1. rbs.co.uk Hertfordshire Housing Conference Clive Barnett, Managing Director, Head of Housing Finance, RBS April 2012

2. 2 rbs.co.uk Areas for discussion Bankers’ perspective ● Overview of Financial Markets and the Economy ● Impact of Spending Review, development opportunities, Affordable Rent, Right to Buy sales initiative etc. ● Social housing capital and debt requirements for the future ● Sources of funding for HA’s 2

3. 3 rbs.co.uk The Economy ● UK an Island? ● A double dip? ● Impact of Europe……crisis what crisis? ● Inflation a concern or secondary concern for UK ● Cost of and availability of funding ECB role/central banks? 3

4. 4 rbs.co.uk The CSR impact ● Development grant much lower but rents can go up so you can borrow more - greater risk and higher gearing? ● Universal Benefit a dream or a reality? ● Impact of Direct Payment? ● Impact of Benefit cap and over occupation? ● Uncertainty? = concern for investors? 4

5. 5 rbs.co.uk Investment levels looking forward ● Decent homes and new build (social, affordable) ● LSVT/ ALMOs, LA borrowing across England, Wales and Scotland ● Affordable programme and son of!! ● Latest Government announcements Nov 2011 –How much?...£10-12bn over next 3 years – And where is it coming from? 5

6. 6 rbs.co.uk Sources – bank and building society How relevant are the banks to the future? Is the banking market dead? ● Declining numbers? ● Cost of funding - margins, underlying interest rates and loan maturity ● Banks old loan book a continued drag? So what? ● Basle 3 and regulatory requirements? ● And what about mortgages….NewBuy? ● Shared ownership 6

7. 7 rbs.co.uk Sources of funding – capital markets ● 15 new issues from the RSL sector in 2010/12 ● Many more queuing up to issue ● Established structure with RSLs achieving the best pricing and execution typical range 4.6%-6% 30 years. ● Credit rating Agencies S&P and Moodys work on implicit government support leading to most rated RSLs being notched up although UK downgrade status with Moodys potential. ● The sector is positively received by investors given its strong rating, secured nature, implicit government support and long- dated paper and we expect this demand to remain solid. ● New source…..Investor direct ? 7