H1 2020 Results 31 st July 2020
Agenda Topic Presen enter er Performance update Alison n Rose Detailed H1 & Q2 results Katie Murray Investment case Alison n Rose
Perform ormanc ance e update ate ALISON SON ROSE, E, Chief Executive Officer 3
H1 results highlights Opera ratin ting g prof ofit 1 Impai airments nts CET1 1 ratio tio % H1 2020 highlights £2.9 billion £2.1 billion 17.2% I mpairment charges as at H1’20 CET1 Ratio up 60 bps vs Q1’20 Operating Profit before impairment Operating loss before tax £0.8bn losses, up 3% on H1’19 driven by net impairments of +2.6bn bn £2.9bn (£0.8) 8) billion 2.9 16.6% 17.2% Operating Loss before tax, down 0.3 Robust capital position with £2.5 billion vs H1’19 Q1’20 Q2’20 strong liquidity levels H1’20 H1’19 Attrib tribut utab able loss Other er expe penses ses 2 Liqui quidi dity Coverag erage ratio tio % 166% (£0.7) 7) billion £3.3 billion Liquidity Coverage Ratio +14p.p. vs £2.0 billion attributable profit in H1’19 Operating expenses excluding Q1’20 Operating lease depreciation down £41m vs H1’19 -1% 1% 166% 166% 152% 152% 3.34 3.30 Q1’20 Q2’20 H1’20 H1’19 1. Excluding the £990m impact of the strategic disposal (Alawwal) in Q2’19 4 2. Operating expenses excluding operating lease depreciation
H1 results highlights We have a robust £2 £2.9 .9bn bn 17.2% 17.2% absolute and relative capital position versus Impairm rment ent charge e CET1 1 ratio o UK listed banks – this Q2’20 Impairment charge of £2.1bn vs We have shaped a capital generative business is underpinned by a £0.8 bn in Q1’20 that in the medium to long term will operate at a CET1 ratio of 13%-14% resilient, capital generative and well Robust capital levels: Our ECL provision has increased to 320-420 bps or c.£5.8-7.6bn headroom to ‒ diversified business £6.4bn target CET1 ratio 830 bps or £15bn headroom to MDA 2 ‒ UK listed banks average MDA 2 headroom of ‒ 365bps 1 Majority of expected FY’20 impairment charge captured in H1’20 Clear intention to return to paying dividends as soon as possible, targeting a pay-out ratio of 40% over time. Expect FY’20 Impairment charge in the Capital return to shareholders is a clear range of £3.5bn to £4.5bn (1% to 1.3% of preference with all other options only considered Loans and advances 3 ) based on current if they provide compelling shareholder value and economic assumptions strategic rationale 1. UK listed banks average of Lloyds, Barclays Group, Santander UK and HSBC Group based on Q1’20 data 2. Maximum Distributable Amount 5 3. Based on Total Loans and advances at H1’20
H1 results highlights Key messages Purpose Pu ose-led, ed, lon ong te term m decisi ision on ma making Strong customer franchises Safe Balanced and consistent approach to risk Simple Focus on simplification and taking costs out Smart Robust balance sheet with strong capital & liquidity levels Focused on generating shareholder value 6
Purpose-led, long term decision making Strong g innovati ation on pipeli line ne in H1 2020 IT investment Credit t scoring on the Payit powering operational Bounce back loans mobile e app Open Banking solution for e-commerce payments 1.8m 8m customers using Fully digital application effectiveness and Settlement within 2 hours rs the feature, NPS +52 3 launched in 6 days innovation agenda In UK PB we now have over 7.2 5 th March 4 th May 25 th June million active mobile users, whilst three quarters of our current Enabled our customers’ rapid digital shift account customers in UK PB and almost all Commercial Banking Digit ital l enga gage gement ment Online ine paymen ments 2 Use of digita ital l tools customers regularly use digital H1’20 H1’20 banking. 500,000+ 42m+ Intelligent payments tool for SMEs Digital sales mix for UK PB is 80% New mobile app downloads Online Banking payments as at Q2’20, up from 55% in c.+17% c.4.6m 485,000+ Q1’20 and 49% in Q2’19 Transactions processed to Average daily mobile New online banking customers date, worth nearly £160m 0m payments, June vs. Jan 2020 +18pts 1 increase in NPS for Branch network (Retail) +20 Q2’20 NPS for Commercial Banking All statistics quoted are as at 30/06/2020, unless otherwise stated 1. Vs pre-Covid levels (average of December 2019 to February 2020 2. Refers to UK PB 7 3. As at April 2020
Strong customer franchises Personal al Banking ng: : UK PB lending g & card spend UK Personal Banking Mortga rtgage ges s & Pe Personal onal loan ans s Debit t and credit card rd spend d and Commercial Monthly new loans issued, # Monthly spend, as % of January spend Banking activity in Mortgages 50k £7.87bn £7.83bn 100% Personal loans H1’20 £1.28bn UK PB: New mortgages and personal £0.98bn 20k loans down 43% and 75% in Q2 vs. 50% Q1, with signs of improvement from Debit cards Credit cards June following the easing of lockdown Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun restrictions and stamp duty changes July highlight ghts Debit card spend decreased by 10% in Commer ercia ial l Bankin ing g lending ng ▪ Debit and credit card spend are up 10% on June levels Q2, as reduced spend was partially Month on month movement, £bn offset by substitution of cash for card ▪ Mortgage completions are up 10% on June levels 5.6 Commercial Banking customer ▪ Mortgage application volumes have increased c.30% on behaviour resulted in increased June levels and are nearing pre-Covid levels 3.6 utilisation of RCFs before government ▪ Weekly commercial card and cash transactions have 1.6 measures introduced in April, with more than doubled by volume from a low point in April customers paying down on RCFs and -0.4 taking up government support ▪ Demand for Government schemes is now tapering off schemes from the initial peak. In July we have seen up to 2000 -2.4 applications a day for bounce back loans compared to Jan Feb Mar Apr May Jun an average of 20,000 a day in the week they were CLBIL BBL launched and around 48,000 on the first day 1. RCFs: Revolving Credit Facilities CBIL RCF 1 8
Strong customer franchises Paymen ent t holidays ys % of book % requeste ted d extensi sion n after People & Families Volumes initial holiday period UK Personal Banking continues to support customers whose 20% approximately 1/3 rd UK Person onal l Mortgages 240,000 income has been impacted by Bankin ing Covid-19 Personal 7% approximately 1/3 rd 72,000 Loans Business Providing lending support to our Commercial Banking customers, with a disciplined approach in line Applicati tion n value Approve ved d % Market t Drawn with our risk appetite £bn £bn Share 4 £bn Lending support has been Commercial ercial extended only to our existing 3.2 c.30% 2.3 CBILS 1 c.£4.0bn Bankin ing customers and is generating positive ROE 0.7 c.28% 0.2 CLBILS 2 c.£1.2bn 6.1 c.20% 5.8 BBLS 3 c.£7.8bn 1. CBILS: Coronavirus Business Interruption Loan Scheme 3. BBLS: Bounce Back Loan Scheme 2. CLBILS: Coronavirus Large Business Interruption Loan Scheme 4. Of approved schemes, according to Data per HM Treasury 9 All statistics quoted are as at 30/06/2020, unless otherwise stated
Balanced and consistent approach to risk Total Loans & Advances es 1 , , H1 ’20 Spotlight t on Personal al loans, , H1 ’20 Loan book is well diversified across Secured Personal Banking Unsecured £196bn 93% 93% 7% 7% 196 Limited unsecured exposure in (53%) our personal loan book Stable average loan-to-value £370bn (LTV) within the mortgage book UK Personal al Banking ng Mortgag ages es by LTV band 1 UK Personal Bank Mortgage Portfolio % FY’19 H1’20 175 35% (47%) ≤50% 34% 52% > 50≤80% 53% 13% > 80≤100% 12% Personal loans Wholesale lending FY’19 H1’20 57% 57% Weighted avg. LTV 10 1. Figures may not cast due to rounding. Loans – amortised cost and FVOCI
Balanced and consistent approach to risk Total Loans & Advanc nces es 1 , , H1 ’20 Spotlight t on sectors rs in focus for managemen ement, t, H1 ’20 Loan book is well Total loans and advances 1,2 , £bn diversified across Commercial Banking Oil & Gas Transport 196 2.1 Airlines 4.6 (53%) Management is focused on key 2.4 Shipping sectors affected by COVID-19 1.2 £28bn 28 £370bn Exposure to sectors in focus is (£29bn as at Q1’20) (8%) down on Q1 10.0 7.9 Leisure Retail Stage 3 loans are £1bn with an appropriate ECL coverage ratio 146 (39%) of 55% ECL Stage Loans, £bn Loans, % covera rage, e, % Personal loans Stage 1 7.8 27.7% 0.7% Sectors in focus for management Stage 2 19.4 68.7% 3.9% Other wholesale lending Stage 3 1.0 3.6% 55.3% 1. Loans – amortised cost and FVOCI 11 2. Subset of Corporate loans, see p.46 of the NatWest Group plc’s H1 IMS
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