H1 2018 Results 3rd A 3rd Augu gust st
Howard Davies Chairman
Ross McEwan Chief Executive Officer
Key Messages Good pe d perf rform rmance i in a tough gh ope pera rating e g environme ment H1 2018 P Pro rofit Be Before Tax of £ £1.8 bn bn, and d Attri ribu butabl ble P Pro rofit o of £ £888m Anno nnounc ncing ng a an n int ntent ntion n to declare 2 2p int nterim d dividend nd (1) Build ilding to a a pay ayout r rat atio io o of ar around 40% over t tim ime Commi mmitted d to <50% c cost st:income me ra ratio a and d 12%+ R ROTE 2020 t targe rgets Focused o d on impro mproving g cust stome mer se serv rvice - physic ical t to dig igit ital s al shif ift contin inues at at pac ace (1) Declaration of the interim dividend is subject to the timing of the finalisation of the previously announced civil settlement in principle with the US Department of Justice (DOJ) in relation to the DOJ’s investigation into RBS’s issuance and underwriting of US RMBS, the timing of which is uncertain. We expect to finalise the 4 settlement with the DOJ and will make a further announcement at the relevant time.
Group financial performance Delivering on our strategy is driving returns for shareholders Stro rong c g capi pital and Stab able le in income Re Reduc ucing cost st deliver vering retur turns 16.1% 16. 1% Excluding NatWest Markets, central £133 133m H1 2018 CET1 Ratio items and one-offs income is Other expenses reduction Up 110bps on Q1 2018 (3) stable on H1 2017 (1) Down 3.6% on H1 2017 (2) 5. 5.3% 3% H1 2018 Group ROTE (~10% ex. net RMBS charge) NatW atWest M Mar arkets inco come r reduce ced 5k 5k £175m, or 19.5%, on H1 2017 Fewer FTEs £888 888m reflecting reduced income in the core Down 6.7% on H1 2017 H1 2018 Attributable profit Rates business Down £51m on H1 2017 286p 286p Fully diluted Tangible Net Asset Value (1) Total income decreased by £217m, or 3.1% compared with H1 2017 (2) Excluding a VAT release in 2017 (3) 16.2% excluding the accrual of the intended interim 5 dividend. 110bps capital build excludes the impact of the £2 billion pre-tax pension contribution, the civil settlement in principle with the US Department of Justice and the accrual of the intended interim dividend
Supporting our customers Helping UK and Republic of Ireland businesses and homeowners £13.6bn gross new mortgage lending Total customer deposits in growth in UKPBB since Dec 17 UK PBB up 4.3% on H1 2017 SME Lending in Business Over 1bn mobile app logins, Banking up 1.5% on H1 2017 up 20% on H1 2017 NatWest Markets helped customers Over £90bn in net loans and raise c.£130bn in debt capital markets advances in Commercial Banking in H1 2018 (1) 19m customers supported across the UK 6 (1) NatWest Markets has acted as Active Bookrunner for Issuers across Corporate, FI and SSA sectors, helping them to raise c. £130bn in debt capital markets across H1 2018
Shift from physical to digital continues at pace Continued focus on investment in digital channels Physical reduction Branc nch c count unter Contac act t Centr tre c calls Cheq eque u e usage e tran tr ansac actions down 11% on H1 2017 down 16% on H1 2017 down 7% on H1 2017 (1) Dig igital sale les in in U UK PBB BB Over 80% 80% of f Commercial up 27% on H1 2017 Mob obile Pay Payments Custom tomers i inte terac act w t with up 26% on H1 2017 us s through di digi gital Mobi bile A App pp logi gins channe nels up 20% on H1 2017 Digital growth Be Bette tter c cus usto tomer Prote tect a t and Lower c r cost st, mo more re re resi silient, grow i gro income me and d be better c contro rolled exp xperienc nce 7 (1) Based on volumes from May 2017 to May 2018
Improving the core business Digital strategy supports cost reduction and improves customer experience UK PBB Mobile A e App u pp user sers ( s (m) Conv nversations with C h Cora 1.5 +20% 0% Cora integrated with NatWest Mobile App 6.0 Million 5.5 1.0 5.0 4.6 0.5 0.0 FY 2016 H1 2017 FY 2017 H1 2018 Q1 2018 Q2 2018 Curre rencyPay ay Tea eal Payments v via Ba Bank nkline ne and nd D Direct C Cha hanne nnels (1) 1) (£bn) n) Award rd winning g NatWest Mobi bile A App pp +7% 7% 41% o of cust stomers mi s migra grated t d to New 233 234 219 Ban anklin ine an and Ban ankli line Mo Mobile ile pilo ilot launc nche hed A.I. tra ransf sforming c g cust stome mer se serv rvice a and d H1 2017 H2 2017 H1 2018 lowering c g cost sts 8 (1) Average monthly payment value across Bankline and Direct channels for all brands
Delivering new innovative solutions Applying what we learn back into the core bank ESM SME CurrencyP yPay Cloud ba d base sed a d accounting so soft ftware New C New Commercial lendi ding g platf atfor orm Piloting g new F Foreign gn Exchange ge p produ duct Curre rencyPay ay Tea eal Voted #1 accounting software for £10-£150k loans Real-time rates SMEs Decision in 10 mins All major global currencies 60k businesses using the software Funds within the hour Simple to use Available on both Mobile and Online Latest NPS +78 Direct access to an FX expert 9
UK Personal and Business Banking Good operating performance despite margin pressure in mortgages UK PBB ( B (£m) +101 +101 Ope perating pr profi fit up £ p £101m 101m 162 (50) • Total i incom ome decreased £11m, 1,432 (11) 1,331 or 0.3% • Operat ating e expenses decreased £162m or 9.3% • Impairm rment nt charge £50m higher, or 52% H1 2017 Op. Income decrease Operating Impairment increase H1 2018 Op. Profit (Reported) expense decrease Profit (Reported) 10
Ulster Bank Republic of Ireland Improved credit metrics across all portfolios Ulste ter B Ban ank Ro RoI (€m) m) +88 +88 Ope perating pr profi fit u up p €88m 88m 17 100 • Total i incom ome increased €14m, or 4.1% 57 • Operat ating e expenses decreased €57m or 16.7% 14 12 • Net I Impairment r releas ase €30m compared to €13m release in H1 2017 H1 2017 Op. Income increase Operating Impairment H1 2018 Op. Profit (Reported) expense decrease decrease Profit (Reported) 11
Commercial Banking Focus on capital efficiency delivering better returns Like ke-fo for-li like b basis is Commercia ial B l Bankin ing ( (£m) +352 +352 912 Transfers (1) 660 (142) 38 560 4 H1 2017 Op. Income Operating expenses Impairments H1 2017 1 2017 H1 1 2018 2018 O Op. Profit (Reported) (Includi ding t g transf sfers) s) Profit ( (Repor ported) d) Lik Like-fo for-lik like basis sis: O Operatin ing p g profit it u up £ £352m • Total i incom ome increased £172m, or 10.7% • Operat ating e expenses decreased £143m or 14.4% • Impairm rment nt charge £37m lower, or 66% 12 (1) Impact of net transfers with NatWest Markets and transfers out to RBS International
Private Banking Reshaping of the business is delivering a better performance Like ke-fo for-li like b basis is Private Pr te B Ban anking ( (£m) +62 +62 156 Transfers (1) (6) 18 94 82 H1 2017 Op. Income Operating expenses H1 2017 1 2017 H1 1 2018 2018 O Op. Profit (Reported) (Includi ding t g transf sfers) s) Profi fit (Repor ported) d) Lik Like-fo for-lik like basis sis: O Operatin ing p g profit it u up £ £62m • Total i incom ome increased £43m, or 12.7% • Operat ating e expenses decreased £13m or 5.6% 13 (1) Impact of transfers in from UK PBB and transfers out to RBS International
RBS International Making good progress towards ring-fencing structure Like ke-fo for-li like b basis is RBS Inte ternati tion onal ( (£m) Transfers (1) +2 +2 82 (7) 173 171 96 H1 2017 Op. Income Operating expenses H1 2017 1 2017 H1 1 2018 2018 O Op. Profit (Reported) (Includi ding t g transf sfers) s) Profi fit (Repor ported) d) Like-fo Lik for-lik like basis sis: O Operatin ing p g profit it u up £2m • Total i incom ome increased £7m, or 2.4% • Operat ating e expenses increased £13m or 12.7% • Net I Impairment r releas ase £3m compared to £5m charge in H1 2017 14 (1) Impact of transfers in from Commercial Banking and Private Banking
NatWest Markets Good customer flows despite a challenging second quarter Like ke-fo for-li like b basis is NatW atWest M Mar arkets ( (£m) Transfers (1) +203 +203 46 66 1 (38) (157) (185) H1 2017 Op. Income Operating expenses Impairment H1 2017 1 2017 H1 1 2018 2018 O Op. (Loss) (Reported) (Inclu luding ing t trans nsfers) Profit ( (Repor ported) d) Like-fo Lik for-lik like basis sis: O Operatin ing p g profit it u up £203 203m • Total i incom ome decreased £175m, or 19.5% • Operat ating e expenses decreased £420m or 38.5% 15 (1) Impact of net transfers with Commercial Banking
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