Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Goldman Sachs European Financials Conference 2010
34 slides from Natwest's conference presentation, Jun 10, 2010
Slide 1: Re-building & Recovery
Re-building & Recovery Goldman Sachs Financials Conference, Madrid 10th June 2010 Bruce Van Saun, Chief Financial Officer
Slide 2: Important Information
Important Information Certain sections in this presentation 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: Key messages
Key messages Strategic targets affirmed, foundations laid in 2009 Robust customer franchises; a Group increasingly positioned for medium-term recovery Retail & Commercial businesses beginning to turn the corner GBM – a more focused business, holding up well Run-off of Non-Core proceeding to plan; dr
Slide 4: 2013 Strategic Plan – defined aspirations
2013 Strategic Plan – defined aspirations RBS’s Strategic Plan A reshaped New management business disciplines Focus on UK and US franchises, A cost base that is reduced, controlled and move balance of Group towards UK and transparent Retail and Commercial businesses Returns and balance sheet u
Slide 5: Progress to date
Progress to date 2010 - a year of execution 2009 2010 2011 2011 onwards Core profits build, Non-Core losses fall Target >15% RoE Formation of the Execution and Return to Group Ongoing revenue and cost Strategic Plan implementation profitability initiatives Creation of Non-Core phase of the
Slide 6: Progress to date
Progress to date Current position versus 2013 targets Key performance Worst FY 09 Q1 10 2013 indicator point Actual Actual Target Core Tier 1 Capital 4%(1) 11.0% 10.6% >8% Loan : deposit ratio (net of provisions) 154%(2) 135% 131% c100% Wholesale funding reliance(3) £343bn(4) £250bn £222bn <£150bn L
Slide 7: A business positioned for recovery in performance
A business positioned for recovery in performance
Slide 8: Who are we?
Who are we? Balanced by geography, growth, risk profile and business cycle RBS Group Global Banking UK Retail & US Retail & RBS & Commercial Commercial Ulster Bank Non-Core Insurance Markets Banking Banking UK Retail UK Corporate & Global Q1 10 Income by Division3 Commercial Transaction Banking Serv
Slide 9: Group connectivity, cross-sell and complementarity
Group connectivity, cross-sell and complementarity Complementary portfolio with clear cohesion, logic and synergies Maximising cross sell opportunities Exploiting economies of scale through shared business services Sharing of best practise policies & learnings Multiple Group funding sources
Slide 10: Strong customer franchises with market leading positions
Strong customer franchises with market leading positions We have strong franchises in large customer-driven markets Q1 Customer Numbers Market Positions Income FY09 Deposits Q110 >12.8m current accounts UK Retail #2 Current Accounts £4.9bn £89.4bn 10m savings accounts UK 1.2m Business, Commercial &
Slide 11: And improved customer satisfaction
And improved customer satisfaction Sustained and improving customer satisfaction levels UK Retail1 UK Commercial2 August 2009 March 2010 67% 68% 66% 66% 79 % 65% 76 % 64% 64% 64% 64% 75 % 63% 73 % 72 % RBS NatWest Peer 1 Peer 2 Peer 3 NatWest RBS Peer 1 Peer 2 Peer 3 Robust franchises remain intac
Slide 12: Retail & Commercial performance
Retail & Commercial1 performance Retail & Commercial businesses beginning to turn the corner Quarterly income by division, £bn 3.9 4.0 3.9 4.1 4.0 R&C accounted for 50% of Core income Q110 Q109 Q209 Q309 Q409 Q110 Robust, stable customer franchises UK Retail UK Corporate Wealth Ulster Bank US R&
Slide 13: Retail and Commercial franchises
Retail and Commercial franchises Retail & Commercial businesses beginning to turn the corner UK Retail Mortgages & Income UK Retail & UK Corporate Deposits & Income £bn 90 500 £m £bn 200 900 £m 450 190 800 85 400 180 700 350 170 600 80 300 160 500 250 150 400 75 200 140 150 130 300 70 100 120 200 50
Slide 14: UK Retail & Business Banking
UK Retail & Business Banking Signs of improving credit quality Mortgages – Arrears vs. CML1 Personal & Cards – Bad debt flows2 CML 3+ % RBS & NW 3+ % RBS Cards Bad Debt flow % 3% RBS Personal Unsecured Loans Bad Debt Flow % 1.5% 2% 1.0% 1% 0.5% 0.0% 0% Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Q4
Slide 15: GBM franchise
GBM franchise A re-focused business – financing & risk management-led GBM Summary – FY07 vs FY09 & Q110 FY07 “Old” GBM Core GBM FY09 Q110 Top 5 wholesale bank in chosen markets Income, £bn 9.11 6.7 11.0 2.8 Fewer, deeper client relationships Costs, £bn (5.8)2 (5.1) (4.7) (1.3) Clear product ch
Slide 16: GBM franchise
GBM franchise Appropriately de-leveraged and de-risked GBM balance sheet, £bn Continued focus on de-leveraging 874 Securities R – Reported Reverse Repos 56% reduction from FY07 CFX C – Constant Currency Loans & Advances Remaining within target range of Settlement balances c£400-450bn Other 412
Slide 17: GBM franchise
GBM franchise 80% of GBM Core Assets are liquid1 GBM Core Assets Proportion of liquidity in GBM Core Assets Debt Securities & Reverse Repo held by businesses 655 35 Significant reduction in Also highly liquid 80% of GBM Core Assets in debt securities and reverse Q409 are liquid assets repo in H208 O
Slide 18: Non-Core division
Non-Core division Non-Core run-off drives the decline in funded assets and risk concentrations Non Core third party assets (TPAs excluding derivatives & Sempra) run-off targets, £bn Breakdown of changes in TPAs Undrawn commitments 85 TPAs 2009-2013 FX (10)-(20) 36 Rollovers & 20-30 drawings 29 c. 21
Slide 19: Non-Core division
Non-Core division Significant progress achieved in run-down Third party assets (TPAs excluding derivatives & Sempra) run-off1 £bn £bn 252 (65) 187 (2) (2) (9) 5 179 FY08 Mvmt2 FY 09 Impairments Sales Run-Off FX Q110 Non-Core assets reduced 4% (£8bn) during Q1 2010 on a reported basis Excluding n
Slide 20: Non-Core composition
Non-Core composition 2009 Y/E TPAs1 by asset class Non-Core Run-Off Most challenging areas of run-off: Other, – CRE £12bn Retail, CRE, – Project & Asset Finance £16bn £52bn – Corporate Loans & Securitisations SME, £3bn Likely to lead to roll-overs in these asset classes Year end 2013 target –
Slide 21: Non-Core impairments stabilised in Q1
Non-Core impairments stabilised in Q1 Impairment trends improving; absence of large single names Q110 Q110 Q409 FY09 Q1 10 Key Sector Impairments: £m % L&A1 % L&A1 % L&A1 UK Retail 5 0.8 1.1 2.1 Mortgage & Personal lending UK Corporate 155 1.9 3.9 4.8 Property & construction 34% of total Ulster Bank
Slide 22: Strengthening funding, liquidity & capital
Strengthening funding, liquidity & capital
Slide 23: Improving funding and liquidity
Improving funding and liquidity Non-Core run-off drives the reduction in wholesale funding reliance Non-Core third party assets (TPAs excl MTMs) run- Refinancing requirement outweighed by run-off in off targets1 trend with the Group Loan:Deposit gap Non-Core third party assets2 300 50 £bn £bn 250 40
Slide 24: Improving funding and liquidity
Improving funding and liquidity Developing wholesale funding mix Wholesale funding maturity £bn 350 Key Key Funding Funding Metrics Metrics 300 H109 FY09 Q110 Reduction in 250 55% 53% 50% 47% Loan:deposit ratio (Group)1 143% 135% 131% funding requirement Core 110% 104% 102% 200 seen in short Loan:
Slide 25: Current funding conditions
Current funding conditions On-going market access Recent 3 month LIBOR trend1 % LIBOR-OIS1,2 Worst Point 3 Jun-104 EU aid package announced USD 3.64% 0.32% 0.8 EUR 2.05% 0.24% 0.7 GBP 2.99% 0.21% 0.6 Significant concerns around Greece LIBOR-OIS spreads remain tighter 0.5 than historic periods of s
Slide 26: Reducing risk concentrations
Reducing risk concentrations Portfolio concentrations continue to decrease Country1 Sector1 Top 10 A+ and lower countries by credit risk Top 10 Corporate industry sectors by credit assets risk assets £bn 0 2 4 6 8 10 12 £bn 0 20 40 60 80 100 120 New frameworks, polices and limits in place Italy Pr
Slide 27: Core Tier 1 – an increased buffer
Core Tier 1 – an increased buffer Significantly strengthened capital position Core Tier 1 Capital progression, FY07 – Q110 & long-run target % 11.0 10.6 Significant progress in strengthening CT1 >8 11% at FY09, driven by B Share issuance, APS overlay and Asset & Liability Management gain 5.9 1
Slide 28: Regulatory uncertainties remain
Regulatory uncertainties remain Path of regulatory change will be phased and sensible BASEL II CHANGES e.g.: Capital – Stressed VaR RWA Correlation Trading Book impacts To be phased in from 2012 Liquidity LIQUIDITY REQUIREMENTS: CHANGES TO CAPITAL DEDUCTIONS e.g.: Increased liquidity reserves
Slide 29: Outlook
Outlook
Slide 30: NIM outlook
NIM outlook Liability margins to improve – asset margins to hold Current Position Outlook Q110 Q409 2011-13 Overall margin Group NIM 1.92% 1.83% Asset margins Liability margins R&C NIM1 3.01% 3.01% R&C margin GBM margin GBM 1.11% 0.89% Non-Core margin Impact of funding & liquidity Non-Core 1.25% 1.1
Slide 31: Driving cost efficiencies
Driving cost efficiencies We can deliver good cost efficiency £bn 17.4 2.4 15.0 FY09 Cost Impact of Non-Core Inflation Volume reduction Disposals roll-off and Core programme investments1 Non-Core Core costs broadly flat over the planning horizon Impact of inflation & volume growth in Core offset
Slide 32: Impairments outlook
Impairments outlook Impairments trend to “normalised” levels Impairments – returning to normalised levels % of £bn Total L&A Outlook 2.5% Non-Core 9.2 66% 5.7% Trend back towards historic levels 1998-2008 avg: 0.6% Core 4.7 34% 1.1% Historic levels flattered by high loan 1.1% growth in 2003-07 p
Slide 33: Concluding comments
Concluding comments Foundations for recovery are in place Robust customer franchises Balance sheet de-risking well underway Business valuation will become clearer over 2010/11 Market environment for NIM starting to improve Impairment trends are moderating - still early days though Focus on business
Slide 34: Questions?
Questions?
The Royal Bank of Scotland Group — Goldman Sachs European Financials Conference 2010 on 6ix