Slide 1: FY 2018 Results
FY 2018 Results 15th February 2019
Slide 2: Howard Davies, Chairman
3x RBS Howard Davies Chairman \ Wa !
Slide 3: Ross McEwan, Chief Executive Officer
Ross McEwan Chief Executive Officer
Slide 4: Key messages
Key messages Good financial performance in an uncertain and highly competitive environment Resuming capital distributions – proposal to pay a 3.5p Final Year and 7.5p Special Dividend Supporting customers through Brexit uncertainty Investing in innovation to deliver a better service for customers Fu
Slide 5: Group financial performance
Group financial performance Costs down Consistent profitability Strong capital delivering returns £3.4bn 4.8% FY’18 Operating profit RoTE FY’18 before tax up from 2.2% in FY’17 £278m up 50% on FY 2017 cost reduction in FY’18(1) down 3.6%, on FY’17 £1.6bn 10.9%(2) FY’18 Attributable profit RoTE FY’18
Slide 6: Supporting customers through targeted lending growth
Supporting customers through targeted lending growth Gross Loans - Mortgages UK PBB (£bn) +1.1% Stable average stock LTV 56% in UK PBB 136.8 138.3 Credit Card exposure remains low at 2% of UK PBB Gross Lending FY’17 FY’18 Net Loans - Mortgages Ulster ROI (€bn) Ulster RoI NPL Portfolio reduced
Slide 7: Supporting customers through targeted lending growth
Supporting customers through targeted lending growth Net Loans - Commercial Banking (£bn) Underlying growth 6.7 3.5 Growing lending with a lower RWA intensity 1.0 90.2 Gross ups(2) 88.0 Active capital management has removed lending which flares under stress FY’17(1) Active capital management FY’
Slide 8: Generating returns for shareholders, from a strong capital position
Generating returns for shareholders, from a strong capital position Interim Final Special dividend dividend dividend £1.6bn 2p 3.5p 7.5p Total to be paid to shareholders Approval from shareholders to have the option to buyback up to 4.99% of the bank’s issued share capital from the UK Government
Slide 9: Customers continue to shift to digital channels
Customers continue to shift to digital channels Payments through mobile (m) Conversations with Cora +43% 5 Cora integrated with 4 NatWest Mobile App 191 Million 3 134 2 1 0 FY’17 FY’18 Q1’18 Q2’18 Q3’18 Q4’18 Tealand Direct Channels (1) (£bn) CurrencyPay Payments via Bankline Award winning NatWest
Slide 10: Transforming the core to drive improved customer advocacy
Transforming the core to drive improved customer advocacy… Paperless Mortgage Account Opening 215k applications >50% commercial Simplify in FY’18 customer accounts opened within 5 days A.I Bankline Mobile Lower cost and better customer Automate 83k customer Bankline now in a experience conversations
Slide 11: Innovating outside the core to meet rising customer expectations
Innovating outside the core to meet rising customer expectations… Free Agent Digital Lending Platform Broader range of Stronger net Strong customer services promoters(1) advocacy Home Agent Qudini Integrated More proactive into Home buying Serving customers in customer services customers ecosystem l
Slide 12: Blueprint for success
Blueprint for success No.1 for customer service, trust Our Ambition and advocacy Our Purpose Serve customers well Serving customers Working together Doing the right thing Thinking Our Values long term *RBS foyttonk XERBS x & RR crsctane a BARBS (Zad/s\s» *4UIster Bank Our Brands Strength Customer |
Slide 13: Investment case
Investment case(1) • A leading UK Retail and Commercial 2 Bank with strong non-ring-fenced banks Balanced, stable and in NatWest Markets and RBS improving income generation International. • Strong brands and market positions 1 3 Resilient Balance Sheet Customer led, Improving • Growing in attractive
Slide 14: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer
Slide 15: FY 2018 update on progress
FY 2018 update on progress Income remained stable (ex notable items, Natwest Resilient income Markets and central items) × Core NWM franchise income down 24% YoY(1) Continuing cost reduction Reduced costs by £278m(2) in 2018, with increased investment spend Actively managing capital RWA reduct
Slide 16: Summary financials
Summary financials vs. FY 2017 £13.4bn Income 2% (126) 13,402 288 Operating £9.6bn 13,133 53 54 expenses (7)% Income (£m)(1) £3.4bn Operating profit 50% FY’17 PBB & RBSI NatWest Centre FY’18 Attributable £1.6bn CPB Markets profit 116% 204 204 Net interest 1.98% 201 margin (FY) (15bps) NIM (bps) 195
Slide 17: Income
Income Resilient income(1) across PBB, CPB and RBSI £m Q3’18 Q4’18 £m % UK PBB 1,564 1,557 (7) (0%) Ulster 151 147 (4) (3%) Future considerations Commercial 787 805 18 2% • Structural Hedge Private 195 198 3 2% • Lending growth in PBB, CPB & RBSI RBSI 157 155 (2) (1%) • W&G EC remedy • Economic unce
Slide 18: Net Interest Margin Q4 2018 vs. Q3 2018
Net Interest Margin Q4 2018 vs. Q3 2018 NIM (bps) (2) 197 4 Future (2) 195 o/w MREL 195 Considerations 193 2 costs (1bp) • Rate sensitivity • Reduction in liquidity • Asset and liability pressures • Economic uncertainty Q3’18 One-offs Q3’18 Liquidity Competitive Q4’18 One-offs Q4’18 underlying manag
Slide 19: Cost reduction
Cost reduction Restructuring excl. W&G Operating costs (£m) Strategic costs (£m) State Aid obligation(1) Strategic costs NWM strategic costs 16,194 2,106 Conduct & Litigation 1,565 Ring Fencing implementation 2,106 Other Expenses Property Portfolio reduction 221 VAT Recovery 5,868 10,401 9,645 1,565
Slide 20: Active capital management
Active capital management Continued planned RWA reductions RWAs (£bn) 200.9 1.0 190.0 (13.2) 1.3 188.7 185-190 FY’17 Pensions Active capital FY’18 IFRS 16 Day 1st January FY’19 Target management 1 impact 2019 proforma 20
Slide 21: Capital generation
Capital generation Strong capital build CET1 (%) Interim: 2p (0.8%) Final: 3.5p 2.4% (0.5%) 17.0% Special: 7.5p (0.2%) 16.2% (0.8%) 16.2% (0.2%) 16.0% FY’17(1) Profit Pensions DOJ Other FY’18 pre 2018 dividend FY’18 post 1 Jan 19 IFRS FY’18 post and RWA Movements dividend dividend 16 impact dividend
Slide 22: Outlook
Outlook(1) Reduce other expenses by c.£300m Strategic costs ~£1.5bn 2019 Targets RWAs £185-190bn range Cost:income ratio <50% Risks to the downside reflect the ongoing economic and political uncertainty and additional costs associated with ring-fencing and Brexit Expected RWA inflation:
Slide 23: Summary
Summary Good results set against a highly competitive environment Bottom-line profit more than doubled vs. FY’17 Continuing cost reduction Very strong capital generation Substantial clean-up of our balance sheet complete Resumed returning capital to shareholders 23
Slide 24: Q&A
3x RBS Q&A
Slide 25: Appendix
3x RBS Appendix
Slide 26: Digital dashboard
Digital dashboard Percentage Volume of transactions (m) FY'17 FY'18 change Physical is reducing Branch Transactions1 165 132 20% Cheque Usage 258 211 18% Contact centre calls 22 20 11% Digital is increasing Mobile: Payments 134 191 43% Users 5.5 6.4 16% App log ins 1,968 2,302 17% Digital sales in U
Slide 27: Net Promoter Scores across our brands
Net Promoter Scores across our brands Personal Banking(1) Business Banking(2) Commercial Banking(3) NatWest remains stable. Branch closures Operating model changes impacting NatWest ahead of the rest of the market impacting Royal Bank of Scotland. customer advocacy 30 25 26 25 25 27 27 25 23 21 22 2
Slide 28: Q4 2018 results by business
Q4 2018 results by business Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PBB items & Total RBS RoI Banking Banking International Markets other(1) Income 1.6 0.1 0.8 0.2 0.2 0.2 0.0 3.1 Operating expenses (0.9) (0.2) (0.6) (0.1) (0.1) (0.5) (0.1) (2.5) Impairment (losses) / releases (0
Slide 29: FY 2018 results by business
FY 2018 results by business Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PBB items & Total RBS RoI Banking Banking International Markets other(1) Income 6.3 0.6 3.4 0.8 0.6 1.4 0.3 13.4 Operating expenses (3.5) (0.6) (1.9) (0.5) (0.3) (1.6) (1.4) (9.6) Impairment (losses) / releases (
Slide 30: Notable items: Income
Notable items: Income (£m) FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Total Income 13,402 3,058 3,642 3,400 3,302 13,133 3,057 3,157 3,707 3,212 IFRS volatility in Central items (59) (25) 77 17 (128) 2 (173) 21 172 (18) Insurance Indemnity 357 85 272 - - - - - -
Slide 31: Notable items: Expenses
Notable items: Expenses (£m) FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 FY 2017 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Total Expenses (9,645) (2,469) (2,441) (2,724) (2,011) (10,401) (3,406) (2,143) (2,399) (2,453) VAT recovery in Centre - - - - - 86 6 29 - 51 Bank Levy (179) (179) - - - (215) (215) - - - o/w
Slide 32: Diluted Tangible Net Asset Value (TNAV) movements
Diluted Tangible Net Asset Value (TNAV) movements Shares in TNAV per Diluted shares Diluted TNAV per Amount (£m) Amount (£m) issue (m) share (p) in issue (m) share (p) FY 2017 TNAV 35,164 11,965 294 35,164 12,031 292 IFRS9 day 1 adj (71) (1) (71) (1) Profit for the period post tax 2,084 17 2,084 17
Slide 33: Diluted Tangible Net Asset Value (TNAV) movements
Diluted Tangible Net Asset Value (TNAV) movements Shares in TNAV per Diluted shares Diluted TNAV Amount (£m) Amount (£m) issue (m) share (p) in issue (m) per share (p) Q3 2018 TNAV 34,672 12,048 288 34,672 12,091 287 Profit for the period post tax 436 4 436 4 Less: profit to NCI / other owners (150)
Slide 34: Income Q4 2018 vs Q3 2018
Income Q4 2018 vs Q3 2018 Income(1) (£m) 3,642 359 3,058 416 (1%) 185 36 (28) (2) 3,283 2,867 2,837 3,022 Q3’18 Total Income Q3’18 NWM & Q3’18 PBB, CPB PBB & CPB RBSI Q4’18 PBB, CPB Q4’18 NWM & Q4’18 Total Income Centre Income & RBSI Income & RBSI Income Centre Income 431 ex one-offs ex one-offs ex
Slide 35: Income FY 2018 vs FY 2017
Income FY 2018 vs FY 2017 Income(1) (£m) 13,133 13,402 (0%) (431) 2,154 488 (59) 54 1,509 13,564 11,410 11,405 12,914 FY’17 Total FY’17 NWM & FY’17 PBB, CPB PBB & CPB(2) RBSI FY’18 PBB, CPB FY’18 NWM & FY’18 Total Income Centre Income & RBSI Income & RBSI Income Centre Income Income ex one-offs(2) e
Slide 36: Income Q4 2018 vs Q4 2017
Income Q4 2018 vs Q4 2017 Income(1) (£m) 3,057 (181) 3,058 (0%) 36 401 185 (21) 21 3,238 3,022 2,837 2,837 Q4’17 Total Q4’17 NWM & Q4’17 PBB, CPB PBB & CPB RBSI Q4’18 PBB, CPB Q4’18 NWM & Q4’18 Total Income Centre Income & RBSI Income & RBSI Income Centre Income Income 431 ex one-offs ex one-offs ex
Slide 37: Net Interest Margin FY 2018 vs. FY 2017
Net Interest Margin FY 2018 vs. FY 2017 NIM (bps) 213 (2) 211 (8) Future (3) Considerations (2) 198 198 0 • Rate sensitivity • Reduction in liquidity • Asset and liability pressures • Economic uncertainty FY’17 One-offs FY’17 Liquidity Competitive Mix FY’18 One-offs FY’18 underlyingmanagement pressu
Slide 38: Net interest income and cash flow hedging reserve sensitivity
Net interest income and cash flow hedging reserve sensitivity(1) Structural and product hedge Change in NII – 25bps upward shift in yield curves 2018 2018 (£m) Year 1 Year 2(2) Year 3(2) Incremental Average notional Overall yield income (£m) (£bn) (%) Structural hedges 32 98 170 Equity structural 46
Slide 39: Cost savings
Cost savings Costs (£m) (4%) 7,637 7,551 86 278 7,359 FY’17 Other expenses VAT release FY’17 FY’17 FY’18 FY’18 Other expenses Other expenses Cost savings ex. VAT 39
Slide 40: Litigation and conduct
Litigation and conduct FY 2018 provisions (£m) Payment Protection Insurance 783 695 • RBS has made provisions totalling £5.3bn to date for PPI claims. 536 £4.6bn had been utilised by 31st December 2018 of which £108m in Q4 2018 • £695m balance sheet provisions remaining Litigation and PPI Other Cust
Slide 41: Impairments
Impairments Q3 2018 Impairment charge Q4 2018 Impairment charge £240m £101m £117m 31bps £60m £79m £100m 15bps 10bps £17m 2bps Q3’18 Headline MES(1) Ulster NPL Sale Q3’18 Q4’18 Headline Q4’18 NWM Q4’18 Impairment Impairments Impairment Impairments net impairment charge ex NWM charge ex releases relea
Slide 42: Sustainable Banking
Sustainable Banking For Climate Related Financial Disclosures please refer to our Annual Report available at www.rbs.com
Slide 43: Sustainability Governance
Sustainability Governance “Sustainability goes hand in hand with building trust. If we act irresponsibly, we will lose trust. That applies not just to how we treat our customers, but also the wider role we play in society.” Ross McEwan, Chief Executive “We’re committed to running the bank as a susta
Slide 44: Performance in key ESG benchmarks
Performance in key ESG benchmarks Benchmark 2016 2017 2018 Additional context: CDP (Climate Change) • We are the only UK Bank to be included in the DJSI World and RBS A- A- A- Europe Indices, and one of only Industry average C C B- 10 in Europe and 27 globally DJSI (Dow Jones Sustainability Index) •
Slide 45: 2018 Overview
2018 Overview Customer Focused Responsible Business Working at RBS Supporting financial education Climate risk management and disclosures Employee engagement MoneySense has been running for over 24 years, We enhanced our environmental, social and ethical Our employee engagement score was 86%, the du
Slide 46: Cautionary & Forward Looking Statements
Cautionary & Forward Looking Statements The targets, expectations and trends discussed in this presentation represent RBSG, and where applicable NWM management’s, current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” section on pages 255