REG - Natwest Markets PLC - NWM Plc 2024 Annual Results
14/02/2025 08:15
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RNS Number : 1147X Natwest Markets PLC 14 February 2025
NatWest Markets Group
2024 Annual Results
NatWest Markets
Plc
ci.natwest.com
NatWest Markets Group (NWM Group)
Results for the year ended 31 December 2024
Financial review
NWM Group reported a profit for the year ended 31 December 2024 of £63
million compared with a loss of £98 million for the year ended 31 December
2023. Higher income largely reflected stronger performances across the primary
business lines. Operating expenses increased in 2024, driven by higher
litigation and conduct costs and other operating expenses.
Highlights
Financial performance
- Income of £1,237 million in 2024 was up by £168 million compared with
£1,069 million in 2023. The increase was largely driven by stronger
performances across the primary business lines, partially offset by FX
reserves recycling and lower income from the profit share arrangement with
fellow NatWest Group subsidiaries.
- Operating expenses of £1,208 million increased by £66 million compared with
£1,142 million in 2023. Litigation and conduct costs of £102 million
reflected ongoing progress in closing legacy matters, including any associated
conduct remediation activity, and were up by £42 million compared with £60
million in 2023. Other operating expenses of £1,106 million were £24 million
higher than £1,082 million in 2023, largely due to increases in staff costs,
severance costs, bank levies and other smaller movements, offset by credits
recognised in relation to property charges and VAT recoveries.
- Total assets and liabilities increased by £5.3 billion and £4.7 billion to
£183.2 billion and £176.2 billion respectively at 31 December 2024, compared
with the prior year. Funded assets were up by £6.5 billion, mainly driven by
increases in loans to customers, trading assets, cash and balances at central
banks and other financial assets, partially offset by a decrease in settlement
balances.
Capital and leverage
- Total NWM Plc RWAs were £20.8 billion at 31 December 2024, compared with
£22.1 billion at 31 December 2023. The decrease in the year was driven by
lower market risk, counterparty credit risk, and a decrease from the annual
update to operational risk RWAs; partially offset by an increase in credit
risk.
- NWM Plc's Common Equity Tier 1 (CET1) ratio was 18.2% at 31 December 2024,
compared with 17.1% at 31 December 2023. The increase in the year was largely
driven by the decrease in RWAs.
- Total MREL for NWM Plc at 31 December 2024 was £10.0 billion, or 48.2% of
RWAs, compared with £7.6 billion or 34.5% of RWAs at 31 December 2023. The
increase in total MREL in 2024 was largely due to the issuance of three new
MREL instruments with NatWest Group plc amounting to $2.15 billion, a new
internal AT1 instrument of $0.75 billion, and two new internal Tier 2
instruments amounting to $1.16 billion, partially offset by the redemption of
an internal €0.95 billion Tier 2 instrument.
- NWM Plc's leverage ratio was 5.5% at 31 December 2024 compared with 5.0% at 31
December 2023. The increase in 2024 reflected higher Tier 1 capital, largely
due to the new internal AT1 instrument of $0.75 billion, partially offset by
an increase in leverage exposure.
Liquidity and funding
- NWM Plc's liquidity portfolio increased by £6.3 billion to £21.0 billion at
31 December 2024, compared with £14.7 billion at 31 December 2023, largely
driven by funding raised to support banking book growth. The LCR increased to
195% (31 December 2023 - 183%), mainly due to the increase in liquidity
portfolio, partially offset by higher outflows. Stressed coverage ratio was
204% at 31 December 2024, compared with 162% at 31 December 2023.
- NWM Plc issued a total of £6.0 billion across a number of public benchmark
transactions during 2024, comprised of €3.75 billion, CHF0.18 billion and
£0.5 billion of notes under its EMTN programme and $2.75 billion of notes
under its US MTN programme. NWM Plc also raised funding in other formats
throughout 2024 including, but not limited to, structured note issuance.
- NWM Plc 2025 funding plan currently anticipates £4-5 billion of public
benchmark issuance. On 10 January 2025, NWM Plc issued a total of €1.0
billion of benchmark notes under the EMTN programme.
Outlook ((1,2))
Medium-term outlook
Metric (3) Estimate
CET1 ratio ~14%
MREL ratio (4) ~30%
Leverage ratio ~4%
(1) This supersedes all prior guidance.
(2) The guidance, targets, expectations and trends discussed in this section
represent management's current expectations and are subject to change,
including as a result of the factors described in the "Risk Factors" section
on pages 159 to 176 NatWest Markets Plc 2024 Annual Report and Accounts. These
statements constitute forward-looking statements. Refer to 'Forward-looking
statements' in this announcement.
(3) All metrics presented relate to NWM Plc.
(4) Includes total regulatory capital, non-eligible capital and downstreamed
internal MREL.
Business performance summary
The table below presents an analysis of key lines of NWM Group's income
statement. Commentary refers to the table below as well as the consolidated
income statement shown on page 5.
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2024 2023 2024 2024 2023
Income statement £m £m £m £m £m
Net interest income 432 355 85 110 154
Non-interest income 805 714 218 174 270
Total income 1,237 1,069 303 284 424
Litigation and conduct costs (102) (60) (41) (23) (31)
Other operating expenses (1,106) (1,082) (321) (231) (283)
Operating expenses (1,208) (1,142) (362) (254) (314)
Operating profit/(loss) before impairment
releases/losses 29 (73) (59) 30 110
Impairment releases/(losses) 8 (2) - 1 (5)
Operating profit/(loss) before tax 37 (75) (59) 31 105
Tax credit/(charge) 26 (23) 19 (11) 2
Profit/(loss) for the period 63 (98) (40) 20 107
Income (1)
Fixed Income 190 153 20 41 16
Currencies 525 496 146 139 145
Capital Markets 666 463 164 171 131
Capital Management Unit & other (2) (49) (7) (11) (27) 19
Income including shared revenue before OCA 1,332 1,105 319 324 311
Transfer pricing arrangements with fellow
NatWest Group subsidiaries (3) (86) (33) (12) (42) 118
Income excluding OCA 1,246 1,072 307 282 429
Own credit adjustments (OCA) (9) (3) (4) 2 (5)
Total income 1,237 1,069 303 284 424
(1) Product performance includes gross income earned on a NatWest
Group-wide basis, including amounts contributed to other NatWest Group
subsidiaries. Income including shared revenue before OCA includes revenue
share from other NatWest Group subsidiaries but before revenue share is paid
to or contributed to those subsidiaries.
(2) Capital Management Unit was set up in Q3 2020 to manage capital
usage and optimisation across all parts of NatWest Markets, with the income
materially relating to legacy positions. In 2024, Other materially relates to
FX reserves recycling.
(3) Transfer pricing arrangements with fellow NatWest Group
subsidiaries includes shared revenue paid to or contributed to those
subsidiaries and a profit share arrangement with fellow NatWest Group
subsidiaries. The profit share arrangement was introduced during Q4 2023 to
reward NWM Group on an arm's length basis for its contribution to the
performance of the NatWest Group Commercial & Institutional business
segment, 2023 being the first full year with the Commercial &
Institutional segment in place. The profit share is not allocated to
individual NatWest Markets product areas.
Year ended 31 December 2024 performance
- Net interest income largely represents interest income from lending
activity and capital hedges, offset by interest expense from the funding costs
of the business. The increase of £77 million compared with 2023 largely
reflects growth in lending activity.
- Non-interest income increased by £91 million in 2024, largely driven
by stronger performances across the primary business lines reflecting strong
customer demand in capital markets and robust trading income, partially offset
by FX reserves recycling relating to legacy overseas operations closure
activity completed during the year. In addition, the amount recognised under
the profit share arrangement with fellow NatWest Group subsidiaries of £146
million was £31 million lower than the amount recognised in 2023.
- Operating expenses were up by £66 million compared with 2023.
Litigation and conduct costs reflected ongoing progress in closing legacy
matters, including any associated conduct remediation activity, and were up by
£42 million compared with 2023. Other operating expenses increased by £24
million compared with 2023, largely due to increases in staff costs, severance
costs, bank levies and other smaller movements, offset by credits recognised
in 2024 in relation to property charges and VAT recoveries relating to earlier
periods.
Q4 2024 performance
- Net interest income decreased by £25 million compared with Q3 2024,
largely due to higher costs from funding of the trading business, and
decreased by £69 million compared with Q4 2023, largely due to the impact of
one-off items recognised in the comparative period.
- Non-interest income increased by £44 million compared with Q3 2024,
largely due to an increase in the amount recognised under the profit share
arrangement with fellow NatWest Group subsidiaries and the impact of FX
reserves recycling relating to legacy overseas operations closure activity,
partially offset by one-off items recognised in the prior quarter.
Non-interest income decreased by £52 million compared with Q4 2023, mainly
due to the profit share arrangement with fellow NatWest Group subsidiaries
under which the 2023 full year amount of £177 million was recognised in Q4
2023, compared with £46 million recognised in the current quarter, in
addition to FX reserves recycling in Q4 2024.
- Operating expenses increased by £108 million compared with Q3 2024
and by £48 million compared with Q4 2023. Litigation and conduct costs
reflected ongoing progress on closing legacy matters, including any associated
conduct remediation activity, and were up by £18 million compared with Q3
2024 and by £10 million compared with Q4 2023. Other operating expenses
increased by £90 million compared with Q3 2024, largely due to VAT recoveries
recognised in the prior quarter including from the finalisation of the 2023
VAT annual adjustment, and the annual bank levy. Other operating expenses
increased by £38 million compared with Q4 2023, largely due to higher VAT
recoveries in the comparative period including from the finalisation of the
2022 annual VAT adjustment, and a number of smaller items.
Business performance summary continued
Balance sheet profile as at 31 December 2024
NWM Group's balance sheet profile is summarised below. Commentary refers to
the tables below as well as the consolidated balance sheet on page 6.
Assets Liabilities
2024 2023 2024 2023
£bn £bn £bn £bn
Cash and balances at central banks 16.2 13.8
Securities 13.9 12.0 10.5 9.8 Short positions
Reverse repos (1) 27.1 23.7 30.6 26.9 Repos (2)
Derivative cash collateral posted (3) 7.3 8.9 12.3 15.1 Derivative cash collateral received (4)
Other trading assets 0.6 0.7 1.1 1.8 Other trading liabilities
Total trading assets 48.9 45.3 54.5 53.6 Total trading liabilities
Loans - amortised cost 19.1 14.2 9.4 9.3 Deposits - amortised cost
Settlement balances 2.0 7.2 1.7 6.6 Settlement balances
Amounts due from holding company Amounts due to holding company
and fellow subsidiaries 0.3 1.7 6.8 5.8 and fellow subsidiaries
Other financial assets 17.9 15.7 31.3 23.6 Other financial liabilities
Other assets 0.7 0.7 0.5 0.6 Other liabilities
Funded assets 105.1 98.6 104.2 99.5 Liabilities excluding derivatives
Derivative assets 78.1 79.3 72.0 72.0 Derivative liabilities
Total assets 183.2 177.9 176.2 171.5 Total liabilities
of which:
32.5 25.1 wholesale funding (5)
16.8 9.9 short-term wholesale funding (5)
Net derivative assets 2.4 2.9 3.5 3.6 Net derivative liabilities
(1) Comprises bank reverse repos of £5.9 billion (2023 - £6.3
billion) and customer reverse repos of £21.2 billion (2023 - £17.4 billion).
(2) Comprises bank repos of £7.2 billion (2023- £4.0 billion) and
customer repos of £23.4 billion (2023 - £22.9 billion).
(3) Comprises derivative cash collateral posted relating to banks of
£3.6 billion (2023 - £4.3 billion) and customers of £3.7 billion (2023 -
£4.6 billion).
(4) Comprises derivative cash collateral received relating to banks
of £5.3 billion (2023 - £6.8 billion) and customers of £7.0 billion (2023 -
£8.3 billion).
(5) Predominantly comprises bank deposits (excluding repos), debt
securities in issue and third-party subordinated liabilities.
- Total assets and liabilities increased by £5.3 billion and £4.7
billion respectively at 31 December 2024. Funded assets, which exclude
derivatives, increased by £6.5 billion, largely driven by higher loans at
amortised cost, trading assets, cash and balances at central banks and other
financial assets, partially offset by a decrease in settlement balances.
Derivative asset fair values were down by £1.2 billion compared with 31
December 2023, and derivative liabilities were unchanged.
- Cash and balances at central banks increased by £2.4 billion, mainly
driven by funding raised to support planned banking book growth and liquidity
requirements.
- Trading assets which primarily relate to client-led activity as well
as derivative cash collateral posted, were up by £3.6 billion, driven by
increases in reverse repos and securities, partially offset by a decrease in
derivative cash collateral posted. Trading liabilities increased by £0.9
billion, as increases in repos and short positions were largely offset by a
decrease in derivative cash collateral received.
- Loans - amortised cost increased by £4.9 billion, driven by higher
loans to customers reflecting growth in Capital Markets.
- Settlement balance assets and liabilities were down by £5.2 billion
and £4.9 billion respectively, largely due to comparatively higher levels of
customer activity in the period leading up to 31 December 2023.
- Other financial assets increased by £2.2 billion mainly driven by an
increase in held-to-collect securities purchased to support customer primary
issuance.
- Other financial liabilities increased by £7.7 billion driven by new
issuance in the year to support planned growth in the business, partially
offset by maturities. The balance as at 31 December 2024 includes £21.9
billion of medium-term notes issued.
- Derivative assets and derivative liabilities were down by £1.2
billion and unchanged respectively, largely reflecting FX rate volatility
across major currencies including the strengthening of USD in Q4 2024, and
variations in interest rates across different currencies and tenors.
Non-IFRS measures
This document contains a number of non-IFRS measures. For details of the basis
of preparation and reconciliations, where applicable, refer to the non-IFRS
measures section on page 12.
Capital, liquidity and funding risk
Introduction
NWM 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 NWM Group operates within its regulatory
requirements and risk appetite.
Capital, RWAs and leverage
Capital resources, RWAs and leverage based on the PRA transitional
arrangements in respect of ECL provisions((4)) for NWM Plc are set out below.
Regulatory capital is monitored and reported at legal entity level for large
subsidiaries of NatWest Group.
31 December 30 September 31 December
2024 2024 2023
Capital adequacy ratios (1,2) % % %
CET1 18.2 17.3 17.1
Tier 1 24.3 20.6 20.2
Total 27.8 23.6 23.0
Total MREL 48.2 42.4 34.5
Capital (1,2) £m £m £m
CET1 3,779 3,720 3,776
Tier 1 5,067 4,416 4,455
Total 5,779 5,066 5,072
Total MREL (3) 10,038 9,104 7,627
Risk-weighted assets
Credit risk 8,908 8,252 7,895
Counterparty credit risk 5,797 6,095 6,516
Market risk 5,105 6,127 6,366
Operational risk 1,002 1,002 1,322
Total RWAs 20,812 21,476 22,099
(1) NWM Plc's total capital ratio requirement is 11.5%, comprising
the minimum capital requirement of 8%, supplemented with the capital
conservation buffer of 2.5% and the institution specific countercyclical
buffer (CCyB) of 1%. The minimum CET1 ratio is 8%, including the minimum
capital requirement of 4.5%. The CCyB is based on the weighted average of NWM
Plc's geographical exposures.
(2) In addition, NWM Plc is subject to Pillar 2A requirements for
CET1, AT1 and T2. Refer to the NWM Plc Pillar 3 report for further details on
these additional capital requirements.
(3) Includes senior debt instruments issued to NatWest Group plc
with a nominal value of £4.3 billion (30 September 2024 - £4.0 billion, 31
December 2023 - £2.6 billion).
(4) The IFRS 9 transitional capital rules in respect to ECL
provisions will no longer apply from 1 January 2025.
Leverage
The leverage ratio has been calculated in accordance with the Leverage Ratio
(CRR) part of the PRA rulebook.
31 December 30 September 31 December
2024 2024 2023
Tier 1 capital (£m) 5,067 4,416 4,455
Leverage exposure (£m) (1) 92,859 96,209 89,929
Leverage ratio (%) 5.5 4.6 5.0
(1) Leverage exposure is broadly aligned to the accounting value of
on and off-balance sheet exposures albeit subject to specific adjustments for
derivatives, securities financing positions and off-balance sheet exposures.
Liquidity and funding
31 December 30 September 31 December
2024 2024 2023
Liquidity coverage ratio (LCR) (%) 195 163 183
Liquidity portfolio (£bn) 21.0 17.0 14.7
Total wholesale funding (£bn) (1) 32.5 32.2 25.1
Total funding including repo (£bn) 91.4 95.1 82.4
(1) Predominantly comprises bank deposits (excluding repos), debt
securities in issue and third-party subordinated liabilities.
Consolidated income statement
For the period ended 31 December 2024
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2024 2023 2024 2024 2023
£m £m £m £m £m
Interest receivable 2,720 2,186 665 698 677
Interest payable (2,288) (1,831) (580) (588) (523)
Net interest income 432 355 85 110 154
Fees and commissions receivable 476 377 102 120 98
Fees and commissions payable (213) (175) (47) (55) (56)
Income from trading activities 585 477 157 199 148
Other operating income (43) 35 6 (90) 80
Non-interest income 805 714 218 174 270
Total income 1,237 1,069 303 284 424
Staff costs (452) (418) (99) (112) (102)
Premises and equipment (75) (66) (20) (19) (19)
Other administrative expenses (671) (642) (240) (120) (187)
Depreciation and amortisation (10) (16) (3) (3) (6)
Operating expenses (1,208) (1,142) (362) (254) (314)
Operating profit/(loss) before impairment
losses/releases 29 (73) (59) 30 110
Impairment releases/(losses) 8 (2) - 1 (5)
Operating profit/(loss) before tax 37 (75) (59) 31 105
Tax credit/(charge) 26 (23) 19 (11) 2
Profit/(loss) for the period 63 (98) (40) 20 107
Attributable to:
Ordinary shareholders (20) (168) (63) 3 89
Paid-in equity holders 73 70 22 17 18
Non-controlling interests 10 - 1 - -
63 (98) (40) 20 107
Consolidated statement of comprehensive income
For the period ended 31 December 2024
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2024 2023 2024 2024 2023
£m £m £m £m £m
Profit/(loss) for the period 63 (98) (40) 20 107
Items that do not qualify for reclassification
Remeasurement of retirement benefit schemes (13) (113) (9) (1) (111)
Change in fair value of credit in financial liabilities
designated at FVTPL (33) (39) (8) 1 (13)
FVOCI financial assets 14 7 1 10 (2)
Tax 23 42 7 (2) 40
(9) (103) (9) 8 (86)
Items that do qualify for reclassification
FVOCI financial assets 5 5 1 (2) (1)
Cash flow hedges (1) (29) 178 (54) 98 226
Currency translation (14) (132) 113 (77) (56)
Tax 16 (48) 16 (20) (15)
(22) 3 76 (1) 154
Other comprehensive (loss)/income after tax (31) (100) 67 7 68
Total comprehensive income/(loss) for the period 32 (198) 27 27 175
Attributable to:
Ordinary shareholders (50) (268) 5 10 157
Paid-in equity holders 73 70 22 17 18
Non-controlling interests 9 - - - -
32 (198) 27 27 175
(1) Refer to footnotes 2 and 3 of the statement of changes in
equity.
Consolidated balance sheet as at 31 December 2024
31 December 30 September 31 December
2024 2024 2023
£m £m £m
Assets
Cash and balances at central banks 16,229 17,237 13,831
Trading assets 48,883 54,361 45,324
Derivatives 78,105 68,578 79,332
Settlement balances 2,043 11,786 7,227
Loans to banks - amortised cost 1,171 1,445 1,246
Loans to customers - amortised cost 17,921 16,247 12,986
Amounts due from holding companies and fellow subsidiaries 343 606 1,730
Other financial assets 17,850 16,766 15,723
Other assets 621 613 518
Total assets 183,166 187,639 177,917
Liabilities
Bank deposits 4,565 4,660 2,267
Customer deposits 4,840 6,459 6,998
Amounts due to holding companies and fellow subsidiaries 6,771 6,870 5,802
Settlement balances 1,729 12,064 6,641
Trading liabilities 54,512 58,964 53,623
Derivatives 72,036 61,417 71,981
Other financial liabilities 31,263 30,383 23,574
Other liabilities 521 500 653
Total liabilities 176,237 181,317 171,539
Equity
Owners' equity 6,929 6,315 6,380
Non-controlling interests - 7 (2)
Total equity 6,929 6,322 6,378
Total liabilities and equity 183,166 187,639 177,917
Consolidated statement of changes in equity
For the period ended 31 December 2024
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2024 2023 2024 2024 2023
£m £m £m £m £m
Called up share capital - at beginning and end of period 400 400 400 400 400
Share premium account - at beginning and end of period 1,946 1,946 1,946 1,946 1,946
Paid-in equity - at beginning of period 904 904 904 904 904
Issued 592 - 592 - -
At end of period 1,496 904 1,496 904 904
Merger reserve - at beginning of period (14) - (12) (13) -
Additions - (14) - 1 (14)
Amortisation 3 - 1 - -
At end of period (11) (14) (11) (12) (14)
FVOCI reserve - at beginning of period 13 3 26 21 16
Unrealised gains/(losses) 20 11 2 9 (4)
Realised (gains)/losses (5) 3 (1) (2) 3
Tax (3) (4) (2) (2) (2)
At end of period 25 13 25 26 13
Cash flow hedging reserve - at beginning of period (164) (294) (138) (216) (375)
Amount recognised in equity (2) (299) (29) (118) 31 148
Amount transferred from equity to earnings (3) 270 207 64 67 78
Tax 16 (48) 15 (20) (15)
At end of period (177) (164) (177) (138) (164)
Foreign exchange reserve - at beginning of period 100 232 (27) 50 156
Retranslation of net assets (98) (143) 91 (123) (51)
Foreign currency gains/(losses) on hedges of net assets 15 19 (7) 3 4
Recycled to profit or loss on disposal of businesses 70 (8) 30 43 (9)
At end of period 87 100 87 (27) 100
Retained earnings - at beginning of period 3,195 3,374 3,216 3,218 3,189
Profit/(loss) attributable to ordinary shareholders and other equity owners 53 (98) (41) 20 107
Paid-in equity dividends paid (73) (70) (22) (17) (18)
Remeasurement of retirement benefit schemes
- gross (13) (113) (9) (1) (111)
- tax 16 40 1 1 39
Realised gains/(losses) on FVOCI equity shares
- gross 4 (2) 1 1 (2)
- tax 8 - 8 - -
Capital contributions (1) - 115 - - -
Changes in fair value of credit in financial liabilities designated at FVTPL
- gross (33) (39) (8) 1 (13)
- tax 2 6 1 (1) 3
Share-based payments
- gross (3) (14) 7 (5) 5
- tax 10 (4) 10 - (4)
Merger reserve amortisation (3) - (1) (1) -
At end of period 3,163 3,195 3,163 3,216 3,195
For the notes to this table refer to the following page.
Consolidated statement of changes in equity
For the period ended 31 December 2024 continued
Year ended Quarter ended
31 December 31 December 31 December 30 September 31 December
2024 2023 2024 2024 2023
£m £m £m £m £m
Owners' equity at end of period 6,929 6,380 6,929 6,315 6,380
Non-controlling interests - at beginning of period (2) (2) 7 7 (2)
Currency translation adjustments and other movements (1) - (1) - -
Profit attributable to non-controlling interests 10 - 1 - -
Dividends paid (7) (7) - -
At end of period - (2) - 7 (2)
Total equity at end of period 6,929 6,378 6,929 6,322 6,378
Attributable to:
Ordinary shareholders 5,433 5,476 5,433 5,411 5,476
Paid-in equity holders 1,496 904 1,496 904 904
Non-controlling interests - (2) - 7 (2)
6,929 6,378 6,929 6,322 6,378
(1) During H1 2023, NatWest Markets invoked a claim against the
parent, NatWest Group plc, in respect of a legacy (non-trading) matter which
was covered by an indemnity agreement. This resulted in a capital
contribution.
(2) The change in the cash flow hedging reserve is driven by
realised accrued interest transferred into the income statement and an
increase in swap rates in the year. The portfolio of hedging instruments are
predominantly receive fixed swaps.
(3) The amount transferred from equity to the income statement is
mostly recorded within net interest income mainly within loans to banks and
customers - amortised cost and balances at central banks.
Consolidated cash flow statement
For the year ended 31 December 2024
31 December 31 December
2024 2023
£m £m
Cash flows from operating activities
Operating profit/(loss) before tax 37 (75)
Adjustments for non-cash items 143 173
Net cash flows from trading activities 180 98
Changes in operating assets and liabilities (226) 2,617
Net cash flows from operating activities before tax (46) 2,715
Income taxes (paid)/received (89) 99
Net cash flows from operating activities (135) 2,814
Net cash flows from investing activities (1,333) (3,251)
Net cash flows from financing activities 1,593 (922)
Effects of exchange rate on cash and cash equivalents (532) (526)
Net decrease in cash and cash equivalents (407) (1,885)
Cash and cash equivalents at 1 January 24,943 26,828
Cash and cash equivalents at 31 December 24,536 24,943
Notes
1. Presentation of condensed consolidated financial statements
The condensed consolidated financial statements should be read in conjunction
with NatWest Markets Plc's 2024 Annual Report and Accounts. The critical and
material 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.
2. Trading assets and liabilities
Trading assets and liabilities comprise assets and liabilities held at fair
value in trading portfolios.
31 December 31 December
2024 2023
Assets £m £m
Loans
- Reverse repos 27,127 23,694
- Collateral given 7,333 8,914
- Other loans 545 762
Total loans 35,005 33,370
Securities
Central and local government
- UK 2,077 2,729
- US 3,734 2,600
- Other 3,506 3,062
Financial institutions and Corporate 4,561 3,563
Total securities 13,878 11,954
Total 48,883 45,324
Liabilities
Deposits
- Repos 30,562 26,902
- Collateral received 12,307 15,062
- Other deposits 895 1,150
Total deposits 43,764 43,114
Debt securities in issue 257 706
Short positions
Central and local government
- UK 2,680 1,893
- US 1,677 2,071
- Other 4,755 4,049
Financial institutions and corporate 1,379 1,790
Total short positions 10,491 9,803
Total 54,512 53,623
Notes
3. Other financial liabilities
31 December 31 December
2024 2023
£m £m
Customer deposits - designated as at fair value through profit or loss (FVTPL) 1,537 1,259
Debt securities in issue
- Medium term notes 21,852 17,608
- Commercial paper and certificates of deposit 7,605 4,433
Subordinated liabilities
- Designated as at FVTPL 234 238
- Amortised cost 35 36
Total 31,263 23,574
4. Amounts due to holding company and fellow subsidiaries
31 December 31 December
2024 2023
£m £m
Bank deposits - amortised cost 548 537
Customer deposits - amortised cost 43 55
Settlement balances - -
Trading liabilities 613 1,028
Other financial liabilities - subordinated liabilities 1,115 1,022
MREL instruments issued to NatWest Group plc 4,358 3,070
Other liabilities 94 90
Total 6,771 5,802
5. Related parties
UK Government
The UK Government, bodies controlled or jointly controlled by the UK
Government and bodies over which it has significant influence are related
parties of NWM Group. NWM Group enters into transactions with many of these
bodies. NWM Group's other transactions with the UK Government include the
payment of taxes, principally UK corporation tax and value added tax; national
insurance contributions; local authority rates; and regulatory fees and levies
(including the bank levy and FSCS levies).
Bank of England facilities
In the ordinary course of business, NWM Group may from time-to-time access
market-wide facilities provided by the Bank of England.
Other related parties
(a) In their roles as providers of finance, NWM Group companies provide
development and other types of capital support to businesses. In some
instances, the investment may extend to ownership or control over 20% or more
of the voting rights of the investee company.
(b) In accordance with IAS 24, transactions or balances between NWM Group
entities that have been eliminated on consolidation are not reported.
(c) NWM Group is recharged from other NatWest Group entities, mainly NWB Plc
which provides the majority of shared services (including technology) and
operational processes.
(d) The primary financial statements include transactions and balances with
its subsidiaries which have been further disclosed in the relevant parent
company notes.
Full details of NWM Group's related party transactions for year ended 31
December 2024 are included in NatWest Markets Plc 2024 Annual Report and
Accounts.
Notes
6. Litigation and regulatory matters
NWM Plc and certain members of NWM Group are party to various legal
proceedings and are involved in, or subject to, various regulatory matters,
including as the subject of investigations and other regulatory and
governmental action (Matters) in the United Kingdom (UK), the United States
(US), the European Union (EU) and other jurisdictions. Note 25 in the NatWest
Markets Plc 2024 Annual Report and Accounts, issued on 14 February 2025 and
available at nwm.com (Note 25), discusses the Matters in which NWM Group is
currently involved and material developments. Other than the Matters discussed
in Note 25, no member of NWM Group is or has been involved in governmental,
legal, or regulatory proceedings (including those which are pending or
threatened) that are expected to be material, individually or in aggregate.
Recent developments in the Matters identified in Note 25 that have occurred
since the Q3 2024 Interim Management Statement was issued on 25 October 2024,
include, but are not limited to, those set out below.
Litigation
London Interbank Offered Rate (LIBOR) and other rates litigation
As previously disclosed, in August 2020, a complaint was filed in the United
States District Court for the Northern District of California by several
United States retail borrowers against the USD ICE LIBOR panel banks and their
affiliates (including NatWest Group plc, NWM Plc, NatWest Markets Securities
Inc. and NWB Plc), alleging (i) that the very process of setting USD ICE LIBOR
amounts to illegal price-fixing; and (ii) that banks in the United States have
illegally agreed to use LIBOR as a component of price in variable retail
loans. In September 2022, the district court dismissed the complaint. In
December 2024, the United States Court of Appeals for the Ninth Circuit
affirmed the district court's decision.
Foreign exchange litigation
As previously disclosed, two sets of proceedings are ongoing in the
Netherlands against NatWest Group plc, NWM Plc and NWM N.V. by Stichting FX
Claims on behalf of a number of parties, seeking declarations from the
district court in Amsterdam concerning liability for anti-competitive FX
market conduct described in decisions of the European Commission (EC) of 16
May 2019 and 2 December 2021, along with unspecified damages. In January 2025,
a third summons was served by Stichting FX Claims on NatWest Group plc, NWM
Plc and NWM N.V., on behalf of a new group of parties. The claimant seeks
similar declarations from the district court in Amsterdam to those being
sought in the previously disclosed claims, along with unspecified damages.
Regulatory matters
US investigations relating to fixed-income securities
In December 2021, NWM Plc pled guilty in the United States District Court for
the District of Connecticut to one count of wire fraud and one count of
securities fraud in connection with historical spoofing conduct by former
employees in US Treasuries markets between January 2008 and May 2014 and,
separately, during approximately three months in 2018. The 2018 trading
occurred during the term of a non-prosecution agreement (NPA) between NWMSI
and the United States Attorney's Office for the District of Connecticut (USAO
CT), under which non-prosecution was conditioned on NWMSI and affiliated
companies not engaging in criminal conduct during the term of the NPA. The
relevant trading in 2018 was conducted by two NWM traders in Singapore and
breached that NPA. The plea agreement reached with the US Department of
Justice (DOJ) and the USAO CT resolved both the spoofing conduct and the
breach of the NPA.
As required by the resolution and sentence imposed by the court, NWM Plc is
subject to a probationary period, which was extended to end concurrently with
the conclusion of the independent monitorship, which is also required under
the plea agreement. The term of the independent monitorship and the ongoing
implementation of recommendations made by it is currently scheduled to
conclude in December 2025 but may be extended by agreement with the DOJ. In
addition, NWM Plc has committed to compliance programme reviews and
improvements and agreed to reporting and co-operation obligations.
In the event that NWM Plc does not meet its obligations to the DOJ, this may
lead to adverse consequences such as increased costs from any extension of
monitorship and/or the period of the probation, findings that NWM Plc violated
its probation term, and possible re-sentencing, amongst other consequences.
Other material adverse collateral consequences may occur as a result of this
matter, as further described in the Risk Factor relating to legal, regulatory
and governmental actions and investigations set out on pages 172 to 173 of the
NatWest Markets Plc 2024 Annual Report and Accounts.
7. Post balance sheet events
Other than as disclosed in the accounts, there have been no other significant
events between 31 December 2024 and the date of approval of these accounts
which would require a change to or additional disclosure.
Non-IFRS financial measures
NWM Group prepares its financial statements in accordance with IFRS as issued
by the IASB which constitutes a body of generally accepted accounting
principles (GAAP). This document contains a number of adjusted or alternative
performance measures, also known as non-GAAP or non-IFRS performance measures.
These measures are adjusted for certain items which management believe are not
representative of the underlying performance of the business and which distort
period-on-period comparison. These non-IFRS measures are not measures within
the scope of IFRS and are not a substitute for IFRS measures. These measures
include:
- Management analysis of operating expenses shows litigation and conduct
costs on a separate line. These amounts are included within staff costs and
other administrative expenses in the statutory analysis. Other operating
expenses excludes litigation and conduct costs which are more volatile and may
distort comparisons with prior periods.
- Funded assets are defined as total assets less derivative assets. This
measure allows review of balance sheet trends exclusive of the volatility
associated with derivative fair values.
- Management view of income by business including shared revenue and
before own credit adjustments. This measure is used to show underlying income
generation in NatWest Markets excluding the impact of own credit adjustments.
- Revenue share refers to income generated by NatWest Markets products
from customers that have their primary relationship with other NatWest Group
subsidiaries, a proportion of which is shared between NatWest Markets and
those subsidiaries.
- Transfer Pricing arrangements with fellow NatWest Group subsidiaries
includes revenue share and a profit share arrangement with fellow NatWest
Group subsidiaries. The profit share arrangement was introduced during 2023 to
reward NWM Group on an arm's length basis for its contribution to the
performance of the NatWest Group Commercial & Institutional business
segment, 2023 being the first full year with the Commercial &
Institutional segment in place. The profit share is not allocated to
individual NatWest Markets product areas.
- Own credit adjustments are applied to positions where it is believed
that the counterparties would consider NWM Group's creditworthiness when
pricing trades. The fair value of certain issued debt securities, including
structured notes, is adjusted to reflect the changes in own credit spreads and
the resulting gain or loss recognised in income.
Operating expenses analysis - management view
Year ended
31 December 2024 31 December 2023
Litigation Other Statutory Litigation Other Statutory
and conduct operating operating and conduct operating operating
costs expenses expenses costs expenses expenses
Staff costs 27 425 452 12 406 418
Premises and equipment - 75 75 - 66 66
Other administrative expenses 75 596 671 48 594 642
Depreciation and amortisation - 10 10 - 16 16
Total 102 1,106 1,208 60 1,082 1,142
Quarter ended
31 December 2024
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Staff costs 5 94 99
Premises and equipment - 20 20
Other administrative expenses 36 204 240
Depreciation and amortisation - 3 3
Total 41 321 362
Quarter ended
30 September 2024
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Staff costs 8 104 112
Premises and equipment - 19 19
Other administrative expenses 15 105 120
Depreciation and amortisation - 3 3
Total 23 231 254
Quarter ended
31 December 2023
Litigation Other Statutory
and conduct operating operating
costs expenses expenses
Staff costs 4 98 102
Premises and equipment - 19 19
Other administrative expenses 27 160 187
Depreciation and amortisation - 6 6
Total 31 283 314
Statement of directors' responsibilities
The responsibility statement below has been prepared in connection with NWM
Group's full Annual Report and Accounts for the year ended 31 December 2024.
We, the directors listed below, confirm that to the best of our knowledge:
- The financial statements, prepared in accordance with UK adopted
International Accounting Standards, International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board and
IFRS as adopted European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of NWM Plc and the
undertakings included in the consolidation taken as a whole; and
- The Strategic Report and Report of the directors (incorporating the
Financial review) include a fair review of the development and performance of
the business and the position of NWM Plc, and the undertakings included in the
consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
By order of the Board Jonathan Peberdy Simon Lowe
Anne Simpson
Non-executive director Chief Executive Officer Chief Financial Officer
13 February 2025
Board of directors Executive directors Non-executive directors
Chair
Frank Dangeard Jonathan Peberdy Tamsin Rowe
Simon Lowe Anne Simpson
Sabrina Wilson
Presentation of information
NatWest Markets Plc ('NWM Plc') is a wholly owned subsidiary of NatWest Group
plc or 'the ultimate holding company'. The NatWest Markets Group ('NWM Group')
or 'we' comprises NWM Plc and its subsidiary and associated undertakings. The
term 'NatWest Group' comprises NatWest Group plc and its subsidiaries.
NWM Plc publishes its financial statements in pounds sterling ('£' or
'sterling'). The abbreviations '£m' and '£bn' represent millions and
thousands of millions of pounds sterling ('GBP'), respectively, and references
to 'pence' represent pence in the United Kingdom ('UK'). Reference to
'dollars' or '$' are to United States of America ('US') dollars. The
abbreviations '$m' and '$bn' represent millions and thousands of millions of
dollars, respectively, and references to 'cents' represent cents in the US.
The abbreviation '€' represents the 'euro', and the abbreviations '€m' and
'€bn' represent millions and thousands of millions of euros, respectively,
and references to 'cents' represent cents in the European Union ('EU').
Statutory results
Financial information contained in this document does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006 ("the
Act"). The statutory accounts for the year ended 31 December 2024 will be
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.
Contact
Paul Pybus NatWest Group Investor Relations +44 (0) 7769161183
Forward-looking statements
Cautionary statement regarding forward-looking statements
Certain sections in this document contain 'forward-looking statements' as that
term is defined in the United States Private Securities Litigation Reform Act
of 1995, such as statements with respect to NWM Group's financial condition,
results of operations and business, including its strategic priorities,
financial, investment and capital targets, and ESG targets, commitments and
ambitions described herein. Statements that are not historical facts,
including statements about NatWest Group's beliefs and expectations, are
forward-looking statements. Words such as 'expect', 'estimate', 'project',
'anticipate', 'commit', 'believe', 'should', 'intend', 'will', 'plan',
'could', 'probability', 'risk', 'target', 'goal', 'objective', 'may',
'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions are intended to identify forward-looking
statements. In particular, this document includes forward-looking targets and
guidance relating to financial performance measures, such as income growth,
operating expense, cost reductions, impairment loss rates, balance sheet
reduction, including the reduction of RWAs, CET1 ratio (and key drivers of the
CET1 ratio, including timing, impact and details), Pillar 2 and other
regulatory buffer requirements and MREL and non-financial performance
measures, such as climate and sustainability-related performance ambitions,
targets and metrics, including in relation to initiatives to transition to a
net zero economy, climate and sustainable funding and financing and financed
emissions.
Limitations inherent to forward-looking statements
Certain sections in this document contain 'forward-looking statements' as that
term is defined in the United States Private Securities Litigation Reform Act
of 1995, such as statements with respect to NWM Group's financial condition,
results of operations and business, including its strategic priorities,
financial, investment and capital targets, and ESG targets, commitments and
ambitions described herein. Statements that are not historical facts,
including statements about NatWest Group's beliefs and expectations, are
forward-looking statements. Words such as 'expect', 'estimate', 'project',
'anticipate', 'commit', 'believe', 'should', 'intend', 'will', 'plan',
'could', 'probability', 'risk', 'target', 'goal', 'objective', 'may',
'endeavour', 'outlook', 'optimistic', 'prospects' and similar expressions or
variations on these expressions are intended to identify forward-looking
statements. In particular, this document includes forward-looking targets and
guidance relating to financial performance measures, such as income growth,
operating expense, cost reductions, impairment loss rates, balance sheet
reduction, including the reduction of RWAs, CET1 ratio (and key drivers of the
CET1 ratio, including timing, impact and details), Pillar 2 and other
regulatory buffer requirements and MREL and non-financial performance
measures, such as climate and sustainability-related performance ambitions,
targets and metrics, including in relation to initiatives to transition to a
net zero economy, climate and sustainable funding and financing and financed
emissions.
Important factors that could affect the actual outcome of the forward-looking
statements
We caution you that a large number of important factors could adversely affect
our results or our ability to implement our strategy, cause us to fail to meet
our targets, predictions, expectations and other anticipated outcomes or
affect the accuracy of forward-looking statements described in this document.
These factors include, but are not limited to, those set forth in the risk
factors and the other uncertainties described in NatWest Markets Plc's Annual
Report and its other public filings. The principal risks and uncertainties
that could adversely affect NWM Group's future results, its financial
condition and/or prospects and cause them to be materially different from what
is forecast or expected, include, but are not limited to: economic and
political risk (including in respect of: economic and political risks and
uncertainties in the UK and global markets, including as a result of inflation
and interest rates, supply chain disruption, and geopolitical developments;
changes in interest rates and foreign currency exchange rates; and HM
Treasury's ownership of NatWest Group plc); business change and execution risk
(including in respect of: NatWest Group's strategy and NatWest Group's
creation of its Commercial & Institutional franchise (of which NWM Group
forms part) and the transfer of NatWest Group's Western European corporate
portfolio); financial resilience risk (including in respect of: NWM Group's
ability to meet targets, generate returns or implement its strategy
effectively; prudential regulatory requirements for capital and MREL; NWM
Group's reliance on access to capital markets directly or indirectly through
its parent (NatWest Group); capital, funding and liquidity risk; reductions in
the credit ratings; the competitive environment; the requirements of
regulatory stress tests; counterparty and borrower risk; model risk;
sensitivity to accounting policies, judgments, estimates and assumptions (and
the economic, climate, competitive and other forward looking information
affecting those judgments, estimates and assumptions); changes in applicable
accounting standards; the adequacy of NatWest Group's resolution plans; and
the application of UK statutory stabilisation or resolution powers to NatWest
Group); climate and sustainability risk (including in respect of: risks
relating to climate change and sustainability-related risks; both the
execution and reputational risk relating to NatWest Group's climate
change-related strategy, ambitions, targets and transition plan; climate and
sustainability-related data and model risk; increasing levels of climate,
environmental, human rights and other sustainability-related laws, regulation
and oversight; climate, environmental, human rights and other
sustainability-related litigation, enforcement proceedings, investigations and
conduct risk); operational and IT resilience risk (including in respect of:
operational risks (including reliance on third party suppliers); cyberattacks;
the accuracy and effective use of data; attracting, retaining and developing
senior management and skilled personnel; complex IT systems; NWM Group's risk
management framework; and NWM Group's reputational risk); and legal,
regulatory and conduct risk (including in respect of: the impact of
substantial regulation and oversight; the outcome of legal, regulatory and
governmental actions and investigations as well as remedial undertakings; and
changes in tax legislation or failure to generate future taxable profits).
Forward-looking statements continued
Climate and sustainability-related disclosures
Climate and sustainability-related disclosures in this document are not
measures within the scope of International Financial Reporting Standards
('IFRS'), use a greater number and level of judgments, assumptions and
estimates, including with respect to the classification of climate and
sustainable funding and financing activities, than our reporting of historical
financial information in accordance with IFRS. These judgments, assumptions
and estimates are highly likely to change materially over time, and, when
coupled with the longer time frames used in these disclosures, make any
assessment of materiality inherently uncertain. In addition, our climate risk
analysis, our ambition to be net zero across our financed emissions, assets
under management and operational value chain by 2050 and, the implementation
of our climate transition plan, remain under development, and the data
underlying our analysis and strategy remain subject to evolution over time.
The process we have adopted to define, gather and report data on our
performance on climate and sustainability-related measures is not subject to
the formal processes adopted for financial reporting in accordance with IFRS
and there are currently limited industry standards or globally recognised
established practices for measuring and defining climate and
sustainability-related metrics. As a result, we expect that certain climate
and sustainability-related disclosures made in this document are likely to be
amended, updated, recalculated or restated in the future. Please also refer to
the cautionary statement in the section entitled 'Climate and
sustainability-related and other forward-looking statements and metrics' of
the NatWest Group 2024 Sustainability Disclosures Report published by NatWest
Group plc for the consolidated group, including NatWest Markets Plc.
Cautionary statement regarding Non-IFRS financial measures and APMs
NWM Group prepares its financial statements in accordance with UK-adopted
International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS). This document may contain financial measures and ratios not
specifically defined under GAAP or IFRS ('Non-IFRS') and/or alternative
performance measures ('APMs') as defined in European Securities and Markets
Authority ('ESMA') guidelines. Non-IFRS measures and APMs 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. 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. Any Non-IFRS measures and/or APMs included in this document, are
not measures within the scope of IFRS, are based on a number of assumptions
that are subject to uncertainties and change, and are not a substitute for
IFRS measures.
The information, statements and opinions contained in this document do not
constitute a public offer under any applicable legislation or an offer to sell
or a solicitation of an offer to buy any securities or financial instruments
or any advice or recommendation with respect to such securities or other
financial instruments.
Legal Entity Identifier: RR3QWICWWIPCS8A4S074
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