NatWest Group plc (NWG) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and thank you for joining our Virtual Shareholder Event. My name is Michael Crow, and I am Head of RBS Group Public Affairs. This year, because of the government's stay at home measures, we're having to hold our AGM behind closed doors. This is an unusual step, but one that we feel we have no option but to take in the circumstances. We do value engagement with our shareholders greatly, and this virtual event is designed to ensure you're still able to make your voice heard by presubmitting questions to our Chairman, Howard Davies; and our CEO, Alison Rose. In a moment, I will pass over to Howard and Alison, who will each deliver a short speech. We will then move on to your presubmitted questions, and we'll do our best within the hour to get through as many of them as we can. We will also be posting on our website answers to questions on key themes. If you have any follow-up questions after today's event, you can e-mail them to [email protected]. Howard, can I pass over to you?

Thank you, Mike, and welcome to this Virtual Shareholder Event on the day of our 2020 AGM. As Mike said, the difficult decision to exclude shareholders from our formal meeting was taken to comply with government guidelines and to protect all our shareholders and staff. Delivering a speech like this from home is a novel experience for me. I was expecting to be at our usual AGM venue at the conference center in Gogarburn, which I'm proud to say has been temporarily turned into a depot for donated food supplies for those in need, working in partnership with Social Bite and the Trussell Trust. But these are exceptional circumstances. Restrictions have been put on our personal freedoms and on the ability of businesses to operate. I hope you are all staying safe at this difficult time. Although you were not able to attend the AGM in person, we ensured that shareholders could submit their votes in advance, either online or by post. A significant number of you did that, and we will publish the results in the usual way. We also think it's important that our shareholders have the opportunity to scrutinize the performance of the company and its Board of Directors. During 2009, we held our first virtual shareholder evening, where those attending were able to put questions to the panel of executives and on Executive Directors and learn more about the business. The Board remains committed to regular communication with shareholders, and we plan to hold further shareholder events in 2020, as we did last year. I'd like to draw your attention first to some notable changes in our membership since the last AGM. Most significantly, of course, we've appointed a new Chief Executive, Alison Rose, from whom you'll be hearing shortly, and said goodbye to our former CEO, Ross McEwan. I'd like to take this opportunity to reiterate my thanks to Ross on behalf of the Board for his immense contribution to RBS through his tenure here. The bank underwent a substantial transformation under Ross' leadership, not least in strengthening our balance sheet and returning the bank to profitability. I was delighted we were able to announce Alison Rose's appointment as group CEO to replace him. During her time leading this bank, she set out a clear vision to build a purpose-led organization to balance the interests of all our stakeholders and champion potential helping people, families and businesses to thrive. In addition to the change of group CEO, we've also welcomed Yasmin Jetha as a Nonexecutive Director to the Group Board. She was previously Group Board Director before joining NatWest Holdings Limited, our ring-fenced bank as a nonexecutive. We've also said goodbye to Alison Davis, who stepped down from her role on 31st of March. The Group Board and RBS as a whole have benefited from her extensive knowledge and expertise since she joined in 2011. Her contribution to the Group Board will be greatly missed. And our former company Secretary, Aileen Taylor, left the bank in August of last year following 19 years here and was replaced by Jan Cargill, previously Deputy Secretary and Director of Corporate Governance. I'd like once again to welcome my new colleagues and to thank all of those who have left us for their contributions to the bank over many years. As we enter a new era, we've announced plans to change our group name from RBS to NatWest. The Board decided this was the right time to align our parent name with the brand under which the great majority of our business is already conducted. Customers will see no change to the products or services that we offer because of the name change, which will become effective later this year. Similarly, our employees will see no change to the way they work, and we will not be moving people out of Scotland as a result of that decision, nor are there any planned changes to the location of our registered headquarters in Edinburgh. In 2019, compared to the previous year, profits were up, costs were down, and we grew lending to households and businesses while retaining strong capital and liquidity positions. Despite a slowing economy and continued low interest rates, the bank delivered a solid performance, generating a pretax operating profit of GBP 4.2 billion and an attributable profit of GBP 3.1 billion or GBP 1.6 billion, excluding the foreign exchange recycling gain following the merger of Alawwal Bank with Saudi British Bank. We also took a significant additional charge of GBP 900 million relating to payment protection insurance as we, along with other banks, experienced a significantly higher number of claims than expected as we approached the Financial Conduct Authority's August 2019 deadline. The bank reduced its operating costs by a further GBP 310 million, taking the cumulative cost reduction to GBP 4.5 billion since 2014. And our balance sheet remains strong. We obtained a clear pass in the Bank of England stress test in December. Our common equity Tier 1 ratio, the key measure of financial strength, is the highest of the major U.K. banks, all of which means we are in a strong position as we face into the economic impact of COVID-19. And we are able to continue to support our customers and to take decisions that will have a positive impact on society and on the economy. I will leave Alison to talk in more detail about our purpose-led strategy and future targets as well as the decisions we are taking to help our customers and communities during this difficult time. The Board is entirely supportive of this strategy and firmly believes that putting purpose at the heart of our decision-making will create a more sustainable bank that will, in turn, generate more sustainable returns for you, our shareholders. When I wrote to you in February, I said that uncertainty continues to dominate the political and economic environment. That now feels like an understatement. COVID-19 has changed everything. Along with all other U.K. banks, RBS has seen its share price fall sharply, reflecting uncertainty about the economy and the prospect of lower interest rates for the foreseeable future. People are worried about their own physical and mental well-being. They're worried about their jobs and the future of their businesses. And they're worried about whether they will be able to access the necessary support in a period of extended lockdown. We can't be sure how long the extraordinary measures that have been put in place will last or the toll COVID-19 will take on our society and the economy, but we know the impact is likely to be severe and long-lasting. With the considerable resources at our disposal, this bank has a responsibility to take action and make a meaningful contribution to manage through this crisis and recover from it. The government and the Bank of England have taken unprecedented steps in both monetary and fiscal policy. We've already seen interest rates cut to historically low levels and huge government-backed interventions designed to enable banks to lend to businesses and support the customers who need it the most. That is all welcome and necessary. But the unfortunate reality is that some of our customers are facing and will continue to face extremely challenging circumstances. We are here to help, and we are constantly monitoring the impact of coronavirus so we can adapt our business and support the customers and communities who rely on us every day. There should be no doubt that the decisions taken by the bank, the government and the regulators, alongside the deterioration in the economic outlook, will have a significant impact on our income and our ability to deliver returns, at least in the short term. You will have seen, for example, the decisions we have taken alongside all the other major U.K. banks to cancel the final ordinary and special dividend payments in 2019, not to pay any quarterly or interim dividend payments this year and to defer decisions on any future shareholder distributions until the end of 2020. That was not a decision we took lightly, and I'm sure it will have been a disappointment to many of you, especially those who rely on the income from their shareholdings. It was, however, in response to a formal request from the Prudential Regulatory Authority (sic) [ Prudential Regulation Authority. ] I would also like to reassure you that we remain committed to capital returns, and we will continue to review the situation and look to resume distributions in due course. Our commitment to returning capital was apparent at our 2019 interim results when we paid an ordinary interim dividend of 2p a share and a special dividend of 12p share. Taken together with the GBP 1.6 billion of dividends we returned in 2018, that represents over GBP 3.3 billion of dividend payments to date, of which GBP 2 billion has been returned to the U.K. taxpayer. As part of our decision-making around dividends, we also announced that we would not undertake any share buybacks until the end of the year. That will have come as little surprise and is the right thing to do. As recently as our full-year results presentation in February, we saw greater potential to take part in share buybacks in the short term. The situation is now very different following the outbreak of coronavirus. Our share price currently stands at around 115p, less than half its value at the beginning of the year, broadly mirroring the share price performance of other banks. Clearly, this is very disappointing, and we would hope that it is only a temporary decline. The government reaffirmed its commitment to disposing of its stake in RBS in this year's budget, albeit over a slightly extended period of time. But there is no realistic prospect of a share sale soon. The government has other priorities and more pressing challenges, and indeed, so do we. That said, we asked you today to renew our authority to participate in the directed buyback of government shares. This authority will last for 12 months until our next AGM and provide the flexibility for us to participate in a buyback early in 2021 should circumstances change and the Board judge it to be in the bank's best interests. This will, of course, also be at the discretion of the Treasury. Turning to remuneration. We also asked you to approve the renewal of our directors' Remuneration Policy and the implementation of the existing policy. The current policy has reached the end of its 3-year cycle. The Performance and Remuneration Committee and the Board have agreed performance measures for Executive Directors that are directly aligned with our goal of being a purpose-led bank. Measures include building the capability of employees to realize their potential, helping to address climate change and embedding a shared purpose across the organization. The current policy ensures that there is significant alignment between shareholders and the rewards achieved by executives. Around 70% of Executive Director pay is delivered in shares over an 8-year time frame. But the policy that applies to the broader workforce is equally important, and we're committed to paying all our employees fairly. The policy was introduced in 2017 and sought to create a simpler, less incentivized culture based on long-term shareholdings and limiting the potential for excessive risk taking. Variable pay is delivered entirely in shares, with performance assessed before granting awards and again before vesting to ensure that performance has proved sustainable. It remains a relatively unusual construct in terms of market practice, but I'm pleased to say it's received strong support from shareholders at the last 3 AGMs. A consultation on the policy took place with our major shareholders during last year, and feedback continues to be positive. The Board believes that the existing policy has served the group well, and only a small number of changes were proposed to align with the latest investor guidance and market practice. First, the pension rate for Executive Directors will be reduced to 10% of base salary, in line with the wider workforce. This rate has already been applied when Katie and Alison were appointed in 2019. Second, building on the existing shareholder requirement, Executive Directors will also be required to hold a set level of shares for at least 2 years after leaving the group. Finally, flexibility will be introduced to allow long-term incentive awards to be adjusted in the absence of dividends during the vesting period. That will only be used for future awards and only once dividend payments to ordinary shareholders have been reestablished. You may be aware, following the publication of reports from a number of proxy advisers, that ISS and PIRC have recommended that shareholders vote against the policy, and that's the position they took in 2017. We do not believe this reflects the sentiment expressed by shareholders in previous AGMs or indeed, during our latest consultation meetings. One of the main points of contention for ISS is the disapplication of prorating the long-term incentive awards, though prorating after grant is fundamental to our Executive Director construct. It allows for a fair level of value to be delivered to executives while having significantly lower maximum awards compared to peers. As the main performance assessment takes place before grant, the award has already been earned to a large extent. It also ties in with the long-term aims of our policy, helping to ensure individuals are motivated up to the point of departure and beyond. I also want to assure you that remuneration will play an important part in the group's continuing response to the coronavirus crisis. One early decision that's been made in conjunction with the PRA is that we will not satisfy any variable remuneration previously awarded to senior employees in cash. The Performance and Remuneration Committee is closely monitoring the situation and will consider what further actions on remuneration may be appropriate. As I've mentioned, we are currently in a period of extraordinary share price volatility, and the Board retains discretion to adjust the vesting outcomes of long-term incentive awards to ensure that they are an appropriate reflection of performance. Executive Directors hold significant numbers of shares, so they're already closely aligned with any change in value that shareholders experience. That is one of the main features of our policy. Recognizing the impact that the current situation is having on people, families and businesses across the U.K., Alison and I also thought it was appropriate to forgo 25% of our fixed pay for the remainder of 2020, which will be donated to the National Emergencies Trust Coronavirus Appeal. Alison has also asked not to be considered for any variable pay this year. Turning to diversity and inclusion. This continues to be a major priority for the bank. As well as being the only major European bank to have an all-female leadership team at Executive Director level, 44% of the bank's top 4,000 leadership positions are now filled by women, a 12% increase since our targets were put in place. That's good progress towards our aim to have a fully gender-balanced workforce at all levels of the organization by 2030. At the start of 2018, we also introduced formal U.K. targets to improve the representation of black, Asian and minority ethnic colleagues in our top 4 leadership layers to at least 14% by 2025. At present, that figure is 9%. Our plan to raise it includes reciprocal mentoring, targeted development workshops and leadership programs and ensuring we have a BAME focus on recruitment, talent identification and promotion. Before I hand over shortly to Alison, I would like to reiterate how important it is that we stand together through these challenging times. As a bank, we are determined to play our part. Our strong balance sheet means we're well positioned to continue to support our customers and the U.K. economy during these difficult times as well as to deliver sustainable returns to our shareholders in the longer term. So all that remains is for me to wish you and your families the best of health at this difficult time, and I look forward to speaking to you face-to-face in happier and, we hope, more normal circumstances next year. I'll now hand over to Alison.

Thank you, Howard, and welcome to you all. As Howard said, these are unique circumstances. But this meeting is a very important part of our calendar, and I'm delighted that we still have the opportunity to give you an update on the bank's current position and to answer your questions. So thank you very much for joining us. Wherever you are today, I hope that you and your families are keeping safe and well. As you will recognize, the challenge that COVID-19 presents to everyone in this country and around the world is unprecedented. Every person, family and business has been affected by the current situation. And the group have been doing all we can to support our customers and the communities we serve and will continue to do so long after this first phase of response has finished. Over the last month alone, to support people and families, we have helped over 190,000 customers with a 3-month mortgage repayment holiday. We've frozen overdraft rates for at least 3 months with similar forbearance available on personal loan repayments and credit cards. We've also established dedicated support lines for customers over 70 and another for NHS workers. And we've reached out directly to some of our most vulnerable customers, contacting nearly 250,000 to date. We've also set up cash delivery service for vulnerable customers and launched a new companion card. And most importantly, we have kept the majority of our branches open for those people and businesses who have no other alternative to do their banking. We've also implemented a range of measures to support businesses. These include announcing a GBP 5 billion working capital fund before any other bank and to date, lending nearly GBP 4 billion to help our customers to adapt to the crisis and weather the storm. We've offered up to 6-month capital repayment holidays on fixed and variable lending. And we've moved at pace to implement the various schemes introduced by the government, including the Coronavirus Business Interruption Loan Schemes, or CBILS, and the Bank of England's COVID-19 Corporate Financing Facility, or CCFF. Up to Thursday, the 23rd of April, we have seen around 7,400 CBILS approved at a value of GBP 1.4 billion. And following the launch at the end of last week of the larger business CBILS scheme, we have already had requests totaling GBP 29 million. We've also executed 13 COVID Corporate Financing Facility mandates at a value of GBP 3.1 billion. We believe that we are doing more than any other bank to operationalize and deliver these schemes for our customers. And this week, along with our peers, we will launch the small CBILS scheme as announced on Monday, the 27th of April. Importantly, we have managed to extend this very substantial range of extra support without losing sight of the bank's responsibility to manage risk intelligently and ensure our safety and soundness is protected. Setting up new processes and propositions is not straightforward, but the resilience, determination and professionalism displayed by my colleagues and the teams right way across the bank has been nothing short of inspirational. And I would like to take this opportunity to publicly thank all of my colleagues for the amazing work they have done in the face of very difficult circumstances. We have also been working hard to help ensure that staff across the bank have been properly supported themselves during the coronavirus outbreak. In the midst of huge uncertainty, one of the first things we did was to reassure colleagues that they would continue to be paid their full salary for the following 6 months should their ability to work be affected by the coronavirus. We have also had to stand up new ways of working for thousands of colleagues at very short notice. We currently have between 40,000 to 50,000 colleagues working from home every day, 3x our previous record. And we've also been directing our colleagues to where the greatest need is. And we trained and redeployed staff to areas where we have needed to increase capacity. Using our strong regional footprint, we've also supported our customers and our colleagues locally. Our deep sector expertise in the regions is helping us respond in a targeted fashion to support businesses. We're using our Regional Boards to gather insight and engage with communities locally to offer our support where we can. Beyond our customer and colleague base, we have also reached directly into the community to offer further help. This includes a GBP 5 million support fund for young entrepreneurs through The Prince's Trust; and a GBP 5 million fund available to match customer donations to the National Emergencies Trust, with GBP 3 million raised to date; and as Howard mentioned, turning our conference center at Edinburgh into a distribution center for food banks across Scotland. And last week, we joined with our catering partner, BaxterStorey, to give over the use of our kitchens at Gogarburn to help prepare food for frontline health care workers. Like everyone across the country, we are all in awe of the work the NHS is doing. And I'd like, on behalf of the bank, to say thank you to everyone working in the NHS and the care sector for their amazing efforts. Our response to date has been guided by our purpose that we launched in February, to champion the potential of people, families and businesses so they can thrive. And being a purposeful bank drives our strategy. And I'm proud to see how our purpose-led approach over the last 7 weeks has shaped how we have made decisions and responded to this crisis. Long-term success is about balancing the interests of all of our stakeholders, our shareholders, our customers and our colleagues as well as the communities that sustain us. That is the core of the strategy that I set out in February and is what we will maintain as we navigate through the coming years. I now want to briefly cover an update on the focus areas and priority of our strategy before briefly summarizing our 2019 financial results. When we laid out our purpose-led strategy in February, I highlighted 3 particular areas of initial focus: Learning, Enterprise and Climate. And our focus on these remains unchanged. On Learning, there is a clear need to develop greater financial capability and confidence in our communities as well as a dynamic learning culture for our colleagues. This remains critical, and we have launched a learning academy across the group as well as enhanced learning support for our customers to help them through the crisis and support financial capability. On Enterprise, the crucial role we have to play in supporting businesses all around the country. I have already outlined our delivery on the government schemes and the many other measures we've put in place to support our business customers. As ever, we are listening and responding to their feedback, and our teams in every region are engaging with customers every day to do all we can to help them in this critical time. And on Climate, something that despite the immediate challenges we face, still remains one of the defining challenges. We have committed to GBP 20 billion of additional funding and financing for climate and sustainable funding by 2022 as well as making our own operations net carbon zero in 2020 and climate positive by 2025. We want to at least halve the climate impact of our financing activity by 2030, and we are working to quantify our climate impact and set sector-specific targets. We identified these 3 areas because they are issues where we believe our business and role in society means we can make a meaningful contribution. And for now, whilst we are rightly putting much of our focus into helping navigate the crisis, this may impact how quickly we reach our initial goals, but our long-term ambitions have not diminished. Aligned with our purpose, I also set out details on some of the key strategic actions we will take over the coming years based on the core themes of being safe, simple and smart. Firstly, I've made it clear that safety and soundness will underpin everything we do. Our strong balance sheet and intelligent focus on risk remain absolutely critical, especially as we continue to support responsible lending in order to stand by our customers. In today's digital world, our operational resilience and keeping our customers' data safe are top priorities so we continue to invest in fraud prevention and security. And our investment in innovation in digital has helped us to respond in an agile fashion to offer simple and smart solutions to our customers. One of the key reasons we have been able to develop these products and solutions so quickly and safely in recent weeks is because of our ongoing investment in our digital platforms. Partnerships are another important part of our future strategy, and we will continue to look to partner as we innovate. Ongoing simplification of our processes and customer journeys is key, and these examples mentioned today show how in many ways this crisis has accelerated our progress in doing this. Being safe, simple and smart will, therefore, not only guide us in supporting our customers and the U.K. economy through this crisis, but also guide our thinking in how we shape the bank as we emerge from it. When I spelled out our plans in February, we could not have predicted how quickly or how severely the coronavirus pandemic would come to affect everyone. However, it is important to note that we face into this crisis from a position of strength. Last year, despite considerable uncertainty in the economy, we delivered a solid set of results. As Howard mentioned, for 2019, we reported an operating profit before tax of GBP 4.2 billion and a bottom line profit of GBP 3.1 billion. These are both up substantially on 2018, benefiting from one -- one-offs in the year. We also exceeded our targets for the year on lending and on cost reduction. We saw GBP 310 million in savings above our GBP 300 million cost target. And underlying our core stability, we ended the year with a CET1 ratio of 16.2%. We will shortly release our results for Q1 so you will understand that I'm restricted in how much I can say about our financial performance so far this year. But it is widely expected that the coronavirus pandemic will continue to have a serious impact on the economy and consequently impact our performance, especially over the short to medium term. Along with the Board, my executive team and I are actively managing against that disruption, ensuring we offer the support our customers need while maintaining a prudent approach to risk. Given these pressures, we remain more confident than ever that the priorities I laid out in February, and as we shared with you today, set the right path for the bank in the long term. Among those priorities were the changes we said we would make to NatWest Markets. I'm pleased to say that we have already begun the work to refocus the business as it becomes a smaller, less expensive part of the group, more closely aligned to our core customer franchise. Tightly managing our costs is going to be fundamental for us. And if we want to be able to give our customers the support they need, we must remain focused on the need to simplify, and these changes are an important part of that simplification. We are now more than a month into an extraordinary period of lockdown, affecting the vast majority of the countries in which we operate. Economic activity has been severely disrupted, and there are likely to be lasting effects for many. As I hope I've made clear today, we have used our purpose to drive a proactive and comprehensive approach to supporting our customers, and we will continue to do so. Throughout this difficult period, there have also been some positives which we can reflect upon. Across the industry as well as with our political and regulatory stakeholders, we have seen a fantastic spirit of collaboration as we try to implement mechanisms aimed at supporting wide swathes of the economy. And at some point, probably gradually at first, life will begin to return to a new normal. When this happens, it is just as important that we are positioned to support economic recovery. By maintaining our focus on becoming purpose-led, carefully utilizing the financial strength we have built over the last few years and being there for our customers as we rebuild, we can continue playing our part to champion potential, helping people, families and businesses to thrive. Thank you.

Thank you, Alison. Thank you, Howard. All right. As I mentioned earlier, we have received a number of presubmitted questions from shareholders. Thank you to those of you who have taken the time to submit them. We will do our best to work through as many as possible. As you'll appreciate, we aren't able to discuss customer issues or complaints in this public setting, and we're also unable to discuss anything that we will cover in our Q1 results as we are currently in a closed period ahead of the announcement on Friday of this week. Right. First question to Howard from [ John Laughlin. ] How secure is the banking system given the collapse of the economic structure of the U.K. due to COVID-19? Howard, over to you.

Well, thank you for that question, [ John, ] which is obviously a very important one. And I think I can give you a reasonably reassuring answer. The British banks in general and RBS, in particular, went into this crisis far stronger than they were when we last had a financial crisis over a decade ago. The banks are operating with much higher levels of reserves. And RBS, in particular, has the highest capital ratio of any major U.K. bank. We each year go through a stress test with severe conditions imposed by the Bank of England, our regulator, and we passed that stress test last year quite comfortably. And that involved a sharp decline in GDP, a sharp decline in house prices and in share prices. And we came through that with a comfortable margin above the minimum capital that we are required to maintain to stay in business. So the banking system is much better placed to withstand this crisis. I suppose I have to end, however, by saying that we do not know at this point how severe the economic crisis will be or how long the lockdown will be. So no one can give you guarantees for -- ever in all circumstances, but we feel very comfortable at present that we are able to support the economy and continue to lend.

Thank you, Howard. Okay. Another question from [ Alan Antony. ] We live in a great country in the U.K., where the government has pledged to inject around GBP 360 billion to underpin the economy through support to individuals and businesses. But we will still fall short, and we will never see some businesses again. Is the bank able to play a role in the world of economic needs, where some countries will be devastated by C-19 and will never regain their livelihood in the medium term? Howard, that one for you.

Thank you. Well, again, another very important question. I think you are probably right that there will be some businesses, and indeed we've already seen some, where the changed long-term circumstances after COVID-19, which perhaps applies in the hospitality industry or the tourism and travel industry, where some of those businesses will not survive. But our focus at the moment is ensuring that businesses which were profitable before the crisis and have a reasonable prospect of being so are able to access funds to tide them through what is a very difficult period. The last part of your question relates to countries. That's, I think, a rather difficult question. As you will have seen, almost all countries, certainly all of those affected by COVID-19, which is most of them, have recognized that the government has to take the strain, and most countries are and most countries are increasing their indebtedness. At the moment, fortunately, interest rates are low so countries are able to do that and provide support for their businesses without provoking a sharp rise in their interest servicing costs. So our government and many others are able to borrow and least temporarily at rates which are quite comfortable and relatively easy for them to sustain. But undoubtedly, some countries, will be in some difficulty. And that's why we have institutions like the World Bank and the IMF who are able to step in with temporary targeted support when individual countries run into problems.

Okay. Thank you, Howard. Right. On to a question from [ Michael Lee. ] Michael asks, in regards to the general trend of a shrinking global economy, what measures and actions are you taking to limit potential risks that will emanate from this, apart from the obvious attempt to withdraw any dividend payments until the rest of the year? I can foresee that the company will also consider cutting jobs at the company as well. My interest is, apart from these usual cost-cutting measures, what else will the company do? That one to you, Howard.

As far as cost-cutting is concerned, we have said that we plan to retain our existing staff during this year because we thought that doing anything else -- and a number of companies who are able to do this would be the wrong thing to do. And of course, we are, for the most part, pretty busy. We've managed to keep over 90% of our branches open throughout this lockdown period. And of course, the demands on our mortgage servicing operations, on our business lending, that, in fact, gone up quite sharply. So at this point, we are not envisaging a large redundancy program. Now in the long run, of course, we are learning lessons about how we can operate more efficiently. We have huge numbers of people now working at home, and that will have some implications in the long run for our utilization of property, and there will be opportunities for us to operate more efficiently. But in the short term, we are focused on ensuring that we support our customers wherever possible. Because I think in the long run, the viability and health of this bank depends on it having a strong customer base and depends on our continuing to serve households and businesses and helping them through this crisis so they come out the other side. Of course, as we do that, we must have an eye on our risk management. We must ensure we are not overexposed in particularly affected sectors. And we must also ensure that we focus on our balance sheet and on our liquidity. At the moment, we are in a comfortable position. Our liquidity is strong. And as I've said, our capital is strong. But clearly, at a time of great economic uncertainty, any experienced banker would tell you, focus on the cash and the liquidity. Have you got enough money at hand to run the bank without needing to go cap in hand to the financial markets for your sustainability? So we are engaged in a very careful program of managing support for our customers on the one hand with maintaining a strong balance sheet and strong liquidity on the other.

Okay. Thank you, Howard. A question in from [ Allan Anthony, ] which I'll ask you to answer, Alison. It's time to take stock of what this bank is all about and to make good on the commitment to support customers and its communities U.K.-wide. What plan has been processed to help customers and businesses to move forward when COVID-19 is beaten? It is likely that some businesses and customers will fall, what can be done to support them in their hour of need? Alison?

Thank you. Very important question. And clearly, these are extraordinary times, and we recognize that it is not business as usual so we are doing everything we can to make sure we support our customers through this crisis. Some of the things we did immediately, I mentioned a few of them in our speech, but we have rapidly reorganized the business to make sure that we can deploy resources to where they're needed the most to help our customers. We saw very high unprecedented volumes of calls coming in so we made sure that we could help there. In terms of the government schemes to help businesses with over 7,000 loans and GBP 1.4 billion advance, we know we're doing more than any other bank to help, along with the additional support that we're putting in place. So we recognize our purpose is really to stand alongside our customers through this period, not just through supporting the government schemes, but also the measures that we're putting in place for our customers, whether those are working capital lines or helping people with mortgage repayment holidays or the support of charities that we've talked about. And we've put some funding in, around GBP 1 million of funding, into some of the debt management and support and advisory charities like Citizens Advice to help our customers. So we know there's a job to do. We also have to be a responsible lender to make sure that we can support companies through this period and also help them in their recovery on the other side. And I think our purpose very clearly helps guide us through that so that we can balance all the needs of our stakeholders.

Thanks, Alison. Right. Howard, I've got 3 questions here that are similar so I'm going to take them all as one in one go. The first one in from ShareSoc. How is the company protecting its key assets and value drivers? The next one from [ Nigel Pulseland, ] does the Board have concerns over the additional risk that has been written on to our balance sheet as part of the CBILS support program. And the final one from [ Gordon Halliday ] and [ Mark Payne, ] how are we looking to protect ourselves from the inevitable increase in impairments that will follow? And do we have any expectation of the bank's 2020 loss provision for COVID-19? Howard?

Thank you. Some general questions there and perhaps also a specific one on 1 particular government scheme. As far as impairments are concerned, I think it's obvious that if the economy goes into a recession this year, which is highly likely, that there will be, for all banks, increased impairments. And you will have seen that already this week, HSBC, Santander and Barclays have come out with results and have acknowledged that they will be facing significantly higher loan impairments than before. So I think that is an inevitable part of recession. There's never been a recession in the U.K., which did not involve some businesses going bankrupt and therefore, some loan impairments for the banks. The specifics of the Corona Business Interruption Loan Scheme are that we are given a guarantee by the British Business Bank. And in the initial scheme that was put in place a few weeks ago, that was an 80% guarantee. We pay the British Business Bank for that guarantee, but it does mean that impairments under that scheme are 80% recoverable from the British Business Bank and ultimately, from the Treasury. And the Chancellor announced this week that for the very small businesses and for loans under GBP 50,000, there will in future be a 100% Treasury guarantee. So CBILS, there may be some impairments because we have 20% guarantee, but probably in the great scheme of things, that will not be a major cause of impairments for British banks who participate in it. And we've been enthusiastic participants because we do see that as an important scheme to keep some viable businesses in operation through a difficult period. As for the future key assets and value drivers, well, we would see that our loyal customer base is the key value that we have. We have very loyal personal customers who take mortgages from us and use us for their regular banking. And we have a very strong business franchise, both in very small businesses, in SMEs and in larger corporates, many of those relationships we've had for a very long time. And one thing that I think any banker would tell you is that relationships tend to persist if you support your customers at difficult times. They then remain loyal to you because they have a good memory of the people who stuck by them when times were tough. So I think from our point of view, the key thing is that we come out of the other side of this crisis with the greater part of our customer base, whether personal or corporate commercial, intact. And so that is our focus on supporting our current customer base so that in the long run, they will stay with us. And in the long run, we will be able to provide profitable services and lending to them. So that is the way we see our strategy running through this crisis.

Okay. Thank you, Howard. And we've got a lot of questions to get through. So if we can just keep the answers a little bit shorter, we'll get through some more. And, Alison, this one to you from ShareSoc. How much cash does the company have? And also what cash and liquidity could the company obtain in the short term? What can the company do to manage short-term expenditure? Alison, to you.

Thank you, Mike. We -- the bank manages a primary liquidity pool of around GBP 125 billion, of which GBP 75 billion is in cash and balances at the central banks with the remainder in high-quality government bonds. There are secondary liquidity facilities with the Bank of England of around GBP 74 billion, and we obviously have access to financial markets where additional unsecured and secured funding can be raised. I think in terms of the second part of your question, how can we manage short-term expenditure? Clearly, keeping our focus on taking costs out while making sure we don't damage our customer and control environment is critical, and there are a number of ways we can do that. We're also making sure we maintain very disciplined doing the right things. So we continue on with our strategic priorities, using more of our technology to help us do things and continuing on with our NatWest markets' refocus.

Okay. Thank you, Alison. Howard, a question here from [ Ben Jeffs. ] It feels as if amongst all of the banks, RBS remains the whipping boy of the FTSE and the global banking industry, with the share price overly affected by every downside risk and slower to recover relative to peers. It doesn't feel as if this will change without a major change in strategy and approach to managing the government's shareholding. What steps are you taking to accelerate the return of RBS fully to the market? To you, Howard.

Thank you. Well, I'm not sure I would accept the premise that we were the whipping boy. If you look at our price-to-book value in relation to other European banks, we're about in the middle of the pack. Now I don't say that with any great prize. It's not, Alison or my objective to remain in the middle of the pack. But that is the fact. We are not significantly badly treated by investors, if you like, if you look across the European banking sector, and our share price for this year has been broadly in line with our other major competitors in the U.K. As far as the government shareholding is concerned, that is a matter for the government. It isn't for us to decide when they sell. That's something that they do. But what we think we can do is participate in a buyback. And indeed, until we hit this unusually turbulent period, we did have capital available where we could participate in buying back shares from the government as part of a broader sell-down. So I think specifically, that is what we can contribute to getting the government's share percentage down, assuming that we come out of the other side of this crisis still with some surplus capital, which we would hopefully be the case.

Great. Thank you, Howard. Okay. Another one on share price, actually. [ David Collin Marshall. ] What are the long-term prospects of the group's share price value? What would you say to prospective shareholders in terms of why they should invest in RBS NatWest Group shares versus other company's shares. Howard?

I'm not going to give a forecast about share price. The record of Chairman who do that is not so great, I think. As for the long-term viability of the company, I think that the key points to retain about RBS is that we are now in a position -- we're quite different from where we were in '20 -- in 2009. All the markets we are in, we have strong positions in. We have -- on private bank, we have a strong offshore bank in the Channel Islands. We have a strong mortgage bank. We have a large market share of personal accounts. We have a large presence in the corporate and commercial banking market. So we are all now focused on markets where we are strong and where we have a sustainable competitive advantage. Where a decade ago, the bank was in a position where its capital was devoted to a wide range of businesses all around the world, in most of which, it did not have any strong market power. So I would say that this is a strong and sustainable bank, largely in the U.K., very largely in the U.K. now with some business in the Republic of Ireland. And therefore, where if you have some confidence in the long-term future of the British economy that RBS is a good investment to hold because we can benefit from the robustness of the British economy, both consumer and commercial.

Thank you, Howard. Okay. On to a question from [ Jerry Crowley. ] On dividends, can you advise if the plan is for the final and special dividend for 2019 to be issued post COVID-19 as a payment in 2021, 2022? Howard?

I explained the decision that we took on dividends and the attitude that the PRA and the Bank of England took. And the position is that we will look again at the dividend position at the end of this year. But I'm afraid, beyond that, it would be unwise and misleading of me to give any particular commitments to distributions, whether ordinary, special or buybacks. We will need to see at the end of 2020 what the position is, which will be largely driven by what's happened to the British economy and the impact on impairments and therefore, the impact on banks' balance sheet. So I'm afraid I'm not prepared to give any dividend forecast at this point.

Okay. Another question on dividend from [ Andrew Tate. ] When will shareholders be able to obtain shares instead of cash for any dividends announced? Howard?

Yes, we don't offer shareholders the opportunity to reinvest in additional ordinary shares at present. We do continue to monitor the possibility of introducing a dividend reinvestment program, and we might reconsider our position in the future. But I'm afraid that we do not offer that facility at present.

Okay. Another question on dividends from [ Agnes Monroe Thompson. ] While I appreciate these are unprecedented times with many people facing financial difficulties, I'm disappointed there will be no dividend paid to shareholders, like myself, who have been shareholders through previous difficult periods. I trust therefore, in keeping with many Directors of large companies, the Directors will be doing the right thing and not accepting their bonus and giving up a proportion of their salaries. Otherwise, it smacks of greed and demonstrates these folks have little or no moral or social conscience. Howard?

The cancellation of the dividend was disappointing. It was disappointing to all small shareholders. It was also disappointing to me and certainly, to Alison. Both of us are shareholders, and it affects us. We decided that although we were not implementing salary cuts across the organization as some businesses have done because, as I explained, we are busy at this point. We decided that the right thing to do, given that our customers, in many cases, are in difficulty, that we should take some recognition of that in our own pay. So both Alison and I did decide voluntarily to give up 25% of our fixed pay for the remainder of this year. And Alison said she did not wish to be considered for a bonus. So I can assure you that we have taken the position seriously. We have shared the pain of our shareholders, and we very much hope that in the long run, we will be able to get back to paying dividends.

Thank you, Howard. Alison, I'm going to group again the next 3 questions together because they're around NatWest rebranding. So the first question from [ David Potter. ] When can we expect to see a much stronger and improved NatWest branding across the whole group and so aim to return to improve all stakeholder perception back to what it was 20 years ago? Similar question received from [ Michael Smith ] who asked whether changing names was an admission our brand had been seriously damaged over the years. And [ Christine French ] also put in a question. Following the rebranding, whether there's any commercial justification for retaining separately the rump of RBS-branded branch network in England, given that its product range and terms are identical to NatWest? For you, Alison.

Thank you very much, Mike, and thank you for the questions. We announced, as you know, on the 14th of February, that we would be changing our parent name to NatWest Group. We felt, and the Board and I felt it was the right time to reflect the new era for the bank and align our group name with the brand under which the majority of our customers interact with us. Around 80% of our customers know us as NatWest. For Scotland, our customers know us as Royal Bank of Scotland and Scotland remains a very important part of the group's heritage and our commitment to our customer and colleagues in Scotland. And the World Bank of Scotland brand remains unchanged. It was felt that a group rename was the appropriate time to do that. In terms of that name change, for a significant period of time, most of our customers are interacting with us under the NatWest name and the World Bank of Scotland name, and much of that rebranding was done a number of years ago. So I think if you look around, a lot of the RBS group signage has already disappeared across our buildings and you will see Royal Bank of Scotland and NatWest.

Okay. Thank you, Alison. Another one for you from [ Richard Upton. ] This time about Bank of England base rate changes. Can you please explain the logic behind the decision not to pass on the reduction in the Bank of England base rate to mortgage customers? Alison?

Thank you. Well, as you know, some of our mortgage products are directly linked to the Bank of England base rate, and so those changes have been made where they are aligned to the base rate. So for example, the NatWest tracker products are linked to the NatWest base rate and Ulster Bank tracker product that's linked to the Ulster Bank base rates. And these rates are managed by us, and they've been decreased in line with the decrease in the Bank of England base rates. On the managed rate products, so for those, those would include SVR, OneConnect and offset mortgages. They are not contractually linked to movements in the base rates. We obviously review our pricing on those projects on a regular basis. And we have passed on some changes. We dropped the standard variable rate by 65 basis points, but that is products have additional features and services, which is reflected in the price. Clearly, we will support our customers. If customers want to move into a traditional lower rate, but as flexible products, we can book them in for free advice with one of our mortgage advisers, which under the current circumstances, we can do remotely. But we will continue to review on an organic basis.

Thank you, Alison. The next question for you as well, I think, from [ Richard Lever. ] It's on interest rates. I suggest you become more competitive with your savings accounts. Your competitors such as Marcus, Cynergy and RCI and others are able to offer easy access account interest rates of up to 1.6% or higher if customers are prepared to lock their money away for 1 year or longer. All businesses, financial or otherwise, are facing difficult times ahead. However, RBS Group, which hasn't performed very well before COVID-19, cannot now blame the coronavirus for all its shortcomings. Alison?

Thank you. On the interest rate, obviously, it is historically a very low interest rate environment, and we do constantly monitor this to look at how we can best help our customers. And in particular, with my priority focus on building financial capability, we also want to encourage people to develop savings habits. And we're doing this by offering up to a 1% saving rate to our Savings Builder account, and we've also included a number of saving tools that are in our app, which help customers do that so we will continue to try and do that. One of the good things about the savings goal tool is we've seen customers save twice as much as a result of those tips and how to do that. So we will continue to explore that. On the second part of your question, Mike, around our performance. Just taking you back to our 2019 performance, we -- I would describe that as a strong and a solid performance. We had operating profit at GBP 4.2 billion, up 26%. And our attributable profit was GBP 3.1 billion, and we continue to grow our lending in attractive segments across our retail and commercial businesses with loan growth of 3.7%. We remain the biggest supporter of U.K. business, with GBP 19.5 billion in gross new lending and GBP 33.3 billion in mortgage growth. So we continue to support our customers. We also have continued to deliver cost savings of GBP 310 million of costs coming out of the business last year and the strong Core Tier 1 ratio. So we are continuing to drive further improvements. We're continuing to invest in the business, and we are putting purpose very clearly at the heart of everything we do so we can drive sustainable long-term -- sustainable long-term returns for our shareholders and our investors.

Thank you, Alison. Okay. Moving on to payment systems, Howard. A question from [ George Nickel. ] Does the Board hold a view on the increased competition emanating from emerging nonbank sources like Apple Pay, Google Pay, et cetera, and the strategy to compete with this challenge? Howard?

Thank you. Yes. Well, we -- it is something we look at rather carefully. And the world of payments has been significantly disrupted in recent years. Not just, of course, by the people you mentioned, but also by the arrival of crypto currencies and other payment mechanisms. It is something that does concern us but the British banks generally have made significant improvements in their payment systems, the faster payment system with which you'll mostly be familiar. And I think the key is to ensure that what we offer is a very efficient and cheap payment mechanism to our customers. So that is our principal focus, which involves improving our digital offering. We have a well-ranked app on our mobile phone, and that is doing well, I think, with our customers. So these are new competitors who have come into the market with, obviously, a good name and strong technology. But we do believe we can compete with them, but we have to be quite fleet of foot, and we have to expand our digital offerings in sensible and intelligent ways.

Okay. We're talking about being fleet of foot. We're now up to the hour. So I am quite keen to keep going though, so we've got a few more questions to get to the end. So let's get through them. This one in from [ Anne Heffernan ] for Alison. It's on carers' card. Before you issued carers' cards to support vulnerable customers and those in isolation, are you doing a criminal record check on the name volunteer? According to your press release, they will have access to GBP 100 every 5 days. Banking scams up to September 2019 rose 40%. And according to Age UK, an older person becomes a fraud victim every 40 seconds. Where there's an opportunity, there's an opportunist. I can no longer use my local ATM to track my account and have to wait until a statement arrives. Frankly, I do not think this has been thought through. Alison, for you.

Thank you. And obviously, we share your concern about scammers and frauds against our customers and continue to invest very significantly in our payment profiling and fraud and security protection to protect our customers as much as possible. On the carers' card, this was really a response to the current situation. And that companion card is there to help those customers avoid getting into a situation where they may be pressurized to hand over their main account card and pin number to someone else if they're not able to get out to the shops and get their essentials because of the current situation. And some customers will have a community or NHS volunteers who can help them. But this is allowing them to give them a way to pay. We thought very, very carefully about who that card is for and the protections around it. And the person's main account number and PIN is not available on this card. It has very small amounts that can be in use. We have full protection on it. And the GBP 100 limit is kept in that separate account and you can't use it for tap-and-go and you can't get cash out of it as well. So no online transactions. So we've thought very carefully about it and are very mindful of your concerns, [ Anne ]. So thank you for the question.

Okay. Thank you, Alison. Right. The next one to you as well, Alison, on climate change from ShareAction. We'd appreciate if RBS could disclose how or whether it is assessing the quality and content of fossil fuel companies' transition plans. And whether the bank is taking note of the distinction between transition plans with aim for 1.5- and 2-degree scenarios? If the answer to either of the above is yes, we would appreciate if RBS would disclose how it is planning on engaging with companies on their transition plans and whether an escalation procedure is in place? Alison?

Thank you. And obviously, I said climate is a very key part of our strategy. I think it's one of the biggest challenges of our generation. We are currently engaging with industry thought leaders and forums on the potential approaches in different assessment criteria. As you know, this is an evolving area. We welcome real engagement and transparent collaboration across the financial services sector to make sure that we can do that, and that will influence our thinking and how we will do that. We aim to deliver as robust approach as possible to assess the various transition plans. I recognize this is a complex exercise, and we will be developing that so we have consistence with the Paris Agreement. So there's a lot of work and collaboration going on. We want a thoughtful constructive approach across the industry as we support the transition. Until this is developed and applied, we'll not know the full impact on our lending. But we're working on that, and we'll report on that as we have more details.

Okay. Thank you very much, Alison. Howard, final 2 questions to you. So the first one is from [ Sean Healey. ] Have you plans to merge the Ulster Bank with the largely government-owned PTSB?

It's not possible for me to discuss any potential mergers or acquisitions. There are very severe controls by the regulators around what one can say about any potential. And so I'm afraid I am simply going to decline to engage with that particular question.

Okay. Thank you, Howard. And the final question from [ Andy Green Hall, ] to you, Howard. How has the coronavirus pandemic impacted your ability to lead RBS? And how secure are the video technologies that the bank uses? I have read reports in the press about challenges around the security of Zoom. Does RBS conduct meetings through Zoom? And how are they made secure?

Thank you. Well, I guess, 2 questions there, really. Is it a problem to lead the bank in these circumstances? I think that we are managing pretty well. We have been very successful in getting people to work effectively at home. And the Board has been very cooperative, and we have held a series of meetings. We meet weekly to oversee what's going on with the company in total. So I would just say that whilst I think it would be foolish to say there were not any constraints in place by this in terms of workability, you can't walk with the floors and look at how people are feeling. That just isn't possible. But you can do the virtual equivalent of that. So I would say that I'm confident that the oversight of the company by the Board, led by me is fit-for-purpose in the present circumstances, I would be comfortable in saying that. We do use Zoom quite extensively. We've had our Board meetings on Zoom. And we have asked ourselves the question about the security. Meetings hosted from our accounts have certain settings locked to create a secure experience. And to say we are comfortable at present that our utilization of Zoom is consistent with the high security standards that you need to have in the bank. And I would say that it has proved a pretty effective mechanism for us, both as a communication mechanism, but also as a decision-making mechanism. And we've had to use it to make some quite important decisions on behalf of the bank over the last few weeks. We constantly look at what we can learn from other companies. But at the moment, we're comfortable with the way in which we use this technology.

Okay. Thank you very much, Howard. Thank you very much, Alison. I'm afraid that concludes our Q&A. For any shareholders who have follow-up questions, please do submit them through the usual channels, and we will endeavor to respond as soon as possible. We intend to run further shareholder events throughout the year. However, given the current circumstances, we are not yet able to finalize dates. But information will be made available on the shareholder information section of our website, www.rbs.com, just as soon as we are able to confirm. Thank you for joining us today, and we hope you and your families stay safe and well in these difficult times.