This was driven by Markets
de-risking its balance sheet, management of the Group Treasury
liquidity portfolio as well as overall risk reduction in respect of
eurozone exposures. The Group’s portfolio comprises exposures to
central governments and sub-sovereigns such as local authorities,
primarily in the Group’s key markets in the UK, Western Europe and
the US.
x Exposure to financial institutions was £28 billion lower, across
securities, loans and derivatives, driven by economy-wide subdued
activity.
x The banking sector is one of the largest in the Group’s portfolio. The
sector is well diversified geographically and by exposure with
derivative exposures being largely collateralised. The sector is
tightly controlled through the combination of the single name
concentration framework, a suite of credit policies specifically
tailored to the sector and country limits. Exposures to the banking
sector decreased by £22 billion during the period, primarily due to
reduced interbank lending and derivative activity, and a reduction in
limits to banks in countries under stress, such as the peripheral
eurozone countries.
x Exposure to other financial institutions comprising traded and non
traded products is spread across a wide range of financial
companies including insurance, securitisation vehicles, financial
intermediaries including broker dealers and central counterparties
(CCPs), financial guarantors - monolines and credit derivative
product companies (CDPCs) - and funds comprising unleveraged,
hedge and leveraged funds. The size of the Core portfolio has
decreased marginally since 2011. Entities in this sector remain
vulnerable to market shocks or contagion from the banking sector.
Credit risk in these sectors is managed through the single name
concentration, sector concentration and asset and product class
frameworks, with specific sector and product caps in place where
there is a perception of heightened credit risk, such as committed
lending to banks, leveraged funds and insurance holding companies.
The Group continues to develop its risk appetite framework for
CCPs to reflect increased activity with these entities driven by
regulatory requirements. The Group is also managing down its
exposures to monolines and CDPCs with the aim of exiting these
portfolios.