Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (February 2014)
34 slides from Natwest's debt investor presentation, Feb 27, 2014
Slide 1: Full Year 2013 Results
Full Year 2013 Results 27 February 2014
Slide 2: Key takeaways
Key takeaways FY13 operating profit pre-RCR £2.5bn, down 15% Y/Y primarily driven by lower income across divisions NIM improved to 2.01%, up 9bps Y/Y Further focus on cost efficiency with operating expenses down 4% Y/Y 8.6% ‘fully loaded’ Core capital ratio, up 90bps Y/Y, but down 50bps vs. Q313 ref
Slide 3: Contents
Contents P&L explained Balance sheet, Capital & Funding RBS Capital Resolution Restatement timetable 3
Slide 4: P&L overview
P&L overview £’m 2013 2012 Q4 2013 Q3 2013 Total Income 19,442 22,085 3,940 4,894 Slide 5 o/w RBS Capital Resolution (333) - (333) - Operating expenses (13,313) (13,854) (3,247) (3,286) Slide 6 Impairment losses (8,432) (5,279) (5,112) (1,170) Slide 7 o/w RBS Capital Resolution (4,490) - (4,290) (20
Slide 5: Income lower in most areas
Income lower in most areas Income, £m -10% 22,085 (1,161) (684) (133) (332) 19,775 (333) 1 19,442 (26%) (4%) (34%) (115%) NIM NIM 1.92% 2.01% FY12 Lower Lower Lower Lower FY13 RCR impact FY13 Markets Retail & Centre Non-Core Commercial Lower Markets reflects strategic scaling back of the balance s
Slide 6: Costs reduced
Costs reduced Expenses, £m Cost:Income ratio, % -4% 13,854 (327) (339) 125 13,313 11% 36% C:I C:I 63% 68% FY12 Lower Lower Other FY13 Markets Non-Core Markets and Non-Core costs down, driven by active asset reduction Tight control across the Group, with staff expenses down 7% Y/Y, with headcount
Slide 7: Lower underlying impairments
Lower underlying impairments Impairment charge, £m Provisions as proportion of REiL, % 8,432 5,279 (90) 4,490 (482) (765) 5% 3,942 35% 34% FY12 Core ex. Core Ulster Non-Core FY13 RCR impact Total Ulster FY13 52% 53% 64% coverage coverage coverage FY 2013 RBS Capital Resolution impairments of £4.5b
Slide 8: Operating profit
Operating profit Operating profit, £m 772 494 (871) 2,952 27% (58%) (827) 2,520 48% (15%) (4,823) (2,303) FY12 Reduced Reduced Lower Remainder FY13 RCR FY13 Ulster Non-Core Markets of Group pre-RCR losses losses Ulster loss ex. RCR halved Y/Y driven by significantly lower impairments R&C down dr
Slide 9: Impact of notable items
Impact of notable items £’m 2013 2012 Q4 2013 Reported in Operating Performance RCR impairment (4,490) (4,290)1 RCR negative income (Fair Value write-downs) (333) (333) Non-Core disposal losses (254) (14) (79) Non-Core loss from trading activities (654) (148) (218) Core businesses redress & litigati
Slide 10: Litigation and conduct provisions increased
Litigation and conduct provisions increased Payment Protection Insurance Interest Rate Hedging Regulatory & Legal Outstanding provision, £m 2,505 2,082 1,077 926 737 (276) 500 776 (353) 465 631 (54) Q313 Q413 Q413 FY13 Q313 Q413 Q413 FY13 Q313 Q413 Q413 FY13 total utilisation top-up total utilisatio
Slide 11: Contents
Contents P&L explained Balance sheet, Capital & Funding RBS Capital Resolution Restatement timetable 11
Slide 12: Balance sheet: Safety & Soundness engrained
Balance sheet: Safety & Soundness engrained Net Stable Funding Liquidity Coverage Loan : deposit ratio Ratio Ratio 94% 122% 102% Q313: 94% Q313: 119% Q313: >100% FY12: 100% FY12: 117% FY12: >100% Short-term wholesale Funded balance sheet Liquidity portfolio funding £740bn £32bn £146bn Q313: £806bn Q
Slide 13: Non-performing loans declining
Non-performing loans declining REiL, £bn REiL as proportion of gross customer loans, % -7% 42.2 -2% 41.1 41.0 40.4 39.4 0.9 RCR impact 38.5 FY12 Q113 Q213 Q313 FY13 9.1% 9.0% 9.5% 9.4% 9.4% Non-performing loans down 2% Q/Q (down 5% ex RCR impact) £0.9bn of Q4 2013 REiL increase relates to assets
Slide 14: On track to achieve CT1 and leverage ratio targets
On track to achieve CT1 and leverage ratio targets FLB3 CT1 build progressing Leverage ratio continues to improve ‘Fully loaded’ Core Tier 1 ratio, % CRR full end-point measure leverage ratio, % ≥12% c.11% ≥4% 3.5% 8.6% 3.1% 7.7% FY12 FY13 2015 2016 FY12 FY13 Long-term 1 target target Target Targe
Slide 15: Good progress on RWA reduction
Good progress on RWA reduction RWA progression, £bn 460 31 37 44 429 6 385 52% 36% FY12 Non-Core Markets R&C / Other FY13 CRD IV uplift FY13 ’Fully Loaded’ Excellent progress in reducing Non-Core & Markets RWAs supported underlying Y/Y capital ratio build CRD IV uplift £44bn, versus £60-70bn ran
Slide 16: Underlying capital generation
Underlying capital generation Key drivers of Basel III ‘Fully Loaded’ Core Tier 1 ratio, % 1.8% underlying build 0.4 (0.3) (0.4) 0.5 (0.2) 8.6 0.9 9.4 7.7 FY12 Non-Core Markets Underlying Pre- Redress Litigation RCR net FY13 reduction deleveraging capital exceptional provisions provisions impact bui
Slide 17: Fully loaded Basel III capital ratio – key drivers
Fully loaded Basel III capital ratio – key drivers £bn FY 2012 Q3 2013 FY 2013 Key drivers CT1 Ratio (current PRA rules) 11.5% 11.6% 10.9% Reported Tangible Equity 49.8 48.6 41.1 Expected loss (6.1) (4.1) (1.7) Benefit of RCR offset in part by other regulatory factors o/w EL - P (5.1) (4.7) (0.1) £4
Slide 18: Leverage ratio – key drivers
Leverage ratio – key drivers CRR full end-point measure leverage ratio, % +0.4% 3.6% 3.5% 3.1% FY 2012 Q3 2013 FY 2013 Fully loaded CET 1 capital, £bn 37.9 41.1 36.8 Total assets, £bn 1,312 1,129 1,028 Netting of derivatives (370) (265) (234) Securities financing transactions (46) (55) (41) Regulato
Slide 19: Non-Core delivered ahead of plan
Non-Core delivered ahead of plan Third Party Assets (TPA), excl. derivatives, £bn Run-off -230 £110bn 258 Disposals 201 £94bn Impairments 138 £25bn 93 57 FY13 28 40 <35 Forecast Original Forecast Revised 2008 2009 2010 2011 2012 2013 Non-Core funded assets reduced by £230bn, 89%, to £28bn at FY13,
Slide 20: Contents
Contents P&L explained Balance sheet, Capital & Funding RBS Capital Resolution Restatement timetable 20
Slide 21: Source of assets and capital for RBS Capital Resolution
Source of assets and capital for RBS Capital Resolution +76% 65 39 37 (11) 28 29 RWAe, £bn (12) 13 TPAs, £bn Non-Core Transfer Core RCR FY13 FY13 to Core to RCR RCR assets selected on the basis of high capital intensity, or poor performance in stress scenarios These assets are disproportionate d
Slide 22: Good progress in initial RCR run-down
Good progress in initial RCR run-down -52% 137 (12) (11) (45) 65 (4) 68% 47 coverage (6) RWAe, £bn (5) TPAs, £bn (5) 29 (2) RCR H113 Disposal Run-off Impairment 1 Other 2 RCR FY13 Good progress in asset reduction to date with RWA equivalents down £72bn, 52%, and funded assets down £18bn, 38% Fir
Slide 23: Progress made against key RCR metrics
Progress made against key RCR metrics H1 2013 FY 2013 By end-2016 Third Party Assets £47bn £29bn ≤£6bn Disposal costs - nm £1.5bn - £2bn Impairments - £4.5bn1 £5.0bn - £5.5bn2 Operating & funding - nm £1.5bn3 costs NPLs as % of Group 9.0% 9.4% 2.5% - 3.5% Target a net capital benefit of >£2bn, c55
Slide 24: RCR asset composition
RCR asset composition June 2013 December 2013 International Banking International Ulster Bank Banking Ulster 6% 8% Bank Markets 20% 17% 16% Markets 17% £47bn £29bn TPA TPA Corporate 16% 17% 32% 30% Corporate Commercial 11% Commercial 11% Real Estate Real Estate Asset Asset Finance Finance 24
Slide 25: RCR – FY 2013 financial impact
RCR – FY 2013 financial impact Pre-RCR RCR Post-RCR Key Group P&L lines, £m Impact Total Income 19,775 (333) 19,442 Impairment losses (3,942) (4,490) (8,432) Operating Profit 2,520 (4,823) (2,303) Tax (76) 306 (382) Attributable loss (4,108) (4,517) (8,625) Income by Division RBS recognised UK Cor
Slide 26: Contents
Contents P&L explained Balance sheet, Capital & Funding RBS Capital Resolution Restatement timetable 26
Slide 27: New reporting structure
New reporting structure From Q2 2014 we will move our reporting to the 3 businesses structure, RCR reported separately No Below-the-Line items – except Own Credit Adjustments, Goodwill and Disposals All costs will be allocated to businesses providing a complete picture of performance Expect
Slide 28: Contacts
Contacts Our Investor Relations team is available to support your research Richard O’Connor Head of Investor Relations richard.oconnor@rbs.com +44 20 7672 1758 For Equity Investors & Analysts For Debt Investors & Analysts For Corporate Access Alexander Holcroft Greg Case Leah McCreanor Head of Equit
Slide 29: Sustainability
Sustainability “The success of a bank depends on two things: a strong financial position; and a reputation for great customer service based on a deep connectivity with the society the bank supports, and is in turn supported by.” Ross McEwan, Chief Executive
Slide 30: Building a sustainable RBS
Building a sustainable RBS Sustainability at RBS means building our future on long term thinking that focuses on our customers and supports the communities in which they live. We are committed to being open and transparent regarding the challenges faced by our business, so our stakeholders can see w
Slide 31: Building a sustainable RBS
Building a sustainable RBS Robust governance RBS has a robust sustainability governance framework, ensuring our approach is managed effectively and debated at the appropriate level. The Sustainability Committee is a Board committee, comprising of three independent non-executive directors as well
Slide 32: Building a sustainable RBS
Building a sustainable RBS Transparency and accountability We identify, manage and report on current and emerging issues of material importance to the business, our customers, communities and wider society. Our ‘financing of the energy sector’ document contains enhanced disclosure around our len
Slide 33: Sustainability performance and commitments
Sustainability performance and commitments RBS is a member of the Equator Principles Association Steering Committee. We were heavily involved in the launch of 'EPIII', the latest iteration of the Principles. We have been members of the United Nations Global Compact since 2003 and we actively par
Slide 34: Forward Looking Statements
Forward Looking Statements 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’, ‘shoul
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