Segment Performance Private Banking 2014 2015 2016 Q4 Full year Q1 Q2 Q3 Q4 Full year Q1 Q2 Q3 Q4 Full year Income statement £m £m £m £m £m £m £m £m £m £m £m £m Net interest income 116 454 110 109 109 108 436 113 113 112 111 449 Net fees and commissions 49 214 50 46 46 44 186 46 48 45 42 181 Other non-interest income 5 21 5 6 5 6 22 6 5 8 8 27 Non-interest income 54 235 55 52 51 50 208 52 53 53 50 208 Total income 170 689 165 161 160 158 644 165 166 165 161 657 Direct expenses - staff costs (44) (178) (46) (44) (43) (43) (176) (40) (37) (38) (39) (154) - other costs (12) (37) (9) (8) (11) (7) (35) (14) (9) (9) (12) (44) Indirect expenses (90) (289) (68) (65) (65) (109) (307) (83) (73) (62) (95) (313) Restructuring costs - direct (1) (1) -- (2) 2 (7) (7) (1) -- -- (6) (7) - indirect -- -- 3 (80) (1) 12 (66) (15) (4) (3) (8) (30) Litigation and conduct costs (90) (90) (2) -- -- (10) (12) -- (2) -- 1 (1) Write down of goodwill -- -- -- -- -- (498) (498) -- -- -- -- -- Operating expenses (237) (595) (122) (199) (118) (662) (1 101) (153) (125) (112) (159) (549) Operating (loss)/profit before impairment releases/(losses) (67) 94 43 (38) 42 (504) (457) 12 41 53 2 108 Impairment releases/(losses) 1 5 1 2 (4) (12) (13) (2) -- (3) 8 3 Operating (loss)/profit (66) 99 44 (36) 38 (516) (470) 10 41 50 10 111 Memo: Operating expenses - adjusted (1) (146) (504) (123) (117) (119) (159) (518) (137) (119) (109) (146) (511) Operating profit/(loss) - adjusted (1) 25 190 43 46 37 (13) 113 26 47 53 23 149 Analysis of income by business Investments 24 104 24 21 20 21 86 28 22 24 23 97 Banking 146 585 141 140 140 137 558 137 144 141 138 560 Total income 170 689 165 161 160 158 644 165 166 165 161 657 Performance ratios Return on equity (2) (15,8%) 4,1% 7,8% (9,9%) 7,4% (118,9%) (27,7%) 1,5% 8,6% 11,1% 1,6% 5,6% Return on equity - adjusted (1,2) 3,7% 9,1% 7,5% 9,3% 7,1% (4,4%) 4,9% 5,1% 9,9% 11,8% 4,5% 7,8% Net interest margin 2,91% 2,89% 2,86% 2,76% 2,72% 2,67% 2,75% 2,80% 2,73% 2,62% 2,50% 2,66% Cost:income ratio 139% 86% 74% 124% 74% 419% 171% 93% 75% 68% 99% 84% Cost:income ratio - adjusted (1) 86% 73% 75% 73% 74% 101% 80% 83% 72% 66% 91% 78% Notes: (1) Excluding restructuring costs, and litigation and conduct costs and write down of goodwill. (2) Return on equity is based on segmental operating profit after tax adjusted for preference dividends divided by average notional equity based on 15% of the monthly average of segmental RWAes, assuming 28% tax rate. RBS Group - Q4 2016 Financial Supplement Page 32