Natwest Group Plc · LSE:NWG
Natwest — Q1 2020 Earnings Presentation
28 slides from Natwest's earnings presentation, May 1, 2020
Slide 1: Q1 2020 Results
Q1 2020 Results 1st May 2020 Information classification:Secret Classification: Secret 1
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose, Chief Executive Officer Information classification: Secret 2
Slide 3: Q1 2020: a resilient performance
Q1 2020: a resilient performance Profit generation Robust capital position Strong liquidity levels £519 million 16.6% 152% Operating Profit CET1 Liquidity Coverage Before Tax Ratio Ratio down 49% on Q1’19 up 40bps on FY’191 in line with FY’19 £288 million 760 basis points £201 billion Attributable M
Slide 4: Key messages
Key messages Our purpose: “We champion potential, helping people, families and businesses to thrive” Our purpose in action Responding to the Covid-19 crisis Balanced and consistent approach to risk Careful deployment of the balance sheet Starting from a position of strength Strong capital and liquid
Slide 5: Responding to the challenges posed by Covid-19
Our Purpose in action Responding to the challenges posed by Covid-19 Operationally resilient Supporting people & families Supporting businesses Dedicated phone lines for NHS, elderly £5bn added to existing Growth 20% increase in new mobile and 30% & vulnerable customers, with calls Funding Package t
Slide 6: Helping our business customers through this uncertainty
Our Purpose in action Helping our business customers through this uncertainty Covid Business Interruption Lending Schemes (CBILS/CLBILS) ▪ £1.4 billion of CBILS approved lending with £29 million of CLBILS requested ▪ c.7.4k CBILS approved ▪ c.40% share1 of approved CBILS loans by value, with strong
Slide 7: Business update: Q1'20 and April'20 approved lending
Balanced and consistent approach to risk Business update: Q1’20 and April’20 approved lending Q1’20 Retail & Commercial net lending, £bn April‘20 gross new lending, £bn +4% 13.1 8.0 0.3 4.8 1.3 2.0 321.0 307.9 152.8 110.9 1 Q4’19 Net UK PB Commercial Other Q1’20 Net Q1’20 Gross Gross new Q1’20 Gross
Slide 8: Well diversified retail and commercial book
Balanced and consistent approach to risk Well diversified retail and commercial book Spotlight on UK PB loans Spotlight on Corporate loans2,3 ▪ Q1’20 £165bn in UK PB Loans of which: ▪ Q1’20 £79bn in Corporate Loans of which, £bn: Shipping Airlines 1.2 Secured 92% 8% Unsecured Retail 2.5 Automotive 9
Slide 9: Advantaged risk and capital profile in a stress scenario
Starting from a position of strength Advantaged risk and capital profile in a stress scenario 2019 BOE stress test result: cumulative UK impairment charge as % of balance sheet 1 BOE FY2019 minimum stressed ratio 3 Clear pass achieved 10.3% ▪ 3.1% above CET1 hurdle rate 8.8% 6.6% ▪ No conversion of
Slide 10: Business update: Costs
Maintaining focus on our priorities Business update: Costs Operating costs Q1’20, £m Strategic costs Q1’20, £m Outlook Operating costs (5%) 131 1,938 1,841 ▪ Remain committed to £250m cost 195 131 reduction target 5 34 36 58 Key drivers: ▪ Reshaping of our investment 1,704 (26) 39 expenditure 1,678
Slide 11: Business update: NatWest Markets
Maintaining focus on our priorities Business update: NatWest Markets RWA, £bn Outlook1 Risk Weighted Assets 38.9 ▪ Actively identifying RWAs for reduction in 2020 37.9 ▪ RWA increase in Q1 as market volatility increased 9.6 9.9 counterparty credit and market risk, partially offset by the PRA’s tempo
Slide 12: Covid-19 has substantial implications for our outlook but we maintain discipline and focus
Maintaining focus on our priorities Covid-19 has substantial implications for our outlook but we maintain discipline and focus Becoming a purpose-led bank Organisation pivoted rapidly to support people, families and businesses Reducing operating costs Progress made and committed to 2020 cost reducti
Slide 13: Katie Murray, Chief Financial Officer
Katie Murray, Chief Financial Officer Information classification: Secret 13
Slide 14: Q1 2020 Income Statement
Q1 2020 Income Statement £m Q1’20 Q1’19 Total income 3,162 3,037 Operating expenses (1,841) (1,938) o/w Litigation and conduct costs 4 (5) o/w Strategic costs (131) (195) o/w Other expenses (1,714) (1,738) Operating profit before impairment losses 1,321 1,099 Impairment losses (802) (86) Operating p
Slide 15: Continued net interest margin pressure
Continued net interest margin pressure Future Bank NIM, bps considerations Future Considerations 193 2 (6) 189 ▪ TFSME funding ▪ Base rate cut ▪ Lower swap curves Asset pressure 3 bps Liability pressure 3 bps ▪ Lower Margin CBILS Q4’19 Central Liquidity Competitive Pressure Q1’20 AIEAs1, 422.4 419.6
Slide 16: Macroeconomic impact of Covid-19
Macroeconomic impact of Covid-19 2020 UK GDP growth forecast, % UK bank rate forecast3, % 3 Apr 08/09 IMF Latest OBR Jan'20 Feb'20 10th 9th April April avg.1 Crisis avg.2 0.75 -3.4 -4.2 0.25 -6.5 -6.5 0.1 2020 21 22 23 24 25 -13.0 2020 UK unemployment rate forecast, % UK manufacturing and services P
Slide 17: ECL and Impairment
ECL and Impairment Movement in ECL1, £bn 4.2 0.6 3.7 0.3 0.2 £[x] billion ECL Q1’20 Q1’20 Q1’20 ECL Q4’19 Write offs2 Impairment charge MES overlay Q1’20 Multiple Economic Scenario Overlay charge by business £m Commercial Private NatWest Central UK PB Ulster RBSI Total Banking Banking Markets & othe
Slide 18: Multiple economic scenario overlay (MES)
Multiple economic scenario overlay (MES) Approach to Multiple economic scenario overlay ▪ Utilised established internal stress testing analysis on which to base an Multiple economic scenario overlay to ECL alongside significant RBS judgement. ▪ The stress scenario included a rise in unemployment to
Slide 19: IFRS 9 implications of customer support
IFRS 9 implications of customer support Customer payment holidays ▪ Payment holidays do not automatically trigger a Significant Increase in Credit Risk (SICR) when granted – no automatic move to Stage 2 if customers were not subject to any other SICR triggers ▪ Accrual of arrears is being suspended
Slide 20: Risk Weighted Asset (RWA) movement
Risk Weighted Asset (RWA) movement RWA (£bn) by category (0.7) ▪ Mortgage floor increase delayed 1.3 to 1 Jan 2022 5.4 ▪ Future RWA movement 185.2 considerations include: ▪ RWA intensity 179.2 ▪ Volumes – CBILS FY’19 Credit Counterparty Operational Q1’20 ▪ Mix Risk Risk Risk RWA (£bn) by business 1.
Slide 21: Strong capital & leverage positions
Strong capital & leverage positions Capital Ratios (% RWA, leverage exposure) Total Capital UK Leverage CET1 Ratio LAC ratio2 Starting point capital ratios reflect a track Ratio Ratio record of underlying capital generation, 16.6% 21.4% 34.1% 5.8% active de-risking and RWA management CET1 headroom a
Slide 22: Prudent liquidity management, diversified funding
Prudent liquidity management, diversified funding Liquidity Portfolio (£bn) Liquidity coverage ratio Total funding mix (£bn)1,2 £49.5bn surplus liquidity over minimum £198bn £199bn £201bn requirement £54bn 70.2 74.4 67.7 LDR Secondary liquidity4 152% Other government 3.9 4.0 £439bn 3.9 AAA to AA- 38
Slide 23: Q1'20 update on targets and guidance
Q1’20 update on targets and guidance1 2020 targets and guidance Q1 Update Regulatory Personal Banking: c.£200m negative impact on impact Reiterate guidance income Costs Cost take-out target: £250m2 Committed to cost take-out target Strategic costs target: £0.8-1.0bn 2020 strategic costs to be at low
Slide 24: Q&A
Q&A Information classification: Secret 24
Slide 25: Appendix
Appendix Information classification: Secret 25
Slide 26: Loan growth by product and sector
Loan growth by product and sector Gross L&A Growth, £bn UK Personal Banking 4% [Government support Q1’20 Gross new 147.5 152.8 card customers c.[x]k schemes impact] (1%) (5%) 8.5 8.4 4.3 Q1’20 Gross 4.1 new Q4’19 Q1’20 Q4’19 Q1’20 Q4’19 [Ofcurrent committed accountslines, Q1’20 Mortgages Personal ad
Slide 27: Notable items
Notable items £m Q1’20 Q4’19 Q1’19 FX recycling (loss)/gain in Central items & other1 (64) 1,169 - Liquidity Asset Bond sale gain 93 (8) (10) IFRS volatility in Central items & other (66) 43 (4) UK Personal Banking debt sale gain - 31 2 Notable Items in Total Income – Total (37) 1,235 (12) Litigatio
Slide 28: Cautionary & forward looking statements
Cautionary & forward looking statements The targets, expectations and trends discussed in this presentation represent RBSG, and where applicable NWM Important factors that could affect the actual outcome of the forward-looking statements management’s, current expectations and are subject to change,