Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (August 2018)
22 slides from Natwest's debt investor presentation, Aug 3, 2018
Slide 1: Fixed Income Investor Presentation H1 2018 Results
Fixed Income Investor Presentation H1 2018 Results 3rd August 2018
Slide 2: Katie Murray, Deputy CFO
3< RBS Katie Murray Deputy CFO \ va!
Slide 3: Summary financials
Summary financials vs. H1 2017 £6.7bn Income (3.1%) 6,919 89 (109) 99 (296) 6,702 £4.7bn Income (£m)(1) Operating expenses (2.4%) H1 2017 PBB & CPB RBSI NatWest Centre H1 2018 Markets £1.8bn Operating profit (6.4%) 218 (11) 202 (3) (2) £0.9bn NIM (bps) Attributable profit (5.4%) H1 2017 Increased Co
Slide 4: Capital outlook
Capital outlook(1) • Expect RWAs to reduce by £5-10bn (vs. FY 2017) by FY 2018 RWA • Mortgage risk weighting expected to increase RWAs by £12bn in H2 2020 outlook • Basel 3 amendments currently assumed to inflate RWAs by 10%, or around £20bn in 2021/2022 CET1 • CET1 ratio 2020 target in excess of 13
Slide 5: 2020 targets
2020 targets(1) Our strategic plan targets sustainable returns based on… Sub-50% 12%+ ROTE Cost:Income Ratio This will be based off… Retail & CET1 ratio in UK income ~90% Commercial RWAs excess of 13% ~85% (1) The targets, expectations and trends discussed in this presentation represent management’s
Slide 6: Core messages
Core messages Attributable profit ex. US RMBS £1,690m for H1 2018 Solid capital generation: CET1 up 110bps(1), RWAs down, major legacy issues largely resolved On track to deliver our 2020 financial targets Intention to build future capital distributions (1) Excludes the impact of £2bn pre-tax pensio
Slide 7: Robert Begbie, Treasurer
3< RBS Robert Begbie Treasurer \ Siva !
Slide 8: Treasurer's View
Treasurer’s View • Balance sheet strength and sustainability in an uncertain environment • Positive momentum on ratings • Largely completed 2018 MREL & funding requirements • Resolution of major legacy issued reflected in credit spread performance • H1 Ring-fencing milestones achieved, on track for
Slide 9: Strong, sustainable balance sheet
Strong, sustainable balance sheet H1 2018 FY 2017 Loan : deposit ratio 87% 88% Short-term wholesale funding £13bn £18bn Liquidity coverage ratio 167% 152% Net stable funding ratio 141% 132% Common equity Tier 1 ratio 16.1% 15.9% CRR Leverage ratio 5.2% 5.3% Loss absorbing capital ratio 29.6% 27.1% 9
Slide 10: Positive momentum on ratings
Positive momentum on ratings Ratings actions in H1 Moodys S&P Fitch RBS Group Baa2/Pos BBB-/Pos BBB+/Pos Inside the ring-fence • H1 2018 saw positive action on our ratings from all three agencies Natwest Bank Plc A1*/A2/Pos A-/Pos A-/Pos • Moody’s upgraded the senior unsecured Royal Bank of Scotland
Slide 11: On track to meet future MREL requirements
On track to meet future MREL(2) requirements Future LAC requirement (1) (4) Progress toward future non-CRR MREL needs Based on BoE June 2018 guidance Based on current £199bn RWA and static regulatory capital requirements (3) CRD IV & Management >4% £24.0bn Buffers (4) £4-6bn annual Non-CRR 11.8% iss
Slide 12: Issuance reflects post ring fencing entity structure
Issuance reflects post ring fencing entity structure • Ring-fenced entity funding weighted toward deposits • No requirement for senior unsecured issuance out of the ring-fenced bank OpCos • Potential for secured issuance from ring-fenced bank OpCos for funding diversification purposes • ~£1-1.5bn se
Slide 13: Actively managing the non-MREL Capital stack
Actively managing the non-MREL Capital stack • Continue to manage the legacy capital stack for value: current & future regulatory value; relative funding cost; and Rating Agency considerations • ~£7bn legacy Tier 1 redeemed since FY 2014 • No need for AT1 or Tier 2 issuance, given outlook for balanc
Slide 14: Progress on structural reform
Progress on structural reform RFTS 1 successfully completed: H1 2018 • Retail & commercial asset transferred across the ring-fence; • Major OpCos renamed; and • Covered Bond programme transferred to NatWest Bank Plc • Capital reduction exercise in NatWest Markets completed in July • Non-permitted cu
Slide 15: Q&A
Q&A Information Classification: Internal 15
Slide 16: Appendix
Appendix Information Classification: Internal 16
Slide 17: RWAs and capital generation
RWAs and capital generation Continued RWA reductions support strong capital build RWAs (£bn) CET1 ratio 16.2% 16.2% (0.1%) 1.0 16.1% 200.9 By the end of 0.2% 2018 Bank 15.9% 0.3% (3.2) RWAs expected to be lower by (0.8%) £5bn - £10bn (vs. 1.0% FY 2017) 198.8 191-196 (0.5%) 0.3% FY 2017 Pensions RWA
Slide 18: Strong CET1 build
Strong CET1 build Target CET1 ratio versus maximum distributable amount (“MDA”), % Illustration, based on assumption of static regulatory capital requirements (3) 16.1 › 13.0 6.4 Illustrative Illustrative(1) 11.1 1.9 headroom (1) headroom 9.7 1.0 0.5 1.0 (4) 0.8 1.9 2.5 (2) Countercyclical Buffer (3
Slide 19: Estimated Loss Absorbing Capital (LAC)
Estimated Loss Absorbing Capital (“LAC”) H1 2018 £bn LAC Value Regulatory Value Par Value Common equity tier 1 32.0 32.0 32.0 Tier 1 Capital: End point CRR compliant 4.0 4.0 4.0 o/w RBS Group Plc (HoldCo) 4.0 4.0 4.0 o/w RBS Operating Subsidiaries (OpCos) - - - Tier 1 Capital: End point CRR non-comp
Slide 20: H1 2018 results by business
H1 2018 results by business Central Ulster Bank Commercial Private RBS NatWest (£bn) UK PBB items & Total RBS RoI Banking Banking International Markets other(1) Income 3.2 0.3 1.8 0.4 0.3 0.7 0.1 6.7 Operating expenses (1.6) (0.3) (0.8) (0.2) (0.1) (0.7) (1.0) (4.7) Impairment (losses) / releases (0
Slide 21: Litigation and conduct
Litigation and conduct End of H1 2018 provisions (£m) Comments 3,715 • Settlement in principle reached with DOJ for US RMBS • Incremental charge of £1,040m taken in Q2 US RMBS 2018 • Nomura RMBS litigation indemnity recovery of £241m 745 711 650 • RBS has made provisions totalling £5.1bn to date for
Slide 22: Disclaimers
Disclaimers The targets, expectations and trends discussed in this presentation represent management’s current expectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 48 and 49 of the H1 2018 IMS and the “Risk Factors” on pages 37
NatWest Group — Debt Investor Presentation (August 2018) on 6ix