H1 2018 Results 3rd August
Howard Davies Chairman
Ross McEwan Chief Executive Officer
Key Messages Good perfo formanc mance e in a a tough operat atin ing environ ronmen ent H1 2018 8 Profit fit Before ore Tax of £1.8 8 bn, a and Attributab able le Profit fit of £888m 8m Announcin ing an i intention on to d declar are e 2p interim m dividen end (1) Buildin ing to a p payout ut ratio of around und 40% over r time Commit itted ed to < <50% cost:in t:incom ome e ratio o and 1 12%+ ROTE 2020 0 targets ts Focused ed on i improvi oving custom omer er service vice - physical al to di digital shift continues ues at pace (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 Strong capital al and Stable e income me Reducin ing cost deliverin vering returns rns 16.1% Excluding NatWest Markets, central £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) 5.3% H1 2018 Group ROTE (~10% ex. net RMBS charge) NatWes est t Markets ets income ome reduced 5k 5k £175m, or 19.5%, on H1 2017 Fewer FTEs £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 Branch counter er Contact t Centr tre e calls Cheq eque e usage e transactions tions down 11% on H1 2017 down 16% on H1 2017 down 7% on H1 2017 (1) Digita tal sales in UK PBB Over 80% of Comm mmerc ercial up 27% on H1 2017 Mobile e Paymen ments ts Custo tomer mers inte tera ract t with up 26% on H1 2017 us through digital Mobile e App logins channels annels up 20% on H1 2017 Digital growth Protec ect and Lower cost, t, more resilient lient, Better r custom omer er grow income and b better r controlled olled experien ience 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 Mobi bile App users rs (m) Conversa rsations tions with th Cora 1.5 +20% 0% Cora integrated with NatWest Mobile App Million 6.0 5.5 1.0 5.0 4.6 0.5 0.0 FY 2016 H1 2017 FY 2017 H1 2018 Q1 2018 Q2 2018 Curren rencyPay cyPay Teal Payments nts via a Bankline e and Direct ct Channels (1 (1) (£bn bn) Award winning N NatWe West st Mobile e App +7% 41% of customers omers migrated ted to New 233 234 Bankli line e and B Banklin ine e Mobile e pilot 219 launch ched ed A.I. . transfo form rming custom omer er servic vice e and H1 2017 H2 2017 H1 2018 loweri ring costs 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 ESME Curren encyPay cyPay Clou oud based accou ountin ting softwar are New Commercia mercial lending platform rm Pilot oting new w Foreign Exchan ange product Curren rencyPay cyPay Teal 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 (£m) +101 +101 Operat ating profit t up £101m 162 (50) • Total incom come decreased £11m, 1,432 (11) 1,331 or 0.3% • Opera ratin ing g expens nses s decreased £162m or 9.3% • Impa pair irment 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 Ulster er Bank RoI ( € m) m) +88 +88 Operat ating profit t up € 88m 88m 17 100 • Total incom come increased € 14m, or 4.1% 57 • Opera ratin ing g expens nses s decreased € 57m or 16.7% 14 12 • Net Impa pair irment nt rele lease € 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-fo for-li like e basis is Commer ercial al Banking (£m) +352 +352 912 Transfers (1) (142) 660 38 560 4 H1 2017 Op. Income Operating expenses Impairments H1 2017 7 H1 2018 8 Op. Profit (Reported) (Inclu ludin ing transfe fers) Profit fit (Reported ed) Like-fo for-li like ke basi sis: Opera ratin ing g profi fit up £352m 2m • Total incom come increased £172m, or 10.7% • Opera ratin ing g expens nses s decreased £143m or 14.4% • Impa pair irment 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-fo for-li like e basis is Privat ate e Banking (£m) +62 +62 156 Transfers (1) (6) 18 94 82 H1 2017 Op. Income Operating expenses H1 2017 H1 2018 8 Op. Profit (Reported) (Inclu ludin ing transfe fers) Profit fit (Reported ed) Like-fo for-li like ke basi sis: Opera ratin ing g profi fit up £62m 2m • Total incom come increased £43m, or 12.7% • Opera ratin ing g expens nses s 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-fo for-li like e basis is RBS Inter ternation tional (£m) Transfers (1) +2 +2 82 (7) 173 171 96 H1 2017 Op. Income Operating expenses H1 2017 H1 2018 8 Op. Profit (Reported) (Inclu ludin ing transfe fers) Profit fit (Reported ed) Like-fo for-li like ke basi sis: Opera ratin ing g profi fit up £2m • Total incom come increased £7m, or 2.4% • Opera erating ing expens enses es increased £13m or 12.7% • Net Impa pair irment nt rele lease £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-fo for-li like e basis is NatWes est t Markets ets (£m) Transfers (1) +203 +203 46 66 1 (38) (157) (185) H1 2017 Op. Income Operating expenses Impairment H1 2017 H1 2018 8 Op. (Loss) (Reported) (Inclu ludin ing transfe fers) Profit fit (Reported ed) Like-fo for-li like ke basi sis: Opera ratin ing g profi fit up £203m 3m • Total incom come decreased £175m, or 19.5% • Opera erating ing expens enses es decreased £420m or 38.5% 15 (1) Impact of net transfers with Commercial Banking
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