Natwest Group Plc · LSE:NWG

Natwest — The Royal Bank of Scotland Group — Q3 2014 Earnings Presentation

23 slides from Natwest's earnings presentation, Oct 31, 2014

  1. Slide 1: Q3 2014 Results

    Q3 2014 Results 31 October 2014

  2. Slide 2: Q314 results highlights

    Q314 results highlights 3rd consecutive quarter of attributable profit, Q314 RoTE: 8% Q314 adjusted operating profit of £2.2bn, up 15% vs. Q214; credit conditions benign Costs consistently reduced; on track to deliver £1bn of cost reductions in 2014 Another quarter of strong progress in RCR Strong c

  3. Slide 3: Results at a glance

    Results at a glance Q314 vs. Q314 vs. P&L summary (£m) Q314 Q214 Q313 Q214 Q313 Income 4,359 4,925 4,894 (11%) (11%) Operating expenses (3,883) (3,700) (3,879) 5% 0.1% o/w Restructuring, Conduct and Litigation (960) (635) (554) 51% 73% 1 Adjusted operating expenses (2,923) (3,065) (3,325) (5%) (12%)

  4. Slide 4: Contents

    Contents 1 P&L explained 2 Update on restructuring progress 3 Balance sheet, Capital & Funding 4 RBS Capital Resolution 4

  5. Slide 5: Income – UK franchises growing

    Income – UK franchises growing Total Income, £m -11% 4,925 47 11 (245) (182) (284) 87 4,359 3% 1% (23%) (£12m) / (1%) excl. Q214 ~170m gain Q214 PBB CPB CIB Citizens Centre RCR Q314  Deposit repricing, improving macro and consumer confidence supporting the UK franchises  CIB impacted by scaling ba

  6. Slide 6: NIM continues to improve

    NIM continues to improve Net Interest Margin, % +0.04% 0.06% (0.01%) 2.26% 2.22% (0.01%) Q214 Asset yields Reduced Other Q314 liability cost  Gently rising NIMs in PBB and CPB as continued deposit repricing reduced the cost of interest bearing liabilities  Q4 NIM is expected to remain at around Q3

  7. Slide 7: Adjusted operating expenses down 5%

    Adjusted operating expenses down 5% Adjusted operating Operating expenses 1 expenses £m £m +5% 325 (151) 21 (12) -5% 3,700 3,883 3,065 2,923 (5%) Q214 Higher Businesses Centre RCR Q314 Q214 Q314 restructuring, cost conduct and reduction litigation  Adjusted expense reduction driven primarily by CIB

  8. Slide 8: Improving impairment trends supported by releases

    Improving impairment trends supported by releases NPL trends Impairment recoveries / (losses) 1 NPLs , £bn Provisions coverage, % Impairments as % of Gross L&A £bn -29% 42.7 £m Q314 9M14 40.4 39.4 30.5 Reported 801 532 o/w RCR 605 625 o/w Ulster 318 261 RBS ex. RCR & Ulster (122) (354) Q311 Q313 Q41

  9. Slide 9: Adjusted operating profit up 15%

    Adjusted operating profit up 15% Adjusted operating Operating profit 1 profit £m £m +15% 2,237 -3% 1,953 1,318 (325) 576 1,277 27 (319) Q214 Higher Businesses Centre RCR Q314 Q214 Q314 restructuring, conduct and litigation  Net provision releases in RCR and Ulster (ex RCR) key driver of improvement

  10. Slide 10: Litigation and conduct provisions

    Litigation and conduct provisions Payment Protection Insurance Interest Rate Hedging Other Regulatory & Legal Outstanding provision, £m 359 2,713 2,354 760 (207) 586 (143) 100 543 553 Q214 Q314 Q314 Q314 Q214 total Q314 Q314 Q214 total Q314 net Q314 total utilisation top-up utilisation top-up  Addi

  11. Slide 11: Contents

    Contents 1 P&L explained 2 Update on restructuring progress 3 Balance sheet, Capital & Funding 4 RBS Capital Resolution 11

  12. Slide 12: Cost reduction plan on track

    Cost reduction plan on track Operating expenses including bank levy and excluding restructuring and conduct & litigation costs £bn 14.0 Long-term cost:income (0.3) ~(3.1) ratio target: ~50% 1 ~(1) ~(2.3) ~0.7 ~8bn 3 FY13 Q413 intangibles Disposals 2014 Future Inflation Medium- 2 4 write-down & run-o

  13. Slide 13: Contents

    Contents 1 P&L explained 2 Update on restructuring progress 3 Balance sheet, Capital & Funding 4 RBS Capital Resolution 13

  14. Slide 14: Early signs of loan growth

    Early signs of loan growth Mortgages – strong net lending growth with Seeing increasing SME client activity continued market share gains 1 Gross new lending, £bn Q314 Y/Y growth in mortgage loans outstanding in PBB UK 4% +24% 2.6 2.1 2% Q313 Q314 RBS Market  Momentum continues on mortgages with gro

  15. Slide 15: Capital generation

    Capital generation Key drivers of the improvement in Common Equity Tier 1 ratio, % +0.7 10.8 0.13 0.13 0.14 0.27 10.1 Q214 Earnings / DTA RCR risk CIB de-risking Other Q314 reduction  Solid progress in capital ratio build, CET1 ratio up 220bps YTD  RWAs down £10.4bn (3%) Q/Q, of which RCR down £4.

  16. Slide 16: On track to achieve CET1 and leverage ratio targets

    On track to achieve CET1 and leverage ratio targets CET1 build progressing Leverage ratio continues to improve Common Equity Tier 1 ratio, % BCBS leverage ratio, % ≥12% 10.8% c.11% 3.9% 3.4% 8.6% FY13 Q314 2015 2016 FY13 Q314 target target  Maintain guidance of a CET1 ratio of c.11% by end-2015 and

  17. Slide 17: Fully loaded Common Equity Tier 1 – key drivers

    Fully loaded Common Equity Tier 1 – key drivers £bn FY13 Q214 Q314 Reported Tangible Equity 41.1 42.9 44.3 Expected loss less impairments (1.7) (1.3) (1.6) Prudential valuation adjustment (0.8) (0.5) (0.4) DTAs (2.3) (1.7) (1.6) Own credit adjustments 0.6 0.6 0.6 Pension fund assets (0.2) (0.2) (0.2

  18. Slide 18: Leverage ratio – key drivers

    Leverage ratio – key drivers BCBS leverage ratio, % +0.5% 3.7% 3.9% 3.4% FY13 Q214 Q314 Fully loaded CET 1 capital, £bn 36.8 39.7 41.2 Total assets, £bn 1,028 1,011 1,046 Netting of derivatives (227) (217) (255) Securities financing transactions 60 77 73 Regulatory deductions & other adjustments (7)

  19. Slide 19: Contents

    Contents 1 P&L explained 2 Update on restructuring progress 3 Balance sheet, Capital & Funding 4 RBS Capital Resolution 19

  20. Slide 20: RCR asset composition and provisions overview

    RCR asset composition and provisions overview Asset composition Asset composition at 30 September 2014 Overview of provisions by sector Markets Ulster Securitised Products: £2.3bn CRE Investment £1.5bn Provisions Emerging Markets: £0.6bn CRE Development: £0.7bn Provisions Gross as a % of Provisions

  21. Slide 21: Outlook

    Outlook Q4 NIM expected to remain around Q3 2014 levels, with modest asset margin pressure balanced by lower funding costs 1 Remain on track to deliver £1bn cost reductions in 2014 Retain our £5bn overall restructuring costs guidance 2014 – 2017 RCR guidance remains unchanged since Trading Statement

  22. Slide 22: Contacts

    Contacts Our Investor Relations team is available to support your research Richard O’Connor Head of Investor Relations richard.oconnor@rbs.com +44 20 7672 1758 For Investors & Analysts For Corporate Access Alexander Holcroft Leah McCreanor Head of Equity Investor Relations Senior Manager, Investor R

  23. Slide 23: 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’, ‘believe’, ‘should

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