RBS 2012 Annual Report Download - page 212

210
Business review Risk and balance sheet management continued
Balance sheet analysis: Debt securities continued
Key points
Debt securities decreased by £44.5 billion or 21% during the year,
principally due to a reduction of £26.4 billion in available-for-sale (AFS)
across the Group and £16.7 billion of HFT positions within Markets
reflecting a combination of de-risking strategies and active balance sheet
management.
HFT
x The £16.7 billion decrease comprised £13.3 billion of central and
local government, £1.3 billion financial institutions, £1.2 billion of
banks and £0.9 billion of corporate:
x Decrease in UK and US government bonds of £1.3 billion and £2.3
billion respectively reflected maturities and disposals in line with
Markets balance sheet management strategy and unwinding of
positions.
x Reduction in other government bonds principally French, Italian,
Swiss and Japanese, was partially offset by moves to German and
Belgian bonds.
AFS
x Decreased by £26.4 billion, comprising £14.9 billion of central and
local government, other financial institutions £7.9 billion, banks £4.3
billion offset by an increase in Corporate of £0.6 billion:
x UK and US government bonds fell by £3.7 billion and £1.8 billion
respectively, primarily due to disposals.
x Group Treasury reduced its liquidity portfolio, reflecting smaller
balance sheet resulting in lower government bonds primarily
German and French (£6.0 billion)
x Japanese government bonds fell by £2.2 billion as lower collateral
was required following a change in clearing status from direct (self-
clearing) to agency.
x Reduction in ABS: US agency decrease reflected maturities and
disposals in light of favourable market conditions in the US, Markets,
and US Retail & Commercial; and Non-Core strategic reductions
also contributed to the decrease in bonds issued by financial
institutions.
x Bank bonds decreased by £4.3 billion of which £1.7 billion related to
Spanish covered bonds reflecting disposals by Group Treasury, and
lower positions in Australian and German securities reflected the
close out of positions and maturities, respectively.
Ratings
The table below analyses debt securities by issuer and external ratings. Ratings are based on the lower of Standard and Poor’s, Moody’s and Fitch.
Central and local government
2012
UK
£m
US
£m
Other
£m
Banks
£m
Other financial
institutions
£m
Corporate
£m
Total
£m
Total
%
Of which
ABS (1)
£m
Total
AAA 17,471 31 17,167 2,304 11,502 174 48,649 30 10,758
AA to AA+ — 36,357 7,424 1,144 26,403 750 72,078 44 28,775
A to AA- — 6 11,707 2,930 3,338 1,976 19,957 12 2,897
BBB- to A- — — 6,245 4,430 4,217 1,643 16,535 10 7,394
Non-investment grade — — 928 439 3,103 614 5,084 3 2,674
Unrated — 1 2 308 1,541 469 2,321 1 1,087
17,471 36,395 43,473 11,555 50,104 5,626 164,624 100 53,585
Core
AAA 17,471 31 17,161 2,296 10,023 172 47,154 30 9,319
AA to AA+ — 36,283 7,419 1,137 24,879 748 70,466 45 27,255
A to AA- — 6 11,707 2,920 2,019 1,968 18,620 12 1,603
BBB- to A- — — 6,245 4,430 3,701 1,602 15,978 10 6,812
Non-investment grade — — 682 439 2,361 496 3,978 2 2,176
Unrated — 1 2 294 1,297 338 1,932 1 859
17,471 36,321 43,216 11,516 44,280 5,324 158,128 100 48,024
Non-Core
AAA — — 6 8 1,479 2 1,495 23 1,439
AA to AA+ — 74 5 7 1,524 2 1,612 25 1,520
A to AA- — — — 10 1,319 8 1,337 21 1,294
BBB- to A- — — — — 516 41 557 8 582
Non-investment grade — — 246 — 742 118 1,106 17 498
Unrated — — — 14 244 131 389 6 228
— 74 257 39 5,824 302 6,496 100 5,561
For the note to these tables refer to page 212.