RBS 2013 Annual Report Download - page 161
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Business review
159
Non-Core has successfully achieved and surpassed its five year Strategic
Plan target, reducing third party assets from the opening £258 billion
position to end 2013 significantly below the original c.£40 billion target at
£28 billion. Over the life of Non-Core this represents an overall reduction
of £230 billion, or 89%. This was achieved through a mixture of
disposals, run-off and impairments. By the end of 2013, the Non-Core
funded balance sheet was c.4% of the Group’s funded balance sheet
compared with 21% when the division was created. RWAs have reduced
from £171 billion to £29 billion, or 83%, over the life of Non-Core.
Third party assets were reduced by £29 billion, or 51%, during the year.
Approximately £3.1 billion of the reduction was due to increased
impairments as a result of the change in the future run-down/disposal
plan for the remaining Non-Core assets under the transition to RCR.
2013 is the final reporting period for the Non-Core division. Approximately
£12 billion of assets which were managed by Non-Core are to be
returned to the relevant Core divisions, with the remaining assets
transferring to RCR from 1 January 2014.
2013 compared with 2012
Third party assets declined by £29 billion, or 51%, reflecting run-off of
£15 billion, disposals of £11 billion and impairments of £5 billion, of which
£3.1 billion is driven by the new RCR strategy to exit these assets over a
shorter timeframe than previous plans.
Risk-weighted assets were £31 billion lower, driven by disposals and run-
off.
Operating loss of £5,527 million was £2,648 million higher than 2012,
principally due to a £2,353 million increase in impairments. This was
predominantly due to £3,118 million of 2013 impairments related to the
creation of RCR, most significantly with £2,299 million in Ulster Bank and
£742 million in International Banking, driven by the new RCR strategy to
exit these assets over a shorter timeframe than previous plans, which has
led to increased impairment losses on the non-performing assets.
Operating loss before impairment losses was £295 million higher with a
reduction in net interest income of £407 million, £207 million additional
disposal losses and £104 million further fair value writedowns offset by
£506 million lower losses from trading activities.
The reduction in net interest income of £407 million was driven by a 31%
fall in interest earning assets driven by run-off and disposals.
Headcount declined by 1,700, or 55% to 1,400 of which 1,000 relates to
operations in India and Romania, reflecting divestment activity and run-
off.
2012 compared with 2011
Third party assets declined by £35 billion, or 38%, largely reflecting
disposals of £18 billion and run-off of £16 billion. The disposal of RBS
Aviation Capital in Q2 2012 contributed c.£5 billion of this reduction.
Risk-weighted assets were £33 billion lower, principally driven by
disposals, run-off and restructuring of existing positions.
An operating loss of £2,879 million was £1,340 million lower than 2011,
principally due to lower impairments and expenses, partially offset by
lower net interest income following run-off and disposals.
Impairment losses fell by £1,694 million to £2,223 million, with £1,366
million of this reduction from the Ulster Bank portfolio and £269 million
from the real estate portfolio.
Income declined by £686 million as continued divestment and run-off
reduced net interest income. Rental income was lower following the
disposal of RBS Aviation Capital in Q2 2012.
Expenses were £332 million lower, driven by reduced headcount and
lower operating lease depreciation, principally following the disposal of
RBS Aviation Capital.
Headcount declined by 29% to 2,900 reflecting the divestment activity
and run-off across the business.