H1/Q2 2015 results and update on strategic progress 30 July 2015 - PowerPoint PPT Presentation

H1/Q2 2015 results and update on strategic progress 30 July 2015

Philip Hampton Chairman

Ross McEwan Chief Executive Officer

Today’s presentation The strategy is working – good progress against 2015 targets We are going further, faster on delivering our Plan  Capital ratio is up  Adjusted costs (1) are down  Returns in the Go-Forward Bank (2) are up  Restructuring continues at pace  Continue to make the bank simpler and easier to do business with Businesses categorised into three areas  Invest to grow: UK PBB and Commercial  Reposition for returns and growth: Ulster Bank, CIB Go-Forward, UK Private Banking  Dispose or run-off: Citizens, CIB Capital Resolution, RCR, Williams & Glyn, International Private Banking Our focus on customer service, trust and advocacy is starting to deliver results 1 (1) Excluding restructuring, litigation and conduct costs. (2) See slide 15 pro-forma Go-Forward and Exit Bank profiles.

Our blueprint for lasting success 3 (1) During the period of CIB restructuring. (2) Excludes restructuring, conduct, litigation and intangible write-off charges as well as the operating costs of Citizens Financial Group and Williams & Glyn. (3) Global Financial Services (GFS) norm currently stands at 83%.

Good progress against 2015 goals Priorities 2015 Goals H1 Progress  £326bn  RWAs reduced to below £300bn  RCR exit substantially complete  Funded assets down 78% since Strength & sustainability initial pool of assets identified (1)  Citizens exit  Further sell-down priced in late July 2015 (2)  AT1 issuance (£2bn)  AT1 issuance to be launched shortly (3)   Improvements in NatWest Personal. Net Promoter Score (NPS) NatWest Business, RBS Business (4) Ulster Customer experience improvement in every UK customer Bank Personal (Northern Ireland) (5) franchise  Over £700m annualised cost savings  Cost reduction of £800m (6) Simplifying the bank achieved in H1   Lending growth in strategic segments 2% annualised growth in UK PBB and Supporting growth in line with nominal UK GDP growth Commercial Banking  Raise employee engagement index  Progress report in Q4 2015 to within 8% of Global Financial Employee engagement Services norm (1) Funded assets are down 71% since 1 Jan 2014. (2) Following the Offering and the directed buy back, RBSG will continue to hold up to 23.4% of CFG’s shares of common stock (20. 9% assuming exercise of the entire over- allotment option). (3) Issuance subject to market conditions. (4) Further details in slide 33 (5) Source: Internal research – Coyne Research June 15 based on 4 quarter roll with latest base size 365. (6) Excludes restructuring, 4 conduct, litigation and intangible write-off charges as well as the operating costs of Citizens Financial Group and Williams & Glyn.

Click to edit Master title style We are becoming simpler Total Number of Properties (1) Number of Programmes -14% -16% -67% 2,900 550 2,500 2,100 -18% 1,500 182 150 2013 2014 2015 2016 2013 2014 2015 Number of products (2) Number of registered companies -6% -22% -32% 1050 295 144 146 984 -14% 266 849 200 112 X End 2014 H1 H1 2014 End 2015 2015 2015 2015 H1 2014 2014 H1 2015 Front Book Back Book 5 (1) Whole bank including branches and head office properties. Williams & Glyn included up to end 2015. (2) Excludes CIB and GTS. Notes: The objectives set on this slide are forward looking statements - See the last page 7 of this presentation.

Building long-term shareholder value Phase 1 – 2014 Phase 3 – 2017 to 2019 Phase 2 – 2015/16 Building financial strength Becoming #1 Improve our Go-Forward Bank and accelerate our Exit Bank (1)  Rebuild capital strength –  Cement customer-centric CET1 ratio +260bps positioning – #1 for customer  Accelerate the transformation during 2014 service, trust and advocacy by 2020 of our Go-Forward Bank  De-risk – US ABP, RCR, NPLs, liquidity portfolio  Achieve attractive, balanced  Achieve material RWA reduction and sustainable financial  Start cost reduction plan – returns – target 12+% ROTE in our Exit Bank £1.1bn savings achieved in 2019  Simplify our organisational  Address other material structure – 7 divisions to 3 franchises remaining issues within our control  Discussions around resumption of dividends / buy-backs (2)  Pay out surplus capital above 13% CET1 ratio subject to PRA approval (2) 6 (1) See slide 15 pro-forma Go-Forward and Exit Bank profiles (2) Subject to PRA approval. In addition, key milestones before seeking PRA approval for capital distributions would include, among other considerations, reaching the 13% CET1 ratio target, achieving confidence in sustainable profitability, improved stress-testing results and operating within risk appetite, peak of litigation and conduct costs passed and at least £2 billion of AT1 raised.

Improving the Go-Forward Bank Delivering for our customers in Phase 2 Priorities H1 2015 highlights  Only bank/building society to have the ‘ fairbanking ’ 5* mark on instant access adult savings range Strength &  Investing over £600m in 2015 on IT, business resilience and regulatory related programmes Sustainability  Continued focus on culture and leadership  Innovation: Apple Pay, TouchID and RNIB approved cards  3% Cashback Reward account launched Customer experience  NatWest mobile banking app customer Net Promoter Score improved to joint #1 in the market (1)  Customers using the mobile banking app increased 12% to 3.3 million  Average personal current account opening time halved to 30 minutes Simplifying  Commercial Bank reduced account opening time by 25% the bank  Rationalisation of our front and back-book product sets by up to 50%  Increased number of mortgage advisors by 28% from H1 2014 Supporting  Launched £2.5 million Skills & Opportunities fund growth  Opening eight entrepreneurial hubs. Birmingham, Bristol and Leeds opened, with more in plan  Set target of 30% female leaders in every business by 2020 Employee engagement  Rollout of bank-wide training to 7,500 leaders across the bank 7 (1) Source: Internal NPS Drivers study, June 15 based on 3 month rolling average with latest base size NatWest (2234) Question: ‘ Based on your recent experience how likely are you to recommend their online services to a relative, friend or colleague in the next 12 months?’

Customers are responding to our investment We are: Customers are: investing in advice more engaged Number of mortgage advisors 869 677 -21% +28% Mortgage service Mortgage NPS NatWest complaints +9 H1 2014 / H1 2015 H1 2014 H1 2015 8 Source: Internal NPS Drivers Study . Latest Bases: NatWest (1233), Question: 'Based on your experience as a (brand) Mortgage customer how likely are you to recommend a (brand) Mortgage to a relative, friend or colleague in the next 12 months?‘ Mortgage complaints data based on internal analysis

Strong growth in our mortgage business UK Personal and Business Banking Applications Gross new lending £9.4bn £5.4bn +42% +43% £6.6bn £3.8bn Q115 Q215 Q115 Q215 Q2 net growth of £1.8bn, balances £105.4bn 9

Summary Stronger capital position. CET1 ratio is up to 12.3% Adjusted costs are down 14% H1 2014 / H1 2015 (1) Investment in our Go-Forward Bank is delivering results Our focus on customer service is starting to deliver results 10 (1) Excluding restructuring, litigation and conduct costs

Ewen Stevenson Chief Financial Officer

Illustrative Go-Forward Bank and Exit Bank profile Illustrative Go-Forward Bank Total Exit group overview (pro-forma 2014) Illustrative Exit Bank (Q2 2015) RBS profile (Q2 2015) Other CIB Int’l CIB Total Other Total Exit Go- Capital Go- (£bn) PBB (1) CPB (2) Go- Citizens RCR W&G (5) Private Investments Group Forward Resolution Forward Forward Banking (4) (3) (3) Income 1.5 1.1 0.4 0.1 3.1 0.8 0.1 0.1 0.2 0.1 - 1.3 4.4 Adj. costs (6) (0.9) (0.5) (0.4) 0.1 (1.7) (0.5) (0.3) (0.1) (0.1) - - (1.0) (2.7) Impairment - - - - - (0.1) - 0.2 - - - 0.1 0.1 releases Adj. op. 0.6 0.6 - 0.2 1.4 0.2 (0.2) 0.2 0.1 0.1 - 0.4 1.8 profit (6) Funded 142 107 149 105 503 83 62 8 20 5 1 179 682 Assets L&A to 129 101 27 2 259 61 31 6 20 3 - 121 380 customers Customer 147 120 22 2 291 64 27 1 23 7 - 122 413 deposits RWAs 52 75 43 8 178 70 45 14 11 2 6 148 326 Adj. RoE 29% 13% nm nm 16% 7% nm nm nm 9% 10% 5% 11% (%) (6,7) (1) Excludes Williams & Glyn. (2) Excludes international private banking. (3) The CIB results split into go-forward and capital resolution elements are based on a modelled approach pending outcomes of ongoing implementation planning and therefore is subject to change. (4) Other go-forward is primarily Centre, including the liquidity portfolio. (5) Does not reflect the cost base, funding and capital profile of a standalone bank. 11 (6) Excludes restructuring and litigation and conduct costs. (7) Segmental ROE is calculated using operating profit after tax on a non-statutory basis adjusted for preference share dividends divided by average notional equity (based on 13% of average RWAe). Total RBS ROE is calculated using operating profit after tax on a non-statutory basis less preference dividends divided by average RBS tangible equity.