Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Barclays Global Financial Services Conference 2012
29 slides from Natwest's conference presentation, Sep 10, 2012
Slide 1: Barclays Global Financial Services Conference
Barclays Global Financial Services Conference Bruce Van Saun, Group Finance Director The Royal Bank of Scotland Group 10 September 2012
Slide 2: Important Information
Important Information 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’, ‘believes’, ‘should’, ‘
Slide 3: Agenda
Agenda RBSG Vision & Strategy Financial performance and trends Resilient franchises Balance sheet, capital and regulation Summary and conclusions 2
Slide 4: Quick reminder - Our objectives and strategy
Quick reminder - Our objectives and strategy Objectives To serve customers well To restore the Bank to a sustainable and conservative risk profile To rebuild value for all shareholders These priorities are interconnected and mutually supporting Strategy The new RBS is built upon customer-dri
Slide 5: A quick reminder – Implementing our strategy
A quick reminder – Implementing our strategy Core Bank Non- Core Bank The focus for sustainable value creation The primary driver of risk reduction Built around customer- driven franchises Businesses that do not meet our Strategic Tests, including both stressed and non - stressed Comprehensive
Slide 6: Progress to date – key financial metrics
Progress to date – key financial metrics Medium-term Group – Key performance indicators Worst point H112 Target Balance sheet & risk (Group): 1 Loan : deposit ratio (net of provisions) 154% 104% c100% 3 2 Short-term wholesale funding £297bn £62bn <10% TPAs 4 3 Liquidity portfolio £90bn £156bn >1.5x
Slide 7: Progress to date – business reshaping
Progress to date – business reshaping A shift toward Retail & Commercial Banking Operating Profit by Business Line, % 20071 Q2122 Target Markets Markets 18% c20% GBM 36% Retail & Retail & Retail & Commercial Commercial Commercial 64% 82% c80% Attractive mix of UK / Non-UK Revenue by Geography, % 200
Slide 8: Progress to date – more prudent leverage and capital position
Progress to date – more prudent leverage and capital position Balance sheet reduction already achieved – c.£635bn £bn Additional targeted 1,563 (246) (186) reduction (266) 929 (~85) 64 1 Worst Point ABN AMRO Non-Core Core M&IB Other H112 Non-Core assets to reduction reduction & MIB2 consortium 2009-
Slide 9: Key milestones – steps on the road to normality
Key milestones – steps on the road to normality Non-Core targeted Jan: SLS fully £60bn-65bn funded repaid assets by year end Q1: MIB structure May: Last CGS Plan to IPO Direct confirmed funding matures Line Group Q1 Q2 Q3 Q4 Apr: £500m debt issuance by DLG completed May: Resumption of APS coverage p
Slide 10: Agenda
Agenda RBSG Vision & Strategy Financial performance and trends Resilient franchises Balance sheet, capital and regulation Summary and conclusions 9
Slide 11: Group revenues - managing the headwinds
Group revenues - managing the headwinds Signs of NIM stabilisation…. … with pockets of volume growth… Group / R&C NIM, % R&C Lending volume growth, $/£bn Group Q112 3.05 2.99 2.94 2.94 2.90 2.91 36.2 37.0 Q212 2.03 10.3 10.7 1.97 1.84 1.84 1.89 1.95 4.7 4.9 Q1 Q2 Q3 Q4 Q1 Q2 US Commercial UK Invoice
Slide 12: Costs - reduction programme continues
Costs - reduction programme continues Greater annualised cost savings… … and lower cost of programme implementation £bn £bn 3.3 3.5 3.9 2.7 3.2 3.1 2.5 Original 2010 view 2011 view 2013 Original 2011 2013 strategic of 2013 of 2013 annualised strategic plan expectation plan saving Cost evolution, 200
Slide 13: Costs – a comparatively efficient base
Costs – a comparatively efficient base RBS cost:income ratio versus peers Cost:income ratio, % 2009 2010 2011 RBS Group1 66 56 62 RBS Core1 52 54 59 Peers2 Top quartile 52 54 57 Median 57 56 62 Bottom quartile 60 62 67 Average 56 58 61 1 Excluding Direct Line Group. 2 Peer group adjusted for excepti
Slide 14: Credit metrics – continuing to improve
Credit metrics – continuing to improve Impairments ex Ireland down 45% Group coverage levels continue to increase Group ex Ulster Bank Ulster Bank Provision coverage 2 3 REIL 1 1 £bn Group ex Ulster Bank as % of L&A Ulster Bank as % of L&A £bn 9.5% 80 51% 51% 60% 7.6% 49% 49% 49% 4.4% 50% 2.0 1.2% 0
Slide 15: Credit metrics – Ulster Bank is appropriately provisioned
Credit metrics – Ulster Bank is appropriately provisioned Ulster Bank non-performing loans are And in line with comparative peers appropriately covered 1 2 H112 group provision coverage, % 7.5 REIL Provision % Coverage 3 58 56 60 46 4.5 4.0 47 60 3.1 2.6 48 1.9 1.9 1.2 CRE - CRE - Invt. Corporate Mo
Slide 16: Agenda
Agenda RBSG Vision & Strategy Financial performance and trends Resilient franchises Balance sheet, capital and regulation Summary and conclusions 15
Slide 17: UK Businesses - market leading franchises
UK Businesses - market leading franchises Growing UK deposit balances Good blended RoE currently RBS UK Retail & UK Corporate UK Market1 household & combined customer deposits (£bn) corporate deposits (£bn) H1’12 RoE +18% +8% 1,600 UK Retail 23.5% 250 234 1,385 1,285 1,400 198 UK Corporate 16.5% 200
Slide 18: US R&C – a valuable franchise
US R&C – a valuable franchise Earnings rebound continues – targeting 12%+ RoE US R&C RoE 12%+ 8.4% 6.3% FY11 actual H112 actual Improved Loan growth Fee income Expenses RWAs Medium- funding cost growth term target A compelling franchise Focused delivery on strategic priorities 12th largest bank in
Slide 19: Wholesale Banking - restructure update
Wholesale Banking - restructure update Business restructure Resilient trading performance, in line with peers2 % Change H112 vs H111 Pro-active response to market developments / headwinds Funded assets3 Revenues Reduce asset and capital usage to improve balance sheet strength, funding profile an
Slide 20: Non-Core assets - good progress in reduction
Non-Core assets - good progress in reduction £bn 2009-2013 2009-H112 85 Un-drawn commitments Funded assets FX (10)-(20) (10) Rollovers 20-30 18 36 & drawings Impairments (20)-(30)1 (20) 186 21 258 Asset sales (90)-(100) (80) 12 201 7 7 Run-off (110)-(130) (94) 138 5 c. 32 94 72 60-65 c.40 Target Pro
Slide 21: Non-Core – 2013 ‘rump’ make-up
Non-Core – 2013 ‘rump’ make-up 2013 rump of c.£40bn TPAs is forecast 2013 Non-Core ‘rump’ estimated at c.£40bn, £bn 40 including: 44% Corporate — Corporate and other assets of low yield but generally good credit quality CRE Retail — CRE of c.£15bn, c.60-65% in longer-term 34% work-out 5% Markets 7
Slide 22: Agenda
Agenda RBSG Vision & Strategy Financial performance and trends Resilient franchises Balance sheet, capital and regulation Summary and conclusions 21
Slide 23: Balance sheet – significant improvement
Balance sheet – significant improvement Deposits vs. wholesale funding, £bn Short-term wholesale funding reduced by £235bn Core bank deposits1 Wholesale funding2 414 432 402 394 297 (79%) 342 213 62 FY09 H110 H112 FY08 H112 Liquidity portfolio bolstered, £bn Term wholesale funding maturities 156 H11
Slide 24: The Group’s risk profile is significantly better
The Group’s risk profile is significantly better De minimis peripheral government bond exposure Commercial Real Estate Exposure2 Peripheral government bond exposure, £bn Core Non-Core 3.9 £98bn £87bn £75bn £69bn £51bn £42bn £41bn £39bn 0.4 £47bn £45bn £34bn 0.0 £30bn FY09 FY11 H112 FY09 FY10 FY11 H1
Slide 25: The capital journey
The capital journey RWAs / Capital Management Headwinds Mitigation / Tailwinds 11.1 0.8 >10% Credit model changes Basel III/CRD IV Non-Core run-down 10.3 Reduction in / removal of APS cover Restructure of Markets business Earnings generation H1 2012 Target APS Cover Targeting year end
Slide 26: Regulation and Challenges
Regulation and Challenges Regulation Status RBS Actions FSA revised industry guidance In process of implementing changes CRE Slotting published c.£10bn RWA impact likely in 2012 RWA uplift of c.£20bn by end ’13 c.£5bn already taken Further clarity from White Paper Final report and legi
Slide 27: Agenda
Agenda RBSG Vision & Strategy Financial performance and trends Resilient franchises Balance sheet, capital and regulation Summary and conclusions 26
Slide 28: Summary and conclusions
Summary and conclusions Economic and market backdrop likely to remain challenging for some time, keeping customer activity subdued External But the factors necessary for economic recovery are being addressed Regulatory change remains intense, the end state is clarifying, although key uncertain
Slide 29: Questions?
The Royal Bank of Scotland Gro Questions?
The Royal Bank of Scotland Group — Barclays Global Financial Services Conference 2012 on 6ix