Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Investor Day (December 2016)
63 slides from Natwest's investor day presentation, Dec 9, 2016
Slide 1: Investor Seminar
Investor Seminar Alexander Holcroft, Investor Relations 9 December 2016
Slide 2: Agenda
Agenda Introduction – Alexander Holcroft Ulster Bank RoI – Gerry Mallon CEO Private Banking – Peter Flavel CEO RBS International – Andrew McLaughlin CEO 2
Slide 3: Our blueprint for success
Our blueprint for success (1) Excluding litigation and conduct costs, restructuring costs, write down of goodwill and other intangible assets and the operating costs of Williams & Glyn 3
Slide 4: 9M 2016 Financial Results
9M 2016 Financial Results Total Core Franchises Total Other RBS Central Ulster Commercial Private RBS Total Core Capital Total UK PBB CIB W&G(1) items & Bank RoI Banking Banking International Franchises Resolution Other other(2) Adj. Income(3) 4.0 0.4 2.5 0.5 0.3 1.2 8.9 (0.1) 0.6 (0.4) 0.1 9.0 Adj.
Slide 5: Strong franchises with clear strategies
Strong franchises with clear strategies Invest to UK PBB Commercial Banking RBS International Grow Q3 2016: Q3 2016: Q3 2016: 64% of total RWAs: 17% RWAs: 42% RWAs: 5% core RWAs Adj. ROE: 28% Adj. ROE: 10% Adj. ROE: 15% • Clear customer segment • Accelerate simplification • Grow domestic market stra
Slide 6: Today's speakers
Today’s speakers Gerry Mallon Peter Flavel Andrew McLaughlin CEO Ulster Bank Ireland DAC CEO Private Banking CEO RBS International Appointed in June 2016. Appointed in March 2016. Appointed in July 2015. Former CEO of Danske Bank in Former CEO of JP Morgan Private Former Director, Commun
Slide 7: Ulster Bank RoI
Ulster Bank RoI Gerry Mallon, CEO 9 December 2016
Slide 8: First impressions of the business
First impressions of the business Ulster Bank is a strong franchise with an established market position We have an opportunity in the Irish market to leverage our position within RBS Legacy tracker book creating a drag on returns and ‘lower for longer’ environment is a challenge High capital ratios
Slide 9: We are the 3rd largest bank in RoI
We are the 3rd largest bank in RoI And the only UK bank with a full service offering in RoI RETAIL COMMERCIAL Branch Banking, Financial Business Banking C&IB, SME, CRE and Planning, Private & Mortgages International Trade Income ~ 2/3rds ~ 1/3rd Customers 1.1m 49k 5.6k Market 12%(1) 14%(2) 16%(2) Sh
Slide 10: Where we have come from
Where we have come from We have made good progress towards building a stronger and more sustainable bank Capital (UBI DAC legal entity) RWAs €bn €bn 10.0 CET1 €bn LHS 50.0 30.0% CET1 % RHS 8.0 25.0% 40.0 6.0 20.0% 30.0 15.0% 4.0 20.0 10.0% 2.0 10.0 5.0% 0.0 0.0% 0.0 2011 2012 2013 2014 2015 Q3 2011
Slide 11: 9M 2016 Results by RBS Franchise: Ulster Bank RoI
9M 2016 Results by RBS Franchise Ulster Bank RoI Total Core Franchises Total Other RBS Central Ulster Commercial Private RBS Total Core Capital Total UK PBB CIB W&G(1) items & Bank RoI Banking Banking International Franchises Resolution Other other(2) Adj. Income(3) 4.0 0.4 2.5 0.5 0.3 1.2 8.9 (0.1)
Slide 12: Our Performance
Our Performance Q3 YTD Key Metrics and Highlights IMS Highlights NIM ROE Adjusted(1,2) Retail NPS 1.61% 1.64% 13.8% 9.5% -8 -15 9M15 9M16 9M15 9M16 Q3 15 Q3 16 Cost:Income Adjusted Mortgage lending Adjusted(1) Operating Profit(1) Market Share 71% 72% €349m 19% 15% €236m 9M15 9M16 9M15 9M16 Q315 Q316
Slide 13: RoI Macro economic metrics
RoI Macro economic metrics Outlook remains favourable, albeit not as favourable as prior to the UK Referendum Composite PMIs – Business Activity Real GDP, % change Unemployment Rate, % of Labour Force 65 5 UB 16 Forecast 4 14 (RoI) 55 12 3 10 45 8 2 6 35 1 4 2 25 0 0 2016f 2017f 2018f 2016f 2017f 20
Slide 14: Challenges & Headwinds
Challenges & Headwinds Overview % Tracker NPL tail Costs Lower for longer Brexit mortgages Close out Tracker Loan portfolio sale will Cost Income ratio is Low interest rates Likely negative impact Mortgage examination reduce NPLs when not sustainable are squeezing deposit on Irish economy complete i
Slide 15: Challenges & Headwinds: tracker mortgages
Challenges & Headwinds Ulster Bank ROI tracker mortgages Trackers were originated at low Ulster Bank ROI – 9 months ended 30 September 2016 margins Tracker book Excl. Trackers Total • Average margin c.1% over ECB refi rate Net Interest Margin ~2.50% 1.64% ~0.60% • Drag on NIM is c.1% and ROE is c.2%
Slide 16: The next phase
The next phase Repurpose & Perform Having been in recovery mode, we are now moving to a new phase. Recover Resize & Repurpose Perform 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 10
Slide 17: Our strategy is aligned with RBS
Our strategy is aligned with RBS Our ambition: No. 1 for customer service, trust and advocacy Legacy Remediation of regulatory issues Legacy portfolios Right size costs Go Forward Simplify our organisation and processes Transformation : Leverage RBS investment in technology Innovation & Digital Embr
Slide 18: Transformation to deliver on our priorities
Illustrative examples Transformation to deliver on our priorities Strength & Customer Simplifying the Supporting Employee Sustainability Experience Bank Growth Engagement Reduce margin and Deepen commercial Increase cross sales Culture of innovation fee leakage relationships Income Improve average T
Slide 19: Transformation
Transformation Focus for 2017 is on driving cost initiatives across all areas • Optimise our points of presence Retail • Enhance digital options • Process efficiency gains • Transform how we work creating more time with customers through segmentation, Commercial removing unproductive processes and e
Slide 20: Medium term outlook from Q3 2016
Medium term outlook from Q3 2016 FY 2015 9 months Outlook from P&L 2016 Q3 2016 Income Profit & Loss (€m) • Growth in lending will improve income • Margin uplift as low yielding trackers reduce Adj. Income(1) 758 544 and new lending margins are holding up well • Low interest rates environment compre
Slide 21: Key messages
Key messages Transformation programme in place to achieve the right C:I ratio Leveraging the strength of RBS and key market opportunities in Ireland Intention to return excess capital – €1.5bn dividend announced 15
Slide 22: Appendices
Appendices
Slide 23: Presenter Biography: Gerry Mallon
Presenter Biography Gerry Mallon Gerry Mallon was appointed Chief Executive Officer, Ulster Bank Ireland DAC in June 2016. He formerly held the role of CEO at Danske Bank in Northern Ireland, where he was a member of the Business Banking and Personal Banking International Leadership teams. Previous
Slide 24: Private Banking
Private Banking Peter Flavel, CEO 9 December 2016
Slide 25: First impressions of the business
First impressions of the business Large and attractive client base, deepen and widen needs-met across our entire proposition, good investment performance Good progress in rebuilding the business; now simpler and firmly focused on the UK Creating capacity and embedding client segmentation to achieve
Slide 26: Our proposition is built on a view across the clients balance sheet
Our proposition is built on a view across the clients balance sheet We retain an important USP as an aggregator, with a view across both sides of the client’s balance sheet Banking Lending Investments • Current account • Mortgages • Discretionary & advisory • Savings • Unsecured lending portfolio ma
Slide 27: Our external market position
Our external market position Iconic UK brands; known for aspiration, heritage and Unique brands reliability Digital platform Self serve capabilities – content, access and security Modern banking with a personal touch; exceptional Experienced banking concierge service, intelligent international offer
Slide 28: We have been rebuilding the business as we reposition for sustainable business growth
We have been rebuilding the business as we reposition for sustainable business growth What does our journey look like? Accelerate sustainable business Delivered growth • To be completed Refocus and invest • Embed investment for growth advice model Reduced office • Right Client, Right Fix the und
Slide 29: Positive nine month results
Positive nine month results Total Core Franchises Total Other RBS Central Ulster Commercial Private RBS Total Core Capital Total UK PBB CIB W&G(1) items & Bank RoI Banking Banking International Franchises Resolution Other other(2) Adj. Income(3) 4.0 0.4 2.5 0.5 0.3 1.2 8.9 (0.1) 0.6 (0.4) 0.1 9.0 Ad
Slide 30: Year-on-year performance
Year-on-year performance (£bn) AuM1 Deposits Net lending +23% +11% +6% 13.5 16.6 22.7 25.3 11.1 11.8 9M’15 9M’16 9M’15 9M’16 9M’15 9M’16 (£m) Income Adj. costs2 +2% +2% 486 496 359 365 9M’15 9M’16 9M’15 9M’16 7 1) Includes £1.4 billion of investment cash, following change in treatment. AuM’s constit
Slide 31: Strong UK value pool with opportunity for growth across the HNW space
Strong UK value pool with opportunity for growth across the HNW space Three key areas of opportunity in HNW space, with immediate focus on our existing PB client base and deepening needs met Our existing PB client base An expanding UK market NatWest & Royal Bank of Scotland referrals as % of new cus
Slide 32: Holdings with us
Our primary growth opportunity is to deepen existing target client base share of wallet >£20m • Manage trade-off between higher cost-to-serve and bespoke client solutions • Preserve wealth and develop conservative solutions for inter- £10-20m generational transfer Holdings with us • Deepen needs-met
Slide 33: We have a strategic plan in place to deliver on our long-term targets
We have a strategic plan in place to deliver on our long-term targets, underpinned by five key priorities 1 Best client experience 5 2 Simplify our Invest in a high business performance Our vision is to be culture the best Private Bank in the UK 4 3 Deepen needs Optimise our met for operating model
Slide 34: Five key priorities deliver our strategic plan
Five key priorities deliver our strategic plan 1 • Strengthen the product suite and services delivery: across banking, lending and investment solutions Best client • Define differentiated value propositions: by brand and client segment experience • Invest in our brands: leverage the “Coutts Club” wi
Slide 35: Digital transformation to drive a richer client experience and productivity
Digital transformation to drive a richer client experience and productivity We are focussed on a simpler, more secure …this will lead to a deeply personalised experience future state, delivered through five building through consistent digital sales and service journeys. blocks… Client Employee Beh
Slide 36: Medium-term outlook from Q3
Medium-term outlook from Q3 (£m) FY 2015 9 months Outlook from P&L 2016 Q3 2016 Income • Impact from margin compression Profit & Loss (£m) expected to continue • Volume growth expected to drive uplift Income 644 496 Costs Adj. Costs (518) (365) • Management actions to reduce operating costs, driven
Slide 37: Summary
Summary Substantial opportunity to add value in an attractive market… …Private Banking is well positioned to take advantage Significant progress rebuilding the business Long term vision achievable through disciplined execution Initiatives in place to achieve sustainable growth 14
Slide 38: Appendix
>< RBS Appendix
Slide 39: Discretionary Portfolio Mandates 5 year performance vs. market
Appendix 1 Discretionary Portfolio Mandates 5 year performance vs. market Performance1 versus peers2 (to 31 October 2016) 1) Based on the composite performance of Coutts Tailored Portfolio Service sterling portfolios invested in the 3 core strategies; Performance figures are composite returns from t
Slide 40: Unitised funds 3 year performance vs. market
Appendix 1 Unitised funds 3 year performance vs. market Performance versus peers (to 31 October 2016)1 Defensive 3m Ytd 1Y 3Y Balanced 3m Ytd 1Y 3Y CMAF UK Defensive 0.6% 8.4% 7.4% 16.0% CMAF UK Balanced 3.1% 9.9% 8.8% 15.5% Peer A 5.0% 16.7% 15.6% 12.9% Peer E 2.3% 7.6% 7.6% 13.3% Peer B 1.7% 5.1%
Slide 41: Presenter Biography: Peter Flavel
Presenter Biography Peter Flavel Peter joined RBS as CEO of Private Banking, responsible for Coutts & Co and Adam & Company in March 2016. Before joining Coutts, Peter held the role of Chief Executive Officer of J.P. Morgan Private Wealth Management, responsible for overseeing and expanding the high
Slide 42: RBS International
RBS International Andrew McLaughlin, CEO 9 December 2016
Slide 43: Early impressions of the business
Early impressions of the business RBS International is a good customer franchise with established market positions It has delivered consistent earnings from long standing customer relationships The business has been profitable since inception, with a track record of returns and potential to increase
Slide 44: A bank meeting the needs of three core customer groups
A bank meeting the needs of three core customer groups Personal & Private Financial SME Banking Institutions Supporting Connecting customer capital and aspirations insight Local retail and commercial Internationally mobile and high net Funds, Banks, Insurers, customers worth customers Wealth Manager
Slide 45: The business has established strong market positions
The business has established strong market positions Jersey Isle of Man Guernsey Personal 45 Top 3 market Current 29 position in every Account 23 jurisdiction Share (%) RBSI Peer 1 Peer 2 Peer 3 Jersey Isle of Man Guernsey Strong customer 11 33 advocacy relative Customer 21 to competitors but NP
Slide 46: Business has shown resilient capacity to generate consistent ~£200m PAT through the cycle
Business has shown resilient capacity to generate consistent ~£200m PAT through the cycle £m 350 6.00% 300 5.00% 250 4.00% 200 3.00% 150 2.00% 100 1.00% 50 0 0.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Underlying Profit after Tax Bank of England Bank Rate 5
Slide 47: 9M 2016 Results by RBS Franchise: RBS International
9M 2016 Results by RBS Franchise RBS International Total Core Franchises Total Other RBS Central Ulster Commercial Private RBS Total Core Capital Total UK PBB CIB W&G(1) items & Bank RoI Banking Banking International Franchises Resolution Other other(2) Adj. Income(3) 4.0 0.4 2.5 0.5 0.3 1.2 8.9 (0.
Slide 48: Q3 YTD 2016 results by customer groups
Q3 YTD 2016 results by customer groups Core customer groups Total RBSI Personal & Private Financial £m SME Banking Institutions RBS International Adj. Income 93 50 135 278 established as a Adj. Operating expenses(1) (49) (21) (36) (108) deposit-led business Impairment (losses) / The LDR is risin
Slide 49: What is the strategic focus for the next three years?
What is the strategic focus for the next three years? No. 1 For customer service, trust and Our Ambition advocacy Serve customers well Our Purpose Serving Working Doing the Thinking customers together right thing long term Our Values Our Brands Reposition Meet more Execute Build Strengthen Our 3 Yea
Slide 50: Repositioning the liability strategy ahead of ICB and responding to lower for longer
1 Repositioning the liability strategy ahead of ICB and responding to lower for longer Personal & Private Financial Total RBSI SME Banking Institutions Deposits £4.5bn £3.9bn £17bn £25.5bn LDR 61% 32% 27% 34% Charging negative Building Liquidity Enhancing value of rates portfolio deposits Charging
Slide 51: Our market research confirms that we can meet more of our existing customers needs
2 Our market research confirms that we can meet more of our existing customers needs Current share ‘Natural share’ Balance Opportunity Jersey 23% 30% £40m - £50m Current Isle of Man 45% - - Accounts Guernsey 29% 30% £2m - £5m Current share ‘Natural share’ Balance Opportunity Jersey 13% 25% £400m - £
Slide 52: Opportunities for growth
3 Opportunities for growth Indicative Description of initiative Revenues New wholesale branch to adopt customers who London cannot borrow from ring-fenced bank (RFB) £60m - £75m Branch Licence application submitted, technical build underway – expect doors open first half 2017 New wholesale bra
Slide 53: The business has similar risk register to the NatWest franchises but also inherent jurisdictional risks
The business has similar risk register to the NatWest franchises but also inherent jurisdictional risks Small, international financial Increased focus on centres have inherent single AML / Terrorist event risk Regulatory Financing environment Policymakers have managed this risk by seeking “regul
Slide 54: Medium term outlook from Q3 2016
Medium term outlook from Q3 2016 Outlook from P&L 9 months 2016 Q3 2016 Income Expect lower for longer to continue to squeeze Profit & Loss (£m) deposit and loan margins Income 278 Volume growth will offset impact of compression Costs Adj. Costs (108) Operating costs will remain tightly manage
Slide 55: Key Messages
Key Messages A retail and commercial bank with strong market position Consistent profits built on long standing customer relationships Executing against strategic intent to deepen customer relationships Consistent profit performance again in 2016 Inherent jurisdictional risks understood and managed
Slide 56: Appendices
Appendices
Slide 57: Presenter Biography: Andrew McLaughlin
Presenter Biography Andrew McLaughlin Dr Andrew McLaughlin was appointed as the CEO of RBS International in July 2015. He was formerly Director, Communications and Chief Economist for RBS. Before joining the bank, he spent three years in corporate finance advisory work with Ernst and Young. Andr
Slide 58: Appendix 2: RBS International will be outside of the ring-fenced bank
Appendix 2: RBS International will be outside of the ring-fenced bank Proposed Future Ring-Fenced Legal Entity Structure (1) The Royal Bank of Scotland Group Plc Group Holding Company and primary issuing entity for MREL Proportional Intercompany issuance of Loss Absorbing Capital NatWest Holdings Li
Slide 59: Appendix 3: Credit book and funding profile
Appendix 3: Credit book and funding profile Total Customer Exposure(1) Funding Profile(2) 30 7% Total Deposits 25 £23.8bn 15% 20 48% 15 LCR Funding 7% Value Funded Customer £10.8bn 10 Assets 4% £7.75bn 5 19% 0 Total Deposits Funding Value Customer Lending Retail - Local Retail - International Funds
Slide 60: Appendix 4: Spotlight on funds – illustrative client profile
Appendix 4: Spotlight on funds – illustrative client profile Name: Henry Tonnington Position: Chief Operating Officer Location: London Segment: Funds (Private Equity Real Estate) Tasmania Capital Partners (TCP) are a real estate investment house based in London who have successfully raised over £2.5
Slide 61: Appendix 5: Local economies relatively advantaged in terms of economic outlook and public finances
Appendix 5: Local economies relatively advantaged in terms of economic outlook and public finances Low public debt levels Prudent management of budgets High income economies Sovereign Debt to GDP % (1) Budget deficit / surplus % (2) GDP per capita US Dollars (3) Norway Luxembourg Isle of Man Gibralt
Slide 62: Appendix 6: Key events that have shaped RBS International
Appendix 6: Key events that have shaped RBS International 1963 Channel Isles 1989 Gibraltar branches opened business established Board of RBS identify RBSI 1994 jurisdictions as high growth opportunity First offshore bank to 2000 Acquisition of NatWest 2011 launch iOS mobile app Offshore 1973 New CE
Slide 63: Forward looking statements
Forward looking statements Certain sections in this document 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’, ‘believe’, ‘should
The Royal Bank of Scotland Group — Investor Day (December 2016) on 6ix