Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Merrill Lynch Banking & Insurance Conference 2008
23 slides from Natwest's conference presentation, Oct 7, 2008
Slide 1: Make it happen
Make it happen Merrill Lynch Banking & Insurance Conference 2008 Sir Fred Goodwin, Group Chief Executive 07 October 2008
Slide 2: Important Information
Important Information This presentation may contain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Grou
Slide 3: Introduction
Introduction • The outlook is subdued • Economic forecasts uncertain • There will continue to be economic activity even though growth prospects are dampened • Opportunities will be spread unevenly by geography • Strong franchises and diversification of income streams will remain important . . . • As
Slide 4: Economic Outlook
Economic Outlook Consensus GDP Growth Forecasts Jan 07 Jul 07 Feb 08 Sep 08 Sep 08 2008 2008 2008 2008 2009 UK 2.4% 2.2% 1.7% 1.2% 0.6% US 3.0% 2.8% 1.6% 1.8% 1.4% Eurozone 2.1% 2.3% 1.6% 1.3% 0.9% Asia-Pacific 4.8% 5.0% 4.9% 4.8% 4.6% Slide 4
Slide 5: Diversification of the Franchise
Diversification of the Franchise Underlying Contribution £m 1H08 % Global Markets – Global Banking & Markets 2,405 30 – Global Transaction Services 886 11 Regional Markets – UK Retail & Commercial Banking 3,221 40 – US Retail & Commercial Banking 534 7 – EME Retail & Commercial Banking 416 5 – Asia
Slide 6: Diversification of Income Streams
Diversification of Income Streams Income by Type Income by Geography Net Interest Income 45% Asia- Rest of Business Personal Pacific World 1% deposits 7% lending 11% 6% Personal deposits 10% Business US lending 17% 17% Insurance net premium income 17% Net fees and Europe commissions 19% 14% Other op
Slide 7: Highlights
Highlights • Strength of the Franchise – UK Retail & Commercial – US Retail & Commercial – GBM • Opportunities for Growth – GBM – GTS – Asia • Operational Effectiveness – Balance Sheet – De-leveraging – Margins – Credit Quality – Integration – Manufacturing Slide 7
Slide 8: Strength of the Franchise: UK Retail & Commercial Banking
Strength of the Franchise: UK Retail & Commercial Banking Strong and diversified franchise well positioned with high returns on equity 1H08 Income 1H08 Other Business 3% Overdrafts 6% Total income +5% Other Commercial Personal Contribution +7% 8% Loans 7% Credit Cards Operating profit +8% Mid 7% Cor
Slide 9: Strength of the Franchise: US Retail & Commercial Banking
Strength of the Franchise: US Retail & Commercial Banking Strong franchise well positioned in consolidating market • Deposit-led franchise: RBS America 1H08 Income #6 largest in the US Personal Commercial lending 8% • Less exposed than peers to credit deposits 13% issues Credit & debit Commercial ca
Slide 10: Strength of the Franchise: Global Banking & Markets
Strength of the Franchise: Global Banking & Markets GBM has market-leading customer franchises, product depth and global reach • Market leading customer franchises 1H08 Income – #1 in UK and Europe, #5 in US and Asia (ex Japan) Asset & Portfolio Rates 28% Management 27% • Product depth – #4 Global I
Slide 11: Opportunities for Growth: GBM Risk Management Products
Opportunities for Growth: GBM Risk Management Products Combination with ABN AMRO has enhanced risk management product capabilities and local reach which will provide sustainable growth Income 1H08 v 1H07 • Volatility has driven increased Currencies +34% customer demand, strongly Local Markets +88% p
Slide 12: Opportunities for Growth: Global Transaction Services
Opportunities for Growth: Global Transaction Services Delivers high quality earnings through the cycle • Global cash management, trade finance, merchant services and 1H07 1H08 commercial cards £m £m % • Top 5 transaction bank with Net interest income 393 440 +12 presence in more than 50 countries, N
Slide 13: Opportunities for Growth: Asia
Opportunities for Growth: Asia Integrated proposition in strongest growing region • £1bn income from Asia in 1H08 Asia Income 1H08 £m • GBM/GTS presence in 15 Asian 1,000 China markets, retail & commercial Hong Kong R&C proposition in 8 Asian markets 800 Taiwan • Linkages between propositions GTS In
Slide 14: Opportunities for Growth: Asia - Retail & Commercial
Opportunities for Growth: Asia - Retail & Commercial The continued expansion of the Asian economies provides strong opportunities in affluent and commercial banking Retail & Commercial Income Growth 1H08 China +89% Hong Kong +6% Taiwan +20% Singapore +56% Indonesia +10% Malaysia +56% India +25% Paki
Slide 15: Operational Effectiveness: Balance Sheet
Operational Effectiveness: Balance Sheet Well matched balance sheet structure 100% Other Other 90% MTM of trading MTM of trading 80% Derivatives Derivatives 70% Reverse Repo 60% Repo Liquid Assets Short-term Liabilities 50% 40% Loans to Banks Deposits by Banks 30% Customer Customer 20% Loans & Depos
Slide 16: Operational Effectiveness: Balance Sheet De-Leveraging
Operational Effectiveness: Balance Sheet De-Leveraging GBM Third Party Assets* £bn 1,000 • Reduction of £108bn in third party assets in the first half, £157bn in 2nd quarter 800 • Focus on improving risk/return profile, whilst continuing to support customer relationships 600 • Programme continues in
Slide 17: Operational Effectiveness: Margins
Operational Effectiveness: Margins Increased risk premiums now available across the business % 2 UK Mortgage Pricing 250 UK Retail Loans & Savings Pricing Credit Suisse Index 1.5 200 150 1 100 0.5 50 0 0 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 2Q 04 2Q 05 2Q 06 2Q 07 2Q 08 Source: Credit Suisse UK Banks
Slide 18: Operational Effectiveness: Credit Quality - UK
Operational Effectiveness: Credit Quality Diversified and high quality portfolio - UK UK Portfolio £282bn • UK Mortgages Leases and Finance 6% – Average LTV 49% Other 9% Individuals – Buy-to-let 1% UK loan Home 28% Property book 18% • UK Consumer Unsecured – Credit card 3 month arrears 0.58% • UK Co
Slide 19: Operational Effectiveness: Credit Quality - US
Operational Effectiveness: Credit Quality Diversified and high quality portfolio - US US Portfolio £57bn • US Core Consumer Real Other Estate Consumer Corporate & Industrial – Average LTV 64% 19% 25% – Average FICO 748 – No Option ARMs – No sub-prime origination CRE* • US Commercial Real 9% Estate –
Slide 20: Operational Effectiveness: Integration
Operational Effectiveness: Integration Integration remains on track to deliver £1.2bn benefits in 2009 and £1.7bn by 2010 Transaction Benefits £m Impact on profit before tax • Delivery of benefits remains 1,650 1,600 ahead of plan 1,400 1,180 • Accelerated delivery of GBM 1,200 headcount reductions
Slide 21: Operational Effectiveness: Integration
Operational Effectiveness: Integration Revenue benefits delivering ahead of plan Composition of Revenue Benefits • Revenue benefit plans to deliver £280m by 2009, £500m by 2010 Retail, Other GBM – 50% from strong growing Asia principally Asia 9 Retail and GTS businesses 9 Credit Markets – 25% from o
Slide 22: Operational Effectiveness: Group Manufacturing
Operational Effectiveness: Group Manufacturing Significant scope for further efficiency gains Annualised % Cost:Income Ratio 1H08 • Roll out of UK model globally 60 57.8 including full run rate synergies • Beyond integration, scope for 55 51.9 significant additional 50 48.4 48.2 efficiency improveme
Slide 23: Summary
Summary • The outlook for 2009 is challenging and presents a changing competitive landscape • We have franchise and operational strength to meet these challenges • We are delivering against our plans and targets • We have the flexibility to respond to organic opportunities as they emerge Slide 23
The Royal Bank of Scotland Group — Merrill Lynch Banking & Insurance Conference 2008 on 6ix