Profits Drop At RBS' Wealth Division, Parent Suffers Loss

Tom Burroughes Group Editor London 4 May 2012


Operating profits at the wealth management arm of Royal Bank of Scotland suffered a fall in the first quarter of 2012.

The wealth division of Royal Bank of Scotland, which includes Coutts, the private bank, reported an operating profit before impairment losses of £55 million (around $89 million) in the first three months of this year, down from £86 million in the previous three months and £75 million a year ago.

The parent firm, which is partly owned by the UK taxpayer, suffered a first-quarter loss.

Part of the dent to the first-quarter profit was caused by an £8.75 million fine imposed on Coutts by the Financial Services Authority in connection with failings connected to anti-money laundering procedures. "As expected, expenses rose as we continued our
strategic investment in the business, with 5 per cent of this increase solely
driven by the FSA fine incurred in March this year. The balance of the
increase reflects the ongoing investment in our strategic priorities," the firm told this publication in a statement today.

"At Coutts, we delivered another increase in
income. Total income rose 7 per cent in the first quarter of 2012 compared with
the same period a year earlier, reflecting growth in lending margins and
volumes, and sustained improvements in treasury income," it said, adding: "We saw an increase in client activity and market
gains, and evidence of the improvement has begun to show in assets under
management levels and positive inflows of net new business. Assets
under management grew 2 per cent compared with the fourth quarter of 2011, and
net new business was positive, and was particularly encouraging in Asia."

Operating profit at the RBS wealth division fell to £45 million in the latest quarter from £73 million in the previous three months, the bank said.

The UK-listed banking group said the wealth division had a net interest margin of 3.67 per cent, up from 3.39 per cent in the previous quarter and 3.24 per cent a year ago. The cost-income ratio widened to 81 per cent at end-March, up from 69 per cent three months earlier, it said.

Total assets under management (excluding deposits) stood at £31.4 billion at the end of March, up from £30.9 billion at the end of December.

The wealth arm of RBS has been restructuring its UK business, revising the roles of private bankers and wealth managers.

In recent months, Coutts announced the sale of the Latin American, Caribbean and African business to RBC Wealth Management. (The business has client assets in the region of £1.5 billion, representing approximately 2 per cent of Coutts' total client assets.)

This sale decision followed last year’s move to focus the Coutts growth strategy on geographies including the UK, Switzerland, Middle East, Russia/Commonwealth of Independent States and selected countries in Asia.

The wealth division had a total of 5,700 staff at the end of March, unchanged from December.

Meanwhile, across the whole RBS group, operating profit in the first quarter of 2012 totalled £1.184 billion, compared with a loss of £144 million in the previous quarter and a profit of £1.133 billion a year ago. There was a pre-tax loss of £1.4 billion in the first quarter, compared with a loss of £1.97 billion in the previous quarter; much of the loss was caused by accounting charges and adjustments relating to debt.

The bank had a core Tier 1 capital ratio of 10.8 per cent at the end of March, slightly higher than three months ago.


Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes