FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549


Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934


For August 6, 2010

Commission File Number: 001-10306

The Royal Bank of Scotland Group plc

RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F    X     Form 40-F        

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes           No    X  



If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________





The following information was issued as a Company announcement in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K:


 

Condensed consolidated balance sheet

at 30 June 2010 - pro forma (unaudited)

 

 

30 June 

2010 

31 March 

2010 

31 December 

2009 

 

£m 

£m 

£m 

       

Assets

     

Cash and balances at central banks

29,591 

42,008 

51,548 

Net loans and advances to banks

54,471 

56,508 

48,777 

Reverse repurchase agreements and stock borrowing

47,663 

43,019 

35,097 

Loans and advances to banks

102,134 

99,527 

83,874 

Net loans and advances to customers

539,340 

553,872 

554,654 

Reverse repurchase agreements and stock borrowing

39,396 

52,906 

41,040 

Loans and advances to customers

578,736 

606,778 

595,694 

Debt securities

236,260 

252,116 

249,095 

Equity shares

17,326 

21,054 

15,960 

Settlement balances

20,718 

24,369 

12,024 

Derivatives

522,871 

462,272 

438,199 

Intangible assets

14,482 

14,683 

14,786 

Property, plant and equipment

17,608 

18,248 

17,773 

Deferred taxation

5,841 

6,540 

6,492 

Prepayments, accrued income and other assets

13,630 

13,909 

18,604 

Assets of disposal groups

21,656 

21,394 

18,432 

       

Total assets

1,580,853 

1,582,898 

1,522,481 

       

Liabilities

     

Bank deposits

96,614 

100,168 

115,642 

Repurchase agreements and stock lending

44,165 

48,083 

38,006 

Deposits by banks

140,779 

148,251 

153,648 

Customer deposits

420,890 

425,102 

414,251 

Repurchase agreements and stock lending

70,655 

81,144 

68,353 

Customer accounts

491,545 

506,246 

482,604 

Debt securities in issue

217,317 

239,212 

246,329 

Settlement balances and short positions

62,724 

70,632 

50,875 

Derivatives

508,966 

444,223 

421,534 

Accruals, deferred income and other liabilities

24,842 

28,247 

24,624 

Retirement benefit liabilities

2,600 

2,670 

2,715 

Deferred taxation

2,126 

2,226 

2,161 

Insurance liabilities

6,521 

7,711 

7,633 

Subordinated liabilities

27,523 

31,936 

31,538 

Liabilities of disposal groups

16,999 

20,563 

18,857 

       

Total liabilities

1,501,942 

1,501,917 

1,442,518 

       

Equity

     

Minority interests

2,109 

2,305 

2,227 

Owners' equity*

76,802 

78,676 

77,736 

       

Total equity

78,911 

80,981 

79,963 

       

Total liabilities and equity

1,580,853 

1,582,898 

1,522,481 

       
       

* Owners' equity attributable to:

     

Ordinary and B shareholders

72,058 

70,830 

69,890 

Other equity owners

4,744 

7,846 

7,846 

       
 

76,802 

78,676 

77,736 



 

Commentary on condensed consolidated balance sheet - pro forma 

 

Total assets of £1,580.9 billion at 30 June 2010 were up £58.4 billion, 4%, compared with 31 December 2009.

 

Cash and balances at central banks were down £22.0 billion, 43% to £29.6 billion due to reduced placings of short-term cash surpluses.

 

Loans and advances to banks increased by £18.3 billion, 22%, to £102.1 billion. Reverse repurchase agreements and stock borrowing ('reverse repos') were up £12.6 billion, 36% to £47.7 billion and bank placings rose £5.7 billion, 12%, to £54.5 billion, largely as a result of increased wholesale funding activity.

 

Loans and advances to customers were down £17.0 billion, 3%, at £578.7 billion.  Within this, reverse repurchase agreements were down £1.6 billion, 4%, to £39.4 billion. Customer lending decreased by £15.3 billion to £539.3 billion or £14.3 billion before impairment provisions. This reflected planned reductions in Non-Core of £21.8 billion together with declines in Global Banking & Markets, £2.6 billion, US Retail & Commercial, £1.4 billion and Ulster Bank, £1.2 billion. These were offset by growth in UK Corporate, £3.6 billion, Global Transaction Services, £3.0 billion, UK Retail, £2.7 billion and Wealth, £1.2 billion, together with the effect of exchange rate movements £2.4 billion.

 

Settlement balances rose £8.7 billion, 72%, to £20.7 billion as a result of increased customer activity from seasonal year end lows.

 

Movements in the value of derivative assets, up £84.7 billion, 19%, to £522.9 billion, and liabilities, up £87.4 billion, 21%, to £509.0 billion, primarily reflect changes in interest rates, currency movements, with the weakening of Sterling against the US dollar offset in part by strengthening against the Euro, and growth in trading volumes. 

 

Assets of disposal groups have risen by £3.2 billion, 17% to £21.7 billion. The inclusion of the Life Assurance business, Global Merchant Services and Eurosales Finance activities in France and Germany together with reduced assets in RBS Sempra Commodities have been partly offset by completion of disposals in respect of certain of the Group's Asian and Latin American businesses.

 

Deposits by banks declined £12.9 billion, 8%, to £140.8 billion.  Reduced inter-bank deposits, down £19.0 billion, 16%, to £96.6 billion were offset in part by increased repurchase agreements and stock lending ('repos'), up £6.1 billion, 16%, to £44.2 billion. 

 

Customer accounts rose £8.9 billion, 2%, to £491.5 billion.  Within this, repos increased £2.3 billion, 3%, to £70.6 billion.  Excluding repos, customer deposits were up £6.6 billion, 2%, to £420.9 billion, reflecting growth in UK Corporate, £7.6 billion, Ulster Bank, £2.0 billion, Global Transaction Services, £1.0 billion (£1.8 billion before transfer of Global Merchant Services to disposal groups), UK Retail, £0.9 billion (£2.7 billion excluding the transfer of the Life Assurance business to disposal groups) and Wealth, £0.5 billion, together with exchange rate movements of £3.8 billion.  This was partially offset by reductions in Non-Core, £5.5 billion, US Retail & Commercial, £2.8 billion and Global Banking & Markets, £1.5 billion.

 

Commentary on condensed consolidated balance sheet - pro forma 

 

Debt securities in issue were down £29.0 billion, 12% to £217.3 billion, mainly as a result of reductions in Global Banking & Markets partially offset by new issuances of £1.9 billion as part of the liability management exercise that completed in May.


Subordinated liabilities decreased by £4.0 billion, 13% to £27.5 billion. This reflected the redemption of £2.6 billion undated loan capital debt preferences shares and trust preferred securities under the liability management exercise concluded in May, together with the conversion of £0.6 billion non-cumulative US dollar preference shares, the redemption of £0.5 billion of other dated and undated loan capital and the effect of exchange rate movements and other adjustments of £0.3 billion. 


Liabilities of disposal groups declined £1.9 billion, 10% to £17.0 billion. Disposals of certain of the Group's Asian and Latin American businesses together with reduced liabilities in RBS Sempra Commodities, have more than offset the inclusion of the Life Assurance business and Global Merchant Services.

 

Owners' equity decreased by £0.9 billion, 1% to £76.8 billion. The partial redemption of preference shares and paid in equity, £3.1 billion less related gains of £0.6 billion, together with an increase in own shares held of £0.7 billion were offset by the issue of £0.6 billion ordinary shares on conversion of the US dollar non-cumulative preference shares classified as debt and exchange rate movements, £1.2 billion and reduced losses in available for sales reserves, £0.3 billion.


Condensed consolidated statement of changes in equity

for the half year ended 30 June 2010 - pro forma

 

 

First half 

2010 

First half 

2009 

Full year 

2009 

 

£m 

£m 

£m 

       

Called-up share capital

     

At beginning of period

14,630 

9,898 

9,898 

Ordinary shares issued in respect of placing and open offers

4,227 

4,227 

B shares issued

510 

Other shares issued during the period

401 

Preference shares redeemed during the period

(2)

(5)

(5)

       

At end of period

15,029 

14,120 

14,630 

       

Paid-in equity

     

At beginning of period

565 

1,073 

1,073 

Securities redeemed during the period

(132)

(308)

(308)

Transfer to retained earnings

(2)

(200)

(200)

       

At end of period

431 

565 

565 

       

Share premium account

     

At beginning of period

23,523 

27,471 

27,471 

Ordinary shares issued in respect of placing and open offer, net of £95 million expenses

1,047 

1,047 

Other shares issued during the period

217 

Preference shares redeemed during the period

- 

(4,995)

(4,995)

Redemption of preference shares classified as debt

118 

       

At end of period

23,858 

23,523 

23,523 

       

Merger reserve

     

At beginning of period

25,522 

10,881 

10,881 

Issue of B shares, net of £399 million expenses

24,591 

Transfer to retained earnings

(12,250)

(9,950)

       

At end of period

13,272 

10,881 

25,522 

       

Available-for-sale reserves

     

At beginning of period

(1,755)

(3,561)

(3,561)

Unrealised gains/(losses) in the period

647 

(1,494)

1,202 

Realised (gains)/losses in the period

(127)

197 

981 

Taxation

(208)

592 

(377)

Recycled to profit or loss on disposal of businesses, net of £6 million tax

(16)

       

At end of period

(1,459)

(4,266)

(1,755)

       

Cash flow hedging reserve

     

At beginning of period

(252)

(876)

(876)

Amount recognised in equity during the period

(58)

415 

380 

Amount transferred from equity to earnings in the period

17 

106 

513 

Taxation

(138)

(269)

Recycled to profit or loss on disposal of businesses, net of £20 million tax  

58 

       

At end of period

(235)

(493)

(252)



 


Condensed consolidated statement of changes in equity

for the half year ended 30 June 2010 - pro forma (continued)

 

 

First half 

2010 

First half 

2009 

Full year 

2009 

 

£m 

£m 

£m 

       

Foreign exchange reserve

     

At beginning of period

4,528 

6,385 

6,385 

Retranslation of net assets

1,775 

(2,724)

(2,322)

Foreign currency (losses)/gains on hedges of net assets

(609)

442 

456 

Taxation

72 

(46)

Recycled to profit or loss on disposal of businesses

(11)

       

At end of period

5,755 

4,057 

4,528 

       

Capital redemption reserve

     

At beginning of period

170 

170 

170 

Preference shares redeemed during the period

       

At end of period

172 

170 

170 

       

Contingent capital reserve

     

At beginning of period

(1,208)

Contingent capital agreement  - consideration payable

(1,208)

       

At end of period

(1,208)

(1,208)

       

Retained earnings

     

At beginning of period

12,134 

7,542 

7,542 

Profit/(loss) attributable to ordinary shareholders and other equity owners

     

- continuing operations

163 

(438)

(2,600)

- discontinued operations

(30)

(58)

(72)

Equity preference dividends paid

(105)

(510)

(878)

Paid-in equity dividends paid, net of tax

(19)

(36)

(57)

Transfer from paid-in equity

     

- gross

200 

200 

- taxation

(1)

Equity owners gain on withdrawal of minority interest

     

- gross

40 

629 

629 

- taxation

(11)

(176)

(176)

Redemption of equity preference shares

(2,968)

Gain on redemption of equity preference shares

609 

Redemption of preference shares classified as debt

(118)

Transfer from merger reserve

12,250 

9,950 

Actuarial losses recognised in retirement benefit schemes

     

- gross

(3,756)

- taxation

1,043 

Net cost of shares bought and used to satisfy share-based payments 

(9)

(13)

(16)

Share-based payments

     

- gross

61 

60 

325 

- taxation

 

       

At end of period

22,003 

7,200 

12,134 

       

Own shares held

     

At beginning of period

(121)

(104)

(104)

Shares purchased during the period

(704)

(33)

Shares issued under employee share schemes

13 

16 

       

At end of period

(816)

(91)

(121)

       

Owners' equity at end of period

76,802 

55,666 

77,736 



 


 Condensed consolidated statement of changes in equity

for the half year ended 30 June 2010 - pro forma (continued)

 

 

First half 

2010 

First half 

2009 

Full year 

2009 

 

£m 

£m 

£m 

       

Minority interests

     

At beginning of period

2,227 

5,436 

5,436 

Currency translation adjustments and other movements

91 

(165)

(152)

Profit attributable to minority interests

42 

554 

648 

Dividends paid

(143)

(310)

(313)

Movements in available-for-sale securities

     

- unrealised gains in the period

23 

23 

- realised gains in the period

(359)

(359)

Equity raised

Equity withdrawn and disposals

(68)

(2,436)

(2,436)

Transfer to retained earnings

(40)

(629)

(629)

       

At end of period

2,109 

2,123 

2,227 

       

Total equity at end of period

78,911 

57,789 

79,963 

       

Total comprehensive income recognised in the statement of changes in equity is attributable as follows:

     

Minority interests

133 

53 

160 

Preference shareholders

105 

510 

878 

Paid-in equity holders

19 

36 

57 

Ordinary and B shareholders

1,549 

(3,692)

(5,747)

       
 

1,806 

(3,093)

(4,652)



 

 


 

Notes to pro forma results 

 

1. Basis of preparation

 

Acquisition and separation of ABN AMRO

On 17 October 2007, RFS Holdings B.V. ("RFS Holdings"), which at the time was owned by RBSG, Fortis N.V., Fortis S.A./N.V., Fortis Bank Nederland (Holding) N.V. and Banco Santander, S.A. ("Santander"), completed the acquisition of ABN AMRO Holding N.V. (which was renamed RBS Holdings N.V. on 1 April 2010).

 

RFS Holdings, which is now jointly owned by RBSG, the Dutch State and Santander (the "Consortium Members"), has substantially completed the separation of the business units of ABN AMRO Holding N.V. As part of this reorganisation, on 6 February 2010, the businesses of ABN AMRO Holding N.V. acquired by the Dutch State were legally demerged from the ABN AMRO Holding N.V. businesses acquired by the Group and were transferred into a newly established holding company, ABN AMRO Bank N.V. (save for certain assets and liabilities acquired by the Dutch State that were not part of the legal separation and which will be transferred to the Dutch State as soon as possible).

 

Legal separation of ABN AMRO Bank N.V. occurred on 1 April 2010, with the shares in that entity being transferred by RBS Holdings N.V. to a holding company called ABN AMRO Group N.V., which is owned by the Dutch State. Certain assets within RBS Holdings N.V. continue to be shared by the Consortium Members. Following the legal separation, RBS Holdings N.V. has one direct subsidiary, The Royal Bank of Scotland N.V. ("RBS N.V."), a fully operational bank within the Group. RBS N.V. is independently rated and regulated by the Dutch Central Bank."

 

Pro forma results

The pro forma financial information shows the underlying performance of the Group including the results of the ABN AMRO businesses retained by the Group. This information is prepared using the Group's accounting policies and is being provided to give a better understanding of the results of RBS operations excluding the results attributable to the other Consortium Members.

 

As of and for the quarter ended 30 June 2010 and in future periods, there will be no significant differences between pro forma and statutory results other than presentation aspects discussed below.

 

Group operating profit on a pro forma basis excludes:

 

·

amortisation of purchased intangible assets;

   

·

integration and restructuring costs;

   

·

gain on redemption of own debt;

   

·

strategic disposals;

   

·

bonus tax;

   

·

Asset Protection Scheme credit default swap - fair value changes; 

   

·

write-down of goodwill and other intangible assets; and

   

·

other Consortium Members' interest in shared assets.



 

 


 

Notes to pro forma results (continued)

 

2. Analysis of income, expenses and impairment losses

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Loans and advances to customers

4,749 

4,702 

6,011 

 

9,451 

11,927 

Loans and advances to banks

132 

139 

253 

 

271 

480 

Debt securities

1,003 

855 

944 

 

1,858 

2,242 

             

Interest receivable

5,884 

5,696 

7,208 

 

11,580 

14,649 

             

Customer accounts

954 

880 

1,337 

 

1,834 

2,730 

Deposits by banks

418 

297 

717 

 

715 

1,771 

Debt securities in issue

847 

854 

1,674 

 

1,701 

2,987 

Subordinated liabilities

37 

200 

304 

 

237 

732 

Internal funding of trading businesses

(56)

(69)

(146)

 

(125)

(431)

             

Interest payable

2,200 

2,162 

3,886 

 

4,362 

7,789 

             

Net interest income

3,684 

3,534 

3,322 

 

7,218 

6,860 

             

Fees and commissions receivable

2,046 

2,051 

2,190 

 

4,097 

4,466 

Fees and commissions payable

           

- banking

(541)

(466)

(529)

 

(1,007)

(1,091)

- insurance related

(38)

(106)

(131)

 

(144)

(260)

             

Net fees and commissions

1,467 

1,479 

1,530

 

2,946 

3,115 

             

Foreign exchange

375 

452 

807 

 

827 

1,659 

Interest rate

202 

960 

1,137 

 

1,162 

2,857 

Credit

702 

506 

(1,973)

 

1,208 

(3,419)

Other

327 

348 

413 

 

675 

947 

             

Income from trading activities

1,606 

2,266 

384 

 

3,872 

2,044 

             

Operating lease and other rental income

344 

343 

325 

 

687 

662 

Changes in the fair value of own debt

515 

(210)

(801)

 

305 

(60)

Changes in the fair value of securities and other

  financial assets and liabilities

(165)

14 

326 

 

(151)

(57)

Changes in the fair value of investment properties

(105)

(3)

(143)

 

(108)

(147)

Profit/(loss) on sale of securities

147 

(59)

 

152 

(173)

Profit on sale of property, plant and equipment

11 

 

12 

25 

Loss on sale of subsidiaries and associates

(20)

 

(11)

Life business (losses)/profits

(23)

35 

48 

 

12 

24 

Dividend income

21 

20 

24 

 

41 

38 

Share of profits less losses of associated entities

17 

14 

(47)

 

31 

(54)

Other income

135 

17 

(80)

 

152 

(132)

             

Other operating income

747 

386 

(416)

 

1,133 

115 

             

Non-interest income (excluding insurance net premium income)

3,820 

4,131 

1,498 

 

7,951 

5,274 

             

Insurance net premium income

1,278 

1,289 

1,301 

 

2,567 

2,657 

             

Total non-interest income

5,098 

5,420 

2,799 

 

10,518 

7,931 

             

Total income

8,782 

8,954 

6,121 

 

17,736 

14,791 



 


 

Notes to pro forma results (continued)

 

2. Analysis of income, expenses and impairment losses (continued)
 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Staff costs

           

- wages, salaries and other staff costs

1,929 

2,195 

1,846 

 

4,124 

4,029 

- social security costs

159 

192 

132 

 

351 

292 

- pension costs

90 

166 

172 

 

256 

339 

Premises and equipment

516 

528 

587 

 

1,044 

1,231 

Other

974 

935 

915 

 

1,909 

1,961 

             

Administrative expenses

3,668 

4,016 

3,652 

 

7,684 

7,852 

Depreciation and amortisation

435 

414 

414 

 

849 

881 

             

Operating expenses

4,103 

4,430 

4,066 

 

8,533 

8,733 

             

General insurance

1,348 

1,107 

895 

 

2,455 

1,865 

Bancassurance

(25)

29 

30 

 

26 

             

Insurance net claims

1,323 

1,136 

925 

 

2,459 

1,891 

             
             

Loan impairment losses

2,479 

2,602 

4,520 

 

5,081 

6,796 

Securities impairment losses

73 

143 

 

81 

725 

             

Impairment losses

2,487 

2,675 

4,663 

 

5,162 

7,521 



 

Note:

(1)

The data above exclude amortisation of purchased intangible assets, integration and restructuring costs, gain on redemption of own debt, strategic disposals, bonus tax, Asset Protection Scheme credit default swap and write-down of goodwill and other intangible assets.



 

3. Loan impairment provisions

Operating profit/(loss) is stated after charging loan impairment losses of £5,081 million (full year 2009 - £13,090 million). The balance sheet loan impairment provisions increased in the half year ended 30 June 2010 from £15,173 million to £16,166 million and the movements thereon were:

 

 

First half 2010

   
 

Core 

Non-Core 

Total 

 

 

Full year 

2009 

 

£m 

£m 

£m 

 

£m 

           

At beginning of period

6,921 

8,252 

15,173 

 

9,451 

Transfers to disposal groups

(67)

(67)

 

(321)

Currency translation and other adjustments

(279)

119 

(160)

 

(428)

Disposals

(17)

(17)

 

(65)

Amounts written-off

(1,063)

(2,718)

(3,781)

 

(6,478)

Recoveries of amounts previously written-off

104 

46 

150 

 

325 

Charge to income statement

2,046 

3,035 

5,081 

 

13,090 

Unwind of discount

(96)

(117)

(213)

 

(401)

           

At end of period

7,633 

8,533 

16,166 

 

15,173 



 

Provisions at 30 June 2010 include £139 million (31 December 2009 - £157 million) in respect of loans and advances to banks. The table above excludes impairment charges relating to securities.

 

Notes to pro forma results (continued)

 

4. Strategic disposals

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

(Loss)/gain on sale of investments in:

           

-  RBS Asset Management's investment

   strategies business

80 

 

80 

-  Asian branches and businesses

(10)

 

(10)

-  Bank of China (1)

 

241 

-  Linea Directa

212 

 

212 

Provision for loss on disposal of:

           

- Latin American business

(142)

(22)

 

(164)

- Asian branches and businesses

 

- Life assurance business

(235)

 

(235)

- Other

(27)

(10)

 

(37)

             
 

(411)

53 

212 

 

(358)

453 



 

Note:

(1)

Including £359 million attributable to minority interests.



 

5. Pensions

Pension costs for the half year ended 30 June 2010 amounted to £256 million (half year ended 30 June 2009 - £339 million; year ended 31 December 2009 - £653 million), net of a £74 million gain in US Retail & Commercial associated with changes to its defined benefit pension plan. Defined benefit schemes charges are based on the actuarially determined pension cost rates at 31 December 2009.

 

The most recent funding valuation of the main UK scheme, at 31 March 2007, showed a surplus of assets over liabilities of £0.7 billion.  The next valuation at 31 March 2010 is currently in progress and the Group expects this valuation to show that liabilities exceed the value of the assets.  Following this valuation, the Group and scheme Trustees will agree the level of contributions to be paid into the scheme.  This could result in the amount of contributions payable in 2010 and subsequent years being materially different from the current rates based on the previous valuation.

 

Notes to pro forma results (continued)

 

6. Taxation

The charge/(credit) for taxation differs from the tax charge/(credit) computed by applying the standard UK corporation tax rate of 28% as follows:

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Profit/(loss) before tax

1,157 

(21)

59 

 

1,136 

15 

             

Expected tax charge/(credit) at 28%

324 

(6)

16 

 

318 

Other non-deductible items

146 

83 

(35)

 

229 

89 

Non-taxable items:

           

- gain on redemption of own debt

(12)

(692)

 

(12)

(692)

- other

(62)

(2)

(93)

 

(64)

(176)

Taxable foreign exchange movements

(7)

(23)

 

(7)

(23)

Foreign profits taxed at other rates

210 

128 

(18)

 

338 

47 

Losses in period not recognised

280 

83 

181 

 

363 

184 

Losses brought forward and utilised

(3)

(8)

(25)

 

(11)

(23)

Adjustments in respect of prior periods

(51)

(172)

49 

 

(223)

178 

             

Actual tax charge/(credit)

825 

106 

(640)

 

931 

(412)



 

The unusually high tax charge in the first six months of 2010 reflects profits in high tax regimes and losses in low tax regimes, impairment of deferred tax assets (£149 million) arising in overseas subsidiaries, mainly Ireland, and £139 million in respect of losses on disposal of businesses for which no tax relief is available.

 

The Group has recognised a deferred tax asset at 30 June 2010 of £5,841 million, of which £3,673 million relates to carried forward trading losses in the UK.  Under UK tax legislation, these UK losses can be carried forward indefinitely to be utilised against profits arising in the future. The Group has considered the carrying value of this asset as at 30 June 2010 and concluded that it is recoverable based on future profit projections.

 


 

Notes to pro forma results (continued)

 

7. Profit attributable to minority interests

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Trust preferred securities

10 

15 

 

10 

45 

Investment in Bank of China

 

359 

Sempra

20 

65 

 

20 

144 

ABN AMRO

 

Other

 

11 

             

Profit attributable to minority interests

30 

12 

83 

 

42 

554 



 

8. Other owners' dividends

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Preference shareholders

           

Non-cumulative preference shares of US$0.01

105 

65 

 

105 

179 

Non-cumulative preference shares of €0.01

57 

 

57 

Non-cumulative preference shares of £1

           

- issued to UK Financial Investments Limited (1)

274 

 

274 

             

Paid-in equity holders

           

Interest on securities classified as equity, net

  of tax

19 

36 

 

19 

36 

             
 

19 

105 

432 

 

124 

546 



 

Note:

(1)

Includes £50 million redemption premium on repayment of preference shares.



 


 

Notes to pro forma results (continued)

 

9. Earnings per ordinary and B share

 

Earnings per ordinary and B share have been calculated based on the following:

 

 

Quarter ended

 

Half year ended

 

30 June 

2010 

31 March 

2010 

30 June 

2009 

 

 

30 June 

2010 

30 June 

2009 

 

£m 

£m 

£m 

 

£m 

£m 

             

Earnings

           

Profit/(loss) from continuing operations

  attributable  to ordinary and B shareholders

283 

(244)

(127)

 

39 

(984)

Gain on redemption of preference shares and paid-in equity

610 

200 

 

610 

200 

             

Adjusted profit/(loss) from continuing

  operations attributable to ordinary and B

  shareholders

893 

(244)

73 

 

649 

(784)

             

Loss from discontinued operations

  attributable to ordinary and B shareholders

(26)

(4)

(13)

 

(30)

(58)

             

Ordinary shares in issue during the period

  (millions)

56,413 

56,238 

53,926 

 

56,326 

46,719 

B shares in issue during the period (millions)

51,000 

51,000 

 

51,000 

             

Weighted average number of ordinary and B shares in issue during the

  period (millions)

107,413 

107,238 

53,926 

 

107,326 

46,719 

             

Basic earnings/(loss) per ordinary and B share from continuing operations

0.8p 

(0.2p)

0.1p 

 

0.6p 

(1.7p)

Amortisation of purchased intangible assets

0.1p 

0.1p 

 

0.1p 

0.2p 

Integration and restructuring costs

0.2p 

0.1p 

0.5p 

 

0.3p 

1.1p 

Gain on redemption of own debt (1)

(1.0p)

(6.7p)

 

(1.0p)

(7.7p)

Strategic disposals

0.4p 

(0.4p)

 

0.3p 

(1.0p)

Bonus tax

0.1p 

 

0.1p 

Asset Protection Scheme credit default swap - fair value changes

(0.3p)

0.3p 

 

Write-down of goodwill and other intangible

  assets

0.6p 

 

0.7p 

             

Adjusted earnings/(loss) per ordinary and B share from continuing operations

0.2p 

0.3p 

(5.8p)

 

0.4p 

(8.4p)

Loss from Non-Core attributable to

  ordinary and B shareholders

0.2p 

0.8p 

7.3p 

 

1.1p 

17.9p 

             

Core adjusted earnings per ordinary

  and B share from continuing operations

0.4p 

1.1p 

1.5p 

 

1.5p 

9.5p 

Core impairment losses

0.3p 

0.5p 

1.8p 

 

0.8p 

3.9p 

             

Pre-impairment Core adjusted earnings per ordinary and B share

0.7p 

1.6p 

3.3p 

 

2.3p 

13.4p 

             

Basic loss per ordinary and B share from discontinued operations

 

(0.1p)



 

Note:

(1)

Gain on redemption of own debt includes gains on redemption of instruments classified as equity which are included in basic earnings.




 

Notes to pro forma results (continued)

 

10. Segmental analysis

 

Analysis of divisional operating profit/(loss)

The following tables provide an analysis of the divisional profit/(loss) for the half years ended 30 June 2010 and 2009 and the quarter ended 30 June 2010, by main income statement captions.  The pro forma divisional income statements on pages 24 to 50 reflect certain presentational reallocations as described in the notes below.  These do not affect the overall operating profit/(loss).

 

 

Net 

interest 

 income 

Non- 

interest 

 income 

 

Total 

 income 

 

Operating 

 expenses 

 Insurance 

net claims 

 

Impairment 

 losses 

 

Operating profit/(loss)

 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

               

Half year ended 30 June 2010

             

UK Retail (1)

1,934 

638 

2,572 

(1,465)

(4)

(687)

416 

UK Corporate

1,257 

669 

1,926 

(834)

(384)

708 

Wealth

293 

228 

521 

(367)

(11)

143 

Global Banking & Markets (2)

693 

4,377 

5,070 

(2,327)

(196)

2,547 

Global Transaction Services

454 

801 

1,255 

(740)

(3)

512 

Ulster Bank

382 

106 

488 

(303)

(499)

(314)

US Retail & Commercial

970 

527 

1,497 

(1,041)

(287)

169 

RBS Insurance (3)

179 

2,025 

2,204 

(351)

(2,106)

(253)

Central items

85 

311 

396 

143 

(1)

(1)

537 

               

Core

6,247 

9,682 

15,929 

(7,285)

(2,111)

(2,068)

4,465 

Non-Core (4)

971 

836 

1,807 

(1,248)

(348)

(3,094)

(2,883)

Amortisation of purchased

  intangible assets

(150)

(150)

Integration and restructuring costs

(422)

(422)

Gain on redemption of own debt

553 

553 

553 

Strategic disposals

(358)

(358)

(358)

Bonus tax

(69)

(69)

               
 

7,218 

10,713 

17,931 

(9,174)

(2,459)

(5,162)

1,136 

RFS Holdings minority interest

29 

29 

33 

               

Total statutory

7,218 

10,742 

17,960 

(9,170)

(2,459)

(5,162)

1,169



 

Notes:

(1)

Reallocation of netting of bancassurance claims of £4 million from non-interest income.

(2)

Reallocation of £21 million between net interest income and non-interest income in respect of funding costs of rental assets, £18 million, and to record interest in financial assets and liabilities designated as fair value through profit or loss, £3 million.

(3)

Total income includes £125 million investment income of which £109 million is included in net interest income and £16 million in non-interest income. Further, instalment income of £70 million has been reallocated between non-interest income and net interest income.

(4)

Reallocation of £131 million between net interest income and non-interest income in respect of funding costs of rental assets, £147 million, and to record interest in financial assets and liabilities designated as fair value through profit or loss, £16 million.




 

 

Notes to pro forma results (continued)

 

10. Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

 income 

Non- 

interest 

 income 

 

Total 

 income 

 

Operating 

 expenses 

Insurance 

net claims 

 

Impairment 

 losses 

 

Operating 

 profit/(loss)

 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

               

Half year ended 30 June 2009

             

UK Retail (1)

1,665 

806 

2,471 

(1,584)

(26)

(824)

37 

UK Corporate

1,059 

639 

1,698 

(742)

(550)

406 

Wealth

334 

222 

556 

(322)

(22)

212 

Global Banking & Markets (2)

1,496 

5,699 

7,195 

(2,440)

(238)

4,517 

Global Transaction Services

445 

783 

1,228 

(719)

(13)

496 

Ulster Bank

410 

108 

518 

(369)

(157)

(8)

US Retail & Commercial

942 

504 

1,446 

(1,128)

(369)

(51)

RBS Insurance (3)

182 

1,983 

2,165 

(391)

(1,551)

(6)

217 

Central items

(184)

161 

(23)

198 

177 

               

Core

6,349 

10,905 

17,254 

(7,497)

(1,577)

(2,177)

6,003 

Non-Core (4)

511 

(2,974)

(2,463)

(1,236)

(314)

(5,344)

(9,357)

Amortisation of purchased   

  intangible assets

(140)

(140)

Write-down of goodwill and other

  intangible assets

(311)

(311)

Integration and restructuring costs

(734)

(734)

Gain on redemption of own debt

3,790 

3,790 

3,790 

Strategic disposals

453 

453 

453 

               
 

6,860 

12,174 

19,034 

(9,918)

(1,891)

(7,521)

(296)

RFS Holdings minority interest

(11)

(2)

(13)

(42)

(55)

               

Total statutory

6,849 

12,172 

19,021 

(9,960)

(1,891)

(7,521)

(351)



 

Notes:

(1)

Reallocation of netting of bancassurance claims of £26 million from non-interest income.

(2)

Reallocation of £24 million between net interest income and non-interest income in respect of funding costs of rental assets, £27 million, and to record interest on financial assets and liabilities designated as fair value through profit or loss, £51 million.

(3)

Total income includes £132 million investment income of which £115 million is included in net interest income and £17 million in non-interest income. Further, instalment income of £67 million has been reallocated between non-interest income and net interest income.

(4)

Reallocation of £158 million between net interest income and non-interest income in respect of funding costs of rental assets, £136 million, and to record interest on financial assets and liabilities designated as fair value through profit or loss, £22 million.




 
 
 
 
 
 
 


 

Notes to pro forma results (continued)

 

10. Segmental analysis (continued)

 

Analysis of divisional operating profit/(loss) (continued)

 

 

Net 

interest 

 income 

Non- 

interest 

 income 

 

Total 

 income 

 

Operating 

 expenses 

Insurance 

net claims 

 

Impairment 

 losses 

 

Operating profit/(loss)

 

£m 

£m 

£m 

£m 

£m 

£m 

£m 

               

Quarter ended 30 June 2010

             

UK Retail (1)

1,001 

294 

1,295 

(744)

25 

(300)

276 

UK Corporate

647 

340 

987 

(399)

(198)

390 

Wealth

150 

116 

266 

(178)

(7)

81 

Global Banking & Markets (2)

320 

1,958 

2,278 

(1,033)

(164)

1,081 

Global Transaction Services

237 

411 

648 

(366)

(3)

279 

Ulster Bank

194 

53 

247 

(143)

(281)

(177)

US Retail & Commercial

502 

275 

777 

(504)

(144)

129 

RBS Insurance (3)

90 

1,015 

1,105 

(176)

(1,132)

(203)

Central items

71 

235 

306 

32 

(1)

337 

               

Core

3,212 

4,697 

7,909 

(3,511)

(1,108)

(1,097)

2,193 

Non-Core (4)

472 

401 

873 

(592)

(215)

(1,390)

(1,324)

Amortisation of purchased

  intangible assets

(85)

(85)

Integration and restructuring costs

(254)

(254)

Gain on redemption of own debt

553 

553 

553 

Strategic disposals

(411)

(411)

(411)

Bonus tax

(15)

(15)

Asset Protection Scheme credit

  default swap - fair value changes

500 

500 

500 

               
 

3,684 

5,740 

9,424 

(4,457)

(1,323)

(2,487)

1,157

RFS Holdings minority interest

(8)

21 

13 

17 

               

Total statutory

3,676 

5,761 

9,437 

(4,453)

(1,323)

(2,487)

1,174 



 

Notes:

(1)

Reallocation of netting of bancassurance claims of £25 million from non-interest income.

(2)

Reallocation of £15 million between net interest income and non-interest income in respect of funding costs of rental assets, £9 million, and to record interest in financial assets and liabilities designated as fair value through profit or loss, £6 million.

(3)

Total income includes £74 million investment income of which £55 million is included in net interest income and £19 million in non-interest income. Further, instalment income of £35 million between non-interest income and net interest income.

(4)

Reallocation of £62 million between net interest income and non-interest income in respect of funding costs of rental assets, £78 million, and to record interest in financial assets and liabilities designated as fair value through profit or loss, £16 million.



 

 

 

 

 

There are additional notes on Financial instruments, including Level 3 balances and Derivatives, on pages 166 to 179. 
 


 Independent review report to The Royal Bank of Scotland Group plc

 

We have been engaged by The Royal Bank of Scotland Group plc ("the Company") to review the pro forma financial information in the half-yearly financial report for the six months ended 30 June 2010 which comprises the pro forma summary consolidated income statement, the pro forma condensed consolidated statement of comprehensive income, the pro forma condensed consolidated balance sheet, the pro forma condensed consolidated statement of changes in equity, the pro forma divisional performance results on pages 21 to 51 and 53 to 58, the related notes 1 to 10 on pro forma results and parts of Risk and capital management set out on pages 78 to 143 except for those indicated as not reviewed (together "the pro forma financial information").

 

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report, including the pro forma financial information, is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the pro forma financial information in accordance with the basis of preparation described in note 1 on page 67.

 

Our responsibility

Our responsibility is to express to the Company a conclusion on the pro forma financial information in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, we are not aware of any material modifications that should be made to the pro forma financial information in the half-yearly financial report for the six months ended 30 June 2010.

 

 

 

Deloitte LLP

Chartered Accountants

Edinburgh, United Kingdom

5 August 2010

 






Signatures



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Date:   August 6, 2010

  THE ROYAL BANK OF SCOTLAND GROUP plc (Registrant)


  By: /s/ Jan Cargill

  Name:
Title:
Jan Cargill
Deputy Secretary