NWG - Earnings call transcript Q1 2022

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Operator

Ladies and gentlemen welcome to NatWest Group Q1 Results 2022 Management Presentation. I would like to remind you that the call today will be recorded. [Operator Instructions] Today's conference call will be hosted by Alison Rose, CEO NatWest Group. Please go ahead Alison.

Alison Rose

Good morning, and thank you for joining us today.

with strategic start I'll usual, a update. brief As the then we'll will take it and through you questions. Katie open results up for we world the last considerably. since has Clearly, changed spoke, geopolitical has greater Russia's led of Ukraine macroeconomic invasion and uncertainty. to And our rising energy disruption. as costs, chain higher as supply rates, ongoing and well now customers face inflation, of and customers built distress, seeing not any signs of them Whilst savings balance are many have of our sheets we and are the acutely aware we healthy face. up during pressures the pandemic, immediate

as uncertainty. just the we So did we pandemic, navigate are during they as this supporting them period of

For around customers vulnerable score, regularly refer health to advice. financial to continue rating scenarios example, help impact and checks we citizens the credit we their different of to X million customers improve more understand we are on deliver a year, their free and

Our relationship dedicated our access business all managers with having benefit of customers expertise in regions. to from sector

continues, donated Appeal. invasion and the Ukraine Humanitarian customers of million Ukraine Disaster Committee, together the X to over with our Emergency As have we colleagues, pounds

are Ukrainian the to refugees offering also UK. practical in We assistance

using we with one opening accounts. our a welcome headquarters are hub providing and bank example, For help as we are of

returns Russia Group Russia. well and our positioned to focus NatWest or the operations direct sustainable exposure with to minimal in two and to years together customers, no have building deeper We strategic strong We makes progress, in our that come. with believe Ukraine on relationships years growth of deliver

So let headlines. me turn financial now to the

generated of million, our tangible from tax the the XX.X%, quarter up equity from X.X% and reporting a first profit return quarter of profit year. strong XXX We X.X year. was are last performance billion, XX%, same on up before We with in up last XX% attributable

annual XX.X%. was We X.X%, an were are jaws continue of and in costs X.X%. up Income and growth, targets. to on Though expect of this reduction, resulted reduction around positive we delivering down cost capital X%, income our

now which of distributions. is XX.X%, ratio includes billion Our CETX £X.X

As this we have to make committed £X distributions billion annual year. you dividend least know, of at

ratio And we made ownership of an bringing includes million XX%, X.X Our in toward billion, an XXX government milestone. CETX important accrual clearly is another which buyback of March to directed that around commitment.

We have million XXX in on the XXX buyback million of executed also additional February. market announced

to above our the of strategic delivering income continue economic We focus our faster income and now plan deliver XX rate targets. on a we as expect as are billion, we result increases. is our than to comfortably updating target that Despite uncertainty, macro assumed

roughly earlier, return by XX% strong CETX a reduce continue both and inflation said this by we business the next, we are into XXXX. a to discipline, taking above equity tangible on cost year to investment comfortably XX% plan X%, cost ratio with and we and As as cost I our in XX% targeting of account

say, a So are our for house, turn to all ways We whether or and customers lives, the in to customers buy by existing let relationships key business. deepen a stages it's me the now drive them their up at supporting other serving in set with to want which future growth. grow we to sustainable

We new franchises. wider our products acquiring across delivering of and more services by are a also range effectively customers

SME continue platforms. XXX we as as grew in billion the ecosystem. net base by well by but assets customer in XXX in year, example, our million XX% first were they expertise XX.X and quarter successfully volatility, to market investment retail the first during we affluent up and Total period. first were same down the XX% administration by customers management to via increased banking, in current XXX,XXX we this and this quarter new accounts extending impacted inflows under For In to invest digital new private management and million, asset in the quarter retail at our last the added as XX% AUMA on included banking, were year XXXX

and As managers. network the sector small leading locally for solutions, specialist as we as of well medium bank based businesses, offer relationship digital an extensive both

As these businesses, merchant using till in digital for the doubled build more years. each the our payments comprehensive number a proposition customers of three we last than has platform of acquiring

clear will offer since new mobile A are as checks, the by buy our ability expect be regulated our of pandemic, Demand the product the pay of to limits, through and we now, on the also grown due app. Unlike We want as also pay summer. and payments provide now, as a proposition credit fully a to safer our for diversifying scoring, later transactions providers, a credit track repayments, covered to such be all bank. for fixed better proposition structured both will many that customers. this from customers protections our innovation, income well and affordability launched keep buy has later rapidly product is start

The This billion second is of X. pound our customers Slide data, technology. invested to investment is X our of with use digitization, entirely interact the now us XX% digital, either which customers commercial our mobile, needs of majority digitally. banking. XX% met and a program, Turning in XX% year in or online of retail digital of customer are and business XX% retail of by customers are being

accounts the fully processing, make on to through requests in to just straight in first of XX% improving compared commercial unsecured X,XXX digital opened service of and journeys. XX,XXX whole automated, made of retail the XX% XXXX. now customers with applications progress good quarter, are We customer continue are

digital us is helping Our transformation customers. acquire new

XX. resulted added improvement of customers retail NPS at of up has last with Improving the minus an acquisition and provides which four in to families from business XXXX, banking two gained business our money, year, for affluent XXXX, RoosterMoney children app has XX, net at our that helps in customer also experience scores, promoter with learn XXX,XXX about up since in significant a managing in mobile from example, a XX, For bank XX,XXX new Mettle, customers. digital And launch. new customers,

improvement in this new circle which results of more a customers. creates course, acquisition virtuous the Of

to now capital Slide X. Turning management on

from the intensity this XX% of risk capital the We first manage XXXX year. quarter have the to and continue business XX% in proactively capital in reduced to at

withdrawal phased is announced. and progressing, with the Our has of pleased from are been we what Ireland Republic

with a low well-diversified is managing fixed We defaults we strong exposure retail average of sectors of we with level book well and monitor is of of LTV limited an are lending XX% way. are our a to risk portfolio have at and a we that mortgage also personal in secured and risk risk profile. growing XX% unsecured XX%, closely. corporate our responsible with

order hand on have focusing maximize I as in through X.X are efficiency total And the distributions for take shareholder Katie of said we And pounds to earlier, to with returns. to billion over I'll you in the We results. that, XXXX. booked capital quarter

Katie Murray

We Bank from Thank the quarter the the up comparator. you, at to Alison. the as income interest performance the X% I'm this up non-interest a Go-Forward using was net total and of £X going £XXX million. fourth up for £X XX% of talk to fourth. billion income Within was reported about XX.X% income quarter, first billion,

This of levy, from conduct course of customers reflects fourth challenges the X.X notable fell for the model basis £XXX income basis margin XXth a now net to and higher ordinary points, year higher increase all which we X XX higher interest to and as level deposits. net living points higher quarter. XX% a from Bank lower rates, to our strong to reported operating increased margins points driven was UK was shareholders which absence for an income wider cost of XX. the a billion the tangible which adjustment the hedge four million Operating basis XXX offset reduction. to Lower annual the on quarter. quarter. the billion X.X of rates result on our of basis interest by profit on and basis release the than in added and March by of Attributable points. UK uncertainty costs, This the income move expenses Excluding of billion, XX XX together, of book first million and by the UK of of to unsecured, equity our I'll points. them interest chain deposit of billion, by the points base on up XXX post front X.X% partly increased basis cost equivalent The XXX release million basis return fourth increased reduced on of base XX.X%. in low million, the a Slide spot continued X.X of supply fourth before two of was defaults points £X reflects positive start rates and all quarter compares the was the mortgage economic at and Net payment ongoing lending. margins, mix this tax million on Taking profit £XX are to in for of due added XX to Net by facing. items, driven benefits

In continue and in banking three were both and has by these quarter. growth retail lower margin basis you loan businesses commercial impacts changes interest by can increased more see, while by offset as driven large institutional, was the repay. margin deposit personal as than reduced NIM net smaller However, higher corporates, bank mix in margins banking, and in points private to

CNI NIM institutional deposit offset increased than the quarter margins retail, the in As and in commercial and more this wider accordingly.

trends want this to this CNN the be deposit cost highlight have But and I yield our loan on to rates the familiar two Slide and for quarter Turning you CNI key franchise. new we points. slide. with -- customer will XX, presented

costs majority loans rates increased institutional and were reprice. deposit points as these secondly, are to commercial XXX, And First, broadly automatic an the eight stable. with variable by loan yields basis of

We expect in following quarter, changes deposit place April. second costs in further rate taking the to increase

at to mortgage Slide to be look will the now you. on dynamics The top chart Turning at XX. familiar margin

for are you quarterly retail showing now group we average just not and metrics the banking. However,

mortgage rates We have XX basis by average the customer first increased in points quarter. around

there rate customer and in mortgage we only for what curve. from effect led customers rates, Of Customer five also the is were swap The in swap broadly average changes however, to their increased stable basis the took year deposit we an course, the by for increase This points XX in pressure considerable April. as recognize charge quarter. deposits. spreads, pay we between difference around early what customer

hedge Of for course, are good higher rates deposit income. swap

As you In we other same by XX of yield XX billion basis the the increase next first as from we level a the is quarter, reflecting structural expect in remain points deposits. and during billion in this by quarter. to over the increased deposits this If further by £XX a slightly hedge hedge know, The X £X assume growth XX the to billion. fourth £XXX we quarter, at then increased months. billion up XXXX, we product customer notional first the further

on on Moving £X.X XXX increased on growth same XX. Slide meet targets, in commercial of In customer look billion period to typical a And by or markets we and government income asset increased at this, notable result retail X.X within volumes repayments In by of million, capital the remind by to quarter last fell or to markets. which, full of large was and not continued increased the you currencies Non-interest growth business first to fourth billion on This million for our was increased linear. other we That's well commissions Other know, lending Fees by loans year income mid-market million the offset increase loans billion invoice increased be driven on This schemes. around and now further quarter. balances were and partially higher seasonality. million to seasonality. of benefited costs £XXX £X lending I'd by turn mortgage comprised income, billion unsecured year. now in or £X.X as on good and down this expenses billion. private corporate activity up from volatility activities our and to from X.X%, institutional to Within issuance reduction in grew non-interest excluding work X% X.X XX. you banking, in look £XX million that I like the and as a institutional, on continue as the as volumes on X.X% fivefold Slide normal XX. utilization, overall higher will as by is X% as despite for XX% businesses. £XXX items, an I now customers XXX commercial Slide and facility quarter. a financing and capital XXX at trading to our in Gross by look million, £XXX operating gross billion. X.X% to the will

now the group. XX. of Go-Forward quarter. reporting or level million, release £XXX a reflects points low net £X Group We're impairment to million impairments the release of fourth to Slide a the basis Turning continuing in on across of a This compared for defaults XX

see the in to ECL migration back further continue good improvements We underlying book one of stage loans driving positive stage to metrics with in credit two releases.

However, our post which releases allocate these uncertainty, million. million increased model to for we to by have £XXX decided £XX adjustment to economic

As supply yet data. include we to are our unchanged and chain cost economic customers impact increased on we of recognize The February we and face the the both are appendix. challenges slide presented that these assumptions living in

basis a XX our loan points line both these rates update in the 'XX to XX 'XX. will and with in below quarter.We usual second to in impairment expect practice We continue

now the ended of quarter by with X.X equity tier and further includes the line IFRS an points, with our redemption from RWAs QX on common net transitional in it pounds relief. Higher at reduced the equity five the shares a nine annual capital of This guidance. of risk legacy look of points. movements liquid changes points ratio XX. XX ratio saving down reduced since XX a the increase Turning preference and XXXX to These on points. million January reductions profit further attributable reduce by ratio first. points This value one weighted assets partially our basis-point will portfolio to were a basis fair distributions, We basis offset X onwards. of by deliver basis basis by billion a The from XX which asset Slide ratio reduced by XX- XX basis XX.X%,

transitional £XXX an year billion. points as billion XX partly annual X for the points, to credit This from IFRS by at basis was £XXX QX, by driven risk XX%. RWA the from of risk, X.X is XX and market exercise. decreased down from to operational XXX% Our relief by end recalibration relief higher basis increased offset benefits million

Slide balance the to strength shows sheet. which our Turning of XX,

target X.X% XX.X% Our basis XX% XXX England minimum XX our Bank XX CETX points, requirement. to ratio now range. to above over of of and leverage down XXX points basis is basis of is U.K. the QX XXX points ratio above

a strong and liquid base. maintained liquidity a We with high funding have also quality pool levels asset stable, diverse

Our slide. legacy headroom billion. preference XXX% our due of my And the turning directed ratio taking and redemption liquidity to decreased coverage buyback, shares the final above the £XX minimum to to

to on to that, Alison. capital. our all this guidance expenses, XXXX And expect quarter back increases a deliver We assumes are plan. comfortably for than billion XXXX. impairments, We This deliver in of taking rate progress hand and now reach And base return items we making reaffirm had reflects together, X.XX% continue on all strong the and and rates income notable faster £XX above in fourth the U.K. excluding with XX%. I'll tangible to expect above we equity to comfortably

Alison Rose

Katie. you, Thank

another the of We for quarter. set have strong results delivered

digital purpose a our the on transformation in plan country, families, focused people, an strong our remain up bank that can in well way support a macro and customers continue to diversified and ongoing the positioned and aware management, we the we growth uncertain As in we an uncertainty, book, plans. are down businesses risk led environment. them of face acutely every challenges lending investment Despite with we underpins and economic

the value very have return options questions. much, we today. and gives And that as committed it targets strength up remain to set Thank to flexibility capital well open fully invest now out growth we other and for for you capital we’ll the to consider as Our us create shareholders.

Operator

our Barclays. [Operator Instructions] take Rakkar Aman question We'll from of first

If you could ask please unmute, and question. your

Aman Rakkar

Good you morning, can Katie. hear morning, Good Hopefully, both Alison. OK. me

Alison Rose

Yes. can. We

Aman Rakkar

of the comfortably consensus guidance a lends about bank 'XX. telling Any wide have mean, think so. first guide, interest Could range. and kind I I guide help and should I itself income, month? to that number to your the us income, XX.X Thanks. in Great. of were if of XXXX would really around us be interest take I If the guess it was refinement understand excess billion, that net revenue per helpful. I But And on that could. you be question billion you year quite £X a of I all,

The second net on was interest income.

your forward ask You're income clearly tailwind Ultimately, rich into perhaps 'XX. can you think your could of rate think much. gaze benefiting that's you hikes from really 'XX in hedge understand you interest continue could a Thank tailwind I for I be to nice If cast in 'XX? could do growing mortgage from expectations deposit year. you part as and that that, compression. or be my margin net income this in for question structural defense us a an against help is, 'XX? supporting 'XX to going And important the very 'XX,

Alison Rose

Great. you, those I I'll of detail. confident comfortably we But numbers. terms questions? But, more bit in in do a want Will. much more above, take terms those to through through get walk guess those feeling you little Katie, to Katie Thank in of you are

Katie Murray

that we of guidance. Absolutely. by sort interest we factors rate our Yes, which that were sure. is looking one incorporate I'll into saying just the of start at the

£XX billion. rate the driven importantly rises. magnitude is that the so The both which base it income be above total And of and comfortable the I'm by degree is timing that will above U.K. to

our base X.XX% assumption year. do this further ‘XX. of further include assumptions of further year, are the expectations rate Bank market Our reaching in rate England and above includes QX note rises of We our our comfortably of guidance above rises this XX estimates currently two rises

and level. uncertainties are the the current this remain comfortable below at we increased face the assumptions, conscious of that is economy this we While market

manage to sheet seen continued of this quite have sides look through been improve increases. guidance. QX, There has limited us which helped deposit the of both do we and kind balance pass has So we in

However, more I XX% attractive deposit would we change to saw through -- in some was accounts say are there. that pass people of the did we last April around well. deposit equivalent saw rate for as There

interest you going is with be terms to But guide it again of come that since through won't can -- give that of But as I'm precise, the slide number. pace and You to our of not half surprise is might then it way I would you think it Amanda, is QX rates rates the the the a year. disclosures but through you see in It precise lower they above This expectations that of gives faster our And much full pass through. and the you, February, in compared your good than what will are when about in those move estimates, on spoke guidance rate rates revenue a you're unchanged the our expected. know one, estimate, in our XXX. if mean. additional where around we as getting updated to that's

structural you it's move at definitely through. we what say as this positive can a we think of the point, hedge If is

-- You this last that the in look, can quarter, see the up. yield moved

those So benefit an is see a kind now XX can one, flowing from into numbers. is piece, of that the but because movement, what XX important the whole for through small you

where you look on at before, that it's to hedge You when compared can in what of terms rate. much, and structural also much we that were adding richer kind where we're -- a writing of and you we're when

was over ago, on year a of kind going on kind to now about going look is of basis you points XXX. XX it If

here. growth that they another on of billion So positive quarter. move the We'll we as would year it deposits deposits, a And would slowed, are. we add next seen the added X stay that I note it say in kind that although that forward disappeared. in billion haven't is if as X over from We I hasn't

we of I'm kind take get to as should drawn can us. forward, not move I on as to be probably that. own you views into So your going see would we helpful on XXXX. NII it something

-- take can our take rate your from think interest and through you there. it guidance I

Aman Rakkar

my for Sorry in echo line. the

Katie Murray

it's Aman, hear, you. sorry. so for We can Apologies fine. Oh,

Operator

comes question Thank you unmute very go Coombs Citi. of and if Andrew, could you And from much. Andrew our next please ahead.

Andrew Coombs

you Can morning. Good me? hear

Alison Rose

Yes. hear can Good We morning. Hi, you. Andrew.

Andrew Coombs

Yes. for questions Hi. A Good me. couple morning.

terms any XX% simple to perhaps you announcement major parts, guidance that a moving given another one Ulster on is basically of today capital, could First of and flag billion bill on a on your still forth? losses, AIB implies got change and XX, I costs, Slide moving question of end. you've buybacks, by what X other the and you which year Is get buyback aside ratio of your for through from a any Bank the But you've seen disposal trackers is charges the already, across. of so pension to with in you're regulation, a in still to billion fact, capital, excess XX% guiding dividend second couple And direct in just withdrawal, On this couple think and here. for from contribution. because us come give capital that, view, don't there's of in

billion X you that at market look potential? we buyback can today have on as of excess So capital

Alison Rose

And and you with Thanks. that you on I me announcements remain and pick the momentum costs our announce change question. the today. with Really let good think pleased the But And pleased there disposals today. unchanged. to continuing guidance me Irish do to progress up want Katie, will just second I could Great. think question? No we take obviously. guidance, let

Katie Murray

know. Buybacks? I Absolutely.

a we look, combination as special of there's know ways you So the four It's distribute that dividend. can kind capital. ordinary of

we through a and February. minimum 'XX that the billion buybacks. it's So halfway buyback announced said we for a 'XX of We're in

I And remind the pleased in seen reflected that of level that the numbers. end that we've us would to we're in year our this we that stock, quite liquidity of with enable kind progress you So quickly.

all our made buybacks. right as we've something would decisions closed, sheet, sense for economic anticipate with were we think that by that Clearly, we the year. window’s that So good the you in well, work the obviously to at could make balance board I to done buyback the that's know, government They of for the you continue this of like and they now, terms time that rest so piece, right utilize.

Operator

Thank you very much.

Rahul, from of Next if question could Morgan. ahead. you Rahul and J.P. unmute please comes go Sinha

Rahul Sinha

Good Can me, hear you morning. Hi. Kitty?

Katie Murray

Yes. you. can hear Fine. We

Rahul Sinha

around on was might just wondering made your separately. to tell get you the more to deposits split of past the on does the how different able through know, I margin you question. evolution the the it disclosure between the some a was side, that's first point. two I'm to divisions, your beta the bit as pass hoping what might through? and be if XX% color the additional from XX% wanted against little retail pass through the commercial just well us, So interested that in within just expect to the I I what And like perhaps deposit assumptions have look color as commercial you was looking And on for retail be from pass side. you

lot M&A? color terms I'm create? acquisitions. some on other interested you The be by of I doing you. also that you was -- where that been any additional been create capital you've add of but look value might there second of evolution And a quite at might conference what around you I you any of just Thank point, in options think presumably -- interested commentary areas where that guess, thinking areas think could through value on potential be, you one could past bolt sort the calls is of press I this on on to Allison, in mentioned is just, based there around would And top some actually return, about on clear, value

Alison Rose

Great. Thank you.

distribution shareholder and would at no the my If we On of that. M&A, shareholders. anything rationale, changed compelling strategic then there's approach to is value my look to as preference

you at which the we've our we mortgage if recently aligned what metro with raised book like things was far, look done money strategy. a think I so or

very have It's a I obviously, we to other have, value, bar able are our would look I'm and to then invest be where billion at. that distribution things we high with that to preference the investment distributions, position business leverage and operating pretty in jaws a in program, shareholder the compelling X of at story, that drive things a got but the guess and there's So there's remains strong with strong look pretty positive compelling. continue

want evolution you through do beyond I've before. no told you pick point. to the So Katie, what pass up

Katie Murray

dependent the look me of you try absolutely, to as in it, of It's me picture a a I market. at of fuller think, you of very look what's a Rahul. upon, give that But happening let -- let And kind it's answer. kind one things, those bit than

we of through market pass the up, incorporating gave increased of those and it number increases. I for as the the products The conditions, is liquidity rate actual said we think, through and bottom at to prevailing be different built by levels. the -- So when they what rate time sensitivity, expectation through of was determined we pace those kind changed all will different of assumptions pass levels And you different subject assumptions franchises. as across including, rake and also the

through Or kind as we to two could XX% in first of was to it obviously got rate last that look first the put you impact April, equivalent the of you rise. at rate which takes March a quarter, If rate XX% We which change of of in the look two. rises.

do obviously well, I reprises of the And and about loans, think, And what's then immediately. of how book, kind and think impact really is that much fixed much vast so that's see majority within there. you if we terms have banking, when to how into fixed, which in an think distinction or because does rate look market CNI no on it the our have it, important the across go reference of actually, that. we've loans liquidity the variable happening versus in And you you you there. retail bank they of are got a as the kind retail depend

you But So then the almost and deposits, move we of our rates all retail benefit. deposit into get corporate managed rates. are

accounts, they an any XXX banking Retail five rate the XXX the price first changes. billion, have for XX% -- changes -- average XX% basis due to don't pricing savings deposits current So quarter. automatic external of points cost accounts,

we've very You'll because points, slightly digital very we of in X.XX% two looking cost here. see terms change. will you're basis another as And the better about pays the a everything rate, to get enhanced to a pay M which also XX then also basis If from managed be consumer, grow nice in you business very banking, points. average an rates. that the as move second will And and much in of opportunity a that CNI then account account, there's got forward

availability something So you, and what's what's the happening through that at we it customers. our market we but kind in happening with to look there work is is of as

Operator

you. Thank

Our Keenan from from Suisse. comes next question Credit Omar

please you could unmute If ahead. and go

Omar Keenan

two guess, picture and the the rate big I've one the quality And NatWest One I questions. markets. question on asset got second interest on outlook. just, the on

second this sense a three that of get cycle at realize Bank lot interest if on to firstly an And continue settle at see million question, the risk is rates a markets the then management fixed look us guidance -- forward level I be? market. are just X% than that, about but positive impacts on think NatWest Bank asset are, put what disclosure do I revenues, your because we and looks through will I negative. So to terms markets, come continue around XXX of you capital the question a perhaps, given the interest revenues going year at NatWest on costs for a but you probably – rather years. that's one think Could still the to forward level expect difficult you in rate that income a struggling how year. and is are higher base funding of is at hear are update I some neutral you indicate revenues in England rate we I the printed thank assumptions a restructuring rates revenue -- rates higher like might of negative the guess be end in so where is continue are going expectations of quite the that on X.X% of units year-over-year, current like England in and of of and at that what something become interest guidance outlook. And rate my to through X.XX% NatWest about something quality the at positive can your basis? give the of you now can interest rates it starting it of going? people -- quarterly how starts of And

Katie Murray

the thanks great. Well, question. Okay, for

much performance of we've business think to of on front So the of in see is largely of capital on what made the that's businesses of and would expect talked foot growing. decisions NatWest all very I I markets a that the the we on about complete, around NatWest restructuring terms and sort stabilization market the products now

performance good and XX%, markets would coming had both QX said, disclosure, has total think you and capital had the we I showing that there quarter, currencies, NatWest into XXX, a I shows by strong income the think keep and increasing respectively. we markets of performance XX% as

created business the In I as would geopolitical that year saw of the start events. terms categorize extreme by the the volatility we pre of it rates

overall, So you up from well markets. very loss. QX three and environment more it it's performance had of at of business the versus XX% I NatWest and if But a started a Ukraine, happy the I'm small with result as lines, And from look ‘XX. a think volatility difficult it the

volatility I refocusing. business the the So and comfortable during we're think pleased very managed with really I'm that well the

movements levels has of or interest of very, no obviously, point that and negative it it interest that's talked any interest forecast asset well. think customers by year, higher So become these significantly what and very rate terms On in rates, look rises business, I levels. when that we largely forecast see and at but it's level of a with a leverage we I and performing the your the complete, think credit than we does the have restructuring I our both on quality point, liquidity, sitting rate interest from can stabilization we think would through concerns rates through at perspective to, I expect caused different what

at I is as good think I our secured, book it, largely quality. look

cause manage the a we are capital, our concern would us interest reduce see credit actively our the work. events and that as not RWA intensity can we but anything rises You on act to seeing rate across continues

cycle we comfortable through that very you. with we're the guidance gave so our And

Operator

of comes question Exane Next B&P Guy from Stebbings Paribas.

Guy Stebbings

Hi, good morning.

the trading one fees hope on income might figure Net to or to in one billion were I And another if rate commissions that's it, and get X grows from QX. your in I XX take I'm today, and X% this that, And X.X XXX that. would rate the XX% billion above year-over-year moderate back then the call year. And deriving other approaching is over so, year. was up first sensitivity QX, just guidance. billion billion start yhat that The guessing XX assumptions and where we an from

in hikes. perhaps. the as just some and So sensitivity like benefit just changed, margin XX missing it Am benefits what be is which heights compression was to think you have through billion much rate with I I specifically reflected scale how talk pass even or XX up guessing on managed to assumptions. just tempering of conservative, a pretty very today roughly I that Thanks. around the something look wondering Slide on end mean given in and change billion, assets uncertain on be near quicker on I'm outlined the is that should deposit on side XX, the you your looks margin. the doubling a guidance sort in you this heights future assumption lower Then explosion, the depositors? most one spread conservative understandable environment. from future up managed follow and income some sort pass mentioned I hasn't I tailwinds focus If we But could of captured you

Alison Rose

your on that We'll made first the we've interest look answer Thanks. there. point, Katie's assumptions and rates on mix the above I comes comfortably that think, and

number, Katie, it to want we've a very do I bit. that comfortable strengthened So why you we're feeling -- think which on little is

Katie Murray

think the next the above at I think basis piece would so about the obviously comfortably is XXX way that we're points. I

assumptions of So our already point there. that built through into kind up until kind of are pass

guidance of it, a a forward we you then above basis we've curve is land in given actually, talked that of that the I and assuming So then managed going about the half those well, margin kind guys view think the one the we in, you XXX it's to a about the two if lot February, would kind that piece. that, I to pieces, of already more say, I in think that That that the were points. way have to when was -- give we we're

So you'd and kind of of of to level got normalized kind up pass through.

view kind can exceeded. that's use as our a if much couple further is to I of So think guidance take a could how where of that -- be to you

As the that. market how see the may it progresses consensus suggest, But let's be. would year on year

Guy Stebbings

Q-on-Q income year operating overlooked just gets that other tempered XX% underlying on but just is briefly and seasonality, the was adjust to that I a may we some base because I if as -- we ultimately, seeing was kind be now, bit mean, are good back Can is I going maybe other up progresses. during think operating distortions because something of which seasonality come maybe income, the it the fair? down in tougher momentum be and given COVID, is year-over-year. of the it XX% you But

Katie Murray

we're kind little in there is and is that a Yes, there businesses good I kind think of bit recovery seeing is of what underlying of QX. in seasonality the always

to there's read into nothing So that.

XX%. I'll the own leave So on view make your to you

So see I'm is just even you little bit on lower. that at going to can if but be that specifically, often XX, look the not I QX slides the commenting that on

Operator

comes Our Pierce next from of question Jonathan Numis.

Jonathan Pierce

questions. I've got two

to first this comment, Apologies The one come again. pass-through on is back to this.

other on can of being billion pushed most make rate in You're about XX% the about what applied XXX I you portfolios in bps latest by sure if the of ICE be in a Go-Forward those about see some talking up you're correctly. I've understand that, Bank? mean, we by hike, rate account surprised that pass-through you've business, the pass-through look of the I now. but XX bigger deposits Can I just bps, hedging got rates this slightly to? understood reserve You've XXX to is Just XX unchanged.

So you're it? a what so XX% point XX about when maybe to basis Is billion XXX the of that pass-through, referencing there's how about billion you'd balances. that latest pass-through hike of unhedged. I talk should XXX Is you XX% think

Katie Murray

add to quite terms just of Can that Allison quickly, I in that.

save retail that. main terms and of one change, in the points think up instance it's XX I So or you've is missed the basis

different up retail change went various picked main on no changes. you on obviously And you've accounts. So accounts, that saver up. the across saw and not savings one current is The then our change

Jonathan Pierce

missed about that's have it It’s I that. think talking may website, one was I basis. up still the one, to but on XX

Katie Murray

that. reason in it not early websites, term sure the the April. So It about that's, in so only and the effect April my on takes in -- part apologies of --

updated. be it should So

But one missed. follow the point So we'll someone you've have that that's up. that

Jonathan Pierce

makes with follow-up That hedge the the Can on structural I again? sense. question

Katie Murray

Yes.

Jonathan Pierce

hedge versus in the as basis year terms was But only Exactly. points. confused QX second the hedge a the I'm QX yield. added isn't total product of point last on basis why half to the slightly in turning in quickly, corner more the you XX of

the billion X.X% and net added QX to durations So X quarter. through to in the hedge you've the is most X% curve, obviously swap

Except in of during at hedge this stocks much the appreciably got over the quarter. You've oddity off, there actually back equity hedges more holding the hedge the we old still again, year? rest income a or the hedge moment are rolling is going X% is the the but up on that's to see to drag, move the yield some

Katie Murray

you What expect mean up, kind on a through. it, bit I know probably would So if we to I we with I can nothing it improve at that's holding back. see there's we But it's look see the to would of a come but as hedge, Jonathan. can, hedging capital familiar is from of little still underlying that the incredibly go I continuing you're say it, headwind,

As schedule you and they'll the that, look at years. one, over three two

it And bit come You up. on well. there. two can as number little you you of over also it of through gently, as quite into see year last year But lumpy, in and first three, can kind the as you comes be year untoward depending there's on years then go a and when grows put nothing the it

up. to You move it will see it see -- start you'll

Operator

from Our KBW. next comes Ed Firth of question

Ed Firth

you in if wonder all I thing mean, look I is at some assume this sort guess no about share bring I I If stressed. of with. seem all of beginning Sterling, imply question you rates, I to But reasonably you I I to doesn't matter. X%, X%, it's X.X%, And at downturn. interest and accept the back prices, I comments credit. living stress Because XXX. pricing if on then are there's hear at the worried, cost struggling your all, the your at we're seem they're could just look to people a material you're by

worries to, just what sector bit, and have not at try telling be the a which even know we But from can do be little seem coming trying to extremes that saw credit I me downturn moment. here, square a honest, the just piece really to adjustment, what it's start you is to regulatory I'll yet cetera. At loans cautious with to us thinking, you try square -- raising we -- that have in lending, I and and and exclude I'm don't, the to if help scenario, some the try I'm two non-performing could in struggling, does et more up And provisions, When do don't I you all, battling really the your that's is make trying whole at just what if seeing I the if in particular. these are we So market. point no you management start I'm wondered, I've what be got nervous? where you, sector all

Alison Rose

and help try me so. Let

largely So our secured. what book, at got, if a book, specifically is prime it's our primarily you've we're look book we --

shape drawdowns would for in the things of terms health issues market overdress. of monitoring we in at of or but think requests increased indicators look is book important, I seeing whether into or financial what would any like we're in our that into calls deferments movement the lines, we of support sort is, leading on call and that all the cards trends and So the and heightened credit

of We those are coming not indicators any through. seeing leading

peoples an the and in the there -- economy, have cash accounts and fact of less is that pandemic £XX across they there UK is £XXX deposit that billion during Now, savings consumer sitting extra that built is element up billion, the of debt.

of across liquidity sheets, you've there sitting as lots corporate got balance well. So

concerns there of around through. of no though is, is signs those So living that being coming mindful distress and cost are very all we supply of What and of chain. inflation

really of of in employment any is very of terms the signs we moment. sort at look – high book, issue if very be So -- of really driver the what would shape the we are we you and the our that it. but proactive, are dynamic unemployment, it. seeing not And is The big remains you that being actively that where at manage is then if

you I start perspective. credit an of be migrating affordability, would migration seeing bite that from start into think more once that into and event really unemployment that would biting So,

will feed or at the X.XX it's that not of X, shape going of is look back you key about book looks is unemployment of think So credit be that ECL. when our the pretty step consensus rates we driver really When ECL, wherever is But to impairment, and driver the unemployment. and at interest that a getting, good. into

happening. what that some dynamics helps. hopefully So you have very different got But is

can proactive going of no our be how on teams would indicators, that. the into distress. sure But signs supporting being focus The you and we relationship very would support in leading customers, address are through area We unemployment. them are we managers, making our proactive through

So, hopefully that's helpful.

Ed Firth

correlation start Yeah. you be for some in internal modeling, your at would No, have that's rates then so et will there to interest cetera, But, level helpful. I guess at because be going sense what point? a to a very have do on, unemployment

Alison Rose

Unemployment has affordability. -- and getting really aren't the another driver that is going of overall Well, so affordability. of sheets we when people balance that's I the rates unemployment book corporate that's that's interest But affordability, across businesses, high. are salaries generally If and unit, on you buffer affect when a liquidity up sensitized and goes level driver at been to a very think of wages and cash in, clearly across the up look it's then dynamic. built sitting in

the around all and back fixed side, on in example, business, for on I look Banking mortgages small rates. degree are our Things of amount customers if of XX% loan, A like think small those our fixed. you the our fixed about high are -- rates. bounce If are on customers, business

sort more going rate things. of So, a will of rising side be to into is go dramatic But affordability. that unemployment interest much

about this interest we into So, concerned biting at are affordability rate point. not

Katie Murray

our one And our add to have repeat to I be to through XXXX What impairment and think, XX% just Alison, guidance guidance. we would the you I below in XXXX. only our the is expect charge said to is, we XX% thing

think the it's rates. own while we terms something impairment manifest, in So, recognize of to have in we particularly we the cost level not crisis, living of where what we are expecting our provisions are, we and

Ed Firth

much. Thanks very Great.

Operator

go Thank you. ahead. comes unmute Rob next Bank. from Noble and question Please And of Deutsche

Rob Noble

aren't credit. year? you that appreciate in rates -- morning And base for higher cost my underlying On this target particularly saying it, Good concern lumpy for are line with a pressure the is cost expectations on performing or your thanks this then, all, is underlying the quarter good. and inflation your questions. cost so it's Is I inflation, I interest a looks for appreciate taking

cost did inflation. of living post-model in take adjustment a You presumably for

that one parts what you inflation from leading just made the of just one is on points negatively UK excess corporates savings, cautious that are What books book? in positions. your that? -- and a then arguments more impact you the And worried liquid people where of the of the in about? but So are does is And people lot held the are excess by wealthier savings have of

-- you So deposits? where holds what proportion see -- excess proportion can the data of the your do actually know, what you customers

Alison Rose

X.X%. So performing them taken let me Yes, start question. expect million or on are XX the we costs the out Te've costs as to.

obviously for with our this, year still set always considered inflation not said And cost times everyone the I X%. so will first X%. linear. I track and comfortable said very quarter when by know target we on we not We the comfortable. as I've be and costs linear. that We're be takeout we remain the the last The are well, four. will

but So, given sort X% expect to our as we're the pick target is this guidance it of you Katie, question? we the is comfortable want for year. cost And next do X%, performance the you up with we've to. performing

Katie Murray

Yeah, absolutely.

economics your So -- XX% Rob, into kind on in of million a XX% of just how recognize normal on I everything update step points I through. of and much just what I but it's we see And And significant the that's you've caution a supply would that. to rolls in bit your cautious looking say, felt do we particularly given held number, given and we juxtaposition kind chain. we're this below living that Yes like, think what do of are, not PMAs of a we to base. consensus few where at, QX, back because cost let's Katie, XX We'll basis will our of a more be little of guidance. on move is

sitting of kind at kind But is. so those that kind a many look judgment our in a numbers, of the where not And is different in but are significant the we hold against clearly as see back. of we'll it's our economics where done of it's moment, at numbers, But kind at. in things about. of of something concerned that. moment, was are So one bit little not tested will we we it's of but assumptions, kind kind we've comfortable Inflation the have it number. decision to It's

wealthy, businesses the the, piece, that of are savings franchise small is slight terms there, you've that's increase. of of and where kind point, by held also across kind retail excess which of seen the our -- they're In they terms kind our that but of also held by in

it's kind leisure -- impacted. that a number lot inflation look think to you the what of when that over sure focused they're estate the we last when at to of well And discretionary get you a real years, on spend starts environment, discretionary happens the the spend our we when exposures, of an retail managed. exposures make think in I

that make impact that then sure on not if kind of can So at to watch kind on we're the there's in that those, risk of space. we follow through

living we are will people be our people we're them. lend and books we not impacts So that going immune, the having -- it's struggle. the impact, But obviously the when to, we of people cost greatest at those unfortunately not look on look at of that the to

we of We a need So mindful the UK look you we need keep to it. see you -- are the is sorry, -- point, need inflation coming need to keep at to the excellent. to to moment at stats this thing most back unemployment And there closely. keep can unemployment

Operator

Thank you.

Cant Chris Our next question Autonomous. comes from of

Chris Cant

questions. Good If Thanks taking I for morning. back NII to could come my please.

change it's us something run the we on NII about show million I that think average So generated that your deposit X.X XXX billion in a benefit improvements in about the the like margin slides. and based if saw the rate, quarter, for rates you

and exit April And to if feels think Go-Forward your XX is of XX you that's X.X I run if your the and allowing prove this maybe of a assume most And now in bps be quite have indicated, I at other the the what quarter, for of coming be okay. it had average so for March quarter. So like that sort where expectations I market there? rate billion, on like in something if X.XX, an to with of even I could rate comfortably to as NII rate hikes, any down on And you annualized right bank? at March, of feels we level the but said rate trying can been would've as appreciate I the that into were the that context bit it pass-through It trim about above you've am Because to pressure. easily bps think I'm the before questions, NatWest correct. further two X.X that's the on end actually missing mortgage in run the XX% about incremental about just markets of recent close of X well, another the terms get as was XX a well I some it for as that NII ask billion question for to

Katie Murray

sort back thing. markets come the one of one me then Let this we'll to do

above, at of rate kind it our coming on comfortably a look, had deposits. the Chris, So through. We rise we did slightly clear from is as of in sitting X.X, we a little -- look terms on rates pass-through were. at the into faster we're consensus where push interest to bit We

very more the You're kind that that what's pipe. actually rate kind rises of costs familiar what's We accounts, to by two how of so much -- deposit we'll only and think We've in get with QX. current us. got the last one

on consensus, at look bit you If that's different.

above guess think comfortably of think but of you those So where carefully. we XX, are, timing quite I I words your about

way positive just viewing the piece and not continuing of across of your that is want those think as you number, kind probably of that kind Do do what means to a precise going to we're both we're the I'm to year all move but generating So, leave good NatWest the you the and I markets we see, out forward. give question. you income it work

Chris Cant

Yes.

of at a number I you or volatility, you unexpected be absent you that volatility. business side quarters for any So the expecting that something Are any the being coming is the off you're forecast to indicated but to a that on indicating positive really the quarters, business to the massive degree. non-negative is caught restructuring rates making I'm further a you not Because number, horrible -- string done. to obviously expected markets loss sort and now rates guess, revenue of asking it's stop had revenue point? rates

Thank So I you. revenues some be it presume if you at positive business, that to weren't keeping going deliver some you point. weren't to expecting actually

Alison Rose

Thanks.

said was very reference was of Ukraine, volatility of NatWest markets saw and managed extreme that as I well market volatility think managed really and a you us volatility our a result doing invasion the in So to well. of I has in by the with the It pleased the performance the as QX. that you business My restructuring to rates restructuring. and business The of in I'm disappointing combination That complete. the QX performance the very was volatility team. team market is the very a stabilized.

You trend has the can NatWest business perform into to positively. this rates And continued from see quarter. contribution the markets and

and making. it So not loss I don't be is to expect it making loss

the handled but is as volatile and of result expect So by I volatility much the the we a we've the there. a didn't think market team restructuring that caused actually stabilization business less invasion, very it I I forecast the well completed. in have

performing. how that comfortable very So I'm business is with

Katie Murray

I And what Alison, if look increased their -- million you -- the accounts the income at XXX of our capital in think, over in markets quarter.

across with I with think place. we're dealt pretty they've the helped volatility, it's them how pleased

Chris Cant

could average, I I If your XXX for a NIM put differently, The obviously first please? on is your the it ask what just exit was period one was what slightly now? exit XQ, question. follow-up If

Katie Murray

on numbers lot So all you, not going think, the just you to kind just exits what detail, that. I'm let's guys, I with from of the given I work of gave give NIM exit and let's things, we've a sorts give work, you I you of

when the definitely would the we're got NIM kind they've and -- we're expecting for -- So rate I way increase, kind the in. how of whole think the looking baked talked at continue that we’re rises, kind more of to to about it we've about at year, look I if of two

we them still more landed hedge. given the and to the I've And to deposit come is structural and of going think quarter impact base, through. much full those, kind growing how improvement a get we're of I QX as So that. We've some timing the strong rises got on very shared which really you with I'd they further in where of helpful. see expect rate of put

So ongoing feel you because to But more quarters I to can the -- exit with But me then going of will trouble probably caught we're not quarters out that much benefit cause those very on rises comfortable work I'm NIM rate get get in Chris, and is performance. to the terms come. going directly. in how

Operator

next of Goldman from Martin Our Leitgeb question comes Sachs.

Martin Leitgeb

congratulations Thank my you to taking the and set numbers. of question good for

business I back just [pass have on I pricing, the could in of Would of to increasingly for around scenario banks here and there of at banks this bit pricing terms wanted this And basis down you margins the normalizes fallen and heading normal pricing here. as we more could expect mortgage stated Or you on] and be wondering into Are on application you ask be Thank liability the just quarter First was if swap in mortgage of that comfortable could around on some XX points XX prior the are all, mortgage in kind a level? liability the writing in new little side, this you from release, comment a bounces pricing? outlook that rates? period. you. margins,

Katie Murray

worry asking. get going mortgages I willing on we to was all at the call. for Thanks to to weren't

So thanks for bringing up.

Let more me specifically need we bit. can any the if talk a and do follow-up about mortgages you

basis XX bank NIM highlighted basis our we group, points then and increased XX in we points, and by in increased by our as QX. retail So

at margins below to be despite are in continue a you retail, expansion I on the the market call. where profitability not and as sensitivities improvements based for consensus XX assumptions overall we the that consider to on are about lot application all what rate mortgage talked a guess NIM the expect and based that basis levels want that We them But interest to on group. points and the see quarter see of sustainable we we've said, the well, rate our

rates part since with points application swaps were of then a very expect the increased to by lot don't XX and see for by quarter. through in of time. times levels. XXX mid QX and low market periods over our level rest latter QX of increasing in basis In appetite points to shouldn't that, you think I sustained quarter, we our basis the mortgage XX at exceptional, at this conditions have the QX. business in write response pricing The So margins January, of remain customer of to increasing the steeply in over these We've

of to enough seeing was However, that still not the swap terms keep in pace curve. were the movements in we

application offset to we've clearly stated the ROE, doing don't periods rate That very I've us. more overall, there, you time. something application. the over talked we the combined up. see with we've kind for hedge, that holistically, expect And And should even levels as of least rate which If of the which mortgage uplifted their about, pressure long M sustainable the another And margins, us this business roll at positive on move to XX% base the we these under the rises, going increases not on price its more pressure they to improve structural look continue there the than are the that’s continue puts see I'm of for overall, to are of large I environment, So basis to as are comfortable swap QX benefits, said, that the capital. forward. positives

there, for the the of kind level. more terms price of I we're in of to up for think QX XXs, continue aiming clearly would very normalized in we applications. expect to kind And kind work strong but in So to a to those margins of a group

see to So you them through. start should come

Operator

Our from Down Robin next HSBC. question of comes

Robin Down

I is living with of crisis. start one request. the the cost if which request with got one question, Maybe obviously I first,

what request one breakdown, Coming you think, give maybe in most of income bit to But of I of question. the do demographic peers. those to feels what who otherwise, deposit for really mortgage is rates? future, beta? to households to low maybe fundamental number key slowing it's we credit to a FICO where feel sort the to it kind quarter? book to of might was just flow And is raise the us for households. to Or of come the that rationale income you've there'll impacted. back you just the some the of elements for make low rates? raising card a book, bases of is like during that kind levels. scores pressure think, I the go drivers are I that a I kind your the kind decide you Any factors XX% of that, see that your of on rates. just to going it from I with we of And income positioned be curious were to raise easier that. be wondered just in this, us I'm political kind kind terms elsewhere got do relative deposit into appreciate there's your haven't Can Because seen customer seeing of of as

Alison Rose

at like is, you of terms on it's the of see secured very, our the one resilient unsecured And our on just prime UK, can say we a and been the diversified of our risk Well, if you base, performance. lender, would so largely book, we're can things of what and see also, that. I a we're look as large demographics a relatively We're low a customer but it reflect diversification and well is its shape very and the in predominantly book. book,

comfortable manage deposits say, Katie, the your we're I interest with market. diversification. with We've On But, at point I of We're on very very seen out challenges, we're you not that the line we look would well passing active terms market. as the Actually, want and sit. of rates. that on being pick the across but up? do passed would to the base with So also where around customer our in risk them helping

Katie Murray

basis In it's basis terms of of XX here. the -- hike been deposit, I points think points of XX There has important.

of that's to And don't it's incredibly it's hike franchise look XX us, to overall, important still it's if and our we've It's is an valuable points deposit we passed funding through. Our think that in reality, XX cost right low. We of franchise. of at incredibly think you thing the through basis do. come --

more than think comments I probably no So it. math Thanks. on

Robin Down

what demographic back I But on be able borrowing. kind to the it of think, come would you households mortgage if point? nice have that, is disclosures. your don't income to low Can the I data that just mortgage a be great shows of data see deal like, the within

going take your kind helpful of customer with But, for could I if would instance, levels, something forwards. can medium we maybe offline of just be see the kind for mortgage income IR it's base, guys. So that

Katie Murray

mean, look happy you chat always have to with one-to-one. requests. I to I happy No. a at on Robin, very mean

lot this, But happy conversation this on know information. you lot I recognize work to and a disclosures of offline a good on do it. doing so in think very a have of we as you I been of have

Operator

would I to Thank over you now hand any back you. And closing much. very like to for Alison, Alison comments. to

Alison Rose

Look, Thanks just it's Great. closing Thank much. you. very a few comments.

are really a quarter. We strong performance this pleased in with very

I strong, is have seen against what you continuing plans. think delivery our

income. have growth in We

are We on delivering our reduction cost as planned.

to a base a strong rating strong clear capital a capital with distribute have plan We performance. and

diversification our with We of book. are comfortable very the risk

default of our that incredibly but our we book are going through, We well-managed. seeing our are the customers in of no are and and very well-diversified book distress signs remains mindful challenges or

on continued ago. here, I you across strengthened and guidance on are results building on we profits of outlook. a -- a bit growth a progress. strong But strong little a book. of give have our a years on comfort well-diversified capital, year significantly loan We sit to Income two set of as Katie see income up and bit Costs

at continued the of end restructuring And now of the of in market, the quarter allocated our that we restructurings terms the almost as year. completed In strategic has momentum obviously performance we the our West done on sales. agreed Irish XX% assets have strong in for and have announced the with business capital

they hard So that Abruptly]. to think, the right working are [Call economic have with customers the through we support sure I make Ends our

NatWest (NWG) 30 Apr 222022 Q1 Earnings call transcript