Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Bank of America Merrill Lynch Banking & Insurance CEO Conference 2013
42 slides from Natwest's conference presentation, Sep 24, 2013
Slide 1: Building a “Really Good” Bank
Building a “Really Good” Bank Bruce Van Saun, Group Finance Director Bank of America Merrill Lynch Banking & Insurance CEO Conference 24th September 2013
Slide 2: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 2
Slide 3: We are striving to this end
We are striving to this end Our purpose To serve our customers well To be trusted, respected and valued by our Our vision customers, shareholders and communities Serving Customers Working together Our values Doing the right thing Thinking long-term This is not the position we started from in 2009 We
Slide 4: “Really Good” Bank viewed through various stakeholder lenses
“Really Good” Bank viewed through various stakeholder lenses Communities & Society Support sustainable prosperity Regulators Investors Comply with Customers Be a safe letter and Serve our and spirit of valuable rules and Customers well investment regulations Employees Offer fulfilling jobs Progress
Slide 5: End state destination increasingly clear
End state destination increasingly clear A leading UK bank anchored in Retail & Commercial business lines Enduring Sustain strong capabilities internationally and in financial markets customer to support the needs of our customers and shareholders franchises Top tier competitor in our chosen f
Slide 6: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 6
Slide 7: Safety & Soundness metrics
Safety & Soundness metrics Medium-term Group – Key performance indicators Worst point H113 target Loan : deposit ratio (net of provisions) 154% 1 96% c.100% Short-term wholesale funding 2 £297bn 3 £37bn <10% TPAs Achieved Liquidity portfolio 4 £90bn 3 £158bn >1.5x STWF Tier 1 leverage ratio 5 28.7x
Slide 8: Clear pathway to capital adequacy
Clear pathway to capital adequacy Clear path to a strong core capital ratio Leverage ratio acceptable and improving Group Core Tier 1 ratio, % Reported CT1 ratio Basel III full end-point measure leverage ratio, % FLBIII CT1 ratio +100bps +30bps 3.4% 10.3 11.1 3.1% ~10.0 8.7 >9.0 7.7 Q412 Q213 2013E
Slide 9: Restructuring nearing successful conclusion
Restructuring nearing successful conclusion New Milestones H113 Comments targets 1 FY13E Expect to surpass the previous £40bn TPA target Non-Core TPAs £45bn by end 2013 £36-38bn 2 FY14E Good RWA progress, on track to achieve £80bn Markets RWAs £87bn 1 ‘fully loaded’ Basel III RWA target by end-2014
Slide 10: Non-Core post 2013: further reduction at lower cost
Non-Core post 2013: further reduction at lower cost Improved Non-Core guidance Move toward more passive management post 2013 Non-Core Third Party Assets, ex. derivatives, £bn Non-Core Third Party Assets, ex. derivatives, by asset class, £bn -83% 2008 2016 258 9 21 c.£20bn -£2-4bn Total 47 112 Assets
Slide 11: Strong Management Team in place
Strong Management Team in place 1 Ross McEwan Chief Executive Officer 1 year with RBS 25 yrs industry experience Previous experience includes: CEO of UK Retail at RBS, Group New appointment Executive for Retail Banking at CBA Bruce Van Saun Nathan Bostock Chris Sullivan Rory Tapner Chief Executive,
Slide 12: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 12
Slide 13: RBS Core business - where do we stand now
RBS Core business - where do we stand now UK focus; International reach Majority of capital allocated to retail and commercial businesses 2012 Revenue by Geography, % Funded Assets by Business Line, % RWAs by Business Line, % 2008 FY12 Markets Retail & 22% International GBM Commercial 34% 56% 44% Re
Slide 14: We have sustained Core customer market positions
We have sustained Core customer market positions UK Corporate UK Retail International Banking Markets #1 UK & EMEA in 4 5 Top 5 in FX, 7 #1 SME Bank #2 for current 1 3 cash management accounts Rates & Asset #1 Corporate #4 UK , #6 EMEA 2 6 6 Bookrunner of Backed Products Bank 16m custo
Slide 15: Customer initiatives are being delivered Group-wide
WIP Customer initiatives are being delivered Group-wide …which are helping us serve our A sample of some of our more recent initiatives… customers better “NatYes” and “RBYES” mortgage campaigns Branch Customer Satisfaction Index 2 NatWest named the UK’s “Most Trusted Mainstream 84% 85% 93% 94% J
Slide 16: Core profit and returns are the new team’s priority
Core profit and returns are the new team’s priority RWAs (£bn) (£bn) RoE (%) 2010 2011 2012 H113 2010 2011 2012 H113 Outlook UK Retail 49 48 46 44 16.3 24.5 24.4 25.8 Stable Upside rests with Wealth 13 13 12 13 15.9 12.8 13.1 12.1 economic growth, rates US R&C 57 59 57 58 3.7 6.3 8.3 8.0 Focus
Slide 17: Geared to a rising rate environment
Geared to a rising rate environment Geared to an immediate upward rate shift Geared to a steady increase in rates Income uplift from a 100bps upward shift in interest rates1 Income uplift from a 200bps ‘ramping’ of interest rates2 £1,160m Core RoE £860m boost £700m c.1.75-2.00% £640m Core RoE boost
Slide 18: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 18
Slide 19: Leading UK R&C franchises
Leading UK R&C franchises UK Retail UK Corporate Wealth A leading customer franchise Market leading product offering Premium brand, boutique approach #1 UK, Assets under #2 for Current #1 SME Bank Management Accounts #1 Corporate Bank #2 UK, 70,000 clients 23% of 22% of 5% of Core 16m customers Core
Slide 20: Supporting the UK consumer
Supporting the UK consumer Lending above market growth rate and share Recent increase in applications UK gross mortgage balances, £bn UK mortgage applications, £bn +35% 8 109.3 +72% 102.5 6 81.0 4 2 2008 Q212 Q213 Q112 Q212 Q312 Q412 Q113 Q213 UK mortgage balances have risen 35% since 2008 to £109
Slide 21: Supporting UK small business
Supporting UK small business Signs of greater SME demand Supported by RBS initiatives to lend SME loan and overdraft applications (£m) 1,050 9 Provided in excess of £4.7bn of Funding 1,018 for Lending Scheme related lending to 1,000 984 over 27,000 business customers 950 9 Mid-sized manufacturers of
Slide 22: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 22
Slide 23: Targeting an absolute cost base of under £12bn by 2015
Targeting an absolute cost base of under £12bn by 2015 Changes to RBS Group Cost base 2008-2015, £bn -22% 17.8 -14% (3.5) 13.9 (2.9) 0.9 (2.0) <12.0 1.5 0.2 0.6 (0.7) Exits 2008 Cost and Investment Inflation, 2012 Gross Incremental Inflation Other3 2015 savings disposals1 spend volume cost investmen
Slide 24: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 24
Slide 25: Citizens – good foundation to deliver improving returns
Citizens – good foundation to deliver improving returns Citizens operates in a 12 state footprint ...with an established presence within our within 3 geographic regions... footprint and nationally Mid West Mid-Atlantic New England Dimension Rank Assets ($118bn) #14 #12 National Loans ($85bn) Deposit
Slide 26: Citizens – more work to be done
Citizens – more work to be done Return on Equity Cost:income ratio 1 1 US R&C US R&C 12%+ 72% 73% 73% 8.3% ~60% 8.0% 6.3% 2011 2012 H113 Target 2011 2012 H113 Target NIM Sizable gap to peer RoE remains 1 US R&C Lower NIM drives RoE gap, reflects asset 3.03% 2.97% 2.92% portfolio mix, risk appeti
Slide 27: Citizens – focus on building momentum through 2014 / 2015
Citizens – focus on building momentum through 2014 / 2015 Strong Commercial Return on Banking Equity pipeline Expanding Capital Markets capabilities USDm # of Lead Left & Joint Lead Arranger 20% Transactions 3,600 2,992 891% 109 83 72 40 11 Q212 Q213 2009 2010 2011 2012 2013YTD 1 Residential Mortgag
Slide 28: Citizens – the building blocks are in place
Citizens – the building blocks are in place A compelling franchise 9th largest branch network in the US with extensive ATM, online, and mobile capabilities; well established franchise in core markets Self-funded with strong asset quality, credit ratings and capital ratios Key contributor to Gr
Slide 29: Citizens IPO – realising franchise value and growth
Citizens IPO – realising franchise value and growth Citizens IPO – another important milestone in RBS’s restructuring plan Benefits of a partial Citizens IPO for RBS Benefits of a partial Citizens IPO for CFG Spotlights progress made Provides local stock to better attract / retain employees, use
Slide 30: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 30
Slide 31: Ulster Bank: 177 years of heritage on the island of Ireland
Ulster Bank: 177 years of heritage on the island of Ireland Republic of Ireland #3 player Northern Ireland #1 player millions millions 6 6 4.6 4 4 1.8 2 1.3 2 0.7 0 0 Population Customer Base Population Customer Base Business Profile Business Profile 1.3m customers 718k customers − Retail: 1.26m
Slide 32: Ulster Bank – remain cautiously optimistic as trends improving
Ulster Bank – remain cautiously optimistic as trends improving Impairments falling, driven by stabilisation in economy £m Core Impairments Non-Core Impairments The macro-economic environment across the -12% island of Ireland has shown improvement 682 Investor confidence in Ireland is returning 5
Slide 33: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 33
Slide 34: Markets – significantly smaller and more focused
Markets – significantly smaller and more focused Assets reduced by over 2/3rds since peak Good RWA progress despite regulatory uplifts GBM / Markets TPAs, £bn GBM / Markets RWAs, £bn -69% -69% 874 279 268 250 87 80 GBM highest point1 Markets Q213 Markets Target GBM highest point2 Markets Q213 Market
Slide 35: Markets delivering on re-shaped and re-sized business model
Markets delivering on re-shaped and re-sized business model Where we are heading How we will get there 2012 Target1 Focus on fixed income product suite only (FX, Income £4.5bn £3-3.25bn Rates, DCM/Credit and Asset Backed Expenses £2.9bn £2-2.25bn Products), where Markets is a top tier and credible
Slide 36: Markets – clear plan on costs
Markets – clear plan on costs Planned cost reductions, £bn Sample initiatives 2012 cost base 2.9 11 Simplified product suite – fixed income product suite only, where Markets is highly competitive 11 Changes to 11 Key areas for exit or run-off: structured retail ~0.3 business model investor products,
Slide 37: Markets – clear plan for RWAs
Markets – clear plan for RWAs Markets RWAs, £bn 29 38 87 10 80 3 7 12 1 FLBIII impact 68 Run-off and exit businesses Markets Q213 FLBIII uplifts FLBIII mitigation Business Short-term Markets target (Basel 2.5) mitigation business (Basel III) 2 exits & run-off Excellent RWA progress – down £14.5bn
Slide 38: Agenda
Agenda Our vision Restructuring - nearing the finishing line Getting more from our Core businesses Spotlight: Leading UK R&C franchises Spotlight: Efficiency & investing for the future Spotlight: US R&C Spotlight: Ulster Spotlight: Markets Key milestones and path ahead 38
Slide 39: We have hit most key milestones
We have hit most key milestones Milestones Outcome 1 Preference share coupons Discretionary coupons resumed in 2012 2 APS Scheme exited in October 2012 with no claim 3 Repaying government funding CGS and SLS schemes fully repaid in 2012 & liquidity support 4 In compliance with all balance sheet & EC
Slide 40: Restructuring well-advanced… path ahead clear
Restructuring well-advanced… path ahead clear Core Bank Serve customers well, and better Lending growth Deliver earnings growth and cost reductions Achieve capital targets Restructuring Conclude active run-down of Non-Core; work through GB/BB analysis Complete Markets restructure Complete DLG sell-d
Slide 41: Questions
‘ x RBS Group Questions
Slide 42: 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’, ‘