Important Information Certain statements made in this document constitute forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995, regarding the belief or current expectations of RBS, RBS’s Directors and other members of its senior management about RBS’s businesses and the transactions described in this document, including statements relating to any future write-downs or impairments. Generally, words such as ‘‘may’’, ‘‘could’’, ‘‘will’’, ‘‘expect’’, ‘‘intend’’, ‘‘estimate’’, ‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘seek’’, ‘‘continue’’ or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance. Rather, they are based on current views and assumptions and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of RBS and are difficult to predict, that may cause actual results to differ materially from any future results or developments expressed or implied from the forward- looking statements. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among other factors: the ability of RBS to access sufficient funding to meet its liquidity needs; developments in the current crisis in the global financial markets; the value and effectiveness of any credit protection purchased by RBS; the extent of future write-downs and impairment charges caused by depressed asset valuations; general economic conditions in the United Kingdom, the United States and other countries were RBS does business; and limitations on, or additional requirements imposed on, RBS’s activities as a result of HM Treasury’s planned investment in RBS. These forward- looking statements speak only as of the date of this announcement. The information and opinions contained in this announcement are subject to change without notice and, subject to compliance with applicable law, RBS assumes no responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. The securities mentioned herein (the “Securities”) have not been, and will not be, registered under the US Securities Act of 1933 (the “Securities Act”) and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act. There will be no public offer of the Securities in the United States. The information contained in this presentation is subject to, and must be read in conjunction with, all other publicly available information, including, where relevant any fuller disclosure document published by the Group. Any person at any time acquiring the securities must do so only on the basis of such person’s own judgement as to the merits of the suitability of the securities for its purposes and only on such information as is contained in public information having taken all such professional or other advice as it considers necessary or appropriate in the circumstances and not in reliance on the information contained herein. The information is not tailored for any particular investor and does not constitute individual investment advice. Information in this presentation relating to the price at which investments have been bought or sold in the past or the yield on investments cannot be relied upon as a guide to future performance. Slide 2
Sir Tom McKillop Make it happen Chairman
Introduction • Unprecedented dislocation in financial markets • Comprehensive measures outlined by HMT to stabilise UK financial system – Liquidity and funding support – Support for banks to raise new capital • Decisive actions taken to secure a stronger future for the Group • Capital raising – £15 billion ordinary share issuance – £5 billion preference share issuance Slide 4
Introduction • Capital raising will place the Group among the best capitalised banks in Europe – Well positioned to absorb impact of economic downturn – Defend and grow core franchises – Support risk reduction and Group restructuring initiatives • Management and Board changes – Stephen Hester appointed Group Chief Executive – John Hourican appointed CEO, Global Banking & Markets – 3 new non-executive directors to be appointed by RBS • Strategic review of Group to be undertaken – Iterative process over six months Slide 5
Group Chief Executive Designate Stephen Hester Make it happen
First Impressions • Embarking on new task with enthusiasm and confidence • High level of support from new colleagues – RBS is embracing change • One purpose, one focus: To rebuild the RBS success story – Shareholder value – Customer support – Employee pride • The Journey – Tough action to allow the real RBS to be seen and to thrive – Difficult near-term news flow as market and economic conditions take their toll Slide 7
Today’s Agenda • Financial Update – Guy Whittaker • The Future – Stephen Hester RBS has been and can be a world class financial institution. That is our goal. Slide 8
Group Finance Director Guy Whittaker Make it happen
Current Trading 9 Months to 30 September 2008 • Group underlying income stable • Costs flat • Pre-impairment profit up 7% • Post-impairment profit down 8% • Q3 credit market write-downs £206 million (after IAS reclassification) • 30 September 2008 pro-forma capital ratios – Core Tier 1 7.9% – Tier 1 11.6% Slide 10
Divisional Performance • Regional Markets: – UK: continued income growth, but slowing – US: modest income growth – Europe, Asia: income growth slowing – Pre-impairment profit across regions broadly stable – Economic weakness leading to marked rise in impairments • GTS performing strongly • RBS Insurance performing well • Manufacturing costs in line with 1H08 trends Slide 11
Divisional Performance • Global Banking & Markets: – Good performance in many customer and flow businesses – Particularly strong in rates and currencies – Origination volumes low in equities and debt – Specific market dislocation events cost c.£0.7bn in September, and c.£1bn since – YTD underlying pre-impairment profit 11% lower – Impairment losses rising in 3Q08, c.50% above 1H08 run rate – Small underlying profit in 3Q08 Slide 12
GBM Balance sheet update GBM Third Party Assets* Key Messages £bn • 3Q08 key drivers: 1,000 917.9 867.6 900 832.6 – Reverse Repos +£27bn 760.8 800 c.700 – Settlement balances +£20bn 700 600 – FX movements significant 500 factor 400 • 3Q08 RWAs +£35bn: 300 200 – Expiry of risk-mitigation 100 transactions +£17bn 0 – FX +£7bn Dec 2007 Mar 2008 Jun 2008 Sep 2008 Dec Target Loans and Advances to Customers excl. Repos Trading Activities Reverse Repos (Customer & Bank) Other Assets** * Third party assets excludes derivatives Slide 13 ** Other Assets includes Cash at Central Bank, L&A Banks excl. Reverse Repos, Deals Pending Settlement, Tangible Assets
Group Credit Quality Key Messages 1H08 3Q08ytd Loans & Advances • Increase in L&A driven by FX to Customers £609.1bn £637.5bn movements (c.60% of increase) NPL + PPL £9.0bn £11.0bn • Weakening economy drives NPLs and impairments in most NPL + PPL % of regions Loans & Advances 1.47% 1.72% • Provision coverage falling as Annualised Impairment more problem loans highly Charge % of L&A 0.46% 0.51% collateralised Provision coverage of NPL + PPL 56% 51% Gross loans and advances to customers excluding reverse repurchase agreements and stock borrowing Impairment charge calculation excludes impairments from available-for-sale securities Slide 14
Corporate Credit Trends Transfers into corporate restructuring unit 400 • Steady increase in transfers from low base in 2Q07 350 • Cases spread by sector and 300 Number of New Cases geography 250 • New cases in 3Q08: 377 200 (3Q07: 228) • Cautious outlook for 2009 150 100 50 Property Wholesale and retail trade Manufacturing Building 0 Tourism and Leisure Business Services 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 TMT Public Sectors Financial Intermediaries Other Quarter Ended Slide 15
Credit Market Write-downs 30 September 2008 Exposures and Write-downs Key Messages Net current Net Average Write-downs Write-downs 3Q08 1 1H08 1 £bn exposure Price (%) • ABX stable in 3Q08 ABS CDOs 2.2 37 - (1.9) • Monoline CVA increases Monolines 3.4 n/a (0.3) (2.1) US Residential • RMBS, Lev Fin and CLOs Mortgages 1.1 63 (0.2) (1.0) balances declining US Commercial Mortgages 1.7 87 - (0.1) • IAS re-classification reduced Leveraged finance 3.9 91 - (0.9) impact on operating profit CLOs 0.8 80 (0.1) (0.1) CDS hedging 0.4 0.2 • Further write-downs likely in 4Q08 Total write-downs net of CDS hedging (0.2) (5.9) (1) Write-downs before tax. Detailed definitions in RBS interim company announcement. Slide 16
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