RBS 2012 Annual Report Download - page 43

RBS GROUP 2012
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Markets is a leading origination, sales and trading business across debt
finance, fixed income, currencies and investor products. The division
offers a unified service to the Group’s corporate and institutional clients.
The Markets’ sales and research teams build strong ongoing client
partnerships, provide market perspective and access, and work with the
division’s trading and structuring teams to meet the client’s objectives
across financing, risk management, investment, securitisation and
liquidity.
Direct Line Group is a retail general insurer with leading market positions
in the United Kingdom, a strong presence in the direct motor channel in
Italy and Germany and a focused position in UK SME commercial
insurance. The Group operates under highly recognised brands such as
Direct Line and Churchill and is comprised of five primary segments:
motor, home, rescue and other personal lines, commercial and
international.
In the UK, Direct Line Group utilises a multi-brand, multi-product and
multi-distribution channel business model that covers most major
customer segments for personal lines general insurance. The Group also
has a focused presence in the commercial market. The Group occupies
leading market positions in terms of in-force policies and has the most
highly recognised brands in the UK for personal motor and home
insurance including Direct Line and Churchill. Other primary Direct Line
Group brands include Privilege and Green Flag; NIG, a provider of
insurance solutions to UK SMEs and Direct Line For Business (“DL4B”),
the Group’s direct commercial brand. The Group is also a major provider
of insurance through a number of strategic partnerships. In Italy and
Germany the Group operates under the Direct Line brand. It is planned
for control of DLG to be ceded by the end of 2013.
Central Functions comprises Group and corporate functions, such as
treasury, finance, risk management, legal, communications and human
resources. The Centre manages the Group's capital resources and
Group-wide regulatory projects and provides services to the operating
divisions.
Non-Core division manages separately assets that the Group intends to
run off or dispose of. The division contains a range of businesses and
asset portfolios primarily from the legacy GBM businesses, higher risk
profile asset portfolios including excess risk concentrations, and other
illiquid portfolios. It also includes a number of other portfolios and
businesses including regional markets businesses that the Group has
concluded are no longer strategic.
Business Services supports the customer-facing businesses and
provides operational technology, customer support in telephony, account
management, lending and money transmission, global purchasing,
property and other services. Business Services drives efficiencies and
supports income growth across multiple brands and channels by using a
single, scalable platform and common processes wherever possible. It
also leverages the Group's purchasing power and is the Group's centre of
excellence for managing large-scale and complex change. For reporting
purposes, Business Services costs are allocated to the divisions above. It
is not deemed a reportable segment.
Business divestments
To comply with the European Commission State aid requirements the
Group agreed a series of restructuring measures to be implemented over
a four year period from December 2009. These measures supplement
the Strategic Plan previously announced by the Group. These include the
divestment of Direct Line Insurance Group plc, the sale of 80.01% of the
Group’s Global Merchant Services business (completed in 2010) and the
sale of substantially all of the RBS Sempra Commodities joint venture
business (largely completed in 2010), as well as the divestment of the
RBS branch-based business in England and Wales and the NatWest
branches in Scotland, along with the direct SME customers across the
UK.
In 2010, the Group reached agreement with Santander UK plc
(‘Santander’) on the sale of certain UK branch-based businesses broadly
comprising the RBS branch-based business in England and Wales and
the NatWest branch-based business in Scotland, along with certain SME
and corporate activities across the UK. However, in October 2012, the
Group announced that it had received notification of Santander’s decision
to pull out of its agreed purchase of these businesses. Santander's
decision followed extensive work by both parties to separate the
businesses into a largely standalone form and to prepare the businesses,
customers and staff for transfer. RBS is continuing to work to fulfil its
obligations to divest these businesses.
Also in October 2012, the Group sold via an initial public offering 520.8
million ordinary shares in Direct Line Insurance Group plc, representing
34.7% of the total issued share capital. This is consistent with the
European Commission’s requirement to cede control by the end of 2013
and complete full divestment from the Group by the end of 2014.
Recent developments
Liability Management Exercise
In January 2013, The Royal Bank of Scotland plc completed a cash
tender offer for approximately £2 billion principal amount of certain US
Dollar, Euro, Sterling, Swiss Franc and Singapore Dollar denominated
senior unsecured securities.
Markets & International Banking Executive changes
On 6 February 2013, the Group announced that John Hourican, Chief
Executive, Markets & International Banking, will leave the Group once he
has completed a handover of his responsibilities. With effect from 1
March 2013, Suneel Kamlani and Peter Nielsen will be co-heads of the
Markets division and John Owen will continue to lead the International
Banking division and will all report directly to the Group Chief Executive.