26 Commercial & Private Banking Alison Rose CEO, Commercial & Private Banking 23% Contribution to income Commercial & Private Banking (CPB) serves commercial and mid-corporate customers and high net worth individuals, deepening relationships with commercial clients, operating overseas through its market-leading trade and foreign exchange services, while connecting our private banking brands more effectively to successful business owners and entrepreneurs. CPB comprises two reportable segments, Commercial Banking and Private Banking. Performance overview • CPB recorded an operating profit of £1,440 million compared with £469 million in the prior year. • Net interest income increased by £112 million or 4%, largely reflecting re-pricing activity on deposits partly offset by the impact of reduced asset margins, a result of the net transfer in of lower margin legacy loans (after the cessation of Non-Core). • Total expenses were down £304 million or 10% reflecting lower litigation and conduct costs, primarily relating to interest rate swap redress, and lower underlying direct costs. • RWAs were £2.3 billion lower at £75.5 billion, primarily reflecting net transfers to RCR, effective 1 January 2014, and improving credit quality on the back of UK economic recovery, offset by loan growth. Within Commercial Banking over 120 products were removed from sale and over 400 process improvements implemented. The first of eight accelerator hubs offering free space, support and advice to high growth business owners opened as part of our plan to support UK entrepreneurs. For further information see pages • • • Performance highlights 2014 2013 Return on equity (%) 11.9 3.7 Net interest margin (%) 2.93 2.81 Cost:income ratio (%) 65 73 Net loans and advances to customers (£bn) 101.6 100.2 Customer deposits (£bn) 122.9 127.9 83 78 75.5 77.8 Loan:deposit ratio (%) 136 - 142 • Building a better bank that serves customers well Within Commercial Banking over 120 products were removed from sale and over 400 process improvements implemented. There has been an improvement in the Net Promoter Score and rating of overall service quality across the business, together with a continuing fall in complaints. The first out of eight accelerator hubs opened in February 2015, offering free space, support and advice to high growth business owners. Within Private Banking the business has progressed well against key priorities in 2014. Improvements are evidenced by several industry awards including: ‘Best private bank in the UK’ (PWM/ The Banker) and ’Most innovative digital offering’ (Private Banker International). Coutts continues to be recognised as a leader in philanthropy, with its ’$1 million donors’ report receiving significant media coverage, and its expertise as an adviser for family businesses and existing entrepreneurs remains a strong point of differentiation. Risk-weighted assets (£bn) Note: RWAs at 31 December 2013 are on Basel 2.5 basis and on the end-point CRR basis at 31 December 2014. Business review Customer Case Study Helping Hertz The summer season sees a surge in tourists visiting the UK, many of whom want to hire a car. For leading car rental company Hertz this poses a unique challenge - how to efficiently fund the required increase in its fleet size to meet the demand of the summer months? A Lombard customer for 30 years, Hertz turned to us to help them find an answer. Working with teams across the bank, we were able to provide a short-term seasonal increase to Hertz UK’s core fleet financing facility giving them the flexibility they needed to manage their peak requirements in line with demand. Chris Cooper, Director of Lombard Strategic Fleet Finance said, “This is an excellent example of us working together and thinking long term for the benefit of both the client and the bank. This deal cements our position as a strategic partner to Hertz and provides a platform for further seasonal support.” 27