3 Things I Learned From Royal Bank Of Scotland Group plc’s Annual Report

I’m working my way through the latest annual reports of your favourite FTSE 100 companies, looking for insights into their businesses. Today, it’s the turn of Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US).

Executive pay

Bankers’ pay continues to be a bone of contention, so I made straight for the remuneration section of RBS’s annual report. I learned that chief executive Stephen Hester — who will be stepping down next month after five years with the bank — earned a base salary for the year of £1.2m and received total remuneration of £1.6m.

I can tell you that Hester’s total remuneration was less than half that of Lloyds’ chief executive Antonio Horta Osorio, and four-and-a-half times less than top paid bank boss Stuart Gulliver of HSBC. RBS’s remuneration report was given the blessing of shareholders at the company’s AGM: over 99% of votes cast were in favour of the resolution to approve the report — the biggest majority of all five banks.

Impairment charges

In addition to the relatively modest executive remuneration at RBS, I was encouraged to learn that annual impairment losses continued to fall at the bank. The company gave numbers for the past three years, summarised in the table below.





Impairment losses £9.2bn £8.7bn £5.3bn
Reduction 39% 5% 39%

I can tell you that the bank’s impairment losses had peaked at just shy of £15bn during 2009; so there’s been a great improvement over the four years.

Net asset value

I learned that tangible net asset value (TNAV) per share was 446p, down 11% from a year earlier. However, I note that RBS’s told us in its recent 9-month results for 2013 that TNAV per share was now 431p — a reduction of 3% (or 4% annualised).

It’s encouraging to see the decline in TNAV moderating to such an extent, because I like to use an asset valuation for banks. At a current price of 330p, RBS’s shares are on offer at a 23% discount to TNAV. Put another way, investors are paying 77p for every £1 of assets on RBS’s books.

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> G A Chester does not own any shares mentioned in this article.