rbs201211026k7.htm
 
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For November 02, 2012
 
Commission File Number: 001-10306

 
The Royal Bank of Scotland Group plc

 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ

 
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X
  
Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________


Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.


Yes
   ___
No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________

 
 
The following information was issued as a Company announcement in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:

 
 
 
 

 
 
 
 
 
 
 
Appendix 1
 
Income statement reconciliations
and Segmental analysis
 
 

 
 
Appendix 1 Income statement reconciliations and Segmental analysis
 
Income statement reconciliations
 
 
Quarter ended
 
30 September 2012
  
30 June 2012
  
30 September 2011
 
Managed 
Reallocation 
of one-off 
items 
Statutory 
  
Managed 
Reallocation 
of one-off 
items 
Statutory 
  
Managed 
Reallocation 
of one-off 
items 
Statutory 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
  
£m 
£m 
£m 
                       
Interest receivable
4,529 
- 
4,529 
  
4,774 
- 
4,774 
  
5,371 
- 
5,371 
Interest payable
(1,656)
(2)
(1,658)
  
(1,801)
(2)
(1,803)
  
(2,293)
(1)
(2,294)
                       
Net interest income
2,873 
(2)
2,871 
  
2,973 
(2)
2,971 
  
3,078 
(1)
3,077 
                       
Fees and commissions receivable
1,403 
- 
1,403 
  
1,450 
- 
1,450 
  
1,452 
- 
1,452 
Fees and commissions payable
(341)
- 
(341)
  
(314)
- 
(314)
  
(304)
- 
(304)
Income from trading activities
769 
(435)
334 
  
931 
(274)
657 
  
282 
675 
957 
(Loss)/gain on redemption of own debt
- 
(123)
(123)
  
- 
- 
- 
  
- 
1 
1 
Other operating income (excluding insurance net premium income)
822 
(1,039)
(217)
  
469 
(75)
394 
  
549 
1,835 
2,384 
Insurance net premium income
932 
- 
932 
  
929 
- 
929 
  
1,036 
- 
1,036 
                       
Non-interest income
3,585 
(1,597)
1,988 
  
3,465 
(349)
3,116 
  
3,015 
2,511 
5,526 
                       
Total income
6,458 
(1,599)
4,859 
  
6,438 
(351)
6,087 
  
6,093 
2,510 
8,603 
                       
Staff costs
(1,943)
(116)
(2,059)
  
(2,036)
(107)
(2,143)
  
(1,963)
(113)
(2,076)
Premises and equipment
(552)
(45)
(597)
  
(523)
(21)
(544)
  
(584)
(20)
(604)
Other administrative expenses
(770)
(489)
(1,259)
  
(936)
(220)
(1,156)
  
(858)
(104)
(962)
Depreciation and amortisation
(374)
(56)
(430)
  
(382)
(52)
(434)
  
(416)
(69)
(485)
                       
Operating expenses
(3,639)
(706)
(4,345)
  
(3,877)
(400)
(4,277)
  
(3,821)
(306)
(4,127)
                       
Profit before other operating charges
2,819 
(2,305)
514 
  
2,561 
(751)
1,810 
  
2,272 
2,204 
4,476 
Insurance net claims
(596)
- 
(596)
  
(576)
- 
(576)
  
(734)
- 
(734)
                       
Operating profit/(loss) before impairment losses
2,223 
(2,305)
(82)
  
1,985 
(751)
1,234 
  
1,538 
2,204 
3,742 
Impairment losses
(1,176)
- 
(1,176)
  
(1,335)
- 
(1,335)
  
(1,536)
(202)
(1,738)
                       
Operating profit/(loss)
1,047 
(2,305)
(1,258)
  
650 
(751)
(101)
  
2 
2,002 
2,004 

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Income statement reconciliations (continued)
 
 
 
Quarter ended
 
30 September 2012
  
30 June 2012
  
30 September 2011
 
Managed 
Reallocation 
of one-off 
items 
Statutory 
  
Managed 
Reallocation 
of one-off 
items 
Statutory 
  
Managed 
Reallocation 
of one-off 
items 
Statutory 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
  
£m 
£m 
£m 
                       
Operating profit/(loss)
1,047 
(2,305)
(1,258)
  
650 
(751)
(101)
  
2 
2,002 
2,004 
Own credit adjustments (1)
(1,455)
1,455 
- 
  
(518)
518 
- 
  
2,622 
(2,622)
- 
Asset Protection Scheme (2)
1 
(1)
- 
  
(2)
2 
- 
  
(60)
60 
- 
Payment Protection Insurance costs
(400)
400 
- 
  
(135)
135 
- 
  
- 
- 
- 
Sovereign debt impairment
- 
- 
- 
  
- 
- 
- 
  
(142)
142 
- 
Interest rate hedge adjustments on impaired available-for-sale
  sovereign debt
- 
- 
- 
  
- 
- 
- 
  
(60)
60 
- 
Amortisation of purchased intangible assets
(47)
47 
- 
  
(51)
51 
- 
  
(69)
69 
- 
Integration and restructuring costs
(257)
257 
- 
  
(213)
213 
- 
  
(233)
233 
- 
(Loss)/gain on redemption of own debt
(123)
123 
- 
  
- 
- 
- 
  
1 
(1)
- 
Strategic disposals
(23)
23 
- 
  
160 
(160)
- 
  
(49)
49 
- 
Bonus tax
- 
- 
- 
  
- 
- 
- 
  
(5)
5 
- 
RFS Holdings minority interest
(1)
1 
- 
  
8 
(8)
- 
  
(3)
3 
- 
                       
(Loss)/profit before tax
(1,258)
- 
(1,258)
  
(101)
- 
(101)
  
2,004 
- 
2,004 
Tax charge
(30)
- 
(30)
  
(290)
- 
(290)
  
(791)
- 
(791)
                       
(Loss)/profit from continuing operations
(1,288)
- 
(1,288)
  
(391)
- 
(391)
  
1,213 
- 
1,213 
Profit/(loss) from discontinued operations, net of tax
5 
- 
5 
  
(4)
- 
(4)
  
6 
- 
6 
                       
(Loss)/profit for the period
(1,283)
- 
(1,283)
  
(395)
- 
(395)
  
1,219 
- 
1,219 
Non-controlling interests
(3)
- 
(3)
  
5 
- 
5 
  
7 
- 
7 
Preference share dividends
(98)
- 
(98)
  
(76)
- 
(76)
  
- 
- 
- 
                       
(Loss)/profit attributable to ordinary and B shareholders
(1,384)
- 
(1,384)
  
(466)
- 
(466)
  
1,226 
- 
1,226 
 
Notes:
 
(1)
Reallocation of £435 million loss (Q2 2012 - £271 million loss; Q3 2011 - £735 million gain) to income from trading activities and £1,020 million loss (Q2 2012 - £247 million loss; Q3 2011 - £1,887 million gain) to other operating income.
(2)
Reallocation to income from trading activities.

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Income statement reconciliations (continued)
 
 
 
Nine months ended
 
30 September 2012
  
30 September 2011
 
Managed 
Reallocation 
of one-off 
 items 
Statutory 
  
Managed 
Reallocation 
of one-off 
 items 
Statutory 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
               
Interest receivable
14,320 
- 
14,320 
  
16,183 
(7)
16,176 
Interest payable
(5,467)
(12)
(5,479)
  
(6,570)
(1)
(6,571)
               
Net interest income
8,853 
(12)
8,841 
  
9,613 
(8)
9,605 
               
Fees and commissions receivable
4,340 
- 
4,340 
  
4,794 
- 
4,794 
Fees and commissions payable
(945)
- 
(945)
  
(887)
- 
(887)
Income from trading activities
2,964 
(1,761)
1,203 
  
3,071 
(132)
2,939 
Gain on redemption of own debt
- 
454 
454 
  
- 
256 
256 
Other operating income (excluding insurance premium income)
2,016 
(2,586)
(570)
  
2,122 
1,795 
3,917 
Insurance net premium income
2,799 
- 
2,799 
  
3,275 
- 
3,275 
               
Non-interest income
11,174 
(3,893)
7,281 
  
12,375 
1,919 
14,294 
               
Total income
20,027 
(3,905)
16,122 
  
21,988 
1,911 
23,899 
               
Staff costs
(6,200)
(572)
(6,772)
  
(6,382)
(303)
(6,685)
Premises and equipment
(1,625)
(79)
(1,704)
  
(1,703)
(74)
(1,777)
Other administrative expenses
(2,525)
(906)
(3,431)
  
(2,557)
(1,078)
(3,635)
Depreciation and amortisation
(1,150)
(182)
(1,332)
  
(1,192)
(170)
(1,362)
               
Operating expenses
(11,500)
(1,739)
(13,239)
  
(11,834)
(1,625)
(13,459)
               
Profit before other operating charges
8,527 
(5,644)
2,883 
  
10,154 
286 
10,440 
Insurance net claims
(1,821)
- 
(1,821)
  
(2,439)
- 
(2,439)
               
Operating profit before impairment losses
6,706 
(5,644)
1,062 
  
7,715 
286 
8,001 
Impairment losses
(3,825)
- 
(3,825)
  
(5,747)
(1,044)
(6,791)
               
Operating profit/(loss)
2,881 
(5,644)
(2,763)
  
1,968 
(758)
1,210 

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Income statement reconciliations (continued)
 
 
 
Nine months ended
 
30 September 2012
  
30 September 2011
 
Managed 
Reallocation 
of one-off 
 items 
Statutory 
  
Managed 
Reallocation 
of one-off 
 items 
Statutory 
 
£m 
£m 
£m 
  
£m 
£m 
£m 
               
Operating profit/(loss)
2,881 
(5,644)
(2,763)
  
1,968 
(758)
1,210 
Own credit adjustments (1)
(4,429)
4,429 
- 
  
2,386 
(2,386)
- 
Asset Protection Scheme (2)
(44)
44 
- 
  
(697)
697 
- 
Payment Protection Insurance costs
(660)
660 
- 
  
(850)
850 
- 
Sovereign debt impairment
- 
- 
- 
  
(875)
875 
- 
Interest rate hedge adjustments on impaired available-for-sale sovereign debt
- 
- 
- 
  
(169)
169 
- 
Amortisation of purchased intangible assets
(146)
146 
- 
  
(169)
169 
- 
Integration and restructuring costs
(930)
930 
- 
  
(586)
586 
- 
Gain on redemption of own debt
454 
(454)
- 
  
256 
(256)
- 
Strategic disposals
129 
(129)
- 
  
(22)
22 
- 
Bonus tax
- 
- 
- 
  
(27)
27 
- 
RFS Holdings minority interest
(18)
18 
- 
  
(5)
5 
- 
               
(Loss)/profit before tax
(2,763)
- 
(2,763)
  
1,210 
- 
1,210 
Tax charge
(459)
- 
(459)
  
(1,436)
- 
(1,436)
               
Loss from continuing operations
(3,222)
- 
(3,222)
  
(226)
- 
(226)
Profit from discontinued operations, net of tax
6 
- 
6 
  
37 
- 
37 
               
Loss for the period
(3,216)
- 
(3,216)
  
(189)
- 
(189)
Non-controlling interests
16 
- 
16 
  
(10)
- 
(10)
Preference share dividends
(174)
- 
(174)
  
- 
- 
- 
               
Loss attributable to ordinary and B shareholders
(3,374)
- 
(3,374)
  
(199)
- 
(199)
 
Notes:
 
(1)
Reallocation of £1,715 million loss (nine months ended 30 September 2011 - £565 million gain) to income from trading activities and £2,714 million loss (nine months ended 30 September 2011 - £1,821 million gain) to other operating income.
(2)
Reallocation to income from trading activities.

 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Segmental analysis
In January 2012, the Group announced the reorganisation of its wholesale businesses into 'Markets' and 'International Banking'. Divisional results are presented based on the new organisational structure. The Group also revised its allocation of funding and liquidity costs and capital for the new divisional structure as well as for a new methodology. In addition, the Group had previously included movements in the fair value of own derivative liabilities within the Markets operating segment. These movements are now combined with movements in the fair value of own debt in a single measure, 'own credit adjustments' and presented as a reconciling item. Refer to 'presentation of information' on page 4 of the main announcement for further details. Comparatives have been restated accordingly.
 
Analysis of divisional operating profit/(loss)
The following tables provide an analysis of divisional operating profit/(loss) by main income statement captions. The divisional income statements on pages 20 to 62 of the main announcement reflect certain presentational reallocations as described in the notes below. These do not affect the overall operating profit/(loss).
 
 
Net 
interest 
income 
Non- 
interest 
income 
Total 
income 
Operating 
expenses 
Insurance 
net claims 
Impairment 
(losses)/ 
recoveries 
Operating 
profit/(loss)
Quarter ended 30 September 2012
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
UK Retail
990 
252 
1,242 
(637)
- 
(141)
464 
UK Corporate 
729 
409 
1,138 
(523)
- 
(247)
368 
Wealth
185 
107 
292 
(219)
- 
(8)
65 
International Banking
227 
308 
535 
(348)
- 
(12)
175 
Ulster Bank
163 
50 
213 
(126)
- 
(329)
(242)
US Retail & Commercial
492 
288 
780 
(536)
- 
(21)
223 
Markets (1)
14 
1,028 
1,042 
(753)
- 
6 
295 
Direct Line Group (2)
61 
838 
899 
(194)
(596)
- 
109 
Central items
(67)
334 
267 
(91)
- 
- 
176 
               
Core
2,794 
3,614 
6,408 
(3,427)
(596)
(752)
1,633 
Non-Core (3)
79 
(29)
50 
(212)
- 
(424)
(586)
               
Managed basis
2,873 
3,585 
6,458 
(3,639)
(596)
(1,176)
1,047 
Reconciling items
              
Own credit adjustments (4)
- 
(1,455)
(1,455)
- 
- 
- 
(1,455)
Asset Protection Scheme (5)
- 
1 
1 
- 
- 
- 
1 
Payment Protection Insurance costs
- 
- 
- 
(400)
- 
- 
(400)
Amortisation of purchased intangible
  assets
- 
- 
- 
(47)
- 
- 
(47)
Integration and restructuring costs
- 
- 
- 
(257)
- 
- 
(257)
Loss on redemption of own debt
- 
(123)
(123)
- 
- 
- 
(123)
Strategic disposals
- 
(23)
(23)
- 
- 
- 
(23)
RFS Holdings minority interest
(2)
3 
1 
(2)
- 
- 
(1)
               
Statutory basis
2,871 
1,988 
4,859 
(4,345)
(596)
(1,176)
(1,258)
 
Notes:
 
(1)
Reallocation of £3 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(2)
Total income includes £48 million investment income, of which £29 million is included in net interest income and £19 million in non-interest income. Reallocation of £32 million between non-interest income and net interest income in respect of instalment income.
(3)
Reallocation of £7 million between net interest income and non-interest income in respect of funding costs of rental assets, £12 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £5 million.
(4)
Comprises £435 million loss included in 'Income from trading activities' and £1,020 million loss included in 'Other operating income' on a statutory basis.
(5)
Included in 'Income from trading activities' on a statutory basis.

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Segmental analysis (continued)
 
Analysis of divisional operating profit/(loss) (continued)
 
 
 
Net 
interest 
income 
Non- 
interest 
income 
 
Total 
income 
 
Operating 
expenses 
Insurance 
net claims 
Impairment 
(losses)/ 
recoveries 
 
Operating 
profit/(loss)
Quarter ended 30 June 2012
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
UK Retail
988 
242 
1,230 
(653)
- 
(140)
437 
UK Corporate
772 
439 
1,211 
(518)
- 
(181)
512 
Wealth
178 
125 
303 
(227)
- 
(12)
64 
International Banking
234 
327 
561 
(367)
- 
(27)
167 
Ulster Bank
160 
46 
206 
(128)
- 
(323)
(245)
US Retail & Commercial
492 
323 
815 
(558)
- 
(28)
229 
Markets
32 
1,034 
1,066 
(796)
- 
(19)
251 
Direct Line Group (1)
68 
866 
934 
(223)
(576)
- 
135 
Central items
1 
110 
111 
(145)
- 
2 
(32)
               
Core
2,925 
3,512 
6,437 
(3,615)
(576)
(728)
1,518 
Non-Core (2)
48 
(47)
1 
(262)
- 
(607)
(868)
               
Managed basis
2,973 
3,465 
6,438 
(3,877)
(576)
(1,335)
650 
Reconciling items
              
Own credit adjustments (3)
- 
(518)
(518)
- 
- 
- 
(518)
Asset Protection Scheme (4)
- 
(2)
(2)
- 
- 
- 
(2)
Payment Protection Insurance costs
- 
- 
- 
(135)
- 
- 
(135)
Amortisation of purchased intangible
  assets
- 
- 
- 
(51)
- 
- 
(51)
Integration and restructuring costs
- 
- 
- 
(213)
- 
- 
(213)
Strategic disposals
- 
160 
160 
- 
- 
- 
160 
RFS Holdings minority interest
(2)
11 
9 
(1)
- 
- 
8 
               
Statutory basis
2,971 
3,116 
6,087 
(4,277)
(576)
(1,335)
(101)
 
Notes:
 
(1)
Total income includes £73 million investment income, of which £37 million is included in net interest income and £36 million in non-interest income. Reallocation of £31 million between non-interest income and net interest income in respect of instalment income.
(2)
Reallocation of £38 million between net interest income and non-interest income in respect of funding costs of rental assets, £40 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £2 million.
(3)
Comprises £271 million loss included in 'Income from trading activities' and £247 million loss included in 'Other operating income' on a statutory basis.
(4)
Included in 'Income from trading activities' on a statutory basis.

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Segmental analysis (continued)
 
Analysis of divisional operating profit/(loss) (continued)
 
 
 
Net 
interest 
income 
Non- 
interest 
income 
 
Total 
income 
 
Operating 
expenses 
Insurance 
net claims 
Impairment 
(losses)/ 
recoveries 
 
Operating 
profit/(loss)
Quarter ended 30 September 2011
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
UK Retail
1,086 
292 
1,378 
(673)
- 
(195)
510 
UK Corporate
753 
453 
1,206 
(547)
- 
(230)
429 
Wealth
152 
118 
270 
(221)
- 
(4)
45 
International Banking (1)
293 
357 
650 
(408)
- 
(14)
228 
Ulster Bank
196 
60 
256 
(137)
- 
(327)
(208)
US Retail & Commercial
482 
289 
771 
(563)
- 
(85)
123 
Markets (2)
(9)
456 
447 
(800)
- 
5 
(348)
Direct Line Group (3)
84 
949 
1,033 
(215)
(695)
- 
123 
Central items
(88)
105 
17 
66 
(1)
(4)
78 
               
Core
2,949 
3,079 
6,028 
(3,498)
(696)
(854)
980 
Non-Core (4)
129 
(64)
65 
(323)
(38)
(682)
(978)
               
Managed basis
3,078 
3,015 
6,093 
(3,821)
(734)
(1,536)
2 
Reconciling items
              
Own credit adjustments (5)
- 
2,622 
2,622 
- 
- 
- 
2,622 
Asset Protection Scheme (6)
- 
(60)
(60)
- 
- 
- 
(60)
Sovereign debt impairment
- 
- 
- 
- 
- 
(142)
(142)
Interest rate hedge adjustments on
  impaired available-for-sale sovereign
  debt
- 
- 
- 
- 
- 
(60)
(60)
Amortisation of purchased
  intangible assets
- 
- 
- 
(69)
- 
- 
(69)
Integration and restructuring costs
- 
- 
- 
(233)
- 
- 
(233)
Gain on redemption of own debt
- 
1 
1 
- 
- 
- 
1 
Strategic disposals
- 
(49)
(49)
- 
- 
- 
(49)
Bonus tax
- 
- 
- 
(5)
- 
- 
(5)
RFS Holdings minority interest
(1)
(3)
(4)
1 
- 
- 
(3)
               
Statutory basis
3,077 
5,526 
8,603 
(4,127)
(734)
(1,738)
2,004 
 
Notes:
 
(1)
Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2)
Reallocation of £3 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3)
Total income includes £72 million investment income, of which £49 million is included in net interest income and £23 million in non-interest income. Reallocation of £35 million between non-interest income and net interest income in respect of instalment income.
(4)
Reallocation of £54 million between net interest income and non-interest income in respect of funding costs of rental assets, £53 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £1 million.
(5)
Comprises £735 million gain included in 'Income from trading activities' and £1,887 million gain included in 'Other operating income' on a statutory basis.
(6)
Included in 'Income from trading activities' on a statutory basis.

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Segmental analysis (continued)
 
Analysis of divisional operating profit/(loss) (continued)
 
 
 
Net 
interest 
income 
Non- 
interest 
income 
 
Total 
income 
 
Operating 
expenses 
 Insurance 
net claims 
Impairment 
(losses)/ 
recoveries 
 
Operating 
profit/(loss)
Nine months ended 30 September 2012
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
UK Retail
2,979 
760 
3,739 
(1,925)
- 
(436)
1,378 
UK Corporate
2,257 
1,293 
3,550 
(1,574)
- 
(604)
1,372 
Wealth
542 
343 
885 
(681)
- 
(30)
174 
International Banking (1)
712 
926 
1,638 
(1,125)
- 
(74)
439 
Ulster Bank
488 
145 
633 
(384)
- 
(1,046)
(797)
US Retail & Commercial
1,480 
871 
2,351 
(1,729)
- 
(68)
554 
Markets (2)
62 
3,780 
3,842 
(2,457)
- 
(15)
1,370 
Direct Line Group (3)
213 
2,586 
2,799 
(650)
(1,821)
- 
328 
Central items
(71)
341 
270 
(238)
- 
(32)
- 
               
Core
8,662 
11,045 
19,707 
(10,763)
(1,821)
(2,305)
4,818 
Non-Core (4)
191 
129 
320 
(737)
- 
(1,520)
(1,937)
               
Managed basis
8,853 
11,174 
20,027 
(11,500)
(1,821)
(3,825)
2,881 
Reconciling items
              
Own credit adjustments (5)
- 
(4,429)
(4,429)
- 
- 
- 
(4,429)
Asset Protection Scheme (6)
- 
(44)
(44)
- 
- 
- 
(44)
Payment Protection Insurance costs
- 
- 
- 
(660)
- 
- 
(660)
Amortisation of purchased intangible
  assets
- 
- 
- 
(146)
- 
- 
(146)
Integration and restructuring costs
- 
- 
- 
(930)
- 
- 
(930)
Gain on redemption of own debt
- 
454 
454 
- 
- 
- 
454 
Strategic disposals
- 
129 
129 
- 
- 
- 
129 
RFS Holdings minority interest
(12)
(3)
(15)
(3)
- 
- 
(18)
               
Statutory basis
8,841 
7,281 
16,122 
(13,239)
(1,821)
(3,825)
(2,763)
 
Notes:
 
(1)
Reallocation of £9 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2)
Reallocation of £5 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3)
Total income includes £211 million investment income, of which £119 million is included in net interest income and £92 million in non-interest income. Reallocation of £94 million between non-interest income and net interest income in respect of instalment income.
(4)
Reallocation of £96 million between net interest income and non-interest income in respect of funding costs of rental assets, £103 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £7 million.
(5)
Comprises £1,715 million loss included in 'Income from trading activities' and £2,714 million loss included in 'Other operating income' on a statutory basis.
(6)
Included in 'Income from trading activities' on a statutory basis.

 
 
Appendix 1 Income statement reconciliations and Segmental analysis (continued)
 
Segmental analysis (continued)
 
Analysis of divisional operating profit/(loss) (continued)
 
 
 
Net 
interest 
income 
Non- 
interest 
income 
 
Total 
income 
 
Operating 
expenses 
 Insurance 
net claims 
Impairment 
(losses)/ 
recoveries 
 
Operating 
profit/(loss)
Nine months ended 30 September 2011
£m 
£m 
£m 
£m 
£m 
£m 
£m 
               
UK Retail
3,270 
929 
4,199 
(2,039)
- 
(597)
1,563 
UK Corporate
2,334 
1,352 
3,686 
(1,611)
- 
(557)
1,518 
Wealth
477 
347 
824 
(637)
- 
(12)
175 
International Banking (1)
876 
1,086 
1,962 
(1,247)
- 
(112)
603 
Ulster Bank
559 
162 
721 
(415)
- 
(1,057)
(751)
US Retail & Commercial
1,404 
843 
2,247 
(1,626)
- 
(261)
360 
Markets (2)
47 
3,676 
3,723 
(2,734)
- 
19 
1,008 
Direct Line Group (3)
261 
2,888 
3,149 
(637)
(2,183)
- 
329 
Central items
(164)
175 
11 
93 
- 
(2)
102 
               
Core
9,064 
11,458 
20,522 
(10,853)
(2,183)
(2,579)
4,907 
Non-Core (4)
549 
917 
1,466 
(981)
(256)
(3,168)
(2,939)
               
Managed basis
9,613 
12,375 
21,988 
(11,834)
(2,439)
(5,747)
1,968 
Reconciling items
              
Own credit adjustments (5)
- 
2,386 
2,386 
- 
- 
- 
2,386 
Asset Protection Scheme (6)
- 
(697)
(697)
- 
- 
- 
(697)
Payment Protection Insurance costs
- 
- 
- 
(850)
- 
- 
(850)
Sovereign debt impairment
- 
- 
- 
- 
- 
(875)
(875)
Interest rate hedge adjustments on
impaired available-for-sale
sovereign debt
- 
- 
- 
- 
- 
(169)
(169)
Amortisation of purchased intangible
  assets
- 
- 
- 
(169)
- 
- 
(169)
Integration and restructuring costs
(2)
(3)
(5)
(581)
-
- 
(586)
Gain on redemption of own debt
- 
256 
256 
- 
- 
- 
256 
Strategic disposals
- 
(22)
(22)
- 
- 
- 
(22)
Bonus tax
- 
- 
- 
(27)
- 
- 
(27)
RFS Holdings minority interest
(6)
(1)
(7)
2 
- 
- 
(5)
               
Statutory basis
9,605 
14,294 
23,899 
(13,459)
(2,439)
(6,791)
1,210 
 
Notes:
 
(1)
Reallocation of £30 million between net interest income and non-interest income in respect of funding costs of rental assets.
(2)
Reallocation of £9 million between net interest income and non-interest income to record interest on financial assets and liabilities designated as at fair value through profit or loss.
(3)
Total income includes £205 million investment income, of which £156 million is included in net interest income and £49 million in non-interest income. Reallocation of £105 million between non-interest income and net interest income in respect of instalment income.
(4)
Reallocation of £159 million between net interest income and non-interest income in respect of funding costs of rental assets, £155 million and to record interest on financial assets and liabilities designated as at fair value through profit or loss, £4 million.
(5)
Comprises £565 million gain included in 'Income from trading activities' and £1,821 million gain included in 'Other operating income' on a statutory basis.
(6)
Included in 'Income from trading activities' on a statutory basis.

 
 
 
 
 
 
 
 
Appendix 2
 
Businesses outlined for
disposal
 
 

 
Appendix 2 Businesses outlined for disposal
 
To comply with EC State Aid requirements the Group agreed to make a series of divestments by the end of 2013: the disposal of a majority interest in Direct Line Group, Global Merchant Services and its interest in RBS Sempra Commodities JV. The Group also agreed to dispose of its RBS England and Wales and NatWest Scotland branch-based businesses, along with certain SME and corporate activities across the UK ('UK branch-based businesses'). The disposals of Global Merchant Services and RBS Sempra Commodities JV businesses have now effectively been completed.
 
On 12 October 2012, the Group announced that it had received notification of Santander's decision to pull out of its agreed purchase of certain of the Group's UK branched-based businesses. Santander's decision follows extensive work by both parties to separate the businesses into a largely standalone form and to prepare the business, customers and staff for transfer. RBS intends to initiate a new process of disposal following discussion with HM Treasury and the European Commission.
 
The Direct Line Group IPO prospectus was published on 28 September 2012 and the shares were admitted to listing on 16 October 2012. RBS Group sold 520.8 million ordinary shares in Direct Line Group, representing 34.7% of the total share capital, generating gross proceeds of £911 million. This was consistent with the already communicated plan to divest control of Direct Line Group in stages, with control ceded by the end of 2013 and complete disposal by the end of 2014.
 
Direct Line Group reached agreement with RBS Group in September 2012 for an arm's-length, five year distribution agreement for the continued provision of general insurance products post-divestment. Residual IT services will also be provided under a Transitional Services Agreement.
 
The table below shows total income and operating profit of Direct Line Group and the UK branch-based businesses.
 
 
Total income
  
Operating profit
before impairments
  
Operating profit
 
YTD 
Q3 2012 
FY 2011 
  
YTD 
Q3 2012 
FY 2011 
  
YTD 
Q3 2012 
FY 2011 
 
£m 
£m 
  
£m 
£m 
  
£m 
£m 
                 
Direct Line Group (1)
2,799 
4,286 
  
328 
407 
  
328 
407 
UK branch-based businesses
672 
959 
  
360 
518 
  
262 
319 
                 
Total
3,471 
5,245 
  
688 
925 
  
590 
726 
 
The table below shows the estimated risk-weighted assets, total assets and capital of the businesses identified for disposal.
 
 
RWAs
  
Total assets
  
Capital
 
30 September 
2012 
31 December 
2011 
  
30 September 
2012 
31 December 
2011 
  
30 September 
2012 
31 December 
2011 
 
£bn 
£bn 
  
£bn 
£bn 
  
£bn 
£bn 
                 
Direct Line Group (1)
n/m 
n/m 
  
13.1 
13.9 
  
3.5 
4.4 
UK branch-based businesses (2)
10.2 
11.1 
  
19.0 
19.3 
  
1.0 
1.1 
                 
Total
10.2 
11.1 
  
32.1 
33.2 
  
4.5 
5.5 
 
Notes:
 
(1)
Total income includes investment income of £211 million (FY 2011 - £302 million). Total assets and estimated capital include approximately £0.9 billion of goodwill, of which £0.7 billion is attributed to Direct Line Group by RBS Group.
(2)
Estimated notional equity based on 10% of RWAs.

 
 
Appendix 2 Businesses outlined for disposal (continued)
 
Further information on the UK branch-based businesses by division is shown in the tables below:
 
 
 
Division
  
Total
 
UK 
Retail 
UK 
Corporate 
  
YTD 
Q3 2012 
FY 2011 
 
£m 
£m 
  
£m 
£m 
           
Income statement
          
Net interest income
241 
256 
  
497 
689 
Non-interest income
64 
111 
  
175 
270 
           
Total income
305 
367 
  
672 
959 
           
Direct expenses
          
  - staff
(53)
(64)
  
(117)
(158)
  - other
(70)
(42)
  
(112)
(166)
Indirect expenses
(46)
(37)
  
(83)
(117)
           
 
(169)
(143)
  
(312)
(441)
           
Operating profit before impairment losses
136 
224 
  
360 
518 
Impairment losses
(42)
(56)
  
(98)
(199)
           
Operating profit
94 
168 
  
262 
319 
           
Analysis of income by product
          
Loans and advances
86 
224 
  
310 
436 
Deposits
58 
108 
  
166 
245 
Mortgages
106 
- 
  
106 
134 
Other
55 
35 
  
90 
144 
           
Total income
305 
367 
  
672 
959 
           
Net interest margin
4.64% 
3.03% 
  
3.64% 
3.57% 
Employee numbers
  (full time equivalents rounded to the nearest hundred)
2,700 
1,600 
  
4,300 
4,400 
 
 
 
Division
  
Total
 
UK 
Retail 
UK 
Corporate 
Markets 
  
30 September 
2012 
31 December 
2011 
 
£bn 
£bn 
£bn 
  
£bn 
£bn 
             
Capital and balance sheet
            
Total third party assets (excluding mark-to-
  market derivatives)
7.4 
11.2 
- 
  
18.6 
18.9 
Loans and advances to customers (gross)
7.6 
11.7 
- 
  
19.3 
19.5 
Customer deposits
8.5 
12.9 
- 
  
21.4 
21.8 
Derivative assets
- 
- 
0.4 
  
0.4 
0.4 
Derivative liabilities
- 
- 
- 
  
- 
0.1 
Risk elements in lending
0.5 
0.9 
- 
  
1.4 
1.5 
Loan:deposit ratio
86% 
88% 
- 
  
87% 
86% 
Risk-weighted assets
3.5 
6.7 
- 
  
10.2 
11.1 
 
 

 
Index
 
 
 
Page
 
 
Accounting policies
74
 
 
Analysis of results
13
  Balance sheet
19
  Capital resources and ratios
18
  Impairment losses
16
  Net-interest income
13
  Non-interest income
14
  One-off and other items
17
  Operating expenses
15
 
 
Available-for-sale reserve
86
 
 
Average balance sheet
68
 
 
Balance sheet
  
  Consolidated
65
  Summary
19
 
 
Basis of preparation
74
 
 
Business divestments
  
  Businesses outlined for disposal
Appendix 2
  Notes
82
 
 
Capital
92
  Analysis of results
18
  Capital resources
93
  Risk asset ratios
92
 
 
Central items
54
 
 
 
Consolidated financial statements
63
  Consolidated balance sheet
65
  Consolidated income statement
63
  Consolidated statement of changes in equity
71
  Consolidated statement of comprehensive income
64
  Notes
74
 
 
Contacts
xii
 
 
Contingent liabilities and commitments
86

 
 
Index (continued)
 
 
 
Page
 
 
Debt securities
109
 
 
Direct Line Group
48
 
 
Dividends
80
 
 
Divisional performance
20
  Central Items
54
  Direct Line Group
48
  International Banking
31
  Markets
44
  Non-Core
56
  UK Corporate
26
  UK Retail
23
  Ulster Bank
35
  US Retail & Commercial
38
  Wealth
29
 
 
Earnings per share
81
 
 
Employees
  
  Costs
76
  Employee numbers
22
 
 
Financial instruments
84
 
 
Forward-looking statements
3
 
 
Funded assets by division
21
 
 
Group Chief Executive's comment
iv
 
 
Highlights
i
 
 
Impairment
  
  Analysis of results
16
  Problem debt management
112
 
 
Income statement
  
  Consolidated
63
  Summary
10
 
 
International Banking
31

 
 
Index (continued)
 
 
 
Page
 
 
Litigation, investigations and reviews
87
 
 
 
Markets
44
 
 
Net interest income
13
 
 
Non-Core
56
 
 
Non-interest income
14
 
 
One-off and other items
17
 
 
Operating expenses
  
  Analysis of results
15
  Notes
76
 
 
Other developments
89
 
 
Outlook
xi
 
 
Payment Protection Insurance
76
 
 
Post balance sheet events
91
 
 
Presentation of information
4
 
 
Results presentation
xii
 
 
Results summary - statutory
9
 
 
Risk and balance sheet management
92
  Capital
92
  Country risk
127
  Credit risk
105
  Liquidity and funding risk
97
  Market risk
122
 
 
Risk-weighted assets
  
  By division
22
  Capital
92
 
 
Segmental analysis
Appendix 1
 
 
Share consolidation
80
 
 
Index (continued)
 
 
 
Page
 
 
Statement of changes in equity
71
 
 
Statement of comprehensive income
64
 
 
Strategic Plan
xi
 
 
Tax
78
 
 
UK Corporate
26
 
 
UK Retail
23
 
 
Ulster Bank
35
 
 
US Retail & Commercial
38
 
 
Value-at-risk (VaR)
124
 
 
Wealth
29
 
 

 
 

 
 
Signatures


 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







 
 
Date: 02 November 2012
 
 
THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)
 
 
 
By:
/s/ Jan Cargill
 
 
Name:
Title:
Jan Cargill
Deputy Secretary