H1 2019 Results Fixed income presentation 2 nd nd August ust 2019 - PowerPoint PPT Presentation

H1 2019 Results Fixed income presentation 2 nd nd August ust 2019

Katie Murray Chief Financial Officer 2

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%) (4) H1’18 Personal, RBSI NatWest Centre Alawwal H1’19 (3) Ulster, Markets 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) o/w DTA write back 215 - 12.1% 286p 289p 16.2% 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 since the 3 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

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. 4

H1 2019 update on progress 2.5% annualised net loan growth across Personal & • Net loan growth th Ulster and Commercial & Private • Targeting 2%-3% net loan growth in 2019 Reduced other expenses by £173m in H1’19 vs H1’18 • Continui nuing ng co cost reducti tion on Targeting cost reduction of £300m in 2019 • Underlying capital generation of 45bps in H1’19 • Capital al generation tion • CET1 ratio at 16.0% post ordinary and special dividend accrual RWAs £189bn • • Targeting CET1 of c.14% by the end of 2021 Capital al returns ns 2p ordinary dividend and 12p special dividend in H1’19 • • Unlikely to achieve our 12%+ RoTE and <50% CIR targets in 2020. • These remain our strategic targets and we believe they are achievable in the medium term. (1) (1) The targets, expectations and trends discussed in this section represents management’s current expectations and are subject t o change, including as a result of the factors described in the “Risk Factors” 5 section on pages 253 to 263 of the 2018 Annual Report and Accounts and pages 47 to 48 of the Interim Results 2019. These statements constitute forward-looking statements. Refer to Forward-looking statements in the appendix of this document

Robert Begbie Treasurer

Treasurer’s review Balance sheet reflects diversified funding, sound liquidity management and strong capital generation Good progress on issuance, lower-end of total 2019 senior unsecured guidance met in H1 (1) S&P one notch upgrade across all rated entities, outlook stable Ongoing optimisation of the capital stack; redeemed € 1bn Tier 2 3.625% (1) Represents communicated guidance of £3-5bn for RBSG senior unsecured MREL requirement and £3-5bn NWM Plc senior unsecured funding target for 2019 7

Strong, sustainable balance sheet Key H1 2019 capital, funding and liquidity metrics Capital stack (% RWA) Total funding mix (£bn) Liquidity portfolio (£bn) (1) (3) 2.7% £78bn £71bn 2.2% Total l CET1 (2) Customer deposits capital ~£439b 439bn £203bn 3bn Primary liquidity Additional Tier 1 Wholesale funding 20.9% 9% Secondary liquidity Tier 2 16.0% £362bn £133bn CRR RWA lever erage ge LDR STWF LCR NSFR £189bn 9bn ratio io 86% 86% £19bn bn 154% 154% 140% 140% 5.2% Note: Figures may not cast due to rounding. (1) Funding excluding repos, derivative cash collateral. (2) Customer deposits includes amounts from NBFIs, excludes customer repos. (3) Primary liquidity includes cash and other highly liquid securities, secondary liquidity comprises assets eligible for discounting at the Bank of England and other central banks 8

Good progress against 2019 issuance plan Continuing diversification of 2019 issuance across a H1 2019 2019 range of formats, currencies and tenors (1) Issuance Guidance • $2bn RBSG senior MREL 6NC5 FXD to FRN RBSG plc Senior Unsecured • $1.25bn RBSG senior MREL 11NC10 FXD to FRN ~£3bn £3-5bn £3 MREL • £500m RBSG senior MREL 8NC7 FXD NWB Plc • £750m NWB Plc inaugural SONIA linked 4yr FRN Covered £750m £2-3bn (2) £2 2) Covered Bond Bond • $1.3bn NWM Plc dual tranche senior 3.5yr FXD and FRN • € 1bn NWM Plc senior 5yr FXD NWM Plc (3) ~£3.6bn £3 £3-5bn Senior Unsecured • € 1.25bn NWM Plc senior 2yr FRN • ¥50bn NWM Plc dual tranche senior 3yr and 5yr FRN (3) • kr500m NWM Plc senior 2yr FRN (1) Excludes private placements and minor trades 9 (2) Total guidance is for NWH for both Covered Bonds and RMBS. (3) 3yr and 5yr Yen transactions launched in June but and not settle until July 2019 and therefore not included in the £3.6bn issuance for H1 2019

Closing remarks Net lending growth in a highly competitive environment Ongoing capital generation and return to shareholders Maintaining a strong set of balance sheet metrics Significant progress toward funding targets 10

Q&A

Appendix

Capital ratios significantly above regulatory requirements H1 2019 CET1 and target CET1 ratio versus 2022 minimum requirements as a % of RWA vs. Total (1) maximum distributable amount (“MDA”) (2) MREL senior unsecured outstanding (Based on illustrative RWA of ~£200bn) 26.5% 5% 16.0% 0% CRR CET1 Buffers Total MREL senior issuance (£bn) 3.3% ~14.0% 0% Illustrative headroom(3) Illustrative ~£4.0bn bn headroom(3) 10.7% 7% HoldCo Senior ~£23. 3.2b 2bn 0.7% 11.6% 1.0% MREL 23.2% ~£19. 9.2b 2bn 2.5% (5) Counter cyclical buffer Pillar 2 GSIB buffer (Removed from 1 Jan 2020) 3.6% Total MREL issuance (6) Capital Conservation buffer 2.0% 10.7% (4) Pillar 2A (varies annually) Remaining net issuance by 1 Jan 2022 Pillar 1 minimum Pillar 1 8.0% 4.5% Minimum requirements 1 Jan 2022 H1 2019 Minimum Management Requirement CET1 target (1) “MREL” = Minimum required eligible liabilities (2) Illustration, based on assumption of static regulatory capital requirements. (3) Headroom presented on the basis of MDA, and does not reflect excess distributable capital. Headroom may vary over time and may be less in future. (4) RBS’s Pillar 2A requirement was 3.6% of RWAs as at 31 December 2018. 56% of the total Pillar 2A requirement, must be met from CET1 capital. Pillar 2A requirement held constant over the period for illustration purposes. Requirement is expected to vary over time and is subject to at least annual review. (5) UK Countercyclical Buffer 13 introduced from November 2018. Firm specific Countercyclical Buffer (CCyB) is based on the weighted average of CCyBs applicable to RBS exposures. The buffer in the illustration is based exclusively on already announced CCyB rates by local regulators. (6) Represents the LAC value of RBS Group plc senior unsecured issuance as at H1 2019

Issuing entity structure (1) Inve vestor ors AT1 T1, T2, MREL The Royal Bank of Scotland Group plc Insid ide e the ring-fen fence iAT1 AT1, iT2, 2, iMREL NatWes est t Holdings Ltd iAT1 AT1, iT2, 2, iMREL iAT1, AT1, iT2, 2, iMRE REL iAT1 AT1, iT2, 2, iMREL iAT1, AT1, iT2, 2, iMRE REL iAT1, AT1, iT2, 2, iMRE REL The Royal Ulste ster Bank k Ltd NatWes est t Bank Ulster er Bank NatWes est t Markets ets RBS Inter ternation tional Bank of Plc Irelan and DAC plc Ltd Ltd Scotland and plc Coutts ts & Co Senio ior r secure cured Senio ior r secure cured Senio ior r unsecur cured Inve vestor ors Inve vestor ors (1) Future external issuance of AT1, Tier 2 and MREL will be from RBS Group plc, subsidiaries will only issue AT1, Tier 2 and MREL internally. NatWest Bank Plc and Ulster Bank Ireland DAC will 14 issue senior secured externally and Natwest Markets Plc will issue senior unsecured externally