Natwest Group Plc · LSE:NWG
Natwest — Q3 2010 Earnings Presentation
22 slides from Natwest's earnings presentation, Nov 5, 2010
Slide 1: Re-building and Recovery
Re-building and Recovery Q3 2010 Results 5th November 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: Contents
Contents Q3 2010 Business review, financial highlights Financial update Balance sheet, funding & capital Conclusions & outlook 3
Slide 4: Key Business Highlights
Key Business Highlights Group operating profit of £726m1, up from £250m in Q210 Core Bank operating profit up 10%1 to £1,732m vs Q210 - Continued momentum in Retail and Commercial Balance sheet risk reduced across asset profile, liquidity & funding position Good progress against Strategic Plan targe
Slide 5: Key Q3 2010 financial highlights
Key Q3 2010 financial highlights Strong progress in R&C, partially offset by GBM Core Business: Operating profit £1.7bn1 Lower impairments drive 10% improvement vs Q2 Return on Equity 12%1 Continues to progress R&C NIM 3.23%, +32bps y-o-y Driven by ongoing asset re-pricing Adjusted C:I Ratio 58%1,2
Slide 6: Tracking well to plan targets
Tracking well to plan targets Current position versus 2013 targets Key performance Worst FY 09 Q3 10 2013 indicator point Actual Actual Target Loan : deposit ratio (net of provisions) 154%1 135% 126% c100% Short-term wholesale funding2 £343bn3 £250bn £178bn <£150bn Liquidity reserves4 £90bn3 £171bn
Slide 7: Group financial highlights
Group financial highlights Group P&L Q310 Q210 Q310 vs Q310 vs £m £m Q210 Q309 Income1 7,917 8,163 (3%) 4% Operating Expenses (4,096) (4,103) 0% (2%) Solid underlying performance Claims (1,142) (1,323) (14%) 0% Income reflects slowdown in Profit before Impairment Losses1 2,679 2,737 (2%) 20% GBM
Slide 8: Core & Non-Core performance
Core & Non-Core performance Core Division Q3 2010 Non-Core Division Q3 2010 Q3 10 Q210 Q310 vs Q310 vs Q310 vs Q310 vs Q3 10 Q210 £m £m Q210 Q309 Q210 Q309 £m £m £m £m Income1 7,029 7,290 (4%) (7%) Income 888 873 15 834 Operating Expenses (3,517) (3,511) 0% (4%) Operating Expenses (579) (592) 13 (53
Slide 9: GBM performance
GBM performance Quarterly income, ex FVooD1 £bn 3.0 2.6 2.8 2.0 2.1 2.0 1.9 1.0 1.6 Overall revenues fell 20% Q209 Q309 Q409 Q110 Q210 Q310 Subdued markets and low volatility across flow products Quarterly income by product, ex FVooD1, £bn Improved currencies performance Business mix adverse
Slide 10: NIM and future outlook
NIM and future outlook Progression & outlook Group NIM – Q310 vs Q210 bps 2 (4) Q409 Q110 Q210 Q310 5 (1) 205 203 Group NIM 1.83 1.92 2.03 2.05 R&C NIM 3.04 2.97 3.11 3.23 GBM 0.89 1.11 1.01 1.14 Q210 R&C GBM/ Liquidity Other Q310 Non- & Non-Core 1.17 1.25 1.22 1.05 Core Funding actions Group and
Slide 11: Group impairments and outlook
Group impairments and outlook Group credit trends, Q409 – Q310 No. wholesale cases transferred to Recoveries Units globally Q409 Q110 Q210 Q310 # cases Group Impairment charge, £m 3,099 2,675 2,487 1,953 500 o/w Core, £m 1,288 971 1,097 782 400 o/w Non-Core, £m 1,811 1,704 1,390 1,171 300 % of gross
Slide 12: Core impairments
Core impairments Q409 Q210 Q310 Q310 Comments: % L&A1 % L&A1 % L&A1 £m UK Retail 1.8 1.1 0.9 251 Continued improvement in unsecured portfolios UK Corporate 0.7 0.7 0.6 158 Improved collective provisions position Ulster Bank 3.5 3.1 3.0 286 Remain elevated reflecting weak economy & property US R&C 1.
Slide 13: Non-Core impairments
Non-Core impairments Q409 Q110 Q210 Q310 Comments: £m £m £m £m CRE 1,120 1,050 1,224 921 Continued elevated high levels, particularly Ulster Bank Manufacturing 125 24 (260) (48) Sector cashflows improving Other Corporate 318 411 281 224 Mortgages 116 137 80 60 Reflecting improvements in US SBO Other
Slide 14: Balance sheet, funding & capital
Re-building and Recovery Balance sheet, funding & capital
Slide 15: Non-Core asset reduction
Non-Core asset reduction Non-Core asset reduction1 Q3 10, £bn TPAs 174 (1) (11) (8) 0 154 Q2 2010 Impairments Disposals Run-Off2 FX Q3 2010 £20bn reduction in funded assets to £154bn; an additional £9bn signed but pending Good progress on disposals - £4bn reduction from country & whole business
Slide 16: Funding and liquidity
Funding and liquidity More resilient funding base, further termed-out funding Evolution of Group funding mix towards more stable long- Key Funding Metrics Key Key Funding Funding Metrics Metrics term funding sources1 FY09 Q210 Q310 FY09 Q210 Q310 £bn % £bn % £bn % Loan:deposit ratio (Group)2 135
Slide 17: Funding - Issuance
Funding - Issuance Continued progress on reduction of short-term wholesale funding reliance 2010 gross issuance target exceeded £35bn1 YTD term funding achieved vs. £bn £25bn 2010 target 2010 2011 2012 2013 Market conditions much improved in H2 70 60 Transactions spanned multiple 50 currencies
Slide 18: RWA & Capital progression
RWA & Capital progression RWAs £bn Core Tier One Ratio % 474 8 6 (8) (5) 475 10.5 (0.1) (0.1) (0.1) 10.2 Q210 Roll off of APS Non- Other Q310 Q210 Attributable RWAs Other Q310 Capital Roll-off Core loss Relief run-off trades £8bn of capital relief trades rolled off in Q3 RWA impact due to lower
Slide 19: Conclusions & outlook
Conclusions & outlook Q3 was a solid quarter featuring diversification of business mix, as Retail & Commercial businesses performed well, off-setting softness in GBM Outlook - R&C: positive momentum, expect to continue, although NIM and impairment trends will moderate - GBM: continued challenging en
Slide 20: Appendices
Appendices
Slide 21: Non-Core asset class composition changes
Non-Core asset class composition changes Corporates and Markets reduced by 41% and 48% since inception; Real Estate by 26% 2008 Year-End funded assets Q3 2010 funded assets Other Corporate Other Corporate RBS Insurance £2.0bn Project & Export Retail RBS Insurance £1.6bn Project & Export Reta
Slide 22: Non-Core long term asset reduction progress
Non-Core long term asset reduction progress NCD has now reduced assets by over £100bn, 40% of total at inception, in under 2 years Non-Core funded assets (excluding derivatives) asset reduction targets, £bn Breakdown of changes in funded assets Undrawn commitments 2009-2013 85 Funded assets FX (10)-