H1 2021 Results Fixed Income Investors - 30th July 2021
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H1 2021 Results Fixed Income Investors 30th July 2021
Katie Murray
Chief Financial Officer
2
H1’21 results highlights
H1’21 performance
Good H1’21
performance, increasing £2,505m £707m £1,842m
shareholder distributions Operating profit before tax in Impairment release in H1’21 Attributable profit in H1’21,
H1’21, up from £0.8bn loss in (38bps) of customer loans compared to £0.7bn loss in
vs. £2,858m charge in H1'20
Supporting our customers H1’20
159bps of customer loans
H1’20
through the recovery with
£4.1bn net lending growth1
Delivering against our targets
Delivering against our
targets to drive sustainable 2.8% 5.9% 18.2%
returns for shareholders
Net Lending Growth1 on an Cost reduction3 of £185m in CET1 Capital Ratio
annualised basis, up £4.1bn on H1’21 vs. H1’20 in line with Q1
Increasing our minimum FY’20 Includes 73bps of IFRS 9
dividend to £1bn and transitional relief
announcing £750m on-
Shareholder distributions
market buyback bringing
FY’21 distributions to
minimum of c.£2.9bn2
£1bn £750m £1.1bn
Minimum annual dividend In-market buy-back Directed buy-back in Mar’21
1. Net lending to customers across the UK and RBSI retail
and commercial businesses, excluding UK Government up from £800m; £500m accrual included in 18.2% CET1 ratio 4.99% window reopens in
2.
lending schemes.
Shareholder distributions include minimum dividends of included in 18.2% CET1 ratio March 2022
£1,000m, on-market buyback of up to £750m and
Directed Buy Back of £1,125m.
3. Other expenses, excluding OLD and Ulster Bank RoI 3
direct costs.
Strategic priorities will drive
sustainable returns
Delivering against our
strategic priorities to
drive sustainable returns
for shareholders
Sustainable growth with an
intelligent approach to risk
Simplification and cost
efficiency
Powering our strategy
through innovation,
partnership and digital
transformation
Portfolio discipline and
effective deployment of
capital
1. Net lending to customers across the UK and RBSI retail
and commercial businesses, excluding UK Government
lending schemes.
2. Other expenses, excluding OLD and Ulster Bank RoI 4
direct costs.
Purpose-led, long term
decision making H1’21 progress
Delivering on our Areas 35.1k individuals or business supported through enterprise programmes, with
ENTERPRISE
of Focus1 >87k interventions
The biggest
supporter of 725 entrepreneurs in the current accelerator cohort, 42% female
Exceeded the 2020-2021 enterprise in the
Coutts has collaborated with the Business Growth Fund to provide additional
£20bn target for Climate UK & Ireland
funding, growth capital and support to small and medium sized enterprises (SMEs)
& Sustainable Funding and
Delivered £2.1bn, 35% of overall £6bn 2021 funding commitment to support
Financing SMEs to scale and grow3
ESG Ratings2 LEARNING 1.5m Financial capability interactions, of which 515k financial health checks
• Sustainalytics rating: Enhancing financial 273k people helped to start saving
capability and the
upgraded to 17.0 (low Launched Career Sense, a new programme to support 13-24 year-olds, aiming
skills of our
risk) from 20.5 (medium colleagues
to reach over 10,000 young people this year
risk) in July 2021
£21.5bn Climate and Sustainable Funding and Financing, including £3.4bn
• MSCI rating: AA CLIMATE
green Wholesale lending, £10.6bn, green bond public issuances and green
A leading bank in private placements4 and £4.3bn Sustainability Linked Loans
• CDP rating: A- the UK
1. H1’21 Climate, Purpose and ESG supplement Playing an active role in tackling climate change collaborating with Microsoft,
2. ESG ratings on this page are: (i) unsolicited; (ii) subject to the & Ireland helping
assessment and interpretation by the ESG rating agencies; (iii) Octopus Energy and CoGo4
provided without warranty (iv) not a sponsorship, to address the
endorsement, or promotion of NatWest Group by the relevant
rating agency. Ratings as of 29/07/2021, the CDP score is climate challenge Retail Banking completed Green5 Mortgages with a value of £431 million during
from the 2020 submission. H1 2021
3. £2.1bn is Gross New Lending, excluding Government lending
schemes, in H1 to those SME customers in scope of the fund,
predominantly SMEs outside of London
NWG founding member of the Net Zero Banking Alliance; Coutts joined the Net
4. Including the underwriting of two loans that meet the CSFI Zero Asset Managers initiative and obtained B Corp certification
criteria (£153m) 5
5. Aligned to the World Green Building Council definition
premised on EPC A and B energy efficiency ratings
Supporting customers at every
stage of their lives
Card spending and Credit Card balances (1) Mortgage lending(1)
Supporting our customers Monthly spend and balances outstanding Retail Banking gross new mortgage lending
through the recovery (£bn rebased 100 = June’20) & net mortgage balance growth (£bn)
9.7
% 8.4
9.6
Debit and credit card 120
126.2
6.7
6.0
spending improved through 115.1
3.0 3.0 3.2
Q2, credit card balances up 100 2.3
97.3
£0.1bn (3%) in the quarter 3.0
Q3’20 Q4’20 Q1’21 Q2’21
80
Strong and improving new Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Gross New Lending Net Lending
Metro acquisition
mortgage lending Debit card Credit card Credit Card Balances
• Retention rate of ~79% in Q2’21
Corporate deleveraging Commercial Banking lending (change in period, £bn)
Gov’t lending schemes • £0.4bn of net government scheme
continues with net repayments in Q2, predominantly
RCFs2
government scheme Other BBLS3
2.9
repayments in Q2 1.4 • ~5% of BBLS customers have
0.5
(0.3) (0.4)
repaid in full
Credit quality remains (2.4) (2.0) (1.2) • ~5% have requested a further
(3.1)
strong and we see growth (1.8)
payment holiday through PAYG4
(0.9) • Of the BBLS customers due to
opportunity as the economy (1.8) start repayment ~92% are
recovers
1. Data relates to Retail Banking. Total change in Q3’20 Q4’20 Q1’21 Q2’21 repaying on or ahead of schedule
2. RCF – Revolving Credit Facility.
3. Bounce Back Loans. Gross Commercial (2.0) (1.9) (1.8) (3.4)
6
4. PAYG option is available to customers 60 days before Loans
first payment.
Portfolio discipline and
effective deployment of capital
Actively managing
ы capital Ulster Bank RoI
• Natwest has agreed a binding sale agreement with Allied Irish Banks, p.l.c. for the
We remain strongly sale of c.€4.2bn of performing commercial loans and associated undrawn
capitalised with 18.2% exposures of c.€2.8bn1
CET1 ratio • We have also agreed a non-binding MoU with Permanent TSB for the sale of
€7.6bn of performing retail and SME loans
Good progress in executing
Ulster Bank RoI withdrawal NatWest Markets
and NatWest Markets
refocusing • NatWest Markets RWAs at £24.4bn, down £2.1bn on Q1’212
Pro-active management of Portfolio Sales and Synthetic Trades
Retail and Commercial
Banking to optimise capital, • Commercial Banking active capital management contributed to £0.8bn reduction
in RWAs in H1
manage credit risk and
drive sustainable returns
1. Completion of each proposed sale is subject to obtaining
regulatory and other approvals and in the case of
Permanent signing definitive sale agreements.
Completion may not occur when contemplated or at all
2. H1’21 RWA shown proforma for model change approval
received in July 2021, benefit of £2.5bn. See page 12 in 7
the NWG Q2’21 IMS.Intelligent and consistent
approach to risk
Impairment release Economic scenarios and weightings, H1’21
The main macroeconomic variables for each of the four scenarios used for expected credit loss
resulting from an (ECL) modelling below:
improvement of the Probability weightings1 UK GDP – Annual Growth (%) UK Unemployment rate – annual avg. (%)
economic outlook Scenario Previous New 2021 2022 5y Avg. 2021 2022 5y Avg.
Updated economic Upside 20% 35% 10.1 5.4 3.9 4.7 4.3 4.1
assumptions with re- Base case 40% 40% 7.3 5.8 3.5 5.3 4.8 4.6
weighting of our scenarios Downside 30% 20% 2.7 4.3 2.9 5.4 7.0 5.8
Extreme 10% 5% 0.1 - 2.5 5.9 11.8 8.1
Our base case now Downside
assumes UK GDP growth of Impairments charge(£m)
7.3% in 2021, up from 4.5% Loan impairment rate (bps of gross loans)
previously 90 229 28 14 88 (11) (66)
3,242
We now expect a net
impairment release for the 2,056 Expect net
full year 2021 release at
FY 21
802
254 130
(102)
(605)
1. Previous weightings from FY’20. New weightings
updated for H1’21 Q1’20 Q2’20 Q3’20 Q4’20 FY’20 Q1’21 Q2’21 FY’21 8Intelligent and consistent
approach to risk ECL3, £m £648m
6,186
Improved economic 5,794
outlook drives ECL 878 (363)
887 (285)
release 117 (15)
(15) 99 (305) 4,9253
164
834
Of the £869m ECL release, 3,792 5,191 315
£648m is driven by the 80
202 4,743
3,776
improvement in economic 3,510
forecasts and PD1 on our FY’19 FY’20 Q1’21 Economic Risk Risk Judgemental Write-offs Q2’21
performing book Forecasts4 metrics: metrics: S3 changes5 and other
S1 & 2
Economic Uncertainty PMA Other PMA Other ECL
PMA2 for economic
uncertainty has reduced ECL Coverage3, %
slightly but is offset by 1.66
other adjustments 1.56
0.24
(0.10)
0.24 (0.08)
ECL coverage reduced (0.00) 0.03 (0.09) 1.313
from 1.56% to 1.31% due 1.13 1.43 0.22
to the ECL release 0.06 1.32
1.07 1.09
1. Probability of Default. FY’19 FY’20 Q1’21 Economic Risk Risk Judgemental Write-offs Q2’21
2. Post Model Adjustments. Forecasts4 metrics: metrics: S3 changes5 and other
3. May not cast due to rounding. S1 & 2
4. Implementation of improved IFRS9 forward-looking
economics scenarios and weightings drive the release.
Economic Uncertainty PMA Other PMA & ECL 9
5. Changes in post model adjustments.Donal Quaid,
DonalTreasurer
Quaid
Treasurer
10Q2’21 results highlights
Treasurer’s review
Capital and leverage Liquidity and funding
Strong capital and leverage
positions, robust liquidity and
diversified funding. 18.2% 24.9% 164% 78%
CET1 ratio Total capital Liquidity coverage Loan:deposit
ratio ratio ratio
Further progress on meeting
end-state MREL requirements
38.9% 6.2% £36bn
and optimising the capital customer deposit
LAC ratio UK leverage
stack. ratio inflows in H1 2020
Moody’s upgrade to Baa1,
Outlook remains Positive. H1 2021 Issuance and capital optimisation Ratings
Credit ESG
Outlook from S&P and Fitch
moved to Stable from ~£2bn £1bn Baa1 AA
Negative. Senior MREL Tier 2 Moody’s MSCI
~£2.4bn BBB 17/Low risk
Sustainalytics risk score
further improved to Low Risk.
~£1bn S&P Sustainalytics
AT1 Legacy capital
retired
A
Fitch
11
Ratings as of 29/07/2021Robust balance sheet with
strong capital & liquidity levels
CET1 headroom above Headroom above Loss absorbing capital
Strong capital position medium term target1,2 minimum UK leverage ratio (LAC) well above min
requirements UK requirement
provides flexibility1
We have shaped a business
to operate with a CET1
420-520bps 295bps
c.£6.8 - 8.5bn of headroom in Q2’21 headroom above minimum
ratio of between 13% to requirements
14% by FY’23. 18.2% 6.2%
38.9%
Our CET1 ratio is now 420-
520bps or c.£6.8bn-£8.5bn 13-14%
C
above our target range and
25.7%
more than double our 3.25%
Maximum Distributable 9.0%
MDA1
Amount. 2.5%
2.0%
4.5%
1. Refer to detailed disclosure in Q2’21 IMS. Headroom
presented on the basis of target CET1, and does not Q2’21 FY’23 Q2’21 UK BoE Mimimum Q2’21 Minimum
reflect excess distributable capital. Headroom may vary CET1 ratio target Leverage ratio Requirement LAC Ratio requirement
over time and may be less in future.
2. Based on assumption of static regulatory capital
Capital Pillar 2A3
requirements.
3. NatWest Group plc’s Pillar 2A requirements are set on a Buffer Pillar 1
nominal capital basis which results in an implied 9.0%
MDA. 56.25% of the total Pillar 2A requirement must be
met from CET1 capital. Pillar 2A requirement is expected
to vary over time and is subject to at least annual 12
review.Robust balance sheet with
strong capital & liquidity levels
Strong capital position CET1, (%)1
post dividend and
buyback accruals
18.2% 0.41 18.2%
(0.18) (0.46)
CET1 ratio 18.2% in line with 0.19
0.10
Q1’21 (0.11) (0.73)
17.5%
2021 dividend accrual,
Q1’21 Attributable Ordinary Buy-back Pension RWA Other incl. Q2’21 IFRS 9 Fully
£750m on-market buyback profit, DTA Dividends permission2 cont. PVA3 benefit4 loaded
plus pension contributions and IFRS9 accrual
relief
reduced ratio by 75 basis
points
RWA, £bn
RWAs reduced by £1.7bn
mainly due to Commercial 164.7
Banking business
(2.6) 163.0
movements. NWM model 160.5
0.9
0.0
change effective in July
gives proforma RWA of
£160.5bn
1. May not cast due to rounding.
2. Distributions are subject to regulatory
approvals. “Directed” buy backs post March’22 only
Q1’21 Credit Risk Counterparty Market Risk Q2’21 Q2’21 Pro-
3. PVA = Prudential Valuation Adjustment. Credit Risk forma5
4. Including IFRS9 Transitional adjustment at 100% reducing
to 75% in 2022. 13
5. RWA proforma for model change approval received in
July 2021, benefit of £2.5bnPortfolio discipline and
effective deployment of capital
CET1 ratio Key drivers of CET1 ratio
v Returning surplus capital 18.2% Capital generation:
to shareholders
• Earnings
13–14%
NatWest Group is a capital • NWM reshaping and Ulster Bank withdrawal
generative business that Capital Usage:
aims to operate at a CET1 • Distributions
2
ratio of between 13-14% by
• Loan growth & Procyclicality
2023
• Regulation
Q2’21 Target
Shareholder distributions FY’23
are a key driver of our path
to 13-14%. We are
NatWest Group capital distributions
increasing our minimum
dividend to £1bn and • NatWest Group now aims to distribute a minimum of £1 billion per annum from
announcing £750m on- 2021 to 2023, via a combination of ordinary and special dividends, and intends to
market buyback bringing commence an ordinary share buy-back programme of up to £750 million in the
second half of the year
FY’21 distributions to
minimum of c.£2.9bn1
1. Shareholder distributions include minimum dividends of
£1,000m, on-market buyback of up to £750m and
Directed Buy Back of £1,125m.
2. Includes dividends, buybacks and dividend linked pension 14
contributions.Robust balance sheet with
strong capital & liquidity levels
High quality liquidity pool Liquidity coverage ratio Total funding mix (£bn)1,2
Significant excess remains well above min UK
Cash and Other
liquidity, diversified central banks primary requirement £66bn
Secondary
funding AAA to AA-
governments liquidity
£75bn £532bn
surplus liquidity over
Liquidity position £277bn minimum requirement £467bn
reflects strong deposit £262bn 165% 164%
growth across both our Customer Deposits
90
corporate and retail £199bn 92
Wholesale funding
franchises 4 Wholesale funding mix (£bn)1,
3 35 100%
Continue to optimise 74
51
funding requirements, 4
including repayment of 47
6% 13% 14% 4%
£5bn TFSME drawings 149
116
74 11%
£66bn
FY’19 FY’20
97.2
H1’21 Min FY’20 H1’21
requirement 52%
£187bn in primary liquidity with Bank deposits TFS/ECB
CP & CD MTN
mix of cash and high quality Senior secured Subordinated debt
sovereign bonds
1. Funding excluding repos, derivative cash collateral. 15
2. Customer deposits includes amounts from NBFIs.Robust balance sheet with
strong capital & liquidity levels
Strong customer deposit Retail Banking £bn Commercial Banking £bn
inflows Current Accounts Savings
+7% +5%
Retail Banking deposits
increased by £12 billion
176
as a result of lower 172 184 168
customer spend and 150
increased savings. 73
66 135
Commercial Banking 52
deposits increased by £8
billion as customers
continued to build and
retain liquidity.
106 111
98
£86bn increase in total
deposits since FY 2019,
of which £34bn Retail
Banking and £41bn
FY’19 H1’21 FY’19 FY’20 H1’21
Commercial Banking1 FY’20
% of total deposits1 39% 38%
1. Other deposits include Ulster Bank RoI, Private Banking,
NWM, RBSI, Central items and Other. Figures may not 16
sum due to rounding.Issuance and capital
management strategy
Issuance and capital 2021 Issuance guidance H1 2021 progress
management progress NWG €1bn 9NC8
HoldCo Senior unsecured Second social bond, third GSS bond,
~£2bn bringing total GSS issuance to ~£2bn
~£3-5bn HoldCo senior MREL
Good progress with 2021 NWG $1.5bn 6NC5
issuance plan; in H1 2021,
NatWest Group plc issued OpCo Senior unsecured NWM $1.25bn Senior Unsecured 144a
~£2bn public
~£2bn MREL eligible senior Modest issuance from NatWest
issuance NWM €1.25bn Senior Unsecured EMTN
Markets Plc
debt, ~£1bn of AT1 and
£1.0bn Tier 2. Capital NWG £400m PNC7.5 AT1
£1bn Tier 2
~£2bn HoldCo Tier 2 NWG $750m PNC11 AT1
NatWest Markets issued ~£1bn AT1
~£1bn HoldCo AT1
~£2bn senior unsecured NWG £1bn 11NC6 Tier 2
term debt Capital optimisation
• Offered to repurchase ~£4.8bn of capital securities in H1 2021; repurchasing ~£1.6bn
NatWest Group continued
to optimise regulatory • Announced calls in respect of ~£0.8bn of capital securities in H1 2021.
efficiency of capital • In July, announced call of ~£2bn of AT1 due Aug-21
through targeted liability
management exercises
and redemptions
17Credit ratings
Moody’s S&P Fitch
NatWest received rating
upgrades from Moody’s Group holding company
on 13 July 2021, with
positive outlook NatWest Group plc Baa1/Pos BBB/Sta A/Sta
maintained on NWG and
Ring-fenced bank operating companies
NWM Plc and NWM N.V.
NatWest Bank plc A1*/A1/Sta A/Sta A+/Sta
Fitch and S&P changed Royal Bank of Scotland plc A1*/A1/Sta A/Sta A+/Sta
their outlook to Stable
(from Negative) in July Ulster Bank Ireland DAC A3*/Baa1/RUR A-/Sta BBB+/Sta
2021 based on stronger Non ring-fenced bank operating companies
than expected UK
NatWest Markets Plc A2/Pos A-/Sta A+/Sta
economic recovery and
NatWest Group’s strong NatWest Markets N.V. A2/Pos A-/Sta A+/Sta
credit profile.
NatWest Markets Securities Inc NR A-/Sta A/Sta
RBSI Ltd Baa1/Pos A-/Sta A/Sta
* Moody's Long-Term Bank Deposit Ratings
18
Ratings as of 29/07/2021ESG Ratings (1) Scale 2019 2020 2021
ESG ratings (1)
MSCI
The Sustainalytics rating Rating AAA to CCC BBB AA AA
improved to 17/Low risk Sustainalytics Risk Rating
in July 2021. 27.7 20.5 17
Rating 1-100
Medium risk Medium risk Low risk
The MSCI rating Negligible to
Industry rank (banks) Severe #242/933 134/975 96/1064
improved from BBB to
AA last December. CDP
(2)
Rating B A- A-
Ongoing participation in A to D-
the Standard & Poor’s Industry average C B
Corporate Sustainability ISS ESG
Assessment (3) Rating A+ to D- C C C (2)
(2)
Prime Status Prime Prime Prime
1. ESG ratings on this page are: (i) unsolicited; (ii) subject
to the assessment and interpretation by the ESG rating
agencies; (iii) provided without warranty (iv) not a
sponsorship, endorsement, or promotion of NatWest
Group by the relevant rating agency. Ratings as of
29.07.2021.
2. CDP and ISS ESG ratings have not yet been reviewed in
2021. 19
3. S&P CSA results are due in November.Katie Murray
Chief Financial Officer
20Investment case
Focused on generating
shareholder value
Purpose-led, long term
decision making 1 We have shaped a business that
should operate at a CET1 ratio of
between 13% to 14% by 2023
through our strategic A purpose led, customer
priorities 420-520bps or c.£6.8bn-8.5bn headroom to
focused business with target CET1 ratio in Q2’21 and more than
capability to grow double our Maximum Distributable Amount
We are:
• Generating good Intelligent and consistent
performance approach to risk
• Supporting our
customers and
growing Retail and
Focus on simplification and 2 Expect to generate a ROTE of
9-10% by 2023
taking costs out
Commercial lending
• Investing to accelerate
our digital Robust balance sheet with NatWest Group intends to maintain
transformation to strong capital & liquidity levels ordinary dividends of around 40% of
3
better serve our attributable profit and aims to
customers Focused on generating distribute a minimum of £1bn per
shareholder value annum from 2021 to 2023 via a
combination of ordinary and special
dividends
21Q&A
22Appendix
23Capital & Leverage
24Issuance and capital
management strategy
Well positioned to meet Total Capital versus minimum requirements Total Leverage requirements 1-Jan-222
2022 capital % RWA Total Tier 1 as a % of Leverage Exposure
requirements1 CET1 AT1 Tier 2
Total Capital in excess of 24.5% 24.9%
6.4%
Transitional and Fully loaded 6.2%
3.1% 3.1%
minimum requirements
2.9% 3.6%
14.1%
3.25%
2.9%
2.2% 0.8% Other T1
18.5% 18.2%
9.0% 2.4% CET1
End point End point Minimum End point End point
Basis incl IFRS9 Basis incl IFRS9 Capital Regulatory
basis basis
FY’20 H1’21 Requirements minimum
FY’20 H1’21
(ex IFRS9) (ex IFRS9)
1. Illustration, based on assumption of static regulatory
capital requirements.
2. The countercyclical leverage ratio buffer is set at 35%
of NatWestGroup’s CCyB. As noted above the UK
CCyB decreased from 1% to 0% on 11 March 2020 in
response to COVID-19. Foreign exposures may be
subject to different CCyB rates depending on the rate 25
set in those jurisdictions.Robust balance sheet with
strong capital & liquidity levels
Key drivers of CET1 ratio3,4
We have shaped a
business that can Capital Capital
operate at a CET1 ratio generation usage
18.2%
of between 13% to 14% • Earnings • Loan growth
by FY’231 • NWM RWA • Pro-cyclicality Distributions4
reduction
We now expect RWAs to ~(3.5%) ~80bps • Min divi ~(155)bps
be below or at the lower • Ulster Bank • DBB ~(140)bps
RoI
end of our previously withdrawal
• In-market buy-backs
guided range of £185-
195bn on 1 January 2022 13-14%
~(0.4%)
This includes c.£15bn of Not to scale
RWA inflation due to the
mortgage book2 Q2’21 Regulation Dividend linked Target
pension FY’231
1. This presentation contains forward-looking
contribution
statements, please see Forward-Looking Statements
on slide 39 and Outlook Statement on page 2 of
Q2’21 NatWest Group IMS.
2. £15bn equates to c.15% risk weights on the
mortgage book as at Q2’21.
3. Impacts are approximate, not to scale and shown on
a standalone basis using Q2’21 capital position.
These impacts will change quarterly. Combined
impacts will not be sum of standalone impact.
4. Distributions are subject to regulatory approvals.
“Directed” buy backs post March’22 only. 26Issuance and capital
management strategy
Well positioned to meet Total Loss Absorbing Capital (LAC)
Senior MREL profile
£bn as at 30th June 2021
2022 MREL requirements1
Loss Absorbing Capital (LAC) value1
CET1 AT1 Tier 2 Senior MREL
£billion equivalent, based on illustrative £200bn
38.9% RWA
Total loss absorbing capital ratio
£63bn
of 38.9% is above the Bank of 21.2
~21-22bn
England (BOE) requirement of 21
19.6 19.6
25.7% at 1 January 2022, 25.7% CRR
buffers
including CRDIV combined 6 2.5%
buffer requirements. 6 Senior
11.6% MREL
30 2.9% Pillar 1
2.2% +P2A
Total senior unsecured MREL 6.5% 11.6%
stock in issue is now £21bn and RWA FY'19 FY'20 H1'21 Steady
90% complete compared to our H1’21
requirement state
end state requirements. requirement
2
RWA £163bn RWA £179bn £170bn £163bn £200bn
% RWA 10.9% 11.3% 13.0% 11.6%
1. “MREL” = Minimum required eligible liabilities.
2. Illustration, based on assumption of static regulatory capital
requirements. End state MREL requirement is set at 2x
(Pillar 1+ Pillar 2A) per Bank of England guidance.
NatWest Group plc’s Pillar 2A requirement was 3.6% of
RWAs as at 30 June 2021. 56.25% of the total Pillar 2A
requirement, must be met from CET1 capital. From July
2020 the Pillar 2A requirement is set as a notional amount.
Pillar 2A requirement held constant over the period for
illustration purposes. Requirement is expected to vary over 27
time and is subject to at least annual review.Issuance and capital
management strategy
AT1 and Tier 2 capital
profile AT1 profile Tier 2 profile
Balance sheet value v Regulatory value
Regulatory value
£billion equivalent
Regulatory value of non-CRR £billion equivalent
compliant legacy Tier 1 and Regulatory value
Tier 2 reduced by £1bn and CRR non-compliant CRR compliant CRR non-compliant CRR compliant
£0.8bn respectively since
2019.
Balance sheet value of CRR 4.0 5.0 5.9 6.9 7.6
6.9
non-compliant Tier 1 and ~£4.4bn 4.9 4.9 ~£5.8bn
Tier 2 at H1’20 is £2.3bn 4.7
(£0.7bn and £1.6bn 1.5
0.8 1.9 1.3 2.0 1.2 1.6
0.5 0.4
respectively), H1’21 Steady FY’19 FY’20 H1’21 Steady
FY’19 FY’20
state state
End-point basis ratios End-point basis ratios
RWA £179bn £170bn £163bn £200bn RWA £179bn £170bn £163bn £200bn
2.2% 2.9% 3.6% 2.2% % RWA 2.7% 2.9% 2.9% 2.9%
% RWA
AT1 requirement is 2.2% of RWA from 1-Jan-2022 Tier 2 requirement is 2.9% of RWA from 1-Jan-2022
28Issuance and capital
management strategy
NatWest Royal Bank
Legal entity capital H1 2021 Holdings
NatWest
of Scotland
Ulster Bank NatWest
RBSI
Bank Plc Ireland DAC Markets Plc
positions Group plc
Capital and leverage metrics
External issuance of AT1, Tier 2
and MREL will only be from CET1 ratio 16.6% 17.1% 12.5% 25.6% 20.2% 18.6%
NatWest Group plc, the group
holding company. Tier 1 ratio 19.5% 19.6% 17.1% 25.6% 23.9% 22.7%
Subsidiary operating companies Total Capital ratio 23.4% 23.0% 23.5% 27.4% 28.9% 22.8%
will only issue AT1, Tier 2 and
MREL internally. RWA £126.8bn £85.9bn £21.2bn £13.3bn £24.6bn £7.3bn
NatWest Bank Plc and Ulster
Bank Ireland DAC issue senior CRR leverage ratio 4.5% 4.2% 4.1% 15.7% 4.7% 4.1%
secured securities externally.
Internal MREL issuance1
Natwest Markets Plc issues senior
unsecured securities externally. Tier 1 £3.7bn £2.4bn £1.0bn - £1.1bn £0.3bn
Tier 2 £4.7bn £3.1bn £1.4bn £0.5bn £1.5bn -
Senior unsecured £10.5bn £5.7bn £0.4bn £0.5bn £3.9bn -
Total internal issuance £18.9bn £11.2bn £2.8bn £1.0bn £6.5bn £0.3bn
1. Internal issuance to the immediate parent company.
Amounts under NatWest Holdings Group reflect issuance
from the ring-fenced bank holding company, NatWest 29
Holdings Limited.Issuing entity structure
Investors
External issuance of AT1,
Tier 2 and MREL is only
from NatWest Group plc,
Issues external AT1, T2, MREL Senior
the group holding
company. NatWest Group plc1
Group holding company
Subsidiary operating
companies will only issue Issues internal AT1, T2, MREL senior
internal AT1, Tier 2 and
MREL. NatWest Holdings Ltd
Ring fenced bank holding company
NatWest Bank issues senior Non ring-fenced bank (NRFB) operating
Ring-fenced bank (RFB) operating subsidiaries subsidiaries
secured securities Issue internal AT1, T2, MREL senior Issue internal AT1, T2, MREL senior
externally. The Royal RBS
NatWest NatWest
Bank of International
Bank Plc Markets Plc
Natwest Markets Plc issues Scotland plc Ltd
senior unsecured securities
externally. Issues external
Issue external
senior secured senior unsecured
Investors Investors
1. The Royal Bank of Scotland Group plc was renamed 30
NatWest Group plc on 22nd July 2020.Green, Social and
Sustainable Bond
Framework
31Improving ESG position in an
evolving market
Launched in 2019, the NWG GSS Framework aims to attract dedicated funding for loans and
~£2bn GSS issuance to investment that bring a positive environment or social impact.
date, active in Green November 2019 May 2020 February 2021
€750m Social Bond $600m Green Bond 1 €1bn Social Bond
and Social bonds • Proceeds allocated to • First from a UK bank to issue USD on-shore • Proceeds allocated to loans
supporting SMEs in some of the market. Proceeds allocated to Renewable originally provided to
Proportion of senior most deprived parts of the UK. Energy projects across the UK including
solar, wind and hydropower facilities.
not-for-profit, registered
housing associations operating
• Published FY 2020 impact
HoldCo issuance in report in May 2021 • Published FY 2020 impact report in in the UK
May 2021
Green, Social &
Sustainability bond Sustainalytics is of the opinion that the NatWest Group Green, Social and Sustainability Bond Framework is
credible and impactful. The bank is well positioned to issue green, social and sustainability bonds.
format • We have an SPO from Sustainalytics who reviewed our Framework and eligibility criteria
• We published a limited assurance report by our auditor alongside our latest impact reports
• Our Social Bonds are listed on the London Stock Exchange’s Sustainability Bond Market
Eligible loans, investments and projects financed/refinanced in whole or in part by the allocation of the proceeds
raised under the Framework must fall into the categories outlined below, aligning with NWG’s Climate and
Sustainable Finance criteria:
Green Social
• Renewable Energy Loans • Loans to support female-owned SMEs
• Loans for technologies and operations promoting • Loans that enhance access to essential services
pollution prevention and control • Loans that provide greater access to affordable housing
• Green Buildings Loans • SME Lending in areas with high unemployment/low
• Clean Transportation Loans income
1. The $600m inaugural green bond constitutes Allocation and impact reports will be available on the NWG website within a year from the issuance of the
approximately £450m of the £1 billion we stated in
February 2020 that we expected to issue under our applicable GSS bond and at least annually thereafter
Green, Social and Sustainability Bond Framework in 32
2020.Q2 2021 Financials
33Focused on generating
shareholder value
£m Q2'21 Q1'21 vs Q1'21 H1'21 H1'20 vs H1'20
Strong Q2 performance
Net interest income 1,985 1,931 2.8% 3,916 3,852 1.7%
Income excluding notable Non-interest income 675 728 (7.3%) 1,403 1,986 (29%)
items was down 1.2% vs Total income 2,660 2,659 0.0% 5,319 5,838 (8.9%)
Q1’21 as strength in
mortgages was offset by Other expenses (1,568) (1,639) (4.3%) (3,207) (3,375) (5.0%)
lower trading income Strategic costs (172) (160) 7.5% (332) (464) (28.5%)
Litigation and conduct costs 34 (16) n.m 18 89 (79.8%)
Other expenses down 4%
over Q2’21 due to Operating expenses (1,706) (1,815) (6.0%) (3,521) (3,750) (6.1%)
ongoing delivery of cost Operating profit before
transformation 954 844 13.0% 1,798 2,088 (13.9%)
impairments
Impairment releases/ losses 605 102 493.1% 707 (2,858) n.m
Further impairment
release of £605m, 66bps Operating profit / (loss) 1,559 946 64.8% 2,505 (770) n.m
loans, reflects improved Tax charge/ credit (202) (233) (13.3%) (435) 208 n.m
economic outlook and low
level of defaults Attributable profit/ (loss) 1,222 620 97.1% 1,842 (705) n.m
RoTE 15.6% 7.9% +7.7ppt 11.7% (4.4%) +16ppt
34Focused on generating
shareholder value
Net Interest Income1 £m
Net interest income (10)
1,985
Group NII
30 2 (11) 4
supported by mortgage NWM NII
growth 32
1,981 Banking NII
Banking NII 1,938
Banking net interest
income ex-notable items 1,931
Group NII
was up 1% in the quarter,
as mortgage growth was NWM NII (7) Notable Retail Commercial Private Other
Q1’21 item2 Banking Banking Banking Q2’21
partially offset by
commercial deleveraging
Bank Net Interest Margin3 bps
Increased liquidity
depresses Bank NIM, 164 3 (4)
however excluding this (1) 161
(1)
trends are broadly stable
Structural hedge impact Q1’21 Notable item2 Liquidity Yield Curve Mix and Price Q2’21
moderates to -1bp in Q2
1. May not cost due to rounding. 480 Average Interest Earning Assets1, £bn 494
2. One-off in Commercial Banking related to tax variable
lease repricing following the enactment of future
corporation tax rate changes (+£32m or +3bps).
3. Bank net interest margin and Bank average interest
239 Bank NIM excluding Liquid Asset Buffer 240
earning assets exclude NWM from NatWest Group plc 35
figures.Focused on generating
shareholder value
NIM drivers: moderate Gross yields of interest earning banking assets, %1
pressure on asset yields 3.0 2.88
2.82 2.81 2.82
2.73 Commercial Banking
Group asset yield impacted Retail Banking
2.73 2.65 2.67
by strong growth in Liquid 2.5 2.65
Asset Buffer, +8% over Q13.
Funding costs broadly 2.07
1.94
stable on Q1 at 0.30% 2.0 1.85 1.84 1.81
NatWest Group
Retail Banking loan yield
impacted by lower 0.0
Q2’20 Q3’20 Q4’20 Q1’21 Q2’21
unsecured balances.
Mortgage margin on back Cost of interest bearing and non-interest bearing banking liabilities, %2
book up 4bps to 1.63% 0.6 0.53
Commercial loan yield 0.5 0.43
broadly stable excluding 0.4
0.31 0.31 0.30
one-off tax adjustment 0.3 NatWest Group
1. For NatWest Group plc this is the gross yield on the IEAs 0.20
of the banking business; for Retail and Commercial 0.2 0.13
Banking it represents the third party customer asset 0.10 0.08
rate.
0.1 0.06
2. For NatWest Group plc this is the cost of interest-bearing
0.13 0.02 Retail Banking
liabilities of the banking business plus the benefit from 0.01 0.01
free funds; for Retail and Commercial Banking it
0.0 0.02 Commercial Banking
represents the third party customer funding rate which
includes both interest-bearing and non-interest bearing
Q2’20 Q3’20 Q4’20 Q1’21 Q2’21
deposits. 36
3. Growth of average balances for the quarter.Focused on generating
shareholder value
Gross customer loans1, quarter on quarter, £bn 367.4 Group
Loan book growing in 6.4 NWM
the quarter Unsecured (0.1)
Gov Schemes
(0.4)
(1.2) 3.9
Gross banking loans to Mortgages 3.6
RCF3
Banking
customers +1.2% in the Group
364.3 Other (1.8) 361.0
0.4 (0.2)
quarter including £1.0bn NWM 7.6
Other 0.1
growth across UK & RBSI
Banking
Retail & Commercial 356.7
businesses, ex govt. Q1’21 Retail & Private Commercial RBSI Ulster Central Q2’21
Banking Bank RoI & Other
schemes Banking
480 Average Interest Earning Assets2, £bn 494
Strong mortgage growth
Gross customer loans1, year to date, £bn
partly offset by commercial
Gov Schemes
deleveraging with Unsecured (0.6) (1.5) 0.1
RCF3
government lending scheme 367.4 Group
(3.8) 6.4 NWM
net repayments of £0.4bn Mortgages 7.0 Other 1.8 (1.4) 1.3
Group 366.5
NWM 8.6 Banking
Central & Other growth Other 0.2
361.0
Banking
reflects reverse repo
357.9
activity
Q4’20 Retail & Private Commercial RBSI Ulster Central Q2’21
1. May not cast due to rounding
2. Bank average interest earning assets = NatWest Group
Banking Banking Bank RoI & Other
plc excluding NWM.
3. Revolving credit facilities for our Commercial Banking
customers.
456 Average Interest Earning Assets2, £bn 494 37Focused on generating
shareholder value
Non Interest Income1 £m
Non-interest income
888
impacted by lower 794
742
trading income 423 645 688
342 236 Trading and other
123 167
Net fees and commissions Group
NatWest Markets1 income
down 25% over Q1’21 to
465 452 522 506 521
£143m due to weaker
Fixed Income
performance and ongoing Q2’20 Q3’20 Q4’20 Q1’21 Q2’21
reshaping of the business
Retail & Commercial Businesses’ Fees and Commissions 2 £m
Retail & Commercial net 413 465 491 470 484 Net fees and commissions R&C
fees and commissions2 up
£14m or 3% over Q1’21 610 597 625 Fees and commissions receivable
578
including £12m of one-offs 529
226 224 226 Payment services
in Retail Banking 196
212
Lending (credit facilities)
140 162 138 149 Credit and debit card fees
133 Invest. Mgmt, underwriting, other
90 118 123 107 124 Fees and commissions payable
110 108 99 128 126
1. Excluding relevant notable items. (116) (113) (119) (127) (141)
2. Retail & Commercial Businesses’ Fees and Commissions
are calculated as NatWest Group excluding NatWest 38
Markets, central items and other.
Q2’20 Q3’20 Q4’20 Q1’21 Q2’21Cautionary and Forward-looking statements
The guidance, targets, expectations and trends discussed in this presentation represent NatWest Group management’s current ex pectations and are subject to change, including as a result of the factors described in the “Summary Risk Factors”
on pages 112-113 of the NatWest Group plc H1 IMS and the “Risk Factors” on pages 345-362 of the NatWest Group plc 2020 Annual Report and Accounts.
Cautionary statement regarding forward-looking statements
Certain sections in this document contain ‘forward-looking statements’ as that term is defined in the United States Private Securities Litigation Reform Act of 1995, such as statements that include the words ‘expect’, ‘estimate’, ‘project’,
‘anticipate’, ‘commit’, ‘believe’, ‘should’, ‘intend’, ‘will’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk (VaR)’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’, ‘optimistic’, ‘prospects’ and similar expressions or variations on these
expressions. In particular, this document includes forward-looking statements relating, but not limited to: the Covid-19 pandemic and its impact on NatWest Group; future profitability and performance, including financial performance targets (such
as RoTE and ROE) and discretionary capital distribution targets; ESG and climate related targets, including in relation to sustainable financing and financed emissions; planned cost savings; implementation of NatWest Group’s Purpose-led
strategy, including in relation to the refocusing of its NWM franchise and the digitalisation of its operations and services; the timing and outcome of litigation and government and regulatory investigations; the implementation of the Alternative
Remedies Package; balance sheet reduction, including the reduction of RWAs; capital, liquidity and leverage ratios and requirements, including CET1 Ratio, RWAes, Pillar 2 and other regulatory buffer requirements and MREL; funding plans and
credit risk profile; capitalisation; portfolios; net interest margin; customer loan and income growth and product share; impairments and write-downs, including with respect to goodwill; restructuring and remediation costs and charges; NatWest
Group’s exposure to political risk, economic risk, climate, environmental and sustainability risk, operational risk, conduct risk, cyber and IT risk and credit rating risk and to various types of market risk, including interest rate risk, foreign exchange
rate risk and commodity and equity price risk; customer experience, including our Net Promotor Score (NPS); employee engagement and gender balance in leadership positions.
Limitations inherent to forward-looking statements
These statements are based on current plans, expectations, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to NatWest Group’s strategy or operations,
which may result in NatWest Group being unable to achieve the current plans, expectations, estimates, targets, projections and other anticipated outcomes expressed or implied by such forward-looking statements. In addition, certain of these
disclosures are dependent on choices relying on key model characteristics and assumptions and are subject to various limitations, including assumptions and estimates made by management. By their nature, certain of these disclosures are only
estimates and, as a result, actual future results, gains or losses could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. The forward-looking statements contained in this
document speak only as of the date we make them and we expressly disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein, whether to reflect any change in our expectations with regard
thereto, any change in events, conditions or circumstances on which any such statement is based, or otherwise, except to the extent legally required.
Important factors that could affect the actual outcome of the forward-looking statements
We caution you that a large number of important factors could adversely affect our results or our ability to implement our strategy, cause us to fail to meet our targets, predictions, expectations and other anticipated outcomes or affect the accuracy
of forward-looking statements described in this document. These factors include, but are not limited to, those set forth in the risk factors and the other uncertainties described in NatWest Group plc’s Annual Report on Form 20-F and its other filings
with the US Securities and Exchange Commission. The principal risks and uncertainties that could adversely NatWest Group’s future results, its financial condition and prospects and cause them to be materially different from what is forecast or
expected, include, but are not limited to: risks relating to the COVID-19 pandemic (including in respect of: the effects on the global economy and financial markets, and NatWest Group’s customers; increased counterparty risk; NatWest Group’s
ability to meet its targets and strategic objectives; increased operational and control risks; increased funding risk; future impairments and write-downs); economic and political risk (including in respect of: uncertainty regarding the effects of Brexit;
increased political and economic risks and uncertainty in the UK and global markets; changes in interest rates and foreign currency exchange rates; and HM Treasury’s ownership of NatWest Group plc); strategic risk (including in respect of the
implementation of NatWest Group’s Purpose-led Strategy, including the re-focusing of the NWM franchise, the phased withdrawal from the Republic of Ireland and NatWest Group’s ability to achieve its targets); financial resilience risk (including in
respect of: NatWest Group’s ability to meet targets and to resume discretionary capital distributions; the competitive environment; counterparty risk; prudential regulatory requirements for capital and MREL; funding risk; changes in the credit
ratings; the adequacy of NatWest Group’s resolution plans; the requirements of regulatory stress tests; model risk; sensitivity to accounting policies, judgments, assumptions and estimates; changes in applicable accounting standards; the value or
effectiveness of credit protection; and the application of UK statutory stabilisation or resolution powers); climate and sustainability risk (including in respect of: risks relating to climate change and the transitioning to a low carbon economy; the
implementation of NatWest Group’s climate change strategy and climate change resilient systems, controls and procedures; increased model risk; the failure to adapt to emerging climate, environmental and sustainability risks and opportunities;
changes in ESG ratings; increasing levels of climate, environmental and sustainability related regulation and oversight; and climate, environmental and sustainability related litigation, enforcement proceedings and investigations); operational and
IT resilience risk (including in respect of: operational risks (including reliance on third party suppliers); cyberattacks; the accuracy and effective use of data; complex IT systems (including those that enable remote working); attracting, retaining and
developing senior management and skilled personnel; NatWest Group’s risk management framework; and reputational risk); and legal, regulatory and conduct risk (including in respect of: the impact of substantial regulation and oversight;
compliance with regulatory requirements; the outcome of legal, regulatory and governmental actions and investigations; the replacement of LIBOR, EURIBOR and other IBOR rates; heightened regulatory and governmental scrutiny (including by
competition authorities); implementation of the Alternative Remedies Package; and changes in tax legislation or failure to generate future taxable profits).
The information, statements and opinions contained in this document do not constitute a public offer under any applicable legislation or an offer to sell or a solicitation of an offer to buy any securities or financial instruments or any advice or
recommendation with respect to such securities or other financial instruments.
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