H1 2019 Results 2 August t 2019 Howard Davies Chairman Ross - PowerPoint PPT Presentation

H1 2019 Results 2 August t 2019

Howard Davies Chairman

Ross McEwan Chief Executive Officer

Group financial performance £2.7bn 7bn £2.0bn 0bn 12.1% 1% Generat ating ing H1’19 Operating profit H1’19 Attributable profit RoTE H1’19 returns rns before tax up £1.2bn on H1’18 up from 5.3% in H1’18 up £868m on H1’18 £173 73m 3.4k 4k Reducin cing costs Cost reduction FTE reduction compared to H1’18 compared to H1’18 2.5% 5% £14.3b 4.3bn Discip ciplined ined Net lending growth Gross new mortgage lending growth on an annualised basis across lending in UK PB retail and commercial businesses in H1’19 16.0% 0% 45bp bps Capital al Post-dividend accrual Underlying capital strength CET1 capital ratio generation at H1’19 in H1’19 Announced ed a 2 2p i interim im ordinary y dividen end & 1 12p special al dividen end per share 4

Challenging operating environment for banks Rate te rise expec ectat tations s contin tinue ue to push sh out ut (1 Busine ness ss confide fidence ce is weake kening ng (2 (2) (1) Manufacturing PMI Service PMI 1.1 60 May 2019 Jun 2019 Jul 2019 1.0 58 0.9 56 0.8 54 % 0.7 52 0.6 50 0.5 48 46 0.4 1 2 3 4 5 Jan Dec Dec Jun Years 2017 2017 2018 2019 Yield curve continues to fall ▪ Business confidence surveys point to a deterioration in investment appetite ▪ Mortgage market remains highly competitive ▪ 5 (1) Bank of England Overnight Sterling Index swap rates (2) Purchasing Manager Index (PMI)

Capital returns to shareholders 2018 H1 2019 2p 3.5p 7.5p 2p 12p Interim Final Special Interim Special £1.6 .6bn £1.7 .7bn paid to to be paid to shareholders shareholders Total payout since resuming dividend payments £3.3 billion, of which £2.0 billion will ▪ be paid to UK Taxpayer Post-dividend accrual CET 1 capital ratio of 16.0%, remaining above our long term ▪ target of c.14% at the end of 2021 6

Supporting customers and growing in key markets Suppo pportin rting g personal sonal custo tomers ers Suppo pportin rting g the regions ons and entrepre repreneursh eurship p 13.9m current £14.3bn 11.2k £30.6bn account customers gross new mortgage v entrepreneurs lending to SME 350k new customer lending in supported by & Mid Corporates UK PB in H1’19 up £0.6bn in H1’19 NatWest hubs (1) accounts since FY’18 Suppo pportin rting g busi sines ess s custo tomers ers Suppo pportin rting g the tran ansi sition on to digi gital tal >12,000 >50% £102.6bn Issued our first of sales done Bankline mobile users lending in Commercial SONIA covered bond up from c.2,500 in digitally in UK PB Banking in H1’19 Q1’19 in June 2019 7 (1) Since hubs were brought in-house in April 2018

Delivering improvements for customers Biometric cards pilot Facial Recognition NatWest Rapid Cash • Supports working capital • Account opening in under 10 • Payments of over £30 using requirements up to £300k minutes for NatWest personal fingerprint authorisation customers Video Banking New credit card proposition First SONIA linked loan • Strong customer volumes with • Supporting our customers • Allow NatWest SMEs to hold a net 35k joining in the last six through the transition away secure pre-arranged video months from LIBOR rates calls 8

Providing innovative solutions Fully automated A digital SME 24x7 personal lending platform banking proposition assistant Currency Pay ™ A simple, secure and streamlined An innovative new international companion bank payment platform account Invoice & payments Business advisor; Capturing Payments automation on one tips, articles & and encouraging platform tailored tools trade 9

Key messages H1 2019 pre tax operati ting ng profit t £2.7bn n and attri ribu butab table le profit t £2.0bn. Announc nced d a 2p ordinary ry interim im dividen end d and 12p special l dividend end per share. Since resumed ed dividen end d payments nts will have return rned ed £3.3bn to sharehol older ders s and £2.0bn n to UK taxpayer yers. s. Supportin ting g customers mers with net lending g up £3.6bn n or 2.5% annualis ised ed across the retail l and commerc rcia ial l businesse ses s in H1 2019. Delive vered red furth ther er improve vements ments for cu customers omers, much ch more to co come. Current nt operati ting ng environ onmen ment t makes s achievin ving g 12% RoTE E by 2020 very unlikely. ely. This remains ns our strategi egic target et and we believe ve it is ach chievab vable le in the medium um term. (1 (1) (1) The targets, expectations and trends discussed in this section represents management’s current expectations and are subject t o c hange, including as a result of the factors described in the “Risk Factors” 10 section on pages 253 to 263 of the 2018 Annual Report and Accounts and pages 46 to 47 of the Interim Results 2019. These statements constitute forward-looking statements. Refer to Forward-looking statements in the appendix of this document.

Katie Murray Chief Financial Officer

H1 2019 summary financials H1’19 vs. £m £m H1’19 H1’18 Incom ome e (£m) m) Net interest income 4,004 (7%) Ne 7,117 Non interest income 3,113 31% To 6,702 990 Total income 7,117 6% 6% (356) 26 (223) Operating expenses (4,100) (13%) (22) Op o/w Other expenses (3,411) (5%) H1’18 Personal, RBSI NatWest Centre Alawwal (4) H1’19 Ulster, Markets (3) ex. Str o/w Strategic costs (629) 80% Commercial ex. Alawwal Liti o/w Litigation & conduct costs (60) (93%) & Private Alawwal Impairment losses (323) 129% Imp Key Metri rics cs Operating profit 2,694 48% 48% Op 7.5% ex. Tax (194) (73%) Ta Alawwal (1) (6) o/w DTA write back 215 - 12.1% 286p 289p 16.0% 16.0% Prefs/ MI/ Disc ops (462) 102% 4.8% Attributable profit 2,038 130% 130% Pro Cost:income ratio 57.2% (13pp) Co (5) RoTE TNAV CET1 Ratio FY18 H1’19 (2) Bank NIM 2.04% (9bps) (1) The tax charge includes a £215 million deferred tax asset credit associated with the transfer of taxable losses from NatWest Markets Plc to RBS Plc under ring-fencing regulations. (2) “Bank NIM” is NIM excluding NatWest Markets (3) “NWM” throughout this presentation refers to NatWest Markets operating segment and should not be assumed the same as the NatWest Markets Plc legal entity or group. (4) Reference to Alawwal throughout this presentation refers to the merger between Alawwal Bank with Saudi British Bank on 17 th June 2019. RBS held a stake in a consortium arrangement 12 since the acquisition of ABN AMRO in 2007. The completion of this merger, and the unwinding of the consortium has impacts on the financial and capital position of RBS. (5) TNAV per ordinary share on a fully diluted basis. (6) FY 2018 Pro forma IFRS 16.

Bank Net Interest Margin Q2 2019 vs. Q1 2019 Bank NIM (bps) 208 207 (1) Futu ture e considera eration tions (4) • Rate sensitivity 202 202 (1) • Reduction in liquidity • Asset and liability pressures • Economic uncertainty Q1’19 Q1’19 Central Competitive Other Q2’19 Q2’19 underlying liquidity pressure underlying (1) £410 410bn bn £404bn AIEAs EAs (2) 13 (1) Underlying NIM is adjusted for <1bp of one-off items. (2) AIEAs refers to Average interest-earning assets as per the Financial Supplement.

2019 Priorities 2-3% Net loan growth th 1. 2. £300m Cost take out Capital al generation tion 3. 4. Capital al returns ns 14

Net loan growth H1’19 annualised net loan growth (1) 1) 2019 target net 2 – 3% loan growth (2) H1’19 net loan growth 2.5% UK Personal 4.0% Banking Ulster Bank 2.1% ROI Commercial 0.0% Private 5.6% RBSI 4.5% 15 (1) H1’19 vs. FY18 net loan growth presented on an annualised basis in GBP. (2) Target net loan growth is 2-3% across Personal, Ulster, Commercial & Private

Cost reduction Operat ating expen enses (£m) Strategic costs Strateg egic costs (£m) Conduct & Litigation Bank Levy 4,910 4,735 Other Expenses 654 350 4,100 481 801 629 179 60 £1.2 – 1.5bn 434 355 3,596 3,584 3,411 299 195 141 H1’18 H2’18 H1’19 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 FY’19 Target (1) FTE 70 67 67 (‘000) £173m Other expenses reduction in H1 2019 Target £300m in 2019 16 (1) We expect to be towards the lower end of £1.2 to £1.5bn range by the end of 2019.

Capital generation H1 2019 Strong capital build CET1 (%) 17.1 (0.3) 0.2 0.6 (0.3) 0.2 (0.8) 0.4 16.0 16.0 c.14.0% Pro-forma Alawwal Alawwal Profit ex. RWAs ex. Other H1’19 Ordinary Special H1’19 Post FY 2021 Q4’18 RWA Profit Alawwal Alawwal Pre-dividend dividend dividend dividend Target reduction accrual ▪ Underlying capital generation of 45bps in H1 2019. 17