RBS 2013 Annual Report Download - page 5

03
2013 Financial Results
Restructuring our balance sheet
Third party assets were reduced by £130 billion over the course of 2013, with
Markets down £72 billion and Non-Core down £29 billion. In the five years since the
end of 2008, the funded balance sheet has been reduced by £487 billion and total
assets by £1,191 billion.
The Core Tier 1 ratio was 10.9% at 31 December 2013. On a fully loaded Basel III
basis, the Common Equity Tier 1 ratio was 8.6%. The impact of the regulatory and
redress provisions booked in Q4 2013 was already reflected in our future capital
plan, and RBS continues to target a fully loaded Basel III Common Equity Tier 1 ratio
of c.11% by the end of 2015 and 12% or above by the end of 2016.
Continued improvement in credit quality, particularly in the UK Retail and Non-
Core portfolios, saw risk elements in lending fall by 4%. Reflecting the increased
impairments associated with the creation of RCR, provision coverage increased from
52% at end 2012 to 64% at end 2013.
RBS remains highly liquid, with short-term wholesale funding down £10 billion
to £32 billion at the end of 2013, covered more than four times by a £146 billion
liquidity portfolio.
Building a bank that is trusted
by its customers
RBS has announced a refreshed strategic
direction with the ambition of building a bank
that earns its customers’ trust by serving them
better than any other bank.
The bank will be structured around the needs
of its customers, with seven existing operating
divisions realigned into three businesses:
Personal & Business Banking, Commercial &
Private Banking and Corporate & Institutional
Banking.
Ulster Bank in Northern Ireland will benefit
from a closer integration with our personal,
business and commercial banking franchises
in Great Britain. We are continuing to explore
further opportunities in the Republic of Ireland
with a view to being a challenger to the
systemic banks.
To position RBS to deliver a sustainable
overall return on tangible equity of 12% plus
in the long term, we must achieve a significant
reduction in costs and complexity.
This simplification is intended to deliver
significant improvements to services delivered
to our customers while at the same time
helping to bring our cost base down from
£13.3 billion in 2013 to £8 billion in the medium
term(9).
Future performance will be reported against
customer and financial measures. Further
details are set out on page 10.
Operating results
RBS recorded an operating profit(1) of £2,520
million excluding the impact of the creation of
RCR which reduced income by £333 million
and increased impairments by £4,490 million.
Including these RCR-related impairment
and other losses of £4,823 million(10), RBS
recorded an operating loss of £2,303 million.
Group income, excluding the RCR impact,
was down 10% to £19,775 million, principally
reflecting a £1,161 million reduction in Markets
income, with expenses down 4% to £13,313
million.
Retail & Commercial operating profit,
excluding £1,385 million of impairments and
other losses related to the creation of RCR,
was down 4% to £4,078 million, with lower
income in UK Corporate and International
Banking offsetting improved impairments in
Ulster Bank and UK Retail.
Markets operating profit, excluding £18 million
of impairments related to the creation of RCR,
was down 58% to £638 million, reflecting its
smaller balance sheet and reduced risk levels.
Non-Core losses, excluding £3,420 million of
impairments and other losses related to the
creation of RCR, were down 27% to £2,107
million, with the cost base falling in line with
run-off.
Loss attributable to shareholders was £8,995
million, reflecting the charges relating to the
creation of RCR and legacy conduct litigation
and redress, the write-down of goodwill and
other intangible assets and deferred tax assets.
Tangible net asset value per ordinary and B
share was 363p at 31 December 2013.