NatWest Group (NWG) Q3 2022 Earnings Call Transcript

For the period ending September 30, 2022

October 28, 2022 4:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the NatWest Group Q3 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 here with Katie Murray, our CFO. And I'll start with the business update before Katie takes you through our financial performance, and we'll then open it up for questions.

So let's start with the headlines on Slide 3. Against a volatile and challenging economic backdrop, we continue to demonstrate the strength and resilience of our business, delivering a strong financial performance while supporting our customers. Operating profit for the first nine months of the year was £4.1 billion, up 15% on the same period last year, and attributable profit was £2.1 billion.

Our return on tangible equity was 10%, and we are reporting positive growth of 21% as a result of strong year-on-year income growth of 23% generated across our core customer franchises, along with cost growth of 1.8%. We maintain our cost reduction target of around 3% for the full year and are on track to deliver that. Our cost/income ratio for the nine months was 54%.

We continue to lend responsibly and support our customers with strong net lending growth of 5.4% since the year-end to £372 billion. Our strong capital generation gives us confidence in our ability to continue delivering for all our stakeholders in challenging times.

Our common equity Tier 1 ratio of 14.3% is approaching our 2022 target of around 14%, and we continue to return excess capital to shareholders. We have now paid or accrued £750 million towards our committed dividend distribution of at least £1 billion in 2022. And together with a special dividend of £1.75 billion announced at the half year and the directed buyback of £1.2 billion in March, this brings total distributions accrued or paid in the nine months to £3.7 billion.

Clearly, the macroeconomic environment has become more uncertain since we spoke with you in July. Inflation, interest rates and energy costs have increased further amidst a heightened market volatility, while supply chain disruption continues. The outlook is now more challenging for our customers with a drop in business and consumer confidence, together with lower economic growth.

In light of this, we have revised the combined weighting to our downside scenarios to 55% compared to 34% at the half year. As a result, we have taken an impairment charge of £242 million in the third quarter compared to a release of £39 million in the second. However, we are not revising our full year impairment guidance. While we believe our economic scenarios are conservative, it is important to note that we have not yet seen any material signs of stress from customers.