RBS 2013 Annual Report Download - page 237
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Business review Risk and balance sheet management
235
• The Group’s exposure to the shipping sector (including shipping
related infrastructure) declined by 18% in 2013 as a result of
scheduled loan amortisation, secondary sales and prepayments.
Out of the total exposure of £11.4 billion, £8.6 billion related to
asset-backed exposure to ocean-going vessels of which dry bulk
accounted for 35% of the exposure, tankers 34%, container ships
15%, gas 10% and other vessels 6%. Conditions remained poor
across the major shipping market segments in 2013, as charter
rates and vessel values remained depressed. The majority of the
Group’s exposure is extended against security in vessels of recent
construction, with less than 4% of the lending secured on vessels
aged over 15 years. A key protection for the Group is the minimum
security covenant. The overall loan-to-value (LTV) on the portfolio at
31 December 2013 was 76%, split 70% for Core and 97% for Non-
Core portfolio respectively. Within the Core portfolio, 13% of
exposure had LTVs greater than 100%.
• An increased number of clients suffered liquidity challenges during
the year or failed to meet their minimum security covenant. This led
to a commensurate rise in referrals to the Watchlist and transfers to
the Global Restructuring Group. At 31 December 2013, 12% of the
Group’s exposure to this sector was in the Watch Red category and
loans in default amounted to £0.9 billion.
*unaudited
• The reduction in exposure in the retail and leisure sector was
consistent with the Group’s strategies to re-balance the Core
portfolios towards stronger customers in the sector while continuing
to reduce the Non-Core book. The modest growth in North America
was in line with agreed sector and region risk appetite.
• Exposure in the telecoms, media and technology sector fell by 18%
during the year, driven by divisional strategies to exit
underperforming sub-sectors in the portfolio. Notably, media
exposure fell 31% during the year.
• Exposure to healthcare of £9.5 billion at the year end (2012 - £9.9
billion) was included in the business services sector. The Group’s
healthcare exposure was heavily biased towards the UK, which
represented 68% of the exposure, unchanged from 2012.