NatWest Group PLC

Welcome everyone.

Today's presentation will be hosted by Chairman Howard Davis, CEO Alison Rose and CFO Katie Murray. After the presentation, we will open up for questions.

Good morning and thank you for joining us today. As usual, I'll start with an update on our strategic priorities before handing over to Katie to take us through the first half results. We'll then take your questions. So starting with the headlines. We're reporting operating profits of 2.5 billion compared to a loss of 0.8 billion in the first half last year. This includes an impairment release of 707 million as a result of an improvement in underlying credit metrics. Most of this release was made in the second quarter when we updated our economic assumptions in light of a more favourable economic outlook. And this results in an attributable profit of 1.8 billion. We continue to make good progress against our targets. Net lending grew 2.8% on an annualised basis, driven by growth in mortgage lending. We reduced costs by 5.9% year on year, though naturally our progress here will not be linear, and we continue to target a reduction rate of about 4% per annum over the next three years. As you know, this is a capital generative business, and we're reporting a CET1 ratio of 18%. This capital strength has enabled us to announce an interim dividend of three pence today and to increase the minimum annual distribution over the next three years from 800 million to a billion pounds. We're also announcing an initial on-market share buyback of up to 750 million, in addition to the 1.1 billion directed buyback of almost 5% of our share capital from the government earlier this year. This brings total distributions for 2021 to about £2.9 billion. And you will have also seen the announcement last week that the government intends to sell part of their shareholding over the 12 months from August onwards. So those are the headlines, and I'll now move on to our strategic priorities on slide four. Against the background of an ongoing pandemic, placing purpose at the heart of our business with our commitment to helping people, families, and businesses to thrive remains of paramount importance. We continue to execute on our strategic priorities, invest for growth, and accelerate our digital transformation in order to drive shareholder returns and deliver on our targets over the next three years. So let me tell you how we're putting purpose into practice. I'll start on slide five with our three focus areas, removing barriers to enterprise, building financial capability and leading on climate change. During the first half, we published a report on what small and medium-sized businesses need to build back after the pandemic and contribute to economic recovery. This research found the largest drivers of future economic growth include supporting more scale-ups, boosting female entrepreneurship and achieving representative workforce participation. We have relaunched our enterprise programme to reflect these priorities and committed £6 billion to support SMEs to scale up and grow, with two thirds of this allocated outside of London. Our enterprise programme has already supported 35,000 entrepreneurs this year, including more than 700 individuals on our current accelerator programme, of which 42% are female. We also continue to help customers strengthen their economic resilience with measures such as free financial health checks, financial education programs, and help in starting to save for the first time. In addition to supporting the recovery of SMEs and entrepreneurs, we're also helping young people whose lives have been badly disrupted by the pandemic. In June, we launched Career Sense, a service aimed at improving employability prospects for 13 to 24-year-olds. And on climate change, the NITA Act is now well recognised by investors. Our focus remains on financing and supporting our customers' transition to a low-carbon economy. During the year, we helped business customers raise £9.5 billion of new sustainable funding and financing, which means we have now exceeded our £20 billion target. We have also announced a collaboration with Microsoft, aimed at helping UK businesses create plans to reduce their carbon emissions. And we're working with Octopus Energy on a scheme that helps our customers transition to electric vehicles. And we have partnered with experts in carbon tracking so that customers can measure emissions associated with their spending via the NatWest Banking app. Turning now to slide six, I'd like to talk about how we're working with our customers as the economy starts to recover. Across our retail and commercial businesses, net lending grew by 4.1 billion during the first half, excluding government lending schemes. With the gradual lifting of restrictions over the past three months, both debit and credit card spending has returned to pre-COVID-19 levels. And whilst credit card balances have declined slightly, that trend started to reverse in the second quarter. Gross new mortgage lending in retail banking grew to 9.7 billion with net lending growth of 3.2 billion. We are seeing some reduction in margins in a competitive marketplace, and Katie will cover this in more detail later. In commercial banking, demand for new lending from businesses has been muted, given high levels of liquidity and significant government support. Revolving credit facility utilization is now around 20% compared to a peak of 40% in April last year. And looking at the government lending schemes, we approved lending of some £14 billion in 2020, of which around 60% was bounce-back loans to small businesses, 30% was C-bills for medium-sized businesses, and the balance was to large corporates. Since the first anniversary of the schemes, when repayments started, 5% of all our bounce-back loans have been repaid in full. and of customers due to start repayments, 92% are now repaying on or ahead of schedule. As you know, the government introduced Pay As You Grow in April, which enables businesses with these loans to request an extension or take a repayment holiday. Just 5% of our Bounce Back Loan customers have asked for a payment holiday through this scheme. In addition to supporting our customers through the pandemic, we are also focused on delivering growth by serving them at key stages throughout their lives, whether it's borrowing to buy a house or saving for retirement. You will see on slide seven that while our share of current accounts in retail banking remains stable at about 16%, we are gradually growing our stock share of mortgages. This is now 11% compared to 10.9% at the full year and 10.6% this time last year. I told you in February how we are transforming customer journeys to drive growth, improve efficiency and reduce costs. And a good example of this is the much improved online process for renewing mortgages that can take as little as 10 minutes compared to anywhere up to three weeks when it was done manually. In private banking, we have brought together our wealth management businesses to make better use of our asset management expertise so that we can support the saving and investment needs of customers more effectively right across the group. Assets under management and administration grew by over 8% or £2.6 billion during the first half to £34.7 billion. £1.4 billion of this increase was net new inflows, of which about 30% were via our digital platforms. These platforms give customers online access to a range of funds managed by the investment team in private banking. digital inflows were more than double the level in the first half last year, which is testament to our ongoing digital transformation. Turning to commercial banking and NatWest markets on slide eight. We continue to be the largest supporter of businesses in the UK with a leading net promoter school. Lending in commercial banking has decreased since the year end, as customers continue to deleverage and revolving credit facilities are paid down. As I said earlier, we have made a significant commitment to supporting small and medium-sized businesses as the economy recovers, since they drive almost half of UK turnover and employ over 40% of the private sector workforce. We are also providing more services for our commercial customers by investing in technology-led innovation and products. Our merchant acquiring platform, TIL, and online payment service PayIt are valuable additions for these customers. Till has processed over a billion pounds worth of transactions since its launch, and we have carried out half a million transactions via PayIt since customers started using it in August last year. We're also extending online offerings such as Rapid Cash, which enables businesses to borrow against unpaid invoices, and Path, which is a one-stop shop for HR and compliance. Both of these have offered a lifeline during the pandemic. In NatWest Markets, the transformation into a simpler, less capital-intensive business is progressing well as we reshape it to focus on corporate and institutional customers in areas such as interest rate risk management, foreign exchange, and capital markets. Our performance in NatWest Markets compared to the first half last year reflects lower levels of market volatility, Similar to others, we experienced lower fixed income activity, whilst our currencies and capital markets businesses are performing broadly in line with expectations. We remain comfortable with income growing to between 800 million and a billion pounds over the medium term. And as our capital restructuring is almost complete, the business is now focused on growth. We have recently established a dedicated climate and ESG capital markets team and continue to leverage our leading position in sustainable financing. As I mentioned earlier, during the first half, we delivered £9.5 billion of climate funding and financing, bringing the total amount issued to £21.5 billion. So we have both accelerated and exceeded our £20 billion target. we also increased our global share in managing green social and sustainability bond underwriting to 3.8%, making us the fourth largest book runner in Europe. I want to turn now to our ongoing digital transformation. You can see on slide nine how digital adoption has continued to accelerate, whilst branch transactions have reduced by almost a third year on year. 60% of our retail customers now use only digital means to interact with us. This means people are able to access our services at any time of day from any place they want, making their lives easier and more convenient. Use of our chatbot Quora is now well established, with 44% of these interactions pleated without human intervention. And video banking accounted for an average of almost 12,000 interactions a week during the first half. enabling us to deliver personalised customer service efficiently without customers needing to travel. I told you in February that we are investing £3 billion over the next three years to support both our income growth and cost reduction initiatives. 80% of this investment is in digital and technology programmes, and this includes the digitisation of key customer journeys, I mentioned mortgage applications earlier. In addition, we are working on credit applications in our retail and commercial businesses in order to increase speed and ease of delivery whilst reducing costs. I'll turn now to capital management on slide 10. As you know, we have made strategic choices in relation to both Ulster Bank and NetWest Markets. We have made good progress on Ulster Bank and have now signed a binding agreement with Allied Irish Bank, to transfer 4.2 billion of performing commercial loans, along with colleagues supporting these loans. We also announced last week a non-binding memorandum of understanding with permanent TSB for the sale of 7.6 billion performing retail and SME loans, as well as the transfer of associated employees and branches. If completed, these two transactions would account for about 60% of the Ulster Bank loan book. Katie will talk more about the impact of this later, but we expect this to be capital accretive over the multi-year withdrawal process. In NatWest markets, RWAs now stand at 24.4 billion on a pro forma basis as we updated our model due to the end of LIBOR. And we remain on track to achieve the majority of our targeted RWA reduction to about 20 billion by the end of the year. As you'd expect, we're also managing our portfolio to reduce capital consumption and manage risk. And in commercial banking, this contributed to an £800 million reduction in our WAs during the first half. We're also actively managing our non-equity capital, and we purchased or called £2.4 billion of Tier 1 and Tier 2 securities to optimise our capital stack and reduce interest payments. Turning to slide 11, our strong capital ratio, which is well above our target ratio of 13 to 14%, gives us scope to return excess capital to shareholders, as well as to invest in the business for growth. As you know, in February, we committed to a payout ratio of 40% for ordinary dividends and distributions of at least 800 million in 2021, 22 and 23. In March, we announced a 1.1 billion directed buyback of almost 5% of our share capital, the maximum amount possible in any given year. Today, we are announcing an interim dividend of 3 pence and have revised our minimum annual distribution from 800 million to a billion pounds. We're also announcing an initial on-market share buyback of up to 750 million. and this brings total distributions for 2021 to a minimum of £2.9 billion. Katie will take you through a more detailed breakdown of how we plan to reach our target CET1 ratio by 2023. And so with that, I'll hand over to Katie to take you through our financial performance.