Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — FY2017 Earnings Presentation
50 slides from Natwest's earnings presentation, Feb 23, 2018
Slide 1: FY 2017 Results
FY 2017 Results 23 February 2018
Slide 2: Howard Davies, Chairman
%£RBS Howard Davies Chairman
Slide 3: Ross McEwan, Chief Executive Officer
Ross McEwan Chief Executive Officer
Slide 4: Key messages
Key messages Strategic plan is working – £2.2bn operating profit before tax and first full year attributable profit in ten years Costs down, income up, capital position stronger, growing in target markets and colleague engagement is highest in ten years Responding to industry change, investing to be
Slide 5: Our performance reflects the economies we serve
Our performance reflects the economies we serve Mortgage approvals - monthly (‘000)(1) Year-on-year change in business lending(3) 70 6% 60 4% 50 2% 40 0% 30 -2% 20 10 -4% 0 -6% FY’15 FY’16 FY’17 FY’15 FY’16 FY’17 Average market interest rate (2 year fixed)(2) Business investment quarter-on-quarter(4
Slide 6: Strategic plan continues to deliver a better financial performance
Strategic plan continues to deliver a better financial performance Robust capital strength Strong record on cost reduction Common Equity Tier 1 Ratio FY cost reduction (£m) IFRS 9 Day 1 Impact (From 1 January 2018) 16.2% 0.3% FY’14 1,100 FY’15 983 15.5% 15.9% 13.4% 11.2% FY’16 985 8.6% FY’17 810 FY’
Slide 7: Personal & Business Banking: Supporting customers in the UK and Republic of Ireland
Personal & Business Banking: Supporting customers in the UK and Republic of Ireland Personal & Business Personal Banking taking share in target markets, Banking Business Banking key supporter of SMEs Market leading brands £31bn €2.6bn Driving growth in Gross new mortgage lending Gross new lending ta
Slide 8: Commercial & Private Banking: Leading supporter of UK businesses
Commercial & Private Banking: Leading supporter of UK businesses and award winning private bank Commercial & Private Largest supporter of UK businesses, Banking voted UK’s Best Private Bank(1) Market leading +21 NPS(2) brands #1 Commercial Bank NPS up 19 points(3) Driving growth in Growth in target
Slide 9: NatWest Markets and RBSI: Good customer activity
NatWest Markets and RBSI: Good customer activity as we continue to reshape the businesses Leading Channel Islands Leading FICC retail bank. Specialised Markets business support for corporates, funds and FIs Market leading brands Adjusted income Total income +4% Driving growth in from increased avera
Slide 10: We simplified the bank further in 2017
We simplified the bank further in 2017, and we have highest colleague engagement in ten years Non-branch property portfolio Systems and applications (28) (1,000) 153 125 3,500 2,500 FY’16 FY’17 FY’16 FY’17 Subsidiary Companies Colleague FTE(2) (114) 604 490 6.6k 7pts FY’16 FY’17 Engagement index (1)
Slide 11: Three pillars of our digital and innovation strategy
Three pillars of our digital and innovation strategy. High tech and High touch Simplified and Safe and Secure Innovative Automated Customer focused and digitally enabled 11
Slide 12: Three pillars of our digital and innovation strategy
Three pillars of our digital and innovation strategy. High tech and High touch Simplified and Safe and Secure Innovative Automated Customer focused and digitally enabled 12
Slide 13: Safe and Secure: We've significantly improved our IT resilience
Safe and Secure: We’ve significantly improved our IT resilience Monthly number of ‘Crit 1’ IT incidents(1) 50 318 45 40 94% reduction to FY’17, 35 and 99% reduction to Q4’17 30 25 133 20 15 10 36 20 5 0 FY’14 FY’15 FY’16 FY’17 (1) Criticality 1 incidents are defined as having an adverse impact on a
Slide 14: Three pillars of our digital and innovation strategy
Three pillars of our digital and innovation strategy. High tech and High touch Simplified and Safe and Secure Innovative Automated Customer focused and digitally enabled 14
Slide 15: Simplified and automated: simple and easy for our customers
Simplified and automated: We want to make it simple and easy for our customers to do their banking UK’s first paperless Self-service account Automated business mortgage opening loans Outstanding customer Available to >90% of new Accounts for 15% of base advocacy – NPS +79 commercial customers rate n
Slide 16: Three pillars of our digital and innovation strategy
Three pillars of our digital and innovation strategy. High tech and High touch Simplified and Safe and Secure Innovative Automated Customer focused and digitally enabled 16
Slide 17: Innovative: Mobile is becoming a key channel
Innovative: Mobile is becoming a key channel for personal, business and commercial customers Customers transition to mobile Bankline and Bankline Mobile Payments by platform (million) 90k commercial customers active on Bankline 35 Mobile Online 30 14k migrated to New Bankline 25 20 New Bankline save
Slide 18: Innovative: Partnering to build market leading digital solutions
Innovative: Partnering to build market leading digital solutions Customers Controls Colleagues 414k interactions since Fewer complaints 228 questions now launch, currently handles answered by Cora 100k each month Referred for specialist Consistent, recorded Colleagues spend more advice when required
Slide 19: Innovative: applying what we learnt to help our colleagues
Innovative: We’re applying what we learnt with our customers to help our colleagues Archie – Artificial intelligence Helping colleague productivity Supports 879 processes – Available 24/7 500 can be done on mobile +29 NPS Access on mobile, 51% conversations contained tablets and desktop Real time da
Slide 20: Consistent strategy and retaining 2020 targets
Consistent strategy and retaining 2020 targets 20
Slide 21: Ewen Stevenson, Chief Financial Officer
Ewen Stevenson Chief Financial Officer
Slide 22: FY 2017 update on progress
FY 2017 update on progress 4 priorities 2017 progress Adjusted income growth of 4.0% Grow income 2.2% net lending growth across PBB, CPB and RBSI(1) primarily driven by mortgage growth Cut costs £810m adjusted operating expenses reduction (-8% nominal) Reduced RWAs by £27.3bn (12.0%) to £201
Slide 23: Q4 2017 Financials
Q4 2017 Financials Q4 vs. Q3 vs. Q4 Q4 vs. Q3 vs. Q4 Income Statement (£m) Key Metrics (%) 2017 2017 2016 2017 2017 2016 Income 3,057 (3%) (5%) Net interest margin 2.04 (8bps) (15bps) Adjusted Income 2,857 (10%) (14%) CET1 ratio 15.9 40bps 250bps Total costs (3,406) 59% (55%) Loan:deposit ratio 88 (
Slide 24: Outlook
Outlook(1) Costs Costs, ex. restructuring and litigation and conduct costs, will reduce vs 2017, but the rate of cost reduction will be materially lower than in 2017 Restructuring Expect to spend c.£1.5bn more than prior guidance (which was £1bn ex. Williams & Glyn; W&G now estimated at around £
Slide 25: CET1 generation 2018 and beyond
CET1 generation 2018 and beyond(1) CET1 RWAs + Underlying profitability + Net Bank RWAs to be lower by 2018 £5bn-£10bn - Potential DoJ/ RMBS settlement - Net growth 2019 + Underlying profitability - IFRS 16 to increase RWAs by c.2- 3bn (1st Jan 2019) + Underlying profitability - Net growth 2020 - Ag
Slide 26: Key messages
Key messages Strategic plan is working – first full year attributable profit in ten years Costs down, income up, capital position stronger, growing in target markets and colleague engagement is highest in ten years Responding to industry change, investing to be less complex, more automated and innov
Slide 27: Q&A
%<RBS O&A
Slide 28: Appendix
%<RBS Appendix
Slide 29: Income growth 2017 vs. 2016
Income growth 2017 vs. 2016 Total income (£m) Adjusted income (£m) 2017 balance sheet growth 2017 Target* 3.0% +4% +4% 13,133 2017 Actual* 2.2% 12,590 12,862 12,372 UK PBB Mortgages(1) 6.9% UK PBB 3.0% Business Banking(1) UK PBB 0.0% Unsecured(1,2) Commercial(1,3) (2.7%) FY 2016 FY 2017 FY 2016 FY 2
Slide 30: NIM progression – Q4 2017
NIM progression – Q4 2017 Net interest margin (‘NIM’), bps 212 (6) 206 0 0 206 (2) 204 Q3’17 Ex. Q3 Q3’17 Liquidity Competitive Q4’17 Q4’17 Q4’17 postive underlying pressure underlying negative Average one-offs one-offs interest 431 431 earning 0% assets (£bn) Q4 NIM reduced by 8bps driven by non-
Slide 31: Net interest income and cash flow hedging reserve sensitivity
Net interest income and cash flow hedging reserve sensitivity(1) Structural and product hedge Change in NII – 25bps upward shift in yield curves 2017 2017 (£m) Year 1 Year 2 Year 3 Incremental Average Overall income (£m) notional (£bn) yield (%) Structural 33 100 171 Equity structural hedges 628 28
Slide 32: Adjusted operating costs – exceeded 2017 target
Adjusted operating costs – exceeded 2017 target Adjusted Operating Costs(1) (£bn) Cumulative Restructuring Spend (£m) W&G Restructuring ex W&G FY 2017 1,565 8.4 cost reduction 221 0.8 7.6 1,034 75 790 58 577 1,344 12 959 732 565 FY 2016 Target 2017: Q1 17 Q2 17 Q3 17 Q4 2017 FY 2017 £750m cost reduc
Slide 33: FY 2017 results by business
FY 2017 results by business Total RBS Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PBB items & RoI Banking Banking International Markets other(1) Adj. Income(2) 6.5 0.6 3.5 0.7 0.4 1.1 0.1 12.9 Adj. Operating (3.2) (0.5) (1.8) (0.4) (0.2) (1.5) 0.0 (7.6) expenses(4) Impairment (losses
Slide 34: Q4 2017 results by business
Q4 2017 results by business Total RBS Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PBB items & RoI Banking Banking International Markets other(1) Adj. Income(2) 1.5 0.2 0.8 0.2 0.1 0.2 (0.1) 2.9 Adj. Operating (0.8) (0.1) (0.5) (0.1) (0.1) (0.4) (0.1) (2.1) expenses(4) Impairment (los
Slide 35: Notable items – Income
Notable items – Income Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (£m) FY 2017 FY 2016 2017 2017 2017 2017 2016 2016 2016 2016 Total Income 13,133 3,057 3,157 3,707 3,212 12,590 3,216 3,310 3,000 3,064 Own Credit Adjustments (69) 9 (5) (44) (29) 180 (114) (156) 194 256 Gain/(Loss) on redemption of own debt (7) (9) 2 (
Slide 36: Notable items – Expenses & Impairments
Notable items – Expenses & Impairments Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (£m) FY 2017 FY 2016 2017 2017 2017 2017 2016 2016 2016 2016 Total Expenses (10,401) (3,406) (2,143) (2,399) (2,453) (16,194) (7,354) (2,911) (3,509) (2,420) Restructuring (1,565) (531) (244) (213) (577) (2,106) (1,007) (469) (392) (238)
Slide 37: Litigation and conduct
Litigation and conduct End of FY 2017 provisions (£m) Comments ~ $4.4bn(1) RBS is involved in investigations by the US 3,243 DOJ and several state attorneys general In December 2017, RBS Financial Products Inc. agreed to pay US$125 million to settle US RMBS the RMBS investigation of the Californ
Slide 38: RWA reduction and capital generation
RWA reduction and capital generation Alawwal Bank PBB Central items RWAs (£bn) NWM legacy ex. Alawwal CPB 228.2 NWM core RBSI (20.8) 7.4 200.9 (13.9) 6.6 14.0 32.3 61.0 80.9 1.0 5.1 FY 2016 Reduction Growth and other Former Capital FY 2017 1st Jan 2018 CET1 13.4% Resolution rundown 15.9% 16.2%(1) ra
Slide 39: Diluted Tangible Net Asset Value (TNAV) movements
Diluted Tangible Net Asset Value (TNAV) movements Q3 2017 Q4 2016 Shares in TNAV per Shares in TNAV per £m £m issue (m) share issue (m) share Starting TNAV 35,621 11,950 298 34,982 11,906 294 Profit/(Loss) for the period post tax(1) (398) (3p) 1,444 12p Less: loss to NCI / other owners (164) (1p) (6
Slide 40: Net Promoter Scores across our businesses
Net Promoter Scores across our businesses Personal Banking(1) Business Banking(2) Commercial Banking(3) Since Q2 2015, NatWest is Impacted by operating model changes Remains ahead of main competitors steadily improving 30 21 20 21 22 21 21 18 20 15 15 13 12 13 13 12 12 11 10 9 9 8 8 9 9 9 10 6 4 4 4
Slide 41: NatWest Markets
NatWest Markets NWM Core Legacy Q4 Q4 Q4 Q4 Q4 Q4 P&L £m FY17 FY16 FY17 FY16 FY17 FY16 2017 2016 2017 2016 2017 2016 Adjusted income 1,090 1,106 165 29 1,665 1,521 284 314 (575) (415) (119) (285) Adjusted costs (1,528) (2,084) (390) (514) (1,268) (1,320) (324) (338) (260) (764) (66) (176) Adjusted P
Slide 42: Business transfers
Business transfers Asset transfers across Q4 2017 and Q1 2018 with no restatement of comparatives 9M 2017 financials related to FY 2017 financials related to transfers effective 1 Oct 2017 transfers effective 1 Jan 2018 CIFL Funds UK PBB CIFL Private Banking Income ~£30m Income ~£150m Costs ~£10m Co
Slide 43: Income Walk
Income Walk (£m) 11,400 807 13,669 12,862 6,250 UKPBB Retail & Commercial 11,444 600 Ulster Bank RoI 3,300 Commercial 0.6 NWM Core 1,665 NWM Legacy & Centre 563 Private 700 550 RBSI 2017 Adjusted Notable items 2017 Baseline Income per slide income Baseline adjusted for transfers (rounded) 43
Slide 44: Costs Walk
Costs Walk (£m) 7,551 86 7,637 6,070 3,150 UK PBB 6,070 Retail & Commercial 450 Ulster Bank RoI 1,750 Commercial Private NWM Core 450 1,268 270 RBSI NWM Legacy & Centre £600Baseline adjusted 299 for transfers (rounded) 2017 adjusted VAT releases 2017 ex. VAT costs releases Expect NatWest Markets o
Slide 45: Sustainable banking
Sustainable banking “Sustainability goes hand in hand with building trust. If we act irresponsibly, we will lose trust. That applies not just to how we treat our customers, but also the wider role we play in society.” Ross McEwan, Chief Executive “We’re committed to running the bank as a sustainable
Slide 46: Board governance and oversight
Board governance and oversight Sustainable banking governance sits directly under the Board and is informed by regular sessions with external stakeholders. The Royal Bank of Scotland Group plc board National The Royal Bank of Westminster Bank Scotland plc board plc board Group Group Sustainable Nomi
Slide 47: Highlights in 2017
Highlights in 2017 %£RBS Customer focused Friends Against Scams 20,000 coli have trained as ‘Friends Against Scams’ to help keep our customers safe and secure. Financial Health Checks This year we've helped over 1 million customers with a Free Financial Health Check. Closed Loop Feedback Anew proces
Slide 48: We are building a more sustainable bank
We are building a more sustainable bank RBS is becoming a more responsible company and we are doing business in a more sustainable way. We are listening and changing for the better. Culture Training Enterprise We improved in all nine Over 64,600 employees We supported over 3,830 categories of the la
Slide 49: Sustainable banking: benchmarks
Sustainable banking: benchmarks 2014 2015 2016 2017 • Retained Leadership position in CDP CDP Leaders category RBS – Disclosure 98 99 A- A- • Members of the United Nations RBS – Performance B B Global Compact since 2003. Industry Av. - Disclosure 69 84 • Sustainability reporting that is C C independ
Slide 50: Forward Looking Statements
Forward Looking Statements Forward-looking statements The targets, expectations and trends discussed in this presentation represent management’s current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” on pages 372 to 402 of the Annual Repo
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