Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (October 2021)
24 slides from Natwest's debt investor presentation, Oct 29, 2021
Slide 1: Q3 2021 Results Fixed Income Investors
Q3 2021 Results Fixed Income Investors 29th Oct 2021
Slide 2: Donal Quaid, Treasurer
Donal Quaid Treasurer 2
Slide 3: Q3'21 results highlights
Q3’21 results highlights Q3’21 performance Strong Q3’21 performance £1,074m £242m £674m Impairment release in Q3’21 Supporting our customers Operating profit before tax in (26bps) of customer loans Attributable profit in Q3’21, Q3’21, up from £0.4bn profit in compared to £61m profit in through the r
Slide 4: Supporting our customers through the recovery
Sustainable growth with an intelligent approach to risk Mortgage net lending1,2 Credit card activity1 Supporting our (change in period, £bn) (rebased 100 = Sept’20) customers through the 3.0 3.2 200 Launch of Purchase and balance transfer card +80%3 3.02 recovery 175 2.3 2.2 150 Net mortgage lending
Slide 5: Spotlight on NIM drivers
Focused on generating shareholder value Mortgage margin dynamics Q4’20 and Q1’21 average 180bps Spotlight on NIM drivers 2.00% Pre-covid-19 Pre-covid-19 lockdown Q3’21 average Mortgage margins are lockdown Q3’21 average 115bps 115bps returning to levels seen pre- 1.50% Jan’20 COVID 19 and ROE remain
Slide 6: Impairment release driven by low level of defaults
Intelligent and consistent approach to risk Impairments charge/ (release), (£m) Impairment release Loan impairment rate (bps of gross loans) driven by low level of 90bps 229bps 28bps 14bps 88bps (11)bps (66)bps (26)bps defaults 3,242 Expect net 2,056 release at Of the £242m impairment FY 21 release,
Slide 7: Robust balance sheet with strong capital & liquidity levels
Robust balance sheet with strong capital & liquidity levels CET1 headroom above Headroom above Liquidity coverage ratio Strong capital and medium term target1,2 minimum UK leverage remains well above min UK liquidity positions provide requirements requirement flexibility 470-570 bps 265bps £79bn Exc
Slide 8: Strong capital generation in the quarter
Robust balance sheet with strong capital & liquidity levels Strong capital CET1, (%)1 generation in the 18.7% quarter 0.11 CET1 ratio 18.7% up 50bps (0.15) 0.37 (0.60) 0.29 on Q2’21 driven by 18.2% (0.11) 18.1% earnings and RWA reduction Q2’21 Attrib. profit Ordinary Dividend RWAs Other incl. Q3’21
Slide 9: Strong customer deposit inflows during 2021
Robust balance sheet with strong capital & liquidity levels Strong customer deposit Retail Banking £bn Commercial Banking £bn inflows during 2021 Current Accounts Savings +7% +5% Retail Banking deposits increased by £14 billion 178 as a result of lower 172 186 168 customer spend and 150 increased sa
Slide 10: Issuance and capital management progress
Issuance and capital management strategy Issuance and capital 2021 Issuance guidance YTD 2021 progress management progress HoldCo Senior unsecured NWG €1bn 9NC8 GSS format - Social ~£3-5bn HoldCo senior MREL ~£3bn Good progress with 2021 NWG $1.5bn 6NC5 issuance plan; YTD 2021, NWG €1bn 8NC7 NatWest
Slide 11: Q&A
Q&A 11
Slide 12: Appendix
Appendix 12
Slide 13: Credit ratings
Credit ratings Moody’s S&P Fitch NatWest Group plc received rating upgrades Group holding company from Moody’s on 13 July 2021, with positive NatWest Group plc Baa1/Pos BBB/Sta A/Sta outlook maintained on Ring-fenced bank operating companies NWG plc and NWM Plc and NWM N.V. NatWest Bank Plc A1*/A1/S
Slide 14: ESG ratings
ESG ratings (1) ESG Ratings (1) Scale 2019 2020 2021 The Sustainalytics rating improved to 17/Low risk MSCI in July 2021. Rating AAA to CCC BBB AA AA The MSCI rating Sustainalytics Risk Rating improved from BBB to 1-100 27.7 20.5 17 AA last December. Rating Negligible to Medium risk Medium risk Low
Slide 15: Other expenses up 0.2% over Q2'21 due to timing of investment spend
Focused on generating shareholder value £m Q3'21 Q2'21 Q3'20 vs Q2'21 vs Q3'20 Strong Q3 performance Net interest income 1,954 1,985 1,926 (1.6)% 1.5% Income excluding notable Non-interest income 820 675 497 21.5% 65.0% items was in line with Total income 2,774 2,660 2,423 4.3% 14.5% Q2’21 as streng
Slide 16: Net interest income supported by mortgage growth
Focused on generating shareholder value Net Interest Income1, £m Net interest income supported by mortgage Group NII 1,985 (4) 5 growth 4 1,953 38 (33) 1,955 Banking NII NWM NII 4 Banking net interest 1,954 Group NII Banking NII 1,981 1,949 income ex-notable items was up 0.3% in the quarter driven b
Slide 17: NIM drivers: moderate pressure on asset yields
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM drivers: moderate 3.0 2.82 2.81 2.82 pressure on asset yields 2.73 2.65 Commercial Banking 2.73 2.65 2.67 Group asset yield 2.5 2.65 2.64 Retail Banking impacted by further growth in Bank Liquid 1.94 Asse
Slide 18: Growth in our target segments
Focused on generating shareholder value Gross customer loans4, quarter on quarter, £bn Growth in our target Gov Schemes (0.7) Mortgages 0.5 segments1 Group 367.4 2.5 RCF6 (0.3) Other (0.3) NWM 6.4 (3.7) Gross banking loans to Unsecured 0.3 358.1 365.3 Group customers down by 0.8% in (1.2) 7.2 NWM Ba
Slide 19: Non-interest income impacted by lower trading income
Focused on generating shareholder value Non Interest Income1 £m Non-interest income 794 737 impacted by lower 645 668 667 trading income 342 123 231 147 137 Trading and other Net fees and commissions Group NatWest Markets income1 down 27% over Q2’21 to 452 522 506 521 530 £105m due to ongoing weak F
Slide 20: Simplification and cost efficiency
Simplification and cost efficiency Cost reduction of 4.3% in Other expenses ex Operating Lease Depreciation and Ulster Bank RoI Direct2, £m 9M’211, on track for c.4% 1,473 4,633 target for FY’21 13 198 1,460 4,435 Other expenses ex-OLD and Ulster Bank RoI2 of £1.5bn in Q3, down £13m or 0.9% versus Q
Slide 21: 2021 financial targets and outlook
Guidance 2021 financial targets and outlook Medium-term targets and outlook Costs We plan on reducing other expenses, excluding OLD, by around 4% in comparison to 2020, excluding any change in Expect annual cost reduction of around 4%, excluding the direct cost base of Ulster Bank RoI. We also expec
Slide 22: Key Drivers of CET1 ratio: from 18.7% at Q3'21 through to FY'23
Key Drivers of CET1 ratio1: from 18.7% at Q3’21 through to FY’23 2 Driver Timing Impact Details Earnings Target a ROTE of 9-10% by FY'23 3 Distributions : Intend to distribute a minimum of £1bn per annum through dividends, £750m accrued through to Dividends Through to FY’23 c.140bps Q3’21. Impact re
Slide 23: Economic Assumptions
Economic Assumptions1 H1’21 FY’20 Scenario Upside Base Case Downside Extreme Upside Base Case Downside Extreme downside downside Weighting 35% 40% 20% 5% 20% 40% 30% 10% UK GDP – Annual Growth (%) 2021 10.1 7.3 2.7 0.1 9.0 4.5 2.6 (4.6) 2022 5.4 5.8 4.3 - 2.6 4.2 4.6 6.1 5 year Average 3.9 3.5 2.9 2
Slide 24: Cautionary and Forward-looking statements
Cautionary and Forward-looking statements The guidance, targets, expectations and trends discussed in this presentation represent NatWest Group management’s current ex pectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 112 -113
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