Company Quick10K Filing
Royal Bank of Scotland
20-F 2019-12-31 Filed 2020-02-27
20-F 2018-12-31 Filed 2019-02-28
20-F 2017-12-31 Filed 2018-03-29
20-F 2016-12-31 Filed 2017-03-27
20-F 2015-12-31 Filed 2016-03-24
20-F 2014-12-31 Filed 2015-03-31
20-F 2013-12-31 Filed 2014-04-30
20-F 2012-12-31 Filed 2013-03-27
20-F 2011-12-31 Filed 2012-03-27
20-F 2010-12-31 Filed 2011-03-31
20-F 2009-12-31 Filed 2010-04-27

RBS 20F Annual Report

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Royal Bank of Scotland Earnings 2017-12-31

Balance SheetIncome StatementCash Flow

20-F 1 a18-3556_120f.htm 20-F







Washington, D.C. 20549






(Mark One)                                                                                                                                                                                                                                                        


¨                                          REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934




x                                        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017




¨                                          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




o                                          SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission file number: 001-10306




(Exact name of Registrant as specified in its charter)


United Kingdom


(Jurisdiction of incorporation)


RBS Gogarburn, PO Box 1000, Edinburgh EH12 1HQ, United Kingdom


(Address of principal executive offices)


Aileen Taylor, Chief Governance Officer and Board Counsel, Tel: +44 (0) 131 626 4099, Fax: +44 (0) 131 626 3081


PO Box 1000, Gogarburn, Edinburgh EH12 1HQ

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)



Securities registered or to be registered pursuant to Section 12(b) of the Act:




Name of each exchange on which

Title of each class






American Depositary Shares, each representing 2 ordinary shares, nominal value £1 per share


New York Stock Exchange*

Ordinary shares, nominal value £1 per share



American Depositary Shares Series S and U each representing one Non-Cumulative Dollar Preference Share, Series S and U respectively


New York Stock Exchange*

Dollar Perpetual Regulatory Tier 1 Securities


New York Stock Exchange

4.70% Subordinated Notes due 2018


New York Stock Exchange

5.625% Senior Notes due 2020


New York Stock Exchange

6.125% Senior Notes due 2021


New York Stock Exchange

6.125% Subordinated Tier 2 Notes due 2022


New York Stock Exchange

6.000% Subordinated Tier 2 Notes due 2023


New York Stock Exchange

6.100% Subordinated Tier 2 Notes due 2023


New York Stock Exchange

3.875% Senior Notes due 2023


New York Stock Exchange

3.498% Senior Notes due 2023


New York Stock Exchange

Senior Floating Rate Notes due 2023


New York Stock Exchange

5.125% Subordinated Tier 2 Notes due 2024


New York Stock Exchange

Leveraged CPI Linked Securities due January 13, 2020





*                 Not for trading, but only in connection with the registration of American Depositary Shares representing such ordinary shares or non-cumulative dollar preference shares, as applicable, pursuant to the requirements of the Securities and Exchange Commission.



Securities registered or to be registered pursuant to Section 12(g) of the Act:




Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:


Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2020   Irish Stock Exchange

Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2021   Irish Stock Exchange

Perpetual Subordinated Contingent Convertible Additional Tier 1 Capital Notes callable 2025   Irish Stock Exchange



Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2017, the close of the period covered by the annual report:


(Title of each class)


(Number of outstanding shares)

Ordinary shares of £1 each

11% cumulative preference shares

5½% cumulative preference shares

Non-cumulative dollar preference shares, Series S and U

Non-cumulative euro preference shares, Series 1 to 3

Non-cumulative sterling preference shares, Series 1









Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


x  Yes      ¨  No


If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.


¨  Yes      x  No


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


x  Yes      ¨  No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


x  Yes      ¨  No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


x  Large accelerated filer

¨ Accelerated filer

¨ Non-accelerated filer


¨ Emerging growth company


If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨


† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012


Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


o  U.S. GAAP


x  International Financial Reporting Standards as issued by the International Accounting Standards Board


¨  Other


If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.


¨  Item 17       ¨  Item 18


If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


¨  Yes      x  No



SEC Form 20-F cross reference guide





Item Caption










Identity of Directors, Senior Management and Advisers


Not applicable



Offer Statistics and Expected Timetable


Not applicable



Key Information

Selected financial data

Capitalisation and indebtedness

Reasons for the offer and use of proceeds

Risk factors



119-121, 127, 130-131, 235-241, 333-344

Not applicable

Not applicable

46-48, 349-379



Information on the Company

History and development of the Company

Business overview

Organisational structure

Property, plant and equipment



2, 108-112, 117, 244-245, 287-288, 303, 381, 393-394, 414

1-49, 108-114, 117-118, 120, 160-166, 322, 383

2, 108, 117, Exhibit 8.1

12, 30-31, 244, 287-288, 381



Unresolved Staff Comments


Not applicable



Operating and Financial Review and Prospects

Operating results

Liquidity and capital resources

Research and development, patents, licences etc

Trend information

Off-balance sheet arrangements

Tabular disclosure of contractual obligations


1-28, 116-150, 208-230

8, 13-18, 214-215, 256-264, 317

18, 127-130, 163-178, 211, 237-241, 281-285, 294-295

Not applicable

1-18, 30-31, 39-48, 117-118

169, 179, 303-316

174-177, 299, 303



Directors, Senior Management and Employees

Directors and senior management


Board practices


Share ownership



49, 51-56, 113-114

84-105, 260-264, 323

49, 51-82, 113-114

34-35, 110-111, 257

87-105, 243, 259



Major Shareholders and Related Party Transactions

Major shareholders

Related party transactions

Interests of experts and counsel



113-114, 324, 346-347, 381

324, 346-347

Not applicable



Financial Information

Consolidated statements and other financial information

Significant changes




117-150, 235-331

2, 113-114, 325



The Offer and Listing

Offer and listing details

Plan of distribution


Selling shareholders


Expenses of the issue



296-298, 390-391

Not applicable

107, 387-388

Not applicable

Not applicable

Not applicable



Additional information

Share capital

Memorandum and articles of association

Material contracts

Exchange controls


Dividends and paying agents

Statement of experts

Documents on display

Subsidiary information



Not applicable





Not applicable

Not applicable


Not applicable



Quantitative and Qualitative Disclosure about Market Risk


152-162, 179-221, 268-284, 333-344



Description of Securities other than Equity Securities





SEC Form 20-F cross reference guide continued





Item Caption










Defaults, Dividend Arrearages and Delinquencies


Not applicable



Material Modifications to the Rights of Security Holders and Use of Proceeds


Not applicable



Controls and Procedures


48, 65, 69, 106, 234, Exhibits 12.1 and 12.2








Audit Committee financial expert





Code of ethics


33, 111-112, 381



Principal Accountant Fees and services


65-66, 265



Exemptions from the Listing Standards


Not applicable



Purchases of Equity Securities by the Issuer and Affiliated Purchasers


Not applicable



Change in Registrant’s Certifying Accountant


Not applicable



Corporate Governance


49, 57-62, 99-100



Mine Safety Disclosure


Not applicable













Financial Statements


Not applicable



Financial Statements









Strategic Report



Detailed information


Forward-looking statements





Presentation of information



Business review


Recent developments



Capital and risk management


2017 performance highlights



Financial statements


Chairman’s statement



Additional information


Chief Executive’s review



Shareholder information


2017 performance summary



Abbreviations and acronyms


Segmental highlights



Glossary of terms


Our business model and strategy





Our Strategy



Important addresses


Our Structure





Our Brands





Building a more sustainable bank





Our approach





Our Values





Our Stakeholders





Our Colleagues





Our Customers





Our operating environment





Key influences in our operating environment





Key economic indicators





Risk overview





Governance at a glance







Forward-looking statements





Cautionary statement regarding forward-looking statements

Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these expressions.


In particular, this document includes forward-looking statements relating, but not limited to: future profitability and performance, including financial performance targets such as return on tangible equity; cost savings and targets, including cost:income ratios; litigation and government and regulatory investigations, including the timing and financial and other impacts thereof; structural reform and the implementation of the UK ring-fencing regime; the implementation of RBS’s transformation programme, including the further restructuring of the NatWest Markets franchise; the satisfaction of the Group’s residual EU State Aid obligations; the continuation of RBS’s balance sheet reduction programme, including the reduction of risk-weighted assets (RWAs) and the timing thereof; capital and strategic plans and targets; capital, liquidity and leverage ratios and requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other regulatory buffer requirements, minimum requirement for own funds and eligible liabilities, and other funding plans; funding and credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth; the level and extent of future impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges; future pension contributions; RBS’s exposure to political risks, operational risk, conduct risk, cyber and IT risk and credit rating risk and to various types of market risks, including as interest rate risk, foreign exchange rate risk and commodity and equity price risk; customer experience including our Net Promoter Score (NPS); sustainability matters, including targets; and employee engagement and gender balance in leadership positions.


Limitations inherent to forward-looking statements

These statements are based on current plans, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to the Group’s strategy or operations, which may result in the Group being unable to achieve the current targets, predictions, expectations and other anticipated outcomes expressed or implied by such forward-looking statements. In addition certain of these disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. Forward-looking statements speak only as of the date we make them and we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.


Important factors that could affect the actual outcome of the forward-looking statements

We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy of forward-looking statements we describe in this document, including in the risk factors and other uncertainties set out on pages 349 to 379 of this document and other risk factors and uncertainties discussed in this document. These include the significant risks for RBS presented by the outcomes of the legal, regulatory and governmental actions and investigations that RBS is or may be subject to and any resulting material adverse effect on RBS of unfavourable outcomes and the timing thereof (including where resolved by settlement); economic, regulatory and political risks, including as may result from the uncertainty arising from Brexit and from the outcome of general elections in the UK and changes in government policies; RBS’s ability to satisfy its residual EU State Aid obligations and the timing thereof; RBS’s ability to successfully implement the significant and complex restructuring required to be undertaken in order to implement the UK ring-fencing regime and related costs; RBS’s ability to successfully implement the various initiatives that are comprised in its restructuring and transformation programme, particularly the proposed further restructuring of the NatWest Markets franchise, the balance sheet reduction programme and its significant cost-saving initiatives and whether RBS will be a viable, competitive, customer focused and profitable bank especially after its restructuring and the implementation of the UK ring-fencing regime; the dependence of the Group’s operations on its IT systems; the exposure of RBS to cyber-attacks and its ability to defend against such attacks; RBS’s ability to achieve its capital, funding, liquidity and leverage requirements or targets which will depend in part on RBS’s success in reducing the size of its business and future profitability as well as developments which may impact its CET1 capital including additional litigation or conduct costs, additional pension contributions, further impairments or accounting changes; ineffective management of capital or changes to regulatory requirements relating to capital adequacy and liquidity or failure to pass mandatory stress tests; RBS’s ability to access sufficient sources of capital, liquidity and funding when required; changes in the credit ratings of RBS, RBS entities or the UK government; declining revenues resulting from lower customer retention and revenue generation in light of RBS’s strategic refocus on the UK; as well as increasing competition from new incumbents and disruptive technologies.


In addition, there are other risks and uncertainties that could adversely affect our results, ability to implement our strategy, cause us to fail to meet our targets or the accuracy of forward-looking statements in this document. These include operational risks that are inherent to RBS’s business and will increase as a result of RBS’s significant restructuring and transformation initiatives being concurrently implemented; the potential negative impact on RBS’s business of global economic and financial market conditions and other global risks, including risks arising out of geopolitical events and political developments; the impact of a prolonged period of low interest rates or unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices; basis, volatility and correlation risks; the extent of future write-downs and impairment charges caused by depressed asset valuations; deteriorations in borrower and counterparty credit quality; heightened regulatory and governmental scrutiny  (including by competition authorities) and the increasingly regulated environment in which RBS operates as well as divergences in regulatory requirements in the jurisdictions in which RBS operates; the risks relating to RBS’s IT systems or a failure to protect itself and its customers against cyber threats, reputational risks; risks relating to increased pension liabilities and the impact of pension risk on RBS’s capital position, including on any requisite management buffer; risks relating to the failure to embed and maintain a robust conduct and risk culture across the organisation or if its risk management framework is ineffective; RBS’s ability to attract and retain qualified personnel; limitations on, or additional requirements imposed on, RBS’s activities as a result of HM Treasury’s investment in RBS; the value and effectiveness of any credit protection purchased by RBS;


risks relating to the reliance on valuation, capital and stress test models and any inaccuracies resulting therefrom or failure to accurately reflect changes in the micro and macroeconomic environment in which RBS operates, risks relating to changes in applicable accounting policies or rules which may impact the preparation of RBS’s financial statements or adversely impact its capital position; the impact of the recovery and resolution framework and other prudential rules to which RBS is subject; the application of stabilisation or resolution powers in significant stress situations;  contribution to relevant compensation schemes; the execution of the run-down and/or sale of certain portfolios and assets; the recoverability of deferred tax assets by the Group; and the success of RBS in managing the risks involved in the foregoing.


The forward-looking statements contained in this document speak only as at the date hereof, and RBS does not assume or undertake any obligation or responsibility to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.


The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicit of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.




Presentation of information





In this document, and unless specified otherwise, the term ‘company’ ‘Bank’ or ‘RBSG’ means The Royal Bank of Scotland Group plc, ‘RBS’, ‘RBS  Group’ or the ‘Group’ means the company and its subsidiaries, ‘the Royal Bank’ or ‘RBS plc’ means The Royal Bank of Scotland plc and ‘NatWest’ means National Westminster Bank Plc.


The company publishes its financial statements in pounds sterling (‘£’ or ‘sterling’). The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling, respectively, and references to ‘pence’ represent pence in the United Kingdom (‘UK’). Reference to ‘dollars’ or ‘$’ are to United States of America (‘US’) dollars. The abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of dollars, respectively, and references to ‘cents’ represent cents in the US. The abbreviation ‘€’ represents the ‘euro’, and the abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros, respectively.


Any information contained on websites linked or reports referenced in this annual report on Form 20-F is for information only and shall not be deemed to be incorporated by reference herein.


Segmental reporting

RBS continues to deliver on its plan to build a strong, simple and fair bank for both customers and shareholders. To support this, and in preparation for the UK ring-fencing regime, the previously reported operating segments were realigned in Q4 2017 and a number of business transfers completed, for full details see the Report of the directors.


RBS Group ring-fencing

The UK ring-fencing legislation requiring the separation of essential banking services from investment banking services will take effect from 1 January 2019.


To comply with these requirements it is RBS’s intention to place the majority of the UK and Western European banking business in ring-fenced banking entities under an intermediate holding company. NatWest Markets Plc (NatWest Markets) will be a separate non ring-fenced bank and The Royal Bank of Scotland International (Holdings) Limited (RBSI Holdings) will also be placed outside the ring-fence, both as direct subsidiaries of RBSG.


On 1 January 2017, RBS made a number of key changes to the legal hierarchy of its subsidiaries to support the move towards a ring-fenced structure. As part of continuing preparation to deliver a fully compliant ring-fencing structure by 1 January 2019, it plans to undertake a further series of actions.  For further details of these actions see the Report of the directors.


Non-GAAP financial information

RBS prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (‘GAAP’). This document contains a number of non-GAAP (or non-IFRS) financial measures. A non-GAAP financial measure is defined as one that measures historical or future financial performance, financial position or cash flows but which excludes or includes amounts that would not be so adjusted in the most comparable GAAP financial measure.


The non-GAAP financial measures used in this document generally exclude certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison.


These measures are used internally by management, in conjunction with IFRS financial measures, to measure performance and make decisions regarding the future direction of the business. Management believes these non-GAAP financial measures, when provided in combination with reported IFRS results, provide helpful supplementary information for investors. These non-GAAP financial measures are not a substitute for and should be read in conjunction with reported IFRS financial measures.


The main non-GAAP financial measures used in this document include:

·                  ‘Adjusted’ measures of financial performance, principally operating profit, operating expenses, total income and other performance measures before: own credit adjustments; gain or loss on redemption of own debt; strategic disposals, restructuring costs, litigation and conduct costs and write down of goodwill;

·                  Certain performance ratios based on the adjusted performance measures described above, including the adjusted cost:income ratio (calculated using adjusted operating income and costs), adjusted return on equity ratio (calculated using adjusted operating profit) and the 2017 cost saving progress and targets (calculated using operating expenses excluding litigation and conduct costs, restructuring costs, write down of goodwill, the impairment of other intangible assets, the operating costs of Williams & Glyn and theVAT recovery)

·                  Personal & Business Banking (PBB) franchise results, combining the reportable segments of UK Personal & Business Banking (UKPBB) and Ulster Bank RoI, Commercial & Private Banking (CPB) franchise results, combining the reportable segments of Commercial Banking and Private Banking (see page 109 for further details on segmental reporting including business descriptions and details of segmental reorganisation and business transfers); and


Reconciliations of these non-GAAP financial measures to the closest equivalent GAAP measure are presented throughout this document and in the 2017 performance on page 6.


Key operating indicators

This document includes a number of operational metrics which management believes may be helpful to investors in understanding the Group’s business, including the Groups position against its own targets. These metrics include performance, funding and credit metrics such as ‘return on tangible equity’ and related RWA equivalents incorporating the effect of capital deductions (RWAes), total assets excluding derivatives (funded assets) and net interest margin (NIM) adjusted for items designated at fair value through profit or loss (non-statutory NIM), cost:income ratio, loan:deposit ratio and REIL/impairment provision ratios. These are internal metrics used to measure business performance.


Capital and liquidity measures

Certain liquidity and capital measures and ratios are presented in this document as management believes they are helpful for investors’ understanding of the liquidity and capital profile of the business and the Group’s position against its own targets and applicable regulatory requirements. Some of these measures are used by management for risk management purposes and may not yet required to be disclosed by a government, governmental authority or self-regulatory organisation. As a result, the basis of calculation of these measures may not be the same as that used by the Group’s peers. These capital and liquidity measures and ratios include: the liquidity coverage ratio, stressed outflow coverage and net stable funding ratio.




Presentation of information





Recent developments


Ring-fencing Transfer scheme

As announced on 22 March 2018, the Court of Session in Edinburgh has approved the application made in November 2017 to initiate the first Ring-fencing Transfer Scheme as detailed on page 108.


FX antitrust litigation

As previously disclosed, RBS is among the defendants in an FX-related antitrust class action on behalf of ‘consumers and end-user businesses’ harmed by alleged collusion in the FX spot market. On 12 March 2018, the United States District Court for the Southern District of New York denied defendants’ motion to dismiss the plaintiffs’ amended complaint, holding that plaintiffs have adequately alleged antitrust standing, and denied defendants’ request to take an immediate appeal from that decision. On 23 March 2018, the same court denied a motion by RBS and certain other defendants to dismiss the complaint for lack of personal jurisdiction.


In addition, as previously disclosed, RBS is among the defendants in a separate consolidated FX-related antitrust class action on behalf of ‘indirect purchasers’ who were allegedly  indirectly affected  by FX instruments that others entered into with the defendant banks. On 15 March 2018, the United States District Court for the Southern District of New York granted RBS and the other defendants’ motion to dismiss on a number of grounds, including failure to plead proximate cause and antitrust standing.


Interest rate hedging products litigation

As previously disclosed, Property Alliance Group (PAG) v The Royal Bank of Scotland plc was the leading case before the English High Court involving both interest rate hedging products (IRHP) mis-selling and LIBOR misconduct allegations. The amount claimed was £34.8 million and the trial ended in October 2016. In December 2016 the High Court dismissed all of PAG’s claims. PAG appealed that decision, and the Court of Appeal’s judgment was handed down on 2 March 2018. RBS was successful on all grounds. The decision (subject to any further appeal by PAG) may have significance for other similar IRHP and LIBOR-related cases currently pending in the English courts, some of which involve substantial amounts.


RMBS and other securitised products investigations

On 6 March 2018, the New York Attorney General announced that it had resolved its investigation of RBS’s issuance and underwriting of residential mortgage-backed securities. RBS Financial Products Inc. will pay US $100 million to the State of New York, and provide US $400 million of consumer relief credits at a cost of approximately US $130 million. The cost of the settlement is covered by existing provisions.


Governance and risk management consent order

As previously disclosed, in July 2011, RBS, RBS plc, and RBS N.V. agreed with the Board of Governors of the Federal Reserve System, the New York State Banking Department, the Connecticut Department of Banking, and the Illinois Department of Financial and Professional Regulation to enter into a consent Cease and Desist Order (‘the Order’) to address deficiencies related to governance, risk management and compliance systems and controls in the US branches of RBS plc and RBS N.V. On 8 March 2018, the Federal Reserve Board announced that it had terminated RBS entities’ obligations to the Federal Reserve Board under the Order. On 23 March 2018, the Illinois Department of Financial and Professional Regulation also notified RBS that it had terminated RBS entities’ obligations to it under the Order.



2017 performance highlights





RBS reported an operating profit before tax of £2,239 million for 2017 and its first profit attributable to shareholders in ten years, of £752 million.


RBS delivered against its targets to increase income, reduce costs and use less capital across its businesses. In addition, RBS made substantive progress on resolving its remaining legacy issues. Net loans and advances growth of 2.2% across PBB, CPB and RBSI(1,2,3) was lower than target, however, the bank made greater progress than anticipated on RWA reductions.


Common Equity Tier 1 (CET1) ratio of 15.9% increased by 2.5 percentage points during 2017 and remains ahead of our 13% target.


We retain our target of achieving a sub 50% cost:income ratio and above 12% return on equity by 2020(4).



(1)              Including the impact of transfers. See notes on page 16 for further details.

(2)              Net loans and advances – UK PBB up from £132.2 billion, 6.9% to £141.3 billion, Ulster Bank RoI up from £18.9 billion, 3.2% to £19.5 billion, Commercial Banking down from £100.1 billion, 4.9% to £95.2 billion, Private Banking up from £12.2 billion, 12.3% to £13.7 billion and RBSI down from £8.8 billion, 3.4% to £8.5 billion.

(3)              Personal & Business Banking consists of the reportable segments UK Personal & Business Banking (UK PBB) and Ulster Bank RoI and Commercial & Private Banking consists of the reportable segments Commercial Banking and Private Banking. RBSI is a separate reportable segment.

(4)              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 this document and in the Risk Factors section on pages 349 to 379. These statements constitute forward looking statements; refer to Forward Looking Statements on pages 1 to 2 of this document






(1)              Including the impact of transfers. See notes on page 16 for further details.

(2)              Net loans and advances – UK PBB up from £132.2 billion, 6.9% to £141.3 billion, Ulster Bank RoI up from £18.9 billion, 3.2% to £19.5 billion, Commercial Banking down from £100.1 billion, 4.9% to £95.2 billion, Private Banking up from £12.2 billion, 12.3% to £13.7 billion and RBSI down from £8.8 billion, 3.4% to £8.5 billion.

(3)              Personal & Business Banking consists of the reportable segments UK Personal & Business Banking (UK PBB) and Ulster Bank RoI and Commercial & Private Banking consists of the reportable segments Commercial Banking and Private Banking. RBSI is a separate reportable segment.

(4)              Based on end-point Capital Requirements Regulation (CRR) Tier 1 capital and leverage exposure under the CRR Delegated Act.

(5)              Refer to income statement reconciliations on page 6.

(6)              Criticality 1 incidents are defined as having an adverse impact on segment’s customers, employees or third parties.

(7)              Operating expenses excluding litigation and conduct costs £1,285 million (2016 - £5,868 million), restructuring costs £1,565 million (2016 - £2,106 million), and VAT recoveries of £86 million (2016 - £227 million).

(8)              Operating expenses excluding litigation and conduct costs £1,285 million (2016 - £5,868 million), restructuring costs £1,565 million (2016 - £2,106 million). Operating lease depreciation included in income of £142 million (December 2016 - £141 million). Income excluding own credit adjustments £69 million loss (2016 – £180 million gain), loss on redemption of own debt £7 million (2016 – £126 million), and strategic disposals £347 million (2016 - £164 million).

(9)              Includes people supported through the following enterprise programmes during 2017: The Prince’s Trust, Skills & Opportunities Fund and Entrepreneurial Spark.




Segmental summary income statements































Central items





Commercial Banking

Private Banking



& other




















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Own credit adjustments




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- direct










- indirect








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Total income - statutory









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Operating expenses - adjusted









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(1)              RBS’s CET 1 target is 13% but for the purposes of computing segmental return on equity (ROE), to better reflect the differential drivers of capital usage, segmental operating profit after tax and adjusted for preference dividends is divided by average notional equity allocated at different rates of 14% (Ulster Bank RoI - 11% prior to 2017), 11% (Commercial Banking), 14% (Private Banking - 15% prior to 2017), 16% (RBS International - 12% prior to November 2017) and 15% for all other segments, of the monthly average of segmental risk-weighted assets incorporating the effect of capital deductions (RWAes). Return on equity is calculated using profit for the period attributable to ordinary shareholders.

(2)              Excluding own credit adjustments, (loss)/gain on redemption of own debt, strategic disposals, restructuring costs, litigation and conduct costs and write down of goodwill.

(3)              Operating lease depreciation included in income (year ended December 2017 - £142 million; year ended 31 December 2016 - £152 million).




Chairman’s statement






Howard Davies



2017 was another year in which we saw the bank move closer to achieving sustainable profitability.


Our share price increased 20% in the year, outperforming other main UK banks. We also welcomed the UK Treasury announcement in November 2017 to potentially restart the privatisation process by the end of March 2019. This announcement showed confidence in our strategic approach, the progress that we have made in making the bank safer and in a position to succeed as we approach a new era of disruption in banking.


The bank made an operating profit before tax of £2,239 million, and an attributable profit of £752 million(1), the first full year profit since 2007.


Progress in resolving legacy issues

We resolved a number of major legacy issues during the year. The Competition Directorate of the European Commission announced that it had agreed a revised scheme to satisfy the remaining State Aid obligations which were imposed on the bank in 2009. The new scheme replaces the need to divest the business formerly described as Williams & Glyn, and involves the creation of a capability fund to benefit challenger banks, alongside incentivised transfers of some of our small business customers. The scheme is not only practical, it will enhance competition.


Another potentially damaging reputational risk was the 2008 Rights Issue litigation. That has now been resolved. The settlement announced in June 2017 brought the proceedings to an end.


In 2017 we continued with the run down of our non-core bank, with legacy risk weighted assets, excluding Alawwal(2), reducing by £12.6 billion in the year. Given its reduced scale, in December we announced the wind-up of this division, with the remainder of the assets now folded back mainly into NatWest Markets We also settled an action with the Federal Housing Finance Agency related to this bank’s participation in the US subprime mortgage market in the run up to the financial crisis.


There is, however, one major piece of litigation we need to resolve in relation to our past subprime mortgage activity, with the Department of Justice in the United States. At this point we cannot say when that issue will be closed, as the timing is not in our gift, but we continue to hope to resolve it in the coming months.


The treatment of some of our small business customers between 2008 and 2013 has been under scrutiny, and has received significant political and media attention. The Financial Conduct Authority (FCA) published a summary report into the historical operation of our former Global Restructuring Group (GRG) and the full report by Promontory was published by the Treasury Select Committee on 20 February 2017. The most serious allegations made against the bank in an earlier report by Dr. Lawrence Tomlinson were not upheld. Promontory stated that “they did not find that defaults were engineered to transfer business simply to generate revenue for RBS”. However, the bank was strongly criticised in the report and we acknowledge that we could have done better for many small business customers in GRG. I again apologise for the mistakes that were made during that time. The attitudes to customers displayed by some staff were not acceptable, and communication with clients was often poor. We have, as a result, refunded complex fees to many customers and established a complaints



(1)              Profit attributable to ordinary shareholders.

(2)              NatWest Markets legacy RWAs 2017 - £14.0 billion (2016 - £26.6 billion); Alawwal RWAs 2017 - £6.6 billion (2016 - £7.9 billion).




Chairman’s statement





scheme which is overseen by an independent third party - retired High Court judge Sir William Blackburne, who is working through our cases. The FCA have described this as an appropriate response to these findings. We have provided a sum of £400 million for these redress schemes.


Economy and Regulation

In 2017 the UK economy continued to grow, albeit below its long-term trend rate. Inflation is currently running at around 3%, above the Bank of England’s 2% target. In its latest outlook the Bank of England has indicated that rates may have to rise somewhat sooner, and to a somewhat greater extent that they had previously anticipated. The Monetary Policy Committee believes that inflation will still be above target three years from now when they expect price pressures to be mounting, necessitating a monetary tightening.


Surveys of business confidence increasingly point to longer term uncertainty over how businesses will structure their operations, once the UK leaves the EU. The depreciation of sterling pushed up inflation but provided a boost to UK exporters, giving them the opportunity to reduce prices in overseas markets or to boost margins. With the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD) pointing to improving global growth prospects in 2018, the UK economy could gain from this favourable tailwind, albeit the scale of these gains is uncertain. In recent weeks, sterling has appreciated against the dollar, but remains weak against the euro.


In terms of regulation it was good to receive clarity on one of the most significant reforms following the financial crisis. The Basel Committee scrutinised the way in which banks assess risk on their balance sheet, with the aim of bringing more consistency and tighter controls. The impact on RBS of the package announced in December 2017 is likely to be small and we are well positioned for when the new rules come into force in 2022.


We are also on track to meet our ring-fencing obligations by 2019. The majority of the bank will be within the ring-fence, so I will chair the Boards of the Group and the ring-fenced bank. We are well advanced in the process of securing the legal permissions we need to transfer some of our customers to the most appropriate post ring-fenced legal entity. This will allow us to continue to serve them with little or no change to their day-to-day banking. The services they use (their local branch, sort code, account numbers and where relevant Relationship Manager) will not change as a result of the Ring-Fencing Transfer Scheme and they will not need to do anything differently.



While there is some more clarity on the regulatory environment, the political context remains uncertain, especially in relation to Brexit. Since our business is largely UK-focused, the impact on RBS is not as significant as it is on many other banks. However, in common with them, we are preparing contingency plans to maintain our Western European business. One option is to use our existing banking licence in the Netherlands to provide continuity of service from NatWest Markets to our EU customers.


Changing customer behaviour and disruption

Our operating environment is also changing. The UK financial services sector is experiencing its most significant period of disruption for some time. More accessible data, cheaper technology, new competition regulation and shifting customer expectations are the key drivers of change and are creating new challenges and opportunities for incumbent banks. These drivers are enabling new challenger banks to compete more effectively, from a lower cost base, and we have to respond. There will be more external partnerships with others than we have seen before as we offer new products and services. In 2017 we created a Technology and Innovation Committee of the Board to oversee and monitor RBS’s strategic direction in what has become one of the most important areas of focus for the bank. The Committee is chaired by Alison Davis. Frank Dangeard and a new Board member, Yasmin Jetha, have also been appointed as members.


We also announced a significant reduction in our branch network. The decision to close a branch is always a difficult one to make, and is never taken lightly. However, customer behaviour is changing, with more customers choosing mobile and online over traditional branch counters, and we must respond to these changes. This shift in behaviour, combined with our partnership with the Post Office, mobile branches and Community Bankers, means there are now more ways to bank than ever before.


Our branches will remain key outlets for customers and we are investing in those that remain, to reflect the way customers want to use them, typically for financial advice related to buying a home or starting a business rather than for routine transactional banking.


Colleague engagement, diversity and inclusion

We are making good progress in improving the culture of the organisation. Our annual colleague sentiment survey scores are the highest they have been in ten years and there is generally a more positive outlook from colleagues across the bank.


In 2017 we were recognised as the ‘Diverse Company of the Year’ at the National Diversity Awards; a Top 10 Employer for Working Families; a Times Top 50 Employer for Women and retained a gold rating for our work on Race in Business in the Community’s Race for Opportunity benchmark. We also have a Black, Asian and Minority Ethnic (BAME) focus on recruitment, talent identification and promotion, and have introduced explicit targets for BAME representation at senior levels in 2018.


Today, for the first time, we have also published details of the average pay gap between male and female colleagues in the bank, which is 37.2%. Gender pay is markedly different to equal pay which looks at the difference in pay between men and women for similar roles. We are confident that we pay our employees fairly and keep our HR policies and processes under regular review to ensure we do so.


Our gender pay gap reflects an under representation of women at senior levels. That is not a satisfactory position and we know that we still have much to do to narrow the gap. We are therefore putting more impetus behind our work to achieve a better gender balance.


We are strongly committed to having more female colleagues in senior positions across the organisation. In 2015 we set ourselves a target to have at least 30% of roles in the three most senior levels of each of our businesses




filled by women by 2020. Our latest figures show we are now at 37% on aggregate, and on track to achieve 40% by 2020. Furthermore, 44% of our top 5000 roles are occupied by women and we are aspiring to achieve full gender balance at all levels of our business by 2030.


Building a sustainable bank

We are committed to running the bank as a more sustainable business, serving today’s customers in a way that also safeguards future generations.


In 2017, RBS publicly committed to support the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) – a voluntary set of guidelines encouraging consistent climate-related disclosures in annual reporting. We also improved our position in a number of rankings – for example achieving 13th in top 100 organisations in the Stonewall Workplace Equality Index and maintained inclusion in the FTSE4GOOD index and high scores in the CDP climate index.


Our volunteering and fundraising partnerships also continue to make a difference for the communities we serve. In 2017, our employees supported a wide variety of charities by raising £4.3m in giving through their giving and fundraising efforts. We also won the Platinum award for Payroll Giving and the Payroll Giving Award for the Most Successful Sustained Scheme; 3,454 charities received funding.


Shareholder engagement

This year, we have increased the overall level of our non-financial disclosures in our Strategic report by featuring our performance highlights against each of our key influences we have described. We have introduced a new section, entitled Our Stakeholders, which describes our stakeholder groups and our approach to managing key topics of interest such as climate change.


As well as encouraging a more open culture internally, the Board has also made a considered effort to listen to the views of all shareholders. In 2017 we hosted two retail shareholder events in London and Edinburgh. Those events provided shareholders with the opportunity to share their views on our progress and our future initiatives directly with members of the Board and executive committee. Individual shareholders’ views on our plans to build a better bank are important to us.


The Board has, during 2017, as in previous years, run a series of stakeholder engagement sessions with representatives from a wide variety of different organisations to discuss key topics such as financial capability and technological disruption with members of our Board and senior executives. This is helping us to make better informed decisions and ensure our future strategy addresses emerging sustainability risks and opportunities. We will continue to run these events in future years. Board members have also visited business customers, and will undertake more such visits around the country this year.


Board Changes

In 2017 Mark Seligman and Yasmin Jetha joined the Board and have already brought a wealth of experience and fresh perspectives to our discussions. Mark became the Senior Independent Director at the end of the year. Sadly, John Hughes, who joined in June 2017, had to step down in September 2017 for health reasons. Dr Lena Wilson was appointed as a non- executive director on 1 January 2018. Lena brings strong commercial and public sector experience to the Board, having previously served as Chief Executive of Scottish Enterprise and Senior Investment Advisor to The World Bank. With effect from 1 January 2018, Sandy Crombie stepped down from the Board and Penny Hughes has told us that she does not plan to stand for re-election at the 2018 Annual General Meeting. I would like to thank both Sandy and Penny for their outstanding commitment and huge contributions to RBS over a number of years. Sandy was, as Senior Independent Director, a great support to my predecessor and to me. Penny has led the Remuneration and, later, the Sustainable Banking Committee with great enthusiasm. We wish them both well for the future.



Overall, the Board believes that in 2017 we have made further progress in resolving the legacy issues which have hung over the bank for too long. We still have important issues to resolve and tough decisions to make, particularly on cost control, but in 2017 we made several important steps in the right direction. Thank you for your patience as we continue the bank’s turnaround.




Chief Executive’s review






Ross McEwan

Chief Executive


Putting the past behind us. Investing for the future.


In 2017 we continued to make good progress in building a simpler, safer and more customer focused bank. I am pleased to report to shareholders that the bank made an operating profit before tax of £2,239 million in 2017, and for the first time in ten years we have delivered a bottom Iine profit of £752 million(1).


We have achieved profitability through delivering on the strategic plan that was set out in 2014. The first part of this plan was focused on building financial strength by reducing risk and building a more sustainable cost base. So far, we have reduced our risk-weighted assets by £228 billion and today can report a Common Equity Tier 1 ratio of 15.9% up from 8.6% in 2013. Our financial strength is now much clearer. Over the same period we have reduced operating costs by £3.9 billion(2). We still have more to do on cost reduction, however this reflects the progress we have made in making the bank more efficient.


A clear indication of the outstanding progress we have made is that from the first quarter of 2018, we will no longer report adjusted financials.


At the same time as building financial strength, we have also made progress with the legacy of our past and improving our core bank. We have delivered on this by resolving a number of our litigation and conduct issues. This includes reaching settlements last year with FHFA in respect of our historical Retail Mortgage Backed Securities (RMBS) activities and with claimants in relation to our 2008 Rights Issue. In 2017 we also continued to run down our legacy assets. The wind-up of our non- core division, Capital Resolution in 2017, was an important moment.


As part of the support we received in 2008 and 2009, the bank was mandated to meet certain requirements under a State Aid restructuring plan. In 2017, we received approval for an alternative remedies package, which replaced our original plan to divest of the business formally known as Williams & Glyn. This is a good solution, both for improving competition in the UK SME banking market, and for shareholders.


With this solution in place and currently being implemented, the number of legacy issues the bank faces has reduced. However, we have one major legacy issue that we have yet to resolve which is with the US Department of Justice. The timing of the resolution of this issue is not in our control.



(1)              Profit attributable to ordinary shareholders.

(2)              Operating expenses excluding litigation and conduct costs, restructuring costs, write-down of goodwill, restructuring costs associated with the business formerly described as Williams & Glyn.




The bank has received significant media attention for its treatment of some small business customers between 2008 and 2013. To those customers who did not receive the experience they should have done while in GRG we have apologised. We accept that we got a lot wrong in how we treated customers in GRG during the crisis. However, these were complex and subjective cases with each case having unique facts about what was the right thing to do. The bank welcomes the FCA’s confirmation that the most serious allegations made against the bank have not been upheld and that the steps the bank announced in November 2016 to put things right for customers are appropriate.


We have made significant progress in improving our culture since then.


Today this bank is a simpler and safer organisation, with colleagues now fully focused on our customers.


I want to thank our colleagues for their commitment and resolve during what has been a difficult chapter in the bank’s history. Our most recent colleague survey, Our View, reported the highest engagement levels in ten years. We also recently won the ‘Employee Engagement Company of the Year’ at the UK Employee Engagement Awards. This shows that our culture is improving. This bank is now more open, less hierarchical and more focused on our customers. Our colleagues serve and support millions of customers across the UK and Republic of Ireland every day, it is vital to our success that they feel engaged and motivated.


Investing to transform our business

When I started as CEO in 2014 the bank was far too complex. We operated in 38 countries, with over 5,000 systems supporting hundreds of different products. In our credit card business alone we offered 55 different card designs, as the organisation had grown we had added complexity which distracted us from our key stakeholder, the customer. Our customers want a bank which protects their safety and security, and is also responsive to their needs.


Today we have exited 26 countries and now have a more focused product set, underpinned by almost half the number of systems we previously had. Simplification will continue to be a key focus for the organisation in 2018.


We are going through all of our end-to- end customer processes to ensure they are fit for purpose.


Our mortgage application journey is experienced by thousands of customers every day. With one of our strategic aims being to grow in this market, the benefits of simplification and automation in this area are vast. Given this, in 2017 NatWest was the first UK bank to offer paperless mortgages. Customers can now apply for a completely digital mortgage which uses the latest technology to securely share and verify documents online. With this new proposition, mortgage offers can now be made within 11 days, down from 23 days before. The process also eliminates close to 4.3 million sheets of paper a year, reducing our impact on the environment.


The opportunities created by greater simplification and automation, in terms of improved controls, cost reduction and a better customer experience, are significant for this bank.


As well as transforming our processes and products, in 2017 we continued to reap the benefits of refocusing our main customer-facing brands. With each now speaking to a unique constituency of customers, we are better placed to differentiate ourselves from our competitors. With NatWest for England and Wales, Royal Bank of Scotland, for Scotland and Ulster Bank for the island of Ireland – we truly are a bank of brands in the UK and the Republic of Ireland.


Customer driven change

Listening and responding to our customers is helping us to get closer to meeting our goal to be No.1. In light of this we have continued with the roll out of Closed Loop Feedback in 2017. Today, within 24 hours of an interaction taking place, customers can provide specific, actionable feedback directly to the teams that serve them, empowering colleagues to listen, learn from and act on what our customers are telling us. With our complaints volumes down 9% on the previous year, and our Net Promoter scores improving in half of our chosen customer segments, we continue to see the benefits of customer driven change in this bank. We still have a lot of work to do to meet our 2020 ambition of being the number one bank for customer service, trust and advocacy.


Listening to our customers is not only reducing complaints, it’s also driving product and service improvements. In our commercial bank for instance, in response to customers’ demand for greater speed and efficiency, we have developed self service account opening. Through this channel more than 90% of our new to bank commercial customers are able to initiate account openings themselves and, crucially, are doing it 30 minutes faster than if they used telephony. Customers told us this was a pain point for them and we have responded.


Listening to our customers and investing to simplifying our processes is helping us build a bank which is lower cost, and competitive in our target markets – improving outcomes for both customers and shareholders.


We are committed to running the bank as a more sustainable business, serving today’s customers in a way that also helps future generations. As technological, social and environmental changes shape the world, it’s important to stay connected with evolving customer needs, our shareholders and the wider expectations of society. One of the ways in which we are doing this is through our Board-level stakeholder engagement programme where we proactively listen, learn and engage with our stakeholders to improve the way we do business.


Supporting the UK economy

While transforming the bank, we have continued to support the UK economy. In 2017 we extended £33.9 billion in new mortgage lending, helping grow our mortgage market share for the fifth consecutive year. We continue to target growth in our mortgage market share in 2018.


We are also the biggest supporter of UK business. Our commercial bank grew lending in our target markets, this commitment supported both recognised household names and fledgling start-ups. Our commitment to business goes beyond simple financing, our Entrepreneurial Spark programme continued to grow in 2017 and has supported over 3,800 new businesses since 2012 with award- winning facilities and an outstanding support network. Our work is also being recognised externally. In 2017 NatWest was awarded Best Business Bank in the UK by the National Association of Commercial and Finance Brokers.




Chief Executive’s review





Throughout 2017 NatWest Markets has continued to deepen its customer relationships by providing global market access and innovative and tailored solutions. As well as increasing employee engagement and improving the control environment, the business has made material progress to realise cost and operating efficiencies.


Responding to technological change

The financial services industry is going through one of the most significant periods of change we have seen in many years, and we are responding.


Like other industries, the digital revolution has naturally led to lower footfall in our branches. Branch transactions are down 40% on 2013, as increasingly our customers prefer the convenience and ease of digital banking. Given this we have made some difficult, but necessary, decisions around the scale of our branch network in 2017. This does not mean we are not supporting our customers. In fact we are providing customers more ways to bank than ever before, be that through a visit to their local Post Office, a visit from one of our 39 mobile branches, which visit over 600 towns and villages on a weekly basis, meeting one of our 100 community bankers, a digital appointment with one of our video bankers, logging on to internet banking platform, or banking on the go with our market leading mobile app. Our customers have never had as many channels through which to undertake their banking.


For the first time we now have more active mobile users than users online, a clear indication of the direction of travel of our customers’ banking preferences.


Our ambition is for the standard of service we provide to always be outstanding, no matter how our customers choose to interact with us. In 2018 our branches will increasingly focus providing specialised expertise and advice as well as on helping customers tap into the wealth of ease and efficiency they can experience through using our digital channels.


In our commercial bank, we are supporting customers shift to mobile through building our online service Bankline service into an app. Currently, 90,000 commercial customers are active on Bankline. In the future we expect this to move increasingly to mobile. In 2018, we will also launch Bankline mobile for our larger commercial customers. This new service will act as a companion to our current Bankline on-line technology. Initially, customers will be able to view transactions and send payments with biometric approval. In the coming quarters we will further expand the scope of what Bankline Mobile offers.


Embracing the latest in digital innovation

We know that we cannot stand still on innovation as our competitors certainly are not. Over the last few years we have invested in building our partnerships and scouting networks across the globe to ensure we are at the cutting edge of technology. We have developed some excellent partnerships and one area we have advanced significantly in is Artificial Intelligence (AI).


By harnessing the latest in computer learning and speech recognition, in partnership with IBM, we have built an AI chatbot, called Cora. Cora is helping our customers with many of their most common queries. Crucially Cora is available 24/7, has no ‘wait-time’ to serve a customer and can handle an unlimited number of queries at the same time. Since Q1 2017 Cora has handled over four hundred thousand conversations responding to over two hundred different questions.


In partnership with Soul Machines, we are investing now to build an evolution of Cora for 2018, giving her a visual avatar acting as the interface with our customers. Initial trials are proving a success with customers telling us that using Cora made them less concerned about converting to our other digital channels. While many customers felt empowered to be more direct in their questioning of Cora, as they felt much safer and more secure with her.


Through digital innovation we will serve customers more efficiently, be more responsive to their needs and at the same reduce costs in the business and build a more solid control environment.


Looking forward

In the past our legacy has dominated our corporate story. In 2017 our financial strength improved and we continued to put the past behind us. We are entering a new phase of transforming the core bank through technology innovation and end-to-end process re-engineering. Our future will be high tech and high touch, which means lower cost, high quality digital services with human expertise available when required.



I would like to thank shareholders for their continued support. We welcome the indication in the Chancellor’s budget statement about the potential to restart share sales during the fiscal year 2018/2019, again this is a further proof of the progress we have made.


We recognise our responsibility towards the society we serve and operate in. It is only by supporting our customers and communities to succeed that we will be become a more sustainable bank. I, together with my management team, view this as a core part of our ambition to be No.1 for customer service, trust and advocacy.


As the number of our legacy issues reduces, and our business performance improves, the investment case for this bank is clearer, and the prospect of us rewarding our shareholders is getting closer.


“In 2017 we continued to make good progress in building a simpler, safer and more customer focused bank.”




2017 performance summary



RBS reported its first profit attributable to shareholders in ten years


·                  2017 operating profit before tax of £2,239 million, an increase of £6,321 million compared with 2016.


·                  Adjusted operating profit before tax(1,2) increased by 31.1% to £4,818 million.


·                  2017 profit attributable to shareholders of £752 million.


·                  4.3% increase in income (4.0% increase in adjusted income(1)) and a 35.8% reduction in operating expenses (8.1% reduction in adjusted operating expenses(2)).


·                  Net interest margin (NIM) reduced by 5 basis points to 2.13% compared with 2016.


·                  Supported the UK economy through a £6.0 billion, or 2.2%(3,4), increase in net lending across PBB, CPB and RBSI(5). Whilst behind our 3% target, this represents strong growth in a competitive environment.


Delivery against our 2017 targets





(1)     Income excluding own credit adjustments £69 million loss (2016 - £180 million gain), loss on redemption of own debt £7 million (2016 - £126 million) and strategic disposals £347 million (2016 - £164 million).

(2)     Operating expenses excluding litigation and conduct costs £1,285 million (2016 - £5,868 million), restructuring costs £1,565 million (2016 - £2,106 million) and VAT recoveries of £86 million (2016 - £227 million).

(3)     Including the impact of transfers. See notes on page 16 for further details.

(4)     Net loans and advances – UK PBB up from £132.2 billion, 6.9% to £141.3 billion, Ulster Bank RoI up from £18.9 billion, 3.2% to £19.5 billion, Commercial Banking down from £100.1 billion, 4.9% to £95.2 billion, Private Banking up from £12.2 billion, 12.3% to £13.7 billion and RBSI down from £8.8 billion, 3.4% to £8.5 billion.

(5)     Personal & Business Banking consists of the reportable segments UK Personal & Business Banking (UK PBB) and Ulster Bank RoI and Commercial & Private Banking consists of the reportable segments Commercial Banking and Private Banking. RBSI is a separate reportable segment.




Continued track record of delivery against our stated objectives


§            Grow income: Total income increased by £543 million or 4.3%. Adjusted income increased by £490 million(1), or 4.0%.


§            Cut costs: Operating expenses reduced by £5,793 million or 35.8%. Excluding VAT recoveries of £86 million (2016 - £227 million), adjusted operating expenses reduced by £810 million(1,2), or 9.6%.


§            Reduce capital usage: Taking into account the impact of volume growth, RWAs reduced by £20.8 billion across PBB (£0.6 billion), CPB (£12.9 billion), RBSI (£4.4 billion) and NatWest Markets core (£2.9 billion), already achieving our 2018 target.


§            Resolve legacy issues:
During 2017, RBS:


             Wound up the former Capital Resolution business. Legacy RWAs now represent around 11% of total;



             Received formal approval from the European Commission for its alternative remedies package in respect of the business previously described as Williams & Glyn; and



             Reached settlement with the Federal Housing Finance Agency (FHFA) and the California State Attorney General in the US and resolved the 2008 rights issue shareholder litigation.


Significant capital build throughout 2017


§            CET1 ratio increased by 250 basis points to 15.9%, despite absorbing significant additional legacy costs.


§            IFRS 9 adoption on 1 January 2018 increased CET1 by a further 30 basis points.


Prioritising transformation acceleration


§            Increased investment and innovation spend focused on achieving higher levels of digitisation and automation.


§            Faster repositioning of the bank’s existing distribution network and technology platforms towards mobile, cloud based platforms and virtualisation.


Building a more sustainable bank


§            Our Board Sustainable Banking Committee hosted four stakeholder engagement sessions, inviting a broad mix of stakeholders to share their perspective on key issues with us.


§            RBS is a founding partner with the National Trading Standards Scam Team on their ‘Friends Against Scams’ initiative.


§            RBS was recognised by InfraDeals as the leading lender to the UK renewables sector by number of transactions over the past six years (2012- 2017).


§            We helped over one million customers with a free Financial Health Checks to help customers organise their finances and achieve their financial goals.


§            We supported over 3,830 people through our enterprise programmes. This includes the following enterprise programmes: Entrepreneurial Spark, Prince’s Trust and Skills & Opportunities Fund.




(1)         Refer to income statement reconciliations on page 6.

(2)         Operating expenses excluding litigation and conduct costs £1,285 million (2016 - £5,868 million), restructuring costs £1,565 million (2016 - £2,106 million) and VAT recoveries of £86 million (2016 - £227 million).







UK Personal & Business Banking


§            UK PBB now includes the business previously described as Williams & Glyn. Operating profit of £2,413 million was 40% higher than in 2016 including a £185 million debt sale gain. Adjusted operating profit(5) of £3,084 million was 18.4% higher than in 2016. Income increased by 5.7% to £6,477 million supported by a 5.9% increase in net loans and advances, which more than offset margin contraction. Operating expenses were 10.5% lower than 2016 reflecting lower litigation and conduct costs, down 67%, partially offset by restructuring costs, up 89%. Return on equity increased to 23.7% from 16.2% in 2016. Adjusted operating expenses(5) were 7.1% lower than 2016 reflecting reduced headcount and lower back-office operations costs. Adjusted return on equity(5) increased to 30.7% in 2017 from 25.1% in 2016. There are a range of variables that could impact near to medium term returns, including RWA inflation as a result of a change in Bank of England mortgage risk weighting.


§            Gross new mortgage lending was £31.0 billion, with market share of new mortgages at approximately 12%, supporting growth in stock share to approximately 10%. Mortgage approval share in Q4 2017 decreased to approximately 12%, from around 14% in Q3 2017, and mortgage new business margins were 14 basis points lower in the quarter, in part reflecting intense price competition in the market.


§            UK PBB continues to invest in its digital offering and now has 5.5 million customers regularly using its mobile app, 20% higher than December 2016, and in 2017 was the first bank to launch a paperless mortgage journey.


Ulster Bank RoI


§            Ulster Bank RoI reported an operating loss of £132 million (151 million), an adjusted operating profit(5) of £96 million (109 million) and a return on equity of (5.0%). Adjusted return on equity was 3.6 %(5) in 2017. Total income increased by £28 million, or 4.9%.  In euro terms, total income decreased by 15 million, or 2.1%., primarily reflecting a reduction in income on free funds, partially offset by one-off items, higher lending income and reduced funding costs. Adjusted income(5) increased by £34 million or 5.9% and in in euro terms decreased by 8 million, or 1.1%


§            Gross new lending increased by 7.2% from £2.1 billion in 2016 to £2.3 billion (by 3.4% from 2.5 billion in 2016 to 2.6 billion in euro terms). Total expenses increased by £7 million (46 million decrease). Further cost efficiencies have been achieved, with adjusted expenses(5) reducing by £6 million (43 million) in 2017.


§            Ulster Bank RoI was amongst the first banks in Ireland to introduce Apple Pay and Android Pay, and now over 70% of our customers are actively using our digital proposition, increased from 58% of our active customer base in 2016. We continue to reposition capital, with REILs down by 5.7% to £3.3 billion (9.8% to 3.7 billion), representing 16.0% of gross customer loans, compared with 17.5% in 2016.




Commercial Banking


§                 Commercial Banking includes selected assets from the former Capital Resolution business from 1 October 2017. Operating profit of £1,108 million was 49.3% higher compared to 2016 and return on equity was 6.6% compared to 4.1%. Adjusted operating profit(5) of £1,308 million was 2.7% higher than 2016 and adjusted return on equity(5) remained broadly stable at 8.2%. Income increased by 2.0% due to increased volumes in targeted segments and deposit re-pricing benefits.


§                 Operating expenses decreased by £453 million to £2,014 million. Adjusted operating expenses(5), reduced by 6.3% reflecting operating model simplification and productivity improvements, including a 16.4% reduction in front office headcount. Commercial Banking net impairment losses of £362 million increased by £156 million and reflecting a small number of single name impairments.


§                 Net loans and advances decreased by £3.1 billion to £97.0 billion. Adjusting for transfers (1) net lending decreased by £4.9 billion in 2017, as growth in targeted segments has been more than offset by active management of the lending book, achieving gross RWA reductions of £12.5 billion.


§                 With the successful launch of our entrepreneur accelerator hub in London we now have 12 business accelerators throughout the UK. Across these hubs, over 3,800 start ups have benefitted from our support, which has helped them raise £255 million of investment while creating over 8,000 jobs.


Private Banking


§                 Private Banking now includes the Collective Investment Funds business transferred from UK PBB on 1 October 2017. Operating profit increased by £32 million, or 28.8%, to £143 million compared with 2016 and return on equity increased from 5.6% to 6.4%. Adjusted operating profit(5), increased by £78 million, or 52.3%, to £227 million and adjusted return on equity(5) increased to 11.3% from 7.8%. Total income increased by £21 million to £678 million. Adjusting for transfers of £9 million, income increased by £12 million due to higher lending volumes and an £8 million gain on a property sale, partially offset by margin pressure.


§                 Operating expenses decreased by 3.6%. A 12.9% reduction in adjusted operating expenses(5),was supported by an 11.8% reduction in front office headcount.


§                 Net loans and advances increased by 10.7% to £13.5 billion and assets under management increased by 14.4%, after adjusting for transfers(2)


§                 We continue to focus on delivering the best customer experience, including investing in digital by launching Coutts Invest and an enhanced mobile experience, and we were awarded Best Private Bank in the UK at the Global Private Banking Awards 2017.


RBS International (RBSI)


§                 RBSI reported an operating profit of £167 million, 12.1% lower than 2016 and return on equity decreased to 11.2% from 13.8%. Adjusted operating profit(5), of £184 million, was 5.6% lower than 2016. Income increased by 4.0% driven by increased lending and deposit volumes and re-pricing actions on the deposit book.


§                 Operating expenses increased by 25.9% compared with 2016. Return on equity decreased to 11.2% from 13.8%. Adjusted operating expenses(5), increased by 19.5% reflecting increased operational costs associated with becoming a non ring-fenced bank. Despite this, adjusted return on equity remained robust at  12.6%.


§                 RWAs of £5.1 billion reduced by £4.4 billion compared with 2016 reflecting the benefit of receiving regulatory approval for RBSI to adopt an advanced internal ratings based approach on the wholesale corporate book.


NatWest Markets


§                 Following the closure of the former Capital Resolution business in Q4 2017, NatWest Markets now includes legacy run-off assets alongside its core businesses. An operating loss of £977 million was reported in 2017, including a profit of £41 million in the core business. Adjusted operating loss(5) of £264 million, compared with £1,231 million in 2016. Total income decreased by £162 million, or 13.4%, to £1,050 million. Adjusted income(5) in the core business increased by 9.5% to £1,665 million, largely driven by Rates as the business navigated markets well.


§                 Legacy disposal losses, other adjustments and impairments of £513 million were incurred in 2017, compared with £825 million in 2016. Operating expenses of £2,201 million were £623 million, or 22.1%, lower than 2016, whereas adjusted operating expenses(5) reduced by 26.7% reflecting a significant reduction in the legacy business, as it moved towards closure, and cost reductions in the core business. RWAs decreased by £15.3 billion, adjusting for transfers(3), to


§                 £52.9 billion primarily reflecting legacy business reductions. At the end of 2017 the legacy business within NatWest Markets had RWAs of £14.0 billion, excluding RBS’s stake in Alawwal Bank, a reduction of £10.9 billion, adjusting for transfers(3), over the course of the year.




(1)              Shipping and other activities which were formerly in Capital Resolution were transferred from NatWest Markets on 1 October 2017, including net loans and advances to customers of £2.6 billion and RWAs of £2.1 billion. Commercial Banking transferred whole business securitisations and relevant financial institution’s (RFI) to NatWest Markets during December 2017, including net loans and advances to customers of £0.8 billion and RWAs of £0.6 billion. Comparatives were not re-presented for these transfers.


(2)              UK PBB Collective Investment Funds (CIFL) business was transferred from UK PBB on 1 October 2017, including total income in Q4 2017 of £11 million and assets under management of £3.3 billion. Private Banking transferred Coutts Crown Dependency (CCD) to NatWest Markets during Q4 2017, including total income of £2 million and assets under management of £1.3 billion. Comparatives were not re-presented for these transfers.


(3)              Shipping and other activities which were formerly in Capital Resolution were transferred to Commercial Banking on 1 October 2017, including RWAs of £2.1 billion. Whole business securitisations and relevant financial institutions (RFI) were transferred from Commercial Banking during December 2017, including RWAs of £0.6 billion. Comparatives were not re-presented for these transfers.


(4)              Transfers include £0.4 billion loans and advances transferred from Commercial Banking to UK PBB during 2017 to better align Business banking customers. Comparatives were not re-presented for these transfers.


(5)              Refer to income statement reconciliations on page 6.







2017 performance summary





Looking forward




2018 Outlook(1)


We reiterate our medium term outlook on both return on tangible equity and cost:income ratio. We also now intend to accelerate the transformation of the bank which necessitates increased investment and innovation spend together with additional restructuring costs. As a result operating costs, excluding restructuring and litigation and conduct costs, will reduce compared with 2017, but the rate of cost reduction will be materially lower than in 2017. We expect to incur restructuring charges of around £2.5 billion across 2018 to 2019 cumulatively, of which c.£0.3 billion relates to the completion of the State Aid remedy and reintegration of the former Williams & Glyn (W&G) business into UK PBB. This is compared to previous guidance of around £1 billion excluding the impact of W&G, with around two thirds of the remaining c.£1.2 billion increase being driven by costs associated with the accelerated transformation.


RBS continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment and manage both conduct-related investigations and litigation, including relating to RMBS. Substantial additional charges and costs may be recognised in the coming quarters.


With the introduction of IFRS 9, impairments are expected to be more volatile and we continue to remain mindful of potential downside risks, particularly from single name and sector driven events. The consensus view of Brexit suggests a weaker UK economy in the short to medium term. With the current high level of UK household debt and real wage compression, any increases in unemployment and interest rates present a threat to retail impairment rates. In wholesale portfolios further softening of GDP growth would be expected to impact credit losses negatively. We retain our guidance that through the cycle losses would be in the range of 30-40bps.


By the end of 2018, we expect Bank RWAs to be lower by £5-10 billion. This is despite model uplifts in Commercial Banking in 2018 which are expected to drive some RWA inflation. The majority of the gross RWA reductions will be within NatWest Markets legacy assets, including the benefit of the anticipated merger between Alawwal Bank and Saudi British Bank, and Commercial Banking.


RBS Group capital and funding issuance plans for 2018 focus on issuing £4-6 billion MREL-compliant securities. We do not currently anticipate the need for either AT1 or Tier 2 issuances. As in 2017, we will continue to target other funding markets to diversify our funding structure. In support of the ring-fencing requirements and to build up RBS Plc (to be renamed NatWest Markets Plc) as a standalone non ring-fenced bank, we anticipate issuing £2-4 billion of senior unsecured issuance from this entity in addition to continued reliance on short term funding.


In the near to medium term, we would expect the bank to maintain a CET1 ratio in excess of our 13% target given a range of variables that are likely to impact us over the coming years. These include:

§                 potential final costs of a resolution with the US Department of Justice;

§                 future potential pension contributions and the interplay with capital buffers for the bank for investment risk being run in the pension plan;

§                 RWA inflation as a result of IFRS 16, Bank of England mortgage floors and Basel 3 amendments;

§                 expected increased and pro-cyclical impairment volatility as a result of IFRS 9; and

§                 the collective impact of these items on our stress test results.


We remain committed to restarting capital distributions when permitted, with resolution with the US Department of Justice being a key milestone to enable this.


Medium term outlook


We retain our target of achieving a sub 50% cost:income ratio and above 12% return on equity by 2020.


While we expect operating costs to reduce each year from 2018 to 2020, given the increased level of investment and innovation spend expected over the coming years we are no longer guiding to an absolute 2020 cost base.


The NatWest Markets segment balance sheet as at end 2017 is broadly similar to the expected target balance sheet of the NatWest Markets Plc after the ring- fence transfer schemes to be carried out during 2018. In preparation for the UK ring-fencing regime, the previously reported operating segments were realigned in Q4 2017 and a number of business transfers completed. These changes included the NatWest Markets segment absorbing the former Capital Resolution segment (other than for certain shipping and portfolio assets). Notwithstanding a planned capital reduction exercise in July 2018, by 2020 this entity is targeting a capital base with a consolidated end state CET1 of 14%, a leverage ratio greater than 4% and a total capital ratio of at least twice the CET1 ratio, including the benefit of downstreamed internal MREL.


By 2020, NatWest Markets targets a RWA position of c.£35 billion including legacy assets, with the legacy assets generating minimal associated income, and an overall cost base of around £1 billion.


Trading update


Overall, RBS has had a positive start to 2018.



(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 this document and in the Risk Factors on pages 349 to 379. These statements constitute forward looking statements, refer to Forward Looking Statements on pages 1 to 2.







Our business model and strategy





Our Strategy


Our ambition is to become number one for customer service, trust and advocacy as we meet the aspirations and needs of our retail, business, commercial, corporate and institutional customers. Our core businesses are centred around the UK and Republic of Ireland markets with a focused international capability.


We are building a better bank for our customers, and one that will deliver sustainable returns for shareholders. Our purpose is to serve customers well, and to do so, we are becoming a safe, simple, customer-focused UK and Ireland bank.


Our plan


Underpinning that ambition is our blueprint for success. This is our plan which drives our strategic decision making.


RBS is continuing to build a bank that is easy to do business with, and meets customers’ continually evolving needs.


Our plan focuses on delivering excellent customer service through all of our brands.


Creating lasting relationships with our customers, who advocate for our bank, is the key to generating sustainable value.





(1)              The goals, 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 this document and in the Risk Factors section on pages 349 to 379. These statements constitute forward looking statements; refer to Forward Looking Statements on pages 1 to 2 of this document.




Our business model and strategy





Our 2020 vision


The bank of 2020 will be high tech and high touch, which means lower cost, high quality digital services with human expertise available when required. This will be underpinned by a clear commitment to our customers, shareholders and other stakeholders.



Our priorities


Strength and sustainability

We remain focused on building a strong and stable bank. We have continued to improve the fundamentals, by increasing our capital strength, building a robust liquidity position and balancing our loan to deposit ratio. As one of the UK’s largest banks we understand the importance of supporting the UK’s economic and social development.

Through our balance sheet lending and range of sustainable banking initiatives, we are working to improve outcomes for all stakeholders.


Customer experience

We are investing in our people, service, and product proposition to ensure we provide market leading technology and signature customer experiences, through a wide variety of channels.


Simplifying the bank

Streamlining of processes and removing unnecessary complexity lowers our operating costs, and makes our customer interactions more straightforward.


Supporting sustainable growth

A strong sustainable business grows with its customers. We continue to support our customers through offering products and services which meet their needs.


Employee engagement

Engaged colleagues lead to engaged customers. At RBS we are committed to investing in our colleagues and creating leaders who inspire and empower their teams.




Our Structure





We have four customer franchises, and each is underpinned by a range of distinct brands, which are the route through which we engage with our customers.









Our Brands



Our brands are our main connection with customers. Each takes a clear and differentiated position that will help us strengthen our relationships with our customers, stand out in the market, and build the value of our brands.





Our business model and strategy





Building a more sustainable bank


Our long term success is dependent on our ability to generate value for society by providing products, services and facilities that are useful to people and the communities in which we operate. Our value creation model is a simplified way of showing how this works, including the way we use resources, skills and relationships to deliver value for all our stakeholders.


One of the ways by which we meet the expectations of our shareholders is by delivering the best possible service for customers to meet their needs. At the same time, we recognise our responsibility towards society as a whole. It is only by supporting our customers and communities to succeed that we will be become a more sustainable bank.


Our key resources and relationships


RBS provides financial services to individuals and businesses, primarily in the UK and Ireland. We rely on financial, human and intellectual, social and relationship, infrastructure and natural capital to do so. We leverage these forms of capital through our expertise, technology and customer focus across our different brands. This helps to improve the quality of customer service. We also seek to create sustainable value for our shareholders and other stakeholders, including customers, employees, and civil society.





Our approach







(1)              Comprises £443 million corporate tax, £504 million irrecoverable VAT, £237 million bank levies and £273 million employer payroll taxes.

(2)              Data relates to reported attempted fraud cases and prevented third party losses in the UK (not including policy declines for debit cards).

(3)              Includes people supported through the following enterprise programmes during 2017: The Prince’s Trust, Skills & Opportunities Fund and Entrepreneurial Spark.

(4)              SME lending balances in over 9,854 postcode sectors across England, Scotland and Wales.

(5)              Data is compiled by Project North East (PNE) and is based on the total spend allocated by each Regional Board.




Our approach





Our Values


Our Values guide our actions every day, in every part of our business. The values are the foundation of how we work at RBS.








Our Stakeholders





RBS exists to serve customers well and we put our customers at the heart of everything we do. This means having an understanding of our impact across all stakeholders of the bank. Understanding who our stakeholders are and their views helps inform our overall strategy. Below is an overview of some of our stakeholder groups.



We have provided three examples below of how we work with different stakeholder groups:


Shareholder engagement sessions

Individual shareholder views on our plans to build a better bank are important to us.


In 2017 we hosted events in Edinburgh and London for our retail shareholders. A diverse group, selected by postcode, were invited to learn more about our business and participate in an interactive Q&A session with a panel of senior management and Board members.


These events gave those in attendance the opportunity to hear from different parts of RBS, ask questions about progress so far and learn more about our plans for the future. We set up market stalls on topics of interest including customer experience, innovation and security. They could talk with employees from different parts of the bank on progress and our plans for the future.


Additionally, we held four external stakeholder engagement sessions with our Sustainable Banking Committee on Financial Capability, UK Housing, Climate Risks and Technology Innovation for Social Good.


Working together to tackle fraud and scams

To help our customers protect themselves against fraud and scams we have been working with various partners across the industry.


NatWest sponsored the production of a Code of Practice on protecting customers from financial harm. The specification, launched in November 2017, included input from Financial Fraud Action UK, the National Trading Standards Scams Team, the Office of the Public Guardian, the Metropolitan Police, and two other major UK banks.


NatWest continue to support ‘Friends Against Scams’ run by National Trading Standards and in 2017 trained over 20,000 colleagues. In 2018 we will be the official bank partner of the One Million Friends Against Scams initiative.


Closed Loop feedback

We are listening, learning and acting on our customers’ feedback. We have taken customer feedback on board and acted on it. Closed loop feedback is about continuously seeking customer feedback and closing the loop on the issues that our customers raise with us.


Examples include:

“It would be good if you could diarise payments”. Customers can now make diarised payments via their mobile app.


“Customers living abroad are unable to use the mobile app with an international number”. Customers can now use our mobile app in various countries including Australia, Gibraltar, Hong Kong, New Zealand, Singapore and South Africa.


“I want all audio statements to have a braille section that allows the customer to know who and what the audio tape is for and what month this relates to”. All our audio statements now have a date so that customers can easily differentiate between them.


In addition, as part of our net promoter system in 2017 we sent out 11.5 million survey invites, with 875,500 responses.




Our approach






Changing face of banking

Since 2014, customers are choosing to do their banking in different ways that suit them and reflect what they do in everyday life. The number of customers using our branches across the UK has fallen by 40% and during the same period mobile banking transactions increased by 73%; in the first half of 2017, there were 1.1 billion mobile and online transactions carried out by our customers.


We are committed to ensuring that our customers have a wide range of ways in which they can bank with us. Every customer is individual and that is why customers can choose from a combination of digital, telephone and face-to-face banking options, each designed to suit their preferences and needs. Customers might carry out simple everyday transactions using our mobile app but still preferring to speak to someone over the phone or via webchat for other banking queries. For more complex needs, such as a Financial Health Check or mortgage advice, customers value having the option to discuss the matter face-to- face or by video.


We are working hard to develop new services to respond to the changing needs and expectations of our customers. All our personal customers can bank with us using our mobile app and online banking services and we have Bankline for business and commercial customers. We also provide a 24/7 webchat service for personal customers, telephony and secure text messaging for when customers want to contact us quickly, digitally and securely.


Closing branches is always a difficult decision and one we do not take lightly. When these decisions are made, we look at each branch and take into account a range of factors including, how customers are choosing to bank with us; how often customers are using the branch; the impact on customers who currently use the branch; other options available to customers including online, mobile, telephony, webchat, cash machines, video banking and local Post Offices and, the proximity of our other branches, including our network of mobile branches and local transport routes and timetables.


We know that for some customers, in particular vulnerable customers, closing branches can be unsettling. We are committed to ensuring that we support all customers with these changes. We aim to provide six months notice before we close a branch (the industry norm is 12 weeks) and we proactively contact our regular branch users and vulnerable customers to talk to them about our decision and the options available to them.


Our national contract with the Post Office means that customers can undertake everyday banking in any of the 11,500 Post Offices throughout the UK. In many areas, we operate mobile branches, which bring our banking services direct to local communities, many of which have not had a branch before.


We acknowledge that some of our customers are not comfortable with using online or mobile banking, and for those customers who would value some support we have created a specialist taskforce of TechXperts who are dedicated to supporting our customers with training and support with digital skills. Our TechXperts support customers with the varied ways to bank and for example accompany customers to the local Post Office to show them how their banking can be done.


We have introduced a number of roles to provide personal, face-to-face banking services in communities, assisting customers with access to our non-cash services, offering support with financial planning and education. Our Community Bankers base themselves in places like libraries, local businesses and community centres so as to best serve local communities. Business Growth Enablers focus on our small business customers. They are specially trained to help source advice that will help local businesses with banking support, as well as harnessing their own network to support business needs. Business Growth Enablers work with industry partners to run free events for customers on issues such as fraud, scams and digital tax returns.






Climate change

We recognise climate change is a significant global issue and we fully support the objectives of the Paris Climate Agreement and the emissions reductions strategies set by the UK and devolved governments. We have publicly pledged our support for the Financial Stability Board’s (FSB) Taskforce on Climate-related Financial Disclosures (TCFD) and we have included more detail on our approach to the TCFD recommendations in the Additional Information section of the 2017 Annual Report on Form 20-F. We also plan to announce further details of our long term approach to climate change.


We believe there is a need to support our customers to reduce their emissions, save energy and manage their costs. Over the last decade, we have become one of the leading lenders to the UK Sustainable Energy market, with expertise and services designed for customers from small businesses up to large corporations. RBS was recognised by InfraDeals as the leading lender to the UK renewables sector by number of transactions over the past six years (2012- 2017).


As we have refocused our business on the UK, Ireland and Western Europe, we’ve also substantially reduced our lending to carbon intensive parts of the global economy such as coal mining and oil extraction. Our total exposure to the oil and gas industry, for example, now accounts for just 0.5% of our lending exposures. In 2017 we did not directly finance any new coal mining or coal power projects. More details of our lending to the energy sector will be published on our Sustainable Banking webpages on in April 2018.


Relative to our size, our operational footprint from serving our customers is quite small, but still significant. Our primary emissions impact comes from the energy used to heat, cool and power our buildings and data centres. We have set targets using a science-based method in order to align our efforts to reduce emissions with the climate science that sits behind the Paris Climate Agreement. Our target for 2020 is to reduce our direct carbon emissions by 45% from a 2014 baseline and at the end of 2017 we had already recorded a 39% reduction. The table below provides more detail.


We have also set 2020 targets to reduce water use by 10% and paper use by 60%, whilst continuing to target zero waste to landfill. We engage colleagues, suppliers and customers in these efforts and in 2017, 3,200 colleagues logged over 24,000 activities to reduce our environmental impact via our green reward app. More information on our targets and initiatives can be found on the Sustainable Banking webpages at



GHG Emissions









Change 2014
to 2017 (%)


Location-based CO2e emissions (Scope 1, 2 and Business Travel) (tonnes)











Scope 1* CO2e emissions (tonnes)











Scope 2** Market-based*** CO2e emissions (tonnes)











Scope 2 Location-based CO2e emissions (tonnes)











Scope 1 and 2 Location-based CO2e emissions per FTE (tonnes)











Scope 3**** CO2e emissions from business travel (tonnes)











We have reported on all emission sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. To our knowledge there are no material omissions. Independent Limited assurance has been provided by Ernst & Young LLP over total reported CO2e emissions (tonnes) (Scope 1*,2** and 3*** location based emissions). Our reporting year runs from October 2016 to September 2017.


These emissions have been calculated using the methodology advised in the Greenhouse Gas Protocol revised edition (2004). The boundary of reporting is set as all entities and facilities either owned or under operational control. Emissions factors used are from UK Government’s GHG Conversion factors (DEFRA), IEA, or relevant local authorities.


*Scope 1: Emissions from fluorinated gas loss and fuel combustion in RBS premises/vehicles. **Scope 2: Emissions from electricity, district heating and district cooling used in RBS premises. *** market-based emissions have been calculated using the GHG Protocol guidelines. ****Scope 3: Emissions associated with business travel (air, rail and road) by RBS employees.








Human rights and Modern Slavery Act

RBS takes a proactive approach to upholding our commitment to respect human rights and our approach is centred on identifying and mitigating potential human rights risks across our business and our wider sphere of influence. The Modern Slavery Act 2015 (MSA) forms part of our approach to human rights as this regulation brings together the serious criminal offences of slavery, servitude, forced or compulsory labour and human trafficking together under one piece of legislation. In 2017 we published our first annual statement on the MSA on This built upon our interim statement which was published in December 2016 and our existing policy framework.


Our approach is underpinned by Our Values and Our Standards. For employees this is via the RBS Code of Conduct ‘Our Code’. Our Code includes a clear commitment to respect human rights, supported by the Yes Check, a tool to guide good decision making. Employees are consulted on key aspects of their working environment, and they can utilise a confidential helpline to discuss any matters of concern.


Our commitment to the international progress of human rights includes upholding the principles of the United Nations Global Compact since 2003.


We are committed to the implementation of the United Nations Guiding Principles on Business and Human Rights and participate with our peers in groups such as the Thun Group and United Nations Environment Programme Finance Initiative. We have been adopters of the Equator Principles since their inception in 2003 to manage social and environmental risks, including human rights, in project- related transactions.


We have sector-specific Environmental, Social and Ethical (ESE) risk policies (available at which include human rights considerations for high-risk sectors. For customers outside these sectors, our general ESE risk concerns policy ensures due diligence is carried out on clients when human rights risks are identified. We expect our customers to share our commitment to respecting human rights within their operations.



Our Customers


We are aware that as a High Street bank we come into contact with millions of customers, some of whom may be victims of modern slavery. Our relationship with our customers is governed by a wide range of risk considerations, including our Anti-Money Laundering (AML) and Environmental, Social, and Ethical (ESE) risk assessments on current or new customers, to consider whether any of their activities carry human rights infringements.



Our People


All of our people are recruited legally and must meet the 1998 Immigration Act requirements.


RBS is a fully accredited Living Wage Employer. We gained accreditation in 2014. RBS’ commitment as a Living Wage accredited employer applies to everyone working for the bank in the UK and has been extended to staff who are employed via suppliers (e.g. cleaning, security and catering staff). Employees are regularly consulted on their working conditions and a confidential helpline is available at all times.



Our Suppliers


We expect our suppliers to uphold the same values and commitments that we have made in relation to social and environmental impacts. Adherence to these policies is required as part of our supply chain tendering process and within our supplier contracts.


Our Sustainable Procurement Code sets out the international human rights commitments we expect of the companies that we work with, including labour standards and non-discrimination.




Our approach





Our Colleagues


Engaging our colleagues is critical to delivering on our strategy and ambition as a bank. Being better for our colleagues means we are better for our customers, and this makes us a better bank.


Creating a Healthy Culture


Building a healthy culture that embodies Our Values is one of our core priorities. Our Values guide the way we identify the right people to serve our customers well, and how we manage, engage and reward our colleagues.


Our Values are at the heart of both Our Standards, the bank-wide behavioural framework and Our Code, the bank- wide Code of Conduct.


Our values are integral to the way we behave and do business and we continue to reinforce them in our systems, policies and processes, communications training and leadership role modelling.


We set ourselves clear cultural priorities each year and manage these through our Executive Committee.


We monitor our progress against our goals. We gather feedback from our colleagues through our listening strategy, and through metrics and key performance indicators to assess our progress and respond accordingly. We do this along with feedback from regulators and industry bodies.


Almost 60,000 colleagues completed our most recent colleague opinion survey. The results were the most positive we’ve seen in recent times and showed we’re changing the culture of the bank for the better. Key measures of engagement, leadership and our culture have improved significantly, and we’re now above the global financial services norm in the majority of our survey categories. The results are encouraging, and show that our hard work is paying off. However, we recognise that we have more to do to make this a stronger bank and a great place to work.


We encourage colleagues to tell us what they think via the annual colleague survey and our regular comments boards. When colleagues wish to report concerns relating to wrong doing or misconduct they can raise concerns via Speak Up, the bank’s whistleblowing service. In 2017 289 cases were raised compared to 213 in 2016.


Performance and Reward


Our approach to performance management provides clarity for our colleagues about how their contribution links to our ambition and all our colleagues have goals set across a balanced scorecard of measures.


Further progress has been made in making sure employees are paid fairly for the work they do and are supported by simple and transparent pay structures. More employees have moved to a purely fixed pay construct during the year, allowing them to concentrate on providing excellent customer service. We will continue to make further changes in 2018 which will result in over half of our employees being on a purely fixed pay construct making their pay fairer and easier to understand.


We are confident that we pay our employees fairly. We keep our HR policies and processes under review to ensure we do so.


Our rates of pay continue to exceed the Living Wage and changes have been introduced to ensure people performing the same roles are paid more consistently.


More information on our remuneration policies can be found in the 2017 Annual Report on Form 20-F.




‘Determined to lead’ (Dtl), our core leadership programme is now embedded as business as usual. Dtl provides consistent tools to lead and engage our colleagues and is transforming the way we operate. In 2017 a further 3,000 leaders participated in the programme.





2017 saw over 16,000 colleagues undertake stage one of Service Excellence training, our customer service programme. This first module introduces our Core Service Behaviours and provides an awareness of the tools and techniques that will help us to deliver the best possible service, every time.


We continue to work closely with the Chartered Banker Institute and Chartered Banker Professional Standards Board (CB:PSB) to professionalise our colleagues. In 2017 we again achieved an Excel rating in the CB:PSB Foundation Standard review , and remain one of only two CB:PSB member firms to have secured ‘Earned Autonomy’.


We also offer a wide range of additional learning opportunities.


Health and Wellbeing

Wellbeing is a strong pillar in making the bank a great place to work.  In 2017 our wellbeing programme successfully delivered against three wellbeing pillars; Physical, Mental, Social and we have started to put in place support against our fourth area of Financial Wellbeing. For the third year running we participated in the Global Challenge (formerly GCC) and with 34,000 colleagues taking part we won the Global Challenge 1st Most Active Organisation Financial Industry. Building on this success, we embraced the rapid acceleration of digital wellbeing and are one of the few large organisations to pilot a digital wellbeing platform.


During 2017 we have continued to support Time to Change (removing the stigma of mental health) and actively encouraged open dialogue across the bank to support Mental Health in the Workplace. We were successful in running bankwide major online campaigns to support Mental Health Awareness Week and World Mental Health Day.


As we continue to support our colleagues through change we have fully utilised the services of our Employee Assistance Programme.



Building a more inclusive RBS is essential for our customers and colleagues.


Our inclusion policy applies to all our colleagues globally to make sure everyone feels included and valued, regardless of their background.


·      As at 31 December 2017, our permanent headcount was 71,924. 49% were male and 51% female.


·      We continue to work towards our target of having at least 30% senior women in our top three leadership layers across each Function and Franchise by 2020. As at the 31 December 2017 we have, on aggregate, 37% women in our top three leadership layers, and our pipeline (around 5000 of our most senior roles) has 44% women. We are on track to have a fully balanced workforce at all levels of the organisation by 2030.


·      RBS plc’s gender pay gap in Great Britain is 37.2% (median 36.5%). The figures also show a gender bonus gap of 64.4% (median 36.6%).


·      A key driver behind the gap is the fact that we have more men in senior roles (which attract higher pay) than women.  In order to close the gender pay gap, we must continue to improve our gender balance in our most senior roles, and here we are making good progress. We have a positive action approach in place, tailored by business, according to the specific challenges they face. As we continue to increase the proportion of women working in senior roles, we expect our gender pay gap will lessen.


·      During 2017, we continued to roll out unconscious bias learning to all our colleagues to create a solid platform for the wider inclusion agenda. 70% of colleagues have now participated in unconscious bias training since it was introduced in 2015.


·      We have plans in place for all segments of our pan-bank disability plan. It addresses areas for improvement including branch access, accessible services, improving colleague adjustment processes and inserting disability checkpoints into our key processes and practices.


·      We continue to focus on building an ethnically diverse RBS. Our plan focuses on positive action and includes reciprocal mentoring, targeted development workshops and leadership programmes and ensuring we have a Black, Asian and Minority Ethnic (BAME) focus on recruitment, talent identification and promotion. We will introduce explicit targets for BAME representation at senior levels in 2018.


·      Our LGBT agenda continues to deliver a better experience for our LGBT colleagues and customers. We have processes in place to support updating gender and title on customers’ banking records and to support colleagues undergoing gender transition. And, we continue to support our c.20,000-strong colleague networks.






CEO – 1




CEO – 2




CEO – 3




CEO – 4




Target population (CEO — 3 and above)










Executive Employees

90 (76%)

28 (24%)

Directors of Subsidiaries

184 (80%)

45 (20%)


There were 347 senior managers (in accordance with the definition contained within the relevant Companies Act legislation), which comprises our executive population and individuals who are directors of our subsidiaries. The RBS Board of directors has fourteen members, consisting of nine male and five female directors.






Our Customers





RBS remains committed to achieving its target of being the number one bank for customer service, trust and advocacy by 2020.




In 2017 we made it our goal to significantly increase NPS or maintain number one in our chosen customer segments. This strategy was implemented to support the overall aim of being the number one bank for customer service, trust and advocacy by 2020.


We use independent surveys to track the progress we are making to achieve our goals in each of our markets and to also measure our customers’ experience.


To measure advocacy, customers are asked how likely they would be to recommend their bank to a friend or colleague, and respond based on a 0-10 scale with 10 indicating ‘extremely likely’ and 0 indicating ‘not at all likely’. Customers scoring 0 to 6 are termed detractors and customers scoring 9 to 10 are termed promoters. The net-promoter score (NPS) is established by subtracting the proportion of detractors from the proportion of promoters.


We also use independent experts to measure our customers’ trust in the bank. Each quarter we ask customers to what extent they trust or distrust their bank to do the right thing. The score is a net measure of those customers that trust their bank (a lot or somewhat) minus those that distrust their bank (a lot or somewhat).


Our Commercial Banking NPS has remained stable during 2017 and remains ahead of its main competitors. In England & Wales, NPS for NatWest Personal Banking has also remained stable and we have met our target for customer trust. In Scotland, while we have not met our target for customer trust for Royal Bank of Scotland, it has increased strongly year on year. We do recognise that significant work is required to improve our customer experience and we continue our work to resolve the ongoing reputational and legacy issues.








NPS: Personal Banking