Natwest Group Plc · LSE:NWG
Natwest — Q1 2021 Earnings Presentation
35 slides from Natwest's earnings presentation, Apr 29, 2021
Slide 1: Q1 2021 Results
Q1 2021 Results 29th April 2021
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 2
Slide 3: Q1'21 results highlights
Q1’21 results highlights Good Q1’21 operating performance £844m £102m £620m Supporting our customers; Operating profit before Impairment release in Q1’21 Attributable profit in Q1’21, impairments in Q1’21, 11bps of customer loans compared to £288m at Q1’20 strong net lending growth down from £1,321m
Slide 4: Strategic priorities will drive sustainable returns
Strategic priorities will drive sustainable returns Our Purpose led strategy will drive sustainable returns for shareholders Strategic priorities delivered through: Sustainable growth with an intelligent approach to risk Simplification and cost efficiency Portfolio discipline and effective deploymen
Slide 5: Supporting our customers through the recovery
Sustainable growth with an intelligent approach to risk Debit & Credit card spending (1) Personal loan & Credit Card demand (1) Supporting our New Cards and Loans issued (‘000) Monthly spend £bn (Rebased 100 = Mar’20) customers through the 120 20 recovery 100 15 Debit and credit card 80 10 spending
Slide 6: NatWest Group is a relationship bank for a digital world
Simplifications and cost efficiency We are a relationship bank for a digital world with high levels of digital engagement NatWest Group is a relationship bank Video Banking Mobile for a digital world c.13k 7.9m Accelerating digital Typical weekly appointments in Q1’21 Active Mobile Users in Q1’21 tr
Slide 7: Actively managing capital
Portfolio discipline and effective deployment of capital CET1 Capital Ratio 18.2%, down 30bps on Q4’20 Actively managing capital ▪ Directed Share Buy Back of £1.1bn, 66bps impact on CET1 ratio First directed buy back completed NatWest Markets and Ulster Bank Proactive management of ▪ NatWest Markets
Slide 8: Delivering against our targets to drive sustainable returns
Portfolio discipline and effective deployment of capital Delivering against our Growth: Targeting lending growth Cost: Targeting c.4% per annum targets to drive above market rate through to 20231 reduction in other expenses2 sustainable returns for shareholders Strategic priorities delivered 3.0% 4.
Slide 9: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 9
Slide 10: Good Q1'21 operating performance
Focused on generating shareholder value Good Q1’21 operating £m Q1'21 Q4'20 Q1’20 vs. Q4'20 vs. Q1'20 performance Net interest income 1,931 1,971 1,942 (2.0%) (0.6%) Non-interest income 728 564 1,220 29% (40%) Income up 5% on Q4’20 Total income 2,659 2,535 3,162 4.9% (15.9%) driven by mortgages and
Slide 11: Net interest income support from mortgage growth
Focused on generating shareholder value Net Interest Income2 £m Net interest income Group NII 1,971 support from mortgage (11) (1) (38) 42 growth (27) 1,931 Group NII Banking net interest Banking NII 1,973 1,938 Banking NII income stable in the quarter, excluding impact of lower day count NWM NII (2
Slide 12: NIM drivers: customer loan and deposit rates stabilising
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM drivers: customer loan and deposit rates 3.5 3.34 3.22 stabilising 3.0 2.88 2.82 2.81 3.11 3.07 2.73 Retail Banking Gross asset yields and 2.48 2.73 Commercial Banking funding costs broadly 2.5 2.27 2.65
Slide 13: Loan book stable in the quarter
Focused on generating shareholder value Gross loans and advances1,2, quarter on quarter, £bn Loan book stable in the Other (2.4) quarter Group 372.4 0.6 2.7 (0.7) 371.0 Group NWM 9.5 8.4 NWM Gross banking loans Banking 362.9 RCF4 (0.3) 362.6 broadly stable in the Banking Mortgages Unsecured Governme
Slide 14: Non interest income impacted by lockdown
Focused on generating shareholder value Non Interest Income1 £m Non interest income 1,105 impacted by lockdown 95 888 48 794 437 44 742 645 Income from trading 375 1 74 Other operating income 298 122 162 activities up 33% over Income from trading activities Net fees and commissions Group Q4’20 due t
Slide 15: On track to meet FY'21 cost reduction target of around 4%
Focused on generating shareholder value Other expenses ex Operating Lease Depreciation and Ulster ROI Direct 1, £m On track to meet FY’21 1,717 1,606 cost reduction target of 183 72 around 4%1 1,534 1,534 Other expenses ex-OLD and Ulster1 down £72m versus Q1’20, equivalent to 4.5% Q4’20 Q1’21 Q1’20
Slide 16: Impairment release as defaults remain low
Intelligent and consistent approach to risk Impairment release as Impairment charge/(release) by segment defaults remain low, Retail Banking Private Banking Commercial Banking RBSI Ulster NatWest Group provision for economic Q1’21 (£m) 34 - (117) (2) (12) (102) uncertainty maintained Q1’21 (bps) 8 -
Slide 17: Diversified risk profile with limited change in Q1
Intelligent and consistent approach to risk Gross Loans & Advances by stage1,2 £bn, Q1’21 Spotlight on sectors in focus for management, Q1’21 Diversified risk profile Total loans and advances1,3, £bn with limited change in Q1 Stage 2 Airlines Transport 1.9 18.3% 4.8 Stage 3 loans £6.1bn or 1.6% of g
Slide 18: Strong capital position post £1.1bn directed buy back
Robust balance sheet with strong capital & liquidity levels Strong capital position CET1, (%)1 post £1.1bn directed buy back 0.5 18.5 (0.7) 0.3 (0.1) 18.2 CET1 ratio 18.2% down (0.2) 0.3% from Q4’20 (1.0) 17.2 Share buy back and 2021 Q4’20 Attrib. Profit RWA Directed 2021 Other Q1’212 IFRS 9 Fully a
Slide 19: Robust balance sheet post LME and repayment of TFSME
Robust balance sheet with strong capital & liquidity levels CET1 headroom above Headroom above Liquidity coverage ratio Robust balance sheet medium term target1,2 minimum UK leverage remains well above min UK requirements requirement post LME and repayment of TFSME 420-520bps 295bps c.£64.9bn c.£7.0
Slide 20: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 20
Slide 21: 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 420-520 bps or c.£7.0-8.6bn headroom to focused business with p
Slide 22: Q&A
Q&A 22
Slide 23: Appendix
Appendix 23
Slide 24: Guidance unchanged since FY'20
Guidance unchanged since FY’20 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 25: Notable items
Notable items Q1'20 Q2'20 Q3'20 Q4’20 FY’20 Q1’21 £m Metro Bank mortgage portfolio acquisition loss - - - (58) (58) - FX recycling (loss)/gain in Central items & other (64) (39) 64 (1) (40) - IFRS volatility in Central items & other1 (66) 55 49 45 83 (1) Retail Banking Debt Sale Gain - 3 4 1 8 Comme
Slide 26: Tangible net asset value
Tangible net asset value £m Share count Pence 31 December 2020 31,712 12,129 261 Directed buy back and pension1 (1,505) (591) 1 Attributable profit 620 - 5 Foreign exchange (348) - (3) Other reserves / share issuance (353) 22 (3) Net change (1,586) (569) - 31 March 2021 30,126 11,560 261 1. In March
Slide 27: Q1'21 Customer loan growth by product and sector
Q1’21 Customer loan growth by product and sector Total loans to customers (amortised cost), £bn Retail Banking 3.0 166.0 163.0 (0.2) 7.3 7.1 (0.3) 3.8 3.5 Q4’20 Q1’21 Q4’20 Q1’21 Q4’20 Q1’21 Mortgages Personal advances Cards Commercial Banking (0.5) 32.4 31.9 (0.5) (0.2) 21.5 21.4 21.2 (0.2) 0.1 21.
Slide 28: Customer Loans and Deposits
Customer Loans and Deposits Loans, £bn1 Deposits, £bn Q4’20 Q1’21 Q4’20 Q1’21 Retail Banking 172.3 174.8 171.8 179.1 Private Banking, ex government schemes 16.7 17.2 32.4 33.5 Commercial Banking, ex government schemes 95.6 93.5 167.7 169.4 RBS International 13.3 14.7 31.3 33.3 UK & RBSI Retail and C
Slide 29: Structural Hedge
Structural Hedge1 2020 2019 Incremental Total Period end Average Total Incremental Total Period end Average Total Income Income notional Notional Yield Income Income notional Notional Yield (£m) (£m) (£m) (£m) % (£m) (£m) (£m) (£m) % Equity structural 478 580 23 24 2.43 399 644 25 27 2.36 hedging Pr
Slide 30: Interest rate sensitivity
Interest rate sensitivity 2020 +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 37 118 199 (37) (118) (199) Managed Margin 319 380 387 (258) (285) (292) Other 15 - - (20) - - Total 3
Slide 31: IFRS 9 Economic Assumptions - unchanged in Q1'21
IFRS 9 Economic Assumptions1 - unchanged in Q1’21 UK GDP – Annual Growth (%) UK Unemployment rate – annual average (%) Probability 5 Year 5 Year Scenario 2021 2022 2021 2022 weighting Average Average 20% 9.0 2.6 3.6 5.6 4.5 4.4 Upside 40% 4.5 4.2 3.1 6.3 6.3 5.7 Base Case Downside 30% 2.6 4.6 2.8 8.
Slide 32: CET1 Ratio Drivers – target 13-14% CET1 by FY'23
CET1 Ratio Drivers – target 13-14% CET1 by FY’23 Key Drivers of CET1 ratio1: CET1 ratio Earnings We target an improvement in ROTE to 9-10% by FY'23 We intend to distribute a minimum of £800m per annum through 18.2% Shareholder distributions dividends while retaining capacity to participate in Direct
Slide 33: ESG – Progress against targets
ESG – Progress against targets 2020 progress ENTERPRISE 1,230 new entrepreneurs supported with the Accelerator programme, and a further 14,200 through Business The biggest Builder supporter of 10,000 hours of coaching delivered to business owners, over 1,000 Enterprise support events reaching more e
Slide 34: Supporting our customers through Covid-19
Supporting our customers through Covid-19 Payment Holidays Total Loans, £bn, (% Share of Book) Q4’20 4.1 (c.4%) 2.4 (c.1%) 6.5 Q1’21 2.5 (c.2%) 1.9 (c.1%) 4.4 Commercial Banking Retail Banking Mortgages Government Lending Scheme Approvals Approved value of c.£14.4bn under government schemes in Comme
Slide 35: 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