Press Release

The Royal Bank of Scotland Group reports a 2010 second quarter operating profit¹ of GBP 869 million, up from GBP 713 million in the first quarter of 2010.

Group posts attributable profit of GBP 257 million for quarter, break-even for first half Core headline operating profits stable at GBP 2,193 million. Retail & Commercial up on rising NIM and continued favourable credit trends, but Global Banking & Markets declines from a strong first quarter. Group on track against strategic plan targets

Key points:

• Second quarter operating profit¹ improved to GBP 869 million compared with GBP 713 million in the first quarter.
• Operating profit in the first half totalled GBP 1,582 million², compared with a loss of GBP 3,354 million in the first half of 2009.
• Excluding gains recorded on the fair value of own debt, Group second quarter operating profit was GBP 250 million, down from the first quarter but substantially improved from a GBP 2,573 million loss in the second quarter of 2009.
• Net of restructuring and other non-operating costs, including a GBP 500 million accounting credit related to the Asset Protection Scheme, profit before tax was GBP 1,157 million, compared with a loss of GBP 21 million in the first quarter of 2010.
• Second quarter net attributable profit was GBP 257 million, compared with a loss of GBP 248 million in Q1 2010. The attributable profit in the first half was GBP 9 million, compared with a loss of GBP 1,042 million a year earlier.
• Core businesses’ headline operating profit held steady at GBP 2,193 million, with progress in Retail & Commercial but lower revenue in Global Banking & Markets, reflecting a weaker capital markets environment.
• Group net interest margin was 2.03%, up 11 basis points relative to the first quarter, led by the Core retail and commercial businesses, where NIM expanded by 14 basis points.
• Total impairments fell from GBP 2,675 million in the first quarter to GBP 2,487 million in the second quarter, reflecting gradual strengthening of the global economy.
• Non-Core’s run-off programme remains on track, with funded assets reduced by GBP 20 billion during Q2.
• Core Tier 1 capital ratio stood at 10.5% at 30 June 2010, compared with 10.6% at 31 March 2010, and Tier 1 ratio at 12.8%. The recent EU-wide stress tests confirmed that RBS remains well capitalised, with a strong Tier 1 capital ratio under both the benchmark and adverse scenarios.
• The run-off of the Non-Core loan book drove a further improvement in the Group loan to deposit ratio (LDR) to 128% from 131% in the first quarter of 2010. Core LDR remained stable at 102%.
• RBS remains in line with or ahead of all the key Group metrics targeted for this stage in its Strategic Plan implementation. Additionally, the Group's disposal programme has achieved good momentum, including the EC-mandated sale of UK branch/SME assets announced earlier this week.
• Customer franchises remain strong, with core businesses generally increasing or holding steady their customer numbers during the second quarter. RBS remains on course to meet its UK mortgage and business lending targets.