profit attributable to ordinary and B shareholders divided by average tangible shareholders’ equity as a percentage. Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill, and identifiable intangible assets.
the statutory body responsible, from 1 April 2013, for the prudential supervision of banks, building societies, insurers and a small number of significant investment firms in the UK. The PRA is a subsidiary of the Bank of England.
the highest quality form of regulatory capital under Basel III comprising common shares issued and related share premium, retained earnings and other reserves excluding the cash flow hedging reserve, less specified regulatory adjustments.
assets adjusted for their associated risks using weightings established in accordance with the Basel Capital Accord as implemented by the PRA. Certain assets are not weighted but deducted from capital.
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Home Arrow Investors Arrow Our Investment Case

Our Investment Case

Safe
Simple
Customer focused
Safe
Simple
Customer focused

Key messages(1)

The fundamentals of our strategy remain unchanged

We have made progress in dealing with legacy issues

Financial targets have been hit three years running

Costs are down and capital is solid with lending and income growth in the core bank

We will go further on costs and faster on digital transformation to deliver a better customer experience

Targeting profitability in 2018 and achieving 12%+ Return on Tangible Equity and a sub 50% Cost:Income ratio by 2020.

Our blueprint for lasting success

Committed to being the No. 1 bank for customers

Note: (1) Excluding litigation and conduct costs, restructuring costs, write down of goodwill and the 2016 VAT release of £227m.

2020 Targets

< 50%
Cost: income ratio target
12%+
Return on Tangible Equity target

(1) The targets, expectations and trends discussed in this page represent management’s current expectations and are subject to change, including as a result of the factors described in this document and in the “Risk Factors” 433 to 464 of the Annual Report and Accounts 2016. These statements constitute forward looking statements, please see Forward Looking Statements.

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This bank has great potential, and we believe that by going further on cost reduction and faster on digital transformation we will deliver a simpler, safer and even more customer-focused bank, with a compelling shareholder investment case.

Ross McEwan

RBS Chief Executive

Progress on our strategy

Since FY 2013 we have successfully dealt with the majority of material legacy issues
  • Refocused on our core franchise markets, with active operations ceased in 26 countries
  • De-risked the balance sheet, with legacy RWA down over 75% from peak in Q1 2014
  • Ownership structure normalised with a single class of ordinary shares, via DAS repayment and conversion of B shares
  • Around 20 material litigation and investigation matters concluded since January 2014, including resolving a number of LIBOR/FX investigations and RMBS civil claims
  • International Private Banking sold; Citizens divested, the largest US bank IPO in history
  • 503 legal entities closed to date, a 45% reduction; systems and applications reduced by 30% since 2013
  • Accelerated £4.2bn contribution into the defined benefited pension plan
  • REILs reduced from £39.4bn (9.4% of gross loans) at Q4 2013 to £10.3bn (3.1%); excluding Capital Resolution and Ulster RoI, REILs are now at 1.5%

Further significant challenges include:

Further significant challenges include:
  • Resolving remaining RMBS matters
  • Satisfying final EC State Aid obligations

Continued strong net lending growth in our core businesses...

Net loans & advances to customers, £bn

And solid income growth

Adjusted Income(1), £bn

(1) Adjusted income excludes own credit adjustments, loss on redemption of own debt and strategic disposals. (2) Adjusted for transfers of businesses from NatWest Markets to Commercial Banking in 2015. Corporate and Institutional Banking was renamed NatWest Markets in December 2016.

Strong market positions

Strong market positions across our customer brands

Note: Market share relates to the our geographic share in each region. This geographic share will be fully aligned to branding and legal entity as part...

Note: Market share relates to the our geographic share in each region. This geographic share will be fully aligned to branding and legal entity as part of ring-fencing compliance.
(1) Source Charterhouse Research 4 quarters ending Q4 2016, Main current account stock market share (business turnover of £0 -2m) excluding Future W&G.
(2) Source: Charterhouse Research 4 quarters ending Q4 2016 (business turnover of £2m -£1bn) excluding Future W&G
(3) Source: Main current account stock market share holding level – based on GfK FRS 6 months ending Dec 2016; excluding Future W&G.
(4) Personal: Main current account – based on IPSOS 4 quarters MAT ending Q4 2016 (5) Source: Charterhouse Research NI main current account market share based on 4 quarters ending Q4 2016 (business turnover £0 – £1bn).
(6) PwC Business Banking Tracker 2016. Turnover <€2.5m. Named as main financial institution.
(7) Source PwC Business Banking Tracker 2016. Turnover €2.5m+. Named as main financial institution.
(8) Personal: IoM; Source GfK RBSI Group Market Share Dec 16 (Base size: IoM 500).
(9) Business: IoM; Source GfK RBSI Group Market Share Dec 16 for businesses with a turnover of £0 -2m (Base size: IoM 100).
(10) Personal: Guernsey; Source GfK RBSI Group Market Share Dec 16 (Base size: Guernsey 501) and Business: Guernsey; Source GfK RBSI Group Market Share Dec 16 for businesses with a turnover of £0 -2m (Base size: Guernsey 100).
(11) Personal: Jersey; Source GfK RBSI Group Market Share Dec 16 (Base size: Jersey 500) and Business: Jersey; Source GfK RBSI Group Market Share Dec 16 for businesses with a turnover of £0 -2m (Base size: Jersey 100).
(12) by Market Share and Overall Service Quality – Greenwich Associates, Global FX Services – UK Corporates 2015.
(13) by Market Share – Greenwich Associates, European Fixed Income – Government Bonds 2016.
(14) by deal value proceeds – Dealogic – 2016.

The foundations to achieve our 2020 targets

The foundations to achieve our 2020 targets:

Better customer service

Strong brands and excellent customer service deliver valuable long-term business.

Simplicity, speed and digitalisation are the future and will reduce costs while making it easier for us to be better for our customers.

Income growth

Positive income growth, highly diversified across UK customer segments.

Accelerate income momentum through enhanced customer servicing in the core bank.

Cost efficiency

We have taken out £3.1bn costs since 2013 but we need to go further. We will take out a further £750m(2) in operating costs in 2017 and £2bn over the next 4 years by reducing complexity and simplifying processes.

Risk Weighted Asset productivity

Low-risk lending and run down of legacy assets to drive high capital efficiency.

We will use capital more efficiently and target a CET1 ratio of at least 13%.

These provide the foundation to achieve a 12+% unadjusted ROTE and a sub 50% cost to income ratio

Notes

(1) The targets, expectations and trends discussed in this page represent management’s current expectations and are subject to change, including as a result of the factors described in this document and in the “Risk Factors” 433 to 464 of the Annual Report and Accounts 2016. These statements constitute forward looking statements, please see Forward Looking Statements. (2) Cost saving target and progress in 2017 calculated using operating expenses excluding restructuring costs, litigation and conduct costs, write down of goodwill 2016 VAT release

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