Natwest Group Plc · LSE:NWG
Natwest — Royal Bank of Scotland Group — Morgan Stanley European Financials Conference 2010
34 slides from Natwest's conference presentation, Mar 24, 2010
Slide 1: Re-building & Recovery
Re-building & Recovery Morgan Stanley European Financials Conference 24th March 2010 Bruce Van Saun, Group Chief Financial Officer
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: Key messages
Key messages Strategic targets affirmed, foundations laid in 2009 A Group increasingly positioned for medium-term recovery Robust customer franchises GBM – a more focused business, holding up well Retail & Commercial businesses beginning to turn the corner Market environment for NIM starting to impr
Slide 4: 2013 Strategic Plan - defined aspirations
2013 Strategic Plan - defined aspirations A reshaped New management business disciplines Focus on UK and US franchises, A cost base that is reduced, and move balance of Group towards controlled and transparent UK Retail and Commercial businesses Returns and balance sheet use Resize and refoc
Slide 5: Affirmed and updated targets
Affirmed and updated targets Key performance indicator Worst point 2009 Actual Why? 2013 Target Higher capital ratios to meet society’s Core Tier 1 Capital 4%(1) 11.0% >8% expectations of a safer banking system Loan : deposit ratio To put our balance sheet on a more 154%(2) 135% c100% (net of provis
Slide 6: A business positioned for recovery in performance
A business positioned for recovery in performance
Slide 7: Who are we?
Who are we? RBS Group operates in the United Kingdom, Europe, the Americas and Asia, serving more than 30 million customers. The Group provides a wide range of products and services to personal, commercial and large corporate and institutional customers through its two principal subsidiaries, The Ro
Slide 8: Group connectivity, cross-sell and complementarity
Group connectivity, cross-sell and complementarity Maximising cross sell opportunities Exploiting economies of scale through shared business services Sharing of best practise policies & learnings Multiple Group funding sources through diverse customer facing businesses Divisional partnersh
Slide 9: Market leading positions
Market leading positions Currentmarket Current marketposition positionof of selected selected franchises franchises UK UK/Ireland GBM/GTS Global Rankings US/Citizens US R&C #1 Small business banking #3 Corporate Top 5 Rates bonds Top 5 player in 8 markets of top 10 in which markets we #1 Corporate a
Slide 10: A strong customer base with growth potential
A strong customer base with growth potential 12.8m current accounts (+3%)1, 9.9m savings accounts (+12%)1 and 8.5m mortgage accounts UK Retail (+10%)1 demonstrating robust growth & strength of franchise Number of active online banking customers increased by almost one quarter1 Customer base ma
Slide 11: Refocused service proposition
Refocused service proposition Increasing customer accessibility – e.g. UK Retail Re-focusing the footprint – e.g. GTS Network Primary Country Significant opportunity to build remote channel access Refocused Country Explore new ownership 56% 41% 37% % of CA 31% 26% 26% 25% 25% 24% customers 17% using
Slide 12: GBM – a more focused business
GBM – a more focused business GBM Summary – FY07 vs FY09 Business Performance – Revenues & Growth FY07 “Old” Core FY09 09 Revenues Gwth vs 08 GBM GBM GBM £bn % Income, £bn 9.11 6.7 11.0 Rates – MM 1.7 4% Costs, £bn (5.8)2 (5.1) (4.7) Rates – flow 3.1 127% Profit, £bn 3.21 1.5 5.7 Currencies 1.3 (17%
Slide 13: Retail & Commercial - upturn ahead
Retail & Commercial1 - upturn ahead Revenues by geography, £bn Business reach UK Retail - Over 15m personal customers UK US - Full range of banking products 1% 9% UK Corporate - Serves 1/4 of the SME market Europe RoW - Tailored products & services 20% - Branch based business advisers Wealth -
Slide 14: Managing costs & business investment
Managing costs & business investment £2.5bn cost saving programme Major investment programmes underway 5 year spend > £6bn to foster growth & efficiency 2011 Cost Saving £2.5bn Example projects: Implementation Cost3: Target Improve & integrate infrastructure GBM – data centres consolidation & IT c
Slide 15: Strengthening funding, liquidity & capital
Strengthening funding, liquidity & capital
Slide 16: Improving funding and liquidity
Improving funding and liquidity Non-Core third party assets (TPAs excl MTMs) run- Refinancing requirement outweighed by run-off in off targets1 trend with the Group Loan:Deposit gap Non-Core third party assets2 £bn £bn 300 50 250 40 200 30 150 20 100 10 50 0 0 2008 1H09 FY09 2010e 2011e 2012e 2013e
Slide 17: Improving funding and liquidity
Improving funding and liquidity Evolution of Group funding mix towards more stable long-term funding sources1 47% Stable long Short term 30% term funding funding Key Key Funding Funding Metrics Metrics FY08 H109 FY09 Loan:deposit ratio (Group)2 151% 143% 135% 20% 17% Core 118% 110% 104% 16% 13% Loan
Slide 18: Core Tier 1 – an increased buffer
Core Tier 1 – an increased buffer Core Tier 1 Capital progression, FY07 – FY09 & long-run target % 11.0 >8 Significant progress in strengthening CT1 11% at FY09, driven by B Share issuance, 5.9 APS overlay and Asset & Liability Management gain 4.0 Provides buffer for potential future losses an
Slide 19: Regulatory uncertainties remain
Regulatory uncertainties remain Significant proportion of potential impact will be on Non-Core portfolios BASEL II CHANGES Stressed VaR Capital – Incremental Risk Charge RWA Correlation Trading Book impacts Securitisations 2010 2011 2012 2013 2014 To be phased in from 2012 Proposals have b
Slide 20: Reducing business risk
Reducing business risk
Slide 21: Managing future run-off
Managing future run-off Non Core third party assets (TPAs excluding derivatives & Sempra) run-off targets, £bn Breakdown of changes in TPAs Undrawn commitments 2009-2013 85 TPAs FX (10)-(20) 36 Rollovers & drawings 20-30 29 c. 212 252 23 Impairments (20)-(30) 187 19 143 Asset sales (60)-(80) 118 13
Slide 22: Non-Core composition
Non-Core composition 2009 Y/E TPAs1 by asset class Non-Core Run-Off Most challenging areas of run-off: Other, – CRE £12bn Retail, CRE, – Project & Asset Finance £16bn £52bn – Corporate Loans & Securitisations SME, £3bn Likely to lead to roll-overs in these asset classes Year end 2013 target –
Slide 23: Non-Core risk mitigation
Non-Core risk mitigation £9.4bn1 Ongoing reduction in trading positions Trading Trading asset write-downs significantly reduced in 2009 £3.5bn1 positions Reversal of banking book hedges in 2009 FY08 FY09 £8.3bn Monoline net exposures significantly reduced in 2009 CDPCs Monolines / Certain
Slide 24: Disposals update – EU mandated
Disposals update – EU mandated Disposals: - Sempra (£14.2bn assets, £10.2bn RWAs, £52m RBS 2009 operating profit) – announced partial sale1, working on remainder alternatives - UK SME / Branches (£23.6bn assets, £18.2bn RWAs, operating loss of £146m, 2009) Sale process progressing, working through s
Slide 25: Outlook
Outlook
Slide 26: NIM & future outlook
NIM & future outlook 2009 2011 Margin progression FY08 to FY09 -11 -13 FY09 FY08 Q4 09 Q3 09 Group NIM Underlying NIM Stabilising NIM R&C Asset Group NIM 1.76 2.08 1.83 1.75 trending margins upwards R&C NIM 2.89 3.00 3.04 2.91 R&C Liability following margins downward R&C Asset margins 1.75 1.38 2.
Slide 27: Impairment outlook
Impairment outlook Group credit trends, Q408 - Q409 No. & value of wholesale cases transferred to Recoveries Units globally, Q308-Q409 (monthly average) £bn £bn 40 4% 600 9 35 8 500 30 3% 7 400 6 25 5 20 2% 300 4 15 200 3 10 1% 2 100 5 1 0 0% 0 0 1 Q308 Q408 Q109 Q209 Q309 Q409 Q408 Q109 Q209 Q309 Q
Slide 28: Concluding comments
Concluding comments Foundations for recovery are in place Robust customer franchises Market environment for NIM starting to improve Impairment trends are moderating - still early days though Focus on business investment Balance sheet de-risking well underway Business valuation will become clearer ov
Slide 29: Questions?
Questions?
Slide 30: Appendix
Appendix
Slide 31: Core Bank – affirmed divisional targets
Core Bank – affirmed divisional targets UK Retail UK Corporate Unlocking the value of our customer franchise as the Leading franchise focused on re-building sustainable most helpful retail bank in the UK value for customers and the bank RoE, % C:I, % LDR, % RoE, % C:I, % LDR, % 2011 >1 <60 <120 2011
Slide 32: Core Bank – affirmed divisional targets
Core Bank – affirmed divisional targets Wealth Ulster Bank Leading UK franchise with global reach, providing Restructuring to sustainable profitability as Irish growth and substantial funding to Group economy recovers RoE, % C:I, % LDR, % RoE, % C:I, % LDR, % 2011 n.m. <60 <35 2011 >0 <75 <175 2013
Slide 33: Non-Core make up by division
Non-Core make up by division 2008 Y/E TPAs1 by asset class 2009 Y/E TPAs1 by asset class Other Corporate Other Corporate RBS Insurance £1.5bn Project & Export RBS Insurance Project & Export Finance Retail & Commercial Countries Finance £20.6bn £2.0bn £21.3bn £4.3bn Asset Finance £22.2bn Retail & Com
Slide 34: Core RoE calculation - 2009
Core RoE calculation - 2009 FY09A Core operating profit 8,325 Tax on operating profit @ 28% (2,331) Preference dividends as disclosed (935) Adjustments re preference accruals 109 (826) Core MI (49) Return on B-Shares (70% * £25.5bn at 0.5% 64 return and 28% tax) Restated adjustable profit 5,183 Pe
Royal Bank of Scotland Group — Morgan Stanley European Financials Conference 2010 on 6ix