Slide 1: NatWest Group Q1 2022 Results
NatWest Group Q1 2022 Results 29 April 2022
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 2
Slide 3: Supporting our customers through uncertainty
Our purpose in action Helping people, ы families and £5.6bn of Climate and Sustainable Funding 2.8m financial capability businesses navigate interactions in Q1’22 and Financing completed in Q1’22 through uncertainty 0.2m financial health checks carried out in Q1’22 Credit Score Predictor launched in
Slide 4: Q1'22 results highlights
Q1’22 results highlights Strong Q1'22 operating Q1’22 performance2 performance £1,287m £841m 11.3% Delivering against our Operating profit before tax Attributable profit Return on Tangible Equity targets to drive sustainable vs. £946m in Q1’21 vs. £620m in Q1’21 vs. 7.9% in Q1’21 returns for shareho
Slide 5: Delivering against our strategic priorities to drive sustainable returns
Strategic priorities will drive sustainable returns Delivering against our Our Purpose strategic priorities to We champion potential, helping drive sustainable returns people, families and businesses to thrive for shareholders and help our customers to thrive Our Strategy Supporting customers at eve
Slide 6: Supporting customers at every stage of their lives, continued positive momentum
Sustainable growth with an intelligent approach to risk Supporting customers at £13.6bn of £100bn Climate and Affluent investment every stage of their lives, Sustainable Funding customers +40% and Financing target in FY’21 Families continued positive £970m Green to date +26 Affluent ~1m Financial he
Slide 7: We are a digital bank delivering improved customer experience
Simplification and efficiency We are a digital bank We are meeting • 61% Retail Banking customers bank entirely digitally1 ы delivering improved • 90% Retail customer needs met digitally our customer customer experience needs digitally • 83% Commercial customers digitally active and efficiencies • 7
Slide 8: Allocating capital to deliver better returns and capital distributions
Disciplined deployment of capital Allocating capital to Managing capital for growth and risk management ы deliver better returns ▪ Group RWA intensity down from 54% in FY’19 to 48% in Q1’22, or 43% excluding and capital distributions regulatory uplifts on 1st January ▪ A well-diversified loan book w
Slide 9: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 9
Slide 10: Strong Q1'22 Go-forward group operating performance
Focused on generating shareholder value Strong Q1’22 Go-forward Go Forward Group, £m 1 Q1'22 vs Q1'22 vs Q1'22 Q4'21 Q1’21 Q4'21 Q1'21 group operating Net interest income 2,023 1,919 1,837 5.4% 10.1% performance Non-interest income 964 660 698 46.1% 38.1% Income excluding notable Total income 2,987
Slide 11: Net interest income higher following UK base rate increases
Focused on generating shareholder value Go-forward Net Interest Income1,2, £m Net interest income 2,023 (8) higher following UK 1,919 20 56 base rate increases (42) 78 Net interest income was up 5% in the quarter driven by higher UK Base Rate and strong lending, Q4’21 Day count Retail Banking Privat
Slide 12: NIM drivers: yields higher post BOE rate increase
Focused on generating Retail Banking shareholder value Private Banking Gross yields of interest earning banking assets, %1 NIM drivers: yields Commercial & Institutional NatWest Group higher post BOE rate 3.0 2.813 2.83 increase 2.73 2.67 2.75 2.62 2.67 2.64 2.59 Group asset yield 2.5 2.58 2.53 incr
Slide 13: Spotlight on NIM drivers
Focused on generating shareholder value Group mortgage margin dynamics, quarterly average % Spotlight on NIM drivers Includes Retail Banking, Private Banking and RBSI 2.0 +c.30bps Customer mortgage rate - applications2 Customer mortgage rates 5 year swap rate3 1.5 have increased by around 30bps in Q
Slide 14: Supporting our customers in target segments
Focused on generating shareholder value Go-forward gross customer loans1, Q1’22 v Q4’21, £bn Balances outstanding at Q1’22 Supporting our +2.3 0.3 customers in target +2.7 segments Gross loans1 to customers up £6.6bn, or 1.9%, in the 2.6 3.0 +1.3 quarter to £362bn. +0.3 Retail Banking mortgage 0.2 0
Slide 15: Non-Interest Income benefited from higher trading income
Focused on generating shareholder value Go-forward Non Interest Income1,2, £m Non-Interest Income 707 740 642 645 benefited from higher 598 205 Trading and other income 221 Net fees and commissions 134 39 trading income 139 Non interest income income1 increased by 511 559 535 486 503 £142m compared
Slide 16: Delivered 4.6% cost reduction in Q1'22
Simplification and cost efficiency Go-forward other operating expenses reduction, £m1 Delivered 4.6% cost -4.6% reduction in Q1'22, on 1,683 track to achieve our 78 target 1,605 Other operating expenses of £1.6bn in Q1 are £78m, or 4.6%, lower than prior year, contributing to our 3% reduction target
Slide 17: Impairment release due to continued low level of defaults
Intelligent and consistent approach to risk Group impairment charge/ (release), £m (10)bps (69)bps (26)bps (37)bps 0bps Impairment release due (8) 0 (7) (13) to continued low level of (90) (31) (7) defaults (226) (328) Group impairment release driven by Ulster Bank RoI (606) and C&I Loan impairment
Slide 18: Strong capital position, progress towards around 14% CET1 by end 2022
Robust balance sheet with strong capital & liquidity levels CET1 ratio, %1 Strong capital position, 18.2 progress towards around 14% CET1 by end 2022 (2.3) £1.5bn CET1 ratio 15.2% down 15.9 0.44 (0.14) (0.14) 70bps on 1st Jan 2022 driven (0.69) by capital return impacts (0.05) 15.2 (0.09) (0.02) tot
Slide 19: Strong capital and liquidity positions provide 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 liquidity positions requirements requirement provide flexibility 120-220bps 225bps £83.3bn Ou
Slide 20: Key financial guidance
Guidance 2021 Base 2022-2023 Outlook Key financial guidance Income ex-notable items to be comfortably We have clear financial £10.1bn above £11.0bn in 2022, assuming 1.25% UK targets to drive Base Rate in Q4’221 sustainable returns for our shareholders Other operating expenses to reduce by £6.8bn ar
Slide 21: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 21
Slide 22: Investment case
Investment case A purpose-led company with clear strategic Accelerating growth priorities, strong market positions and capacity to grow Simplification via Digital and Technology We are: • Supporting our customers whilst growing and diversifying income Disciplined deployment of capital • A relationsh
Slide 23: Q&A
Q&A 23
Slide 24: Q1'22 Group performance
Q1'22 Group performance Q1’22 Q1'21 Q1'22 Q1'21 incl. discontinued operations Go- Ulster Go- Ulster £m 1 1 forward Bank RoI Group Group forward Bank RoI Group Group Total income 2,987 40 3,027 2,591 2,987 99 3,086 2,659 Operating expenses (1,707) (113) (1,820) (1,804) (1,707) (124) (1,831) (1,815) I
Slide 25: Outlook
Outlook Financial targets and outlook Income In 2022, we expect income excluding notable items to be comfortably above £11.0 billion in the Go-forward group. Costs We plan to invest around £3 billion over 2021 to 2023 but, with continuing simplification, we plan to reduce Go-forward group operating
Slide 26: Notable items
Notable items Notable items in Income, £m Q1’21 Q2’21 Q3’21 Q4’21 FY’21 Q1’22 Private Banking Consideration on the sale of Adam & Company investment management business -- -- -- 54 54 -- Commercial and Institutional Banking Own credit adjustments (OCA) 2 (1) 2 3 6 18 Tax variable lease repricing, NI
Slide 27: New segmental summary
New segmental summary We have created a new franchise, Commercial & Institutional, bringing together our Commercial, NatWest Markets and RBS International businesses to form a single franchise, with common objectives, to best support our customers across the full non-personal customer lifecycle. Uls
Slide 28: Ulster Bank RoI – continuing & discontinued
Ulster Bank RoI – continuing & discontinued Q1'22 Q1'21 Q4'21 Ulster Bank ROI (£m) Continuing Discontinued Continuing Discontinued Continuing Discontinued Total Total Total operations operations operations operations operations operations Total income 40 59 99 56 68 124 43 66 109 Operating expenses
Slide 29: Tangible net asset value
Tangible net asset value GBP, m Share count, m Pence As at 31 December 2021 30,689 11,272 272 Attributable profit 841 7 Cash flow hedge reserve (net of tax) (718) (6) Redemption of preference shares (254) (2) Direct share buy-back (1,213) (550) 3 On-market share buy-backs (309) (135) 1 Pension1 (379
Slide 30: Key drivers of CET1 ratio
Key drivers of CET1 ratio1 Capital generation Capital usage • Earnings • Loan growth 15.2% • Ulster Bank RoI withdrawal (0.2) Distributions2 (0.2) • Min divi ~(100)bps • DBB3 ~(70)bps • On-market buy-backs 13-14% Not to scale Q1’22 Regulation Dividend Target FY’23 linked pension contribution 1. Impa
Slide 31: Key Drivers of CET1 ratio
Key Drivers of CET1 ratio From 15.2% at 31st March 2022 through to FY’23 Driver Timing Impact 1 Details Earnings In 2023 we expect to achieve a RoTE comfortably above 10% for the Group Lending volumes Across 2022 and 2023, we expect movements in RWAs to largely reflect lending growth 2 Intend to dis
Slide 32: Impairment (charge)/release by segment
Impairment (charge)/release by segment Commercial Retail Private Central Go-forward Ulster Bank & Group Banking Banking items Group RoI Institutional Q1’22 (£m) (5) 5 11 (4) 7 31 38 Q1’22 (bps) 1 (11) (3) nm 0 nm (1) Q4’21 (£m) (5) 12 317 4 328 13 341 Q4’21 (bps) 1 (26) (101) nm (37) nm (38) Q1’21 (
Slide 33: Customer Loans and Deposits
Customer Loans1 and Deposits Loans to customers - amortised Customer Deposits, £bn cost, £bn2 Q4’21 Q1’22 Q4’21 Q1’22 Retail Banking 182.2 184.9 188.9 189.7 Private Banking 18.4 18.7 39.3 40.3 Commercial & Institutional 124.2 126.6 217.5 217.9 Central items & other 27.5 28.8 15.7 17.7 Go-forward Gro
Slide 34: Q1'22 Customer loan growth by product and sector
Q1’22 Customer loan growth by product and sector Total loans to customers (amortised cost), £bn Retail Banking +2.6 175.4 172.8 +0.1 0.0 7.1 7.2 3.8 3.8 Q4’21 Q1’22 Q4’21 Q1’22 Q4’21 Q1’22 Mortgages Personal advances Cards C&I Gross loans to customers (amortised cost) ex-government schemes, £bn +0.3
Slide 35: Supporting our customers through Covid-19
Supporting our customers through Covid-19 £0.7bn of net government scheme repayments in Q1, £0.4bn related to BBLS Government Lending Scheme in NWG, £bn1 Approved 6.1 1.8 0.7 0.5 9.1 BBLS Drawdown Q4’21 7.5 (0.4) Drawdown Q1’22 7.1 0.1 Approved 3.3 0.6 0.3 4.3 CBILS Drawdown Q4’21 3.4 (0.3) Drawdown
Slide 36: Asset quality
Asset quality1 Retail Mortgage LTV distribution by stage Total Stage 1 Stage 2 Stage 3 FY'19 FY'20 FY'21 FY'19 FY'20 FY'21 FY'19 FY'20 FY'21 FY'19 FY'20 FY'21 ≤50% 51,791 55,857 66,488 47,746 50,170 61,233 3,375 5,009 4,548 511 554 644 >50% and ≤70% 51,582 63,202 73,437 47,224 55,263 68,271 3,804 7,
Slide 37: Structural Hedge
Structural Hedge1 FY 2021 FY 2020 Incremental Total Period end Average Incremental Total Period end Average Total Yield Total Yield Income Income notional Notional Income Income notional Notional (£m) (£m) (£bn) (£bn) % (£m) (£m) (£bn) (£bn) % Equity structural 426 448 21 22 2.05 478 580 23 24 2.43
Slide 38: Interest rate sensitivity
Interest rate sensitivity1 FY 2021 +25 basis points parallel upward shift -25 basis points parallel upward shift Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 (£m) (£m) (£m) (£m) (£m) (£m) Structural Hedge 43 144 235 (43) (144) (235) Managed Margin 282 220 255 (255) (209) (187) Other 4 - - (5) - - Total
Slide 39: UK Economic Assumptions
UK Economic Assumptions1 FY’21 H1’21 Extreme Extreme Scenario Upside Base Case Downside Upside Base Case Downside downside downside Weighting 30% 45% 20% 5% 35% 40% 20% 5% UK GDP – Annual Growth (%) 2021 7.0 7.0 7.0 7.0 10.1 7.3 2.7 0.1 2022 8.1 5.0 1.5 (3.6) 5.4 5.8 4.3 - 5 year - CAGR 2.4 1.7 1.4
Slide 40: Issuance and capital management strategy
Issuance and capital management strategy • In Q1, NatWest Group plc successfully executed its first benchmark senior MREL transaction of the year • NatWest Markets Plc issued ~£2bn senior unsecured term debt, in public benchmark format, contributing to its £4-5bn guidance for 2022 2022 Issuance guid
Slide 41: Credit ratings
Credit ratings Moody’s S&P Fitch Group holding company NatWest Group plc Baa1/Pos BBB/Sta A/Sta Ring-fenced bank operating companies NatWest Bank Plc A1*/A1/Sta A/Sta A+/Sta Royal Bank of Scotland plc A1*/A1/Sta A/Sta A+/Sta Ulster Bank Ireland DAC A3*/Baa1/RUR A-/Sta BBB+/Sta Non ring-fenced bank o
Slide 42: ESG ratings
ESG ratings1 ESG Ratings1 Scale 2019 2020 2021 MSCI Rating AAA to CCC BBB AA AA Sustainalytics ESG Risk Rating 1-100 27.7 20.5 17.3 Rating Negligible to Medium risk Medium risk Low risk Severe CDP Rating B A- B A to D- Industry average C B B ISS ESG Rating C C C A+ to D- Prime Status Prime Prime Pri
Slide 43: 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 expectations and are subject to change, including as a result of the factors described in the “Risk Factors” on pages 406-426 of the N