REG - NatWest Group plc - 3rd Quarter Results

NatwestAnnouncement

29/10/2021 07:05

RNS Number : 6499Q
  
NatWest Group plc
  
29 October 2021
  
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2021
Interim Management Statement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                           natwestgroup.com
 
 
 
 
 
 

 

NatWest Group plc
Q3 2021 Interim Management Statement 
 
Alison Rose, Chief Executive Officer, commented: 
 
"Throughout Q3 2021, NatWest continued to deliver a strong operating performance; growing in key areas and accelerating our digital transformation to improve customer experience and make our business more efficient. Our robust capital position means that we have been able to buy back £402 million of our shares to date(1) whilst also investing for growth as we support our customers and drive sustainable returns to our shareholders. 
 
Although we are seeing challenges in the economy and for our customers - especially around supply chains and the cost of living - a number of key indicators remain positive; growth is good, unemployment is low and there are limited signs of default across our book. We have a vital role to play in helping the 19 million people, families and businesses we serve in communities throughout the UK to thrive. Because when they thrive, so do we.
 
NatWest Group has made addressing the climate challenge and supporting our customers through the transition a key strategic priority. We recently announced a new target to deliver an additional £100 billion of Climate and Sustainable Funding and Financing between 1 July 2021 and the end of 2025, having exceeded our initial two-year target of £20 billion in less than 18 months."
 
Financial performance in a challenging environment 




●


Q3 2021 operating profit before tax of £1,074 million, attributable profit of £674 million and a return on tangible equity (RoTE) of 8.5%.




●


Income across the UK and RBSI retail and commercial businesses, excluding notable items, increased by £103 million, or 4.4%, compared with Q3 2020 principally reflecting balance sheet growth. NatWest Markets (NWM) income, excluding asset disposals/strategic risk reduction and OCA, decreased by £175 million, or 62.5%, compared with Q3 2020 reflecting continued weakness in Fixed Income which was impacted by subdued levels of customer activity and ongoing reshaping of the business.




●


Bank net interest margin (NIM) excluding Liquid Asset Buffer (LAB) decreased by 6 basis points to 2.34% compared with Q2 2021 principally reflecting the Q2 2021 tax variable lease repricing in Commercial Banking. Bank NIM of 1.54% decreased by 7 basis points.




●


Other expenses, excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs, were £198 million, or 4.3% lower for the year to date.




●


A net impairment release of £242 million in Q3 2021 mainly reflects releases in non-default portfolios, principally in Commercial Banking.




 
Robust balance sheet with strong capital and liquidity levels
 




●


CET1 ratio of 18.7% was 50 basis points higher than Q2 2021 largely reflecting the attributable profit and reduction in RWAs partially offset by the foreseeable dividend accrual.




●


The liquidity coverage ratio (LCR) of 166%, representing £78.6 billion headroom above 100% minimum requirement, increased by 2 percentage points compared with Q2 2021, reflecting continued growth in customer deposits.




●


Net lending decreased by £1.7 billion to £361.0 billion during Q3 2021. Across the UK and RBSI retail and commercial businesses, net lending excluding UK Government support schemes increased by £2.9 billion, including £2.5 billion related to mortgage growth, with year to date annualised growth of 3.1%.




●


Customer deposits increased by £9.1 billion compared with Q2 2021 to £476.3 billion. Across the UK and RBSI retail and commercial businesses customer deposits increased by £8.5 billion, or 2.0%, largely due to customers continuing to build and retain liquidity and higher short term placements in RBS International (RBSI).




●


RWAs decreased by £3.2 billion to £159.8 billion during Q3 2021 mainly reflecting business movements in Commercial Banking and unwinding of the Q2 2021 increase in NWM following regulatory approval to update the VaR model to remove the impact of GBP LIBOR cessation. 




 




Outlook(2)




We retain the outlook guidance provided in the 2021 Interim Results document, except:
·    We no longer expect to achieve the majority of the remaining RWA reduction towards the medium term target in NWM of £20 billion this year; and 
·    We now expect Group RWAs to be below our previously guided range of £185-195 billion on 1 January 2022. 
 
 




 


 




(1)   At 27 October 2021.
(2)   The guidance, targets, expectations and trends discussed in this section represent NatWest Group plc management's current expectations and are subject to change, including as a result of the factors described in the NatWest Group plc Risk Factors section on pages 345 to 362 of the 2020 Annual Report and Accounts, pages 112 and 113 of the NatWest Group plc 2021 Interim Results, pages 156 to 172 of the NatWest Markets Plc 2020 Annual Report and Accounts and on pages 48 and 49 of the NatWest Markets Plc 2021 Interim Results. 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. If they succeed, so will we. By being relevant to our customers and communities and by supporting our colleagues, we will deliver long-term value and drive sustainable returns to our shareholders. Some key achievements for the nine months ended 30 September 2021 are:
 
People and families




●


Supported customers with five million financial capability interactions including 750,000 financial health checks.  




●


Retail Banking personalised messaging to customers has grown from 72 million messages in the first nine months of 2020 to 318 million in the same period of 2021. The personalisation of messages has resulted in a 41% increase in customer engagement.




●


As part of our strategy to help families and young people manage their money more effectively, we acquired the fintech business RoosterMoney, whose pocket money app aims to build money confidence and financial capability from an early age.




●


Launched Housemate, an app designed to help young renters manage shared bills and help build a history with the bank's data partner Experian.




 
Businesses




●


Announced a target to provide an additional £100 billion Climate and Sustainable Funding and Financing (CSFF) to customers between the 1 July 2021 and the end of 2025 as well as plans to launch a new green loan product for Small to Medium-sized Enterprise (SME) customers.




●


Relaunched our entrepreneurship proposition and refocused 11 of our 12 Entrepreneur Accelerator hubs to support high growth, female led, black and minority ethnic led and B Corp focused businesses.




●


Coutts collaborated with the Business Growth Fund to provide additional funding and growth capital, and to support small and medium-sized enterprises (SMEs).




 
Colleagues




●


Recognised as a top ten UK employer by the work-life balance charity Working Families.




●


Introduced a framework for NatWest Group's new hybrid working model, balancing the needs of our customers, communities and colleagues. 




●


Named by LinkedIn as one of the top 25 workplaces in the UK to grow a career and recognised in The Times Top 50 Employers for Women for the 11th year running.




 
Communities




●


Retail Banking completed Green Mortgages with a value of £565 million during the nine months ended 30 September 2021.




●


Teamed up with the manufacturer of one of Britain's best-known childhood games, Top Trumps, to launch a new MoneySense Climate Savers competition for primary school pupils across the UK as part of our principal sponsorship of the UN Climate Change conference COP26.




●


Launched a 'Sustainable Homes and Buildings' Coalition' with British Gas, Worcester Bosch, and Shelter to improve UK buildings energy efficiency. The Coalition aims to address the key blockers to meeting net zero in the UK buildings environment.




●


Issued a €1 billion affordable housing social bond, the first of its kind by a UK bank. The proceeds will support lending to not-for-profit, UK housing associations as part of our commitment to provide £3 billion of funding to the UK's affordable housing sector by the end of 2022.




●


Coutts became the first major UK Private Bank and Wealth Manager to be certified as a B Corp, demonstrating its commitment to meeting the highest standards of verifiable social and environmental performance, public transparency and legal accountability.  




 


 




 
For further detail refer to the Climate, Purpose and ESG measures supplement Q3 2021.
 
 
 
 

 

Business performance summary




 


Nine months ended


 


Quarter ended


 




 


30 September


30 September


 


30 September


30 June


30 September


 




 


2021


2020


 


2021


2021


2020


 




Total income


£8,093m


£8,261m


 


£2,774m


£2,660m


£2,423m


 




Operating expenses


(£5,463m)


(£5,564m)


 


(£1,942m)


(£1,706m)


(£1,814m)


 




Profit before impairment releases/(losses)


£2,630m


£2,697m


 


£832m


£954m


£609m


 




Operating profit/(loss) before tax


£3,579m


(£415m)


 


£1,074m


£1,559m


£355m


 




Profit/(loss) attributable to ordinary shareholders


£2,516m


(£644m)


 


£674m


£1,222m


£61m


 




 


 


 


 


 


 


 


 




Excluding notable items within total income (1)


 


 


 


 


 


 


 




Total income excluding notable items 


£7,910m


£8,564m


 


£2,621m


£2,621m


£2,720m


 




Operating expenses


(£5,463m)


(£5,564m)


 


(£1,942m)


(£1,706m)


(£1,814m)


 




Profit before impairment releases/(losses) and 


 


 


 


 


 


 


 




   excluding notable items


£2,447m


£3,000m


 


£679m


£915m


£906m


 




Operating profit/(loss) before tax and excluding notable items


£3,396m


(£112m)


 


£921m


£1,520m


£652m


 




UK and RBSI retail and commercial income excluding


£7,110m


£7,167m


 


£2,423m


£2,368m


£2,320m


 




   notable items (2)


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 




Performance key metrics and ratios


 


 


 


 


 


 


 




Bank net interest margin (2,3)


1.59%


1.73%


 


1.54%


1.61%


1.65%


 




Bank net interest margin excluding liquid asset buffer (2)


2.38%


2.45%


 


2.34%


2.40%


2.39%


 




Bank average interest earning assets (2,3)


£493bn


£449bn


 


£505bn


£494bn


£469bn


 




Bank average interest earning assets excluding


 


 


 


 


 


 


 




   liquid asset buffer (2)


£330bn


£318bn


 


£331bn


£330bn


£324bn


 




Cost:income ratio (2)


67.1%


66.9%


 


69.6%


63.7%


74.5%


 




Loan impairment rate (2)


(35bps)


115bps


 


(26bps)


(66bps)


28bps


 




Earnings per share - basic


21.5p


(5.3p)


 


5.8p


10.6p


0.5p


 




Return on tangible equity (2)


10.7%


(2.7%)


 


8.5%


15.6%


0.8%


 




 


30 September


30 June


31 December




 


2021


2021


2020




Balance sheet


 


 


 




Total assets


£778.3bn


£775.9bn


£799.5bn




Funded assets (2)


£674.5bn


£666.3bn


£633.0bn




Loans to customers - amortised cost


£361.0bn


£362.7bn


£360.5bn




Loans to customers and banks - amortised cost and FVOCI 


£374.0bn


£375.6bn


£372.4bn




UK and RBSI retail and commercial net lending excluding UK Government


 


 


 




   support schemes (2)


£304.9bn


£302.0bn


£297.9bn




Impairment provisions - amortised cost


£4.3bn


£4.7bn


£6.0bn




Total impairment provisions 


£4.4bn


£4.9bn


£6.2bn




Expected credit loss (ECL) coverage ratio 


1.19%


1.31%


1.66%




Assets under management and administration (AUMA) (2)


£35.7bn


£34.7bn


£32.1bn




Customer deposits 


£476.3bn


£467.2bn


£431.7bn




UK and RBSI retail and commercial customer deposits (2)


£437.2bn


£428.7bn


£403.2bn




 


 


 


 




Liquidity and funding


 


 


 




Liquidity coverage ratio (LCR)


166%


164%


165%




Liquidity portfolio


£278bn


£277bn


£262bn




Net stable funding ratio (NSFR) (4)


155%


154%


151%




Loan:deposit ratio (2)


76%


78%


84%




Total wholesale funding


£67bn


£66bn


£71bn




Short-term wholesale funding


£22bn


£23bn


£19bn




 


 


 


 




Capital and leverage


 


 


 




Common Equity Tier (CET1) ratio (5)


18.7%


18.2%


18.5%




Total capital ratio


24.6%


24.9%


24.5%




Pro forma CET1 ratio, pre dividend accrual (6)


19.5%


19.1%


18.8%




Risk-weighted assets (RWAs)


£159.8bn


£163.0bn


£170.3bn




UK leverage ratio (7)


5.9%


6.2%


6.4%




Tangible net asset value (TNAV) per ordinary share


269p


266p


261p




Number of ordinary shares in issue (millions) (8)


11,436


11,569


12,129



 
 
 
 
 
 
 
 
 



 




(1)


Refer to page 4 for details of notable items within total income.




(2)


Refer to Non-IFRS financial measures Appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics.




(3)


NatWest Group excluding NWM.




(4)


NSFR reported in line with CRR2 regulations finalised in June 2019.




(5)


Based on CRR end-point including the IFRS 9 transitional adjustment of £1.0 billion (30 June 2021 - £1.2 billion; 31 December 2020 - £1.7 billion). Excluding this adjustment, the CET1 ratio would be 18.1% (30 June 2021 - 17.5%; 31 December 2020 - 17.5%).




(6)


The pro forma CET1 ratio at 30 September 2021 excludes foreseeable items of £1.2 billion, £402 million for ordinary dividends and £816 million foreseeable charges and pension contributions (30 June 2021 excludes foreseeable items of £1.4 billion, £500 million for ordinary dividends and £924 million foreseeable charges and pension contributions; 31 December 2020 excludes foreseeable charges of £364 million for ordinary dividend (3p per share) and £266 million pension contribution).




(7)


Based on UK end-point including the IFRS 9 transitional adjustment of £1.0 billion (30 June 2021 - £1.2 billion; 31 December 2020 - £1.7 billion). Excluding this adjustment the UK leverage ratio would be 5.8% (30 June 2021 - 6.0%; 31 December 2020 - 6.1%).




(8)


In March 2021, there was an agreement with HM Treasury to buy 591 million ordinary shares in the Company from UK Government Investments Ltd (UKGI). NatWest Group cancelled 391 million of the purchased ordinary shares and held the remaining 200 million in own shares held. The number of ordinary shares in issue excludes own shares held which comprises the remainder of the shares purchased and shares held by the NatWest Group 2001 Employee Share Trust.




 
 
Summary consolidated income statement for the period ended 30 September 2021
 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m 


£m 


 


£m 


£m 


£m 




Net interest income


5,870


5,778 


 


1,954


1,985 


1,926 




Own credit adjustments


2


19 


 


2


(2)


(34)




Other non-interest income


2,221


2,464 


 


818


677 


531 




Non-interest income


2,223


2,483 


 


820


675 


497 




Total income


8,093


8,261 


 


2,774


2,660 


2,423 




Litigation and conduct costs


(276)


81 


 


(294)


34 


(8)




Strategic costs


(409)


(687)


 


(77)


(172)


(223)




Other expenses


(4,778)


(4,958)


 


(1,571)


(1,568)


(1,583)




Operating expenses


(5,463)


(5,564)


 


(1,942)


(1,706)


(1,814)




Profit before impairment releases/(losses)


2,630


2,697 


 


832


954 


609 




Impairment releases/(losses)


949


(3,112)


 


242


605 


(254)




Operating profit/(loss) before tax


3,579


(415)


 


1,074


1,559 


355 




Tax (charge)/credit


(765)


1 


 


(330)


(202)


(207)




Profit/(loss) for the period


2,814


(414)


 


744


1,357 


148 




 


 


 


 


 


 


 




Attributable to:


 


 


 


 


 


 




Ordinary shareholders


2,516


(644)


 


674


1,222 


61 




Preference shareholders


14


21 


 


5


4 


5 




Paid-in equity holders


241


272 


 


63


91 


80 




Non-controlling interests


43


(63)


 


2


40 


2 




 




Notable items within total income (1)


 


 


 


 


 


 




Own credit adjustments (OCA)


2


19


 


2


(2)


(34)




FX recycling (loss)/gain in Central items & other 


-


(39)


 


-


-


64




Liquidity Asset Bond sale gain


70


111


 


45


20


1




IFRS volatility in Central items & other (2)


44


38


 


-


45


49




Loss on redemption of own debt


(138)


(324)


 


-


(20)


(324)




Retail Banking debt sale gain


-


7


 


-


-


4




Commercial Banking fair value and disposal (loss)/gain


(18)


(10)


 


4


(8)


1




Commercial Banking tax variable lease repricing


32


-


 


-


32


-




NatWest Markets asset disposals/strategic risk 


 


 


 


 


 


 




   reduction (3)


(52)


(75)


 


(12)


(36)


(12)




Share of associate profits/(losses) for Business


 


 


 


 


 


 




   Growth Fund


208


(30)


 


79


8


(46)




Ulster Bank RoI gain arising from the restructuring of


 


 


 


 


 


 




   structural hedges


35


-


 


35


-


-




Total


183


(303)


 


153


39


(297)




 
(1)   Refer to page 1 of the Non-IFRS financial measures Appendix.
(2)   IFRS volatility relates to derivatives used for risk management not in IFRS hedge accounting relationships and IFRS hedge ineffectiveness.
(3)   Asset disposals/strategic risk reduction relates to the cost of exiting positions, which includes changes in carrying value to align to the expected exit valuation, and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.
 
Non-IFRS financial measures
This document contains a number of non-IFRS financial measures and performance metrics not defined under IFRS. For details of the basis of preparation and reconciliations, where applicable, refer to the Appendix.
 
 
 
Business performance summary
 
Chief Financial Officer review




 




 




We have delivered a strong operating performance in the third quarter. We have grown lending across our retail and commercial franchises and have continued to deliver against our CSFF commitments. Good progress has been made against our cost reduction commitments and we continue to work towards optimising our capital base. During the quarter default levels remained low across our portfolio and we have reported another impairment release as a result.
 




Financial performance
Total income increased by 14.5% to £2,774 million compared with Q3 2020. Excluding notable items, income was £99 million, or 3.6%, lower than Q3 2020 principally in NWM, reflecting continued weakness in Fixed Income which was impacted by subdued levels of customer activity and ongoing reshaping of the business. The Currencies and Capital Markets businesses performed in line with expectations. Across the UK and RBSI retail and commercial businesses income increased by 4.4% reflecting strong balance sheet growth, principally in our mortgage book. Excluding notable items income was in line with the second quarter. Bank NIM, excluding the LAB, of 2.34% was 6 basis points lower than Q2 2021 reflecting the one-off tax variable lease repricing adjustment in Q2 2021 and a £14 million AT1 reclassification in Q3 2021. Bank NIM of 1.54% was 7 basis points lower reflecting the one-off items and increased levels of liquidity. 




 




We have delivered a cost reduction of £198 million, or 4.3%, for the year to date. This has been achieved by transformation across our Customer Journeys and NWM business, in line with the strategic announcement made in February 2020, and we remain committed to our 4% full year cost reduction target. Strategic costs of £77 million in the quarter included £50 million in NWM, £18 million of technology spend and £13 million of redundancy charges. Litigation and conduct costs were £294 million which included provisions for an anticipated fine in respect of NWB Plc's breaches of the UK Money Laundering Regulations 2007 and other matters.




 




A net impairment release of £242 million reflects the continued low levels of realised losses we have seen to date. Total impairment provisions reduced by £0.5 billion to £4.4 billion in the quarter and as a result ECL coverage ratio decreased from 1.31% to 1.19%. Whilst we are comfortable with the strong credit performance of our book, we continue to hold economic uncertainty post model adjustments (PMA) of £0.7 billion, or 16.4% of total impairment provisions. We will continue to assess this position as we see the impact within the economy of the UK Government support measures winding down and we emerge from the pandemic.




 




As a result, we are pleased to report a Q3 2021 attributable profit of £674 million, with earnings per share of 5.8 pence and a RoTE of 8.5%.    




We continued to support our customers whilst taking a measured approach to risk. Across the UK and RBSI retail and commercial businesses, net lending excluding UK Government support schemes increased by £2.9 billion in the quarter, including £2.5 billion of mortgage growth, and annualised growth for the year to date was 3.1%. Total Group net lending reduced by £1.7 billion, which included a £3.5 billion reduction in Ulster Bank RoI as loans agreed to be sold to Allied Irish Banks p.l.c. as part of our phased withdrawal from the Republic of Ireland were reclassified as assets held for sale. 
 
During H1 2021 we exceeded our 2020-21 target of providing an additional £20 billion CSFF, bringing our delivery against this target to £21.5 billion. During Q3 2021 we completed £2.0 billion CSFF which will contribute towards the new £100 billion target.




 




Customer deposits increased by £9.1 billion, or 1.9%, in the quarter as customers continued to build and retain liquidity. 
 
TNAV per share increased by 3 pence in the quarter to 269 pence largely reflecting the attributable profit partially offset by the impact of the share buy-back programme.




 




 
Capital and leverage




The CET1 ratio remains robust at 18.7%, or 18.1% excluding IFRS 9 transitional relief, and increased by 50 basis points in the quarter reflecting the attributable profit and reduction in RWAs partially offset by a foreseeable dividend accrual, a dividend linked pension accrual and reduction in IFRS 9 transitional relief. The total capital ratio decreased by 30 basis points in the quarter to 24.6%.




 




RWAs decreased by £3.2 billion to £159.8 billion during Q3 2021 mainly reflecting business movements in Commercial Banking and unwinding of the Q2 2021 increase in NWM following regulatory approval to update the VaR model to remove the impact of GBP LIBOR cessation.  




 




Funding and liquidity 




The LCR increased by 2 percentage points to 166%, representing £78.6 billion headroom above 100% minimum requirement, primarily reflecting continued growth in customer deposits. Total wholesale funding increased by £1 billion in the quarter to £66 billion. 




 
 
 

 

Business performance summary
Retail Banking 




 


 


 


Quarter ended




 


 


 


 


 


30 September


30 June


30 September




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£m


£m


£m




Total income


 


 


 


 


1,131


1,094


1,022




Operating expenses


 


 


 


 


(552)


(600)


(647)




   of which: Other expenses


 


 


 


 


(543)


(545)


(560)




Impairment (losses)/releases


 


 


 


 


(16)


91


(70)




Operating profit


 


 


 


 


563


585


305




 


 


 


 


 


 


 


 




Return on equity


 


 


 


 


29.9%


32.0%


15.3%




Net interest margin


 


 


 


 


2.09%


2.08%


2.05%




Cost:income ratio


 


 


 


 


48.8%


54.8%


63.3%




Loan impairment rate


 


 


 


 


4bps


(20)bps


17bps




 




 


 


 


As at




 


 


 


 


 


30 September


30 June


31 December




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£bn


£bn


£bn




Net loans to customers - amortised cost


 


 


 


 


180.5


178.1


172.3




Customer deposits


 


 


 


 


186.3


184.1


171.8




RWAs


 


 


 


 


36.6


35.6


36.7




 
 




During Q3 2021, Retail Banking continued to pursue sustainable growth with an intelligent approach to risk, delivering an operating profit of £563 million. Lending growth was supported by a strong performance in mortgages and a return to unsecured lending growth with improved customer spending and demand for new lending as the UK economy continued to recover. Retail Banking completed £0.5 billion of CSFF in Q3 2021 which will contribute towards the new NatWest Group target of £100 billion between 1 July 2021 and the end of 2025. Retail Banking also made good progress in buy-to-let, with application volumes in Q3 2021 more than double Q2 2021 reflecting the alignment of lending criteria with the rest of the market, the introduction of a simplified policy and customer journey improvements.




 




●


Total income was £109 million, or 10.7%, higher than Q3 2020 primarily due to strong mortgage balance growth and improved asset margins, partially offset by lower deposit returns and lower unsecured balances. Total income was £37 million, or 3.4%, higher than Q2 2021 reflecting balance growth and higher transactional-related fee income, partially offset by the non-repeat of Q2 2021 one-off items totalling £12 million.




●


Net interest margin was 1 basis point higher than Q2 2021 largely reflecting higher margin unsecured balance growth. Mortgage completion margins of 143 basis points were lower than the back book margin of 164 basis points, with application margins of 115 basis points in the quarter decreasing to 105 basis points in the latter part of Q3 2021, reflecting rising swap rates and continued strong competition in the market.




●


Other expenses were £17 million, or 3.0%, lower than Q3 2020 primarily reflecting a 9.6% reduction in headcount as a result of continued digitalisation, automation and improvement of end-to-end customer journeys. Customer behaviour continues to shift towards digital with 89% of retail customer needs met digitally, up from 77% in Q3 2020, and mobile payments increased 13% compared with Q3 2020. Additionally, 7.0 million current account customers are now exclusively using digital channels to interact with us, up from 6.7 million in Q3 2020.




●


A net impairment charge of £16 million in Q3 2021 primarily reflects Stage 3 defaults, which remain at low levels, partially offset by ECL releases resulting from continued stable portfolio performance underpinned by government support schemes.




●


Net loans to customers increased by £2.4 billion, or 1.3%, compared with Q2 2021 reflecting continued mortgage growth of £2.2 billion, with gross new mortgage lending of £8.3 billion representing flow share of approximately 11%. Personal advances and cards both increased by £0.1 billion as customer demand and spend levels increased.




●


Customer deposits increased £2.2 billion, or 1.2%, compared with Q2 2021 reflecting slower growth than previous periods as customer spending increased following the easing of UK Government restrictions.




●


RWAs increased by £1.0 billion, or 2.8%, compared with Q2 2021 largely reflecting lending growth across all products and predictive loss model recalibrations.




 
 
 
Business performance summary
Private Banking 




 


 


 


Quarter ended




 


 


 


 


30 September


30 June


30 September




 


 


 


 


2021


2021


2020




 


 


 


 


£m


£m


£m




Total income


 


 


 


195


183


187




Operating expenses


 


 


 


(116)


(128)


(112)




  of which: Other expenses


 


 


 


(117)


(120)


(106)




Impairment releases/(losses)


 


 


 


15


27


(18)




Operating profit


 


 


 


94


82


57




 


 


 


 


 


 


 




Return on equity


 


 


 


18.1%


15.9%


11.2%




Net interest margin


 


 


 


1.76%


1.75%


1.99%




Cost:income ratio


 


 


 


59.5%


69.9%


59.9%




Loan impairment rate


 


 


 


(32)bps


(60)bps


43bps




 




 




 


 


 


As at




 


 


 


 


30 September


30 June


31 December




 


 


 


 


2021


2021


2020




 


 


 


 


£bn


£bn


£bn




Net loans to customers - amortised cost


 


 


 


18.4


18.0


17.0




Customer deposits


 


 


 


35.7


34.7


32.4




RWAs


 


 


 


11.4


11.2


10.9




Assets under management (AUMs) (1)


 


 


 


30.5


29.6


27.0




Assets under administration (AUAs) (1)


 


 


 


5.2


5.1


5.1




Total assets under management and administration (AUMA) (1)


 


 


 


35.7


34.7


32.1




 
 




(1)   The definition of AUMs/AUAs has been updated to provide clarity on assets where the investment management is undertaken by Private Banking. AUMs now comprise assets where the investment management is undertaken by Private Banking irrespective of the franchise the customer belongs to. AUAs now comprises third party assets held on an execution-only basis in custody. Total AUMA remain as before.
 




Private Banking return on equity of 18.1% and operating profit of £94 million in Q3 2021 was supported by a strong operating performance and continued balance growth. During the first nine months of the year approximately 1,300 new customers were onboarded into Private Banking, an increase of around 10% compared to the same period last year.




 
NatWest Group completed the sale of Adam & Company's £1.8 billion investment management business to Canaccord Genuity Wealth Management on 1 October 2021 for a total consideration of £54 million, which included the Adam & Company brand and the FCA regulated Adam & Company Investment Management Ltd legal entity which had net assets of £2 million. The final net gain on sale will be recorded as a notable item in the Q4 2021 results.




 




●


Total income was £8 million, or 4.3%, higher than Q3 2020 as strong balance growth was partially offset by lower deposit returns. Total income was £12 million, or 6.6%, higher than Q2 2021 reflecting continued balance growth. Net interest margin was broadly in line with Q2 2021.




●


Other expenses were £11 million, or 10.4%, higher than Q3 2020 principally due to investment in digital infrastructure and an increase in headcount related to the enhancement of AUMA growth propositions.




●


A net impairment release of £15 million in Q3 2021 mainly reflects ECL releases in non-default portfolios.




●


Net loans to customers increased by £0.4 billion, or 2.2%, compared with Q2 2021 due to continued strong mortgage lending growth, whilst RWAs increased by £0.2 billion, or 1.8%.




●


AUMAs increased by £1.0 billion, or 2.9%, compared with Q2 2021 reflecting positive investment performance of £0.3 billion and AUM net new money inflows of £0.7 billion. AUM net new money inflows of £2.1 billion in the nine months ended 30 September 2021 included £0.6 billion of digital investing net inflows into NatWest Invest, Royal Bank Invest and Coutts Invest, compared to £0.2 billion during the same period of 2020. 




 


 




 
 
 
 
 
 
 
Business performance summary
Commercial Banking




 


 


 


Quarter ended




 


 


 


 


 


30 September


30 June


30 September




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£m


£m


£m




Total income


 


 


 


 


965


982


1,004




Operating expenses


 


 


 


 


(556)


(569)


(553)




   of which: Other expenses (excluding OLD)


 


 


 


 


(484)


(470)


(490)




Impairment releases/(losses)


 


 


 


 


216


451


(127)




Operating profit


 


 


 


 


625


864


324




 


 


 


 


 


 


 


 




Return on equity


 


 


 


 


21.7%


29.3%


9.2%




Net interest margin


 


 


 


 


1.49%


1.60%


1.65%




Cost:income ratio


 


 


 


 


56.0%


56.4%


53.4%




Loan impairment rate


 


 


 


 


(83)bps


(170)bps


45bps




 
 




 


 


 


As at




 


 


 


 


 


30 September


30 June


31 December




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£bn


£bn


£bn




Net loans to customers - amortised cost


 


 


 


 


102.7


103.8


108.2




Customer deposits


 


 


 


 


178.3


176.0


167.7




RWAs


 


 


 


 


66.4


69.5


75.1




 




 
 
Commercial Banking delivered a resilient performance in Q3 2021 with an operating profit of £625 million including a £216 million impairment release as the UK economy continued to recover.  Commercial Banking continues to actively manage its balance sheet to enhance returns through a combination of active capital management, pricing discipline, targeted sector appetite and growing capital efficient revenue streams. These actions have enabled the business to deliver a resilient revenue performance whilst materially increasing capital efficiency and returns.




 




In the nine months ended 30 September 2021, Commercial Banking completed £3.4 billion of CSFF, including £0.9 billion in Q3 2021 which will contribute towards the new NatWest Group target of £100 billion between 1 July 2021 and the end of 2025. Commercial Banking continues to scale Tyl to business customers providing an opportunity to reduce cash usage and customer footfall in branch network. Tyl has processed over £1.5 billion transactions since inception in 2019.




 




●


Total income was £39 million, or 3.9%, lower than Q3 2020 as lower deposit returns and lower lending volumes were partially offset by a recovery in transactional banking volumes. Total income was £17 million, or 1.7%, lower than Q2 2021 mainly reflecting the non-repeat of a tax variable lease repricing gain of £32 million and lower lending volumes, partially offset by higher deposit returns and increased transactional banking income.




●


Net interest margin was 11 basis points lower than Q2 2021 mainly due to the non-repeat of the tax variable lease repricing gain in Q2 2021. Excluding the impact of the tax variable lease repricing gain, NIM was broadly stable compared with Q2 2021.




●


Other expenses were £6 million, or 1.2%, lower than Q3 2020 primarily reflecting an 8.3% reduction in headcount and lower non-staff costs, including additional VAT recoveries, partially offset by higher back office operational costs.




●


A net impairment release of £216 million in Q3 2021 primarily reflects ECL releases related to the reduced economic uncertainty with Stage 3 defaults remaining at low levels.




●


Net loans to customers decreased by £1.1 billion, or 1.1%, compared with Q2 2021 primarily reflecting UK Government financial support scheme repayments of £0.7 billion and targeted sector reductions mainly across Real Estate and Retail, partially offset by growth in Specialised Business of £0.3 billion as customer utilisation levels increased. RCF utilisation was approximately 19% of committed facilities, broadly stable versus Q2 2021 and significantly below the COVID-19 peak of approximately 40%.




●


Customer deposits increased by £2.3 billion, or 1.3%, compared with Q2 2021 as customers continued to build and retain liquidity.




●


RWAs decreased by £3.1 billion, or 4.5%, compared with Q2 2021 reflecting business movements including targeted sector reductions across Real Estate and Retail as well as active capital management of £0.7 billion.



 
 
 
 
 
 
 
 
 



 
 
 
Business performance summary
International Banking & Markets
RBS International
 




 


 


 


Quarter ended




 


 


 


 


 


30 September


30 June


30 September




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£m


£m


£m




Total income


 


 


 


 


136


133


112




Operating expenses


 


 


 


 


(60)


(55)


(53)




   of which: Other expenses


 


 


 


 


(56)


(52)


(50)




Impairment releases/(losses)


 


 


 


 


11


27


(34)




Operating profit


 


 


 


 


87


105


25




 


 


 


 


 


 


 


 




Return on equity


 


 


 


 


21.6%


26.5%


6.4%




Net interest margin


 


 


 


 


0.99%


1.02%


1.07%




Cost:income ratio


 


 


 


 


44.1%


41.4%


47.3%




Loan impairment rate


 


 


 


 


(28)bps


(71)bps


105bps




 


 




 




 


 


 


As at




 


 


 


 


 


30 September


30 June


31 December




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£bn


£bn


£bn




Net loans to customers - amortised cost


 


 


 


 


15.6


15.1


13.3




Customer deposits


 


 


 


 


36.9


33.9


31.3




RWAs


 


 


 


 


8.1


7.6


7.5




Depositary assets (1)


 


 


 


 


463.8


460.4


427.5




 
(1)   Assets held by RBSI as an independent trustee and in a depositary service capacity. 
During Q3 2021 RBS International (RBSI) delivered £87 million of operating profit, supported by net lending growth and an impairment release. RBSI also supported local social enterprises to thrive through mentoring programmes and delivered digital enhancements to eQ, our payment processing platform, making batch payments easier for our customers. In the nine months ended 30 September 2021, RBSI completed £0.6 billion of CSFF.




 




●


Total income was £24 million, or 21.4%, higher than Q3 2020 primarily due to higher average customer volumes and higher non utilisation and depositary fees. Net interest margin was 3 basis points lower than Q2 2021 primarily due to lower returns from higher surplus deposits.




●


Other expenses were £6 million, or 12.0%, higher than Q3 2020 primarily reflecting higher investment spend.




●


A net impairment release of £11 million in Q3 2021 primarily reflects releases across Stage 1 and Stage 2 portfolios.




●


Net loans to customers increased by £0.5 billion, or 3.3%, reflecting new business growth and higher utilisation levels in the Institutional Banking sector.




●


Customer deposits increased by £3.0 billion, or 8.8%, compared with Q2 2021 due to higher short-term placements in the Institutional Banking sector.




●


Depositary assets were £3.4 billion, or 0.7% higher than Q2 2021 and £60.9 billion, or 15.1%, higher than Q3 2020 reflecting new client business, new fund launches and strong fund performance from existing clients.




●


RWAs increased by £0.5 billion, or 6.6%, compared with Q2 2021 principally due to higher lending volumes and higher deposit balances placed with third party banks.



 
 
 
 
 
 
 
 
 



 
 
 
 
 
Business performance summary
International Banking & Markets
NatWest Markets(1)
 




 


 


 


Quarter ended




 


 


 


 


 


30 September


30 June


30 September




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£m


£m


£m




Income excluding revenue share, asset disposals and OCA


 


 


160


193


325




Revenue share paid to other NatWest Group segments


 


 


(55)


(50)


(45)




Income excluding asset disposals and OCA


 


 


 


105


143


280




Asset disposals/strategic risk reduction (2)


 


 


 


(12)


(36)


(12)




Own credit adjustments (OCA)


 


 


 


 


2


(1)


(34)




Total income


 


 


 


 


95


106


234




Operating expenses


 


 


 


 


(258)


(285)


(302)




   of which: Other expenses


 


 


 


 


(206)


(216)


(225)




Impairment releases


 


 


 


 


3


10


2




Operating loss


 


 


 


 


(160)


(169)


(66)




 


 


 


 


 


 


 


 




Return on equity


 


 


 


 


(12.1%)


(12.1%)


(4.7%)




Cost:income ratio


 


 


 


 


271.6%


268.9%


129.1%




 




 


 


 


As at




 


 


 


 


 


30 September


30 June


31 December




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


£bn


£bn


£bn




Funded assets


 


 


 


 


108.0


111.8


105.9




RWAs


 


 


 


 


25.4


26.9


26.9




 
(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) as the NatWest Markets segment excludes the Central items & other segment.
(2)   Asset disposals/strategic risk reduction relates to the cost of exiting positions, which includes changes in carrying value to align to the expected exit valuation, and the impact of risk reduction transactions entered into, in respect of the strategic announcement on 14 February 2020.
 




NatWest Markets has supported customers in navigating challenging market conditions and continued to deliver an integrated customer proposition across NatWest Group. NatWest Markets has maintained a focus on product innovation, investing in its people, and on growing its expertise in areas that matter most to customers. 




In the nine months ended 30 September 2021, NatWest Markets completed £6.9 billion of CSFF, including £0.5 billion in Q3 2021 which will contribute towards the new NatWest Group target of £100 billion between 1 July 2021 and the end of 2025.




●


Income excluding asset disposals/strategic risk reduction and OCA decreased by £175 million, or 62.5%, compared with Q3 2020 reflecting continued weakness in Fixed Income which was impacted by subdued levels of customer activity and ongoing reshaping of the business, resulting in an operating loss of £160 million in Q3 2021. The Currencies and Capital Markets businesses performed in line with expectations.




●


Other expenses decreased £19 million, or 8.4%, compared with Q3 2020, reflecting continued reductions in line with the strategic announcement in February 2020.




●


RWAs decreased by £1.5 billion, or 5.6%, compared to Q2 2021 as the impact related to LIBOR cessation largely unwound, with £2.4 billion unwinding in Q3 2021 and £0.1 billion to unwind in October, partially offset by higher credit risk driven by activity in the capital markets business.




 
 
 
Business performance summary
Ulster Bank RoI




 


 


 


Quarter ended




 


 


 


 


 


30 September


30 June


30 September




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


€m


€m


€m




Total income


 


 


 


 


171


137


145




Operating expenses


 


 


 


 


(144)


(156)


(138)




   of which: Other expenses


 


 


 


 


(134)


(149)


(129)




Impairment releases/(losses)


 


 


 


 


19


(1)


(6)




Operating profit/(loss)


 


 


 


 


46


(20)


1




 


 


 


 


 


 


 


 




Return on equity


 


 


 


 


9.9%


(4.1%)


0.2%




Net interest margin


 


 


 


 


1.40%


1.43%


1.47%




Cost:income ratio


 


 


 


 


84.2%


113.9%


95.2%




Loan impairment rate


 


 


 


 


(48)bps


2bps


11bps




 


 


 


 


 


 


 


 




 




 


 


 


As at




 


 


 


 


 


30 September


30 June


31 December




 


 


 


 


 


2021


2021


2020




 


 


 


 


 


€bn


€bn


€bn




Net loans to customers - amortised cost


 


 


 


 


15.3


19.4


20.0




Customer deposits


 


 


 


 


21.6


21.6


21.8




RWAs


 


 


 


 


11.7


12.2


13.2




 




 




Ulster Bank RoI continues its phased withdrawal from the Republic of Ireland and delivered an operating profit of €46 million for Q3 2021. Since the end of July, apart from UBIDAC's asset finance business, commercial banking has been closed to new customers, remaining open for existing customers only. From the end of October, Ulster Bank RoI will stop accepting applications from new personal customers but will continue to consider applications on a reduced number of products from existing personal customers. Progress has continued with Allied Irish Banks p.l.c. and Permanent TSB Group Holdings p.l.c. for the sale of performing loan portfolios and associated undrawn exposures, UBIDAC's asset finance business and 25 branch locations, the details of which were outlined in the interim results. Discussions are ongoing with other counterparties about their potential interest in other parts of the bank.




 


 




●


Total income increased by €26 million, or 17.9%, compared with Q3 2020 primarily due to gains arising from the restructuring of the duration of swaps hedging deposits and other balances under the withdrawal plan, partially offset by lower lending levels and fee income as a result of the decision to withdraw from the RoI market. 




●


Net interest margin was 3 basis points lower than Q2 2021 reflecting continuation of reducing lending volumes against a stable deposit base, resulting in higher liquid assets in a negative interest rate environment.




●


Other expenses were €5 million, or 3.9%, higher than Q3 2020 as higher VAT charges and regulatory levies have been partially offset by a 10.7% reduction in headcount, lower back office operational costs and the reclassification of withdrawal-related programme costs to strategic costs. 




●


A net impairment release of €19 million in Q3 2021 reflects improvements in the mortgage and commercial portfolios.




●


Net loans to customers decreased by €4.1 billion, or 21.1%, compared with Q2 2021 reflecting the reclassification of €3.7 billion of loans agreed to be sold to Allied Irish Banks, p.l.c. as assets held for sale and repayments continuing to exceed gross new lending, which was €0.4 billion in Q3 2021.



 
 
 
 
 
 
 
 
 



 
Central items & other




 


Quarter ended




 


30 September


30 June


30 September




 


2021


2021


2020




 


£m


£m


£m




Central items not allocated


(173)


110 


(285)




 




●


A £173 million operating loss within central items not allocated mainly reflects various litigation and conduct items, partially offset by a £79 million share of gains under equity accounting for Business Growth Fund and other treasury income.




 
 

 

Segment performance 
 




 


Nine months ended 30 September 2021




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


Central items


Total NatWest




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




 


£m


£m


£m


£m


£m


£m


£m


£m




Income statement


 


 


 


 


 


 


 


 




Net interest income


3,017


354


1,937


277


(4)


275


14


5,870




Own credit adjustments


-


-


-


-


3


-


(1)


2




Other non-interest income


264


209


951


115


391


113


178


2,221




Total income


3,281


563


2,888


392


390


388


191


8,093




Direct expenses


 


 


 


 


 


 


 


 




  - staff costs


(342)


(102)


(421)


(80)


(274)


(140)


(1,146)


(2,505)




  - other costs


(161)


(30)


(196)


(36)


(93)


(97)


(1,660)


(2,273)




Indirect expenses


(1,142)


(227)


(956)


(44)


(295)


(122)


2,786


-




Strategic costs


 


 


 


 


 


 


 


 




  - direct


(21)


(7)


(43)


(7)


(141)


(10)


(180)


(409)




  - indirect


(49)


(7)


(30)


(3)


(15)


(3)


107


-




Litigation and conduct costs


(24)


8


(62)


(2)


-


(12)


(184)


(276)




Operating expenses


(1,739)


(365)


(1,708)


(172)


(818)


(384)


(277)


(5,463)




Operating profit/(loss)before impairment releases


1,542


198


1,180


220


(428)


4


(86)


2,630




Impairment releases


41


42


784


40


19


27


(4)


949




Operating profit/(loss) 


1,583


240


1,964


260


(409)


31


(90)


3,579




Additional information


 


 


 


 


 


 


 


 




Return on tangible equity (1)


na


na


na


na


na


na


na


10.7%




Return on equity (1)


28.3%


15.5%


21.9%


21.9%


(10.1%)


2.5%


nm


na




Cost:income ratio (1)


53.0%


64.8%


57.6%


43.9%


209.7%


99.0%


nm


67.1%




Total assets (£bn)


207.6


28.2


186.0


39.9


210.1


25.2


81.3


778.3




Funded assets (£bn) (1)


207.6


28.2


186.0


39.9


108.0


25.2


79.6


674.5




Net loans to customers - amortised cost (£bn)


180.5


18.4


102.7


15.6


7.1


13.2


23.5


361.0




Loan impairment rate (1)


(3)bps


(30)bps


(100)bps


(34)bps


nm


(26)bps


nm


(35)bps




Impairment provisions (£bn)


(1.6)


(0.1)


(1.9)


(0.1)


(0.1)


(0.5)


-


(4.3)




Impairment provisions - stage 3 (£bn)


(0.8)


-


(0.8)


(0.1)


(0.1)


(0.4)


-


(2.2)




Customer deposits (£bn)


186.3


35.7


178.3


36.9


2.2


18.5


18.4


476.3




Risk-weighted assets (RWAs) (£bn)


36.6


11.4


66.4


8.1


25.4


10.0


1.9


159.8




RWA equivalent (RWAe) (£bn)


36.6


11.4


66.5


8.2


26.9


10.0


2.1


161.7




Employee numbers (FTEs - thousands)


15.0


1.9


8.8


1.6


1.6


2.5


27.5


58.9




Third party customer asset rate (2)


2.68% 


2.36% 


2.71% 


2.23% 


nm


2.27% 


nm


nm




Third party customer funding rate (2)


(0.06%)


0.00%


(0.01%)


0.07% 


nm


0.01% 


nm


nm




Average interest earning assets (£bn) (1)


194.2


26.8


168.0


36.2


32.4


25.6


nm


525.4




Bank net interest margin (1)


2.08%


1.77%


1.54%


1.02%


na


1.44%


nm


1.59%




Bank net interest margin excluding liquid asset buffer (1)


na


na


na


na


na


na


na


2.38%




nm = not meaningful, na = not applicable.
Refer to page 16 for the notes to this table. 



Segment performance 




 


Nine months ended 30 September 2020




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


Central items


Total NatWest




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




 


£m


£m


£m


£m


£m


£m


£m


£m




Income statement


 


 


 


 


 


 


 


 




Net interest income


2,919


371


2,073


286


(55)


294


(110)


5,778




Own credit adjustments


-


-


-


-


19


-


-


19




Other non-interest income


288


208


934


85


1,086


85


(222)


2,464




Total income


3,207


579


3,007


371


1,050


379


(332)


8,261




Direct expenses


 


 


 


 


 


 


 


 




  - staff costs


(399)


(117)


(497)


(92)


(434)


(150)


(934)


(2,623)




  - other costs


(152)


(36)


(212)


(37)


(131)


(65)


(1,702)


(2,335)




Indirect expenses


(1,178)


(194)


(957)


(42)


(229)


(139)


2,739


-




Strategic costs


 


 


 


 


 


 


 


 




  - direct


(46)


(4)


(5)


(8)


(187)


(9)


(428)


(687)




  - indirect


(138)


(10)


(111)


(3)


(24)


(10)


296


-




Litigation and conduct costs


191


(3)


8


3


(4)


1


(115)


81




Operating expenses


(1,722)


(364)


(1,774)


(179)


(1,009)


(372)


(144)


(5,564)




Operating profit/(loss) before impairment (losses)


1,485


215


1,233


192


41


7


(476)


2,697




Impairment losses


(727)


(74)


(1,917)


(80)


(38)


(251)


(25)


(3,112)




Operating profit/(loss)


758


141


(684)


112


3


(244)


(501)


(415)




Additional information


 


 


 


 


 


 


 


 




Return on tangible equity (1)


na


na


na


na


na


na


na


(2.7%)




Return on equity (1)


12.2%


9.2%


(8.7%)


10.0%


(0.8%)


(16.6%)


nm


na




Cost:income ratio (1)


53.7%


62.9%


57.4%


48.2%


96.1%


98.2%


nm


66.9%




Total assets (£bn)


189.5


24.9


186.9


32.7


283.2


27.4


47.0


791.6




Funded assets (£bn) (1)


189.5


24.9


186.9


32.7


121.3


27.4


44.6


627.3




Net loans to customers - amortised cost (£bn)


166.7


16.5


110.0


12.8


10.1


18.3


19.3


353.7




Loan impairment rate (1)


57bps


59bps


226bps


83bps


nm


175bps


nm


115bps




Impairment provisions (£bn)


(1.9)


(0.1)


(3.0)


(0.1)


(0.2)


(0.8)


-


(6.1)




Impairment provisions - stage 3 (£bn)


(0.9)


-


(1.1)


-


(0.2)


(0.5)


-


(2.7)




Customer deposits (£bn)


164.9


30.3


161.3


30.4


4.7


19.6


7.2


418.4




Risk-weighted assets (RWAs) (£bn)


36.3


10.6


76.5


7.0


30.0


12.1


1.4


173.9




RWA equivalent (RWAe) (£bn)


36.3


10.6


76.6


7.1


32.0


12.1


1.4


176.1




Employee numbers (FTEs - thousands)


16.6


1.8


9.6


1.7


2.8


2.8


26.3


61.6




Third party customer asset rate (2)


2.92%


2.59%


2.93%


2.57%


nm


2.27%


nm


nm




Third party customer funding rate (2)


(0.23%)


(0.15%)


(0.10%)


(0.03%)


nm


(0.05%)


nm


nm




Average interest earning assets (£bn) (1)


179.8


23.3


160.8


31.3


38.4


26.2


nm


487.8




Bank net interest margin (1)


2.17%


2.12%


1.72%


1.22%


na


1.50%


nm


1.73%




Bank net interest margin excluding liquid asset buffer (1)


na


na


na


na


na


na


na


2.45%




nm = not meaningful, na = not applicable.
Refer to page 16 for the notes to this table.

 
Segment performance 
 




 


Quarter ended 30 September 2021




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


Central items


Total NatWest




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




 


£m


£m


£m


£m


£m


£m


£m


£m




Income statement


 


 


 


 


 


 


 


 




Net interest income


1,041


122


629


95


(1)


88


(20)


1,954




Own credit adjustments


-


-


-


-


2


-


-


2




Other non-interest income


90


73


336


41


94


57


127


818




Total income


1,131


195


965


136


95


145


107


2,774




Direct expenses


 


 


 


 


 


 


 


 




  - staff costs


(110)


(35)


(141)


(28)


(86)


(46)


(378)


(824)




  - other costs


(50)


(10)


(65)


(12)


(29)


(29)


(552)


(747)




Indirect expenses


(383)


(72)


(314)


(16)


(91)


(39)


915


-




Strategic costs


 


 


 


 


 


 


 


 




  - direct


(5)


(2)


(4)


(1)


(51)


(9)


(5)


(77)




  - indirect


11


-


(7)


(1)


1


(1)


(3)


-




Litigation and conduct costs


(15)


3


(25)


(2)


(2)


1


(254)


(294)




Operating expenses


(552)


(116)


(556)


(60)


(258)


(123)


(277)


(1,942)




Operating profit/(loss) before impairment (losses)/releases


579


79


409


76


(163)


22


(170)


832




Impairment (losses)/releases


(16)


15


216


11


3


16


(3)


242




Operating profit/(loss) 


563


94


625


87


(160)


38


(173)


1,074




Additional information


 


 


 


 


 


 


 


 




Return on tangible equity (1)


na


na


na


na


na


na


na


8.5%




Return on equity (1)


29.9%


18.1%


21.7%


21.6%


(12.1%)


9.6%


nm


na




Cost:income ratio (1)


48.8%


59.5%


56.0%


44.1%


271.6%


84.8%


nm


69.6%




Total assets (£bn)


207.6


28.2


186.0


39.9


210.1


25.2


81.3


778.3




Funded assets (£bn) (1)


207.6


28.2


186.0


39.9


108.0


25.2


79.6


674.5




Net loans to customers - amortised cost (£bn)


180.5


18.4


102.7


15.6


7.1


13.2


23.5


361.0




Loan impairment rate (1)


4bps


(32)bps


(83)bps


(28)bps


nm


(47)bps


nm


(26)bps




Impairment provisions (£bn)


(1.6)


(0.1)


(1.9)


(0.1)


(0.1)


(0.5)


-


(4.3)




Impairment provisions - stage 3 (£bn)


(0.8)


-


(0.8)


(0.1)


(0.1)


(0.4)


-


(2.2)




Customer deposits (£bn)


186.3


35.7


178.3


36.9


2.2


18.5


18.4


476.3




Risk-weighted assets (RWAs) (£bn)


36.6


11.4


66.4


8.1


25.4


10.0


1.9


159.8




RWA equivalent (RWAe) (£bn)


36.6


11.4


66.5


8.2


26.9


10.0


2.1


161.7




Employee numbers (FTEs - thousands)


15.0


1.9


8.8


1.6


1.6


2.5


27.5


58.9




Third party customer asset rate (2)


2.64%


2.36%


2.65%


2.24%


nm


2.24%


nm


nm




Third party customer funding rate (2)


(0.05%)


0.00%


0.00%


0.07%


nm


0.02%


nm


nm




Average interest earning assets (£bn) (1)


197.5


27.5


167.5


37.9


32.5


25.2


nm


537.4




Bank net interest margin (1)


2.09%


1.76%


1.49%


0.99%


na


1.38%


nm


1.54%




Bank net interest margin excluding liquid asset buffer (1)


na


na


na


na


na


na


na


2.34%




nm = not meaningful, na = not applicable.
Refer to page 16 for the notes to this table.
 
 
Segment performance 
 




 


Quarter ended 30 June 2021




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


Central items


Total NatWest




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




 


£m


£m


£m


£m


£m


£m


£m


£m




Income statement


 


 


 


 


 


 


 


 




Net interest income


1,003


117


665


93


4


93


10


1,985




Own credit adjustments


-


-


-


-


(1)


-


(1)


(2)




Other non-interest income


91


66


317


40


103


26


34


677




Total income


1,094


183


982


133


106


119


43


2,660




Direct expenses


 


 


 


 


 


 


 


 




  - staff costs


(116)


(33)


(139)


(26)


(77)


(47)


(371)


(809)




  - other costs


(50)


(11)


(65)


(11)


(35)


(45)


(542)


(759)




Indirect expenses


(379)


(76)


(301)


(15)


(104)


(38)


913


-




Strategic costs


 


 


 


 


 


 


 


 




  - direct


(5)


(5)


(13)


(2)


(60)


(1)


(86)


(172)




  - indirect


(43)


(3)


(14)


(1)


(11)


(1)


73


-




Litigation and conduct costs


(7)


-


(37)


-


2


(4)


80


34




Operating expenses


(600)


(128)


(569)


(55)


(285)


(136)


67


(1,706)




Operating profit/(loss) before impairment releases/(losses)


494


55


413


78


(179)


(17)


110


954




Impairment releases/(losses)


91


27


451


27


10


(1)


-


605




Operating profit/(loss) 


585


82


864


105


(169)


(18)


110


1,559




Additional information


 


 


 


 


 


 


 


 




Return on tangible equity (1)


na


na


na


na


na


na


na


15.6%




Return on equity (1)


32.0%


15.9%


29.3%


26.5%


(12.1%)


(4.3%)


nm


na




Cost:income ratio (1)


54.8%


69.9%


56.4%


41.4%


268.9%


114.3%


nm


63.7%




Total assets (£bn)


204.2


27.7


185.8


37.0


219.4


25.4


76.4


775.9




Funded assets (£bn) (1)


204.2


27.7


185.8


36.9


111.8


25.4


74.5


666.3




Net loans to customers - amortised cost (£bn)


178.1


18.0


103.8


15.1


6.3


16.7


24.7


362.7




Loan impairment rate (1)


(20)bps


(60)bps


(170)bps


(71)bps


nm


2bps


nm


(66)bps




Impairment provisions (£bn)


(1.6)


(0.1)


(2.1)


(0.1)


(0.1)


(0.7)


-


(4.7)




Impairment provisions - stage 3 (£bn)


(0.8)


-


(0.8)


(0.1)


(0.1)


(0.4)


-


(2.2)




Customer deposits (£bn)


184.1


34.7


176.0


33.9


2.5


18.5


17.5


467.2




Risk-weighted assets (RWAs) (£bn)


35.6


11.2


69.5


7.6


26.9


10.5


1.7


163.0




RWA equivalent (RWAe) (£bn)


35.6


11.3


69.5


7.7


28.6


10.5


1.8


165.0




Employee numbers (FTEs - thousands)


15.3


1.9


9.1


1.6


1.6


2.6


27.1


59.2




Third party customer asset rate (2)


2.67%


2.36%


2.82%


2.18%


nm


2.28%


nm


nm




Third party customer funding rate (2)


(0.06%)


0.00%


(0.02%)


0.09%


nm


0.01%


nm


nm




Average interest earning assets (£bn) (1)


193.8


26.8


167.1


36.4


32.3


25.8


nm


526.1




Bank net interest margin (1)


2.08%


1.75%


1.60%


1.02%


na


1.45%


nm


1.61%




Bank net interest margin excluding liquid asset buffer (1)


na


na


na


na


na


na


na


2.40%




nm = not meaningful, na = not applicable.
For the notes to this table, refer to the following page.
 
 
Segment performance 




 


Quarter ended 30 September 2020




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


Central items


Total NatWest




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




 


£m


£m


£m


£m


£m


£m


£m


£m




Income statement


 


 


 


 


 


 


 


 




Net interest income


937


120


703


85


(21)


100


2


1,926




Own credit adjustments


-


-


-


-


(34)


-


-


(34)




Other non-interest income


85


67


301


27


289


30


(268)


531




Total income


1,022


187


1,004


112


234


130


(266)


2,423




Direct expenses


 


 


 


 


 


 


 


 




  - staff costs


(131)


(38)


(156)


(27)


(108)


(50)


(317)


(827)




  - other costs


(49)


(11)


(72)


(10)


(37)


(23)


(554)


(756)




Indirect expenses


(380)


(57)


(299)


(13)


(80)


(47)


876


-




Strategic costs


 


 


 


 


 


 


 


 




  - direct


(45)


(4)


(3)


(5)


(67)


(5)


(94)


(223)




  - indirect


(35)


-


(38)


2


(8)


(2)


81


-




Litigation and conduct costs


(7)


(2)


15


-


(2)


-


(12)


(8)




Operating expenses


(647)


(112)


(553)


(53)


(302)


(127)


(20)


(1,814)




Operating profit/(loss) before impairment (losses)/releases


375


75


451


59


(68)


3


(286)


609




Impairment (losses)/releases


(70)


(18)


(127)


(34)


2


(8)


1


(254)




Operating profit/(loss)


305


57


324


25


(66)


(5)


(285)


355




Additional information


 


 


 


 


 


 


 


 




Return on tangible equity (1)


na


na


na


na


na


na


na


0.8%




Return on equity (1)


15.3%


11.2%


9.2%


6.4%


(4.7%)


(1.0%)


nm


na




Cost:income ratio (1)


63.3%


59.9%


53.4%


47.3%


129.1%


97.7%


nm


74.5%




Total assets (£bn)


189.5


24.9


186.9


32.7


283.2


27.4


47.0


791.6




Funded assets (£bn) (1)


189.5


24.9


186.9


32.7


121.3


27.4


44.6


627.3




Net loans to customers - amortised cost (£bn)


166.7


16.5


110.0


12.8


10.1


18.3


19.3


353.7




Loan impairment rate (1)


17bps


43bps


45bps


105bps


nm


17bps


nm


28bps




Impairment provisions (£bn)


(1.9)


(0.1)


(3.0)


(0.1)


(0.2)


(0.8)


-


(6.1)




Impairment provisions - stage 3 (£bn)


(0.9)


-


(1.1)


-


(0.2)


(0.5)


-


(2.7)




Customer deposits (£bn)


164.9


30.3


161.3


30.4


4.7


19.6


7.2


418.4




Risk-weighted assets (RWAs) (£bn)


36.3


10.6


76.5


7.0


30.0


12.1


1.4


173.9




RWA equivalent (RWAe) (£bn)


36.3


10.6


76.6


7.1


32.0


12.1


1.4


176.1




Employee numbers (FTEs - thousands)


16.6


1.8


9.6


1.7


2.8


2.8


26.3


61.6




Third party customer asset rate (2)


2.82%


2.43%


2.73%


2.40%


nm


2.27%


nm


nm




Third party customer funding rate (2)


(0.13%)


(0.02%)


(0.02%)


0.03%


nm


(0.01%)


nm


nm




Average interest earning assets (£bn) (1)


182.2


24.0


169.3


31.5


39.2


27.3


nm


508.2




Bank net interest margin (1)


2.05%


1.99%


1.65%


1.07%


na


1.46%


nm


1.65%




Bank net interest margin excluding liquid asset buffer (1)


na


na


na


na


na


na


na


2.39%




nm = not meaningful, na = not applicable.




(1)


Refer to Non-IFRS financial measures Appendix for details of basis of preparation and reconciliation of non-IFRS financial measures and performance metrics where relevant. 




(2)


Third party customer asset rate is calculated as annualised interest receivable on third-party loans to customers as a percentage of third-party loans to customers, including those reported as assets held for sale. This excludes intragroup items, loans to banks and liquid asset portfolios. Third party customer funding rate reflects interest payable or receivable on third-party customer deposits, including interest bearing and non-interest bearing customer deposits. Intragroup items, bank deposits, debt securities in issue and subordinated liabilities 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.





 

Risk and capital management
 




 


Page




Credit risk


 




     Segment analysis - portfolio summary


17




     Segment analysis - loans


19




     Movement in ECL provision


19




     ECL post model adjustments


20




     Sector analysis - COVID-19 impact


21




     Wholesale support schemes


23




Capital, liquidity and funding risk


24




 
Credit risk 
Segment analysis - portfolio summary
The table below shows gross loans and expected credit loss (ECL), by segment and stage, within the scope of the IFRS 9 ECL framework.
 




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster


Central items


 




 


Banking


Banking


Banking


International


Markets


Bank RoI (1)


& other


Total




30 September 2021


£m


£m


£m


£m


£m


£m


£m


£m




Loans - amortised cost and FVOCI (2)


 


 


 


 


 


 


 


 




Stage 1


167,641


17,511


78,185


15,791


8,401


11,530


28,023


327,082




Stage 2


12,511


1,018


24,266


1,815


361


1,407


107


41,485




Stage 3


1,902


289


2,112


178


98


854


-


5,433




Of which: individual


-


289


1,089


178


88


37


-


1,681




Of which: collective


1,902


-


1,023


-


10


817


-


3,752




 


182,054


18,818


104,563


17,784


8,860


13,791


28,130


374,000




ECL provisions (3)


 


 


 


 


 


 


 


 




Stage 1


137


16


164


11


9


30


15


382




Stage 2


641


36


1,050


37


35


85


15


1,899




Stage 3


833


40


786


49


81


382


-


2,171




Of which: individual


-


40


380


49


72


14


-


555




Of which: collective


833


-


406


-


9


368


-


1,616




 


1,611


92


2,000


97


125


497


30


4,452




ECL provisions coverage (4)


 


 


 


 


 


 


 


 




Stage 1 (%)


0.08


0.09


0.21


0.07


0.11


0.26


0.05


0.12




Stage 2 (%)


5.12


3.54


4.33


2.04


9.70


6.04


14.02


4.58




Stage 3 (%)


43.80


13.84


37.22


27.53


82.65


44.73


-


39.96




 


0.88


0.49


1.91


0.55


1.41


3.60


0.11


1.19




 


 


 


 


 


 


 


 


 




30 June 2021


 


 


 


 


 


 


 


 




Loans - amortised cost and FVOCI (2)


 


 


 


 


 


 


 


 




Stage 1


158,989


16,728


75,713


15,027


7,019


13,732


29,493


316,701




Stage 2


18,866


1,444


27,895


1,342


721


2,821


99


53,188




Stage 3


1,921


307


2,226


206


108


935


-


5,703




Of which: individual


-


307


1,202


206


98


38


-


1,851




Of which: collective


1,921


-


1,024


-


10


897


-


3,852




 


179,776


18,479


105,834


16,575


7,848


17,488


29,592


375,592




ECL provisions (3)


 


 


 


 


 


 


 


 




Stage 1


120


21


208


15


10


44


15


433




Stage 2


709


49


1,222


46


36


225


13


2,300




Stage 3


811


36


812


47


88


398


-


2,192




Of which: individual


-


36


386


47


79


12


-


560




Of which: collective


811


-


426


-


9


386


-


1,632




 


1,640


106


2,242


108


134


667


28


4,925




ECL provisions coverage (4)


 


 


 


 


 


 


 


 




Stage 1 (%)


0.08


0.13


0.27


0.10


0.14


0.32


0.05


0.14




Stage 2 (%)


3.76


3.39


4.38


3.43


4.99


7.98


13.13


4.32




Stage 3 (%)


42.22


11.73


36.48


22.82


81.48


42.57


-


38.44




 


0.91


0.57


2.12


0.65


1.71


3.81


0.09


1.31




 
For the notes to this table refer to the following page.

 
Risk and capital management
Credit risk continued
Segment analysis - portfolio summary             
 




 


 


 


 


International Banking & Markets


 


 


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster


Central items


 




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Total




31 December 2020


£m


£m


£m


£m


£m


£m


£m


£m




Loans - amortised cost and FVOCI (2)


 


 


 


 


 


 


 


 




Stage 1


139,956


15,321


70,685


12,143


7,780


14,380


26,859


287,124




Stage 2


32,414


1,939


37,344


2,242


1,566


3,302


110


78,917




Stage 3


1,891


298


2,551


211


171


1,236


-


6,358




Of which: individual


-


298


1,578


211


162


43


-


2,292




Of which: collective


1,891


-


973


-


9


1,193


-


4,066




 


174,261


17,558


110,580


14,596


9,517


18,918


26,969


372,399




ECL provisions (3)


 


 


 


 


 


 


 


 




Stage 1


134


31


270


14


12


45


13


519




Stage 2


897


68


1,713


74


49


265


15


3,081




Stage 3


806


39


1,069


48


132


492


-


2,586




Of which: individual


-


39


607


48


124


13


-


831




Of which: collective


806


-


462


-


8


479


-


1,755




 


1,837


138


3,052


136


193


802


28


6,186




ECL provisions coverage (4)


 


 


 


 


 


 


 


 




Stage 1 (%)


0.10


0.20


0.38


0.12


0.15


0.31


0.05


0.18




Stage 2 (%)


2.77


3.51


4.59


3.30


3.13


8.03


13.64


3.90




Stage 3 (%)


42.62


13.09


41.91


22.75


77.19


39.81


-


40.67




 


1.05


0.79


2.76


0.93


2.03


4.24


0.10


1.66




 
(1)   30 September 2021 data excludes £3.3 billion of gross loans and £148 million of ECL that were reclassified as assets held-for-sale.
(2)   Fair value through other comprehensive income (FVOCI).
(3)   Includes £7 million (30 June 2021 - £6 million; 31 December 2020 - £6 million) related to assets classified as FVOCI.
(4)   ECL provisions coverage is calculated as ECL provisions divided by loans - amortised cost and FVOCI. It is calculated on third party loans and total ECL provisions.
(5)   The table shows gross loans only and excludes amounts that were outside the scope of the ECL framework. Other financial assets within the scope of the IFRS 9 ECL framework were cash and balances at central banks totalling £163.6 billion (30 June 2021 - £150.5 billion; 31 December 2020 - £122.7 billion) and debt securities of £45.7 billion (30 June 2021 - £49.8 billion; 31 December 2020 - £53.8 billion).
 
·   Stage 1 and Stage 2 ECL reduced further in Q3 2021, with sustained improvement in underlying risk metrics underpinned by various government support schemes. The Stage 2 population reduced reflecting lower underlying PDs, resulting in migration of cases back to Stage 1. The Stage 2 population remained above pre-COVID-19 levels.
·   Stage 3 loans and ECL balances reduced slightly in Q3 2021 mainly due to write-off and repayment of defaulted debt. To date, the various COVID-19 related government support schemes have mitigated new flows into default. It is expected that defaults will increase as the various government support schemes unwind.     
·   The economic scenarios driving the ECL requirement, as well as the model performance considerations, were consistent with those described in the NatWest Group 2021 Interim Results.
 
 
 
Risk and capital management
Credit risk continued
Segment analysis - loans
·   Retail Banking - Balance sheet growth since the 2020 year end was mainly in mortgages, with strong mortgage growth particularly in property purchases following the easing of COVID-19 restrictions and the extension of the stamp duty holiday. Unsecured balances increased slightly during Q3 2021 mainly due to increased credit card spending as lockdown restrictions eased. In both the mortgage and unsecured portfolios, selective relaxation of lending criteria was implemented during 2021. Stage 2 balances decreased, reflecting the ongoing stable portfolio performance but was primarily a result of the improved economic outlook during 2021, with reduced PDs driving migration back into Stage 1 after conclusion of the three month significant increase in credit risk "persistence" period. Stage 3 ECL was stable in Q3 2021 as new defaults remained subdued due to the effects of government support schemes. There is an expectation that defaults will increase in the coming months with the ending of the government job retention scheme, but uncertainty remains on the timing and extent of this. 
·   Commercial Banking - Balance sheet reduction during Q3 2021 reflected a decrease in both government support scheme debt and conventional debt. A further reduction is expected in government support scheme exposure during Q4 2021 as repayments continue and government support schemes are closed for new lending. Outside of government support scheme lending, there was a decrease due to strategic reductions in exposure to high risk sectors. Sector appetite continues to be regularly reviewed based on updated financial performance and economic outlook for the sectors. Stage 2 balances continued to fall reflecting positive economic outlook and portfolio performance which is lowering PDs and resulting in exposure migrating back to Stage 1. PD deterioration remains the primary driver of cases in Stage 2. This migration of cases back to Stage 1 also led to a reduction in ECL as more exposure moves to a 12 month expected credit loss assessment from a lifetime loss assessment. Stage 3 balances continued to reduce as the pace of repayment and write-off of existing impaired debt outweighed the effect of new flows to default. The termination of the government BBL, CBIL and CLBIL support schemes, commencement of government support scheme repayments and the expiration of capital repayment holidays could trigger a rise in problem debt. While Wholesale forbearance increased during 2020, there has been a reducing trend in 2021. Payment holidays and covenant waivers were, and remain, the most common forms of forbearance granted.
·   Ulster Bank RoI - Balance sheet reductions reflected loan amortisation outstripping new lending following the announcement of the phased withdrawal of Ulster Bank RoI from the Irish market. Stage 3 balances continued to reduce as new defaults remained subdued. In Q3 2021, £3.2 billion of net performing commercial loans were reclassified as assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Banks p.l.c..
 
Movement in ECL provision
The table below shows the main ECL provision movements.




 


ECL provision




 


£m




At 1 January 2021


6,186




Changes in economic forecasts


(363)




Changes in risk metrics and exposure: Stage 1 and Stage 2


(784)




Changes in risk metrics and exposure: Stage 3


122




Judgemental changes: changes in post model adjustments for Stage 1, Stage 2 and Stage 3


63




Write-offs and other


(772)




At 30 September 2021


4,452




 
·   ECL reduced during 2021 as the economy recovered from COVID-19 and government support schemes mitigated the flow of cases into default. 
·   Economic forecasts were updated for H1 2021 and drove a reduction in ECL on implementation. The positive economics, both forward looking and actual economic outcomes resulted in improving underlying portfolio credit metrics resulting in a reduction in Stage 1 and Stage 2 ECL. 
·   Stage 3 movements remained relatively muted with low level underlying defaults, partially offset by ECL releases on previously impaired exposure. 
·   Judgemental overlays increased during 2021, mainly due to deferred model calibrations where implied ECL releases were not deemed supportable. 
 
 
 
Risk and capital management
Credit risk continued
ECL post model adjustments
The table below shows ECL post model adjustments by segment.
 




 


Retail Banking (1)


Commercial Banking


Ulster Bank RoI (1)


Other


Total




30 September 2021


£m


£m


£m


£m


£m




Deferred model calibrations


111


62


4


-


177




Economic uncertainty


169


469


61


30


729




Other adjustments


22


5


122


3


152




 


302


536


187


33


1,058




 


 


 


 


 


 




30 June 2021




Deferred model calibrations


103


51


(2)


-


152




Economic uncertainty


197


493


114


30


834




Other adjustments


22


19


118


4


163




 


322


563


230


34


1,149




 


 


 


 


 


 




31 December 2020




Deferred model calibrations


34


13


2


-


49




Economic uncertainty


158


526


176


18


878




Other adjustments


20


19


26


3


68




 


212


558


204


21


995




 
(1)  Of which: UK Retail Banking mortgages - £141 million (30 June 2021 - £150 million; 31 December 2020 - £123 million); Ulster Bank RoI mortgages - £181 million (30 June 2021 - £177 million; 31 December 2020 - £139 million); and Ulster Bank RoI Wholesale - £7 million (30 June 2021 - £54 million; 31 December 2020 - £65 million).
 
·   Retail Banking - The post model adjustment for deferred model calibrations increased to £111 million from £103 million at 30 June 2021. This reflected management's continued judgement that the implied ECL decreases that continued to manifest themselves through the standard probability of default model monitoring process during the quarter were not fully supportable. Management retained this view on the basis that underlying portfolio performance has been underpinned by government support schemes and further outcome data is required.
 
The post model adjustment for economic uncertainty decreased to £169 million from £197 million at 30 June 2021. This was primarily due to a post model adjustment release of £28 million relating to the improvement in the underlying risk profile of customers who had accessed payment holiday support and were previously considered higher risk (£55 million was held at 30 June 2021). In addition, NatWest Group continues to retain a holdback of a modelled ECL release of £69 million, again due to the delayed default emergence reflective of the various government support schemes (£15 million related to mortgages and £54 million related to unsecured lending). The H1 2021 overlay also included an ECL uplift on buy-to-let mortgages of £14 million (31 December 2020 - £15 million) to mitigate the risk of a disproportionate credit deterioration in challenging economic circumstances.
 
·   Commercial Banking - The post model adjustment for economic uncertainty included an overlay of £409 million (£450 million across NatWest Group's Wholesale portfolio) based on a judgemental thesis, reflecting concern that the unprecedented nature of COVID-19 could result in longer debt recovery periods and lower values than history suggested, and also the risk of idiosyncratic credit outcomes. The overlay remains unchanged since December 2020. It also included an overlay of £15 million in respect of elevated concerns around borrowers' ability to refinance facilities at the end of the contractual term. This reduced from £23 million at H1 2021. Additionally, it included overlays to address the effects of government support schemes.
 
There was also a post model adjustment for deferred model calibrations on the business banking portfolio reflecting management's judgement that the beneficial modelling effect, and implied ECL decrease, was not supportable while portfolio performance was under-pinned by the effect of various government support schemes.
 
·   Ulster Bank RoI - The post model adjustment for deferred model calibration increased by £6 million from H1 2021. Similar to Retail Banking, this post model adjustment reflected management's view that implied ECL decreases observable through the model monitoring process were not fully supportable. Included in H1 2021 other adjustments, was a post model adjustment of £118 million to reflect judgement that continuing actions on the phased withdrawal of Ulster Bank RoI from the Irish market will lead to higher/earlier crystallisation of losses. This post model adjustment increased by £4 million to £122 million for Q3 2021. In Q3 2021, the economic uncertainty adjustment decreased from £114 million to £61 million. This reduction reflected post-model adjustments of £56 million allocated to assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Bank p.l.c..
 
 
Risk and capital management
Credit risk continued
Sector analysis - COVID-19 impact
The table below shows ECL, by stage, for the Personal portfolio and key sectors of the Wholesale portfolio, that continue to be affected by COVID-19. 




 


 


Off-balance sheet


 


 




 


Loans - amortised cost & FVOCI


Loan


 


Contingent


 


ECL provisions 




 


Stage 1


Stage 2


Stage 3


Total


commitments


 


liabilities


 


Stage 1


Stage 2


Stage 3


Total




30 September 2021


£m


£m


£m


£m


£m


 


£m


 


£m


£m


£m


£m




Personal


194,957


14,036


2,925


211,918


38,867


 


62


 


170


716


1,161


2,047




  Mortgages


185,621


10,986


2,207


198,814


15,444


 


-


 


45


225


559


829




  Credit cards


2,844


909


82


3,835


15,295


 


-


 


56


172


60


288




  Other personal


6,492


2,141


636


9,269


8,128


 


62


 


69


319


542


930




Wholesale


132,125


27,449


2,508


162,082


84,490


 


4,323


 


212


1,183


1,010


2,405




  Property


27,657


4,896


1,108


33,661


16,620


 


461


 


52


194


402


648




  Financial institutions


48,428


2,251


11


50,690


15,691


 


976


 


18


93


6


117




  Sovereign


5,609


200


8


5,817


1,222


 


2


 


17


1


2


20




  Corporate


50,431


20,102


1,381


71,914


50,957


 


2,884


 


125


895


600


1,620




    Of which:


 


 


 


 


 


 


 


 


 


 


 


 




        Airlines and aerospace 


765


859


75


1,699


1,573


 


208


 


2


45


30


77




        Automotive


4,486


1,702


20


6,208


3,984


 


72


 


12


34


12


58




        Health


3,291


1,669


125


5,085


622


 


12


 


10


74


43


127




        Land transport and logistics


3,243


1,305


46


4,594


3,081


 


231


 


5


62


20


87




        Leisure


3,237


4,771


308


8,316


2,151


 


111


 


11


321


134


466




        Oil and gas


1,173


349


53


1,575


1,469


 


403


 


2


21


30


53




        Retail


6,133


1,958


152


8,243


5,211


 


419


 


11


46


68


125




Total


327,082


41,485


5,433


374,000


123,357


 


4,385


 


382


1,899


2,171


4,452




 




 


 


 


 


 


 


 


 


 


 


 


 


 




30 June 2021


 


 


 


 


 


 


 


 


 


 


 


 




Personal


186,256


20,414


3,029


209,699


37,504


 


42


 


152


786


1,141


2,079




  Mortgages


177,630


16,750


2,328


196,708


12,822


 


3


 


43


249


561


853




  Credit cards


2,562


1,083


82


3,727


14,470


 


-


 


47


183


59


289




  Other personal


6,064


2,581


619


9,264


10,212


 


39


 


62


354


521


937




Wholesale


130,445


32,774


2,674


165,893


85,724


 


4,348


 


281


1,514


1,051


2,846




  Property


28,105


6,782


1,054


35,941


17,083


 


508


 


93


313


391


797




  Financial institutions


47,694


2,361


17


50,072


14,659


 


926


 


21


115


7


143




  Sovereign


5,596


153


9


5,758


1,356


 


2


 


18


1


2


21




  Corporate


49,050


23,478


1,594


74,122


52,626


 


2,912


 


149


1,085


651


1,885




    Of which:


 


 


 


 


 


 


 


 


 


 


 


 




        Airlines and aerospace 


635


1,017


60


1,712


1,805


 


209


 


2


33


27


62




        Automotive


4,214


1,617


201


6,032


3,897


 


98


 


15


60


14


89




        Health


3,136


2,276


123


5,535


650


 


12


 


12


116


47


175




        Land transport and logistics


3,131


1,578


53


4,762


3,061


 


170


 


7


83


30


120




        Leisure


3,264


5,578


305


9,147


2,106


 


123


 


15


323


142


480




        Oil and gas


1,005


415


60


1,480


1,663


 


339


 


3


11


31


45




        Retail


6,133


2,303


191


8,627


5,339


 


468


 


13


112


80


205




Total


316,701


53,188


5,703


375,592


123,228


 


4,390


 


433


2,300


2,192


4,925




 


 


 


 


 


 


 


 


 


 


 


 


 




31 December 2020


 


 


 


 


 


 


 


 


 


 


 


 




Personal


166,548


34,352


3,288


204,188


38,960


 


45


 


171


996


1,228


2,395




  Mortgages


158,387


29,571


2,558


190,516


14,554


 


3


 


51


319


635


1,005




  Credit cards


2,411


1,375


109


3,895


14,262


 


-


 


53


225


76


354




  Other personal


5,750


3,406


621


9,777


10,144


 


42


 


67


452


517


1,036




Wholesale


120,576


44,565


3,070


168,211


89,845


 


4,785


 


348


2,085


1,358


3,791




  Property


23,733


13,021


1,322


38,076


16,829


 


568


 


123


507


545


1,175




  Financial institutions


44,002


3,624


17


47,643


15,935


 


1,076


 


23


90


8


121




  Sovereign


4,751


204


4


4,959


1,585


 


2


 


14


1


2


17




  Corporate


48,090


27,716


1,727


77,533


55,496


 


3,139


 


188


1,487


803


2,478




    Of which:


 


 


 


 


 


 


 


 


 


 


 


 




        Airlines and aerospace 


753


1,213


41


2,007


1,888


 


215


 


2


42


25


69




        Automotive


4,383


1,759


161


6,303


4,205


 


102


 


17


63


17


97




        Health


2,694


2,984


131


5,809


616


 


14


 


13


164


48


225




        Land transport and logistics


2,868


1,823


111


4,802


3,782


 


197


 


8


98


32


138




        Leisure


3,299


6,135


385


9,819


2,199


 


125


 


22


439


204


665




        Oil and gas


1,178


300


83


1,561


2,225


 


346


 


4


20


59


83




        Retail


6,702


2,282


187


9,171


5,888


 


512


 


18


112


101


231




Total


287,124


78,917


6,358


372,399


128,805


 


4,830


 


519


3,081


2,586


6,186




 
 
 
Risk and capital management
Credit risk continued
Sector analysis - COVID-19 impact
·   Personal - Mortgage balances increased during 2021 with strong purchase demand in the UK assisted by the extension of the stamp duty holiday. Unsecured lending balances reduced during 2021, however as noted earlier, increased slightly in Q3 2021 as COVID-19 restrictions eased and lending criteria were selectively relaxed. As also noted previously, ECL in Stage 2 decreased due to migrations back to Stage 1 following the effects of the economic scenarios used since H1 2021 and continued stable portfolio performance supporting improved risk metrics. The total ECL coverage requirements were broadly stable during Q3 2021.
·   Wholesale - On and off-balance sheet exposure reduced during the quarter with lower demand for new lending due to uncertainty in the economy and many customers able to utilise the excess liquidity created by various government support schemes. Additionally, there was a £0.7 billion decrease in government support scheme lending following scheduled repayment activity. When the government BBL, CBIL and CLBIL support schemes closed, approximately 317,000 applications across all the schemes had been approved, totalling £14.7 billion in new lending, of which, £13.4 billion had been drawdown. Approximately £1.1 billion has since been repaid. 62% of the government support scheme lending by value had been granted through BBLS. Construction (in Property), Retail and Leisure remain the top three sectors for borrowers accessing the government support schemes. Uptake for the subsequent Recovery Loan Scheme remains muted. Wholesale credit risk outlook is still uncertain despite improving economic metrics. The termination of the government BBL, CBIL and CLBIL support schemes, commencement of government support scheme repayments and the expiration of capital repayment holidays could trigger a rise in problem debt. Credit risk measures continue to reflect a more stable environment but horizon risks remain, including issues in the supply chain and rising energy costs which are contributing to overall inflationary pressures. Sector appetite continued to be regularly reviewed and where appropriate adjusted, for those sectors most affected by COVID-19. Stage 2 balances continued to reduce reflecting positive economic outlook and portfolio performance. In Q3 2021, £3.2 billion of net performing commercial loans were reclassified as assets held-for-sale, for which Ulster Bank RoI has entered a binding agreement to sell to Allied Irish Banks p.l.c..
 
 
 
 
Risk and capital management
Credit risk continued
Wholesale support schemes
The table below shows the uptake of the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) by Wholesale customers which ended for new applicants on 31 March 2021. Sectors shown are those that continue to be affected by COVID-19. Drawdown amounts reflect total balances net of repayments. These include the effects of further drawdowns, term extensions, and other loan adjustments.




 


BBLS


 


CBILS


 


CLBILS




 


Approved


Drawdown 


% of BBLS to


 


Approved


Drawdown 


% of CBILS to


 


Approved


Drawdown 


% of CLBILS to




30 September 2021


volume


amount (£m)


sector loans


 


volume


amount (£m)


sector loans


 


volume


amount (£m)


sector loans




Wholesale lending by sector


 


 


 


 


 


 


 


 


 


 


 




  Airlines and aerospace


260


6


0.35%


 


18


9


0.53%


 


4


16


0.94%




  Automotive


12,839


389


6.27%


 


578


128


2.06%


 


26


30


0.48%




  Education


2,050


50


3.37%


 


121


66


4.44%


 


10


32


2.15%




  Health


10,248


282


5.55%


 


630


95


1.87%


 


3


19


0.37%




  Land transport and logistics


8,996


243


5.29%


 


399


93


2.02%


 


1


-


-




  Leisure


32,721


931


11.20%


 


2,182


533


6.41%


 


39


194


2.33%




  Oil and gas


329


9


0.57%


 


15


7


0.44%


 


-


-


-




  Retail


32,652


1,007


12.22%


 


1,655


370


4.49%


 


26


74


0.90%




  Property 


71,422


1,899


5.64%


 


2,491


632


1.88%


 


37


88


0.26%




  Other (including Business 


 


 


 


 


 


 


 


 


 


 


 




    Banking)


127,787


3,029


3.32%


 


8,918


1,762


1.93%


 


84


300


0.33%




Total


299,304


7,845


4.84%


 


17,007


3,695


2.28%


 


230


753


0.46%




 
(1)  The Recovery Loan Scheme, a successor to the closed BBLS, CBILS, and CLBILS was launched on 6 April 2021. Uptake of the new scheme was minimal with 364 customers having drawn down £30 million as at 30 September 2021.
 

 
 
 
Risk and capital management
Capital, liquidity and funding risk
Introduction 
NatWest Group continually ensures a comprehensive approach is taken to the management of Capital, Liquidity and Funding,
underpinned by frameworks, risk appetite and policies, to manage and mitigate Capital, Liquidity and Funding risks. The framework ensures the tools and capability are in place to facilitate the management and mitigation of risk ensuring that NatWest Group operates within its regulatory requirements and risk appetite.
 
Within the 2020 Annual Report and Accounts, NatWest Group outlined a number of COVID-19 specific relief measures which impacted capital and leverage ratios during the year, one of which was a temporary change to the Prudential Valuation Adjustment (PVA). From 1 January 2021, the aggregation factor reverted to 50% from 66%. This has increased NatWest Group's PVA deduction by c.£120 million. 
 
Key developments since December 2020
 




CET1 (CRR end-point)


The CET1 ratio increased by 20 basis points to 18.7%. The increase is primarily due to the attributable profit in the period of £2.5 billion and a reduction in RWAs, partially offset by the impact of the directed buy back and associated pension contribution of £1.2 billion (72 bps), foreseeable charges and pension contributions of £0.8 billion (48 bps), a £0.8 billion decrease in the IFRS 9 transitional adjustment (45 bps) and other reserve movements in the period.




Total RWAs


Total RWAs decreased 6.2% to £159.8 billion mainly reflecting decreases in credit risk RWAs of £7.6 billion, market risk RWAs of £1.4 billion and operational risk RWAs of £0.9 billion following the annual recalculation in Q1 2021. The decrease in credit risk RWAs was mainly driven by reductions in Commercial Banking and Ulster Bank RoI. Market risk RWAs decreased £1.4 billion predominantly due to the transition from LIBOR to alternative risk free rates. Counterparty credit risk RWAs reduced by £0.6 billion as a result of reduced exposures in NatWest Markets.




UK leverage ratio


The UK leverage ratio decreased c.50 basis points to 5.9% driven by a £2.7 billion decrease in Tier 1 capital.




Liquidity portfolio


The liquidity portfolio increased by £15.4 billion in the period to £277.8 billion at Q3 2021, with primary liquidity increasing by £20.6 billion to £190.9 billion. The increase in primary liquidity was mainly driven by customer deposits, cash proceeds from new issuances and the methodology change to include UBIDAC cash at central banks. This is offset by the TFSME repayment, buy back of shares owned by UK Government, pension fund contributions, liability management exercise, increased lending and the purchase of mortgages from Metro Bank. Secondary liquidity is lower due to a reduction of collateral pre-positioned with the Bank of England due to monthly repayments of underlying assets.




 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Maximum Distributable Amount (MDA) and Minimum Capital Requirements 
NatWest Group is subject to minimum capital requirements relative to RWAs. The table below summarises the minimum capital requirements (the sum of Pillar 1 and Pillar 2A), and the additional capital buffers which are held in excess of the regulatory minimum requirements and are usable in stress.   
 
Where the CET1 ratio falls below the sum of the minimum capital and the combined buffer requirement, there is a subsequent automatic restriction on the amount available to service discretionary payments (including AT1 coupons), known as the MDA. Note that different requirements apply to individual legal entities or sub-groups and that the table shown does not reflect any incremental PRA buffer requirements, which are not disclosable.
 
The current capital position provides significant headroom above both our minimum requirements and our MDA threshold requirements.
 




Type


CET1


Total Tier 1


Total capital




Pillar 1 requirements


4.5%


6.0%


8.0%




Pillar 2A requirements


2.0%


2.7%


3.6%




Minimum Capital Requirements


6.5%


8.7%


11.6%




Capital conservation buffer


2.5%


2.5%


2.5%




Countercyclical capital buffer (1) 


-


-


-




MDA threshold (2)


9.0%


 


n/a


n/a




Subtotal


9.0%


 


11.2%


14.1%




Capital ratios at 30 September 2021


18.7%


21.1%


24.6%




Headroom (3) 


9.7%


9.9%


10.5%




 
(1)   In response to COVID-19, many countries reduced their CCyB rates. Most notably for NatWest Group, the Financial Policy Committee reduced the UK rate from 1% to 0% and the CBI also announced a reduction of the Republic of Ireland rate from 1% to 0%.
(2)   Pillar 2A requirements for NatWest Group are set on a nominal capital basis.
(3)   The headroom does not reflect excess distributable capital and may vary over time.
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Capital and leverage ratios
The table below sets out the key capital and leverage ratios.




 


 


 


 




 


30 September


30 June


31 December




 


2021


2021


2020




Capital adequacy ratios (1)


%


%


%




CET1


18.7


18.2


18.5




Tier 1


21.1


21.8


21.4




Total


24.6


24.9


24.5




 


 


 


 




Capital


£m


£m


£m




Tangible equity


30,769


30,751


31,712




 


 


 


 




Prudential valuation adjustment


(264)


(285)


(286)




Deferred tax assets


(765)


(832)


(760)




Own credit adjustments


27


22


(1)




Pension fund assets


(385)


(384)


(579)




Cash flow hedging reserve


254


77


(229)




Foreseeable ordinary dividends


(402)


(500)


(364)




Foreseeable charges - on-market ordinary share buy back programme


(462)


(750)


-




Foreseeable pension contributions


(354)


(174)


(266)




Prudential amortisation of software development costs


476


537


473




Adjustments under IFRS 9 transitional arrangements


973


1,198


1,747




Other adjustments for regulatory purposes


(5)


-


-




Total deductions


(907)


(1,091)


(265)




 


 


 


 




CET1 capital


29,862


29,660


31,447




AT1 capital


3,875


5,916


4,983




Tier 1 capital


33,737


35,576


36,430




Tier 2 capital


5,522


4,973


5,255




Total regulatory capital


39,259


40,549


41,685




 


 


 


 




Risk-weighted assets


 


 


 




Credit risk


122,270


122,475


129,914




Counterparty credit risk


8,475


8,619


9,104




Market risk


7,979


10,845


9,362




Operational risk


21,031


21,031


21,930




Total RWAs


159,755


162,970


170,310




 


 


 


 




Leverage


 


 


 




Cash and balances at central banks


164,851


151,511


124,489




Trading assets


66,357


70,195


68,990




Derivatives


103,770


109,556


166,523




Financial assets


417,273


422,356


422,647




Other assets


26,027


22,240


16,842




Total assets


778,278


775,858


799,491




Derivatives


 


 


 




  - netting and variation margin


(107,160)


(112,441)


(172,658)




  - potential future exposures


36,382


37,468


38,171




Securities financing transactions gross up


1,903


1,486


1,179




Other off balance sheet items


44,292


43,979


45,853




Regulatory deductions and other adjustments


(14,340)


(13,831)


(8,943)




Claims on central banks


(161,688)


(148,644)


(122,252)




Exclusion of bounce back loans


(7,845)


(8,239)


(8,283)




UK leverage exposure


569,822


575,636


572,558




UK leverage ratio % (2)


5.9


6.2


6.4




                                                        
 
(1)   Based on CRR end-point including an IFRS 9 transitional adjustment of £1.0 billion (30 June 2021 - £1.2 billion, 31 December 2020 - £1.7 billion). Excluding this adjustment, the CET1 ratio would be 18.1% (30 June 2021 - 17.5%, 31 December 2020 - 17.5%). The amended article for the prudential treatment of software assets was implemented in December 2020. Excluding this adjustment the CET1 ratio at 30 September 2021 would be 18.4% (30 June 2021 - 17.9%, 31 December 2020 - 18.2%).
(2)   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 an IFRS 9 transitional adjustment, the UK leverage ratio would be 5.8% (30 June 2021 - 6.0%, 31 December 2020 - 6.1%). The amended article for the prudential treatment of software assets was implemented in December 2020. Excluding this adjustment, the UK leverage ratio at 30 September 2021 would be 5.8% (30 June 2021 - 6.1%, 31 December 2020 - 6.3%).
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Capital flow statement 
The table below analyses the movement in CET1, AT1 and Tier 2 capital for the nine months ended 30 September 2021.




 


CET1


AT1


Tier 2


Total




 


£m


£m


£m


£m




At 1 January 2021


31,447


4,983


5,255


41,685




Attributable profit for the period


2,516


-


-


2,516




Ordinary interim dividend paid 


(348)


-


-


(348)




Own credit


28


-


-


28




Share capital and reserve movements in respect of employee share schemes


41


-


-


41




Directed buy back


(1,231)


-


-


(1,231)




On-market ordinary share buy back programme


(750)


-


-


(750)




Foreseeable ordinary dividends


(402)


-


-


(402)




Foreseeable pension contributions


(354)


-


-


(354)




Foreign exchange reserve


(283)


-


-


(283)




FVOCI reserve


(123)


-


-


(123)




Goodwill and intangibles deduction


(65)


-


-


(65)




Deferred tax assets


(5)


-


-


(5)




Prudential valuation adjustments


22


-


-


22




New issues of capital instruments


-


933


1,635


2,568




Redemption of capital instruments


150


(2,041)


(1,456)


(3,347)




Net dated subordinated debt instruments


-


-


76


76




Foreign exchange movements


-


-


26


26




Adjustment under IFRS 9 transitional arrangements


(774)


-


-


(774)




Other movements


(7)


-


(14)


(21)




At 30 September 2021


29,862


3,875


5,522


39,259




 
·    CET1 decrease is primarily due to the impact of the directed buy back and associated pension contribution of £1.2 billion, foreseeable dividends and pension contributions of £0.8 billion, a £0.8 billion decrease in the IFRS 9 transitional adjustment and other reserve movements. This is partially offset by an attributable profit in the period. At H1 2021, an on-market ordinary share buy back programme of £750 million was announced resulting in a foreseeable charge to capital, of which £288 million has been executed in the third quarter with the remaining £462 million remaining foreseeable at 30 September 2021.
·    AT1 reflects the £400 million 4.5% Reset Perpetual Subordinated Contingent Convertible Notes issued in March 2021 and $750 million 4.600% Reset Perpetual Subordinated Contingent Convertible notes in June 2021. It also reflects a $2.7 billion redemption of 8.625% Perpetual Subordinated Contingent Convertible Additional notes in August 2021.
·    The Tier 2 movement is primarily due to the redemption of own debt of £1.5 billion in March 2021, a £1.0 billion issuance of subordinated Tier 2 notes in May 2021 and a €750 million issuance of subordinated Tier 2 notes in September 2021.
 
 
 
 
Risk and capital management
Capital, liquidity and funding risk continued
Risk-weighted assets 
The table below analyses the movement in RWAs during the period, by key drivers.
 




 


 


Counterparty


 


Operational


 




 


Credit risk


credit risk


Market risk


 risk


Total




 


£bn


£bn


£bn


£bn


£bn




At 1 January 2021


129.9


9.1


9.4


21.9


170.3




Foreign exchange movement


(0.8)


(0.1)


-


-


(0.9)




Business movement


(4.0)


(0.4)


1.9


(0.9)


(3.4)




Risk parameter changes (1)


(1.4)


(0.1)


-


-


(1.5)




Model updates


(0.4)


-


(3.3)


-


(3.7)




Other movements (2)


(0.8)


-


-


-


(0.8)




Acquisitions and disposals (3)


(0.2)


-


-


-


(0.2)




At 30 September 2021


122.3


8.5


8.0


21.0


159.8




 
The table below analyses segmental RWAs.
 




 


 


 


 


International Banking & Markets


 


Central


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster


items &


 




 


Banking


Banking


Banking


International


Markets


Bank RoI


 other


Total




Total RWAs


£bn


£bn


£bn


£bn


£bn


£bn


£bn


£bn




At 1 January 2021


36.7


10.9


75.1


7.5


26.9


11.8


1.4


170.3




Foreign exchange movement


-


-


(0.3)


-


(0.2)


(0.4)


-


(0.9)




Business movement


-


0.5


(6.5)


0.7


2.2


(0.7)


0.4


(3.4)




Risk parameter changes (1)


(0.1)


-


(0.8)


(0.1)


(0.1)


(0.5)


0.1


(1.5)




Model updates


-


-


(0.4)


-


(3.3)


-


-


(3.7)




Other movements (2)


-


-


(0.7)


-


(0.1)


-


-


(0.8)




Acquisitions and disposals (3)


-


-


-


-


-


(0.2)


-


(0.2)




At 30 September 2021


36.6


11.4


66.4


8.1


25.4


10.0


1.9


159.8




 


 


 


 


 


 


 


 


 




Credit risk


29.4


10.0


58.1


7.1


6.7


9.1


1.9


122.3




Counterparty credit risk


0.2


0.1


0.3


-


7.9


-


-


8.5




Market risk


-


-


-


-


8.0


-


-


8.0




Operational risk


7.0


1.3


8.0


1.0


2.8


0.9


-


21.0




Total RWAs


36.6


11.4


66.4


8.1


25.4


10.0


1.9


159.8




 
(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)   The movements in other include the following:
a.     RWA benefit of £0.8 billion as a result of the CRR COVID-19 amendment for Infrastructure Supporting Factor.
b.     Asset transfers from NatWest Markets to Commercial.
(3)   The movement in acquisitions & disposals reflected a portfolio sale of non-performing loans in Ulster Bank RoI.
 




●


Total RWAs decreased to £159.8 billion during the period due to the following:
o  Credit risk RWAs decreased by £7.6 billion due to repayments and expired facilities in Commercial Banking and reductions in business lending and mortgages in Ulster Bank RoI in line with the announced phased withdrawal.
o  Operational risk RWAs decreased by £0.9 billion following the annual recalculation in Q1 2021.
o  Counterparty credit risk RWAs reduced by £0.6 billion, mainly reflecting reduced IMM exposures in NatWest Markets.
o  Market Risk RWAs decreased by £1.4 billion primarily driven by a decrease in modelled market risk reflecting a reduction in tenor basis risk in sterling flow rates, related to the transition from LIBOR to alternative risk-free rates.
 
 




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




 


Liquidity value




 


30 September 2021


 


30 June 2021


 


31 December 2020




 


NatWest


 


NatWest


 


NatWest




 


Group (1)


 


Group


 


Group 




 


£m


 


£m


 


£m




Cash and balances at central banks


161,763


 


148,904


 


115,820




  AAA to AA- rated governments


25,699


 


34,639


 


50,901




  A+ and lower rated governments


40


 


38


 


79




  Government guaranteed issuers, public sector entities and


 


 


 


 


 




        government sponsored entities


265


 


265


 


272




   International organisations and multilateral development banks


3,027


 


3,175


 


3,140




LCR level 1 bonds


29,031


 


38,117


 


54,392




LCR level 1 assets


190,794


 


187,021


 


170,212




LCR level 2 assets


118


 


116


 


124




Non-LCR eligible assets


-


 


-


 


-




Primary liquidity 


190,912


 


187,137


 


170,336




Secondary liquidity (2)


86,856


 


89,909


 


91,985




Total liquidity value


277,768


 


277,046


 


262,321




 




(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)
(3)


Comprises assets eligible for discounting at the Bank of England and other central banks.
Following a change in methodology in our internal stressed outflow coverage metric, cash placed at Central Bank of Ireland within UBIDAC is now reported in the liquidity portfolio.





 
 
 
Condensed consolidated income statement for the period ended 30 September 2021 (unaudited)
 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m 


£m 


 


£m 


£m 


£m 




Interest receivable


7,166 


7,702 


 


2,384


2,433 


2,512 




Interest payable


(1,296)


(1,924)


 


(430)


(448)


(586)




Net interest income 


5,870 


5,778 


 


1,954


1,985 


1,926 




Fees and commissions receivable


1,982 


2,081 


 


670


665 


651 




Fees and commissions payable


(425)


(591)


 


(140)


(144)


(199)




Income from trading activities


326 


1,054 


 


95


71 


252 




Other operating income 


340 


(61)


 


195


83 


(207)




Non-interest income


2,223 


2,483 


 


820


675 


497 




Total income


8,093 


8,261 


 


2,774


2,660 


2,423 




Staff costs


(2,794)


(2,937)


 


(892)


(917)


(982)




Premises and equipment


(765)


(902)


 


(263)


(254)


(251)




Other administrative expenses


(1,291)


(1,081)


 


(588)


(326)


(385)




Depreciation and amortisation


(613)


(644)


 


(199)


(209)


(196)




Operating expenses


(5,463)


(5,564)


 


(1,942)


(1,706)


(1,814)




Profit before impairment releases/(losses)


2,630 


2,697 


 


832


954 


609 




Impairment releases/(losses)


949 


(3,112)


 


242


605 


(254)




Operating profit/(loss) before tax


3,579 


(415)


 


1,074


1,559 


355 




Tax (charge)/credit


(765)


1 


 


(330)


(202)


(207)




Profit/(loss) for the period


2,814 


(414)


 


744


1,357 


148 




 


 


 


 


 


 


 




Attributable to:


 


 


 


 


 


 




Ordinary shareholders


2,516 


(644)


 


674


1,222 


61 




Preference shareholders


14 


21 


 


5


4 


5 




Paid-in equity holders


241 


272 


 


63


91 


80 




Non-controlling interests


43 


(63)


 


2


40 


2 




 


2,814 


(414)


 


744


1,357 


148 




Earnings per ordinary share 


21.5p


(5.3p)


 


5.8p


10.6p


0.5p




Earnings per ordinary share - fully diluted


21.4p


(5.3p)


 


5.8p


10.5p


0.5p




 
(1)    Other operating income includes £138 million loss on redemption of own debt for the nine months ended 30 September 2021; Q3 2021 - £nil million (nine months ended 30 September 2020 - £324 million loss; Q2 2021 - £20 million loss; Q3 2020 - £324 million loss).
 
 
Condensed consolidated statement of comprehensive income for the period ended 30 September 2021 (unaudited)
 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m


£m


 


£m


£m


£m




Profit/(loss) for the period


2,814


(414)


 


744


1,357


148




Items that do not qualify for reclassification


 


 


 


 


 


 




Remeasurement of retirement benefit schemes (1)


(740)


54


 


(6)


(226)


(14)




Changes in fair value of credit in financial liabilities 


 


 


 


 


 


 




  designated at fair value through profit or loss (FVTPL) 


 


 


 


 


 


 




    due to own credit risk


(29)


20


 


(4)


(18)


(63)




Fair value through other comprehensive income (FVOCI) 


 


 


 


 


 


 




   financial assets


11


(43)


 


3


7


77




Tax (1)


185


13


 


3


45


13




 


(573)


44


 


(4)


(192)


13




Items that do qualify for reclassification 


 


 


 


 


 


 




FVOCI financial assets


(145)


(37)


 


 -


(27)


74




Cash flow hedges


(610)


364


 


(245)


(7)


(53)




Currency translation


(267)


425


 


21


55


(150)




Tax 


130


(85)


 


65


(48)


94




 


(892)


667


 


(159)


(27)


(35)




Other comprehensive (loss)/income after tax


(1,465)


711


 


(163)


(219)


(22)




Total comprehensive income for the period


1,349


297


 


581


1,138


126




 


 


 


 


 


 


 




Attributable to:


 


 


 


 


 


 




Ordinary shareholders


1,047


51


 


512


998


37




Preference shareholders


14


21


 


5


4


5




Paid-in equity holders


241


272


 


63


91


80




Non-controlling interests


47


(47)


 


1


45


4




 


1,349


297


 


581


1,138


126




 
(1)   Following the purchase of ordinary shares from UKGI in March 2021, NatWest Group contributed £500 million to its main pension scheme in line with the memorandum of understanding announced on 17 April 2018. After tax relief, this contribution reduced total equity by £365 million. There was also a pre tax loss of £176 million (€205 million) in relation to the interim re-measurement of the Ulster Bank Pension Scheme (Republic of Ireland), as a result of significant movements in underlying actuarial assumptions (June 2020: net gain of £90 million (€101 million)). In line with our policy, the present value of defined benefit obligations and the fair value of plan assets at the end of the interim reporting period, are assessed to identity significant market fluctuations and one-off events since the end of the prior financial year.

 

Condensed consolidated balance sheet as at 30 September 2021 (unaudited)




 


30 September


31 December




2021


2020




 


£m


£m 




Assets


 


 




Cash and balances at central banks


164,851


124,489




Trading assets


66,357


68,990




Derivatives


103,770


166,523




Settlement balances


8,140


2,297




Loans to banks - amortised cost


9,251


6,955




Loans to customers - amortised cost


361,022


360,544




Other financial assets


47,000


55,148




Intangible assets


6,723


6,655




Other assets


11,164


7,890




Total assets


778,278


799,491




 


 


 




Liabilities


 


 




Bank deposits 


17,375


20,606




Customer deposits


476,319


431,739




Settlement balances


7,792


5,545




Trading liabilities


70,946


72,256




Derivatives


98,560


160,705




Other financial liabilities


47,857


45,811




Subordinated liabilities


8,675


9,962




Notes in circulation


3,037


2,655




Other liabilities


5,830


6,388




Total liabilities


736,391


755,667




 


 


 




Equity


 


 




Ordinary shareholders' interests


37,492


38,367




Other owners' interests


4,384


5,493




Owners' equity


41,876


43,860




Non-controlling interests


11


(36)




Total equity


41,887


43,824




Total liabilities and equity


778,278


799,491




 

 

Condensed consolidated statement of changes in equity for the period ended 30 September 2021 (unaudited)
 




 


Share 


 


 


 


 


 


 




capital and


 


 


 


Total


Non


 




 


statutory


Paid-in


Retained


Other


owners'


controlling


Total 




 


reserves (1)


equity


earnings


reserves*


equity


 interests


equity




 


£m


£m


£m


£m


£m


£m


£m




At 1 January 2021


13,216


4,999


12,567


13,078


43,860


(36)


43,824




Profit attributable to ordinary shareholders


 


 


 


 


 


 


 




    and other equity owners  


-


-


2,771


-


2,771


43


2,814




Other comprehensive income


 


 


 


 


 


 


 




  - Realised gains/(losses) in period 


 


 


 


 


 


 


 




        on FVOCI equity shares 


-


-


2


(2)


-


-


-




  - Remeasurement of retirement 


 


 


 


 


 


 


 




        benefit schemes (2)


-


-


(740)


-


(740)


-


(740)




  - Changes in fair value of credit in financial 


 


 


 


 


 


 


 




        liabilities designated at FVTPL due 


 


 


 


 


 


 


 




         to own credit risk


-


-


(29)


-


(29)


-


(29)




  - Unrealised losses: FVOCI and equity shares


-


-


-


(65)


(65)


-


(65)




  - Unrealised losses: cash flow hedges


-


-


-


(501)


(501)


-


(501)




  - Foreign exchange reserve movement


-


-


-


(271)


(271)


4


(267)




  - Amount transferred from equity to earnings


-


-


-


(178)


(178)


-


(178)




  - Tax


-


-


187


128


315


-


315




Ordinary share dividends paid


-


-


(693)


-


(693)


-


(693)




Preference share and paid-in equity


 


 


 


 


 


 


 




  dividends paid


-


-


(255)


-


(255)


-


(255)




Shares repurchased during the period (3,4)


-


-


(1,036)


-


(1,036)


-


(1,036)




Shares and securities issued during the period (5)


87


937


-


-


1,024


-


1,024




Reclassification of paid-in equity (6)


-


(2,046)


-


-


(2,046)


-


(2,046)




Redemption of paid-in equity (7)


-


-


150


-


150


-


150




Redemption of preference shares


24


-


(24)


-


-


-


-




Share-based payments


-


-


(65)


-


(65)


-


(65)




Movement in own shares held (3)


(365)


-


-


-


(365)


-


(365)




At 30 September 2021


12,962


3,890


12,835


12,189


41,876


11


41,887




 


 


 


 


 


 


 


 




 


 


 


 


 


 


30 September




 


 


 


 


 


 


 


2021




Attributable to:


 


 


 


 


£m




Ordinary shareholders


 


 


 


 


 


 


37,492




Preference shareholders


 


 


 


 


 


 


494




Paid-in equity holders


 


 


 


 


 


 


3,890




Non-controlling interests


 


 


 


 


 


 


11




 


 


 


 


 


 


 


41,887




*Other reserves consists of:


 


 


 


 


 


 




Merger reserve


 


 


 


 


 


 


10,881




FVOCI reserve


 


 


 


 


 


 


237




Cash flow hedging reserve


 


 


 


 


 


 


(254)




Foreign exchange reserve


 


 


 


 


 


 


1,325




 


 


 


 


 


 


 


12,189




 
(1)   Share capital and statutory reserves includes share premium, capital redemption reserve and own shares held.
(2)   Following the purchase of ordinary shares from UKGI in March 2021, NatWest Group contributed £500 million to its main pension scheme in line with the memorandum of understanding announced on 17 April 2018. After tax relief, this contribution reduced total equity by £365 million. There was also a pre tax loss of £176 million (€205 million) in relation to the interim re-measurement of the Ulster Bank Pension Scheme (Republic of Ireland), as a result of significant movements in underlying actuarial assumptions (June 2020: net gain of £90 million (€101 million)). In line with our policy, the present value of defined benefit obligations and the fair value of plan assets at the end of the interim reporting period, are assessed to identity significant market fluctuations and one-off events since the end of the prior financial year.
(3)   In March 2021, there was an agreement with HM Treasury to buy 591 million ordinary shares in the Company from UK Government Investments Ltd (UKGI), at 190.5p per share for the total consideration of £1.13 billion. NatWest Group cancelled 391 million of the purchased ordinary shares, amounting to £744 million excluding fees, and held the remaining 200 million in own shares held, amounting to £381 million excluding fees. The nominal value of the share cancellation has been transferred to the capital redemption reserve.
(4)   In line with the announcement in July 2021, NatWest Group plc repurchased and cancelled 137.1 million shares for total consideration of £292.2 million excluding fees. Of the 137.1 million shares bought back, 2.9 million shares were settled and cancelled in October 2021. The nominal value of the share cancellations has been transferred to the capital redemption reserve with the share premium element to retained earnings.
(5)   AT1 capital notes totalling US$750 million less fees were issued in June 2021 (£400 million less fees were issued in March 2021 and US$1.49 billion less fees were issued in June 2020).
(6)   In July 2021, paid-in equity reclassified to liabilities as the result of a call in August 2021 of US$2.65 billion AT1 Capital notes.
(7)   The redemption of paid-in equity includes a tax credit of £16 million.
 
 
 

 

Notes
1. Basis of preparation 
The condensed consolidated financial statements should be read in conjunction with NatWest Group plc 2020 Annual Report and Accounts which were prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. 
 
Going concern
Having reviewed NatWest Group's forecasts, projections, the potential impact of COVID-19, and other relevant evidence, the directors have a reasonable expectation that NatWest Group will continue in operational existence for a period of not less than twelve months. Accordingly, the results for the period ended 30 September 2021 have been prepared on a going concern basis.
 
2. Accounting policies 
NatWest Group's principal accounting policies are as set out on pages 264 to 268 of the NatWest Group plc 2020 Annual Report and Accounts. Changes to accounting policies from 1 January 2021 had no material effect on NatWest Group plc's
accounts. 
 
Critical accounting policies and key sources of estimation uncertainty
The judgements and assumptions that are considered to be the most important to the portrayal of NatWest Group's financial condition are those relating to deferred tax, fair value of financial instruments, loan impairment provisions, goodwill and provisions for liabilities and charges. These critical accounting policies and judgements are referenced on page 268 of the NatWest Group plc 2020 Annual Report and Accounts. Estimation uncertainty has been affected by the COVID-19 pandemic. Management's consideration of this source of uncertainty is outlined in the relevant sections of NatWest Group plc 2020 Annual Report and Accounts, including the ECL estimate for the period in the Risk and capital management section contained in the NatWest Group plc 2020 Annual Report and Accounts.
 
It was announced in the UK Government's Budget on 27 October 2021 that the UK banking surcharge will decrease from 8% to 3% from 1 April 2023. This change is expected to be enacted in 2022. The resulting change to the net deferred tax asset position in NatWest Group is not expected to be material.
 
Information used for significant estimates
The COVID-19 pandemic has continued to cause significant economic and social disruption. 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, refer to the NatWest Group plc Risk factors in the 2020 Annual Report and Accounts.
 
 

 

Notes
3. Litigation and regulatory matters 
NatWest Group plc's Interim Results 2021, issued on 30 July 2021, included disclosures about NatWest Group's litigation and regulatory matters in Note 12. Set out below are the material developments in those matters since publication of the Interim Results 2021.
 
Litigation
Residential mortgage-backed securities (RMBS) litigation in the US
The State of New Mexico, on behalf of certain state agencies, has been pursuing claims in New Mexico state court against NWMSI concerning certain historical RMBS offerings that allegedly involved materially false or misleading statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans underlying the RMBS were issued. NWMSI has reached an agreement in principle to settle this matter for an amount that is covered by an existing provision. 
 
London Interbank Offered Rate (LIBOR) and other rates litigation 
On 30 September 2021, the United States District Court for the Southern District of New York dismissed all claims against NWM Plc and other NatWest Group companies in the class action alleging that manipulation of JPY LIBOR and Euroyen TIBOR impacted the price of derivatives allegedly tied to those rates, finding a lack of antitrust standing and personal jurisdiction. The dismissal may be the subject of a future appeal.
 
Madoff
NWM N.V. is a defendant in two actions filed by the trustee for the bankruptcy estates of Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC, in bankruptcy court in New York, which together seek to clawback more than US$298 million in redemptions that NWM N.V. allegedly received from certain Madoff feeder funds and certain swap counterparties. In these and similar cases pending against other defendants, the bankruptcy court previously held that, in order to proceed to discovery and pursue its claims, the trustee had to allege that a defendant lacked "good faith" when it received the funds in question. In August 2021, the United States Court of Appeals for the Second Circuit, in similar cases against other defendants, reversed the bankruptcy court's ruling on this question, holding instead that if a defendant wishes to rely on "good faith" arguments, it is a matter for the defendant to prove in their defence. The trustee's actions against NWM N.V. will proceed in light of the appellate court's ruling.
 
Odd lot corporate bond trading antitrust litigation
On 25 October 2021, the United States District Court for the Southern District of New York granted, on several grounds, defendants' motion to dismiss the class action complaint alleging that from August 2006 onwards various securities dealers, including NWMSI, conspired artificially to widen spreads for odd lots of corporate bonds bought or sold in the United States secondary market and to boycott electronic trading platforms that would have allegedly promoted pricing competition in the market for such bonds. The dismissal is subject to appeal.  
 
Regulatory matters
US investigations relating to fixed-income securities 
In October 2017, NWMSI entered into a non-prosecution agreement (NPA) with the United States Attorney for the District of Connecticut (USAO) in connection with alleged misrepresentations to counterparties relating to secondary trading in various forms of asset-backed securities. In the NPA, the USAO agreed not to file criminal charges relating to certain conduct and information described in the NPA, conditional on NWMSI and affiliated companies complying with the NPA's reporting and conduct requirements during its term, including by not engaging in conduct during the NPA that the USAO determines was a felony under federal or state law or a violation of the anti-fraud provisions of the United States securities law.
 
The NatWest Markets business is currently responding to a separate criminal investigation by the USAO and the US Department of Justice (DoJ) concerning unrelated trading by certain NWM Plc and NWMSI former traders involving alleged spoofing. The NPA (referred to above) has been extended as the criminal investigation has progressed and related discussions with the USAO and the DoJ, including relating to the impact of such alleged conduct on the status of the NPA and the potential consequences thereof, have been ongoing. On 30 August 2021, NWMSI received a letter from USAO stating that it had determined that NWMSI had materially breached the NPA as a result of the alleged spoofing activity and that NWMSI is subject to prosecution for securities fraud in respect of the conduct underlying the NPA. NatWest Markets is engaging in discussions with the U.S. government about the resolution of the alleged spoofing activity investigation and the USAO's determination of the breach of the NPA, including why criminal prosecution of the conduct underlying the NPA should not be pursued.
 
The precise duration and outcome of this matter remains uncertain. 
 
 
 
 
 
Notes
3. Litigation and regulatory matters continued
Adverse outcomes or resolution of current or future legal or regulatory actions (in particular, a finding of criminal liability in this matter) could have material collateral consequences for NatWest Group's business and result in restrictions or limitations on NatWest Group's operations.
 
These may include the effective or actual disqualification from carrying on certain regulated activities and consequences resulting from the need to reapply for various important licences or obtain waivers to conduct certain existing activities of NatWest Group, particularly but not solely in the US, which may take a significant period of time and the results of which are uncertain. Disqualification from carrying on any activities, whether automatic as a result of the resolution of a particular matter or as a result of the failure to obtain such licences or waivers could adversely impact NatWest Group's business, in particular in the 
US. This in turn and/or any fines, settlement payments or penalties could adversely impact NatWest Group's reported financial results and condition, capital position or reputation.
 
FCA investigation into NatWest Group's compliance with the Money Laundering Regulations 2007 
In July 2017, the FCA notified NatWest Group that it was undertaking an investigation into NatWest Group's compliance with the UK Money Laundering Regulations 2007 ("MLR 2007") in relation to certain money service businesses and related parties. 
 
In March 2021, the FCA notified NatWest Group that it had commenced criminal proceedings against NWB Plc for three offences under regulation 45(1) of the MLR 2007 arising from the handling of the accounts of a UK incorporated customer. 
 
On 7 October 2021, NWB Plc pleaded guilty to the three offences under regulation 45(1) of the MLR 2007 for failure to comply with regulation 8(1) of the MLR 2007 between 7 November 2013 and 23 June 2016 and 8(3) and 14(1) of the MLR 2007 between 8 November 2012 and 23 June 2016. 
These regulations required the firm to determine and conduct risk sensitive due diligence and ongoing monitoring of its customers for the purposes of preventing money laundering. The offences relate to operational weaknesses between 2012 and 2016, during which period NWB Plc did not adequately monitor the accounts of that customer. 
 
NWB Plc has cooperated fully with the FCA since its investigation began. The FCA has confirmed it will not take action against any individual current or former employee of NWB Plc. 
 
The case has been remitted to the Crown Court for sentencing, which will be determined at a hearing scheduled to take place on a date to be determined by the Crown Court. NWB Plc made a provision at 30 September 2021 in anticipation of a potential fine being imposed at that hearing, but is not disclosing the amount as it remains the matter of ongoing judicial proceedings. In addition to the fine, other material adverse collateral consequences may occur as a result of these convictions.
 
Review and investigation of treatment of tracker mortgage customers in Ulster Bank Ireland DAC
In December 2015, correspondence was received from the CBI setting out an industry examination framework in respect of the sale of tracker mortgages from approximately 2001 until the end of 2015. The redress and compensation phase has concluded, although an appeals process is currently anticipated to run until at least the end of 2021. NatWest Group has made provisions totalling €350 million (£300 million), of which €332 million (£285 million) had been utilised by 30 September 2021 in respect of redress and compensation.
 
UBIDAC previously identified further legacy business issues, as an extension to the tracker mortgage review. These remediation programmes are ongoing. NatWest Group has made provisions of €163 million (£140 million), of which €155 million (£133 million) had been utilised by 30 September 2021 for these programmes. 
 
UBIDAC customers continue to lodge tracker mortgage complaints with the Financial Services and Pensions Ombudsman (FSPO). UBIDAC is challenging two recent FSPO adjudications in the Irish High Court. The outcome and impact of that challenge on those and related complaints is uncertain but potentially may be material.
 
4. Post balance sheet events 
Other than as disclosed there have been no significant events between 30 September 2021 and the date of approval of these accounts that 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 'UBIDAC' refers to Ulster Bank Ireland DAC. The term 'RBSI Holdings' refers to The Royal Bank of Scotland International (Holdings) Limited. 
 
NatWest Group publishes its financial statements in pounds sterling ('£' or 'sterling'). The abbreviations '£m' and '£bn' represent millions and thousands of millions of pounds sterling, respectively, and references to 'pence' represent pence in the United Kingdom ('UK'). References to 'dollars' or '$' are to United States of America ('US') dollars. The abbreviations '$m' and '$bn' represent millions and thousands of millions of dollars, respectively, and references to 'cents' represent cents in the US. The abbreviation '€' represents the 'euro', and the abbreviations '€m' and '€bn' represent millions and thousands of millions of euros, respectively, and references to 'cents' represent cents in the European Union ('EU'). 
 
To aid readability, this document retains references to EU legislative and regulatory provisions in effect in the UK before 1 January 2021 that have now been implemented in UK domestic law. These references should be read and construed as including references to the applicable UK implementation measures with effect from 1 January 2021.
 
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 2020 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.
 
MAR - Inside Information
This announcement contains information that qualified or may have qualified as inside information for NatWest Group plc, for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR) as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. This announcement is made by Alexander Holcroft, Head of Investor Relations for NatWest Group plc.
 
Contacts 




Analyst enquiries:


Alexander Holcroft, Investor Relations


+44 (0) 20 7672 1758


 




Media enquiries:


NatWest Group Press Office


+44 (0) 131 523 4205


 




 


Management presentation 


Webcast and dial in details 




Date:


29 October 2021


www.natwestgroup.com/results
 
 




Time:


8:45am UK time


International: +44 (0) 203 057 6566




Conference ID:


1653446


UK Free Call: 0800 279 5995
US Local Dial-In, New York: +1 646 741 2115



 
 
 
 
 



 
Available on www.natwestgroup.com/results
·    Q3 2021 Interim Management Statement and slides.
·    A financial supplement containing income statement, balance sheet and segment performance for the quarter ended 30 September 2021.
·    NatWest Group and NWH Group Pillar 3 supplements.
 
 
·    Climate, Purpose and ESG measures supplement Q3 2021. 
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', 'will', 'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target', 'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or variations on these expressions. 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: the impact of the COVID-19 pandemic, its regulatory capital position and related requirements, its financial position, profitability and financial performance (including financial, capital, cost savings and operational targets), the implementation of its Purpose-led strategy and the refocusing of its NatWest Markets franchise, its ESG and climate-related 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 impact of the COVID-19 pandemic, future acquisitions, the outcome of legal, regulatory and governmental actions and investigations, 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 impact of climate-related risks and the transitioning to a low carbon economy. 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 2020 Annual Report and Accounts (ARA), NatWest Group plc's Interim Results for H1 2021 and NatWest Group plc's filings with 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
NatWest Group prepares its financial statements in accordance with generally accepted accounting principles (GAAP). This document contains a number of adjusted or alternative performance measures, also known as non-GAAP or non-IFRS performance measures. These measures are adjusted for notable and other defined items which management believe are not representative of the underlying performance of the business and which distort period-on-period comparison. The non-IFRS measures provide users of the financial statements with a consistent basis for comparing business performance between financial periods and information on elements of performance that are one-off in nature. The non-IFRS measures also include the calculation of metrics that are used throughout the banking industry. These non-IFRS measures are not measures within the scope of IFRS and are not a substitute for IFRS measures. These measures include:
 
Non-IFRS financial measures




Measure


Basis of preparation


Additional analysis or reconciliation




NatWest Group return on tangible equity 


Annualised profit or loss for the period attributable to ordinary shareholders divided by average tangible equity. Average tangible equity is average total equity excluding non-controlling interests (NCI) less average intangible assets and average other owners' equity.


Table 1




Segmental return on equity


Segmental operating profit or loss adjusted for preference share dividends and tax divided by average notional tangible equity, allocated at an operating segment specific rate, of the period average segmental risk-weighted assets incorporating the effect of capital deductions (RWAes).


Table 2




Operating expenses analysis - management view


The management analysis of operating expenses shows strategic costs and litigation and conduct costs in separate lines. Depreciation and amortisation, and other administrative expenses attributable to these costs are included in strategic costs and litigation and conduct costs lines for management analysis. These amounts are included in staff, premises and equipment and other administrative expenses in the statutory analysis.


Table 3




Cost:income ratio


Total operating expenses less operating lease depreciation divided by total income less operating lease depreciation.


Table 4




Net interest margin (NIM)


Net interest income as a percentage of average interest-earning assets.


Table 5




Bank NIM 


Net interest income of the banking business less NatWest Markets (NWM) element as a percentage of interest-earning assets of the banking business less NWM element.


Table 5




Bank NIM excluding Liquid Asset Buffer


Net interest income of the banking business less NWM element as a percentage of interest-earning assets of the banking business less NWM element and Liquid Asset Buffer.


Table 5




Income across UK and RBSI retail and commercial businesses excluding notable items


Comprises income in the Retail Banking, Commercial Banking, Private Banking and RBS International operating segments, excluding notable items.


Table 7




Net lending in the UK and RBSI retail and commercial businesses excluding UK Government support schemes


Comprises customer loans in the Retail Banking, Commercial Banking, Private Banking and RBS International operating segments, excluding UK Government support schemes.


Table 8




Customer deposits across UK and RBSI retail and commercial businesses


Comprises customer deposits in the Retail Banking, Commercial Banking, Private Banking and RBS International operating segments. 


Table 9




Other expenses excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs.                           


Total operating expenses less strategic, litigation and conduct costs, operating lease depreciation and Ulster Bank RoI direct costs.


Table 10




Commentary - adjusted periodically for specific items


NatWest Group and segmental business performance commentary have been adjusted for the impact of specific items such as notable items, operating lease depreciation, strategic costs and litigation and conduct costs.
 


Notable items - page 4, Operating lease depreciation,
Strategic costs and litigation and conduct costs - pages 12 to 16.




 
 
 
Appendix - Non-IFRS financial measures
Performance metrics based on but not defined under IFRS
 




Measure


Basis of preparation


Additional analysis or reconciliation




Loan:deposit ratio 


Net customer loans held at amortised cost divided by total customer deposits.


Table 6




Tangible net asset value (TNAV)


Tangible equity divided by the number of ordinary shares in issue (excluding own shares held). Tangible equity is ordinary shareholders' equity less intangible assets. 


Page 3




Funded assets


Total assets less derivatives.


Pages 3, 10 and 12 to 16




Loan impairment rate


The annualised loan impairment charge divided by gross customer loans.


Pages 3, 6 to 9, and 11 to 16




Third party customer asset rate


Third party customer asset rate is calculated as annualised interest payable or receivable on third-party loans to customers as a percentage of third-party loans to customers, including those reported as assets held for sale. This excludes intragroup items, loans to banks and liquid asset portfolios, which are included for the calculation of net interest margin.


Pages 12 to 16




Third party customer funding rate


Third party customer funding rate is calculated as annualised interest payable or receivable on third-party customer deposits as a percentage of third-party customer deposits, including interest bearing and non-interest bearing customer deposits. Intragroup items, bank deposits, debt securities in issue and subordinated liabilities are excluded for customer funding rate calculation. 


Pages 12 to 16




Assets under management and administration (AUMA) 


AUMA comprises both assets under management (AUMs) and assets under
administration (AUAs) serviced through the Private Banking franchise. 
 
AUMs comprise assets where the investment management is undertaken by Private Banking on behalf of Private Banking, Retail Banking and RBSI customers. 
 
AUAs comprise third party assets held on an execution-only basis in custody by Private Banking, Retail Banking and RBSI for their customers accordingly, for which the execution services are supported by Private Banking. Private Banking receive a fee in respect of providing investment management and execution services to Retail Banking and RBSI franchises.


Pages 3 and 7




Depositary assets


Assets held by RBSI as an independent trustee and in a depositary service capacity. 


Page 9




 
 
Appendix Non-IFRS financial measures 
1. Return on tangible equity 
 
 




 


Nine months ended 


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




Profit/(loss) attributable to ordinary shareholders (£m)


2,516


(644)


 


674


1,222


61




Annualised profit/(loss) attributable to ordinary


 


 


 


 


 


 




   shareholders (£m)


3,355


(859)


 


2,696


4,888


244




Average total equity excluding NCI (£m)


42,978


43,766


 


42,507


43,011


43,145




Adjustment for other owners' equity and intangibles (£m)


(11,525)


(11,760)


 


(10,881)


(11,712)


(11,482)




Adjusted total tangible equity (£m)


31,453


32,006


 


31,626


31,299


31,663




Return on tangible equity (%)


10.7%


(2.7%)


 


8.5%


15.6%


0.8%




 
2. Segmental return on equity 
 




 


 


 


 


International Banking & Markets


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster




 


Banking


Banking


Banking


International


Markets


Bank RoI




Nine months ended 30 September 2021


£m


£m


£m


£m


£m


£m




Operating profit/(loss) (£m)


1,583 


240 


1,964 


260 


(409)


31 




Preference share cost allocation (£m)


(60)


(15)


(114)


(15)


(47)


-




Adjustment for tax (£m)


(426)


(63)


(518)


(43)


128 


-




Adjusted attributable profit/(loss) (£m)


1,097 


162 


1,332 


202 


(328)


31 




Annualised adjusted attributable profit/(loss) (£m)


1,463 


216 


1,776 


269 


(437)


41 




Average RWAe (£bn)


35.7 


11.1 


70.6 


7.7 


28.8 


10.8 




Equity factor


14.5%


12.5%


11.5%


16.0%


15.0%


15.5%




RWAe applying equity factor (£bn)


5.2 


1.4 


8.1 


1.2 


4.3 


1.7 




Return on equity


28.3%


15.5%


21.9%


21.9%


(10.1%)


2.5%




 


 


 


 


 


 


 




Nine months ended 30 September 2020


 


 


 


 


 


 




Operating profit (£m)


758


141


(684)


112


3


(244)




Preference share cost allocation (£m)


(66)


(17)


(114)


(15)


(51)


-




Adjustment for tax (£m)


(194)


(35)


223


(14)


13


-




Adjusted attributable profit/(loss) (£m)


498


89


(575)


83


(35)


(244)




Annualised adjusted attributable profit/(loss) (£m)


664 


119 


(767)


111 


(47)


(325)




Average RWAe (£bn)


37.6


10.3


76.6


6.9


39.2


12.6




Equity factor


14.5%


12.5%


11.5%


16.0%


15.0%


15.5%




RWAe applying equity factor (£bn)


5.5


1.3


8.8


1.1


5.9


2.0




Return on equity


12.2%


9.2%


(8.7%)


10.0%


(0.8%)


(16.6%)




 
 
 
 
Appendix Non-IFRS financial measures 
2. Segmental return on equity continued
 




 


 


 


 


 


 


 




 


 


 


 


International Banking & Markets


 




 


Retail


Private


Commercial


RBS


NatWest


Ulster 




 


Banking


Banking


Banking


International


Markets


Bank RoI




Quarter ended 30 September 2021


£m


£m


£m


£m


£m


£m




Operating profit/(loss) (£m)


563 


94 


625 


87 


(160)


38 




Preference share cost allocation (£m)


(20)


(5)


(38)


(5)


(16)


-




Adjustment for tax (£m)


(152)


(25)


(164)


(14)


49 


-




Adjusted attributable profit/(loss) (£m)


391 


64 


423 


68 


(127)


38 




Annualised adjusted attributable profit/(loss) (£m)


1,564 


256 


1,692 


272 


(508)


152 




Average RWAe (£bn)


36.1 


11.3 


67.6 


7.8 


27.9 


10.2 




Equity factor


14.5%


12.5%


11.5%


16.0%


15.0%


15.5%




RWAe applying equity factor (£bn)


5.2 


1.4 


7.8 


1.3 


4.2 


1.6 




Return on equity


29.9%


18.1%


21.7%


21.6%


(12.1%)


9.6%




 


 


 


 


 


 


 




Quarter ended 30 June 2021


 


 


 


 


 


 




Operating profit/(loss) (£m)


585


82


864


105


(169)


(18)




Preference share cost allocation (£m)


(20)


(5)


(38)


(5)


(15)


-




Adjustment for tax (£m)


(158)


(22)


(231)


(18)


52


-




Adjusted attributable profit/(loss)(£m)


407


55


595


83


(132)


(18)




Annualised adjusted attributable profit/(loss) (£m)


1,628 


220 


2,380 


332 


(528)


(72)




Average RWAe (£bn)


35.1


11.1


70.6


7.8


29.2


10.8




Equity factor


14.5%


12.5%


11.5%


16.0%


15.0%


15.5%




RWAe applying equity factor (£bn)


5.1


1.4


8.1


1.2


4.4


1.7




Return on equity


32.0%


15.9%


29.3%


26.5%


(12.1%)


(4.3%)




 


 


 


 


 


 


 




Quarter ended 30 September 2020


 


 


 


 


 


 




Operating profit/(loss) (£m)


305 


57 


324 


25 


(66)


(5)




Preference share cost allocation (£m)


(22)


(6)


(38)


(5)


(17)


-




Adjustment for tax (£m)


(79)


(14)


(80)


(3)


23 


-




Adjusted attributable profit/(loss) (£m)


204 


37 


206 


17 


(60)


(5)




Annualised adjusted attributable profit/(loss) (£m)


816 


148 


824 


68 


(240)


(20)




Average RWAe (£bn)


36.7 


10.5 


77.8 


6.8 


34.0 


12.3 




Equity factor


14.5%


12.5%


11.5%


16.0%


15.0%


15.5%




RWAe applying equity factor (£bn)


5.3 


1.3 


8.9 


1.1 


5.1 


1.9 




Return on equity


15.3%


11.2%


9.2%


6.4%


(4.7%)


(1.0%)




 


 


 


 


 


 


 




 
3. Operating expenses analysis




Statutory analysis (1,2)


 


 


 


 


 


 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




Operating expenses


£m 


£m 


 


£m 


£m 


£m 




Staff costs


2,794


2,937


 


892


917


982




Premises and equipment


765


902


 


263


254


251




Other administrative expenses


1,291


1,081


 


588


326


385




Depreciation and amortisation


613


644


 


199


209


196




Total operating expenses


5,463


5,564


 


1,942


1,706


1,814




 
 
(1)    On a statutory, or GAAP, basis strategic costs are included within staff costs, premises and equipment, depreciation and amortisation 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 financial measures 
3. Operating expenses analysis continued




Non-statutory analysis


 


 


 


 




 


Nine months ended




 


30 September 2021




 


 


Litigation


 


 




 


 


and


 


Statutory




 


Strategic


conduct


Other


operating




Operating expenses


costs


costs


expenses


expenses




Staff costs


289


-


2,505


2,794




Premises and equipment


30


-


735


765




Other administrative expenses


68


276


947


1,291




Depreciation and amortisation


22


-


591


613




Total 


409


276


4,778


5,463




 


 


 


 


 




 


Nine months ended




 


30 September 2020




 


 


Litigation


 


 




 


 


and


 


Statutory




 


Strategic


conduct


Other


operating




Operating expenses


costs


costs


expenses


expenses




Staff costs


315


-


2,622


2,937




Premises and equipment


170


-


732


902




Other administrative expenses


143


(81)


1,019 


1,081 




Depreciation and amortisation


59


-


585


644




Total 


687


(81)


4,958


5,564




 


 


 


 


 




 


Quarter ended




 


30 September 2021




 


 


Litigation


 


 




 


 


and


 


Statutory




 


Strategic


conduct


Other


operating




Operating expenses


costs


costs


expenses


expenses




Staff costs


74


-


818


892




Premises and equipment


(2)


-


265


263




Other administrative expenses


4


294


290


588




Depreciation and amortisation


1


-


198


199




Total 


77


294


1,571


1,942




 


 


 


 


 




 


Quarter ended




 


30 June 2021




 


 


Litigation


 


 




 


 


and


 


Statutory




 


Strategic


conduct


Other


operating




Operating expenses


costs


costs


expenses


expenses




Staff costs


104


-


813


917




Premises and equipment


16


-


238


254




Other administrative expenses


41


(34)


319


326




Depreciation and amortisation


11


-


198


209




Total 


172


(34)


1,568


1,706




 


 


 


 


 




 


Quarter ended




 


30 September 2020




 


 


Litigation


 


 




 


 


and


 


Statutory




 


Strategic


conduct


Other


operating




Operating expenses


costs


costs


expenses


expenses




Staff costs


155


-


827


982




Premises and equipment


22


-


229


251




Other administrative expenses


43


8


334


385




Depreciation and amortisation


3


-


193


196




Total 


223


8


1,583


1,814




 
 
Appendix Non-IFRS performance measures 
4. Cost:income ratio
 




 


 


 


 


International Banking & Markets


 


Central


Total




 


Retail


Private


Commercial


RBS


NatWest


Ulster 


items


NatWest 




 


Banking


Banking


Banking


International


Markets


Bank RoI


& other


Group




Nine months ended 30 September 2021


£m


£m


£m


£m


£m


£m


£m


£m




Operating expenses


(1,739)


(365)


(1,708)


(172)


(818)


(384)


(277)


(5,463)




Operating lease depreciation


-


-


106


-


-


-


-


106




Adjusted operating expenses


(1,739)


(365)


(1,602)


(172)


(818)


(384)


(277)


(5,357)




Total income


3,281 


563 


2,888 


392 


390 


388 


191 


8,093 




Operating lease depreciation


-


-


(106)


-


-


-


-


(106)




Adjusted total income


3,281 


563 


2,782 


392 


390 


388 


191 


7,987 




Cost:income ratio 


53.0%


64.8%


57.6%


43.9%


209.7%


99.0%


nm


67.1%




 


 


 


 


 


 


 


 


 




Nine months ended 30 September 2020


 


 


 


 


 


 


 


 




Operating expenses


(1,722)


(364)


(1,774)


(179)


(1,009)


(372)


(144)


(5,564)




Operating lease depreciation


-


-


110


-


-


-


-


110




Adjusted operating expenses


(1,722)


(364)


(1,664)


(179)


(1,009)


(372)


(144)


(5,454)




Total income


3,207 


579 


3,007 


371 


1,050 


379 


(332)


8,261 




Operating lease depreciation


-


-


(110)


-


-


-


-


(110)




Adjusted total income


3,207 


579 


2,897 


371 


1,050 


379 


(332)


8,151 




Cost:income ratio 


53.7%


62.9%


57.4%


48.2%


96.1%


98.2%


nm


66.9%




 




Quarter ended 30 September 2021


 


 


 


 


 


 


 


 




Operating expenses


(552)


(116)


(556)


(60)


(258)


(123)


(277)


(1,942)




Operating lease depreciation


-


-


36 


-


-


-


-


36 




Adjusted operating expenses


(552)


(116)


(520)


(60)


(258)


(123)


(277)


(1,906)




Total income


1,131 


195 


965 


136 


95 


145 


107 


2,774 




Operating lease depreciation


-


-


(36)


-


-


-


-


(36)




Adjusted total income


1,131 


195 


929 


136 


95 


145 


107 


2,738 




Cost:income ratio 


48.8%


59.5%


56.0%


44.1%


271.6%


84.8%


nm


69.6%




 


 


 


 


 


 


 


 


 




Quarter ended 30 June 2021


 


 


 


 


 


 


 


 




Operating expenses


(600)


(128)


(569)


(55)


(285)


(136)


67 


(1,706)




Operating lease depreciation


-


-


35


-


-


-


-


35




Adjusted operating expenses


(600)


(128)


(534)


(55)


(285)


(136)


67 


(1,671)




Total income


1,094 


183 


982 


133 


106 


119 


43 


2,660 




Operating lease depreciation


-


-


(35)


-


-


-


-


(35)




Adjusted total income


1,094 


183 


947 


133 


106 


119 


43 


2,625 




Cost:income ratio 


54.8%


69.9%


56.4%


41.4%


268.9%


114.3%


nm


63.7%




 


 


 


 


 


 


 


 


 




Quarter ended 30 September 2020


 


 


 


 


 


 


 


 




Operating expenses


(647)


(112)


(553)


(53)


(302)


(127)


(20)


(1,814)




Operating lease depreciation


-


-


37


-


-


-


-


37




Adjusted operating expenses


(647)


(112)


(516)


(53)


(302)


(127)


(20)


(1,777)




Total income


1,022 


187 


1,004 


112 


234 


130 


(266)


2,423 




Operating lease depreciation


-


-


(37)


-


-


-


-


(37)




Adjusted total income


1,022 


187 


967 


112 


234 


130 


(266)


2,386 




Cost:income ratio 


63.3%


59.9%


53.4%


47.3%


129.1%


97.7%


nm


74.5%




 
 
 
Appendix Non-IFRS performance measures 
5. Net interest margin




 


Nine months ended


 


Quarter ended or as at




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m


£m


 


£m


£m


£m




NatWest Group net interest income


5,870


5,778


 


1,954


1,985


1,926




Less NWM net interest income


4


55


 


1


(4)


21




Net interest income excluding NWM


5,874 


5,833 


 


1,955 


1,981 


1,947 




 


 


 


 


 


 


 




Annualised NatWest Group net interest income 


7,848


7,718


 


7,752


7,962


7,662




Annualised net interest income excluding NWM


7,854


7,792


 


7,756


7,946


7,746




 


 


 


 


 


 


 




Average interest earning assets (IEA)


525,352


487,777


 


537,419


526,124


508,156




Less NWM average IEA


32,397


38,403


 


32,497


32,263


39,213




Bank average IEA 


492,955


449,374


 


504,922


493,861


468,943




Less liquid asset buffer average IEA (1)


162,907


131,094


 


173,654


163,437


144,619




Bank average IEA excluding liquid asset buffer


330,048


318,280


 


331,268


330,424


324,324




 


 


 


 


 


 


 




Net interest margin


1.49%


1.58%


 


1.44%


1.51%


1.51%




Bank net interest margin 


1.59%


1.73%


 


1.54%


1.61%


1.65%




   (NatWest Group NIM excluding NWM)


 


 


 


 


 


 




Bank net interest margin excluding liquid asset buffer


2.38%


2.45%


 


2.34%


2.40%


2.39%




 
(1)   Liquid asset buffer consists of assets held by NatWest Group, such as cash balances at central banks and high-quality government debt securities, that can be used to ensure repayment of financial obligations as they fall due.
 
6. Loan:deposit ratio 




 


As at




 


30 September


30 June


30 September




 


2021


2021


2020




 


£m


£m


£m




Loans to customers - amortised cost 


361,022


362,711


353,691




Customer deposits 


476,319


467,214


418,358




Loan:deposit ratio (%)


76%


78%


85%




 
 
7. Income across UK and RBSI retail and commercial businesses excluding notable items
 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m


£m


 


£m


£m


£m




Retail Banking


3,281


3,207


 


1,131


1,094


1,022




Private Banking


563


579


 


195


183


187




Commercial Banking


2,888


3,007


 


965


982


1,004




RBS International


392


371


 


136


133


112




Income


7,124


7,164


 


2,427


2,392


2,325




Less notable items


(14)


3


 


(4)


(24)


(5)




Total UK and RBSI retail and commercial businesses 


 


 


 


 


 


 




   income excluding notable items


7,110


7,167


 


2,423


2,368


2,320




 
 
 
Appendix Non-IFRS performance measures 
8. Net lending in the UK and RBSI retail and commercial businesses excluding UK Government support schemes
 




 


 


 


 


30 September


30 June


30 September




 


 


 


 


2021


2021


2020




 


 


 


 


£bn


£bn


£bn




Retail Banking


 


 


 


180.5


178.1


166.7




Private Banking


 


 


 


18.4


18.0


16.5




Commercial Banking


 


 


 


102.7


103.8


110.0




RBS International


 


 


 


15.6


15.1


12.8




Loans to customers


 


 


 


317.2


315.0


306.0




Less UK Government support schemes


 


 


 


(12.3)


(13.0)


(11.3)




Total UK and RBSI retail and commercial businesses


 


 


 


 


 


 




   net lending excluding UK Government support schemes


 


 


304.9


302.0


294.7




 
 
9. Customer deposits across UK and RBSI retail and commercial businesses
 




 


 


 


 


30 September


30 June


30 September




 


 


 


 


2021


2021


2020




 


 


 


 


£bn


£bn


£bn




Retail Banking


 


 


 


186.3


184.1


164.9




Private Banking


 


 


 


35.7


34.7


30.3




Commercial Banking


 


 


 


178.3


176.0


161.3




RBS International


 


 


 


36.9


33.9


30.4




Total UK and RBSI retail and commercial businesses customer deposits


 


437.2


428.7


386.9




 
 
10. Other expenses excluding operating lease depreciation (OLD) and Ulster Bank RoI direct costs
 




 


Nine months ended


 


Quarter ended




 


30 September


30 September


 


30 September


30 June


30 September




 


2021


2020


 


2021


2021


2020




 


£m


£m


 


£m


£m


£m




Operating expenses 


5,463


5,564


 


1,942


1,706


1,814




Less strategic, litigation and conduct costs


(685)


(606)


 


(371)


(138)


(231)




Other expenses


4,778


4,958


 


1,571


1,568


1,583




Less OLD


(106)


(110)


 


(36)


(35)


(37)




Less Ulster Bank RoI direct costs


(237)


(215)


 


(75)


(92)


(73)




Other expenses excluding OLD and


 


 


 


 


 


 




   Ulster Bank RoI direct costs


4,435


4,633


 


1,460


1,441


1,473




 

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