Natwest Group Plc · LSE:NWG
Natwest — Q1 2023 Earnings Presentation
37 slides from Natwest's earnings presentation, Apr 28, 2023
Slide 1: NatWest Group Q1 2023 Results
NatWest Group NatWest Group Q1 2023 Results
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer
Slide 3: Strong earnings and returns
Strong earnings and returns £1.8bn £1.3bn 19.8% Operating profit before tax Attributable profit Return on Tangible Equity vs £1.2bn in Q1’22 vs £0.8bn in Q1’22 vs 11.3% in Q1’22 Focused on growth, +37.2% +£214m 49.8% efficiency and operating leverage Income ex notable items1 Other operating expenses
Slide 4: Strong funding, deposits and liquidity profile; diversified loan book
Strong funding, 83% ~£422bn 139% deposits and liquidity Loan to deposit ratio Customer Deposits1 Liquidity Coverage Ratio profile £53bn surplus deposits down £11bn vs Q4’22 £43bn headroom Diversified and high ~5% <5% 93% quality loan book Top 10 customers2 Commercial Real Estate Personal lending sec
Slide 5: A reminder of our purpose-led strategy focused on growth, cost and capital
A reminder of our purpose-led strategy focused on growth, cost and capital Our Purpose We champion potenticl, Drive targeted growth across helping people, families the Group and businesses to thrive. Climate Enterprise Maintain expense and Our Strategy investment discipline Supporting * Effective ca
Slide 6: Delivering on our strategy: personalised solutions, sustainability, digital
Delivering personalised solutions Supporting customers’ Embedding our services across customers’ lifecycles sustainability transitions in our customers’ digital lives • Retail - youth flow share has increased • Delivered £40.2bn of CSFF vs our • 93% of Retail customers’ needs to 18.1%1, with 19% mor
Slide 7: Objectives and Q1'23 progress
Objectives Q1’23 progress Status Disciplined Deliver income excluding notable items for the Group of around £14.8 billion in 2023 £3.8bn On track and responsible growth Provide £100 billion of Climate and Sustainable Funding and Financing1 £40.2bn1 On track Deliver a cost: income ratio excluding lit
Slide 8: 1. Cost:income ratio is total Group income, divided by total costs excluding litigation and
1. Cost:income ratio is total Group income, divided by total costs excluding litigation and conduct 8
Slide 9: Katie Murray, Chief Financial Officer
Katie Murray - Chief Financial Officer
Slide 10: Group financial summary, Q1'23
Q1'23 vs Q1'23 vs Group, £m Q1'23 Q4'22 Q1'22 Q4'22 Q1'22 Net interest income, ex notable items1 2,902 2,909 2,027 (0.2%) 43.2% Non-interest income, ex notable items1 918 857 757 7.1% 21.3% 1 Total income, ex notable items 3,820 3,766 2,784 1.4% 37.2% Total income 3,876 3,708 3,008 4.5% 28.9% Other
Slide 11: Net interest income and margin drivers
-0.2% 2,909 2,902 2,868 41 39 (62) 20 (17) 13 Q4’22 Redemption EIR Q4’22 ex Day count Retail Banking Private Banking Commercial Central items Q1’23 adjustment2 notable items & Institutional & other +2 327 325 (1) 320 5 12 (9) Q4’22 Redemption EIR Q4’22 ex Lending margin Deposit margin Funding & othe
Slide 12: Customer deposit balances
189.7 Higher tax payments & Retail Banking 188.4 spending -2% 184.0 40.3 Higher tax payments and Private Banking 41.2 further investment -9% Paydown of debt 37.3 217.9 Paydown of debt Commercial & Institutional 203.3 Growth in large corporates Key drivers of deposit -1% balances: 200.5 • Macro econo
Slide 13: Drivers of higher deposit costs
Non interest-bearing balances Personal 1 Interest bearing Term deposits Corporate and Other 2 balances ~60% Instant Access % insured ~40% Q4’22 ~40% ~11% ~68% ~52% Q4’22 ~54% ~8% Q4’22 ~6% +100bps 4.0 Average UK Base Rate 3.92 3.5 Average cost of interest bearing customer deposits across 3 businesse
Slide 14: Customer lending by segment
187.4 Mortgages1 199.9 Gross new lending ~10bn1 +2% 69% New business LTV2 203.8 13.3 Unsecured 14.2 Primarily credit card +1% growth 14.4 4.5 Other Private 4.4 Private commercial +2% lending growth 4.5 2.6 Business Banking3 2.4 Sensible deleveraging -17% 2.0 66.6 Commercial Mid-Market 3 67.4 Higher
Slide 15: Liquidity and funding
Cash and balances at central banks 152% 2% AAA to AA- rated government bonds 145% 139% 17% Other LCR level 1 bonds Secondary liquidity £61.2bn Total liquidity value £209.9bn 81% FY’19 FY’22 Q1’23 12-month average LCR 151% Amortised cost 23% Fair value OCI Net Stable Funding Ratio 141% The majority o
Slide 16: Non-interest income and net fees
918 Q1’23 performance 857 807 757 757 • Primarily reflecting stronger performance in 242 335 Fixed Income trading and increased Capital 227 204 213 Markets income 544 580 553 615 583 Trading and other income Net fees and commissions Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 544 580 553 615 583 Net fees and comm
Slide 17: Operating expenses and cost considerations
+12.5% 1,932 Q1’23 cost considerations 35 15 32 o Staff costs include ~£60m one off cash payment of £1,000, or local equivalent, for ~60,000 FTE in January 1,718 132 o Non repeat of ~£100m charge for bank levy in Q4’22 Q1’22 Staff costs Other Premises and Depreciation Q1’23 administrative equipment
Slide 18: Mortgage and corporate loan book
Mortgages Corporate • Mortgage LTV of 53%2 • Diversified £74.6bn corporate loan book • Balances: 67% 5Y, 23% 2Y, 1% 10Y, 5% • Low exposure to in focus areas such as Retail Tracker, 4% SVR £7.9bn, Automotive £7.4bn and Leisure £7.4bn • £33.4bn or ~17% of fixed book expire by end of • Limited exposure
Slide 19: Loan impairment rate and ECL coverage
85 Group loan impairment rate 21 20-30 15 16 13 FY’23 Guidance 18 8 9 7 17 6 Stage 3 loan impairment rate1 12 2 (32) FY’16 FY’17 FY’18 FY’19 FY’20 FY’21 FY’22 Q1’23 FY’23 guidance 1.03% 0.91% 0.89% ECL coverage, % 3,806 20-30bps 3,434 3,447 584 352 333 417 59 61 Economic Uncertainty PMA 337 70 1,737
Slide 20: CET1 ratio and RWA movement
(0.16) 14.7 0.02 0.72 (0.29) 14.4 14.2 (0.08) Q4’22 IFRS 9 transitional Group earnings Group RWAs Other CET1 CET1 ratio pre Ordinary Q1’23 relief 1 changes distributions dividend accrual 178.1 176.1 (0.1) (0.8) 1.1 1.8 Ulster Bank RoI 4.6 5.4 170.7 173.5 Q4’22 Credit Risk Counterparty Market Risk Op
Slide 21: Capital and leverage requirements
19.6% 5.40% 14.4% Tier2 3.0% (£5.5bn) 13-14% AT1 2.2% 15.2% 4.25% (£3.9bn) 1.2% 2.7% 0.40 3.85% 10.4% 1.2% MDA2 0.60 Min. 9.5% 1.7% 2.1% Requirement 0.8% MDA2 2.5% 2.5% CET1 14.4% 1.7% 1.7% (£25.7bn) 10.4% 3.25 4.5% 4.5% Q1’23 Q1’23 FY’23 operating Q1’23 FY’23 requirements Q1’23 FY’23 requirement re
Slide 22: 1. Cost:income ratio is total Group income, divided by total costs excluding litigation and
1. Cost:income ratio is total Group income, divided by total costs excluding litigation and conduct 2. Total Income ex notable items 22
Slide 23: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer
Slide 24: 1. Cost:income ratio is total Group income, divided by total costs excluding litigation and
24 1. Cost:income ratio is total Group income, divided by total costs excluding litigation and conduct.
Slide 25: NatWest Group
& NatWest Group
Slide 26: Appendix
)! Append
Slide 27: Outlook
Outlook We retain the outlook guidance provided in the 2022 Annual Report and Accounts. The economic outlook remains uncertain. We will monitor and react to market conditions and refine our internal forecasts as the economic position evolves. The following statements are based on our current expecta
Slide 28: Segment financials, Q1'23
Ulster Bank ROI continuing operations are reflected within Central Items & other Retail Private Commercial & Central items Group Q1'23, £bn Group Banking Banking Institutional & other Net interest income 1.5 0.2 1.3 (0.1) 2.9 Non-interest income 0.1 0.1 0.7 0.1 1.0 Total income 1.6 0.3 2.0 0.0 3.9 I
Slide 29: Notable items in income
Q1’22 Q2’22 Q3’22 Q4'22 FY'22 Q1'23 Group income 3,008 3,211 3,229 3,708 13,156 3,876 Notable items in Income, £m Q1’22 Q2’22 Q3’22 Q4'22 FY'22 Q1'23 Commercial and Institutional Banking Own credit adjustments (OCA) 18 34 9 (19) 42 6 Fair value, disposal losses and strategic risk reduction -- (45) -
Slide 30: Asset yields and funding costs by segment
5.5 Retail Banking 5.38 5.0 Private Banking 4.5 4.44 Commercial & Institutional 4.0 4.07 NatWest Group 3.5 3.19 3.53 3.62 3.49 2.83 2.77 3.0 2.59 3.09 2.98 2.94 2.5 2.53 2.59 2.64 2.72 2.0 1.97 2.40 1.79 0.0 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 1.4 1.24 Retail Banking 1.2 1.15 Private Banking 1.0 0.87 Comm
Slide 31: Tangible equity and share count movement
GBP, m Share count, m Pence As at 31 December 2022 25,482 9,659 264 Attributable profit 1,279 13 Cash flow hedge reserve (net of tax) 215 2 FVOCI (net of tax) 64 1 Shares repurchased during the year (293) (115) 0 Other movements (101) 37 (2) Net change 1,164 (78) 14 As at 31 March 2023 26,646 9,581
Slide 32: Impairment by segment
Private Commercial & Central items Retail Banking Group Banking Institutional & other Q1’23 (£m) (114) (8) 44 8 (70) Q1’23 (bps) 22 17 (13) nm 7 Q4’22 (£m) (87) (2) (62) 7 (144) Q4’22 (bps) 17 4 19 nm 16 Q1’22 (£m) (5) 5 11 25 36 Q1’22 (bps) 1 (11) (3) nm (4) 32
Slide 33: Mortgage LTV distribution by stage
Mortgage LTV distribution by stage Total Stage 1 Stage 2 Stage 3 FY'19 FY'20 FY'21 FY'22 FY'19 FY'20 FY'21 FY'22 FY'19 FY'20 FY'21 FY'22 FY'19 FY'20 FY'21 FY'22 ≤50% 51,791 55,857 66,488 80,675 47,746 50,170 61,233 71,321 3,375 5,009 4,548 8,257 511 554 644 1,036 >50% and ≤70% 51,582 63,202 73,437 7
Slide 34: Scenario weighting and economic assumptions
Q1'23 and FY'22 Q3'22 H1'22 FY’21 Extreme Extreme Extreme Extreme Scenario Upside Base Case Downside Upside Base Case Downside Upside Base Case Downside Upside Base Case Downside downside downside downside downside Weighting Weighted Weighted Weighted 19% 45% 21% 16% 10% 35% 30% 25% 21% 45% 20% 14%
Slide 35: Structural hedge income and yield
FY 2022 Period end Total Income Average Notional Total Yield notional (£m) (£bn) (£bn) % Equity 363 21 21 1.77 Product 1571 184 176 0.89 Other 201 25 26 0.77 Total 2,135 230 223 0.96 H1 2022 Period end Total Income Average Notional Total Yield notional (£m) (£bn) (£bn) % Equity 178 20 20 1.77 Produc
Slide 36: Structural hedge and managed margin sensitivity
FY 2022 +25 basis points parallel upward shift -25 basis points parallel downward shift Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 (£m) (£m) (£m) (£m) (£m) (£m) Structural Hedge 50 158 260 (50) (158) (260) Managed Margin 148 141 136 (170) (140) (129) Total 198 299 396 (220) (298) (389) H1 2022 +25 ba
Slide 37: 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 “Risk Factors” in NWG’s 2022 Annual Repo