Natwest Group Plc · LSE:NWG
Natwest — Debt Investor Presentation (February 2023)
37 slides from Natwest's debt investor presentation, Feb 17, 2023
Slide 1: NatWest Group FY 2022 Results – Fixed income investors
NatWest Group FY 2022 Results Fixed income investors 17 February 2023 Document classification: Public 1
Slide 2: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer
Slide 3: Strong 2022 performance
Strong 2022 performance Strong earnings £5.1bn £3.3bn 12.3% Operating profit before tax Attributable profit Return on Tangible Equity vs £3.8bn in FY’21 vs £3.0bn in FY’21 vs 9.4% in FY’21 Continued focus on growth, efficiency and 29.7% (2.9)% 14.2% capital Income growth1 Cost1 reduction of £201m CE
Slide 4: We have delivered on our strategy and met our 2022 objectives
We have delivered on our strategy and met our 2022 objectives Objectives FY'22 results Status Targeted 2022 Income above £11.0 billion in the Go-forward group1,2 (upgraded to £12.8bn3) £13.1bn ✓ growth Provide an additional £100 billion of Climate and Sustainable Funding and £24.5bn On track Financi
Slide 5: Our purpose enables us to support the economy and our stakeholders
Our purpose enables us to support the economy and our stakeholders Category Examples • 6.7% growth in lending since FY’211 • 8.1% growth in Retail and Private Banking lending in FY’22, including £45bn of gross new mortgage lending Supporting our customers • 4.4% growth in C&I lending in FY’22, with
Slide 6: Strong Q4'22 and FY'22 operating performance
Strong Q4’22 and FY'22 operating performance Q4'22 vs Q4'22 vs FY'22 vs Group, £m Q4'22 Q3'22 Q4'21 FY'22 FY'21 Q3'22 Q4'21 FY'21 1 Net interest income, ex notable items 2,909 2,640 1,922 10.2% 51.4% 9,883 7,503 31.7% 1 Non-interest income, ex notable items 857 757 618 13.2% 38.6% 3,178 2,681 18.5%
Slide 7: UK macro-economic context and outlook
UK macro-economic context and outlook1 UK GDP annual growth rate, % UK Unemployment Rate, % 5.0 4.4 4.8 4.6 4.4 4.2 1.0 0.7 4.0 3.8 3.6 3.4 -0.9 2022 2023 2024 2025 3.2 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24 Q3’24 Q4’24 Q1’25 Q2’25 Q3’25 Q4’25 UK CPI Inflation, % year-on-year ch
Slide 8: Continued income momentum in the fourth quarter
Continued income momentum in the fourth quarter Net Interest Income, £m +10.2% incl. mortgage adj. (42) 2,909 2,868 £(23)m1 145 (41) 40 2,640 126 Q3’22 Retail Banking Private Banking Commercial Central items Q4’22 ex Redemption EIR Q4’22 & Institutional & other notable items adjustment2 Bank Net Int
Slide 9: Balanced loan growth across the Group in 2022
Balanced loan growth across the Group in 2022 Gross customer loans by products and segments, £bn Mortgages LDR1 LDR LDR Unsecured 105% 47% 64% Gov Schemes balances +8% Business Banking +4% Commercial Mid-Market 199.2 133.5 131.5 194.3 Corporate & Institutions 183.7 12.0 125.9 11.7 Other 10.9 55.4 53
Slide 10: Non interest income supported by new lending fees in Q4
Non interest income supported by new lending fees in Q4 Non Interest Income1, £m +19% 857 3,178 807 757 757 2,682 242 886 2022 performance supported by: 618 213 227 204 43 562 • Higher spend and payment related fees in Retail Banking and C&I • Higher trading income in C&I 575 580 615 2,120 2,292 544
Slide 11: Delivered target reduction of around 3% for 2022
Delivered target reduction of around 3% for 2022 Group other operating expenses1 2021-2022, £m C:I ratio3 55.5% 7,302 Includes £195m of Ulster direct expenses exit costs in 2022 Ulster indirect expenses Other operating expenses 433 (2.9)% 6,849 6,869 (201) 221 6,648 FY’21 Net cost FY’22 FY’22 Ulster
Slide 12: Expect other operating expenses of around £7.6bn in 2023
Expect other operating expenses of around £7.6bn in 2023 and litigation and conduct costs to be broadly stable Group other operating expenses 2022-2023, £bn C:I ratio2 <52% +5% increase ~7.6 ex Ulster directs ~7.3 ~0.3 Down from £433m in 2022 ~7.0 6.9 +0.1 ~7.3 Ulster Bank RoI direct expenses Other
Slide 13: Well diversified, de-risked, high-quality loan book
Well diversified, de-risked, high-quality loan book Arrears levels remain broadly stable Mortgages Corporate • Customer rates reducing from October peak • Diversified £73.6bn corporate loan book • Mortgage LTV of 53%2 • Low exposure to in focus areas such as Retail £8.4bn, Automotive £7.3bn and Leis
Slide 14: Well provided for the economic cycle and have revised the economic scenarios
Well provided for the economic cycle and have revised the economic scenarios Economic scenarios and weightings Q3'22 FY'22 Extreme Extreme Upside Base Case Downside Upside Base Case Downside downside downside 10% 35% 30% 25% 19% 45% 21% 16% Additional Stage 1 and 2 ECL at 100% weighting 445 216 (193
Slide 15: Our impairment guidance remains unchanged with 20-30bps in 2023
Our impairment guidance remains unchanged with 20-30bps in 2023 History of loan impairment rates, bps Impairment charge / (release), £m 20-30bps 85 Group loan impairment rate FY’23 Guidance Stage 3 loan impairment rate1 391 337 (54) 21 20-30 15 16 13 9 18 17 (1,173) 12 8 6 (32) FY’16 FY’17 FY’18 FY’
Slide 16: Donal Quaid, Treasurer
NatWest UI Donal Quaid Treasurer
Slide 17: Strong capital, MREL and leverage positions in 2022
Strong capital, MREL and leverage positions in 2022 Capital and leverage 14.2% 19.3% 31.5% 5.4% £176.1bn Loss absorbing Risk weighted CET1 ratio Total capital ratio UK leverage ratio capital ratio assets Robust liquidity and diversified funding Liquidity and funding 145% 145% 79% £450.3bn. £74.4bn.
Slide 18: Strong capital and leverage positions
Strong capital and leverage positions CET1 capital (%RWA)1, 2 UK leverage ratio (% leverage exposure) O-SII Group risk Add-on3 14.2% Countercyclical leverage ratio buffer6 13-14% 5.4% Minimum Tier 1 capital requirement 1.2% 4.25% 1.2% 3.95% 1.7% 10.4% 0.40% 0.8% 9.5% MDA2 0.40% 0.30% 0.60% 3.85% MDA
Slide 19: Continued sustainable capital generation and distribution with progress towards CET1 range of 13-14%
Continued sustainable capital generation and distribution with progress towards CET1 range of 13-14% CET1 ratio, % 0.19 (0.08) 0.59 (0.79) 14.3 14.2 14.2% CET1 ratio includes accrual (0.05) for £800 million on-market buyback announced today Q3’22 Group Other CET1 Group RWAs Ordinary Pension Q4’22 ea
Slide 20: Total MREL resources comfortably above requirements
Total MREL resources comfortably above requirements1 Total Loss Absorbing Capital (LAC)1,2 £bn as at 31 December 2022 31.5% Senior MREL 1.2% 12.0% 1.2% 1.7% 0.8% 2.5% 2.5% 19.3% 2 x Pillar 2A3 2 x Pillar 2A3 Tier 2 6.0% 6.0% 2.9% (£5.1bn) 22% AT1 2.2% MREL (£3.9bn) MREL eligible requirement Tier 2 1
Slide 21: Liquidity coverage ratio remains well above minimum UK requirement
Liquidity coverage ratio remains well above minimum UK requirement Liquidity coverage ratio High quality liquidity pool £52bn £162bn surplus liquidity over minimum requirement of primary liquidity with a mix of cash and high quality sovereign bonds 172% 145% £286bn £262bn 78 £226bn 100% £199bn 92 Se
Slide 22: Strong customer deposit franchise
Strong customer deposit franchise Group customer deposit composition Franchise customer deposit mix Group Customer deposit trends As at 31st December 2022 (ex UBIDAC and Treasury) As at 31st December 2022 £431.7bn £479.8bn £450.3bn 34.1 17.4 4% 25.9 £[X]bn 217.5 203.3 42% 40% 201.6 £433bn 45% £450.3
Slide 23: Structural hedging provides a multi-year tailwind
Structural hedging provides a multi-year tailwind Product structural hedge income statement outlook, £bn Considerations for product structural hedge income £184bn product hedge notional at year end 2022 2.0 Product hedge income Already written • We model 3.3% average 5-year swap rate on reinvestment
Slide 24: Stable and diversified funding sources
Stable and diversified funding sources Funding composition (£bn)1,2 Wholesale funding mix1 Wholesale funding by maturity Senior notes and subordinated Customer deposits provide ~86% of funding Access to diverse wholesale funding Longer term funding ~70% of total liabilities by currency supply produc
Slide 25: Strong support for wholesale funding transactions in 2022
Strong support for wholesale funding transactions in 20221 Across multiple currencies and tenors 2022 guidance 2022 actual NatWest Senior unsecured (MREL) ~£3bn to £5bn ~£3.7bn • $1bn 6NC5 • $1.5bn 4NC3 • £750m 7NC6 • €1bn 6NC5 Green - - Group plc • £650m (HoldCo) Tier 2 capital - £650m2 - 10.5NC5.5
Slide 26: In 2023, expect to be active from HoldCo and OpCo, across multiple asset classes
In 2023, expect to be active from HoldCo and OpCo, across multiple asset classes 2023 guidance NatWest Group plc Senior unsecured MREL ~£3bn to £5bn (HoldCo) Tier 2 capital Up to £1bn NatWest Markets Plc (OpCo) Senior unsecured (non-MREL)1 ~£3bn to £5bn NatWest Markets NV (OpCo) Senior unsecured (no
Slide 27: Ratings progress in 2022
Ratings progress in 2022 Moody’s S&P Fitch Group holding company NatWest Group plc A3/Sta BBB/Sta A/Sta 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 Ulster Bank Ireland DAC A1/Sta1
Slide 28: Katie Murray, Chief Financial Officer
Katie Murray Chief Financial Officer
Slide 29: Medium-term group targets and 2023 guidance
Medium-term group targets and 2023 guidance SUSTAINABLE MEDIUM-TERM GROUP TARGETS Sustainable RoTE Cost:Income ratio1 Payout ratio 40% 14-16% <50% by 2025 + capacity for buybacks Provide £100 billion of Climate and Sustainable Funding and Financing by 2025 Operating with a CET1 ratio in the range of
Slide 30: NatWest
NatWest UI
Slide 31: Appendices
Appendices 1. Total LCR level 1 assets liquidity value.
Slide 32: Issuing entity structure
Issuing entity 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. NatWest Bank Plc issues senior secured securities externally. Natwest Markets Plc issues senior
Slide 33: Legal entity capital positions
Legal entity capital positions Ulster NatWest Royal Bank NatWest NatWest NatWest Bank FY 2022 Holdings of Scotland Markets Markets RBSI Bank Plc Ireland Limited plc Plc NV DAC Capital and leverage metrics CET1 ratio 12.8% 11.3% 11.6% 38.6% 17.2% 21.0% 18.5% Tier 1 ratio 15.4% 13.3% 16.8% 38.6% 20.4%
Slide 34: NatWest Group plc run-off profile
NatWest Group plc run-off profile Senior MREL run-off profile NWG plc AT1 call profile Contractual maturity, balance sheet value Balance sheet value, £billion equivalent £billion equivalent £2.0bn £8.9bn £1.0bn £0.9bn £6.0bn 2025 2027 2028 & later NWG plc Tier 2 roll-off profile1 Balance sheet value
Slide 35: Legacy capital stack
Legacy capital stack Low residual balance of legacy capital following capital optimisation actions Legacy capital actions 2022-23 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
Slide 36: Fixed Income investor contacts
Fixed Income investor 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 +4
Slide 37: 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
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