Natwest Group Plc · LSE:NWG
Natwest — Ulster Bank Group — Investor Presentation (July 2013)
41 slides from Natwest's investor presentation, Jul 2, 2013
Slide 1: Ulster Bank Investor Roundtable
Ulster Bank Investor Roundtable Jim Brown, Chief Executive Officer, Ulster Bank Group 2nd July 2013
Slide 2: Important Information
Important Information The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to
Slide 3: Today’s speakers
Today’s speakers Jim Brown Stephen Bell Chief Executive Officer Chief Risk Officer 2 yrs in post (6 yrs with RBS) 1 yr in post (1 yr with RBS) 25 yrs industry experience 26 yrs industry experience Richard Harding Simon Barry Chief Financial Officer Chief Economist, (Acting) Republic of Ireland 1 yr
Slide 4: We have built an experienced management team to deliver the strategy
We have built an experienced management team to deliver the strategy Executive: Jim Richard Stephen David Thomas Ellvena Richard Steve Bobbie Joy Christian Brown Harding Bell Graham Donnan Daniels Bergin McAdam Pierce Managing Role: Chief Chief Chief Risk Director, Chief Managing Head of Head of Hea
Slide 5: Agenda
Agenda Introduction and Strategy Macroeconomic Environment Financial Performance & Outlook Asset Quality Summary 5
Slide 6: Introduction & Strategy
Introduction & Strategy Jim Brown, Chief Executive Officer, Ulster Bank Group 6
Slide 7: 177 years of heritage on the island of Ireland; Ulster Bank on the outside, RBS on the inside
177 years of heritage on the island of Ireland; Ulster Bank on the outside, RBS on the inside Republic of Ireland #3 player Northern Ireland #1 player millions millions 6 6 4.6 4 4 1.8 2 1.3 2 0.7 0 0 Population Customer Base Population Customer Base Business Profile Business Profile Ulster Bank h
Slide 8: Executive summary
Executive summary The macro-economic environment across the island of Ireland has shown improvement Investor confidence in Ireland is returning Banking sector continues to restructure with exits, job losses/branch closures announced Deposit market/pricing appears to be normalising despite re
Slide 9: We have a clear strategy to create a Really Good Bank whilst tackling Legacy issues
We have a clear strategy to create a Really Good Bank whilst tackling Legacy issues Create a customer centric, sustainable Really Good Bank Maximise value of Legacy loans Target growth in sectors/segments that leverage our competitive advantage Build out collections & recovery Reshape distribution D
Slide 10: Retail strategy: Deepening relationships with Mass Retail and driving share with Mass Affluent segments
Retail strategy: Deepening relationships with Mass Retail and driving share with Mass Affluent customer segments Deepen relationships with Mass Retail primary/secondary customers How we’re going to position ourselves Focus on continuing to accelerate Mass Affluent market share growth Leverage th
Slide 11: Corporate Strategy: Lowering cost to serve through direct service model
Corporate Strategy: Lowering cost to serve through direct service model, driving sectoral expertise/propositions to deepen relationships Serve customers segments with appropriate direct / relationship How we’re going to managed models to optimise offering for customer and overall cost base positio
Slide 12: Ulster Bank’s flow shares exceed stock across most major products
Ulster Bank’s flow shares exceed stock across most major products Current Account Stock/Flow Savings Stock/Flow* Mortgage Stock/Flow 25% 15% 14% 15% 20% 12% 12% Republic 20% of 15% 10% 10% 12% Ireland 6% (Retail) 10% 5% 5% 5% 0% 0% 0% Stock Flow Stock Flow Stock Flow Current Account Stock/Flow Savin
Slide 13: Retail Strategy: Continue to invest in our digital offering
Retail Strategy: Continue to invest in our digital offering – increasing penetration/usage across transaction and account opening Highlights Transactions by channel Online is a key distribution channel, attracting volume from higher cost channels Mobile 21% 15% ¾ Active online banking customers up
Slide 14: Huge progress made. Clear targets set
Huge progress made. Clear targets set Core performance indicators Worst point Q113 Target Loan : deposit ratio (net of provisions) 191% 127% c.100% Intra Group Line (gross) €15.9bn €2.7bn Nil NIM 1.67% 1.85% >2.15% Cost : income ratio 84% 63% ≤50% Return on equity (40%) (14%) ≥12% Net Promoter Score
Slide 15: Ulster Bank Group will evolve its operating model and organisation to become simpler and more efficient
Ulster Bank Group will evolve its operating model and organisation to become simpler and more efficient 2012 By end 2014 By 2016 UBG structured along three business lines: Core bank reaches breakeven. Legacy/Non- UBG restored to profitability and on a – Retail core portfolios and stranded cost
Slide 16: Macroeconomic Environment
Macroeconomic Environment Simon Barry, Chief Economist, Ulster Bank Group 16
Slide 17: Cautiously optimistic as RoI economy returns to growth over 2011/12
Cautiously optimistic as RoI economy returns to growth over 2011/12 GDP growth returned to positive territory in ’11 and ‘12 Exports have weakened but domestic demand less of a drag Irish GDP, y/y% Irish GDP and Selected Components, y/y% 5.0 (2-qtr avg) 15 3.0 10 1.0 5 -1.0 0 -5 -3.0 -10 Source: CSO
Slide 18: Consumer spending and house prices trends have shown clear improvement, but remain fragile
Consumer spending and house prices trends have shown clear improvement, but remain fragile Household income and spending (nominal) Residential property prices % YoY % YoY 20 20 15 10 10 5 0 0 -10 -5 -20 -10 Source: CSO -15 Source: CSO -30 8 0 2 8 0 2 7 9 1 3 7 9 1 -1 -1 -0 -1 -1 -0 -0 -0 -1 -1 -0 -0
Slide 19: Important structural and budgetary headwinds remain
Important structural and budgetary headwinds remain Irish household liabilities Household savings rate €bn % of disposable income 16 250 Peak was in Q4 '08 (€214bn) 14 200 12 150 Latest Q4 '12 (€183bn) 10 100 8 50 Source: CSO Source: CBoI 6 0 2 3 4 5 6 7 8 9 0 1 2 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 -1 ec
Slide 20: Ireland outperforming the wider eurozone, but risks to growth remain tilted to the downside
Ireland outperforming the wider eurozone, but the overall balance of risks to growth remains tilted to the downside Contributions to GDP growth Unemployment rate % points % of labour force p 8 16 6 Source: CSO, UB 4 14 2 12 0 -2 10 -4 8 -6 -8 6 -10 Source: CSO, UB 4 -12 2 07 08 09 10 11 12 f f f 13
Slide 21: Tentative recovery underway in Northern Ireland, but growth set to lag the UK
Tentative recovery underway in Northern Ireland, but growth set to lag the UK NI & RoI residential property price index Some signs of a private sector recovery NI & RoI Residential Property Price Index NI Composite Economic Index: Private Sector Q/Q Growth Y/Y Growth Index 2005 = 100 200 5% 10% NI B
Slide 22: Financial Performance & Outlook
Financial Performance & Outlook Richard Harding, Chief Financial Officer (Acting), Ulster Bank Group 22
Slide 23: Geographical & Divisional Analysis for FY 2012
Geographical & Divisional Analysis for FY 2012 Geographical Analysis Divisional Analysis Ulster Bank (Core) Ulster Bank (Core) FY 12 RI NI FY 12 Corporate Retail £m £m £m £m £m £m Income 845 590 255 Income 845 422 423 Expenses (521) (367) (154) Expenses (521) (226) (295) Profit Before Impairment 324
Slide 24: Summary Financial Performance
Summary Financial Performance Ulster Bank (Core) 2008 2010 2012 2012 v 2008 Key Message (% change) Outlook £m £m £m Income 1,039 975 845 (19%) Revenue down 2008-2012 by Expenses (715) (575) (521) 27% c20% in line with reduction in interest earning assets Profit Before Impairment 324 400 324 - Impair
Slide 25: Improvement in impairment trend
Improvement in impairment trend Financials Ulster Bank (Core) Q1 2013 Q1 2012 Q1 2013 v Q1 2012 £m £m % Key Message Income 208 214 (3%) Revenue broadly stable despite Expenses (132) (130) (1%) reduction in interest earning assets and competition on deposits Profit Before Impairment 76 84 (10%) Impai
Slide 26: Cost Initiatives – Long Term C:I Ratio Target of ≤50%
Cost Initiatives – Long Term C:I Ratio Target of ≤50% Estimated Saving C:I Ratio 62% £30m-40m Estimated Saving £10m-15m Estimated Saving Total costs Initiatives: £5m-10m Target £521m Future Bank: Retail C:I Ratio ≤50% UK & Corporate UK convergence Streamlined Branch footprint Initiatives: Simplified
Slide 27: Capital and Funding
Capital and Funding Stable and growing deposit base Diverse funding base and minimal ECB1 reliance Customer deposits, €m Funding mix ECB Securitisations Intra-Group 27 27 24 25 25 8% Other liabilities Capital & Reserves 5% 2% 21% 5% 31% Corporate & Wholesale 27% Retail Deposits Mar-12 Jun-12 Sep-12
Slide 28: Ulster Bank is performing credibly vs. peers
Ulster Bank is performing credibly vs. peers Ulster Bank (Core) Bank of Ireland AIB FY12 v FY11 FY12 v FY11 FY12 v FY11 (£m) FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 % @ CFX % % Income 845 947 (6%) 1,880 2,058 (9%) 1,424 1,788 (20%) Costs (521) (548) (1%) (1,638) (1,645) 0% (1,739) (1,687) 3% Profit befo
Slide 29: Residential Mortgages REIL coverage vs. Peers – Republic of Ireland
Residential Mortgages REIL coverage vs. Peers – Republic of Ireland REIL as % of Loans & Advances REIL Coverage % % 25 80 70 20 18% 60 49% 15 50 44% 12% 40 10 28% 8% 30 20 5 10 0 0 2010 2011 2012 2010 2011 2012 UBIL AIB BOI KBC PTSB Lloyds UBIL AIB BOI KBC PTSB Lloyds Note: Red line indicates the UB
Slide 30: Asset Quality
Asset Quality Stephen Bell, Chief Risk Officer, Ulster Bank Group 30
Slide 31: Ulster Bank: Portfolio on a Page
Ulster Bank: Portfolio on a Page FY2012 Retail Corporate Core Corporate Non-Core Total UBG 50 Portfolio 45 40 Retail Portfolio consists of: £11.3bn ■ Mortgages (96%, £19.2bn) of which 16% is REiL (2011: 11%). 35 Provisions coverage of REiL of 48% FY2012 Gross Loans £bn (2011: 43%) £1.2bn ■ Other len
Slide 32: Retail Credit Risk
Retail Credit Risk UBG Mortgages are split 68% / 22% / 10% for New business in Q1 low (£70m) but written at a substantially lower LTV (71%) Tracker/SVR/Fixed Majority of delinquencies are from effectively a “closed pool” - 84% of Breakdown of ROI Mortgages Book of €20.7bn the portfolio and 95% o
Slide 33: ROI Mortgage Arrears
ROI Mortgage Arrears Arrears Link Between Arrears and Unemployment Broken Post-Q2 2011 €m Break in trend Historically high correlation between arrears 400 20% and unemployment broke after Q1/Q2 2011 (CCMA/Dunne1 ruling) Unemployment (RHS) 300 15% Accommodation The average mortgage in arrears is
Slide 34: Wholesale Credit Risk
Wholesale Credit Risk Breakdown of CRE portfolio (FY12) Significant proportion of wholesale credit both in the Core (CRE 34%) and Non-Core (CRE 88%) % portfolios is property related Residential development 3 35 £6bn £b Core Non‐Core Total Deleveraging has taken place, though at a slow Gross Asse
Slide 35: Summary
Summary Jim Brown, Chief Executive Officer, Ulster Bank Group 35
Slide 36: Ulster Bank Summary
Ulster Bank Summary The macro-economic environment across the island of Ireland is improving Investor confidence in Ireland is returning Banking sector continues to restructure Deposit market/pricing appears to be normalising We are executing on our strategy to create a “really good bank”
Slide 37: Appendices
Appendices RBS Group 37
Slide 38: Ulster Bank Management Team (1 of 2)
Ulster Bank Management Team (1 of 2) Name Title Background Jim Brown Chief Executive • Jim Brown is Chief Executive of Ulster Bank Group with responsibility for the Ulster Bank businesses in Northern Ireland and the Officer Republic of Ireland. Jim is also a member of the RBS Management Committee. P
Slide 39: Ulster Bank Management Team and Chief Economist (2 of 2)
Ulster Bank Management Team and Chief Economist (2 of 2) Name Title Background Richard Donnan Managing Director, • Richard was appointed to the role of Managing Director, Retail Markets in January 2011. He joined Ulster Bank in 1989 and has Retail Markets since held a number of senior positions with
Slide 40: Ulster Bank (Q113)
Ulster Bank (Q113) Core gross L&A, £33.1bn Non-Core gross L&A, £12.6bn CRE: CRE: Other £1.6bn CRE - Investment Corporate – Other 60% RoI 65% RoI 13% £3.4bn, 27% £7.8bn, 24% 22% NI 27% NI 18% UK 8% UK Mortgages: CRE - Development 88% RoI £0.7bn, 2% 12% NI CRE – Investment CRE - Mortgages £3.6bn, 11%
Slide 41: Ulster Bank asset quality (Q113)
Ulster Bank asset quality (Q113) Core Ulster Bank, £33.1bn loan book – 53% provision coverage1 £bn Mortgages £bn Corporate - Other £bn CRE - Investment 38% 47% 48% 42% 53% 61% 63% 36% 46% 17% 43% 31% 12% 8% 24% 25% 3.43 19% 18% 2.45 2.38 1.78 1.68 1.92 1.66 1.50 1.54 1.14 1.16 0.98 0.68 0.89 0.77 0.
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