Natwest Group Plc · LSE:NWG
Natwest — The Royal Bank of Scotland Group — Investor Day (March 2012)
68 slides from Natwest's investor day presentation, Mar 12, 2012
Slide 1: RBS Americas Investor Roundtable
RBS Americas Investor Roundtable Stamford, US 12th March 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 Introduction Citizens GBM Americas Questions
Slide 4: Financial highlights 2011
Financial highlights 2011 Core Business: FY11 1 Operating profit £6.1bn R&C underlying2 up 10%. Strong UK Retail performance 3 Return on Equity 10.5% R&C 11.3%, GBM 7.7%, Insurance 10.3% R&C NIM 3.21% (+7bps) Asset re-pricing outweighs funding cost increase in 2011 1,4 Cost : income ratio 60% Cost p
Slide 5: Balance sheet improvement is ahead of original plan
Balance sheet improvement is ahead of original plan Group Assets Group Risk Weighted Assets 9 9 Group Funded Assets, £bn Gross RWAs, £bn ~1,600 578 550 508 1,210 38 977 470 1 Worst point FY11 Plan FY11 Actual FY08 FY11 Plan FY11 Actual Regulatory changes2 Non-Core Assets Core Funding Deficit / (Surp
Slide 6: Capital levels robust despite balance sheet clean-up
Capital levels robust despite balance sheet clean-up Core earnings generated have allowed us to take legacy losses 2009-2011 Cumulative Core Operating Profit versus Other2 losses, £bn Core impairments ex. Ulster Bank PBIL Operating Profit 32.9 11.5 8.8 21.4 10.7 24.1 26.4 13.5 34.2 7.8 Retail & GBM
Slide 7: RBS profits have exceeded original plan
RBS profits have exceeded original plan Core Bank Non-Core 9 9 2009 - 2011 Cumulative Operating Profit, £bn 2009 - 2011 Cumulative Operating Loss, £bn 22.0 18.3 (24.3) (28.4) Plan Actual Plan Actual UK Retail UK Corporate 9 9 2009 - 2011 Cumulative Operating Profit, £bn 2009 - 2011 Cumulative Operat
Slide 8: Core: Setbacks are being tackled
Core: Setbacks are being tackled Insurance Ulster Bank Operating Profit, £m Core Ulster Bank Pre-impairment Profit & Impairments, £m 454 1,384 Impairments stabilised Q411 RoE in H211 58 11% 649 281 360 (295) FY09 FY11 FY09 FY10 FY11 PBIL Impairments US R&C Actions Operating Profit, $m 769 Insuranc
Slide 9: GBM delivered in a challenging environment
GBM delivered in a challenging environment Operating profit ahead of expectations While using less balance sheet 2009 - 2011 Cumulative Operating Profit, £bn Third Party Assets, £bn 10.7 58% reduction in 874 asset consumption 9.1 2009-11 501 Average RoE 362 of 18% 1 2 1 Plan Actual FY07 FY11 Plan FY
Slide 10: GBM management action: adjust business mix
GBM management action: adjust business mix, improving sustainable strength & value FY07 revenues1, old structure Balance sheet structure 66% R&C GBM Markets R&C GBM 34% GBM 32% 2007 44% 56% RWAs4 Rest of Group 66% Target 23% 77% FY11 revenues2, new structure o/w c.10% Int’l Banking Markets 20% 80% R
Slide 11: US operations - Core to the Group
US operations - Core to the Group Retail & Commercial1 Global Banking & Markets Expect Retail & Commercial to generate c.80% of Core US largest contributor to GBM by geography in 2011; Revenues c.36% of revenues US R&C Remaining Core R&C FY11 GBM Revenue Distribution2 FY11 Deposits 15 85 22% 27% FY1
Slide 12: Agenda
Agenda Introduction Citizens GBM Americas Questions
Slide 13: Citizens
Citizens Ellen Alemany, Chief Executive Officer Citizens Financial Group, Inc. and RBS Americas
Slide 14: Key Messages
Key Messages Solid 2011 financial performance Significant realignment of major business lines Strong growth and increased market share in key products Cost control remained a focus Asset quality and capital remained well above the peer average Major investments in colleagues and technolo
Slide 15: Citizens Bank Overview
Citizens Bank Overview Non-Footprint New England Total Deposit Market Share – Top Ten MSAs Convenience Branches: 497 ATMs: 215 ATMs: 1,393 9.1% 8.8% Midwest Branches: 365 ATMs: 554 Mid Atlantic Branches: 658 ATMs: 1,702 2010 2011 National Distribution Rankings: Experienced Management Team 9th larg
Slide 16: Business Line Realignment
Business Line Realignment 11
Slide 17: Financial Performance
Financial Performance Core USR&C 2009 2010 2011 (IFRS - Excl GTS) Actual Actual Actual (1) RWA ($BN) 97 88 B 91 (1) W Total assets ($BN) 122 111 115 Appropriate Customer deposits (spot $BN) 97 91 W 92 Risk Loan:deposits ratio (net loans) (%) 80 81 W 85 Impairments/L&A (%) 1.4 1.0 B 0.5 Notional ROE%
Slide 18: Continuing to improve NIM%
Continuing to improve NIM% +29bps +46 bps Peer Average * CFG** 3.54% 3.51% 3.22% 2.96% 2.80% 2.50% FY Average 2009 2010 2011 2009 2010 2011 Citizens improved its NIM% 16 bps in 2011 (peer banks declined 3bps) by focusing on: Optimizing loan pricing Improvements in deposit mix Strategic balance
Slide 19: Working towards a balanced mix
Working towards a balanced mix Citizens currently has a diverse business… …and continues to rebalance its asset mix Revenue 2011 Assets Consumer FY 09 Commercial Consumer Non Core Non Core Banking 17% 4.5% 66.0% 48% GTS 5.7% Total Commercial* 35% 29.5% FY 11 9% Commercial Banking 23.8% 50% Core U.S.
Slide 20: Original Strategic Objectives from 2009 Plan
Original Strategic Objectives from 2009 Plan Level of Objective Initiative Completion Create absolute alignment within Consumer Banking Rebalance the Improve retail mortgage capacity business mix Increase proportion of Commercial Banking Capture Continue to investment in capital markets capabilities
Slide 21: Improvements in the Distribution Model
Improvements in the Distribution Model Consumer Banking Continued to optimize the branch network through consolidation and divestitures Implemented 170 intelligent deposit machines with 1,700 planned Investments in Online Banking – iPad and Android launching in 2012 Launched Facebook page in
Slide 22: Deepening the Consumer Customer Relationships
Deepening the Consumer Customer Relationships Citizens’ customer metrics demonstrates its continued focus on deepening customer relationships and larger share of wallet Payment Active Households / Balances Total Households 2,727 2,724 2,724 2,680 2,644 2,623 2,587 2,559 (000s) 100% 14.8 90% 14.6 80%
Slide 23: Consumer Lending Growth and Penetration
Consumer Lending Growth and Penetration Consumer Lending continues to grow its core … and improve alignment with the branch franchise businesses… HELOC Balance Growth YoY TD Bank 14.3% Deposit HH w/Consumer Loan Deposit HH w/Credit Card Citizens 11.7% 3 0 . 0 % 2 5 . 0 % Huntington 7.0% 2 9 . 0 % 21
Slide 24: Consumer Asset Quality Improves
Consumer Asset Quality Improves Vintage cumulative loss performance continues to Citizens has a much smaller foreclosure portfolio improve and stronger asset quality 2007 2009 8.0% Loans in Foreclosure / Total Serviced Loans 2008 2010 6.0% JPM Chase 6.7% Bank of America 5.9% 4.0% Ally 4.4% Mortgage
Slide 25: Commercial Banking Summary
Commercial Banking Summary Significant business line realignment and colleague investments were made in 2011 Continued build out of specialty vertical businesses (i.e. Healthcare and Technology) Significantly expanded capital markets capabilities and fee generation Expect to execute partners
Slide 26: Commercial customer metrics indicate service and capabilities improving
Commercial Customer metrics indicate service and capabilities are improving Commercial Enterprise Banking ** Middle Market ** 2010 2011 2010 2011 Loyalty - Likelihood to Recommend 62% 81% 66% 90% Relationship Manager Proactively Provides Advice & Solutions 59% 75% 69% 84% Effectively Coordinating Pr
Slide 27: Vertical Specialties and Capital Markets
Vertical Specialties and Capital Markets Healthcare & Technology Growth Capital Markets Growth & Penetration Total Revenue Growth Capital Markets Growth 40 37 2009 2010 2011 35 100 30 181% CAGR 87 347% CAGR $ in Millions 80 25 60 20 18 40 $40 40 15 20 11 $15 10 $2 0 5 # of Lead Left & Joint Capital
Slide 28: Regulatory Mitigation Strategy
Regulatory Mitigation Strategy Reg E / Opt In Dodd - Frank Durbin Amendment Mitigation Highlights • Eliminating free checking for • Eliminated free savings accounts • Raised ancillary fees (wire, fx, stop inactive and low balance • Removed fee waivers payment, etc) customers • Raised foreign ATM fee
Slide 29: Planned Technology Investments
Planned Technology Investments CFG is strategically investing in technology $900 million in strategic plan $274 $246 $207 $120 $80 $40 2007 2008 2009 2010 2011 2012E $ in millions Planned highlights for 2012 include: Branch Image Capture Electronic Data Interchange Intelligent Deposit Machin
Slide 30: Well Positioned For Success
Well Positioned For Success Successful repositioning of all major business lines Build on the momentum of C&I and Capital Markets growth Continue to improve on Consumer Lending penetration NIM situated for increase as rate environment improves Cross sell Treasury Solutions (GTS) products
Slide 31: John Fawcett
John Fawcett Chief Financial Officer Citizens Financial Group, Inc. and RBS Americas
Slide 32: Income Statement
Income Statement US Retail & Commercial IFRS - $MM FY 11 B/(W) vs. Prior Year Environment stable, but challenging Actual $ % Net Interest Income 3,042 80 3% Fee Income 1,453 (55) (4%) Total Revenue Excl. Gains Gains & Losses 158 75 91% Non Interest Income 1,611 20 1% 1,140 1,170 1,102 1,125 1,061 To
Slide 33: Revenue Composition
Revenue Composition IFRS Benefit of deposit mix / pricing and commercial loan growth 800 700 $MM 600 500 400 10 Doing more with less 30 $BN 50 70 90 110 130 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Net Interest Income* ($MM) 743 720 755 767 753 762 756 739 742 780 781
Slide 34: Net Interest Margin Trend
Net Interest Margin Trend NIM% increased 8 consecutive quarters prior to Q3’11 headwinds. Continuing to close gap with peers 900 3.40% 10Y Treasury Yield 850 3.17% 3.11% 3.20% 4.00 3.08% $MM 800 3.06% 3.00% 3.50 2.94% 3.07% 3.00% 750 2.91% 2.89% 2.84% 2.81% 3.00% 3.00 2.99% 2.98% 700 2.77% 2.73% 2.8
Slide 35: Total Expense
Total Expense IFRS - $MM 3,600 Non Controllable 3,400 36 Underlying 113 25 decrease 2% 22 12 8 3,200 3,363 3,281 3,000 2,800 FY 2010 Deposit Operational Staf f Other 2010 Pension MSR FY 2011 Insurance Losses Expense Gain Total expenses reduced (excluding impact of the one time IFRS benefit associate
Slide 36: Credit
Credit US GAAP - $MM Steadily improving credit quality 1,300 24 1,200 1,000 Loan Impairment by Product 1,100 900 1,000 800 510 733* 900 394* 700 Consumer $MM 800 Commercial 600 700 1,201 1,109 378 600 500 500 394* 400 400 300 300 307 200 200 355 100 100 87 0 0 Reserve for Credit Other Charge-Offs Bu
Slide 37: Credit
Credit US GAAP - $BN December 2011 Wholesale Credit Retail Credit Distribution by Region LTV 0 1 2 3 4 5 6 FICO 0 5 10 15 < 50 > 760 Mid‐Atlantic 50–60 740–759 CRE 5% Midwest C&I 60–70 720–739 20% 70–80 Mid Atlantic Home 80–85 700–719 Midwest 85–90 680–699 31% 24% Equity 90–95 660–679 95–100 640–659
Slide 38: Strong Asset Quality and Reserve vs. Peers
Strong Asset Quality and Reserve vs. Peers Citizens Financial Group US GAAP NPLs / Loans % Reserves / NPLs % KeyCorp 1.54% KeyCorp 130% M&T Bank 1.77% PNC 91% Comerica 2.31% M&T Bank 85% Citizens 2.35% Citizens 83% BB&T 2.65% BB&T 77% PNC 2.94% Peer Avg 76% US Bancorp 3.16% Comerica 74% Peer Avg 3.3
Slide 39: Average Balance Sheet
Average Balance Sheet Citizens Financial Group AFS Portfolio IFRS - $MM Inc/(Dec) 30 FY 11 FY 11 v FY 10 Actual $ % 25 90% Government guaranteed. ST Fixed Non-Agency Short Term $ 1,974 $ (2,829) (59)% 20 Portfolio size has been reduced almost 1/2 from a Floating Agency $BN AFS 21,053 (1,530) (7)
Slide 40: Well Capitalized vs. Peers
Well Capitalized vs. Peers Citizens Financial Group US GAAP Tier 1 Capital Ratio Tier 1 Common Ratio Citizens 13.85% Citizens 13.34% Regions 13.28% KeyCorp 11.26% KeyCorp 12.99% Comerica 10.37% PNC 12.60% PNC 10.29% BB&T 12.46% BB&T 9.74% Fifth Third 11.91% Peer Avg 9.35% Peer Avg 11.66% Fifth Third
Slide 41: Appendix
Appendix
Slide 42: Legal Entity
Legal Entity Legal Vehicle Citizens Financial Group US Retail & Commercial Business GTS Services Core Non-Core External View Group Business Services Group Central Items Group Treasury Cost Allocation
Slide 43: Reconciliation of Core US Retail & Commercial Banking to Total CFG
Reconciliation of Core US Retail & Commercial Banking to Total CFG IFRS - $MM FY 2011 US Retail & Commercial Business Central Total Core Non Core Total GTS Services Items CFG Net Interest Income $ 3,087 $ 268 $ 3,354 $ 13 $ (34) $ (1) $ 3,332 Fee Income 1,453 9 1,462 212 23 0 1,698 Total Revenue Exc
Slide 44: Non-Core Loan Portfolio
Non-Core Loan Portfolio Non-Core End of Period Loans - $BN Non-Core End of Period Loan Projections - $BN (2012 Budget) As of December 2011 (Spot) 25 SBO 3.7 22.8 Mortgage Speciality & Corresp. 1.2 Student Lending 1.2 20 Indirect Auto 0.1 17.8 Credit Cards 0.1 Retail Non Core 6.4 15 13.3 CRE 1.5 10 8
Slide 45: Agenda
Agenda Introduction Citizens GBM Americas Questions
Slide 46: GBM Americas
GBM Americas Bob McKillip Co-Chief Executive Officer, Global Banking & Markets Scott Eichel Global Head of Asset-Backed Products and Head of US Credit
Slide 47: Agenda
Agenda GBM Americas FY 2011 Performance 2012 Business Overview
Slide 48: GBM Americas 2011 Overview
GBM Americas 2011 Overview GBM Americas Organizational Structure Global Banking & Markets Global Banking & Markets Americas Markets Banking Michael Lyublinsky1 Bob McKillip Co-CEO, GBM Americas Co-CEO, GBM Americas Support Scott Eichel, Global Head of Asset-Backed Products and Head of US Credit repo
Slide 49: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance GBM Americas 2011 Performance GBM Actuals – FY11 vs. FY10 vs. FY09 ($bn) GBM Americas was exceptionally profitable immediately FY FY FY following the 2008 financial crisis. 2011 2010 2009 Income 3.4 3.8 5.5 The business has continued to deliver in spite of worsen
Slide 50: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance GBM Americas 2011 Results Business1 Performance – Income ($bn) More balanced performance across GBM businesses versus FY FY FY 2011 2010 2009 US peers. Actual Actual Actual Rates 0.7 0.6 1.5 Heightened volatility resulted in risk aversion among clients and limite
Slide 51: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Reduced revenue volatility over time GBM daily revenues Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Dec-11 2010 saw market conditions return to more “normal” levels following unprecedented volatility in 2009. 2011 saw a conti
Slide 52: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance GBM Americas Core Assets ($bn) Markets balance sheet is liquid and has been de-risked considerably since 2008 Banking Loans and Advances have been reduced by over 50% since 2008 148 148 144 Equities 138 13 Cash & T-Bills 8% Other 8% ABS 8% Non- Agency Reverse 42
Slide 53: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Progress on 2009 Strategic Themes Implementation on track More focused execution required Status Today t Deepen Corporate client franchises and expand wallet share through financing and risk management-led proposition t Reposition selected products for greater profit
Slide 54: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Progress on 2009 Strategic Themes Implementation on track Implementation More focused execution required status vs. plan Wallet share improving in investment grade and high yield markets. t Deepen Corporate client franchises Increased cross sell including strong
Slide 55: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Progress on 2009 Strategic Themes Implementation on track More focused execution required Implementation status vs. plan Attract and retain Experienced and stable management team. t top talent in the US Key hires made in 2011 including new Head of Foreign Exchang
Slide 56: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Market Environment Interest Rate Volatility – Move Index (bps) FX Volatility Indices (bps) Volatility dominated Rates and 120 18 Euro Dollar 3m FX markets in 2011 primarily the CVIX 110 GBP Dollar 3m result of the European sovereign 16 debt crisis and fears of a gl
Slide 57: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Americas Banking Volumes Americas Banking Volumes ($bn) Loan Volumes ($bn) ECM Volumes ($bn) 900 669 115 800 700 95 536 86 491 600 442 DCM 408 413 68 500 63 Loan 58 400 290 42 300 M&A 193 34 200 100 - ECM Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 201
Slide 58: GBM Americas FY 2011 Performance
GBM Americas FY 2011 Performance Response to Market Environment Market developments / headwinds Management actions Increased RWA and capital requirements from regulatory change Restructure business to focus on market leading capabilities Pressure on unsecured wholesale funding volumes and asso
Slide 59: Agenda
Agenda GBM Americas FY 2011 Performance 2012 Business Overview
Slide 60: 2012 Business Overview
2012 Business Overview Business Update and Structural Changes In January 2012, Global Banking & Markets (GBM) and Global Transaction Services (GTS) business restructuring announced. Markets will continue to focus on leading origination and trading franchises. International Banking will bring t
Slide 61: 2012 Business Overview
2012 Business Overview Markets FY 11 Pro-Forma Income1 Going Forward Americas Income Americas Income vs. Global by Product $2.8bn $7.1bn Investor Products & Industry expectation for revenues to decline over the short 2% Equities Derivatives 7% Currencies to medium term as reduced liquidity and mar
Slide 62: 2012 Business Overview
2012 Business Overview International Banking FY 11 Pro-Forma Income1 Going Forward Americas Income Americas Income vs. Global by Product $4.0bn $0.6bn Reduced liquidity levels, external market stress and 9% Cash Management 7% Trade Finance regulatory pressures continue to impact revenues across th
Slide 63: 2012 Business Overview
2012 Business Overview Regulatory Outlook – Preparing for Changing Regulation Potential Impact Concerns Response Current plan is to: Derivatives Mandated clearing. Lack of final rules from clear for clients and potentially Required registration of regulators on Trading & swap dealers and m
Slide 64: 2012 Business Overview
2012 Business Overview Key Conclusions Sustaining leadership positions in chosen markets Intensifying client focus Strategic Progress Maintaining discipline in capital usage and liquidity Delivering returns consistent with Group-wide strategic plan Increasing wallet share with Corporate an
Slide 65: Agenda
Agenda GBM Americas FY 2011 Performance 2012 Business Overview Appendix
Slide 66: Appendix
Appendix Markets Business Overview Asset Backed Products: Provides secondary market solutions to clients covering a full range of asset backed products. Asset Rates: Offers clients a full spectrum of Rates Products Backed including, Treasuries, Agencies and IRD Swaps and Products Options. Mone
Slide 67: Appendix
Appendix International Banking Business Overview Cash Management: Optimizes working capital for corporate clients by offering a comprehensive range of Cash products including online account management and liquidity Management management services. Trade Finance: A comprehensive, cost-effective ra
Slide 68: Questions?
‘ x RBS Group Questions?
The Royal Bank of Scotland Group — Investor Day (March 2012) on 6ix