Natwest Group Plc · LSE:NWG
Natwest — Q1 2024 Earnings Presentation
35 slides from Natwest's earnings presentation, Apr 26, 2024
Slide 1: 26 April 2024
26 April 2024
Slide 2: Paul Thwaite, Chief Executive Officer
NatWest UI 1 Paul Thwaite | Chief Executive Officer
Slide 3: Q1 2024 highlights
Disciplined £361bn £420bn £43bn Customer Loans1 Customer Deposits2 AUMA3 approach to growth +£1.4bn vs Q4’23 +£0.9bn vs Q4’23 +£2.3bn vs Q4’23 Strong returns with £3.4bn £2.0bn 14.2% attributable profit of Income ex notable items4 Costs5 Return on Tangible Equity £0.9bn vs £3.8bn in Q1’23 vs £1.9bn
Slide 4: Katie Murray, Chief Financial Officer
NatWest UI *. “ Katie Murray “©" Chief Financial Officer
Slide 5: Group financial results, £m
Q1'24 vs Q1'24 vs Group, £m Q1'24 Q4'23 Q1'23 Q4'23 Q1'23 Net interest income, ex notable items1 2,651 2,670 2,902 (0.7%) (8.6%) Non-interest income, ex notable items1 763 772 918 (1.2%) (16.9%) 1 Total income, ex notable items 3,414 3,442 3,820 (0.8%) (10.6%) Total income 3,475 3,537 3,876 (1.8%) (
Slide 6: Net interest margin and total income movement
Non interest income Net interest income Total Centre income Net interest margin1, bps Net interest margin 199bps 202bps 205bps 3,537 32 -0.8% 3,475 (127) 3,442 (29) 3,414 61 899 (24) (6) 50 (95) 772 (3) 3 (6) (13) 763 824 3 businesses +£14m 2,670 2,651 2,651 2,638 Q4’23 Notable items Q4’23 ex Day co
Slide 7: Customer loans by segment
203.8 Mortgages1 Q1’23 205.4 • ~10.5% flow share in Q1’24 203.3 Q4’23 • ~12.6% stock share at Q1’244 14.4 Q1’24 Unsecured1 15.8 15.8 • ~8.7% stock share at Q1’24, 4.5 up from 6.9% at FY’225 Other Private 4.5 4.6 Business 2.1 Banking2,3 1.9 1.9 Commercial 67.5 +£3.9bn, 3.0% in Q1’24 68.9 Mid-market2,
Slide 8: Customer deposits by segment
6.0 Q4’23 66.1 121.9 188.0 5.2 5.3 5.3 Retail +£2.0bn 5.0 Banking Q1’24 66.4 123.6 190.0 4.4 3.8 4.0 3.0 3.1 Private Q4’23 7.2 30.5 37.7 2.7 +£0.1bn 3.0 Banking Q1’24 7.0 30.8 37.8 2.0 2.0 2.1 2.0 1.5 1.8 Q4’23 68.9 124.5 193.4 1.2 Commercial 0.9 -£1.2bn 1.0 & Institutional1 Q1’24 63.6 128.6 192.2 0
Slide 9: Other operating expenses
+5.0% 2,028 61 25 1,932 21 7 7 87 • FY’24 severance and property exit costs more weighted to 100 4 first half • New BOE levy recognised annually in March with income 1,916 recovery through the year • In 2024, we expect other operating expenses to be broadly 1,828 stable compared with 2023, excluding
Slide 10: Loan impairment charge
Loan Impairment charge / (release), £m 3,131 337 578 93 (1,173) FY’20 FY’21 FY’22 FY’23 Q1’24 85 17 15 8 9 14 Group loan impairment rate 8 10 6 Stage 3 loan impairment rate (32) FY’20 FY’21 FY’22 FY’23 Q1’24 Balance Sheet Post Model Adjustment 878 584 352 429 411 For Economic uncertainty, £m 10
Slide 11: CET1 ratio and TNAV movement
(0.24) 13.7 0.50 0.03 (0.20) 13.5 13.4 Q4’23 Attrib. profit Group RWAs Other CET1 CET1 ratio pre Ordinary Q1’24 changes distributions dividend accrual CET1 capital1 24.4 +0.9 +0.1 -0.4 25.1 £bn RWAs1 £bn 183.0 +3.3 186.3 302 (1) 1 10 292 1 Q4’23 On-market Attributable profit Cash flow Other Q1’24 sh
Slide 12: Targets and 2024 guidance
Targets and 2024 guidance! 2024 Guidance Total Other Loan RoTE Income operating impairment expenses rate Broadly stable . 2 ~ £13.0-13.5bn’ vs 20233 Below 20bps 12% -— Q1 Performance -————_ £3.4bn2 £2.0bn 10bps 14.2% ects P2026 RoTEtargetof>1s% 2026 RoTE target of >13% oe avout ivigena Capacity for
Slide 13: Q&A
Slide 14: Appendix
Slide 15: Outlook
Outlook We retain the outlook guidance provided in the 2023 Annual Report and Accounts with the exception of full year 2024 Q1’24 Group operating costs (excluding litigation and conduct costs) which is now expected to be broadly stable compared with 2023 excluding around £0.1 billion increase in ban
Slide 16: Notable items in Group income
Q1'23 Q2’23 Q3'23 Q4'23 FY'23 Q1'24 Group income 3,876 3,851 3,488 3,537 14,752 3,475 Notable items in Income, £m Q1'23 Q2’23 Q3'23 Q4'23 FY'23 Q1'24 Commercial and Institutional Banking Own credit adjustments (OCA) 6 3 (6) (5) (2) (5) Tax interest on prior periods (Net Interest Income) -- -- -- 3 3
Slide 17: Segment results Q1'24
Retail Private Commercial & Central items Group Q1'24, £bn Group Banking Banking Institutional & other Net interest income 1.2 0.1 1.2 0.1 2.7 Non-interest income 0.1 0.1 0.6 0.0 0.8 Total income 1.3 0.2 1.9 0.1 3.5 Income ex-notable items 1.3 0.2 1.9 0.0 3.4 Other operating expenses (0.8) (0.2) (1.
Slide 18: Tangible net asset value movement
GBP, m Share count, m Pence As at 31 December 2023 25,653 8,792 292 On-market share buyback (235) (102) 1 Attributable profit 918 10 Cash flow hedge reserve (net of tax) (45) (1) Other movements 69 37 1 Net change 707 (65) 10 As at 31 March 2024 26,360 8,727 302 18
Slide 19: Net interest margin drivers
+6bps 205 202 4 199 2 (2) 1 tax interest on prior periods Q4’23 Notable items Q4’23 ex Lending margin Deposit margin Funding & other Q1’24 notables 524.7 521.1 Group AIEAs Group AIEAs 19
Slide 20: Net interest income and Group NIM
2,902 2,824 2,685 2,638 2,651 Net interest income Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 522 514 521 525 521 Group AIEAs 162 152 158 158 155 o.w. Liquid Asset Buffer Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 2.25% 2.20% 2.05% 1.99% 2.05% Group NIM Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 20
Slide 21: Lending and deposit margins by segment
6.81 Retail Banking 7.0 6.72 6.65 Private Banking 6.5 6.0 Commercial & Institutional 5.38 5.84 5.5 NatWest Group 4.97 5.0 4.80 4.88 4.5 4.41 4.67 4.07 4.26 4.50 4.0 3.88 3.79 3.5 3.49 3.34 3.50 3.0 3.11 2.94 0.0 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 3.5 3.14 3.02 Retail Banking 3.0 2.80 Private Banking 2.62
Slide 22: Structural hedge income and notional
FY 2023 Period end Total Income Average Notional Total Yield notional (£m) (£bn) (£bn) % Equity 418 22 22 1.87 Product 2822 185 199 1.42 Total 3,240 207 221 1.47 H1 2023 Period end Total Income Average Notional Total Yield notional (£m) (£bn) (£bn) % Equity 204 23 22 1.83 Product 1,362 202 205 1.33
Slide 23: Deposit mix and hedge mix
433 419 433 419 6% 16% 28 68 Term deposits 68 Term Hedge 197 54% 50% 166 Unhedged 209 Instant Access Q1’23 ~8% 40% 208 185 Product 34% Structural hedge Non-interest-bearing 142 balances FY’22 FY’23 FY’22 FY’23 Deposit mix Hedge mix 23
Slide 24: Interest rate sensitivity: structural hedge and managed margin
FY 2023 +25 basis points parallel upward shift -25 basis points parallel downward shift Year 1 Year 2 Year 3 Year 1 Year 2 Year 3 (£m) (£m) (£m) (£m) (£m) (£m) Structural Hedge 44 138 227 (44) (138) (227) Managed Margin 120 117 114 (125) (121) (105) Total 164 255 341 (169) (259) (332) H1 2023 +25 ba
Slide 25: Economic scenarios and weightings
Q1'24 and FY'23 H1'23 Q1'23 and FY'22 Upside Base Case Downside Extreme Extreme Extreme Scenario Upside Base Case Downside Upside Base Case Downside downside downside downside Weighting Weighted Weighted 21% 45% 20% 13% Weighted average 19% 45% 21% 16% 19% 45% 21% 16% average average UK GDP – Annual
Slide 26: Impairment charge by segment
Retail Private Commercial & Central items Group Banking Banking Institutional & other Q1’24 (£m) 63 (6) 39 (3) 93 Q1’24 (bps) 12bps (13)bps 11bps nm 10bps Q4’23 (£m) 103 5 15 3 126 Q4’23 (bps) 20bps 11bps 4bps nm 13bps Q1’23 (£m) 114 8 (44) (8) 70 Q1’23 (bps) 22bps 17bps (13)bps nm 7bps 26
Slide 27: Loan book composition: personal and wholesale
Personal: £221.9bn, 57% of group Wholesale: £165.8bn, 43% of group Group mortgages £206.1bn Corporate £77.5bn Loan-to-value of 55%1, stable year-on-year Diverse corporate loan book, with exposure across a broad range of sectors 64% 5Y, 25% 2Y, 1% 10Y, 6% Tracker2, 4% SVR Default levels remain below
Slide 28: CET1 and leverage ratio requirements
5.10% 13.5% 152% 151% 144% 11.7% 4.25% 0.40 3.85% 1.2% 10.5% Min. 0.60 1.7% MDA2 Requirement 2.5% 1.8% 3.25 4.5% Q1’24 Regulatory Q1’24 Regulatory FY’19 FY’23 Q1’24 requirement requirement O-SII group risk add-on3 Pillar 2A5 O-SII group risk add-on3 Countercyclical buffer4 Pillar 1 Countercyclical l
Slide 29: Total capital and MREL requirements
18.8% Tier 2 30.7% 3.2% 15.4% 1.2% AT1 1.7% 2.1% Tier 2 2.8% 2.5% AT1 2 x Pillar 2A3 2.1% Senior MREL & MREL eligible 6.5% CET1, AT1, Tier 2 capital 22.5% resources MREL CET1 requirement 13.5% 2 x Pillar 1 CET1 2 x Pillar 1 10.5% CET1 16.0% O-SII Group Risk Add-on4 Countercyclical buffer5 Capital co
Slide 30: Funding issuance plan and 2024 YTD
2024 YTD Holding company 2024 guidance issuance2 • $1.3bn 4NC3 Senior unsecured MREL £4bn to £5bn ~£2.2bn - • $1.5bn 11NC10 - • $1bn 10.25NC5.25 NatWest Group plc Tier 2 capital £1bn to £2bn ~£800m - - Additional Tier 1 Up to £1bn - - - - Operating companies Senior unsecured • €1.75bn 2Yr FRN NatWes
Slide 31: Credit ratings
Moody’s S&P Fitch Group holding company A3/Sta BBB+/Sta A/Sta NatWest Group plc Ring-fenced bank operating companies NatWest Bank Plc A1/Sta1 A+/Sta A+/Sta Royal Bank of Scotland plc A1/Sta1 A+/Sta A+/Sta NatWest Bank Europe GMBH NR A+/Sta A+/Sta Non ring-fenced bank operating companies NatWest Mark
Slide 32: 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 33: Footnotes (slides 3-27)
Slide 3: 1. Gross Loans and Advances to Customers at amortised cost across the three business segments – Retail, Private and Commercial & Institutional. 2. Customers Deposits across the three business segments – Retail, Private and Commercial & Institutional. 3. Assets under management and administr
Slide 34: Footnotes (slide 28 onwards)
Slide 28: 1. Operating range in 2023 reflects medium term CET1 of 13-14%. 2. Based on assumption of static regulatory capital requirement. 3. O-SII buffer of 1.5% applies to the ring-fenced bank holding company. The equivalent O-SII Group Risk Add-on’ is ~1.2%. The O-SII Group Risk Add-on is include
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 “Risk Factors” in the NatWest Group plc 2