REG - NatWest Group plc - NWG plc Q3 Results 2024
25/10/2024 07:00
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RNS Number : 5654J NatWest Group plc 25 October 2024
Inside this report
Business performance summary
2 Q3 2024 performance summary
4 Performance key metrics and ratios
6 Chief Financial Officer's review
7 Retail Banking
8 Private Banking
9 Commercial & Institutional
10 Central items & other
11 Segment performance
Risk and capital management
16 Credit risk
16 Segment analysis - portfolio summary
17 Segment analysis - loans
17 Movement in ECL provision
18 ECL post model adjustments
19 Sector analysis - portfolio summary
24 Capital, liquidity and funding risk
30 Pension risk
Financial statements and notes
31 Condensed consolidated income statement
32 Condensed consolidated statement of comprehensive income
33 Condensed consolidated balance sheet
34 Condensed consolidated statement of changes in equity
36 Presentation of condensed consolidated financial statements
36 Litigation and regulatory matters
36 Post balance sheet events
Additional information
37 Presentation of information
37 Statutory accounts
37 Contacts
37 Forward-looking statements
Appendix
38 Non-IFRS financial measures
43 Performance measures not defined under IFRS
Q3 2024 performance summary
Chief Executive, Paul Thwaite, commented:
"The strength of NatWest Group's performance is underpinned by the support we
provide to our 19 million customers in every nation and region of the UK. By
continuing to deliver against our strategy, we are growing and simplifying our
bank whilst managing our capital more efficiently.
As the UK's biggest bank for business, and one that serves millions of
households, NatWest Group plays a key role in driving economic growth across
the UK. Throughout the third quarter of 2024, we have grown our lending,
helping customers to buy or remortgage their homes or to start and grow their
businesses. With customer activity increasing, defaults remaining low and
optimism amongst businesses and consumers, we are well placed to succeed with
our customers and for our shareholders in the months and years ahead."
Q3 2024 performance
- Attributable profit of £1,172 million and a return on tangible equity
(RoTE) of 18.3%.
- Total income excluding notable items((1)) of £3,772 million was £182
million, or 5.1%, higher than Q2 2024 primarily reflecting lending and deposit
growth and margin expansion. Net interest margin (NIM) of 2.18% was 8 basis
points higher.
- Other operating expenses were £144 million lower than Q2 2024.
- Net impairment charge of £245 million or 25 basis points of gross
customer loans. Levels of default remain at low levels across the portfolio.
- Net loans to customers excluding central items increased by £8.4
billion in the quarter, of which £2.3 billion was in relation to the Metro
Bank mortgage portfolio acquisition, with strong growth across the three
businesses, including a £1.4 billion increase in mortgage balances.
- Customer deposits excluding central items increased by £2.2 billion
with growth across all three businesses driven by savings.
- The liquidity coverage ratio (LCR) of 148%, representing £52.7 billion
headroom above 100% minimum requirement, decreased by 3 percentage points
compared with Q2 2024.
- TNAV per share showed good growth in the quarter as the profit drove a
12 pence increase to 316 pence.
- Common Equity Tier 1 (CET1) ratio of 13.9% was 30 basis points higher
than Q2 2024. Capital generation pre distributions was 57 basis points in the
quarter and 197 basis points for the year to date. RWAs of £181.7 billion
increased by £0.9 billion.
Q3 year to date performance
- Attributable profit of £3,271 million and a RoTE of 17.0%.
- Total income excluding notable items((1)) of £10,776 million was £121
million, or 1.1%, lower than prior year. NIM was 2.11% for the year to date.
- Other operating expenses were £140 million higher than the same period
of 2023, or £38 million (0.7%) higher excluding costs in relation to a retail
share offering((2)) of £24 million and additional bank levies of £78
million.
- Net impairment charge of £293 million or 10 basis points of gross
customer loans and levels of default remain stable for the year to date.
- Net loans to customers excluding central items increased by £8.1
billion reflecting £6.2 billion of growth in Commercial & Institutional
and £2.3 billion in respect of the Metro Bank mortgage portfolio
acquisition.
- Customer deposits excluding central items increased by £8.3 billion,
including £4.0 billion of growth in Retail Banking, £2.0 billion in Private
Banking and £2.3 billion in Commercial & Institutional.
(1) Refer to the Non-IFRS financial measures appendix for details
of notable items.
(2) Costs incurred preparing for a retail share offering proposed
by the previous UK Government, now not expected to proceed.
Q3 2024 performance summary continued
Outlook((1))
We continue to assess the economic outlook and will monitor and react to
market conditions and refine our internal forecasts as the economic position
evolves. The following statements are based on our current expectations for
interest rates and economic activity.
In 2024 we now expect:
- to achieve a return on tangible equity above 15%.
- income excluding notable items to be around £14.4 billion.
- Group operating costs, excluding litigation and conduct costs, to
be broadly stable compared with 2023 excluding around £0.1 billion increase
in bank levies and £24 million of costs in relation to a retail share
offering.
- our loan impairment rate for 2024 to be below 15 basis points.
In 2026 we continue to expect:
- to achieve a return on tangible equity for the Group of greater
than 13%.
Capital - we continue to:
- target a CET1 ratio in the range of 13-14%.
- expect RWAs to be around £200 billion at the end of 2025,
including the impact of Basel 3.1 on a pro-forma basis. We expect the impact
of Basel 3.1 to be an uplift of around £8 billion on 1 January 2026.
- expect to pay ordinary dividends of around 40% of attributable
profit and maintain capacity to participate in directed buybacks from the UK
Government, recognising that any exercise of this authority would be dependent
upon HMT's intentions. We will also consider further on-market buybacks as
appropriate.
(1) The guidance, targets, expectations, and trends discussed in
this section represent NatWest Group plc management's current expectations and
are subject to change, including as a result of the factors described in the
NatWest Group plc Risk Factors section in the 2023 Annual Report and Accounts
and Form 20-F and the Summary Risk Factors in the NatWest Group plc Interim
Results announcement. These statements constitute forward-looking statements.
Refer to Forward-looking statements in this announcement.
Business performance summary
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 Variance 2024 2024 Variance 2023 Variance
Summary consolidated income statement £m £m % £m £m % £m %
Net interest income 8,307 8,411 (1.2%) 2,899 2,757 5.2% 2,685 8.0%
Non-interest income 2,571 2,804 (8.3%) 845 902 (6.3%) 803 5.2%
Total income 10,878 11,215 (3.0%) 3,744 3,659 2.3% 3,488 7.3%
Litigation and conduct costs (142) (242) (41.3%) (41) (77) (46.8%) (134) (69.4%)
Other operating expenses (5,740) (5,600) 2.5% (1,784) (1,928) (7.5%) (1,793) (0.5%)
Operating expenses (5,882) (5,842) 0.7% (1,825) (2,005) (9.0%) (1,927) (5.3%)
Profit before impairment losses/releases 4,996 5,373 (7.0%) 1,919 1,654 16.0% 1,561 22.9%
Impairment (losses)/releases (293) (452) (35.2%) (245) 45 nm (229) 7.0%
Operating profit before tax 4,703 4,921 (4.4%) 1,674 1,699 (1.5%) 1,332 25.7%
Tax charge (1,232) (1,439) (14.4%) (431) (462) (6.7%) (378) 14.0%
Profit from continuing operations 3,471 3,482 (0.3%) 1,243 1,237 0.5% 954 30.3%
Profit/(loss) from discontinued operations, net of tax 12 (138) (108.7%) 1 15 (93.3%) (30) (103.3%)
Profit for the period 3,483 3,344 4.2% 1,244 1,252 (0.6%) 924 34.6%
Performance key metrics and ratios
Notable items within total income (1) £102m £318m nm (£28m) £69m nm (£26m) nm
Total income excluding notable items (1) £10,776m £10,897m (1.1%) £3,772m £3,590m 5.1% £3,514m 7.3%
Net interest margin (1) 2.11% 2.17% (6bps) 2.18% 2.10% 8bps 2.05% 13bps
Average interest earning assets (1) £526bn £519bn 1.3% £530bn £528bn 0.4% £521bn 1.7%
Cost:income ratio (excl. litigation and conduct) (1) 52.8% 49.9% 2.9% 47.6% 52.7% (5.1%) 51.4% (3.8%)
Loan impairment rate (1) 10bps 16bps (6bps) 25bps (5bps) 30bps 24bps 1bps
Profit attributable to ordinary shareholders £3,271m £3,165m 3.3% £1,172m £1,181m (0.8%) £866m 35.3%
Total earnings per share attributable to ordinary shareholders - basic 38.3p 34.1p 4.2p 14.1p 13.7p 0.4p 9.8p 4.3p
Return on tangible equity (RoTE) (1) 17.0% 17.1% (0.1%) 18.3% 18.5% (0.2%) 14.7% 3.6%
Climate and sustainable funding and financing (2) £23.4bn £20.6bn 13.6% £7.1bn £9.7bn (26.8%) £4.6bn 54.3%
nm = not meaningful.
For the footnotes to this table refer to the following page.
Business performance summary continued
As at
30 September 30 June 31 December
2024 2024 Variance 2023 Variance
Balance sheet £bn £bn % £bn %
Total assets 711.9 690.3 3.1% 692.7 2.8%
Loans to customers - amortised cost 386.7 379.3 2.0% 381.4 1.4%
Loans to customers excluding central items (1,3) 363.7 355.3 2.4% 355.6 2.3%
Loans to customers and banks - amortised cost and FVOCI 397.0 388.9 2.1% 392.0 1.3%
Total impairment provisions (4) 3.6 3.3 9.1% 3.6 -
Expected credit loss (ECL) coverage ratio 0.89% 0.86% 3bps 0.93% (4bps)
Assets under management and administration (AUMA) (1) 46.5 45.1 3.1% 40.8 14.0%
Customer deposits 431.1 433.0 (0.4%) 431.4 (0.1%)
Customer deposits excluding central items (1,3) 427.4 425.2 0.5% 419.1 2.0%
Liquidity and funding
Liquidity coverage ratio (LCR) 148% 151% (3.0%) 144% 4.0%
Liquidity portfolio 226 227 (0.4%) 223 1.3%
Net stable funding ratio (NSFR) 137% 139% (2.0%) 133% 4.0%
Loan:deposit ratio (excl. repos and reverse repos) (1) 84% 83% 1% 84% -
Total wholesale funding 89 83 7.2% 80 11.3%
Short-term wholesale funding 31 27 14.8% 28 10.7%
Capital and leverage
Common Equity Tier 1 (CET1) ratio (5) 13.9% 13.6% 30bps 13.4% 50bps
Total capital ratio (5) 19.7% 19.5% 20bps 18.4% 130bps
Pro forma CET1 ratio (excl. foreseeable items) (6) 14.4% 14.1% 30bps 14.2% 20bps
Risk-weighted assets (RWAs) 181.7 180.8 0.5% 183.0 (0.7%)
UK leverage ratio 5.0% 5.2% (0.2%) 5.0% -
Tangible net asset value (TNAV) per ordinary share (1,7) 316p 304p 12p 292p 24p
Number of ordinary shares in issue (millions) (7) 8,293 8,307 (0.2%) 8,792 (5.7%)
(1) Refer to the Non-IFRS financial measures appendix for details
of the basis of preparation and reconciliation of non-IFRS financial measures
and performance metrics.
(2) NatWest Group uses its climate and sustainable funding and
financing inclusion (CSFFI) criteria to determine the assets, activities and
companies that are eligible to be included within its climate and sustainable
funding and financing target. This includes both provision of committed (on
and off-balance sheet) funding and financing, including provision of services
for underwriting issuances and private placements.
(3) Central items includes Treasury repo activity and Ulster Bank
Republic of Ireland.
(4) Includes £0.1 billion relating to off-balance sheet exposures
(30 June 2024 - £0.1 billion; 31 December 2023 - £0.1 billion).
(5) Refer to the Capital, liquidity and funding risk section for
details of the basis of preparation.
(6) The pro forma CET1 ratio at 30 September 2024 excludes
foreseeable items of £808 million for ordinary dividends (30 June 2024
excludes foreseeable items of £889 million: £839 million for ordinary
dividends and £50 million foreseeable charges; 31 December 2023 excludes
foreseeable items of £1,538 million: £1,013 million for ordinary dividends
and £525 million foreseeable charges).
(7) The number of ordinary shares in issue excludes own shares
held.
Chief Financial Officer's review
We delivered an operating profit of £1,674 million in Q3 2024 with a RoTE of
18.3%. Total income excluding notable items of £3.8 billion was up by 5.1% on
Q2 2024.
Net loans to customers excluding central items growth of £8.4 billion was
broad-based across Retail Banking, Commercial & Institutional customers
and includes £2.3 billion relating to the acquisition of the Metro Bank
mortgage portfolio.
Customer deposits excluding central items increased by £2.2 billion in the
quarter and our robust balance sheet means that we remain in a strong
liquidity position, with an LCR of 148% representing £52.7 billion headroom
above 100% minimum requirement and an LDR (excl. repos and reverse repos) of
84%. Also, our CET1 ratio remains within our targeted range at 13.9%.
Strong Q3 2024 performance
- Total income increased by 2.3% in Q3 2024 to £3,744 million compared
with Q2 2024 and was 7.3% higher than Q3 2023. Total income excluding notable
items was £182 million higher than Q2 2024, primarily reflecting lending and
deposit growth, margin expansion and the benefit of an additional day in the
quarter.
- NIM of 2.18% was 8 basis points higher than Q2 2024 primarily driven by
expansion across deposits, as well as in funding and other items.
- Total operating expenses reduced by £180 million compared with Q2 2024
and were £102 million lower than Q3 2023. Other operating expenses were £144
million lower than Q2 2024 primarily reflecting lower severance and other
staff costs, costs incurred in relation to a retail share offering in the
prior quarter and lower costs in relation to our withdrawal from the Republic
of Ireland. Other operating expenses for the year to date were £140 million
higher than the same period of 2023, or £38 million (0.7%) higher excluding
costs in relation to a retail share offering of £24 million and additional
bank levies of £78 million. We remain committed to deliver on our full year
cost guidance, excluding the impact of increased bank levies and costs in
relation to a retail share offering.
- A net impairment charge of £245 million was incurred in Q3 2024, with
higher Stage 3 charges within Commercial & Institutional. The year to date
charge was £293 million or 10 basis points of gross customer loans. Levels of
default remain stable for the year to date and at low levels across the
portfolio. Compared with Q2 2024, our ECL provision increased by £0.2 billion
to £3.6 billion and our ECL coverage ratio has increased from 0.86% to 0.89%.
We retain post model adjustments of £0.3 billion related to economic
uncertainty, or 8.4% of total impairment provisions. Whilst we are comfortable
with the strong credit performance of our book, we continue to assess this
position regularly.
- As a result, we are pleased to report an attributable profit for Q3 2024
of £1,172 million, with earnings per share of 14.1 pence and a RoTE of 18.3%.
The RoTE for the year to date was 17.0%.
Robust balance sheet with strong capital and liquidity levels
- Net loans to customers excluding central items increased by £8.4
billion, of which £2.3 billion was in relation to the Metro Bank mortgage
portfolio acquisition. The remaining £6.1 billion increase in the quarter was
primarily due to growth in Corporate & Institutions, an increase in term
loan facilities in Commercial Mid-market and a £1.4 billion increase in
Retail Banking mortgage balances. UK Government scheme repayments were £0.5
billion in the quarter.
- Up to 30 September 2024 we have provided £85.4 billion against our
target to provide £100 billion climate and sustainable funding and financing
between 1 July 2021 and the end of 2025. As part of this we aim to provide at
least £10 billion in lending for EPC A- and B-rated residential properties
between 1 January 2023 and the end of 2025. During Q3 2024 we provided £7.1
billion climate and sustainable funding and financing, which included £1.0
billion in lending for EPC A- and B-rated residential properties.
- Customer deposits excluding central items increased £2.2 billion in Q3
2024. Retail Banking deposits growth of £0.5 billion and Private Banking of
£0.2 billion was as a result of increased savings balances, and Commercial
& Institutional deposits increased £1.5 billion reflecting growth within
Commercial Mid-market. Term balances remained stable for the third quarter at
17% of the book, up from 16% at the end of 2023.
- The LCR of 148%, representing £52.7 billion headroom above 100% minimum
requirement, decreased by 3 percentage points compared with Q2 2024 primarily
due to increased lending (including the Metro Bank mortgage portfolio
acquisition) partially offset by increased customer deposits and capital
issuance. Our primary liquidity at Q3 2024 was £162.3 billion and £101.4
billion, or 62%, of this was cash and balances at central banks. Total
wholesale funding increased by £6.0 billion in the quarter to £88.9 billion.
- TNAV per share increased by 12 pence in Q3 2024 to 316 pence primarily
reflecting the profit for the period and a c.£0.45 billion movement in
cashflow hedging reserves partially offset by the interim dividend payment.
Strong returns driving strong capital generation
- The CET1 ratio of 13.9% was 30 basis points higher than Q2 2024
principally reflecting the attributable profit for the quarter, c.65 basis
points, partially offset by the increase in RWAs, c.10 basis points, and the
ordinary dividend accrual, c.25 basis points.
- RWAs increased by £0.9 billion in the third quarter to £181.7 billion
largely reflecting lending growth and £0.9 billion in relation to the Metro
Bank mortgage portfolio acquisition partially offset by RWA management of
£1.3 billion.
Business performance summary
Retail Banking
Quarter ended
30 September 30 June 30 September
2024 2024 2023
£m £m £m
Total income 1,459 1,365 1,442
Operating expenses (659) (697) (780)
of which: Other operating expenses (656) (690) (721)
Impairment losses (144) (59) (169)
Operating profit 656 609 493
Return on equity (1) 21.4% 20.3% 17.5%
Net interest margin (1) 2.43% 2.31% 2.37%
Cost:income ratio (excl. litigation and conduct) (1) 45.0% 50.5% 50.0%
Loan impairment rate (1) 28bps 12bps 33bps
As at
30 September 30 June 31 December
2024 2024 2023
£bn £bn £bn
Net loans to customers (amortised cost) 207.4 203.3 205.2
Customer deposits 192.0 191.5 188.0
RWAs 64.8 62.3 61.6
(1) Refer to the Non-IFRS financial measures appendix for details of
the basis of preparation and reconciliation of non-IFRS financial measures and
performance metrics.
In Q3 2024, Retail Banking continued to support customers with increased
mortgage lending and unsecured lending growth. In addition, lending increased
£2.3 billion as a result of the Metro Bank mortgage portfolio acquisition. We
delivered a return on equity of 21.4% and an operating profit of £0.7
billion, with positive income momentum and increased net interest margin from
deposit margin expansion.
Retail Banking provided £0.9 billion of climate and sustainable funding and
financing in Q3 2024 from lending on properties with an EPC rating of A or B.
Q3 2024 performance
- Total income was £94 million, or 6.9%, higher than Q2 2024 reflecting
deposit margin expansion, lending growth and the impact of an additional day
in the quarter. Q3 2024 total income was £17 million or 1.2% higher than Q3
2023 due to deposit margin expansion and lending growth, partly offset by
asset margin compression and the impact of a deposit balance mix shift from
current accounts to savings.
- Net interest margin was 12 basis points higher than Q2 2024 largely
reflecting deposit margin expansion and benefits from treasury activity.
- Other operating expenses were £34 million, or 4.9%, lower than Q2
2024 reflecting savings from a 3.2% reduction in headcount in the quarter, as
well as severance and property exit costs. Other operating expenses were £65
million, or 9.0%, lower than Q3 2023 reflecting savings from a 9.0% reduction
in headcount and non-repeat of property disposal losses in Q3 2023.
- An impairment charge of £144 million, compared with a £59 million
charge in Q2 2024, largely reflecting lower good book releases.
- Net loans to customers increased by £4.1 billion, or 2.0%, driven by
£3.7 billion higher mortgage balances including £2.3 billion related to the
Metro Bank mortgage portfolio acquisition and an underlying £1.4 billion
increase in net mortgage lending. Personal advances increased by £0.2 billion
and cards balances increased by £0.3 billion in Q3 2024.
- Customer deposits increased by £0.5 billion, or 0.3%, in Q3 2024
reflecting growth in savings partly offset by a reduction in current account
balances.
- RWAs increased by £2.5 billion, or 4.0%, in the quarter primarily due
to book movements and including the impact of the Metro Bank mortgage
portfolio acquisition.
Business performance summary continued
Private Banking
Quarter ended
30 September 30 June 30 September
2024 2024 2023
£m £m £m
Total income 253 236 214
Operating expenses (166) (175) (157)
of which: Other operating expenses (166) (175) (157)
Impairment releases/(losses) 3 5 2
Operating profit 90 66 59
Return on equity (1) 19.7% 14.4% 11.7%
Net interest margin (1) 2.50% 2.30% 2.15%
Cost:income ratio
(excl. litigation and conduct) (1) 65.6% 74.2% 73.4%
Loan impairment rate (1) (7)bps (11)bps (4)bps
AUMA net flows (£bn) (1,2) 0.9 1.0 0.2
As at
30 September 30 June 31 December
2024 2024 2023
£bn £bn £bn
Net loans to customers (amortised cost) 18.2 18.1 18.5
Customer deposits 39.7 39.5 37.7
RWAs 11.0 11.0 11.2
Assets under management (AUMs) (1) 35.7 34.7 31.7
Assets under administration (AUAs) (1) 10.8 10.4 9.1
Assets under management and
administration (AUMA) (1) 46.5 45.1 40.8
(1) Refer to the Non-IFRS financial measures appendix for details of
basis of preparation and reconciliation of non-IFRS financial measures and
performance metrics.
(2) AUM net flows were previously reported.
In Q3 2024, Private Banking continued to support customers with an increase in
AUMA balances reflecting net inflows of £0.9 billion. Private Banking
delivered a return on equity of 19.7% and an operating profit of £90 million.
Private Banking provided £0.2 billion of climate and sustainable funding and
financing in Q3 2024, principally in relation to mortgages on residential
properties with an EPC rating of A or B and wholesale transactions.
Q3 2024 performance
- Total income was £17 million, or 7.2% higher than Q2 2024 primarily
driven by deposit margin expansion and higher AUMA balances driving an
increase in investment fee income. Q3 2024 total income was £39 million, or
18.2%, higher than Q3 2023 primarily reflecting deposit margin expansion and
higher AUMA balances driving an increase in investment fee income, partly
offset with the impact of deposit mix changes as customers migrated from
current account accounts to savings products offering higher returns, combined
with a reduction in lending volumes.
- Net interest margin was 20 basis points higher than Q2 2024 largely
reflecting deposit margin expansion and benefits from treasury activity.
- Other operating expenses were £9 million, or 5.1%, lower than Q2 2024
primarily due to lower severance costs. Q3 2024 other operating expenses were
£9 million, or 5.7%, higher than Q3 2023 primarily reflecting increased
investment spend.
- An impairment release of £3 million, compared with a £5 million
release in Q2 2024, largely reflecting a reduction in good book releases, with
Stage 3 charges broadly flat and remaining at low levels.
- Net loans to customers were broadly stable compared with Q2 2024 with
gross new mortgage lending offset by redemptions.
- Customer deposits increased by £0.2 billion, or 0.5%, in Q3 2024
reflecting growth in instant access savings, partially offset by lower current
account balances.
- AUMA increased by £1.4 billion in Q3 2024, reflecting AUMA net
inflows of £0.9 billion and £0.5 billion of positive market movements.
Business performance summary continued
Commercial & Institutional
Quarter ended
30 September 30 June 30 September
2024 2024 2023
£m £m £m
Net interest income 1,392 1,297 1,271
Non-interest income 679 644 570
Total income 2,071 1,941 1,841
Operating expenses (945) (1,099) (1,012)
of which: Other operating expenses (911) (1,053) (960)
Impairment releases/(losses) (109) 96 (59)
Operating profit 1,017 938 770
Return on equity (1) 19.9% 17.8% 14.7%
Net interest margin (1) 2.24% 2.12% 2.07%
Cost:income ratio
(excl. litigation and conduct) (1) 44.0% 54.3% 52.1%
Loan impairment rate (1) 31bps (28)bps 18bps
As at
30 September 30 June 31 December
2024 2024 2023
£bn £bn £bn
Net loans to customers (amortised cost) 138.1 133.9 131.9
Customer deposits 195.7 194.2 193.4
Funded assets (1) 331.1 315.5 306.9
RWAs 104.0 104.9 107.4
(1) Refer to the Non-IFRS financial measures appendix for details of
the basis of preparation and reconciliation of non-IFRS financial measures and
performance metrics.
In Q3 2024, Commercial & Institutional continued to support customers with
an increase in lending of 3.1% and delivered a strong performance in income
and operating profit supporting a return on equity of 19.9%. We continued to
see good client demand for lending and net interest margin expansion
supporting overall improved profitability.
Commercial & Institutional provided £6.0 billion of climate and
sustainable funding and financing in Q3 2024 to support customers investing in
the transition to net zero.
Q3 2024 performance
- Total income was £130 million, or 6.7%, higher than Q2 2024
principally reflecting deposit margin expansion, customer lending growth and
the impact of an additional day in the quarter. Total income was £230
million, or 12.5%, higher than Q3 2023 primarily due to deposit margin
expansion, strong customer activity in capital markets and customer lending
growth.
- Net interest margin was 12 basis points higher than Q2 2024 largely
reflecting deposit margin expansion and benefits from treasury activity.
- Other operating expenses were £142 million, or 13.5%, lower than Q2
2024 reflecting reduced severance costs and benefit of VAT recovery. Other
operating expenses were £49 million, or 5.1%, lower than Q3 2023 primarily
due to a VAT recovery benefit.
- An impairment charge of £109 million compared with a £96 million
release in Q2 2024, reflecting the non-repeat of good book releases in Q2 2024
and higher Stage 3 charges in Q3 2024.
- Net loans to customers increased by £4.2 billion, or 3.1%, in Q3 2024
principally due to growth within Corporate & Institutions and an increase
in term loan facilities within Commercial Mid-market, partly offset by UK
Government scheme repayments of £0.5 billion.
- Customer deposits increased by £1.5 billion, or 0.8%, in Q3 2024
largely reflecting growth in Commercial Mid-market.
- RWAs decreased by £0.9 billion, or 0.9%, compared with Q2 2024
primarily due to continued RWA management activity of £1.2 billion and
foreign exchange benefits, partially offset by lending book growth and a small
increase in market risk and counterparty credit risk.
Business performance summary continued
Central items & other
Quarter ended
30 September 30 June 30 September
2024 2024 2023
£m £m £m
Continuing operations
Total income (39) 117 (9)
Operating expenses (55) (34) 22
of which: Other operating expenses (51) (10) 45
of which: Ulster Bank RoI direct expenses (14) (30) (43)
Impairment releases/(losses) 5 3 (3)
Operating (loss)/profit (89) 86 10
As at
30 September 30 June 31 December
2024 2024 2023
£bn £bn £bn
Net loans to customers (amortised cost) 23.0 24.0 25.8
Customer deposits 3.7 7.8 12.3
RWAs 1.9 2.6 2.8
Q3 2024 performance
- Total income was £156 million lower than Q2 2024 primarily reflecting
foreign exchange recycling losses and lower gains on interest and foreign
exchange risk management derivatives not in accounting hedge relationships and
lower income in relation to our Ulster Bank RoI business. Total income was
£30 million lower than Q3 2023 primarily reflecting foreign exchange
recycling losses and lower gains on interest and foreign exchange risk
management derivatives not in accounting hedge relationships partially offset
with losses associated with property lease terminations in Q3 2023 not
repeated in Q3 2024.
- Customer deposits decreased by £4.1 billion, or 52.6%, compared with
Q2 2024 primarily reflecting repo activity in Treasury.
- Net loans to customers decreased £1.0 billion to £23.0 billion in Q3
2024 mainly due to reverse repo activity in Treasury.
Segment performance
Nine months ended 30 September 2024
Retail Private Commercial & Central items Total NatWest
Banking Banking Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 3,825 455 3,935 92 8,307
Own credit adjustments - - (5) - (5)
Other non-interest income 324 242 1,941 69 2,576
Total income 4,149 697 5,871 161 10,878
Direct expenses (586) (190) (1,120) (3,844) (5,740)
Indirect expenses (1,527) (331) (1,864) 3,722 -
Other operating expenses (2,113) (521) (2,984) (122) (5,740)
Litigation and conduct costs (16) (1) (111) (14) (142)
Operating expenses (2,129) (522) (3,095) (136) (5,882)
Operating profit before impairment losses/releases 2,020 175 2,776 25 4,996
Impairment (losses)/releases (266) 14 (52) 11 (293)
Operating profit 1,754 189 2,724 36 4,703
Income excluding notable items (1) 4,149 697 5,876 54 10,776
Additional information
Return on tangible equity (1) na na na na 17.0%
Return on equity (1) 19.4% 13.6% 17.4% nm na
Cost:income ratio (excl. litigation and conduct) (1) 50.9% 74.7% 50.8% nm 52.8%
Total assets (£bn) 231.1 27.3 398.7 54.8 711.9
Funded assets (£bn) (1) 231.1 27.3 331.1 53.7 643.2
Net loans to customers - amortised cost (£bn) 207.4 18.2 138.1 23.0 386.7
Loan impairment rate (1) 17bps (10)bps 5bps nm 10bps
Impairment provisions (£bn) (1.9) (0.1) (1.6) - (3.6)
Impairment provisions - Stage 3 (£bn) (1.1) - (1.0) - (2.1)
Customer deposits (£bn) 192.0 39.7 195.7 3.7 431.1
Risk-weighted assets (RWAs) (£bn) 64.8 11.0 104.0 1.9 181.7
RWA equivalent (RWAe) (£bn) 65.3 11.0 105.3 2.4 184.0
Employee numbers (FTEs - thousands) 12.2 2.2 12.8 32.5 59.7
Third party customer asset rate (1) 3.95% 4.99% 6.74% nm nm
Third party customer funding rate (1) (2.08%) (3.15%) (1.92%) nm nm
Average interest earning assets (£bn) (1) 220.5 26.6 244.9 na 526.2
Net interest margin (1) 2.32% 2.29% 2.15% na 2.11%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
Segment performance continued
Nine months ended 30 September 2023
Retail Private Commercial & Central items Total NatWest
Banking Banking Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 4,242 572 3,775 (178) 8,411
Own credit adjustments - - 3 - 3
Other non-interest income 320 209 1,811 461 2,801
Total income 4,562 781 5,589 283 11,215
Direct expenses (604) (181) (1,118) (3,697) (5,600)
Indirect expenses (1,460) (287) (1,735) 3,482 -
Other operating expenses (2,064) (468) (2,853) (215) (5,600)
Litigation and conduct costs (83) (11) (146) (2) (242)
Operating expenses (2,147) (479) (2,999) (217) (5,842)
Operating profit before impairment losses 2,415 302 2,590 66 5,373
Impairment losses (362) (9) (79) (2) (452)
Operating profit 2,053 293 2,511 64 4,921
Income excluding notable items (1) 4,562 781 5,586 (32) 10,897
Additional information
Return on tangible equity (1) na na na na 17.1%
Return on equity (1) 25.1% 20.3% 16.1% nm na
Cost:income ratio (excl. litigation and conduct) (1) 45.2% 59.9% 51.0% nm 49.9%
Total assets (£bn) 229.1 26.8 411.6 49.6 717.1
Funded assets (£bn) (1) 229.1 26.8 325.2 48.5 629.6
Net loans to customers - amortised cost (£bn) 205.2 18.8 130.5 22.8 377.3
Loan impairment rate (1) 23bps 6bps 8bps nm 16bps
Impairment provisions (£bn) (1.9) (0.1) (1.5) - (3.5)
Impairment provisions - Stage 3 (£bn) (1.1) - (0.8) - (1.9)
Customer deposits (£bn) 184.5 37.2 201.8 12.4 435.9
Risk-weighted assets (RWAs) (£bn) 58.9 11.6 107.9 3.2 181.6
RWA equivalent (RWAe) (£bn) 58.9 11.6 109.1 3.9 183.5
Employee numbers (FTEs - thousands) 13.4 2.4 12.6 33.3 61.7
Third party customer asset rate (1) 3.13% 4.43% 5.98% nm nm
Third party customer funding rate (1) (1.24%) (1.88%) (1.23%) nm nm
Average interest earning assets (£bn) (1) 221.8 27.3 244.2 na 519.2
Net interest margin (1) 2.56% 2.80% 2.07% na 2.17%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
Segment performance continued
Quarter ended 30 September 2024
Retail Private Commercial & Central items Total NatWest
Banking Banking Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,350 170 1,392 (13) 2,899
Own credit adjustments - - 2 - 2
Other non-interest income 109 83 677 (26) 843
Total income 1,459 253 2,071 (39) 3,744
Direct expenses (205) (64) (356) (1,159) (1,784)
Indirect expenses (451) (102) (555) 1,108 -
Other operating expenses (656) (166) (911) (51) (1,784)
Litigation and conduct costs (3) - (34) (4) (41)
Operating expenses (659) (166) (945) (55) (1,825)
Operating profit/(loss) before impairment losses/releases 800 87 1,126 (94) 1,919
Impairment (losses)/releases (144) 3 (109) 5 (245)
Operating profit/(loss) 656 90 1,017 (89) 1,674
Income excluding notable items (1) 1,459 253 2,069 (9) 3,772
Additional information
Return on tangible equity (1) na na na na 18.3%
Return on equity (1) 21.4% 19.7% 19.9% nm na
Cost:income ratio (excl. litigation and conduct) (1) 45.0% 65.6% 44.0% nm 47.6%
Total assets (£bn) 231.1 27.3 398.7 54.8 711.9
Funded assets (£bn) (1) 231.1 27.3 331.1 53.7 643.2
Net loans to customers - amortised cost (£bn) 207.4 18.2 138.1 23.0 386.7
Loan impairment rate (1) 28bps (7)bps 31bps nm 25bps
Impairment provisions (£bn) (1.9) (0.1) (1.6) - (3.6)
Impairment provisions - Stage 3 (£bn) (1.1) - (1.0) - (2.1)
Customer deposits (£bn) 192.0 39.7 195.7 3.7 431.1
Risk-weighted assets (RWAs) (£bn) 64.8 11.0 104.0 1.9 181.7
RWA equivalent (RWAe) (£bn) 65.3 11.0 105.3 2.4 184.0
Employee numbers (FTEs - thousands) 12.2 2.2 12.8 32.5 59.7
Third party customer asset rate (1) 4.09% 5.01% 6.67% nm nm
Third party customer funding rate (1) (2.10%) (3.16%) (1.91%) nm nm
Average interest earning assets (£bn) (1) 221.4 27.0 246.8 na 529.8
Net interest margin (1) 2.43% 2.50% 2.24% na 2.18%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
Segment performance continued
Quarter ended 30 June 2024
Retail Private Commercial & Central items Total NatWest
Banking Banking Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,259 151 1,297 50 2,757
Own credit adjustments - - (2) - (2)
Other non-interest income 106 85 646 67 904
Total income 1,365 236 1,941 117 3,659
Direct expenses (192) (65) (380) (1,291) (1,928)
Indirect expenses (498) (110) (673) 1,281 -
Other operating expenses (690) (175) (1,053) (10) (1,928)
Litigation and conduct costs (7) - (46) (24) (77)
Operating expenses (697) (175) (1,099) (34) (2,005)
Operating profit before impairment losses/releases 668 61 842 83 1,654
Impairment (losses)/releases (59) 5 96 3 45
Operating profit 609 66 938 86 1,699
Income excluding notable items (1) 1,365 236 1,943 46 3,590
Additional information
Return on tangible equity (1) na na na na 18.5%
Return on equity (1) 20.3% 14.4% 17.8% nm na
Cost:income ratio (excl. litigation and conduct) (1) 50.5% 74.2% 54.3% nm 52.7%
Total assets (£bn) 226.5 27.2 381.9 54.7 690.3
Funded assets (£bn) (1) 226.5 27.2 315.5 53.6 622.8
Net loans to customers - amortised cost (£bn) 203.3 18.1 133.9 24.0 379.3
Loan impairment rate (1) 12bps (11)bps (28)bps nm (5)bps
Impairment provisions (£bn) (1.7) (0.1) (1.5) - (3.3)
Impairment provisions - Stage 3 (£bn) (1.0) - (0.9) (0.1) (2.0)
Customer deposits (£bn) 191.5 39.5 194.2 7.8 433.0
Risk-weighted assets (RWAs) (£bn) 62.3 11.0 104.9 2.6 180.8
RWA equivalent (RWAe) (£bn) 63.1 11.0 106.7 3.1 183.9
Employee numbers (FTEs - thousands) 12.6 2.2 12.8 33.0 60.6
Third party customer asset rate (1) 3.97% 5.01% 6.73% nm nm
Third party customer funding rate (1) (2.10%) (3.15%) (1.93%) nm nm
Average interest earning assets (£bn) (1) 219.6 26.5 246.0 na 527.6
Net interest margin (1) 2.31% 2.30% 2.12% na 2.10%
nm = not meaningful, na = not applicable.
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
Segment performance continued
Quarter ended 30 September 2023
Retail Private Commercial & Central items Total NatWest
Banking Banking Institutional & other Group
£m £m £m £m £m
Continuing operations
Income statement
Net interest income 1,334 144 1,271 (64) 2,685
Own credit adjustments - - (6) - (6)
Other non-interest income 108 70 576 55 809
Total income 1,442 214 1,841 (9) 3,488
Direct expenses (206) (63) (377) (1,147) (1,793)
Indirect expenses (515) (94) (583) 1,192 -
Other operating expenses (721) (157) (960) 45 (1,793)
Litigation and conduct costs (59) - (52) (23) (134)
Operating expenses (780) (157) (1,012) 22 (1,927)
Operating profit before impairment losses/releases 662 57 829 13 1,561
Impairment (losses)/releases (169) 2 (59) (3) (229)
Operating profit 493 59 770 10 1,332
Income excluding notable items (1) 1,442 214 1,847 11 3,514
Additional information
Return on tangible equity (1) na na na na 14.7%
Return on equity (1) 17.5% 11.7% 14.7% nm na
Cost:income ratio (excl. litigation and conduct) (1) 50.0% 73.4% 52.1% nm 51.4%
Total assets (£bn) 229.1 26.8 411.6 49.6 717.1
Funded assets (£bn) (1) 229.1 26.8 325.2 48.5 629.6
Net loans to customers - amortised cost (£bn) 205.2 18.8 130.5 22.8 377.3
Loan impairment rate (1) 33bps (4)bps 18bps nm 24bps
Impairment provisions (£bn) (1.9) (0.1) (1.5) - (3.5)
Impairment provisions - Stage 3 (£bn) (1.1) - (0.8) - (1.9)
Customer deposits (£bn) 184.5 37.2 201.8 12.4 435.9
Risk-weighted assets (RWAs) (£bn) 58.9 11.6 107.9 3.2 181.6
RWA equivalent (RWAe) (£bn) 58.9 11.6 109.1 3.9 183.5
Employee numbers (FTEs - thousands) 13.4 2.4 12.6 33.3 61.7
Third party customer asset rate (1) 3.34% 4.80% 6.72% nm nm
Third party customer funding rate (1) (1.69%) (2.80%) (1.65%) nm nm
Average interest earning assets (£bn) (1) 223.7 26.6 243.4 na 520.8
Net interest margin (1) 2.37% 2.15% 2.07% na 2.05%
nm - not meaningful, na - not applicable
(1) Refer to the Non-IFRS financial measures appendix for details of the basis of
preparation and reconciliation of non-IFRS financial measures and performance
metrics.
Risk and capital management
Credit risk
Segment analysis - portfolio summary
The table below shows gross loans and ECL, by segment and stage, within the
scope of the IFRS 9 ECL framework.
30 September 2024 31 December 2023
Retail Private Commercial & Central items Retail Private Commercial & Central items
Banking Banking Institutional & other Total Banking Banking Institutional & other Total
£m £m £m £m £m £m £m £m £m £m
Loans - amortised cost and FVOCI (1,2)
Stage 1 181,930 17,236 127,115 26,874 353,155 182,297 17,565 119,047 29,677 348,586
Stage 2 23,599 849 13,319 - 37,767 21,208 906 15,771 6 37,891
Stage 3 3,359 304 2,457 - 6,120 3,133 258 2,162 10 5,563
Of which: individual - 235 1,231 - 1,466 - 186 845 - 1,031
Of which: collective 3,359 69 1,226 - 4,654 3,133 72 1,317 10 4,532
Subtotal excluding disposal group loans 208,888 18,389 142,891 26,874 397,042 206,638 18,729 136,980 29,693 392,040
Disposal group loans - - 67 67
Total 26,874 397,042 29,760 392,107
ECL provisions (3)
Stage 1 297 15 273 15 600 306 20 356 27 709
Stage 2 478 10 326 1 815 502 20 447 7 976
Stage 3 1,089 37 1,012 - 2,138 1,097 34 819 10 1,960
Of which: individual - 37 446 - 483 - 34 298 - 332
Of which: collective 1,089 - 566 - 1,655 1,097 - 521 10 1,628
Subtotal excluding ECL provisions on disposal group loans 1,864 62 1,611 16 3,553 1,905 74 1,622 44 3,645
ECL provisions on disposal group loans - - 36 36
Total 16 3,553 80 3,681
ECL provisions coverage (4)
Stage 1 (%) 0.16 0.09 0.21 0.06 0.17 0.17 0.11 0.30 0.09 0.20
Stage 2 (%) 2.03 1.18 2.45 nm 2.16 2.37 2.21 2.83 nm 2.58
Stage 3 (%) 32.42 12.17 41.19 - 34.93 35.01 13.18 37.88 100.00 35.23
ECL provisions coverage excluding disposal group loans 0.89 0.34 1.13 0.06 0.89 0.92 0.40 1.18 0.15 0.93
ECL provisions coverage on disposal group loans - - 53.73 53.73
Total 0.06 0.89 0.27 0.94
(1) 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 £104.7 billion (31 December 2023 - £103.1 billion) and debt
securities of £61.3 billion (31 December 2023 - £50.1 billion).
(2) Fair value through other comprehensive income (FVOCI). Includes
loans to customers and banks.
(3) Includes £4 million (31 December 2023 - £9 million) related to
assets classified as FVOCI and £0.1 billion (31 December 2023 - £0.1
billion) related to off-balance sheet exposures.
(4) ECL provisions coverage is calculated as ECL provisions divided by
loans - amortised cost and FVOCI. It is calculated on loans and total ECL
provisions, including ECL for other (non-loan) assets and unutilised exposure.
Some segments with a high proportion of debt securities or unutilised exposure
may result in a not meaningful (nm) coverage ratio.
Risk and capital management continued
Credit risk continued
Segment analysis - loans
- Retail Banking - Loans to customers increased during the year as a
result of continued growth in credit card lending and the £2.3 billion Metro
Bank mortgage portfolio acquisition. Excluding the acquisition, mortgage
balances reduced as redemptions were only partially offset by new lending. New
lending and portfolio credit quality was maintained with limited increases in
arrears, in-line with expectations. Total ECL coverage decreased during the
year reflective of Q2 2024 debt sale activity on unsecured portfolios (£0.2
billion of assets), reductions in economic uncertainty post model adjustments
and stable underlying portfolio performance. The reduction in good book
coverage so far this year was a result of unsecured PD modelling updates
alongside an improved view on forward looking economics since 31 December
2023. Post model adjustments to capture increased affordability pressures on
customers due to high inflation and interest rates decreased at Q2 2024,
reflecting a revision of portfolio sub-segments deemed most at risk, supported
by back-testing of default outcomes. Flow rates into Stage 3 reduced during H1
2024 and have remained consistent into Q3 2024.
- Commercial & Institutional - Growth in the first three quarters of
2024 was principally driven by financial institutions and a number of
corporate sectors including commercial real estate. Sector appetite continues
to be reviewed regularly, with particular focus on sector clusters deemed to
represent a heightened risk. Total ECL coverage reduced during the year
reflecting increased Stage 1 exposure and positive portfolio performance. Good
book coverage improved due to portfolio growth and performance along with a
reduction in post model adjustments. Stage 3 ECL increased due to flows into
default on individually assessed customers.
Movement in ECL provision
The table below shows the main ECL provision movements during the year.
ECL provision
£m
At 1 January 2024 3,645
Transfers to disposal groups and reclassifications (18)
Changes in economic forecasts (17)
Changes in risk metrics and exposure: Stage 1 and Stage 2 (124)
Changes in risk metrics and exposure: Stage 3 592
Judgemental changes: changes in post model adjustments for Stage 1,
Stage 2 and Stage 3 (135)
Write-offs and other (390)
At 30 September 2024 3,553
- For the nine months to 30 September 2024, overall ECL decreased. This
primarily reflected debt sale activity on Retail Banking unsecured assets
(£0.2 billion), reductions in economic uncertainty post model adjustments,
and stable underlying portfolio performance across NatWest Group. There was a
slight reduction in total ECL coverage alongside increases in Stage 3 ECL.
- In the Personal portfolio, Stage 3 default inflows in 2024 reduced
relative to 2023, as the recent trends of risk parameter normalisation
stabilise.
- In the Non-personal portfolio, Stage 3 charges have started to
normalise driven by individual exposures. The total number of defaults has
increased in 2024 but is still lower than historical trends.
- Judgemental ECL post model adjustments decreased from 31 December
2023. This reflected management's view that the level of economic uncertainty
due to inflation being higher for longer, higher interest rates and liquidity
concerns, has reduced and now represents 9% of total ECL (31 December 2023 -
13%). Refer to the ECL post model adjustments section.
Risk and capital management continued
Credit risk continued
ECL post model adjustments
The table below shows ECL post model adjustments.
Retail Banking Private Commercial & Central items
Mortgages Other Banking Institutional & other Total
30 September 2024 £m £m £m £m £m £m
Deferred model calibrations - - 1 17 - 18
Economic uncertainty 80 43 7 169 - 299
Other adjustments - - - 10 - 10
Total 80 43 8 196 - 327
Of which:
- Stage 1 38 21 4 82 - 145
- Stage 2 33 22 4 112 - 171
- Stage 3 9 - - 2 - 11
31 December 2023
Deferred model calibrations - - 1 23 - 24
Economic uncertainty 118 39 13 256 3 429
Other adjustments 1 - - 8 23 32
Total 119 39 14 287 26 485
Of which:
- Stage 1 75 14 6 115 10 220
- Stage 2 31 25 8 167 9 240
- Stage 3 13 - - 5 7 25
- Retail Banking - The post model adjustment for economic uncertainty
of £123 million (31 December 2023 - £157 million) remained largely in line
with Q2 2024. The reduction relative to the 2023 year end reflected a revision
to the cost of living post model adjustment at Q2 2024 and is currently held
at £114 million (31 December 2023 - £144 million). This update was supported
by back-testing of default outcomes for higher risk segments. The cost of
living post model adjustment captures the risk on segments in the Retail
Banking portfolio that are more susceptible to the effects of cost of living
rises. It focuses on key affordability lenses, including customers with lower
income in fuel poverty, over-indebted borrowers and customers vulnerable to a
potential mortgage rate shock.
- Commercial & Institutional - The post model adjustment for
economic uncertainty decreased to £169 million (31 December 2023 - £256
million). The inflation, supply chain and liquidity post model adjustment of
£138 million (31 December 2023 - £206 million) was maintained for lending
prior to 1 January 2024, with a sector level downgrade being applied to the
sectors that were considered most at risk. While inflationary pressures are
subsiding, geopolitical events could impact supply chains and there are
ongoing concerns across many sectors in relation to reducing cash reserves.
The £68 million reduction reflected positive portfolio movements and exposure
reduction. A £30 million (31 December 2023 - £50 million) post model
adjustment to cover the residual risks from Covid-19 remains for the risks
surrounding associated debt to customers that have utilised government support
schemes. This adjustment is reducing as customers default or repay.
- Central items & other - The £26 million reduction was mainly due
to the £23 million post model adjustment in other adjustments being removed
in the period, reflecting the withdrawal from the Republic of Ireland.
Risk and capital management continued
Credit risk continued
Sector analysis - portfolio summary
The table below shows financial assets and off-balance sheet exposures gross
of ECL and related ECL provisions, impairment and past due by sector, asset
quality and geographical region.
Personal Non-personal Total
Credit Corporate and Financial
Mortgages (1) cards Other Total Other institutions Sovereign Total
30 September 2024 £m £m £m £m £m £m £m £m £m
Loans by geography 209,161 6,680 9,741 225,582 110,557 59,647 1,256 171,460 397,042
- UK 209,161 6,680 9,741 225,582 97,232 39,721 566 137,519 363,101
- RoI - - - - 1,097 974 - 2,071 2,071
- Other Europe - - - - 5,238 9,593 379 15,210 15,210
- RoW - - - - 6,990 9,359 311 16,660 16,660
Loans by asset quality (2) 209,161 6,680 9,741 225,582 110,557 59,647 1,256 171,460 397,042
- AQ1-AQ4 111,141 122 814 112,077 43,664 55,087 978 99,729 211,806
- AQ5-AQ8 94,378 6,299 7,832 108,509 64,168 4,490 125 68,783 177,292
- AQ9 1,066 92 198 1,356 323 12 133 468 1,824
- AQ10 2,576 167 897 3,640 2,402 58 20 2,480 6,120
Loans by stage 209,161 6,680 9,741 225,582 110,557 59,647 1,256 171,460 397,042
- Stage 1 185,922 4,714 7,276 197,912 95,220 58,920 1,103 155,243 353,155
- Stage 2 20,663 1,799 1,568 24,030 12,935 669 133 13,737 37,767
- Stage 3 2,576 167 897 3,640 2,402 58 20 2,480 6,120
- Of which: individual 144 - 24 168 1,227 51 20 1,298 1,466
- Of which: collective 2,432 167 873 3,472 1,175 7 - 1,182 4,654
Loans - past due analysis 209,161 6,680 9,741 225,582 110,557 59,647 1,256 171,460 397,042
- Not past due 206,003 6,489 8,822 221,314 107,448 59,494 1,236 168,178 389,492
- Past due 1-30 days 1,143 44 67 1,254 1,738 138 - 1,876 3,130
- Past due 31-90 days 753 45 100 898 468 9 - 477 1,375
- Past due 90-180 days 495 40 93 628 90 1 - 91 719
- Past due >180 days 767 62 659 1,488 813 5 20 838 2,326
Loans - Stage 2 20,663 1,799 1,568 24,030 12,935 669 133 13,737 37,767
- Not past due 19,503 1,745 1,467 22,715 12,020 642 133 12,795 35,510
- Past due 1-30 days 762 26 38 826 540 26 - 566 1,392
- Past due 31-90 days 398 28 63 489 375 1 - 376 865
Weighted average life
- ECL measurement (years) 8 4 6 5 6 2 1 6 6
Weighted average 12 months PDs
- IFRS 9 (%) 0.52 3.03 5.09 0.77 1.27 0.18 5.46 0.92 0.84
- Basel (%) 0.68 3.58 3.26 0.86 1.10 0.16 5.46 0.81 0.84
ECL provisions by geography 444 404 1,057 1,905 1,541 87 20 1,648 3,553
- UK 444 404 1,057 1,905 1,371 34 13 1,418 3,323
- RoI - - - - 3 1 - 4 4
- Other Europe - - - - 114 8 - 122 122
- RoW - - - - 53 44 7 104 104
For the notes to this table refer to page 22.
Risk and capital management continued
Credit risk continued
Sector analysis - portfolio summary continued
Personal Non-personal Total
Credit Other Corporate and Financial
Mortgages (1) cards personal Total Other institutions Sovereign Total
30 September 2024 £m £m £m £m £m £m £m £m £m
ECL provisions by stage 444 404 1,057 1,905 1,541 87 20 1,648 3,553
- Stage 1 60 92 150 302 249 36 13 298 600
- Stage 2 68 198 214 480 324 9 2 335 815
- Stage 3 316 114 693 1,123 968 42 5 1,015 2,138
- Of which: individual 12 - 14 26 415 37 5 457 483
- Of which: collective 304 114 679 1,097 553 5 - 558 1,655
ECL provisions coverage (%) 0.21 6.05 10.85 0.84 1.39 0.15 1.59 0.96 0.89
- Stage 1 (%) 0.03 1.95 2.06 0.15 0.26 0.06 1.18 0.19 0.17
- Stage 2 (%) 0.33 11.01 13.65 2.00 2.50 1.35 1.50 2.44 2.16
- Stage 3 (%) 12.27 68.26 77.26 30.85 40.30 72.41 25.00 40.93 34.93
Loans by residual maturity 209,161 6,680 9,741 225,582 110,557 59,647 1,256 171,460 397,042
- <1 year 3,368 3,680 3,180 10,228 34,826 45,266 426 80,518 90,746
- 1-5 year 11,732 3,000 5,544 20,276 47,007 11,542 499 59,048 79,324
- >5<15 year 45,515 - 1,011 46,526 20,867 2,805 297 23,969 70,495
- >15 year 148,546 - 6 148,552 7,857 34 34 7,925 156,477
Other financial assets by asset quality (2) - - - - 3,178 29,011 133,767 165,956 165,956
- AQ1-AQ4 - - - - 3,176 28,618 133,767 165,561 165,561
- AQ5-AQ8 - - - - 2 393 - 395 395
Off-balance sheet 13,625 19,434 8,118 41,177 74,529 21,246 237 96,012 137,189
- Loan commitments 13,625 19,434 8,077 41,136 71,483 19,772 237 91,492 132,628
- Financial guarantees - - 41 41 3,046 1,474 - 4,520 4,561
Off-balance sheet by asset quality (2) 13,625 19,434 8,118 41,177 74,529 21,246 237 96,012 137,189
- AQ1-AQ4 12,805 510 6,736 20,051 47,313 19,601 150 67,064 87,115
- AQ5-AQ8 806 18,585 1,335 20,726 26,783 1,601 23 28,407 49,133
- AQ9 - 9 20 29 18 - 64 82 111
- AQ10 14 330 27 371 415 44 - 459 830
For the notes to this table refer to page 22.
Risk and capital management continued
Credit risk continued
Sector analysis - portfolio summary continued
Personal Non-personal Total
Credit Corporate and Financial
Mortgages (1) cards Other Total Other institutions Sovereign Total
31 December 2023 (3) £m £m £m £m £m £m £m £m £m
Loans by geography 208,275 5,904 9,595 223,774 108,546 57,087 2,633 168,266 392,040
- UK 208,275 5,893 9,592 223,760 95,736 39,906 2,016 137,658 361,418
- RoI - 11 3 14 897 279 - 1,176 1,190
- Other Europe - - - - 5,471 7,865 399 13,735 13,735
- RoW - - - - 6,442 9,037 218 15,697 15,697
Loans by asset quality (2) 208,275 5,904 9,595 223,774 108,546 57,087 2,633 168,266 392,040
- AQ1-AQ4 118,266 124 914 119,304 42,217 53,367 2,488 98,072 217,376
- AQ5-AQ8 86,868 5,577 7,552 99,997 63,818 3,686 123 67,627 167,624
- AQ9 860 63 150 1,073 386 18 - 404 1,477
- AQ10 2,281 140 979 3,400 2,125 16 22 2,163 5,563
Loans by stage 208,275 5,904 9,595 223,774 108,546 57,087 2,633 168,266 392,040
- Stage 1 188,140 3,742 6,983 198,865 91,006 56,105 2,610 149,721 348,586
- Stage 2 17,854 2,022 1,633 21,509 15,415 966 1 16,382 37,891
- Stage 3 2,281 140 979 3,400 2,125 16 22 2,163 5,563
- Of which: individual 122 - 20 142 865 2 22 889 1,031
- Of which: collective 2,159 140 959 3,258 1,260 14 - 1,274 4,532
Loans - past due analysis 208,275 5,904 9,595 223,774 108,546 57,087 2,633 168,266 392,040
- Not past due 205,405 5,743 8,578 219,726 104,316 56,735 2,633 163,684 383,410
- Past due 1-30 days 1,178 41 71 1,290 2,713 332 - 3,045 4,335
- Past due 31-90 days 518 38 112 668 616 12 - 628 1,296
- Past due 90-180 days 445 32 103 580 113 2 - 115 695
- Past due >180 days 729 50 731 1,510 788 6 - 794 2,304
Loans - Stage 2 17,854 2,022 1,633 21,509 15,415 966 1 16,382 37,891
- Not past due 16,803 1,971 1,529 20,303 14,358 932 1 15,291 35,594
- Past due 1-30 days 765 27 40 832 616 24 - 640 1,472
- Past due 31-90 days 286 24 64 374 441 10 - 451 825
Weighted average life
- ECL measurement (years) 9 3 6 6 6 2 - 6 6
Weighted average 12 months PDs
- IFRS 9 (%) 0.50 3.45 5.29 0.75 1.55 0.19 0.37 1.07 0.89
- Basel (%) 0.67 3.37 3.15 0.84 1.16 0.17 0.37 0.81 0.83
ECL provisions by geography 420 376 1,168 1,964 1,599 66 16 1,681 3,645
- UK 420 365 1,163 1,948 1,383 38 13 1,434 3,382
- RoI - 11 5 16 6 1 - 7 23
- Other Europe - - - - 153 12 - 165 165
- RoW - - - - 57 15 3 75 75
For the notes to this table refer to page 22.
Risk and capital management continued
Credit risk continued
Sector analysis - portfolio summary continued
Personal Non-personal Total
Credit Other Corporate and Financial
Mortgages (1) cards personal Total Other institutions Sovereign Total
31 December 2023 (3) £m £m £m £m £m £m £m £m £m
ECL provisions by stage 420 376 1,168 1,964 1,599 66 16 1,681 3,645
- Stage 1 88 76 152 316 336 44 13 393 709
- Stage 2 61 207 238 506 454 15 1 470 976
- Stage 3 271 93 778 1,142 809 7 2 818 1,960
- Of which: individual 12 - 14 26 302 2 2 306 332
- Of which: collective 259 93 764 1,116 507 5 - 512 1,628
ECL provisions coverage (%) 0.20 6.37 12.17 0.88 1.47 0.12 0.61 1.00 0.93
- Stage 1 (%) 0.05 2.03 2.18 0.16 0.37 0.08 0.50 0.26 0.20
- Stage 2 (%) 0.34 10.24 14.57 2.35 2.95 1.55 100.00 2.87 2.58
- Stage 3 (%) 11.88 66.43 79.47 33.59 38.07 43.75 9.09 37.82 35.23
Loans by residual maturity 208,275 5,904 9,595 223,774 108,546 57,087 2,633 168,266 392,040
- <1 year 3,375 3,398 3,169 9,942 31,008 43,497 489 74,994 84,936
- 1-5 year 9,508 2,506 5,431 17,445 49,789 11616 1,872 63,277 80,722
- >5<15 year 46,453 - 993 47,446 19,868 1,939 199 22,006 69,452
- >15 year 148,939 - 2 148,941 7,881 35 73 7,989 156,930
Other financial assets by asset quality (2) - - - - 2,690 26,816 123,683 153,189 153,189
- AQ1-AQ4 - - - - 2,690 26,084 123,683 152,457 152,457
- AQ5-AQ8 - - - - - 732 - 732 732
Off-balance sheet 9,843 17,284 8,462 35,589 73,921 22,221 227 96,369 131,958
- Loan commitments 9,843 17,284 8,417 35,544 70,942 20,765 227 91,934 127,478
- Financial guarantees - - 45 45 2,979 1,456 - 4,435 4,480
Off-balance sheet by asset quality (2) 9,843 17,284 8,462 35,589 73,921 22,221 227 96,369 131,958
- AQ1-AQ4 9,099 448 7,271 16,818 47,296 20,644 165 68,105 84,923
- AQ5-AQ8 721 16,518 1,162 18,401 26,296 1,574 45 27,915 46,316
- AQ9 7 6 4 17 15 - - 15 32
- AQ10 16 312 25 353 314 3 17 334 687
(1) Includes a portion of Private Banking lending secured against
residential real estate, in line with ECL calculation methodology. Private
Banking and RBS International mortgages are reported in UK, reflecting the
country of lending origination and includes crown dependencies.
(2) AQ bandings are based on Basel PDs and mapping is as follows:
Internal asset quality band Probability of default range Indicative S&P rating Internal asset quality band Probability of default range Indicative S&P rating
AQ1 0% - 0.034% AAA to AA AQ6 1.076% - 2.153% BB- to B+
AQ2 0.034% - 0.048% AA to AA- AQ7 2.153% - 6.089% B+ to B
AQ3 0.048% - 0.095% A+ to A AQ8 6.089% - 17.222% B- to CCC+
AQ4 0.095% - 0.381% BBB+ to BBB- AQ9 17.222% - 100% CCC to C
AQ5 0.381% - 1.076% BB+ to BB AQ10 100% D
£0.3 billion (31 December 2023 - £0.3 billion) of AQ10 Personal balances
primarily relate to loan commitments, the drawdown of which is effectively
prohibited.
(3) Previously published sectors for the Non-personal portfolio
have been re-presented to reflect internal sector reporting. Property is now
included in corporate and other.
Risk and capital management continued
Credit risk continued
Sector analysis - portfolio summary
The table below shows ECL by stage, for the Personal portfolio and
Non-personal portfolio including the three largest borrowing sector clusters
included in corporate and other.
Loans - amortised cost and FVOCI Off-balance sheet ECL provisions
Loan Contingent
Stage 1 Stage 2 Stage 3 Total commitments liabilities Stage 1 Stage 2 Stage 3 Total
30 September 2024 £m £m £m £m £m £m £m £m £m £m
Personal 197,912 24,030 3,640 225,582 41,136 41 302 480 1,123 1,905
Mortgages (1) 185,922 20,663 2,576 209,161 13,625 - 60 68 316 444
Credit cards 4,714 1,799 167 6,680 19,434 - 92 198 114 404
Other personal 7,276 1,568 897 9,741 8,077 41 150 214 693 1,057
Non-personal 155,243 13,737 2,480 171,460 91,492 4,520 298 335 1,015 1,648
Financial institutions (2) 58,920 669 58 59,647 19,772 1,474 36 9 42 87
Sovereigns 1,103 133 20 1,256 237 - 13 2 5 20
Corporate and other 95,220 12,935 2,402 110,557 71,483 3,046 249 324 968 1,541
Of which:
Commercial real estate 16,485 1,365 410 18,260 6,280 120 60 29 144 233
Consumer industries 13,114 3,399 468 16,981 10,533 576 42 91 198 331
Mobility and logistics 13,674 1,535 168 15,377 9,497 634 25 28 56 109
Total 353,155 37,767 6,120 397,042 132,628 4,561 600 815 2,138 3,553
31 December 2023 (3)
Personal 198,865 21,509 3,400 223,774 35,544 45 316 506 1,142 1,964
Mortgages (1) 188,140 17,854 2,281 208,275 9,843 - 88 61 271 420
Credit cards 3,742 2,022 140 5,904 17,284 - 76 207 93 376
Other personal 6,983 1,633 979 9,595 8,417 45 152 238 778 1,168
Non-personal 149,721 16,382 2,163 168,266 91,934 4,435 393 470 818 1,681
Financial institutions (2) 56,105 966 16 57,087 20,765 1,456 44 15 7 66
Sovereigns 2,610 1 22 2,633 227 - 13 1 2 16
Corporate and other 91,006 15,415 2,125 108,546 70,942 2,979 336 454 809 1,599
Of which:
Commercial real estate 14,998 2,040 374 17,412 7,155 106 86 58 112 256
Consumer industries 12,586 4,050 541 17,177 10,209 649 61 119 222 402
Mobility and logistics 13,186 2,074 143 15,403 8,728 496 33 39 48 120
Total 348,586 37,891 5,563 392,040 127,478 4,480 709 976 1,960 3,645
(1) As at 30 September 2024, £139.9 billion, 66.9%, of the total
residential mortgages portfolio had Energy Performance Certificate (EPC) data
available (31 December 2023 - £140.8 billion, 67.6%), of which, 45.7% were
rated as EPC A to C (31 December 2023 - 44.1%).
(2) Includes transactions, such as securitisations, where the
underlying risk may be in other sectors.
(3) Previously published sectors for the Non-personal portfolio have
been re-presented to reflect internal sector reporting. Property is now
included in corporate and other.
Risk and capital management continued
Capital, liquidity and funding risk
Introduction
NatWest Group takes a comprehensive approach 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.
Key developments since 31 December 2023
CET1 ratio MREL ratio RWAs
13.9% 32.9% £181.7bn
(as at 31 December 2023 - 13.4%) (as at 31 December 2023 - 30.5%) (as at 31 December 2023 - £183.0bn)
The CET1 ratio increased by 50 basis points to 13.9%. The increase in the CET1 The Minimum Requirements of own funds and Eligible Liabilities (MREL) ratio Total RWAs decreased by £1.3 billion to £181.7 billion reflecting:
ratio was due to a £0.9 billion increase in CET1 capital and a £1.3 billion increased by 240 basis points to 32.9%, driven by a £4.0 billion increase in
decrease in RWAs. MREL and £1.3 billion decrease in RWAs. MREL increased to £59.8 billion
driven by a £2.2 billion increase in eligible capital and a £1.8 billion
increase in senior unsecured debt. The increase in capital was driven by - a decrease in credit risk RWAs of £2.2 billion, primarily due to
attributable profit and reserve movements, a £0.8 billion increase due to active RWA management and a reduction in risk weighted assets from foreign
The CET1 capital increase was mainly driven by an attributable profit to issuance of $1.0 billion Additional Tier 1 and a £0.6 billion increase driven exchange movements due to sterling appreciation versus the euro and US dollar.
ordinary shareholders of £2.8 billion (net of ordinary interim dividend paid) by issuances and redemptions of subordinated debt instruments in the period. These movements are partially offset by drawdowns and new facilities within
and other movements on reserves and regulatory adjustments of £0.1 billion The increase in senior unsecured debt was driven by the issuance of USD debt Commercial & Institutional, lending growth and the Metro Bank mortgage
partially offset by a directed buyback of £1.2 billion and a foreseeable instruments totalling $4.6 billion and EUR debt instruments totalling €1.8 portfolio acquisition within Retail Banking.
ordinary dividend accrual of £0.8 billion. billion, partially offset by redemption of a €0.8 billion debt instrument
and a $2.0 billion debt instrument, and FX movements. - a decrease of £0.5 billion in counterparty credit risk driven by
reduced over-the-counter exposures.
- a decrease in market risk RWAs of £0.2 billion, predominantly
driven by risk reduction activity.
- an increase of £1.6 billion in operational risk RWAs following
the annual recalculation as a result of higher income compared to 2020.
UK leverage ratio Liquidity portfolio LCR
5.0% £226.5bn 148%
(as at 31 December 2023 - 5.0%) (as at 31 December 2023 - £222.8bn) (as at 31 December 2023 - 144%)
The leverage ratio remains at 5.0%, due to a £31.9 billion increase in The liquidity portfolio increased by £3.7 billion to £226.5 billion during The Liquidity Coverage Ratio (LCR) increased by 4 percentage points to 148%,
leverage exposure offset by a £1.7 billion increase in Tier 1 capital. The the year. Primary liquidity increased by £14.2 billion to £162.3 billion, during the year, driven by increased customer deposits and issuance partially
key drivers in the leverage exposure were an increase in other financial driven by an increase in customer deposits and issuance partially offset by offset by increased lending (incl. Metro Bank mortgage portfolio acquisition)
assets, trading assets, and other off-balance sheet items. increased lending (incl. Metro Bank mortgage portfolio acquisition) and and capital distributions (share buyback and dividends).
capital distributions (share buyback and dividends). Secondary liquidity
decreased £10.5 billion due to a decrease in pre-positioned collateral at the
Bank of England.
Risk and capital management continued
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 capital 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 NatWest
Group's minimum requirements and its MDA threshold requirements.
Type CET1 Total Tier 1 Total capital
Pillar 1 requirements 4.5% 6.0% 8.0%
Pillar 2A requirements 1.8% 2.4% 3.2%
Minimum Capital Requirements 6.3% 8.4% 11.2%
Capital conservation buffer 2.5% 2.5% 2.5%
Countercyclical capital buffer (1) 1.7% 1.7% 1.7%
MDA threshold (2) 10.5% n/a n/a
Overall capital requirement 10.5% 12.6% 15.4%
Capital ratios at 30 September 2024 13.9% 16.5% 19.7%
Headroom (3,4) 3.4% 3.9% 4.3%
(1) The UK countercyclical buffer (CCyB) rate is currently being
maintained at 2%. This may vary in either direction in the future subject to
how risks develop. Foreign exposures may be subject to different CCyB rates
depending on the rate set in those jurisdictions.
(2) Pillar 2A requirements for NatWest Group are set as a variable
amount with the exception of some fixed add-ons.
(3) The headroom does not reflect excess distributable capital and may
vary over time.
(4) Headroom as at 31 December 2023 was CET1 2.9%, Total Tier 1 2.9%
and Total Capital 3.0%.
Leverage ratios
The table below summarises the minimum ratios of capital to leverage exposure
under the binding PRA UK leverage framework applicable for NatWest Group.
Type CET1 Total Tier 1
Minimum ratio 2.44% 3.25%
Countercyclical leverage ratio buffer (1) 0.6% 0.6%
Total 3.04% 3.85%
(1) The countercyclical leverage ratio buffer is set at 35% of
NatWest Group's CCyB.
Risk and capital management continued
Capital, liquidity and funding risk continued
Capital and leverage ratios
The table below sets out the key capital and leverage ratios. NatWest Group is
subject to the requirements set out in the UK CRR therefore the capital and
leverage ratios are presented under these frameworks on a transitional basis.
30 September 30 June 31 December
2024 2024 2023
Capital adequacy ratios (1) % % %
CET1 13.9 13.6 13.4
Tier 1 16.5 16.2 15.5
Total 19.7 19.5 18.4
Capital £m £m £m
Tangible equity 26,220 25,241 25,653
Expected loss less impairment (23) (34) -
Prudential valuation adjustment (245) (233) (279)
Deferred tax assets (746) (822) (979)
Own credit adjustments 18 19 (10)
Pension fund assets (162) (161) (143)
Cash flow hedging reserve 1,365 1,812 1,899
Foreseeable ordinary dividends (808) (839) (1,013)
Adjustment for trust assets (2) (365) (365) (365)
Foreseeable charges - (50) (525)
Adjustments under IFRS 9 transitional arrangements 42 39 202
Total regulatory adjustments (924) (634) (1,213)
CET1 capital 25,296 24,607 24,440
Additional AT1 capital 4,670 4,670 3,875
Tier 1 capital 29,966 29,277 28,315
Tier 2 capital 5,824 5,924 5,317
Total regulatory capital 35,790 35,201 33,632
Risk-weighted assets
Credit risk 145,448 144,852 147,598
Counterparty credit risk 7,255 7,139 7,830
Market risk 7,190 6,956 7,363
Operational risk 21,821 21,821 20,198
Total RWAs 181,714 180,768 182,989
(1) Based on current PRA rules, includes the transitional
arrangements for the capital impact of IFRS 9 expected credit loss (ECL)
accounting. The impact of the IFRS 9 transitional adjustments at 30 September
2024 was £42 million for CET1 capital, £42 million for Total Capital and £3
million RWAs (30 June 2024 - £39 million CET1 capital, £39 million Total
Capital and £1 million RWAs and 31 December 2023 - £0.2 billion CET1
capital, £54 million Total Capital and £17 million RWAs). Excluding this
adjustment, the CET1 ratio would be 13.9% (30 June 2024 - 13.6% and 31
December 2023 - 13.2%). Tier 1 Capital ratio would be 16.5% (30 June 2024 -
16.2% and 31 December 2023 - 15.4%) and the Total Capital ratio would be 19.7%
(30 June 2024 - 19.5% and 31 December 2023 - 18.4%).
(2) Prudent deduction in respect of agreement with the pension
fund.
Risk and capital management continued
Capital, liquidity and funding risk continued
Capital and leverage ratios continued
30 September 30 June 31 December
2024 2024 2023
Leverage £m £m £m
Cash and balances at central banks 105,629 115,833 104,262
Trading assets 54,445 45,974 45,551
Derivatives 68,720 67,514 78,904
Financial assets 455,770 437,909 439,449
Other assets 27,317 22,116 23,605
Assets of disposal groups 16 992 902
Total assets 711,897 690,338 692,673
Derivatives
- netting and variation margin (66,427) (66,846) (79,299)
- potential future exposures 16,047 16,829 17,212
Securities financing transactions gross up 1,588 1,645 1,868
Other off balance sheet items 57,154 55,003 50,961
Regulatory deductions and other adjustments (20,707) (15,782) (16,043)
Claims on central banks (102,090) (112,377) (100,735)
Exclusion of bounce back loans (2,746) (3,084) (3,794)
UK leverage exposure 594,716 565,726 562,843
UK leverage ratio (%) (1) 5.0 5.2 5.0
(1) The UK leverage exposure and transitional Tier 1 capital are
calculated in accordance with current PRA rules. Excluding the IFRS 9
transitional adjustment, the UK leverage ratio would be 5.0% (30 June 2024 -
5.2%, 31 December 2023 - 5.0%).
Risk and capital management continued
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 2024. It is presented on a transitional basis
based on current PRA rules.
CET1 AT1 Tier 2 Total
£m £m £m £m
At 31 December 2023 24,440 3,875 5,317 33,632
Attributable profit for the period 3,271 - - 3,271
Ordinary interim dividend paid (497) - - (497)
Directed buyback (1,241) - - (1,241)
Foreseeable ordinary dividends (808) - - (808)
Foreign exchange reserve (137) - - (137)
FVOCI reserve (8) - - (8)
Own credit 28 - - 28
Share based remuneration and shares vested under employee share schemes 135 - - 135
Goodwill and intangibles deduction 26 - - 26
Deferred tax assets 233 - - 233
Prudential valuation adjustments 34 - - 34
New issues of capital instruments - 795 1,341 2,136
Redemption of capital instruments - - (622) (622)
Foreign exchange movements - - (84) (84)
Adjustment under IFRS 9 transitional arrangements (160) - - (160)
Expected loss less impairment (23) - - (23)
Other movements 3 - (128) (125)
At 30 September 2024 25,296 4,670 5,824 35,790
- For CET1 movements refer to the key points on page 24.
- AT1 movements reflects the £0.8 billion issued of the $1.0
billion 8.125% Reset Perpetual Subordinated Contingent Convertible Notes
issued in May 2024.
- Tier 2 instrument movements of £0.6 billion include £0.8 billion
in relation to $1.0 billion 6.475% Fixed to Fixed Reset Subordinated Tier 2
Notes 2034 issued in March 2024 and a £0.6 billion 5.642% Fixed to Fixed
Reset Subordinated Tier 2 Notes 2034 issued in September 2024, partially
offset by the £0.1 billion redemption of 5.125% Subordinated Tier 2 Notes
2024 in May 2024, £0.6 billion in relation to the $750 million redemption of
Fixed to Fixed Reset Subordinated Tier 2 Notes 2029 in September 2024 and
foreign exchange movements.
- Within Tier 2, there was also a decrease in the Tier 2 surplus
provisions.
Risk and capital management continued
Capital, liquidity and funding risk continued
Risk-weighted assets
The table below analyses the movement in RWAs for the nine months ended 30
September 2024, by key drivers.
Counterparty Operational
Credit risk credit risk Market risk risk Total
£bn £bn £bn £bn £bn
At 31 December 2023 147.6 7.8 7.4 20.2 183.0
Foreign exchange movement (1.0) - - - (1.0)
Business movement (1.4) (0.4) (0.2) 1.6 (0.4)
Risk parameter changes (0.7) (0.1) - - (0.8)
Model updates - - - - -
Acquisitions 0.9 - - - 0.9
At 30 September 2024 145.4 7.3 7.2 21.8 181.7
The table below analyses segmental RWAs.
Total
Retail Private Commercial & Central items NatWest
Banking Banking Institutional & other Group
Total RWAs £bn £bn £bn £bn £bn
At 31 December 2023 61.6 11.2 107.4 2.8 183.0
Foreign exchange movement - - (1.0) - (1.0)
Business movement 2.0 (0.2) (1.3) (0.9) (0.4)
Risk parameter changes 0.1 - (0.9) - (0.8)
Model updates 0.2 - (0.2) - -
Acquisitions 0.9 - - - 0.9
At 30 September 2024 64.8 11.0 104.0 1.9 181.7
Credit risk 56.4 9.5 78.1 1.4 145.4
Counterparty credit risk 0.2 - 7.1 - 7.3
Market risk 0.1 - 7.1 - 7.2
Operational risk 8.1 1.5 11.7 0.5 21.8
Total RWAs 64.8 11.0 104.0 1.9 181.7
Total RWAs decreased by £1.3 billion to £181.7 billion during the period
mainly reflecting:
- A reduction in risk weighted assets from foreign exchange
movements of £1.0 billion due to sterling appreciation versus the euro and US
dollar.
- A decrease in business movements of £0.4 billion primarily due to
active RWA management of £5.6 billion, partially offset by the recalculation
of operational risk as a result of higher income when compared to 2020 and an
increase in drawdowns and new facilities within Commercial &
Institutional. Further increases in Retail Banking reflecting lending growth.
- Reduction in risk parameters of £0.8 billion primarily driven by
customers moving into default and improved risk metrics within Commercial
& Institutional.
- An offsetting movement in model updates driven by IRB Temporary
Model Adjustment within Retail Banking and Commercial & Institutional.
- An increase in acquisitions of £0.9 billion for the Metro Bank
mortgage portfolio acquisition within Retail Banking.
Risk and capital management continued
Capital, liquidity and funding risk continued
Liquidity portfolio
The table below shows the composition of the liquidity portfolio with primary
liquidity aligned to high-quality liquid assets on a regulatory LCR basis.
Secondary liquidity comprises assets which are eligible as collateral for
local central bank liquidity facilities and do not form part of the LCR
eligible high-quality liquid assets.
Liquidity value
30 September 2024 30 June 2024 31 December 2023
NatWest NWH UK DoL NatWest NWH UK DoL NatWest NWH UK DoL
Group (1) Group (2) Sub Group (1) Group (2) Sub Group (1) Group (2) Sub
£m £m £m £m £m £m £m £m £m
Cash and balances at central banks 101,413 69,097 68,621 111,763 73,408 72,895 99,855 68,495 67,954
High quality government/MDB/PSE and GSE bonds (4) 48,401 36,187 36,187 35,616 26,253 26,253 36,250 26,510 26,510
Extremely high quality covered bonds 3,820 3,820 3,820 3,892 3,892 3,892 4,164 4,164 4,164
LCR level 1 assets 153,634 109,104 108,628 151,271 103,553 103,040 140,269 99,169 98,628
LCR level 2 Eligible Assets (5) 8,629 7,444 7,444 9,124 7,897 7,897 7,796 7,320 7,320
Primary liquidity (HQLA) (6) 162,263 116,548 116,072 160,395 111,450 110,937 148,065 106,489 105,948
Secondary liquidity 64,214 64,186 64,186 66,589 66,559 66,559 74,722 74,683 74,683
Total liquidity value 226,477 180,734 180,258 226,984 178,009 177,496 222,787 181,172 180,631
(1) NatWest Group includes the UK Domestic Liquidity Sub-Group (UK
DoLSub), NatWest Markets Plc and other significant operating subsidiaries that
hold liquidity portfolios. These include RBSI Ltd and NWM N.V. who hold
managed portfolios that comply with local regulations that may differ from PRA
rules.
(2) NWH Group comprises UK DoLSub and NatWest Bank Europe GmbH who
hold managed portfolios that comply with local regulations that may differ
from PRA rules.
(3) NatWest Markets Plc liquidity portfolio is reported in the NatWest
Markets Plc 2023 Annual Report and Accounts.
(4) Multilateral development bank abbreviated to MDB, public sector
entities abbreviated to PSE and government sponsored entities abbreviated to
GSE.
(5) Includes Level 2A and Level 2B.
(6) High-quality liquid assets abbreviated to HQLA.
Pension risk
In September 2024, the Trustee of the NatWest Group Pension Fund entered into
a further buy-in transaction with a third party insurer for some of the
liabilities of the Main section. Around a third of the Main section is now
covered by insurance policies that give protection against demographic and
investment risks, improving security of the member benefits. The transaction
does not affect the 2024 statement of comprehensive income because the net
pension asset is limited to zero due to the impact of the asset ceiling.
Condensed consolidated income statement
for the period ended 30 September 2024 (unaudited)
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Interest receivable 18,734 15,071 6,444 6,235 5,589
Interest payable (10,427) (6,660) (3,545) (3,478) (2,904)
Net interest income 8,307 8,411 2,899 2,757 2,685
Fees and commissions receivable 2,378 2,213 811 797 754
Fees and commissions payable (529) (484) (181) (171) (169)
Trading income 607 609 257 221 191
Other operating income 115 466 (42) 55 27
Non-interest income 2,571 2,804 845 902 803
Total income 10,878 11,215 3,744 3,659 3,488
Staff costs (3,112) (2,924) (965) (1,085) (919)
Premises and equipment (863) (845) (284) (286) (275)
Other administrative expenses (1,153) (1,390) (330) (399) (519)
Depreciation and amortisation (754) (683) (246) (235) (214)
Operating expenses (5,882) (5,842) (1,825) (2,005) (1,927)
Profit before impairment losses/releases 4,996 5,373 1,919 1,654 1,561
Impairment (losses)/releases (293) (452) (245) 45 (229)
Operating profit before tax 4,703 4,921 1,674 1,699 1,332
Tax charge (1,232) (1,439) (431) (462) (378)
Profit from continuing operations 3,471 3,482 1,243 1,237 954
Profit/(loss) from discontinued operations, net of tax 12 (138) 1 15 (30)
Profit for the period 3,483 3,344 1,244 1,252 924
Attributable to:
Ordinary shareholders 3,271 3,165 1,172 1,181 866
Paid-in equity holders 202 182 73 69 61
Non-controlling interests 10 (3) (1) 2 (3)
3,483 3,344 1,244 1,252 924
Earnings per ordinary share - continuing operations 38.2p 35.6p 14.1p 13.5p 10.1p
Earnings per ordinary share - discontinued operations 0.1p (1.5p) 0.0p 0.2p (0.3p)
Total earnings per share attributable to ordinary shareholders - basic 38.3p 34.1p 14.1p 13.7p 9.8p
Earnings per ordinary share - fully diluted continuing operations 37.9p 35.4p 14.0p 13.4p 10.1p
Earnings per ordinary share - fully diluted discontinued operations 0.1p (1.5p) 0.0p 0.2p (0.3p)
Total earnings per share attributable to ordinary shareholders - fully diluted 38.0p 33.9p 14.0p 13.6p 9.8p
Condensed consolidated statement of comprehensive income
for the period ended 30 September 2024 (unaudited)
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Profit for the period 3,483 3,344 1,244 1,252 924
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of retirement benefit schemes (92) (105) (32) (24) (41)
Changes in fair value of financial liabilities designated at fair value
through profit or loss (FVTPL)
due to changes in credit risk (25) (27) 1 (3) (23)
FVOCI financial assets 16 36 49 (20) 6
Tax 39 20 (5) 13 13
(62) (76) 13 (34) (45)
Items that will be reclassified subsequently to profit or loss when specific
conditions are met:
FVOCI financial assets 21 65 (20) (4) 12
Cash flow hedges 732 (208) 611 187 526
Currency translation (119) (401) (77) (17) 68
Tax (221) (16) (164) (60) (143)
413 (560) 350 106 463
Other comprehensive profit/(losses) after tax 351 (636) 363 72 418
Total comprehensive income for the period 3,834 2,708 1,607 1,324 1,342
Attributable to:
Ordinary shareholders 3,622 2,529 1,535 1,253 1,284
Paid-in equity holders 202 182 73 69 61
Non-controlling interests 10 (3) (1) 2 (3)
3,834 2,708 1,607 1,324 1,342
Condensed consolidated balance sheet
as at 30 September 2024 (unaudited)
30 September 31 December
2024 2023
£m £m
Assets
Cash and balances at central banks 105,629 104,262
Trading assets 54,445 45,551
Derivatives 68,720 78,904
Settlement balances 11,637 7,231
Loans to banks - amortised cost 6,742 6,914
Loans to customers - amortised cost 386,723 381,433
Other financial assets 62,305 51,102
Intangible assets 7,588 7,614
Other assets 8,092 8,760
Assets of disposal groups 16 902
Total assets 711,897 692,673
Liabilities
Bank deposits 31,747 22,190
Customer deposits 431,070 431,377
Settlement balances 12,283 6,645
Trading liabilities 59,079 53,636
Derivatives 61,650 72,395
Other financial liabilities 63,552 55,089
Subordinated liabilities 6,669 5,714
Notes in circulation 3,304 3,237
Other liabilities 4,004 5,202
Total liabilities 673,358 655,485
Equity
Ordinary shareholders' interests 33,808 33,267
Other owners' interests 4,690 3,890
Owners' equity 38,498 37,157
Non-controlling interests 41 31
Total equity 38,539 37,188
Total liabilities and equity 711,897 692,673
Condensed consolidated statement of changes in equity
for the period ended 30 September 2024 (unaudited)
Share Other Other reserves Total Non
capital and Paid-in statutory Retained Cash flow Foreign owners' controlling Total
share premium equity reserves (3) earnings Fair value hedging exchange Merger equity interests equity
£m £m £m £m £m £m £m £m £m £m £m
At 1 January 2024 10,844 3,890 2,004 10,645 (49) (1,899) 841 10,881 37,157 31 37,188
Profit attributable to ordinary shareholders
and other equity owners
- continuing operations 3,461 3,461 10 3,471
- discontinued operations 12 12 - 12
Other comprehensive income
Realised gains in period on FVOCI equity shares 54 (54) - -
Remeasurement of retirement benefit schemes (92) (92) (92)
Changes in fair value of credit in financial liabilities
designated at FVTPL due to own credit risk (25) (25) (25)
Unrealised gains 24 24 24
Amounts recognised in equity (442) (442) (442)
Retranslation of net assets (283) (283) (283)
Gains on hedges of net assets 122 122 122
Amount transferred from equity to earnings 13 1,174 42 1,229 1,229
Tax 25 9 (198) (18) (182) (182)
Total comprehensive income/(loss) - - - 3,435 (8) 534 (137) - 3,824 10 3,834
Transactions with owners
Ordinary share dividends paid (1,505) (1,505) - (1,505)
Paid in equity dividends (202) (202) (202)
Securities issued 800 800 800
Shares repurchased during the period (1,2) (428) 428 (1,171) (1,171) (1,171)
Share based remuneration and shares vested
under employee share schemes 142 (7) 135 135
Own shares acquired (540) (540) (540)
At 30 September 2024 10,416 4,690 2,034 11,195 (57) (1,365) 704 10,881 38,498 41 38,539
Condensed consolidated statement of changes in equity for the period ended 30
September 2023 (unaudited) continued
Share Other Other reserves Total Non
capital and Paid-in statutory Retained Cash flow Foreign owners' controlling Total
share premium equity reserves (3) earnings Fair value hedging exchange Merger equity interests equity
£m £m £m £m £m £m £m £m £m £m £m
At 1 January 2023 11,700 3,890 1,393 10,019 (102) (2,771) 1,478 10,881 36,488 8 36,496
Profit/(loss) attributable to ordinary shareholders
and other equity owners
- continuing operations 3,485 3,485 (3) 3,482
- discontinued operations (138) (138) - (138)
Other comprehensive income
Realised gains in period on FVOCI equity shares 2 (2) - -
Remeasurement of retirement benefit schemes (105) (105) (105)
Changes in fair value of credit in financial liabilities
designated at FVTPL due to own credit risk (27) (27) (27)
Unrealised gains 68 68 68
Amounts recognised in equity (821) (821) (821)
Retranslation of net assets (189) (189) (189)
Gains on hedges of net assets 111 111 111
Amount transferred from equity to earnings (4) 33 613 (323) 323 323
Tax 27 (17) 12 (18) 4 4
Total comprehensive income/(loss) - - - 3,244 82 (196) (419) - 2,711 (3) 2,708
Transactions with owners
Ordinary share dividends paid (1,456) (1,456) - (1,456)
Paid in equity dividends (182) (182) (182)
Shares repurchased during the period (1,2) (751) 751 (1,852) (1,852) (1,852)
Share based remuneration and shares vested
under employee share schemes (10) (10) (10)
Own shares acquired (279) (279) (279)
Acquisition of subsidiary - 32 32
At 30 September 2023 10,949 3,890 1,865 9,763 (20) (2,967) 1,059 10,881 35,420 37 35,457
(1) As part of the On Market Share Buyback Programmes NatWest Group plc
repurchased and cancelled 173.3 million (September 2023 - 364.3 million)
shares. The total consideration of these shares excluding fees was £450.9
million (September 2023 - £951.0 million). Included in the retained earnings
reserve movement is 2.3 million shares which were repurchased and cancelled in
December 2023, settled in January 2024 for a total consideration of £4.9
million. The nominal value of the share cancellations has been transferred to
the capital redemption reserve.
(2) In June 2024, there was an agreement to buy 392.4 million (May 2023 - 469.2
million) ordinary shares of the Company from His Majesty's Treasury at 316.2
pence per share (May 2023 - 268.4 pence per share) for total consideration of
£1.2 billion (May 2023 - £1.3 billion). NatWest Group cancelled 222.4
million (May 2023 - 336.2 million) of the purchased ordinary shares, amounting
to £706.9 million (May 2023 - £906.9 million) excluding fees and held the
remaining 170.0 million (May 2023 - 133.0 million) shares as Own Shares Held,
amounting to £540.2 million (May 2023 - £358.8 million), excluding fees. The
nominal value of the share cancellation has been transferred to the capital
redemption reserve.
(3) Other statutory reserves consist of Capital redemption reserves of £2,935
million (2023 - £2,402 million) and Own shares held reserves of (£901)
million (2023 - (£537) million).
(4) Includes £305 million FX recycled to profit or loss upon completion of a
capital repayment by UBIDAC in 2023.
Notes
1. Presentation of condensed consolidated financial statements
The condensed consolidated financial statements should be read in conjunction
with NatWest Group plc's 2023 Annual Report and Accounts. The accounting
policies are the same as those applied in the consolidated financial
statements.
The directors have prepared the condensed consolidated financial statements on
a going concern basis after assessing the principal risks, forecasts,
projections and other relevant evidence over the twelve months from the date
they are approved.
Amendments to IFRS effective from 1 January 2024 had no material effect on the
condensed consolidated financial statements.
2. Litigation and regulatory matters
NatWest Group plc's Interim Results 2024, issued on 26 July 2024, included
disclosures about NatWest Group's litigation and regulatory matters in Note
14. Set out below are the material developments in those matters (which have
been previously disclosed) since publication of the Interim Results 2024.
Litigation
1MDB litigation
A Malaysian court claim was served in Switzerland in November 2022 by 1MDB, a
sovereign wealth fund, in which Coutts & Co Ltd was named, along with six
others, as a defendant in respect of losses allegedly incurred by 1MDB. It is
claimed that Coutts & Co Ltd is liable as a constructive trustee for
having dishonestly assisted the directors of 1MDB in the breach of their
fiduciary duties by failing (amongst other alleged claims) to undertake due
diligence in relation to a customer of Coutts & Co Ltd, through which
funds totalling c.US$1 billion were received and paid out between 2009 and
2011. 1MDB seeks the return of that amount plus interest. Coutts & Co Ltd
filed an application in January 2023 challenging the validity of service and
the Malaysian court's jurisdiction to hear the claim, and a hearing took place
in February 2024. In March 2024, the court granted that application. 1MDB has
appealed that decision and a prior decision by the court not to allow them to
discontinue their claim. Both appeals are scheduled to be heard in December
2024.
Coutts & Co Ltd (a subsidiary of RBS Netherlands Holdings B.V., which in
turn is a subsidiary of NWM Plc) is a company registered in Switzerland and is
in wind-down following the announced sale of its business assets in 2015.
Regulatory matters
Review and investigation of treatment of tracker mortgage customers in Ulster
Bank Ireland DAC
In December 2015, correspondence was received from the Central Bank of Ireland
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 process has now largely concluded, although a small number of
cases remain outstanding relating to uncontactable customers.
UBIDAC customers have lodged tracker mortgage complaints with the Financial
Services and Pensions Ombudsman (FSPO). UBIDAC challenged three FSPO
adjudications in the Irish High Court. In June 2023, the High Court found in
favour of the FSPO in all matters and a provision was recognised. UBIDAC
appealed that decision to the Court of Appeal and a hearing took place in
February 2024. In September 2024, the Court of Appeal allowed UBIDAC's appeal
and set aside certain findings of the FSPO. The Court of Appeal directed one
aspect of the FSPO decisions to be remitted to the FSPO for consideration
following an oral hearing.
3. Post balance sheet events
Other than as disclosed in this document, there have been no significant
events between 30 September 2024 and the date of approval of this announcement
which would require a change to, or additional disclosure, in the
announcement.
Presentation of information
'Parent company' refers to NatWest Group plc and 'NatWest Group' and 'we'
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.
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' or 'p' represent pence where the amounts are denominated in pounds
sterling ('GBP'). Reference to 'dollars' or '$' are to United States of
America ('US') dollars. The abbreviations '$m' and '$bn' represent millions
and thousands of millions of dollars, respectively. The abbreviation '€'
represents the 'euro', and the abbreviations '€m' and '€bn' represent
millions and thousands of millions of euros, respectively.
Statutory accounts
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 2023 have been
filed with the Registrar of Companies. The report of the auditor on those
statutory accounts was unqualified, did not draw attention to any matters by
way of emphasis and did not contain a statement under section 498(2) or (3) of
the Act.
Contacts:
Analyst enquiries: Claire Kane, Investor
Relations +44 (0) 20 7672 1758
Media enquiries: NatWest Group Press
Office +44 (0) 131 523 4205
Management presentation
Date: 25 October 2024
Time: 9am
Zoom ID: 921 0980 4618
Available on natwestgroup.com/results
- Q3 2024 Interim Management Statement and background slides.
- A financial supplement containing income statement, balance sheet
and segment performance for five quarters ended 30 September 2024.
- NatWest Group Pillar 3 at 30 September 2024.
Forward-looking statements
This document may include 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: its outlook, guidance and targets (including in
relation to RoTE, income, operating costs, loan impairment rate, CET1 ratio,
RWA levels, payment of dividends and participation in directed buybacks), its
economic and political risks, its financial position, profitability and
financial performance, the implementation of its strategy, increasing
competition from incumbents, challengers and new entrants and disruptive
technologies, its access to adequate sources of liquidity and funding, its
regulatory capital position and related requirements, its exposure to third
party risks, its impairment losses and credit exposures under certain
specified scenarios, substantial regulation and oversight, ongoing legal,
regulatory and governmental actions and investigations, and NatWest Group's
exposure to operational risk, conduct risk, cyber, data and IT risk, financial
crime 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, future growth initiatives (including
acquisitions, joint ventures and strategic partnerships), the outcome of
legal, regulatory and governmental actions and investigations, the level and
extent of future impairments and write-downs, legislative, political, fiscal
and regulatory developments, accounting standards, competitive conditions,
technological developments, interest and exchange rate fluctuations, general
economic and political conditions and uncertainties (such as the direct and
indirect impacts of escalating armed conflicts) and the impact of
climate-related risks and the transitioning to a net zero 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 2023 Annual Report on Form 20-F, NatWest Group plc's Interim Results for
H1 2024 on Form 6-K, NatWest Group plc's Interim Management Statement for Q1
and Q3 2024 on Form 6-K, and its other public filings. 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.
Non-IFRS financial measures
NatWest Group prepares its financial statements in accordance with UK-adopted
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS). This document contains a number of non-IFRS measures, also
known as alternative performance measures, defined under the European
Securities and Markets Authority (ESMA) guidance or non-GAAP financial
measures in accordance with the Securities and Exchange Commission (SEC)
regulations. These measures are adjusted for notable and other defined items
which management believes 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 a calculation of metrics that are used
throughout the banking industry.
These non-IFRS measures are not a substitute for IFRS measures and a
reconciliation to the closest IFRS measure is presented where appropriate.
Measure Description
Cost:income ratio (excl. litigation and conduct) The cost:income ratio (excl. litigation and conduct) is calculated as other
operating expenses (operating expenses less litigation and conduct costs)
Refer to table 2. Cost:income ratio (excl. litigation and conduct) on page 40. divided by total income. Litigation and conduct costs are excluded as they are
one-off in nature, difficult to forecast for Outlook purposes and distort
period-on-period comparisons.
Customer deposits excluding central items Customer deposits excluding central items is calculated as total NatWest Group
customer deposits excluding Central items & other customer deposits.
Refer to Segmental performance on pages 11-15 for components of calculation. Central items & other includes Treasury repo activity and Ulster Bank RoI.
The exclusion of Central items & other removes the volatility relating
to Treasury repo activity and the reduction of deposits as part of our
withdrawal from the Republic of Ireland.
These items may distort period-on-period comparisons and their removal gives
the user of the financial statements a better understanding of the movements
in customer deposits.
Funded assets Funded assets is calculated as total assets less derivative assets. This
measure allows review of balance sheet trends exclusive of the volatility
Refer to Condensed consolidated balance sheet on page 33 for components of associated with derivative fair values.
calculation.
Loan:deposit ratio (excl. repos and reverse repos) Loan:deposit ratio (excl. repos and reverse repos) is calculated as net
customer loans held at amortised cost excluding reverse repos divided by total
Refer to table 5. Loan:deposit ratio (excl. repos and reverse repos) on page customer deposits excluding repos. This metric is used to assess liquidity.
41.
The removal of repos and reverse repos reduces volatility and presents the
ratio on a basis that is comparable to UK peers. The nearest ratio using IFRS
measures is loan:deposit ratio. This is calculated as net loans to customers
held at amortised cost divided by customer deposits.
NatWest Group return on tangible equity NatWest Group return on tangible equity comprises annualised profit or loss
for the period attributable to ordinary shareholders divided by average
Refer to table 6. NatWest Group return on tangible equity on page 42. tangible equity. Average tangible equity is average total equity excluding
average non-controlling interests, average other owners' equity and average
intangible assets. This measure shows the return NatWest Group generates on
tangible equity deployed. It is used to determine relative performance of
banks and used widely across the sector, although different banks may
calculate the rate differently. The nearest ratio using IFRS measures is
return on equity. This comprises profit attributable to ordinary shareholders
divided by average total equity.
Non-IFRS financial measures continued
Measure Description
Net interest margin (NIM) and average interest earning assets Net interest margin is net interest income, as a percentage of average
interest earning assets (IEA). Average IEA are average IEA of the banking
Refer to Segmental performance on pages 11-15 for components of calculation. business of NatWest Group and primarily consists of cash and balances at
central banks, loans to banks, loans to customers and other financial assets
mostly comprising of debt securities. Average IEA shows the average asset base
generating interest over the period.
Net loans to customers excluding central items Net loans to customers excluding central items is calculated as total NatWest
Group net loans to customers excluding Central items & other net loans to
Refer to Segmental performance on pages 11-15 for components of calculation. customers. Central items & other includes Treasury reverse repo activity
and Ulster Bank RoI. The exclusion of Central items & other removes the
volatility relating to Treasury reverse repo activity and the reduction of
loans to customers as part of our withdrawal from the Republic of Ireland.
This allows for better period-on-period comparisons and gives the user of the
financial statements a better understanding of the movements in net loans to
customers.
Operating expenses excluding litigation and conduct The management analysis of operating expenses shows litigation and conduct
costs separately. These amounts are included within staff costs and other
Refer to table 4. Operating expenses excluding litigation and conduct on page administrative expenses in the statutory analysis. Other operating expenses
41. excludes litigation and conduct costs, which are more volatile and may distort
period-on-period comparisons.
Segmental return on equity Segment return on equity comprises segmental operating profit or loss,
adjusted for paid-in equity and tax, divided by average notional equity.
Refer to table 7. Segmental return on equity on page 42. Average RWAe is defined as average segmental RWAs incorporating the effect of
capital deductions. This is multiplied by an allocated equity factor for each
segment to calculate the average notional equity. This measure shows the
return generated by operating segments on equity deployed.
Tangible net asset value (TNAV) per ordinary share TNAV per ordinary share is calculated as tangible equity divided by the number
of ordinary shares in issue. This is a measure used by external analysts in
Refer to table 3. Tangible net asset value (TNAV) per ordinary share on page valuing the bank and allows for comparison with other per ordinary share
40. metrics including the share price. The nearest ratio using IFRS measures is:
net asset value (NAV) per ordinary share - this comprises ordinary
shareholders' interests divided by the number of ordinary shares in issue.
Total income excluding notable items Total income excluding notable items is calculated as total income less
notable items. The exclusion of notable items aims to remove the impact of
Refer to table 1. Total income excluding notable items on page 40. one-offs and other items which may distort period-on-period comparisons.
Non-IFRS financial measures continued
1. Total income excluding notable items
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Continuing operations
Total income 10,878 11,215 3,744 3,659 3,488
Less notable items:
Commercial & Institutional
Own credit adjustments (OCA) (5) 3 2 (2) (6)
Central items & other
Liquidity Asset Bond sale losses - (33) - - (9)
Share of associate profits/(losses) for Business Growth Fund 22 (5) 11 4 10
Property lease termination losses - (69) - - (69)
Interest and FX management derivatives not in hedge accounting 131 100 5 67 48
relationships
FX recycling (losses)/gains (46) 322 (46) - -
102 318 (28) 69 (26)
Total income excluding notable items 10,776 10,897 3,772 3,590 3,514
2. Cost:income ratio (excl. litigation and conduct)
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Continuing operations
Operating expenses 5,882 5,842 1,825 2,005 1,927
Less litigation and conduct costs (142) (242) (41) (77) (134)
Other operating expenses 5,740 5,600 1,784 1,928 1,793
Total income 10,878 11,215 3,744 3,659 3,488
Cost:income ratio 54.1% 52.1% 48.7% 54.8% 55.2%
Cost:income ratio (excl. litigation and conduct) 52.8% 49.9% 47.6% 52.7% 51.4%
3. Tangible net asset value (TNAV) per ordinary share
As at
30 September 30 June 31 December
2024 2024 2023
Ordinary shareholders' interests (£m) 33,808 32,831 33,267
Less intangible assets (£m) (7,588) (7,590) (7,614)
Tangible equity (£m) 26,220 25,241 25,653
Ordinary shares in issue (millions) (1) 8,293 8,307 8,792
NAV per ordinary share (pence) 408p 395p 378p
TNAV per ordinary share (pence) 316p 304p 292p
(1) The number of ordinary shares in issue excludes own shares
held.
Non-IFRS financial measures continued
4. Operating expenses excluding litigation and conduct
Nine months ended Quarter ended
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Other operating expenses
Staff expenses 3,060 2,878 947 1,064 904
Premises and equipment 863 845 284 286 275
Other administrative expenses 1,063 1,194 307 343 400
Depreciation and amortisation 754 683 246 235 214
Total other operating expenses 5,740 5,600 1,784 1,928 1,793
Litigation and conduct costs
Staff expenses 52 46 18 21 15
Other administrative expenses 90 196 23 56 119
Total litigation and conduct costs 142 242 41 77 134
Total operating expenses 5,882 5,842 1,825 2,005 1,927
Operating expenses excluding litigation and conduct 5,740 5,600 1,784 1,928 1,793
5. Loan:deposit ratio (excl. repos and reverse repos)
As at
30 September 30 June 31 December
2024 2024 2023
£m £m £m
Loans to customers - amortised cost 386,723 379,331 381,433
Less reverse repos (25,115) (24,961) (27,117)
Loans to customers - amortised cost (excl. reverse repos) 361,608 354,370 354,316
Customer deposits 431,070 432,975 431,377
Less repos (2,482) (6,846) (10,844)
Customer deposits (excl. repos) 428,588 426,129 420,533
Loan:deposit ratio (%) 90% 88% 88%
Loan:deposit ratio (excl. repos and reverse repos) (%) 84% 83% 84%
Non-IFRS financial measures continued
6. NatWest Group return on tangible equity
Nine months ended and as at Quarter ended and as at
30 September 30 September 30 September 30 June 30 September
2024 2023 2024 2024 2023
£m £m £m £m £m
Profit attributable to ordinary shareholders 3,271 3,165 1,172 1,181 866
Annualised profit attributable to ordinary shareholders 4,361 4,220 4,688 4,724 3,464
Average total equity 37,707 36,150 37,960 37,659 35,081
Adjustment for average other owners' equity and intangible assets (12,040) (11,427) (12,375) (12,080) (11,583)
Adjusted total tangible equity 25,667 24,723 25,585 25,579 23,498
Return on equity 11.6% 11.7% 12.3% 12.5% 9.9%
Return on tangible equity 17.0% 17.1% 18.3% 18.5% 14.7%
7. Segmental return on equity
Nine months ended 30 September 2024 Nine months ended 30 September 2023
Retail Private Commercial & Retail Private Commercial &
Banking Banking Institutional Banking Banking Institutional
Operating profit (£m) 1,754 189 2,724 2,053 293 2,511
Paid-in equity cost allocation (£m) (56) (13) (130) (43) (17) (125)
Adjustment for tax (£m) (475) (49) (649) (563) (77) (597)
Adjusted attributable profit (£m) 1,223 127 1,946 1,447 199 1,790
Annualised adjusted attributable profit (£m) 1,630 169 2,594 1,930 265 2,386
Average RWAe (£bn) 62.7 11.1 108.0 56.9 11.4 105.6
Equity factor 13.4% 11.2% 13.8% 13.5% 11.5% 14.0%
Average notional equity (£bn) 8.4 1.2 14.9 7.7 1.3 14.8
Return on equity (%) 19.4% 13.6% 17.4% 25.1% 20.3% 16.1%
Quarter ended 30 September 2024 Quarter ended 30 June 2024 Quarter ended 30 September 2023
Retail Private Commercial & Retail Private Commercial & Retail Private Commercial &
Banking Banking Institutional Banking Banking Institutional Banking Banking Institutional
Operating profit (£m) 656 90 1,017 609 66 938 493 59 770
Paid-in equity cost allocation (£m) (22) (5) (47) (18) (4) (43) (13) (6) (39)
Adjustment for tax (£m) (178) (24) (243) (165) (17) (224) (134) (15) (183)
Adjusted attributable profit (£m) 456 61 728 426 45 671 346 38 548
Annualised adjusted attributable profit (£m) 1,826 245 2,910 1,702 179 2,685 1,382 153 2,193
Average RWAe (£bn) 63.8 11.1 106.0 62.7 11.1 109.0 58.5 11.4 106.7
Equity factor 13.4% 11.2% 13.8% 13.4% 11.2% 13.8% 13.5% 11.5% 14.0%
Average notional equity (£bn) 8.5 1.2 14.6 8.4 1.2 15.0 7.9 1.3 14.9
Return on equity (%) 21.4% 19.7% 19.9% 20.3% 14.4% 17.8% 17.5% 11.7% 14.7%
Performance measures not defined under IFRS
The table below summarises other performance measures used by NatWest Group,
not defined under IFRS, and therefore a reconciliation to the nearest IFRS
measure is not applicable.
Measure Description
Assets under management and administration (AUMA) AUMA comprises both assets under management (AUMs) and assets under
administration (AUAs) serviced through the Private Banking segment. AUMs
comprise assets where the investment management is undertaken by Private
Banking on behalf of Private Banking, Retail Banking and Commercial &
Institutional customers.
AUAs comprise i) third party assets held on an execution-only basis in custody
by Private Banking, Retail Banking and Commercial & Institutional for
their customers, for which the execution services are supported by Private
Banking, and for which Private Banking receives a fee for providing investment
management and execution services to Retail Banking and Commercial &
Institutional business segments ii) AUA of Cushon, acquired on 1 June 2023,
which are supported by Private Banking and held and managed by third parties.
This measure is tracked and reported as the amount of funds that we manage or administer, and directly impacts the level of investment income that we receive.
AUMA net flows AUMA net flows represents assets under management and assets under
administration.
AUMA net flows is reported and tracked to monitor the business performance of
new business inflows and management of existing client withdrawals across
Private Banking, Retail Banking and Commercial & Institutional.
Climate and sustainable funding and financing The climate and sustainable funding and financing metric is used by NatWest Group to measure the level of support it provides customers, through lending products and underwriting activities, to help in their transition towards a net zero, climate resilient
and sustainable economy. We have a target to provide £100 billion of climate and sustainable funding and financing between the 1 of July 2021 and the end of 2025. As part of this, we aim to provide at least £10 billion in lending for residential properties
with EPC ratings A and B between 1 January 2023 and the end of 2025.
Loan impairment rate Loan impairment rate is the annualised loan impairment charge divided by gross customer loans. This measure is used to assess the credit quality of the loan book.
Third party rates 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. This excludes assets of disposal groups, 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.
Wholesale funding Wholesale funding comprises deposits by banks (excluding repos), debt securities in issue and subordinated liabilities. Funding risk is the risk of not maintaining a diversified, stable and cost-effective funding base. The disclosure of wholesale funding
highlights the extent of our diversification and how we mitigate funding risk.
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