Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — UBS Global Financial Services Conference 2011
34 slides from Natwest's conference presentation, May 10, 2011
Slide 1: Consistent Progress Continues
Consistent Progress Continues Bruce Van Saun, Group Finance Director UBS Global Financial Services Conference 10th May 2011
Slide 2: Important Information
Important Information 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’, ‘believes’, ‘should
Slide 3: Agenda
Agenda The RBS Vision Business Progress Core RBS: Driving Future Value Achieving our targets Summary & Outlook
Slide 4: What we are aiming for
What we are aiming for To be amongst the world’s most admired, valuable and stable universal banks, powered by market-leading businesses in large customer-driven markets To target 15%+ sustainable RoE, from a stable AA category risk profile and balance sheet Well balanced business mix to produce an
Slide 5: Core business principles
Core business principles Each business attractive “in its own right" Strong business linkages – “One Bank" Leading customer franchises Sharing of costs, expertise, customers and capabilities to maximum extent that is 15%+ RoE profitable Proportionate risk and balance sheet usage Shared man
Slide 6: A sustainable and balanced business
A sustainable and balanced business A complementary group of businesses…. … well balanced by business mix and geography 1 FY10 Core revenues by Division Retail & Commercial Global Retail Customers UK Retail Global Corporate UK Retail Banking Clients 22% UK Corporate & Markets Deposits Governments We
Slide 7: Benchmarking our peers
Benchmarking our peers Market Capitalisation1, £bn FY10 position vs. peer2 median Bank of America Citigroup 9.5% >£60bn RoE3 % HSBC JP Morgan Chase 13.3% BNP Paribas Goldman Sachs 40% Lloyds Banking Group Mitsubishi UFJ Group IB Income3 % £40-60bn 32% RBS Santander UBS International 34% % Income3 41
Slide 8: UK Economic backdrop gradually improving
UK Economic backdrop gradually improving Rebalancing expected to continue in the UK economy… UK Official bank rate, % UK GDP, % UK unemployment, % 3.0% 4.0% 8.40% 2.5% 2.0% 8.00% 2.0% 0.0% 7.60% 10 11 12 13 1.5% 20 20 20 20 (2.0%) 7.20% 1.0% (4.0%) 6.80% 0.5% (6.0%) 6.40% 0.0% (8.0%) 09 10 11 12 13
Slide 9: Agenda
Agenda The RBS Vision Business Progress Core RBS: Driving Future Value Achieving our targets Summary & Outlook
Slide 10: Financial Highlights Q1 11
Financial Highlights Q1 11 Core Business: 1 Operating profit £2.1bn (+25%) 3 UK Retail, Corporate & GBM driving performance; Insurance profitable 1,2 Return on Equity 15% (+300bps) 3 Core RoE growth driven by UK Corporate, GBM & RBS Insurance Core NIM 2.26% (+1bp) 3 Stable margin as R & C growth off
Slide 11: Creating the Core Bank
Creating the Core Bank Core Bank Non-Core The focus for sustainable value creation The primary driver of risk reduction Built around customer-driven franchises Businesses that do not meet our Strategic Tests, including both stressed and non- Comprehensive business restructuring stressed assets
Slide 12: Customer driven franchises
Customer driven franchises Market Customer Comments1 Position1 Satisfaction1 Robust franchises, increasing customer satisfaction; Strong deposit and UK Retail mortgage performance UK Leading customer satisfaction & market position; Strong growth in deposits Corporate reflecting success in broadening
Slide 13: Reconnecting with staff & customers
Reconnecting with staff & customers RBS brand perception in the UK1 Improving staff sentiment2 Engagement Index Employment Security Q2 2010 Q4 2010 Reward (Pay) Pride in RBS Morale 54% 52% 52% Favourable score 49% 48% 47% 46% 45% Favourability Trust (trust or Reputation (strong Likelihood to (favour
Slide 14: Risk reduction progressing well
Risk reduction progressing well Non-Core reduction profile Substantial reduction in ‘tall-trees’ exposures Funded assets Single name concentration over risk appetite1 # of cases 120 118 £39bn 258 Institutions Financial 201 100-120 96 £36bn 138 125 -38% 96 89 £26bn 20-40 79 £24bn 2008 2009 2010 Q111
Slide 15: Improving our Funding Position
Improving our Funding Position Loan : Deposit ratio improved Wholesale funding & Liquidity balance achieved Comparative loan : deposit ratios, % Comparative liquid assets and ST wholesale funding, % 175% 30% 150% 25% 125% 20% 100% 15% 28% 75% 154% 10% 18% 50% 115% 108% 106% 14% 14% 15% 15% 14% 96% 8
Slide 16: Transformation of Funding Profile
Transformation of Funding Profile Funding Profile is Improving Actively terming out funding £bn % Wholesale Funding >1yr1 45% 50% 55% 250 150% £952bn 140% 200 £808bn £735bn 130% 34% 150 27% 17% 120% 18% 22% 25% 100 110% 50 48% 51% 58% 100% 0 90% FY08 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 FY08
Slide 17: Agenda
Agenda The RBS Vision Business Progress Core RBS: Driving Future Value Achieving our targets Summary & Outlook
Slide 18: Journey to world class: UK Retail
Journey to world class: UK Retail Re-engaging Customers and Strengthening our Brands ROE and C:I Ahead of Target Published customer charter - have delivered on 80% of 70% the 25 goals outlined 60% 50% C:I Major investment programme supporting improved 50% Target customer service 40% Investing
Slide 19: Journey to world class: UK Corporate
Journey to world class: UK Corporate Strong Franchise Strong Quarterly ROE progression 1 Strong market share and customer satisfaction provide RoE (%) 2 healthy base for growth 15.8% 14.1% Well connected, offering clients full service across GTS and GBM products. 9.9% Strong deposit collecting
Slide 20: Journey to world class: Wealth & GTS
Journey to world class: Wealth & GTS Wealth - Defined strategy GTS - Top 5 Global player High return potential with strong brand Stable quality returns through-the-cycle New management in place in Q410 New management appointed in Q111 New strategy delivers sharper market focus and Strong
Slide 21: Managing through industry change: GBM
Managing through industry change: GBM Generating attractive income and earnings Operating off a rebalanced and de-risked balance sheet GBM Core revenues £bn GBM TPAs1 £bn 874 2.8 2.4 1.9 £2bn 1.6 1.6 423 400-450 412 397 Q110 Q210 Q310 Q410 Q111 FY07 Q409 Q410 Q111 Target Range Strong positioning in
Slide 22: Steadily Turning Around: US R&C
Steadily Turning Around: US R&C Robust customer metrics Rebalancing asset mix towards Commercial Customer satisfaction is high at 73.1% , and above 1 FY08 Q111 regional competition, 71.7% 1 Good consumer perception; 10% of non-customers 1 most likely to switch to Citizens 39% 43% Active online
Slide 23: Improving the under-performers: RBS Insurance
Improving the under-performers: RBS Insurance Lower claims costs helping drive a return to profitability £m £m Claims Operating profit / loss 1,200 100 (31%) 0 800 -100 400 -200 0 -300 Q110 Q210 Q310 Q410 Q111 Q110 Q210 Q310 Q410 Q111 ongoing motor price improvements in Q1111 driving further improve
Slide 24: Improving the under-performers: Ulster Bank
Improving the under-performers: Ulster Bank Key points Significantly improved balance sheet Loan : Deposit ratio1 now below 150% % Loan: Deposit Ratio1 200 Franchise intact, 3% increase in deposit base q-o-q Net gainer in customer numbers across footprint 150 Ongoing cost re-engineering deli
Slide 25: Ulster Bank: Asset deep dive
Ulster Bank: Asset deep dive Ulster Bank – Non-Core gross L&A , £14.8bn, (-6% y-o-y) 1 Ulster Bank – Core gross L&A, £37.2bn, (-4% y-o-y) CRE - Development CRE: CRE: £1bn, 3% 57% RoI Other £2.0bn 64% RoI 20% NI 13% 27% NI Corporate – Other 23% UK 10% UK £8.9bn, 24% Mortgages: Q111 90% RoI Q111 L&A 1
Slide 26: Agenda
Agenda The RBS Vision Business Progress Core RBS: Driving Future Value Achieving our targets Summary & Outlook
Slide 27: Pathway to achieve >15% RoE
Pathway to achieve >15% RoE1 Economic recovery drives R&C RoE higher Indicative walk-back – UK Corporate 2010 Divisional RoEs Indicative ROE walk-back 2010-2013 GTS 43% Wealth 19% UK Retail 18% >15% UK Corporate 12% 12% US R&C 4% Ulster Bank -21% 2010 ROE NIM Volumes Non II Other 2 2013 ROE Initiati
Slide 28: Capital Management important H211 until end-2013
Capital Management important H211 until end- 2013 Maintain earnings recovery Decisions on payments of dividends and coupons on preference shares and hybrid capital instruments in Q212 Desire to exit the Asset Protection Scheme in Q4 2012 Consider options for any surplus capital over time: —
Slide 29: Government sell-down considerations
Government sell-down considerations Government (UKFI) Investment B Shares Hold broadly the same rights as the ordinary shares Total Investment Non-voting Shares Investment per Share (m) (£m) (p) Dividends are fully discretionary3 Rank pari passu with ordinary shares on winding up / liquidati
Slide 30: Agenda
Agenda The RBS Vision Business Progress Core RBS: Driving Future Value Achieving our targets Summary & Outlook
Slide 31: A clear plan for the future
A clear plan for the future Leading positions in our customer 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 business cycle
Slide 32: Questions?
Questions?
Slide 33: Appendix
Appendix
Slide 34: Non-Core Asset Class Composition Changes
Non-Core Asset Class Composition Changes 2008 Year-End funded assets Q1 2011 funded assets Other Corporate Corporate Other RBS Insurance £2.0bn Project & Export Retail Project & Export Retail Bank of China / Linea Finance £21.3bn RBS Insurance £1.5bn UK Mortgages & Finance £15.6bn UK M
The Royal Bank of Scotland Group — UBS Global Financial Services Conference 2011 on 6ix