Report
of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
30 October 2020
Commission file number: 001-10306
Form 6-K
NatWest Group plc
Gogarburn
PO Box 1000
Edinburgh EH12 1HQ
Scotland
United Kingdom
(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-
This report on Form 6-K, except for any information
contained on any websites linked or documents referred to in this report, shall
be deemed incorporated by reference into the company’s Registration Statement
on Form F-3 (File No. 333-222022) and to be a part thereof from the date on
which this report is filed, to the extent not superseded by documents or
reports subsequently filed or furnished.
Forward-looking
statements
Cautionary statement regarding forward-looking
statements
Certain sections in this document contain ‘forward-looking
statements’ as that term is defined in the United States Private Securities
Litigation Reform Act of 1995, such as statements that include 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.
In particular, this document includes forward-looking
statements relating, but not limited to: the Covid-19 pandemic and its impact
on NatWest Group; future profitability and performance, including financial
performance targets such as return on tangible equity; cost savings and
targets; implementation of NatWest Group’s strategy; litigation and government
and regulatory investigations, including the timing and financial and other
impacts thereof; the implementation of the Alternative Remedies Package; the
continuation of NatWest Group’s balance sheet reduction programme, including
the reduction of risk-weighted assets (RWAs) and the timing thereof; capital
and strategic plans and targets; capital, liquidity and leverage ratios and
requirements, including CET1 Ratio, RWA equivalents (RWAe), Pillar 2 and other
regulatory buffer requirements, minimum requirement for own funds and eligible
liabilities, and other funding plans; funding and credit risk profile;
capitalisation; portfolios; net interest margin; customer loan and income
growth; the level and extent of future impairments and write-downs, including
with respect to goodwill; restructuring and remediation costs and charges;
NatWest Group’s exposure to political risk, economic risk, climate change risk,
operational risk, conduct risk, cyber and IT risk and credit rating risk and to
various types of market risks, including interest rate risk, foreign exchange
rate risk and commodity and equity price risk; customer experience including
our Net Promotor Score (NPS); employee engagement and gender balance in
leadership positions.
Limitations inherent to forward-looking
statements
These statements are based on current plans, estimates,
targets and projections, and are subject to significant inherent risks,
uncertainties and other factors, both external and relating to NatWest Group’s
strategy or operations, which may result in NatWest Group being unable to
achieve the current targets, predictions, expectations and other anticipated
outcomes expressed or implied by such forward-looking statements. In addition,
certain of these disclosures are dependent on choices relying on key model
characteristics and assumptions and are subject to various limitations,
including assumptions and estimates made by management. By their nature,
certain of these disclosures are only estimates and, as a result, actual future
gains and losses could differ materially from those that have been estimated.
Accordingly, undue reliance should not be placed on these statements.
Forward-looking statements speak only as of the date we make them and we
expressly disclaim any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in NatWest Group’s expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
Important factors that could affect the actual
outcome of the forward-looking statements
We caution you that a large number of important factors could
adversely affect our results or our ability to implement our strategy, cause us
to fail to meet our targets, predictions, expectations and other anticipated
outcomes or affect the accuracy of forward-looking statements we describe in
this document, including in the risk factors and other uncertainties set out in
NatWest Group plc’s 2019 Annual Report and Accounts on Form 20-F and other
materials filed with, or furnished to, the US Securities and Exchange
Commission, and other risk factors and uncertainties discussed in this
document. These include the significant risks for NatWest Group presented by:
economic and political risk (including in respect of: the uncertainty surrounding
the Covid-19 pandemic and the impact of the Covid-19 pandemic on NatWest Group;
prevailing uncertainty regarding the terms of the UK’s withdrawal from the
European Union; increased political and economic risks and uncertainty in the
UK and global markets; climate change and the transition to a low carbon
economy; HM Treasury’s ownership of NatWest Group plc and the possibility that
it may exert a significant degree of influence over NatWest Group; changes in
interest rates and changes in foreign currency exchange rates); financial
resilience risk (including in respect of: NatWest Group’s ability to meet
targets; the level and extent of future impairments and write-downs (including
with respect to goodwill); NatWest Group’s ability to resume discretionary
capital distributions; the highly competitive markets in which NatWest Group
operates; deterioration in borrower and counterparty credit quality; the
ability of NatWest Group to meet prudential regulatory requirements for capital
and MREL, or to manage its capital effectively; the ability of NatWest Group to
access adequate sources of liquidity and funding; changes in the credit ratings
of NatWest Group plc, any of its subsidiaries or any of its respective debt
securities; NatWest Group’s ability to meet requirements of regulatory stress
tests; possible losses or the requirement to maintain higher levels of capital
as a result of limitations or failure of various models; sensitivity of NatWest
Group’s financial statements to underlying accounting policies, judgments,
assumptions and estimates; changes in applicable accounting policies; the value
or effectiveness of any credit protection purchased by NatWest Group and the
application of UK statutory stabilisation or resolution powers); strategic risk
(including in respect of: the implementation and execution of NatWest Group’s
Purpose-led Strategy, including as it relates to the re-alignment of the NWM
franchise and NatWest Group’s climate ambition and the risk that NatWest Group
may not achieve its targets); operational and IT resilience risk (including in
respect of: NatWest Group being subject to cyberattacks; operational risks
inherent in NatWest Group’s business; exposure to third party risks including
as a result of outsourcing and its use of new technologies and innovation, as
well as related regulatory and market changes; NatWest Group’s operations being
highly dependent on its IT systems; NatWest Group relying on attracting,
retaining and developing senior management and skilled personnel and maintaining
good employee relations; NatWest Group’s risk management framework; and
reputational risk) and legal, regulatory and conduct risk (including in respect
of: NatWest Group’s businesses being subject to substantial regulation and
oversight; NatWest Group complying with regulatory requirements; legal,
regulatory and governmental actions and investigations (including the final
number of PPI claim and their amounts); the replacement of LIBOR, EURIBOR and
other IBOR rates to alternative risk free rates; heightened regulatory and
governmental scrutiny (including by competition authorities); implementation of
the Alternative Remedies Package and the costs related thereto; and changes in
tax legislation).
The forward-looking statements contained in this document
speak only as at the date hereof, and NatWest Group does not assume or
undertake any obligation or responsibility to update any forward-looking
statement to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
The information, statements and opinions contained in this
document do not constitute a public offer under any applicable legislation or
an offer to sell or solicit of any offer to buy any securities or financial
instruments or any advice or recommendation with respect to such securities or
other financial instruments.
NatWest Group – Form 6-K Q3
Results 2020 1
Introduction
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.
Non-IFRS financial information
NatWest
Group prepares its financial statements in accordance with International
Financial Reporting Standards (IFRS) as
issued by the International
Accounting Standards Board(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 believes 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. For details of the basis of
preparation and reconciliations where applicable refer to the Appendix in this
announcement.
NatWest Group – Form 6-K Q3
Results 2020 2
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, total income decreased by 16.5%. 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.
|
●
|
Net interest margin of 1.51% was 3 basis points lower than Q2 2020. 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.
|
●
|
Operating expenses reduced by £884 million in Q3 2020 in comparison to Q3 2019. 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.
|
●
|
Net loans to customers at amortised cost increased by £1.3 billion in Q3 2020 in comparison to Q2 2020. 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 on Form 6-K 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
112 to 113 of its Interim Results 2020 on Form 6-K, pages 31 to 32 of its Q1
2020 Form 6-K and pages 286 to 300 of its 2019 Annual Report and Accounts on
Form 20-F. These statements constitute forward-looking statements. Refer to
Forward-looking statements in this announcement.
NatWest Group – Form 6-K Q3
Results 2020 3
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.
NatWest Group – Form 6-K Q3
Results 2020 4
|
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.
NatWest Group – Form 6-K Q3
Results 2020 5
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)
|
-
|
NatWest Group – Form 6-K Q3
Results 2020 6
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.
|
●
|
Operating
expenses were £954 million, or 59.6%, lower than Q3 2019. 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.
|
NatWest Group – Form 6-K Q3
Results 2020 7
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
|
130
|
120
|
145
|
|
Net loans to customers -
|
|
|
|
Operating expenses
|
(127)
|
(122)
|
(131)
|
|
amortised cost
|
18.3
|
18.7
|
18.2
|
Impairment (losses)/
|
|
|
|
|
Customer deposits
|
19.6
|
20.0
|
18.5
|
releases
|
(8)
|
(216)
|
17
|
|
RWAs
|
12.1
|
12.8
|
13.0
|
Operating (loss)/profit
|
(5)
|
(218)
|
31
|
|
|
|
|
|
Return on equity
|
(1.0%)
|
(44.5%)
|
5.8%
|
|
|
|
|
|
Net interest margin
|
1.46%
|
1.48%
|
1.55%
|
|
|
|
|
|
Cost:income ratio
|
97.7%
|
101.7%
|
90.3%
|
|
|
|
|
|
Loan impairment rate
|
17bps
|
441bps
|
(34)bps
|
|
|
|
|
|
|
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 £15 million, or
10.3%, compared to Q3 2019 (€16 million, or 9.9% in euro terms), 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
(€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 (2 basis points in euro terms) in comparison to Q2 2020
reflecting the continued impact of negative rates on increased liquid assets.
|
●
|
Impairment losses were £8 million (€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 £0.4 billion (€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 (€0.4 billion) was broadly in line with Q2 2020.
|
●
|
Customer deposits decreased by £0.4 billion (€0.4
billion) in comparison to Q2 2020 mainly due to the introduction of negative
rates on certain commercial deposit categories.
|
●
|
RWAs decreased by £0.7 billion (€0.8 billion) in
comparison to Q2 2020 reflecting the £0.2 billion (€0.2 billion) impact of
the NPL sale derecognition, lower volumes and improved credit metrics.
|
NatWest Group – Form 6-K Q3
Results 2020 8
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.
|
●
|
Operating expenses were £85 million, or 13.3%, lower than Q3 2019. 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.
|
NatWest Group – Form 6-K Q3
Results 2020 9
Business performance
summary
Private
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
|
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
£11 million, or 5.6%, 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.
|
●
|
Operating expenses were £9 million, or 14.5%, lower
than Q3 2019. 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.
|
NatWest Group – Form 6-K Q3
Results 2020 10
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.
|
●
|
Total
income was £84 million, or 56%, higher than Q3 2019. 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.
|
●
|
Operating expenses were £46 million, or 13.2% lower
than Q3 2019. 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
|
NatWest Group – Form 6-K Q3
Results 2020 11
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 16 for the notes to this table. nm =' not' meaningful.
NatWest Group – Form 6-K Q3 Results
2020 12
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 16 for the notes to this table. nm =' not' meaningful.
NatWest Group – Form 6-K Q3 Results
2020 13
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 16 for the notes to this table. nm =' not' meaningful.
NatWest Group – Form 6-K Q3 Results
2020 14
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 16 for the notes to this table. nm =' not' meaningful.
NatWest Group – Form 6-K Q3 Results
2020 15
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.
NatWest Group – Form 6-K Q3 Results
2020 16
Capital and risk management
|
Page
|
Capital,
liquidity and funding risk
|
17
|
Credit risk
|
|
Segmental
exposure
|
23
|
Sector
analysis
|
27
|
Wholesale
support schemes
|
29
|
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.
|
NatWest Group – Form 6-K Q3
Results 2020 17
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) 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
(3) 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
(4) The
headroom does not reflect excess distributable capital and may vary over time.
NatWest Group – Form 6-K Q3
Results 2020 18
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%.
NatWest Group – Form 6-K Q3
Results 2020 19
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
|
NatWest Group – Form 6-K Q3
Results 2020 20
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.
|
NatWest Group – Form 6-K Q3
Results 2020 21
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.
|
NatWest Group – Form 6-K Q3
Results 2020 22
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.
NatWest Group – Form 6-K Q3
Results 2020 23
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 on Form 6-K along with further detail on
various aspects of the IFRS 9 process.
NatWest Group – Form 6-K Q3
Results 2020 24
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
|
NatWest Group – Form 6-K Q3
Results 2020 25
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.
NatWest Group – Form 6-K Q3
Results 2020 26
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
|
13
|
|
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.
NatWest Group – Form 6-K Q3
Results 2020 27
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 on Form 6-K,
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.
NatWest Group – Form 6-K Q3
Results 2020 28
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
|
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 on Form 20-F 2019 for further details of the Risk of Credit Loss
framework).
NatWest Group – Form 6-K Q3
Results 2020 29
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.
NatWest Group – Form 6-K Q3
Results 2020 30
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)
|
NatWest Group – Form 6-K Q3
Results 2020 31
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
|
NatWest Group – Form 6-K Q3
Results 2020 32
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.
NatWest Group – Form 6-K Q3
Results 2020 33
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
on Form 20-F 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 204 to 208 of the NatWest Group plc’s 2019
Annual Report and Accounts on Form 20-F 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 208 of the NatWest Group plc’s 2019 Annual Report and
Accounts on Form 20-F. 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 on Form 6-K.
NatWest Group – Q3 Results 2020 34
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 on Form 20-F and
the summary risk factors contained in the Q1 2020 IMS and the Interim Results
2020 on Form 6-K).
Goodwill
Goodwill remains recoverable: key assumptions and sensitivities
around these assumptions are materially consistent with those disclosed in the
NatWest Group Interim Results 2020 on Form 6-K.
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 on Form 6-K, 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 on Form 6-K 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.
NatWest Group – Q3 Results 2020 35
Additional information
Other financial
data
The
following table shows NatWest Group’s issued and fully paid share capital,
owners’ equity and indebtedness on a consolidated basis in accordance with IFRS
as at 30 September 2020.
|
As at
30 September
2020
|
|
£m
|
Share capital
- allotted, called up and fully paid
|
|
Ordinary shares of £1
|
12,127
|
Retained income and other
reserves
|
31,061
|
Owners’ equity
|
43,188
|
|
|
NatWest Group indebtedness
|
|
Trading liabilities - debt
securities in issue
|
1,779
|
Other financial liabilities
– debt securities in issue
|
48,135
|
Subordinated liabilities
|
10,467
|
Total indebtedness
|
60,381
|
Total capitalisation and
indebtedness
|
103,569
|
Under
IFRS, certain preference shares are classified as debt and are included in Subordinated
liabilities in the table above.
The information
contained in the table above has not changed materially since 30 September
2020.
|
|
Year ended 31 December
|
|
Nine months ended and
as at
30 September
2020
|
2019
|
2018
|
2017
|
2016
|
2015
|
|
|
|
|
|
|
|
Return on average total
assets (1)
|
(0.01%)
|
0.4%
|
0.2%
|
0.1%
|
(0.8%)
|
(0.2%)
|
Return
on average ordinary shareholders’ equity (2)
|
(2.2%)
|
7.9%
|
4.0%
|
1.9%
|
(15.3%)
|
(4.0%)
|
Average total equity as a
percentage
of average total assets
|
5.6%
|
6.2%
|
7.2%
|
7.0%
|
6.2%
|
6.0%
|
Dividend payout ratio
|
-
|
96.3%
|
14.9%
|
-
|
-
|
-
|
Notes:
(1) Return on average total assets represents profit
attributable to ordinary shareholders as a percentage of average total assets.
(2) Return on average ordinary shareholders’ equity
represents profit attributable to ordinary shareholders as a percentage of
average ordinary shareholders’ equity.
NatWest Group – Form 6-K Q3
Results 2020 36
Appendix
RBSFinance0000012Secret
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 12 to 16).
|
Notable
items - page 6
Transfers
– pages 7 and 10
Strategic
costs and, litigation and conduct costs - pages 12 to 16
|
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
5
|
NIM
|
Net interest income of the banking business as
a percentage of interest-earning assets of the banking business.
|
Page
5
|
Funded assets
|
Total
assets less derivatives.
|
Pages
12 to 16
|
ECL loss rate
|
The
annualised loan impairment charge divided by gross customer loans.
|
Pages
12 to 16
|
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
12 to 16
|
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
12 to 16
|
Note:
(1) Metric based on GAAP measures,
included as not defined under IFRS and reported for compliance with ESMA
adjusted performance measure rules.
NatWest Group – Form 6-K Q3
Results 2020 1
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%
|
NatWest Group – Form 6-K Q3
Results 2020 2
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%)
|
NatWest Group – Form 6-K Q3
Results 2020 3
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.
NatWest Group – Form 6-K Q3
Results 2020 4
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%
|
NatWest Group – Form 6-K Q3
Results 2020 5
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%
|
NatWest Group – Form 6-K Q3
Results 2020 6
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorised.
NatWest Group plc
Registrant
/s/ Katie Murray
Group Chief Financial Officer
30 October 2020
NatWest Group – Form 6-K Q3
Results 2020 7
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