NatWest Group (NWG) Q2 2022 Earnings Call Transcript

For the period ending June 30, 2022

July 29, 2022 4:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the NatWest Group H1 Results 2022 management presentation. Today's presentation will be hosted by CEO, Alison Rose; and CFO, Katie Murray. After the presentation, we will open up for questions. Alison, please go ahead.

Alison Rose

Good morning, and thank you for joining us today. I'm joined by our Group CFO, Katie Murray this morning, and I'll start with the business update before Katie takes you through the results. We'll then open it up for questions. So let's start with the headlines on Slide 3. We're announcing a strong first half performance today with operating profit before tax of £2.8 billion, up 12.8% on the first half last year.

And attributable profit of £1.9 billion. Our return on tangible equity was 13.1%, up from 11.7%. We're reporting strong income growth of 16.2% and costs were down 1.5%, resulting in positive jaws of 17.7%. We continue to target a reduction in costs of around 3% for the year and remain on track to deliver that.

In a challenging macroeconomic environment, we maintain a strong balance sheet and disciplined risk management. We have a well-diversified wholesale loan book. 93% of our personal lending is secured, and we are well provisioned. We continue to deploy credit to support our customers and net lending grew 2.6% to £362 billion during the first half. The bank is also highly capital generative.

Our common equity Tier 1 ratio is now 14.3%, and we have been clear about our intention to return excess capital to shareholders. We are declaring an interim dividend of [£0.035] per share which represents £366 million towards our distribution of at least £1 billion this year. We're also announcing today a proposed special dividend of £1.75 billion with a share consolidation. In addition to the directed buyback of £1.2 billion in March, this brings total distributions announced for the first half to £3.3 billion. And we have also recently completed the £750 million on-market buyback announced in February.

Just over 2 years ago, we set out our purpose-led strategy, placing customers at the heart of our business as you can see on Slide 4.

The rationale was simple, by helping our customers to thrive, we too will thrive. Against the backdrop of economic uncertainty, we continue to focus on our 4 strategic priorities in order to drive long-term sustainable value, and that starts with supporting our customers, which I'll talk about more on Slide 5. While we are not currently seeing any immediate signs of stress, we are acutely aware of the precious customers face this year with higher inflation, rising interest rates, a steep increase in energy costs and supply chain disruption. The strength of our capital generation and balance sheet enables us to stand alongside customers and colleagues as they face into these challenges. Many of our customers built up savings during the pandemic, so household finances are in a relatively good shape, and businesses have healthy balance sheets.