Hello and welcome. We have once again decided to hold a virtual event, separate from our formal AGM. The safety of our staff and our shareholders are of paramount importance.
Taking on board the feedback from last year, we moved the meeting forward so that you, our shareholders, can hear what Alison and I have to say and put to us any questions you may have, before deciding how you wish to vote on the resolutions.
Maintaining frequent engagement with all our stakeholders is an important priority for the Board. This meeting builds on our activity in 2020, including virtual events for retail shareholders and Board sessions with institutional shareholders.
Before Alison talks about business developments, I will cover the governance changes over the last year. There were a number of changes to the Board.
Baroness Noakes stepped down as a non-executive director in July 2020 after nine years on the Board, with Morten Friis succeeding her as Chairman of the Group Board Risk Committee. Morten has been on the committee since 2014 so the transition was very smooth.
Alison Davis also left the Board in March 2020 after nine years. Yasmin Jetha was re-appointed as a non-executive director on 1 April 2020 and succeeded Alison Davis as Chairman of the Technology and Innovation Committee as well as becoming a member of the Group Sustainable Banking Committee. Yasmin was previously a member of the ring-fenced bank board.
I would like to thank Sheila and Alison for their outstanding contributions to the Board over many years. I would also like to welcome Yasmin back to the Board and thank all of my colleagues for their continued dedication in the face of very challenging circumstances.
Effective oversight is especially critical at times like these. From the start of the pandemic, we quickly established a rhythm of weekly Board meetings to receive updates from the management team on our response to Covid-19 and how the implementation of our purpose was helping to meet the needs of the customers, colleagues and communities we serve.
Despite the tough operating environment, the bank is making good progress on its strategy. We continue to grow in our key areas of focus. We are simplifying our business and accelerating our digital transformation to serve our customers better at every stage of their lives. And we have strong levels of capital and liquidity.
Of course, it is always unfortunate to report a loss, even if our performance in 2020 was largely driven by an impairment provision of more than three billion pounds. Most of that provision relates to potential future loan losses, the full extent of which will not be known until the impact of the pandemic on the economy becomes clearer.
And although the persistent low interest rate environment and ongoing Covid-19 restrictions will continue to challenge the financial performance of all UK banks for the foreseeable future, your Group is well positioned to navigate the ongoing uncertainty, to support its customers and to drive sustainable returns to shareholders.
In December of last year, the Prudential Regulation Authority made the welcome announcement that it was lifting its restrictions on capital returns, subject to certain sensible guardrails.
Following that decision, and having considered a range of factors, we announced a final dividend of 3 pence per share at our Full Year Results.
And subject to permission from the regulators at the appropriate time, we plan to distribute at least £800 million each year to 2023 through a combination of ordinary and special dividends, maintaining our 40% pay-out ratio for ordinary dividends.
With a Common Equity Tier 1 ratio of over 18% at Full Year 2020 we are operating well above our target range of 13 to 14%. Our intention remains to return capital to shareholders and we have now set out a clear path to reach our target by 2023, whilst retaining the flexibility to pursue other options that create value, such as our acquisition of a mortgage book from Metro Bank at the end of last year.
Share prices across the UK banking sector, including our own, saw a marked decline through 2020. Again, that was to be expected given the prevailing economic conditions.
There has, however, been positive momentum in recent months as a Brexit deal was reached and the vaccination programmes rolled out. Over last 12 months our share price is up by more than 80%.
Last month, we were able to use some of our excess capital to buy back almost 600m Government shares through an off-market placement at a total cost to the bank of £1.1 billion.
That directed buy back could only take place with the agreement of the Treasury and the Prudential Regulation Authority.
We believe it is a good use of capital for the bank and our shareholders. It helps make progress against the stated ambition of both the Government and the bank to reduce the Government shareholding, which, as a result, now stands at just under 60%.
The directed buy back from the Government also triggered a £500m pre-tax pension payment in line with the memorandum of understanding announced with our pension trustees in April 2018.
Last month, we also received the disappointing news that the Financial Conduct Authority has launched criminal proceedings against the bank for alleged failures to comply with Anti-money laundering regulations.
We take these matters extremely seriously and the bank has co-operated fully throughout the FCA’s investigation.
As set out in their statement, the case arises from the handling of funds deposited into accounts operated by a UK incorporated customer of NatWest.
An adjournment of the initial hearing was agreed by the court at the request of both parties to allow for a detailed consideration of the case by NatWest in an appropriate timeframe.
The initial hearing is now set to take place on May 26.
Detecting and preventing financial crime to protect people, families and businesses is a key priority for the Group.
Today, we have over 4,000 colleagues dedicated to that task. And, over the past three years alone, the bank has invested almost £500m in anti-money laundering systems and controls.
But we cannot tackle financial crime in isolation. We work with other organisations, including industry bodies, law enforcement agencies, regulators and governments to help find solutions to this shared problem and to improve our own approach.
To conclude, I would like to thank Alison Rose and her team for the commitment and energy they have displayed in remarkably challenging circumstances.
As a Board, we firmly believe that this bank has in place a well-balanced leadership with the necessary experience and expertise to deliver on our purpose which, to remind you, is that we champion potential, helping people, families and businesses to thrive.
By embedding that purpose at the core of our business, we have signalled our intention to build a relationship bank for a digital world, to make a positive contribution to society and to drive sustainable returns to our shareholders.
Finally, I’d like to wish all of you the best during these difficult times and I will now hand over to Alison.