Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Bank of America Merrill Lynch Banking & Insurance CEO Conference 2012
30 slides from Natwest's conference presentation, Sep 25, 2012
Slide 1: Building franchise value in an uncertain world
Building franchise value in an uncertain world Stephen Hester, CEO, The Royal Bank of Scotland Group Bank of America Merrill Lynch - Banking & Insurance CEO Conference 25th September 2012
Slide 2: 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’, ‘
Slide 3: Agenda
Agenda Task 1 – RBS Recovery Task 2 – Ensuring the recovered bank is a ‘good’ bank Task 3 - Building our long-term vision Conclusions
Slide 4: Our objectives & strategy
Our objectives & strategy Objectives To serve customers well To restore the Bank to a sustainable and conservative risk profile To rebuild value for all shareholders These priorities are interconnected and mutually supporting Strategy The new RBS is built upon customer-driven businesses with
Slide 5: Progress to date – capital, funding and liquidity
Progress to date – capital, funding and liquidity Balance sheet managed down; Non-Core reduced Liquidity portfolio > Short-term wholesale funding Funded assets, £bn Group £bn Short-term wholesale funding ~1,6001 Non-Core 297 Liquidity portfolio 927 156 90 2582 62 72 Worst Point H112 FY08 H112 Loan t
Slide 6: Milestones remaining in the Recovery Plan
Milestones remaining in the Recovery Plan Sustain improvements to date Business Completion of the Markets and International Banking restructure performance Turnaround in Ireland/Ulster Bank, continuing progress at Citizens Non-Core assets reduced to £40bn target by end 2013 EU required Dir
Slide 7: End 2013 Aspiration – terrific progress, platform to build from
End 2013 Aspiration – terrific progress, platform to build from A resized, restructured and de-risked balance sheet A fundamentally Re-balance in funding, liquidity and capital achieved restructured group An efficiently run, lower cost business Market-leading positions with customer centrici
Slide 8: Agenda
Agenda Task 1 – RBS Recovery Task 2 – Ensuring the recovered bank is a ‘good’ bank Task 3 - Building our long-term vision Conclusions
Slide 9: What is “franchise value” in an uncertain world?
What is “franchise value” in an uncertain world? Undoubted balance sheet strength and platform to build from — 10%+ Core Tier 1 ratios under Basel III — Loans funded by quality deposits — Strong liquidity ratios, limited wholesale funding reliance Business mix dominated by high quality, stable c
Slide 10: Making the Core bank ‘good’ – strategic tests applied
Making the Core bank ‘good’ – strategic tests applied 5 tests for the Group and each business 1. Top tier competitive position in enduring customer franchise 2. RoE ≥ CoE 3. Proportionate use of balance sheet, risk and funding 4. Capable of organic growth – but ‘market limited’ 5. Balanced and inter
Slide 11: Making the Core bank ‘good’ – progress
Making the Core bank ‘good’ – progress 1. Top tier competitive position in enduring customer franchise 1 UK Retail: #2 for UK current accounts (13m); 11.7m savings accounts 2 3 UK Corporate: #1 SME Bank, #1 Corporate Bank; c1.2m customers 4 Wealth: #2 UK Wealth Management Provider 5 US R&C: Top 5 pl
Slide 12: Making the Core bank ‘good’ – progress
Making the Core bank ‘good’ – progress 2. RoE > CoE Core business RoE, H112 CoE (11.5%) UK Retail 23% UK Corporate 17% Good progress towards achieving RoE ≥ CoE Wealth 12% Core UK Retail & Corporate franchises performing well Int’l Banking 9% Further management actions to drive returns in Inte
Slide 13: Making the Core bank ‘good’ – progress
Making the Core bank ‘good’ – progress 3. Proportionate use of balance sheet, risk and funding Balance sheet usage Risk exposures Loan to Deposit Ratio, % ‘Old’ GBM vs. Markets funded assets (£bn) Core CRE Exposure (£bn) H112 847 51 39 UK Retail 104% UK Corporate 85% 302 ~250 FY09 H112 Wealth 44% Co
Slide 14: Making the Core bank ‘good’ – progress
Making the Core bank ‘good’ – progress 4. Capable of organic growth Growing UK deposit balances While increasing lending to customers UK Retail & UK Corporate customer deposits (£bn) UK Retail & UK Corporate drawn L&A (£bn) +18% +4% 250 230 234 223 220 215 198 200 210 150 200 FY09 H112 FY09 H112 US
Slide 15: Making the Core bank ‘good’ – progress
Making the Core bank ‘good’ – progress 5. Balanced and interconnected – revenues, customers, products, people Revenues Revenue benefits from shared customers, cross division Customers Full service proposition (product/geography) important for corporate customer base Products Shared expertise and bes
Slide 16: Making the Core bank ‘good’ – key strategies
Making the Core bank ‘good’ – key strategies How we’re retooling the business: Serving customers well Right-sizing the cost base Investing for the future Rebalancing business mix Areas to address further 12
Slide 17: Serving customers well – our purpose and future
Serving customers well – our purpose and future Targeting consistently high customer satisfaction levels: UK Retail UK Corporate Customer Satisfaction1, % Relationship Manager Q112 Q212 Best in peer group Satisfaction2, % Market Average 63% 67% 65% 65% 56% 57% 62 63 67 68 71 72 Jun 11 Mar 12 Jun 12
Slide 18: Right-sizing the Core cost base
Right-sizing the Core cost base Critically evaluating the cost base: Greater annualised cost savings… … and lower cost of programme implementation £bn £bn 3.2 3.4 3.9 2.7 3.2 3.1 2.5 Original 2010 view 2011 view 2013 Original 2011 2013 strategic of 2013 of 2013 annualised strategic plan expectation
Slide 19: Investing for the future
Investing for the future While ensuring the business is invested for better customer service and performance: Investing to improve strength, efficiency and effectiveness Schedule of investment spend £bn 3.1 3.3 1.9 0.9 Ongoing investment spend focused on: — Enhancing customer experience 2009 2010
Slide 20: Rebalancing business mix
Rebalancing business mix A business anchored in the UK, and in retail & commercial banking, with appropriate global opportunities: A shift toward Retail & Commercial Banking Operating Profit by Business Line, % 20071 Q2122 Target Markets Markets 18% c20% Retail & GBM Commercial 47% Retail & Retail &
Slide 21: Areas to address further – Markets, Ulster Bank and Non-Core
Areas to address further – Markets, Ulster Bank and Non-Core Markets restructure Ulster Bank turn-around Non-Core reduction TPA1 (£bn) Appropriately provisioned, in line with Funded assets, £bn peers, %2 362 58 72 302 56 60-65 ~250 46 c.40 Jun 11 Jun 12 Target Allied Ulster Bank of H112A FY12E FY13
Slide 22: Areas to address further – prudential and conduct regulation
Areas to address further – prudential and conduct regulation Prudential Regulation: Status Strategic direction clear ICB/Ring-fencing ‘Plumbing’ clarity still WIP Basel III / CRD IV Implementation 01/01/13 may be delayed FSA pressure on models (CRE slotting etc) RWA Intensity RWA uplift be
Slide 23: Areas to address further – regulatory capital requirements
Areas to address further – regulatory capital requirements RWAs / Capital Management Headwinds Mitigation / Tailwinds 11.1 0.8 >10% Model changes Basel III/CRD IV Non-Core run-down 10.3 APS cancellation Restructure of Markets business Earnings generation H1 2012 Target APS Cover Target
Slide 24: Investment proposition
Investment proposition RBS is nearing the point of becoming a recovered bank and well on the way to ‘good’: — Restructuring phase should be largely complete by end 2013 — Ongoing businesses should be retooled and performing ‘in-line’ with competitors with robust, enduring, valuable franchises — De
Slide 25: Agenda
Agenda Task 1 – RBS Recovery Task 2 – Ensuring the recovered bank is a ‘good’ bank Task 3 - Building our long-term vision Conclusions
Slide 26: Post 2013 – Growing Group profitability to full potential
Post 2013 – Growing Group profitability to full potential Post 2013 : The road to profit normality Internal levers to be utilised External supports required Customer centric approach: Global economic growth: — Relevant products/accessibility — Positive loan demand — Helpful Banking — Interest ra
Slide 27: What will good look like
What will good look like Leading positions in all our customer focused businesses Top tier market franchises Strong, predictable and resilient business performance Complementary portfolio with clear cohesion logic and synergies Balanced portfolio Balanced by geography, growth, risk profile and busin
Slide 28: Agenda
Agenda Task 1 – RBS Recovery Task 2 – Ensuring the recovered bank is a ‘good’ bank Task 3 - Building our long-term vision Conclusions
Slide 29: Conclusions
Conclusions Significant progress against initial 5 year strategic plan Creating a recovered bank, close to being achieved; Non-Core risk reduction running ahead of plan, safety and soundness restored Rectifying the Making the recovered bank a ‘good’ one; Ex Ulster Bank, all businesses at or on
Slide 30: Questions?
The Royal Bank of Scotland Gro Questions?