RBS 2013 Annual Report Download - page 29

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Chief Executive’s review
announced our intention to remove £9 billion
of the worst credit risks from the Ulster Bank
balance sheet. Our second step is focused
on improving customer experience and
shareholder return.
As outlined in November, we are reviewing our
business to make it viable and sustainable into
the future. In this regard we are accelerating
our strategy for the bank to improve service to
our customers, reduce costs and simplify our
operating model.
Our bank in Northern Ireland will benefit from
a closer integration with our personal and
business franchises in the rest of the United
Kingdom. There are meaningful synergies
in terms of investment, costs and customer
experience from doing this. It is essential
if we are to provide a more appealing and
compelling service to our customers in
Northern Ireland under the Ulster Bank brand.
In the Republic of Ireland we will continue to
explore further opportunities to transform our
business. We have a range of options but we
are now clear on the goal; we will build on our
position to be a compelling challenger bank to
the domestic pillar banks.
Our customers in the island of Ireland need to
know that we are committed to providing them
with a great everyday banking service. We will
finalise our plans in the coming months – but
this is about a change in business strategy not
a withdrawal from the market.
These moves are designed to position the
bank to do more for our customers and
consequently reward our shareholders for
their patience.
Measures that matter
We will only succeed in delivering our goals
if everyone who works in the bank is clear on
the measures that matter. It is too easy to be
distracted by measures that flatter progress
on things that ultimately don’t count towards
our ambition.
The measures we use must have credibility
with customers and the wider public if we
are to regain trust. And they must focus the
bank relentlessly on improving returns for
shareholders. It is abundantly clear to me that
we need to reward our existing shareholders
for their patience and attract new ones based
on our potential and performance.
Measure 1: Customer
We will target the best Net Promoter Score
in the market in the long term in each of our
chosen business areas. The most trusted
bank in the UK in the long term.
Measure 2: Efficiency
We will aim to deliver a cost:income ratio
(including bank levy, restructuring charges
and, from 2015, the EU resolution fund
charge) of approximately 55% in the medium
term, falling in the long term to around 50%.
On the same basis, we target a reduction in
our costs to approximately £8 billion in the
medium term.
Measure 3: Returns
Our overall targeted return on tangible equity
(RoTE) will be approximately 9-11% in the
medium term. Our long-term RoTE target is
12% plus.
Measure 4: Capital strength
We will target a CET1 capital ratio, on a fully
loaded Basel III basis, of 12% or greater by
the end of 2016. Our targeted leverage ratio,
on the same basis, will be 3.5-4% in the medium
term and 4% or above in the long term.
These simple measures mean we will strike a
permanent balance between the needs of our
stakeholders.
How we’ll do business
The scale of the challenge we have faced
over the last few years taught us a simple
fundamental lesson: you cannot succeed at
your customers’ expense. This is why last year
we agreed a very simple purpose for the bank:
to serve customers well.
Our future is not about us, it’s about our
customers. These words greet our employees
as they walk into our offices every day. They
have come to represent a shorthand for what
went wrong, but also what we need to get right.
Although we remain in the shadow of our
past conduct failings, we have a clear and
universal set of values that bind the bank
together.
Serving customers
We exist to serve customers. We earn their
trust by focusing on their needs and delivering
excellent service.
Working together
We care for each other and work best as
one team. We bring the best of ourselves to
work and support one another to realise our
potential.
Doing the right thing
We do the right thing. We take risk seriously
and manage it prudently. We prize fairness
and diversity and exercise judgement with
thought and integrity.
Thinking long term
We know we succeed only when our customers
and communities succeed. We do business in
an open, direct and sustainable way.
These values are the basis for how we lead,
how we reward, how we make decisions and
how we treat our customers and each other.
They are not yet etched in stone, but become
stronger the more they are tested. They are
core to us succeeding as a bank.
Conclusion
RBS isn’t just any bank. Few, if any,
comparisons do justice to the scale of the
turnaround that RBS required.
We’ve got to a point of safety and soundness
through a steady focus and patient
determination. There will be more things from
our past that come back to haunt us, but they
will be fewer in number.
Over time, with steady focus and disciplined
delivery, the new RBS will emerge. The
businesses we operate will be highly effective
and relentless in their pursuit of delivering
service that makes us number one for
customers.
We will be simple to do business with, free
from distractions and supported by a strong
capital base.
The outcome will be a bank that is truly trusted
by customers.
Ross McEwan
Chief Executive