Natwest Group Plc · LSE:NWG
Natwest — Investor Day (November 2018)
49 slides from Natwest's investor day presentation, Nov 29, 2018
Slide 1: Commercial Banking Investor Seminar
Commercial Banking Investor Seminar 29th November 2018
Slide 2: Your presenters
Your presenters Alison Rose, Chief Executive Officer, Commercial & Private Banking • Appointed February 2014 - 26 years experience with RBS • Previous roles include: Head of M&IB, EMEA; Head of EMEA Corporate & Sponsor Coverage; Global Head of Portfolio and Head of Leverage Finance UK Andrew Lewis,
Slide 3: Agenda
Agenda Commercial Banking Overview – Alison Rose, CPB Chief Executive Officer Transforming the Core – Andrew Lewis, MD, Capital & Transaction Management, CPB Digitising Customer Experience – Keith Middlemass, CPB Chief Digital Officer Delivering Innovation – Andrew Ellis, Head of Strategy and Innova
Slide 4: Alison Rose, CPB Chief Executive Officer
Alison Rose CPB Chief Executive Officer
Slide 5: The focus of today's presentation: Commercial Banking
The focus of today’s presentation: Commercial Banking CPB: Alison Rose Inside the ring-fence Moving into CPB from 1 Jan 2019 Outside the ring-fence Business Banking Commercial Banking Private Banking RBS International England, Scotland England, Scotland England, Scotland Crown Dependencies, Gibralta
Slide 6: Commercial Banking: driving growth, value and returns
Commercial Banking: driving growth, value and returns What sets us apart in a highly competitive environment Driving sustainable Strong digital channels growth by embedding and propositions, balance sheet, capital continuously improving and risk discipline Largest UK customer journeys Commercial ban
Slide 7: Our strategy is based on a deep understanding of customer needs
Our strategy is based on a deep understanding of customer needs Customer Micro Small SME Complex SME / Mid Large Corporate needs: Expect ‘Mobile first’ with Informed RM for support Corporate Supplement internal a personal touch during ‘moments of Trusted RM for advice expertise with advice truth’ wi
Slide 8: We have transformed the business with disciplined delivery against all key priorities
We have transformed the business with disciplined delivery against all key priorities… 1 2 3 4 5 Invest in our Digitise customer Simplify our Generate Deliver innovation people experience business sustainable growth to market Engagement1 Digital utilisation2 Account opening RWAe intensity Innovation
Slide 9: Invest in our people
1 Invest in our people Tomorrow’s RM Today’s market Yesterday’s RM leading RM1 Developing the RM of the Providing broader Becoming an invaluable Transactional future business solutions, and business partner, relationships, helping sector-led insight providing timely insight customers navigate and so
Slide 10: Digitise customer experience
2 Digitise customer experience Enhanced customer experience through…. … improved channels New Bankline Bankline Mobile Bankline Direct … and digital customer journeys Lombard Digital On-boarding and Lending Account Opening Transformation 10
Slide 11: Simplify our business
3 Simplify our business Eliminating Wholesale product rationalisation: 250 products to <95 Simplifying Credit policies: 60 into 1, Pricing models 10 into 1 Automating Automated 9,000 short form annual renewals 11
Slide 12: Generate sustainable growth
4 Generate sustainable growth Ongoing disciplined approach… …releasing capital and driving sustainable growth Gross RWA reductions 20 Data Quality / £bn (cum.) 18 Models 13 Capital and risk 12 Risk Transfer Trades management 6 Active Capital 4 Management 1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Pricing 2017 2017 2017
Slide 13: Deliver innovation to market
5 Deliver innovation to market • Dedicated innovation team • Feet on the ground in Fintech hubs and experience where it counts • Partnering in order to access leading expertise and acquire Innovating inside talent and outside the core • Creating solutions to real business problems • Innovation progr
Slide 14: Strengthening the business to create shareholder value
Strengthening the business to create shareholder value Balance sheet up Revenue up Gross Loans & Advances Revenue £bn £bn CAGR CAGR +5% 91.1 2.5 +4% 2.6 87.0 74.8 2.2 36.4 25.1 Q3 2014 Q3 2014 Q3 2018 Q3 2014 Q3 2014 YTD Q3 2018 Adjusted1 YTD Adjusted1 YTD Gross lending per client facing FTE (£m) Ad
Slide 15: Key messages: delivering growth, value and returns
Key messages: delivering growth, value and returns 1 Largest UK Commercial bank with leading customer advocacy 2 Driving sustainable growth by embedding balance sheet, capital and risk discipline 3 Leading relationship-led engagement model, driving growth in chosen areas 4 Strong digital channels an
Slide 16: Andrew Lewis, MD, Capital & Transaction Management, CPB
Andrew Lewis MD, Capital & Transaction Management, CPB
Slide 17: A disciplined approach to capital, pricing and risk has transformed the balance sheet
A disciplined approach to capital, pricing and risk has radically transformed the balance sheet Capital and risk management Pricing Conduct & controls 17
Slide 18: As we grow we will continue to manage capital proactively and efficiently
Capital and risk management As we grow we will continue to manage capital proactively and efficiently Gross L&As, RWAe, RWAe Intensity £bn, % Gross L&As RWAe RWAe Intensity • Proactively manage our lending portfolio: 82% 84% • Low returning relationships / single name exits 78% 80% • Assets that per
Slide 19: Key Transactions 2016 - 2018
Capital and risk management Key Transactions 2016 - 2018 Synthetic Back-book Portfolio Sale Synthetic Portfolio Sale Securitisation restructuring Securitisation £300m £433m £102m £126m £5,890m 2016 2017 £3.5bn UK SME CRE UK Healthcare UK Passenger UK SME & IPRE SME Railway Fleet Credit Facilities Cr
Slide 20: Pricing: instilling a pricing discipline
Pricing Instilling a pricing discipline Before After 5% 5% Proposed Proposed margin margin Proposed Margin Proposed Margin 4% 4% 3% 3% 2% 2% 2% 3% Grid 4% margin5% 2% 3% Grid 4% margin5% At grid Grid Margin Grid Margin 20 Within 20%
Slide 21: Material structural de-risk from a conduct and prudential regulation perspective
Conduct & Controls Material structural de-risk from a conduct and prudential regulation perspective Lessons from the past support disciplined approach going forward • Evidence based sales through need and outcome focused journeys • Systematic link between customer sophistication and product Sales co
Slide 22: Keith Middlemass, CPB Chief Digital Officer
Keith Middlemass CPB Chief Digital Officer
Slide 23: We are a strong digital business, operating at scale
We are a strong digital business, operating at scale… Handling c.2.5m site #1 for Online 1m+ registered visits and Satisfaction1 users, from 5 primary digital £200bn+ in micro channels transactions per month businesses to FTSE 100 Note(s): Latest available data; (1) Charterhouse Commercial Banking s
Slide 24: #1 for online satisfaction, delivering to customers and relationship managers
…#1 for online satisfaction1, delivering to customers and relationship managers Our approach Digital utilisation2 Bankline Site Visits3 % m Customer 85% 70% 2.6 1.4 2015 2018 2015 2018 Income per RM RM engagement £m % Digital 1.4 71% 59% 1.0 Relationship manager Q3 2014 YTD Q3 2018 YTD 2015 2018 Not
Slide 25: We are continually improving our channels
We are continually improving our channels… • Processing over 400,000 payments daily • Reducing time taken to make a payment by ~30% Bankline • Cora, our digital chatbot, is processing c.5,000 Bankline queries per month (16% after hours) • Launching in App Store in Q4 2018 Bankline Mobile • Testing w
Slide 26: Whilst digitising our customer journeys
… whilst digitising our customer journeys… On-boarding & • 30% of Commercial accounts opened digitally Account Opening • Over 50% of all accounts opened within 5 days • Lending approval in 24 hours Lending • Pre-assessed SME loans of £750k Transformation • Application to decision in 4 minutes • Deli
Slide 27: And reinventing the way we work
… and reinventing the way we work Illustrative example of digital execution Co-creation Customer-led with customers at every step 1,000 # customers 50 co-creating From proof of Version #1 Moving at concept to Alpha Beta Launch pace launch in months Version #2 Alpha Beta Launch Continuous Version #3
Slide 28: Mobile Bankline App
*RBS } Mobile Bankline App >»
Slide 29: Andrew Ellis, Head of Strategy and Innovation, CPB
Andrew Ellis Head of Strategy and Innovation, CPB
Slide 30: Building businesses and digital solutions for new and existing customers
Building businesses and digital solutions for new and existing customers c.800k1 existing c.4.5m2 potential new SME customers customers Multi- Fully Direct & Channel Digital 3rd Parties Current account, Broad suite of banking payments, and integrated and value add services business services 30 Note(
Slide 31: Mettle: a new current account helping business owners make better decisions
Mettle: a new current account helping business owners to make better decisions The forward-looking business account that lets you know what’s next ✓ 5 minute remote account opening ✓ Create, send, track and chase invoices when they are due ✓ Capture receipts and categorise transactions for bookkeepi
Slide 32: A portfolio creating solutions to real business problems
A portfolio creating solutions to real business problems Modular - API Enabled - Single Sign On - Shared Customers “…giving me a quick and “…my personal advisor, easy way to borrow helping me to resolve money when I need it, at business issues with on- a fair price” demand access to expertise” “…sav
Slide 33: Building innovation capabilities by doing things differently
Building innovation capabilities by doing things differently Working differently to develop: Partnering with: • Developing strategic external partnerships • Rapidly building solutions • 60+ software as a service providers onboarded in an agile environment • Launched proof of concept in 6 months Hire
Slide 34: Underpinned by a robust venture capital-style approach
Underpinned by a robust venture capital-style approach Innovation operating model principles 1 Bold strategy and vision 5 Strong talent pool 2 Tough VC-style portfolio governance 6 Consistent ways of working 3 Direct venture support model 7 Shared assets and routes to market 4 Optimised BAU interact
Slide 35: Rob Whittick, CPB Finance Director
Rob Whittick CPB Finance Director
Slide 36: Our diverse client base provides the platform for sustainable returns
Our diverse client base provides the platform for sustainable returns Segment Balance Sheet split: Q3 2018 Gross Loans & Advances £bn • We support a diverse range of clients 29.9 starting at c.£2m turnover through to 20.7 17.7 the top end of the FTSE 100 9.7 8.7 4.4 • Whilst returns vary across the
Slide 37: We have built a business to deliver sustainable returns and shareholder value
We have built a business to deliver sustainable returns and shareholder value Gross Loans & Advances Revenues £bn £bn CAGR • Achieved strong underlying CAGR +4% +5% business growth since 2014 – headline results impacted by 87.0 91.1 2.5 2.2 2.6 active portfolio management and 74.8 business transfers
Slide 38: We have achieved above market asset growth in our target areas
We have achieved above market asset growth in our target areas Gross Loans & Advances £bn • Delivered £6bn growth (+3% annualised) in the core business since Dec 2016, (4) ahead of market in target areas 6 (12) • Growth in higher returning SMEs and Mid-Corps and selected Large Corporates has offset
Slide 39: Management actions have mitigated pressures on NIM and fees
Management actions have mitigated external and internal pressures on NIM and fees Net Interest Margin1 % • Actions to improve underlying NIM include asset and deposit pricing initiatives, adjusting deposit • Asset & Liability • Competition mix, and targeted volume growth pricing • Liquidity headroom
Slide 40: We have driven consistent improvements in operating efficiency and productivity
We have driven consistent improvements in operating efficiency and front line productivity FTE Client Facing Middle Office Operations 9,600 • Our investment in Digital, Front Line 8,850 7,500 7,400 capability and business simplification has 3,250 3,100 enabled a 23% headcount reduction 2,550 2,500 2
Slide 41: We will continue to take action to improve returns
We will continue to take action to improve returns to deliver sustainable value RoE (%) More to come Whilst absorbing • RM productivity • Growth in • Competition • Asset & liability • Business re- targeted areas • Capital model pricing organisation • Further cost changes • Active capital • Hedging i
Slide 42: We meet our clients' needs through a portfolio of great products
We meet our clients’ needs through a portfolio of great products Financing and Risk Management - buying & leasing assets, working capital management, investing, enabling trade and managing risk Q3 Asset • Financing products provide sustained Q3 YTD Product 1 Balance Sheet support to our customers an
Slide 43: Economic metrics relevant to our business
Economic metrics relevant to our business GDP YoY growth1 – relevant for wider business investment M4 PNFC (YoY)2 – relevant for SME & mid-corps levels and for Lombard and RBSIF 3.5% 7.5% GDP growth 3.0% 5% GDP forecast 2.5% 2.5% 2.0% 0% 1.5% -2.5% 0.0% -5% 2012 2014 2016 2018 2020 2022 2015 2016 20
Slide 44: We project improving returns driven by sustainable growth
We project improving returns driven by sustainable growth • Our continued focus on core growth, Q3 3-5 year costs and capital productivity will drive Commercial Banking (£m) RoE upwards 2018 YTD Outlook* Income 2,569 • We will continue to invest in the business and develop new products – Costs (ex.
Slide 45: Key Messages
Key Messages The business has delivered consistent profits through the cycle, driven by management 1 actions We have a diverse and stable revenue base and a high quality balance sheet, 2 actions on pricing have offset economic headwinds We have proactively managed the portfolio to improve quality of
Slide 46: Key Messages
3x RBS Key Messages ‘\ va !
Slide 47: Key messages: delivering growth, value and returns
Key messages: delivering growth, value and returns 1 Largest UK Commercial bank with leading customer advocacy 2 Driving sustainable growth by embedding balance sheet, capital and risk discipline 3 Leading relationship-led engagement model, driving growth in chosen areas 4 Strong digital channels an
Slide 48: Questions
3x RBS Questions \ hve !
Slide 49: Disclaimers
Disclaimers The targets, expectations and trends discussed in this presentation represent management’s current expectations and are subject t o change, including as a result of the factors described in the “Risk Factors” on pages 372 to 402 of the Annual Report and Accounts 2017 and the “Summary Ris