Natwest Group Plc · LSE:NWG
Natwest — Q3 2024 Earnings Presentation
40 slides from Natwest's earnings presentation, Oct 25, 2024
Slide 1: Q3 2024 Results
NatWest UI 1? Q3 2024 Results 25 October 2024
Slide 2: Paul Thwaite, Chief Executive Officer
NatWest UI 1 Paul Thwaite | Chief Executive Officer
Slide 3: Disciplined growth across lending, deposits and AUMA
Disciplined growth £367bn £427bn £46.5bn across lending, Customer Loans1 deposits and AUMA +£8.1bn incl. Metro Customer Deposits2 AUMA +£8.3bn vs Dec’23 +£5.7bn vs Dec’23 acquisition vs Dec’23 Strong returns with £10.8bn £5.7bn 17.0% attributable profit of Costs4 Income ex notable items3 Return on T
Slide 4: Katie Murray, Chief Financial Officer
NatWest UI = Katie Murray Chief Financial Officer
Slide 5: Group financial results, £m
Q3'24 vs Q3'24 vs Group, £m Q3'24 Q2'24 Q3'23 Q2'24 Q3'23 1 Net interest income, ex notable items 2,899 2,757 2,685 5.2% 8.0% 1 Non-interest income, ex notable items 873 833 829 4.8% 5.3% 1 Total income, ex notable items 3,772 3,590 3,514 5.1% 7.3% Total income 3,744 3,659 3,488 2.3% 7.3% Other oper
Slide 6: Income and net interest margin; guidance
10,776 Net interest income Non interest income Total Centre income 2,469 +5.1% Guidance 31 (55) 3,772 80 • FY’24 total income1 3 17 77 (2) of ~£14.4bn 3,590 31 873 • Assumes UK Base Rate 4.75% by end 833 2024 3 businesses +£206m, +5.8% 8,307 NII +£174m, +6.4% Non-II +£32m, +3.8% 2,757 2,899 Q2’24 ex
Slide 7: Customer loan growth by segment
205.4 Q4’23 Mortgages1 202.5 Balance growth of +£3.8bn includes 206.3 Q2’24 £2.3bn Metro Bank mortgage portfolio, taking the Q3’24 stock share to 12.6% as at Aug’244 15.8 Gross New Lending +25% in Q3 vs Q2 Unsecured1 16.1 16.6 +£0.3bn in Q3’24, 9.3% stock share5 4.5 Other Private 4.6 4.6 Business 1.
Slide 8: Customer deposit balances by business
Retail Q4’23 66.1 121.9 188.0 6.0 5.2 5.3 5.3 5.3 5.1 Banking Q2’24 65.3 126.2 191.5 5.0 +£0.5bn Q3’24 64.3 127.7 192.0 4.0 3.0 3.1 3.1 3.1 Q4’23 7.2 30.5 37.7 2.7 Private 3.0 2.1 2.1 2.1 Banking Q2’24 6.7 32.8 39.5 1.8 2.0 +£0.2bn 2.0 Q3’24 6.5 33.2 39.7 1.0 Q4’23 68.9 124.5 193.4 0.0 Commercial Q2
Slide 9: Other operating expenses
-7.5% -6.4%* Retail share offer costs 1,928 -6.1% 17 Bank levies 1 30 (117) -1.9% Ulster direct costs -0.1% +0.6% 1,784 (36) 11 14 Other operating expenses excl. retail share offer costs, (2) bank levies and Ulster direct costs 1,881 1,775 (5) Q2’24 Staff costs Other Premises and Depreciation Q3’24
Slide 10: Loan impairment charge and rate
3,131 724 245 293 Loan impairment charge / 337 578 (release), £m1 93 (45) (1,173) FY’19 FY’20 FY’213 FY’22 FY’23 Q1’24 Q2’24 Q3’24 9M’24 Loan impairment rate, bps1,2 Retail Banking 25 45 (2) 11 22 12 12 28 17 Commercial & Institutional 27 156 (92) 9 7 11 (28) 31 5 Private Banking (4) 58 (29) (1) 8 (
Slide 11: CET1 ratio and risk-weighted assets
(0.07) 14.2 (0.01) (0.26) 13.9 0.65 13.6 CET1 ratio in 13-14% range Q2’24 Attrib. profit Group RWAs Other CET1 CET1 ratio pre Ordinary dividend Q3’24 changes distributions CET1 capital1 £bn 24.6 +1.2 -0.5 25.3 Guidance +£0.9bn RWA ~£200bn at the 0.9 (1.3) end of 2025, (0.8) 181.7 pro forma for B3.1
Slide 12: Tangible net asset value and share count
316 5 (2) 304 14 (6) Q2’24 Interim Attributable profit Cash flow FX and other Q3’24 dividend paid hedge reserve (net of tax) +26.4% 316 271 250 TNAVps Ordinary shares outstanding at period end (bn) Q3’22 Q3’23 Q3’24 9.7 8.9 8.3
Slide 13: Targets and 2024 guidance
Targets and 2024 guidance! 2024 Guidance Total Other Loan RoTE Income operating impairment expenses rate Broadly stable ~ 2 0, £14.4bn’ vs 20233 Below 15bps >15% > 9M’24 Performance -————_} £10.8bn? £5.7bn 10bps 17.0% Targets P2026 RoTEtargetof>1s% 2026 RoTE target of >13% ee ivigena Capacity for pa
Slide 14: A ae)
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Slide 15: Appendix
NatWest UI ~~“ Appendix
Slide 16: Outlook
Outlook: We continue to assess the economic outlook and 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 expectations for interest rates and economic activity. In 2024 we now expect: • to
Slide 17: Economic assumptions: base rate, CPI, GDP, unemployment
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 4.5 UK Consumer price index2 4.0 4.00 3.5 3.50 3.0 3.00 3.00 2.75 2.5 2.0 2.1 2.1 2.0 1.5 Dec’23 Dec’24 Dec’25 Dec’26 2024-2026 reflects NatWest Group IFRS 9 base ca
Slide 18: Notable items in income
Q3'23 Q4'23 FY'23 Q1'24 Q2'24 Q3'24 Group income 3,488 3,537 14,752 3,475 3,659 3,744 Notable items in Income, £m Q3'23 Q4'23 FY'23 Q1'24 Q2'24 Q3'24 Commercial and Institutional Own credit adjustments (OCA) (6) (5) (2) (5) (2) 2 Tax interest on prior periods (Net Interest Income) -- 3 3 -- -- -- Ce
Slide 19: Segment results Q3'24
Retail Private Commercial & Central items Group Q3'24, £bn Group Banking Banking Institutional & other Net interest income 1.4 0.2 1.4 (0.0) 2.9 Non-interest income 0.1 0.1 0.7 (0.0) 0.8 Total income 1.5 0.3 2.1 (0.0) 3.7 Income ex-notable items 1.5 0.3 2.1 (0.0) 3.8 Other operating expenses (0.7) (
Slide 20: Tangible equity, share buyback and dividend movements
GBP, m Share count, m Pence As at 30 June 2024 25,241 8,307 304 On-market share buyback (53) (14) (0) Ordinary interim dividend (paid August 2024) (497) (6) Attributable profit 1,172 14 Cash flow hedge reserve (net of tax) 447 5 FX movements (net of tax) (84) (1) Other movements (6) (0) (0) Net chan
Slide 21: Net interest margin bridge
+8bps 218 4 210 4 (1) Q2’24 Lending margin Deposit margin Funding & other Q3’24 529.8 527.6 Group AIEAs Group AIEAs 21
Slide 22: Net interest income and Group NIM
2,899 2,757 Net interest income 2,685 2,638 2,651 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 521 525 521 528 530 Group AIEAs 158 158 155 160 162 o.w. Liquid Asset Buffer Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 2.18% 2.10% Group NIM 2.05% 2.05% 1.99% Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 22
Slide 23: Lending and deposit margins by business
6.81 6.73 6.67 Retail Banking 7.0 6.72 6.65 Private Banking 6.5 6.0 Commercial & Institutional 5.5 5.01 NatWest Group 4.88 4.97 5.01 5.0 4.80 4.5 4.67 4.75 4.84 4.0 4.26 4.50 3.5 3.97 4.09 3.34 3.79 3.50 0.0 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 3.5 3.14 3.15 3.16 3.02 Retail Banking 3.0 2.80 Private Bankin
Slide 24: Structural hedge
Product hedge gross income Gross income already written as at June’24 • >90% of expected 2024 product hedge income already 3.0 written as at June’24 • Annual maturities are one fifth of the period end balance which is equivalent to c.£35bn in FY’24.3 2.0 • We continue to expect the hedge notional to
Slide 25: Structural hedge income and yield
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 26: Structural hedge and managed margin 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 27: 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 28: 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 29: Impairment charge by segment
Retail Private Commercial & Central items Group Banking Banking Institutional & other 9M'24 (£m) 266 (14) 52 (11) 293 9M'24 (bps) 17bps (10)bps 5bps nm 10bps 9M'23 (£m) 362 9 79 2 452 9M'23 (bps) 23bps 6bps 8bps nm 16bps Q3’24 (£m) 144 (3) 109 (5) 245 Q3’24 (bps) 28bps (7)bps 31bps nm 25bps Q2’24 (£
Slide 30: Loan book composition: personal and wholesale
Personal: £225.6bn, 57% of group Wholesale: £171.5bn, 43% of group Group mortgages £209.2bn Corporate and other ex CRE £92.3bn 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 leve
Slide 31: CET1 ratio and leverage requirements
5.00% 13.9% 152% 148% 4.25% 144% 11.7% 0.40% 3.85% 1.2% 10.5% 0.60% Min. Requirement 1.7% MDA2 2.5% 1.8% 3.25% 4.5% Q3’24 Regulatory Q3’24 Regulatory FY’19 FY’23 Q3’24 requirement requirement O-SII group risk add-on3 Pillar 2A5 O-SII group risk add-on3 Countercyclical buffer4 Pillar 1 Countercyclica
Slide 32: Total capital and MREL position
19.7% Tier 2 32.9% 3.2% 15.4% AT1 2.6% Tier 2 1.2% 2.8% 1.7% 2.5% AT1 2.1% 2 x Pillar 2A3 6.5% CET1 22.5% Senior MREL & MREL CET1 MREL eligible requirement 13.9% CET1, AT1, Tier 2 capital 2 x Pillar 1 10.5% CET1 resources 2 x Pillar 1 16% O-SII Group Risk Add-on4 Countercyclical buffer5 Capital cons
Slide 33: Funding mix: customer deposits and wholesale funding
2% 7% 10% 80 87 83 £[X]bn 14% £83bn 15% 51% 431 433 433 8.2 Bank deposits 3.8 TFSME CP & CD Q4'23 Q1'24 H1'24 MTN 3 Senior secured Oct-25 From Mar-27 Customer deposits Wholesale funding Subordinated debt 33
Slide 34: Holding company issuance guidance and year-to-date issuance
Holding company 2024 YTD 2024 guidance issuance2 • $1.0bn 4NC3 FXD Senior • $0.3bn 4NC3 FRN £4bn to • €0.75bn 7NC6 FXD unsecured ~£4.8bn • $1.5bn 11NC10 FXD - - (MREL) £5bn • $0.5bn 4.25NC3.25 FRN • €1.0bn 8NC7 FXD • $1.25bn 6NC5 FXD NatWest Group plc £1bn to Tier 2 capital ~£1.3bn • $1.0bn 10.25NC5
Slide 35: Debt 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 35
Slide 36: Credit ratings
Moody’s S&P Fitch Group holding company NatWest Group plc A3/Sta BBB+/Sta A/Sta Tier 21 Baa1 BBB- BBB+ AT11 Baa3 BB- BBB- Ring-fenced bank operating companies NatWest Bank Plc A1/Sta2 A+/Sta A+/Sta Royal Bank of Scotland plc A1/Sta2 A+/Sta A+/Sta NatWest Bank Europe GMBH NR A+/Sta A+/Sta Non ring-fe
Slide 37: Group issuance structure
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 38: Capital and liquidity: worst point versus Q3 2024
Worst point1 Q3 2024 Capital & liquidity Key observations, then and now…. CET1 ratio2 4.0% 13.9% • Markets RWA nearly 50% of total RWA £578bn £181.7bn group RWA vs 12% today • High reliance on short term o/w Markets RWA £279bn £21.5bn funding; peaked at 60% of total Wholesale funding £492bn £89bn4 w
Slide 39: Footnotes
Slide 3: 1. Gross loans across 3 businesses. 2. Customer deposits across 3 businesses. 3. Excludes notable items per slide 18. 4. Costs excluding litigation and conduct. 5. Average number of ordinary shares reduced in 9M’24 vs 9M’23. Slide 5: 1. Excludes notable items per slide 18. Slide 6: 1. Total
Slide 40: Cautionary statement regarding 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 2023 Annual Report and Accounts and Form 20-F, the “Risk F