H1 2020 Results 31st July 2020 Agenda Topic Presenter Performance update Alison Rose Detailed H1 & Q2 results Katie Murray Investment case Alison Rose Performance update ALISON ROSE, Chief Executive Officer 3 H1 results highlights 1 H1 2020 highlights Operating profit Impairments CET1 ratio % £2.1 billion £2.9 billion 17.2% Operating Profit before impairment Impairment charges as at H1’20 CET1 Ratio up 60bps vs Q1’20 Operating loss before tax £0.8bn losses, up 3% on H1’19 driven by net impairments of +2.6bn £2.9bn (£0.8) billion 2.9 16.6% 17.2% Robust capital position with Operating Loss before tax, down 0.3 £2.5 billion vs H1’19 Q1’20 Q2’20 strong liquidity levels H1’19 H1’20 Attributable loss Other expenses2 Liquidity Coverage ratio % (£0.7) billion £3.3 billion 166% £2.0 billion attributable profit in H1’19 Operating expenses excluding Liquidity Coverage Ratio +14p.p. vs Operating lease depreciation down Q1’20 £41m vs H1’19 -1% 152% 166% 3.34 3.30 Q1’20 Q2’20 H1’19 H1’20 1. Excluding the £990m impact of the strategic disposal (Alawwal) in Q2’19 2. Operating expenses excluding operating lease depreciation 4 H1 results highlights We have a robust absolute and relative £2.9bn 17.2% capital position versus Impairment charge CET1 ratio UK listed banks – this Q2’20 Impairment charge of £2.1bn vs We have shaped a capital generative business is underpinned by a £0.8bn in Q1’20 that in the medium to long term will operate at a resilient, capital CET1 ratio of 13%-14% generative and well Robust capital levels: Our ECL provision has increased to ‒ 320-420 bps or c.£5.8-7.6bn headroom to diversified business £6.4bn target CET1 ratio ‒ 830 bps or £15bn headroom to MDA2 ‒ UK listed banks average MDA2 headroom of 365bps1 Majority of expected FY’20 impairment charge captured in H1’20 Clear intention to return to paying dividends as soon as possible, targeting a pay-out ratio of 40% over time. Expect FY’20 Impairment charge in the range of £3.5bn to £4.5bn (1% to 1.3% of Capital return to shareholders is a clear Loans and advances3) based on current preference with all other options only considered economic assumptions if they provide compelling shareholder value and strategic rationale 1. UK listed banks average of Lloyds, Barclays Group, Santander UK and HSBC Group based on Q1’20 data 2. Maximum Distributable Amount 3. Based on Total Loans and advances at H1’20 5 H1 results highlights Key messages Purpose-led, long term decision making Strong customer franchises Safe Balanced and consistent approach to risk Simple Focus on simplification and taking costs out Smart Robust balance sheet with strong capital & liquidity levels Focused on generating shareholder value 6 Purpose-led, long term decision making Strong innovation pipeline in H1 2020 IT investment Credit scoring on the Payit mobile app Bounce back loans Open Banking solution for powering operational 1.8m customers using Fully digital application e-commerce payments effectiveness and the feature, NPS +523 launched in 6 days Settlement within 2 hours innovation agenda In UK PB we now have over 7.2 million active mobile users, whilst 5th March 4th May 25th June three quarters of our current account customers in UK PB and Enabled our customers’ rapid digital shift almost all Commercial Banking Digital engagement Online payments2 Use of digital tools customers regularly use digital banking. H1’20 H1’20 500,000+ 42m+ Intelligent payments tool for SMEs Digital sales mix for UK PB is 80% New mobile app downloads Online Banking payments as at Q2’20, up from 55% in Q1’20 and 49% in Q2’19 485,000+ c.+17% c.4.6m New online banking customers Average daily mobile Transactions processed to payments, June vs. Jan 2020 date, worth nearly £160m +18pts1 increase in NPS for Branch network (Retail) +20 Q2’20 NPS for Commercial Banking All statistics quoted are as at 30/06/2020, unless otherwise stated 1. Vs pre-Covid levels (average of December 2019 to February 2020 2. Refers to UK PB 7 3. As at April 2020 Strong customer franchises UK Personal Banking Personal Banking: UK PB lending & card spend Mortgages & Personal loans Debit and credit card spend and Commercial Monthly new loans issued, # Monthly spend, as % of January spend Banking activity in 50k Mortgages £7.87bn £7.83bn Personal loans 100% H1’20 £1.28bn UK PB: New mortgages and personal £0.98bn 20k loans down 43% and 75% in Q2 vs. 50% Q1, with signs of improvement from Debit cards Credit cards June following the easing of lockdown restrictions and stamp duty changes Jan Feb Mar Apr May Jun Jan Feb Mar Apr May Jun Debit card spend decreased by 10% in Commercial Banking lending July highlights Q2, as reduced spend was partially ▪ Debit and credit card spend are up 10% on June levels Month on month movement, £bn offset by substitution of cash for card ▪ Mortgage completions are up 10% on June levels 5.6 Commercial Banking customer ▪ Mortgage application volumes have increased c.30% on behaviour resulted in increased 3.6 June levels and are nearing pre-Covid levels utilisation of RCFs before government ▪ measures introduced in April, with 1.6 Weekly commercial card and cash transactions have more than doubled by volume from a low point in April customers paying down on RCFs and -0.4 taking up government support ▪ Demand for Government schemes is now tapering off from the initial peak. In July we have seen up to 2000 schemes -2.4 Jan Feb Mar Apr May Jun applications a day for bounce back loans compared to an average of 20,000 a day in the week they were BBL 1. RCFs: Revolving Credit Facilities CLBIL launched and around 48,000 on the first day CBIL RCF1 8 Strong customer franchises Payment holidays % of book % requested extension after People & Families Volumes initial holiday period UK Personal Banking continues to support customers whose UK Personal Mortgages 240,000 20% approximately 1/3rd income has been impacted by Banking Covid-19 Personal 72,000 7% approximately 1/3rd Business Loans Providing lending support to our Commercial Banking customers, with a disciplined approach in line with our risk appetite Application value Approved % Market Drawn £bn £bn Share4 £bn Lending support has been extended only to our existing Commercial CBILS1 c.£4.0bn 3.2 c.30% 2.3 customers and is generating Banking positive ROE CLBILS2 c.£1.2bn 0.7 c.28% 0.2 BBLS3 c.£7.8bn 6.1 c.20% 5.8 1. CBILS: Coronavirus Business Interruption Loan Scheme 3. BBLS: Bounce Back Loan Scheme 2. CLBILS: Coronavirus Large Business Interruption Loan Scheme 4. Of approved schemes, according to Data per HM Treasury 9 All statistics quoted are as at 30/06/2020, unless otherwise stated Balanced and consistent approach to risk Total Loans & Advances1, H1’20 Spotlight on Personal loans, H1’20 Loan book is well diversified across Secured Personal Banking Unsecured 196 93% £196bn 7% Limited unsecured exposure in (53%) our personal loan book Stable average loan-to-value (LTV) within the mortgage book £370bn UK Personal Banking Mortgages by LTV band1 UK Personal Bank Mortgage Portfolio % FY’19 H1’20 175 35% (47%) ≤50% 34% 52% >50≤80% 53% 13% >80≤100% 12% Personal loans Wholesale lending FY’19 H1’20 57% Weighted avg. LTV 57% 10 1. Figures may not cast due to rounding. Loans – amortised cost and FVOCI Balanced and consistent approach to risk Total Loans & Advances1, H1’20 Spotlight on sectors in focus for management, H1’20 Loan book is well 1,2 diversified across Total loans and advances , £bn Commercial Banking Oil & Gas Transport 196 2.1 Airlines 4.6 Management is focused on key (53%) 2.4 Shipping sectors affected by COVID-19 1.2 £28bn 28 (£29bn as at Q1’20) Exposure to sectors in focus is £370bn (8%) down on Q1 10.0 7.9 Leisure Retail Stage 3 loans are £1bn with an appropriate ECL coverage ratio 146 (39%) of 55% ECL Stage Loans, £bn Loans, % coverage, % Personal loans Stage 1 7.8 27.7% 0.7% Sectors in focus for management Stage 2 19.4 68.7% 3.9% Other wholesale lending Stage 3 1.0 3.6% 55.3% 1. Loans – amortised cost and FVOCI 11 2. Subset of Corporate loans, see p.46 of the NatWest Group plc’s H1 IMS Strong customer franchises H1’20: Deposit growth UK Personal Banking1 Commercial Banking £bn Current Accounts £bn Total customer deposits Savings +18% increased by £39bn (+11%) vs +7% 160 FY’19 161 144 150 153 135 Personal Banking customer 59 deposits increased by £11bn 52 54 (+7%) vs FY’19 reflecting lower consumer spending and increased savings Commercial deposits grew by £25bn (18%) over the same 98 98 102 period, reflecting customers retaining liquidity, including new funds received through government schemes FY’19 Q1’20 Q2’20 FY’19 Q1’20 Q2’20 % of total deposits 41% 40% 39% 37% 37% 39% 1. Figures may not sum due to rounding 12 Purpose-led, long term decision making We champion potential, helping Strategic priorities people, families and businesses to thrive Powered by Simple to deal with innovation and Reengineering-led partnerships simplification to drive better customer Strong pace of experience and business model colleague innovation and Supporting engagement partnership Sharpened customers at customer and every stage of capital allocation their lives focus Ambitious targets on Evolve our Refocus NWM to meet propositions to reflect Enterprise, Learning the needs of customers changing customer and Climate – capital ratio behaviour accretive 13 Focus on simplification and taking costs out Accelerating refocus 2020 RWAs, £bn Actions taken of NatWest Markets c.470 £63m £2.8bn reduction in Headcount reduction Disposal losses2 Refocusing NatWest Markets to serve RWA achieved in 6 months our