NatWest Group PLC

Good morning everyone and thank you for joining Alice and Katie and me for our full year 2020 results presentation. It's fair to say that 2020 was a year like no other. Politicians, regulators and industry leaders had to come together and find urgent solutions to a series of rapidly evolving challenges caused by the pandemic. And the United Kingdom left the European Union after nearly 50 years of membership. At the last minute, the trade agreement with the EU avoided a disorderly exit, but there's still a lot of work to do and significant uncertainty persists, particularly in financial services. The direct impact of Brexit is not as significant for the NatWest Group as it is for banks with larger EU or markets operations, and we are as prepared as we can be through well-capitalized operational entities in the EU. Any wider economic impacts on the UK will, however, clearly have implications for the bank's performance in the medium term. Against that extraordinary backdrop, we provided exceptional levels of much-needed support to our customers and the communities in which we work throughout 2020. Although the persistent low interest rate environment and ongoing COVID-19 restrictions will continue to challenge financial performance amongst all UK banks for the foreseeable future, Our bank is well positioned to navigate the ongoing uncertainty and is making good progress against its purpose-led strategy. By embedding our purpose at the core of our business, we have signalled our intention to deliver not only a sustainable financial performance for shareholders, but to make a positive contribution to society. In December, the PRA made the welcome announcement that it was lifting restrictions on capital returns for UK banks, subject to certain sensible guardrails. Following that decision, we have announced a final dividend of three pence per share, and subject to permission from the regulators, we plan to distribute at least £800 million each year to 2023 through a combination of ordinary and special dividends, maintaining our 40% payout ratio for ordinary dividends. The Board are grateful to Alison and her senior team for the leadership and energy they've displayed in remarkably challenging circumstances. We firmly believe that we have a well-balanced leadership team in place with the necessary experience and expertise to deliver our objectives. And with that, I will hand over to Alison and Katie, who will take you through our results and our strategic priorities in more detail. Alison.

Thank you, Howard, and good morning. I'll start with an update on our strategic priorities before handing over to Katie to take you through the full year results. We'll then open it up for questions. So starting with the headlines. Against a backdrop of economic uncertainty, we have delivered a resilient performance while supporting customers throughout the pandemic and accelerating our digital transformation. Today, we're reporting an operating profit before impairment of 2.9 billion for the full year, with impairments of 3.2 billion below our guided range. Our well-diversified loan book remains resilient and there has been little change in stage migration. Taking impairments into account, this resulted in an operating loss before tax of £350 million and an attributable loss of £750 million. Despite the challenges of the pandemic, we have continued with disciplined execution of our strategic priorities, strengthened our executive team and delivered on our targets. During the year, we grew retail and commercial lending by 7% versus our target of 3%. We reduced costs by £277 million, above our target of £250 million. And we continue to reshape NatWest Markets, reducing our WA's to £27 billion, well below our £32 billion target. This resulted in an initial dividend of £500 million from NatWest Markets to the Group this month. As a capital generative business, we operate with one of the strongest capital ratios of our European peer group at 18.5%. And as I have said before, this gives us the flexibility to navigate continuing uncertainty, to consider options for creating shareholder values, such as our recent acquisition from Metrobank, and to return capital to shareholders. Following the Bank of England's announcement in December, I'm pleased to announce that we're reporting a proposed final dividend of 3 pence per share today, which is the maximum allowed within their guardrails. Subject to regulatory permission, our intention remains to return capital to shareholders with a payout ratio of 40% for ordinary dividends and with distributions of at least 800 million per annum in 2021, 2022 and 2023, giving us the capacity to participate in directed buybacks from the government. You will have seen that we have also announced this morning the conclusion of our strategic review on Ulster Bank. Despite the progress that has been made in recent years, it is clear that Ulster Bank's business in the Republic of Ireland will not be able to generate sustainable long-term returns. So we have decided to make a phased withdrawal over the coming years, and I'll cover this in more detail later. So those are the headlines, and I'll move on now to talk about our strategic priorities on slide five. This time a year ago, we set out a purpose-led strategy just before COVID-19. And it's an understatement to say it was not quite the year I had anticipated when I stood up in front of you last February. Yet the experience of 2020 has shown that it has never been more important to put purpose at the heart of our business, helping people, families and businesses to thrive. And throughout this year, we have done everything we can to put this into practice. Our purpose is underpinned by four strategic priorities with a plan to drive sustainable returns by serving customers across their lifetime to generate value, powering the organization through innovation and partnerships, simplifying and digitizing our business to improve customer experience, increase efficiency and reduce costs, and by deploying our capital effectively to maximize returns. Our purpose is also exemplified by three focus areas. removing barriers to enterprise, building financial capability, and leading on climate change, which deliver benefits for all our stakeholders and deepen our ability to drive long-term sustainable returns. So let me give you a flavor of what putting purpose into practice has entailed in 2020 on slide six. Over the last year, our people have done everything they can to support our customers in the face of exceptional challenges, and I'd like to thank my colleagues for their incredible dedication and commitment. At the start of the pandemic, we set up remote working for over 50,000 colleagues and kept 95% of our branch network open for customers who need us, whilst also accelerating our digital offering. We provided mortgage holidays, capital repayment holidays, help for vulnerable customers and approved over 14 billion of loans under government lending schemes. Demand for this support has been tapering since the second quarter, and despite the ongoing pandemic and extension of government lending schemes, current trends show no increase in demand, no increase in impairments, and continued growth in mortgage lending. Nevertheless, we recognise that there are tough times ahead for some of our customers as the pandemic continues, and we continue to work closely with them to understand their needs. During the year, we also responded to customer needs through our three focus areas, which I'll cover on slide seven. We are committed to removing barriers to enterprise as a vital means of supporting economic growth and job creation, whilst also generating income for NatWest. We recognise the pandemic has presented particular challenges for entrepreneurs, and we have pivoted to digital channels to continue to support them. We migrated our 12 accelerator hubs around the country to digital delivery and welcomed over 1,200 new entrepreneurs to virtual accelerator programs. We helped more than 14,000 entrepreneurs through Business Builder, which offers advice and networking opportunities online. And we hosted over 1,000 virtual events for more than 45,000 business owners across the country. We also supported female entrepreneurs in 2020 by creating a £1 billion fund to which we added a further billion this year. On learning, there has never been a greater need for financial capability and the pandemic has left many people struggling with their finances. And our banking app, which offers customers dedicated support and advice, has helped them manage debt, understand personal credit scores and stay in control of their money. We reached 2.9 million people in 2020 through activities such as free financial health checks, our financial education programme Money Sense and training on forward awareness. And we also helped over half a million people start saving with us for the first time. Our commitments on climate change recognise that this is a risk of ever increasing importance for investors and customers. We are helping the transition to a low carbon economy by aiming to halve the climate impact of our financing activity by 2030. During 2020, we reduced our exposure to the oil and gas sector by about 16%, and it's worth noting that oil and gas represents less than 1% of our loan book. We also helped business customers raise £12 billion of new sustainable financing and funding, enabling us to bring forward our £20 billion target from 2022 to this year, which we now expect to exceed. We launched our first green mortgage in the autumn and having achieved net zero on our own operations in 2020, we remain focused on making them climate positive by 2025. So looking at our activity across the year, our purpose has served as well. I'd like to talk now about progress on our strategic priorities on slide eight. Our strategy remains focused on delivering sustainable returns over time. and our clear priorities are first to build sustainable growth with a continued strong risk discipline. We have lent above the market rate in 2020 and expect to continue to do so over the next three years. Secondly, we are simplifying the business and delivering cost efficiencies. We expect to reduce costs by about 4% a year through to 2023, leveraging our investment in technology. And third, we are actively managing capital in order to maximise returns and aim to operate with a CET1 ratio of 13% to 14% by 2023. So let me move on now to talk about generating income growth on slide nine. We benefit from having strong customer franchises across the business that provide multiple growth opportunities, and we are building on our strengths to serve customers across key moments in their lives. In retail banking, we have a 16% share of current accounts but a lower stock share in mortgage lending. We see mortgages as an attractive growth area and we continue to grow organically in 2020. Our stock share increased to 10.9% up from 10.2% in 2019 with net new lending of £12.5 billion. In addition, we acquired a £3 billion mortgage portfolio from Metrobank which supplements our organic growth plans and represents a positive contribution to income. We plan to build on this position and grow further whilst maintaining strong pricing discipline. In private banking, we brought our wealth businesses together last summer so that we can make better use of our asset management expertise to support saving and investment needs for customers across the group. For example, our online platform, NatWest Invest, gives customers a simple way to invest in a range of funds managed by the investment team in private banking. Over 1,600 new customers were onboarded by Private Banking in 2020, and assets under management or administration grew about 6%, or 1.7 billion, almost half of which was net new inflows. By working across the group to help more customers meet their investment needs, we plan to grow assets under management significantly over the next three years. Turning to commercial banking on slide 10. We are the largest supporter of businesses in the UK, with a leading net promoter score, and nearly 70% of our sales in our commercial bank were digital in 2020. We are providing more services for our commercial customers by investing in technology-led innovation and products, such as our merchant acquiring platform, Till, which continues to gain traction, and our new payment platform, PayIt.com. PayIt was launched last June using the UK's open banking infrastructure to enable online payments direct from consumer bank accounts in close to real time. We're also investing in digital capabilities that will enable us to deliver a relationship management experience to 16,000 more customers, but at a lower cost. We have enhanced our proposition for small business customers with our digital-only business bank, Metal, as well as online offerings such as RapidCash which enables businesses to borrow against unpaid invoices, and Path, a one-stop shop for HR and compliance that has been a lifeline for businesses during COVID. Finally, in NatWest Markets, the team are executing well and reshaping the business to serve corporate and institutional customers with leading products and capabilities in areas such as foreign exchange, interest rate risk management, and capital markets. With a simplified and less capital-intensive business that is better integrated into the bank, we are extending our expertise in foreign exchange across the group, deepening our coverage and product offering for commercial customers, and leveraging our leading position on sustainable financing, where we brought forward our £20 billion target from next year to this year, as I mentioned earlier, and we expect to exceed it. You can see on slide 11 how the pandemic has accelerated the rate of digital adoption over the past year. 58% of our retail customers now use digital only to interact with us, up from 46% a year ago, while transaction volumes through branches continue to decline as a result of changing customer behavior. We are investing in digital transformation to create a relationship bank for a digital world. In other words, a bank where customers can interact with us in person or online at any time of the day and from any place they choose. Video banking is a good example of this, with meetings up from under 100 a week in January last year to around 15,000 a week in January this year. Use of our artificial intelligence chatbot Quora grew 67% in 2020 to 9 million interactions, of which 40% were completed without any human intervention. Our ongoing digital transformation, together with the initiatives I've spoken about in each of the businesses, will help us acquire new customers, drive additional revenue generation and support our lending growth target. It will also help us to increase efficiency and reduce costs, which I will cover on slide 12. Customer journeys currently account for 30% of our cost base, so transforming them through greater automation will have a significant impact on our operating costs. We were able to extend over £8 billion of bounce-back loans last year by creating an end-to-end digital application process within the space of a week. We also used automation to improve account opening in commercial banking last year, resulting in a net promoter score of 60, up from 16. and we are building on this experience to continue to transform other customer journeys. For example, since last September, customers have been able to renew their mortgage online in a simple straight-through process that takes as little as 10 minutes, compared with anywhere up to 23 days when the process was manual. Our mortgage retention levels improved to about 80% in 2020, compared to about 70% in 2019. We're now planning to extend digital decision-making across all our channels, creating greater speed and certainty for our customers. With further automation like this, we are targeting gross savings in the region of 300 million by 2023 as part of our cost reduction target of around 4% per annum. So let me turn now to investment on slide 13. We intend to invest £3 billion over the next three years, of which more than half will support our income growth and cost reduction initiatives. Our aim is to build a technology and data-driven business supported by greater automation, artificial intelligence and robotics in order to improve customer experience, increase efficiency and reduce costs. We're also expecting to reduce strategic costs to around 800 million in 2021 with a continued reduction through to 2023. Turning to slide 14, I'd like to update you on our decision on Ulster Bank. After an extensive review it has become clear that Ulster Bank's business in the Republic of Ireland will not be able to generate an acceptable level of sustainable returns. As a result, we have decided to make a phased withdrawal from the Republic of Ireland over the coming years in an orderly manner. We will do everything we can to ensure that customers and colleagues are well supported and that service is maintained. In the near term, there will be minimal change for customers and colleagues. And we have also made a commitment that there will be no job losses or branch closures in the Republic of Ireland this year. As part of this phased withdrawal, the group has entered into a memorandum of understanding with AIB to sell Ulster Bank's performing commercial loan book and to transfer some Ulster Bank colleagues supporting this loan book. Naturally, any transaction is subject to the usual due diligence as well as regulatory approval. We are also in early stage discussions with other strategic partners about other retail and SME assets and liabilities. We expect the withdrawal from the Republic of Ireland to be capital accretive over the duration of the process. This decision has no impact on Ulster Bank in Northern Ireland. We are continuing to actively manage capital across the group in other ways, as you can see on slide 15. In NatWest Markets, we're ahead of plan as we reduce risk-rated assets and expect to have largely completed our RWA restructuring by the end of this year. We're also managing portfolios and using synthetic trades across the business to reduce capital consumption, manage risk and improve returns. For example, we took actions to offset RWA growth in commercial banking last year, which reduced them by 800 million, and we will make further reductions this year. We expect combined exit and disposal losses from NatWest Markets and commercial banking of around 300 million in 2021. In retail banking, we have sold about 3 billion of non-performing debt over the past four years. and we continually optimize our regulatory capital with liability management exercises. We're focused on maximizing our capital efficiency in order to improve returns to shareholders, which I will cover on slide 16. As you know, NatWest is a capital generative business and our strong capital position has been an advantage over the past year when it has given us both security and flexibility in an uncertain environment. Yet with a CET1 ratio of 18.5%, we are operating well above our target ratio of 13 to 14%. As I said earlier, we are reporting a final dividend of three pence today and subject to permission from the regulators, we plan to distribute at least 800 million per annum in 2021, 22 and 23 through a combination of ordinary and special dividends, maintaining our 40% payout ratio for ordinary dividends. This gives us the capacity to participate in directed buybacks from the government for up to 4.99% of issued share capital a year. Our intention remains to return capital to shareholders or pursue other options that create value. And we have now set out a clear glide path to reach our 2023 target CET1 ratio of 13 to 14%. So let me conclude on slide 17. The economic outlook remains uncertain in an ongoing pandemic, and whilst we welcome the vaccination programme, the duration of the current lockdown remains unclear. In this environment, we continue to do everything we can to support our customers whilst advancing our strategy and accelerating our digital transformation. Our focus is on driving improved shareholder returns by growing income, reducing costs and maximising capital efficiency. With disciplined execution in each of these areas, we expect to deliver a return on tangible equity of 9% to 10% by the end of our three-year plan. With that, I'll hand over to Katie to take you through the financial performance in more detail.

Thank you, Alison, and good morning, everyone. I will start with the group income statement, and I'm going to focus performance on the fourth quarter. Total income of £2.5 billion was up 4.6% on the third quarter. Within this, net interest income grew 2% to £2 billion and non-interest income was up 13% to £564 million. This increase reflects strong lending volumes, increased margins on mortgages and a non-recurring loss of £324 million on the liability management exercise in the third quarter. Total income, excluding all notable items, was down 4% on the third quarter as a result of lower levels of customer activity and tight risk management in NatWest markets, partially offset by income growth of 2% across our other businesses. Operating expenses grew 29% to £2.3 billion, driven by the annual UK bank levy, higher strategic costs, which were up around £100 million, and increased litigation and conduct costs. This means we're reporting an operating profit before impairments of £194 million, 68% lower than the third quarter. The impairment charge for the fourth quarter decreased to £130 million. This represents 14 basis points of gross customer loans, and I will talk more about this later. Taking all of this together, were reported an operating profit before tax of £64 million. The attributable loss to ordinary shareholders of £109 million reflects deferred tax movements in Ulster Bank and Royal Bank of Scotland, along with coupons on 81 bonds and preference shares. I'll move on now to net interest income on slide 20. Group net interest income for the fourth quarter was £45 million higher than the third, If you look at the columns for the third quarter on the left and the fourth quarter on the right, you can see that banking net interest income grew £26 million or 1.3%. This reflects strong mortgage growth, improved mortgage margins and lower issuance costs following the repurchase of legacy instruments in Q3. The strong position in the centre is in part the result of this repurchase. Turning to bank net interest margin, this increased one basis point in the fourth quarter to 166 basis points. This is the result of three factors. The lower yield curve accounted for a fall of two basis points due to the structural hedge. This was offset by a one basis point increase for liquidity and two basis point increase for mix and pricing. The change in mix and pricing reflects the full quarter benefit of higher overdraft fees, as well as the liability management exercise. Moving on now to look at the drivers of net interest margin. On slide 21, we show customer loan and deposit rates for retail and commercial banking, which together account for over 80% of group net interest income. We also show the overall group gross yield and cost of interest earning banking assets, which covers the rest of the balance sheet. notably the lower yielding liquidity portfolio and our higher cost wholesale funding. On the asset or lending side, yields across the Group continue to fall, reflecting the pass-through of lower interest rates. But the pace of reduction slowed further in the fourth quarter. Gross yield for the Group declined by nine basis points to 185 basis points, compared to a 13 basis point decline in Q3. This was driven by commercial banking, where front book rates remained below the back book due to the rate cut earlier in the year. On the liability or deposit side, costs reduced by a further 17 basis points to 50 basis points in the fourth quarter, largely driven by the repurchase of legacy instruments in Q3. Overall, deposit costs have stabilised. Looking at net interest margin in the first quarter of 2021, there are three main factors to consider. First, ongoing pressure from the structural hedge. We expect this to be greater in 2021, at a little over three basis points per quarter. This will not be completely linear, and to be absolutely clear, over the year, it equates to a reduction in income of a little over £300 million from our hedge portfolio compared to 2020. Second, a change in liquidity. In January, we repaid £5 million of TFSME loans. However, our deposit base has continued to grow during our third lockdown, and liquidity levels will depend on customer behaviour in the coming months. The third factor is mix and pricing. Mortgage margins on the front book increased in the fourth quarter to 161 basis points. above an improved back book of 147 basis points. Application margins grew to 180 basis points. However, we expect them to reduce during the year as demand tapers. Mix will also be affected by demand for higher margin unsecured and corporate lending, which will ultimately depend on lockdowns and the shape of economic recovery. Moving on now to look at volumes on slide 22. Growth banking loans increased by £9 billion in the fourth quarter, driven by mortgages, which grew £6 billion, or 3%, reflecting strong demand ahead of the stamp duty deadline. And of course, the £3 billion portfolio acquired from Metrobank. Our retail banking flow share in the fourth quarter was 13% above our stock share of 10.9%. Mortgages now make up 51% of total customer loans across the bank. Unsecured balances declined slightly in the fourth quarter, both across personal advances and credit cards. Demand for government schemes also slowed further, but this still accounted for £1.6 billion of additional lending. However, this was more than offset by £2.4 billion of RCF repayments in commercial banking. with utilisation in Q4 of 22%, lower than the usual pre-Covid levels of 27%. Average interest-earning banking assets grew by £4 billion, or 1%, as Metro Bank completed late in the quarter. Looking now at the charges year on year, gross banking loans increased by £36 billion, or 11%, driven by mortgage growth of £16.5 billion, and government lending schemes of £12.9 billion. Average interest earning banking assets were £53 billion higher than the fourth quarter of 2019, reflecting increased liquidity. Customer deposits grew by £62 billion, which reduced our loan-to-deposit ratio by five percentage points to 84%. Moving on now to look at non-interest income on slide 23. Fourth quarter non-interest income excluding notable items was £645 million, 34% lower than the same period last year and 19% down on the third quarter this year. Within this, income from trading activities decreased 59% from the third quarter to £122 million. This reflects a weaker performance on the fixed income business with lower levels of customer activity, tight risk management and a further reduction of RWAs. Looking ahead, we expect NatWest Markets' income, excluding disposal losses, to be in the range of £800 to £1 billion for 2021, as a result of more normalised market conditions, as well as the ongoing reduction in RWAs towards our medium-term target of around £20 billion. Moving now to fees and commissions for the retail and commercial bank, which increased 6% from the third quarter to £491 million. This was driven by lending and payment services in the commercial bank. Despite this recovery, fees and commissions remained below the fourth quarter of last year, in part due to regulatory changes in retail banking. The impact on group income for 2020 was around £200 million and you will see the full annualised effect this year. The outlook for fees and commissions is uncertain given the current national lockdown, but we would expect them to grow as the economy recovers. So to round off my comments on income, we are targeting lending growth above the market rate in 2021, which we expect to be more than offset by two main headwinds. the impact of the structural hedge and the income reduction in NatWest markets that I just mentioned. As a result, we expect income, excluding notable items, to be slightly lower in 2021 than 2020. I covered costs in my opening slide, so I'll move now on to look at ECL on slide 24. You'll remember from the half year that our modelling is based on four different economic scenarios. to which we attach a probability weighting. We use the two central scenarios to reflect our expected outlook, each with the same probability weighting of 35%. Given the stabilisation of economics, we have now increased the probability weighting to 40% for our base case. This scenario anticipates GDP growth of around 4.5% in 2021. Unemployment rate averages 6.3%, with an improvement expected from Q4. A decline in house prices in low single digits is forecast for this year, before steadily reversing from 2022 onwards. And interest rates are expected to remain low, with an anticipated reduction in the central bank rate to zero in the second quarter this year. This 10 basis point decline feels a little conservative today, but as we were discussing negative rates only two weeks ago, this is clearly volatile. it would represent around £60 million of income for 2021. We have included £878 million of post-model adjustments for economic uncertainty in our ECL provisions until further credit performance data becomes available as government support protection unwinds. These assumptions are reflected in our expected credit loss provisions of £6.2 billion for the full year. You will see our updated sensitivities on the slide. If we were to weight 100% to the extreme downside scenario, this would increase ECL by £2.2 billion. And if we weighted 100% to the upside, it would reduce our ECL by £840 million. So let me now cover how this impacts the impairment charge on slide 25. We reported an impairment charge in the fourth quarter of £130 million, or 14 basis points of gross customer loans. This was down from 28 basis points in Q3, largely driven by a reduced charge of £10 million in the commercial bank, compared to £127 million in Q3. This reduction reflects a number of releases, the impact of refreshing our economic assumptions and the post-model adjustments I talked about earlier. Our active capital management in the commercial bank has contributed to this low impairment charge, and we have had no tall tree exposures in 2020, or indeed this year. In retail banking, the £65 million charge is a slight reduction, mainly reflecting stage 3 default charges and updated economic scenarios. Any potential flow of new defaults is still being delayed by Government support. Our impairment charge for the full year of £3.2 billion is equivalent to 88 basis points of loans. We expect impairments for 2021 to be at or below or through the cycle guidance of 30 to 40 basis points. I would now like to talk about our risk profile on slide 26. There has been little change during the quarter as government support measures are ongoing and customers have built up healthy cash balances over the year. 97% of our loan book is in stage 1 and stage 2 not past due, where customers remain up to date on payments. Stage 2 past due is 0.8% of the book, down from 0.9% at Q3. And stage 3 is 1.7%, down from 1.9% at Q3, reflecting write-offs of legacy mortgages in Ulster. Our ECL coverage ratio is 1.7%, with stage 3 coverage of 41% in line with Q3. As we know, some of our wholesale loans are in sectors that we monitor closely. These amounted to £27 billion in Q4, which represents 7% of gross loans. In these sectors, similar to the trend at group level, Stage 3 gross loans were broadly stable at around £800 million and we remain comfortable with coverage at 52%. Turning now to look at risk-weighted assets and capital on slide 27. RWA has decreased £3.6 billion in Q4, driven by credit risk and counterparty credit risk. This reduction was mainly in NatWest Markets. We reduced RWAs by £3.1 billion to £27 billion, ahead of our £32 billion target. We expect NatWest Markets RWAs to increase slightly in the first quarter this year due to normal seasonality, but our year-end target remains appropriate. This year we expect to achieve the majority of our targeted reduction down to around £20 billion. There was no impact overall from pro-cyclicality for the full year. This reflects positive trends in retail banking, which offset the negative trends in commercial banking. We ended the year with a common equity tier one ratio of 18.5% on a transitional basis under IFRS 9. This is 30 basis points higher than Q3, driven by lower RWAs and software intangible benefits. partially offset by the proposed dividend of three pence and the linked pension contributions of £266 million post-tax. Together, these accounted for an impact of 36 basis points. Moving on to the drivers of our CET1 ratio on slide 28. We have shaped the business to operate at a CET1 ratio of 13 to 14%. and we plan to reach this level by 2023. As you can see, there are a number of factors to consider when modelling this evolution. First, we expect to generate capital as we move towards our 9-10% return target in 2023. Second, distributions to ordinary shareholders are a priority and we intend to distribute a minimum of £800 million per annum through dividends. while retaining capacity to participate in directed buybacks, for which we have regulatory permission in place today. These are also linked to pension payments, where we have committed to pay up to a further £1.1 billion pre-tax into the pension funds over the coming years. IFRS 9 transitional benefit, which accounts for around 100 basis points of our ratio, will taper down through to 2024, and will also be affected by stage migration, which remains uncertain. On the denominator, we expect RWAs to increase relative to full year 20, driven by three factors. First, lending growth. We intend to grow above market rate in the UK and RBSI, excluding government schemes, and the mix of lending will impact RWAs. Second, pro-cyclicality, which to date has been incredibly low, and the timing of which remains uncertain. Third, regulation. We expect changes made by the PRA to increase our mortgage RWAs by around £12 billion. This reflects growth in the book and assumes risk weights of around 15% as we have previously guided. While this is effective from January 1, 2022, we would expect to see some of this inflation brought forward to 2021 as a result of pro-cyclicality. On BAL3, we anticipate inflation of less than 5% in 2023, given the changes that will come into effect on January 1, 2022. These impacts will be partially offset by the ongoing refocus of NatWest markets. Taking all of these facts together, we expect RWA's in the range of £185 to £195 billion at the end of 2021, including all regulatory impacts on January 1, 2022. Turning to our capital position on slide 29. Our CET1 ratio is now 450 to 550 basis points above our 13 to 14% target range and more than double our maximum distributable amount. Our UK leverage ratio of 6.4% is 315 basis points above the Bank of England minimum requirements. We have also maintained strong liquidity levels with a high quality liquid asset pool and a stable diverse funding base. our liquidity coverage ratio increased in the quarter to 165% due to higher deposits and headroom above our minimum requirement is now £72 billion. Turning to the outlook for returns on slide 30. As Alison said, we expect NatWest Group to generate a return of tangible equity of between 9% and 10% by 2023. The key drivers behind this are, first, growth. While we expect income to be slightly down in 2021, we are targeting above market rate lending growth across our UK and RBS international retail and commercial businesses through to 2023. And we expect support from a normalisation of customer activity as we exit lockdown and as the economy recovers. Second, cost reduction. We plan to reduce other expenses by around 4% per annum, excluding the impact of the phased withdrawal from the Republic of Ireland, along with continued reduction in strategic costs. Third, capital. We intend to reduce our CET1 ratio to between 13% and 14% by 2023. And finally, we would expect ongoing impairment normalisations. So to conclude, we have delivered a resilient operating performance with growth in net interest income in the fourth quarter and continued progress on both cost and RWA reductions, accompanied by a strong capital and liquidity build. And with that, I'll hand back to Alison.