Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Goldman Sachs European Financials Conference 2011
32 slides from Natwest's conference presentation, Jun 9, 2011
Slide 1: Consistent Progress Continues
Consistent Progress Continues Nathan Bostock; Head of Group Restructuring & Risk The Royal Bank of Scotland Group Goldman Sachs European Financials Conference; 9th June 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: What we are aiming for
What we are aiming for To be amongst the world’s most admired, valuable and stable universal banks, powered by market-leading businesses in large customer-driven markets To target 15%+ sustainable RoE, from a stable AA category risk profile and balance sheet Well balanced business mix to produce an
Slide 4: How we will get there
How we will get there Core Bank Non-Core Bank The focus for sustainable value creation The primary driver of risk reduction Built around customer-driven franchises Businesses that do not meet our Strategic Tests, including both stressed and non-stressed Comprehensive business restructuring ass
Slide 5: 2010 / 2011 – Executing the plan
2010 / 2011 – Executing the plan 2012 onwards 2009 2010/2011 Core profits build, Non-Core losses fall Target >15% ROE Formation of the Strategic Plan Execution and implementation phase Ongoing revenue and cost of the plan initiatives Creation of Non-Core Investment in Core franchises Com
Slide 6: Core Bank – a sustainable & balanced design
Core Bank – a sustainable & balanced design 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 Govern
Slide 7: Tracking Well to Plan Targets
Tracking Well to Plan Targets Group – Key performance indicators Worst point Q4 10 Actual Q1 11 Actual 2013 Target 1 Loan : deposit ratio (net of provisions) 154% 117% 115% c100% 2 3 Short-term wholesale funding £343bn £157bn £168bn <£150bn 4 3 Liquidity portfolio £90bn £155bn £151bn c£150bn 5 6 Lev
Slide 8: Non-Core Update
Non-Core Update
Slide 9: Non-Core in the RBS Group context
Non-Core in the RBS Group context £bn Non-Core Core Group 2009 2010 Q1 2009 2010 Q1 2009 2010 Q1 Profit & Loss 9.1 4.5 3.8 4.5 Income from 1.8 1.5 trading activities -5.2 0.0 -0.3 Impairments -5.5 -1.1 -4.7 -3.8 -0.9 -1.9 -9.2 -13.9 -9.3 8.3 7.6 2.1 2.1 1.1 Operating profit -1.0 -5.5 -6.2 -14.6 Bala
Slide 10: Non-Core Division management
Non-Core Division management A highly experienced management team in place Support functions Nathan Bostock Christine Palmer John Collins Head of Restructuring & Risk 30 years in the industry CRO Legal 23 years in the industry 21 years in the industry Nick Perkins Maeve Byrne COO CFO Jeremy Bennett
Slide 11: Non-Core - from definition to delivery
Non-Core - from definition to delivery Definition Delivery 2009 2010 2011 Select assets Build detailed data on assets Detailed asset model Management Build transaction infrastructure Specialist resource gaps filled in place Communicate Determined priorities and built Formulate strategy to stak
Slide 12: Objectives of the Division
Objectives of the Division Achieving run down while maximising shareholder value Maximise Maximise Shareholdervalue shareholder Value Viable whole Sell now Optimise timing, cost and method of businesses exit Sell later Accelerate reduction of capital and funding Maximise reduction in the RBS
Slide 13: Non-Core targets and progress to date
Non-Core targets and progress to date Non-Core TPA reduction plan – accelerated for 2011 £bn 2009-13 2009-Q111 Undrawn commitments TPAs (excl. derivs) FX (10)-(20) (8) 85 Rollovers & drawings 20-30 13 36 £118bn original 2011 funded target (133) 2 25 Impairments (20)-(30) (16) 21 258 18 201 15 Asset
Slide 14: Asset reduction progress
Asset reduction progress £bn, TPAs excl. derivatives Disposals H1 H2 Signed but not Run-off H1 H2 FY 2010 Q1 2011 completed at Q1 International Businesses & Portfolios 3.5 2.0 5.5 0.0 0.6 “24 businesses & countries completed/agreed” 2.9 6.4 9.3 4.4 4.8 7.6 12.4 2.4 2.1 Portfolio & Banking “Over 500
Slide 15: Impairment trends
Impairment trends Cumulative impairments by division Cumulative impairments by sector £bn Cumulative Charge As a % of FY08 L&A £bn Cumulative Charge As a % of FY08 L&A 2 20% 25 35% 25 20% 1 1 30% 21.0 21.0 18% 30% 20 20 15% 16% 14% 25% 14% 15 15 12% 20% 11% 17% 8% 10% 9.2 15% 10% 9.7 10 10 8% 11% 8%
Slide 16: Ulster Bank Non-Core Asset Deep Dive
Ulster Bank Non-Core Asset Deep Dive 1 2 Ulster Bank – Non-Core gross L&A , £14.8bn, (-6% y-o-y) Ulster Bank – Non-Core REIL, Provisions & Coverage REIL & Total coverage 47% Coverage, % CRE: Provisions, £bn Other £2.0bn 64% RoI 13% 27% NI 46% 43% 55% 10% UK 85% Q111 CRE - Investment L&A CRE - 7.6
Slide 17: Non-Core run-off vs. disposal
Non-Core run-off vs. disposal Run-off is: Assets at inception: − The biggest contributor to run-down £258bn* − More capital efficient and cheaper in valuation and execution costs than market disposals But cannot be taken for granted – it requires a focused and systematic approach and plenty of f
Slide 18: Price / Book Value of TPAs disposed
Future Non-Core disposals Potential for increased disposal losses Indicative profile of Non-Core asset sales to date 120% Capital Neutral Progress to date: Price / Book Value (BV) of TPAs disposed 110% — FY08-Q111 cumulative disposals of £51bn — c£1.6bn2 of disposal 100% losses, split 50/50 above
Slide 19: Indicative RWA Impacts under Basel 3
Indicative RWA Impacts under Basel 3 1 RWA impacts £bn 2 88-100 Non-Core c40% 45-50 25-30 2 Core 18-20 c60% CRD3 (Basel CRD4 CRD 4 Total 2.5) (Counterparty Deductions Risk) End 2011 Start 2013 2013 Year of impact Clarification provided from Basel Committee Uncertainties remain, with a range of p
Slide 20: Run-down of Non-Core reduces funding need
Run-down of Non-Core reduces funding need Asset reduction lessens market funding requirement Non-Core reduction reduces reliance £bn 1 Non-Core Run-down CGS Maturity Target Issuance on wholesale funding 2 70 Term Maturity Issuance Lower requirement for public unsecured issuance going forward 60
Slide 21: Risk Update
Risk Update
Slide 22: Dynamic Holistic risk agenda model
Dynamic Holistic risk agenda model Macro-Economic Sovereign Rating Strategy & Policy Deliver 5 year plan with strong Risk Architecture risk management Operating Model AA Category Rating Risk Appetite & Framework Capital Requirements Political & Regulatory 22
Slide 23: The Cone of Uncertainty
The Cone of Uncertainty —* Profi, Ing Ri. git Grade Rat 3 Ce ee MILESTONE KEY: Risk Appetite Framework Identification Control Measurement People Infrastructure 23
Slide 24: Getting to grips with risk management
Getting to grips with risk management 2008 2009 2010 2011 Activity Review senior risk leadership Self certification Rationalise group policies Master rating scale Committed credit exposure (TCE) Exposure watchlist Concentration risk Credit approval framework Market Risk Committee
Slide 25: Revisit the Cone of Uncertainty
Revisit the Cone of Uncertainty 25
Slide 26: Maintain Stakeholder Confidence
Maintain Stakeholder Confidence Stakeholder confidence is about rebuilding and maintaining the trust of our key stakeholders. Rebuilding our reputation will take time. In RBS’ case specifically, it is a question of demonstrating that factors contributing to our outlier risk profile in the past h
Slide 27: Risk envelope - Structural balance sheet improvements largely done
Risk envelope - Structural balance sheet improvements largely done RBS capital ratios strong with Non-Core reducing Leverage Ratios “in the pack” Comparative Core Tier 1 Capital Ratios1, % Tier 1 Leverage Ratios6 vs Peer averages % 12 APS benefit 10.7 Ex. APS 1.2 6 8 7.6 10.8 3 5.5 5.9 9.4 9.4 8.9 9
Slide 28: Risk agenda in practise - risk concentration reduction progressing well
Risk agenda in practise - risk concentration reduction progressing well Substantial reduction in REIL growth slowing; Significantly improved provision levels ‘tall-trees’ exposure transfers to work-out slowing in Ulster Bank Single Name Concentration exposures No. of wholesale cases transferred to P
Slide 29: Conclusions
Conclusions All key Group metrics on or ahead of Plan for this stage of Strategic Plan Group Momentum Risk agenda fully embedded and traction gained across the Group Maintained March 2011 – S&P upgrade from BBB+ to A- Non-Core TPAs reduced 52% since inception Non-Core delivery On target to
Slide 30: Appendix
Appendix
Slide 31: Non-Core asset class composition changes
Non-Core asset class composition changes 2008 Year-End TPAs (excl. derivs) Q1 2011 TPAs (excl. derivs) Other Corporate Corporate Other RBS Insurance £2.0bn Project & Export Retail Project & Export Retail Bank of China / Linea Finance £21.3bn RBS Insurance £1.5bn UK Mortgages & Finance £1
Slide 32: Update on Ireland – Asset Deep Dive
Update on Ireland – Asset Deep Dive 1 Ulster Bank – Core gross L&A, £37.2bn, (-4% y-o-y) Ulster Bank – Non-Core gross L&A , £14.8bn, (-6% y-o-y) CRE - Development CRE: CRE: £1bn, 3% 57% RoI Other £2.0bn 64% RoI 20% NI 13% 27% NI Corporate – Other 23% UK 10% UK £8.9bn, 24% Mortgages: Q111 90% RoI Q11
The Royal Bank of Scotland Group — Goldman Sachs European Financials Conference 2011 on 6ix