Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — UBS Global Financial Services Conference 2005
46 slides from Natwest's conference presentation, May 9, 2005
Slide 1: UBS Global Financial Services Conference
UBS Global Financial Services Conference Sir Fred Goodwin Group Chief Executive
Slide 2: Forward looking statements
Certain statements made in this presentation are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance,
Slide 3: As good as it gets?
As good as it gets? UBS Global Financial Services Conference Titles 2000 Profitability – is it sustainable? 2001 Growth prospects in a low inflation environment 2002 Opportunities in uncertain times 2003 Capturing value in a challenging environment 2004 Managing for growth 2005 As good as it gets? S
Slide 4: As good as it gets? RBS Group Operating Profit Growth
As good as it gets? RBS Group Operating Profit Growth 2000 Profitability – is it sustainable? +31% 2001 Growth prospects in a low inflation environment +32% 2002 Opportunities in uncertain times +12% 2003 Capturing value in a challenging environment +11% 2004 Managing for growth +15% 2005 As good as
Slide 5: International Economies
International Economies Forecasters predict positive economic growth 2002 2003 2004 2005 2006 UK 1.8% 2.2% 3.1% 2.5% 2.3% US 1.9% 3.0% 4.4% 3.7% 3.4% Germany 0.1% 0.1% 1.4% 0.9% 1.4% Source: Datastream, Consensus Economics Slide 5
Slide 6: Diversity – by Brand/Channel
Diversity – by Brand/Channel Multi-Brand, Multiple Channel Strategy Slide 6
Slide 7: Diversity – by Geography
Diversity – by Geography 2004 Operating Profit Charter One Pro forma Rest of World Europe 1% 8% US UK 25% 66% Slide 7
Slide 8: Diversity – by Geography
Diversity – by Geography Income Growth 2004 2003 Change in Local Currency UK (£m) 17,519 15,099 +16% Ireland (€m) 1,040 749 +39% Continental Europe (€m) 1,242 801 +55% United States ($m) 6,362 4,713 +35% Rest of World ($m) 392 373 +5% Total income adjusted for currency impact +20% Slide 8
Slide 9: Diversity – by Geography: United States
Diversity – by Geography United States 2004 2003 Change Income $m $m % Citizens 3,923 2,983 +32% Corporate Banking & Financial Markets 1,996 1,541 +30% Retail Direct 196 0 Central items 247 189 United States 6,362 4,713 +35% Slide 9
Slide 10: Diversity – by Geography: Continental Europe
Diversity – by Geography Continental Europe 2004 2003 Change Income €m €m % Corporate Banking & Financial Markets 436 263 +66% RBS Insurance 249 231 +8% Wealth Management 223 150 +49% Retail Direct 214 121 +77% Central items 120 36 Continental Europe 1,242 801 +55% Slide 10
Slide 11: Diversity – by Business
Diversity – by Business 2004 Income Corporate Banking & Financial Markets 33% Retail Banking + Retail Direct 30% Wealth Management 4% Ulster Bank 3% Citizens 9% RBS Insurance 21% Slide 11
Slide 12: Diversity – by Type of Income
Diversity – by Type of Income 2004 Income Net Interest Income 40% Non-Interest Income 60% Slide 12
Slide 13: Diversity of Non-Interest Income
Diversity of Non-Interest Income Non-Interest Income % of Total Income 2004 Net fees and commissions 21% – Money transmission and lending 11% – Cards related 4% – Other 6% General insurance premium income 22% Dealing profits (before associated costs) 9% Other operating income 8% Non-interest income
Slide 14: Diversity of Net Interest Income
Diversity of Net Interest Income % of Total Income 2004 Personal deposits 10% Personal lending 12% Business deposits 7% Business lending 11% Net interest income to total income 40% Slide 14
Slide 15: As good as it gets? Corporate Banking & Financial Markets
As good as it gets? ▮ Corporate Banking & Financial Markets Slide 15
Slide 16: Corporate Banking & Financial Markets
Corporate Banking & Financial Markets 2004 2003 Change £m £m Net interest income 2,545 2,324 +10% Non-interest income 4,964 4,373 +14% Total income 7,509 6,697 +12% Direct expenses 2,664 2,322 +15% Contribution before provisions 4,845 4,375 +11% Provisions 580 755 -23% Contribution 4,265 3,620 +18%
Slide 17: UK Corporate Lending
UK Corporate Lending Corporate sector lending is increasing % increase 20 15 10 5 0 2000 2001 2002 2003 2004 2005 Month on prior year month growth in non-financial lending Source: Bank of England, financial institution sterling net lending excl securitisations to PNFC, seasonally adjusted Slide 17
Slide 18: Corporate Banking & Financial Markets
Corporate Banking & Financial Markets Income 2004 2003 Change US ($m) 1,996 1,541 +30% Continental Europe (€m) 436 263 +66% ▮ United States – Established debt capital markets business, leveraging Greenwich Capital’s customer relationships – Increased distribution of CBFM products to Citizens’ custom
Slide 19: Corporate Banking & Financial Markets
Corporate Banking & Financial Markets ▮ UK activity levels good ▮ Strong momentum in Europe ▮ Meaningful organic growth in US coupled with greater collaboration with Citizens ▮ Credit quality stable Slide 19
Slide 20: As good as it gets? Retail Banking and Retail Direct
As good as it gets? As good as it gets? ▮ Corporate Banking & Financial Markets no ▮ Retail Banking and Retail Direct Slide 20
Slide 21: Retail Banking
Retail Banking 2004 2003 Change £m £m Net interest income 3,112 2,959 +5% Non-interest income 1,630 1,514 +8% Total income 4,742 4,473 +6% Direct expenses 1,074 1,030 +4% Contribution before provisions 3,668 3,443 +7% Provisions 389 273 +42% Contribution 3,279 3,170 +3% 2003 restated following trans
Slide 22: Retail Direct
Retail Direct 2004 2003 Change £m £m Net interest income 938 849 +10% Non-interest income 1,191 986 +21% Total income 2,129 1,835 +16% Direct expenses 712 657 +8% Contribution before provisions 1,417 1,178 +20% Provisions 377 297 +27% Contribution 1,040 881 +18% 2003 restated following transfer of c
Slide 23: Retail Banking and Retail Direct
Retail Banking and Retail Direct % of Group Income 2004 Personal lending 8% Personal deposits 6% Non-interest income and small business banking 16% Total 30% Slide 23
Slide 24: UK Consumer Confidence
UK Consumer Confidence UK consumer confidence has remained stable Index 40 30 20 Personal financial situation 10 0 -10 -20 -30 2000 2001 2002 2003 2004 2005 Source: GfK Slide 24
Slide 25: UK Personal Lending
UK Personal Lending UK personal lending has doubled in 7 years £bn 1,500 1,000 Personal lending (mortgages + credit cards + personal loans) 500 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Source: Bank of England Slide 25
Slide 26: UK Personal Lending
UK Personal Lending % of Total Income 2004 Net Non- Total Interest Interest Credit cards + personal loans 7% 2% 9% Mortgages 2% – 2% Personal lending 9% 2% 11% Slide 26
Slide 27: UK Personal Lending
UK Personal Lending But UK personal sector gearing remains low % Total Household Interest Payments/Total Household Disposable Income 20 15 10 5 0 1985 1990 1995 2000 2005 Source: Bank of England (series commenced 1987) Slide 27
Slide 28: UK Personal Lending
UK Personal Lending The rate of increase in personal loans has declined % increase 20 Credit cards 15 Personal loans 10 5 0 2000 2001 2002 2003 2004 2005 Annual growth in unsecured balances Source: Bank of England Slide 28
Slide 29: Retail Banking and Retail Direct
Retail Banking and Retail Direct ▮ Continuing income growth, although consumer in a period of transition – Reducing growth in income from unsecured lending – Increased volume of secured lending – Increased activity in savings ▮ Continued growth in small business income and money transmission ▮ Some
Slide 30: As good as it gets?
As good as it gets? As good as it gets? ▮ Corporate Banking & Financial Markets no ▮ Retail Banking and Retail Direct no Slide 30
Slide 31: As good as it gets? Citizens
As good as it gets? As good as it gets? ▮ Corporate Banking & Financial Markets no ▮ Retail Banking and Retail Direct no ▮ Citizens Slide 31
Slide 32: Citizens
Citizens 2004 2003 Change $m $m Net interest income 2,821 2,143 +32% Non-interest income 1,102 841 +31% Total income 3,923 2,984 +31% Expenses 1,877 1,438 +31% Contribution before provisions 2,046 1,546 +32% Provisions 146 145 +1% Contribution 1,900 1,401 +36% Slide 32
Slide 33: Citizens
Citizens Excluding Acquisitions 2004 2003 Change $m $m Net interest income 2,352 2,124 +11% Non-interest income 856 838 +2% Total income 3,208 2,962 +8% Expenses 1,525 1,430 +7% Contribution before provisions 1,683 1,532 +10% Provisions 113 145 -22% Contribution 1,570 1,387 +13% Slide 33
Slide 34: Charter One
Charter One 2004 2003 Change $bn $bn Consumer loans 14.3 12.6 +13% Mortgage loans 11.3 10.7 +6% Commercial loans 6.8 5.5 +24% Loans and advances 32.4 28.8 +13% Current accounts/savings 19.3 16.9 +14% Certificates of deposit 9.8 10.3 -5% Deposits 29.1 27.2 +7% At 31 December, US GAAP Slide 34
Slide 35: Transaction Benefits
Transaction Benefits Contribution to Profit Before Tax in 2007 $m Revenue benefits 222 Cost savings 185 Total 407 Slide 35
Slide 36: Opportunities for Organic Growth
Opportunities for Organic Growth Households 000s ▮ Citizens states – New England 4,767 – Mid-Atlantic 4,837 ▮ Charter One states – Midwest 15,490 – Northeast 3,416 Source: SNL Datasource Slide 36
Slide 37: Opportunities for Organic Growth
Opportunities for Organic Growth Population Total Forecast (m) Deposits H’hold Income $bn Growth (04-09) Midwest Chicago, Illinois 9.4 220.5 13.2% Detroit, Michigan 4.5 76.2 11.5% Cleveland, Ohio 2.1 62.2 11.0% Indianapolis, Indiana 1.6 23.7 13.4% Deposits exclude Credit Unions Source: SNL Datasourc
Slide 38: Charter One
Charter One Branches In-store Traditional 228 146 461 502 417 419 456 446 1999 2000 2001 2002 2003 2004 Source: 2003 annual report, Citizens Slide 38
Slide 39: Citizens
Citizens Distribution of 2004 Income by Activity Citizens 36% 30% 18% 12% 4% Retail Commercial Consumer Mortgage Other Banking Banking Lending Related Citizens income 2004 Retail banking includes deposits and fees, commercial banking includes loans, deposits and fees Slide 39
Slide 40: Citizens and Charter One
Citizens and Charter One Distribution of 2004 Income by Activity 47% Citizens Charter One 36% 30% 18% 16% 16% 15% 12% 6% 4% Retail Commercial Consumer Mortgage Other Banking Banking Lending Related Citizens: 2004 income, Charter One: Sep-Dec 2004 income Retail banking includes deposits and fees, com
Slide 41: Citizens
Citizens ▮ Good underlying franchise growth ▮ Charter One – Initial performance good – Integration fully on track – Enhanced product range and new branches adding value – So far, so good ▮ Credit quality stable Slide 41
Slide 42: As good as it gets?
As good as it gets? As good as it gets? ▮ Corporate Banking & Financial Markets no ▮ Retail Banking and Retail Direct no ▮ Citizens no Slide 42
Slide 43: As good as it gets?
As good as it gets? As good as it gets? ▮ Corporate Banking & Financial Markets no ▮ Retail Banking and Retail Direct no ▮ Citizens no ▮ RBS Insurance no ▮ Wealth Management no ▮ Ulster no Slide 43
Slide 44: Summary
As good as it gets? Summary ▮ Group continues to perform well ▮ UK personal sector in period of transition ▮ Limited dependency on UK personal lending ▮ Activities in US and Europe significant and growing ▮ All integrations fully on track ▮ All divisions have real growth opportunities Slide 44
Slide 45: As good as it gets? RBS definitely not
As good as it gets? As good as it gets? ▮ RBS definitely not Slide 45
Slide 46: UBS Global Financial Services Conference
UBS Global Financial Services Conference Sir Fred Goodwin Group Chief Executive
The Royal Bank of Scotland Group — UBS Global Financial Services Conference 2005 on 6ix