Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (July 2021)
39 slides from Natwest's debt investor presentation, Jul 30, 2021
Slide 1: H1 2021 Results – Fixed Income Investors
H1 2021 Results Fixed Income Investors 30th July 2021
Slide 2: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 2
Slide 3: H1'21 results highlights
H1’21 results highlights H1’21 performance Good H1’21 performance, increasing £2,505m £707m £1,842m shareholder distributions Operating profit before tax in Impairment release in H1’21 Attributable profit in H1’21, H1’21, up from £0.8bn loss in (38bps) of customer loans compared to £0.7bn loss in vs
Slide 4: Strategic priorities will drive sustainable returns
Strategic priorities will drive sustainable returns Delivering against our strategic priorities to drive sustainable returns for shareholders Sustainable growth with an intelligent approach to risk Simplification and cost efficiency Powering our strategy through innovation, partnership and digital t
Slide 5: Delivering on our Areas of Focus
Purpose-led, long term decision making H1’21 progress Delivering on our Areas 35.1k individuals or business supported through enterprise programmes, with ENTERPRISE of Focus1 >87k interventions The biggest supporter of 725 entrepreneurs in the current accelerator cohort, 42% female Exceeded the 2020
Slide 6: Supporting our customers through the recovery
Supporting customers at every stage of their lives Card spending and Credit Card balances (1) Mortgage lending(1) Supporting our customers Monthly spend and balances outstanding Retail Banking gross new mortgage lending through the recovery (£bn rebased 100 = June’20) & net mortgage balance growth (
Slide 7: Actively managing capital
Portfolio discipline and effective deployment of capital Actively managing ы capital Ulster Bank RoI • Natwest has agreed a binding sale agreement with Allied Irish Banks, p.l.c. for the We remain strongly sale of c.€4.2bn of performing commercial loans and associated undrawn capitalised with 18.2%
Slide 8: Impairment release from improved economic outlook
Intelligent and consistent approach to risk Impairment release Economic scenarios and weightings, H1’21 The main macroeconomic variables for each of the four scenarios used for expected credit loss resulting from an (ECL) modelling below: improvement of the Probability weightings1 UK GDP – Annual Gr
Slide 9: Improved economic outlook drives ECL release
Intelligent and consistent approach to risk ECL3, £m £648m 6,186 Improved economic 5,794 outlook drives ECL 878 (363) 887 (285) release 117 (15) (15) 99 (305) 4,9253 164 834 Of the £869m ECL release, 3,792 5,191 315 £648m is driven by the 80 202 4,743 3,776 improvement in economic 3,510 forecasts an
Slide 10: Donal Quaid, Treasurer
Donal Quaid, DonalTreasurer Quaid Treasurer 10
Slide 11: Q2'21 results highlights: Treasurer's review
Q2’21 results highlights Treasurer’s review Capital and leverage Liquidity and funding Strong capital and leverage positions, robust liquidity and diversified funding. 18.2% 24.9% 164% 78% CET1 ratio Total capital Liquidity coverage Loan:deposit ratio ratio ratio Further progress on meeting end-stat
Slide 12: Robust balance sheet with strong capital & liquidity levels
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 to operate wi
Slide 13: Strong capital position post dividend and buyback accruals
Robust balance sheet with strong capital & liquidity levels Strong capital position CET1, (%)1 post dividend and buyback accruals 18.2% 0.41 18.2% (0.18) (0.46) CET1 ratio 18.2% in line with 0.19 0.10 Q1’21 (0.11) (0.73) 17.5% 2021 dividend accrual, Q1’21 Attributable Ordinary Buy-back Pension RWA O
Slide 14: Returning surplus capital to shareholders
Portfolio discipline and effective deployment of capital CET1 ratio Key drivers of CET1 ratio v Returning surplus capital 18.2% Capital generation: to shareholders • Earnings 13–14% NatWest Group is a capital • NWM reshaping and Ulster Bank withdrawal generative business that Capital Usage: aims to
Slide 15: High quality liquidity pool and funding mix
Robust balance sheet with strong capital & liquidity levels High quality liquidity pool Liquidity coverage ratio Total funding mix (£bn)1,2 Significant excess remains well above min UK Cash and Other liquidity, diversified central banks primary requirement £66bn Secondary funding AAA to AA- governme
Slide 16: Strong customer deposit inflows
Robust balance sheet with strong capital & liquidity levels Strong customer deposit Retail Banking £bn Commercial Banking £bn inflows Current Accounts Savings +7% +5% Retail Banking deposits increased by £12 billion 176 as a result of lower 172 184 168 customer spend and 150 increased savings. 73 66
Slide 17: Issuance and capital management progress
Issuance and capital management strategy Issuance and capital 2021 Issuance guidance H1 2021 progress management progress NWG €1bn 9NC8 HoldCo Senior unsecured Second social bond, third GSS bond, ~£2bn bringing total GSS issuance to ~£2bn ~£3-5bn HoldCo senior MREL Good progress with 2021 NWG $1.5bn
Slide 18: Credit ratings
Credit ratings Moody’s S&P Fitch NatWest received rating upgrades from Moody’s Group holding company on 13 July 2021, with positive outlook NatWest Group plc Baa1/Pos BBB/Sta A/Sta maintained on NWG and Ring-fenced bank operating companies NWM Plc and NWM N.V. NatWest Bank plc A1*/A1/Sta A/Sta A+/St
Slide 19: ESG ratings
ESG Ratings (1) Scale 2019 2020 2021 ESG ratings (1) MSCI The Sustainalytics rating Rating AAA to CCC BBB AA AA improved to 17/Low risk Sustainalytics Risk Rating in July 2021. 27.7 20.5 17 Rating 1-100 Medium risk Medium risk Low risk The MSCI rating Negligible to Industry rank (banks) Severe #242/
Slide 20: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 20
Slide 21: Focused on generating shareholder value
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 through our strategic A purpose led, customer priorities 420-520bps or c.£6.8bn-8.5bn headroom to focused busin
Slide 22: Q&A
Q&A 22
Slide 23: Appendix
Appendix 23
Slide 24: Capital & Leverage
Capital & Leverage 24
Slide 25: Well positioned to meet 2022 capital requirements
Issuance and capital management strategy Well positioned to meet Total Capital versus minimum requirements Total Leverage requirements 1-Jan-222 2022 capital % RWA Total Tier 1 as a % of Leverage Exposure requirements1 CET1 AT1 Tier 2 Total Capital in excess of 24.5% 24.9% 6.4% Transitional and Full
Slide 26: Business can operate at a CET1 ratio of 13-14% by FY'23
Robust balance sheet with strong capital & liquidity levels Key drivers of CET1 ratio3,4 We have shaped a business that can Capital Capital operate at a CET1 ratio generation usage 18.2% of between 13% to 14% • Earnings • Loan growth by FY’231 • NWM RWA • Pro-cyclicality Distributions4 reduction We
Slide 27: Well positioned to meet 2022 MREL requirements
Issuance and capital management strategy Well positioned to meet Total Loss Absorbing Capital (LAC) Senior MREL profile £bn as at 30th June 2021 2022 MREL requirements1 Loss Absorbing Capital (LAC) value1 CET1 AT1 Tier 2 Senior MREL £billion equivalent, based on illustrative £200bn 38.9% RWA Total l
Slide 28: AT1 and Tier 2 capital profile
Issuance and capital management strategy AT1 and Tier 2 capital profile AT1 profile Tier 2 profile Balance sheet value v Regulatory value Regulatory value £billion equivalent Regulatory value of non-CRR £billion equivalent compliant legacy Tier 1 and Regulatory value Tier 2 reduced by £1bn and CRR n
Slide 29: Legal entity capital positions
Issuance and capital management strategy NatWest Royal Bank Legal entity capital H1 2021 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 16.6
Slide 30: Issuing entity structure
Issuing entity structure Investors External issuance of AT1, Tier 2 and MREL is only from NatWest Group plc, Issues external AT1, T2, MREL Senior the group holding company. NatWest Group plc1 Group holding company Subsidiary operating companies will only issue Issues internal AT1, T2, MREL senior in
Slide 31: Green, Social and Sustainable Bond Framework
Green, Social and Sustainable Bond Framework 31
Slide 32: ~£2bn GSS issuance to date
Improving ESG position in an evolving market Launched in 2019, the NWG GSS Framework aims to attract dedicated funding for loans and ~£2bn GSS issuance to investment that bring a positive environment or social impact. date, active in Green November 2019 May 2020 February 2021 €750m Social Bond $600m
Slide 33: Q2 2021 Financials
Q2 2021 Financials 33
Slide 34: Strong Q2 performance
Focused on generating shareholder value £m Q2'21 Q1'21 vs Q1'21 H1'21 H1'20 vs H1'20 Strong Q2 performance Net interest income 1,985 1,931 2.8% 3,916 3,852 1.7% Income excluding notable Non-interest income 675 728 (7.3%) 1,403 1,986 (29%) items was down 1.2% vs Total income 2,660 2,659 0.0% 5,319 5,
Slide 35: Net interest income supported by mortgage growth
Focused on generating shareholder value Net Interest Income1 £m Net interest income (10) 1,985 Group NII 30 2 (11) 4 supported by mortgage NWM NII growth 32 1,981 Banking NII Banking NII 1,938 Banking net interest income ex-notable items 1,931 Group NII was up 1% in the quarter, as mortgage growth w
Slide 36: NIM drivers: moderate pressure on asset yields
Focused on generating shareholder value NIM drivers: moderate Gross yields of interest earning banking assets, %1 pressure on asset yields 3.0 2.88 2.82 2.81 2.82 2.73 Commercial Banking Group asset yield impacted Retail Banking 2.73 2.65 2.67 by strong growth in Liquid 2.5 2.65 Asset Buffer, +8% ov
Slide 37: Loan book growing in the quarter
Focused on generating shareholder value Gross customer loans1, quarter on quarter, £bn 367.4 Group Loan book growing in 6.4 NWM the quarter Unsecured (0.1) Gov Schemes (0.4) (1.2) 3.9 Gross banking loans to Mortgages 3.6 RCF3 Banking customers +1.2% in the Group 364.3 Other (1.8) 361.0 0.4 (0.2) qua
Slide 38: Non-interest income impacted by lower trading income
Focused on generating shareholder value Non Interest Income1 £m Non-interest income 888 impacted by lower 794 742 trading income 423 645 688 342 236 Trading and other 123 167 Net fees and commissions Group NatWest Markets1 income down 25% over Q1’21 to 465 452 522 506 521 £143m due to weaker Fixed I
Slide 39: 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 ex pectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 112-113
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