NatWest Group (LSE:NWG) — Shareholder Event

0:00 Good afternoon, ladies and gentlemen, and welcome to the NATWEST GROUP Shareholder Event. The The company may not be in a position to answer every question received during today's meeting. However, the company can review all questions submitted today, we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. The shareholder event will start momentarily. Thank you. Good evening, and welcome to our shareholder event.

2:59 I'm Victoria Cleverly, and I'm the Chief Operating Officer in our DigitalX business, which powers our technology operations right across NatWest. And I have the pleasure of being your host for this evening. Tonight's event, though, is all about giving our shareholders the opportunity to join our Chair and Chief Group Executive and ask questions ahead of the twenty twenty five Annual General Meeting on Wednesday, April 23. Now shareholders attending the AGM will, of course, be able to ask questions related to the business of the AGM during the Q and A session, which will proceed the formal voting process on the day. And if you'd like to ask and submit questions in advance of the AGM, you can do so by writing to the email address now on your screen.

3:46 And if you want to cast your vote before the AGM, please note that online voting will close at 10AM UK time on the April 17. Now back to this evening, and I'm really pleased to be joined by our chair, Rick Haythorn Thwaite, and our group chief executive, Paul Thwaite. Now before we move over to the shareholder questions they've put to us, I think it'd be great start the evening with a little bit of insight from yourselves in terms of what we've achieved and some of the focus for 2025. So, Rick, I'm gonna start with you first, and I think it's nearly a year to the day maybe that you've been our chair at NatWest. So maybe hand over to you to get some perspectives on what's been achieved. Thank you. Thank you, Victoria, and and thank you everyone for joining. I mean, virtual events like this, are very much an important part of our engagement with you, our shareholders.

4:35 With our AGM less than two weeks away, it gives us an opportunity to talk about our ambitions for the bank and to answer any questions you might have. As you say, Victoria, it's pretty much a year since I took up the role of chairman of NATWEST GROUP. Although, I think I've got to make it until next Tuesday before I formally hit the the landmark. The reality is that I've spent much of the past twelve months getting to know this business. And I and I firmly believe the strengths we have today lay great foundations for future growth. We have a bank that is consistently profitable with a clear and focused business model, and crucially, we're succeeding for our customers and shareholders. As a bank that serves more than 19,000,000 customers, the combination of our scale and our strong local relationships provide us with the data and insight to better anticipate, understand, and importantly, to their changing needs.

5:33 But our ability to capitalize on this opportunity and grow is dependent on us becoming a more integrated and technology enabled bank with the agility to serve our customers how, where, and when they want, deepening our existing relationships, and creating new ones now and in the future. So throughout the year, I've had the opportunity to travel and meet some of our customers and colleagues in different parts of the country as well as internationally. I visited our accelerator hubs, helping entrepreneurs to scale, as well as commercial and corporate managers who are helping businesses to grow and export, bringing positive impacts to local economies. And I've had I've seen firsthand the energy and enthusiasm that our colleagues have for supporting our customers and the communities we serve.

6:25 At a time when competition is coming from all corners, this focus is paramount. The strength of NATWEST is evident from our performance, and our strategy is delivering consistently for our shareholders. We saw a strong share price performance through 2024, up more than 80% over the year. We announced £4,000,000,000 of capital returned to shareholders, including an interim dividend of £500,000,000 and proposed final dividend of £1,200,000,000. And we also completed two directed buybacks, which helped reduce the government shareholding from around 38% at the start of 2024 to less than 4% now. So the fur for the first time since 2008, the government is no longer the biggest shareholder in the bank, and it's likely that NATWEST will return to private ownership this year.

7:16 And this will be a symbolic moment. For over a decade, we have been in recovery mode. But today, we have a strong bank with positive momentum, clear priorities, and a focus on succeeding with our customers and for our shareholders. Of course, we continue to face a period of geopolitical and economic uncertainty. Recent days have shown us the volatility and pace of events we're navigating. And our priority is to continue to support our customers through all eventualities.

7:48 Time and again, we have seen the resilience of our customers through a number of challenges from COVID to the energy shock and high inflation, and we've seen a strong, well capitalized banking sector that has been able to support them through these difficult times. We went established for a range of economic outcomes and have an important role to play in delivering growth across The UK. And while there's always more to do, we are realistic but optimistic about the opportunities and challenges ahead as we enter a new forward looking chapter in our story. Yeah. Thanks, Rick. And it's been wonderful to see that momentum grow across NATWEST as well. And also, what an opportunity to get out to the businesses and spend some time with the relationship managers and also the branch staff where we're really making a difference for customers. So it's been great to hear. So, Paul, let me turn to yourself. So you're leading the bank with three very clear priorities.

8:40 Share us a little bit in terms of, you know, what's been achieved, but importantly, for 2025. Yeah. Of course. Thank you, Victoria, and thank you everyone, like Rick, for taking the time to join us today. I appreciate it. I'd start by saying that we started 2025 with really good momentum on the back of what was a very positive year for the bank in 2024. We had strong financial performance that drove upgrades in our income and our returns guidance as we went through the year. And you touched on the three priorities. We made excellent progress against those those three priorities

9:14 during the year. First, on disciplined growth, we increased both our lending and deposits during 2024. We serve over 19,000,000 personal and business customers across The UK, and that growth is really grounded in the support and services we provide to them. And we added half a million new customers. They chose to bank with us during 2024. Throughout the year, we helped more than 350,000 mortgage customers to buy or refinance their homes, including over thirty five thousand first time buyers. Our assets under management and administration increased by 20% as we help more customers to invest and save. And for our commercial customers, we grew our lending by 10,000,000,000 and welcomed over 90,000 new startups to NATWEST, underscoring our position as the the number one bank for business in The UK.

10:08 And to accelerate that organic growth, we also announced acquisitions from both Metro Bank and Sainsbury's Bank. These built on our obvious areas of strength at very attractive returns and really aligned to our our strategic priorities.

10:23 Our second priority is our focus on bank wide simplification, which is designed to increase efficiency, but also importantly, improve our customer experience. Our investments in further digital transformation continues to help us anticipate and respond to customers' changing needs both faster and more effectively. In retail banking, around 80% of customers now bank with us entirely digitally, and some eligible mortgage customers can receive a mortgage offer within twenty four hours. In our commercial business, we're making it faster and easier to access more of the products and services our customers need from FX transactions to small business loans. It doesn't only save our customers time, it also saves time for our colleagues who can then focus on more complex needs and solutions.

11:13 At the same time, we've continued to simplify our operations, for example, by reducing our property footprint and

11:20 exiting our hub in Poland. Our third priority is to allocate capital dynamically and maintain really strong risk management. That's helped us to drive strong capital generation, which in turn enables us to support our customers, invest in the business, and also make distributions to shareholders. At the time of my appointment last year, I said that we shouldn't underestimate the strength of our foundations, whether that's the scale of our customer base, our robust balance sheet, our national and local presence, or our leading market positions across our three customer businesses. As you'd expect, we thought deeply about our strategy during the past year, including the opportunities we have to both deepen our customer relationships but add new relationships.

12:08 And this work confirmed our view that the three strategic priorities are serving us very well. First, we'll continue to grow with our customers, providing the personalized services and expertise they need to achieve their goals, whether it's buying a home, growing a business, or investing for the future.

12:27 Second, we'll further advance our plan for bank wide simplification using technology more effectively in order to improve efficiency and productivity, but also to deliver a better customer experience. To this end, we recently announced we are the first UK headquartered bank to be working with OpenAI as part of a collaboration that has the potential to accelerate how quickly and widely we can deploy some of the latest developments in Gen AI. And finally, we'll take advantage of the strength of our balance sheet and risk management by allocating our capital strategically to optimize our returns dynamically in changing and volatile market environments. And as a result of all that, we are targeting a return on tangible equity of greater than 15% in 2027, and we intend to increase our dividend payout ratio to around 50% from 2025 onwards.

13:26 This is a significant year for NATWEST. We have good momentum within our business, and we are optimistic yet realistic about the opportunities and challenges ahead. We firmly believe that NATWEST has a key role to play in supporting growth and the wider UK economy. And across the bank, we are fully focused on delivery, shaping our future as a vital and trusted partner to our customers and to The UK itself. Because, ultimately, if we succeed with our customers,

13:57 we win together for our colleagues, our communities, and also our shareholders. Yeah. Thank you, Paul. Significant but exciting year ahead, I think, ahead of us now. So thank you both. I think you've set the scene very well, but I think it's time that we take the questions that are being put to us, by our shareholders. So first of all, thank you to the shareholders who've joined this evening. We're delighted also to be joined tonight by a number of shareholders who hold their shares via investment platforms and stockbrokers. Now we've already received lots lots of questions, so thank you to those shareholders who've taken the time to submit these ahead. Where we've received multiple questions on a similar same topic, I'm going to try my very best to summarize so we can get through as many questions as possible. You can also ask a question during the session by using the Q and A button, and we will do our very best to answer as many of these as we can this evening.

14:51 Now just a quick reminder that shareholders who have submitted questions will be deemed to consent to their name being mentioned while we address your question.

14:59 And as I'm sure you'll appreciate, we aren't able to discuss any customer issues or complaints in this public setting. Now without further ado, let's move on to your questions and hear more from Rick and Paul. So the first set of questions, I'm going to theme around the bank's strategy and performance, if that's okay. And Paul, I'm going to come to you with our first question this evening. So a number of our shareholders, including Clifton Pinto, Deepak Kumar, Matt Dunthorn, Simon Bentley and David Allen, would like to know more about NATWEST GROUP's plans for growth and if NATWEST would be open to acquisitions in The UK or further afield. There's been a lot of focus on consolidation of financial services. So would the board consider further consolidation opportunities like Sainsbury's?

15:45 What are your thoughts here? Okay. Well, thanks to thanks to those who've asked the the question. I think it's it's very top topical given the, I guess, The UK kind of banking environment. Where I'd start, Victoria, with my answer there is the is probably to touch refer back to some of my earlier comments. You know, the great thing about NATWEST at the moment is is is we have we have all met we have momentum in our in our core underlying business. You know, the three businesses that we have have grown through 2024, on both sides of the balance sheet and our fees, and we'd expect that to continue as as we go through '25. So we see and I see lots of opportunities actually to deploy our capital organically, yes, supporting the growth of our retail business, our wealth business, and our commercial and institutional business. And we think we can do that at attractive returns, which is great.

16:35 But as the question alluded to, you know, we made a couple of acquisitions last year, Metro and Sainsbury's Bank. We're very pleased with them. You know, they added scale to our business. They are very aligned with the strategy that

16:47 we have. Metro on the mortgage side, Sainsbury's adding retail customers, but also increasing our market share in credit cards and unsecured personal loans. So we looked at those opportunities, and we knew we had the potential to, I guess, to bring those businesses onto our highly digitized and and scalable platform, and we did that. I do think, and the board does think, and and we've seen a lot of it over the last eighteen, twenty four months, that, there will be consolidation in The UK market. So, it's incumbent on us to assess those opportunities. But as some will have heard me say before, it's a very it's very important that we have a very high financial bar, and we also have a very high operational bar when we consider those opportunities, especially as we have such attractive opportunities to grow our existing business organically.

17:36 So we will look at opportunities, but we'll

17:38 be very disciplined, and it has to offer compelling value to to shareholders. And what what we compare it to is the the alternatives, which is, you know, investing in our own business or, for example, returning that that capital to shareholders via buyback. So that's how we think about it. Confident about the ability to grow organically, but thought and very thoughtful and disciplined about any acquisitions or inorganic. Yeah. Thank you. Thanks, Paul. So our next question relates to digital transformation. I guess it's a topic topic close to my heart, but it's also a very big topic and a very important topic with an awful lot going on at the moment. So I'm actually gonna come to both of you, I think, on the answer to this one. So we've received questions on this from Praveen Prenkumar and through our shareholder q and a platform.

18:24 And they would like to know what progress has been made on NatWest Digital's transformation journey and how does it compare with competitors in terms of user adoption and technology integration. So Paul, I'm gonna start with you first on that one. Thank you. Well, where I'll start is, you know, I don't think it's any secret that technology is really transforming how NATWEST, but also the sector supports and delivers products and services to to to its customers. They they allow us to simplify. They allow us to technology allows us to digitize, but also to be a lot more customer focused given the ways in which we're now able to use data to to personalize services. And I think we're well well progressed with the the digital transformation. It it's not something that's

19:10 that's just started. I've said before in these type of calls that we we invest a significant amount of money, around 1,000,000,000 a year in a in, I guess, changing the bank, and the majority of that goes into technology and data. So we're investing an awful lot to improve productivity, to make sure we're keeping pace with with innovation and making sure that what our customers need from us, you know, they're they're ever more demanding and should be from technology perspective, whether it's in the mobile app or whether it's in our channels for for our business customers. So it allows us to keep up with innovation and improve the proposition. But also very importantly, it helps us to improve security and resilience and making sure we can protect our customers and protect our colleagues and keep everybody safe. So in a way, kind of technology is universal and ubiquitous across across the whole organization.

20:04 Inevitably, at the moment, a lot a lot of the thinking is around artificial intelligence and how we can deploy those tools and those capabilities. I think we've got some excellent examples of in the bank how it's improving customer experience as well as improving productivity.

20:19 You will know Victoria. We have a kind of chatbot for customers called Quora. Over 18,000,000 interactions last year between our customers and Quora. We have an internal version, which we call Archie Plus. You know, that's dealing with 75 of kinda HR and people inquiries internally. So these tools really are are being deployed both to support and service customers, but also our our colleagues as well. So I think we have a very open minded approach. We work with a lot of partners in the technology space. I touched on the partnership with open eye OpenAI, but we work with all the big tech partners really to get the best of technology so we can deliver the best of best of service and the best of products to customers. Rick, do you want to add to that?

21:04 Yeah. I would just sort of reflect, I think, as you all know, that the rapid convergence of technology and financial services means that investment in technology and digital transformation is a strategic imperative. We're seeing an increasingly rapid rate of change, whether it's technological, societal, geopolitical. And and under those circumstances, businesses just have to be agile. And if you're gonna be agile, you better be simpler, better integrated, and technology enabled. And, you know, this is why we we continue to drive hard to modernize this company, whether it's rationalization of our apps or whether it is increasing our capability. The fact we hired over 3,000 engineers over the last two years is very, very important.

22:00 And this is something, as you can imagine,

22:02 we we discuss a lot in the boardroom and and particularly since the arrival of of Jill Whitehead as a a non executive director. And she brings the right skills, a background, particularly data and digital that, is totally aligned with the growth our growth ambition. Of course, if you're going to drive any transformation, whether it's technology or other, you need to have the right skills and ambitions at the leadership level. In Paul and his team, we absolutely have that. Thank you. Thank you both. Super exciting in terms of the developments, what's going on, but also the impact it's having with our customers and how we're may able to make their journey so much simpler. So more to come on this one, I'm sure. So let's turn to an another question now. And this time, we have a video question on the topic of our annual results.

22:54 I'm Gabrielle Burn. In the annual results, a return on tangible equity of 17.5% was reported. Is there a ceiling on that or a floor to the costs that you are expecting to cut? Thank you, Gabrielle. I think Paul is probably one best for you, please. Thank you, Gabrielle. Thank thank you for the question. Yeah. And you're right. In in 2024, we delivered a return on tangible equity of 17 and a half percent, which is a very strong performance. And for those shareholders who are following through the year, we we we periodically upgraded our our guidance on both income and returns, and we're very pleased with the outcome. We think that compares very well to, you know, our peer group.

23:37 I'm often asked kinda what drives the the returns, kinda what what sits behind that, and it's a combination of a lot of hard work but also many things. We we we focused on the growth agenda, you know, and I was pleased that we were able to demonstrate growth in in all three of our businesses. We we remained very disciplined on on the and Gabrielle touched on that on on the cost agenda. Our costs were stable through the year, and that allows us to generate capital, support our customers, invest in the business, and return money to to shareholders. So as Rick alluded to in his introduction, actually, we we think we've positioned the business well to drive strong, healthy, but sustainable sustainable returns. And that's why in February, I I announced the targets that I did. We said for 2025, our return on tangible equity target is between 1516%, and we said greater than 15% in 2027.

24:32 So that's they're the targets that we've communicated externally. So, Gabriel, hopefully, that gives you a sense in relevance to your question. On your

24:39 specific around around costs, again, we're very transparent in terms of our communications and our disclosures. What we've said this year is that our cost will be around 8,000,000,000, so marginally up on last year. That includes around naught 100,000,000 in relation to the acquisitions that we made during last year. So we've clearly communicated that, and that's the expectations for for 2025. And the leadership team are very focused on ensuring, you know, we can deliver that number in a way that our that our shareholders

25:10 would expect us to, and a lot of that is driven by our simplification agenda. So we're pleased I guess, big picture, we're pleased with the returns. We're pleased with the momentum we have and and our ability to deliver sustainable returns. And to me, it shows the the underlying strength of the the customer franchises and the value that we're providing to customers, and that's why we've been confident to share those targets with the market. That's great. Thank you. Thank you. So I'm just gonna stay with the theme still of the bank strategy and and performance. And our next question comes from Nia Singh who asks, what's on NATWEST plans to become the number one UK retail bank? So, Paul, I'm gonna come back to you on this question, please. Back to me. Yep. Thank you, Niraj, for the for the for the question. I'll start by saying we we have a great retail bank. You know, it's a it's it's a it has significant scale already, and the great news is that that it's growing. You know, it grew it's a business that grew its lending. It's a business that grew its deposits. It also added a lot of customers during during the year, which to me is always the sign of a a healthy business and a healthy franchise. If you're you're adding customers, you know, whether that's in some of our target segments like youth or students or within our premier segment. So we have a we have a we have a we have a great retail business, and I think it's underpinned by the breadth of products and services that we have. You know, it's a it's what I call a full service retail bank. It has a a great range of products.

26:36 Touching on our earlier question, a lot of them are available digitally. So that that sets us up for for for success. But we also believe and I guess this is Niraj's question. We also believe we can grow the retail business. We we believe we've got lots of opportunity to grow some of those key customer segments that I touched on, youth and premier. We've seen great momentum in the growth in our mortgage business and also in our credit card business, but we think there's more more to more to more to do there. Likewise, on simplification, retail has really been at the forefront of the digitization agenda. You know, the mob the the mobile app scores very highly, rates very highly. We're constantly adding new functionality, new services into that, which get very good customer feedback. So I guess that hopefully, Niraj, gives you a sense of whilst we have a great retail bank, we also have a sense of ambition for for for what it could be. And I don't necessarily want it to be the largest retail bank. What we're aiming for it to be is the best retail bank, And I think we're well on our way to doing that.

27:41 So I'm pleased with the momentum. We've got lots of ideas how we continue to grow the business, and we look forward to realizing that over the course of the next couple of years. That's great. The best and delighting its customers through. So thank you for that one. So let me turn, next to a question from, Robert Plantinay, who would like to know if there's any opportunities for boutique presence for NATWEST in town centers rather than a full branch. So sorry, Rick. Paul, I'm gonna come back to you on this one. I think this is probably one for you to take. Be good to hear your thoughts on You're working hard here. I am. Yes. Doroh, Rick. I will get to you. Thank you. So so the the branches will always be an important part of our our our proposition. I think what one of the the competitive advantages and the great things about NATWEST is, you know, the presence we have in our in our towns and cities and our communities.

28:34 Sometimes that's through branches. Sometimes that's through our relationship managers in our commercial bank. So in that context, you know, branches are play a very important role, not just in supporting our retail customers, but also in supporting our our business customers. What's also true is that increasingly customers demand more from us on the digital side of things as well or and she and or choose to to bank digitally. So we so I guess we have we have a situation where customers really want to be able to do whatever they whatever they want at any time of day or night. So I guess our strategy is to make sure we've got the right combination of digital channels, physical channels, whether that's physical channels we own, like the branch, or other other other physical channels which we help to invest in, be that the banking hubs or be that the post office services.

29:27 So that's that's the context, really. At the moment, we have around 400 branches. You know, we're investing in them. We'll invest over £20,000,000 this year in making sure those branches are as they should be for our customers, but also for our colleagues. So that that's something I'm very committed to. Likewise, we're investing in bank in banking hubs as they roll out across the country in combination with other banks. I think that's a a very important development. It'll it allows a lot more communities to have access to face to face kind of facilities, and maybe that's part of the question that that that Robert alludes to. So we're not considering on top of that a boutique presence, but what we are doing is making sure we're investing in the hubs where we have NATWEST staff available, whether it's for for retail or for business. We're investing in the post office services to make sure they're as good as they can be, but we're also investing in our own branches as well.

30:19 So, I guess, the challenge in in for the leadership team and the board is to make sure we get the balance right between the digital services that our customers demand from us, but also the the physical services. And I think we're getting that right at the moment. Good. Thank you. Thanks, Paul. So I think that rounds off our questions related to the bank's strategy and performance. So, Rick, I'm gonna come to you with a question around debanking, if that's okay. So the question is from Malcolm Bennett asking, please advise the updated position with respect to mister Farage and his debanking claim. Very good. Well, thank you, Malcolm. I I I think I recall you were asking a similar question in our November virtual session, and I know this is a topic of of great interest to people.

31:07 As you would have undoubtedly recently seen that we resolved and settled our dispute with mister Farage, and we rightly apologized again. I think by the terms of that settlement are confidential. There's nothing more I can really say on that. But I will say that there were aspects of that incident that were totally unacceptable. That said, a lot of the insights that came out of the incident actually were procedural. And we committed in November to ensure that all of those aspects that were procedural and highlighted by the Travis Smith report would be fully implemented.

31:56 There are some that are not in our control that require primary legislation, But even there, we're trying to get ahead of the curve. And so, for example, in areas such as for those very few people we do have to ask to to leave their accounts, that we now give them ninety days notice. But this is something that we'll we'll progress with and and make sure that the bank really learns from the the the episode. Yeah. Thank you. So we've got a cup couple of questions now around dividends and share buybacks. So we've received questions from David Burley, Jesus Signs, and John Smith asking if NATWEST plans to introduce a dividend reinvestment plan. And, Sir Rick, I'm gonna come to you on this question, if that's okay. Very good.

32:42 Well well, thank you, David, and others. You know, I can fully understand when you look at the dividend reinvestment plans or DRIPs as they're they're colloquially known, that on the face of it, they look attractive. But in reality, they're very complex, and complex because most of our shareholders, most of us as shareholders, I'm obviously one, we have paper certificates. And this analog nature of it, combined with the actually quite low demand for drips, means that we're not inclined to pursue those programs right now. But as, many of you may know, the the government actually initiated recently, a digitization task force under Saint Douglas Flint. And we have every expectation that the recommendation for that will be digitized, the shared system, bringing it to the twenty first century, basically.

33:33 And and we'd certainly we'll relook at the the proposition at that point. Now I should be clear that there will be quite a number of people on this call who do have, digital share certificates because they have their stock with investment management platforms or nominee accounts. But for those accounts, it's the individual provider, not NATWEST, who determines what the the dividend handling policy is. Thank you. So just sticking with this theme a little bit more. So our next question is from Clifford Pinto who asked, why does NATWEST not buy back more of its shares in the open market and use its capital more efficiently? Right. What are your thoughts on this one? It's great. Yeah. It's a great great question, Clifford, and something we are always considering at the board. I mean, we we strongly believe that NATWEST is well positioned to deliver great results and and to drive disciplined growth and investment in our business and attractive returns.

34:34 As we continue to build this positive momentum that Paul has referred so eloquently to, I think we have a number of options for deploying the capital. Obviously, we can have strategic internal investment. We can consider, as Paul mentioned, inorganic opportunities, or we can return to shareholders via buybacks or dividends. The most important thing is we're very disciplined in our approach that is driven by absolute focus on on value for the shareholders. And buybacks will always remain an important tool. I mean, we we returned £4,000,000,000 of capital to shareholders last year, 2,200,000,000 of which were buybacks. That's 9% up in the previous year.

35:19 As many will recall, the final results, end year results, we we signaled that we were going to be shifting our dividend payout ratio from 40% to 50% in 2025, which just speaks to the confidence we have in the outlook of the company. And buybacks will most certainly remain an important tool. Yeah. No. Thank you. Thank you. So turning to a now a question on the regulatory landscape. And Paul, I'm going to come over to you for this question, if that's okay. So a shareholder question has come through from our shareholder Q and A platform asking if there are any anticipated regulatory changes that could significantly impact NATWEST operations or financial performance? Well, thank you, Victoria. So this is a topic that I I think probably over the last six or nine months has had an awful lot of lot of attention, and it really links, I guess, to the wider kinda UK agenda and the government's agenda of, I guess, recognizing that economic growth is is critical and finding a finding a way of growing the the country's GDP is is important.

36:28 And I think one of the very positive things about that, which and we agree that's a very it's a it should be the priority for the government. One of the key things about that is the recognition that financial services, banks such as ours, the role that we can play in supporting that growth. And I think it's in that context that the debate around the regulatory agenda has has evolved, whether that's direct engagement, you know, from governments. I guess we we we've seen examples of that in the media, advice, etcetera. And on the back of that, I guess, our two primary regulators not not our only regulators, but our two primary regulators, the Prudential Regulatory Authority, the PRA and the FCA, the Financial Conduct Authority, have obviously been kind of working through how to, I guess, support competitiveness competitiveness and the growth agenda as well as the kind of the stability and protection kind of objectives. And it's in that context, I think, that this debate is playing out. And I've been very consistent. I think high quality regulation is absolutely crucial.

37:34 I think it's it provides a bedrock to the sector. It provides a degree of, you know, surety to to investors. But what's important is we get the balance right, and that balance is between risk, you know, and protection. And investors want confidence. They want certainty, whether that's large institutional investors domestically or international investors. And I think what we've seen is a debate evolve about what's what's a proportionate amount of regulation and how do we make sure that we have a let a level playing field versus, for example, some of the other international areas, but also make sure we don't create unintended consequences that maybe can't support that wider that wider growth agenda. So where are we now, I guess, is the is is is is at the heart of the question. I think there's been some positive progress. I think the delays and amendments to to Basel 3.1 to align with other international, kind of jurisdictions means that we don't we don't create a disconnect.

38:36 So I think that's been positive. The changes to ring fencing legislation that that that that have gone through parliament, again, support the financial services sector, but also make sure that we've got the right checks and balances in. So so there's been some progress. But I guess a lot of the debate is still very much ongoing. So whether it's about changes to mortgage affordability, allowing more people to buy their homes, whether it's reviewing kind of wealth and the advice boundary and savings of investments. Their ideas which are, I guess, in discussion, you know, reg right. The regulators are doing reviews, and they're things that could help customers, but also help help the sector and businesses. And we're very keen to contribute and are contributing very actively giving our perspective on that. So I guess in summary, Victoria, I would say that the environment is definitely you know, that is is improving in that context. The dialogue is very constructive.

39:31 And I think over the course of the next twelve months, we'll get a sense of how substantive the changes are to the regulatory environment and how that supports The UK economy and, by definition, UK banks. Thank you. A lot large number of considerations there in this space. But just I'm just gonna stay with the regulatory environment a little bit more. So we have another question from our shareholder q and a platform on our approach to managing credit risk. So the question here is, given economic uncertainty, what measures are being taken to manage credit risk in your loan portfolio, especially in commercial lending and mortgages? It's a topic that we as you we spend an awful lot of time on as a as a as a bank that is not only the biggest lender to business in The UK, but also one of the biggest lenders to households as well. So it's it's always top of our agenda.

40:24 And at the board level, at the leadership team level, we we spend a lot of time looking at the different asset books, whether that's mortgages, credit cards, commercial real estate, normal business lending. And we've been very pleased by the resilience of the loan book. If you look at our results over the course of the last five or six years, the asset quality, you know, the the the way in which the credit risk has been managed has has been exemplar, I think. And in a way, that reflects the the strength of corporates. It respects the it reflects the the strength of households and and the the the higher savings rates over the last couple of years, wage growth, relatively low unemployment in the country. So so there's been some things that supported the the asset quality. But I think our job is to be, you know, is to be, I guess, slight slightly skeptical, you know, and be looking around corners to understand where credit risk could materialize. So we review all our books very regularly. We run a range of different scenarios, some in conjunction with the regulators, some ourselves with different changes to the interest rate environment, different changes to the GDP growth environment, maybe changes to unemployment.

41:37 We dig we go deep into specific sectors. You know, there's particular sectors that we think might be affected by what's happening in The UK economy or, for example, some of the the, you know, the the more recent volatility. So that's the way we we reassure ourselves around credit risk. And we we flex our appetite to, you know, to to reflect the circumstances. But if you take a big step back, you know, and you think about NATWEST and its its lending books, you know, we have a incredibly well diversified loan book. If you look at our commercial book, it's spread, and there's lots of disclosures on this for those who, know, who are interested. The it's a very broad spread of sectors. We don't have particularly high concentrations. If you look at our personal lending, the majority of it is secured.

42:22 The majority is it is on relatively low LTV. So we're very, what I call, a prime kinda prime book lender. Our default rates are very low. You know, another if you look at 2024, our cost of risk or our impairment rate was nine basis points. That's incredibly low when you compare it to some of the whether it's, kind of the peer averages or the the kind of Western European bank averages. So from that perspective, you know, we feel as if we're we're very we're very thoughtful, we're very diligent, but we're very pleased with the resilience of of the book and and the asset quality. Yeah. Great. Thank you, Paul. So let's turn to another question. So I have another video question actually on the topic of, the Fair Banking Act. Hi. My name is John Coleman. My question is why has NATWEST GROUP not committed to a Fair Banking Act, which would help ever growing numbers of people indebted to high cost lenders and worse sell bond sharks?

43:21 Yeah. Thank you. So, Rick, can I get your views on this one, please? No, Jim. Thank you. It's, obviously very topical right now, I think. And and I think it's worth reflecting that those that are advocating for the Fair Banking Act are actually touching on a number of issues that are very close to our heart, namely financial inclusion and financial resilience. And, you know, we provide a lot of support. We really try to help customers navigate their way through uncertain financial circumstances, and when necessary, try to help them avoid nonbank lenders where they could end up being trapped in high rates and and restrictive terms.

44:08 And and we really would encourage any customer that is facing financial challenge to to engage with us. I mean, we have dedicated teams. We have tailored solutions, whether it's freezing interest on forbearance for unsecured loans, stopping fees for for those people who who need our support. You know, we do write off debt sometimes based on individual circumstances and trying to find access to to safe, affordable credit. And in fact, I think last year, around 8,000,000 customers access the various features in there and a number of features and tools. It's not not just that. I mean, we we we have know your credit score.

44:55 We have benefit in entitlement tools where people can can really dive into these these levels. And actually, if if you come back to a point that Paul made a minute ago that, overall, we have still low levels of arrears for mortgages and cards. That's not to say that some people are not struggling. Clearly, they they are in today's economy. And I think relationships we have with partners, like systems advice, to to work with people who can't access mainstream finances, I think it's it's very important. But I say again, any customer who is experiencing difficulties, please come to us, and and we can together work a solution. And and, you know, we we don't need a fair banking act to persuade us to do that. No. Exactly. Exactly.

45:45 Thank you. So I'm gonna take a question now from Paul Howard in the space of resilience, a hugely important topic for us. And Paul asks, looking at the recent IT failures in all sectors, such as those experienced by TSB or the recent issues at Heathrow Airport and the alarming rise in cyber threats, what assurances can you provide that NATWEST is at the forefront of cyber and digital defenses and has the resilience to withstand operational failures without significant disruption. So, Rick, I'm gonna come back to you on this topic. Very broad, but very important for us. What are your thoughts? Paul, I mean, how topical. And and you can imagine we spend a a lot of time in the boardroom digging away at this one. It's so vital. I mean, because, you know, as as Paul alludes to, you know, the advances in technology are such that more and more customers are using digital banking than ever before.

46:41 And, you know, in terms of resilience, you know, we're guided by very specific principles, guided by experts, internal, external. You know, as as UK's largest retail one of The UK's largest retail commercial banks, we have to be focused on high quality, resilient, stable technology services. Paul mentioned it in his introduction. We spend a lot of money on this. It's about 1,000,000,000 a year goes in into data technology, digital as a whole. And it's it's it's coming through in the results. We've dramatically reduced the number of incidents impacting, customers, and importantly, the time take to resolve these issues. I mean, for the important services we deliver for customers 99.9% of of the time.

47:33 We have the right tools in place at at all ends. I mean, the one end, the twenty four seven cyber security and monitoring. The other end, really training our our colleagues to to be able to to recognize and and call out suspicious emails and and and practices. And and Paul's point on he raises on continuity points specifically. We we have a lot of layers of resilience there, you know, whether it is making sure we obtain our our power from multiple sources or high voltage backup generation. We we really many, many, frontiers of resilience there. Of course, we are deemed as critical national infrastructure, and therefore, we're assessed, frequently for our ability to avoid failure and recover from failure quickly.

48:25 And we we test ourselves frequently. So I can assure Paul and and all the listeners here, there's absolutely no complacency in here, and there's a continuous focus on continuing to improve resilience and security because it can never be good enough. Mhmm. And helpful to hear how important the discussion is around the board table as well. So so thank you. Thank you for sharing. So another question here. We've received a question on the topic of data protection from several of our shareholders, including Anne Harrison. The question is, what is NATWEST's approach to handling personal and special category customer data, both internally and through third party agents. How often is this reviewed and what controls are in place to ensure that there's compliance with the relevant regulations?

49:11 So Rick, I'm gonna come to you on this one, please. Very good. Great great question, Anne. Thank you. I mean, clearly, privacy is is a a vital component of of serving our customers. And, at the heart of of the way we deal with this is is our, privacy and client confidentiality policy, which sets out our approach to making sure we always fulfill our legal obligations, but goes further than that to to kind of reflect the fundamental data privacy rights of our customers and making sure that we safeguard personal data. We review the policy annually. We have mandatory training for all our colleagues, making sure they really understand the legal and regulatory obligations. We factor privacy into the design of our products, processes, our business practices, and minimizing wherever we can the extent to which we collect personal data, which I think is is an important consideration.

50:13 Thinking around privacy is embedded in in all our our bank wide processes, and an internal audit is charged with really ensuring, provided the insurance, that we have the controls to monitor, manage, mitigate privacy and security issues. Allusion to the third party suppliers equally important. We engage with our suppliers a lot to make sure that they meet legal requirements. We actively engage to understand and review their privacy standards. When they're not up to it, we act. Finally, I'd just say that for anyone interested, there's clear guidance and information on our website, a customer privacy notice, that says how we collect personal data, what we collect as personal data, and under what circumstances we might have to share that data with third parties. All important points and very happy, you know, people take the interest. Yep. Good.

51:13 Thank you. So let's switch to a new theme, around climate. And, again, this is a topic of much debate, at at the moment. So we've received questions from Eric Conroy and John Hyatt on this topic. Eric and John have asked if our efforts to reach net zero climate target by 2050 are still in course, and can we bring this target forward? So Rick, why don't you take this one, please? Yeah. Eric and and John, obviously, it's extremely topical. I start by standing back and saying, look, we feel we remain very positive about the growth opportunities that are presented by The UK's commitment to net zero. You know, we have significant expertise in in the the bank to to actively support the transition of our customers and and help them be resilient and fit for the future and and in line with our commercial strategy. I mean, we we want to grow as a vital and trusted partner of these these customers, and we have the expertise and and services to meet their changing needs.

52:19 We are still very committed to achieving net zero in 2050. How we do that is far from clear. So is this the moment to bring it forward? No. But we are very focused on working on how to do that with customers and other partners. As far as we're concerned, what was is directly in our control, clearly our our own emissions I mean, we are operating emissions. Since 2019, we've reduced those by 51%. It'll be 70% by 2030. Our goal to halve our climate impact of financing activity by 2030 is challenging. Still working away at it. I mean, to achieve this and to achieve the net net zero goals, you know, we we do it's gonna be dependent on technology development. It's going to be dependent on government policy, developments.

53:19 It's going to be dependent on supplier, customer, societal responses to the challenges that come come forward. Now, we're we noted that the the government's or the UK climate change committee that advises the government came out with its seven climate target this year, and we're reviewing that in detail because I I think that'll help inform the future direction and our targeting. Think it's something we're always considering. But, you know, we really should reassure Eric and John that we're not taking the foot off the pedal on this. Exactly. Great. Thank you. So, Paul, let me turn to some questions here around defense funding, if that's okay. So we've got questions from Eric Conroy and Makeda Drodes.

54:10 Paul, the question is if you can explain our policy on lending in the defense sector, please. Yeah. Well, thank thank you, Eric and and Makita. We're one of the biggest supporters of UK corporate and UK business. And as part of that, we support and are proud to support the the defense sector who meet our, you know, meet our normal criteria. So from that perspective, it it's very clear. Yeah. And we've been very consistent with that over over a number of years. Probably slightly less well known is the fact that, I guess, we've supported the military for over two hundred years through our Haltz kind of military banking unit, and that supports 30,000 military personnel across The UK, but also across across the world as well. So I guess that's another aspect to our support for for for the sector and the military.

55:03 We're a UK focused bank, so inevitably, our policies, our processes always ensure that they you know, we comply with with local compliant compliance, the legal position, and licensing that can often be set, especially in this sector, by by the UK government. We always make sure we comply by the the relevant international standards as well. So I know that the question talked about about policy. We're very transparent as well around this. There's a our criteria in relation to defense and private security are published on our our website. So if anybody wants to, I guess, get get more granular detail, there's a fair bit of information there, and I'd encourage people to to to look at that. We're also myself and the leadership team, we're also very, I think, alive and alert to the fact that during, you know, time difficult times when there is conflict, there are heightened kinda human rights risks, and that might require more diligence, more oversight, engagement with different clients or or governments.

56:07 So we're we're very alive to that, and and we do that on a very you know, we have we have a great great team in this area who do that on a very, very active basis, you know, have have have the relevant contacts in in in governments and the relevant government departments. So, yeah, our commitment is there. We want to support the defense sector, but we'll we'll we'll ensure we do that in a way where we've undertaken the appropriate due diligence and the advice from the from the relevant authorities. And it's a it's an area that understandably and arguably rightly has been getting a lot of attention over the course of the last three or six months. But hopefully, that gives you a sense of our position. And, yep, I'll just reference our website if people want to get into, you know, some specifics. If they wanna read more Yeah. That's out there. Okay. Thank you. So I think we've got time for one more question this evening. So our last question is from who asks if NATWEST GROUP will continue to be a UK domestic focused bank after the soon to be full privatization.

57:04 Now you both commented on kind of where where we were a little bit earlier in the opening, but such a good topic. I I think I'm gonna come to you both for some for some comments here. So, Rick, why don't I come to you first on your thoughts on the return to private ownership? Thank you for the question. I I think that, the first thing I would say is, inevitably, we're pleased with the progress we've made to moving towards privatization to over the last year, moving from nearly 40% down to less than 4%. And as I always remind people that actually the decisions about timing, price mechanics has nothing to do with us. That's really lies with the treasury. But I think it's entirely reasonable to expect over the next few months then the government will will leave our share register, which will be a very significant moment.

57:51 I mean, it'll mark a a new forward looking chapter for for NATWEST. And and I think one has to, at a point like that, record our gratitude to the taxpayer. You know, they stepped in to rescue the bank and the wider sector during the great financial crisis. And that intervention stabilized, the financial system and protected millions of savers, homeowners, and businesses. And and it allowed the bank to undertake the significant change we have to a simpler, safer, consistently profitable bank that delivers for the shareholders and customers. Know, one has to say during all that period, the bank has been a very patient and supportive shareholder.

58:44 It has never sought to intervene on strategy or in day to day operations. And I say now that the return to private ownership is a shared ambition with them. It is we both see it in the best interest of the shareholder, and, and I think that that the this is the right moment to move there. Brilliant. So, Paul, what are your thoughts around, that return and perhaps a little bit around the implications for future strategy? Yes. As as Rick alluded to, it'll definitely be a a symbolic movement. But in the context of the the strategy, the the return to private ownership per se doesn't doesn't impact the way we operate or the way we think about what we need to do to be successful as a bank. You know, we we we are a and to the question, we are a u primarily a UK focused bank. We have a very clear strategy. That strategy, as you can see over the course of the last eighteen months, is clearly delivering for our customers, but it's also delivering for our shareholders. So don't expect any significant shift in that. You know, we hopefully, we've laid out today a little bit, you know, that we see that there is still significant opportunity within both the existing customer base and The UK to continue to to grow the bank, deliver more value for our customers, and then deliver more more value for shareholders. You know, we are we are the we are, as I've alluded to, the biggest bank for business, and that inevitably gives us an international dimension. We're supporting our customers as they as they trade internationally.

1:00:13 We're also supporting international businesses as they come into The UK. We support capital flows between the different jurisdictions. So, yes, we're a UK focused bank, but our but our clients are trading all over the world and clients from other parts of the world are are trading in into into The UK. So that's how I think about the strategy. So it will be a symbolic moment. It'll be very important for colleagues, for for the industry, and for The UK more more more widely. It's allowed the bank to attract a lot you know, a broad range of global investors, you know, from different parts of the world that, I guess, buy into the strategy and buy into the growth prospects of the bank. So in that regard, we're looking forward with with confidence and with conviction. And myself, Rick, the board, we're fully focused on really shaping the future. You know, we wanna be a vital, trusted partner to our customers, but also to The UK. And if we get that if we get that right, you know, that's great for our colleagues.

1:01:11 It's brilliant for our communities, and it's also very rewarding for our shareholders. Thank you. That's a nice confident note, I think, to finish on. And thank you to you both, Rick and Paul, for your insights and perspectives. We've covered a lot of topics, some very important topics for the broader society and for us as a bank. So thank you very much to both of you. And thank you also to our shareholders for joining us this evening. If we haven't got round to answering your question, the team will follow-up with you directly. We'll also be publishing the responses to the questions raised on our shareholder hub, which can be found at natwestgroup.com. If you have any follow-up questions arising from what you've heard tonight from either Rick or Paul, please do write to us with the email address on the screen, and we will respond as soon as possible.

1:02:02 So that draws this discussion to a close. You have heard directly from our chair and from our group chief executive, and I hope you feel more informed before casting your votes at this year's AGM. And for me, I'd like to say thank you and good night. Thank you, ladies and gentlemen. Thank you for your attendance, this afternoon. We'll now redirect you so that you can provide your feedback to the company in order they can better understand your views and expectations.

1:02:49 This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team at NATWEST GROUP PLC, we'd like to thank you for attending today's presentation and wish you all a good rest of your day. Thank you.