Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Investor Day (March 2011)
65 slides from Natwest's investor day presentation, Mar 7, 2011
Slide 1: RBS Americas Investor Roundtable
RBS Americas Investor Roundtable The Royal Bank of Scotland Group 7th March 2011
Slide 2: Important Information
Important Information Certain sections in this presentation 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 Introduction Citizens GBM Americas Questions 3
Slide 4: Introduction
Introduction Bruce Van Saun, RBS Group Chief Financial Officer
Slide 5: Business Achievements 2010
Business Achievements 2010 RBS strategic plan re-affirmed and “on-track” All key Group metrics on or ahead of Plan for this stage Particular progress on Group reshaping, disposals and balance sheet reductions Business performance improved 1 Group operating profit of £1.9bn well ahead of plan (
Slide 6: Tracking Well to Plan Targets
Tracking Well to Plan Targets Group – Key performance indicators Worst point FY 10 Actual 2013 Target 1 Loan : deposit ratio (net of provisions) 154% 117% c100% 2 3 Short-term wholesale funding £343bn £157bn <£150bn 4 3 Liquidity reserves £90bn £155bn c£150bn 5 6 Leverage ratio 28.7x 16.9x <20x 7 Co
Slide 7: Core RBS
Core RBS A complementary group of businesses…. … well balanced by business mix and geography 1 FY10 Core revenues by Division Retail & Commercial Global Retail UK Retail Global Corporate UK Retail Customers Banking Clients 22% UK Corporate & Markets Deposits Governments Wealth Financial SMEs GBM Ins
Slide 8: US operations - Core to the Group
US operations - Core to the Group Retail & Commercial1 Global Banking & Markets We expect Retail & Commercial to generate c.2/3 of Core We expect GBM to generate c.1/3 of Core Revenues, Revenues, US R&C will be an important contributor GBM Americas will be a significant contributor US R&C Remaining
Slide 9: Agenda
Agenda Introduction Citizens GBM Americas Questions 9
Slide 10: Citizens
Citizens Ellen Alemany, Chief Executive Officer Citizens Financial Group, Inc. and RBS Americas 10
Slide 11: Key Messages
Key Messages Solid 2010 turnaround performance Growing market share in key products ‘Good’ deposit growth Strong customer satisfaction Major investment program 11
Slide 12: Super Regional Bank
Strategy Citizens’ strategy is based on delivering products and services of a national bank locally to customer in its 12 state footprint Our goal is to earn our customers’ loyalty and serve as their primary banking partner providing local, helpful service and global resources. We will be a top-tier
Slide 13: Performance
Performance Core U.S. Retail & Commercial 2009 2010 2013 Strategic Actual Actual Plan RWA ($B) 97 88 Total assets ($B) 122 110 Customer deposits (spot $B) 97 91 * Appropriate Risk Loan to deposits (%) 81 83 <90 Cust. Funding surplus ($B) 18 16 Impairments/L&A (%) 1.4 1.0 Notional ROE (%) (1.3) 3.6 >
Slide 14: Rebalance Business Mix
Rebalance Business Mix Level of Objective Initiative Completion Rebalance the business Create absolute alignment with retail branches mix Improve retail mortgage capacity Increase proportion of commercial business Capture under-penetrated Target mass affluent / premier banking segments Expand small
Slide 15: Diversified Business
Diversified Business Citizens currently has a diverse business… …and continues to rebalance its asset mix Citizens Financial Group Core U.S. Retail & Commercial Commercial Revenue 2010 Assets Retail Consumer & FY08 Business Banking, Non Core, 39.7% 7.2% Global 39% 61% Transaction Services, 7.4% FY10
Slide 16: Organic Increase in Distribution Model
Organic Increase in Distribution Model Added 13 locations to the branch distribution Expanded ATM convenience by over 1,000 (40% increase) Build-out of Premier / Wealth Management Launched mobile banking for iPhone and iPad Investing in Online Channels Expanded Mortgage Banking loan officer average
Slide 17: Improvement in NIM%
Improvement in NIM% Citizens improved its margin 30 bps in 2010, about 14 bps more than the market National Market * +16 bps Citizens Financial Group ** 2.95% +30 bps 2.79% 2.80% 2.50% 2009 2010 2009 2010 2013 Although Citizens is still ~75 bps lower than the regional peer average (3.54%), we expect
Slide 18: Consumer & Business Banking
Consumer & Business Banking Consumer branch franchise has strong coverage Deposit share decline due to strategic in its three regions decision to optimize composition Mid Atlantic Branches: 658 Total Deposit Market Share – Top Ten MSAs ATMs: 1,582 10.0% 9.6% 9.0% Midwest Branches: 369 ATMs: 604 New
Slide 19: Consumer & Business Banking
Consumer & Business Banking Citizens customer metrics demonstrate its focus on deepening relationships Citizens Bank’ remains focused on active, profitable customer relationships Citizens Bank recognized by Forrester and TNS for top notch service delivery Citizens received industry service awa
Slide 20: Reg E & Dodd-Frank Overview
Reg E & Dodd-Frank Overview Reg E / Opt In* Dodd - Frank Durbin Amendment Effective date – July 2010 new customers Effective date – July 21, 2011 proposed August 2010 for existing customers Key Provisions – Opt in* to Overdraft Key Provisions – Debit card interchange capped at $0.12 Impact – 2010: $
Slide 21: Consumer Finance
Consumer Finance Consumer Finance continues to grow its core …and improve alignment with the branch continuing businesses… franchise $B Deposit Customers w/Consumer Loan Deposit Customers w/HELOC Origination growth – Continuing Business 27.5% 7.5% 2009 2010 Grwth 25.1% 22.6% Home Equity 3.7 6.0 60%
Slide 22: Consumer Finance
Consumer Finance Vintage cumulative loss performance continues to Citizens has much smaller foreclosure portfolio improve and stronger asset quality 2007 2009 Loans in Foreclosure/Total Serviced Loans * 2008 2010 JPM Chase 5.6% 1.20% Bank of America 5.5% Mortgage 0.80% PNC 4.5% Ally 4.4% 0.40% SunTr
Slide 23: Commercial Banking & GTS
Commercial Banking & GTS Reconfigured Commercial Enterprise Banking model Continued build out of specialty vertical business lines Improved derivative and GTS cross sell opportunities First in market to launch GTS mobile banking solution Citizens’ commercial & industrial loan growth …and asset quali
Slide 24: Commercial Banking & GTS
Commercial Banking & GTS Commercial banking has enhanced its Capital …and improved alignment with GTS Markets opportunity… Significant increase in the number of Capital Markets wins Fees generated have increased tenfold over 2009 The 41 transactions led in 2010 is more than triple the number led
Slide 25: Major Investment Program
Major Investment Program Citizens is increasing its strategic investment in technology ~$900 million spend in strategic plan $275 ~ $275 $170 $110 $80 $ millions $40 2007 2008 2009 2010 2011E 2012E Citizens is currently investing heavily in major Investment Programs: BIC Teller Commercial Loan
Slide 26: Well Positioned for Success
Well Positioned for Success Organic Growth Rebalanced Business Mix NIM % Recovery – positioned for rising rate environment Credit Recovery – comparatively strong asset quality Delivering the Strategic Plan Goals and Metrics over time Strategic Investment in Technology 26
Slide 27: Citizens
Citizens John Fawcett, Chief Financial Officer Citizens Financial Group, Inc. and RBS Americas 27
Slide 28: Income Statement
Income Statement IFRS $MM B/(W) vs. Prior Year Core US Retail & Commercial FY 2010 $ % Net Interest Income 2,962 185 7% Non Interest Income 1,591 104 7% Gradual recovery and stabilization in a Total Revenue 4,553 289 7% challenging environment Staff Expense (1,212) 2 0% Other Operating Expense (880)
Slide 29: Revenue Composition
Revenue Composition IFRS $MM Core US Retail & Commercial Margin uplift compensating for a smaller Reg E impact notable in H2 somewhat balance sheet muted by record mortgage refi activity Net Interest Income Fee Income 390 398 370 358 36 34 363 748 745 27 739 37 30 30 34 730 25 27 39 29 40 74 690 35
Slide 30: Operating Profit Pre/Post Impairment and 3M LIBOR
Operating Profit Pre/Post Impairment and 3M LIBOR IFRS $MM Core US Retail & Commercial 1,000 600 3M LIBOR – Avg (bps) 900 871 550 819 817 776 773 800 767 755 768 500 72 101 329 122 700 127 450 303 609 617 614 259 592 603 593 587 583 600 400 193 168 500 231 224 214 350 296 252 320 400 788 746 300 666
Slide 31: Net Interest Margin Trend
Net Interest Margin Trend IFRS Core US Retail & Commercial Gradually growing margin and closing gap with peers 900 3.20% 850 3.02% 2.96% 3.00% $MM 800 2.90% 2.90% 2.83% 2.78% 2.77% 750 2.72% 2.73% 2.87% 2.80% 2.81% 2.83% 2.82% 700 2.63% 2.71% 2.71% 650 2.69% 2.70% 2.60% 125 2.43% 600 2.40% 2.58% 2.5
Slide 32: Total Expense
Total Expense IFRS $MM Core US Retail & Commercial 3,600 3,400 120 13 10 2* 38 13 113 103 3,200 3,339 3,281 3,000 FY 2009 Deposit Pension Gain Staff Expense MSR Operational NPA / Advertising All Other FY 2010 Insurance Losses OREO Total Expenses reduced and remain a key focus * includes Business Ser
Slide 33: Credit
Credit US GAAP $MM Core US Retail & Commercial Steadily improving credit quality 1,191 1,201 1,200 FYFY Provision Loan Impairment 1,091 1,200 1,000 1,000 800 581 733* 800 733* 722 Consumer IFRS 600 US GAAP Commercial 600 1,191 1,201 421 400 400 510 200 200 312 0 - - 0 Reserve for Credit Charge-Offs
Slide 34: Strong Asset Quality and Reserves vs. Peers
Strong Asset Quality and Reserves vs. Peers Q4 2010 Citizens Financial Group GAAP NPLs / Loans % Reserves / NPLs % U.S. Bancorp 2.25% KeyCorp 137% KeyCorp 2.32% U.S. Bancorp 116% M&T Bank 2.64% PNC 93% Comerica 2.90% Peer Average Peer Average 83% Citizens Citizens 2.94% Fifth Third 81% PNC 3.40% Cit
Slide 35: Well Capitalized vs. Peers
Well Capitalized vs. Peers Q4 2010 Citizens Financial Group GAAP Tier 1 Ratio, % Tier 1 Common Ratio, % Tier 1 % Tier 1 Com m on % (Q4 '10) KeyCorp* 15.16% Citizens Citizens 12.52% Fifth Third 13.94% Comerica 10.13% SunTrust* 13.67% PNC 9.80% Citizens Citizens 13.04% KeyCorp* 9.34% Regions* 12.40% B
Slide 36: Appendix - Citizens
Appendix - Citizens
Slide 37: Citizens Financial Group
Legal Entity Legal Vehicle Citizens Financial Group US Retail & Commercial Business GTS Services Core Non-Core External View Group Business Services Group Central Items Group Treasury Cost Allocation 37
Slide 38: Non-Core Loan Portfolio
Non-Core Loan Portfolio Non-Core End of Period Loans - $B Non-Core End of Period Loan Projections - $B As of December 2010 (Spot) 25.0 SBO 4.5 22.8 RV-Marine 2.4 Mortgage Speciality & Corresp. 1.5 20.0 Student Lending 1.3 17.8 Indirect Auto 0.3 Credit Cards 0.2 15.0 13.3 Retail Non Core 10.2 11.0 CR
Slide 39: Reconciliation of Core US Retail & Commercial Banking to Total CFG
Reconciliation of Core US Retail & Commercial Banking to Total CFG IFRS $MM FY 2010 US Retail & Commercial Business Central Total Core Non Core Total GTS Services Items CFG* Net Interest Income $ 3,010 $ 345 $ 3,355 $ 7 $ (43) $ (2) $ 3,317 Fee Income 1,508 33 1,541 392 24 0 1,958 Total Revenue Excl
Slide 40: Agenda
Agenda Introduction Citizens GBM Americas Questions 40
Slide 41: GBM Americas
GBM Americas Bob McKillip & Michael Lyublinsky Co-Chief Executive Officers, Global Banking & Markets
Slide 42: GBM Americas: Overview
GBM Americas: Overview Our organizational structure Global Banking & Markets Global Banking & Markets Americas Markets Banking Michael Lyublinsky Bob McKillip Co-CEO, GBM Americas Co-CEO, GBM Americas Support Global Banking & Markets Americas is a leading banking partner to major corporations, and f
Slide 43: GBM Americas: Our core product offering
GBM Americas: Overview Our core product offering Core Markets Businesses Core Banking Businesses Rates Trading Coverage Mortgage Trading DCM Currencies Syndicate Flow Credit ABS Origination Emerging Markets Corporate Finance Equities & Structured Retail Portfolio Management
Slide 44: GBM Americas: Our management structure
GBM Americas: Overview Our management structure is defined GBM CEO RBS Americas CEO John Hourican Ellen Alemany Global Head of Banking Global Head of Markets President, GBM & Deputy GBM CEO Peter Nielsen* Suneel Kamlani* Marco Mazzucchelli* Head of Markets, Head of Global Co-Heads of GBM Americas Am
Slide 45: GBM Americas: Progress against strategic initiatives
GBM Americas: Overview We continue to make progress against our strategic initiatives Strategic Action Progress to Date Strong positions maintained in key businesses including Mortgages and Rates Preserve Core Return on Equity significantly over the Group hurdle rate in 2010 Franchise Full est
Slide 46: GBM Americas: Global infrastructure investment program
GBM Americas: Overview Our ~$800m global infrastructure investment program is well under-way Tight control and efficient deployment of 1. Balance Sheet Balance Sheet resources 1 Industrialise GBM's F2B 2. RWA Accurate measurement and efficient Strategic Outcomes infrastructure management of RWA Impr
Slide 47: GBM Americas: We are seeing results
GBM Americas: Overview We are seeing results GBM Summary – FY08 vs FY09 vs FY10 Continued Performance FY08 FY09 FY10 Higher quality revenue streams 1 Income , $bn (0.5) 5.5 3.8 Sustainable and efficient cost profile 2 Costs , $bn (1.3) (1.4) (1.3) Credible results in 2010, markets return to
Slide 48: GBM Americas: 2010 Quarterly Income by Product
GBM Americas: Overview 2010 Quarterly Income1 by Product ($bn) 1.5 1.0 0.5 - 10 Q1 10 Q2 10 Q3 10 Q4 Rates - M M Rates - Flow Currencies Equities Credit & M ortgage M arkets PM & Origination Solid performance reflecting seasonality and cyclicality, especially in the Rates business Diverse revenu
Slide 49: GBM Americas: Business Performance - Income
GBM Americas: Overview Business Performance – Income ($bn) Income returned to more “normal” levels, following FY10 Income exceptionally strong market conditions in 2009 Rates - MM 0.1 Balanced performance across core businesses Rates - Flow 0.5 with exceptional results in Credit & Mortgage Curre
Slide 50: GBM Americas: De-risked Markets Portfolio
GBM Americas: Overview We have significantly de-risked our Markets Portfolio 25 Historical US ABS Portfolio1 Gross MV Gross exposure for Mortgages has decreased 20 New ABS VaR model approved Gross Market Value ($bn) 15 MV limits established for cash TB+AFS MV inventories in each asset type 10
Slide 51: GBM Americas: Challenging market environment
GBM Americas: Overview We continue to deliver in a challenging market environment Forex bid-offer spread trends (indexed to Q109 vs. USD) FX Volatility Indices CVIX Index 24 EUR Euro Dollar 3m 1.0 22 JPY GBP Dollar (Cable) 3m 20 0.8 GBP 18 0.6 16 14 0.4 12 10 0.2 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q
Slide 52: Strong DCM and Syndicated Lending volumes in the Americas
GBM Americas: Overview Strong DCM and Syndicated Lending volumes in the Americas Americas Banking Volumes ($bn) Loan Volumes ($bn) ECM Volumes ($bn) 183 58 175 350 300 138 42 121 39 250 115 114 104 99 32 200 DCM 85 Loans 69 23 24 150 57 17 17 M&A 14 13 13 100 37 11 50 ECM - Jan-10 Feb-10 Mar-10 Apr-
Slide 53: Maintaining strong positions in key businesses
GBM Americas: Overview Top 3 6–10 We are maintaining strong positions in our key businesses 4–5 >11 Position Current 1-2 year aspiration Customer Relationship USA Ranking (PGS) Rates Options Rates Delta* Important Relationships Credit Markets Lead Relationships 6 FX MBS Syndicated Loans * Overall Ra
Slide 54: Client deal counts and volumes increasing
GBM Americas: Overview GBM Americas client deal counts and volumes have been increasing Total Client Value $bn Deal Count and Volumes Deal Count (Millions) : - Added 0.4 Value 0.3 +7% 2.2 Client 2.1 Traded 1.6 1.6 Value 2009 2010 2009 2010 Volumes (bns) : - Corporate 0.4 Sales 0.3 +24% 32 FI Sales 1
Slide 55: DCM strong with Corporate Banking clients
GBM Americas: Overview DCM has been strong with our Corporate Banking clients PGS Corporate Client Mix Corporate Income Product Spilt ECM 1% Corporate Finance DCM 1% Platinum 35% 18% GTS Silver 9% 42% Gold Portfolio 40% Sales 30% 24% PGS FI Client Mix FI Income Product Spilt ECM 0% Portfolio 2% GTS
Slide 56: Three step approach to managing our people
GBM Americas: Overview Terminations We have a three step approach to managing our people Attract Retain Develop Global and regional training and Target hires from competitive, Pay for performance philosophy development courses global financial services firms Total compensation Annual 360 f
Slide 57: Assessing impacts of Regulatory Reform
GBM Americas: Overview We are proactively assessing the impacts of Regulatory Reform Key Reforms Response Established U.S. regulatory reform working groups around key issues with Dodd Frank appropriate senior level representation across affected businesses and entities Working with a collective
Slide 58: Market and Competitor Outlook
GBM Americas: Overview Market and Competitor Outlook Market Outlook Market conditions are noticeably Growth projected to increase in The trading environment is likely to more stable on the back of capital 2011 to at least 3%;unemployment remain choppy over the next 12 raising by the banks, but
Slide 59: Looking forward...
GBM Americas: Overview Looking forward... Relentless focus on execution of our strategic objectives Continue to protect and defend our key franchises Proactively assess changes to the regulatory environment Maintain “best-in-class” risk management framework Continue to invest in business g
Slide 60: Appendix – GBM Americas
Appendix – GBM Americas
Slide 61: GBM Americas: Markets Businesses
GBM Americas: Overview Markets Businesses: Rates Trading: Offers clients a full spectrum of Rates Products including Treasuries, Agencies, IRD Swaps, Options, Inflation Products, Structured Products and Short Term Markets. Equities & Rates Mortgage Trading: Provides secondary market solutions to
Slide 62: GBM Americas: Banking Businesses
GBM Americas: Overview Banking Businesses: DCM: Offers corporate and FI clients a broad range of debt market solutions ranging from bond financings to risk management solutions. Coverage Corporate ABS Origination: Provides top-tier US non-mortgage term DCM ABS distribution, structuring and advis
Slide 63: 2010 Key Deals and Achievements
GBM Americas: Appendix 2010 Key Deals and Achievements FMG Resources (August 2006) Pty Ltd. USD 2,040,000,000 7.000% Senior Notes due 2015 “Fully Committed Funded Bridge Facility” Joint Book-Running Manager October 2010 Australia 63
Slide 64: 2010 Awards
GBM Americas: Appendix 2010 Awards 64
Slide 65: Q&A
Q&A
The Royal Bank of Scotland Group — Investor Day (March 2011) on 6ix