FY 2017 Results 23 February 2018 Howard Davies Chairman Ross - PowerPoint PPT Presentation

FY 2017 Results 23 February 2018

Howard Davies Chairman

Ross McEwan Chief Executive Officer

Key messages Strategic plan is working – £2.2bn operating profit before tax and first full year attributable profit in ten years Costs down, income up, capital position stronger, growing in target markets and colleague engagement is highest in ten years Responding to industry change, investing to be less complex, more automated and innovative Costs will reduce versus 2017, but the rate of cost reduction will be materially lower than in 2017 due to investment and innovation spend Reaffirming 2020 targets 12%+ RoE and <50% cost:income Investment case is clearer and the prospect of shareholder returns is getting closer 4

Our performance reflects the economies we serve Mortgage approvals - monthly (‘000) (1) Year-on-year change in business lending (3) 6% 70 60 4% 50 2% 40 0% 30 -2% 20 -4% 10 -6% 0 FY’15 FY’16 FY’17 FY’15 FY’16 FY’17 Average market interest rate (2 year fixed) (2) Business investment quarter-on-quarter (4) 8% 4% 60% LTV 75% LTV 90% LTV 6% 3% 4% 2% 2% 0% 1% -2% 0% -4% FY’15 FY’16 FY’17 FY’15 FY’16 FY’17 (1) Monthly number of monetary financial institutions sterling approvals for house purchase to individuals seasonally adjusted (2) Monthly interest rate of UK monetary financial institutions (excl. Central Bank) sterling 2 year (60% , 75%, 90% LTV) fixed rate mortgage to households not seasonally adjusted (3) Monthly 12 month growth rate of monetary financial institutions‘ sterling net lending to private non -financial corporations seasonally adjusted (4) Chained-volume measure. Data are adjusted for 5 the transfer of nuclear reactors from the public corporation sector to central government in 2005 Q2. 2017 Q3 is Bank of England projection.

Strategic plan continues to deliver a better financial performance Robust capital strength Strong record on cost reduction Common Equity Tier 1 Ratio FY cost reduction (£m) 16.2% IFRS 9 Day 1 Impact (From 1 January 2018) FY’14 0.3% 1,100 FY’15 983 15.9% 15.5% 13.4% FY’16 985 11.2% 8.6% 810 FY’17 FY’13 FY’14 FY’15 FY’16 FY’17 Driving positive adjusted operating JAWS Growth in key markets Loans and advances to customers by segment (£bn) £12,862m Adj. Income 4.0% +7.3% 6.4 £12,372m 6.3 12.1% 136.8 128.0 £8,220m 16.1 14.1 Adj. costs (8.1%) FY’16 FY’17 £7,551m UKPBB Business banking (1) Asset and invoice finance FY’16 FY’17 UKPBB Mortgages 6 (1) Excluding transfers

Personal & Business Banking: Supporting customers in the UK and Republic of Ireland Personal & Business Personal Banking taking share in target markets, Banking Business Banking key supporter of SMEs Market leading brands £31bn € 2.6bn Driving growth in Gross new mortgage lending Gross new lending target markets Flow share 12% vs stock +3.4% on FY’16 share 10% More efficient 12.8% 7.2% operating model Positive adjusted JAWS Positive adjusted JAWS 30.7% 3.6% Returns Adj. return on equity Adj. return on equity 25.1% at FY’16 8.4% at FY’16 7

Commercial & Private Banking: Leading supporter of UK businesses and award winning private bank Commercial & Private Largest supporter of UK businesses, voted UK’s Best Private Bank (1) Banking Market leading +21 NPS (2) NPS up 19 points (3) brands #1 Commercial Bank Growth in target 14% Driving growth in segments and improved Increase in AuM on target markets FY’16 capital efficiency More efficient 8.3% 16.1% operating model Positive adjusted JAWS Positive adjusted JAWS 8.2% 11.3% Returns Adj. return on equity Adj. return on equity 8.4% in FY’16 7.8% in FY’16 (1) Global Private Banking awards 2017 (2) Source: Charterhouse Research Business Banking Survey, YE Q4 2017. Commercial £2m+ in GB (RBSG sample size, excluding don’t knows: 904). Question: 8 “How likely would you be to recommend (bank)”. Base: Claimed main bank. Data weighted by region and turnover to be representa tive of businesses in Great Britain. (3) Source: Wealth X. Nov 2017 (aggregate 3 months data . Base 1180.)

NatWest Markets and RBSI: Good customer activity as we continue to reshape the businesses Leading Channel Islands Leading FICC retail bank. Specialised Markets business support for corporates, funds and FIs Market leading brands Total income +4% Adjusted income Driving growth in from increased average stable underpinned by target markets lending balances and Rates deposit repricing Adjusted operating Luxembourg and Repositioning for expenses 26.7% London branches ring-fencing lower than 2016 established Core operating profit 12.6% Returns £41m up £427m on Adj. return on equity 2016 9

We simplified the bank further in 2017, and we have highest colleague engagement in ten years Non-branch property portfolio Systems and applications (28) (1,000) 153 125 3,500 2,500 FY’16 FY’17 FY’16 FY’17 Subsidiary Companies Colleague FTE (2) (114) 604 490 6.6k 7pts FY’16 FY’17 Engagement index (1) 10 (1) Employee engagement as measured by annual group-wide colleague survey – Our View (2) FTE: Full time employee basis

Three pillars of our digital and innovation strategy. High tech and High touch Simplifi ified ed and Safe and Secure e Innovati ative ve Automa mated ted Customer mer focus used ed and digital ally ly enabled ed 11

Three pillars of our digital and innovation strategy. High tech and High touch Simplifi ified ed and Safe and Secure e Innovati ative ve Automa mated ted Customer mer focus used ed and digital ally ly enabled ed 12

Safe and Secure: W e’ve significantly improved our IT resilience Monthly number of ‘ Crit 1’ IT incidents (1) 50 318 45 40 94% reduction to FY’17, and 99% reduction to Q4’17 35 30 25 133 20 15 36 10 20 5 0 FY’14 FY’15 FY’16 FY’17 13 (1) Criticality 1 incidents are defined as having an adverse impact on a division’s customers, employees, or 3rd parties

Three pillars of our digital and innovation strategy. High tech and High touch Simplifi ified ed and Safe and Secure e Innovati ative ve Automa mated ted Customer mer focus used ed and digital ally ly enabled ed 14

Simplified and automated: We want to make it simple and easy for our customers to do their banking UK’s first paperless Self-service account Automated business mortgage opening loans Outstanding customer Available to >90% of new Accounts for 15% of base advocacy – NPS +79 rate non – personal lending commercial customers Average offer in 11 days – Customers open accounts Auto decision on 70% of down from 23 when it suits them enquiries Safer data – no lost Documentation issued Pre-approved loans up to paperwork. Saves 4.3m faster, and colleague £50k sheets of paper a year interaction reduced Over 50% existing 30 min faster than phone Over 90% adoption rate customers renew online, application in minutes 15

Three pillars of our digital and innovation strategy. High tech and High touch Simplifi ified ed and Safe and Secure e Innovati ative ve Automa mated ted Customer mer focus used ed and digital ally ly enabled ed 16

Innovative: Mobile is becoming a key channel for personal, business and commercial customers Customers transition to mobile Bankline and Bankline Mobile Payments by platform (million) 90k commercial customers active on Bankline 35 Mobile Online 30 14k migrated to New Bankline 25 20 New Bankline saves customers 30% of their time 15 to manage their day to day banking 10 5 0 Q1’16 Q2’16 Q3’16 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 >5m Active mobile users, up 20% on Digital companion to Bankline to be Dec-16 launched in 2018 68% of active everyday banking tasks 70% adoption from non-incentivised available on app, up from 50% in 2016 participants in pilot Digital payments up 14% since 2014 View transactions Customers sent a payment using the mobile Biometric payment approvals app 4 times a second in 2017 A market leading Mobile app Net Promoter Score: +51 17

Innovative: Partnering to build market leading digital solutions Customers Controls Colleagues 414k interactions since Fewer complaints 228 questions now launch, currently handles answered by Cora 100k each month Referred for specialist Consistent, recorded Colleagues spend more advice when required advice and service time with customers Available 24/7 18

Innovative: We’re applying what we learnt with our customers to help our colleagues Archie – Artificial intelligence Helping colleague productivity Supports 879 processes – 500 can be done on mobile Available 24/7 +29 NPS Access on mobile, tablets and desktop 51% conversations contained Real time data and insights to help manage our people and 23k conversations businesses 19

Consistent strategy and retaining 2020 targets 20

Ewen Stevenson Chief Financial Officer