Segment performance Capital Resolution 2016 compared with 2015 ● RWAs decreased by £14.5 billion, or 30%, to £34.5 billion reflecting disposal activity partially offset by an increase due to the weakening of sterling. Since the end of 2014, RWAs have reduced by £60.6 billion, or 64%. ● Funded assets decreased by £25.8 billion to £27.6 billion with the most significant reductions across Markets and GTS. ● An operating loss of £4,870 million compared with a loss of £3,687 million in 2015 and included litigation and conduct costs of £3,413 million. The adjusted operating loss was £1,432 million compared with £412 million in 2015. ● Income disposal losses were £572 million, £205 million higher than 2015, and included £259 million in respect of the shipping portfolio. In addition, a funding valuation adjustment charge of £170 million was incurred in 2016. ● Operating expenses decreased from £4,951 million to £4,255 million in 2016 principally driven by lower adjusted operating expenses and lower restructuring costs. Adjusted expenses decreased by £775 million, or 50%, to £764 million, principally reflecting a 1,000 reduction in headcount. ● A net impairment loss of £253 million compared with a net impairment release of £725 million in 2015 and principally comprised charges relating to a number of shipping assets (£424 million). Q4 2016 compared with Q3 2016 ● RWAs decreased by £4.1 billion to £34.5 billion reflecting disposal activity partially offset by an increase due to the weakening of sterling. ● Funded assets decreased by £7.3 billion to £27.6 billion with the most significant reductions across Markets and GTS. ● An operating loss of £3,503 million compared with an operating loss of £454 million in Q3 2016 and included litigation and conduct costs of £3,156 million. The adjusted operating loss was £331 million compared with £118 million in Q3 2016, with the increase primarily reflecting increased disposal losses. ● Adjusted expenses increased by £3 million to £176 million and included the annual UK bank levy charge of £22 million. Q4 2016 compared with Q4 2015 ● An operating loss of £3,503 million compared with an operating loss of £1,902 million in Q4 2015 and included litigation and conduct costs of £3,156 million. The adjusted operating loss was £331 million compared with a loss of £271 million in Q4 2015. ● Adjusted expenses decreased by £218 million, or 55%, to £176 million principally reflecting a 1,000 reduction in headcount. 45 RBS – Annual results 2016