Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Bank of America Merrill Lynch Banking & Insurance CEO Conference 2011
28 slides from Natwest's conference presentation, Oct 4, 2011
Slide 1: RBS - Where have we got to, and looking ahead
RBS - Where have we got to, and looking ahead Stephen Hester, Group Chief Executive Officer Bank of America Merrill Lynch Banking & Insurance CEO Conference 4th October 2011 04/10/2011 1
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 for today
Agenda for today Strategic plan Progress to date Challenges and RBS response Implications & conclusions
Slide 4: Restructuring plan is based around three interlocking objectives
Restructuring plan is based around three interlocking objectives Key elements of the Strategic Plan 1 Safety & security of the bank Shareholder value creation 3 2 Serving customers well 1
Slide 5: And implemented through our Core/Non-Core approach
And implemented through our Core/Non-Core approach 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 Comprehensi
Slide 6: Our business building blocks
Our business building blocks 1. UK anchor 2.Global opportunities 3. Extending our Core through disciplined, consistent execution Sustain an attractive and Focus on select global Prioritise risk adjusted returns defensible customer driven opportunities that: over growth: franchise in the UK: Provid
Slide 7: RBS Core Business 2011
RBS Core Business 2011 Business portfolio 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% UK Corporate 63% Wealth 5% 20% UK 64% Europe 10%
Slide 8: We have been clear on what was important and how we aimed to deliver
We have been clear on what was important and how we aimed to deliver Group – Key performance indicators Worst point Q211 2013 Target Balance sheet & risk: 1 Loan : deposit ratio (net of provisions) 154% 114% c100% 3 2 Short-term wholesale funding £297bn £148bn <£125bn 4 3 Liquidity portfolio £90bn £
Slide 9: Agenda for today
Agenda for today Strategic plan Progress to date Challenges and RBS response Implications & conclusions
Slide 10: Progress to date - Safety and security
Progress to date - Safety and security Reduction in Non-Core Reduction in concentration risk Non-Core TPA progression, £bn Corporate SNC exposures over risk appetite, £bn Funded assets Undrawn commitments Down 33% 85 Down £145bn 36 49 21 17 39 258 33 201 138 113 2008 2009 2010 H1 2011 Jun 2010 Dec 2
Slide 11: Progress to date - Serving customers well in large markets
Progress to date - Serving customers well in large markets Revenues Deposits Division Current market Position FY10, £bn H111, £bn UK Retail 5.4 96 Top 2 UK Corporate 3.9 100 Market leader Wealth 1.1 37 UK Market leader GTS 2.6 73 #6 Globally Ulster Bank 1.0 24 #1 Northern Ireland, Top 3 Ireland US R
Slide 12: Progress to date – Serving customer well in large markets
Progress to date – Serving customer well in large markets Best in class UK Retail customer service Ulster Retail gaining customers Customer Satisfaction1, % Ulster Retail customers lost and new to the brand, ‘000 Best in class 28 29 27 16 16 17 62 67 66 68 60 61 June 10 March 11 June 11 June 10 Marc
Slide 13: Progress towards Shareholder value creation
Progress towards Shareholder value creation Rebuilding R&C NIM Actively 1 managing down the cost base R&C NIM, % Group Costs, £bn bps 350 1 Core Group 322 10 306 300 284 9 8.7 8.5 250 8.0 (8%) 8 200 7 150 6 100 5 H109 H110 H111 H109 H110 H111 Impairments ex Ireland down 51% Steady progress in R&C pr
Slide 14: Progress towards Shareholder value creation
Progress towards Shareholder value creation Retail & Commercial: increasing returns ROE progression, FY09-H110, % 17.0 14.3 Repricing of asset portfolio has driven higher NIM 8.5 Higher returns despite losses in Ulster 10.5 12.2 Strong cost control driving efficiency 6.5 Continued platform i
Slide 15: Progress towards Shareholder value creation
Progress towards Shareholder value creation 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 TNAV remain robu
Slide 16: Route map for medium term RoE improvement
Route map for medium term RoE improvement H1 11 Divisional RoEs GTS 29% Resilient R&C revenues UK Retail 27% Ongoing cost saving programme Core impairments still above historical average Wealth 18% Divisional improvement plan enacted; gaining UK Corporate 14% traction — Irish results targete
Slide 17: Agenda for today
Agenda for today Strategic plan Progress to date Challenges and RBS response Implications & conclusions
Slide 18: Economic and Market challenges
Economic and Market challenges Challenge RBS Impact Slower economic recovery Lower R&C customer activity and balance — Interest rates ‘lower for longer’ sheet growth — Lower investment / customer activity NIM pressures from liabilities — Slower rebalancing of economies Heightened focus on co
Slide 19: Regulatory challenges
Regulatory challenges Challenge RBS Impact Cushioned by Non-Core run-down Basel III capital requirements Higher capital requirement — Higher RWAs Significant period of transition — Changes to capital deductions Re-examine optimal business mix RoE impact Basel III Liquidity requirements
Slide 20: RBS Response - Continued focus on costs
RBS Response - Continued focus on costs 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 2010 expectation Cu
Slide 21: RBS Response - Continued focus on balance sheet
RBS Response - Continued focus on balance sheet RBS capital ratios strong Leverage Ratios “in the pack” Comparative Core Tier 1 Capital Ratios1, Tier 1 Leverage Ratios6 vs Peer averages % % 12 11.1 APS benefit 8 1.3 Ex. APS 6 8 4 7.7 10.9 10.0 9.8 9.7 5.6 5.7 4 2 4.4 3.4 4.0 0 0 RBS Group RBS Group
Slide 22: RBS Response – Continue to reduce usage of short-term wholesale funding
RBS Response – Continue to reduce usage of short-term wholesale funding Short-term wholesale funding1 halved since 2008 Non-Core reduction lessens market funding requirement now stands below liquidity pool of £155bn £bn Short-term wholesale funding1 Liquidity pool £bn Non-Core Run-down2 Term Debt Ma
Slide 23: RBS Response - Manage Eurozone exposure
RBS Response - Manage Eurozone exposure Sovereign Exposure1 Lending Exposure Modest peripheral government bond Well-spread loan exposures - RoI exposure predominantly a domestic balance sheet % of Gross L&A Belgium 770 Belgium 2,366 0.4% France 5,503 7,389 Core France 1.3% Netherlands 5,323 Netherla
Slide 24: The ICB - initial thoughts
The ICB - initial thoughts First impressions At tough end of market expectations Lead time and some ring-fence flexibility is helpful Drives an extension of the Group’s existing restructuring plan Positives Negatives Will increase funding costs and capital need especially outside ring-fence
Slide 25: Agenda for today
Agenda for today Strategic plan Progress to date Challenges and RBS response Implications & Conclusions
Slide 26: Implications
Implications Balance sheet targets remain broadly appropriate — Reaffirm commitment to prudent funding position — Further reduction in Unsecured Wholesale Funding — Continued commitment to de-risking balance sheet via Non-Core — Re-examine optimal balance sheet size Reiterate continued focus on
Slide 27: Conclusions
Conclusions Make the Bank safe & sound Strategy remains Return to value creation, positive economic profit Focus on franchises and customers Balance sheet, funding, liquidity metrics strong and now ‘in the pack’ Good progress to Non-Core reduction ahead of schedule whilst building CT1 and
Slide 28: Questions?
Questions? 04/10/2011 28