Thank you, Howard and may I add my welcome, to everyone here today.
Given the current health guidance, we are again meeting virtually and we are pleased to have this opportunity to update you on our progress over the last year.
In February 2020, we launched our Purpose “to champion the potential of people, families and businesses” and it has been tested and proven over the last year. We are breaking down barriers and building financial confidence, so our 19 million customers can rebuild and thrive. Our purpose is all about balancing the needs of all our stakeholders: our customers, colleagues and communities because when they succeed, so do we.
We are focusing on three Purpose areas which are commercial imperatives: Climate, Enterprise and Learning. We know our activity in these areas will increase resilience and long term value for those we serve, and drive sustainable returns to you, our shareholders.
Importantly, we have also made strong investments in the Executive team who are leading on our Purpose and Strategy attracting significant talent from the UK and internationally, and injecting new energy and insight to our collective priorities and planning.
The bank began last year in a strong financial position, and has delivered a resilient performance through the strength of our core franchises and brands, in a challenging environment.
As Howard said, our attributable loss of £753 million for 2020 reflects an impairment charge of £3.2 billion. This is below our guided range, and a significant proportion relates to future potential loan losses under IFRS9. Before impairments, we made an operating profit of £2.9 billion.
We also reduced operating costs by £277 million, exceeding our £250 million target, which reflects effective acceleration of our bank-wide transformation.
We continue to operate with one of the strongest capital ratios of our European peer group, at 18.5%. This capital strength gives us the flexibility to navigate the continuing uncertainty, return capital to shareholders, and consider options for creating shareholder value. In announcing a final dividend of 3 pence per share at our full year results, we intend to pay out £347 million to shareholders, of which £208 million will go to the UK Government.
As Howard has covered in detail, we were able to participate in a directed buy back last month, which we believe is a good use of capital for our bank and shareholders and further puts us on the path to private ownership.
We have significant capacity to grow, and our lending is well diversified with limited exposure to unsecured loans. We have seen net lending across our Retail and Commercial businesses increase by 7%; exceeding our 3% target. This includes our acquisition of a mortgage book from Metro Bank, representing effective use of our strong capital position, in a key area of focus.
In all, amidst considerable disruption, we are making determined progress against the strategy I set out in February 2020, which prioritises our transformation efforts in four key areas:
- Serving customers across their lifetime to deepen relationships and generate growth.
- Powering the organisation through innovation and partnerships, a productive blend of the right people, technology and insights.
- Simplifying and digitising our business to improve customer experience, increase efficiency and reduce costs.
- Sharpening our capital allocation, to get our capital working efficiently, and being deployed effectively, to maximise returns. We are proud of the teams who, in 2020, reduced the risk-weighted assets in NatWest Markets by £11 billion, to around £27 billion, well below our original target.
In addition, we announced the conclusion of our strategic review on Ulster Bank. As Ulster Bank’s business in the Republic of Ireland will not be able to generate sustainable long term returns, we have decided to make a phased withdrawal over the coming years. We expect this withdrawal to be capital accretive over the duration of the process. This decision has no impact on Ulster Bank in Northern Ireland.
The sum of all four strategic priorities is: “to build a relationship bank for a digital world”. Recent events have catalysed both adoption and demand of digital propositions, and our four strategic priorities are strengthening our customer offering.
During the pandemic, we stepped-up to become part of the solution for customers, making possible well over a quarter of a million mortgage repayment holidays, and innovating new products at speed. Such as a Companion Card, for vulnerable or isolated customers.
We kept 95% of our branch network open, which meant thousands of branch staff helping customers on our highstreets, whilst others made over 400,000 calls to customers at home. Use of our digital channels has accelerated, last January, we did around 100 video conference calls with customers, each week. We now do 15,000 a week. We also now have 9.4 million active digital users, and 7.7 million active users of our mobile app. In fact, 58% of our Retail customers now use only digital channels; a 12% increase, compared to 2019.
There are other important upward trends, we’ve helped 600,000 customers to start saving, and have had nearly 3 million interactions on financial capability. For example, through our new Financial Flex programme, to increase confidence and understanding in talking about money.
We also provided £31.5 billion of gross new mortgage lending in 2020 in Retail Banking, which includes over 1200 Green Mortgages, incentivising those whose homes are more energy efficient, as part of our commitment to help customers transition to a low carbon economy.
We recognise that this has been an incredibly tough period for many businesses, and we have again stepped up to deliver new Government lending schemes. Over the year, the approved lending amounted to over £14 billion.
As part of our ongoing, targeted support for enterprise and climate, we have also provided £1 billion ring-fenced debt financing for female entrepreneurs, and £12 billion climate and sustainable financing. Maintaining intelligent risk management throughout.
Going forward, we are making targeted contributions to business recovery and growth, partnering Government and drawing on our own expertise, to break down key barriers. We are committing £6 billion to support SMEs increase their productivity and sustainability, and we are working through our Regional Boards to relaunch and deliver our market leading enterprise proposition. This provides more local businesses the support, training or growth opportunities they need.
We also pivoted our enterprise initiatives to be delivered digitally and, by full year results this February, our 12 accelerator hubs had held over 1,000 virtual events for more than 45,000 attendees.
Earlier this month, I was on a virtual visit to the South West, marking the partnership of NatWest Group with Bristol Green Climate Partnership and Bristol Council, to launch their Climate Action Programme. This aligns with our ambition to facilitate faster, simpler transition to a lower carbon future, for business customers. We’re providing billions of new green financing, and have also joined forces with Microsoft, whose cloud, data and AI platform, combined with our customer relationships and insight, can help more companies to better understand, and reduce, their emissions.
Last year, we achieved Net Zero in our own operations and have done extensive work to analyse and mitigate our portfolio of climate risk. We have committed to be Climate Positive by 2025 and, last year, NatWest Markets helped issue 36 Green Bonds, raising £23 billion for environmental activities. This year to date, we’ve already lead managed 20 Green Bonds, totalling £21 billion.
As the principal banking sponsor for COP26, and a leading lender for renewables, we are proactively supporting the transition and the critical greening of UK industries.
We couldn’t achieve all this, without the extraordinary efforts of our colleagues who rallied to work in new ways, and be there when our customers needed us most. We set up 50,000 colleagues to work remotely and have since brought in a raft of additional support. From a new, 24/7 GP line, to the SilverCloud wellbeing platform, to the launch of the Learning Academy. We’ve also introduced a number of Covid-secure measures in branches and office sites, to keep each other safe.
Meanwhile, colleagues themselves have done a great deal to support community services. For example, we repurposed part of our Gogarburn campus, to become one of the UK’s biggest foodbanks, both for surrounding communities and, in the evening, for NHS Lothian staff. We’ve also opened up our Younger Building in Edinburgh as a mass vaccination centre, and became a Corporate Patron of the National Emergencies Trust, raising £10 million last year, by match funding customer donations. We have also announced a £1 million fund for Save Lives to support survivors of economic and domestic abuse.
I am proud of the compassion and initiative of colleagues across the business, finding new ways to improve the strength and wellbeing of our communities. And I would like to thank all of them.
Our People are at the heart of our bank, they bring our Purpose and Strategy to life. In the past year, we have found new ways to support our customers at pace, whilst exceeding the core financial targets we set in February 2020, around lending growth and cost efficiency.
I have great confidence in the team we have assembled on the Executive Committee, who are leading on the plan we set out to the market this February, including our RoTE target of 9-10%, by 2023.
We are working together, as One Bank, to secure sustainable growth through our strategy. One Bank means collaboration across the Group to identify and deliver the right priorities, delivering fantastic customer experiences, being simpler to deal with, and creating value for shareholders.
This is how we will champion the potential of people, families and businesses, and drive sustainable returns.
Chairman speech - Virtual Shareholder Event Statements