RBS 2012 Annual Report Download - page 42

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Business review
Description of business
Introduction
The Royal Bank of Scotland Group plc is the holding company of a large
global banking and financial services group. Headquartered in Edinburgh,
the Group operates in the United Kingdom, the United States and
internationally through its principal subsidiaries, the Royal Bank and
NatWest. Both the Royal Bank and NatWest are major UK clearing
banks. In the United States, the Group's subsidiary RBS Citizens is a
large commercial banking organisation. Globally, the Group has a
diversified customer base and provides a wide range of products and
services to personal, commercial and large corporate and institutional
customers.
Following the placing and open offers in December 2008 and in April
2009, HM Treasury owned approximately 70.3% of the enlarged ordinary
share capital of the company. In December 2009, the company issued a
further £25.5 billion of new capital to HM Treasury. This new capital took
the form of B shares, which do not generally carry voting rights at general
meetings of ordinary shareholders but are convertible into ordinary
shares and qualify as Core Tier 1 capital. Following the issuance of the B
shares, HM Treasury's holding of ordinary shares of the company
remained at 70.3% although its economic interest rose to 84.4%.
At 31 December 2012, HM Treasury’s holding in the company’s ordinary
shares was 65.3% and its economic interest was 81.1%.
The Group had total assets of £1,312.3 billion and owners' equity of
£68.1 billion at 31 December 2012. The Group's risk asset ratios at 31
December 2012, were a Total capital ratio of 14.5%, a Core Tier 1 capital
ratio of 10.3% and a Tier 1 capital ratio of 12.4%.
Organisational structure and business overview
Organisational change
In January 2012, the Group announced changes to its wholesale banking
operations in light of a changed market and regulatory environment. The
changes saw the reorganisation of the Group’s wholesale businesses into
‘Markets’ and ‘International Banking’ and the exit from and downsizing of
selected activities. The changes ensure the wholesale businesses
continue to deliver against the Group’s strategy.
The changes include an exit from cash equities, corporate brokering,
equity capital markets and mergers and acquisitions advisory businesses.
Significant reductions in balance sheet, funding requirements and cost
base in the remaining wholesale businesses will be implemented.
Global Banking & Markets (GBM) and Global Transaction Services (GTS)
divisions have been reorganised as follows:
x The ‘Markets’ business maintains its focus on fixed income, with
strong positions in debt capital raising, securitisation, risk
management, foreign exchange and rates. It will serve the corporate
and institutional clients of all Group businesses.
x GBM's corporate banking business has been combined with the
international businesses of the GTS arm into a new ‘International
Banking’ unit and provides clients with a 'one-stop shop' access
to the Group’s debt financing, risk management and payments
services. This international corporate business will be self-funded
through its stable corporate deposit base.
x The domestic small and mid-size corporates previously served by
GTS are now managed within RBS's domestic corporate banking
businesses in the UK, Ireland (Ulster Bank) and the US (US Retail &
Commercial).
Our wholesale business retains its international footprint ensuring that it
can serve our customers' needs globally. We believe that, despite current
challenges to the sector, wholesale banking services can play a central
role in supporting cross border trade and capital flows, financing
requirements and risk management and we remain committed to this
business.
The Group’s activities are organised on a divisional basis as follows:
UK Retail offers a comprehensive range of banking products and related
financial services to the personal market. It serves customers through a
number of channels including: the RBS and NatWest network of
branches and ATMs in the United Kingdom, telephony, online and
mobile. UK Retail remains committed to delivering ‘Helpful and
Sustainable’ banking and to the commitments set out in its Customer
Charter - the results of which are externally assessed and published
every six months.
UK Corporate is a leading provider of banking, finance and risk
management services to the corporate and SME sector in the United
Kingdom. It offers a full range of banking products and related financial
services through a nationwide network of relationship managers, and also
through telephone and internet channels. The product range includes
asset finance through the Lombard brand.
Wealth provides private banking and investment services in the UK
through Coutts & Co and Adam & Company, offshore banking through
RBS International, NatWest Offshore and Isle of Man Bank, and
international private banking through Coutts & Co Ltd.
International Banking serves the world’s largest companies with a leading
client proposition focused on financing, transaction services and risk
management. International Banking serves as the delivery channel for
Markets products to corporate clients and serves international
subsidiaries of both International Banking and clients from UK Corporate,
Ulster Bank and US Retail & Commercial through its international
network.
Ulster Bank is a leading retail and commercial bank in Northern Ireland
and the Republic of Ireland. It provides a comprehensive range of
financial services through both its Retail Banking division, which provides
loan and deposit products through a network of branches and direct
channels, and its Corporate Banking division, which provides services to
businesses and corporate customers.
US Retail & Commercial provides financial services primarily through the
Citizens and Charter One brands. US Retail & Commercial is engaged in
retail and corporate banking activities through its branch network in 12
states in the United States and through non-branch offices in other
states.
The divisions discussed above are collectively referred to as Retail &
Commercial.