Slide 1: Full Year 2019 Results & Investor Update
Full Year 2019 Results & Investor Update 14 February 2020 1
Slide 2: Agenda
Agenda Topic Presenter Introduction and Howard Davies macroeconomic context 2019 results Alison Rose, Katie Murray Investor update Alison Rose Investment case and Katie Murray target financial shape 2
Slide 3: Introduction and macroeconomic context
Introduction and macroeconomic context: Howard Davies 3
Slide 4: Our Customer Brands
a NatWest Group Our Customer Brands CREF Uster Bank Ceutlilde NatWest Child Co. QD)Rummonps a MILITARY BANKING ( {lame Gonpany NE iN S| wy ISLE oF MAN BANK @& gS Lombard ax RBS ~ — International — NatWest Markets
Slide 5: Macroeconomic context
Macroeconomic context Actual Forecast UK gross domestic product growth1 Bank of England base rate2,3 Challenges remain for banks: 1.8% 1.7% 1.7% • Subdued GDP 1.4% 1.2% 1.1% 0.50% 0.75% 0.75% 0.50% 0.50% 0.50% growth outlook 2017 18 19 20 21 2022 2017 18 19 20 21 2022 • Low rate environment • Prev
Slide 6: 2019 results: Alison Rose, Chief Executive Officer
2019 results: Alison Rose, Chief Executive Officer 6
Slide 7: Solid financial performance, sets foundation for future success
Solid financial performance, sets foundation for future success Generating Returns Growing Lending Reducing Cost Returning Capital FY’19 Operating Net lending Other expenses £4.2bn profit before tax up £0.9bn on 3.7%2 growth – exceeding our £310m1 in FY’19 exceeded our £1bn4 Final ordinary and s
Slide 8: Continued progress on culture, customer advocacy and innovation
Continued progress on culture, customer advocacy and innovation Culture Customer Advocacy Innovation NPS Top quartile on average #1 commercial bank1 Launched and used by 2019 Banking Standards More work to do across customers Board Survey Personal & Business Corporate Chartered Status First bank
Slide 9: We are in a position of strength with opportunities to improve
We are in a position of strength with opportunities to improve Positions of strength Opportunities Meet broader set of customer needs across life Strong customer franchises and market- stages to maximise customer potential and leading positions protect revenue Simplify and re-engineer to increase cu
Slide 10: 2019 results: Katie Murray, Chief Financial Officer
2019 results: Katie Murray, Chief Financial Officer 2019 results: Katie Murray, Chief Financial Officer 10
Slide 11: Q4 2019 summary financials
Q4 2019 summary financials £m Q4’19 Q4’19 vs. Q4’18 Q4’19 vs. Q3’19 Total income 4,233 38% 46% Operating expenses (2,527) 2% (6%) o/w Other expenses (1,905) (6%) 10% o/w Strategic costs (537) 51% 150% o/w Litigation & conduct costs (85) (8%) (89%) Impairment losses (160) n.m. (25%) Operating profit/
Slide 12: Continued net interest margin pressure
Continued net interest margin pressure Future Bank NIM, bps considerations 197 196 Rate sensitivity (1) 0 (3) 0 193 193 (0) Reduction in liquidity Asset Pressure 3bps Deposit Pressure 0bps Asset and liability pressures Economic Q3’19 One-offs Q3’19 Central Competitive Other Q4’19 One-offs Q4’19 unce
Slide 13: Loan growth exceeded 2019 target
Loan growth exceeded 2019 target FY’19 target net 2% – 3% loan growth1 FY’19 Gross new mortgage lending FY’19 Net loan growth1 3.7% £33.3bn4,5 UK Personal Banking 6.7% FY’19 Gross new Ulster Bank ROI2 (3.2) % personal loans £3.9bn5 Commercial (0.2) % FY’19 Commercial Private 8.4% Banking gross new l
Slide 14: Loan growth by product and sector
Loan growth by product and sector Gross L&A Growth, £bn UK Personal Banking FY’19 Gross new 6.8% 6.5% card customers 160.3 138.5 147.5 150.1 c.275k 11.8% 7.5% 7.6 8.5 4.0 4.3 FY’18 FY’19 FY’18 FY’19 FY’18 FY’19 FY’18 FY’19 FY’19 Gross new Mortgages Personal advances Cards Total UK Personal Banking c
Slide 15: Strong capital generation
Strong capital generation CET1, % 15.7 16.2 0.1 (0.3) (0.2) 0.9 (0.0) Q4’19 vs. Generated Q3’19 110bps of capital Q3’19 Profit Dividends Pensions RWAs Other Q4’19 from profits in TNAV1,2 p 272 267 FY’19, excluding 16. 0 16.2 0.6 (0.5) 1.1 (1.4) (0.2) 0.5 0.1 Alawwal profits FY’19 vs. FY’18 and PPI p
Slide 16: FY'19 update on progress
FY’19 update on progress Net loan growth ▪ 3.7% FY’19 net loan growth across Personal, Ulster RoI, Commercial & Private ▪ Exceeded 2-3% net loan growth target in 2019 Continuing cost ▪ Reduced other expenses by £310m in FY’19 reduction ▪ Exceeded our £300m FY’19 target Capital ▪ CET1 ratio at 16.2%
Slide 17: Investor update: Alison Rose, Chief Executive Officer
Investor update: Alison Rose, Chief Executive Officer 17 17
Slide 18: Agenda
Agenda A solid foundation to build from Facing into unprecedented disruption Our purpose-led strategy Refocusing NatWest Markets Investment case that delivers sustainable returns 18
Slide 19: Solid foundation and position of strength in serving people, families and businesses
Solid foundation and position of strength in serving people, families and businesses Customer base Market position Financial strength A leading UK bank #1 Commercial bank1 Strong capital base businesses bank with us; gross new 19m customers 1 in 4 lending growing every 16.2% CET1 ratio in FY’19 quar
Slide 20: Supporting every region in the UK and RoI
Supporting every region in the UK and RoI Supporting People £6 in every £10 lent to SMEs and UK mortgage customers is outside of ▪ 7.7m people reached through MoneySense lessons since London and the South East 1994 ▪ Over 600 remote locations reached through Mobile Branches Biggest supporter of manu
Slide 21: Preparing for unprecedented disruption in society
Preparing for unprecedented disruption in society Trends Insights 2.5m+ more people over 55 years old by 20251 People c.50% of all growth in 70+ population in rural areas2 >50% of potential future retirement income locked in property3 Housing Private renters outnumber mortgage holders, among under 4
Slide 22: A purpose-led bank responding to the changing needs of all stakeholders
A purpose-led bank responding to the changing needs of all stakeholders Simple to Powered by innovation deal with and partnerships Reengineering-led Strong pace of business simplification to drive model innovation and better customer partnership experience and colleague engagement Supporting Sharpen
Slide 23: We champion potential, helping people, families and businesses to thrive
We champion potential, helping people, families and businesses to thrive Our Values1 Honest and Fair With Serving Doing the customers right thing A Good Citizen Customers and Suppliers One purpose- led bank delivering sustainable financial returns A Responsible and Working Thinking Guardian for toge
Slide 24: Areas of focus aligned to the most pressing issues for our stakeholders
Areas of focus aligned to the most pressing issues for our stakeholders Our areas of focus Enterprise Learning Climate Our ambition The biggest supporter of start-ups Leading learning organisation; Leading bank in the UK & RoI in the UK & RoI enhancing the financial ability of the helping to address
Slide 25: A leading UK & RoI bank helping to address the climate challenge
A leading UK & RoI bank helping to address the climate challenge Ambitious aims… … with achievements to date and a set of short-to-medium term commitments Supporting clients Achievements Short-to-medium term commitments No project finance to new coal fired Stop lending and underwriting to compan
Slide 26: Evolve our propositions to support our customers at every life stage
Evolve our propositions to support our customers at every life stage We will respond to9… Young adults Early to mid-life Households Retirement ▪ Straight into work ▪ Professionals ▪ Affluent ▪ Higher education ▪ Workers ▪ Established ▪ 66.4m and training Gig / freelancers ▪ Out of work people1 ▪ New
Slide 27: Taking a whole life view will unlock opportunities
Taking a whole life view will unlock opportunities Pre-empt and meet customers’ existing needs Innovate to meet a set of growing needs8 PCA share1 15% Non-standard / flexible mortgages RBS share of personal / Short-term 6% 9p.p. Decumulation propositions and advice private borrowing balances2 produc
Slide 28: Deliver relationship led banking for a digital world
Deliver relationship led banking for a digital world Evolving our physical interactions to better reflect More customers now bank with us digitally our customers’ needs >70% of UK Personal Banking and Ulster Bank Customer relationship RoI customers were digitally active in 2019 High physical Relat
Slide 29: Improve customer experience and drive further efficiency
Improve customer experience and drive further efficiency Clear aims for the customer journey transformation… … Accelerated with a new focus Example activities A step change in customer Train front-line staff, e.g., to guide customers to self-assisted tools Greater experience Deploy digital tools at
Slide 30: To power delivery of strategy, continue to innovate and partner
To power delivery of strategy, continue to innovate and partner Based on a number of … that we continue to criteria… … we have a strong portfolio of assets … strengthen Aligned to our purpose and strategic imperatives Innovate Helping businesses and Clear path to scaling communities thrive Fal
Slide 31: Reducing the capital committed to NatWest Markets by c.50%
Reducing the capital committed to NatWest Markets by c.50% RWA and Capital, £bn Legacy Rates Currencies Financing 37.9 Our current plan2 6.5 assumes: ▪ CET1 capital allocated to NWM 17.4 ~20 RWAs reduced by ~£3bn 3.2 ▪ Capital reduction xx expected to be CET1 10.8 capital ratio accretive in year one
Slide 32: Serving our corporate and institutional customers with a refocused business
Serving our corporate and institutional customers with a refocused business Commercial Banking NatWest Markets Illustrative corporate and institutional customers expected Franchise view Customer view to deliver c.8% ROE in the medium to long term1 Full service financing and risk management – providi
Slide 33: Investment case
Investment case Key messages Financial outcomes1 Purpose-led decision making Medium to long term RoTE target of 9-11% Revenue opportunities to help counteract low rate Solid customer businesses with ability to grow environment. Lending target greater than 3%2 Operating cost3 reduction of £250m in 20
Slide 34: Investment case and target financial shape: Katie Murray
Investment case and target financial shape: Katie Murray, Chief Financial Officer 34
Slide 35: Agenda
Agenda Financially resilient Investing to deliver strategy and cost transformation NatWest Markets – refocusing NWM, reducing capital in the business by c.50% in the medium term Investment case – sustainable returns of 9-11% RoTE in the medium to long term 35
Slide 36: Sound balance sheet
Sound balance sheet FY’19 Short-term Liquidity Loan : Funded assets CET1 ratio wholesale funding coverage ratio deposit ratio 16.2% £19.4bn 152% 89% £573bn 36
Slide 37: Building from a position of financial strength
Building from a position of financial strength FY’19 NatWest Personal Ulster RoI Commercial Private RBSI Markets RoE, % 21.01 2.3 8.4 15.4 25.7 (3.2) Operating 855 49 1,327 297 344 (25) profit, £m Net lending, 158.9 18.2 101.2 15.5 14.1 8.4 £bn RWAs, £bn 37.8 13.0 72.5 10.1 6.5 37.9 1 Excluding PPI
Slide 38: Continue to invest c.£1bn per year in the business
Continue to invest c.£1bn per year in the business We have invested c.£8bn over the past 6 years transforming the bank …. with an increasing focus on Digital and expect to continue to invest c.£1bn per year… and Innovation Investment c.£1bn c.£1bn c.£1bn spend c.20%3 7.2 Reduction in mandatory and G
Slide 39: Building on our strong track record, next wave of reengineering to reduce cost base
Building on our strong track record, next wave of reengineering to reduce cost base % YoY cost Solid record on cost reduction reduction Group strategic costs2, £bn FY cost reduction1, £m 0.8-1.0 FY’14 1,100 9% FY’15 983 9% FY’16 985 11% FY’20 FY’17 810 10% FY’18 278 4% Group costs3, £bn FY’19 310 4%
Slide 40: NatWest Markets will be c.10% of the group
NatWest Markets will be c.10% of the group Capital release, £bn RWA and Capital, £bn Medium term, Legacy Currencies Year 1 cumulative Rates Financing 37.9 NWM RWA reduction 6-8 c.18 6.5 17.4 ~20 NWM associated capital RWAs c.1.0 c.2.7 3.2 release1 xx 10.8 NWM strategic costs c.0.2 2019 Medium term t
Slide 41: Financially and operationally resilient - Capital generation & distribution
Financially and operationally resilient - Capital generation & distribution CET1 ratio profile Headwinds from RWA inflation, Pension contribution, Basel 3 amendments, CCyB 16.2 and climate impact CET1, % c.14 Including revenue impact from refocusing, 13-14 NWM current plans assume capital ratio accr
Slide 42: Financial targets and outlook
Financial targets and outlook 2020 financial targets and outlook Medium to long term targets and outlook Regulatory impact Personal Banking: c.£200m negative impact on income n/a Costs Cost take-out target: £250m1 Ongoing operating cost take-out Strategic costs target of £0.8-1.0bn for NWM refocus (
Slide 43: Investment case
Investment case Key messages Financial outcomes1 Purpose-led decision making Medium to long term RoTE target of 9-11% Revenue opportunities to help counteract low rate Solid customer businesses with ability to grow environment. Lending target greater than 3%2 Operating cost3 reduction of £250m in 20
Slide 44: Q&A
Q&A 44
Slide 45: Appendix
Appendix 45
Slide 46: FY 2019 results by business
FY 2019 results by business1 UK Personal Ulster Bank Commercial Private NatWest Central items £bn RBSI Total RBS Banking RoI Banking Banking Markets & other2 Income 4.9 0.6 4.3 0.8 0.6 1.3 1.8 14.3 Operating expenses (3.6) (0.6) (2.6) (0.5) (0.3) (1.4) (0.4) (9.3) Impairment (losses) / releases (0.4
Slide 47: Q4 2019 results by business
Q4 2019 results by business1 UK Personal Ulster Bank Commercial Private NatWest Central items £bn RBSI Total RBS Banking RoI Banking Banking Markets & other2 Income 1.2 0.1 1.1 0.2 0.2 0.3 1.2 4.2 Operating expenses (0.8) (0.1) (0.7) (0.1) (0.1) (0.4) (0.3) (2.5) Impairment (losses) / releases (0.1)
Slide 48: Adjusted financials - 2019
Adjusted financials - 2019 Adjusted FY’191 £m FY’19 (income ex. FX recycling gain) Total income 14,253 12,794 Operating expenses (9,325) (9,325) o/w Other expenses (7,049) (7,049) o/w Strategic costs (1,381) (1,381) o/w Litigation & conduct (895) (895) costs Impairment losses (696) (696) Operating p
Slide 49: Notable items
Notable items £m FY’19 Q4’19 Q3’19 Q2’19 Q1’19 FY’18 Q4’18 Q3’18 Q2’18 Q1’18 Alawwal Bank merger gain on disposal 444 - - 444 - - - - - - FX recycling gain 1,459 1,169 - 290 - - - - - - Provisions release 256 - - 256 - - - - - - Other Strategic Disposals 45 - - 45 - - - - - - IFRS volatility in Cent
Slide 50: Q4 2019 – Income walks
Q4 2019 – Income walks Income Ex Total One-offs Other one-offs1 Income Q4’19 vs. Q4’18, £m (4.0)% 4,233 3,058 (185) 1,221 (109) 36 289 (5) 3,022 2,837 2,723 3,012 Q4 ‘18 Q4’ 18 Q4 ‘18 Q4 ‘19 Q4 ’19 Q4 ‘19 Income Q4’19 vs. Q3’19, £m (2.0)% 4,233 2,903 1,221 (53) (178) (55) 0 289 2,956 2,778 2,723 3,0
Slide 51: FY 2019 – Income walk
FY 2019 – Income walk Legacy liability release FX recycling gain1 Income Ex Total One-offs Income FY’19 vs. FY’18, £m Alawwal Other one-offs2 14,253 13,402 444 256 488 1,459 (1,509) (2.6)% (7) (317) 997 16 12,914 12,101 11,405 11,104 FY’18 FY’18 FY’18 Personal & RBSI FY’19 FY’19 FY’19 Total Income N
Slide 52: Cost reduction exceeded 2019 target
Cost reduction exceeded 2019 target Operating costs1, £m Strategic costs4, £m Write down of goodwill Litigation & conduct Other Expenses Strategic costs OLD2 16,353 16,194 498 1,381 2,106 2,931 1,004 3,568 5,868 10,401 9,645 9,325 153 1,565 1,004 1,200 – 1,381 1,500 152 1,285 1,282 142 121 895 138 9
Slide 53: Strong asset quality at FY 2019 with stage 3 loans below 2.0% of gross loans
Strong asset quality at FY 2019 with stage 3 loans below 2.0% of gross loans Commercial Private RBS NatWest Total RBSG UK Personal Banking Ulster Bank RoI1 Banking Banking International Markets FY’19 Loan impairment 25 (18) 38 n.m. n.m. n.m. 21 rate2, bps Total ECL 1.4 0.8 1.4 n.m. n.m. 0.1 3.8 prov
Slide 54: Net interest income and cash flow hedging reserve sensitivity
Net interest income and cash flow hedging reserve sensitivity1 Structural and product hedge Change in NII -25bps upward parallel shift in yield curves, £m 2019 2019 Year 1 Year 22 Year 32 Incremental Average notional, £bn Total yield, % Structural hedges (27) (90) (154) income, £m Equity structural
Slide 55: Ring-fence
Abridged Structure – January 2020 “Non-Bank” Key Entity “Bank” Key Entity The Royal Bank of Scotland Group plc (Scotland) Inside the ring-fence Outside the ring-fence The Royal Bank of Scotland NatWest Holdings Limited NatWest Markets Plc RBS AA Holdings (UK) International (Holdings) (England) (Scot
Slide 56: Cautionary & forward looking statements
Cautionary & forward looking statements The targets, expectations and trends discussed in this presentation represent RBSG, and where applicable Important factors that could affect the actual outcome of the forward-looking statements NWM management’s, current expectations and are subject to change,