Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
29 April 2021
Commission file number: 001-10306
Form 6-K
NatWest Group plc
Gogarburn
PO Box 1000
Edinburgh EH12 1HQ
Scotland
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or
will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F X Form
40-F
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):__
Indicate by check mark if the registrant is submitting
the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):__
Indicate by check mark whether the registrant by
furnishing the information contained in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes No
X
If "Yes" is marked, indicate below the file
number assigned to
the registrant in connection with Rule 12g3-2(b): 82-
This report on Form 6-K, except for any information
contained on any websites linked or documents referred to in this report, shall
be deemed incorporated by reference into the company’s Registration Statement
on Form F-3 (File No. 333-251220) and to be a part thereof from the date on
which this report is filed, to the extent not superseded by documents or
reports subsequently filed or furnished.
Forward-looking
statements
Cautionary statement regarding forward-looking
statements
Certain sections in this document contain ‘forward-looking
statements’ as that term is defined in the United States Private Securities
Litigation Reform Act of 1995, such as statements that include the words
‘expect’, ‘estimate’, ‘project’, ‘anticipate’, ‘commit’, ‘believe’, ‘should’,
‘intend’, ‘will’, ‘plan’, ‘could’, ‘probability’, ‘risk’, ‘Value-at-Risk
(VaR)’, ‘target’, ‘goal’, ‘objective’, ‘may’, ‘endeavour’, ‘outlook’,
‘optimistic’, ‘prospects’ and similar expressions or variations on these
expressions. In particular, this document includes forward-looking statements
relating, but not limited to: the COVID-19 pandemic and its impact on NatWest
Group; future profitability and performance, including financial performance
targets (such as RoTE) and discretionary capital distribution targets; ESG and
climate-related targets, including in relation to sustainable financing and
financed emissions; planned cost savings; implementation of NatWest Group’s
Purpose-led strategy, including in relation to the refocusing of its NWM
franchise and the digitalisation of its operations and services; the timing and
outcome of litigation and government and regulatory investigations; the
implementation of the Alternative Remedies Package; balance sheet reduction,
including the reduction of RWAs; capital, liquidity and leverage ratios and
requirements, including CET1 Ratio, RWAes, Pillar 2 and other regulatory buffer
requirements and MREL; funding plans and credit risk profile; capitalisation;
portfolios; net interest margin; customer loan and income growth and market
share; impairments and write-downs, including with respect to goodwill;
restructuring and remediation costs and charges; NatWest Group’s exposure to
political risk, economic risk, climate, environmental and sustainability risk,
operational risk, conduct risk, cyber and IT risk and credit rating risk and to
various types of market risk, including interest rate risk, foreign exchange
rate risk and commodity and equity price risk; customer experience, including
our Net Promotor Score (NPS); employee engagement and gender balance in
leadership positions.
Limitations inherent to forward-looking
statements
These statements are based on current plans, expectations,
estimates, targets and projections, and are subject to significant inherent
risks, uncertainties and other factors, both external and relating to NatWest
Group’s strategy or operations, which may result in NatWest Group being unable
to achieve the current plans, expectations, estimates, targets, projections and
other anticipated outcomes expressed or implied by such forward-looking
statements. In addition, certain of these disclosures are dependent on choices
relying on key model characteristics and assumptions and are subject to various
limitations, including assumptions and estimates made by management. By their
nature, certain of these disclosures are only estimates and, as a result,
actual future results, gains or losses could differ materially from those that
have been estimated. Accordingly, undue reliance should not be placed on these
statements. The forward-looking statements contained in this document speak
only as of the date we make them and we expressly disclaim any obligation or
undertaking to update or revise any forward-looking statements contained
herein, whether to reflect any change in our expectations with regard thereto,
any change in events, conditions or circumstances on which any such statement
is based, or otherwise, except to the extent legally required.
Important factors that could affect the actual
outcome of the forward-looking statements
We caution you that a large number of important factors could
adversely affect our results or our ability to implement our strategy, cause us
to fail to meet our targets, predictions, expectations and other anticipated
outcomes or affect the accuracy of forward-looking statements described in this
document. These factors include, but are not limited to, those set forth in the
risk factors and the other uncertainties described in NatWest Group plc’s
Annual Report on Form 20-F and its other filings with the US Securities and
Exchange Commission. The principal risks and uncertainties that could adversely
NatWest Group’s future results, its financial condition and prospects and cause
them to be materially different from what is forecast or expected, include, but
are not limited to: risks relating to the COVID-19 pandemic (including in
respect of: the effects on the global economy and financial markets, and
NatWest Group’s customers; increased counterparty risk; NatWest Group’s ability
to meet its targets and strategic objectives; increased operational and control
risks; increased funding risk; future impairments and write-downs); economic
and political risk (including in respect of: uncertainty regarding the effects
of Brexit; increased political and economic risks and uncertainty in the UK and
global markets; changes in interest rates and foreign currency exchange rates;
and HM Treasury’s ownership of NatWest Group plc); strategic risk (including in
respect of the implementation of NatWest Group’s Purpose-led Strategy,
including the re-focusing of the NWM franchise and NatWest Group’s ability to
achieve its targets); financial resilience risk (including in respect of:
NatWest Group’s ability to meet targets and to resume discretionary capital
distributions; the competitive environment; counterparty risk; prudential
regulatory requirements for capital and MREL; funding risk; changes in the
credit ratings; the adequacy of NatWest Group’s resolution plans; the
requirements of regulatory stress tests; model risk; sensitivity to accounting
policies, judgments, assumptions and estimates; changes in applicable
accounting standards; the value or effectiveness of credit protection; and the
application of UK statutory stabilisation or resolution powers); climate and
sustainability risk (including in respect of: risks relating to climate change
and the transitioning to a low carbon economy; the implementation of NatWest
Group’s climate change strategy and climate change resilient systems, controls
and procedures; increased model risk; the failure to adapt to emerging climate,
environmental and sustainability risks and opportunities; changes in ESG
ratings; increasing levels of climate, environmental and sustainability related
regulation and oversight; and climate, environmental and sustainability related
litigation, enforcement proceedings and investigations); operational and IT
resilience risk (including in respect of: operational risks (including reliance
on third party suppliers); cyberattacks; the accuracy and effective use of
data; complex IT systems (including those that enable remote working);
attracting, retaining and developing senior management and skilled personnel;
NatWest Group’s risk management framework; and reputational risk); and legal,
regulatory and conduct risk (including in respect of: the impact of substantial
regulation and oversight; compliance with regulatory requirements; the outcome
of legal, regulatory and governmental actions and investigations; the
replacement of LIBOR, EURIBOR and other IBOR rates; heightened regulatory and
governmental scrutiny (including by competition authorities); implementation of
the Alternative Remedies Package; and changes in tax legislation or failure to
generate future taxable profits).
The information, statements and opinions contained in this
document do not constitute a public offer under any applicable legislation or
an offer to sell or a solicitation of an offer to buy any securities or
financial instruments or any advice or recommendation with respect to such
securities or other financial instruments
NatWest Group – Form 6-K Q1
Results 2021 1
Introduction
Presentation of information
‘Parent
company’ refers to NatWest Group plc and ‘NatWest Group’ refers to NatWest
Group plc and its subsidiary and associated undertakings. The term ‘NWH Group’
refers to NatWest Holdings Limited (‘NWH’) and its subsidiary and associated
undertakings. The term ‘NWM Group’ refers to NatWest Markets Plc (‘NWM Plc’)
and its subsidiary and associated undertakings. The term ‘NWM N.V.’ refers to
NatWest Markets N.V. The term ‘NWMSI’ refers to NatWest Markets Securities,
Inc. The term ‘RBS plc’ refers to The Royal Bank of Scotland plc. The term ‘NWB
Plc’ refers to National Westminster Bank Plc. The term ‘UBI DAC’ refers to
Ulster Bank Ireland DAC. The term ‘RBSI Limited’ refers to The Royal Bank of
Scotland International Limited.
NatWest
Group publishes its financial statements in pounds sterling (‘£’ or
‘sterling’). The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands
of millions of pounds sterling, respectively, and references to ‘pence’
represent pence in the United Kingdom (‘UK’). Reference to ‘dollars’ or ‘$’ are
to United States of America (‘US’) dollars. The abbreviations ‘$m’ and ‘$bn’
represent millions and thousands of millions of dollars, respectively, and
references to ‘cents’ represent cents in the US. The abbreviation ‘€’
represents the ‘euro’, and the abbreviations ‘€m’ and ‘€bn’ represent millions
and thousands of millions of euros, respectively, and references to ‘cents’
represent cents in the European Union (‘EU’).
To
aid readability, this document retains references to EU legislative and
regulatory provisions in effect in the UK before 1 January 2021 that have now
been implemented in UK domestic law. These references should be read and
construed as including references to the applicable UK implementation measures
with effect from 1 January 2021.
Non-IFRS financial information
As described in the Accounting
policies on page 32, NatWest Group prepares its financial statements in
accordance with generally accepted accounting principles (GAAP). This document
contains a number of adjusted or alternative performance measures, also known
as non-GAAP or non-IFRS performance measures. These measures are adjusted for
certain items which management believe are not representative of the underlying
performance of the business and which distort period-on-period comparison. The
non-IFRS measures provide users of the financial statements with a consistent
basis for comparing business performance between financial periods and
information on elements of performance that are one-off in nature. The non-IFRS
measures also include the calculation of metrics that are used throughout the
banking industry. These non-IFRS measures are not measures within the scope of
IFRS and are not a substitute for IFRS measures. These measures include:
Non-IFRS financial
measures
Measure
|
Basis of preparation
|
Additional analysis or reconciliation
|
NatWest Group return on tangible equity
|
Annualised profit or loss for the period attributable to
ordinary shareholders divided by average tangible equity. Average tangible
equity is average total equity excluding non-controlling interests (NCI) less
average intangible assets and average other owners’ equity.
|
Table 1
|
Segmental return on equity
|
Segmental operating profit or loss adjusted for
preference share dividends and tax divided by average notional tangible equity,
allocated at an operating segment specific rate, of the period average
segmental risk-weighted assets incorporating the effect of capital deductions
(RWAes).
|
Table 1
|
Operating expenses analysis – management view
|
The management analysis of operating expenses shows
strategic costs and litigation and conduct costs in separate lines.
Depreciation and amortisation, impairment of other intangibles and other
administrative expenses attributable to these costs are included in strategic
costs and litigation and conduct costs lines for management analysis. These
amounts are included in staff, premises and equipment and other administrative
expenses in the statutory analysis.
|
Table 2
|
Cost:income ratio
|
Total
operating expenses less operating lease depreciation divided by total income
less operating lease depreciation.
|
Table 3
|
Commentary – adjusted periodically for specific items
|
NatWest Group and segmental business performance
commentary have been adjusted for the impact of specific items such as
notable items, operating lease depreciation, strategic costs and litigation
and conduct costs.
|
Notable
items - page 8, Operating lease
depreciation, Strategic costs and litigation and conduct costs - pages 15 to 17
|
Net lending in the retail and commercial business
|
Comprises customer loans in the Retail Banking,
Commercial Banking, Private Banking and RBS International operating segments,
excluding UK Government support schemes.
|
Pages 4 and 7
|
Bank net interest margin (NIM)
|
Net interest income of the banking business
less NatWest Markets (NWM) element as a percentage of average interest-earning
assets of the banking business less NWM element.
|
Table 4
|
NatWest Group – Form 6-K Q1
Results 2021 2
Performance
metrics based on but not defined under IFRS
Measure
|
Basis of preparation
|
Additional analysis or reconciliation
|
Loan:deposit ratio
|
Net customer loans held at amortised cost divided by total
customer deposits.
|
Table 5
|
Tangible net asset value (TNAV)
|
Tangible
equity divided by the number of ordinary shares in issue (excluding own
shares held). Tangible equity is ordinary shareholders’ equity less
intangible assets.
|
Page6
|
NIM
|
Net interest income as a percentage of average interest-earning
assets.
|
Page6
|
Funded assets
|
Total
assets less derivatives.
|
Pages15 to 17
|
ECL loss rate
|
The
annualised loan impairment charge divided by gross customer loans.
|
Pages15 to 17
|
Third party customer asset rate
|
Third
party customer asset rate is calculated as annualised interest receivable on
third-party loans to customers as a percentage of third-party loans to
customers only. This excludes intragroup items, loans to banks and liquid
asset portfolios, which are included for the calculation of net interest margin.
|
Pages15 to 17
|
Third party customer funding rate
|
Third
party customer funding rate is calculated as annualised interest payable on
third-party customer deposits as a percentage of third-party customer
deposits, including interest bearing and non-interest bearing customer
deposits. This excludes intragroup items, bank deposits, debt securities in
issue and subordinated liabilities.
|
Pages15 to 17
|
Assets under management and administration (AUMA)
|
Total
AUMA comprises both assets under management (AUMs) and assets under
administration (AUAs) managed within the Private Banking franchise. AUMs
comprise assets under management, assets under custody and investment cash
relating to Private Banking customers. AUAs are managed by Private Banking on
behalf of Retail Banking and RBSI and a management fee is received in
respect of providing this service.
|
Page 10
|
NatWest Group – Form 6-K Q1
Results 2021 3
NatWest Group plc
Q1 2021 Interim
Management Statement
Alison Rose, Chief Executive Officer, commented:
“NatWest Group’s profit in the
first quarter of 2021 is a result of a good operating performance in our core
franchises as well as modest impairment releases that reflect the better than
expected performance of our loan book across the first three months of the
year.
We continue to make progress
against our strategic targets; growing in key areas, simplifying the bank and
accelerating our digital transformation to meet the rapidly evolving needs of
our customers. We are also pleased that we were able to use some of our excess
capital to buy back shares from the UK Government.
Defaults remain low as a result of
the UK Government support schemes and there are reasons for optimism with the
vaccine programmes progressing at pace and restrictions being eased. However,
there is continuing uncertainty for our economy and for many of our customers
as a result of COVID-19. Our capital strength and well-diversified balance
sheet means NatWest Group is well positioned to help people, families and
businesses to rebuild and thrive.
We are building a relationship bank
for a digital world. A bank that champions potential and plays a positive role
in society in order to build long-term value and drive sustainable returns for
our shareholders.”
Good financial performance in a challenging environment with
better than expected performance of the loan portfolio
●
|
Q1 2021 operating profit before tax of £946 million and an attributable profit of £620 million.
|
●
|
Total income decreased by £503 million, or 15.9%, compared with Q1 2020. Income across the UK and RBSI retail and commercial businesses, excluding notable items, decreased by £203 million, or 8.0%, compared with Q1 2020 reflecting the lower yield curve, subdued transactional business activity and lower consumer spending, partially offset by balance sheet growth.
|
●
|
Net interest margin of 1.53% was 1 basis point lower than Q4 2020. Bank net interest margin (NIM) of 1.64% was 2 basis points lower than Q4 2020 principally reflecting lower structural hedge income, 3 basis points, partly offset by mortgage margin improvement, 1 basis point.
|
●
|
Total operating expenses were £26 million, or 1.4%, lower than Q1 2020. Other expenses, excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs, were £72 million, or 4.5%, lower than Q1 2020.
|
●
|
A net impairment release of £102 million in Q1 2021 reflects releases in non-default portfolios, principally in Commercial Banking.
|
Robust balance sheet with strong capital and liquidity levels
|
●
|
CET1 ratio of 18.2% was 30 basis points lower than Q4 2020, reflecting the directed buy back, associated pension contribution, and foreseeable dividend accrual partially offset by the reduction in RWAs and the attributable profit for the period.
|
●
|
The liquidity coverage ratio (LCR) of 158%, representing £64.9 billion above 100%, decreased by 7 percentage points compared with Q4 2020, following a repayment of the Term Funding Scheme with additional incentives for SMEs (TFSME).
|
●
|
Net lending decreased by £1.8 billion to £358.7 billion in comparison to Q4 2020. Across the UK and RBSI retail and commercial businesses, net lending excluding UK Government support schemes, increased by £2.2 billion, or 3.0% on an annualised basis, including £3.4 billion related to mortgages. Retail Banking gross new mortgage lending was £9.6 billion in the quarter.
|
●
|
Customer deposits increased by £21.6 billion compared with Q4 2020 to £453.3 billon. Across the UK and RBSI retail and commercial businesses customer deposits increased by £12.1 billion, or 3.0%, as customers sought to retain liquidity and reduced spending. Treasury repo activity drove a further £10.9 billion increase in the quarter.
|
●
|
RWAs decreased by £5.6 billion compared with Q4 2020 mainly reflecting reductions in Retail Banking and Commercial Banking.
|
Outlook(1)
|
We retain the outlook guidance
provided in the 2020 Annual Report on Form 20-F document.
|
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 NatWest Group plc “Risk Factors” section on pages 347 to 366 of the 2020 Annual Report on Form 20-F. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement
|
NatWest Group – Form 6-K Q1
Results 2021 4
Our purpose in action
We champion potential, helping people, families and
businesses to thrive. By working to benefit our customers, colleagues and
communities, we will deliver long-term value and drive sustainable returns to
our shareholders. Some key achievements in Q1 2021 include:
People and families
●
|
NatWest Group is participating in the new mortgage guarantee
scheme, which provides a UK Government
guarantee to lenders on mortgages with just a 5% deposit and will help many
customers for whom home ownership has felt far out of reach.
|
●
|
As part of our Digital Regular Saver, launched in 2020, we
recently announced a £10,000 prize draw that will provide further incentive
to our customers to start and continue saving, helping them build financial
security.
|
●
|
Our Personal Portfolio Funds – available through NatWest Invest,
Royal Bank Invest and Coutts Invest – support customers to invest in their
futures. Less than five years since their launch, Assets under Management
have exceeded £1 billion, with 30% growth in Q1 2021.
|
●
|
We teamed up with the creators of 'No Really, I'm Fine' – a
mental health podcast – to bring listeners the 'Mind Over Money' podcast tackling
the issue of financial wellbeing, with practical tips to avoid scams, manage
spending habits and deal with a financial crisis.
|
Businesses
|
●
|
In response to our SME Recovery Report, NatWest Group announced
a £6 billion funding commitment to support SMEs to scale and grow, with £4
billion allocated outside London. We also formed new strategic partnerships
with Business in The Community (BITC), Hatch and Digital Boost, to empower
underrepresented entrepreneurs and communities to embed new skills and
technology.
|
●
|
Commercial Banking is playing a key role in helping customers
recover and grow, through Pay As You Grow for existing Bounce Back Loans and
supporting access to finance through the new Recovery Loan Scheme.
|
●
|
Coutts has partnered with the Business Growth Fund to develop
the UK Enterprise Fund. This fund will co-invest equity growth capital,
taking minority stakes in businesses looking to scale in the UK, with a focus
on investing in female and diverse entrepreneurs.
|
●
|
NatWest Group has joined forces with Microsoft to help UK
businesses better understand their carbon footprint and create tailored
action plans to reduce their carbon emissions, leveraging digital
technologies.
|
Colleagues
●
|
In our sixth year as
headline sponsor of National Careers Week, we announced the creation of 240
social mobility apprenticeships across contact centre, digital, technology
and innovation skills. The new roles will support young people facing
barriers in their early career, giving them the tools and support they need
to succeed.
|
●
|
In response to the pandemic’s significant impact on young people, in partnership with the Bank Workers Charity, we have launched a free online counselling and
wellbeing support service – Kooth – for the
dependants of current and former colleagues in the UK,
aged 11-18 years old.
|
●
|
In Q1 2021, we launched the Chartered Banker Institute
Enterprise Membership to our colleagues, providing access to award winning
professional content, toolkits and development material, one of the many ways
we are supporting our colleagues to be the best they can be.
|
Communities
|
●
|
One of our Edinburgh offices has been transformed into a mass
vaccination centre, at no cost to the NHS. The centre is running 12 hours a
day, seven days a week and is currently capable of providing 480 appointments
every day.
|
●
|
In Q1 2021, NatWest Group issued a €1 billion affordable housing
social bond, the first of its kind by a UK bank. The proceeds will support
lending to not-for-profit, UK housing associations as part of our commitment
to provide £3 billion of funding to the UK’s affordable housing sector by the
end of 2022.
|
●
|
NatWest Group launched an innovative offering with Octopus
Energy to help people and businesses switch to electric vehicles. It provides tailored advice, charging infrastructure funding
solutions and access to some of the latest renewable technologies.
|
●
|
NatWest Group was recently announced as a corporate patron of
the National Emergencies Trust (NET). Alongside the NET’s other patrons,
we’ll play an active role in shaping the response to future emergencies,
having helped to raise £10 million for the NET Coronavirus Appeal in 2020.
|
NatWest Group – Form 6-K Q1
Results 2021 5
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
Total income
|
|
|
|
£2,659m
|
£2,535m
|
£3,162m
|
Operating expenses
|
|
|
|
(£1,815m)
|
(£2,341m)
|
(£1,841m)
|
Profit before impairment releases/(losses)
|
|
|
|
£844m
|
£194m
|
£1,321m
|
Operating profit before tax
|
|
|
|
£946m
|
£64m
|
£519m
|
Profit/(loss) attributable to ordinary shareholders
|
|
|
|
£620m
|
(£109m)
|
£288m
|
|
|
|
|
|
|
|
Excluding notable items within total income (1)
|
|
|
|
|
|
|
Total income excluding notable items
|
|
|
|
£2,673m
|
£2,616m
|
£3,047m
|
Operating expenses
|
|
|
|
(£1,815m)
|
(£2,341m)
|
(£1,841m)
|
Profit before impairment releases/(losses) and excluding notable
items
|
|
|
£858m
|
£275m
|
£1,206m
|
Operating profit before tax and excluding notable items
|
|
|
|
£960m
|
£145m
|
£404m
|
|
|
|
|
|
|
|
Performance key metrics and ratios
|
|
|
|
|
|
|
Bank net interest margin (NatWest Group NIM excluding
NWM) (2)
|
|
|
1.64%
|
1.66%
|
1.89%
|
Bank average interest earning assets (NatWest Group
excluding NWM) (2)
|
|
|
£480bn
|
£473bn
|
£422bn
|
Cost:income ratio (2)
|
|
|
|
67.8%
|
92.2%
|
57.7%
|
Loan impairment rate (2)
|
|
|
|
(11bps)
|
14bps
|
90bps
|
Earnings per share - basic
|
|
|
|
5.1p
|
(0.9p)
|
2.4p
|
Return on tangible equity (2)
|
|
|
|
7.9%
|
(1.4%)
|
3.6%
|
|
31 March
|
31 December
|
31 March
|
|
2021
|
2020
|
2020
|
Balance sheet
|
|
|
|
Total assets
|
£769.8bn
|
£799.5bn
|
£817.6bn
|
Funded assets (2)
|
£646.8bn
|
£633.0bn
|
£608.9bn
|
Loans to customers - amortised cost
|
£358.7bn
|
£360.5bn
|
£351.3bn
|
Loans to customers and banks - amortised cost and
FVOCI (3)
|
£371.0bn
|
£372.4bn
|
£364.0bn
|
Impairment provisions - amortised cost
|
£5.6bn
|
£6.0bn
|
£4.2bn
|
Total impairment provisions (3)
|
£5.8bn
|
£6.2bn
|
£4.3bn
|
Expected credit loss (ECL) coverage ratio (3)
|
1.56%
|
1.66%
|
1.19%
|
Assets under management and administration (AUMA) (2)
|
£32.6bn
|
£32.1bn
|
£26.7bn
|
Customer deposits
|
£453.3bn
|
£431.7bn
|
£384.8bn
|
|
|
|
|
Liquidity and funding
|
|
|
|
Liquidity coverage ratio (LCR)
|
158%
|
165%
|
152%
|
Liquidity portfolio
|
£263bn
|
£262bn
|
£201bn
|
Net stable funding ratio (NSFR) (4)
|
153%
|
151%
|
138%
|
Loan:deposit ratio (2)
|
79%
|
84%
|
91%
|
Total wholesale funding
|
£61bn
|
£71bn
|
£86bn
|
Short-term wholesale funding
|
£20bn
|
£19bn
|
£32bn
|
|
|
|
|
Capital and leverage
|
|
|
|
Common Equity Tier (CET1) ratio (5)
|
18.2%
|
18.5%
|
16.6%
|
Total capital ratio
|
24.0%
|
24.5%
|
21.4%
|
Pro forma CET1 ratio, pre dividend accrual (6)
|
18.6%
|
18.8%
|
16.6%
|
Risk-weighted assets (RWAs)
|
£164.7bn
|
£170.3bn
|
£185.2bn
|
CRR leverage ratio (5)
|
5.0%
|
5.2%
|
5.1%
|
UK leverage ratio
|
6.2%
|
6.4%
|
5.8%
|
Tangible net asset value (TNAV) per ordinary share
|
261p
|
261p
|
273p
|
Number of ordinary shares in issue (millions) (7)
|
11,560
|
12,129
|
12,094
|
Notes:
(1)
|
Refer to page 8 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 page 18 for further details. 31 March 2020
has been restated for the accounting policy change for balances held with central
banks. Refer to Accounting policy changes effective 1 January 2020 on page 263
in the NatWest Group plc 2020 Annual Report on Form 20-F 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 17.2% and the CRR
leverage ratio would be 4.7%.
|
(6)
|
The pro forma CET1
ratio at 31 March 2021 excludes foreseeable charges of £547 million for
ordinary dividend including £200 million (11bps) in Q1 2021 (31 December 2020
excludes foreseeable charges of £364 million for ordinary dividend (3p per
share) and £266 million pension contribution). At 31 March 2020 there was no
charge in CET1 for foreseeable dividends or charges.
|
(7)
|
In March 2021, there
was an agreement with HM Treasury to buy 591 million ordinary shares in the
Company from UK Government Investments Ltd (UKGI). NatWest Group cancelled
391 million of the purchased ordinary shares, and held the remaining 200
million in own shares held. The number of ordinary shares in issue excludes
own shares held.
|
Non-IFRS financial measures
This document contains a number of non-IFRS financial measures and
performance metrics not defined under IFRS. For details of the basis of
preparation and reconciliations, where applicable, refer to the Appendix.
NatWest Group – Form 6-K Q1
Results 2021 6
Business performance summary
Chief Financial Officer review
|
In the first quarter of
2021 we have continued to make progress against our strategic objectives and
have delivered a good financial performance. We continue to support our
customers through this period of uncertainty and expect to grow lending,
excluding UK Government financial support schemes, in our UK and RBSI retail
and commercial businesses above the market rate in 2021, whilst reducing
costs by around 4%(1). The Q1 2021 results include a small
impairment release, as support schemes continue to mitigate realised levels
of default. Finally, our capital and liquidity positions remain robust.
|
Financial
performance
Total income decreased by
£503 million, or 15.9%, compared with Q1 2020. Excluding notable items,
income decreased by £374 million, or 12.3%, due to the lower yield curve,
subdued transactional business activity and a more normalised level of
customer activity in NatWest Markets, partially offset by balance sheet growth.
Net interest margin of 1.53% was 1 basis point lower than Q4 2020. Bank NIM of
1.64% decreased by 2 basis points compared with Q4 2020 as lower structural
hedge income, 3 basis points, was partly offset by mortgage margin
improvement, 1 basis point.
|
|
Total operating expenses
were £26 million, or 1.4% lower than Q1 2020. We achieved a cost reduction of
£72 million, or 4.5%, compared with Q1 2020 mainly reflecting actions taken
in NatWest Markets in line with the strategic announcement made in February 2020
and other actions across Retail Banking and Commercial Banking. Headcount was
5.7% lower than Q1 2020. Strategic costs in the quarter of £160 million
included £53 million redundancy charges, £24 million related to property
charges and a £14 million charge related to technology spend.
|
|
Whilst we continue to
navigate a high degree of uncertainty in the wider economic environment, a
net impairment release of £102 million in the quarter reflects releases in
non-default portfolios, principally in Commercial Banking, as support schemes
continue to mitigate realised levels of default. Total impairment provisions
decreased by £0.4 billion to £5.8 billion in the quarter, which resulted in a
reduction in the ECL coverage ratio from 1.66% at Q4 2020 to 1.56%.
|
|
As a result, we are pleased
to report an attributable profit of £620 million, with earnings per share of 5.1
pence and a return on tangible equity (RoTE) of 7.9%.
|
We continued to support our
customers during this period of uncertainty, whilst taking a measured
approach to risk. Total lending decreased by £1.8 billion, or 0.5%, compared
with Q4 2020. Across the UK and RBSI retail and commercial businesses, net
lending excluding UK Government support schemes increased by £2.2 billion, or
3.0% on an annualised basis, including £3.4 billion of mortgage growth
partially offset by lower unsecured balances and a reduction in SME & mid
corporate lending.
|
|
Customer deposits increased
by £21.6 billion, or 5.0%, to £453.3 billon in the quarter. Across the UK and
RBSI retail and commercial businesses customer deposits increased by £12.1
billion, or 3.0%, as customers sought to retain liquidity and reduced
spending. Treasury repo activity drove a further £10.9 billion increase in
the quarter.
|
Capital and
leverage
|
Following the successful
directed buy back in March 2021, the CET1 ratio remains robust at 18.2%, or
17.2% excluding IFRS 9 transitional relief. The 30 basis points reduction in
the quarter reflected the directed buy back, and associated pension
contribution, 72 basis points, and foreseeable dividend accrual, 11 basis
points, partially offset by the reduction in RWAs and the attributable profit
for the period. The total capital ratio decreased by 50 basis points in
the quarter to 24.0%.
|
RWAs of £164.7 billion
decreased by £5.6 billion, or 3.3%, in the quarter reflecting business
movements, including lower unsecured lending, of £2.5 billion, risk parameter
improvements of £1.0 billion, Commercial Banking capital management activity
and FX movements of £1.3 billion.
TNAV per share was in line
with Q4 2020 at 261 pence as the attributable profit and directed buy back
were offset by movements in FX reserves, cash flow hedging reserves and the
dividend linked pension contribution.
|
The UK leverage ratio of
6.2% decreased by 20 basis points in the quarter.
|
Funding and
liquidity
|
The liquidity portfolio was
£263 billion at the end of Q1 2021, broadly stable with Q4 2020, and the LCR
decreased by 7 percentage points to 158%, representing £64.9 billion headroom
above 100%, reflecting the £5.0 billion TFSME repayment in January 2021, the
redemption of own debt, directed buy back and other balance sheet movements,
partially offset by the 3.0% increase in customer deposits. The loan:deposit
ratio reduced by 5 percentage points in the quarter to 79%.
|
Total wholesale funding decreased by
£10 billion compared with Q4 2020. Short term wholesale funding increased by
£1.0 billion in the quarter to £20 billion.
|
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 NatWest Group plc “Risk Factors” section on pages
347 to 366 of the 2020 Annual Report on Form 20-F. These statements
constitute forward-looking statements. Refer to Forward-looking statements in
this announcement.
|
NatWest Group – Form 6-K Q1
Results 2021 7
Summary
consolidated income statement for the period ended 31 March 2021
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
£m
|
£m
|
£m
|
Net interest income
|
|
|
|
1,931
|
1,971
|
1,942
|
Own credit adjustments
|
|
|
|
2
|
(43)
|
155
|
Other non-interest income
|
|
|
|
726
|
607
|
1,065
|
Non-interest income
|
|
|
|
728
|
564
|
1,220
|
Total income
|
|
|
|
2,659
|
2,535
|
3,162
|
Litigation and conduct costs
|
|
|
|
(16)
|
(194)
|
4
|
Strategic costs
|
|
|
|
(160)
|
(326)
|
(131)
|
Other expenses
|
|
|
|
(1,639)
|
(1,821)
|
(1,714)
|
Operating expenses
|
|
|
|
(1,815)
|
(2,341)
|
(1,841)
|
Profit before impairment releases/(losses)
|
|
|
|
844
|
194
|
1,321
|
Impairment releases/(losses)
|
|
|
|
102
|
(130)
|
(802)
|
Operating profit before tax
|
|
|
|
946
|
64
|
519
|
Tax charge
|
|
|
|
(233)
|
(84)
|
(188)
|
Profit/(loss) for the period
|
|
|
|
713
|
(20)
|
331
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Ordinary shareholders
|
|
|
|
620
|
(109)
|
288
|
Preference shareholders
|
|
|
|
5
|
5
|
8
|
Paid-in equity holders
|
|
|
|
87
|
83
|
97
|
Non-controlling interests
|
|
|
|
1
|
1
|
(62)
|
Notable items within total income
|
|
|
|
|
|
|
Own credit adjustments (OCA)
|
|
|
|
2
|
(43)
|
155
|
FX recycling loss in Central items & other
|
|
|
|
-
|
(1)
|
(64)
|
Liquidity Asset Bond sale gain
|
|
|
|
-
|
2
|
93
|
IFRS volatility in Central items & other (1)
|
|
|
|
(1)
|
45
|
(66)
|
Loss on redemption of own debt
|
|
|
|
(118)
|
-
|
-
|
Retail Banking debt sale gain
|
|
|
|
-
|
1
|
-
|
Metro Bank mortgage portfolio acquisition loss
|
|
|
|
-
|
(58)
|
-
|
Commercial Banking fair value and disposal loss
|
|
|
|
(14)
|
(27)
|
(19)
|
NatWest Markets asset disposals/strategic risk
reduction (2)
|
|
|
(4)
|
(8)
|
-
|
Share of gains under equity accounting for Business Growth Fund
|
|
|
121
|
8
|
16
|
Total
|
|
|
|
(14)
|
(81)
|
115
|
Notes:
|
(1)
|
IFRS volatility relates to derivatives used for risk
management not in IFRS hedge accounting relationships and IFRS hedge
ineffectiveness.
|
(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 Group – Form 6-K Q1
Results 2021 8
Business
performance summary
Retail Banking
|
|
|
Quarter ended
|
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
|
1,056
|
974
|
1,150
|
Operating expenses
|
|
|
|
|
(587)
|
(818)
|
(529)
|
of which: Other expenses
|
|
|
|
|
(557)
|
(566)
|
(592)
|
Impairment losses
|
|
|
|
|
(34)
|
(65)
|
(297)
|
Operating profit
|
|
|
|
|
435
|
91
|
324
|
Return on equity
|
|
|
|
|
23.0%
|
3.8%
|
15.5%
|
Net interest margin
|
|
|
|
|
2.06%
|
2.03%
|
2.28%
|
Cost:income ratio
|
|
|
|
|
55.6%
|
84.0%
|
46.0%
|
Loan impairment rate
|
|
|
|
|
8bps
|
15bps
|
72bps
|
|
|
|
As at
|
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
|
2021
|
2020
|
|
|
|
|
|
£bn
|
£bn
|
Net loans to customers - amortised cost
|
|
|
|
|
174.8
|
172.3
|
Customer deposits
|
|
|
|
|
179.1
|
171.8
|
RWAs
|
|
|
|
|
35.0
|
36.7
|
During Q1 2021, Retail Banking continued to pursue
sustainable growth with an intelligent approach to risk. Lending growth in
the quarter was supported by a strong performance in mortgages, with gross
new mortgage lending of £9.6 billion in the quarter, partially offset by the
continued UK Government restrictions impacting customer spending and
resulting in higher repayments of unsecured balances.
|
|
●
|
Retail Banking continues to
support customers whose income has been impacted by COVID-19. As at 31 March
2021, Retail Banking had c.12,000 active mortgage repayment holidays,
representing around 1% of the book by volume, and approximately 16,000, or
2%, of personal loan customers on active repayment holidays at the end of Q1
2021.
|
●
|
Total income was £94
million, or 8.2%, lower than Q1 2020 primarily due to lower deposit returns
and unsecured balances, combined with regulatory changes impacting fee
income, partially offset by strong balance growth in mortgages and improved
mortgage margins. Net interest margin increased by 3 basis points compared
with Q4 2020 reflecting mortgage margin improvement, partially offset by
lower hedge returns and lower unsecured balance mix. Mortgage completion
margins of around 180 basis points were higher than the back book margin of
around 160 basis points. Application margins were around 180 basis points in
the quarter but decreased to around 165 basis points in the latter part of Q1
2021 primarily due to rising swap rates.
|
●
|
Operating expenses
increased by £58 million, or 11.0%, compared with Q1 2020. Other expenses
were £35 million, or 5.9%, lower than Q1 2020 primarily reflecting a
reduction in headcount.
|
●
|
Impairment
losses of £34 million in Q1 2021 continue to reflect a low level of Stage 3
defaults, which benefitted from a £17 million provision release relating to a
planned debt sale(1), and a small release from accounts flowing
from Stage 2 back to Stage 1.
|
●
|
Net loans to customers
increased by £2.5 billion, or 1.5%, compared with Q4 2020 due to continued
strong mortgage growth of £3.0 billion, with gross new mortgage lending in
the quarter of £9.6 billion, and flow share of approximately 13%. Personal
advances and cards reduced by £0.2 billion and £0.3 billion respectively as
customers spent less and made higher repayments, reflecting the impact of the
UK Government restrictions.
|
●
|
Customer deposits increased
by £7.3 billion, or 4.2%, compared with Q4 2020 as continued UK Government
initiatives combined with restrictions, resulted in lower customer spend and
increased savings.
|
●
|
RWAs decreased by £1.7
billion, or 4.6%, compared with Q4 2020 largely reflecting lower unsecured
balances and continued quality improvements supported by rising house prices
and customer behaviour.
|
|
|
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 NatWest
Group plc “Risk Factors” section on pages 347 to 366 of the 2020 Annual
Report on Form 20-F. These statements constitute forward-looking statements.
Refer to Forward-looking statements in this announcement.
|
NatWest Group – Form 6-K Q1
Results 2021 9
Business performance
summary
Private Banking
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
185
|
184
|
201
|
Operating expenses
|
|
|
|
(121)
|
(91)
|
(123)
|
of which: Other expenses
|
|
|
|
(122)
|
(119)
|
(118)
|
Impairment releases/(losses)
|
|
|
|
-
|
(26)
|
(29)
|
Operating profit
|
|
|
|
64
|
67
|
49
|
Return on equity
|
|
|
|
12.4%
|
13.3%
|
9.8%
|
Net interest margin
|
|
|
|
1.79%
|
1.86%
|
2.25%
|
Cost:income ratio
|
|
|
|
65.4%
|
49.5%
|
61.2%
|
Loan impairment rate
|
|
|
|
0bps
|
61bps
|
73bps
|
|
|
|
As at
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
2021
|
2020
|
|
|
|
|
£bn
|
£bn
|
Net loans to customers - amortised cost
|
|
|
|
17.5
|
17.0
|
Customer deposits
|
|
|
|
33.5
|
32.4
|
RWAs
|
|
|
|
11.2
|
10.9
|
Assets Under Management (AUMs)
|
|
|
|
29.4
|
29.1
|
Assets Under Administration (AUAs) (1)
|
|
|
|
3.2
|
3.0
|
Total Assets Under Management and Administration (AUMA)
|
|
|
|
32.6
|
32.1
|
Note:
|
(1)
|
Private Banking manages AUA
portfolios on behalf of Retail Banking and RBS International and receives a management
fee in respect of providing this service
.
|
Private Banking delivered a
resilient operating performance in the quarter, including strong balance
growth, which supported a Q1 2021 return on equity of 12.4%. AUMA growth in
the quarter included record investment inflows of £245 million into digital
investment products: NatWest Invest, Royal Bank Invest and Coutts Invest,
more than double the level seen in Q4 2020.
|
|
●
|
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. As at 31 March 2021, £61 million BBLS, £234 million CBILS and £44
million CLBILS had been approved.
|
●
|
Total income was £16 million,
or 8.0%, lower than Q1 2020 primarily reflecting lower deposit returns
partially offset by strong balance growth. Net interest margin decreased by 7
basis points compared with Q4 2020 reflecting lower deposit returns and
higher liquidity portfolio costs.
|
●
|
Net loans to customers
increased by £0.5 billion, or 2.9%, compared with Q4 2020 due to mortgage
lending growth.
|
●
|
AUMAs increased by £0.5
billion, or 1.6%, compared with Q4 2020 reflecting positive investment
performance of £0.1 billion and net new money inflows of £0.4 billion, which
were impacted by EEA resident client outflows following the UK’s exit from
the EU.
|
|
|
NatWest Group – Form 6-K Q1
Results 2021 10
Business performance
summary
Commercial Banking
|
|
|
Quarter ended
|
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
|
941
|
951
|
1,008
|
Operating expenses
|
|
|
|
|
(583)
|
(656)
|
(610)
|
of which: Other expenses (excluding OLD)
|
|
|
|
|
(513)
|
(560)
|
(532)
|
Impairment releases/(losses)
|
|
|
|
|
117
|
(10)
|
(435)
|
Operating profit/(loss)
|
|
|
|
|
475
|
285
|
(37)
|
Return on equity
|
|
|
|
|
14.9%
|
8.1%
|
(2.5%)
|
Net interest margin
|
|
|
|
|
1.54%
|
1.56%
|
1.83%
|
Cost:income ratio
|
|
|
|
|
60.5%
|
67.8%
|
59.1%
|
Loan impairment rate
|
|
|
|
|
(43)bps
|
4bps
|
157bps
|
|
|
|
As at
|
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
|
2021
|
2020
|
|
|
|
|
|
£bn
|
£bn
|
Net loans to customers - amortised cost
|
|
|
|
|
106.6
|
108.2
|
Customer deposits
|
|
|
|
|
169.4
|
167.7
|
RWAs
|
|
|
|
|
71.6
|
75.1
|
Commercial Banking delivered a solid performance in Q1
2021 despite the continued impact of UK Government restrictions and a
challenging operating environment. Commercial Banking will continue to
play a key role in helping its customers recover and grow as the wider
economy re-opens through Pay As You Grow, for existing Bounce Back Loan
customers, and by supporting continued access to finance through the new
Recovery Loan Scheme.
|
|
●
|
Commercial Banking
continues to support customers through a comprehensive package of initiatives
including participation in the UK Government’s financial support schemes. As
at 31 March 2021, £9.1 billion BBLS, £4.0 billion CBILS and £1.3 billion
CLBILS had been approved and there were active payment holidays on c.8,900
customer accounts, representing 2% of the lending book by value, compared to
4% at the end of 2020.
|
●
|
Total income was £67
million, or 6.6%, lower than Q1 2020 reflecting lower deposit returns and
subdued transactional business activity. Net interest margin decreased by 2
basis points compared with Q4 2020 mainly reflecting lower hedge returns.
|
●
|
Operating expenses
decreased by £27 million, or 4.4%, compared with Q1 2020. Other expenses, excluding
OLD, decreased by £19 million, or 3.6%, compared with Q1 2020 as cost
reduction actions were partially offset by higher remediation costs and
increased back office operations costs.
|
●
|
A net impairment release of £117 million in Q1 2021 mainly
reflected a modest improvement in underlying portfolio credit metrics, with
minimal Stage 3 defaults.
|
●
|
Net loans to customers
decreased by £1.6 billion, or 1.5%, compared with Q4 2020 as lower SME &
mid corporates lending and net RCF repayments of £0.3 billion were partially
offset by £0.5 billion drawdowns against UK Government financial support schemes,
including £0.3 billion related to BBLS and £0.2 billion related to CBILS. RCF
utilisation remained stable with Q4 2020 at c.22% of committed facilities.
|
●
|
Customer
deposits increased by £1.7 billion, or 1.0%, compared with Q4 2020 as
customers continued to build and retain liquidity in light of economic
uncertainty and the continued
impact of UK Government initiatives.
|
●
|
RWAs decreased by £3.5
billion, or 4.7%, compared with Q4 2020 reflecting lower lending volumes,
£0.6 billion active capital management, £0.5 billion lower operational risk
and a £0.2 billion risk parameter improvement.
|
NatWest Group – Form 6-K Q1
Results 2021 11
Business performance
summary
International
Banking & Markets
RBS
International
|
|
|
Quarter ended
|
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
|
123
|
126
|
144
|
Operating expenses
|
|
|
|
|
(57)
|
(112)
|
(61)
|
of which: Other expenses
|
|
|
|
|
(52)
|
(73)
|
(60)
|
Impairment releases/(losses)
|
|
|
|
|
2
|
(27)
|
(15)
|
Operating profit/(loss)
|
|
|
|
|
68
|
(13)
|
68
|
Return on equity
|
|
|
|
|
17.5%
|
(5.5%)
|
19.4%
|
Net interest margin
|
|
|
|
|
1.06%
|
1.03%
|
1.45%
|
Cost:income ratio
|
|
|
|
|
46.3%
|
88.9%
|
42.4%
|
Loan impairment rate
|
|
|
|
|
(5)bps
|
81bps
|
44bps
|
|
|
|
As at
|
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
|
2021
|
2020
|
|
|
|
|
|
£bn
|
£bn
|
Net loans to customers - amortised cost
|
|
|
|
|
14.7
|
13.3
|
Customer deposits
|
|
|
|
|
33.3
|
31.3
|
RWAs
|
|
|
|
|
7.7
|
7.5
|
RBS International (RBSI) Q1 2021 return on equity of 17.5%
was supported by strong lending volumes, cost management discipline and a
small impairment release. RBSI implemented a range of mobile and online
banking enhancements, including the introduction of Cora for RBSI online and
mobile, whilst continuing to support customers through the ongoing COVID-19
pandemic.
|
|
●
|
As at 31 March 2021, RBSI was supporting 106 mortgage
repayment breaks, reflecting a mortgage value of £21 million, and was providing
226 business customers with working capital facilities, reflecting a value of
£424 million, whilst continuing to suspend a range of fees and charges for
its personal and business customers.
|
●
|
Total income was £21 million, or 14.6%, lower than Q1 2020
primarily reflecting the impact of the interest rate reductions on deposit
income. Net interest margin increased by 3 basis points compared with Q4 2020
mainly reflecting higher average lending volumes in the Institutional Banking
sector.
|
●
|
Operating expenses decreased by £4 million, or 6.6%,
compared with Q1 2020. Other expenses were £8 million, or 13.3%, lower than
Q1 2020 mainly reflecting lower project spend and an 11.1% reduction in
headcount.
|
●
|
Net loans to customers
increased by £1.4 billion, or 10.5%, compared with Q4 2020 reflecting
incremental Funds business in the Institutional Banking sector.
|
●
|
Customer deposits increased by £2.0 billion, or 6.4%,
compared with Q4 2020 due to an inflow of short term call deposits in the
Institutional Banking sector as Funds customer activity increased.
|
NatWest Group – Form 6-K Q1
Results 2021 12
Business performance
summary
International
Banking & Markets
NatWest Markets(1)
|
|
|
Quarter ended
|
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
|
189
|
73
|
543
|
of which:
|
|
|
|
|
|
|
|
- Income excluding asset
disposals/strategic risk reduction and own credit adjustments
|
|
191
|
124
|
388
|
- Asset disposals/strategic risk
reduction (2)
|
|
|
|
(4)
|
(8)
|
-
|
- Own credit adjustments
|
|
|
|
|
2
|
(43)
|
155
|
Operating expenses
|
|
|
|
|
(275)
|
(301)
|
(342)
|
of which: Other expenses
|
|
|
|
|
(240)
|
(244)
|
(298)
|
Impairment releases/(losses)
|
|
|
|
|
6
|
(2)
|
5
|
Operating (loss)/profit
|
|
|
|
|
(80)
|
(230)
|
206
|
Return on equity
|
|
|
|
|
(6.3%)
|
(15.0%)
|
8.7%
|
Cost:income ratio
|
|
|
|
|
145.5%
|
nm
|
63.0%
|
|
|
|
As at
|
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
|
2021
|
2020
|
|
|
|
|
|
£bn
|
£bn
|
Funded Assets
|
|
|
|
|
105.7
|
105.9
|
RWAs
|
|
|
|
|
26.5
|
26.9
|
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).
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 continued to make good progress on refocusing
to better support NatWest Group’s customers and to create a more sustainable
business. During the quarter NatWest Markets maintained its strong
performance in climate and sustainability financing delivering £3.0 billion
of financing towards NatWest Group’s 2021 target. Building on the momentum
gained in 2020, further changes to simplify its operations were announced in
the first quarter of 2021, including plans to consolidate its operational
footprint in Asia. NatWest Markets also announced the last part of the
One Bank strategy to bring teams and expertise together from across the bank.
|
●
|
Total income was £354
million, or 65.2%, lower than Q1 2020 reflecting more normalised levels of
customer activity, with the prior period impacted by exceptional levels of
market activity generated by the initial spread of the COVID-19 virus, a £153
million reduction in OCA, as credit spreads tightened, and disposal losses of
£4 million in the current period.
|
●
|
Operating expenses
decreased by £67 million, or 19.6%, compared with Q1 2020. Other expenses
were £58 million, or 19.5%, lower than Q1 2020 reflecting continued
reductions in line with the strategic announcement in February 2020.
|
●
|
RWAs decreased by £0.4
billion compared with Q4 2020 reflecting £0.6 billion lower counterparty
credit risk and £0.5 billion lower credit risk partially offset by a £0.7
billion increase in market risk as customer activity increased from the
seasonally lower level at the end of 2020.
|
NatWest Group – Form 6-K Q1
Results 2021 13
Business performance
summary
Ulster Bank RoI
|
|
|
Quarter ended
|
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
|
£m
|
£m
|
£m
|
Total income
|
|
|
|
|
124
|
131
|
129
|
Operating expenses
|
|
|
|
|
(125)
|
(114)
|
(123)
|
of which: Other expenses
|
|
|
|
|
(115)
|
(100)
|
(118)
|
Impairment releases/(losses)
|
|
|
|
|
12
|
1
|
(27)
|
Operating profit/(loss)
|
|
|
|
|
11
|
18
|
(21)
|
Return on equity
|
|
|
|
|
2.5%
|
3.9%
|
(4.2%)
|
Net interest margin
|
|
|
|
|
1.48%
|
1.50%
|
1.56%
|
Cost:income ratio
|
|
|
|
|
100.8%
|
87.0%
|
95.3%
|
Loan impairment rate
|
|
|
|
|
(27)bps
|
(2)bps
|
56bps
|
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
|
|
|
31 March
|
31 December
|
|
|
|
|
|
2021
|
2020
|
|
|
|
|
|
£bn
|
£bn
|
Net loans to customers - amortised cost
|
|
|
|
|
16.9
|
18.0
|
Customer deposits
|
|
|
|
|
18.4
|
19.6
|
RWAs
|
|
|
|
|
11.1
|
11.8
|
Note:
|
(1)
|
Ratios have been presented on a Euro basis. Comparatives
have been restated.
|
|
Plans remain on track to
proceed with a phased withdrawal from the Republic of Ireland over the coming
years, which will be managed in an orderly and considered manner. Ulster Bank
RoI remains open for business and continues to support its customers through
this transition and challenges of COVID-19. Constructive discussions remain
ongoing with Allied Irish Banks p.l.c for the sale of a c.€4.0 billion
portfolio of performing commercial loans and continue with Permanent TSB
Group Holdings p.l.c among other strategic banking counterparties about their
potential interest in other parts of the bank(1).
|
●
|
Total income was £5 million
(€8 million), or 3.9%, (5.3% in euro terms), lower than Q1 2020 reflecting a
reduction in lending volumes and fee income due to COVID-19, partly offset by
an increase in FX gains. Net interest margin of 1.48% (1.49% in euro terms) was
broadly stable compared with Q4 2020.
|
●
|
Operating expenses were £2
million, or 1.6%, higher compared with Q1 2020 but remained stable in euro
terms. Other expenses were £3 million (€5 million), or 2.5% (3.6% in euro
terms), lower than Q1 2020 due to a 6.9% reduction in headcount and lower
back office operations costs, partly offset by increased government levies.
|
●
|
A net impairment release of
£12 million (€14 million) in the quarter primarily reflects improvements in
the mortgage portfolio.
|
●
|
Net loans to customers
decreased by £1.1 billion, or 6.1% largely due to the weakening of the euro.
In euro terms, net loans to customers decreased by €0.2 billion, or 1.0% compared
with Q4 2020 as repayments continued to exceed gross new lending of £0.3
billion (€0.4 billion).
|
●
|
Customer deposits decreased
by £1.2 billion, or 6.1% largely due to the weakening of the euro. In euro
terms, customer deposits decreased by €0.1 billion, or 0.5%, compared with Q4
2020 mainly due to a reduction in commercial balances. The loan:deposit ratio
remained broadly stable at 92% (91% in euro terms).
|
Central items &
other
|
Quarter ended
|
|
31 March
|
31 December
|
31 March
|
|
2021
|
2020
|
2020
|
|
£m
|
£m
|
£m
|
Central items not allocated
|
(27)
|
(154)
|
(70)
|
●
|
A £27 million operating
loss within central items not allocated mainly reflects a £118 million day
one loss on redemption of own debt related to the repurchase of legacy
instruments, which will result in annual net interest savings of c.£49
million, and strategic costs, largely offset by the £121 million share of
gains under equity accounting for Business Growth Fund and other treasury
income.
|
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 NatWest
Group plc “Risk Factors” section on pages 347 to 366 of the 2020 Annual
Report on Form 20-F. These statements constitute forward-looking statements.
Refer to Forward-looking statements in this announcement
|
NatWest Group – Form 6-K Q1
Results 2021 14
Segment performance
|
Quarter ended 31 March 2021
|
|
|
|
|
International Banking & Markets
|
|
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
Central items
|
Total NatWest
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Income statement
|
|
|
|
|
|
|
|
|
Net interest income
|
973
|
115
|
643
|
89
|
(7)
|
94
|
24
|
1,931
|
Non-interest income
|
83
|
70
|
298
|
34
|
194
|
30
|
17
|
726
|
Own credit adjustments
|
-
|
-
|
-
|
-
|
2
|
-
|
-
|
2
|
Total income
|
1,056
|
185
|
941
|
123
|
189
|
124
|
41
|
2,659
|
Direct expenses
|
|
|
|
|
|
|
|
|
- staff costs
|
(116)
|
(34)
|
(141)
|
(26)
|
(111)
|
(47)
|
(397)
|
(872)
|
- other costs
|
(61)
|
(9)
|
(66)
|
(13)
|
(29)
|
(23)
|
(566)
|
(767)
|
Indirect expenses
|
(380)
|
(79)
|
(341)
|
(13)
|
(100)
|
(45)
|
958
|
-
|
Strategic costs
|
|
|
|
|
|
|
|
|
- direct
|
(11)
|
-
|
(26)
|
(4)
|
(30)
|
-
|
(89)
|
(160)
|
- indirect
|
(17)
|
(4)
|
(9)
|
(1)
|
(5)
|
(1)
|
37
|
-
|
Litigation and conduct costs
|
(2)
|
5
|
-
|
-
|
-
|
(9)
|
(10)
|
(16)
|
Operating expenses
|
(587)
|
(121)
|
(583)
|
(57)
|
(275)
|
(125)
|
(67)
|
(1,815)
|
Operating profit/(loss)before impairment (losses)/releases
|
469
|
64
|
358
|
66
|
(86)
|
(1)
|
(26)
|
844
|
Impairment (losses)/releases
|
(34)
|
-
|
117
|
2
|
6
|
12
|
(1)
|
102
|
Operating profit/(loss)
|
435
|
64
|
475
|
68
|
(80)
|
11
|
(27)
|
946
|
Additional information
|
|
|
|
|
|
|
|
|
Return on equity (1)
|
23.0%
|
12.4%
|
14.9%
|
17.5%
|
(6.3%)
|
2.5%
|
nm
|
7.9%
|
Cost:income ratio (1)
|
55.6%
|
65.4%
|
60.5%
|
46.3%
|
145.5%
|
100.8%
|
nm
|
67.8%
|
Total assets (£bn)
|
199.2
|
26.9
|
187.1
|
36.7
|
226.8
|
25.9
|
67.2
|
769.8
|
Funded assets (£bn) (1)
|
199.2
|
26.9
|
187.1
|
36.7
|
105.7
|
25.9
|
65.3
|
646.8
|
Net loans to customers - amortised cost (£bn)
|
174.8
|
17.5
|
106.6
|
14.7
|
7.5
|
16.9
|
20.7
|
358.7
|
Loan impairment rate (1)
|
8bps
|
0bps
|
(43)bps
|
(5)bps
|
nm
|
(27)bps
|
nm
|
(11)bps
|
Impairment provisions (£bn)
|
(1.8)
|
(0.1)
|
(2.7)
|
(0.1)
|
(0.1)
|
(0.7)
|
(0.1)
|
(5.6)
|
Impairment provisions - stage 3 (£bn)
|
(0.8)
|
-
|
(0.9)
|
-
|
(0.1)
|
(0.5)
|
(0.1)
|
(2.4)
|
Customer deposits (£bn)
|
179.1
|
33.5
|
169.4
|
33.3
|
2.4
|
18.4
|
17.2
|
453.3
|
Risk-weighted assets (RWAs) (£bn)
|
35.0
|
11.2
|
71.6
|
7.7
|
26.5
|
11.1
|
1.6
|
164.7
|
RWA equivalent (RWAe) (£bn)
|
35.0
|
11.2
|
71.7
|
7.7
|
29.2
|
11.1
|
1.7
|
167.6
|
Employee numbers (FTEs - thousands)
|
15.8
|
1.9
|
9.5
|
1.6
|
2.1
|
2.7
|
26.0
|
59.6
|
Third party customer asset rate (2)
|
2.73%
|
2.36%
|
2.65%
|
2.29%
|
nm
|
2.35%
|
nm
|
nm
|
Third party customer funding rate (2)
|
(0.08%)
|
(0.00%)
|
(0.01%)
|
0.05%
|
nm
|
(0.06%)
|
nm
|
nm
|
Average interest earning assets (£bn) (1)
|
191.2
|
26.0
|
169.4
|
34.1
|
32.4
|
25.8
|
nm
|
512.2
|
Bank net interest margin (1)
|
2.06%
|
1.79%
|
1.54%
|
1.06%
|
na
|
1.48%
|
nm
|
1.64%
|
nm
=' not' meaningful, na =' not' applicable.
Refer to page 17 for the
notes to this table.
NatWest Group – Form 6-K Q1
Results 2021 15
Segment
performance
|
Quarter ended 31 December 2020
|
|
|
|
|
International Banking & Markets
|
|
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
Central items
|
Total NatWest
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Income statement
|
|
|
|
|
|
|
|
|
Net interest income
|
949
|
118
|
667
|
85
|
(2)
|
101
|
53
|
1,971
|
Non-interest income
|
25
|
66
|
284
|
41
|
118
|
30
|
43
|
607
|
Own credit adjustments
|
-
|
-
|
-
|
-
|
(43)
|
-
|
-
|
(43)
|
Total income
|
974
|
184
|
951
|
126
|
73
|
131
|
96
|
2,535
|
Direct expenses
|
|
|
|
|
|
|
|
|
- staff costs
|
(117)
|
(32)
|
(141)
|
(25)
|
(90)
|
(48)
|
(385)
|
(838)
|
- other costs
|
(56)
|
(16)
|
(72)
|
(16)
|
(21)
|
(21)
|
(781)
|
(983)
|
Indirect expenses
|
(393)
|
(71)
|
(382)
|
(32)
|
(133)
|
(31)
|
1,042
|
-
|
Strategic costs
|
|
|
|
|
|
|
|
|
- direct
|
(6)
|
2
|
(35)
|
(37)
|
(50)
|
(3)
|
(197)
|
(326)
|
- indirect
|
(36)
|
(3)
|
(28)
|
(1)
|
(6)
|
(3)
|
77
|
-
|
Litigation and conduct costs
|
(210)
|
29
|
2
|
(1)
|
(1)
|
(8)
|
(5)
|
(194)
|
Operating expenses
|
(818)
|
(91)
|
(656)
|
(112)
|
(301)
|
(114)
|
(249)
|
(2,341)
|
Operating profit/(loss) before impairment (losses)/releases
|
156
|
93
|
295
|
14
|
(228)
|
17
|
(153)
|
194
|
Impairment (losses)/releases
|
(65)
|
(26)
|
(10)
|
(27)
|
(2)
|
1
|
(1)
|
(130)
|
Operating profit/(loss)
|
91
|
67
|
285
|
(13)
|
(230)
|
18
|
(154)
|
64
|
Additional information
|
|
|
|
|
|
|
|
|
Return on equity (1)
|
3.8%
|
13.3%
|
8.1%
|
(5.5%)
|
(15.0%)
|
3.9%
|
nm
|
(1.4%)
|
Cost:income ratio (1)
|
84.0%
|
49.5%
|
67.8%
|
88.9%
|
nm
|
87.0%
|
nm
|
92.2%
|
Total assets (£bn)
|
197.6
|
26.2
|
187.4
|
34.0
|
270.1
|
26.6
|
57.6
|
799.5
|
Funded assets (£bn) (1)
|
197.6
|
26.2
|
187.4
|
34.0
|
105.9
|
26.6
|
55.3
|
633.0
|
Net loans to customers - amortised cost (£bn)
|
172.3
|
17.0
|
108.2
|
13.3
|
8.4
|
18.0
|
23.3
|
360.5
|
Loan impairment rate (1)
|
15bps
|
61bps
|
4bps
|
81bps
|
nm
|
(2)bps
|
nm
|
14bps
|
Impairment provisions (£bn)
|
(1.8)
|
(0.1)
|
(2.9)
|
(0.1)
|
(0.2)
|
(0.8)
|
(0.1)
|
(6.0)
|
Impairment provisions - stage 3 (£bn)
|
(0.8)
|
-
|
(1.1)
|
-
|
(0.1)
|
(0.5)
|
(0.1)
|
(2.6)
|
Customer deposits (£bn)
|
171.8
|
32.4
|
167.7
|
31.3
|
2.6
|
19.6
|
6.3
|
431.7
|
Risk-weighted assets (RWAs) (£bn)
|
36.7
|
10.9
|
75.1
|
7.5
|
26.9
|
11.8
|
1.4
|
170.3
|
RWA equivalent (RWAe) (£bn)
|
36.7
|
10.9
|
75.1
|
7.5
|
28.7
|
11.8
|
1.6
|
172.3
|
Employee numbers (FTEs - thousands)
|
16.0
|
1.8
|
9.6
|
1.7
|
2.2
|
2.7
|
25.9
|
59.9
|
Third party customer asset rate (2)
|
2.81%
|
2.38%
|
2.65%
|
2.34%
|
nm
|
2.33%
|
nm
|
nm
|
Third party customer funding rate (2)
|
(0.10%)
|
(0.01%)
|
(0.01%)
|
0.05%
|
nm
|
(0.07%)
|
nm
|
nm
|
Average interest earning assets (£bn) (1)
|
186.1
|
25.2
|
170.2
|
32.9
|
36.5
|
26.8
|
nm
|
509.6
|
Bank net interest margin (1)
|
2.03%
|
1.86%
|
1.56%
|
1.03%
|
na
|
1.50%
|
nm
|
1.66%
|
nm
=' not' meaningful, na =' not' applicable.
Refer
to page 17 for the notes to this table.
NatWest Group – Form 6-K Q1
Results 2021 16
Segment performance
|
Quarter ended 31 March 2020
|
|
|
|
|
International Banking & Markets
|
|
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
Central items
|
Total NatWest
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Group
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Income statement
|
|
|
|
|
|
|
|
|
Net interest income
|
1,007
|
127
|
674
|
111
|
(40)
|
97
|
(34)
|
1,942
|
Non-interest income
|
143
|
74
|
334
|
33
|
428
|
32
|
21
|
1,065
|
Own credit adjustments
|
-
|
-
|
-
|
-
|
155
|
-
|
-
|
155
|
Total income
|
1,150
|
201
|
1,008
|
144
|
543
|
129
|
(13)
|
3,162
|
Direct expenses
|
|
|
|
|
|
|
|
|
- staff costs
|
(135)
|
(39)
|
(174)
|
(32)
|
(167)
|
(48)
|
(324)
|
(919)
|
- other costs
|
(58)
|
(16)
|
(73)
|
(14)
|
(57)
|
(24)
|
(553)
|
(795)
|
Indirect expenses
|
(399)
|
(63)
|
(321)
|
(14)
|
(74)
|
(46)
|
917
|
-
|
Strategic costs
|
|
|
|
|
|
|
|
|
- direct
|
-
|
-
|
(2)
|
(1)
|
(34)
|
(1)
|
(93)
|
(131)
|
- indirect
|
(34)
|
(5)
|
(39)
|
(3)
|
(8)
|
(4)
|
93
|
-
|
Litigation and conduct costs
|
97
|
-
|
(1)
|
3
|
(2)
|
-
|
(93)
|
4
|
Operating expenses
|
(529)
|
(123)
|
(610)
|
(61)
|
(342)
|
(123)
|
(53)
|
(1,841)
|
Operating profit/(loss) before impairment (losses)/releases
|
621
|
78
|
398
|
83
|
201
|
6
|
(66)
|
1,321
|
Impairment (losses)/releases
|
(297)
|
(29)
|
(435)
|
(15)
|
5
|
(27)
|
(4)
|
(802)
|
Operating profit/(loss)
|
324
|
49
|
(37)
|
68
|
206
|
(21)
|
(70)
|
519
|
Additional information
|
|
|
|
|
|
|
|
|
Return on equity (1)
|
15.5%
|
9.8%
|
(2.5%)
|
19.4%
|
8.7%
|
(4.2%)
|
nm
|
3.6%
|
Cost:income ratio (1)
|
46.0%
|
61.2%
|
59.1%
|
42.4%
|
63.0%
|
95.3%
|
nm
|
57.7%
|
Total assets (£bn)
|
186.3
|
23.4
|
178.3
|
33.2
|
335.7
|
26.3
|
34.4
|
817.6
|
Funded assets (£bn) (1)
|
186.3
|
23.4
|
178.3
|
33.2
|
129.6
|
26.3
|
31.8
|
608.9
|
Net loans to customers - amortised cost (£bn)
|
163.7
|
15.8
|
109.2
|
13.6
|
12.2
|
18.7
|
18.1
|
351.3
|
Loan impairment rate (1)
|
72bps
|
73bps
|
157bps
|
44bps
|
nm
|
56bps
|
nm
|
90bps
|
Impairment provisions (£bn)
|
(1.6)
|
(0.1)
|
(1.7)
|
-
|
(0.1)
|
(0.7)
|
-
|
(4.2)
|
Impairment provisions - stage 3 (£bn)
|
(0.9)
|
-
|
(1.0)
|
-
|
(0.1)
|
(0.6)
|
-
|
(2.6)
|
Customer deposits (£bn)
|
152.8
|
29.0
|
143.9
|
32.3
|
5.7
|
19.3
|
1.8
|
384.8
|
Risk-weighted assets (RWAs) (£bn)
|
38.2
|
10.3
|
76.9
|
6.8
|
38.9
|
12.7
|
1.4
|
185.2
|
RWA equivalent (RWAe) (£bn)
|
38.2
|
10.3
|
77.0
|
7.1
|
42.2
|
12.7
|
1.7
|
189.2
|
Employee numbers (FTEs - thousands)
|
17.3
|
1.8
|
9.5
|
1.8
|
5.1
|
2.9
|
24.8
|
63.2
|
Third party customer asset rate (2)
|
3.07%
|
2.81%
|
3.22%
|
2.72%
|
nm
|
2.28%
|
nm
|
nm
|
Third party customer funding rate (2)
|
(0.36%)
|
(0.32%)
|
(0.18%)
|
(0.10%)
|
nm
|
(0.08%)
|
nm
|
nm
|
Average interest earning assets (£bn) (1)
|
177.4
|
22.7
|
148.4
|
30.9
|
36.1
|
24.9
|
nm
|
458.5
|
Bank net interest margin (1)
|
2.28%
|
2.25%
|
1.83%
|
1.45%
|
na
|
1.56%
|
nm
|
1.89%
|
nm =' not' meaningful, na =' not'
applicable.
Notes:
|
(1)
|
Refer
to the Appendix for details of the basis of preparation and reconciliation of
non-IFRS performance measures where relevant.
|
(2)
|
Third
party customer asset rate is calculated as annualised interest receivable on
third-party loans to customers as a percentage of third-party loans to
customers only. Third party customer funding rate reflects interest payable
on third-party customer deposits, including interest bearing and non-interest
bearing customer deposits. This excludes intragroup items, loans to banks and
liquid asset portfolios. Intragroup items, bank deposits, debt securities in
issue and subordinated liabilities are excluded for customer funding rate
calculation. Comparatives have been restated. Net interest margin is
calculated as net interest income as a percentage of the average interest-earning
assets without these exclusions
|
NatWest Group – Form 6-K Q1
Results 2021 17
|
Page
|
Credit risk
|
|
Segment analysis
– portfolio summary
|
18
|
Segment analysis
– loans
|
19
|
Movement in
ECL provision
|
19
|
Sector
analysis
|
20
|
Wholesale
support schemes
|
21
|
Capital,
liquidity and funding risk
|
22
|
Credit risk
Segment analysis –
portfolio summary
The table below
shows gross loans and expected credit loss (ECL), by segment and stage, within
the scope of the IFRS 9 ECL framework.
|
|
|
|
International Banking & Markets
|
|
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
Central items
|
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Total
|
31 March 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Loans - amortised cost and FVOCI (1)
|
|
|
|
|
|
|
|
|
Stage 1
|
150,004
|
16,024
|
72,202
|
13,857
|
6,865
|
13,342
|
24,730
|
297,024
|
Stage 2
|
24,569
|
1,876
|
34,572
|
2,089
|
1,413
|
3,274
|
111
|
67,904
|
Stage 3
|
1,957
|
295
|
2,399
|
202
|
111
|
1,141
|
-
|
6,105
|
Of which: individual
|
-
|
295
|
1,380
|
202
|
102
|
83
|
-
|
2,062
|
Of which: collective
|
1,957
|
-
|
1,019
|
-
|
9
|
1,058
|
-
|
4,043
|
|
176,530
|
18,195
|
109,173
|
16,148
|
8,389
|
17,757
|
24,841
|
371,033
|
ECL provisions (2)
|
|
|
|
|
|
|
|
|
Stage 1
|
145
|
29
|
255
|
19
|
12
|
42
|
13
|
515
|
Stage 2
|
851
|
70
|
1,599
|
71
|
43
|
249
|
15
|
2,898
|
Stage 3
|
821
|
36
|
937
|
44
|
91
|
452
|
-
|
2,381
|
Of which: individual
|
-
|
36
|
494
|
44
|
82
|
14
|
-
|
670
|
Of which: collective
|
821
|
-
|
443
|
-
|
9
|
438
|
-
|
1,711
|
|
1,817
|
135
|
2,791
|
134
|
146
|
743
|
28
|
5,794
|
ECL provisions coverage (3,4)
|
|
|
|
|
|
|
|
|
Stage 1 (%)
|
0.10
|
0.18
|
0.35
|
0.14
|
0.17
|
0.31
|
0.05
|
0.17
|
Stage 2 (%)
|
3.46
|
3.73
|
4.63
|
3.40
|
3.04
|
7.61
|
13.51
|
4.27
|
Stage 3 (%)
|
41.95
|
12.20
|
39.06
|
21.78
|
81.98
|
39.61
|
-
|
39.00
|
|
1.03
|
0.74
|
2.56
|
0.83
|
1.74
|
4.18
|
0.11
|
1.56
|
31 December 2020
|
|
|
|
|
|
|
|
|
Loans - amortised cost and FVOCI (1)
|
|
|
|
|
|
|
|
|
Stage 1
|
139,956
|
15,321
|
70,685
|
12,143
|
7,780
|
14,380
|
26,859
|
287,124
|
Stage 2
|
32,414
|
1,939
|
37,344
|
2,242
|
1,566
|
3,302
|
110
|
78,917
|
Stage 3
|
1,891
|
298
|
2,551
|
211
|
171
|
1,236
|
-
|
6,358
|
Of which: individual
|
-
|
298
|
1,578
|
211
|
162
|
43
|
-
|
2,292
|
Of which: collective
|
1,891
|
-
|
973
|
-
|
9
|
1,193
|
-
|
4,066
|
|
174,261
|
17,558
|
110,580
|
14,596
|
9,517
|
18,918
|
26,969
|
372,399
|
ECL provisions (2)
|
|
|
|
|
|
|
|
|
Stage 1
|
134
|
31
|
270
|
14
|
12
|
45
|
13
|
519
|
Stage 2
|
897
|
68
|
1,713
|
74
|
49
|
265
|
15
|
3,081
|
Stage 3
|
806
|
39
|
1,069
|
48
|
132
|
492
|
-
|
2,586
|
Of which: individual
|
-
|
39
|
607
|
48
|
124
|
13
|
-
|
831
|
Of which: collective
|
806
|
-
|
462
|
-
|
8
|
479
|
-
|
1,755
|
|
1,837
|
138
|
3,052
|
136
|
193
|
802
|
28
|
6,186
|
ECL provisions coverage (3,4)
|
|
|
|
|
|
|
|
|
Stage 1 (%)
|
0.10
|
0.20
|
0.38
|
0.12
|
0.15
|
0.31
|
0.05
|
0.18
|
Stage 2 (%)
|
2.77
|
3.51
|
4.59
|
3.30
|
3.13
|
8.03
|
13.64
|
3.90
|
Stage 3 (%)
|
42.62
|
13.09
|
41.91
|
22.75
|
77.19
|
39.81
|
-
|
40.67
|
|
1.05
|
0.79
|
2.76
|
0.93
|
2.03
|
4.24
|
0.10
|
1.66
|
Notes:
|
(1)
|
Fair
value through other comprehensive income (FVOCI).
|
(2)
|
Includes
£7 million (31 December 2020 – £6 million) related to assets classified as
FVOCI
|
(3)
|
ECL
provisions coverage is calculated as ECL provisions divided by loans –
amortised cost and FVOCI.
|
(4)
|
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.
|
(5)
|
The
table shows gross loans only and excludes amounts that are outside the scope
of the ECL framework. Other financial assets within the scope of the IFRS 9
ECL framework were cash and balances at central banks totalling £139.2
billion (31 December 2020 – £122.7 billion) and debt securities of £51.2
billion (31 December 2020 – £53.8 billion).
|
NatWest Group – Form 6-K Q1
Results 2021 18
Risk and capital management
Credit risk continued
Segment analysis –
portfolio summary
Key points
●
|
Stage 1 and
Stage 2 ECL reduced during Q1 2021, mainly in the Wholesale portfolios,
reflecting an improvement in underlying credit metrics.
|
●
|
Stage 3 ECL
balances decreased due to the write-off of previously defaulted debt. The
extension of various COVID-19 related customer support mechanisms has also
mitigated new flows into default. It is expected that defaults will increase
once government support mechanisms end.
|
●
|
Loan balances
in Stage 2 reduced during the quarter but remained elevated following the
deterioration in forward-looking probability of default (PD) during H1 2020.
In Q4 2020, the forecast economics improved, resulting in reduced PDs and
driving some migration of exposure back into Stage 1 during Q1 2021.
|
●
|
The economic
scenarios driving the ECL requirement, as well as the model performance
considerations, were consistent with those described in the NatWest Group plc
2020 Annual Report and Accounts, along with further detail on various aspects
of the IFRS 9 process.
|
|
Segment analysis – loans
|
Key points
|
●
|
Retail Banking: Balance sheet growth continued
during Q1 2021, driven by mortgages, where new lending remained strong.
Unsecured lending balances continued to reduce during Q1 2021, as customer
spend and demand for unsecured borrowing remained subdued, in line with
recent industry trends. Stage 2 balances decreased, primarily as a result of
the improved economic outlook since H1 2020, with reduced PDs driving
migration back into Stage 1 after conclusion of the three month significant
increase in credit risk “persistence” period. Stage 3 ECL increased,
predominantly driven by customers exceeding 90 days past due after being
unable to resume full repayments following payment holidays that concluded in
late 2020. However, the various COVID-19 related customer support schemes
(for example, loan repayment holidays and the government job retention
scheme) continued to mitigate observable portfolio deterioration in the
short-term.
|
●
|
Commercial Banking: Balance
sheet exposure reduced, with lower demand than Q3 and Q4 2020 for new lending
under government support schemes, as well as a decrease in non-scheme
lending. The uncertain outlook resulted in delayed investment and low
confidence among customers leading to the repayment of revolving credit
facilities and working capital facilities as liquidity is optimised.
Construction (in Property), Retail and Leisure were the top three sectors for
borrowers accessing the government lending schemes. Stage 2 exposure
decreased further during the quarter. This was driven by modest improvement
in underlying credit metrics resulting in the migration of exposure to Stage
1 coupled with underlying balance reduction. For those balances that
migrated to Stage 2 during the period, consistent with prior periods, PD
deterioration remained the largest contributor to Stage 2 migration. The flow
of exposure into Stage 3 remained low during Q1 2021, as government
interventions and relief continue to mitigate against defaults. Sector
appetite continued to be regularly reviewed and was adjusted for those
sectors most affected by COVID-19, most notably a reduction in off-balance
sheet exposures in the Land Transport & Logistics, Oil and Gas and Retail
sectors. While Wholesale forbearance increased significantly during the first
half of 2020, there has been a reducing trend since
then. This continued during Q1 2021 as customers returned to normal repayment
schedules. The Leisure, Automotive and Services sectors represented the
largest share of forbearance flow in the Wholesale portfolio, by value, in Q1
2021. Payment holidays and covenant waivers were the most common forms of
forbearance granted.
|
●
|
Ulster Bank RoI: Balance
sheet exposure reduced with diminished credit demand caused by ongoing
COVID-19 disruption. The weakening of the euro against sterling during
the quarter further contributed to this balance sheet reduction. The decrease
in ECL reflected continued improvements in the Stage 3 portfolio as well as
currency fluctuations.
|
Movement in ECL
provision
The table below shows the
main ECL provision movements during the reporting period.
|
ECL provision
|
|
£m
|
At 1 January 2021
|
6,186
|
Changes in economic forecasts
|
-
|
Changes in risk metrics and exposure: Stage 1 and Stage 2
|
(198)
|
Changes in risk metrics and exposure: Stage 3
|
58
|
Judgemental changes: changes in post model adjustments for Stage
1, Stage 2 and Stage 3
|
56
|
Write-offs and other
|
(308)
|
At 31 March 2021
|
5,794
|
Key points
●
|
ECL
reduced during Q1 2021, reflecting a decrease in underlying exposures as well
as foreign exchange movements.
|
●
|
Stage
3 defaults continued to be mitigated by COVID-19 support mechanisms.
Additionally, broader portfolio deterioration continued to be subdued and
resulted in favourable movements in IFRS 9 risk metrics, which lead to some
additional post model adjustments being required to ensure provision
adequacy.
|
NatWest Group – Form 6-K Q1
Results 2021 19
Risk and capital management
Credit risk continued
Sector analysis
The table below shows ECL, by stage, for the Personal portfolio
and key sectors of the Wholesale portfolio, that continue to be affected by COVID-19.
|
|
Off-balance sheet
|
|
|
|
Loans - amortised cost & FVOCI
|
Loan
|
|
Contingent
|
|
ECL provisions
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
commitments
|
|
liabilities
|
|
Stage 1
|
Stage 2
|
Stage 3
|
Total
|
31 March 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
|
£m
|
£m
|
£m
|
£m
|
Personal
|
176,310
|
26,576
|
3,212
|
206,098
|
37,221
|
|
43
|
|
181
|
949
|
1,201
|
2,331
|
Mortgages
|
168,293
|
22,389
|
2,484
|
193,166
|
12,523
|
|
2
|
|
49
|
309
|
605
|
963
|
Credit cards
|
2,236
|
1,219
|
85
|
3,540
|
14,571
|
|
-
|
|
59
|
214
|
65
|
338
|
Other personal
|
5,781
|
2,968
|
643
|
9,392
|
10,127
|
|
41
|
|
73
|
426
|
531
|
1,030
|
Wholesale
|
120,714
|
41,328
|
2,893
|
164,935
|
85,777
|
|
4,327
|
|
334
|
1,949
|
1,180
|
3,463
|
Property
|
24,299
|
12,055
|
1,236
|
37,590
|
16,948
|
|
505
|
|
126
|
435
|
485
|
1,046
|
Financial institutions
|
43,392
|
3,317
|
13
|
46,722
|
14,220
|
|
947
|
|
24
|
94
|
7
|
125
|
Sovereign
|
4,949
|
116
|
9
|
5,074
|
1,428
|
|
2
|
|
17
|
1
|
1
|
19
|
Corporate
|
48,074
|
25,840
|
1,635
|
75,549
|
53,181
|
|
2,873
|
|
167
|
1,419
|
687
|
2,273
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airlines and
aerospace
|
548
|
1,296
|
61
|
1,905
|
1,773
|
|
211
|
|
2
|
36
|
39
|
77
|
Automotive
|
4,376
|
1,760
|
124
|
6,260
|
4,173
|
|
97
|
|
15
|
67
|
16
|
98
|
Education
|
752
|
788
|
63
|
1,603
|
1,131
|
|
16
|
|
2
|
43
|
18
|
63
|
Health
|
2,880
|
2,624
|
176
|
5,680
|
670
|
|
13
|
|
13
|
202
|
51
|
266
|
Land transport and
logistics
|
3,004
|
1,658
|
94
|
4,756
|
3,110
|
|
184
|
|
7
|
102
|
31
|
140
|
Leisure
|
3,335
|
5,746
|
336
|
9,417
|
2,223
|
|
123
|
|
18
|
362
|
153
|
533
|
Oil and gas
|
1,052
|
427
|
63
|
1,542
|
1,749
|
|
304
|
|
4
|
25
|
32
|
61
|
Retail
|
6,719
|
2,254
|
182
|
9,155
|
5,532
|
|
488
|
|
15
|
134
|
89
|
238
|
Total
|
297,024
|
67,904
|
6,105
|
371,033
|
122,998
|
|
4,370
|
|
515
|
2,898
|
2,381
|
5,794
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
|
166,548
|
34,352
|
3,288
|
204,188
|
38,960
|
|
45
|
|
171
|
996
|
1,228
|
2,395
|
Mortgages
|
158,387
|
29,571
|
2,558
|
190,516
|
14,554
|
|
3
|
|
51
|
319
|
635
|
1,005
|
Credit cards
|
2,411
|
1,375
|
109
|
3,895
|
14,262
|
|
-
|
|
53
|
225
|
76
|
354
|
Other personal
|
5,750
|
3,406
|
621
|
9,777
|
10,144
|
|
42
|
|
67
|
452
|
517
|
1,036
|
Wholesale
|
120,576
|
44,565
|
3,070
|
168,211
|
89,845
|
|
4,785
|
|
348
|
2,085
|
1,358
|
3,791
|
Property
|
23,733
|
13,021
|
1,322
|
38,076
|
16,829
|
|
568
|
|
123
|
507
|
545
|
1,175
|
Financial institutions
|
44,002
|
3,624
|
17
|
47,643
|
15,935
|
|
1,076
|
|
23
|
90
|
8
|
121
|
Sovereign
|
4,751
|
204
|
4
|
4,959
|
1,585
|
|
2
|
|
14
|
1
|
2
|
17
|
Corporate
|
48,090
|
27,716
|
1,727
|
77,533
|
55,496
|
|
3,139
|
|
188
|
1,487
|
803
|
2,478
|
Of which:
|
|
|
|
|
|
|
|
|
|
|
|
|
Airlines and
aerospace
|
753
|
1,213
|
41
|
2,007
|
1,888
|
|
215
|
|
2
|
42
|
25
|
69
|
Automotive
|
4,383
|
1,759
|
161
|
6,303
|
4,205
|
|
102
|
|
17
|
63
|
17
|
97
|
Education
|
821
|
754
|
63
|
1,638
|
1,016
|
|
16
|
|
2
|
41
|
17
|
60
|
Health
|
2,694
|
2,984
|
131
|
5,809
|
616
|
|
14
|
|
13
|
164
|
48
|
225
|
Land transport and
logistics
|
2,868
|
1,823
|
111
|
4,802
|
3,782
|
|
197
|
|
8
|
98
|
32
|
138
|
Leisure
|
3,299
|
6,135
|
385
|
9,819
|
2,199
|
|
125
|
|
22
|
439
|
204
|
665
|
Oil and gas
|
1,178
|
300
|
83
|
1,561
|
2,225
|
|
346
|
|
4
|
20
|
59
|
83
|
Retail
|
6,702
|
2,282
|
187
|
9,171
|
5,888
|
|
512
|
|
18
|
112
|
101
|
231
|
Total
|
287,124
|
78,917
|
6,358
|
372,399
|
128,805
|
|
4,830
|
|
519
|
3,081
|
2,586
|
6,186
|
Key points
●
|
Personal: As noted earlier, ECL in Stage 1 and
Stage 2 decreased due to continued reduction in unsecured balances and
subdued portfolio deterioration, maintaining the reduced PD levels observed
in Q4 2020. This resulted in a reduction of Stage 2 assets during Q1 2021.
The ECL coverage requirements were broadly stable during Q1 2021.
|
●
|
Wholesale: On and off-balance sheet exposure
reduced during the quarter with slowing demand for COVID-19 government
lending schemes. There was a £0.6 billion increase in government lending
schemes in Q1 2021 (refer to the Wholesale Support Schemes table on the
following page for further information). When BBLS, CBILS and CLBILS closed,
approximately 315,000 applications across all the schemes had been approved,
totalling £14.7 billion in new lending, of which, £13.5 billion had been
drawdown. 62% of the total new lending by value had been granted through
BBLS.Construction (in Property), Retail and
Leisure remained the top three sectors for borrowers accessing the government
lending schemes. Sector appetite continued to be regularly reviewed and where
appropriate adjusted, for those sectors most affected by COVID-19. Stage 2
exposures reduced during Q1 2021.
|
NatWest Group – Form 6-K Q1
Results 2021 20
Risk and capital management
Credit risk continued
Wholesale support schemes
The table below shows the uptake
of the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption
Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme
(CLBILS) by Wholesale customers, by sector.
|
BBLS
|
|
CBILS
|
|
CLBILS
|
|
Approved
|
Drawdown
|
% of BBLS to
|
|
Approved
|
Drawdown
|
% of CBILS to
|
|
Approved
|
Drawdown
|
% of CLBILS to
|
31 March 2021
|
volume
|
amount (£m)
|
sector loans
|
|
volume
|
amount (£m)
|
sector loans
|
|
volume
|
amount (£m)
|
sector loans
|
Wholesale lending by sector
|
|
|
|
|
|
|
|
|
|
|
|
Airlines and aerospace
|
269
|
7
|
0.37%
|
|
20
|
9
|
0.47%
|
|
4
|
11
|
0.58%
|
Automotive
|
12,969
|
429
|
6.85%
|
|
584
|
150
|
2.40%
|
|
27
|
58
|
0.93%
|
Education
|
2,091
|
55
|
3.43%
|
|
120
|
76
|
4.74%
|
|
10
|
33
|
2.06%
|
Health
|
10,471
|
327
|
5.76%
|
|
621
|
100
|
1.76%
|
|
3
|
24
|
0.42%
|
Land transport and logistics
|
9,107
|
264
|
5.55%
|
|
392
|
102
|
2.14%
|
|
3
|
9
|
0.19%
|
Leisure
|
33,103
|
1,024
|
10.87%
|
|
2,162
|
565
|
6.00%
|
|
38
|
214
|
2.27%
|
Oil and gas
|
335
|
10
|
0.65%
|
|
14
|
7
|
0.45%
|
|
-
|
-
|
-
|
Retail
|
33,127
|
1,113
|
12.16%
|
|
1,638
|
430
|
4.70%
|
|
30
|
107
|
1.17%
|
Property
|
72,172
|
2,078
|
5.53%
|
|
2,465
|
692
|
1.84%
|
|
41
|
120
|
0.32%
|
Other (including Business
|
|
|
|
|
|
|
|
|
|
|
|
Banking)
|
124,611
|
3,321
|
3.82%
|
|
8,798
|
1,873
|
2.15%
|
|
86
|
275
|
0.32%
|
Total
|
298,255
|
8,628
|
5.23%
|
|
16,814
|
4,004
|
2.43%
|
|
242
|
851
|
0.52%
|
31 December 2020
|
|
|
|
|
|
Wholesale lending by sector
|
|
|
|
|
|
|
|
|
|
|
|
Airlines and aerospace
|
253
|
7
|
0.35%
|
|
21
|
9
|
0.45%
|
|
4
|
8
|
0.40%
|
Automotive
|
12,301
|
416
|
6.60%
|
|
553
|
139
|
2.21%
|
|
31
|
58
|
0.92%
|
Education
|
1,943
|
53
|
3.24%
|
|
111
|
73
|
4.46%
|
|
11
|
37
|
2.26%
|
Health
|
9,821
|
314
|
5.41%
|
|
601
|
101
|
1.74%
|
|
3
|
24
|
0.41%
|
Land transport and logistics
|
8,575
|
255
|
5.31%
|
|
365
|
97
|
2.02%
|
|
3
|
5
|
0.10%
|
Leisure
|
31,148
|
989
|
10.07%
|
|
1,983
|
512
|
5.21%
|
|
34
|
173
|
1.76%
|
Oil and gas
|
303
|
9
|
0.58%
|
|
15
|
8
|
0.51%
|
|
-
|
-
|
-
|
Retail
|
31,315
|
1,078
|
11.75%
|
|
1,548
|
416
|
4.54%
|
|
29
|
121
|
1.32%
|
Property
|
67,698
|
1,996
|
5.24%
|
|
2,350
|
664
|
1.74%
|
|
41
|
133
|
0.35%
|
Other (including Business
|
|
|
|
|
|
|
|
|
|
|
|
Banking)
|
118,486
|
3,181
|
3.57%
|
|
8,504
|
1,752
|
1.97%
|
|
86
|
267
|
0.30%
|
Total
|
281,843
|
8,298
|
4.93%
|
|
16,051
|
3,771
|
2.24%
|
|
242
|
826
|
0.49%
|
Notes:
(1)
|
The
table contains some cases which as at 31 March 2021 were approved but not yet
drawn down. Approved limits as at 31 March 2021 were as follows: BBLS – £9.1
billion (94% drawn); CBILS – £4.3 billion (94% drawn); and CLBILS – £1.3
billion (64% drawn).
|
(2)
|
The
UK Government schemes ended for new applications on 31 March 2021. NatWest
Group will continue to help customers recover and grow, through Pay as You
Grow for existing BBLS customers and supporting access to finance through the
new Recovery Loan Scheme
|
.
NatWest Group – Form 6-K Q1
Results 2021 21
Risk and capital management
Capital,
liquidity and funding risk
Introduction
NatWest
Group continually ensures a comprehensive approach is taken to the management
of Capital, Liquidity and Funding,
underpinned
by frameworks, risk appetite and policies, to manage and mitigate Capital,
Liquidity and Funding risks. The framework ensures the tools and capability are
in place to facilitate the management and mitigation of risk ensuring that
NatWest Group operates within its regulatory requirements and risk appetite.
Within the 2020 Annual Report on
Form 20-F, NatWest Group outlined a number of COVID-19 specific relief measures
which impacted capital and leverage ratios during the year. Below is the one
relief measure which was only a temporary amendment and therefore is reverting
to the previous rules in 2021.
●
|
Prudential
Valuation Adjustment (PVA) – From
1 January 2021 the aggregation factor reverts back to 50% from 66%. This has
increased NatWest Group’s PVA deduction by c.£85 million.
|
The CRR quick fix addressing
COVID-19 relief measures also resulted in the acceleration of a number of
changes introduced in CRR2 including prudential amortisation for software, an
Infrastructure supporting factor, and a broadening of the SME supporting
factor.
Key developments
CET1
|
The CET1 ratio decreased by 30
basis points to 18.2% reflecting the impact of the directed buy back and
associated pension contribution of £1.2 billion (72 basis points), foreseeable
dividend accrual of £0.2 billion (11 basis points), partially offset by the
reduction in RWAs (c.60 basis points), attributable profit and other reserve
movements.
|
Total RWAs
|
Total RWAs decreased by £5.6
billion during the period, mainly reflecting a decrease in credit risk RWAs
of £4.8 billion as well as a reduction in operational risk RWAs of £0.9
billion following the annual recalculation in Q1 2021. The decrease in credit
risk RWAs was mainly driven by reductions in Commercial Banking, Retail
Banking and Ulster Bank RoI. Counterparty credit risk RWAs reduced by £0.5
billion during the period as a result of reduced exposures in NatWest
Markets. There were offsetting increases in market risk RWAs of £0.6 billion,
mainly driven by higher SVaR-based RWAs.
|
CRR leverage
ratio
|
The CRR leverage ratio
decreased c.20 basis points to 5.0% predominantly due to a £1.0 billion decrease
in Tier 1 capital in addition to an £11.2 billion increase in the leverage
exposure driven primarily by cash and balances at central banks.
|
UK leverage
ratio
|
The UK leverage ratio decreased
c.20 basis points to 6.2% driven by a £1.0 billion decrease in Tier 1 capital.
|
Liquidity
portfolio
|
The liquidity portfolio in Q1
2021 remained broadly stable at £263 billion, with primary liquidity
decreasing by £0.3 billion to £170 billion. The decrease in primary liquidity
was primarily driven by repayment of TFSME funding, buy back of shares owned
by the UK Government, pension fund contributions, liability management
exercise and the purchase of Metro Bank loans; offset by an increase in
deposits and a methodology change to include UBI DAC cash at central banks.
The increase in secondary liquidity of £0.7 billion is driven by
unencumbrance of assets following TFSME repayment during the quarter.
|
NatWest Group – Form 6-K Q1
Results 2021 22
Risk and capital management
Capital, liquidity and
funding risk continued
Maximum
Distributable Amount (MDA)
and Minimum Capital Requirements
NatWest Group is subject to
minimum capital requirements relative to RWAs. The table below summarises the
minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the
additional capital buffers which are held in excess of the regulatory minimum
requirements and are usable in stress.
Where the CET1 ratio falls
below the sum of the minimum capital and the combined buffer requirement, there
is a subsequent automatic restriction on the amount available to service
discretionary payments, known as the MDA. Note that different requirements
apply to individual legal entities or sub-groups and that the table shown does
not reflect any incremental PRA buffer requirements, which are not disclosable.
The current capital position
provides significant headroom above both our minimum requirements and our MDA
threshold requirements.
Type
|
CET1
|
Total Tier 1
|
Total capital
|
Pillar
1 requirements
|
4.5%
|
6.0%
|
8.0%
|
Pillar
2A requirements
|
2.0%
|
2.6%
|
3.5%
|
Minimum
Capital Requirements
|
6.5%
|
8.6%
|
11.5%
|
Capital
conservation buffer
|
2.5%
|
2.5%
|
2.5%
|
Countercyclical
capital buffer (1)
|
-
|
-
|
-
|
MDA
Threshold (2)
|
9.0%
|
|
n/a
|
n/a
|
Subtotal
|
9.0%
|
|
11.1%
|
14.0%
|
Capital
ratios at 31 March 2021
|
18.2%
|
21.5%
|
24.0%
|
Headroom(3)
|
9.2%
|
10.4%
|
10.0%
|
Notes:
(1)
|
Many countries announced reductions in their
countercyclical capital buffer rates in response to COVID-19. Most notably
for NatWest Group, the Financial Policy Committee reduced the UK rate from 1%
to 0% effective from 11 March 2020. The CBI also announced a reduction of the
Republic of Ireland rate from 1% to 0% effective from 1 April 2020.
|
(2)
|
Pillar
2A requirements for NatWest Group are set on a nominal capital basis, which
result in an implied 9.0% MDA.
|
(3)
|
The headroom does not reflect excess distributable
capital and may vary over time.
|
NatWest Group – Form 6-K Q1
Results 2021 23
Risk and capital management
Capital,
liquidity and funding risk continued
Capital and leverage
ratios
The table below sets out the key capital
and leverage ratios.
|
CRR basis (1)
|
|
31 March
|
31 December
|
31 March
|
|
2021
|
2020
|
2020
|
Capital adequacy ratios
|
%
|
%
|
%
|
CET1
|
18.2
|
18.5
|
16.6
|
Tier 1
|
21.5
|
21.4
|
18.8
|
Total
|
24.0
|
24.5
|
21.4
|
|
|
|
|
Capital
|
£m
|
£m
|
£m
|
Tangible equity
|
30,126
|
31,712
|
32,990
|
|
|
|
|
Prudential valuation adjustment
|
(436)
|
(286)
|
(531)
|
Deferred tax assets
|
(750)
|
(760)
|
(722)
|
Own credit adjustments
|
6
|
(1)
|
(519)
|
Pension fund assets
|
(570)
|
(579)
|
(488)
|
Cash flow hedging reserve
|
38
|
(229)
|
(259)
|
Foreseeable ordinary dividends
|
(547)
|
(364)
|
-
|
Foreseeable charges
|
-
|
(266)
|
-
|
Prudential amortisation of software development costs
|
524
|
473
|
-
|
Adjustments under IFRS 9 transitional arrangements
|
1,655
|
1,747
|
296
|
Total deductions
|
(80)
|
(265)
|
(2,223)
|
|
|
|
|
CET1 capital
|
30,046
|
31,447
|
30,767
|
AT1 capital
|
5,380
|
4,983
|
4,051
|
Tier 1 capital
|
35,426
|
36,430
|
34,818
|
Tier 2 capital
|
4,118
|
5,255
|
4,883
|
Total regulatory capital
|
39,544
|
41,685
|
39,701
|
|
|
|
|
Risk-weighted assets
|
|
|
|
Credit risk
|
125,131
|
129,914
|
136,354
|
Counterparty credit risk
|
8,579
|
9,104
|
13,917
|
Market risk
|
9,962
|
9,362
|
12,998
|
Operational risk
|
21,031
|
21,930
|
21,930
|
Total RWAs
|
164,703
|
170,310
|
185,199
|
|
|
|
|
Leverage
|
|
|
|
Cash and balances at central banks*
|
140,347
|
124,489
|
81,085
|
Trading assets
|
65,558
|
68,990
|
81,843
|
Derivatives
|
122,955
|
166,523
|
208,734
|
Financial assets*
|
418,290
|
422,647
|
421,456
|
Other assets
|
22,626
|
16,842
|
24,526
|
Total assets
|
769,776
|
799,491
|
817,644
|
Derivatives
|
|
|
|
- netting and variation margin
|
(126,250)
|
(172,658)
|
(220,973)
|
- potential future exposures
|
38,279
|
38,171
|
46,254
|
Securities financing transactions gross up
|
3,249
|
1,179
|
2,484
|
Other off balance sheet items
|
43,734
|
45,853
|
39,580
|
Regulatory deductions and other adjustments
|
(14,535)
|
(8,943)
|
(8,818)
|
CRR leverage exposure
|
714,253
|
703,093
|
676,171
|
|
|
|
|
CRR leverage ratio % (2)
|
5.0
|
5.2
|
5.1
|
|
|
|
|
UK leverage exposure
|
567,959
|
572,558
|
603,070
|
UK leverage ratio % (3)
|
6.2
|
6.4
|
5.8
|
*31 March 2020 has been restated for the accounting
policy change for balances held with central banks. Refer to Accounting policy
changes effective 1 January 2020 on page 263 in the NatWest Group plc 2020
Annual Report on Form 20-F for further details.
Notes:
(1)
|
Based on CRR end-point including the IFRS
9 transitional adjustment of £1,655 million. Excluding this adjustment, the
CET1 ratio would be 17.2%. The amended article for the prudential treatment
of software assets was implemented in December 2020, excluding this
adjustment the CET1 ratio at 31 March 2021 would be 18.0%.
|
(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 4.7%.
|
(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 6.0%.
|
NatWest Group – Form 6-K Q1
Results 2021 24
Risk and capital management
Capital, liquidity and
funding risk continued
Capital flow statement
The
table below analyses the movement in CET1, AT1 and Tier 2 capital for the three
months ended 31 March 2021.
|
CET1
|
AT1
|
Tier 2
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
At 1 January 2021
|
31,447
|
4,983
|
5,255
|
41,685
|
Attributable profit for the period
|
620
|
-
|
-
|
620
|
Own credit
|
7
|
-
|
-
|
7
|
Share capital and reserve movements in respect of employee share
schemes
|
20
|
-
|
-
|
20
|
Directed buy back
|
(1,231)
|
-
|
-
|
(1,231)
|
Foreign exchange reserve
|
(348)
|
-
|
-
|
(348)
|
FVOCI reserve
|
(89)
|
-
|
-
|
(89)
|
Goodwill and intangibles deduction
|
40
|
-
|
-
|
40
|
Deferred tax assets
|
10
|
-
|
-
|
10
|
Prudential valuation adjustments
|
(150)
|
-
|
-
|
(150)
|
New issues of capital instruments
|
-
|
397
|
-
|
397
|
Redemption of capital instruments
|
-
|
-
|
(1,456)
|
(1,456)
|
Net dated subordinated debt instruments
|
-
|
-
|
453
|
453
|
Foreign exchange movements
|
-
|
-
|
(62)
|
(62)
|
Foreseeable ordinary dividends
|
(183)
|
-
|
-
|
(183)
|
Adjustment under IFRS 9 transitional arrangements
|
(92)
|
-
|
-
|
(92)
|
Other movements
|
(5)
|
-
|
(72)
|
(77)
|
At 31 March 2021
|
30,046
|
5,380
|
4,118
|
39,544
|
Key points
●
|
CET1
decrease primarily due to the impact of the directed buy back and associated
pension contribution of £1.2 billion, foreseeable dividend accrual of £0.2
billion and other offsetting items.
|
●
|
AT1
reflects the £400 million 4.5% Reset Perpetual
Subordinated Contingent Convertible Notes issued in March 2021.
|
●
|
Tier 2 movement primarily due to the redemption of own debt of £1.5
billion.
|
NatWest Group – Form 6-K Q1
Results 2021 25
Risk and capital management
Capital, liquidity and
funding risk continued
Risk-weighted assets
The table below analyses the
movement in RWAs during the period, by key drivers.
|
|
Counterparty
|
|
Operational
|
|
|
Credit risk
|
credit risk
|
Market risk
|
risk
|
Total
|
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
At 1 January 2021
|
129.9
|
9.1
|
9.4
|
21.9
|
170.3
|
Foreign exchange movement
|
(1.1)
|
(0.2)
|
-
|
-
|
(1.3)
|
Business movement
|
(2.2)
|
(0.3)
|
0.9
|
(0.9)
|
(2.5)
|
Risk parameter changes (1)
|
(1.0)
|
-
|
-
|
-
|
(1.0)
|
Model updates
|
(0.5)
|
-
|
(0.3)
|
-
|
(0.8)
|
At 31 March 2021
|
125.1
|
8.6
|
10.0
|
21.0
|
164.7
|
The
table below analyses segmental RWAs.
|
|
|
|
International Banking & Markets
|
|
Central
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
items &
|
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
other
|
Total
|
Total RWAs
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
At 1 January 2021
|
36.7
|
10.9
|
75.1
|
7.5
|
26.9
|
11.8
|
1.4
|
170.3
|
Foreign exchange movement
|
-
|
-
|
(0.3)
|
(0.1)
|
(0.4)
|
(0.5)
|
-
|
(1.3)
|
Business movement
|
(0.9)
|
0.3
|
(2.5)
|
0.3
|
0.3
|
(0.2)
|
0.2
|
(2.5)
|
Risk parameter changes (1)
|
(0.8)
|
-
|
(0.2)
|
-
|
-
|
-
|
-
|
(1.0)
|
Model updates
|
-
|
-
|
(0.5)
|
-
|
(0.3)
|
-
|
-
|
(0.8)
|
At 31 March 2021
|
35.0
|
11.2
|
71.6
|
7.7
|
26.5
|
11.1
|
1.6
|
164.7
|
|
|
|
|
|
|
|
|
|
Credit risk
|
27.9
|
9.8
|
63.3
|
6.6
|
5.7
|
10.2
|
1.6
|
125.1
|
Counterparty credit risk
|
0.1
|
0.1
|
0.2
|
0.1
|
8.1
|
-
|
-
|
8.6
|
Market risk
|
-
|
-
|
0.1
|
-
|
9.9
|
-
|
-
|
10.0
|
Operational risk
|
7.0
|
1.3
|
8.0
|
1.0
|
2.8
|
0.9
|
-
|
21.0
|
Total RWAs
|
35.0
|
11.2
|
71.6
|
7.7
|
26.5
|
11.1
|
1.6
|
164.7
|
Note:
(1)
|
Risk parameter changes
relate to changes in credit quality metrics of customers and counterparties
(such as probability of default and loss given default) as well as internal
ratings based model changes relating to counterparty credit risk in line with
European Banking Authority Pillar 3 Guidelines.
|
Key
points
●
|
Total RWAs
decreased by £5.6 billion during the period:
|
|
●
|
Credit risk RWAs reduced by £4.8 billion mainly driven by a decrease in
lending and active capital management in Commercial Banking along with lower
unsecured balances and improved risk metrics for key customer portfolios
within Retail Banking. In addition, favourable foreign exchange
movements resulted in further reductions.
|
|
●
|
Counterparty credit risk RWAs reduced by £0.5 billion, mainly
reflecting reduced IMM exposures in NatWest Markets.
|
|
●
|
The £0.6 billion increase in market risk RWAs reflected an increase in
modelled market risk mainly driven by higher SVaR-based RWAs.
|
|
●
|
Operational risk RWAs decreased by £0.9 billion following the annual
recalculation in Q1 2021.
|
NatWest Group – Form 6-K Q1
Results 2021 26
Risk and capital management
Capital, liquidity and
funding risk continued
Credit risk exposure at
default (EAD) and risk-weighted assets (RWAs)
The table below analyses
credit risk EADs and RWAs by on and off balance sheet.
|
|
|
|
|
International Banking & Markets
|
|
|
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
Central items
|
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Total
|
31 March 2021
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
£bn
|
EAD
|
On balance sheet
|
265.8
|
25.2
|
153.9
|
37.0
|
31.3
|
26.7
|
1.1
|
541.0
|
Off
balance sheet
|
26.9
|
0.3
|
28.5
|
4.4
|
4.9
|
2.1
|
0.1
|
67.2
|
Total
|
292.7
|
25.5
|
182.4
|
41.4
|
36.2
|
28.8
|
1.2
|
608.2
|
|
|
|
|
|
|
|
|
|
|
RWAs
|
On balance sheet
|
25.6
|
9.6
|
49.5
|
5.4
|
3.8
|
9.2
|
1.6
|
104.7
|
Off
balance sheet
|
2.3
|
0.2
|
13.8
|
1.2
|
1.9
|
1.0
|
-
|
20.4
|
Total
|
27.9
|
9.8
|
63.3
|
6.6
|
5.7
|
10.2
|
1.6
|
125.1
|
31 December 2020
|
|
|
|
|
|
|
|
|
EAD
|
On balance sheet
|
254.7
|
23.7
|
151.4
|
34.0
|
33.4
|
27.4
|
0.9
|
525.5
|
Off
balance sheet
|
28.3
|
0.3
|
29.3
|
5.1
|
5.5
|
2.2
|
0.1
|
70.8
|
Total
|
283.0
|
24.0
|
180.7
|
39.1
|
38.9
|
29.6
|
1.0
|
596.3
|
|
|
|
|
|
|
|
|
|
|
RWAs
|
On balance sheet
|
26.7
|
9.4
|
52.5
|
5.1
|
4.1
|
9.6
|
1.4
|
108.8
|
Off
balance sheet
|
2.5
|
0.2
|
13.8
|
1.4
|
2.1
|
1.1
|
—
|
21.1
|
Total
|
29.2
|
9.6
|
66.3
|
6.5
|
6.2
|
10.7
|
1.4
|
129.9
|
31 March 2020
|
|
|
|
|
|
|
|
|
EAD
|
On balance sheet
|
225.3
|
20.3
|
140.3
|
32.9
|
36.9
|
27.0
|
0.5
|
483.2
|
Off
balance sheet
|
29.1
|
0.3
|
25.4
|
4.0
|
7.2
|
2.1
|
0.5
|
68.6
|
Total
|
254.4
|
20.6
|
165.7
|
36.9
|
44.1
|
29.1
|
1.0
|
551.8
|
|
|
|
|
|
|
|
|
|
|
RWAs
|
On balance sheet
|
27.6
|
8.8
|
56.6
|
4.6
|
7.2
|
10.5
|
1.2
|
116.5
|
Off
balance sheet
|
3.0
|
0.2
|
11.5
|
1.2
|
2.7
|
1.1
|
0.2
|
19.9
|
Total
|
30.6
|
9.0
|
68.1
|
5.8
|
9.9
|
11.6
|
1.4
|
136.4
|
Liquidity
portfolio
The table below shows the
liquidity portfolio by product, with primary liquidity aligned to internal
stressed outflow coverage and regulatory liquidity coverage ratio (LCR)
categorisation. Secondary liquidity comprises assets eligible for discount at
central banks, which do not form part of the liquid asset portfolio for LCR or internal
stressed outflow coverage purposes.
|
Liquidity value
|
|
31 March 2021
|
|
31 December 2020
|
|
31 March 2020
|
|
NatWest
|
|
NatWest
|
|
NatWest
|
|
Group (1)
|
|
Group (1)
|
|
Group (1)
|
|
£m
|
|
£m
|
|
£m
|
Cash and balances at central banks
|
137,410
|
|
115,820
|
|
73,772
|
AAA to AA- rated governments
|
29,406
|
|
50,901
|
|
55,879
|
A+ and lower rated governments
|
7
|
|
79
|
|
1,362
|
Government guaranteed issuers, public sector entities and
|
|
|
|
|
|
government sponsored
entities
|
250
|
|
272
|
|
225
|
International organisations and multilateral
development banks
|
2,825
|
|
3,140
|
|
2,431
|
LCR level 1 bonds
|
32,488
|
|
54,392
|
|
59,897
|
LCR level 1 assets
|
169,898
|
|
170,212
|
|
133,669
|
LCR level 2 assets
|
114
|
|
124
|
|
-
|
Non-LCR eligible assets
|
-
|
|
-
|
|
82
|
Primary liquidity
|
170,012
|
|
170,336
|
|
133,751
|
Secondary liquidity (2)
|
92,665
|
|
91,985
|
|
67,668
|
Total liquidity value
|
262,677
|
|
262,321
|
|
201,419
|
Notes:
|
(1)
|
NatWest Group includes the UK Domestic Liquidity
Sub-Group (NWB Plc, RBS plc, Coutts & Co and Ulster Bank Limited),
NatWest Markets Plc and other significant operating subsidiaries that hold liquidity
portfolios. These include The Royal Bank of Scotland International Limited,
NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios that comply
with local regulations that may differ from PRA rules.
|
(2)
|
Comprises
assets eligible for discounting at the Bank of England and other central
banks.
|
(3)
|
Following
a change in methodology in our internal stressed outflow coverage metric, cash
placed at Central Bank of Ireland within UBI DAC is now reported in the liquidity
portfolio.
|
NatWest Group – Form 6-K Q1
Results 2021 27
Condensed consolidated income statement for the period ended 31 March
2021 (unaudited)
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
£m
|
£m
|
£m
|
Interest receivable
|
|
|
|
2,349
|
2,369
|
2,683
|
Interest payable
|
|
|
|
(418)
|
(398)
|
(741)
|
Net interest income
|
|
|
|
1,931
|
1,971
|
1,942
|
Fees and commissions receivable
|
|
|
|
647
|
653
|
748
|
Fees and commissions payable
|
|
|
|
(141)
|
(131)
|
(175)
|
Income from trading activities
|
|
|
|
160
|
71
|
592
|
Other operating income (1)
|
|
|
|
62
|
(29)
|
55
|
Non-interest income
|
|
|
|
728
|
564
|
1,220
|
Total income
|
|
|
|
2,659
|
2,535
|
3,162
|
Staff costs
|
|
|
|
(985)
|
(986)
|
(992)
|
Premises and equipment
|
|
|
|
(248)
|
(321)
|
(258)
|
Other administrative expenses
|
|
|
|
(377)
|
(764)
|
(398)
|
Depreciation and amortisation
|
|
|
|
(205)
|
(270)
|
(193)
|
Operating expenses
|
|
|
|
(1,815)
|
(2,341)
|
(1,841)
|
Profit before impairment releases/(losses)
|
|
|
|
844
|
194
|
1,321
|
Impairment releases/(losses)
|
|
|
|
102
|
(130)
|
(802)
|
Operating profit before tax
|
|
|
|
946
|
64
|
519
|
Tax charge
|
|
|
|
(233)
|
(84)
|
(188)
|
Profit/(loss) for the period
|
|
|
|
713
|
(20)
|
331
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Ordinary shareholders
|
|
|
|
620
|
(109)
|
288
|
Preference shareholders
|
|
|
|
5
|
5
|
8
|
Paid-in equity holders
|
|
|
|
87
|
83
|
97
|
Non-controlling interests
|
|
|
|
1
|
1
|
(62)
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
5.1p
|
(0.9)p
|
2.4p
|
Earnings per ordinary share - fully diluted
|
|
|
|
5.1p
|
(0.9)p
|
2.4p
|
Note:
(1)
|
31 March 2021 includes £118 million loss on
redemption of own debt.
|
NatWest Group – Form 6-K Q1
Results 2021 28
Condensed
consolidated statement of comprehensive income for the period ended 31 March
2021(unaudited)
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
£m
|
£m
|
£m
|
Profit/(loss) for the period
|
|
|
|
713
|
(20)
|
331
|
Items that do not qualify for reclassification
|
|
|
|
|
|
|
Remeasurement of retirement benefit schemes (1)
|
|
|
|
(508)
|
(50)
|
(22)
|
(Loss)/profit on fair value of credit in financial liabilities
|
|
|
|
|
|
|
designated as at FVTPL due to own credit
risk
|
|
|
|
(7)
|
(72)
|
188
|
FVOCI financial assets
|
|
|
|
1
|
(21)
|
(253)
|
Tax (1)
|
|
|
|
137
|
29
|
-
|
|
|
|
|
(377)
|
(114)
|
(87)
|
Items that do qualify for reclassification
|
|
|
|
|
|
|
FVOCI financial assets
|
|
|
|
(118)
|
81
|
(143)
|
Cash flow hedges
|
|
|
|
(358)
|
(93)
|
312
|
Currency translation
|
|
|
|
(343)
|
(149)
|
358
|
Tax
|
|
|
|
113
|
(4)
|
(53)
|
|
|
|
|
(706)
|
(165)
|
474
|
Other comprehensive (loss)/income after tax
|
|
|
|
(1,083)
|
(279)
|
387
|
Total comprehensive (loss)/income for the period
|
|
|
|
(370)
|
(299)
|
718
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Ordinary shareholders
|
|
|
|
(463)
|
(389)
|
662
|
Preference shareholders
|
|
|
|
5
|
5
|
8
|
Paid-in equity holders
|
|
|
|
87
|
83
|
97
|
Non-controlling interests
|
|
|
|
1
|
2
|
(49)
|
|
|
|
|
(370)
|
(299)
|
718
|
Note:
(1)
|
In March 2021, there was
an agreement with HM Treasury to buy 591 million ordinary shares in the
Company from UK Government Investments Ltd (UKGI), at 190.5p per share. This triggered
NatWest Group to contribute £500 million to its main pension scheme in line
with the memorandum of understanding announced on 17 April 2018. After tax
relief, this contribution reduced total equity by £365 million.
|
NatWest Group – Form 6-K Q1
Results 2021 29
Condensed
consolidated balance sheet as at 31 March 2021 (unaudited)
|
31 March
|
31 December
|
31 March
|
2021
|
2020
|
2020
|
|
£m
|
£m
|
£m
|
Assets
|
|
|
|
Cash and balances at central banks*
|
140,347
|
124,489
|
81,085
|
Trading assets
|
65,558
|
68,990
|
81,843
|
Derivatives
|
122,955
|
166,523
|
208,734
|
Settlement balances
|
8,013
|
2,297
|
9,840
|
Loans to banks - amortised cost*
|
7,239
|
6,955
|
9,306
|
Loans to customers - amortised cost
|
358,728
|
360,544
|
351,328
|
Other financial assets
|
52,323
|
55,148
|
60,822
|
Intangible assets
|
6,666
|
6,655
|
6,619
|
Other assets
|
7,947
|
7,890
|
8,067
|
Total assets
|
769,776
|
799,491
|
817,644
|
|
|
|
|
Liabilities
|
|
|
|
Bank deposits
|
18,610
|
20,606
|
26,733
|
Customer deposits
|
453,308
|
431,739
|
384,800
|
Settlement balances
|
8,234
|
5,545
|
8,905
|
Trading liabilities
|
70,508
|
72,256
|
80,767
|
Derivatives
|
116,015
|
160,705
|
204,477
|
Other financial liabilities
|
43,743
|
45,811
|
47,870
|
Subordinated liabilities
|
8,078
|
9,962
|
10,898
|
Notes in circulation
|
2,705
|
2,655
|
2,009
|
Other liabilities
|
5,926
|
6,388
|
7,062
|
Total liabilities
|
727,127
|
755,667
|
773,521
|
|
|
|
|
Equity
|
|
|
|
Ordinary shareholders' interests
|
36,792
|
38,367
|
39,609
|
Other owners' interests
|
5,892
|
5,493
|
4,554
|
Owners’ equity
|
42,684
|
43,860
|
44,163
|
Non-controlling interests
|
(35)
|
(36)
|
(40)
|
Total equity
|
42,649
|
43,824
|
44,123
|
Total liabilities and equity
|
769,776
|
799,491
|
817,644
|
*31 March 2020 has been restated for the accounting policy
change for balances held with central banks. Refer to Accounting policy changes
effective 1 January 2020 on page 263 in the NatWest Group plc 2020 Annual
Report on Form 20-F for further details.
NatWest Group – Form 6-K Q1
Results 2021 30
Condensed
consolidated statement of changes in equity for the period ended 31 March 2021 (unaudited)
|
Share
|
|
|
|
|
|
|
capital and
|
|
|
|
Total
|
Non
|
|
|
statutory
|
Paid-in
|
Retained
|
Other
|
owners'
|
controlling
|
Total
|
|
reserves (1)
|
equity
|
earnings
|
reserves*
|
equity
|
interests
|
equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 1 January 2021
|
13,216
|
4,999
|
12,567
|
13,078
|
43,860
|
(36)
|
43,824
|
Profit attributable to ordinary shareholders
|
|
|
|
|
|
|
|
and other equity owners
|
-
|
-
|
712
|
-
|
712
|
1
|
713
|
Other comprehensive income
|
|
|
|
|
|
|
|
- Realised gains in period
|
|
|
|
|
|
|
|
on FVOCI equity shares
|
-
|
-
|
(3)
|
3
|
-
|
-
|
-
|
- Remeasurement of retirement
|
|
|
|
|
|
|
|
benefit
schemes (2)
|
-
|
-
|
(508)
|
-
|
(508)
|
-
|
(508)
|
- Changes in fair value of credit in
financial
|
|
|
|
|
|
|
|
liabilities at FVTPL
|
-
|
-
|
(7)
|
-
|
(7)
|
-
|
(7)
|
- Other amounts recognised in equity
|
-
|
-
|
-
|
(799)
|
(799)
|
-
|
(799)
|
- Amount transferred from equity to
earnings
|
-
|
-
|
-
|
(19)
|
(19)
|
-
|
(19)
|
- Tax
|
-
|
-
|
139
|
111
|
250
|
-
|
250
|
Preference share and paid-in equity
|
|
|
|
|
|
|
|
dividends paid
|
-
|
-
|
(92)
|
-
|
(92)
|
-
|
(92)
|
Shares repurchased during the year (3)
|
-
|
-
|
(748)
|
-
|
(748)
|
-
|
(748)
|
Shares and securities issued during the year (4)
|
87
|
399
|
-
|
-
|
486
|
-
|
486
|
Share-based payments
|
-
|
-
|
(67)
|
-
|
(67)
|
-
|
(67)
|
Movement in own shares held (3)
|
(384)
|
-
|
-
|
-
|
(384)
|
-
|
(384)
|
At 31 March 2021
|
12,919
|
5,398
|
11,993
|
12,374
|
42,684
|
(35)
|
42,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 March
|
|
|
|
|
|
|
|
2021
|
Attributable to:
|
|
|
|
|
£m
|
Ordinary shareholders
|
|
|
|
|
|
|
36,792
|
Preference shareholders
|
|
|
|
|
|
|
494
|
Paid-in equity holders
|
|
|
|
|
|
|
5,398
|
Non-controlling interests
|
|
|
|
|
|
|
(35)
|
|
|
|
|
|
|
|
42,649
|
*Other reserves consists of:
|
|
|
|
|
|
|
Merger reserve
|
|
|
|
|
|
|
10,881
|
FVOCI reserve
|
|
|
|
|
|
|
271
|
Cash flow hedging reserve
|
|
|
|
|
|
|
(38)
|
Foreign exchange reserve
|
|
|
|
|
|
|
1,260
|
|
|
|
|
|
|
|
12,374
|
Notes:
(1)
|
Share capital and statutory reserves includes share
premium, capital redemption reserve and own shares held.
|
(2)
|
The purchase of ordinary shares triggered NatWest Group to
contribute £500 million to its main pension scheme in line with the
memorandum of understanding announced on 17 April 2018. After tax relief,
this contribution reduced total equity by £365 million.
|
(3)
|
In March 2021, there was an agreement with HM Treasury to
buy 591 million ordinary shares in the Company from UK Government Investments
Ltd (UKGI), at 190.5p per share for the total consideration of £1.13 billion.
NatWest Group cancelled 391 million of the purchased ordinary shares,
amounting to £744 million excluding fees, and held the remaining 200 million
in own shares held, amounting to £381 million excluding fees. The nominal
value of the Share cancellation has been transferred to the capital
redemption reserve.
|
(4)
|
AT1 capital notes, classified as paid-in equity, totalling
£400 million less fees were issued in March 2021.
|
NatWest Group – Form 6-K Q1
Results 2021 31
Notes
1. Basis of preparation
The condensed consolidated
financial statements should be read in conjunction with NatWest Group plc 2020
Annual Report on Form 20-F which were prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act
2006.
Going concern
Having reviewed NatWest
Group’s forecasts, projections, the potential impact of COVID-19, and other
relevant evidence, the directors have a reasonable expectation that NatWest
Group will continue in operational existence for a period of not less than
twelve months. Accordingly, the results for the period ended 31 March 2021 have
been prepared on a going concern basis.
2. Accounting policies
NatWest Group’s principal accounting
policies are as set out on pages 263 to 267 of the NatWest Group plc 2020
Annual Report on Form 20-F. From 1 January 2021, the accounting policies have
been updated to reflect the adoption of amendments to
IFRS 16 (Leases) covering COVID-19 Related Rent Concessions. The effect of
the amendment on NatWest Group’s accounts is immaterial.
Critical
accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are
considered to be the most important to the portrayal of NatWest Group’s
financial condition are those relating to deferred tax, fair value of financial
instruments, loan impairment provisions, goodwill and provisions for
liabilities and charges. These critical accounting policies and judgements are referenced
on page 267 of the NatWest Group plc 2020 Annual Report on
Form 20-F. Estimation uncertainty has been affected
by the COVID-19 pandemic. Management’s consideration
of this source of uncertainty is outlined in the relevant sections of NatWest
Group plc 2020 Annual Report on Form 20-F, including the ECL estimate for the
period in the Risk and capital management section contained in the NatWest
Group plc 2020 Annual Report on Form 20-F.
It was announced
in the UK Government’s Budget on 3 March 2021 that the main UK corporation tax
rate will increase from 19% to 25% from 1 April 2023. This legislative change
has not yet been substantively enacted. The UK Government has also announced a
review of the current bank surcharge rate of 8% to ensure that the combined
rate of corporation tax, applicable to banking entities, does not increase
substantially from its current level when the proposed change to the main UK corporation
tax rate comes into effect. NatWest Group has not made an estimate of the
impact of the post balance sheet date change in the main UK corporation tax
rate on the basis that it is uncertain what the combined rate of corporation
tax, applicable to banking entities from 1 April 2023, will be until the UK Government
has completed its review of the bank surcharge.
Information used for significant
estimates
The COVID-19 pandemic has continued to cause significant economic
and social disruption. Key financial estimates are based on management's latest
five-year revenue and cost forecasts. Measurement of goodwill, deferred tax
and expected credit losses are highly sensitive to reasonably possible changes
in those anticipated conditions. Other reasonably possible assumptions about
the future include a prolonged financial effect of the COVID-19 pandemic on the
economy of the UK and other countries. Changes in judgements and assumptions
could result in a material adjustment to those estimates in the next reporting
periods. (Refer to the NatWest Group plc Risk factors in the 2020 Annual Report
on Form 20-F).
NatWest Group – Form 6-K Q1 Results
2021 32
Notes
3. Litigation
and regulatory matters
NatWest
Group plc's 2020 Annual Report on Form 20-F, issued on 19 February 2021,
included disclosures about NatWest Group's litigation and regulatory matters in
Note 26. Set out below are the material developments in those matters since publication
of the 2020 Annual Report on Form 20-F.
Litigation
London
Interbank Offered Rate (LIBOR) and other rates litigation
NWM Plc is a defendant in a
class action relating to alleged manipulation of the Singapore Interbank
Offered Rate and Singapore Swap Offer Rate, pending in the United States
District Court for the Southern District of New York (SDNY). In July 2019, the
SDNY dismissed the complaint for lack of subject matter jurisdiction, but on 17
March 2021, that decision was reversed by the United States Court of Appeals
for the Second Circuit. The case will now return to the SDNY for further
litigation.
Government securities
antitrust litigation
NWMSI and certain other US
broker-dealers are defendants in a consolidated antitrust class action pending
in the SDNY on behalf of persons who transacted in US Treasury securities or
derivatives based on such instruments, including futures and options. The
complaint was dismissed on 31 March 2021, subject to the right of the
plaintiffs to replead their case.
EUA trading
litigation
Following judgment against NWM Plc in March
2020 in the claim by ten companies (all in liquidation) and their respective
liquidators, the High Court in October 2020, quantified damages against
NWM Plc at £45 million plus interest and costs and permitted NWM Plc to appeal
its judgment to the Court of Appeal. The appeal hearing took place in March
2021 and judgment is awaited.
US Anti-Terrorism Act
litigation
NWB Plc is defending lawsuits filed in the United States
District Court for the Eastern District of New York by a number of US nationals
(or their estates, survivors, or heirs) who were victims of terrorist attacks
in Israel. In October 2017, the trial court dismissed claims against NWB Plc
with respect to two of the 18 terrorist attacks at issue. In March 2019, the
trial court granted summary judgment in favour of NWB Plc in respect of the
remaining claims. On 7 April 2021, the United States Court of Appeals for the
Second Circuit affirmed the trial court’s judgment in favour of NWB Plc, subject
to the right of the plaintiffs to seek review by the United States Supreme
Court.
Regulatory
matters
FCA
investigation into NatWest Group’s compliance with the Money Laundering
Regulations 2007
In July 2017, the FCA notified
NatWest Group that it was undertaking an investigation into NatWest Group’s
compliance with the UK Money Laundering Regulations 2007 (“MLR 2007”) in
relation to certain money service businesses and related parties. NatWest Group
is co-operating with the investigation, including responding to information
requests from the FCA.
On 15 March 2021, the FCA
notified NatWest Group that it had commenced criminal proceedings against NWB
Plc for offences under regulation 45(1) of the MLR 2007 for alleged failures to
comply with regulations 8(1), 8(3) and 14(1) of the MLR 2007 between 11 November
2011 and 19 October 2016, arising from the handling of the accounts of a UK
incorporated customer. NWB Plc will be required to attend an initial hearing at
Westminster Magistrates’ Court on 26 May 2021. Material adverse collateral consequences,
in addition to further substantial costs and the recognition of provisions, may
occur as a result of these criminal proceedings.
Review and investigation of treatment of tracker mortgage
customers in Ulster Bank Ireland DAC
In April 2016, the CBI
commenced an investigation into suspected breaches by UBI DAC of specified
provisions of the Consumer Protection Code 2006 in its treatment of certain
tracker mortgage customers. On 23 March 2021, UBI DAC agreed with the CBI to
pay a fine of €37.8 million for breaches of its regulatory obligations in
respect of its treatment of tracker mortgage customers. The fine was
substantially covered by existing provisions.
4. Post balance sheet events
Other than as disclosed there
have been no other significant events between 31 March 2021 and the date of
approval of these accounts which would require a change to or additional
disclosure in the condensed consolidated financial statements.
NatWest Group – Form 6-K Q1
Results 2021 33
Additional information
Other financial data
The following table
shows NatWest Group’s issued and fully paid share capital, owners’ equity and
indebtedness on a consolidated basis in accordance with IFRS as at 31 March
2021.
|
As at
|
|
31 March
|
|
2021
|
|
£m
|
Share capital
- allotted, called up and fully paid
|
|
Ordinary shares of £1
|
11,776
|
Retained income and other
reserves
|
30,908
|
Owners’ equity
|
42,684
|
|
|
NatWest Group
indebtedness
|
|
Trading liabilities - debt
securities in issue
|
1,387
|
Other financial liabilities
– debt securities in issue
|
43,030
|
Subordinated liabilities
|
8,078
|
Total indebtedness
|
52,495
|
Total capitalisation and
indebtedness
|
95,179
|
Under
IFRS, certain preference shares are classified as debt and are included in
subordinated liabilities in the table above.
The information
contained in the table above has not changed materially since 31 March 2021.
|
|
Year ended 31 December
|
|
Three months
|
|
|
|
|
|
|
ended and as at
|
|
|
|
|
|
|
31 March 2021
|
2020
|
2019
|
2018
|
2017
|
2016
|
|
|
|
|
|
|
|
Return on average total
assets (1)
|
0.3%
|
(0.1%)
|
0.4%
|
0.2%
|
0.1%
|
(0.8%)
|
Return
on average ordinary shareholders’ equity (2)
|
6.5%
|
(2.0%)
|
7.9%
|
4.0%
|
1.9%
|
(15.3%)
|
Average total equity as a
percentage
|
|
|
|
|
|
|
of average total assets
|
5.7%
|
5.4%
|
6.2%
|
7.2%
|
7.0%
|
6.2%
|
Dividend payout ratio
|
-
|
-
|
96.3%
|
14.9%
|
-
|
-
|
Notes:
(1)
|
Return on average total assets represents profit or
loss attributable to ordinary shareholders as a percentage of average total
assets.
|
(2)
|
Return on average ordinary shareholders’ equity
represents profit or loss attributable to ordinary shareholders as a
percentage of average ordinary shareholders’ equity.
|
NatWest Group – Form 6-K Q1
Results 2021 34
Appendix
Non-IFRS
financial measures
Appendix – Non–IFRS financial
measures
As
described in the Accounting policies on page 32, NatWest Group prepares its
financial statements in accordance with generally accepted accounting
principles (GAAP). This document contains a number of adjusted or alternative
performance measures, also known as non-GAAP or non-IFRS performance measures.
These measures are adjusted for certain items which management believe are not
representative of the underlying performance of the business and which distort
period-on-period comparison. The non-IFRS measures provide users of the
financial statements with a consistent basis for comparing business performance
between financial periods and information on elements of performance that are
one-off in nature. The non-IFRS measures also include the calculation of
metrics that are used throughout the banking industry. These non-IFRS measures
are not measures within the scope of IFRS and are not a substitute for IFRS
measures. These measures include:
Non-IFRS
financial measures
Measure
|
Basis of preparation
|
Additional analysis or reconciliation
|
NatWest Group return on tangible equity
|
Annualised profit or loss for the period attributable to
ordinary shareholders divided by average tangible equity. Average tangible
equity is average total equity excluding non-controlling interests (NCI) less
average intangible assets and average other owners’ equity.
|
Table 1
|
Segmental return on equity
|
Segmental operating profit or loss adjusted for
preference share dividends and tax divided by average notional tangible equity,
allocated at an operating segment specific rate, of the period average
segmental risk-weighted assets incorporating the effect of capital deductions
(RWAes).
|
Table 1
|
Operating expenses analysis – management view
|
The management analysis of operating expenses shows
strategic costs and litigation and conduct costs in separate lines.
Depreciation and amortisation, impairment of other intangibles and other administrative
expenses attributable to these costs are included in strategic costs and
litigation and conduct costs lines for management analysis. These amounts are
included in staff, premises and equipment and other administrative expenses
in the statutory analysis.
|
Table 2
|
Cost:income ratio
|
Total
operating expenses less operating lease depreciation divided by total income
less operating lease depreciation.
|
Table 3
|
Commentary – adjusted periodically for specific items
|
NatWest Group and segmental business performance
commentary have been adjusted for the impact of specific items such as
notable items, operating lease depreciation, strategic costs and litigation
and conduct costs.
|
Notable
items - page 8, Operating lease
depreciation, Strategic costs and litigation and conduct costs - pages 15 to 17
|
Net lending in the retail and commercial business
|
Comprises customer loans in the Retail Banking,
Commercial Banking, Private Banking and RBS International operating segments,
excluding UK Government support schemes.
|
Pages 4 and 7
|
Bank net interest margin (NIM)
|
Net interest income of the banking business
less NatWest Markets (NWM) element as a percentage of average interest-earning
assets of the banking business less NWM element.
|
Table 4
|
Performance
metrics based on but not defined under IFRS
Measure
|
Basis of preparation
|
Additional analysis or reconciliation
|
Loan:deposit ratio
|
Net customer loans held at amortised cost divided by total
customer deposits.
|
Table 5
|
Tangible net asset value (TNAV)
|
Tangible
equity divided by the number of ordinary shares in issue (excluding own
shares held). Tangible equity is ordinary shareholders’ equity less
intangible assets.
|
Page6
|
NIM
|
Net interest income as a percentage of average interest-earning
assets.
|
Page6
|
Funded assets
|
Total
assets less derivatives.
|
Pages15 to 17
|
ECL loss rate
|
The
annualised loan impairment charge divided by gross customer loans.
|
Pages15 to 17
|
Third party customer asset rate
|
Third
party customer asset rate is calculated as annualised interest receivable on
third-party loans to customers as a percentage of third-party loans to
customers only. This excludes intragroup items, loans to banks and liquid
asset portfolios, which are included for the calculation of net interest margin.
|
Pages15 to 17
|
Third party customer funding rate
|
Third
party customer funding rate is calculated as annualised interest payable on
third-party customer deposits as a percentage of third-party customer
deposits, including interest bearing and non-interest bearing customer
deposits. This excludes intragroup items, bank deposits, debt securities in
issue and subordinated liabilities.
|
Pages15 to 17
|
Assets under management and administration (AUMA)
|
Total
AUMA comprises both assets under management (AUMs) and assets under
administration (AUAs) managed within the Private Banking franchise. AUMs
comprise assets under management, assets under custody and investment cash
relating to Private Banking customers. AUAs are managed by Private Banking on
behalf of Retail Banking and RBSI and a management fee is received in
respect of providing this service.
|
Page 10
|
NatWest Group – Form 6-K Q1
Results 2021 1
Appendix Non-IFRS financial measures
1. Return on tangible equity
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
Profit/(loss) attributable to ordinary shareholders (£m)
|
|
|
|
620
|
(109)
|
288
|
Annualised profit/(loss) attributable to ordinary
|
|
|
|
|
|
|
shareholders (£m)
|
|
|
|
2,480
|
(436)
|
1,152
|
Average total equity excluding NCI (£m)
|
|
|
|
43,566
|
43,648
|
44,018
|
Adjustment for other owners' equity and intangibles (£m)
|
|
|
|
(12,333)
|
(11,895)
|
(11,911)
|
Adjusted total tangible equity (£m)
|
|
|
|
31,233
|
31,753
|
32,107
|
Return on tangible equity (%)
|
|
|
|
7.9%
|
(1.4%)
|
3.6%
|
|
|
|
|
|
|
|
|
|
|
|
International Banking & Markets
|
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
Quarter ended 31 March 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Operating profit/(loss) (£m)
|
435
|
64
|
475
|
68
|
(80)
|
11
|
Preference share cost allocation (£m)
|
(20)
|
(5)
|
(38)
|
(5)
|
(16)
|
-
|
Adjustment for tax (£m)
|
(116)
|
(17)
|
(122)
|
(11)
|
27
|
-
|
Adjusted attributable profit/(loss) (£m)
|
299
|
42
|
315
|
52
|
(69)
|
11
|
Annualised adjusted attributable profit/(loss) (£m)
|
1,196
|
168
|
1,260
|
208
|
(276)
|
44
|
Average RWAe (£bn)
|
35.8
|
11.0
|
73.6
|
7.4
|
29.2
|
11.4
|
Equity factor
|
14.5%
|
12.5%
|
11.5%
|
16.0%
|
15.0%
|
15.5%
|
RWAe applying equity factor (£bn)
|
5.2
|
1.4
|
8.5
|
1.2
|
4.4
|
1.8
|
Return on equity
|
23.0%
|
12.4%
|
14.9%
|
17.5%
|
(6.3%)
|
2.5%
|
|
|
|
|
|
|
|
Quarter ended 31 December 2020
|
|
|
|
|
|
|
Operating profit/(loss) (£m)
|
91
|
67
|
285
|
(13)
|
(230)
|
18
|
Preference share cost allocation (£m)
|
(22)
|
(5)
|
(38)
|
(5)
|
(17)
|
-
|
Adjustment for tax (£m)
|
(19)
|
(17)
|
(69)
|
3
|
69
|
-
|
Adjusted attributable profit/(loss)(£m)
|
50
|
45
|
178
|
(15)
|
(178)
|
18
|
Annualised adjusted attributable profit/(loss) (£m)
|
200
|
180
|
712
|
(60)
|
(712)
|
72
|
Average RWAe (£bn)
|
36.1
|
10.7
|
75.9
|
7.1
|
31.5
|
11.9
|
Equity factor
|
14.5%
|
12.5%
|
11.5%
|
16.0%
|
15.0%
|
15.5%
|
RWAe applying equity factor (£bn)
|
5.2
|
1.3
|
8.7
|
1.1
|
4.7
|
1.8
|
Return on equity
|
3.8%
|
13.3%
|
8.1%
|
(5.5%)
|
(15.0%)
|
3.9%
|
|
|
|
|
|
|
|
Quarter ended 31 March 2020
|
|
|
|
|
|
|
Operating profit/(loss) (£m)
|
324
|
49
|
(37)
|
68
|
206
|
(21)
|
Preference share cost allocation (£m)
|
(22)
|
(6)
|
(38)
|
(5)
|
(17)
|
-
|
Adjustment for tax (£m)
|
(85)
|
(12)
|
21
|
(9)
|
(53)
|
-
|
Adjusted attributable profit/(loss) (£m)
|
217
|
31
|
(54)
|
54
|
136
|
(21)
|
Annualised adjusted attributable profit/(loss) (£m)
|
868
|
124
|
(216)
|
216
|
544
|
(84)
|
Average RWAe (£bn)
|
38.7
|
10.2
|
74.1
|
7.0
|
41.9
|
12.8
|
Equity factor
|
14.5%
|
12.5%
|
11.5%
|
16.0%
|
15.0%
|
15.5%
|
RWAe applying equity factor (£bn)
|
5.6
|
1.3
|
8.5
|
1.1
|
6.3
|
2.0
|
Return on equity
|
15.5%
|
9.8%
|
(2.5%)
|
19.4%
|
8.7%
|
(4.2%)
|
|
|
|
|
|
|
|
NatWest Group – Form 6-K Q1
Results 2021 2
Appendix Non-IFRS financial measures
2. Operating expenses analysis
Statutory
analysis (1,2)
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
Operating expenses
|
|
|
|
£m
|
£m
|
£m
|
Staff costs
|
|
|
|
985
|
986
|
992
|
Premises and equipment
|
|
|
|
248
|
321
|
258
|
Other administrative expenses
|
|
|
|
377
|
764
|
398
|
Depreciation and amortisation
|
|
|
|
205
|
270
|
193
|
Total operating expenses
|
|
|
|
1,815
|
2,341
|
1,841
|
Non-statutory
analysis
|
|
|
|
|
|
Quarter ended
|
|
31 March 2021
|
|
|
Litigation
|
|
|
|
|
and
|
|
Statutory
|
|
Strategic
|
conduct
|
Other
|
operating
|
Operating expenses
|
costs
|
costs
|
expenses
|
expenses
|
Staff costs
|
111
|
-
|
874
|
985
|
Premises and equipment
|
16
|
-
|
232
|
248
|
Other administrative expenses
|
23
|
16
|
338
|
377
|
Depreciation and amortisation
|
10
|
-
|
195
|
205
|
Total
|
160
|
16
|
1,639
|
1,815
|
|
|
|
|
|
|
Quarter ended
|
|
31 December 2020
|
|
|
Litigation
|
|
|
|
|
and
|
|
Statutory
|
|
Strategic
|
conduct
|
Other
|
operating
|
Operating expenses
|
costs
|
costs
|
expenses
|
expenses
|
Staff costs
|
147
|
-
|
839
|
986
|
Premises and equipment
|
63
|
-
|
258
|
321
|
Other administrative expenses
|
54
|
194
|
516
|
764
|
Depreciation and amortisation
|
62
|
-
|
208
|
270
|
Total
|
326
|
194
|
1,821
|
2,341
|
|
|
|
|
|
|
Quarter ended
|
|
31 March 2020
|
|
|
Litigation
|
|
|
|
|
and
|
|
Statutory
|
|
Strategic
|
conduct
|
Other
|
operating
|
Operating expenses
|
costs
|
costs
|
expenses
|
expenses
|
Staff costs
|
73
|
-
|
919
|
992
|
Premises and equipment
|
13
|
-
|
245
|
258
|
Other administrative expenses
|
43
|
(4)
|
359
|
398
|
Depreciation and amortisation
|
2
|
-
|
191
|
193
|
Total
|
131
|
(4)
|
1,714
|
1,841
|
Notes:
(1)
|
On a statutory, or GAAP, basis strategic
costs are included within staff costs, premises and equipment, depreciation
and amortisation, impairment of other intangible assets and other
administrative expenses. Strategic costs relate to restructuring provisions,
related costs and projects that are transformational in nature.
|
(2)
|
On a statutory, or GAAP, basis litigation
and conduct costs are included within other administrative expenses.
|
NatWest Group – Form 6-K Q1
Results 2021 3
Appendix Non-IFRS performance measures
3. Cost:income ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
International Banking & Markets
|
|
Central
|
Total
|
|
Retail
|
Private
|
Commercial
|
RBS
|
NatWest
|
Ulster
|
items
|
NatWest
|
|
Banking
|
Banking
|
Banking
|
International
|
Markets
|
Bank RoI
|
& other
|
Group
|
Quarter ended 31 March 2021
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Operating expenses
|
(587)
|
(121)
|
(583)
|
(57)
|
(275)
|
(125)
|
(67)
|
(1,815)
|
Operating lease depreciation
|
-
|
-
|
35
|
-
|
-
|
-
|
-
|
35
|
Adjusted operating expenses
|
(587)
|
(121)
|
(548)
|
(57)
|
(275)
|
(125)
|
(67)
|
(1,780)
|
Total income
|
1,056
|
185
|
941
|
123
|
189
|
124
|
41
|
2,659
|
Operating lease depreciation
|
-
|
-
|
(35)
|
-
|
-
|
-
|
-
|
(35)
|
Adjusted total income
|
1,056
|
185
|
906
|
123
|
189
|
124
|
41
|
2,624
|
Cost:income ratio
|
55.6%
|
65.4%
|
60.5%
|
46.3%
|
145.5%
|
100.8%
|
nm
|
67.8%
|
|
|
|
|
|
|
|
|
|
Quarter ended 31 December 2020
|
|
|
|
|
|
|
|
|
Operating expenses
|
(818)
|
(91)
|
(656)
|
(112)
|
(301)
|
(114)
|
(249)
|
(2,341)
|
Operating lease depreciation
|
-
|
-
|
35
|
-
|
-
|
-
|
-
|
35
|
Adjusted operating expenses
|
(818)
|
(91)
|
(621)
|
(112)
|
(301)
|
(114)
|
(249)
|
(2,306)
|
Total income
|
974
|
184
|
951
|
126
|
73
|
131
|
96
|
2,535
|
Operating lease depreciation
|
-
|
-
|
(35)
|
-
|
-
|
-
|
-
|
(35)
|
Adjusted total income
|
974
|
184
|
916
|
126
|
73
|
131
|
96
|
2,500
|
Cost:income ratio
|
84.0%
|
49.5%
|
67.8%
|
88.9%
|
nm
|
87.0%
|
nm
|
92.2%
|
|
|
|
|
|
|
|
|
|
Quarter ended 31 March 2020
|
|
|
|
|
|
|
|
|
Operating expenses
|
(529)
|
(123)
|
(610)
|
(61)
|
(342)
|
(123)
|
(53)
|
(1,841)
|
Operating lease depreciation
|
-
|
-
|
36
|
-
|
-
|
-
|
-
|
36
|
Adjusted operating expenses
|
(529)
|
(123)
|
(574)
|
(61)
|
(342)
|
(123)
|
(53)
|
(1,805)
|
Total income
|
1,150
|
201
|
1,008
|
144
|
543
|
129
|
(13)
|
3,162
|
Operating lease depreciation
|
-
|
-
|
(36)
|
-
|
-
|
-
|
-
|
(36)
|
Adjusted total income
|
1,150
|
201
|
972
|
144
|
543
|
129
|
(13)
|
3,126
|
Cost:income ratio
|
46.0%
|
61.2%
|
59.1%
|
42.4%
|
63.0%
|
95.3%
|
nm
|
57.7%
|
4. Net interest margin
|
|
|
Quarter ended or as at
|
|
|
|
|
31 March
|
31 December
|
31 March
|
|
|
|
|
2021
|
2020
|
2020
|
|
|
|
|
£m
|
£m
|
£m
|
NatWest Group net interest income
|
|
|
|
1,931
|
1,971
|
1,942
|
Less: NWM net interest income
|
|
|
|
7
|
2
|
40
|
Net interest income excluding NWM
|
|
|
|
1,938
|
1,973
|
1,982
|
Annualised net interest income
|
|
|
|
7,831
|
7,820
|
7,811
|
Annualised net interest income excluding NWM
|
|
|
|
7,860
|
7,828
|
7,972
|
Average interest earning assets (IEA)
|
|
|
|
512,237
|
509,598
|
458,514
|
NWM average IEA
|
|
|
|
32,429
|
36,515
|
36,113
|
Bank average IEA excluding NWM
|
|
|
|
479,808
|
473,083
|
422,401
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
1.53%
|
1.54%
|
1.70%
|
Bank net interest margin (NatWest Group NIM excluding NWM)
|
|
|
|
1.64%
|
1.66%
|
1.89%
|
5. Loan:deposit ratio
|
As at
|
|
31 March
|
31 December
|
31 March
|
|
2021
|
2020
|
2020
|
|
£m
|
£m
|
£m
|
Loans to customers - amortised cost
|
358,728
|
360,544
|
351,328
|
Customer deposits
|
453,308
|
431,739
|
384,800
|
Loan:deposit ratio (%)
|
79%
|
84%
|
91%
|
NatWest Group – Form 6-K Q1
Results 2021 4
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorised.
NatWest Group plc
Registrant
/s/ Katie Murray
Group Chief Financial Officer
29 April 2021
NatWest Group – Form 6-K Q1
Results 2021
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