RBS 2012 Annual Report Download - page 466

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Notes on the consolidated accounts continued
38 Segmental analysis
(a) Divisions
The directors manage the Group primarily by class of business and
present the segmental analysis on that basis. This includes the review of
net interest income for each class of business - interest receivable and
payable for all reportable segments is therefore presented net. Segments
charge market prices for services rendered to other parts of the Group;
funding charges between segments are determined by Group Treasury,
having regard to commercial demands. The segment measure is
operating profit/(loss).
In January 2012, the Group announced the reorganisation of its
wholesale businesses into 'Markets' and 'International Banking'.
Divisional results and the number of persons employed in the divisions
(Note 3) have been presented based on the new organisational structure.
The Group has also reviewed the allocation of funding and liquidity costs
and capital for the new divisional structure as well as for a new
methodology. The new methodology is designed to ensure that the
allocated funding and liquidity costs more fully reflect each division’s
funding requirement. In addition, the Group had previously included
movements in the fair value of own derivative liabilities within the Markets
operating segment. These movements have now been combined with
movements in the fair value of own debt in a single measure, ‘own credit
adjustments’ and presented as a reconciling item. Comparatives have
been restated accordingly.
The Group's reportable segments are 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 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 focussed 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.
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.
Although Direct Line Group has been reclassified as a discontinued
operation, it continues to be presented as a reportable operating
segment.
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 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.