Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (February 2021)
32 slides from Natwest's debt investor presentation, Feb 19, 2021
Slide 1: FY 2020 Results - Fixed Income Investors
FY 2020 Results Fixed Income Investors 19th February 2021
Slide 2: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 2
Slide 3: 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 4: 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 5: 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 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: 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) RCF4 (2.4) NWM 11.4 362.9 Banking Gross banking loans grew Banking 353.9 £9.0bn in Q4’20 a
Slide 8: 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 9: 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 10: 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 11: Donal Quaid, Treasurer
Donal Quaid, DonalTreasurer Quaid Treasurer 11
Slide 12: Treasurer's review: FY'20 results highlights
FY’20 results highlights Capital and leverage Liquidity and funding Treasurer’s review 18.5% 24.5% 165% 84% CET1 ratio Total capital Liquidity coverage Strong capital and leverage Loan:deposit ratio ratio ratio positions, robust liquidity and diversified funding. 37.5% 6.4% £62bn Further progress on
Slide 13: Strong capital position provides flexibility
Robust balance sheet with strong capital & liquidity levels CET1 headroom above Headroom above Loss absorbing capital Strong capital position medium term target1,2 minimum UK leverage ratio (LAC) well above min requirements UK requirement provides flexibility1 We have shaped a business that we inten
Slide 14: 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 15: We have shaped a business that should operate at a CET1 ratio of 13% to 14% by 2023
Robust balance sheet with strong capital & liquidity levels Key Drivers of CET1 ratio1: We target an improvement in ROTE to 9-10% by We have shaped a Earnings 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 16: Well positioned to meet 2022 capital and MREL requirements
Issuance and capital management strategy Well positioned to meet 2022 capital and MREL Total Capital versus minimum Total LAC requirements requirements 1-Jan-222 requirements1 25.3% 24.5% 23.5% CRD IV 2.5% Tier 2 Countercyclical buffer 3.1% buffers AT1 3.1% UK rate reduced from 1% to CET1 2.9% 0% ef
Slide 17: Significant excess liquidity, diversified funding
Robust balance sheet with strong capital & liquidity levels High quality liquidity pool Liquidity coverage ratio well Total funding mix (£bn)1,2 Significant excess above minimum liquidity, diversified requirements 71 Secondary AAA to AA- funding liquidity Other governments Cash and £503bn government
Slide 18: Strong customer deposit inflows
Robust balance sheet with strong capital & liquidity levels Strong customer deposit inflows Retail Banking £bn Commercial Banking Current Accounts £bn Savings +24% +14% 168 Retail Banking deposits 172 increased by £22 billion as 150 135 a result of lower customer spend and increased 66 savings. 52 C
Slide 19: Issuance and capital management strategy: 2020 issuance recap
Issuance and capital management strategy 2020 Issuance recap Issuance and capital management strategy Senior unsecured • First USD green bond issued by a UK ~£1.4bn HoldCo MREL $600m 4NC3 Green NWG was active across the (dual-tranche) bank capital stack, issuing a $1bn 8NC7 combined ~£8bn in Senior
Slide 20: Issuance and capital management strategy: 2021 issuance programme
Issuance and capital management strategy 2021 Issuance programme Issuance and capital management strategy Senior unsecured Capital Legacy capital Expect to be active across ▪ ~£3-5bn HoldCo senior MREL ▪ ~£2bn HoldCo Tier 2 ▪ Ongoing opportunities to the capital stack as we look optimise regulatory
Slide 21: Marked improvement in ESG ratings from MSCI and Sustainalytics
Improving ESG position in an evolving market Marked improvement in ESG ratings1 from MSCI SUSTAINALYTICS MSCI and ▪ Rating improved to AA from BBB ▪ Rating improved to 20.5/Medium risk Sustainalytics, ▪ A score of < 20 would characterise reflecting our progress N G as ‘low’ risk in a number of areas
Slide 22: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 22
Slide 23: 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 24: Q&A
Q&A 24
Slide 25: Appendix
Appendix 25
Slide 26: 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 27: Credit ratings
Credit ratings Moody’s S&P Fitch Group holding company Moody’s recently upgraded NatWest Markets two notches NatWest Group plc Baa2/Pos BBB/Neg A/Neg to A3, whilst maintaining it’s positive outlook. Ring-fenced bank operating companies Fitch upgraded the senior ratings of NWM Plc and NWM NatWest Ban
Slide 28: ESG ratings
Scale 2019 2020 ESG ratings MSCI The MSCI rating improved from Rating BBB to AA AAA to CCC BBB AA Sustainalytics Risk Rating The Sustainalytics rating also improved to 20.5/Medium risk. 1-100 27.7 20.5 Rating A score of < 20 would Negligible to Medium risk Medium risk characterise N G as ‘low’ risk
Slide 29: Issuing entity structure
Issuing entity structure Investors External issuance of AT1, Tier 2 and MREL is only from Issues external AT1, T2, MREL Senior NatWest Group plc, the group holding company. NatWest Group plc1 Group holding company Subsidiary operating companies will only issue internal AT1, Tier 2 and MREL. Issues i
Slide 30: Legal entity capital positions
NatWest Royal Bank Legal entity capital FY 2020 Holdings NatWest of Scotland Ulster Bank NatWest RBSI Bank Plc Ireland DAC Markets Plc positions Group plc Capital and leverage metrics External issuance of AT1, Tier 2 and MREL will only be from CET1 ratio 17.5% 17.8% 17.6% 28.1% 21.7% 18.6% NatWest G
Slide 31: 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 32: 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
NatWest Group — Debt Investor Presentation (February 2021) on 6ix