NatWest Group PLC

Good morning and welcome to the NatWest Group Q3 Results 2025 management presentation. Today's presentation will be hosted by CEO Paul Thwaite and CFO Katie Murray. After the presentation we will take questions.

Good morning and thanks for joining us today. I'll start with a short introduction before I hand over to Katie to take you through the numbers. We have delivered another strong quarter as we continue to execute on our priorities of disciplined growth, bank-wide simplification, together with managing our balance sheet and risk well. Though inflation is above the Bank of England's 2% target, the economy is growing, unemployment is low, wage growth is above the rate of inflation, and businesses and households have relatively high levels of savings and liquidity. This is reflected in the levels of customer activity we're seeing across the bank. So let me start with the headlines for the first nine months. Lending has grown 4.4% since the year end to £388 billion, in line with our annual growth rate of more than 4% over the past six years. Growth has been broad-based across our three businesses and we attracted a further 70,000 new customers in the quarter. Mortgage lending was up by more than £5 billion for the first nine months as we broadened our customer proposition with new offers for first-time buyers and family-backed mortgages and issued mortgages to landlords in collaboration with buy-to-let specialist LandBay. Unsecured lending grew £2.9 billion or 17.3% and we made good progress integrating our recently acquired Sainsbury's customers. They are now able to view their credit card, link their Nectar card and view their Nectar points from credit card spending via the NatWest app. In commercial and institutional, we delivered lending growth of 7.9 billion or 5.5% across both our large corporate and institutional and commercial mid-market businesses in areas such as infrastructure, social housing and sustainable finance. As the number one lender to infrastructure, we are supporting many large scale programmes up and down the country. And we have delivered 7.6 billion towards our 2030 Group Climate and Transition Finance target of 200 billion announced in July. Deposits grew 0.8% to £435 billion as we balanced volume with value in a competitive market and as customers managed their savings across cash deposits and investments. And as more customers across the bank chose to invest with us, assets under management and administration have grown 14.5% to £56 billion. This has contributed to growth in non-interest income, along with higher fees from payments, cards and good performance in our currencies and capital markets business. This customer activity has resulted in a strong financial performance. Income grew to £12.1 billion, 12.5% higher than the first nine months last year. Costs were up 2.5% at £5.9 billion, resulting in operating profit of £5.8 billion and attributable profit of £4.1 billion. Our return on tangible equity was 19.5%. Given the strength of our performance, we are revising our full year guidance for income to around £16.3 billion and for returns to greater than 18%. We continue to make good progress on both simplification and capital management. We have reduced the cost income ratio by five percentage points to 47.8% and we generated 202 basis points of capital for the nine months and ended the third quarter with a CET1 ratio of 14.2%. This strong capital generation allows us not just to support customers, but to invest in the business and deliver attractive returns to shareholders. As you know, we announced a new share buyback of 750 million at the half year, of which 50% has now been carried out, and we expect to complete the buyback by our full year results. Earnings per share have grown 32.4% year on year, and TNAV per share is up 14.6% at 362 pence. So, a strong performance for the first nine months. I'll hand over to Katie to take you through the numbers for the third quarter.

Thank you, Paul. I'll talk about the third quarter using the second quarter as a comparator. Income excluding all notable items was up 3.9% at £4.2 billion. Total income was up 8.2% including £166 million of notable income items. Operating expenses were 2.1% lower at £2 billion due to lower litigation and conduct charges. and the impairment charge was 153 million, or 15 basis points of loans. Taken together, this delivered operating profit before tax of 2.2 billion for the quarter, and profit attributable to ordinary shareholders of 1.6 billion. Our return on tangible equity was 22.3%. Turning now to income. Overall income, excluding notable items, grew 3.9% to 4.2 billion. Across our three businesses, income increased by 2.5% or £101 million. Net interest income grew 3% or £94 million to £3.3 billion. This was driven by further lending growth and margin expansion as tailwinds from the structural hedge and the benefit from the Sainsbury's portfolios for a full quarter more than offset the impact of the base rate cut in August. Net interest margin was up nine basis points to 237, mainly due to deposit margin expansion and funding another treasury activity. Non-interest income across the three businesses was up 0.8% compared with a strong second quarter. This was due to increased card fees in retail banking, higher investment management fees in private banking and wealth management, and a good performance in currencies and capital markets with heightened volatility. Given continued positive momentum and a clearer line of sight to the year end, we have refined our income guidance and now expect full year total income excluding notable items to be around £16.3 billion. We continue to assume one further base rate cut this year with rates reaching 3.75% by the year end. This improved guidance alongside strong Q3 returns means we now expect return on tangible equity for the full year to be greater than 18%. Moving now to lending, where we have delivered another strong quarter of growth. Growth loans to customers across our three businesses increased by 4.4 billion to 388.1 billion pounds, with growth well balanced between personal and corporate customers. Across retail banking and private banking and wealth management, mortgage balances grew by 1.7 billion, and our stock share remained stable at 12.6%. Unsecured balances increased by a further 100 million, mainly in credit cards. In commercial and institutional, gross customer loans excluding government schemes were up by 3 billion pounds. This includes 1.6 billion across our commercial mid-market customers, in particular in project finance, social housing and residential commercial real estate, as well as £1.5 billion in corporate and institutions, mainly driven by infrastructure and funds lending. I'll now turn to deposits. These were broadly stable across our three businesses at £435 billion. Retail banking deposit balances were down 0.8 billion, with growth of 0.6 billion in current accounts, more than offset by lower fixed-term saving balances following large maturities. Private banking balances reduced by 0.7 billion, with flows into investments as customers diversify and manage their savings, as well as tax payments made in July. We saw a small increase in commercial and institutional of 0.4 billion with higher balances in both commercial, mid-market and business banking. Deposit mix across the three businesses were broadly stable. Turning now to costs. We are pleased with our delivery of savings this year, which allows us to invest and accelerate our programme of bank-wide simplification. Costs grew 1% to £2 billion, including £34 million of our guided one-time integration costs. This brings integration costs for the first nine months to £68 million. We remain on track for other operating expenses to be around £8 billion for the full year, plus around £100 million of one-time integration costs. This means you should expect expenses to be higher in the fourth quarter, driven by the annual bank levy and the timing of investment spend. I'd like to turn now to impairments. Our prime loan book is well diversified and continues to perform well. We are reporting a net impairment charge of 153 million for the third quarter, equivalent to 15 basis points of loans on an annualised basis. Our post-model adjustments for economic uncertainty of £233 million are broadly unchanged. And following our usual review, our economic assumptions also remain unchanged. Overall, we are comfortable with our provisions and coverage, and we have no significant concerns about the credit portfolio at this time. Given the current performance of the book and the 17 basis points of impairments year to date, we continue to expect a loan impairment rate below 20 basis points for the full year. Turning now to capital. We ended the third quarter with a common equity tier one ratio of 14.2%, up 60 basis points on the second. We generated 101 basis points of capital before distributions, taking the nine month total to 202 basis points. Strong third quarter earnings added 84 basis points and a reduction in risk-weighted assets contributed another eight basis points. Risk-weighted assets decreased by 1 billion to 189.1 billion. 0.9 billion of business movements, which broadly reflects our lending growth, and 0.3 billion from CRD4 model inflation were more than offset by a 2.2 billion reduction as a result of RWA management. This brings our CET1 ratio before distributions to 14.6%. We accrued 50% of attributable profits for the ordinary dividend as usual, equivalent to 42 basis points of capital. We continue to expect RWAs of 190 to 195 billion at the year end, with a greater impact from CRD4 expected in the fourth quarter. Turning now to guidance for 2025. We now expect income excluding notable items to be around 16.3 billion and return on tangible equity to be greater than 18%. Our cost impairment and RWA guidance remains unchanged. And with that, I'll hand back to Paul. Thank you.