Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (July 2022)
35 slides from Natwest's debt investor presentation, Jul 29, 2022
Slide 1: NatWest Group H1 2022 Results Fixed Income Investors
NatWest Group H1 2022 Results Fixed Income Investors 29 July 2022
Slide 2: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 2
Slide 3: H1'22 results highlights
H1’22 results highlights Balanced growth and H1’22 performance strong operating performance driving £2,833m £1,891m 13.1% attractive returns and Operating profit before tax2 Attributable profit Return on Tangible Equity capital generation vs. £2,512m in H1’21 vs. £1,842m in H1’21 vs. 11.7% in H1’21
Slide 4: Strategic priorities driving sustainable returns
Strategic priorities driving sustainable returns Delivering against our strategic priorities to drive sustainable returns for shareholders and Our Purpose help our customers to We champion potential, helping thrive people, families and businesses to thrive Powering growth through: - Supporting custo
Slide 5: Supporting our customers and colleagues through uncertainty
Our purpose in action Personal Helping people, families customers 0.4m financial health 2.7m customers proactively contacted with support and ы and businesses navigate checks carried out in H1’22 information through uncertainty 100k customers supported by Financial Health & Support ~£30m per annum o
Slide 6: Operating at scale across our One Bank model
Supporting customers at every stage of their lives Operating at scale Strong franchises: A leading UK bank serving 19 million customers1 across our One Bank Retail Private Commercial & model Banking Banking Institutional We are a leading UK bank with 19 million customers Criteria: >£1m lending, inve
Slide 7: Effective capital allocation across a well diversified loan book
Disciplined deployment of capital Effective capital Well diversified loan book, strong track record on risk management ы allocation across a well Loans - amortised cost and FVOCI, £bn 93% diversified loan book Personal lending secured Wholesale with 92% Mortgage book fixed 40% ex-CRE Proactively man
Slide 8: Strong Q2'22 operating performance delivering RoTE of 15.2%
Generating sustainable shareholder value Strong Q2’22 operating Q2'22 vs H1'22 vs performance delivering Go-forward group, £m 1 Q2'22 Q1'22 Q1'22 H1'22 H1'21 H1'21 RoTE of 15.2% Net interest income 2,305 2,023 13.9% 4,328 3,729 16.1% Income excluding notable Non-interest income 894 964 (7.3%) 1,858
Slide 9: Strong net interest income growth driven by margin and volume
Generating sustainable shareholder value Go-forward Net Interest Income1,2, £m +13.9% Strong net interest 2,305 22 (21) income growth driven 150 28 by both margin and 2,023 105 volume growth Net interest income was up 13.9% in the quarter driven by higher margin and strong Q1’22 Retail Banking Priva
Slide 10: Strong loan growth
Generating sustainable shareholder value Go-forward gross customer loans1, Q2’22 vs Q1’22, £bn Balances outstanding at Q2’22 Strong loan growth +3.8 Gross loans1 to customers across our three franchises are up £4.4bn, or 1.3%, in the 3.3 quarter to £337.8bn +0.5 Retail Banking mortgage growth of £3.
Slide 11: Non-interest income growth from increased customer activity
Generating sustainable Go-forward Non Interest Income1,2, £m shareholder value 797 740 707 Non-Interest Income1 642 645 222 598 205 Trading and other income growth from increased 221 139 134 39 Net fees and commissions customer activity Net fees and commissions2 increased £40m in Q2 503 511 559 535
Slide 12: We are strengthening our 2022 income guidance
Generating sustainable Go-forward group income guidance1, £bn shareholder value Around 12.5 Other Net-Interest and We are strengthening 1.9 Mortgage margins Non-Interest Income benefits our 2022 income 10.1 guidance We remain well positioned for rising UK interest rates and are seeing good customer
Slide 13: Delivered 1.5% cost reduction in H1
Simplification and cost efficiency Group other operating expenses, £m Delivered 1.5% cost H1’21 H1’22 Cost:Income ratio 64% 55% reduction in H1, and 68% 58% -1.5% despite inflation, we are 3,517 3,484 3,291 3,241 on track to achieve our target of around 3% 1,880 1,790 reduction for FY’22 721 747 502
Slide 14: Quality of loan book and low defaults drive impairment release
Intelligent and consistent approach to risk Group ECL Coverage, % 1.03 Quality of loan book and Economic Uncertainty PMA Other PMA & ECL ECL coverage, low level of defaults excluding the economic 0.15 drive further impairment 0.93 uncertainty PMA, of 0.78%, reflects the release quality of the book a
Slide 15: ECL decrease in H1'22 driven by improved loan book quality
Intelligent and consistent Update to our economic scenarios and weightings approach to risk FY’21 H1’22 Change Base case scenario ECL decrease in H1’22 Macroeconomic variable1 2022 2023 2022 2023 2022 2023 driven by improved Weighting 45% 45% 0% quality of loan book and UK GDP - annual growth (%) 5.
Slide 16: Donal Quaid, Treasurer
Donal Quaid, DonalTreasurer Quaid Treasurer 16
Slide 17: Treasurer's review
H1’22 results highlights Treasurer’s review Strong capital, MREL and leverage positions, Capital and 14.3% 19.3% 31.7% 5.2% Loss absorbing comfortably above leverage CET1 ratio Total capital ratio capital ratio UK leverage ratio regulatory minima Robust liquidity and 159% 71% £476bn £76bn Liquidity
Slide 18: Strong capital position provides flexibility
Robust balance sheet with strong capital & liquidity levels CET1 headroom above minimum Total Leverage requirements2,3 Strong capital position regulatory requirements and medium Total Tier 1 as a % of Leverage Exposure provides flexibility1 term target1,2 We have shaped a business to operate with a
Slide 19: Continued sustainable capital generation with progress towards CET1 target
Robust balance sheet with strong capital & liquidity levels CET1 ratio, %1 Continued sustainable (0.08) capital generation with (0.25) 0.53 progress towards CET1 15.2 (0.14) ratio of around 14% by end 2022 (0.97) CET1 ratio 14.3% decreased 14.3 90bps in Q2 driven by the special dividend of £1.75bn a
Slide 20: Strong capital generation and distributions
Strong capital generation and distributions Strong capital Consistent, strong capital generation ы generation and Operating profit before impairments1, £bn distributions 2.9 3.0 2.8 NatWest Group is a highly capital generative business with a strong track record on risk diversification and managemen
Slide 21: £76.1bn surplus liquidity over £198bn of primary liquidity
Robust balance sheet with strong capital & liquidity levels Significant surplus Liquidity coverage ratio remains High quality liquidity pool well above min UK requirement liquidity £76.1bn surplus liquidity over £198bn of primary liquidity 1 Liquidity position reflects minimum requirement with a mix
Slide 22: Stable and diversified funding sources
Robust balance sheet with strong capital & liquidity levels Funding profile H1’22 Stable and diversified Total funding mix (£bn)1,2 funding sources Wholesale funding mix (£bn)1 Customer deposits in the Go-forward group 11% 11% £76bn represent ~86% of our total £476bn 5% funding mix. 16% £552bn £76bn
Slide 23: Strong customer deposit inflows
Robust balance sheet with strong capital & liquidity levels Strong customer deposit inflows Retail Banking £bn Commercial & Private £bn Institutional £bn Deposits increased by Current Accounts Savings £14.8bn in the Go-forward group during H1’22 189 191 223 42 Retail Banking deposits 172 218 39 incr
Slide 24: We remain well positioned for rising interest rates
Generating sustainable shareholder value Managed margin and structural hedge benefits versus 2021: Net interest income growth year-on-year1, £bn We remain well positioned for rising Managed margin benefit at 1.25% +1.9 interest rates Additional managed margin benefit at 2.00% Structural hedge benefi
Slide 25: Total MREL resources comfortably above requirements
Issuance and capital management strategy Total Loss Absorbing Capital (LAC)1,2 Senior MREL profile 2022-23 Total MREL resources £bn as at 30th June 2022 Loss Absorbing Capital (LAC) value2 comfortably above £billion equivalent requirements1 31.7% 0.0% Total loss absorbing capital £22.3bn ratio of 31
Slide 26: Total capital in excess of 2022 capital requirements
Issuance and capital management strategy Total capital in excess Total Capital versus minimum requirements NWG plc AT1 call profile of 2022 capital CRR end-point basis, % RWA Balance sheet value, £billion requirements1 Tier 2 Balance sheet value at end of period Callable during period CET1 AT1 3.9 N
Slide 27: Optimising the capital stack for regulatory efficiency
Issuance and capital management strategy Optimising the capital Legacy run-off profile Notional value, GBP equivalent1 stack for regulatory efficiency £1.8bn HoldCo T2 OpCp T1 OpCo T2 Capital management 0.1 actions over recent years have significantly reduced 0.6 the legacy capital stack 1.1 Legacy
Slide 28: Issuance and capital management progress
Issuance and capital management strategy Issuance and capital management progress 2022 guidance H1 2022 progress NatWest Group plc issued ~£1.6bn MREL ~£3-5bn NWG £750m 7NC6 Senior Unsecured eligible senior unsecured NatWest Group plc Senior unsecured HoldCo from NatWest Group plc NWG $1bn 6NC5 Seni
Slide 29: Credit ratings
Credit ratings Moody’s S&P Fitch NatWest Group plc, NatWest Markets Plc and Group holding company NatWest Markets N.V. ratings remain on positive NatWest Group plc Baa1/Pos BBB/Sta A/Sta outlook from Moody’s Ring-fenced bank operating companies Moody’s recently aligned NatWest Bank Plc A1*/A1/Sta A/
Slide 30: ESG ratings
ESG ratings (1) ESG Ratings (1) Scale 2019 2020 2021 2022 Our Sustainalytics rating MSCI is affirmed as low risk. Rating AAA to CCC BBB AA AA AA2 ISS ESG upgraded Sustainalytics ESG Risk Rating NatWest to C+ from C, Prime status affirmed. 1-100 27.7 20.5 17.3 17.7 Rating Negligible to Medium risk Me
Slide 31: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 31
Slide 32: Investment case
Investment case A purpose-led company Accelerating growth with proactive with clear strategic priorities, strong risk management franchises and capacity to grow Simplification via Digital and Technology We are: • Supporting our customers whilst growing and diversifying income Disciplined deployment
Slide 33: Q&A
Q&A 33
Slide 34: Fixed income investment proposition
Investment case ✓ Capital generative business with capital and leverage ratios well Fixed income above minimum requirements and improving RoTE investment proposition ✓ Reducing state ownership by efficiently deploying excess capital, A purpose-led company including buybacks with clear strategic prio
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 management’s current expectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors” on pages 106-107 o
NatWest Group — Debt Investor Presentation (July 2022) on 6ix