NatWest Group PLC

Good morning and welcome to the NatWest Group Annual Results 2022 Management Presentation. 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. Howard, please go ahead.

Good morning, everyone, and thank you for joining Alison, Katie and me for our full year 2022 results presentation. Against a difficult and uncertain backdrop, with at times turbulent financial markets, NatWest Group delivered a strong financial performance in the year. We achieved continued growth in our lending and further progress against our strategy. In addition, the government shareholding fell below 50% for the first time since the financial crisis. They have continued to sell in the market and their stake is now well below 44%. While the majority stake in itself had no material effect on the way the bank operates and the government did not and does not interfere in our commercial decisions, it was an important milestone underlining the progress we have made in recent years. The outlook for this year remains challenging, with a decline in economic activity expected and a further tightening of real incomes, which will inevitably affect spending and borrowing. But our strong financial performance, continued capital generation and robust balance sheet mean that we nonetheless look forward with confidence. Our strong capital position also allowed us to continue lending through the pandemic while investing to create a simpler and better banking experience for our customers and delivering on our purpose, about which Alison will say more shortly. I'm confident that the bank's strategy will ensure we can continue to support all of our stakeholders and to deliver sustainable growth and returns in the years to come. With that, I'll hand over to Alison, who will take you through our results and our future priorities in more detail.

Thank you, Howard, and good morning. I will start with a business overview and our priorities going forward before Katie takes you through the bank's performance for 2022. We will then open it up for questions. You can see the strength and resilience of our business in the results we are announcing today. In a difficult macroeconomic environment, we remain well positioned as a result of our strong customer franchise, disciplined risk management and robust balance sheet as we continue to support customers in order to generate growth. So let's start with the highlights. We delivered operating profit for the full year of 5.1 billion, up 34% on the prior year, with a tributable profit of 3.3 billion. Our return on tangible equity was 12.3%, up from 9.4% in 2021. We are reporting income of 13.1 billion, and we have continued our tight cross-discipline, reducing expenses by 2.9% in line with our target. This resulted in a much improved cost income ratio of 55.5%, down from 70% for 2021. During the year, we distributed or accrued a total of 5.1 billion for shareholders, which comprised 1.3 billion in ordinary dividends above our committed distribution of at least a billion pounds, a special dividend of 1.75 billion announced at the half year, the directed buyback of 1.2 billion completed last March, and our third on-market buyback announced today of 800 million. As a result, our common equity tier one ratio at the year end was 14.2% in line with our target. We have made excellent progress on the strategic priorities we set out three years ago. Despite the disruption caused by a global pandemic and the Russian invasion of Ukraine, we have remained focused on supporting our customers and delivering on our commitments. Thank you. Thank you. This has delivered an excellent outcome for shareholders with very significant distributions and a return on tangible equity of 12.3%, well above our initial target. In an uncertain economic environment, our strong balance sheet, high quality deposit base and disciplined risk management continue to give us a competitive edge. Whilst arrears are currently broadly stable, we are very aware of the pressures that customers face as a result of high inflation, a steep increase in energy prices and a challenging macroeconomic environment. The strength of our balance sheet, evidenced here by our capital, leverage and liquidity ratios, together with the quality of our loan book, which is almost all secured in personal lending with prudent loan-to-value ratios, make it possible for us to continue supporting customers and the UK economy through difficult times. Given the uncertain economic outlook, our purpose-led strategy has never been more relevant. We have continued to support customers by lending responsibly and helping them save for the future, with lending across our three business segments up 6.7% year-on-year. We have also proactively contacted customers with advice on managing the cost of living, carrying out free financial health checks, delivered hardship funding through charities and offered targeted support such as forbearance for those in need. Our colleagues face the same challenges as our customers, so we have supported them with targeted pay rises for the lowest paid as well as enhanced parental leave and ongoing training and development. Three years ago, I outlined four strategic priorities designed to achieve sustainable returns for shareholders. So I'd like to update you on our progress since then. By supporting our customers across every stage of their lives, we have continued to grow organically and built on our strong franchise. Customers want a bank that is easier to deal with, so we have invested in digital transformation to simplify our processes and improve customer journeys at the same time as reducing costs and increasing efficiency. For example, 72% of new retail accounts were opened with straight-through processing in 2022 compared to just 14% in 2019. 88% of retail customer needs were met digitally, and over 60% of our retail customers are now digital only. We're also using data analytics more effectively, so around 12 million personalized messages were acted on by customers last year, up nearly 40% on 2021. All of this has significantly improved customer satisfaction. Since 2019, our retail net promoter score has increased from 4 to 22. Our affluent net promoter score has gone from minus 2 to 25. And we have the leading net promoter score for commercial banking in the UK at 22. We also set out to deploy capital more effectively within a culture of strong risk management. We have reduced our RWA density from 53% to 47%. And by refocusing NatWest markets and making significant progress on our phased withdrawal from Ulster Bank Republic of Ireland, we have decreased RWAs by 20.8 billion within these entities. We actively manage risk by maintaining a well-diversified loan book where we monitor at-risk sectors closely. Our focus on driving innovation and developing strategic partnerships is enabling us to offer customers a wider range of services. As the leading commercial bank in the UK, we are proud of our digital-only business bank, Metal, which now serves 44,000 customers. And we are building out a comprehensive payments proposition for our commercial customers, which includes our payment provider, Till, and a platform using the UK's open banking infrastructure called PayIt. Our new strategic partnership with Vadena Group is just one example of how we are accessing the expertise of others and combining it with our own to deliver innovation. By putting Vadena's technological capabilities and cloud platform together with banking technology developed by Metal, we aim to create a leading UK banking as a service business. In short, we are now serving existing customers better and gaining new ones as a result of our focus on deepening relationships, digital transformation and the provision of a wider range of innovative services. I'd like to move on now to our plans moving forward. Over the past three years, we have successfully delivered our transformation. This is now a simpler organization that is more focused, more capital efficient, and easier for our customers to interact with. The purpose and priorities we set out three years ago will not change. We will continue to be a purpose-led, helping our customers to thrive, to focus on becoming a simpler organization that is highly cost efficient, Thank you. Thank you. First, by increasing our personalised engagement with customers at every stage of their lives. We've shown that we can generate value for both customers and shareholders by deepening relationships. Second, by leveraging our competitive edge as a leading UK provider of renewable financing to support customers in their transition to a net zero economy. And third, by further embedding our services into customers' digital lives. Our customers spend more time online than ever before, and we have to be where they are. We are doing all this to deliver sustainable growth and diversification of income as we participate in areas which are set to outgrow traditional banking revenue pools. So let me give you some examples in each of our businesses. In retail banking, we start from a strong position with 17 million customers, strong net promoter schools, and a growing share in mortgages and credit cards. Yet we have capacity to grow further by driving higher levels of engagement and enhancing our customer proposition. For example, we are strengthening our youth and family offering to build on the success of our rooster money acquisition, which helps young children manage money. Last year, we connected Rooster with our own app, which resulted in 90,000 new card openings during the year. We know that customers who join us in childhood have greater lifetime value than those who join us as adults and that when we serve a full family, parents become more valuable. Supporting households to act on energy efficiency is not just an essential part of making a transition to a net zero economy, but also commercially valuable. That's why we are funding a green home retrofit pilot, helping customers to decide what improvements they need to make, and then financing solutions such as insulation upgrades, heat pumps and solar panels. Our green mortgages offer a discounted interest rate to customers who buy a property with an energy efficiency rating of A or B. As part of our ambition to provide £100 billion of climate and sustainable funding and financing we aim to make at least £10 billion of lending available for homes with these ratings by the end of 2025 helping homeowners to improve energy efficiency and reduce emissions. Further embedding our services in our customers' digital lives allows us to improve both customer experience and our own efficiency. A good example of this is our digital-only mortgages. We were the first UK bank to offer a paperless mortgage so that an offer could be made within 24 hours. This has completely transformed the process of buying a property, as well as increased our market share, and we are building on this success to grow our share further. We will also support financial wellbeing by extending our free credit score service, which is currently available just for our own customers, to everyone in the UK. One of the major changes we have made in our private bank is making better use of our asset management expertise to serve our customers more effectively across the group. This has enabled us to grow assets under management to 33.4 billion since 2019, delivering a strong performance despite significant macroeconomic challenges, with 6.5 billion of net new money and a 60% increase in digital net new money. We saw new customer inflows of 5% into our private bank in 2022, of which a fifth were referrals from other parts of the group. And we see a significant opportunity to grow assets under management further by increasing the number of referrals. We also plan to scale our wealth offering, which includes not just investing, but also saving, lending and financial planning. We want to help more people invest sustainably and have set a target for our own discretionary funds to achieve net zero by 2050. And as we continue to embed our services in customers' digital lives, we are enhancing and expanding our digital investment platform, NatWest Invest. This week, we have also announced our intention to acquire a majority stake in fintech cushion. This allows us to enter the workplace savings and pension market, which is expected to double in size to well over a trillion pounds by 2031. After a successful pilot last year, we plan to extend their offering to our commercial customers in order to improve financial well-being as well as drive long-term fee income. Last year, we created a new business segment bringing together commercial and institutional banking. This is now a less capital intensive business, helping to extend our expertise in foreign exchange, interest rate management and capital markets to more commercial customers. As we look to the future, we plan to continue growing our share in startups and high growth businesses. We are the number one UK high street bank for startups with a share of 16.4%. Last year, we opened 99,000 new startup accounts, almost 40% of which were via metal. This is supported by our regional network of free accelerator hubs, which offers a program specifically tailored to high-growth businesses. And we also plan to launch a new enhanced trade finance platform to meet more customers' international needs. We have an important role to play in helping our business customers transition to a net zero economy. We're already a leading underwriter and provider of renewable financing in the UK, and we have delivered over £27 billion of climate and sustainable funding and financing towards our £100 billion target. We have led a collaboration with other banks to launch CarbonPlace, the world's first marketplace for carbon offsets. And we are rolling out the NatWest Carbon Planner, launched last summer, which is a free platform to help SMEs reduce their carbon footprint. Good examples of embedding our services in customers' digital lives include building out our comprehensive payments proposition delivered through Till and PayIt, as well as extending our foreign exchange offering via digital channels. At the same time as focusing on targeted growth, we will continue our strong track record of discipline, cost management and investment. Since 2020, we have made an 18 percentage point improvement in our cost income ratio. We are targeting a ratio below 52% this year and less than 50% on a sustainable basis by 2025. We are now two years through our 3 billion investment programme with a significant proportion going into our digital transformation. We expect to invest in the region of 3.5 billion over the next three years, but you can see the mix of spend change as our digital transformation advances. We will also continue to deploy capital effectively across the business. You can see here how our allocation of capital has changed since 2019, with a reduction of RWAs in commercial and institutional and Ulster Bank Republic of Ireland and an increase in the retail bank. This more effective deployment of capital, combined with our strong capital generation, has enabled us to support our customers in difficult times, as well as invest for growth, consider other strategic options and make shareholder distributions of almost £11bn since 2019. By continuing to deliver targeted growth, to manage cost in a disciplined manner and to deploy our capital effectively, we plan to operate with a CET1 ratio of 13 to 14% over the medium term and deliver a sustainable return on tangible equity of 14 to 16%. We expect to generate and return significant capital to shareholders in 2023 and intend to maintain our payout ratio of 40% with the capacity to deploy any excess capital by making additional buybacks. Thank you very much. And I'll now hand over to Katie to take you through our full year performance in detail.