Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Merrill Lynch European Banking & Insurance Conference 2003
41 slides from Natwest's conference presentation, Oct 7, 2003
Slide 1: Living in a 1% World
Living in a 1% World Fred Goodwin Group Chief Executive
Slide 2: 1% World
Slide 2 Living in a 1% World 1% World z Stakeholder pensions z Sandler regulated products
Slide 3: Implications for RBS
Slide 3 Living in a 1% World Implications for RBS z Lower margins on long term savings Less than 1% of RBS income from long term savings z Higher volumes of distribution of long term savings Simpler products, processes better for bank distribution
Slide 4: What are the required characteristics for growth?
Slide 4 Living in a 1% World What are the required characteristics for growth?
Slide 5: Required Characteristics for Growth
Slide 5 Required Characteristics for Growth z Organic growth – Large distribution capacity – Multiple brands – Low market shares – Effective sales processes – Able to grow new businesses – Diversity of income z Acquisitions – Able to make good acquisitions – Good at integration of acquisitions z Eff
Slide 6: Large Distribution Capacity
Slide 6 Large Distribution Capacity Distribution Channels UK Ranking z Branches #1 z Supermarkets #1 z Telephone #1 = z Internet #? (large) z ATMs #1 z Relationship Managers #1 Source: Company Accounts, CACI and Link
Slide 7: Multiple Brands
Slide 7 Multiple Brands Multi-Brand, Multiple Channel Strategy
Slide 8: Multi-Brand, Multiple Channel Strategy
Slide 8 Multiple Brands Multi-Brand, Multiple Channel Strategy z Appeals to different customer groups z Allows different product variants, pricing z Gives flexibility for future z Allows management autonomy
Slide 9: Low Market Shares
Slide 9 Low Market Shares UK Market Shares Total RBS Current accounts 21% Savings accounts 8% Personal loans 10% Mortgages 5% Credit cards 17% Life insurance 2% Motor insurance 16%* Home insurance 13%* Small business relationships 30% Corporate lead relationships 33% Source: NOP 2002, NFO 2002, RBS
Slide 10: Effective Sales Processes
Slide 10 Effective Sales Processes NatWest Packaged Accounts 000s 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Jun Dec Jun Dec Jun Dec Jun Dec Jun 99 99 00 00 01 01 02 02 03
Slide 11: Effective Sales Processes
Slide 11 Effective Sales Processes UK Banks Average Growth in Income 1992 - 1999 RBS Bank of Scotland Abbey National HSBC Standard Chartered Halifax Woolwich Lloyds TSB Barclays NatWest Alliance & Leicester 0 5 10 15 20 % pa Income excluding exceptional items
Slide 12: Effective Sales Processes
Slide 12 Effective Sales Processes UK Banks Average Growth in Income 1999 - 2002 RBS HBOS HSBC Lloyds TSB Barclays Standard Chartered Alliance & Leicester Abbey National 0 5 10 15 20 % pa Income excluding exceptional items
Slide 13: Able to Grow New Businesses
Slide 13 Able to Grow New Businesses Examples of UK Financial Commenced Profit/(Loss) Services New Entrants 2002 Scottish Widows Bank 1995 £8m Goldfish 1996 (£40m) The One Account 1997 £20m Sainsbury’s Bank 1997 £22m Tesco Personal Finance (RBS JV) 1997 £96m Egg 1998 (£17m) Standard Life Bank 1998 (
Slide 14: Diversity of Income
Slide 14 Diversity of Income RBS Income Mix 1H03 Net Interest Income 44% Non-Interest Income 56%
Slide 15: Diversity of Income
Slide 15 Diversity of Income Non-Interest Income Non-Interest Income to Total Income 1H03 RBS 56% Lloyds TSB 48% Barclays 46% HSBC 39% HBOS 38% Standard Chartered 38% Abbey National* 35% As reported * Personal Financial Services Trading
Slide 16: Diversity of Income: Non-Interest Income
Slide 16 Diversity of Income Non-Interest Income Non-Interest Income % of Total Income 1H03 Net fees and commissions 24% General insurance premium income 13% Dealing profits (before associated costs) 11% Other operating income 8% Non-interest income to total income 56%
Slide 17: Dealing Profits Reflect Customer-driven Activities
Slide 17 Diversity of Income Non-Interest Income Dealing Profits Reflect Customer-driven Activities 1H03 Foreign exchange & interest rate products 7% RBS Greenwich Capital – Mortgage-backed securities 2% – Other products 2% Dealing profits (before associated costs) 11%
Slide 18: Diversity of Income
Slide 18 Diversity of Income RBS Income Mix 1H03 Net Interest Income 44% Deposits Assets 20% 24% Non-Interest Income 56%
Slide 19: Diversity of Income: Net Interest Income
Slide 19 Diversity of Income Net Interest Income Net Interest Income % of Total Income 1H03 Personal deposits 12% Personal lending 12% Business deposits 8% Business lending 12% Net interest income to total income 44%
Slide 20: Not Too Dependent on Personal Lending
Slide 20 Diversity of Income Net Interest Income Not Too Dependent on Personal Lending Consumer finance 10% Mortgages 2% Personal lending 12%
Slide 21: Able to Make Good Acquisitions
Slide 21 Able to Make Good Acquisitions z Expect to generate surplus capital z Can add to operations in – UK + Ireland – Continental Europe – United States z Track record of good acquisitions
Slide 22: Able to Make Good Acquisitions
Slide 22 Able to Make Good Acquisitions Date Acquisition Division Consideration (m) 1998 Sep Balance of Citizens (23.5% from Bank of Ireland) Citizens $750 1999 Oct State Street (commercial banking) Citizens $350 Nov Green Flag Direct Line £223 2000 Jan UST Corporation Citizens $1,400 Mar NatWest RB
Slide 23: Good at Integration of Acquisitions
Slide 23 Good at Integration of Acquisitions Approach z Minimal disruption to customer-facing activities z Retain separate brands, if appropriate z De-duplication of IT, processing and central functions z Deliver promised revenue benefits and cost savings
Slide 24: Good at Integration of Acquisitions
Slide 24 Good at Integration of Acquisitions RBS + NatWest Citizens + Mellon z Large, complex integrations z Substantial IT conversions z Completed ahead of schedule z Delivered cost savings and revenue benefits, ahead of expectations
Slide 25: Able to Improve Efficiency
Slide 25 Able to Improve Efficiency UK Banks Cost:Income Ratio 1H03 HBOS 42.1% RBS 43.0% Lloyds TSB 48.6% HSBC 51.3% Barclays 52.8% Standard Chartered 53.4% Abbey National* 53.7% As reported * Personal Financial Services Trading
Slide 26: Advantages of Manufacturing Division
Slide 26 Able to Improve Efficiency Advantages of Manufacturing Division z Single platform supporting multiple brands and channels z Economies of scale, benefits of specialisation z Able to implement new technologies across Group z Able to deliver cost savings associated with acquisitions
Slide 27: Efficiency Outlook
Slide 27 Able to Improve Efficiency Outlook z Further progress expected z Continue to centralise Manufacturing e.g. RBS Insurance z Simplify processes e.g. image and workflow z Projects under way – Specific objectives with income/cost benefits – Self-financing programme
Slide 28: Required Characteristics for Growth
Slide 28 Required Characteristics for Growth z Organic growth – Large distribution capacity 4 – Multiple brands 4 – Low market shares 4 – Effective sales processes 4 – Able to grow new businesses 4 – Diversity of income 4 z Acquisitions – Able to make good acquisitions 4 – Good at integration of acq
Slide 29: Summary
Slide 29 Living in a 1% World Summary z Well placed to continue growth, whatever the external environment z Strategy diversity, flexibility z Range of strategic options
Slide 30: First Active
a« RBS The Royal Bank of Scotland Group First Active
Slide 31: First Active Offer
Slide 31 First Active Offer z Cash offer of e6.20 per share z Values First Active at e887 million z Recommended by First Active Board z Accretive to RBS earnings
Slide 32: Branch Network
Slide 32 First Active Branch Network First Active
Slide 33: Branch Networks
Slide 33 First Active Branch Networks 90 Branches First Active Ulster Bank
Slide 34: First Active
Slide 34 First Active First Active Branches 51 Customers 335,000 Market shares – Mortgages 12% – Savings accounts 3% – Personal loans 1%
Slide 35: Ulster Bank and First Active
Slide 35 First Active Ulster Bank First Active Republic of Ireland Branches 122 51 Customers 506,000 335,000 Market shares – Mortgages 3% 12% – Savings accounts 4% 3% – Personal loans 3% 1% – Personal current accounts 9% – – Credit cards 7% – – SME accounts 14% –
Slide 36: Ulster Bank + First Active
Slide 36 First Active Ulster Bank +First Active Republic of Ireland Branches 173 Customers approx 800,000 Market shares – Mortgages 15% – Savings accounts 7% – Personal loans 4% – Personal current accounts 9% – Credit cards 7% – SME accounts 14%
Slide 37: Mortgages Market Ranking
Slide 37 First Active Mortgages Market Ranking Irish Life & Permanent #1 Ulster Bank + First Active #2 Bank of Ireland #3= AIB #3=
Slide 38: Savings Accounts Market Ranking
Slide 38 First Active Savings Accounts Market Ranking AIB #1 Bank of Ireland #2 Irish Life & Permanent #3= Ulster Bank + First Active #3=
Slide 39: Ulster Bank and First Active 1H03
Slide 39 First Active Ulster Bank First Active 1H03 1H03 Profit before tax e191m e34m Loans to customers e14.9bn e7.6bn* Customer deposits e12.9bn e3.9bn * Gross of securitisation of e2.7bn
Slide 40: Strategy
Slide 40 First Active Strategy z Retain First Active and Ulster Bank brands and branch networks Cost Savings z Combine technology, processing activities, central functions z Leverage Group functions z Lower funding costs Revenue Benefits z Strengthen Ulster Bank’s mortgage offering z Broaden First A
Slide 41: Fred Goodwin, Group Chief Executive
Fred Goodwin Group Chief Executive
The Royal Bank of Scotland Group — Merrill Lynch European Banking & Insurance Conference 2003 on 6ix