Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (February 2022)
47 slides from Natwest's debt investor presentation, Feb 18, 2022
Slide 1: Full Year 2021 Results Fixed Income Update
Full Year 2021 Results Fixed Income Update 18th February 2022
Slide 2: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer 2
Slide 3: FY'21 results highlights
FY’21 results highlights FY’21 performance1 Strong 2021 performance and attractive shareholder £4.3bn £3.0bn 9.4% distributions Operating profit before tax in Attributable profit in FY’21, Return on Tangible Equity in FY’21, vs. £0.4bn loss in FY’20 vs. £0.8bn loss in FY’20 FY’21, vs. (2.4%) in FY’2
Slide 4: Strategic priorities will drive sustainable returns
Strategic priorities will drive sustainable returns Delivering against our Our Purpose strategic priorities to We champion potential, helping drive sustainable returns people, families and businesses to thrive for shareholders and help our customers to Our Strategy thrive Supporting customers at eve
Slide 5: Supporting customers at every stage of their lives
Sustainable growth with an intelligent approach to risk Supporting customers at • ~1m Financial health • Affluent +23 NPS every stage of their lives, checks annually vs. -2 in FY’19² positive momentum since • 470k new primary • Digital Net New Money £0.8bn vs. banked customers 2019 since Mar’20¹ £0.
Slide 6: Supporting our customers on the climate transition
Sustainable growth with an intelligent approach to risk ы Supporting our Corps. & Institutions SMEs to Mid. Corps. Consumers customers on the climate transition #2 – globally for GBP £160bn-plus – the SME £728m – Green 2021 Highlights: GSS Bond underwriting2 revenue opportunity3 Mortgages4 completed
Slide 7: Disciplined deployment of capital
Disciplined deployment of capital Actively managing capital for growth and risk management ы Capital usage and generation ▪ Group RWA intensity down from 54% in FY’19 to 43% in FY’21 ▪ Through ongoing active capital management in Commercial we have reduced Allocating capital to low returning RWAs by
Slide 8: Strong Q4'21 operating performance
Focused on generating shareholder value Strong Q4'21 operating Q4'21 vs FY'21 vs Go-forward group, £m1 Q4'21 Q3'21 FY’21 FY’20 performance Q3'21 FY'20 Income excluding notable Net interest income 1,919 1,866 7,514 7,354 2.8% 2.2% items was stable versus Q3’21 as higher balances Non-interest income 6
Slide 9: Net interest income support from margin and volumes
Focused on generating shareholder value Go-forward Net Interest Income1,2, £m Net interest income 1,919 support from margin 14 3 4 and volumes 1,866 16 16 Net interest income was up 3% in the quarter driven by higher volumes and high yield curve Q3’21 Retail Commercial Private NatWest Other Q4’21 Ba
Slide 10: NIM drivers: limited change to customer rates post December
Focused on generating shareholder value Gross yields of interest earning banking assets, %1 NIM drivers: limited 3.0 2.81 2.823 change to customer 2.73 2.73 Commercial Banking 2.65 rates post December 2.65 2.67 2.5 2.65 2.64 BOE rate increase 2.58 Retail Banking Retail Banking loan yield 2.0 1.83 1.
Slide 11: Supporting our customers in target segments
Focused on generating shareholder value Go-forward gross customer loans1, quarter on quarter, £bn 355.6 Supporting our customers in target (0.7) Gov Schemes 4.0 Mortgages segments 351.6 1.4 0.1 (1.3) RCF2 0.2 Other 0.4 (0.1) Gross loans1 to customers Unsecured up 1.1% in the quarter driven by mortga
Slide 12: Non-interest income benefited from ongoing recovery in fees
Focused on generating shareholder value Go-forward Non Interest Income1,2, £m 707 Non-interest income 615 642 645 598 benefited from ongoing 116 221 139 134 39 recovery in fees and Trading & Other commissions offset by Net fees & Commissions lower trading income 499 486 503 511 559 NatWest Markets i
Slide 13: Impairment release resulting from better economic outlook
Intelligent and consistent approach to risk Impairment release Economic scenarios and weightings FY’21 H1’21 Change resulting from better Base case scenario Macroeconomic variable1 economic outlook 2022 2023 2022 2023 2022 2023 Weighting 45% 40% 5% Updated economic UK GDP - annual growth (%) 5.0 1.6
Slide 14: Improved economic outlook and risk metrics drive ECL release
Intelligent and consistent Group ECL3 £m £1,542m approach to risk 6,186 (166) Improved economic 878 (611) 117 outlook and risk metrics (931) 6 374 drive ECL release (1,052) 3,792 3,806 80 202 5,191 584 Of the £2.4bn ECL release 417 3,510 in FY’21, £0.6bn was in the 2,805 fourth quarter, largely FY’1
Slide 15: Donal Quaid, Treasurer
Donal Quaid, DonalTreasurer Quaid Treasurer 15
Slide 16: Treasurer's review
FY’21 results highlights Capital and leverage Liquidity and funding Treasurer’s review 18.2% 15.9% 24.1% 172% 75% Strong capital and leverage FY’21 1-Jan’22 Total capital Liquidity coverage Loan:deposit positions, robust liquidity and CET1 ratio proforma ratio ratio ratio diversified funding. CET1 r
Slide 17: Strong capital position provides flexibility
Robust balance sheet with strong capital & liquidity levels CET1 headroom above minimum Total Leverage requirements 1-Jan-222,3 Strong capital position regulatory requirements and medium Total Tier 1 as a % of Leverage Exposure provides flexibility1 term target1,2 We have shaped a 18.2% business to
Slide 18: Strong capital position post announced distributions
Robust balance sheet with strong capital & liquidity levels CET1 ratio, (%)2 Strong capital position 18.7% post announced 0.05 18.2% (0.75) 0.32 (0.10) distributions (2.0) 15.9% (0.2) (0.1) CET1 ratio 18.2% down 50bps on Q3’21 driven by announced distributions Q3’21 Attrib. profit Capital RWAs Other
Slide 19: £89.9bn surplus liquidity over minimum requirement
Robust balance sheet with strong capital & liquidity levels Significant surplus Liquidity coverage ratio remains well High quality liquidity pool above min UK requirement liquidity £89.9bn surplus liquidity over £208bn2 of primary liquidity with a mix of cash and high quality Liquidity position refl
Slide 20: Stable and diversified funding sources
Robust balance sheet with strong capital & liquidity levels Stable and diversified Total funding mix (£bn)1,2 Wholesale funding mix (£bn)1, funding sources Bank deposits £77bn 11% 10% TFSME 5% Customer deposits 16% CP & CD represent ~86% of our total £557bn £77bn MTN funding mix. £480bn Senior 12% O
Slide 21: Strong customer deposit inflows
Robust balance sheet with strong capital & liquidity levels Strong customer deposit Retail £bn Commercial £bn Private £bn inflows Current Accounts Savings Retail Banking deposits +10% +6% +21% increased by £17 billion as a result of lower customer 189 178 172 168 spend and increased 150 39 savings.
Slide 22: Well positioned for 2022 MREL requirements
Issuance and capital management strategy Total Loss Absorbing Capital (LAC)1,2 Senior MREL profile 2022-23 Well positioned for 2022 £bn as at 31st December 2021 Loss Absorbing Capital (LAC) value2 £billion equivalent MREL requirements1 Total loss absorbing capital 39.8% ratio of 39.8% is above the £
Slide 23: 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 CRR end-point basis, % RWA Balance sheet value, £billion of 2022 capital requirements1 CET1 AT1 Tier 2 Balance sheet value at end of period Callable during period Next
Slide 24: Optimising the capital stack for regulatory efficiency
Issuance and capital management strategy Legacy capital by type Legacy capital by legal entity1 As at FY’21 As at FY’21 Optimising the capital Notional value, GBP equivalent Notional value, GBP equivalent stack for regulatory HoldCo T1 NWG plc efficiency 23% HoldCo T2 8% 2% OpCo T1 Capital managemen
Slide 25: 2021 issuance recap
Issuance and capital management strategy 2021 Issuance recap Issuance and capital management progress NatWest Group plc (HoldCo) Completed 2021 issuance ~£3.2bn senior unsecured MREL from NWG €1bn 9NC8 Social Bond NatWest Group plc NWG $1.5bn 6NC5 plan with NatWest Group plc issuing ~£3.2bn MREL NWG
Slide 26: Credit ratings
Credit ratings Moody’s S&P Fitch JCR NatWest Group plc received rating upgrades Group holding company from Moody’s on 13 July and August 2021, with NatWest Group plc Baa1/Pos BBB/Sta A/Sta A/Sta positive outlook Ring-fenced bank operating companies maintained on NWG plc and NWM Plc and NWM NatWest B
Slide 27: ESG ratings
ESG ratings (1) ESG Ratings (1) Scale 2019 2020 2021 The MSCI rating was MSCI affirmed at AA. Rating AAA to CCC BBB AA AA Our Sustainalytics rating Sustainalytics ESG Risk Rating improved to 17.3/Low Risk vs 2020. 1-100 27.7 20.5 17.3 Rating Negligible to Medium risk Medium risk Low risk Assigned a
Slide 28: 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 29: Q&A
Q&A 29
Slide 30: Green, Social and Sustainability Bond Framework
Green, Social and Sustainability Bond Framework 30
Slide 31: Our purpose and initial areas of focus
Green, Social and Sustainability Bond Framework Our initial areas of focus Our purpose Climate Enterprise Learning NatWest Group champions Our ambition Our ambition potential, helping people, Our ambition families and businesses to Net zero by 2050, including 35K individuals or businesses 15m financ
Slide 32: Green, Social or Sustainability Bond Framework launched in 2019
Green, Social and Sustainability Bond Framework We obtained an independent Second Party Opinion from Sustainalytics who reviewed our GSS Launched in 2019, our Bond Framework and eligibility criteria. Sustainalytics is of the opinion that the GSS Bond Green, Social or Framework is credible and impact
Slide 33: Since 2019, ~£2.8bn issued under the GSS Bond Framework
Green, Social and Sustainability Bond Framework November 2019 • ICMA Category: SME Lending Since 2019, NatWest €750m Social • Proceeds allocated to supporting SMEs in some of the most Group plc has issued Bond deprived parts of the UK. ~£2.8bn under the GSS • Published impact report in May 2021 Bond
Slide 34: Operating company information
. Operating company information 34
Slide 35: Issuing entity structure
Issuing entity structure External issuance of AT1, Investors Tier 2 and MREL is only from NatWest Group plc, the group holding Issues external AT1, T2, MREL Senior company. NatWest Group plc1 Group holding company Subsidiary operating companies will only issue internal AT1, Tier 2 and Issues interna
Slide 36: Legal entity capital positions
Issuance and capital management strategy Ulster Legal entity capital NatWest NatWest Royal Bank Bank NatWest NatWest FY 2021 Holdings of Scotland Markets Markets RBSI positions Group Bank Plc plc Ireland Plc NV DAC External issuance of AT1, Capital and leverage metrics Tier 2 and MREL will only 15.9
Slide 37: Appendix
Appendix 37
Slide 38: FY'21 performance supported by economic recovery with RoTE 9.4%
Focused on generating shareholder value FY’21 performance FY’21 FY’21 supported by economic incl. discontinued operations recovery with RoTE 9.4% £m Go- Ulster Go- Ulster forward1 Bank RoI Group forward1 Bank RoI Group Go-forward1 group income stable compared to FY’20 Total income 10,284 228 10,512
Slide 39: Outlook
Outlook Financial targets and outlook Income In 2022, we expect income excluding notable items to be above £11.0 billion in the Go-forward group. Costs We plan to invest around £3 billion over 2021 to 2023 but, with continuing simplification, we plan to reduce Go-forward group operating expenses, ex
Slide 40: Key drivers of CET1 ratio through to FY'23
Key Drivers of CET1 ratio: from 15.9% at 1 Jan 2022 through to FY’23 Driver Timing Impact1 Details Earnings In 2023 we expect to achieve a RoTE comfortably above 10% for the Group Lending volumes Across 2022 and 2023, we expect movements in RWAs to largely reflect lending growth Intend to distribute
Slide 41: Diversified risk profile
Diversified risk profile Gross Loans & Advances excluding Ulster1 by stage £bn, Q4’21 Gross loans and Advances ex-Ulster1 by sector £bn, Q4’21 Stage 2 Stage 2 Past due Not past due Stage 3 0.7% 8.4% Corporate Mortgages 1.2% 69.6 Property 32.4 £362.6 £362.6 187.8 Other 0.6 59.0 Stage 1 Sovereign & FI
Slide 42: Supporting our customers through Covid-19
Supporting our customers through Covid-19 £0.7bn of net government scheme repayments in Q4, £0.4bn related to BBLS Government Lending Scheme in NWG, £bn1 Approved 6.1 1.8 0.7 0.5 9.1 BBLS Drawdown Q3’21 7.9 (0.4)2 Drawdown Q4’21 7.5 0.1 Approved 3.3 0.6 0.3 4.3 CBILS Drawdown Q3’21 3.7 (0.3)2 Drawdo
Slide 43: Structural Hedge
Structural Hedge1 FY 2021 FY 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) (£bn) (£bn) % (£m) (£m) (£bn) (£bn) % Equity structural 426 448 21 22 2.05 478 580 23 24 2.43
Slide 44: Interest rate sensitivity
Interest rate sensitivity1 FY 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 43 144 235 (43) (144) (235) Managed Margin 282 220 255 (255) (209) (187) Other 4 (5) Total 329 364
Slide 45: Economic Assumptions
Economic Assumptions1 FY’21 H1’21 Scenario Upside Base Case Downside Extreme Upside Base Case Downside Extreme downside downside Weighting 30% 45% 20% 5% 35% 40% 20% 5% UK GDP – Annual Growth (%) 2021 7.0 7.0 7.0 7.0 10.1 7.3 2.7 0.1 2022 8.1 5.0 1.5 (3.6) 5.4 5.8 4.3 - 5 year Average 3.9 3.2 2.8 2.
Slide 46: Contact details
Contact details Our Treasury and Group Treasury Investor Relations teams Donal Quaid Scott Forrest engage regularly with Group Treasurer Head of Treasury Debt Capital Markets our investors and are donal.quaid@natwest.com scott.forrest@natwest.com available to help with your queries Investor Relation
Slide 47: Caution About Forward-looking and other statements
Caution About Forward-looking and other 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” on pages 406-426
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