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Half-Year Operating Profits Rise At RBS's Wealth Arm, AuM Higher

Tom Burroughes

5 August 2011

The wealth management arm of Royal Bank of Scotland, which is being rebranded under the “Coutts” label, reported an operating profit before impairments of £162 million ($263.4 million) from £154 million a year before, while assets under management rose slightly.

For the three months to 30 June, RBS’s wealth unit logged an operating profit before impairments of £77 million, down from £88 million in the same quarter of a year ago, while RBS as a whole said its core operating profit rose to £1.68 billion from £1.57 billion a year ago. RBS posted an attributable loss of £897 million, which includes a previously announced £850 million charge for Payment Protection Insurance claims and £733 million provision related to Greek government bonds. A number of banks, including Barclays and Lloyds, have announced charges related to sales of PPI products, which have led to a flood of compensation claims.

Like its peer Lloyds Banking Group (which reported results yesterday), RBS is partly owned by the UK government having been bailed out by the taxpayer after the 2008 market meltdown.

RBS’s wealth business includes Coutts, the UK bank, Adam & Co, and RBS Coutts, among other businesses. As described by this publication from a recent interview, the firm is in the process of rebranding its wealth operations under a single “Coutts” brand (apart from Adam & Co) and adjusting its client focus.

Impairments at the wealth division were £3 million in the latest quarter, down from £7 million a year ago.

“The global market footprint has been adjusted to increase focus on territories where wealth has scale or the opportunity for strategic future growth while, in the UK, the business has focused on ensuring services provided more closely meet the specific needs of different client groups and remain of a consistently high quality,” RBS said.

“The division is increasing its focus on technology innovation, with implementation of a new IT platform in the UK continuing. The business is exploring additional opportunities to bring new innovation to the client interface with a view to improving the client experience, enhance the interaction between clients and the bank and provide advisors with improved ability to collaborate and serve client needs,” it said.

The wealth arm had a net interest margin of 3.61 per cent, up from 3.37 per cent at the end of June a year ago. It had a cost/income ratio of 74 per cent at 30 June, up from 70 per cent at the end of March this year. Return on equity was 17.4 per cent, compared with 19 per cent at the end of March.

Assets under management, excluding deposits, stood at £34.3 billion at 30 June, up from £32.1 billion at end-2010.

RBS’s wealth arm employed 5,500 people at the end of June, which is up from 5,200 at the end of December.

RBS said it had a Core Tier 1 capital ratio – a key measure of a bank’s financial strength – of 11.1 per cent at the end of June.