TIDMNWG

RNS Number : 6911D

NatWest Group plc

30 October 2020

Q3 2020

Interim Management Statement

www.natwestgroup.com

NatWest Group plc

Q3 2020 Interim Management Statement

Alison Rose, Chief Executive Officer, commented:

"These results demonstrate the resilience of our underlying business and the strength of our balance sheet in the face of significant continued uncertainty. Our sector-leading capital position, strong levels of liquidity and intelligent and consistent approach to risk mean we can continue to provide our customers and communities with the support they need.

Although impairments were relatively low in the quarter and we have seen some positive trends across our customer base, the full impact of Covid-19 remains very unclear. Challenging times lie ahead, especially as the current government support schemes come to an end and as new Covid-19 related restrictions are introduced.

We continue to deliver well against our strategy, building a bank that champions potential and has the capability to grow. By building deeper relationships with our customers at every stage of their lives, simplifying the bank further, investing in innovation and partnerships and allocating capital well, we will deliver sustainable returns to our shareholders."

Financial performance in a challenging environment

 
--  Q3 2020 operating profit before tax of GBP355 million and an attributable 
     profit to ordinary shareholders of GBP61 million including a GBP324 
     million loss on redemption of own debt. 
--  In comparison to Q3 2019, across the retail and commercial businesses 
     income decreased by 12.1%. Within NatWest Markets (NWM), the level 
     of primary issuance and market activity eased in Q3 2020, compared 
     to the first half of the year. 
--  Bank net interest margin (NIM) of 1.65% was 2 basis points lower 
     than Q2 2020 principally reflecting reduced structural hedge income 
     as a result of lower swap rates and the contraction of the yield 
     curve. Mortgage front book new business and switcher completion margins 
     were approximately 140 basis points, broadly in line with the overall 
     book margin. 
--  Strategic costs of GBP223 million in Q3 2020 include GBP90 million 
     redundancy costs, a GBP34 million charge related to technology spend 
     and a GBP21 million property charge. 
--  Other expenses, excluding operating lease depreciation (OLD), were 
     GBP152 million lower than Q3 2019, with a GBP193 million cost reduction 
     achieved for the year to date. We remain on track to achieve our 
     GBP250 million target for full year 2020. 
--  Net impairment losses of GBP254 million in Q3 2020, or 28 basis points 
     of gross customer loans, resulted in an expected credit loss (ECL) 
     coverage ratio of 1.72%. 
 
  Robust balance sheet with strong capital and liquidity levels 
--  CET1 ratio of 18.2% was 100 basis points higher than Q2 2020 mainly 
     reflecting a GBP7.6 billion reduction in RWAs, principally in NatWest 
     Markets. Excluding IFRS 9 transitional relief, the CET1 ratio was 
     17.2%. 
--  The liquidity coverage ratio (LCR) remains strong at 157%, representing 
     GBP61.8 billion headroom above 100%, which includes the impact of 
     a GBP5.0 billion term funding scheme (TFS) repayment within the quarter. 
--  Across the retail and commercial businesses net lending increased 
     by GBP0.4 billion during Q3 2020, as GBP2.9 billion drawdowns against 
     UK Government lending initiatives and GBP2.4 billion related to mortgages 
     was partially offset by net revolving credit facility (RCF) repayments 
     of GBP3.1 billion and lower lending across Large Corporate & Institutions 
     and Specialised business. 
--  Customer deposits of GBP418.4 billion increased by GBP10.1 billion 
     during Q3 2020, with retail and commercial balances GBP6.6 billion 
     higher as consumer spending continued to be impacted by government 
     restrictions and customers retained liquidity. 
 
 
Outlook(1) 
We retain the outlook guidance provided in the 2020 Interim Results 
 with the exception of the following updates, noting the continued significant 
 economic uncertainty. 
 We believe the full year impairment charge is likely to be at the lower 
 end of the GBP3.5-4.5 billion range following the limited level of defaults 
 across lending portfolios and associated ECL stage migration within 
 the third quarter. 
 
We now expect NatWest Group RWAs to be below our previously guided range 
 of GBP185-195 billion at the end of 2020 following the relatively low 
 level of procyclical inflation experienced to date, with previously 
 expected uplifts delayed to 2021, whilst also now targeting NatWest 
 Markets RWAs of around GBP30 billion by the end of 2020. 
 
 
 Note: 
 (1) The guidance, targets, expectations and trends discussed in 
  this section represent management's current expectations and are 
  subject to change, including as a result of the factors described 
  in the NatWest Group plc "Risk Factors" as described on pages 108-109 
  of its Interim Results 2020, pages 29-31 of its Q1 2020 IMS and 
  pages 281-295 of its 2019 Annual Report & Accounts. These statements 
  constitute forward-looking statements. Refer to Forward-looking 
  statements in this announcement. 
 

Our Purpose in action - we champion potential, helping people, families and businesses to thrive

Helping our customers, colleagues and communities through the impacts of Covid-19

Provided lending support to our customers with a disciplined approach to risk and value creation:

   --   Approved GBP13.0 billion through the government lending initiatives (1) . 

-- Facilitated approximately GBP8.8 billion of Covid-19 Corporate Financing Facilities (CCFF) issuances (2) .

Supported the financial health of our customers:

-- Helped approximately 250,000 customers with an initial mortgage repayment holiday and provided payment holidays on over 72,000 business customer accounts (3) .

-- Launched 'Banking My Way' service, enabling customers who need additional support to request bespoke assistance, with 38,500 registrations since its launch (4) .

Long-term investment plan is powering our operational effectiveness:

-- Increased digital adoption with 9.3 million active digital users as at Q3 2020 (9.0 million as at Q3 2019), 6 million interactions with our AI chat bot Cora in the first nine months of 2020 (3.9 million in the first nine months of 2019) and c.9,000 weekly video banking conversations now taking place, compared to less than 100 a week in January 2020 (5) .

-- Announced a new relationship with BlackRock to support our investment management processing activity, enabling savings to be passed onto our clients.

Partnered to proactively respond and support UK communities:

-- NatWest Social and Community Capital launched a GBP1 million Coronavirus Response Fund offering grants to organisations across the UK that employ people from vulnerable or disadvantaged groups.

-- Launched a review with SafeLives into supporting survivors of economic abuse and acquired coercive debt.

Prioritised the wellbeing of our colleagues:

-- Continued to enable more than 50,000 colleagues to work from home, delivering office furniture and computer equipment, including 31,000 tech bundles to homes (6) .

-- Enhanced our free mental health support through a new partnership with Silvercloud, providing substantial, sector-leading support to any colleague who needs it and provided all leaders access to extended mental health awareness support.

Q3 2020 progress against areas of focus

Enterprise - addressing barriers to enterprise and business creation:

-- NatWest Entrepreneur Accelerator Programme ranked the top UK accelerator by total attendances (7) . The programme has run 800 virtual events with 33,000 attendees since the start of lockdown (2) .

-- Over half of the GBP1 billion of debt funding to support female entrepreneurs announced in February 2020 has been committed as part of our ambition to help create new businesses in the UK (2) .

Learning - skill building, particularly around financial confidence:

-- Reached 2.4 million people through financial capability interactions including live MoneySense lessons on social media (6) .

-- Island Saver, the world's first financial education console, PC and mobile game, has been downloaded over 1.7 million times since its launch (8) .

Climate - supporting the necessary transition to a low carbon economy:

-- As part of our membership of the Green Finance Institute's 'Coalition for the Energy Efficiency of Buildings', we have signed up to their Green Home Retrofit Principles.

-- Progress in sustainability has been recognised by leading ESG rating agencies: Sustainalytics substantially improved our Risk Score to 20.5 (from 27.5) in July 2020 and MSCI upgraded our ESG rating to A (from BBB) in October 2020.

Diversity and inclusion - building an open and inclusive bank where everyone can thrive:

-- In addition to our existing target of at least 14% BAME representation in senior UK roles by 2025, we have introduced a new target to have 3% Black colleagues in senior UK roles by 2025.

   --   Included in 'The Times' Top 50 employers for women. 

Notes:

(1) As at 30 September 2020, inclusive of Commercial Banking and Private Banking: Bounce Back Loan Scheme (BBLS) - GBP7.9 billion; Coronavirus Business Interruption Loan Scheme (CBILS) - GBP3.9 billion, Coronavirus Large Business Interruption Loan Scheme (CLBILS) - GBP1.2 billion.

   (2)   As at 30 September 2020. 

(3) For the nine months ended 30 September 2020 in Retail Banking and since 22 March 2020 in Commercial Banking. As at 30 September 2020, there were 37,000 active mortgage repayment holidays and approximately 55,000 active payment holidays on business customer accounts.

   (4)   From launch date of 19 August 2020 to 9 October 2020. 
   (5)   Weekly conversation volumes, as at week commencing 12 October 2020. 
   (6)   For the nine months ended 30 September 2020. 
   (7)   Beauhurst report 'Accelerating Growth'- September 2020. 
   (8)   From launch date of 13 May 2020 to 30 September 2020. 

Business performance summary

 
                                        Nine months ended                    Quarter ended 
                                    --------------------------  --------------------------------------- 
                                    30 September  30 September  30 September      30 June  30 September 
Performance key metrics and 
 ratios                                     2020          2019          2020         2020          2019 
----------------------------------  ------------  ------------  ------------               ------------ 
Profit before impairment losses        GBP2,697m     GBP3,222m       GBP609m      GBP767m       GBP205m 
Operating (loss)/profit before                                                (GBP1,289m) 
 tax                                   (GBP415m)     GBP2,686m       GBP355m                    (GBP8m) 
(Loss)/profit attributable to                                                   (GBP993m)     (GBP315m) 
 ordinary shareholders                 (GBP644m)     GBP1,723m        GBP61m 
Bank net interest margin 
 (NatWest Group NIM excluding 
  NWM) (1)                                 1.73%         2.02%         1.65%        1.67%         1.97% 
Bank average interest earning 
 assets 
 (NatWest Group excluding NWM)                                                   GBP458bn      GBP416bn 
  (1)                                   GBP449bn      GBP410bn      GBP468bn 
Cost:income ratio (1)                      66.9%         67.5%         74.5%        70.9%         92.9% 
Loan impairment rate (1)                  115bps         22bps         28bps       229bps         26bps 
Earnings per share 
 - basic                                  (5.3p)         14.3p          0.5p       (8.2p)        (2.6p) 
 - basic fully diluted                    (5.3p)         14.2p          0.5p       (8.2p)        (2.6p) 
Return on tangible equity (1)             (2.7%)          6.8%          0.8%      (12.4%)        (3.8%) 
Average tangible equity                  GBP32bn       GBP34bn       GBP32bn      GBP32bn       GBP33bn 
Average number of ordinary shares 
 outstanding during the period 
  (millions) 
 - basic                                  12,090        12,064        12,110       12,085        12,075 
 - fully diluted (2)                      12,112        12,099        12,133       12,107        12,106 
----------------------------------  ------------  ------------  ------------  -----------  ------------ 
 
 
                                                 30 September     30 June  31 December 
Balance sheet key metrics and ratios                     2020        2020         2019 
-----------------------------------------------  ------------              ----------- 
Total assets                                       GBP791.6bn  GBP806.9bn   GBP723.0bn 
Funded assets (1)                                  GBP627.3bn  GBP623.5bn   GBP573.0bn 
Loans to customers - amortised cost                GBP353.7bn  GBP352.3bn   GBP326.9bn 
Impairment provisions                                GBP6.1bn    GBP6.1bn     GBP3.7bn 
Customer deposits                                  GBP418.4bn  GBP408.3bn   GBP369.2bn 
 
Liquidity coverage ratio (LCR)                           157%        166%         152% 
Liquidity portfolio                                  GBP243bn    GBP243bn     GBP199bn 
Net stable funding ratio (NSFR) (3)                      147%        144%         141% 
Loan:deposit ratio (1)                                    85%         86%          89% 
Total wholesale funding                               GBP75bn     GBP86bn      GBP75bn 
Short-term wholesale funding                          GBP25bn     GBP22bn      GBP19bn 
 
Common Equity Tier (CET1) ratio (4)                     18.2%       17.2%        16.2% 
Total capital ratio                                     23.7%       22.5%        21.2% 
Pro forma CET1 ratio, pre dividend accrual (5)          18.2%       17.2%        17.0% 
Risk-weighted assets (RWAs)                        GBP173.9bn  GBP181.5bn   GBP179.2bn 
CRR leverage ratio                                       5.2%        5.1%         5.1% 
UK leverage ratio                                        6.2%        6.0%         5.8% 
 
Tangible net asset value (TNAV) per ordinary 
 share                                                   265p        264p         268p 
Tangible net asset value (TNAV) per ordinary 
 share - fully diluted (1,2)                             264p        263p         267p 
Tangible equity                                    GBP32,093m  GBP32,006m   GBP32,371m 
Number of ordinary shares in issue (millions)          12,127      12,125       12,094 
Number of ordinary shares in issue (millions) 
 - fully diluted (2,6)                                 12,149      12,147       12,138 
-----------------------------------------------  ------------  ----------  ----------- 
 

Notes:

(1) Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS financial and performance measures.

(2) Includes the effect of dilutive share options and convertible securities. Dilutive shares on an average basis for the nine months ended 30 September 2020 were 22 million shares; Q3 2020 - 23 million shares (nine months ended 30 September 2019 - 35 million shares; Q2 2020 - 22 million shares; Q3 2019 - 31 million shares) and as at 30 September 2020 were 22 million shares (as at 30 June 2020 - 22 million shares; as at 31 December 2019 - 44 million shares).

   (3)   NSFR reported in line with CRR2 regulations finalised in June 2019. 

(4) At September and June 2020 there is no charge in CET1 for foreseeable dividends or charges. The pro forma CET1 ratio at 31 December 2019 excluded foreseeable charges of GBP968 million for ordinary dividends (3p per share final dividend and 5p per share special dividend) and GBP365 million pension contribution.

(5) Based on CRR end point including the IFRS 9 transitional adjustment of GBP1.7 billion. Excluding this adjustment, the CET1 ratio would be 17.2%.

(6) Includes 16 million shares held by the Employee Benefit Trust (30 June 2020 - 16 million shares; 31 December 2019 - 15 million shares).

Non-IFRS financial measures

This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations, where applicable, refer to the Appendix.

Summary consolidated income statement for the period ended 30 September 2020

 
                                      Nine months ended                  Quarter ended 
                                  --------------------------  ----------------------------------- 
                                  30 September  30 September  30 September  30 June  30 September 
                                          2020          2019          2020     2020          2019 
                                          GBPm          GBPm          GBPm     GBPm          GBPm 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Net interest income                      5,778         6,010         1,926    1,910         2,006 
Own credit adjustments                      19          (58)          (34)    (102)          (12) 
Other non-interest income                2,464         4,068           531      868           909 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Non-interest income                      2,483         4,010           497      766           897 
Total income                             8,261        10,020         2,423    2,676         2,903 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Litigation and conduct costs                81         (810)           (8)       85         (750) 
Strategic costs                          (687)         (844)         (223)    (333)         (215) 
Other expenses                         (4,958)       (5,144)       (1,583)  (1,661)       (1,733) 
Operating expenses                     (5,564)       (6,798)       (1,814)  (1,909)       (2,698) 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Profit before impairment losses          2,697         3,222           609      767           205 
Impairment losses                      (3,112)         (536)         (254)  (2,056)         (213) 
Operating (loss)/profit before 
 tax                                     (415)         2,686           355  (1,289)           (8) 
Tax credit/(charge)                          1         (395)         (207)      396         (201) 
--------------------------------  ------------                ------------  -------  ------------ 
(Loss)/profit for the period             (414)         2,291           148    (893)         (209) 
                                                ------------ 
 
Attributable to: 
Ordinary shareholders                    (644)         1,723            61    (993)         (315) 
Preference shareholders                     21            30             5        8            10 
Paid-in equity holders                     272           277            80       95            95 
Non-controlling interests                 (63)           261             2      (3)             1 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
 
 
Notable items within total income 
Alawwal bank merger gain in 
 NatWest Markets                                -   444      -     -     - 
FX recycling (loss)/gain in 
 Central items & other                       (39)   290     64  (39)     - 
Legacy liability release in 
 Central items & other                          -   256      -     -     - 
Loss on redemption of own debt              (324)     -  (324)     -     - 
Liquidity Asset Bond sale gain/(loss)         111   (8)      1    17  (19) 
IFRS volatility in Central items 
 & other                                       38  (34)     49    55  (51) 
NatWest Markets asset disposals/strategic 
 risk reduction                              (75)  (35)   (12)  (63)   (8) 
Share of losses under equity 
 accounting for 
   Business Growth Fund                      (28)     -   (43)   (1)     - 
------------------------------------------  -----  ----  -----  ----  ---- 
 

Business performance summary

Retail Banking (formerly UK Personal Banking)

 
                                     Quarter ended                                              As at 
                          -----------------------------------                     ---------------------------------- 
                          30 September  30 June  30 September                     30 September  30 June  31 December 
                                  2020     2020          2019                             2020     2020         2019 
                                  GBPm     GBPm          GBPm                            GBPbn    GBPbn        GBPbn 
                                                                                  ------------  -------  ----------- 
Total income                                                   Net loans to 
 (1)                             1,022    1,035         1,224   customers - 
Operating expenses 
 (1)                             (647)    (546)       (1,601)    amortised cost          166.7    164.5        158.9 
Impairment                                                     Customer deposits 
 losses                           (70)    (360)         (131)   (1)                      164.9    161.0        150.3 
Operating profit/(loss)            305      129         (508)  RWAs                       36.3     36.7         37.8 
Return on equity                 15.3%     5.7%       (26.8%) 
Net interest 
 margin                          2.05%    2.18%         2.44% 
Cost:income 
 ratio                           63.3%    52.8%        130.8% 
Loan impairment 
 rate                            17bps    87bps         34bps 
------------------------  ------------  -------  ------------  -----------------  ------------  -------  ----------- 
 

Note:

(1) Comparisons with prior periods are impacted by the transfer of the Private Client Advice business to Private Banking from 1 January 2020. The net impact on Q3 2019 operating profit would have been to decrease total income by GBP11 million and operating expenses by GBP2 million. The net impact on the Q3 2019 balance sheet would have been to decrease customer deposits by GBP0.2 billion.

 
Retail Banking customer activity levels in Q3 2020 improved significantly 
 compared with Q2 2020 with debit and credit card spend levels 30% and 
 43% higher respectively and mortgage applications increased by 91%. 
 In the nine months ended 30 September 2020, Retail Banking helped approximately 
 250,000 customers with an initial mortgage repayment holiday and as 
 at Q3 2020 had 37,000 active mortgage repayment holidays, representing 
 3% of the book by volume. Additionally, Retail Banking had approximately 
 40,000, or 4%, of personal loan customers on active repayment holidays 
 as at Q3 2020. 
 
--   Total income decreased by GBP202 million, or 16.5%, in comparison 
      to Q3 2019 due to lower fee income on overdrafts, lower deposit returns, 
      mortgage margin dilution and lower international spend related fee 
      income, partially offset by strong balance growth in mortgages and 
      customer deposits. Total income decreased by GBP13 million compared 
      with Q2 2020, reflecting a 13 basis point reduction in net interest 
      margin largely due to the deferred impact of the lower yield curve 
      on deposit margins. Mortgage book margin stabilised in Q3 2020 as 
      front book new business and switcher completion margins were approximately 
      140 basis points, broadly in line with the overall book margin. In 
      Q3 2020, application margins were around 160 basis points as spreads 
      in the market continued to widen. 
--   Excluding strategic, litigation and conduct costs, operating expenses 
      decreased by GBP49 million, or 8.0%, compared with Q3 2019, predominantly 
      reflecting a reduction in staff costs associated with a 10.3% reduction 
      in headcount. 
--   Impairment losses of GBP70 million in Q3 2020 primarily reflect stage 
      three default charges driven by personal advances. 
--   Net loans to customers increased by GBP2.2 billion compared with Q2 
      2020. Gross new mortgage lending was GBP6.7 billion in Q3 2020, with 
      market flow share of approximately 11% and strong retention supporting 
      a stock share of approximately 10.6%. Unsecured balances remained 
      stable in Q3 2020, compared with a reduction of GBP0.8 billion in 
      Q2 2020. 
--   Customer deposits increased by GBP3.9 billion in Q3 2020, compared 
      with an GBP8.2 billion increase in Q2 2020, predominantly driven by 
      increasing current account balances, however growth slowed in Q3 2020 
      as customer spend levels increased towards pre-Covid-19 levels. 
 

Business performance summary

Ulster Bank RoI

 
                                   Quarter ended                                              As at 
                        -----------------------------------                     ---------------------------------- 
                        30 September  30 June  30 September                     30 September  30 June  31 December 
                                2020     2020          2019                             2020     2020         2019 
                                EURm     EURm          EURm                            EURbn    EURbn        EURbn 
                        ------------  -------  ------------ 
                                                             Net loans to 
Total income                     145      135           161   customers - 
Operating expenses             (138)    (140)         (146)    amortised cost           20.2     20.5         21.4 
Impairment 
 (losses)/                                                   Customer deposits          21.6     22.0         21.7 
  releases                       (6)    (246)            19  RWAs                       13.3     14.1         15.3 
Operating 
 profit/(loss)                     1    (251)            34 
Return on equity                0.2%  (45.5%)          5.8% 
Net interest 
 margin                        1.47%    1.49%         1.54% 
Cost:income 
 ratio                         95.2%   103.7%         90.7% 
Loan impairment 
 rate                          11bps   460bps       (34)bps 
----------------------  ------------  -------  ------------  -----------------  ------------  -------  ----------- 
 
Note: 
 (1) Ratios have been presented on a Euro basis. Comparatives have been 
 restated. 
 
Our strategy to grow our Ulster Bank business in the Republic of Ireland 
 organically and safely remains unchanged. We continue to evaluate the 
 impact of Covid-19 and the challenges to the economy and we are reviewing 
 our strategy appropriately and responsibly in light of these events. 
 
In the event of any changes being made to our strategy, these would 
 be undertaken with full consideration of any impact on customers, colleagues 
 and shareholders in the first instance. Our priority now is to continue 
 to remain focused on supporting our colleagues in serving our customers 
 in these difficult times. 
As at Q3 2020, Ulster Bank RoI had approved over 17,000 payment breaks 
 and, of those who have rolled off their initial payment break, approximately 
 46% have opted for a second payment break, representing around 8% of 
 the lending book by value. 
 
--                     Total income decreased by EUR16 million, or 9.9%, compared with Q3 
                        2019 primarily due to lower lending income, reduced transaction volumes 
                        and fee income resulting from the impact of Covid-19. Total income 
                        increased by EUR10 million in comparison to Q2 2020, reflecting higher 
                        fee income from a return to more normalised transaction levels. Net 
                        interest margin decreased by 2 basis points in comparison to Q2 2020 
                        reflecting the continued impact of negative rates on increased liquid 
                        assets. 
--                     Impairment losses were EUR6 million in Q3 2020, with payment breaks 
                        in part mitigating the full impact of credit losses attributable 
                        to the Covid-19 pandemic. 
--                     Net loans to customers decreased by EUR0.3 billion compared with 
                        Q2 2020 as repayments continued to exceed gross new lending, combined 
                        with a further derecognition of the non-performing loan (NPL) sale 
                        agreed in 2019. Gross new lending of EUR0.4 billion was broadly in 
                        line with Q2 2020. 
--                     Customer deposits decreased by EUR0.4 billion in comparison to Q2 
                        2020 mainly due to the introduction of negative rates on certain 
                        commercial deposit categories. 
--                     RWAs decreased by EUR0.8 billion in comparison to Q2 2020 reflecting 
                        the EUR0.2 billion impact of the NPL sale derecognition, lower volumes 
                        and improved credit metrics. 
 
 

Business performance summary

Commercial Banking

 
                              Quarter ended                                              As at 
                   -----------------------------------                     ---------------------------------- 
                   30 September  30 June  30 September                     30 September  30 June  31 December 
                           2020     2020          2019                             2020     2020         2019 
                           GBPm     GBPm          GBPm                            GBPbn    GBPbn        GBPbn 
                   ------------  -------  ------------ 
                                                        Net loans to 
Total income              1,004      995         1,077   customers - 
Operating 
 expenses                 (553)    (611)         (638)    amortised cost          110.0    112.0        101.2 
Impairment 
 losses                   (127)  (1,355)         (108)  Customer deposits         161.3    159.6        135.0 
Operating 
 profit/(loss)              324    (971)           331  RWAs                       76.5     78.3         72.5 
Return on 
 equity                    9.2%  (32.5%)          8.4% 
Net interest 
 margin                   1.65%    1.70%         1.90% 
Cost:income 
 ratio                    53.4%    59.9%         57.9% 
Loan impairment 
 rate                     45bps   472bps         42bps 
-----------------  ------------  -------  ------------  -----------------  ------------  -------  ----------- 
 
Commercial Banking continues to support customers through a comprehensive 
 package of initiatives including participation in the UK Government's 
 financial support schemes. As at Q3 2020, GBP7.9 billion BBLS, GBP3.7 
 billion CBILS and GBP1.2 billion CLBILS had been approved. Since 22 
 March 2020 Commercial Banking provided payment holidays on over 72,000 
 customer accounts and as at Q3 2020 had active payment holidays on 
 c.55,000 customer accounts, representing c.8% of the lending book by 
 value. 
 
--                Total income decreased by GBP73 million, or 6.8%, compared with Q3 
                   2019 as the continued contraction of the yield curve and lower business 
                   activity was partially offset by increased lending volumes. Net interest 
                   margin decreased by 5 basis points in comparison to Q2 2020 as a 
                   result of lower deposit funding benefits. 
--                Other expenses, excluding OLD, were GBP36 million, or 6.8%, lower 
                   than Q3 2019 mainly due to a reduction in back office operations 
                   costs and a 3.0% reduction in headcount. 
--                Impairment losses of GBP127 million in Q3 2020 primarily reflect 
                   stage one and two movements related to the expected deterioration 
                   in the economic environment, with total stage three charges of GBP53 
                   million, including a small number of single name charges. 
--                Net loans to customers decreased by GBP2.0 billion compared with 
                   Q2 2020 as GBP3.1 billion net RCF repayments and lower lending across 
                   Large Corporate & Institutions and Specialised business lending more 
                   than offset drawdowns against UK Government lending schemes, including 
                   GBP1.7 billion related to BBLS, GBP0.8 billion related to CBILS and 
                   GBP0.4 billion related to CLBILS. RCF utilisation decreased to c.26% 
                   of committed facilities, broadly in line with pre-Covid-19 levels. 
--                Customer deposits increased by GBP1.7 billion compared with Q2 2020 
                   as customers continued to retain liquidity. 
--                RWAs decreased by GBP1.8 billion compared with Q2 2020 as lower lending 
                   volumes and a c.GBP1.5 billion reduction reflecting the CRR Covid-19 
                   amendment to accelerate the planned changes to the SME supporting 
                   factor and the introduction of an Infrastructure supporting factor, 
                   partially offset by risk parameter changes. 
 
 

Business performance summary

Private Banking - (commentary adjusted for transfers)

 
                                 Quarter ended                                                  As at 
                      -----------------------------------                         ---------------------------------- 
                      30 September  30 June  30 September                         30 September  30 June  31 December 
                              2020     2020          2019                                 2020     2020         2019 
                              GBPm     GBPm          GBPm                                GBPbn    GBPbn        GBPbn 
                                                           Net loans to 
                                                           customers 
Total income                   187      191           198  - 
Operating 
 expenses                    (112)    (129)         (119)    amortised cost               16.5     16.0         15.5 
Impairment                                                 Customer deposits              30.3     29.8         28.4 
  (losses)/releases           (18)     (27)             2  RWAs                           10.6     10.4         10.1 
Operating                                                  Assets Under 
 profit                         57       35            81  Management 
Return on 
 equity                      11.2%     6.6%         16.8%    (AUMs)                       27.3     27.1         23.2 
Net interest                                               Assets Under 
 margin                      1.99%    2.14%         2.35%  Administration 
Cost:income 
 ratio                       59.9%    67.5%         60.1%    (AUAs) (1)                    2.8      2.7          7.2 
Loan impairment 
 rate                        43bps    67bps        (5)bps  Total Assets Under 
                                                             Management and 
                                                             Administration 
                                                              (AUMA)                      30.1     29.8         30.4 
--------------------  ------------  -------  ------------  ---------------------  ------------  -------  ----------- 
 
 
Notes: 
            (1) Private Banking manages assets under administration portfolios on 
             behalf of Retail Banking and RBSI and receives a management fee in respect 
             of providing this service. 
             (2) Comparisons with prior periods are impacted by the transfer of the 
             Private Client Advice business from Retail Banking from 1 January 2020. 
             The net impact on Q3 2019 operating profit would have been to increase 
             total income by GBP11 million and operating expenses by GBP2 million. 
             The net impact on the Q3 2019 balance sheet would have been to increase 
             customer deposits by GBP0.2 billion. AUMs would have been GBP4.5 billion 
             higher, with a corresponding decrease in AUAs. Variances in the commentary 
             below have been adjusted for the impact of this transfer. 
Private Banking remains committed to supporting clients through a range 
 of initiatives, including the provision of mortgage and loan repayment 
 breaks and via participation in UK Government lending initiatives, with 
 c.GBP0.3 billion approved as at Q3 2020. 
--   Total income was GBP22 million, or 10.5%, lower than Q3 2019 mainly 
      reflecting lower deposit funding benefits, a reduction in fee income 
      and one-off benefits related to hedging income gains in Q3 2019, partially 
      offset by balance sheet growth. Net interest margin decreased by 15 
      basis points in comparison to Q2 2020 primarily due to lower deposit 
      funding benefits. 
--   Impairment losses of GBP18 million largely reflected stage one and 
      two charges. 
--   Net loans to customers increased by GBP0.5 billion in comparison to 
      Q2 2020 reflecting mortgage growth and drawdowns against UK Government 
      lending schemes . 
--   Total AUMAs overseen by Private Banking increased by GBP0.3 billion 
      compared with Q2 2020 reflecting positive investment performance. 
 

RBS International

 
                                  Quarter ended                                              As at 
                       -----------------------------------                     ---------------------------------- 
                       30 September  30 June  30 September                     30 September  30 June  31 December 
                               2020     2020          2019                             2020     2020         2019 
                               GBPm     GBPm          GBPm                            GBPbn    GBPbn        GBPbn 
                                                            Net loans to 
Total income                    112      115           150   customers - 
Operating expenses             (53)     (65)          (62)    amortised cost           12.8     12.7         14.1 
Impairment losses              (34)     (31)             -  Customer deposits          30.4     29.5         30.1 
Operating profit                 25       19            88  RWAs                        7.0      6.8          6.5 
Return on equity               6.4%     4.3%         26.0% 
Net interest margin           1.07%    1.15%         1.55% 
Cost:income ratio             47.3%    56.5%         41.3% 
Loan impairment 
 rate                        105bps    97bps             - 
---------------------  ------------  -------  ------------  -----------------  ------------  -------  ----------- 
 
As at Q3 2020, RBS International had 322 active mortgage repayment breaks, 
 reflecting a mortgage value of GBP82 million, and is providing support 
 for 566 business customers with working capital facilities, reflecting 
 a value of GBP503 million, while continuing to suspend a range of fees 
 and charges for its personal and business customers. 
 
--                    Total income decreased by GBP38 million, or 25.3%, compared with Q3 
                       2019 primarily due to the impact of the interest rate reductions on 
                       deposit income and lower fee income reflecting the economic response 
                       to Covid-19. Net interest margin decreased by 8 basis points compared 
                       with Q2 2020 due to reduced funding benefits. 
--                    Excluding strategic, litigation and conduct costs, operating expenses 
                       decreased by GBP7 million, or 12.3%, compared with Q3 2019 mainly 
                       due to lower staff costs as a result of a 5.6% headcount reduction 
                       and lower project spend. 
--                    Impairment losses were GBP34 million higher than Q3 2019 due to revised 
                       economic scenarios, refreshed staging and maturity date analysis. 
--                    Customer deposits were GBP0.9 billion higher than Q2 2020 due to short 
                       term placements in the Institutional Banking Sector. 
--                    RWAs increased by GBP0.2 billion compared with Q2 2020 due to customer 
                       maturities and higher lending balances in the wholesale sector. 
 
 

Business performance summary

NatWest Markets (1)

 
                                               Quarter ended                                    As at 
                                    -----------------------------------           ---------------------------------- 
                                    30 September  30 June  30 September           30 September  30 June  31 December 
                                            2020     2020          2019                   2020     2020         2019 
                                            GBPm     GBPm          GBPm                  GBPbn    GBPbn        GBPbn 
                                                                         Funded 
Total income                                 234      273           150   Assets         121.3    122.9        116.2 
of which:                                                                RWAs             30.0     35.1         37.9 
  - Income excluding 
        asset disposals/strategic 
        risk reduction 
         and own 
       credit adjustments                    280      438           161 
  - Asset disposals/strategic 
      risk reduction 
       (2)                                  (12)     (63)             - 
  - Own credit adjustments                  (34)    (102)          (11) 
Operating expenses                         (302)    (365)         (348) 
Impairment releases/(losses)                   2     (45)             5 
Operating (loss)                            (66)    (137)         (193) 
Return on equity                          (4.7%)   (7.1%)        (8.7%) 
Cost:income ratio                         129.1%   133.7%        232.0% 
----------------------------------  ------------  -------  ------------  -------  ------------  -------  ----------- 
 

Notes:

(1) The NatWest Markets operating segment is not the same as the NatWest Markets Plc legal entity (NWM Plc) or group (NWM or NWM Group). For 2019, NWM Group includes NatWest Markets N.V. (NWM N.V.) from 29 November 2019 only. For periods prior to Q4 2019, NWM N.V. was excluded from the NWM Group. In both 2019 and 2020 the NatWest Markets segment excludes the Central items & other segment.

(2) Asset disposals/strategic risk reduction in 2020 relates to the cost of exiting positions and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.

 
During Q3 2020 NatWest Markets made further progress on reshaping the 
 business for the future, putting purpose at its core. The front office 
 operating model was reorganised to increase focus on NatWest Group's 
 customers. A Capital Management Unit has also been established to safely 
 manage capital reduction and optimisation. Further refinements to the 
 product suite were also communicated, to focus resources on developing 
 product capability in the areas that matter most to NatWest Group's 
 customers. This included exiting Distressed and Emerging Markets Credit 
 trading and making changes to simplify the Rates business. In line with 
 the strategy announced in February, NatWest Markets has continued to 
 reduce RWAs, particularly within counterparty credit and market risk, 
 and are now targeting RWAs of around GBP30 billion by the end of 2020. 
--  Income excluding asset disposals/strategic risk reduction, OCA and 
     notable items increased by GBP111 million, or 65.7%, in comparison 
     to Q3 2019. Although market activity and the level of primary issuance 
     eased in Q3 2020 compared to the first half of the year, income was 
     significantly higher than Q3 2019 due to elevated hedging costs in 
     the prior period. 
--  Excluding strategic, litigation and conduct costs, operating expenses 
     decreased by GBP57 million, or 20.2%, in comparison to Q3 2019 reflecting 
     continued reductions in line with the strategic announcement in February 
     2020. 
--  RWAs were GBP5.1 billion lower than Q2 2020 as counterparty credit 
     risk decreased by GBP2.2 billion and market risk decreased by GBP2.2 
     billion due to capital optimisation actions. 
 

Central items & other

 
                                         Quarter ended 
                              ----------------------------------- 
                              30 September  30 June  30 September 
                                      2020     2020          2019 
                                      GBPm     GBPm          GBPm 
Central items not allocated          (285)    (146)           162 
----------------------------  ------------  -------  ------------ 
 
 
--  A GBP285 million operating loss within central items not allocated 
     in Q3 2020 principally reflects the day one loss on redemption of 
     own debt of GBP324 million related to the repurchase of legacy instruments 
     which will result in annual net interest savings of c.GBP74 million. 
     Q3 2019 principally reflected a GBP162 million reimbursment under 
     indemnification agreements relating to residential mortgage-backed 
     securities. 
 

Segment performance

 
                                                         Nine months ended 30 September 2020 
                                -------------------------------------------------------------------------------------- 
                                                                                                Central 
                                 Retail    Ulster  Commercial  Private            RBS  NatWest    items  Total NatWest 
                                                                                                & other 
                                Banking  Bank RoI     Banking  Banking  International  Markets      (1)          Group 
                                   GBPm      GBPm        GBPm     GBPm           GBPm     GBPm     GBPm           GBPm 
Income statement 
Net interest income               2,919       294       2,073      371            286     (55)    (110)          5,778 
Non-interest income                 288        85         934      208             85    1,086    (222)          2,464 
Own credit adjustments                -         -           -        -              -       19        -             19 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Total income                      3,207       379       3,007      579            371    1,050    (332)          8,261 
Direct expenses 
     - staff costs                (399)     (150)       (497)    (137)           (92)    (434)    (914)        (2,623) 
     - other costs                (152)      (65)       (211)     (61)           (37)    (131)  (1,678)        (2,335) 
Indirect expenses               (1,178)     (139)       (958)    (149)           (42)    (229)    2,695              - 
Strategic costs 
     - direct                      (46)       (9)         (5)      (4)            (8)    (187)    (428)          (687) 
     - indirect                   (138)      (10)       (111)     (10)            (3)     (24)      296              - 
Litigation and conduct costs        191         1           8      (3)              3      (4)    (115)             81 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating expenses              (1,722)     (372)     (1,774)    (364)          (179)  (1,009)    (144)        (5,564) 
Operating profit/(loss)before 
 impairment 
 (losses)/releases                1,485         7       1,233      215            192       41    (476)          2,697 
Impairment (losses)/releases      (727)     (251)     (1,917)     (74)           (80)     (38)     (25)        (3,112) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating profit/(loss)             758     (244)       (684)      141            112        3    (501)          (415) 
Additional information 
Return on equity (2)              12.2%   (16.6%)      (8.7%)     9.2%          10.0%   (0.8%)       nm         (2.7%) 
Cost:income ratio (2)             53.7%     98.2%       57.4%    62.9%          48.2%    96.1%       nm          66.9% 
Total assets (GBPbn)              189.5      27.4       186.9     24.9           32.7    283.2     47.0          791.6 
Funded assets (GBPbn)             189.5      27.4       186.9     24.9           32.7    121.3     44.6          627.3 
Net loans to customers - 
 amortised cost 
 (GBPbn)                          166.7      18.3       110.0     16.5           12.8     10.1     19.3          353.7 
Loan impairment rate (2)          57bps    175bps      226bps    59bps          83bps       nm       nm         115bps 
Impairment provisions (GBPbn)     (1.9)     (0.8)       (3.0)    (0.1)          (0.1)    (0.2)        -          (6.1) 
Impairment provisions - stage 
 3 (GBPbn)                        (0.9)     (0.5)       (1.1)        -              -    (0.2)        -          (2.7) 
Customer deposits (GBPbn)         164.9      19.6       161.3     30.3           30.4      4.7      7.2          418.4 
Risk-weighted assets (RWAs) 
 (GBPbn)                           36.3      12.1        76.5     10.6            7.0     30.0      1.4          173.9 
RWA equivalent (RWAe) (GBPbn)      36.3      12.1        76.6     10.6            7.1     32.0      1.4          176.1 
Employee numbers (FTEs - 
 thousands)                        16.6       2.8         9.6      2.1            1.7      2.8     26.0           61.6 
Average interest earning 
 assets (GBPbn)                   179.8      26.2       160.8     23.3           31.3     38.4       nm          487.8 
Net interest margin               2.17%     1.50%       1.72%    2.12%          1.22%  (0.19%)       nm          1.58% 
Third party customer asset 
 rate (3)                         2.92%     2.29%       2.93%    2.59%          2.57%       nm       nm             nm 
Third party customer funding 
 rate (3)                       (0.23%)   (0.12%)     (0.20%)  (0.18%)        (0.03%)       nm       nm             nm 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
 

Refer to page 14 for the notes to this table. nm = not meaningful.

Segment performance

 
                                                         Nine months ended 30 September 2019 
                               --------------------------------------------------------------------------------------- 
                                                                                                Central 
                                Retail    Ulster  Commercial  Private            RBS  NatWest     items  Total NatWest 
                                                                                                & other 
                               Banking  Bank RoI     Banking  Banking  International  Markets       (1)          Group 
                                  GBPm      GBPm        GBPm     GBPm           GBPm     GBPm      GBPm           GBPm 
                               -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Income statement 
Net interest income              3,118       302       2,127      391            361    (184)     (105)          6,010 
Non-interest income                553       125       1,115      191             99      890        60          3,033 
Own credit adjustments               -         1           -        -              -     (58)       (1)           (58) 
Strategic disposals                  -         -           -        -              -      444       591          1,035 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Total income                     3,671       428       3,242      582            460    1,092       545         10,020 
Direct expenses 
     - staff costs               (431)     (156)       (521)    (122)           (89)    (508)     (905)        (2,732) 
     - other costs               (217)      (70)       (223)     (52)           (37)    (128)   (1,685)        (2,412) 
Indirect expenses              (1,113)     (134)       (915)    (145)           (40)    (246)     2,593              - 
Strategic costs 
     - direct                      (8)      (12)        (20)        -            (9)    (104)     (691)          (844) 
     - indirect                  (143)      (19)       (171)     (30)            (6)     (37)       406              - 
Litigation and conduct costs     (918)      (21)        (50)      (2)              -      (3)       184          (810) 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Operating expenses             (2,830)     (412)     (1,900)    (351)          (181)  (1,026)      (98)        (6,798) 
Operating profit/(loss) 
 before impairment 
 (losses)/releases                 841        16       1,342      231            279       66       447          3,222 
Impairment (losses)/releases     (312)        38       (310)        5              3       41       (1)          (536) 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Operating profit/(loss)            529        54       1,032      236            282      107       446          2,686 
Additional information 
Return on equity (2)              7.8%      3.4%        8.7%    16.7%          28.5%   (2.2%)        nm           6.8% 
Cost:income ratio (2)            77.1%     96.3%       57.2%    60.3%          39.3%    94.0%        nm          67.5% 
Total assets (GBPbn)             176.7      26.1       166.6     22.6           31.2    318.3      35.0          776.5 
Funded assets (GBPbn)            176.7      26.0       166.6     22.6           31.2    142.7      34.9          600.7 
Net loans to customers - 
 amortised cost 
 (GBPbn)                         154.6      19.0       101.5     15.2           13.8      9.1       6.3          319.5 
Loan impairment rate (2)         27bps   (26)bps       40bps   (4)bps         (3)bps       nm        nm          22bps 
Impairment provisions (GBPbn)    (1.4)     (0.8)       (1.3)        -              -    (0.2)     (0.1)          (3.8) 
Impairment provisions - stage 
 3 (GBPbn)                       (0.8)     (0.8)       (1.0)        -              -    (0.2)         -          (2.8) 
Customer deposits (GBPbn)        147.9      18.8       135.7     28.2           29.1      3.3       6.7          369.7 
Risk-weighted assets (RWAs) 
 (GBPbn)                          37.5      13.3        77.0     10.0            6.5     43.8       1.4          189.5 
RWA equivalent (RWAe) (GBPbn)     38.4      13.6        78.1     10.0            6.6     48.9       1.7          197.3 
Employee numbers (FTEs - 
 thousands)                       18.5       3.0         9.9      1.9            1.8      5.1      25.5           65.7 
Average interest earning 
 assets (GBPbn)                  165.3      25.2       145.8     21.5           29.3     35.1        nm          445.1 
Net interest margin              2.52%     1.60%       1.95%    2.44%          1.65%  (0.70%)        nm          1.81% 
Third party customer asset 
 rate (3)                        3.27%     2.29%       3.37%    2.95%          2.93%       nm        nm             nm 
Third party customer funding 
 rate (3)                      (0.37%)   (0.15%)     (0.35%)  (0.44%)        (0.14%)       nm        nm             nm 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
 

Refer to page 14 for the notes to this table. nm = not meaningful.

Segment performance

 
                                                           Quarter ended 30 September 2020 
                                -------------------------------------------------------------------------------------- 
                                                                                                Central 
                                 Retail    Ulster  Commercial  Private            RBS  NatWest    items  Total NatWest 
                                                                                                & other 
                                Banking  Bank RoI     Banking  Banking  International  Markets      (1)          Group 
                                   GBPm      GBPm        GBPm     GBPm           GBPm     GBPm     GBPm           GBPm 
Income statement 
Net interest income                 937       100         703      120             85     (21)        2          1,926 
Non-interest income                  85        30         301       67             27      289    (268)            531 
Own credit adjustments                -         -           -        -              -     (34)        -           (34) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Total income                      1,022       130       1,004      187            112      234    (266)          2,423 
Direct expenses 
     - staff costs                (131)      (50)       (156)     (44)           (27)    (108)    (311)          (827) 
     - other costs                 (49)      (23)        (71)     (14)           (10)     (37)    (552)          (756) 
Indirect expenses                 (380)      (47)       (300)     (48)           (13)     (80)      868              - 
Strategic costs 
     - direct                      (45)       (5)         (3)      (4)            (5)     (67)     (94)          (223) 
     - indirect                    (35)       (2)        (38)        -              2      (8)       81              - 
Litigation and conduct costs        (7)         -          15      (2)              -      (2)     (12)            (8) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating expenses                (647)     (127)       (553)    (112)           (53)    (302)     (20)        (1,814) 
Operating profit/(loss)before 
 impairment 
 (losses)/releases                  375         3         451       75             59     (68)    (286)            609 
Impairment (losses)/releases       (70)       (8)       (127)     (18)           (34)        2        1          (254) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating profit/(loss)             305       (5)         324       57             25     (66)    (285)            355 
Additional information 
Return on equity (2)              15.3%    (1.0%)        9.2%    11.2%           6.4%   (4.7%)       nm           0.8% 
Cost:income ratio (2)             63.3%     97.7%       53.4%    59.9%          47.3%   129.1%       nm          74.5% 
Total assets (GBPbn)              189.5      27.4       186.9     24.9           32.7    283.2     47.0          791.6 
Funded assets (GBPbn)             189.5      27.4       186.9     24.9           32.7    121.3     44.6          627.3 
Net loans to customers - 
 amortised cost 
 (GBPbn)                          166.7      18.3       110.0     16.5           12.8     10.1     19.3          353.7 
Loan impairment rate (2)          17bps     17bps       45bps    43bps         105bps       nm       nm          28bps 
Impairment provisions (GBPbn)     (1.9)     (0.8)       (3.0)    (0.1)          (0.1)    (0.2)        -          (6.1) 
Impairment provisions - stage 
 3 (GBPbn)                        (0.9)     (0.5)       (1.1)        -              -    (0.2)        -          (2.7) 
Customer deposits (GBPbn)         164.9      19.6       161.3     30.3           30.4      4.7      7.2          418.4 
Risk-weighted assets (RWAs) 
 (GBPbn)                           36.3      12.1        76.5     10.6            7.0     30.0      1.4          173.9 
RWA equivalent (RWAe) (GBPbn)      36.3      12.1        76.6     10.6            7.1     32.0      1.4          176.1 
Employee numbers (FTEs - 
 thousands)                        16.6       2.8         9.6      2.1            1.7      2.8     26.0           61.6 
Average interest earning 
 assets (GBPbn)                   182.2      27.3       169.3     24.0           31.5     39.2       nm          507.3 
Net interest margin               2.05%     1.46%       1.65%    1.99%          1.07%  (0.21%)       nm          1.51% 
Third party customer asset 
 rate (3)                         2.82%     2.32%       2.73%    2.43%          2.41%       nm       nm             nm 
Third party customer funding 
 rate (3)                       (0.13%)   (0.11%)     (0.03%)  (0.02%)          0.03%       nm       nm             nm 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
 

Refer to page 14 for the notes to this table. nm = not meaningful.

Segment performance

 
                                                             Quarter ended 30 June 2020 
                               --------------------------------------------------------------------------------------- 
                                                                                                Central 
                                Retail    Ulster  Commercial  Private            RBS  NatWest     items  Total NatWest 
                                                                                                & other 
                               Banking  Bank RoI     Banking  Banking  International  Markets       (1)          Group 
                                  GBPm      GBPm        GBPm     GBPm           GBPm     GBPm      GBPm           GBPm 
                               -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Income statement 
Net interest income                975        97         696      124             90        6      (78)          1,910 
Non-interest income                 60        23         299       67             25      369        25            868 
Own credit adjustments               -         -           -        -              -    (102)         -          (102) 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Total income                     1,035       120         995      191            115      273      (53)          2,676 
Direct expenses 
     - staff costs               (133)      (52)       (167)     (46)           (33)    (159)     (287)          (877) 
     - other costs                (45)      (18)        (67)     (23)           (13)     (37)     (581)          (784) 
Indirect expenses                (399)      (46)       (337)     (54)           (15)     (75)       926              - 
Strategic costs 
     - direct                      (1)       (3)           -        -            (2)     (86)     (241)          (333) 
     - indirect                   (69)       (4)        (34)      (5)            (2)      (8)       122              - 
Litigation and conduct costs       101         1         (6)      (1)              -        -      (10)             85 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Operating expenses               (546)     (122)       (611)    (129)           (65)    (365)      (71)        (1,909) 
Operating profit/(loss) 
 before impairment 
 (losses)/releases                 489       (2)         384       62             50     (92)     (124)            767 
Impairment (losses)/releases     (360)     (216)     (1,355)     (27)           (31)     (45)      (22)        (2,056) 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
Operating profit/(loss)            129     (218)       (971)       35             19    (137)     (146)        (1,289) 
Additional information 
Return on equity (2)              5.7%   (44.5%)     (32.5%)     6.6%           4.3%   (7.1%)        nm        (12.4%) 
Cost:income ratio (2)            52.8%    101.7%       59.9%    67.5%          56.5%   133.7%        nm          70.9% 
Total assets (GBPbn)             187.1      27.6       186.0     23.9           31.5    303.8      47.0          806.9 
Funded assets (GBPbn)            187.1      27.6       186.0     23.9           31.5    122.9      44.5          623.5 
Net loans to customers - 
 amortised cost 
 (GBPbn)                         164.5      18.7       112.0     16.0           12.7     11.4      17.0          352.3 
Loan impairment rate (2)         87bps    441bps      472bps    67bps          97bps       nm        nm         229bps 
Impairment provisions (GBPbn)    (1.9)     (0.9)       (3.0)    (0.1)              -    (0.2)         -          (6.1) 
Impairment provisions - stage 
 3 (GBPbn)                       (0.9)     (0.6)       (1.2)        -              -    (0.1)         -          (2.8) 
Customer deposits (GBPbn)        161.0      20.0       159.6     29.8           29.5      5.5       2.9          408.3 
Risk-weighted assets (RWAs) 
 (GBPbn)                          36.7      12.8        78.3     10.4            6.8     35.1       1.4          181.5 
RWA equivalent (RWAe) (GBPbn)     36.7      12.8        78.4     10.4            6.9     37.2       1.5          183.9 
Employee numbers (FTEs - 
 thousands)                       17.1       2.8         9.6      2.0            1.8      5.0      24.4           62.7 
Average interest earning 
 assets (GBPbn)                  179.8      26.4       164.6     23.3           31.5     39.9        nm          497.4 
Net interest margin              2.18%     1.48%       1.70%    2.14%          1.15%    0.06%        nm          1.54% 
Third party customer asset 
 rate (3)                        2.88%     2.27%       2.88%    2.53%          2.58%       nm        nm             nm 
Third party customer funding 
 rate (3)                      (0.20%)   (0.12%)     (0.25%)  (0.14%)        (0.01%)       nm        nm             nm 
-----------------------------  -------  --------  ----------  -------  -------------  -------  --------  ------------- 
 

Refer to page 14 for the notes to this table. nm = not meaningful.

Segment performance

 
                                                           Quarter ended 30 September 2019 
                                -------------------------------------------------------------------------------------- 
                                                                                                Central 
                                 Retail    Ulster  Commercial  Private            RBS  NatWest    items  Total NatWest 
                                                                                                & other 
                                Banking  Bank RoI     Banking  Banking  International  Markets      (1)          Group 
                                   GBPm      GBPm        GBPm     GBPm           GBPm     GBPm     GBPm           GBPm 
Income statement 
Net interest income               1,034       102         703      130            119     (62)     (20)          2,006 
Non-interest income                 190        43         374       68             31      223     (20)            909 
Own credit adjustments                -         -           -        -              -     (11)      (1)           (12) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Total income                      1,224       145       1,077      198            150      150     (41)          2,903 
Direct expenses 
     - staff costs                (143)      (52)       (172)     (40)           (30)    (159)    (295)          (891) 
     - other costs                 (81)      (22)        (72)     (17)           (14)     (42)    (594)          (842) 
Indirect expenses                 (385)      (44)       (317)     (49)           (13)     (81)      889              - 
Strategic costs 
     - direct                      (12)       (3)          10        -            (4)     (55)    (151)          (215) 
     - indirect                    (68)       (9)        (83)     (13)            (1)      (7)      181              - 
Litigation and conduct costs      (912)       (1)         (4)        -              -      (4)      171          (750) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating expenses              (1,601)     (131)       (638)    (119)           (62)    (348)      201        (2,698) 
Operating profit/(loss) before 
 impairment 
 (losses)/releases                (377)        14         439       79             88    (198)      160            205 
Impairment (losses)/releases      (131)        17       (108)        2              -        5        2          (213) 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
Operating profit/(loss)           (508)        31         331       81             88    (193)      162            (8) 
Additional information 
Return on equity (2)            (26.8%)      5.8%        8.4%    16.8%          26.0%   (8.7%)       nm         (3.8%) 
Cost:income ratio (2)            130.8%     90.3%       57.9%    60.1%          41.3%   232.0%       nm          92.9% 
Total assets (GBPbn)              176.7      26.1       166.6     22.6           31.2    318.3     35.0          776.5 
Funded assets (GBPbn)             176.7      26.0       166.6     22.6           31.2    142.7     34.9          600.7 
Net loans to customers - 
 amortised cost 
 (GBPbn)                          154.6      19.0       101.5     15.2           13.8      9.1      6.3          319.5 
Loan impairment rate (2)          34bps   (34)bps       42bps   (5)bps              -       nm       nm          26bps 
Impairment provisions (GBPbn)     (1.4)     (0.8)       (1.3)        -              -    (0.2)    (0.1)          (3.8) 
Impairment provisions - stage 
 3 (GBPbn)                        (0.8)     (0.8)       (1.0)        -              -    (0.2)        -          (2.8) 
Customer deposits (GBPbn)         147.9      18.8       135.7     28.2           29.1      3.3      6.7          369.7 
Risk-weighted assets (RWAs) 
 (GBPbn)                           37.5      13.3        77.0     10.0            6.5     43.8      1.4          189.5 
RWA equivalent (RWAes) (GBPbn)     38.4      13.6        78.1     10.0            6.6     48.9      1.7          197.3 
Employee numbers (FTEs - 
 thousands)                        18.5       3.0         9.9      1.9            1.8      5.1     25.5           65.7 
Average interest earning 
 assets (GBPbn)                   168.1      26.2       146.7     22.0           30.4     38.6       nm          454.4 
Net interest margin               2.44%     1.55%       1.90%    2.35%          1.55%  (0.64%)       nm          1.75% 
Third party customer asset 
 rate (3)                         3.23%     2.26%       3.31%    2.92%          2.91%       nm       nm             nm 
Third party customer funding 
 rate (3)                       (0.37%)   (0.14%)     (0.36%)  (0.44%)        (0.14%)       nm       nm             nm 
------------------------------  -------  --------  ----------  -------  -------------  -------  -------  ------------- 
 

Notes:

(1) Central items & other includes unallocated transactions, including volatile items under IFRS, items related to Alawwal bank merger and RMBS related charges.

(2) Refer to the Appendix for details of basis of preparation and reconciliation of non-IFRS performance measures where relevant.

(3) Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers only. Third party customer funding rate reflects interest payable on third-party customer deposits. This excludes intragroup items, loans to banks and liquid asset portfolios. Intragroup items, bank deposits and debt securities in issue are excluded for customer funding rate calculation. Net interest margin is calculated as net interest income as a percentage of the average interest-earning assets without these exclusions.

Capital and risk management

 
                                        Page 
-------------------------------------  ----- 
 Capital, liquidity and funding risk      15 
-------------------------------------  ----- 
 Credit risk 
-------------------------------------  ----- 
     Segmental exposure                   21 
-------------------------------------  ----- 
     Sector analysis                      25 
-------------------------------------  ----- 
     Wholesale support schemes            27 
-------------------------------------  ----- 
 

Capital, liquidity and funding risk

Introduction

The economic impact of the Covid-19 pandemic was significant. While liquidity, capital and funding were closely monitored

throughout, NatWest Group benefited from its strong positions, particularly in relation to CET1, going into the crisis. Prudent

risk management continues to be important as the full economic effects of the global pandemic unfold.

Key developments

 
 --   The CET1 ratio increased by 200 basis points to 18.2%. There was 
       a release of GBP1.3 billion following the cancellation of the proposed 
       2019 dividend payments and associated pension contribution in Q1 
       2020, as announced by the Board in response to Covid-19. The attributable 
       loss in the period was GBP644 million however the IFRS 9 transitional 
       arrangements on expected credit losses provided relief of GBP1,719 
       million. 
 --   Total RWAs decreased by GBP5.3 billion during the period, mainly 
       reflecting reductions in Market Risk RWAs of GBP3.6 billion and 
       Counterparty Credit Risk RWAs of GBP2.4 billion. Operational Risk 
       RWAs reduced by GBP0.7 billion following the annual recalculation 
       in Q1 2020. The reduction in Market Risk RWAs was due to movements 
       in Risks-not-in-VaR (RNIV) and Incremental Risk Charge (IRC) as 
       well as a reduction in non-modelled market risk. There were offsetting 
       increases in Credit Risk RWAs of GBP1.4 billion. 
 --   The CRR leverage ratio increased to 5.2% due to a GBP2.5 billion 
       increase in Tier 1 capital which is partially offset by a GBP44.4 
       billion increase in the leverage exposure driven by balance sheet 
       exposures. 
 

In response to the Covid-19 pandemic, a number of relief measures to alleviate the financial stability impact have been announced and recommended by regulatory and supervisory bodies. One significant announcement was on 26 June when the European Parliament passed an amended regulation to the CRR in response to the Covid-19 pandemic ("the CRR Covid-19 amendment"); NatWest Group has applied a number of the CRR amendments for Q3 2020 reporting. The impact on capital and leverage of the CRR amendment and other relief measures are set out below.

 
 --   IFRS 9 Transition - NatWest Group has elected to take advantage 
       of the transitional regulatory capital rules in respect of expected 
       credit losses following the adoption of IFRS 9; it had previously 
       had a negligible impact up to Q4 2019. The CRR Covid-19 amendment 
       now requires a full CET1 addback for the movement in stage 1 and 
       stage 2 ECL from 1 January 2020 for the next two years. The IFRS 
       9 transitional arrangement impact on NatWest Group CET1 regulatory 
       capital at 30 September 2020 is GBP1,719 million. Excluding this 
       adjustment, the CET1 ratio would be 17.2%. 
 --   UK Leverage exposure - The Prudential Regulation Authority (PRA) 
       announced the ability for firms to apply for a modification by consent 
       to permit the netting of regular-way purchase and sales settlement 
       balances. The PRA also offered a further modification that gave 
       an exclusion from the UK Leverage Exposure for BBLS and other 100% 
       guaranteed government Covid-19 lending schemes. NatWest Group has 
       received permission to apply these and it has reduced the UK leverage 
       exposure by c.GBP9.8 billion and GBP7.5 billion respectively. 
 --   CRR Leverage exposure - The CRR Covid-19 amendment accelerated a 
       change in CRR2 to allow the netting of regular-way purchase and 
       sales settlement balances. NatWest Group has applied this, and it 
       has reduced the CRR leverage exposure by c.GBP9.8 billion. 
 --   Infrastructure and SME RWA supporting factors - The CRR Covid-19 
       amendment allowed an acceleration of the planned changes to the 
       SME supporting factor and the introduction of an Infrastructure 
       supporting factor. NatWest Group has implemented these beneficial 
       changes to supporting factors which have reduced RWAs by c.GBP1.0 
       billion for SMEs and GBP0.8 billion for Infrastructure. 
 --   Prudential Valuation Adjustment (PVA) - The European Commission 
       amended the prudent valuation Regulatory Technical Standard such 
       that, due to the exceptional levels of market volatility, the aggregation 
       factor was increased from 50% to 66% until 31 December 2020 inclusive. 
       This has reduced NatWest Group's PVA deduction by c.GBP100 million. 
 --   Market Risk Value-at-risk (VaR) model capital multiplier - Earlier 
       in the year, the PRA and De Nederlandsche Bank (DNB) announced temporary 
       approaches in relation to the exceptional levels of market volatility 
       which resulted in an increase in VaR model back-testing exceptions 
       in NatWest Markets Plc and NatWest Markets N.V.. Under the PRA temporary 
       approach, capital multiplier increases due to new back-testing exceptions 
       which have resulted in an increase in capital requirements could 
       be offset through a commensurate reduction in RNIV capital requirements. 
       The PRA announced that this temporary approach will cease to apply 
       from 1 October 2020, and be replaced by the measures announced in 
       the CRR Covid-19 amendment where back-testing exceptions due to 
       the exceptional levels of market volatility due to Covid-19 can 
       be excluded from the capital multiplier. The application of this 
       CRR Covid-19 measure is subject to approval by the PRA, which NatWest 
       Markets Plc has applied for. The PRA approach resulted in c.GBP1.3 
       billion benefit. 
 --   Capital buffers - Many countries have announced reductions in their 
       countercyclical capital buffer rates in response to Covid-19. Most 
       notably for NatWest Group, the Financial Policy Committee reduced 
       the UK rate from 1% to 0% effective from 11 March 2020. The CBI 
       also announced a reduction of the Republic of Ireland rate from 
       1% to 0% effective from 1 April 2020. 
 

Capital and risk management

Capital, liquidity and funding risk continued

Maximum Distributable Amount (MDA) and Minimum Capital Requirements

NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.

Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments, known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.

The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.

 
 Type                                                   CET1   Total Tier 1   Total capital 
---------------------------------  -------------------------  -------------  -------------- 
 Pillar 1 requirements                                  4.5%           6.0%            8.0% 
 Pillar 2A requirements                                 1.9%           2.6%            3.4% 
---------------------------------  -------------------------  -------------  -------------- 
 Minimum Capital Requirements                           6.4%           8.6%           11.4% 
 Capital conservation buffer                            2.5%           2.5%            2.5% 
 Countercyclical capital buffer 
 (1)                                                    0.0%           0.0%            0.0% 
 G-SIB buffer (2)                                          -              -               - 
---------------------------------  -------------------------  -------------  -------------- 
 MDA Threshold (3)                                      8.9%             na              na 
---------------------------------  -------------------------  -------------  -------------- 
 Subtotal                                               8.9%          11.1%           13.9% 
---------------------------------  -------------------------  -------------  -------------- 
 Capital ratios at 30 September 
 2020                                                  18.2%          20.5%           23.7% 
---------------------------------  -------------------------  -------------  -------------- 
 Headroom (4)                                           9.3%           9.4%            9.8% 
---------------------------------  -------------------------  -------------  -------------- 
 
 
 

Notes:

 
 (1)    Many countries have announced reductions in their countercyclical 
         capital buffer rates in response to Covid-19. Most notably for NatWest 
         Group, the Financial Policy Committee reduced the UK rate from 1% 
         to 0% effective from 11 March 2020. The CBI also announced a reduction 
         of the Republic of Ireland rate from 1% to 0% effective from 1 April 
         2020. 
 (2)    In November 2018 the Financial Stability Board announced that NatWest 
         Group is no longer a G-SIB. From 1 January 2020, NatWest Group was 
  (3)    released from this global buffer requirement. 
         The prevailing combined buffer requirements for NatWest Group equate 
  (4)    to the aggregate of the capital conservation buffer and countercyclical 
         buffer. The PRA informed a revised Pillar 2A requirement on a nominal 
         capital basis effective from 5 October 2020 which results in an implied 
         9.1% MDA. 
         The headroom does not reflect excess distributable capital and may 
         vary over time. 
 

Capital and risk management

Capital, liquidity and funding risk continued

Capital and leverage ratios

The table below sets out the key capital and leverage ratios.

 
                                                                      CRR basis (1) 
                                                     ----------------------------------------------- 
                                                                30 September    30 June  31 December 
Capital adequacy ratios                                                 2020       2020         2019 
                                                     -----------------------  ---------  ----------- 
CET1 (%)                                                                18.2       17.2         16.2 
Tier 1 (%)                                                              20.5       19.4         18.5 
Total (%)                                                               23.7       22.5         21.2 
---------------------------------------------------  -----------------------  ---------  ----------- 
 
Capital                                                                 GBPm       GBPm         GBPm 
                                                                              ---------  ----------- 
Tangible equity                                                       32,093     32,006       32,371 
 
Expected loss less impairment provisions                                   -          -        (167) 
Prudential valuation adjustment                                        (341)      (370)        (431) 
Deferred tax assets                                                    (835)      (844)        (757) 
Own credit adjustments                                                 (154)      (244)        (118) 
Pension fund assets                                                    (590)      (588)        (474) 
Cash flow hedging reserve                                              (300)      (341)         (35) 
Foreseeable ordinary and special dividends                                 -          -        (968) 
Foreseeable charges                                                        -          -        (365) 
Adjustments under IFRS 9 transitional arrangements                     1,719      1,578            - 
Other deductions                                                           -          -          (2) 
---------------------------------------------------  ----------------------- 
Total deductions                                                       (501)      (809)      (3,317) 
 
CET1 capital                                                          31,592     31,197       29,054 
AT1 capital                                                            3,990      3,990        4,051 
---------------------------------------------------  -----------------------  ---------  ----------- 
Tier 1 capital                                                        35,582     35,187       33,105 
Tier 2 capital                                                         5,710      5,596        4,900 
---------------------------------------------------  -----------------------  ---------  ----------- 
 
Total regulatory capital                                              41,292     40,783       38,005 
 
Risk-weighted assets 
---------------------------------------------------  -----------------------  ---------  ----------- 
Credit risk                                                          132,387    135,657      131,012 
Counterparty credit risk                                              10,170     12,354       12,631 
Market risk                                                            9,399     11,517       12,930 
Operational risk                                                      21,930     21,930       22,599 
Total RWAs                                                           173,886    181,458      179,172 
---------------------------------------------------  -----------------------  ---------  ----------- 
 
Leverage 
Cash and balances at central banks                                   106,388    100,281       77,858 
Trading assets                                                        70,820     72,402       76,745 
Derivatives                                                          164,311    183,419      150,029 
Financial assets                                                     424,291    428,040      399,088 
Other assets                                                          25,751     22,745       19,319 
---------------------------------------------------  -----------------------  ---------  ----------- 
Total assets                                                         791,561    806,887      723,039 
 
Derivatives 
 - netting and variation margin                                    (172,389)  (194,387)    (157,778) 
 - potential future exposures                                         40,439     44,019       43,004 
Securities financing transactions gross up                             1,193      1,312        2,224 
Other off balance sheet items                                         44,650     43,484       42,363 
Regulatory deductions and other adjustments                         (17,167)   (14,579)      (8,978) 
CRR leverage exposure                                                688,287    686,736      643,874 
---------------------------------------------------  -----------------------  ---------  ----------- 
 
CRR leverage ratio % (2)                                                 5.2        5.1          5.1 
 
UK leverage exposure                                                 576,889    585,115      570,330 
---------------------------------------------------  -----------------------  ---------  ----------- 
UK leverage ratio % (3)                                                  6.2        6.0          5.8 
---------------------------------------------------  -----------------------  ---------  ----------- 
 

Notes:

(1) Based on CRR end point including the IFRS 9 transitional adjustment of GBP1,719 million. Excluding this adjustment, the CET1 ratio would be 17.2%.

(2) Presented on CRR end point Tier 1 capital (including IFRS 9 transitional adjustment) and leverage exposure under the CRR Delegated Act. Excluding the IFRS 9 transitional adjustment, the leverage ratio would be 4.9%.

(3) Presented on CRR end point Tier 1 capital (including IFRS 9 transitional adjustment). The UK leverage ratio excludes central bank claims from the leverage exposure where deposits held are denominated in the same currency and of contractual maturity that is equal or longer than that of the central bank claims. Excluding the IFRS 9 transitional adjustment, the UK leverage ratio would be 5.9%.

Capital and risk management

Capital, liquidity and funding risk continued

Capital flow statement

The table below analyses the movement in CET1, AT1 and Tier 2 capital for the nine months ended 30 September 2020.

 
                                                      CET1      AT1  Tier 2    Total 
                                                      GBPm     GBPm    GBPm     GBPm 
At 1 January 2020                                   29,054    4,051   4,900   38,005 
--------------------------------------------------  ------  -------  ------  ------- 
Attributable loss for the period                     (644)        -       -    (644) 
Own credit                                            (36)        -       -     (36) 
Foreign exchange reserve                               415        -       -      415 
FVOCI reserve                                        (174)        -       -    (174) 
Goodwill and intangibles deduction                      22        -       -       22 
Deferred tax assets                                   (78)        -       -     (78) 
Prudential valuation adjustments                        90        -       -       90 
Expected loss less impairment                          167        -       -      167 
New issues of capital instruments                        -    1,216   1,654    2,870 
Redemption of capital instruments                        -  (1,277)   (751)  (2,028) 
Net dated subordinated debt/grandfathered 
 instruments                                             -        -   (579)    (579) 
Foreign exchange movements                           (355)        -     103    (252) 
Foreseeable ordinary and special dividends             968        -       -      968 
Foreseeable charges                                    365        -       -      365 
Adjustment under IFRS 9 transitional arrangements    1,719        -       -    1,719 
Other movements                                         79        -     383      462 
At 30 September 2020                                31,592    3,990   5,710   41,292 
--------------------------------------------------  ------  -------  ------  ------- 
 

Key points

 
 
  *    NatWest Group has elected to take advantage of the 
       transitional regulatory capital rules in respect of 
       expected credit losses following the adoption of IFRS 
       9; it had previously had a negligible impact up to Q4 
       2019. The CRR Covid-19 amendment now requires a full 
       CET1 addback for the movement in stage 1 and stage 2 
       ECL from 1 January 2020 for the next two years. The 
       IFRS 9 transitional arrangement impact on NatWest 
       Group CET1 regulatory capital at 30 September 2020 is 
       GBP1,719 million. 
 
 
  *    Foreign exchange movements in CET1 include a GBP345 
       million charge in relation to a $2 billion AT1 
       redemption announcement on 28 June 2020. 
 

Capital and risk management

Capital, liquidity and funding risk continued

Risk-weighted assets

The table below analyses the movement in RWAs during the period, by key drivers.

 
                                     Counterparty          Operational 
                             Credit        credit  Market 
                               risk          risk    risk         risk  Total 
                              GBPbn         GBPbn   GBPbn        GBPbn  GBPbn 
At 1 January 2020             131.0          12.6    13.0         22.6  179.2 
Foreign exchange movement       1.6           0.2       -            -    1.8 
Business movement                 -         (1.6)   (2.1)        (0.7)  (4.4) 
Risk parameter changes (1)      0.3           0.2       -            -    0.5 
Methodology changes (2)       (1.4)         (0.1)       -            -  (1.5) 
Model updates                   0.9             -   (0.2)            -    0.7 
Other movements (3)               -         (1.1)   (1.3)            -  (2.4) 
---------------------------  ------  ------------  ------  -----------  ----- 
At 30 September 2020          132.4          10.2     9.4         21.9  173.9 
---------------------------  ------  ------------  ------  -----------  ----- 
 

The table below analyses segmental RWAs.

 
                                                                                      Central 
                       Retail    Ulster  Commercial  Private            RBS  NatWest    items 
                                                                                            & 
                      Banking  Bank RoI     Banking  Banking  International  Markets    other  Total 
Total RWAs              GBPbn     GBPbn       GBPbn    GBPbn          GBPbn    GBPbn    GBPbn  GBPbn 
At 1 January 2020        37.8      13.0        72.5     10.1            6.5     37.9      1.4  179.2 
--------------------  -------  --------  ----------  -------  -------------  -------  -------  ----- 
Foreign exchange 
 movement                   -       0.7         0.5        -            0.1      0.5        -    1.8 
Business movement       (0.3)     (1.0)         2.4      0.6            0.4    (6.2)    (0.3)  (4.4) 
Risk parameter 
 changes (1)            (1.2)     (0.7)         1.9        -              -      0.5        -    0.5 
Methodology changes 
 (2)                        -     (0.1)       (1.8)    (0.1)              -      0.2      0.3  (1.5) 
Model updates               -       0.2         0.7        -              -    (0.2)        -    0.7 
Other movements 
 (3)                        -         -         0.3        -              -    (2.7)        -  (2.4) 
At 30 September 
 2020                    36.3      12.1        76.5     10.6            7.0     30.0      1.4  173.9 
--------------------  -------  --------  ----------  -------  -------------  -------  -------  ----- 
 
Credit risk              28.7      11.0        67.6      9.3            6.0      8.4      1.4  132.4 
Counterparty credit 
 risk                     0.1         -         0.2      0.1              -      9.8        -   10.2 
Market risk               0.1       0.1         0.2        -              -      9.0        -    9.4 
Operational risk          7.4       1.0         8.5      1.2            1.0      2.8        -   21.9 
Total RWAs               36.3      12.1        76.5     10.6            7.0     30.0      1.4  173.9 
--------------------  -------  --------  ----------  -------  -------------  -------  -------  ----- 
 

Notes:

 
 (1)   Risk parameter changes relate to changes in credit quality metrics 
        of customers and counterparties (such as probability of default and 
        loss given default) as well as internal ratings based model changes 
        relating to counterparty credit risk in line with European Banking 
        Authority Pillar 3 Guidelines. 
 (2)   (a) The new securitisation framework has been fully implemented from 
        1 January 2020 and all positions have moved to the new framework. 
        (b) Methodology changes also reflect the CRR Covid-19 amendment which 
        allowed an acceleration of the planned changes to the SME supporting 
        factor and the introduction of an Infrastructure supporting factor. 
 (3)   Other movements include: 
        (a) The temporary reduction permitted by the PRA to offset the impact 
        of multiplier increases (included in business movement). The offset 
        covers all metrics affected by the multiplier increase, including 
        CVAs. 
        (b) Hedging activity on counterparty credit risk in NatWest Markets. 
        (c) A transfer of Insurance related assets from NatWest Markets to 
        Commercial Banking. 
 
 

Key point

 
--  Total RWAs decreased by GBP5.3 billion during the period, mainly reflecting 
     reductions in Market Risk RWAs of GBP3.6 billion and Counterparty 
     Credit Risk RWAs of GBP2.4 billion. Operational Risk RWAs reduced 
     by GBP0.7 billion following the annual recalculation in Q1 2020. The 
     reduction in Market Risk RWAs was due to movements in Risks-not-in-VaR 
     (RNIV) and Incremental Risk Charge (IRC) as well as a reduction in 
     non-modelled market risk. The reduction in Counterparty Credit Risk 
     RWAs was driven by hedging activity and trade novations. There were 
     increases in Credit Risk RWAs of GBP1.4 billion mainly attributed 
     to increases due to foreign exchange movements of GBP1.6 billion and 
     model changes of GBP0.9 billion, which were partially offset by the 
     beneficial CRR changes to supporting factors which have reduced RWAs 
     by c.GBP1.8 billion. The GBP0.3 billion increase in Credit Risk RWAs 
     due to risk parameters mainly reflected PD deteriorations for customers 
     in Commercial, partly offset by improved risk metrics for Retail Banking 
     products. 
 

Capital and risk management

Capital, liquidity and funding risk continued

Credit risk exposure at default (EAD) and Risk-weighted assets (RWAs)

The table below analyses credit risk RWAs and EADs during the period, by on and off balance sheet.

 
                        Retail  Ulster  Commercial  Private            RBS  NatWest  Central 
                                                                                       items 
                       Banking    Bank     Banking  Banking  International  Markets  & other  Total 
                                   RoI 
30 September 2020        GBPbn   GBPbn       GBPbn    GBPbn          GBPbn    GBPbn    GBPbn  GBPbn 
--------------------- 
        On balance 
EAD      sheet           239.9    28.0       149.8     22.2           32.2     38.2      0.9  511.2 
 Off balance 
  sheet                   28.1     2.3        30.4      0.3            4.8      6.2      0.1   72.2 
 Total                   268.0    30.3       180.2     22.5           37.0     44.4      1.0  583.4 
 
        On balance 
RWAs     sheet            26.1     9.9        53.7      9.1            4.7      6.2      1.4  111.1 
------ 
 Off balance 
  sheet                    2.6     1.1        13.9      0.2            1.3      2.2        -   21.3 
 
 Total                    28.7    11.0        67.6      9.3            6.0      8.4      1.4  132.4 
 --------------------  -------  ------  ----------  -------  -------------  -------  -------  ----- 
30 June 2020 
--------------------- 
        On balance 
EAD      sheet           235.6    28.3       152.6     21.4           31.1     40.7      0.7  510.4 
------ 
 Off balance 
  sheet                   27.2     2.2        29.9      0.3            4.8      6.2      0.4   71.0 
 
 Total                   262.8    30.5       182.5     21.7           35.9     46.9      1.1  581.4 
 
 
        On balance 
RWAs     sheet            26.4    10.6        56.3      8.9            4.5      7.0      1.3  115.0 
------ 
 Off balance 
  sheet                    2.7     1.1        13.2      0.2            1.3      2.1      0.1   20.7 
 
 Total                    29.1    11.7        69.5      9.1            5.8      9.1      1.4  135.7 
 --------------------  -------  ------  ----------  -------  -------------  -------  -------  ----- 
31 December 2019 
--------------------- 
        On balance 
EAD      sheet           221.8    26.0       131.4     20.3           31.7     35.4      0.7  467.3 
------ 
 Off balance 
  sheet                   30.2     2.2        27.2      0.3            3.3      7.5      0.4   71.1 
 
 Total                   252.0    28.2       158.6     20.6           35.0     42.9      1.1  538.4 
 
 
        On balance 
RWAs     sheet            27.1    10.8        50.8      8.7            4.7      6.4      1.3  109.8 
------ 
 Off balance 
  sheet                    3.1     1.1        12.5      0.2            1.0      3.2      0.1   21.2 
 
 Total                    30.2    11.9        63.3      8.9            5.7      9.6      1.4  131.0 
 --------------------  -------  ------  ----------  -------  -------------  -------  -------  ----- 
 

Liquidity portfolio

The table below shows the liquidity portfolio by product, with primary liquidity aligned to internal stressed outflow coverage and regulatory liquidity coverage ratio (LCR) categorisation. Secondary liquidity comprises assets eligible for discount at central banks, which do not form part of the liquid asset portfolio for LCR or internal stressed outflow purposes.

 
                                                     Liquidity value 
                                         --------------------------------------- 
                                         30 September  30 June 2020  31 December 
                                             2020                        2019 
                                         ------------  ------------  ----------- 
                                              NatWest       NatWest      NatWest 
                                            Group (1)     Group (1)    Group (1) 
                                                 GBPm          GBPm         GBPm 
---------------------------------------  ------------  ------------  ----------- 
Cash and balances at central banks            103,198        97,201       74,289 
 AAA to AA- rated governments                  49,143        56,234       46,622 
 A+ and lower rated governments                   492         1,040        1,277 
 Government guaranteed issuers, public 
  sector entities and 
       government sponsored entities              282           261          251 
  International organisations and 
   multilateral development 
       banks                                    2,781         2,799        2,393 
---------------------------------------  ------------  ------------  ----------- 
LCR level 1 bonds                              52,698        60,334       50,543 
---------------------------------------  ------------  ------------  ----------- 
LCR level 1 assets                            155,896       157,535      124,832 
LCR level 2 assets                                126           127            - 
Non-LCR eligible assets                             -             -           88 
---------------------------------------  ------------  ------------  ----------- 
Primary liquidity                             156,022       157,662      124,920 
Secondary liquidity (2)                        87,392        84,910       74,431 
Total liquidity value                         243,414       242,572      199,351 
---------------------------------------  ------------  ------------  ----------- 
 

Notes:

 
(1)  NatWest Group includes the UK Domestic Liquidity Sub-Group (NWB Plc, 
      RBS plc, Coutts & Co and Ulster Bank Limited), NatWest Markets Plc 
      and other significant operating subsidiaries that hold liquidity 
      portfolios. These include The Royal Bank of Scotland International 
      Limited, NWM N.V. and Ulster Bank Ireland DAC who hold managed portfolios 
      that comply with local regulations that may differ from PRA rules. 
(2)  Comprises assets eligible for discounting at the Bank of England 
      and other central banks. 
(3)  Liquidity portfolio table approach has been aligned to the ILAAP 
      methodology with effect from December 2019. 
 

Capital and risk management

Credit risk

Portfolio summary - segment analysis

The table below shows gross loans and ECL, by segment and stage, within the scope of the IFRS 9 ECL framework.

 
                           Retail  Ulster  Commercial  Private            RBS  NatWest  Central 
                                                                                          items 
                          Banking    Bank     Banking  Banking  International  Markets  & other    Total 
                                      RoI                                                   (2) 
30 September 2020            GBPm    GBPm        GBPm     GBPm           GBPm     GBPm     GBPm     GBPm 
Loans - amortised 
 cost and FVOCI (1) 
Stage 1                   133,208  13,916      57,513   14,637         12,219    9,288   27,454  268,235 
Stage 2                    33,289   4,222      52,291    1,911          1,834    1,869      111   95,527 
Stage 3                     2,036   1,333       2,750      290            203      195        -    6,807 
Of which: individual            -      30       1,669      290            203      190        -    2,382 
Of which: collective        2,036   1,303       1,081        -              -        5        -    4,425 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
                          168,533  19,471     112,554   16,838         14,256   11,352   27,565  370,569 
ECL provisions 
Stage 1                       153      39         280       30             14       20       11      547 
Stage 2                       904     268       1,722       55             53       41       18    3,061 
Stage 3                       921     509       1,125       28             43      139        -    2,765 
Of which: individual            -      11         630       28             43      135        -      847 
Of which: collective          921     498         495        -              -        4        -    1,918 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
                            1,978     816       3,127      113            110      200       29    6,373 
ECL provisions coverage 
Stage 1 (%)                  0.11    0.28        0.49     0.20           0.11     0.22     0.04     0.20 
Stage 2 (%)                  2.72    6.35        3.29     2.88           2.89     2.19    16.22     3.20 
Stage 3 (%)                 45.24   38.18       40.91     9.66          21.18    71.28        -    40.62 
                             1.17    4.19        2.78     0.67           0.77     1.76     0.11     1.72 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
30 June 2020 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Loans - amortised 
 cost and FVOCI 
Stage 1                   136,065  18,642      53,514   14,465         12,697   10,197   20,864  266,444 
Stage 2                    28,270   4,478      58,374    1,567          1,825    2,381      115   97,010 
Stage 3                     2,052   1,547       2,806      256            195      178        -    7,034 
Of which: individual            -      22       1,727      256            195      172        -    2,372 
Of which: collective        2,052   1,525       1,079        -              -        6        -    4,662 
                          166,387  24,667     114,694   16,288         14,717   12,756   20,979  370,488 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
ECL provisions 
Stage 1                       155      42         217       21              9       18        7      469 
Stage 2                       901     262       1,714       49             25       53       21    3,025 
Stage 3                       902     567       1,184       29             42      136        -    2,860 
Of which: individual            -       4         701       29             42      129        -      905 
Of which: collective          902     563         483        -              -        7        -    1,955 
                            1,958     871       3,115       99             76      207       28    6,354 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
ECL provisions coverage 
Stage 1 (%)                  0.11    0.23        0.41     0.15           0.07     0.18     0.03     0.18 
Stage 2 (%)                  3.19    5.85        2.94     3.13           1.37     2.23    18.26     3.12 
Stage 3 (%)                 43.96   36.65       42.20    11.33          21.54    76.40        -    40.66 
                             1.18    3.53        2.72     0.61           0.52     1.62     0.13     1.72 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
31 December 2019 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Loans - amortised 
 cost and FVOCI 
Stage 1                   144,513  18,544      88,100   14,956         14,834    9,273   15,282  305,502 
Stage 2                    13,558   1,642      11,353      587            545      180        3   27,868 
Stage 3                     1,902   2,037       2,162      207            121      169        -    6,598 
Of which: individual            -      68       1,497      207            121      158        -    2,051 
Of which: collective        1,902   1,969         665        -              -       11        -    4,547 
                          159,973  22,223     101,615   15,750         15,500    9,622   15,285  339,968 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
ECL provisions 
Stage 1                       114      29         152        7              4       10        6      322 
Stage 2                       467      53         214        7              6        5        -      752 
Stage 3                       823     693       1,021       29             21      131        -    2,718 
Of which: individual            -      22         602       29             21      122        -      796 
Of which: collective          823     671         419        -              -        9        -    1,922 
                            1,404     775       1,387       43             31      146        6    3,792 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
ECL provisions coverage 
Stage 1 (%)                  0.08    0.16        0.17     0.05           0.03     0.11     0.04     0.11 
Stage 2 (%)                  3.44    3.23        1.88     1.19           1.10     2.78        -     2.70 
Stage 3 (%)                 43.27   34.02       47.22    14.01          17.36    77.51        -    41.19 
                             0.88    3.49        1.36     0.27           0.20     1.52     0.04     1.12 
------------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 

Notes:

   (1)   Fair value through other comprehensive income. 

(2) During Q3 2020, GBP5.1 billion of loans and advances to banks were reclassified from Ulster Bank RoI to Central items & other.

Capital and risk management

Credit risk continued

Portfolio summary - segment analysis

Key points

-- The rise in total ECL in the period was mainly due to increased ECL on Stage 1 and Stage 2 exposures in H1 2020, and reflective of the significantly deteriorated economic environment arising from Covid-19. Overall, Stage 3 ECL has been broadly stable year-to-date, with the various government support schemes mitigating actual portfolio deterioration in the short-term and therefore delaying default emergence.

-- The significant uplift in loan balances in Stage 2 was driven by deterioration in forward-looking customer probability of default (PD), also reflecting the deteriorated economic outlook, and resulted in a significant migration of exposures from Stage 1 to Stage 2 as at 30 June 2020.

-- Total ECL remained broadly stable during Q3 2020, largely reflective of maintaining the underlying economics unchanged from Q2 2020. The movement in Stage 2 balances was also less volatile in Q3 2020 (refer to the following page for further details).

-- The economic scenarios driving the ECL requirement, as well as the model performance considerations, are consistent with those described in the NatWest Group Interim Results 2020 along with further detail on various aspects of the IFRS 9 process.

Capital and risk management

Credit risk continued

Segmental loans

The table below shows gross loans by days past due, by segment and stage, within the scope of the ECL framework.

 
                                              Gross loans 
                        ------------------------------------------------------- 
                                            Stage 2 
                                 Not past   1-29    >30 
                          Stage       due    DPD    DPD   Total  Stage    Total 
                              1                                      3 
30 September 2020          GBPm      GBPm   GBPm   GBPm    GBPm   GBPm     GBPm 
Retail Banking          133,208    31,774  1,015    500  33,289  2,036  168,533 
Ulster Bank RoI          13,916     3,824    157    241   4,222  1,333   19,471 
Personal                 10,793     1,897    123    150   2,170  1,170   14,133 
Wholesale                 3,123     1,927     34     91   2,052    163    5,338 
Commercial Banking       57,513    50,885    623    783  52,291  2,750  112,554 
Private Banking          14,637     1,868     22     21   1,911    290   16,838 
Personal                 12,311       164     20     19     203    252   12,766 
Wholesale                 2,326     1,704      2      2   1,708     38    4,072 
RBS International        12,219     1,805     17     12   1,834    203   14,256 
Personal                  2,725        20     14      7      41     76    2,842 
Wholesale                 9,494     1,785      3      5   1,793    127   11,414 
NatWest Markets           9,288     1,771     98      -   1,869    195   11,352 
Central items & other    27,454       111      -      -     111      -   27,565 
----------------------  -------  --------  -----  -----  ------  -----  ------- 
Total loans             268,235    92,038  1,932  1,557  95,527  6,807  370,569 
Of which: 
Personal                159,037    33,855  1,172    676  35,703  3,534  198,274 
Wholesale               109,198    58,183    760    881  59,824  3,273  172,295 
----------------------  -------  --------  -----  -----  ------  -----  ------- 
30 June 2020 
                        ------------------------------------------------------- 
Retail Banking          136,065    26,597  1,017    656  28,270  2,052  166,387 
Ulster Bank RoI          18,642     4,122    150    206   4,478  1,547   24,667 
Personal                 10,602     2,015    131    133   2,279  1,384   14,265 
Wholesale                 8,040     2,107     19     73   2,199    163   10,402 
Commercial Banking       53,514    55,593  1,934    847  58,374  2,806  114,694 
Private Banking          14,465     1,545     14      8   1,567    256   16,288 
Personal                 11,972       168     12      7     187    243   12,402 
Wholesale                 2,493     1,377      2      1   1,380     13    3,886 
RBS International        12,697     1,792     15     18   1,825    195   14,717 
Personal                  2,793        18     13     11      42     68    2,903 
Wholesale                 9,904     1,774      2      7   1,783    127   11,814 
NatWest Markets          10,197     2,363      -     18   2,381    178   12,756 
Central items & other    20,864       115      -      -     115      -   20,979 
----------------------  -------  --------  -----  -----  ------  -----  ------- 
Total loans             266,444    92,127  3,130  1,753  97,010  7,034  370,488 
Of which: 
Personal                161,432    28,798  1,173    807  30,778  3,747  195,957 
Wholesale               105,012    63,329  1,957    946  66,232  3,287  174,531 
----------------------  -------  --------  -----  -----  ------  -----  ------- 
 
 
31 December 2019 
                        ----------------------------------------------------- 
Retail Banking          144,513  11,921  1,034    603  13,558  1,902  159,973 
Ulster Bank RoI          18,544   1,405    104    133   1,642  2,037   22,223 
Personal                 10,858     944     96    105   1,145  1,877   13,880 
Wholesale                 7,686     461      8     28     497    160    8,343 
Commercial Banking       88,100  10,837    254    262  11,353  2,162  101,615 
Private Banking          14,956     478     63     46     587    207   15,750 
Personal                 11,630     180     60     41     281    192   12,103 
Wholesale                 3,326     298      3      5     306     15    3,647 
RBS International        14,834     520     18      7     545    121   15,500 
Personal                  2,799      27     17      6      50     65    2,914 
Wholesale                12,035     493      1      1     495     56   12,586 
NatWest Markets           9,273     176      4      -     180    169    9,622 
Central items & other    15,282       3      -      -       3      -   15,285 
----------------------  -------  ------  -----  -----  ------  -----  ------- 
Total loans             305,502  25,340  1,477  1,051  27,868  6,598  339,968 
Of which: 
Personal                169,800  13,072  1,207    755  15,034  4,036  188,870 
Wholesale               135,702  12,268    270    296  12,834  2,562  151,098 
----------------------  -------  ------  -----  -----  ------  -----  ------- 
 

Capital and risk management

Credit risk continued

Segmental loans

Key points

-- Retail Banking : Balance sheet growth since 2019 year-end was driven by mortgages, with strong growth pre-Covid-19 in Q1 2020 that moderated significantly in Q2 2020, before picking up in Q3 2020 as lockdown measures eased. Unsecured lending balances reduced in Q2 2020 as customer spend and demand for borrowing reduced as a result of lockdown and customers made repayments. During Q3 2020, overall unsecured balances flattened, with a slight growth in credit cards offsetting further reductions in other unsecured lending. Loan balances in Stage 2 increased significantly, driven by deterioration in forward-looking customer PDs primarily at the half-year point and reflected the deteriorated economic environment. The movement in Stage 2 balances was less pronounced in Q3 2020. However, there was a further increase driven by the significant increase in credit risk (SICR) policy criteria that meant retail exposures must remain in Stage 2 for at least three months after the customer PD has reduced below the SICR trigger level, meaning flows back to Stage 1 were subdued. The various Covid-19 related customer support schemes (for example, loan repayment holidays and the government job retention scheme) are mitigating actual portfolio deterioration in the short-term, with the days past due, and flows to Stage 3 metrics, yet to be materially affected.

-- Ulster Bank RoI : Similar to Retail Banking, the increase in both ECL and balances in Stage 2 was mainly due to the deteriorated economic outlook primarily at the half-year point. The reduction in Stage 3 ECL and balances reflected the de-recognition of non-performing exposures following the execution of three tranches of a previously agreed portfolio sale and continued improvements in the portfolio.

-- Commercial Banking : Balance sheet growth during 2020 mainly occurred in the first half of the year and was primarily due to drawdowns on existing facilities and new lending under government support schemes. In line with the other business segments, Stage 2 balances increased significantly during Q2 2020 when revised economics materially affected the forward-looking IFRS 9 PDs. Consistent with previous periods, PD deterioration remained the largest contributor to Stage 2 migration. Although there has been an increase in past due exposures, the flow to Stage 3 remained stable in Q3 2020, as government interventions and relief mitigate against defaults at this point. Stage 1 loans increased during Q3 2020, mainly reflecting increased government scheme lending.

Capital and risk management

Credit risk continued

S ector analysis

The table below shows ECL by stage, for the Personal portfolios and key sectors of the Wholesale portfolios, that continue to be affected by Covid-19.

 
                                                                 Off-balance sheet 
                                                              ------------------------ 
                                    Loans - amortised 
                                       cost & FVOCI                  Loan   Contingent        ECL provisions 
                             -------------------------------                            -------------------------- 
                               Stage   Stage  Stage           commitments               Stage  Stage  Stage 
                                   1       2      3    Total          (1)  liabilities      1      2      3  Total 
30 September 2020               GBPm    GBPm   GBPm     GBPm         GBPm         GBPm   GBPm   GBPm   GBPm   GBPm 
Personal                     159,037  35,703  3,534  198,274       40,706           46    177  1,011  1,358  2,546 
 Mortgages                   150,944  30,896  2,671  184,511       12,489            3     32    286    651    969 
 Credit cards                  2,526   1,323    107    3,956       15,474            -     50    245     85    380 
 Other personal                5,567   3,484    756    9,807       12,743           43     95    480    622  1,197 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
Wholesale                    109,198  59,824  3,273  172,295       91,240        4,746    370  2,050  1,407  3,827 
 Property                     25,489  12,299  1,424   39,212       16,666          577    144    461    532  1,137 
 Financial institutions       39,624   3,434     34   43,092       17,084        1,105     24     72      8    104 
 Sovereign                     9,670     104      5    9,779        1,022            2     15      -      1     16 
 Corporate                    34,415  43,987  1,810   80,212       56,468        3,062    187  1,517    866  2,570 
   Of which: 
       Airlines and 
        aerospace                378   1,833     41    2,252        1,931          227      3     61     26     90 
       Automotive              2,475   4,352     83    6,910        4,217          106     13    115     19    147 
       Education                 593   1,067     62    1,722          819           16      3     37     18     58 
       Health                  2,286   3,470    155    5,911          689           14     11    141     56    208 
       Land transport 
        and logistics          1,448   3,396    119    4,963        3,697          210     10     98     39    147 
       Leisure                 3,242   6,541    526   10,309        2,085          124     33    350    244    627 
       Oil and gas               454   1,279     87    1,820        2,410          347      5     43     57    105 
       Retail                  5,052   4,238    117    9,407        6,219          504     19    147     99    265 
Total                        268,235  95,527  6,807  370,569      131,946        4,792    547  3,061  2,765  6,373 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
30 June 2020 
Personal                     161,432  30,778  3,747  195,957       41,279           48    178  1,010  1,404  2,592 
 Mortgages                   152,947  26,292  2,903  182,142       11,158            3     34    292    706  1,032 
 Credit cards                  2,387   1,321    110    3,818       17,481            -     47    243     86    376 
 Other personal                6,098   3,165    734    9,997       12,640           45     97    475    612  1,184 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
Wholesale                    105,012  66,232  3,287  174,531       89,151        5,038    291  2,015  1,456  3,762 
 Property                     26,782  12,400  1,259   40,441       15,423          607    126    392    513  1,031 
 Financial institutions       39,133   3,789     10   42,932       17,500        1,130     22     69      5     96 
 Sovereign                     9,436       1      6    9,443        1,129            2     10      -      -     10 
 Corporate                    29,661  50,042  2,012   81,715       55,099        3,299    133  1,554    938  2,625 
   Of which: 
       Airlines and 
        aerospace                495   1,839     38    2,372        1,829          233      4     53     26     83 
       Automotive              2,000   5,437    146    7,583        3,547           93      8    108     19    135 
       Education                 704     919     83    1,706          725           19      2     27     16     45 
       Health                  2,055   3,650    168    5,873          515          139      9    145     60    214 
       Land transport 
        and logistics          1,149   3,334    110    4,593        3,919          206      6     96     43    145 
       Leisure                 2,755   6,739    534   10,028        1,841          126     22    303    249    574 
       Oil and gas               465   1,535     89    2,089        2,627          382      4     55     61    120 
       Retail                  2,647   5,059    221    7,927        5,858          507     13    158    170    341 
Total                        266,444  97,010  7,034  370,488      130,430        5,086    469  3,025  2,860  6,354 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
31 December 2019 
Personal                     169,800  15,034  4,036  188,870       43,316           50    130    503  1,449  2,082 
 Mortgages                   159,261  11,465  3,277  174,003       14,345            3     25    118    821    964 
 Credit cards                  3,103   1,259    116    4,478       16,686            -     40    132     89    261 
 Other personal                7,436   2,310    643   10,389       12,285           47     65    253    539    857 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
Wholesale                    135,702  12,834  2,562  151,098       79,060        5,477    192    249  1,269  1,710 
 Property                     32,896   2,580    895   36,371       14,739          644     45     47    402    494 
 Financial institutions       35,707     546     13   36,266       15,417        1,325     16      4      8     28 
 Sovereign                     7,410       4      5    7,419        1,021            1      7      -      -      7 
 Corporate                    59,689   9,704  1,649   71,042       47,883        3,507    124    198    859  1,181 
   Of which: 
       Airlines and 
        aerospace 
        (2)                    1,412     261     40    1,713        1,716          271      2      3     55     60 
       Automotive              5,062   1,143     20    6,225        3,815           98     12     11     15     38 
       Education               1,426     154     12    1,592          654           18      2      4      1      7 
       Health                  4,695     844    167    5,706          534           17      9     16     52     77 
       Land transport 
        and logistics          3,477     316     53    3,846        3,301          249      6     12     21     39 
       Leisure                 6,323   1,253    377    7,953        2,876          135     25     27    175    227 
       Oil and gas             1,923     140     86    2,149        2,400          358      5      3     55     63 
       Retail                  6,397   1,279    215    7,891        5,383          560     13     16    180    209 
Total                        305,502  27,868  6,598  339,968      122,376        5,527    322    752  2,718  3,792 
---------------------------  -------  ------  -----  -------  -----------  -----------  -----  -----  -----  ----- 
 

Notes:

(1) Includes GBP3.8 billion of commercial cards related balances, as at 30 September 2020 (GBP4.1 billion as at 30 June 2020), which were brought into scope of ECL calculations during 2020.

(2) Stage 3 ECL at 31 December 2019 included GBP27 million of ECL related to contingent liabilities.

Capital and risk management

Credit risk continued

S ector analysis

Key points

-- Personal: As noted earlier, both the increased ECL on Stage 1 and Stage 2 exposures, and the migration of assets from Stage 1 to Stage 2, were mainly a result of deterioration in forward-looking customer PDs primarily at the half-year point and reflected the deteriorated economic environment. The ECL requirements were broadly stable during Q3 2020 largely reflective of maintaining the underlying economics unchanged from Q2 2020, and the mitigating effects on portfolio deterioration of Covid-19 related customer support schemes, as previously described. The reduction in mortgage Stage 3 ECL and balances reflected the de-recognition in Ulster Bank RoI of non-performing exposures following the execution of three tranches of a previously agreed portfolio sale and continued improvements in the portfolio.

-- Wholesale: On and off-balance sheet growth since the 2019 year-end was mainly due to further drawdowns on existing facilities and new lending (drawn and undrawn) agreed under the Covid-19 government lending schemes. A further GBP2.9 billion increase in government lending schemes occurred in Q3 (refer to the table on the following page for further information). Construction (within Property), Retail and Leisure represented the top three sectors for borrowers accessing the various government lending schemes. Sector appetite continues to be regularly reviewed and where appropriate has been adjusted for those sectors most affected by the Covid-19 pandemic.

As described in the NatWest Group Interim Results 2020, NatWest Group adopted a nuanced response to capture the sector ECL impact from the Covid-19 crisis by using sector specific credit cycle indices in its Wholesale methodology. As a result, a more adverse impact is seen in sectors experiencing the most disruption through this period with an increase in both Stage 2 and ECL balances. This impact was seen during Q2 2020 when revised economics were implemented. During Q3 2020, exposures reduced with relatively low ECL charges. Performing book charges reflected model recalibrations taking account of portfolio changes and the moving closer to the predicted worst point in the economic cycle. As government relief schemes reduce, defaults are expected to rise with cases moving from Stage 2 to Stage 3.

Capital and risk management

Credit risk continued

Wholesale support schemes

The table below shows the uptake of Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS) in Wholesale, by sector.

 
                                BBLS                           CBILS                           CLBILS 
                    -----------------------------  ------------------------------  ------------------------------- 
                                        % of BBLS                      % of CBILS                      % of CLBILS 
                    Approved  Drawdown         to  Approved  Drawdown          to  Approved  Drawdown           to 
                                amount     sector              amount      sector              amount       sector 
30 September 2020     Volume    (GBPm)      loans    Volume    (GBPm)       loans    Volume    (GBPm)        loans 
------------------  --------  --------  ---------  --------  --------  ----------  --------  --------  ----------- 
Wholesale lending 
 by sector 
 Airlines and 
  aerospace              223         6      0.27%        19         7       0.31%         2         -            - 
 Automotive           11,531       385      5.57%       538       125       1.81%        31        47        0.68% 
 Education             1,766        47      2.73%       105        54       3.14%        10        35        2.03% 
 Health                9,035       289      4.89%       573        89       1.51%         3        24        0.41% 
 Land transport 
  and logistics        7,991       235      4.74%       341        82       1.65%         3         5        0.10% 
 Leisure              28,778       902      8.75%     1,869       429       4.16%        31        94        0.91% 
 Oil and gas             271         8      0.44%        16         6       0.33%         -         -            - 
 Retail               29,425       999     10.62%     1,493       391       4.16%        25        75        0.80% 
 Property (3)         53,841     1,514      3.86%     2,224       605       1.54%        35       112        0.29% 
 Other (including 
  Business 
   Banking)          118,645     3,127      3.48%     8,100     1,450       1.61%        77       180        0.20% 
Total                261,506     7,512      4.36%    15,278     3,238       1.88%       217       572        0.33% 
------------------  --------  --------  ---------  --------  --------  ----------  --------  --------  ----------- 
30 June 2020 
------------------  -----------------------------  ------------------------------  ------------------------------- 
Wholesale lending 
 by sector 
 Airlines and 
  aerospace              175         5      0.21%        17         4       0.17%         -         -            - 
 Automotive            9,267       309      4.07%       495       111       1.46%        26        22        0.29% 
 Education             1,347        36      2.11%        83        21       1.23%         4        30        1.76% 
 Health                6,976       222      3.78%       543        69       1.17%         2         5        0.09% 
 Land transport 
  and logistics        6,222       181      3.94%       306        66       1.44%         2         3        0.07% 
 Leisure              22,776       715      7.13%     1,697       305       3.04%        16        11        0.11% 
 Oil and gas             197         6      0.29%        13         5       0.24%         -         -            - 
 Retail               23,824       808     10.19%     1,395       328       4.14%        13        48        0.61% 
 Property (3)         41,233     1,170      2.89%     2,018       456       1.13%        27        31        0.08% 
 Other (including 
  Business 
   Banking)           88,391     2,343      2.55%     7,160     1,035       1.13%        53        31        0.03% 
Total                200,408     5,795      3.32%    13,727     2,400       1.38%       143       181        0.10% 
------------------  --------  --------  ---------  --------  --------  ----------  --------  --------  ----------- 
 

Notes:

(1) The table contains some cases which as at 30 September 2020 were approved but not yet drawn down.

(2) Approved limits as at 30 September 2020 were as follows: BBLS - GBP7.9 billion (95% drawn); CBILS - GBP3.9 billion (83% drawn); CLBILS - GBP1.2 billion (50% drawn).

(3) Construction activities previously reported in Other (including Business Banking) have been reclassified as Property, to be consistent with other sector analysis provided. Comparatives have been restated.

Key points

-- The value and volume of lending under government support schemes continued to grow during Q3 2020, though at a slower rate than in Q2 2020.

-- Customers seeking Covid-19 related support, including payment holidays, who were not subject to any wider SICR triggers and who are assessed as being viable and able to meet credit appetite metrics in the medium-term post-crisis, were not considered to have been granted forbearance. Completed forbearance flow for Wholesale remained elevated in Q3 2020, in line with Q2 2020. Property, Transport and Leisure represented the largest share of forbearance flow in Q3 2020, continuing an emerging trend from Q2 2020. The rise in Transport and Property results from forbearance completed on individually significant exposures. Payment holidays and covenant waivers remain the most common forms of forbearance granted. Heightened Monitoring and Risk of Credit Loss values increased in the quarter with a concentration towards borrowers in the Retail, Leisure and Property sectors which represented approximately 50% of the inflows to the framework (refer to page 134 of the NatWest Group plc's Annual Report and Accounts 2019 for further details of the Risk of Credit Loss framework).

   Condensed consolidated income statement for the period ended 30 September 2020   (unaudited) 
 
                                      Nine months ended                  Quarter ended 
                                  --------------------------  ----------------------------------- 
                                  30 September  30 September  30 September  30 June  30 September 
                                          2020          2019          2020     2020          2019 
                                          GBPm          GBPm          GBPm     GBPm          GBPm 
Interest receivable                      7,702         8,474         2,512    2,507         2,921 
Interest payable                       (1,924)       (2,464)         (586)    (597)         (915) 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Net interest income                      5,778         6,010         1,926    1,910         2,006 
Fees and commissions receivable          2,081         2,570           651      682           808 
Fees and commissions payable             (591)         (673)         (199)    (217)         (186) 
Income from trading activities           1,054           794           252      210           195 
Other operating income (1)                (61)         1,319         (207)       91            80 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Non-interest income                      2,483         4,010           497      766           897 
Total income                             8,261        10,020         2,423    2,676         2,903 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Staff costs                            (2,937)       (3,028)         (982)    (963)       (1,000) 
Premises and equipment                   (902)         (823)         (251)    (393)         (265) 
Other administrative expenses          (1,081)       (2,085)         (385)    (298)       (1,222) 
Depreciation and amortisation            (635)         (853)         (194)    (248)         (232) 
Impairment of other intangible 
 assets                                    (9)           (9)           (2)      (7)            21 
Operating expenses                     (5,564)       (6,798)       (1,814)  (1,909)       (2,698) 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
Profit before impairment losses          2,697         3,222           609      767           205 
Impairment losses                      (3,112)         (536)         (254)  (2,056)         (213) 
Operating (loss)/profit before 
 tax                                     (415)         2,686           355  (1,289)           (8) 
Tax credit/(charge)                          1         (395)         (207)      396         (201) 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
(Loss)/profit for the period             (414)         2,291           148    (893)         (209) 
 
Attributable to: 
Ordinary shareholders                    (644)         1,723            61    (993)         (315) 
Preference shareholders                     21            30             5        8            10 
Paid-in equity holders                     272           277            80       95            95 
Non-controlling interests                 (63)           261             2      (3)             1 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
                                         (414)         2,291           148    (893)         (209) 
Earnings per ordinary share             (5.3p)         14.3p          0.5p   (8.2p)        (2.6p) 
Earnings per ordinary share 
 - fully diluted                        (5.3p)         14.2p          0.5p   (8.2p)        (2.6p) 
--------------------------------  ------------  ------------  ------------  -------  ------------ 
 

Note:

   (1)    Other operating income includes GBP324 million loss on redemption of own debt. 

Condensed consolidated statement of comprehensive income for the period ended 30 September 2020 (unaudited)

 
                                                 Nine months ended                  Quarter ended 
                                             --------------------------  ----------------------------------- 
                                             30 September  30 September  30 September  30 June  30 September 
                                                     2020          2019          2020     2020          2019 
                                                     GBPm          GBPm          GBPm     GBPm          GBPm 
                                             ------------  ------------  ------------           ------------ 
(Loss)/profit for the period                        (414)         2,291           148    (893)         (209) 
-------------------------------------------  ------------  ------------  ------------  -------  ------------ 
Items that do not qualify for 
 reclassification 
Remeasurement of retirement 
 benefit schemes                                       54          (96)          (14)       90          (28) 
Profit/(loss) on fair value 
 of credit in financial liabilities 
 designated as at FVTPL due 
  to own credit risk                                   20         (115)          (63)    (105)          (19) 
FVOCI financial assets                               (43)          (92)            77      133         (130) 
Tax                                                    13            24            13        -           (2) 
                                                       44         (279)            13      118         (179) 
-------------------------------------------  ------------  ------------  ------------  -------  ------------ 
Items that do qualify for reclassification 
FVOCI financial assets                               (37)           (3)            74       32             9 
Cash flow hedges                                      364           688          (53)      105           286 
Currency translation                                  425         (298)         (150)      217          (57) 
Tax                                                  (85)         (193)            94    (126)          (71) 
                                                      667           194          (35)      228           167 
-------------------------------------------  ------------  ------------  ------------  -------  ------------ 
Other comprehensive income/(loss) 
 after tax                                            711          (85)          (22)      346          (12) 
Total comprehensive income/(loss) 
 for the period                                       297         2,206           126    (547)         (221) 
-------------------------------------------  ------------  ------------  ------------  -------  ------------ 
 
Attributable to: 
Ordinary shareholders                                  51         1,624            37    (648)         (326) 
Preference shareholders                                21            30             5        8            10 
Paid-in equity holders                                272           277            80       95            95 
Non-controlling interests                            (47)           275             4      (2)             - 
                                                      297         2,206           126    (547)         (221) 
-------------------------------------------  ------------  ------------  ------------  -------  ------------ 
 
   Condensed consolidated balance sheet as at 30 September 2020   (unaudited) 
 
                                      30 September  30 June  31 December 
                                              2020     2020         2019 
                                              GBPm     GBPm         GBPm 
Assets 
Cash and balances at central banks         106,388  100,281       77,858 
Trading assets                              70,820   72,402       76,745 
Derivatives                                164,311  183,419      150,029 
Settlement balances                         10,947    7,806        4,387 
Loans to banks - amortised cost             11,864   12,972       10,689 
Loans to customers - amortised cost        353,691  352,341      326,947 
Other financial assets                      58,736   62,727       61,452 
Intangible assets                            6,600    6,602        6,622 
Other assets                                 8,204    8,337        8,310 
------------------------------------  ------------  -------  ----------- 
Total assets                               791,561  806,887      723,039 
 
Liabilities 
Bank deposits                               18,666   21,119       20,493 
Customer deposits                          418,358  408,268      369,247 
Settlement balances                          9,839    6,895        4,069 
Trading liabilities                         73,023   75,540       73,949 
Derivatives                                160,532  179,859      146,879 
Other financial liabilities                 48,848   49,681       45,220 
Subordinated liabilities                    10,467   13,558        9,979 
Other liabilities                            8,678    8,906        9,647 
------------------------------------  ------------  -------  ----------- 
Total liabilities                          748,411  763,826      679,483 
 
Equity 
------------------------------------  ------------  -------  ----------- 
Ordinary shareholders' interests            38,693   38,608       38,993 
Other owners' interests                      4,495    4,495        4,554 
Owners' equity                              43,188   43,103       43,547 
Non-controlling interests                     (38)     (42)            9 
------------------------------------  ------------  -------  ----------- 
Total equity                                43,150   43,061       43,556 
Total liabilities and equity               791,561  806,887      723,039 
------------------------------------  ------------  -------  ----------- 
 

Condensed consolidated statement of changes in equity for the period ended 30 September 2020 (unaudited)

 
                                     Share 
                               capital and                                  Total          Non 
                                 statutory  Paid-in  Retained      Other  owners'  controlling    Total 
                                  reserves   equity  earnings  reserves*   equity    interests   equity 
                                      GBPm     GBPm      GBPm       GBPm     GBPm         GBPm     GBPm 
At 1 January 2020                   13,146    4,058    13,946     12,397   43,547            9   43,556 
Loss attributable to ordinary 
 shareholders 
   and other equity owners               -        -     (351)          -    (351)         (63)    (414) 
Other comprehensive income 
 - Realised gains in period 
       on FVOCI equity shares 
        (1)                              -        -       114      (114)        -            -        - 
 - Remeasurement of retirement 
       benefit schemes                   -        -        54          -       54            -       54 
 - Changes in fair value 
  of credit in financial 
       liabilities at FVTPL              -        -        20          -       20            -       20 
 - Other amounts recognised 
  in equity                              -        -         -        810      810           16      826 
 - Amount transferred from 
  equity to earnings                     -        -         -      (133)    (133)            -    (133) 
 - Recycled to profit or 
  loss on disposal                                                                                    - 
     of businesses                       -        -         -         16       16            -       16 
 - Tax                                   -        -         1       (73)     (72)            -     (72) 
Preference share and paid-in 
 equity 
 dividends paid                          -        -     (293)          -    (293)            -    (293) 
Unclaimed dividend                       -        -         2          -        2            -        2 
Shares and securities issued 
 during the year                        49    1,220      (11)          -    1,258            -    1,258 
Redemption/reclassification              -  (1,277)     (355)          -  (1,632)            -  (1,632) 
Share-based payments                     -        -      (56)          -     (56)            -     (56) 
Movement in own shares 
 held                                   18        -         -          -       18            -       18 
-------------------------------  ---------  -------  --------  ---------  -------  -----------  ------- 
At 30 September 2020                13,213    4,001    13,071     12,903   43,188         (38)   43,150 
-------------------------------  ---------  -------  --------  ---------  -------  -----------  ------- 
 
                                                                                           30 September 
                                                                                                   2020 
Attributable to:                                                                                   GBPm 
Ordinary shareholders                                                                            38,693 
Preference shareholders                                                                             494 
Paid-in equity holders                                                                            4,001 
Non-controlling interests                                                                          (38) 
-------------------------------  ---------  -------  --------  ---------  -------  -----------  ------- 
                                                                                                 43,150 
                                                                                                ------- 
*Other reserves consists of: 
Merger reserve                                                                                   10,881 
FVOCI reserve                                                                                      (36) 
Cash flow hedging reserve                                                                           300 
Foreign exchange reserve                                                                          1,758 
-------------------------------  ---------  -------  --------  ---------  -------  -----------  ------- 
                                                                                                 12,903 
                                                                                                ------- 
 

Note:

(1) The gain includes a reclassification from Other comprehensive income to Retained earnings following conversion of Visa B and C preference shares to Visa Class A shares in September 2020. There has been a corresponding adjustment to the conversion ratio of the Visa B and C preference shares.

Notes

1. Basis of preparation

The condensed consolidated financial statements should be read in conjunction with NatWest Group plc's (formerly The Royal Bank of Scotland Group plc) 2019 Annual Report and Accounts which were prepared in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).

Going concern

Having reviewed NatWest Group's forecasts, projections, the potential impact of Covid-19, and other relevant evidence, the directors have a reasonable expectation that NatWest Group will continue in operational existence for the foreseeable future. Accordingly, the results for the period ended 30 September 2020 have been prepared on a going concern basis.

2. Accounting policies

NatWest Group's principal accounting policies are as set out on pages 208 to 212 of the NatWest Group plc's 2019 Annual Report and Accounts and are unchanged other than as presented below.

Accounting policy changes effective 1 January 2020

Amendments to IFRS 3 Business Combinations (IFRS 3) - Changes to the definition of a business

The IASB amended IFRS 3 to provide additional guidance on the definition of a business. The amendment aims to help entities when determining whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendments are in line with current accounting policy and therefore did not affect the financial statements.

Definition of material - Amendments to IAS 1 - Presentation of Financial Statements (IAS 1) and IAS 8 -

Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8)

The IASB clarified the definition of 'material' and aligned the definition of material used in the Conceptual Framework and in other IFRS standards. The amendments clarify that materiality will depend on the nature or magnitude of information. Under the amended definition of materiality, an entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. NatWest Group's definition and application of materiality is in line with the definition in the amendments.

Interest Rate Benchmark Reform (IBOR reform) Phase 1 amendments to IFRS 9 and IAS 39

The IASB issued 'Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)' as a first reaction to the potential effects the IBOR reform could have on financial reporting. The amendments focused on hedge accounting and allow hedge relationships affected by the IBOR reform to be accounted for as continuing hedges. Amendments are effective for annual reporting periods beginning on or after 1 January 2020 with early application permitted. NatWest Group early adopted these amendments for the annual period ending on 31 December 2019.

Interest Rate Benchmark Reform (IBOR reform) Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Phase 2 of the IASB's IBOR project addresses the wider accounting issues arising from the IBOR reform. This was published in August 2020 and is awaiting endorsement. The amendments are effective for annual reporting periods beginning on or after 1 January 2021 with early application permitted. NatWest Group intends to early adopt Phase 2 of the standard once endorsed. NatWest Group's IBOR transition program remains on-track and key milestones have been met. Conversion from LIBOR to alternative risk-free rates (RFRs) is expected to increase as RFR-based products become more widely available and key market-driven conversion events occur.

Amendment to IFRS effective 1 June 2020

Covid-19 amendments on lease modifications - Amendments to IFRS 16 - Leases (IFRS 16)

The IASB published 'amendments to IFRS 16 covering Covid-19-Related Rent Concessions'. These provide lessees with an exemption from assessing whether a Covid-19 related rent concession is a lease modification. The amendment is effective for annual reporting periods beginning on or after 1 June 2020. The effect of the amendment on NatWest Group's financial statements is immaterial and will be adopted from 1 January 2021.

Critical accounting policies and key sources of estimation uncertainty

The judgements and assumptions that are considered to be the most important to the portrayal of NatWest Group's financial condition are those relating to goodwill, provisions for liabilities and charges, deferred tax, loan impairment provisions and fair value of financial instruments. These critical accounting policies and judgements are described on page 212 of the NatWest Group plc's 2019 Annual Report and Accounts. Estimation uncertainty has been affected by the Covid-19 pandemic during the first three quarters of 2020. Management's consideration of this source of uncertainty is outlined in the relevant sections of this Interim Management Statement, including the ECL estimate for the period in the Capital and Risk Management section contained in the NatWest Group Interim Results 2020.

Notes

2. Accounting policies continued

Information used for significant estimates

The Covid-19 pandemic has continued to cause significant economic and social disruption during the quarter ended 30 September 2020. Key financial estimates are based on a range of anticipated future economic conditions described by internally developed scenarios. Measurement of goodwill, deferred tax and expected credit losses are highly sensitive to reasonably possible changes in those anticipated conditions. Other reasonably possible assumptions about the future include a prolonged financial effect of the Covid-19 pandemic on the economy of the UK and other countries. Changes in judgements and assumptions could result in a material adjustment to those estimates in the next reporting periods, including impairment of goodwill (refer to the NatWest Group plc risk factors in the 2019 Annual Report and Accounts and the summary risk factors contained in the Q1 2020 IMS and the Interim Results 2020).

Goodwill

Goodwill remains recoverable: key assumptions and sensitivities around these assumptions are materially consistent with those disclosed in the NatWest Group Interim Results 2020.

Tax credit

The lower than anticipated tax credit by applying the standard UK statutory tax rate of 19%, is attributable to a decrease in the carrying value of deferred tax assets in respect of losses, no recognition of deferred tax in the period in respect of some current year tax losses and the banking surcharge. This is offset to some extent by the UK Government decision to reverse the previously enacted reduction in the UK tax rate change.

3. Litigation, investigations and reviews

NatWest Group's Interim Results 2020, issued on 31 July 2020, included disclosures about NatWest Group's litigation, investigations and reviews in Note 14. Set out below are the material developments in those matters since the Interim Results 2020 were published.

Litigation

Residential mortgage-backed securities litigation in the US

In September 2020, NWMSI settled residential mortgage-backed securities (RMBS) claims by the Federal Home Loan Bank of Seattle. The settlement amount, which has been paid, was covered by an existing provision.

In September 2020, a complaint was served on NWMSI by the State of New Mexico, which claims, in a case pending in state court in New Mexico, that certain New Mexico state agencies suffered US$119 million in damages resulting from misrepresentations concerning RMBS they purchased from NWMSI and six other banks primarily from 2005-2007.

London Interbank Offered Rate (LIBOR) and other rates litigation

On 18 August 2020, a complaint was filed in the United States District Court for the Northern District of California by several United States consumer borrowers against the USD ICE LIBOR panel banks and their affiliates, alleging that the normal process of setting USD ICE LIBOR amounts to illegal price-fixing, and also that banks in the United States have illegally agreed to use LIBOR as a component of price in variable consumer loans. The NatWest Group defendants are NatWest Group plc, NWM Plc, NWMSI and NWB Plc. The plaintiffs seek damages and to prevent the enforcement of LIBOR-based instruments.

EUA trading litigation

Following judgment against NWM Plc in March 2020, the High Court on 2 October 2020 quantified damages against NWM Plc at GBP45 million plus interest and costs, and permitted it to appeal to the Court of Appeal.

Investigations and reviews

US investigations relating to fixed-income securities

In September 2020, the NatWest Markets business reached a settlement in principle, subject to documentation, with the State of Maryland concerning its investigation of the issuance and underwriting of RMBS. The amount of the tentative settlement, which will be paid by RBS Financial Products Inc., is covered by an existing provision.

4. Post balance sheet events

Other than as disclosed there have been no other significant events between 30 September 2020 and the date of approval of these accounts which would require a change to or additional disclosure in the condensed consolidated financial statements.

Additional information

Presentation of information

'Parent company' refers to NatWest Group plc and 'NatWest Group' refers to NatWest Group plc and its subsidiary and associated undertakings. The term 'NWH Group' refers to NatWest Holdings Limited ('NWH') and its subsidiary and associated undertakings. The term 'NWM Group' refers to NatWest Markets Plc ('NWM Plc') and its subsidiary and associated undertakings. The term 'NWM N.V.' refers to NatWest Markets N.V. The term 'NWMSI' refers to NatWest Markets Securities, Inc. The term 'RBS plc' refers to The Royal Bank of Scotland plc. The term 'NWB Plc' refers to National Westminster Bank Plc. The term 'UBI DAC' refers to Ulster Bank Ireland DAC. The term 'RBSI Limited' refers to The Royal Bank of Scotland International Limited.

UK Personal Banking was renamed Retail Banking, with effect from 16 September 2020.

NatWest Group publishes its financial statements in pounds sterling ('GBP' or 'sterling'). The abbreviations 'GBPm' and 'GBPbn' 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 'EUR' represents the 'euro', and the abbreviations 'EURm' and 'EURbn' represent millions and thousands of millions of euros, respectively.

Statutory results

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act'). The statutory accounts for the year ended 31 December 2019 have been filed with the Registrar of Companies. The report of the auditor on those statutory accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Act.

Contacts

 
                     Alexander Holcroft, Investor 
Analyst enquiries:    Relations                     +44 (0) 20 7672 1758 
Media enquiries:     NatWest Group Press Office     +44 (0) 131 523 4205 
 
 
                Analyst and investor call  Webcast and dial in details 
Date:           30 October 2020            https://investors.natwestgroup.com/results-centre 
Time:           9am UK time                International: +44 (0) 203 057 6566 
Conference ID:  4482325                    UK Free Call: 0800 279 5995 
                                            US Local Dial-In, New York: +1 646 741 2115 
                =========================  ================================================= 
 

Available on www.natwestgroup.com/results

   --    Q3 2020 Interim Management Statement and slides. 

-- A financial supplement containing income statement, balance sheet and segment performance for the quarter ended 30 September 2020.

   --    NatWest Group and NWH Group Pillar 3 supplements. 

Forward looking statements

This document contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, such as statements that include, without limitation, the words 'expect', 'estimate', 'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. These statements concern or may affect future matters, such as NatWest Group's future economic results, business plans and strategies. In particular, this document may include forward-looking statements relating to NatWest Group plc in respect of, but not limited to: its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital and operational targets), its access to adequate sources of liquidity and funding, increasing competition from new incumbents and disruptive technologies, its exposure to third party risks, its ongoing compliance with the UK ring-fencing regime and ensuring operational continuity in resolution, its impairment losses and credit exposures under certain specified scenarios, substantial regulation and oversight, ongoing legal, regulatory and governmental actions and investigations, the transition of LIBOR and IBOR rates to alternative risk free rates and NatWest Group's exposure to economic and political risks (including with respect to terms surrounding Brexit and climate change), operational risk, conduct risk, cyber and IT risk, key person risk and credit rating risk. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. Factors that could cause or contribute to differences in current expectations include, but are not limited to, the final

number of PPI claims and their amounts, the level and extent of future impairments and write-downs (including with respect to goodwill), legislative, political, fiscal and regulatory developments, accounting standards, competitive conditions, technological developments, interest and exchange rate fluctuations, general economic and political conditions and the uncertainty surrounding the Covid-19 pandemic and its impact on NatWest Group. These and other factors, risks and uncertainties that may impact any forward-looking statement or NatWest Group plc's actual results are discussed in NatWest Group plc's UK 2019 Annual Report and Accounts (ARA), NatWest Group plc's Interim Results for Q1 2020 and NatWest Group plc's Interim Results for H1 2020 and materials filed with, or furnished to, the US Securities and Exchange Commission, including, but not limited to, NatWest Group plc's most recent Annual Report on Form 20-F and Reports on Form 6-K. The forward-looking statements contained in this document speak only as of the date of this document and NatWest Group plc does not assume or undertake any obligation or responsibility to update any of the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise, except to the extent legally required.

Legal Entity Identifier: 2138005O9XJIJN4JPN90

Appendix

   Non-IFRS financial   measures 

Appendix Non-IFRS financial measures

As described in Note 1, NatWest Group prepares its financial statements in accordance with IFRS as issued by the IASB which constitutes a body of generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for certain items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:

Non-IFRS financial measures

 
                                                                         Additional 
                                                                          analysis or 
 Measure         Basis of preparation                                     reconciliation 
--------------  ------------------------------------------------------  ----------------- 
 NatWest Group   Annualised loss or profit for the period attributable   Table 1 
  return on       to ordinary shareholders divided by average 
  tangible        tangible equity. Average tangible equity is 
  equity          average total equity less average intangible 
                  assets and average other owners' equity. 
--------------  ------------------------------------------------------  ----------------- 
 Segmental       Annualised segmental operating loss or profit           Table 1 
  return on       adjusted for tax and for preference share dividends 
  equity          divided by average notional equity, allocated 
                  at an operating segment specific rate, of the 
                  period average segmental risk-weighted assets 
                  incorporating the effect of capital deductions 
                  (RWAes). 
--------------  ------------------------------------------------------  ----------------- 
 Operating       The management analysis of operating expenses           Table 2 
  expenses        shows strategic costs and litigation 
  analysis        and conduct costs in separate lines. Depreciation 
  - management    and amortisation, impairment of 
  view            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. 
--------------  ------------------------------------------------------  ----------------- 
 Cost:income     Total operating expenses less operating lease           Table 3 
  ratio           depreciation divided by total income less operating 
                  lease depreciation. 
--------------  ------------------------------------------------------  ----------------- 
 Commentary      NatWest Group and segmental business performance        Notable items 
  - adjusted      commentary have been adjusted for the impact            - page 4 
  periodically    of specific items such as transfers, strategic          Transfers - 
  for specific    costs and, litigation and conduct costs (detailed       pages 5 and 
  items           on pages 10 to 14).                                     8 
                                                                          Strategic costs 
                                                                          and, litigation 
                                                                          and conduct 
                                                                          costs - pages 
                                                                          10 to 14 
--------------  ------------------------------------------------------  ----------------- 
 Bank net        Net interest income of the banking business             Table 4 
  interest        less NatWest Markets (NWM) element as a percentage 
  margin (NIM)    of interest-earning assets of the banking business 
                  less NWM element. 
 

Performance metrics not defined under IFRS(1)

 
                                                                                     Additional analysis 
 Measure             Basis of preparation                                             or reconciliation 
------------------  --------------------------------------------------------------  -------------------- 
 Loan:deposit        Net customer loans held at amortised cost divided by            Table 5 
  ratio               total customer deposits. 
------------------  --------------------------------------------------------------  -------------------- 
 Tangible net        Tangible equity divided by the number of ordinary shares        Page 3 
  asset value         in issue. Tangible equity is ordinary shareholders' 
  (TNAV)              interest less intangible assets. 
------------------  --------------------------------------------------------------  -------------------- 
 NIM                 Net interest income of the banking business as a percentage     Page 3 
                      of interest-earning assets of the banking business. 
------------------  --------------------------------------------------------------  -------------------- 
 Funded assets       Total assets less derivatives.                                  Pages 10 to 
                                                                                      14 
------------------  --------------------------------------------------------------  -------------------- 
 ECL loss rate       The annualised loan impairment charge divided by gross          Pages 10 to 
                      customer loans.                                                 14 
------------------  --------------------------------------------------------------  -------------------- 
 Third party         Third party customer asset rate is calculated as annualised     Pages 10 to 
  customer asset      interest receivable on third-party loans to customers           14 
  rate                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. 
------------------  --------------------------------------------------------------  -------------------- 
 Third party         Third party customer funding rate is calculated as annualised   Pages 10 to 
  customer funding    interest payable on third-party customer deposits as            14 
  rate                a percentage of third-party customer deposits. This 
                      excludes intragroup items, bank deposits and debt securities 
                      in issue. 
 

Note:

(1) Metric based on GAAP measures, included as not defined under IFRS and reported for compliance with ESMA adjusted performance measure rules.

Appendix Non-IFRS financial measures

1. Return on tangible equity

 
                                            Nine months ended              Quarter ended or as at 
                                                 or as at 
                                        --------------------------  ------------------------------------ 
                                        30 September  30 September  30 September   30 June  30 September 
                                                2020          2019          2020      2020          2019 
--------------------------------------  ------------  ------------  ------------  --------  ------------ 
(Loss)/profit attributable to 
 ordinary shareholders (GBPm)                  (644)         1,723            61     (993)         (315) 
Annualised (loss)/profit attributable 
 to ordinary 
  shareholders (GBPm)                          (859)         2,297           244   (3,972)       (1,260) 
--------------------------------------  ------------  ------------  ------------  --------  ------------ 
Adjustment for PPI provision 
 for Q3 2019 (GBPm)                                                                                  900 
Adjusted profit attributable 
 to ordinary shareholders (GBPm)                                                                     585 
Annualised adjusted (loss)/profit 
 attributable to ordinary 
  shareholders (GBPm)                                                                              2,340 
--------------------------------------  ------------  ------------  ------------  --------  ------------ 
 
Average total equity (GBPm)                   43,766        46,025        43,145    44,068        45,579 
Adjustment for other owners' 
 equity and intangibles (GBPm)              (11,760)      (12,432)      (11,482)  (11,987)      (12,226) 
--------------------------------------  ------------  ------------  ------------  --------  ------------ 
Adjusted total tangible equity 
 (GBPm)                                       32,006        33,593        31,663    32,081        33,353 
 
Return on tangible equity (%)                 (2.7%)          6.8%          0.8%   (12.4%)        (3.8%) 
Return on tangible equity adjusting 
 for impact 
  of PPI provision (%)                                                                              7.0% 
--------------------------------------  ------------  ------------  ------------  --------  ------------ 
 

Appendix Non-IFRS financial measures

1. Return on tangible equity continued

 
                                                      Ulster 
                                             Retail     Bank  Commercial  Private            RBS  NatWest 
Nine months ended 30 September              Banking      RoI     Banking  Banking  International  Markets 
 2020 
Operating profit/(loss) (GBPm)                  758    (244)       (684)      141            112        3 
Preference share cost allocation 
 (GBPm)                                        (66)        -       (114)     (17)           (15)     (51) 
Adjustment for tax (GBPm)                     (194)        -         223     (35)           (14)       13 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Adjusted attributable profit/(loss) 
 (GBPm)                                         498    (244)       (575)       89             83     (35) 
Annualised adjusted attributable 
 profit/(loss) (GBPm)                           664    (325)       (767)      119            111     (47) 
Average RWAe (GBPbn)                           37.6     12.6        76.6     10.3            6.9     39.2 
Equity factor                                 14.5%    15.5%       11.5%    12.5%          16.0%    15.0% 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
RWAe applying equity factor 
 (GBPbn)                                        5.5      2.0         8.8      1.3            1.1      5.9 
Return on equity                              12.2%  (16.6%)      (8.7%)     9.2%          10.0%   (0.8%) 
 
Nine months ended 30 September 
 2019 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Operating profit (GBPm)                         529       54       1,032      236            282      107 
Adjustment for tax (GBPm)                     (148)        -       (289)     (66)           (39)     (30) 
Preference share cost allocation 
 (GBPm)                                        (54)        -       (123)     (12)            (5)     (50) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Adjusted attributable profit(GBPm)              327       54         620      158            238       27 
Annualised adjusted attributable 
 profit (GBPm)                                  436       72         827      211            317       36 
Adjustment for Alawwal bank 
 merger gain (GBPm)                               -        -           -        -              -    (200) 
Annualised adjusted attributable 
 profit/(loss) (GBPm)                           436       72         827      211            317    (164) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Average RWAe (GBPbn)                           37.4     14.2        79.3      9.7            6.9     49.0 
Equity factor                                 15.0%    15.0%       12.0%    13.0%          16.0%    15.0% 
RWAe applying equity factor 
 (GBPbn)                                        5.6      2.1         9.5      1.3            1.1      7.4 
Return on equity                               7.8%     3.4%        8.7%    16.7%          28.5%   (2.2%) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
 
Quarter ended 30 September 
 2020 
Operating profit/(loss) (GBPm)                  305      (5)         324       57             25     (66) 
Preference share cost allocation 
 (GBPm)                                        (22)        -        (38)      (6)            (5)     (17) 
Adjustment for tax (GBPm)                      (79)        -        (80)     (14)            (3)       23 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Adjusted attributable profit/(loss) 
 (GBPm)                                         204      (5)         206       37             17     (60) 
Annualised adjusted attributable 
 profit/(loss) (GBPm)                           816     (20)         824      148             68    (240) 
Average RWAe (GBPbn)                           36.7     12.3        77.8     10.5            6.8     34.0 
Equity factor                                 14.5%    15.5%       11.5%    12.5%          16.0%    15.0% 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
RWAe applying equity factor 
 (GBPbn)                                        5.3      1.9         8.9      1.3            1.1      5.1 
Return on equity                              15.3%   (1.0%)        9.2%    11.2%           6.4%   (4.7%) 
 
Quarter ended 30 June 2020 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Operating profit/(loss) (GBPm)                  129    (218)       (971)       35             19    (137) 
Preference share cost allocation 
 (GBPm)                                        (22)        -        (38)      (5)            (5)     (17) 
Adjustment for tax (GBPm)                      (30)        -         283      (8)            (2)       43 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Adjusted attributable profit/(loss)(GBPm)        77    (218)       (726)       22             12    (111) 
Annualised adjusted attributable 
 profit/(loss) (GBPm)                           308    (872)     (2,904)       88             48    (444) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Average RWAe (GBPbn)                           37.4     12.6        77.8     10.3            7.1     41.8 
Equity factor                                 14.5%    15.5%       11.5%    12.5%          16.0%    15.0% 
RWAe applying equity factor 
 (GBPbn)                                        5.4      2.0         8.9      1.3            1.1      6.3 
Return on equity                               5.7%  (44.5%)     (32.5%)     6.6%           4.3%   (7.1%) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
 
Quarter ended 30 September 
 2019 
Operating (loss)/profit (GBPm)                (508)       31         331       81             88    (193) 
Adjustment for tax (GBPm)                       142        -        (92)     (23)           (12)       54 
Preference share cost allocation 
 (GBPm)                                        (18)        -        (41)      (4)            (5)     (20) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
Adjusted attributable (loss)/profit 
 (GBPm)                                       (384)       31         198       54             71    (159) 
Annualised adjusted attributable 
 (loss)/profit (GBPm)                       (1,536)      124         792      216            283    (634) 
Average RWAe (GBPbn)                           38.2     14.2        78.8      9.9            6.8     48.7 
Equity factor                                 15.0%    15.0%       12.0%    13.0%          16.0%    15.0% 
------------------------------------------ 
RWAe applying equity factor 
 (GBPbn)                                        5.7      2.1         9.5      1.3            1.1      7.3 
Return on equity                            (26.8%)     5.8%        8.4%    16.8%          26.0%   (8.7%) 
------------------------------------------  -------  -------  ----------  -------  -------------  ------- 
 
 

Appendix Non-IFRS financial measures

2. Operating expenses analysis

 
Statutory analysis (1,2) 
                                     Nine months ended                  Quarter ended 
                                 --------------------------  ----------------------------------- 
                                 30 September  30 September  30 September  30 June  30 September 
                                         2020          2019          2020     2020          2019 
Operating expenses                       GBPm          GBPm          GBPm     GBPm          GBPm 
Staff costs                             2,937         3,028           982      963         1,000 
Premises and equipment                    902           823           251      393           265 
Other administrative expenses           1,081         2,085           385      298         1,222 
Depreciation and amortisation             635           853           194      248           232 
Impairment of other intangible 
 assets                                     9             9             2        7          (21) 
-------------------------------  ------------  ------------  ------------  -------  ------------ 
Total operating expenses                5,564         6,798         1,814    1,909         2,698 
-------------------------------  ------------  ------------  ------------  -------  ------------ 
 
 
Non-statutory analysis 
                                                                Nine months ended 
                              -------------------------------------------------------------------------------------- 
                                          30 September 2020                           30 September 2019 
                              ------------------------------------------  ------------------------------------------ 
                                         Litigation                                  Litigation 
                                                and            Statutory                    and            Statutory 
                              Strategic     conduct     Other  operating  Strategic     conduct     Other  operating 
Operating expenses                costs       costs  expenses   expenses      costs       costs  expenses   expenses 
----------------------------  ---------  ----------  --------  ---------  ---------  ----------  --------  --------- 
Staff costs                         315           -     2,622      2,937        296           -     2,732      3,028 
Premises and equipment              170           -       732        902         93           -       730        823 
Other administrative 
 expenses                           143        (81)     1,019      1,081        197         810     1,078      2,085 
Depreciation and 
 amortisation                        52           -       583        635        233           -       620        853 
Impairment of other 
 intangible 
 assets                               7           -         2          9         25           -      (16)          9 
Total                               687        (81)     4,958      5,564        844         810     5,144      6,798 
----------------------------  ---------  ----------  --------  ---------  ---------  ----------  --------  --------- 
 
                                                                  Quarter ended 
                              -------------------------------------------------------------------------------------- 
                                          30 September 2020                              30 June 2020 
                              ------------------------------------------  ------------------------------------------ 
                                         Litigation                                  Litigation 
                                                and            Statutory                    and            Statutory 
                              Strategic     conduct     Other  operating  Strategic     conduct     Other  operating 
Operating expenses                costs       costs  expenses   expenses      costs       costs  expenses   expenses 
----------------------------  ---------  ----------  --------  ---------  ---------  ----------  --------  --------- 
Staff costs                         155           -       827        982         87           -       876        963 
Premises and equipment               22           -       229        251        135           -       258        393 
Other administrative 
 expenses                            43           8       334        385         57        (85)       326        298 
Depreciation and 
 amortisation                         3           -       191        194         47           -       201        248 
Impairment of other 
 intangible 
 assets                               -           -         2          2          7           -         -          7 
---------------------------- 
Total                               223           8     1,583      1,814        333        (85)     1,661      1,909 
----------------------------  ---------  ----------  --------  ---------  ---------  ----------  --------  --------- 
 
                                            Quarter ended 
                              ------------------------------------------ 
                                          30 September 2019 
                              ------------------------------------------ 
                                         Litigation 
                                                and            Statutory 
                              Strategic     conduct     Other  operating 
Operating expenses                costs       costs  expenses   expenses 
----------------------------  ---------  ----------  --------  --------- 
Staff costs                         109           -       891      1,000 
Premises and equipment               28           -       237        265 
Other administrative 
 expenses                            67         750       405      1,222 
Depreciation and 
 amortisation                        11           -       221        232 
Impairment of other 
 intangible 
 assets                               -           -      (21)       (21) 
Total                               215         750     1,733      2,698 
----------------------------  ---------  ----------  --------  --------- 
 

Notes:

(1) On a statutory, or GAAP basis, strategic costs are included within staff costs, premises and equipment, depreciation and amortisation, impairment of other intangible assets and other administrative expenses. Strategic costs relate to restructuring provisions, related costs and projects that are transformational in nature.

(2) On a statutory, or GAAP basis, litigation and conduct costs are included within other administrative expenses.

Appendix Non-IFRS performance measures

3. Cost:income ratio

 
                              Ulster                                               Central    Total 
                      Retail    Bank  Commercial  Private            RBS  NatWest    items  NatWest 
                     Banking     RoI     Banking  Banking  International  Markets  & other    Group 
Nine months ended       GBPm    GBPm        GBPm     GBPm           GBPm     GBPm     GBPm     GBPm 
------------------- 
30 September 2020 
Operating expenses   (1,722)   (372)     (1,774)    (364)          (179)  (1,009)    (144)  (5,564) 
Operating lease 
 depreciation              -       -         110        -              -        -        -      110 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Adjusted operating 
 expenses            (1,722)   (372)     (1,664)    (364)          (179)  (1,009)    (144)  (5,454) 
Total income           3,207     379       3,007      579            371    1,050    (332)    8,261 
Operating lease 
 depreciation              -       -       (110)        -              -        -        -    (110) 
Adjusted total 
 income                3,207     379       2,897      579            371    1,050    (332)    8,151 
Cost:income ratio      53.7%   98.2%       57.4%    62.9%          48.2%    96.1%       nm    66.9% 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 
30 September 2019 
Operating expenses   (2,830)   (412)     (1,900)    (351)          (181)  (1,026)     (98)  (6,798) 
Operating lease 
 depreciation              -       -         103        -              -        -        -      103 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Adjusted operating 
 expenses            (2,830)   (412)     (1,797)    (351)          (181)  (1,026)     (98)  (6,695) 
Total income           3,671     428       3,242      582            460    1,092      545   10,020 
Operating lease 
 depreciation              -       -       (103)        -              -        -        -    (103) 
Adjusted total 
 income                3,671     428       3,139      582            460    1,092      545    9,917 
Cost:income ratio      77.1%   96.3%       57.2%    60.3%          39.3%    94.0%       nm    67.5% 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 
Quarter ended 
------------------- 
30 September 2020 
Operating expenses     (647)   (127)       (553)    (112)           (53)    (302)     (20)  (1,814) 
Operating lease 
 depreciation              -       -          37        -              -        -        -       37 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Adjusted operating 
 expenses              (647)   (127)       (516)    (112)           (53)    (302)     (20)  (1,777) 
Total income           1,022     130       1,004      187            112      234    (266)    2,423 
Operating lease 
 depreciation              -       -        (37)        -              -        -        -     (37) 
Adjusted total 
 income                1,022     130         967      187            112      234    (266)    2,386 
Cost:income ratio      63.3%   97.7%       53.4%    59.9%          47.3%   129.1%       nm    74.5% 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 
30 June 2020 
Operating expenses     (546)   (122)       (611)    (129)           (65)    (365)     (71)  (1,909) 
Operating lease 
 depreciation              -       -          37        -              -        -        -       37 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Adjusted operating 
 expenses              (546)   (122)       (574)    (129)           (65)    (365)     (71)  (1,872) 
Total income           1,035     120         995      191            115      273     (53)    2,676 
Operating lease 
 depreciation              -       -        (37)        -              -        -        -     (37) 
Adjusted total 
 income                1,035     120         958      191            115      273     (53)    2,639 
Cost:income ratio      52.8%  101.7%       59.9%    67.5%          56.5%   133.7%       nm    70.9% 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 
30 September 2019 
Operating expenses   (1,601)   (131)       (638)    (119)           (62)    (348)      201  (2,698) 
Operating lease 
 depreciation              -       -          35        -              -        -        -       35 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
Adjusted operating 
 expenses            (1,601)   (131)       (603)    (119)           (62)    (348)      201  (2,663) 
Total income           1,224     145       1,077      198            150      150     (41)    2,903 
Operating lease 
 depreciation              -       -        (35)        -              -        -        -     (35) 
Adjusted total 
 income                1,224     145       1,042      198            150      150     (41)    2,868 
Cost:income ratio     130.8%   90.3%       57.9%    60.1%          41.3%   232.0%       nm    92.9% 
-------------------  -------  ------  ----------  -------  -------------  -------  -------  ------- 
 

Appendix Non-IFRS performance measures

4. Net interest margin

 
                                        Nine months ended               Quarter ended or as 
                                             or as at                            at 
                                    --------------------------  ----------------------------------- 
                                    30 September  30 September  30 September  30 June  30 September 
                                            2020          2019          2020     2020          2019 
                                            GBPm          GBPm          GBPm     GBPm          GBPm 
NatWest Group net interest income          5,778         6,010         1,926    1,910         2,006 
NWM net interest income                       55           184            21      (6)            62 
----------------------------------  ------------  ------------  ------------  -------  ------------ 
Net interest income excluding 
 NWM                                       5,833         6,194         1,947    1,904         2,068 
Annualised net interest income             7,718         8,035         7,662    7,682         7,959 
Annualised net interest income 
 excluding NWM                             7,792         8,281         7,746    7,658         8,205 
Average interest earning assets 
 (IEA)                                   487,777       445,068       507,325  497,440       454,429 
----------------------------------  ------------  ------------  ------------  -------  ------------ 
NWM average IEA                           38,403        35,065        39,213   39,874        38,616 
Bank average IEA excluding NWM           449,374       410,003       468,112  457,566       415,813 
----------------------------------  ------------  ------------  ------------  -------  ------------ 
 
Net interest margin                        1.58%         1.81%         1.51%    1.54%         1.75% 
Bank net interest margin (NatWest 
 Group NIM excluding NWM)                  1.73%         2.02%         1.65%    1.67%         1.97% 
----------------------------------  ------------  ------------  ------------  -------  ------------ 
 

5. Loan:deposit ratio

 
                                                    As at 
                                      ---------------------------------- 
                                      30 September  30 June  31 December 
                                              2020     2020         2019 
                                              GBPm     GBPm         GBPm 
Loans to customers - amortised cost        353,691  352,341      326,947 
Customer deposits                          418,358  408,268      369,247 
Loan:deposit ratio (%)                         85%      86%          89% 
------------------------------------  ------------  -------  ----------- 
 

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(END) Dow Jones Newswires

October 30, 2020 03:00 ET (07:00 GMT)