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Royal Bank of Scotland Group Plc - Q3 2019 Interim Management Statement

The Royal Bank of Scotland Group plc

Q3 2019 Interim Management Statement


RBS reported an operating loss before tax of £8 million, which included a £900 million provision in respect of Payment Protection Insurance (PPI), compared with an operating profit of £961 million in Q3 2018.

Return on tangible equity was 7.0% for Q3 2019 excluding the PPI charge.

Income was broadly stable across the retail and commercial businesses compared with Q2 2019, excluding notable items.

Group income was impacted by a particularly challenging quarter in NatWest Markets (NWM).

RBS reported an attributable loss of £315 million for Q3 2019.


Supporting our customers through continued lending growth

UK Personal Banking (UK PB) gross new mortgage lending was £8.6 billion in Q3 2019 compared with £6.7 billion in Q2 2019.

Commercial Banking net lending was £0.1 billion higher than Q2 2019. Across Business Banking, SME & Mid-Corporate, and Specialised business, lending continues to increase, with year to date growth of £1.6 billion.

We continue to achieve net lending growth across UK PB, Ulster Bank RoI, Commercial and Private Banking at attractive returns; net loans to customers increased by 3.2% on an annualised basis for the year to date, exceeding our 2-3% net loan growth target.

Q3 2019 net impairment loss of £213 million equates to 26 basis points of gross customer loans, compared with 31 basis points in Q3 2018. The cost of risk remains below our view of a normalised long term loss rate of 30-40 basis points.


Continuing competitive market

Across the retail and commercial businesses, income decreased by 3.1% compared with Q3 2018 excluding notable items.

Bank net interest margin (NIM) of 1.97% was 5 basis points lower than Q2 2019 primarily reflecting the contraction of the yield curve and competitive pressures in the mortgage business as front book margins, whilst higher than Q2 2019, remain lower than back book margins.

NWM had a challenging quarter with core income of £184 million, lower by £147 million, or 44.4%, than Q3 2018. Rates income in particular was impacted by a deterioration in economic sentiment for the global economy and a fall in bond yields. This, together with legacy items culminated in a loss of £193 million for the quarter.

Costs decreased by £20 million in comparison to Q3 2018, with a £193 million cost reduction achieved for the year to date. We remain on track to achieve our £300 million target for full year 2019.


Capital generation

CET1 ratio of 15.7% included a 50 basis point reduction in respect of the PPI charge.

RWAs increased by £1.0 billion in Q3 2019 to £189.5 billion, principally reflecting an increase in NWM. In line with previous guidance, we expect to end the year with RWAs of around £185-190 billion.


2019 and 2020 outlook - unchanged(1)

We retain the outlook provided in the 2019 Interim Results.