FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For 19 February, 2021
Commission File Number: 001-10306
 
NatWest Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
   Form 20-F X Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________
 
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ___ No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
 
 
 
    Annual Results
      For the year ended 31 December 2020
 
 
 
 
 
natwestgroup.com
 
NatWest Group plc
2020 NatWest Group performance summary
Alison Rose, Chief Executive Officer:
 
“The past year presented some extraordinary challenges for our customers, colleagues and communities. We provided exceptional levels of support to those who needed it, including the approval of over £14 billion of lending under UK Government schemes, demonstrating that we have truly put Our Purpose at the heart of this business. Being purpose-led isn’t just the right thing to do, it has a powerful commercial imperative and is fundamental to building sustainable value in our business.
 
Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance in a challenging operating environment. The bank continued to grow in key areas such as mortgages and commercial lending and our balance sheet remains strong, with one of the highest capital ratios amongst our UK and European peers. We have today announced our intention to pay a final dividend whilst reaffirming our commitment to regular capital returns for shareholders in the future.
 
We made strong progress in executing the strategy we set out in February 2020 as we build a relationship bank for a digital world; a bank that will meet the rapidly evolving needs of our customers at different stages of their lives through an ever-increasing focus on digital and transformation. In turn, this will drive sustainable, long-term returns to our shareholders.
 
We cannot be certain of the long-term impact of the pandemic. But we can be certain that our bank will continue to support those who need it most as we build back better. By championing potential and helping people, families and businesses to rebuild and thrive, we will succeed together.”
 
Financial performance in a challenging environment
Full year 2020 operating loss of £351 million and an attributable loss of £753 million. Q4 2020 operating profit before tax of £64 million and an attributable loss of £109 million.
Full year 2020 net impairment losses of £3,242 million, or 88 basis points of gross customer loans, resulted in an expected credit loss (ECL) coverage ratio of 1.66%.
In comparison to 2019, income across the retail and commercial businesses, excluding notable items, decreased by 10.0% as the lower yield curve, subdued business activity and lower consumer spending were partially offset by strong balance growth.
2020 Bank net interest margin (NIM) of 1.71% decreased by 28 basis points compared with 2019. Q4 2020 Bank NIM of 1.66% increased by 1 basis point in comparison to Q3 2020 as lower average central liquidity and improved asset margins more than offset reduced structural hedge income as a result of lower swap rates.
A cost reduction of £277 million was achieved during 2020, ahead of our £250 million target for the year.
 
Robust balance sheet with strong capital and liquidity levels
CET1 ratio of 18.5%, was 230 basis points higher than 2019, including c.100 basis points related to IFRS 9 transitional relief. The CET1 ratio increased by 30 basis points in comparison to Q3 2020 as the £3.6 billion reduction in RWAs and a 23 basis point software intangible benefit were partially offset by the 3 pence proposed final dividend, 21 basis points, and linked pension contribution, 16 basis points.
The liquidity coverage ratio (LCR) of 165%, representing £72.1 billion headroom above 100%, increased by 13 percentage points in comparison to 2019. In comparison to Q3 2020 LCR increased by 8 percentage points reflecting the continued growth in customer deposits.
Net lending across the retail and commercial businesses increased by £20.9 billion in 2020 supported by £12.9 billion drawdowns against UK Government lending schemes and £16.2 billion mortgage lending, including £3.0 billion related to the Metro Bank plc mortgage portfolio acquisition. This growth has been partially offset by lower unsecured balances, which were impacted by lower spend and higher repayments, subdued business activity and increased loan provisions. In Q4 2020, net lending across the retail and commercial businesses increased by £4.5 billion as mortgage growth of £6.2 billion and £1.6 billion of lending against UK Government lending schemes more than offset £2.4 billion net revolving credit facility (RCF) repayments.
Customer deposits increased by £62.5 billion in comparison to 2019, with retail and commercial balances £60.5 billion higher as consumer spending was impacted by government restrictions and customers retained liquidity. In Q4 2020, customer deposits increased by £13.3 billion.
RWAs decreased by £8.9 billion in comparison to 2019, including an £11.0 billion reduction in NatWest Markets to £26.9 billion, partially offset by volume growth across the retail and commercial businesses with minimal levels of procyclical credit risk inflation. RWAs reduced by £3.6 billion in Q4 2020, largely in NatWest Markets.
 
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:
Approved £14.1 billion through the government lending initiatives.(1)
Facilitated approximately £9.5 billion of COVID-19 Corporate Financing Facilities (CCFF) issuances.(2)
 
Supported the financial health of our customers:
Helped customers with approximately 258,000 mortgage repayment holidays and provided payment holidays on over 74,000 business customer accounts.(3)
95% of branches have been kept open during the pandemic and a new 'virtual queuing system' developed, with software developer Qudini, so customers who need to visit one of our branches can do so as safely as possible.
 
Long-term investment plan is powering our operational effectiveness:
Increased digital adoption with 9.4 million active digital users (2019 - 8.7 million), and with video banking now available across our entire network, interactions have increased from fewer than 100 per week in January 2020 to almost 9,000 per week by the end of 2020.
Announced an integration with global small business platform Xero, allowing its users to apply for NatWest Rapid Cash, a flexible line of credit based on outstanding invoices up to the value of £300,000, providing simple, swift support to a number of key businesses during the pandemic.
 
Prioritised the wellbeing of our colleagues:
Continued to support more than 50,000 colleagues to work from home. The timing of a phased return to our offices will be led by UK Government guidance and factors such as the progress of vaccinations.
Introduced a new digital physiotherapy offering, giving colleagues free access to physiotherapy advice, complementing existing resources to maintain and enhance colleague health, such as virtual GPs and the SilverCloud wellbeing platform.
 
Partnered and responded proactively to support UK communities:
Extended our support for vulnerable customers through a joint referral service with Citizens Advice, offering support to customers who need assistance to address the root cause of their financial vulnerability.
Launched the Winter Sparkle campaign, sending food, clothes, basic home supplies and toys from the Gogarburn food bank and charity distribution centres to people experiencing winter poverty across the UK.
 
Progress against areas of focus
 
Enterprise – addressing barriers to enterprise and business creation:
Launched an SME Transformation Taskforce, co-chaired by NatWest Group and the Federation of Small Businesses, bringing together policymakers, business groups and other stakeholders to share insights and discuss recommendations of support to spark growth back into this crucial part of the UK economy.
In January 2020, we announced £1 billion of funding for female entrepreneurs, which has all been committed, we have now doubled this funding to £2 billion to help support female-led businesses to recover from the disruption caused by the coronavirus.
 
Learning – skill building, particularly around financial confidence:
Reached 2.9 million people through financial capability interactions in 2020.
Launched Financial Flex campaign to encourage Brits – especially younger generations – to start talking more openly and honestly about their finances to combat growing worries around money.
 
Climate – supporting the necessary transition to a low carbon economy:
Supported our customers with £12.0 billion of Climate and Sustainable Funding and Financing in 2020.
Launched Green Mortgages offering a preferential interest rate to new or existing customers who are purchasing an energy efficient property.
Announced we will be the banking sponsor of the 26th UN Climate Change Conference of the Parties (COP26).
 
Diversity and inclusion – building an open and inclusive bank where everyone can thrive:
At the end of 2020 we have, on aggregate, 39% women in our top three leadership layers, an increase of 10% since targets were introduced in 2015.
As at the 31 December 2020 we have on aggregate 10% Black, Asian and Minority Ethnic colleagues in our top four leadership layers in the UK, representing a 2% increase since targets were introduced to improve representation to at least 14% by 2025.
 
Notes:
(1)
As at 31 December 2020, inclusive of Commercial Banking and Private Banking: Bounce Back Loan Scheme (BBLS) – £8.6 billion; Coronavirus Business Interruption Loan Scheme (CBILS) – £4.2 billion, Coronavirus Large Business Interruption Loan Scheme (CLBILS) – £1.3 billion.
(2)
As at 31 December 2020.
(3)
For the year ended 31 December 2020 in Retail Banking and since 22 March 2020 in Commercial Banking, there were c.16,000 active mortgage repayment holidays and c.11,000 active payment holidays on business customer accounts.
 
Chief Executive’s Statement
 
We champion potential, helping people, families and businesses to thrive.  
 
Dear shareholders,
 
The past year presented some extraordinary challenges for our customers, colleagues and communities in the face of an ongoing global health crisis that led to a widespread economic crisis.
 
Throughout the course of the year, we responded at pace, providing exceptional levels of support to those who needed it and demonstrating that we have truly put Our Purpose at the heart of this business. In the face of such trying circumstances, I am proud of the resilience, empathy and kindness exhibited by so many of my colleagues across the bank.
 
We champion potential; breaking down barriers and building financial confidence so the 19 million people, families and businesses we serve in communities up and down the country can rebuild and thrive.
 
But COVID-19 has created opportunities as well as challenges, and it has accelerated a number of underlying trends in customer behaviour, our ways of working and the future shape of our economy.
 
We look forward with renewed hope and positivity and although we cannot be certain of the long-term impact of the pandemic, this bank will continue to serve our customers and support those who need it most. We will succeed together and, as a result, NatWest Group will drive sustainable, long-term returns for our shareholders.
 
Financial Performance
Despite reporting a loss for the year, NatWest Group delivered a resilient underlying performance through the strength of our core franchises and brands in a challenging operating environment. Our attributable loss of £753 million for 2020 reflects an impairment charge of £3.2 billion, a significant proportion of this impairment charge relates to potential future loan losses under IFRS 9. We continue to experience relatively low levels of actual default in our lending book, which is well diversified with limited exposure to unsecured loans. Before impairments, NatWest Group made an operating profit of £2.9 billion.
 
At 18.5% our CET1 ratio – the key measure of financial strength – is one of the highest amongst our UK and European peers. This capital strength gives us the flexibility to navigate the continuing uncertainty, return capital to shareholders and consider options for creating shareholder value.
 
In the face of extreme disruption, we made determined progress against the strategy we set out in February 2020 and surpassed our financial targets. We are building a relationship bank for a digital world; a bank that supports customers at every stage of their lives, that is simple to deal with and that is powered by innovation and partnerships, with far sharper capital allocation.
 
We have significant capacity to grow, with activity levels increasing across both our retail and commercial businesses. Net lending grew 7% in 2020, while our gross new mortgage lending represented a share of around 13%, taking our stock share to almost 11%.
 
In December 2020, we supplemented the organic growth we continue to achieve in mortgages with the acquisition of a £3 billion mortgage book from Metro Bank plc. This was our first significant acquisition since the financial crisis and represented a positive use of our strong capital position in a key area of focus.
 
Championing potential through COVID-19
Colleagues
The safety and wellbeing of our colleagues has been, and remains, a priority for the bank throughout the pandemic. We introduced resources to maintain and enhance the physical and mental health of our colleagues, providing access to virtual GPs, the SilverCloud wellbeing platform and free physiotherapy advice. For almost 10,000 keyworker colleagues who have remained on the frontline, all of our offices and branches were made COVID-secure. Around 50,000 colleagues have been working from home since March last year, supported by the delivery of 37,000 tech bundles and over 25,000 chairs and desks. The timing of a phased return to our offices will be led by UK Government guidance and factors such as the progress of vaccinations.
 
We continue to create opportunities for new talent from a range of backgrounds to join our organisation, including through our Social Mobility Apprenticeship Programme – one of the first of its kind in the UK – as well as providing existing colleagues with easy access to the very best learning through the NatWest Group Learning Academy.
 
Chief Executive’s Statement continued
Customers
From the start of the pandemic, it was clear that this was not business as usual. By pivoting our business at pace and collaborating with politicians, regulators and industry leaders, we were able to continue to serve our customers in the face of unprecedented demand.
 
In total, we approved around £14 billion of loans for business customers under the different government schemes in 2020 and provided 258,000 mortgage holidays. We delivered £5.2 million of cash securely to our customers in vulnerable situations and made almost 480,000 calls to check up on them, whilst also introducing a Companion Card that allowed trusted volunteers to pay for their essential goods.
 
Thanks to the extraordinary dedication of our colleagues, we have remained on the high street, supporting our customers and consistently keeping more than 95% of our branches open.
 
We have more than 800 branches and 16,000 physical points of presence, including our ATM network and our relationship with the Post Office. These remain an important part of how we deliver services to our customers.
 
The pandemic has also accelerated trends in how our customers want to bank with us. In particular, we have seen a rapid increase in digital adoption. We now have 9.4 million active digital users and 7.7 million active users of our mobile app. 58% of our retail customer base in the UK now exclusively uses digital channels to interact with us, an increase of 12% compared with 2019.
 
For business customers, we were able to extend over £8 billion of Bounce Back Loans by creating an end to end digital application process within the space of a week.
 
As we responded to COVID-19, we also migrated our enterprise support initiatives to be delivered digitally. Our 12 entrepreneur accelerator hubs held over 1,000 virtual events with 45,782 attendees since the start of lockdown.
 
Communities
As a relationship bank that sits at the heart of communities up and down the country, we have a responsibility to provide support to the most vulnerable people in society.
 
Leveraging existing relationships, part of our Gogarburn HQ was transformed into a food bank distribution hub for the Social Bite, Trussell Trust and Cyrenians charities. We’ve supported these charities to produce over one million meals for those in need since the start of March 2020 and we became a vital distribution network for items such as 240,000 books and education packs, 250,000 items of essential clothing and over 200,000 items of toiletries, masks, hand sanitisers and snacks. Meanwhile, the roof garden at our Coutts office on The Strand donated produce to the Felix Project which delivers surplus food to food banks, schools and charities throughout London.
 
The bank also raised £10 million by match-funding customer donations to the National Emergencies Trust and established a £5 million fund with the Prince’s Trust to help young entrepreneurs during the crisis. Working with SafeLives, we launched a review into how we can better support customers who have been victims of economic abuse and acquired coercive debt and announced a £1 million fund to support survivors of economic and domestic abuse.
 
Our Purpose
The COVID-19 pandemic has not distracted us from Our Purpose; we champion potential, helping people, families and businesses to thrive. Nor has it distracted us from the three key areas of focus we set out in February 2020. If anything, it has made them even more important. Our Purpose also has a powerful commercial imperative. If our customers succeed, so will we.
 
By removing barriers, building financial capability, championing equality and helping to tackle climate change, we are determined to pave the way for a better future.
 
Removing barriers to enterprise
We are already the largest supporter of UK business, serving around 1 in 4 UK businesses. However, we know that setting up and running a business is harder than it should be for under-represented groups, including for female and Black, Asian and Minority Ethnic-led businesses. We want to remove these barriers.
 
In 2020, as a result of the pandemic, we launched an SME response strategy that supported four million of our current customers to help them survive and thrive through the crisis.
 
Chief Executive’s Statement continued
At the start of last year, we also created a £1 billion fund aligned to our focus on supporting female entrepreneurs. During the course of 2020, all of this fund was allocated, leading us to announce an additional £1 billion in funding to help support female-led businesses recover from the disruption caused by coronavirus.
 
Building financial capability
Developing good habits can help to transform people’s relationships with money, and this has never been more important given the economic disruption we continue to face. We helped 600,000(1) customers to start saving with us in 2020, with a view to helping two million by 2023.
 
Building financial confidence and capability is especially important for young people. Over the last 26 years, our flagship MoneySense financial education programme has reached more than nine million children in 1 in 3 UK schools and last year we reached more than 2.9 million people though our various financial capability interactions.
 
We also launched Island Saver, the world’s first financial education mobile, console and PC game for children. With more than 2.3 million downloads, it has helped us to engage children from a young age in the importance of managing their money.
 
Leading the climate challenge
Climate change is the greatest challenge facing the planet. Tackling it requires collaboration across governments, industries and society.
 
We are determined to play a leading role in driving positive change. In November 2020, we announced that NatWest Group will be one of the Principal Partners and banking sponsor of the 26th UN Climate Change Conference of the Parties (COP26), taking place in Glasgow later this year.
 
There is much more we can do, both to get our own house in order and to help our customers in the transition to a low-carbon economy. We have set ourselves the ambitious goals of at least halving the climate impact of our financing by 2030 and making our own operations climate positive by 2025, having made them net carbon zero in 2020.
 
As a founding signatory to the UN Principles for Responsible Banking we are committed to aligning our strategy with the 2015 Paris Climate and UN Sustainable Development Goals.
 
In 2020, we helped our business customers with £12 billion of new climate and sustainable financing and funding. We also launched our first ever Green Mortgage in October 2020 and are supporting the drive to decarbonise the UK transportation sector through the Future Mobility Group.
 
Lord Stern was appointed as an independent adviser to NatWest Group to help us achieve our ambitions and James Close as our new Director, Climate Change, to co-ordinate and deliver our climate strategy.
 
Our strategy
NatWest Group will be a relationship bank for a digital world. Our strategy is to deliver on Our Purpose and drive sustainable returns to shareholders through our four strategic priorities.
 
Supporting customers at every stage of their lives
We will be more relevant to our customers by building deeper relationships and evolving our proposition to meet their needs throughout their lives. We benefit from having strong customer franchises across the business that provide multiple growth opportunities. For example, by bringing together our wealth businesses we can serve our customers better by focusing on the changing financial requirements through each stage of their lifetime.
 
Powered by innovation and partnerships
We invest around £1 billion each year to continuously improve our customers’ experience by harnessing our internal expertise and partnering with some of the most innovative companies from around the world. We have already created a strong culture of innovation with the development of customer propositions such as Mettle. We have also partnered with Pollinate to produce the award-winning Tyl. And we established a new relationship with BlackRock to support our investment management processing activity.
 
Note:
(1)
 Includes instances where customers had existing savings with other banks and transferred them into their NatWest Group account.
 
Chief Executive’s Statement continued
Simple to deal with
We are becoming much simpler as a bank and much simpler to deal with for our customers. As part of our One Bank operating model, we are creating key Centres of Excellence in areas such as climate change, fraud and financial crime which bring together the expertise of colleagues from across NatWest Group for the benefit of our customers. By reducing complexity and improving efficiency, we continue to take costs out of our operating model, delivering £277 million of cost reductions in 2020, against our £250 million target.
 
Sharpened capital allocation
Our capital is a resource to be used across the bank, to drive growth and optimise returns from a safe and secure base. A crucial element of this plan is refocusing NatWest Markets to serve our corporate and commercial customers better. Risk weighted assets in NatWest Markets reduced by £11 billion to £26.9 billion in 2020, exceeding our target for 2020, with a further reduction to £20 billion planned for the medium term. NatWest Markets is far more closely aligned to the rest of NatWest Group and its market-leading role in providing customers with access to COVID-19 Corporate Financing Facilities and to environmental, social and governance (ESG) finance are further examples of the strength of this franchise.
 
Ulster Bank RoI
In recent years, our strategy for Ulster Bank in the Republic of Ireland has been to improve returns by growing the business, reducing costs and resolving legacy issues. I want to pay tribute to our colleagues who through their commitment and dedication have helped to transform this business. Our priority over the coming months will remain on supporting our customers, communities and colleagues through these difficult times.
 
Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank will not be able to generate sustainable long term returns for our shareholders. As a result, we are to begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.
 
Overview
Overall, we delivered well against our strategy throughout 2020. Looking ahead, we have set a number of financial targets across a three year plan to 2023; to deliver lending growth above market rate, to reduce costs by around 4% each year and to operate with a CET1 capital ratio of 13% to 14% by 2023. Taken together, our four strategic priorities will drive sustainable, long-term returns to our shareholders and we are targeting a return on tangible equity of 9% to 10% by 2023.
 
An additional priority throughout the year was to put in place a leadership structure to deliver our strategy. As a result, I made a number of important external appointments including David Lindberg as CEO, Retail Banking, Jen Tippin as Chief Transformation Officer, Nigel Prideaux as Chief Communications Officer and Marg Jobling as Chief Marketing Officer. Each brings considerable experience and expertise to their respective roles and we are already working closely together. Some of my former colleagues, including our CEO of Retail Banking, Les Matheson, left the bank to pursue opportunities elsewhere. I would like to thank them for their invaluable contributions over many years and wish them all the best for the future.
 
Chief Executive’s Statement continued
A diverse and inclusive bank
We continue to focus on building a more diverse and inclusive organisation. At the end of 2020, 39% of the roles in our top three leadership layers were held by female colleagues, a 10% uplift since our targets were introduced.
 
2020 also brought an increased focus on racial inequality with the tragic death of George Floyd and the rise of the Black Lives Matter movement. Following the establishment of a taskforce led by the co-chairs of our multicultural network, we published a report - Banking on Racial Equality: A Positive Roadmap for Change - looking at what more we could do to champion the potential of colleagues, customers and communities from Black, Asian and Minority Ethnic backgrounds.
 
This built on the targets we put in place in 2018 to increase the number of colleagues from Black, Asian and Minority Ethnic backgrounds in our top four UK leadership layers in the bank to 14% by 2025. We currently have 10% Black, Asian and Minority Ethnic representation amongst our UK senior leaders, a 2% increase since the targets were introduced. Under our new commitments, we have launched a separate goal to have 3% Black colleagues in senior UK roles by 2025.
 
A sustainable future
Our robust balance sheet and sector-leading capital strength, underpinned by a resilient business with strong capacity for growth, gives us the flexibility to navigate the uncertain outlook, support our customers and deliver sustainable returns to shareholders.
 
But we can only deliver these returns through our strong culture and values, with purpose at our core. We have passionate, motivated and engaged colleagues, despite all the challenges of COVID-19 and with most people working from home for a considerable period of time: 95% of colleagues think we’re doing a good job responding to the pandemic and 92% are proud of our contribution to community and society. These numbers mean a lot to me. They give me confidence that we are building a sustainable future for this bank.
 
The way we live and work is changing. And people’s expectations of companies are changing as well. We won’t always get everything right. But by collaborating with others and demonstrating that we can play a positive role in society, we will help to create a greener, fairer and more inclusive economy for all, allowing us to deliver long-term sustainable value for all our shareholders.
 
And by championing potential and helping people, families and businesses to rebuild and thrive, we will succeed together.
 
Outlook(1)
NatWest Group, as with all companies, continues to deal with a range of significant risks and uncertainties in the external economic, political and regulatory environment. Expectations regarding the rate of economic recovery continue to change rapidly in response to government measures to limit the spread of COVID-19, expectations around the rollout of COVID-19 vaccines and policy measures to support the recovery.
 
Our central economic forecasts, as detailed on pages 173-175 in the 2020 Annual Report and Accounts, support our corporate plan, and are in line with the consensus view. The rollout of COVID-19 vaccines enables recovery through 2021, with GDP growth of around 4.5% expected, gradually moderating thereafter. Interest rates are expected to remain low throughout the forecast horizon, with an anticipated reduction in the central bank rate to zero in the second quarter of 2021. The unemployment rate reaches around 7% before beginning to steadily reduce from 2022, supported by the ongoing recovery. A decline in house prices in the low-single digits is forecast for 2021 before improving steadily.
 
The short and medium term outlook continues to be subject to significant uncertainty and we will continue to actively monitor and react to market conditions and refine our internal forecasts as the economic position evolves.
 
2021 Outlook
We plan on reducing other expenses, excluding OLD, by around 4% in comparison to 2020, excluding any change in the direct cost base of Ulster Bank RoI. We also expect to incur strategic costs of around £0.8 billion during 2021 from the continued refocussing of NatWest Markets and resizing of the Group’s cost base.
We expect NatWest Markets exit and disposal costs and the impact of Commercial Banking capital management actions to total a combined £0.3 billion in 2021.
 
Our full year 2020 impairment loss rate was 88 basis points of gross customer loans. We expect that the full year 2021 loss rate will be at or below our through the cycle guidance of 30-40 basis points, with losses driven by a combination of the developing economic outlook for the UK and Republic of Ireland and the level of economic distress experienced by our personal and commercial customers as government support measures scale down and restrictions ease.
 
We are targeting above market rate lending growth across our UK and RBS International retail and commercial businesses, excluding UK Government financial support schemes.
 
We expect NatWest Group RWAs, including Ulster Bank RoI, to be in the range of £185-195 billion, when including on a proforma basis the impact of Bank of England’s mortgage risk weight changes and other model changes introduced on 1 January 2022. The impact of the mortgage regulatory changes is expected to be around £12 billion, subject to the timing and quantum of any procyclicality before implementation and based on the current book size and weighting. The £12 billion equates to an anticipated book risk weight of 15% which is subject to change. In 2021 we also expect to achieve the majority of the remaining NatWest Markets RWA reduction towards the medium term target of £20 billion, but expect minimal reduction in RWAs in Ulster Bank RoI in 2021 as a result of the completion of the strategic review announced today. Other changes in RWAs will be driven by the level of procyclical inflation driven by the economic outlook, downgrades in the credit quality and assessments in the commercial book and ongoing demand for lending from our customers.
 
NatWest Group capital and funding plans focus on issuing £3-5 billion of MREL-compliant instruments, with a continued focus on issuance under our Green, Social and Sustainability Bond Framework, around £1.0 billion of AT1 and around £2.0 billion of Tier 2 instruments. As in prior years, we will continue to target other funding sources to diversify our funding structure.
 
Medium term outlook
We expect to achieve a return on tangible equity of 9-10% and a CET1 capital ratio of 13-14% by 2023. Supporting this we are targeting above market rate lending growth per annum across our UK and RBS International retail and commercial businesses and expect annual cost reduction of around 4%, excluding the impact of the phased withdrawal from the Republic of Ireland, along with continued strategic cost reduction.
 
We anticipate RWA inflation from Basel 3 amendments to be less than 5% of RWAs as at 31 December 2020 and currently expect implementation in 2023. The details of Basel 3 amendments remain subject to regulatory uncertainty on both quantum and timing.
 
As a result of the decision to withdraw from the Republic of Ireland announced today we would expect the level of RWAs to reduce in the coming years, and for this withdrawal to be capital accretive for NatWest Group across the multi-year process.
 
NatWest Group capital distributions
Subject to economic conditions being in line with, or better than, our central economic forecast, NatWest Group intends to maintain ordinary dividends of around 40% of attributable profit and aims to distribute a minimum of £800 million per annum from 2021 to 2023 via a combination of ordinary and special dividends. NatWest Group intends to maintain the required capacity to participate in directed buybacks of the UK Government stake and recognises that any exercise of this authority would be dependent upon HMT’s intentions and is limited to 4.99% of issued share capital in any 12 month period.

 
Note:
 (1)
The guidance, targets, expectations and trends discussed in this section represent NatWest Group plc management’s current expectations and are subject to change, including as a result of the factors described in the “Risk Factors” section on pages 345 to 362 of the NatWest Group plc 2020 Annual Report and Accounts and on pages 156 to 172 of the NatWest Markets Plc 2020 Annual Report and Accounts These statements constitute forward-looking statements. Refer to Forward-looking statements in this document.
 
 
Business performance summary
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
Total income
£10,796m
£14,253m
 
£2,535m
£2,423m
£4,233m
Operating expenses
(£7,905m)
(£9,325m)
 
(£2,341m)
(£1,814m)
(£2,527m)
Profit before impairment losses
£2,891m
£4,928m
 
£194m
£609m
£1,706m
Operating (loss)/profit before tax
(£351m)
£4,232m
 
£64m
£355m
£1,546m
(Loss)/profit attributable to ordinary shareholders
(£753m)
£3,133m
 
(£109m)
£61m
£1,410m
 
 
 
 
 
 
 
Excluding notable items within total income (1)
 
 
 
 
 
 
Total income excluding notable items
£11,180m
£12,138m
 
£2,616m
£2,720m
£3,019m
Operating expenses
(£7,905m)
(£9,325m)
 
(£2,341m)
(£1,814m)
(£2,527m)
Profit before impairment losses and excluding notable items
£3,275m
£2,813m
 
£275m
£906m
£492m
Operating profit before tax and excluding notable items
£33m
£2,117m
 
£145m
£652m
£332m
 
 
 
 
 
 
 
Performance key metrics and ratios
 
 
 
 
 
 
Bank net interest margin (NatWest Group NIM excluding NWM) (2)
1.71%
1.99%
 
1.66%
1.65%
1.93%
Bank average interest earning assets
 
 
 
 
 
 
  (NatWest Group excluding NWM) (2)
£455bn
£413bn
 
£473bn
£469bn
£420bn
Cost:income ratio (2)
72.9%
65.1%
 
92.2%
74.5%
59.4%
Loan impairment rate (2)
88bps
21bps
 
14bps
28bps
19bps
Earnings per share
 
 
 
 
 
 
  - basic
 (6.2p)
26.0p
 
 (0.9p)
0.5p
11.7p
Return on tangible equity (2)
(2.4%)
9.4%
 
(1.4%)
0.8%
17.7%
 
 
31 December
30 September
31 December
 
2020
2020
2019
Balance sheet
 
 
 
Total assets
£799.5bn
£791.6bn
£723.0bn
Funded assets (2)
£633.0bn
£627.3bn
£573.0bn
Loans to customers - amortised cost
£360.5bn
£353.7bn
£326.9bn
Loans to customers and banks - amortised cost and FVOCI *(3)
£372.4bn
£365.5bn
£336.8bn
Impairment provisions - amortised cost
£6.0bn
£6.1bn
£3.7bn
Total impairment provisions (3)
£6.2bn
£6.4bn
£3.8bn
Expected credit loss (ECL) coverage ratio *(3)
1.66%
1.74%
1.13%
Assets under management and administration (AUMA) (2)
£32.1bn
£30.1bn
£30.4bn
Customer deposits
£431.7bn
£418.4bn
£369.2bn
 
 
 
 
Liquidity and funding
 
 
 
Liquidity coverage ratio (LCR)
165%
157%
152%
Liquidity portfolio
£262bn
£243bn
£199bn
Net stable funding ratio (NSFR) (4)
151%
147%
141%
Loan:deposit ratio (2)
84%
85%
89%
Total wholesale funding
£71bn
£75bn
£75bn
Short-term wholesale funding
£19bn
£25bn
£19bn
 
 
 
 
Capital and leverage
 
 
 
Common Equity Tier (CET1) ratio (5)
18.5%
18.2%
16.2%
Total capital ratio
24.5%
23.7%
21.2%
Pro forma CET1 ratio, pre dividend accrual (6)
18.8%
18.2%
17.0%
Risk-weighted assets (RWAs)
£170.3bn
£173.9bn
£179.2bn
CRR leverage ratio (5)
5.2%
5.2%
5.1%
UK leverage ratio
6.4%
6.2%
5.8%
Tangible net asset value (TNAV) per ordinary share
261p
265p
268p
 
* 2019 data has been restated for the accounting policy change for balances held with central banks. Refer to Accounting policy changes effective 1 January 2020 for further details.
 
Notes:
(1)
Refer to page 12 for details of notable items within total income.
(2)
Refer to the Appendix for details of the basis of preparation and reconciliation of non-financial and performance measures.
(3)
Refer to pages 21 and 22 for further details.
(4)
NSFR reported in line with CRR2 regulations finalised in June 2019.
(5)
Based on CRR end point including the IFRS 9 transitional adjustment of £1.7 billion. Excluding this adjustment, the CET1 ratio would be 17.5% and the CRR leverage ratio would be 4.9%.
(6)
The pro forma CET1 ratio at 31 December 2020 excludes foreseeable charges of £364 million for ordinary dividend (3p per share) and £266 million pension contribution. 30 September 2020 - £nil. 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.
 
Business performance summary
Chief Financial Officer review
Financial performance
Total income decreased by £3,457 million, or 24.3%, compared with 2019. Excluding notable items, income decreased by £958 million, or 7.9%, due to reductions across the retail and commercial businesses, partially offset by higher NatWest Markets income reflecting increased customer activity as the market reacted to the spread of the COVID-19 virus.
Income across the retail and commercial businesses, excluding notable items, decreased by 10.0% compared with 2019 reflecting the lower yield curve, mortgage margin dilution, subdued business activity and lower consumer spending. Increased lending, whilst maintaining a disciplined approach to risk, has partially offset, with gross new mortgage lending of £31.5 billion in Retail Banking and drawdowns against UK Government lending schemes in Commercial Banking.
Bank net interest margin (NIM) of 1.71% was 28 basis points lower than 2019, principally reflecting the impact of the falling yield curve and mortgage margin dilution, although this partly receded in the latter part of the year. Q4 2020 Bank NIM of 1.66% increased by 1 basis point in comparison to Q3 2020 as lower average central liquidity and improved asset margins more than offset reduced structural hedge income as a result of lower swap rates.
NatWest Markets income excluding asset disposal/strategic risk reduction, own credit adjustments (OCA) and notable items increased by 21.4% in comparison to 2019 reflecting increased customer activity as the market reacted to the spread of the COVID-19 virus.
Litigation and conduct costs of £113 million represent £473 million of additional charges offset by various releases as programmes conclude, including a £277 million PPI release, with final agreement reached on 18 February 2021 with the Official Receiver in relation to a portfolio of historical PPI claims. The additional charges mainly represent increased cost of review and execution of Other Customer Redress as well as Litigation provisions.
Strategic costs of £1,013 million included £256 million related to property charges, £173 million redundancy costs and a £154 million charge related to technology spend.
Other expenses, excluding OLD, decreased by £277 million, or 4.0%, compared with 2019 reflecting the continued transition from physical to digital, the optimisation of our property footprint, lower investment spend and reductions in NatWest Markets in line with the strategic announcement made in February 2020. Headcount reduced by c.4,100, or 6.4%.
The net impairment loss of £3,242 million, 88 basis points of gross customer loans, mainly reflects charges taken in the first half of 2020 due to the uncertain economic environment. The level of Stage 3 defaults remains low, reflecting the impact of government support. Total impairment provisions increased by £2.4 billion to £6.2 billion compared with 2019 and the ECL coverage ratio increased from 1.13% to 1.66%.
The full year attributable loss was £753 million with earnings per share of (6.2) pence and a return on tangible equity of (2.4%). A final dividend of 3 pence per share is proposed.
Net lending across the retail and commercial businesses increased by £20.9 billion in 2020 supported by £12.9 billion drawdowns against UK Government lending schemes and £16.2 billion mortgage lending, including £3.0 billion related to the Metro Bank plc mortgage portfolio acquisition. This growth has been partially offset by lower unsecured balances, which were impacted by lower spend and higher repayments, subdued business activity and increased loan provisions. In Q4 2020, net lending across the retail and commercial businesses increased by £4.5 billion as mortgage growth of £6.2 billion and £1.6 billion of lending against UK Government lending schemes more than offset £2.4 billion net RCF repayments.
Customer deposits increased by £62.5 billion, or 16.9%, in comparison to 2019 with retail and commercial balances £60.5 billion higher as consumer spending was impacted by government restrictions and customers retained liquidity. In Q4 2020, customer deposits increased by £13.3 billion.
 
Capital and leverage
CET1 ratio of 18.5%, was 230 basis points higher than 2019, including c.100 basis points related to IFRS 9 transitional relief. The CET1 ratio increased by 30 basis points in comparison to Q3 2020 as the £3.6 billion reduction in RWAs and a 23 basis point software intangible benefit were partially offset by the 3 pence proposed final dividend, 21 basis points, and linked pension contribution, 16 basis points.
The total capital ratio increased by 330 basis points to 24.5% in comparison to 2019.
RWAs decreased by £8.9 billion, or 5.0%, compared with 2019 including an £11.0 billion reduction in NatWest Markets to £26.9 billion, partially offset by volume growth across the retail and commercial businesses with minimal levels of procyclical credit risk inflation. RWAs reduced by £3.6 billion compared with Q3 2020 mainly reflecting ongoing capital optimisation actions in NatWest Markets, including the sale of the remaining shareholding in Saudi British Bank (SABB).
The CRR leverage ratio increased by c.10 basis points compared with 2019 reflecting a £3.3 billion increase in Tier 1 capital, partially offset by a £59.2 billion increase in the leverage exposure. The UK leverage ratio increased by c.60 basis points reflecting a £3.3 billion increase in Tier 1 capital.
Funding and liquidity
The liquidity portfolio increased by £63 billion in 2020 to £262 billion primarily driven by the significant growth in customer deposits, which exceeded lending growth. The LCR increased by 13 percentage points in 2020 to 165%, representing £72.1 billion headroom above 100%, including the net £5.0 billion reduction related to Term Funding Scheme (TFS) repayments and a Term Funding Scheme with additional incentives for SMEs (TFSME) drawdown in the year. In comparison to Q3 2020 LCR increased by 8 percentage points primarily reflecting the continued growth in customer deposits.
The loan:deposit ratio of 84% was 5 percentage points lower than 2019 as growth in customer deposits exceeded lending growth due to the impact of government restrictions on consumer spending and customers retaining liquidity.
Total Wholesale funding increased by £4 billion compared with 2019. Short-term wholesale funding was £19 billion, in line with 2019.
 
Summary consolidated income statement for the period ended 31 December 2020
 
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Net interest income
7,749
8,047
 
1,971
1,926
2,037
Own credit adjustments
(24)
(80)
 
(43)
(34)
(22)
Strategic disposals
-
1,035
 
-
-
Other non-interest income
3,071
5,251
 
607
531
2,218
Non-interest income
3,047
6,206
 
564
497
2,196
Total income
10,796
14,253
 
2,535
2,423
4,233
Litigation and conduct costs
(113)
(895)
 
(194)
(8)
(85)
Strategic costs
(1,013)
(1,381)
 
(326)
(223)
(537)
Other expenses
(6,779)
(7,049)
 
(1,821)
(1,583)
(1,905)
Operating expenses
(7,905)
(9,325)
 
(2,341)
(1,814)
(2,527)
Profit before impairment losses
2,891
4,928
 
194
609
1,706
Impairment losses
(3,242)
(696)
 
(130)
(254)
(160)
Operating (loss)/profit before tax
(351)
4,232
 
64
355
1,546
Tax charge
(83)
(432)
 
(84)
(207)
(37)
(Loss)/profit for the period
(434)
3,800
 
(20)
148
1,509
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
Ordinary shareholders
(753)
3,133
 
(109)
61
1,410
Preference shareholders
26
39
 
5
5
9
Paid-in equity holders
355
367
 
83
80
90
Non-controlling interests
(62)
261
 
1
2
-
 
Notable items within total income
 
 
 
 
 
 
Own credit adjustments (OCA)
(24)
(80)
 
(43)
(34)
(22)
Alawwal bank merger gain in NatWest Markets
-
444
 
-
-
-
FX recycling (loss)/gain in Central items & other (1)
(40)
1,459
 
(1)
64
1,169
Legacy liability release in Central items & other
-
256
 
-
-
-
Loss on redemption of own debt
(324)
-
 
-
(324)
-
Liquidity Asset Bond sale gain/(loss)
113
(16)
 
2
1
(8)
IFRS volatility in Central items & other (2)
83
9
 
45
49
43
Retail Banking debt sale gain
8
49
 
1
4
31
Metro Bank mortgage portfolio acquisition loss
(58)
-
 
(58)
-
-
Vocalink gain on disposal
-
45
 
-
-
-
Commercial Banking fair value and disposal (loss)/gain
(37)
(16)
 
(27)
1
1
NatWest Markets asset disposals/strategic risk reduction (3)
(83)
(35)
 
(8)
(12)
-
Share of losses under equity accounting for
 
 
 
 
 
 
   Business Growth Fund
(22)
-
 
8
(46)
-
Total
(384)
2,115
 
(81)
(297)
1,214
 
Notes:
(1)
2019 Includes £290 million arising on the completion of the Alawwal bank merger, £1,102 million arising on the liquidation of RFS Holdings and £67 million in relation to dividends from UBI DAC.
(2)
IFRS volatility relates to loans which are economically hedged but for which hedge accounting is not permitted under IFRS.
(3)
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. Prior period comparatives refer to the previously disclosed NatWest Markets legacy business disposal losses.
 
Business performance summary
Retail Banking
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Total income
4,181
4,866
 
974
1,022
1,195
Operating expenses
(2,540)
(3,618)
 
(818)
(647)
(788)
Impairment losses
(792)
(393)
 
(65)
(70)
(81)
Operating profit
849
855
 
91
305
326
Return on equity
10.2%
9.6%
 
3.8%
15.3%
14.9%
Net interest margin
2.13%
2.47%
 
2.03%
2.05%
2.32%
Cost:income ratio
60.8%
74.4%
 
84.0%
63.3%
65.9%
Loan impairment rate
45bps
25bps
 
15bps
17bps
20bps
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
172.3
166.7
158.9
Customer deposits
 
 
 
171.8
164.9
150.3
RWAs
 
 
 
36.7
36.3
37.8
 
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 full year 2019 operating profit would have been to decrease total income by £44 million and other expenses by £8 million. The net impact on Q4 2019 operating profit would have been to decrease total income by £11 million and other expenses by £2 million. The net impact on the Q4 2019 balance sheet would have been to decrease customer deposits by £0.2 billion.
 
Throughout 2020 Retail Banking helped approximately 258,000 customers with a mortgage repayment holiday and as at 31 December 2020 had 16,000 active mortgage repayment holidays, representing 1% of the book by volume. Additionally, Retail Banking had approximately 17,000, or 2%, of personal loan customers on active repayment holidays as at Q4 2020.
 
NatWest Group acquired a £3.0 billion prime UK mortgage portfolio from Metro Bank plc on 18 December 2020. The impact on full year 2020 operating profit was a £58 million loss on acquisition, a £2 million increase in net interest income and a £9 million increase in impairment losses. The impact on the Q4 2020 balance sheet was to increase net loans to customers by £3.0 billion and RWAs by £1.2 billion. The portfolio will be earnings accretive within two years.
 
2020 compared with 2019
Total income was £685 million, or 14.1%, lower as regulatory changes and COVID-19 support measures impacted fee income, combined with lower deposit returns and unsecured balances, partially offset by strong balance growth in mortgages and customer deposits.
Net interest margin decreased by 34 basis points reflecting the impact of the lower yield curve on deposit returns, lower unsecured balances and mortgage margin pressure, as front book margins were lower than back book margins.
Other expenses decreased by £108 million, or 4.5%, reflecting a significant reduction in headcount, enabled by digital transformation benefits and increased digital adoption, lower fraud costs and COVID-19 slowing down investment spend. Litigation and conduct costs were £19 million.
Impairment losses of £792 million largely reflect significant Stage 2 ECL uplifts taken in H1 2020 for expected future economic deterioration.
Net loans to customers increased by £13.4 billion, or 8.4%, as a result of strong gross new mortgage lending and retention. Gross new mortgage lending was £31.5 billion with flow share of 13%, supporting a stock share of 10.9%, up from 10.2% at Q4 2019. Personal advances and cards reduced by £1.2 billion and £0.5 billion respectively reflecting lower spend and higher repayments due to COVID-19 restrictions.
Customer deposits increased by £21.5 billion, or 14.3%, as UK Government backed initiatives for COVID-19, combined with restrictions, resulted in lower customer spend and increased savings.
RWAs decreased by £1.1 billion, or 2.9%, supported by lower personal unsecured balances.
 
Q4 2020 compared with Q3 2020
Total income was £48 million lower impacted by a £58 million loss on acquisition. Excluding this impact, total income was £10 million higher as increased mortgage margins, strong balance growth, and a full quarter impact of customer rate changes on overdrafts and savings offset the impact of the lower yield curve. Net interest margin decreased by 2 basis points due to lower deposit returns. Q4 2020 mortgage front book margins were approximately 160 basis points, resulting in an improved overall mortgage book margin, with application margins around 180 basis points in the quarter.
Other expenses were £6 million higher largely due to the inclusion of the annual UK bank levy charge, partially offset by lower staff costs related to a 3.6% reduction in headcount.
Litigation and conduct costs of £210 million in Q4 2020 primarily reflect additional charges related to the increased cost of review and execution of Other Customer Redress.
Impairment losses of £65 million in Q4 2020 primarily reflect Stage 3 default charges and updated economic scenarios.
Net loans to customers increased by £5.6 billion, supported by gross new mortgage lending of £8.4 billion.
 
Q4 2020 compared with Q4 2019
Total income decreased by £221 million, or 18.5%, as a result of lower deposit returns, reduced unsecured balances, lower fees from regulatory changes and reduced customer spend, partially offset by mortgage income growth.
Other expenses were £76 million, or 11.8%, lower as headcount reduction was enabled by digital simplification.
 
Business performance summary
Ulster Bank RoI
 
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
€m
€m
 
€m
€m
€m
Total income
574
647
 
144
145
162
Operating expenses
(548)
(630)
 
(127)
(138)
(162)
Impairment releases/(losses)
(281)
38
 
3
(6)
(5)
Operating (loss)/profit
(255)
55
 
20
1
(5)
Return on equity
(11.7%)
2.3%
 
3.9%
0.2%
(0.9%)
Net interest margin (1)
1.50%
1.59%
 
1.48%
1.47%
1.57%
Cost:income ratio (1)
95.5%
97.4%
 
88.2%
95.2%
100.0%
Loan impairment rate (1)
134bps
(17)bps
 
(6)bps
11bps
9bps
 
 
 
 
€bn
€bn
€bn
Net loans to customers (amortised cost)
 
 
 
20.0
20.2
21.4
Customer deposits
 
 
 
21.8
21.6
21.7
RWAs
 
 
 
13.2
13.3
15.3
Note:
(1) Ratios have been presented on a euro basis. Euro comparatives have been restated.
 
Following an extensive review and despite the progress that has been made, it has become clear Ulster Bank will not be able to generate sustainable long term returns for our shareholders. As a result, we are to begin a phased withdrawal from the Republic of Ireland over the coming years which will be undertaken with careful consideration of the impact on customers and our colleagues.
 
Throughout the difficulties and uncertainties of 2020, Ulster Bank RoI has continued to support its customers COVID-19 by keeping its branches, cash and call centres open throughout and by making significant improvements to its digital platforms. During 2020 almost 18,000 payment breaks were provided, with 82% returning to payment arrangements as at 31 December 2020. Additionally, Ulster Bank RoI continued to support its commercial customers by providing them assistance with the Future Growth Loan and Credit Guarantee schemes initiated by the Irish government.
 
2020 compared with 2019
Total income decreased by €73 million, or 11.3%, reflecting lower lending volumes and fee income due to the impact of COVID-19, lower FX gains, lower hedging income and a one-off swap breakage benefit in 2019. Net Interest margin decreased by 9 basis points due to the impact of negative rates on increased liquid assets.
Other expenses decreased by €25 million, or 4.7%, reflecting a 6.9% headcount reduction following the scale-down of functional teams and lower marketing, back office and project costs, partially offset by higher pension costs due to a one-off credit in 2019.
Impairment losses of €281 million reflect the charges taken in the first half of 2020 which were significantly impacted by the uncertain economic environment created by the COVID-19 pandemic.
Net loans to customers decreased by €1.4 billion, or 6.5%, as repayments exceeded gross new lending of €2.1 billion, combined with a €0.3 billion de-recognition of non-performing loans (NPLs) from a sale agreed in Q4 2019, and increased loan provisions.
Customer deposits increased by €0.1 billion, or 0.5%, due to a large one-off placement at the end of the year, partially offset by earlier reductions in commercial balances due to pricing changes, including the implementation of negative rates on large and mid-sized corporate customers and non-bank financial institutions.
RWAs decreased by €2.1 billion, or 13.7%, reflecting the impact of NPL de-recognitions and lower lending volumes.
 
Q4 2020 compared with Q3 2020
Total income and net interest margin remained broadly stable as government measures and lockdown restrictions continued to impact transaction volumes.
Other expenses decreased by €17 million reflecting lower project costs, lower back office operations costs and a number of one-off items.
A net impairment release of €3 million in Q4 2020 reflects payment breaks in part mitigating the full impact of credit losses attributable to the COVID-19 pandemic.
Net loans to customers decreased by €0.2 billion as repayments continued to exceed gross new lending of €0.5 billion, which was in line with the previous quarter.
Customer deposits increased by €0.2 billion resulting in a loan:deposit ratio of 92%, down from 93% in Q3 2020.
 
Q4 2020 compared with Q4 2019
Total income decreased by €18 million, or 11.1%, reflecting the impact of COVID-19 on lending volumes and fee income combined with lower FX gains.
Other expenses decreased by €16 million, or 12.5%, reflecting lower staff, administration and marketing costs partially offset by one-off items.
 
 
Business performance summary
Commercial Banking
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Total income
3,958
4,318
 
951
1,004
1,076
Operating expenses
(2,430)
(2,600)
 
(656)
(553)
(700)
Impairment losses
(1,927)
(391)
 
(10)
(127)
(81)
Operating (loss)/profit
(399)
1,327
 
285
324
295
Return on equity
(4.5%)
8.4%
 
8.1%
9.2%
7.6%
Net interest margin
1.68%
1.95%
 
1.56%
1.65%
1.94%
Cost:income ratio
59.9%
58.9%
 
67.8%
53.4%
63.9%
Loan impairment rate
173bps
38bps
 
4bps
45bps
32bps
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
108.2
110.0
101.2
Customer deposits
 
 
 
167.7
161.3
135.0
RWAs
 
 
 
75.1
76.5
72.5
 
Commercial Banking continues to support customers through a comprehensive package of initiatives including participation in the UK Government’s financial support schemes. During 2020, £8.6 billion BBLS, £3.9 billion CBILS and £1.3 billion CLBILS had been approved. Since 22 March 2020 Commercial Banking provided payment holidays on over 74,000 customer accounts and as at 31 December 2020 had active payment holidays on c.11,000 customer accounts, representing 4% of the lending book by value.
 
2020 compared with 2019
Total income decreased by £360 million, or 8.3%, reflecting lower deposit returns and subdued transactional business activity, combined with a £21 million increase in fair value and disposal losses, primarily through risk mitigation actions. Net Interest margin decreased by 27 basis points reflecting the impact of the lower yield curve on deposit returns and increased liquidity portfolio costs from higher deposit volumes, partially offset by deposit repricing.  
Other expenses, excluding OLD, increased by £18 million, or 0.9%, as £80 million higher back office operations costs, increased innovation spend and £19 million lower VAT recoveries were partially offset by a headcount reduction of 1.0% following operating model efficiencies in the second half of 2019 and COVID-19 slowing down investment spend.
Impairment losses of £1,927 million primarily reflect the deterioration of the economic outlook as a result of the COVID-19 pandemic driving significant Stage 2 charges, with total Stage 3 charges of £318 million, including a small number of single name charges. 
Net loans to customers increased by £7.0 billion, or 6.9%, as £12.6 billion drawdowns against UK Government lending schemes were partially offset by lower specialised business lending and increased loan provisions. RCF utilisation decreased to c.22% of committed facilities, below Q4 2019 pre-COVID-19 levels of c.27% and significantly lower than the peak of c.40% in April 2020.
Customer deposits increased by £32.7 billion, or 24.2%, as customers built and retained liquidity in light of economic uncertainty combined with the impact of government and central bank actions in light of COVID-19.
RWAs increased by £2.6 billion, or 3.6%, reflecting volume growth and £2.4 billion higher risk parameters, partially offset by a £0.8 billion reduction related to active capital management 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.
 
Q4 2020 compared with Q3 2020
Total income decreased by £53 million reflecting £27 million fair value and disposal losses, mainly through risk mitigation actions, and the impact of lower deposit returns. Net Interest margin decreased by 9 basis points primarily due to the lower yield curve impacting deposit returns.
Other expenses, excluding OLD, increased by £70 million as the annual UK bank levy charge of £90 million and higher innovation spend was partially offset by cost reduction actions and £8 million higher VAT recoveries.
Net loans to customers decreased by £1.8 billion as RCF repayments of £2.4 billion more than offset by £1.4 billion drawdowns against UK Government lending schemes, including £0.7 billion related to BBLS, £0.5 billion related to CBILS and £0.2 billion related to CLBILS.
Customer deposits increased by £6.4 billion as customers continued to build and retain liquidity in light of economic uncertainty combined with the impact of government and central bank actions in light of COVID-19.
RWAs decreased by £1.4 billion as lower lending volumes and a £0.6 billion reduction related to active capital management were partially offset by £0.6 billion higher risk parameters.
 
 
Q4 2020 compared with Q4 2019
Total income decreased by £125 million, or 11.6%, reflecting the impact of the lower yield curve on deposit returns and subdued transactional business activity, combined with a £27 million fair value and disposal loss, mainly through risk mitigation actions, compared with a £1 million gain in Q4 2019.
Other expenses, excluding OLD, increased by £18 million, or 3.3%, reflecting £37 million higher back office operations costs, £18 million lower VAT recoveries and increased innovation spend, partially offset by a headcount reduction of 1.0% following operating model efficiencies in the second half of 2019 and other cost reduction actions.
 
Business performance summary
Private Banking – commentary adjusted for transfers
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Total income
763
777
 
184
187
195
Operating expenses
(455)
(486)
 
(91)
(112)
(135)
Impairment (losses)/releases
(100)
6
 
(26)
(18)
1
Operating profit
208
297
 
67
57
61
Return on equity
10.3%
15.4%
 
13.3%
11.2%
12.0%
Net interest margin
2.05%
2.40%
 
1.86%
1.99%
2.30%
Cost:income ratio
59.6%
62.5%
 
49.5%
59.9%
69.2%
Loan impairment rate
58bps
(4)bps
 
61bps
43bps
(3)bps
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
17.0
16.5
15.5
Customer deposits
 
 
 
32.4
30.3
28.4
RWAs
 
 
 
10.9
10.6
10.1
Assets Under Management (AUMs)
 
 
 
29.1
27.3
23.2
Assets Under Administration (AUAs) (1)
 
 
 
3.0
2.8
7.2
Assets Under Management and Administration (AUMA)
 
 
 
32.1
30.1
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 full year 2019 operating profit would have been to increase total income by £44 million and other expenses by £8 million. The net impact on Q4 2019 operating profit would have been to increase total income by £11 million and other expenses by £2 million. The net impact on the Q4 2019 balance sheet would have been to increase customer deposits by £0.2 billion. AUMs would have been £4.6 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 personal loan repayment deferrals in appropriate circumstances and via participation in the UK Government’s financial support schemes. During 2020, £58 million BBLS, £237 million CBILS and £44 million CLBILS had been approved.
 
2020 compared with 2019
Total income decreased by £58 million, or 7.1%, primarily reflecting lower deposit funding benefits and a reduction in fee income partially offset by balance sheet growth. Net Interest margin decreased by 35 basis points reflecting lower deposit funding benefits and higher liquidity portfolio costs.
Other expenses increased by £19 million, or 4.3%, reflecting higher investment spend focused on enhancing the client proposition and a number of one-off items partially offset by lower back office operations costs.
Impairment losses of £100 million primarily reflect Stage 1 and Stage 2 charges due to the deterioration of the economic outlook, with total Stage 3 charges of £15 million.
Net loans to customers increased by £1.5 billion, or 9.7%, supported by £0.7 billion of mortgage lending growth and £0.3 billion drawdowns against UK Government lending schemes. RWAs increased by £0.8 billion, or 7.9%, primarily reflecting increased lending volumes.
Customer deposits increased by £3.8 billion, or 13.3%, reflecting £2.3 billion of commercial inflows and £1.5 billion of personal inflows.
AUMAs increased by £1.7 billion, or 5.6%, reflecting positive investment performance of £0.9 billion and net new money inflows of £0.8 billion, which were impacted by EEA resident client outflows following the UK’s exit from the EU.
 
Q4 2020 compared with Q3 2020
Total income decreased by £3 million mainly due to lower deposit funding benefits and an internal profit share adjustment with RBS International related to the provision of services partially offset by an increase in fee income and balance sheet growth. Net Interest margin decreased by 13 basis points primarily due to lower deposit funding benefits.
Other expenses increased by £13 million largely reflecting the annual UK bank levy charge. Q4 2020 included a litigation and conduct release of £29 million.
Net loans to customers increased by £0.5 billion primarily due to mortgage lending growth and drawdowns against UK Government lending schemes.
Customer deposits increased by £2.1 billion due to £1.0 billion of commercial inflows and £1.1 billion of personal inflows.
AUMAs increased by £2.0 billion reflecting positive investment performance of £1.8 billion and net new money inflows of £0.2 billion, which were impacted by EEA resident client outflows following the UK’s exit from the EU.
 
Q4 2020 compared with Q4 2019
Total income decreased by £22 million, or 10.7%, reflecting lower deposit funding benefits and a reduction in fee income partially offset by balance sheet growth.
Other expenses decreased by £3 million, or 2.5%, reflecting lower back office operations costs partially offset by higher investment spend and a number of one-off items.
 
 
Business performance summary
RBS International
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Total income
497
610
 
126
112
150
Operating expenses
(291)
(264)
 
(112)
(53)
(83)
Impairment losses
(107)
(2)
 
(27)
(34)
(5)
Operating profit
99
344
 
(13)
25
62
Return on equity
6.1%
25.7%
 
(5.5%)
6.4%
17.3%
Net interest margin
1.17%
1.60%
 
1.03%
1.07%
1.47%
Cost:income ratio
58.6%
43.3%
 
88.9%
47.3%
55.3%
Loan impairment rate
80bps
1bps
 
81bps
105bps
14bps
 
 
 
 
£bn
£bn
£bn
Net loans to customers (amortised cost)
 
 
 
13.3
12.8
14.1
Customer deposits
 
 
 
31.3
30.4
30.1
RWAs
 
 
 
7.5
7.0
6.5
 
As at 31 December 2020, RBS International has supported 1,240 mortgage repayment breaks, reflecting a mortgage value of £268 million, and has provided financial support for 622 business customers with working capital facilities, reflecting a value of £588 million, while continuing to suspend a range of fees and charges for its personal and business customers.
 
2020 compared with 2019
Total income decreased by £113 million, or 18.5%, 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 43 basis points due to lower deposit funding benefits as a result of central bank interest rate reductions.
Other expenses were stable as front office non-staff cost reduction actions and a 5.6% headcount reduction were offset by a higher bank levy charge.
Impairment losses of £107 million primarily reflect a more uncertain economic environment and refreshed staging and maturity date analysis.
Net loans to customers decreased by £0.8 billion, or 5.7%, as customers repaid facilities to position themselves in the uncertain environment, partially offset by increased investment activity in the latter part of 2020.
Customer deposits increased by £1.2 billion, or 3.8%, due to short term placement inflows across both Institutional and Local Banking.
RWAs increased by £1.0 billion, or 15.4%, due to customer maturities and higher lending facilities in the wholesale sector.
 
Q4 2020 compared with Q3 2020
Total income increased by £14 million due to the full quarter impact of reinstating fees previously waived to support customers at the start of the COVID-19 pandemic, an increase in internal profit share in relation to agency fees in NatWest Markets and the provision of services in Private Banking. Net Interest margin reduced by 4 basis points primarily due to higher inflow of customer deposit balances.
Other expenses increased by £23 million mainly due to the inclusion of the £17 million annual bank levy charge.
Impairment losses of £27 million in Q4 2020 largely reflect Stage 1 and Stage 2 charges within the wholesale sector. Stage 3 charges remain low despite continued economic uncertainty.
Net loans to customers increased by £0.5 billion reflecting drawdowns in the Institutional Banking sector as investment activity increased.
Customer deposits increased by £0.9 billion due to short term placements across both Institutional and Local Banking.
RWAs increased by £0.5 billion primarily reflecting increased lending volumes in the Institutional Banking sector.
 
Q4 2020 compared with Q4 2019
Total income decreased by £24 million, or 16.0%, primarily reflecting lower deposit funding benefits due to central bank interest rate reductions partially offset by higher fee income as a result of non-utilisation fees and an internal profit share in relation to agency fees in NatWest Markets and the provision of services in Private Banking.
Other expenses decreased by £5 million, or 6.4%, as a £10 million reduction in front office costs relating to lower non-staff costs and lower headcount was partially offset by a higher bank levy charge.
.
 
Business performance summary
NatWest Markets (1)
 
Year ended and as at
 
Quarter ended and as at
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Total income
1,123
1,342
 
73
234
250
of which:
 
 
 
 
 
 
   - Income excluding asset disposals/strategic risk
 
 
 
 
 
 
        reduction and own credit adjustments
1,230
1,422
 
124
280
272
   - Asset disposals/strategic risk reduction (2)
(83)
-
 
(8)
(12)
-
   - Own credit adjustments
(24)
(80)
 
(43)
(34)
(22)
Operating expenses
(1,310)
(1,418)
 
(301)
(302)
(392)
Impairment releases/(losses)
(40)
51
 
(2)
2
10
Operating (loss)
(227)
(25)
 
(230)
(66)
(132)
Return on equity
(3.8%)
(3.2%)
 
(15.0%)
(4.7%)
(6.5%)
Cost:income ratio
116.7%
105.7%
 
nm
129.1%
156.8%
 
 
 
 
£bn
£bn
£bn
Funded assets
 
 
 
105.9
121.3
116.2
RWAs
 
 
 
26.9
30.0
37.9
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.
 
NatWest Markets has made significant progress in reshaping the business for the future and advancing its transformation to deliver the refocused strategy announced in February 2020. As progress has been made against the strategy, RWAs have reduced and the business is ahead of its plan to achieve the medium-term reduction to £20 billion.
 
By accelerating its transformation to become a more integrated and sustainable part of NatWest Group, NatWest Markets has focused on what it does best and what matters to NatWest Group’s customers. The product offering has been simplified and in Q2 2020 NatWest Markets entered an agreement with BNP Paribas to provide ‘house’ Futures and associated back office services. NatWest Markets has consolidated certain customer coverage teams and services and functional teams with their counterparts from across NatWest Group, enhancing our collaborative approach to customers.
 
2020 compared with 2019
Total income decreased by £219 million, or 16.3%, reflecting the £444 million Alawwal bank merger gain in 2019 and an increase in disposal losses of £48 million partially offset by stronger business performance in the current year.
Income excluding asset disposals/strategic risk reduction, OCA and notable items increased by £217 million, or 21.4%, reflecting a strong performance over the year, particularly in the first half of 2020 as customer activity increased as the market reacted to the spread of the COVID-19 virus.
Other expenses decreased by £140 million, or 11.9%, reflecting continued reductions in line with the strategic announcement in February 2020.
Impairment losses of £40 million reflect the impact of Stage 2 charges taken in the first half of 2020 compared with a net impairment release of £51 million in the prior year for a small number of legacy cases.
RWAs decreased by £11.0 billion, or 29.0%, as market risk and counterparty credit risk decreased by £3.6 billion and £3.5 billion respectively and credit risk decreased by £3.4 billion as the business exceeded its target for RWA reductions over the course of 2020.
 
Q4 2020 compared with Q3 2020
Total income decreased by £161 million reflecting a weaker performance in the Fixed Income business amid lower levels of customer activity.
Other expenses increased by £19 million primarily reflecting the inclusion of the annual UK bank levy charge.
RWAs decreased by £3.1 billion reflecting ongoing capital optimisation actions, including the sale of NatWest Markets’ remaining shareholding in Saudi British Bank (SABB).
 
Q4 2020 compared with Q4 2019
Total income decreased by £177 million, or 70.8%, reflecting a small number of one-off releases in the prior year and a weaker performance in the Fixed Income business amid lower levels of customer activity.
Other expenses decreased by £52 million, or 17.6%, reflecting continued reductions in line with the strategic announcement in February 2020.
 
 

 
Business performance summary
Central items & other
 
Year ended
 
Quarter ended
 
31 December
31 December
 
31 December
30 September
31 December
 
2020
2019
 
2020
2020
2019
 
£m
£m
 
£m
£m
£m
Central items not allocated
(655)
1,385
 
(154)
(285)
939
 
Central items not allocated represented a £655 million operating loss in 2020 principally reflecting the day one loss on redemption of own debt of £324 million related to the repurchase of legacy instruments, property related strategic costs, litigation and conduct charges and other treasury income. 2019 included £1,459 million of FX recycling gains, a £169 million reimbursement under indemnification agreements relating to US residential mortgage-backed securities (RMBS) and strategic costs of £449 million, which were mainly property related.
 
 
 
Business performance summary
Capital and leverage ratios
 
CRR basis (1)
 
31 December 
30 September 
31 December 
 
2020
2020
2019
Capital adequacy ratios
CET1
18.5
18.2
16.2
Tier 1
21.4
20.5
18.5
Total
24.5
23.7
21.2
 
 
 
 
Capital
£m
£m
£m
Tangible equity
31,712
32,093
32,371
 
 
 
 
Expected loss less impairment provisions
-
-
(167)
Prudential valuation adjustment
(286)
(341)
(431)
Deferred tax assets
(760)
(835)
(757)
Own credit adjustments
(1)
(154)
(118)
Pension fund assets
(579)
(590)
(474)
Cash flow hedging reserve
(229)
(300)
(35)
Foreseeable ordinary and special dividends
(364)
-
(968)
Foreseeable charges
(266)
-
(365)
Prudential amortisation of software development costs
473
-
-
Adjustments under IFRS 9 transitional arrangements
1,747
1,719
-
Other adjustments for regulatory purposes
-
-
(2)
Total deductions
(265)
(501)
(3,317)
 
 
 
 
CET1 capital
31,447
31,592
29,054
AT1 capital
4,983
3,990
4,051
Tier 1 capital
36,430
35,582
33,105
Tier 2 capital
5,255
5,710
4,900
 
 
 
 
Total regulatory capital
41,685
41,292
38,005
 
 
 
 
Risk-weighted assets
 
 
 
Credit risk
129,914
132,387
131,012
Counterparty credit risk
9,104
10,170
12,631
Market risk
9,362
9,399
12,930
Operational risk
21,930
21,930
22,599
Total RWAs
170,310
173,886
179,172
 
 
 
 
Leverage (1)
 
 
 
Cash and balances at central banks*
124,489
111,681
80,993
Trading assets
68,990
70,820
76,745
Derivatives
166,523
164,311
150,029
Other financial assets*
422,647
418,998
395,953
Other assets
16,842
25,751
19,319
Total assets
799,491
791,561
723,039
Derivatives
 
 
 
  - netting and variation margin
(172,658)
(172,389)
(157,778)
  - potential future exposures
38,171
40,439
43,004
Securities financing transactions gross up
1,179
1,193
2,224
Undrawn commitments
45,853
44,650
42,363
Regulatory deductions and other adjustments
(8,943)
(17,167)
(8,978)
CRR Leverage exposure
703,093
688,287
643,874
 
 
 
 
CRR leverage ratio % (2)
5.2
5.2
5.1
 
 
 
 
UK leverage exposure
572,558
576,889
570,330
UK leverage ratio % (3)
6.4
6.2
5.8
 
*September 2020 and December 2019 data has been restated for the accounting policy change for balances held with central banks. Refer to Accounting policy changes effective 1 January 2020 for further details.
 
Notes:
(1)
Based on CRR end point including the IFRS 9 transitional uplift to capital of £1.7 billion and £0.2 billion to RWAs. Excluding this adjustment, the CET1 ratio would be 17.5%.
(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 6.1%.
 
Business performance summary
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 Bank
Commercial
Private
RBS
NatWest
Central items
 
 
Banking
RoI
Banking
Banking
International
Markets
& other
Total
2020
£m
£m
£m
£m
£m
£m
£m
£m
Loans - amortised cost and FVOCI
 
 
 
 
 
 
 
 
Stage 1
139,956
14,380
70,685
15,321
12,143
7,780
26,859
287,124
Stage 2
32,414
3,302
37,344
1,939
2,242
1,566
110
78,917
Stage 3
1,891
1,236
2,551
298
211
171
6,358
Of which: individual
43
1,578
298
211
162
2,292
Of which: collective
1,891
1,193
973
9
4,066
 
174,261
18,918
110,580
17,558
14,596
9,517
26,969
372,399
ECL provisions (1)
 
 
 
 
 
 
 
 
Stage 1
134
45
270
31
14
12
13
519
Stage 2
897
265
1,713
68
74
49
15
3,081
Stage 3
806
492
1,069
39
48
132
2,586
Of which: individual
13
607
39
48
124
831
Of which: collective
806
479
462
8
1,755
 
1,837
802
3,052
138
136
193
28
6,186
ECL provisions coverage (2,3)
 
 
 
 
 
 
 
 
Stage 1 (%)
0.10
0.31
0.38
0.20
0.12
0.15
0.05
0.18
Stage 2 (%)
2.77
8.03
4.59
3.51
3.30
3.13
13.64
3.90
Stage 3 (%)
42.62
39.81
41.91
13.09
22.75
77.19
40.67
 
1.05
4.24
2.76
0.79
0.93
2.03
0.10
1.66
Impairment losses
 
 
 
 
 
 
 
 
ECL charge (4)
792
250
1,927
100
107
40
26
3,242
Stage 1
(36)
(68)
(58)
25
8
(2)
10
(121)
Stage 2
619
261
1,667
60
71
54
15
2,747
Stage 3
209
57
318
15
28
(12)
1
616
Of which: individual
(12)
166
15
28
(3)
194
Of which: collective
209
69
152
(9)
1
422
ECL loss rate - annualised (basis points) (3)
45
132
174
57
73
42
10
87
Amounts written-off
378
219
321
5
3
11
937
Of which: individual
172
5
3
11
191
Of which: collective
378
219
149
746
 
Business performance summary
Portfolio summary – segment analysis continued
 
 
Retail
Ulster Bank
Commercial
Private
RBS
NatWest
Central items
 
 
Banking
RoI
Banking
Banking
International
Markets
& other
Total
2019*
£m
£m
£m
£m
£m
£m
£m
£m
Loans - amortised cost and FVOCI
 
 
 
 
 
 
 
 
Stage 1
144,513
15,409
88,100
14,956
14,834
9,273
15,282
302,367
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
19,088
101,615
15,750
15,500
9,622
15,285
336,833
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 (2,3)
 
 
 
 
 
 
 
 
Stage 1 (%)
0.08
0.19
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
4.06
1.36
0.27
0.20
1.52
0.04
1.13
Impairment losses
 
 
 
 
 
 
 
 
ECL charge (4)
393
(34)
391
(6)
2
(51)
1
696
Stage 1
(90)
(37)
(66)
(14)
(5)
(212)
Stage 2
256
(35)
99
5
(8)
1
318
Stage 3
227
38
358
8
2
(43)
590
Of which: individual
328
8
2
(35)
303
Of which: collective
227
38
30
(8)
287
ECL loss rate - annualised (basis points) (3)
25
(15)
38
(4)
1
(53)
1
20
Amounts written-off
235
85
450
1
5
16
792
Of which: individual
5
345
1
5
16
372
Of which: collective
235
80
105
420
 
*2019 data has been restated for the accounting policy change for balances held with central banks. Refer to Accounting policy changes effective 1 January 2020 for further details.
 
Notes:
(1) Includes £6 million (2019 - £4 million) related to assets classified as FVOCI.
(2) 
ECL provisions coverage is calculated as ECL provisions divided by loans – amortised cost and FVOCI.
(3) 
ECL provisions coverage and ECL loss rates are calculated on third party loans and related ECL provisions and charge respectively. ECL loss rate is calculated as annualised third party ECL charge divided by loans – amortised cost and FVOCI.
(4) 
Includes a £12 million charge (2019 - £2 million) related to other financial assets, of which £2 million (2019 - £1 million release) related to assets classified as FVOCI; and £28 million (2019 - nil) related to contingent liabilities.
(5) 
The table shows gross loans only and excludes amounts that are outside the scope of the ECL framework. Refer to the Financial instruments within the scope of the IFRS 9 ECL framework section in the NatWest Group plc 2020 Annual Report and Accounts for further details. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £122.7 billion (2019 – £79.2 billion) and debt securities of £53.8 billion (2019 – £59.4 billion).
 
Analysis of ECL provision
The table below shows gross loans and ECL provision analysis.
 
 
31 December 2020
30 September 2020*
30 June 2020*
31 December 2019*
 
£m
£m
£m
£m
Total Loans
372,399
365,276
365,527
336,833
  Personal
204,188
198,274
195,957
188,870
  Wholesale
168,211
167,002
169,570
147,963
 
 
 
 
 
Value of loans in Stage 2
78,917
95,527
97,010
27,868
  Personal
34,352
35,703
30,778
15,034
  Wholesale
44,565
59,824
66,232
12,834
 
 
 
 
 
ECL Provisions in Stage 2
3,081
3,061
3,025
752
  Personal
996
1,011
1,010
503
  Wholesale
2,085
2,050
2,015
249
 
 
 
 
 
ECL Provision Coverage in Stage 2
3.90%
3.20%
3.12%
2.70%
  Personal
2.90%
2.83%
3.28%
3.35%
  Wholesale
4.68%
3.43%
3.04%
1.94%
 
*Q3 2020, Q2 2020 and Q4 2019 data has been restated for the accounting policy change for balances held with central banks. Refer to Accounting policy changes effective 1 January 2020 for further details.
 
Segment performance
 
Year ended 31 December 2020
 
 
 
 
 
 
Central
Total
 
Retail
Ulster
Commercial
Private
RBS
NatWest
 items &
NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
other
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
3,868
395
2,740
489
371
(57)
(57)
7,749
Non-interest income
313
115
1,218
274
126
1,204
(179)
3,071
Own credit adjustments
-
-
-
-
-
(24)
-
(24)
Total income
4,181
510
3,958
763
497
1,123
(236)
10,796
Direct expenses - staff costs
(516)
(198)
(638)
(173)
(117)
(524)
(1,295)
(3,461)
                               - other costs
(208)
(86)
(279)
(83)
(53)
(152)
(2,457)
(3,318)
Indirect expenses
(1,571)
(170)
(1,344)
(210)
(74)
(362)
3,731
-
Strategic costs  - direct
(52)
(12)
(40)
(2)
(45)
(237)
(625)
(1,013)
                             - indirect
(174)
(13)
(139)
(13)
(4)
(30)
373
-
Litigation and conduct costs
(19)
(7)
10
26
2
(5)
(120)
(113)
Operating expenses
(2,540)
(486)
(2,430)
(455)
(291)
(1,310)
(393)
(7,905)
Operating profit/(loss) before impairment losses
1,641
24
1,528
308
206
(187)
(629)
2,891
Impairment losses
(792)
(250)
(1,927)
(100)
(107)
(40)
(26)
(3,242)
Operating profit/(loss)
849
(226)
(399)
208
99
(227)
(655)
(351)
Additional information
 
 
 
 
 
 
 
 
Return on equity (1)
10.2%
(11.7%)
(4.5%)
10.3%
6.1%
(3.8%)
nm
(2.4%)
Cost:income ratio (1)
60.8%
95.3%
59.9%
59.6%
58.6%
116.7%
nm
72.9%
Total assets (£bn)
197.6
26.6
187.4
26.2
34.0
270.1
57.6
799.5
Funded assets (£bn)
197.6
26.6
187.4
26.2
34.0
105.9
55.3
633.0
Net loans to customers - amortised cost (£bn)
172.3
18.0
108.2
17.0
13.3
8.4
23.3
360.5
Loan impairment rate (1)
45bps
133bps
173bps
58bps
80bps
nm
nm
88bps
Impairment provisions (£bn)
(1.8)
(0.8)
(2.9)
(0.1)
(0.1)
(0.2)
(0.1)
(6.0)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.5)
(1.1)
-
-
(0.1)
(0.1)
(2.6)
Customer deposits (£bn)
171.8
19.6
167.7
32.4
31.3
2.6
6.3
431.7
Risk-weighted assets (RWAs) (£bn)
36.7
11.8
75.1
10.9
7.5
26.9
1.4
170.3
RWA equivalent (RWAe) (£bn)
36.7
11.8
75.1
10.9
7.5
28.7
1.6
172.3
Employee numbers (FTEs - thousands)
16.0
2.7
9.6
2.1
1.7
2.2
25.6
59.9
Average interest earning assets (£bn)
181.4
26.4
163.1
23.8
31.7
37.9
nm
493.5
Net interest margin
2.13%
1.50%
1.68%
2.05%
1.17%
(0.15%)
nm
1.57%
Third party customer asset rate (2)
2.89%
2.30%
2.86%
2.53%
2.52%
nm
nm
nm
Third party customer funding rate (2)
(0.19%)
(0.07%)
(0.08%)
(0.11%)
(0.01%)
nm
nm
nm
 
For the notes to this table, refer to page 27. nm = not meaningful.
 
 
Segment performance
 
Year ended 31 December 2019
 
 
 
 
 
 
Central
Total
 
Retail
Ulster
Commercial
Private
RBS
NatWest
 items &
NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
other
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
4,130
400
2,842
521
478
(188)
(136)
8,047
Non-interest income
736
167
1,476
256
132
1,166
1,318
5,251
Own credit adjustments
-
-
-
-
-
(80)
-
(80)
Strategic disposals
-
-
-
-
-
444
591
1,035
Total income
4,866
567
4,318
777
610
1,342
1,773
14,253
Direct expenses - staff costs
(560)
(193)
(686)
(162)
(120)
(626)
(1,220)
(3,567)
                             - other costs
(302)
(96)
(286)
(66)
(57)
(202)
(2,473)
(3,482)
Indirect expenses
(1,541)
(181)
(1,264)
(211)
(67)
(350)
3,614
-
Strategic costs  - direct
(17)
(33)
(41)
(2)
(12)
(178)
(1,098)
(1,381)
                             - indirect
(273)
(27)
(261)
(36)
(8)
(44)
649
-
Litigation and conduct costs
(925)
(22)
(62)
(9)
-
(18)
141
(895)
Operating expenses
(3,618)
(552)
(2,600)
(486)
(264)
(1,418)
(387)
(9,325)
Operating profit/(loss) before impairment (losses)/releases
1,248
15
1,718
291
346
(76)
1,386
4,928
Impairment (losses)/releases
(393)
34
(391)
6
(2)
51
(1)
(696)
Operating profit/(loss)
855
49
1,327
297
344
(25)
1,385
4,232
Additional information
 
 
 
 
 
 
 
 
Return on equity (1)
9.6%
2.3%
8.4%
15.4%
25.7%
(3.2%)
nm
9.4%
Cost:income ratio (1)
74.4%
97.4%
58.9%
62.5%
43.3%
105.7%
nm
65.1%
Total assets (£bn)
182.3
25.4
165.4
23.3
31.7
263.9
31.0
723.0
Funded assets (£bn)
182.3
25.4
165.4
23.3
31.7
116.2
28.7
573.0
Net loans to customers - amortised cost (£bn)
158.9
18.2
101.2
15.5
14.1
8.4
10.6
326.9
Loan impairment rate (1)
25bps
(18)bps
38bps
(4)bps
1bps
nm
nm
21bps
Impairment provisions (£bn)
(1.4)
(0.8)
(1.3)
-
-
(0.1)
(0.1)
(3.7)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.7)
(1.0)
-
-
(0.1)
(0.1)
(2.7)
Customer deposits (£bn)
150.3
18.5
135.0
28.4
30.1
3.7
3.2
369.2
Risk-weighted assets (RWAs) (£bn)
37.8
13.0
72.5
10.1
6.5
37.9
1.4
179.2
RWA equivalent (RWAe) (£bn)
38.2
13.2
72.8
10.1
6.7
40.5
1.7
183.2
Employee numbers (FTEs - thousands)
18.0
2.9
9.7
1.9
1.8
5.0
24.7
64.0
Average interest earning assets (£bn)
167.2
25.1
145.9
21.7
29.9
35.4
nm
448.6
Net interest margin
2.47%
1.59%
1.95%
2.40%
1.60%
(0.53%)
nm
1.79%
Third party customer asset rate (2)
3.23%
2.28%
3.36%
2.93%
2.89%
nm
nm
nm
Third party customer funding rate (2)
(0.37%)
(0.09%)
(0.19%)
(0.35%)
(0.11%)
nm
nm
nm
 
For the notes to this table, refer to page 27. nm = not meaningful.
 
 
Segment performance
 
Quarter ended 31 December 2020
 
 
 
 
 
 
Central
Total
Retail
Ulster
Commercial
Private
RBS
NatWest
 items &
NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
other
Group
 
£m
£m
£m
£m
£m
£m
£m
£m
Income statement
 
 
 
 
 
 
 
 
Net interest income
949
101
667
118
85
(2)
53
1,971
Non-interest income
25
30
284
66
41
118
43
607
Own credit adjustments
-
-
-
-
-
(43)
-
(43)
Total income
974
131
951
184
126
73
96
2,535
Direct expenses - staff costs
(117)
(48)
(141)
(36)
(25)
(90)
(381)
(838)
                               - other costs
(56)
(21)
(68)
(22)
(16)
(21)
(779)
(983)
Indirect expenses
(393)
(31)
(386)
(61)
(32)
(133)
1,036
-
Strategic costs  - direct
(6)
(3)
(35)
2
(37)
(50)
(197)
(326)
                             - indirect
(36)
(3)
(28)
(3)
(1)
(6)
77
-
Litigation and conduct costs
(210)
(8)
2
29
(1)
(1)
(5)
(194)
Operating expenses
(818)
(114)
(656)
(91)
(112)
(301)
(249)
(2,341)
Operating profit/(loss) before impairment (losses)/releases
156
17
295
93
14
(228)
(153)
194
Impairment (losses)/releases
(65)
1
(10)
(26)
(27)
(2)
(1)
(130)
Operating profit/(loss)
91
18
285
67
(13)
(230)
(154)
64
Additional information
 
 
 
 
 
 
 
 
Return on equity (1)
3.8%
3.9%
8.1%
13.3%
(5.5%)
(15.0%)
nm
(1.4%)
Cost:income ratio (1)
84.0%
87.0%
67.8%
49.5%
88.9%
nm
nm
92.2%
Total assets (£bn)
197.6
26.6
187.4
26.2
34.0
270.1
57.6
799.5
Funded assets (£bn)
197.6
26.6
187.4
26.2
34.0
105.9
55.3
633.0
Net loans to customers - amortised cost (£bn)
172.3
18.0
108.2
17.0
13.3
8.4
23.3
360.5
Loan impairment rate (1)
15bps
(2)bps
4bps
61bps
81bps
nm
nm
14bps
Impairment provisions (£bn)
(1.8)
(0.8)
(2.9)
(0.1)
(0.1)
(0.2)
(0.1)
(6.0)
Impairment provisions - stage 3 (£bn)
(0.8)
(0.5)
(1.1)
-
-
(0.1)
(0.1)
(2.6)
Customer deposits (£bn)
171.8
19.6
167.7
32.4
31.3
2.6
6.3
431.7
Risk-weighted assets (RWAs) (£bn)
36.7
11.8
75.1
10.9
7.5
26.9
1.4
170.3
RWA equivalent (RWAe) (£bn)
36.7
11.8
75.1
10.9
7.5
28.7
1.6
172.3
Employee numbers (FTEs - thousands)
16.0
2.7
9.6
2.1
1.7
2.2
25.6
59.9
Average interest earning assets (£bn)
186.1
26.8
170.2
25.2
32.9
36.5
nm
509.6
Net interest margin
2.03%
1.50%
1.56%
1.86%
1.03%
(0.02%)
nm
1.54%
Third party customer asset rate (2)
2.81%
2.33%
2.65%
2.38%
2.34%
nm
nm
nm
Third party customer funding rate (2)
(0.10%)
(0.07%)
(0.01%)
(0.01%)
0.05%
nm
nm
nm
 
For the notes to this table, refer to page 27nm = not meaningful.
 
Segment performance
 
Quarter ended 30 September 2020
 
 
 
 
 
 
Central
Total
 
Retail
Ulster
Commercial
Private
RBS
NatWest
 items &
NatWest
 
Banking
Bank RoI
Banking
Banking
International
Markets
other
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