Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — H1 2009 Earnings Presentation
100 slides from Natwest's earnings presentation, Aug 7, 2009
Slide 1: Re-building Standalone Strength
Re-building Standalone Strength Philip Hampton, Chairman 7 August 2009
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 for today
Agenda for today Philip Hampton Introduction Stephen Hester 1H Highlights Vision, strategy and performance targets Progress on implementation Asset Protection Scheme Current challenges and market trends Guy Whittaker 1H Financials Slide 3
Slide 4: Re-building Standalone Strength
Re-building Standalone Strength Stephen Hester, Group Chief Executive 7 August 2009
Slide 5: 1H 2009 Results – Business highlights
1H 2009 Results – Business highlights Presented full details of financial and business position Comprehensive change to Board and Executive Management New Strategic Plan, charting course back to standalone strength and value, a fundamental restructuring of RBS Detailed implementation plans in place
Slide 6: 1H 2009 Results – Financial highlights
1H 2009 Results – Financial highlights Core Bank Profit £6.3bn, Non-Core Loss £9.6bn. Pre-tax profit £15m due to liability management gains 1H09 income of £14.8bn, up 27%, capturing near-term buoyancy of capital markets but underlying, a margin squeeze in core banking businesses Impairments £7.5bn a
Slide 7: RBS Strategic Plan
RBS Strategic Plan Plan is designed as the most radical restructuring achievable without unacceptable risk to success, viability and customer support Core Bank Non-Core The primary focus for value creation The primary driver of risk reduction Built around customer-driven franchises Businesses th
Slide 8: 2013 Vision for RBS
2013 Vision for RBS By 2013, RBS to be one of the world’s most admired, valuable and stable universal banks RBS to return 15%+ sustainable RoEs, powered by market-leading businesses in large customer-driven markets The Group to deliver its strategy from a stable AA category risk profile and balance
Slide 9: Targets we have set
Targets we have set Measure 2008 Actual 2013 Target Risk Stand-alone credit rating1 BBB category AA category Core Tier 1 capital ratio 4%2 >8% Restructuring Plan Loan/deposit ratio (LDR) 156%3 c.100% comprehensively Wholesale funding reliance4 £343bn5 <£150bn addresses every area of “failure
Slide 10: Core Bank – Divisional targets & plans
Core Bank – Divisional targets & plans 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 11: Core Bank – Divisional targets & plans
Core Bank – Divisional targets & plans 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 n
Slide 12: Non-core asset run-off targets
Non-core asset run-off targets Non Core third party assets (TPAs excl MTMs) run-off targets, £bn Undrawn commitments Breakdown of changes in TPAs, TPAs 2009 – 2013 85 Rollovers & additional drawings 50-60 70 ~50 Asset sales (50)–(60) ~25 c.230 252 ~9 Run-off (185)–(205) 214 ~202 ~172 ~133 ~1 APS sec
Slide 13: RBS Group 2013 – Binding disciplines
RBS Group 2013 – Binding disciplines Each business attractive “in its own right” Strong business linkages – “One Bank” Leading customer franchises Sharing of costs, expertise, customers and 15%+ RoE capabilities to maximum extent that is profitable Proportionate risk and balance sheet usage
Slide 14: Update on implementation
Update on implementation Divisional Our strategy, and the roadmap to deliver it, have been defined at plans Group and Divisional level 5-year plans finalised, KPIs and targets set for all Divisions across the Group, detailed implementation plans in place Non-core division Non-core division est
Slide 15: Update on implementation
Update on implementation Divisional Macro-risk areas fundamentally addressed by Plan plans New processes, governance and controls New risk culture being embedded across the Group Non-core division Clear expense reduction plan created, to capture £2.5bn of savings APS Implementation well un
Slide 16: APS Overview
APS Overview Terms of APS Pro forma capital impact Key terms of the APS agreement were APS reduces RWA impact of insured assets, announced in February: benefit running off as Non-Core runs down APS and related measures designed to and covered assets mature enable RBS to meet FSA “stress tests”
Slide 17: APS Implementation – Anticipated timeline
APS Implementation – Anticipated timeline 2009 Current stage Feb Autumn Accession Phase 1 Phase 2 Phase 3 Accession agreement Initial Finalisation of Establish Sign accession Shareholder identification of asset selection governance agreement circular assets for APS structures and Negotia
Slide 18: Challenges and opportunities
Challenges and opportunities Implementation is the key challenge – this is a far reaching restructuring programme Wholesale funding risks present but reducing as Non-Core runs off The economic environment may impact both revenue and credit costs in either direction Non-Core run down and losses impac
Slide 19: Macro risks update
Macro risks update Loan losses and economic outlook Wholesale funding Impairments likely to remain elevated in 2010 Material improvement from Q1 and may reduce only slowly in 2011 – Central bank usage halved Flow into GRG beginning to moderate – Unguaranteed term funding restarted Probabilit
Slide 20: My Take on H1 Results
My Take on H1 Results There is a lot that is really valuable to build on – Customer franchises intact everywhere – GBM rebound shows merit of its core business post restructuring – Banking businesses hurt by recession but improved asset margins and cost programme taking hold – Early days but big s
Slide 21: Re-building Standalone Strength
Re-building Standalone Strength Guy Whittaker, Group Finance Director 7 August 2009
Slide 22: Group – H109 Results
Group – H109 Results £bn 27% 4% 14.8 (8.7) (1.9) 4.2 (0.9) 0.4 (7.5) (1.4) 4.2 (1.0) (3.3) Income Costs General PBIL Impair- Operating Gains1 Other2 Tax Pref Attributable insurance ments loss Shares, loss claims MI and Goodwill3 1 Includes £3.8bn gain on debt redemption and strategic disposal gains
Slide 23: Group - Income
Group - Income Income road map H108 to H109, £bn 27% 14.8 0.6 2.2 11.7 (1.4) 3.7 (2.0) H108 Income Net II Non-II1 Trading FX Other H109 Income income NII margin declined as expected Non II – reflects lower fee and other income in Retail & Commercial, absence of prior year gains and de-leveraging
Slide 24: Net interest margin drivers
Net interest margin drivers Division FY08 % H109 % Comments Outlook UK Retail 3.62 3.62 Wider asset margins offset by deposit margin compression UK Corporate 2.54 2.14 Impact of deposit floors partially offset by asset re-pricing US R&C 2.65 2.31 Impact of deposit floors partially offset by asset re
Slide 25: Group - H109 costs road map
Group - H109 costs road map £bn 0.2 8.7 8.4 (0.6) 0.7 H108 costs Cost FX Regulatory H109 costs reduction & other programme £2.5bn cost reduction programme on track 8,400 decline in Group headcount in H1091 9% adverse impact of stronger $ and € Higher depositor protection levies in U.K. and U
Slide 26: Group - Credit quality
Group - Credit quality H108 FY08 Q109 Q209 H109 Gross L&A1, £bn 608.8 701.3 681.8 - 610.4 NPL + PPL, £bn 9.0 19.0 23.7 - 31.0 NPL + PPL, % of L&A 1.47% 2.69% 3.48% - 5.08% Impairment Charge, £bn 1.5 7.4 2.9 4.6 7.5 Impairment charge2, % of L&A 0.46% 0.91% 1.34% 2.98% 2.22% Provision coverage, % 55%
Slide 27: H109 Results – Core & Non-Core
H109 Results – Core & Non-Core £bn Core Division Non-Core Division 25% 17.8 (18%) (98%) (7.7) 33% (3.0) (1.0) (1.6) 8.5 (0.3) (4.3) (2.2) 6.3 (5.3) (9.6) Income Costs Insur- PBIL Impair- Operating Income2 Costs Insur- PBIL Impair- Operating ance ments profit1 ance ments loss1 claims claims H109 Grou
Slide 28: Core performance
Core performance
Slide 29: Core - Income
Core - Income H108 H109 Constant FX £bn £bn % UK Retail 2.5 2.5 (1%) UK Corporate 1.8 1.6 (12%) Wealth 0.5 0.6 2% GBM 3.7 7.8 86% GTS 1.2 1.2 (2%) US R&C 1.2 1.4 (6%) Ulster Bank 0.5 0.5 (14%) RBS Insurance 2.2 2.2 (3%) Central Items 0.6 - - Core Total 14.2 17.8 16% Very strong trading performance
Slide 30: Core - GBM underlying performance
Core - GBM underlying1 performance GBM Q-O-Q income, £bn £4.5bn £3.0bn 4.8 £1.5bn 2.9 2.3 2.3 1.9 1.6 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q109 income performance driven by strong customer flows and positive market environment Core franchise performing well Normalised levels of income expected
Slide 31: Core - Impairments
Core - Impairments Absolute impairments by division and % of book Impairments % change % of £bn vs. H208 L&A1 Key sector impairments Total 2.2 18% 0.97% Includes AFS impairments of £143m Unsecured Personal £0.49bn, Cards £0.27bn, UK Retail 0.8 42% 1.70% Mortgages £0.06bn UK Corporate 0.6 145% 1.08%
Slide 32: Core – H109 Divisional performance
Core – H109 Divisional performance PBIL Impairment Losses Operating Profit £m £m £m UK Retail 877 (824) 53 UK Corporate 872 (551) 321 Wealth 240 (22) 218 GBM 5,110 (237) 4,873 GTS 509 (13) 496 Ulster Bank 149 (157) (8) US R&C 318 (369) (51) RBS Insurance 223 (6) 217 Central Items 173 2 175 Core Tota
Slide 33: Non-Core performance
Non-Core performance
Slide 34: Non-Core – Income
Non-Core – Income £bn H109 income H109 income by division Fees & commissions 0.3 UK Retail 0.0 Insurance net premium 0.4 Ulster Bank 0.1 Other (0.2) Wealth 0.2 Credit Exotics (0.5) US R&C 0.2 CDOs (0.5) CDPCs (0.6) UK Corporate 0.2 CDS Hedging1 (1.0) RBS Insurance 0.4 Monoline write-downs (1.5) GBM
Slide 35: Non-Core – Impairments
Non-Core – Impairments Absolute impairments by sector and % of book Impairments, % change % of £bn vs. H208 L&A1 Key sector impairments Total 5.3 30% 5.65% Includes AFS impairments of £582m Manufacturing £1bn, TMT £0.6bn, Property & GBM 3.0 6% 4.38% Construction £0.6bn Property & Construction £0.4bn
Slide 36: Non-Core – Run-off
Non-Core – Run-off Derivative Assets £bn Third party assets Asset Reduction 325 43 73 5 9 21 14 2 231 31 252 200 FY08 MTM Write- Disposals Run-off FX H109 downs Good progress on balance sheet reduction Disposal of Linea Directa and Bank of China stake in H109 Part sale of Asian business announ
Slide 37: Risk management
Risk management
Slide 38: Portfolio quality – Core overview
Portfolio quality – Core overview Exposure by division Exposure1 risk rating Portfolio performance Portfolio by division, % Portfolio by grade, % £bn 0 10 20 30 40 50 0 10 20 30 Normal monitoring 504 Global Markets AQ1 o/w Financial institutions 112 o/w Corporates and 392 UK Corporate AQ2 Personal U
Slide 39: Portfolio quality – Non-Core overview
Portfolio quality – Non-Core overview Exposure by division Exposure1 risk rating Portfolio performance Portfolio by division, % Portfolio by grade, % £bn 0 25 50 75 100 0 10 20 Normal monitoring 86 AQ1 o/w Financial institutions 5 Non-Core o/w Corporates and 81 AQ2 personal AQ3 Heightened monitoring
Slide 40: Single name concentration
Single name concentration1 exposure Number of Total committed exposure entities under Total (TCE)2 % of total Investment heightened Financial Institutions Cases £bn TCE2 grade % monitoring Dec 2008 150 132 12 62 43 Jun 2009 122 128 14 69 57 TCE of top 20 87 8 85 6 91 10 84 9 522 210 19 39 201 Corpor
Slide 41: Impairments outlook – Wholesale
Impairments outlook – Wholesale No. of corporate cases transferred to Recoveries Units globally 550 500 450 400 350 300 Other1 Transport & Storage 250 Manufacturing 200 Construction 150 Wholesale & Retail Trade 100 Property 50 0 Mar Jun Sep Dec Jan Feb Mar Apr May Jun 2008 2009 Case flow reflects
Slide 42: Funding & Capital
Funding & Capital
Slide 43: Composition of the balance sheet
Composition of the balance sheet Balance sheet road map FY07 to H109 on a constant currency basis £trn 1.3 Net other 1.2 1.1 Good progress on reducing Reverse repos 1.0 balance sheet 23% lower on a constant currency Trading assets basis in last 18 months Loans to banks GBM balance sheet down £
Slide 44: Funding and liquidity
Funding and liquidity Key Funding Metrics Highlights FY08 H109 Significant progress in building the liquidity portfolio Loan:deposit ratio 152% 144% 50% reduction in Central Bank funding Loan:deposit gap £241bn £188bn £5bn of non-government guaranteed term debt Q209 Wholesale Funding >1yr1 45%
Slide 45: RWA progression
RWA progression RWAs, £bn 578 (32) 39 (30) (8) 547 FY08 De- FX Pro-cyclicality Deductions H109 leveraging 6% reduction in RWAs at CFX from de-leveraging, primarily in GBM Portfolio Management Strengthening of GBP has resulted in reduction in RWAs De-leveraging largely off-set by pro-cyclicalit
Slide 46: Capital progression
Capital progression Core Tier 1 Ratio, % 0.7 (0.7) 0.9 (0.2) (0.2) 6.4 5.9 (0.2) FY08 £5b Pref. Gain on Attributable Minority Capital H109 share redemption loss interest deductions conversion of own liabilities Core Tier 1 ratio 6.4%, up 50bp vs FY08 Tier 1 ratio 9.0%, down 90bp vs FY08 APS Co
Slide 47: Our focus now – Execution
Our focus now – Execution Vision, strategy and performance targets in place New management team, Non-Core Division, cost plan and risk plan in place Business continuing to serve its customers, sustaining core franchises Now need to: Complete APS and related approvals Implement the plan – r
Slide 48: Questions?
Questions?
Slide 49: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank Slide 1
Slide 50: APS – Overview of the scheme
APS – Overview of the scheme Credit protection from the UK government together with liability management and other measures would allow RBS to pass FSA stress tests, enhancing financial strength and providing stability for customers, depositors and investors as restructuring programme executed Core
Slide 51: Operation and Key Terms
Operation and Key Terms Protection for covered assets from the 1 Jan 2009 for the life of the assets Losses result from defined trigger events (failure to pay, bankruptcy, restructuring) and are net of recoveries APS Once finalised covered assets can be withdrawn but not substituted Manageme
Slide 52: Asset Selection
Asset Selection Principal selection criteria: Risk and degree of impairment in base case and stressed scenario Liquidity of the exposure Both core and non-core assets analysed. Inclusion of core assets reflects risk profile and provides capacity to meet UK lending commitments Equity type exposur
Slide 53: Proposed APS Covered Assets
Proposed APS Covered Assets Subject to final agreement with HMT on covered asset pool 2008 RWAs, £bn, estimated 2008 TPAs, £bn, estimated Core Non-Core Total Core Non-Core Total APS 84 81 165 APS 90 110 200 Non- Non- 333 80 413 886 142 1,027 APS APS Total 417 161 578 Total 976 252 1,227 TPAs excludi
Slide 54: Proposed Core assets covered by APS
Proposed Core assets covered by APS Subject to final agreement with HMT on covered asset pool 2008 RWAs, £bn, estimated 2008 TPAs, £bn, estimated Divisions Total Insured Total Insured GBM 167 33 513 29 UK Corporate 81 25 107 31 GTS 17 22 UK Retail 46 17 104 18 Ulster Bank 24 9 48 12 Wealth 11 15 Cit
Slide 55: Proposed Non-Core assets covered by APS
Proposed Non-Core assets covered by APS Subject to final agreement with HMT on covered asset pool 2008 RWAs, £bn, estimated 2008 TPAs, £bn, estimated Donor Divisions Total Insured Total Insured GBM 113 60 177 77 UK Corporate 18 15 25 20 GTS 3 2 UK Retail 2 1 3 1 Ulster Bank 7 5 18 12 Wealth 4 3 Citi
Slide 56: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank Slide 8
Slide 57: Definition of Non-Core
Definition of Non-Core BUs, Products, Locations and Customer Relationships that have not met the 5 Tests set in October 2008 Features to remain Core Have a strong market share Customer 1 Have a sustainable customer franchise franchise Are competitive in the changing market environment Genera
Slide 58: Overview of the non-core division
Overview of the non-core division Non-strategic assets Financials Stressed assets, or those which TPAs £252bn at Dec 08, £200bn at Jun 09 do not meet our 5 strategic tests Derivatives £73bn at Dec 08, £31bn at Jun 09 Includes portfolios, assets, RWAs £161bn at Dec 08, £164bn at Jun 09 and
Slide 59: Non-core asset run-off targets
Non-core asset run-off targets Non Core third party assets (TPAs excl MTMs) run-off profile, £bn 1H09 FY2009 Undrawn commitments* 6 12 10 4 3 4 Rollovers Breakdown 2 10 10 2 0 0 Additional drawings of changes -9 -12 -10 -7 -13 -11 Asset sales in TPA -36 -59 -40 -38 -32 -35 Run-off** -15 -15 APS secu
Slide 60: Non-Core third party assets (TPAs)
Non-Core third party assets (TPAs) Total £200bn (TPAs excl derivatives) as of 1H09 across a broad range of asset classes, customer segments and geographies TPAs*, £bn xx (% of Donor division assets transferred to Non-Core) 19 UK CB (12%) n/a Non-GBM countries (2%) 13 Citizens (6%) 24 4 12 27 Ulster
Slide 61: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank Slide 13
Slide 62: A fundamental remake of RBS’ risk profile
A fundamental remake of RBS’ risk profile Successful implementation of RBS’ restructuring plan will include a fundamental and permanent risk reduction– though banks cannot exist without measured risk taking RBS risk – Changes underway Strategy and culture Business foundations From “size, growth, s
Slide 63: A fundamental remake of RBS’ risk profile
A fundamental remake of RBS’ risk profile RBS risk – Changes underway Balance sheet and risk Process and governance Doubled Core Tier 1 capital ratio Improve systems and processes Creation and run off of £252bn Non- throughout bank Core bank New Board and Executive risk Tangible equity lev
Slide 64: £2.5bn cost reduction programme underway
£2.5bn cost reduction programme underway £bn, 2011 net P&L impact targeted Progress against targets 0.6bn savings in H1 16.2 15.7 Annualised, approximately 0.9 £1.1bn of £2.5bn delivered 2.5 1.5 0.7 ABN integration nearly there 1.8 0.7 Client and trade novations Systems de-duplication Techni
Slide 65: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 17
Slide 66: Group allocations H109
Group allocations H109 £m Income Costs Funding Centre Manufacturing Indirect Costs UK Retail (78) (142) (796) (938) UK Corporate (134) (36) (219) (255) Wealth 39 (26) (61) (87) GBM 164 (117) (277) (394) GTS 59 (33) (431) (464) Ulster Bank (3) (20) (132) (152) US Retail & Commercial (37) (35) (360) (
Slide 67: ABN AMRO – Netherlands separation time line
ABN AMRO – Netherlands separation time line July 2009 August 2009 November 2009 December 2009 New Banking Commence & Payments Legal demerger Legal separation legal process IT Platform executed executed for demerger implemented Separate new ABN Filing of documents AMRO NV and RBS to Dutch Courts NBV
Slide 68: Heightened Monitoring - Wholesale
Heightened Monitoring - Wholesale Wealth UK corporate Heightened monitoring, £bn US R&C GBM Corporate Ulster GBM Banks & FI Wholesale 300 250 200 150 100 50 0 Jun Sep Dec Jan Feb Mar Apr May Jun 2008 2009 The Group operates a Heightened Monitoring process to ensure heightened monitoring applies to
Slide 69: Heightened Monitoring - Retail
Heightened Monitoring - Retail Heightened monitoring, £bn US R&C Ulster UK Retail Consumer 3.0 2.5 2.0 1.5 1.0 0.5 0 Jun Sep Dec Jan Feb Mar Apr May Jun 2008 2009 RBS Group Retail Heightened Monitoring totalled £2.7bn in June 09, reflects accounts in arrears FX benefit in Q2, overall trend is fl
Slide 70: Impairments – Non-Core
Impairments – Non-Core Total impairments by sector1 (£m), L&A (£bn), and %2 L&A % of L&A % of L&A % of £bn L&A £bn L&A £bn L&A Man’fact Mortgages 18 6 0.63% 1,000 Mortgages 3 2 0.25% & Infrast’ Ulster Bank4 Commercial UK Retail 27 3 1.93% Prop’ & 471 Personal 1 7.29% Inv. & Dev 32 Constr’ 94 20 Resi
Slide 71: Core portfolio quality – by region and sector
Core portfolio quality – by region and sector Exposure by region Exposure by sector Portfolio by region, % Portfolio by sector, % 0 10 20 30 40 50 0 5 10 15 20 25 30 United Personal Kingdom Banks, other FIs Western Europe Property (Excluding UK) Manufacturing Transport and Storage North America Whol
Slide 72: Non-core portfolio quality – by region and sector
Non-core portfolio quality – by region and sector Exposure by region Exposure by sector Portfolio by region, % Portfolio by sector, % 0 10 20 30 40 0 5 10 15 20 25 30 United Property Kingdom Personal Western Europe Banks, other FIs (Excluding UK) Transport and Storage TMT North America Manufacturing
Slide 73: Commercial Property exposure
Commercial Property exposure1,2 Global Portfolio; £90.8bn; -8%* Global Portfolio Core; £54.7bn, Non-Core; £36.1bn By division % 70% Investment and 28% Development Largest sectors within Investment properties are: 23% Retail, 21% Office, 18% Residential UK Corporate 36 11 & 16% Mixed Less than
Slide 74: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 26
Slide 75: Corporate Sector – Shipping
Corporate Sector – Shipping Global Portfolio; £14bn; -16%* Core; £8.0bn, Non-Core; £6.0bn By sector % Primarily lending to SPVs with full security Tanker 26 16 over the asset and related cash flow Our core business will continue to focus on Dry bulk 19 6 long-term relationships with established
Slide 76: Corporate Sector – Oil & Gas
Corporate Sector – Oil & Gas Global Portfolio; £18.6bn; -22%* Core; £15.2bn, Non-Core; £3.4bn By sector % 88% GBM, 6% UK Corporate, 6% other E&P exposures are principally secured Integrated 25 7 borrowing base facilities, referenced to conservative forward looking oil price assumptions, adjusted
Slide 77: Corporate Sector – Automotives
Corporate Sector – Automotives1 Global Portfolio; £10.8bn; -23%* Core; £9.5bn, Non-Core; £1.3bn By sector % 53% GBM, 33% UK Corporate, 8% US R&C, 6% other Retail 35 8 Maintaining a cautious approach to the sector Relationships with largest players Rental 16 1 Portfolio continues to face chal
Slide 78: Corporate Sector – Project Finance
Corporate Sector – Project Finance Global Portfolio; £13.6bn; -3%* Core; £3.0bn, Non-Core; £10.6bn By geography % Total deals; 637 c50% of the book comprises social housing, quasi government backed, zero defaults Western Europe 3% 65% C20% UK infrastructure PFI, quasi government backed A per
Slide 79: Corporate Sector – Aviation
Corporate Sector – Aviation Global Portfolio; £15.6bn; -13%* Core; £2.0bn, Non-Core; £13.6bn By Facility type % Majority of exposures are managed by Aviation Capital, a specialist leasing and debt provider to the aviation industry Operating Lease 46 49% Europe, 18% North America Modern fleet –
Slide 80: Corporate Sector – Retailers
Corporate Sector – Retailers Global Portfolio: £22.9bn; -7%* Core: £20.0bn; Non-Core: £2.9bn By Retailer type % Other 36 7 £22.9bn total exposure 40% GBM, 33% UK Corporate, 10% US Department R&C, 9% Ulster, 8% Other 15 2 Stores Cautious stance taken in 2008/09 Food Retailers 15 1 Small numbe
Slide 81: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 33
Slide 82: UK Retail mortgages
UK Retail mortgages UK Portfolio1; £78.6bn; +6%* Mortgages – Arrears vs. CML2 Core; £76.6bn, Non-Core; £2.0bn % Cumulative LTV distribution as % of book volume1 CML 3+ % RBS & NW 3+ % % Dec–08 Jun–09 2.6 61 2.4 54 2.2 2.0 35 1.8 29 1.6 27 22 1.4 19 13 15 1.2 11 8 5 1.0 0.8 0.6 >50% >75% >80% >90% >9
Slide 83: UK Personal Unsecured
UK Personal Unsecured Bad debt experience – Personal & Cards Core:£20.6bn; Non-Core: £0.9bn % RBS Cards 3-month Arrears % Personal Unsecured Loans & Current Accounts Bad Debt flow % Evidence of increased pressure on UK 1.4 consumers’ finances 1.2 The Government’s breathing space initiative has i
Slide 84: UK Corporate - Business Banking
UK Corporate - Business Banking Bad debt experience – Business Banking Core; £17.5bn, Non-Core; £3.0bn Business Banking Bad Debt flow % % 0.30% Continued decline in asset quality driven 0.25% by macro economic factors High levels of debt flow continued 0.20% in H109 High balance accounts enter
Slide 85: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 37
Slide 86: Commercial Property by type – GBM
Commercial Property by type – GBM Global Portfolio; £25.1bn; +0%* Core; £8.6bn, Non-Core; £16.5bn By sub-sector % 33% UK, 48% Western Europe (Germany 15%, Spain 5%), 3% USA,16% Rest of Commercial World 20 65 Investment 88% investment and 11% development Commercial Investment properties are pri
Slide 87: GBM balance sheet
GBM balance sheet £bn GBM balance sheet – Continued focus on de-leveraging R – Reported C – Constant currency Other 874 Securities 756 Reverse Repos 740 Loans & Advances 691 667 595 Constant currency 566 540 535 calculation based 454 on 2007 balance 407 sheet date exchange rates 141 127 R C R C R C
Slide 88: GBM credit portfolio by credit grade
GBM credit portfolio by credit grade 1 GBM – Credit grade exposures1 GBM –– Credit GBM Sectorgrade exposures exposures1 1% 2% 4% 10% 3% 3% 23% 8% 5% 39% 5% 14% 7% 14% 10% 17% 5% 7% 12% 11% Banks and Building Societies AQ1 AQ2 AQ3 AQ4 AQ5 FIs Manufacturing AQ6 AQ7 AQ8 AQ9 AQ10 Transport and Storage P
Slide 89: GBM credit portfolio by credit grade - Core
GBM credit portfolio by credit grade - Core 1 GBM – Credit grade exposures1 GBM –– Credit GBM Sectorgrade exposures exposures1 2% 1% 1% 2% 11% 8% 3% 5% 32% 12% 44% 5% 6% 3% 17% 9% 14% 7% 6% 12% Banks and Building Societies Financial Intermediaries AQ1 AQ2 AQ3 AQ4 AQ5 Manufacturing AQ6 AQ7 AQ8 AQ9 AQ
Slide 90: GBM credit portfolio by credit grade - Non-Core
GBM credit portfolio by credit grade - Non-Core 1 GBM – Credit grade exposures1 GBM –– Credit GBM Sectorgrade exposures exposures1 9% 2% 13% 2% 13% 26% 4% 3% 1% 6% 9% 6% 10% 3% 10% 6% 16% 13% 19% 29% Banks and Building Societies Financial Intermediaries AQ1 AQ2 AQ3 AQ4 AQ5 Manufacturing Transport an
Slide 91: GBM – Derivative trading assets
GBM – Derivative trading assets1 Derivatives – Majority is flow product in liquid markets FY08 H109 H109 £bn Uncollateralised Derivative Portfolio £bn £bn % 552 (466) Government 8 2 6% Investment Grade 48 21 48% Monolines & CDPCs 17 8 18% Non-Investment Grade 23 12 28% Total 96 43 100% 86 43 43 Coll
Slide 92: GBM – Non-Derivative trading assets
GBM – Non-Derivative trading assets1 £bn 257 164 H109 2008 Asset £bn £bn % change Debt securities 95 110 (14%) Reverse repos 69 92 (25%) T Bills 16 16 - 16 35 Loans & advances 35 60 (42%) 8 Equities 8 11 (27%) 34 Other 34 30 13% GBM total 257 320 (20%) Non- Debt T bills L&A Equities Other derivative
Slide 93: GBM – Reverse repos
GBM – Reverse repos1 £bn FY08 H109 % Exposure by counterparty £bn £bn change Reverse repos – Banks 57 31 (46%) 78 Reverse repos – Customers 39 47 21% Total 96 78 (19%) 31 47 % of total MTM Maturity profile FY08 H109 < 3 months 82.6 93.7 < 6 months 12.1 3.3 < 1 year 4.4 3.0 Total Banks Customers > 1
Slide 94: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 46
Slide 95: US R&C
US R&C Total Portfolio; $103bn; -7%* Home Equity & Residential Mortgage Core; $81bn, Non-Core; $22bn Portfolio (ex SBO) % Cumulative LTV distribution as % of book value: Residential Mtg/ 2 36 61 Home equity 56 Dec-08 Jun-09 Corporate & 42 24 2 36 35 Industrial 27 Auto & other 19 12 8 14 13 consumer
Slide 96: US R&C – Retail consumer lending metrics
US R&C – Retail consumer lending metrics Core Non-Core Residential Residential Mortgage Home Equity Auto Mortgage Home Equity Auto SBO Outstanding Balance $11.9bn $25.9bn $9bn $1.4bn $0.5bn $0.8bn $6bn Percentage of Total Loans 14% 32% 12% 1% 0% 0% 6% Weighted Average FICO1 742 740 738 704 725 694 7
Slide 97: Appendix
Appendix APS Non-Core Risk, Cost Reduction Programme Financial Details Corporate Sectors UK Banking GBM US Retail & Commercial Ulster Bank 49
Slide 98: Ulster Bank – Sector Analysis
Ulster Bank – Sector Analysis Total portfolio: £54bn; -10%* Ulster Bank mortgage portfolio Core: £38.9bn; Non-Core: £15.1bn Cumulative indexed LTV distribution as % of book volume1: Mortgages 30 11 Dec–08 Jun–09 53 56 Property 20 15 36 32 32 28 24 2 18 19 Corporate Other 21 13 15 9 Personal Other 2
Slide 99: Ulster Bank – Commercial Property
Ulster Bank – Commercial Property1 Total portfolio; £17.6bn; -6%* Core; £10bn, Non-Core; £7.6bn Cumulative LTV distribution as % of book value: Dec–08 Jun–09 Commercial 29 8 Investment 92 88 84 77 Residential 68 13 20 Development 55 48 Commercial 35 35 8 8 25 Development 21 20 12 9 3 7 Residential 3
Slide 100: Slide 100
The Royal Bank of Scotland Group — H1 2009 Earnings Presentation on 6ix