Royal Bank of Scotland : RBS 2019 AGM

Thank you for the kind words Howard, and good afternoon.

When I took on the job in 2013 the bank had been stabilised following the aftermath of the financial crisis, but we were still a long way from recovery.

I focused on five key priorities where we had to improve, if we were going to compete and deliver returns to shareholders:

1. Making the bank simpler, safer and more UK focused,
2. Operating with a more efficient cost base,
3. Supporting sustainable growth,
4. Improving employee engagement,
5. And finally and most importantly, improving customer experience.

We've made substantial progress in each area.

• The balance sheet has reduced by a third from over £1 trillion to £694 billion.

• Our capital position is stronger - CET1 ratio from 8.6% to over 16%. This has helped us pass the Bank of England Stress test for the first time and restart dividend payments.

• We've resolved over 20 material conduct and litigation issues and addressed the historical deficit in the Group Pension Fund.

• We've refocused on our home markets. 92% of our revenue is from the UK up from 80% in 2014.

• Costs are down over £4bn, we've reduced the number of employees from 118k in 2013 to 67k and exited over 20 countries.

• We've continued to undertake significant restructuring, some of it mandated by the conditions of the bailout, others through strategic choice:

 We divested Citizens, completing the largest US bank IPO in history in the process,
 We reshaped NatWest Markets to focus on rates, currencies and financing,
 We have run off substantial non-core assets, including RBS capital resolution which started with £137 billion in risk weighted assets, and
 We're progressing with the alternative remedies package for the business that was formerly known as Williams & Glyn.

One of the things I am most proud of is despite this significant restructuring, our colleague engagement is at its highest level since we started recording in 2002. This shows the resilience and determination of our employees.

At the same time undertaking this significant restructuring we have strived to get closer to our ambition to be the best bank for customers in the UK & Ireland. We still have a long way to travel to get there but I am still convinced that was the right aspiration to set.

With our major legacy issues now behind us we are able to focus fully on becoming a much better bank for our customers. There is still much more to do, and the CMA scores and our own NPS data show this, but we are making progress.

Turning to 2018.

I'm pleased to be able to report that, for the second year running, we have delivered a strong financial performance.

The strategic plan we set out in 2014 continues to deliver. 2018 represented another year of progress towards our goal to be a customer focused bank that is financially strong, and delivers good returns to shareholders.

This progress has not been easy, and has involved a number of difficult decisions along the way. You - our shareholders - have remained patient and committed throughout, and I'd like to thank you for your support while we have restructured the bank.

Let me talk you through our performance in a little more detail.

As our Q1 results will be announced to the market tomorrow morning, I am unable to discuss those with you today. I will instead refer you back to our annual results which were announced in early February.

In those results, we reported a pre-tax operating profit of £3.4 billion, up 50% on full year 2017, and an attributable profit of £1.6 billion, more than double what was achieved the previous year.

We took a further £278 million of costs out of the business in 2018. We have now taken out over £4 billion of operating costs over the last five years - a target that many thought was impossible.

It is worth noting that excluding conduct and litigation and strategic costs our full year cost: income ratio would have been 54.5%, and our Return on Equity would have been 10.9%.

Finally, as Howard mentioned, in the last Bank of England stress tests we obtained a clear pass - a good example of how our strategy of de-risking the balance sheet is paying off.

Our financial results were welcomed by the market, and our stock has traded well so far in 2019.

All of this has been delivered in the face of unprecedented political and economic uncertainty.

We have a key role to play in supporting the UK economy. As Howard mentioned earlier, our focus has been to continue serving customers throughout this uncertainty.

Last year we delivered £30.4 billion in gross new mortgage lending in UK Personal & Business Banking.

We also made or renewed commitments of around £30 billion of term lending facilities to mainly UK businesses.

And our Commercial and Business Banking operation supported total lending of over £100 billion.

This is what we mean when we talk about supporting sustainable growth.

Touching briefly on the Brexit negotiations, the continued uncertainty is holding back the UK economy, with the most recent forecasts pointing to subdued GDP growth rates relative to historic trends.

As a large predominantly UK focused bank, our results will of course reflect the economic performance of the UK.

Away from this, we will continue to support our customers with lending - where there is demand and within risk appetite, as well as provide advice on how they can prepare for Brexit.

In light of this, this week we announced that we have doubled the level of funding available through our Growth Fund to help businesses ready their supply chains for the UK's departure from the EU - taking the total fund to £6 billion.

Aside from the current economic situation, we are also dealing with the most significant disruption in the banking sector for many years - this being the rise of technology. Customer expectations are high and they are changing the way they want to bank with us.

We continue to see a decrease in traditional payment methods such as cash and cheques as customers embrace our digital channels at an increasing pace.

To be clear, our branches remain a core part of our service and we are investing in them. We will not be closing any further branches in 2019 and have no plans to reduce the branch network in 2020.

This will give customers, colleagues and communities certainty about where they want to bank. We know that physical interaction remains important, especially for small businesses looking to deposit cash.

And on the topic of cash, we do not see the demise of cash in the UK, but we do see it playing a much lesser part in day to day transactions. We are committed to ensuring the availability of cash in the UK and will look for alternative ways of providing customers with access to it.

This is why we are partnering with two other large banks to create the first group of UK shared business banking hubs this year. This pilot looks at creating shared centres where small businesses can deposit their cash.

In addition we have partnered with the Post Office to ensure our customers have 11,000 points of presence to pay cash and cheques in and to take cash out. Our fleet of mobile branch vans also make 700 stops every week in villages and towns where we do not have a branch.

Having said that, digital adoption continues to increase exponentially. We now have 6.4 million regular mobile app users, an increase of 16% on last year. We are also seeing customers taking out products via digital channels at an increasing rate. Almost half of all personal product sales are now completed this way. That's up 19% on last year.

So it's imperative we continue to evolve. Our focus for the core bank is to build solutions to allow customers to do their banking simply, whenever and wherever they want.

As we look ahead to our 2020 goals, it's clear that we are a long way from our ambition to be number 1 for customers. Our latest CMA scores were published alongside our annual results and they show little improvement for both Royal Bank and NatWest, though we did see some marginal gains in both the online and mobile space.

Our ambition remains to be number one for customer service, trust and advocacy. We have a lot to do to get there, but it is right that we retain this ambition, and the full focus of the organisation is now on serving customers well, without the distractions this bank has had for the last five years.

We're looking at how we can simplify, automate and digitise the key customer processes and journeys in the core bank. Our paperless mortgage process- a UK first - is just one example. We also have Cora, our AI Chat Bot who now handles on average 83,000 customer queries per week.

For commercial customers, we have upgraded our online platform - Bankline - and reduced the time it takes to make a payment by around 30%. We have taken the great services from Bankline and put them in a convenient mobile app. Although early days, this is proving popular with customers. It currently has a 4.6 out of 5 rating in the Apple App store.

These innovations are helping us to drive positive customer advocacy while at the same time lowering our costs. It's vital that we continue to take this approach in the future if we are to achieve our ambition.

NatWest Markets continues to focus on customer service and is increasingly using technology to enhance the way it provides innovative financial solutions. For example, FX micropay makes it simpler for businesses operating globally to accept payments in multiple currencies, reducing costs and increasing revenues for our customers. Our success in harnessing technology has been recognised with two major industry awards.

Outside of the core bank we are piloting Bó and Mettle as two standalone digital banks. Bó is a digital personal bank targeted at helping people to manage their money better. Mettle is a digital banking platform for SME business customers.

We are taking key learnings from these and applying them across to the core bank. It is clear that not everything we pilot will be a complete success. But as long as we learn as we go, we are comfortable with our approach.

Of course, as larger numbers of our customers adopt digital ways of banking, we must continue to innovate and invest to protect customers against fraud and our systems against increasingly sophisticated cyber attacks.

We have signed up to the new Financial Sector Cyber Collaboration Centre which will see a more concerted industry response by the UK's banks and law enforcement to commit resources and to work together against this common threat.

Turning our attention to this year. We will continue to focus on our priorities, with specific goals for 2019 which will help us keep up the momentum on our ambition.

This year, we want to:

• continue to improve our colleague engagement;
• move closer to a greater than 12% Return on Tangible Equity;
• move towards a circa 14% Common Equity Tier 1 capital ratio;
• close the gap to number 1 for service, trust and advocacy by achieving a 2 place improvement in the CMA ranking for both NatWest and Royal Bank Brands;
• take a further circa £300 million out of our operating cost base; and
• grow net lending in our Commercial and Private Banking, and Personal Banking franchises by 2-3%.

We are determined to build a great place to work and a sustainable bank.

Despite everything that has happened over the last 10 years, and the enormous effort that has been required to turn the bank around, colleague engagement is at an all time high.

I am very encouraged by these results. We know we still have a lot more change to go through to get RBS fit for the future - so we must continue to lead and support our colleagues.

I'd like to thank all of my colleagues for their efforts and resilience again during 2018. They are what makes RBS a special bank.

So, to summarise:
• Our strategy is working.
• The balance sheet is stronger, our financial performance improved, and colleague engagement is at an all time high.
• We have resumed dividends to you, our shareholders, and will continue to look at ways of returning excess capital.
• And finally, we have a clear ambition to serve customers well. We have new goals for 2019 - we will focus on lowering cost and improving our service for customers.

It is never easy to leave somewhere like RBS. With much of the restructuring done and the bank on a strong, stable and profitable footing, I have delivered the strategy that I set out in 2013 and now feels like the right time for me to step aside and for a new CEO to lead the bank. I will be around for a while yet to ensure an orderly handover. However, as the banking industry transforms to deal with changes in customer behaviour and the evolving technological landscape, a new set of challenges are emerging for whomever has the honour to become the next CEO. I have every confidence that they will rise to the challenge.