Report of Foreign Private Issuer

 

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

29 August 2014

 

 

 

RBS Holdings N.V.

 

Gustav Mahlerlaan 350

1082 ME Amsterdam

PO BOX 12925

The Netherlands

 

(Address of principal executive offices)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F  X                                              Form 40-F     

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):__

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):__

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes                                                                 No  X  

 

If "Yes" is marked, indicate below the file number assigned to

the registrant in connection with Rule 12g3-2(b): 82-             

 

RBS Holdings N.V.

 

 

RBS Holdings N.V. (RBSH) is the parent company of The Royal Bank of Scotland N.V. (RBS N.V.) group of subsidiaries and associated companies (together, the RBSH Group). The Royal Bank of Scotland Group plc (RBSG) is the ultimate holding company of RBSH Group. RBS Group refers to RBSG and its consolidated subsidiaries and associated companies.

 

 

 

Certain sections in, or incorporated by reference in, this document contain 'forward-looking statements', such as statements that include the words 'expect', 'estimate', 'project', 'anticipate', 'believes', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'will', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on such expressions.

 

In particular, this document includes forward-looking statements relating, but not limited to: RBSH Group's restructuring plans and RBS Group’s new strategic plan, divestments, capitalisation, portfolios, net interest margin, capital ratios, liquidity, risk weighted assets, return on equity, cost: income ratios, leverage and loan: deposit ratios, funding and risk profile, certain ring-fencing proposals, sustainability targets, RBSH Group's future financial performance, the level and extent of future impairments and write-downs, including sovereign debt impairments, the protection provided by the Asset Protection Scheme (APS) back-to-back contracts with The Royal Bank of Scotland plc (RBS plc), and RBSH Group's potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain of the market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated.

 

Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: the financial condition of RBS Group; the global economic and financial market conditions and other geopolitical risks and their impact on the financial industry in general and on RBSH Group in particular; the ability to access sufficient sources of liquidity and funding; the ability to implement strategic plans on a timely basis, or at all, including the disposal of certain assets in RBS Capital Resolution and assets and businesses required as part of the State Aid restructuring plan of RBS Group; organisational  restructuring; including any adverse consequences of a failure to transfer, or delay in transferring, certain business assets and liabilities from RBS N.V. to RBS plc; deteriorations in borrower and counterparty credit quality; the extent of future write-downs and impairment charges caused by depressed asset valuations; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices and basis, volatility and correlation risks; changes in the credit ratings of RBSH Group; ineffective management of capital or changes to capital adequacy or liquidity requirements; litigation and regulatory investigations, including investigations relating to the setting of interest rates and foreign exchange trading and rate setting activities and the reliability and resilience of its IT systems; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; the ability of RBSH Group to attract or retain senior management or other key employees; regulatory or legal changes (including those requiring any restructuring of RBSH Group's operations) in the Netherlands, the United States (US), the United Kingdom (UK), the rest of Europe and other countries in which RBSH Group operates or a change in policy of the government of the Netherlands; changes to regulatory requirements relating to capital and liquidity, including implementation of the EU Recovery and Resolution Directive and the Single Supervisory Mechanism; changes to the monetary and interest rate policies of the central banks and other governmental and regulatory bodies; changes in Dutch and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; pension fund shortfalls; general operational risks; reputational risk; general geopolitical and economic conditions in the Netherlands and in other countries in which RBSH Group has significant business activities or investments; the protection provided to RBSH Group pursuant to the APS back-to-back contracts and their effect on RBSH Group's financial and capital position; the cross liability resulting from the legal demergers of ABN AMRO Bank N.V. and RBS II B.V.; limitations on, or additional requirements imposed on, RBSH Group's activities as a result of HM Treasury's investment in RBSG; and the success of RBSH Group in managing the risks involved in the foregoing.

 

 

The forward-looking statements contained in this document speak only as of the date of this announcement, and RBSH Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

For a further discussion of certain risks faced by RBSH Group, see Risk factors on pages 36 and 37.

 

The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.

 

 

General information

RBSH Group offers a wide range of banking products and financial services, principally in the Netherlands and Asia.

 

In 2007, RFS Holdings B.V. (RFS Holdings), which was jointly owned by RBSG, Fortis (succeeded by the Dutch State in 2008) and Banco Santander S.A. (together the Consortium Members) completed the acquisition of RBS Holdings N.V. RFS Holdings is the sole shareholder of RBS Holdings N.V..

 

RBSG's shareholding in RFS Holdings is currently 97.7%. RFS Holdings is controlled by RBSG, which is incorporated in the UK and is the ultimate parent company of RBSH Group. The consolidated financial statements of RBSH Group are included in the consolidated financial statements of RBS Group.

 

Transfers of a substantial part of the business activities of RBS N.V. to The Royal Bank of Scotland plc (RBS plc)

Consistent with RBS Group’s efforts to simplify its structure, thereby reducing risk, cost and complexity, on 19 April 2011, the Boards of RBSG, RBS plc, RBS Holdings N.V. and RBS N.V. announced their programme to transfer a substantial part of the business activities of RBS N.V. to RBS plc subject, amongst other matters, to regulatory and other approvals, and employee consultation procedures.

 

The UK business was transferred to RBS plc in 2011 and most of the other European businesses were transferred in 2012. The majority of the Asian businesses were transferred in 2012 with the Indian support activity transferred in 2013. Also in 2013, assets and liabilities relating to businesses in Russia, Romania, Korea and North America were transferred to RBS plc.

 

RBS Group is committed to providing the necessary support to ensure that RBS N.V. continues to meet its commitments during and after the programme.

 

Due to the ongoing transfers and business divestments, the results for the first half of 2014 discussed in the Financial review on page 5 are not entirely comparable with the first half of 2013.

 

 

Operating profit/(loss)

Operating profit before tax was €61 million compared with a loss of €56 million in the first half of 2013. The increase was due to a significant reduction in operating expenses and impairment losses which was partially offset by a decline in total income.

 

Total income

Total income fell by 13% to €255 million from €293 million in the first half of 2013.

 

Net interest income  

Net interest income fell by 17% to €106 million from €127 million in the first half of 2013. Interest receivable and payable decreased as a result of reduced balance sheet positions driven by business divestments and planned contraction.

 

Non-interest income

Non-interest income fell by 10% to €149 million from €166 million in the first half of 2013. The loss from trading activities of €42 million in the first six months of 2014 was driven by mark-to-market interest rate swap movements in Australia, compared with income of €84 million in 2013. Fees and commissions receivable and payable fell predominantly as a result of business divestments. These were offset by an increase in other operating income of €128 million primarily due to changes in the fair value of financial assets designated at fair value through profit or loss together with a gain on redemption of subordinated debt instruments in January 2014.

 

Operating expenses

Operating expenses decreased by 31% to €211 million from €305 million in the first half of 2013. A reduction in both staff and non-staff costs resulting from business divestments in the second half of 2013 was partially offset by a litigation settlement.

 

Impairment recoveries/(losses)

Impairment recoveries were €17 million compared with losses of €44 million in the first half of 2013. The recoveries in the first half of 2014 reflected the release of latent provisions plus individual case recoveries whereas the 2013 charge was mainly driven by impairment on a small number of individual cases. Securities losses reduced by €35 million to €14 million compared with the first half of 2013.

 

Capital

RBSH Group’s capital, risk-weighted assets (RWAs) and risk asset ratios are set out below.

 

 

 

Capital (continued)

 

 

Notes:

 

Total capital was stable at €4.5 billion. Tier 1 capital increased by €0.4 billion due mainly to a change in the treatment of RBSH Group’s investment in Saudi Hollandi Bank which, under CRD IV, is proportionally consolidated; previously it was treated as a capital deduction.

 

Condensed consolidated income statement

 

 

Condensed consolidated statement of comprehensive income

 

 

Condensed consolidated balance sheet

 

 

Key points

 

 

Condensed consolidated statement of changes in equity

 

 

Notes:

 

 

Condensed consolidated cash flow statement

 

 

 

1. Basis of preparation

RBS Holdings N.V.’s condensed consolidated financial statements have been prepared in accordance with IAS 34 ‘Interim Financial Reporting’.  They should be read in conjunction with RBSH Group’s audited financial statements published in the 2013 Annual Report which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, as adopted by the European Union (EU) (together IFRS).

 

The condensed consolidated financial statements are unaudited. In the opinion of management, all relevant disclosures necessary for an understanding of the changes in consolidated financial position and performance of RBS Holdings N.V. since the end of the last annual reporting period have been made.

 

Going concern

A summary of the risk factors which could materially affect RBSH Group’s future results are described on pages 36 and !Syntax Error, #.  

 

Having reviewed RBSH Group’s forecasts and projections and considered the interim results of the RBS Group for the half year ended 30 June 2014, approved on 31 July 2014, which were prepared on a going concern basis, together with evidence that the RBS Group will continue to provide sufficient resources to RBSH Group, the directors have a reasonable expectation that RBSH Group will continue in operational existence for the foreseeable future. Accordingly, the interim financial statements for the half year ended 30 June 2014 have been prepared on a going concern basis.

 

2. Accounting policies

There have been no significant changes to the RBSH Group’s principal accounting policies as set out on pages 94 to 102 of the 2013 Annual Report and Accounts apart from the adoption of new and revised IFRSs that are effective from 1 January 2014:

 

‘Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)’ adds application guidance to IAS 32 to address inconsistencies identified in the application of the standard’s criteria for offsetting financial assets and financial liabilities.

 

‘Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27)’ applies to investment entities; such entities should account for their subsidiaries (other than those that provide services related to the entity’s investment activities) at fair value through profit or loss.

 

IFRIC 21 ‘Levies’ provides guidance on accounting for levies payable to public authorities if certain conditions are met on a particular date.

 

IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)’ aligns IAS 36’s disclosure requirements about recoverable amounts with IASB’s original intentions.

 

IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)’ provides relief from discontinuing hedge accounting on novation of a derivative designated as a hedging instrument.

 

The implementation of these requirements has not had a material effect on RBSH Group’s financial statements.

 

 

 

2. Accounting policies (continued) 

 

Critical accounting policies and key sources of estimation uncertainty

The reported results of the RBSH Group are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. The judgements and assumptions that are considered to be the most important to the portrayal of the RBSH Group’s financial condition are those relating to provisions for liabilities; deferred tax; loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgments are described on pages 101 and 102 of the 2013 Annual Report and Accounts.

 

Recent developments in IFRS

In July 2014 the IASB published IFRS 9 ‘Financial Instruments’. IFRS 9 replaces the current financial instruments standard IAS 39, setting out new accounting requirements in a number of areas. First, there are revisions to the classification and measurement of financial instruments. There are new restrictions on the ability to account for financial assets at amortised cost and a prohibition on the bifurcation of embedded derivatives from financial assets. Accounting for financial liabilities is largely unchanged except for the treatment of changes in the fair value of liabilities designated as at fair value through profit or loss attributable to own credit risk; these are recognised in other comprehensive income. Secondly, there are amended requirements for hedge accounting designed to align the accounting more closely to the risk management framework and remove or simplify some of the rule-based requirements of IAS 39. The basic mechanics of hedge accounting: fair value, cash flow and net investment hedges are retained. Finally, there is a new approach to credit impairment provisions moving from IAS 39’s incurred loss model to an expected loss model. An expected loss model will result in the recognition of credit impairment losses earlier than an incurred loss model. IFRS 9 is effective for periods beginning on or after 1 January 2018.

 

IFRS 9 makes major and fundamental changes to accounting for financial instruments. The RBSH Group is continuing its assessment of its effect on the RBSH Group’s financial statements.

 

The IASB also published:

 

RBSH Group is reviewing these requirements to determine their effect, if any, on its financial reporting.

 

 

3. Impairment provisions

Impairment (recoveries)/losses charged to the income statement comprise:

 

The balance sheet loan impairment provisions decreased in the half year ended 30 June 2014 from €195 million to €117 million and the movements thereon were:

 

Provisions at 30 June 2014 include no amounts in respect of loans and advances to banks (30 June 2013 - €1 million).

 

4. Taxation

The actual tax (charge)/credit differs from the expected tax (charge)/credit computed by applying the standard Dutch corporation tax rate of 25% as follows:

 

 

5. Segmental analysis

On 27 February 2014, RBS Group announced the reorganisation of the previously reported operating divisions into three franchises: Personal & Business Banking, Commercial & Private Banking and Corporate & Institutional Banking (CIB). Only CIB, comprising the former Markets and International Banking divisions, is relevant for RBS N.V..

 

RBS Capital Resolution (RCR) was established with effect from 1 January 2014 by the transfer of capital intensive and higher risk assets from existing divisions. Non-Core was dissolved on 31 December 2013. No business lines moved to RCR and so comparative data has not been restated. RCR will be reported separately until disposal or wind-down.

 

Comparatives have been restated accordingly.

 

 

 

 

5. Segmental analysis (continued) 

 

 

 

6. Coupon payments

RBSH Group has resumed payments on the hybrid capital instruments issued by RBS N.V.: RBS Capital Funding Trust V, RBS Capital Funding Trust VI and RBS Capital Funding Trust VII following the end of the European Commission ban in 2013. Future coupons and dividends on hybrid capital instruments will only be paid subject to, and in accordance with, the terms of the relevant instruments.

 

7. Credit protection arrangements

RBSH Group has also entered into two agreements with RBS plc under which it has bought credit protection over the exposures held by RBSH Group that were subject to RBS Group’s Asset Protection Scheme agreement with HM Treasury (HMT). These agreements cover 100% of losses on these assets. One agreement provides protection over a portfolio that includes significant exposure in the form of derivatives; the other covers assets that are measured at amortised cost. The former agreement is accounted for as a credit derivative. The second agreement meets the definition of a financial guarantee contract and is accounted for as such. RBS plc exited the APS effective 18 October 2012. The agreements are not impacted by RBS plc’s exit from the APS. As at 30 June 2014, all derivative exposures have been exited and there has been no change to the financial guarantee contract.

 

 

7. Credit protection arrangements (continued) 

With effect from 1 January 2013, the Managing Board of RBS Holdings N.V. agreed with RBS plc to reduce the number of covered assets included in the agreements as a result of the progress made with the transfers to RBS plc during 2011 and 2012. Unamortised fees relating to the assets previously covered will be reimbursed by RBS plc. The assets covered under the agreement at 30 June 2014 was €1.0 billion (31 December 2013 - €1.0 billion), with an average remaining maturity of three years. At 30 June 2014 the carrying value of the prepaid fee for the financial guarantee contract was €15 million (31 December 2013 - €20 million).

 

 

Discontinued operations in 2014 and 2013 relate to the remaining Dutch State acquired businesses held within RBS Holdings N.V.

 

 

8. Discontinued operations and assets and liabilities of disposal groups (continued) 

 

 

Notes:

 

As at 30 June 2014, the assets and liabilities of disposal groups included balances of a number of businesses in India and Thailand, loan portfolios in the Latin American region and remaining Private Equity portfolios, as well as the remaining Dutch State acquired businesses.

 

None of the businesses transferring within the RBS Group meet the criteria of IFRS 5 to be classified as discontinued operations.

 

As at 31 December 2013, the assets and liabilities of disposal groups related mainly to the Thai business; other assets and liabilities related to certain loan portfolios in the Latin American region, remaining Private Equity portfolios within the Non-Core segment, and the remaining Dutch State acquired businesses.

 

 

9. Financial instruments

 

Classification

The following tables analyse the RBSH Group’s financial assets and liabilities in accordance with the categories of financial instruments in IAS 39 with assets and liabilities outside the scope of IAS 39 shown separately.

 

 

 

 

9. Financial instruments (continued) 

 

Notes: