Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Debt Investor Presentation (August 2016)
28 slides from Natwest's debt investor presentation, Aug 5, 2016
Slide 1: Fixed Income Investor Presentation H1 2016 Results
Fixed Income Investor Presentation H1 2016 Results 5 August 2016
Slide 2: Ewen Stevenson, Chief Financial Officer
Ewen Stevenson Chief Financial Officer
Slide 3: Key Messages
Key Messages We maintain strong positions in our target markets, supported by product and service improvements The fundamentals of our Plan remain unchanged. However, we are now operating in a more uncertain environment Progress against our Plan has made us more resilient to deal with this uncertain
Slide 4: Q2 2016 results by franchise
Q2 2016 results by franchise Core Franchises Total Other Total RBS Central Ulster Commercial Private RBS Total Core Capital Total (£bn) UK PBB CIB W&G items & Bank RoI Banking Banking International Franchises Resolution Other other(1) Adj. Income(2) 1.3 0.1 0.8 0.2 0.1 0.4 3.0* (0.4) 0.2 (0.1) (0.3)
Slide 5: Lowered costs by >£2.5bn over the last 2.5 years
Lowered costs by >£2.5bn over the last 2.5 years Reduction in Adjusted Operating Costs from 2013 - H1 2016 (£bn) Other reduction Target to reduce adjusted operating costs by 11.9 £800m in 2016; £404m achieved in H1 2016 (0.4)(1) (1.1) 10.4 (1.0)(2) Organic 9.4 (0.8)(3) reduction 0.4 8.6 W&G 1.5 Capi
Slide 6: Reduction of legacy businesses & portfolios
Reduction of legacy businesses & portfolios Legacy business & portfolios (RWAs) (£bn) Citizens (69%) W&G 176 IPB Capital Resolution 68 Residual central items and other 10 2 65 4 (15%) 55 95 1 10 10 10 48 42 ~30-35 0 2 3 FY 2014 Q1 2016 Q2 2016 FY 2016 (1) Capital Resolution expected to reduce RWAs t
Slide 7: Spotlight on credit
Spotlight on credit Customer loans & advances Gross L&As by sector Gross L&As by business at end Q2 2016 at end Q2 2016 (£bn) (£bn) 333.0 333.0 UK PBB Personal Mortgages Ulster Personal Unsecured UK 131.2 Personal Commercial Banking 127.5 Commercial Mortgages Private Real Estate £147.1 RBS Internati
Slide 8: Spotlight on Credit
Spotlight on Credit Risk Elements in Lending REILs Key portfolios REILs As at end Q2 2016 As at end Q2 2016 (£bn) (£bn) (as % of Total Gross L&As) (as % of Total Gross L&As within the business key portfolio) (70%) 39.4 (9.4%) UK PBB Capital 2.3 Ulster 1.8% Commercial Resolution 20.3 4.3 20.1% Ex Cap
Slide 9: Post EU Referendum financial implications
Post EU Referendum financial implications NIM / impact of low interest rates Volumes Impairment cycle / IFRS 9 Legacy assets rundown and defined benefit pension plan 9
Slide 10: Summary
Summary Strong and growing core bank – delivered again in Q2 Legacy continues to be cleaned up and reduced EU Referendum outcome creates new uncertainty Positioned to deal with potential challenges ahead 10
Slide 11: John Cummins, Treasurer
xx RBS John Cummins Treasurer
Slide 12: H1 2016 Results – Treasurer’s view
H1 2016 Results – Treasurer’s view Strong funding and liquidity metrics maintained 14.5% CET1 ratio, versus 13% target Active management toward end-state MREL compliance £2.2bn Senior HoldCo issued YTD, versus £3-5bn 2016 target Continue to target up to £2bn AT1 issuance in 2016, subject to market c
Slide 13: Funding & liquidity
Funding & liquidity H1 2016 FY 2015 Loan : deposit ratio 92% 89% Short-term wholesale funding £15bn £17bn Liquidity portfolio £153bn £156bn Liquidity coverage ratio 116% 136% Net stable funding ratio 119% 121% Stressed outflow coverage 213% 227% Balance sheet position means no current requirement fo
Slide 14: Capital ratios maintained above target
Capital ratios maintained above target CRR end-point Common Equity CRR end-point Tier 1 Leverage Tier 1 (CET1) ratio, % ratio, % 15.5 5.6 14.5 5.2 13.0 11.2 4.2 3.4 8.6 (1) FY 2013 FY 2014 FY 2015 H1 2016 Target FY 2013 FY 2014 FY 2015 H1 2016 14 (1) During period of restructuring
Slide 15: Current assessment of appropriate buffers
Current assessment of appropriate buffers Target CET1 ratio versus maximum distributable amount (“MDA”), % (4) Illustration, based on assumption of static regulatory requirements 14.5 Illustrative 13.0 headroom(1) Illustrative 10.8 2.2 (1) 6.2 headroom 1.0 8.3 (2) 2.5 0.4 0.6 (3) (4) 2.8 2.8 10.8 8.
Slide 16: Continue to reduce outstanding wholesale funding
Continue to reduce outstanding wholesale funding FY 2014 - H1 2016 reduction in outstanding wholesale funding, £bn 83.5 2.9 12.0 19.3 55.1 FY 2014 Issuance Calls / Buybacks Maturity H1 2016 Total wholesale funding funding reduced by £28.4bn since FY 2014 to £55.1bn Continue to expect maturities to b
Slide 17: Progression toward HoldCo primary issuing entity
Progression toward HoldCo primary issuing entity Target organisational structure(1) moving toward HoldCo as primary issuing entity RBS Group plc Single Point of Entry for UK resolution compliance drives future Loss-Absorbing Capital (“LAC”) issuance from Holding Company HoldCo Proportional Intercomp
Slide 18: Estimated Loss Absorbing Capital (“LAC”) positon
(1) Estimated Loss Absorbing Capital (“LAC”) positon (4) H1 2016, £bn LAC value (1) Regulatory Value (2,3) Par Value (5) Common Equity Tier 1 Capital 35.7 35.7 35.7 Tier 1 Capital: End point CRR compliant AT1 2.0 2.0 2.0 o/w RBS Group Plc (HoldCo) 2.0 2.0 2.0 o/w RBS Operating Subsidiaries (OpCo's)
Slide 19: Sizing future capital / funding requirements
Sizing future capital / funding requirements (1) Illustrative future loss absorbency requirements Scaled to Minimum Requirements for Own Funds and Eligible Liabilities (“MREL”) based on Bank of England Consultation(2) Discretionary buffers MREL G-SIB 1.0% (3) ‘up to’ Continue to target up to £2bn AT
Slide 20: H1 2016 Results – Treasurer’s view
H1 2016 Results – Treasurer’s view Strong funding and liquidity metrics maintained 14.5% CET1 ratio, above 13% target Active management toward end-state MREL compliance £2.2bn Senior HoldCo issued YTD, versus £3-5bn target Continue to target up to £2bn AT1 issuance in 2016, subject to market conditi
Slide 21: Q&A
Q&A
Slide 22: Appendix
Appendix
Slide 23: Spotlight on Credit
Spotlight on Credit UK & Ireland CRE exposure Total UK investment portfolio average LTV 53%, UK CRE investment portfolio by LTV band performing book 49%, Commercial Banking new at end Q2 2016 business LTV 46% (£bn) Interest cover 3.4x in Commercial Banking UK and Total UK CRE exposure £24.6bn(3) 1.6
Slide 24: Spotlight on Credit
Spotlight on Credit UK residential mortgage exposure UK PBB mortgage exposure by LTV band UK total mortgage exposure by region At end Q2 2016 At end Q2 2016 UK PBB performing mortgages: £109.1bn(1) (£bn) Other regions South East 50% or less 39% 25.0 28.0 50-70% 36% 70-80% 13% West Midlands 7.1 80-90
Slide 25: Litigation and conduct
Litigation and conduct End of H1 2016 provisions (£m) Comments MBS litigation and investigations may require additional provisions in future periods that in aggregate could be 5,172 materially in excess of the provisions existing as of Q1 US RMBS 2016 These provisions do not include potential penalt
Slide 26: £125bn of free funds
£125bn of free funds A strategic asset but cyclically challenging Average Non-interest bearing demand deposits Sensitivity of Net interest income to interest by franchise, and tangible equity rate changes (£bn) Tangible equity Other(1) CPB PBB 122 125 Sensitivity 108 (£m) 42 40 + 25 basis point shif
Slide 27: Forward Looking Statements
Forward Looking Statements 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’, ‘believe’, ‘sh
Slide 28: Thank you
Thank you
The Royal Bank of Scotland Group — Debt Investor Presentation (August 2016) on 6ix