Natwest Group Plc · LSE:NWG
Natwest — Investor Day (March 2010)
40 slides from Natwest's investor day presentation, March 2010
Slide 1: Investor Round Table, March 2010
John Hourican Chief Executive Officer, Global Banking & Markets Investor Round Table March 2010
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: GBM plays an important part in Global Capital Markets and is a key component of RBSG
GBM plays an important part in Global Capital Markets and is a key component of RBSG Key Facts Balanced portfolio - % of Core Group3 Underwritten 543 bonds globally, 12.6% of issues in 20091 5th largest arranger of syndicated loans outside US in 20091 65% 69% 83% # 4 for all bond issuance in t
Slide 4: Key Messages
Key Messages 1. A clear strategy for GBM - Clients at the heart of everything we do - Clear product choices - Tight risk management, capital and funding control - New management team 2. Progress to date - On track to deliver our 5 year strategy - Refocusing of GBM business towards core products & cl
Slide 5: We have a clear vision: partner of choice for our leading clients
We have a clear vision : ‘partner of choice for our leading clients’ Top 5 wholesale bank in chosen markets Fewer, deeper client relationships Clear product choices Global, focused on major hubs Financing and risk management-led “Flow monster” Leadership in fixed income Global Banking En
Slide 6: A clear strategy for GBM: Deeper client franchise
A clear strategy for GBM : Deeper client franchise Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Client base Fewer, deeper client relationships 26,000+ Corporates Resize client base and serve global list of FI’s core issuer and investor client ba
Slide 7: A clear strategy for GBM: Clear product choices
A clear strategy for GBM : Clear product choices Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Core Markets Businesses Core Banking Businesses • Rates Trading and Risk Management • Investment Grade Bonds • Mortgage Trading • High Yield Bonds • Credit
Slide 8: Our product strategy aligns with our overall plan and market dynamics
A clear strategy for GBM : Our product strategy aligns with our overall plan and market dynamics Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Profitability Estimated GBM rankings1 Top 5 (defend / grow) Top 10 (invest / grow) ECM Top 15 (invest / gro
Slide 9: A clear strategy for GBM: Rationalised global footprint
A clear strategy for GBM : Rationalised global footprint Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management 16 primary locations GBM revenues 2009 - Geographic breakdown 23 refocus countries 12 countries to explore new ownership UK EMEA 33% Asia 37% Ameri
Slide 10: A clear strategy for GBM: Tight capital and funding control
A clear strategy for GBM : Tight capital and funding control Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Capital Proportionate use of balance sheet, risk and funding across businesses Active credit portfolio management Revised risk management
Slide 11: A clear strategy for GBM: Tight risk management
A clear strategy for GBM : Tight risk management Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Risk revolution Radical upgrading of Front Office Risk Management Supervisory policy Counterparty Exposure Management Funding Policies Improving
Slide 12: A clear strategy for GBM: New management team
A clear strategy for GBM : New management team Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management A strong blend of experience, ambition and stability Extensive experience in banking: 24 years average in industry Changes post crisis: 72% of the new ma
Slide 13: Key Messages
Key Messages 1. A clear strategy for GBM - Clients at the heart of everything we do - Clear product choices - Tight risk management, capital and funding control - New management team 2. Progress to date - On track to deliver our 5 year strategy - Refocusing of GBM business towards core products & cl
Slide 14: Progress to date: GBM is a dramatically refocused business
Progress to date : GBM is a dramatically refocused business “Old GBM” Core GBM Core GBM FY071 FY072 FY093 Income £ 9.1 bn £ 6.7 bn Income £ 11.0 bn Costs (£ 5.8 bn) (£ 5.1 bn) Costs (£ 4.7 bn) Profit £ 3.2 bn £ 1.5 bn Profit £ 5.7 bn ROE 10.8% 10.4% ROE 30.7% Balance Sheet4 £ 874 bn £ 617 bn Balance
Slide 15: Progress to date: Strong financial performance
Progress to date : Strong financial performance GBM quarterly revenues1 by product (£bn) 4.4 Rates - Money Markets Rates - Flow Currencies 2.6 Equities 2.1 2.0 Credit Markets 1.0 PM & Origination -1.3 Q308 Q408 Q109 Q209 Q309 Q409 GBM annual revenues1 by product (£bn) GBM revenue1 growth by product
Slide 16: Progress to date: Balance sheet reduced significantly
Progress to date : Balance sheet reduced significantly Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management GBM balance sheet1 – Continued focus on de-leveraging, £bn R – Reported C – Constant Currency Other 874 Securities Reverse Repos Loans & Advances 668
Slide 17: Progress to date: Improved balance sheet liquidity
Progress to date : Improved balance sheet liquidity Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management 655 GBM Core Assets Proportion of liquidity in Debt Securities & Reverse 35 GBM Core Assets (Q409) Repo held by businesses Also highly Significant reduc
Slide 18: Progress to date: Deepening client relationships
Progress to date : Deepening client relationships Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Share of Core Client wallet increased globally1 Planned net revenue mix migration Corporates: from 3% to 5% Client Revenues: 2009-2013 FI’s: from 2%
Slide 19: Progress to date: Success in chosen product areas
Progress to date : Success in chosen product areas Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Markets Banking Underwritten 543 bonds globally, 12.6% of issues Led 6 of the 10 largest in 2009 Best Structured Product No 1 Currency Overall - debt cap
Slide 20: Progress to date: Equities & Structured Retail Products
Progress to date : Equities & Structured Retail Products Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management A fundamental shift to a lower risk model, aligned to GBM client priorities and fully leveraging cross sell opportunities to drive improved market
Slide 21: Progress to date: Risk revolution
Progress to date : Risk revolution Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management Risk ■ Radical upgrading of front office risk management frameworks ■ Moved VaR to 99 percentile tail risk ■ Created a market leading Counterparty Exposure Management bu
Slide 22: Progress to date: Investing in essential infrastructure
Progress to date : Investing in essential infrastructure Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management A 2-year, £550m+ front-to back infrastructure investment programme Tight control and efficient deployment 1. Balance Sheet of Balance Sheet resourc
Slide 23: Progress to date: Investing in our people
Progress to date : Investing in our people Capital, Balance Risk Clients Products Geographies Technology People Sheet & Funding Management New people programme ■ Attracting and retaining talent is integral to the success of GBM: ■ Comprehensive organizational changes implemented in 2009 ■ Continued
Slide 24: Business Achievements 2009: Banner year for GBM
Business Achievements 2009: Banner year for GBM GBM captured industry buoyancy despite massive restructuring Arms around the Problems - discovery, disclosure, mitigate – no more surprises RBS's essential source of value sustained and intact - All core businesses functioning “normally”, customer fran
Slide 25: Key Messages
Key Messages 1. A clear strategy for GBM - Clients at the heart of everything we do - Clear product choices - Tight risk management, capital and funding control - New management team 2. Progress to date - On track to deliver our 5 year strategy - Refocusing of GBM business towards core products & cl
Slide 26: Focused on the future: 2013 Vision for RBS
Focused on the future : 2013 Vision for RBS A universal bank, anchored by retail and commercial activities with strong, Enduring complementary investment banking capability customer In the top 5 peer group in our chosen markets franchises Customer franchises reinvigorated by investment and bet
Slide 27: Focused on the future: Targets we have affirmed & updated
Focused on the future : Targets we have affirmed & updated Measure Worst point 2009 2013 Target Value Drivers Group Core Core Return on Equity (RoE) (31%)1,2 13%3 >15%3 Cost/income net of claims (C:I) 97%2 53% <50% Risk Measures Group Group Group Core Tier 1 capital ratio 4%4 11.0% >8% Loan:deposit
Slide 28: Focused on the future: Industry Developments
Focused on the future : Industry Developments Banking is a mature, consolidated/consolidating industry Able to adjust to rebuild sustainable fair returns on capital provided through efficiencies and margin rebuild Thrust of regulatory change is appropriate and considered Key 2010 issue is “calib
Slide 29: Focused on the future: Impact of regulatory change
Focused on the future : Impact of regulatory change Significant proportion of potential impact will be on Non-Core portfolios BASEL II CHANGES Stressed VaR Capital – Incremental Risk Charge RWA Correlation Trading Book impacts Securitisations 2010 2011 2012 2013 2014 To be phased in from 201
Slide 30: Focus & challenges for 2010
Focus & challenges for 2010 Focus Challenges ■ Continue to rebuild and deepen ■ Global economic conditions are fragile relationships with core customers ■ Wholesale funding costs ■ Weakened economies ■ Defend market leading positions ■ Low trading spreads & volatility ■ Sterling depreciation ■ Conti
Slide 31: Conclusions
Conclusions ■ 2009 was an exceptional year and a solid foundation for 2010 ■ Strategy is clear and we are on track to deliver our 5 year strategy ■ Clear risk reduction ■ Clear balance sheet reduction ■ Highly liquid assets ■ Driving efficiency ■ Investing heavily ■ Challenges ahead ■ Economic ■ Reg
Slide 32: GBM: Appendix
GBM : Appendix Markets businesses Banking businesses Derivative trading assets Non-Derivative trading book assets Reverse repos Debt securities Credit portfolio by credit grade Group connectivity 32
Slide 33: GBM: Markets businesses
GBM : Markets businesses Businesses: Markets • Rates Trading: Offers clients a full spectrum of Rates Products including Treasuries, Agencies, IRD Swaps, Options, Inflation Products, Structured Products and Short Term Markets. • Mortgage Trading: Provides secondary market solutions to Rates client h
Slide 34: GBM: Banking businesses
GBM : Banking businesses Banking Businesses: • Investment Grade & High Yield Bonds: Offers corporate and FI clients a broad range of debt market solutions ranging from bond financings to risk management solutions. Investment • Non-Mortgage ABS (Conduits): Provides top-tier US non- Coverage Grade mor
Slide 35: GBM: Derivative trading assets
GBM : Derivative trading assets1 Derivatives Derivatives – –Majority Majority is flow is flow product product in markets in liquid liquid FY09 FY08 % Uncollateralised Derivative Portfolio £bn £bn Chg markets; £bn Government 2.2 8 (75%) Investment Grade 15.0 48 (69%) Monolines & CDPCs - 17 (100%) 414
Slide 36: GBM: Non-Derivative trading book assets
GBM : Non-Derivative trading book assets £bn 254 144 FY09 FY08 Asset £bn £bn % change Debt securities 74.2 94.2 (21%) Reverse repos1 69.5 90.1 (23%) 27 T Bills 26.5 16.0 66% 50 Loans & advances 50.3 54.8 (8%) Equities 10.7 10.8 (1%) 11 23 Other 22.7 25.3 (10%) GBM Core2 253.9 291.3 (13%) Non- Debt T
Slide 37: GBM: Reverse repos
GBM : Reverse repos1 FY09 FY08 % Exposure by counterparty £bn £bn change £bn Reverse repos – Banks 34 57 (40%) Reverse repos – Customers 39 32 22% 73 Total 73.3 88.8 (18%) 34 % of total MTM 39 Maturity profile FY09 FY08 < 3 months 91.7 82.6 < 6 months 3.9 12.1 < 1 year 4.4 4.4 Total Banks Customers
Slide 38: GBM: Debt securities
GBM : Debt securities1 £bn 70 FY09 Asset £bn Central & Local Government 41.9 Mortgage & asset-backed securities 30.6 Treasury & other bills 28.3 24 Banks & Building Society 7.2 11 Corporate (inc Financials) 5 4 2 2 Debt Securities total 113 AAA AA A BBB- BB+ Unrated and and below below – Majority of
Slide 39: GBM: Credit portfolio by credit grade
GBM : Credit portfolio by credit grade GBM – Credit grade exposures1 GBM – Sector exposures1 Core Core £224.4bn 2% 1% 1% 12% 5% 4% 4% 14% 4% 38% 46% 4% 6% Property: 3% 3% 15% 6% Average rating AQ3.0 8% 4% 9% 14% Non Core Non Core £87.7bn 14% 13% 11% 4% 2% 2% 16% 4% 5% 1% 6% 6% 9% 11% 15% 9% 12% Prop
Slide 40: GBM: Group connectivity is important
GBM : Group connectivity is important Group Treasury Short term Long term funding funding and capital Wealth GTS Clients Clients GBM Products Payments, RBS trade, ICM Global Banking & Markets GBM products Branches Retail: Corporate Clients Banking: UK, GBM products Ireland, UK, Ireland, US, US, etc.