Segment performance ● Deposit balances performed strongly, increasing by £8.0 billion, or 6%, to £145.8 billion driven by 13% growth in personal current account balances. Personal savings balances increased 3% despite re- pricing activity. ● RWAs decreased by £0.6 billion, or 2%, to £32.7 billion due to asset mix benefits and overall improved credit quality, largely reflecting the current benign credit conditions, partly offset by increased lending. Q4 2016 compared with Q3 2016 ● Operating profit decreased by £286 million to £281 million. Adjusted operating profit of £546 million was £45 million lower than Q3 2016 primarily reflecting £35 million of intangible asset write downs and the annual UK bank levy charge of £34 million. ● Income was broadly stable in the quarter. Net interest income continued to build momentum, increasing by £8 million driven by further strong lending growth across mortgages, business lending and personal loans, with NIM broadly stable at 2.94%. As mortgage SVR balances and margins begin to stabilise, we have seen mortgage income growth for the fourth consecutive quarter. Non interest income declined by £5 million, or 2%, reflecting lower seasonal credit card interchange fees and increased Reward cash-back payments, partially offset by a £15 million gain following the re- commencement of debt sales in our non-performing loans book. ● Adjusted operating expenses increased £59 million, or 8%, principally due to intangible asset write downs of £35 million and the annual UK bank levy charge of £34 million. Excluding these items, adjusted operating expenses reduced by £10 million, or 1%, due to further improvements in digital and process automation delivering lower headcount and staff costs. ● Net loans and advances grew by £2.5 billion to £132.1 billion with gross mortgage balances up £2.4 billion. ● Deposits grew by £2.1 billion to £145.8 billion driven by strong growth in current account balances, £1.4 billion. Q4 2016 compared with Q4 2015 ● Operating profit increased by £571 million to £281 million, predominantly driven by lower litigation and conduct charges. Adjusted operating profit increased by £142 million to £546 million reflecting an £85 million increase in income and a £100 million reduction in adjusted operating expenses partially offset by a £43 million increase in impairments. ● Total income increased by £85 million, or 7%, to £1,339 million. Net interest income increased by £63 million, or 6%, to £1,093 million reflecting mortgage volume growth, partially offset by a 9 basis point reduction in net interest margin to 2.94%. ● Adjusted operating expenses reduced by £100 million, or 11%, primarily driven by lower headcount. ● A net impairment loss of £16 million compared with a £27 million release in Q4 2015. 39 RBS – Annual results 2016