The UK personal & business banking (UK PBB) business of RBS has posted an operating profit of £1.45bn for the year 2014, a surge of 77% compared with £819m a year ago.
The annual net interest income of the business registered an increase of £193m or 4% with strong improvements in deposit margins and volume growth.
However, this was partly offset by lower asset margins linked to the continued change in the mix of the loan book towards secured lending and lower mortgage margins, the banking group said in its earnings release.
Lending rose by £2bn, with net new mortgage lending of £3.9bn partially offset by reduced unsecured balances.
The unit’s operating expenses decreased by £174m or 4%, reflecting lower restructuring and litigation and conduct costs.
The net impairment charge was down by 47% to £268m driven by a further decrease in new default charges together with releases of provisions and recoveries on previously written off debt.
Mortgage balances increased by £3.9bn or 4%, to £103.2bn driven by strong performance as advisor capacity increased.
UK PBB’s gross new mortgage business increased by 37% to £19.7bn, representing a market share of 10% with our stock share of 8% continuing to grow.
Ulster Bank, which together with UK PBB constitutes RBS’s personal & business banking segment, recorded an operating profit of £606m in 2014 compared with a loss of £1.61bn in 2013.
The turnaround was driven by £365 million net impairment releases compared with impairment losses of £1.77bn in 2013. Its adjusted operating profit was £609m compared with a loss of £1.48bn.
Ulster Bank’s total income decreased by £29m to £830m largely due non-recurrence of significant hedging gains on the mortgage portfolio in 2013.
Its net interest income increased by £17m to £636m, primarily driven by a significant reduction in the cost of deposits and a benefit from the recognition of income on certain previously non-performing assets, partly offset by the adverse impact on the tracker mortgage book of lower European Central Bank refinancing interest rates. Net interest margin increased 39 basis points to 2.27%.
Overall, RBS group has reported £3.5bn loss for 2014, down from £9bn loss the previous year.