Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — CBFM Conference 2005
137 slides from Natwest's conference presentation, Oct 3, 2005
Slide 1: The Royal Bank of Scotland Group
a« RBS The Royal Bank of Scotland Group
Slide 2: Forward looking statements disclaimer
This presentation may contain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Group's economic results,
Slide 3: Sir Fred Goodwin, Group Chief Executive
Sir Fred Goodwin Group Chief Executive
Slide 4: RBS Group Structure
Slide 4 RBS Group Structure CUSTOMERS ▮ Ulster Bank ▮ Direct Line ▮ RBS ▮ RBS ▮ Citizens ▮ First Active ▮ Churchill ▮ NatWest ▮ NatWest ▮ Charter One ▮ ▮ Direct brands ▮ RBS Greenwich Capital ▮ Personal Privilege ▮ Personal ▮ Coutts ▮ Business ▮ NIG ▮ Commercial ▮ Business ▮ Personal ▮ Corporate ▮ I
Slide 5: RBS Group Structure
Slide 5 RBS Group Structure CUSTOMERS ▮ Ulster Bank ▮ Direct Line ▮ RBS ▮ RBS ▮ Citizens ▮ First Active ▮ Churchill ▮ NatWest ▮ NatWest ▮ Charter One ▮ ▮ Direct brands ▮ RBS Greenwich Capital ▮ Personal Privilege ▮ Personal ▮ Coutts ▮ Business ▮ NIG ▮ Commercial ▮ Business ▮ Personal ▮ Corporate ▮ I
Slide 6: Group Operating Profit
Slide 6 Group Operating Profit UK GAAP 2004 2003 Change Change £m £m £m Corporate Banking & Financial Markets 4,265 3,620 645 +18% Retail Markets 4,787 4,453 334 +8% Manufacturing (2,439) (2,114) (325) -15% Citizens 1,037 857 180 +21% RBS Insurance 862 609 253 +42% Ulster Bank 468 354 114 +32% Centr
Slide 7: Agenda
Slide 7 Corporate Banking & Financial Markets Agenda 10.05 Introduction and Overview Johnny Cameron 10.45 Mid-Corporate and Commercial Alan Dickinson 11.20 Coffee Break 11.35 Global Banking and Markets Brian Crowe CBFM US Jay Levine 12.30 Conclusions Johnny Cameron Questions & Answers 13.00 Lunch
Slide 8: Corporate Banking & Financial Markets
Corporate Banking & Financial Markets
Slide 9: Introduction and Overview
Introduction and Overview Johnny Cameron Chief Executive, CBFM
Slide 10: Corporate Banking & Financial Markets
Slide 10 Corporate Banking & Financial Markets ▮ Relationship banking ▮ Broad range of customers from large corporates to small commercials (not small businesses) ▮ 15,000 people ▮ Leading capability across range of products ▮ Strong position in UK, growing in US, Europe and Asia ▮ 2004 total income
Slide 11: Some things have not changed
Slide 11 Corporate Banking & Financial Markets Since the last CBFM presentation in 2000, some things have not changed… ▮ Relationship-led ▮ Hands-on management ▮ Close to customers ▮ Credit committees key to managing risk and returns ▮ Growth-oriented
Slide 12: Some things have changed a lot
Slide 12 Corporate Banking & Financial Markets … some things have changed a lot ▮ Built a truly international business ▮ Expanded our distribution capability ▮ Established ourselves in major markets ▮ Recruited additional high calibre people ▮ We are now competing against a different peer group
Slide 13: Strong Growth in Income and Contribution
Slide 13 Strong Growth in Income and Contribution UK GAAP 2001 2004 Growth £m £m % pa Total income 5,164 6,992 +11% Direct expenses 1,470 2,005 +11% Provisions 502 573 +5% Contribution 3,192 4,414 +11%
Slide 14: Strong Growth in Income and Contribution
Slide 14 Strong Growth in Income and Contribution IFRS 1H04 1H05 Growth £m £m % Total income 3,331 3,927 +18% Direct expenses 1,024 1,198 +17% Provisions 253 181 -28% Contribution 2,054 2,548 +24%
Slide 15: Consistent Growth in Income
Slide 15 Consistent Growth in Income Total Income £bn 4.0 3.0 2.0 1.0 0.0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 16: Consistent Growth in Contribution
Slide 16 Consistent Growth in Contribution Contribution £bn 3.0 2.0 1.0 0.0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 17: Consistent Growth
Slide 17 Consistent Growth ▮ Consistency of income and contribution growth reflects diversity of income ▮ CBFM is diversified – By business – By geography – By customer
Slide 18: Diversity by Business
Slide 18 Diversity by Business Business 1H05 Income 1H05 Income £m % CBFM Core Banking 1,749 45% Structured Finance 726 18% Financial Markets 1,452 37% Total CBFM 3,927 100%
Slide 19: Diversity by Geography
Slide 19 Diversity by Geography Geography 1H05 Income 1H05 Income £m % CBFM UK 2,853 72% US 695 18% Europe 301 8% Asia-Pacific 78 2% Total CBFM 3,927 100%
Slide 20: Diversity by Business and Geography
Slide 20 Diversity by Business and Geography 1H05 Income £m UK US Europe Asia- Total Pacific CBFM Core Banking 1,662 26 55 6 1,749 Structured Finance 525 63 127 11 726 Financial Markets 666 606 119 61 1,452 Total CBFM 2,853 695 301 78 3,927
Slide 21: Diversity by Customer
Slide 21 Diversity by Customer Customers UK US Europe Asia- Pacific Financial institutions Large corporates Mid-corporates /Citizens X X Commercials Citizens X X Small businesses Retail Citizens X X Markets
Slide 22: Diversity by Customer
Slide 22 Diversity by Customer Customers UK US Europe Asia- Pacific Financial institutions Large corporates Mid-corporates /Citizens X X Commercials Citizens X X Small businesses Retail Citizens X X Markets
Slide 23: Different Customers Have Different Needs
Slide 23 Diversity by Customer Different Customers Have Different Needs Sophistication Commercials Mid-corporates Large Corporates Financial Institutions Size Mid-Corporate and Commercial Global Banking and Markets
Slide 24: Different Customer Needs
Slide 24 Different Customer Needs Mid-Corporate Global Banking and Commercial and Markets ▮ Relationship manager ▮ Relationship ▮ Full suite of products ▮ Product excellence ▮ Effective co-ordination of ▮ Access to markets product delivery ▮ Intellectual capital ▮ Responsive credit process ▮ Lack of
Slide 25: Diversity of Income
Slide 25 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 26: Diversity of Income
Slide 26 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking and Markets and Commercial Asia- UK UK US Europe Pacific Core Banking 1,223 439 26 55 6 Structured Finance – 525 63 127 11 Financial Markets 84 582 606 119 61 Total CBFM 1,307 1,546 695 301 78
Slide 27: Financial Performance
Slide 27 Financial Performance ▮ Results ▮ Income ▮ Efficiency ▮ Risk ▮ Return on capital ▮ Return on market risk
Slide 28: 1H05 Results
Slide 28 1H05 Results £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Net interest income 852 617 1,469 Non-interest income 455 2,003 2,458 Total income 1,307 2,620 3,927 Direct expenses 328 870 1,198 Provisions 100 81 181 Contribution 879 1,669 2,548 Average RWAs (£bn) 68.3 12
Slide 29: Income
Slide 29 Income 1H05 £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Net interest income 852 617 1,469 Non-interest income 455 2,003 2,458 Percentage of total income – Net interest income 65% 24% 37% – Non-interest income 35% 76% 63%
Slide 30: Financial Metrics
Slide 30 Financial Metrics 1H05 Mid-Corporate Global Banking Total and Commercial and Markets CBFM Income (£m) 1,307 2,620 3,927 Average RWAs (£bn) 68.3 124.3 192.6 Total income/ average RWAs 3.9% 4.3% 4.1%
Slide 31: Total Income/Average RWAs
Slide 31 Total Income/Average RWAs UK GAAP IFRS 2001 2002 2003 2004 1H04 1H05 Mid-Corporate and Commercial 4.6% 4.4% 4.1% 4.1% 4.1% 3.9% Global Banking and Markets 4.5% 4.3% 4.2% 4.2% 4.2% 4.3% Total CBFM 4.5% 4.3% 4.1% 4.2% 4.2% 4.1%
Slide 32: Income Growth
Slide 32 Income Growth Growth % pa Growth % pa 1H01-1H05 1H04-1H05 Mid-Corporate and Commercial 7% 11% Global Banking and Markets 17% 22% Total CBFM 13% 18%
Slide 33: Efficiency
Slide 33 Efficiency 1H05 Mid-Corporate Global Banking Total and Commercial and Markets CBFM Total income 1,307 2,620 3,927 Direct expenses 328 870 1,198 Direct expenses/ total income 25.1% 33.2% 30.5%
Slide 34: Efficiency
Slide 34 Efficiency Direct Costs/Total Income UK GAAP IFRS 2001 2002 2003 2004 1H04 1H05 Mid-Corporate and Commercial 21.9% 25.3% 24.6% 22.7% 24.9% 25.1% Global Banking and Markets 32.9% 29.6% 30.0% 32.0% 33.9% 33.2% Total CBFM 28.5% 28.0% 28.1% 28.7% 30.7% 30.5%
Slide 35: Efficiency
Slide 35 Efficiency Income and Costs per Head 1H05 £000s 800 Income/Head Fixed Costs/Head Variable Costs/Head 600 400 200 0 Mid-Corporate and Global Banking and CBFM Commercial Markets
Slide 36: Financial Metrics
Slide 36 Financial Metrics 1H05 Mid-Corporate Global Banking Total and Commercial and Markets CBFM Total income/ average RWAs 3.9% 4.3% 4.1% Total income less direct expenses/ average RWAs 2.9% 2.8% 2.9%
Slide 37: Total Income less Direct Expenses/Average RWAs
Slide 37 Total Income less Direct Expenses/ Average RWAs UK GAAP IFRS 2001 2002 2003 2004 1H04 1H05 Mid-Corporate and Commercial 3.6% 3.3% 3.1% 3.2% 3.1% 2.9% Global Banking and Markets 3.0% 3.0% 2.9% 2.9% 2.8% 2.8% Total CBFM 3.2% 3.1% 3.0% 3.0% 2.9% 2.9%
Slide 38: Risk
Slide 38 Risk 1H05 Mid-Corporate Global Banking Total and Commercial and Markets CBFM Provisions (£m) 100 81 181 Average RWAs (£bn) 68.3 124.3 192.6 Provisions/ average RWAs 0.29% 0.13% 0.19%
Slide 39: Risk
Slide 39 Risk Provisions/Average RWAs UK GAAP IFRS 2001 2002 2003 2004 1H04 1H05 Mid-Corporate and Commercial 0.39% 0.46% 0.41% 0.43% 0.51% 0.29% Global Banking and Markets 0.47% 0.63% 0.56% 0.29% 0.21% 0.13% Total CBFM 0.44% 0.57% 0.51% 0.34% 0.32% 0.19%
Slide 40: Financial Metrics
Slide 40 Financial Metrics Mid-Corporate Global Banking Total and Commercial and Markets CBFM Total income/ average RWAs 3.9% 4.3% 4.1% Total income less direct expenses/average RWAs 2.9% 2.8% 2.9% Contribution/ average RWAs 2.6% 2.7% 2.7%
Slide 41: Contribution/Average RWAs
Slide 41 Contribution/Average RWAs UK GAAP IFRS 2001 2002 2003 2004 1H04 1H05 Mid-Corporate and Commercial 3.2% 2.8% 2.7% 2.8% 2.6% 2.6% Global Banking and Markets 2.5% 2.4% 2.3% 2.6% 2.6% 2.7% Total CBFM 2.8% 2.5% 2.5% 2.6% 2.6% 2.7%
Slide 42: Return on Capital
Slide 42 Return on Capital Mid-Corporate Global Banking Total and Commercial and Markets CBFM Contribution (£m) 879 1,669 2,548 Average RWAs (£bn) 68.3 124.3 192.6 Contribution/ average RWAs 2.6% 2.7% 2.7% Contribution/ 7% of average RWAs 37% 39% 38%
Slide 43: Return on Capital
Slide 43 Return on Capital CBFM 1H05 Allocation of Manufacturing costs (approx £2,600m per annum) £0m £500m £700m £900m £2,600m Cost:income ratio 30.5% 36.8% 39.3% 41.9% 63.3% Contribution/ 7% of average RWAs 38% 34% 33% 32% 19%
Slide 44: Market Risk
Slide 44 Market Risk Value at Risk £m 20 15 10 5 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 Value at Risk (VaR) based on 1 day 95%
Slide 45: Return on Market Risk
Slide 45 Return on Market Risk Ratio of Income from Trading Activities to VaR 1H05 Lehman Brothers 10.83 RBS 10.20 Deutsche Bank 7.63 Goldman Sachs 7.51 ABN Amro 6.16 Morgan Stanley 5.47 Merrill Lynch 5.03 Bank of America 4.55 Citigroup 4.45 Barclays 4.10 UBS 3.90 HSBC 3.62 Credit Suisse First Bosto
Slide 46: We Focus on
Slide 46 Corporate Banking & Financial Markets We Focus on ▮ Managing return on capital invested in each customer relationship ▮ Income ▮ Costs ▮ Risk ▮ New business opportunities ▮ People ▮ Team working
Slide 47: Summary
Slide 47 Corporate Banking & Financial Markets Summary ▮ Strong and consistent income growth ▮ Strong and consistent returns on capital ▮ Two distinct customer groups with similar returns – Mid-Corporate and Commercial – Global Banking and Markets
Slide 48: Agenda
Slide 48 Corporate Banking & Financial Markets Agenda 10.05 Introduction and Overview Johnny Cameron 10.45 Mid-Corporate and Commercial Alan Dickinson 11.20 Coffee Break 11.35 Global Banking and Markets Brian Crowe CBFM US Jay Levine 12.30 Conclusions Johnny Cameron Questions & Answers 13.00 Lunch
Slide 49: Mid-Corporate and Commercial
Mid-Corporate Mid-Corporate and Commercial Alan Dickinson Head of Corporate Banking
Slide 50: Mid-Corporate and Commercial
Slide 50 Mid-Corporate and Commercial 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 51: Mid-Corporate and Commercial Businesses
Slide 51 Mid-Corporate and Commercial Businesses ▮ Core Banking – Corporate Banking – Commercial Banking – Asset Finance – Invoice Finance ▮ Financial Markets
Slide 52: Core Banking: Corporate Banking
Slide 52 Core Banking Corporate Banking ▮ Leading market position with 32% market share ▮ 8,400 relationship customers – UK businesses with a turnover of £10 million up to £1 billion ▮ 268 relationship managers ▮ 67 business development managers ▮ 18 offices in major corporate centres ▮ Key products
Slide 53: Core Banking: Commercial Banking
Slide 53 Core Banking Commercial Banking ▮ Leading market position with 34% market share ▮ 78,000 relationship customers – UK businesses with a turnover of £1 million to £10 million ▮ 1,008 relationship managers ▮ 149 business development managers ▮ 152 offices spread across the UK ▮ Key products –
Slide 54: Core Banking: Asset Finance
Slide 54 Core Banking Asset Finance Lombard ▮ Leading market position with 27% market share ▮ Over 94,000 customers ▮ Over 300 field based specialist sales staff ▮ 42 offices in the UK ▮ Key products – Hire purchase – Contract hire – Operating and finance leasing – Fleet management
Slide 55: Core Banking: Invoice Finance
Slide 55 Core Banking Invoice Finance RBS Commercial Services ▮ Leading market position with 20% market share ▮ Over 6,600 customers ▮ Over 100 field based specialist sales staff ▮ 11 offices in the UK ▮ Key products – Invoice discounting – Factoring
Slide 56: Financial Markets
Slide 56 Financial Markets ▮ Six regional teams focused on needs of Corporate and Commercial customers ▮ Key products – Foreign exchange – Money markets – Interest rate hedging – Debt capital markets
Slide 57: Diversity of Income
Slide 57 Diversity of Income 1H05 Income £m Corporate Commercial Other Total Banking 463 498 36 997 Asset Finance 52 59 38 149 Invoice Finance 13 33 31 77 Financial Markets 64 20 n/a 84 Mid-Corporate 592 610 105 1,307 and Commercial
Slide 58: Income Growth
Slide 58 Income Growth Total Income £m Growth 7% pa Impact of 1,500 Competition Commission 1,000 500 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 59: Different Customer Needs
Slide 59 Different Customer Needs Mid-Corporate Global Banking and Commercial and Markets ▮ Relationship manager ▮ Relationship ▮ Full suite of products ▮ Product excellence ▮ Effective co-ordination of ▮ Access to markets product delivery ▮ Intellectual capital ▮ Responsive credit process ▮ Lack of
Slide 60: Relationship Manager
Slide 60 Relationship Manager ▮ Dedicated experienced Relationship Managers – Average of 20 years service (Commercial) – Average of 18 years service (Corporate) – Professional corporate banking qualification ▮ Segmentation – By geography – By sector, eg professionals, healthcare, leisure and media –
Slide 61: Full Suite of Products
Slide 61 Full Suite of Products ▮ #1 UK Payments ▮ #1 UK Card Transaction Processing ▮ #1 UK Deposits ▮ #1 UK Lending ▮ #1 UK Asset Finance ▮ #1 UK Invoice Finance ▮ #1 UK Foreign Exchange ▮ #1 Sterling Interest Rate Derivatives Source: BACS, APACS, BBA MBBG data, TNS, FDA, Risk Magazine, RBS estima
Slide 62: Effective Co-ordination of Delivery
Slide 62 Effective Co-ordination of Delivery RMs ‘Deliver the Bank’ ▮ Close links between relationship teams and core product areas ▮ Relationship staff incentivised on full product suite ▮ Locally based product sales teams ▮ Alignment with service teams ▮ Co-location
Slide 63: Effective Co-ordination of Delivery
Slide 63 Effective Co-ordination of Delivery Co-location ▮ Corporate ▮ Commercial ▮ Lombard ▮ RBSCS ▮ Financial Markets
Slide 64: Responsive Credit Process
Slide 64 Responsive Credit Process ▮ RM Platform – Credit decision support system – Building knowledge of customer business and needs – Fast decisions – Ease of use for RMs – Risk management and reporting
Slide 65: Quality of Service Support
Slide 65 Quality of Service Support ▮ Four UK based dedicated Corporate Service Centres ▮ Bespoke service for key sectors, eg professionals ▮ Service teams aligned with RM teams ▮ Single point of contact for the customer ▮ Proactive service support ▮ Image & Workflow and Query Management systems
Slide 66: Customer Satisfaction with Corporate Service Centre
Slide 66 Quality of Service Support Customer Satisfaction with Corporate Service Centre RBS 78 Barclays 76 Lloyds TSB 75 HSBC 68 Mean satisfaction score, 0 to 100 Source: DVL Smith – Commercial Competitor CSI Q1 2005
Slide 67: Different Customer Needs
Slide 67 Different Customer Needs Mid-Corporate and Commercial ▮ Relationship manager ▮ Full suite of products ▮ Effective co-ordination of product delivery ▮ Responsive credit process ▮ Quality of service support Source: Based on RBS’s analysis of external research from agencies including TNS, Gree
Slide 68: Market Share: England & Wales
Slide 68 Market Share % England & Wales 40 RBS 30 Barclays 20 HSBC Lloyds TSB 10 HBOS 0 2003 2004 Source: TNS, £1m – £100m excluding agriculture
Slide 69: Market Share: Scotland
Slide 69 Market Share % Scotland 40 RBS HBOS 30 20 Clydesdale 10 Lloyds TSB HSBC 0 Barclays 2003 2004 Source: TNS, £1m – £100m excluding agriculture
Slide 70: Share of Wallet
Slide 70 Share of Wallet Index 150 Specialist Products 125 Banking income 100 1H03 1H04 1H05 Income rebased to 2003 levels Specialist products includes: Asset Finance, Invoice Finance and Financial Markets
Slide 71: Mid-Corporate and Commercial Summary
Slide 71 Mid-Corporate and Commercial Summary ▮ Strength of franchise ▮ #1 in full suite of products ▮ Superior service model ▮ Continued growth
Slide 72: Agenda
Slide 72 Corporate Banking & Financial Markets Agenda 10.05 Introduction and Overview Johnny Cameron 10.45 Mid-Corporate and Commercial Alan Dickinson 11.20 Coffee Break 11.35 Global Banking and Markets Brian Crowe CBFM US Jay Levine 12.30 Conclusions Johnny Cameron Questions & Answers 13.00 Lunch
Slide 73: The Royal Bank of Scotland Group
a« RBS The Royal Bank of Scotland Group
Slide 74: Global Banking and Markets
Global Banking and Markets Brian Crowe Deputy Chief Executive, CBFM
Slide 75: Diversity of Income
Slide 75 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 76: Global Banking and Markets
Slide 76 Global Banking and Markets ▮ Large corporate and financial institutions including – Over 95% of the FTSE 100 – Over 80% of the Fortune 100 – Over 90% of the Dow Jones Eurostoxx 50 ▮ Offices in 20 countries – UK – US – Europe – Asia Pacific ▮ 7,300 people
Slide 77: Different Customer Needs
Slide 77 Different Customer Needs Mid-Corporate Global Banking and Commercial and Markets ▮ Relationship manager ▮ Relationship ▮ Full suite of products ▮ Product excellence ▮ Effective co-ordination of ▮ Access to markets product delivery ▮ Intellectual capital ▮ Responsive credit process ▮ Lack of
Slide 78: Relationship Management
Slide 78 Relationship Management ▮ Built on traditional bank model ▮ Relationship manager at heart of customer interface – Has industry sector expertise – Works with product specialists – Manages multiple points of contact ▮ No M&A or equities
Slide 79: Income Growth
Slide 79 Income Growth Total Income £bn Growth 17% pa 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 80: Stable Cost:Income Ratio
Slide 80 Stable Cost:Income Ratio Direct Expenses/Total Income % 50 40 30 20 10 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 81: Diversity of Income
Slide 81 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 82: Core Banking Products
Slide 82 Core Banking Products 1H05 Income 1H05 Income £m % CBFM Lending 400 10% Deposits 74 2% Payments 52 1% Total 526 13%
Slide 83: Core Banking Product Excellence
Slide 83 Core Banking Product Excellence ▮ UK lending #1 ▮ UK deposits #1 ▮ UK payments #1 Source: BBA MBBG data, Thomson Financial, BACS, APACS
Slide 84: Diversity of Income
Slide 84 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 85: Structured Finance Products
Slide 85 Structured Finance Products 1H05 Income 1H05 Income £m % CBFM Acquisition finance 239 6% Property finance 141 4% Project & infrastructure finance 101 2% Asset finance 195 5% (trains, ships, aircraft) Other 50 1% Total 726 18%
Slide 86: Structured Finance Centre of Excellence
Slide 86 Structured Finance Centre of Excellence ▮ Complex credit experience ▮ Specialist sector knowledge ▮ Asset valuation skills ▮ Execution disciplines ▮ Global competence required ▮ Strong distribution capability (limited holds)
Slide 87: Structured Finance Distribution Excellence 1H05
Slide 87 Structured Finance Distribution Excellence 1H05 Structured Finance No of US$bn Share European Bookrunners Issues 1. RBS 51 26.6 13.6% 2. BNP 31 14.6 7.4% 3. Barclays 34 14.4 7.3% 4. JPMorgan Chase 15 13.3 6.8% 5. Citigroup 20 10.7 5.5% 6. Deutsche 10 9.8 5.0% 7. Morgan Stanley 5 9.0 4.6% 8.
Slide 88: Structured Finance Product Excellence
Slide 88 Structured Finance Product Excellence ▮ #1 Leveraged finance house in Europe ▮ #1 Project finance bank globally ▮ #1 Train operating lessor in Europe ▮ #3 Commercial aircraft financier globally Source: Thomson Financial, RBS estimates
Slide 89: Diversity of Income
Slide 89 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 90: Financial Markets Products
Slide 90 Financial Markets Products 1H05 Income 1H05 Income £m % CBFM Currencies 237 6% Interest rates 399 10% Debt capital markets 691 18% Other 41 1% Total 1,368 35%
Slide 91: Financial Markets Product Excellence
Slide 91 Financial Markets Product Excellence ▮ Product excellence in Financial Markets requires – Scale in ‘flow’ products – Sophistication in ‘value’ products
Slide 92: Financial Markets Product Excellence
Slide 92 Financial Markets Product Excellence Scale Created by Investment in ▮ Sales coverage of high volume/high value customers ▮ Electronic dealing capabilities in high volume/low value products ▮ Additional high volume markets (eg European Governments) Sophistication Created by Investment in ▮ H
Slide 93: Currencies Products
Slide 93 Currencies Products Flow Products ▮ Spot FX Value Products ▮ Vanilla FX options ▮ Exotic FX options
Slide 94: Currencies Product Excellence
Slide 94 Currencies Product Excellence Ranking 2001 1H05 Flow Products Total spot FX globally #11 #6 Value Products Vanilla FX options #5 #5 Exotic FX options #5 #1 Source: Risk Magazine, FX Week, RBS estimates
Slide 95: Currencies Product Excellence
Slide 95 Currencies Product Excellence Vanilla FX Options Exotic FX Options 2005 2005 1. UBS 13.2% 1. RBS 15.3% 2. JPMorgan Chase 9.3% 2. JPMorgan Chase 11.7% 3. Citigroup 7.2% 3. Goldman Sachs 10.6% 4. Deutsche Bank 6.9% 4. Merrill Lynch 8.4% 5. RBS 5.1% 5. UBS 7.3% Source: Risk Magazine
Slide 96: Interest Rates Products
Slide 96 Interest Rates Products Flow Products ▮ Money markets ▮ Government bonds ▮ Interest rate swaps Value Products ▮ Interest rate options ▮ Inflation products All currencies
Slide 97: Interest Rates Product Excellence
Slide 97 Interest Rates Product Excellence 2001 1H05 Market Ranking Market Ranking Share Share Flow Products UK Gilts 6.7% #5 11.9% #2 US Treasuries 4.6% #8 6.8% #5 Interest rate swaps 5.9% #7 7.5% #5 Value Products Interest rate options n/a #9 n/a #7 Inflation products n/a #5= n/a #3 Source: UK Deb
Slide 98: Debt Capital Markets Products
Slide 98 Debt Capital Markets Products Flow/Value Products ▮ Syndicated loans ▮ Corporate bonds Value Products ▮ Securitisation (asset-backed securities) ▮ Credit derivatives ▮ Collateralised Debt Obligations (CDOs)
Slide 99: Debt Capital Markets Product Excellence
Slide 99 Debt Capital Markets Product Excellence All Debt (Loans and Bonds) Market Share 1H01 2001 2002 2003 2004 1H05 Sterling 10.3% 10.1% 13.5% 15.9% 15.4% 16.3% US$ 1.0% 1.0% 1.9% 1.9% 2.2% 3.1% Euros 0.4% 0.5% 0.7% 1.8% 2.8% 3.8% All currencies 1.3% 1.2% 2.0% 2.3% 2.8% 3.6% Source: Bondware/Deal
Slide 100: Debt Capital Markets Product Excellence 1H01
Slide 100 Debt Capital Markets Product Excellence 1H01 All Debt/All Currencies Rank US$bn % JPMorgan Chase 1 737 21.6% Citigroup 2 423 12.4% Bank of America 3 322 9.5% Credit Suisse First Boston 4 180 5.3% Merrill Lynch 5 170 5.0% Deutsche Bank 6 161 4.7% Morgan Stanley 7 134 3.9% Lehman Brothers 8
Slide 101: Debt Capital Markets Product Excellence 1H05
Slide 101 Debt Capital Markets Product Excellence 1H05 All Debt/All Currencies Rank US$bn % JPMorgan Chase 1 673 13.6% Citigroup 2 504 10.2% Bank of America 3 423 8.5% Deutsche Bank 4 290 5.9% Lehman Brothers 5 216 4.4% Barclays 6 189 3.8% UBS 7 181 3.7% RBS 8 179 3.6% Morgan Stanley 9 172 3.5% Gold
Slide 102: Securitisation Product Excellence 1H05
Slide 102 Securitisation Product Excellence 1H05 Ranking Bookrunner Amount No of Market US$m Issues Share 1. Lehman Brothers 88,621 140 9.9% 2. Bear Stearns 65,042 118 7.2% 3. RBS 63,533 99 7.1% 4. CSFB 62,192 120 6.9% 5. Citigroup 62,159 129 6.9% Source: IFR, Thompson Financial Global securitisatio
Slide 103: Diversity of Income
Slide 103 Diversity of Income 1H05 Income £m Mid-Corporate Global Banking Total and Commercial and Markets CBFM Core Banking 1,223 526 1,749 Structured Finance – 726 726 Financial Markets 84 1,368 1,452 Total CBFM 1,307 2,620 3,927
Slide 104: Diversity of Income
Slide 104 Diversity of Income 1H05 Income £m Global Banking and Markets UK US Europe Asia- Total Pacific Core Banking 439 26 55 6 526 Structured Finance 525 63 127 11 726 Financial Markets 582 606 119 61 1,368 Total CBFM 1,546 695 301 78 2,620
Slide 105: UK Income Growth
Slide 105 UK Income Growth Total Income £m Growth 12% pa 2,000 1,500 1,000 500 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 106: UK Outlook
Slide 106 UK Outlook ▮ Coverage and product capability very strong, with further opportunities to deepen customer penetration ▮ London is major centre for financial activities, so growth not limited to UK economy ▮ Global Banking and Markets financials include some London-based global businesses
Slide 107: Diversity of Income
Slide 107 Diversity of Income 1H05 Income £m Global Banking and Markets UK US Europe Asia- Total Pacific Core Banking 439 26 55 6 526 Structured Finance 525 63 127 11 726 Financial Markets 582 606 119 61 1,368 Total CBFM 1,546 695 301 78 2,620
Slide 108: US: Jay Levine
US Jay Levine Head of CBFM North America
Slide 109: Diversity of Income
Slide 109 Diversity of Income 1H05 Income £m Global Banking and Markets UK US Europe Asia- Total Pacific Core Banking 439 26 55 6 526 Structured Finance 525 63 127 11 726 Financial Markets 582 606 119 61 1,368 Total CBFM 1,546 695 301 78 2,620
Slide 110: US Financial Markets
Slide 110 US Financial Markets 1H05 Income 1H05 Income £m % CBFM Currencies 19 0% Interest rates 152 4% Debt capital markets 435 11% Total 606 15%
Slide 111: US Income Growth
Slide 111 US Income Growth Total Income $m Growth 28% pa 1,500 1,000 500 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 112: US RBS Greenwich Capital
Slide 112 US RBS Greenwich Capital 1981 – 2000 ▮ Greenwich Capital founded in 1981 ▮ Designated a primary dealer in US Treasuries ▮ Established asset-backed origination, sales & trading 2000 – 2003 ▮ Acquired by RBS as part of NatWest ▮ Expanded real estate securitisation business ▮ Launched CDO bus
Slide 113: US RBS Greenwich Capital
Slide 113 US RBS Greenwich Capital US Treasury Sales Asset-Backed Sales Ranking Ranking 2004 Firm 2004 Firm 1 RBS Greenwich Capital 1 RBS Greenwich Capital 2 JPMorgan Chase 2 Lehman Brothers 3 Bear Stearns 3 Citigroup 3 Lehman Brothers 4 Bear Stearns 3 Morgan Stanley 5 Credit Suisse First Boston 3 U
Slide 114: US Developments During 2004
Slide 114 US Developments During 2004 ▮ Combined NY branch and RBS Greenwich Capital – Created one business – Appointed single management team ▮ Co-located Financial Markets activities in Greenwich ▮ Expanded corporate and financial institutions relationship teams ▮ Launched corporate bond business,
Slide 115: US Early Results 1H05
Slide 115 US Early Results 1H05 ▮ Added 185 new corporate relationships ▮ Improved from 27th to 11th in corporate loan syndications ▮ Increased volumes in interest rate derivatives by 102% ▮ Lead-managed corporate bonds issues: Source: Loan Pricing Corporation
Slide 116: US Outlook
Slide 116 US Outlook Deliver the Benefits of ▮ Strong reputation with financial institutions ▮ Broader corporate customer base ▮ Full service proposition ▮ Accessing international markets for US investors ▮ Accessing US markets for non-US borrowers
Slide 117: US CBFM + Citizens
Slide 117 US CBFM + Citizens US Banks 2004 Ranked by Assets 1. Citigroup 2. JPMorgan Chase 3. Bank of America 4. Wachovia 5. Wells Fargo 6. RBS 7. US Bancorp 8. SunTrust 9. HSBC US 10 National City Source: SNL 31 December 2004
Slide 118: Benefits of Partnership with Citizens
Slide 118 US CBFM + Citizens Benefits of Partnership with Citizens ▮ Gives CBFM access to Citizens customers – Distribution – Origination ▮ Gives Citizens access to CBFM customers ▮ Enables Citizens to use CBFM products to upscale relationships and expand in mid-corporate market ▮ Citizens and CBFM
Slide 119: Diversity of Income
Slide 119 Diversity of Income 1H05 Income £m Global Banking and Markets UK US Europe Asia- Total Pacific Core Banking 439 26 55 6 526 Structured Finance 525 63 127 11 726 Financial Markets 582 606 119 61 1,368 Total CBFM 1,546 695 301 78 2,620
Slide 120: Europe Income Growth
Slide 120 Europe Income Growth Total Income €m Growth 41% pa 500 400 300 200 100 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 121: Europe
Slide 121 Europe 2000 Acquisition and Property Finance in France and Germany 2001 Commenced investment by appointing local country heads in France, Germany, Italy and Spain 2002 Recruited corporate relationship managers and FM teams Established relevant Structured Finance businesses 2003 Acquired No
Slide 122: Europe
Slide 122 Europe ▮ Controlled sequential build-out of European franchise ▮ Timing of initial investment was good ▮ Applied proven relationship management model ▮ Local customer relationships established by local staff ▮ Structured Finance success built off London platform
Slide 123: Europe Rankings 1H05
Slide 123 Europe Rankings 1H05 ▮ #4 syndicated loan bookrunner, France ▮ #3 bond bookrunner for financial institutions, Italy ▮ #1 mandated lead arranger for syndicated loans, Spain Source: IFR, Dealogic Bondware, Thomson Financial
Slide 124: Europe transactions
Germany July 2005 EADS European Aeronaulic Defence & Space Company NV EUR 3,000,000,000 Syndicated Revolving Credit Facilities Mandated Lead Arranger & Bookrunner Germany May 2005 viterra Acquisition Financing Senior & Subordinated Facilities Underwriter & Mandated Lead Arranger Germany September 20
Slide 125: Acquisition of Allied Domecq by Pernod Ricard
Slide 125 Europe ▮ Acquisition of Allied Domecq by Pernod Ricard ▮ RBS joint bookrunner ▮ The largest corporate acquisition financing in France this year
Slide 126: Europe Outlook
Slide 126 Europe Outlook Leverage Platform ▮ Leverage relationships and reputation already established ▮ Extend financial institution franchise ▮ Continue to expand Structured Finance and Financial Markets footprint ▮ Maintain momentum of organic growth
Slide 127: Diversity of Income
Slide 127 Diversity of Income 1H05 Income £m Global Banking and Markets UK US Europe Asia- Total Pacific Core Banking 439 26 55 6 526 Structured Finance 525 63 127 11 726 Financial Markets 582 606 119 61 1,368 Total CBFM 1,546 695 301 78 2,620
Slide 128: Asia-Pacific Income Growth
Slide 128 Asia-Pacific Income Growth Total Income $m Growth 33% pa 150 100 50 0 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 IFRS
Slide 129: Asia-Pacific Overview
Slide 129 Asia-Pacific Overview ▮ Asia – principally Financial Markets business with financial institutions ▮ Australia – CBFM business similar to Europe ▮ Branches in Japan, Hong Kong, China, Singapore and Australia ▮ 500 people ▮ Future opportunity
Slide 130: Global Banking and Markets Summary
Slide 130 Global Banking and Markets Summary ▮ Strong income growth ▮ Stable cost:income ratio ▮ Product excellence across Core Banking, Structured Finance and Financial Markets ▮ Leading position in UK ▮ Established in US ▮ Established in Europe ▮ Many opportunities for growth
Slide 131: Conclusions
Conclusions Johnny Cameron Chief Executive, CBFM
Slide 132: Progress
Slide 132 Corporate Banking & Financial Markets Progress ▮ We have managed transition to a distribution-led international business ▮ We are now a top 10 player globally in our chosen markets ▮ CBFM income is increasingly diversified – By business – By geography – By customer
Slide 133: Business Model
Slide 133 Corporate Banking & Financial Markets Business Model ▮ Relationship business model and employee culture are integral to CBFM’s success ▮ CBFM values – Entrepreneurial – Performance-driven – Team-oriented – Customer-focussed ▮ Model has strong appeal for customers ▮ Good staff satisfaction,
Slide 134: Platform for Growth
Slide 134 Corporate Banking & Financial Markets Platform for Growth ▮ UK – More to come from leading franchise and renewed service model ▮ US – Unique platform for growth from the combination of RBS Greenwich Capital, RBS and Citizens ▮ Europe – Leverage relationships and reputation now established
Slide 135: A Good Business
Slide 135 Corporate Banking & Financial Markets A Good Business ▮ Maintained relationship-led culture ▮ Low cost:income ratio enhances good returns on capital from both customer groups ▮ Well-managed investment has led to good growth with stable cost:income ratio ▮ Excellent business with good momen
Slide 136: The Royal Bank of Scotland Group
a« RBS The Royal Bank of Scotland Group
Slide 137: Notes
Slide 137 Notes ▮ Financials from 2001 to 2004 are stated on a UK GAAP basis, except where 1H04 comparisons are given on an IFRS basis ▮ Financials for 1H05 are stated on an IFRS basis ▮ Income is stated net of operating lease depreciation. Costs exclude operating lease depreciation ▮ The Corporate
The Royal Bank of Scotland Group — CBFM Conference 2005 on 6ix