Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (July 2024)
39 slides from Natwest's debt investor presentation, Jul 26, 2024
Slide 1: 26 July 2024
26 July 2024
Slide 2: NatWest
NatWest UI
Slide 3: Strong returns with attributable profit of £2.1bn
Strong returns with £7.0bn £4.0bn 16.4% attributable profit of Income ex notable items1 Costs2 Return on Tangible Equity £2.1bn, EPS 24.2p vs £7.4bn in H1’23 vs £3.8bn in H1’23 vs 18.2% in H1’23 Strong funding and risk management 83% 151% 13.6% 3bps Loan impairment Loan to Deposit Ratio Liquidity Co
Slide 4: Growing our customer base and strategic progress
• Growing our customer base +220k1 • Strategic hubs from 3 to 2 • Active liquidity management Poland exit by end 2025 announced £6.1bn deposit growth with mix • Accretive growth in target segments stabilisation Loans to Commercial Mid-market • Platforms and Channels customers + £1.8bn2 Telephony sys
Slide 5: Interest rates higher for longer than anticipated
2024-2026 reflects NatWest Group IFRS 9 base case1 5.5 5.25 UK base rate assumption at H1’24 5.0 4.75 UK base rate assumption at FY’23 • Interest rates have remained 4.5 UK Consumer price index2 higher for longer than anticipated; 4.0 4.00 we now expect 2 Base Rate cuts in 3.5 3.50 2024 and 5 cuts i
Slide 6: Group income statement
Q2'24 vs H1'24 vs Group, £m Q2'24 Q1'24 Q1'24 H1'24 H1'23 H1'23 Net interest income, ex notable items 1 2,757 2,651 4.0% 5,408 5,726 (5.6%) Non-interest income, ex notable items 1 833 763 9.2% 1,596 1,657 (3.7%) 1 Total income, ex notable items 3,590 3,414 5.2% 7,004 7,383 (5.1%) Total income 3,659
Slide 7: Total income and strengthened guidance
Net interest income Non interest income Total Centre income +5.2% 3,590 28 29 11 51 3,414 43 17 (3) 833 763 3 businesses +£147m, +4.3% Strengthened guidance NII +£111m, +4.3% Non-II +£36m, +4.5% • FY’24 total income2 of ~£14.0bn 2,651 2,757 • Assumes UK Base Rate 4.75% by end 2024 Q1’24 Retail Banki
Slide 8: Illustrative income impact of -25bps shift in yield curve
Illustrative Year 1 Income impact of -25bps downward shift in yield curve, (£m) 6.0 (44) (42) 5.2 5.3 5.3 5.3 (50) 5.0 4.4 4.0 3.0 3.1 3.1 2.7 (125) (125) 3.0 2.0 2.0 2.1 2.1 (170) 2.0 1.8 1.2 1.0 (169) (167) 0.0 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 (220) FY’22 FY’23 H1’24 Average base rate Average cost of
Slide 9: Structural hedge
Product hedge gross income Gross income already written 3.0 • >90% of expected 2024 product hedge income already written 2.0 • Annual maturities are one fifth of the period end 2.8 2.9 2.9 2.9 balance which is equivalent to c.£35bn in FY’24.3 1.0 • We continue to expect the hedge notional to reduce
Slide 10: Other operating expenses
-4.9% 2,028 +0.9% -3.7% Retail share offer costs 1 17 -0.4% 8 25 (72) -2.0% Bank levies 2 (7) 1,928 87 (38) 17 30 Ulster direct Other operating expenses excluding 1,908 retail share offer costs, bank levies and Ulster direct 1,881 Q1’24 Staff costs Other Premises and Depreciation Q2’24 administrativ
Slide 11: Loan impairment charge / (release)
3,131 Includes £117m of total PMA releases 724 578 Loan Impairment charge / 337 93 (release), £m1 (45) (1,173) FY’19 FY’20 FY’213 FY’22 FY’23 Q1’24 Q2’24 Loan impairment rate, bps1,2 Retail Banking 25 45 (2) 11 22 12 12 Commercial & Institutional 27 156 (92) 9 7 11 (28) Private Banking (4) 58 (29) (
Slide 12: Delivering attractive returns to shareholders
Delivering attractive returns to shareholders os ————_ Total Other operating Loan RoTE Income expenses impairment rate Broadly stable ~ 2. 0, £14.0bn‘ vs 20233 Below 15 bps >14% Po Targets 2026 RoTE target of >13% Ordinary dividend payout ratio ~40% Capacity for buybacks CET1 ratio in the range of 1
Slide 13: NatWest
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Slide 14: Capital, leverage, liquidity and funding
Capital and leverage 13.6% 19.5% 31.7% 5.2% £180.8bn Risk weighted CET1 ratio Total capital ratio MREL ratio UK leverage ratio assets Liquidity and 83% funding 151% 139% Loan to deposit £425.2bn. £83bn. Liquidity coverage Net stable funding ratio Customer Wholesale funding ratio ratio (ex repos and
Slide 15: Liquidity portfolio
152% 151% 145% 144% 2% 6% 22% Secondary liquidity £67bn Total liquidity value £227bn 70% FY’19 FY’22 FY’23 H1’24 Cash and balances at central banks High quality government bond Extremely high-quality covered bonds Level 2 eligible assets Numbers may not cast due to rounding 15
Slide 16: Customer deposits
£421bn £424bn £419bn £420bn £425bn Q4’23 66.1 121.9 188.0 +£5.2bn Retail Banking Q1’24 66.4 123.6 190.0 11% 15% 17% 16% 17% +£1.5bn Q2’24 65.3 126.2 191.5 52% Q4’23 7.2 30.5 37.7 50% 50% 51% 51% Private Banking Q1’24 7.0 30.8 37.8 +£1.7bn Q2’24 6.7 32.8 39.5 37% Q4’23 68.9 124.5 193.4 35% 34% 33% 32
Slide 17: Gross customer lending
205.4 Q4’23 Gross New Lending +20% in Q2 vs Q1, Mortgages1 203.3 202.5 Q1’24 more than offset by redemptions Q2’24 12.4% stock share as at May’244 15.8 Unsecured1 15.8 +£0.4bn in Q2’24, 9.0% stock share5 16.1 4.5 Other Private 4.6 • Sainsbury’s Bank transaction +£2.5bn unsecured, 4.6 +10.6% proforma
Slide 18: Regulatory capital and leverage requirements
5.20% 13.6% 11.7% 1.4% 4.25% 1.2% 0.40 3.85% 10.5% Min. 1.7% MDA2 0.60 Requirement 2.5% 1.8% 3.25 4.5% Q2’24 Regulatory Q2’24 Regulatory requirement requirement O-SII group risk add-on3 Pillar 2A5 O-SII group risk add-on3 Countercyclical buffer4 Pillar 1 Countercyclical leverage ratio buffer6 Capita
Slide 19: CET1 capital and RWA movements
14.5 0.04 0.41 (0.67) 0.63 (0.26) 13.6 13.5 Q1’24 Attrib. profit Group RWAs Other CET1 CET1 ratio pre Directed Buyback Ordinary Q2’24 changes distributions dividend CET1 capital1 25.1 +1.2 +0.1 -1.2 -0.5 24.6 £bn -£5.5bn 186.3 (3.9) (1.0) 180.8 (0.6) Q1’24 RWA management Business Movements Other Q2’
Slide 20: Total capital and MREL
19.5% Tier 2 3.3% 31.7% 15.4% AT1 2.6% Tier 2 1.2% Senior MREL 12.2% 1.7% 2.8% 2.5% AT1 2.1% 2 x Pillar 2A3 6.5% CET1 22.5% MREL eligible MREL CET1 CET1, AT1 & requirement 13.6% Tier 2 capital 2 x Pillar 1 CET1 resources 10.5% 2 x Pillar 1 19.5% 16% O-SII Group Risk Add-on4 Countercyclical buffer5 C
Slide 21: Holding company guidance and H1 2024 issuance
Holding company 2024 H1 2024 guidance issuance2 • $1.0bn 4NC3 FXD Senior unsecured (MREL) £4bn to £5bn ~£2.2bn • $0.3bn 4NC3 FRN - - • $1.5bn 11NC10 FXD NatWest Group plc Tier 2 capital £1bn to £2bn ~£800m • $1.0bn 10.25NC5.25 - - Additional Tier 1 Up to £1bn ~£800m • $1.0bn PerpNC10 - - Operating c
Slide 22: A ae)
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Slide 23: Appendix
Slide 24: Credit ratings
Moody’s S&P Fitch Group holding company NatWest Group plc A3/Sta BBB+/Sta A/Sta Ring-fenced bank operating companies NatWest Bank Plc A1/Sta1 A+/Sta A+/Sta Royal Bank of Scotland plc A1/Sta1 A+/Sta A+/Sta NatWest Bank Europe GMBH NR A+/Sta A+/Sta Non ring-fenced bank operating companies NatWest Mark
Slide 25: Funding mix
2% 7% 10% 74 80 83 £[X]bn 14% £83bn 15% 51% 450 431 433 8.2 Bank deposits 3.8 TFSME CP & CD 2022 2023 H1'24 MTN 3 Senior secured Oct-25 From Mar-27 Customer deposits Wholesale funding Subordinated debt 25
Slide 26: Wholesale funding maturity profile
4.5 4.9 3.3 3.7 0.6 H2 2024 2025 2026 2027 2028 1.2 1.0 1.0 0.6 0.6 H2 2024 2025 2026 2027 2028 2.0 1.0 0.4 H2 2024 2025 2026 2027 2028 26
Slide 27: Asset yields and funding costs by segment
6.81 Retail Banking 7.0 6.73 6.72 6.65 Private Banking 6.5 5.84 6.0 Commercial & Institutional 5.5 5.01 NatWest Group 4.97 5.0 4.41 4.80 4.88 4.67 4.75 4.5 4.26 4.50 3.97 4.0 3.88 3.79 3.5 3.34 3.50 3.0 3.11 0.0 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 3.5 3.14 3.15 3.02 Retail Banking 3.0 2.80 Private Banking
Slide 28: Structural hedge income and notional
H1 2024 Period end Total income Average notional Total yield notional (£m) (£bn) (£bn) % Equity 218 22 22 1.95 Product 1,392 175 176 1.58 Total 1,610 197 198 1.62 FY 2023 Period end Total income Average notional Total yield notional (£m) (£bn) (£bn) % Equity 418 22 22 1.87 Product 2,822 185 199 1.42
Slide 29: Interest rate sensitivity
H1 2024 +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 42 129 216 (42) (129) (216) Managed Margin 93 97 110 (125) (107) (110) Total 135 226 326 (167) (236) (326) FY 2023 +25 basi
Slide 30: Deposit mix and hedge mix
1.5% 1.5% 425 425 Subject to customer and market dynamics 419 419 16% 17% Term deposits 68 73 Term hedge 68 73 Term Deposit Income: moderate increase • Volume: increasing at a more moderate rate • Margin: broadly stable Unhedged 166 Unhedged Deposit Income: some reduction 50% 51% 178 Instant Access
Slide 31: Economic scenarios and weightings
H1'24 Q1'24 and FY'23 H1'23 Upside Base Case Downside Extreme Upside Base Case Downside Extreme Extreme Scenario Upside Base Case Downside downside downside downside Weighting Weighted Weighted 22% 45% 19% 14% 21% 45% 20% 13% Weighted average 19% 45% 21% 16% average average UK GDP – Annual Growth (%
Slide 32: Loan book: personal and wholesale
Personal: £221.4bn, 57% of group Wholesale: £167.5bn, 43% of group Group mortgages £205.5bn Corporate £76.6bn Loan-to-value of 57%1 stable year-on-year Diverse corporate loan book, with exposure 64% 5Y, 26% 2Y, 1% 10Y, 6% Tracker2, 3% SVR across a broad range of sectors Default levels remain below h
Slide 33: Commercial real estate loan-to-value
30-Jun-24 Gross Loans 31-Dec-23 Gross Loans Total Total (£m) (£m) ≤50% 8,219 ≤50% 7,898 >50% and ≤70% 4,308 >50% and ≤70% 3,878 >70% and ≤100% 451 >70% and ≤100% 515 >100% 273 >100% 273 Total with LTVs 13,251 Total with LTVs 12,564 Total portfolio Total portfolio 48% 48% average LTV average LTV (1)
Slide 34: Issuance structure across group entities
External issuance of AT1, Tier 2 and MREL is only from NatWest Group plc, the group holding company. Subsidiary operating companies will only issue internal AT1, Non ring-fenced bank (NRFB) operating subsidiaries Issue internal Tier 2 and MREL. AT1, T2, MREL senior NatWest Bank Plc issues senior sec
Slide 35: Capital and liquidity: worst point vs Q2 2024
Worst point1 Q2 2024 Capital & liquidity Key observations, then and now…. CET1 ratio2 4.0% 13.6% • Markets RWA nearly 50% of RWA £578bn £180.8bn total group RWA v 11% today o/w Markets RWA £279bn £20.5bn • High reliance on short term Wholesale funding £492bn £83bn4 funding; peaked at 60% of total wh
Slide 36: Footnotes
Slide 3: 1. Excludes notable items. 2. Costs excluding litigation and conduct. 3. The loan:deposit ratio (LDR) (excl. repos and reverse repos) was 83% at Q2 2024, with customer deposits exceeding net loans to customers by around £72 billion. 4. £54.5bn headroom above the regulatory minimum. 5. £1.7b
Slide 37: Footnotes
Slide 27: 1. For NatWest Group plc this is the gross yield on the IEAs of the banking business; for Retail, Commercial & Institutional and Private it represents the third party customer asset rate. 2. For NatWest Group plc this is the cost of interest-bearing liabilities of the banking business plus
Slide 38: Cautionary statement regarding forward-looking statements
The guidance, targets, expectations and trends discussed in this presentation represent NatWest Group management’s current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” in NWG’s 2023 Annual Report and Accounts and Form 20-F, the “Risk Fa
Slide 39: Group Treasury and Investor Relations contacts
Group Treasury Investor Relations Scott Forrest Paul Pybus Amber Sekhri Head of Capital Strategy & Head of Debt Investor Relations Fixed Income Corporate Access Treasury Debt Capital Markets paul.pybus@natwest.com amber.sekhri@natwest.com scott.forrest@natwest.com +44 (0) 207 672 1758 +44 (0) 207 67
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