Natwest Group Plc · LSE:NWG
Natwest — H1 2019 Earnings Presentation
37 slides from Natwest's earnings presentation, Aug 2, 2019
Slide 1: H1 2019 Results
H1 2019 Results 2 August 2019
Slide 2: Howard Davies, Chairman
3x RBS Howard Davies Chairman \ Wa !
Slide 3: Ross McEwan, Chief Executive Officer
Ross McEwan Chief Executive Officer
Slide 4: Group financial performance
Group financial performance £2.7bn Generating £2.0bn 12.1% H1’19 Operating profit H1’19 Attributable profit RoTE H1’19 returns before tax up £1.2bn on H1’18 up from 5.3% in H1’18 up £868m on H1’18 £173m 3.4k Reducing costs Cost reduction FTE reduction compared to H1’18 compared to H1’18 2.5% £14.3bn
Slide 5: Challenging operating environment for banks
Challenging operating environment for banks Rate rise expectations continue to push out(1) Business confidence is weakening(2) 1.1 May 2019 Jun 2019 Jul 2019 60 Manufacturing PMI Service PMI 1.0 58 0.9 56 0.8 54 % 0.7 52 0.6 50 0.5 48 0.4 46 1 2 3 4 5 Jan Dec Dec Jun Years 2017 2017 2018 2019 ▪ Yiel
Slide 6: Capital returns to shareholders
Capital returns to shareholders 2018 H1 2019 2p 3.5p 7.5p 2p 12p Interim Final Special Interim Special £1.6bn £1.7bn paid to to be paid to shareholders shareholders ▪ Total payout since resuming dividend payments £3.3 billion, of which £2.0 billion will be paid to UK Taxpayer ▪ Post-dividend accrual
Slide 7: Supporting customers and growing in key markets
Supporting customers and growing in key markets Supporting personal customers Supporting the regions and entrepreneurship 13.9m current £14.3bn £30.6bn 11.2k account customers gross new mortgage v lending to SME entrepreneurs 350k new customer lending in & Mid Corporates supported by accounts since
Slide 8: Delivering improvements for customers
Delivering improvements for customers Facial Recognition Biometric cards pilot NatWest Rapid Cash • Account opening in under 10 • Payments of over £30 using • Supports working capital minutes for NatWest personal fingerprint authorisation requirements up to £300k customers Video Banking New credit c
Slide 9: Providing innovative solutions
Providing innovative solutions A digital SME Fully automated banking proposition 24x7 personal lending platform assistant CurrencyPay™ A simple, secure An innovative new and streamlined companion bank international account payment platform Business advisor; Invoice & payments Capturing Payments tips
Slide 10: Key messages
Key messages H1 2019 pre tax operating profit £2.7bn and attributable profit £2.0bn. Announced a 2p ordinary interim dividend and 12p special dividend per share. Since resumed dividend payments will have returned £3.3bn to shareholders and £2.0bn to UK taxpayers. Supporting customers with net lendin
Slide 11: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer
Slide 12: H1 2019 summary financials
H1 2019 summary financials H1’19 vs. £m H1’19 H1’18 Income (£m) Netinterest Net interest income income 4,004 (7%) 7,117 Nonnon-interest Total interest income income 3,113 31% 6,702 Total income 7,117 6% (356) 990 26 (223) Operating Operating expenses expenses (4,100) (13%) (22) o/w Other expenses (3
Slide 13: Bank Net Interest Margin Q2 2019 vs. Q1 2019
Bank Net Interest Margin Q2 2019 vs. Q1 2019 Bank NIM (bps) 208 207 (1) Future (4) considerations 202 202 • Rate sensitivity (1) • Reduction in liquidity • Asset and liability pressures • Economic uncertainty Q1’19 Q1’19 Central Competitive Other Q2’19 Q2’19 underlying liquidity pressure underlying
Slide 14: 2019 Priorities
2019 Priorities 1. 2-3% Net loan growth 2. £300m Cost take out 3. Capital generation 4. Capital returns 14
Slide 15: Net loan growth
Net loan growth H1’19 annualised net loan growth(1) 2019 target net 2–3% loan growth (2) H1’19 net loan growth 2.5% UK Personal Banking 4.0% Ulster Bank 2.1% ROI Commercial 0.0% Private 5.6% RBSI 4.5% (1) H1’19 vs. FY18 net loan growth presented on an annualised basis in GBP. (2) Target net loan gro
Slide 16: Cost reduction
Cost reduction Operating expenses (£m) Strategic costs Strategic costs (£m) Conduct & Litigation 4,910 Bank Levy 4,735 Other Expenses 350 654 4,100 801 481 179 629 60 £1.2 – 1.5bn 434 3,584 3,596 355 3,411 299 195 141 H1’18 H2’18 H1’19 Q2’18 Q3’18 Q4’18 Q1’19 Q2’19 FY’19 Target(1) FTE 70 67 67 (‘000
Slide 17: Capital generation H1 2019
Capital generation H1 2019 Strong capital build CET1 (%) 17.1 (0.3) 0.2 0.6 (0.3) 0.2 (0.8) 16.0 0.4 16.0 c.14.0% Pro-forma Alawwal Alawwal Profit ex. RWAs ex. Other H1’19 Ordinary Special H1’19 Post FY 2021 Q4’18 RWA Profit Alawwal Alawwal Pre-dividend dividend dividend dividend Target reduction ac
Slide 18: Strong, sustainable balance sheet
Strong, sustainable balance sheet Key H1 2019 capital, funding and liquidity metrics Capital stack Total funding mix Liquidity portfolio (1) (3) (% RWA) (£bn) (£bn) 2.7% £78bn 2.2% £71bn Total CET1 Customer deposits (2) capital Additional Tier 1 ~£439bn £203bn Primary liquidity Wholesale funding 20.
Slide 19: H1 2019 update on progress
H1 2019 update on progress • 2.5% annualised net loan growth across Personal & Net loan growth Ulster and Commercial & Private • Targeting 2-3% net loan growth in 2019 • Reduced other expenses by £173m in H1’19 vs H1’18 Continuing cost reduction • Targeting cost reduction of £300m in 2019 • Underlyi
Slide 20: Q&A
3x RBS Q&A \ Wa
Slide 21: Fixed Income
3x RBS Fixed Income \ hve !
Slide 22: Good progress against 2019 issuance plan
Good progress against 2019 issuance plan H1 2019 2019 Continuing diversification of 2019 issuance across a Issuance Guidance range of formats, currencies and tenors(1) RBSG plc • $2bn RBSG senior MREL 6NC5 FXD to FRN Senior Unsecured • $1.25bn RBSG senior MREL 11NC10 FXD to FRN ~£3bn £3-5bn MREL • £
Slide 23: Capital ratios significantly above regulatory requirements
Capital ratios significantly above regulatory requirements H1 2019 CET1 and target CET1 ratio versus 2022 minimum requirements as a % of RWA vs. Total (1) maximum distributable amount (“MDA”) (2) MREL senior unsecured outstanding (Based on illustrative RWA of ~£200bn) 16.0% 26.5% CRR CET1 Buffers To
Slide 24: Appendix
3x RBS Appendix
Slide 25: H1 2019 results by business
H1 2019 results by business Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PB items & Total RBS RoI Banking Banking International Markets ( 1) other Income 2.4 0.3 2.2 0.4 0.3 0.9 0.6 7.1 Operating expenses (1.2) (0.3) (1.3) (0.2) (0.1) (0.7) (0.3) (4.1) Impairment (losses) / releases (
Slide 26: Notable items
Notable items (£m) Q2 2019 Q1 2019 FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Alawwal Bank merger gain on disposal 444 - - - - - - FX recycling gain 290 - - - - - - Provisions release 256 - - - - - - Other Strategic Disposals 45 - - - - - - IFRS volatility in Central items 21 (4) (59) (25) 77 17 (128)
Slide 27: Q2 2019 summary financials
Q2 2019 summary financials Q2'19 v s. £m Q2'19 Q 2'18 Net interest income 1,971 (10%) Income (£m) Non interest income 2,109 73% 4,080 3,400 990 Total income 4,080 20% 12 (45) (235) (42) Operating expenses (2,162) (21%) o/w Other expenses (1,673) (7%) Q2’18 Personal, RBSI NatWest Centre Alawwal (4) Q
Slide 28: Income H1 2019 vs H1 2018
Income H1 2019 vs H1 2018 (£m) 6,702 7,117 93 990 (908) (2%) (124) 530 26 6,609 6,133 5,701 5,603 (6) H1’18 Total H1’18 NWM & H1’18 Personal Personal & RBSI H1’19 Personal H1’19 NWM & H1’19 Total Income Centre Income & Ulster and Ulster and & Ulster and Centre Income Income ex one-offs Commercial &
Slide 29: Income Q2 2019 vs Q1 2019
Income Q2 2019 vs Q1 2019 (£m) 4,080 990 3,037 (1%) (252) 25 (37) 8 278 3,068 2,816 2,787 3,065 (31) Q1’19 Total Q1’19 NWM & Q1’19 Personal Personal & RBSI Q2’19 Personal Q2’19 NWM & Q2’19 Total Income Centre Income & Ulster and Ulster and & Ulster and Centre Income Income ex one-offs Commercial & C
Slide 30: UK Personal Banking balance sheet
UK Personal Banking balance sheet UK PB Gross L&As (£bn) UK PB Accounts (#m) +1.8% +2.1% Gross new 140.9 153.1 accounts 150.0 138.4 346k Gross new +0.4% accounts 122k Gross new 13.8 13.9 lending £14.3bn +0.9% +7.9% +0.0% 4.2 4.2 7.6 8.2 4.0 4.0 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19
Slide 31: Commercial balance sheet
Commercial balance sheet Commercial Gross L&As (£bn) (0.1%) 102.7 102.6 +2.0% +4.0% (4.7%) +4.5% 0.0% 30.6 (8.6%) 30.0 21.4 20.4 20.7 20.7 n.m. 14.9 15.5 6.7 7.0 7.0 6.4 2.0 2.0 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 FY18 H1’19 Large Commercial Business SME & mi
Slide 32: Net interest income sensitivity
Net interest income sensitivity(1) Structural and product hedge Change in NII – 25bps upward shift in yield curves H1’19 H1’19 (£m) Year 1 Year 2(2) Year 3(2) Incremental Average notional Overall yield income (£m) (£bn) (%) Structural hedges 32 99 171 Equity 197 29 2.31 Managed margin(3) 213 241 243
Slide 33: NatWest Markets
NatWest Markets Focused offering connected with the wider RBS Group Electronic offering becoming more important H1 2019 NWM Core Income by product(1) (£m) Strong market positions on Tradeweb(2) Rates Currencies Financing Revenue Share #1 dealer #1 dealer with other -100 374 227 201 702 Gilts GBP Swa
Slide 34: Diluted Tangible Net Asset Value
Diluted Tangible Net Asset Value (TNAV) movements Shares in TNAV per Diluted shares in Diluted TNAV per Amount (£m) Amount (£m) issue (m) share (p) issue (m) share (p) Q1 2019 TNAV 34,962 12,090 2.89 34,962 12,129 2.88 Profit for the period post tax 1,703 - 0.14 1,703 - 0.14 Less: profit to NCI / ot
Slide 35: Net Promoter Scores across our brands
Net Promoter Scores across our brands Personal Banking(1) Business Banking(2) Commercial Banking(3) NatWest stable. NatWest stable. NatWest ahead of the rest of their Royal Bank of Scotland recovering. Royal Bank bottoming out. market. Royal Bank improving. 30 26 25 25 27 27 25 23 22 21 21 20 20 20
Slide 36: Digital Dashboard
Digital Dashboard Volume of transactions (m) H1’18 H1’19 Movement Physical is reducing Branch Transactions 70 46 34% Cheque Usage(1) 90 44 51% Contact centre calls 12 11 8% Digital is increasing Mobile: Payments 88 120 36% Users 6.0 6.8 13% Logins to mobile app(2) 1,126 1,253 11% Digital sales in UK
Slide 37: Cautionary & forward looking statements
Cautionary & forward looking statements The targets, expectations and trends discussed in this presentation represent RBSG, and where applicable NWM management’s, cu rrent expectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 47