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H1 2021 Results Fixed Income Investors 30Th July 2021 Katie Murray Chief Financial Officer

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H1 2021 Results Fixed Income Investors 30Th July 2021 Katie Murray Chief Financial Officer H1 2021 Results Fixed Income Investors 30th July 2021 Katie Murray Chief Financial Officer 2 H1’21 results highlights H1’21 performance Good H1’21 performance, increasing £2,505m £707m £1,842m shareholder distributions Operating profit before tax in Impairment release in H1’21 Attributable profit in H1’21, H1’21, up from £0.8bn loss in (38bps) of customer loans compared to £0.7bn loss in vs. £2,858m charge in H1'20 H1’20 H1’20 Supporting our customers 159bps of customer loans through the recovery with £4.1bn net lending growth1 Delivering against our targets Delivering against our targets to drive sustainable 2.8% 5.9% 18.2% returns for shareholders Net Lending Growth1 on an Cost reduction3 of £185m in CET1 Capital Ratio annualised basis, up £4.1bn on H1’21 vs. H1’20 in line with Q1 Increasing our minimum FY’20 Includes 73bps of IFRS 9 dividend to £1bn and transitional relief announcing £750m on- market buyback bringing Shareholder distributions FY’21 distributions to £750m £1.1bn minimum of c.£2.9bn2 £1bn Minimum annual dividend In-market buy-back Directed buy-back in Mar’21 1. Net lending to customers across the UK and RBSI retail and commercial businesses, excluding UK Government up from £800m; £500m accrual included in 18.2% CET1 ratio 4.99% window reopens in lending schemes. 2. Shareholder distributions include minimum dividends of included in 18.2% CET1 ratio March 2022 £1,000m, on-market buyback of up to £750m and Directed Buy Back of £1,125m. 3. Other expenses, excluding OLD and Ulster Bank RoI 3 direct costs. Strategic priorities will drive sustainable returns Delivering against our strategic priorities to drive sustainable returns for shareholders Sustainable growth with an intelligent approach to risk Simplification and cost efficiency Powering our strategy through innovation, partnership and digital transformation Portfolio discipline and effective deployment of capital 1. Net lending to customers across the UK and RBSI retail and commercial businesses, excluding UK Government lending schemes. 2. Other expenses, excluding OLD and Ulster Bank RoI 4 direct costs. Purpose-led, long term decision making H1’21 progress Delivering on our Areas 35.1k individuals or business supported through enterprise programmes, with of Focus1 ENTERPRISE The biggest >87k interventions supporter of 725 entrepreneurs in the current accelerator cohort, 42% female Exceeded the 2020-2021 enterprise in the Coutts has collaborated with the Business Growth Fund to provide additional UK & Ireland £20bn target for Climate funding, growth capital and support to small and medium sized enterprises (SMEs) & Sustainable Funding and Delivered £2.1bn, 35% of overall £6bn 2021 funding commitment to support Financing SMEs to scale and grow3 ESG Ratings2 LEARNING 1.5m Financial capability interactions, of which 515k financial health checks • Sustainalytics rating: Enhancing financial 273k people helped to start saving capability and the upgraded to 17.0 (low Launched Career Sense, a new programme to support 13-24 year-olds, aiming skills of our to reach over 10,000 young people this year risk) from 20.5 (medium colleagues risk) in July 2021 £21.5bn Climate and Sustainable Funding and Financing, including £3.4bn • MSCI rating: AA CLIMATE green Wholesale lending, £10.6bn, green bond public issuances and green A leading bank in private placements4 and £4.3bn Sustainability Linked Loans • CDP rating: A- the UK 1. H1’21 Climate, Purpose and ESG supplement Playing an active role in tackling climate change collaborating with Microsoft, 2. ESG ratings on this page are: (i) unsolicited; (ii) subject to the & Ireland helping assessment and interpretation by the ESG rating agencies; (iii) Octopus Energy and CoGo4 provided without warranty (iv) not a sponsorship, to address the endorsement, or promotion of NatWest Group by the relevant Retail Banking completed Green5 Mortgages with a value of £431 million during rating agency. Ratings as of 29/07/2021, the CDP score is climate challenge from the 2020 submission. H1 2021 3. £2.1bn is Gross New Lending, excluding Government lending schemes, in H1 to those SME customers in scope of the fund, predominantly SMEs outside of London NWG founding member of the Net Zero Banking Alliance; Coutts joined the Net 4. Including the underwriting of two loans that meet the CSFI Zero Asset Managers initiative and obtained B Corp certification criteria (£153m) 5 5. Aligned to the World Green Building Council definition premised on EPC A and B energy efficiency ratings Supporting customers at every stage of their lives Card spending and Credit Card balances(1) Mortgage lending(1) Supporting our customers Monthly spend and balances outstanding Retail Banking gross new mortgage lending through the recovery (£bn rebased 100 = June’20) & net mortgage balance growth (£bn) 9.6 9.7 % 8.4 126.2 Debit and credit card 6.7 120 6.0 spending improved through 115.1 3.0 3.0 3.2 Q2, credit card balances up 2.3 100 97.3 £0.1bn (3%) in the quarter 3.0 Q3’20 Q4’20 Q1’21 Q2’21 80 Strong and improving new Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Gross New Lending Net Lending Metro acquisition mortgage lending Debit card Credit card Credit Card Balances • Retention rate of ~79% in Q2’21 Corporate deleveraging Commercial Banking lending (change in period, £bn) • £0.4bn of net government scheme continues with net Gov’t lending schemes RCFs2 repayments in Q2, predominantly government scheme Other BBLS3 2.9 repayments in Q2 1.4 • ~5% of BBLS customers have 0.5 (0.3) (0.4) repaid in full (2.4) (1.2) • ~5% have requested a further Credit quality remains (3.1) (2.0) 4 strong and we see growth (1.8) payment holiday through PAYG (0.9) opportunity as the economy • Of the BBLS customers due to (1.8) start repayment ~92% are recovers repaying on or ahead of schedule 1. Data relates to Retail Banking. Total change in Q3’20 Q4’20 Q1’21 Q2’21 2. RCF – Revolving Credit Facility. Gross Commercial (2.0) (1.9) (1.8) (3.4) 3. Bounce Back Loans. 6 4. PAYG option is available to customers 60 days before Loans first payment. Portfolio discipline and effective deployment of capital Actively managing ы capital Ulster Bank RoI • Natwest has agreed a binding sale agreement with Allied Irish Banks, p.l.c. for the We remain strongly sale of c.€4.2bn of performing commercial loans and associated undrawn capitalised with 18.2% exposures of c.€2.8bn1 CET1 ratio • We have also agreed a non-binding MoU with Permanent TSB for the sale of €7.6bn of performing retail and SME loans Good progress in executing Ulster Bank RoI withdrawal NatWest Markets and NatWest Markets refocusing • NatWest Markets RWAs at £24.4bn, down £2.1bn on Q1’212 Pro-active management of Portfolio Sales and Synthetic Trades Retail and Commercial Banking to optimise capital, • Commercial Banking active capital management contributed to £0.8bn reduction manage credit risk and in RWAs in H1 drive sustainable returns 1. Completion of each proposed sale is subject to obtaining regulatory and other approvals and in the case of Permanent signing definitive sale agreements. Completion may not occur when contemplated or at all 2. H1’21 RWA shown proforma for model change approval received in July 2021, benefit of £2.5bn. See page 12 in 7 the NWG Q2’21 IMS. Intelligent and consistent approach to risk Impairment release Economic scenarios and weightings, H1’21 The main macroeconomic variables for each of the four scenarios used for expected credit loss resulting from an (ECL) modelling below: improvement of the Probability weightings1 UK GDP – Annual Growth (%) UK Unemployment rate – annual avg. (%) economic outlook Scenario Previous New 2021 2022 5y Avg. 2021 2022 5y Avg. Updated economic Upside 20% 35% 10.1 5.4 3.9 4.7 4.3 4.1 assumptions with re- Base case 40% 40% 7.3 5.8 3.5 5.3 4.8 4.6 weighting of our scenarios Downside 30% 20% 2.7 4.3 2.9 5.4 7.0 5.8 Extreme 10% 5% 0.1 - 2.5 5.9 11.8 8.1 Our base case now Downside assumes UK GDP growth of Impairments charge(£m) 7.3% in 2021, up from 4.5% Loan impairment rate (bps of gross loans) previously 90 229 28 14 88 (11) (66) We now expect a net 3,242 impairment release for the 2,056 Expect net full year 2021 release at 802 FY 21 254 130 (102) (605) 1. Previous weightings from FY’20. New weightings updated for H1’21 Q1’20 Q2’20 Q3’20 Q4’20 FY’20 Q1’21 Q2’21 FY’21 8 Intelligent and consistent ECL3, £m approach to risk £648m 6,186 Improved economic 5,794 outlook drives ECL 878 (363) 117 887 (285) release (15)(15) 99 (305) 4,9253 164 834 Of the £869m ECL release, 3,792 5,191 315 202 4,743 £648m is driven by the 80 3,776 improvement in economic 3,510 1 forecasts and PD on our FY’19 FY’20 Q1’21 Economic Risk Risk Judgemental Write-offs Q2’21 performing book Forecasts4 metrics: metrics: S3 changes5 and other S1 & 2 Economic Uncertainty PMA Other PMA Other ECL PMA2 for economic uncertainty has reduced ECL Coverage3, % slightly but is offset by 1.66 other adjustments 1.56 0.24 (0.10) 0.24 (0.08) ECL coverage reduced (0.00) 0.03 (0.09) 1.313 from 1.56% to 1.31% due 1.13 1.43 0.22 to the ECL release 0.06 1.32 1.07 1.09 1.
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