Natwest Group Plc · LSE:NWG
Natwest — FY2020 Earnings Presentation
38 slides from Natwest's earnings presentation, Feb 19, 2021
Slide 1: FY 2020 Results
FY 2020 Results 19th February 2021
Slide 2: Howard Davies, Chairman
Howard Davies Chairman Information classification: Classification: Secret Secret 2
Slide 3: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 3
Slide 4: FY'20 results highlights
FY’20 results highlights Resilient FY’20 £2.9bn performance Operating profit before Supported customers and accelerated digital impairments in FY’20, up 4% on FY’191 £3.2bn 18.5% FY’20 Impairments FY’20 CET1 Capital Ratio transformation 88bps of customer loans Up 230bps on FY’19 Up from £0.7bn Inclu
Slide 5: Strategic priorities will drive sustainable returns
Strategic priorities will drive sustainable returns UR A LUE NatWest Group is a relationship bank for a digital world. ur urpose e champion potential, helping We champion potential; people, families and businesses breaking down barriers and to thrive building financial confidence so the 19 million peo
Slide 6: Supporting customers at every stage of their lives
Supporting customers at every stage of their lives Supporting our customers Retail Banking Payment Holidays Supporting our Mortgage Payment Holidays, £bn Share ▪ 95% of branches kept open during customers’ financial the pandemic of book health through Peak 33.6 c.22% ▪ Extended support to vulnerable
Slide 7: Delivering on our Areas of Focus
Purpose-led, long term decision making 2020 progress Delivering on our Areas 1,230 new entrepreneurs supported with the Accelerator programme, and a of Focus ENTERPRISE further 14,200 through Business Builder The biggest 10,000 hours of coaching delivered to business owners, over 1,000 Enterprise su
Slide 8: Our four strategic priorities drive sustainable returns for shareholders
Strategic priorities will drive sustainable returns Our four strategic priorities drive upporting owered by sustainable returns for customers at every stage of partnerships innovation shareholders their lives Priorities delivered through: Target: 9-10% ROTE imple to harpened by 2023 Sustainable grow
Slide 9: Personal customers - strong position with capability to grow
Sustainable growth with an intelligent approach to risk Retail Banking Private Banking Positioned for growth Personal customers - Share of personal products strong position with c.16.3% c.10.9% c.5.5% £32.1bn 0.7% capability to grow PCA1 Mortgage2 Unsecured2 AUMA Share of UK mortgage market2 With st
Slide 10: Corporate customers – expanding more services across our franchise
Sustainable growth with an intelligent approach to risk Commercial Banking NatWest Markets Corporate customers – Positioned for growth expanding more Share of commercial products Product share3 services across our 32% 30% franchise 20% 16.8% 12.0% 10.7% #1 Strong franchises and product Business Curr
Slide 11: Accelerating digital transformation to deliver income growth
Sustainable growth with an intelligent approach to risk We are a relationship bank for a digital world with high levels of digital engagement Accelerating digital transformation to Video Banking Mobile deliver income growth The pandemic has significantly increased the 15k 7.7m pace of digital adopti
Slide 12: Accelerating digital transformation to drive simplification and cost efficiencies
Simplification and cost efficiency Simplifying customer journeys to improve customer experience Accelerating digital Journey Metric Previous Current Next Steps transformation to drive 48 Hours2 simplification and cost BBLS Lending Commercial Time to 14 ▪ Lending <£750k, approval for efficiencies Len
Slide 13: Investment increasingly focused on delivering income and cost benefits
Simplification and cost efficiency Investment spend1, FY’21-FY’23 Investment increasingly focused on delivering 0.2 0.4 • We will invest £3bn over the next income and cost 0.4 (6%) (12%) Income Initiatives three years to support the One Bank (14%) benefits Cost Initiatives strategy 0.6 Shared Busine
Slide 14: Actively Managing Capital: Ulster Bank Ireland
Portfolio discipline and effective deployment of capital Ulster ank Ireland DAC FY’20 Actively Managing Capital Strategic review undertaken of Loans amortised cost (€bn)1 Loans by staging (€bn)1 Ulster Bank in the Republic of Stage 1 & 2 Ireland through lens of 93.5% sustainable returns and capital
Slide 15: NatWest Markets RWA reduction progressing toward target
Portfolio discipline and effective deployment of capital NatWest Markets RWA reduction progressing toward target Actively Managing Capital Risk Weighted Assets (£bn) ▪ Reduced RWA by £11bn or 29% during NWM reshaped; uses less capital, 37.9 2020, c.£5bn ahead of FY’20 guidance1 focused on NWG custom
Slide 16: Returning surplus capital to shareholders
Portfolio discipline and effective deployment of capital Returning surplus CET1 Capital Ratio capital to shareholders 18.5% NWG is a capital generative business that seeks to operate 4.5-5.5% at a CET1 ratio of between 13-14% 13-14% by 2023 FY’20 proposed final dividend of 3 pence per share FY’20 Ta
Slide 17: Strategic priorities will drive sustainable returns
Strategic priorities will drive sustainable returns UR A LUE NatWest Group is a relationship bank for a digital world. ur urpose e champion potential, helping Simplifying our business to people, families and businesses improve customer to thrive experience, increase efficiency and reduce costs Power
Slide 18: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 18
Slide 19: FY'20 and Q4'20 performance: resilient operating profit before impairments
Focused on generating shareholder value FY’20 and Q4’20 £m Q4'20 Vs Q3'20 FY'20 s FY’191 performance: Net interest income 1,971 2.3% 7,749 (3.7%) resilient operating profit Non-interest income 564 13% 3,047 (25%) before impairments Total income 2,535 4.6% 10,796 (11%) Income in Q4’20 was up 4.6% Oth
Slide 20: Net interest income support from mortgage volumes and margins
Focused on generating shareholder value Net Interest Income £m Net interest income 1,971 Group NII support from mortgage Group NII 1,926 12 52 volumes and margins (36) (2) Banking net interest income 1,973 Banking NII Banking NII 1,947 is up 1.3% over Q3’20 reflecting strong mortgage growth and high
Slide 21: NIM drivers: Q4'20 Group costs fall more than yields
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM drivers: Q4’20 3.5 3.34 Group costs fall more 3.22 than yields 3.0 2.88 2.82 2.81 3.11 3.07 Retail Banking Gross asset yields reduced 2.48 Commercial Banking 9bps in Q4’20 to 1.85%. 2.5 2.27 2.73 2.65 Fun
Slide 22: Continued loan growth in Q4'20 – targeting growth above market
Focused on generating shareholder value Gross loans and advances1, quarter on quarter, £bn Continued loan growth 372.4 Group Other 3.9 9.5 NWM in Q4’20 – targeting 1.6 Group 365.3 growth above market 6.0 (0.1) RCF3 (2.4) NWM 11.4 362.9 Banking Gross banking loans grew Banking 353.9 £9.0bn in Q4’20 a
Slide 23: Non interest income impacted by customer activity levels
Focused on generating shareholder value Non Interest Income1 £m Non interest income 1,105 983 95 impacted by customer 888 209 48 794 activity levels 437 44 645 160 375 1 Other operating income Non-interest income1 in 298 122 Income from trading activities Q4’20 is down 19% over the Net fees and comm
Slide 24: ECL change in Q4'20 reflects improvement in economic assumptions
Sustainable growth with intelligent approach to risk ECL change in Q4’20 Economic scenarios and weightings, FY’20 reflects improvement in Probability UK GDP – Annual Growth (%) UK Unemployment rate – annual average (%) economic assumptions Scenario Weighting 2021 2022 5y Avg. 2021 2022 5y Avg. and w
Slide 25: Impairment charge of 14bps in Q4'20
Sustainable growth with intelligent approach to risk Impairment charge of Impairment charge / (release) by segment, (£m) 14bps in Q4’20 Commercial Private NatWest Retail Banking Ulster RBSI Banking Banking Group Q4’20 impairment charge FY’20 792 250 1,927 100 107 3,242 of £130m is 14bps of gross cus
Slide 26: Diversified risk profile
Intelligent and consistent approach to risk Gross Loans & Advances by stage1,2 £bn, Q4’20 Spotlight on sectors in focus for management, Q4’20 Diversified risk profile Total loans and advances1,3, £bn Stage 2 £6.4bn or 1.7% of group loans Stage 3 Past due Airlines Stage 2 Transport are in Stage 3, do
Slide 27: Robust capital position with limited procyclicality to date
Robust balance sheet with strong capital & liquidity levels RWA, £bn Robust capital position with limited 173.9 procyclicality to date (2.5) (1.1) 170.3 RWA reduction of £3.6bn in 0.0 the quarter driven by NWM, which reduced by £3.1bn. Procyclicality for the group Q3’20 Credit Risk Counterparty Mark
Slide 28: We have shaped a business that should operate at a CET1 ratio of 13-14%
Robust balance sheet with strong capital & liquidity levels Key Drivers of CET1 ratio1: We have shaped a Earnings We target an improvement in ROTE to 9-10% by FY'23 business that should We intend to distribute a minimum of £800m per operate at a CET1 ratio CET1 ratio Shareholder annum through divide
Slide 29: Strong capital and liquidity positions provides flexibility
Robust balance sheet with strong capital & liquidity levels CET1 headroom above Headroom above Liquidity coverage ratio Strong capital and medium term target1,2 minimum UK leverage remains well above min UK requirements requirement liquidity positions provides flexibility 450-550bps 315bps c.£72bn W
Slide 30: We expect to generate a ROTE of 9-10% by 2023
Focused on generating shareholder value Return on Tangible Equity We expect to generate a Illustrative purposes only, not to scale ROTE of 9-10% by 2023. 9 - 10% Improvement in ROTE driven by: 1. Growth – we target loan growth above market through to (2.4%) 20231; 2. Costs – we target c.4% per annum
Slide 31: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 31
Slide 32: Focused on generating shareholder value driven by our strategic priorities
Investment case Focused on generating shareholder value Purpose-led, long term decision making 1 We have shaped a business that should operate at a CET1 ratio of between 13% to 14% by 2023 driven by our strategic A purpose led, customer 450-550 bps or c.£7.7-9.4bn headroom to focused business with p
Slide 33: Appendix
Appendix 33
Slide 34: Financial targets and outlook
Financial targets and outlook1 2021 financial targets and outlook Medium-term targets and outlook Costs We plan on reducing other expenses, excluding OLD, by around 4% in comparison to 2020, excluding any change in the Expect annual cost reduction of around 4%, excluding direct cost base of Ulster B
Slide 35: Notable items
Notable items1 Q1’19 Q2'19 Q3'19 Q4’19 FY’19 Q1'20 Q2'20 Q3'20 Q4’20 FY’20 Metro Bank mortgage portfolio acquisition loss - - - - - - - - (58) (58) Alawwal bank merger gain in NatWest Markets - 444 - - 444 - - - - - FX recycling (loss)/gain in Central items & other - 290 - 1,169 1,459 (64) (39) 64 (
Slide 36: Ongoing cost reduction in Q4'20
ngoing cost reduction in Q4’20 Other expenses ex Operating Lease Depreciation 1, £m 240 (277) 1,786 6,911 6,634 1,546 Q3’20 Q4’20 FY’19 FY’20 Strategic costs, £m 103 (368) 326 1,381 88 Property 223 470 1,013 Technology 21 38 NWM direct 256 34 50 299 Redundancy, 154 67 61 ex. NWM 178 237 Other 140 13
Slide 37: Loan growth by product and sector
Loan growth by product and sector Total loans to customers (amortised cost), £bn Retail Banking Q1’20 Gross new 6.0 card customers c.xk 163.0 157.0 (0.5) 0.0 7.8 7.3 3.8 3.8 Q1’20 Gross new Q3’20 Q4’20 Q3’20 Q4’20 Q3’20 Of committed current accounts Q4’20 lines, c.xk Mortgages Personal advances Card
Slide 38: Cautionary and Forward-looking statements
Cautionary and Forward-looking statements The guidance, targets, expectations and trends discussed in this presentation represent NatWest Group (and where applicable N WM Group) management’s, current expectations and are subject to change, including as a result of the factors described in the “Risk