FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For October 30, 2020
Commission File Number: 001-10306
 
NatWest Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
   Form 20-F X Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________
 
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ___ No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
 
 
 
Q3 2020
Interim Management Statement
 
 
 
 
 
 
 
 
                          www.natwestgroup.com
 
 
 
 
 
 
 
 
 
NatWest Group plc
Q3 2020 Interim Management Statement
 
Alison Rose, Chief Executive Officer, commented:
 
"These results demonstrate the resilience of our underlying business and the strength of our balance sheet in the face of significant continued uncertainty. Our sector-leading capital position, strong levels of liquidity and intelligent and consistent approach to risk mean we can continue to provide our customers and communities with the support they need.
 
Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid-19 remains very unclear. Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19 related restrictions are introduced.
 
We continue to deliver well against our strategy, building a bank that champions potential and has the capability to grow. By building deeper relationships with our customers at every stage of their lives, simplifying the bank further, investing in innovation and partnerships and allocating capital well, we will deliver sustainable returns to our shareholders."
 
Financial performance in a challenging environment
●
Q3 2020 operating profit before tax of £355 million and an attributable profit to ordinary shareholders of £61 million including a £324 million loss on redemption of own debt.
●
In comparison to Q3 2019, across the retail and commercial businesses income decreased by 12.1%. Within NatWest Markets (NWM), the level of primary issuance and market activity eased in Q3 2020, compared to the first half of the year.
●
Bank net interest margin (NIM) of 1.65% was 2 basis points lower than Q2 2020 principally reflecting reduced structural hedge income as a result of lower swap rates and the contraction of the yield curve. Mortgage front book new business and switcher completion margins were approximately 140 basis points, broadly in line with the overall book margin.
●
Strategic costs of £223 million in Q3 2020 include £90 million redundancy costs, a £34 million charge related to technology spend and a £21 million property charge.
●
Other expenses, excluding operating lease depreciation (OLD), were £152 million lower than Q3 2019, with a £193 million cost reduction achieved for the year to date. We remain on track to achieve our £250 million target for full year 2020.
●
Net impairment losses of £254 million in Q3 2020, or 28 basis points of gross customer loans, resulted in an expected credit loss (ECL) coverage ratio of 1.72%.
 
Robust balance sheet with strong capital and liquidity levels
 
●
CET1 ratio of 18.2% was 100 basis points higher than Q2 2020 mainly reflecting a £7.6 billion reduction in RWAs, principally in NatWest Markets. Excluding IFRS 9 transitional relief, the CET1 ratio was 17.2%.
●
The liquidity coverage ratio (LCR) remains strong at 157%, representing £61.8 billion headroom above 100%, which includes the impact of a £5.0 billion term funding scheme (TFS) repayment within the quarter.
●
Across the retail and commercial businesses net lending increased by £0.4 billion during Q3 2020, as £2.9 billion drawdowns against UK Government lending initiatives and £2.4 billion related to mortgages was partially offset by net revolving credit facility (RCF) repayments of £3.1 billion and lower lending across Large Corporate & Institutions and Specialised business.
●
Customer deposits of £418.4 billion increased by £10.1 billion during Q3 2020, with retail and commercial balances £6.6 billion higher as consumer spending continued to be impacted by government restrictions and customers retained liquidity. 
 
Outlook(1)
We retain the outlook guidance provided in the 2020 Interim Results with the exception of the following updates, noting the continued significant economic uncertainty.
 
We believe the full year impairment charge is likely to be at the lower end of the £3.5-4.5 billion range following the limited level of defaults across lending portfolios and associated ECL stage migration within the third quarter.
 
We now expect NatWest Group RWAs to be below our previously guided range of £185-195 billion at the end of 2020 following the relatively low level of procyclical inflation experienced to date, with previously expected uplifts delayed to 2021, whilst also now targeting NatWest Markets RWAs of around £30 billion by the end of 2020.
 
 
 
Note:
(1)   The guidance, targets, expectations and trends discussed in this section represent management's current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc "Risk Factors" as described on pages 108-109 of its Interim Results 2020, pages 29-31 of its Q1 2020 IMS and pages 281-295 of its 2019 Annual Report & Accounts. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
 
 
 
Our Purpose in action - we champion potential, helping people, families and businesses to thrive
 
Helping our customers, colleagues and communities through the impacts of Covid-19
Provided lending support to our customers with a disciplined approach to risk and value creation:
●      Approved £13.0 billion through the government lending initiatives(1).
●      Facilitated approximately £8.8 billion of Covid-19 Corporate Financing Facilities (CCFF) issuances(2).
 
Supported the financial health of our customers:
●      Helped approximately 250,000 customers with an initial mortgage repayment holiday and provided payment holidays on over 72,000 business customer accounts(3).
●      Launched 'Banking My Way' service, enabling customers who need additional support to request bespoke assistance, with 38,500 registrations since its launch(4).
 
Long-term investment plan is powering our operational effectiveness:
●      Increased digital adoption with 9.3 million active digital users as at Q3 2020 (9.0 million as at Q3 2019), 6 million interactions with our AI chat bot Cora in the first nine months of 2020 (3.9 million in the first nine months of 2019) and c.9,000 weekly video banking conversations now taking place, compared to less than 100 a week in January 2020(5). 
●      Announced a new relationship with BlackRock to support our investment management processing activity, enabling savings to be passed onto our clients.
 
Partnered to proactively respond and support UK communities:
●      NatWest Social and Community Capital launched a £1 million Coronavirus Response Fund offering grants to organisations across the UK that employ people from vulnerable or disadvantaged groups.
●      Launched a review with SafeLives into supporting survivors of economic abuse and acquired coercive debt.
 
Prioritised the wellbeing of our colleagues:
●      Continued to enable more than 50,000 colleagues to work from home, delivering office furniture and computer equipment, including 31,000 tech bundles to homes(6).
●      Enhanced our free mental health support through a new partnership with Silvercloud, providing substantial, sector-leading support to any colleague who needs it and provided all leaders access to extended mental health awareness support.
 
 
Q3 2020 progress against areas of focus
Enterprise - addressing barriers to enterprise and business creation:
●      NatWest Entrepreneur Accelerator Programme ranked the top UK accelerator by total attendances(7). The programme has run 800 virtual events with 33,000 attendees since the start of lockdown(2).
●      Over half of the £1 billion of debt funding to support female entrepreneurs announced in February 2020 has been committed as part of our ambition to help create new businesses in the UK(2).
 
Learning - skill building, particularly around financial confidence:
●      Reached 2.4 million people through financial capability interactions including live MoneySense lessons on social media(6).
●      Island Saver, the world's first financial education console, PC and mobile game, has been downloaded over 1.7 million times since its launch(8).
 
Climate - supporting the necessary transition to a low carbon economy:
●      As part of our membership of the Green Finance Institute's 'Coalition for the Energy Efficiency of Buildings', we have signed up to their Green Home Retrofit Principles.
●      Progress in sustainability has been recognised by leading ESG rating agencies: Sustainalytics substantially improved our Risk Score to 20.5 (from 27.5) in July 2020 and MSCI upgraded our ESG rating to A (from BBB) in October 2020.
 
Diversity and inclusion - building an open and inclusive bank where everyone can thrive:
●      In addition to our existing target of at least 14% BAME representation in senior UK roles by 2025, we have introduced a new target to have 3% Black colleagues in senior UK roles by 2025.
●      Included in 'The Times' Top 50 employers for women.
 
 
 
Notes:
(1)   As at 30 September 2020, inclusive of Commercial Banking and Private Banking: Bounce Back Loan Scheme (BBLS) - £7.9 billion; Coronavirus Business Interruption Loan Scheme (CBILS) - £3.9 billion, Coronavirus Large Business Interruption Loan Scheme (CLBILS) - £1.2 billion.
(2)   As at 30 September 2020.
(3)   For the nine months ended 30 September 2020 in Retail Banking and since 22 March 2020 in Commercial Banking. As at 30 September 2020, there were 37,000 active mortgage repayment holidays and approximately 55,000 active payment holidays on business customer accounts.
(4)   From launch date of 19 August 2020 to 9 October 2020.
(5)   Weekly conversation volumes, as at week commencing 12 October 2020.
(6)   For the nine months ended 30 September 2020.
(7)   Beauhurst report 'Accelerating Growth'- September 2020.
(8)   From launch date of 13 May 2020 to 30 September 2020.
 
 
 
Business performance summary
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
Performance key metrics and ratios
2020
2019
 
2020
2020
2019
Profit before impairment losses
£2,697m
£3,222m
 
£609m
£767m
£205m
Operating (loss)/profit before tax
(£415m)
£2,686m
 
£355m
(£1,289m)
(£8m)
(Loss)/profit attributable to ordinary shareholders
(£644m)
£1,723m
 
£61m
(£993m)
(£315m)
Bank net interest margin
 
 
 
 
 
 
 (NatWest Group NIM excluding NWM) (1)
1.73%
2.02%
 
1.65%
1.67%
1.97%
Bank average interest earning assets
 
 
 
 
 
 
  (NatWest Group excluding NWM) (1)
£449bn
£410bn
 
£468bn
£458bn
£416bn
Cost:income ratio (1)
66.9%
67.5%
 
74.5%
70.9%
92.9%
Loan impairment rate (1)
115bps
22bps
 
28bps
229bps
26bps
Earnings per share
 
 
 
 
 
 
  - basic
(5.3p)
14.3p
 
0.5p
(8.2p)
(2.6p)
  - basic fully diluted
(5.3p)
14.2p
 
0.5p
(8.2p)
(2.6p)
Return on tangible equity (1)
(2.7%)
6.8%
 
0.8%
(12.4%)
(3.8%)
Average tangible equity
£32bn
£34bn
 
£32bn
£32bn
£33bn
Average number of ordinary shares
 
 
 
 
 
 
  outstanding during the period (millions)
 
 
 
 
 
 
  - basic
12,090
12,064
 
12,110
12,085
12,075
  - fully diluted (2)
12,112
12,099
 
12,133
12,107
12,106
 
 
30 September
30 June
31 December
Balance sheet key metrics and ratios
2020
2020
2019
Total assets
£791.6bn
£806.9bn
£723.0bn
Funded assets (1)
£627.3bn
£623.5bn
£573.0bn
Loans to customers - amortised cost
£353.7bn
£352.3bn
£326.9bn
Impairment provisions
£6.1bn
£6.1bn
£3.7bn
Customer deposits
£418.4bn
£408.3bn
£369.2bn
 
 
 
 
Liquidity coverage ratio (LCR)
157%
166%
152%
Liquidity portfolio
£243bn
£243bn
£199bn
Net stable funding ratio (NSFR) (3)
147%
144%
141%
Loan:deposit ratio (1)
85%
86%
89%
Total wholesale funding
£75bn
£86bn
£75bn
Short-term wholesale funding
£25bn
£22bn
£19bn
 
 
 
 
Common Equity Tier (CET1) ratio (4)
18.2%
17.2%
16.2%
Total capital ratio
23.7%
22.5%
21.2%
Pro forma CET1 ratio, pre dividend accrual (5)
18.2%
17.2%
17.0%
Risk-weighted assets (RWAs)
£173.9bn
£181.5bn
£179.2bn
CRR leverage ratio
5.2%
5.1%
5.1%
UK leverage ratio
6.2%
6.0%
5.8%
 
 
 
 
Tangible net asset value (TNAV) per ordinary share
265p
264p
268p
Tangible net asset value (TNAV) per ordinary share - fully diluted (1,2)
264p
263p
267p
Tangible equity
£32,093m
£32,006m
£32,371m
Number of ordinary shares in issue (millions)
12,127
12,125
12,094
Number of ordinary shares in issue (millions) - fully diluted (2,6)
12,149
12,147
12,138
 
Notes:
(1)   Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS financial and performance measures.
(2)   Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for the nine months ended 30 September 2020 were 22 million shares; Q3 2020 -  23 million shares (nine months ended 30 September 2019 - 35 million shares; Q2 2020 - 22 million shares; Q3 2019 - 31 million shares) and as at 30 September 2020 were 22 million shares (as at 30 June 2020 - 22 million shares; as at 31 December 2019 - 44 million shares).
(3)   NSFR reported in line with CRR2 regulations finalised in June 2019.
(4)   At September and June 2020 there is no charge in CET1 for foreseeable dividends or charges. The pro forma CET1 ratio at 31 December 2019 excluded foreseeable charges of £968 million for ordinary dividends (3p per share final dividend and 5p per share special dividend) and £365 million pension contribution.
(5)   Based on CRR end point including the IFRS 9 transitional adjustment of £1.7 billion. Excluding this adjustment, the CET1 ratio would be 17.2%.
(6)   Includes 16 million shares held by the Employee Benefit Trust (30 June 2020 - 16 million shares; 31 December 2019 - 15 million shares).
                                 
 
Non-IFRS financial measures
This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations, where applicable, refer to the Appendix.
 
 
 
Summary consolidated income statement for the period ended 30 September 2020
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
 
£m 
£m 
 
£m 
£m 
£m 
Net interest income
5,778
6,010
 
1,926
1,910
2,006
Own credit adjustments
19
(58)
 
(34)
(102)
(12)
Other non-interest income
2,464
4,068
 
531
868
909
Non-interest income
2,483
4,010
 
497
766
897
Total income
8,261
10,020
 
2,423
2,676
2,903
Litigation and conduct costs
81
(810)
 
(8)
85
(750)
Strategic costs
(687)
(844)
 
(223)
(333)
(215)
Other expenses
(4,958)
(5,144)
 
(1,583)
(1,661)
(1,733)
Operating expenses
(5,564)
(6,798)
 
(1,814)
(1,909)
(2,698)
Profit before impairment losses
2,697
3,222
 
609
767
205
Impairment losses
(3,112)
(536)
 
(254)
(2,056)
(213)
Operating (loss)/profit before tax
(415)
2,686
 
355
(1,289)
(8)
Tax credit/(charge)
1
(395)
 
(207)
396
(201)
(Loss)/profit for the period
(414)
2,291
 
148
(893)
(209)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
(644)
1,723
 
61
(993)
(315)
Preference shareholders
21
30
 
5
8
10
Paid-in equity holders
272
277
 
80
95
95
Non-controlling interests
(63)
261
 
2
(3)
1
 
Notable items within total income
 
 
 
 
 
 
Alawwal bank merger gain in NatWest Markets
-
444
 
-
-
-
FX recycling (loss)/gain in Central items & other
(39)
290
 
64
(39)
-
Legacy liability release in Central items & other
-
256
 
-
-
-
Loss on redemption of own debt
(324)
-
 
(324)
-
-
Liquidity Asset Bond sale gain/(loss)
111
(8)
 
1
17
(19)
IFRS volatility in Central items & other
38
(34)
 
49
55
(51)
NatWest Markets asset disposals/strategic risk reduction
(75)
(35)
 
(12)
(63)
(8)
Share of losses under equity accounting for
 
 
 
 
 
 
    Business Growth Fund
(28)
-
 
(43)
(1)
-
 
 
 
 
 
 
Business performance summary
Retail Banking (formerly UK Personal Banking)
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
£m
£m
£m
 
 
£bn
£bn
£bn
Total income (1)
1,022
1,035
1,224
 
Net loans to customers -
 
 
 
Operating expenses (1)
(647)
(546)
(1,601)
 
   amortised cost
166.7
164.5
158.9
Impairment losses
(70)
(360)
(131)
 
Customer deposits (1)
164.9
161.0
150.3
Operating profit/(loss)
305
129
(508)
 
RWAs
36.3
36.7
37.8
Return on equity
15.3%
5.7%
(26.8%)
 
 
 
 
 
Net interest margin
2.05%
2.18%
2.44%
 
 
 
 
 
Cost:income ratio
63.3%
52.8%
130.8%
 
 
 
 
 
Loan impairment rate
17bps
87bps
34bps
 
 
 
 
 
 
Note:
(1)   Comparisons with prior periods are impacted by the transfer of the Private Client Advice business to Private Banking from 1 January 2020. The net impact on Q3 2019 operating profit would have been to decrease total income by £11 million and operating expenses by £2 million. The net impact on the Q3 2019 balance sheet would have been to decrease customer deposits by £0.2 billion.
Retail Banking customer activity levels in Q3 2020 improved significantly compared with Q2 2020 with debit and credit card spend levels 30% and 43% higher respectively and mortgage applications increased by 91%. In the nine months ended 30 September 2020, Retail Banking helped approximately 250,000 customers with an initial mortgage repayment holiday and as at Q3 2020 had 37,000 active mortgage repayment holidays, representing 3% of the book by volume. Additionally, Retail Banking had approximately 40,000, or 4%, of personal loan customers on active repayment holidays as at Q3 2020.
 
●
Total income decreased by £202 million, or 16.5%, in comparison to Q3 2019 due to lower fee income on overdrafts, lower deposit returns, mortgage margin dilution and lower international spend related fee income, partially offset by strong balance growth in mortgages and customer deposits. Total income decreased by £13 million compared with Q2 2020, reflecting a 13 basis point reduction in net interest margin largely due to the deferred impact of the lower yield curve on deposit margins. Mortgage book margin stabilised in Q3 2020 as front book new business and switcher completion margins were approximately 140 basis points, broadly in line with the overall book margin. In Q3 2020, application margins were around 160 basis points as spreads in the market continued to widen.
●
Excluding strategic, litigation and conduct costs, operating expenses decreased by £49 million, or 8.0%, compared with Q3 2019, predominantly reflecting a reduction in staff costs associated with a 10.3% reduction in headcount.
●
Impairment losses of £70 million in Q3 2020 primarily reflect stage three default charges driven by personal advances.
●
Net loans to customers increased by £2.2 billion compared with Q2 2020. Gross new mortgage lending was £6.7 billion in Q3 2020, with market flow share of approximately 11% and strong retention supporting a stock share of approximately 10.6%. Unsecured balances remained stable in Q3 2020, compared with a reduction of £0.8 billion in Q2 2020.
●
Customer deposits increased by £3.9 billion in Q3 2020, compared with an £8.2 billion increase in Q2 2020, predominantly driven by increasing current account balances, however growth slowed in Q3 2020 as customer spend levels increased towards pre-Covid-19 levels.
 
 
 
 
Business performance summary
Ulster Bank RoI
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
€m
€m
€m
 
 
€bn
€bn
€bn
Total income
145
135
161
 
Net loans to customers -
 
 
 
Operating expenses
(138)
(140)
(146)
 
   amortised cost
20.2
20.5
21.4
Impairment (losses)/
 
 
 
 
Customer deposits
21.6
22.0
21.7
   releases
(6)
(246)
19
 
RWAs
13.3
14.1
15.3
Operating profit/(loss)
1
(251)
34
 
 
 
 
 
Return on equity
0.2%
(45.5%)
5.8%
 
 
 
 
 
Net interest margin
1.47%
1.49%
1.54%
 
 
 
 
 
Cost:income ratio
95.2%
103.7%
90.7%
 
 
 
 
 
Loan impairment rate
11bps
460bps
(34)bps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:
(1)   Ratios have been presented on a Euro basis. Comparatives have been restated.
 
Our strategy to grow our Ulster Bank business in the Republic of Ireland organically and safely remains unchanged. We continue to evaluate the impact of Covid-19 and the challenges to the economy and we are reviewing our strategy appropriately and responsibly in light of these events.
 
 
In the event of any changes being made to our strategy, these would be undertaken with full consideration of any impact on customers, colleagues and shareholders in the first instance. Our priority now is to continue to remain focused on supporting our colleagues in serving our customers in these difficult times.
 
As at Q3 2020, Ulster Bank RoI had approved over 17,000 payment breaks and, of those who have rolled off their initial payment break, approximately 46% have opted for a second payment break, representing around 8% of the lending book by value.
 
 
●
Total income decreased by €16 million, or 9.9%, compared with Q3 2019 primarily due to lower lending income, reduced transaction volumes and fee income resulting from the impact of Covid-19. Total income increased by €10 million in comparison to Q2 2020, reflecting higher fee income from a return to more normalised transaction levels. Net interest margin decreased by 2 basis points in comparison to Q2 2020 reflecting the continued impact of negative rates on increased liquid assets.
●
Impairment losses were €6 million in Q3 2020, with payment breaks in part mitigating the full impact of credit losses attributable to the Covid-19 pandemic.
●
Net loans to customers decreased by €0.3 billion compared with Q2 2020 as repayments continued to exceed gross new lending, combined with a further derecognition of the non-performing loan (NPL) sale agreed in 2019. Gross new lending of €0.4 billion was broadly in line with Q2 2020.
●
Customer deposits decreased by €0.4 billion in comparison to Q2 2020 mainly due to the introduction of negative rates on certain commercial deposit categories.
●
RWAs decreased by €0.8 billion in comparison to Q2 2020 reflecting the €0.2 billion impact of the NPL sale derecognition, lower volumes and improved credit metrics.
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Business performance summary
Commercial Banking
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
£m
£m
£m
 
 
£bn
£bn
£bn
Total income
1,004
995
1,077
 
Net loans to customers -
 
 
 
Operating expenses
(553)
(611)
(638)
 
   amortised cost
110.0
112.0
101.2
Impairment losses
(127)
(1,355)
(108)
 
Customer deposits
161.3
159.6
135.0
Operating profit/(loss)
324
(971)
331
 
RWAs
76.5
78.3
72.5
Return on equity
9.2%
(32.5%)
8.4%
 
 
 
 
 
Net interest margin
1.65%
1.70%
1.90%
 
 
 
 
 
Cost:income ratio
53.4%
59.9%
57.9%
 
 
 
 
 
Loan impairment rate
45bps
472bps
42bps
 
 
 
 
 
 
Commercial Banking continues to support customers through a comprehensive package of initiatives including participation in the UK Government's financial support schemes. As at Q3 2020, £7.9 billion BBLS, £3.7 billion CBILS and £1.2 billion CLBILS had been approved. Since 22 March 2020 Commercial Banking provided payment holidays on over 72,000 customer accounts and as at Q3 2020 had active payment holidays on c.55,000 customer accounts, representing c.8% of the lending book by value.
 
●
Total income decreased by £73 million, or 6.8%, compared with Q3 2019 as the continued contraction of the yield curve and lower business activity was partially offset by increased lending volumes. Net interest margin decreased by 5 basis points in comparison to Q2 2020 as a result of lower deposit funding benefits.
●
Other expenses, excluding OLD, were £36 million, or 6.8%, lower than Q3 2019 mainly due to a reduction in back office operations costs and a 3.0% reduction in headcount.
●
Impairment losses of £127 million in Q3 2020 primarily reflect stage one and two movements related to the expected deterioration in the economic environment, with total stage three charges of £53 million, including a small number of single name charges.
 
●
Net loans to customers decreased by £2.0 billion compared with Q2 2020 as £3.1 billion net RCF repayments and lower lending across Large Corporate & Institutions and Specialised business lending more than offset drawdowns against UK Government lending schemes, including £1.7 billion related to BBLS, £0.8 billion related to CBILS and £0.4 billion related to CLBILS. RCF utilisation decreased to c.26% of committed facilities, broadly in line with pre-Covid-19 levels.
●
Customer deposits increased by £1.7 billion compared with Q2 2020 as customers continued to retain liquidity.
●
RWAs decreased by £1.8 billion compared with Q2 2020 as lower lending volumes and a c.£1.5 billion reduction reflecting the CRR Covid-19 amendment to accelerate the planned changes to the SME supporting factor and the introduction of an Infrastructure supporting factor,  partially offset by risk parameter changes.
 
 
 
 
 
 
 
 
 
 
 

 
Business performance summary
Private Banking - (commentary adjusted for transfers)
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
£m
£m
£m
 
 
£bn
£bn
£bn
Total income
187
191
198
 
Net loans to customers -
 
 
 
Operating expenses
(112)
(129)
(119)
 
   amortised cost
16.5
16.0
15.5
Impairment
 
 
 
 
Customer deposits
30.3
29.8
28.4
   (losses)/releases
(18)
(27)
2
 
RWAs
10.6
10.4
10.1
Operating profit
57
35
81
 
Assets Under Management
 
 
 
Return on equity
11.2%
6.6%
16.8%
 
   (AUMs)
27.3
27.1
23.2
Net interest margin
1.99%
2.14%
2.35%
 
Assets Under Administration
 
 
 
Cost:income ratio
59.9%
67.5%
60.1%
 
   (AUAs) (1)
2.8
2.7
7.2
Loan impairment rate
43bps
67bps
(5)bps
 
Total Assets Under
 
 
 
 
 
 
 
 
   Management and
 
 
 
 
 
 
 
 
   Administration (AUMA)
30.1
29.8
30.4
 
Notes:
(1)   Private Banking manages assets under administration portfolios on behalf of Retail Banking and RBSI and receives a management fee in respect of providing this service.
(2)   Comparisons with prior periods are impacted by the transfer of the Private Client Advice business from Retail Banking from 1 January 2020. The net impact on Q3 2019 operating profit would have been to increase total income by £11 million and operating expenses by £2 million. The net impact on the Q3 2019 balance sheet would have been to increase customer deposits by £0.2 billion. AUMs would have been £4.5 billion higher, with a corresponding decrease in AUAs. Variances in the commentary below have been adjusted for the impact of this transfer.
 
Private Banking remains committed to supporting clients through a range of initiatives, including the provision of mortgage and loan repayment breaks and via participation in UK Government lending initiatives, with c.£0.3 billion approved as at Q3 2020.
 
●
Total income was £22 million, or 10.5%, lower than Q3 2019 mainly reflecting lower deposit funding benefits, a reduction in fee income and one-off benefits related to hedging income gains in Q3 2019, partially offset by balance sheet growth. Net interest margin decreased by 15 basis points in comparison to Q2 2020 primarily due to lower deposit funding benefits.
●
Impairment losses of £18 million largely reflected stage one and two charges.
●
Net loans to customers increased by £0.5 billion in comparison to Q2 2020 reflecting mortgage growth and drawdowns against UK Government lending schemes.
●
Total AUMAs overseen by Private Banking increased by £0.3 billion compared with Q2 2020 reflecting positive investment performance.
 
RBS International
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
£m
£m
£m
 
 
£bn
£bn
£bn
Total income
112
115
150
 
Net loans to customers -
 
 
 
Operating expenses
(53)
(65)
(62)
 
   amortised cost
12.8
12.7
14.1
Impairment losses
(34)
(31)
-
 
Customer deposits
30.4
29.5
30.1
Operating profit
25
19
88
 
RWAs
7.0
6.8
6.5
Return on equity
6.4%
4.3%
26.0%
 
 
 
 
 
Net interest margin
1.07%
1.15%
1.55%
 
 
 
 
 
Cost:income ratio
47.3%
56.5%
41.3%
 
 
 
 
 
Loan impairment rate
105bps
97bps
-
 
 
 
 
 
 
 
As at Q3 2020, RBS International had 322 active mortgage repayment breaks, reflecting a mortgage value of £82 million, and is providing support for 566 business customers with working capital facilities, reflecting a value of £503 million, while continuing to suspend a range of fees and charges for its personal and business customers.
 
●
Total income decreased by £38 million, or 25.3%, compared with Q3 2019 primarily due to the impact of the interest rate reductions on deposit income and lower fee income reflecting the economic response to Covid-19. Net interest margin decreased by 8 basis points compared with Q2 2020 due to reduced funding benefits.
●
Excluding strategic, litigation and conduct costs, operating expenses decreased by £7 million, or 12.3%, compared with Q3 2019 mainly due to lower staff costs as a result of a 5.6% headcount reduction and lower project spend.
●
Impairment losses were £34 million higher than Q3 2019 due to revised economic scenarios, refreshed staging and maturity date analysis.
●
Customer deposits were £0.9 billion higher than Q2 2020 due to short term placements in the Institutional Banking Sector.
●
RWAs increased by £0.2 billion compared with Q2 2020 due to customer maturities and higher lending balances in the wholesale sector.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business performance summary
NatWest Markets(1)
 
Quarter ended
 
 
As at
 
30 September
30 June
30 September
 
 
30 September
30 June
31 December
 
2020
2020
2019
 
 
2020
2020
2019
 
£m
£m
£m
 
 
£bn
£bn
£bn
Total income
234
273
150
 
Funded Assets
121.3
122.9
116.2
of which:
 
 
 
 
RWAs
30.0
35.1
37.9
   - Income excluding
 
 
 
 
 
 
 
 
         asset disposals/strategic
 
 
 
 
 
 
 
 
         risk reduction and own
 
 
 
 
 
 
 
 
        credit adjustments
280
438
161
 
 
 
 
 
   - Asset disposals/strategic
 
 
 
 
 
 
 
 
       risk reduction (2)
(12)
(63)
-
 
 
 
 
 
   - Own credit adjustments
(34)
(102)
(11)
 
 
 
 
 
Operating expenses
(302)
(365)
(348)
 
 
 
 
 
Impairment releases/(losses)
2
(45)
5
 
 
 
 
 
Operating (loss)
(66)
(137)
(193)
 
 
 
 
 
Return on equity
(4.7%)
(7.1%)
(8.7%)
 
 
 
 
 
Cost:income ratio
129.1%
133.7%
232.0%
 
 
 
 
 
 
Notes:
(1)    The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity (NWM Plc) or group (NWM or NWM Group). For 2019, NWM Group includes NatWest Markets N.V. (NWM N.V.) from 29 November 2019 only. For periods prior to Q4 2019, NWM N.V. was excluded from the NWM Group. In both 2019 and 2020 the NatWest Markets segment excludes the Central items & other segment.
(2)    Asset disposals/strategic risk reduction in 2020 relates to the cost of exiting positions and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.
 
During Q3 2020 NatWest Markets made further progress on reshaping the business for the future, putting purpose at its core. The front office operating model was reorganised to increase focus on NatWest Group's customers. A Capital Management Unit has also been established to safely manage capital reduction and optimisation. Further refinements to the product suite were also communicated, to focus resources on developing product capability in the areas that matter most to NatWest Group's customers. This included exiting Distressed and Emerging Markets Credit trading and making changes to simplify the Rates business. In line with the strategy announced in February, NatWest Markets has continued to reduce RWAs, particularly within counterparty credit and market risk, and are now targeting RWAs of around £30 billion by the end of 2020.
 
●
Income excluding asset disposals/strategic risk reduction, OCA and notable items increased by £111 million, or 65.7%, in comparison to Q3 2019. Although market activity and the level of primary issuance eased in Q3 2020 compared to the first half of the year, income was significantly higher than Q3 2019 due to elevated hedging costs in the prior period.
●
Excluding strategic, litigation and conduct costs, operating expenses decreased by £57 million, or 20.2%, in comparison to Q3 2019 reflecting continued reductions in line with the strategic announcement in February 2020.
●
RWAs were £5.1 billion lower than Q2 2020 as counterparty credit risk decreased by £2.2 billion and market risk decreased by £2.2 billion due to capital optimisation actions.
 
 
 
Central items & other
 
Quarter ended
 
 
30 September
30 June
30 September
 
 
 
 
2020
2020
2019
 
 
 
 
£m
£m
£m
 
 
 
Central items not allocated
(285)
(146)
162
 
 
 
 
●
A £285 million operating loss within central items not allocated in Q3 2020 principally reflects the day one loss on redemption of own debt of £324 million related to the repurchase of legacy instruments which will result in annual net interest savings of c.£74 million. Q3 2019 principally reflected a £162 million reimbursment under indemnification agreements relating to residential mortgage-backed securities.
 
 
 

 
Segment performance
 
Nine months ended 30 September 2020
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
Total NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
& other (1)
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
2,919
294
2,073
371
286
(55)
(110)
5,778
Non-interest income
288
85
934
208
85
1,086
(222)
2,464
Own credit adjustments
-
-
-
-
-
19
-
19
Total income
3,207
379
3,007
579
371
1,050
(332)
8,261
Direct expenses
 
 
 
 
 
 
 
 
  - staff costs
(399)
(150)
(497)
(137)
(92)
(434)
(914)
(2,623)
  - other costs
(152)
(65)
(211)
(61)
(37)
(131)
(1,678)
(2,335)
Indirect expenses
(1,178)
(139)
(958)
(149)
(42)
(229)
2,695
-
Strategic costs
 
 
 
 
 
 
 
 
  - direct
(46)
(9)
(5)
(4)
(8)
(187)
(428)
(687)
  - indirect
(138)
(10)
(111)
(10)
(3)
(24)
296
-
Litigation and conduct costs
191
1
8
(3)
3
(4)
(115)
81
Operating expenses
(1,722)
(372)
(1,774)
(364)
(179)
(1,009)
(144)
(5,564)
Operating profit/(loss)before impairment (losses)/releases
1,485
7
1,233
215
192
41
(476)
2,697
Impairment (losses)/releases
(727)
(251)
(1,917)
(74)
(80)
(38)
(25)
(3,112)
Operating profit/(loss)
758
(244)
(684)
141
112
3
(501)
(415)
Additional information
 
 
 
 
 
 
 
 
Return on equity (2)
12.2%
(16.6%)
(8.7%)
9.2%
10.0%
(0.8%)
nm
(2.7%)
Cost:income ratio (2)
53.7%
98.2%
57.4%
62.9%
48.2%
96.1%
nm
66.9%
Total assets (£bn)
189.5
27.4
186.9
24.9
32.7
283.2
47.0
791.6
Funded assets (£bn)
189.5
27.4
186.9
24.9
32.7
121.3
44.6
627.3
Net loans to customers - amortised cost (£bn)
166.7
18.3
110.0
16.5
12.8
10.1
19.3
353.7
Loan impairment rate (2)
57bps
175bps
226bps
59bps
83bps
nm
nm
115bps
Impairment provisions (£bn)
(1.9)
(0.8)
(3.0)
(0.1)
(0.1)
(0.2)
-
(6.1)
Impairment provisions - stage 3 (£bn)
(0.9)
(0.5)
(1.1)
-
-
(0.2)
-
(2.7)
Customer deposits (£bn)
164.9
19.6
161.3
30.3
30.4
4.7
7.2
418.4
Risk-weighted assets (RWAs) (£bn)
36.3
12.1
76.5
10.6
7.0
30.0
1.4
173.9
RWA equivalent (RWAe) (£bn)
36.3
12.1
76.6
10.6
7.1
32.0
1.4
176.1
Employee numbers (FTEs - thousands)
16.6
2.8
9.6
2.1
1.7
2.8
26.0
61.6
Average interest earning assets (£bn)
179.8
26.2
160.8
23.3
31.3
38.4
nm
487.8
Net interest margin
2.17%
1.50%
1.72%
2.12%
1.22%
(0.19%)
nm
1.58%
Third party customer asset rate (3)
2.92%
2.29%
2.93%
2.59%
2.57%
nm
nm
nm
Third party customer funding rate (3)
(0.23%)
(0.12%)
(0.20%)
(0.18%)
(0.03%)
nm
nm
nm
 
 
Refer to page 14 for the notes to this table. nm = not meaningful.
 
 
 
Segment performance
 
Nine months ended 30 September 2019
 
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
Total NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
 & other (1)
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
3,118
302
2,127
391
361
(184)
(105)
6,010
Non-interest income
553
125
1,115
191
99
890
60
3,033
Own credit adjustments
-
1
-
-
-
(58)
(1)
(58)
Strategic disposals
-
-
-
-
-
444
591
1,035
Total income
3,671
428
3,242
582
460
1,092
545
10,020
Direct expenses
 
 
 
 
 
 
 
 
  - staff costs
(431)
(156)
(521)
(122)
(89)
(508)
(905)
(2,732)
  - other costs
(217)
(70)
(223)
(52)
(37)
(128)
(1,685)
(2,412)
Indirect expenses
(1,113)
(134)
(915)
(145)
(40)
(246)
2,593
-
Strategic costs
 
 
 
 
 
 
 
 
  - direct
(8)
(12)
(20)
-
(9)
(104)
(691)
(844)
  - indirect
(143)
(19)
(171)
(30)
(6)
(37)
406
-
Litigation and conduct costs
(918)
(21)
(50)
(2)
-
(3)
184
(810)
Operating expenses
(2,830)
(412)
(1,900)
(351)
(181)
(1,026)
(98)
(6,798)
Operating profit/(loss) before impairment (losses)/releases
841
16
1,342
231
279
66
447
3,222
Impairment (losses)/releases
(312)
38
(310)
5
3
41
(1)
(536)
Operating profit/(loss)
529
54
1,032
236
282
107
446
2,686
Additional information
 
 
 
 
 
 
 
 
Return on equity (2)
7.8%
3.4%
8.7%
16.7%
28.5%
(2.2%)
nm
6.8%
Cost:income ratio (2)
77.1%
96.3%
57.2%
60.3%
39.3%
94.0%
nm
67.5%
Total assets (£bn)
176.7
26.1
166.6
22.6
31.2
318.3
35.0
776.5
Funded assets (£bn)
176.7
26.0
166.6
22.6
31.2
142.7
34.9
600.7
Net loans to customers - amortised cost (£bn)
154.6
19.0
101.5
15.2
13.8
9.1
6.3
319.5
Loan impairment rate (2)
27bps
(26)bps
40bps
(4)bps
(3)bps
nm
nm
22bps
Impairment provisions (£bn)
(1.4)
(0.8)
(1.3)
-
-
(0.2)
(0.1)
(3.8)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.8)
(1.0)
-
-
(0.2)
-
(2.8)
Customer deposits (£bn)
147.9
18.8
135.7
28.2
29.1
3.3
6.7
369.7
Risk-weighted assets (RWAs) (£bn)
37.5
13.3
77.0
10.0
6.5
43.8
1.4
189.5
RWA equivalent (RWAe) (£bn)
38.4
13.6
78.1
10.0
6.6
48.9
1.7
197.3
Employee numbers (FTEs - thousands)
18.5
3.0
9.9
1.9
1.8
5.1
25.5
65.7
Average interest earning assets (£bn)
165.3
25.2
145.8
21.5
29.3
35.1
nm
445.1
Net interest margin
2.52%
1.60%
1.95%
2.44%
1.65%
(0.70%)
nm
1.81%
Third party customer asset rate (3)
3.27%
2.29%
3.37%
2.95%
2.93%
nm
nm
nm
Third party customer funding rate (3)
(0.37%)
(0.15%)
(0.35%)
(0.44%)
(0.14%)
nm
nm
nm
 
 
Refer to page 14 for the notes to this table. nm = not meaningful.
 
 
 
Segment performance
 
Quarter ended 30 September 2020
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
Total NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
& other (1)
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
937
100
703
120
85
(21)
2
1,926
Non-interest income
85
30
301
67
27
289
(268)
531
Own credit adjustments
-
-
-
-
-
(34)
-
(34)
Total income
1,022
130
1,004
187
112
234
(266)
2,423
Direct expenses
 
 
 
 
 
 
 
 
  - staff costs
(131)
(50)
(156)
(44)
(27)
(108)
(311)
(827)
  - other costs
(49)
(23)
(71)
(14)
(10)
(37)
(552)
(756)
Indirect expenses
(380)
(47)
(300)
(48)
(13)
(80)
868
-
Strategic costs
 
 
 
 
 
 
 
 
  - direct
(45)
(5)
(3)
(4)
(5)
(67)
(94)
(223)
  - indirect
(35)
(2)
(38)
-
2
(8)
81
-
Litigation and conduct costs
(7)
-
15
(2)
-
(2)
(12)
(8)
Operating expenses
(647)
(127)
(553)
(112)
(53)
(302)
(20)
(1,814)
Operating profit/(loss)before impairment (losses)/releases
375
3
451
75
59
(68)
(286)
609
Impairment (losses)/releases
(70)
(8)
(127)
(18)
(34)
2
1
(254)
Operating profit/(loss)
305
(5)
324
57
25
(66)
(285)
355
Additional information
 
 
 
 
 
 
 
 
Return on equity (2)
15.3%
(1.0%)
9.2%
11.2%
6.4%
(4.7%)
nm
0.8%
Cost:income ratio (2)
63.3%
97.7%
53.4%
59.9%
47.3%
129.1%
nm
74.5%
Total assets (£bn)
189.5
27.4
186.9
24.9
32.7
283.2
47.0
791.6
Funded assets (£bn)
189.5
27.4
186.9
24.9
32.7
121.3
44.6
627.3
Net loans to customers - amortised cost (£bn)
166.7
18.3
110.0
16.5
12.8
10.1
19.3
353.7
Loan impairment rate (2)
17bps
17bps
45bps
43bps
105bps
nm
nm
28bps
Impairment provisions (£bn)
(1.9)
(0.8)
(3.0)
(0.1)
(0.1)
(0.2)
-
(6.1)
Impairment provisions - stage 3 (£bn)
(0.9)
(0.5)
(1.1)
-
-
(0.2)
-
(2.7)
Customer deposits (£bn)
164.9
19.6
161.3
30.3
30.4
4.7
7.2
418.4
Risk-weighted assets (RWAs) (£bn)
36.3
12.1
76.5
10.6
7.0
30.0
1.4
173.9
RWA equivalent (RWAe) (£bn)
36.3
12.1
76.6
10.6
7.1
32.0
1.4
176.1
Employee numbers (FTEs - thousands)
16.6
2.8
9.6
2.1
1.7
2.8
26.0
61.6
Average interest earning assets (£bn)
182.2
27.3
169.3
24.0
31.5
39.2
nm
507.3
Net interest margin
2.05%
1.46%
1.65%
1.99%
1.07%
(0.21%)
nm
1.51%
Third party customer asset rate (3)
2.82%
2.32%
2.73%
2.43%
2.41%
nm
nm
nm
Third party customer funding rate (3)
(0.13%)
(0.11%)
(0.03%)
(0.02%)
0.03%
nm
nm
nm
 
 
Refer to page 14 for the notes to this table. nm = not meaningful.
 
Segment performance
 
Quarter ended 30 June 2020
 
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
Total NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
 & other (1)
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
975
97
696
124
90
6
(78)
1,910
Non-interest income
60
23
299
67
25
369
25
868
Own credit adjustments
-
-
-
-
-
(102)
-
(102)
Total income
1,035
120
995
191
115
273
(53)
2,676
Direct expenses
 
 
 
 
 
 
 
 
  - staff costs
(133)
(52)
(167)
(46)
(33)
(159)
(287)
(877)
  - other costs
(45)
(18)
(67)
(23)
(13)
(37)
(581)
(784)
Indirect expenses
(399)
(46)
(337)
(54)
(15)
(75)
926
-
Strategic costs
 
 
 
 
 
 
 
 
  - direct
(1)
(3)
-
-
(2)
(86)
(241)
(333)
  - indirect
(69)
(4)
(34)
(5)
(2)
(8)
122
-
Litigation and conduct costs
101
1
(6)
(1)
-
-
(10)
85
Operating expenses
(546)
(122)
(611)
(129)
(65)
(365)
(71)
(1,909)
Operating profit/(loss) before impairment (losses)/releases
489
(2)
384
62
50
(92)
(124)
767
Impairment (losses)/releases
(360)
(216)
(1,355)
(27)
(31)
(45)
(22)
(2,056)
Operating profit/(loss)
129
(218)
(971)
35
19
(137)
(146)
(1,289)
Additional information
 
 
 
 
 
 
 
 
Return on equity (2)
5.7%
(44.5%)
(32.5%)
6.6%
4.3%
(7.1%)
nm
(12.4%)
Cost:income ratio (2)
52.8%
101.7%
59.9%
67.5%
56.5%
133.7%
nm
70.9%
Total assets (£bn)
187.1
27.6
186.0
23.9
31.5
303.8
47.0
806.9
Funded assets (£bn)
187.1
27.6
186.0
23.9
31.5
122.9
44.5
623.5
Net loans to customers - amortised cost (£bn)
164.5
18.7
112.0
16.0
12.7
11.4
17.0
352.3
Loan impairment rate (2)
87bps
441bps
472bps
67bps
97bps
nm
nm
229bps
Impairment provisions (£bn)
(1.9)
(0.9)
(3.0)
(0.1)
-
(0.2)
-
(6.1)
Impairment provisions - stage 3 (£bn)
(0.9)
(0.6)
(1.2)
-
-
(0.1)
-
(2.8)
Customer deposits (£bn)
161.0
20.0
159.6
29.8
29.5
5.5
2.9
408.3
Risk-weighted assets (RWAs) (£bn)
36.7
12.8
78.3
10.4
6.8
35.1
1.4
181.5
RWA equivalent (RWAe) (£bn)
36.7
12.8
78.4
10.4
6.9
37.2
1.5
183.9
Employee numbers (FTEs - thousands)
17.1
2.8
9.6
2.0
1.8
5.0
24.4
62.7
Average interest earning assets (£bn)
179.8
26.4
164.6
23.3
31.5
39.9
nm
497.4
Net interest margin
2.18%
1.48%
1.70%
2.14%
1.15%
0.06%
nm
1.54%
Third party customer asset rate (3)
2.88%
2.27%
2.88%
2.53%
2.58%
nm
nm
nm
Third party customer funding rate (3)
(0.20%)
(0.12%)
(0.25%)
(0.14%)
(0.01%)
nm
nm
nm
 
 
Refer to page 14 for the notes to this table. nm = not meaningful.
 
 
 
 
Segment performance
 
Quarter ended 30 September 2019
 
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
Total NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
& other (1)
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
1,034
102
703
130
119
(62)
(20)
2,006
Non-interest income
190
43
374
68
31
223
(20)
909
Own credit adjustments
-
-
-
-
-
(11)
(1)
(12)
Total income
1,224
145
1,077
198
150
150
(41)
2,903
Direct expenses
 
 
 
 
 
 
 
 
  - staff costs
(143)
(52)
(172)
(40)
(30)
(159)
(295)
(891)
  - other costs
(81)
(22)
(72)
(17)
(14)
(42)
(594)
(842)
Indirect expenses
(385)
(44)
(317)
(49)
(13)
(81)
889
-
Strategic costs
 
 
 
 
 
 
 
 
  - direct
(12)
(3)
10
-
(4)
(55)
(151)
(215)
  - indirect
(68)
(9)
(83)
(13)
(1)
(7)
181
-
Litigation and conduct costs
(912)
(1)
(4)
-
-
(4)
171
(750)
Operating expenses
(1,601)
(131)
(638)
(119)
(62)
(348)
201
(2,698)
Operating profit/(loss) before impairment (losses)/releases
(377)
14
439
79
88
(198)
160
205
Impairment (losses)/releases
(131)
17
(108)
2
-
5
2
(213)
Operating profit/(loss)
(508)
31
331
81
88
(193)
162
(8)
Additional information
 
 
 
 
 
 
 
 
Return on equity (2)
(26.8%)
5.8%
8.4%
16.8%
26.0%
(8.7%)
nm
(3.8%)
Cost:income ratio (2)
130.8%
90.3%
57.9%
60.1%
41.3%
232.0%
nm
92.9%
Total assets (£bn)
176.7
26.1
166.6
22.6
31.2
318.3
35.0
776.5
Funded assets (£bn)
176.7
26.0
166.6
22.6
31.2
142.7
34.9
600.7
Net loans to customers - amortised cost (£bn)
154.6
19.0
101.5
15.2
13.8
9.1
6.3
319.5
Loan impairment rate (2)
34bps
(34)bps
42bps
(5)bps
-
nm
nm
26bps
Impairment provisions (£bn)
(1.4)
(0.8)
(1.3)
-
-
(0.2)
(0.1)
(3.8)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.8)
(1.0)
-
-
(0.2)
-
(2.8)
Customer deposits (£bn)
147.9
18.8
135.7
28.2
29.1
3.3
6.7
369.7
Risk-weighted assets (RWAs) (£bn)
37.5
13.3
77.0
10.0
6.5
43.8
1.4
189.5
RWA equivalent (RWAes) (£bn)
38.4
13.6
78.1
10.0
6.6
48.9
1.7
197.3
Employee numbers (FTEs - thousands)
18.5
3.0
9.9
1.9
1.8
5.1
25.5
65.7
Average interest earning assets (£bn)
168.1
26.2
146.7
22.0
30.4
38.6
nm
454.4
Net interest margin
2.44%
1.55%
1.90%
2.35%
1.55%
(0.64%)
nm
1.75%
Third party customer asset rate (3)
3.23%
2.26%
3.31%
2.92%
2.91%
nm
nm
nm
Third party customer funding rate (3)
(0.37%)
(0.14%)
(0.36%)
(0.44%)
(0.14%)
nm
nm
nm
 
Notes:
(1)   Central items & other includes unallocated transactions, including volatile items under IFRS, items related to Alawwal bank merger and RMBS related charges.
(2)   Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS performance measures where relevant.
(3)   Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers only. Third party customer funding rate reflects interest payable on third-party customer deposits. This excludes intragroup items, loans to banks and liquid asset portfolios. Intragroup items, bank deposits and debt securities in issue are excluded for customer funding rate calculation. Net interest margin is calculated as net interest income as a percentage of the average interest-earning assets without these exclusions.
 
 
 
Capital and risk management
 
Page
Capital, liquidity and funding risk
15
Credit risk
 
     Segmental exposure
21
     Sector analysis
25
     Wholesale support schemes
27
 
Capital, liquidity and funding risk
Introduction
The economic impact of the Covid-19 pandemic was significant. While liquidity, capital and funding were closely monitored
throughout, NatWest Group benefited from its strong positions, particularly in relation to CET1, going into the crisis. Prudent
risk management continues to be important as the full economic effects of the global pandemic unfold. 
 
Key developments
●
The CET1 ratio increased by 200 basis points to 18.2%. There was a release of £1.3 billion following the cancellation of the proposed 2019 dividend payments and associated pension contribution in Q1 2020, as announced by the Board in response to Covid-19. The attributable loss in the period was £644 million however the IFRS 9 transitional arrangements on expected credit losses provided relief of £1,719 million.
●
Total RWAs decreased by £5.3 billion during the period, mainly reflecting reductions in Market Risk RWAs of £3.6 billion and Counterparty Credit Risk RWAs of £2.4 billion. Operational Risk RWAs reduced by £0.7 billion following the annual recalculation in Q1 2020.  The reduction in Market Risk RWAs was due to movements in Risks-not-in-VaR (RNIV) and Incremental Risk Charge (IRC) as well as a reduction in non-modelled market risk.  There were offsetting increases in Credit Risk RWAs of £1.4 billion.
●
The CRR leverage ratio increased to 5.2% due to a £2.5 billion increase in Tier 1 capital which is partially offset by a £44.4 billion increase in the leverage exposure driven by balance sheet exposures.
 
In response to the Covid-19 pandemic, a number of relief measures to alleviate the financial stability impact have been announced and recommended by regulatory and supervisory bodies. One significant announcement was on 26 June when the European Parliament passed an amended regulation to the CRR in response to the Covid-19 pandemic ("the CRR Covid-19 amendment"); NatWest Group has applied a number of the CRR amendments for Q3 2020 reporting. The impact on capital and leverage of the CRR amendment and other relief measures are set out below.
 
●
IFRS 9 Transition - NatWest Group has elected to take advantage of the transitional regulatory capital rules in respect of expected credit losses following the adoption of IFRS 9; it had previously had a negligible impact up to Q4 2019. The CRR Covid-19 amendment now requires a full CET1 addback for the movement in stage 1 and stage 2 ECL from 1 January 2020 for the next two years. The IFRS 9 transitional arrangement impact on NatWest Group CET1 regulatory capital at 30 September 2020 is £1,719 million.  Excluding this adjustment, the CET1 ratio would be 17.2%.
●
UK Leverage exposure - The Prudential Regulation Authority (PRA) announced the ability for firms to apply for a modification by consent to permit the netting of regular-way purchase and sales settlement balances. The PRA also offered a further modification that gave an exclusion from the UK Leverage Exposure for BBLS and other 100% guaranteed government Covid-19 lending schemes. NatWest Group has received permission to apply these and it has reduced the UK leverage exposure by c.£9.8 billion and £7.5 billion respectively.
●
CRR Leverage exposure - The CRR Covid-19 amendment accelerated a change in CRR2 to allow the netting of regular-way purchase and sales settlement balances. NatWest Group has applied this, and it has reduced the CRR leverage exposure by c.£9.8 billion.
●
Infrastructure and SME RWA supporting factors - The CRR Covid-19 amendment allowed an acceleration of the planned changes to the SME supporting factor and the introduction of an Infrastructure supporting factor. NatWest Group has implemented these beneficial changes to supporting factors which have reduced RWAs by c.£1.0 billion for SMEs and £0.8 billion for Infrastructure.
●
Prudential Valuation Adjustment (PVA) - The European Commission amended the prudent valuation Regulatory Technical Standard such that, due to the exceptional levels of market volatility, the aggregation factor was increased from 50% to 66% until 31 December 2020 inclusive. This has reduced NatWest Group's PVA deduction by c.£100 million.
●
Market Risk Value-at-risk (VaR) model capital multiplier - Earlier in the year, the PRA and De Nederlandsche Bank (DNB) announced temporary approaches in relation to the exceptional levels of market volatility which resulted in an increase in VaR model back-testing exceptions in NatWest Markets Plc and NatWest Markets N.V.. Under the PRA temporary approach, capital multiplier increases due to new back-testing exceptions which have resulted in an increase in capital requirements could be offset through a commensurate reduction in RNIV capital requirements. The PRA announced that this temporary approach will cease to apply from 1 October 2020, and be replaced by the measures announced in the CRR Covid-19 amendment where back-testing exceptions due to the exceptional levels of market volatility due to Covid-19 can be excluded from the capital multiplier. The application of this CRR Covid-19 measure is subject to approval by the PRA, which NatWest Markets Plc has applied for. The PRA approach resulted in c.£1.3 billion benefit.
●
Capital buffers - Many countries have announced reductions in their countercyclical capital buffer rates in response to Covid-19. Most notably for NatWest Group, the Financial Policy Committee reduced the UK rate from 1% to 0% effective from 11 March 2020. The CBI also announced a reduction of the Republic of Ireland rate from 1% to 0% effective from 1 April 2020.
 
 
 
Capital and risk management
Capital, liquidity and funding risk continued
Maximum Distributable Amount (MDA) and Minimum Capital Requirements
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.  
 
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments, known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.
 
The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.
 
Type
CET1
Total Tier 1
Total capital
Pillar 1 requirements
4.5%
6.0%
8.0%
Pillar 2A requirements
1.9%
2.6%
3.4%
Minimum Capital Requirements
6.4%
8.6%
11.4%
Capital conservation buffer
2.5%
2.5%
2.5%
Countercyclical capital buffer (1) 
0.0%
0.0%
0.0%
G-SIB buffer (2)
-
 
-
-
MDA Threshold (3)
8.9%
 
na
 
na
Subtotal
8.9%
11.1%
13.9%
Capital ratios at 30 September 2020
18.2%
20.5%
23.7%
Headroom (4)
9.3%
9.4%
9.8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes:
(1)
Many countries have announced reductions in their countercyclical capital buffer rates in response to Covid-19. Most notably for NatWest Group, the Financial Policy Committee reduced the UK rate from 1% to 0% effective from 11 March 2020. The CBI also announced a reduction of the Republic of Ireland rate from 1% to 0% effective from 1 April 2020.
(2)
(3)
(4)
In November 2018 the Financial Stability Board announced that NatWest Group is no longer a G-SIB. From 1 January 2020, NatWest Group was released from this global buffer requirement.
The prevailing combined buffer requirements for NatWest Group equate to the aggregate of the capital conservation buffer and countercyclical buffer. The PRA informed a revised Pillar 2A requirement on a nominal capital basis effective from 5 October 2020 which results in an implied 9.1% MDA.
The headroom does not reflect excess distributable capital and may vary over time.
 
 
 
Capital and risk management
Capital, liquidity and funding risk continued
Capital and leverage ratios
The table below sets out the key capital and leverage ratios.
 
CRR basis (1)
 
30 September
30 June
31 December
Capital adequacy ratios
2020
2020
2019
CET1 (%)
18.2
17.2
16.2
Tier 1 (%)
20.5
19.4
18.5
Total (%)
23.7
22.5
21.2
 
 
 
 
Capital
£m
£m
£m
Tangible equity
32,093
32,006
32,371
 
 
 
 
Expected loss less impairment provisions
-
-
(167)
Prudential valuation adjustment
(341)
(370)
(431)
Deferred tax assets
(835)
(844)
(757)
Own credit adjustments
(154)
(244)
(118)
Pension fund assets
(590)
(588)
(474)
Cash flow hedging reserve
(300)
(341)
(35)
Foreseeable ordinary and special dividends
-
-
(968)
Foreseeable charges
                        -
-
(365)
Adjustments under IFRS 9 transitional arrangements
1,719
1,578
-
Other deductions
-
-
(2)
Total deductions
(501)
(809)
(3,317)
 
 
 
 
CET1 capital
31,592
31,197
29,054
AT1 capital
3,990
3,990
4,051
Tier 1 capital
35,582
35,187
33,105
Tier 2 capital
5,710
5,596
4,900
 
 
 
 
Total regulatory capital
41,292
40,783
38,005
 
 
 
 
Risk-weighted assets
 
 
 
Credit risk
132,387
135,657
131,012
Counterparty credit risk
10,170
12,354
12,631
Market risk
9,399
11,517
12,930
Operational risk
21,930
21,930
22,599
Total RWAs
173,886
181,458
179,172
 
 
 
 
Leverage
 
 
 
Cash and balances at central banks
106,388
100,281
77,858
Trading assets
70,820
72,402
76,745
Derivatives
164,311
183,419
150,029
Financial assets
424,291
428,040
399,088
Other assets
25,751
22,745
19,319
Total assets
791,561
806,887
723,039
 
 
 
 
Derivatives
 
 
 
  - netting and variation margin
(172,389)
(194,387)
(157,778)
  - potential future exposures
40,439
44,019
43,004
Securities financing transactions gross up
1,193
1,312
2,224
Other off balance sheet items
44,650
43,484
42,363
Regulatory deductions and other adjustments
(17,167)
(14,579)
(8,978)
CRR leverage exposure
688,287
686,736
643,874
 
 
 
 
CRR leverage ratio % (2)
5.2
5.1
5.1
 
 
 
 
UK leverage exposure
576,889
585,115
570,330
UK leverage ratio % (3)
6.2
6.0
5.8
                                                       
Notes:
(1)   Based on CRR end point including the IFRS 9 transitional adjustment of £1,719 million. Excluding this adjustment, the CET1 ratio would be 17.2%.
(2)   Presented on CRR end point Tier 1 capital (including IFRS 9 transitional adjustment) and leverage exposure under the CRR Delegated Act. Excluding the IFRS 9 transitional adjustment, the leverage ratio would be 4.9%.
(3)   Presented on CRR end point Tier 1 capital (including IFRS 9 transitional adjustment). The UK leverage ratio excludes central bank claims from the leverage exposure where deposits held are denominated in the same currency and of contractual maturity that is equal or longer than that of the central bank claims. Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.9%.
 
 
 
 
Capital and risk management
Capital, liquidity and funding risk continued
Capital flow statement
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the nine months ended 30 September 2020.
 
CET1
AT1
Tier 2
Total
 
£m
£m
£m
£m
At 1 January 2020
29,054
4,051
4,900
38,005
Attributable loss for the period
(644)
-
-
(644)
Own credit
(36)
-
-
(36)
Foreign exchange reserve
415
-
-
415
FVOCI reserve
(174)
-
-
(174)
Goodwill and intangibles deduction
22
-
-
22
Deferred tax assets
(78)
-
-
(78)
Prudential valuation adjustments
90
-
-
90
Expected loss less impairment
167
-
-
167
New issues of capital instruments
-
1,216
1,654
2,870
Redemption of capital instruments
-
(1,277)
(751)
(2,028)
Net dated subordinated debt/grandfathered instruments
-
-
(579)
(579)
Foreign exchange movements
(355)
-
103
(252)
Foreseeable ordinary and special dividends
968
-
-
968
Foreseeable charges
365
-
-
365
Adjustment under IFRS 9 transitional arrangements
1,719
-
-
1,719
Other movements
79
-
383
462
At 30 September 2020
31,592
3,990
5,710
41,292
 
Key points
●     NatWest Group has elected to take advantage of the transitional regulatory capital rules in respect of expected credit losses following the adoption of IFRS 9; it had previously had a negligible impact up to Q4 2019. The CRR Covid-19 amendment now requires a full CET1 addback for the movement in stage 1 and stage 2 ECL from 1 January 2020 for the next two years. The IFRS 9 transitional arrangement impact on NatWest Group CET1 regulatory capital at 30 September 2020 is £1,719 million. 
●     Foreign exchange movements in CET1 include a £345 million charge in relation to a $2 billion AT1 redemption announcement on 28 June 2020.
 
 
 
 
 
Capital and risk management
Capital, liquidity and funding risk continued
Risk-weighted assets
The table below analyses the movement in RWAs during the period, by key drivers.
 
 
 
Counterparty
 
Operational
 
 
Credit risk
credit risk
Market risk
 risk
Total
 
£bn
£bn
£bn
£bn
£bn
At 1 January 2020
131.0
12.6
13.0
22.6
179.2
Foreign exchange movement
1.6
0.2
-
-
1.8
Business movement
-
(1.6)
(2.1)
(0.7)
(4.4)
Risk parameter changes (1)
0.3
0.2
-
-
0.5
Methodology changes (2)
(1.4)
(0.1)
-
-
(1.5)
Model updates
0.9
-
(0.2)
-
0.7
Other movements (3)
-
(1.1)
(1.3)
-
(2.4)
At 30 September 2020
132.4
10.2
9.4
21.9
173.9
 
The table below analyses segmental RWAs.
 
 
 
 
 
 
 
 
Central
 
 
Retail
Ulster
Commercial
Private
RBS
NatWest
items &
 
 
Banking
Bank RoI
Banking
Banking
International
Markets
 other
Total
Total RWAs
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
At 1 January 2020
37.8
13.0
72.5
10.1
6.5
37.9
1.4
179.2
Foreign exchange movement
-
0.7
0.5
-
0.1
0.5
-
1.8
Business movement
(0.3)
(1.0)
2.4
0.6
0.4
(6.2)
(0.3)
(4.4)
Risk parameter changes (1)
(1.2)
(0.7)
1.9
-
-
0.5
-
0.5
Methodology changes (2)
-
(0.1)
(1.8)
(0.1)
-
0.2
0.3
(1.5)
Model updates
-
0.2
0.7
-
-
(0.2)
-
0.7
Other movements (3)
-
-
0.3
-
-
(2.7)
-
(2.4)
At 30 September 2020
36.3
12.1
76.5
10.6
7.0
30.0
1.4
173.9
 
 
 
 
 
 
 
 
 
Credit risk
28.7
11.0
67.6
9.3
6.0
8.4
1.4
132.4
Counterparty credit risk
0.1
-
0.2
0.1
-
9.8
-
10.2
Market risk
0.1
0.1
0.2
-
-
9.0
-
9.4
Operational risk
7.4
1.0
8.5
1.2
1.0
2.8
-
21.9
Total RWAs
36.3
12.1
76.5
10.6
7.0
30.0
1.4
173.9
 
Notes:
(1)
Risk parameter changes relate to changes in credit quality metrics of customers and counterparties (such as probability of default and loss given default) as well as internal ratings based model changes relating to counterparty credit risk in line with European Banking Authority Pillar 3 Guidelines.
(2)
(a) The new securitisation framework has been fully implemented from 1 January 2020 and all positions have moved to the new framework.
(b) Methodology changes also reflect the CRR Covid-19 amendment which allowed an acceleration of the planned changes to the SME supporting factor and the introduction of an Infrastructure supporting factor.
(3)
Other movements include:
(a) The temporary reduction permitted by the PRA to offset the impact of multiplier increases (included in business movement). The offset covers all metrics affected by the multiplier increase, including CVAs.
(b) Hedging activity on counterparty credit risk in NatWest Markets.
(c) A transfer of Insurance related assets from NatWest Markets to Commercial Banking.
 
 
Key point
●
Total RWAs decreased by £5.3 billion during the period, mainly reflecting reductions in Market Risk RWAs of £3.6 billion and Counterparty Credit Risk RWAs of £2.4 billion. Operational Risk RWAs reduced by £0.7 billion following the annual recalculation in Q1 2020.  The reduction in Market Risk RWAs was due to movements in Risks-not-in-VaR (RNIV) and Incremental Risk Charge (IRC) as well as a reduction in non-modelled market risk. The reduction in Counterparty Credit Risk RWAs was driven by hedging activity and trade novations. There were increases in Credit Risk RWAs of £1.4 billion mainly attributed to increases due to foreign exchange movements of £1.6 billion and model changes of £0.9 billion, which were partially offset by the beneficial CRR changes to supporting factors which have reduced RWAs by c.£1.8 billion. The £0.3 billion increase in Credit Risk RWAs due to risk parameters mainly reflected PD deteriorations for customers in Commercial, partly offset by improved risk metrics for Retail Banking products.
 
 
 
 
Capital and risk management
Capital, liquidity and funding risk continued
Credit risk exposure at default (EAD) and Risk-weighted assets (RWAs)
The table below analyses credit risk RWAs and EADs during the period, by on and off balance sheet.
 
 
 
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
 
 
Banking
Bank RoI
Banking
Banking
International
Markets
& other
Total
30 September 2020
£bn
£bn
£bn
£bn
£bn
£bn
£bn
£bn
EAD
On balance sheet
239.9
28.0
149.8
22.2
32.2
38.2
0.9
511.2
Off balance sheet
28.1
2.3
30.4
0.3
4.8
6.2
0.1
72.2
Total
268.0
30.3
180.2
22.5
37.0
44.4
1.0
583.4
 
 
 
 
 
 
 
 
 
 
RWAs
On balance sheet
26.1
9.9
53.7
9.1
4.7
6.2
1.4
111.1
Off balance sheet
2.6
1.1
13.9
0.2
1.3
2.2
-
21.3
Total
28.7
11.0
67.6
9.3
6.0
8.4
1.4
132.4
30 June 2020
 
 
 
 
 
 
 
 
EAD
On balance sheet
235.6
28.3
152.6
21.4
31.1
40.7
0.7
510.4
Off balance sheet
27.2
2.2
29.9
0.3
4.8
6.2
0.4
71.0
Total
262.8
30.5
182.5
21.7
35.9
46.9
1.1
581.4
 
 
 
 
 
 
 
 
 
 
RWAs
On balance sheet
26.4
10.6
56.3
8.9
4.5
7.0
1.3
115.0
Off balance sheet
2.7
1.1
13.2
0.2
1.3
2.1
0.1
20.7
Total
29.1
11.7
69.5
9.1
5.8
9.1
1.4
135.7
31 December 2019
 
 
 
 
 
 
 
 
EAD
On balance sheet
221.8
26.0
131.4
20.3
31.7
35.4
0.7
467.3
Off balance sheet
30.2
2.2
27.2
0.3
3.3
7.5
0.4
71.1
Total
252.0
28.2
158.6
20.6
35.0
42.9
1.1
538.4
 
 
 
 
 
 
 
 
 
 
RWAs
On balance sheet
27.1
10.8
50.8
8.7
4.7
6.4
1.3
109.8
Off balance sheet
3.1
1.1
12.5
0.2
1.0
3.2
0.1
21.2
Total
30.2
11.9
63.3
8.9
5.7
9.6
1.4
131.0
 
Liquidity portfolio
The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory liquidity coverage ratio (LCR) categorisation. Secondary liquidity comprises assets eligible for discount at central banks, which do not form part of the liquid asset portfolio for LCR or internal stressed outflow purposes.
 
 
Liquidity value
 
30 September 2020
 
30 June 2020
 
31 December 2019
 
NatWest
 
NatWest
 
NatWest
 
Group (1)
 
Group (1)
 
Group (1)
 
£m
 
£m
 
£m
Cash and balances at central banks
103,198
 
97,201
 
74,289
  AAA to AA- rated governments
49,143
 
56,234
 
46,622
  A+ and lower rated governments
492
 
1,040
 
1,277
  Government guaranteed issuers, public sector entities and
 
 
 
 
 
        government sponsored entities
282
 
261
 
251
   International organisations and multilateral development
 
 
 
 
 
        banks
2,781
 
2,799
 
2,393
LCR level 1 bonds
52,698
 
60,334
 
50,543
LCR level 1 assets
155,896
 
157,535
 
124,832
LCR level 2 assets
126
 
127
 
-
Non-LCR eligible assets
-
 
-
 
88
Primary liquidity
156,022
 
157,662
 
124,920
Secondary liquidity (2)
87,392
 
84,910
 
74,431
Total liquidity value
243,414
 
242,572
 
199,351
 
Notes:
(1)
NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, RBS plc, Coutts & Co and Ulster Bank Limited), NatWest Markets Plc and other significant operating subsidiaries that hold liquidity portfolios. These include The Royal Bank of Scotland International Limited, NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios that comply with local regulations that may differ from PRA rules.
(2)
Comprises assets eligible for discounting at the Bank of England and other central banks.
(3)
Liquidity portfolio table approach has been aligned to the ILAAP methodology with effect from December 2019.
 
 
 
 
 
 
Capital and risk management
Credit risk
Portfolio summary - segment analysis
The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.
 
Retail
Ulster
Commercial
Private
RBS
NatWest
Central items
 
 
Banking
Bank RoI
Banking
Banking
International
Markets
& other (2)
Total
30 September 2020
£m
£m
£m
£m
£m
£m
£m
£m
Loans - amortised cost and FVOCI (1)
 
 
 
 
 
 
 
 
Stage 1
133,208
13,916
57,513
14,637
12,219
9,288
27,454
268,235
Stage 2
33,289
4,222
52,291
1,911
1,834
1,869
111
95,527
Stage 3
2,036
1,333
2,750
290
203
195
 -  
6,807
Of which: individual
 -  
30
1,669
290
203
190
 -  
2,382
Of which: collective
2,036
1,303
1,081
 -  
 -  
5
 -  
4,425
 
168,533
19,471
112,554
16,838
14,256
11,352
27,565
370,569
ECL provisions
 
 
 
 
 
 
 
 
Stage 1
153
39
280
30
14
20
11
547
Stage 2
904
268
1,722
55
53
41
18
3,061
Stage 3
921
509
1,125
28
43
139
 -  
2,765
Of which: individual
 -  
11
630
28
43
135
 -  
847
Of which: collective
921
498
495
 -  
 -  
4
 -  
1,918
 
1,978
816
3,127
113
110
200
29
6,373
ECL provisions coverage
 
 
 
 
 
 
 
 
Stage 1 (%)
0.11
0.28
0.49
0.20
0.11
0.22
0.04
0.20
Stage 2 (%)
2.72
6.35
3.29
2.88
2.89
2.19
16.22
3.20
Stage 3 (%)
45.24
38.18
40.91
9.66
21.18
71.28
 -  
40.62
 
1.17
4.19
2.78
0.67
0.77
1.76
0.11
1.72
30 June 2020
 
 
 
 
 
 
 
 
Loans - amortised cost and FVOCI
 
 
 
 
 
 
 
 
Stage 1
136,065
18,642
53,514
14,465
12,697
10,197
20,864
266,444
Stage 2
28,270
4,478
58,374
1,567
1,825
2,381
115
97,010
Stage 3
2,052
1,547
2,806
256
195
178
-
7,034
Of which: individual
-
22
1,727
256
195
172
-
2,372
Of which: collective
2,052
1,525
1,079
-
-
6
-
4,662
 
166,387
24,667
114,694
16,288
14,717
12,756
20,979
370,488
ECL provisions
 
 
 
 
 
 
 
 
Stage 1
155
42
217
21
9
18
7
469
Stage 2
901
262
1,714
49
25
53
21
3,025
Stage 3
902
567
1,184
29
42
136
-
2,860
Of which: individual
-
4
701
29
42
129
-
905
Of which: collective
902
563
483
-
-
7
-
1,955
 
1,958
871
3,115
99
76
207
28
6,354
ECL provisions coverage
 
 
 
 
 
 
 
 
Stage 1 (%)
0.11
0.23
0.41
0.15
0.07
0.18
0.03
0.18
Stage 2 (%)
3.19
5.85
2.94
3.13
1.37
2.23
18.26
3.12
Stage 3 (%)
43.96
36.65
42.20
11.33
21.54
76.40
-
40.66
 
1.18
3.53
2.72
0.61
0.52
1.62
0.13
1.72
31 December 2019
 
 
 
 
 
 
 
 
Loans - amortised cost and FVOCI
 
 
 
 
 
 
 
 
Stage 1
144,513
18,544
88,100
14,956
14,834
9,273
15,282
305,502
Stage 2
13,558
1,642
11,353
587
545
180
3
27,868
Stage 3
1,902
2,037
2,162
207
121
169
-
6,598
Of which: individual
-
68
1,497
207
121
158
-
2,051
Of which: collective
1,902
1,969
665
-
-
11
-
4,547
 
159,973
22,223
101,615
15,750
15,500
9,622
15,285
339,968
ECL provisions
 
 
 
 
 
 
 
 
Stage 1
114
29
152
7
4
10
6
322
Stage 2
467
53
214
7
6
5
-
752
Stage 3
823
693
1,021
29
21
131
-
2,718
Of which: individual
-
22
602
29
21
122
-
796
Of which: collective
823
671
419
-
-
9
-
1,922
 
1,404
775
1,387
43
31
146
6
3,792
ECL provisions coverage
 
 
 
 
 
 
 
 
Stage 1 (%)
0.08
0.16
0.17
0.05
0.03
0.11
0.04
0.11
Stage 2 (%)
3.44
3.23
1.88
1.19
1.10
2.78
-
2.70
Stage 3 (%)
43.27
34.02
47.22
14.01
17.36
77.51
-
41.19
 
0.88
3.49
1.36
0.27
0.20
1.52
0.04
1.12
 
Notes:
(1)   Fair value through other comprehensive income.
(2)   During Q3 2020, £5.1 billion of loans and advances to banks were reclassified from Ulster Bank RoI to Central items & other.
 
 
 
 
Capital and risk management
Credit risk continued
Portfolio summary - segment analysis
Key points
●     The rise in total ECL in the period was mainly due to increased ECL on Stage 1 and Stage 2 exposures in H1 2020, and reflective of the significantly deteriorated economic environment arising from Covid-19. Overall, Stage 3 ECL has been broadly stable year-to-date, with the various government support schemes mitigating actual portfolio deterioration in the short-term and therefore delaying default emergence.
●     The significant uplift in loan balances in Stage 2 was driven by deterioration in forward-looking customer probability of default (PD), also reflecting the deteriorated economic outlook, and resulted in a significant migration of exposures from Stage 1 to Stage 2 as at 30 June 2020.
 
●     Total ECL remained broadly stable during Q3 2020, largely reflective of maintaining the underlying economics unchanged from Q2 2020. The movement in Stage 2 balances was also less volatile in Q3 2020 (refer to the following page for further details).
 
●    The economic scenarios driving the ECL requirement, as well as the model performance considerations, are consistent with those described in the NatWest Group Interim Results 2020 along with further detail on various aspects of the IFRS 9 process.
 
 
 
 
Capital and risk management
Credit risk continued
Segmental loans
The table below shows gross loans by days past due, by segment and stage, within the scope of the ECL framework.
 
Gross loans
 
 
Stage 2
 
 
 
 
Not past
1-29
>30
 
 
 
 
Stage 1
due
DPD
DPD
Total
Stage 3
Total
30 September 2020
£m
£m
£m
£m
£m
£m
£m
Retail Banking
133,208
31,774
1,015
500
33,289
2,036
168,533
Ulster Bank RoI
13,916
3,824
157
241
4,222
1,333
19,471
Personal
10,793
1,897
123
150
2,170
1,170
14,133
Wholesale
3,123
1,927
34
91
2,052
163
5,338
Commercial Banking
57,513
50,885
623
783
52,291
2,750
112,554
Private Banking
14,637
1,868
22
21
1,911
290
16,838
Personal
12,311
164
20
19
203
252
12,766
Wholesale
2,326
1,704
2
2
1,708
38
4,072
RBS International
12,219
1,805
17
12
1,834
203
14,256
Personal
2,725
20
14
7
41
76
2,842
Wholesale
9,494
1,785
3
5
1,793
127
11,414
NatWest Markets
9,288
1,771
98
 -  
1,869
195
11,352
Central items & other
27,454
111
 -  
 -  
111
 -  
27,565
Total loans
268,235
92,038
1,932
1,557
95,527
6,807
370,569
Of which:
 
 
 
 
 
 
 
Personal
159,037
33,855
1,172
676
35,703
3,534
198,274
Wholesale
109,198
58,183
760
881
59,824
3,273
172,295
30 June 2020
 
Retail Banking
136,065
26,597
1,017
656
28,270
2,052
166,387
Ulster Bank RoI
18,642
4,122
150
206
4,478
1,547
24,667
Personal
10,602
2,015
131
133
2,279
1,384
14,265
Wholesale
8,040
2,107
19
73
2,199
163
10,402
Commercial Banking
53,514
55,593
1,934
847
58,374
2,806
114,694
Private Banking
14,465
1,545
14
8
1,567
256
16,288
Personal
11,972
168
12
7
187
243
12,402
Wholesale
2,493
1,377
2
1
1,380
13
3,886
RBS International
12,697
1,792
15
18
1,825
195
14,717
Personal
2,793
18
13
11
42
68
2,903
Wholesale
9,904
1,774
2
7
1,783
127
11,814
NatWest Markets
10,197
2,363
-
18
2,381
178
12,756
Central items & other
20,864
115
-
-
115
-
20,979
Total loans
266,444
92,127
3,130
1,753
97,010
7,034
370,488
Of which:
 
 
 
 
 
 
 
Personal
161,432
28,798
1,173
807
30,778
3,747
195,957
Wholesale
105,012
63,329
1,957
946
66,232
3,287
174,531
31 December 2019
 
Retail Banking
144,513
11,921
1,034
603
13,558
1,902
159,973
Ulster Bank RoI
18,544
1,405
104
133
1,642
2,037
22,223
Personal
10,858
944
96
105
1,145
1,877
13,880
Wholesale
7,686
461
8
28
497
160
8,343
Commercial Banking
88,100
10,837
254
262
11,353
2,162
101,615
Private Banking
14,956
478
63
46
587
207
15,750
Personal
11,630
180
60
41
281
192
12,103
Wholesale
3,326
298
3
5
306
15
3,647
RBS International
14,834
520
18
7
545
121
15,500
Personal
2,799
27
17
6
50
65
2,914
Wholesale
12,035
493
1
1
495
56
12,586
NatWest Markets
9,273
176
4
-
180
169
9,622
Central items & other
15,282
3
-
-
3
-
15,285
Total loans
305,502
25,340
1,477
1,051
27,868
6,598
339,968
Of which:
 
 
 
 
 
 
 
Personal
169,800
13,072
1,207
755
15,034
4,036
188,870
Wholesale
135,702
12,268
270
296
12,834
2,562
151,098
 
 
 
Capital and risk management
Credit risk continued
Segmental loans
Key points
 
●      Retail Banking: Balance sheet growth since 2019 year-end was driven by mortgages, with strong growth pre-Covid-19 in Q1 2020 that moderated significantly in Q2 2020, before picking up in Q3 2020 as lockdown measures eased. Unsecured lending balances reduced in Q2 2020 as customer spend and demand for borrowing reduced as a result of lockdown and customers made repayments. During Q3 2020, overall unsecured balances flattened, with a slight growth in credit cards offsetting further reductions in other unsecured lending. Loan balances in Stage 2 increased significantly, driven by deterioration in forward-looking customer PDs primarily at the half-year point and reflected the deteriorated economic environment. The movement in Stage 2 balances was less pronounced in Q3 2020. However, there was a further increase driven by the significant increase in credit risk (SICR) policy criteria that meant retail exposures must remain in Stage 2 for at least three months after the customer PD has reduced below the SICR trigger level, meaning flows back to Stage 1 were subdued. The various Covid-19 related customer support schemes (for example, loan repayment holidays and the government job retention scheme) are mitigating actual portfolio deterioration in the short-term, with the days past due, and flows to Stage 3 metrics, yet to be materially affected.
 
 
●      Ulster Bank RoI: Similar to Retail Banking, the increase in both ECL and balances in Stage 2 was mainly due to the deteriorated economic outlook primarily at the half-year point. The reduction in Stage 3 ECL and balances reflected the de-recognition of non-performing exposures following the execution of three tranches of a previously agreed portfolio sale and continued improvements in the portfolio.
 
 
●      Commercial Banking: Balance sheet growth during 2020 mainly occurred in the first half of the year and was primarily due to drawdowns on existing facilities and new lending under government support schemes. In line with the other business segments, Stage 2 balances increased significantly during Q2 2020 when revised economics materially affected the forward-looking IFRS 9 PDs. Consistent with previous periods, PD deterioration remained the largest contributor to Stage 2 migration. Although there has been an increase in past due exposures, the flow to Stage 3 remained stable in Q3 2020, as government interventions and relief mitigate against defaults at this point. Stage 1 loans increased during Q3 2020, mainly reflecting increased government scheme lending.
 
 
 
 
Capital and risk management
Credit risk continued
Sector analysis
The table below shows ECL by stage, for the Personal portfolios and key sectors of the Wholesale portfolios, that continue to be affected by Covid-19.
 
 
Off-balance sheet
 
 
 
Loans - amortised cost & FVOCI
Loan
 
Contingent
 
ECL provisions
 
Stage 1
Stage 2
Stage 3
Total
commitments (1)
 
liabilities
 
Stage 1
Stage 2
Stage 3
Total
30 September 2020
£m
£m
£m
£m
£m
 
£m
 
£m
£m
£m
£m
Personal
159,037
35,703
3,534
198,274
40,706
 
46
 
177
1,011
1,358
2,546
  Mortgages
150,944
30,896
2,671
184,511
12,489
 
3
 
32
286
651
969
  Credit cards
2,526
1,323
107
3,956
15,474
 
-
 
50
245
85
380
  Other personal
5,567
3,484
756
9,807
12,743
 
43
 
95
480
622
1,197
Wholesale
109,198
59,824
3,273
172,295
91,240
 
4,746
 
370
2,050
1,407
3,827
  Property
25,489
12,299
1,424
39,212
16,666
 
577
 
144
461
532
1,137
  Financial institutions
39,624
3,434
34
43,092
17,084
 
1,105
 
24
72
8
104
  Sovereign
9,670
104
5
9,779
1,022
 
2
 
15
-
1
16
  Corporate
34,415
43,987
1,810
80,212
56,468
 
3,062
 
187
1,517
866
2,570
    Of which:
 
 
 
 
 
 
 
 
 
 
 
 
        Airlines and aerospace
378
1,833
41
2,252
1,931
 
227
 
3
61
26
90
        Automotive
2,475
4,352
83
6,910
4,217
 
106
 
13
115
19
147
        Education
593
1,067
62
1,722
819
 
16
 
3
37
18
58
        Health
2,286
3,470
155
5,911
689
 
14
 
11
141
56
208
        Land transport and logistics
1,448
3,396
119
4,963
3,697
 
210
 
10
98
39
147
        Leisure
3,242
6,541
526
10,309
2,085
 
124
 
33
350
244
627
        Oil and gas
454
1,279
87
1,820
2,410
 
347
 
5
43
57
105
        Retail
5,052
4,238
117
9,407
6,219
 
504
 
19
147
99
265
Total
268,235
95,527
6,807
370,569
131,946
 
4,792
 
547
3,061
2,765
6,373
30 June 2020
 
 
 
 
 
 
 
 
 
 
 
 
Personal
161,432
30,778
3,747
195,957
41,279
 
48
 
178
1,010
1,404
2,592
  Mortgages
152,947
26,292
2,903
182,142
11,158
 
3
 
34
292
706
1,032
  Credit cards
2,387
1,321
110
3,818
17,481
 
-
 
47
243
86
376
  Other personal
6,098
3,165
734
9,997
12,640
 
45
 
97
475
612
1,184
Wholesale
105,012
66,232
3,287
174,531
89,151
 
5,038
 
291
2,015
1,456
3,762
  Property
26,782
12,400
1,259
40,441
15,423
 
607
 
126
392
513
1,031
  Financial institutions
39,133
3,789
10
42,932
17,500
 
1,130
 
22
69
5
96
  Sovereign
9,436
1
6
9,443
1,129
 
2
 
10
-
-
10
  Corporate
29,661
50,042
2,012
81,715
55,099
 
3,299
 
133
1,554
938
2,625
    Of which:
 
 
 
 
 
 
 
 
 
 
 
 
        Airlines and aerospace
495
1,839
38
2,372
1,829
 
233
 
4
53
26
83
        Automotive
2,000
5,437
146
7,583
3,547
 
93
 
8
108
19
135
        Education
704
919
83
1,706
725
 
19
 
2
27
16
45
        Health
2,055
3,650
168
5,873
515
 
139
 
9
145
60
214
        Land transport and logistics
1,149
3,334
110
4,593
3,919
 
206
 
6
96
43
145
        Leisure
2,755
6,739
534
10,028
1,841
 
126
 
22
303
249
574
        Oil and gas
465
1,535
89
2,089
2,627
 
382
 
4
55
61
120
        Retail
2,647
5,059
221
7,927
5,858
 
507
 
13
158
170
341
Total
266,444
97,010
7,034
370,488
130,430
 
5,086
 
469
3,025
2,860
6,354
31 December 2019
 
 
 
 
 
 
 
 
 
 
 
 
Personal
169,800
15,034
4,036
188,870
43,316
 
50
 
130
503
1,449
2,082
  Mortgages
159,261
11,465
3,277
174,003
14,345
 
3
 
25
118
821
964
  Credit cards
3,103
1,259
116
4,478
16,686
 
-
 
40
132
89
261
  Other personal
7,436
2,310
643
10,389
12,285
 
47
 
65
253
539
857
Wholesale
135,702
12,834
2,562
151,098
79,060
 
5,477
 
192
249
1,269
1,710
  Property
32,896
2,580
895
36,371
14,739
 
644
 
45
47
402
494
  Financial institutions
35,707
546
13
36,266
15,417
 
1,325
 
16
4
8
28
  Sovereign
7,410
4
5
7,419
1,021
 
1
 
7
-
-
7
  Corporate
59,689
9,704
1,649
71,042
47,883
 
3,507
 
124
198
859
1,181
    Of which:
 
 
 
 
 
 
 
 
 
 
 
 
        Airlines and aerospace (2)
1,412
261
40
1,713
1,716
 
271
 
2
3
55
60
        Automotive
5,062
1,143
20
6,225
3,815
 
98
 
12
11
15
38
        Education
1,426
154
12
1,592
654
 
18
 
2
4
1
7
        Health
4,695
844
167
5,706
534
 
17
 
9
16
52
77
        Land transport and logistics
3,477
316
53
3,846
3,301
 
249
 
6
12
21
39
        Leisure
6,323
1,253
377
7,953
2,876
 
135
 
25
27
175
227
        Oil and gas
1,923
140
86
2,149
2,400
 
358
 
5
3
55
63
        Retail
6,397
1,279
215
7,891
5,383
 
560
 
13
16
180
209
Total
305,502
27,868
6,598
339,968
122,376
 
5,527
 
322
752
2,718
3,792
Notes:
(1)    Includes £3.8 billion of commercial cards related balances, as at 30 September 2020 (£4.1 billion as at 30 June 2020), which were brought into scope of ECL calculations during 2020.
(2)    Stage 3 ECL at 31 December 2019 included £27 million of ECL related to contingent liabilities.
 
 
 
Capital and risk management
Credit risk continued
Sector analysis
Key points
 
●      Personal: As noted earlier, both the increased ECL on Stage 1 and Stage 2 exposures, and the migration of assets from Stage 1 to Stage 2, were mainly a result of deterioration in forward-looking customer PDs primarily at the half-year point and reflected the deteriorated economic environment. The ECL requirements were broadly stable during Q3 2020 largely reflective of maintaining the underlying economics unchanged from Q2 2020, and the mitigating effects on portfolio deterioration of Covid-19 related customer support schemes, as previously described. The reduction in mortgage Stage 3 ECL and balances reflected the de-recognition in Ulster Bank RoI of non-performing exposures following the execution of three tranches of a previously agreed portfolio sale and continued improvements in the portfolio.
 
●      Wholesale: On and off-balance sheet growth since the 2019 year-end was mainly due to further drawdowns on existing facilities and new lending (drawn and undrawn) agreed under the Covid-19 government lending schemes. A further £2.9 billion increase in government lending schemes occurred in Q3 (refer to the table on the following page for further information). Construction (within Property), Retail and Leisure represented the top three sectors for borrowers accessing the various government lending schemes. Sector appetite continues to be regularly reviewed and where appropriate has been adjusted for those sectors most affected by the Covid-19 pandemic.
 
 
As described in the NatWest Group Interim Results 2020, NatWest Group adopted a nuanced response to capture the sector ECL impact from the Covid-19 crisis by using sector specific credit cycle indices in its Wholesale methodology. As a result, a more adverse impact is seen in sectors experiencing the most disruption through this period with an increase in both Stage 2 and ECL balances. This impact was seen during Q2 2020 when revised economics were implemented. During Q3 2020, exposures reduced with relatively low ECL charges. Performing book charges reflected model recalibrations taking account of portfolio changes and the moving closer to the predicted worst point in the economic cycle. As government relief schemes reduce, defaults are expected to rise with cases moving from Stage 2 to Stage 3.
 
 
 
 
Capital and risk management
Credit risk continued
Wholesale support schemes
The table below shows the uptake of Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) in Wholesale, by sector.
 
 
BBLS
 
CBILS
 
CLBILS
 
Approved
Drawdown
% of BBLS to
 
Approved
Drawdown
% of CBILS to
 
Approved
Drawdown
% of CLBILS to
30 September 2020
Volume
amount (£m)
sector loans
 
Volume
amount (£m)
sector loans
 
Volume
amount (£m)
sector loans
Wholesale lending by sector
 
 
 
 
 
 
 
 
 
 
 
  Airlines and aerospace
223
6
0.27%
 
19
7
0.31%
 
2
-
-
  Automotive
11,531
385
5.57%
 
538
125
1.81%
 
31
47
0.68%
  Education
1,766
47
2.73%
 
105
54
3.14%
 
10
35
2.03%
  Health
9,035
289
4.89%
 
573
89
1.51%
 
3
24
0.41%
  Land transport and logistics
7,991
235
4.74%
 
341
82
1.65%
 
3
5
0.10%
  Leisure
28,778
902
8.75%
 
1,869
429
4.16%
 
31
94
0.91%
  Oil and gas
271
8
0.44%
 
16
6
0.33%
 
-
-
-
  Retail
29,425
999
10.62%
 
1,493
391
4.16%
 
25
75
0.80%
  Property (3)
53,841
1,514
3.86%
 
2,224
605
1.54%
 
35
112
0.29%
  Other (including Business
 
 
 
 
 
 
 
 
 
 
 
    Banking)
118,645
3,127
3.48%
 
8,100
1,450
1.61%
 
77
180
0.20%
Total
261,506
7,512
4.36%
 
15,278
3,238
1.88%
 
217
572
0.33%
30 June 2020
 
 
 
 
 
Wholesale lending by sector
 
 
 
 
 
 
 
 
 
 
 
  Airlines and aerospace
175
5
0.21%
 
17
4
0.17%
 
-
-
-
  Automotive
9,267
309
4.07%
 
495
111
1.46%
 
26
22
0.29%
  Education
1,347
36
2.11%
 
83
21
1.23%
 
4
30
1.76%
  Health
6,976
222
3.78%
 
543
69
1.17%
 
2
5
0.09%
  Land transport and logistics
6,222
181
3.94%
 
306
66
1.44%
 
2
3
0.07%
  Leisure
22,776
715
7.13%
 
1,697
305
3.04%
 
16
11
0.11%
  Oil and gas
197
6
0.29%
 
13
5
0.24%
 
-
-
-
  Retail
23,824
808
10.19%
 
1,395
328
4.14%
 
13
48
0.61%
  Property (3)
41,233
1,170
2.89%
 
2,018
456
1.13%
 
27
31
0.08%
  Other (including Business
 
 
 
 
 
 
 
 
 
 
 
    Banking)
88,391
2,343
2.55%
 
7,160
1,035
1.13%
 
53
31
0.03%
Total
200,408
5,795
3.32%
 
13,727
2,400
1.38%
 
143
181
0.10%
 
Notes:
(1)    The table contains some cases which as at 30 September 2020 were approved but not yet drawn down.
(2)    Approved limits as at 30 September 2020 were as follows: BBLS - £7.9 billion (95% drawn); CBILS - £3.9 billion (83% drawn); CLBILS - £1.2 billion (50% drawn).
(3)    Construction activities previously reported in Other (including Business Banking) have been reclassified as Property, to be consistent with other sector analysis provided. Comparatives have been restated.
 
Key points
 
●      The value and volume of lending under government support schemes continued to grow during Q3 2020, though at a slower rate than in Q2 2020.
 
 
●      Customers seeking Covid-19 related support, including payment holidays, who were not subject to any wider SICR triggers and who are assessed as being viable and able to meet credit appetite metrics in the medium-term post-crisis, were not considered to have been granted forbearance. Completed forbearance flow for Wholesale remained elevated in Q3 2020, in line with Q2 2020. Property, Transport and Leisure represented the largest share of forbearance flow in Q3 2020, continuing an emerging trend from Q2 2020. The rise in Transport and Property results from forbearance completed on individually significant exposures. Payment holidays and covenant waivers remain the most common forms of forbearance granted. Heightened Monitoring and Risk of Credit Loss values increased in the quarter with a concentration towards borrowers in the Retail, Leisure and Property sectors which represented approximately 50% of the inflows to the framework (refer to page 134 of the NatWest Group plc's Annual Report and Accounts 2019 for further details of the Risk of Credit Loss framework).
 
 
 
 
 
Condensed consolidated income statement for the period ended 30 September 2020 (unaudited)
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
 
£m 
£m 
 
£m 
£m 
£m 
Interest receivable
7,702
8,474
 
2,512
2,507
2,921
Interest payable
(1,924)
(2,464)
 
(586)
(597)
(915)
Net interest income
5,778
6,010
 
1,926
1,910
2,006
Fees and commissions receivable
2,081
2,570
 
651
682
808
Fees and commissions payable
(591)
(673)
 
(199)
(217)
(186)
Income from trading activities
1,054
794
 
252
210
195
Other operating income (1)
(61)
1,319
 
(207)
91
80
Non-interest income
2,483
4,010
 
497
766
897
Total income
8,261
10,020
 
2,423
2,676
2,903
Staff costs
(2,937)
(3,028)
 
(982)
(963)
(1,000)
Premises and equipment
(902)
(823)
 
(251)
(393)
(265)
Other administrative expenses
(1,081)
(2,085)
 
(385)
(298)
(1,222)
Depreciation and amortisation
(635)
(853)
 
(194)
(248)
(232)
Impairment of other intangible assets
(9)
(9)
 
(2)
(7)
21
Operating expenses
(5,564)
(6,798)
 
(1,814)
(1,909)
(2,698)
Profit before impairment losses
2,697
3,222
 
609
767
205
Impairment losses
(3,112)
(536)
 
(254)
(2,056)
(213)
Operating (loss)/profit before tax
(415)
2,686
 
355
(1,289)
(8)
Tax credit/(charge)
1
(395)
 
(207)
396
(201)
(Loss)/profit for the period
(414)
2,291
 
148
(893)
(209)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
(644)
1,723
 
61
(993)
(315)
Preference shareholders
21
30
 
5
8
10
Paid-in equity holders
272
277
 
80
95
95
Non-controlling interests
(63)
261
 
2
(3)
1
 
(414)
2,291
 
148
(893)
(209)
Earnings per ordinary share
(5.3p)
14.3p
 
0.5p
(8.2p)
(2.6p)
Earnings per ordinary share - fully diluted
(5.3p)
14.2p
 
0.5p
(8.2p)
(2.6p)
 
Note:
(1)    Other operating income includes £324 million loss on redemption of own debt.
 
 
 
 
Condensed consolidated statement of comprehensive income for the period ended 30 September 2020 (unaudited)
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
(Loss)/profit for the period
(414)
2,291
 
148
(893)
(209)
Items that do not qualify for reclassification
 
 
 
 
 
 
Remeasurement of retirement benefit schemes
54
(96)
 
(14)
90
(28)
Profit/(loss) on fair value of credit in financial liabilities
 
 
 
 
 
 
  designated as at FVTPL due to own credit risk
20
(115)
 
(63)
(105)
(19)
FVOCI financial assets
(43)
(92)
 
77
133
(130)
Tax
13
24
 
13
-
(2)
 
44
(279)
 
13
118
(179)
Items that do qualify for reclassification
 
 
 
 
 
 
FVOCI financial assets
(37)
(3)
 
74
32
9
Cash flow hedges
364
688
 
(53)
105
286
Currency translation
425
(298)
 
(150)
217
(57)
Tax
(85)
(193)
 
94
(126)
(71)
 
667
194
 
(35)
228
167
Other comprehensive income/(loss) after tax
711
(85)
 
(22)
346
(12)
Total comprehensive income/(loss) for the period
297
2,206
 
126
(547)
(221)
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
51
1,624
 
37
(648)
(326)
Preference shareholders
21
30
 
5
8
10
Paid-in equity holders
272
277
 
80
95
95
Non-controlling interests
(47)
275
 
4
(2)
-
 
297
2,206
 
126
(547)
(221)
 
 
 
 
 
Condensed consolidated balance sheet as at 30 September 2020 (unaudited)
 
30 September
30 June
31 December
2020
2020
2019
 
£m
£m 
£m 
Assets
 
 
 
Cash and balances at central banks
106,388
100,281
77,858
Trading assets
70,820
72,402
76,745
Derivatives
164,311
183,419
150,029
Settlement balances
10,947
7,806
4,387
Loans to banks - amortised cost
11,864
12,972
10,689
Loans to customers - amortised cost
353,691
352,341
326,947
Other financial assets
58,736
62,727
61,452
Intangible assets
6,600
6,602
6,622
Other assets
8,204
8,337
8,310
Total assets
791,561
806,887
723,039
 
 
 
 
Liabilities
 
 
 
Bank deposits
18,666
21,119
20,493
Customer deposits
418,358
408,268
369,247
Settlement balances
9,839
6,895
4,069
Trading liabilities
73,023
75,540
73,949
Derivatives
160,532
179,859
146,879
Other financial liabilities
48,848
49,681
45,220
Subordinated liabilities
10,467
13,558
9,979
Other liabilities
8,678
8,906
9,647
Total liabilities
748,411
763,826
679,483
 
 
 
 
Equity
 
 
 
Ordinary shareholders' interests
38,693
38,608
38,993
Other owners' interests
4,495
4,495
4,554
Owners' equity
43,188
43,103
43,547
Non-controlling interests
(38)
(42)
9
Total equity
43,150
43,061
43,556
Total liabilities and equity
791,561
806,887
723,039
 
 
Condensed consolidated statement of changes in equity for the period ended 30 September 2020 (unaudited)
 
 
Share
 
 
 
 
 
 
capital and
 
 
 
Total
Non
 
 
statutory
Paid-in
Retained
Other
owners'
controlling
Total
 
reserves
equity
earnings
reserves*
equity
 interests
equity
 
£m
£m
£m
£m
£m
£m
£m
At 1 January 2020
13,146
4,058
13,946
12,397
43,547
9
43,556
Loss attributable to ordinary shareholders
 
 
 
 
 
 
 
    and other equity owners 
-
-
(351)
-
(351)
(63)
(414)
Other comprehensive income
 
 
 
 
 
 
 
  - Realised gains in period
 
 
 
 
 
 
 
        on FVOCI equity shares (1)
-
-
114
(114)
-
-
-
  - Remeasurement of retirement
 
 
 
 
 
 
 
        benefit schemes
-
-
54
-
54
-
54
  - Changes in fair value of credit in financial
 
 
 
 
 
 
 
        liabilities at FVTPL
-
-
20
-
20
-
20
  - Other amounts recognised in equity
-
-
-
810
810
16
826
  - Amount transferred from equity to earnings
-
-
-
(133)
(133)
-
(133)
  - Recycled to profit or loss on disposal
 
 
 
 
 
 
-
      of businesses
-
-
-
16
16
-
16
  - Tax
-
-
1
(73)
(72)
-
(72)
Preference share and paid-in equity
 
 
 
 
 
 
 
  dividends paid
-
-
(293)
-
(293)
-
(293)
Unclaimed dividend
-
-
2
-
2
-
2
Shares and securities issued during the year
49
1,220
(11)
-
1,258
-
1,258
Redemption/reclassification
-
(1,277)
(355)
-
(1,632)
-
(1,632)
Share-based payments
-
-
(56)
-
(56)
-
(56)
Movement in own shares held
18
-
-
-
18
-
18
At 30 September 2020
13,213
4,001
13,071
12,903
43,188
(38)
43,150
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30 September
 
 
 
 
 
 
 
2020
Attributable to:
 
 
 
 
£m
Ordinary shareholders
 
 
 
 
 
 
38,693
Preference shareholders
 
 
 
 
 
 
494
Paid-in equity holders
 
 
 
 
 
 
4,001
Non-controlling interests
 
 
 
 
 
 
(38)
 
 
 
 
 
 
 
43,150
*Other reserves consists of:
 
 
 
 
 
 
Merger reserve
 
 
 
 
 
 
10,881
FVOCI reserve
 
 
 
 
 
 
(36)
Cash flow hedging reserve
 
 
 
 
 
 
300
Foreign exchange reserve
 
 
 
 
 
 
1,758
 
 
 
 
 
 
 
12,903
 
Note:
(1)   The gain includes a reclassification from Other comprehensive income to Retained earnings following conversion of Visa B and C preference shares to Visa Class A shares in September 2020. There has been a corresponding adjustment to the conversion ratio of the Visa B and C preference shares.
 
 

Notes
1. Basis of preparation
The condensed consolidated financial statements should be read in conjunction with NatWest Group plc's (formerly The Royal Bank of Scotland Group plc) 2019 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).
 
Going concern
Having reviewed NatWest Group's forecasts, projections, the potential impact of Covid-19, and other relevant evidence, the directors have a reasonable expectation that NatWest Group will continue in operational existence for the foreseeable future. Accordingly, the results for the period ended 30 September 2020 have been prepared on a going concern basis.
 
2. Accounting policies
NatWest Group's principal accounting policies are as set out on pages 208 to 212 of the NatWest Group plc's 2019 Annual Report and Accounts and are unchanged other than as presented below.
 
Accounting policy changes effective 1 January 2020
Amendments to IFRS 3 Business Combinations (IFRS 3) - Changes to the definition of a business
The IASB amended IFRS 3 to provide additional guidance on the definition of a business. The amendment aims to help entities when determining whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendments are in line with current accounting policy and therefore did not affect the financial statements.
 
Definition of material - Amendments to IAS 1 - Presentation of Financial Statements (IAS 1) and IAS 8 -
Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)
The IASB clarified the definition of 'material' and aligned the definition of material used in the Conceptual Framework and in other IFRS standards. The amendments clarify that materiality will depend on the nature or magnitude of information. Under the amended definition of materiality, an entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. NatWest Group's definition and application of materiality is in line with the definition in the amendments.
 
Interest Rate Benchmark Reform (IBOR reform) Phase 1 amendments to IFRS 9 and IAS 39
The IASB issued 'Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)' as a first reaction to the potential effects the IBOR reform could have on financial reporting. The amendments focused on hedge accounting and allow hedge relationships affected by the IBOR reform to be accounted for as continuing hedges. Amendments are effective for annual reporting periods beginning on or after 1 January 2020 with early application permitted. NatWest Group early adopted these amendments for the annual period ending on 31 December 2019.
 
Interest Rate Benchmark Reform (IBOR reform) Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
Phase 2 of the IASB's IBOR project addresses the wider accounting issues arising from the IBOR reform. This was published in August 2020 and is awaiting endorsement. The amendments are effective for annual reporting periods beginning on or after 1 January 2021 with early application permitted. NatWest Group intends to early adopt Phase 2 of the standard once endorsed. NatWest Group's IBOR transition program remains on-track and key milestones have been met. Conversion from LIBOR to alternative risk-free rates (RFRs) is expected to increase as RFR-based products become more widely available and key market-driven conversion events occur.
 
Amendment to IFRS effective 1 June 2020
Covid-19 amendments on lease modifications - Amendments to IFRS 16 - Leases (IFRS 16)
The IASB published 'amendments to IFRS 16 covering Covid-19-Related Rent Concessions'. These provide lessees with an exemption from assessing whether a Covid-19 related rent concession is a lease modification. The amendment is effective for annual reporting periods beginning on or after 1 June 2020. The effect of the amendment on NatWest Group's financial statements is immaterial and will be adopted from 1 January 2021.
 
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of NatWest Group's financial condition are those relating to goodwill, provisions for liabilities and charges, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on page 212 of the NatWest Group plc's 2019 Annual Report and Accounts. Estimation uncertainty has been affected by the Covid-19 pandemic during the first three quarters of 2020. Management's consideration of this source of uncertainty is outlined in the relevant sections of this Interim Management Statement, including the ECL estimate for the period in the Capital and Risk Management section contained in the NatWest Group Interim Results 2020.
 
 
 
 
Notes
2. Accounting policies continued
Information used for significant estimates
The Covid-19 pandemic has continued to cause significant economic and social disruption during the quarter ended 30 September 2020. Key financial estimates are based on a range of anticipated future economic conditions described by internally developed scenarios.  Measurement of goodwill, deferred tax and expected credit losses are highly sensitive to reasonably possible changes in those anticipated conditions. Other reasonably possible assumptions about the future include a prolonged financial effect of the Covid-19 pandemic on the economy of the UK and other countries. Changes in judgements and assumptions could result in a material adjustment to those estimates in the next reporting periods, including impairment of goodwill (refer to the NatWest Group plc risk factors in the 2019 Annual Report and Accounts and the summary risk factors contained in the Q1 2020 IMS and the Interim Results 2020).
 
Goodwill
Goodwill remains recoverable: key assumptions and sensitivities around these assumptions are materially consistent with those disclosed in the NatWest Group Interim Results 2020.
 
Tax credit
The lower than anticipated tax credit by applying the standard UK statutory tax rate of 19%, is attributable to a decrease in the carrying value of deferred tax assets in respect of losses, no recognition of deferred tax in the period in respect of some current year tax losses and the banking surcharge. This is offset to some extent by the UK Government decision to reverse the previously enacted reduction in the UK tax rate change. 
 
 
 
 
3. Litigation, investigations and reviews
NatWest Group's Interim Results 2020, issued on 31 July 2020, included disclosures about NatWest Group's litigation, investigations and reviews in Note 14. Set out below are the material developments in those matters since the Interim Results 2020 were published.
 
Litigation
Residential mortgage-backed securities litigation in the US
In September 2020, NWMSI settled residential mortgage-backed securities (RMBS) claims by the Federal Home Loan Bank of Seattle. The settlement amount, which has been paid, was covered by an existing provision.
 
In September 2020, a complaint was served on NWMSI by the State of New Mexico, which claims, in a case pending in state court in New Mexico, that certain New Mexico state agencies suffered US$119 million in damages resulting from misrepresentations concerning RMBS they purchased from NWMSI and six other banks primarily from 2005-2007. 
 
London Interbank Offered Rate (LIBOR) and other rates litigation
On 18 August 2020, a complaint was filed in the United States District Court for the Northern District of California by several United States consumer borrowers against the USD ICE LIBOR panel banks and their affiliates, alleging that the normal process of setting USD ICE LIBOR amounts to illegal price-fixing, and also that banks in the United States have illegally agreed to use LIBOR as a component of price in variable consumer loans. The NatWest Group defendants are NatWest Group plc, NWM Plc, NWMSI and NWB Plc. The plaintiffs seek damages and to prevent the enforcement of LIBOR-based instruments.
 
EUA trading litigation
Following judgment against NWM Plc in March 2020, the High Court on 2 October 2020 quantified damages against NWM Plc at £45 million plus interest and costs, and permitted it to appeal to the Court of Appeal.
 
Investigations and reviews
US investigations relating to fixed-income securities
In September 2020, the NatWest Markets business reached a settlement in principle, subject to documentation, with the State of Maryland concerning its investigation of the issuance and underwriting of RMBS. The amount of the tentative settlement, which will be paid by RBS Financial Products Inc., is covered by an existing provision.
 
4. Post balance sheet events
Other than as disclosed there have been no other significant events between 30 September 2020 and the date of approval of these accounts which would require a change to or additional disclosure in the condensed consolidated financial statements.
 
 
 
 
 
Additional information
Presentation of information
'Parent company' refers to NatWest Group plc and 'NatWest Group' refers to NatWest Group plc and its subsidiary and associated undertakings. The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and its subsidiary and associated undertakings.  The term 'NWM Group' refers to NatWest Markets Plc ('NWM Plc') and its subsidiary and associated undertakings.  The term 'NWM N.V.' refers to NatWest Markets N.V. The term 'NWMSI' refers to NatWest Markets Securities, Inc. The term 'RBS plc' refers to The Royal Bank of Scotland plc.  The term 'NWB Plc' refers to National Westminster Bank Plc.  The term 'UBI DAC' refers to Ulster Bank Ireland DAC.  The term 'RBSI Limited' refers to The Royal Bank of Scotland International Limited.
 
UK Personal Banking was renamed Retail Banking, with effect from 16 September 2020.
 
NatWest Group publishes its financial statements in pounds sterling ('£' or 'sterling'). The abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds sterling, respectively, and references to 'pence' represent pence in the United Kingdom ('UK'). Reference to 'dollars' or '$' are to United States of America ('US') dollars. The abbreviations '$m' and '$bn' represent millions and thousands of millions of dollars, respectively, and references to 'cents' represent cents in the US. The abbreviation '€' represents the 'euro', and the abbreviations '€m' and '€bn' represent millions and thousands of millions of euros, respectively.
 
Statutory results
Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2019 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.
 
Contacts
Analyst enquiries:
Alexander Holcroft, Investor Relations
+44 (0) 20 7672 1758
Media enquiries:
NatWest Group Press Office
+44 (0) 131 523 4205
 
 
Analyst and investor call
Webcast and dial in details
Date:
30 October 2020
https://investors.natwestgroup.com/results-centre
 
 
Time:
9am UK time
International: +44 (0) 203 057 6566
Conference ID:
4482325
UK Free Call: 0800 279 5995
US Local Dial-In, New York: +1 646 741 2115
 
 
Available on www.natwestgroup.com/results
●        Q3 2020 Interim Management Statement and slides.
●        A financial supplement containing income statement, balance sheet and segment performance for the quarter ended 30 September 2020.
●        NatWest Group and NWH Group Pillar 3 supplements.
 
Forward looking statements
This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as NatWest Group's future economic results, business plans and strategies. In particular, this document may include forward-looking statements relating to NatWest Group plc in respect of, but not limited to: its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital and operational targets), its access to adequate sources of liquidity and funding, increasing competition from new incumbents and disruptive technologies, its exposure to third party risks, its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, the transition of LIBOR and IBOR rates to alternative risk free rates and NatWest Group's exposure to economic and political risks (including with respect to terms surrounding Brexit and climate change), operational risk, conduct risk, cyber and IT risk, key person risk and credit rating risk. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, the final number of PPI claims and their amounts, the level and extent of future impairments and write-downs (including with respect to goodwill), legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations, general economic and political conditions and the uncertainty surrounding the Covid-19 pandemic and its impact on NatWest Group. These and other factors, risks and uncertainties that may impact any forward-looking statement or NatWest Group plc's actual results are discussed in NatWest Group plc's UK 2019 Annual Report and Accounts (ARA), NatWest Group plc's Interim Results for Q1 2020 and NatWest Group plc's Interim Results for H1 2020 and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, NatWest Group plc's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and NatWest Group plc does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.
 
 
Legal Entity Identifier: 2138005O9XJIJN4JPN90
 

 
 
Appendix
 
Non-IFRS financial measures
 

 
 
 
 
Appendix Non-IFRS financial measures
As described in Note 1, NatWest Group prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:
 
Non-IFRS financial measures
Measure
Basis of preparation
Additional analysis or reconciliation
NatWest Group return on tangible equity
Annualised loss or profit for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is average total equity less average intangible assets and average other owners' equity.
Table 1
Segmental return on equity
Annualised segmental operating loss or profit adjusted for tax and for preference share dividends divided by average notional equity, allocated at an operating segment specific rate, of the period average segmental risk-weighted assets incorporating the effect of capital deductions (RWAes).
Table 1
Operating expenses analysis - management view
The management analysis of operating expenses shows strategic costs and litigation
and conduct costs in separate lines. Depreciation and amortisation, impairment of
other intangibles and other administrative expenses attributable to these costs are
included in strategic costs and litigation and conduct costs lines for management
analysis. These amounts are included in staff, premises and equipment and other
administrative expenses in the statutory analysis.
Table 2
Cost:income ratio
Total operating expenses less operating lease depreciation divided by total income less operating lease depreciation.
Table 3
Commentary - adjusted periodically for specific items
NatWest Group and segmental business performance commentary have been adjusted for the impact of specific items such as transfers, strategic costs and, litigation and conduct costs (detailed on pages 10 to 14).
Notable items - page 4
Transfers - pages 5 and 8
Strategic costs and, litigation and conduct costs - pages 10 to 14
Bank net interest margin (NIM)
Net interest income of the banking business less NatWest Markets (NWM) element as a percentage of interest-earning assets of the banking business less NWM element.
Table 4
 
Performance metrics not defined under IFRS(1) 
Measure
Basis of preparation
Additional analysis or reconciliation
Loan:deposit ratio
Net customer loans held at amortised cost divided by total customer deposits.
Table 5
Tangible net asset value (TNAV)
Tangible equity divided by the number of ordinary shares in issue. Tangible equity is ordinary shareholders' interest less intangible assets.
Page 3
NIM
Net interest income of the banking business as a percentage of interest-earning assets of the banking business.
Page 3
Funded assets
Total assets less derivatives.
Pages 10 to 14
ECL loss rate
The annualised loan impairment charge divided by gross customer loans.
Pages 10 to 14
Third party customer asset rate
Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers only. This excludes intragroup items, loans to banks and liquid asset portfolios, which are included for the calculation of net interest margin.
Pages 10 to 14
Third party customer funding rate
Third party customer funding rate is calculated as annualised interest payable on third-party customer deposits as a percentage of third-party customer deposits. This excludes intragroup items, bank deposits and debt securities in issue.
Pages 10 to 14
 
Note:
(1)     Metric based on GAAP measures, included as not defined under IFRS and reported for compliance with ESMA adjusted performance measure rules.
 
 
 
 
Appendix Non-IFRS financial measures
1. Return on tangible equity
 
 
 
Nine months ended or as at
 
Quarter ended or as at
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
(Loss)/profit attributable to ordinary shareholders (£m)
(644)
1,723
 
61
(993)
(315)
Annualised (loss)/profit attributable to ordinary
 
 
 
 
 
 
   shareholders (£m)
(859)
2,297
 
244
(3,972)
(1,260)
Adjustment for PPI provision for Q3 2019 (£m)
 
 
 
 
 
900
Adjusted profit attributable to ordinary shareholders (£m)
 
 
 
 
 
585
Annualised adjusted (loss)/profit attributable to ordinary
 
 
 
 
 
 
   shareholders (£m)
 
 
 
 
 
2,340
 
 
 
 
 
 
 
Average total equity (£m)
43,766
46,025
 
43,145
44,068
45,579
Adjustment for other owners' equity and intangibles (£m)
(11,760)
(12,432)
 
(11,482)
(11,987)
(12,226)
Adjusted total tangible equity (£m)
32,006
33,593
 
31,663
32,081
33,353
 
 
 
 
 
 
 
Return on tangible equity (%)
(2.7%)
6.8%
 
0.8%
(12.4%)
(3.8%)
Return on tangible equity adjusting for impact
 
 
 
 
 
 
   of PPI provision (%)
 
 
 
 
 
7.0%
 
 
 
 
Appendix Non-IFRS financial measures
1. Return on tangible equity continued
 
 
Ulster
 
 
 
 
 
Retail
 Bank
Commercial
Private
RBS
NatWest
Nine months ended 30 September 2020
Banking
RoI
Banking
Banking
International
Markets
Operating profit/(loss) (£m)
758
(244)
(684)
141
112
3
Preference share cost allocation (£m)
(66)
-
(114)
(17)
(15)
(51)
Adjustment for tax (£m)
(194)
-
223
(35)
(14)
13
Adjusted attributable profit/(loss) (£m)
498
(244)
(575)
89
83
(35)
Annualised adjusted attributable profit/(loss) (£m)
664
(325)
(767)
119
111
(47)
Average RWAe (£bn)
37.6
12.6
76.6
10.3
6.9
39.2
Equity factor
14.5%
15.5%
11.5%
12.5%
16.0%
15.0%
RWAe applying equity factor (£bn)
5.5
2.0
8.8
1.3
1.1
5.9
Return on equity
12.2%
(16.6%)
(8.7%)
9.2%
10.0%
(0.8%)
 
 
 
 
 
 
 
Nine months ended 30 September 2019
 
 
 
 
 
 
Operating profit (£m)
529
54
1,032
236
282
107
Adjustment for tax (£m)
(148)
-
(289)
(66)
(39)
(30)
Preference share cost allocation (£m)
(54)
-
(123)
(12)
(5)
(50)
Adjusted attributable profit(£m)
327
54
620
158
238
27
Annualised adjusted attributable profit (£m)
436
72
827
211
317
36
Adjustment for Alawwal bank merger gain (£m)
-
-
-
-
-
(200)
Annualised adjusted attributable profit/(loss) (£m)
436
72
827
211
317
(164)
Average RWAe (£bn)
37.4
14.2
79.3
9.7
6.9
49.0
Equity factor
15.0%
15.0%
12.0%
13.0%
16.0%
15.0%
RWAe applying equity factor (£bn)
5.6
2.1
9.5
1.3
1.1
7.4
Return on equity
7.8%
3.4%
8.7%
16.7%
28.5%
(2.2%)
 
 
 
 
 
 
 
Quarter ended 30 September 2020
 
 
 
 
 
 
Operating profit/(loss) (£m)
305
(5)
324
57
25
(66)
Preference share cost allocation (£m)
(22)
-
(38)
(6)
(5)
(17)
Adjustment for tax (£m)
(79)
-
(80)
(14)
(3)
23
Adjusted attributable profit/(loss) (£m)
204
(5)
206
37
17
(60)
Annualised adjusted attributable profit/(loss) (£m)
816
(20)
824
148
68
(240)
Average RWAe (£bn)
36.7
12.3
77.8
10.5
6.8
34.0
Equity factor
14.5%
15.5%
11.5%
12.5%
16.0%
15.0%
RWAe applying equity factor (£bn)
5.3
1.9
8.9
1.3
1.1
5.1
Return on equity
15.3%
(1.0%)
9.2%
11.2%
6.4%
(4.7%)
 
 
 
 
 
 
 
Quarter ended 30 June 2020
 
 
 
 
 
 
Operating profit/(loss) (£m)
129
(218)
(971)
35
19
(137)
Preference share cost allocation (£m)
(22)
-
(38)
(5)
(5)
(17)
Adjustment for tax (£m)
(30)
-
283
(8)
(2)
43
Adjusted attributable profit/(loss)(£m)
77
(218)
(726)
22
12
(111)
Annualised adjusted attributable profit/(loss) (£m)
308
(872)
(2,904)
88
48
(444)
Average RWAe (£bn)
37.4
12.6
77.8
10.3
7.1
41.8
Equity factor
14.5%
15.5%
11.5%
12.5%
16.0%
15.0%
RWAe applying equity factor (£bn)
5.4
2.0
8.9
1.3
1.1
6.3
Return on equity
5.7%
(44.5%)
(32.5%)
6.6%
4.3%
(7.1%)
 
 
 
 
 
 
 
Quarter ended 30 September 2019
 
 
 
 
 
 
Operating (loss)/profit (£m)
(508)
31
331
81
88
(193)
Adjustment for tax (£m)
142
-
(92)
(23)
(12)
54
Preference share cost allocation (£m)
(18)
-
(41)
(4)
(5)
(20)
Adjusted attributable (loss)/profit (£m)
(384)
31
198
54
71
(159)
Annualised adjusted attributable (loss)/profit (£m)
(1,536)
124
792
216
283
(634)
Average RWAe (£bn)
38.2
14.2
78.8
9.9
6.8
48.7
Equity factor
15.0%
15.0%
12.0%
13.0%
16.0%
15.0%
RWAe applying equity factor (£bn)
5.7
2.1
9.5
1.3
1.1
7.3
Return on equity
(26.8%)
5.8%
8.4%
16.8%
26.0%
(8.7%)
 
 
 
 
 
 
 
 
 
 
Appendix Non-IFRS financial measures
2. Operating expenses analysis
Statutory analysis (1,2)
 
 
 
 
 
 
 
Nine months ended
 
Quarter ended
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
Operating expenses
£m 
£m 
 
£m 
£m 
£m 
Staff costs
2,937
3,028
 
982
963
1,000
Premises and equipment
902
823
 
251
393
265
Other administrative expenses
1,081
2,085
 
385
298
1,222
Depreciation and amortisation
635
853
 
194
248
232
Impairment of other intangible assets
9
9
 
2
7
(21)
Total operating expenses
5,564
6,798
 
1,814
1,909
2,698
 
Non-statutory analysis
 
 
 
 
 
 
 
 
 
 
Nine months ended
 
30 September 2020
 
30 September 2019
 
 
Litigation
 
 
 
 
Litigation
 
 
 
 
and
 
Statutory
 
 
and
 
Statutory
 
Strategic
conduct
Other
operating
 
Strategic
conduct
Other
operating
Operating expenses
costs
costs
expenses
expenses
 
costs
costs
expenses
expenses
Staff costs
315
-
2,622
2,937
 
296
-
2,732
3,028
Premises and equipment
170
-
732
902
 
93
-
730
823
Other administrative expenses
143
(81)
1,019
1,081
 
197
810
1,078
2,085
Depreciation and amortisation
52
-
583
635
 
233
-
620
853
Impairment of other intangible assets
7
-
2
9
 
25
-
(16)
9
Total
687
(81)
4,958
5,564
 
844
810
5,144
6,798
 
 
 
 
 
 
 
 
 
 
 
Quarter ended
 
30 September 2020
 
30 June 2020
 
 
Litigation
 
 
 
 
Litigation
 
 
 
 
and
 
Statutory
 
 
and
 
Statutory
 
Strategic
conduct
Other
operating
 
Strategic
conduct
Other
operating
Operating expenses
costs
costs
expenses
expenses
 
costs
costs
expenses
expenses
Staff costs
155
-
827
982
 
87
-
876
963
Premises and equipment
22
-
229
251
 
135
-
258
393
Other administrative expenses
43
8
334
385
 
57
(85)
326
298
Depreciation and amortisation
3
-
191
194
 
47
-
201
248
Impairment of other intangible assets
-
-
2
2
 
7
-
-
7
Total
223
8
1,583
1,814
 
333
(85)
1,661
1,909
 
 
 
 
 
 
 
 
 
 
 
Quarter ended
 
 
 
 
 
 
30 September 2019
 
 
 
 
Litigation
 
 
 
 
 
 
 
 
 
and
 
Statutory
 
 
 
 
 
 
Strategic
conduct
Other
operating
 
 
 
 
 
Operating expenses
costs
costs
expenses
expenses
 
 
 
 
 
Staff costs
109
-
891
1,000
 
 
 
 
 
Premises and equipment
28
-
237
265
 
 
 
 
 
Other administrative expenses
67
750
405
1,222
 
 
 
 
 
Depreciation and amortisation
11
-
221
232
 
 
 
 
 
Impairment of other intangible assets
-
-
(21)
(21)
 
 
 
 
 
Total
215
750
1,733
2,698
 
 
 
 
 
 
Notes:
(1)    On a statutory, or GAAP basis, strategic costs are included within staff costs, premises and equipment, depreciation and amortisation, impairment of other intangible assets and other administrative expenses. Strategic costs relate to restructuring provisions, related costs and projects that are transformational in nature.
(2)    On a statutory, or GAAP basis, litigation and conduct costs are included within other administrative expenses.
 
 
 
Appendix Non-IFRS performance measures
3. Cost:income ratio
 
 
Ulster
 
 
 
 
Central
Total
 
Retail
 Bank
Commercial
Private
RBS
NatWest
items
NatWest
 
Banking
RoI
Banking
Banking
International
Markets
& other
Group
Nine months ended
£m
£m
£m
£m
£m
£m
£m
£m
30 September 2020
 
 
 
 
 
 
 
 
Operating expenses
(1,722)
(372)
(1,774)
(364)
(179)
(1,009)
(144)
(5,564)
Operating lease depreciation
-
-
110
-
-
-
-
110
Adjusted operating expenses
(1,722)
(372)
(1,664)
(364)
(179)
(1,009)
(144)
(5,454)
Total income
3,207
379
3,007
579
371
1,050
(332)
8,261
Operating lease depreciation
-
-
(110)
-
-
-
-
(110)
Adjusted total income
3,207
379
2,897
579
371
1,050
(332)
8,151
Cost:income ratio
53.7%
98.2%
57.4%
62.9%
48.2%
96.1%
nm
66.9%
 
 
 
 
 
 
 
 
 
30 September 2019
 
 
 
 
 
 
 
 
Operating expenses
(2,830)
(412)
(1,900)
(351)
(181)
(1,026)
(98)
(6,798)
Operating lease depreciation
-
-
103
-
-
-
-
103
Adjusted operating expenses
(2,830)
(412)
(1,797)
(351)
(181)
(1,026)
(98)
(6,695)
Total income
3,671
428
3,242
582
460
1,092
545
10,020
Operating lease depreciation
-
-
(103)
-
-
-
-
(103)
Adjusted total income
3,671
428
3,139
582
460
1,092
545
9,917
Cost:income ratio
77.1%
96.3%
57.2%
60.3%
39.3%
94.0%
nm
67.5%
 
 
 
 
 
 
 
 
 
Quarter ended
 
 
 
 
 
 
 
 
30 September 2020
 
 
 
 
 
 
 
 
Operating expenses
(647)
(127)
(553)
(112)
(53)
(302)
(20)
(1,814)
Operating lease depreciation
-
-
37
-
-
-
-
37
Adjusted operating expenses
(647)
(127)
(516)
(112)
(53)
(302)
(20)
(1,777)
Total income
1,022
130
1,004
187
112
234
(266)
2,423
Operating lease depreciation
-
-
(37)
-
-
-
-
(37)
Adjusted total income
1,022
130
967
187
112
234
(266)
2,386
Cost:income ratio
63.3%
97.7%
53.4%
59.9%
47.3%
129.1%
nm
74.5%
 
 
 
 
 
 
 
 
 
30 June 2020
 
 
 
 
 
 
 
 
Operating expenses
(546)
(122)
(611)
(129)
(65)
(365)
(71)
(1,909)
Operating lease depreciation
-
-
37
-
-
-
-
37
Adjusted operating expenses
(546)
(122)
(574)
(129)
(65)
(365)
(71)
(1,872)
Total income
1,035
120
995
191
115
273
(53)
2,676
Operating lease depreciation
-
-
(37)
-
-
-
-
(37)
Adjusted total income
1,035
120
958
191
115
273
(53)
2,639
Cost:income ratio
52.8%
101.7%
59.9%
67.5%
56.5%
133.7%
nm
70.9%
 
 
 
 
 
 
 
 
 
30 September 2019
 
 
 
 
 
 
 
 
Operating expenses
(1,601)
(131)
(638)
(119)
(62)
(348)
201
(2,698)
Operating lease depreciation
-
-
35
-
-
-
-
35
Adjusted operating expenses
(1,601)
(131)
(603)
(119)
(62)
(348)
201
(2,663)
Total income
1,224
145
1,077
198
150
150
(41)
2,903
Operating lease depreciation
-
-
(35)
-
-
-
-
(35)
Adjusted total income
1,224
145
1,042
198
150
150
(41)
2,868
Cost:income ratio
130.8%
90.3%
57.9%
60.1%
41.3%
232.0%
nm
92.9%
 
 
 
 
Appendix Non-IFRS performance measures
4. Net interest margin
 
Nine months ended or as at
 
Quarter ended or as at
 
30 September
30 September
 
30 September
30 June
30 September
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
NatWest Group net interest income
5,778
6,010
 
1,926
1,910
2,006
NWM net interest income
55
184
 
21
(6)
62
Net interest income excluding NWM
5,833
6,194
 
1,947
1,904
2,068
Annualised net interest income
7,718
8,035
 
7,662
7,682
7,959
Annualised net interest income excluding NWM
7,792
8,281
 
7,746
7,658
8,205
Average interest earning assets (IEA)
487,777
445,068
 
507,325
497,440
454,429
NWM average IEA
38,403
35,065
 
39,213
39,874
38,616
Bank average IEA excluding NWM
449,374
410,003
 
468,112
457,566
415,813
 
 
 
 
 
 
 
Net interest margin
1.58%
1.81%
 
1.51%
1.54%
1.75%
Bank net interest margin (NatWest Group NIM excluding NWM)
1.73%
2.02%
 
1.65%
1.67%
1.97%
 
5. Loan:deposit ratio
 
As at
 
30 September
30 June
31 December
 
2020
2020
2019
 
£m
£m
£m
Loans to customers - amortised cost
353,691
352,341
326,947
Customer deposits
418,358
408,268
369,247
Loan:deposit ratio (%)
85%
86%
89%
 
 
 
 
 
 
 
 
 
 
 
Date: 30 October 2020
 
 
 
NATWEST GROUP plc (Registrant)
 
 
 
By: /s/ Jan Cargill
 
 
 
Name: Jan Cargill
 
Title: Deputy Secretary
 
 
 
 
 
 
 
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