FY 2018 Results 15 15 th th Februar uary y 2019
Howard Davies Chairman
Ross McEwan Chief Executive Officer
Key messages Good financ ncial al performa rmanc nce in an uncertai tain n and highly y competit titiv ive e environ onmen ent Resumi ming ng capital tal distrib ibut utio ions ns – proposal al to pay a 3.5p Final l Year and 7.5p Specia ial l Dividen end Supportin ting g customers mers through gh Brexi xit t uncerta rtainty inty Investin ting g in innovati ation on to deliver ver a better er service for cu customers mers Furth ther er progress ss with our strateg tegic ic plan 4
Group financial performance Costs down Consistent profitability Strong capital delivering returns £3.4 .4bn 4.8% 8% FY’18 Operating profit RoTE FY’18 before tax up from 2.2% in FY’17 £278m 8m up 50% on FY 2017 cost reduction in FY’18 (1) d own 3.6%, on FY’17 10.9 .9% (2) £1.6 .6bn RoTE FY’18 FY’18 Attributable profit excluding strategic costs and more than double FY 2017 litigation and conduct costs 4k fewer r FTEs down 6% on FY’17 16.2 .2% £286m 6m CET1 ratio FY’18 (3) Q4’18 Attributable profit 240bps in year capital first in 8 years generation 5 (1) Excluding one-off VAT releases in 2017 (2) Calculated as profit attributable to ordinary shareholders excluding strategic costs net of tax at 27% and litigation and conduct costs, as disclosed in the RBSG Company Announcement on page 7. Average tangible equity as disclosed on page 3. (3) Includes: The impact of a £2 billion pre-tax pension contribution; the settlement with the Department of Justice; and full year ordinary and special dividends
Supporting customers through targeted lending growth Gross oss Loans ans - Mortgag rtgages s UK PBB (£bn bn) +1.1 .1% Stable average stock LTV 56% in UK PBB 138.3 136.8 Credit Card exposure remains low at 2% of UK PBB Gross Lending FY’17 FY’18 Net Loans ans - Mortgag rtgages s Ulster ter ROI ( € bn bn) Ulster RoI NPL Portfolio reduced by 41% in past two years 1.4 0.5 22.0 21.0 Ulster RoI New Mortgage lending up 13% on FY’17 FY’17 Asset sale and Net new FY’18 tracker book lending & repayments other assets 6
Supporting customers through targeted lending growth Net Loans ans - Commerci rcial al Banki king g (£bn bn) Underly lyin ing growth Growing lending with a lower RWA 6.7 3.5 intensity 1.0 90.2 Gross ss ups (2) 88.0 2) Active capital management has removed lending which flares under stress FY’17 (1) Active capital FY’18 management Net Loans ans - Private ate Banking ng (£bn bn) 15.4% FY’18 Return on equity +0.9 .9 14.3 13.4 Achieved targets a year ahead of plan FY’17 (1) FY’18 (1) Like for like FY’17 - including net impact of transfers and reclassifications due to IFRS9. (2) The Group is party to a number of arrangements, including master netting agreements, that give it the right to offset financial assets and 7 financial liabilities, but where it does not intend to settle the amounts net or simultaneously, the assets and liabilities concerned are presented gross
Generating returns for shareholders, from a strong capital position Interim Final Special dividend dividend dividend £1.6bn Total to be 2p 3.5p 7.5p paid to shareholders Approval from shareholders to have the option to buyback up to 4.99% of the bank’s issued share capital from the UK Government Progressing towards a c.14% CET 1 capital ratio at the end of 2021 8
Customers continue to shift to digital channels Payments nts throug ough mobi bile (m) Conversa rsations tions with th Cora +43% 5 Cora integrated with 4 NatWest Mobile App 191 Million 3 134 2 1 0 FY’17 FY’18 Q1’18 Q2’18 Q3’18 Q4’18 Curren rencyPay cyPay Teal Payments nts via a Bankline e and Direct ct Channels (1 (1) (£bn bn) Award winning N NatWest West Mobile e App +7.3 .3% Upgraded ed Banklin line, e, reduct uction ion in t time to 250 233 make e paymen ents by c c.30 30% A.I. . transfo form rming custom omer er servic vice e and loweri ring costs H2’17 H2’18 9 (1) Average monthly payment value across Bankline and Direct channels for all brands
Transforming the core to drive improved customer advocacy … Paperles rless s Mortgage Accoun ount Opening 215k applicat ation ions s >50% commerc ercial al Simplify in FY’18 customer omer accoun ounts s opened within 5 da days Bankli line e Mobile A.I Lower cost and 83k custom omer er Bankli line e now i in a a better customer Automate conver versa sation ions a mobile e app experience week (1) Mimo FXmicrop ropay ay Proact active ive insight Real-ti time me rates s in Digitise savin ing custom omers ers all major r global l time and mo money curren encies cies 10 (1) Average weekly queries received in 2018
Innovating outside the core to meet rising customer expectations… Free Agent Digital al Lending Platfo form rm Broader Stronger er net Strong customer omer range of promoter ters (1) advocac acy services Home Agent Qudini Integrated More proactive Serving ving customers omers in Home buying into customers customer services locat ation ion and t time of ecosys system em lives their choosi sing Mettle Bó Bó Help customers omers Digital Forward-loo lookin ing banks manage their finances es business ss accoun ount better 11 (1) Following adoption of Free Agent, average customer NPS is 25 points higher than customers without Free Agent
Blueprint for success 12
Investment case (1) • A leading UK Retail and Commercial 2 Bank with strong non-ring-fenced banks Balance lanced, d, stable ble and d in NatWest Markets and RBS impro proving ving income me generati ration International. 1 • 3 Strong brands and market positions Custome mer r led, , Impro proving ving Resilie lient nt Balance lance Sheet t • Growing in attractive chosen markets digita gital l enabl bled d produ ducti tivi vity ty with h impro provin ving g effic icie ienc ncy model c.14% CET1 T1 Ratio io Sub 50% C:I Ratio io • Track record of cost and risk reduction – sub 50% C:I ratio 4 Sustai ainab nable le • Reinvestment Improving returns and capital generation returns rns above ove cost of capita ital – 12%+ ROTE 12%+ ROTE • Resilient balance sheet – c.14% CET1 Ratio Signif gnificant icant capita ital l return rn potenti ntial al to share reho holde lders • Significant distribution potential (1) The targets, expectations and trends discussed in this presentation represent management’s current expectations and are subject t o change, including as a result of the factors described in the “Risk Factors” on pages 255 to 265 of the Annual Report and Accounts 2018. These statements constitute 13 forward looking statements, please see Cautionary & Forward Looking Statements at the end of this presentation.
Katie Murray Chief Financial Officer
FY 2018 update on progress Income remained stable (ex notable items, Natwest Resilien ient inco come Markets and central items) × Core NWM franchise income down 24% YoY (1) Continui nuing ng cost r eduction ion Reduced costs by £278m (2) in 2018, with increased investment spend Actively vely managing ng capita tal l RWA reduction £12bn; exceeded £191-196bn guidance 240bps underlying capital built in the year CET1 ratio 16.2% (proforma 16.0% for IFRS 16) Delive verin ring g capital al return rns Proposed a final dividend of 3.5p and a special dividend of 7.5p Ordinary dividend pay-out ratio already built to c.40% of attributable profits 15 (1) NatWest Markets Core Income excluding Own credit adjustments. “NWM” throughout this presentation refers to Natwest Markets franchise. (2) Excluding one-off VAT release in 2017.
Summary financials vs. FY 2017 £13.4bn Income 2% 13,402 (126) 288 Operating £9.6bn 13,133 54 53 expenses (7)% Income (£m) (1) £3.4bn Operating profit 50% FY’17 PBB & RBSI NatWest Centre FY’18 Attributable £1.6bn CPB Markets profit 116% 204 204 Net interest 1.98% 201 margin (FY) (15bps) NIM (bps) 195 193 CET1 ratio 16.2% (post dividend) 30bps Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 TNAV per 286p share (2) (6p) 16,194 10,401 4.8% 9,645 RoTE Costs (£m) 260bps Cost:Income 71.7% FY’16 FY’17 FY’18 ratio (7ppts) (1) Adjusted for the impact transfers. (2) TNAV per ordinary share on a fully diluted basis. 16
Income Resilient lient income (1) acros oss PBB, CPB and RB RBSI Q4’18 £m Q3’18 £m % UK PBB 1,564 1,557 (7) (0%) Ulster (4) 151 147 Future (3%) considerations Commercial 787 805 18 2% • Structural Hedge Private 195 198 3 2% • Lending growth in PBB, CPB & RBSI RBSI 157 155 (2) (1%) • W&G EC remedy • Economic uncertainty NWM 569 152 (417) (73%) • Competitive pressures Central Items 219 44 (175) (80%) Total 3,642 3,058 (584) (16%) 17 (1) Adjusted for the impact of transfers.
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