Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Bank of America Merrill Lynch Banking & Insurance CEO Conference 2010
33 slides from Natwest's conference presentation, Sep 28, 2010
Slide 1: Competing in the Age of Austerity
Competing in the Age of Austerity Stephen Hester, Group Chief Executive 28th September 2010 Bank of America Merrill Lynch Banking & Insurance CEO Conference
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: Introduction and agenda for today
Introduction and agenda for today Introduction RBS is being radically restructured and is on target for sustainable future success. Huge changes are well underway reducing excess balance sheet, risk, product, client & geographic scope, cost base and changing the culture & management. This presen
Slide 4: Progress to date in the Strategic Plan
Progress to date in the Strategic Plan Competing in the Age of Austerity
Slide 5: Strategic Plan – clear direction
Strategic Plan – clear direction RBS’s 2013 vision To be amongst the world’s most admired, valuable and stable universal banks, powered by market-leading businesses in large customer-driven markets To return >15% sustainable RoEs, from a stable AA category risk profile and balance sheet The business
Slide 6: Strategic Plan – defined aspirations
Strategic Plan – defined aspirations RBS is driving through the key elements of its Strategic Plan Core Bank Non-Core The focus for sustainable value creation The primary driver of risk reduction Built around customer-driven franchises Businesses that do not meet our Strategic Comprehensive bu
Slide 7: Strategic Plan - timeline
Strategic Plan - timeline 2010/11 – executing the plan 2009 2010/2011 2012 onwards Core profits build, Non-Core losses fall Target >15% RoE Formation of the Execution and implementation phase of the Ongoing revenue and cost Strategic Plan plan initiatives Creation of Non-Core Investment in
Slide 8: Strategic Plan - progress to date
Strategic Plan - progress to date Current position versus 2013 targets Key performance Worst FY 09 Q2 10 2013 indicator point Actual Actual Target Core Tier 1 Capital 4%(1) 11.0% 10.5% >8% Loan : deposit ratio (net of provisions) 154%(2) 135% 128% c100% Wholesale funding reliance(3) £343bn(4) £250bn
Slide 9: Economic backdrop
Economic backdrop Challenges remain in achieving global economic re-balancing Future assumptions Consensus Economic Data UK (%) 2009 2010E 2011E 2012E 2013E Economies continue to recover 1 GDP growth (4.9) 1.4 1.4 1.6 1.8 Pace of recovery impacted by continued deleveraging Unemployment rate2 7.6
Slide 10: Future regulatory framework
Future regulatory framework The regulatory picture continues to evolve Basel III - Jump in conservatism, but time to adjust. Important detail still to work through - Welcome recent developments, appear rational Resolution regimes - Too big to fail, Living wills, Bail-ins - Regulatory debate taking s
Slide 11: Core RBS Performance to date
Core RBS Performance to date Competing in the Age of Austerity
Slide 12: Core RBS
Core RBS Future Group profile, a strong and balanced business Core RBS H110 Core revenues by Division RBS Insurance UK Retail Retail & 13% 17% Commercial Global R&C Retail US R&C 67% UK Retail Global Corporate UK Customers 10% Corporate Banking Clients 13% UK Corporate & Markets Ulster Bank Deposits
Slide 13: UK Corporate
UK Corporate Strong customer franchises Closing funding gap – balancing loans with deposit growth Customer Satisfaction Scores £bn 100 Customer Deposits Loan:deposit ratio 150 % 95 Funding gap closing 140 Commercial1 Corporate1 90 130 RBS 54% 62% 85 80 120 Peer 52% 58% 75 average 110 70 Business h
Slide 14: UK Retail
UK Retail Opportunities for growth - growing customer numbers Strong growth in deposits and mortgages Y-o-Y1 £bn Deposits Mortgage Lending £bn 90 90 Current accounts growth +2% Saving accounts growth +5% 85 Mortgage account growth +8% 80 80 Retail franchise gains are increasing customer numbers 70
Slide 15: US Retail & Commercial
US Retail & Commercial Developing customer proposition - seeing early results Enhancing performance - Improving market share Investment in marketing and sales outreach has driven The business plan has delivered customer metrics to- account growth…. date ahead of the original strategic plan Y-o-Y
Slide 16: GBM
GBM Underlying performance in line with peers to date Underlying quarterly income (ex FVooD), £bn Benchmarking GBM’s quarterly performance1 % GBM Peer Average 65 70 4.5 45 50 3.0 30 10 1.5 -10 4.4 2.6 2.1 2.0 2.8 1.9 -30 (31) (31) (26) -50 (43) Q109 Q209 Q309 Q409 Q110 Q210 Revenues 2 C:I Ratio3 Ope
Slide 17: Progress to date in Core divisions performance
Progress to date in Core divisions performance We are making progress, but significant opportunity remains Return on Equity1, % Loan:deposit Ratio, % Cost:income Ratio, % H110 Reported 2013 Target H110 Reported 2013 Target H110 Reported 2013 Target UK Retail 14.2% 15%+ 114 <105 57 c.50 UK Corporate
Slide 18: Progress to date in the Core risk profile
Progress to date in the Core risk profile The Core bank will operate off a more conservative balance sheet in future Key balance sheet metrics FY09 Q210 Core loan:deposit ratio1 104% 102% Core loan:deposit ratio nearing target of 1:1 £16bn £8bn Quality of liquidity reserves improve as Core loan:
Slide 19: Driving Core performance improvements
Driving Core performance improvements Competing in the Age of Austerity
Slide 20: Revenue growth - the margin question
Revenue growth - the margin question Plan assumes liability margins will improve, asset margins to hold Current position & outlook Asset repricing continues to progress, but well advanced UK Retail Assets UK Corporate Assets Low Q210 Outlook Still to reprice Still to reprice Group NIM 1.70%1 2.03% R
Slide 21: Revenue growth - business initiatives
Revenue growth - business initiatives The Group can grow organically Leverage group capabilities e.g. GTS & GBM - creation of Global Network Banking to extend product delivery to GBM clients worldwide UK Retail - restructure of bancassurance JV with Aviva, full ownership and control of in- Cross
Slide 22: Investment in the business
Investment in the business The Group can deliver good cost efficiency Cost Reduction Programme £3.5bn Gross 5-year Investment Spend £6.1bn Investment Programme £2.6bn Cost reduction programme Example Initiatives Cost reduction programme annualised savings on track to exceed market commitment of £2.5
Slide 23: Investment in the business
Investment in the business The Group is investing significantly in the business Cost Reduction Programme £3.5bn Gross 5-year Investment Spend £6.1bn Investment Programme £2.6bn We are investing for future efficiencies and revenue growth Programme return on investment Retail Transformation Programme
Slide 24: Investment in the business
Investment in the business The Group is investing significantly in the business Cost Reduction Programme £3.5bn Gross 5-year Investment Spend £6.1bn Investment Programme £2.6bn We are investing for future efficiencies and revenue growth On-line use - Businesses with Project Genesis, Credit Transform
Slide 25: Operating leverage
Operating leverage The Core Business targets attractive operating leverage We have the levers to pull to drive future operating efficiency e C:I C:I g enu Current 1 Target a tin v r Re 56.8% <50% Ope d it ove i ves rof pr r P Further margin recovery D Im Non-Interest Income growth Broadly Flat Costs
Slide 26: Impairments
Impairments Outer years of the plan should see impairments normalise Impairments - Returning to normalised levels 2.3% H110 Key Metrics Impairments % of loans1 (£bn) 1.8% Core 2.07 0.96% 1998-2008 avg: 0.6% 0.9% Non-Core 3.09 4.64% 2003-07 avg: 0.5% Total 5.16 1.82% Trend back towards historic lev
Slide 27: Continued development in funding profile
Continued development in funding profile Group loans to be deposit funded Deposit initiatives are gaining traction… …and we are making progress in our funding mix Deposit Growth Potential Example deposit initiatives Divisional funding gap progression Target Invest in new affluent proposition with 20
Slide 28: Continued de-risking of the balance sheet
Continued de-risking of the balance sheet Non-Core run-down and EU disposals progressing well, lowers execution risk Non-Core Asset Disposals TPAs decreased by £84bn at Q210, reduction on plan Non-Core asset portfolio run-off/sales on target £bn ̶ Ongoing risk reduction Undrawn commitments 85 Fu
Slide 29: Capital planning
Capital planning The Group will maintain a conservative but rational capital structure The Group’s capital position is healthy versus peers1 The Group’s leverage is in-line with peers Comparative Core Tier 1 Capital Ratios, % Tier 1 Leverage Ratios2 vs Peer averages1,3,4, % APS benefit 12 Ex. APS 10
Slide 30: Concluding comments
Concluding comments Competing in the age of austerity
Slide 31: RBS Investment Case
RBS Investment Case Improved valuation will come with delivery of the plan Business Case Investment Case Market leading businesses in large, As plan targets are hit, and enduring, customer driven markets External uncertainties reduce Retail & Commercial businesses to drive earnings recovery
Slide 32: Key messages
Key messages The New RBS in 2013 Leading positions in all our customer businesses Top tier market franchises Strong, predictable and resilient business performance Complementary portfolio with clear cohesion logic and synergies Balanced portfolio Balanced by geography, growth, risk profile and busin
Slide 33: Questions?
Questions?