Natwest Group Plc · LSE:NWG
Natwest — Royal Bank of Scotland Group — Investor Day (April 2011)
44 slides from Natwest's investor day presentation, Apr 8, 2011
Slide 1: UK Corporate Investor Roundtable
UK Corporate Investor Roundtable Chris Sullivan, CEO UK Corporate & 8 April 2011 UK Corporate Executive Committee
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
Agenda Introduction to UK Corporate - Overview - Financial performance and outlook - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 3
Slide 4: Our position within the Group
Our position within the Group Core RBS FY10 Core revenues1 by Division Ulster, 4% US R&C, 12% Retail & Commercial GBM, 32% Global Retail GTS, 10% UK Retail Global Corporate Customers Banking Clients UK Corporate & Markets Wealth, 4% Deposits Governments UK Wealth Corporate, 16% Financial SME Institu
Slide 5: UK Corporate
UK Corporate UK Corporate Role: to service and grow the Group’s small, medium and large business customers in the UK Business and Commercial Banking (B&C) Corporate and Institutional Banking (CIB) Relationships with small and medium size Relationships with medium and large clients in the UK with
Slide 6: An experienced team at the helm
An experienced team at the helm CEO Corporate Banking Division In role: 2 yrs Experience: 35 yrs CEO CEO Corporate & Business & Institutional Banking Commercial Banking In role: 2 yrs In role: 2 yrs Experience: 20 yrs Experience: 30 yrs Chief Financial Chief Risk Officer Chief Operating Chief Strate
Slide 7: We have a strong franchise…
We have a strong franchise… Leading customer franchise Strong customer satisfaction Improving service Market position for primary banking relationships1 Overall customer satisfaction scores2, 2010 Volume of customer complaints, UK Corporate 67 Customer UK Corporate Market > £25m 45 65 Number of comp
Slide 8: …which is well connected…
…which is well connected… UK Corporate delivers a comprehensive proposition linked into capabilities across the Group Global Transaction Services Clients Cash Management, Trade Finance, Commercial Cards (c100,000) (c£740m FY10 Income) Branch network, Private FX, rates, Capital Market Banking, Coutts
Slide 9: … and adds significant value across the Group
… and adds significant value across the Group Close to £5bn of franchise revenues Contribution enhanced 2010 total income from UK Corporate customers, £m 2010 Operating Profit from UK Corporate customers, £m c90 c5bn c150 c30 c2bn c740 c270 c400 3,895 1,463 UK Corporate GTS1 GBM 1 Other 1 Group inco
Slide 10: Our intent is to be a 'world class' business in our chosen markets
Our intent is to be a ‘world class’ business in our chosen markets Strategic priority Position end of 2008 Progress in 2009-101 Aspiration Customer-centric, sector and asset-class based model Putting the implemented for Corporates Un-differentiated and under- Launched SME charter to service sm
Slide 11: Agenda
Agenda Introduction to UK Corporate - Overview - Financial performance and outlook - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 11
Slide 12: Good progress across key metrics - 1
Good progress across key metrics - 1 FY08 FY09 FY10 FY10 vs. Santander branch disposal as % £m £m £m FY09 of 2010 UK Corporate1 Net interest income 2,448 2,292 2,572 12% c.13% Non-interest income 1,289 1,290 1,323 3% c.11% Total income 3,737 3,582 3,895 9% c.12% Costs 1,637 1,530 1,671 9% c.12% Pre
Slide 13: Good progress across key metrics - 2
Good progress across key metrics - 2 Asset margin driving NIM uplift Underlying cost control, with targeted investment Headline UK Corporate NIM, % UK Corporate headline & underlying expenses, £m Underlying3 2009 2010 2.51 1,671 2.22 2.02 1,642 1,566 1.44 0.91 1,530 0.55 Reported NIM Asset margin1 D
Slide 14: 2010 Results by business
2010 Results by business CIB B&C Centre UK Corporate UK Corporate results key highlights £m £m £m £m Income of £3.9bn excludes £1.1bn of Net interest income 1,073 1,494 5 2,572 franchise income booked in other divisions Non-interest income 491 869 (37) 1,323 C:I Ratios reflect higher cost to ser
Slide 15: Economic prospects suggest gradual recovery
Economic prospects suggest gradual recovery Rebalancing expected to continue in the UK economy… UK Official bank rate, % UK GDP, % UK unemployment, % 3.0% 4.0% 8.40% 2.5% 2.0% 8.00% 2.0% 0.0% 7.60% 10 11 12 13 1.5% 20 20 20 20 (2.0%) 7.20% 1.0% (4.0%) 6.80% 0.5% (6.0%) 6.40% 0.0% (8.0%) 09 10 11 12
Slide 16: Outlook
Outlook P&L and Balance Sheet Strategic targets 2010 Near Medium 2010 Near Med. 2013 £m actual term term actual term term target outlook outlook ROE 12.1% >15% NII 2,572 C:I Ratio 43% <35% Other income 1,323 L:D Ratio 110% <130% Costs (1,671) Impairments (761) Clear pathway to >15% RoE established I
Slide 17: Agenda
Agenda Introduction to UK Corporate - Overview - Financial performance and outlook - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 17
Slide 18: Our intent is to be 'world class' in managing the risk in our business
Our intent is to be ‘world class’ in managing the risk in our business Strategic priority Position end of 2008 Progress in 2009-101 Aspiration Managing the Measure through stress testing & economic capital Low volatility of risk adjusted stability of Limited focus on earnings volatility Vola
Slide 19: How we control our book
How we control our book RBS Group Appetite Maintain Capital Deliver Stable Earnings Stable/Efficient Access Maintain Market Adequacy Growth to Funding Confidence Volatility (stress testing) / Economic Capital UK Corporate Target Balance Sheet (sector) level strategic plan Dynamic Risk Profile Sector
Slide 20: Improving our risk profile
Improving our risk profile Improved sector diversification Reduced single name concentrations UK Corporate Loans & Advances composition, 2009-10 UK Corporate single name concentrations, FY09-10 £111.6bn £111.7bn 14 140 Number of connections in breach Concentration exposure over 8% 9% Asset and invoi
Slide 21: Managing impairments
Managing impairments Loan loss ratio is approaching normalised levels Early warning indicators improving UK Corporate impairments as % of L&A, 2008-10 UK Corporate value of cases in watch-list, 2010-11 14,000 200bps 12,000 160bps Value of cases (£m) 10,000 120bps 8,000 80bps 6,000 40bps 4,000 2,000
Slide 22: Agenda
Agenda Introduction to UK Corporate - Overview - Financial performance and outlook - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 22
Slide 23: B&C - Strong franchise supported by depth of capabilities and UK reach
B&C - Strong franchise supported by depth of capabilities and UK reach Top tier market positions Greatest breadth of capabilities Business Commercial RBS Invoice Lombard Banking Banking Finance Customer SME Invoice Peer 1 Peer 2 Peer 3 Peer 4 focus SME <£2m Asset finance £2-25m finance Customers 9 1
Slide 24: B&C - Franchise creates significant value for the Group
B&C - Franchise creates significant value for the Group Close to £3bn of franchise revenues Self-funding2 on a franchise basis B&C 2010 Revenue, £m c400 c2,870 B&C 2010 Funding, £m 2,364 6,700 600 (6,100) 1 1 1 3 Reported GBM GTS Retail Franchise Reported Gap GTS Franchise Surplus Contribution enhan
Slide 25: B&C - We have already made significant progress in rebalancing and managing
B&C - We have already made significant progress in rebalancing and managing Funding gap closed Margin progression Impairments reducing LDR - Reported LDR - Franchise B&C interest margin, 2008-10, % B&C impairments, 2008-10, £m 128% 124% 3.44% 1.5% 110% 2.77% 2.99% 1.1% 114% 109% 99% 1 1.83% 1.93% 2.
Slide 26: B&C - There is clear opportunity to deliver more value
B&C - There is clear opportunity to deliver more value Current product penetration is below peers Excellent product capability Average product holding with main bank We have excellent product capability, but we have not 6.0 fully leveraged the benefits 5.4 5.5 Product penetration is below top co
Slide 27: B&C - Most comprehensive commitment to our customers through the cycle
B&C - Most comprehensive commitment to our customers through the cycle Supporting customers through… Listening to customers to shape our plans… SME Customer Charter ks He Providing overdrafts on a committed basis r is pl y Extending our overdraft Price Promise m m e e Deliver what to ag Greate
Slide 28: B&C - Committed significant investment to change our business (Genesis)
B&C - Committed significant investment to change our business (Genesis) Investment spend of £300m over 5 years to deliver… Through an efficient multi-channel model 1) Reconfigured relationship model to focus on customer Relationship Smaller portfolio sizes, better relationship management need and
Slide 29: B&C - We have embarked on a journey to transform the customer's experience
B&C - We have embarked on a journey to transform the customer’s experience TODAY Transformed customer experience TOMORROW Overview of current model New Multi-channel operating model ▪ Customer promise Relationship Online & ▪ Full knowledge of Management Branch Telephony customer’s not consistently d
Slide 30: B&C - Delivering sustainable, long-term value
B&C - Delivering sustainable, long-term value Indicative B&C RoE outlook >15% >15% 9.6% 2010 RoE NII Volume NII Rate Non II Costs Impairments RWA 2013 RoE Challenges Management Actions Economic sluggishness - GDP, unemployment, A more disciplined risk framework insolvencies - Improved risk proce
Slide 31: Agenda
Agenda Introduction to UK Corporate - Overview - Financial performance and outlook - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 31
Slide 32: CIB - We have a powerful and sustainable relationship-led franchise
CIB - We have a powerful and sustainable relationship-led franchise Client Centric operating model Market leading product offering Major Major Major Peer 1 Peer 2 Peer 3 Real Institutional Corporate Large Estate Coverage Coverage Corporate Rates & FX GBM DCM 99 99 9 99 Finance Coverage FIs ECM
Slide 33: CIB - Delivering attractive contribution and returns
CIB - Delivering attractive contribution and returns CIB headline metrics - reported Growing revenue and contribution Net interest income £1,073m ROE 17.6% 1,482 1,564 Non-interest income £491m 1,263 +6% +17% Total income £1,564m Cost Income Ratio 27% Contribution (£m) Costs £(416)m +2% Revenue Pre
Slide 34: CIB - Strong funding, capital and risk discipline
CIB - Strong funding, capital and risk discipline Transformed risk management model Disciplined capital allocation 3.7% Fit for purpose risk and control framework 3.4% Portfolio Management function built from scratch 3.0% Income/RWA Embedded risk appetite by sector and asset class RWA (£bn)
Slide 35: CIB - We are investing in our Relationship Management infrastructure and collateral
CIB - We are investing in our Relationship Management infrastructure and collateral Relationship management tools Cost of Operating Expected RAPM = Income - Cost - capital/ - Loss Risk Adjusted Performance Measure (RAPM) enables funding RMs to assess customer/portfolio and segment profitability 12
Slide 36: CIB - Strengthening our deposits capability to sustain our funding and income ambitions
CIB - Strengthening our deposits capability to sustain our funding and income ambitions We have built deposit capabilities We are investing for sustainable growth Product Management providing insights into P&L Deposits Liquidity Engine performance drivers Liquidity Sales Specialists supporting R
Slide 37: CIB - We connect with the Group for the benefit of our clients…
CIB - We connect with the Group for the benefit of our clients… Offering high quality products Global Banking and Markets (GBM) Global Transaction Services (GTS) Lombard GBM Risk Solutions Rank % Share FX1 1 18% Interest Rate Derivatives2 2 22% Issues / GBM Capital Markets Rank USD % Share Deals UK
Slide 38: CIB - …with significant success and further product diversification opportunities
CIB - …with significant success and further product diversification opportunities Strong penetration across product set with further opportunities to grow Product penetration, % Global Banking and Markets (GBM) Global Transaction Services (GTS) Speciality Finance 100 96 100 45 49 39 31 26 21 21 16 1
Slide 39: CIB - We are a franchise holder, focussed on sustainable, long term value
CIB - We are a franchise holder, focussed on sustainable, long term value Franchise revenue and contribution Franchise funding4 and RoE CIB 2010 Revenue, £m – Close to £2.3bn of franchise revenues CIB 2010 Funding, £bn – Self-funding on a franchise basis c345 c90 15.8 (2.9) c245 c2,245 8.6 1,564 (5.
Slide 40: Agenda
Agenda Introduction to UK Corporate - Overview - Outlook and financial performance - Risk Management Spotlight on our business - Business and Commercial (B&C) - Corporate and Institutional (CIB) Summary 40
Slide 41: Key messages
Key messages Strong customer franchise with most comprehensive offering in the market Very significant contributor to RBS Group Strong progress in 2009-10 across all financial and risk metrics Targeted investment to further strengthen our platform Operating in a challenging environment but with heal
Slide 42: Questions?
Questions?
Slide 43: Appendix
Appendix
Slide 44: UK Corporate Management CV's
UK Corporate Management CV’s Name Title Background Chris CEO, Corporate Chris joined Lombard in 1975, working his way up to lead that business. Before his current role as CEO of Corporate Banking Division he served as Chief Executive of RBS Insurance, Chief Executive of RBS Retail, and Head of Gro
Royal Bank of Scotland Group — Investor Day (April 2011) on 6ix