RBS » Topics » Corporate Banking and Financial Markets (CBFM)

This excerpt taken from the RBS 6-K filed Oct 19, 2005.
Corporate Banking and Financial Markets (“CBFM”) is the largest provider of banking services and structured financing to medium and large businesses in the UK and a growing provider of debt financing and risk management solutions to large businesses in Europe and North America and to financial institutions worldwide.

The business provides an integrated range of products and services including corporate and commercial banking, treasury and capital markets products, structured and acquisition finance, trade finance, leasing and factoring. CBFM is also a leading global provider of debt, foreign exchange and derivatives products and includes RBS Greenwich Capital in North America.

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THE ROYAL BANK OF SCOTLAND GROUP plc

CORPORATE BANKING AND FINANCIAL MARKETS (continued)

Contribution increased by £472 million, 23% to £2,534 million reflecting growth in all business areas and a lower charge for provisions.

Total income was up £525 million, 14% to £4,308 million. Strong growth was achieved across all major geographies, with our non-UK businesses continuing to produce good results, reflecting the investment we have made in them in prior years.

Net interest income, excluding the cost of funding rental assets, increased £253 million, 17% to £1,700 million. Average loans and advances to customers in the banking businesses increased by 20% to £125.2 billion partly due to higher utilisations of lending facilities by large corporates. Average customer deposits in the banking businesses also increased by 15% to £83.1 billion, with particularly strong growth in large corporate and institutional deposits. The increase in 2005 also reflects the classification and recognition of lending fees under IFRS.

Non-interest income rose by 12% to £2,841 million. Fees receivable fell by £39 million, 5% to £786 million due to the classification and recognition of lending fees as interest income under IFRS which was partially offset by an increase in fees earned from customer services in risk management, financial structuring, debt-raising and banking operations as we continued to extend our customer franchise. Fees payable increased by £8 million, 6% to £134 million.

Income from trading activities, which arises from our role in providing customers with debt and risk management products in interest rate, currency and credit rose by 15% to £1,175 million. The income growth has been achieved through increasing customer volumes across the product range and the strengthening of our customer franchise, notably with global financial institutions. Average trading value-at-risk remained modest at around £12 million.

The asset rental business comprising operating lease assets and investment properties continued to grow with average rental assets increasing by 7% to £11.7 billion; income from rental assets was 11% higher at £725 million.

Other operating income, including realised gains and changes in fair value of financial assets in 2005, increased by £134 million, 86% to £289 million.

Direct expenses increased by £183 million, 13% to £1,589 million. The increase in staff costs reflects higher performance-related bonuses and the expansion of our debt capital markets business in the US in the second half of last year.

Provisions were £185 million compared with £315 million, a reduction of £130 million, 41%. The charge for the first half of 2005, which includes the effect of discounting required under IFRS, reflects the continuing strong credit fundamentals in our corporate lending portfolio.

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THE ROYAL BANK OF SCOTLAND GROUP plc

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