Not up on the RBS Investor Relations website as far as I can tell, but was filed with the SEC yesterday, so I'd imagine that it will be posted later today:

http://www.sec.gov/Archives/edgar/data/702162/00009501031200...

Headlines are a £3.8bn loss for the year (£4.2bn at an operating level). Within shareholders' equity, this was more than offset by Parent Company funding of £5.2bn. Would be interesting to see how this compares with what their budgets were for capital movements.

It is, to be blunt, not a very pretty picture.

Cost of funding increasing; which directly hits their NII margin. Large PPI claims/provision hit, and large Ulster Bank impairments (both of which are, of course, known and shouldn't be a surprise to anyone assuming they read the Feb announcements closely enough!).

There's a LOT of information in there if you're a banking nerd and want to dig into the detail.

Also a Fixed Income presentation from Feb that I found wandering around the corporate website:

http://www.investors.rbs.com/download/slides/Fixed_Income_In...

K

Interestingly the £5.2bn "capital contribution" gets only a 2 line elucidation, while there are a dozen pages of anlaysis of the pension costs. The good news for NWBD holders is the mention of regulatory control over the extraction of reserves in favour of the parent.

How can a contribution of money be added to distributable reserves and not to capital?
Can someone explain the mysteries of UK law - corporate accounting?
Am I right to assume that NWC coupons are safe because the losses were replenished by RBS, instead of eating into reserves as would be the standard?

Reserves
Under UK companies legislation, when shares are redeemed or purchased wholly or partly out of the company's profits, the amount by which the company's issued share capital is diminished must be transferred to the capital redemption reserve. The capital maintenance provisions of UK companies legislation apply to the capital redemption reserve as if it were part of the company’s paid up share capital.

UK law prescribes that only reserves of the Bank are taken into account for the purpose of making distributions and the permissible applications of the share premium account and capital redemption reserve of £459 million (2010 - £459 million; 2009 - £426 million) included within other reserves.

In the year, the Group received a contribution of capital of £5,200 million (2010 - £2,950 million; 2009 - £750 million) from the holding company for which no additional share capital was issued. As such, this has been recorded as a capital contribution in retained earnings.

The Group optimises capital efficiency by maintaining reserves in subsidiaries, including regulated entities. Certain preference shares and subordinated debt are also included within regulatory capital. The remittance of reserves to the parent or the redemption of shares or subordinated capital by regulated entities may be subject to maintaining the capital resources required by the relevant regulator.

amateur

There's another £5bn in the RBS plc accounts. It seems they just shovel reserves around the group. Technically you do it by intra-group charges, so to call them capital contribitions is a misnomer.

The capital maintenance guff is tangential.

I guess they would rather stiffen up capital adequacy this way rather than by the issue of further share capital as the transactions can be reversed and excess reserves kicked up to the parent without messing with permissible capital payments etc

With losses and deferred tax assets building up this massively I wonder if 9% NWDB would be a better bet than NATW. The only thing that keeps NATW from converting into 8.392% prefs is the tax deductability of interest for Natwest, but it looks like Natwest won't create any taxable profits anytime soon it give the company a strong incentive to finally convert, no? Plus it can carry forward the losses for tax reasons, so won't pay taxes for a very very long time. Anyone agree/disagree?

Hi BoB

Correct me if I am wrong, but wasn't one of the small print conditions on the bailout (of Lloyds and RBS) that they would not be able to carry forward the losses that they made (are still making) for tax purposes. Hence, I am expecting that as soon as they start making any money, they will be taxed on it all.

I don't have any links for this, and am very happy if someone is confident to put me right on this if I am wrong

P

Hi P

wasn't one of the small print conditions on the bailout (of Lloyds and RBS) that they would not be able to carry forward the losses that they made (are still making) for tax purposes

No. It was going to be a condition of the APS scheme, but Lloyds ducked out of the scheme, and, if memory serves, when the goal posts moved for RBS the price came down big time to a minimum of £2.5 bn, if they wanted to get out early.

BTW, re your post about the tax credits etc, I haven't got the AUS/UK double tax treaty to hand, but normally you could expect to get some credit against Aussie tax for the dividend even though in the UK you cannot claim it back. I know I can here in France.

Regards

David

David
Thank you for your reply, and the steer re tax, I will pass it on to my accountant
BW
PM

PeteMedic

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