Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (July 2020)
24 slides from Natwest's debt investor presentation, Jul 31, 2020
Slide 1: H1 2020 Results Fixed Income Investors
H1 2020 Results Fixed Income Investors 31st July 2020
Slide 2: Katie Murray, Chief Financial Officer
KATIE MURRAY, Chief Financial Officer 2
Slide 3: H1 results highlights
H1 results highlights Operating profit1 Impairments CET1 ratio % H1 2020 highlights £2.1 billion £2.9 billion 17.2% Operating Profit before impairment Impairment charges as at H1’20 CET1 Ratio up 60bps vs Q1’20 Operating loss before tax £0.8bn losses, up 3% on H1’19 driven by net impairments of +2.6
Slide 4: Strong customer franchises: People & Families, Business
Strong customer franchises Payment holidays % of book % requested extension after People & Families Volumes initial holiday period UK Personal Banking continues to support customers whose UK Personal Mortgages 240,000 20% approximately 1/3rd income has been impacted by Banking Covid-19 Personal Loan
Slide 5: UK Personal Banking and Commercial Banking activity in H1'20
Strong customer franchises UK Personal Banking Personal Banking: UK PB lending & card spend and Commercial Mortgages & Personal loans Monthly new loans issued, # Debit and credit card spend Monthly spend, as % of January spend Banking activity in 50k Mortgages £7.87bn £7.83bn H1’20 Personal loans 10
Slide 6: Balanced and consistent approach to risk
Balanced and consistent approach to risk Total Loans & Advances1, H1’20 Spotlight on sectors in focus for management, H1’20 Loan book is well Total loans and advances1,2, £bn diversified across 196 (53%) Retail and £370bn 28 Oil & Gas (8%) Transport Commercial Banking 4.6 2.1 Airlines 2.4 146 Shippi
Slide 7: H1: Impairments
H1 & Q2 detail Movement in ECL, £m H1: Impairments 2,458 6,354 Stage 3 individual charges of £131m and Stage 1 & 2 charges 3,792 269 of £2,458m 131 (296) The existing overlay for economic uncertainty at Q1 2020 of £798 million has been absorbed through the H1’20 ECL Net Write offs and Stage 3 Stage
Slide 8: Approach to ECL
H1 & Q2 detail Approach to ECL 1 Selected economic scenarios and weightings A three step approach including four Probability UK GDP – Annual Growth (%) UK Unemployment rate (%) economic scenarios with two central Scenario Weighting 2020 2021 5y Avg. 2020 2021 5y Avg. scenarios and expert credit judg
Slide 9: H1: stage migration and impact on ECL within Personal
H1 & Q2 detail Gross Loans, % ECL coverage, % H1: stage migration FY’19 H1’20 FY’19 H1’20 and impact on ECL Personal1 Mortgages 1.0% 1.9% 0.9% 1.6% Stage 3 25.1% 24.3% within Personal 5.6% 13.5% Stage 2 1.0% 1.1% We have continued to use a 91.5% conservative approach to stage 84.0% Stage 1 0.0% 0.0%
Slide 10: H1: stage migration and impact on ECL within Wholesale
H1 & Q2 detail Gross Loans, % ECL coverage, % H1: stage migration FY’19 H1’20 FY’19 H1’20 and impact on ECL within Wholesale Wholesale1 0.4% 1.7% 1.9% 1.7% Stage 3 49.5% 44.3% 8.1% Sensitivity: if higher PD materiality threshold of 75bps used Wholesale stage 2 migration reduced by 24% 36.3% Stage 2
Slide 11: Q2: Risk weighted assets (RWA)
H1 & Q2 detail RWA, £bn Q2: Risk weighted assets (RWA) 185.2 We expect to end 2020 with risk weighted assets in the range of 1.5 £185 – £195bn We have seen limited procyclicality to date 1.5 We would expect to see some procyclicality as impairments occur 0.7 181.5 We expect further RWA increase in l
Slide 12: Accelerating refocus of NatWest Markets
Focus on simplification and taking costs out Accelerating refocus 2020 RWAs, £bn Actions taken of NatWest Markets £2.8bn reduction in c.470 £63m Refocusing NatWest Markets to serve Headcount reduction Disposal losses2 RWA achieved in 6 months communicated as at associated with our corporate and inst
Slide 13: Outlook & investment case
Outlook & investment case Purpose-led, long term decision making Investment case People and families - supporting the financial health of our customers Strong customer franchises Safe Business - providing lending support with disciplined approach to risk and value accretion Balanced and consistent C
Slide 14: Donal Quaid, Treasurer
Donal Quaid, Treasurer 14
Slide 15: Strong capital & leverage positions
Robust balance sheet with strong capital & leverage levels CET1 headroom above Total LAC ratio above Headroom above Strong capital & minimum requirements (MDA)1,2 end-state minimum requirements2 minimum UK leverage requirements leverage positions Our capital and leverage 830bps 1150bps 275 bps £15bn
Slide 16: Significant excess liquidity, diversified funding
Robust balance sheet with significant excess liquidity, diversified funding Liquidity Portfolio (£bn) Liquidity coverage ratio Total funding mix (£bn)1,2 Significant excess £68bn 86 liquidity, Secondary liquidity Other AAA to AA- governments Cash and surplus liquidity over £494bn diversified governm
Slide 17: H1'20: Deposit growth
Loan to deposit ratio 89% 86% H1’20: Deposit growth % FY’19 H1’20 UK Personal Banking Commercial Banking Total customer deposits £bn Current Accounts £bn increased by £39bn (+11%) vs Savings +18% FY’19 +7% 160 161 144 Personal Banking customer 150 153 135 deposits increased by £11bn (+7%) vs FY’19 r
Slide 18: Good progress with 2020 issuance plans
NatWest Group Plc ~£3.5bn issued by HoldCo in H1 Good progress H1 issuance against 2020 plan £bn H1 Issuance 2020 Plan with 2020 Senior ~£1.3bn Dual-tranche $1.6bn comprising $1bn issuance plans MREL £2bn to £4bn 8NC7 Conventional and $600m 4NC3 inaugural green issuance Year to date progress offers
Slide 19: Well positioned to meet future capital requirements
H1 Total Capital versus minimum Future LAC requirements and progress towards future Well positioned requirements senior MREL1 needs Based on illustrative £200bn RWAs and static regulatory capital to meet future requirements2,3 25.3% capital Tier 2 AT1 24.1% CRD IV buffers 2.5% CET1 requirements 3.8%
Slide 20: Credit Ratings
Credit Ratings Moody’s S&P Fitch Fitch affirmed the senior HoldCo ratings of NatWest Group plc, The Royal Bank of NatWest Group plc Baa2/Pos BBB/Neg A/Neg Scotland Plc, National OpCos inside the ring-fence Westminster Bank Plc, and Ulster Bank Ltd NatWest Bank Plc A1*/A2/Pos A/Neg A+/Neg Fitch upgra
Slide 21: Appendix
Appendix 21
Slide 22: H1: Income statement
H1 & Q2 detail £m H1’20 Vs H1’191 Q2’20 Vs Q1’20 H1: Income statement Net interest income 3,852 -4% 1,910 -2% Income - excluding the Q2’19 Non-interest income 1,986 -6% 766 -37% strategic disposal of Alawwal - Total income 5,838 -5% 2,676 -15% decreased by 5% in comparison to H1’19 Operating expense
Slide 23: Issuing entity structure
Issuing entity structure1 Investors AT1, T2, MREL Senior NatWest Group plc2 Inside the ring-fence iAT1, iT2, iMREL NatWest Holdings Ltd iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL iAT1, iT2, iMREL The Royal Bank NatWest Bank Ulster Bank Ltd Ulster Bank Ireland NatWest Markets
Slide 24: Cautionary and Forward-looking Statements
Cautionary statement regarding forward-looking statements Cautionary and Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate
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