Natwest Group Plc · LSE:NWG
Natwest — Q3 2020 Earnings Presentation
29 slides from Natwest's earnings presentation, Oct 30, 2020
Slide 1: Q3 2020 Results
Q3 2020 Results 30th October 2020
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 2
Slide 3: Q3 2020 results highlights
Q3 2020 results highlights Q3’20 Operating performance Impairments CET1 ratio Resilient operating £3.1 billion £0.6 billion 18.2% performance Operating profit before impairment Impairment charges as at 9M’20 CET1 Ratio up 100 bps vs Q2’20 in Q3’20 Operating profit before £2.6bn 100bps impairments of
Slide 4: Purpose-led, long term decision making and strategic priorities
Purpose-led, long term decision making We champion Strategic priorities potential, helping people, families and businesses to thrive Building an open and Simple Powered by inclusive bank where to deal innovation and with partnerships everyone can thrive Supporting Sharpened customers at customer and
Slide 5: Supporting the financial health of our Retail customers
Supporting customers at every stage of their lives Retail Banking Activity Supporting the financial health of our ▪ Mortgage gross new lending and ▪ Credit card spend up 43% on Q2’20 Retail customers applications 10% and 91% higher than Q2’20, respectively 85% of mortgage payment holidays, by number
Slide 6: Supporting the financial health of our Commercial customers
Supporting customers at every stage of their lives Commercial Banking Activity Supporting the Approved value, £bn NWG Share Drawn financial health of our Q2’20 Q3’20 of approvals2 balance Commercial customers BBLS 6.1 1.8 7.9 c.20% £7.5bn Total approved Commercial Banking lending under government sc
Slide 7: Attractive industry positions with capability to grow
Simple to deal with Attractive industry Retail Banking Private Banking NatWest Group share of personal products % of new customers to Private Banking referred from positions with capability the wider group8 to grow c.16% c.21% c.18% c.10.6% c.17% c.6% Over 19 million customers PCA3 Mortgage Unsecure
Slide 8: Powered by innovation and partnerships
Powered by innovation and partnerships Continue to make Customers increasingly engage with us via digital channels good progress on simplifying the Digital engagement Artificial Intelligence Use of digital tools business and taking 6 million c.9k cost out while 9.3 million Active digital users at Q3
Slide 9: Sharpened customer and capital allocation focus: NatWest Markets
Sharpened customer and capital allocation focus Accelerating refocus of NatWest Market RWAs, £bn NatWest Markets Further progress made to £7.9bn reduction in RWA achieved in 9 months reshape the business, expected to be capital ratio 37.9 38.9 accretive over the transition 35.1 plan period, focussin
Slide 10: Delivery of our four strategic priorities will drive sustainable returns
Purpose-led, long term decision making Delivery of our four strategic priorities will Supporting customers at every stage of their lives drive sustainable returns over the long term Simple to deal with Powered by innovation and partnerships Sharpened customer and capital allocation focus Driving Sus
Slide 11: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 11
Slide 12: Q3 Performance: resilient operating profit before impairment losses
Focused on generating shareholder value Q3 Performance: £m Q3’20 Vs Q2’20 9M’20 Vs 9M’191 resilient operating profit Net interest income 1,926 0.8% 5,778 (3.9%) before impairment losses Non-interest income 497 (35.1%) 2,483 (17.8%) Income in Q3’20 includes Total income 2,423 (9.5%) 8,261 (8.5%) £324
Slide 13: Net interest income support from volumes
Focused on generating shareholder value Net Interest Income £m Net interest income 1,926 Group NII Group NII 1,910 support from volumes 6 NWM NII 80 Banking net interest income (38) 3 7 (4) (5) is up 2% over Q2’20 driven 1,947 Banking NII by higher average interest Banking NII 1,904 earning assets.
Slide 14: NIM Drivers: ongoing pass-through of base rate change
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM Drivers: ongoing 3.31 3.34 3.4 pass-through of base 3.2 3.22 rate change 3.0 3.23 3.11 2.88 2.82 3.07 Retail Banking Reductions in gross asset 2.8 2.53 2.48 Commercial Banking 2.6 2.73 yields and funding
Slide 15: Balanced loan book with continued growth in the quarter
Focused on generating shareholder value Total loans and advances1 £bn Balanced loan book with continued growth 370.6 Group 0.1 (0.2) in the quarter Group 370.5 2.4 (0.8) 11.4 NWM NWM 12.8 Gross banking loans grew 357.7 359.2 £1.5bn in Q3 driven by Banking mortgages and Government Banking scheme lend
Slide 16: Non interest income impacted by HCCR and customer activity levels
Focused on generating shareholder value Non Interest Income1 £m Non interest income 1,086 969 983 76 impacted by HCCR and 132 899 209 59 796 customer activity levels 215 437 46 160 375 Other operating income Non-interest income1 in 298 Income from trading activities Q3’20 is down 18% over the Net fe
Slide 17: Ongoing simplification focus with a further £152m cost take-out
Focused on generating shareholder value Other expenses ex Strategic costs, £m Litigation and Ongoing simplification Operating Lease conduct costs, £m focus with a further Depreciation, £m Property Other Technology NWM £152m cost take-out 8 in Q3’20 1,624 333 Achieved £193m of our full year target of
Slide 18: Impairments reflect no change to economic assumptions and limited migration
Intelligent and consistent approach to risk Selected economic scenarios and weightings, Q3’20 Impairments reflect no Probability UK GDP – Annual Growth (%) UK Unemployment rate (%) change to economic Scenario Weighting 2020 2021 5y Avg. 2020 2021 5y Avg. assumptions and limited Central 1 35% -14.3 1
Slide 19: Diversified risk with manageable exposure to sectors most impacted by COVID-19
Intelligent and consistent approach to risk Total Loans & Advances by stage 1 £bn, Q3’20 Spotlight on sectors in focus for management, Q3’20 Diversified risk with Total loans and advances1,2, £bn manageable exposure to sectors most Airlines Transport impacted by COVID-19 2.3 5.0 £6.8bn or 1.8% of gr
Slide 20: Robust capital position with limited procyclicality to date
Robust balance sheet with strong capital & liquidity levels RWA, £bn Robust capital position with limited Below procyclicality to date 185 -195 181.5 RWA reduction of £7.6bn in (2.2) (2.1) 173.9 (3.3) the quarter driven by NWM (£5.1bn reduction) and the Q2’20 Counterparty Market Risk Credit Risk Q3’
Slide 21: Strong capital and liquidity positions maintained in Q3
Robust balance sheet with strong capital & liquidity levels CET1 headroom above Headroom above Liquidity coverage ratio Strong capital and medium to long term target1,2 minimum UK leverage well above min UK requirements requirement liquidity positions maintained in Q3 420-520bps 295bps £62bn We have
Slide 22: Investment case
Investment case ALISON ROSE, Chief Executive Officer 22
Slide 23: Focused on generating shareholder value and resuming capital distribution
Investment case We are focused on generating shareholder Purpose-led, long term decision making 1 We have shaped a business that should operate at a CET1 ratio of between 13% to 14% over time value and resuming A purpose led, customer 420-520 bps or c.£7.2-9.0bn headroom to focused business with tar
Slide 24: Q&A
Q&A 24
Slide 25: Appendix
Appendix 25
Slide 26: Q3'20 update on targets and guidance
Q2 guidance Updated Q3 guidance1 Q3’20 update on Regulatory Retail Banking: c.£200m negative impact on Guidance maintained impact income for full year 2020 targets and guidance Costs We remain committed to achieving a £250 Guidance maintained million cost reduction in 2020. We now expect strategic c
Slide 27: Notable items
Notable items1 Q1’19 Q2'19 Q3'19 Q4’19 FY’19 Q1'20 Q2'20 Q3'20 Alawwal Bank merger gain on disposal - 444 - - 444 - - - FX recycling gain in Central items - 290 - 1,169 1,459 (64) (39) 64 Provisions release - 256 - - 256 - - - Other Strategic Disposals - 45 - - 45 - - - IFRS volatility in Central it
Slide 28: Loan growth by product and sector
Loan growth by product and sector Total loans to customers (amortised cost), £bn Retail Banking [Government support Q1’20 Gross new 2.3 card customers c.[x]k 157.0 schemes impact] 154.7 (0.2) 8.0 7.8 0.1 3.7 3.8 Q1’20 Gross new Q2’20 Q3’20 Q2’20 Q3’20 Q2’20 [Ofcurrent committed accountslines, Q3’20
Slide 29: Cautionary and Forward-looking Statements
Cautionary statement regarding forward-looking statements Cautionary and Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate