The Royal Bank of Scotland Group Q1 2013 Results 3 rd May 2013 - PowerPoint PPT Presentation

The Royal Bank of Scotland Group Q1 2013 Results 3 rd May 2013

Important Information Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘believes’, ‘should’, ‘intend’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘will’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on such expressions. In particular, this document includes forward-looking statements relating, but not limited to: the Group’s restructuring plans, divestments, capitalisation, portfolios, net interest margin, capital ratios, liquidity, risk weighted assets (RWAs), return on equity (ROE), profitability, cost:income ratios, leverage and loan:deposit ratios, funding and risk profile; discretionary coupon and dividend payments; certain ring-fencing proposals; sustainability targets; the Group’s future financial performance; the level and extent of future impairments and write-downs, including sovereign debt impairments; and the Group’s potential exposures to various types of market risks, such as interest rate risk, foreign exchange rate risk and commodity and equity price risk. These statements are based on current plans, estimates and projections, and are subject to inherent risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. For example, certain market risk disclosures are dependent on choices about key model characteristics and assumptions and are subject to various limitations. By their nature, certain of the market risk disclosures are only estimates and, as a result, actual future gains and losses could differ materially from those that have been estimated. Other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this document include, but are not limited to: the global economic and financial market conditions and other geopolitical risks, and their impact on the financial industry in general and on the Group in particular; the ability to implement strategic plans on a timely basis, or at all, including the disposal of certain Non-Core assets and assets and businesses required as part of the State Aid restructuring plan; organisational restructuring, including any adverse consequences of a failure to transfer, or delay in transferring, certain business assets and liabilities from RBS N.V. to RBS; the ability to access sufficient sources of liquidity and funding; deteriorations in borrower and counterparty credit quality; litigation and regulatory investigations including investigations relating to the setting of LIBOR and other interest rates; costs or exposures borne by the Group arising out of the origination or sale of mortgages or mortgage-backed securities in the United States; the extent of future write-downs and impairment charges caused by depressed asset valuations; the value and effectiveness of any credit protection purchased by the Group; unanticipated turbulence in interest rates, yield curves, foreign currency exchange rates, credit spreads, bond prices, commodity prices, equity prices and basis, volatility and correlation risks; changes in the credit ratings of the Group; ineffective management of capital or changes to capital adequacy or liquidity requirements; changes to the valuation of financial instruments recorded at fair value; competition and consolidation in the banking sector; the ability of the Group to attract or retain senior management or other key employees; regulatory or legal changes (including those requiring any restructuring of the Group’s operations) in the United Kingdom, the United States and other countries in which the Group operates or a change in United Kingdom Government policy; changes to regulatory requirements relating to capital and liquidity; changes to the monetary and interest rate policies of central banks and other governmental and regulatory bodies; changes in UK and foreign laws, regulations, accounting standards and taxes, including changes in regulatory capital regulations and liquidity requirements; the implementation of recommendations made by the Independent Commission on Banking (ICB) and their potential implications; impairments of goodwill; pension fund shortfalls; general operational risks; HM Treasury exercising influence over the operations of the Group; insurance claims; reputational risk; the ability to access the contingent capital arrangements with HM Treasury; the conversion of the B Shares in accordance with their terms; limitations on, or additional requirements imposed on, the Group’s activities as a result of HM Treasury’s investment in the Group; and the success of the Group in managing the risks involved in the foregoing. The forward-looking statements contained in this document speak only as of the date of this announcement, and the Group does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of any offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.

Business Highlights & Review

Business highlights Strong improvements in capital position: � Robust capital levels with reported CT1 ratio up 50bps to 10.8%, ‘fully loaded’ Basel III ratio also up 50bps to 8.2% � Remain confident of c.9% ‘fully loaded’ ratio by end 2013 and c.10% by end 2014 � TNAV per share improved by 13p to 459p (3%) Robust Safety and Soundness � Funding and liquidity metrics remain at ‘gold standard’ targets � Liquidity buffer up by £11bn to £158bn, c.3.7 times coverage of STWF 1 Core Business – performance resilient: � Operating R&C profit continues to ‘run hard to stand still’ given environment. R&C profits up 12% YoY � Ulster loss narrowed by 33% (£79m) QoQ as credit costs improved � Markets adjusting to new level post Q1 announcements Non-Core – further reduction achieved: � Funded assets reduced by £6bn in constant currency terms, down c.£205bn since inception of plan; on track for FY13 target of £40bn Branch divestment: � Work towards a full separation and IPO continues. Good progress made in recent months Focused on serving our customers well: � Sustained strong customer franchises across Core business. Net promoter scores slightly up 1 Short-term Wholesale Funding 1

Financial highlights Core Business: Q113 Operating profit 1 £1.3bn Resilient start to year Return on Equity 2 Core ex Ulster RoE 10.3% 8.2% Broadly stable NIM, expect gentle uplift from here R&C NIM 2.90% Cost : income ratio 4 64% Costs down 10% YoY Impairments £0.6bn Down 20% QoQ, Ulster down 39% YoY Loan : deposit ratio 5 90% Strong position maintained Group Progress: Q113 Operating profit +50% QoQ driven by lower Non-Core losses and seasonally higher Markets £0.8bn Non-Core funded £53bn Further £6bn reduction QoQ in constant currency driven by run-off and sales assets Capital strength 10.8% CT1 ratio increased 50bps driven by RWA reduction. FLBIII CT1 ratio increased 50bps to 8.2% Pre-tax profit £0.8bn QoQ reduction in below the line items supports profitability 1 Excluding own credit adjustment (OCA). 2 Equity allocated based on share of Group tangible equity. 3 Ongoing businesses. 4 Adjusted C:I ratio net of insurance claims. 5 Net of provisions. 2

Our record on UK lending is strong Supporting Homeowners Support for British Businesses FLS UK ‘Real Economy’ lending 1 , £bn UK Retail gross mortgage balances, £bn +33% 99 +1% 182.2 75 0.9 0.3 180.2 0.7 2008 Q113 Jun-12 Q312 Q412 Q113 Mar-13 � Initial signs of Core 2 SME lending starting to Support for Small Businesses grow again. +5% annualised growth rate in Q113 SME Core 2 ‘Real Economy’ balances now starting to grow, £bn � Market share of new UK mortgage lending in 35.0 +5% annualised 2006-8 was 5.7%. For 2009-12 this averaged growth rate 34.5 11% 34.5 34.1 34.0 � UK Retail mortgage balances have risen 33% 34.0 since 2008 to £99.1 billion in Q113 in a market 33.6 33.1 that has risen by only 3% 33.5 � In Q113, accounted for 35% of all SME lending in 33.0 the UK, compared with overall customer market Q112 Q212 Q312 Q412 Q113 share of 24% 3 . Over 90% acceptance rate 1 RBS Core lending per FLS, excl. Commercial Property and adding Lombard Finance and Invoice Finance. After adjusting for write-offs between Jul-12 and Mar-13. 2 Core SME lending excl. Commercial Property. 3 British Bankers’ Association and RBS internal data. 3

Finance & Risk Review