Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (February 2020)
26 slides from Natwest's debt investor presentation, Feb 14, 2020
Slide 1: Full Year 2019 Results Fixed Income
Full Year 2019 Results Fixed Income 14 February 2020 1
Slide 2: 2019 Financial Performance
2019 Financial Performance 2
Slide 3: FY'19 update on progress
FY’19 update on progress The results in this presentation relate to The Royal Bank of Scotland Group plc which is intended to be renamed NatWest Group plc later this year. Forward-looking considerations: The targets, expectations and trends discussed in this presentation reflect management’s current
Slide 4: Q4 2019 summary financials
Q4 2019 summary financials £m Q4’19 Q4’19 vs. Q4’18 Q4’19 vs. Q3’19 Total income 4,233 38% 46% Operating expenses (2,527) 2% (6%) o/w Other expenses (1,905) (6%) 10% o/w Strategic costs (537) 51% 150% o/w Litigation & conduct costs (85) (8%) (89%) Impairment losses (160) n.m. (25%) Operating profit/
Slide 5: Treasurer's review of 2019
Treasurer’s review of 2019 Balance sheet reflects diversified funding, prudent liquidity management and ongoing capital generation Strong pass on BoE stress test, lower Pillar 2A requirements and GSIB buffer removed Issuance plan achieved, inaugural SONIA linked covered bond and our first social bon
Slide 6: Strong capital generation
Strong capital generation Capital stack1 (% RWA) Capital generation (CET1, %) Q4’19 vs Q3’19 2.7% 2.3% Total capital 21.2% 16.2% CET1 Additional Tier 1 Tier 2 FY’19 vs FY’18 CRR RWA leverage LAC £179bn ratio 33.3% 5.1% Note: Figures may not cast due to rounding 1 End-point CRR basis 6
Slide 7: Diversified funding, prudent liquidity metrics
Diversified funding, prudent liquidity metrics Total funding mix (£bn)1,2 Liquidity portfolio (£bn)3 Liquidity coverage ratio (%) 152% 158% 152% £75bn £74bn £444bn £199bn £369bn £125bn Customer deposits Wholesale funding Primary liquidity3 Secondary liquidity FY 2017 FY 2018 FY 2019 Wholesale fundin
Slide 8: 2019 issuance
2019 issuance RBS Group plc1 NatWest Markets Plc $2bn 6NC5 $1.3bn dual tranche 3.5yr $1.25bn 11NC10 FXD and FRN Senior Unsecured £500m 8NC7 € 1bn 5yr FXD ~£4bn € 1.25bn 2yr FXD € 500m 1.5yr FRN €750m 6NC5 Senior € 250m 5yr FXD Social Bond Unsecured € 500m 1.5yr FRN Tier 2 $750m $750m10NC5 10NC5 ~£5b
Slide 9: Investment case, target financial shape and 2020 guidance
Investment case, target financial shape and 2020 guidance 9
Slide 10: A purpose-led bank responding to the changing needs of all stakeholders
A purpose-led bank responding to the changing needs of all stakeholders Simple to Powered by innovation deal with and partnerships Reengineering-led Strong pace of business simplification to drive model innovation and better customer partnership experience and colleague engagement Supporting Sharpen
Slide 11: NatWest Markets will be c.10% of the group
NatWest Markets will be c.10% of the group Capital release, £bn RWA and Capital, £bn Medium term, Legacy Currencies Year 1 cumulative Rates Financing 37.9 NWM RWA reduction 6-8 c.18 6.5 17.4 ~20 NWM associated capital RWAs c.1.0 c.2.7 3.2 release1 xx 10.8 NWM strategic costs c.0.2 2019 Medium term t
Slide 12: Financial targets and outlook
Financial targets and outlook 2020 financial targets and outlook Medium to long term targets and outlook Regulatory impact Personal Banking: c.£200m negative impact on income n/a Costs Cost take-out target: £250m1 Ongoing operating cost take-out Strategic costs target of £0.8-1.0bn for NWM refocus (
Slide 13: 2020 issuance plans
2020 issuance plans Continued diversification of issuance across a range of formats, currencies and tenors • Senior unsecured MREL: £2 to 4bn, of which up to £1bn in GSS1 format RBS Group plc 2 • Tier 2: up to £2.5bn • AT1: up to £1.5bn NatWest Markets Plc • Senior unsecured: £3 to 5bn • Covered Bon
Slide 14: CET1 ratio significantly above regulatory requirements
CET1 ratio significantly above regulatory requirements FY 2019 CET1 and target CET1 ratio versus maximum distributable amount (“MDA”)1 G-SIB Pillar 2A (varies annually) 3 Countercyclical buffer (CCyB) Pillar 1 minimum 16.2% Capital Conservation buffer • G-SIB buffer of 1.0% no longer applies to RBSG
Slide 15: NatWest Markets Plc overview
NatWest Markets Plc overview Key FY 2019 metrics 17.3% 38.4% 5.1% 254% £35bn CET1 MREL CRR Leverage LCR RWAs Funding sources and plans NatWest Markets Plc medium-term guidance Balance sheet value CET1 Ratio Above 15% of funding 16.9 16.4 11.7 base as at 1 MREL Ratio At least 30% FY 19 2 Capital and
Slide 16: Investment case
Investment case Key messages Financial outcomes Purpose-led decision making Medium to long term RoTE target of 9-11% Revenue opportunities to help counteract low rate Solid customer businesses with ability to grow environment. Lending target greater than 3%1 Operating cost2 reduction of £250m in 202
Slide 17: Appendix
Appendix 17
Slide 18: FY 2019 results by business
FY 2019 results by business1 UK Personal Ulster Bank Commercial Private NatWest Central items £bn RBSI Total RBS Banking RoI Banking Banking Markets & other2 Income 4.9 0.6 4.3 0.8 0.6 1.3 1.8 14.3 Operating expenses (3.6) (0.6) (2.6) (0.5) (0.3) (1.4) (0.4) (9.3) Impairment (losses) / releases (0.4
Slide 19: Q4 2019 results by business
Q4 2019 results by business1 UK Personal Ulster Bank Commercial Private NatWest Central items £bn RBSI Total RBS Banking RoI Banking Banking Markets & other2 Income 1.2 0.1 1.1 0.2 0.2 0.3 1.2 4.2 Operating expenses (0.8) (0.1) (0.7) (0.1) (0.1) (0.4) (0.3) (2.5) Impairment (losses) / releases (0.1)
Slide 20: Strong asset quality at FY 2019 with stage 3 loans below 2.0% of gross loans
Strong asset quality at FY 2019 with stage 3 loans below 2.0% of gross loans Commercial Private RBS NatWest Total RBSG UK Personal Banking Ulster Bank RoI1 Banking Banking International Markets FY’19 Loan impairment 25 (18) 38 n.m. n.m. n.m. 21 rate2, bps Total ECL 1.4 0.8 1.4 n.m. n.m. 0.1 3.8 prov
Slide 21: Ratings have continued on a positive trend
Ratings have continued on a positive trend Moody’s S&P Fitch RBS Group Baa2/Pos BBB/Sta A/Sta Inside the ring-fence Natwest Bank Plc A1*/A2/Pos A/Sta A+/Sta Royal Bank of Scotland plc A1*/A2/Pos A/Sta A+/Sta Ulster Bank Ireland DAC A3*/Baa1/Pos A-/Sta A-/Sta Ulster Bank Ltd A1*/A2/Pos A/Sta A+/Sta O
Slide 22: Issuing entity structure
Issuing entity structure1 Investors AT1, T2, MREL The Royal Bank of Scotland Group plc2 Inside the ring-fence iAT1, iT2, iMREL NatWest Holdings Ltd iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL The Royal Bank NatWest Bank Ulster Bank Ltd Ulster Bank Ireland Nat
Slide 23: Good progress on future MREL stack, on track to meet end-state requirements
Good progress on future MREL stack, on track to meet end-state requirements Future LAC Requirement2 Progress towards future senior MREL3 needs Current RBS Group Capital Based on BoE 2019 actual and Based on illustrative £200bn RWAs and static Stack (FY 2019)1 indicative MREL requirements regulatory
Slide 24: Estimated Loss Absorbing Capital ("LAC")
Estimated Loss Absorbing Capital (“LAC”) Balance sheet (£bn) Par Value Regulatory value LAC value value CET1 Capital 29.1 29.1 29.1 29.1 Tier 1 capital: end-point CRR compliant AT1 4.0 4.0 4.0 4.0 o/w: RBSG (HoldCo) 4.0 4.0 4.0 4.0 o/w: RBSG operating subsidiaries (OpCos) - - - - Tier 1 capital: non
Slide 25: Internal MREL – FY 2019 Ring-fence
Internal MREL – FY 2019 RBSG 1 AT1: £5.7bn T2: £8.8bn Inside the ring-fence MREL: £19.2bn Outside the ring-fence NWH NWM Plc 3 RBSI 2 AT1 : £3.7bn T2: £4.3bn AT1 : £0.9bn T2: £2.0bn AT1 : £0.3bn T2: £0.0bn iMREL: £7.6bn iMREL: £5.1bn iMREL: £0.0bn (2) RBS Plc NWB Plc 3 AT1: £1.0bn T2: £1.5bn AT1: £2
Slide 26: Cautionary & forward looking statements
Cautionary & forward looking statements The targets, expectations and trends discussed in this presentation represent RBSG, and where applicable Important factors that could affect the actual outcome of the forward-looking statements NWM management’s, current expectations and are subject to change,
NatWest Group — Debt Investor Presentation (February 2020) on 6ix