Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Barclays Capital Global Financial Services Conference 2011
31 slides from Natwest's conference presentation, Sep 12, 2011
Slide 1: Barclays Capital Financial Services Conference
Barclays Capital Financial Services Conference Bruce Van Saun, Group Finance Director The Royal Bank of Scotland Group 12th September 2011
Slide 2: Important information
Important information 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’, ‘should’, ‘
Slide 3: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 4: Our vision
Our vision To be among the world’s most admired, valuable and stable universal banks, powered by market-leading businesses in large customer-driven markets 1. UK anchor 2.Global opportunities 3. Extending our Core through disciplined, consistent execution Sustain an attractive and highly Focus on se
Slide 5: Our strategy
Our strategy Core Bank Non-Core Bank The focus for sustainable value creation The primary driver of risk reduction Built around customer-driven franchises Businesses that do not meet our Strategic Tests, including both stressed and non-stressed Comprehensive business restructuring assets Sub
Slide 6: Core Bank 2011 – A balanced business mix
Core Bank 2011 – A balanced business mix A balanced portfolio of businesses ...with good geographic coverage H111 revenues1 by division H111 operating profit1,2 by division H111 revenues by geography Ulster 4% US R&C 5% RoW 5% US R&C 12% GTS 9% Wealth 4% US 21% GTS 9% GBM GBM R&C3 32% R&C3 37% 68% U
Slide 7: Strong divisional connectivity with more potential
Strong divisional connectivity with more potential £5bn UK Corporate franchise revenues GBM client and product cross-sell 2010 total income from UK Corporate customers £bn 2010 GBM cross-sell income £bn 0.9 2.4 0.3 0.1 c5.0 0.7 3.9 0.3 1.2 UK C GTS1 GBM1 Other1 Group GBM GTS funding Group Total repo
Slide 8: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 9: Reducing risk – Non-Core run-down continues
Reducing risk – Non-Core run-down continues Continued progress in reducing Non-Core funded assets £bn Funded assets Un-drawn commitments 85 36 Target FY11-FY13 145 21 258 17 15 201 138 83-93 113 96 8 30-40 2008 2009 2010 H1 FY 1 2012 2013 2011 2011 Funded assets down 56% from FY08 reflecting: – £6
Slide 10: Reducing risk – Non-Core market risk lowered
Reducing risk – Non-Core market risk lowered Exotic Credit Book daily P&L moves1 £m 60 40 20 0 -20 -40 Non-Core P&L volatility Significant progress in reducing -60 muted vs the market during exotic trading risk and volatility Eurozone crisis and vs 2009 Majority of market risk associated ITRAXX2
Slide 11: Reducing risk - GBM market risk lowered
Reducing risk - GBM market risk lowered Then: H2 2008 GBM trading revenue daily P&L Now: 6 month1 GBM trading revenue daily P&L Significantly reduced VaR2 Primary focus: macro, financing & risk management Min Max Revenues, £bn Avg: 2.4 1.9 Q211 £79m 1.6 1.6 1.6 Banking Equities Q410 £154m Currencies
Slide 12: Reducing risk – Credit concentrations reduced
Reducing risk – Credit concentrations reduced Sovereign 1 Sector 2 Single name concentrations 3 Peripheral Euro-zone Sovereign Top industry sectors by Corporate SNC exposures over risk exposures, net AFS banking book loans and advances appetite £m £bn # cases 0 20 40 60 955 Individuals - Mortgages 1
Slide 13: Reducing risk - Funding position strengthened
Reducing risk - Funding position strengthened Funding Profile is Improving Actively terming out funding £bn % Wholesale Funding >1yr1 250 150% 45% 50% 56% 140% £952bn 200 £808bn 130% £740bn 150 120% 100 110% 50 48% 52% 58% 100% 0 90% FY08 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 FY08 FY09 H
Slide 14: Reducing risk - Balance sheet metrics increasingly strong
Reducing risk - Balance sheet metrics increasingly strong RBS capital ratios strong Leverage Ratios “in the pack” Comparative Core Tier 1 Capital Ratios1, Tier 1 Leverage Ratios6 vs Peer averages % % 12 APS benefit 8 11.1 Ex. APS 1.3 6 8 4 7.7 10.9 10.0 9.4 9.8 9.7 5.6 5.7 4 2 4.4 3.4 4.0 0 0 RBS Gr
Slide 15: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 16: Q2 11 performance review
Q2 11 performance review Core Business: Q211 Q210 1 Operating profit £1.7bn £1.6bn +6% driven by UK Retail performance and Insurance turn-around 1,2 Return on Equity 12% 12% Momentum in UK Retail offset by subdued GBM R&C NIM 3.22% 3.11% +11bps due to higher asset margins, offsetting funding & liqui
Slide 17: Good progress vs 2013 targets
Good progress vs 2013 targets Group – Key performance indicators Worst point Q2 10 Actual Q2 11 Actual 2013 Target 1 Loan : deposit ratio (net of provisions) 154% 128% 114% c100% 2 3 Short-term wholesale funding £297bn £163bn £148bn <£125bn 4 3 Liquidity portfolio £90bn £137bn £155bn c£150bn 5 6 Lev
Slide 18: Core Retail & Commercial Margin stable
Core Retail & Commercial Margin stable Strong and stable absolute & risk-adjusted R&C margin bps 1 350 321 311 320 321 322 301 300 250 200 150 100 Q110 Q210 Q310 Q410 Q111 Q211 R&C represents 87% of Group NII Asset and Liability margins broadly stable Balance sheet remains asset-sensitive 1 Q1
Slide 19: Impairment trends stable/improving
Impairment trends stable/improving Impairments ex Ireland down 51% Group coverage levels continue to increase £bn Group impairments ex Ireland as % of L&A1 £bn Ireland impairments as % of L&A 1 Provision % of NPLs2 10 Group impairments ex Ireland 30 49.0% 50% Ireland impairments 47.0% 47.0% 47.0% 9.
Slide 20: Cost reduction programme delivering ahead of expectations
Cost reduction programme delivering ahead of expectations Lower cost of programme implementation…. …with greater annualised cost saving Evolution of 5 year cost reduction programme spend Evolution of 2011 annualised cost saving expectations (18%) 3.9 +12% 3.5 3.2 3.3 2.7 2.8 2.5 Original Strategic 2
Slide 21: Strong base for medium-term RoE improvement
Strong base for medium-term RoE improvement R&C continues to move toward 15%+ RoE potential Leaders: H111 Divisional RoEs GTS – New Management in place, franchise GTS 29% gaining traction UK Retail – Strong financial momentum, UK Retail 27% excellent customer franchise Wealth – Executing strat
Slide 22: Robust CT1 and TNAV trends despite rapid Non-Core reduction
Robust CT1 and TNAV trends despite rapid Non-Core reduction Non-Core reduction ahead of plan Core Tier One improved1 Funded assets, £bn Core Tier 1 ratio, % +60bps (56%) 11.1% 10.5% 10.7% 258 113 96 FY08 H111 FY11 Target Q210 Q410 Q211 TNAV maintained despite significant one-offs Both CT1 ratio and
Slide 23: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 24: External challenges - Economic back-drop
External challenges - Economic back-drop Recovery from financial crises is typically slow Developed economies remain stuck in the slow lane UK GDP levels during recessions and recoveries Annual GDP growth in selected economies 2005-2010 (%y/y) 101 15% (index, start of the recession = 100) 100 10% 99
Slide 25: External challenges – Regulatory changes
External challenges – Regulatory changes 2011-2018 regulatory timeline RWAs Capital CRD 3 – 31/12/11 CRD 4 – 01/01/13 CT1 requirements Removal of Phase-in of measures Impact: £25-30bn Impact: £63-70bn1 securitisation regarding EL, pension deficit, 9.5% + UK Finish? deducts DTA and AFS reserves 2011
Slide 26: External challenges - Impact and response
External challenges - Impact and response External factor RBS / Industry impact RBS response Weak economic Lower loan growth Improve cross-sell and drive even recovery Lower customer activity greater efficiency Interest Rates Absence of liability Optimise funding and deposit structure “lower for lon
Slide 27: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 28: ICB - Initial thoughts
ICB - Initial thoughts Areas for discussion: Summary thoughts on Final Report Thoughts on Ring-fencing proposal — Potential implications — Potential costs — Range of potential outcomes Process and timetable going forward Any other implications 21
Slide 29: Agenda
Agenda RBSG Vision & Strategy Reducing risk: Non-Core, Markets, Credit, Funding Financial performance, progress and delivery External challenges ICB - Initial thoughts Summary and conclusions
Slide 30: Summary & conclusions
Summary & conclusions Macro uncertainties remain: — Subdued economic and interest rate outlook — Euro-zone concerns persevere — Clients remain risk-averse, outlook cautious — Irish economy showing signs of stabilisation But regulatory path becoming clearer: — ICB proposals announced today — Base
Slide 31: Questions?
Questions?
The Royal Bank of Scotland Group — Barclays Capital Global Financial Services Conference 2011 on 6ix