Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — FY2014 Earnings Presentation
50 slides from Natwest's earnings presentation, Feb 26, 2015
Slide 1: 2014 Annual Results and update on strategic progress
2014 Annual Results and update on strategic progress 26 February 2015
Slide 2: Philip Hampton, Chairman
Philip Hampton Chairman
Slide 3: Ross McEwan, Chief Executive Officer
Ross McEwan Chief Executive Officer
Slide 4: Today's presentation
Today’s presentation Ambition to be #1 for customer service, trust and advocacy Strategy working – strong execution against 2014 targets 2014 creates the platform to go further, faster on strategy: Further reshaping of CIB CET1 ratio target raised to 13% for the period of CIB restructuring Cit
Slide 5: Strong execution against 2014 strategic targets
Strong execution against 2014 strategic targets Strategy Goal 2014 Target 2014 Delivery Unquestioned CET1 >11% by end 2015 CET1 +260bps to 11.2% capital strength Overhaul of costs £1bn cost reduction in 2014 £1.1bn(1) Resilient Improve the resilience Key services available 99.96% customer systems of
Slide 6: 2014 strategic milestones
2014 strategic milestones RCR RWAs down 53%, run-down targets achieved 1 year ahead of original plan Citizens Successful IPO, deconsolidation now targeted by end 2015 US ABP business Exit of business, run-down 79% complete Ulster Bank Review completed, retained with new plan Coutts Review completed,
Slide 7: 2014 financial results
2014 financial results FY13 FY14 Income £19.4bn £18.2bn Operating costs £14.0bn £12.4bn (excl. restructuring, conduct & litigation) Restructuring, conduct & litigation costs £4.5bn £3.5bn Impairment (losses) / recoveries £(8.4)bn £1.2bn Operating (loss) / profit £(7.5)bn £3.5bn Attributable (loss) £
Slide 8: Improving our business for shareholders
Improving our business for shareholders UK PBB Commercial £6,037m £3,210m Income +4% Income +2% £5,813m £3,157m +7% +4% £3,406m £1,673m £3,299m £1,639m Adj. Costs -3%(1) Adj. Costs -2%(1) 2013 2014 2013 2014 RoE 19.4% Cost:income 55%(1) RoE 12.6% Cost:income 51%(1) (1) Adjusted: excluding restructur
Slide 9: Improving our business for customers
Improving our business for customers Over 1000% growth in 16 branch transformations mobile usage since 2010 per week ~3m active mobile 93% of branches re-branded customers by end of 2016 End of 2013 447 3,973 0 6,106 Our expanding presence communities served self service banking points Total points
Slide 10: Focusing on growth in the UK strategic segments
Focusing on growth in the UK strategic segments UK Mortgages UK Commercial Progress #4 in GB mortgages(1) #1 UK Commercial Bank(3) in 2014 £103bn in balances(2) (+4%) £86bn in balances (+1%) Grow our large, successful UK retail and commercial franchises Intention Above market net balance growth Loan
Slide 11: Progress is being made towards our target of becoming #1
Progress is being made towards our target of becoming #1 Net Promoter Scores across our core franchises 30 Personal Banking(1) Business Banking(2) Commercial Banking(3) 20 17 15 13 10 10 7 8 5 6 6 5 4 4 1 0 (4) (5) (10) (11) (11) (10) (10) (13) (13) (13) (16) (16) (15) (20) (23) (26) (30) (30) (38)
Slide 12: Reshaping our CIB business
Reshaping our CIB business Drivers of Returns are too low Capital usage Operating risks are outside of changes Costs are too high is too high our go-forward risk appetite Creating a more focused corporate and institutional bank built on existing product/service strengths £147bn RWAs reduced substa
Slide 13: Reshaping our CIB business
Reshaping our CIB business Drivers of Returns are too low Capital usage Operating risks are outside of changes Costs are too high is too high our go-forward risk appetite Creating a more focused corporate and institutional bank built on existing product/service strengths Strong focused product offer
Slide 14: 2015-2019 – Targeted outcomes
2015-2019 – Targeted outcomes RCR run-down target achieved CIB restructuring ahead of schedule CET1 ratio of 13% complete Citizens deconsolidation Citizens exit Strong returns Williams & Glyn Williams & ICB compliant RWAs below £300bn IPO Glyn exit from a lower risk £2bn AT1 is
Slide 15: The bank RBS intends to become
The bank RBS intends to become RBS in 2019 Personal & Commercial & Corporate & # 1 Service Business Banking Private Banking Institutional Banking #2 UK Personal Current Accounts #1 SME Bank Top 3 UK Rates, DCM, FX #3 ROI Personal Current Accounts #1 UK Commercial Bank Top 3 European Structured Leadi
Slide 16: 2015 delivery targets
2015 delivery targets Strategy goal 2015 delivery target RWAs reduced to below £300bn; RCR exit substantially completed and CFG Strength and sustainability deconsolidated; £2bn of AT1 raised Customer experience NPS improvement in every UK customer franchise Simplifying the bank Cost reduction of £80
Slide 17: Summary
Summary Customer ambition reaffirmed and extended Strong execution against 2014 targets Positions us to now accelerate strategy Build on strengths of our domestic franchises Address unacceptable returns in CIB New ambitious 2015 delivery targets Intent to distribute capital above a 13% CET1 targ
Slide 18: Ewen Stevenson, Chief Financial Officer
Ewen Stevenson Chief Financial Officer
Slide 19: RBS FY 2014 & Q4 2014 results – P&L
RBS FY 2014 & Q4 2014 results – P&L vs. FY vs. Q4 Full Year (£m) FY 2014 Q4 2014 FY 2014 vs. FY 2013 2013 (%) 2013 (%) Income 18,197 (6%) 3,860 (2%) Increases in PBB and CPB NII offset by Operating expenses(1) (12,398) (12%) (3,131) (18%) lower CIB income Restructuring costs (1,257) +92% (563) +21
Slide 20: RBS FY 2014 & Q4 2014 results – Balance Sheet
RBS FY 2014 & Q4 2014 results – Balance Sheet vs. Q3 vs. Q4 2013 Full Year FY 2014 FY 2014 vs. FY 2013 2014 (%) (%) 387p +0% +7% TNAV per share (p) TNAV of 387p – down 1p from Q3, but up 24p in Tangible equity (£bn) 44 +0% +8% 2014 Customer balances (£bn) RWAs down £73bn (17.1%), principally dri
Slide 21: UK Personal & Business Banking
UK Personal & Business Banking vs. FY vs. Q4 Full Year (£m) FY 2014 Q4 2014 FY 2014 vs. FY 2013 2013 (%) 2013 (%) Income 6,037 +4% 1,532 +3% Positive operating jaws and substantially Operating expenses(1) (3,299) (3%) (866) (9%) lower impairments leading to a 77% rise in operating profit Restructu
Slide 22: Ulster Bank
Ulster Bank vs. FY vs. Q4 Full Year (£m) FY 2014 Q4 2014 FY 2014 vs. FY 2013 2013 (%) 2013 (%) Income 830 (3%) 204 +1% Operating profit of £606m in 2014, the Operating expenses(1) (586) +4% (162) +10% first profit since 2008. Net impairment releases of £365m compared with Restructuring costs (22)
Slide 23: Commercial Banking
Commercial Banking vs. FY vs. Q4 Full Year (£m) FY 2014 Q4 2014 FY 2014 vs. FY 2013 2013 (%) 2013 (%) Income 3,210 +2% 831 +2% Operating profit up 143% driven by Operating expenses(1) (1,639) (2%) (475) (1%) lower net impairment losses, lower expenses and higher income Restructuring costs (93) +69
Slide 24: Private Banking
Private Banking FY 2014 vs. FY Full Year (£m) FY 2014 Q4 2014 Int’l Private FY 2014 vs. FY 2013 2013 (%) Banking(5) Income 1,082 +0% 267 230 Positive £211m swing into operating (4) profit driven by lower expenses and net Operating expenses(1) (828) (5%) (228) (257) impairment releases Restructurin
Slide 25: Corporate & Institutional Banking
Corporate & Institutional Banking vs. FY vs. Q4 Full Year (£m) FY 2014 Q4 2014 FY 2014 vs. FY 2013 2013 (%) 2013 (%) Income 3,949 (21%) 691 (34%) Income down 21% in line with material Operating expenses(1) (3,561) (22%) (822) (40%) RWA (27%) and risk reduction Restructuring costs (295) +46% (88) (
Slide 26: RCR
RCR vs. Q3 Full Year (£m) FY 2014 Q4 2014 Comments 2014 (%) Income 45 (185) (252%) Funded assets down £14bn (48%) and Operating expenses(1) (356) (95) +12% RWAe(2) down £38bn (58%) in 2014, driven by disposals and repayments Restructuring costs (7) (3) (25%) Litigation & conduct costs 0 0 - Oper
Slide 27: Outlook for FY 2015 vs. FY 2014
Outlook for FY 2015 vs. FY 2014 Core UK / Irish businesses continue to perform well, but headwinds remain CIB expected to see revenue decline substantially faster than cost takeout at this point in its restructuring £800m of cost reductions targeted(1) Significant impairment recoveries from
Slide 28: Our go-forward business profile
Our go-forward business profile Go-forward businesses Total profile (pro-forma 2014) Exit group overview overview (pro-forma (pro-forma2014) 2014) RBS CIB Other Int’l go- Total go- CIB Other Total Exit (£bn) PBB(1) CPB(2) go- Private W&G(4) Citizens RCR forward forward forward Legacy Banking Investm
Slide 29: CIB – future shape of the business
CIB – future shape of the business FY 2014 Current CIB Go-forward Non-strategic Region RWAs (£bn) Income (£m) RWAs (£bn) Income (£m) RWAs (£bn) Income (£m) UK / Europe(1) 71 2,488 34 1,630 37 858 US(2) 24 974 11 274 14 700 APAC 12 487 2 111 10 376 Total 107 3,949 46 2,015 61 1,934 Countries 38 13 25
Slide 30: Track record of legacy asset reductions
Track record of legacy asset reductions US ABP Run-down RCR Run-down Risk-Weighted Assets, £bn Risk-Weighted Asset equivalents, £bn -79% -58% 19 65 38 15 27 4 2013 US ABP 2014 1 Jan 2014 RCR run-down 2014 reduction 30
Slide 31: Managing for value – other legacy asset pools
Managing for value – other legacy asset pools End-2014 End-14 Funded Duration/ Portfolio / Investment Comments RWAs(£bn) Assets maturity profile (£bn) Go-forward business Pool of legacy, low margin or capital intensive assets (including CRE) CPB legacy book 12 (RWAe) 15 >5 years(1) Accelerate st
Slide 32: Current assessment of appropriate buffers
Current assessment of appropriate buffers Target CET1 ratio versus maximum distributable amount (“MDA”) trigger, % 13.0 Illustrative 11.2 2.5 headroom to 10.5 trigger (5) Q4 2014 illustrative 1.5 headroom to 4.2 trigger (5) 7.5 2.5 0.4 0.6 (1) (2) 2.0 2.0 10.5 (4) 7.0 G-SIB 4.5 Capital Conservation
Slide 33: We intend to distribute excess capital
We intend to distribute excess capital At or above 13% CET1 ratio target PRA approval required Milestones before seeking approval include: - Confidence in sustainable profitability - Improved stress-testing results – operating within risk appetite - Peak of litigation and conduct costs passed
Slide 34: Summary
Summary Strong performance against 2014 targets We now have a platform to accelerate strategy for 2015 – 2019 with clear milestones in place Better placed to weather outstanding litigation and conduct issues Confident in our ability to execute our restructuring plan – accelerates path to a leaner, s
Slide 35: Q&A
Slide 36: Appendix
Slide 37: Proposed future ICB structure
Proposed future ICB structure(1) RBS Group plc RBS International CIB Ring-Fenced Bank NRFB(2) NRFB(2) Scotland Rest of UK Ireland Royal Bank of NatWest Ulster Bank RoI RBS International RBS plc legal entity(3) Scotland (Scottish Coutts Isle of Man Bank customers) Lombard Adam & Co.
Slide 38: Future TLAC requirements
Future TLAC requirements Example of potential total loss absorbing capital (“TLAC”) requirement(1) for RBS CET1 Discretionary Buffer Estimated total CET1 G-SIB 1.5% capital requirement 20-24%(4) CET1 Capital Conservation Buffer 2.5% Total Loss TLAC eligible bonds 4-8% Absorbing Single Point of Ent
Slide 39: Improving the transparency of our returns
Improving the transparency of our returns Segmental RoEs updated Total PBB CPB CIB Citizens RCR Other RBS FY 2014 reported RWAs (£bn) 66.6 75.5 107.1 68.4 22.0 16.3 355.9 Tangible allocated equity (£bn)(2) 8.0 9.1 12.9 8.2 2.6 2.0 44.4 Reported RoTE 2014 (%) 17.5% 11.9% (4.2%) 6.6% nm nm (8.0%) FY 2
Slide 40: Litigation and conduct
Litigation and conduct FY14 provision Provisions PPI Provision now covers c17 months of the current £m FY14 net Q414 monthly utilisation. Expect claims to tail off over charge net charge a longer period than previously Regulatory Interest Rate Hedging and Legal(1) 2,568 703 381 Reflects increase
Slide 41: Impact of notable items on P&L
Impact of notable items on P&L £m FY 2014 Q4 2014 Reported in adjusted operating performance AFS disposal gains in Centre (Income) 149 6 Risk Management (including IFRS volatility) in Centre (Income) (437) (322) UK Bank Levy (1) (Costs) (250) (250) Restructuring costs Restructuring costs (1,257) (56
Slide 42: Leverage ratio – key drivers
Leverage ratio – key drivers BCBS leverage ratio, % +0.8% 4.2% 3.4% 3.7% FY13 H114 FY14 Fully loaded CET 1 capital, £bn 36.8 39.7 40.0 Total assets, £bn 1,028 1,011 1,051 Netting of derivatives (227) (217) (331) Securities financing transactions 60 77 25 Regulatory deductions & other adjustments (7)
Slide 43: Tangible Net Asset Value movements
Tangible Net Asset Value movements FY 2013 Q3 2014 Shares in TNAV per Shares in TNAV per £m £m issue (m) share(1) issue (m) share(1) Starting TNAV 41,082 11,303 363p 44,345 11,303 388p Reported attributable profit (3,470) (30p) (5,791) (51p) Citizens and intangibles write-downs 4,517 +40p 4,305 +38p
Slide 44: RCR asset composition and provisions overview
RCR asset composition and provisions overview Asset composition at 31 December 2014 Overview of provisions by sector Markets Ulster Bank Provisions Provisions Securitised Products: £1.8bn CRE Investment £1.2bn Gross loans Provisions as a % as a % of Emerging Markets: £0.5bn CRE Development: £0.7bn o
Slide 45: Sustainability
Sustainability “Our ambition is to shape the world around us in a positive way. We recognise that we still have a long way to go achieve this position across our business. Sustainability is therefore not just about the many responsibilities and obligations that RBS has, but about taking leadership o
Slide 46: Building a sustainable RBS
Building a sustainable RBS Over the last five years at RBS, we have been building a sustainability programme that is able to help shape the strategy of the Bank. It has taken that full period to build up robust systems for managing social and environmental issues. We also tasked ourselves with the c
Slide 47: Building a sustainable RBS
Building a sustainable RBS Robust governance RBS has a robust sustainability governance framework, ensuring there is senior level oversight of sustainability issues. The Sustainable Banking Committee is a Board committee comprised of independent non- executive directors and Executive Committee m
Slide 48: Building a sustainable RBS
Building a sustainable RBS Transparency and accountability Our sustainability reporting is aligned to the Global Reporting Initiative and is independently assured. ‘Our financing of the energy sector’ briefing provides enhanced disclosure around our lending to this sector. In 2014, RBS was ran
Slide 49: Sustainability performance and commitments
Sustainability performance and commitments RBS performance in ratings and benchmarks 2011 2012 2013 2014 RBS is a member of the Equator DJSI Principles Association Steering Committee. RBS 76 79 82 82 RBS has been included in the Dow Peer average 53 59 58 60 Jones Sustainability World Index (DJSI
Slide 50: 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’, ‘believe’, ‘should
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