28 Corporate & Institutional Banking Rory Cullinan Executive Chairman, Corporate & Institutional Banking and Capital Resolution 22% Share of operating profit Contribution to income Commitment to customers was demonstrated by the award of The Banker’s Most Innovative Bank in Risk Management in Q3 2014. Winner of IFR magazine’s Sterling Bond House of the year award in Q4 2014. For further information see pages 143 - 145 Corporate & Institutional Banking (CIB) serves our corporate and institutional clients primarily in the UK and Western Europe, as well as those US and Asian multinationals with substantial trade and investment links in the region, with debt financing, risk management and trade services, focusing on core product capabilities that are of most relevance to our clients. This business’s strategy has been revised in 2015 (see page 14 for Reshaping our CIB business). Performance overview • CIB recorded an operating loss of £892 million compared with a loss of £2,882 million in 2013. • Total income declined by 21%, reflecting reduced deployment of resources and difficult trading conditions, characterised by subdued levels of client activity and limited market volatility. • Operating expenses fell by £2,360 million driven primarily by lower litigation and conduct costs. Adjusted expenses (1) decreased by £1,006 million, or 22%, reflecting the continued focus on cost savings across both business and support areas. • Net impairment releases totalled £9 million compared with a net impairment charge of £680 million in 2013, reflecting a reduction in latent loss provisions and a low level of new impairments. • Funded assets fell by 10% reflecting the focus on core product areas including the wind-down of Credit Trading and the US ABP businesses. • RWAs were managed down by £40.0 billion from £147.1 billion on 1 January 2014 to £107.1 billion on 31 December 2014. Building a better bank that serves customers well CIB focused on its strengths in core product areas during 2014, reducing the scale of the business and simplifying the operating model. This allowed CIB to better serve customers while deploying fewer resources. The commitment to customers was demonstrated by the award of The Banker’s Most Innovative Bank in Risk Management in Q3 2014 and by winning IFR magazine’s Sterling Bond House of the year award in Q4 2014. The drive to concentrate on core products is evidenced by the 27% fall in RWAs (compared with 1 January 2014 on an end-point CRR basis) and the 22% year on year fall in adjusted expenses. Note: (1)Excluding restructuring and litigation and conduct costs. Performance highlights 2014 2013 Return on equity (%) (4.2) (12.9) Cost:income ratio (%) 123 144 Net loans and advances to customers excluding reverse repos (£bn) 72.8 68.2 Customer deposits excluding repos (£bn) 59.4 64.8 Risk-weighted assets (£bn) 107.1 120.4 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 29 Customer Case Study Manchester takes off Manchester Airports Group (MAG) owns and operates four UK airports including Manchester, the UK’s third largest airport, and London Stansted, the fastest growing airport in London. They serve over 45 million passengers and handle more than 600,000 tonnes of freight every year, contributing over £4 billion to the UK economy and directly supporting around 45,000 full-time jobs. Our long-standing relationship with MAG has seen us support both their £1.5 billion acquisition of London Stansted in 2013, and two bond issuances which raised a total of £810 million. Those funds allowed MAG to refinance the acquisition debt used to buy London Stansted, and gave them a platform to invest in services and facilities at their airports. A good example of their investment is the multi-million pound upgrade of the terminal at London Stansted. The expansion will double the size of the security space, expand the departure lounge and help create a new lounge area in the terminal building.
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