Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (April 2023)
30 slides from Natwest's debt investor presentation, Apr 28, 2023
Slide 1: 28 April 2023
28 April 2023 Document classification: Public
Slide 2: NatWest presenter introduction
NatWest UI Officer
Slide 3: Strong earnings and returns
Strong earnings and returns £1.8bn £1.3bn 19.8% Operating profit before tax Attributable profit Return on Tangible Equity vs £1.2bn in Q1’22 vs £0.8bn in Q1’22 vs 11.3% in Q1’22 Focused on growth, +37.2% +£214m 49.8% efficiency and operating leverage Income ex notable items1 Other operating expenses
Slide 4: Strong funding, deposits and liquidity profile
Strong funding, 83% ~£422bn 139% deposits and liquidity Loan to deposit ratio Customer Deposits1 Liquidity Coverage Ratio profile £53bn surplus deposits down £11bn vs Q4’22 £43bn headroom Diversified and high ~5% <5% 93% quality loan book Top 10 customers2 Commercial Real Estate Personal lending sec
Slide 5: Q1'23 progress against objectives
Objectives Q1’23 progress Status Disciplined Deliver income excluding notable items for the Group of around £14.8 billion in 2023 £3.8bn On track and responsible growth Provide £100 billion of Climate and Sustainable Funding and Financing1 £40.2bn1 On track Deliver a cost: income ratio excluding lit
Slide 6: Net interest income and margin
-0.2% 2,909 2,902 41 2,868 (62) 39 20 (17) 13 Q4’22 Redemption EIR Q4’22 ex Day count Retail Banking Private Banking Commercial Central items Q1’23 adjustment2 notable items & Institutional & other +2 327 325 (1) 320 5 12 (9) Q4’22 Redemption EIR Q4’22 ex Lending margin Deposit margin Funding & othe
Slide 7: Loan growth by segment
187.4 Mortgages1 199.9 Gross new lending ~10bn1 +2% 69% New business LTV2 203.8 13.3 Unsecured 14.2 Primarily credit card 14.4 +1% growth 4.5 Other Private 4.4 Private commercial 4.5 +2% lending growth 2.6 Business Banking3 2.4 Sensible deleveraging 2.0 -17% 66.6 Commercial Mid-Market 3 67.4 Higher
Slide 8: Non-interest income
918 Q1’23 performance 857 807 757 757 • Primarily reflecting stronger performance in 242 335 227 Fixed Income trading and increased Capital 213 204 Markets income 580 553 615 583 544 Trading and other income Net fees and commissions Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 544 580 553 615 583 Net fees and comm
Slide 9: Operating expenses and cost considerations
+12.5% 1,932 Q1’23 cost considerations 35 15 32 o Staff costs include ~£60m one off cash payment of £1,000, or local equivalent, for ~60,000 FTE in January 1,718 132 o Non repeat of ~£100m charge for bank levy in Q4’22 Q1’22 Staff costs Other Premises and Depreciation Q1’23 administrative equipment
Slide 10: Loan book composition: mortgages, corporate, CRE
Mortgages Corporate • Mortgage LTV of 53%2 • Diversified £74.6bn corporate loan book • Balances: 67% 5Y, 23% 2Y, 1% 10Y, 5% Tracker, • Low exposure to in focus areas such as Retail 4% SVR £7.9bn, Automotive £7.4bn and Leisure £7.4bn • Limited exposure to Oil and Gas £1.0bn • £33.4bn or ~17% of fixed
Slide 11: Impairments and ECL coverage
85 Group loan impairment rate 21 20-30 15 16 13 9 FY’23 Guidance 18 8 7 17 6 Stage 3 loan impairment rate1 12 2 (32) FY’16 FY’17 FY’18 FY’19 FY’20 FY’21 FY’22 Q1’23 FY’23 guidance 1.03% 0.91% 0.89% ECL coverage, % 3,806 20-30bps 3,434 3,447 584 352 333 417 59 61 Economic Uncertainty PMA 337 70 1,737
Slide 12: NatWest Treasurer introduction
NatWest UI Donal Quaid Treasurer
Slide 13: Capital, leverage, liquidity and funding
Capital and leverage 14.4% 19.6% 32.4% 5.4% £178.1bn Loss absorbing Risk weighted CET1 ratio Total capital ratio UK leverage ratio capacity assets Liquidity and 83% funding 139% 141% Loan to deposit £430.5bn. £79bn. Liquidity coverage Net stable funding ratio Customer Wholesale funding ratio ratio (
Slide 14: Secondary liquidity
Cash and balances at central banks 152% 145% 2% AAA to AA- rated government bonds 139% 17% Other LCR level 1 bonds Secondary liquidity £61.2bn Total liquidity value £209.9bn 81% FY’19 FY’22 Q1’23 12-month average LCR 151% Amortised cost 23% Fair value OCI Net Stable Funding Ratio 141% The majority o
Slide 15: Customer deposits by segment
189.7 Higher tax payments & Retail Banking 188.4 -2% spending 184.0 40.3 Higher tax payments and Private Banking 41.2 further investment -9% Paydown of debt 37.3 217.9 Paydown of debt Commercial & Institutional 203.3 Growth in large corporates Key drivers of deposit -1% balances: 200.5 • Macro econo
Slide 16: Drivers of higher deposit costs
Non interest-bearing balances Personal 1 Interest bearing Term deposits Corporate and Other 2 balances ~60% Instant Access % insured ~40% Q4’22 ~40% ~11% ~68% ~52% Q4’22 ~54% ~8% Q4’22 ~6% +100bps 4.0 Average UK Base Rate 3.92 3.5 Average cost of interest bearing customer deposits across 3 businesse
Slide 17: Capital requirements and CET1 ratio
19.6% 5.40% 14.4% Tier2 3.0% (£5.5bn) 13-14% AT1 2.2% 15.2% (£3.9bn) 4.25% 1.2% 2.7% 0.40 3.85% 10.4% 1.2% 0.60 Min. 1.7% MDA2 0.8% 9.5% 2.1% Requirement MDA2 2.5% 2.5% CET1 14.4% 1.7% 1.7% (£25.7bn) 3.25 10.4% 4.5% 4.5% Q1’23 Q1’23 FY’23 operating Q1’23 FY’23 requirements Q1’23 FY’23 requirement re
Slide 18: CET1 and RWA movements
(0.16) 14.7 0.02 0.72 (0.29) 14.4 14.2 (0.08) Q4’22 IFRS 9 transitional Group earnings Group RWAs Other CET1 CET1 ratio pre Ordinary Q1’23 relief 1 changes distributions dividend accrual 178.1 176.1 1.8 (0.1) (0.8) 1.1 4.6 Ulster Bank RoI 5.4 170.7 173.5 Q4’22 Credit Risk Counterparty Market Risk Op
Slide 19: 2023 issuance guidance and Q1'23 actual
2023 guidance Q1’23 actual NatWest Senior unsecured (MREL) ~£3bn to £5bn ~£2bn • $1bn 4NC3 • $1bn 11NC10 • €500m 5NC4 Social bond Group plc (HoldCo) Tier 2 capital Up to £1bn ~£600m - • €700m 11NC6 NatWest Senior unsecured (non-MREL) public • €750m 3yr FRN Markets Plc benchmark ~£3bn to £5bn ~£1.3bn
Slide 20: Credit ratings and S&P rating action
Moody’s S&P Fitch S&P long-term issuer rating action: Group holding company • NatWest Group plc long-term issuer ratings NatWest Group plc A3/Sta BBB+/Sta A/Sta now rated BBB+ from BBB Ring-fenced bank operating companies • Core operating NatWest Bank Plc A1/Sta1 A+/Sta A+/Sta subsidiaries within th
Slide 21: NatWest appendix introduction
NatWest UI Officer
Slide 22: Financial footnotes
22 1. Cost:income ratio is total Group income, divided by total costs excluding litigation and conduct 2. Total Income ex notable items 22
Slide 23: NatWest
NatWest UI
Slide 24: Liquidity footnote
1. Total LCR level 1 assets liquidity value.
Slide 25: Group income statement summary
Q1'23 vs Q1'23 vs Group, £m Q1'23 Q4'22 Q1'22 Q4'22 Q1'22 Net interest income, ex notable items1 2,902 2,909 2,027 (0.2%) 43.2% Non-interest income, ex notable items1 918 857 757 7.1% 21.3% 1 Total income, ex notable items 3,820 3,766 2,784 1.4% 37.2% Total income 3,876 3,708 3,008 4.5% 28.9% Other
Slide 26: Loss absorbing capacity and MREL requirements
32.4% Senior MREL 1.2% 12.8% 1.7% 2.5% 2 x Pillar 2A3 6.0% MREL eligible 22% CET1, AT1 & MREL Tier 2 capital requirement resources 2 x Pillar 1 2 x Pillar 1 19.6% CET1 16.0% O-SII Group Risk Add-on4 Countercyclical buffer5 Capital conservation buffer Total LAC 2023 LAC requirements 1. “MREL” = Minim
Slide 27: Group funding and issuance structure
External issuance of AT1, Tier 2 and MREL is only from NatWest Group plc, the group holding company. Subsidiary operating companies will only issue internal AT1, Tier 2 and MREL. Non ring-fenced bank (NRFB) operating subsidiaries Issue internal AT1, T2, MREL senior NatWest Bank Plc issues senior sec
Slide 28: Legacy securities nominal values
Security Nominal value Nominal value, £billion equivalent1 Tier 1 GB0006227051 NWB plc 9% Perp £116m Tier 2 XS0041078535 NWB plc 11.5% Perp2 £31m GB0007548026 NWG plc 5.5% Perp £0.2m GB0007548133 NWG plc 11% Perp £0.2m US00077TAA25 NWM NV 7.75% May 2023 $101m XS0123050956 NWM NV February 2041 €170m
Slide 29: Group Treasury and Investor Relations contacts
Group Treasury Investor Relations Scott Forrest Paul Pybus Amber Sekhri Head of Treasury Debt Capital Markets Head of Debt Investor Relations Fixed Income Corporate Access scott.forrest@natwest.com paul.pybus@natwest.com amber.sekhri@natwest.com +44 (0) 207 672 1758 +44 (0) 207 672 1767 Useful links
Slide 30: 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 expectations and are subject to change, including as a result of the factors described in the “Risk Factors” in NWG’s 2022 Annual Repor
NatWest Group — Debt Investor Presentation (April 2023) on 6ix