Natwest Group Plc · LSE:NWG
Natwest — H1 2021 Earnings Presentation
41 slides from Natwest's earnings presentation, Jul 30, 2021
Slide 1: H1 2021 Results
H1 2021 Results 30th July 2021
Slide 2: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive 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 customers at every stage of their lives
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: We are delivering on our growth priorities: Retail and Private Banking
Sustainable growth with an intelligent approach to risk Retail Banking Private Banking We are delivering on our Stock share1, % Balances, £bn FY’20 H1’21 FY’20 H1’21 growth priorities Current account share stable at ~16% harnessing innovation +7.1% +8.1% and partnerships 10.9 11.0 10.9 11.1 +5.9% 32
Slide 8: We are delivering on our growth priorities: Commercial Banking and NatWest Markets
Sustainable growth with an intelligent approach to risk Commercial Banking NatWest Markets (NWM) We are delivering on our Total Gross Commercial Loans (£bn) Income excl. asset disposals/strategic risk growth priorities reduction and own credit adjustments (£m) 111.1 826 harnessing innovation 105.9 a
Slide 9: NatWest Group is a relationship bank for a digital world
Simplifications and cost efficiency NatWest Group is a We are a relationship bank for a digital world with high levels of digital engagement relationship bank for a Video Banking Mobile Typical weekly appointments2 Active mobile users3 digital world (‘000 appointments) (m customers) Accelerating dig
Slide 10: Actively managing capital
Portfolio discipline and effective deployment of capital Ulster Bank RoI Actively managing ы capital ▪ Natwest has agreed a binding sale agreement with Allied Irish Banks, p.l.c. for the sale of c.€4.2bn of performing commercial loans and associated undrawn We remain strongly exposures of c.€2.8bn1
Slide 11: Returning surplus capital to shareholders
Portfolio discipline and effective deployment of capital CET1 ratio Key drivers of CET1 ratio Returning surplus capital v to shareholders 18.2% Capital generation: • Earnings NatWest Group is a capital 13–14% • NWM reshaping and Ulster Bank withdrawal generative business that Capital Usage: aims to
Slide 12: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 12
Slide 13: Strong Q2 performance
Focused on generating shareholder value Strong Q2 performance £m Q2'21 Q1'21 vs Q1'21 H1'21 H1'20 vs H1'20 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 Q1’21 as strength in Total income 2,66
Slide 14: Net interest income supported by mortgage growth
Focused on generating shareholder value Net Interest Income1 £m Net interest income 1,985 Group NII supported by mortgage 30 (10) 2 (11) 4 NWM NII growth 32 1,938 1,981 Banking NII Banking NII Banking net interest income ex-notable items 1,931 was up 1% in the quarter, Group NII as mortgage growth w
Slide 15: NIM drivers: moderate pressure on asset yields
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM drivers: moderate 3.0 2.88 2.82 2.81 2.82 pressure on asset yields 2.73 Commercial Banking Group asset yield 2.73 2.65 2.67 2.5 2.65 Retail Banking impacted by strong growth in Liquid Asset 2.07 Buffer, +
Slide 16: 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 the 6.4 NWM 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 17: 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 423 645 688 342 123 236 167 Trading and other NatWest Markets1 income Net fees and commissions Group down 25% over Q1’21 to 465 452 522 506 521 £143m due to weaker Fixed I
Slide 18: Cost reduction of 5.9% in H1'21, on track for c.4% target
Simplification and cost efficiency Cost reduction of 5.9% in Other expenses ex Operating Lease Depreciation and Ulster Bank RoI Direct2, £m H1’211, on track for c.4% 1,554 3,160 target for FY’21 113 185 1,441 2,975 Other expenses ex-OLD and Ulster Bank RoI2 of £1.4bn in Q2, down £113m or 7% versus Q
Slide 19: Impairment release resulting from an improvement of the 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 20: 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 3,792 5,191 315 release, £648m is driven 80 202 4,743 3,776 by the improvement in 3,510 economic forecasts an
Slide 21: Good progress on phased withdrawal from the Republic of Ireland
Portfolio discipline and effective deployment of capital Good progress on our Ulster Bank RoI, H1’21 phased withdrawal from Loans amortised cost (€bn) RWAs (€bn) the Republic of Ireland c.4.2 Entered a binding c.4.0 agreement with AIB1 for the c.8.4 sale of c.€4.2bn gross €20.2bn €12.2bn performing
Slide 22: 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 23: We have shaped a business that can operate at a CET1 ratio of 13% to 14%
Robust balance sheet with strong capital & liquidity levels We have shaped a Key drivers of CET1 ratio3,4 business that can Capital Capital operate at a CET1 ratio generation usage of between 13% to 14% 18.2% • Earnings • Loan growth by FY’231 • NWM RWA • Pro-cyclicality Distributions4 reduction We
Slide 24: Strong capital and liquidity positions provide flexibility
Robust balance sheet with strong capital & liquidity levels Strong capital and CET1 headroom above Headroom above Liquidity coverage ratio medium term target1,2 minimum UK leverage remains well above min UK liquidity positions provide requirement requirements flexibility In H1 we repurchased or 420-
Slide 25: Alison Rose, Chief Executive Officer
Alison Rose Chief Executive Officer 25
Slide 26: Investment case: 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 focused business with 420-520bps or c.£6.8bn-8.5bn hea
Slide 27: Q&A
Q&A 27
Slide 28: Appendix
Appendix 28
Slide 29: Guidance
Guidance 2021 financial targets and outlook Medium-term targets and outlook Costs We plan on reducing other expenses, excluding OLD, by around 4% in comparison to 2020, excluding any change in Expect annual cost reduction of around 4%, excluding the direct cost base of Ulster Bank RoI. We also expec
Slide 30: Notable items
Notable items Q2'20 Q3'20 Q4’20 FY’20 Q1’21 Q2’21 £m Metro Bank mortgage portfolio acquisition loss - - (58) (58) - - FX recycling (loss)/gain in Central items & other (39) 64 (1) (40) - - IFRS volatility in Central items & other1 55 49 45 83 (1) 45 Retail Banking Debt Sale Gain 3 4 1 8 - - Commerci
Slide 31: Key Drivers of CET1 ratio: 18.2% at Q2'21 through to FY'23
Key Drivers of CET1 ratio1: 18.2% at Q2’21 through to FY’23 2 Driver Timing Impact Details Earnings Target a ROTE of 9-10% by FY'23 3 Distributions : Intend to distribute a minimum of £1bn per annum through dividends, £500m accrued at Q2’21. Dividends Through to FY’23 c.155bps Impact related to rema
Slide 32: Tangible net asset value
Tangible net asset value £m Share count Pence 31 March 2021 30,126 11,560 261 Attributable profit 1,222 - 11 FY’20 dividend paid (347) - (3) Remeasurement of net defined benefit liability (net of tax) (182) - (2) Other movements (68) 9 (1) Net change 625 9 5 As at 30 June 2021 30,751 11,569 266 32
Slide 33: Customer Loans and Deposits
Customer Loans and Deposits Loans, £bn1 Deposits, £bn Q1’21 Q2’21 Q1’21 Q2’21 Retail Banking 174.8 178.1 179.1 184.1 Private Banking, ex government schemes 17.2 17.7 33.5 34.7 Commercial Banking, ex government schemes 93.5 91.1 169.4 176.0 RBS International 14.7 15.1 33.3 33.9 UK & RBSI Retail and C
Slide 34: Q2'21 Customer loan growth by product and sector
Q2’21 Customer loan growth by product and sector Total loans to customers (amortised cost), £bn Retail Banking 3.2 169.2 166.0 (0.2) 0.1 7.1 6.9 3.5 3.6 Q1’21 Q2’21 Q1’21 Q2’21 Q1’21 Q2’21 Mortgages Personal advances Cards Commercial Banking (0.52) (0.32) 35.5 (1.6) (0.8) 31.9 (0.1) 21.2 19.6 21.0 2
Slide 35: Structural Hedge
Structural Hedge1 H1 2021 H1 2020 Incremental Total Period end Average Total Incremental Total Period end Average Total Income Income notional Notional Yield Income Income notional Notional Yield (£m) (£m) (£m) (£m) % (£m) (£m) (£m) (£m) % Equity structural 235 244 23 23 2.13 209 294 24 25 2.39 hedg
Slide 36: Interest rate sensitivity
Interest rate sensitivity H1 2021 +25 basis points parallel upward shift -25 basis points parallel upward shift Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 (£m) (£m) (£m) (£m) (£m) (£m) Structural Hedge 39 127 215 (39) (127) (215) Managed Margin 414 365 287 (374) (420) (395) Other (3) - - 7 Total 450
Slide 37: Economic Assumptions
Economic Assumptions1 H1’21 FY’20 Scenario Upside Base Case Downside Extreme Upside Base Case Downside Extreme downside downside Weighting 35% 40% 20% 5% 20% 40% 30% 10% UK GDP – Annual Growth (%) 2021 10.1 7.3 2.7 0.1 9.0 4.5 2.6 (4.6) 2022 5.4 5.8 4.3 - 2.6 4.2 4.6 6.1 5 year Average 3.9 3.5 2.9 2
Slide 38: Impairment charge/(release) by segment
Impairment charge/(release) by segment Retail Private Commercial Ulster Bank Natwest NatWest RBSI Banking Banking Banking RoI Markets Group Q2’21 (£m) (91) (27) (451) (27) 1 (10) (605) Q2’21 (bps) (20) (60) (170) (71) 2 n.m (66) Q1’21 (£m) 34 - (117) (2) (12) (6) (102) Q1’21 (bps) 8 - (43) (5) (27)
Slide 39: Diversified credit risk profile
Diversified credit risk profile Gross Loans & Advances by stage 1,2 £bn, Spotlight on sectors in focus for management Q2’21 Total loans and advances1,3, £bn, Q2’21 Stage 2 Airlines Transport 1.7 14.2% 4.8 Stage 3 1.5% Retail 8.6 £375.6bn 25.7bn 9.1 84.3% 1.5 Leisure Stage 1 Oil and Gas Staging of to
Slide 40: Supporting our customers through Covid-19
Supporting our customers through Covid-19 Payment Holidays Total Loans, £bn, (% Share of Book) Q1’21 2.5 (c.2%) 1.9 (c.1%) 4.4 Q2’21 1.3 (c.1%) 1.4 0.1 (c.0.04%) Commercial Banking Retail Banking Mortgages Government Lending Scheme Approvals Approved value of c.£14.4bn under government schemes in Co
Slide 41: 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 [111]-[1