19 Discontinued operations and assets and liabilities of disposal groups
As part of implementing the legislation following the recommendations of the Independent Commission on Banking, NatWest Group Holdings Corp (NWGH), which is a direct subsidiary of NatWest and which wholly owns RBS Securities Inc (RBSSI), is due to be transferred to RBSG by 1 January 2019 in preparation for ring-fencing. Accordingly, NWGH is classified as a disposal group at 31 December 2017 and presented as a discontinued operation, with comparative income statement and related notes re-presented.
On 1 January 2017 Ulster Bank (Ireland) Holdings Unlimited Company (UBIH) was sold to NatWest Holdings. NatWest Holdings is a subsidiary of RBS plc, the immediate parent company of the Group. Accordingly, UBIH was classified as a disposal group at 31 December 2016 and presented as a discontinued operation.
(a) Profit from discontinued operations, net of tax
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
£m |
|
£m |
|
£m |
|
NWGH |
|
|
|
|
|
|
|
Interest income |
|
— |
|
— |
|
1 |
|
Interest expense |
|
(17) |
|
(4) |
|
(7) |
|
|
|
|
|
|
|
|
|
Net interest income |
|
(17) |
|
(4) |
|
(6) |
|
Other income |
|
99 |
|
146 |
|
412 |
|
|
|
|
|
|
|
|
|
Total income |
|
82 |
|
142 |
|
406 |
|
Operating expenses |
|
(724) |
|
(1,859) |
|
(2,868) |
|
|
|
|
|
|
|
|
|
Loss before impairment losses |
|
(642) |
|
(1,717) |
|
(2,462) |
|
Impairment losses |
|
— |
|
(6) |
|
(2) |
|
|
|
|
|
|
|
|
|
Operating loss before tax |
|
(642) |
|
(1,723) |
|
(2,464) |
|
Tax credit/(charge) |
|
7 |
|
(23) |
|
84 |
|
|
|
|
|
|
|
|
|
Loss from NWGH discontinued operations, net of tax |
|
(635) |
|
(1,746) |
|
(2,380) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBIH |
|
|
|
|
|
|
|
Interest income |
|
— |
|
482 |
|
487 |
|
Interest expense |
|
— |
|
(72) |
|
(124) |
|
|
|
|
|
|
|
|
|
Net interest income |
|
— |
|
410 |
|
363 |
|
Other income |
|
— |
|
122 |
|
141 |
|
|
|
|
|
|
|
|
|
Total income |
|
— |
|
532 |
|
504 |
|
Operating expenses |
|
— |
|
(584) |
|
(341) |
|
|
|
|
|
|
|
|
|
(Loss)/profit before impairment losses |
|
— |
|
(52) |
|
163 |
|
Impairment losses |
|
— |
|
112 |
|
676 |
|
|
|
|
|
|
|
|
|
Operating profit before tax |
|
— |
|
60 |
|
839 |
|
Tax credit/(charge) |
|
— |
|
3 |
|
(3) |
|
|
|
|
|
|
|
|
|
Profit from UBIH discontinued operations, net of tax |
|
— |
|
63 |
|
836 |
|
|
|
|
|
|
|
|
Note:
|
(1) |
Other comprehensive loss from discontinued operations for the year ended 31 December 2017 was £67 million. |
(b) Operating cash flows attributable to discontinued operations
|
|
|
2017 |
|
2016 |
|
2015 |
|
|
|
£m |
|
£m |
|
£m |
|
Net cash flows from operating activities |
|
(795) |
|
2,560 |
|
(2,724) |
|
Net cash flows from investing activities |
|
4 |
|
178 |
|
211 |
|
Net cash flows from financing activities |
|
502 |
|
(1,802) |
|
(5) |
|
Net increase in cash and cash equivalents |
|
(361) |
|
1,675 |
|
(2,463) |
(c) Assets and liabilities of disposal groups
|
|
|
2017 |
|
2016 |
|
|
|
£m |
|
£m |
|
Assets of disposal groups |
|
|
|
|
|
Cash and balances at central banks |
|
— |
|
249 |
|
Loans and advances to banks |
|
10,381 |
|
2,418 |
|
Loans and advances to customers |
|
8,838 |
|
18,922 |
|
Debt securities and equity shares |
|
4,062 |
|
2,953 |
|
Derivatives |
|
3 |
|
94 |
|
Property, plant and equipment |
|
168 |
|
67 |
|
Settlement balances |
|
1,011 |
|
— |
|
Other assets |
|
63 |
|
273 |
|
|
|
|
|
|
|
|
|
24,526 |
|
24,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities of disposal groups |
|
|
|
|
|
Deposits by banks |
|
3,168 |
|
1,309 |
|
Customer accounts |
|
13,976 |
|
16,113 |
|
Derivatives |
|
2 |
|
126 |
|
Debt securities in issue |
|
— |
|
1,179 |
|
Subordinated liabilities |
|
804 |
|
76 |
|
Settlement balances |
|
1,532 |
|
— |
|
Short positions |
|
2,436 |
|
— |
|
Provisions for liabilities and charges |
|
1,722 |
|
202 |
|
Other liabilities |
|
209 |
|
308 |
|
|
|
|
|
|
|
|
|
23,849 |
|
19,313 |
|
|
|
|
|
|
At 31 December 2017, disposal groups comprise the third party net assets of NWHG due to be distributed to RBSG before 1 January 2019; costs to distribute are expected to be immaterial. At 31 December 2016, disposal groups comprise the third party net assets of UBIH and the Group’s interest in RBS International.
Debt securities and equity shares are carried at fair value and are primarily classed as Level 1in the fair value hierarchy.