Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Investor Day (February 2014)
51 slides from Natwest's investor day presentation, Feb 27, 2014
Slide 1: Building a truly customer centric bank
Building a truly customer centric bank Strategy Outline 27 February 2014
Slide 2: Introduction
Introduction Philip Hampton, Chairman
Slide 3: Agenda
Agenda Strategy Outline Ross McEwan Transforming the Bank – implementation Simon McNamara Go-forward financial profile Nathan Bostock Conclusions Ross McEwan Q&A Philip Hampton
Slide 4: Our vision for a bank that earns your trust
Our vision for a bank that earns your trust Be reliable, consistent and simple to do business with Earn our customers' trust and win more of their business Generate reliable returns, positive organic cash flow and pay an ordinary dividend Our ambition: to be number one for customer service, trust an
Slide 5: Where we are today
Where we are today We have market leading franchises… …but they are vulnerable if we don’t act We have made great progress in …but our cost base and organisational downsizing and risk reduction… model still reflect our past ambition We have been pro-active in refocusing on …but most of our businesse
Slide 6: We must invest in our customer franchises
We must invest in our customer franchises We have market leading franchises… …but they are vulnerable if we don’t act 3 #2 UK Retail current accounts 2 Customers’ expectations are rising and 3 #1 UK Small Business Banking their needs are rapidly evolving 3 #1 UK Wealth Management 2 We make it too co
Slide 7: We must reduce cost and complexity further
We must reduce cost and complexity further We have made great progress in …but our cost base and organisational downsizing and risk reduction… model still reflect our past ambition -54% -18% ~1,600 16 13 740 TPAs, £bn Costs, £bn 2007 2013 2008 2013 Loan : deposit ratio 94% Siloed organisation
Slide 8: We must generate lower risk, strong and sustainable earnings
We must generate lower risk, strong and sustainable earnings We have been pro-active in refocusing on …but most of our businesses continue to where we have a competitive advantage… generate sub-par returns RBS FY 2013 Core Return on Equity by division excluding RCR impact, % We made significant pr
Slide 9: Our key priorities
Our key priorities Organise around our customers Fundamental overhaul of cost base Intelligent deployment of technology Unquestioned capital strength Empower our people 6
Slide 10: Our strategy: UK focused Retail & Commercial bank
Our strategy: UK focused Retail & Commercial bank With Markets and international capabilities to meet our clients’ needs, primarily focusing to support their UK and Western European operations Business mix shift towards the UK… ….with emphasis on Retail & Commercial Illustrative split by total incom
Slide 11: Organised to best serve our customers' needs
Organised to best serve our customers’ needs From 7 Divisions to 3 businesses, each serving specific segments of customers with similar needs Rebalancing from c.70% of our people in “back office” support and control roles to a majority in customer-facing roles, with remuneration of all staff lin
Slide 12: Managed as One Bank
Managed as One Bank Personal & Business Commercial & Private Corporate & Institutional Banking Banking Banking Les Matheson Alison Rose Donald Workman IT & Ops Support & Control Bank-wide service platforms and functions allow us to deliver the whole bank to our customers through their lifecycle and
Slide 13: Best UK bank for Personal & Business customers
Best UK bank for Personal & Business customers Personal & Business Banking combines all customers with retail-like needs: mass retail, affluent and small business owners, enabling a coherent and efficient service proposition Our proposition Our opportunities Differentiated service and extensive mu
Slide 14: We continue to invest in our leading SME franchise
We continue to invest in our leading SME franchise We are the UK bank best able to support business customers throughout their entire lifecycle SME franchise As businesses grow and their needs become more complex, our proposition changes with them Personal & Business Banking Commercial & Private B
Slide 15: We will continue to transform Ulster Bank
We will continue to transform Ulster Bank Ulster Gross Third Party Assets, £bn 45 ~(15) ~(10) ~15-20 ~5 Northern Ireland ~10-15 Republic of Ireland FY13 Transferred to RCR Tracker mortgages ‘Future’ Ulster We are committed to providing our Irish customers with a great everyday banking service Ho
Slide 16: Market Leader in Commercial & Private Banking
Market Leader in Commercial & Private Banking Commercial & Private Banking brings together our Commercial franchise with our Private Banking offering, allowing us to better connect Coutts with successful business owners Our proposition Our opportunities Dedicated relationship management Deepen r
Slide 17: Corporate & Institutional: the UK's pre-eminent Corporate Bank
Corporate & Institutional: the UK’s pre-eminent Corporate Bank We are aligning our Markets and international capabilities with our most sophisticated domestic and multinational clients’ needs, primarily focusing to support their UK and Western European operations Our proposition Our opportunities
Slide 18: C&I has deep relationships with large corporates
C&I has deep relationships with large corporates UK Large Corporate Banking Europe Top-Tier Large Corporate Banking 90 60 80 55 RBS 50 70 Bank 2 Bank 2 Important Relationship (%) Important Relationship (%) Bank 3 45 Bank 7 60 40 Bank 1 Bank 1 RBS 35 Bank 6 50 30 Bank 8 40 Bank 3 Bank 7 25 Bank 9 Ban
Slide 19: Next chapter: we are embarking on a multi-year transformation
Next chapter: we are embarking on a multi-year transformation 2014 2015-onwards Immediate actions to improve customer Transformational change focus and cost effectiveness Investment in front-line customer Implement new organisation structure propositions Stop low value add activities Future
Slide 20: How we define our long-term success
How we define our long-term success Service #1 Net Promoter Score for each of our segments Customers Trust #1 trusted bank in the UK Great place to work People Engagement Index ≥ Global Financial Services norm1 Attractive and consistent returns Return on Tangible Equity 12+% Cost:income ratio ~50% I
Slide 21: Agenda
Agenda Strategy Outline Ross McEwan Transforming the Bank – implementation Simon McNamara Go-forward financial profile Nathan Bostock Conclusions Ross McEwan Q&A Philip Hampton
Slide 22: Transforming the Bank
Transforming the Bank Where we are… Where we want to be… Multiple legacy systems running at Systems rationalised and simplified sub-optimal cost Ageing core systems Systems based on a target architecture with improved resilience Operationally complex services, primarily A simple, multi-channel bank
Slide 23: Transforming the Bank (cont'd)
Transforming the Bank (cont’d) Theme Objective Giving our customers greater confidence in us by ensuring safe, RESILIENT secure and resilient foundations for the bank's systems Making it easier and quicker for customers to do business SIMPLER with us by simplifying our business processes and systems
Slide 24: Simplifying our change portfolio
Simplifying our change portfolio Number of Projects Legacy portfolio had 550 programmes -72% aligned to Divisions, many of which were duplicates 550 Target of 150 initiatives, focused solely on the goals of the Bank 247 Same investment levels planned, but now directed at process improvements 1
Slide 25: We are too complex
We are too complex Main UK Retail and 109 Credit card propositions 16 Corporate call centres Manual payments 7.8m processed annually 5 Mortgage platforms Days to produce a 1,133 Live websites 17 mortgage offer Separate AML 7 initiatives underway £90m Postage spend annually Cash and Different retail
Slide 26: Simplifying our technology estate
Simplifying our technology estate By reducing the number of platforms in use we can focus on their resiliency and reduce the overhead in their ongoing management Reducing the Reducing the number of Reducing the number number of platforms core banking systems of payment systems1 -80% -88% >50% fewer
Slide 27: Simplifying our property portfolio
Simplifying our property portfolio Bank-wide London case study Total Number of Properties1 Number of London Offices2 -6% -21% -36% -29% 11 3,100 7 2,900 6 2,800 5 2,300 2013 2014 2015 2016 2013 2013 2014 2014 2015 2015 2016 2016 2013 2014 2015 2016 Total Property (m. sq. ft.)1 London Office (m. sq.
Slide 28: Focusing on fewer, more strategic supplier relationships
Focusing on fewer, more strategic supplier relationships Number of RBS Suppliers (‘000’s) -23% -75% Launched an enhanced key supplier programme 100 where each of our top 50 suppliers will have 77 their own dedicated contact leading their strategic relationship 42 We continue to focus on 26 the v
Slide 29: Building on our mobile and channel offering
Building on our mobile and channel offering Allows more of our customers to do more things when they want, meeting more of their needs at lower cost User Base 2013 2.9m 2009 1.4bn 0.3m 2011 Log-ins since launch The only UK bank to offer Used in almost every app on Windows platform country across the
Slide 30: Using data to better serve our customers
Using data to better serve our customers This involves: This has so far led to: Rationalising where we hold data 400,000 e.g. from 15 data stores down to 2 for New weekly customer conversations all our UK Retail customers driven by data insights Improving the quality of the data 25 million Weekly pe
Slide 31: Safer technology infrastructure
Safer technology infrastructure Three core areas of focus will ensure the safety of our systems, reduce the number of incidents and minimise the impact of them on customers. IT Resilience Batch Transformation Critical Processes Critical infrastructure Batch processing will Critical IT processes will
Slide 32: Delivering across the next five years
Delivering across the next five years 2014 2015 2016 2017 2018 Q1 Q2 Q3 Q4 Stop non-aligned Distribution in-flight/planned Seamless multi-channel service for customers and staff; standard business processes projects Accelerate Simplification aligned in-flight Rationalised technology base; many l
Slide 33: Agenda
Agenda Strategy Outline Ross McEwan Transforming the Bank – implementation Simon McNamara Go-forward financial profile Nathan Bostock Conclusions Ross McEwan Q&A Philip Hampton
Slide 34: High level financial targets
High level financial targets 2013 Medium-term 2 Long-term 3 Return on Negative ~9-11% 12+% Tangible Equity1 Costs £13.3bn ~£8bn ~50% Cost:income ratio4 73% ~55% CT1 ratio5 8.6% ≥12% ≥12% Leverage ratio 3.5% 3.5-4% ≥4% 1 Tangible equity based on CT1 ratio of 12%. 2 Medium-term defined as 2016/17. 3 L
Slide 35: Balance sheet rationalisation nearing successful conclusion
Balance sheet rationalisation nearing successful conclusion Funded assets and Total income, £bn 1,563 >£800bn balance sheet reduction Non-Core reduction: £230bn Core GBM / Markets reduction: £343bn ABN AMRO assets to consortium partners: £246bn 740 Further rationalisation Citizens divestment
Slide 36: Now we must focus on driving sustainable returns
Now we must focus on driving sustainable returns Return on Tangible Equity, % ~1.0% ~9-11%2 ~4.0% ~3.0% ~2.5%1 2013 underlying Non-Core/ Cost reduction Lower Medium- RoTE RCR run-down impairments term target3 RCR run-down ~£2bn medium-term Significant reduction complete cost reductions in Ulst
Slide 37: And address the legacy cost base
And address the legacy cost base Cost : Income ratio, % 70%1 ~ (6)% ~9% 73%1 Down Down £1.3bn £2.6bn 2012 Reduced costs Lower income due 2013 to asset reduction Costs have not fallen in line with asset reduction, leaving us inefficient and resulting in low returns Future returns will be driven b
Slide 38: We will make our cost base fit for purpose
We will make our cost base fit for purpose Operating expenses, £bn 13.3 >£5bn cost reduction ~(3.1) ~(2.2) 0.4 ~8 Long-term cost:income ratio target: ~50% FY13 Disposals Targeted EU resolution Medium- & run-off cost savings fund, bank term target levy1 Our historic scale and complexity has led to
Slide 39: Delivering our strategy will further reduce costs by ~40%
Delivering our strategy will further reduce costs by ~40% Est. cost to Expected Savings Sample initiatives achieve 2, 4 2013 cost Businesses base c.30% c.35% c.15% c.20% £13.3bn Improve customer proposition with Planned cost reductions, £bn focus on simplified service provision Businesses ~£ (0.3)
Slide 40: Restructuring costs explained
Restructuring costs explained Restructuring costs, £bn 2014 2015 2016 2017 Total Restructuring costs Total restructuring costs ~£2bn ~£2bn ~£1bn ~£0.2bn ~£5.2bn o/w incl. in previous guidance1 ~£1bn1 Incremental restructuring costs ~£1bn ~£2bn ~£1bn ~£0.2bn ~£4.2bn o/w cost of achieving asset reduct
Slide 41: Optimising our capital usage
Optimising our capital usage Key elements of capital usage optimisation FLB3 RWAs, £bn 429 ~(50) ~(45) ~(65) ~30 ~300 2013 Markets and RCR run- Disposals Loan growth Future IB reduction down RBS shape Steady state1 RBS – RoE expectations and capital usage per division FLB3 RoE 15+% 15+% Steady state
Slide 42: Building capital strength
Building capital strength FLB3 CT1 ratio, % Key drivers Potential uses of capital Citizens divestment Business and loan growth RCR capital release Buffer for potential future dividends Earnings Volatile items e.g. conduct and ≥12% litigation costs Williams & Glyn divestment De-riskin
Slide 43: Our future profile will be lower risk
Our future profile will be lower risk Basel III RWAs significantly NPLs normalising with RCR Impairments consistently reduced run-down improving FLB3 RWAs, £bn NPLs as % of Gross L&A Impairments as % L&A -13% 9.4% 0.9%2 495 429 0.4-0.6% ~300 2.5-3.5% 2012 2013 Steady 2013 End-2016 2013 2014 to 2016
Slide 44: New reporting structure
New reporting structure From Q2 2014 we will move our reporting to the 3 businesses structure, RCR reported separately No Below-the-Line items – except Own Credit Adjustments, Goodwill and Disposals All costs will be allocated to businesses providing a complete picture of performance Expect
Slide 45: New business structure – indicative financial highlights
New business structure – indicative financial highlights Table below shows indicative financial highlights excluding the impact of RCR. Personal and Commercial and Corporate and FY13, £bn Business Banking Private Banking Institutional Banking Income 6.2 4.7 5.6 Costs (3.5) (2.6) (4.1) Impairments (1
Slide 46: Future RBS profile designed to address ICB
Future RBS profile designed to address ICB Future regulation + Future RBS shape Broad ring-fence 3 Details of ICB are still evolving and are subject to change Our new structure is designed to be flexible and is broadly compliant with the current direction of travel We expect majority of assets
Slide 47: Outlook
Outlook 2014 NIM stable to slightly up Income Expect some underlying ‘core’ loan growth 2014 target c.£1bn reduction1 Costs Medium-term reduction of absolute costs to ~£8bn Restructuring costs of ~£2bn in 2014, of which ~£1bn included Restructuring costs in previous guidance Total increm
Slide 48: Agenda
Agenda Strategy Outline Ross McEwan Transforming the Bank – implementation Simon McNamara Go-forward financial profile Nathan Bostock Conclusions Ross McEwan Q&A Philip Hampton
Slide 49: Our Investment Case
Our Investment Case Market leading businesses in large, attractive markets Attractive returns delivered medium-term Lower risk, sustainable retail & commercial based earnings Robust capital position, model capable of paying dividends Continued transparency; track and report progress 43
Slide 50: Q&A
Q&A
Slide 51: Forward Looking Statements
Forward Looking Statements Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘believes’, ‘shoul
The Royal Bank of Scotland Group — Investor Day (February 2014) on 6ix