Financial Results

Adjusted 2014 Profit Rises Sharply At RBS's Private Banking Arm; Announces New Head

Tom Burroughes, Group Editor, London, 26 February 2015


The private banking arm of RBS, currently in the throes of a major restructure as it looks to offload non-UK operations, said profits rose strongly in 2014.

(Updates with Rory Tapner departure, new appointment.)

Royal Bank of Scotland announced today that its private banking business arm, which includes its Coutts and Adam & Co operations, reported an adjusted operating profit in 2014 of £258 million ($400.7 million), up sharply from £172 million a year earlier.

The UK-listed bank, which is majority-owned by the UK taxpayer, said it has made “good” progress towards plans to offload its non-UK wealth management business but it gave few other details about the possible timing of any exit. International private banking, it should be noted, logged a narrower operating loss last year of £27 million, down from £110 million in 2013. Yesterday, this publication reported that it is understood that Rory Tapner, who has been the head of RBS’s global wealth business since joining from UBS in 2010, is leaving the firm.

In today's statement, RBS said that Donald Workman has been appointed executive chairman, a newly created role. Workman will oversee the conclusion of the sale and separation of the private banking business outside of the UK as well as overseeing the Coutts UK business. He will report to Alison Rose. Tapner, it confirmed, is leaving the bank with immediate effect. 

"Donald has a broad and deep understanding of The Royal Bank of Scotland business, having led the Asset Protection Scheme, the Asia and Pacific region and most recently the Corporate and Institutional Banking business," it continued. Alison Rose, who is CEO of RBS Commercial and Private Banking, said: “Donald’s appointment will ensure a smooth transition for clients and staff as we work towards concluding the sale of sale and separation of the private banking business outside of the UK. He will also ensure that we are able to develop our new strategy for the Coutts business in the UK. “Donald has a tremendous amount of experience of leading businesses through change while maintaining a focus on our clients and I am delighted that he has joined the team to support this transition," she added.

Private banking net fees and commissions fell to £335 million last year from £355 million; other non-interest income was £56 million, down from £64 million. Net interest income was £691 million, up from £658 million in 2013, RBS said in a statement. Operating expenses last year narrowed slightly to £936 million from £1.109 billion.

The cost/income ratio of the private banking business – a widely-used metric in the sector – stood at an adjusted level of 77 per cent in 2014 from 81 per cent in 2013. Return on equity was 7.8 per cent from a negative figure of 3.1 per cent in 2013.

Total assets under management at the end of last year were £28.3 billion from £29.7 billion at the end of 2013, affected by low-margin custody outflows, the bank said. Customer deposits were £36.1 billion versus £37.2 at end-2013.

Group results

At the overall group level, RBS said it reported an attributable loss of £3.470 billion in 2014, compared with a loss of £8.995 billion a year earlier. The result included a loss from discontinued operations of £3.445 billion, which reflected a £3.994 billion fair value write-down in relation to the reclassification of Citizens to disposal groups, and a tax charge of £1.9 billion, which included a £1.5 billion write-off of deferred tax assets.

Operating profit totalled £3.503 billion for 2014, compared with an operating loss of £7.500 billion in 2013. This reflected improved operating results from the core domestic businesses together with significant impairment releases in Ulster Bank and RBS Capital Resolution. These results include £1.257 billion of restructuring costs compared with £656 million in 2013, and £2.194 billion of litigation and conduct costs compared with £3.844 billion in the prior year.

The bank said that its UK personal and business banking arm delivered a “good performance built on strong growth from a reinvigorated mortgage business”. It said commercial banking's efforts to stimulate demand resulted in a resumption of loan book growth; together with active management of cost and capital, this supported a “significant improvement” in profitability. Corporate and institutional banking moved towards a lower risk model with a further £40 billion cut in risk-weighted assets on a fully loaded Basel III basis.

Statutory operating profit before tax, which excludes results from discontinued operations, was £2.643 billion compared with an operating loss of £8.849 billion in 2013.

Chairman stepping down
The bank confirmed that Philip Hampton, chairman, will be stepping down in August, as announced in September last year. He will be replaced by Sir Howard Davies, a luminary of the banking and regulatory world.

Sir Howard has held roles including those of chairman of the Financial Services Authority (as the UK financial regulator used to be known); deputy governor of the Bank of England, and director general of the Confederation of British Industry. He is currently chairman of Phoenix Group, a non-executive director of Prudential, and a non-executive director of Morgan Stanley. He will step down from Phoenix and Morgan Stanley.


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