All right. Good morning ladies and gentlemen. Let's start. Welcome to our half year results. We have a small attributable loss in the half year, but I think essentially we are breakeven at the bottom line. But we have had further improvements in our capital position, both achieved and expected now with the virtual -- near exit from Citizens, with the latest sale this week. There is a recurring theme of good profits from our operating businesses, being overshadowed by conduct charges, and restructuring we have taken [indiscernible] in the half and I will say something briefly, if I may, about conduct charges. They are now north of £10 billion with more to come in this bank. And the industry as a whole, and this bank, have got frankly a poor track record in predicting this. We have consistently undercalled [ph] they exploded, I think, after LIBOR, and arguably the flow of money from banks to public treasuries has been very helpful in welcoming those treasuries. We have [indiscernible] as well as we can and currently believe that a forthcoming settlement on asset-backed securities in the U.S. is by some distance, likely to be, the most material of them. Partly because it has been -- not because it has been material in many other banks. And that has been the case for a couple of years. So we have a lot of issues, a lot of disclosures, but the asset-backed litigation issue looks like it could be the most significant. But the real business of running a bank that can deliver good sustainable returns from doing the right things with its customers, and focused in areas of competitive strength. After all, that's what we are really about over any period of time. I think we are well on the way to getting there, as you will hear shortly from Ross and Ewen. And in that context, we welcome frankly with some relief, the U.K. Government's decision to look to sell shares at their convenience, and we have always believed that this would be very much in the interest of this bank for the government to begin its exit process. So let me now, with those remarks, hand over to Ross. Ross, if I may say so, has been a fantastic addition to the team here at RBS, and I think is building an ever more effective team amongst its top people, and he is in charge of today's line up. So I will hand over.

Thank you very much Philip, and good morning to everyone. Today, I will give you an overview of our progress and then Ewen will take you through a lot more detail from the accounts. As I said at the top of the year that, we are determined to go through further and faster on the strategy, and today you will see that in our results. While we still have a lot of substantial work to do, to rebuild this bank and to make it the bank that we want it to be, I do feel that we are making good progress against the strategy and the targets that we have set ourselves. The bank we are building is delivering better returns, and the businesses we are leaving behind are running down at a lot faster pace than we had probably anticipated. We are also working quickly and prudently through the outstanding conduct and litigation issues that Philip talked about, but we all know, that the remainding drag on our resources is both financial and on our people. You will see from the results that we are posting today, this is the bank moving forward on its plan. It’s a plan to build a stronger, simpler and fairer bank for both customers and shareholders, and we are focusing squarely on our core strengths here in the U.K. and in the Republic of Ireland. We are determined to win our customer's trust and build a bank that delivers sustainable returns from a lower risk profile. Sot let's get into the results; today, you will see that we are going further and faster on delivering our plan. Our capital ratio is up, our costs are down, returns in the Go-forward bank are improving, restructuring is continuing at a pace and we are reducing…

Thanks Ross. So in phase 2 of our plan, there is three things we are currently focused no; building value in the go forward bank through improving customer service, enhancing growth and increasing returns. Accelerating the rundown of the Exit Bank, while still protecting value, and progressively working through a list of other issues. I think across all three fronts, we have made steady progress during Q2. You have seen the slide before at our full year results, hits the smoke between what we describe as our Go-Forward bank and our Exit Bank. Our Go-Forward bank has a really strong set of customer franchises positioned across the spectrum. Ross talked about earlier, the continued progress we are making towards being the number one for customer service, trust and advocacy, financially, we are also making good progress during the quarter. On returns, they are continuing to improve from already healthy levels. 14% normalized return on equity for Q1, and that's after backing out about £200 million for IFRS volatility gains and prior to conduct and litigation charges; and that's up from a like-for-like 13% return in Q1. On growth, the annualized first half growth across U.K. Personal and Business Banking and Commercial was 2% on an annualized basis. So we are quietly pleased with this value dynamic. Improving customer service, solid growth and volumes and increasing returns. Net interest income was up slightly on the last quarter. This reflected some growth in average interest earning assets up to £1 billion in the quarter, offsetting a modest decline in the net interest margin. The total net interest margin was down three basis points in the quarter, versus a six basis point decline in Q1. This was primarily due to a continuing switch from standard variable rate to fixed rate mortgages, and higher…

Thanks very much Ewen. I just wanted to close by revisiting the slide that I talked to you about in February of this year. You see from the results that we are posting today, this is a bank moving forward on its plan. It’s a plan to build a stronger, simpler and fairer bank for both customers and for shareholders. We are focusing squarely on our core strength here in the U.K., and in the Republic of Ireland. We are determined to win our customer's trust to build a strong bank that delivers attractive, balanced and sustainable returns from a lower risk profile. This is a bank that is delivering on its plan, and readying itself for the future. And with that, we are open for questions.

Thank you very much. Its Tom Rayner from Exane BNP Paribas. I might have three actually, the first one on the central [indiscernible], and Ewen I think you said Q1 is good an assumption as any, we presume that revenue was zero on a sort of an ongoing basis. Clearly, it’s a lot higher than that in Q2. So I was just wondering if you could just reiterate that as your best guidance for that line? Second question, just on the distribution sort of not until the first quarter 2017, does that rule out the announcement of a dividend in 2016 to be paid in Q1, or is that being too precise? I am interested in what should the caveat, you think, are the most important? Is it the passing the [0:43:33] litigation, because that's what it sounds as if it might be the reason you're pushing out that guidance? And then just finally, the work you're doing so far in IFRS 9, I wondered if you could give us any feel for how material we think that issue might be for yourselves and the industry? Thank you.

On the central items, look I think the answer is, the best guidance is zero. Of that £300 million odd that I think is in the Go-Forward bank in Q2, there is over £200 million of IFRS volatility gains for example. So when I mentioned that normalized return of 14%, I'd already backed out a couple of percent of excess return for that. On distributions, I think you're trying to be too precise on that, in terms of -- it sort of links into the caveat's question. So if you think about the things that we need to demonstrate, I think its right that we need to demonstrate sustained profitability at the moment. We think we have got a very Go-Forward bank, and then every quarter we are continuing to report very substantive restructuring charges and substantive conduct and litigation charges. So we have to travel through a period, which we think will be through over that period of seeing the bulk of our restructuring charges through to P&L. Realistically, the bulk of that should be over the next 12 months or so. On conduct and litigation, I don't think we view that probably as the -- it’s the biggest hurdle. The ones I mentioned. We will be disappointed I think if we were sitting here in a year's time, and hadn't managed to bottom out a lot of those conduct and litigation issues, particularly, U.S. RMBS. I think you also have to sort of bear in mind, the annual stress testing cycle, which is effectively a 11-month lookback in terms of the performance and capital resilience of the bank. So stress test results this year will be out in November, effectively looking back to the end of 2014. So we think we need to go through this year's stress test round, another stress test round, which means we should be able to start to engage with the PRA I think in late 2016. So when I talked about Q1 2017, I was talking about dividend or buybacks in Q1 2017.

So it was just on IFRS 9, I don't know if its too early?

On IFRS 9, it is too early at this point. I think, we do expect there to be a one-off increase in balance sheet provisions at the time of the introduction of IFRS 9. Its too early for us to give you a decent quantification of that. We also don't know yet the impact on capital, because there the expected loss charge and what the offset is, if provisions increase, does the expected loss charge then go away, as a capital deduct. But as and when, we are able to talk about that and give you some guidance, we will.

Thank you very much.

Yes sir. Good morning. Martin Leitgeb on Goldman. Just a follow-up on litigation and one on legacy IP. With regards to litigation in terms of how you think about the outstanding litigation issues, both in terms of potential quantum and timing, has there been any material change in how you think about these over the last two quarters? And secondly, on the rundown of the legacy IB, you are now at £20 billion, that is a target of £25 billion. And if I understand your comments right with regards to the U.S. loan sales, you are essentially now already close to £25 billion, once those close. How do we think about this rundown into 2015 and 2016? Will this pace, this very fast pace you had in the first half 2015 be maintained, and we have a relatively small balance left with the end of 2016, which is potentially derivatives? Or how should we best think about this? Thank you.

Maybe I can take the second one, and Ross you can --?

On the rundown of CIB capital resolution, you're right. Its not the full 20, because there was a transfer out of CIB of about £2 billion of IWAs into commercial. But in terms of that £25 billion reduction target, I think you should have seen that we are relatively comfortable with achieving it this year. I'd be disappointed if we only [ph] achieved it. In terms of the rundown of capital resolution, I think overall, it would be our expectation I think that we would have made substantive progress by the end of 2016. Not just similar to RCR, there is assets in there that are quite long tailed in nature. So it will get down at some point to a stub of assets that will take a long period of time to manage out. But I'd be disappointed if we hadn't got through the bulk of the rundown of the next two years. I think its fair to say that the team worked incredibly well on getting the assets out, at a pace faster than we thought. We have seen that in the first half. I think we are about £19 billion RWAs down against the target of £25 billion. So markets being okay. We will exceed that this year. So we have got good markets for selling into and we are taking advantage of it. On the litigation, set out this year with sort of three things in mind, [indiscernible] conduct and litigation. One was around tidying up the FX issues that we were dealing with. Second one was the GIG, which has been a plague on reputation. That's what the FCA is still at the moment, and still a bit of time to go through there, but that's one we would like to have, at least the answer to this here. And the third one was RMBS. We have been watching all other cases come through. Our time is coming. Just looking at -- but we still just don't have an indication of what those numbers are, until we get into conversations. But again, would like to have those conversations if its appropriate starting this year. So we can give a much better guidance to yourselves, to the rest of the market.

I think specifically in relation to your question, we haven't changed our provisions now for some time. But our expectation of costs are higher than the provision. We just don't have a basis to identify a different number.

Correct.

Thank you.

Morning. Its Andrew Coombs from Citi. A couple of number related questions, then one bigger picture question. First number of questions on the commercial bank; the other non-NII has jumped quite a bit quarter-on-quarter £69 million to £104 million; and in the text you referenced gains on equity disposals as the reason for that. How could you elaborate and just how sustainable that is? My second question would be on the £9 billion of RWAs that have been transferred from CIB to the Commercial Bank. You talked about £400 million of attached revenues, what's the attached costs and impairments to that? I am trying to get an idea if that's the drag on the 13% Go-Forward CPB, or benefit or some idea. And then a final question, border question, there is obviously a lot of focus on litigation, and particularly the U.S. MBS case outstanding. How much of a headwind do you think the uncertainty is around that litigation, as to starting the timeframe of the government exit? Do you think you need to be further along in the discussions? Do you have a better idea of the quantum of that, before you think you could proceed with that government placing?

So on the first question, I think you should have seen that equity disposal rates went off, and therefore not sustainable. On the costs and returns out of the £400 million of incremental revenues, we are still in the process of working through those numbers at the moment; because as you have seen, one of the reasons we are not able to give you and we will work towards over the next couple of quarters, giving you a much better understanding of the full cost breakdown between capital resolution and CIB going forward. But because we are in the middle of that restructuring at the moment, we can't give you precise estimates of what the costs are against that £400 million.

Just on the headwinds, particularly around litigation and contact issues and the government sale. Its in the hands of the governments to take their timing on when they do the sale. I think those parties that I suspect they will be talking to, will have their own views on what these costs will be and will have to factor them into their own pricing numbers. We have just been as clear as we possibly can with the knowns that we know, to make sure that everybody is aware of those numbers and you've got pretty full [indiscernible] fuller disclosure. This time over, we found that there was quite a bit of confusion when we talked about RMBS, what did that mean? And people sort of went to Freddie and Fannie and that was it -- but there are some other cases that we knew about, but we just wanted everybody to know that. So I think its in the hands of parties that the government talks to.

Our disclosures are targeted of having a fair orderly market, in which trading can sensibly take place, if there is an answer to your general question just related to the --

Hi morning everybody. Its Raul from JP Morgan Cazenove. If I could have two questions here Ross please. First one is, a general one on your mortgage growth strategy; because I get the point that the bank is hiring a lot of mortgage advisors, an area where it hasn't been focused in the past, and there clearly needs to be more growth going forward. But if you look at the numbers and the margin on this product area, in the last couple of quarters, your balances have gone up by roughly £2 billion, but your income is broadly flat, slyly, and if you look year-on-year, clearly, you make less income now than you use to make in the previous quarter of last year, on a higher balance basis. So we are not quite 2007 yet, but the margin on mortgages is falling very rapidly, and do you think it still makes sense for the bank to continue to grow this area, especially if you can maybe talk about the ROE as how you look at it, would be interesting? And then the second question is more Williams and Glynn, if you can talk to us about what's going well there, what isn't going well, and the dependency on any competition, sort of inquiry, because obviously that seems to be an area of focus as well?

Well first off, we do like the mortgage-backed. I mean, we have been quite weak in this market. We have been growing over a number of years, but still quite weak for the size of the bank we are and for the customer base we have. We believe that with the right capability and service delivery, we can grow this safely. We are not going to be growing this market like we did in the Irish market, back before we collapsed, and there is no way that's going to happen. So within the risk tolerance that Les and his team are very well aware of and have to stay within that. I think you've seen, if we hadn't started growing the balances, the profitability of this business would have come down any way, because the margins are coming down, as people from standard variable across to fixed. Of any banks, we have probably got the lowest now standard variable book, as a percentage of the total book. There are still some banks with 50% of their book on standard variable, which to me says, this is a great hunting ground for RBS to go after, because they are paying too much. And that's what we have been concentrating on with our customer base, actually identifying customers that actually have a standard variable rate, that we can approach to do a better deal for them. What's key in these markets, costs have to come down in delivering mortgages. That's another thing we are working on, is our service delivery and how we operate in that market. So I think we are seeing more volume. Yes, its going to be lower margin, because people are transferring from standard to fixed, that's going to continue.

Yeah, I think we are a long-long way from 2007, in terms of margins. I mean, the returns we are getting on the front book are still very attractive and are still --

If you look at mortgage margin and ROE then --

ROEs we are getting on the front book. Its still very attractive and we are still putting the business on.

Its very good ROE. And countries around the world that have much than the margin, are still making good ROEs on, but it does come back to efficiency. The other problem in this market, is we just didn't have enough people qualified to do it, and it had never been in the DNA of RBS or even NatWest, because we didn't come from a building society. Now you're seeing us getting very good at this, and I think people are enjoying the experience. They are having, as it seems, this [indiscernible]. Williams and Glynn, this is a big task. I mean, I don't think anybody has ever taken a bank from within inside a bank and recreated -- it has got thousand plus systems and applications, having to take out a bank and stand it up. So no one said this was going to be easy, and its not -- I mean, if you set out to have a look at this, you wouldn't do this to yourself on purpose. So we are doing it. As Ewen said, we don't have options. It is a tough task. We have got 4000 plus staff, just working on taking it out. It will be tight, but our view is we will get it out by the end of next year, ready for an IPO. We have done a pretty good job on this to have got a banking license, and that's something that we are working on, and it needs to be an organization that can show itself to be sustainable as it comes out and over the long term. We are working very hard on it. Well its going well. The entire organization is focused on it. We'd say probably, even 12-18 months ago, that was not the case. It is one of our top priorities, because without this coming out, we are restricted at what we can do under the RBS brand and we are restricted with what we can do with the flexibility of this organization. So [indiscernible].

And the CMA interest in that? I mean, is that something you consider a risk factor?

Look, we have heard good conversation with CMA. We have -- financials, we have actually said to them, look, take these numbers, but there is more coming, as we get more acquainted with this business as Ewen said. As you look at it, there is a unit inside the bank that's highly profitable. But the issue for us is to put the cost structure we have against it, that's what we have been building, and those numbers still changed. So that's why we are not clearing them out to you today, because we are just not convinced that they are the right numbers yet. It’s a pretty complex business. I mean, we are standing everything up, treasury, systems, bonds, absolutely everything to get a license.

We have a question on the line from Mr. Joshi from Nomura, what are your views on the buy-to-let market? Do you think its contractive and would you look to increase market share? If yes, to what level?

Well I think the buy to let market is an attractive market for us done well and done within the risk parameters again. We have recently examined this market and what type of business we want. And again, the risk parameters of this business, risk appetite statements are quite clear about what we'd want and what we don't want. I think this will actually become a more important market in the mortgage area over the next, probably five years. In the sense, as house prices come up, some houses get out of the reach of many people who want to live in certain areas, and the investors need to come into those markets. I also see, as people take the -- choose to take some money out of their pension funds, maybe well be investing in this area as well. So I do think that we do need to be there, but we do need to stay within good risk perimeters and not blow ourselves up on this market. But I think it’s a good attractive market. Margins are okay. Returns are pretty good and stay within your risk parameters. Don't get tempted to go outside them.

Good morning. Ian Gordon from Investec. Could I just come back to the capital return story? It feels like, at the past quarter you spent a lot of time with investors reiterating the guidance you gave one quarter ago, namely that you expected your CET-1 to get to 13% in 2016, and with respect to [indiscernible] pretty unlikely then, and given the progress you have made in the last 48 hours, it feels exceedingly unlikely now, even after taking your account off the quarterly commentary you've given us in note 16 on conduct. So just in case I missed it, have you dropped that guidance in terms of time scale or number, especially in the light of the very helpful performance disclosures you have given us, in terms of A, the focus you've made, and B, the mathematical effect of what you plan to do in the next five months with TFG?

I don't think we have adjusted the target. We always said that our target was to get to a 13% Tier-1 ratio. We expect to get there during 2016 and we expect to get there after we set all conduct and delegation, and pay the debts. I think you're right, that the dynamic around Citizens is probably different from that original guidance. But in terms of the real guidance, I think the real guidance today is, don't expect us to be making a capital distribution until first quarter of 2017. Irrespective of where our core tier-1 ratio is during 2016. And why is that, I think the principal rate for us would be demonstrating good stress test results at the back end of next year, as being the key determiner of the viability and your return to capital distributions. I mean, you would have seen, at the end of last year, we were a stress bank. We think we have moved a lot of stress, but we still have progress to do.

Its Claire Kane from Royal Bank of Canada. I have two questions, on is a follow-up please on the mortgage pricing? So could you please talk us through the slowdown you have had in the margin compression? Perhaps tell us how, if the churn of the SBR book has slowed, or if you are seeing some bit of pricing improve slightly from last quarter? And then my second question, perhaps a bit early, but I just wondered if you had any comments yet on the new Pillar 2 framework that came out yesterday from the PRA, and how in general you are hoping to manage down your Pillar 2 capital buffer requirements?

Just on your first question, certainly in the first quarter, there was acceleration in fixed, which created quite a drag on our NIM. Looking at Mr. Les Matheson, I have to get a feel for the next quarter, has that thing [indiscernible] better or has it stayed the same? I mean, we have got a smaller notebook of standard variable rates. So the rate of movement for us would be less than I suspect in similar other parties on that one, and I will pass to Ewen on Pillar 2.

I was in board meetings all day, and yesterday even. So I haven't yet caught up on the news, but I am sure within 24 hours, I will have your good answer on that. I think whatever they announced, I would stick with a previous guidance, and when we have run all of our analysis on -- where we think the PRA is going to go, we think the 13% core Tier-1 target gives us appropriate buffers, both above NDA triggers, and where we think Pillar 2A is likely to go for us.

Hi its David Lock from Deutsche. Just a couple on Ulster Bank please. Firstly, when you look at risk weighted assets, your risk weighted asset intensity still is very high versus the rest of the market. I just wonder if you could give any color on whether think that could come down over the coming years, particularly as you roll off that track book? And then secondly, you made a comment about the cost income ratio being too high. Is this strategy about getting it down, is that mainly a cost kind of dynamic, or are you trying to reprice any of the mortgages you have there, or move the track of mortgages on to a higher rate?

On RWA intensity or density, we do think that that will come down over time. I think you have to remember, that we are under PRA-RWA rules, not CBI-RWA rules, and there is a difference, that's why the Irish banks have lower mortgage density relative to us for their RWAs. But the reason why its so high in Ireland is, because of the track on mortgage book. If you look at our U.K./Irish mortgages, the ROA density is still north of 18%. So that will take some time to come down, but it will slowly come down, I think, both as the track book comes down and house prices continue to look great. In Ireland, I think there is very little capacity to actually reprices those mortgages. I think it is mainly a cost reduction story for us.

And that's going to come through us working well with the Ulster Bank team to actually eliminate whatever costs and you know the old saying of -- many restaurants, one back kitchen. And that's what we've claimed to do. We have started to align some of the systems, much better than what we have had. So that we can do some of these things just one -- five times across the organization. That process has started, it will take some time.

Its too costly.

Liz and the team know that. That's what they are working on. They are going to get the costs down. It’s a smaller bank than it was five years ago. The balance sheet is much smaller and it needs to realign itself.

Okay. I think we are coming to the end. There is a question online, why is your performance in U.K. Personal and Unsecured Lending so weak? Both loans and credit card balances are falling? It seems surprising you have positive impairments from both areas? Thanks.

That's a very good question. I will put that into Liz's review next time around. There is certainly pressure on the margin in this business, and there is some parts of this margin we have chosen not to fully participate in. It was surprising in some of the areas here, I think is getting to a point, where we are not going to talk about this on-board. We are just not getting a return on equity. Therefore why put your capital forward? And we are being sensible on those areas. In the credit card side, actually our balances haven't been falling, they have actually been quietly growing, even though we haven't been playing the zero balance transfer, which I think, as you know my views on that, we just need to be growing that business much more sensibly, long term other than short term players. So the credit card business has been okay with growth, but its sending the personal loans that we have chosen to actually not participate parts of that market. We just don't see the returns on it. And again, nice piece of discipline by Liz and the team on there.

Hi, its Joe Dickerson from Jefferies. I have two questions if I may; the first is, as you run off legacy funding, does the benefit from that funding show up in the corporate center? Is that allocated out to the business segments? And then the second is on the FHFA litigation in the U.S. There was a recent case and ruling from Judge Cote in New York, and so I was wondering if your expectation on the FHFA settlement, is that the settlement would be paid gross or net of the securities; because in that case, there was a requirement for the parties to actually buy back the securities, and we see these numbers of like £13 billion in the press, and that seems to be overstate, because that means buying back securities. And it seems as if you have got about $9.1 billion of securities left out of the $32 billion of UPB? Thanks.

So we do philosophically, try and charge everything out to the franchises. So as the benefit of those legacy funding costs come out, that will be allocated to the various franchises. We are trying not to keep any costs at the center, to try and get you through the returns for the businesses. On the FHFA litigation, Judge Cote is probably the most extreme judge of FHFA settlements. Its not our expectation that we are going to have to settle gross. I think when you look at FHFA, there has been plenty of people settled now. I think there is a reasonable range of estimates that exists in the market, as to where those settlement costs have been, relative to the gross exposure. Our views would not be inconsistent with those market fees.

Thanks.

You want a second bite?

Thank you. Tom Rayner again. So to come back to you and your response to Ian's and Gordon's question. Just so completely clear; because we are talking about 2016, obviously Citizens should be fully sold some time around the end of the year. So the pro forma number we are talking about today is over 15%. So what you're saying is that you're thinking about 2016 because of the stress test impact and that its backward-looking nature, not because there is a danger that litigation could be so large in that year, that it knocks the capital ratio back from where it should be, north of 15 to closer to 13. I just wanted to be 100% of what the message is? Thank you.

Well so DES [ph] 1.2 billion. So if you pro forma for Citizens Exit, that's about just under 50 basis points. I think I will be a brave man to estimate what our final litigation and contract costs are. But what I am trying to say is, stick to the 13, because that's the benchmark that we are going to use to return excess capital back to shareholders. We don't want to hold anything more than that. But I am just being transparent and realistic in telling you, we don't expect. If we were to begin that capital distribution back to shareholders until first quarter 2017.

Okay. Any more really important questions? Had a good one. Thank you very much.