Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — UBS Financial Services Conference 2012
36 slides from Natwest's conference presentation, May 8, 2012
Slide 1: RBS: The Progress Continues
RBS: The Progress Continues Bruce Van Saun, Group FD, The Royal Bank of Scotland Group UBS Financial Services Conference 8th May 2012
Slide 2: Important Information
Important Information Certain sections in this document 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: Agenda
Agenda RBS: The Recovery Plan and Scorecard Key Elements of Risk Reduction Attractive Core Business Franchises Q1 Business Highlights Conclusion 3
Slide 4: The Recovery Plan and Scorecard
The Recovery Plan and Scorecard
Slide 5: In 2009 RBS instigated a 5 year Recovery Plan
In 2009 RBS instigated a 5 year Recovery Plan Objectives To serve customers well To restore the Bank to a sustainable and conservative risk profile To rebuild value for all shareholders These priorities are interconnected and mutually supporting Strategy The new RBS is built upon customer-dr
Slide 6: Progress to date: Balance sheet
Progress to date: Balance sheet Balance sheet managed down Non-Core assets reduced by two-thirds 9 9 Group Funded Assets, £bn Third Party Assets, £bn ~1,600 (41%) 258 (68%) 950 83 1 Worst point Q112 FY08 Q112 Short-term funding reduced Liquidity portfolio > STWF2 9 9 STWF, £bn Liquidity portfolio, £
Slide 7: Progress to date: Balance sheet
Progress to date: Balance sheet Capital base robust Leverage below target 9 9 Core Tier 1 ratio, % Leverage, x APS benefit 28.7 10.8 680bps 16.4 18.0 4.0 FY08 Q112 FY08 Q112 Target Close to self-funded 9 Group loan : deposit ratio, % Focus on safety and security of the bank - key balance sheet met
Slide 8: Progress to date: The Group's risk profile is significantly better
Progress to date: The Group’s risk profile is significantly better Commercial Real Estate Exposure1 Single name credit concentrations Core Non-Core Corporate SNC Exposures Over Risk Appetite2 £98bn 385 £87bn £72bn £69bn 241 £51bn £42bn 161 £40bn £39bn £19bn £47bn £45bn £32bn FY09 FY10 Q112 FY09 FY10
Slide 9: Key elements of risk reduction
Key elements of risk reduction
Slide 10: Non-Core: Driving risk improvement
Non-Core: Driving risk improvement The primary driver of risk reduction Non-Core – make-up at inception Non-Core – challenges & answers Separately managed as run-down division Significant complexity around portfolio At inception: assets — £258bn of funded assets — Brought in asset class expert
Slide 11: Non-Core: How we went about it
Non-Core: How we went about it Run-down plan: Run-off has been key driver: — Biggest single contributor to run-down – 42%3 reduction Assets at inception: to date £258bn1 — No/limited execution costs relative to market disposals — Requires a focused and systematic approach — Stay close to clients –
Slide 12: Good progress in Non-Core run-down
Good progress in Non-Core run-down £bn 2009-2013 2009-Q112 85 Un-drawn commitments Funded assets FX (10)-(20) (9) Rollovers 20-30 17 36 & drawings Impairments (20)-(30)1 (19) 175 21 258 Asset sales (90)-(100) (74) 12 201 11 Run-off (110)-(130) (90) 138 8 c. 43 94 83 c40 Target Progress to date 2008
Slide 13: Non-Core: 2013 'rump'
Non-Core: 2013 ‘rump’ 2013 rump of c.£40bn TPAs is forecast 2013 Non-Core ‘rump’ estimated at c.£40bn, £bn 40 including: 44% Corporate — Corporate and other assets of low yield but generally good credit quality CRE Retail — CRE of c.£15bn, c.60-65% in longer-term 34% work-out 5% Markets 7% Natur
Slide 14: GBM: Restructuring 2008/09
GBM: Restructuring 2008/09 Wholesale restructuring in 2008 GBM donated Non-Core assets - Deleveraging ahead of plan TPAs1 169 TPAs1, £bn Ability to focus £bn on deleveraging 169 Original Plan 104 Actual 668 GBM 80 -169 Non-Core 7 57 43 256 15 FY08 FY11 499 08 GBM Enhanced risk culture fully embedded
Slide 15: GBM: Why we had to go to round two restructuring
GBM: Why we had to go to round two restructuring Economic RBS impact Slower economic recovery NIM and impairment headwinds Flatter yield curve Lower customer activity levels Market RBS impact Customer risk aversion Lower IB client activity & risk volatility Dislocated funding markets
Slide 16: GBM: The plan going forward
GBM: The plan going forward RBS Competitive Positioning Weak Strong Low • Cash Equities • Prime Services • FX • Corporate Broking • Transaction Services Capital Intensity • Equity Capital Markets • Investor Products • M&A • Credit Markets • Rates • Emerging Markets • Asset-backed Products • Corporat
Slide 17: Markets business overview
Markets business overview Summary Provides products and services to a wide range of the Group’s clients and addresses the more complex financial needs of large corporate and institutional clients and (via Retail network, RBS Wealth and third party distributors) sophisticated retail investors Int
Slide 18: Significant connectivity of Markets business with rest of RBS Group
Significant connectivity of Markets business with rest of RBS Group Revenue Connectivity of Markets and International Banking Businesses Across RBS Group International UK Retail Banking ~£40m ~£1.1bn ~£1bn ~£150m UK Citizens Markets Corporate ~£80m ~£600m Ulster Bank Wealth ~£80m ~£20m ~£1.9bn1 re
Slide 19: International Banking overview
International Banking overview Summary Client focus: Internationally oriented corporates and their subsidiaries. Financial Institutions to who we sell Transactions Services Coverage model: Integrated coverage organisation serving own client base and international transaction services needs of th
Slide 20: Markets & Int'l Banking: Achievable medium term targets
Markets & Int’l Banking: Achievable medium term targets Q112 Medium-term targets Management levers Markets IB Markets IB Cost: income 50% 72% c.60% <60% Cost efficiency ratio RWA reduction: — Lower inventory RoE 21.1% 7.5% >12% >12% — De-risking — Model improvements Reduce asset and capital us
Slide 21: Attractive Core business franchises
Attractive Core business franchises
Slide 22: Core: Robust franchises, leading market positions
Core: Robust franchises, leading market positions UK Retail: 1 — #2 for UK current accounts (13m); 11.4m savings accounts UK Corporate: 2 3 — #1 SME bank, #1 Corporate Bank; c1.2m customers Wealth: 4 — #1 UK High Net Worth Private Bank US R&C: 5 — Top 5 player in 8 of the top10 markets in wh
Slide 23: Core: A complementary mix of businesses
Core: A complementary mix of businesses RoEs Loan to Deposit Ratio Q112 RoE, % Target >12% Q112 LDR, % Target c.100% UK Retail 24 Wealth 44 UK Corporate 16 US R&C1 72 Wealth 10 UK Corporate 87 US R&C1 8 UK Retail 105 Int’l Banking 8 Int’l Banking 116 Ulster Bank -26 Ulster Bank 147 Total R&C 9 Total
Slide 24: Core: Improving sustainable strength & value
Core: Improving sustainable strength & value FY07 revenues1, old structure Balance sheet structure 66% R&C GBM Markets R&C GBM 34% GBM 32% Rest of Group 2007 44% 56% RWAs4 66% Target 23% 77% FY11 revenues2, new structure o/w c.10% Int’l Banking Markets 20% 80% R&C 2007 68% 32% TPAs 11% International
Slide 25: Revenue diversity: Geography and business mix
Revenue diversity: Geography and business mix Geographic coverage Key points FY11 revenues by geography1 RoW 5% Attractive business make-up US 21% Anchored in domestic market Focused international presence UK 64% Europe 10% Appropriate scope of Markets revenues Business mix versus peers 2011
Slide 26: Core: A sustainable business emerging
Core: A sustainable business emerging NIM stabilising Tight cost management Core business NIM, % Core costs, £bn 2.19% 2.30% 3.8 3.8 3.61 2.12% Q110 Q111 Q112 Q110 Q111 Q112 Impairments normalising A self funded business Core Impairments, £m Ulster Bank Core ex Ulster Core loan to deposit ratio, % %
Slide 27: Q1 Business highlights
**RBS Group Q1 Business highlights
Slide 28: Business Highlights
Business Highlights Robust operating profit: £1.2bn Group operating profit in Q112 vs £144m loss in Q411 Core operating profit of £1.7bn; RoE of 11%, 14.4% excluding Ulster Bank Rebound from subdued client activity levels in Markets Risk reduction continues apace: Funded assets reduced £27bn
Slide 29: Financial highlights
Financial highlights Core Business: Q112 1 Operating profit £1.7bn +46% q-o-q driven by improved performance in Markets business 2 Return on Equity 11% 14.4% excluding Ulster Bank +1bp q-o-q; wholesale funding reduction offsets mix towards secured lending R&C NIM 2.91% and lower swap rates 1,3 Cost
Slide 30: Progress against plan
Progress against plan Medium-term Group – Key performance indicators Worst point Q112 Target Balance sheet & risk: 1 Loan : deposit ratio (net of provisions) 154% 106% c100% 3 2 Short-term wholesale funding £297bn £80bn <10% TPAs 4 3 Liquidity portfolio £90bn £153bn >1.5x STWF 5 6 Leverage ratio 28.
Slide 31: Funding and liquidity vs. peers
Funding and liquidity vs. peers Key Metrics RBS Q112 UK Peers4 EU Peers4 Better than Peers FY11 FY11 UK EU Loan : Deposit Ratio (Group/Core) 106% / 93% 109% 99% 9 9 x 9 Liquidity Buffer1 as % STWF2 191% 151% 89% 9 9 STWF2 as % Funded Balance Sheet 8% 13% 13% 9 9 STWF2 as % TWF3 34% 51% 47% 9 9 Depos
Slide 32: Planned milestones in 2012
Planned milestones in 2012 Non-Core targeted £65- Jan: SLS fully 70bn funded assets by repaid year end Q1: MIB structure May: Last CGS Plan to IPO Insurance confirmed funding matures Q1 Q2 Q3 Q4 Apr: £500m debt issuance by DLG completed Plan for Santander sale to close Apr: 1 for 10 ordinary share c
Slide 33: Conclusion
¥* RBS Group F 4 Conclusion
Slide 34: Markers of success
Markers of success A fundamentally A resized, restructured and de-risked balance sheet restructured group An efficiently run, lower cost business Maintenance of market-leading positions with customer relevance A viable, attractive, Complementary business proposition with appropriate capital
Slide 35: Conclusions
Conclusions Solid operating performance from the Core Business Core Franchises Retail & Commercial remains stable against backdrop of weak economy Markets rebounds, demonstrating strength of franchise despite smaller balance sheet Non-Core continues to execute well; losses £799m lower than Q
Slide 36: Questions?
*~ RBS Group F 4 Questions?
The Royal Bank of Scotland Group — UBS Financial Services Conference 2012 on 6ix