Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Investor Day (November 2006)
132 slides from Natwest's investor day presentation, Nov 9, 2006
Slide 1: Make it happen
Make it happen strength diversity flexibility
Slide 2: Forward looking statements
This presentation may contain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Group's economic results,
Slide 3: Driving Growth
Driving Growth Sir Fred Goodwin Group Chief Executive
Slide 4: EPS Growth
Slide 4 EPS Growth Cumulative Growth in Earnings Per Share 200 180 160 140 120 100 2001 2005 2008 RBS excluding goodwill amortisation and integration costs, as reported (UK GAAP 2001-2004 and IFRS 2004-2005)
Slide 5: EPS Growth
Slide 5 EPS Growth Cumulative Growth in Earnings Per Share 200 180 160 1 0% AGR 140 C 120 100 2001 2005 2008 RBS excluding goodwill amortisation and integration costs, as reported (UK GAAP 2001-2004 and IFRS 2004-2005)
Slide 6: EPS Growth
Slide 6 EPS Growth Cumulative Growth in Earnings Per Share 200 180 160 1 0% AGR 140 C 120 100 2001 2005 2008 RBS excluding goodwill amortisation and integration costs, as reported (UK GAAP 2001-2004 and IFRS 2004-2005)
Slide 7: Drivers of Growth
Slide 7 Drivers of Growth ▮ Diversified income ▮ Scale and distribution ▮ Growing market share ▮ New products/new markets ▮ Operational excellence ▮ Strong risk management ▮ Financial strength
Slide 8: Agenda
Slide 8 Agenda Retail Markets Gordon Pell RBS Insurance Mark Fisher Ulster Bank Cormac McCarthy Coffee break Citizens Larry Fish Corporate Markets Johnny Cameron Financial Framework Guy Whittaker Closing remarks Sir Fred Goodwin Questions & Answers
Slide 9: Retail Markets
Retail Markets Gordon Pell Chief Executive
Slide 10: Diversified Income
Slide 10 Diversified Income 1H06 Income £4,221m Merchant acquiring 4% Money transmission 13% Business deposits 8% Business lending 7% Overdrafts 8% Other 6% Personal loans 9% Other investment prods 6% Mortgages 7% Bancassurance 8% Credit cards 15% Personal savings 9%
Slide 11: Scale
Slide 11 Scale Rank Personal current accounts #1= Personal savings #6 Personal loans #2 Credit cards #2 Mortgages #5= Business banking #1 Bancassurance #5 Merchant acquisition #1
Slide 12: Distribution
Slide 12 Distribution ▮ 14.5 million personal banking customers ▮ 10.1 million UK credit card customers ▮ 1.2 million business customers (turnover <£1m) ▮ #1 UK-wide distribution network – 2,274 branches – 14,418 traditional and merchant fill ATMs – 2.3 million active internet users ▮ Comprehensive
Slide 13: Market Share
Slide 13 Market Share Share Trend Personal current accounts 21% Ò Personal savings 9% Ò Personal loans 16% Î Credit cards 16% Ò Mortgages 6% Î Business banking 25% Ô Bancassurance 9% Ò Merchant acquisition 42% Î
Slide 14: Opportunities for Growth
Slide 14 Opportunities for Growth 12-24 Month Outlook Personal current accounts 9 Personal savings 99 Personal loans 9 Credit cards 9 Mortgages 99 Business banking 99 Bancassurance 999 Private banking – UK 999 Private banking – International 999
Slide 15: Personal Current Accounts
Slide 15 Personal Current Accounts 9 ▮ Achieved #1= market share – #1 for new business – #1 account ‘switchers’ – #1 for students – #1 for affluent customers ▮ Highest proportion of ‘extremely’ satisfied customers Business Priorities ▮ Maintain service primacy ▮ Grow RBS in England & Wales ▮ 30 bran
Slide 16: Personal Savings
Slide 16 Personal Savings 99 ▮ 12% share of new business, v 9% share of stock ▮ Stable margins supported by service proposition Business Priorities ▮ Integrate further with current accounts and bancassurance as part of core offering ▮ Increasing use of structured savings products, with sales rising
Slide 17: Current Accounts & Personal Savings
Slide 17 Current Accounts & Personal Savings 1H06 v 1H05 Ave Savings + MTA Balance Growth Balance Growth % 12 10.2 10 8.2 8 6 4 2 0 Market Retail Markets Source: Bank of England, Internal Data
Slide 18: Unsecured Lending
Slide 18 Unsecured Lending 9 Personal Loans Credit Cards ▮ Muted volumes ▮ Leading share of new cards issued ▮ Deliberately cautious view ▮ Focus on organic channels ▮ Focus on organic channels ▮ Partnership with Bank of ▮ Scaled back less profitable China direct lending Credit Quality ▮ Overall our
Slide 19: Mortgages
Slide 19 Mortgages 99 ▮ Single mortgage business created ▮ £66bn book ▮ Joint 5th largest player in the market ▮ Market share stable ▮ 2H06 new business in line with stock Business Priorities ▮ Major investment in branch process and sales force ▮ Broaden product offering
Slide 20: Business Banking
Slide 20 Business Banking 99 ▮ Maintain #1 UK bank for SME’s ▮ Income £800m 1H06 (19% of total) ▮ Strong, stable credit quality ▮ New leadership team, senior transfer from Corporate Markets Business Priorities ▮ Re-energised relationship manager and direct delivery models ▮ Introduce proven products
Slide 21: Bancassurance
Slide 21 Bancassurance 999 ▮ Fastest growing UK bancassurer ▮ APE in 1H06 +89% v 1H05 ▮ Increasing market share by c50% ▮ 15% increase in sales force combined with sales productivity gains of 50% v 2005 ▮ New business margins growing Business Priorities ▮ Further increase sales force by 50%+ to >1,0
Slide 22: Bancassurance
Slide 22 Bancassurance APE Growth £m 32% 500 481 400 364 300 57% 89% 196 200 138 125 100 73 0 1H05 1H06 1H05 1H06 1H05 1H06 RBS Lloyds TSB HBOS
Slide 23: Private Banking – UK RBS and NatWest
Slide 23 Private Banking – UK 999 RBS and NatWest ▮ 500k customers, 1,000+ Relationship Managers ▮ #1 market share in current accounts for high earners – 25% of the £50k+ segment ▮ Income £340m 1H06 ▮ £6bn AUMs, balance sheet of £35bn (deposits + lending) Business Priorities ▮ Transformation of lega
Slide 24: Private Banking – UK Coutts, Adam and RBS International
Slide 24 Private Banking – UK 999 Coutts, Adam and RBS International ▮ Leading UK private banks – 69,000 clients, 365 bankers (39% increase since 2003), 28 offices (3 new in 06/1Q07) ▮ Largest offshore bank – 163,000 clients, 44 offices ▮ £13bn AUMs, balance sheet of £27bn (deposits + lending) ▮ Cou
Slide 25: Private Banking – International
Slide 25 Private Banking – International 999 ▮ Strong presence in Europe and Asia – 15 offices, 235 private bankers ▮ £13bn AUMs, balance sheet of £7bn (deposits + lending) ▮ 3yr CAGR 22% in profit Business Priorities ▮ Increase private bankers by 35% to 318 at FY07 ▮ Partnership with Bank of China
Slide 26: Summary
Slide 26 Summary ▮ Strong franchise with diverse income streams and stable product margins ▮ UK credit environment still challenging but our metrics remain stable ▮ New organisation provides opportunity for increased cost efficiency ▮ Further opportunities in savings, investments, private banking an
Slide 27: Drivers of Growth
Slide 27 Drivers of Growth ▮ Diversified income 999 ▮ Scale 999 ▮ Distribution 999 ▮ Growing market share 99 ▮ New products/new markets 9
Slide 28: RBS Insurance
RBS Insurance Mark Fisher Chairman
Slide 29: Diversified Income
Slide 29 Diversified Income 1H06 Income £2,761m Rescue 3% Other 7% Commercial 7% UK Home 18% UK Motor 58% International Motor 7%
Slide 30: Diversified Income
Slide 30 Diversified Income 1H06 Income £2,761m Broker 14% Motor 39% External partners 15% Own brands 55% Internal partner 16% Home 9% Other 5% Rescue 2%
Slide 31: Scale
Slide 31 Scale UK Market Positions Rank Personal motor Total #1 Own brands #1 Internal partner – TPF #3 External partners #7 Personal home Total #2 Own brands #3 Internal partner – TPF #18 External partners #5 Commercial SME #8
Slide 32: Distribution
Slide 32 Distribution ▮ Over 8.6m UK motor policies ▮ Over 4.5m UK home policies ▮ Over 4.9m UK rescue policies ▮ Over 2m policies in Spain, Italy and Germany ▮ #1 for direct distribution – Over 16k telephone quotes per day – Over 5k advisors – Over 50k quotes online per day ▮ #1 for partnerships ▮
Slide 33: Market Share
Slide 33 Market Share UK Market Positions Share Trend Personal motor Total 34% Î Own brands 22% Î Internal partner – TPF 7% Î External partners 5% Î Personal home Total 16% Ò Own brands 8% Ò Internal partner – TPF 1% Ò External partners 7% Î Commercial SME 5% Ò
Slide 34: UK Motor Market
Slide 34 UK Motor Market Motor Premium and Claims Index 130 Claims 120 110 Premiums 100 90 2002 2003 2004 2005 1H06 2002=100
Slide 35: RBS Insurance
Slide 35 RBS Insurance £m m 1,000 16 Motor and Home in force policies (rhs) Profit (lhs) 14 800 12 600 10 8 400 6 4 200 2 0 0 2002 2005 Note: 2002 proforma basis including Churchill, UK GAAP, 2005 IAS
Slide 36: RBS Insurance
Slide 36 RBS Insurance ▮ RBS Insurance has delivered – Strong organic profit growth – Benefits of Churchill acquisition – Strong return on capital, around 30% ▮ This has been achieved through – Focus on single operating platform and operating efficiency z Superior underwriting z Procurement benefits
Slide 37: Opportunities for Growth
Slide 37 Opportunities for Growth 12-24 Month Outlook Growing Market Share Own brands (9) 9 Partnerships 9 Commercial 99 New Products/New Markets International 99
Slide 38: Own Brands
Slide 38 Own Brands (9)9 ▮ Some signs of sustained upward motor pricing ▮ But continued claims inflation ▮ Price increases take 12 months to implement across the book and a further 12 months to feed through to profit in full
Slide 39: Own Brands
Slide 39 Own Brands (9)9 ▮ Well positioned as motor prices increase – Strong brands – 9 out of 10 Direct Line and Churchill customers would recommend them as chosen insurer – Leading pricing capability – #1 web insurer – Leading retention rates (Direct Line in excess of 80%) – Multiple options to us
Slide 40: Partnerships
Slide 40 Partnerships 9 ▮ RBS Insurance is #1 in the partnership market. Partners represent £1.7bn of total income in 2005 – 4 major partners account for 80% of the total Partnership income – Partners have differing profiles ▮ Role of Partnerships – Contribution to fixed costs – Scale: operational a
Slide 41: Commercial
Slide 41 Commercial 99 ▮ Focused on SME insurance Broker Business Own Brand Business ▮ Rapidly growing ▮ NatWest / RBS the #1 UK Bank – 11% CAGR IFP growth, 04-06 for SMEs ▮ Exploit technology lead ▮ Cross-sell into RBS and NatWest customer base – Packaged products and automated underwriting – 31% u
Slide 42: International
Slide 42 International 99 Spain ▮ #1 direct insurer with a 56% share of the direct market ▮ Direct 10% of overall market and growing at 13% 2004-05 ▮ Achieved critical mass with 1.3m in-force policies Italy ▮ #3 direct insurer with a 22% share of the direct market ▮ Direct 4% of overall market and g
Slide 43: Summary
Slide 43 Summary ▮ Strong performance in difficult market ▮ Strong brands ▮ Well positioned as pricing moves ▮ Good opportunities in Commercial and International ▮ Continue to drive efficiency and product innovation in core business
Slide 44: Drivers of Growth
Slide 44 Drivers of Growth ▮ Diversified income 9 ▮ Scale 999 ▮ Distribution 999 ▮ Growing market share (9)9 ▮ New products/new markets 99
Slide 45: Ulster Bank
Ulster Bank Cormac McCarthy Chief Executive
Slide 46: Diversified Income
Slide 46 Diversified Income 1H06 Income £471m Other 7% Money transmission 7% Capital markets 8% Personal loans + credit cards 6% Mortgages 13% Corporate banking 19% Personal savings 9% Wealth 4% Business lending 19% Business deposits 8%
Slide 47: Diversified Income
Slide 47 Diversified Income 1H06 Income £471m Northern Ireland 30% Republic of Ireland 70%
Slide 48: Scale
Slide 48 Scale NI RoI Rank Rank Personal current accounts #1 #3= Personal loans #2 #4 Credit cards #1 #4 Mortgages #5 #2 Savings #3 #5 Business & corporate banking #1 #3
Slide 49: Scale – Integration
Slide 49 Scale Integration ▮ Successfully completed in October 2006 ▮ Multi-currency, multi-jurisdiction, multi-brand ▮ Provides scalable Manufacturing platform, increasing productivity ▮ Access to RBS Group products and services ▮ Unique competitive advantage in Ireland
Slide 50: Distribution
Slide 50 Distribution ▮ 1.5m personal customers ▮ 0.2m business and corporate customers ▮ 272 branches ▮ 1,000 ATMs (2nd largest ATM network in Ireland) ▮ 32 business centres (10 NI, 22 RI) ▮ Over 850 commercial and business managers ▮ Specialist financial markets sales force
Slide 51: Distribution – Number of Branches
Slide 51 Distribution No of Branches NI RoI Total Ulster Bank/First Active 90 182 272 First Trust/AIB 57 274 331 Bank of Ireland 43 280 323 Northern/NIB 96 59 155 Permanent TSB – 104 104 Halifax 17 22 39 UB Branch RoI UB Business Centre UB Branch NI First Active store
Slide 52: Market Share
Slide 52 Market Share NI RoI Share Trend Share Trend Personal current accounts 24% Ò 11% Ò Personal loans 14% Î 5% Ò Credit cards 16% Ò 9% Î Mortgages 6% Ò 15% Ò Savings 11% Î 6% Ò Business and corporate banking 32% Ò 14% Ò
Slide 53: Opportunities for Growth
Slide 53 Opportunities for Growth 12-24 Month Outlook Money transmission/current accounts 99 Personal savings 99 Personal lending + credit cards 999 Wealth management 999 Mortgages 999 Small business 999 Corporate & capital markets 999
Slide 54: Personal Banking
Slide 54 Personal Banking 99 Current Accounts and Mortgages ▮ Expand and enhance branch network – 3 new branches opened in last 18 months; 27 potential locations identified – £50m upgrade of Retail outlets underway since 2005; completion due 2007 ▮ Penetrate growing youth market – Relationships esta
Slide 55: Business and Corporate Banking
Slide 55 Business and Corporate Banking 999 ▮ Deploy additional relationship management resource to support market share growth – 15% increase in sales force in last 18 months – Ongoing significant recruitment from competitor banks ▮ Expand physical presence – 15% increase in business centre outlets
Slide 56: New Products/New Markets
Slide 56 New Products/New Markets 99 ▮ Leveraging Group platform – Direct banking – Offset mortgages, launched in November 2006 – Affluent proposition – RBS global capabilities in business and corporate banking ▮ Wealth management – High net worth team now in place – Leveraging relationships in corp
Slide 57: Summary
Slide 57 Summary ▮ Strong in corporate and retail banking, in Northern Ireland and in the Republic of Ireland ▮ Healthy economic growth set to continue ▮ Competitive advantage from deployment of RBS scale and capabilities ▮ Expansion of distribution network, people and product range ▮ Excellent grow
Slide 58: Drivers of Growth
Slide 58 Drivers of Growth ▮ Diversified income 999 ▮ Scale 999 ▮ Distribution 99 ▮ Growing market share 999 ▮ New products/new markets 99
Slide 59: Driving Growth
ae RBS The Royal Bank of Scotland Group Driving Growth
Slide 60: Citizens Financial Group
Citizens Financial Group Larry Fish Chairman and Chief Executive Officer
Slide 61: Diversified Income
Slide 61 Diversified Income 1H06 Income £1,686m Business deposits 13% Personal checking 18% Business lending 19% Personal savings 15% Other 8% Secured personal loans 11% Credit cards 2% Mortgages 5% Home equity loans 9%
Slide 62: Scale
Slide 62 Scale Rank Deposits #8 Assets #9 Secured personal loans #7 – Indirect auto outstandings #5 Mortgages #16 Home equity loan outstandings #6 Credit cards #9 Business lending #14
Slide 63: Distribution
Slide 63 Distribution ▮ #8 branch network – 1,613 branches ▮ #2 supermarket branch network – 526 branches ▮ #9 ATM network – 3,202 ATMs ▮ 4.6 million personal customers ▮ 460,000 business customers
Slide 64: Distribution – Footprint Map
Slide 64 Distribution Vermont Wik Michigan & ew Hampshire % ® } Massachusetts + @ a / Indiana @ ; he Mi e , ~ , Rhode Island ino Ohio . K ~ . Mlinois “@ é Connecticut e 2. y New Jersey @ ’ b Delaware KY
Slide 65: Market Demographics and Economics
Slide 65 Distribution Market Demographics and Economics New Mid- Midwest Total Total England Atlantic Citizens US (ex NYC) Population (m) 13.2 21.9 35.0 70.1 303.6 Median household income ($) 62,672 52,308 53,405 54,802 51,546 Deposits ($bn) 280 402 667 1,349 6,386
Slide 66: Deposit Market Share
Slide 66 Deposit Market Share Total Market Citizens Trend Deposits $bn Market Share New England Massachusetts 149 17.6% Ò Rhode Island 21 48.4% Ò New Hampshire 21 30.7% Ò Connecticut 79 4.9% Ò Vermont 10 9.7% Î Mid-Atlantic Pennsylvania 236 11.0% Î Delaware 18 7.4% Ò Upstate New York 148 6.7% Ò Midw
Slide 67: Deposit Market Share – Illinois
Slide 67 Deposit Market Share – Illinois Rank Institution Total Deposits Market Branches $m Share 1 JPMorgan Chase 333 39,798 13.1% 2 LaSalle Bank 143 37,017 12.1% 3 BMO Financial 180 24,956 8.2% 4 Citizens pro forma 141 8,324 2.7% 4 Fifth Third 129 8,158 2.7% 5 Citizens 131 7,313 2.4% 6 Wintrust Fi
Slide 68: Opportunities for Growth
Slide 68 Opportunities for Growth 12-24 Month Outlook Personal checking/savings 99 Secured personal loans 9 Mortgages 9 Home equity loans 99 Business banking 99 Mid-corporate banking 999 Merchant acquisition 999
Slide 69: Personal Checking/Savings
Slide 69 Personal Checking/Savings 99 ▮ Personal deposit balances: $69.6 billion ▮ Small business banking – Deposits balances: $8.8 billion – #2 SBA lender in US – Sales force makes 350,000 in-person customer visits per year ▮ Sales and service management – Compensation reflects sales and service me
Slide 70: Personal Checking/Savings Action Steps
Slide 70 Personal Checking/Savings 99 Action Steps ▮ Debit card innovation – PayPass – contactless technology (largest MasterCard issuer) – ‘Everyday’ rewards program rolled out to entire footprint – Phase 2 leverages ‘Everyday points’ for other banking products ▮ Price savings on liquid and CD port
Slide 71: Customer Satisfaction
Slide 71 Customer Satisfaction % 90 Mid-Atlantic 85 New England New York 80 Midwest 75 70 65 3Q05 4Q05 1Q06 2Q06
Slide 72: Consumer Lending
Slide 72 Consumer Lending 9 ▮ June 06 balances – Mortgage $19.4bn – Home equity $33.1bn – Auto $14.3bn – Other $10.1bn ▮ Approximately 99% secured, prime only ▮ Environment – Growth in consumer loan demand softening – Mortgages: Higher rates/slowdown in housing demand – Tightening of credit spreads/
Slide 73: Consumer Lending Action Steps
Slide 73 Consumer Lending 9 Action Steps ▮ Link new rewards programme to consumer lending products ▮ Deeper customer penetration in home equity lending ▮ Position Citizens as the home equity bank of choice – Quick application turnaround ▮ Restructure cost base of mortgage origination operation – Mor
Slide 74: Business Banking
Slide 74 Business Banking 99 ▮ Balances – Loans: $32 billion – Deposits: $24 billion ▮ Lenders: 525 ▮ Business loans have increased 14% 1H06 v 1H05 ▮ Significant growth in commercial fees 1H06 v 1H05 International 57% Derivatives 37% Cash management 21% – International and derivatives leverage RBS c
Slide 75: Business Banking Action Steps
Slide 75 Business Banking 99 Action Steps ▮ Continue penetration of Mid-Atlantic region ▮ Build out Midwest commercial lending effort – Increase relationship managers to 121 by Dec 07, 61% increase – Also build associated support teams (cash management, international, derivatives) ▮ Leverage RBS deb
Slide 76: New Products/New Markets
Slide 76 New Products/New Markets ▮ Mid-Corporate Banking ▮ RBS Lynk ▮ Supermarket Branches ▮ Credit Card/Kroger Joint Venture ▮ National Home Equity Lending
Slide 77: Mid-Corporate Banking
Slide 77 Mid-Corporate Banking 999 ▮ New centralized approach to Mid-Corporate customers ▮ Combine Citizens’ local presence with RBS global capabilities ▮ 1,100 companies with turnover of $250m – $1,500m in Citizens’ 13 state franchise ▮ Currently have relationships with 300 Action Steps ▮ 75% incre
Slide 78: RBS Lynk
Slide 78 RBS Lynk 999 ▮ Providing merchant acquiring services for small businesses nationally ▮ Acquired Lynk Systems in September 2004 ▮ 9th largest merchant acquirer in US ▮ 11% penetration of Citizens existing small and business customers ▮ Growth 1H06 v 1H05 – Merchants (spot) 17% – Fee income (
Slide 79: Supermarket Branches
Slide 79 Supermarket Branches 99 ▮ 526 branches ▮ $8.2bn deposits, up 9% June 06 v June 05 ▮ Supermarket strategy based on customer acquisition – Average store has 20,000 customer visits per week Action Steps ▮ Continue high opportunity New York Stop & Shop expansion – 63 new branches by end 2009 ▮
Slide 80: Supermarket Branches – New York
Slide 80 Supermarket Branches – New York
Slide 81: Credit Card/Kroger Joint Venture
Slide 81 Credit Card/Kroger Joint Venture 99 ▮ $2.5 billion in current outstandings ▮ 1.8 million credit cards issued under RBS, Citizens and Kroger brands ▮ Distribution channels include branch, direct mail and Kroger ▮ Kroger is 2nd largest supermarket group in US – 40 million customers and 2,500
Slide 82: National Home Equity Lending
Slide 82 National Home Equity Lending 99 ▮ Origination of home equity loans and lines in most states through internet sites and through national broker network ▮ Differentiation on aggregator sites through customer service rankings and completion speed ▮ Top customer service rating for internet home
Slide 83: In-Fill Acquisition
Slide 83 In-Fill Acquisition ▮ Announced acquisition of GreatBanc on 30 October ▮ $1 billion in deposits and 10 branches in Chicago ▮ Improves Citizens deposit market rank in Chicago region from 5th to 4th ▮ Expense driven projections – does not rely on aggressive asset and revenue growth ▮ Large fr
Slide 84: Profitability
Slide 84 Profitability $m $m 150,000 330 Net interest income (rhs) 320 140,000 3.15% Net interest margin 310 3.05% 130,000 300 2.92% 290 120,000 2.86% 280 2.74% 2.75% 270 110,000 260 100,000 250 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Monthly data Earnings assets (lhs)
Slide 85: Summary
Slide 85 Summary ▮ Growth in consumer loan demand softening ▮ Continued slow growth in deposits ▮ Margin improvement unlikely, short term ▮ Business banking outlook favourable ▮ Continuing to invest in high growth areas ▮ Disciplined cost and credit management
Slide 86: Drivers of Growth
Slide 86 Drivers of Growth ▮ Diversified income 99 ▮ Scale 999 ▮ Distribution 99 ▮ Growing market share 99 ▮ New products/new markets 99
Slide 87: Corporate Markets
Corporate Markets Johnny Cameron Chief Executive
Slide 88: Corporate Markets
Slide 88 Corporate Markets Corporate Markets UK Corporate Banking Global Banking & Markets (UKCB) (GBM) ▮ Commercial Banking ▮ Relationship banking ▮ Corporate Banking ▮ Project and asset finance ▮ Asset Finance ▮ Credit ▮ Invoice Finance ▮ Rates ▮ Currencies ▮ Equity Finance Specialised Lending Ser
Slide 89: Relationship-Driven Banking Model
Slide 89 Corporate Markets Relationship-Driven Banking Model UK Corporate Banking Global Banking & Markets ▮ Relationship manager ▮ Relationship ▮ Full suite of products ▮ Product excellence ▮ Co-ordinated product ▮ Access to markets delivery ▮ Intellectual capital ▮ Responsive credit process ▮ Lack
Slide 90: Corporate Markets Income
Slide 90 Corporate Markets 1H06 Income £4,587m UK Corporate Banking 34% Global Banking & Markets 66% Income is on underlying basis ie net of operating lease depreciation
Slide 91: UK Corporate Banking
ae RBS The Royal Bank of Scotland Group UK Corporate Banking
Slide 92: Diversified Income
Slide 92 Diversified Income 1H06 Income £1,546m Other 7% GBM product sales 5% Invoice finance 6% Corporate lending 25% Asset finance 9% Money transmission 7% Commercial lending 19% Deposits 22% Income is on underlying basis ie net of operating lease depreciation
Slide 93: Scale
Slide 93 Scale Rank Corporate Banking #1 Commercial Banking #1 Lending #1 Deposits #1 Money Transmission #1 Asset Finance (Lombard) #1 Invoice Finance #1 RBS has been consistent market leader for 6 years
Slide 94: Distribution
Slide 94 Distribution ▮ 79,000 Commercial customers (turnover £1m to £25m) ▮ 11,000 Corporate customers (turnover over £25m) ▮ 100,000 Lombard customers ▮ 6,800 Invoice Finance customers ▮ Over 2,500 customer-facing staff
Slide 95: Market Share
Slide 95 Market Share Share Trend Commercial Banking 34% Ò Corporate Banking 30% Î Lending 20% Î Deposits 24% Ò Money Transmission 40% Î Asset Finance (Lombard) 25% Î Invoice Finance 19% Î
Slide 96: Growing Share – Customer Penetration
Slide 96 Growing Share Customer Penetration ▮ Increased staff training and focussed incentives ▮ Streamlined credit process – One view of credit ▮ Improved technology for front line, driving efficiency – RM Desktop and RM Platform ▮ Co-location and property improvement – 2006: 17 properties, 2007: 2
Slide 97: Growing Share – Customer Acquisition
Slide 97 Growing Share Customer Acquisition ▮ Increased front-line staff – 188 new RMs 2H06 – 377 new RMs 2007 ▮ Revised operating model frees up RMs – RM admin roles reassigned – Streamlined documentation – RM mobility tools ▮ 3,800 (4%) new customers year-on-year ▮ Enhanced electronic banking – 13
Slide 98: Consistent Income Growth
Slide 98 Consistent Income Growth £m 2,000 Growth 8% pa Impact of 1,500 Competition Commission 1,000 500 0 IFRS IFRS IFRS 1H02 2H02 1H03 2H03 1H04 2H04 1H05 2H05 1H06 Income is on underlying basis ie net of operating lease depreciation 1H02 – 2H04 data on October 2005 investor day basis, 1H05 – 1H06
Slide 99: UKCB Drivers of Growth
Slide 99 UKCB Drivers of Growth ▮ Diversified income 99 ▮ Scale 999 ▮ Distribution 999 ▮ Growing market share 99 ▮ New products/new markets 9
Slide 100: Global Banking & Markets
ae RBS The Royal Bank of Scotland Group Global Banking & Markets
Slide 101: Diversified Income: Product
Slide 101 Diversified Income: Product 1H06 Income £3,041m Other 7% ABS/MBS 14% Equity finance 6% Relationship banking 10% Debt capital markets 11% Project and asset finance 9% Real estate 10% Currencies 8% Leveraged finance 8% Rates 17% Income is on underlying basis ie net of operating lease depreci
Slide 102: Diversified Income: Geography
Slide 102 Diversified Income: Geography 1H02 – 1H06 Growth CAGR% 50 40 30 20 10 0 1H06 UK US Europe Asia-Pacific Income £1,680m £846m £430m £85m Income figures on underlying basis ie net of operating lease depreciation; growth rates in local currencies
Slide 103: Scale
Slide 103 Scale Rank Credit – All debt #5 – Global loans #5 – Global DCM volume #7 – Global ABS & MBS #1 – European leveraged loans #2 Rates – US treasuries #4 – UK gilts #2 – Interest rate swaps (all currencies) #4 Currencies – FX globally #5 – FX E-trading market share #5 Project and Asset Finance
Slide 104: Origination
Slide 104 Origination ▮ Large corporate and financial institutions clients including – Over 95% of the FTSE 100 – 80% of the Fortune 100 – Over 95% of the Dow Jones Eurostoxx 50 ▮ Integration of GBM US ▮ All offices in Continental Europe growing fast – A bank of choice for corporate transactions in
Slide 105: Distribution
Slide 105 Distribution Expanding Distribution Channels Primary Loan and bond underwriting Secondary Securitisation, CLOs, synthetic CLOs, secondary sales Strategic investors Consistent participation in RBS’ origination capacity 3rd party asset RBS managed CDOs management Alternative funds management
Slide 106: Market Share
Slide 106 Market Share Share Trend Credit – All debt 4.7% Ò – Global loans 4.1% Î – Global DCM volume 5.2% Ò – Global ABS & MBS 8.5% Ò – European leveraged loans 12.6% Î Rates – US treasuries 7.8% Ò – UK gilts 10.9% Î – Interest rate swaps (all currencies) 9.6% Ò Currencies – FX globally 6.4% Ò – FX
Slide 107: Market Share – Global All Debt Bookrunners
Slide 107 Market Share Global All Debt Bookrunners Market Share % 1Q06 – 3Q06 Ranking 5 4.7 4.6 1 JP Morgan 4.1 4 2 Citigroup 3.3 3 Bank of America 3.1 3 2.8 4 Deutsche Bank 2.5 2.6 5 RBS 2 1.8 6 Barclays Capital 7 Lehman Brothers 1 8 Merrill Lynch 9 Goldman Sachs 0 10 Morgan Stanley 1H02 2H02 1H03
Slide 108: Market Share Growth
Slide 108 Market Share Growth ▮ Debt Capital Markets Drive on from top 10 to top 5 in Euros and similarly in US$ ▮ ABS/MBS Maintain leading rank in securitisation (market growth outside US and recovery in US) ▮ Leveraged Finance Move up US rankings by building on European leadership ▮ Real Estate Ap
Slide 109: Market Share Growth – Investment
Slide 109 Market Share Growth Investment in People ▮ 2,250 hires in the last two years ▮ Plan for 1,250 hires in 2007 ▮ 56% in support functions, particularly Asia-Pacific ▮ 44% in front office, including major increases in US and Greater China Investment in Technology ▮ Significant capital expendit
Slide 110: New Products/New Markets
Slide 110 New Products/New Markets Key Criteria for Assessing Opportunities ▮ Markets with adequate scale ▮ Markets with growth momentum ▮ Competitive intensity Potential Opportunities ▮ Relevant expertise for GBM ▮ Leverage platform and franchise ▮ Fit with customer proposition ▮ Appropriate market
Slide 111: New Products/New Markets Illustrative List
Slide 111 New Products/New Markets Illustrative List GBM Income 1H06 Growth £m 1H06 v 1H05 Equity Derivatives 38 73% Structured Retail Products 15 257% FX & Rates Prime Brokerage and Futures 39 39% Structured Credit 67 247% Commodities 3 50% Emerging Markets 16 25% Middle East 12 7%
Slide 112: Consistent Income Growth
Slide 112 Consistent Income Growth £bn 3.5 Growth 16% pa Other income 3.0 IFTA 2.5 2.0 1.5 1.0 0.5 0.0 IFRS IFRS IFRS 1H02 2H02 1H03 2H03 1H04 2H04 1H05 2H05 1H06 RBS Group VaR (£m) 9.7 8.4 11.5 7.4 13.1 10.9 13.8 12.8 14.5 Period end Value at Risk (VaR) based on 1 day 95%. Income is on underlying b
Slide 113: GBM Drivers of Growth
Slide 113 GBM Drivers of Growth ▮ Diversified income 999 ▮ Scale 999 ▮ Origination/distribution 99 ▮ Growing market share 999 ▮ New products/new markets 999
Slide 114: Summary
Slide 114 Summary ▮ Still reinforcing leadership in corporate banking in the UK, and more to go for ▮ Strong progress in building global business lines and global distribution ▮ Investment in people and the technology to support them ▮ Many additional opportunities for growth
Slide 115: Financial Framework
Financial Framework Guy Whittaker Group Finance Director
Slide 116: Drivers of Growth
Slide 116 Drivers of Growth ▮ Diversified income ▮ Scale and distribution ▮ Growing market share ▮ New products/new markets ▮ Operational excellence ▮ Strong risk management ▮ Financial strength
Slide 117: Diversified Income
Slide 117 Diversified Income 999 1H06 Income £13,642m – Up 10% Corporate Markets 35% Retail Markets 30% Ulster Bank 3% Citizens 12% RBS Insurance 20% Operating Profit £4,603m – Up 15%
Slide 118: Diversified Income
Slide 118 Diversified Income 999 % Group 1H06 Total Income Personal – Deposits + lending 28.1% – Other banking income 4.0% – General insurance 20.0% Total 52.1% Business – Deposits + lending 28.5% – Other banking income 16.7% Total 45.2% Other 2.7% Total 100.0%
Slide 119: Scale – Leading Market Positions
Slide 119 Scale 999 Leading Market Positions ▮ #1 UK corporate bank ▮ #1 UK retail and private bank ▮ #2 UK general insurer ▮ #6 US bank ▮ #3 Irish bank ▮ #5 global debt issuer ▮ #1 global purchasing
Slide 120: Operational Excellence
Slide 120 Operational Excellence 999 Unique Manufacturing Model Manufacturing Cost Increases % 16 Acquisition 14 Investment Basecase 12 10 8 6 4 2 0 -2 2004 2005 1H06
Slide 121: Operational Excellence
Slide 121 Operational Excellence 999 Group Cost:Income Ratio % 60 45.3 41.9 40 20 0 IFRS 2001 1H06
Slide 122: Strong Risk Management
Slide 122 Strong Risk Management 999 P&L Bad Debt Charge as % of Loans + Advances % 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 1H06
Slide 123: Strong Risk Management
Slide 123 Strong Risk Management 999 IFTA £m 1,500 % 1 10 1,200 u p m e c o In 900 600 VaR up 20% 300 0 1H01 1H06 IFTA % of total income 10.1 10.7 Period end VaR at 95% £12.1m £14.5m
Slide 124: Financial Strength
Slide 124 Financial Strength 999 Profit Cover of P&L Bad Debt Charge 7.0 6.2x 6.0 5.0 4.5x 4.2x 4.0x 4.0 3.2x 3.0 2.0 1.0 0.0 RBS HSBC Barclays HBOS Lloyds TSB Source – Company accounts
Slide 125: Financial Strength
Slide 125 Financial Strength 999 Capital Generation IFRS IFRS IFRS £bn 2002 2003 2004 2005 2006 Gross capital generated 4.2 4.7 5.0 5.6 Capital to support growth in RWAs at 5.0% (1.2) (1.5) (3.0) (2.3) Ordinary dividends (1.3) (1.5) (1.6) (1.9) Capital available for other purposes 1.7 1.7 0.4 1.4 AV
Slide 126: Financial Strength
Slide 126 Financial Strength 999 Capital Management ▮ Investing in profitable growth ▮ Active balance sheet management ▮ Stable capital ratios ▮ Progressive dividend policy ▮ Available capital surplus
Slide 127: Driving Growth
Driving Growth Sir Fred Goodwin Group Chief Executive
Slide 128: Drivers of Growth
Slide 128 Drivers of Growth ▮ Diversified income 999 ▮ Scale and distribution 999 ▮ Growing market share 99 ▮ New products/new markets 99 ▮ Operational excellence 999 ▮ Strong risk management 999 ▮ Financial strength 999
Slide 129: EPS Growth
Slide 129 EPS Growth Cumulative Growth in Earnings Per Share 200 180 160 1 0% AGR 140 C 120 100 2001 2005 2008 RBS excluding goodwill amortisation and integration costs, as reported (UK GAAP 2001-2004 and IFRS 2004-2005)
Slide 130: EPS Growth
Slide 130 EPS Growth Cumulative Growth in Earnings Per Share 200 180 160 140 120 100 2001 2005 2008 RBS excluding goodwill amortisation and integration costs, as reported (UK GAAP 2001-2004 and IFRS 2004-2005)
Slide 131: Driving Growth
ae RBS The Royal Bank of Scotland Group Driving Growth
Slide 132: Make it happen
Make it happen strength diversity flexibility
The Royal Bank of Scotland Group — Investor Day (November 2006) on 6ix