Natwest Group Plc · LSE:NWG
Natwest — Investor Day (September 2018)
49 slides from Natwest's investor day presentation, Sep 24, 2018
Slide 1: UK Personal & Business Banking Investor Seminar
UK Personal & Business Banking Investor Seminar 24th September 2018
Slide 2: Today’s speakers
Today’s speakers Les Matheson Frans Woelders Lloyd Cochrane Claire Baird CEO Chief Digital Officer Product Director Finance Director Homebuying & Appointed in March 2014 Appointed in May 2018 Ownership Appointed in June 2018 Joined RBS in 2010 as Prior to joining RBS, Appointed in June 2
Slide 3: Agenda
Agenda UK Personal & Business Banking Overview – Les Matheson, CEO Investing in Digital Capabilities – Frans Woelders, CDO Home Buying & Ownership – Lloyd Cochrane, Product Director Financial Performance – Claire Baird, FD Note(s): (1) Except and unless otherwise noted, all financial information in
Slide 4: Les Matheson, UK PBB Chief Executive Officer
Les Matheson UK PBB Chief Executive Officer
Slide 5: UK Personal & Business Banking
UK Personal & Business Banking 1 Delivering strong Strong market positions, sustainable RoE driving established trust and the Group to its 2020 clear customer targets Well positioned in vision a rapidly evolving digital market for long term Growing in sustainable growth Reduced physical chosen marke
Slide 6: UK PBB Overview
UK PBB Overview Customers1 Business Areas Personal (P): 17,245k Business (B): 854k Personal Scotland Deposits P: 11%, B: 13% Personal Northern Ireland Advances P: 4%, B: 5% Mortgages Business England & Wales P: 85%; B: 82% Banking % of total customers 6 Note(s): (1) Personal figures as at March 18,
Slide 7: We are driving from a position of strength
We are driving from a position of strength Business Strength Customer Growth1 Product Growth New Business Market Share (UK PBB)1 UK PBB balance net growth vs market2 Commercial 12mths ending June RBS Market Mortgages Growing operating profit 11.4% 11.0% 10.4% 9.7% 9.7% 9.6% Steady trajectory on cost
Slide 8: We have made progress on our priorities…
We have made progress on our priorities… Customer Simplifying Supporting Strength & Employee Experience the Bank Sustainable Growth Sustainability Engagement Personal NatWest NPS1 Cost: Income Ratio Total loans & advances Return on Equity Engagement Score2 +13 76% £163.4bn 29% +87 £141.9bn 50% +15%
Slide 9: …while maintaining a low risk profile
…while maintaining a low risk profile Low income volatility with Lower proportion of unsecured Small proportion of SVR balanced portfolio balances mortgages % Personal balances that are % income by portfolio % mortgage balances by type unsecured 8.9% Other 1% 1% 19% 19% 7.7% Business & Commercial Pe
Slide 10: We have a clear customer focused vision
We have a clear customer focused vision Help me manage my everyday banking Help me manage my short-term Acting as the gateway to all of our borrowing customers’ financial needs Help me manage my home buying & ownership Help me manage my business 10
Slide 11: Digital customer base & capabilities growth while reducing our physical footprint…
Digital customer base & capabilities growth while reducing our physical footprint… Digital growth Mobile Mobile App Digital sales in 6m Mobile Payments2 logins UK PBB App users up 26% on up 20% on up 27% on H1 (H1 2018)1 H1 2017 H1 2017 2017 Physical reduction Physical Branches Branch counter Cheque
Slide 12: …and delivering market-leading innovation into the hands of customers
…and delivering market-leading innovation into the hands of customers Successfully Leading the way on partnered with and AI with our digital acquired fintech assistant Cora FreeAgent Q1 2017 Q1 2018 H2 2014 Q3 2017 Q2 2018 First bank in the UK Launched the UK’s Building new to launch TouchID first p
Slide 13: We are investing in delivering long-term sustainable growth…
We are investing in delivering long-term sustainable growth… Customer Digital Strength & Simplification Propositions Capabilities Sustainability Innovative digital Expansion of Building & Core Banking Future1 propositions using Artificial connecting to Platform Open Banking Intelligence/ ecosystems
Slide 14: …and are adapting how we work to remain competitive
…and are adapting how we work to remain competitive Digital first, customer led, agile at scale Strategy and Innovation Home Buying and Ownership Everyday Banking Short Term Borrowing Business Banking Technology Centres of Excellence Personal Banking Digital Banking Functions 14
Slide 15: UK Personal & Business Banking
UK Personal & Business Banking 1 Delivering strong Strong market positions, sustainable RoE driving established trust and the Group to its 2020 clear customer targets Well positioned in vision a rapidly evolving digital market for long term Growing in sustainable growth Reduced physical chosen marke
Slide 16: Frans Woelders, UK PBB Chief Digital Officer
Frans Woelders UK PBB Chief Digital Officer
Slide 17: Helping customers adopt digital banking…
Helping customers adopt digital banking… Using data to proactively engage customers across all frontline channels • Web, mobile and email campaigns to • >850 TechXperts, minimum of one • >5m personalised customer insight drive adoption and usage accessible in every branch prompts displayed in-app ev
Slide 18: …and delivering the experience customers want…
…and delivering the experience customers want… Simplicity and an intuitive user experience are key to adoption and continued digital engagement Drivers of NatWest app advocacy1 We continually refine our app’s user experience: • Clean, uncluttered, easy to understand • Quick access to most used featu
Slide 19: …while transforming our assisted channels
…while transforming our assisted channels Adapting to changing customer behaviours Adding value in different ways Branch visits1 40 Testing new - 26% formats and Millions 20 experiences for assisted 0 self-serve H1 2016 H1 2018 97% # of branches2 100% Transactions and enquiries 400k Secure messages
Slide 20: More customers are choosing to bank digitally…
More customers are choosing to bank digitally… 1 Leading the way in mobile adoption Meeting more needs through digital channels2 Branch Digital 6.0m Sales 800 (9%) +38% Thousands # mobile app users 700 volume 600 fulfilled 500 4.2m >50% 400 H1 2016 H1 2018 Adoption by customers c.35% Funds +41% 200
Slide 21: …engaging deeply with our brands
…engaging deeply with our brands Digital propositions which benefit both customer and bank Saving time & money for customers & the bank Mobile active customers vs. Pay someone new2 non mobile active 1 Branch Telephony Mobile app Travel time 10-30 mins - - # of interactions x 6.2 Wait time 0-10 mins
Slide 22: Aligning customer experience and cost efficiency
Aligning customer experience and cost efficiency Applying innovative technology to help customers self-serve with confidence We are actively exploring extended Cora – our digital assistant, use cases for Cora, e.g.: powered by artificial intelligence • Answer questions on >500k conversations with cu
Slide 23: Transforming experience through customer led design
Transforming experience through customer led design • Available for all new to bank customers 16 questions • Built mobile first, but adaptable (down from 120) to any device or channel 6 mins to open • End-to-end automation (down from 16) • Piloting instant in-app identity 93k accounts verification w
Slide 24: Strengthening customer relationships
Strengthening customer relationships Customers find managing their financial lives a challenge and want help. We are testing two different kinds of solution, harnessing the power of data Personal Financial Manager Broader Ecosystem Data driven financial insights Chat-based Al enabled financial that
Slide 25: We are organising around the customer and positioning ourselves for the future
We are organising around the customer and positioning ourselves for the future We are taking advantage of opportunities in a rapidly evolving world We are working with Digital first Quickly identifying Working with the FinTechs and are technology platform winning bets right partners already building
Slide 26: Key messages
Key messages 1 Proactive, digital-first journeys designed around the customer 2 Help more customers do more of their everyday banking digitally 3 Deepening customer engagement 4 Reducing cost and growing digital sales and service Positioning ourselves to take advantage of opportunities in a rapidly
Slide 27: Lloyd Cochrane, Product Director, Home Buying & Ownership
Lloyd Cochrane Product Director, Home Buying & Ownership
Slide 28: Business performance
Business performance Strong growth but margins under pressure due to increasingly aggressive competitor pricing New business flow and stock Stock growth Market share1 Competitors2 movements 0 60% LTV H1 2018 2 Year Fixed ~£32bn ~£31bn 11% Initial Product Cash £137.4bn Fee £136.8bn Rate Back ~£25bn £
Slide 29: UK PBB Mortgages Overview
UK PBB Mortgages Overview Book LTV BTL vs. Owner occupied mix >100% 0.3 H1 2018 average FY 2017 H1 2018 book LTV 80% <=100% 18.5 Buy to Buy to let let 12% Total 13% 50% <=80% 69.7 57% book <=50% 48.6 0 10 20 30 40 50 60 70 55% BTL Owner Owner Mortgage balance (£bn) occupied occupied Geographical spl
Slide 30: Driving customer advocacy
Driving customer advocacy Delivering journey improvements through paperless mortgages and digital switching UK’s 1st Paperless Increased mortgage Reducing application to Resulting in market mortgage application switching via digital offer time and delivering leading NPS for customers channels custom
Slide 31: Video
Video 31
Slide 32: Managing customer retention
Managing customer retention Focussed on customer retention in an increasingly price competitive market Product development Ecosystem development Contact strategy Pricing initiatives 32
Slide 33: Innovation agenda
Innovation agenda Our key areas of focus will position us to thrive in an evolving market context, improving customer experience while cutting cost to serve Pursuing a digital first strategy assisted by Expanding experience both people when it matters before and after a Digitisation customer gets a
Slide 34: Home Agent
Home Agent Moving from product and advice towards being a relevant and engaging customer ecosystem Thinking of moving Apply Move Manage and renew Home Agent (current MVP - more upcoming features) Post-MVP Your Equity You have £30,000 available now Set my Find my next Apply and Help me move Improve m
Slide 35: Key messages
Key messages Established top 4 mortgage lender with ~12% new business share. Targeting 1 stock growth above market levels while continuing to reduce cost & manage risk Driving customer advocacy via high quality customer experience and 2 service (highest ‘Apply & Set up’ NPS) Successful delivery of d
Slide 36: Claire Baird, UK PBB Financial Director
Claire Baird UK PBB Financial Director
Slide 37: UK Economy remains resilient
UK Economy remains resilient GDP growing, but very slowly1 Unemployment at historically low levels1 3.5% 9% GDP YoY % growth GDP growth % Unemployment 3.0% 8% GDP forecast 2.5% 7% 2.0% 6% 1.5% 5% 0.0% 0% 2012 2014 2016 2018 2020 2022 2006 2008 2010 2012 2014 2016 2018 Interest rates lower for much l
Slide 38: Consistently strong financial performance
Consistently strong financial performance FY FY FY H1 2015 2016 2017 2018 Income (£m) 6,033 6,127 6477¹ , 3,161 NIM (%) 3.13% 2.97% 2.86% 2.81% Costs (£m) (4,564) (4,276) (3,829) (1,582) Cost: Income (%) 76% 70% 59% 50% Impairments (£m) (8) (125) (235) (147) Operating Profit (£m) 1,461 1,726 2,413 1
Slide 39: Consistently strong financial performance
Consistently strong financial performance Strong Balance Sheet growth in a competitive environment. C:I ratio continues to improve as we simplify the bank Above-market loan growth funded by strong deposit growth… …maintaining income levels in a competitive environment… Balance Sheet (£bn) Growth Inc
Slide 40: Cost Benefits from digital led strategy
Cost Benefits from digital led strategy Customer transition from physical to digital supports cost efficiency Reduced impact of legacy issues allowing focus on investing for the Digital adoption has increased resulting in lower branch future numbers, headcount and lower staff costs… Total Operating
Slide 41: Short Term Borrowing
Short Term Borrowing Strong growth in Personal Loans, with digital loans sales up from 38% of total in 2015 to 56% in H1 2018, partly offset by lower Credit Card balances as we remain out of the 0% balance transfer market Reduced the level of unsecured lending exposure in credit … leading to lower u
Slide 42: Mortgage income level maintained
Mortgage income level maintained Mortgage market remains highly competitive with pricing pressure largely offset by strong balance growth Intense competition and higher funding rates have led to a contraction in mortgage margins Indicative product margin¹ 2.20% 2.00% 1.93% 1.89% Total Income (£m) 2,
Slide 43: Strong and disciplined Mortgage growth
Strong and disciplined Mortgage growth New lending share consistently ahead of stock market share, while maintaining risk discipline Strong mortgage balance growth while reducing our exposure to higher risk segments… Balance Split (£bn) Low share of interest only and Buy to Let mortgages Interest On
Slide 44: Deposit funding structure a competitive advantage
Deposit funding structure a competitive advantage We are well placed to benefit from rising rate environment, with deposits a natural hedge to increased mortgage margin pressures Strong current account deposit growth has provided an Personal Deposit Income inexpensive funding base Total Deposit (£bn
Slide 45: Business Banking
Business Banking Lending growth supported by strong deposit base, with strong and improving financial performance Lending growth ahead of market supported by very strong Income improves while keeping the cost base under deposit base with an LDR of 29% control… Balance sheet split (£bn) Growth (2015
Slide 46: Overall financials - Medium Term Outlook
Overall financials - Medium Term Outlook Loan growth expected to continue to outperform the market, supported by strong funding position. Mortgage margin pressures expected to be largely mitigated by improved deposit returns FY FY FY H1 Medium Term 2015 2016 2017 2018 Outlook² Income (£m) 6,033 6,12
Slide 47: Key messages
Key messages 1 Strong Return on Equity supported by robust pricing and profitability discipline Targeted above-market lending growth supported by strong overall 2 funding position Deposit base provides a competitive funding and liquidity advantage and 3 we are well placed to benefit from a rising ra
Slide 48: Questions
3x RBS Questions \ Wa !
Slide 49: Disclaimer
Disclaimer The targets, expectations and trends discussed in this presentation represent management’s current expectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 48 and 49 of the H1 2018 IMS for The Royal Bank of Scotland Grou