FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
 
For April 29, 2021
Commission File Number: 001-10306
 
NatWest Group plc
 
RBS, Gogarburn, PO Box 1000
Edinburgh EH12 1HQ
 
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
   Form 20-F X Form 40-F ___
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):_________
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_________
 
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ___ No X
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- ________
 
 
 
 
The following information was issued as Company announcements in London, England and is furnished pursuant to General Instruction B to the General Instructions to Form 6-K: 
 
 
 
 
 
 
 
 
 
Q1 2021
Interim Management Statement
  
 
 
                           natwestgroup.com
 
 

  
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.
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. 
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.
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 Results 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 345 to 362 of the 2020 Annual Report and Accounts and on pages 156 to 172 of the NatWest Markets Group Plc 2020 Annual Report and Accounts. These statements constitute forward-looking statements. Refer to Forward-looking statements in this announcement.
 
  
Our purpose in action
We champion potential, helping people, families and businesses to thrive. 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.
 
     
 
Business performance summary
 
 
 
 
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 5 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 15 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 264 in the NatWest Group plc 2020 Annual Report and Accounts 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.
  
 
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%. 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. 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.
 
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. 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.
  
 
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.
 

 
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.
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, 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.
 
 
 
 
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.
 
 
  
 
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.
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.
 
 
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
 
 
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.
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.
 

 
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.
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.
 
 
 
Business performance summary
Ulster Bank RoI
 
 
 
 
Quarter ended
 
 
 
 
 
31 March
31 December
31 March
 
 
 
 
 
2021
2020
2020
 
 
 
 
 
 €m
 €m
 €m
Total income
 
 
 
 
142
144
150
Operating expenses
 
 
 
 
(143)
(127)
(143)
   of which: Other expenses
 
 
 
 
(132)
(112)
(137)
Impairment releases/(losses)
 
 
 
 
14
3
(32)
Operating profit/(loss)
 
 
 
 
13
20
(25)
Return on equity
 
 
 
 
2.6%
3.9%
(4.3%)
Net interest margin
 
 
 
 
1.49%
1.48%
1.56%
Cost:income ratio
 
 
 
 
100.7%
88.2%
95.3%
Loan impairment rate
 
 
 
 
(27)bps
(6)bps
58bps
 
 
 
 
 
 
 
 

 
 
 
As at
 
 
 
 
 
31 March
31 December
 
 
 
 
 
 
2021
2020
 
 
 
 
 
 
 €bn
 €bn
 
Net loans to customers - amortised cost
 
 
 
 
19.8
20.0
 
Customer deposits
 
 
 
 
21.7
21.8
 
RWAs
 
 
 
 
13.1
13.2
 
 
 
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.
 
 
Total income was €8 million, or 5.3%, 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 1.49% was broadly stable compared with Q4 2020.
Other expenses were €5 million, or 3.6%, 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 €14 million in the quarter primarily reflects improvements in the mortgage portfolio.
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 €0.4 billion.
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 91%.
 
 
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.
 
 
 

 
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 14 for the notes to this table.
 
 
 
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 14 for the notes to this table.
 
 
 
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.
 
 
 
Risk and capital management
 
 
Page
Credit risk
 
     Segment analysis - portfolio summary
15
     Segment analysis - loans
16
     Movement in ECL provision
16
     Sector analysis
17
     Wholesale support schemes
18
Capital, liquidity and funding risk
19
 
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).
 
 
 
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 BankingBalance 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.
 
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.
 
 
 
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.
 

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 and Accounts, 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.
 
 
 
 
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.
 
 
 
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