# Royal Bank of Scotland Group report an operating loss before tax of £8 million

- Link: https://www.directorstalkinterviews.com/royal-bank-of-scotland-group-report-an-operating-loss-before-tax-of-8-million/412796181
- Published: 2019-10-24T07:15:51+01:00
- Author: Amilia Stone

**Royal Bank of Scotland Group **(LON:RBS) announced its Interim Management Statement.

RBS reported an operating loss before tax of £8 million, which included a £900 million
provision in respect of Payment Protection Insurance (PPI), compared with an operating
profit of £961 million in Q3 2018.

● Return on tangible equity was 7.0% for Q3 2019 excluding the PPI charge.

● Income was broadly stable across the retail and commercial businesses compared
with Q2 2019, excluding notable items.

● Group income was impacted by a particularly challenging quarter in NatWest Markets(
NWM).

● RBS reported an attributable loss of £315 million for Q3 2019.

Supporting our customers through continued lending growth

● UK Personal Banking (UK PB) gross new mortgage lending was £8.6 billion in Q3 
2019 compared with £6.7 billion in Q2 2019.

● Commercial Banking net lending was £0.1 billion higher than Q2 2019. Across Business
Banking, SME & Mid-Corporate, and Specialised business, lending continues to increase,
with year to date growth of £1.6 billion.

● We continue to achieve net lending growth across UK PB, Ulster Bank RoI, Commercial
and Private Banking at attractive returns; net loans to customers increased by 3.2%
on an annualised basis for the year to date, exceeding our 2-3% net loan growth 
target.

● Q3 2019 net impairment loss of £213 million equates to 26 basis points of gross
customer loans, compared with 31 basis points in Q3 2018. The cost of risk remains
below our view of a normalised long term loss rate of 30-40 basis points.

**Continuing competitive market**

● Across the retail and commercial businesses, income decreased by 3.1% compared
with Q3 2018 excluding notable items.

● Bank net interest margin (NIM) of 1.97% was 5 basis points lower than Q2 2019 
primarily reflecting the contraction of the yield curve and competitive pressures
in the mortgage business as front book margins, whilst higher than Q2 2019, remain
lower than back book margins.

● NWM had a challenging quarter with core income of £184 million, lower by £147 
million, or 44.4%, than Q3 2018. Rates income in particular was impacted by a deterioration
in economic sentiment for the global economy and a fall in bond yields. This, together
with legacy items culminated in a loss of £193 million for the quarter.

● Costs decreased by £20 million in comparison to Q3 2018, with a £193 million cost
reduction achieved for the year to date. We remain on track to achieve our £300 
million target for full year 2019.

**Capital generation**

● CET1 ratio of 15.7% included a 50 basis point reduction in respect of the PPI 
charge.

● RWAs increased by £1.0 billion in Q3 2019 to £189.5 billion, principally reflecting
an increase in NWM. In line with previous guidance, we expect to end the year with
RWAs of around £185-190 billion.

**2019 and 2020 outlook – unchanged(1)**

We retain the outlook provided in the 2019 Interim Results.

**Note:**

_(1) The targets, expectations and trends discussed in this section represent management’s
current expectations and are subject to change, including as a result of the factors
described in the “Risk Factors” section on pages 253 to 263 of the 2018 Annual Report
and Accounts and the Summary Risk Factors on pages 46 and 47 of the 2019 Interim
Results. These statements constitute forward-looking statements. Refer to Forward-
looking statements in this announcement._

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